EXHIBIT 1.01
ENVIRONMENTAL POWER
CORPORATION
PLACEMENT AGENT
AGREEMENT
Dated: March 17, 2004
Westminster Securities Corp.
100 Wall Street
New York, NY 10007
Ladies and Gentlemen:
The undersigned, Environmental Power
Corporation, a Delaware corporation (the “Company”),
proposes to issue and sell a minimum of forty (40) (the
“Minimum Offering”) investment units (individually, a
“Unit”) and a maximum of up to two hundred ten (210)
Units (the “Maximum Offering”), at a price of $24,000
per Unit, each such Unit consisting of (a) 30,000 shares (the
“Shares”) of the Company’s common stock, par
value $0.01 per share (“Common Stock”) and (ii) three
year warrants (the “Warrants”) to purchase shares of
Common Stock (the “Warrant Shares”), in an amount equal
to one Warrant Share per two shares of Common Stock comprising each
Unit purchased, at an exercise price equal to one and 10/100
dollars ($1.10) per Warrant Share, subject to adjustment (the
“Warrant Exercise Price”). The Units, Shares, Warrants,
Warrant Shares and Placement Agent Warrants (as hereinafter
defined) are referred to collectively herein as the
“Equity.” All share prices, exercise prices, redemption
prices and conversion prices, including, but not limited to the
Warrant Exercise Price, should be assumed to be proportionally
adjusted to reflect forward or reverse stock splits, stock
dividends, recapitalizations and the like occurring after the date
of this Agreement.
The Company shall have the right,
upon 30 days’ written notice to the holders thereof
(“Redemption Notice”), to redeem all or any portion of
the Warrants at a price equal to $.01 per Warrant Share, provided
that (i) the Shares, Warrant Shares and all shares of Common Stock
underlying the Placement Agent Warrant have been registered for
resale pursuant to the Securities Act of 1933, as amended (the
“Securities Act”) and are freely tradable without
restriction or legend for at least the 30-day period preceding such
notice and (ii) the Closing Bid Price for the Common Stock has been
not less than $2.00 per share (subject to adjustment to reflect
forward or reverse stock splits, stock dividends, recapitalizations
and the like) for the 10-trading day period immediately preceding
such notice. As used herein, “Closing Bid Price”, shall
mean the closing bid price of the Common Stock as reported by
Bloomberg Financial L.P. on the date in question (based on a
trading day from 9:30 a.m. ET to 4:02 p.m. Eastern Time) (and, if
no closing bid price is reported, the closing price as so reported,
and if neither the closing bid price nor the closing price is so
reported, the last reported price of the Common Stock as determined
by an independent evaluator mutually agreed to by the
parties.
The Warrants shall have customary
weighted average anti-dilution rights with respect to any issuance
(or deemed issuance) of Common Stock at a price less than $1.10 per
share, and shall otherwise be subject to adjustment in connection
with forward or reverse stock splits, stock dividends,
recapitalizations, mergers and the like occurring after the date on
which they are issued. The Warrants will expire three years from
the Closing (as defined below) at which they were
issued.
The Company is obligated to file, at
its own expense, a registration statement (the “Registration
Statement”) with the SEC with respect to the Equity (the
“Registrable Securities”), to cause the Registration
Statement to go effective on or before 150 days after the Final
Closing (as defined below), and to keep such Registration Statement
effective until the earlier of the date that (i) all the
Registrable Securities have been sold pursuant to such Registration
Statement, (ii) all Registrable Securities have been otherwise
transferred to persons who may trade such shares without
restriction under the Securities Act, and the Company has delivered
a new certificate or other evidence of ownership for such
securities not bearing a restrictive legend or (iii) all
Registrable Securities may be sold at any time, without volume or
manner of sale limitations pursuant to Rule 144(k) or any similar
provision then in effect under the Securities Act. In the event
such Registration Statement is not filed or effective within the
time periods described above (other than an “Allowed
Delay” as described below), the Company will pay each holder
of Units a penalty of one percent (1%) of the original purchase
price actually paid for the Shares and the Warrant Shares
constituting the Registrable Securities for each month (prorated
for partial months), payable in cash or in stock at the
holder’s option, until the registration statement has been
filed and declared effective or until the Registrable Securities
may be sold pursuant to Rule 144. In addition, all holders of Units
shall have unlimited piggyback registration rights (subject to a
customary underwriter’s cutback in the case of an
underwritten offering) prior to and during the time the
Registration Statement is required to remain effective, without
regard to (a) whether any stop order suspending the effectiveness
of the Registration Statement has been issued or any proceedings
for such purpose have been initiated or (b) the receipt by the
Company of any notification with respect to the suspension of the
qualification of the securities included in the Registration
Statement for sale in any jurisdiction or the initiation of any
proceeding for such purpose. All expenses of registration shall be
borne by the Company. In the event a registration statement
registering the Warrant Shares is not effective within one year
after the Closing, the Warrants shall become eligible to be
exercisable pursuant to a cashless exercise feature. In the event
that, in the judgment of the Company, it is advisable to suspend
use of a prospectus included in the Registration Statement (a
“Prospectus”) due to pending material developments or
other events that have not yet been publicly disclosed and as to
which the Company believes public disclosure would be detrimental
to the Company, or should the Company determine that a
post-effective amendment to the Registration Statement is otherwise
required (an “Allowed Delay”), the Company shall notify
all persons listed as selling stockholders in such Registration
Statement (the “Selling Stockholders”) to such effect,
and, upon receipt of such notice, each such Selling Stockholder
shall immediately discontinue any sales of Registrable Securities
pursuant to such Registration Statement until such Selling
Stockholder has received copies of a supplemented or amended
Prospectus or until such Selling Stockholder is advised in writing
by the Company that the then current Prospectus may be used and has
received copies of any additional or supplemental filings that are
incorporated or deemed incorporated by reference in such
Prospectus. Notwithstanding anything to the contrary herein, the
Company shall not exercise such right to suspend sales of
Registrable Securities for a period in excess of 30 days
consecutively or an aggregate of 60 days in any 365-day
period.
The offering of Units in the Company
(the “Offering”) will be conducted on a “best
efforts, all or none” basis with respect to the Minimum
Offering and on a “best efforts” basis with respect to
the remainder of the Maximum Offering in excess of the Minimum
Offering. Fractional Units may be sold at the discretion of the
Placement Agent. As used herein, including with respect to the
representations and warranties contained herein, unless the context
otherwise requires, the term “Company” shall include
the Company together with all of its direct and indirect wholly
owned subsidiaries, and all representations and warranties of the
Company herein shall also be deemed made on behalf of and with
respect to each such subsidiary of the Company. This Placement
Agent
Agreement (“Agreement”) is to
confirm the arrangements with you (the “Placement
Agent”), with respect to the sale of the Units by the
Placement Agent as exclusive agent for the Company in the
Offering.
The Offering will not be registered
with the SEC nor with any state securities authority, but rather
will be offered as a private placement pursuant to an exemption
from registration under Regulation D (“Regulation D”)
promulgated under Section 4(2) and Rule 506 of the Securities Act,
and available state securities law exemptions.
The Units are to be sold in the
Offering only to “accredited investors”, as that term
is defined in Regulation D, pursuant to a disclosure document to be
prepared by the Company with the assistance of its counsel and the
Placement Agent and its counsel (the “Memorandum”). The
Memorandum shall be in a form reasonably acceptable to the
Placement Agent and its counsel.
SECTION 1. Description of
Securities. The Equity shall conform in all respects to
descriptions thereof contained in the Memorandum and the
description above.
SECTION 2. Representations and
Warranties of the Company. The Company hereby represents,
warrants and covenants with the Placement Agent as
follows:
(a) The Memorandum, copies of which
will be delivered to the Placement Agent, will be carefully
prepared to disclose, or incorporate by reference from the
Company’s Quarterly Reports on Form 10Q, Annual Reports on
Form 10-K or Current Reports on Form 8-K as filed with the
Securities and Exchange Commission (the “SEC Reports”),
all information concerning the Company which would be material to
an investment decision by an “accredited investor” (as
defined in Regulation D). The date on which the Offering is
authorized by the Company to commence is the date of the Memorandum
and is herein called the “Commencement Date.” The time
and date of each issuance of Units hereunder is herein called the
“Issuance Date” or the
“Closing.”
(b) The Company is duly incorporated
and validly existing as a corporation in good standing under the
laws of the state of its incorporation, having corporate power and
authority to own its properties and conduct its business and is
duly qualified and in good standing in each foreign jurisdiction
where the conduct of its business so requires such qualification,
except where the failure to be so qualified would not have a
material adverse effect on the Company. No direct or indirect
rights to acquire Common Stock exist, except as have been
previously disclosed to the public or as disclosed in the
Memorandum.
(c) The unaudited financial
statements of the Company for the three month periods ended
September 30, 2003, June 30, 2003, and March 31, 2003, and the
audited financial statements of the Company for the year ended
December 31, 2002, included in the SEC Reports (collectively, the
“Financial Statements”), fairly present in all material
respects the information purported to be shown therein of the
Company, at the respective dates to which they apply; and such
Financial Statements have been prepared in conformity with GAAP
consistently applied throughout the periods involved and are in
accordance in all material respects with the books and records of
the Company.
(d) The assets of the Company, as
shown in the Financial Statements, are owned by the Company with
good title, free and clear of all liens, encumbrances and equities
of record or otherwise, except (i) those specifically referred to
in the Memorandum, (ii) those which do not materially adversely
affect the use or value of such assets, (iii) the lien of current
taxes not now due or which are being contested in good faith and
for which adequate reserves have been set aside and (iv) those
disclosed in the Financial Statements or elsewhere in the SEC
Reports. The Company has the full corporate right, power and
authority to maintain and operate its business and properties as
the
same are now operated or proposed to be operated
and is complying with all laws, ordinances and regulations
applicable thereto, except where the failure to so comply would not
have a material adverse effect on the Company.
(e) There are no actions, suits or
proceedings at law or in equity pending, or to the Company’s
knowledge threatened, against the Company before or by any federal
or state commission, regulatory body, administrative agency or
other governmental body wherein, either in any case or in the
aggregate, an unfavorable ruling, decision or finding would
materially adversely affect the business, franchise, licenses,
permits, operations or financial condition of the Company which are
not disclosed in the Memorandum or the SEC Reports.
(f) The execution and delivery by
the Company of this Agreement, the consummation and performance of
the transactions herein contemplated, and compliance with the terms
of this Agreement and the Memorandum by the Company will not
conflict with, result in a breach of, or constitute a material
default under, the Certificate of Incorporation or the bylaws of
the Company, in each case as amended to date, or any indenture,
mortgage, deed of trust or other agreement or instrument to which
the Company is now a party or by which it or any of its assets or
properties is bound, or any law, order, rule, regulation, writ,
injunction, judgment or decree of any government, governmental
instrumentality or court, domestic or foreign, having jurisdiction
over the Company or any of its business or properties, to the
extent that such conflict, breach or default might have a material
adverse effect on the Company, and its subsidiaries as a whole, or
their respective businesses, properties or financial condition on a
consolidated basis.
(g) Except as set forth in the
Memorandum or the SEC Reports, all material licenses, permits,
approval, leases, contracts and agreements referred to in the
Memorandum or the SEC Reports (including the Financial Statements),
along with all other material licenses, permits, approvals, leases,
governmental authorizations or contracts to which the Company is a
party, have been obtained and are valid and in full force and
effect and neither the Company nor, to the knowledge of the
Company, any other party is in default thereunder, and to the
knowledge of the Company, no event has occurred which with the
passage of time or the giving of notice, or both, would constitute
a default thereunder.
(h) Except as described in the
Memorandum or the SEC Reports, the Company has timely filed all
federal, state and local tax returns required to be filed,
including without limitation, all sales tax returns, or has
obtained extensions thereof and has paid, or is contesting in good
faith, all taxes shown on such returns.
(i) Except as described in the
Memorandum or the SEC Reports, all material licenses, permits,
approvals or governmental authorizations necessary to permit the
Company to conduct its business have been obtained and are
outstanding and will be outstanding on each Issuance Date, and the
Company is in all material respects complying therewith. There are
no proceedings pending, or to the knowledge of the Company
threatened, seeking to cancel, terminate or limit such licenses,
approvals or permits.
(j) The Company shall apply the
proceeds from the sale of the Units solely for working capital and
general corporate purposes.
(k) The Memorandum or the SEC
Reports set forth a true and complete list of all material patents,
trademarks, trade names, copyright registrations and applications
therefor now or heretofore used or presently proposed to be used in
the conduct of the business of the Company. Except as set forth in
the Memorandum or the SEC Reports: (i) the Company owns or
possesses adequate licenses or other valid rights to use all
patents, patent rights, trademarks, trademark rights, trade names,
trade
name rights, trade secrets, copyright
registrations, know-how and other proprietary information
(collectively, “Rights”) necessary to the conduct of
the business of the Company as presently being conducted; (ii) the
validity of such Rights and the title thereto of the Company has
not been questioned in any litigation to which the Company is or
has been a party, nor, to the best knowledge of the Company, is any
such litigation threatened, other than as set forth in the
Memorandum or the SEC Reports; (iii) to the best knowledge of the
Company, the conduct of the business of the Company as now
conducted does not and will not conflict with Rights of others in
any way which has or might reasonably be expected to have a
material adverse effect on the Company; and (iv) no proceedings are
pending against the Company nor, to the best knowledge of the
Company, are any proceedings threatened against the Company,
alleging any violation of Rights of any third person. The Company
does not know of (x) any use that has heretofore been or is
now being made of any Rights owned by the Company, except by the
Company or by a person duly licensed by it to use the same under an
agreement described in the Memorandum or the SEC Reports or
(y) any material infringement of any Right owned by or
licensed by or to the Company. To the best knowledge of the
Company, all Rights heretofore owned or held by any agent,
independent contractor, employee or officer of the Company or any
subsidiary thereof and used in the business of the Company in any
manner have been duly and effectively transferred to the Company.
The consummation of the transactions contemplated by this Agreement
will not alter or impair the rights and interests of the Company in
any of the items referred to in this paragraph or disclosed in the
Memorandum or the SEC Reports as it relates to intangible property
rights.
(l) All of the representations,
agreements and warranties in this Section 2 shall survive delivery
of and payment for all or any part of the Units for two years from
and after such delivery and payment.
(m) The Company has no subsidiaries
other than those disclosed in the Memorandum or the SEC
Reports.
(n) All of the SEC Reports were true
and correct in all material respects upon the dates of filing
thereof.
SECTION 3. Issuance, Sale and
Delivery of the Units.
(a) The Company hereby agrees to
sell the Units directly through the Placement Agent on a
“best efforts all-or-none” basis with respect to the
Minimum Offering, and thereafter on a “best efforts”
basis with respect to the remaining Units up to the Maximum
Offering. Pending the closing of the sale of the Minimum Offering,
the proceeds of the Offering will be deposited in escrow in a
non-interest bearing account at Citibank, N.A. Unless the Minimum
Offering of Units is sold, the Offering will terminate and all
funds theretofore received from the sale of the Units will be
promptly returned to the subscribers without deduction therefrom or
interest thereon. During the period of escrow, subscribers will not
be entitled to a return of their subscriptions, except as required
by law. If the Minimum Offering is completed, the remaining Units
up to the amount of the Maximum Offering will be offered on a
“best efforts” basis until the first to occur of (i)
the completion of the Maximum Offering, (ii) May 21, 2004 or (iii)
the termination of the Offering by mutual agreement of the
Placement Agent and the Company.
(b) All checks or wire transfers for
the purchase of Units shall be made payable to Citibank, N.A., as
escrow agent (“Escrow Agent”), and shall be accompanied
by a duly executed subscription agreement and statement of
accredited investor in the forms annexed
