UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 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): February 10,
2010
Casita Enterprises,
Inc.
(Exact
Name of Registrant as Specified in Charter)
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Nevada
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333-147104
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20-8457250
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(State
or other jurisdiction
of
incorporation)
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(Commission
File Number)
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(IRS
Employer
Identification
No.)
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7675
Dagget Street
Suite
150
San
Diego, California
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92111
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(Address
of principal executive offices)
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(Zip
Code)
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Registrant’s
telephone number, including area code:
(858)
799-4583
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1093
East Main Street, # 508
El
Cajon, California 92021
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(Former
name or former address, if changed since last
report)
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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:
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Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
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Pre-commencement
communications pursuant to Rule 13e-4 (c) under the Exchange Act (17 CFR
240.13e-4(c))
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CURRENT
REPORT ON FORM 8-K
CASITA
ENTERPRISES, INC.
TABLE
OF CONTENTS
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Completion
of Acquisition or Disposition of Assets
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1
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1
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Description
of Our Company
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2
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2
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10
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Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
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10
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14
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Security
Ownership of Certain Beneficial Owners and
Management
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20
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Executive
Officers and Directors
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20
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21
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Certain
Relationships and Related Transactions
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26
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Unregistered
Sales of Equity Securities
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26
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Description
of Capital Stock
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27
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Changes
in Control of Registrant.
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28
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Departure
of Directors or Certain Officers; Election of Directors; Appointment of
Certain Officers; Compensatory Arrangements of Certain
Officers.
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28
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Amendments
to Articles of Incorporation or Bylaws; Change in Fiscal
Year.
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28
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Change
in Shell Company Status.
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29
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Financial
Statements and Exhibits.
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29
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Item 2.01 Completion
of Acquisition or Disposition of Assets
Merger
The Merger.
On
February 10, 2010, Casita Enterprises, Inc., a Nevada corporation (“Casita”),
entered into an Agreement and Plan of Merger and Reorganization (the “Merger
Agreement”) by and among Casita, Envision Solar International, Inc., a privately
held California corporation (“Envision”), and ESII Acquisition Corp., a newly
formed, wholly-owned Delaware subsidiary of STG (“Acquisition Sub”). Upon
closing of the merger transaction contemplated under the Merger Agreement (the
“Merger”), Acquisition Sub was merged with and into Envision, and Envision, as
the surviving corporation, became a wholly-owned subsidiary of
Casita.
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At
the closing of the Merger, each share of Envision’s common stock issued
and outstanding immediately prior to the closing of the Merger was
converted into the right to receive 9.398 shares of Casita’s common stock
(the “Exchange Ratio”), and each option and warrant to purchase Envision’s
common stock was converted on the same basis into, respectively, an option
or, in the case of consenting warrant holders, warrants to purchase
Casita’s common stock. An aggregate of 8,000,000 shares of Casita’s common
stock were issued to the holders of Envision’s common stock, and an
aggregate of 2,819,340 shares, subject to any adjustments that may be
required in order to comply with Sections 409A and 422
of the Internal
Revenue Code of 1986, as amended (the “Code”), and 51,808 shares of
Casita’s common stock were reserved for issuance under such Envision
options and warrants, respectively.
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Pursuant
to the terms of the Merger Agreement, Casita assumed all of Envision’s
obligations under Envision’s outstanding stock options and warrants.
Immediately prior to the Merger, Envision had outstanding stock options
and warrants to purchase an aggregate of 428,980 and 5,513 shares of
its common stock, respectively, which outstanding options and warrants
became options and warrants to purchase an aggregate of 4,031,472
shares (subject to any adjustments that may be required in order to comply
with Sections 409A and 422
of the Code) and
51,808 shares of Casita’s common stock, respectively, after giving effect
to the Merger. In connection with the assumption of Envision’s
2007 Unit Option Plan (the “2007 Plan”), under which 100,000 shares of
Envision’s common stock were reserved for issuance as incentive awards to
officers, directors, employees and other qualified persons, Casita
reserved 939,800 shares (subject to any adjustments that may be required
in order to comply with Sections 409A and 422
of the Code) of
its common stock for issuance under the assumed 2007 Plan. In connection
with the assumption of Envision’s 2008 Option Plan (the “2008 Plan”),
under which 200,000 shares of Envision’s common stock were reserved for
issuance as incentive awards to officers, directors, employees and other
qualified persons, Casita reserved 1,879,560 shares (subject to any
adjustments that may be required in order to comply with Sections 409A and
422
of the
Code) of its common stock for issuance under the assumed 2008 Plan.
Neither Casita nor Envision had any other options or warrants to purchase
shares of capital stock outstanding immediately prior to the closing of
the Merger.
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Upon
the closing of the Merger, Jose Cisneros resigned as the sole officer and
director of Casita, and simultaneously with the Merger a new board of
directors and new officers were appointed for Casita. Casita’s new board
of directors consists of Robert Noble and Jay Potter, previously the
directors of Envision. In addition, immediately following the Merger,
Casita appointed the previous officers of Envision as officers of
Casita.
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Immediately
following the closing of the Merger, under the terms of an Agreement of
Conveyance, Transfer and Assignment of Assets and Assumption of
Obligations (the “Conveyance Agreement”), Casita transferred all of its
pre-Merger assets and liabilities to its wholly owned subsidiary, Casita
Enterprises Holdings, Inc., a Delaware corporation (“SplitCo”).
Thereafter, pursuant to a stock purchase agreement (the “Stock Purchase
Agreement”), Casita transferred all of the outstanding capital stock of
SplitCo to Jose Cisneros and four former stockholders of Casita in
exchange for certain indemnifications, waivers and releases, along with
the cancellation of an aggregate of 5,000,000 shares of Casita’s common
stock (the “Split-Off”), leaving 12,000,000 shares of common stock
outstanding, of which 4,000,000 were shares held by persons who were
stockholders of Casita prior to the
Merger.
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Immediately
following the Split-Off, the board of directors of Casita, pursuant to
Section 78.207 of the Neveda Revised Statutes, approved a 3.25-for-1
forward stock split (the “Stock Split”). Pursuant to the Stock Split,
every one (1) share of Casita’s issued and outstanding common stock as
presently classified will be reclassified into 3.25 whole post-split
shares of the Casita’s common stock. In addition, in connection with the
Stock Split, Casita’s authorized common stock was increased from
50,000,000 shares of common stock to 162,500,000 shares of common stock.
No fractional shares of the Casita’s common stock will be issued in
connection with the Stock Split. Stockholders who are entitled to a
fractional post-split share will receive in lieu thereof one (1) whole
post-split share. Following the Stock Split, each stockholder’s percentage
ownership interest in Casita and proportional voting power remain
virtually unchanged except for minor changes that will result from
rounding fractional shares into whole shares. The rights and privileges of
the holders of Casita’s common stock is substantially unaffected by the
Stock Split. All issued and outstanding options, warrants, and convertible
securities of Casita immediately prior to the Stock Split have been
adjusted for the Stock Split, including the options and warrants assumed
by Casita in the Merger listed
above.
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Following
the Merger, the Split-Off and the Stock Split, there will be issued and
outstanding on a fully diluted basis (assuming the exercisability of the
warrants and options described above) and reserved under the 2007 Plan,
the 2008 Plan and 2010 Plan, 48,331,426 shares of Casita’s common stock,
as follows:
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the
former stockholders of Envision hold 26,000,000 shares of Casita’s common
stock
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the
legacy stockholders of Casita hold 13,000,000 shares of Casita’s common s
tock
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there
are an aggregate of 9,162,856 shares of Casita’s common stock issued or
reserved under the 2007 Plan and 2008
Plan
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there
are 168,376 warrants to purchase shares of Casita’s common stock issued
and outstanding
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The
foregoing description of the Merger and related transactions does not purport to
be complete and is qualified in its entirety by reference to the complete text
of the (i) Merger Agreement, which is filed as Exhibit 2.1 hereto, (ii) the
Conveyance Agreement, which is filed as Exhibit 10.23 hereto, and (iii) the
Stock Purchase Agreement, which is filed as Exhibit 10.24 hereto, each of which
is incorporated herein by reference.
The
shares of Casita’s common stock issued to former holders of Envision’s common
stock in connection with the Merger were not registered under the Securities Act
of 1933, as amended (the “Securities Act”), in reliance upon the exemption from
registration provided by Section 4(2) of the Securities Act and Regulation D
promulgated under that section, which exempts transactions by an issuer not
involving any public offering. These securities may not be offered or sold in
the U.S. absent registration or an applicable exemption from the registration
requirements. Certificates representing these shares contain a legend
stating the restrictions applicable to such shares.
Changes to the
Business.
Casita intends to carry on Envision’s business as
its sole line of business. Casita has relocated its executive offices
to 7675 Dagget Street, Suite 150, San Diego, California 92111 and its telephone
number is (858) 799-4583.
Changes to the Board of Directors and
Executive Officers.
Upon the closing of the Merger, Jose
Cisneros resigned as the sole officer and director of Casita and Robert Noble
and Jay Potter were appointed to Casita’s board of
directors. Following the Merger, Robert Noble was appointed as
Casita’s chief executive officer, president and chairman of the board, Howard
Smith was appointed as chief financial officer and treasurer and Joanna Tan was
appointed as executive vice president, chief operating officer and
secretary.
All
directors hold office for one-year terms until the election and qualification of
their successors. Officers are elected by the board of directors and
serve at the discretion of the board.
Accounting
Treatment
. The Merger is being accounted for as an acquisition
and recapitalization. Envision is the acquirer for
accounting purposes and, consequently, the assets and liabilities and the
historical operations that are reflected in the financial statements herein are
those of Envision.
Tax Treatment.
Any
gain required to be recognized will be subject to regular individual or
corporate federal income taxes, as the case may be.
Description
of Our Company
ESII’s
predecessor, Envision Solar, LLC, was formed in 2006 as a California limited
liability company. It was converted from a California limited
liability company to a California corporation pursuant to a plan of statutory
conversion on September 11, 2007. ESII has three wholly-owned
subsidiaries, Envision Solar Construction, Inc., a California corporation
(“Envision Construction”), Envision Solar Residential, Inc., a California
corporation (“Envision Residential”) and Envision Africa, LLC, a Delaware
limited liability company (“Envision Africa”).
Description
of Business
As
used in this Current Report on Form 8-K, all references to the “Company,” “we,”
“our” and “us” for periods prior to the closing of the Merger refer to ESII, and
for periods subsequent to the closing of the Merger refer to
Casita.
Overview
We are a
solar design and development company that services the sustainable and solar
building systems industries. Our services include solar
infrastructure master planning, solar master planning, solar system design and
solar system procurement and development management for commercial, industrial,
institutional and residential customers. We have also developed solar integrated
building systems including Solar Trees, Solar Rows, LifePorts and LifeVillages,
and provide a full range of solar project planning, design, engineering and
construction management services to support these products.
We were
founded in 2006 by a team of sustainable design architects with the aim of
broadening the use of solar powered technologies throughout the world, while at
the same time capitalizing on its growth in popularity. In
particular, we seek to design and develop:
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solar
parking arrays for applications on parking lots and parking
structures
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integrated
tracking technologies and systems for solar parking
arrays
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solar
integrated electric vehicle charging systems product packages,
and,
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other
solar integrated infrastructure and building systems including modular,
light gauge steel based systems with integrated battery storage
capacity, for residential, light-commercial and developing nation
applications.
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From 2007
through 2009, we completed 18 solar technology projects, including 12 parking
lot solar arrays (known as ParkSolar projects) and six residential
scale,
cold
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formed
steel installations (known as LifeSystems, which include LifePorts). In
addition, in 2008, we developed an Independent Sustainable Energy Facility
(ISEF) product for use by the military, developing nations, and others- marketed
as LifeVillage that was based upon our LifeSystems products.
The
Industry
Electric
power is used to operate businesses, industries, homes, offices and provides the
power for our communications, entertainment, transportation and medical needs.
As our energy supply and distribution mix changes, we believe that electricity
is likely to be used more frequently and pervasively for local transportation
(electric vehicles) and space/water heating needs. According to the
U.S. Department of Energy, electricity in 2008 (the last year for which data is
available) was generated from the following sources: coal – 23.9%, natural gas –
21.2%, crude oil – 10.5%, nuclear – 8.5% and renewable energy –
9.8%. “Renewable energy” typically refers to non-traditional
energy sources, including solar energy. Due to continuously increasing energy
demands, we believe the electric power industry faces the following
challenges:
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Limited Energy
Supplies.
The primary fuels that have supplied this industry,
fossil fuels in the form of oil, coal and natural gas, are limited.
Worldwide demand is predicted to increase at a time that industry experts
have concluded that supply is limited. Therefore, the increased demand
will probably result in increased prices, making it more likely that
long-term average costs for electricity will continue to
increase.
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Generation, Transmission and
Distribution Infrastructure Costs.
Historically, electricity has
been generated in centralized power plants transmitted over high voltage
lines, and distributed locally through lower voltage transmission lines
and transformer equipment. As electricity needs increase, these systems
will need to be expanded. Without further investments in this
infrastructure, the likelihood of power shortages (“brownouts” and
“blackouts”) may increase.
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Stability of Suppliers.
Since many of the major countries who supply fossil fuel are located in
unstable regions of the world, purchasing oil and natural gas from these
countries may increase the risk of supply shortages and cost
increases.
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Environmental Concerns and
Climate Change
. Concerns about global warming and greenhouse gas
emissions has resulted in the Kyoto Protocol, various states enacting
stricter emissions control laws and utilities in several states being
required to comply with renewable portfolio standards, which require the
purchase of a certain amount of power from renewable
sources.
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Solar
energy is the underlying energy source for renewable fuel sources, including
biomass fuels and hydroelectric energy. By extracting energy directly from the
sun and converting it into an immediately usable form, either as heat or
electricity, intermediate steps are eliminated. We believe, in this sense, solar
energy is one of the most direct and unlimited energy sources.
Solar
energy can be converted into usable forms of energy either through the
photovoltaic, or PV, effect (generating electricity from photons) or by
generating heat (solar thermal energy). Solar thermal systems include
traditional domestic hot water, or DHW, collectors, swimming pool collectors,
and high temperature thermal collectors (used to generate electricity in central
generating systems). DHW thermal systems are typically distributed on rooftops
so that they generate heat for the building on which they are situated. High
temperature thermal collectors typically use concentrating mirror systems and
are typically located in remote sites.
According
to PV News, California and New Jersey account for approximately 90% of the U.S.
residential market. We believe this is largely attributable to the fact that
these states currently have the most attractive incentive programs. The
California Solar Initiative provides $3.2 billion of incentives toward solar
development over 11 years. In addition, recently approved regulations
in New Jersey require solar PV power to provide 2% of New Jersey’s electricity
needs by 2020, requiring the installation of 1,500 megawatts of solar electric
power. According to DSIRE (the Database of State Incentives for Renewable
Energy) at least 18 other states also have some type of incentive program and 20
states provide some type of rebate to customers or installers of solar power
systems. We expect that such programs, as well as federal grants, tax rebates
and other incentives, all of which are discussed in greater detail below, will
continue to drive growth in the solar power market for the near
future.
Anatomy
of a Solar Power System
Solar
power systems convert the energy in sunlight directly into electrical energy
within solar cells based on the photovoltaic effect. Multiple solar cells, which
produce direct current, or DC, power, are electrically interconnected into solar
panels. A typical 180 watt solar panel may have 72 individual solar cells.
Multiple solar panels are electrically wired together. The number of solar
panels installed on a building are generally selected to meet that building’s
annual electrical usage, or selected to fill available un-shaded roof or ground
space. Solar panels are electrically wired to an inverter, which converts the
power from DC to alternating current, or AC, power and interconnects with the
utility grid.
Solar Electric Cells.
Solar
electric cells convert light energy into electricity at the atomic level. The
conversion efficiency of a solar electric cell is defined as the ratio of the
sunlight energy that hits the cell divided by the electrical energy that is
produced by the cell. By improving this efficiency, we believe solar electric
energy becomes competitive with fossil fuel sources. The earliest solar electric
devices converted about 1% - 2% of sunlight energy into electric energy. Current
solar electric devices convert 5% - 25% of light energy into electric energy
(the overall efficiency for solar panels is lower than solar cells because of
the panel frame and gaps between solar cells), and current mass produced panel
systems are substantially less expensive than earlier systems. Efforts in the
industry are currently being directed towards the development of new solar cell
technology to reduce per watt costs and increase area efficiencies.
Solar Panels.
Solar electric
panels are composed of multiple solar cells, along with the necessary internal
wiring, aluminum and glass framework, and external electrical connections.
Although panels are usually installed on top of a roof or on an external
structure, certain designs include the solar electric cells as part of
traditional building materials, such as shingles and rolled out roofing. Solar
electric cells integrated with traditional shingles is usually most compatible
with masonry roofs and, while it may offset costs for other building materials
and be aesthetically appealing, it is generally more expensive than traditional
panels.
Inverters.
Inverters convert
the DC power from solar panels to the AC power used in buildings. Grid-tie
inverters synchronize to utility voltage and frequency and only operate when
utility power is stable (in the case of a power failure these grid-tie inverters
shut down to safeguard utility personnel from possible harm during repairs).
Inverters also operate to maximize the power extracted from the solar panels,
regulating the voltage and current output of the solar array based on sun
intensity.
Monitoring.
There are two
basic approaches to access information on the performance of a solar power
system. We believe that the most accurate and reliable approach is to collect
the solar power performance data locally from the inverter with a hard-wired
connection and then transmit that data via the internet to a centralized
database. Data on the performance of a system can then be accessed from any
device with a web browser, including personal computers and cell phones. As an
alternative to web-based remote monitoring, most commercial inverters have a
digital display on the inverter itself that shows performance data and can also
display this data on a nearby personal computer with a hard-wired or wireless
connection.
Net Metering.
The owner of a
grid-connected solar electric system may not only buy, but may also sell,
electricity each month. This is because electricity generated by the solar
electric system can be used on-site or fed through a meter into the utility
grid. Utilities are required to buy power from owners of solar electric systems
(and other independent producers of electricity) under the Public Utilities
Regulatory Policy Act of 1978. California’s net metering law provides that all
utilities must allow customers with solar electric systems rated up to one
megawatt to interconnect with the local utility grid and receive retail value
for the electricity produced. When a home or business requires more electricity
than the solar power array is generating (for example, in the evening), the need
is automatically met by power from the utility grid. When a home or business
requires less electricity than the solar electric system is generating, the
excess is fed (or sold) back to the utility and the electric meter actually
spins backwards. Used this way, the utility serves as a backup to the solar
electric similar to the way in which batteries serve as a backup in stand-alone
systems.
Solar
Power Benefits
The
direct conversion of light into energy offers the following benefits compared to
conventional energy sources:
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Economic
. Once
a solar power system is installed, the cost of generating electricity is
fixed over the lifespan of the system. There are no risks that fuel prices
will escalate or fuel shortages will develop. In addition, cash paybacks
for systems range from 5 to 25 years, depending on the level of state and
federal incentives, electric rates, annualized sun intensity and
installation costs. Solar power systems at customer sites generally
qualify for net metering to offset a customer’s highest electric rate
tiers, at the retail, as opposed to the wholesale, electric
rate.
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Convenience
. Solar
power systems can be installed on a wide range of sites, including small
residential roofs, the ground, covered parking structures and large
industrial buildings. Solar power systems also have few, if any, moving
parts and are generally guaranteed to operate for 25 years resulting, we
believe, in low maintenance and operating costs and reliability compared
to other forms of power generation.
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Environmental
. We
believe solar power systems are one of the most environmentally friendly
ways of generating electricity. There are no harmful greenhouse gas
emissions, no wasted water, no noise, no waste generation and no
particulates. Such benefits continue for the life of the
system.
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Security
. Producing
solar power improves energy security both on an international level (by
reducing fossil energy purchases from hostile countries) and a local level
(by reducing power strains on local electrical transmission and
distribution systems).
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Infrastructure
. Solar
power systems can be installed at the site where the power is to be used,
thereby reducing electrical transmission and distribution costs. Solar
power systems installed and operating at customer sites may also save the
cost of construction of additional energy infrastructure including power
plants, transmission lines, distribution systems and operating
costs.
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Our
Products and Services
We are
active in the solar power industry as a designer and developer of solar power
systems on parking lots and parking structures for commercial, institutional and
municipal customers. We provide our customers with a single point of
contact for their system design, engineering work, building permit, rebate
approval, utility hookup and subsequent maintenance. We concentrate on the
design and development of grid-tied solar power systems that are able to take
advantage of net metering initiatives. We entered the
residential market in 2008 and commenced design and installation of solar
charging stations for plug-in hybrid electric vehicles in 2009. Our
services, which include sustainable infrastructure master planning, solar master
planning, solar system design and engineering, solar system procurement and
delivery, and solar system project development and turnkey management, are
provided by us, together with partner companies such as general contractors,
construction managers, solar integrators, architecture firms, planning firms,
structural engineers and electrical engineers.
Our
Products
Commercial Solar Parking
Arrays.
Our
Park
Solar designs and structures address the commercial solar parking lot array
market. Commercial parking lots and parking structures provide a tremendous
opportunity for solar deployment. They are ideal locations for the
installation of solar power systems because photovoltaic arrays require a large
physical area that is free from any obstruction that may cause shading on the
photovoltaic panels. Typical rooftops, in contrast, often have
elevator overruns, stair towers, vents, mechanical systems, screens and
waterproof membranes that interfere with direct sunlight and create a range of
solar and building performance issues. Solar parking arrays are
very attractive to property owners with large parking areas and high electric
utility bills because they shade vehicles in an aesthetic manner and create
renewable energy for the adjacent facility. Unlike traditional
rooftop-mounted solar arrays, our designs are highly attractive, are visible
commitments to environmental responsibility and create added value for each
property in the form of covered parking. We market, design and
develop solar parking arrays under the SolarTree
and
Solar Grove trademarks. Prospective customers for solar parking
arrays include corporate campuses, commercial office buildings, light industrial
facilities, shopping malls, quick service restaurants, municipal and government
buildings, schools, colleges, apartment complexes, universities, transit
authorities, hospitals and medical clinics, airports, sports arenas, amusement
parks, zoos, museums and performing arts centers and military
bases.
Our Park
Solar products for commercial solar parking lot arrays are custom designed and
installed on a project-by-project basis. Projects are acquired through direct
sales efforts by our staff and referrals through partner companies
including: independent solar power owners, project developers, solar
integrators and building industry providers (i.e., general contractors and
construction management firms). The Park Solar products are designed
for re-use and systematized mass-production, but are currently fabricated for
specific projects and erected and installed by general
contractors. Because we outsource the fabrication of our engineered
structures, we do not hold any inventory.
Electric Vehicle and Hybrid Electric
Vehicle Charging Stations.
Our electric vehicle and hybrid
electric vehicle charging station product, CleanCharge, is an integrated “solar
to smart-grid electric vehicle charging system” comprised of a Solar Tree and an
electric vehicle charging infrastructure system. CleanCharge provides
electricity to electric vehicles and plug-in hybrid electric vehicles and is
typically installed in conjunction with ParkSolar projects. The solar
charging stations will include a parking shade structure, solar PV modules,
inverters, battery back-ups and other technologies.
In
April 2009, Bright Automotive unveiled its IDEA electric vehicle in Washington,
D.C. and we designed and built a CleanCharge prototype for the event. To date,
we have installed two CleanCharge stations for Dell, Inc. in Round Rock, Texas
and one for McDonalds in San Diego, California.
Residential Scale Solar
Infrastructure Integrated Building Systems
. Our LifeSystems
product line of modular solar structures for residential and light commercial
markets offers kit-build, free-standing structures. The modular structure kits
include light-gauge steel framing, a complete standing seam metal roof,
photovoltaic modules, inverter equipment, and all fasteners and
screws. Options for cladding, windows, doors, and wall inserts are
available to customize the final product. Potential customers
for LifeSystems include existing or new construction single family home
residential developments, and existing or new construction multi-family housing
complexes. These products are not currently available in wide scale
distribution, although we have recently completed pilot
projects. Future plans for wide scale distribution will rely on
securing third party licensing and partnering agreements.
Independent Sustainable Energy
Facilities.
Our LifeVillage products offer rapid and widespread
deployment of safe, system-built, solar-integrated buildings that provide
shelter and clean energy. By creating their own clean energy,
they have the potential to provide purified water, modern communications
facilities and equipment and transmission capabilities for cell phones,
internet, radio and television. Each LifeVillage is a grouping of LifePorts in a
self-contained configuration to deliver clean, reliable energy, water and other
services. We have conceptualized and developed a comprehensive, integrated,
turn-key model to construct independent sustainable energy facilities, which
model comprises of component integration and packaging for national and
international delivery, on-site structure fabrication and construction and
reliable, scalable battery storage systems.
Our LifeVillage products are not
currently in wide scale distribution. Future plans for wide scale distribution
will rely primarily on distribution agreements with entities in overseas
markets, defense contractors, global construction and other building industry
companies. Potential uses for LifeVillage products include:
|
·
|
refugee
facilities, hospitals, clinics and
housing;
|
|
·
|
communications
companies;
|
|
·
|
retail,
housing, hospitality and
healthcare;
|
|
·
|
military,
police, postal, education and other government agencies;
and
|
|
·
|
electricity,
gas, water, power plants and co-generation
facilities
|
Products
Under Development
We have several product initiatives
under development:
|
·
|
Solar
Tree-in-a-box
-
we are developing a flat pack box, called a Solar Tree-in-a-box
to commercialize the Solar Trees, allowing for wider distribution
geographically and economies of scale for greater volume. This product is
part of our initiative called “Drive to Grid Parity,” which recognizes
that if parking lot solar arrays can be fully installed at a price point
of $5 per watt DC, we can enter markets with much favorable
economics.
|
|
·
|
EnvisionTrak
- a single axis
tracking Solar Tree which has the ability to track the sun throughout the
day, significantly increasing the output of the photovoltaic
system.
|
|
·
|
ComposiTree
- a Solar Tree
constructed of resin based, fiber-reinforced pultrusions, which will be
approximately one-quarter the weight of current Solar Trees constructed of
steel.
|
Services
We
believe that there is a growing need worldwide for our high-level, comprehensive
solar and sustainable infrastructure master planning capabilities, with projects
that include site-specific solar master plans as well as large-scale “solar
city” master planning projects. In addition to typical planning considerations
of fresh and waste water, energy, building, transportation and other
infrastructure components, we integrate all viable renewable energy options and
other environmental/sustainable components into our plans.
Markets for our services include local,
state and federal/national governments, corporations and
institutions. Planning and design services can be provided for
corporate campuses, commercial office buildings, light industrial facilities,
shopping malls, municipal and government buildings, schools, colleges, apartment
complexes, universities, transit authorities, hospitals and medical clinics,
airports, sports arenas, amusement parks, zoos, museums and performing arts
centers, military bases, new construction single family home residential
developments and existing or new construction multi-family housing
complexes.
Sustainable Infrastructure Master
Planning.
We have the capability to provide sustainable infrastructure
master planning (SIMP) services to governments, corporate organizations, and
institutions including but not limited to the following areas: solar, wind,
geothermal, biomass, anaerobic digestion and other sustainable/renewable energy
sources. SIMP involves evaluation of the entire range of sustainability options
available to a government, corporate organization or institution and making
recommendations through a comprehensive plan. SIMP includes development of an
integrated overall project sustainability strategy, consideration and assembly
of governmental, academic, non-governmental and private sector co-participants
and review and consideration of sustainable design, technology, infrastructure
and “best practices” including but not limited to solar, wind, geothermal,
biomass, anaerobic digestion and other sustainable/renewable energy sources. As
part of the planning process, we develop the project design guidelines, produce
the building and structure concept design, define the project scheduling,
participate in the development and review of all cost estimates and budgeting,
coordinate US Green Building Council’s Leadership in Energy and Environmental
Design (LEED) analyses, and assess relevant technologies, qualifications and
capabilities of manufacturers, contractors and service providers. We also
represent our clients in the planning and support of entitlement and approvals
as well as participation in the review of environmental impact
reports.
Solar Master
Planning.
We have the capability to provide solar master
planning services to governments, corporate organizations, and institutions
including but not limited to the following areas: rooftop, ground-mount, BIPV
(Building Integrated Photovoltaic) and Solar Integrated Infrastructure and
Building Systems (SIIBS). Examples of SIIBS
include
elevated solar parking lot arrays (Solar Tree and Solar Row), residential
systems (LifeSystems) and Life Village. Solar master planning
services involve evaluation of the entire range of solar energy options
available to a government, corporate organization or institution and making
recommendations through a comprehensive plan. As part of the planning
process, we develop an integrated overall project solar strategy, provide solar
site recommendations, analyze the four major types of solar
installation: rooftop, ground-mount, BIPV and SIIBS, calculate solar
system sizes, annual energy output and cost estimates, assess solar technology
including solar-thermal and solar-photovoltaic and evaluate the qualifications
and capabilities of solar manufacturers and service
providers. In addition, we develop the project solar design
guidelines and performance standards, plan and support entitlement processing
and approvals, define the project scheduling and participate in the development
and review of all cost estimates and budgeting.
Solar System Design and
Engineering.
We have the capability to provide solar system
design services to governments, corporate organizations and
institutions. Examples of solar system designs include photovoltaic
rooftop systems, photovoltaic ground mount systems, BIPV systems and solar
integrated infrastructure building systems (SIIBS).
This service entails site- specific
analysis, preliminary drawing, financial analysis and calculation of system size
and annual power output. Following completion of this analysis, we design a
solar system and present it to the client and provide the client with a concept
design, schematic design, design development, landscape design and with civil,
geotechnical, structural and electrical engineering analysis. The industrial
design phase includes the design of the solar system structure, racking system
and tracking if applicable.
Solar System Procurement and
Delivery.
This service entails the fabrication and delivery of
solar infrastructure integrated building systems (SIIBS).
Solar System Project Development and
Turnkey Management.
This service includes all of the
deliverables provided with our solar system design and engineering and solar
system procurement and delivery services, and project management.
Future
Services
Additional services we may offer in the
future include solar system operations and maintenance and systems monitoring
and data acquisition, which entails assisting customers in the selection of
system monitoring equipment and coordinating the installation of the monitoring
system.
Competition
The solar
power design and integration industry is in its early stages of development and
is highly fragmented. Competitors in our market include: SPG Solar,
SunPower, Solar Power Inc., Borrego Solar, Akeena Solar, and Baja Construction.
A number of these competitors are significantly larger and have substantially
greater resources than we do and are able to achieve greater economies of scale
and lower cost structures than us and may, therefore, be able to provide their
products to customers at lower prices than we are able to. Moreover, we cannot
be certain that our competitors will not develop the expertise, experience and
resources to offer products that are superior in both price and quality to our
products. Similarly, we cannot be certain that we will be able to maintain or
enhance our competitive position within our industry, maintain our customer base
at current levels or increase our customer base. In addition to the
foregoing, we also face competition from installers and integrators of solar
systems, photovoltaic module manufacturers, independent solar power owners,
renewable energy developers, solar architects, architectural firms and
construction firms.
Strategy
Our
strategy is to build upon our foundation of solar architecture and industrial
design, long-term experience in the building and construction industry with
technology innovation, advanced product development and engineering. We
currently derive our revenues from various services, including: sustainable
infrastructure master planning, solar master planning, design/engineering
services, project development, project management, construction services, system
integration, operations and maintenance. Our long-term revenue model is to
commercialize all of our designs for easy, standardized, drop-ship customer
delivery worldwide.
Customers
Our customer base is varied. Our Park
Solar customers include: McBride Electric for a project with Dell
Inc., Conengy for a project with Centocor Inc., Borrego Solar for a
project with the University of California -San Diego, Macerich/TFO
Architects for a project at Santa Monica Place, Sun Edison for a
project with the California State University-Bakersfield and AMSolar for a
project with a McDonald’s franchisee. Our solar master plan customers
include The Centre for Environmental Planning and Technology in Gujarat,
India.
Suppliers
We are
not a manufacturer and do not source raw materials. The main
components of the Park Solar products are photovoltaic panels, inverters and the
steel structures (such as Solar Trees) that support the photovoltaic
panels. We do not typically purchase the photovoltaic panels or
inverters directly. In most cases, the solar system owner will
purchase these components. The solar system owner is typically either
the end user of the Park Solar product or the project developer (e.g. a power
purchase agreement provider). The steel structures that support
the photovoltaic panels are typically supplied directly to the general
contractors who work on our behalf by steel providers. Our direct
principal suppliers are vendors such as general contractors and structural
engineers.
Research
and Development
We not only supply and develop solar
power systems, but we also seek to develop new technologies and products that
will promote the expansion of the industry. During the fiscal years
ended December 31, 2007 and 2008 and the period ended September 30, 2009, we
spent $13,785, $127,337, and $0 respectively, on research and development
activity, none of which was borne directly by our
customers.
Intellectual
Property
Patents
We have
been issued U.S. Patent # 0194669 from the U.S. Patent and Trademark Office for
EnvisionTrak – a Sun Tracking Solar Panels (i.e a dual-axis tracking Solar
Tree
)
. In
addition, we have a patent pending that covers key claims of our LifePort
technology (Support System For A Photovoltaic System – Application
#11/842,484).
Registered
Trademarks
We have
registered the trademarks “Solar Tree” for prefabricated metal carport systems
composed of photovoltaic modules, electrical inverters and supporting structures
for generating electric power from solar radiation and for providing shade for
vehicles, “Solar Grove” for multiple carport systems composed of photovoltaic
modules, electrical inverters and supporting structures for generating electric
power from solar radiation and for providing shade for vehicles and “LifePort”
for prefabricated metal buildings. Previously, under an exclusive
licensing agreement with Kyocera Solar that expired December 31, 2008, the Solar
Tree and Solar Grove marks could only be used with Kyocera Solar
products. We purchased these marks from Kyocera Solar, Inc. and can
use them in connection with any photovoltaic systems supplied by any third
party.
Strategic
Technology Developments
Other technology initiatives that we
are actively developing include the ComposiTree and the Solar Tree-in-a-box.
We plan
to apply for additional patents for LifeSystems products and the LifeVillage
Independent Sustainable Energy Facilities.
Regulatory
Matters
Our
operations are subject to a variety of national, federal, state and local laws,
rules and regulations relating to worker safety, zoning, building and electrical
codes, and the use, storage, discharge and disposal of environmentally sensitive
materials. Because we purchase and do not manufacture our solar power systems,
we do not use, generate, store or discharge toxic, volatile or otherwise
hazardous chemicals and wastes. We do not engage in such activities in
connection with our research and development activities. We believe that we are
in compliance in all material respects with all laws, rules, regulations and
requirements that affect our business. Further, we believe that compliance with
such laws, rules, regulations and requirements does not impose a material
impediment on our ability to conduct business.
We
believe that economic and national security issues, technological advances,
environmental regulations seeking to limit emissions from the use of fossil
fuels, air pollution regulations restricting the release of greenhouse gasses,
aging electricity transmission infrastructure and limited and sometimes
unreliable supply of fossil fuels, has made reliance on traditional sources of
fuel for generating electricity less attractive. Government policies, in the
form of both regulation and incentives, have accelerated the adoption of solar
technologies by businesses and consumers. For example, in the United States, the
2005 energy bill enacted for three years a 30% investment tax credit for solar
which was renewed and extended for an additional eight years in November 2008,
and in February 2009 an alternative cash rebate program was approved. In
January 2006, California approved the largest solar program in the
country’s history that provides for long term subsidies in the form of rebates
to encourage use of solar energy where possible.
Despite
the benefits of solar power, there are also certain risks and challenges faced
by users of solar power. Solar power is heavily dependent on government
subsidies to promote acceptance by mass markets. We believe that the
near-term growth in the solar energy industry depends significantly on the
availability and size of these government subsidies and on the ability of the
industry to reduce the cost of generating solar electricity. The
market for solar energy products is, and for some time will continue to be,
heavily dependent on public policies that support growth of solar energy. There
can be no assurances that such policies will continue. Decreases in
the levels of rebates, incentives or other governmental support for solar energy
would have an adverse affect on our ability to sell our products.
Government Subsidies and
Incentives
Various
subsidies and tax incentive programs exist at the federal and state level to
encourage the adoption of solar power, including capital cost rebates,
performance-based incentives, feed-in tariffs, tax credits and net metering.
Capital cost rebates provide funds to a customer based on the cost or size of
the customer’s solar power system. Performance-based incentives provide funding
to a customer based on the energy produced by the customer’s solar system. Under
a feed-in tariff subsidy, the government sets prices that regulated utilities
are required to pay for renewable electricity generated by end-users. The prices
are set above market rates and may be differentiated based on system size or
application. Feed-in tariffs pay customers for solar power system generation
based on kilowatt-hours produced, at a rate generally guaranteed for a period of
time. The federal government will provide grants equal to 30% of the cost of
commercial solar power systems placed in service in 2009 and 2010, and solar
power systems that are not placed into service prior to December 31, 2010
qualify for the grants so long as construction begins prior to December 31, 2010
and they are placed into service by December 31, 2017.
Tax credits reduce a
customer’s taxes at the time the taxes are due. There is currently a 30% federal
tax credit for residential and commercial solar power systems. Commercial
customers can elect either a 30% cash payment from the federal grant program or
the traditional tax credit. Effective from the beginning of 2009, the $2,000 cap
on the federal tax credit for residential solar power systems has been removed,
and that credit is now uncapped. Several states currently offer state
tax credits as well. Under net metering, a customer can generate more
energy than the customer uses, during which periods the electricity meter will
spin backwards. During these periods, the customer “lends” electricity to the
grid, retrieving an equal amount of power at a later time. Net metering programs
used in several states enable end-users to sell excess solar electricity to
their local utility in exchange for a credit against their utility bills. Net
metering programs are usually combined with rebates, and do not provide cash
payments if delivered solar electricity exceeds their utility
bills. In addition, several states have adopted renewable portfolio
standards, or RPS, which mandate that a certain portion of electricity delivered
to a customer come from a list of eligible renewable energy
resources. Under a RPS the government requires regulated utilities to
supply a portion of their total electricity generation in the form of
electricity from renewable sources. Some programs further specify that a portion
of the renewable energy quota must be from solar generated
electricity.
Building
Codes
We are
required to obtain building permits and comply with local ordinances and
building and electrical codes for each project, the cost of which is included in
our estimated costs for each proposal.
Employees
As of
January 30, 2010, we had a total of five full time employees, two of whom are
consultants. Our employees are not party to any collective bargaining agreement.
We believe our relations with our employees are good.
Property
We lease
approximately 4,200 square feet of office space in San Diego pursuant to a lease
that shall expire in 2013. This facility serves as our corporate
headquarters.
In
connection with our entry into this lease, we issued to our landlord and real
estate broker a 10% convertible note in the amount of $100,000, which shall
become due on December 18, 2010 and is subordinated in right of payment to the
prior payment in full of all of our existing and future senior indebtedness. The
holders of the note may, at their option, convert all or a portion of the
outstanding principal amount and unpaid accrued interest as of the date of
conversion into shares of our common stock equal to one share for each $0.33 of
outstanding principal and unpaid accrued interest. In the event that we receive
more than $1,000,000 in a financing or a series of financings (whether related
or unrelated) prior to the maturity date of the note, 25% of the proceeds from
any such financing in excess of $1,000,000 shall be used to pay down the note.
Any funds provided to us by Gemini Master Fund, Ltd. (“Gemini”) or any person or
entity that co-invests with Gemini shall not be credited towards the $1,000,000
threshold.
Our rents
for the periods following the maturity date of the note are set forth
below:
|
Period
|
Rent
|
|
December
19, 2010 through December 18, 2011
|
$8,418.00
per month
|
|
December
19, 2011 through December 18, 2012
|
$8,670.54per
month
|
|
December
19, 2012 through December 18, 2013
|
$8,930.66
per month
|
Legal
Proceedings
From time
to time, we may be involved in litigation relating to claims arising out of our
operations in the normal course of business. As of February 10, 2010,
there were no pending or threatened lawsuits that could reasonably be expected
to have a material effect on the results of our operations except for the
following suits, all filed in the Superior Court of California, County of San
Diego:
We are
party to a wrongful termination suit filed in August 2009 by one of our former
employees. The employee was an “at-will” employee under California
employment law and claims that he was promised a job as in-house counsel, which
never materialized. The plaintiff is seeking general and special damages and
punitive damages. We successfully demurred to the
plaintiff’s complaint. The plaintiff amended his complaint, we answered it and
we are now in the discovery stage. We deny any liability under this
claim.
We are
party to a lawsuit filed in the Superior Court of California, County of San
Diego in July 2009. The plaintiff alleges, among other things, that we
misrepresented the number of installation contracts we had entered into in order
to induce it to invest in our 2008 private placement and enter into projects
with us. The lawsuit seeks to recover $250,000 in investments made in the
private placement and approximately $166,000 plus interest at 10% from April 1,
2009 in monies owed for project work in 2008 and 2009. We are currently
responding to the plaintiff’s discovery demands. We deny any liability under
this claim.
We were
sued by our former landlord in May 2009 for, among other things, unpaid rent and
damages. We vacated the premises on December 20, 2009 and the landlord
repossessed the premises on January 1, 2010. We are attempting to settle this
suit.
On February 4, 2010, we were sued by a
former vendor for, among other things, breach of contract, fraud and unjust
enrichment for approximately $140,000. The plaintiff alleges that we failed to
pay it for steel columns and associated labor it provided to us in connection
with one of our projects. We are reviewing the claim and have had no further
communications with the plaintiff.
There are
no proceedings in which any of our directors, officers or affiliates, or any
registered or beneficial shareholder, is an adverse party or has a material
interest adverse to our interest.
Forward-Looking
Statements
Statements
in this Current Report on Form 8-K and other written reports made from time to
time by us that are not historical facts constitute so-called “forward-looking
statements,” all of which are subject to risks and uncertainties.
Forward-looking statements can be identified by the use of words such as
“expects,” “plans,” “will,” “forecasts,” “projects,” “intends,” “estimates,” and
other words of similar meaning. Forward-looking statements are likely to address
our growth strategy, financial results and product and development programs,
among other things. One must carefully consider any such statement and should
understand that many factors could cause actual results to differ from our
forward-looking statements. Such risks and uncertainties include but are not
limited to those outlined in the section entitled “Risk Factors” and other risks
detailed from time to time in our filings with the SEC or otherwise. These
factors may include inaccurate assumptions and a broad variety of other risks
and uncertainties, including some that are known and some that are not. No
forward-looking statement can be guaranteed and actual future results may vary
materially.
Information
regarding market and industry statistics contained in this Report is included
based on information available to us that we believe is accurate. It
is generally based on industry and other publications that are not produced for
purposes of securities offerings or economic analysis. We have not
reviewed or included data from all sources, and cannot assure investors of the
accuracy or completeness of the data included in this
Report. Forecasts and other forward-looking information obtained from
these sources are subject to the same qualifications and the additional
uncertainties accompanying any estimates of future market size, revenue and
market acceptance of products and services. We do not assume any
obligation to update any forward-looking statement. As a result,
investors should not place undue reliance on these forward-looking
statements.
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
This
discussion should be read in conjunction with the other sections of this Report,
including “Risk Factors,” “Description of Business” and the Financial Statements
attached hereto pursuant to Item 9.01 and the related exhibits. The
various sections of this discussion contain a number of forward-looking
statements, all of which are based on our current expectations and could be
affected by the uncertainties and risk factors described throughout this
Report. See “Forward-Looking Statements.” Our actual results may
differ materially.
Recent
Events
Prior to
February 10, 2010, we were a “shell company”, as defined by the Securities and
Exchange Commission, without material assets or activities. On February 10,
2010, we completed a merger, pursuant to which a wholly owned subsidiary of ours
merged with and into Envision, with Envision being the surviving corporation and
becoming our wholly owned subsidiary. In connection with this merger, we
discontinued our former business and succeeded to the business of Envision as
our sole line of business. The merger is being accounted for as a
recapitalization
,
with
Envision deemed to be the accounting acquirer and Casita the acquired company.
Accordingly, Envision’s historical financial statements for periods prior to the
merger have become those of the registrant (Casita) retroactively restated for,
and giving effect to, the number of shares received in the merger. The
accumulated earnings of Envision were also carried forward after the
acquisition. Operations reported for periods prior to the merger are those of
Envision.
Overview
We are a solar design
and development company that services the sustainable and solar building systems
industries. We have developed solar parking arrays on parking
lots and parking structures and solar integrated building systems and provide
services including solar infrastructure master planning, solar master planning,
solar system design and solar system procurement and management for commercial,
industrial, institutional and residential customers.
Critical
Accounting Policies
Use of
Estimates
. The preparation of financial statements in
accordance with generally accepted accounting principles in the U.S. (“U.S.
GAAP”) requires us to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosures of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. The financial statements
include estimates based on currently available information and our judgment as
to the outcome of future conditions and circumstances. Significant estimates in
these financial statements include useful lives and impairment of long-lived
assets, realization of certain tax benefits, collectability of accounts
receivable and construction progress billing under the completed contract method
of revenue recognition. Changes in the status of certain facts or
circumstances could result in material changes to the estimates used in the
preparation of the financial statements and actual results could differ from the
estimates and assumptions.
Revenue Recognition.
Revenues
are computed on the “completed contract method” of accounting in accordance with
SOP 81-1, Accounting for Performance of Construction-Type and Certain Production
Type Contracts, whereby revenues are recognized when the contract is complete.
However, in the event a loss on a contract is foreseen, we will recognize the
loss as it is incurred. Payments received in advance of the performance of
services or of the delivery of goods are deferred as liabilities until the
services are performed or the goods are delivered. We include shipping and
handling fees billed to customers as revenues and shipping and handling costs as
cost of revenues.
Additionally,
we follow the guidance of EITF Issue 01-9, Accounting for Consideration Given by
a Vendor to a Customer and EITF Issue 02-16, Accounting By a Customer (Including
a Reseller) for Certain Considerations Received from
Vendors. Accordingly, any incentives received from vendors are
recognized as a reduction of the cost of products. Cash incentives provided to
our customers are recognized as a reduction of the related sale price, and,
therefore, are a reduction in sales.
Stock Based
Compensation.
At inception, we adopted SFAS 123(R), Share
Based Payment and Related Interpretations (“SFAS 123(R)”). SFAS 123(R) requires
companies to estimate and recognize the fair value of stock-based awards to
employees and directors. The value of the portion of an award that is ultimately
expected to vest is recognized as an expense over the requisite service periods
using the straight-line attribution method. We estimate the fair
value of each stock option at the grant date by using the Black-Scholes option
pricing model.
Changes in Accounting
Principles
. No significant changes in accounting principles
were adopted during fiscal 2007 and 2008, or during the first nine months ended
September 30, 2009.
Fair Value
Measurements
. SFAS 157, Fair Value Measurements (“SFAS 157”)
is effective for financial assets and liabilities in fiscal years beginning
after November 15, 2007, and for non-financial assets and liabilities in fiscal
years beginning after November 15, 2008. We adopted SFAS 157 for financial
assets and liabilities in fiscal 2008 with no material impact to our financial
statements. We are currently evaluating the potential impact of the application
of SFAS 157 on our nonfinancial assets and liabilities.
SFAS 157
applies to all assets and liabilities that are being measured and reported on a
fair value basis. SFAS 157 requires new disclosure requirements that establish a
framework for measuring fair value in accordance with U.S. GAAP, and expands
disclosure requirements pertaining to fair value measurements. SFAS 157 enables
the reader of the financial statements to assess the inputs used to develop
those measurements by establishing a hierarchy for ranking the quality and
reliability of the information used to determine fair values. The statement
requires that assets and liabilities carried at fair value be classified and
disclosed in one of the following three categories:
Level 1:
Quoted market prices in active markets for identical assets or
liabilities.
Level 2:
Observable market based inputs or unobservable inputs that are corroborated by
market data.
Level 3:
Unobservable inputs that are not corroborated by market data.
In
determining the appropriate levels, we perform a detailed analysis of the assets
and liabilities that are subject to SFAS 157. At each reporting period, all
assets and liabilities for which the fair value measurement is based on
significant unobservable inputs are classified as Level 3.
Fair Value of Financial
Instruments
. Fair value represents our best estimate based on
a range of methodologies and assumptions. Advances to companies controlled by
shareholders and the advances from ultimate shareholders are presumed to have a
fair value measured by the cash proceeds exchanged at issuance in accordance
with APB-21, Interest on Receivables and Payables.
Unrecognized Tax
Benefits
. On January 1, 2007, we adopted the provisions of FIN
48, Accounting for Uncertainty in Income Taxes, (“FIN 48”) which is an
interpretation of SFAS 109, Accounting for Income Taxes (“SFAS 109”). FIN 48
prescribes a recognition threshold that a tax position is required to meet
before being recognized in the financial statements and provides guidance on
de-recognition, measurement, classification, interest and penalties, accounting
in interim periods, disclosure and transition issues. FIN 48 contains a two-step
approach to recognizing and measuring uncertain tax positions accounted for in
accordance with SFAS 109. The first step is to evaluate the tax position for
recognition by determining if the weight of available evidence indicates that it
is more likely than not that the position will be sustained upon ultimate
settlement with a taxing authority, including resolution of related appeals or
litigation processes, if any. The second step is to measure the tax benefit as
the largest amount that is more than 50% likely of being realized upon ultimate
settlement. Prior to January 1, 2007 and the implementation of FIN 48, we
recorded tax contingencies when the exposure item became probable and reasonably
estimable, in accordance with SFAS 5, Accounting for Contingencies. The adoption
of FIN 48 has not had a material effect on our financial position or results of
operations for the years ended December 31, 2008 and 2007 or the nine months
ended September 30, 2009.
We do not
expect our unrecognized tax benefits to change significantly over the next
twelve months.
Classification of Interest and
Penalties
. Additionally, FIN 48 requires that we accrue
interest and related penalties, if applicable, on all tax positions for which
reserves have been established consistent with jurisdictional tax
laws. Our policy to include interest and penalties related to
unrecognized tax benefits within the provision for income taxes did not change
as a result of adopting FIN 48.
Results
of Operations
Nine
Months Ended September 30, 2009 Compared to Nine Months Ended September 30,
2008
Revenue.
For
the nine months ended September 30, 2009, our revenue was $715,522, compared to
$973,018 for the same period in 2008, representing a decrease of
26%. This decline in revenue was primarily attributable to our
current and potential customers’ inability to obtain financing for solar
projects as a result of recent market conditions. In particular,
revenue received from subcontracting out installation and electrical work was
$46,704 for the nine months ended September 30, 2009, compared to $240,167 for
the same period in 2008, a decrease of 81% and Envision Construction’s revenue
was $431,538 for the nine months ended September 30, 2009 compared to $727,851
for the same period in 2008, a decrease of 41%. The decrease in our
revenue was offset by an increase in architectural design fee income of $224,173
compared to $0 for the same period in 2008.
Gross Profit.
For
the nine months ended September 30, 2009, our gross profit was $349,106,
compared to a gross loss of $337,954 for the same period in 2008, representing
an increase of 197%. This increase in our gross profit resulted primarily from
the lower costs of raw materials and favorable pricing terms in our
contracts.
Operating
Expenses.
Excluding stock based compensation, total operating
expense was $1,100,640 for the nine months ended September 30, 2009, compared to
$3,707,491 for the same period in 2008, a decrease of 71%. This
reduction was primarily caused by lower operating expenses, employee-related
costs, marketing expenses and travel expenses. Employee-related costs
decreased from $1,099,509 to $564,507, marketing expenses decreased from
$168,536 to $33,777, travel expenses decreased from $252,396 to
$41,920 and consulting expenses decreased from $401,640 to
$71,986. These reductions were offset by an increase in bad debt
expense of $72,101.
Provision for Income
Taxes.
Our income taxes for the nine months ended September
30, 2009 were $3,219, compared to $8,408 compared to the same period in 2008, a
decrease of 62%. We did not incur any federal tax liability in 2009
and 2008 because we incurred operating losses in those
years. However, we were obligated to pay certain state and local
income taxes associated with our operations in the State of
California.
Net Earnings.
We
generated net losses of approximately $3,558,000 for the nine months ended
September 30, 2009 compared to approximately $8,356,000 for the same period in
2008, a decrease of 12.5%.
Approximately $2,449,000
of the 2009 loss is attributable to non-cash charges associated with stock
related compensation.
Year
Ended December 31, 2008 Compared to Year Ended December 31, 2007
Revenue.
Total
revenue increased from $52,661 in 2007 to $2,418,391 in 2008, an increase of
4,492%. The increase in revenue during 2008 was primarily
attributable to the rapid growth in solar installations as customers rushed to
complete solar project installations prior to the expected expiration of federal
tax credits for solar projects. We were awarded 5 major
contracts which required substantial project completion by December 31,
2008. These projects accounted for approximately $2,100,000 of our
total revenue in 2008.
Gross Margin.
Our
gross loss increased from approximately $95,086 in 2007 to $477,073 in 2008, an
increase of 402%, because we completed our backlog of contracts that required
substantial project completion by December 31, 2008. The increase in
gross loss in 2008 was primarily attributable to an unexpected increase in the
cost of steel between the dates we were awarded the contracts and the dates we
procured the steel for the projects covered by the contracts and our use of
sub-contractors, whom we paid an aggregate amount of $1,448,627 in
2008. We did not use sub-contractors in 2007.
Operating
Expenses.
Operating expenses increased from approximately
$3,186,706 in 2007 to approximately $9,076,473 in 2008, an increase of
230%. Most of the increase was due to an increase in stock related
compensation charges from $1,831,553 in 2007 to $4,363,912 in 2008 in connection
with the issue of incentive options to our employees and
consultants. Overhead costs related to workforce growth also caused
operating expenses to increase because salaries and related payroll costs
increased as we hired additional individuals to meet expected future
demand. However, many of our contracts were voided by our customers
because they were not able to secure financing to pay for solar installations
and the expected demand did not materialize. The canceled contracts were not
accompanied by a concurrent commensurate decrease in operating expenses as we
did not immediately reduce salaries and related payroll costs.
Intangible Asset
Impairment.
In January 2008, we entered into an asset purchase
agreement with Generating Assets, LLC, a Delaware limited liability (“Generating
Assets”), pursuant to which we acquired the assets and assumed the liabilities
of Generating Assets. In particular, we acquired all rights, titles
and interests to all of Generating Assets’ intellectual property, including the
name “Generating Assets, LLC”, transferable or assignable licenses, certain
contracts and the right to negotiate final agreements with certain third
parties. In exchange for these rights, we assumed all obligations
under the assigned contracts, certain predetermined operating liabilities, paid
a cash fee of $9,000, issued 10,000 shares of our common stock valued at $10.00
per share and issued an option to purchase 168,980 shares of our common stock
for a total consideration of approximately $1,267,000. We
subsequently determined that these assets were impaired and took a charge of
approximately $1,358,000 to adjust the carry value of the
assets. This charge is included in our operating expenses for the
fiscal year ended December 31, 2008.
Provision for Income Taxes.
Our income taxes increased from $800 in 2007 to $9,420 in 2008, an
increase of 1,176%. Because we incurred operating losses in both
years, we did not incur any federal tax liability. However, we were
obligated to pay certain state and local income taxes associated with our
operations in the State of California.
Net Loss.
Our net
loss increased from approximately $3,283,000 in 2007 to $9,595,000 in 2008, an
increase of 292%, due to factors mentioned in our discussion of operating
expenses set forth above. Of this loss, approximately $5,722,000 in
2008 was attributable to non-cash charges associated with stock related
compensation and the asset impairment charge to earnings with respect to the
acquisition of Generating Assets.
Liquidity
and Capital Resources
General.
At
September 30, 2009, we had cash and cash equivalents of approximately $20,000.
We have historically met our cash needs through a combination of cash flows from
operating activities and proceeds from private placements of our securities. Our
cash requirements are generally for operating activities. We believe that our
cash balance at the time of the Merger should be sufficient to finance our cash
requirements for expected operational activities, capital improvements, and
partial repayment of debt through the next 4 months.
Our
operating activities generated a deficit cash flow of approximately $98,000 for
the nine month period ended September 30, 2009, and we used cash in operations
of approximately $2,248,000 during the same period in the prior year. The
principal elements of cash flow from operations for the nine months ended
September 30, 2009 included a net loss of $3,557,679, bad
debt expense of $72,101, depreciation expense of $45,398, stock-based
compensation expense of $2,449,000 and decreased investment in operating working
capital elements of approximately $563,000.
Cash
generated in our financing activities was $115,504 for the nine months ended
September 30, 2009, compared to cash generated of approximately $2,325,000
during the comparable period in 2008. This decrease was primarily
attributed to an operating loss from operations.
Cash used
in investing activities during the nine months ended September 30, 2009 was
approximately $0 for additions to property and equipment, compared to $181,403
during the same period in 2008. This decrease was primarily
attributable to a reduction in capital expenditures.
As of
September 30, 2009, current liabilities exceeded current assets by 31 times.
Current assets decreased from $247,544 at December 31, 2008 to $74,118 at
September 30, 2009 while current liabilities increased to $2,288,000 at
September 30, 2009 from $1,798,000 during the same period in 2008. As a result,
our working capital increased from a deficit of $1,550,307 at December 31, 2008
to a deficit of $2,213,573 at September 30, 2009.
Factors
That May Affect Future Operations
We
believe that our future operating results will continue to be subject to
quarterly variations based upon a wide variety of factors, including the
cyclical nature of the solar industry and the markets for our products. Our
operating results could also be impacted by a continued weakening of the U.S.
economy as well as the general availability of credit to our customers who are
dependent upon obtaining bank loans to finance solar projects. We predominately
sell to customers in the commercial and state
government markets. Accordingly, changes in the condition
of any of our customers may have a greater impact than if our sales were more
evenly distributed between different end markets.
Off
Balance Sheet Transactions and Related Matters
We
have no off-balance sheet transactions, arrangements, obligations (including
contingent obligations), or other relationships with unconsolidated entities or
other persons that have, or may have, a material effect on our financial
condition, changes in financial condition, revenues or expenses, results of
operations, liquidity, capital expenditures or capital resources.
Recent
Accounting Pronouncements
Accounting for Noncontrolling
Interests in Consolidated Financial Statements.
In December
2007, the Financial Accounting Standards Board (“FASB”) issued SFAS 160,
Noncontrolling Interests in Consolidated Financial Statements (“SFAS 160”), an
amendment of ARB 51, Consolidated Financial Statements, which changes the
accounting and reporting for minority interests. Minority interests will be
recharacterized as non-controlling interests and will be reported as a component
of equity separate from the parent’s equity, and purchases or sales of equity
interests that do not result in a change in control will be accounted for as
equity transactions. In addition, net income attributable to the noncontrolling
interest will be included in consolidated net income on the face of the income
statement and, upon a loss of control, the interest sold, as well as any
interest retained, will be recorded at fair value with any gain or loss
recognized in earnings. SFAS 160 is effective for us beginning January 1, 2009
and will apply prospectively, except for the presentation and disclosure
requirements, which will apply retrospectively. We do not believe that adoption
of SFAS 160 will have an impact on our consolidated financial
statements.
In May
2009, FASB issued an accounting standard that became part of ASC Topic 855,
Subsequent Events (“ASC Topic 855”). ASC Topic 855 establishes
general standards of accounting for and disclosure of events that occur after
the balance sheet date but before financial statements are issued or are
available to be issued. ASC Topic 855 sets forth (1) the period after
the balance sheet date during which management of a reporting entity should
evaluate events or transactions that may occur for potential recognition or
disclosure in the financial statements, (2) the circumstances under which an
entity should recognize events or transactions occurring after the balance sheet
date in its financial statements and (3) the disclosures that an entity should
make about events or transactions that occurred after the balance sheet
date. ASC Topic 855 is effective for interim or annual financial
periods ending after June 15, 2009. The adoption of ASC Topic 855 did
not have a material effect on our financial statements.
In June 2009, FASB issued an accounting
standard whereby the FASB Accounting Standards Codification (the “Codification”)
will be the single source of authoritative nongovernmental U.S.
GAAP. Rules and interpretive releases of the SEC under authority of
federal securities laws are also sources of authoritative GAAP for SEC
registrants. ASC Topic 105, Generally Accepted Accounting Principles
(“ASC 105”) is effective for interim and annual periods ending after September
15, 2009. All existing accounting standards are superseded as
described in ASC Topic 105. All other accounting literature not
included in the Codification is non-authoritative. The Codification
is not expected to have a significant impact on our financial
statements.
Risk
Factors
There
are numerous and varied risks, known and unknown, that may prevent us from
achieving our goals. If any of these risks actually occur, our
business, financial condition or results of operation may be materially
adversely affected. In such case, the trading price of our common
stock could decline and investors could lose all or part of their
investment.
Risks
Related to Our Business
We
have sustained recurring losses since inception and expect to incur additional
losses in the foreseeable future.
We were
formed on June 12, 2006 and have reported annual net losses since inception. For
our fiscal years ended December 31, 2008 and December 31, 2007, we experienced
losses of approximately $9,600,000 and $3,283,000, respectively. We
also sustained a loss of approximately $3,558,000 for the period ended
September 30, 2009. As of December 31, 2008, we had an accumulated
deficit of approximately $13,200,000 which increased to approximately
$16,700,000 as of the period ended September 30, 2009. In addition, we expect to
incur additional losses in the foreseeable future, and there can be no assurance
that we will ever achieve profitability. Our future viability, profitability and
growth depend upon our ability to successfully operate and expand our
operations. There can be no assurance that any of our efforts will prove
successful or that we will not continue to incur operating losses in the
future.
We
do not have substantial cash resources and if we cannot raise additional funds
or generate more revenues, we will not be able to pay our vendors and will
probably not be able to continue as a going concern.
As of
February 10, 2010, our available cash balance was approximately $5,500
.
We will need to raise
additional funds to pay outstanding vendor invoices and execute our business
plan. Our future cash flows depend on our ability to enter into, and
be paid under, contracts for the construction of solar energy projects and our
ability to sell our debt and equity securities on terms satisfactory to
us. There can be no assurance that additional funds will be available
when needed from any source or, if available, will be available on terms that
are acceptable to us.
We may be
required to pursue sources of additional capital through various means,
including joint venture projects and debt or equity financings. Future
financings through equity investments will be dilutive to existing
stockholders. Also, the terms of securities we may issue in future capital
transactions may be more favorable for our new investors. Newly issued
securities may include preferences, superior voting rights, the issuance of
warrants or other convertible securities, which will have additional dilutive
effects. Further, we may incur substantial costs in pursuing future capital
and/or financing, including investment banking fees, legal fees, accounting
fees, printing and distribution expenses and other costs. We may also be
required to recognize non-cash expenses in connection with certain securities we
may issue, such as convertible notes and warrants, which will adversely impact
our financial condition and results of operations.
Our
ability to obtain needed financing may be impaired by such factors as the
weakness of capital markets, both generally and specifically in the renewable
energy industry, and the fact that we have not been profitable, which could
impact the availability or cost of future financings. If the amount of capital
we are able to raise from financing activities, together with our revenues from
operations, is not sufficient to satisfy our capital needs, even to the extent
that we reduce our operations accordingly, we may be required to cease
operations.
We
have a limited operating history, and it may be difficult for potential
investors to evaluate our business.
We began
operations in June 2006. Our limited operating history makes it difficult for
potential investors to evaluate our business or prospective operations. Since
our formation, we have generated only limited revenues. Our revenues were
approximately $2,418,000 and approximately $53,000 for the years ended
December 31, 2008 and December 31, 2007, respectively. Our revenues
for the period ended September 30, 2009 were approximately $716,000
compared
to approximately $973,000 for the same period in 2008. As an early stage
company, we are subject to all the risks inherent in the initial organization,
financing, expenditures, complications and delays inherent in a relatively new
business. Investors should evaluate an investment in us in light of the
uncertainties encountered by such companies in a competitive environment. Our
business is dependent upon the implementation of our business plan,
a
s well as the
ability of our clients to enter into agreements with third parties for, among
other things, the supply of photovoltaic and solar-thermal systems, on
commercially favorable terms, as well as the availability and timing of
financing from third parties for each project. There can be no assurance that
our efforts will be successful or that we will be able to attain
profitability.
We
face intense competition, and many of our competitors have substantially greater
resources than we do.
We
operate in a highly competitive environment that is characterized by price
fluctuations, supply shortages and rapid technological change. We compete with
major international and domestic companies. Our major competitors include SPG
Solar, Borrego Solar, Inc. and REC Solar, Inc. as well as numerous other
regional players, and other companies similar to us primarily located in our
operating markets. Our competitors often have greater market recognition and
substantially greater financial, technical, marketing, distribution, purchasing,
manufacturing, personnel and other resources than we do. Many of our competitors
are developing and are currently producing products based on new solar power
technologies that may ultimately have costs similar to, or lower than, our
projected costs. Many of our current and potential competitors have longer
operating histories, greater name recognition, access to larger customer bases
and significantly greater financial, sales and marketing, manufacturing,
distribution, technical and other resources than we do. As a result, they may be
able to respond more quickly to changing customer demands or to devote greater
resources to the development, promotion and sales of products than we
can.
Some of
our competitors own, partner with, have longer term or stronger relationships
with solar cell providers which could result in them being able to obtain solar
panels on a more favorable basis than we can. It is possible that new
competitors or alliances among existing competitors could emerge and rapidly
acquire significant market share, which would harm our business. If we fail to
compete successfully, our business would suffer and we may lose or be unable to
gain market share.
We may in
the future compete for potential customers with solar and heating, ventilation
and air conditioning system installers and service providers, electricians,
utilities and other providers of solar power equipment or electric power.
Competition in the solar power services industry may increase in the future,
partly due to low barriers to entry. In addition, we may face competition from
other alternative energy resources now in existence or developed in the future.
Increased competition could result in price reductions, reduced margins or loss
of market share and greater competition for qualified technical
personnel.
There can
be no assurance that we will be able to compete successfully against current and
future competitors. If we are unable to compete effectively, or if competition
results in a deterioration of market conditions, our business and results of
operations would be adversely affected.
Our
profitability depends, in part, on our success and brand recognition and we
could lose our competitive advantage if we are not able to protect our
trademarks and patents against infringement, and any related litigation could be
time-consuming and costly.
We
believe our brand has gained substantial recognition by customers in certain
geographic areas. We have registered the “Solar Tree”, “Solar Grove” and
“LifePort” trademarks with the United States Patent and Trademark Office. Use of
our trademarks or similar trademarks by competitors in geographic areas in which
we have not yet operated could adversely affect our ability to use or gain
protection for our brand in those markets, which could weaken our brand and harm
our business and competitive position. In addition, any litigation relating to
protecting our trademarks and patents against infringement could be time
consuming and costly.
The
success of our business depends on the continuing contributions of Robert Noble
and other key personnel who may terminate their employment with us at any time,
and we will need to hire additional qualified personnel.
We rely
heavily on the services of Robert Noble, the chairman of the board of directors
and our chief executive officer, as well as several other management personnel.
Loss of the services of any such individuals would adversely impact our
operations. In addition, we believe our technical personnel represent a
significant asset and provide us with a competitive advantage over many of our
competitors and that our future success will depend upon our ability to retain
these key employees and our ability to attract and retain other skilled
financial, engineering, technical and managerial personnel. We do not currently
maintain any “key man” life insurance with respect to any of such
individuals.
If
we are unable to attract, train and retain highly qualified personnel, the
quality of our services may decline and we may not successfully execute our
internal growth strategies.
Our
success depends in large part upon our ability to continue to attract, train,
motivate and retain highly skilled and experienced employees, including
technical personnel. Qualified technical employees periodically are in great
demand and may be unavailable in the time frame required to satisfy our
customers’ requirements. While we currently have available technical expertise
sufficient for the requirements of our business, expansion of our business could
require us to employ additional highly skilled technical personnel. We expect
competition for such personnel to increase as the market for solar power systems
expands.
There can
be no assurance that we will be able to attract and retain sufficient numbers of
highly skilled technical employees in the future. The loss of personnel or our
inability to hire or retain sufficient personnel at competitive rates of
compensation could impair our ability to secure and complete customer
engagements and could harm our business.
We
are exposed to risks associated with the ongoing financial crisis and weakening
global economy, which increase the uncertainty of project financing for
commercial solar installations and the risk of non-payment from both commercial
and residential customers.
The
recent severe tightening of the credit markets, turmoil in the financial
markets, and weakening global economy are contributing to slowdowns in the solar
industry, which slowdowns may worsen if these economic conditions are prolonged
or deteriorate further. The market for installation of solar power systems
depends largely on commercial and consumer capital spending. Economic
uncertainty exacerbates negative trends in these areas of spending, and may
cause our customers to push out, cancel, or refrain from placing orders, which
may reduce our net sales. Difficulties in obtaining capital and deteriorating
market conditions may also lead to the inability of some customers to obtain
affordable financing, including traditional project financing and tax-incentive
based financing and home equity based financing, resulting in lower sales to
potential customers with liquidity issues, and may lead to an increase of
incidents where our customers are unwilling or unable to pay for systems they
purchase, and additional bad debt expense for us. Further, these conditions and
uncertainty about future economic conditions make it challenging for us to
obtain equity and debt financing to meet our working capital requirements to
support our business, forecast our operating results, make business decisions,
and identify the risks that may affect our business, financial condition and
results of operations. If we are unable to timely and appropriately adapt to
changes resulting from the difficult macroeconomic environment, our business,
financial condition or results of operations may be materially and adversely
affected.
Risks
Relating to Our Industry
We have
experienced technological changes in our industry. New
technologies may
prove inappropriate and result in liability to us or may not
gain market
acceptance by our customers.
The solar
power industry (and the alternative energy industry, in general) is subject to
technological change. Our future success will depend on our ability to
appropriately respond to changing technologies and changes in function of
products and quality. If we adopt products and technologies that are not
attractive to consumers, we may not be successful in capturing or retaining a
significant share of our market. In addition, some new technologies are
relatively untested and unperfected and may not perform as expected or as
desired, in which event our adoption of such products or technologies may cause
us to lose money.
A drop in the
retail price of conventional energy or non-solar alternative
energy sources
may negatively impact our profitability.
We
believe that a customer’s decision to purchase or install solar power
capabilities is primarily driven by the cost and return on investment resulting
from solar power systems. Fluctuations in economic and market conditions that
impact the prices of conventional and non-solar alternative energy sources, such
as decreases in the prices of oil and other fossil fuels, could cause the demand
for solar power systems to decline, which would have a negative impact on our
profitability. Changes in utility electric rates or net metering policies could
also have a negative effect on our business.
Existing
regulations, and changes to such regulations, may present
technical,
regulatory and economic barriers to the purchase and use of solar power
products, which may significantly reduce demand for our
products.
Installation
of solar power systems are subject to oversight and regulation in accordance
with national and local ordinances, building codes, zoning, environmental
protection regulation, utility interconnection requirements for metering and
other rules and regulations. We attempt to keep up-to-date about these
requirements on a national, state, and local level, and must design systems to
comply with varying standards. Certain cities may have ordinances that prevent
or increase the cost of installation of our solar power systems. In addition,
new government regulations or utility policies pertaining to solar power systems
are unpredictable and may result in significant additional expenses or delays
and, as a result, could cause a significant reduction in demand for solar energy
systems and our services. For example, there currently exist metering caps in
certain jurisdictions which effectively limit the aggregate amount of power that
may be sold by solar power generators into the power grid.
Our business
depends on the availability of rebates, tax credits and other
financial
incentives; reduction, elimination or uncertainty of which would reduce the
demand for our services.
Many
states, including California and New Jersey, offer substantial incentives to
offset the cost of solar power systems. These systems can take many forms,
including direct rebates, state tax credits, system performance payments and
Renewable Energy Credits (RECs). Moreover, the federal government currently
offers a 30% tax credit for the installation of solar power systems. Effective
2009, the federal tax credit is 30% (uncapped) for residences. The federal
government also currently offers commercial customers the option to elect a 30%
grant in lieu of the 30% tax credit if they begin construction on the system
before December 31, 2010, and the system is put into service by December 31,
2017. Businesses may also elect to accelerate the depreciation on their system
over five years. Uncertainty about the introduction of, reduction in or
elimination of such incentives or delays or interruptions in the implementation
of favorable federal or state laws could substantially increase the cost of our
systems to our customers, resulting in significant reductions in demand for our
services, which would negatively impact our sales.
Our
business strategy depends on the widespread adoption of solar power
technology.
The
market for solar power products is emerging and rapidly evolving, and its future
success is uncertain. If solar power technology proves unsuitable for widespread
commercial deployment or if demand for solar power products fails to develop
sufficiently, we would be unable to generate enough revenues to achieve and
sustain profitability and positive cash flow. The factors influencing the
widespread adoption of solar power technology include but are not limited
to:
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cost-effectiveness
of solar power technologies as compared with conventional and non-solar
alternative energy technologies;
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performance
and reliability of solar power products as compared with conventional and
non-solar alternative energy
products;
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success
of other alternative distributed generation technologies such as fuel
cells, wind power, tidal power and micro
turbines;
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fluctuations
in economic and market conditions which impact the viability of
conventional and non-solar alternative energy sources, such as increases
or decreases in the prices of oil and other fossil
fuels;
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continued
deregulation of the electric power industry and broader energy industry;
and
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availability
of governmental subsidies and
incentives.
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Risks
Relating to Our Organization and Our Common Stock
As
of the Merger, we became a consolidated subsidiary of a company that is subject
to the reporting requirements of federal securities laws, which can be expensive
and may divert resources from other projects, thus impairing our ability to
grow.
As a
result of the Merger, we became a public reporting company and, accordingly,
subject to the information and reporting requirements of the Exchange Act and
other federal securities laws, including compliance with the Sarbanes-Oxley Act
of 2002 (the “Sarbanes-Oxley Act”). The costs of preparing and filing
annual and quarterly reports, proxy statements and other information with the
SEC (including reporting of the Merger) and furnishing audited reports to
stockholders will cause our expenses to be higher than they would have been if
we remained privately held and did not consummate the Merger.
If
we fail to establish and maintain an effective system of internal control, we
may not be able to report our financial results accurately or to prevent
fraud. Any inability to report and file our financial results
accurately and timely could harm our reputation and adversely impact the trading
price of our common stock.
It may be
time consuming, difficult and costly for us to develop and implement the
internal controls and reporting procedures required by the Sarbanes-Oxley
Act. We may need to hire additional financial reporting, internal
controls and other finance personnel in order to develop and implement
appropriate internal controls and reporting procedures. Effective
internal control is necessary for us to provide reliable financial reports and
prevent fraud. If we cannot provide reliable financial reports or
prevent fraud, we may not be able to manage our business as effectively as we
would if an effective control environment existed, and our business and
reputation with investors may be harmed. In addition, if we are
unable to comply with the internal controls requirements of the Sarbanes-Oxley
Act, then we may not be able to obtain the independent accountant certifications
required by such act, which may preclude us from keeping our filings with the
SEC current and may adversely affect any market for, and the liquidity of, our
common stock.
Public
company compliance may make it more difficult for us to attract and retain
officers and directors.
The
Sarbanes-Oxley Act and new rules subsequently implemented by the SEC have
required changes in corporate governance practices of public
companies. As a public company, we expect these new rules and
regulations to increase our compliance costs and to make certain activities more
time consuming and costly. As a public company, we also expect that
these new rules and regulations may make it more difficult and expensive for us
to obtain director and officer liability insurance in the future and we may be
required to accept reduced policy limits and coverage or incur substantially
higher costs to obtain the same or similar coverage. As a result, it
may be more difficult for us to attract and retain qualified persons to serve on
our board of directors or as executive officers.
Because
we became public by means of a merger, we may not be able to attract the
attention of major brokerage firms.
There may
be risks associated with us becoming public through a
merger. Securities analysts of major brokerage firms may not provide
coverage of us since there is no incentive to brokerage firms to recommend the
purchase of our common stock. No assurance can be given that
brokerage firms will, in the future, want to conduct any secondary offerings on
behalf of our post-Merger company.
Our
stock price may be volatile.
The
market price of our common stock is likely to be highly volatile and could
fluctuate widely in price in response to various factors, many of which are
beyond our control, including the following:
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changes
in our industry;
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competitive
pricing pressures;
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our
ability to obtain working capital financing;
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additions
or departures of key personnel;
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limited
“public float” in the hands of a small number of persons whose sales or
lack of sales could result in positive or negative pricing pressure on the
market price for our common stock;
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sales
of our common stock;
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our
ability to execute our business plan;
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operating
results that fall below
expectations;
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loss
of any strategic relationship;
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regulatory
developments;
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economic
and other external factors; and
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period-to-period
fluctuations in our financial
results.
|
In
addition, the securities markets have from time to time experienced significant
price and volume fluctuations that are unrelated to the operating performance of
particular companies. These market fluctuations may also materially
and adversely affect the market price of our common stock.
We
may not pay dividends in the future. Any return on investment may be
limited to the value of our common stock.
We do not
anticipate paying cash dividends in the foreseeable future. The
payment of dividends on our common stock will depend on earnings, financial
condition and other business and economic factors affecting us at such time as
our board of directors may consider relevant. If we do not pay
dividends, our common stock may be less valuable because a return on your
investment will only occur if our stock price appreciates.
There
is currently no liquid trading market for our common stock and we cannot ensure
that one will ever develop or be sustained.
To date
there has not been a liquid trading market for our common
stock. We cannot predict how liquid the market for our common stock
might become. As soon as is practicable, we anticipate applying for
listing of our common stock on either the NYSE Amex Equities, The Nasdaq Capital
Market or other national securities exchange, assuming that we can satisfy the
initial listing standards for such exchange. We currently do not
satisfy the initial listing standards for any of these exchanges, and cannot
ensure that we will be able to satisfy such listing standards or that our common
stock will be accepted for listing on any such exchange. Should we
fail to satisfy the initial listing standards of such exchanges, or our common
stock is otherwise rejected for listing and remains quoted on the OTC Bulletin
Board or is suspended from the OTC Bulletin Board, the trading price of our
common stock could suffer and the trading market for our common stock may be
less liquid and our common stock price may be subject to increased
volatility.
Furthermore,
for companies whose securities are quoted on the OTC Bulletin Board, it is more
difficult (i) to obtain accurate quotations, (ii) to obtain coverage for
significant news events because major wire services generally do not publish
press releases about such companies and (iii) to obtain needed
capital.
Our
common stock is currently a “penny stock,” which may make it more difficult for
our investors to sell their shares.
Our
common stock is currently and may continue in the future to be subject to the
“penny stock” rules adopted under Section 15(g) of the Exchange Act. The penny
stock rules generally apply to companies whose common stock is not listed on The
NASDAQ Stock Market or other national securities exchange and trades at less
than $4.00 per share, other than companies that have had average revenue of at
least $6,000,000 for the last three years or that have tangible net worth of at
least $5,000,000 ($2,000,000 if the company has been operating for three or more
years). These rules require, among other things, that brokers who trade penny
stock to persons other than “established customers” complete certain
documentation, make suitability inquiries of investors and provide investors
with certain information concerning trading in the security, including a risk
disclosure document and quote information under certain circumstances. Many
brokers have decided not to trade penny stocks because of the requirements of
the penny stock rules and, as a result, the number of broker-dealers willing to
act as market makers in such securities is limited. If we remain subject to the
penny stock rules for any significant period, it could have an adverse effect on
the market, if any, for our securities. Since our securities are subject to the
penny stock rules, investors may find it more difficult to dispose of our
securities.
Offers
or availability for sale of a substantial number of shares of our common stock
may cause the price of our common stock to decline.
If our
stockholders sell substantial amounts of our common stock in the public market,
or upon the expiration of any statutory holding period under Rule 144, or issued
upon the exercise of outstanding options or warrants, it could create a
circumstance commonly referred to as an “overhang” and in anticipation of which
the market price of our common stock could fall. The existence of an
overhang, whether or not sales have occurred or are occurring, also could make
more difficult our ability to raise additional financing through the sale of
equity or equity-related securities in the future at a time and price that we
deem reasonable or appropriate.
Robert
Noble, our chief executive officer and chairman of our board of directors,
beneficially owns a substantial portion of our outstanding common stock, which
enables him to influence many significant corporate actions and in certain
circumstances may prevent a change in control that would otherwise be beneficial
to our stockholders.
Robert
Noble beneficially owns approximately 25.4%of our outstanding shares of common
stock. As such, he has a substantial impact on matters requiring the vote of the
stockholders, including the election of our directors and most of our corporate
actions. This control could delay, defer, or prevent others from initiating a
potential merger, takeover or other change in our control, even if these actions
would benefit our stockholders and us. This control could adversely affect the
voting and other rights of our other stockholders and could depress the market
price of our common stock.
Security
Ownership of Certain Beneficial Owners and Management
The
following table sets forth certain information as of February 10, 2010 regarding
the beneficial ownership of our common stock, taking into account the
consummation of the Merger, by (i) each person or entity who, to our knowledge,
beneficially owns more than 5% of our common stock; (ii) each executive officer
and named officer; (iii) each director; and (iv) all of our officers and
directors as a group. Unless otherwise indicated in the footnotes to
the following table, each of the stockholders named in the table has sole voting
and investment power with respect to the shares of our common stock beneficially
owned. Except as otherwise indicated, the address of each of the stockholders
listed below is: c/o 7675 Dagget Street, Suite 150, San Diego, California 92111.
|
Name of Beneficial Owner
|
|
Number
of Shares
Beneficially Owned(1)
|
|
Percentage Beneficially
Owned(1)(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All
officers and directors as a group (4 persons)
|
|
19,183,694
|
|
41.6%
|
________________
|
|
(1)
|
Shares
of common stock beneficially owned and the respective percentages of
beneficial ownership of common stock assumes the exercise of all options,
warrants and other securities convertible into common stock beneficially
owned by such person or entity currently exercisable or exercisable within
60 days of February 10, 2010. Shares issuable pursuant to the exercise of
stock options and warrants exercisable within 60 days are deemed
outstanding and held by the holder of such options or warrants for
computing the percentage of outstanding common stock beneficially owned by
such person, but are not deemed outstanding for computing the percentage
of outstanding common stock beneficially owned by any other
person.
|
|
(2)
|
Based
on 39,000,000 shares of our common stock outstanding immediately following
the Merger.
|
|
(3)
|
Includes
6,027,632 shares of common stock issuable upon the exercise of options. On
February 10, 2010, Mr. Noble entered into an agreement with us, pursuant
to which Mr. Noble agreed to cancel these options upon the issuance to Mr.
Noble of a new option to purchase an aggregate of 9,162,856 shares of
common stock at an exercise price of $0.33 per share, which option shall
vest immediately upon our achievement of cumulative gross revenues of
either (i) $15,000,000 during the fiscal year ended December 31, 2010 or
(ii) $30,000,000 prior to December 31,
2014.
|
|
(4)
|
Includes
308,006 shares of common stock and 84,962 stock purchase warrants held by
Nexcore Capital, Inc. Mr. Potter is the chairman and president
of Nexcore Capital, Inc.
|
|
(5)
|
Includes
366,514
shares of common stock issuable upon exercise of
options.
|
|
(6)
|
Includes
671,943 shares of common stock issuable upon exercise of
options.
|
Executive
Officers and Directors
The
following persons became our executive officers and directors on February 10,
2010, upon effectiveness of the Merger, and hold the positions set forth
opposite their respective names.
|
Name
|
|
Age
|
|
Position
|
|
|
|
|
|
Chief
Executive Officer, President and Chairman of the Board of
Directors
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive
Vice President and Chief Operating Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
Our
directors hold office until the earlier of their death, resignation or removal
by stockholders or until their successors have been qualified. Our
officers are elected annually by, and serve at the pleasure of, our board of
directors.
Biographies
Directors
and Officers
Robert Noble
has served as our
chief executive officer, president and chairman of the board of directors since
2006. Prior to founding Envision, Mr. Noble served as the chief
executive officer of Tucker Sandler Architects, an architecture firm located in
San Diego, California, from 2000 through 2007. Mr. Noble has served
as the chairman of Noble Environmental Technologies, Inc., a materials company,
since 1998, Ecoinvestment Network, a California company, since 2007, Envision
Regenerative Health, a California company, since 2008 and the Noble
Group, Inc., a California company, since 2007. Mr. Noble is an accomplished
architect, environmental designer, industrial designer and environmental
technology entrepreneur. Mr. Noble and his work have won numerous awards,
including awards from Popular Science Magazine (Best of What’s New),
Entrepreneur Magazine (Innovator of the Year, Environmental Category), National
Public Radio (E-chievement Environmental Award), the Urban Land Institute (San
Diego Smart Growth Award, Innovation Category) and The American Institute of
Architects – San Diego Chapter (Energy Efficiency Award). He received
his undergraduate degree in architecture from the University of California –
Berkeley, and his Master of Architecture from Harvard University Graduate School
of Design. Mr. Noble also completed graduate work at Cambridge University and
Harvard Business School.
Howard Smith
has served as our
chief financial officer since September 2009. Mr. Smith has served as
a partner and leader of the clean tech practice group of Tatum, LLC, an
executive services firm, since March 2009 and as a partner and founder of
Chartworth, a strategy and management consulting firm, since
2003. From 2005 through 2007 he served as the chief financial officer
of GT Solar International, an international manufacturer of PV capital
equipment.
Mr.
Smith has also served as a director of Price Waterhouse Coopers and as a
consultant at Booz-Allen & Hamilton. Mr. Smith holds a BA in
Economics and Government from the College of William and Mary, a Master of
Public Administration from George Washington University, and an MBA from The
Fuqua School of Business at Duke University.
Joanna Tan
has served as our
executive vice president and chief operating officer since February
2009. Prior to joining Envision, Ms. Tan served as a vice president –
commercial insurance group of the American International Group, Inc. from 2003
through 2008. Ms. Tan has also worked at J.P. Morgan Asia Pacific in
the areas of project finance, mergers and acquisitions and credit
research. Ms. Tan received her undergraduate degree in government
from Cornell University and also holds an MBA and a Masters in International
Affairs from Columbia University.
Jay Potter
has served as our
director since 2007.
Mr. Potter has been
active in the financial and energy industries for over 20 years and has
successfully participated, directed or placed over two hundred million dollars
of capital in start-up and early stage companies. Mr. Potter is an
entrepreneur and understands the needs of early stage and start-up companies. He
takes an active role in the development of the funded companies and to that end
has participated as advisor, director and officer to defend shareholder
positions. In 2006, Mr. Potter served as the interim chief executive
officer of EAU Technologies Inc. (Symbol: EAUI:OB), a publicly traded company
specializing in non-toxic sanitation and disinfectant
technologies. He founded an early stage venture fund in GreenCore
Capital, Inc. and serves as the company’s chairman and chief executive
officer. He has served as chairman, president and chief executive
officer of Nexcore Capital, Inc. and its financial service affiliates since
co-founding the company in 1996. Mr. Potter serves as the chairman of Sterling
Energy Resources, Inc. (symbol: SGER:PK), a public oil and gas company involved
in the acquisition, exploration and development of oil and natural gas from its
numerous leases. Sterling Energy Resoueces, Inc. filed for bankruptcy
in 2009. Mr. Potter serves as a director of EAU Technologies,
Envision, and Noble Environmental Technologies among others.
There are
no family relationships among any of our directors and executive
officers.
Executive
Compensation
Summary
Compensation Table
The table
below sets forth, for our last two fiscal years, the compensation earned by (i)
Robert Noble, our chief executive officer, president and chairman, (ii) Howard
Smith, our chief financial officer, (iii) Joanna Tan, our executive vice
president, chief operating officer and secretary, (iv) Karen Morgan,
our former president and the former president of Envision Energy, Inc.
(“Envision Energy”), a dissolved subsidiary of ESII, and (v) Pamela Stevens, our
former executive vice president, Commercial Development Group.
|
Name
and Principal Position
|
Year
|
|
Salary
|
|
|
Deferred
Comp
|
|
|
Bonus
|
|
|
Stock
Awards
|
|
|
Option
Awards
($)(1)
|
|
|
All
Other Compensation
|
|
|
Total
|
|
|
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
|
|
|
($)
|
|
|
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert
Noble Chief Executive Officer ,
|
2009
|
|
|
69,500
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
286,492
|
|
|
|
-
|
|
|
|
468,492
|
|
|
President
and Chairman
|
2008
|
|
|
204,000
|
|
|
|
112,500
|
|
|
|
25,000
|
|
|
|
|
|
|
|
1,868,100
|
|
|
|
|
|
|
|
2,097,100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Howard
Smith(2)
|
2009
|
|
|
20,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
431,880
|
|
|
|
|
|
|
|
451,880
|
|
|
Chief
Financial Officer
|
2008
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joanna
Tan (5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
13,750
|
|
|
|
55,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
643,321
|
|
|
|
-
|
|
|
|
712,071
|
|
|
Chief
Operating Officer
|
2008
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Karen
Morgan(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Former
President and
|
2009
|
|
|
--
|
|
|
|
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
Former
President of Envision Energy
|
2008
|
|
|
120,000
|
|
|
|
-
|
|
|
|
40,000
|
|
|
|
|
|
|
|
1,141,104
|
|
|
|
|
|
|
|
1,301,104
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pamela
Stevens(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Former
Executive Vice President,
|
2009
|
|
|
--
|
|
|
|
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
Commercial
Development Group
|
2008
|
|
|
95,327
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
343,303
|
|
|
|
--
|
|
|
|
438,630
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bill
Adelson (6)
|
2009
|
|
|
33,438
|
|
|
|
100,938
|
|
|
|
--
|
|
|
|
|
|
|
|
303,379
|
|
|
|
|
|
|
|
437,755
|
|
|
Former
President
|
2008
|
|
|
118,125
|
|
|
|
16,875
|
|
|
|
10,000
|
|
|
|
|
|
|
|
799,949
|
|
|
|
|
|
|
|
944,949
|
|
|
(1)
|
The
amounts in this column reflect the dollar amounts recognized for financial
statement reporting purposes with respect to the years ended December 31,
2009 and 2008, in accordance with SFAS 123(R). For a
description of SFAS 123(R) and the assumptions used in determining the
value of the options, see the notes to the financial statements included
as Exhibit 99.1 to this Current Report on Form
8-K.
|
|
(2)
|
Mr.
Smith is a consultant whose compensation is paid by Tatum,
LLC. As of February 10, 2010, we were obligated to pay Tatum
Mr. Smith’s salary compensation.
|
|
(3)
|
Ms.
Morgan was terminated as our president and as president of Envision Energy
on November 30, 2008.
|
|
(4)
|
Ms.
Stevens resigned
as our executive
vice president and chief operating officer on December 5,
2008.
|
|
(5)
|
Ms.
Tan received options in lieu of salary for the first six months of her
employment in 2009. After the sixth month, she was eligible to begin
earning a salary in
August 2009.
|
|
(6)
|
Mr.
Adelson resigned as president of Envision on October 30,
2009.
|
Agreements
with Executive Officers
Robert
Noble
On
June 15, 2007 Envision Solar, LLC, our predecessor, entered into an employment
agreement with Robert Noble to serve as its chief executive officer and
president. Pursuant to his employment agreement, Mr. Noble is
entitled to receive an annual base salary of $120,000, a monthly allowance of
$1,200 to cover automobile expenses and options to purchase 135,000 units of
Envision LLC, which, following our statutory conversion from a California
limited liability company into a California corporation, were converted into
options to purchase 4,123,285 shares of our common
stock. In the event that Mr. Noble’s employment with us is terminated
for any reason, Mr. Noble shall be entitled to receive his then current salary
accrued through the effective date of termination plus accrued but unused
vacation time. Mr. Noble’s employment agreement has no specified
termination date.
On
February 10, 2010, we entered into a letter agreement with Robert Noble,
pursuant to which Mr. Noble agreed to terminate all of his options under
Envision’s 2007 Unit Option Plan and 2008 Equity Incentive Plan upon the
issuance to Mr. Noble of a new option to purchase an aggregate of 9,162,856
shares of common stock at an exercise price of $0.33 per share, which option
shall vest immediately upon our achievement of cumulative gross revenues of
either (i) $15,000,000 during the fiscal year ended December 31, 2010 or (ii)
$30,000,000 prior to December 31, 2014.
Howard
Smith
On September 1, 2009 we entered into an
interim service agreement with Tatum, LLC (“Tatum”), an executive services firm,
pursuant to which Mr. Smith, a Tatum employee, performs services for us as our
chief financial officer and we pay Tatum for Mr. Smith’s
services. Tatum compensates Mr. Smith directly for his
services. We have agreed to pay Tatum a fee of $20,000 per month,
$5,000 which shall be payable in cash and the remaining $15,000 shall be payable
in stock options. We shall issue Tatum that number of stock options with an
exercise price equal to the fair market value as calculated according to the
formula below:
number of
options = A x 2, where:
A =
amount of consulting fees payable in options divided by the fair market value
per share (at the time the fees are earned)
|
|
As
of February 10, 2010, we were obligated to pay Tatum Mr. Smith’s salary
compensation.
|
Joanna
Tan
On February 2, 2009, we entered into an
employment agreement with Joanna Tan to serve as our executive vice president
and chief operating officer. Pursuant to her employment
agreement, Ms. Tan is entitled to receive an annual base salary of
$165,000. For the initial six month period of her employment, or
until we secure financing of at least $500,000, we have agreed to issue to Ms.
Tan options with a fair market value strike price in lieu of her salary
calculated according to the formula below:
number of
options = A x 2, where:
A =
amount of salary forgiven divided by the fair market value per share (at the
time the salary is earned)
Ms. Tan
was granted options to purchase 13,750 shares of common stock of Envision at
$10.00 per share for work performed between February 2009 and July 2009, which
options have a ten year term and vested immediately upon grant. As a
result of the Merger and the Stock Split, this option was converted into an
option to purchase 293,975shares of our common stock at an exercise price of
$.33 per share. Ms. Tan was granted an additional option to purchase
8,250 shares of common stock of Envision at $10.00per share for work performed
between August 2009 and December 2009, with a ten year term that vested
immediately upon grant. As a result of the Merger and the Stock
Split, was connected into an option to purchase 251,978 shares of our common
stock at an exercise price of $.33 per share.
In the
event that Ms. Tan’s employment with us is terminated for any reason, Ms. Tan
shall be entitled to receive her then current salary accrued (subject to the
calculations set forth above) through the effective date of termination plus
accrued but unused vacation time. Ms. Tan’s employment agreement has
no specified termination date.
Karen
Morgan
Ms.
Morgan, our former president and the former president of Envision Energy, which
we dissolved October 31, 2008, was terminated from these positions on November
30, 2008. Ms. Morgan began serving as our president and as the
president of Envision Energy pursuant to an employment agreement effective
October 1, 2007. Pursuant to the agreement, Ms. Morgan was entitled
to receive an annual base salary of $120,000, a monthly allowance of $1,500 to
cover automobile expenses and options to purchase 763,571 shares of common stock
of Envision. The agreement also provided that our board of directors
could, at its discretion, issue her a bonus of $50,000.
Ms.
Morgan was granted 4,358,465 options at prices ranging between $.33 and $1.31
per share. Such options were subject to annual cliff vesting with a
term of 10 years.
Pamela
Stevens
Ms.
Stevens, our former executive vice president, commercial development group,
resigned from this position on December 5, 2008. Ms. Stevens began
serving as our executive vice president, commercial development group, pursuant
to an employment agreement dated April 7, 2008. Pursuant to the
agreement, Ms. Stevens was entitled to receive an annual base salary of
$120,000, a monthly allowance of $1,250 to cover automobile expenses and options
to purchase 1,466,057 shares of our common stock.
Ms.
Stevens was granted 1,466,057 options at prices ranging between $.33 and $1.31
per share. Such options were subject to annual cliff vesting with a
term of 10 years.
William
Adelson
Mr.
Adelson, our former president, resigned from this position on October 30,
2009. Mr. Adelson began serving as our executive vice president and
chief operating officer, pursuant to an employment agreement dated June 15,
2007. Pursuant to the agreement, Mr. Adelson was entitled to receive
an annual base salary of $80,000, a monthly allowance of $800 to cover
automobile expenses and options to purchase 3,481,885 shares of common stock of
Envision.
Outstanding
Equity Awards at Fiscal Year-End
The
following table shows information concerning unexercised options outstanding as
of December 31, 2009 for each of our named executive
officers.
|
Name
|
Number
of securities
underlying
unexercised
options
(#) exercisable
|
Number
of securities
underlying
unexercised
options
(#) unexercisable
|
Option
exercise price ($)
|
Option
expiration date ($)
|
|
Robert
Noble
|
4,123,285
|
4,123,285
|
$0.33
|
May
14, 2017
|
|
|
1,527,143
|
1,527,143
|
$1.31
|
July
21, 2018
|
|
|
17,196
|
17,196
|
$1.31
|
February
11, 2018
|
|
Howard
Smith
|
366,514
|
366,514
|
$0.33
|
September
30, 2019
|
|
Joanna
Tan
|
167,986
|
167,986
|
$0.33
|
March
31, 2019
|
|
|
251,979
|
251,979
|
$0.33
|
June
30, 2019
|
|
|
125,989
|
125,989
|
$0.33
|
September
30, 2019
|
|
|
125,989
|
125,989
|
$0.33
|
December
31, 2019
|
|
Karen
Morgan
|
2,822,160
|
2,822,160
|
$0.33
|
December
31, 2017
|
|
|
604,748
|
604,748
|
$0.65
|
December
31, 2017
|
|
|
916,286
|
916,286
|
$1.31
|
December
31, 2008
|
|
|
11,454
|
11,454
|
$1.31
|
February
11, 2018
|
|
|
3,818
|
3,818
|
$1.31
|
October
12, 2018
|
|
Pamela
Stevens
|
1,466,057
|
1,466,057
|
$1.31
|
January
5, 2009
|
|
|
3,818
|
3,818
|
$1.31
|
January
5, 2009
|
|
William
Adelson
|
3,481,885
|
3,481,885
|
$0.33
|
September
30, 2009
|
|
|
610,857
|
610,857
|
$1.31
|
September
30, 2009
|
|
|
11,454
|
11,454
|
$1.31
|
February
11, 2018
|
|
|
15,271
|
15,271
|
$1.31
|
October
12, 2018
|
2007
Unit Option Plan
In July,
2007, Envision LLC adopted the 2007 Plan, pursuant to which 100,000 units of
Envision LLC were reserved for issuance as awards to employees, members of
Envision LLC’s board of managers, consultants and other service
providers. The purpose of the 2007 Plan was to provide an incentive
to attract and retain directors, officers, consultants, advisors and employees
whose services are considered valuable, to encourage a sense of proprietorship
and to stimulate an active interest of such persons in Envision LLC’s
development and financial success. Upon our statutory conversion into a
California corporation in September 2007, each option to purchase units issued
under the 2007 Plan was converted into the right to purchase shares of our
common stock on a one to one ratio. The 2007 Plan will be
administered by our board of directors until such time as such authority has
been delegated to a committee of the board of directors. 9,315,552
awards, on a post-Merger basis, have been granted to date under the 2007
Plan.
2008
Stock Option Plan
On
December 16, 2008, we adopted the 2008 Plan, pursuant to which 200,000 shares of
Envision common stock were reserved for issuance as awards to employees,
directors, consultants and other service providers. The purpose of the 2008 Plan
is to provide an incentive to attract and retain directors, officers,
consultants, advisors and employees whose services are considered valuable, to
encourage a sense of proprietorship and to stimulate an active interest of such
persons in our development and financial success. Under the 2008 Plan, we are
authorized to issue incentive stock options intended to qualify under Section
422 of the Code and non-qualified stock options. The incentive
stock options may only be granted to employees. Nonstatutory stock
options may be granted to employees, directors and consultants. The
2008 Plan will be administered by our board of directors until such time as such
authority has been delegated to a committee of the board of
directors. 3,786,733 awards, on a post-Merger basis, have been granted to
date under the 2008 Plan.
2010
Equity Incentive Plan
In order to provide an incentive to
attract and retain directors, officers, consultants, advisors and employees
whose services are considered valuable, to encourage a sense of proprietorship
and to stimulate an active interest of such persons in our development and
financial success, we intend to adopt a new equity incentive plan (the “2010
Plan”), pursuant to which 15,000,000 shares of our common stock will be reserved
for issuance as awards to employees, directors, consultants and other service
providers. In addition, all awards under Envision’s 2007 Plan and 2008
Plan will be assumed under the 2010 Plan.
Director
Compensation
During
the fiscal years ended December 31, 2009 and 2008, our directors did not receive
any compensation from us for their services in such capacity and we do not
foresee paying our directors any compensation for their services in such
capacity in the future.
Directors’
and Officers’ Liability Insurance
We plan
to secure directors’ and officers’ liability insurance insuring our directors
and officers against liability for acts or omissions in their capacities as
directors or officers, subject to certain exclusions shortly after the date of
the Merger. Such insurance will also insure us against losses which
we may incur in indemnifying our officers and directors.
Code of Ethics
We intend
to adopt a code of ethics that applies to our officers, directors and employees,
including our principal executive officer and principal accounting officer, but
have not done so to date due to our relatively small size. We intend to adopt a
written code of ethics in the near future.
Board
Committees
We expect
our board of directors, in the future, to appoint an audit committee, nominating
committee and compensation committee, and to adopt charters relative to each
such committee. We intend to appoint such persons to committees of
the board of directors as are expected to be required to meet the corporate
governance requirements imposed by a national securities exchange, although we
are not required to comply with such requirements until we elect to seek a
listing on a national securities exchange.
Certain
Relationships and Related Transactions
In 2007
Envision LLC issued 238,875 units to Robert Noble as payment in full for
$238,875 owed by it to him in connection with an accounts receivable he
purchased from one of its vendors.
Jay
Potter, our director, is the control person of Nexcore Capital, Inc., Envision’s
selling agent in two private placement transactions in November 2007 and
February 2008. See Item 3.02 for details of these private
placements.
In June
2008, Envision issued a note in the amount of $18,700 to William Adelson, a
former officer, as reimbursement for cash advances he made to
Envision. The note bears interest at 5% and is due and payable with
accrued interest on or before May 31, 2009. The note was not paid at maturity
and the balance was included in the $34,246 principal balance of a new note
executed in October 2009 and due December 31, 2009. Mr. Adelson resigned in
November 2009. As of February 2010 this note was in default for
payment of principal and interest.
Item 3.02 Unregistered
Sales of Equity Securities
In
November 2007 Envision LLC sold 199,848 units at a purchase price of $10.00 per
unit for an aggregate offering price of $1,998,480 (the “2007 Private
Placement”). In connection with the 2007 Private Placement, Nexcore
Capital, Inc. received a fee of $310,272 and we issued to Nexcore Capital, Inc.
19,985 shares of our common stock, which were issued in reliance on the
exemption from registration afforded by Section 4(2). These securities were not
registered under the Securities Act, or the securities laws of any state, and
were offered and sold in reliance on the exemption from registration afforded by
Section 4(2) under the Securities Act and Regulation D (Rule 506) under the
Securities Act and corresponding provisions of state securities laws, which
exempt transactions by an issuer not involving a public offering.
In
2007, Envision issued an aggregate of 49,994 shares of our common stock to
employees and consultants as compensation for services provided to
us.
These
securities were not registered under the Securities Act, or the securities laws
of any state, and were issued in reliance on the exemption from registration
afforded by Section 4(2) under the Securities Act and Regulation D (Rule 506)
under the Securities Act and corresponding provisions of state securities laws,
which exempt transactions by an issuer not involving a public
offering.
In
2007, Envision issued 250 shares of our common stock to an individual as
compensation for services provided to us.
These
securities were not registered under the Securities Act, or the securities laws
of any state, and were issued in reliance on the exemption from registration
afforded by Section 4(2) under the Securities Act and Regulation D (Rule 506)
under the Securities Act and corresponding provisions of state securities laws,
which exempt transactions by an issuer not involving a public
offering.
In
January 2008, pursuant to an agreement with a former law firm, Envision agreed
to issue to the law firm a warrant to purchase 801 shares of Envision common
stock for an exercise price of $0.01 per share. Following the Merger and Stock
Split, this warrant was converted into a warrant to purchase 24,465 shares of
our common stock at an exercise price of $.01. The warrant expires
January 1, 2015.
These
securities were not registered under the Securities Act, or the securities laws
of any state, and were issued in reliance on the exemption from registration
afforded by Section 4(2) under the Securities Act and Regulation D (Rule 506)
under the Securities Act and corresponding provisions of state securities laws,
which exempt transactions by an issuer not involving a public
offering.
In
December
2008 Envision sold 67,311
shares of common stock at a purchase price of $40.00 per share for an aggregate
offering price of $2,692,444 (the “2008 Private Placement”). In connection with
the 2008 Private Placement, Nexcore Capital, Inc. and Financial West Group, Inc.
received an aggregate fee of $296,169
a
five-year warrant to purchase 4,712 shares for a purchase price of $40 per
share. These securities were not registered under the Securities Act, or the
securities laws of any state, and were offered and sold in reliance on the
exemption from registration afforded by Section 4(2) under the Securities Act
and Regulation D (Rule 506) under the Securities Act and corresponding
provisions of state securities laws, which exempt transactions by an issuer not
involving a public offering.
In November 2008 Envision issued a
five-month
$591,771
promissory note to an investor
(the "holder") as bridge financing
prior to an anticipated equity. Under the terms of the note, $101,771 of prepaid
interest was included in the note balance of which $10,000 was a loan fee. The
note bears interest at the rate of 7% per annum on the $500,000
net subscription amount, plus a
15% fee on the subscription amount, plus 15% of the 7% per annum interest
(effective interest of approximately 49%) with a default rate of 20% per annum.
The note was due April 11, 2009 and is secured by substantially all of
Envision’s assets and the assts of its subsidiaries and is unconditionally
guaranteed by all of its subsidiaries. Under the terms of the note, the
outstanding principal and interest can be converted into equity at a 10%
discount from any reverse merger financing in the event Envision entered into a
“reverse merger” with a publicly traded corporation. Additionally,
promptly following the consummation of a reverse merger
transaction, Envision had agreed to issue the holder such number of
shares of public company common stock such that following the reverse merger the
lender shall own 0.3125% of our fully-diluted number of outstanding shares of
common stock of the public company.
The note came due in May 2009 and Envision was unable to fulfill its
obligations. In April 2009, Envision entered into a
forbearance agreement with the
holder, which extended the due date to December 31, 2009. Under the terms
of the forbearance agreement, the interest rate increased to 15% and Envision
issued 10,000 shares of its common stock to the holder in consideration of this
agreement. Interest only payments were to start being due monthly in
arrears in the first calendar month after Envision raises $100,000 from all
capital raising transactions.
In
October 2009, Envision entered into an agreement with the holder pursuant to
which it amended the note to increase the interest rate to 20% retroactive to
April 11, 2009 through October 30, 2009, adjust the per annum interest to 12%
starting November 1, 2009 (default rate of 20%), extend the maturity to December
31, 2010 and add a conversion feature to allow conversion at the holder’s option
to shares of our common stock at $.33 per share. The $591,771 note was
amended to add accrued interest of $65,423 to the principal balance resulting in
a new principal balance of $657,194. Additionally, a new second note was
issued for $125,000. This new note has the same terms of the amended
note. Interest under both notes is due on the first business day of each
calendar quarter starting January 4, 2010, and we have the option to add such
interest to the note principal balance effectively making the interest due at
note maturity. Both notes contain price protection features such that if we sell
equity or convert existing instruments to common stock at a price less than the
$.33 per share conversion price, the conversion price will be adjusted downward
to the sale price. Furthermore, if we issue new rights, warrants, options
or other common stock equivalents at an exercise price less than the $.33 per
share conversion price, then the conversion price shall be adjusted downward to
a new price based on a stipulated formula. The holder may not convert the
debt if it results in the holder beneficially holding more than 9.9% of our
common stock.
Each of
the above securities were issued to the holder in reliance on the exemption from
registration afforded by Section 4(2) under the Securities Act and Regulation D
(Rule 506) under the Securities Act and corresponding provisions of state
securities laws, which exempt transactions by an issuer not involving a public
offering.
In
October 2009, Envision issued a 10% convertible promissory note for $102,236,
which includes the total $100,000 principal advanced plus $2,236 of accrued
interest. This note is due December 31, 2010. This note is
convertible into shares of our common stock at $.33 per share.
This note
was not registered under the Securities Act, or the securities laws of any
state, and was issued in reliance on the exemption from registration afforded by
Section 4(2) under the Securities Act and Regulation D (Rule 506) under the
Securities Act and corresponding provisions of state securities laws, which
exempt transactions by an issuer not involving a public
offering.
In
December 2010, Envision issued a $100,000 note with a 10% interest rate to its
landlord and real estate broker. This note is subordinated in right
of payment to the prior payment in full of all of its existing and future senior
indebtedness. The holders of the note may, at their option, convert
all or a portion of the outstanding principal amount and unpaid accrued interest
as of the date of conversion into shares of our common stock equal to one share
for each $0.33 of outstanding principal and unpaid accrued interest.
In
the event that we receive more than $1,000,000 in a financing or a series of
financings (whether related or unrelated) prior to the maturity date of the
note, 25% of the proceeds from any such financing in excess of $1,000,000 shall
be used to pay down the note. Any funds provided to us by certain
entities shall not be credited towards the $1,000,000 threshold.
This note
was not registered under the Securities Act, or the securities laws of any
state, and was issued in reliance on the exemption from registration afforded by
Section 4(2) under the Securities Act and Regulation D (Rule 506) under the
Securities Act and corresponding provisions of state securities laws, which
exempt transactions by an issuer not involving a public
offering.
Information
set forth in Item 2.01 of this Current Report on Form 8-K with respect to the
issuance of unregistered equity securities in connection with the Merger is
incorporated by reference into this Item 3.02.
Description
of Capital Stock
Authorized
Capital Stock
We have
authorized 162,500,000 shares of capital stock, par value $0.001 per share, of
which all
are
shares of common stock no other classes of stock are
authorized.
Capital
Stock Issued and Outstanding
After
giving effect to the Merger, the Split-Off, the Stock Split, we have issued and
outstanding securities on a fully diluted basis as follows:
|
|
●
|
39,000,000
shares of common stock;
|
Common
Stock
The
holders of our common stock are entitled to one vote per share. Our Articles of
Incorporation do not provide for cumulative voting. The holders of our common
stock are entitled to receive such dividends, if any, as may be declared by our
board of directors out of legally available funds; however, the current policy
of our board of directors is to retain earnings, if any, for operations and
growth. The holders of our common stock have no preemptive,
subscription, redemption or conversion rights.
Warrants
Pursuant to an agreement with a former law
firm, we agreed to issue to the law firm a warrant to purchase 801 shares of
Envision common stock for an exercise price of $0.01 per
share. Following the Merger and Stock Split, this warrant was
converted into a warrant to purchase 24,465 shares of our common stock at an
exercise price of $0.01. The warrant expires January 1,
2015.
Pursuant
to a selling agreement with Nexcore Capital, Inc., in connection with our 2008
Private Placement, we agreed to issue to Nexcore Capital, Inc. and Financial
West Group five-year warrants to purchase an aggregate of 4,712 shares of
Envision common stock. Following the Merger and Stock Split, these
were converted into warrants to purchase 143,918 shares of our common
stock.
Dividend
Policy
We
currently intend to use all available funds to develop our business and do not
anticipate that we will pay dividends in the future. We can give no
assurances that we will ever have excess funds available to pay
dividends.
Indemnification
of Directors and Officers
Under our
Articles of Incorporation, no director or officer will be held personally liable
to us or our shareholders for damages of breach of fiduciary duty as a director
or officer unless such breach involves intentional misconduct, fraud, a knowing
violation of law, or a payment of dividends in violation of the law.
Under our Bylaws,
directors and officers will be indemnified to the fullest extent allowed by the
law against all damages and expenses suffered by a director or officer being
party to any action, suit, or proceeding, whether civil, criminal,
administrative or investigative.
This same
indemnification is provided pursuant to Nevada Revised Statutes, Chapter
78.
The
general effect of the foregoing is to indemnify a control person, officer or
director from liability, thereby making the company responsible for any expenses
or damages incurred by such control person, officer or director in any action
brought against them based on their conduct in such capacity, provided they did
not engage in fraud or criminal activity.
Any repeal or modification of these
provisions approved by our stockholders shall be prospective only, and shall not
adversely affect any limitation on the liability of a director or officer of
ours existing as of the time of such repeal or modification.
Anti-Takeover
Effect of Certain By-Law Provisions
Our
Amended Articles of Incorporation and Bylaws contain provisions that could have
the effect of discouraging potential acquisition proposals or tender offers or
delaying or preventing a change of control of our company. These provisions are
as follows:
● they
provide that special meetings of stockholders may be called only by our
chairman, our secretary or by a resolution adopted by a majority of our board of
directors; and
● they
do not include a provision for cumulative voting in the election of directors.
Under cumulative voting, a minority stockholder holding a sufficient number of
shares may be able to ensure the election of one or more directors. The absence
of cumulative voting may have the effect of limiting the ability of minority
stockholders to effect changes in our board of directors.
Trading
Information
Our
common stock is currently approved for quotation on the OTC Bulletin Board
maintained by the Financial Industry Regulatory Authority, Inc. under the symbol
CSTA and there is no active trading market for our stock. We intend
to notify the OTC Bulletin Board of our upcoming name change and will obtain a
new symbol. As soon as practicable, and assuming we satisfy all
necessary initial listing requirements, we intend to apply to have our common
stock listed for trading on the NYSE Amex Equities or The Nasdaq Stock Market,
although we cannot be certain that any of these applications will be
approved
.
Transfer
Agent
The
transfer agent for our common stock is Island Stock Transfer.
Item 5.01 Changes
in Control of Registrant.
Reference
is made to the disclosure set forth under Item 2.01 of this Current Report on
Form 8-K, which disclosure is incorporated herein by reference.
Item 5.02 Departure
of Directors or Certain Officers; Election of Directors; Appointment of Certain
Officers; Compensatory Arrangements of Certain Officers.
Our sole
officer and director immediately prior to the Merger resigned from all positions
with us as of February 10, 2010, effective upon the closing of the
Merger. Pursuant to the terms of the Merger, our new directors and
officers are as set forth therein. Reference is made to the
disclosure set forth under Item 2.01 of this Current Report on Form 8-K, which
disclosure is incorporated herein by reference.
Item 5.03 Amendments
to Articles of Incorporation or Bylaws; Change in Fiscal Year.
Information
set forth in Item 2.01 of this Current Report on Form 8-K is incorporated by
reference into this Item 3.02.
Item 5.06 Change
in Shell Company Status.
Following
the consummation of the Merger described in Item 2.01 of this Current Report on
Form 8-K, we believe that we are not a shell corporation as that term is defined
in Rule 405 of the Securities Act and Rule 12b-2 of the Exchange
Act.
Item 9.01 Financial
Statements and Exhibits.
(a)
Financial
Statements of Businesses Acquired
. In accordance with Item
9.01(a), Envision’s audited financial statements for the fiscal years ended
December 31, 2008 and 2007 are filed in this Current Report on Form 8-K as
Exhibit 99.1 and Envision’s unaudited financial statements for the nine months
ended September 30, 2009 are filed in this Current Report on Form 8-K as Exhibit
99.2.
(b)
Pro
Forma Financial Information
. In accordance with Item 9.01(b),
our pro forma financial statements are filed in this Current Report on Form 8-K
as Exhibit 99.3.
(c)
Exhibits
.
The
exhibits listed in the following Exhibit Index are filed as part of this Current
Report on Form 8-K.
|
Exhibit No.
|
Description
|
|
|
|
|
|
Agreement
of Merger and Plan of Reorganization, dated February 10, 2010, by and
among Casita Enterprises, Inc., ESII Acquisition Corp. and Envision Solar
International, Inc.
|
|
|
Articles
of Incorporation (Incorporated herein by reference from Exhibit 3.1 to our
Registration Statement on Form SB-2 filed with the SEC on November 2,
2007)
|
|
|
Bylaws
(Incorporated herein by reference from Exhibit 3.2 t o our Registration
Statement on Form SB-2 filed with the SEC on November 2,
2007)
|
|
10.1
|
Selling
Agreement, dated as of January 17, 2007, by and between
Envision Solar, LLC and Nexcore Capital, Inc.
|
|
10.2
|
2007
Unit Option Plan of Envision Solar, LLC, dated as of July
2007
|
|
10.3
|
Asset
Purchase Agreement, dated as of January, 2008, by and among Envision Solar
International, Inc. and Generating Assets, LLC
|
|
10.4
|
Warrant,
dated as of January 11, 2008, issued to Squire, Sanders & Dempsey
L.L.P.
|
|
10.5
|
Selling
Agreement., dated as of February 11, 2008, by and between Envision Solar
International, Inc. and Nexcore Capital, Inc
|
|
10.6
|
Promissory
Note, dated June 1, 2008, issued to William Adelson
|
|
10.7
|
Securities
Purchase Agreement, dated as of November 12, 2008, by and between Envision
Solar International, Inc. and Gemini Master Fund, Ltd.
|
|
10.8
|
Secured
Bridge Note, dated November 12, 2008, issued to Gemini Master Fund,
Ltd.
|
|
10.9
|
Security
Agreement, dated as of November 12, 2008, by and among Envision Solar
International, Inc., Envision Solar Construction, Inc., Envision Solar
Residential, Inc., Envision Africa, LLC, Gemini Master Fund, Ltd. and
Gemini Strategies, LLC
|
|
10.10
|
Intellectual
Property Security Agreement, dated as of November 12, 2008, by and among
Envision Solar International, Inc., Envision Solar Construction, Inc.,
Envision Solar Residential, Inc., Envision Africa, LLC Gemini Master Fund,
Ltd. and Gemini Strategies, LLC
|
|
10.11
|
Subsidiary
Guarantee, dated as of November 12, 2008, by and among Envision Solar
International, Inc., Envision Solar Construction, Inc., Envision Solar
Residential, Inc., Envision Africa, LLC and Gemini Strategies,
LLC
|
|
10.12
|
Forbearance
Agreement, dated as of April 11, 2009, by and among Envision Solar
International, Inc., Envision Solar Construction, Inc., Envision Solar
Residential, Inc., Envision Africa, LLC and Gemini Master Fund,
Ltd.
|
|
10.13
|
Agreement,
dated as of July 6, 2009, by and between Envision Solar International,
Inc. and Team Solar, Inc.
|
|
10.14
|
Sustainable
Strategy, Planning and Solar Advisory Services Agreement, dated as of
October 1, 2009, between Envision Solar International, Inc. and Centre for
Environmental Planning and Technology
|
|
10.15
|
Subordination
Agreement, dated as of October 1, 2009, by and among Envision Solar
International, Inc., Envision Solar Construction, Inc., Envision Solar
Residential, Inc., Envision Africa, LLC, Jon Evey, Gemini Master Fund,
Ltd. and Gemini Strategies, LLC
|
|
10.16
|
Consulting
Services Agreement, dated as of October 23, 2008, by and between Envision
Solar International, Inc. and Chevron Energy Solutions
Company
|
|
10.17
|
Master
Consulting Services Agreement, dated as of October 23, 2008, by and
between Envision Solar International, Inc. and Chevron Energy Solutions
Company
|
|
10.18
|
Amendment
Agreement, dated as of October 30, 2009, by and among Envision Solar
International, Inc., Envision Solar Construction, Inc., Envision Solar
Residential, Inc., Envision Africa, LLC, Gemini Master Fund, Ltd. and
Gemini Strategies, LLC
|
|
10.19
|
Lock-up
Agreement, dated as of October 30, 2009, by and between Envision Solar
International, Inc. and Robert Noble
|
|
10.20
|
Lease
dated as of December 17, 2009 by and between Pegasus KM, LLC and Envision
Solar International, Inc.
|
|
10.21
|
10%
Subordinated Convertible Promissory Note, dated December 17, 2009, issued
to Mark Mandell, William Griffith and Pegasus Enterprises,
LP
|
|
10.22
|
Amended
and Restated 10% Subordinated Convertible Promissory Note, dated as of
December 31, 2010, issued to John Evey
|
|
|
Agreement
of Conveyance, Transfer and Assignment of Assets and Assumption of
Obligations, dated as of February 10, 2010, by and between Casita
Enterprises, Inc. and Casita Enterprises Holdings,
Inc.
|
|
|
Stock
Purchase Agreement, dated February 10, 2010, by and between Casita
Enterprises, Inc. and Jose Cisneros, Marco Martinez, Paco Sanchez, Don
Miguel and Lydia Marcos
|
|
|
Employment
Agreement, dated June 15, 2007 by and between Envision Solar
International, Inc. and Robert Noble
|
|
|
Assignment
of Employment Agreement, dated February 10, 2010, by and between Casita
Enterprises, Inc., Envision Solar International, Inc. and Robert
Noble
|
|
|
Employment
Agreement, dated February 2, 2009 by and between Envision Solar
International, Inc. and Joanna Tan
|
|
|
Assignment
of Employment Agreement, dated February 10, 2010, by and between Casita
Enterprises, Inc., Envision Solar International, Inc. and Joanna
Tan
|
|
|
Interim
Services Agreement, dated September, 2009 by and between Envision Solar
International, Inc. and Tatum, LLC
|
|
|
Assignment
of Employment Interim Services Agreement, dated February 10, 2010, by and
between Casita Enterprises, Inc., Envision Solar International, Inc. and
Tatum, LLC
|
|
|
Envision
Solar International, Inc. and Subsidiaries financial statements for the
fiscal years ended December 31, 2008 and 2007
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Envision
Solar International, Inc. and Subsidiaries unaudited financial statements
for the three and nine months ended September 30, 2009 and
2008
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Pro
forma unaudited consolidated financial statements as of September 30,
2009
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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 thereunto
duly authorized.
Date: February
12, 2010
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CASITA
ENTERPRISES, INC.
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By:
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/s/
Robert Noble
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Robert
Noble
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Chief
Executive Officer
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INDEX
TO EXHIBITS
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Exhibit No.
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Description
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Agreement
of Merger and Plan of Reorganization, dated February 10, 2010, by and
among Casita Enterprises, Inc., ESII Acquisition Corp. and Envision Solar
International, Inc.
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Articles
of Incorporation (Incorporated herein by reference from Exhibit 3.1 to our
Registration Statement on Form SB-2 filed with the SEC on November 2,
2007)
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Bylaws
(Incorporated herein by reference from Exhibit 3.2 t o our Registration
Statement on Form SB-2 filed with the SEC on November 2,
2007)
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10.1
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Selling
Agreement, dated as of January 17, 2007, by and between
Envision Solar, LLC and Nexcore Capital, Inc.
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10.2
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2007
Unit Option Plan of Envision Solar, LLC, dated as of July
2007
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10.3
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Asset
Purchase Agreement, dated as of January, 2008, by and among Envision Solar
International, Inc. and Generating Assets, LLC
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10.4
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Warrant,
dated as of January 11, 2008, issued to Squire, Sanders & Dempsey
L.L.P.
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10.5
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Selling
Agreement., dated as of February 11, 2008, by and between Envision Solar
International, Inc. and Nexcore Capital, Inc
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10.6
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Promissory
Note, dated June 1, 2008, issued to William Adelson
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10.7
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Securities
Purchase Agreement, dated as of November 12, 2008, by and between Envision
Solar International, Inc. and Gemini Master Fund, Ltd.
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10.8
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Secured
Bridge Note, dated November 12, 2008, issued to Gemini Master Fund,
Ltd.
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10.9
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Security
Agreement, dated as of November 12, 2008, by and among Envision Solar
International, Inc., Envision Solar Construction, Inc., Envision Solar
Residential, Inc., Envision Africa, LLC, Gemini Master Fund, Ltd. and
Gemini Strategies, LLC
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10.10
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Intellectual
Property Security Agreement, dated as of November 12, 2008, by and among
Envision Solar International, Inc., Envision Solar Construction, Inc.,
Envision Solar Residential, Inc., Envision Africa, LLC Gemini Master Fund,
Ltd. and Gemini Strategies, LLC
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10.11
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Subsidiary
Guarantee, dated as of November 12, 2008, by and among Envision Solar
International, Inc., Envision Solar Construction, Inc., Envision Solar
Residential, Inc., Envision Africa, LLC and Gemini Strategies,
LLC
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10.12
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Forbearance
Agreement, dated as of April 11, 2009, by and among Envision Solar
International, Inc., Envision Solar Construction, Inc., Envision Solar
Residential, Inc., Envision Africa, LLC and Gemini Master Fund,
Ltd.
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10.13
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Agreement,
dated as of July 6, 2009, by and between Envision Solar International,
Inc. and Team Solar, Inc.
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10.14
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Sustainable
Strategy, Planning and Solar Advisory Services Agreement, dated as of
October 1, 2009, between Envision Solar International, Inc. and Centre for
Environmental Planning and Technology
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10.15
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Subordination
Agreement, dated as of October 1, 2009, by and among Envision Solar
International, Inc., Envision Solar Construction, Inc., Envision Solar
Residential, Inc., Envision Africa, LLC, Jon Evey, Gemini Master Fund,
Ltd. and Gemini Strategies, LLC
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10.16
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Consulting
Services Agreement, dated as of October 23, 2008, by and between Envision
Solar International, Inc. and Chevron Energy Solutions
Company
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10.17
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Master
Consulting Services Agreement, dated as of October 23, 2008, by and
between Envision Solar International, Inc. and Chevron Energy Solutions
Company
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10.18
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Amendment
Agreement, dated as of October 30, 2009, by and among Envision Solar
International, Inc., Envision Solar Construction, Inc., Envision Solar
Residential, Inc., Envision Africa, LLC, Gemini Master Fund, Ltd. and
Gemini Strategies, LLC
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10.19
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Lock-up
Agreement, dated as of October 30, 2009, by and between Envision Solar
International, Inc. and Robert Noble
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10.20
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Lease
dated as of December 17, 2009 by and between Pegasus KM, LLC and Envision
Solar International, Inc.
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10.21
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10%
Subordinated Convertible Promissory Note, dated December 17, 2009, issued
to Mark Mandell, William Griffith and Pegasus Enterprises,
LP
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10.22
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Amended
and Restated 10% Subordinated Convertible Promissory Note, dated as of
December 31, 2010, issued to John Evey
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Agreement
of Conveyance, Transfer and Assignment of Assets and Assumption of
Obligations, dated as of February 10, 2010, by and between Casita
Enterprises, Inc. and Casita Enterprises Holdings,
Inc.
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Stock
Purchase Agreement, dated February 10, 2010, by and between Casita
Enterprises, Inc. and Jose Cisneros, Marco Martinez, Paco Sanchez, Don
Miguel and Lydia Marcos
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Employment
Agreement, dated June 15, 2007 by and between Envision Solar
International, Inc. and Robert Noble
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Assignment
of Employment Agreement, dated February 10, 2010, by and between Casita
Enterprises, Inc., Envision Solar International, Inc. and Robert
Noble
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Employment
Agreement, dated February 2, 2009 by and between Envision Solar
International, Inc. and Joanna Tan
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Assignment
of Employment Agreement, dated February 10, 2010, by and between Casita
Enterprises, Inc., Envision Solar International, Inc. and Joanna
Tan
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Interim
Services Agreement, dated September, 2009 by and between Envision Solar
International, Inc. and Tatum, LLC
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Assignment
of Employment Interim Services Agreement, dated February 10, 2010, by and
between Casita Enterprises, Inc., Envision Solar International, Inc. and
Tatum, LLC
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Envision
Solar International, Inc. and Subsidiaries financial statements for the
fiscal years ended December 31, 2008 and 2007
|
|
|
Envision
Solar International, Inc. and Subsidiaries unaudited financial statements
for the three and nine months ended September 30, 2009 and
2008
|
|
|
Pro
forma unaudited consolidated financial statements as of September 30,
2009
|
Exibit
2.1
_____________________________________________________
AGREEMENT
OF MERGER AND
PLAN
OF REORGANIZATION
_____________________________________________________
BY
AND AMONG
CASITA
ENTERPRISES, INC.,
ESII
ACQUISITION CORP.
and
ENVISION
SOLAR INTERNATIONAL, INC.
Dated as
of February 10, 2010
AGREEMENT
OF MERGER AND PLAN OF REORGANIZATION
THIS
AGREEMENT OF MERGER AND PLAN OF REORGANIZATION (this “
Agreement
”) is made
and entered into on February 10, 2010, by and among CASITA ENTERPRISES, INC., a
Nevada corporation (“
Parent
”), ESII
ACQUISITION CORP., a Delaware corporation (“
Acquisition Corp.
”),
which is a wholly-owned subsidiary of Parent, and ENVISION SOLAR INTERNATIONAL,
INC., a California corporation (the “
Company
”).
W I T N E
S S E T H :
WHEREAS,
the Board of Directors of each of Acquisition Corp., Parent and the Company has
each determined that it is fair to and in the best interests of their respective
corporations and stockholders for Acquisition Corp. to be merged with and into
the Company (the “
Merger
”) upon the
terms and subject to the conditions set forth herein;
WHEREAS,
the Board of Directors of each of Parent, Acquisition Corp. and the Company has
approved the Merger in accordance with the Nevada Revised Statutes (the “
NRS
”), the General
Corporation Law of the State of Delaware (the “
DGCL
”) and the
Corporations Code of the State of California (the “
CCC
”), and upon the
terms and subject to the conditions set forth herein, in the Delaware
Certificate of Merger attached as
Exhibit A
hereto (the
“
DE-Certificate of
Merger
”) and the California Agreement of Merger attached as
Exhibit B
hereto (the
“
CA-Agreement of
Merger
”);
WHEREAS,
the requisite stockholders of the Company have approved by written consent
pursuant to Section 603(a) of the CCC this Agreement, the DE-Certificate of
Merger, the CA-Agreement of Merger and the transactions contemplated and
described hereby and thereby, including, without limitation, the Merger, and
Parent, as the sole stockholder of Acquisition Corp., has approved by written
consent pursuant to Section 78.320 of the NRS this Agreement, the DE-Certificate
of Merger, the CA-Agreement of Merger and the transactions contemplated and
described hereby and thereby, including, without limitation, the
Merger;
WHEREAS,
the parties hereto intend that the Merger contemplated herein shall qualify as a
reorganization within the meaning of Section 368(a)(1)(A) of the Internal
Revenue Code of 1986, as amended (the “
Code
”), by reason of
Section 368(a)(2)(E) of the Code.
NOW,
THEREFORE, in consideration of the mutual agreements and covenants hereinafter
set forth, the parties hereto agree as follows:
ARTICLE
I.
THE
MERGER
Section
1.01
Merger
. Subject
to the terms and conditions of this Agreement, the DE-Certificate of Merger and
the CA-Agreement of Merger, Acquisition Corp. shall be merged with and into the
Company in accordance with Section 252 of the DGCL and Section 1108 of the CCC.
At the Effective Time (as defined below), the separate legal existence of
Acquisition Corp. shall cease, and the Company shall be the surviving
corporation in the Merger (sometimes hereinafter referred to as the “
Surviving
Corporation
”) and shall continue its corporate existence under the laws
of the State of California under the name “Envision Solar International,
Inc.”
Section
1.02
Effective
Time
. The Merger shall become effective upon the filing of (a)
the DE-Certificate of Merger with the Secretary of State of the State of
Delaware in accordance with Section 252 of the DGCL and (b) the CA-Agreement of
Merger with the Secretary of State of the State of California in accordance with
Section 1103 of the CCC. The time at which the Merger shall become effective as
aforesaid is referred to hereinafter as the “
Effective
Time
.”
Section
1.03
Closing
.
The
closing of the Merger (the “Closing”) shall occur concurrently with the
Effective Time (the “Closing Date”). The Closing shall occur at the offices
of the Company. At the Closing, all of the documents, certificates,
agreements, opinions and instruments referenced in Article VII will be executed
and delivered as described therein. At the Effective Time, all actions to be
taken at the Closing shall be deemed to be taken
simultaneously.
Section
1.04
Certificate of
Incorporation, By-laws, Directors and Officers
.
(a)
The
Certificate of Incorporation of the Company, as in effect immediately prior to
the Effective Time, attached as
Exhibit C
hereto,
shall be the Certificate of Incorporation of the Surviving Corporation from and
after the Effective Time until amended in accordance with applicable law and
such Certificate of Incorporation.
(b)
The
By-laws of the Company, as in effect immediately prior to the Effective Time,
attached as
Exhibit
D
hereto, shall be the By-laws of the Surviving Corporation from and
after the Effective Time until amended in accordance with applicable law, the
Certificate of Incorporation of the Surviving Corporation and such
By-laws.
(c)
The
directors and officers listed in
Exhibit E
hereto
shall be the directors and officers of the Surviving Corporation and Parent, and
each shall hold his respective office or offices from and after the Effective
Time until his successor shall have been elected and shall have qualified in
accordance with applicable law, or as otherwise provided in the Certificate of
Incorporation or By-laws of the Surviving Corporation or the Certificate of
Incorporation or By-laws of Parent, as the case may be.
Section
1.05
Assets and
Liabilities
. At the Effective Time, the Surviving Corporation shall
possess all the rights, privileges, powers and franchises of a public as well as
of a private nature, and be subject to all the restrictions, disabilities and
duties of each of Acquisition Corp. and the Company (collectively, the “
Constituent
Corporations
”); and all the rights, privileges, powers and franchises of
each of the Constituent Corporations, and all property, real, personal and
mixed, and all debts due to any of the Constituent Corporations on whatever
account, as well as all other things in action or belonging to each of the
Constituent Corporations, shall be vested in the Surviving Corporation; and all
property, rights, privileges, powers and franchises, and all and every other
interest shall be thereafter as effectively the property of the Surviving
Corporation as they were of the several and respective Constituent Corporations,
and the title to any real estate vested by deed or otherwise in either of such
Constituent Corporations shall not revert or be in any way impaired by the
Merger; but all rights of creditors and all liens upon any property of any of
the Constituent Corporations shall be preserved unimpaired, and all debts,
liabilities and duties of the Constituent Corporations shall thenceforth attach
to the Surviving Corporation, and may be enforced against it to the same extent
as if said debts, liabilities and duties had been incurred or contracted by
it.
Section
1.06
Manner and Basis of
Converting Shares
.
(a)
At the
Effective Time:
(i)
each
share of common stock, par value $0.001 per share, of Acquisition Corp. that
shall be outstanding immediately prior to the Effective Time shall, by virtue of
the Merger and without any action on the part of the holder thereof, be
converted into the right to receive one (1) share of common stock, no par value
per share, of the Surviving Corporation, so that at the Effective Time, Parent
shall be the holder of all of the issued and outstanding shares of the Surviving
Corporation;
(ii)
the
shares of common stock, no par value per share, of the Company (the “
Company Common
Stock
”) owned by the stockholders of the Company, each of which is listed
on
Schedule
1.06(a)(ii)
(other than shares of Company Common Stock as to which
appraisal rights are perfected pursuant to the applicable provisions of the CCC
and not withdrawn or otherwise forfeited) (the “
Stockholders
”),
shall, by virtue of the Merger and without any action on the part of the
Stockholders, be converted into the right to receive the number of shares of
common stock, par value $0.001 per share of the Parent (the “
Parent Common Stock
”)
specified in
Schedule
1.06(a)(ii)
for each of the Stockholders, which shall be equal to9.398
shares of Parent Common Stock for each share of Company Common Stock with
fractional shares of Parent Common Stock rounded to the nearest whole share;
and
(iii)
each
share of Company Common Stock held in the treasury of the Company immediately
prior to the Effective Time shall be cancelled in the Merger and cease to
exist.
(b)
After the
Effective Time, there shall be no further registration of transfers on the stock
transfer books of the Surviving Corporation of the shares of Company Common
Stock that were outstanding immediately prior to the Effective
Time.
Section
1.07
Surrender and Exchange of
Certificates
. Promptly after the Effective Time and upon (a) surrender of
a certificate or certificates representing shares of Company Common Stock that
were outstanding immediately prior to the Effective Time or an affidavit and
indemnification in form reasonably acceptable to counsel for Parent stating that
such Stockholder has lost its certificate or certificates or that such have been
destroyed and (b) delivery of a Letter of Transmittal (as described in Article
IV hereof), Parent shall issue to each record holder of Company Common Stock
surrendering such certificate, certificates or affidavit and Letter of
Transmittal, a certificate or certificates registered in the name of such
Stockholder representing the number of shares of Parent Common Stock that such
Stockholder shall be entitled to receive as set forth in Section 1.06(a)(ii)
hereof. Until the certificate, certificates or affidavit is or are surrendered
together with the Letter of Transmittal as contemplated by this Section 1.07 and
Article IV hereof, each certificate or affidavit that immediately prior to the
Effective Time represented any outstanding shares of Company Common Stock shall
be deemed at and after the Effective Time to represent only the right to receive
upon surrender as aforesaid the Parent Common Stock specified in
Schedule 1.06
hereof
for the holder thereof or to perfect any rights of appraisal that such holder
may have pursuant to the applicable provisions of the CCC .
Section
1.08
Parent Common
Stock
. Parent agrees that it will cause the Parent Common
Stock into which the Company Common Stock is converted at the
Effective Time pursuant to Section 1.06(a)(ii) to be available for such
purposes. Parent further covenants that immediately following the Effective
Time, Parent will effect cancellations of its outstanding shares of Parent
Common Stock and that there will be no more than 4,000,000 shares of Parent
Common Stock issued and outstanding, and that no other common or preferred stock
or equity securities or any options, warrants, rights or other agreements or
instruments convertible, exchangeable or exercisable into common or preferred
stock or other equity securities shall be issued or outstanding, except as
described herein.
Section
1.09
Stock Options
. At the
Effective Time, each outstanding purchase right under the 2007 Unit Option Plan
of Envision Solar, LLC, (the “
2007 Plan
”), as
amended to date and with any addendums thereto, and under the Envision Solar
International, Inc. 2008 Stock Option Plan (the “
2008 Plan
”), as
amended to date and any addendums thereto (each, a “
Company Option
”)
shall be assumed by Parent in such manner that Parent is a corporation “issuing
or assuming a stock option in a transaction to which Section 424(a) applies”
within the meaning of the Code, and shall be converted into a right to purchase
Parent Common Stock in accordance with this Section 1.09. Each Company Option so
converted shall continue to have, and be subject to, the same terms and
conditions (including vesting schedule) as set forth in the 2007 Plan or 2008
Plan, as applicable, and any agreements thereunder immediately prior to the
Effective Time, except that, as of the Effective Time, (i) each Company Option
shall be exercisable (or shall become exercisable in accordance with its terms)
for that number of whole shares of Parent Common Stock equal to the product of
the number of shares that were issuable upon exercise of such Company Option
immediately prior to the Effective Time multiplied by 9.398 (the “
Option Exchange
Ratio
”), rounded down to the nearest whole number of shares of Parent
Common Stock and (ii) the per share exercise price for the shares of Parent
Common Stock issuable upon exercise of such Company Option so converted shall be
equal to the quotient determined by dividing the exercise price per share of
Company Common Stock at which such Company Option was exercisable immediately
prior to the Effective Time by the Option Exchange Ratio, rounded up to the
nearest whole cent,
subject
to any adjustments that may be required in order to comply with Sections 409A
and 422
of
the Code.
Section
1.10
Warrants
. At the
Effective Time, each outstanding warrant to purchase shares of Company Common
Stock (each, a “
Company Warrant
”)
shall be assumed by Parent, and shall be converted into a right to purchase
Parent Common Stock in accordance with this Section 1.10. Each Company Warrant
so converted shall continue to have, and be subject to, the same terms and
conditions as set forth in each Company Warrant immediately prior to the
Effective Time, except that, as of the Effective Time, (i) each Company Warrant
shall be exercisable (or shall become exercisable in accordance with its terms)
for that number of whole shares of Parent Common Stock equal to the product of
the number of shares that were issuable upon exercise of such Company Warrant
immediately prior to the Effective Time multiplied by 9.398 (the “
Warrant Exchange
Ratio
”), rounded down to the nearest whole number of shares of Parent
Common Stock and (ii) the per share exercise price for the shares of Parent
Common Stock issuable upon exercise of such Company Warrant so converted shall
be equal to the quotient determined by dividing the exercise price per share of
Company Common Stock at which such Company Warrant was exercisable immediately
prior to the Effective Time by the Warrant Exchange Ratio, rounded up to the
nearest whole cent.
Section
1.11
Operation of Surviving
Corporation
. The Company acknowledges that upon the
effectiveness of the Merger, and the material compliance by Parent and
Acquisition Corp. with their respective duties and obligations hereunder, Parent
shall have the absolute and unqualified right to deal with the assets and
business of the Surviving Corporation as its own property without limitation on
the disposition or use of such assets or the conduct of such
business.
Section
1.12
Further
Assurances
. From time to time, from and after the Effective
Time, as and when reasonably requested by Parent, the proper officers and
directors of the Company as of the Effective Time shall, for and on behalf and
in the name of the Company or otherwise, execute and deliver all such deeds,
bills of sale, assignments and other instruments and shall take or cause to be
taken such further actions as Parent, Acquisition Corp. or their respective
successors or assigns reasonably may deem necessary or desirable in order to
confirm or record or otherwise transfer to the Surviving Corporation title to
and possession of all of the properties, rights, privileges, powers, franchises
and immunities of the Company or otherwise to carry out fully the provisions and
purposes of this Agreement, the DE-Certificate of Merger and the CA-Agreement of
Merger.
ARTICLE
II.
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
The
Company hereby represents and warrants to Parent and Acquisition Corp. as
follows. Notwithstanding anything to the contrary contained herein, disclosure
of items in the draft Current Report on Form 8-K of Parent with respect to the
Merger, and all exhibits thereto, a copy of which is attached hereto as
Exhibit F
(collectively, the “
Disclosures
”) shall
be deemed to be disclosure of such items for all purposes under this Agreement,
including, without limitation, for all applicable representations and warranties
of the Company:
Section
2.01
Organization, Standing,
Subsidiaries, Etc
.
(a)
The
Company is a corporation duly organized and existing in good standing under the
laws of the State of California and has all requisite power and authority
(corporate and other) to carry on its business, to own or lease its properties
and assets, to enter into this Agreement, the DE-Certificate of Merger and the
CA-Agreement of Merger and to carry out the terms hereof and thereof. Copies of
the Certificate of Incorporation and By-laws of the Company that have been
delivered to Parent and Acquisition Corp. prior to the execution of this
Agreement are true and complete and have not since been amended or
repealed.
(b)
Except as
set forth on
Schedule
2.01(b)
, the Company has no subsidiaries or direct or indirect interest
(by way of stock ownership or otherwise) in any firm, corporation, limited
liability company, partnership, association or business.
Section
2.02
Qualification
. The
Company is duly qualified to conduct business as a foreign corporation and is in
good standing in each jurisdiction wherein the nature of its activities or its
properties owned or leased makes such qualification necessary, except where the
failure to be so qualified would not have a material adverse effect on the
condition (financial or otherwise), properties, assets, liabilities, business
operations, results of operations or prospects of the Company taken as a whole
(the “
Condition of the
Company
”).
Section
2.03
Capitalization of the
Company
. The authorized capital stock of the Company consists
of 10,000,000 shares of Company Common Stock, of which there are 831,263 shares
of Company Common Stock issued and outstanding, and such shares are duly
authorized, validly issued, fully paid and non-assessable, and none of such
shares have been issued in violation of the preemptive rights of any natural
person, corporation, business trust, association, limited liability company,
partnership, joint venture, other entity, government, agency or political
subdivision (each, a “
Person
”). The offer,
issuance and sale of such shares of Company Common Stock were (a) exempt from
the registration and prospectus delivery requirements of the Securities Act of
1933, as amended (the “
Securities Act
”), (b)
registered or qualified (or were exempt from registration or qualification)
under the registration or qualification requirements of all applicable state
securities laws and (c) accomplished in conformity with all other applicable
securities laws. None of such shares of Company Common Stock are subject to a
right of withdrawal or a right of rescission under any federal or state
securities or “Blue Sky” law. Except as set forth on
Schedule 2.03
hereto,
the Company has no outstanding options, rights or commitments to issue Company
Common Stock or other Equity Securities (as defined below) of the Company, and
there are no outstanding securities convertible or exercisable into or
exchangeable for Company Common Stock or other Equity Securities of the Company.
For purposes of this Agreement, “
Equity Security
”
shall mean any stock or similar security of an issuer or any security (whether
stock or Indebtedness for Borrowed Money (as defined below)) convertible, with
or without consideration, into any stock or other equity security, or any
security (whether stock or Indebtedness for Borrowed Money) carrying any warrant
or right to subscribe to or purchase any stock or similar security, or any such
warrant or right.
Section
2.04
Indebtedness
. The
Company has no Indebtedness for Borrowed Money, except as otherwise set forth in
this Agreement or disclosed on the Balance Sheets (as defined below). For
purposes of this Agreement, “
Indebtedness for Borrowed
Money
” shall mean (a) all Indebtedness in respect of money borrowed
including, without limitation, Indebtedness which represents the unpaid amount
of the purchase price of any property and is incurred in lieu of borrowing money
or using available funds to pay such amounts and not constituting an account
payable or expense accrual incurred or assumed in the ordinary course of
business of the Company, (b) all Indebtedness evidenced by a promissory note,
bond or similar written obligation to pay money or (c) all such Indebtedness
guaranteed by the Company or for which the Company is otherwise contingently
liable. Furthermore, for purposes of this Agreement, “
Indebtedness
” shall
mean any obligation of the Company which, under generally accepted accounting
principles in the United Stated (“
GAAP
”), is required
to be shown on the balance sheet of the Company as a liability. Any obligation
secured by a mortgage, pledge, security interest, encumbrance, lien or charge of
any kind (a “
Lien
”), shall be
deemed to be Indebtedness, even though such obligation is not assumed by the
Company.
Section
2.05
Company
Stockholders
.
Schedule 1.06
hereto
contains a true and complete list of the names of the record owners of all of
the outstanding shares of Company Common Stock and other Equity Securities of
the Company, together with the number of securities held or to which such Person
has rights to acquire. To the knowledge of the Company, there is no voting
trust, agreement or arrangement among any of the beneficial holders of Company
Common Stock affecting the nomination or election of directors or the exercise
of the voting rights of Company Common Stock.
Section
2.06
Corporate Acts and
Proceedings
. The execution, delivery and performance of this
Agreement, the DE-Certificate of Merger and the CA-Agreement of Merger
(together, the “
Merger
Documents
”) have been duly authorized by the Board of Directors of the
Company and have been approved by the requisite vote of the Stockholders, and
all of the corporate acts and other proceedings required for the due and valid
authorization, execution, delivery and performance of the Merger Documents and
the consummation of the Merger have been validly and appropriately taken, except
for the filings referred to in Section 1.02.
Section
2.07
Governmental
Consents
. All material consents, approvals, orders, or
authorizations of, or registrations, qualifications, designations, declarations,
or filings with any federal or state governmental authority on the part of the
Company required in connection with the consummation of the Merger shall have
been obtained prior to, and be effective as of, the Closing.
Section
2.08
Compliance with Laws and
Instruments
. The business, products and operations of the
Company have been and are being conducted in compliance in all material respects
with all applicable laws, rules and regulations, except for such violations
thereof for which the penalties, in the aggregate, would not have a material
adverse effect on the Condition of the Company. The execution, delivery and
performance by the Company of the Merger Documents and the consummation by the
Company of the transactions contemplated by this Agreement: (a) will not cause
the Company to violate or contravene (i) any provision of law, (ii) any rule or
regulation of any agency or government, (iii) any order, judgment or decree of
any court, or (iv) any provision of the Certificate of Incorporation or By-laws
of the Company, (b) will not violate or be in conflict with, result in a breach
of or constitute (with or without notice or lapse of time, or both) a default
under, any indenture, loan or credit agreement, deed of trust, mortgage,
security agreement or other contract, agreement or instrument to which the
Company is a party or by which the Company or any of its properties is bound or
affected, except as would not have a material adverse effect on the Condition of
the Company and (c) will not result in the creation or imposition of any Lien
upon any property or asset of the Company. The Company is not in violation of,
or (with or without notice or lapse of time, or both) in default under, any term
or provision of its Certificate of Incorporation or By-laws or of any indenture,
loan or credit agreement, deed of trust, mortgage, security agreement or, except
as would not materially and adversely affect the Condition of the Company, any
other material agreement or instrument to which the Company is a party or by
which the Company or any of its properties is bound or affected.
Section
2.09
Binding
Obligations
. The Merger Documents constitute the legal, valid
and binding obligations of the Company and are enforceable against the Company
in accordance with their respective terms, except as such enforcement is limited
by bankruptcy, insolvency and other similar laws affecting the enforcement of
creditors’ rights generally and by general principles of equity.
Section
2.10
Broker’s and Finder’s
Fees
. No Person has, or as a result of the transactions
contemplated or described herein will have, any right or valid claim against the
Company, Parent, Acquisition Corp. or any Stockholder for any commission, fee or
other compensation as a finder or broker, or in any similar
capacity.
Section
2.11
Financial
Statements
. Parent has previously been provided with the
Company’s audited balance sheets (the “
Balance Sheets
”) as
of December 31, 2007 and December 31, 2008 (the “
Balance Sheet Date
”)
and the audited statements of operations and accumulated deficits and cash flows
for the years ended December 31, 2007 and December 31, 2008. Such financial
statements are collectively referred to as the “
Financial
Statements
”. Such financial statements (a) are in accordance with the
books and records of the Company, (b) present fairly in all material respects
the financial condition of the Company at the dates therein specified and the
results of its operations and changes in financial position for the periods
therein specified and (c) have been prepared in accordance with GAAP applied on
a basis consistent with prior accounting periods.
Section
2.12
Absence of Undisclosed
Liabilities
. The Company has no material obligation or liability (whether
accrued, absolute, contingent, liquidated or otherwise, whether due or to become
due), arising out of any transaction entered into at or prior to the Closing,
except (a) as disclosed in the Balance Sheets, (b) to the extent set forth on or
reserved against in the Balance Sheets or the notes to the Financial Statements,
(c) current liabilities incurred and obligations under agreements entered into
in the usual and ordinary course of business since the Balance Sheet Date, none
of which (individually or in the aggregate) has had or will have a material
adverse effect on the Condition of the Company and (d) by the specific terms of
any written agreement, document or arrangement identified in the
Disclosures.
Section
2.13
Changes
. Except
as disclosed on
Schedule 2.13
, since
the Balance Sheet Date, the Company has not (a) incurred any debts, obligations
or liabilities, absolute, accrued, contingent or otherwise, whether due or to
become due, except for fees, expenses and liabilities incurred in connection
with the Merger and related transactions and current liabilities incurred in the
usual and ordinary course of business, (b) discharged or satisfied any Liens
other than those securing, or paid any obligation or liability other than,
current liabilities shown on the Balance Sheets and current liabilities incurred
since the Balance Sheet Date, in each case in the usual and ordinary course of
business, (c) mortgaged, pledged or subjected to Lien any of its assets,
tangible or intangible other than in the usual and ordinary course of business,
(d) sold, transferred or leased any of its assets, except in the usual and
ordinary course of business, (e) cancelled or compromised any debt or claim, or
waived or released any right, of material value,
(f)
suffered any physical damage, destruction or loss (whether or not covered by
insurance) materially and adversely affecting the Condition of the Company, (g)
entered into any transaction other than in the usual and ordinary course of
business, (h) encountered any labor union difficulties, (i) made or granted any
wage or salary increase or made any increase in the amounts payable under any
profit sharing, bonus, deferred compensation, severance pay, insurance, pension,
retirement or other employee benefit plan, agreement or arrangement, other than
in the ordinary course of business consistent with past practice, or entered
into any employment agreement, (j) issued or sold any shares of capital stock,
bonds, notes, debentures or other securities or granted any options (including
employee stock options), warrants or other rights with respect thereto, (k)
declared or paid any dividends on or made any other distributions with respect
to, or purchased or redeemed, any of its outstanding capital stock, (l) suffered
or experienced any change in, or condition affecting, the Condition of the
Company other than changes, events or conditions in the usual and ordinary
course of its business, none of which (either by itself or in conjunction with
all such other changes, events and conditions) has been materially adverse, (m)
made any change in the accounting principles, methods or practices followed by
it or depreciation or amortization policies or rates theretofore adopted, (n)
made or permitted any amendment or termination of any material contract,
agreement or license to which it is a party, (o) suffered any material loss not
reflected in the Balance Sheets or its statement of income for the period ended
on the Balance Sheet Date, (p) paid, or made any accrual or arrangement for
payment of, bonuses or special compensation of any kind or any severance or
termination pay to any present or former officer, director, employee,
stockholder or consultant, (q) made or agreed to make any charitable
contributions or incurred any non-business expenses in excess of $50,000 in the
aggregate, or (r) entered into any agreement, or otherwise obligated itself, to
do any of the foregoing.
Section
2.14
Assets and
Contracts
.
(a)
Schedule 2.14(a)
contains a true and complete list of all real property leased by the Company and
of all tangible personal property owned or leased by the Company having a cost
or fair market value of greater than $250,000. All the real property listed in
Schedule
2.14(a)
is leased by the Company under valid leases enforceable in
accordance with their terms, and there is not, under any such lease, any
existing default or event of default or event which with notice or lapse of
time, or both, would constitute a default by the Company, and the Company has
not received any notice or claim of any such default by the Company. The Company
does not own any real property.
(b)
Except as
expressly set forth in this Agreement, the Financial Statements or the notes
thereto, or as disclosed in
Schedule 2.14(b)
hereto, the Company is not a party to any written or oral agreement not made in
the ordinary course of business that is material to the Company. Except as
disclosed in
Schedule
2.14(b)
hereto, the Company is not a party to any written or oral (i)
agreement for the purchase of fixed assets or for the purchase of materials,
supplies or equipment in excess of normal operating requirements, (ii) agreement
for the employment of any officer, individual employee or other Person on a
full-time basis or any agreement with any Person for consulting services, (iii)
indenture, loan or credit agreement, note agreement, deed of trust, mortgage,
security agreement, promissory note or other agreement or instrument relating to
or evidencing Indebtedness for Borrowed Money or subjecting any asset or
property of the Company to any Lien or evidencing any Indebtedness, (iv)
guaranty of any
Indebtedness,
(v) other than as set forth in
Schedule 2.14(a)
hereto, lease or agreement under which the Company is lessee of or holds or
operates any property, real or personal, owned by any other Person under which
payments to such Person exceed $250,000 per year, (vi) agreement granting any
preemptive right, right of first refusal or similar right to any Person, (vii)
agreement or arrangement with any Affiliate or any “associate” (as such term is
defined in Rule 405 under the Securities Act) of the Company or any present or
former officer, director or stockholder of the Company, (viii) agreement
obligating the Company to pay any royalty or similar charge for the use or
exploitation of any tangible or intangible property, (ix) covenant not to
compete or other material restriction on its ability to conduct a business or
engage in any other activity, (x) agreement to register securities under the
Securities Act or (xi) collective bargaining agreement. Except as disclosed in
Schedule
2.14(b)
, none of the agreements, contracts, leases, instruments or other
documents or arrangements listed in
Schedules 2.14(a)
and
2.14(b)
requires the consent of any of the parties thereto other than the Company to
permit the contract, agreement, lease, instrument or other document or
arrangement to remain effective following consummation of the Merger and the
transactions contemplated hereby. For purposes of this Agreement, an “
Affiliate
” shall mean
any Person that directly or indirectly controls, is controlled by, or is under
common control with, the indicated Person.
(c)
The
Company has made available to Parent and Acquisition Corp. true and complete
copies of all agreements and other documents and a description of all applicable
oral agreements disclosed or referred to in
Schedules 2.14(a)
and
2.14(b)
, as
well as any additional agreements or documents, requested by Parent or
Acquisition Corp. The Company has in all material respects performed all
obligations required to be performed by it to date and is not in default in any
material respect under any of the contracts, agreements, leases, documents,
commitments or other arrangements to which it is a party or by which it or any
of its property is otherwise bound or affected.
Section
2.15
Employees
. The
Company has complied in all material respects with all laws relating to the
employment of labor, and the Company has encountered no material labor union
difficulties. Other than pursuant to ordinary arrangements of employment
compensation, the Company is not under any obligation or liability to any
officer, director or employee of the Company.
Section
2.16
Tax Returns and
Audits
.
(a)
All
required federal, state and local Tax Returns (as defined below) of the Company
have been accurately prepared and duly and timely filed, and all federal, state
and local Taxes (as defined below) required to be paid with respect to the
periods covered by such returns have been paid. The Company is not and has not
been delinquent in the payment of any Tax. The Company has not had a Tax
deficiency proposed or assessed against it and has not executed a waiver of any
statute of limitations on the assessment or collection of any Tax. None of the
Company’s federal income tax returns has been audited by any governmental
authority; and none of the Company’s state or local income or franchise tax
returns has been audited by any governmental authority. The reserves for Taxes
reflected on the Balance Sheets are and will be sufficient for the payment of
all unpaid Taxes payable by the Company as of the Balance Sheet Date. Since the
Balance Sheet Date, the Company has made adequate provisions on its books of
account for all Taxes with respect to its business, properties and operations
for such period.
The
Company has withheld or collected from each payment made to each of its
employees the amount of all taxes (including, but not limited to, federal, state
and local income taxes, Federal Insurance Contribution Act taxes and Federal
Unemployment Tax Act taxes) required to be withheld or collected therefrom, and
has paid the same to the proper Tax receiving officers or authorized
depositaries. There are no federal, state, local or foreign audits, actions,
suits, proceedings, investigations, claims or administrative proceedings
relating to Taxes or any Tax Returns of the Company now pending, and the Company
has not received any notice of any proposed audits, investigations, claims or
administrative proceedings relating to Taxes or any Tax Returns. The Company is
not obligated to make a payment, nor is it a party to any agreement that under
certain circumstances could obligate it to make a payment that would not be
deductible under Section 280G of the Code. The Company has not agreed, nor is it
required, to make any adjustments under Section 481(a) of the Code (or any
similar provision of state, local and foreign law), whether by reason of a
change in accounting method or otherwise, for any Tax period for which the
applicable statute of limitations has not yet expired. The Company (i) is not a
party to, nor is it bound by or obligated under, any Tax sharing agreement, Tax
indemnification agreement or similar contract or arrangement, whether written or
unwritten (collectively, “
Tax Sharing
Agreements
”), and (ii) does not have any potential liability or
obligation to any Person as a result of, or pursuant to, any such Tax Sharing
Agreements.
(b)
For
purposes of this Agreement, the following terms shall have the meanings provided
below:
(i)
“
Tax
” or “
Taxes
” shall mean (A)
any and all taxes, assessments, customs, duties, levies, fees, tariffs, imposts,
deficiencies and other governmental charges of any kind whatsoever (including,
but not limited to, taxes on or with respect to net or gross income, franchise,
profits, gross receipts, capital, sales, use, ad valorem, value added, transfer,
real property transfer, transfer gains, transfer taxes, inventory, capital
stock, license, payroll, employment, social security, unemployment, severance,
occupation, real or personal property, estimated taxes, rent, excise, occupancy,
recordation, bulk transfer, intangibles, alternative minimum, doing business,
withholding and stamp), together with any interest thereon, penalties, fines,
damages costs, fees, additions to tax or additional amounts with respect
thereto, imposed by the United States (federal, state or local) or other
applicable jurisdiction; (B) any liability for the payment of any amounts
described in clause (A) as a result of being a member of an affiliated,
consolidated, combined, unitary or similar group or as a result of transferor or
successor liability, including, without limitation, by reason of Regulation
Section 1.1502-6; and (C) any liability for the payments of any amounts as a
result of being a party to any Tax Sharing Agreement or as a result of any
express or implied obligation to indemnify any other Person with respect to the
payment of any amounts of the type described in clause (A) or (B).
(ii)
“
Tax Return
” shall
include all returns and reports (including elections, declarations, disclosures,
schedules, estimates and information returns (including Form 1099 and
partnership returns filed on Form 1065) required to be supplied to a Tax
authority relating to Taxes.
Section
2.17
Patents and Other Intangible
Assets
.
(a)
The
Company (i) owns or has the right to use, free and clear of all Liens, claims
and restrictions, all patents, trademarks, service marks, trade names,
copyrights, licenses and rights with respect to the foregoing used in or
necessary for the conduct of its business as now conducted or proposed to be
conducted without infringing upon or otherwise acting adversely to the right or
claimed right of any Person under or with respect to any of the foregoing and
(ii) is not obligated or under any liability to make any payments by way of
royalties, fees or otherwise to any owner or licensor of, or other claimant to,
any patent, trademark, service mark, trade name, copyright or other intangible
asset, with respect to the use thereof or in connection with the conduct of its
business or otherwise.
(b)
To the
knowledge of the Company, the Company owns and has the unrestricted right to use
all trade secrets, if any, including know-how, negative know-how, formulas,
patterns, programs, devices, methods, techniques, inventions, designs,
processes, computer programs and technical data and all information that derives
independent economic value, actual or potential, from not being generally known
or known by competitors (collectively, “
Intellectual
Property
”) required for or incident to the development, operation and
sale of all products and services sold by the Company, free and clear of any
right, Lien or claim of others;
provided
,
however
, that the
possibility exists that other Persons, completely independently of the Company
or its employees or agents, could have developed Intellectual Property similar
or identical to that of the Company. The Company is not aware of any such
development of substantially identical trade secrets or technical information by
others. All Intellectual Property can and will be transferred by the Company to
the Surviving Corporation as a result of the Merger and without the consent of
any person or entity other than the Company.
Section
2.18
Employee Benefit Plans;
ERISA
.
(a)
Except as
disclosed on
Schedule
2.18
hereto, there are no “employee benefit plans” (within the meaning of
Section 3(3) of ERISA) nor any other employee benefit or fringe benefit
arrangements, practices, contracts, policies or programs of every type other
than programs merely involving the regular payment of wages, commissions, or
bonuses established, maintained or contributed to by the Company, whether
written or unwritten and whether or not funded. The plans listed on
Schedule 2.18
hereto
are hereinafter referred to as the “
Employee Benefit
Plans
.”
(b)
All
current and prior material documents, including all amendments thereto, with
respect to each Employee Benefit Plan have been made available to Parent and
Acquisition Corp. or their advisors.
(c)
To the
knowledge of the Company, all Employee Benefit Plans are in material compliance
with the applicable requirements of ERISA, the Code and any other applicable
state, federal or foreign law.
(d)
There are
no pending claims or lawsuits that have been asserted or instituted against any
Employee Benefit Plan, the assets of any of the trusts or funds under the
Employee Benefit Plans, the plan sponsor or the plan administrator of any of the
Employee Benefit Plans or against any fiduciary of an Employee Benefit Plan with
respect to the operation of such plan, nor does the Company have any knowledge
of any incident, transaction, occurrence or circumstance that might reasonably
be expected to form the basis of any such claim or lawsuit.
(e)
There is
no pending or, to the knowledge of the Company, contemplated investigation, or
pending or possible enforcement action by the Pension Benefit Guaranty
Corporation, the Department of Labor, the Internal Revenue Service or any other
government agency with respect to any Employee Benefit Plan and the Company has
no knowledge of any incident, transaction, occurrence or circumstance which
might reasonably be expected to trigger such an investigation or enforcement
action.
(f)
No actual
or, to the knowledge of the Company, contingent liability exists with respect to
the funding of any Employee Benefit Plan or for any other expense or obligation
of any Employee Benefit Plan, except as disclosed on the financial statements of
the Company, and no contingent liability exists under ERISA with respect to any
“multi-employer plan,” as defined in Section 3(37) or Section 4001(a)(3) of
ERISA.
(g)
No events
have occurred or are expected to occur with respect to any Employee Benefit Plan
that would cause a material change in the costs of providing benefits under such
Employee Benefit Plan or would cause a material change in the cost of providing
for other liabilities of such Employee Benefit Plan.
Section
2.19
Title to Property and
Encumbrances
. The Company has good, valid and indefeasible
marketable title to all properties and assets used in the conduct of its
business (except for property held under valid and subsisting leases that are in
full force and effect and which are not in default) free of all Liens and other
encumbrances, except Permitted Liens and such ordinary and customary
imperfections of title, restrictions and encumbrances as do not, individually or
in the aggregate, materially detract from the value of the property or assets or
materially impair the use made thereof by the Company in its business. Without
limiting the generality of the foregoing, the Company has good and indefeasible
title to all of its properties and assets reflected in the Balance Sheets,
except for property disposed of in the usual and ordinary course of business
since the Balance Sheet Date and for property held under valid and subsisting
leases that are in full force and effect and that are not in default. For
purposes of this Agreement, “
Permitted Liens
”
shall mean (a) Liens for taxes and assessments or governmental charges or levies
not at the time due or in respect of which the validity thereof shall currently
be contested in good faith by appropriate proceedings; (b) Liens in respect of
pledges or deposits under workmen’s compensation laws or similar legislation,
carriers’, warehousemen’s, mechanics’, laborers’ and materialmens’ and similar
Liens, if the obligations secured by such Liens are not then delinquent or are
being contested in good faith by appropriate proceedings and (c) Liens
incidental to the conduct of the business of the Company that were not incurred
in connection with the borrowing of money or the obtaining of advances or
credits and which do not in the aggregate materially detract from the value of
its property or materially impair the use made thereof by the Company in its
business.
Section
2.20
Condition of
Properties
. All facilities, machinery, equipment, fixtures and
other properties owned, leased or used by the Company are in reasonably good
operating condition and repair, subject to ordinary wear and tear, and are
adequate and sufficient for the Company’s business.
Section
2.21
Insurance
Coverage
. There is in full force and effect one or more
policies of insurance issued by insurers of recognized responsibility, insuring
the Company and its properties, products and business against such losses and
risks, and in such amounts, as are customary for corporations of established
reputation engaged in the same or similar business and similarly situated. The
Company has not been refused any insurance coverage sought or applied for, and
the Company has no reason to believe that it will be unable to renew its
existing insurance coverage as and when the same shall expire upon terms at
least as favorable to those currently in effect, other than possible increases
in premiums that do not result from any act or omission of the Company. No suit,
proceeding or action or, to the best current actual knowledge of the Company,
threat of suit, proceeding or action has been asserted or made against the
Company within the last five years due to alleged bodily injury, disease,
medical condition, death or property damage arising out of the function or
malfunction of a product, procedure or service designed, manufactured, sold or
distributed by the Company.
Section
2.22
Litigation
. Except
as disclosed in
Schedule 2.22
, there
is no legal action, suit, arbitration or other legal, administrative or other
governmental proceeding pending or, to the knowledge of the Company, threatened
against or affecting the Company or its properties, assets or business, and
after reasonable investigation, the Company is not aware of any incident,
transaction, occurrence or circumstance that might reasonably be expected to
result in or form the basis for any such action, suit, arbitration or other
proceeding. The Company is not in default with respect to any order, writ,
judgment, injunction, decree, determination or award of any court or any
governmental agency or instrumentality or arbitration authority.
Section
2.23
Licenses
. The
Company possesses from all appropriate governmental authorities all licenses,
permits, authorizations, approvals, franchises and rights necessary for the
Company to engage in the business currently conducted by it, all of which are in
full force and effect.
Section
2.24
Interested Party
Transactions
. Except as disclosed in
Schedule 2.24
, no
officer, director or stockholder of the Company or any Affiliate or “associate”
(as such term is defined in Rule 405 under the Securities Act) of any such
Person or the Company has or has had, either directly or indirectly, (a) an
interest in any Person that (i) furnishes or sells services or products that are
furnished or sold or are proposed to be furnished or sold by the Company or (ii)
purchases from or sells or furnishes to the Company any goods or services, or
(b) a beneficial interest in any contract or agreement to which the Company is a
party or by which it may be bound or affected.
Section
2.25
Environmental
Matters
.
(a)
To the
knowledge of the Company, the Company has never generated, used, handled,
treated, released, stored or disposed of any Hazardous Materials (as defined
below) on any real property on which it now has or previously had any leasehold
or ownership interest, except in compliance with all applicable Environmental
Laws (as defined below).
(b)
To the
knowledge of the Company, the historical and present operations of the business
of the Company are in compliance with all applicable Environmental Laws, except
where any non-compliance has not had and would not reasonably be expected to
have a material adverse effect on the Condition of the Company.
(c)
There are
no material pending or, to the knowledge of the Company, threatened, demands,
claims, information requests or notices of noncompliance or violation against or
to the Company relating to any Environmental Law; and, to the knowledge of the
Company, there are no conditions or occurrences on any of the real property used
by the Company in connection with its business that would reasonably be expected
to lead to any such demands, claims or notices against or to the Company, except
such as have not had, and would not reasonably be expected to have, a material
adverse effect on the Condition of the Company.
(d)
To the
knowledge of the Company, (i) the Company has not sent or disposed of, otherwise
had taken or transported, arranged for the taking or disposal of (on behalf of
itself, a customer or any other party) or in any other manner participated or
been involved in the taking of or disposal or release of a Hazardous Material to
or at a site that is contaminated by any Hazardous Material or that, pursuant to
any Environmental Law, (A) has been placed on the “National Priorities List”,
the “CERCLIS” list, or any similar state or federal list, or (B) is subject to
or the source of a claim, an administrative order or other request to take
“removal”, “remedial”, “corrective” or any other “response” action, as defined
in any Environmental Law, or to pay for the costs of any such action at the
site; (ii) the Company is not involved in (and has no basis to reasonably expect
to be involved in) any suit or proceeding and has not received (and has no basis
to reasonably expect to receive) any notice, request for information or other
communication from any governmental authority or other third party with respect
to a release or threatened release of any Hazardous Material or a violation or
alleged violation of any Environmental Law, and has not received (and has no
basis to reasonably expect to receive) notice of any claims from any Person
relating to property damage, natural resource damage or to personal injuries
from exposure to any Hazardous Material; and (iii) the Company has timely filed
every report required to be filed, acquired all necessary certificates,
approvals and permits, and generated and maintained all required data,
documentation and records under all Environmental Laws, in all such instances
except where the failure to do so would not reasonably be expected to have,
individually or in the aggregate, a material adverse effect on the Condition of
the Company.
(e)
For
purposes of this Agreement, the following terms shall have the meanings provided
below:
(i)
“
Environmental Laws
”
shall mean the Comprehensive Environmental Response, Compensation and Liability
Act, 42 U.S.C. §§ 9601, et seq.; the Emergency Planning and Community
Right-to-Know Act of 1986, 42 U.S.C. §§ 11001, et seq.; the Resource
Conservation and Recovery Act, 42 U.S.C. §§ 6901, et seq.; the Toxic Substances
Control Act, 15 U.S.C. §§ 2601 et seq.; the Federal Insecticide, Fungicide, and
Rodenticide Act, 7 U.S.C. §§ 136, et seq. and comparable state statutes dealing
with the registration, labeling and use of pesticides and herbicides; the Clean
Air Act, 42 U.S.C. §§ 7401 et seq.; the Clean Water Act (Federal Water Pollution
Control Act), 33 U.S.C. §§ 1251 et seq.; the Safe Drinking Water Act, 42 U.S.C.
§§ 300f, et seq.; the Hazardous Materials Transportation Act, 49 U.S.C. §§ 1801,
et seq.; as any of the above statutes have been amended as of the date hereof,
all rules, regulations and policies promulgated pursuant to any of the above
statutes, and any other foreign, federal, state or local law, statute,
ordinance, rule, regulation or policy governing environmental matters, as the
same have been amended as of the date hereof.
(ii)
“
Hazardous Material
”
shall mean any substance or material meeting any one or more of the following
criteria: (a) it is or contains a substance designated as or meeting the
characteristics of a hazardous waste, hazardous substance, hazardous material,
pollutant, contaminant or toxic substance under any Environmental Law; (b) its
presence at some quantity requires investigation, notification or remediation
under any Environmental Law; or (c) it contains, without limiting the foregoing,
asbestos, polychlorinated biphenyls, petroleum hydrocarbons, petroleum derived
substances or waste, pesticides, herbicides, crude oil or any fraction thereof,
nuclear fuel, natural gas or synthetic gas.
Section
2.26
Questionable
Payments
. Neither the Company nor any director, officer or, to
the knowledge of the Company, agent, employee or other Person associated with or
acting on behalf of the Company, has used any corporate funds for unlawful
contributions, gifts, entertainment or other unlawful expenses relating to
political activity; made any direct or indirect unlawful payments to government
officials or employees from corporate funds; established or maintained any
unlawful or unrecorded fund of corporate monies or other assets; made any false
or fictitious entries on the books of record of any such corporations; or made
any bribe, rebate, payoff, influence payment, kickback or other unlawful
payment.
Section
2.27
Obligations to or by
Stockholders
. Except as set forth on
Schedule 2.27
, the
Company has no liability or obligation or commitment to any Stockholder or any
Affiliate or “associate” (as such term is defined in Rule 405 under the
Securities Act) of any Stockholder, nor does any Stockholder or any such
Affiliate or associate have any liability, obligation or commitment to the
Company.
Section
2.28
Duty to Make
Inquiry
. To the extent that any of the representations or
warranties in this Article II are qualified by “knowledge” or “belief,” the
Company represents and warrants that it has made due and reasonable inquiry and
investigation concerning the matters to which such representations and
warranties relate, including, but not limited to, diligent inquiry of its
directors, officers and key personnel.
Section
2.29
Disclosure
. There
is no fact relating to the Company that the Company has not disclosed to Parent
and Acquisition Corp. in writing that has had or is currently having a material
and adverse effect or, insofar as the Company can now foresee, will materially
and adversely affect the Condition of the Company. No representation or warranty
by the Company herein and no information disclosed in the schedules or exhibits
hereto by the Company contains any untrue statement of a material fact or omits
to state a material fact necessary to make the statements contained herein or
therein not misleading.
ARTICLE
III.
REPRESENTATIONS
AND WARRANTIES OF PARENT AND ACQUISITION CORP.
Parent
and Acquisition Corp. represent and warrant to the Company as follows.
Notwithstanding anything to the contrary contained herein, disclosure of items
in the Parent SEC Documents (as defined below) shall be deemed to be disclosure
of such items for all purposes under this Agreement, including, without
limitation, for all applicable representations and warranties of Parent and
Acquisition Corp.:
Section
3.01
Organization and
Standing
. Parent is a corporation duly organized and existing
in good standing under the laws of the State of Nevada. Acquisition Corp. is a
corporation duly organized and existing in good standing under the laws of the
State of Delaware. Parent and Acquisition Corp. have heretofore delivered to the
Company complete and correct copies of their respective Articles of
Incorporation or Certificates of Incorporation, as applicable, and By-laws as
now in effect. Parent and Acquisition Corp. have full corporate power and
authority to carry on their respective businesses as they are now being
conducted and as now proposed to be conducted and to own or lease their
respective properties and assets. Neither Parent nor Acquisition Corp. has any
subsidiaries (except Parent’s ownership of Acquisition Corp.) or direct or
indirect interest (by way of stock ownership or otherwise) in any firm,
corporation, limited liability company, partnership, association or business.
Parent owns all of the issued and outstanding capital stock of Acquisition Corp.
free and clear of all Liens, and Acquisition Corp. has no outstanding options,
warrants or rights to purchase capital stock or other securities of Acquisition
Corp., other than the capital stock owned by Parent. Unless the context
otherwise requires, all references in this Article III to “Parent” shall be
treated as being a reference to Parent and Acquisition Corp. taken together as
one enterprise.
Section
3.02
Qualification
. Parent
is duly qualified to conduct business as a foreign corporation and are in good
standing in each jurisdiction wherein the nature of its activities or its
properties owned or leased makes such qualification necessary, except where the
failure to be so qualified would not have a material adverse effect on the
condition, properties, assets, liabilities or business operations of Parent (the
“
Condition of the
Parent
”).
Section
3.03
Corporate
Authority
. Each of Parent and/or Acquisition Corp. (as the
case may be) has full corporate power and authority to enter into the Merger
Documents and the other agreements to be made pursuant to the Merger Documents,
and to carry out the transactions contemplated hereby and thereby. All corporate
acts and proceedings required for the authorization, execution, delivery and
performance of the Merger Documents and such other agreements and documents by
Parent and/or Acquisition Corp. (as the case may be) have been duly and validly
taken or will have been so taken prior to the Closing. Each of the Merger
Documents constitutes a legal, valid and binding obligation of Parent and/or
Acquisition Corp. (as the case may be), each is enforceable against it and/or
them in accordance with its terms, except as such enforcement may be limited by
bankruptcy, insolvency, reorganization or other similar laws affecting
creditors’ rights generally and by general principles of equity.
Section
3.04
Broker’s and Finder’s
Fees
. No Person is entitled by reason of any act or omission
of Parent or Acquisition Corp. to any broker’s or finder’s fees, commission or
other similar compensation with respect to the execution and delivery of the
Merger Documents, or with respect to the consummation of the transactions
contemplated thereby, except as set forth in the Disclosures.
Section
3.05
Capitalization
.
(a)
The
authorized capital stock of Parent consists of 50,000,000 shares of Parent
Common Stock, of which 9,000,000 shares are issued and outstanding. Parent has
no outstanding options, rights or commitments to issue shares of Parent Common
Stock or any other Equity Security of Parent or Acquisition Corp., and there are
no outstanding securities convertible or exercisable into or exchangeable for
shares of Parent Common Stock or any other Equity Security of Parent or
Acquisition Corp. There is no voting trust, agreement or arrangement among any
of the beneficial holders of Parent Common Stock affecting the nomination or
election of directors or the exercise of the voting rights of Parent Common
Stock.
(b)
The
authorized capital stock of Acquisition Corp. consists of 3,000 shares of common
stock, par value $.001 per share (the “
Acquisition Corp. Common
Stock
”), of which 1,000 shares are issued and outstanding. All of the
outstanding Acquisition Corp. Common Stock is owned by Parent. All outstanding
shares of the capital stock of Acquisition Corp. are validly issued and
outstanding, fully paid and non-assessable, and none of such shares have been
issued in violation of the preemptive rights of any Person. Acquisition Corp.
has no outstanding options, rights or commitments to issue shares of Acquisition
Corp. Common Stock or any other Equity Security of Acquisition Corp., and there
are no outstanding securities convertible or exercisable into or exchangeable
for shares of Acquisition Corp. Common Stock or any other Equity Security of
Acquisition Corp.
Section
3.06
Acquisition
Corp
. Acquisition Corp. is a wholly-owned Delaware subsidiary
of Parent that was formed specifically for the purpose of the Merger and that
has not conducted any business or acquired any property, and will not conduct
any business or acquire any property prior to the Closing Date, except in
preparation for and otherwise in connection with the transactions contemplated
by the Merger Documents and the other agreements to be made pursuant to or in
connection with the Merger Documents.
Section
3.07
Validity of
Shares
. The shares of Parent Common Stock to be issued at the
Closing pursuant to Section 1.06(a)(ii) hereof, when issued and delivered in
accordance with the terms hereof and of the other Documents, shall be duly and
validly issued, fully paid and non-assessable. Based in part on the
representations and warranties of the Stockholders as contemplated by Article IV
hereof and assuming the accuracy thereof, the issuance of the Parent Common
Stock upon consummation of the Merger pursuant to Section 1.06(a)(ii) will be
exempt from the registration and prospectus delivery requirements of the
Securities Act and from the qualification or registration requirements of any
applicable state “Blue Sky” or securities laws.
SEC Reporting and
Compliance
.
(a)
Parent
filed a registration statement on Form SB-2 under the Securities Act, which
became effective on or about December 11, 2007. Since that date, Parent has
timely filed with the U.S. Securities and Exchange Commission (the “
Commission
”) all
registration statements, proxy statements, information statements and reports
required to be filed pursuant to the Securities Exchange Act of 1934, as amended
(the “
Exchange
Act
”). Parent has not filed with the Commission a certificate on Form 15
pursuant to Rule 12h-3 of the Exchange Act.
(b)
Parent
has made available to the Company true and complete copies of the registration
statements, information statements and other reports (collectively, the “
Parent SEC
Documents
”) filed by Parent with the Commission. None of the Parent SEC
Documents, as of their respective dates, contained any untrue statement of a
material fact or omitted to state a material fact necessary in order to make the
statements contained therein not misleading.
(c)
Prior to
and until the Closing, Parent will provide to the Company copies of any and all
amendments or supplements to the Parent SEC Documents filed with the Commission
and all subsequent registration statements and reports filed by Parent
subsequent to the filing of the Parent SEC Documents with the Commission and any
and all subsequent information statements, proxy statements, reports or notices
filed by Parent with the Commission or delivered to the stockholders of
Parent.
(d)
Parent is
not an investment company within the meaning of Section 3 of the Investment
Company Act of 1940, as amended.
(e)
The
shares of Parent Common Stock are quoted on the Over-the-Counter (OTC) Bulletin
Board under the symbol “CSTA.OB” and Parent is in compliance in all material
respects with all rules and regulations of the OTC Bulletin Board applicable to
it and the Parent Common Stock.
(f)
Between
the date hereof and the Closing Date, Parent shall continue to satisfy the
filing requirements of the Exchange Act and all other requirements of applicable
securities laws and of the OTC Bulletin Board.
(g)
The
Parent SEC Documents include all certifications and statements required of it,
if any, by (i) Rule 13a-14 or 15d-14 under the Exchange Act, and (ii) 18 U.S.C.
Section 1350 (Section 906 of the Sarbanes-Oxley Act of 2002), and each of such
certifications and statements contain no qualifications or exceptions to the
matters certified therein other than a knowledge qualification, permitted under
such provision, and have not been modified or withdrawn and neither Parent nor
any of its officers has received any notice from the Commission questioning or
challenging the accuracy, completeness, form or manner of filing or submission
of such certifications or statements.
(h)
Parent
has otherwise complied with the Securities Act, Exchange Act and all other
applicable federal and state securities laws.
Section
3.08
Financial
Statements
. The balance sheets and statements of operations,
stockholders’ equity and cash flows contained in the Parent SEC Documents (the
“
Parent Financial
Statements
”) (a) have been prepared in accordance with GAAP applied on a
basis consistent with prior periods (and, in the case of unaudited financial
information, on a basis consistent with year-end audits), (b) are in accordance
with the books and records of Parent and (c) present fairly in all material
respects the financial condition of Parent at the dates therein specified and
the results of its operations and changes in financial position for the periods
therein specified. The financial statements included in Parent’s SB-2 were
audited by Madsen & Associates CPA’s, Inc., Parent’s independent registered
public accounting firm
Section
3.09
Governmental
Consents
. All material consents, approvals, orders, or
authorizations of, or registrations, qualifications, designations, declarations,
or filings with any federal or state governmental authority on the part of
Parent or Acquisition Corp. required in connection with the consummation of the
Merger shall have been obtained prior to, and be effective as of, the
Closing.
Section
3.10
Compliance with Laws and
Other Instruments
. The execution, delivery and performance by
Parent and/or Acquisition Corp. of the Merger Documents and the other agreements
to be made by Parent or Acquisition Corp. pursuant to or in connection with the
Merger Documents and the consummation by Parent and/or Acquisition Corp. of the
transactions contemplated by the Merger Documents will not cause Parent and/or
Acquisition Corp. to violate or contravene (a) any provision of law, (b) any
rule or regulation of any agency or government, (c) any order, judgment or
decree of any court or (d) any provision of their respective charters or By-laws
as amended and in effect on and as of the Closing Date and will not violate or
be in conflict with, result in a breach of or constitute (with or without notice
or lapse of time, or both) a default under any material indenture, loan or
credit agreement, deed of trust, mortgage, security agreement or other agreement
or contract to which Parent or Acquisition Corp. is a party or by which Parent
and/or Acquisition Corp. or any of their respective properties is
bound.
Section
3.11
No General
Solicitation
. In issuing Parent Common Stock in the Merger
hereunder, neither Parent nor anyone acting on its behalf has offered to sell
the Parent Common Stock by any form of general solicitation or
advertising.
Section
3.12
Absence of Undisclosed
Liabilities
. Neither Parent nor Acquisition Corp. has any
material obligation or liability (whether accrued, absolute, contingent,
liquidated or otherwise, whether due or to become due), arising out of any
transaction entered into at or prior to the Closing, except (a) as disclosed in
the Parent SEC Documents, (b) to the extent set forth on or reserved against in
the balance sheet of Parent in the most recent Parent SEC Document filed by
Parent (the “
Parent
Balance Sheet
”) or the notes to the Parent Financial Statements, (c)
current liabilities incurred and obligations under agreements entered into in
the usual and ordinary course of business since the date of the Parent Balance
Sheet (the “
Parent
Balance Sheet Date
”), none of which (individually or in the aggregate)
materially and adversely affects the Condition of Parent and (d) by the specific
terms of any written agreement, document or arrangement attached as an exhibit
to the Parent SEC Documents.
Section
3.13
Changes
. Since
the Parent Balance Sheet Date, except as disclosed in the Parent SEC Documents,
Parent has not (a) incurred any debts, obligations or liabilities, absolute,
accrued or, to Parent’s knowledge, contingent, whether due or to become due,
except for current liabilities incurred in the usual and ordinary course of
business, (b) discharged or satisfied any Liens other than those securing, or
paid any obligation or liability other than, current liabilities shown on the
Parent Balance Sheet and current liabilities incurred since the Parent Balance
Sheet Date, in each case in the usual and ordinary course of business, (c)
mortgaged, pledged or subjected to Lien any of its assets, tangible or
intangible, other than in the usual and ordinary course of business, (d) sold,
transferred or leased any of its assets, except in the usual and ordinary course
of business, (e) cancelled or compromised any debt or claim, or waived or
released any right of material value, (f) suffered any physical damage,
destruction or loss (whether or not covered by insurance) that could reasonably
be expected to have a material adverse effect on the Condition of the Parent,
(g) entered into any transaction other than in the usual and ordinary course of
business, (h) encountered any labor union difficulties, (i) made or granted any
wage or salary increase or made any increase in the amounts payable under any
profit
sharing, bonus, deferred compensation, severance pay, insurance, pension,
retirement or other employee benefit plan, agreement or arrangement, other than
in the ordinary course of business consistent with past practice, or entered
into any employment agreement, (j) issued or sold any shares of capital stock,
bonds, notes, debentures or other securities or granted any options (including
employee stock options), warrants or other rights with respect thereto, (k)
declared or paid any dividends on or made any other distributions with respect
to, or purchased or redeemed, any of its outstanding capital stock, (l) suffered
or experienced any change in, or condition affecting, the Condition of the
Parent other than changes, events or conditions in the usual and ordinary course
of its business, none of which (either by itself or in conjunction with all such
other changes, events and conditions) could reasonably be expected to have a
material adverse effect on the Condition of the Parent, (m) made any change in
the accounting principles, methods or practices followed by it or depreciation
or amortization policies or rates theretofore adopted, (n) made or permitted any
amendment or termination of any material contract, agreement or license to which
it is a party, (o) suffered any material loss not reflected in the Parent
Balance Sheet or its statement of income for the year ended on the Parent
Balance Sheet Date, (p) paid, or made any accrual or arrangement for payment of,
bonuses or special compensation of any kind or any severance or termination pay
to any present or former officer, director, employee, stockholder or consultant,
(q) made or agreed to make any charitable contributions or incurred any
non-business expenses in excess of $5,000 in the aggregate or (r) entered into
any agreement, or otherwise obligated itself, to do any of the
foregoing.
Section
3.14
Tax Returns and
Audits
. All required federal, state and local Tax Returns of
Parent have been accurately prepared in all material respects and duly and
timely filed, and all federal, state and local Taxes required to be paid with
respect to the periods covered by such returns have been paid to the extent that
the same are material and have become due, except where the failure so to file
or pay could not reasonably be expected to have a material adverse effect upon
the Condition of the Parent. Parent is not and has not been delinquent in the
payment of any Tax. Parent has not had a Tax deficiency assessed against it.
None of Parent’s federal income, state and local income and franchise tax
returns has been audited by any governmental authority. The reserves for Taxes
reflected on the Parent Balance Sheet are sufficient for the payment of all
unpaid Taxes payable by Parent with respect to the period ended on the Parent
Balance Sheet Date. There are no federal, state, local or foreign audits,
actions, suits, proceedings, investigations, claims or administrative
proceedings relating to Taxes or any Tax Returns of Parent now pending, and
Parent has not received any notice of any proposed audits, investigations,
claims or administrative proceedings relating to Taxes or any Tax
Returns.
Section
3.15
Employee Benefit Plans;
ERISA
.
(a)
Except as
disclosed in the Parent SEC Documents, there are no “employee benefit plans”
(within the meaning of Section 3(3) of ERISA) nor any other employee benefit or
fringe benefit arrangements, practices, contracts, policies or programs other
than programs merely involving the regular payment of wages, commissions, or
bonuses established, maintained or contributed to by Parent. Any plans listed in
the Parent SEC Documents are hereinafter referred to as the “
Parent Employee Benefit
Plans
.”
(b)
Any
current and prior material documents, including all amendments thereto, with
respect to each Parent Employee Benefit Plan have been given to the Company or
its advisors.
(c)
All
Parent Employee Benefit Plans are in material compliance with the applicable
requirements of ERISA, the Code and any other applicable state, federal or
foreign law.
(d)
There are
no pending, or to the knowledge of Parent, threatened, claims or lawsuits which
have been asserted or instituted against any Parent Employee Benefit Plan, the
assets of any of the trusts or funds under the Parent Employee Benefit Plans,
the plan sponsor or the plan administrator of any of the Parent Employee Benefit
Plans or against any fiduciary of a Parent Employee Benefit Plan with respect to
the operation of such plan.
(e)
There is
no pending, or to the knowledge of Parent, threatened, investigation or pending
or possible enforcement action by the Pension Benefit Guaranty Corporation, the
Department of Labor, the Internal Revenue Service or any other government agency
with respect to any Parent Employee Benefit Plan.
(f)
No actual
or, to the knowledge of Parent, contingent liability exists with respect to the
funding of any Parent Employee Benefit Plan or for any other expense or
obligation of any Parent Employee Benefit Plan, except as disclosed on the
financial statements of Parent or the Parent SEC Documents, and to the knowledge
of Parent, no contingent liability exists under ERISA with respect to any
“multi-employer plan,” as defined in Section 3(37) or Section 4001(a)(3) of
ERISA.
Section
3.16
Litigation
. There
is no legal action, suit, arbitration or other legal, administrative or other
governmental proceeding pending or, to the knowledge of Parent, threatened
against or affecting Parent or Acquisition Corp. or any of their respective
properties, assets or businesses. To the knowledge of Parent, neither Parent nor
Acquisition Corp. is in default with respect to any order, writ, judgment,
injunction, decree, determination or award of any court or any governmental
agency or instrumentality or arbitration authority.
Section
3.17
Licenses
. Parent
possesses from all appropriate governmental authorities all licenses, permits,
authorizations, approvals, franchises and rights necessary for the Company to
engage in the business currently conducted by it, all of which are in full force
and effect.
Section
3.18
Interested Party
Transactions
. Except as disclosed in the Parent SEC Documents,
no officer, director or stockholder of Parent or any Affiliate or “associate”
(as such term is defined in Rule 405 under the Securities Act) of any such
Person or of Parent has or has had, either directly or indirectly, (a) an
interest in any Person that (i) furnishes or sells services or products that are
furnished or sold or are proposed to be furnished or sold by Parent or (ii)
purchases from or sells or furnishes to Parent any goods or services, or (b) a
beneficial interest in any contract or agreement to which Parent is a party or
by which it or any of its assets may be bound or affected.
Section
3.19
Questionable
Payments
. Neither Parent, Acquisition Corp. nor, to the
knowledge of Parent, any director, officer, agent, employee or other Person
associated with or acting on behalf of Parent or Acquisition Corp. has used any
corporate funds for unlawful contributions, gifts, entertainment or other
unlawful expenses relating to political activity; made any direct or indirect
unlawful payments to government officials or employees from corporate funds;
established or maintained any unlawful or unrecorded fund of corporate monies or
other assets; made any false or fictitious entries on the books of record of any
such corporations; or made any bribe, rebate, payoff, influence payment,
kickback or other unlawful payment.
Section
3.20
Obligations to or by
Stockholders
. Except as disclosed in the Parent SEC Documents,
Parent has no liability or obligation or commitment to any stockholder of Parent
or any Affiliate or “associate” (as such term is defined in Rule 405 under the
Securities Act) of any stockholder of Parent, nor does any stockholder of Parent
or any such Affiliate or associate have any liability, obligation or commitment
to Parent.
Section
3.21
Assets and
Contracts
. Except as expressly set forth in this Agreement,
the Parent Balance Sheet or the notes thereto, or the Parent SEC Documents,
Parent is not a party to any written or oral agreement not made in the ordinary
course of business that is material to Parent. Parent does not own any real
property. Except as expressly set forth in this Agreement, the Parent Balance
Sheet or the notes thereto, or the Parent SEC Documents, Parent is not a party
to or otherwise barred by any written or oral (a) agreement with any labor
union, (b) agreement for the purchase of fixed assets or for the purchase of
materials, supplies or equipment in excess of normal operating requirements, (c)
agreement for the employment of any officer, individual employee or other Person
on a full-time basis or any agreement with any Person for consulting services,
(d) bonus, pension, profit sharing, retirement, stock purchase, stock option,
deferred compensation, medical, hospitalization or life insurance or similar
plan, contract or understanding with respect to any or all of the employees of
Parent or any other Person, (e) indenture, loan or credit agreement, note
agreement, deed of trust, mortgage, security agreement, promissory note or other
agreement or instrument relating to or evidencing Indebtedness for Borrowed
Money or subjecting any asset or property of Parent to any Lien or evidencing
any Indebtedness, (f) guaranty of any Indebtedness, (g) lease or agreement under
which Parent is lessee of or holds or operates any property, real or personal,
owned by any other Person, (h) lease or agreement under which Parent is lessor
or permits any Person to hold or operate any property, real or personal, owned
or controlled by Parent, (i) agreement granting any preemptive right, right of
first refusal or similar right to any Person, (j) agreement or arrangement with
any Affiliate or any “associate” (as such term is defined in Rule 405 under the
Securities Act) of Parent or any present or former officer, director or
stockholder of Parent, (k) agreement obligating Parent to pay any royalty or
similar charge for the use or exploitation of any tangible or intangible
property, (1) covenant not to compete or other restriction on its ability to
conduct a business or engage in any other activity, (m) distributor, dealer,
manufacturer’s representative, sales agency, franchise or advertising contract
or commitment, (n) agreement to register securities under the Securities Act,
(o) collective bargaining agreement or (p) agreement or other commitment or
arrangement with any Person continuing for a period of more than three months
from the Closing Date that involves an expenditure or receipt by Parent in
excess of $1,000. Parent maintains no insurance policies or insurance coverage
of any kind with respect to Parent, its business, premises, properties, assets,
employees and agents. No consent of any bank or other depository is required to
maintain any bank account, other deposit relationship or safety deposit box of
Parent in effect following the consummation of the Merger and the transactions
contemplated hereby.
Section
3.22
Employees
. Other
than pursuant to ordinary arrangements of employment compensation, Parent is not
under any obligation or liability to any officer, director, employee or
Affiliate of Parent.
Section
3.23
Disclosure
. There
is no fact relating to Parent that Parent has not disclosed to the Company in
writing that materially and adversely affects nor, insofar as Parent can now
foresee, will materially and adversely affect, the condition (financial or
otherwise), properties, assets, liabilities, business operations, results of
operations or prospects of Parent. No representation or warranty by Parent
herein and no information disclosed in the schedules or exhibits hereto by
Parent contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements contained herein or therein not
misleading.
ARTICLE
IV.
ADDITIONAL
REPRESENTATIONS, WARRANTIES AND
COVENANTS
OF THE STOCKHOLDERS
Promptly
after the Effective Time, Parent shall cause to be mailed to each holder of
record of Company Common Stock that was converted pursuant to Section 1.06
hereof into the right to receive Parent Common Stock a letter of transmittal
(“
Letter of
Transmittal
”) that shall contain additional representations, warranties
and covenants of such Stockholder, including without limitation, that (a) such
Stockholder has full right, power and authority to deliver such Company Common
Stock and Letter of Transmittal, (b) the delivery of such Company Common Stock
will not violate or be in conflict with, result in a breach of or constitute a
default under, any indenture, loan or credit agreement, deed of trust, mortgage,
security agreement or other agreement or instrument to which such Stockholder is
bound or affected, (c) such Stockholder has good, valid and marketable title to
all shares of Company Common Stock indicated in such Letter of Transmittal and
that such Stockholder is not affected by any voting trust, agreement or
arrangement affecting the voting rights of such Company Common Stock, (d)
whether such Stockholder is an “accredited investor,” as such term is defined in
Regulation D under the Securities Act and that such Stockholder is acquiring
Parent Common Stock for investment purposes, and not with a view to selling or
otherwise distributing such Parent Common Stock in violation of the Securities
Act or the securities laws of any state and (e) such Stockholder has had an
opportunity to ask and receive answers to any questions such Stockholder may
have had concerning the terms and conditions of the Merger and the Parent Common
Stock and has obtained any additional information that such Stockholder has
requested. Delivery shall be effected, and risk of loss and title to the Company
Common Stock shall pass, only upon delivery to Parent (or an agent of Parent) of
(x) certificates evidencing ownership thereof as contemplated by Section 1.07
hereof (or affidavit of lost certificate), and (y) the Letter of Transmittal
containing the representations, warranties and covenants contemplated by this
Article IV.
ARTICLE
V.
CONDUCT
OF BUSINESSES PENDING THE MERGER.
Section
5.01
Conduct of Business by the
Company Pending the Merger
. Prior to the Effective Time,
unless Parent or Acquisition Corp. shall otherwise agree in writing or as
otherwise contemplated by this Agreement:
(a)
the
business of the Company shall be conducted only in the ordinary
course;
(b)
the
Company shall not (i) directly or indirectly redeem, purchase or otherwise
acquire or agree to redeem, purchase or otherwise acquire any shares of its
capital stock; (ii) amend its Certificate of Incorporation or By-laws except to
effectuate the transactions contemplated in the Disclosures or (iii) split,
combine or reclassify the outstanding Company Stock or declare, set aside or pay
any dividend payable in cash, stock or property or make any distribution with
respect to any such stock;
(c)
the
Company shall not (i) issue or agree to issue any additional shares of, or
options, warrants or rights of any kind to acquire any shares of, Company Common
Stock, except to issue shares of Company Common Stock in connection with any
matter relating to the Disclosures (ii) acquire or dispose of any fixed assets
or acquire or dispose of any other substantial assets other than in the ordinary
course of business; (iii) incur additional Indebtedness or any other liabilities
or enter into any other transaction other than in the ordinary course of
business; (iv) enter into any contract, agreement, commitment or arrangement
with respect to any of the foregoing or (v) except as contemplated by this
Agreement, enter into any contract, agreement, commitment or arrangement to
dissolve, merge, consolidate or enter into any other material business
combination;
(d)
the
Company shall use its best efforts to preserve intact the business organization
of the Company, to keep available the service of its present officers and key
employees, and to preserve the good will of those having business relationships
with it;
(e)
the
Company will not, nor will it authorize any director or authorize or permit any
officer or employee or any attorney, accountant or other representative retained
by it to, make, solicit, encourage any inquiries with respect to, or engage in
any negotiations concerning, any Acquisition Proposal (as defined below for
purposes of this paragraph). The Company will promptly advise Parent orally and
in writing of any such inquiries or proposals (or requests for information) and
the substance thereof. As used in this paragraph, “
Acquisition Proposal
”
shall mean any proposal for a merger or other business combination involving the
Company or for the acquisition of a substantial equity interest in it or any
material assets of it other than as contemplated by this Agreement. The Company
will immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any Person conducted heretofore with respect to
any of the foregoing; and
(f)
the
Company will not enter into any new employment agreements with any of its
officers or employees or grant any increases in the compensation or benefits of
its officers and employees or amend any employee benefit plan or
arrangement.
Section
5.02
Conduct of Business by
Parent and Acquisition Corp
. Pending the Merger. Prior to the Effective
Time, unless the Company shall otherwise agree in writing or as otherwise
contemplated by this Agreement:
(a)
the
business of Parent and Acquisition Corp. shall be conducted only in the ordinary
course;
(b)
neither
Parent nor Acquisition Corp. shall (i) directly or indirectly redeem, purchase
or otherwise acquire or agree to redeem, purchase or otherwise acquire any
shares of its capital stock; (ii) amend its charter or by-laws other than to
effectuate the transactions contemplated hereby; or (iii) split, combine or
reclassify its capital stock or declare, set aside or pay any dividend payable
in cash, stock or property or make any distribution with respect to such
stock;
(c)
neither
Parent nor Acquisition Corp. shall (i) issue or agree to issue any additional
shares of, or options, warrants or rights of any kind to acquire shares of, its
capital stock; (ii) acquire or dispose of any assets other than in the ordinary
course of business (except for dispositions in connection with Section 5.02(a)
hereof); (iii) incur additional Indebtedness or any other liabilities or enter
into any other transaction except in the ordinary course of business; (iv) enter
into any contract, agreement, commitment or arrangement with respect to any of
the foregoing or (v) except as contemplated by this Agreement, enter into any
contract, agreement, commitment or arrangement to dissolve, merge, consolidate
or enter into any other material business contract or enter into any
negotiations in connection therewith;
(d)
neither
Parent nor Acquisition Corp. will, nor will they authorize any director or
authorize or permit any officer or employee or any attorney, accountant or other
representative retained by them to, make, solicit, encourage any inquiries with
respect to, or engage in any negotiations concerning, any Acquisition Proposal
(as defined below for purposes of this paragraph). Parent will promptly advise
the Company orally and in writing of any such inquiries or proposals (or
requests for information) and the substance thereof. As used in this paragraph,
“
Acquisition
Proposal
” shall mean any proposal for a merger or other business
combination involving Parent or Acquisition Corp. or for the acquisition of a
substantial equity interest in either of them or any material assets of either
of them other than as contemplated by this Agreement. Parent will immediately
cease and cause to be terminated any existing activities, discussions or
negotiations with any Person conducted heretofore with respect to any of the
foregoing; and
(e)
neither
Parent nor Acquisition Corp. will enter into any new employment agreements with
any of their officers or employees or grant any increases in the compensation or
benefits of their officers and employees.
ARTICLE
VI.
ADDITIONAL
AGREEMENTS
Section
6.01
Access and
Information
. The Company, on the one hand, and Parent and
Acquisition Corp., on the other hand, shall each afford to the other and to the
other’s accountants, counsel and other representatives full access during normal
business hours throughout the period prior to the Effective Time to all of its
properties, books, contracts, commitments and records (including but not limited
to tax returns) and during such period, each shall furnish promptly to the other
all information concerning its business, properties and personnel as such other
party may reasonably request, provided that no investigation pursuant to this
Section 6.01 shall affect any representations or warranties made herein. Each
party shall hold, and shall cause its employees and agents to hold, in
confidence all such information (other than such information that (a) is already
in such party’s possession or (b) becomes generally
available
to the public other than as a result of a disclosure by such party or its
directors, officers, managers, employees, agents or advisors or (c) becomes
available to such party on a non-confidential basis from a source other than a
party hereto or its advisors, provided that such source is not known by such
party to be bound by a confidentiality agreement with or other obligation of
secrecy to a party hereto or another party until such time as such information
is otherwise publicly available;
provided
,
however
, that (i) any
such information may be disclosed to such party’s directors, officers, employees
and representatives of such party’s advisors who need to know such information
for the purpose of evaluating the transactions contemplated hereby (it being
understood that such directors, officers, employees and representatives shall be
informed by such party of the confidential nature of such information), (ii) any
disclosure of such information may be made as to which the party hereto
furnishing such information has consented in writing and (iii) any such
information may be disclosed pursuant to a judicial, administrative or
governmental order or request;
provided
,
further
, that the
requested party will promptly so notify the other party so that the other party
may seek a protective order or appropriate remedy and/or waive compliance with
this Agreement and if such protective order or other remedy is not obtained or
the other party waives compliance with this provision, the requested party will
furnish only that portion of such information that is legally required and will
exercise its best efforts to obtain a protective order or other reliable
assurance that confidential treatment will be accorded the information
furnished. If this Agreement is terminated, each party will deliver to the other
all documents and other materials (including copies) obtained by such party or
on its behalf from the other party as a result of this Agreement or in
connection herewith, whether so obtained before or after the execution
hereof.
Section
6.02
Additional
Agreements
. Subject to the terms and conditions herein
provided, each of the parties hereto agrees to use its commercially reasonable
efforts to take, or cause to be taken, all action and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement, including using its commercially reasonable efforts to satisfy
the conditions precedent to the obligations of any of the parties hereto, to
obtain all necessary waivers, and to lift any injunction or other legal bar to
the Merger (and, in such case, to proceed with the Merger as expeditiously as
possible). In order to obtain any necessary governmental or regulatory action or
non-action, waiver, consent, extension or approval, each of Parent, Acquisition
Corp. and the Company agrees to take all reasonable actions and to enter into
all reasonable agreements as may be necessary to obtain timely governmental or
regulatory approvals and to take such further action in connection therewith as
may be necessary. In case at any time after the Effective Time any further
action is necessary or desirable to carry out the purposes of this Agreement,
the proper officers and/or directors of Parent, Acquisition Corp. and the
Company shall take all such necessary action.
Section
6.03
Publicity
. No
party shall issue any press release or public announcement pertaining to the
Merger that has not been agreed upon in advance by Parent and the Company,
except as Parent reasonably determines to be necessary in order to comply with
the rules of the Commission or of the principal trading exchange or market for
the Parent Common Stock, provided, that in such case Parent will use its best
efforts to allow the Company to review and reasonably approve any such press
release or public announcement prior to its release.
Section
6.04
Appointment of Directors and
Officers
. Immediately at the Effective Time, Parent shall
accept the resignations of the current officers and directors of Parent, and
shall cause the persons listed as directors in
Exhibit E
hereto to
be elected to the Board of Directors of Parent. At the first annual meeting of
Parent stockholders and thereafter, the election of members of Parent’s Board of
Directors shall be accomplished in accordance with the By-laws of Parent and the
rules of the Commission.
Section
6.05
Assumption of
Agreements
. At the Effective Time, Parent shall affirmatively
assume any all liabilities and obligations of the Company with respect to the
Merger.
ARTICLE
VII.
CONDITIONS
TO PARTIES’ OBLIGATIONS
Section
7.01
Conditions to Parent and
Acquisition Corp. Obligations
. The obligations of Parent and
Acquisition Corp. under the Merger Documents are subject to the fulfillment, at
or prior to the Closing, of the following conditions, any of which may be waived
in whole or in part by Parent.
(a)
The
representations and warranties of the Company under this Agreement shall be
deemed to have been made again on the Closing Date and shall then be true and
correct in all material respects.
(b)
The
Company shall have performed and complied in all material respects with all
agreements and conditions required by this Agreement to be performed or complied
with by it on or before the Closing Date.
(c)
Except as
disclosed in the Financial Statements, there shall not exist on the Closing Date
any Default (as defined below) or Event of Default (as defined below) or any
event or condition that, with the giving of notice or lapse of time or both,
would constitute a Default or Event of Default and, since the Balance Sheet
Date, there shall have been no material adverse change in the Condition of the
Company. For purposes of this Agreement, “
Default
” shall mean a
default or failure in the due observance or performance of any covenant,
condition or agreement on the part of a party to be observed or performed under
the terms of the Merger Documents, if such default or failure in performance
shall remain un-remedied for five (5) days. Furthermore, for purposes of this
Agreement, “
Event of
Default
” shall mean (i) the failure to pay any Indebtedness for Borrowed
Money, or any interest or premium thereon, within five (5) days after the same
shall become due, whether such Indebtedness shall become due by scheduled
maturity, by required prepayment, by acceleration, by demand or otherwise, (ii)
an event of default under any agreement or instrument evidencing or securing or
relating to any such Indebtedness or (iii) the failure to perform or observe any
material term, covenant, agreement or condition on its part to be performed or
observed under any agreement or instrument evidencing or securing or relating to
any such Indebtedness when such term, covenant or agreement is required to be
performed or observed.
(d)
No action
or proceeding before any court, governmental body or agency shall have been
threatened, asserted or instituted to restrain or prohibit, or to obtain
substantial damages in respect of, the Merger Documents or the carrying out of
the transactions contemplated by the Merger Documents.
(e)
Parent
and Acquisition Corp. shall have received the following:
(i)
copies of
resolutions of the Board of Directors and the Stockholders, certified by the
Secretary of the Company, authorizing and approving the execution, delivery and
performance of the Merger Documents and all other documents and instruments to
be delivered pursuant thereto;
(ii)
a
certificate of incumbency executed by the Secretary of the Company certifying
the names, titles and signatures of the officers authorized to execute any
documents referred to in this Agreement and further certifying that the Articles
of Incorporation and By-laws of the Company delivered to Parent and Acquisition
Corp. at the time of the execution of this Agreement have been validly adopted
and have not been amended or modified;
(iii)
evidence
as of a recent date of the good standing and corporate existence of the Company
issued by the Secretary of State of the State of California and evidence that
the Company is qualified to transact business as a foreign corporation and is in
good standing in each state of the United States and in each other jurisdiction
where the character of the property owned or leased by it or the nature of its
activities makes such qualification necessary; and
(iv)
such
additional supporting documentation and other information with respect to the
transactions contemplated hereby as Parent and Acquisition Corp. may reasonably
request.
(f)
All
corporate and other proceedings and actions taken in connection with the
transactions contemplated hereby and all certificates, opinions, agreements,
instruments and documents mentioned herein or incident to any such transactions
shall be reasonably satisfactory in form and substance to Parent and Acquisition
Corp. The Company shall furnish to Parent and Acquisition Corp. such supporting
documentation and evidence of the satisfaction of any or all of the conditions
precedent specified in this Section 7.01 as Parent or its counsel may reasonably
request.
Section
7.02
Conditions to the Company’s
Obligations
. The obligations of the Company under the Merger
Documents are subject to the fulfillment, at or prior to the Closing, of the
following conditions, any of which may be waived in whole or in part by the
Company.
(a)
The
representations and warranties of Parent and Acquisition Corp. under this
Agreement shall be deemed to have been made again on the Closing Date and shall
then be true and correct in all material respects.
(b)
Parent
and Acquisition Corp. shall have performed and complied in all material respects
with all agreements and conditions required by the Merger Documents to be
performed or complied with by them on or before the Closing Date.
(c)
There
shall not exist on the Closing Date any Default or Event of Default or any event
or condition that, with the giving of notice or lapse of time or both, would
constitute a Default or Event of Default and, since the Parent Balance Sheet
Date, there shall have been no material adverse change in the Condition of the
Parent.
(d)
The
Company shall have received the following:
(i)
copies of
resolutions of Parent’s and Acquisition Corp.’s respective boards of directors
and the sole stockholder of Acquisition Corp., certified by their respective
Secretaries, authorizing and approving, to the extent applicable, the execution,
delivery and performance of the Merger Documents and all other documents and
instruments to be delivered by them pursuant thereto;
(ii)
a
certificate of incumbency executed by the respective Secretaries of Parent and
Acquisition Corp. certifying the names, titles and signatures of the officers
authorized to execute the documents referred to in this Agreement and further
certifying that the Certificates of Incorporation and By-laws of Parent and
Acquisition Corp. appended thereto have not been amended or
modified.
(iii)
a
certificate, dated the Closing Date, executed by the President and Chief
Financial Officer of each of the Parent and Acquisition Corp., certifying that
(A) except for the filing of the DE-Certificate of Merger and the CA-Agreement
of Merger, all consents, authorizations, orders and approvals of, and filings
and registrations with, any court, governmental body or instrumentality that are
required for the execution and delivery of the Merger Documents and the
consummation of the Merger shall have been duly made or obtained, and all
material consents by third parties required for the Merger have been obtained
and (B) no action or proceeding before any court, governmental body or agency
has been threatened, asserted or instituted to restrain or prohibit, or to
obtain substantial damages in respect of, the Merger Documents or the carrying
out of the transactions contemplated by any of the Merger
Documents;
(iv)
a
certificate of Island Stock Transfer, Parent’s transfer agent and registrar,
certifying, as of the business day prior to the Closing Date, a true and
complete list of the names and addresses of the record owners of all of the
outstanding shares of Parent Common Stock, together with the number of shares of
Parent Common Stock held by each record owner and the total number of shares of
Parent Common Stock then outstanding;
(v)
the
executed resignations of all directors and officers of Parent, with the director
resignations to take effect at the Closing Date;
(vi)
evidence
as of a recent date and within five (5) days of the Effective Date of the good
standing and corporate existence of Parent and of Acquisition Corp. issued by
the Secretary of State of the state of Nevada and the Secretary of State of the
State of Delaware, respectively, and evidence that Parent and Acquisition Corp.
are qualified to transact business as foreign corporations and are in good
standing in each state of the United States and in each other jurisdiction where
the character of the property owned or leased by them or the nature of their
activities makes such qualification necessary; and
(vii)
such
additional supporting documentation and other information with respect to the
transactions contemplated hereby as the Company may reasonably
request.
(e)
All
corporate and other proceedings and actions taken in connection with the
transactions contemplated hereby and all certificates, opinions, agreements,
instruments and documents mentioned herein or incident to any such transactions
shall be satisfactory in form and substance to the Company. Parent and
Acquisition Corp. shall furnish to the Company such supporting documentation and
evidence of satisfaction of any or all of the conditions specified in this
Section 7.02 as the Company may reasonably request.
(f)
No action
or proceeding before any court, governmental body or agency shall have been
threatened, asserted or instituted to restrain or prohibit, or to obtain
substantial damages in respect of, the Merger Documents or the carrying out of
the transactions contemplated by the Merger Documents.
ARTICLE
VIII.
INDEMNIFICATION
AND RELATED MATTERS
Section
8.01
Indemnification by
Parent
. Parent shall indemnify and hold harmless the Company and the
Stockholders (collectively, the “
Company Indemnified
Parties
”), and shall reimburse the Company Indemnified Parties for, any
loss, liability, claim, damage, expense (including, but not limited to, costs of
investigation and defense and reasonable attorneys’ fees) or diminution of value
(collectively, “
Damages
”) arising
from or in connection with (a) any inaccuracy, in any material respect, in any
of the representations and warranties of Parent and Acquisition Corp. in this
Agreement or in any certificate delivered by Parent and Acquisition Corp. to the
Company pursuant to this Agreement, or any actions, omissions or statements of
fact inconsistent with any such representation or warranty, (b) any failure by
Parent or Acquisition Corp. to perform or comply in any material respect with
any covenant or agreement in this Agreement, (c) any claim for brokerage or
finder’s fees or commissions or similar payments based upon any agreement or
understanding alleged to have been made by any such party with Parent or
Acquisition Corp. in connection with any of the transactions contemplated by
this Agreement, (d) taxes attributable to any transaction or event occurring on
or prior to the Closing, (e) any claim relating to or arising out of any
liabilities reflected in the Parent Financial Statement or with respect to
accounting fees arising thereafter or (f) any litigation, action, claim,
proceeding or investigation by any third party relating to or arising out of the
business or operations of Parent, or the actions of Parent or any holder of
Parent capital stock prior to the Effective Time.
Indemnification by
Company.
After the Effective Date, the Company agrees to
defend, indemnify and hold the Parent’s current directors and officers harmless
from and against all indemnifiable damages of the Parent’s current directors and
officers. For this purpose, “indemnifiable damages” of the Parent
means the aggregate of all expenses, losses, costs, deficiencies, liabilities
and damages (including, without limitation, reasonable attorneys’ fees and court
costs) incurred or suffered by the Parent or their respective current directors
and officers as a result of or in connection with: (1) any inaccurate
representation or warranty made by the Company in or pursuant to this Agreement,
(2) any default in the performance of any of the covenants or agreements made by
the Company in this Agreement, (3) the operation of business after the Effective
Date, or any occurrence, act or omission of the Company or of any shareholder,
director, officer, employee, consultant or agent of the Company or Parent which
occurs subsequent to the Effective Date, and causes damage to the Parent’s
current directors and officers. The prevailing party in any claim for
indemnification shall be entitled to receive reasonable attorneys’ fees and
expenses from the non prevailing party. Any Notice of Claims shall follow the
identical procedure, as appropriate, as per the Company Indemnified
Parties.
Section
8.02
Survival
. All
representations, warranties, covenants and agreements of Parent and Acquisition
Corp. contained in this Agreement or in any certificate delivered pursuant to
this Agreement shall survive the Closing for the time period set forth in
Section 8.03 notwithstanding any investigation conducted with respect thereto.
The representations and warranties of the Company contained in this Agreement or
in any certificate delivered pursuant to this Agreement shall not survive the
Closing.
Section
8.03
Time Limitations
.
Neither Parent nor Acquisition Corp. shall have any liability (for
indemnification or otherwise) with respect to any representation or warranty, or
agreement to be performed and complied with prior to the Effective Time, unless
on or before the two-year anniversary of the Effective Time (the “
Claims Deadline
”),
Parent is given notice of a claim with respect thereto, in accordance with
Section 8.05, specifying the factual basis therefor in reasonable detail to the
extent then known by the Company Indemnified Parties.
Section
8.04
Limitation on
Liability
. The obligations of Parent and Acquisition Corp. to the Company
Indemnified Parties set forth in Section 8.01 shall be subject to the following
limitations:
(a)
The
aggregate liability of Parent and Acquisition Corp. to the Company Indemnified
Parties under this Agreement shall be payable by the issuance of additional
shares of Parent Common Stock pursuant to Section 8.06.
(b)
Other
than claims based on fraud or for specific performance, injunctive or other
equitable relief, the indemnity provided in this Article VIII shall be the sole
and exclusive remedy of the Company Indemnified Parties against Parent and
Acquisition Corp. at law or equity for any matter covered by Section
8.01.
Section
8.05
Notice of
Claims
.
(a)
If, at
any time on or prior to the Claims Deadline, any of the Company Indemnified
Parties shall assert a claim for indemnification pursuant to Section 8.01, such
Company Indemnified Party shall submit to Parent a written claim in good faith
signed by an authorized officer of the Company or other Company Indemnified
Party, as applicable, stating (i) that a Company Indemnified Party incurred or
reasonably believes it may incur Damages and the reasonable estimate of the
amount of any such Damages; (ii) in reasonable detail, the facts alleged as the
basis for such claim and the section or sections of this Agreement alleged as
the basis or bases for the claim; and (iii) if the Damages have actually been
incurred, the number of additional shares of Parent Common Stock to which the
Stockholders are entitled to with respect to such Damages, which shall be
determined as provided in Section 8.06 below. If the claim is for Damages which
the Company Indemnified Parties reasonably believe may be incurred or are
otherwise un-liquidated, the written claim of the applicable Company Indemnified
Party shall state the reasonable estimate of such Damages, in which event a
claim shall be deemed to have been asserted under this Article VIII in the
amount of such estimated Damages, but no distribution of additional shares of
Parent Common Stock to the Stockholders pursuant to Section 8.06 below shall be
made until such Damages have actually been incurred.
(b)
In the
event that any action, suit or proceeding is brought against any Company
Indemnified Party with respect to which Parent may have liability under this
Article VIII, Parent shall have the right, at its cost and expense, to defend
such action, suit or proceeding in the name and on behalf of the Company
Indemnified Party;
provided
,
however
, that a
Company Indemnified Party shall have the right to retain its own counsel, with
fees and expenses paid by Parent, if representation of the Company Indemnified
Party by counsel retained by Parent would be inappropriate because of actual or
potential differing interests between Parent and the Company Indemnified Party.
In connection with any action, suit or proceeding subject to Article VIII,
Parent and each Company Indemnified Party agree to render to each other such
assistance as may reasonably be required in order to ensure proper and adequate
defense of such action, suit or proceeding. Parent shall not, without the prior
written consent of the applicable Company Indemnified Party, which consent shall
not be unreasonably withheld or delayed, settle or compromise any claim or
demand if such settlement or compromise does not include an irrevocable and
unconditional release of such Company Indemnified Party for any liability
arising out of such claim or demand.
Section
8.06
Payment of Damages
.
In the event that the Company Indemnified Parties shall be entitled to
indemnification pursuant to this Article VIII for actual Damages incurred by
them, Parent shall, within thirty (30) days after the final determination of the
amount of such Damages, issue to the Stockholders that number of additional
shares of Parent Common Stock in an aggregate amount equal to the quotient
obtained by dividing (x) the amount of such Damages by (y) the Fair Market Value
per share of the Parent Common Stock as of the date (the “
Determination Date
”)
of the submission of the notice of claim to Parent pursuant to Section 8.05.
Such shares of Parent Common Stock shall be issued to the Stockholders pro rata,
in proportion to the number of shares of Parent Common Stock issued (or
issuable) to the Stockholders at the Effective Time. For purposes of this
Section 8.06, “
Fair
Market Value
” shall mean, with respect to a share of Parent Common Stock
on any Determination Date, the average of the daily closing prices for the 10
consecutive business days prior to such date. The closing price for each day
shall be the last sales price or in case no sale takes place on such day, the
average of the closing high bid and low asked prices, in either case (a) as
officially quoted on the OTC Bulletin Board, the NASDAQ Stock Market or such
other market on which the Parent Common Stock is then listed for trading or
quoted, or (b) if, in the reasonable judgment of the Board of Directors of
Parent, the OTC Bulletin Board or the NASDAQ Stock Market is no longer the
principal United States market for the Parent Common Stock, then as quoted on
the principal United States market for the Parent Common Stock as determined by
the Board of Directors of Parent, or (c) if, in the reasonable judgment of the
Board of Directors of Parent, there exists no principal United States market for
the Parent Common Stock, then as reasonably determined in good faith by the
Board of Directors of Parent.
ARTICLE
IX.
TERMINATION
PRIOR TO CLOSING
Section
9.01
Termination of
Agreement
. This Agreement may be terminated at any time prior
to the Closing:
(a)
by the
mutual written consent of the Company, Acquisition Corp. and
Parent;
(b)
by the
Company, if Parent or Acquisition Corp. (i) fails to perform in any material
respect any of its agreements contained herein required to be performed by it on
or prior to the Closing Date, or (ii) materially breach any of their
representations, warranties or covenants contained herein, which failure or
breach is not cured within thirty (30) days after the Company has notified
Parent and Acquisition Corp. of its intent to terminate this Agreement pursuant
to this paragraph (b);
(c)
by Parent
and Acquisition Corp. if the Company (i) fails to perform in any material
respect any of its agreements contained herein required to be performed by it on
or prior to the Closing Date or (ii) materially breaches any of its
representations, warranties or covenants contained herein, which failure or
breach is not cured within thirty (30) days after Parent or Acquisition Corp.
has notified the Company of its intent to terminate this Agreement pursuant to
this paragraph (c);
(d)
by either
the Company, on the one hand, or Parent and Acquisition Corp., on the other
hand, if there shall be any order, writ, injunction or decree of any court or
governmental or regulatory agency binding on Parent, Acquisition Corp. or the
Company that prohibits or materially restrains any of them from consummating the
transactions contemplated hereby, provided that the parties hereto shall have
used their best efforts to have any such order, writ, injunction or decree
lifted and the same shall not have been lifted within ninety (90) days after
entry by any such court or governmental or regulatory agency; or
Section
9.02
Termination of
Obligations
. Termination of this Agreement pursuant to this
Article IX shall terminate all obligations of the parties hereunder, except for
the obligations under Sections 6.01, 10.03 and 10.11;
provided
,
however
, that
termination pursuant to paragraphs (b) or (c) of Section 9.01 shall not relieve
the defaulting or breaching party or parties from any liability to the other
parties hereto.
ARTICLE
X.
MISCELLANEOUS
Section
10.01
Notices
. Any
notice, request or other communication hereunder shall be given in writing and
shall be served either personally, by overnight delivery or delivered by mail,
certified return receipt and addressed to the following addresses:
(a)
If to
Parent or Acquisition Corp.:
Casita
Enterprises, Inc.
1093 East
Main Street, Suite 508
El Cajon,
CA 92021
Attention:
Jose Cisneros
With a
copy to:
Jill
Arlene Robbins, P.A.
525 93
Street
Surfside,
Florida 33154
Attention:
Jill Arlene Robbins
(b)
If to the
Company:
Envision
Solar International, Inc.
7675
Dagget St, Suite 150, San Diego, CA 92111
Attention:
Robert Noble
Notices
shall be deemed received at the earlier of actual receipt or three (3) business
days following mailing. Counsel for a party (or any authorized representative)
shall have authority to accept delivery of any notice on behalf of such
party.
Section
10.02
Entire
Agreement
. This Agreement, including the schedules and
exhibits attached hereto and other documents referred to herein, contains the
entire understanding of the parties hereto with respect to the subject matter
hereof. This Agreement supersedes all prior agreements and undertakings between
the parties with respect to such subject matter.
Section
10.03
Expenses
. Each
party shall bear and pay all of the legal, accounting and other expenses
incurred by it in connection with the transactions contemplated by this
Agreement.
Section
10.04
Time
. Time
is of the essence in the performance of the parties’ respective obligations
herein contained.
Section
10.05
Severability
. Any
provision of this Agreement that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
Section
10.06
Successors and
Assigns
. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors, assigns and
heirs; provided, however, that neither party shall directly or indirectly
transfer or assign any of its rights hereunder in whole or in part without the
written consent of the others, which may be withheld in its sole discretion, and
any such transfer or assignment without said consent shall be void.
Section
10.07
No Third Parties
Benefited
. This Agreement is made and entered into for the
sole protection and benefit of the parties hereto, their successors, assigns and
heirs, and no other Person shall have any right or action under this
Agreement.
Section
10.08
Counterparts
. This
Agreement may be executed in one or more counterparts, with the same effect as
if all parties had signed the same document. Each such counterpart shall be an
original, but all such counterparts together shall constitute a single
agreement.
Section
10.09
Recitals, Schedules and
Exhibits
. The Recitals, Schedules and Exhibits to this
Agreement are incorporated herein and, by this reference, made a part hereof as
if fully set forth herein.
Section
10.10
Section Headings and
Gender
. The Section headings used herein are inserted for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement. All personal pronouns used in this Agreement
shall include the other genders, whether used in the masculine, feminine or
neuter gender, and the singular shall include the plural, and vice versa,
whenever and as often as may be appropriate.
Section
10.11
Governing
Law
. This Agreement shall be governed by and construed and
enforced in accordance with the internal laws of the State of New York without
regard to principles of conflicts of laws, except that the applicable terms of
Section 1 shall be governed by the NRS, DGL and the CCC.
[Signature
Page Follows]
IN
WITNESS WHEREOF, the parties hereto have executed this Agreement to be binding
and effective as of the day and year first above written.
PARENT:
CASITA
ENTERPRISES, INC.
By:
/s/ Jose
Cisneros
Name:
Jose Cisneros
Title:
President and Chief Executive Officer
ACQUISITION
CORP:
ESII
ACQUISITION CORP.
By:
/s/ Jose
Cisneros
Name:
Jose Cisneros
Title:
President
THE
COMPANY:
ENVISION
SOLAR INTERNATIONAL, INC.
By:
Robert
Noble
Name:
Robert Noble
Title:
Chief Executive Officer
[SIGNATURE
PAGE TO AGREEMENT OF MERGER AND PLAN OF REORGANIZATION]
Exhibit 10.1
Selling
Agreement
January
17, 2007
Mr.
Robert Noble
Chairman
& Chief Executive Officer
Envision
Solar, LLC
225
Broadway Avenue, Suite 1700
San
Diego, CA 92101
Re:
Common Stock Offering at
$10.00 per Share
Gentlemen:
Envision
Solar, LLC ("ENVISION" or "the Company") is a California Limited Liability
Company formed to provide durable and attractive integrative photovoltaic
systems designed to facilitate the worldwide transition to the use of renewable
energy. ENVISION desires to raise $2,000,000 through the sale of 200,000 Shares
("The Shares") to Accredited Investors ("Investor") at a price of $10.00 per
Share pursuant to Rule 506 of the Securities Act of 1933. Each Investor
participating in this Offering is required to purchase a minimum of 5,000
shares; however, ENVISION may choose to accept purchases below the minimum at
its discretion. ENVISION hereby confirms as follows its agreement with Nexcore
Capital, Inc. ("Nexcore"), a registered member in good standing of the National
Association of Securities Dealers ("NASD"), under which Nexcore will act as a
non-exclusive agent for ENVISION in connection with the Offering of the
Shares.
1.
Memorandum
.
ENVISION is
authorizing the preparation of a private placement memorandum ("Memorandum")
relating to the sale of the Shares.
2.
Appointment
of Agent
.
On the
basis of the representations, warranties and covenants herein contained, and
subject to the terms and conditions herein set forth, Nexcore is hereby
appointed as a non-exclusive agent of ENVISION to offer and sell the Shares to
Accredited Investors. Nexcore covenants to offer and sell Shares on a "best
efforts" basis on behalf of ENVISION in accordance with the terms of this
Agreement and the Memorandum, and not to misrepresent orally or in writing any
of the facts regarding ENVISION, its business, or the Offering. Nexcore
covenants to closely supervise all of its representatives in the Offering of the
Shares and to comply with all applicable federal and state securities laws and
NASD rules and regulations. Nexcore is not responsible for the contents of the
Memorandum. Nexcore covenants not to use any written material or oral statements
in offering or selling the Shares which are not specifically authorized by
ENVISION, provided, that Nexcore is specifically authorized to use the
Memorandum. Subject to the performance by ENVISION of its obligations to be
performed hereunder, and to the accuracy of all the representations and
warranties contained herein, Nexcore hereby accepts such agency and agrees to
perform its obligations hereunder.
3.
Representations
and Warranties of Envision
.
ENVISION represents,
warrants and agrees with Nexcore for Nexcore's benefit that:
(a) All
action required to be taken by ENVISION as a condition to sale of the Shares
has been
taken.
(b) ENVISION
is duly and validly organized, existing and in good standing as a
limited
liability company under the laws of the State of California, with full power and
authority to
conduct
its business and proposed business as described in the Memorandum. ENVISION has
unencumbered
title to all government licenses and permits necessary to conduct its business,
and is duly qualified to conduct its business in all jurisdictions in which such
qualification is necessary or appropriate.
(c)
From the
commencement of the Offering period through the Offering Termination Date, as
that term is defined in the Memorandum, the Memorandum will not contain an
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading.
(d)
This
Agreement has been duly and validly authorized, executed and delivered by or on
behalf of ENVISION, and constitutes the valid, binding and enforceable agreement
of ENVISION.
(e)
No
federal or state securities agency has issued an order preventing or suspending
the Offering or the use of the Memorandum with respect to the sale of the
Shares. ENVISION will promptly notify Nexcore upon the issuance of any such
order and furnish Nexcore with a copy thereof. The Memorandum and any amendment
or supplement thereto will comply and will continue to comply with all
applicable requirements of the Securities Act of 1933, as amended (the "Act"),
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and any
other applicable federal and state laws and regulations at all times during the
term of this Agreement.
(f)
No
consent, approval, authorization or other order of any governmental authority is
required in connection with the execution, delivery or performance by ENVISION
of this Agreement.
(g)
The
execution and delivery of this Agreement will not constitute a breach of, or
default under, any instrument by which ENVISION is bound or, to the best of
their knowledge, any order, rule or regulation of any court or any governmental
body or administrative agency having jurisdiction over ENVISION.
4.
Nexcore
Representations and Warranties
.
Nexcore represents and
warrants that it is duly and fully licensed under the rules and regulations of
the NASD and is capable of performing and satisfying its obligations under this
Agreement. Nexcore further represents and warrants that Nexcore's execution and
performance of this Agreement will not cause Nexcore to be in default under or
to violate any agreement, law, rule, regulation, order or judgment applicable to
it.
5.
Compensation
to Nexcore
.
In
consideration for Nexcore's services hereunder, ENVISION covenants to pay
Nexcore a selling commission equal to ten (10%) percent of the total purchase
price of Shares sold by representatives who are registered with Nexcore. The
selling commission payable to Nexcore will be paid periodically as ENVISION
accepts sales of Shares. In those cases where the investor is an institution,
and the size of the investment is greater than $500,000 (i.e. exceeds 100,000
shares), ENVISION and Nexcore agree that ENVISION shall pay Nexcore a reduced
selling commission of four percent (4%) on these institutional
sales.
6.
Due
Diligence Allowance.
In consideration for due
diligence expenses incurred by Nexcore in connection with the Offering, ENVISION
covenants to pay Nexcore a due diligence fee equal to three percent (3%) of the
total purchase price of Shares sold by representatives who are registered with
Nexcore. In those cases where the investor is an institution, and the size of
the investment is greater than $500,000 (i.e. exceeds 100,000 shares), ENVISION
and Nexcore agree that ENVISION shall pay Nexcore a reduced due diligence fee of
two percent (2%) on these institutional sales. The due diligence allowance will
be paid periodically as ENVISION accepts sales of Shares.
7.
Incentive
Compensation and Offering Costs.
In consideration for
other expenses incurred by Nexcore in connection with the Offering, including
but not limited to administrative and
miscellaneous
expenses, Nexcore will also receive from ENVISION a nonaccountable expense
reimbursement in cash equal to two percent (2%) of the total purchase price of
all Shares sold by representatives who are registered with Nexcore. In addition,
as non-cash incentive compensation for Nexcore, ENVISION shall also compensate
Nexcore with fully-paid, non-accessible, and assignable common Shares of the
Company equal to ten percent (10%) of the total number of Shares sold in this
Offering, subject to a maximum of 20,000 Shares, and based upon the 200,000
Shares offered in the Memorandum.
Selling\agrat\Envision.doc
8.
Offering
Costs
.
ENVISION
will pay all legal, accounting, printing and other Offering expenses incurred by
the Company from its existing general working capital.
9.
Covenants
of the Company
.
ENVISION covenants with Nexcore that:
(a)
The term
of this Agreement will commence on the date first above written and will
terminate on the Offering Termination Date of April 30, 2007, as defined in the
Memorandum, unless sooner terminated by the written agreement of both parties to
this Agreement.
(b)
If any
event relating to the Company occurs which requires, in the opinion of
ENVISION's counsel, an amendment or supplement to the Memorandum in order that
the Memorandum will not contain an untrue statement of a material fact or omit
to state a material fact necessary in order to make the statements therein not
misleading in the light of the circumstances existing at the time it is
delivered to a subscriber, ENVISION will forthwith prepare the amendment or
supplement to the Memorandum and deliver a copy thereof to Nexcore. Furthermore,
ENVISION will furnish such information to Nexcore as Nexcore may from time to
time reasonably request.
(c)
ENVISION
will endeavor in good faith to qualify the Shares for offering and sale under,
or to establish the exemption of the Offering and sale of the Shares from
qualification or registration under, applicable state securities or "blue sky"
laws. ENVISION will pay all legal fees and related expenses in connection with
qualifying the Shares under said "blue sky" laws.
(d)
ENVISION
will not offer to sell Shares in any state in which such offer would be
unlawful. ENVISION will bear all of the costs and liability incurred by it or
Nexcore as a result of the unlawful offer of Shares by the Company in any state,
unless Nexcore directly causes such unlawful offer without the participation of
ENVISION.
(e)
ENVISION
covenants to issue financial statements and reports of the Company in accordance
with the Memorandum.
(f)
Nexcore
will have reasonable review and approval rights with respect to the Memorandum
and its contents.
(g)
ENVISION
covenants that Nexcore shall retain the right to offer this opportunity to an
entity affiliated with Nexcore, such as, by way of illustration but not of
limitation, The Greencore Private Energy Fund, etc.
10.
Payment
of Expenses and Fees
.
Except as provided in Sections 5, 6 and 7 of this Agreement, Nexcore and
ENVISION will each pay their own expenses incident to the transactions
contemplated by this Agreement. ENVISION will bear all of the fees and expenses
incurred in printing of the Memorandum.
11.
Mutual
Non-circumvention
.
ENVISION and Nexcore covenant not to directly or indirectly circumvent
the other parry or its affiliates with respect to any relationships introduced
or made known to each party as a direct or indirect result of this Agreement,
including but not limited to investors,
customers,
suppliers, and professionals, without the prior consent of the other party. In
the event of a breach of this section by either party, each party will have all
injunctive and equitable relief available, as well as all other remedies at law
or in equity.
Selling\agmt\Envision.doc
12.
Conditions
of Nexcore's Obligations
.
Nexcore's obligations
hereunder are subject to the accuracy of and compliance with the representations
and warranties of ENVISION in this Agreement, and to the performance by ENVISION
of its obligations hereunder.
13.
Conditions
of the Obligations of Envision
.
The obligations of ENVISION
hereunder are subject to the accuracy of and the compliance with Nexcore's
representations and warranties in this Agreement, and to the performance by
Nexcore of its obligations hereunder.
14.
Term of
Agreement
.
The
term of this Agreement will commence on the date first above written and will
terminate on the Offering Termination Date, as that term is defined in the
Memorandum.
15.
Indemnification
.
(a)
ENVISION
hereby indemnifies and holds Nexcore, Nexcore's affiliates, officers, directors,
shareholders, agents, employees, accountants and attorneys, and each of them,
harmless from and against all liabilities, claims, damages, losses, costs,
attorneys fees and expenses arising directly or indirectly from (a) the conduct
of ENVISION's business, (b) the manner and conduct of any offer or sale of
securities by persons or entities other than Nexcore which conduct any business
with ENVISION, (c) any financial statements or other financial information
prepared, provided, published, or disseminated by ENVISION, or (d) the source or
manner of solicitation of any prospective Investors referred by ENVISION to
Nexcore. In addition, ENVISION hereby indemnifies and holds Nexcore, Nexcore's
affiliates, officers, directors, shareholders, agents, employees, consultants
and attorneys, and each of them, harmless from and against any loss, expense,
claim, damage or liability to which Nexcore or said other parties may become
subject under any securities act, common law concept, or otherwise, insofar as
such loss, expense, claim, damage or liability or action in respect thereof,
arises out of or is based in whole or in part on any untrue statement or alleged
untrue statement of any material fact made by ENVISION, any employee of the
Company, or in the Memorandum, or the omission thereby of any material fact
required to be stated or necessary to make the statement made to a prospective
investor not misleading. ENVISION shall promptly reimburse the indemnified
parties for any reasonable legal or other expenses incurred by them in
connection with any such indemnified action or claim.
(b)
ENVISION
will not be liable under this indemnity agreement with respect to any claim made
against Nexcore or any of said other persons related to Nexcore unless ENVISION
is notified in writing of the nature of the claim. ENVISION shall be entitled to
participate at its own expense in the defense or, if it so elects within a
reasonable time after receipt of such notice, to assume the defense of any such
claims, which defense shall be conducted by counsel chosen by it and reasonably
satisfactory to Nexcore and the other said person or persons related to Nexcore
who are defendants in any suit so brought. In the event that the ENVISION elects
to assume the defense of any such suit and retain such counsel, Nexcore or the
person or persons who are defendants in the suit shall bear the fees and
expenses of any additional counsel thereafter retained by Nexcore or them.
ENVISION agrees to promptly notify Nexcore of the assertion of any claim against
it or against any person who is a control person of ENVISION in connection with
the sale of the Shares.
(c)
Nexcore
agrees to indemnify and hold harmless ENVISION and its affiliates, officers,
directors, shareholders, agents, employees, attorneys and accountants against
any and all loss, liability, claim, damage and expense whatsoever directly or
indirectly resulting from material violations by Nexcore or its representatives
of any of Nexcore's representations, warranties or covenants in this Agreement,
or of any applicable law, rule or regulation. In case any action is brought
against ENVISION or any of its affiliates under such laws, regulations or rules
on account of such material violation of such representations, warranties or
covenants, Nexcore shall have the rights and duties given to ENVISION, and
ENVISION shall have the rights and duties given to Nexcore, by the provisions of
Section 13(b).
SeIling\agmt\Envi3i0n.doc
16.
Representations. Warranties and Agreements to Survive Delivery
.
All
representations,
warranties and agreements shall remain operative and in full force and effect,
regardless of any investigation made by or on behalf of Nexcore or any person
who controls Nexcore, or by or on behalf of ENVISION or any person who controls
ENVISION, for a period of four years after the Offering Termination Date, as
that term is defined in the Memorandum.
17.
Notices
.
All communications herein
shall be in writing and, if sent to Nexcore, shall be mailed, delivered or
telegraphed and confirmed to Nexcore at 10509 Vista Sorrento Parkway, Suite 300,
San Diego, CA 92121, attention: Jay S. Potter, President, or, if sent to
ENVISION, shall be delivered or telegraphed and confirmed to it at Envision
Solar, LLC, 225 Broadway Avenue, Suite 1700, San Diego, California 92101,
attention: Robert Noble, Chief Executive Officer.
18.
Parties
.
This Agreement shall inure
to the benefit of and be binding upon Nexcore, ENVISION, and their respective
successors and assigns.
19.
Entire
Agreement
.
This
Agreement represents the entire agreement among the parties hereto and may not
be amended except by a writing signed by the party against whom enforcement of
the provision is sought.
20.
Injunctive
Relief
.
20.1
Damages
Inadequate
Each
parry acknowledges that it would be impossible to measure in money the damages
to the other party if there is a failure to comply with any covenants or
provisions of this Agreement, and agrees that in the event of any breach of any
covenant or provision, the other party to this Agreement will not have an
adequate remedy at law.
20.2
Injunctive
Relief
It is
therefore agreed that the other party to this Agreement who is entitled to the
benefit of the covenants or provisions of this Agreement which have been
breached, in addition to any other rights or remedies which they may have, shall
be entitled to immediate injunctive relief to enforce such covenants and
provisions, and that in the event that any such action or proceeding is brought
in equity to enforce them, the defaulting or breaching party will not urge a
defense that there is an adequate remedy at law.
21.
Waivers
.
If any party shall at any
time waive any rights hereunder resulting from any breach by the other party of
any of the provisions of this Agreement, such waiver is not to be construed as a
continuing waiver of other breaches of the same or other provisions of this
Agreement. Resort to any remedies referred to herein shall not be construed as a
waiver of any other rights and remedies to which such party is entitled under
this Agreement or otherwise.
22.
Governing
Law
.
This
Agreement shall be governed by and construed in accordance with the laws of the
State of California, and the venue for any action hereunder shall be in the
appropriate forum in the County of San Diego, State of California.
23.
Counterparts
.
This Agreement may be
executed simultaneously in any number of counterparts, each of which
counterparts shall be deemed to be an original, and such counterparts shall
constitute but one and the same instrument.
24.
Attorneys'
Fees and Costs
.
In the event that either parry must resort to legal action in order to
enforce the provisions of this Agreement or to defend such action, the
prevailing party shall be entitled to receive reimbursement from the
nonprevailing party for all reasonable attorneys' fees and all other costs
incurred in commencing or defending such action, or in enforcing this Agreement,
including but not limited to post judgment costs.
SeIling\agmt\Envis!oa.doc
25.
Further
Acts
.
The parties
to this Agreement hereby agree to execute any other documents and take any
further actions which are reasonably necessary or appropriate in order to
implement the transactions contemplated by this Agreement.
26.
Time of
Essence
.
Time is
of the essence in the performance of the obligations under this
Agreement.
27.
Authorized
Signatures
.
Each
party to this Agreement hereby represents that the persons signing below are
duly authorized to execute this Agreement on behalf of their respective
party.
28.
Execution
.
If the foregoing is in
accordance with your understanding of our Agreement, kindly sign and return to
us a counterpart hereof, whereupon this Agreement along with all counterparts
will become a binding Agreement between Nexcore and ENVISION in accordance with
its terms.
Very truly
yours,
|
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Nexcore Capital,
Inc.
|
|
|
|
a
Delaware corporation
|
|
|
|
|
|
|
|
|
|
|
|
|
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By:
|
|
|
|
|
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Jay
S. Potter President
|
|
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Title
|
|
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Confirmed
and Accepted:
Envision
Solar, LLC
a
California Limited Liability Compnay
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By:
|
/s/
Robert Noble
|
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Robert
Noble
|
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Chairman and Chief
Executive Officer
|
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Sel)ing\agmt\Envision.doc
Exhibit
10.2
2007
UNIT
OPTION PLAN
OF
ENVISION
SOLAR, LLC
A
California limited liability company
TABLE OF
CONTENTS
|
ARTICLE
1
|
Purpose;
Definition of Company and Other Terms
|
1
|
|
1.1
|
Purpose
|
1
|
|
1.2
|
Definition
of Company; Subsidiary
|
1
|
|
1.3
|
Terminology
|
1
|
|
|
|
|
|
ARTICLE
2
|
Units
Awards Under the Plan
|
2
|
|
2.1
|
Type
of Awards
|
2
|
|
2.2
|
Unexercised
Units
|
2
|
|
|
|
|
|
ARTICLE
3
|
Eligibility
|
2
|
|
|
|
|
|
ARTICLE
4
|
Administration
|
3
|
|
4.1
|
The
Board of Managers
|
3
|
|
4.2
|
Authority
of the Board
|
3
|
|
4.3
|
Effectuation
of Plan by Company
|
3
|
|
|
|
|
|
ARTICLE
5
|
Grant
of Options
|
4
|
|
5.1
|
Option
Agreements
|
4
|
|
5.2
|
Option
Date
|
4
|
|
5.3
|
Acknowledgments
and Warranties in Option Agreements
|
4
|
|
|
|
|
|
ARTICLE
6
|
Terms
and Conditions for Options
|
4
|
|
6.1
|
Employment
by the Company
|
4
|
|
6.2
|
Option
Price
|
5
|
|
6.3
|
Price
Determination
|
5
|
|
6.4
|
Exercise
of Option; Payment for Units
|
5
|
|
6.5
|
Term
of Options; Option Period
|
5
|
|
6.6
|
Option
Exercise Period
|
5
|
|
6.7
|
Non-Transferability
of Options
|
5
|
|
6.8
|
Limitations
on Exercise; Termination of Employment
|
6
|
|
6.9
|
Accumulation
Rights
|
6
|
|
6.10
|
Minimum
Unit Purchase
|
6
|
|
6.11
|
Employee
Holding Period
|
6
|
|
6.12
|
Retirement
of Employee
|
6
|
|
6.13
|
Death
of Optionee
|
6
|
|
6.14
|
Disability
of Employee
|
7
|
|
6.15
|
Options
of Employee not Exercisable at Termination
|
7
|
|
6.16
|
Failure
of Retired, Deceased or Disabled Optionee to Exercise
Option
|
7
|
|
6.17
|
Repurchase
Agreements
|
7
|
|
6.18
|
Withholding
Taxes
|
7
|
TABLE OF
CONTENTS
(continued)
|
ARTICLE
7
|
Time
Limit on Granting of Options
|
7
|
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|
|
ARTICLE
8
|
Adjustments
by Reason of Recapitalization, Stock Split-Ups, Etc8
|
8
|
|
8.1
|
Effect
of Options on Company’s Rights
|
8
|
|
8.2
|
Recapitalization
|
8
|
|
8.3
|
Reorganization
|
8
|
|
8.4
|
Price
Adjustment
|
9
|
|
|
|
|
|
ARTICLE
9
|
Transfer
of Control
|
9
|
|
9.1
|
Definitions
|
9
|
|
9.2
|
Effect
of Transfer of Control on Options
|
10
|
|
|
|
|
|
ARTICLE
10
|
Right
to Amend, Suspend or Terminate the Plan
|
10
|
|
|
|
|
|
ARTICLE
11
|
No
Obligation to Exercise Option
|
10
|
|
|
|
|
|
ARTICLE
12
|
Modification,
Extension and Renewal and Cancellation of Options
|
10
|
|
|
|
|
|
ARTICLE
13
|
Compliance
With Laws
|
10
|
|
13.1
|
Securities
Laws
|
10
|
|
13.2
|
Liability
of Company; Compliance With Law
|
11
|
|
|
|
|
|
ARTICLE
14
|
Provisions
in Option Agreements
|
11
|
|
|
|
|
|
ARTICLE
15
|
Indemnification
of the Board
|
11
|
|
|
|
|
|
ARTICLE
16
|
General
Provisions
|
12
|
|
16.1
|
Governing
Law
|
12
|
|
16.2
|
Effective
Date of the Plan
|
12
|
2007
UNIT
OPTION PLAN
OF
ENVISION
SOLAR LLC
ARTICLE
1
PURPOSE; DEFINITION OF
COMPANY AND OTHER TERMS
1.1
Purpose
.
The purpose of
this Unit Option Plan (“Plan”) is to aid in maintaining and developing
management and employees for Envision Solar, LLC, a California limited liability
company (the “Company”), intended to advance the long range interests and
performance of the Company. The Plan will afford present and future
executives, other employees, and independent contractors an opportunity to
secure a unit ownership in the Company through the grant of unit options (as
defined herein) which are referred to herein as
“Options”. Executives, employees and independent contractors will
thus be encouraged to acquire a permanent stake in the prosperity of the
Company. The Plan will also permit the Company to compete with other
organizations offering similar plans in obtaining and retaining the services of
executives and other key personnel whom the Company desires to
employ. Since a Plan participant may be required to remain in the
services of the Company in order to obtain its full benefits, the Plan is also
an inducement to participants to remain with the Company.
1.2
Definition
of Company; Subsidiary
.
The word
“Company,” when used in the Plan with reference to employment or where otherwise
applicable, shall include a “parent corporation” and/or a “subsidiary
corporation” of the Company as those terms are respectively defined in Sections
424(e) and 424(f) of the Internal Revenue Code of 1986, as amended (the
“Code”).
1.3
Terminology
.
If the context so
requires, all personal pronouns used in this Plan, whether used in the
masculine, feminine, or neuter gender, shall include all other genders, and the
singular shall include the plural, and vice versa. Titles of sections
and subsections are for convenience only, and shall neither limit nor amplify
the provisions of the Plan itself, and all references herein to sections or
subsections shall refer to the corresponding section or subsection of this Plan,
unless specific reference is made to such sections or subsections of another
document or instrument. All capitalized terms not otherwise defined herein shall
have the meaning given to them in the Operating Agreement of the Company
effective as of August 15, 2006 (“Operating Agreement”).
ARTICLE
2
UNITS
AWARDS UNDER THE
PLAN
2.1
Type of
Awards
.
The units to be
sold pursuant to the exercise of Options granted under this Plan shall be the
membership units of the Company (“Units”). The total number of Units
which may be purchased pursuant to the exercise of Options granted under this
Plan shall not, except as provided in Article 8 or upon approval of the members,
exceed 100,000 Units. No reduction in the number of outstanding Units
shall affect the validity or enforceability of options granted prior to the
reduction.
2.2
Unexercised
Units
.
In the event that
an Option granted under the Plan expires, is canceled, or is terminated
unexercised as to any Units subject thereto, such Units subject to the
unexercised portion of such Option may again be subject to an Option granted
under this Plan.
ARTICLE
3
ELIGIBILITY
Options will be granted from time to
time under the Plan only to:
3.1
Employees
of the Company (including managers and assistant managers), all of whom are
referred to herein as “Employees”;
3.2
Members
of the Board of Managers of the Company (“Managers”), whether or not employees
of the Company; and
3.3
Certain
persons or organizations who are independent contractors, who have substantial
business contacts with the Company which would give rise to familiarity with the
business and financial aspects of the Company, and who render to the Company
services of special importance to the Company in the management, operation or
development of its business.
Any grantee may hold more than one
Option, but only on the terms and subject to the restrictions contained
herein. Such Employees, Managers and independent contractors
(collectively referred to herein as “Participants” or “Optionees”) will be
selected from time to time during the period when the Plan is in operation by
the Board of Managers (the “Board”) which will also determine the number of
Units which each Participant shall be entitled to purchase under his
Option.
ARTICLE
4
ADMINISTRATION
4.1
The Board
of Managers
.
The Plan shall be
administered by the Board elected by the members of the Company as described in
the Company Operating Agreement; provided, however, that no Manager of the Board
shall vote upon or approve the granting of any Option to such
Manager.
4.2
Authority
of the Board
.
Subject to the
express provisions of the Plan, the Board shall have the sole authority, in its
absolute discretion, to:
4.2.1
Determine
and designate from time to time which Employees, Managers, and independent
contractors to whom Options to purchase Units shall be granted;
4.2.2
Determine
the number of Units to be subject to Options (sometimes “Option Units”) granted
hereunder (subject, however, to the limitations specified in Section 2.1 and
Article 8), and the time or times when such Options shall be
granted;
4.2.3
Determine
the option or exercise price of the Option Units (subject, however, to the
limitations specified in Section 6.2);
4.2.4
Determine
the time or times when each Option becomes exercisable, and the duration of the
exercise period (subject to Sections 6.5 and 6.6);
4.2.5
Prescribe,
amend and rescind the form or forms of the Option Agreements (as defined in
Section 5.1) under the Plan (which shall be consistent with the Plan but need
not be identical);
4.2.6
Adopt,
amend, and rescind such rules and regulations as in its opinion may be advisable
in the administration of the Plan (subject, however, to the limitations
specified in Article 10);
4.2.7
Construe
and interpret the Plan, the rules and regulations and the Option Agreements
under the Plan, and make all other determinations deemed necessary or advisable
for the administration of the Plan; and
4.2.8
Place
such restrictions on sale or other disposition of the Units purchased upon
exercise of an Option as may be determined by the Board.
All
decisions, determinations, and interpretations by the Board of the terms of the
Plan, and the agreements and other instruments created pursuant to the Plan,
made in good faith shall be final, binding, and conclusive on all Optionees for
all purposes.
4.3
Effectuation
of Plan by Company
.
The Company shall
effect the grant of Options under the Plan to Employees, Managers, and
independent contractors of the Company in accordance with the determinations
made by the Board, by the execution of agreements with Optionees, and any other
necessary instruments in writing, in form approved by the Board and conforming
to the provisions of the Plan. The Board shall, from time to time,
authorize and direct the issuance and sale of Units of the Company pursuant to
such Options as and when the same may be exercised, in whole or in part, in
accordance with their respective terms.
ARTICLE
5
GRANT OF
OPTIONS
5.1
Option
Agreements
.
Upon the Board’s
determination to grant an Option to an Optionee, the Board shall promptly advise
the Optionee of its action, the number of Units subject to the Option so granted
and the price to be paid for the Units upon exercise of the
Option. Within a reasonable period of time from the date of the grant
of such Option the Optionee shall enter into an agreement for the grant of such
Option in such form as the Board determines which complies with the terms and
conditions of this Plan (“Option Agreement”). In the event action
taken by the Board is by written consent of its Managers, the action or approval
of the Board shall be deemed to be taken at the time the last executing Manager
signs the consent unless such action specifies a later time.
5.2
Option
Date
.
Unless otherwise
specified in an Option Agreement, the date of grant or “Option Date” of any
Option shall be deemed to be the date on which the grant of such Option shall be
approved by the Board or such other date as the Board shall, at the time of such
approval, fix as the date of grant thereof.
5.3
Acknowledgments
and Warranties in Option Agreements
.
As a condition to
the exercise of the Option, the Optionee may be required in said Option
Agreement to acknowledge and agree that:
5.3.1
The
Optionee will, from time to time, notify the Company in writing of each
disposition (including a sale, exchange, gift, or a transfer of legal title) of
Units acquired pursuant to the exercise of an Option made by such
Optionee. Such notification shall be in writing and shall be made
within fifteen (15) days after each such disposition is made.
5.3.2
The
Optionee and his transferees have no rights as a Unit holder with respect to any
Units covered by the Plan until the date of the issuance of a Unit certificate
to him for such Units. No adjustment shall be made for distributions
(whether in cash, securities or other property) or other rights for which the
record date is prior to the date such Unit certificate is issued, except as
provided in Article 8.
ARTICLE
6
TERMS AND CONDITIONS FOR
OPTIONS
6.1
Employment
by the Company
.
Nothing contained
in the Plan or in any Option granted pursuant to the Plan shall confer upon any
Optionee any right to continue in the employment of the Company, or interfere in
any way with the right of the Company to terminate his employment at any time,
with or without cause.
6.2
Option
Price
.
Each Option
granted pursuant to the Plan shall have a stated exercise or Option price for
each Unit subject to the Option, which price shall be not less than the fair
market value per Unit on the Option Date, as determined by the Board in good
faith.
6.3
Price
Determination
.
In making its
Option price determination, the Board may use any reasonable valuation method,
taking into consideration prices at which Units of the Company have been
recently sold and purchased, and other relevant factors as determined by the
Board.
6.4
Exercise
of Option; Payment for Units
.
Units may be purchased
pursuant to an Option granted under the Plan only upon receipt by the Company of
notice in writing from the Optionee of his intention to purchase and upon such
other terms as may be required by his Option Agreement. Upon the
date(s) specified for the completion of the purchase of his Units, Optionee,
shall pay the Company in United States Dollars the full purchase price of the
Units purchased; provided however, that, at the discretion of the Board, the
Optionee may allow (i) a delay in payment up to thirty days from the date the
Option, or portion thereof, is exercised; (ii) payment, in whole or in part,
through the surrender of Option Units then issuable upon exercise of the Option;
(iii) payment, in whole or in part, by the delivery by Optionee to the Company
of a promissory note in the form approved by the Company; (iv) payment, in
whole or in part, through delivery of property of any kind which constitutes
good and valuable consideration; or any method of “cashless exercise” permitted
by the Board and approved by Company’s counsel.
6.5
Term of
Options; Option Period
.
Each Option
granted pursuant to this Plan shall have a term of not more than ten (10) years
from the Option Date (the “Option Period”).
6.6
Option
Exercise Period
.
Each Optionee to
whom an Option has been granted shall have the right to purchase Units, at any
time, or from time to time, during the Option Period in accordance with the
vesting schedule and other terms of his Option Agreement. Each Option
Agreement which includes a vesting schedule shall set out the maximum percentage
or number of Units which such Optionee may purchase in any installment
period.
6.6.1
An
Employee Optionee shall be credited with a full year of continuous employment by
the Company during the Option Period only on an anniversary date of his Option
Date, and only if on such anniversary date he is and has been continuously
employed by the Company since the Option Date.
6.6.2
Absence
of an Employee Optionee on duly granted leave or due to sickness for a period of
not more than ninety (90) days shall not be deemed to be an interruption of the
continuity of his employment for purposes of this Plan.
6.7
Non-Transferability
of Options
.
No Option shall
be transferable by the Optionee other than by will or, if he dies intestate, by
the laws of descent and distribution of the state of his domicile at the time of
his death. All Options shall be exercisable during an Optionee’s
lifetime only by such Optionee.
6.8
Limitations
on Exercise; Termination of Employment
.
Subject to the
provisions of this Plan, the exercise of Options may be limited in whole or in
part for any period or periods of time as specified in each Option Agreement,
and any Option may be exercised to the extent it is exercisable in whole at any
time, or in part from time to time, during the Option Period (as defined in
Section 6.5); provided, however, that:
6.8.1
If the
Board determines that the Optionee has committed an act materially adverse to
the interests of the Company, all of the Optionee’s rights to purchase Units not
yet purchasable pursuant to his Option (i.e. non-vested options) shall cease and
terminate as of the date of such act; and
6.8.2
Except as
provided in Sections 6.12, 6.13 and 6.14 below, no Option granted to an Employee
may be exercised more than ninety (90) days after such Optionee’s employment or
service with the Company has been terminated for any reason, and within such
ninety (90) day period said Optionee may exercise his Option only to the extent
the same was exercisable on his date of termination. If during said
ninety (90) day period the Optionee shall die, his executors, administrators,
legatees or distributees, shall have an additional period ending six (6) months
from the date of death within which to exercise the Option. The Board
shall determine what constitutes termination of employment, including whether an
authorized leave of absence, or absence for military or governmental service
constitutes termination of employment for purposes of the Plan, which
determination shall be final and conclusive.
6.9
Accumulation
Rights
.
Unless otherwise
provided in an Option Agreement, to the extent Option Units are not exercised in
any installment period, such Option Units shall accumulate and be exercisable in
whole or in part in any subsequent installment period.
6.10
Minimum
Unit Purchase
.
Each Option
Agreement shall provide that not less than a certain number of Units (e.g., 100
Units) may be purchased at any one time, unless the Units purchased are the
total number purchasable at the time.
6.11
Employee
Holding Period
.
Except to the
extent specifically waived by the Company in the Option Agreement reflecting an
Option granted under this Plan, each Employee to whom an Option is granted under
the Plan shall, as consideration therefor and as a condition of its grant,
remain in the continuous employ of the Company for at least one year from the
date of grant before he may exercise any part of the Option.
6.12
Retirement
of Employee
.
In the event of
an Employee’s retirement, such Employee’s Option (if granted to him as an
Employee) may be exercised by him at any time within the period ending with the
earlier of the expiration date of his Option or ninety (90) days after the date
of his retirement, to the extent it was exercisable on the date of his
retirement.
6.13
Death of
Optionee
.
Upon the
termination of employment by the death of an Optionee, the executor or
administrator of his estate, or the person to whom his Option shall have been
transferred pursuant to his will or the laws of descent and distribution may,
within the period ending with the earlier of the expiration date of his Option
or one (1) year from the date of the Optionee’s death, exercise the Employee’s
Option to the extent it was exercisable on his date of death.
6.14
Disability
of Employee
.
In the event of
the termination of his employment by the Company due to the Disability (within
the meaning of Section 22(e)(3) of the Code) of an Optionee who was granted his
Option as an Employee, the disabled Optionee (or a legal representative who is a
mere custodian of the Optionee’s property, stands in a fiduciary relationship to
such Optionee, and is subject to court supervision) may, within the earlier of
the period ending with the expiration date of his Option or one (1) year after
the termination of the Optionee’s employment with the Company, exercise said
Option to the extent it was exercisable on the date of said termination of
employment.
6.15
Options
of Employee not Exercisable at Termination
.
Notwithstanding
anything herein to the contrary, no Option granted to an Employee which is not
exercisable at the termination of such Participant’s employment with the Company
shall thereafter become exercisable, regardless of the reason for such
termination.
6.16
Failure
of Retired, Deceased or Disabled Optionee to Exercise Option
.
To the extent
that any Option of a retired, deceased, or disabled Optionee, who was granted
his Option as an Employee, is not exercised within the limited periods specified
in Sections 6.12, 6.13 and 6.15, all further rights to purchase Units pursuant
to such Option shall cease and terminate as of the expiration of such
period.
6.17
Repurchase
Agreements
.
As a condition
precedent to the Optionee’s right to receive any Option granted pursuant to this
Plan, the Board may require the Optionee to execute a document containing right
of first refusal and/or repurchase provisions providing the Company the right to
repurchase Option Units under certain circumstances. All of the Option Units
shall be, and are deemed to be, subject to all the restrictions, terms,
covenants, and conditions set forth in any such repurchase
agreement.
6.18
Withholding
Taxes
.
Whenever Units
are to be issued under the Plan, the Company shall have the right to require the
recipient to remit to the Company an amount sufficient to satisfy federal,
state, and local withholding tax requirements prior to the delivery of any
certificate or certificates for such Units.
ARTICLE
7
TIME LIMIT ON GRANTING OF
OPTIONS
No Options may be granted under the
Plan subsequent to ten (10) years after the date this Plan became effective
(“Expiration Date”). Any Option outstanding under the Plan at the
time of its termination shall remain in effect until it shall have been
exercised, or shall have expired or otherwise terminated pursuant to the
provisions of this Plan.
ARTICLE
8
ADJUSTMENTS BY REASON
OFRECAPITALIZATION, UNIT SPLITS, ETC
8.1
Effect of
Options on Company’s Rights
.
The grant of an
Option pursuant to the Plan shall not affect in any way the right or power of
the Company to make adjustments, reclassifications, reorganizations, or changes
of its capital or business structure, or to merge, or to consolidate, or to
dissolve, liquidate, sell, or transfer all or any part of its business or
assets. Except as expressly provided in this Article, an Optionee
shall have no other rights by reason of any subdivision or
consolidation of Units or the payment of any distributions or any other increase
or decrease in the number of Units or by reason of any dissolution, liquidation,
merger or consolidation or spin-off of assets or equity of another
company. Any issue by the Company of Units or securities convertible
into Units shall not affect, and no adjustment by reason thereof shall be made
with respect to, the number or price of Units subject to any
Option.
8.2
Recapitalization
.
In the event
there are splits, subdivisions, combinations or reclassifications of the Units
of the Company subsequent to the effective date of this Plan, the number of
Units reserved for issuance pursuant to the Plan, including the Units issuable
upon the exercise of outstanding Options, shall be increased or decreased
proportionately, as the case may be, to appropriately reflect such
event.
8.3
Reorganization
.
8.3.1
In case
the Company is merged or consolidated with another corporation and the Company
is the surviving entity, each outstanding Option, whether or not then
exercisable, shall pertain to and apply to the securities to which a holder of
the number the Option Units subject to such Option would have been
entitled.
8.3.2
Subject
to any required action by the Company’s Unit holders, in the case the Company is
merged or consolidated with another corporation and the Company is not the
surviving entity, or in case the property or Units of the Company are acquired
by another corporation, or in case of a separation, reorganization, or
liquidation of the Company, the Board, or the board of directors or managers of
any corporation assuming the obligations of the Company hereunder, shall, in its
sole discretion as to each outstanding Option, either: (a) make
appropriate provision for protection of such Option by the substitution on an
equitable basis of appropriate equity of the Company, or of the merged,
consolidated or otherwise reorganized corporation which will be issuable in
respect to the equity of the Company, provided only that the excess of the
aggregate fair market value of the equity subject to such Option immediately
after such substitution over the purchase price thereof is substantially the
same as, but in no event more than, the excess of the aggregate fair market
value of the Option Units subject to such Option immediately before such
substitution over the purchase price thereof; (b) upon written notice to the
holder of such Option, provide that such Option must be exercised within a
specified period not exceeding sixty (60) days of the date of such notice to the
extent such Option is exercisable on the last day of such specified period or it
will be terminated; or (c) provide that any or all Options which are not yet
exercisable shall be exercisable upon such further terms and conditions as may
be prescribed and which are not otherwise inconsistent with the Option Agreement
and this Plan. Any portion of such Option which is not exercisable on
the last day of any period specified pursuant to clause (b) in the preceding
sentence shall terminate, and any portion of such Option which is not exercised
on or before said last day shall terminate on said last day.
8.4
Price
Adjustment
.
If, after the
granting of an Option to any Optionee hereunder, a substitution or an adjustment
shall be required to be made under this Article 8 in the number or kind of Units
or other securities then subject to such Option, the price per Unit payable by
the Optionee for Units or securities which he may thereafter be entitled to
purchase under such Option shall be concurrently adjusted so that the aggregate
purchase price of all Units or securities not theretofore purchased under such
Option will be apportioned ratably and equitably to and among the substituted or
adjusted number or kind of Units or other securities.
ARTICLE
9
TRANSFER OF
CONTROL
9.1
Definitions
.
For the purposes of this
Article 9, the following terms shall have the following meanings:
9.1.1
An
“Ownership Change Event” shall be deemed to have occurred if any of the
following occurs with respect to the Company:
|
(i)
|
|
The direct or indirect sale or exchange in a single or
series of related transactions by the Unit holders of the Company of more
than eighty percent (80%) of the Units of the Company;
|
|
|
|
|
|
(ii)
|
|
A merger or consolidation in which the Company is a
party;
|
|
|
|
|
|
(iii)
|
|
The sale, exchange, or transfer of all or substantially
all of the assets of the Company; or
|
|
|
|
|
|
(iv)
|
|
A liquidation or dissolution of the
Company.
|
9.1.2
A
“Transfer of Control” shall mean an Ownership Change Event or a series of
related Ownership Change Events (collectively, the “Transaction”) wherein the
Unit holders of the Company immediately before the Transaction do not retain
immediately after the Transaction, in substantially the same proportions as
their ownership of Units of the Company immediately before the Transaction,
direct or indirect beneficial ownership of more than eighty percent (80%) of the
total combined voting power of the outstanding Units of the Company or the
corporation or corporations to which the assets of the Company were transferred
(the “Transferee Corporations(s)”), as the case may be. For purposes of the
preceding sentence, indirect beneficial ownership shall include, without
limitation, an interest resulting from ownership of the voting stock of one or
more corporations which, as a result of the Transaction, own the Company or the
Transferee Corporation(s), as the case may be, either directly or through one or
more subsidiary corporations. The Board shall have the right to determine
whether multiple sales or exchanges of the Units of the Company or multiple
Ownership Change Events are related, and its determination shall be final,
binding and conclusive.
9.2
Effect of
Transfer of Control on Options
.
In the event of a
Transfer of Control, this Option shall terminate. If this Option would otherwise
terminate pursuant to the foregoing sentence, Optionee shall have the right, at
such time prior to the consummation of the transaction causing such termination
as the Company shall designate, to exercise any vested
unexercised portions of this Option.
ARTICLE
10
RIGHT TO AMEND, SUSPEND OR
TERMINATE THE PLAN
The Board shall have the right to
amend, suspend or terminate the Plan at any time, provided, however, that no
such action shall affect or in any way impair the rights of an Optionee under
any Option theretofore granted under the Plan without the consent of the
Optionee or the transferee of the Option, and provided further that no such
action, without approval of the Company’s Unit holders, may: (a) increase the
total number of Units which may be sold or transferred pursuant to Options
granted under the Plan, except as permitted pursuant to Article 8; (b) change
the designation of class of persons eligible to participate in the Plan; (c)
decrease the minimum Option price specified in Article 6; (d) extend the maximum
term of Options granted hereunder; or (e) extend the term of the
Plan.
ARTICLE
11
NO OBLIGATION TO EXERCISE
OPTION
The granting of an Option shall impose
no obligation on the recipient to exercise such Option.
ARTICLE
12
MODIFICATION, EXTENSION
ANDRENEWAL AND CANCELLATION OF OPTIONS
Subject to the terms and conditions and
within the limitations of the Plan, the Board may (i) modify, extend or renew
outstanding Options granted under the Plan, (ii) accept the surrender or
cancellation of outstanding Options (to the extent not theretofore exercised),
and (iii) authorize the granting of new Options in substitution therefor (to the
extent not theretofore exercised). Notwithstanding the foregoing,
however, no modification of an Option shall, without the consent of the
Optionee, alter or impair any rights or obligations under any such Option
theretofore granted under the Plan.
ARTICLE
13
COMPLIANCE WITH
LAWS
13.1
Securities
Laws
.
Each Option under
the Plan shall be granted on such terms and conditions, including investment
intent, as are deemed advisable by the Board in order to comply with applicable
federal, state, and local securities laws, rules, and regulations. No
Options shall be granted, and no Units shall be sold or issued upon the exercise
of any Option, unless and until the issuance, as determined by the Board,
complies with any then applicable requirements of the Securities and Exchange
Commission, the California Commissioner of Corporations, other regulatory
agencies having jurisdiction thereof and any securities exchanges upon which
securities of the Company may be listed.
13.2
Liability
of Company; Compliance With Law
.
The Company and
the Managers of the Board shall be relieved from any liability for the
non-issuance or non-transfer, or any delay of issuance or transfer, of any Units
subject to Options under the Plan which results from the inability of the
Company to comply with, or to obtain, or from any delay in obtaining from any
regulatory body having jurisdiction, all requisite authority to issue or
transfer Units upon exercise of the Options under the Plan, if counsel for the
Company deems such authority reasonably necessary for lawful issuance or
transfer of any such Units. Appropriate legends may be placed on the
Unit certificates evidencing Units issued upon exercise of Options to reflect
such transfer restrictions.
ARTICLE
14
PROVISIONS IN OPTION
AGREEMENTS
The Option Agreements authorized under
this Plan shall contain such other provisions, including, without limitation,
conditions and restrictions upon the exercise of the Option and/or upon the sale
or other disposition of the Units purchased upon the exercise of an Option, as
the Board shall deem advisable in its absolute discretion (and which may be more
restrictive as to the Optionee than those herein); provided, however, that such
provisions shall be consistent with the terms and conditions set forth
herein.
ARTICLE
15
INDEMNIFICATION OF
THE
BOARD
In addition to such other rights of
indemnification as they may have as Managers of the Board shall be indemnified
by the Company against the reasonable expenses, including attorneys’ fees
actually and necessarily incurred in connection with the defense of any action,
suit or proceeding, or in the connection with any appeal therein, to which they
or any of them may be a party by reason of any action taken or failure to act
under or in connection with this Plan or agreements made hereunder, and against
all amounts paid by them in settlement thereof or in satisfaction of a judgment
therefor, provided such settlement is approved by independent legal counsel
selected by the Company, except in relation to matters as to which it shall be
adjudged in such action, suit, or proceeding that such Manager is liable for
gross negligence or willful misconduct in the performance of his duties;
provided further that within sixty (60) days after institution of any such
action, suit, or proceeding such Manager shall, in writing, offer the Company
the opportunity, at its own expense, to handle and defend the same.
ARTICLE
16
GENERAL
PROVISIONS
16.1
Governing
Law
.
This Plan shall be
governed by the laws of the State of California.
16.2
Effective
Date of the Plan.
The Plan became
effective when approved by the Board.
Approved
by the Board of Managers on: July ___, 2007.
12
Exhibit 10.3
ASSET
PURCHASE AGREEMENT
This
ASSET PURCHASE AGREEMENT ("Agreement") is made effective the ________day
of
January 2008 ("Effective Date"), between Envision Solar International, Inc., a
California corporation ("Buyer"), and Generating Assets, LLC, a Delaware limited
liability company ("Seller"). Karen Morgan, an individual ("Morgan"), is a party
hereto for the limited purposes of Sections 11.2 and 13.
RECITALS
A. Seller
operates a business engaged in providing solar financing and development
(the
"Business").
B. Seller
wishes to sell to Buyer and Buyer wishes to purchase from Seller, on the
terms and
conditions of this Agreement, substantially all of the assets of Seller and the
Business.
C. All
terms used in this Agreement with initial upper-case letters which are not
defined
within the text of the Agreement itself are defined in Section
14.1.
NOW,
THEREFORE, in consideration of the mutual covenants, agreements,
representations, and warranties contained in this Agreement, the parties agree
as follows:
AGREEMENT
1.
Purchase
and Sale
.
Subject
to the terms and conditions set forth in this Agreement, Seller hereby sells,
conveys, transfers, assigns and delivers to Buyer, and Buyer purchases from
Seller, all of Seller's right, title, benefits and interest in all rights and
assets used in the operation of the Business including, without limitation, the
rights and assets described in
Exhibit A
(collectively, the "Assets"), free and clear of all Liens.
2.
Non-assumption
of Liabilities
.
Except as provided in Section 2.1, Buyer shall not (i) assume and/or take
the Assets subject to any existing liabilities, accounts payable or other
contracts or obligations; or (ii) be liable in any manner or way for any of the
liabilities, accounts payable, contracts, obligations, claims or demands of or
against Seller arising from Seller's ownership of the Assets or operation of the
Business. Seller shall indemnify, defend and hold Buyer harmless from and
against any of the foregoing.
2.1
Assumed
Liabilities
.
Notwithstanding Section 2, Buyer shall assume and be responsible for the
satisfaction of the following obligations and liabilities of
Seller:
2.1.1
All obligations of
Seller under the Assigned Contracts.
2.1.2
All obligations
pursuant to an Engagement Letter with Squire,
Sanders
& Dempsey, L.L.P. ("SSD") dated December 4, 2007 attached as Exhibit C (the
"SSD
Agreement").
2.1.3
The payment
obligations referenced in a letter from Morgan to MacKenzie Communications, Inc.
("MacKenzie") dated December 17, 2007, attached as
Exhibit D
(the
"MacKenzie Agreement").
3.
Consideration
.
The consideration payable
for the Assets ("Purchase
Consideration")
is comprised of the following, which shall be provided at the Closing to
certain
third
parties as specified below:
3.1
The assumption and
performance of the obligations specified in the SSD
Agreement.
3.2
The
assumption and performance of the obligations specified in the MacKenzie
Agreement.
3.3
10,000
shares of common stock of Envision ("Envision Shares") issued to the persons
specified in
Exhibit
B
, subject to their execution of the Investor Acknowledgement
("Acknowledgement") substantially in the form attached as
Exhibit E
, to be more
specifically allocated as specified in
Exhibit
B
.
3.4
139,160
Envision Options at an exercise price of $10 per share with a 10-year term, and
29,820, Envision Options at an exercise price of $20 per share with a 2-year
term, issued to the persons specified in
Exhibit B
, pursuant
to the terms of an Option Agreement substantially in the form attached as
Exhibit F
, to be more
specifically allocated as specified in
Exhibit
B
.
3.5
Immediately
available funds of $9,000 to Morgan.
3.6
The
performance of the obligations specified in the Option Agreement
attached
as
Exhibit G
("Malone Option Agreement").
4.
Representations
and Warranties of Seller
.
As an inducement to Buyer to
enter
into this
Agreement, and intending that Buyer shall rely on such representations and
warranties
in
connection with the transactions set forth herein, Seller represents and
warrants to Buyer that
the
following matters in this Article
4
are true and
accurate.
4.1
Power and
Authority
.
Seller
has full power and authority and contractual right and authority to enter into
this Agreement and to sell, convey, assign and transfer the Assets, and has
taken all corporate action necessary to authorize the execution and delivery of
this Agreement, the sale of the Assets in accordance with its terms and the
performance of the obligations of Seller hereunder, except as otherwise provided
for herein. This Agreement has been duly executed by an authorized
representative of Seller, and constitutes the legal, valid and binding
obligation of Seller in accordance with its terms, subject to applicable
bankruptcy, insolvency and other laws affecting the rights of creditors
generally.
4.2
Organization
.
Seller is a limited
liability company duly organized, validly existing and in good standing under
the laws of the State of Delaware, and has all necessary powers to carry on the
Business as it is now being conducted.
4.3
Title to
Assets
.
Seller
has good and assignable title to and interest in the Assets, and the Assets are
not encumbered by any Lien, whether accrued, absolute, contingent, or otherwise,
and whether due or to become due, which Buyer shall or will succeed to by reason
of its purchase of the Assets. Seller shall transfer and assign all of the
Assets to Buyer, free and clear of all Liens. Seller has not interfered with,
infringed upon, misappropriated or otherwise come into conflict with any rights
of third parties in and to any Asset, and has never received any charge,
complaint, claim or notice alleging any such interference, infringement,
misappropriation or violation.
4.4
Intellectual
Property
.
4.4.1
Ownership
.
Seller owns or has the right
to use pursuant to license, sublicense, agreement, or permission all
Intellectual Property necessary for the operation of the Business as currently
conducted and as proposed to be conducted. Each item of Intellectual Property
owned or used by Seller in the Business immediately prior to the Closing will be
owned or available for use by the Buyer on identical terms and conditions
subsequent to the Closing. Seller has taken all necessary action to maintain and
protect each item of Intellectual Property that Seller owns or
uses.
4.4.2
No
Infringement
.
Seller has not interfered with, infringed upon, misappropriated, or
otherwise come into conflict with any Intellectual Property rights of third
parties, and there has never been any charge, complaint, claim, demand, or
notice alleging any such interference, infringement, misappropriation, or
violation (including any claim that Seller must license or refrain from using
any Intellectual Property rights of any third party). To the Knowledge of
Seller, Buyer will not interfere with, infringe upon, misappropriate, or
otherwise come into conflict with, any Intellectual Property rights of third
parties as a result of the continued operation of the Businesses as presently
conducted or proposed to be conducted. To the Knowledge of Seller, no third
party has interfered with, infringed upon, misappropriated, or otherwise come
into conflict with any Intellectual Property rights of Seller.
4.5
Compliance
with Laws
.
The
Business had complied with, and is not in violation of, any applicable federal,
state or local statutes, laws or regulations.
4.6
No
Illegal Payments
.
Neither Seller nor any manager, director, officer, employee or agent of
Seller, has (a) directly or indirectly given or agreed to give airy illegal
gift, contribution, payment or similar benefit to any supplier, customer,
governmental official or employee or other person who was, is or may be in a
position to help or hinder Seller (or assist in connection with any actual or
proposed transaction) or made or agreed to make any illegal contribution, or
reimbursed any illegal political gift or contribution made by any other person,
to any candidate for federal, state, local or foreign public office which might
subject Seller to any damage or penalty in any civil, criminal or governmental
litigation or proceeding, or (b) established or maintained any unrecorded fund
or asset or made any false entries on any books or records for any
purpose.
4.7
Permits
and Licenses
.
Seller has all permits and licenses, if any, required for the conduct of
the Business. Each such permit and license is in full force and effect, and
Seller has not engaged in any activity which would cause or permit revocation or
suspension of any such permit or license, and no action or proceeding looking to
or contemplating the revocation or suspension of any such permit or license is
pending or threatened.
4.8
Litigation
.
There is no suit, action,
arbitration, or legal, administrative, or other proceeding, or governmental
investigation pending or, to the Knowledge of Seller, threatened, against or
affecting the Business or Assets. Seller is not in default in relation to the
Business or Assets with respect to any order, writ, injunction, or decree of any
federal, state, local, or foreign court, department, agency, or
instrumentality.
4.9
No
Default
.
The
consummation of the transaction contemplated by this Agreement will not result
in or constitute any of the following: (i) a default or an event that, with
notice or lapse of time or both, would be a default, breach, or violation of any
lease, license, promissory note, conditional sales contract, commitment,
indenture, mortgage, deed of trust, or other agreement, instrument, or
arrangement to which Seller is a party which would prohibit, interfere, or
otherwise restrict or encumber the free, unrestricted and unabated transfer of
the Assets; or (li) the creation or imposition of any Lien on any of the
Assets.
4.10
Governmental
Consent
.
No
consent, approval or authorization of or designation, declaration or filing with
any governmental authority on the part of
:
Seller is required in connection with the valid execution and delivery of this
Agreement, or the consummation of any transaction contemplated
hereby.?:
4.11
Assigned
Contracts
.
Complete and accurate copies of all Assigned Contracts have been provided
to Buyer.
4.11.1
Each
Assigned Contract is legal, valid and in full force and effect, enforceable in
accordance with its terms except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium and similar laws relating to
or affecting creditors generally and by the availability of equitable remedies.
To Seller's Knowledge, no other party to any Assigned Contract has taken the
position that any provision of such contract is unenforceable.
4.11.2
Seller
not breached any Assigned Contract, and, to Seller's Knowledge, no other Person
has breached any Assigned Contract.
4.11.3
To
Seller's Knowledge, no event has
occurred,
and no circumstance
or condition exists, that (with or without notice or lapse of time) will, or
could reasonably be expected to, (A) result in a breach of any of the provisions
of any Assigned Contract, (B) give any Person the right to declare a default or
exercise any remedy under any Assigned Contract, (C) give any Person the right
to accelerate the maturity or performance of any Assigned Contract, or (D) give
any Person the right to cancel, terminate or modify any Assigned
Contract.
4.11.4
Seller
has not received any notice or other communication regarding any actual or
possible breach of any Assigned Contract that has not been resolved. Seller has
not received notice of termination or cancellation of or intent to cancel or
terminate any Assigned Contract.
4.11.5
Seller has not
waived any of its rights under any Assigned
Contract.
4.11.6
No Person
is renegotiating, or has a right pursuant to the terms of any Assigned Contract
to renegotiate any amount paid or payable to Seller under any Assigned Contract
or any other material term or provision of any Assigned Contract.
4.11.7
Each
Assigned Contract will continue to be enforceable, and in full force and effect
on identical terms immediately following the consummation of the Transactions,
and the consummation of the transactions shall not (either alone or upon the
occurrence of additional acts or events) result in any payment or payments
becoming due from Seller to any Person or give any Person the right to terminate
or alter the provisions of such Assigned Contract. The consummation of the
transactions contemplated by this Agreement will not affect any of the Assigned
Contracts in a manner that could reasonably be expected to be materially adverse
to Buyer.
4.12
Negotiation
Rights
.
With
respect to the Negotiation Rights specified on
Exhibit
A
:
(a)
Seller is
currently actively negotiating a final, complete and legally binding agreement
with the designated party;
(b)
Seller
has not received any indication and has no reason to believe that the designated
party is unwilling to enter into a final agreement with Seller; and
(c)
Seller
has provided to Buyer all. documents relating to the negotiations, including all
correspondence, copies of emails, term sheets, letters of intent, letter
agreements, and proposals.
4.13
Performance
of Obligations
.
With respect to the Business, Seller has performed all material
obligations required to be performed by it to date, and is not in default under
any material contract, agreement, lease, commitment, indenture, mortgage, deed
of trust, or other document to which it is a party.
4.14
Completeness
of Representations
.
None of the representations and warranties made by Seller in this
Agreement
contains or will
contain any untrue statement of a material fact, or omit any material fact, the
omission of which
would
be misleading.
4.15
Survival
of Representations
.
All representations and warranties of Seller, whether oral or written,
including any representations and warranties in any written statements or
documents delivered or made available to Buyer by Seller, shall survive the
closing of the transactions contemplated by this Agreement.
5.
Representations
and Warranties of Buyer
.
Buyer represents and warrants to Seller as follows:
5.1
Power and
Authority
.
Buyer
has full corporate power and authority and contractual right and authority to
enter into this Agreement and to purchase the Assets, and has taken all
corporate action necessary to authorize the execution and delivery of this
Agreement, the purchase of the Assets in accordance with its terms, and the
performance of the obligations of Buyer hereunder. This Agreement has been duly
executed by an authorized officer of Buyer, and constitutes the legal, valid and
binding obligation of Buyer in accordance with its terms, subject to applicable
bankruptcy, insolvency and other laws affecting the rights of creditors
generally.
5.2
Completeness
of Representations
.
None of the representations and warranties made by Buyer in this
Agreement contains or will contain any untrue statement of a material fact, or
omit any material fact, the omission of which would be misleading.
5.3
Survival
of Representations
.
All representations and warranties of Buyer, whether oral or written,
including any representations and warranties in any written statements or
documents delivered or made available to Seller by Buyer, shall survive the
closing of the transactions contemplated by this Agreement.
6.
Employees
and Compensation
.
Buyer shall have the right, but not the obligation, to employ any or all
of the employees of Seller. Should Buyer employ any of those employees, such
employment shall be on such terms as Buyer may establish. All employees shall be
paid in full through the Effective Date by Seller, including all amounts for
accrued vacation and all other benefits. Seller shall take no action to impede
or interfere withjany efforts by Buyer to employ
current
employees of Seller.
Seller and Morgan hereby indemnify and hold Buyer harmless from and against any
and all loss or liability in any way connected with (i) amounts due and owing to
Seller's employees as of the Effective Date, whether such amounts be for
compensation or otherwise; and (ii) any past or current unfair labor practices
of Seller as of the Effective Date.
7.
Deliveries
by Seller
.
Upon
the complete execution of this Agreement, Seller shall deliver to
Buyer:
|
(i)
|
|
An
executed Assignment of Agreements in the form attached as
Exhibit
H
;
|
|
(ii)
|
|
the
Investor Acknowledgement in the form of
Exhibit D
executed by each
person
listed in
Exhibit
B
;
|
|
(iii)
|
|
the
Option Agreement in the form of
Exhibit E
executed by each person
listed
in
Exhibit
B
;
|
|
(iv)
|
|
the
Malone Option Agreement in the form of
Exhibit G
executed by
Charlene
Malone ("Malone"); and
|
|
(v)
|
|
such
other items required to be delivered by Seller under this
Agreement.
|
8.
Deliveries
by Buyer
.
Upon
the complete execution of this Agreement, Buyer
shall
deliver to Seller or the party specified:
|
(i)
|
|
to
SSD, the Warrant to Purchase Common Stock in the form included in
Exhibit C
,
executed by Buyer;
|
|
(ii)
|
|
the
Envision Shares to the persons specified in
Exhibit B
as
receiving
Envision
Shares;
|
|
(iii)
|
|
the
Option Agreements in the form of
Exhibit E
executed by Buyer, to the
persons
specified in
Exhibit
B
;
|
|
(iv)
|
|
the
Purchase Consideration specified in Section 3.5 to Morgan; and
|
|
(v)
|
|
the
Malone Option Agreement executed by Buyer to
Malone.
|
9.
Costs and
Expenses
.
Each
party shall pay its own costs and expenses incurred by such party in connection
with this Agreement and consummating the transactions described
herein.
10.
Indemnity.
10.1
Seller's
Indemnity
.
Seller
shall indemnify, defend, and hold harmless Buyer, and its successors,
Affiliates, assigns, officers, directors, employees, attorneys and agents,
against and in respect of any and all claims, demands, losses, costs, expenses,
obligations, liabilities, damages, recoveries, and deficiencies, that they or
any of them shall incur
;
or
suffer, which arise, result from, or relate to (i) the use of the Assets or
Business operations prior to the Effective Date or (ii) any breach of, or
failure by Seller to perform any of its representations, warranties, covenants,
or agreements contained in this Agreement.
10.2
Buyer's
Indemnity
.
Buyer
shall indemnify, defend and hold harmless Seller and its Affiliates, assigns,
officers, directors, members, managers, employees, attorneys and agents against,
and in respect of, any and all claims, losses, expenses, costs, obligations and
liabilities that Seller may incur or suffer by reason of (i) Buyer's operation
of the Business following the Effective Date, or (ii) Buyer's breach of or
failure to perform any of the warranties, guarantees, commitments or covenants
contained in this Agreement.
11.
Seller's
Obligations
.
11.1
Change of
Name
.
Seller
shall not use or employ in any manner the name "Generating Assets, LLC" or any
derivative thereof or name similar thereto, and Seller shall take and cause to
be taken all necessary action to cease the public use of such name. Seller shall
deliver to Buyer such executed documents as may be required to change Seller's
name on that date to another name bearing no similarity to "Generating Assets,
LLC" including but not limited to a name change amendment suitable for filing
with the Delaware Secretary of State. Seller hereby appoints Buyer as its
attorney-in-fact to file all such documents.
11.2
Covenant
Not to Compete
.
Seller and Morgan agree that for a period of five years after the
Effective Date, neither they nor any of their Affiliates shall, directly or
indirectly, (1) own, manage, operate, join, control or participate in the
ownership, management, operation or control of; (2) be employed by; (3) provide
consulting, research and development or other services to; or (4) sell products
to any business, which engages in the development, marketing or sale of products
or services which are competitive with or similar to the Business. In the event
that the provisions of this section are found to exceed the limitation provided
by applicable law, then such provisions shall be reformed to set forth the
maximum limitations permitted. The covenants contained in this section are
intended to be an agreement authorized by Section 16601 of the California
Business and Professions Code. The competition restrictions contained in this
section shall not be deemed or construed to modify, restrict or eliminate any
competition restrictions contained in any other agreement between Buyer or any
Affiliate and Seller, Morgan, or any of their Affiliates. Seller and Morgan
expressly acknowledge that the remedy at law for any breach of the covenants set
forth in this section will be inadequate, and that upon any such breach, or
threatened breach, Buyer shall be entitled as a matter of right to injunctive
relief in any court of competent jurisdiction, in equity or otherwise, and to
enforce the specific performance of the obligations of Seller and Morgan under
this section without the necessity of proving the actual damage to Buyer or the
inadequacy of a legal remedy. The rights conferred upon Buyer by the preceding
sentence shall not be exclusive of, but shall be in addition to, any other
rights or remedies which Buyer may have at law, in equity or
otherwise.
11.3
Assistance
Regarding Negotiations
.
Seller shall assist Buyer in its continuation and conclusion of
negotiations with the designated parties with respect to the Negotiation Rights
conveyed by this Agreement. More specifically, Seller shall-facilitate
introductions and meetings between Buyer and such designated parties, shall
recommend to the designated parties that they negotiate final agreements with
Buyer, and shall otherwise support-Buyer in efforts to successfully conclude
such negotiations.
12.
Broker's
Fees
.
Each of the
parties represents that they have dealt with no broker or finder in connection
with any of the transactions contemplated by this Agreement, and, insofar as
they know, no broker or other person is entitled to any commission or finder's
fees in connection with any of these transactions. Seller and Buyer each agree
to indemnify and hold harmless one another against any loss, liability, damage,
cost, claim, or expense incurred by reason of any brokerage, commission, or
finder's fee alleged to be payable because of any act, omission, or statement of
the indemnifying party.
13.
Confidential
Information
,
hi
connection with the ownership and operation of the Business, Seller and Morgan
obtained confidential information relating to the Assets and Assigned Contracts.
Seller and Morgan shall treat such information as confidential, preserve the
confidentiality thereof, not duplicate or use such information and instruct its
employees and all other parties who have had access to such information to keep
confidential and not use such information in a way which is detrimental to Buyer
in its exercise of its rights and enjoyments of the benefits under the Assigned
Contracts. Seller agrees that the foregoing confidentiality covenants are
material terms of this Agreement and a condition concurrent to Buyer's
obligations under this Agreement.
14.
Miscellaneous
.
14.1
Defined
Terms
.
For the
purposes of this Agreement, the following words and expressions shall have the
following meanings:
14.1.1
"
Affiliate
"
means any individual,
partnership, corporation, trust or other entity or association, directly or
indirectly, through one or more intermediaries, controlling, controlled by, or
under common control with the relevant Person. The term "control," as used in
the immediately preceding sentence, means, with respect to a corporation or
limited liability company the right to exercise, directly or indirectly, more
than fifty percent (50%) of the voting rights attributable to the controlled
corporation or limited liability company, and, with respect to any individual,
partnership, trust, other entity or association, the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of the controlled entity.
14.1.2
"
Assigned
Contracts
"
means
the agreements listed in Section (e)
of
Exhibit A.
14.1.3
"
Intellectual
Property
"
means
any patents, patent applications, trademarks, tradenames, service marks,
copyrights, and any applications therefore, technology, know-how, trade secrets,
inventory, ideas, algorithms, processes, computer software programs or
applications, and tangible or intangible proprietary information.
14.1.4
"
Governmental
Authority
"
means
any government or political subdivision or regulatory authority, whether
federal, state, local or foreign, or any agency or instrumentality of any such
government or political subdivision or regulatory authofity, or any federal
state, local or foreign court or arbitrator.
14.1.5
"
Knowledge
of Seller
"
or
"
Seller's
Knowledge
"
means
the knowledge of the managers, members and employees of Seller, including
Morgan, who would reasonably be,expected to have such knowledge after
due.inquiry, or that such Persons should have known based upon the facts
available at the time of determination.
14.1.6
"
Lien
" means any
security deed, mortgage, deed to secure debt, deed of trust, lien, pledge,
assignment, charge, security interest, title retention agreement, negative
pledge, levy, execution, seizure, attachment, garnishment or other encumbrance
of any land in respect of such property, whether or not choate, vested or
perfected.
14.1.7
"
Person
"
means an individual, general
partnership, limited partnership, limited liability company, corporation, trust,
estate, real estate investment trust association or any other
entity.
14.2
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.
14.3
Modification
.
This Agreement may be
modified or rescinded only by a writing signed by all parties to this Agreement
or by their duly authorized agents.
14.4
Assignment
.
This Agreement shall not be
assignable, in whole or in part, by either party without the written consent of
the other party, except that (1) Buyer may, without the consent of Seller,
assign its rights and obligations under this Agreement to an Affiliate, provided
that Buyer obtains the Affiliate's written agreement enforceable by Seller to
assume
and
perform, from and after the date of such assignment, the terms, conditions, and
provisions imposed by this Agreement upon Buyer, whereupon Buyer shall be
relieved of any future liability under this Agreement; and (2) Seller may,
without the consent of Buyer, assign the benefits of this Agreement, including
its right to payments, but not its obligations.
14.5
Further
Conveyances
.
On
and after the Effective Date, and without further consideration or expense to
Buyer, Seller shall execute and deliver such further documents of conveyance and
transfer, and take such other action as Buyer reasonably requests to effectively
convey and transfer to Buyer any of the Assets in accordance with this
Agreement, and will assist Buyer in the exercise of its rights as assignee under
the Assigned Contracts. Seller also shall deliver or cause to be delivered, at
such times and places as reasonably requested by Buyer, such additional
documents as Buyer may reasonably request for the purposes of carrying out this
Agreement.
14.6
No
Waiver
.
No waiver
of any right under this Agreement shall be deemed effective unless in writing
and signed by the party charged with such waiver, and no waiver of any right
arising from any breach or failure to perform shall be deemed to be a waiver of
any future such right or of any other right arising under this
Agreement.
14.7
Entire
Agreement
.
This
Agreement constitutes the entire agreement between the parties and supersedes
all prior ■agreements, and understandings, oral and written, between the parties
hereto with respect to the subject matter hereof.
14.8
Exhibits
.
All attached exhibits and
schedules to which reference is made
herein
are hereby-incorporated by this reference.
14.9
Headings;
Construction; Interpretation
.
Section headings contained
in tins Agreement are included for convenience only and form no part of the
agreement between the parties. When the context so requires and when used in
this Agreement, the singular shall be deemed to include the plural and the
plural shall be deemed to include the singular. This Agreement shall not be
interpreted against a party by virtue of such party's participation in the
drafting of the Agreement or any provisions herein.
14.10
Separability
.
If any provision of this
Agreement is or becomes or is deemed to be invalid, illegal, or unenforceable in
any jurisdiction, such provision shall be deemed amended to conform to
applicable laws so as to be valid and enforceable or, if it cannot be so amended
without materially altering the intention of the parties, it shall be stricken
and the remainder of this Agreement shall remain in full force and
effect.
14.11
Counterparts
.
This Agreement may be
executed in any number of counterparts, each of which shall be an original and
all of which together shall constitute but one and the same
document.
14.12
Time of
the Essence
.
Time
shall be of the essence for all purposes under this Agreement.
14.13
Survival
of Representations, Warranties and Agreement
.
The
representations,
warranties, obligations, covenants and agreements of the parties hereto shall in
allevents
survive the close or termination of this Agreement where same is necessary to
effectuate
the intention of the
parties. .
.
14.14
Binding
Effect
.
This
Agreement shall be binding upon and mure to the benefit of Seller and Buyer and
their respective representatives and assigns.
14.15
Notices
.
Any notice required or
authorized to be given hereunder or any other communications between the parties
provided for under the terms of this Agreement shall be in writing (unless
otherwise provided) and shall, be served personally, or by reputable express
courier sendee or by facsimile transmission addressed to the relevant party at
the address stated below or at any other address provided by that party to the
other as its address for service. Any notice so given personally shall be deemed
to have been served on delivery, any notice so given by express courier service
shall be deemed to have been served two (2) business days after the same shall
have been delivered to the relevant courier, and any notice so given by
facsimile transmission shall be deemed to have been received on dispatch. .In
proving such sendee, it shall be sufficient to produce the receipt of a
reputable courier company showing the correct address of the addressee or prove
that the facsimile transmission was followed by an activity report showing the
correct facsimile number of the party on whom notice is served and. the correct
number of pages transmitted
|
|
If to. Seller,
to:
|
Karen
Morgan
16
Baywater Drive
Danen, CT
06820
Fax:
(203). 656-4375
|
|
|
|
|
|
|
If to Morgan,
to:
|
Karen
Morga
16
Baywater Drive
Danen,
CT 06820
Fax:
(203) 656-4375
|
|
|
|
|
|
|
If to Buyer,
to:
|
Envision
Solar International, Inc.
4225
Executive Square, Suite 480
La
Jolla, CA 92037
Attn:
Robert L. Noble
Fax:(619)
238-1429
|
|
|
|
|
|
|
With a copy (which
shall
|
|
|
|
not
constitute notice) to:
|
John
C. O'Neill,
Esq.
Procopio,
Cory, Hargreaves & Savitch LLP
530
B Street, Suite 2100
San
Diego, CA 92101
Fax:
(619) 744-5464
|
|
|
|
|
or to
such other address or to such other person as any party shall designate to the
others for such purpose in the manner hereinabove set forth.
14.16
Arbitration
.
Any controversy or claim
arising out of or relating to this Agreement, or the breach thereof, shall be
settled by binding arbitration in San Diego, California, before a single,
neutral arbitrator administered by the American Arbitration Association in
accordance with its Commercial Arbitration Rules, and judgment upon the award
rendered by the arbitrator may be entered in any court having jurisdiction
thereof.
14.17
Attorneys'
Fees
.
If any
action or arbitration is commenced to enforce or interpret any provision of this
Agreement, the substantially prevailing party shall be entitled to recover from
the other party actual attorneys' fees and costs incurred in connection with
such action, in addition to all other proper relief. Attorneys' fees incurred in
enforcing any judgment are recoverable as a separate item, and this provision
for post-judgment attorneys' fees shall survive any judgment and shall not be
deemed merged into the judgment.
14.18
Remedies
Cumulative
.
All
remedies provided in this Agreement are cumulative and non-exclusive, and shall
be in addition to any and all other rights and remedies provided by law or in
equity.
14.19
Governing
Law
.
This
Agreement shall be governed by and construed under the laws of the State of
California, without regard to the conflict of laws principles thereof, as the
same apply to agreements executed solely by residents of California and wholly
to be performed within California.
14.20
Tax
Consequences
.
Seller acknowledges that Buyer makes no representations or warranties,
and has provided no advice to Seller with respect to the tax consequences to
Seller of the transactions contemplated by this Agreement. Seller acknowledges
that it has been advised by Buyer to consult its own tax advisor and legal
counsel with respect to the tax aspects of this Agreement.
///
///
///
///
///
///
///
///
///
IN
WITNESS WHEREOF,
the
parties
hereto
have executed this Agreement as of the Effective Date.
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ENVISION
SOLAR INTERNATIONAL, INC.,
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a
California corporation
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By:
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/s/
Robert L. Noble
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Name Robert
L. Noble
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Chief
Executive Officer
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GENERATING
ASSETS, LLC
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a
Delware Limited liability company
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By:
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/s/ Karen Morgan
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Karen
Morgan
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Manager
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/s/ Karen Morgan
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Karen
Morgan, an individual
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EXHIBITS
A -
Assets
B -
Allocation of Shares and Options
C - SSD
Agreement
D -
MacKenzie Agreement
E - Form
of Investor Acknowledgement
F -
Option Agreement
G -
Malone Option Agreement
H -
Assignment of Agreements
13
Exhibit
10.4
CONFIDENTIAL
THIS
WARRANT AND ALL SHARES OF WARRANT STOCK ISSUABLE HEREUNDER, HAVE BEEN AND WILL
BE ISSUED WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT") AND MAY NOT BE SOLD, OFFERED FOR SALE, TRANSFERRED, PLEDGED OR
HYPOTHECATED WITHOUT REGISTRATION UNDER THE ACT UNLESS EITHER (i) THE COMPANY
HAS RECEIVED AN OPINION OF COUNSEL, IN FORM AND SUBSTANCE REASONABLY
SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT REGISTRATION IS NOT REQUIRED IN
CONNECTION WITH SUCH DISPOSITION OR (ii) THE SALE OF SUCH SECURITIES IS MADE
PURSUANT TO RULE 144 PROMULGATED UNDER THE ACT.
WARRANT
TO PURCHASE COMMON STOCK
OF
ENVISION
SOLAR INTERNATIONAL, INC.
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Warrant
No.___________________________
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La Jolla,
California
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Date of Issuance: January
11
_,
2008
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THIS
CERTIFIES THAT, for value received, Squire, Sanders & Dempsey L.L.P. or its
permitted registered assigns (the "
Holder
"), is
entitled, subject to the terms and conditions of this Warrant, at
any
time or
from time to time after January___________ , 2008 (the "
Effective Date
"), to
purchase from Envision Solar
International,
Inc., a California corporation (the "
Company
"), the Number
of Shares of Warrant Stock (as defined below) of the Company at an exercise
price equal to $0.01 (the "
Exercise Price
") per
share. Furthermore, both the Number of Shares of Warrant Stock purchasable upon
exercise of this Warrant and the Exercise Price are subject to adjustment as
provided herein. The Warrant Stock shall automatically expire unless previously
exercised on January 1, 2015 (the "
Termination Date
").
Except as otherwise provided herein, all defined terms shall have the meanings
ascribed to such terms as set forth in Section 1 hereinbelow.
1.
CERTAIN DEFINITIONS. As used in this Warrant the following terms shall have the
following respective meanings:
"
Change of Control
"
means (i) the sale, lease, exchange or other transfer, directly or indirectly,
of all or substantially all of the assets of Company or its subsidiaries (in one
transaction or in a series of related transactions); (ii) the approval by the
shareholders of the Company of any plan or proposal for the liquidation or
dissolution of the Company; (iii) a merger or consolidation to which the Company
is a party if the shareholders of Company immediately prior to the effective
date of such merger or consolidation have "beneficial ownership" (as defined in
Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the "
Exchange Act
"))
immediately following the effective date of such merger or consolidation of
securities of the surviving entity representing 50% or less of the combined
voting power of the surviving entity's then outstanding securities (determined
on a fully diluted basis) ordinarily having the right to vote at elections of
directors; or (iv) the sale or transfer of outstanding securities by the
shareholders of Company to any person if after the sale or transfer such person
becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of 50% or more of the combined voting power of
Company's outstanding securities ordinarily having the right to vote at
elections of directors.
"
Common Stock
" shall
mean the Company's common stock.
"
Fair Market Value
" of
a share of Warrant Stock as of a particular date shall mean:
(a)
If traded
on a national securities exchange or the Nasdaq National Market, the Fair Market
Value shall be deemed to be the average of the closing prices of the shares of
the Warrant Stock of the Company on such exchange or market over the five (5)
business days ending immediately prior to the applicable date of
valuation;
(b)
If
actively traded over-the-counter, the Fair Market Value shall be deemed to be
the average of the closing bid prices over the 30-day period ending immediately
prior to the applicable date of valuation; and
(c)
If there
is no active public market, the Fair Market Value shall be determined by the
Board of Directors of the Company in good faith using any reasonable method of
valuation, which determination shall be conclusive and binding on all interested
parties.
"IPO"
shall mean the first firm commitment underwritten public offering of the
Company's Common Stock pursuant to an effective registration statement filed
with the SEC under the Securities Act.
"
Number of Shares of Warrant
Stock
" and "
Number of Shares
"
shall mean, subject to the terms hereof, the number or quotient equal to
$8,006.20 divided by the lesser of (a) the price per share sold by the Company
in its next preferred stock, Common Stock or other equity financing of
securities after the Date of Issuance of this Warrant, or (b) SI 0.00 per share.
Notwithstanding the foregoing, the Number of Shares of Warrant Stock (i)
represents the number of shares or securities of Warrant Stock at any time
receivable or issuable upon exercise of this Warrant, and (ii) shall be subject
to adjustment as set forth in this Warrant.
"Re
gistered Holder
"
shall mean any Holder in whose name this Warrant is registered upon the books
and records maintained by the Company.
"SEC"
shall mean the U.S. Securities and Exchange Commission.
"
Securities Act
" shall
mean the Securities Act of 1933, as amended.
"
Warrant
" shall
include this Warrant and any warrant delivered in substitution or exchange for
this Warrant as provided herein.
"
Warrant Stock
" shall
mean the Common Stock of the Company and any other securities, including any
securities into which such Warrant Stock has converted, at any time receivable
or issuable upon exercise of this Warrant.
2.
[RESERVED].
3.
EXERCISE
OF WARRANT
3.1
Payment
. Subject to
compliance with the terms and conditions of this Warrant and applicable
securities laws, this Warrant may be exercised, in whole or in part at any time
or from time to time after the Effective Date so long as Holder continues to
serve as legal counsel to the Company, by the delivery (including, without
limitation, delivery by facsimile) of the form of Notice of Exercise attached
hereto as
Exhibit 1
(the "
Notice of
Exercise
"), duly executed by the Holder, at the principal office of the
Company, and as soon as practicable after such date, surrendering
(a)
this
Warrant at the principal office of the Company (as listed in Section 14 below),
and
(b)
payment,
(i) in cash (by check) or by wire transfer, (ii) by cancellation by the Holder
of indebtedness of the Company to the Holder; or (lii) by a combination of (i)
and (ii), of an amount equal to the product obtained by multiplying the Number
of Shares of Warrant Stock being purchased upon such exercise by the then
effective Exercise Price (the "
Exercise
Amount
").
3.2
Net Issue Exercise
.
In lieu of the payment methods set forth in
Section
3.1(b) above, if the Fair Market Value of one share of Warrant Stock is greater
than the
Exercise
Price (at the date of calculation set forth below), the Holder may elect to
exchange all or
some of
the Warrant for shares of Warrant Stock equal to the value of the Warrant being
exchanged
on the date of exchange. If Holder elects to exchange this Warrant as provided
in this
Section
3.2, the Holder shall tender to the Company, at the principal office of the
Company, the
Warrant
for the amount being exchanged, along with a properly endorsed Notice of
Exercise, and
the
Company shall issue to the Holder the Number of Shares of the Warrant Stock
computed
using the
following formula:
X =
Y (A-B)
A
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 the amount of the Warrant
being
exchanged (as adjusted to the date of such calculation).
A = the
Fair Market Value of one share of the Warrant Stock.
B =
Exercise Price (as adjusted to the date of such
calculation).
All
references herein to an "exercise" of the Wairant shall include an exchange
pursuant to this Section 3.2.
3.3
IPO. Upon
receipt of a written notice of the Company's intention to raise capital by
selling shares of Common Stock in an IPO (the "
IPO Notice
"), which
notice shall be delivered to the Holder at least thirty (30) but not more than
sixty (60) days before the anticipated date of the filing with the SEC of the
registration statement for such IPO, the Holder shall promptly notify the
Company whether the Holder will exercise this Warrant. Notwithstanding whether
an IPO Notice has been delivered to the Holder or any other provision of this
Warrant to the contrary, this Warrant shall be deemed exercised on the
consummation of the IPO; the Fair Market Value will be the price at which one
share of Common Stock was sold to the public in the IPO. Ff the Holder has
elected to exercise this Warrant pursuant to this Section and the IPO is not
consummated, then the Holder's exercise of this Warrant shall not be effective
unless the Holder confirms in writing the Holder's intention to go forward with
the exercise of this Warrant.
3.4
"Easy Sale" Exercise
.
In lieu of the payment methods set forth in Section 3.1(b) above, when permitted
by law and applicable regulations (including the rules of Nasdaq and the
National Association of Securities Dealers (the "
NASD
")), the Holder
may pay the Exercise Amount through a "same day sale" commitment from the Holder
(and if applicable a broker-dealer that is a member of the NASD (an "
NASD Dealer
")),
whereby the Holder will irrevocably elect to exercise this Warrant and to sell
at least that Number of Shares of Warrant Stock so purchased to pay the Exercise
Amount (and up to all of the shares of Warrant Stock so purchased) and the
Holder (or, if applicable, the NASD Dealer) commits upon sale (or, in the case
of the NASD Dealer, upon receipt) of such shares of Warrant Stock to forward the
Exercise Amount directly to the Company, with any sale proceeds in excess of the
Exercise Amount being for the benefit of the Holder.
3.5
Stock Certificates;
Fractional Shares
. As soon as practicable on or after the
date of
exercise of this Warrant under Section 3.1, 3.2, 3.3 or 3.4 above, as
applicable, the
Company
shall issue and deliver to the person or persons entitled to receive the same a
certificate
or
certificates for the number of whole shares of Warrant Stock issuable upon such
exercise,
together
with cash in lieu of any fraction of a share equal to such fraction of the
current Fair
Market
Value of one whole share of Warrant Stock as of the date of exercise of this
Warrant. No
fractional
shares or scrip representing fractional shares shall be issued upon an exercise
of this
Warrant.
3.6
Partial Exercise; Effective
Date of Exercise
. In case of any partial
exercise
of this Warrant, the Company shall cancel this Warrant upon surrender hereof and
shall
execute
and deliver a new Warrant of like tenor and date for the balance of the shares
of Warrant
Stock
purchasable hereunder. This Warrant shall be deemed to have been exercised
immediately
prior to
the close of business on the date of its surrender for exercise as provided
above. The
person
entitled to receive the shares of Warrant Stock issuable upon exercise of this
Warrant shall
be
treated for all puiposes as the holder of record of such shares as of the close
of business on the
date the
Holder is deemed to have exercised this Warrant.
4.
VALID
ISSUANCE; TAXES. All shares of Warrant Stock issued upon the exercise of this
Warrant shall be validly issued, fully paid and non-assessable, and the Company
shall pay all taxes and other governmental charges that may be imposed in
respect of the issue or delivery thereof.
5.
ADJUSTMENT
OF EXERCISE PRICE AND NUMBER OF SHARES. The Number of Shares of Warrant Stock
issuable upon exercise of this Warrant (or any shares of stock or other
securities or property receivable or issuable upon exercise of this Warrant) and
the Exercise Price are subject to adjustment upon occurrence of the following
events:
5.1
Adjustment for Stock Splits.
Stock Subdivisions or Combinations of Shares
. If the Company at any time
while this Warrant, or any portion hereof, remains outstanding shall split,
subdivide or combine the shares of Warrant Stock, as to which purchase rights
under this Warrant exist, into a different number of securities of the same
class, the Number of Shares of Warrant Stock issuable upon exercise of this
Warrant shall be proportionately increased and the Exercise Price for such
securities shall be proportionately decreased in the case of a split or
subdivision, and likewise, the Number of Shares of Warrant Stock issuable upon
exercise of this Warrant shall be proportionately decreased and the Exercise
Price proportionately increased in the case of a combination.
5.2
Adjustment for Dividends or
Distributions of Stock or Other Securities or Property
. In case the
Company shall make or issue, or shall fix a record date for the determination of
eligible holders entitled to receive, a dividend or other distribution with
respect to the Warrant Stock (or any shares of stock or other securities at the
time issuable upon exercise of the Warrant) payable in (a) securities of the
Company or (b) assets (excluding cash dividends paid or payable solely out of
retained earnings), then, in each such case, the Holder on exercise of this
Warrant at any time after the consummation, effective date or record date of
such dividend or other distribution, shall receive, in addition to the shares of
Warrant Stock (or such other stock or securities) issuable on such exercise
prior to such date, and without the payment of additional consideration
therefor, the securities or such other assets of the Company to which such
Holder would have been entitled upon such date if such Holder had exercised this
Warrant on the date hereof and had thereafter, during the period from the date
hereof to and including the date of such exercise, retained such shares and/or
all other additional stock available by it as aforesaid during such period
giving effect to all adjustments called for by this Section 5.
5.3
Reclassification
. If
the Company, by reclassification of securities or otherwise, shall change any of
the securities as to which purchase rights under this Warrant exist into the
same or a different number of securities of any other class or classes, this
Warrant shall thereafter represent the right to acquire such number and kind of
securities as would have been issuable as a result of such change with respect
to the securities that were subject to the purchase rights under this Warrant
immediately prior to such reclassification or other change and the Exercise
Price therefore shall be appropriately adjusted, all subject to further
adjustment as provided in this Section 5. No adjustment shall be made pursuant
to this Section 5.3 upon any conversion or redemption of the Warrant Stock which
is the subject of Section 5.5.
5.4
Adjustment for Capita]
Reorganization, Merger or Consolidation
. If at any time while this
Warrant, or any portion hereof, is outstanding and unexpired there shall be a
Change of Control, this Warrant shall cease to represent the right to receive
Warrant Stock and shall automatically represent the right to receive upon the
exercise of this Warrant, during the period specified herein and upon payment of
the Exercise Price then in effect, the Number of Shares of stock or other
securities or property offered to the Company's holders of Warrant Stock in
connection with such Change of Control that a holder of shares of Warrant Stock,
deliverable upon exercise of this Warrant would have been entitled to receive in
such Change of Control if this Warrant had been exercised immediately before
such Change of Control, subject to further adjustment as provided in this
Section 5. The foregoing provisions of this Section 5.4 shall similarly apply to
successive reorganizations, consolidations, mergers, sales, and transfers to the
extent that this Warrant is assigned to or assumed by any successor corporation
or entity, whether by operation of law or otherwise, and to the stock or
securities of any other corporation that are at the time receivable upon the
exercise of this Warrant. If the per-share consideration payable to the holder
hereof for shares of Warrant Stock in connection with any such transaction is in
a form other than cash or marketable securities, then the value of such
consideration shall be determined in good faith by the Company's Board of
Directors. In all events, appropriate adjustment (as determined in good faith by
the Company's Board of Directors) shall be made in the application of the
provisions of this Warrant with respect to the rights and interests of the
Holder after the transaction, to the end that the provisions of this Warrant
shall be applicable after that event, as near as reasonably may be, in relation
to any shares or other property deliverable after that event upon exercise of
this Warrant.
5.5
Redemption or Termination of
Warrant Stock
. In case all or any portion of the authorized and
outstanding shares of Warrant Stock of the Company are redeemed or converted or
reclassified into other securities or property pursuant to the Company's
Articles or Certificate of Incorporation or otherwise, or the Warrant Stock
otherwise ceases to exist, then, in such case, the Holder of this Warrant, upon
exercise hereof at any time after the date on which the Warrant Stock is so
redeemed or ceases to exist (the "
Warrant Stock Termination
Date
"), shall receive, subject to the terms of this Warrant, in lieu of
the Number of Shares of Warrant Stock that would have been issuable upon such
exercise immediately prior to the Warrant Stock Termination Date, the securities
or property that would have been received if this Warrant had been exercised in
full and the Warrant Stock received thereupon had been simultaneously converted
immediately prior to the Warrant Stock Termination Date, all subject to further
adjustment as provided in this Warrant. Additionally, the Exercise Price shall
be immediately adjusted to equal the quotient obtained by dividing (x) the
aggregate Exercise Price of the maximum Number of Shares of Warrant Stock for
which this Warrant was exercisable immediately prior to the Warrant Stock
Termination Date by (y) the Number of Shares of Warrant Stock of the Company for
which this Warrant is exercisable immediately after the Warrant Stock
Termination Date, all subject to further adjustment as provided
herein.
6.
CERTIFICATE
AS TO ADJUSTMENTS. In each case of any adjustment in the Exercise Price, or
number or type of shares issuable upon exercise of this Warrant, the Chief
Financial Officer or Controller of the Company shall compute such adjustment in
accordance with the tenns of this Warrant and prepare a certificate setting
forth such adjustment and showing in detail the facts upon which such adjustment
is based, including a statement of the adjusted Exercise Price. After each such
adjustment, the Company shall promptly send (by facsimile and by either first
class mail, postage prepaid or overnight delivery) a copy of each such
certificate to the Holder.
7.
LOSS OR
MUTILATION. Upon receipt of evidence reasonably satisfactory to the Company of
the ownership of and the loss, theft, destruction or mutilation of this Warrant,
and of indemnity reasonably satisfactory to it, and (in the case of mutilation)
upon surrender and cancellation of this Warrant, the Company will execute and
deliver in lieu thereof a new Warrant of like tenor as the lost, stolen,
destroyed or mutilated Warrant.
8.
RESERVATION
OF WARRANT STOCK. The Company hereby covenants that at all times there shall be
reserved for issuance and delivery upon exercise of this Warrant such Number of
Shares of Warrant Stock or other shares of capital stock of the Company as are
from time to time issuable upon exercise of this Warrant and, from time to time,
will take all steps necessary to amend its Articles or Certificate of
Incorporation to provide sufficient reserves of shares of Warrant Stock issuable
upon exercise of this Warrant. All such shares shall be duly authorized, and
when issued upon such exercise, shall be validly issued, fully paid and
non-assessable, free and clear of all liens, security interests, charges and
other encumbrances or restrictions on sale and free and clear of all preemptive
rights, except encumbrances or restrictions arising under federal or state
securities laws. Issuance of this Warrant shall constitute full authority to the
Company's officers who are charged with the duty of executing stock certificates
to execute and issue the necessary certificates for shares of Warrant Stock upon
the exercise of this Warrant.
9.
TRANSFER
AND EXCHANGE. Subject to the terms and conditions of this Warrant and compliance
with all applicable securities laws, this Warrant and all rights hereunder may
be transferred to any parent or subsidiary of the Registered Holder, in whole or
in part, on the books of the Company maintained for such purpose at the
principal office of the Company referred to above, by the Registered Holder
hereof in person, or by duly authorized attorney, upon surrender of this Warrant
properly endorsed and upon payment of any necessary transfer tax or other
governmental charge imposed upon such transfer. Upon any permitted partial
transfer, the Company will issue and deliver to the Registered Holder a new
Warrant or Warrants with respect to the shares of Warrant Stock not so
transferred. Each taker and holder of this Warrant, by taking or holding the
same, consents and agrees that when this Warrant shall have been so endorsed,
the person in possession of this Warrant may be treated by the Company, and all
other persons dealing with this Warrant, as the absolute owner hereof for any
purpose and as the person entitled to exercise the rights represented hereby,
any notice to the contrary notwithstanding; provided, however that until a
transfer of this Warrant is duly registered on the books of the Company, the
Company may treat the Registered Holder hereof as the owner for all
purposes.
10.
RESTRICTIONS
ON TRANSFER. The Holder, by acceptance hereof, agrees that, absent an effective
registration statement filed with the SEC under the Securities Act, covering the
disposition or sale of this Warrant or the Warrant Stock issued or issuable upon
exercise hereof, as the case may be, and registration or qualification under
applicable state securities laws, such Holder will not sell, transfer, pledge,
or hypothecate any or all such Warrants, Warrant Stock, or Common Stock, as the
case may be, unless either (i) the Company has received an opinion of counsel,
in form and substance reasonably satisfactory to the Company, to the effect that
such registration is not required in connection with such disposition or (ii)
the sale of such securities is made pursuant to Rule 144, promulgated pursuant
to the Securities Act.
11.
COMPLIANCE
WITH SECURITIES LAWS. By acceptance of this Warrant, the Holder hereby
represents, warrants and covenants that any shares of stock purchased upon
exercise of this Warrant or acquired upon conversion thereof shall be acquired
for investment only and not with a view to, or for sale in connection with, any
distribution thereof; that the Holder has had such opportunity as the Holder has
deemed adequate to obtain from representatives of the Company such information
as is necessary to permit the Holder to evaluate the merits and risks of its
investment in the Company; that the Holder is able to bear the economic risk of
holding such shares of Warrant Stock for an indefinite period; that the Holder
understands that shares of Warrant Stock will not be registered under the
Securities Act (unless otherwise required pursuant to exercise by the Holder of
the registration rights, if any, previously granted to the Holder) and will be
"restricted securities" within the meaning of Rule 144 promulgated under the
Securities Act and that the exemption from registration under Rule 144 will not
be available for at least one year from the date of exercise of this Warrant,
subject to any special treatment by the SEC for exercise of this Warrant
pursuant to Section 3.3, and even then will not be available unless a public
market then exists for the stock, adequate information concerning the Company is
then available to the public, and other terms and conditions of Rule 144 are
complied with; and that all stock certificates representing shares of Warrant
Stock may have affixed thereto a legend substantially in the following
form:
THE
SECURITIES REPRESENTED HEREBY HAVE BEEN ISSUED WITHOUT REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE SOLD, OFFERED FOR
SALE, TRANSFERRED, PLEDGED OR HYPOTHECATED WITHOUT REGISTRATION UNDER THE ACT
UNLESS EITHER (i) THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL, IN FORM AND
SUBSTANCE REASONABLY SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT
REGISTRATION IS NOT REQUIRED IN CONNECTION WITH SUCH DISPOSITION OR (ii) THE
SALE OF SUCH SECURITIES IS MADE PURSUANT TO RULE 144 PROMULGATED UNDER THE
ACT.
12.
NO RIGHTS
OR LIABILITIES AS STOCKHOLDERS. This Warrant shall not entitle the Holder to any
voting rights or other rights as a stockholder of the Company.
13.
REGISTRATION
AND OTHER RIGHTS. With regard to all shares of Warrant Stock issuable upon
exercise of this Warrant, the Company shall give Holder the opportunity to
obtain the same contractual registration rights granted to other
investors.
14.
NOTICES.
Except as may be otherwise provided herein, all notices, requests, waivers and
other communications made pursuant to this Agreement shall be in writing and
shall be conclusively deemed to have been duly given (a) when hand delivered to
the other party; (b) when received if sent by facsimile at the address and
number set forth below; (c) five (5) business days after deposit in the U.S.
mail first class, postage prepaid, registered or certified mail with return
receipt requested and addressed to the other part}' as set forth below; or (d)
the next business day after deposit with a national overnight delivery service,
postage prepaid, addressed to the parties as given below, or designate
additional addresses, for purposes of this section by giving the other party
written notice of the new address in the manner set forth above.
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To Squire. Sanders
& Dempsey L.L.P.
:
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To the
Company:
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Attn: Nicholas Unkovic
600 Hansen Way
Palo Alto,
California 94303
Fax
Number: 650-843-8777
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Envision
Solar International, Inc.
4225
Executive Square, Suite 480
La
Jolla, California 92037
Fax
Number: 858-799-459
Attn:
President
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15.
TITLES
AND HEADINGS. The titles, captions and headings of this Warrant are included for
ease of reference only and will be disregarded in interpreting or construing
this Warrant. Unless otherwise specifically stated, all references herein to
"sections" and "exhibits" will mean "sections" and "exhibits" to this
Warrant.
16.
LAW
GOVERNING. This Warrant shall be governed in all respects by the laws of the
State of California, without regard to principles of conflict of
laws.
17.
NO
MPAIRMENT. The Company will not, by amendment of its Articles or Certificate of
Incorporation or bylaws, or through reorganization, consolidation, merger,
dissolution, issue or sale of securities, sale of assets or any other voluntary
action, avoid or seek to avoid the observance or performance of any of the terms
of this Warrant, but will at all times in good faith assist in the carrying out
of all such terms and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the Registered Holder of this
Warrant against impairment. Without limiting the generality of the foregoing,
the Company (a) will not increase the par value of any shares of Warrant Stock
above the amount payable therefor upon such exercise, and (b) will take all such
action as may be necessary or appropriate in order that the Company may validly
and legally issue fully paid and nonassessable shares of Warrant Stock upon
exercise of this Warrant.
18.
NOTICES
OF RECORD DATE. In case: (a) the Company shall take a record of the holders of
its Common Stock (or other stock or securities at the time receivable upon the
exercise of this Warrant), for the purpose of entitling them to receive any
dividend or other distribution, or any right to subscribe for or purchase any
shares of stock of any class or any other securities or to receive any other
right; (b) of any consolidation or merger of the Company with or into another
corporation, any capital reorganization of the Company, any reclassification of
the capital stock of the Company, or any conveyance of all or substantially all
of the assets of the Company to another corporation in which holders of the
Company's stock are to receive stock, securities or property of another
corporation; (c) of any voluntary dissolution, liquidation or winding-up of the
Company; or (d) of any redemption or conversion of all outstanding Warrant
Stock; then, and in each such case, the Company will mail or cause to be mailed
to the Registered Holder of this Warrant a notice specifying, as the case may
be, (i) the date on which a record is to be taken for the purpose of such
dividend, distribution or right, or (ii) the date on which such event or
transaction is to take place, and the time, if any is to be fixed, as of which
the holders of record of Warrant Stock shall be entitled to exchange their
shares of Warrant Stock for securities or other property deliverable upon such
event or transaction. Such notice shall be delivered at least thirty (30) days
prior to the date therein specified.
19.
SEVERABILITY.
If any paragraph, provision or clause of this Warrant shall be found or be held
to be illegal, invalid or unenforceable, the remainder of this Warrant shall be
valid and enforceable and the parties shall use good faith to negotiate a
substitute, valid and enforceable provision that most nearly effects the
parties' intent in entering into this Warrant.
20.
COUNTERPARTS.
This Warrant may be executed in any number of counterparts, each of which shall
be an original, but all of which together shall constitute one
instrument.
21.
NO
INCONSISTENT AGREEMENTS. The rights granted to the Holder hereunder do not in
any way conflict with and are not inconsistent with the rights granted to
holders of the Company's securities under any other agreements, except rights
that have been waived.
IN
WITNESS WHEREOF, the parties hereto have executed this Warrant as of the
Effective Date.
|
SQUIRE, SANDERS & DEMPSEY L.L.P.
|
|
ENVISION SOLAR INTERNATIONAL,
INC.
|
|
|
|
|
|
By:
/s/
Nicholas
Unkovic
|
|
By:
/s/
Karen
Morgan
|
|
Name:
Nicholas
Unkovic
|
|
Name:
Karen
Morgan
|
|
Title:
Partner
|
|
Title:
President
|
SIGNATURE
PAGE TO PREFERRED STOCK WARRANT
ISSUED BY
ENVISION SOLAR INTERNATIONAL, INC.
TO
SQUIRE, SANDERS & DEMPSEY L.L.P.
EXHIBIT 1
NOTICE OF
EXERCISE
(To be
executed upon exercise of Warrant)
|
ENVISION SOLAR
INTERNATIONAL, INC.
|
|
WARRANT
NO.________________________
|
The
undersigned hereby irrevocably elects to exercise the right of purchase
represented by this Warrant Certificate for, and to purchase thereunder, the
securities of Envision Solar International, Inc., as provided for therein, and
(check the applicable box):
o
Tenders
herewith payment of the exercise price in full in the form of cash or a
certified or official bank check in same-day funds in the amount of
$[____________] for [__________] such securities.
o
Elects
the Net Issue Exercise option pursuant to Section 3.2 of the Warrant, and
accordingly requests delivery of a net of [______________] of such securities,
according to the following calculation:
x=
y(a-b
)
([_____________])
= [__________]) (
[__________]
) -
([___________])
A ([____________])
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 the amount of the
Warrant
being
exchanged (as adjusted to the date of such calculation).
A = the
Fair Market Value of one share of the Warrant Stock.
b
=
Exercise Price (as adjusted to the date of such
calculation).
o
Elects the Easy Sale
Exercise option pursuant to Section 3.4 of the Warrant, and
accordingly
requests
delivery of a net of [_____________] of such securities.
Please
issue a certificate or certificates for such securities in the name of, and pay
any cash for any fractional share to:
Signature:
____________________________________
Name:
[____________________________________]
Address:
[_____________________________________]
Date:
[______________________________________]
Note: The
above signature should correspond exactly with the name on the first page of
this Warrant Certificate or with the name of the assignee appearing in the
assignment form below.
If the
number of securities designated above shall not be all the shares purchasable
under this Warrant, a new Warrant Certificate is to be issued in the name of
said undersigned for the balance remaining of the shares purchasable thereunder
rounded up to the next higher whole number of shares.
EXHIBIT 2
ASSIGNMENT
(To be
executed only upon assignment ofWarrant)
|
ENVISION SOLAR
INTERNATIONAL, INC.
|
|
WARRANT
NO.___________________________
|
For value
received, [_______________] hereby sells, assigns and transfers unto
[_____________________] the
Warrant,
together with all right, title and interest therein, and does hereby irrevocably
constitute and
appoint
[ ________________]attorney, to transfer said Warrant on the books of the
withm-named Company
with
respect to the Number of Shares ofWarrant Stock set forth below, with full power
of substitution in the premises:
|
Name(s)
of Assignee(s)
|
Address
|
Warrant
Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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And if
said Number of Shares of Warrant Stock shall not be all the Warrant Stock
represented by the Warrant, a new Warrant is to be issued in the name of said
undersigned for the balance remaining of the Warrant Stock registered by said
Warrant.
Signature:
____________________________
Name:
[____________________________]
Address:
[____________________________]
Date: [_____________________________]
Notice:
The signature to the foregoing Assignment must correspond to the name as written
upon the face of this security in every particular, without alteration or any
change whatsoever; signature(s) must be guaranteed by an eligible guarantor
institution (banks, stock brokers, savings and loan associations and credit
unions with membership in an approved signature guarantee medallion program)
pursuant to Securities and Exchange Commission Rule 17Ad-15.
11
Exhibit
10.5
SELLING
AGREEMENT
February
11,2008
Mr.
Robert Noble
Chief
Executive Officer
Envision
Solar International, Inc.
4225
Executive Square, Suite 480
LaJolla,
CA 92037
Re: Offering
of Shares $40.00 per Share
Gentlemen:
Envision Solar International,
Inc. ("ENVISION" or "the Company") is a California corporation formed in 2007 to
develop and commercialize carport and other structures with integrative
photovoltaic arrays in the United States and internationally. ENVISION desires
to raise up to $4,000,000 through the sale of up to 100,000 Shares ("Shares") to
Accredited Investors ("Investors") at a price of $40.00 per Share pursuant to
Regulation D of the Securities Act of 1933, as amended (the "Offering"). Each
Investor participating in this Offering is required to purchase a minimum of
1,000 Shares; however, ENVISION may choose to accept purchases below the minimum
at its discretion. ENVISION hereby confirms as follows its agreement with
Nexcore Capital, Inc. ("Nexcore"), a registered member in good standing of the
Financial Industry Regulatory Association ("FINRA"), formerly the National
Association of Securities Dealers, Inc. ("NASD"), under which Nexcore will act
as a nonexclusive agent for ENVISION in connection with the Offering.
1.
Memorandum
.
ENVISION has caused the
preparation of a private placement memorandum ("Memorandum") relating to the
sale of the Shares.
2.
Appointment
of Agent
.
On the
basis of the representations, warranties and covenants herein contained, and
subject to the terms and conditions herein set forth, Nexcore is hereby
appointed as a non-exclusive agent (except as provided in Section 3) of ENVISION
to offer and sell the Shares to Accredited Investors. Nexcore covenants to offer
and sell Shares on a "best efforts" basis on behalf of ENVISION in accordance
with the terms of this Agreement and the Memorandum, and not to misrepresent
orally or in writing any of the facts regarding ENVISION, its business, or the
Offering. Nexcore covenants to closely supervise all of its representatives in
the Offering of the Shares and to comply with all applicable federal and state
securities laws and NASD rules and regulations. Nexcore is not responsible for
the contents of the Memorandum. Nexcore covenants not to use any written
material or oral statements in offering or selling the Shares which are not
specifically authorized by ENVISION, provided, that Nexcore is specifically
authorized to use the Memorandum. Subject to the performance by ENVISION of its
obligations to be performed hereunder, and to the accuracy of all the
representations and warranties contained herein, Nexcore hereby accepts such
agency and agrees to perform its obligations hereunder.
3.
Limited
Exclusivity
.
Notwithstanding the non-exclusive nature of the appointment of Nexcore,
Nexcore shall have limited exclusivity as provided in this section. During the
term of this agreement as specified in Section 10(a), Nexcore shall have the
right to
act as
exclusive agent with respect to $2,500,000 of the Offering. ENVISION shall
reserve for exclusive sale by Nexcore (or by other FINRA-licensed entity
referred by Nexcore) 62,500 of the Shares for sale by Nexcore during this
period.
4.
Representations
and Warranties of ENVISION
.
ENVISION
represents,
warrants
and agrees with Nexcore for Nexcore's benefit that:
(a)
All
action required to be taken by ENVISION as a condition to sale of the Shares has
been taken.
(b)
ENVISION
is duly and validly organized, existing and in good standing as a corporation
under the laws of the State of California, with full power and authority to
conduct its business and proposed business as described in the Memorandum.
ENVISION has all government licenses and permits necessary to conduct its
business, and is duly qualified to conduct its business in all jurisdictions in
which such qualification is necessary.
(c)
From the
commencement of the Offering through the termination or expiration of the
Offering, the Memorandum will not contain an untrue statement of a material fact
or omit to state a material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(d)
This
Agreement has been duly and validly authorized, executed and delivered by or on
behalf of ENVISION, and constitutes the valid, binding and enforceable agreement
of ENVISION.
(e)
No
federal or state securities agency has issued an order preventing or suspending
the Offering or the use of the Memorandum with respect to the sale of the
Shares. ENVISION will promptly notify Nexcore upon the issuance of any such
order and furnish Nexcore with a copy thereof. The Memorandum and any amendment
or supplement thereto will comply and will continue to comply with all
applicable requirements of the Securities Act of 1933, as amended (the "Act"),
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and any
other applicable federal and state laws and regulations at all times during the
term of this Agreement.
(f)
No
consent, approval, authorization or other order of any governmental authority is
required in connection with the execution, delivery or performance by ENVISION
of this Agreement.
(g)
The
execution and delivery of this Agreement will not constitute a breach of, or
default under, any instrument by which ENVISION is bound or, to the best of
their knowledge, any order, rule or regulation of any court or any governmental
body or administrative agency having jurisdiction over ENVISION.
[Missing Graphic Reference]
5.
Nexcore
Representations and Warranties.
Nexcore represents and
warrants
that it
is duly and fully licensed under the rules and regulations of the NASD and is
capable of
performing
and satisfying its obligations under this Agreement. Nexcore further represents
and
warrants
that Nexcore's execution and performance of this Agreement will not cause
Nexcore to
be
in default under or to violate any agreement, law, rule, regulation, order or
judgment applicable to it.
6.
Compensation
to Nexcore.
In consideration for
Nexcore's services hereunder, ENVISION covenants to pay Nexcore a selling
commission equal to seven percent (7%) of the total purchase price of Shares
sold in the Offering by or through Nexcore or by or through other FINRA licensed
entities referred by Nexcore. The selling commission payable to Nexcore will be
paid periodically as ENVISION accepts subscriptions for the sales of Shares and
receives payments therefore. Nexcore shall not be entitled to a selling
commission for any Shares not sold by or through Nexcore or by or through other
FINRA entities referred by Nexcore, but which are instead sold by ENVISION
itself or by a third party not referred by Nexcore.
7.
Due
Diligence Allowance.
In consideration for due
diligence expenses incurred by Nexcore in connection with the Offering, ENVISION
covenants to pay Nexcore a due diligence fee equal to two (2%) percent of the
total purchase price of Shares sold in the Offering by or through Nexcore or by
or through other FINRA licensed entities referred by Nexcore, provided, however,
that should ENVISION refer prospective investors to Nexcore for potential
inclusion in the Offering, Nexcore will not be entitled to a due diligence fee
with respect to these referrals. In addition, should any single investor
purchase 12,500 or more Shares for a total purchase price of $500,000 or more,
Nexcore will not be entitled to a due diligence fee with respect to mat
investment.
8.
Offering
Costs.
In
consideration for other expenses incurred by Nexcore in connection with the
Offering, including but not limited to administrative and miscellaneous
expenses, Nexcore will also receive from ENVISION a non-accountable expense
reimbursement in cash equal to two (2%) percent of the total purchase price of
all Shares sold in the Offering by or through Nexcore or by or through other
FINRA licensed entities referred by Nexcore, provided, however, that should
ENVISION refer prospective investors to Nexcore for potential inclusion in the
offering, Nexcore will not be entitled to an expense reimbursement with respect
to those referrals. In addition, should any single investor purchase 12,500 or
more Shares for a total purchase price of $500,000 or more, Nexcore will not be
entitled to an expense reimbursement with respect to that
investment.
In
addition, as non-cash incentive compensation for Nexcore, ENVISION shall also
compensate Nexcore with non-assessable and assignable Warrants to purchase
common stock of the Company at $40.00 (Forty dollars) per share exercisable up
to five (5) years after the termination or expiration of the Offering. ENVISION
shall compensate Nexcore with the number of Warrants equal to seven percent (7%)
of the total number of Shares sold in this Offering by or through Nexcore or by
or through another FINRA licensed entity referred by Nexcore, subject to a
maximum of 7,000 Warrants. The Warrant shall not include any sales of Shares
made by ENVISION itself or by a third party not referred by
Nexcore.
Nexcore
acknowledges that, concurrently with the Offering, ENVISION is offering for sale
convertible promissory notes in an aggregate amount up to $1,000,000. As
referred to in mis agreement, the term "Offering" does not include the sale of
any such notes. Nexcore understands that ENVISION intends to reduce the amount
of the Offering by the aggregate principal amount of any convertible promissory
notes sold by ENVISION. Nexcore shall not be
compensated
with respect to the sale of any such notes, and acknowledges that any reduction
of the amount of the Offering as a result of the sale of notes may reduce the
compensation otherwise payable to Nexcore pursuant to this
agreement.
9.
Offering
Costs
.
ENVISION
will pay all legal, accounting, printing and other
Offering
expenses incurred by the Company from its existing general working
capital.
10.
Covenants
of the Company
.
ENVISION covenants with Nexcore that:
(a)
The term
of this Agreement will commence on the date first above written and will
terminate on the date ("Termination Date") which is 60 days after the date the
Memorandum is first provided by Nexcore to a third party, unless sooner
terminated or extended by the written agreement of both parties to this
Agreement.
(b)
If any
event relating to the Company occurs which requires, in the opinion of
ENVISION's counsel, an amendment or supplement to the Memorandum in order that
the Memorandum will not contain an untrue statement of a material fact or omit
to state a material fact necessary in order to make the statements therein not
misleading in the light of the circumstances existing at the time it is
delivered to a subscriber, ENVISION will forthwith prepare the amendment or
supplement to the Memorandum and deliver a copy thereof to Nexcore. Furthermore,
ENVISION will furnish such information to Nexcore as Nexcore may from time to
time reasonably request.
(c)
ENVISION
will endeavor in good faith to qualify the Shares for offering and sale under,
or to establish the exemption of the Offering and sale of the Shares from
qualification or registration under, applicable state securities or "blue sky"
laws. ENVISION will pay all legal fees and related expenses in connection with
qualifying the Shares under said "blue sky" laws.
(d)
ENVISION
will not offer to sell Shares in any state in which such offer would be
unlawful. ENVISION will bear all of the costs and liability incurred by it or
Nexcore as a result of the unlawful offer of Shares by the Company in any state,
unless Nexcore directly causes such unlawful offer without the participation of
ENVISION.
(e)
ENVISION
covenants to issue financial statements and reports of the Company in accordance
with the Memorandum.
(f)
Nexcore
will have reasonable review and approval rights with respect to the Memorandum
and its contents.
(g)
ENVISION
covenants not to terminate the Offering before the Offering Termination Date, as
defined in the Memorandum, and Nexcore shall have at least the full Offering
period to sell all of the Shares.
(h) ENVISION
covenants that Nexcore shall have the right to obtain the
equity or
financing for ENVISION from to an entity affiliated with Nexcore, such as, by
way of
illustration
but not of limitation, The Greencore Capital Equity Fund, LLC.
11.
Payment
of Expenses and Fees
.
Except as provided in Sections 5, 6 and 7 of this Agreement, Nexcore and
ENVISION will each pay their own expenses incident to the transactions
contemplated by this Agreement. ENVISION will bear all of the fees and expenses
incurred in printing of the Memorandum.
12.
Noncircumvention
.
ENVISION shall not directly
or indirectly circumvent Nexcore or any of its affiliates with respect to any
relationships introduced or made known to the Company by Nexcore as a direct or
indirect result of this Agreement, including but not limited to investors,
customers, suppliers, and professionals, without the prior written consent of
Nexcore. In the event of a breach of this section by ENVISION, Nexcore will have
all injunctive and equitable relief available, as well as all other remedies at
law or in equity.
13.
Conditions
to Nexcore's Obligations
.
Nexcore's obligations
hereunder are subject to the accuracy of and compliance with the representations
and warranties of ENVISION in this Agreement, and to the performance by ENVISION
of its obligations hereunder.
14.
Conditions
to the Obligations of ENVISION
.
The obligations of ENVISION
hereunder are subject to the accuracy of and the compliance with Nexcore's
representations and warranties in this Agreement, and to the performance by
Nexcore of its obligations hereunder.
15.
Term of
Agreement
.
The
term of this Agreement will commence on the date first above written and will
terminate on the Termination Date.
16.
Indemnification
.
(a)
ENVISION
hereby indemnifies and holds Nexcore, Nexcore's affiliates, officers, directors,
shareholders, agents, employees, accountants and attorneys, and each of them,
harmless from and against all liabilities, claims, damages, losses, costs,
attorneys fees and expenses arising directly or indirectly from (a) the conduct
of ENVISION's business, (b) the manner and conduct of any offer or sale of
securities by persons or entities other than Nexcore which conduct any business
with ENVISION, (c) any financial statements or other financial information
prepared, provided, published, or disseminated by ENVISION, or (d) the source or
manner of solicitation of any prospective Investors referred by ENVISION to
Nexcore. In addition, ENVISION hereby indemnifies and holds Nexcore, Nexcore's
affiliates, officers, directors, shareholders, agents, employees, consultants
and attorneys, and each of them, harmless from and against any loss, expense,
claim, damage or liability to which Nexcore or said other parties may become
subject under any securities act, common law concept, or otherwise, insofar as
such loss, expense, claim, damage or liability or action in respect thereof,
arises out of or is based in whole or in part on any untrue statement or alleged
untrue statement of any material fact made by ENVISION, any employee of the
Company, or in the Memorandum, or the omission thereby of any material fact
required to be stated or necessary to make the statement made to a prospective
investor not misleading. ENVISION shall promptly reimburse the indemnified
parties for any reasonable legal or other expenses incurred by them in
connection with any such indemnified action or claim.
(b)
ENVISION
will not be liable under this indemnity agreement with respect to any claim made
against Nexcore or any of said other persons related to Nexcore
unless
ENVISION
is notified in writing of the nature of the claim. ENVISION shall be entitled to
participate at its own expense in the defense or, if it so elects within a
reasonable time after receipt of such notice, to assume the defense of any such
claims, which defense shall be conducted by counsel chosen by it and reasonably
satisfactory to Nexcore and the other said person or persons related to Nexcore
who are defendants in any suit so brought. In the event that the ENVISION elects
to assume the defense of any such suit and retain such counsel, Nexcore or the
person or persons who are defendants in the suit shall bear the fees and
expenses of any additional counsel thereafter retained by Nexcore or them.
ENVISION agrees to promptly notify Nexcore of the assertion of any claim against
it or against any person who is a control person of ENVISION in connection with
the sale of the Shares.
(c)
Nexcore agrees to indemnify and hold harmless ENVISION and its affiliates,
officers, directors, shareholders, agents, employees, attorneys and accountants
against any and all loss, liability, claim, damage and expense whatsoever
directly or indirectly resulting from material violations by Nexcore or its
representatives of any of Nexcore's representations, warranties or covenants in
this Agreement, or of any applicable law, rule or regulation. In case any action
is brought against ENVISION or any of its affiliates under such laws,
regulations or rules on account of such material violation of such
representations, warranties or covenants, Nexcore shall have the rights and
duties given to ENVISION, and ENVISION shall have the rights and duties given to
Nexcore, by the provisions of Section 15(b).
17.
Representations,
Warranties and Agreements to Survive Delivery
.
All
representations,
warranties and agreements shall remain operative and in full force and effect,
regardless of any investigation made by or on behalf of Nexcore or any person
who controls Nexcore, or by or on behalf of ENVISION or any person who controls
ENVISION, for a period of four years after the Termination Date.
18.
Notices
.
All notices, requests,
demands and other communications hereunder
shall be
deemed to have been duly given if delivered, faxed, or mailed by first class
mail:
|
|
If to
ENVISION:
|
Envision
Solar International, Inc.
4225
Executive Square, Suite 480
La
Jolla,CA 92037
Facsimile:(858)
799-4592
Attn:
Robert L. Noble
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With a copy (which
shall
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not constitute
notice) to:
|
John C.
O'Neill, Esq.
Procopio,
Cory, Hargreaves & Savitch LLP
530
B Street, Suite 2100
San
Diego, CA 92101-4469
Facsimile:
(619) 744-5464
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If to
Nexcore:
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10509
Vista Sorrento Parkway, Suite 300
San
Diego, CA 92121
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Facsimile:
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Attn: Jay S. Potter,
President
|
|
19.
Parties
.
This Agreement shall inure
to the benefit of and be binding upon Nexcore, ENVISION, and their respective
successors and assigns.
20.
Entire
Agreement
.
This
Agreement represents the entire agreement among the parties hereto and may not
be amended except by a writing signed by the party against whom enforcement of
the provision is sought.
21.
Injunctive
Relief
.
Each
party acknowledges that it would be impossible to measure in money the damages
to the other party if there is a failure to comply with any covenants or
provisions of this Agreement, and agrees that in the event of any breach of any
covenant or provision, the other party to this Agreement will not have an
adequate remedy at law. It is therefore agreed that the other party to this
Agreement who is entitled to the benefit of the covenants or provisions of this
Agreement which have been breached, in addition to any other rights or remedies
which they may have, shall be entitled to immediate injunctive relief to enforce
such covenants and provisions, and that in the event that any such action or
proceeding is brought in equity to enforce them, the defaulting or breaching
party will not urge a defense that there is an adequate remedy at
law.
22.
Waivers
.
If any party shall at any
time waive any rights hereunder resulting from any breach by the other party of
any of the provisions of this Agreement, such waiver is not to be construed as a
continuing waiver of other breaches of the same or other provisions of this
Agreement. Resort to any remedies referred to herein shall not be construed as a
waiver of any other rights and remedies to which such party is entitled under
this Agreement or otherwise.
23.
Governing
Law
.
This
Agreement shall be governed by and construed in accordance with the laws of the
State of California, and the venue for any action hereunder shall be in the
appropriate forum in the County of San Diego, State of California.
24.
Counterparts.
This Agreement may be
executed simultaneously in any number of counterparts, each of which
counterparts shall be deemed to be an original, and such counterparts shall
constitute but one and the same instrument.
25.
Attorneys'
Fees and Costs
.
In the event that either party must resort to legal action in order to
enforce the provisions of this Agreement or to defend such action, the
prevailing party shall be entitled to receive reimbursement from the
nonprevailing party for all reasonable attorneys' fees and all other costs
incurred in commencing or defending such action, or in enforcing this Agreement,
including but not limited to post-judgment costs.
26.
Further
Acts
.
The parties
to this Agreement hereby agree to execute any other documents and take any
further actions which are reasonably necessary or appropriate in order to
implement the transactions contemplated by this Agreement.
27.
Time of
Essence
.
Time is
of the essence in the performance of the obligations under this
Agreement.
28.
Authorized
Signatures
.
Each
party to tins Agreement hereby represents that the persons signing below are
duly authorized to execute this Agreement on behalf of their respective
party.
29.
Execution
.
If the foregoing is in
accordance with your understanding of our Agreement, kindly sign and return to
us a counterpart hereof, whereupon this Agreement along with all counterparts
will become a binding Agreement between Nexcore and ENVISION in accordance with
its terms.
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|
Very truly yours,
Nexcore Capital Inc.
a Delaware corporation
By:
/s/ Jay
S.Potter
Jay S. Potter
President
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Confirmed
and Accepted:
|
Envision Solar International,
Inc,
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a California
Corporation
|
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By:
/s/ Robert L. Noble
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Robert L.
Noble
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Chief Executive
Officer
|
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Exhibit 10.6
PROMISSORY
NOTE
|
Borrower
Information
|
|
Name:
|
Date:
|
|
Envision
Solar International, Inc.
|
6/1/08
|
|
Street
Address:
|
Date
of Birth:
|
|
4225
Executive Square Suite 1000
|
N/A
|
|
City:
|
Telephone
Number:
|
|
La
Jolla
|
858.799.4583
|
|
State:
|
Driver's
License Number:
|
|
California
|
N/A
|
|
Zip
Code:
|
Social
Security Number:
|
|
92037
|
N/A
|
|
Lender
Information
|
|
Name:
|
Telephone
Number:
|
|
William
S. Adelson
|
760-994-8780
|
|
Street
Address:
|
|
|
19503
Vista Del Otero
|
|
City:
|
Make
Check Payable To:
|
|
Ramona
|
William
S. Adelson
|
|
State:
|
|
|
California
|
|
Zip
Code:
|
|
92065
|
|
Loan
Information
|
|
Loan
Amount & Interest Due:
|
Loan
Period
|
|
1/5/2009
$18,380.40 Jan 09 Rent + bank fee
|
Due
on 12/31/09
|
|
1/12/2009
$12,860.30 Archicad payoff
|
|
|
1/16/2009
$ 2,053.14 Payroll for J Lindenfeld
|
|
6/30/2009
$ 136.07 Additional Monthly
Interest
|
|
7/31/09
$ 136.07 Additional Monthly
Interest
|
|
8/31/09
$ 136.07 Additional Monthly
Interest
|
|
9/30/09
$ 136.07 Additional Monthly
Interest
|
|
10/31/09
$ 136.07 Additional Monthly
Interest
|
|
11/30/09
$ 136.07 Additional Monthly
Interest
|
|
12/31/09
$ 136.07 Additional Monthly
Interest
|
|
|
Total $
34,246.32
|
|
|
Interest
Rate:
|
Payment
Schedule:
|
|
5%
|
Payment
of $32,246.32 due on
12/31/09
|
1
.
Promise to Pay.
For value
received,
Envision Solar
International, Inc.
promises to pay
William S. Adelson
$32655.86
and interest at the yearly rate of 5% on the unpaid balance as specified
below.
2.
Installments.
o
Borrower will
pay__________________payments of $__________________each at
monthly/yearly/__________________ntervals on the____________ay of
the
month.
x
Borrower will
pay one lump payment of $34,884.30 on 12/31/09.
o
Borrower will
pay____________payments of $_______________each at
monthly/yearly/________________ntervals with a final balloon
payment
of__________at the end of the loan term on______________date.
3.
Application of Payments.
Payments will be applied first to interest and then to
principal.
4.
Prepayment.
Borrower may
prepay all or any part of the principal without penalty.
5.
Loan Acceleration.
It
borrower is more
than______________days late in making any payment. Lender may declare that
the
entire balance of unpaid principal is due immediately, together with the
interest that has accrued.
7.
Security
o
This is an
unsecured note.
x
Borrower
agrees that until the principal and interest owed under this promissory note are
paid in full, this note will be secured by a security agreement and Uniform
Commercial Code Financing statement giving Lender a
security
interest in the equipment, fixtures, inventory and accounts receivable of the
business known as Envision Solar International, Inc.
o
Borrower agrees that until the principal and interest owed under
this promissory note are paid in full, this note will be secured by
the
o
mortgage__________________________
o
deed of
trust covering the real estate commonly known as
and more
fully described as
follows:____________________________
8.
Collection Costs.
If Lender
prevails in a lawsuit to collect on this note, Borrower will pay Lender's costs
and
lawyer's
fees in an amount the court finds to be reasonable.
The
undersigned and all other parties to this note, whether as endorsers, guarantors
or sureties, agree to remain fully bound until this note shall be fully paid and
waive demand, presentment and protest and all notices hereto and further agree
to remain bound notwithstanding any extension, modification, waiver, or other
indulgence or discharge or release of any obligor hereunder or exchange,
substitution, or release of any collateral granted as security for this note. No
modification or indulgence by any holder hereof shall be binding unless in
writing; and any indulgence on any one occasion shall not be an indulgence for
any other or future occasion. Any modification or change in terms, hereunder
granted by any holder hereof, shall be valid and binding upon each of the
undersigned, notwithstanding the acknowledgement of any of the undersigned, and
each of the undersigned does hereby irrevocably grant to each of the others a
power of attorney to enter into any such modification on their behalf. The
rights of any holder hereof shall be cumulative and not necessarily successive.
This note shall take effect as a sealed instrument and shall be construed,
governed and enforced in accordance with the laws of the State of
California
Adelson
Note Payable
5%
5/1/2009
|
Date
|
|
Amount
|
|
|
Annual
Interest
|
|
|
# Days
|
|
|
Interest
|
|
|
Total
|
|
Description
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1/5/2009
|
|
|
18,020.00
|
|
|
|
901.00
|
|
|
|
146
|
|
|
|
360.40
|
|
|
|
18,380.40
|
|
Jan 09 Rent + bank
fee
|
|
1/12/2009
|
|
|
12,620.00
|
|
|
|
631.00
|
|
|
|
139
|
|
|
|
240.30
|
|
|
|
12,860.30
|
|
Arch
icad payoff
|
|
1/16/2009
|
|
|
2,015.86
|
|
|
|
100.79
|
|
|
|
135
|
|
|
|
37.28
|
|
|
|
2,053.14
|
|
Payroll for J
Lindenfeld
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32,655.86
|
|
|
|
|
|
|
|
|
|
|
|
637.98
|
|
|
$
|
33,293.84
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6/30/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
136.07
|
|
|
|
|
|
|
|
7/31/09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
136.07
|
|
|
|
|
|
|
|
8/31/09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
136.07
|
|
|
|
|
|
|
|
9/30/09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
136.07
|
|
|
|
|
|
|
|
10/31/09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
136.07
|
|
|
|
|
|
|
|
11/30/09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
136.07
|
|
|
|
|
|
|
|
12/31/09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
136.07
|
|
|
|
|
|
|
|
Total
Due
|
|
|
32,655.86
|
|
|
|
|
|
|
|
|
|
|
|
1,590.46
|
|
|
|
34,246.32
|
|
|
3
Exhibit
10.7
SECURITIES
PURCHASE AGREEMENT
This
Securities Purchase Agreement (this “
Agreement
”) is dated
as of November 12, 2008 between Envision Solar International, Inc., a California
corporation (the “
Company
”), and Gemini
Master Fund, Ltd. (including its successors and assigns, the “
Purchaser
”).
WHEREAS,
subject to the terms and conditions set forth in this Agreement and pursuant to
Section 4(2) of the Securities Act of 1933, as amended (“
Securities Act
”), and
Regulation D promulgated thereunder, the Company desires to issue and sell to
the Purchaser, and the Purchaser desires to purchase from the Company,
securities of the Company as more fully described in this
Agreement.
NOW,
THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement,
and for other good and valuable consideration, the receipt and adequacy of which
are hereby acknowledged, the Company and the Purchaser agree as
follows:
ARTICLE
I.
DEFINITIONS
1.1
Definitions
. In
addition to the terms defined elsewhere in this Agreement: (a) capitalized terms
that are not otherwise defined herein have the meanings given to such terms in
the Note (as defined herein), and (b) the following terms have the meanings set
forth in this Section 1.1:
“
Action
” shall have
the meaning ascribed to such term in Section 3.1(j).
“
Affiliate
” means any
Person that, directly or indirectly through one or more intermediaries, controls
or is controlled by or is under common control with a Person.
“
Board of Directors
”
means the board of directors of the Company.
“
Business Day
” means
any day except any Saturday, any Sunday, any day which is a federal legal
holiday in the United States or any day on which banking institutions in the
State of New York are authorized or required by law or other governmental action
to close.
“
Closing
” means the
closing of the purchase and sale of the Note pursuant to Section
2.1.
“
Closing Date
” means
the Business Day when all of the Transaction Documents have been executed and
delivered by the applicable parties thereto, and all conditions precedent to (i)
the Purchaser’s obligations to pay the Subscription Amount and (ii) the
Company’s obligations to deliver the Note, have been satisfied or
waived.
“
Contingent
Obligation
” means, as to any Person, any direct or indirect liability,
contingent or otherwise, of that Person with respect to any indebtedness, lease,
dividend or other obligation of another Person if the primary purpose or intent
of such other Person incurring such liability, or the primary effect thereof, is
to provide assurance to the obligee of such liability that such liability will
be paid or discharged, or that any agreements relating thereto will be complied
with, or that the holders of such liability will be protected (in whole or in
part) against loss with respect thereto.
“
Disclosure Schedules
”
shall have the meaning ascribed to such term in Section 3.1.
“
Exchange Act
” means
the Securities Exchange Act of 1934, as amended.
“
GAAP
” shall have the
meaning ascribed to such term in Section 3.1(h).
“
Indebtedness
” of any
Person means (a) all indebtedness for borrowed money, (b) all obligations
issued, undertaken or assumed as the deferred purchase price of property or
services, except for trade payables entered into in the ordinary course of
business, (c) all obligations in respect of letters of credit, surety bonds,
bankers acceptances or similar instruments (including without limitation all
reimbursement or payment obligations with respect thereto), (d) 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, (e) all indebtedness created or arising under
any conditional sale or other title retention agreement, or incurred as
financing, in either case with respect to any property or assets acquired with
the proceeds of such indebtedness (even if the rights and remedies of the seller
or bank under such agreement in the event of default are limited to repossession
or sale of such property), (f) all monetary obligations under any leasing or
similar arrangement which is classified as a “capital lease” under GAAP, and (g)
all Contingent Obligations in respect of Indebtedness of others of the kinds
referred to in clauses (a) through (f) above.
“
Intellectual Property
Rights
” shall have the meaning ascribed to such term in Section
3.1(o).
“
IP Security
Agreement
” means the Intellectual Property Security Agreement(s), dated
on or about the date hereof, by the Company and certain Subsidiaries in favor of
the Purchaser, in the form of
Exhibit C
attached
hereto, securing the obligations of the Company under the Note and other
Transaction Documents.
“
Liens
” means a lien,
charge, security interest, encumbrance, right of first refusal, preemptive right
or other restriction.
“
Material Adverse
Effect
” shall have the meaning assigned to such term in Section
3.1(b).
“
Material Permits
”
shall have the meaning ascribed to such term in Section 3.1(m).
“
Maximum Rate
” shall
have the meaning ascribed to such term in Section 5.15.
“
Note
” means the
Secured Bridge Note issued by the Company to the Purchaser hereunder, in the
form of
Exhibit
A
attached hereto and having an original Principal Amount of
$591,770.83.
“
Person
” means an
individual or corporation, partnership, trust, incorporated or unincorporated
association, joint venture, limited liability company, joint stock company,
government (or an agency or subdivision thereof) or other entity of any
kind.
“
Principal Amount
”
shall mean $591,770.83.
“
Proceeding
” means an
action, claim, suit, investigation or proceeding (including, without limitation,
an informal investigation or partial proceeding, such as a deposition), whether
commenced or threatened.
“
Purchaser Party
”
shall have the meaning ascribed to such term in Section 4.2.
“
Reverse Merger
Transaction
” means a transaction in which the Company directly or
indirectly (a) merges or consolidates with, or in one or a series of related
transaction sells all or substantially all of its and its Subsidiaries’ assets
to, an entity that is required, or whose parent is a corporation that is
required, to file reports pursuant to Section 13 or 15(d) under the Exchange Act
(a “
Public
Company
”) that is required or permitted to be accounted for by the Public
Company as a “reverse acquisition” under GAAP, and (b) at or about the time of
such transaction described in clause (a), the Company and/or such Public Company
sells securities in a capital raising transaction (“
Reverse Merger
Financing
”).
“
Securities
” shall
have the meaning set forth in 3.2(c).
“
Securities Act
” means
the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder
“
Security Agreement
”
means the Security Agreement, dated on or about the date hereof, by the Company
in favor of the Purchaser, in the form of
Exhibit B
attached
hereto, securing the obligations of the Company and its Subsidiaries under the
Note and other Transaction Documents.
“
Security Documents
”
means any and all security agreements, pledge agreements, hypothecation
agreements, collateral assignments, mortgages, deeds of trust, control
agreements and similar such agreements, executed and delivered by the Company,
any of its Subsidiaries and/or any third party in favor of the Purchaser
pursuant to the Transaction Documents which secures the Company’s and its
Subsidiaries obligations under the Transaction Documents, and other documents
executed, delivered and/or filed by the Company, any of its Subsidiaries, any
third party and/or the Purchaser as permitted or required under any of the
foregoing, including without limitation the Security Agreement and the IP
Security Agreement.
“
Subscription Amount
”
means $500,000 in United States dollars and in immediately available funds,
which is the aggregate amount to be paid for the Note purchased hereunder by the
Purchaser.
“
Subsidiary
” means any
subsidiary of the Company as set forth on
Schedule 3.1(a)
and
shall, where applicable, include any direct or indirect subsidiary of the
Company formed or acquired after the date hereof. In Section 3.1
hereof, references to the Company shall refer to the Company together with its
Subsidiaries, as applicable.
“
Subsidiary Guarantee
”
means the Subsidiary Guarantee, in the form attached hereto as
Exhibit D
, executed
by each Subsidiary in favor of the Purchaser, guaranteeing the Company’s
obligations under the Note.
“
Transaction
Documents
” means this Agreement, the Note, the Subsidiary Guarantee, the
Security Documents and all exhibits and schedules thereto and hereto and any
other documents or agreements executed in connection with the transactions
contemplated hereunder.
ARTICLE
II.
PURCHASE
AND SALE
2.1
Closing
. On
the Closing Date, upon the terms and subject to the conditions set forth herein,
substantially concurrent with the execution and delivery of this Agreement by
the parties hereto, the Company agrees to sell, and the Purchaser agrees to
purchase, the Note in the principal amount of $591,770.83 for a purchase price
equal to the Subscription Amount. The Purchaser shall deliver to the
Company, via wire transfer, immediately available funds equal to the
Subscription Amount and the Company shall deliver the Note to the Purchaser, and
the Company and the Purchaser shall deliver the other items set forth in Section
2.2 deliverable at the Closing. Upon satisfaction of the conditions
set forth in Sections 2.2 and 2.3, the Closing shall occur at the offices of
Peter J. Weisman, P.C. located at 767 Third Avenue, 6th Floor, New York, New
York 10017, or such other location as the parties shall mutually
agree.
2.2
Deliveries
.
(a)
On the
Closing Date, the Company shall deliver or cause to be delivered to the
Purchaser the following:
(i)
this
Agreement duly executed by the Company;
(ii)
legal
opinions of counsel to the Company, in substantially the form and substance
attached hereto as Exhibit E;
(iii)
the Note
registered in the name of the Purchaser;
(iv)
the
Security Documents, including without limitation the Security Agreement and the
IP Security Agreement(s) reasonably requested by the Purchaser, duly executed by
the Company and each Subsidiary; and
(v)
the
Subsidiary Guarantee, duly executed by each Subsidiary of the
Company.
(b)
On the
Closing Date, the Purchaser shall deliver or cause to be delivered to the
Company the following:
(i)
this
Agreement duly executed by the Purchaser;
(ii)
the
Subscription Amount by wire transfer to the account as specified in writing by
the Company; and
(iii)
the
Security Documents to which the Purchaser is a party and required by law to be
signed by such Party in order to be binding.
2.3
Closing
Conditions
.
(a)
The
obligations of the Company hereunder in connection with the Closing are subject
to the following conditions being met:
(i)
the
accuracy in all material respects when made and on the Closing Date of the
representations and warranties of the Purchaser contained herein;
(ii)
all
obligations, covenants and agreements of the Purchaser required to be performed
at or prior to the Closing Date shall have been performed; and
(iii)
the
delivery by the Purchaser of the items set forth in Section 2.2(b) of this
Agreement.
(b)
The
respective obligations of the Purchaser hereunder in connection with the Closing
are subject to the following conditions being met:
(i)
the
accuracy in all material respects when made and on the Closing Date of the
representations and warranties of the Company contained herein;
(ii)
all
obligations, covenants and agreements of the Company required to be performed at
or prior to the Closing Date shall have been performed;
(iii)
the
delivery by the Company of the items set forth in Section 2.2(a) of this
Agreement;
(iv)
there
shall have been no Material Adverse Effect with respect to the Company since the
date hereof; and
(v)
from the
date hereof to the Closing Date, trading in securities generally as reported by
Bloomberg L.P. shall not have been suspended or limited, or minimum prices shall
not have been established on securities whose trades are reported by such
service, on any national securities exchange or market, nor shall a banking
moratorium have been declared either by the United States or New York State
authorities nor shall there have occurred any material outbreak or escalation of
hostilities or other national or international calamity of such magnitude in its
effect on, or any material adverse change in, any financial market which, in
each case, in the reasonable judgment of the Purchaser, makes it impracticable
or inadvisable to purchase the Note at the Closing.
ARTICLE
III.
REPRESENTATIONS
AND WARRANTIES
3.1
Representations and
Warranties of the Company
. Except as set forth under the
corresponding section of the disclosure schedules delivered to the Purchaser
concurrently herewith (“
Disclosure
Schedules
”) which Disclosure Schedules shall be deemed a part hereof, the
Company hereby makes the following representations and warranties to the
Purchaser:
(a)
Subsidiaries
. All
of the direct and indirect subsidiaries of the Company are set forth on
Schedule
3.1(a)
. Except as otherwise set forth on such schedule, the
Company owns, directly or indirectly, all of the capital stock or other equity
interests of each Subsidiary free and clear of any Liens, and all of the issued
and outstanding shares of capital stock of each Subsidiary are validly issued
and are fully paid, non-assessable and free of preemptive and similar rights to
subscribe for or purchase securities. All Subsidiaries which are
designated as “inactive” on such schedule do not have any material assets and do
not engage in any operations and shall remain as such unless the Company first
notifies the Purchaser and executes and delivers any further Security Documents
reasonably requested by the Purchaser.
(b)
Organization and
Qualification
. The Company and each of the Subsidiaries is an
entity duly incorporated or otherwise organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or organization
(as applicable), with the requisite power and authority to own and use its
properties and assets and to carry on its business as currently
conducted. Neither the Company nor any Subsidiary is in violation or
default of any of the provisions of its respective certificate or articles of
incorporation, bylaws or other organizational or charter
documents. Each of the Company and the Subsidiaries is duly qualified
to conduct business and is in good standing as a foreign corporation or other
entity in each jurisdiction in which the nature of the business conducted or
property owned by it makes such qualification necessary, except where the
failure to be so qualified or in good standing, as the case may be, could not
have or reasonably be expected to result in (i) a material adverse effect on the
legality, validity or enforceability of any Transaction Document, (ii) a
material adverse effect on the results of operations, assets, business,
prospects or condition (financial or otherwise) of the Company and the
Subsidiaries, taken as a whole, or (iii) a material adverse effect on the
Company’s and any Subsidiary’s ability to perform in any material respect on a
timely basis its obligations under any Transaction Document (any of (i), (ii) or
(iii), a “
Material
Adverse Effect
”) and no Proceeding has been instituted in any such
jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or
curtail such power and authority or qualification. The Company has
furnished to the Purchaser true and correct copies of the Company’s articles of
incorporation and by-laws, as each is currently in effect.
(c)
Authorization;
Enforcement
. The Company has the requisite corporate power and
authority to enter into and to consummate the transactions contemplated by each
of the Transaction Documents and otherwise to carry out its obligations
hereunder and thereunder. The execution and delivery of each of the
Transaction Documents by the Company and the consummation by it of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary action on the part of the Company and no further action is required by
the Company, the Board of Directors or the Company’s stockholders in connection
therewith. Each Transaction Document has been (or upon delivery will
have been) duly executed by the Company and, when delivered in accordance with
the terms hereof and thereof, will constitute the valid and binding obligation
of the Company enforceable against the Company in accordance with its terms,
except (i) as limited by general equitable principles and applicable bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting enforcement of creditors’ rights generally, (ii) as limited by laws
relating to the availability of specific performance, injunctive relief or other
equitable remedies and (iii) insofar as indemnification and contribution
provisions may be limited by applicable law.
(d)
No
Conflicts
. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the
other transactions contemplated hereby and thereby do not and will not: (i)
conflict with or violate any provision of the Company’s or any Subsidiary’s
certificate or articles of incorporation, bylaws or other organizational or
charter documents, or (ii) conflict with, or constitute a default (or an event
that with notice or lapse of time or both would become a default) under, result
in the creation of any Lien upon any of the properties or assets of the Company
or any Subsidiary (other than Liens in favor of the Purchaser), or give to
others any rights of termination, amendment, acceleration or cancellation (with
or without notice, lapse of time or both) of, any agreement, credit facility,
debt or other instrument (evidencing a Company or Subsidiary debt or otherwise)
or other understanding to which the Company or any Subsidiary is a party or by
which any property or asset of the Company or any Subsidiary is bound or
affected, or (iii) conflict with or result in a violation of any law, rule,
regulation, order, judgment, injunction, decree or other restriction of any
court or governmental authority to which the Company or a Subsidiary is subject
(including federal and state securities laws and regulations), or by which any
property or asset of the Company or a Subsidiary is bound or affected; except in
the case of each of clauses (ii) and (iii), such as could not have or reasonably
be expected to result in a Material Adverse Effect.
(e)
Filings, Consents and
Approvals
. The Company is not required to obtain any consent,
waiver, authorization or order of, give any notice to, or make any filing or
registration with, any court or other federal, state, local or other
governmental authority or other Person in connection with the execution,
delivery and performance by the Company of the Transaction Documents, other than
the filing of Form D with the U.S. Securities and Exchange Commission and such
filings as are required to be made under applicable state securities
laws.
(f)
Issuance of the
Note
. The Note is duly authorized and, when issued and paid
for in accordance with the applicable Transaction Documents, will be duly and
validly issued, fully paid and nonassessable, free and clear of all Liens
imposed by the Company other than restrictions on transfer provided for in the
Transaction Documents.
(g)
Capitalization
. The
capitalization of the Company is as set forth on
Schedule
3.1(g)
. No Person has any right of first refusal, preemptive
right, right of participation, or any similar right to participate in the
transactions contemplated by the Transaction Documents. There are no
outstanding options, warrants, scrip rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities, rights or
obligations convertible into or exercisable or exchangeable for, or giving any
Person any right to subscribe for or acquire, any shares of capital stock, or
contracts, commitments, understandings or arrangements by which the Company or
any Subsidiary is or may become bound to issue additional shares of capital
stock. The issuance and sale of the Notes will not obligate the
Company to issue shares of capital stock or other securities to any Person
(other than the Purchaser) and will not result in a right of any holder of
Company securities to adjust the exercise, conversion, exchange or reset price
under any of such securities. All of the outstanding shares of capital stock of
the Company are validly issued, fully paid and nonassessable, have been issued
in compliance with all federal and state securities laws, and none of such
outstanding shares was issued in violation of any preemptive rights or similar
rights to subscribe for or purchase securities. No further approval
or authorization of any stockholder, the Board of Directors or others is
required for the issuance and sale of the Notes. There are no
stockholders agreements, voting agreements or other similar agreements with
respect to the Company’s capital stock to which the Company is a party or, to
the knowledge of the Company, between or among any of the Company’s
stockholders.
(h)
Financial
Statements
. The financial statements of the Company provided
to the Purchaser have been prepared in accordance with United States generally
accepted accounting principles applied on a consistent basis during the periods
involved (“
GAAP
”), except as may
be otherwise specified in such financial statements or the notes thereto and
except that the financial statements may not contain all footnotes required by
GAAP, and fairly present in all material respects the financial position of the
Company and its consolidated Subsidiaries as of and for the dates thereof and
the results of operations and cash flows for the periods then ended, subject to
normal, immaterial, year-end audit adjustments.
(i)
Material
Changes
. Except as set forth on
Schedule 3.1(i)
,
since December 31, 2007 (i) there has been no event, occurrence or development
that has had or that could reasonably be expected to result in a Material
Adverse Effect, (ii) the Company has not incurred any liabilities (contingent or
otherwise) other than (A) trade payables and accrued expenses incurred in the
ordinary course of business consistent with past practice and (B) liabilities
not required to be reflected in the Company’s financial statements pursuant to
GAAP, (iii) the Company has not altered its method of accounting, (iv) the
Company has not declared or made any dividend or distribution of cash or other
property to its stockholders or purchased, redeemed or made any agreements to
purchase or redeem any shares of its capital stock and (v) the Company has not
issued any equity securities to any officer, director or Affiliate, except
pursuant to existing Company stock option plans.
(j)
Litigation
. There
is no action, suit, inquiry, notice of violation, proceeding or investigation
pending or, to the knowledge of the Company, threatened against or affecting the
Company, any Subsidiary or any of their respective properties before or by any
court, arbitrator, governmental or administrative agency or regulatory authority
(federal, state, county, local or foreign) (collectively, an “
Action
”) which (i)
adversely affects or challenges the legality, validity or enforceability of any
of the Transaction Documents or (ii) could, if there were an unfavorable
decision, have or reasonably be expected to result in a Material Adverse
Effect. Neither the Company nor any Subsidiary, nor any director or
officer thereof, is or has been the subject of any Action involving a claim of
breach of fiduciary duty.
(k)
Labor
Relations
. No material labor dispute exists or, to the
knowledge of the Company, is imminent with respect to any of the employees of
the Company which could reasonably be expected to result in a Material Adverse
Effect. None of the Company’s or its Subsidiaries’ employees is a
member of a union that relates to such employee’s relationship with the Company
or such Subsidiary, and neither the Company nor any of its Subsidiaries is a
party to a collective bargaining agreement, and the Company and its Subsidiaries
believe that their relationships with their employees are good. No
executive officer, to the knowledge of the Company, is, or is now expected to
be, in violation of any material term of any employment contract,
confidentiality, disclosure or proprietary information agreement or
non-competition agreement, or any other contract or agreement or any restrictive
covenant in favor of any third party, and the continued employment of each such
executive officer does not, to the knowledge of the Company, subject the Company
or any of its Subsidiaries to any liability with respect to any of the foregoing
matters. The Company and its Subsidiaries are in compliance with all
U.S. federal, state, local and foreign laws and regulations relating to
employment and employment practices, terms and conditions of employment and
wages and hours, except where the failure to be in compliance could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
(l)
Compliance
. Neither
the Company nor any Subsidiary (i) is in default under or in violation of (and
no event has occurred that has not been waived that, with notice or lapse of
time or both, would result in a default by the Company or any Subsidiary under),
nor has the Company or any Subsidiary received notice of a claim that it is in
default under or that it is in violation of, any indenture, loan or credit
agreement or any other agreement or instrument to which it is a party or by
which it or any of its properties is bound (whether or not such default or
violation has been waived), (ii) is in violation of any order of any court,
arbitrator or governmental body, or (iii) is or has been in violation of any
statute, rule or regulation of any governmental authority, including without
limitation all foreign, federal, state and local laws applicable to its business
and all such laws that affect the environment, except in each case as could not
have or reasonably be expected to result in a Material Adverse
Effect.
(m)
Regulatory
Permits
. The Company and the Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct their
respective businesses as currently contemplated, except where the failure to
possess such permits could not reasonably be expected to result in a Material
Adverse Effect (“
Material Permits
”),
and neither the Company nor any Subsidiary has received any notice of
proceedings relating to the revocation or modification of any Material
Permit.
(n)
Title to
Assets
. The Company and the Subsidiaries have good and
marketable title in fee simple to all real property owned by them and good and
marketable title in all personal property owned by them that is material to the
business of the Company and the Subsidiaries, as the case may be, in each case
free and clear of all Liens, except for Liens as do not materially affect the
value of such property and do not materially interfere with the use made and
proposed to be made of such property by the Company and the Subsidiaries and
Liens for the payment of federal, state or other taxes, the payment of which is
neither delinquent nor subject to penalties. Any real property and
facilities held under lease by the Company and the Subsidiaries are held by them
under valid, subsisting and enforceable leases with which the Company and the
Subsidiaries are in compliance.
(o)
Patents and
Trademarks
. The Company and the Subsidiaries have, or have
rights to use, all patents, patent applications, trademarks, trademark
applications, service marks, trade names, trade secrets, inventions, copyrights,
licenses and other intellectual property rights and similar rights necessary or
material for use in connection with their respective businesses as currently
contemplated and which the failure to so have could have a Material Adverse
Effect (collectively, the “
Intellectual Property
Rights
”). Neither the Company nor any Subsidiary has received
a notice (written or otherwise) that any of the Intellectual Property Rights
used by the Company or any Subsidiary violates or infringes upon the rights of
any Person. To the knowledge of the Company, all such Intellectual Property
Rights are enforceable and, to the knowledge of the Company, there is no
existing infringement by another Person of any of the Intellectual Property
Rights. The Company and its Subsidiaries have taken reasonable security measures
to protect the secrecy, confidentiality and value of all of their intellectual
properties, except where failure to do so could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
The Company has duly and
properly filed or caused to be filed with the United States Patent and Trademark
Office (the “
PTO
”) and applicable
foreign and international patent authorities all patent applications owned by
the Company (the “
Company Patent
Applications
”). To the knowledge of the Company, the Company has complied
with the PTO’s duty of candor and disclosure for the Company Patent Applications
and has made no material misrepresentation in the Company Patent
Applications. The Company is not aware of any information material to
a determination of patentability regarding the Company Patent Applications not
called to the attention of the PTO or similar foreign authority. The
Company is not aware of any information not called to the attention of the PTO
or similar foreign authority that would preclude the grant of a patent for the
Company Patent Applications. The Company has no knowledge of any
information that would preclude the Company from having clear title to the
Company Patent Applications.
(p)
Insurance
. The
Company and the Subsidiaries are insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as are prudent
and customary in the businesses in which the Company and the Subsidiaries are
engaged. Neither the Company nor any Subsidiary has any 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.
(q)
Transactions with Affiliates
and Employees
. None of the officers or directors of the
Company and, to the knowledge of the Company, none of the employees of the
Company is presently a party to any transaction with the Company or any
Subsidiary (other than for services as employees, officers and directors),
including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company, any entity in
which any officer, director, or any such employee has a substantial interest or
is an officer, director, trustee or partner, in each case in excess of $25,000
other than for (i) payment of salary or consulting fees for services rendered,
(ii) reimbursement for expenses incurred on behalf of the Company and (iii)
other employee benefits, including stock option agreements under any stock
option plan of the Company.
(r)
Internal Accounting
Controls
. The Company and the Subsidiaries maintain a system
of internal accounting controls sufficient to provide reasonable assurance that
(i) transactions are executed in accordance with management’s general or
specific authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to maintain
asset accountability, (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 the existing assets at reasonable
intervals and appropriate action is taken with respect to any
differences.
(s)
Investment Company
.
The Company is not, and is not an Affiliate of, and immediately after receipt of
payment for the Note, will not be or be an Affiliate of, an “investment company”
within the meaning of the Investment Company Act of 1940, as
amended. The Company shall conduct its business in a manner so that
it will not become subject to the Investment Company Act of 1940, as
amended.
(t)
Disclosure
. All
written disclosure furnished by or on behalf of the Company to the Purchaser
regarding the Company, its business and the transactions contemplated hereby,
including the Disclosure Schedules to this Agreement, is true and correct and
does 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. The press
releases disseminated by the Company during the twelve months preceding the date
of this Agreement taken as a whole do not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made and when made, not misleading.
(u)
Solvency
. Based
on the consolidated financial condition of the Company as of the Closing Date
after giving effect to the receipt by the Company of the proceeds from the sale
of the Note hereunder, (i) the fair saleable value of the Company’s assets
exceeds the amount that will be required to be paid on or in respect of the
Company’s existing debts and other liabilities (including known contingent
liabilities) as they mature, (ii) the Company’s assets do not constitute
unreasonably small capital to carry on its business as now conducted and as
proposed to be conducted including its capital needs taking into account the
particular capital requirements of the business conducted by the Company, and
projected capital requirements and capital availability thereof, and (iii) the
current cash flow of the Company, together with the proceeds the Company would
receive, were it to liquidate all of its assets, after taking into account all
anticipated uses of the cash, would be sufficient to pay all amounts on or in
respect of its liabilities when such amounts are required to be
paid. The Company does not intend to incur debts beyond its ability
to pay such debts as they mature (taking into account the timing and amounts of
cash to be payable on or in respect of its debt). The Company has no
knowledge of any facts or circumstances which lead it to believe that it will
file for reorganization or liquidation under the bankruptcy or reorganization
laws of any jurisdiction within one year from the Closing Date.
(v)
Indebtedness
.
Schedule 3.1(v)
sets
forth as of the date hereof all outstanding secured and unsecured Indebtedness
of the Company and its Subsidiaries, or for which the Company and its
Subsidiaries have commitments, in excess of $25,000.
(w)
Tax
Status
. Except for matters that would not, individually or in
the aggregate, have or reasonably be expected to result in a Material Adverse
Effect, each of the Company and each Subsidiary has filed all necessary federal,
state and foreign income and franchise tax returns and has paid or accrued all
taxes shown as due thereon (unless and only to the extent that the Company and
each of its Subsidiaries has set aside on its books provisions reasonably
adequate for the payment of all unpaid taxes), and the Company has no knowledge
of a tax deficiency which has been asserted or threatened against the Company or
any Subsidiary (except those being contested in good faith).
(x)
No General
Solicitation
. Neither the Company nor any person acting on behalf of the
Company has offered or sold any of the securities by any form of general
solicitation or general advertising.
(y)
No Integrated Offering or
Sale
. 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 cause the sale of the Note to the Purchaser to be
integrated with prior offerings by the Company for purposes of the Securities
Act or any applicable shareholder approval provisions, nor will the Company or
any of its Subsidiaries take any action or steps that would cause the sale of
the Note to be integrated with other offerings.
(z)
Foreign Corrupt
Practices.
Neither the Company, nor to the knowledge of the
Company, any agent or other person acting on behalf of the Company, has (i)
directly or indirectly, used any funds for unlawful contributions, gifts,
entertainment or other unlawful expenses related to foreign or domestic
political activity, (ii) made any unlawful payment to foreign or domestic
government officials or employees or to any foreign or domestic political
parties or campaigns from corporate funds, (iii) failed to disclose fully any
contribution made by the Company (or made by any person acting on its behalf of
which the Company is aware) which is in violation of law, or (iv) violated in
any material respect any provision of the Foreign Corrupt Practices Act of 1977,
as amended.
(aa)
Seniority
. As
of the Closing Date, no Indebtedness or other claim against the Company is
senior to the Note in right of payment, whether with respect to interest or upon
liquidation or dissolution, or otherwise, other than indebtedness secured by
purchase money security interests (which is senior only as to underlying assets
covered thereby) and capital lease obligations (which is senior only as to the
property covered thereby).
(bb)
Acknowledgment Regarding the
Purchaser’s Purchase of the Note
. The Company acknowledges and
agrees that the Purchaser is acting solely in the capacity of an arm’s length
purchaser with respect to the Transaction Documents and the transactions
contemplated thereby. The Company further acknowledges that the Purchaser is not
acting as a financial advisor or fiduciary of the Company (or in any similar
capacity) with respect to the Transaction Documents and the transactions
contemplated thereby and any advice given by the Purchaser or any of their
respective representatives or agents in connection with the Transaction
Documents and the transactions contemplated thereby is merely incidental to the
Purchaser’s purchase of the Note. The Company further represents to
the Purchaser that the Company’s decision to enter into this Agreement and the
other Transaction Documents has been based solely on the independent evaluation
of the transactions contemplated hereby by the Company and its
representatives.
(cc)
Accounts
Receivable
. All notes and accounts receivable of the Company and
its Subsidiaries are reflected properly on their books and records, are valid
receivables subject to no setoffs or counterclaims, are current and collectible,
and will be collected in accordance with their terms at their recorded amounts,
subject only to the reserve for bad debts or an aging of accounts and notes
receivable, in each case provided to the Purchaser, as adjusted for the passage
of time through the Closing Date in accordance with the past custom and practice
of the Company and its Subsidiaries.
3.2
Representations and
Warranties of the Purchaser
. The Purchaser hereby represents
and warrants as of the date hereof and as of the Closing Date to the Company as
follows:
(a)
Organization;
Authority
. The Purchaser is an entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization with full right, corporate or partnership power and authority to
enter into and to consummate the transactions contemplated by the Transaction
Documents and otherwise to carry out its obligations hereunder and thereunder.
The execution and delivery of the Transaction Documents and performance by the
Purchaser of the transactions contemplated by the Transaction Documents have
been duly authorized by all necessary corporate or similar action on the part of
the Purchaser. Each Transaction Document to which it is a party has
been duly executed by the Purchaser, and when delivered by the Purchaser in
accordance with the terms hereof, will constitute the valid and legally binding
obligation of the Purchaser, enforceable against it in accordance with its
terms, except (i) as limited by general equitable principles and applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting enforcement of creditors’ rights generally, (ii) as
limited by laws relating to the availability of specific performance, injunctive
relief or other equitable remedies and (iii) insofar as indemnification and
contribution provisions may be limited by applicable law.
(b)
Approvals and
Consents
. No action, approval, consent or authorization, including, but
not limited to, any action, approval, consent or authorization by any
governmental or quasi-governmental agency, commission, board, bureau, or
instrumentality is necessary or required as to such Purchaser in order to
constitute this Agreement as a valid, binding and enforceable obligation of such
Purchaser in accordance with its terms.
(c)
Own Account
. The
Purchaser understands that the Note and Common Shares (as defined below)
(collectively, “Securities”) are “restricted securities” and have not been
registered under the Securities Act or any applicable state securities law and
is acquiring the Securities as principal for its own account and not with a view
to or for distributing or reselling such Securities or any part thereof in
violation of the Securities Act or any applicable state securities law, has no
present intention of distributing any of such Securities in violation of the
Securities Act or any applicable state securities law and has no direct or
indirect arrangement or understandings with any other persons to distribute or
regarding the distribution of such Securities in violation of the Securities Act
or any applicable state securities law. The Purchaser is acquiring the
Securities hereunder in the ordinary course of its business.
(d)
Purchaser Status
. At
the time the Purchaser was offered the Securities, it was, and at the date
hereof it is: (i) an “accredited investor” as defined in Rule 501(a)(1), (a)(2),
(a)(3), (a)(7) or (a)(8) under the Securities Act or (ii) a “qualified
institutional buyer” as defined in Rule 144A(a) under the Securities Act. The
Purchaser is not required to be registered as a broker-dealer under Section 15
of the Exchange Act.
(e)
Experience of the
Purchaser
. The Purchaser, either alone or together with its
representatives, has such knowledge, sophistication and experience in business
and financial matters so as to be capable of evaluating the merits and risks of
the prospective investment in the Securities, and has so evaluated the merits
and risks of such investment. The Purchaser is able to bear the economic risk of
an investment in the Securities and, at the present time, is able to afford a
complete loss of such investment.
(f)
General Solicitation
.
The Purchaser is not purchasing the Securities as a result of any advertisement,
article, notice or other communication regarding the Securities published in any
newspaper, magazine or similar media or broadcast over television or radio or
presented at any seminar or any other general solicitation or general
advertisement.
(g)
Available
Information
. The Purchaser (i) has been provided an
opportunity for a reasonable time prior to the date hereof to obtain additional
information concerning the purchase of the Note (the “
Offering
”), the
Company and all other information to the extent the Company possesses such
information or can acquire it without unreasonable effort or expense; (ii) has
been given the opportunity for a reasonable time prior to the date hereof to ask
questions of, and receive answers from, the Company or its representatives
concerning the terms and conditions of the Offering and other matters pertaining
to an investment in the Securities, or that which was otherwise provided in
order for them to evaluate the merits and risks of a purchase of the Securities
to the extent the Company possesses such information or can acquire it without
unreasonable effort or expense; and (iii) has determined that the Securities are
a suitable investment for such Purchaser.
ARTICLE
IV.
OTHER
AGREEMENTS OF THE PARTIES
4.1
Transfer
Restrictions
.
(a)
The
Securities may only be disposed of in compliance with state and federal
securities laws. In connection with any transfer of the Securities
other than pursuant to an effective registration statement or Rule 144, (i) the
Company may, if reasonable, require the transferor thereof to provide to the
Company an opinion of counsel selected by the transferor and reasonably
acceptable to the Company, the form and substance of which opinion shall be
reasonably satisfactory to the Company, to the effect that such transfer does
not require registration of such transferred Securities under the Securities
Act, (ii) as a condition of such transfer, such transferee shall agree in
writing to be bound by the terms of this Agreement and shall make in writing the
representations and warranties contained in Section 3.2 (c), (d), (e) and (f) of
this Agreement, and (iii) any such transfer made which does not comply with this
sentence shall be null and void.
(b)
The
Purchaser agrees to the imprinting, so long as is required by this Section 4.1,
of a legend on any of the certificates for Common Shares in the following
form:
THIS
SECURITY HAS NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS.
(c)
The
Purchaser agrees that it will sell any Securities pursuant to either the
registration requirements of the Securities Act, including any applicable
prospectus delivery requirements, or an exemption therefrom.
(d)
Any
legend on any certificates for Securities shall be promptly removed following a
sale made in accordance with the plan of distribution of a registration
statement covering the resale of such Securities being declared effective and
compliance with the prospectus delivery requirements or following a sale made in
compliance with Rule 144.
4.2
Use of
Proceeds
. The Company shall use the net proceeds from the sale
of the Note hereunder for working capital purposes and shall not use such
proceeds for (a) the satisfaction of any portion of the Company’s debt (other
than payment of trade payables in the ordinary course of the Company’s business
and prior practices), (b) the redemption of any capital stock, (c) the
settlement of any outstanding litigation, or (d) making any investments in
securities or otherwise purchasing any equity or debt securities, including
without limitation purchasing any corporate, governmental, municipal or
auction-rate bonds or other debts instruments (whether at auction, in the open
market or otherwise), any commercial or chattel paper, or any certificates of
deposit, or investing in any money market or mutual funds.
4.3
Indemnification of the
Purchaser
. Subject to the provisions of this Section
4.3, the Company will indemnify and hold the Purchaser and its directors,
officers, shareholders, members, partners, employees and agents (each, a “
Purchaser Party
”)
harmless from any and all losses, liabilities, obligations, claims,
contingencies, damages, costs and expenses, including all judgments, amounts
paid in settlements, court costs and reasonable attorneys’ fees and costs of
investigation that any Purchaser Party may suffer or incur as a result of or
relating to (a) any breach of any of the representations, warranties, covenants
or agreements made by the Company in this Agreement or in the other Transaction
Documents or (b) any action instituted against the Purchaser in any capacity, or
any of them or their respective Affiliates, by any stockholder of the Company
with respect to any of the transactions contemplated by the Transaction
Documents (except to the extent such action is based upon a breach of the
Purchaser’s representations, warranties or covenants under the Transaction
Documents or any agreements or understandings the Purchaser may have with any
such stockholder or any violations by the Purchaser of state or federal
securities laws or any conduct by the Purchaser which constitutes fraud, gross
negligence, willful misconduct or malfeasance). If any action shall be brought
against any Purchaser Party in respect of which indemnity may be sought pursuant
to this Agreement, the Purchaser Party shall promptly notify the Company in
writing, and the Company shall have the right to assume the defense thereof with
counsel of its own choosing reasonably acceptable to the Purchaser
Party. Any Purchaser Party shall have the right to employ separate
counsel in any such action and participate in the defense thereof, but the fees
and expenses of such counsel shall be at the expense of such Purchaser Party
except to the extent that (i) the employment thereof has been specifically
authorized by the Company in writing, (ii) the Company has failed after a
reasonable period of time to assume such defense and to employ counsel or (iii)
in such action there
is, in
the reasonable opinion of such separate counsel, a material conflict on any
material issue between the position of the Company and the position of such
Purchaser Party, in which case the Company shall be responsible for the
reasonable fees and expenses of no more than one such separate
counsel. The Company will not be liable to any Purchaser Party under
this Agreement (A) for any settlement by such Purchaser Party effected without
the Company’s prior written consent, which shall not be unreasonably withheld or
delayed, or (B) to the extent, but only to the extent that a loss, claim, damage
or liability is attributable to any Purchaser Party’s breach of any of the
representations, warranties, covenants or agreements made by the Purchaser Party
in this Agreement or in the other Transaction Documents.
4.4
Security
. The
Company’s and any Subsidiaries’ obligations under the Note and other Transaction
Documents shall be secured by all the assets of the Company and its
Subsidiaries. As of the Closing, the Purchaser shall be granted a
security interest in all the assets of the Company, including without limitation
all of the Intellectual Property Rights and the Company’s ownership interests in
the Subsidiaries, and in the assets of such Subsidiaries, to be memorialized in
the Security Documents. The Company shall execute such other agreements,
documents and financing statements reasonably requested by the Purchaser, which
will be filed at the Company’s expense with the applicable jurisdictions and
authorities. The Company shall also execute all such documents
reasonably necessary in the opinion of the Purchaser to memorialize and further
protect the security interests described herein. The Purchaser may appoint a
collateral agent to represent it in connection with the security interest being
granted to the Purchaser.
4.5
Additional
Guarantors
. The Company shall cause each of its
Subsidiaries formed or acquired on or after the date hereof to execute and
deliver to the Purchaser a Subsidiary Guarantee and a Security Agreement in
conformity with those executed and delivered at Closing.
4.6
Operation of
Business
. So long as the Note remains outstanding, the Company (together
with its Subsidiaries) shall:
(a)
Insurance
. Maintain
in full force and effect insurance reasonably believed by the Company to be
adequate coverage (a) on all assets and activities, covering property loss or
damage and loss of income by fire or other hazards or casualty, and (b) against
all liabilities, claims and risks for which it is customary for companies
similarly situated to the Company to insure, including without limitation
applicable product liability insurance, required workmen’s compensation
insurance, and other insurance covering injury or damage to persons or
property. The Company shall promptly furnish or cause to be furnished
evidence of such insurance to the Purchaser upon request, in form and substance
reasonably satisfactory to the Purchaser.
(b)
Information on Adverse
Changes
. Promptly inform the Purchaser of (i) all material
adverse changes in the Company’s financial condition, (ii) all litigation and
claims and threatened litigation and claims against the Company or its
Subsidiaries, and (iii) any event, occurrence or other matter which has had or
could be reasonably expected to result in a Materially Adverse Effect or would
have a material adverse effect on the Collateral (as defined in the Security
Agreement).
(c)
Books and
Records
. Maintain its books and records in accordance
with GAAP applied on a consistent basis and permit the Purchaser to examine and
audit such books and records at reasonable times upon reasonable
notice.
(d)
Financial
Statements
. Furnish the Purchaser with, as soon as available,
but no later than 45 days following the end of each fiscal quarter, the
Company’s consolidated balance sheet, income statement, cash flow statement,
accounts receivable aging report, and current sales orders, prepared in
accordance with GAAP applied on a consistent basis.
(e)
Operations
. Substantially
maintain its present executive and management personnel, and conduct its
business affairs in a reasonable and prudent manner and in compliance with all
applicable foreign, federal, state and municipal laws, ordinances, rules and
regulations with respect to its properties, charters, businesses and operations
except where any such non-compliance would not reasonably be expected to result
in a Material Adverse Effect. Without the prior written consent of the
Purchaser, the Company shall not (i) engage in any business activities
substantially different than those in which the Company is presently engaged,
(ii) cease operations, liquidate, merge or consolidate with any other entity
(excluding a Reverse Merger Transaction), (iii) pay any dividends on or purchase
outstanding shares of capital stock or equity of the Company or its
Subsidiaries, or (iv) sell, transfer or dispose of (A) all or substantially all
of the Company’s assets on a consolidated basis or (B) any of the Company’s or
its Subsidiaries’ material assets.
(f)
Assets
. Upon
request of the Purchaser, furnish the Purchaser with detailed information
concerning each account receivable of the Company and its Subsidiaries, the
status of each patent, patent pending and other intellectual property, and the
status and terms of each letter of intent or contemplated letter of intent with
respect to potential solar installations, designs and/or construction by the
Company or its Subsidiaries.
4.7
Reverse Merger
Transaction
. The Purchaser shall have the right to participate
for up to $571,759.26 in any Reverse Merger Financing on the same terms and
conditions as all other investors in such Reverse Merger Financing in accordance
with terms of this Section 4.7.
(a)
At least
10 Business Days prior to the closing of the Reverse Merger Financing, the
Company shall deliver to the Purchaser a written notice of its intention to
effect a Reverse Merger Financing (“
RM Notice
”), which RM
Notice shall describe in detail the proposed terms of such Reverse Merger
Financing, the amount of proceeds intended to be raised thereunder and the
Person or Persons through or with whom such Reverse Merger Financing is proposed
to be effected, including all parties contemplated to participate therein in any
capacity, and shall include a term sheet or similar document relating thereto as
an attachment and any available drafts of contemplated transaction
documentation.
(b)
If the
Purchaser desires to participate in the Reverse Merger Financing, the Purchaser
shall provide written notice to the Company on or prior to the closing of the
Reverse Merger Financing specifying its election to participate in the Reverse
Merger Financing and the amount of the Purchaser’s participation. The
Purchaser’s participation shall be on the same terms and conditions as all other
investors in such Reverse Merger Financing (subject to the exchange right set
forth in subsection (d) below).
(c)
If the
contemplated terms of any Reverse Merger Financing change in any material
respect from those set forth in the RM Notice, the Company may not complete the
Reverse Merger Financing unless and until it first provides to the Purchaser
another RM Notice containing the currently contemplated terms of the Reverse
Merger Financing (and offering the Purchaser the right to participate as set
forth herein) at least 10 Business Days prior to the closing of such revised
Reverse Merger Financing.
(d)
If the
Purchaser elects to participate in the Reverse Merger Financing, the Purchaser
shall have the right to pay for the securities purchased in the Reverse Merger
Financing, and receive an effective 10% discount on the purchase price therefor,
by exchanging its Note in the principal amount of $591,770.83 in lieu of cash
for securities issued in the Reverse Merger Financing having a purchase price of
$571,759.26. For clarification (i) upon such exchange the
Holder shall surrender the Note to the Company (or Public Company) and the
$591,770.83 principal amount thereunder (consisting of 115% of sum of the
$500,000 Subscription Amount plus capitalized interest thereon at 7% per annum
for 5 months) shall be deemed paid in full, and (ii) the $571,759.26 purchase
price in the Reverse Merger Financing represents a 10% discount to the Purchaser
based on the assumption that the Note without such agreed 15% premium would have
a value of $514,583.33 (consisting of the $500,000 Subscription Amount plus
capitalized interest thereon at 7% per annum for 5 months). If the
Purchaser elects to exchange its Note in part, the Note shall be applied against
the purchase price of such securities in the Reverse Merger Financing equal to
the applicable pro rata portion of $571,759.26 in accordance with the terms
hereof.
4.8
Stock
Issuance
. As additional consideration for the Purchaser
purchasing the Note hereunder and making the loans evidenced thereby, upon or
promptly following consummation of a Reverse Merger Transaction, the Company
shall cause the Public Company to issue such number of shares of common stock
(“
Common
Shares
”) of the Public Company to the Purchaser such that following the
Reverse Merger Transaction, the Purchaser shall own 0.3125% of the fully-diluted
number of outstanding shares of common stock of the Public Company (assuming
conversion and exercise of all outstanding options, warrants and convertible
securities). All Common Shares issued pursuant to this paragraph
shall be duly and validly issued, fully paid and nonassessable, free and clear
of all Liens imposed by the Public Company.
ARTICLE
V.
MISCELLANEOUS
5.1
Termination
.
This Agreement may be terminated by the Purchaser by written notice to the
Company if the Closing has not been consummated on or before November 17, 2008;
provided
,
however
, that such
termination will not affect the right of any party to sue for any breach by the
other party.
5.2
Fees and
Expenses
. At the Closing, the Company has agreed to reimburse
Gemini Strategies, LLC and/or Gemini Master Fund Ltd. (collectively, “
Gemini
”) the
non-accountable sum of $7,500 for its legal fees and
expenses. Accordingly, in lieu of the foregoing payment, the
aggregate amount that Gemini is to pay for the Note at the Closing shall be
reduced by $7,500. In addition, the Company shall reimburse Gemini
and the Purchaser for estimated UCC searches and filing fees and fees and
expenses of any local or third party patent and trademark counsel engaged by the
Purchaser in connection with the security interests granted to the Purchaser,
which will be payable on the Closing Date out of funds otherwise deliverable by
Gemini for its Subscription Amount hereunder. Except as expressly set
forth in the Transaction Documents to the contrary, each party shall pay the
fees and expenses of its advisers, counsel, accountants and other experts, if
any, and all other expenses incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this
Agreement. In the event the Closing does not occur for any reason,
the Company shall pay Gemini the non-accountable sum of $5,000 for its legal
fees and expenses plus reimbursement of out-of-pocket amounts for UCC liens
searches, provided that such amount shall affect the Purchaser’s right to sue
for damages caused by any breach by the Company.
5.3
Entire
Agreement
. The Transaction Documents, together with the
exhibits and schedules thereto, contain the entire understanding of the parties
with respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and
schedules.
5.4
Notices
. Any
and all notices or other communications or deliveries to be provided by under
the Transaction Documents shall be in writing and delivered personally, by
facsimile, by email, or sent by a nationally recognized overnight courier
service, at the address, facsimile number or email address specified on the
signature pages hereto for such purpose. Any and all notices or other
communications or deliveries required or permitted to be provided hereunder
shall be in writing and shall be deemed given and effective on the earliest of
(a) the date of transmission, if such notice or communication is delivered via
facsimile at the facsimile number set forth on the signature pages attached
hereto, or by email at the email address set forth on the signature
pages attached hereto, prior to 5:30 p.m. (New York City time) on a Business
Day, (b) the next Business Day after the date of transmission, if such notice or
communication is delivered via facsimile or email as set forth above on a day
that is not a Business Day or later than 5:30 p.m. (New York City time) on any
Business Day, (c) the third Business Day following the date of mailing, if sent
by regular mail, or (d) the Business Day following the date on which such notice
or communication is deposited with a nationally recognized overnight courier
service. The address for such notices and communications shall be as
set forth on the signature pages attached hereto.
5.5
Amendments;
Waivers
. No provision of this Agreement may be waived,
modified, supplemented or amended except in a written instrument signed, in the
case of an amendment, by the Company and the Purchaser, or, in the case of a
waiver, by the party against whom enforcement of any such waived provision is
sought. No waiver of any default with respect to any provision,
condition or requirement of this Agreement shall be deemed to be a continuing
waiver in the future or a waiver of any subsequent default or a waiver of any
other provision, condition or requirement hereof, nor shall any delay or
omission of any party to exercise any right hereunder in any manner impair the
exercise of any such right.
5.6
Headings
. The
headings herein are for convenience only, do not constitute a part of this
Agreement and shall not be deemed to limit or affect any of the provisions
hereof.
5.7
Successors and
Assigns
. This Agreement shall be binding upon and inure to the
benefit of the parties and their successors and permitted
assigns. The Company may not assign this Agreement or any rights or
obligations hereunder without the prior written consent of the Purchaser (other
than by merger). The Purchaser may assign any or all of its rights
under this Agreement to any Person to whom the Purchaser assigns or transfers
the Note, provided that such transferee agrees in writing to be bound, with
respect to the Note, by the provisions of the Transaction Documents that apply
to the “Purchaser.”
5.8
No Third-Party
Beneficiaries
. This Agreement is intended for the benefit of
the parties hereto and their respective successors and permitted assigns and is
not for the benefit of, nor may any provision hereof be enforced by, any other
Person, except as otherwise set forth in Section 4.3.
5.9
Governing
Law
. All questions concerning the construction, validity,
enforcement and interpretation of the Transaction Documents shall be governed by
and construed and enforced in accordance with the internal laws of the State of
New York, without regard to the principles of conflicts of law
thereof. Each party agrees that all legal proceedings concerning the
interpretations, enforcement and defense of the transactions contemplated by
this Agreement and any other Transaction Documents (whether brought against a
party hereto or its respective affiliates, directors, officers, shareholders,
employees or agents) shall be commenced exclusively in the state and federal
courts sitting in the City of New York. Each party hereby irrevocably
submits to the exclusive jurisdiction of the state and federal courts sitting in
the City of New York, borough of Manhattan for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein (including with respect to the enforcement of any of the
Transaction Documents), and hereby irrevocably waives, and agrees not to assert
in any suit, action or proceeding, any claim that it is not personally subject
to the jurisdiction of any such court, that such suit, action or proceeding is
improper or is an inconvenient venue for such proceeding. Each party
hereby irrevocably waives personal service of process and consents to process
being served in any such suit, action or proceeding by mailing a copy thereof
via registered or certified mail or overnight delivery (with evidence of
delivery) to such party at the address in effect for notices to it under this
Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall
be deemed to limit in any way any right to serve process in any other manner
permitted by law. If either party shall commence an action or
proceeding to enforce any provisions of the Transaction Documents, then the
prevailing party in such action or proceeding shall be reimbursed by the other
party for its reasonable attorneys’ fees and other costs and expenses incurred
with the investigation, preparation and prosecution of such action or
proceeding.
5.10
Survival
. The
representations and warranties shall survive the Closing and the delivery of the
Note for the applicable statue of limitations.
5.11
Execution
. This
Agreement may be executed in two or more counterparts, all of which when taken
together shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each party and delivered to the
other party, it being understood that both parties need not sign the same
counterpart. In the event that any signature is delivered by
facsimile transmission or by e-mail delivery of a “.pdf” or other document image
format data file, such signature shall create a valid and binding obligation of
the party executing (or on whose behalf such signature is executed) with the
same force and effect as if such facsimile or “.pdf” or other document image
format data file signature page were an original thereof.
5.12
Severability
. If any
term, provision, covenant or restriction of this Agreement is held by a court of
competent jurisdiction to be invalid, illegal, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions set forth herein
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated, and the parties hereto shall use their commercially reasonable
efforts to find and employ an alternative means to achieve the same or
substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be
the intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.
5.13
Remedies
. In
addition to being entitled to exercise all rights provided herein or granted by
law, including recovery of damages, each of the Purchaser and the Company will
be entitled to specific performance under the Transaction
Documents. The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations contained in the Transaction Documents and hereby agrees to waive
and not to assert in any action for specific performance of any such obligation
the defense that a remedy at law would be adequate.
5.14
Payment Set Aside
. To
the extent that the Company makes a payment or payments to the Purchaser
pursuant to any Transaction Document or the Purchaser enforces or exercises its
rights thereunder, and such payment or payments or the proceeds of such
enforcement or exercise or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside, recovered from, disgorged
by or are required to be refunded, repaid or otherwise restored to the Company,
a trustee, receiver or any other person under any law (including, without
limitation, any bankruptcy law, state or federal law, common law or equitable
cause of action), then to the extent of any such restoration the obligation or
part thereof originally intended to be satisfied shall be revived and continued
in full force and effect as if such payment had not been made or such
enforcement or setoff had not occurred.
5.15
Usury
. To
the extent it may lawfully do so, the Company hereby agrees not to insist upon
or plead or in any manner whatsoever claim, and will resist any and all efforts
to be compelled to take the benefit or advantage of, usury laws wherever
enacted, now or at any time hereafter in force, in connection with any claim,
action or proceeding that may be brought by the Purchaser in order to enforce
any right or remedy under any Transaction Document. Notwithstanding
any provision to the contrary contained in any Transaction Document, it is
expressly agreed and provided that the total liability of the Company under the
Transaction Documents for payments in the nature of interest shall not exceed
the maximum lawful rate authorized under applicable law (the “
Maximum Rate
”), and,
without
limiting the foregoing, in no event shall any rate of interest or default
interest, or both of them, when aggregated with any other sums in the nature of
interest that the Company may be obligated to pay under the Transaction
Documents exceed such Maximum Rate. It is agreed that if the maximum
contract rate of interest allowed by law and applicable to the Transaction
Documents is increased or decreased by statute or any official governmental
action subsequent to the date hereof, the new maximum contract rate of interest
allowed by law will be the Maximum Rate applicable to the Transaction Documents
from the effective date forward, unless such application is precluded by
applicable law. If under any circumstances whatsoever, interest in
excess of the Maximum Rate is paid by the Company to the Purchaser with respect
to indebtedness evidenced by the Transaction Documents, such excess shall be
applied by the Purchaser to the unpaid principal balance of any such
indebtedness or be refunded to the Company, the manner of handling such excess
to be at the Purchaser’s election.
5.16
Saturdays, Sundays,
Holidays, etc.
If the last or appointed day for
the taking of any action or the expiration of any right required or granted
herein shall not be a Business Day, then such action may be taken or such right
may be exercised on the next succeeding Business Day.
5.17
Construction
. The
parties agree that each of them and/or their respective counsel has reviewed and
had an opportunity to revise the Transaction Documents and, therefore, the
normal rule of construction to the effect that any ambiguities are to be
resolved against the drafting party shall not be employed in the interpretation
of the Transaction Documents or any amendments hereto.
5.18
Waiver of Jury
Trial
. In any action, suit or proceeding in any jurisdiction
brought by any party against any other party, the parties each knowingly and
intentionally, to the greatest extent permitted by applicable law, hereby
absolutely, unconditionally, irrevocably and expressly waives forever trial by
jury.
(Signature
Page Follows)
IN
WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
|
ENVISION
SOLAR INTERNATIONAL, INC.
|
|
|
By:
/s/ Robert Noble
Name: Robert
Noble
Title: CEO
|
|
|
Address for Notice:
4225
Executive Square, Suite 1000
San
Diego, CA 92037
|
with
a copy to:
Haynes
and Boone, LLP
1221
Avenue of the Americas, 26
th
Floor
New
York, New York 10020
|
|
Fax:
___________________
Email:
_________________
Attn:
Robert Noble
|
Attention:
Harvey J. Kesner, Esq.
Fax:
(212) 918-8989
Email:
harvey.kesner@haynesboone.com
|
|
|
|
GEMINI
MASTER FUND, LTD.
By: GEMINI
STRATEGIES, LLC, as investment manager
By:
/s/ Steven
Winters
________________________________
Name: Steven
Winters
Title: President
|
Address for Notice
:
|
|
|
c/o
Gemini Strategies, LLC
135
Liverpool Drive, Suite C
|
with copy
to
Peter
J. Weisman, P.C.
|
|
Cardiff,
CA 92007
|
767
Third Avenue, 6
th
Floor
|
|
Attn: Steven
Winters
|
New
York, NY 10017
|
|
Fax:
(858) 509-8808
|
Fax:
(212) 676-5665
|
|
Email:
steve@geministrategies.com
|
Email:
pweisman@pweisman.com
|
Subscription
Amount: $500,000.00
Principal
Amount: $591,770.83
24
Exhibit 10.8
ENVISION
SOLAR INTERNATIONAL, INC.
SECURED
BRIDGE NOTE
|
Original
Issue Date: November 12, 2008
|
$591,770.83
|
THIS NOTE is the duly authorized and
validly issued Secured Bridge Note of ENVISION SOLAR INTERNATIONAL, INC., a
California corporation (the “
Company
”), having its
principal place of business at 4225 Executive Square, Suite 1000, San Diego, CA
92037, designated as its Secured Bridge Note (this “
Note
”).
FOR VALUE
RECEIVED, the Company promises to pay to GEMINI MASTER FUND, LTD. or its
registered assigns (the “
Holder
”) the sum of
Five-Hundred Ninety-One Thousand Seven-Hundred Seventy Dollars and Eighty-Three
Cents (US$591,770.83) on the date (the “
Maturity Date
”) which
is the earlier of (a) five (5) months following the Original Issue Date hereof
or (b) the occurrence of any Fundamental Transaction (as defined below),
provided that upon or prior to such maturity hereof the Holder shall have the
right to exchange this Note and the amount due hereunder in whole or in part for
securities being issued in a Reverse Merger Financing (as defined in the
Purchase Agreement) in accordance with the terms set forth in Section 4.7 of the
Purchase Agreement. (For clarification, if so elected by the Holder,
this Note shall remain outstanding until and to the extent exchanged pursuant to
Section 4.7 of the Purchase Agreement.)
The
Company’s and its Subsidiaries’ obligations under this Note and the other
Transaction Documents are secured by the Collateral (as defined in the Security
Agreement) pursuant to the terms of the Security Documents and the obligations
under this Note are guaranteed by the Company’s Subsidiaries pursuant to the
Subsidiary Guarantee.
This Note
is subject to the following additional provisions:
Section
1
.
Definitions
. For
the purposes hereof, in addition to the terms defined elsewhere in this Note (a)
initially capitalized terms used herein and not otherwise defined herein shall
have the meanings set forth in the Purchase Agreement and (b) the following
terms shall have the following meanings:
“
Bankruptcy Event
”
means any of the following events: (a) the Company or any Significant Subsidiary
(as defined in Rule 1-02(w) of Regulation S-X) thereof 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 Significant Subsidiary
thereof; (b) there is commenced against the Company or any Significant
Subsidiary thereof any such case or proceeding that is not dismissed within 60
days after commencement; (c) the Company or any Significant Subsidiary thereof
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
Significant Subsidiary thereof 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 calendar days after such appointment; (e) the Company or any
Significant Subsidiary thereof makes a general assignment for the benefit of
creditors; (f) the Company or any Significant Subsidiary thereof calls a meeting
of its creditors with a view to arranging a composition, adjustment or
restructuring of its debts; or (g) the Company or any Significant Subsidiary
thereof, 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.
“
Business Day
” means
any day except any Saturday, any Sunday, any day which shall be a federal legal
holiday in the United States or any day on which banking institutions in the
State of New York are authorized or required by law or other governmental action
to close.
“
Event of Default
”
shall have the meaning set forth in Section 6
.
“
Fundamental
Transaction
” means (a) the Company enters into any Reverse Merger
Transaction, (b) the Company effects any merger or consolidation of the Company
with or into another Person, (c) the Company effects any sale of all or
substantially all of its assets in one transaction or a series of related
transactions,
(d)
an acquisition of effective control (whether through legal or beneficial
ownership of capital stock of the Company, by contract or otherwise) of in
excess of 50% of the voting securities of the Company or its Subsidiaries
comprising a majority of the Company’s assets, (e) any tender offer or exchange
offer (whether by the Company or another Person) is completed pursuant to which
holders of common stock of the Company are permitted to tender or exchange their
shares for other securities, cash or property, or (f) the Company effects any
reclassification of its common stock or any compulsory share exchange pursuant
to which the common stock is effectively converted into or exchanged for other
securities, cash or property. For purposes hereof the assets of the Company
shall include the assets of the Company together with its
Subsidiaries.
“
Late Fees
” shall have
the meaning set forth in Section 2.
“
Mandatory Default
Amount
” means the sum of (i) 115% of the outstanding amount of this Note,
plus 100% of accrued and unpaid interest hereon, including all Late Fees, and
(ii) all other amounts, costs, expenses and liquidated damages due in respect of
this Note.
“
New York Courts
”
shall have the meaning set forth in Section 7(d).
“
Original Issue Date
”
means the date of the issuance of this Note, regardless of any transfers of this
Note and regardless of the number of instruments which may be issued to evidence
this Note.
“
Permitted
Indebtedness
” means (a) the indebtedness evidenced by the Note, (b) the
Indebtedness existing on the Closing Date which is set forth on
Schedule 3.1(v)
attached to the Purchase Agreement, provided that the terms of any such
Indebtedness have not been changed from the terms existing on the Closing Date,
(c) lease obligations and purchase money indebtedness of up to $100,000, in the
aggregate, incurred in connection with the acquisition of capital assets and
lease obligations with respect to newly acquired or leased assets, and (d)
unsecured indebtedness that (i) is expressly subordinate to the Note pursuant to
a written subordination agreement with the Holder that is acceptable to the
Holder in its sole and absolute discretion and (ii) matures at a date later than
the Maturity Date.
“
Permitted Lien
” means
the individual and collective reference to the following: (a) Liens for taxes,
assessments and other governmental charges or levies not yet due or Liens for
taxes, assessments and other governmental charges or levies being contested in
good faith and by appropriate proceedings for which adequate reserves (in the
good faith judgment of the management of the Company) have been established in
accordance with GAAP; (b) Liens imposed by law which were incurred in the
ordinary course of the Company’s business, such as carriers’, warehousemen’s and
mechanics’ Liens, statutory landlords’ Liens, and other similar Liens arising in
the ordinary course of the Company’s business, and which (x) do not individually
or in the aggregate materially detract from the value of such property or assets
or materially impair the use thereof in the operation of the business of the
Company and its consolidated Subsidiaries or (y) are being contested in good
faith by appropriate proceedings, which proceedings have the effect of
preventing for the foreseeable future the forfeiture or sale of the property or
asset subject to such Lien; (c) Liens incurred in connection with Permitted
Indebtedness under clauses (a) and (c) thereunder, provided that such Liens are
not secured by assets of the Company or its Subsidiaries other than the assets
so acquired or leased.
“
Purchase Agreement
”
means the Securities Purchase Agreement, dated on or about the date hereof,
among the Company and the original Holder hereof, as amended, modified or
supplemented from time to time in accordance with its terms.
Section
2
.
Interest; Late
Fees
.
a)
Interest
Rate
. Interest on the principal amount of this Note (other
than Default Interest and Late Fees, as provided in Section 2(b) below, and the
Mandatory Default Amount, as described in Section 6(b) below and the definition
thereof) shall be fully earned on the Original Issue Date and shall be equal to
(i) 7% per annum of the Subscription Amount for the five (5) month period
immediately following the Original Issue Date hereof plus (ii) (x)15% of such
Subscription Amount and (y) 15% of such 7% interest (as set forth in clause (i)
above). All such interest shall be capitalized on the Original Issue
Date by being added to the Subscription Amount such that the face amount of the
Note shall be equal to $591,770.83.
b)
Default
Interest
. All overdue accrued and unpaid amounts to be paid
hereunder shall entail a late fee at an interest rate equal to the lesser of 20%
per annum or the maximum rate permitted by applicable law (“
Late Fees
”) which
shall accrue daily from the date such amount is due hereunder through and
including the date of actual payment in full.
c)
Calculations
. All
interest calculations shall be on the basis of a 360-day year with 30-day
months.
Section
3.
Registration of Transfers
and Exchanges
.
a)
Different
Denominations
. This Note is exchangeable for an equal aggregate principal
amount of Notes of different authorized denominations, as requested by the
Holder surrendering the same. No service charge will be payable for
such exchange.
b)
Investment
Representations
. This Note has been issued subject to certain
investment representations of the Company and the original Holder set forth in
the Purchase Agreement and may be transferred or exchanged only (i) in
compliance with applicable federal and state securities laws and regulations,
and (ii) in compliance with the Purchase Agreement (including without limitation
Section 4.1 thereof and the requirements set forth therein that such subsequent
Holder make certain additional representations to the Company).
Section
4. No
Prepayment. The Company may not prepay this Note in whole or in part
without the prior written consent of the Holder.
Section
5. Negative
Covenants. As long as any portion of this Note remains outstanding, unless the
Holder shall have otherwise given prior written consent, the Company shall not,
and shall not permit any of its subsidiaries (whether or not a Subsidiary on the
Original Issue Date) to, directly or indirectly:
a)
other
than Permitted Indebtedness, enter into, create, incur, assume, guarantee or
suffer to exist any Indebtedness of any kind, including but not limited to, a
guarantee, 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;
b)
other than Permitted Liens, enter
into, create, incur, assume or suffer to exist any Liens of any kind, 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;
c)
amend its charter documents,
including without limitation its certificate or articles of incorporation and
bylaws, in any manner that materially and adversely affects any rights of the
Holder;
d)
repay,
repurchase or offer to repay, repurchase or otherwise acquire more than a
de
minimis
number of
shares of its common stock or any other securities;
e)
repay, repurchase or offer to
repay, repurchase or otherwise acquire any Indebtedness (except for the Note in
accordance with the terms of the Note), other than regularly scheduled principal
and interest payments as such terms are in effect as of the Closing
Date;
f)
repay, repurchase or offer to repay, repurchase or
otherwise acquire any Indebtedness to any current or former employees, officers
or directors of the Company or its Subsidiaries or such current or former
employees’, officers’ or directors’ affiliates, including without limitation any
loans from or management fees payable to Robert Noble
,
Karen Morgan, Bill Adelson, Pam Stevens or their
affiliates;
g)
pay cash dividends or distributions
on any equity securities of the Company;
h)
enter
into any transaction with any affiliate of the Company or any Subsidiary, unless
such transaction is made on an arm’s-length basis and expressly approved by a
majority of the disinterested directors of the Company (even if less than a
quorum otherwise required for board approval); or
i)
enter
into any agreement with respect to any of the foregoing
.
Section
6
.
Events of
Default
.
a)
“
Event of Default
”
means, wherever used herein, any of the following events (whatever the reason
for such event and whether such event shall be voluntary or involuntary or
effected by operation of law or pursuant to any judgment, decree or order of any
court, or any order, rule or regulation of any administrative or governmental
body):
i. any default in the payment of any amount owing to the Holder on this
Note, as and when the same shall become due and payable (whether on the Maturity
Date or by acceleration or otherwise) which default is not cured within 5
Business Days;
ii.
the
Company shall fail to observe or perform any other covenant or agreement
contained in the Note which failure is not cured, if possible to cure, within
the earlier to occur of (A) 5 Business Days after notice of such failure sent by
the Holder or its representative and (B) 10 Business Days after the Company has
become or should have become aware of such failure;
iii.
a default
or event of default (subject to any grace or cure period provided in the
applicable agreement, document or instrument) shall occur under (A) any of the
Transaction Documents or (B) any other material agreement, lease, document or
instrument to which the Company or any Subsidiary is obligated (and not covered
by clause (vi) below);
iv.
any
representation or warranty made in this Note, any other Transaction Document,
any written statement pursuant hereto or thereto or any other report, financial
statement or certificate made or delivered to the Holder shall be untrue or
incorrect in any material respect as of the date when made or deemed
made;
v.
the
Company or any Significant Subsidiary shall be subject to a Bankruptcy
Event;
vi.
the
Company or any Subsidiary shall default on any of its obligations under any
mortgage, credit agreement or other facility, indenture agreement, factoring
agreement or other instrument under which there may be issued, or by which there
may be secured or evidenced, any indebtedness for borrowed money or money due
under any long term leasing or factoring arrangement that (a) involves an
obligation greater than $75,000, whether such indebtedness now exists or shall
hereafter be created, and (b) results in such indebtedness becoming or being
declared due and payable prior to the date on which it would otherwise become
due and payable;
vii.
if any of
the Security Documents or any Subsidiary Guarantee ceases to be in full force
and effect (including failure to create a valid and perfected first priority
lien on and security interest in all the Collateral (as defined in the Security
Agreement) and Intellectual Property Rights of the Company and its Subsidiaries)
at any time for any reason;
viii.
any
material adverse change in the condition, value or operation of a material
portion of the Collateral or Intellectual Property Rights; or
ix.
any
monetary judgment, writ or similar final process shall be entered or filed
against the Company, any subsidiary or any of their respective property or other
assets for more than $75,000, and such judgment, writ or similar final process
shall remain unvacated, unbonded or unstayed for a period of 45 calendar
days.
b)
Remedies Upon Event of
Default
. If any Event of Default occurs, the outstanding principal amount
of this Note, plus accrued but unpaid interest, liquidated damages and other
amounts owing in respect thereof through the date of acceleration, shall become,
at the Holder’s election, immediately due and payable in cash at the Mandatory
Default Amount. After the occurrence and during the continuance of
any Event of Default, the interest rate on this Note shall accrue at an interest
rate equal to the lesser of 20% per annum or the maximum rate permitted under
applicable law. Upon the payment in full of the Mandatory Default
Amount, the Holder shall promptly surrender this Note to or as directed by the
Company. In connection with such acceleration described herein, the
Holder need not provide, and the Company hereby waives, any presentment, demand,
protest or other notice of any kind, and the Holder may immediately and without
expiration of any grace period enforce any and all of its rights and remedies
hereunder and all other remedies available to it under applicable
law. Such acceleration may be rescinded and annulled by the Holder at
any time prior to payment hereunder and the Holder shall have all rights as a
holder of the Note until such time, if any, as the Holder receives full payment
pursuant to this Section 6(b). No such rescission or annulment shall
affect any subsequent Event of Default or impair any right consequent
thereon.
Section
7
.
Miscellaneous
.
a)
Notices
. Any
and all notices or other communications or deliveries to be provided by the
Holder hereunder shall be in writing and delivered personally, by facsimile, by
email, or sent by a nationally recognized overnight courier service, addressed
to the Company, at the address set forth above, or such other facsimile number
or address or email address as the Company may specify for such purpose by
notice to the Holder delivered in accordance with this Section 7. Any
and all notices or other communications or deliveries required or permitted to
be provided hereunder shall be in writing and shall be deemed given and
effective on the earliest of (a) the date of transmission, if such notice or
communication is delivered via facsimile or by email prior to 5:30 p.m. (New
York City time) on a Business Day, (b) the next Business Day after the date of
transmission, if such notice or communication is delivered via facsimile or
email as set forth above on a day that is not a Business Day or later than 5:30
p.m. (New York City time) on any Business Day, (c) the third Business Day
following the date of mailing, if sent by regular mail, or (d) the Business Day
following the date on which such notice or communication is deposited with a
nationally recognized overnight courier service. The address for such
notices and communications shall be as set forth on the signature pages attached
to the Purchase Agreement.
b)
Absolute Obligation
.
Except as expressly provided herein, no provision of this Note shall alter or
impair the obligation of the Company, which is absolute and unconditional, to
pay the principal of, liquidated damages and accrued interest, as applicable, on
this Note at the time, place, and rate, and in the coin or currency, herein
prescribed. This Note is a direct debt obligation of the Company.
c)
Lost or Mutilated
Note
. If this Note shall be mutilated, lost, stolen or
destroyed, the Company shall execute and deliver, in exchange and substitution
for and upon cancellation of a mutilated Note, or in lieu of or in substitution
for a lost, stolen or destroyed Note, a new Note for the principal amount of
this Note so mutilated, lost, stolen or destroyed, but only upon receipt of
evidence of such loss, theft or destruction of such Note, and of the ownership
hereof, reasonably satisfactory to the Company (with an affidavit by the Holder
confirming such loss, theft or destruction being deemed reasonably
satisfactory).
d)
Governing
Law
. All questions concerning the construction, validity,
enforcement and interpretation of this Note shall be governed by and construed
and enforced in accordance with the internal laws of the State of New York,
without regard to the principles of conflict of laws thereof. Each
party agrees that all legal proceedings concerning the interpretation,
enforcement and defense of the transactions contemplated by any of the
Transaction Documents (whether brought against a party hereto or its respective
Affiliates, directors, officers, shareholders, employees or agents) shall be
commenced in the state and federal courts sitting in the City of New York,
Borough of Manhattan (the “
New York
Courts
”). Each party hereto
hereby
irrevocably
submits to the exclusive jurisdiction of the New York Courts for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (including with respect to
the enforcement of any of the Transaction Documents), and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of such New York Courts,
or such New York Courts are improper or inconvenient venue for such
proceeding. Each party hereby irrevocably waives personal service of
process and consents to process being served in any such suit, action or
proceeding by mailing a copy thereof via registered or certified mail or
overnight delivery (with evidence of delivery) to such party at the address in
effect for notices to it under this Note and agrees that such service shall
constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way
any right to serve process in any other manner permitted by applicable law. Each
party hereto hereby irrevocably waives, to the fullest extent permitted by
applicable law, any and all right to trial by jury in any legal proceeding
arising out of or relating to this Note or the transactions contemplated hereby.
If either party shall commence an action or proceeding to enforce any provisions
of this Note, then the prevailing party in such action or proceeding shall be
reimbursed by the other party for its attorney’s fees and other costs and
expenses reasonably incurred in the investigation, preparation and prosecution
of such action or proceeding.
e)
Waiver
. Any
waiver by the Company or the Holder of a breach of any provision of this Note
shall not operate as or be construed to be a waiver of any other breach of such
provision or of any breach of any other provision of this Note. The
failure of the Company or the Holder to insist upon strict adherence to any term
of this Note on one or more occasions shall not be considered a waiver or
deprive that party of the right thereafter to insist upon strict adherence to
that term or any other term of this Note. Any waiver by the Company
or the Holder must be in writing.
f)
Severability
. If
any provision of this Note is invalid, illegal or unenforceable, the balance of
this Note shall remain in effect, and if any provision is inapplicable to any
Person or circumstance, it shall nevertheless remain applicable to all other
Persons and circumstances. If it shall be found that any interest or
other amount deemed interest due hereunder violates the applicable law governing
usury, the applicable rate of interest due hereunder shall automatically be
lowered to equal the maximum rate of interest permitted under applicable law.
The Company covenants (to the extent that it may lawfully do so) that it shall
not at any time insist upon, plead, or in any manner whatsoever claim or take
the benefit or advantage of, any stay, extension or usury law or other law which
would prohibit or forgive the Company from paying all or any portion of the
principal of or interest on this Note as contemplated herein, wherever enacted,
now or at any time hereafter in force, or which may affect the covenants or the
performance of this indenture, and the Company (to the extent it may lawfully do
so) hereby expressly waives all benefits or advantage of any such law, and
covenants that it will not, by resort to any such law, hinder, delay or impeded
the execution of any power herein granted to the Holder, but will suffer and
permit the execution of every such as though no such law has been
enacted.
g)
Next Business
Day
. Whenever any payment or other obligation hereunder shall
be due on a day other than a Business Day, such payment shall be made on the
next succeeding Business Day.
h)
Headings
. The
headings contained herein are for convenience only, do not constitute a part of
this Note and shall not be deemed to limit or affect any of the provisions
hereof.
i)
Assumption
. Any
successor to the Company or any surviving entity in a Fundamental Transaction
shall (i) assume, prior to such Fundamental Transaction, all of the obligations
of the Company under this Note and the other Transaction Documents pursuant to
written agreements in form and substance satisfactory to the Holder and (ii)
issue to the Holder a new Note of such successor entity evidenced by a written
instrument substantially similar in form and substance to this Note, including
without limitation having a principal amount and interest rate equal to the
principal amount and the interest rate of this Note and having similar ranking
to this Note, which shall be satisfactory to the Holder. The provisions of
this Section 7(i) shall apply similarly and equally to successive Fundamental
Transactions and shall not affect the Holder’s other rights hereunder or under
the other Transaction Documents.
j)
Usury
. This
Note shall be subject to the anti-usury limitations contained herein and in the
Purchase Agreement.
*********************
IN
WITNESS WHEREOF, the Company has caused this Note to be duly executed by a duly
authorized officer as of the date first above indicated.
|
ENVISION
SOLAR INTERNATIONAL, INC.
|
|
By:
|
/s/ Robert Noble
|
|
Name:
|
Robert
Noble
|
|
Title:
|
CEO
|
10
Exhibit
10.9
SECURITY
AGREEMENT
This
SECURITY AGREEMENT, dated as of November 12, 2008 (this “
Agreement
”), is among
ENVISION SOLAR INTERNATIONAL, INC., a California corporation (the “
Company
”), each of
the undersigned direct and indirect Subsidiaries of the Company and all other
direct and indirect Subsidiaries of the Company (
the
“
Guarantors
”
,
and together with the Company
, the “
Debtors
”), and the
holder, signatory hereto, of the Company’s Secured Bridge Note issued or to be
issued in the original principal amount of $591,770.83 (the “
Note
”) pursuant to
the Purchase Agreement (as defined below) (“
Secured Party
”, and
together with its endorsees, transferees and assigns, the “
Secured
Parties
”).
W
I T N E S S E T H:
WHEREAS,
pursuant to that certain Securities Purchase Agreement dated on or about the
date hereof between the Company and the Secured Party (the “
Purchase Agreement
”),
the Secured Party has agreed to extend the loans to the Company evidenced by the
Note;
WHEREAS,
pursuant to that certain Subsidiary Guarantee, dated as of the date hereof
(“
Guarantee
”),
the
Guarantors
have jointly and severally agreed to guarantee and act as surety for payment of
the Note; and
WHEREAS,
in order to induce the Secured Party to extend the loans evidenced by the Note,
each Debtor has agreed to execute and deliver to the Secured Party this
Agreement and to grant the Secured Party a security interest in certain property
of such Debtor to secure the prompt payment, performance and discharge in full
of all of the Company’s obligations under the Note and other Transaction
Documents and the Guarantors’ obligations under the Guarantee;
NOW,
THEREFORE, in consideration of the agreements herein contained and for other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto hereby agree as follows:
1.
Certain Definitions
. As used
in this Agreement, the following terms shall have the meanings set forth in this
Section 1. Terms used but not otherwise defined in this Agreement
that are defined in Article 9 of the UCC (such as “account”, “chattel paper”,
“commercial tort claim”, “deposit account”, “document”, “equipment”, “fixtures”,
“general intangibles”, “goods”, “instruments”, “inventory”, “investment
property”, “letter-of-credit rights”, “proceeds” and “supporting obligations”)
shall have the respective meanings given such terms in Article 9 of the
UCC.
(a)
“
Collateral
” means the
collateral in which the Secured Parties is granted a security interest by this
Agreement and which shall include the following personal property of the
Debtors, whether presently owned or existing or hereafter acquired or coming
into existence, wherever situated, and all additions and accessions thereto and
all substitutions and replacements thereof, and all proceeds, products and
accounts thereof, including without limitation all proceeds from the sale or
transfer of the Collateral and of insurance covering the same and of any tort
claims in connection therewith
, and all dividends,
interest, cash, notes, securities, equity interest or other property at any time
and from time to time acquired, receivable or otherwise distributed in respect
of, or in exchange for, any or all of the Pledged Securities (as defined
below)
:
(i)
All
goods, including without limitation (A) all machinery, equipment, computers,
motor vehicles, trucks, tanks, boats, ships, appliances, furniture, special and
general tools, fixtures, test and quality control devices and other equipment of
every kind and nature and wherever situated, together with all documents of
title and documents representing the same, all additions and accessions thereto,
replacements therefor, all parts therefor, and all substitutes for any of the
foregoing and all other items used and useful in connection with any Debtor’s
businesses and all improvements thereto; and (B) all inventory;
(ii)
All
contract rights and other general intangibles, including without limitation, all
partnership interests, membership interests, stock or other securities,
rights under any of the Organizational Documents,
agreements related to the Pledged Securities,
licenses, distribution and
other agreements, computer software (whether “off-the-shelf”, licensed from any
third party or developed by any Debtor), computer software development rights,
leases, franchises, customer lists, quality control procedures, grants and
rights, goodwill, trademarks, service marks, trade styles, trade names, patents,
patent applications, copyrights, and income tax refunds;
(iii)
All
accounts, together with all instruments, all documents of title representing any
of the foregoing, all rights in any merchandising, goods, equipment, motor
vehicles and trucks which any of the same may represent, and all right, title,
security and guaranties with respect to each account, including any right of
stoppage in transit;
(iv)
All
documents, letter-of-credit rights, instruments and chattel paper;
(v)
All
commercial tort claims;
(vi)
All
deposit accounts and all cash (whether or not deposited in such deposit
accounts);
(vii)
All
investment property;
(viii)
All
supporting obligations;
(ix)
All
files, records, books of account, business papers, and computer programs,
including without limitation and
all
files, records, books, ledger cards, correspondence, computer programs, tapes,
disks, digital storage media and related data processing software
that at any time evidence or contain information relating to any of the
Collateral set forth in clauses (i)-(viii) above or are otherwise necessary or
helpful in the collection thereof or realization thereupon; and
(x)
All the
products, profits and proceeds of all of the foregoing Collateral set forth in
clauses (i)-(ix) above, and all payments under insurance (whether or not the
Secured Party is the loss payee thereof) or under any indemnity, warranty or
guaranty, payable by reason or loss or damage to, or otherwise with respect to,
any of the foregoing Collateral set forth in clauses (i)-(ix)
above.
Without limiting the generality of the foregoing, the
“
Collateral
” shall include all investment property and general
intangibles respecting ownership and/or other equity interests in each
Guarantor, including, without limitation, the shares of capital stock and the
other equity interests listed on
Schedule H
hereto (as the same may be modified from time to time
pursuant to the terms hereof), and any other shares of capital stock and/or
other equity interests of any other direct or indirect subsidiary of any Debtor
obtained in the future, and, in each case, all certificates representing such
shares and/or equity interests and, in each case, all rights, options, warrants,
stock, other securities and/or equity interests that may hereafter be received,
receivable or distributed in respect of, or exchanged for, any of the foregoing
and all rights arising under or in connection with the Pledged Securities,
including, but not limited to, all dividends, interest and
cash.
Notwithstanding
the foregoing, nothing herein shall be deemed to constitute an assignment of any
asset which, in the event of an assignment, becomes void by operation of
applicable law or the assignment of which is otherwise prohibited by applicable
law (in each case to the extent that such applicable law is not overridden by
Sections 9-406, 9-407 and/or 9-408 of the UCC or other similar applicable law);
provided
,
however
, that to the
extent permitted by applicable law, this Agreement shall create a valid security
interest in such asset and, to the extent permitted by applicable law, this
Agreement shall create a valid security interest in the proceeds of such
asset.
(b)
“
Intellectual
Property
” means the collective reference to all rights, priorities and
privileges relating to intellectual property, whether arising under United
States, multinational or foreign laws or otherwise, including without limitation
(i) all copyrights arising under the laws of the United States, any other
country or any political subdivision thereof, whether registered or unregistered
and whether published or unpublished, all registrations and recordings thereof,
and all applications in connection therewith, including without limitation all
registrations, recordings and applications in the United States Copyright
Office, (ii) all letters patent of the United States, any other country or any
political subdivision thereof, all reissues and extensions thereof, and all
applications for letters patent of the United States or any other country and
all divisions, continuations and continuations-in-part thereof, (iii) all
trademarks, trade names, corporate names, company names, business names,
fictitious business names, trade dress, service marks, logos, domain names and
other source or business identifiers, and all goodwill associated therewith, now
existing or hereafter adopted or acquired, all registrations and recordings
thereof, and all applications in connection therewith, whether in the United
States Patent and Trademark Office or in any similar office or agency of the
United States, any State thereof or any other country or any political
subdivision thereof, or otherwise, and all common law rights related thereto,
(iv) all trade secrets arising under the laws of the United States, any other
country or any political subdivision thereof, (v) all rights to obtain any
reissues, renewals or extensions of the foregoing, (vi) all licenses for any of
the foregoing, and (vii) all causes of action for infringement of the
foregoing.
(c)
“
Necessary
Endorsement
” means undated stock powers
endorsed in blank or other proper instruments of assignment duly executed and
such other instruments or documents as the Agent (as that term is defined below)
may reasonably request.
(d)
“
Obligations
” means
all of the liabilities and obligations (primary, secondary, direct, contingent,
sole, joint or several) due or to become due, or that are now or may be
hereafter contracted or acquired, or owing to, of any Debtor to the Secured
Parties either (i) under this Agreement, the Note, the Guarantee, the other
Transaction Documents and any other instruments, agreements or other documents
executed and/or delivered in connection herewith or therewith, or (ii) related
to any other liabilities or obligations associated with any indebtedness for
borrowed money from any Secured Party to any Debtor, in each case, whether now
or hereafter existing, voluntary or involuntary, direct or indirect, absolute or
contingent, liquidated or unliquidated, whether or not jointly owed with others,
and whether or not from time to time decreased or extinguished and later
increased, created or incurred, and all or any portion of such obligations or
liabilities that are paid, to the extent all or any part of such payment is
avoided or recovered directly or indirectly from any of the Secured Parties as a
preference, fraudulent transfer or otherwise as such obligations may be amended,
supplemented, converted, extended or modified from time to
time. Without limiting the generality of the foregoing, the term
“Obligations” shall include, without limitation: (i) principal of and interest
on the Note and the loans extended pursuant thereto; (ii) any and all other
fees, indemnities, costs, obligations and liabilities of the Debtors from time
to time under or in connection with this Agreement, the Note, the Guarantee, the
other Transaction Documents and any other instruments, agreements or other
documents executed and/or delivered in connection herewith or therewith; and
(iii) all amounts (including but not limited to post-petition interest) in
respect of the foregoing that would be payable but for the fact that the
obligations to pay such amounts are unenforceable or not allowable due to the
existence of a bankruptcy, reorganization or similar proceeding involving any
Debtor.
(e)
“
Organizational
Documents
” means with respect to any Debtor, the documents by which such
Debtor was organized (such as a certificate of incorporation, certificate of
limited partnership or articles of organization, and including without
limitation any certificates of designation for preferred stock or other forms of
preferred equity) and which relate to the internal governance of such Debtor
(such as bylaws, a partnership agreement or an operating, limited liability or
members agreement).
(f)
“
Pledged Securities
”
shall have the meaning ascribed to such term in Section 4(i).
(g)
“
Transaction
Documents
” shall have the meaning ascribed to such term in the Purchase
Agreement.
(h)
“
UCC
” means the
Uniform Commercial Code of the State of New York and/or any other applicable law
of any state or states which has jurisdiction with respect to all, or any
portion of, the Collateral or this Agreement from time to time. It is
the intent of the parties that defined terms in the UCC should be construed in
their broadest sense so that the term “Collateral” will be construed in its
broadest sense. Accordingly if there are, from time to time, changes
to defined terms in the UCC that broaden the definitions, they are incorporated
herein and if existing definitions in the UCC are broader than the amended
definitions, the existing ones shall be controlling.
2.
Grant of Security Interest in
Collateral
. As an inducement for the Secured Parties to extend the loans
as evidenced by the Note and to secure the complete and timely payment,
performance and discharge in full, as the case may be, of all of the
Obligations, each Debtor hereby unconditionally and irrevocably pledges, grants
and hypothecates to the Secured Parties a first priority security interest in
and to, a lien upon and a right of set-off against all of their respective
right, title and interest of whatsoever kind and nature in and to, the
Collateral (a “
Security Interest
”
and, collectively, the “
Security
Interests
”).
3.
Delivery of Certain
Collateral
. Contemporaneously or
prior to the execution of this Agreement, each Debtor shall deliver or cause to
be delivered to the Agent (a) any and all certificates and other instruments
representing or evidencing the Pledged Securities, together with all Necessary
Endorsements, and (b) any and all certificates and other instruments or
documents representing any of the other Collateral, in each case, together with
all Necessary Endorsements. The Debtors are, contemporaneously with
the execution hereof, delivering to the Agent, or have previously delivered to
the Agent, a true and correct copy of each Organizational Document governing any
of the Pledged Securities.
4.
Representations, Warranties,
Covenants and Agreements of the Debtors
. Except as set forth under the
corresponding section of the disclosure schedules delivered to the Secured Party
concurrently herewith (the “
Disclosure
Schedules
”), which Disclosure Schedules shall be deemed a part hereof,
each Debtor represents and warrants to, and covenants and agrees with, the
Secured Party as follows:
(a)
Each
Debtor has the requisite corporate, partnership, limited liability company or
other power and authority to enter into this Agreement and otherwise to carry
out its obligations hereunder. The execution, delivery and
performance by each Debtor of this Agreement and the filings contemplated
therein have been duly authorized by all necessary action on the part of such
Debtor and no further action is required by such Debtor. This
Agreement has been duly executed by each Debtor. This Agreement
constitutes the legal, valid and binding obligation of each Debtor, enforceable
against each Debtor in accordance with its terms.
(b)
The
Debtors have no place of business or offices where their respective books of
account and records are kept (other than temporarily at the offices of its
attorneys or accountants) or places where Collateral is stored or located,
except as set forth on
Schedule A
attached
hereto. No Debtor owns any real property. Except as
disclosed on
Schedule
A
, none of such Collateral is in the possession of any consignee, bailee,
warehouseman, agent or processor.
(c)
Except
for Permitted Liens (as defined in the Note) and except as set forth on
Schedule B
attached
hereto, the Debtors are the sole owner of the Collateral, free and clear of any
liens, security interests, encumbrances, rights or claims, and are fully
authorized to grant the Security Interests. Except as set forth on
Schedule B
attached hereto, there is not on file in any governmental or regulatory
authority, agency or recording office an effective financing statement, security
agreement, license or transfer or any notice of any of the foregoing (other than
those that will be filed in favor of the Secured Parties pursuant to this
Agreement) covering or affecting any of the Collateral. Except as set
forth on
Schedule
B
attached hereto and except pursuant to this Agreement, as long as this
Agreement shall be in effect, the Debtors shall not execute and shall not
knowingly permit to be on file in any such office or agency any other financing
statement or other document or instrument (except to the extent filed or
recorded in favor of the Secured Parties pursuant to the terms of this
Agreement).
(d)
No
written claim has been received that any Collateral or Debtor's use of any
Collateral violates the rights of any third party. There has been no adverse
decision to any Debtor's claim of ownership rights in or exclusive rights to use
the Collateral in any jurisdiction or to any Debtor's right to keep and maintain
such Collateral in full force and effect, and there is no proceeding involving
said rights pending or, to the best knowledge of any Debtor, threatened before
any court, judicial body, administrative or regulatory agency, arbitrator or
other governmental authority.
(e)
Each
Debtor shall at all times maintain its books of account and records relating to
the Collateral at its principal place of business and its Collateral at the
locations set forth on
Schedule A
attached
hereto and may not relocate such books of account and records or tangible
Collateral unless it delivers to the Secured Parties at least 30 days prior to
such relocation (i) written notice of such relocation and the new location
thereof (which must be within the United States) and (ii) evidence that
appropriate financing statements under the UCC and other necessary documents
have been filed and recorded and other steps have been taken to perfect the
Security Interests to create in favor of the Secured Parties a valid, perfected
and continuing first priority lien in all the Collateral.
(f)
This
Agreement creates in favor of the Secured Parties a valid security interest in
the Collateral, subject only to Permitted Liens (as defined in the Note)
securing the payment and performance of the Obligations. Upon making
the filings described in the immediately following paragraph, all security
interests created hereunder in any Collateral which may be perfected by filing
Uniform Commercial Code financing statements shall have been duly
perfected. Except for the filing of the Uniform Commercial Code
financing statements referred to in the immediately following paragraph, the
recordation of the Intellectual Property Security Agreement(s) (as defined
below) with the United States Copyright Office or the United States Patent and
Trademark Office with respect to copyrights, patents and trademarks
(and
applications relating each of the foregoing) as described in paragraph 4(mm),
the execution and delivery of deposit account control agreements satisfying the
requirements of Section 9-104(a)(2) of the UCC with respect to each deposit
account of the Debtors,
and the delivery of the
certificates and other instruments provided in Section 3,
no further
action is necessary to create, perfect or protect the security interests created
hereunder. Without limiting the generality of the foregoing, except
for the execution and delivery of this Agreement by the Secured Party, the
filing of said financing statements, the recordation of said Intellectual
Property Security Agreement(s), and the execution and delivery of said deposit
account control agreements, no consent of any third parties and no
authorization, approval or other action by, and no notice to or filing with, any
governmental authority or regulatory body is required for (i) the execution,
delivery and performance of this Agreement, (ii) the creation or perfection of
the Security Interests created hereunder in the Collateral, or (iii) the
enforcement of the rights of the Agent and the Secured Parties
hereunder.
(g)
Each
Debtor hereby authorizes the Agent to file one or more financing statements
under the UCC, with respect to the Security Interests, with the proper filing
and recording agencies in any jurisdiction deemed proper by it.
(h)
The
execution, delivery and performance of this Agreement by the Debtors does not
(i) violate any of the provisions of any Organizational Documents of any Debtor
or any judgment, decree, order or award of any court, governmental body or
arbitrator or any applicable law, rule or regulation applicable to any Debtor or
(ii) conflict with, or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation (with or without
notice, lapse of time or both) of, any agreement, credit facility, debt or other
instrument (evidencing any Debtor's debt or otherwise) or other understanding to
which any Debtor is a party or by which any property or asset of any Debtor is
bound or affected. All required consents (including without
limitation from stockholders or creditors of any Debtor) necessary for any
Debtor to enter into and perform its obligations hereunder have been
obtained.
(i)
The capital stock and other equity interests listed on
Schedule
H
hereto (the “
Pledged
Securities
”) represent all of the capital
stock and other equity interests of the Guarantors, and represent all capital
stock and other equity interests owned, directly or indirectly, by the Company
or any Guarantor. All of the Pledged Securities are validly issued,
fully paid and nonassessable, and the Company is the legal and beneficial owner
of the Pledged Securities, free and clear of any lien, security interest or
other encumbrance except for the security interests created by this Agreement
and other Permitted Liens (as defined in the Note).
(j)
The ownership and other equity interests in partnerships
and limited liability companies (if any)
included in the Collateral
(the
“
Pledged
Interests
”) by their express terms do not
provide that they are securities governed by Article 8 of the UCC and are not
held in a securities account or by any financial
intermediary.
(k)
Except
for Permitted Liens (as defined in the Note), until this Agreement and the
Security Interest hereunder shall be terminated pursuant to Section 14 hereof,
each Debtor shall at all times maintain in favor of the Secured Parties the
liens and Security Interests provided for hereunder as valid and perfected first
priority liens and security interests in all the Collateral. Each
Debtor hereby agrees to defend the same against the claims of any and all
persons and entities. Each Debtor shall safeguard and protect all
Collateral for the account of the Secured Parties. At the request of
the Agent, each Debtor will sign and deliver to the Agent on behalf of the
Secured Parties at any time or from time to time one or more financing
statements pursuant to the UCC in form reasonably satisfactory to the Agent and
will pay the cost of filing the same in all public offices wherever filing is,
or is deemed by the Agent to be, necessary or desirable to effect the rights and
obligations provided for herein. Without limiting the generality of
the foregoing, each Debtor shall pay all fees, taxes and other amounts necessary
to maintain the Collateral and the Security Interests hereunder, and each Debtor
shall obtain and furnish to the Agent from time to time, upon demand, such
releases and/or subordinations of claims and liens which may be required to
maintain the priority of the Security Interests hereunder.
(l)
Except as
listed on
Schedule
I
, no Debtor will transfer, pledge, hypothecate, encumber, license, sell
or otherwise dispose of any of the Collateral (except for licenses granted by a
Debtor in its ordinary course of business and sales of inventory and other
unused or outdated assets by a Debtor in its ordinary course of business)
without the prior written consent of all the Secured Parties.
(m)
Each
Debtor shall keep and preserve its equipment, inventory and other tangible
Collateral in good condition, repair and order and shall not operate or locate
any such Collateral (or cause to be operated or located) in any area excluded
from insurance coverage.
(n)
Each Debtor shall maintain with financially sound and
reputable insurers, insurance with respect to the Collateral, including
Collateral hereafter acquired, against loss or damage of the kinds and in the
amounts customarily insured against by entities of established reputation having
similar properties similarly situated and in such amounts as are customarily
carried under similar circumstances by other such entities and otherwise as is
prudent for entities engaged in similar businesses but in any event sufficient
to cover the full replacement cost thereof. Each Debtor shall cause
each insurance policy issued in connection herewith to provide, and the insurer
issuing such policy to certify to the Agent, that (a) the Agent will be named as
lender loss payee and additional insured under each such insurance policy; (b)
if such insurance be proposed to be cancelled or materially changed for any
reason whatsoever, such insurer will promptly notify the Agent and such
cancellation or change shall not be effective as to the Agent for at least
thirty (30) days after receipt by the Agent of such notice, unless the effect of
such change is to extend or increase coverage under the policy; and (c) the
Agent will have the right (but no obligation) at its election to remedy any
default in the payment of premiums within thirty (30) days of notice from the
insurer of such default. If no Event of Default (as defined in the
Note) exists and if the proceeds arising out of any claim or series of related
claims do not exceed $100,000, loss payments in each instance will be applied by
the applicable Debtor to the repair and/or replacement of property with respect
to which the loss was incurred to the extent reasonably feasible, and any loss
payments or the balance thereof remaining, to the extent not so applied, shall
be payable to
the applicable Debtor;
provided
,
however
, that payments received by any Debtor after an Event of
Default occurs and is continuing or in excess of $100,000 for any occurrence or
series of related occurrences shall be paid to the Agent on behalf of the
Secured Parties and, if received by such Debtor, shall be held in trust for the
Secured Parties and immediately paid over to the Agent unless otherwise directed
in writing by the Agent. Copies of such policies or the related
certificates, in each case, naming the Agent as lender loss payee and additional
insured shall be delivered to the Agent at least annually and at the time any
new policy of insurance is issued.
(o)
Each
Debtor shall promptly, but no later than ten (10) days after obtaining knowledge
thereof, advise the Secured Parties, through the Agent, in sufficient detail of
any materially adverse change in the Collateral and of the occurrence of any
event which would have a material adverse effect on the value of the Collateral
or on the Secured Parties’ security interest therein.
(p)
Each
Debtor shall promptly execute and deliver to the Agent such further deeds,
mortgages, assignments, security agreements, financing statements or other
instruments, documents, certificates and assurances and take such further action
as the Agent may from time to time request and may in its sole discretion deem
necessary to perfect, protect or enforce the Secured Parties’ security interest
in the Collateral including without limitation, if applicable, the execution and
delivery of a separate security agreement with respect to each Debtor’s
Intellectual Property (each an “
Intellectual Property
Security Agreement
”) in which the Secured Parties have been granted a
security interest hereunder, substantially in a form reasonably acceptable to
the Agent, which Intellectual Property Security Agreement(s), other than as
stated therein, shall be subject to all of the terms and conditions
hereof.
(q)
Each
Debtor shall permit the Agent and its representatives and agents to inspect the
Collateral during normal business hours and upon reasonable prior notice, and to
make copies of records pertaining to the Collateral as may be reasonably
requested by the Agent from time to time.
(r)
Each
Debtor shall take all steps reasonably necessary to diligently pursue and seek
to preserve, enforce and collect any rights, claims, causes of action and
accounts receivable in respect of the Collateral.
(s)
Each
Debtor shall promptly notify the Secured Parties in sufficient detail upon
becoming aware of any attachment, garnishment, execution or other legal process
levied against any Collateral and of any other information received by such
Debtor that may materially affect the value of the Collateral, the Security
Interests or the rights and remedies of the Secured Parties
hereunder.
(t)
All
information heretofore, herein or hereafter supplied to the Secured Parties by
or on behalf of any Debtor with respect to the Collateral is and will be
accurate and complete in all material respects as of the date
furnished.
(u)
The
Debtors shall at all times preserve and keep in full force and effect their
respective valid existence and good standing and any rights and franchises
material to its business.
(v)
No Debtor
will change its name, type of organization, jurisdiction of organization,
organizational identification number (if it has one), legal or corporate
structure, or identity, or add any new fictitious name unless it provides at
least 30 days prior written notice to the Secured Parties of such change and, at
the time of such written notification, such Debtor provides any financing
statements or fixture filings necessary to perfect and continue the perfection
of the Security Interests granted and evidenced by this Agreement.
(w)
Except in
the ordinary course of business, no Debtor may 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 without the consent of the Agent which shall not
be unreasonably withheld.
(x)
No Debtor
may relocate its chief executive office to a new location without providing 30
days prior written notification thereof to the Secured Parties and so long as,
at the time of such written notification, such Debtor provides any financing
statements or fixture filings necessary to perfect and continue the perfection
of the Security Interests granted and evidenced by this Agreement.
(y)
Each
Debtor was organized and remains organized solely under the laws of the state
set forth next to such Debtor’s name in
Schedule D
attached
hereto, which
Schedule
D
sets forth each Debtor’s organizational identification number or, if
any Debtor does not have one, states that one does not exist.
(z)
(i) The
actual name of each Debtor is the name set forth in
Schedule D
attached
hereto; (ii) no Debtor has any trade names except as set forth on
Schedule E
attached
hereto; (iii) no Debtor has used any name other than that stated in the preamble
hereto or as set forth on
Schedule E
for the
preceding five years; and (iv) no entity has merged into any Debtor or been
acquired by any Debtor within the past five years except as set forth on
Schedule
E
.
(aa)
At any
time and from time to time that any Collateral consists of instruments,
certificated securities or other items that require or permit possession by the
secured party to perfect the Security Interest created hereby, the applicable
Debtor shall deliver such Collateral to the Agent.
(bb)
Each Debtor, in its capacity as issuer, hereby agrees to
comply with any and all orders and instructions of the Agent regarding the
Pledged Interests consistent with the terms of this Agreement without the
further consent of any Debtor as contemplated by Section 8-106 (or any successor
section) of the UCC. Further, each Debtor agrees that it shall not
enter into a similar agreement (or one that would confer “control” within the
meaning of Article 8 of the UCC) with any other person or
entity.
(cc)
Each
Debtor shall cause all tangible chattel paper constituting Collateral to be
delivered to the Agent, or, if such delivery is not possible, then to cause such
tangible chattel paper to contain a legend noting that it is subject to the
security interest created by this Agreement. To the extent that any
Collateral consists of electronic chattel paper, the applicable Debtor shall
cause the underlying chattel paper to be “marked” within the meaning of Section
9-105 of the UCC (or successor section thereto).
(dd)
If there
is any investment property or deposit account included as Collateral that can be
perfected by “control” through an account control agreement, the applicable
Debtor shall, promptly upon written request of the Agent following the
occurrence of an Event of Default, cause such an account control agreement, in
form and substance in each case satisfactory to the Agent, to be entered into
and delivered to the Agent for the benefit of the Secured Parties.
(ee)
To the
extent that any Collateral consists of letter-of-credit rights, the applicable
Debtor shall, promptly upon written request of the Agent following the
occurrence of an Event of Default, cause the issuer of each underlying letter of
credit to consent to an assignment of the proceeds thereof to the Secured
Parties.
(ff)
To the
extent that any Collateral is in the possession of any third party, the
applicable Debtor shall join with the Agent in notifying such third party of the
Secured Parties’ security interest in such Collateral and shall use its best
efforts to obtain an acknowledgement and agreement from such third party with
respect to the Collateral, in form and substance reasonably satisfactory to the
Agent.
(gg)
If any
Debtor shall at any time hold or acquire a commercial tort claim, such Debtor
shall promptly notify the Secured Parties in a writing signed by such Debtor of
the particulars thereof and grant to the Secured Parties in such writing a
security interest therein and in the proceeds thereof, all upon the terms of
this Agreement, with such writing to be in form and substance reasonably
satisfactory to the Agent.
(hh)
Each
Debtor shall immediately provide written notice to the Secured Parties of any
and all accounts which arise out of contracts with any governmental authority
and, to the extent necessary to perfect or continue the perfected status of the
Security Interests in such accounts and proceeds thereof, shall execute and
deliver to the Agent an assignment of claims for such accounts and cooperate
with the Agent in taking any other steps required, in its judgment, under the
Federal Assignment of Claims Act or any similar federal, state or local statute
or rule to perfect or continue the perfected status of the Security Interests in
such accounts and proceeds thereof.
(ii)
Each
Debtor shall cause each
subsidiary
of such Debtor to immediately become a party hereto (an “
Additional Debtor
”),
by executing and delivering an Additional Debtor Joinder in substantially the
form of
Annex A
attached hereto and comply with the provisions hereof applicable to the
Debtors. Concurrent therewith, the
Additional
Debtor shall deliver replacement schedules for, or supplements to all other
Schedules to (or referred to in) this Agreement, as applicable, which
replacement schedules shall supersede, or supplements shall modify, the
Schedules then in effect. The Additional Debtor shall also deliver
such opinions of counsel, authorizing resolutions, good standing certificates,
incumbency certificates, organizational documents, financing statements and
other information and documentation as the Agent may reasonably
request. Upon delivery of the foregoing to the Agent, the Additional
Debtor shall be and become a party to this Agreement with the same rights and
obligations as the Debtors, for all purposes hereof as fully and to the same
extent as if it were an original signatory hereto and shall be deemed to have
made the representations, warranties and covenants set forth herein as of the
date of execution and delivery of such Additional Debtor Joinder, and all
references herein to the “Debtors” shall be deemed to include each Additional
Debtor.
(jj)
Each Debtor shall vote the Pledged Securities to comply
with the covenants and agreements set forth herein and in the
Note.
(kk)
Each Debtor shall register the pledge of the applicable
Pledged Securities on the books of such Debtor. Each Debtor shall
notify each issuer of Pledged Securities to register the pledge of the
applicable Pledged Securities in the name of the Secured Parties on the books of
such issuer. Further, except with respect to certificated securities
delivered to the Agent, the applicable Debtor shall deliver to the Agent an
acknowledgement of pledge (which, where appropriate, shall comply with the
requirements of the relevant UCC with respect to perfection by registration)
signed by the issuer of the applicable Pledged Securities, which acknowledgement
shall confirm that: (a) it has registered the pledge on its books and records;
and (b) at any time directed by the Agent during the continuation of an Event of
Default, such issuer will transfer the record ownership of such Pledged
Securities into the name of any designee of the Agent, will take such steps as
may be necessary to effect the transfer, and will comply with all other
instructions of the Agent regarding such Pledged Securities without the further
consent of the applicable Debtor.
(ll)
In the event that, upon an occurrence of an Event of
Default, the Agent shall sell all or any of the Pledged Securities to another
party or parties (herein called the “
Transferee
”) or shall purchase or retain all or any of the Pledged
Securities, each Debtor shall, to the extent applicable: (i) deliver to the
Agent or the Transferee, as the case may be, the articles of incorporation,
bylaws, minute books, stock certificate books, corporate seals, deeds, leases,
indentures, agreements, evidences of indebtedness, books of account, financial
records and all other Organizational Documents and records of the Debtors and
their direct and indirect subsidiaries; (ii) use its best efforts to obtain
resignations of the persons then serving as officers and directors of the
Debtors and their direct and indirect subsidiaries, if so requested; and (iii)
use its best efforts to obtain any approvals that are required by any
governmental or regulatory body in order to permit the sale of the Pledged
Securities to the Transferee or the purchase or retention of the Pledged
Securities by the Agent and allow the Transferee or the Agent to continue the
business of the Debtors and their direct and indirect
subsidiaries.
(mm)
Without
limiting the generality of the other obligations of the Debtors hereunder, each
Debtor shall promptly (i) cause to be registered at the United States Copyright
Office all of its material copyrights, (ii) cause the security interest
contemplated hereby with respect to all Intellectual Property registered at the
United States Copyright Office or United States Patent and Trademark Office to
be duly recorded at the applicable office, and (iii) give the Agent notice
whenever it acquires (whether absolutely or by license) or creates any
additional material Intellectual Property.
(nn)
Each
Debtor will from time to time, at the joint and several expense of the Debtors,
promptly execute and deliver all such further instruments and documents, and
take all such further action as may be necessary or desirable, or as the Agent
may reasonably request, in order to perfect and protect any security interest
granted or purported to be granted hereby or to enable the Secured Parties to
exercise and enforce their rights and remedies hereunder and with respect to any
Collateral or to otherwise carry out the purposes of this
Agreement.
(oo)
Schedule F
attached
hereto lists all of the patents, patent applications, trademarks, trademark
applications, registered copyrights, and domain names owned by any of the
Debtors as of the date hereof.
Schedule F
lists all
material licenses in favor of any Debtor for the use of any patents, trademarks,
copyrights and domain names as of the date hereof. All material
patents and trademarks of the Debtors have been duly recorded at the United
States Patent and Trademark Office and all material copyrights of the Debtors
have been duly recorded at the United States Copyright Office.
(pp)
Except as
set forth on
Schedule
G
attached hereto, none of the account debtors or other persons or
entities obligated on any of the Collateral is a governmental authority covered
by the Federal Assignment of Claims Act or any similar federal, state or local
statute or rule in respect of such Collateral.
5.
Effect of Pledge on Certain
Rights
.
If any of the Collateral subject to this Agreement
consists of nonvoting equity or ownership interests (regardless of class,
designation, preference or rights) that may be converted into voting equity or
ownership interests upon the occurrence of certain events (including without
limitation upon the transfer of all or any of the other stock or assets of the
issuer), it is agreed that the pledge of such equity or ownership interests
pursuant to this Agreement or the enforcement of any of the Agent’s rights
hereunder shall not be deemed to be the type of event which would trigger such
conversion rights notwithstanding any provisions in the Organizational Documents
or agreements to which any Debtor is subject or to which any Debtor is
party.
6.
Defaults
. The following events
shall be “
Events of
Default
”:
(a)
The
occurrence of an Event of Default (as defined in the Note) under the
Note;
(b)
Any
representation or warranty of any Debtor in this Agreement shall prove to have
been incorrect in any material respect when made;
(c)
The
failure by any Debtor to observe or perform any of its obligations hereunder for
five (5) business days after delivery to such Debtor of notice of such failure
by or on behalf of a Secured Party unless such default is capable of cure but
cannot be cured within such time frame and such Debtor is using best efforts to
cure same in a timely fashion; or
(d)
If any
material provision of this Agreement shall at any time for any reason be
declared to be null and void, or the validity or enforceability thereof shall be
contested by any Debtor, or a proceeding shall be commenced by any Debtor, or by
any governmental authority having jurisdiction over any Debtor, seeking to
establish the invalidity or unenforceability thereof, or any Debtor shall deny
that any Debtor has any material liability or obligation purported to be created
under this Agreement.
7.
Duty to Hold in
Trust
.
(a)
Upon the
occurrence of any Event of Default and at any time thereafter, each Debtor
shall, upon receipt of any revenue, income
,
dividend, interest
or other sums subject to the Security Interests,
whether payable pursuant to the Note or otherwise, or of any check, draft, note,
trade acceptance or other instrument evidencing an obligation to pay any such
sum, hold the same in trust for the Secured Parties and shall forthwith endorse
and transfer any such sums or instruments, or both, to the Secured Parties,
pro-rata in proportion to their respective then-currently outstanding principal
amount of the Note for application to the satisfaction of the
Obligations.
(b)
If any Debtor shall become entitled to receive or shall
receive any securities or other property (including without limitation shares of
Pledged Securities or instruments representing Pledged Securities acquired after
the date hereof, or any options, warrants, rights or other similar property or
certificates representing a dividend, or any distribution in connection with any
recapitalization, reclassification or increase or reduction of capital, or
issued in connection with any reorganization of such Debtor or any of its direct
or indirect subsidiaries) in respect of the Pledged Securities (whether as an
addition to, in substitution of, or in exchange for, such Pledged Securities or
otherwise), such Debtor agrees to (i) accept the same as the agent of the
Secured Parties; (ii) hold the same in trust on behalf of and for the benefit of
the Secured Parties; and (iii) deliver any and all certificates or instruments
evidencing the same to the Agent on or before the close of business on the fifth
business day following the receipt thereof by such Debtor, in the exact form
received together with the Necessary Endorsements, to be held by the Agent
subject to the terms of this Agreement as Collateral.
8.
Rights and Remedies Upon
Default
.
(a)
Upon the
occurrence of any Event of Default and at any time thereafter, the Secured
Parties, acting through the Agent, shall have the right to exercise all of the
remedies conferred hereunder and under the Note and other Transaction Documents,
and the Secured Parties, acting through the Agent, shall have all the rights and
remedies of a secured party under the UCC. Without limitation, the
Agent, for the benefit of the Secured Parties, shall have the following rights
and powers:
(i)
The Agent
shall have the right to take possession of the Collateral and, for that purpose,
enter, with the aid and assistance of any person, any premises where the
Collateral, or any part thereof, is or may be placed and remove the same, and
each Debtor shall assemble the Collateral and make it available to the Agent at
places which the Agent shall reasonably select, whether at such Debtor's
premises or elsewhere, and make available to the Agent, without rent, all of
such Debtor’s respective premises and facilities for the purpose of the Agent
taking possession of, removing or putting the Collateral in saleable or
disposable form.
(ii)
Upon notice to the Debtors by the Agent, all rights of
each Debtor to exercise the voting and other consensual rights which it would
otherwise be entitled to exercise and all rights of each Debtor to receive the
dividends and interest which it would otherwise be authorized to receive and
retain, shall cease. Upon such notice, the Agent shall have the right
to receive, for the benefit of the Secured Parties, any interest, cash dividends
or other payments on the Collateral and, at the option of the Agent, to exercise
in such Agent’s discretion all voting rights pertaining
thereto. Without limiting the generality of the foregoing, the Agent
shall have the right (but not the obligation) to exercise all rights with
respect to the Collateral as it were the sole and absolute owner thereof,
including without limitation to vote and/or to exchange, at its sole discretion,
any or all of the Collateral in connection with a merger, reorganization,
consolidation, recapitalization or other readjustment concerning or involving
the Collateral or any Debtor or any of its direct or indirect
subsidiaries.
(iii)
The Agent
shall have the right to operate the business of each Debtor using the Collateral
and shall have the right to assign, sell, lease or otherwise dispose of and
deliver all or any part of the Collateral, at public or private sale or
otherwise, either with or without special conditions or stipulations, for cash
or on credit or for future delivery, in such parcel or parcels and at such time
or times and at such place or places, and upon such terms and conditions as the
Agent may deem commercially reasonable, all without (except as shall be required
by applicable statute and cannot be waived) advertisement or demand upon or
notice to any Debtor or right of redemption of a Debtor, which are hereby
expressly waived. Upon each such sale, lease, assignment or other
transfer of Collateral, the Agent, for the benefit of the Secured Parties, may,
unless prohibited by applicable law which cannot be waived, purchase all or any
part of the Collateral being sold, free from and discharged of all trusts,
claims, right of redemption and equities of any Debtor, which are hereby waived
and released.
(iv)
The Agent
shall have the right (but not the obligation) to notify any account debtors and
any obligors under instruments or accounts to make payments directly to the
Agent, on behalf of the Secured Parties, and to enforce the Debtors’ rights
against such account debtors and obligors.
(v)
The
Agent, for the benefit of the Secured Parties, may (but is not obligated to)
direct any financial intermediary or any other person or entity holding any
investment property to transfer the same to the Agent, on behalf of the Secured
Parties, or its designee.
(vi)
The Agent
may (but is not obligated to) transfer any or all Intellectual Property
registered in the name of any Debtor at the United States Patent and Trademark
Office and/or Copyright Office into the name of the Secured Parties or any
designee or any purchaser of any Collateral.
(b)
The Agent shall comply with any applicable law in
connection with a disposition of Collateral and such compliance will not be
considered adversely to affect the commercial reasonableness of any sale of the
Collateral. The Agent may sell the Collateral without giving any
warranties and may specifically disclaim such warranties. If the
Agent sells any of the Collateral on credit, the Debtors will only be credited
with payments actually made by the purchaser. In addition, each
Debtor waives any and all rights that it may have to a judicial hearing in
advance of the enforcement of any of the Agent’s rights and remedies hereunder,
including without limitation the Agent’s right following an Event of Default to
take immediate possession of the Collateral and to exercise its rights and
remedies with respect thereto.
(c)
For the purpose of enabling the Agent to further
exercise rights and remedies under this Section 8 or elsewhere provided by
agreement or applicable law, each Debtor hereby grants to the Agent, for the
benefit of the Agent and the Secured Parties, an irrevocable, nonexclusive
license (exercisable without payment of royalty or other compensation to such
Debtor) to use, license or sublicense following an Event of Default, any
Intellectual Property now owned or hereafter acquired by such Debtor, and
wherever the same may be located, and including in such license access to all
media in which any of the licensed items may be recorded or stored and to all
computer software and programs used for the compilation or printout
thereof.
9.
Inter
Secured Party Rights; Transaction/Applications of Proceeds.
(a)
If an
Event of Default occurs and any party hereto collects proceeds pursuant to its
rights under any Obligations, the Agent shall be immediately notified and such
payment shall be shared with all of the other Secured Parties as set forth
above. Notwithstanding anything to the contrary contained in the Purchase
Agreement or any document executed in connection with the Obligations and
irrespective of: (i) the time, order or method of attachment or perfection of
the security interests created in favor of Secured Parties; (ii) the time or
order of filing or recording of financing statements or other documents filed or
recorded to perfect security interests in any Collateral; (iii) anything
contained in any filing or agreement to which any Secured Party now or hereafter
may be a party; and (iv) the rules for determining perfection or priority under
the UCC or any other law governing the relative priorities of secured creditors,
each of the Secured Parties acknowledges that (x) all other Secured Parties have
a valid security interest in the Collateral and (y) the security interests of
the Secured Parties in any Collateral pursuant to any outstanding Obligations
shall be
pari
passu
with each
other and enforced pursuant to the terms of this Agreement through the
Agent. Each Secured Party, severally and not jointly with the other
Secured Parties, shall indemnify, defend, and hold harmless the other Secured
Parties against and in respect of any and all claims, demands, losses, costs,
expenses, obligations, liabilities, damages, recoveries, and deficiencies,
including interest, penalties, and reasonable professional and attorneys’ fees,
including those arising from settlement negotiations, that the other Secured
Parties shall incur or suffer, which arise, result from, or relate to a breach
of, or failure by such Secured Party to perform under this
Agreement.
(b)
The
proceeds of any such sale, lease or other disposition of the Collateral
hereunder or from payments made on account of any insurance policy insuring any
portion of the Collateral shall be applied first, to the expenses of retaking,
holding, storing, processing and preparing for sale, selling, and the like
(including without limitation any taxes, fees and other costs incurred in
connection therewith) of the Collateral, then to the reasonable attorneys’ fees
and expenses incurred by the Agent in enforcing the Secured Parties’ rights
hereunder and in connection with collecting, storing and disposing of the
Collateral, then to satisfaction of the Obligations, pro rata among the Secured
Parties (based on then-outstanding principal amounts of Note at the time of any
such determination), and then to the payment of any other amounts required by
applicable law, after which the Secured Parties shall pay to the applicable
Debtor any surplus proceeds. If, upon the sale, license or other
disposition of the Collateral, the proceeds thereof are insufficient to pay all
amounts to which the Secured Parties are legally entitled, the Debtors will be
liable for the deficiency, together with interest thereon, at the rate of 20%
per annum or the lesser amount permitted by applicable law (the “
Default Rate
”), and
the reasonable fees of any attorneys employed by the Secured Parties to collect
such deficiency. To the extent permitted by applicable law, each
Debtor waives all claims, damages and demands against the Secured Parties
arising out of the repossession, removal, retention or sale of the Collateral,
unless due solely to the gross negligence or willful misconduct of the Secured
Parties as determined by a final judgment (not subject to further appeal) of a
court of competent jurisdiction.
10.
Securities Law Provision
. Each Debtor recognizes that the Agent may
be limited in its ability to effect a sale to the public of all or part of the
Pledged Securities by reason of certain prohibitions in the Securities Act of
1933, as amended, or other federal or state securities laws (collectively, the
“
Securities
Laws
”), and may be compelled to resort to
one or more sales to a restricted group of purchasers who may be required to
agree to acquire the Pledged Securities for their own account, for investment
and not with a view to the distribution or resale thereof. Each
Debtor agrees that sales so made may be at prices and on terms less favorable
than if the Pledged Securities were sold to the public and that the Agent has no
obligation to delay the sale of any Pledged Securities for the period of time
necessary to register the Pledged Securities for sale to the public under the
Securities Laws. Each Debtor shall cooperate with the Agent in its
attempt to satisfy any requirements under the Securities Laws applicable to the
sale of the Pledged Securities by the Agent.
11.
Costs and Expenses
. Each
Debtor agrees to pay all reasonable out-of-pocket fees, costs and expenses
incurred in connection with any filing required hereunder, including without
limitation any financing statements pursuant to the UCC, continuation
statements, partial releases and/or termination statements related thereto or
any expenses of any searches reasonably required by the Agent. The
Debtors shall also pay all other claims and charges which in the reasonable
opinion
of the Agent are reasonably likely to prejudice, imperil or otherwise affect the
Collateral or the Security Interests therein. The Debtors will also,
upon demand, pay to the Agent the amount of any and all reasonable expenses,
including the reasonable fees and expenses of its counsel and of any experts and
agents, which the Agent, for the benefit of the Secured Parties, may incur in
connection with (i) the enforcement of this Agreement, (ii) the custody or
preservation of, or the sale of, collection from, or other realization upon, any
of the Collateral, or (iii) the exercise or enforcement of any of the rights of
the Secured Parties under the Note. Until so paid, any fees payable
hereunder shall be added to the principal amount of the Note and shall bear
interest at the Default Rate.
12.
Responsibility for Collateral
.
The Debtors assume all liabilities and responsibility in connection with all
Collateral, and the Obligations shall in no way be affected or diminished by
reason of the loss, destruction, damage or theft of any of the Collateral or its
unavailability for any reason. Without limiting the generality of the
foregoing, (a) neither the Agent nor any Secured Party (i) has any duty (either
before or after an Event of Default) to collect any amounts in respect of the
Collateral or to preserve any rights relating to the Collateral, or (ii) has any
obligation to clean-up or otherwise prepare the Collateral for sale, and (b)
each Debtor shall remain obligated and liable under each contract or agreement
included in the Collateral to be observed or performed by such Debtor
thereunder. Neither the Agent nor any Secured Party shall have any
obligation or liability under any such contract or agreement by reason of or
arising out of this Agreement or the receipt by the Agent or any Secured Party
of any payment relating to any of the Collateral, nor shall the Agent or any
Secured Party be obligated in any manner to perform any of the obligations of
any Debtor under or pursuant to any such contract or agreement, to make inquiry
as to the nature or sufficiency of any payment received by the Agent or any
Secured Party in respect of the Collateral or as to the sufficiency of any
performance by any party under any such contract or agreement, to present or
file any claim, to take any action to enforce any performance or to collect the
payment of any amounts which may have been assigned to the Agent or to which the
Agent or any Secured Party may be entitled at any time or times.
13.
Security Interests Absolute
.
All rights of the Secured Parties and all obligations of the Debtors hereunder,
shall be absolute and unconditional, irrespective of: (a) any lack of validity
or enforceability of this Agreement, the Note, any other Transaction Documents
or any agreement entered into in connection with the foregoing, or any portion
hereof or thereof; (b) any change in the time, manner or place of payment or
performance of, or in any other term of, all or any of the Obligations, or any
other amendment or waiver of or any consent to any departure from the Note, any
other Transaction Documents or any other agreement entered into in connection
with the foregoing; (c) any exchange, release or nonperfection of any of the
Collateral, or any release or amendment or waiver of or consent to departure
from any other collateral for, or any guarantee, or any other security, for all
or any of the Obligations; (d) any action by the Secured Parties to obtain,
adjust, settle and cancel in its sole discretion any insurance claims or matters
made or arising in connection with the Collateral; or (e) any other circumstance
which might otherwise constitute any legal or equitable defense available to a
Debtor, or a discharge of all or any part of the Security Interests granted
hereby. Until the Obligations shall have been paid and performed in
full, the rights of the Secured Parties shall continue even if the Obligations
are barred for any reason, including without limitation the running of the
statute of limitations or bankruptcy. Each Debtor expressly waives
presentment,
protest,
notice of protest, demand, notice of nonpayment and demand for
performance. In the event that at any time any transfer of any
Collateral or any payment received by the Secured Parties hereunder shall be
deemed by final order of a court of competent jurisdiction to have been a
voidable preference or fraudulent conveyance under the bankruptcy or insolvency
laws of the United States, or shall be deemed to be otherwise due to any party
other than the Secured Parties, then, in any such event, each Debtor’s
obligations hereunder shall survive cancellation of this Agreement, and shall
not be discharged or satisfied by any prior payment thereof and/or cancellation
of this Agreement, but shall remain a valid and binding obligation enforceable
in accordance with the terms and provisions hereof. Each Debtor
waives all right to require the Secured Parties to proceed against any other
person or
entity or
to apply any Collateral
which the Secured Parties may hold at any time, or to marshal assets, or to
pursue any other remedy. Each Debtor waives any defense arising by
reason of the application of the statute of limitations to any obligation
secured hereby.
14.
Term of Agreement
. This
Agreement and the Security Interests shall terminate
, automatically and without any action on the part of
the Agent or Secured Parties,
on the date on which all payments under the
Note have been indefeasibly paid in full (or exchanged in full for securities
issued in connection with a Reverse Merger Financing (as defined in the Purchase
Agreement) pursuant to Section 4.7 of the Purchase Agreement) and all other
Obligations have been paid or discharged; provided, however, that all
indemnities of the parties hereto contained in this Agreement (including without
limitation
Annex
B
hereto) shall survive and remain operative and in full force and effect
regardless of the termination of this Agreement
. The Agent and Secured Parties shall, at the
Debtors’ request and expense, take any and all action required to discharge any
and all security interests and release to the Debtors any and all Collateral in
the Agent’s or Secured Parties’ possession or control. The Secured
Parties hereby agree that the Debtors shall have the right to take all necessary
action to cause the termination and release of all security interests granted
hereunder upon termination of this Agreement
.
15.
Power of Attorney; Further
Assurances
.
(a)
Each
Debtor authorizes the Agent, and does hereby make, constitute and appoint the
Agent and its officers, agents, successors or assigns with full power of
substitution, as such Debtor’s true and lawful attorney-in-fact, with power, in
the name of the Agent or such Debtor, to, after the occurrence and during the
continuance of an Event of Default, (i) endorse any note, checks, drafts, money
orders or other instruments of payment (including payments payable under or in
respect of any policy of insurance) in respect of the Collateral that may come
into possession of the Agent; (ii) sign and endorse any financing statement
pursuant to the UCC or any invoice, freight or express bill, bill of lading,
storage or warehouse receipts, drafts against debtors, assignments,
verifications and notices in connection with accounts, and other documents
relating to the Collateral; (iii) pay or discharge taxes, liens, security
interests or other encumbrances at any time levied or placed on or threatened
against the Collateral; (iv) demand, collect, receive, compromise, settle and
sue for monies due in respect of the Collateral; (v) transfer any Intellectual
Property or provide licenses respecting any Intellectual Property; and (vi)
generally, at the option of the Agent, and at the expense of the Debtors, at any
time, or from time to time, execute and deliver any and all documents and
instruments and do all acts and things which the Agent deems necessary to
protect, preserve and realize
upon the
Collateral and the Security Interests granted therein in order to effect the
intent of this Agreement, the Note and other Transaction Documents all as fully
and effectually as the Debtors might or could do; and each Debtor hereby
ratifies all that said attorney shall lawfully do or cause to be done by virtue
hereof. This power of attorney is coupled with an interest and shall
be irrevocable for the term of this Agreement and thereafter as long as any of
the Obligations shall be outstanding.
The designation set forth herein shall be deemed to
amend and supersede any inconsistent provision in the Organizational Documents
or other documents or agreements to which any Debtor is subject or to which any
Debtor is a party.
Without limiting the generality of the
foregoing, after the occurrence and during the continuance of an Event of
Default, each Secured Party is specifically authorized to execute and file any
applications for or instruments of transfer and assignment of any patents,
trademarks, copyrights or other Intellectual Property with the United States
Patent and Trademark Office and the United States Copyright
Office.
(b)
On a
continuing basis, each Debtor will make, execute, acknowledge, deliver, file and
record, as the case may be, with the proper filing and recording agencies in any
jurisdiction, including without limitation the jurisdictions indicated on
Schedule C
attached
hereto, all such instruments, and take all such action as may reasonably be
deemed necessary or advisable, or as reasonably requested by the Agent, to
perfect the Security Interests granted hereunder and otherwise to carry out the
intent and purposes of this Agreement, or for assuring and confirming to the
Agent the grant or perfection of a perfected security interest in all the
Collateral under the UCC.
(c)
Each
Debtor hereby irrevocably appoints the Agent as such Debtor’s attorney-in-fact,
with full authority in the place and instead of such Debtor and in the name of
such Debtor, from time to time in the Agent’s discretion, to take any action and
to execute any instrument which the Agent may deem necessary or advisable to
accomplish the purposes of this Agreement, including the filing, in its sole
discretion, of one or more financing or continuation statements and amendments
thereto, relative to any of the Collateral without the signature of such Debtor
where permitted by law, which financing statements may (but need not) describe
the Collateral as “all assets” or “all personal property” or words of like
import, and ratifies all such actions taken by the Agent. This power
of attorney is coupled with an interest and shall be irrevocable for the term of
this Agreement.
16.
Notices
. All notices,
requests, demands and other communications hereunder shall be subject to the
notice provision of the Purchase Agreement.
17.
Other Security
. To the extent
that the Obligations are now or hereafter secured by property other than the
Collateral or by the guarantee, endorsement or property of any other person,
firm, corporation or other entity, then the Agent shall have the right, in its
sole discretion, to pursue, relinquish, subordinate, modify or take any other
action with respect thereto, without in any way modifying or affecting any of
the Secured Parties’ rights and remedies hereunder.
18.
Appointment of
Agent
. The Secured Parties hereby appoint Gemini Strategies,
LLC or its appointed agent to act as their agent (“
Gemini
” or “
Agent
”) for purposes
of exercising any and all rights and remedies of the Secured Parties hereunder.
Such appointment shall continue until revoked in writing by the Secured
Parties
,
at
which time
the Secured Parties shall appoint a new Agent. The
Agent shall have the rights, responsibilities and immunities set forth in
Annex B
hereto.
19.
Miscellaneous
.
(a)
No course
of dealing between the Debtors and the Secured Parties, nor any failure to
exercise, nor any delay in exercising, on the part of the Secured Parties, any
right, power or privilege hereunder or under the Note shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, power or
privilege hereunder or thereunder preclude any other or further exercise thereof
or the exercise of any other right, power or privilege.
(b)
All of
the rights and remedies of the Secured Parties with respect to the Collateral,
whether established hereby or by the Note or by any other agreements,
instruments or documents or by law, shall be cumulative and may be exercised
singly or concurrently.
(c)
This
Agreement, together with the exhibits and schedules hereto, contain the entire
understanding of the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, oral or written, with respect
to such matters, which the parties acknowledge have been merged into this
Agreement and the exhibits and schedules hereto. No provision of this
Agreement may be waived, modified, supplemented or amended except in a written
instrument signed, in the case of an amendment, by the Debtors and the Secured
Parties or, in the case of a waiver, by the party against whom enforcement of
any such waived provision is sought.
(d)
If any
term, provision, covenant or restriction of this Agreement is held by a court of
competent jurisdiction to be invalid, illegal, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions set forth herein
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated, and the parties hereto shall use their commercially reasonable
efforts to find and employ an alternative means to achieve the same or
substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be
the intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.
(e)
No waiver
of any default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of
any subsequent default or a waiver of any other provision, condition or
requirement hereof, nor shall any delay or omission of any party to exercise any
right hereunder in any manner impair the exercise of any such
right.
(f)
This
Agreement shall be binding upon and inure to the benefit of the parties and
their successors and permitted assigns. The Company and the
Guarantors may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of each Secured Party (other than by
merger). Any Secured Party may assign any or all of its rights under
this Agreement to any Person to whom such Secured Party assigns or transfers any
Securities, provided such transferee agrees in writing to be bound, with respect
to the transferred Securities, by the provisions of this Agreement that apply to
the “Secured Parties.”
(g)
Each
party shall take such further action and execute and deliver such further
documents as may be necessary or appropriate in order to carry out the
provisions and purposes of this Agreement.
(h)
All
questions concerning the construction, validity, enforcement and interpretation
of this Agreement shall be governed by and construed and enforced in accordance
with the internal laws of the State of New York, without regard to the
principles of conflicts of law thereof. Each Debtor agrees that all
proceedings concerning the interpretations, enforcement and defense of the
transactions contemplated by this Agreement and the Note (whether brought
against a party hereto or its respective affiliates, directors, officers,
shareholders, partners, members, employees or agents) shall be commenced
exclusively in the state and federal courts sitting in the City of New York,
Borough of Manhattan. Each Debtor hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in the City of New York,
Borough of Manhattan for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed
herein, and hereby irrevocably waives, and agrees not to assert in any
proceeding, any claim that it is not personally subject to the jurisdiction of
any such court or that such proceeding is improper. Each party hereto
hereby irrevocably waives personal service of process and consents to process
being served in any such proceeding by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to such party
at the address in effect for notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way
any right to serve process in any manner permitted by law. Each party
hereto hereby irrevocably waives, to the fullest extent permitted by applicable
law, any and all right to trial by jury in any legal proceeding arising out of
or relating to this Agreement or the transactions contemplated
hereby. If any party shall commence a proceeding to enforce any
provisions of this Agreement, then the prevailing party in such proceeding shall
be reimbursed by the other party for its reasonable attorney’s fees and other
costs and expenses incurred with the investigation, preparation and prosecution
of such proceeding.
(i)
This
Agreement may be executed in any number of counterparts, each of which when so
executed shall be deemed to be an original and, all of which taken together
shall constitute one and the same Agreement. In the event that any
signature is delivered by facsimile transmission or
e-mail
transmission, such signature shall create a valid binding obligation of the
party executing the same (or on whose behalf such signature is executed) with
the same force and effect as if such facsimile signature were the original
thereof.
(j)
All
Debtors (including without limitation any Additional Debtor joined hereto) shall
be jointly and severally be liable for the obligations of each Debtor to the
Secured Parties hereunder.
(k)
Each
Debtor shall indemnify, reimburse and hold harmless the Agent and the Secured
Parties and their respective partners, members, shareholders, officers,
directors, employees and agents (and any other persons with other titles that
have similar functions) (collectively, “
Indemnitees
”) from
and against any and all losses, claims, liabilities, damages, penalties, suits,
costs and expenses, of any kind or nature, (including fees relating to the cost
of investigating and defending any of the foregoing) imposed on, incurred by or
asserted against such Indemnitee in any way related to or arising from or
alleged to arise from this Agreement or the Collateral, except any such losses,
claims, liabilities, damages, penalties, suits, costs and expenses which result
from any violation of the terms or provisions of this Agreement or the
agreements underlying the Obligations or the negligence or willful misconduct of
the Indemnitee. This indemnification provision is in addition to, and
not in limitation of, any other indemnification provision in the Note, the
Purchase Agreement or any other agreement, instrument or other document executed
or delivered in connection herewith or therewith.
(l)
Nothing in this Agreement shall be construed to subject
the Agent or any Secured Party to liability as a partner or member in or of any
Debtor or any of its direct or indirect subsidiaries, nor shall the Agent or any
Secured Party be deemed to have assumed any obligations under any partnership
agreement or limited liability company agreement, as applicable, of any such
Debtor or any of its direct or indirect subsidiaries or otherwise, unless and
until any such Secured Party exercises its right to be substituted for such
Debtor as a partner or member, as applicable, pursuant
hereto.
(m)
To the extent that the grant of the security interest in
the Collateral and the enforcement of the terms hereof require the consent,
approval or action of any partner or member, as applicable, of any Debtor or any
direct or indirect subsidiary of any Debtor or compliance with any provisions of
any of the Organizational Documents, the Debtors hereby grant such consent and
approval and waive any such noncompliance with the terms of said
documents.
[SIGNATURE
PAGES FOLLOW]
IN
WITNESS WHEREOF, the parties hereto have caused this Security Agreement to be
duly executed on the day and year first above written.
ENVISION SOLAR INTERNATIONAL,
INC.
, a California corporation
By:
/s/ Robert
Noble
______________________________________
Name: Robert
Noble
Title: CEO
ENVISION SOLAR CONSTRUCTION,
INC.
, a California corporation
By:
/s/ Robert
Noble
______________________________________
Name: Robert
Noble
Title: CEO
ENVISION SOLAR RESIDENTIAL,
INC.
, a California corporation
By:
/s/ Robert
Noble
______________________________________
Name: Robert
Noble
Title: CEO
ENVISION AFRICA, LLC
, a
Delaware limited liability company
By:
/s/ Robert
Noble
______________________________________
Name: Robert
Noble
Title: CEO
[SIGNATURE
PAGE OF SECURED PARTY FOLLOWS]
[SIGNATURE
PAGE OF SECURED PARTY TO ESII SECURITY AGREEMENT]
|
|
By:
GEMINI STRATEGIES, LLC, as investment
manager
|
By:
/s/ Steven
Winters
Name: Steven
Winters
Title: Managing
Member
|
|
GEMINI STRATEGIES, LLC
,
as Agent
|
By:
/s/ Steven
Winters
Name: Steven
Winters
Title: Managing
Member
ANNEX
A
to
SECURITY
AGREEMENT
FORM
OF ADDITIONAL DEBTOR JOINDER
Security
Agreement dated as of November ___, 2008 made by
ENVISION
SOLAR INTERNATIONAL, INC.
and its
subsidiaries party thereto from time to time, as Debtors
to and in
favor of
the
Secured Parties identified therein (the “
Security
Agreement
”)
Reference
is made to the Security Agreement as defined above; capitalized terms used
herein and not otherwise defined herein shall have the meanings given to such
terms in, or by reference in, the Security Agreement.
The
undersigned hereby agrees that upon delivery of this Additional Debtor Joinder
to the Secured Parties referred to above (or the Agent on their behalf), the
undersigned shall (a) be an Additional Debtor under the Security Agreement, (b)
have all the rights and obligations of the Debtors under the Security Agreement
as fully and to the same extent as if the undersigned was an original signatory
thereto, and (c) be deemed to have made the representations and warranties set
forth therein as of the date of execution and delivery of this Additional Debtor
Joinder. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, THE
UNDERSIGNED SPECIFICALLY GRANTS TO THE SECURED PARTIES A SECURITY INTEREST IN
THE COLLATERAL OWNED BY IT AS MORE FULLY SET FORTH IN THE SECURITY AGREEMENT AND
ACKNOWLEDGES AND AGREES TO THE WAIVER OF JURY TRIAL PROVISIONS SET FORTH
THEREIN.
Attached
hereto are supplemental and/or replacement Schedules to the Security Agreement,
as applicable. An executed copy of this Joinder shall be delivered to
the Secured Parties (or the Agent on their behalf), and the Secured Parties may
rely on the matters set forth herein on or after the date
hereof. This Joinder shall not be modified, amended or terminated
without the prior written consent of the Secured Parties.
IN
WITNESS WHEREOF, the undersigned has caused this Joinder to be executed in the
name and on behalf of the undersigned.
|
|
[Name
of Additional Debtor]
|
|
|
By:
________________________
|
Dated:
ANNEX
B
to
SECURITY
AGREEMENT
THE
AGENT
1.
Appointment
.
The Secured Parties
(all capitalized terms used herein and not otherwise defined shall have the
respective meanings provided in the Security Agreement to which this Annex B is
attached (the "
Agreement
")), by
their acceptance of the benefits of the Agreement, hereby designate Gemini
Strategies, LLC (“
Gemini
” or “
Agent
”) as the Agent
to act as specified herein and in the Agreement. Each Secured Party
shall be deemed irrevocably to authorize the Agent to take such action on its
behalf under the provisions of the Agreement and any other Transaction Document
(as such term is defined in the Note) and to exercise such powers and to perform
such duties hereunder and thereunder as are specifically delegated to or
required of the Agent by the terms hereof and thereof and such other powers as
are reasonably incidental thereto. The Agent may perform any of its
duties hereunder by or through its agents or employees.
2.
Nature of Duties
.
The Agent shall
have no duties or responsibilities except those expressly set forth in the
Agreement. Neither the Agent nor any of its partners, members,
shareholders, officers, directors, employees or agents shall be liable for any
action taken or omitted by it as such under the Agreement or hereunder or in
connection herewith or therewith, be responsible for the consequence of any
oversight or error of judgment or answerable for any loss, unless caused solely
by its or their gross negligence or willful misconduct as determined by a final
judgment (not subject to further appeal) of a court of competent
jurisdiction. The duties of the Agent shall be mechanical and
administrative in nature; the Agent shall not have by reason of the Agreement or
any other Transaction Document a fiduciary relationship in respect of any Debtor
or any Secured Party; and nothing in the Agreement or any other Transaction
Document, expressed or implied, is intended to or shall be so construed as to
impose upon the Agent any obligations in respect of the Agreement or any other
Transaction Document except as expressly set forth herein and
therein.
3.
Lack of Reliance on the
Agent
. Independently and without reliance upon the Agent, each
Secured Party, to the extent it deems appropriate, has made and shall continue
to make (i) its own independent investigation of the financial condition and
affairs of the Company and its subsidiaries in connection with such Secured
Party’s investment in the Debtors, the creation and continuance of the
Obligations, the transactions contemplated by the Transaction Documents, and the
taking or not taking of any action in connection therewith, and (ii) its own
appraisal of the creditworthiness of the Company and its subsidiaries, and of
the value of the Collateral from time to time, and the Agent shall have no duty
or responsibility, either initially or on a continuing basis, to provide any
Secured Party with any credit, market or other information with respect thereto,
whether coming into its possession before any Obligations are incurred or at any
time or times thereafter. The Agent shall not be responsible to the
Debtors or any Secured Party for any recitals, statements, information,
representations or warranties herein or in any document, certificate or other
writing delivered in connection herewith, or for the execution, effectiveness,
genuineness, validity, enforceability, perfection, collectability, priority or
sufficiency of the Agreement or any other Transaction Document, or for the
financial condition of the Debtors or the value of any of the Collateral, or be
required to make any inquiry concerning either the performance or observance of
any of the terms, provisions or conditions of the Agreement or any other
Transaction Document, or the financial condition of the Debtors, or the value of
any of the Collateral, or the existence or possible existence of any default or
Event of Default under the Agreement, the Note or any of the other Transaction
Documents.
4.
Certain Rights of the
Agent
. The Agent shall have the right to take any action with
respect to the Collateral, on behalf of all of the Secured
Parties. To the extent practical, the Agent shall request
instructions from the Secured Parties with respect to any material act or action
(including failure to act) in connection with the Agreement or any other
Transaction Document, and shall be entitled to act or refrain from acting in
accordance with the instructions of Secured Parties; if such instructions are
not provided despite the Agent’s request therefor, the Agent shall be entitled
to refrain from such act or taking such action, and if such action is taken,
shall be entitled to appropriate indemnification from the Secured Parties in
respect of actions to be taken by the Agent; and the Agent shall not incur
liability to any person or entity by reason of so refraining. Without
limiting the foregoing, (a) no Secured Party shall have any right of action
whatsoever against the Agent as a result of the Agent acting or refraining from
acting hereunder in accordance with the terms of the Agreement or any other
Transaction Document, and the Debtors shall have no right to question or
challenge the authority of, or the instructions given to, the Agent pursuant to
the foregoing, and (b) the Agent shall not be required to take any action which
the Agent believes (i) could reasonably be expected to expose it to personal
liability or (ii) is contrary to this Agreement, the Transaction Documents or
applicable law.
5.
Reliance
. The Agent
shall be entitled to rely, and shall be fully protected in relying, upon any
writing, resolution, notice, statement, certificate, telex, teletype or
telecopier message, cablegram, radiogram, order or other document or telephone
message signed, sent or made by the proper person or entity, and, with respect
to all legal matters pertaining to the Agreement and the other Transaction
Documents and its duties thereunder, upon advice of counsel selected by it, and
upon all other matters pertaining to this Agreement and the other Transaction
Documents and its duties thereunder, upon advice of other experts selected by
it. Anything to the contrary notwithstanding, the Agent shall have no
obligation whatsoever to any Secured Party to assure that the Collateral exists
or is owned by the Debtors or is cared for, protected or insured or that the
liens granted pursuant to the Agreement have been properly or sufficiently or
lawfully created, perfected, or enforced or are entitled to any particular
priority.
6.
Indemnification
.
To the extent
that the Agent is not reimbursed and indemnified by the Debtors, the Secured
Parties will jointly and severally reimburse and indemnify the Agent from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever which may be imposed on, incurred by or asserted against the
Agent in performing its duties hereunder or under the Agreement or any other
Transaction Document, or in any way relating to or arising out of the Agreement
or any other Transaction Document except for those determined by a final
judgment (not subject to further appeal) of a court of competent jurisdiction to
have resulted solely from the Agent's own gross negligence or willful
misconduct. Prior to taking any action hereunder as Agent, the Agent
may require each Secured Party to deposit with it sufficient sums as it
determines in good faith is necessary to protect the Agent for costs and
expenses associated with taking such action.
7.
Resignation by the Agent
.
(a) The
Agent may resign from the performance of all its functions and duties under the
Agreement and the other Transaction Documents at any time by giving 30 days'
prior written notice (as provided in the Agreement) to the Debtors and the
Secured Parties. Such resignation shall take effect upon the
appointment of a successor Agent pursuant to clauses (b) and (c)
below.
(b) Upon
any such notice of resignation, the Secured Parties shall appoint a successor
Agent hereunder.
(c) If
a successor Agent shall not have been so appointed within said 30-day period,
the Agent shall then appoint a successor Agent who shall serve as Agent until
such time, if any, as the Secured Parties appoint a successor Agent as provided
above. If a successor Agent has not been appointed within such 30-day
period, the Agent may petition any court of competent jurisdiction or may
interplead the Debtors and the Secured Parties in a proceeding for the
appointment of a successor Agent, and all fees, including, but not limited to,
extraordinary fees associated with the filing of interpleader and expenses
associated therewith, shall be payable by the Debtors on demand.
(d) Upon
the acceptance of any appointment as Agent hereunder by a successor Agent, such
successor Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Agent and the retiring
Agent shall be discharged from its duties and obligations under the
Agreement. After any retiring Agent’s resignation or removal hereunder as
Agent, the provisions of the Agreement including this Annex B shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was
Agent.
8.
Rights with respect to
Collateral
.
Each Secured
Party agrees with all other Secured Parties and the Agent (i) that it shall not,
and shall not attempt to, exercise any rights with respect to its security
interest in the Collateral, whether pursuant to any other agreement or otherwise
(other than pursuant to this Agreement), or take or institute any action against
the Agent or any of the other Secured Parties in respect of the Collateral or
its rights hereunder (other than any such action arising from the breach of this
Agreement) and (ii) that such Secured Party has no other rights with respect to
the Collateral other than as set forth in this Agreement and the other
Transaction Documents.
DISCLOSURE
SCHEDULES
Schedule
A
Principal Place of Business
and Location of Collateral
4225
Executive Square, Suite 1000, San Diego, California 92037.
Schedule
B
Exceptions
None
Schedule
C and D
Legal Names; Organizational
and Filing Jurisdictions and Identification Numbers
|
Name
|
Entity
Type
|
Jurisdiction
|
Jurisdiction
ID Number (NOT EIN)
|
Address
|
|
Envision
Solar International, Inc.
|
Corporation
|
California
|
|
4225
Executive Square
Suite
1000
San
Diego, CA 92037
|
|
Envision
Solar Construction, Inc.
|
Corporation
|
California
|
|
4225
Executive Square
Suite
1000
San
Diego, CA 92037
|
|
Envision
Solar Residential, Inc.
|
Corporation
|
California
|
|
4225
Executive Square
Suite
1000
San
Diego, CA 92037
|
|
Envision
Africa, LLC
|
Limited
Liability Company
|
Delaware
|
|
4225
Executive Square
Suite
1000
San
Diego, CA 92037
|
[Note:
Company to provide ID #s or state that they don’t exist.]
Schedule
E
Other Names; Mergers and
Acquisitions
None
Schedule
F
Intellectual
Property
[Note:
Does the company have any domain names, such as
“envisionsolar.com”?]
Patent
Applications
|
Owner
|
Short
Title
|
Country
|
Status
|
Application
Number
|
Filing
Date
|
Inventors
|
|
Envision
Solar International, Inc.
|
Solar
Module Racking and Electrical Connection System
|
USA
|
Pending
|
61/035,573
|
3/11/2008
|
R.
Noble, W. Adelson, M. Colby
|
|
Envision
Solar International, Inc.
|
Photovoltaic
System and Method
|
USA
|
Pending
|
12/046,113
|
3/11/2008
|
R.
Noble, N. Zeller, W. Adelson, M. Colby, J. Labrum
|
|
Envision
Solar International, Inc.
|
Support
System for a Photovoltaic System
|
USA
|
Pending
|
11/842,484
|
8/21/2007
|
R.
Noble, N. Zeller, W. Adelson
|
|
Envision
Solar International, Inc.
|
Sun
Tracking Solar Panels
|
USA
|
Pending
|
12/025,192
|
2/4/2008
|
R.
Noble, W. Adelson,
|
Trademarks
and Trademark Applications
|
Owner
|
Trademark
|
Country
|
Status
|
Application/
Serial Number
|
Filing
Date
|
Issuance
Date
|
Registration Number
|
|
Envision
Solar International, Inc.
|
LifePort
|
USA
|
Registered.
|
77115387
|
2/24/2007
|
4/1/2008
|
3,406,252
|
|
Envision
Solar International, Inc.
|
LifeShade
|
USA
|
Request
for first extension of time to file statement of use has been
granted.
|
77126066
|
3/8/2008
|
|
|
|
Owner
|
Trademark
|
Country
|
Status
|
Application/
Serial Number
|
Filing
Date
|
Issuance
Date
|
Registration Number
|
|
Envision
Solar International, Inc.
|
LifeCanopy
|
USA
|
Request
for first extension of time to file statement of use has been
granted.
|
77126053
|
3/8/2007
|
|
|
|
Envision
Solar International, Inc.
|
LifeCharge
|
USA
|
Request
for first extension of time to file statement of use has been
granted.
|
77126081
|
3/8/2007
|
|
|
|
Envision
Solar International, Inc.
|
Solar
Row
|
USA
|
Abandoned.
Failure to respond or late response.
|
77126003
|
3/8/2007
|
|
|
|
Envision
Solar International, Inc.
|
Solar
Canopy
|
USA
|
Abandoned.
Failure to respond or late response.
|
77126025
|
3/8/2007
|
|
|
|
Envision
Solar International, Inc.
|
SolarOrchard
|
USA
|
Abandoned.
Failure to respond or late response.
|
77126175
|
3/8/2007
|
|
|
|
Envision
Solar International, Inc.
|
Plant
a Solar Tree
|
USA
|
Abandoned.
Failure to respond or late response.
|
77172347
|
5/3/2007
|
|
|
|
Envision
Solar International, Inc.
|
Green
Shade
|
USA
|
Abandoned.
Failure to respond or late response.
|
77126161
|
3/8/2007
|
|
|
|
Envision
Solar International, Inc.
|
Solar
Tree
|
USA
|
Request
for fourth extension of time to file statement of use
granted.
|
78624896
|
5/6/2005
|
|
|
|
Owner
|
Trademark
|
Country
|
Status
|
Application/
Serial Number
|
Filing
Date
|
Issuance
Date
|
Registration Number
|
|
Envision
Solar International, Inc.
|
Beyond
Parking
|
USA
|
Abandoned.
No statement of use filed after notice of allowance was
issued.
|
77181581
|
5/15/2007
|
|
|
|
Envision
Solar International, Inc.
|
Be
Cool Park Solar
|
USA
|
Abandoned.
No statement of use filed after notice of allowance was
issued.
|
77192558
|
5/29/2007
|
|
|
Material
Licenses
Agreement
by and between Envision Solar, LLC (a predecessor of the Company) and Kyocera
Solar, Inc., dated December 19, 2006 for use of the trademarks “Solar Grove” and
“Solar Tree.”
|
Owner
|
Trademark
|
Country
|
Status
|
Application/
Serial Number
|
Filing
Date
|
Issuance
Date
|
Registration Number
|
|
Kyocera
Solar, Inc.
|
SOLAR
GROVE
|
USA
|
Request
for fourth extension of time to file statement of use
granted.
|
78564619
|
2/10/2005
|
|
|
|
Kyocera
Solar, Inc.
|
SOLAR TREE
|
USA
|
Request
for fourth extension of time to file statement of use
granted.
|
78624896
|
5/6/2005
|
|
|
Schedule
G
Government Account
Debtors
None
Schedule
H
Pledged
Securities
All
equity interests and debt securities in the entities listed in Schedule C
above.
Schedule
I
Permitted Licenses and
Dispositions
None
34
Exhibit
10.10
INTELLECTUAL
PROPERTY SECURITY AGREEMENT
This
INTELLECTUAL PROPERTY SECURITY AGREEMENT (this “
Agreement
”), dated as
of November 12, 2008, is made by
ENVISION SOLAR INTERNATIONAL,
INC
.,
a
California corporation (the “
Grantor
”), in favor
of
GEMINI STRATEGIES,
LLC
, as collateral agent (“
Agent
”) for the
holder of the Secured Bridge Note issued or to be issued in the original
principal amount of $591,770.83 (the “
Note
”) by the
Grantor, pursuant to the Purchase Agreement (as defined below) (collectively
with its endorsees, transferees and assigns, the “
Lender
”).
W I T N E
S S E T H:
WHEREAS,
the Grantor and the Lender are party to that certain Securities Purchase
Agreement, dated on or about the date hereof (“
Purchase Agreement
”),
pursuant to which the Grantor issued or is issuing the Note, among other
things;
WHEREAS,
contemporaneously herewith the Grantor is entering into a Security Agreement
(“
Security
Agreement
”), pursuant to which the Grantor has granted a security
interest in its assets and properties to secure the satisfaction of the
Grantor’s obligations under the Note, among other things; and
WHEREAS,
the Grantor is obligated under the Security Agreement to take such further
actions as the collateral Agent requests to further perfect the Lender’s
security interest granted under the Security Agreement, including without
limitation with respect to intellectual property;
NOW,
THEREFORE, in consideration of the premises and mutual covenants herein
contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Grantor hereby agrees as
follows:
DEFINED
TERMS.
(a)
Certain Defined
Terms
. As used in this Agreement, the following terms shall
have the meanings set forth below:
“
Copyrights
”
means copyrights and copyright registrations, including without limitation the
copyright registrations and recordings listed on
Schedule I
attached
hereto, if any, and (i) all reissues, continuations, extensions or renewals
thereof, (ii) all income, royalties, damages and payments now and hereafter due
and/or payable under and with respect thereto, subject to payment to any
co-owner of its, his or her share thereof, including without limitation payments
under all licenses entered into in connection therewith and damages and payments
for past or future infringements thereof, (iii) the right to sue for past,
present and future infringements thereof, and (iv) all of the Grantor’s rights
corresponding thereto throughout the world.
“
Intellectual
Property Licenses
” means rights under or interest in any Patent,
Trademark, Copyright or other intellectual property under a license agreement,
whether verbal or in writing, regardless of whether the Grantor is a licensee or
licensor under any such license agreement, including without
limitation
all the intellectual property licenses listed on
Schedule I
attached
hereto, if any, and also including without limitation software license
agreements with any other party, and also including all of the
Grantor’s rights corresponding to Grantor’s Intellectual Property Licenses
throughout the world.
“
Patents
”
means patents and patent applications, including without limitation the patents
and patent applications listed on
Schedule I
hereto and
all continuations, divisionals, provisionals, continuations in part, or reissues
of applications related to patents thereon, and (i) all renewals thereof, (ii)
all income, royalties, damages and payments now and hereafter due and/or payable
under and with respect thereto, subject to payment to any co-owner or inventor
of its, his or her share thereof, including without limitation payments under
all licenses entered into in connection therewith and damages and payments for
past or future infringements or dilutions thereof, (iii) the right to sue for
past, present and future infringements thereof, and (iv) all of the Grantor’s
rights corresponding thereto throughout the world.
“
Trademarks
”
means trademarks, trade names, trade styles, registered trademarks, trademark
applications, service marks, registered service marks and service mark
applications, including without limitation the registered trademarks listed on
Schedule I
hereto, and (i) all renewals thereof, (ii) all income, royalties, damages and
payments now and hereafter due and/or payable under and with respect thereto,
subject to payment to any co-owner of its, his or her share thereof, including
without limitation payments under all licenses entered into in connection
therewith and damages and payments for past or future infringements or dilutions
thereof, (iii) the right to sue for past, present and future infringements and
dilutions thereof, (iv) the goodwill of the Grantor’s business symbolized by the
foregoing and connected therewith, and (v) all of the Grantor’s rights
corresponding thereto throughout the world.
(b)
Terms Defined in the
Purchase Agreement
. Capitalized terms used in this Agreement
and not otherwise defined herein have the meanings ascribed to them in the
Purchase Agreement.
2.
GRANT OF SECURITY INTEREST
IN INTELLECTUAL PROPERTY COLLATERAL
. Grantor hereby grants to
the Agent, as collateral agent for the Lender, a continuing and perfected first
priority security interest (as set forth in the Security Agreement) in all of
Grantor’s right, title and interest in, to and under all of Grantor’s
Intellectual Property (as defined in the Security Agreement), including without
limitation the following, whether presently existing or hereafter created or
acquired (collectively, the “
Intellectual Property
Collateral
”):
(a)
all of
Grantor’s Patents and Grantor’s rights under all Patent Intellectual Property
Licenses to which it is a party, including those patents referred to on
Schedule I
hereto,
including:
|
(i)
|
all
registrations and applications in respect of the foregoing, including
continuations, divisionals, provisionals, continuations in part, or
reissues of applications and patents issuing thereon;
and
|
|
(ii)
|
all
products and proceeds of the foregoing, including without limitation any
claim by Grantor against third parties for past, present or future
infringement of any Patent or any Patent licensed under any Intellectual
Property License;
|
(b)
all of
Grantor’s Trademarks and Grantor’s rights under all Trademark Intellectual
Property Licenses to which it is a party, including those trademarks referred to
on
Schedule I
hereto, including:
|
(i)
|
all
registrations, applications, and renewals in respect of the
foregoing;
|
|
(ii)
|
all
goodwill of the business connected with the use of, and symbolized by,
each Trademark and each Trademark licensed under an Intellectual Property
License; and
|
|
(iii)
|
all
products and proceeds of the foregoing, including without limitation any
claim by Grantor against third parties for past, present or future (i)
infringement or dilution of any Trademark or any Trademark licensed under
any Intellectual Property License or (ii) injury to the goodwill
associated with any Trademark or any Trademark licensed under any
Intellectual Property License; and
|
(c)
all of
Grantor’s Copyrights and Grantor’s rights under all Copyright Intellectual
Property Licenses to which it is a party, including those referred to on
Schedule I
hereto,
including:
|
(i)
|
all
registrations, applications, and renewals in respect of the foregoing;
and
|
|
(ii)
|
all
products and proceeds of the foregoing, including without limitation any
claim by Grantor against third parties for past, present or future
infringement of any Copyright or any Copyright licensed under any
Intellectual Property License.
|
3.
SECURITY
AGREEMENT
. The security interests granted pursuant to this
Agreement are granted in conjunction with the security interests granted to
Lender pursuant to the Security Agreement. Grantor hereby
acknowledges and affirms that the rights and remedies of Lender with respect to
the security interest in the Intellectual Property Collateral made and granted
hereby are more fully set forth in the Security Agreement, the terms and
provisions of which are incorporated by reference herein as if fully set forth
herein.
4.
AUTHORIZATION TO
SUPPLEMENT
. If Grantor shall obtain rights to any new
Intellectual Property Rights (as defined in the Security Agreement), the
provisions of this Agreement shall automatically apply
thereto. Grantor shall give Lender prompt written notice with respect
to any such new Intellectual Property Rights. Grantor represents that
Schedule I
is
substantially accurate and complete but reserves the right from time to time to
correct inaccuracies and/or omissions by giving Lender written notice
thereof. Without limiting Grantor’s obligations under this
Section 4
, Grantor
hereby authorizes the Agent and Lender unilaterally to modify this Agreement by
amending
Schedule
I
to include any such corrections
and other
modifications and any such new Intellectual Property Rights of
Grantor. Notwithstanding the foregoing, no failure to so modify this
Agreement or amend
Schedule I
shall in
any way affect, invalidate or detract from Lender’ continuing security interest
in all Intellectual Property Collateral, whether or not listed on
Schedule
I
.
5.
COUNTERPARTS
. This
Agreement may be executed in any number of counterparts, each of which shall be
deemed to be an original, but all such separate counterparts shall together
constitute but one and the same instrument. In proving this Agreement
in any judicial proceedings, it shall not be necessary to produce or account for
more than one such counterpart signed by the party against whom enforcement is
sought. Any signatures delivered by a party by facsimile transmission
or by e-mail transmission shall be deemed an original signature
hereto.
6.
GOVERNING LAW;
JURISDICTION
. This Agreement shall be governed by and
construed under the laws of the State of New York applicable to contracts made
and to be performed entirely within the State of New York. Each party
hereby irrevocably submits to the exclusive jurisdiction of the state and
federal courts sitting in the City and County of New York for the adjudication
of any dispute hereunder or in connection herewith or with any transaction
contemplated hereby and hereby irrevocably waives, and agrees not to assert in
any suit, action or proceeding, any claim that it is not personally subject to
the jurisdiction of any such court, that such suit, action or proceeding is
brought in an inconvenient forum or that the venue of such suit, action or
proceeding is improper. Each party hereby irrevocably waives personal
service of process and consents to process being served in any such suit, action
or proceeding by mailing a copy thereof to such party at the address in effect
for notices to it under this Agreement and agrees that such service shall
constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way
any right to serve process in any manner permitted by law.
7.
SUCCESSORS AND
ASSIGNS
. The terms and conditions of this Agreement shall
inure to the benefit of and be binding upon the respective successors and
permitted 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 permitted assigns any rights, remedies,
obligations or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement. Lender may assign its rights
hereunder in connection with any private sale or transfer of its Note, in which
case the term “Lender” shall be deemed to refer to such transferee as though
such transferee were an original signatory hereto. Grantor may not
assign its rights or obligations under this Agreement.
[
Signature Pages
Follow
]
IN
WITNESS WHEREOF, the Grantor has caused this Intellectual Property Security
Agreement to be executed and delivered by its duly authorized officer as of the
date first set forth above.
ENVISION
SOLAR INTERNATIONAL, INC.
By:
/s/ Robert
Noble
____________________________
Name: Robert
Noble
Title:
CEO
5
Exhibit
10.11
SUBSIDIARY
GUARANTEE
SUBSIDIARY
GUARANTEE, dated as of November 12, 2008 (this “
Guarantee
”), made by
each of the undersigned direct and indirect Subsidiaries of the Company (as
defined below) (together with any other entities that may become a party hereto
as provided herein, individually and collectively, the “
Guarantors
”, and
together with the Company, the “
Debtors
”), in favor
of Gemini Master Fund, Ltd. (including its successors, transferees and assigns,
the “
Purchaser
”).
W
I T N E S S E T H:
WHEREAS,
pursuant to that certain Securities Purchase Agreement (“
Purchase Agreement
”)
dated on or about the date hereof by and between Envision Solar International,
Inc., a California corporation (the “
Company
”), and the
Purchaser, the Company has agreed to sell and issue to the Purchaser, and the
Purchaser has agreed to purchase from the Company, the Company’s Secured Bridge
Note (the “
Note
”), subject to
the terms and conditions set forth therein;
WHEREAS,
each Guarantor is a direct or indirect Subsidiary of the Company, and as a
condition to the Closing of the transactions contemplated by the Purchase
Agreement, and in order to induce the Purchaser to enter into and consummate the
transactions contemplated by the Purchase Agreement (including without
limitation purchasing the Note and making the loans evidenced thereby), the
Company has agreed that the Guarantors would guaranty the Company’s obligations
under the Note, Purchase Agreement and other Transaction Documents in accordance
with the terms set forth in this Guarantee, the Note, the Purchase Agreement and
other Transaction Documents; and
WHEREAS, each Guarantor will directly
benefit from the extension of credit to the Company represented by the issuance
of the Note;
NOW, THEREFORE, in consideration of the
premises and to induce the Purchaser to enter into the Purchase Agreement and to
carry out the transactions contemplated thereby, each Guarantor hereby agrees
with the Purchaser as follows:
1.
Definitions
. Unless
otherwise defined herein, terms defined in the Purchase Agreement and used
herein shall have the meanings given to them in the Purchase
Agreement. The words “hereof,” “herein,” “hereto” and “hereunder” and
words of similar import when used in this Guarantee shall refer to this
Guarantee as a whole and not to any particular provision of this Guarantee, and
Section and Schedule references are to this Guarantee unless otherwise
specified. The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms. The
following terms shall have the following meanings:
“
Guarantee
” means this
Subsidiary Guarantee, as the same may be amended, supplemented or otherwise
modified from time to time.
“
Obligations
” means,
in addition to all other costs and expenses of collection incurred by the
Purchaser in enforcing any of such Obligations and/or this Guarantee, all of the
liabilities and obligations (primary, secondary, direct, contingent, sole, joint
or several) due or to become due, or that are now or may be hereafter contracted
or acquired, or owing, of any Debtor to the Purchaser, including without
limitation all obligations under the Purchase Agreement, the Note, this
Guarantee and any other instruments, agreements or other documents executed
and/or delivered in connection herewith or therewith, in each case, whether now
or hereafter existing, voluntary or involuntary, direct or indirect, absolute or
contingent, liquidated or unliquidated, whether or not jointly owed with others,
and whether or not from time to time decreased or extinguished and later
increased, created or incurred, and all or any portion of such obligations or
liabilities that are paid, to the extent all or any part of such payment is
avoided or recovered directly or indirectly from the Purchaser as a preference,
fraudulent transfer or otherwise, as such obligations may be amended,
supplemented, converted, extended or modified from time to
time. Without limiting the generality of the foregoing, the term
“Obligations” shall include without limitation: (i) principal of, and interest
on, the Note and the loans extended pursuant thereto; (ii) any and all other
fees, indemnities, costs, obligations and liabilities of the Debtors from time
to time under or in connection with the Purchase Agreement, the Note, this
Guarantee and any other instruments, agreements or other documents executed
and/or delivered in connection herewith or therewith; and (iii) all amounts
(including but not limited to post-petition interest) in respect of the
foregoing that would be payable but for the fact that the obligations to pay
such amounts are unenforceable or not allowable due to the existence of a
bankruptcy, reorganization or similar proceeding involving any
Debtor.
2.
Guarantee
.
(a)
Guarantee
.
(i)
The
Guarantors hereby, jointly and severally, absolutely, unconditionally and
irrevocably, guarantee to the Purchaser and its successors, indorsees,
transferees and assigns, the prompt and complete payment and performance by the
Company when due (whether at the stated maturity, by acceleration or otherwise)
of the Obligations. The Guarantors’ liability under this Guarantee
shall be unlimited, open and continuous for so long as this Guarantee remains in
force.
(ii)
Anything
herein or in any other Transaction Document to the contrary notwithstanding, the
maximum liability of each Guarantor hereunder and under the other Transaction
Documents shall in no event exceed the amount which can be guaranteed by such
Guarantor under applicable federal and state laws, including laws relating to
the insolvency of debtors, fraudulent conveyance or transfer or laws affecting
the rights of creditors generally (after giving effect to the right of
contribution set forth in Section 2(b)).
(iii)
Each
Guarantor agrees that the Obligations may at any time and from time to time
exceed the amount of the liability of such Guarantor hereunder without impairing
the guarantee contained in this Section 2 or affecting the rights and remedies
of the Purchaser hereunder.
(iv)
The
guarantee contained in this Section 2 shall remain in full force and effect
until all the Obligations and the obligations of each Guarantor under the
guarantee contained in this Section 2 shall have been satisfied by payment in
full.
(v)
No
payment made by the Company, any of the Guarantors, any other guarantor or any
other Person or received or collected by the Purchaser from the Company, any of
the Guarantors, any other guarantor or any other Person by virtue of any action
or proceeding or any set-off or appropriation or application at any time or from
time to time in reduction of or in payment of the Obligations shall be deemed to
modify, reduce, release or otherwise affect the liability of any Guarantor
hereunder which shall, notwithstanding any such payment (other than any payment
made by such Guarantor in respect of the Obligations or any payment received or
collected from such Guarantor in respect of the Obligations), remain liable for
the Obligations up to the maximum liability of such Guarantor hereunder until
the Obligations are paid in full.
(vi)
Notwithstanding
anything to the contrary in this Guarantee, with respect to any defaulted
non-monetary Obligations the specific performance of which by the Guarantors is
not reasonably possible, the Guarantors shall only be liable for making the
Purchaser whole on a monetary basis for the Company's failure to perform such
Obligations in accordance with the Transaction Documents.
(b)
Right of
Contribution
. Each Guarantor hereby agrees that to the extent
that a Guarantor shall have paid more than its proportionate share of any
payment made hereunder, such Guarantor shall be entitled to seek and receive
contribution from and against any other Guarantor hereunder which has not paid
its proportionate share of such payment. Each Guarantor's right of
contribution shall be subject to the terms and conditions of Section
2(c). The provisions of this Section 2(b) shall in no respect limit
the obligations and liabilities of any Guarantor to the Purchaser, and each
Guarantor shall remain liable to the Purchaser for the full amount guaranteed by
such Guarantor hereunder.
(c)
No
Subrogation
. Notwithstanding any payment made by any Guarantor
hereunder or any set-off or application of funds of any Guarantor by the
Purchaser, no Guarantor shall be entitled to be subrogated to any of the rights
of the Purchaser against the Company or any other Guarantor or any collateral
security or guarantee or right of offset held by the Purchaser for the payment
of the Obligations, nor shall any Guarantor seek or be entitled to seek any
contribution or reimbursement from the Company or any other Guarantor in respect
of payments made by such Guarantor hereunder, until all amounts owing to the
Purchaser by the Company on account of the Obligations are paid in
full. If any amount shall be paid to any Guarantor on account of such
subrogation rights at any time when all of the Obligations have not been paid in
full, such amount shall be held by such Guarantor in trust for the Purchaser,
segregated from other funds of such Guarantor, and shall, promptly following
receipt by such Guarantor, be turned over to the Purchaser in the exact form
received by such Guarantor (duly indorsed by such Guarantor to the Purchaser, if
required), to be applied against the Obligations, whether matured or unmatured,
in such order as the Purchaser may determine.
(d)
Amendments, Etc. With
Respect to the Obligations
. Each Guarantor shall remain obligated
hereunder notwithstanding that, without any reservation of rights against any
Guarantor and without notice to or further assent by any Guarantor, any demand
for payment of any of the Obligations made by the Purchaser may be rescinded by
the Purchaser and any of the Obligations continued, and the Obligations, or the
liability of any other Person upon or for any part thereof, or any collateral
security or guarantee therefor or right of offset with respect thereto, may,
from time to time, in whole or in part, be renewed, extended, amended, modified,
accelerated, compromised, waived, surrendered or released by the Purchaser, and
the Purchase Agreement, the Note and the other Transaction Documents and any
other documents executed and delivered in connection therewith may be amended,
modified, supplemented or terminated, in whole or in part, as the Purchaser may
deem advisable from time to time, and any collateral security, guarantee or
right of offset at any time held by the Purchaser for the payment of the
Obligations may be sold, exchanged, waived, surrendered or released. The
Purchaser shall have no obligation to protect, secure, perfect or insure any
Lien at any time held by them as security for the Obligations or for the
guarantee contained in this Section 2 or any property subject
thereto.
(e)
Guarantee Absolute and
Unconditional
. Each Guarantor waives any and all notice of the creation,
renewal, extension or accrual of any of the Obligations and notice of or proof
of reliance by the Purchaser upon the guarantee contained in this Section 2 or
acceptance of the guarantee contained in this Section 2; the Obligations, and
any of them, shall conclusively be deemed to have been created, contracted or
incurred, or renewed, extended, amended or waived, in reliance upon the
guarantee contained in this Section 2; and all dealings between the Company and
any of the Guarantors, on the one hand, and the Purchaser, on the other hand,
likewise shall be conclusively presumed to have been had or consummated in
reliance upon the guarantee contained in this Section 2. Each Guarantor waives,
to the fullest extent permitted by law, diligence,
presentment,
protest, demand for payment and notice of default or nonpayment to or upon the
Company or any of the Guarantors with respect to the Obligations. Each Guarantor
understands and agrees that the guarantee contained in this Section 2 shall be
construed as a continuing, absolute and unconditional guarantee of payment
without regard to (a) the validity or enforceability of the Purchase Agreement,
the Note or any other Transaction Document, any of the Obligations or any other
collateral security therefor or guarantee or right of offset with respect
thereto at any time or from time to time held by the Purchaser, (b) any defense,
set-off or counterclaim (other than a defense of payment and performance in full
of the Obligations or fraud by the Purchaser) which may at any time be available
to or be asserted by the Company or any other Person against the Purchaser, or
(c) any other circumstance whatsoever (with or without notice to or knowledge of
the Company or such Guarantor) which constitutes, or might be construed to
constitute, an equitable or legal discharge of the Company for the Obligations,
or of such Guarantor under the guarantee contained in this Section 2, in
bankruptcy or in any other instance. When making any demand hereunder or
otherwise pursuing its rights and remedies hereunder against any Guarantor, the
Purchaser may, but shall be under no obligation to, make a similar demand on or
otherwise pursue such rights and remedies as they may have against the Company,
any other Guarantor or any other Person or against any collateral security or
guarantee for the Obligations or any right of offset with respect thereto, and
any failure by the Purchaser to make any such demand, to pursue such other
rights or remedies or to collect any payments from the Company, any other
Guarantor or any other Person or to realize upon any such collateral security or
guarantee or to exercise any such right of offset, or any release of the
Company, any other Guarantor or any other Person or any such collateral
security, guarantee or right of offset, shall not relieve any Guarantor of any
obligation or liability hereunder, and shall not impair or affect the rights and
remedies, whether express, implied or available as a matter of law, of the
Purchaser against any Guarantor. For the purposes hereof, “demand”
shall include without limitation the commencement and continuance of any legal
proceedings.
(f)
Reinstatement
. The
guarantee contained in this Section 2 shall continue to be effective, or be
reinstated, as the case may be, if at any time payment, or any part thereof, of
any of the Obligations is rescinded or must otherwise be restored or returned by
the Purchaser upon the insolvency, bankruptcy, dissolution, liquidation or
reorganization of the Company or any Guarantor, or upon or as a result of the
appointment of a receiver, intervenor or conservator of, or trustee or similar
officer for, the Company or any Guarantor or any substantial part of its
property, or otherwise, all as though such payments had not been
made.
(g)
Payments
. Each
Guarantor hereby guarantees that payments hereunder will be paid to the
Purchaser without set-off or counterclaim in U.S. dollars at the address set
forth or referred to in the Purchase Agreement.
3.
Representations and
Warranties
. Each Guarantor hereby makes the following representations and
warranties to the Purchaser as of the date hereof:
(a)
Organization and
Qualification
. The Guarantor is an entity, duly organized, validly
existing and in good standing under the laws of the applicable jurisdiction set
forth on Schedule 1, with the requisite power and authority to own and use its
properties and assets and to carry on its business as currently conducted. The
Guarantor has no subsidiaries other than those identified as such on the
Disclosure Schedules to the Purchase Agreement. The Guarantor is duly
qualified to do business and is in good standing as a foreign corporation in
each jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary, except where the failure to be
so qualified or in good standing, as the case may be, could not, individually or
in the aggregate, (x) adversely affect the legality, validity or enforceability
of any of this Guaranty in any material respect, (y) have a material adverse
effect on the results of operations, assets, prospects, or financial condition
of the Guarantor, or (z) adversely impair in any material respect the
Guarantor's ability to perform fully on a timely basis its obligations under
this Guaranty (a “
Material Adverse
Effect
”).
(b)
Authorization;
Enforcement
. The Guarantor has the requisite power and
authority to enter into and to consummate the transactions contemplated by this
Guaranty, and otherwise to carry out its obligations hereunder. The
execution and delivery of this Guaranty by the Guarantor and the consummation by
it of the transactions contemplated hereby have been duly authorized by all
requisite action on the part of the Guarantor. This Guaranty has been
duly executed and delivered by the Guarantor and constitutes the legal, valid
and binding obligation of the Guarantor enforceable against the Guarantor in
accordance with its terms.
(c)
No Conflicts
. The
execution, delivery and performance of this Guaranty by the Guarantor and the
consummation by the Guarantor of the transactions contemplated thereby do not
and will not (i) conflict with or violate any provision of its
articles
or certificate of incorporation or operating agreement or (ii) conflict with,
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or
instrument to which the Guarantor is a party, or (iii) result in a violation of
any law, rule, regulation, order, judgment, injunction, decree or other
restriction of any court or governmental authority to which the Guarantor is
subject (including federal and state securities laws and regulations), or by
which any material property or asset of the Guarantor is bound or affected,
except in the case of each of clauses (ii) and (iii) such conflicts, defaults,
terminations, amendments, accelerations, cancellations and violations as could
not, individually or in the aggregate, have or result in a Material Adverse
Effect. The business of the Guarantor is not being conducted in
violation of any law, ordinance or regulation of any governmental authority,
except for violations which, individually or in the aggregate, do not have a
Material Adverse Effect.
(d)
Consents and
Approvals
. The Guarantor is not required to obtain any
consent, waiver, authorization or order of, or make any filing or registration
with, any court or other federal, state, local, foreign or other governmental
authority or other person in connection with the execution, delivery and
performance by the Guarantor of this Guaranty.
(e)
Purchase
Agreement
. The representations and warranties of the Company
set forth in the Purchase Agreement as they relate to the Guarantor, each of
which is hereby incorporated herein by reference, are true and correct as of
each time such representations are deemed to be made pursuant to the Purchase
Agreement, and the Purchaser shall be entitled to rely on each of them as if
they were fully set forth herein, provided that each reference in each such
representation and warranty to the Company's knowledge shall, for the purposes
of this Section 3, be deemed to be a reference to the Guarantor's
knowledge.
(f)
Company’s
Request
. This Guarantee is executed at the Company’s request
and not at the request of the Purchaser.
(g)
Obtaining Company
Information
. The Guarantor has established adequate means of
obtaining from the Company on a continuing basis information regarding the
Company’s financial condition.
(h)
Solvency
. As
of the date hereof and after giving effect to the transactions contemplated
hereby (a) the property of the Guarantor, at a fair valuation, will exceed its
debt; (b) the capital of the Guarantor will not be unreasonably small to conduct
its business; (c) the Guarantor will not have incurred debts, or have intended
to incur debts, beyond its ability to pay such debts as they mature; and (d) the
present fair salable value of the assets of the Guarantor will be greater than
the amount that will be required to pay its probable liabilities (including
debts) as they become absolute and matured. For purposes of this
subsection (h), “debt” means any liability on a claim, and “claim” means (i) the
right to payment, whether or not such right is reduced to judgment, liquidated,
unliquidated, fixed, contingent, matured, unmatured, undisputed, legal,
equitable, secured or unsecured, or (ii) the right to an equitable remedy for
breach of performance if such breach gives rise to a right to payment, whether
or not such right to an equitable remedy is reduced to judgment, fixed,
contingent, matured, unmatured, undisputed, secured or unsecured.
4.
Covenants
.
(a)
Actions
. Each
Guarantor covenants and agrees with the Purchaser that, from and after the date
of this Guarantee until the Obligations shall have been paid in full, such
Guarantor shall take, and/or shall refrain from taking, as the case may be, each
commercially reasonable action that is necessary to be taken or not taken, as
the case may be, so that no Event of Default is caused by the failure to take
such action or to refrain from taking such action by such
Guarantor.
(b)
Insurance
. So
long as the Note remains outstanding, each Guarantor shall have in full force
and effect (a) insurance reasonably believed by such Guarantor to be adequate on
all assets and activities, covering property damage and loss of income by fire
or other casualty, and (b) insurance reasonably believed to be adequate
protection against all liabilities, claims and risks against which it is
customary for companies similarly situated as such Guarantor to
insure.
(c)
Compliance with
Laws
. So long as the Note remains outstanding, each Guarantor
will use reasonable efforts to comply with all applicable laws, rules,
regulations, orders and decrees of all governmental authorities, except to the
extent non-compliance (in one instance or in the aggregate) would not have a
Material Adverse Effect.
(d)
Corporate Existence; Merger
and Consolidation
. So long as the Note remains outstanding,
each Guarantor shall maintain its corporate existence. Each Guarantor shall not
consolidate with or merge with or into, or convey, transfer or lease all or
substantially all its assets to, any Person, except to the same extent that the
Company is so permitted, and in accordance with the same provisions applicable
to the Company, in the Purchase Agreement or the Note (with the assumption of
obligations applying to the assumption of the obligations under this
Guarantee).
(e)
Taxes
. Each
Guarantor shall pay, and shall cause each of its subsidiaries to pay, prior to
delinquency, all material taxes, assessments, and governmental levies except
such as are contested in good faith and by appropriate proceedings or where the
failure to effect such payment is not adverse in any material respect to such
Guarantor or the Purchaser.
(f)
Stay, Extension and Usury
Laws
. Each Guarantor covenants (to the extent that it may
lawfully do so) that it shall not at any time insist upon, plead, or in any
manner whatsoever claim or take the benefit or advantage of, any stay, extension
or usury law wherever enacted, now or at any time hereafter in force, that may
affect the covenants or the performance of this Guarantee; and each Guarantor
(to the extent that it may lawfully do so) hereby expressly waives all benefit
or advantage of any such law, and covenants that it shall not, by resort to any
such law, hinder, delay or impede the execution of any right herein granted to
the Purchaser, but shall suffer and permit the execution of every such right as
though no such law has been enacted.
(g)
Negative
Covenants
. So long as any of the Obligations are outstanding,
unless the Purchaser shall otherwise consent in writing, each Guarantor will not
directly or indirectly on or after the date of this Guarantee:
i.
other than Permitted Indebtedness
(as defined in the Note), enter into, create, incur, assume or suffer to exist
any Indebtedness of any kind, including but not limited to, a guarantee, 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;
ii.
other than Permitted Liens (as defined in the Note),
enter into, create, incur, assume or suffer to exist any liens of any kind, 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;
iii.
amend its certificate of incorporation, bylaws or other
charter documents so as to adversely affect any rights of the Purchaser
hereunder;
iv.
repay,
repurchase or offer to repay, repurchase or otherwise acquire more than a de
minimis number of shares of its securities or debt obligations;
v.
repay,
repurchase or offer to repay, repurchase or otherwise acquire any Indebtedness,
other than regularly scheduled principal and interest payments as such terms are
in effect as of the Closing Date;
vi.
repay,
repurchase or offer to repay, repurchase or otherwise acquire any indebtedness
to any current or former employees, officers or directors of such Guarantor or
Company or such current or former employees’, officers’ or directors’
affiliates, including without limitation any loans from or management fees
payable to any of the foregoing;
vii.
pay cash
dividends or distributions on any equity securities of such
Guarantor;
viii.
enter
into any transaction with any Affiliate of such Guarantor, unless such
transaction is made on an arm’s-length basis and expressly approved by a
majority of the disinterested directors of the Company (even if less than a
quorum otherwise required for board approval); or
ix. enter into any agreement with
respect to any of the foregoing; provided, however, that no Guarantor shall be
prohibited from undertaking any of the actions described above that the Company
is permitted to undertake pursuant to the terms of the Purchase Agreement, Note
and any and all other agreements or other documents entered into in connection
with the financings contemplated by the Purchase Agreement.
5.
Miscellaneous
.
(a)
Amendments in
Writing
. None of the terms or provisions of this
Guarantee may be waived, amended, supplemented or otherwise modified except in
writing by the Purchaser.
(b)
Notices
. All
notices, requests and demands to or upon the Purchaser or any Guarantor
hereunder shall be effected in the manner provided for in the Purchase
Agreement, provided that any such notice, request or demand to or upon any
Guarantor shall be addressed to such Guarantor at its notice address set forth
on
Schedule
1
.
(c)
No Waiver by Course of
Conduct; Cumulative Remedies
. The Purchaser shall not by any act (except
by a written instrument pursuant to Section 5(a)), delay, indulgence, omission
or otherwise be deemed to have waived any right or remedy hereunder or to have
acquiesced in any default under the Transaction Documents or Event of
Default. No failure to exercise, nor any delay in exercising, on the
part of the Purchaser any right, power or privilege hereunder shall operate as a
waiver thereof. No single or partial exercise of any right, power or
privilege hereunder shall preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. A waiver by the
Purchaser of any right or remedy hereunder on any one occasion shall not be
construed as a bar to any right or remedy which the Purchaser would otherwise
have on any future occasion. The rights and remedies provided herein
are cumulative, may be exercised singly or concurrently and are not exclusive of
any other rights or remedies provided by law.
(d)
Enforcement Expenses;
Indemnification
.
(i)
Each
Guarantor agrees to pay, or reimburse the Purchaser for, all costs and expenses
incurred in collecting against such Guarantor under the guarantee contained in
Section 2 or otherwise enforcing or preserving any rights under this Guarantee
and the other Transaction Documents to which such Guarantor is a party,
including without limitation the reasonable fees and disbursements of counsel to
the Purchaser.
(ii)
Each
Guarantor agrees to pay, and to save the Purchaser harmless from, any and all
liabilities with respect to, or resulting from any delay in paying, any and all
stamp, excise, sales or other taxes which may be payable or determined to be
payable in connection with any of the transactions contemplated by this
Guarantee.
(iii)
Each
Guarantor agrees to pay, and to save the Purchaser harmless from, any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever with respect
to the execution, delivery, enforcement, performance and administration of this
Guarantee to the extent the Company would be required to do so pursuant to the
Purchase Agreement.
(iv)
The
agreements in this Section shall survive repayment of the Obligations and all
other amounts payable under the Purchase Agreement, the Note and the other
Transaction Documents.
(e)
Successor and
Assigns
. This Guarantee shall be binding upon the successors and assigns
of each Guarantor and shall inure to the benefit of the Purchaser and their
respective successors and assigns; provided that no Guarantor may assign,
transfer or delegate any of its rights or obligations under this Guarantee
without the prior written consent of the Purchaser.
(f)
Set-Off
. Each
Guarantor hereby irrevocably authorizes the Purchaser at any time and from time
to time while an Event of Default under any of the Transaction Documents shall
have occurred and be continuing, without notice to such Guarantor or any other
Guarantor, any such notice being expressly waived by each Guarantor, to set-off
and appropriate and apply any and all deposits, credits, indebtedness or claims,
in any currency, in each case whether direct or indirect, absolute or
contingent, matured or unmatured, at any time held or owing by the Purchaser to
or for the credit or the account of such Guarantor, or any part thereof in such
amounts as the Purchaser may elect, against and on account of the obligations
and liabilities of such Guarantor to the Purchaser hereunder and claims of every
nature and description of the Purchaser against such Guarantor, in any currency,
whether arising hereunder, under the Purchase Agreement, any other Transaction
Document or otherwise, as the Purchaser may elect, whether or not the Purchaser
have made any demand for payment and although such obligations, liabilities and
claims may be contingent or unmatured. The Purchaser shall notify
such Guarantor promptly of any such set-off and the application made by the
Purchaser of the proceeds thereof, provided that the failure to give such notice
shall not affect the validity of such set-off and application. The
rights of the Purchaser under this Section are in addition to other rights and
remedies (including without limitation other rights of set-off) which the
Purchaser may have.
(g)
Counterparts
. This
Guarantee may be executed by one or more of the parties to this Guarantee on any
number of separate counterparts (including by fax or PDF), and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument.
(h)
Severability
. Any
provision of this Guarantee which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
(i)
Section
Headings
. The Section headings used in this Guarantee are for
convenience of reference only and are not to affect the construction hereof or
be taken into consideration in the interpretation hereof.
(j)
Integration
. This
Guarantee and the other Transaction Documents represent the agreement of the
Guarantors and the Purchaser with respect to the subject matter hereof and
thereof, and there are no promises, undertakings, representations or warranties
by the Purchaser relative to subject matter hereof and thereof not expressly set
forth or referred to herein or in the other Transaction Documents.
(k)
Governing
Law
. This guarantee shall be governed by, and construed and
interpreted in accordance with, the law of the state of New York without regard
to any principles of conflicts of laws.
(l)
Submission to
Jurisdictional; Waiver
. Each Guarantor hereby
irrevocably
and unconditionally:
(i)
submits
for itself and its property in any legal action or proceeding relating to this
Guarantee and the other Transaction Documents to which it is a party, or for
recognition and enforcement of any judgment in respect thereof, to the
non-exclusive general jurisdiction of the Courts of the State of New York,
located in New York County, New York, the courts of the United States of America
for the Southern District of New York, and appellate courts from any
thereof;
(ii)
consents
that any such action or proceeding may be brought in such courts and waives any
objection that it may now or hereafter have to the venue of any such action or
proceeding in any such court or that such action or proceeding was brought in an
inconvenient court and agrees not to plead or claim the same;
(iii)
agrees
that service of process in any such action or proceeding may be effected by
mailing a copy thereof by registered or certified mail (or any substantially
similar form of mail), postage prepaid, to such Guarantor at its address
referred to in Schedule 1 below or at such other address of which the Purchaser
shall have been notified pursuant thereto;
(iv)
agrees
that nothing herein shall affect the right to effect service of process in any
other manner permitted by law or shall limit the right to sue in any other
jurisdiction; and
(v)
waives,
to the maximum extent not prohibited by law, any right it may have to claim or
recover in any legal action or proceeding referred to in this Section any
special, exemplary, punitive or consequential damages.
(m)
Acknowledgements
. Each
Guarantor hereby acknowledges that:
(i)
it has
been advised by counsel in the negotiation, execution and delivery of this
Guarantee and the other Transaction Documents to which it is a
party;
(ii)
the
Purchaser has no fiduciary relationship with or duty to any Guarantor arising
out of or in connection with this Guarantee or any of the other Transaction
Documents, and the relationship between the Guarantors, on the one hand, and the
Purchaser, on the other hand, in connection herewith or therewith is solely that
of debtor and creditor; and
(iii)
no joint
venture is created hereby or by the other Transaction Documents or otherwise
exists by virtue of the transactions contemplated hereby among the Guarantors
and the Purchaser.
(n)
Release of
Guarantors
. Subject to Section 2, each Guarantor will be released from
all liability hereunder concurrently with the repayment in full of all amounts
owed under the Purchase Agreement, the Note and the other Transaction
Documents.
(o)
Seniority
. The
Obligations of each of the Guarantors hereunder rank senior in priority to any
other Indebtedness (as defined in the Purchase Agreement) of such
Guarantor.
(p)
Waiver of Jury
Trial
. EACH GUARANTOR AND, BY ACCEPTANCE OF THE BENEFITS
HEREOF, THE PURCHASER, HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY
JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS GUARANTEE AND FOR ANY
COUNTERCLAIM THEREIN.
(q)
Security
. The
Obligations and Guarantors’ obligations hereunder and under the other
Transaction Documents are secured by the assets of the Guarantors pursuant to
the terms of the Security Documents.
*****************
IN
WITNESS WHEREOF, the undersigned has caused this Guarantee
to be
duly executed and delivered as of the date first above written.
ENVISION SOLAR INTERNATIONAL,
INC.
, a California corporation
By:____
/s/ Robert
Noble__
____________________________________
Name: Robert
Noble
Title: CEO
ENVISION SOLAR CONSTRUCTION,
INC.
, a California corporation
By:____
/s/ Robert
Noble__
____________________________________
Name: Robert
Noble
Title: CEO
ENVISION SOLAR RESIDENTIAL,
INC.
, a California corporation
By:____
/s/ Robert
Noble__
____________________________________
Name: Robert
Noble
Title: CEO
ENVISION AFRICA, LLC
, a
Delaware limited liability company
By:____
/s/ Robert
Noble__
____________________________________
Name: Robert
Noble
Title: CEO
13
Exhibit
10.12
FORBEARANCE
AGREEMENT
FORBEARANCE
AGREEMENT (this “Agreement”), dated as of April 11, 2009, by and between
Envision Solar International, Inc., a California corporation (“Borrower”),
Envision Solar Construction, Inc., a California corporation, Envision Solar
Residential, Inc., a California corporation, and Envision Africa, LLC, a
Delaware limited liability company, (collectively, “the Envision Guarantors” or
“Guarantors”), and Gemini Master Fund, Ltd. (“Lender”).
W
I
T
N
E
S
S
E
T
H
WHEREAS,
Lender, Borrower and the Envision Guarantors have entered into Financing
Agreements (as defined below) pursuant to which Lender has made loans to
Borrower, including, without limitation, a Secured Bridge Note, dated, November
12, 2008, in the principal amount of $591,770.83 (the “Bridge Note”)
and
WHEREAS,
Borrower anticipates defaulting on the Bridge Note and has requested that Lender
forbear from exercising its rights as a result of such events of default and
Lender is willing to agree to forbear from exercising its rights and remedies on
the terms and conditions contained herein;
NOW,
THEREFORE, in consideration of the foregoing, and the respective agreements,
warranties and covenants contained herein, the parties hereto agree, covenant
and warrant as follows:
1.1
Additional
Definitions
. As used herein, the following terms shall have
the respective meanings given to them below:
(a)
“Collateral
Agent” shall mean Gemini Strategies, LLC.
(b)
“Financing
Agreements” shall mean all agreements, documents and instruments at any time
executed and/or delivered in connection with or related to the Bridge Note,
including, without limitation, the Securities Purchase Agreement, Security
Agreement, and Subsidiary Guarantee, as the same now exist and as has been and
may hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced.
(c)
“Lien”
shall mean any mortgage, deed of trust, pledge, hypothecation, assignment,
deposit arrangement, security interest, encumbrance (including, but not limited
to, easements, rights of way and the like), lien (statutory or other), security
agreement or transfer intended as security, including, without limitation, any
conditional sale or other title retention agreement, the interest of a lessor
under a capital lease or any financing lease having substantially the same
economic effect as any of the foregoing.
(d)
“Obligations”
shall mean the Bridge Note, including Borrower’s obligations to pay all amounts
payable thereunder, including, without limitation, principal, interest, the
Mandatory Default Amount (as defined in the Bridge Note), fees, costs, expenses
and other charges, and any amendments, modifications, supplements, extensions,
renewals, restatements or replacements thereof.
(e)
“Security
Agreement” shall mean the Security Agreement, dated as of November 12, 2008, by
and between Borrower, the Lender, the Collateral Agent, and the
Guarantors.
(f)
“Termination
Date” shall have the meaning given to such term in Section 3.2
hereof.
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SECTION
2.
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ACKNOWLEDGMENT
.
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2.1
Acknowledgment of
Obligations
. Borrower and the Envision Guarantors hereby
acknowledge, confirm and agree that as of the close of business on April 12,
2009, Borrower is indebted to Lender in respect of the Bridge Note in the amount
of $591,770.83 (the “Note Amount”). The Note Amount,is
unconditionally owing by Borrower to Lender, without offset, defense or
counterclaim of any kind, nature or description whatsoever.
2.2
Acknowledgment of Security
Interests
. Borrower and the Envision Guarantors hereby
acknowledge, confirm and agree that Lender has and shall continue to have valid,
enforceable and perfected Liens upon and security interests in the assets and
properties of Borrower and the Envision Guarantors heretofore granted to Lender
pursuant to, and having first priority as set forth in, the Financing Agreements
executed prior to the date of this Agreement.
2.3
Acknowledgment of Patent and
Trademark Assignments.
Borrower and the Envision Guarantors
hereby acknowledge, confirm and agree that Lender has and shall continue to have
valid and enforceable assignments of the patents, trademarks and other
intellectual property and other assets assigned by Borrower and the Envision
Guarantors, including without limitation those listed on the annexes to the
Security Agreement
2.4
Binding Effect of
Documents
. Borrower and the Envision Guarantors hereby
acknowledge, confirm and agree that: (a) each of the Financing Agreements
to which it is a party has been duly executed and delivered to Lender by
Borrower or the Envision Guarantors and each is in full force and effect as of
the date hereof, (b) the agreements and obligations of Borrower, or the Envision
Guarantors contained in such documents and this Agreement constitute the legal,
valid and binding obligations of Borrower and the Envision Guarantors,
enforceable against it in accordance with their respective terms (subject to
bankruptcy, insolvency, creditors rights and general equitable principles), and
Borrower, and the Envision Guarantors have no valid defense to the enforcement
of such obligations, and (c) Lender is entitled to the rights, remedies and
benefits provided for in the Financing Agreements.
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SECTION
3.
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FORBEARANCE AND CHANGE
OF MATERIAL TERMS OF THE BRIDGE
NOTE
.
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3.1
Forbearance
.
(a)
Subject
to the terms and conditions of this Agreement, including but not limited to
Lender’s receipt of a payment of all remaining amounts outstanding, including
interest, fees and expenses and any other amounts owed to the Lender from or on
behalf of the Borrower on or before December 31, 2009, Lender agrees to forbear
from exercising its rights and remedies under the Financing Agreements,
applicable law or otherwise until the earliest to occur of (a) December 31,
2009, (b) the third day following any Fundamental Transaction (as defined in the
Bridge Note), and (c) Borrower’s breach of any of the terms and provisions of
this Agreement or any Event of Default under and as defined in the Bridge Note
(other than pursuant to Section 6(a)(i) thereof) (the “Termination
Date”).
(b)
Upon the
Termination Date, the agreement of Lender to forbear shall automatically and
without further action or notice terminate and be of no force and effect, it
being understood and agreed that the effect of such termination will be to
permit Lender to exercise such rights and remedies immediately, including, but
not limited to the foreclosure of all collateral as described in the Financing
Agreements; in each case without any further notice, passage of time or
forbearance of any kind.
(c)
Borrower
agrees that all of the Obligations under the Bridge Note shall, if not sooner
paid, be absolutely and unconditionally due and payable in full in cash or other
immediately available funds by Borrower to Lender on the Termination
Date. No termination of any of the Financing Agreements or any
provisions thereof shall relieve or discharge Borrower, or the Envision
Guarantors, of their duties, covenants and obligations under the Financing
Agreements and this Agreement until all Obligations have been finally paid in
full in cash or other immediately available funds.
(d)
If after
the date hereof the Company and/or its Subsidiaries in one or more transactions
issues any debt or equity securities or otherwise obtains a loan for borrowed
money in connection with any capital raising transaction (“Capital Raising
Transaction”) in excess of $500,000 in the aggregate for all such transactions,
the Company shall repay a portion of the outstanding principal amount, and
accrued interest thereon, hereunder at least equal to 25% of the gross proceeds
(net of broker’s commissions) received by the Company or such Subsidiary in such
transaction(s). Each such repayment shall be made with one (1)
Business Day following the date of receipt by the Company of such
proceeds.
(e) Beginning
on April 12, 2009, the Note Amount (together with any capitalized interest
thereon pursuant to the terms hereof) owed by Borrower to Lender shall bear
interest at a rate of 15% per year. Such interest shall be payable
monthly in arrears beginning on the first business day of each calendar month
commencing the first calendar month after which the Borrower raises $100,000 in
the aggregate (net of brokers’ commissions) for all Capital Raising
Transactions. Any amounts of accrued interest not paid on the first
business day for any calendar month after April 12, 2009 shall be compounded and
added to the principal amount then outstanding under the Bridge
Note.
(f) As
additional consideration for the Lender agreeing to this Agreement, the Borrower
shall issue 10,000 shares of common stock of the Borrower to the
Lender. Such shares of common stock shall be duly and validly issued,
fully paid and nonassessable, and free and clear of all Liens and shall be
delivered to the Lender within 5 business days after the signing of this
Agreement.
3.2
No Other Waivers;
Reservation of Rights
.
(a)
Lender
has not waived, is not by this Agreement waiving any events of default which may
be continuing on the date hereof or any events of default which may occur after
the date hereof, and except as expressly set forth in Section 3.1(a) hereof,
Lender has not agreed to forbear with respect to any of its rights or remedies
concerning any events of default, which may have occurred and are continuing as
of the date hereof or which may occur after the date hereof.
4.1
Release
.
(a)
In
consideration of the agreements of Lender contained herein and the making of the
Bridge Note and other financial accommodations by Lender to Borrower pursuant to
the Financing Agreements, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Borrower and the
Envision Guarantors on behalf of themselves and their respective successors and
assigns, hereby, jointly and severally, absolutely, unconditionally and
irrevocably release, remise and forever discharge Lender and the Collateral
Agent, their successors and assigns, and its present and former shareholders,
affiliates, subsidiaries, divisions, predecessors, directors, officers,
managers, members, partners, attorneys, employees, agents and other
representatives (Lender, Collateral Agent and all such other parties being
hereinafter referred to collectively as the “Releasees” and individually as a
“Releasee”), of and from any and all demands, actions, causes of action, suits,
covenants, contracts, controversies, agreements, promises, sums of money,
accounts, bills, reckonings, damages, claims, counterclaims, defenses, rights of
set-off, demands, obligations and liabilities whatsoever (individually, a
“Claim” and collectively, “Claims”) of every name and nature, known or unknown,
suspected or unsuspected, both at law and in equity, which Borrower or Envision
Guarantors or any of their respective successors or assigns, as the case may be,
may now or hereafter own, hold, have or claim to have against the Releasees or
any of them for, upon, or by reason of any nature, cause or thing whatsoever
which arises at any time on or prior to the day and date of this Agreement for
or on account of, or in relation to, or in any way in connection with any of the
Financing Agreements.
(b)
Each of
Borrower and the Envision Guarantors understands, acknowledges and agrees that
the release set forth above may be pleaded as a full and complete defense and
may be used as a basis for an injunction against any action, suit or other
proceeding which may be instituted, prosecuted or attempted in breach of the
provisions of such release.
(c)
Each of
Borrower and the Envision Guarantors agrees that no fact, event, circumstance,
evidence or transaction which could now be asserted or which may hereafter be
discovered shall affect in any manner the final and unconditional nature of the
release set forth above.
4.2
Covenant Not to
Sue
. Borrower and Envision Guarantors, on behalf of themselves
and their respective successors and assigns, hereby jointly and severally,
absolutely, unconditionally and irrevocably, covenant and agree with each
Releasee that they will not sue (at law, in equity, in any regulatory proceeding
or otherwise) any Releasee on the basis of any Claim released, remised and
discharged by Borrower and Guarantors pursuant to Section 4.1
above. If Borrower or Guarantors violate the foregoing covenant,
Borrower or Guarantors, as applicable, agree to pay, in addition to such other
damages as any Releasee may sustain as a result of such violation,
all fees and costs incurred by any Releasee as a result of such
violation (including reasonable attorney’s fees).
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SECTION
5.
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REPRESENTATIONS AND
WARRANTIES
.
|
Borrower
hereby represents, warrants and covenants with and to Lender as
follows:
5.1
Binding Effect of
Documents
. This Agreement and the other Financing Agreements
have been duly executed and delivered to Lender by Borrower and the Envision
Guarantors and are in full force and effect. The agreements and
obligations of Borrower contained in the Financing Agreements constitute legal,
valid and binding obligations of Borrower, enforceable by Lender against
Borrower in accordance with their respective terms, except to the extent that a
court of competent jurisdiction refuses to enforce such agreements due to
bankruptcy, insolvency, creditors rights, general equitable principles or
otherwise.
5.2
No Conflict,
Etc.
The execution, delivery and performance of this Agreement
by Borrower and the Envision Guarantors, does not and will not violate any
agreement, instrument or undertaking to which they are a party or by which they
are bound, and do not and will not result in, or require, the creation or
imposition of any Lien on any of their properties or revenues.
5.3
Additional Events of
Default
. The parties hereto acknowledge, confirm and agree
that the failure of Borrower or the Envision Guarantors to comply with the
covenants, conditions and agreements contained herein or in any other agreement,
document or instrument at any time executed and/or delivered by Borrower with,
to or in favor of Lender shall constitute an event of default under the
Financing Agreements.
5.4
Subsidiaries
. The
Company has no direct or indirect subsidiaries other than the Envision
Guarantors
5.5
IP
. The
Company and its Subsidiaries do not have any trademarks or patents (or filings
or applications therefor) except as set forth in the Security
Agreement.
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SECTION
6.
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CONDITIONS TO
EFFECTIVENESS OF THIS
AGREEMENT
.
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The terms and provisions of Section 3.1
of this Agreement shall only be effective upon the satisfaction of Lender that
it has received, in form and substance satisfactory to Lender, an original of
this Agreement, duly authorized, executed and delivered by Borrower and the
Envision Guarantors and the shares of common stock provided for in Section
3.1(f).
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SECTION
7.
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PROVISIONS OF GENERAL
APPLICATION
.
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7.1
Effect of this
Agreement
. Except as modified pursuant hereto, no other
changes or modifications to the Financing Agreements are intended or implied and
in all other respects the Financing Agreements are hereby specifically ratified,
restated and confirmed by all parties hereto as of the effective date
hereof. To the extent of conflict between the terms of this Agreement
and the Financing Agreements, the terms of this Agreement shall
control. The Financing Agreements and this Agreement shall be read
and construed as one agreement.
7.2
Costs and
Expenses
. The Borrower, the Envision Guarantors and the Lender
each absolutely and unconditionally agree to pay all of their own
expenses, including all fees and disbursements of any counsel in
connection with the preparation, negotiation, execution or delivery of this
Agreement and any agreements delivered in connection with the transactions
contemplated hereby or any of its directors, officers, members, managers,
partners, employees, agents or other representatives as a consequence of or in
any way in connection with the preparation, negotiation, execution or delivery
of this Agreement and any agreements prepared, negotiated, executed or delivered
in connection with the transactions contemplated hereby.
7.3
Further
Assurances
. The parties hereto shall execute and deliver such
additional documents and take such additional action as may be reasonably
necessary or desirable to effectuate the provisions and purposes of this
Agreement.
7.4
Merger
. This
Agreement and the documents executed in connection herewith represent the entire
expression of the agreement of Borrower, the Envision Guarantors and Lender
regarding the matters set forth herein. No modification, rescission,
waiver, release or amendment of any provision of this Agreement shall be made,
except by a written agreement signed by Borrower, the Envision Guarantors and
Lender, except for any extension of the Termination Date which shall only
require execution by Lender.
7.5
Governing
Law
. The rights and obligations hereunder of each of the
parties hereto shall be governed by and interpreted and determined in accordance
with the internal laws of the State of California without regard to principle of
conflicts of laws, but excluding any rule of law that would cause the
application of the law of any jurisdiction other than the laws of the State of
California.
7.6
Binding
Effect
. This Agreement shall be binding upon and inure to the
benefit of each of the parties hereto and their respective heirs, executors,
administrators, successors and permitted assigns, as the case may
be.
7.7
Survival of Representations
and Warranties
. All representations and warranties made in
this Agreement or any other document furnished in connection with this Agreement
shall survive the execution and delivery of this Agreement and the other
documents, and no investigation by Lender or any closing shall affect the
representations and warranties or the right of Lender to rely upon
them.
7.8
Severability
. Any
determination that any provision of this Agreement or any application thereof is
invalid, illegal or unenforceable in any respect in any instance shall not
affect the validity, legality or enforceability of such provision in any other
instance, or the validity, legality or enforceability of any other provision of
this Agreement.
7.9
Reviewed by
Attorneys
. Borrower and the Envision Guarantors represent and
warrant that they (a) understand fully the terms of this Agreement and the
consequences of the execution and delivery of this Agreement, (b) have been
afforded an opportunity to have this Agreement reviewed by, and to discuss
this Agreement and all documents executed in connection herewith with, such
attorneys and other persons as Borrower may wish, and (c) have entered into this
Agreement and executed and delivered all documents in connection herewith of its
own free will and accord and without threat, duress or other coercion of any
kind by any person. The parties hereto acknowledge and agree that
neither this Agreement nor the other documents executed pursuant hereto shall be
construed more favorably in favor of one than the other based upon which party
drafted the same, it being acknowledged that all parties hereto contributed
substantially to the negotiation and preparation of this Agreement and the other
documents executed pursuant hereto or in connection herewith.
7.10
Mutual Waiver of Right of
Jury Trial
. BORROWER, ENVISION GUARANTORS, AND LENDER HEREBY
WAIVE THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING
OUT OF, OR IN ANY WAY RELATING TO: (A) THIS AGREEMENT, OR ANY OF THE
AGREEMENTS, INSTRUMENTS OR DOCUMENTS REFERRED TO HEREIN; (B) ANY OTHER
PRESENT OR FUTURE INSTRUMENT OR AGREEMENT BETWEEN THEM; OR (C) ANY CONDUCT, ACTS
OR OMISSIONS OF LENDER, ENVISION GUARANTORS OR BORROWER OR ANY OF THEIR
RESPECTIVE DIRECTORS, OFFICERS, MANAGERS, MEMBERS, PARTNERS, EMPLOYEES, AGENTS,
ATTORNEYS OR AFFILIATES; IN EACH OF THE FOREGOING CASES, WHETHER IN CONTRACT OR
TORT OR OTHERWISE.
7.11
Counterparts
. This
Agreement may be executed in any number of counterparts, but all of such
counterparts shall together constitute but one and the same
agreement. In making proof of this Agreement, it shall not be
necessary to produce or account for more than one counterpart thereof signed by
each of the parties hereto. Delivery of an executed counterpart of
this Agreement by telefacsimile or .pdf shall have the same force and effect as
delivery of an original executed counterpart of this Agreement.
[REMAINDER
OF THIS PAGE INTENTIONALLY LEFT BLANK]
IN
WITNESS WHEREOF, this Agreement is executed and delivered as of the day and year
first above written.
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LENDER:
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GEMINI
MASTER FUND, LTD.
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By:
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GEMINI
STRATEGIES, LLC, as investment manager
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By:
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/s/ Steven
Winters
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Title:
President
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BORROWER:
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ENVISION
SOLAR INTERNATIONAL, INC.
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By: /s/ Robert
Noble
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Title: CEO
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ENVISION
GUARANTORS:
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ENVISION
SOLAR CONSTRUCTION, INC.,
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By: /s/ Robert
Noble
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Title: CEO
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ENVISION
SOLAR RESIDENTIAL, INC.
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By: /s/ Robert
Noble
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Title: CEO
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ENVISION
AFRICA, LLC
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By: /s/ Robert
Noble
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Title: CEO
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Exhibit
10.13
STANDARD
SHORT FORM AGREEMENT BETWEEN
PROJECT
OWNER AND SYSTEM SUPPLIER
This
Agreement is made this
6
day of
JULY
in
the year
2009,
by and
between the
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PROJECT OWNER:
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Team Solar,
Inc.
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5000
Bailey Loop
McCIellan
CA 95652
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and the
SYSTEM
SUPPLIER:
ENVISION
SOLAR INTERNATIONAL, INC.
4225
Executive Square, Suite
1000
LaJolla, CA 92037
for
services in connection with the
WORK:
Solar
Design & Engineering; PV Support Foundations; PV Support Steel Detailing,
Fabrication, & Erection; Prefmished Tapered Metal Beam Wraps; and PV Module
Installation.
for the
following
PROJECT: California
State University - Bakersfield
located
at the
PROJECT SITE:
Bakersfield, CA
and for
which the
PROJECT NUMBER
is:
CA-08-0041
1.
THE WORK
System Supplier shall perform all
required design, engineering, construction administration and management
services and furnish and install all required material and equipment to complete
the scope of work. The System Supplier shall use its best efforts to perform the
Work in an expeditious manner consistent the direction of the Project Owner and
the Contract Documents applicable to System Supplier's scope of work. System
Supplier shall provide all labor, equipment and services necessary to complete
the Work, as described in Exhibit A, all of which shall be provided in full
accord with the direction of the Project Owner, or when applicable, reasonably
inferable from the Contract Documents as being necessary to produce the
indicated results. All on-site construction work shall be performed by a
licensed California Contractor.
2.
CONTRACT PRICE
As full compensation for
performance by System Supplier of the Work, Project Owner shall pay System
Supplier the lump sum price of one million, three hundred thirty six thousand,
four hundred eighty four dollars (
$1,336,484.00).
The lump sum
price is hereinafter referred to as the Contract Price, which shall be subject
to increase or decrease as provided in this Agreement.
3.
EXHIBITS
The following Exhibits are
incorporated by reference and made part of this Agreement:
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l.
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Exhibit
'A' -
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Contract
Documents
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2.
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Exhibit
'B' -
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Scope
of Work
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3.
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Exhibit
'C' -
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Progress
Schedule, Milestones, & Liquidated Damages
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4.
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Exhibit
'D' -
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Payment
Form with Schedule of Values
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5.
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Exhibit
'E' -
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Insurance
Requirements
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6.
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Exhibit
'F' -
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Interim
and Final Lien Wavers
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7.
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Exhibit
'G' -
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Add
Alternates - NOT USED
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8.
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Exhibit
'H' -
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Unit
Prices-NOT USED
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9.
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Exhibit
'T' -
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Change
Order Form
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10.
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Exhibit
'T'-
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Not
Used
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11.
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Exhibit
'K'-
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List
of Owner Furnished Material & Equipment
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12.
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Exhibit
'L'-
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Warrantee
Requirements
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4.
SYSTEM SUPPLIER'S
RESPONSIBILITIES
It is understood and agreed that the System Supplier
will provide direction to the designated representative of the System Supplier.
The System Supplier shall be responsible for supervision and coordination of the
Work, including the construction means, methods, techniques, sequences and
procedures utilized, unless the Contract Documents give other specific
instructions.
4.1
All
permits and fees shall be the responsibility of the Project Owner pursuant to
this Agreement, except as detailed in Exhibit B.
4.2
The
Project Owner shall be responsible for all applicable taxes, including the Work
provided by System Supplier.
4.3
In the
event that Project Owner elects to perform work at the Project Site directly or
by others retained by Project Owner, System Supplier and Project Owner shall
coordinate the activities of all forces at the Project Site and shall agree upon
fair and reasonable schedules and operational procedures for Project Site
activities. Project Owner shall require each separate contractor to cooperate
with System Supplier and assist with the coordination of activities and the
review of construction schedules and operations. The Contract Price and Contract
Time shall be equitably adjusted, as mutually agreed by the parties, for changes
made necessaiy by the coordination of construction activities, and the
construction schedule shall be revised accordingly.
4.4
In order
to facilitate its responsibilities for completion of the Work in accordance with
and as reasonably inferable from the Contract Documents, prior to commencing the
Work, System Supplier shall examine and compare the drawings and specifications
with information furnished by Project Owner; relevant field measurements made by
System Supplier; and any visible conditions at the Project Site affecting the
Work. Notwithstanding the foregoing, System Supplier shall have no
responsibility for the design errors, omissions, or inconsistencies of Project
Owner, Project Company or any other 3
rd
parties for whom System Supplier is not liable.
4,5
WARRANTY
4.5.1 The
Work shall be executed in accordance with the Contract Documents in a
workmanlike manner. In the event the System Supplier's Work is modified to
include work beyond a time & material basis, the System Supplier warrants
that all materials and equipment shall be new, of good quality, in conformance
with the Contract Documents, and free from defective workmanship and materials.
In such a case, the System Supplier's warranty does not include remedies for
defects or damages caused by normal wear and tear during normal usage, use for a
purpose for which the Project was not intended, improper or insufficient
maintenance, modifications performed by Project Owner or others retained by
Project Owner, or abuse. System Suppliers' warranty shall commence upon Final
Acceptance of the Work by the Project Owner and continue for a period of 1 year
thereafter. No other warranties, express nor implied, are provided by System
Supplier; provided, System Supplier hereby assigns to Project Owner all specific
written warranties provided by System Suppliers, vendors, and manufacturers and
all such specific warranties shall continue as noted therein.
4.6
SAFETY As
between Project Owner and System Supplier, System Supplier shall have overall
responsibility for safety precautions and programs in the performance of the
Work by System Supplier and its lower tiers, except that System Supplier's
System Suppliers shall also be responsible for the safety of persons or property
in the performance of their work, and for compliance with the provisions of
applicable laws and regulations. System Supplier shall seek to avoid injury,
loss or damage to persons or property by taking reasonable steps to protect its
employees and other persons at the Project Site; materials and equipment stored
at on-site or off-site locations for use in the Work; and property located at
the site and adjacent to Work areas, whether or not the property is part of the
Work.
4.7
HAZARDOUS
MATERIALS A Hazardous Material is any substance or material identified now or in
the future as hazardous under any federal, state or local law or regulation, or
any other substance or material which may be considered hazardous or otherwise
subject to statutory or regulatory requirement governing handling, disposal
and/or clean-up. System Supplier shall not be obligated to commence or continue
work until any Hazardous Material discovered at the Project Site has been
removed, or rendered or determined to be harmless by Project Owner as certified
by an independent testing laboratory and approved by the appropriate government
agency. If System Supplier incurs additional costs and/or is delayed due to the
presence or remediation of Hazardous Material, System Supplier shall be entitled
to an equitable adjustment in the Contract Price and/or the Contract
Time.
4.8
MATERIALS
BROUGHT TO THE WORKSITE System Supplier shall be responsible for the proper
delivery, handling, application, storage, removal and disposal of all materials
and substances brought to the Project Site by System Supplier in accordance with
the Contract Documents and used or consumed in the performance of the
Work.
4.9
SUBMITTALS
In the event that the System Supplier's Work is expanded, the System Supplier
shall submit to Project Owner for review and approval all shop drawings,
samples, product data and similar submittals as may be required by either this
Agreement or the Contract Documents. System Supplier shall be responsible to
Project Owner for the accuracy and conformity of its submittals to the Contract
Documents. System Supplier shall prepare and deliver its submittals to Project
Owner in a manner consistent with the Progress Schedule of the Work and in such
time and sequence so as not to delay the performance of the Work or the work of
Project Owner and others retained by Project Owner. When System Supplier
delivers its submittals to Project Owner, System Supplier shall identify in
writing for each submittal all changes, deviations or substitutions from either
the requirements of this Agreement or the Contract Documents. The approval of
any System Supplier submittal shall not be deemed to authorize deviations,
substitutions or changes in the requirements of the Contact Documents unless
express written approval is obtained from Project Owner specifically authorizing
such deviation, substitution or change. Further, Project Owner shall not make
any change, deviation or substitution through the submittal process without
specifically identifying and authorizing such deviation to System Supplier.
Project Owner shall be responsible for review and approval of submittals with
reasonable promptness (3 business days) to avoid causing delay. System Supplier
shall perform all Work strictly in accordance with approved submittals. Project
Owner's approval does not relieve System Supplier from responsibility for
Defective Work resulting from errors or omissions of any kind within the
approved submittals.
4.10 SITE
CONDITIONS If the conditions at the Project Site are (a) subsurface or other
physical conditions
which are
materially different from those indicated in the Contract Documents, or (b)
unusual or unknown
physical
conditions which are materially different from conditions ordinarily encountered
and generally recognized as inherent in Work provided for in the Contract
Documents, System Supplier shall stop Work and give written notice of the
condition to Project Owner as soon as possible upon recognition of the
condition. System Supplier shall not be required to perform any work relating to
the unknown condition without the written mutual agreement of the parties. Any
change in the Contract Price and/or Contract Time as a result of the unknown
condition shall be made by Change Order.
4.11
CUTTING,
FITTING AND PATCHING System Supplier shall perform cutting, fitting and patching
necessary to coordinate the various parts of the Work and to prepare its Work
for the work of Project Owner or others retained by Project Owner.
4.12
CLEANING
UP System Supplier shall regularly remove debris and waste materials at the
Project Site resulting from System Supplier's Work. Prior to discontinuing Work
in an area, System Supplier shall clean the area and remove all rubbish and its
construction equipment, tools, machinery, waste and surplus materials. System
Supplier shall minimize and confine dust and debris resulting from construction
activities. At the completion of the Work, System Supplier shall remove and
dispose in a lawful manner from the Project Site all construction equipment,
tools, surplus materials, waste materials (excluding Hazardous Materials) and
debris,
5.
PROJECT OWNER'S RESPONSIBILITIES
Any information or services to be
provided by Project Owner shall
be
provided in a timely manner (two (2) business days) so as not to delay the
Work.
5.1WORKSITE
INFORMATION Project Owner shall provide at Project Owner's expense and with
reasonable
promptness
the following;
.1
information describing the physical characteristics of the site, including
surveys, site evaluations, legal descriptions, data or drawings depicting
existing conditions;
.2
subsurface reports may be provided by Project Owner; it is understood and agreed
that such subsurface reports are provided for information only, Project Owner
makes no warranty as to the accuracy and reliability of such reports;
and
.3 any
other information or services requested in writing by System Supplier that are
relevant to System Supplier's performance of the Work and under Project Owner's
control.
5.2 EVIDENCE
OF ABILITY TO PAY Upon written request by the System Supplier the Project Owner
shall
provide
to System Supplier reasonable evidence of Project Owner's ability to pay System
Supplier for the Work
(i.e. tax
equity financing, bank financing, other).
6.
SUBCONTRACTS
Work not performed by System Supplier with its own forces shall be performed by
System Suppliers. System Supplier agrees to bind eveiy System Supplier and
material supplier (and require every System Supplier to so bind its System
Suppliers and material suppliers) to all the provisions of this Agreement and
the Contract Documents as they apply to the System Supplier's and material
supplier's portions of the Work.
7.
CONTRACT
TIME
7.1
DATE OF
COMMENCEMENT Unless otherwise agreed in writing the date of this agreement shall
serve as the Date of Commencement of Work, unless, as to those permits which are
not the responsibility of System Supplier, Project Owner has not obtained all
permits and approvals necessary for System Supplier to commence the
Work.
7.2
TIME The
Contract Time shall be measured from the date of commencement. The Contractor
shall achieve Substantial Completion of the entire Work not later than 79
calendar days from the date of commencement of construction, subject to
adjustments of this Contract Time as provided in the Contract Documents. This
shall also be in accordance with the schedule and required interim milestones as
indicated in Exhibit 'C - Progress Schedule, Milestones & Liquidated
Damages, attached to this contract.
8.
SCHEDULE OF THE WORK:
See Exhibit
C.
9.
DELAYS
AND EXTENSIONS OF TIME: If the System Supplier is delayed at any time in the
commencement or progress of the Work by an act or neglect of the Project Owner
or any 3
rd
party for whom System Supplier is not responsible
(i
.e.,
other
than System Supplier's System Suppliers, suppliers, agents, employees), or by
changes ordered in the Work, or by labor disputes, fire, unusual delay in
deliveries, unavoidable casualties or other causes beyond the System Supplier's
control, or by delay authorized by the Project Owner, then the Contract Time and
Contract
Price shall be equitably adjusted. The Project Owners determination of merit and
notice to the System Supplier on Claims for extension of time shall not be
unreasonably withheld by Project Owner.
10.
ALLOWANCES:
Not Applicable.
11.
CHANGES
11.1
System
Supplier may request and/or Project Owner may order changes in the Work or the
timing or sequencing of performance of the Work that impacts the Contract Price
or the Contract Time. All such changes in the Work that affect Contract Time or
Contract Price shall be formalized in a Change Order, to be approved by Project
Owner.
11.2
Project
Owner and System Supplier shall negotiate in good faith an appropriate
adjustment to the Contract Price and/or the Contract Time and shall conclude
these negotiations as expeditiously as possible. Acceptance of the Change Order
and any adjustment in the Contract Price and/or Contract Time shall not be
unreasonably withheld.
11.3
COST OR
CREDIT DETERMINATION
11
.2.3
.
1
An increase or decrease in the
Contract Price and/or the Contract Time resulting from a change in the Work
shall be determined by one or more of the following methods:
.1 unit
prices set forth in this Agreement or as subsequently agreed;
.2 a
mutually accepted, itemized lump sum;
.3 costs
calculated on a basis agreed upon by Project Owner and System Supplier plus a
fee (either a lump sum or a fee based on a percentage of cost) to which they
agree; or .4 by the method provided below:
11.4
It is
understood and agreed that only the net amount of any Change Order will be
subject to the System Supplier Fee of fifteen (15) percent. System Supplier Fee
will be all inclusive of all direct and indirect field overhead and supervision;
all corporate overhead; all insurances; all material markups; and all
profit.
11.5
PERFORMANCE
OF CHANGED WORK System Supplier shall not be obligated to perform Changed Work
until a Change Order has been executed by Project Owner and System
Supplier.
12. PAYMENT
12.1
INITIAL
PROGRESS PAYMENT - Upon execution of this Agreement, System Supplier shall
submit to Project Owner an application for payment covering initial design
costs. Project Owner shall pay the amount otherwise due on any approved payment
application, less any amounts as set forth below, no later than seven (7) days
after System Supplier has submitted a complete and accurate payment
application.
12.2
PROGRESS
PAYMENTS - System Supplier shall submit to Project Owner and, if directed, a
monthly application for payment no later than the 25th day of the calendar month
for the preceding thirty (30) days. System Supplier's applications for payment
shall be itemized and supported by System Supplier's schedule of values and any
other substantiating data as required by this Agreement, Payment applications
shall include payment requests on account of properly authorized Change Orders.
Project Owner shall pay the amount otherwise due on any approved payment
application, less any amounts as set forth below, no later than twenty (20) days
after System Supplier has submitted a complete and accurate payment application.
Progress Payments will be accelerated should Project Owner require expedited
procurement of materials.
12.3RETAINAGE
- For all System Supplier Work not performed on a time & material basis, the
Project Owner shall retain five (5) percent of the approved monies due System
Supplier until the accepted Substantial Completion of System Supplier's Work,
and thereafter only withhold such amount equating to a reasonable estimate of
the cost to complete remaining punch-list items.
12.4
FAILURE TO PAY - If the Project Owner does not pay the System Supplier as
required herein, then the System Supplier may, upon seven additional days'
written notice to the Project Owner, suspend the Work until payment of the
amount owing has been received. The Contract Time shall be extended
appropriately and the Contract Price shall be increased by the amount of the
System Supplier's reasonable costs of shut-down, delay and start-up, plus
interest as provided for in the Contract Documents.
12.5
Reserved
12.6
FINAL
COMPLETION When final completion has been achieved, inclusive of the
satisfactory completion of System Supplier's punchlist, and the acceptance of
all applicable warrant)', and operation and maintenance documentation, as
applicable, the System Supplier shall prepare for Project Owner's acceptance a
final report stating that to the best of System Supplier's knowledge, and based
on Project Owner's inspections, the Work has reached final completion in
accordance with the Contract Documents. Upon achieving this final Completion,
The Project Owner shall promptly release for payment all remaining amounts due
the System Supplier.
13. OWNERSHIP
OF DOCUMENTS - OWNERSHIP OF ARCHITECTURAL DESIGNS
13.1 PROPERTY
OF SYSTEM SUPPLIER. All Design Documents, including, without limitation, and
designs, building designs or other depictions underlying or shown in them, shall
be deemed the sole and exclusive property of System Supplier and ownership
thereof is irrevocably vested in System Supplier, whether or not the Project is
constructed.
13.2
INTETLLECTUAL
PROPERTY/ASSIGNMENT OF RIGHTS. All Intellectual Property Rights in the Design
Documents, including any designs, building designs or other depictions
underlying or shown in them are the property of System Supplier. System Supplier
shall own all Intellectual Property Rights and any other tangible and/or
intangible property rights in or associated with the Design Documents. No
transfer and assignment will be effective for the entire duration of such
Intellectual Property Rights and other rights thereto and include, but not be
limited to, all rights including rights in related plans, specifications,
documentation, derivative works and moral rights.
13.3
USE
BY PROJECT OWNER. Without limitation to the other provisions of this Section 13,
Project Owner shall have the right to use the Design Documents for the
construction, use, occupancy or maintenance of the Project, including, without
limitation, future additions, alterations, or repairs to the
Project.
13.4
SYSTEM
SUPPLIER'S WARRANTY. System Supplier represents and warrants that the Design
Documents, and the use of the Design Documents in the ordinaiy course, are free
of any claim of infringement and will not violate any right of any third party,
including any Intellectual Property Right.
13.5
INSPECTION
BY PROJECT OWNER. Project Owner shall have the right at any time or times, upon
prior written request to System Supplier, to review the status and condition of
the Design Documents while in development or during construction and to request
that copies thereof be provided to Project Owner, with the cost of such copies
reimbursed to System Supplier as a Reimbursable Expense.
14. INDEMNITY
14.1
To the
fullest extent permitted by law, System Supplier shall defend, indemnify and
hold Project Owner, Project Owner's officers, directors, members, consultants,
agents and employees and the Host and Project Company harmless from all claims
for bodily injury and property damage, other than to the Work itself and other
property insured under Exhibit E, that may arise from the performance of the
Work to the extent of the negligence attributed to such acts or omissions by
System Supplier, sub-contractors or anyone employed directly or indirectly by
any of them or by anyone for whose acts any of them may be liable. System
Supplier shall not be required to defend, indemnify or hold harmless Project
Owner or Project Company or others retained by Project Owner for any acts,
omissions or negligence of Project Owner or Project Company or others retained
by any other party.
14.2
To the
fullest extent permitted by law, Project Owner shall defend, indemnify and hold
harmless System Supplier, its officers, directors or members, System Suppliers
or anyone employed directly or indirectly by any of them or anyone for whose
acts any of them may be liable from all claims for bodily injury and property
damage, that may arise from the performance of work by Project Owner or Project
Company to the extent of the negligence attributed to such acts or omissions by
these parties.
15.
MUTUAL
WAIVER OF CONSEQUENTIAL DAMAGES Project Owner and System Supplier agree to waive
all claims against each other for any consequential damages that may arise out
of or relate to this Agreement. Project Owner agrees to waive such damages
including but not limited to Project Owner's loss of use of the Project, any
rental expenses incurred, loss of income, profit or financing related to the
Project, as well as the loss of business, loss of financing, principal office
overhead and expenses, loss of profits not related to this Project, or loss of
reputation. System Supplier agrees to waive damages including but not limited to
loss of business, loss of financing, principal office overhead and expenses,
loss of profits not related to this Project, loss of bonding capacity or loss of
reputation. This Paragraph shall not be construed to preclude contractual
provisions for liquidated damages when such provisions relate to direct damages
only. The provisions of this Paragraph shall also apply to the termination of
this Agreement and shall survive such termination.
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15.
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MUTUAL WAIVER OF CONSEQUENTIAL
DAMAGES
Project Owner and System Supplier agree to waive all claims
against each other for any consequential damages that may arise out of or
relate to this Agreement. Project Owner agrees to waive such damages
including but not limited to Project Owner's loss of use of the Project,
any rental expenses incurred, loss of income, profit or financing related
to the Project, as well as the loss of business, loss of financing,
principal office overhead and expenses, loss of profits not related to
this Project, or loss of reputation. System Supplier agrees to waive
damages including but not limited to loss of business, loss of financing,
principal office overhead and expenses, loss of profits not related to
this Project, loss of bonding capacity or loss of reputation. This
Paragraph shall not be construed to preclude contractual provisions for
liquidated damages when such provisions relate to direct damages only. The
provisions of this Paragraph shall also apply to the termination of this
Agreement and shall survive such termination.
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16.
NOTICE
TO CURE AND TERMINATION
16.1
TERMINATION
BY OWNER If, within seven (7) days of receipt of a notice to cure pursuant to
Paragraph 16.1, System Supplier fails to commence and satisfactorily continue
correction of the default set forth in the notice to cure, Project Owner may
notify System Supplier that it intends to terminate this Agreement for default
absent appropriate corrective action within fourteen (14) additional days. After
the expiration of the additional seven (7) day period, Project Owner may
terminate this Agreement by written notice absent appropriate corrective action.
Termination for default is in addition to any other remedies available to
Project Owner under Paragraph 17. If Project Owner's costs arising out of System
Supplier's failure to cure, including the cost of completing the Work and
reasonable attorney fees, exceed the unpaid Contract Price, System Supplier
shall be liable to Project Owner for such excess costs. If Project Owner's costs
are less than the unpaid Contract Price, Project Owner shall pay the difference
to System Supplier. In the event Project Owner exercises its rights under this
Paragraph, upon the request of System Supplier, Project Owner shall furnish to
System Supplier a detailed accounting of the costs incurred by Project
Owner.
16.2
TERMINATION
BY PROJECT OWNER Upon seven (7) days' written notice to Project Owner, System
Supplier may terminate this Agreement if the Work:
(a)
has
been stopped fr a sixty (60) day period through no fault of System Supplier for
any of the
following
reasons:
.1 under
court order or order of other governmental authorities having
jurisdiction;
.2 as a
result of the declaration of a national emergency or other governmental act
during which, through no act or fault of System Supplier, materials are not
available; or
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(b)
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If the Project Owner
fails within a sixty (60) day period to pay the System Supplier amounts
due
under
the contracts as provided in Section 12.2 and the System Supplier has
provided the Project
Owner
seven (7) days' written notice to Project
Owner.
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16.3 TERMINATION
FOR CONVENIENCE The Project Owner may, at any time, terminate this
Agreement
for the Project Owner's convenience and without cause. In case of such
termination for the
Project
Owner's convenience, the System Supplier shall be entitled to receive payment
for the
Subcontract
Work executed, and costs incurred by reason of such termination, along with
reasonable
overhead
and profit on the Subcontract Work not performed. Upon receipt of written notice
from the
Project
Owner of such termination for the Project Owner's convenience the System
Supplier shall:
.1 cease
operations as directed by the Project Owner in the notice;
.2 take
actions necessaiy, or as the Project Owner may direct for the protection /
preservation of the Work;
.3 except
for the Work directed to be performed prior to the e ffective date of
termination stated in the notice, terminate all existing Sub-subcontracts and
purchase orders and enter into no further Sub-subcontract and/or purchase
orders.
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17.
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ASSIGNMENT
Neither Project Owner nor
System Supplier shall assign its interest in this Agreement without the
written consent of the other except as to the assignment of proceeds. The
terms and conditions of this Agreement shall be binding upon both parties,
their partners, successors, assigns and legal representatives. Neither
party to this Agreement shall assign the Agreement as a whole without
written consent of the other.
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18.
GOVERNING LAW
This Agreement shall be governed
by the law in effect at the location of the Project.
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19
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JOINT DRAFTING
The parties expressly
agree that this Agreement was jointly drafted, and that they both had
opportunity to negotiate terms and to obtain assistance of counsel in
reviewing terms prior to execution. This Agreement shall be construed
neither against nor in favor of either party, but shall be construed in a
neutral manner.
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20
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DISPUTE RESOLUTION
In the event of a
dispute, controversy, or claim arising out of or relating to this
Agreement, the System Supplier and Subcontractor ("the Parties") shall
confer and attempt to resolve such matter informally. If such dispute or
claim cannot be resolved in this manner, then the dispute or claim shall
be referred first to the Parties' executive officers for their review and
resolution. Claims not resolved by other means shall be decided by
arbitration which, unless the parties mutually agree otherwise, shall be
in accordance with the Construction Industry Arbitration Rules of the
American Arbitration Association currently in effect. The demand for
arbitration shall be filed in writing with the other party to the Contract
and with the American Arbitration Association. Any arbitration shall be
conducted by a mutually agreed Arbitrator. The award rendered by the
arbitrator shall be final and binding on the Parties and shall be deemed
enforceable in any court having jurisdiction thereof and of the Parties.
The arbitration shall be heard by one arbitrator, who shall have
experience in the general subject matter to which the dispute relates, for
claims in excess of $250,000 a panel of multiple Arbitrators shall be
used. The shall take place in the state where the Work has been performed
or in a mutually agreed location. The cost of the arbitration shall be
borne equally by the Parties. If either Party becomes involved in
arbitration or litigation arising from this Agreement, each Party will be
responsible for its own legal and attorney's
fees.
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PROJECT
OWNER:
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BY:
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/s/ William
Morrow
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ATTEST:
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William
Morrow
Director, Construction
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PRINT
NAME
PRINT TITLE
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SYSTEM
SUPPLIER
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BY:
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/s/ William
Adelson
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ATTEST:
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/s/ Joanna
Tan
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William
Adelson
President
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Joanna
Tan
CFO, COO
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PRINT
NAME PRINT
TITLE
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EXHIBIT
A - CONTRACT DOCUMENTS
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Project Name:
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CSU -
Bakersfield - Parking Lot E Canopy
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Project
Number:
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CA-08-0041
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Project
Location:
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9001
Stockdale Hwy
Bakersfield
CA
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Project
Description:
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Solar
design and structural engineering: PV foundation supports; PV support
steel
detailing,
fabrication & erection, PV module
Installation.
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Sheet
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Title
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Author
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Date
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T
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Title
Page
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SunEdison/
Envision
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6/26/09
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A.l
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Site
Plan
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SunEdison/
Envision
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6/26/09
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A.2
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Demo
Plan
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SunEdison/
Envision
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6/26/09
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A.3
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Site
Elevations
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SunEdison/
Envision
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6/26/09
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A.4
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Large Array plans and
elevations
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SunEdison/
Envision
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6/26/09
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A.5
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Medium Array plans and
elevations
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SunEdison/
Envision
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6/26/09
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A.6
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Small Array plans and
elevations
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SunEdison/
Envison
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6/26/09
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A.7
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Reflected Ceiling
plans
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SunEdison/
Envision
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6/26/09
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A.8
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Reflected Ceiling
plans
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SunEdison/
Envision
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6/26/09
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A.9
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Sections
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SunEdison/
Envision
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6/26/09
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A.10
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Details
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SunEdison/
Envision
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6/26/09
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S.1
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Structural notes and
plans
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Orie's/SunEdison/
Envision
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6/26/09
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S.2
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Structural elevations and
details
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Orie's/SunEdison/
Envision
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6/26/09
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S.3
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Inverter equipment pad and
anchorage
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Orie's/SunEdison/
Envision
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6/26/09
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S.4
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Inverter equipment pad
details
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Orie's/SunEdison/
Envision
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6/26/09
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EXHIBIT
B - SCOPE OF WORK
A.
General
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a.
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System
Supplier shall obtain and maintain all permits and licenses required to
perform and complete its
work,
unless otherwise indicated.
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b.
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System
Supplier is responsible for generation of the Construction sets of the
Contract Documents. The
System
Supplier is responsible for reproduction or procurement of any additional
sets required to perform
the
work and shall provide any required sets to Project Owner upon request.
All printing costs are a
reimbursable
expense.
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c.
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System
Supplier shall provide to Project Owner all required Shop Drawings,
Submittals, Samples, As-
Builds,
Operating Manuals, overstock materials, and all warranties required by the
Contract Documents.
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d. All Requests for Information must be in
writing to and from Project Owner and System Supplier.
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e.
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System
Supplier shall provide Daily Work Reports to the Project Owner's Project
Superintendent for
each
day System Supplier is working on
site.
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f.
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System
Supplier shall provide required Quality Control and Completion
documentation and checklists to
the
Project Owner's Project Superintendent on a regular
basis.
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g. System Supplier shall provide a list of all
materials with lead-times over two (2) weeks.
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h.
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Project
Owner shall be responsible for all material stocking and storage, which
includes Project Owner
supplied
material and/or equipment.
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i.
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Project
Owner shall provide and be responsible for any storage containers and or
field office trailers
required
to complete their work, in locations determined by Project
Owner.
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j. If applicable, System Supplier shall provide
quantity survey for Project Owner provided materials.
k. System Supplier shall coordinate and install
all Project Owner provided items per the Contract Documents,
as
pertaining to System
Supplier's work.
l.
Parking is the responsibility of System Supplier; coordinated with
Project Owner's Project Superintendent.
m.
Coordinate and manage inspections by the local building department, utility
field engineers, project company consultants, all as may be required, in order
to obtain all final approvals.
B.
Safety
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A.
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All
of the System Supplier's work shall comply with all local, State and
Federal building codes, laws and
regulations.
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B.
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System
Supplier shall adhere to all current safety laws including, but not
limited to Local, State, and Federal
OSHA
regulations, and to Project Owner's sa
fety
standards.
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C.
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Hard hats
are required on this project by ALL persons, at ALL times, and in ALL
areas.
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D.
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System
Supplier must keep records on site of daily and weekly safety meeting and
will provide copies to Project
Owner
upon request.
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E.
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System
Supplier must keep records onsite of individuals who are trained and
qualified to operate equipment on
the
jobs ite.
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F.
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System
Supplier must contact USA Utility or the appropriate company to identify
all underground lines prior to
digging.
Any disconnections of service will be the responsibility of the System
Supplier.
|
|
|
G.
|
Provide
required Certificate of Insurance (with noted Additional Insureds) prior
to mobilization on the Project.
|
|
|
H.
|
System
Supplier to have a designated Superintendent on site at all times while
installation activities are being
conducted
so as to be a single point-of-contact for both Project Owner and the Host
Company. Superintendent
will
provide Project Owner with a 24-hour contact person and the individual
must be able to communicate in
English.
|
|
|
I.
|
Project
Owner is responsible to provide and or install all required safety
equipment, rails, protection or other
devices
and or equipment necessary to complete the work.
|
|
|
J.
|
Project
Owner is responsible for security to protect any materials staged on the
ground during non working hours.
|
|
|
K.
|
The
System Supplier shall comply with all security and safety requirements and
regulation of the Host Company.
|
|
|
L.
|
The
following Safety Documents will be provided to the Project Owner's
Construction for review and approval prior to issuance of a Notice to
Proceed.
|
|
|
|
|
|
|
|
a.
System
Suppliers General Safety Plan
|
|
|
|
b.
Site
Specific Safety Plan
|
|
|
|
c.
Site
Specific Risk Assessment
|
|
|
|
d.
Site Specific
Emergency Action Plan
|
C.
Design
Scope
|
A.
|
Furnish
all required design documents including but not limited to Drawings,
Specifications, Design Manuals,
Design
Standards, necessary to permit, and construct the Tee Structures, Support
Foundations, PV Support
Steel
and PV Module Installation in compliance with all local, state, and
national codes and jurisdictional
requirements
& regulations.
|
|
|
|
|
B.
|
Due Diligence
Documents
|
|
|
|
|
|
a.
|
Project
Owner shall provide Facility As-Built drawings to System Supplier. System
Supplier is responsible for verification and coordination of this
information with their
design.
|
|
|
b.
|
Provide all Site
Evaluation and Preliminary Approval deliverables.
|
|
|
|
|
|
|
c.
|
Notate any
host-customer considerations and requirements known prior to
design/technical specification.
|
|
|
|
|
|
C.
|
Provide
required preliminary design documents to evaluate initial product and
system specifications for
review
by Project owner and/or the Host Company, provide follow up corrective
action items as necessary.
|
|
|
|
|
|
D.
|
|
Provide
permit submittal ready, approved by licensed PE for each discipline
required, prior to permit
submittal
for final design review.
|
|
E.
|
|
Comply
with all local Utility, AHJ, and National code agencies as appropriate -
obtain in writing, any code
variances
approved by authorized agencies.
|
|
F.
|
|
Provide
updated design drawings, per approved change orders, during construction
as appropriate.
|
|
G.
|
|
Provide
As-Built drawings upon completion of system installation, including all,
reference drawings, and
hard-copies,
per the term-out schedule supplied, and as-built drawing checklist (to be
supplied by Project
Owner).
|
|
H.
|
|
Provide
copies of all Professional Engineering deliverables, including stamps and
signatures on all drawings,
and
calculation packages as applicable.
|
|
I.
|
|
Provide
technical solutions or correspondence to support system term-outs, as it
relates to Independent
Engineering
review, in a prompt manner as to support intended
schedule.
|
D. Construction
Scope
|
A.
|
This
Contract Agreement includes, but is not limited to, providing all labor,
material, tools, equipment and supervision to complete the following scope
of work;
|
|
|
|
System
Supplier shall furnish and Install all required footings, foundations,
slabs, and mounting pads including all required layout, excavation, form
work, reinforcing, anchor bolts and finishing of concrete necessary. The
foundation spoils are to be spread on site and the AC debris shall be
stockpiled into a location as determined by the Project Owner to be hauled
off site by Project Owner.
|
|
|
|
1
.
|
System
Supplier shall install in all required footings Conduit supplied by
Project Owner.
|
|
|
|
2.
|
System
Supplier shall furnish, fabricate, and install all required steel
(
Tee'
structures including all required layout, hardware, welding, Temporary
bracing during erection, and all other material or equipment for a
complete installation.
|
|
|
|
3.
|
System
Supplier shall furnish, fabricate, and install all required steel purlins
and other support member to support the installation of PV modules
including all required layout, hardware, welding, Temporary bracing during
erection, and all other material or equipment for a complete
installation.
|
|
|
|
4.
|
Installation
of Project Owner provided equipment, as indicated on the provided "List of
Owner Supplied Material and Equipment", including but not limited to
installation of PV Modules.
|
|
|
|
5.
|
Furnish
and Install all required miscellaneous mounting hardware, blocking or
other material necessaiy for a complete installation of the work, except
where indicated on "List of Owner Supplied Material and
Equipment"
|
|
|
|
6.
|
System
Supplier shall perform required Painting and galvanizing required,
including touchup as required
|
|
|
|
7.
|
System
Supplier is to perform all required Saw Cutting and or Core
Drilling.
|
|
|
|
8.
|
System
Supplier shall remove light poles noted and deliver to the Campus
Facilities Department. The concrete light standards shall be removed to 2"
below finish grade. The concrete debris shall be stockpiled into a
location as determined by the Project Owner to be hauled off site by
Project Owner.
|
|
|
|
9.
|
System
Supplier intends to prefabricate the modules for installation on the steel
structure. System Supplier shall provide any required work benches and
equipment necessaiy to complete the work. System supplier shall allow an
electrician access to the work area to pre-wire the panels prior to
erection. System Supplier and Project Owner shall coordinate the module
delivery and security of the staging area at a later date.
|
|
B.
|
In
addition the System Supplier shall be responsible for the
following:
|
|
|
|
1.
|
Ail
required labor and equipment for offloading and material
placement.
|
|
|
|
2.
|
All
rigging of materials.
|
|
|
|
3.
|
Unloading,
inventory, and storage of all material delivered to project
site.
|
|
|
|
4.
|
Any and
all personnel lifts and or scaffold.
|
|
|
|
5.
|
All
Layout for the System Supplier's work from benchmarks provided by Project
Owner.
|
|
|
|
6.
|
System
Supplier is responsible for supplying any temporary power and additional
task lighting required to perform its work.
|
|
|
|
7.
|
Project
Owner shall furnish all required Trash Removal and Dumpsters as required
for work, including off haul of asphalt paving
|
|
|
|
8.
|
Maintain
all areas free of waste materials, debris, and rubbish. Maintain site in a
clean and orderly fashion.
|
|
|
|
9.
|
Supply
all required Rental Equipment and any required Small Tools for the
performance of its work.
|
|
|
|
10.
|
All
required surface preparation.
|
|
|
|
11.
|
Repair
of any damaged work existing or new; including but not limited to roof
membrane or material,
asphalt
paving, concrete paving, curb & gutter, or existing
buildings.
|
|
|
|
12.
|
System
Supplier shall furnish all required warranties to the Project Owner as
indicated in the attached Warranty Requirements document, including, but
not limited to, all 'workmanship' warranties and assignment to the Owner
of all Manufacturer's warranties.
|
|
|
|
13.
|
Project
Owner shall furnish and maintain the required Temporary Restroom
Facilities at the code required numbers and frequency of
maintenance.
|
E. Other
Conditions
|
A.
|
System
Supplier shall not be entitled to any payment for Field Extra Work Orders
without the signature of Project
Owner's
Project Superintendent or Construction Project Manager. The effect of such
signature is limited by the
terms
and conditions of the Contract
Agreement.
|
|
|
|
|
|
B.
|
When
grounds exist justifying a back charge against the System Supplier,
whether
or
not due
to a default under
this
Agreement, Project Owner may provide System Supplier written notice to
take appropriate corrective action,
as
determined by Project Owner, within twenty-four (24) hours. If System
Supplier fails to commence and
satisfactorily
continue corrective action to the satisfaction of Project Owner, then
System Supplier shall be liable for all costs and expenses resulting there
from, including, but not limited to, investigation costs, costs to remedy,
mark-up for overhead and profit of fifteen (15%), plus any attorneys' fees
incurred
by
Project
Owner.
|
F.
Exclusions
|
A.
|
The
Work excludes performance or completion bonds for the city, other
government entities or third parties.
|
|
B.
|
The
Work excludes all materials testing, field testing, field inspections, and
special inspection costs. Such
excluded
items are to be provided separately by the Project Owner and paid by the
Project Owner at no cost to
the
System Supplier.
|
|
C.
|
The Work
excludes providing payment and performance bonds to the Project
Owner.
|
|
D.
|
Excludes
costs to address architectural treatments for normal shrinkage cracks in
concrete construction.
|
|
E.
|
The Work
excludes all concrete for Electrical scope of work.
|
|
F.
|
The Work
excludes PV module washing provisions and equipment.
|
|
G.
|
The Work
excludes well points or dewatering.
|
|
H.
|
The
Work excludes installation of any Project Owner furnished items except as
indicated on the "List of
Owner
furnished Material and Equipment."
|
|
I.
|
The Work
excludes all landscaping and re-establishment of existing
landscaping.
|
|
J.
|
Owner shall perform
any pavement patching required around the foundation bases and light
fixture bases removed as a result of the work. Supplier shall provide a
concrete base approximately 2" below finish grade to allow a finish paving
application by others.
|
EXHIBIT
C - PROJECT SCHEDULE
|
Project
Milestones:
|
|
|
|
|
|
|
|
|
Start Construction (drilling
foundations)
|
8/3/2009
|
|
|
|
|
|
|
|
School Blackout Period ( no
work, all parking
|
|
|
lots clean and available to the
campus)
|
9/7/09 -
9/25/09
|
|
|
|
|
|
|
|
Module installation complete
(no later than)
|
10/21/2009
|
|
|
|
|
Final
Completion
|
10/27/2009
|
Exhibit 'D'
- Payment Form
with Schedule of
Values
CONTINUATION
SHEET
AIA
document
g
703
|
AIA Document
g702,
APPLICATION
AND CERTIFICATE FOR PAYMENT, containing Contractor's signed Certification
is attached.
In tabulation below, amounts
are stated to the nearest dollar.
Use Column I on Contracts where
variable retainage for the line items may apply
|
|
APPLICATION
NUMBER:
APPLICATION
DATE:
PERIOD
TO:
ARCHITECT'
S
PROJECT NO:
|
|
A
|
B
|
C
|
D
|
E
|
F
|
G
|
H
|
I
|
|
ITEM
|
DESCRIPTION OF WORK
|
SCHEDULED
|
WORK
COMPLETED
|
MATERIALS
|
TOTAL
|
%
|
BALANCE
|
RETAINAGE
|
|
NO.
|
|
VALUE
|
FROM
PREVIOUS
|
THIS
PERIOD
|
PRESENTLY
|
COMPLETED
|
(G+C)
|
TO
FINISH
|
|
|
|
|
|
APPLICATION
|
|
STORED
|
AND
STORED
|
|
(C-G)
|
|
|
|
|
|
(D+E)
|
|
(NOT
IN
|
TO
DATE
|
|
|
|
|
|
|
|
|
|
D OR
E)
|
(D+E+F)
|
|
|
|
|
|
Design
/ Engineering
|
|
|
|
|
|
|
|
|
|
1-330S
|
Preliminary
Design and Engineering
|
0.00
|
-
|
-
|
-
|
-
|
0%
|
0,00
|
0.00
|
|
1-33DS
|
Final
permit design drawings
|
0.00
|
|
|
|
|
0%
|
0.00
|
0,00
|
|
|
Structure
installation
|
|
|
|
|
|
|
|
|
|
2-050S
|
Demo
existing light poles
|
0.00
|
-
|
-
|
-
|
-
|
0%
|
0.00
|
0.00
|
|
3-300S
|
Pier
foundations
|
0.00
|
-
|
|
-
|
-
|
0%
|
0,00
|
0.00
|
|
5-2QQS
|
Structural
Steel Material
|
0.00
|
|
|
|
|
|
|
|
|
5-200S
|
Structural
Steel - installation
|
0.00
|
-
|
-
|
-
|
-
|
0%
|
0.00
|
0,00
|
|
16-300S
|
Module
Installation
|
0.00
|
|
-
|
-
|
-
|
0%
|
0.00
|
0.00
|
|
5-20
OS
|
Paint
structural steel
|
0.00
|
|
|
|
|
0%
|
0.00
|
0.00
|
|
|
|
0
|
0
|
0
|
0
|
0
|
|
0.00
|
0
|
CONTINUATION
SHEET
AIA
document
g
703
|
AIA Document
g702,
APPLICATION
AND CERTIFICATE FOR PAYMENT, containing Contractor's signed Certification
is attached.
In tabulation below, amounts
are stated to the nearest dollar.
Use Column I on Contracts where
variable retainage for the line items may apply
|
|
APPLICATION
NUMBER:
APPLICATION
DATE:
PERIOD
TO:
ARCHITECT'
S
PROJECT NO:
|
|
A
|
B
|
C
|
D
|
E
|
F
|
G
|
H
|
I
|
|
ITEM
NO.
|
DESCRIPTION
OF
WORK
|
SCHEDULED VALUE
|
WORK
CO
MPLETED
|
|
|
%
(G+C)
|
BALANCE
TO
FINISH
|
RETAINAGE
|
|
|
|
|
FROM
PREVIOUS
APPLICATION
(D +
E)
|
THIS
PERIOD
|
|
|
|
|
|
|
|
CHANGE
ORDER #
|
-
|
-
|
-
|
|
|
|
-
|
0.00
|
|
|
|
-
|
-
|
-
|
|
|
|
-
|
0.00
|
|
|
|
-
|
-
|
-
|
|
|
|
-
|
0.00
|
|
|
|
-
|
-
|
-
|
|
|
|
-
|
0.00
|
|
|
|
-
|
-
|
--
|
|
|
|
-
|
0.00
|
|
|
|
-
|
-
|
-
|
|
|
|
-
|
0.00
|
|
|
|
-
|
-
|
-
|
|
|
|
-
|
0.00
|
|
|
|
-
|
-
|
-
|
|
|
|
-
|
0.00
|
|
|
|
-
|
-
|
-
|
|
|
|
|
|
|
|
|
-
|
-
|
-
|
|
|
|
|
|
|
|
|
-
|
-
|
-
|
|
|
|
|
|
|
|
|
-
|
-
|
--
|
|
|
|
|
|
|
|
|
-
|
-
|
-
|
|
|
|
|
|
|
|
|
-
|
-
|
-
|
|
|
|
|
|
|
|
|
-
|
-
|
-
|
|
|
|
|
|
|
|
|
-
|
-
|
-
|
|
|
|
|
|
|
|
|
-
|
-
|
-
|
|
|
|
|
|
|
|
|
-
|
-
|
-
|
|
|
|
|
|
|
|
|
-
|
-
|
-
|
|
|
|
|
|
|
|
|
-
|
-
|
-
|
|
|
|
|
|
|
|
|
-
|
-
|
-
|
|
|
|
|
|
|
|
|
-
|
-
|
-
|
|
|
|
|
|
|
|
|
-
|
-
|
-
|
|
|
|
|
|
|
|
|
-
|
-
|
-
|
|
|
|
|
|
|
|
|
-
|
-
|
-
|
|
|
|
|
|
|
|
|
-
|
-
|
-
|
|
|
|
-
|
-
|
|
|
Exhibit 'E'
-
Insurance
|
|
|
Requirements
|
|
1.
|
Required
Coverage
. Subcontractor shall carry and maintain
with carriers or self insurance, as a minimum, the following insurance
coverage:
|
|
|
1.1.
|
Workers
Compensation
|
|
|
|
Workers
Compensation Insurance and Employers Liability Insurance in accordance
with the laws of the state of where work may be done with limits for
employer's liability in the minimum amount of $100,000
|
|
|
1.2.
|
Commercial
General Liability coverage with a General Aggregate of $2,000,000 per
occurrence,
with
the following coverage's;
|
|
|
Per
Occurrence
|
$2,000,000
|
|
|
Products &
Completed Operations
|
$1,000,000
|
|
|
Personal Injury
& Advertising Injury
|
$1,000,000
|
|
|
General
Aggregate
|
$2,000,000
|
|
|
1.3.
|
Automotive Liability Insurance covering owned, non-owned and hired
automobiles in the minimum limits
of:
|
|
|
Bodily
Injury
|
$1,000,000 each
person
|
|
|
Bodily
Injury
|
$1,000,000 each
occurrence and;
|
|
|
Property
Damage
|
$1,000,000 each
occurrence
|
|
|
|
|
|
2.
|
|
Policy
Endorsements
- All insurance coverage required to be maintained by
Subcontractor under this
Agreement
shall:
|
|
|
2.1.
|
provide a
severability of interests or cross liability clause;
|
|
|
2.2.
|
except
in the case of worker's compensation insurance and other statutory
insurances where it would be inappropriate, name each SunEdison Party, the
Host, and others as may be reasonably required by Contractor, as
additional insureds; and
|
|
|
2.3.
|
to
the extent permissible in accordance with the policy, include a waiver of
subrogation by the insurers in favor of each Host, each SunEdison Party,
SunEd Solar, investor, and each of their respective assignees, affiliates,
agents, officers, directors, employees, insurers or policy issuers and a
waiver of any right of the insurers to any set-off or counterclaim,
whether by endorsement or otherwise, in respect of any type of liability
of any of the persons insured under any such policies.
|
|
3.
|
Certificates
.
Subcontractor shall throughout the Agreement period post certificates
and/or memoranda of insurance evidencing the coverage specified in this
Exhibit by providing hardcopy certificates to
Contractor.
|
|
4.
|
Cancellations
.
|
|
|
|
|
|
4.1.
|
All
policies of insurance to be secured and maintained by Subcontractor
hereunder shall provide, by endorsement, that the Contractor
Representative and any additional insured where required in writing shall
be provided forty-five (45) days' prior written notice of any material
policy changes or cancellations (except two (2) days for non-payment of
premium) and that no such cancellation or change shall be effective
without such notice.
|
|
|
|
|
|
|
4.2.
|
Subcontractor
shall immediately notify the Contractor Representative regarding the
occurrence of any of the following events: (a) any significant loss
covered by a policy required to be maintained by this Exhibit; (b) any
significant dispute with an insurer; (c) the early cancellation of any
policy; (d) the failure to pay any premium payment; (e) the failure, for
any reason, to maintain any policy required to be maintained by this
Exhibit; and (f) any significant change in any insurance coverage
contracted for by Subcontractor.
|
|
IMPORTANT
|
|
If the certificate
holder is an ADDITIONAL INSURED, the policy(ies) must bo endorsed, A
statement on this certificate does not confer rights to the certificate
holder in lieu of such endorsement(s).
If SUBROGATION IS
WAIVED, subject to the terms and conditions of the policy, certain
policies may require an endorsement. A statement on this certificate does
not confer rights to the certificate holder in lieu of such endorse
ment(s).
|
|
DISCLAIMER
|
|
The Certificate of
Insurance on the reverse side of this form does not constitute a contract
between the issuing insurers), authorized representative or producer, and
the certificate holder, nor does it affirmatively or negatively amend,
extend or alter the coverage afforded by the policies listed
thereon.
|
|
|
Exhibit 'F'
-
Interim & fina
|
|
|
Lien
Wavers
|
|
|
|
|
CONDITIONAL
WAIVER AND RELEASE
UPON
PROGRESS PAYMENT
California
Civil Code Section 3262(d)(1)
Job/Account
#_______________
Upon
receipt by the undersigned of a check from
in
the sum of $______________payable
to____________________________________„
and
when the check has been properly endorsed and has been paid by the bank
upon which it is drawn, this document shaii become effective to release
any mechanics' lien, stop notice, or bond right
the
undersigned has on the job
of __________________________________________
located
at_________________________________________________________________
to
the following extent:
This
release covers a progress payment for labor, services, equipment or
material furnished to
_______________________________________________________________________________________________________________________
through_______________________only
and does not cover any retention retained before or after the
release
date
or extras furnished before the release date for which payment has not been
received or extras or items furnished after the release date. Rights based
upon work performed or items furnished under a written change order which
has been fully executed by the parties prior to the release date are
covered by this release unless specifically reserved by the claimant in
this release. This release of any mechanics lien, stop notice, or bond
right shall not otherwise affect the contract rights, including rights
between parties to the contract based upon a rescission, abandonment,
breach of the contract, or the right of the undersigned to recover
compensation for furnished labor, services, equipment or material covered
by this release if that furnished labor, services, equipment or material
was not compensated by the progress payment. Before any recipient of this
document relies on it, said recipient should verify evidence of payment to
the undersigned.
Date:__________________________ ___________________________
(company
name)
By:___________________________
(signature)
___________________________
(print
name)
NOTE:
CIVIL CODE 3262 (d)(1) PROVIDES: Where the claimant is required to execute
a waiver and release in exchange for, or in order to induce the payment
of, a progress payment and the claimant is not, in fact, paid in exchange
for the waiver and release or a single payee check or joint payee check is
given in exchange for the waiver and release, the waiver and release shall
follow substantially the form set forth
above.
|
|
UNCONDITIONAL
WAIVER AND RELEASE
UPON
FINAL PAYMENT
California
Civil Code Section 3262(d)(4)
Job/Account
#_____________________
The
undersigned has been paid in full for all labor, services, equipment or
materia! furnished
to:___________________________________________________________________________
on
the job of:___________________________________________________________
located
at:__________________________________________________________________________
and
does hereby waive and release any right to a mechanics lien, stop notice,
or any right against
a
labor and material bond on the job, except for disputed claims for extra
work in the amount of
$_________________________________________________________________________________
.
Date:__________________________ ____________________________
(company
name)
By:___________________________
(signature)
___________________________
(print name)
NOTICE
TO PERSONS SIGNING THIS WAIVER: THIS DOCUMENT WAIVES RIGHTS
UNCONDITIONALLY AND STATES THAT YOU HAVE BEEN PAID FOR GIVING UP THOSE
RIGHTS. THIS DOCUMENT IS ENFORCEABLE AGAINST YOU IF YOU SIGN IT, EVEN IF
YOU HAVE NOT BEEN PAID. IF YOU HAVE NOT BEEN PAID, USE A CONDITIONAL
RELEASE FORM.
NOTE:
CIVIL CODE 3262(d)(4) PROVIDES: Where the claimant is required to execute
a waiver and release in exchange for, or in order to induce payment of, a
final payment and the claimant asserts in the waiver that it has, in fact,
been paid the final payment, the waiver and release shall follow
substantially the form set forth
above.
|
|
9.
|
Exhibit 'H'
-
Unit Prices
|
|
|
Exhibit 'H'
-
Unit Prices
|
|
|
NOT
USED
|
|
10.
|
Exhibit
T
- Change Order
Form
|
|
CHANGE
|
Attachment
F - AiA form G701
|
OWNER
|
o
|
|
ORDER
|
|
ARCHITECT
|
o
|
|
|
|
CONTRACTOR
|
o
|
|
AIA DOCUMENT
G701
|
|
FIELD
|
o
|
|
|
|
OTHER
|
o
|
|
|
|
|
|
|
PROJECT:
|
|
CHANGE ORDER NUMBER:
|
|
|
|
DATE:
|
|
|
|
PROJECT
NO.:
|
|
TO
CONTRACTOR:
|
|
CONTRACT
DATE:
|
|
|
|
CONTRACT
FOR:
|
The
Contract is changed as follows:
|
No.
|
Description
|
Cost
|
|
|
1.
|
|
$
|
-
|
|
2.
|
|
$
|
-
|
|
3.
|
|
$
|
-
|
|
4.
|
|
$
|
-
|
|
5.
|
|
$
|
-
|
|
6.
|
|
$
|
-
|
|
7.
|
|
$
|
-
|
|
8.
|
|
$
|
-
|
|
9.
|
|
$
|
-
|
|
10.
|
|
$
|
-
|
|
|
SubTotal
|
$
|
-
|
This
change order constitutes full and final resolution on cost and contract time for
the above issues. The contractor waves all right to any and all future claims
related to the issues addressed herein.
|
The original
(Contract Sum) (Guaranteed maximum Price) was
|
|
|
Net change by
previously authorized Change orders
|
|
|
The (Contract Sum)
(Guaranteed maximum Price) prior to this Change order was
|
|
|
The
(Contract Sum) (Guaranteed maximum price) will be (increased)
(decreased)
(unchanged)
by this Change Order in the amount of
|
|
|
The
new (Contract Sum) (Guaranteed maximum Price) including this Change order
will be
|
$ -
|
The
Contract Time will be (increased) decreased) (unchanged) by
The date
of Substantial Completion as of the date of this Change Order therefore
is
|
NOTE:
|
This
summary does not reflect changes In the Contract Sum, Contract Time or
Guaranteed Maximum Price which have been authorized by Construction Change
Directive.
|
|
|
|
|
|
|
|
ARCHITECT
|
|
CONTRACTOR
|
|
OWNER
|
|
|
|
|
|
|
|
Address
|
|
Address
|
|
Address
|
|
|
|
|
|
|
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BY
|
|
BY
|
|
BY
|
|
|
|
|
|
|
|
DATE
|
|
DATE
|
|
DATE
|
Exhibit K - List
of Owner Furnished Equipment & Material
|
Project
Name:
|
CSU -
Bakersfield - Parking Lot E Canopy
|
|
Project
Number
|
CA-08-0041
|
|
Project
Location:
|
9001 Stockdate
HwBakersfield CA
|
|
Description
|
Furnished By
|
Installed
By
|
|
|
|
|
|
Yingli YL175 (156)
Solar Modules
|
SunEdison
|
Contractor
|
WORKMANSHIP
WARRANTY
This
Workmanship Warranty is offered [SELLER/CONTRACTOR], a Delaware limited
liability company ("Contractor") to [PURCHASER] ("Owner") in regard to the
photovoltaic system installed at Owner's premises at [ADDRESS], pursuant to that
certain Agreement Between Owner and Contractor dated as of [DATE] (collectively,
"Agreement").
|
1.
|
WORKMANSHIP
WARRANTY
|
|
|
1.1.
|
Contractor
warrants that the System generally defined within the Agreement will be
free from defects in workmanship for the period defined in Section 1.2 of
this Warranty.
|
|
|
1.2.
|
The
term of this Warranty shall be one (1) year starting from [DATE OF
COMMERICAL OPERATION] (the "Warranty Period").
|
|
|
1.3.
|
Except
as provided below, if during the Warranty Period the System becomes
inoperable as a result of defects in workmanship to the System, then
Contractor will have the relevant System components repaired or replaced
as provided below:
|
|
|
|
1.3.1.
|
The
following are System components covered by this Warranty: photovoltaic
modules, inverter, transformer, and racking structure.
|
|
|
|
1.3.2.
|
Consumable
items are not included as System components covered by this Warranty.
Consumable items include but are not limited to fuses, batteries,
lubricants, and filters.
|
|
|
1.4.
|
|
|
|
1.5.
|
Contractor's
obligations under this warranty are dependent on Owner's compliance with
the provisions of Section 3 of this Warranty.
|
|
2.
|
|
|
|
2.1.
|
The
Warranty is only for the benefit of the original purchaser of the System
(i.e., Owner) or its Affiliates.
|
|
|
2.2.
|
Contractor
may use the services of a subcontractor in supporting this
Warranty.
|
|
|
2.3.
|
Owner
shall at all times provide or arrange reasonable access for Contractor
and/or its subcontractors to the System for purposes of supporting this
Warranty.
|
|
3.
|
|
|
|
3.1.
|
Owner
shall be solely responsible for the operation and maintenance of the
System in strict compliance with the System Operations and Maintenance
Manual.
|
|
|
3.2.
|
Contractor
shall have no obligations under this Warranty or otherwise should Owner
fail to operate and maintain the System in strict compliance with the
System Operations and Maintenance Manual.
|
|
|
3.3.
|
Contractor's
obligations under this Warranty shall be limited solely to defects which
are direct and obvious defects in Contractor's
workmanship.
|
|
4.
|
CLAIMS UNDER WORKMANSHIP
WARRANTY
|
|
|
4.1.
|
The
Owner shall designate an employee to serve as the System Manager. The
System Manager is the operator of the System and is required to perform
the activities defined in the Operations and Maintenance
Manual.
|
|
|
4.2.
|
The
System manager may request inspection of the System by making a claim
under this Warranty. To make a claim, the System Manager
must:
|
|
|
|
4.2.1.
|
Identify a
fault condition in the System.
|
|
|
|
4.2.2.
|
Conduct
preliminary troubleshooting in accordance with the Operations and
Maintenance Manual.
|
|
|
|
4.2.3.
|
Contact
Contractor's Service Manager or his designee.
|
|
|
|
4.2.4.
|
Perform
reasonable troubleshooting of the System requested by the Contractor's
Service Manager or his designee.
|
|
|
|
4.2.5.
|
Notify
Contractor's Service Manager in writing to the contact information
provided below that service is required in response to a claim under this
Warranty.
|
|
|
|
|
[FULL contact
information]
|
|
|
4.3
|
Contractor
or Contractor's subcontractor will respond to a claim under this Warranty
as described below:
|
|
|
|
4.3.1.
|
Contractor
will ensure trained maintenance personnel respond within 72 hours
following receipt of a service request as specified in 4.2.5.
|
|
|
|
4.3.2.
|
Contractor
will repair or replace any faulty System component as provided in 1.3
above in a timely manner, but in no event later than eight (8) weeks from
time of such request subject to material availability.
|
|
|
|
4.3.3.
|
If
upon inspection of the System, it is determined that (i) the System is
operating within applicable specifications or (ii) that the cause of
inoperability of the System is excluded or limited under this Warranty,
Owner will be liable for any reasonable labor and material expenses
incurred by Contractor in connection with the service call.
|
|
|
4.4
|
When
performing any work under this Warranty, Contractor has the right, at its
sole discretion, to repair or replace all or part of the System using new,
remanufactured or refurbished parts or products provided said "parts" are
of equal or greater quality of the part being replaced;
provided
that,
if any defect is due to a design flaw in any part, Contractor shall, at
its sole option, repair or replace such part with an acceptable substitute
therefore. Any original part that is removed and substituted with a
replacement part will become the property of Contractor, and the
replacement part will become property of Owner.
|
|
5.
|
WORKMANSHIP WARRANTY EXCLUSIONS
AND LIMITATIONS
|
|
|
5.1.
|
No
other warranty to Owner or any other person, whether express, implied or
statutory, is made as to the installation, design, description, quality,
merchantability, completeness, useful life, future economic viability, or
fitness for any particular purpose of the System or any other service
provided hereunder or described herein, or as to any other matter, all of
which are expressly disclaimed by Contractor.
|
|
|
5.2.
|
The
Warranty provided herein does not cover damage, malfunctions or service
failures caused by:
|
|
|
|
5.2.1.
|
Failure
to follow the Operations and Maintenance Manual or other maintenance
instructions provided by Contractor in all material respects;
|
|
|
|
5.2.2.
|
Repair,
modification, or movement of the System or components thereof by someone
other than a service technician approved by Contractor or attachment to
the System of equipment not supplied by Contractor;
|
|
|
|
5.2.3.
|
Abuse,
misuse, or negligent acts of any Person (other than Contractor, its
subcontractors, and their respective employees, representatives and
agents); or
|
|
|
|
5.2.4.
|
Damage
or deteriorated performance of the System caused by electrical surges (to
the extent not caused by the System or any portion thereof), lightning,
fire, flood, extreme weather creating conditions outside of the
Specifications for such System, pest damage, accidental breakage (not
including accidental breakage by Contractor, its subcontractors, and their
respective employees, representatives and agents)), actions of third
parties (other than Contractor, its subcontractors, and their respective
employees, representatives and agents) and other events or accidents
outside the reasonable control of Contractor, its subcontractors, and
their respective employees, representatives and agents and not arising
under normal operating conditions.
|
|
6.
|
ASSIGNMENT OF
MANUFACTURERS' WARRANTIES.
Contractor hereby assigns to Owner all
manufacturers' warranties as to the System's solar panels and
inverter.
|
|
7.
|
The
Contractor shall meet or exceed all local, State or utility specific
requirements including, but not limited to those under the California
Solar initiative Program. These include the following per section 2.4 -
All systems must have a minimum 10-year warranty provided in combination
by the manufacturer and installer to protect the purchaser against
defective workmanship, system or component breakdown, or degradation in
electrical output of more than fifteen percent from their originally rated
electrical output during the ten-year period. The warranty must cover the
solar generating system only, including
PV
modules (panels) and inverters, solar collectors, tracking
mechanisms, associated with the solar system and provide for no-cost
repair or replacement of the system or system components, including any
associated labor during the warranty
period.
|
December 31,2008
Exhibit 10.14
SUSTAINABLE
STRATEGY, PLANNING AND SOLAR ADVISORY
SERVICES
AGREEMENT
BETWEEN
Centre
for Environmental Planning and Technology
and
ENVISION
SOLAR
AGREEMENT
made this
1
st
day
of
OCT
in the year of Two Thousand and Nine
between
Envision Solar International, Inc. of La Jolla, California, USA (Envision), and
Centre for Environmental Planning and Technology, of Ahmedabad, India
(CEPT).
For the Project: Gandhinagar Solar City
Master Plan and Pilot Demonstration Project (The Plan)
ENVISION
and CEPT agree as set forth below.
1)
SCOPE OF BASIC SERVICES
|
a)
|
CEPT
will engage, with affiliated government, academic and other partners, in
the planning for the Gandhinagar Solar City, one of the first projects
being developed under the Indian national government's initiatives.
Envision will provide senior professional advisory and project management
support to CEPT in coordination and partnership with institutions,
agencies and other parties participating with CEPT on the
project.
|
|
b)
|
Envision
will provide Basic Services as described below. As
"Senior
Sustainable Planning Advisor",
Envision will advise CEPT and other
participants in the project in the management and deployment of The Plan,
in the following activities
(Lead/Support):
|
|
i)
|
Overall
Master Planning for the Solar City project
(Envision Solar India (ESI)
lead
/
Centre for
Environmental Planning and Technology(CEPT)
support)
|
|
ii)
|
General assessment of solar &
other renewable technology opportunities including
solar-photovoltaic and
solar-thermal, as well as other sources of renewable energy like
wind and biomass.
(ESI
lead/CEPT
support)
|
|
iii)
|
Collection of existing data,
drawings and maps, certified land surveys, including
information on grades and lines
of streets, alleys, pavements and adjoining property; rights-of-way,
restrictions, easements, encroachments, zoning, deed restrictions,
boundaries and
contours of the site; locations, dimensions and complete data pertaining
to existing
buildings, other improvements and trees; and full information concerning
available service
and utility lines both public and private, above and below grade.
(CEPT
lead)
|
|
iv)
|
Collation of items in #3 above
and incorporation of key information into "base" drawings
and other documents.
(CEPT
lead/ESI
support)
|
|
v)
|
Assessment and conceptual design
of solar technology for a high profile, high visibility
pilot demonstration project
(ESI
lead)
|
|
vi)
|
Coordination of, or participation
in the commissioning of presentation models, colour
renderings, digital animations,
videos, documentary films and other materials needed
(ESI
lead/CEPT
support)
|
|
vii)
|
Preliminary cost estimations for
project implementation
(CEPT
lead/ES'
support)
|
|
viii)
|
Coordination
and leadership for key meetings
including:
|
|
ix)
|
Kick-off
(ESI
lead/CEPT
support)
|
|
x)
|
Stakeholder Workshop
(ESI
lead/CEPT
support)
|
|
xi)
|
Final Report Presentation
(ESI
lead/CEPT
support)
|
|
xii)
|
Other
key activities necessary for the implementation of the planning
process
|
2)
PROJECT PHASES and DELIVERABLES
Envision's
services will commence with the execution of this agreement and continue through
the following Phases:
a)
Phase 1 (month 1):
Activities:
i)
Kick-off,
Plan Conceptualization (ESI/CEPT)
ii)
Assembly
of Initial Participants (ESI/CEPT)
iii)
Stakeholder Workshop (ESI/CEPT)
Deliverables:
i.
Plan
Conceptualization Report, digital and hard-copy (ESI/CEPT)
ii.
Drawings,
Digital Models (ESI/CEPT)
b)
Phase 2 (Month 2):
Activities:
i)
Sustainable
Concept Master Plan Development (ESI/CEPT)
ii)
Concept
Design for High Profile Demonstration Project
iii)
Presentation
Material Development
iv)
Tender –
Bill of quantity / Specification / Condition of Contract (for Executing agency)
Deliverables:
i)
Concept
Master Plan Final Report, digital and hard copy (ESI/CEPT)
ii)
Outline
proposal for high profile showcase project (ESI)
iii)
Tender
Document with BoQ, Condition of Contract and Specification
(CEPT/ESI)
iv)
Web-ready
digital models and narrated animation (ESI/CEPT) v) Live Project Website (or
section on
envisionsolar.com
/
CEPT /links) (ESI)
3)
FEES AND BASIC EXPENSES
To carry
out services as listed in scope of work, CEPT will pay consultation fees to ESI
amounting to Total INR 14,10,660.00 (Rupees fourteen lacs ten thousand, six
hundred and sixty rupees. (Or its equivalent in US Dollars) in addition CEPT
will spend maximum up to INR 1,65,000 (one lac sixty five thousand rupees) for
ESI's expenses in India
4)
ADDITIONAL SERVICES
|
a)
|
This
contract is intended to cover the basic services outlined above in heading
one. In the event that Additional Services not included in Basic Services
are required, they will be charged separately according to the schedule in
heading seven. Additional services shall include the
following:
|
|
b)
|
Documentation
of existing conditions: Includes measuring, field notes, to scale drawings
and photographs of existing
context.
|
|
c)
|
Detailed
Cost Estimating
|
|
d)
|
Design
Changes after phase approval.
|
|
e)
|
Physical
presentation models
|
|
f)
|
IGBC
LEED® consulting or certification
applications.
|
|
g)
|
Energy
Modelling or other energy
specialization
|
|
h)
|
Any
other service not otherwise included in this Agreement under Basic
Services or not customarily furnished in accordance with generally
accepted design and planning practices. i) Fees paid for securing approval
of authorities having jurisdiction over the
Project
|
|
i)
|
Fees
paid for securing approval of authorities having jurisdiction over the
Project
|
5)
CEPT'S RESPONSIBILITIES
a)
CEPT
shall provide full information available regarding its requirements for the
Project.
b)
CEPT Shall designate, when necessary, a representative authorized ot act on its
behalf with respect to the Project
c) Other
responsibilities as indicated in section 2 — Project Phases and Deliverables:
above.
6)
CONSTRUCTION
ESTIMATES
|
a)
|
It
is expressly understood that statements of probable construction cost and
detailed cost estimates prepared by Envision represent best judgment only.
It is recognized that neither CEPT nor Envision have any control over cost
of material, labor or equipment, over the Contractor's methods of
determining bid prices or over competitive bidding or market
conditions.
|
7)
PAYMENTS
TO ENVISION
According
to the agreement between GEDA & CEPT, GEDA will pay CEPT in the following
instalments:
One third
of the total amount at the commencement of the project; payable on signing the
agreement between GEDA & CEPT.
One third
of the total amount on completion & submission of the interim report
following the first round of meetings;
The final
third of the total amount on completion & submission of the completed
proposals for the project.
CEPT will
pay ESI its proportion of the fees & expenses on receipt of the
corresponding payments from GEDA, in the same installments.
|
i.
|
One
third of the amount due to ESI at the commencement of the project; payable
once the initial payment has been received by CEPT from
GEDA;
|
|
ii.
|
One
third of the amount payable to ESI on completion & submission of the
interim report; payable once the interim payment has been received by CEPT
from GEDA;
|
|
iii.
|
One
third of the amount payable to ESI on completion & submission of the
completed proposals for the project; payable once the final payment has
been received by CEPT from GEDA
|
Invoices
will be submitted by ESI at the end of Phase 1 and Phase 2 and are due upon
receipt
8)
TERMINATION OF AGREEMENT
|
a)
|
This
agreement may be terminated by either party upon seven days' written
notice should the other party fail substantially to perform in accordance
with its terms through no fault of the party initiating the
termination.
|
|
b)
|
In
the event Envision terminates or is terminated, Envision shall be paid its
compensation for services performed to termination date, including
Reimbursable Expenses then due and all termination
expenses.
|
9)
INSTRUMENTS OF SERVICE
Original
Drawings, Models and Specifications as instruments of service are and shall
remain the joint property of CEPT and ESI. Both retain property regarding this
project – Both can use this ONLY for promotional purpose (Website and
Presentation for future projects) whether the Project for which they are made is
executed of not. They are not to be used by either CEPT or ESI on other projects
or extensions to this Project except by agreement in writing and with
appropriate compensation to Envision.
10)
HOLD
HARMLESS
CEPT
shall indemnify and hold harmless ESI, ESI consultants, sub-consultants and
agents, and any of its and their employees from and against any and all
liability, claims, judgments, or demands including but not limited to attorney's
fees arising directly or indirectly out of this agreement, save and except
claims or litigation arising through the sole negligence of ESI or any of its
employees or its consultants, sub-consultants and agents and any of their
employees.
11)
RESOLUTION
OF DISPUTES
All
disputes or differences which may arise between the ESI and the CEPT on any
matter connected with this agreement or in regard to the interpretation of the
context there of including any claim shall be referred to at the request of
either party for arbitration. For such purpose an arbitrator who shall be
nominated by ESI and CEPT. The arbitration shall be conducted as per the
provision of the Arbitration and Conciliation Act 1996 and/or any statutory
modification thereof. Upon every or any such reference the cost of such
arbitration references and award shall be as per the rules of the Indian Council
of Arbitration as amended time to time. The decision and award of the arbitrator
shall be final and binding on the ESI and CEPT.
12)
EXTENT OF AGREEMENT
This
Agreement represents the entire and integrated agreement between CEPT and
Envision and supersedes all prior negotiations, representations or agreements,
either written or oral. This agreement may be amended only by written instrument
signed by both CEPT and Envision.
13)
GOVERNING LAW
Unless
otherwise specified, this Agreement shall be governed by the laws of the
India.
This
Agreement executed the day and year first written above.
|
ENVISION:
|
|
Centre
for Environmental Planning and Technology:
|
|
|
|
|
|
|
|
/s/
Robert Noble
|
|
/s/
Dr
R.N.Vakil
|
|
|
Robert
Noble, AIA, LEED AP
California
License #C21574
|
|
Dr
R.N.Vakil
|
|
Exhibit 10.15
This SUBORDINATION AGREEMENT
(this
"Agreement"),
dated as of October 1, 2009 is among
Envision Solar International, Inc.,
a California corporation (the
"Company"), Envision Solar
Construction, Inc.,
a California corporation
("ESC"), Envision Solar Residential,
Inc.,
a California corporation
("ESR"),
Envision Africa, LLC
("EA";
the Company, ESC,
ESR and EA, each an
"Obligor"
and, together,
"Obligors"), Jon Evey ("Subordinated
Creditor"),
the Purchaser (as defined in the Purchase Agreement described
below), and Gemini Strategies, LLC, a Delaware limited liability company, in its
capacity as collateral agent for itself and for the Purchaser (including any
successor agent, hereinafter, the
"Collateral
Agent").
R
E C I T A L S
A. The
Company has executed and delivered to the Purchaser that certain
senior
note dated as of November 12, 2008 (as the same may be amended, supplemented,
restated
or modified and in effect from time to time, the
"Note").
The Note was issued
pursuant
to that
certain Securities Purchase Agreement, dated as of November 12, 2008 (as
amended,
restated,
supplemented or otherwise modified and in effect from time to time, the
"Purchase
Agreement"),
by and among the
Company and the Purchaser, and pursuant to which the
Purchaser
has made certain loans
("Loans")
to the
Company.
B. Each
of the Obligors (other than the Company) (each such entity, together
with each
other person or entity who becomes a party to the Guaranty (as defined herein)
by
execution
of a joinder in the form of
Exhibit A
attached
thereto, is referred to individually as a
"Guarantor"
and collectively
as the
"Guarantors")
have executed a Guaranty dated as of
November
12, 2008 (as the same may be amended, supplemented, restated or modified and in
effect
from time to time, the
"Guaranty")
in favor of the
Collateral Agent in respect of the
Company's
obligations under the Purchase Agreement and the Note.
C. The
Company has issued the Subordinated Creditor a 10% subordinated
convertible
promissory note pursuant to which, among other things, the Subordinated Creditor
has
extended credit to the Company in the aggregate original principal amount of
$102,235.62
(as the
same may be amended, supplemented, restated or otherwise modified from time to
time
as
permitted hereunder and including any notes issued in exchange or substitution
therefor,
collectively,
the
"Subordinated Note"),
and pursuant to which the Company has incurred and
may
hereafter incur other obligations and liabilities to the Subordinated Creditor.
NOW,
THEREFORE, in reliance upon this Agreement, to induce the Purchaser to continue
to make the Loans, and for other good and valuable consideration, the receipt
and sufficiency of which hereby are acknowledged, the parties hereto hereby
agree as follows:
1.
Definitions
.
All capitalized terms used
but not elsewhere defined in this Agreement shall have the respective meanings
ascribed to such terms in the Purchase Agreement and the Note. The following
terms shall have the following meanings in this Agreement:
Purchaser
shall mean holders of
Senior Indebtedness including, without limitation, any holder of any Senior
Indebtedness after the consummation of any Permitted Refinancing.
Enforcement
Action
is
defined in subsection 2.7.
Loan
Documents
means the collective
reference to the Purchase Agreement and the Note, the Security Agreement, the
Guaranty and each of the other agreements to which any Obligor is a party or is
bound in connection with the transactions contemplated under the Purchase
Agreement and the Note.
Paid in
Full
or
Payment
in Full
shall mean the
indefeasible payment in full in cash or conversion in full of all Senior
Indebtedness and termination of all commitments to lend under the Loan Documents
and Permitted Refinancing Loan Documents.
Permitted
Refinancing
means any refinancing of
the Senior Indebtedness.
Permitted
Refinancing Loan Documents
means any and all
agreements, documents and instruments executed in connection with a Permitted
Refinancing of Senior Indebtedness.
Proceeding
is defined in subsection
2.3.
Purchaser
shall mean holders of
Senior Indebtedness including, without limitation, any holder of any Senior
Indebtedness after the consummation of any Permitted Refinancing.
Senior
Indebtedness
shall mean the
obligations, liabilities and other amounts owed under the Purchase Agreement,
the Note or any other Loan Document including all interest, fees, expenses,
indemnities and enforcements costs, whether before or after the commencement of
a Proceeding and without regard to whether or not an allowed claim, and all
obligations and liabilities incurred with respect to Permitted Refinancings,
together with any amendments, restatements, modifications, renewals or
extensions of any thereof.
Subordinated
Creditor
shall mean the
"Subordinated Creditor" which is signatory to this Agreement and any other
holders of the Subordinated Note or any other Subordinated Indebtedness from
time to time as permitted hereunder.
Subordinated
Default
shall mean a default in
the payment of the Subordinated Indebtedness, or performance of any term,
covenant or condition contained in the Subordinated Indebtedness Documents or
the occurrence of any event or condition, which default, event or condition
permits the Subordinated Creditor to accelerate or demand payment of all or any
portion of the Subordinated Indebtedness.
Subordinated
Default Notice
shall mean a written
notice to the Collateral Agent pursuant to which the Collateral Agent is
notified of the existence of a Subordinated Default, which notice incorporates a
reasonably detailed description of such Subordinated Default.
Subordinated
Indebtedness
shall mean all of the
obligations of Obligors to the Subordinated Creditor evidenced by the
Subordinated Note and all other amounts now or hereafter owed by Obligors to the
Subordinated Creditor pursuant to the Subordinated Indebtedness
Documents.
Subordinated
Indebtedness Documents
shall mean the
Subordinated Note and all other documents and instruments evidencing or
pertaining to any portion of the Subordinated Indebtedness, as amended,
supplemented, restated or otherwise modified from time to time as permitted
hereunder.
2.
Subordination of
Subordinated Indebtedness to Senior Indebtedness
.
2.1
Subordination
.
The payment of any and all
of the Subordinated Indebtedness hereby expressly is subordinated, to the extent
and in the manner set forth herein, to the Payment in Full of the Senior
Indebtedness. Each holder of Senior Indebtedness, whether now outstanding or
hereafter arising, shall be deemed to have acquired Senior Indebtedness in
reliance upon the provisions contained herein.
2.2
Restriction
on Payments
.
Notwithstanding any provision of the Subordinated Indebtedness Documents
to the contrary and in addition to any other limitations set forth herein or
therein, no payment (whether made in cash, securities or other property or by
set-off) of principal, interest or any other amount due with respect to the
Subordinated Indebtedness shall be made or received, and the Subordinated
Creditor shall not exercise any right of set-off or recoupment with respect to
any Subordinated Indebtedness, until all of the Senior Indebtedness is Paid in
Full.
2.3
Proceedings
.
In the event of any
insolvency, bankruptcy, receivership, custodianship, liquidation,
reorganization, assignment for the benefit of creditors or other proceeding for
the liquidation, dissolution or other winding up of any Obligor or any of its
Subsidiaries or any of their respective properties (a
"Proceeding"):
(i) the
Purchaser shall be entitled to receive payment in full in cash of
the
Senior Indebtedness before the Subordinated Creditor is entitled to
receive
any payment upon the Subordinated Indebtedness, and the
Purchaser
shall be entitled to receive for application in payment such
Senior
Indebtedness any payment or distribution of any kind or character,
whether
in cash, property or securities or by set-off or otherwise, which
may be
payable or deliverable in any such Proceedings in respect of the
Subordinated
Indebtedness;
(ii) any
payment or distribution of assets of any Obligor of any kind or
character,
whether in cash, property or securities, by set-off or otherwise,
to which
the Subordinated Creditor would be entitled pursuant to the
Subordinated
Indebtedness but for the provisions hereof shall be paid by
the
liquidating trustee or agent or other Person making such payment or
distribution,
whether a trustee in bankruptcy, a receiver or liquidating
trustee
or otherwise, directly to the Collateral Agent for the benefit of
Purchaser
until the Senior Indebtedness shall have been Paid in Full, and
the
Subordinated Creditor acknowledges and agrees that such payment or
distribution
may, particularly with respect to interest on Senior Indebtedness after the
commencement of a Proceeding, result in the Subordinated Creditor receiving less
than it would otherwise receive;
(iii) the
Subordinated Creditor hereby irrevocably (x) authorizes,
empowers
and directs all receivers, trustees, debtors in possession,
liquidators,
custodians, conservators and others having authority in the
premises
to effect all such payments and deliveries, and the Subordinated
Creditor
also irrevocably authorizes, empowers and directs, the Collateral
Agent
until the Senior Indebtedness shall have been Paid in Full, to
demand,
sue for, collect and receive every such payment or distribution,
and (y)
agrees to execute and deliver to the Collateral Agent and the
Purchaser
all such further instruments confirming the authorization
referred
to in the foregoing clause (x); and
(iv) the
Subordinated Creditor hereby irrevocably authorizes,
empowers
and appoints the Collateral Agent (until the Senior
Indebtedness
shall have been Paid in Full) as its agent and attorney in fact
to (x)
execute, verify, deliver and file such proofs of claim upon the failure
of the
Subordinated Creditor promptly to do so (and in any event prior to
thirty
(30) days before the expiration of the time to file any proof) and (y)
vote such
claims in any such Proceeding; provided that no holder of
Senior
Indebtedness shall have any obligation to execute, verify, deliver
and/or
file any such proof of claim or vote such claim. In the event the
Collateral
Agent or the Purchaser (or any agent, designee or nominee
thereof)
votes any claim in accordance with the authority granted hereby,
the
Subordinated Creditor shall not be entitled to change or withdraw such
vote.
The
Senior Indebtedness shall continue to be treated as Senior Indebtedness and the
provisions hereof shall continue to govern the relative rights and priorities of
the Purchaser and the Subordinated Creditor even if all or part of the Senior
Indebtedness or the security interests securing the Senior Indebtedness are
subordinated, set aside, avoided or disallowed in connection with any such
Proceeding and the provisions hereof shall be reinstated if at any time any
payment of any of the Senior Indebtedness is rescinded or must otherwise be
returned by the Collateral Agent, the Purchaser or any agent, designee or
nominee of such holder.
2.4
Incorrect
Payments
.
If any
payment (whether made in cash, securities or other property) not permitted under
this Agreement is received by the Subordinated Creditor on account of the
Subordinated Indebtedness before all Senior Indebtedness is Paid in Full, such
payment shall not be commingled with any asset of the Subordinated Creditor,
shall be held in trust by the Subordinated Creditor for the benefit of the
Purchaser and shall promptly be paid over to the Collateral Agent or its
designated representative, for application (in accordance with the Purchase
Agreement, the Note or the Permitted Refinancing Loan Documents) to the payment
of the Senior Indebtedness then remaining unpaid, until all of the Senior
Indebtedness is Paid in Full.
2.5
Sale,
Transfer
.
The
Subordinated Creditor shall not sell, assign, dispose of or otherwise transfer
all or any portion of the Subordinated Indebtedness (a) without giving prior
written notice of such action to the Collateral Agent, (b) unless prior to the
consummation of any such action, the transferee thereof shall execute and
deliver to the Collateral Agent a joinder to this Agreement, or an agreement
substantially identical to this Agreement and acceptable to the Collateral
Agent, in either case providing for the continued subordination and forbearance
of the Subordinated Indebtedness to the Senior Indebtedness as provided herein
and for the continued effectiveness of all of the rights of the Collateral Agent
and the Purchaser arising under this Agreement and (c) unless following such
sale, assignment, pledge, disposition or other transfer, there shall either be
(i) no more than two holders of Subordinated Indebtedness or (ii) one Person
acting as agent for all holders of the Subordinated Indebtedness pursuant to
documentation reasonably satisfactory to the Collateral Agent such that any
notices and communications to be delivered to the Subordinated Creditor
hereunder and any consents required by the Subordinated Creditor shall be made
to or obtained from such agent and shall be binding on the Subordinated Creditor
as if directly obtained from the Subordinated Creditor. In the event of a
permitted sale, assignment, disposition or other transfer, the Subordinated
Creditor engaging in such sale, assignment, disposition or other transfer, prior
to the consummation of any such action, shall cause the transferee thereof to
execute and deliver to the Collateral Agent a joinder to this Agreement, or an
agreement substantially identical to this Agreement and acceptable to the
Collateral Agent, in either case providing for the continued subordination and
forbearance of the Subordinated Indebtedness to the Senior Indebtedness as
provided herein and for the continued effectiveness of all of the rights of the
Purchaser and the Collateral Agent arising under this Agreement. Notwithstanding
the failure to execute or deliver any such agreement, the subordination effected
hereby shall survive any sale, assignment, disposition or other transfer of all
or any portion of the Subordinated Indebtedness, and the terms of this Agreement
shall be binding upon the successors and assigns of the Subordinated Creditor,
as provided in Section 10 below.
2.6
Legends
.
Until the Senior
Indebtedness is Paid in Full, each of the Subordinated Indebtedness Documents at
all times shall contain in a conspicuous manner the following
legend:
"This
Note and the indebtedness evidenced hereby are subordinate in the manner and to
the extent set forth in that certain Subordination Agreement (the "Subordination
Agreement") dated
as
of____________, 2009 among Envision Solar International, Inc., a
California
corporation, Envision Solar Construction, Inc., a California corporation,
Envision Solar Residential, Inc., a California corporation, Envison Africa, LLC,
a Delaware limited
liability
company,
[_____________
],
a
[_______________
]
, and Gemini Strategies,
LLC, to
the Senior Indebtedness (as defined in the Subordination
Agreement);
and each holder of this Note, by its acceptance hereof, shall be bound by the
provisions of the Subordination Agreement."
2.7
Restriction
on Action by the Subordinated Creditor
.
(a)
Until the
Senior Indebtedness is Paid in Full and notwithstanding anything contained in
the Subordinated Indebtedness Documents, the Purchase Agreement, the other Loan
Documents or the Permitted Refinancing Loan Documents to the contrary, the
Subordinated Creditor shall not, without the prior written consent of the
Collateral Agent, agree to any amendment, modification or supplement to the
Subordinated Indebtedness Documents, the effect of which is to (i) increase the
maximum principal amount of the Subordinated Indebtedness or rate of interest
(or cash pay rate of interest) on any of the Subordinated Indebtedness, (ii)
shorten the dates upon which payments of principal or interest on the
Subordinated Indebtedness are due, (iii) change in a manner adverse to any
Obligor or add any event of default or add or make more restrictive any covenant
with respect to the Subordinated Indebtedness, (iv) change the redemption,
prepayment or put provisions of the Subordinated Indebtedness, (v) alter the
subordination provisions with respect to the Subordinated Indebtedness,
including, without limitation, subordinating the Subordinated Indebtedness to
any other debt, (vi) shorten the maturity date of any of the Subordinated
Indebtedness or otherwise alter the repayment terms of the Subordinated
Indebtedness in a manner adverse to any Obligor, (vii) take any liens in any
assets of any Obligor or any of its Subsidiaries or any other assets securing
the Senior Indebtedness or (viii) obtain any guaranties or credit support from
any Person or (ix) change or amend any other term of the Subordinated
Indebtedness Documents if such change or amendment would increase the
obligations of any Obligor or confer additional material rights on the
Subordinated Creditor or any other holder of the Subordinated Indebtedness in a
manner adverse to any Obligor, the Collateral Agent or the
Purchaser.
(b)
Until the
Senior Indebtedness is Paid in Full, the Subordinated Creditor shall not,
without the prior written consent of the Collateral Agent, take or continue any
action, or exercise any rights, remedies or powers in respect of any of the
Subordinated Note or any other Subordinated Indebtedness Documents, or exercise
or continue to exercise any other right or remedy at law or in equity that the
Subordinated Creditor might otherwise possess, to collect any amount due and
payable in respect of any Subordinated Note or any of the other Subordinated
Indebtedness, including, without limitation, the acceleration of the
Subordinated Indebtedness, the commencement of any action to enforce payment or
foreclosure on any lien or security interest, the filing of any petition in
bankruptcy or the taking advantage of any other insolvency law of any
jurisdiction (any of the foregoing, an
"Enforcement Action").
If the
Subordinated Creditor shall attempt to take any Enforcement Action or otherwise
seek to collect or realize upon any of the Subordinated Indebtedness in
violation of the terms hereof, the holders of the Senior Indebtedness may, by
virtue of the terms hereof, restrain any such Enforcement Action or other
action, either in its own name or in the name of the applicable
Obligor.
(c) Until
the Senior Indebtedness is Paid in Full, any Liens of the Subordinated Creditor
in the Collateral which may exist in breach of the Subordinated Creditor's
agreement pursuant to subsection 2.7(a)(vii) or Section 18 of this Agreement
shall be and hereby are subordinated for all purposes and in all respects to the
Liens of the Collateral Agent and the Purchaser in the Collateral, regardless of
the time, manner or order of perfection of any such Liens. In the event that the
Subordinated Creditor obtains any Liens in the Collateral in violation of
subsection 2.7(a)(vii) or Section 18 of this Agreement, the Subordinated
Creditor (i) shall (or shall cause their agent) to promptly execute and deliver
to the Collateral Agent such termination statements and releases as the
Collateral Agent shall request to effect the release of the Liens of the
Subordinated Creditor in such Collateral and (ii) shall be deemed to have
authorized the Collateral Agent to file any and all termination statements
required by the Collateral Agent in respect of such Liens. In furtherance of the
foregoing, the Subordinated Creditor hereby irrevocably appoints the Collateral
Agent its attorney-in-fact, with full authority in the place and stead of the
Subordinated Creditor and in the name of the Subordinated Creditor or otherwise,
to execute and deliver any document or instrument which the Subordinated
Creditor may be required to deliver pursuant to this subsection
2.7(c).
3.
Continued Effectiveness of
this Agreement; Modifications to Senior
Indebtedness
.
(a)
The terms
of this Agreement, the subordination effected hereby, and the rights and the
obligations of the Subordinated Creditor, the Collateral Agent and the Purchaser
arising hereunder, shall not be affected, modified or impaired in any manner or
to any extent by: (i) any amendment or modification of or supplement to the
Purchase Agreement, any other Loan Document or any Permitted Refinancing Loan
Document or any Subordinated Indebtedness Document; (ii) the validity or
enforceability of any of such documents; or (iii) any exercise or non-exercise
of any right, power or remedy under or in respect of the Senior Indebtedness or
the Subordinated Indebtedness or any of the instruments or documents referred to
in clause (i) above.
(b)
The
Collateral Agent and the Purchaser may at any time and from time to time in
their sole discretion, renew, amend, refinance, extend or otherwise modify the
terms and provisions of Senior Indebtedness (including, without limitation, the
terms and provisions relating to the principal amount outstanding thereunder,
the rate of interest thereof, the payment terms thereof and the provisions
thereof regarding default or any other matter) or exercise (or refrain from
exercising) any of their rights under the Loan Documents, all without notice to
or consent from the Subordinated Creditor and without incurring liability to the
Subordinated Creditor and without impairing or releasing the obligations of the
Subordinated Creditor under this Agreement. No compromise, alteration,
amendment, renewal, restatement, refinancing or other change of, or waiver,
consent or other action in respect of any liability or obligation under or in
respect of, any terms, covenants or conditions of Senior Indebtedness or the
Loan Documents, whether or not in accordance with the provisions of the Senior
Indebtedness, shall in any way alter or affect any of the subordination
provisions hereof.
4.
Representations and
Warranties
.
(a)
The
Subordinated Creditor hereby represents and warrants to the
Collateral
Agent and the Purchaser as follows:
4.1
Existence
and Power
.
The
Subordinated Creditor is duly organized, validly existing and in good standing
under the laws of the state of its organization.
4.2
Authority
.
The Subordinated Creditor
has full power and authority to enter into, execute, deliver and carry out the
terms of this Agreement and to incur the obligations provided for herein, all of
which have been duly authorized by all proper and necessary action and are not
prohibited by the organizational documents of the Subordinated
Creditor.
4.3
Binding
Agreements
.
This
Agreement, when executed and delivered, will constitute the valid and legally
binding obligation of the Subordinated Creditor enforceable in accordance with
its terms.
4.4
Conflicting
Agreements; Litigation
.
No provisions of any mortgage, indenture, contract, agreement, statute,
rule, regulation, judgment, decree or order binding on the Subordinated Creditor
or affecting the property of the Subordinated Creditor conflicts with, or
requires any consent which has not already been obtained under, or would in any
way prevent the execution, delivery or performance of the terms of this
Agreement. The execution, delivery and carrying out of the terms of this
Agreement will not constitute a default under, or result in the creation or
imposition of, or obligation to create, any Lien upon the property of the
Subordinated Creditor pursuant to the terms of any such mortgage, indenture,
contract or agreement. No pending or, to the best of the Subordinated Creditor's
knowledge, threatened, litigation, arbitration or other proceedings if adversely
determined would in any way prevent the performance of the terms of this
Agreement.
4.5
No
Divestiture
.
On
the date hereof, the Subordinated Creditor is the current owner and holder of
its Subordinated Note and all other Subordinated Indebtedness
Documents.
4.6
Default
under Subordinated Indebtedness Documents
. (a)
On the date hereof, no
default exists under or with respect to the Subordinated Note or any of the
other Subordinated Indebtedness Documents.
(b)
Each
Obligor hereby represents and warrants to the Collateral Agent and
the
Purchaser that the signatories to this Agreement under the heading "Subordinated
Creditor"
constitute
all of the holders of the Subordinated Note and the other Subordinated
Indebtedness.
5.
Cumulative
Rights, No Waivers
.
Each and every right, remedy and power granted to the Collateral Agent or
the Purchaser hereunder shall be cumulative and in addition to any other right,
remedy or power specifically granted herein, in the Purchase Agreement, the
other Loan Documents or Permitted Refinancing Loan Documents or now or hereafter
existing in equity, at law, by virtue of statute or otherwise, and may be
exercised by the Collateral Agent or the Purchaser, from time to time,
concurrently or independently and as often and in such order as the Collateral
Agent or the Purchaser may deem expedient. Any failure or delay on the part of
the Collateral Agent or the Purchaser in exercising any such right, remedy or
power, or abandonment or discontinuance of steps to enforce the same, shall not
operate as a waiver thereof or affect the Collateral Agent's or the Purchaser's
right thereafter to exercise the same, and any single or partial exercise of any
such right, remedy or power shall not preclude any other or further exercise
thereof or the exercise of any other right, remedy or power, and no such
failure, delay, abandonment or single or partial exercise of the Collateral
Agent's or the Purchaser's rights hereunder shall be deemed to establish a
custom or course of dealing or performance among the parties
hereto.
6.
Modification
.
Any modification or waiver
of any provision of this Agreement, or any consent to any departure by the
Collateral Agent or the Subordinated Creditor therefrom, shall not be effective
in any event unless the same is in writing and signed by the Collateral Agent
and the holders of at least 51% of the then outstanding principal balance of the
Subordinated Note, and then such modification, waiver or consent shall be
effective only in the specific instance and for the specific instance and for
the specific purpose given. Any notice to or demand on the Subordinated Creditor
in any event not specifically required of the Collateral Agent hereunder shall
not entitle the Subordinated Creditor to any other or further notice or demand
in the same, similar or other circumstances unless specifically required
hereunder.
7.
Additional
Documents and Actions
.
The Subordinated Creditor at any time, and from time to time, after the
execution and delivery of this Agreement, upon the request of the Collateral
Agent and at the expense of the Company, promptly will execute and deliver such
further documents and do such further acts and things as the Collateral Agent
may request in order to effect fully the purposes of this
Agreement.
8.
Notices
.
Any notices, consents,
waivers or other communications required or permitted to be given under the
terms of this Agreement must be in writing and will be deemed to have been
delivered: (i) upon receipt, when delivered personally; (ii) upon receipt, when
sent by facsimile (provided confirmation of transmission is mechanically or
electronically generated and kept on file by the sending party); or (iii) one
(1) Business Day after deposit with a nationally recognized overnight delivery
service, in each case properly addressed to the party to receive the same. The
addresses and facsimile numbers for such communications shall be:
|
|
If to a
Subordinated
Creditor:
|
[___________________________]
|
|
|
|
|
|
|
with a copy
to:
|
[____________________________]
|
|
|
|
|
|
|
If to any
Obligor:
|
Envision
Solar International, Inc.
4225
Executive Square Suite
1000
La Jolla, CA 92037
Attention:
Chief Executive Officer
Telecopy:
(858) 799-4592
|
|
|
|
|
|
|
with a copy
to:
|
Haynes
and Boone, LLP
1221
Avenue of the Americas
26
th
Floor
New
York, NY 10020
Attention:
Rick A. Werner, Esq.
Telecopy:
(212) 844-8234
|
|
|
|
|
|
|
|
|
|
|
If to the
Collateral Agent:
|
Gemini
Strategies, LLC
135
Liverpool Drive, Suite C
Cardiff,
CA 92007
Attention:
Steven Winters
Telecopy:
(858) 509-8808
|
|
|
|
|
|
|
with a copy
to:
|
Peter J.
Weisman, P.C.
767
Third Avenue, 6th Floor
New
York, N.Y.
10017
Telecopy: (212) 676-5665
|
|
|
|
|
or, in
the case of party named above, at such other address and/or facsimile number
and/or to the attention of such other person as the recipient party has
specified by written notice given to each other party five (5) days prior to the
effectiveness of such change. Written confirmation of receipt (A) given by the
recipient of such notice, consent, waiver or other communication, (B)
mechanically or electronically generated by the sender's facsimile machine
containing the time, date, recipient facsimile number and an image of the first
page of such transmission or (C) provided by a nationally recognized overnight
delivery service shall be rebuttable evidence of personal service, receipt by
facsimile or deposit with a nationally recognized overnight delivery service in
accordance with clause (i), (ii) or (iii) above, respectively.
9.
Severability
.
In the event that any
provision of this Agreement is deemed to be invalid by reason of the operation
of any law or by reason of the interpretation placed thereon by any court or
governmental authority, this Agreement shall be construed as not containing such
provision and the invalidity of such provision shall not affect the validity of
any other provisions hereof, and any and all other provisions hereof which
otherwise are lawful and valid shall remain in full force and
effect.
10.
Successors
and Assigns
.
This
Agreement shall inure to the benefit of the successors and assigns of the
Collateral Agent and the Purchaser and shall be binding upon the successors and
assigns of the Subordinated Creditor and Obligors.
11.
Counterparts
.
This Agreement may be
executed in two or more identical counterparts, all of which shall be considered
one and the same agreement and shall become effective when counterparts have
been signed by each party and delivered to each other party; provided that a
facsimile signature shall be considered due execution and shall be binding upon
the signatory thereto with the same force and effect as if the signature were an
original, not a facsimile signature.
12.
Defines Rights of Creditors;
Subrogation
.
(a)
The
provisions of this Agreement are solely for the purpose of defining the relative
rights of the Subordinated Creditor, the Collateral Agent and the Purchaser and
shall not be deemed to (i) create any rights or priorities in favor of any other
Person, including, without limitation, any Obligor, or (ii) amend any of the
Loan Documents or in any way waive any of the rights that the Collateral Agent
and the Purchaser have against any Obligor under the Loan
Documents.
(b)
Subject
to the Payment in Full of the Senior Indebtedness, in the event and to the
extent cash, property or securities otherwise payable or deliverable to the
holders of the Subordinated Indebtedness shall have been applied pursuant to
this Agreement to the payment of Senior Indebtedness, then and in each such
event, the holders of the Subordinated Indebtedness shall be subrogated to the
rights of each holder of Senior Indebtedness to receive any further payment or
distribution in respect of or applicable to the Senior Indebtedness; and, for
the purposes of such subrogation, no payment or distribution to the holders of
Senior Indebtedness of any cash, property or securities to which any holder of
Subordinated Indebtedness would be entitled except for the provisions of this
Agreement shall, and no payment over pursuant to the provisions of this
Agreement to the holders of Senior Indebtedness by the holders of the
Subordinated Indebtedness shall, as between any Obligor, its creditors other
than the holders of Senior Indebtedness and the holders of Subordinated
Indebtedness, be deemed to be a payment by such Obligor to or on account of
Senior Indebtedness.
13.
Conflict
.
In the event of any conflict
between any term, covenant or condition of this Agreement and any term, covenant
or condition of any of the Subordinated Indebtedness Documents, the provisions
of this Agreement shall control and govern. For purposes of this Section 13, to
the extent that any provisions of any of the Subordinated Indebtedness Documents
provide rights, remedies and benefits to the Collateral Agent or the Purchaser
that exceed the rights, remedies and benefits provided to the Collateral Agent
or the Purchaser under this Agreement, such provisions of the applicable
Subordinated Indebtedness Documents shall be deemed to supplement (and not to
conflict with) the provisions hereof.
14.
Statement
of Indebtedness to Subordinated Creditor
.
The Company will furnish to
the Collateral Agent upon demand, a statement of the indebtedness owing from
Obligors to the Subordinated Creditor, and will give the Collateral Agent access
to the books of Obligors in accordance with the Purchase Agreement so that the
Collateral Agent can make a full examination of the status of such
indebtedness.
15.
Headings
.
The paragraph headings used
in this Agreement are for convenience only and shall not affect the
interpretation of any of the provisions hereof.
16.
Termination
.
This Agreement shall
terminate upon the Payment in Full of the Senior Indebtedness.
17.
Subordinated
Default Notice
.
The Subordinated Creditor and the Company each shall provide the
Collateral Agent with a Subordinated Default Notice upon the occurrence of each
Subordinated Default, and the Subordinated Creditor shall notify the Collateral
Agent in the event such Subordinated Default is cured or waived.
18.
No
Contest of Senior Indebtedness or Liens; No Security for Subordinated
Indebtedness
.
The
Subordinated Creditor agrees that it will not, and will not encourage any other
Person to, at any time, contest the validity, perfection, priority or
enforceability of the Senior Indebtedness or Liens in the Collateral granted to
the Collateral Agent pursuant to the Purchase Agreement, the other Loan
Documents or the Permitted Refinancing Loan Documents or accept or take any
collateral security for the Subordinated Indebtedness. In furtherance of the
foregoing, on the date hereof, the Subordinated Creditor hereby represents and
warrants that it has not taken or received a security interest in, or lien upon,
any asset of any Obligor, whether in respect of the Subordinated Indebtedness or
otherwise.
19.
Governing
Law, Jurisdiction Waiver of Jury Trial
.
All questions concerning the
construction, validity, enforcement and interpretation of this Agreement shall
be governed by the internal laws of the State of New York, without giving effect
to any choice of law or conflict of law provision or rule (whether of the State
of New York or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of New York. Each party hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in the City of New York, borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address for such notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY
WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH
OR
ARISING
OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
20.
Waiver of
Consolidation
.
The Subordinated Creditor acknowledges and agrees
that (i)
Obligors are each separate and distinct entities; and (ii) it will not at any
time insist upon,
plead or
seek advantage of any substantive consolidation, piercing the corporate veil or
any other
order or
judgment that causes an effective combination of the assets and liabilities of
Obligors in
any case
or proceeding under Title 11 of the United States Code or other similar
proceeding.
[remainder
of page intentionally left blank]
IN
WITNESS WHEREOF, each Subordinated Creditor, each Obligor, the Collateral Agent
and the Purchaser have caused this Agreement to be executed as of the date first
above written.
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SUBORDINATED
CREDITOR:
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/s/ John Evey
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John
Evey
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COLLATERAL
AGENT:
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Gemini Strategies, LLC
in its capacity as collateral agent for the Purchaser
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By:
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Name:
Steven Winters
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Title:
President
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THE PURCHASER:
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Gemini Master Fund, Ltd.,
a Cayman Islands corporation
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By:
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Gemini
Strategies, LLC Its: Investment Adviser
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By:
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Name:
Steven Winters
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Title:
President
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Exhibit 10.16
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Chevron
Energy Solutions Company.
a division of Chevron U.S.A.
Inc.
Chevron ES Project # DWCES-31912-320
Chevron ES Contract #:4012
Chevron ES Service Order #
:
|
WORK
ORDER #03
FOR
ENGINEERING SERVICES
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Consultant: Envision
Solar International, Inc.
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Consultant
Address:
4225 Executive
Square,
Suite
1000, La Jolla, CA 92037
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Consultant
Phone:858-768-5153
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Work
Order Amount:
Not-to-Exceed
$211,350
(which
shall include all applicable taxes pursuant to Section 5 of the
Contract)
Bond
Required:
No
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Retention
:
0%
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The
Consulting Services Agreement ("Contract") entered into on October 23, 2008 by
and between
Chevron Energy
Solutions Company, a division of Chevron U.S.A. Inc.
("Company") and
Consultant is hereby amended on this date, December 16, 2008 by this Work Order
which is fully incorporated into the Contract as follows:
A.
SCOPE OF
WORK:
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I.
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Services
to be Provided.
Consultant and the Company agree that the work to
be done
hereunder
(hereinafter referred to as the "Work") by Consultant is as
follows:
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Provide
all labor, materials, and services necessary to provide professional engineering
design and specification services for the required scope of work as described in
Exhibit
A at
Los
Angeles CCD Southwest College ("Customer") site.
Deliverables.
Deliver complete design, specification (based on CSI2004) and DSA
submittal package for Photovoltiac parking structure canopy, roof mounted,
building elevation façade, side walks, amphitheatre and green zone area based on
solar world PV model 230 panel at Los Angeles Southwest College. Assist with the
DSA approval process. Lead the coordination for RFI, submittals, specifications,
DSA forms and DSA approval.
B.
SCHEDULE:
Consultant
shall commence Work upon receipt of executed Work Order and Company's receipt of
a current Certificate of Insurance as required pursuant to
EXHIBIT B. In addition, the Work
shall not commence until Subcontractors' receipt of a Notice to Proceed from
Company for each step of the work (i.e., 10%, 50% and 100% of work),
and
shall complete performance of its Work no later than December 30, 2009 and
according to the schedule milestones as described in Exhibit A unless otherwise
directed by the Company in writing. Consultant will meet with the Company
regularly to keep the Company informed of the progress of his
activities.
C.
COMPENSATION:
In total
consideration of the services described herein to be furnished and provided by
Consultant:
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I.
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The
Work Order Amount to be paid by the Company to Consultant is listed above.
The Work Order Amount is a fixed not-to-exceed price, and includes all
Reimbursable Expenses. Prior to its first monthly requisition, Consultant
shall submit a detailed cost breakdown showing the subdivision of the Work
Order Amount into its various
parts.
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II.
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Reimbursable
expenses mean the actual, direct, out-of-pocket costs incurred for coach
air travel (when such travel is requested by the Company), car rental,
lodging, meals, mileage, tolls, parking, phone calls, copying, etc.
Company shall reimburse consultant in the full amount to the extent that
said expenses appear to be reasonable and have been approved in advance by
the Company. Any expenses or costs incurred shall be charged at actual
cost without markup. Original receipts must be provided to obtain
reimbursement.
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III.
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Consultant
shall prepare and present to the Company, monthly, an
original
invoice on the
attached form for services rendered and approved costs incurred as
provided herein. Within forty-five (45) days of Company's receipt and
approval of Consultant's invoice, the Company shall pay Consultant the
amount, minus retention, therefore in U.S.
dollars.
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Send all
invoices to:
Chevron
Energy Solutions Company
2929
E. Imperial Highway,
Suite
200 Brea, CA 92821
Attn:
Steve Pelaseyed
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IV.
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Since
Consultant is not an employee of the Company, Consultant is not entitled
to participate in any benefit programs provided by the Company. The
Company will not provide consultant with office space, telephone, or
secretarial services, except on a temporary basis, as related to a
specific project assignment and for the Company's own convenience. Work
hours and work location shall be separately determined for each individual
assignment.
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V.
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No
overtime shall be performed on the services hereunder nor shall any claim
therefore be valid, unless the same shall have been authorized in writing
by the Company prior to the performance thereof. Overtime which does not
result in any extra charge to the Company may be authorized orally. As
used in this section, overtime is all time in excess of eight hours per
person per day or in excess of forty hours per person per week and any
other time for which a rate higher than a straight time rate will be
charged to the Company pursuant to this Work
Order.
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VI.
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No
payment to Consultant will be authorized until Company receives a Payment
and Performance Bond (if required) and a current Certificate of Insurance
and any required lien releases
(Exhibit
C).
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After a
one-week review period by the Company and the Owner, Consultant shall complete
final documents within one week of receipt of the Company's and Owner's
comments. Consultant shall provide all printing/copying/binding
services.
If
additional services are required beyond the scope of this document, Consultant
shall provide such additional services on a time and materials basis at the pre
approved hourly rate.
NOTE:
Hourly fee shall include overhead, profit, administration costs, etc. This
breakdown shall be used for checking Consultant's monthly requisition for
payment and for potential work scope reduction or addition (via a Change Order
to this Work Order) if needed. This estimate breakdown shall be subject to the
Company's approval and shall be used as a guide only and shall not be binding on
the Company. The balance of the Work Order Amount shall be paid to Consultant
upon:
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·
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Satisfactory completion of all Consultant's Work including record drawings
and O&M data;
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·
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Acceptance thereof by the Company and the Owner, in
writing;
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No
payment to Consultant shall operate as an approval of Consultant's
Work.
D.
CONSULTANT
INFORMATION:
Key
Contact
Mariana Moncada
AIA
Phone:
858-768-5153
E.
CONSULTANT
OBLIGATIONS:
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I.
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Responsibilities.
Consultant agrees to furnish and pay for all materials, labor,
services,
equipment,
tools, appliances, licenses, taxes, permits, and everything necessary for
the
proper
completion of the Work described in Section A hereof. Consultant agrees to
be bound to the Company by all of the terms of the agreement between the
Company and the Owner as it relates to the Work set out in Section A
hereof.
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II.
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Site Visitation and
Layout Responsibility.
The Consultant represents and
warrants that it has thoroughly familiarized itself with the complete
scope of work and construction schedule for this project and has
completely investigated all aspects of the Work and the work of other
trades. The Consultant acknowledges that it has visited the Project site
and visually inspected the general and local conditions which could affect
the Work. Any failure of the Consultant to reasonably ascertain from a
visual inspection of the site, the general and local conditions which
could affect the Work, will not relieve the Consultant from its
responsibility to properly complete the Work without additional expense to
the Company. The Consultant shall lay out and be strictly responsible for
the accuracy of the Work and for any loss or damage to the Company or
others by reason of the Consultant's failure to set out or perform its
Work correctly. The Consultant shall exercise prudence so that the actual
and final conditions and details of its Work shall result in alignment of
finish surfaces.
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III.
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Safety.
Consultant and its subcontractors, if any, shall work safely
at all times while at Customer's facilities. Consultant shall provide
adequate training and supervision to ensure that its employees and
subcontractors work safely. If the job cannot be done safely, Consultant
shall stop work immediately and notify Company. Also, Company may stop
work if it deems that Consultant is doing the work in an unsafe manner.
Consultant shall not restart work until the work can be done safely.
Consultant shall not be entitled to additional compensation or an
extension of time if work is stopped due to unsafe conditions. Consultant
and its subcontractors, if any, will comply with all of Customer's safety
procedures and protocols, as well as local, state, and federal safety
codes and requirements, including OSHA. Prior to starting construction,
Consultant will provide Company with a written copy of its Injury and
Illness Prevention Plan for review. Any lost time accident sustained by
any of Consultant's employees, or Consultant's subcontractors' employees,
shall be reported to the Chevron ES Safety Manager within 24 hours (Gary
Nelson, Phone Number 651-905-5740, Fax Number
651-905-5701).
|
F.
OTHER:
Consultant
shall adhere to the insurance and any other applicable requirements as set forth
in the Design Build Finance Agreement between Los Angeles Community College
District Southwest College and Company and attached as
Exhibit B.
Upon
execution of this Work Order, it shall become part of and subject to all the
terms and conditions of the Contract, to which this Work Order shall be
attached. All other terms and conditions provided in the Contract remain
unchanged.
IN
WITNESS WHEREOF, the duly authorized representative of each of the parties
hereto has executed this Work Order in duplicate originals to be effective as of
December 16, 2008.
|
Envision
Solar International, Inc.
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CHEVRON
ENERGY SOLUTIONS COMPANY,
a
division of Chevron U.S.A. Inc.
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By:
|
/s/ Mariana
Mencada
|
By:
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(Signature)
|
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(Signature)
|
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Print
Name:
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Mariana
Mencada
|
Print
Name:
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Title:
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Senior
Architect
|
Title:
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William Brockenborough
General Manager - Operations
EXHIBIT
A
1.
Ownership
of Documents
All
documents provided by the Company, at any time, will remain the property of the
Company and are to be returned to the Company upon request. All documents
prepared by Consultant under this Work Order shall be the property of the
Company. The Company agrees to indemnify, defend, and hold the Consultant
harmless and releases the Consultant from any liability or claims arising out of
the use of the documents for any project other than the project contemplated in
this Work Order.
2.
Required
Services
Develop
design package based on solar world model 230 carport structures, roof mounted,
building elevation façade, side walks, amphitheatre and green area for complete
DSA approval as outlined in scope of work below.
Other
Requirements:
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A.
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A
primary consideration for the Consultant throughout this project shall be
minimizing construction costs. Consultant shall, if consistent with sound
professional practices, reuse existing equipment and materials wherever
practical and in good condition. Arbitrary replacement of existing
equipment or materials without due diligence in investigating viability of
reusing existing equipment or materials is unacceptable. Consultant shall
carefully consider placement of equipment to minimize conduit and piping
lengths.
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B.
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Consultant
shall accurately identify all obstacles to moving large equipment into
place and shall identify temporary or permanent relocation of such
obstacles on the drawings.
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C.
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Consultant
shall clearly mark with spray paint during a site visit all asbestos and
other hazardous materials to be removed as a result of his
work.
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D.
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Consultant's
specifications shall be up-to-date. Utilization of outdated standards or
specifications, or specification of discontinued equipment, is
unacceptable.
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E.
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All
assumptions made by Consultant which can materially affect installation
costs shall be
clearly
stated in writing prior to completing plans and
specifications.
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F.
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If
Consultant determines that a substantial deviation is required or
recommended from the indicated scope of work, Consultant shall notify the
Company in writing as soon as possible upon this
determination.
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G.
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The
Consultant will perform his or her services with due and reasonable
diligence consistent with sound professional practices, providing adequate
staff and experience to complete the project to meet the intent of the
Company's scope of work. Should the consultant discern that the schedule
will not be met for any reason, he or she shall so notify the Company as
soon as practically possible.
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H.
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If
additional construction costs are incurred due to omissions or negligence
by Consultant, the Consultant shall provide the additional services
necessary to design the necessary changes for no additional fee. Hidden
conditions are not considered omissions or negligent acts. If additional
construction costs are incurred due to an error, omissions, or a negligent
act by Consultant, the additional cost shall be born by the Consultant or
their insurance carrier.
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I.
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Consultant
shall design the modifications to the existing systems and the
installation of new equipment and systems utilizing new equipment and
materials equivalent to Owner's existing
standards.
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J.
|
All
critical dimensions shall be verified by the Consultant. Drawings provided
by Company or Owner shall not be assumed to be correct for critical
dimensions. Notes requiring Subcontractor to verify critical dimensions
shall be unacceptable.
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K.
|
Control
valves shall be included in the Consultant's designs and
specifications.
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L.
|
The
Work Order Amount for Consultant's Work shall include costs for any
required structural engineering
work.
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M.
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Consultant's
drawings shall clearly indicate any existing obstacles requiring a less
than optimal pipe or duct routing, equipment location, etc. to the extent
possible by review of the drawings and performing a field survey of the
existing conditions. Conditions that exist and are not obvious without
demolition of existing structure or wall shall be considered hidden
conditions.
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N.
|
Validity
of reusing versus replacing existing air handlers, pumps, etc. shall be
based on field measurements. Measurements shall be performed by the
Consultant. Assuming original design conditions are still valid shall be
unacceptable.
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O.
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Any
additional work beyond the scope of this document which results in
increased compensation to the Consultant must be authorized in writing,
prior to performing the work.
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P.
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Consultant's
professional services shall be performed with the degree of skill and care
as is consistent with the degree of reasonable and ordinary skill and care
currently and commonly exercised by a reputable member of the design
profession in the state in which the project is located under the same or
similar circumstances.
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Q.
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Work
will be invoiced on a monthly basis using the actual time and expenses
spent on the project to date. All expense charges must be substantiated
with receipts. All invoices must be substantiated, if required, with time
sheets for all personnel assigned to the
project.
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R.
|
All
Work must be prepared or supervised by a licensed Professional Engineer
that is registered in the State where the installation is to occur. Design
drawings and specifications shall be stamped and signed by the registered
Professional Engineer.
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3.
Communication
Unless
specifically otherwise authorized, all communication from the Consultant on this
project shall be through the Company. There shall be no communication directly
between the Consultant and the Owner or Subcontractors unless specifically
authorized in writing by the Company.
4.
Confidentiality
Consultant
agrees that any data obtained as the result of this Work Order is confidential
and remains the property of the Company. Consultant also agrees that it will
not, during the term of this Work Order or subsequent to the expiration or
termination thereof, disclose to any third party any information which
Consultant acquired from or about the Company (or any of its affiliates) or its
plans or operations, as a result of the confidential relationship created
herein, and Consultant shall not use for its own benefit any of such
information.
SCOPE
OF WORK
The basic
intent of this Work Order is to retain a design consultant as a single source to
perform all or specified design services and to manage the design development
phase of the outlined scope of work with minimum input, other than review and
approval, from the Company's staff. The following items are to be included in
the scope of work
Consultant
shall work with Company, to provide the required system ADA, Architectural
design, leading coordination effort among all other consultants related to this
specific scope of work and survey as well as project management assistance.
Consultant will prepare construction documents in accordance with DSA, Customer
and Company's design requirement.
The
project scope is as follows:
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1)
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Visit
site to analyze project
constraints.
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2)
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Interdisciplinary coordination with Company nd its
consultants.
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3)
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Organization of project plans and
specifications.
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4)
|
Architectural
design, specifications (based on CSI 2004(, and PV module layouts based on
Solar World 230 and/or what Company provides as module specification to
Consultant.
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5)
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Structural
engineering design.
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6)
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Obtain
DSA, local fire department, and any other required government
approval.
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7)
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Lead
overall team effort in order to achieve DSA
approval.
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8)
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Coordinate
technical requirement.
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9)
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Compliance
with ADA access requirements where applicable. Submit hard copies aand
electronic copies on CD of all drawings (Autocad 2007 and PDF files
formats) to Company. Drawings will be prepared utilizing backgrounds
provided by Company. If backgrounds are not available, Consultant will
create them.
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10)
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Prepare
documents for DSA review.
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11)
|
Coordinate
with Magdelan and others to expedite DSA review / back check/ and final
approval
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12)
|
Assist
all consultants with CSI2004
specifications
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13)
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Construction
Administration Support i.e. relevant submittal review, RFIs, construction
questions, forms, etc. throughout the construction
period.
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Attractive
and innovative PV systems designs for the areas toured during the November 3,
2008 site visit and area laid out on the PV-01 sheet for Southwest College,
including:
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a)
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Roof
top solar design.
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b)
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Amphitheatre
solar trees. Three rows of tree;like structures surrounding the
amphitheatre.
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c)
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Two
walkway areas running east west; one on the west side of the campus near
the student services activities center and one on the east side of the
campus near the Northeast quadrant
parking.
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d)
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A
cluster of solar trees in the common area near the Cox
building.
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e)
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Solar
rows along the top of the existing parking garage near the track and
field.
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f)
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BIPV
(Building Integrated Photovoltaic) at four locations on
campus:
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·
Perimeter
of mechanical area screen on the lecture lab building
·
South
façade of the gymnasium
·
South
façade of the lectures lab building, applied to existing steel
structure
·
South
façade of technical education
Schedule of Work
Milestone
Project
documentation/DSA submittal by March 9, 2009
DSA
review and approval estimated for eight weeks (i.e., May 9, 2009)
Support
construction project through final completion of Parking Lot 3 and
1,
which is
estimated at December 30, 2009.
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Fee
Breakdown
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10%
concept design submittal
|
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$
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21,135
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50%
design submittal
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$
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84,540
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100%
design submittal
|
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$
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42,270
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DSA
and Public Agency Sign-Off
|
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$
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10,567.50
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Project
Construction Support
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$
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10,567.50
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Total
project fee is
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$
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211,350
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The
consultant shall work based on the 10%, 50% and 90% design process. Each step of
the process requires a written "Notice to Proceed" from the Company's Project
Manager Steve Pelaseyed prior to proceeding to the next level. The intention is
to use the 10% conceptual design for customer approval and create a balance
between production and approval process.
EXHIBIT
B
DESIGN-BUILD-FINANCE
AGREEMENT
FOR
THE
LOS ANGELES SOUTHWEST COLLEGE
Between
LOS
ANGELES COMMUNITY COLLEGE DISTRICT
and
CHEVRON
ENERGY SOLUTIONS COMPANY, A DIVISION OF CHEVRON U.S.A., INC.
SECTION 6
SUBCONTRACTORS AND SUBCONSULTANTS
A.
Licenses
.
Each Subcontractor and
Subconsultant shall be properly licensed as required by Applicable Laws to
perform the portion of the Work assigned to it to perform.
B.
Competitive
Bidding.
To the
extent required by Applicable Laws. all Subcontractors and Subconsultants shall
be selected by means of a competitive selection or bidding process that complies
with all Applicable Laws (including, without limitation, the provisions of the
California Public Contract Code applicable to California Community College
Districts) the District's Community Economic Development Program and the
District's Policy on Local, Small and Emerging Businesses. Contractor will
thoroughly investigate the qualifications and experience of all proposed
first-Tier specialty trade subcontractors
and
subconsultants, including, without limitation, any factors relevant to
bidder experience, skill, safety record, past history of defaults and financial
responsibility. Contractor shall not subcontract. and shall disqualify from
working on the Project, any individual or firm: (1) that
is
debarred from contracting with the District, any local agency
in the
State of California, any agency or department of the State of California or the
federal government; or (2) that is not properly licensed or has an existing
unsatisfied judgment entered against it arising from a violation of the
Applicable Laws pertaining
to
licensing of
contractors; or (3) as to which there exists reasonable evidence that the
individual or firm is not qualified or Is unfit to perform, or (4) that has an
average experience modifier over the prior five (5) years of greater than 1.24.
All information obtained by Contractor in the course of its performance of its
obligations under this Part B shall be provided to District upon
request.
C.
Third-Party
Rights.
There is no intent on the part of District or Contractor to
create any rights (including, without limitation, third-party beneficiary
rights) in favor of any Subcontractor and against District and nothing contained
in the Contract Documents and no course of conduct, act or omission on the part
of District shall be construed as creating a direct or indirect contractual
obligation on the part of District to any Subcontractor, Subconsultant or other
third party.
D.
Substitutions.
Contractor
shall
comply with
all Applicable Laws in respect to substitution
of any Subcontractor with
another Subcontractor. All substitute Subcontractors shall be selected through a
competitive bidding process that complies with the requirements of this
Contract. Any request by Contractor to substitute a Subcontractor will be
considered only if such request is in strict conformity with California Public
Contract Code Sections 4100
et seq. commonly known as
the Subcontracting and Subletting Fair Practices Act,
which Sections are
incorporated herein
by reference. Neither approval nor disapproval of a
request for substitution shall give rise to any right on the part of Contractor
to
an
adjustment of the Contract Sum or Contract Time.
E.
Communications.
Upon
written request to Contractor, District shall have the right, without
interfering with nor directing their performance, to communicate with the
Subcontractors and Subconsultants with respect to matters that are related to
Contractor's pen
fth mance of its
obligations under the Contract Documents. Contractor
shall be
provided with a copy of all such written communications.
F.
Written
Agreements.
By written agreement
Contractor shall require each Subcontractor
and Subconsultant, to The
extent of the Work to be performed by the Subcontractor or
Subconsuttant, to
be
bound to
Contractor by terms of the
Contract Documents and to
assume toward Contractor
all the obligations and
responsibilities which Contractor, by the
Contract Documents, assumes toward the District. Each such agreement shall
preserve
and protect
the rights of District under the Contract Documents with respect to the Work
to be
performed by the
Subcontractor or Subconsultant
so
that subcontracting
thereof will
not prejudice such rights. Without limitation to the
foregoing, such
agreements
shall
require the Subcontractor or Subconsultant to consent to the contingent
assignment of the subcontract agreement to District as provided hereinbelow, and
to
participate in and be bound to the same extent as Contractor by the
dispute resolution processes applicable to resolution and determination of
Claims under this Contract. Contractor shall, promptly after their execution,
furnish to District for its information a copy of the standard form of agreement
that it proposes to use with its Subcontractors and Subconsultants. Contractor
shall provide and promptly update as and when new information Is available a
complete list of the names and addresses of all Subcontractors and
Subconsultants. All written agreements with Subcontractors and Subconsultants
shall contain provisions specifying that the Contractor shall have the right to
terminate such
agreements upon notice of
termination
of this Agreement by the District, without further obligation
by District or Contractor (other than for paying for services and materials
incorporated into the Project prior to District's notice of
termination).
G.
Contingent
Assignment.
Contractor
hereby
assigns to District, or to such person or
entity as
District, In its discretion, designates, all its interest in both (1) its
contracts with
first-Tier
Subcontractors and Subconsultants now or hereafter entered into by Contractor
for performance of any part of the Work; and (2) it's rights as principal under
each performance bond furnished by each first-Tier Subcontractor. Such
assignment will be effective only as to those contracts which District or its
designee accepts in writing. District's and its designee's sole payment
obligation in the event it accepts such assignment shall be to pay in accordance
with the terms of such contract for the Work performed after District's or its
designee's acceptance of such assignment.
H.
Prompt
Payment
.
Contractor shall promptly pay all amounts payable
to the Subcontractors and Subconsultants. Contractor shall remain responsible,
notwithstanding the exercise by District of any right in accordance with the
terms of the Contract Documents, to promptly satisfy from its own funds
undisputed amounts that are due to all the Subcontractors and Subconsultants who
have performed Work.
I.
Responsibility.
Contractor
shall, at all times, be fully responsible for the acts and/or omissions of its
Subcontractors and. Subconsultants and their employees and agents.
Notwithstanding the foregoing, District shall have the right, without thereby
assuming any responsibility or obligation, to monitor the employment and other
activities of Contractor and the Subcontractors or Subconsultants for compliance
with the terms of the Contract Documents; provided, however, that in doing so
District shall not interfere with or direct the performance of Work by any
Subcontractor or Subconsultant. Nothing in the Contract Documents and no course
of conduct by District shall be interpreted as creating or implying any
contractual relationship between District and any Subcontractor, Subconsultant
or other person or entity other than Contractor nor as creating or implying the
existence of any obligation on the part of the District to pay, or to be
responsible for the payment of, any sums to any Subcontractor, Subconsultant or
person or entity.
J.
Permits.
At Contractors own
expense, Contractor will obtain or renew and deliver to District all permits,
license, inspections and approvals of Governmental Authorities relating to
design, construction or occupancy of the Project (including, without limitation,
DSA permits and plan
check fees) and shall
obtain
and pay for any annual operating permits that may be required
following Final Completion of the entire Project.
SECTION 14 CEQA
COMPLIANCE
In
accordance with Government Code Section 5956.6(b)(1), prior to any project
development, the Parties shall take all actions necessary to comply with the
California Environmental Quality Act, Division 13 (commencing with Section
21000) of the Public Resources Code.
SECTION
15 TERMINATION OF CONTRACT
A. TERMINATION
FOR CONTRACTOR BREACH.
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(1)
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If
the Contractor refuses or fails to prosecute the construction of the
Project, Work, or any part of either, with such diligence as will ensure
its completion within the Contract Time as adjusted pursuant to this
Contract, or fails to complete the Project, Work, or any portion of either
within the Contract Time, or if the Contractor should be adjudged
bankrupt, or if Contractor-should make a general assignment for the
benefit of its creditors, or if a receiver should be appointed on account
of its insolvency, or the Contractor or any of its Subcontractors or
Subconsultants should violate any of the provisions of this Contract, the
District may serve written notice upon the Contractor and its Surety of
the District's intention to take over and/or terminate this Contract, the
Work or any portion of either. This notice of intent to take over and/or
terminate shall contain the reasons for such intention to and a statement
to that effect that the Contractor's right to perform shall cease and
terminate upon the expiration of ten (10) Days unless the circumstances
giving rise to such notice have ceased and/or, been corrected in a manner
satisfactory to the District.
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(2)
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If a
Performance Bond has been issued for the Work then notice of take over
and/or termination shall be also given to the Surety. In order for Surety
to be entitled to take over the Work itself or through its contractor, the
Surety shall: (1) give the District written notice of Surety's intention
to take over and commence performance of this Contract within (15) Days of
the District's service of said notice of intent to terminate upon Surety,
and (2) actually commence performance of this Contract within thirty (30)
Days of the District's service of said notice upon
Surety.
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(3)
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In the event that
the District elects to take over and/or terminate, then, without
limitation to District's other rights under Applicable Laws: (a) the
District may, without liability for so doing, take possession of and
utilize in completion of the Work such materials, appliances, plants and
other property belonging to the Contractor and its Subcontractors that are
on the Site and reasonably necessary for such completion; (b) Surety and
Contractor shall be jointly and severally liable to the District for any
resulting Loss to the District; and (c) District shall have the right,
without duplication and in addition to its other rights and remedies under
this Contract or Applicable Laws, to withhold any payment to Contractor
and/or by Unilateral Change Order to reduce the Contract Sum by the amount
of any Loss resulting from Contractor's breach.
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(4)
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In
the event that District elects to take over or terminate the Work or
Contractor, then Contractor's right to payment
for
the portion of the Work completed in accordance with the terms of
the Contract Documents shall be limited to the amounts set forth in
Section 15, C, (3), below.
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(5)
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In the event that
District elects to take over or terminate in accordance with this Section
15, A, then Contractor shall, without limitation to any of its other
obligations under the Contract Document, comply with the requirements of
Section 15, C, (1), below.
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B. Termination
by District for Convenience.
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(1)
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The
District may terminate the Project, Work or this Contract, in whole or,
from time to time, in part, if the District determines that a termination
is in the District's interest.
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(2)
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Such
termination for convenience shall be effective upon delivery to the
Contractor of written notice specifying that the termination is for the
convenience of the District, the extent of termination, and the effective
date of such termination.
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C.
Obligations
of Contractor Upon Termination (for Cause or Convenience) by
District.
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(1)
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After receipt of
notice of termination by District, and except as otherwise directed by the
District's representative, the Contractor shall, regardless of any delay
in determining or adjusting amounts due, if any, to Contractor,
immediately proceed with the following
obligations:
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(a)
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Stop
Work as specified in the District's
notice.
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(b)
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Complete
any Work specified in the notice to be continued by Contractor
in
accordance with the Contract
Documents.
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(c)
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Leave
the Site and in a safe and sanitary manner such that it does not
pose
any threat to the public health or
safety.
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(d)
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Provide
to District, in writing, no later than two (2) Days after request by
District, a statement: (1) listing all subcontracts, purchase orders and
contracts between Contractor and each Subcontractor and Subconsultant that
are outstanding, as well as any change orders, amendments and
modifications thereto; (2) of the status of invoicing, payments and
balance owing under each such subcontract, purchase order and contract;
(3) of the status of performance and any claims asserted under each such
subcontract, purchase order and contract; and (4) such other information
as District may determine necessary in order to decide whether to accept
assignment of any such subcontract, purchase order or
contract;
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(e)
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promptly
following and in accordance with District's written direction: (1)
.-asOr
t
'
I
to
District or its designee those subcontracts, purchase orders or
contracts,
or
portions thereof, between Contractor and a Subcontractor or
Subconsultant that District elects to accept by assignment; (2) cancel, on
the most favorable terms reasonably possible, any subcontract, purchase
order or contract, or portion thereof, that District does not elect to
accept by assignment; and (3) if requested by District, settle, with the
prior written approval of District of the terms of settlement, all
outstanding liabilities to Subcontractors with respect to the Work
terminated or discontinued.
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(f)
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Place
no further subcontracts or orders, except as necessary to
complete
the continued portion of the Contract, Project or
Work.
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(2)
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Termination
or take over of the Contract or Work by District for cause shall not
relieve the Surety of its obligations under the Performance Bond and
Payment Bond.
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SECTION
16 MAINTENANCE OF RECORDS; AUDIT
A.
The Contractor, and
any Subcontractors and Subconsultants, shalt keep or cause to be kept true and
complete books, records, and accounts of alt financial transactions In the
course of its activities and operations related to the Project. These documents
may Include sales slips, invoices, payrolls, personnel records, requests for
payment, and other data relating to all matters covered by the Contract
Documents. At all times during and for four (4) years following the expiration
of the Term of this
Contract
the
Contractor, and any Subcontractors and Subconsultants, shall retain such data
and records. Contractor shall make available for inspection and/or copying by
District (at District's expense) at its principal place of business all
requested data and records at any time during normal business hours, and as
often as the District deems necessary. Upon explratkm of the Term of this
Contract, if requested by District and upon receipt of payment for the same.
Contractor shall provide District with one (1) complete copy of all books,
records and accounts of all financial transactions in the course of its
activities and operations related to the Project. Without limitation to
District's other rights or remedies under Applicable Laws, failure to make
requested records available for audit by the date requete.d
witi
constitute
grounds for termination by District of this Contract for cause
SECTION
17 LABOR COMPLIANCE PROGRAM AND PROJECT LABOR
AGREEMENT
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A.
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Contractor
and all the Subcontractors and Subconsultants shall at all times comply
with the requirements of the Project Labor Agreement. Contractor shall
include, and shall require the Subcontractors to include, contractual
provisions in all contracts they enter into for the performance of the
Work, requiring each Subcontractor, of every Tier, who furnishes any labor
for the performance of Work, to comply with the provisions of the Project
Labor Agreement at no additional cost.
Any
requirement currently set
forth in, or hereafter developed, adopted or implemented pursuant to the
terms of the Project Labor Agreement, that Is applicable to the Project,
that is not set forth herein or that is by mistake incorrectly stated,
shall be deemed to be inserted in the Contract and shall be read and
enforced as though it were included herein; and, if through mistake or
otherwise
any
such requirement is not inserted or if inserted and requires correction,
then upon request of either Party this Contract shall forthwith be amended
by Modification to make such insertion or correction. In the event of a
conflict between the Project Labor
Agreement
and the provisions of the Contract Documents, the Project Labor Agreement
shall control.
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B.
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Pursuant
to California Labor Code Section 1771.7, District has implemented and
shall enforce Labor Compliance Program that has been established for the
Project A pre-construction conference will be held for the benefit
of Contractor
and the SuboOntractors and Subconsultants to discuss labor
requirements of the Labor Compliance Program that apply to the Project at
which attendance by Contractor is mandatory. The Labor Compliance Program
includes, without limitation, provisions requiring Contractor to comply
with the prevailing rates of wages, maintenance and submission of weekly
certified payroll records, employment of apprentices and, compliance with
legal hours of work, and debarment Contractor shall post *Notice of
Initial Approver of the District's Labor Compliance Program at the Site in
accordance with 8 California Code of Regulations 16429. Contractor, and
any Subcontractors and Subconsultants, are required to comply with the
requirements of the Labor Compliance Program, at no additional cost to
District. Payroll records shall be certified and submitted to the labor
compliance office and furthermore shall be available for inspection at all
reasonable hours at the principal office of
Contractor.
Contractor shall include, and shall require the Subcontractors and
Subconsultants to include, contractual provisions In all contracts they
enter into for the performance of the Work, requiring each Subcontractor
and Subconsultant, of
every
Tier, who furnishes any labor for the performance of Work, to
comply with these provisions at no additional cost. Contractor and the
Subcontractors and Subconsultants shall comply with all applicable
provisions of the California Labor Code and the Labor Compliance Program
relating to prevailing wage, hours of work, apprentices, and maintenance
and submission of certified payroll reports, and shall pay
appropriate
penalties as described above, for failure to comply pursuant to the
California Labor Code, including, but not limited to, Sections 1775, 1776,
1777.7 and 1813.
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B.
Hours of
Work.
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(1)
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As
provided in Article 3 (commencing at Section 1810), Chapter 1, Part 7,
Division 2 of the Labor Code, eight (8) hours of labor shall constitute a
legal Day's work. The time of service of any worker employed at any time
by Contractor or by any Subcontractor or Subconsultant on any subcontract
under this Contract upon the Work or upon any part of the Work
contemplated by this Contract shall be limited and restricted by
Contractor to eight (8) hours per
Day,
and
forty (40) hours during any one week, except as hereinafter ,provided.
Notwithstanding the provisions herein above set forth, Work performed by
employees of Contractor in excess of eight (8) hours per Day and forty
(40) hours during any one week, shall be permitted upon the Work upon
compensation for all hours worked in excess of eight (8) hours per Day at
not less than one and one-half times the basic rate of
pay.
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(2)
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Contractor
shall keep and shall cause each Subcontractor and Subcontractor to keep an
accurate record showing the name of and actual hours worked each calendar
day and each calendar week by each worker employed In connection with the
Work or any part of the Work contemplated by this Contract. The record
shall be kept open at all reasonable hours to the inspection of District
and to the Division of Labor Law Enforcement, Department of Industrial
Relations of the State of
California.
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(3)
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Pursuant
to Labor Code Section 1813, Contractor shall pay to District (or District
may reduce the Contract Sum by the amount of) a penalty of twenty-five
dollars ($25) for each worker employed in the execution of this Contract
by Contractor or by any Subcontractor or Subconsultant for each Day during
which such workman is required or permitted to work more than eight (8)
hours in any Day and forty (40) hours in any one calendar week In
violation of the provisions of Article 3 (commencing at Section 1810),
Chapter 1, Part 7, Division 2 of the Labor Code. Unless compensation to
the worker so employed by Contractor is not less than
one
and one half (1
1
/2)
times the basic rate of pay for all hours worked in excess of eight (8)
hours per Day.
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(4)
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Any
Work necessary to be performed after regular working hours, or on Sundays
or
other holidays shall be performed at Contractor's own expense. Contractor
will
also pay at its own expense for overtime inspection costs which are not
authorized
by District and are over and above the normal
rate.
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C.
Apprentices.
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(1)
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Contractor acknowledges and
agrees that this Contract Is governed by the provisions of Labor Code
Section 1777.5. it shall be the responsibility of Contractor to ensure
compliance with this Paragraph and with Labor Code Section 1777.5 for all
apprenticeable occupations.
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(2)
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Apprentices
of any crafts or trades may be employed and, when required by Labor Code
Section 1777.5, shall be employed provided they are properly registered in
full compliance with the provisions of the Labor
Code.
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(3)
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Every
such apprentice shalt be paid the standard wage paid to apprentices under
the regulations of the craft or trade at which he is employed and shall be
employed only at the
Work of the craft or
trade to which he is
registered.
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(4)
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Only apprentices, as
defined In Section 3077,
who are in training under apprenticeship
standards and written apprentice agreements under Chapter 4 (commencing at
Section 3070), Division 3 of the Labor Code, are eligible to be employed.
The employment and training of each apprentice shall be in accordance with
the provisions of the apprenticeship standards and apprentice agreements
under which he is
training.
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(5)
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Pursuant
to Labor
Code Section 1777.5, if
that Section applies to this Contract as indicated above, Contractor and
any Subcontractor and Subconsultant employing workers in any
apprenticeable craft or trade in performing any Work under this Contract
shall apply to the applicable joint apprenticeship committee for a
certificate approving Contractor or Subcontractor under the applicable
apprenticeship standards for the employment and training of apprentices in
the area or industry affected and fixing the ratio of apprentices to
journeymen employed in performing the Work. However, approval as
established by the joint apprenticeship committee or committees shall be
subject to the approval of the Administrator
of Apprenticeship.
The joint apprenticeship committee or committees, subsequent to approving
Contractor or the subject Subcontractor or
Subconsultant, shall
arrange for the dispatch of apprentices to Contractor or the
Subcontractor in
order to comply with this section. Contractor and each
Subcontractor and
Subconsultant shall submit Contract award information to the
applicable joint
apprenticeship committee which shall include an estimate
of
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journeyman
hours to be performed under the Contract, the number of apprentices to be
employed, and the approximate dates the apprentices will be employed.
Contractor or Subcontractors shall not be required to submit individual
applications for approval to local joint apprenticeship committees
provided they are already covered by the local apprenticeship standards.
The ratio of Work performed by apprentices to journeyman, who shall be
employed in the craft or trade on the Project, may be the ratio stipulated
in the apprenticeship standards under which the joint apprenticeship
committee operates, but, except as otherwise provided in this Section 17,
in no case shall the ratio be less than one hour of apprentices work for
every five hours of labor performed by a
journeyman.However,
the minimum ratio for
the
land surveyor classification
shall
be less than one apprentice for each five
journeyman.
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(6)
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Any
ratio shall apply during any
day or portion of a day when any journeyman, or the higher standard
stipulated
by
the joint apprenticeship committee, is employed at the Site and
shall be computed on the basis of the hours worked during the day by
journeymen so employed, except for the land surveyor classification.
Contractor shall employ apprentices for the number of hours computed as
above before the end of the Contract. However, Contractor shall endeavor,
to the greatest extent possible, to employ apprentices during the same
time period that the journeymen in the same craft or trade are employed at
the Site. Where an hourly apprenticeship ratio is not feasible for a
particular craft or trade, the Division of Apprenticeship Standards, upon
application of a joint apprenticeship committee, may order a minimum ratio
of not less than one apprentice for each five journeymen in a craft or
trade classification.
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(7)
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Contractor
and each Subcontractor and Subconsultant, if covered by this Section 18,
upon the Issuance of the approval certificate, or if previously approved
in the craft or trade, shall employ the number of apprentices or the ratio
of apprentices to journeymen stipulated in the apprenticeship standards.
Upon proper showing by Contractor or Subcontractor or Subconsuitant that
it employs apprentices in the craft or trade in the state on all of its
contracts on an annual average of not less than one hour of apprentice
work for every five hours of labor performed by a journeyman, or in the
land surveyor classification, one apprentice for each five journeymen, the
Division of Apprenticeship Standards may grant a certificate exempting
Contractor from the 1-to-5 hourly ratio
as set
forth in this Section 18.
This Paragraph 7 hall not apply to contracts of general contractors or to
contracts of specialty contractors not bidding for work through a general
or prime contractor, when the contracts of general contractors or those
specialty contractors involve less than thirty thousand dollars ($30,000).
Any Work performed by a journeyman in excess of eight hours per Day or 40
hours per week, shall not be used to calculate the hourly ratio required
by this Section 18. "Apprenticeable craft or trade," as used in this
Section 18 means a craft or trade determined as an apprenticeable
occupation in accordance with rules and regulations prescribed by the
Apprenticeship Council. The joint apprenticeship committee shall have the
discretion to grant a certificate, which shall be subject to the approval
of the Administrator of Apprenticeship, exempting a contractor from the
1-to-5 ratio set forth in this Section 18 when it finds that any one of
the following conditions is met:
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(a)
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Unemployment
for the previous three-month period in the area
exceeds an average of 15
percent
(15%),
or
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(b)
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The
number of apprenttma in training in such area exceeds a
ratio
of 1-to-5.
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(c)
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There
is a showing that the apprenticeable craft or trade is replacing at least
one-thirtieth (1/30) of its journeymen annually through apprenticeship
training, either on a statewide basis or on a local
basis.
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(d)
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Assignment of an apprentice to any work performed under a
public works contract would create a condition which would jeopardize his
or her life or the life, safety, or property of fellow employees or the
public at large, or If the specific task to which the apprentice is to be
assigned is of such a nature that training cannot be provided by a
journeyman.
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(8)
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When
exemptions are granted to an organization which represents contractors in
a specific trade from the 1 -to-5 ratio on a local or statewide basis, the
member contractors will not be required to submit individual applications
for approval to local joint apprenticeship committees. if they are already
covered by the local apprenticeship
standards.
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(9)
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Pursuant
to Labor Code Section 1777.5, Contractor and any Subcontractor and
Subconsultant under Contractor, who, in performing any of the Work under
the Contract, employs journeymen or apprentices in any apprenticeable
craft or trade
and
who is not contributing to a fund or funds to administer and conduct the
apprenticeship program in any such craft or trade in the area of the Site,
to which fund or funds other contractors In the area of the Site are
contributing, shall contribute to the fund or funds In each craft or trade
in which he or she employs journeymen or apprentices on the Project in the
same amount or upon the same basis and in the same manner as the other
contractors do, but where the trust fund administrators are unable to
accept the funds, contractors not signatory to the trust agreement shall
pay a like amount to the California Apprenticeship Council. The Division
of Labor Standards Enforcement is authorized to enforce the payment of the
contributions to the fund or funds as set forth in Labor Code Section
227.
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(10)
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The responsibility of compliance with this Section 18 and
Section 1777.5 for all apprenticeable occupations is with
Contractor.
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(11)
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All decisions of the joint apprenticeship committee under
this Section 18 and Section 1777.5 are subject to Section
3081.
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(12)
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It
shall be unlawful for an employer or a labor union to refuse to accept
otherwise qualified employees as registered apprentices
on
the grounds of race, religious
creed, color, national origin, ancestry, sex, or age, except as provided
in Section 3077.
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(13)
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Pursuant
to Section 1777.7, in the event Contractor or a Subcontractor willfully
fails to comply with the provisions of this Section 18 and Section 1777.5
of the Labor Code:
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(a)
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The
Director of Industrial Relations shall deny Contractor or a
Subcontractor,
both individually and in the name of the business
entity
under which Contractor or the Subcontractor Is doing business, the right
to bid on or to receive, any public works contract for a period of up to
one year for the first violation and for a period of up to three (3) years
for
the
second and subsequent
violations. Each period of debarment shall run from the date the
determination of noncompliance by the Administrator of Apprenticeship
becomes an order of the California Apprenticeship
Council.
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(b)
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Contractor or a Subcontractor or
Subconsultant who violates Section 1777.5 shall forfeit as a civil penalty
an amount not exceeding one hundred dollars ($100) for each calendar day
of noncompliance. Pursuant to Section 1727, upon receipt of a
determination that a civ
g
penalty has been imposed, District may reduce the Contract Sum by the
amount of the civil penalty .
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(14)
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In
lieu of the penalty provided for above, the Director of Industrial
Relations may for a first time violation and with the concurrence of the
joint apprenticeship committee, order Contractor or Subcontractor or
Subconsultant to provide apprentice employment equivalent to the work
hours that would have been provided for apprentices during the period of
noncompliance.
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(15)
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Any
penalties assessed by the awarding body pursuant to this Section 18 shall
be deposited in the general fund of
District
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(16)
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The
interpretation and enforcement of Labor Code Section 1777.5 shall be in
accordance with the rules and procedures of the California Apprenticeship
Council.
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(17)
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Contractor shall become fully
acquainted with the Applicable Laws regarding apprentices prior to
commencement of the Work. Special attention is directed to Sections
1777.5, 1777.6, and 1777.7 of the Labor Code. and Title 8, California Code
of Regulations, Section 200 et seq. Questions may be directed to the State
Division of Apprenticeship Standards, 455 Golden Gate Avenue, San
Francisco, California.
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SECTION
19 BONDING REQUIREMENTS
Prior to
commencing Work, Contractor shall furnish, without adjustment to the Contract
Sum, a Performance Bond in an amount equal to one hundred percent (100%) of the
Contract Sum and a Payment Bond to guarantee payment of all claims for labor and
materials furnished, in an amount equal to one hundred percent (100%) of said
Contract Sum (collectively 'Bonds"). The Bonds shall be issued using the forms
in Attachment
"M" -
"Performance and Payment Bond Forms". The Surety(ies) supplying the
Payment Bond and Performance Bond shall be an 'admitted surety insurer," as
defined by Section 995120 of the Code of Civil Procedure authorized to do
business In the State of California, and reasonably satisfactory to District.
The Surety supplying the Performance Bond shall have an A.M. Best's Insurance
Rating of not less than The Payment and Performance Bonds shall remain in effect
until Final Completion of the entirety of the Work and payment of all stop
notices and Claims by Contractor or the Subcontractors, of any Tier, have been
satisfied. The filing of Performance and Payment Bonds shall provide security to
the District to ensure the proper completion of the construction under this
Contract, including the initial warranty period, and are not being furnished to
cover the performance of any energy guaranty or guaranteed savings under this
Contract. The Payment Bond and Performance Bond shall each name the District as
obligee. Neither Changes nor adjustments to the Contract Sum or Contract Time
shall in any way release or exonerate Contractor or its Surety(ies) from their
obligations, and notice thereof shall be waived by the Surety(ies).
SECTION 20
BONDING REQUIREMENTS
[intentionally
omitted]
SECTION
21 CONTRACTOR WARRANTY, CONTRACTOR PERFORMANCE GUARANTEE AND SUBCONTRACTOR
WARRANTIES
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A.
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Contractor
Warranty.
Contractor guarantees
that all materials, equipment,
workmanship related
to the Project Facility shall be free of defects for a period of twelve
(12) months from
Substantial Completion of the Project Facility. The Contractor Warranty
shall be renewed for any portion of the labor, equipment appears within
twelve (12) months after Substantial Completion and shall be thereafter
extended for an additional period of twelve (12) months. All services
provided under the Contractor Warranty shall be performed in a timely
manner and at the reasonable convenience of the District.
The
Contractor Warranty expressly excludes any remedy for damage caused by
improper use by District, improper or inadequate maintenance by District,
corrosion, erosion or deterioration (other than corrosion, erosion or
deterioration caused by a defect in the Work), abuse by District,
modifications or repairs not performed by an authorized Subcontractor
(unless Contractor has failed, after request by District, to provide for
repair by an authorized Subcontractor), improper operation by District, or
normal wear and tear under normal usage. The Contractor Warranty is not
intended and shall not be interpreted as a limit upon the District's
rights under any Subcontractor warranties that are required by the Project
Criteria or that are otherwise provided in connection with the Work.
Contractor's liability under the Contractor Warranty shall be limited to
repairing or replacing (if repair is not sufficient fully cure the breach
of the Contractor Warranty) the labor, equipment or materials that are the
basis for the breach of the Contractor Warranty (including the repair or
replacement of any other property or work damaged in the course of such
replacement or repair). If the Contractor is unable, after receipt of two
(2) written notices given to
Contractor
by District, to successfully repair or replace the labor, equipment or
materials within six (6) months of the second notice, then the District's
repair and replace warranty shall be deemed to have failed and the
District's rights and remedies shall not be limited by the provisions of
this Section 21.
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B.
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Subcontractor Warranties
.
The Subcontractor warranties for equipment and materials shall
comply with the requirements of the Project Criteria. Each shall commence
no earlier than the date of issuance of the Certificate of Substantial
Completion for the Project Facility in which such warranted portion of the
Work is contained. Contractor shall provide that each Subcontractor will
provide such warranty or guarantee In writing directly to District.
Warranties by Subcontractors shall be provided directly by the entity
providing such extended warranty and shall run directly to the District If
they do not run directly to the District, then any rights that Contractor
may have under such warranty shall be deemed assigned to District.
Contractor shall (as a separate service to District and not as part of its
Contractor Warranty or Contractor Performance Guarantee) and at
Contractors own expense, assist, facilitate and cooperate with District in
exercising District's rights under the Subcontractor warranties,
including, without limitation, making at District's request appropriate
demands and assisting District is
securing performance
under
any Subcontractor warranty.
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SECTION
23 ASSIGNMENT OF ANTI TRUST CLAIMS
California
Public Contract Code Section 7103.5(b), which is hereby incorporated by this
reference, provides:
"In
entering into a public works contract or a subcontract to supply goods,
services, or materials pursuant to a public works contract, the contractor or
the subcontractor offers and agrees to assign to the awarding body [the
District] all rights, title, and interest in and to all causes of action it may
have under Section 4 of the Clayton Act, (15 U.S.C. Sec. 15) or under the
Cartwright Act (Chapter 2 (commencing with Section 16700) of Part 2 of Division
7 of the Business and Professions Code), arising from purchases of goods,
services, or materials pursuant to the public works contract or the subcontract.
This assignment shall be made and become effective at the time the awarding body
tenders final payment to Contractor or contractor, without further
acknowledgement by the parties."
Contractor
for itself and all the Subcontractors and Subconsultants agree to assign to
District all rights, title and interest in and to all such causes of action
Contractor and all the Subcontractors and Subconsultants may have under Section
4 of the Clayton Act, (15 U.S.C. Sect. 15) or under the Cartwright Act (Chapter
2 (commencing with Section 16700) of Part 2 of division 7 of the Business and
Professions Code), arising from purchase of goods, services, or materials
pursuant to the public works contract or the subcontract. Contractor shall
require assignments from all the Subcontractors and Subconsultants to comply
herewith.
SECTION
24 SEPARATE CONTRACTORS
District
reserves the right to perform construction or operations on the Site though Its
Separate Contractors or District's own forces. District and Contractor shall
cooperate to coordinate the activities of Contractor and its Subcontractors with
the District's Separate Contractors, employees and agents so as avoid and
minimize Delay affecting either the Work or such other construction or
operations. If part of Contractor's Work depends for proper execution on the
construdiun by the Separate Contractors or District's own forces, Contractor
shall, prior to proceeding with that portion of the Work, promptly report to the
District apparent discrepancies or defects in such construction or operations
that would render the Work unsuitable. deficient or not in compliance with the
Contract Documents. if a dispute arises between Contractor and a Separate
Contractor as to the responsibility for maintaining the Site and surrounding
area free from waste materials and rubbish, the District may dean up and
allocate the cost thereof among those responsible as the District determines to
be just.
SECTION
25 USE OF PREMISES
Contractor
shall confine operations at the Site to areas permitted by Applicable Laws,
Applicable Permits and the Contract Documents and shall not unreasonably
encumber the Site or existing facilities on the Site with any materials or
equipment Contractor shall not load or permit any part of the Work to be loaded
with a weight so as to endanger the safety of persons or property at the
Site.
SECTION
26 CLEANING UP
Contractor
shall at all times keep the Site free from accumulations of waste material or
rubbish caused by the performance of the Work, and at Substantial Completion and
Final Completion of each Project Facility. Contractor shall remove from the all
such waste material and rubbish and all tools, scaffolding and surplus materials
belonging to Contractor and/or is Subcontractors, it being specifically
understood that at prior to turning over any portion of the Work to the District
for beneficial use and occupancy. Contractor shall leave the are to be occupied
or used at the Site "broom clean," or its equivalent, unless more exactly
specified.
District
warrants and represents that District has, and will continue to retain at all
times during the course of constriction, legal title to the Site and that said
land is properly subdivided and zoned so as to permit the construction and use
of said Site. District further warrants and represents that title to said land
is free of any easements, conditions, limitation, special permits, variances,
agreements or restrictions which would prevent, limit, or otherwise restrict the
construction or use of said Site.
SECTION
28 TRENCH SHORING
As
required by California Labor Code Section 6705, if the Contract Sum exceeds
Twenty-Five Thousand Dollars ($25,000) and involves the excavation of any trench
or trenches five (5) feet or more in depth, Contractor shall, in advance of
commencing excavation, submit to District a detailed plan showing the design of
shoring, bracing, sloping or other provisions to be made for worker protection
from the hazard of caving ground duging the excavation of such trench or
trenches. If such plan varies from the Shoring Systems Standards established by
the Construction Safety Orders of the Division of Industrial Safety, the plan
shall be prepared by a registered civil or structural engineer, employed by
Contractor at Contractor's own expense. Nothing in this Section shall be deemed
to allow the use of a system less effective than that required by such
Construction Safety Orders. No excavation of such trench or trenches shall be
commenced until such plan has been reviewed by District or Its Consultant
assigned to conduct such review. Nothing in this Section shall be construed to
impose any liability, including, without limitation, any tort liability, upon
neither District nor any of its officers, agents, representatives or
employees.
SECTION
29 INSURANCE
B.
Coverage; Subcontractor, Subconsultant Insurance.
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(1)
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Contractor
shall maintain and shall require that every Subcontractor and
Suboonsultant, of any Tier, performing or providing any portion of the
Work obtain and maintain, for the duration of its performance of the Work
and for the full duration of all guarantee or warranty periods set forth
in the Contract Documents (and such longer periods as required below for
completed operations coverage), the insurance coverage outlined in (a)
through (d) below, and all such other insurance as required by Applicable
Laws; provided, however, that Subcontractors not providing professional
services shall not be required to provide Professional Liability coverage
and except where District has given its written approval to waive said
limits for a specific
Subcontractor.
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(a)
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Commercial
General Liability and Property Insurance, on an 'occurrences form covering
occurrences (including, but not limited to those listed below) arising out
of or related to
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operations,
whether such operations be by the Contractor, a Subcontractor or
Subconsultant or by anyone directly or indirectly employed by any of them,
or by anyone for whose acts any of them may be liable, involving damage or
loss, of any kind: (1) because or bodily injury, sickness or disease or
death of any person other than the Contractor's, Subcontractors or
Subconsultant's employees; (2) sustained (a) by a person as a result of an
offense directly or indirectly related to employment of such person, or
(b) by another person; (3) other than to the Work itself, because of
injury to or destruction of tangible property including loss of use
resulting therefrom; (4) because of bodily injury, death of a person or
property damages arising out of ownership, maintenance or use of a motor
vehicle; (5) contractual liability insurance; and (6) completed
operations, with limits as follows:
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$2,000,000
per occurrence for Bodily Injury and Property Damage.
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$2,000,000
General Aggregate - other than Products/Completed
Operations.
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$1,000,000
Products/Completed Operations Aggregate for the duration of a period of
not shorter than 1 year after Final Completion and Acceptance of the
Project.
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$1,000,000
Personal & Advertising Injury.
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Full
replacement value for Fire Damage.
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and
including, without limitation, special hazards coverage for: $1,000,000
Material hoists
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$1,000,000
Explosion, collapse & underground
(XCU
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(b)
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Auto
Liability insurance, on an occurrence form, for owned, hired and non-owned
vehicles with limits of $1,000,000 per occurrence
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(c)
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Professional
Liability insurance (only to be provided by Subconsultants or
Subcontractors performing professional services), written on a
"claims-made" form, with limits of:
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$1,000,000
per claim $1,000,000 aggregate
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(d)
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Excess
Liability insurance, on an "occurrence" form, in excess of coverages
provided for Commercial General Liability, Auto Liability, Professional
Liability and Employer's Liability, with limits as
follows:
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$1,000,000
each occurrence (or, In the case of coverage in excess of Professional
Liability, each claim).
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$1,000,000
aggregate
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(2)
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Evidence
of Insurance. Upon request of District, Contractor shall promptly deliver
to District Certificates of Insurance evidencing that the Subcontractors
and Subconsultants have obtained and maintained policies of insurance in
conformity with the requirements of this Section 29. Failure or refusal of
Contractor to do so may be deemed by District to be a material default by
Contractor of the Contract
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(3)
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Builder's
Risk "All-Risk" Insurance. Builder's Risk 'All Risk' Insurance will be
purchased by District, which shall include primary coverage protecting the
insured's interest in materials, supplies, equipment, lectures,
structures, and real property to be incorporated into and forming a part
of the Project and with policy limits protects up to the Estimated Maximum
Value of the Project for any one loss or occurrence and with deductibles
of between $5,000-$25,000 per occurrence. Said Builder's Risk policy shall
be endorsed to add Contractor and its Subcontractors of the first Tier and
Suboonsultants of the first Tier as additional named insureds, as their
interests may appear, and to waive the carrier's right of recovery under
subrogation against Contractor and all Subcontractors and Subconsultants
whose interest are insured under such policy. If a claim results from any
construction activity of Contractor or a Subcontractor of Subconsultant,
then Contractor or the Subcontractor or Subconsultant having care, custody
and control of the damaged property shall pay the deductible amount. Any
loss or damage covered by the Builder's Risk Policy shall be adjusted by
and payable to District, or its designee, for the benefit of all parties
as their interest may appear. District shall not be responsible for loss
or damage to and shall not obtain and/or maintain In force insurance on
temporary structures, construction equipment, tools or personal effects,
owned, rented to, or in the care, custody and control of Contractor or any
Subcontractor or Subconsultant. In the event of loss or damage is caused
by the acts or omissions of Contractor or its Subcontractors or
Subconsultants that is not covered by the Builders Risk policy, the cost
of the repair and/or replacement of such loss or damage shall be at
Contractor's own expense. District, Contractor and all Subcontractors and
Subconsultants each and all waive rights of subrogation against each other
to the extent that said Builder's Risk policy covers property damage
arising out of the perils of fire or other casualty also covered by
Contractor's or a Subcontractor's or Sub consultant's insurance
policy.
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(4)
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Policy
Requirements and Endorsements. Except as otherwise stated in this
Paragraph 4, Contractor's self-Insurance and each policy of insurance
required to be provided by Subcontractors and Subconsultants shalt comply
with the following:
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(a)
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The
Contractor's self-insurance or the insurance policies shall contain
waivers of subrogation rights against District, members of the Board of
Trustees, District's Consultants, and each of their respective agents,
employees and volunteers, and the State Allocation
Board
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(b)
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The
Contractor's self-insurance or the insurance policies provided for
Commercial General Liability, Auto Liability, as well as any Excess
Liability coverage in excess thereof, shall be endorsed to include,
individually and collectively, the District, members of the Board of
Trustees, District's Consultants, and each of their respective agents,
employees and volunteers, and the State Allocation Board, as additional
insureds.
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(c)
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The
Contractor's self-insurance or the insurance polices shall provide that
the insurance is primary coverage with respect to District and all other
additional insureds, shall not be considered contributory insurance with
any Insurance policies of the District or any other additional insureds,
and all insurance coverages provided by District and any other additional
insureds shall be considered excess to the coverages provided by the
Subcontractor or Subconsultant.
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(
5
)
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Deductibles
.
In the event of any
loss or damage covered by a policy of insurance required to be obtained
and maintained a Subcontractor or Subconsultant hereunder, Contractor
shall be solely and exclusively responsible for the payment of the
deductible, if any, under such policy of insurance, without adjustment to
the Contract Sum.
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(
6
)
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Insurer Ratings.
The policies of
Insurance required to be obtained by Subcontractors and Subconsultants
shall be issued by Insurer having: (a) A.M. Best rated A- or better, (b)
A.M. Best Financial Size Category VII or higher. and (c) authorized under
California law to transact business in the State of California and
authorized to issue insurance policies in the State of California.
Contractor shall include in its contracts with its Subcontractors and
Subconsultants provisions stating that If at any time during performance
of the Work, the insurer fails to comply with any of the foregoing
requirements, then within thirty (30) Days of District's or Contractor's
written notice of the Insufficiency of the insurer, such insurer shaft be
replaced with another insurer who does comply with said
requirements.
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(7)
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Cancellation
.
Each of the
foregoing policies of insurance shall require the insurer to provide,
written notice to District and all additional insureds no later than
thirty (30) Days prior to any cancellation, material change in terms or
reduction In the limits of any Insurance required to be maintained by the
Subcontractor or Subconsultant. Should any coverage required to be
provided by a Subcontractor or Subconsultant be cancelled, its terms
materially changed or its limits reduced below the requirements of this
Section 29, then District shall have the right but not the obligation,
after written notice to Contractor, to procure replacement insurance at no
cost
to
District.
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(8)
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No Limitation or Waiver
.
Nothing
contained in this Section 29 is to be construed as limiting the extent of
Contractors responsibility for Losses resulting from its operations or
performance of the Work under the Contract Documents. in no instance will
the District's exercise of its option to occupy and use completed portions
of the Work relieve Contractor of its obligation to maintain
self-insurance or Subcontractor and Subconsultant insurance for the full
duration of time required under this Section
29.
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SECTION
30 INDEMNIFICATION
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A.
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Contractor
Indemnification Obligation
.
Contractor shall indemnify, hold harmless and defend the District,
Board of Trustees, District's Consultants, and each of their members,
officers, employees, agents, insurers and volunteers ("Indemnitee(s)"),
from and against any and all Losses arising out of or relating to any of
the following: (1) any act or omission of Contractor or a Subcontractor or
Subconsultant, of any Tier,
constituting
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negligence,
breach of contract, breath of warranty or willful misconduct; (2) the
nonpayment of any Subcontractor or Subconsultant, of any Tier, for the
Work performed; (3) the violation by Contractor or a Subcontractor, of any
Tier, of any labor agreements; provided, however, that nothing contained
herein shall be construed as obligating Contractor to indemnify an
Indemnitee for Losses resulting from that Indemnitee's sole negligence,
that lndemnitee's active negligence or willful misconduct of such
Indemnitee or its agents, servants or independent contractors who are
directly responsible to such lndemnitee, where such sole negligence,
active negligence or willful misconduct has been determined by agreement
of Contractor and that Indemnitee or has been adjudged by the final and
binding findings of a court or arbitrator of competent jurisdiction. In
instances where the active negligence or willful misconduct of an
Indemnitee or its agents, servants or independent contractors who are
directly responsible to such Indemnitee accounts for only a percentage of
the Loss involved, the obligation of Contractor will be for that portion
of the Loss not due to the active negligence or willful misconduct of such
Indemnitee or its agents, servants or independent contractors who are
directly responsible to such Indemnitee. The waiver of Consequential
Damages provisions of Section 21, above, shall not apply to Contractor's
indemnification obligations for Losses suffered by the District from
claims made by third parties.
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B.
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Not
Limited by Insurance.
The
indemnification, defense and hold harmless obligations of Contractor under
this Section 30, as well as any such obligations stated elsewhere in the
Contract Documents: (1) shall not be limited by the amounts or types of
insurance (or the deductibles or self-insured retention amounts of such
insurance) which Contractor or any Subcontractor of Subconsultant Is
required to carry under the terms of the Contract Documents; (2) are
independent of and in addition to the Indemnitees' rights under the
Insurance to be provided by Contractor or any Subcontractor or
Subconsultant; and (3) shall not be limited, in the event of a claim
against an Indemnitee by an employee of Contractor, a Subcontractor, a
Subconsultant, anyone directly or indirectly employed by them or anyone
for whose acts they may be liable, by a limitation on amount or type of
damages, compensation or benefits payable by or for Contractor or
Subcontractor or Subconsultant under any workers compensation act,
disability benefit act or other employee benefit
program.
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C.
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Subcontractors, Subconsultants.
Contractor agrees to include provisions identical to those set
forth in this Section 30 in the agreements it executes with
each and
every
Subcontractor and Subconsultant, of every Tier. In the event Contractor
fails to do so, Contractor agrees to be fully responsible to provide such
defense and indemnification on the Subcontractor's or Subconsultant's
behalf according to the terms of this Section
30.
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D.
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Other
Rights
.
Notwithstanding
anything stated in this Section 30 or elsewhere in the Contract Docuinents
to
the
contrary. an
Indemnitee's right to seek
equitable indemnity and contribution from Contractor is in no way
diminished or precluded by any agreement by Contractor to provide express
contractual indemnity to such
indemnitee.
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E.
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Defense
Costs
.
The Contractors
obligation to defend under this Section 30 includes, without limitation,
the obligation to immediately reimburse an Indemnitee for any attorney's
fees), court costs (statutory and non-statutory), arbitration and
mediation expenses, professional, expert and consultant fees,
investigative costs, postage costs, document copying costs, telecopy costs
and any and all other costs and expenses associated with defense of such
Indemnitee) as and when Incurred by any Indemnitee in defense of a claim
by any third person or entity as a result of Contractors failure or
refusal to comply with its immediate defense obligation to such
Indemnitee. Nothing stated in this Section 30 or elsewhere in the Contract
Documents shall be interpreted
as
providing or implying that the obligation of Contractor to defend
an Indemnitee against an alleged Loss that is within the scope of the
Contractor's indemnification obligation under this Section
30
or under any other provision of the Contract Documents is to any
extent released, excused, limited or relieved by a finding, determination,
award or judgment by a court or arbitrator that the alleged Loss was due
to circumstances not within the scope of such indemnification obligation,
provided that, in the event that such findings, determination, award or
judgment states that such loss was due to the sole negligence, active
negligence or willful misconduct of the Indemnitee, the Indemnitee shall
reimburse Contractor for all the above-stated reimbursable costs and
expenses paid by Contractor for the defense of the
Indemnitee.
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SECTION
32 SITE USE AND ACCESS
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D.
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Coordination
.
Contractor shall:
(1) coordinate its operations with, and secure the approval of, the
District before using any portion of the Site; (2) leave its Work and
storage areas and surrounding areas at the Site in as good condition as it
found them and restore them to the condition they were in prior to its
commencing the Work; (3) confine its operations, access and parking at the
Site to areas permitted by Applicable Laws, Applicable Permits and the
Contract Documents and not unreasonably encumber the Site with materials
or equipment; and (4) keep mobile equipment and operable machinery locked
or otherwise made inoperable whenever left unattended. Contractor shall
confine apparatus, the storage of materials and the operations of the
workers to the areas designated by District. Without limitation to the
foregoing, Contractor acknowledges that it is experienced in performing
construction within limited and confined areas and spaces such as those
that are anticipated to exist on the Site and agrees to assume
responsibility, without adjustment to the Contract Sum or Contract Time,
to take all responsible measures (including, without limitation, those
related to protection, storage, staging and deliveries) as may be
necessary to adapt its performance to the constraints of the
Site.
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E.
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Restrictions
.
Contractor
shall not allow any person, other than the workers, Su
bcontractors,
Subconsultants, and authorized union representatives, or other individuals
authorized by the District, to come upon any portion of the Site where the
Work is being performed. Contractor shall submit to the District the names
of all personnel either directly employed by Contractor or in the employ
of any of the Subcontractors or Subconsultants who will be present at the
Site. All personnel will be required to register and wear badges furnished
by the District. Personnel not displaying badge identification will be
removed from the Site. All such badges shall all be returned to the
District when no longer needed for performance of the
Work.
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G.
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Prohibited
Substances
. Contractor shall not permit the use of tobacco or the
possession of alcohol or controlled substances on the
Site.
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SECTION
38 NON-DISCRIMINATION
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A.
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Contractor shall not discriminate in the
provision of services hereunder because of race, color, religion, national
origin, ancestry, sex, age, sexual orientation, marital status, AIDS or
disability in accordance with the requirements of Applicable Laws. For the
purpose of this Section, discrimination in the provision of services may
include, but is not limited to the following: (1) denying any person any
service or benefit or the availability of a facility;
(2)
providing any service or
benefit
to
any
person which is not equivalent, or in a nonequivalent manner or at a
non-equivalent time, from that provided to others; (3) subjecting any
person to segregation or separate treatment in any manner related to the
receipt of any service; (4) restricting any person in any way in the
enjoyment of any advantage or privilege enjoyed by others receiving any
service or benefit; (5) treating any person differently from others in
determining admission, enrollment, eligibility, membership, or any other
requirement or condition which persons must meet in order to be provided
any service or benefit. Contractor shall ensure that services are provided
without regard to race, color, religion, national origin, ancestry, sex,
age, sexual orientation, marital status, AIDS or disability. Contractor
shall establish and maintain written procedures under which any person,
applying for, performing or receiving services hereunder, may seek
resolution from Contractor of a complaint with respect to any alleged
discrimination. Such persons shall be advised by Contractor of these
procedures. A copy of such procedures shall be posted by Contractor in a
conspicuous place, available and open to the public, in each
of
Contractor's
facilities where Work is to be prepared or
performed.
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B.
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Contractor
will not discriminate against any employee or applicant for employment
because of race, color, religion, national origin, ancestry,
sex,
age, sexual
orientation, marital status, AIDS or disability in accordance with
requirements of Applicable Laws. Without limitation to any other
provisions of this Section,
in
the performance of the
obligations under the Contract Documents, the Contractor and the
Subcontractors and Subconsultants shall comply with all applicable
provisions
of
the California Fair Employment Practices Act (California Government
Code
Sections 12940-48) and the applicable equal
employment provisions of the Civil Rights Act
of
1964 (42 U.S. C.
200e -
217),
whichever is more restrictive. Contractor and the Subcontractors
and Subconsultants shall ensure that qualified applicants
are
employed and that employees are treated during employment without regard
to race, color, religion, national origin, ancestry, sex, age, sexual
orientation, marital status, AIDS or disability, in accordance with
requirements
of
Applicable Laws. Such shall include, but not be limited to, the
following: (1) employment, promotion, demotion, transfer, recruitment or
recruitment advertising, layoff or termination, rates of pay or other
forms of compensation and (2) selection for training, including
apprenticeship. Contractor agrees to post in conspicuous places in each of
Contractor's facilities preparing or providing the Work hereunder,
available and open to employees and applicants for employment, notices
setting forth the provisions of this Section. Contractor shall, in all
solicitations or advertisements for employees placed by or on behalf of
Contractor, state that all qualified applicants will receive consideration
for employment without regard to race, color, religion, national
origin,
ancestry, sex, age, sexual orientation, marital status, AIDS or
disability, in accordance with requirements of Applicable Laws. Coptractor
shall send to each labor union, or representative co-workers with which it
has a collective bargaining agreement or other contract or understanding a
notice advising the labor union or the workers' representative of
Contractor's commitments under this
Section.
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C.
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In
accordance with Applicable Laws, Contractor shall allow duly authorized
representatives of the County, State, and Federal government access to its
employment records during regular business hours in order to verify
compliance with the provisions of this Section. Contractor shall provide
such other information and records as such representatives may require in
order to verify compliance with the provisions of this Section. If the
District finds that any of the provisions of this Section have been
violated by Contractor or any of the Subcontractors or Subconsultants,
such violation shall, if not cured in the manner required by this
Contract, constitute an Event of Default by Contractor upon which District
may cancel, terminate or suspend this Contract or any portion of the Work
undertaken hereunder. While District reserves the right to determine
independently that the anti-discrimination provisions
of
the Contract have
been violated, in addition, a determination by the California Fair
Employment and Housing Commission or the Federal Equal Employment
Opportunity Commission that Contractor or the Subcontractor or
Subconsultant has violated State or Federal anti-discrimination laws shall
constitute a finding by the District that Contractor
or
the Subcontractor or
Subconsultant has violated the provisions of this
Section.
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D.
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Contractor
hereby agrees that it will comply with Section 504 of the Rehabilitation
Act of 1973, as amended (29 U.S.C. 794) and similar Applicable Laws
relating to employment of or access to persons with disabilities, all
requirements imposed by applicable Federal Regulations, and all guidelines
and interpretations issued pursuant thereto, to the end that no qualified
disabled person shall, on the basis of disability, be excluded from
participation in, be denied the benefits of, or otherwise be subjected to
discrimination under any program or activity of Contractor receiving
Federal Financial Assistance.
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SECTION
39 COMPLIANCE WITH DTSC GUIDELINES/IMPORTED SOILS
If the
Project requires the use of imported soils, the Contractor shall be responsible
to use and shall certify that the imported material it uses is free of any
Hazardous Materials of any nature or type as defined in accordance with
California Law and the California Health and Safety Code. The District reserves
the right to reject any imported material that has come from agricultural or
commercial land uses. Contractor must notify the District of the source of
material and comply with all Environmental Laws, including (but not limited to)
any Los Angeles Regional Water Quality Control Board rules, regulations and
resolutions, and when applicable, with the guidelines of the Department of Toxic
Substances Control (DTSC).
SECTION
60 CONFIDENTIALITY
Contractor
shall treat all information and data furnished to it by District or its
Consultants, or otherwise obtained or prepared by the Contractor concerning the
Project or the Work, as strictly confidential and shall not disclose any of the
same to any other person or entity unless required to do so in connection with
Contractor's performance of the Contract or any filings or applications
submitted to Governmental Authorities. Contractor's obligation of
confidentiality hereunder shall not apply to: (1) information which is in the
public domain through no action or inaction of Contractor; or (2) information
proprietary to the Contractor that was in the possession of Contractor prior to
the Contract Effective Date. Contractor shall instruct all of its employees and
all of its Subcontractors and Subconsultants of this obligation and shall be
responsible for their full compliance herewith.
Attachment
D
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1.7.5
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Allowable Markups
. Except as otherwise
provided in Part .5, below, of this Paragraph 1.7.5 or elsewhere in the
Contract Documents, adjustments to the Contract Sum for Compensable
Changes or Deleted Work shall be calculated based upon the Allowable Costs
added (in the case of Compensable Change) or saved (in the case of Deleted
Work) plus the Allowable Markups set forth below, which markups shall be
deemed full compensation for, without limitation, the following: (1)
direct and indirect overhead, insurance and bond premiums, consumables,
small tools, cleanup and profit of Contractor; (2) direct and indirect
overhead, insurance and bond premiums, consumables, small tools, cleanup
and profit of the Subcontractors, and Subconsultants, of every Tier; and
(3) all other costs set forth in Paragraph 1.7.4, above. The Allowable
Markups, shall be computed as
follows:
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\
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.3
Lower-Tier
Subcontractor or Subconsultant
Work:
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(i)
Compensable Change.
With
respect to a Compensable Change performed by a Subcontractor or
Subconsultant below the first-Tier, the added Allowable Markup shall for
each such Tier be (a) fifteen percent (15%) of the (b) cumulative
Allowable Costs added for that portion of the Compensable Change performed
by such lower-Tier Subcontractor or Subconsultant; plus (c) five percent
(5%) for first Tier Subcontractors and Subconsultants, plus (d) an
additional Allowable Markup on the sum of (a), (b) and (c) of twenty-five
percent (25%) by Contractor.
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(ii)
Deleted Work.
Subject to further
adjustment as provided in Paragraph 1.7.8, below, with respect to Deleted
Work involving Work to be performed by second and any lower-Tier
Subcontractors, the District shall be entitled to a cumulative credit from
the lower-Tier Subcontractors of (a) eight percent (8%) of the (b)
Allowable Costs for portion of the Deleted Work involving the Work of such
lower-Tier Subcontractors, and (c) an additional credit from the
first-Tier Subcontractor on the sum of (a) and (b) of five percent (5%),
and (d) an additional credit from Contractor on the sum of (a), (b) and
(c) of five percent (5%).
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.4
Review of
Markups.
It is Contractor's responsibility to review information
submitted by Subcontractors and Subconsultants to ensure that all markups
by Subcontractors and Subconsultants, of every Tier, comply with the
requirements of the Contract Documents. Payment by the District of markups
that exceed Allowable Markups shall not be considered as a waiver by the
District of the right to repayment by Contractor of any markup charged
that is in excess of Allowable Markups.
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.5
No Markup
Allowed.
Notwithstanding and without limitation to anything else
stated in the Contract Documents, Contractor shall not be entitled to an
Allowable Markup or any other amount or allowance as markup for overhead
or profit on sums due to Contractor for Extra Work that are based on
agreed unit prices; or (2) other amounts with respect to which the
Contract Documents provide that no additional Allowable Markup shall be
paid.
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EXHIBIT
C
Lien
Waivers and Releases
CONDITIONAL
WAIVER AND RELEASE
UPON
PROGRESS PAYMENT
Project
Name:
CES
Contract Number:
Upon
receipt by the undersigned of a check from Chevron Energy Solutions Company
("CES")
in the sum of $
(amount of
check)
payable
to
(Contractor
Company name)
and when
the check has been properly endorsed and has been paid by the bank upon which it
is drawn, this document shall become effective to release any mechanic's lien,
stop notice, or bond
right the
undersigned has on the job of located at
(owner's
name)
(address
of location/job description--if multiple sites/locations, please specify amount
of funds allocated to each site/location)
to the
following extent. This release covers a progress payment for labor, services,
equipment, or material furnished to
(Customer's
name)
through
only and
(date)
does not
cover any retentions retained before or after the release date; extras furnished
before the release date for which payment has not been received; extras or items
furnished after the release date. Rights based upon work performed or items
furnished under a written change order which has been fully executed by the
parties prior to the release date are covered by this release unless
specifically reserved by the claimant in this release. This release of any
mechanic's lien, stop notice, or bond right shall not otherwise affect the
contract rights, including rights between parties to the contract based upon a
rescission, abandonment, or breach of the contract, or the right of the
undersigned to recover compensation for furnished labor, services, equipment, or
material covered by this release if that furnished labor, services, equipment,
or material was not compensated by the progress payment. Before any recipient of
this document relies on it, said party should verify evidence of payment to the
undersigned.
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Dated:
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(Contractor Company Name)
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(Printed or Typed Name)
Title:
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UNCONDITIONAL
WAIVER AND RELEASE
UPON
PROGRESS PAYMENT
Project
Name:
CES
Contract Number:
The
undersigned has been paid and has received a progress payment in the in the sum
of
$
for labor, services, equipment,
(amount of
check)
or
material furnished to
on
the job of
located at
(Customer's
name) (owner's
name) (address of
location/job description-- if multiple
sites/locations)
and does
hereby release any mechanic's
(please specify
amount of funds allocated to each site /location)
lien,
stop notice, or bond right that the undersigned has on the above referenced job
to the following extent. This release covers a progress payment for labor,
services, equipment, or
material
furnished to
through
(Customer's
name)
(date)
only and
does not cover any retentions retained before or after the release date; extras
furnished before the release date for which payment has not been received;
extras or items furnished after the release date. Rights based upon work
performed or items furnished under a written change order which has been fully
executed by the parties prior to the release date are covered by this release
unless specifically reserved by the claimant in this release. This release of
any mechanic's lien, stop notice, or bond right shall not otherwise affect the
contract rights, including rights between parties to the contract based upon a
rescission, abandonment, or breach of the contract, or the right of the
undersigned to recover compensation for furnished labor, services, equipment, or
material covered by this release if that furnished labor, services, equipment,
or material was not compensated by the progress payment.
NOTICE:
THIS DOCUMENT WAIVES RIGHTS UNCONDITIONALLY AND STATES THAT YOU HAVE BEEN PAID
FOR GIVING UP THOSE RIGHTS. THIS DOCUMENT IS ENFORCEABLE AGAINST YOU IF YOU SIGN
IT, EVEN IF YOU HAVE NOT BEEN PAID. IF YOU HAVE NOT BEEN PAID, USE A CONDITIONAL
RELEASE FORM.
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Dated:
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(Contractor Company Name)
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(Printed or Typed Name)
Title:
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CONDITIONAL
WAIVER AND RELEASE
UPON FINAL
PAYMENT
Project
Name:
CES
Contract Number:
Upon
receipt by the undersigned of a check from Chevron Energy Solutions
Company.
(CES") in
the sum of $
payable
to
(amount of
check)
(Contractor Company name)
and when
the check has been properly endorsed and has been paid by the bank upon which it
is
drawn,
this document shall become effective to release any mechanic's lien, stop
notice, or bond
right the
undersigned has on the job of
(owner's
name)
located
at
(address
of location/job description -- if multiple sites/locations, please specify
amount of funds allocated to each site/location)
This
release covers the final payment to the undersigned for all labor, services,
equipment, or material furnished to on the job, except for disputed claims for
additional work in the amount of $
. Except
as otherwise disclosed herein, all subcontractors and/or
(amount of
disputed claims)
suppliers
to the undersigned have been paid in full for the labor, services, equipment, or
material included in this voucher or will be paid from the proceeds of any funds
disbursed to the undersigned in accordance with this voucher; such funds will be
received in trust for that purpose. Before any recipient of this document relies
on it, said party should verify evidence of payment to the
undersigned.
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Dated:
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(Contractor Company Name)
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(Printed or Typed Name)
Title:
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UNCONDITIONAL
WAIVER AND RELEASE
UPON FINAL
PAYMENT
Project
Name:
CES
Contract Number:
The
undersigned has been paid in full for all labor, services, equipment, or
material furnished to
(Customer's
name)
on the
job of
located at
(owner's
name)
(address
of location/job description -- if multiple sites/locations, please specify
amount of funds allocated to each site/location)
and does
hereby waive and release any right to a mechanic's lien, stop notice, or any
right against
a labor
and material bond on the job, except for disputed claims for extra work in the
amount of $
. Except
as otherwise disclosed herein, all subcontractors and/or
(amount of disputed
claims)
suppliers
to the undersigned have been paid in full for the labor, services, equipment, or
material included in this voucher or will be paid from the proceeds of any funds
disbursed to the undersigned in accordance with this voucher; such funds will be
received in trust for that purpose.
NOTICE:
THIS DOCUMENT WAIVES RIGHTS UNCONDITIONALLY AND STATES THAT YOU HAVE BEEN PAID
FOR GIVING UP THOSE RIGHTS. THIS DOCUMENT IS ENFORCEABLE AGAINST YOU IF YOU SIGN
IT, EVEN IF YOU HAVE NOT BEEN PAID. IF YOU HAVE NOT BEEN PAID, USE A CONDITIONAL
RELEASE FORM.
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Dated:
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(Contractor Company Name)
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(Printed or Typed Name)
Title:
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CONTINUATION
SHEET
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APPLICATION
AND CERTIFICATE FOR PAYMENT containing CONTRACTOR'S signed Certification
is attached
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Use Column I
on Contracts where variable retainage for the line items may
apply
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Work
Completed
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Item
No.
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Description
of Work
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Scheduled
Value
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Previous
Applications
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This
Application
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Stored
Materials
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Total Completed
and
Stored to-Date
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Balance
to Finish
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Retainage
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A
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B
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C
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D
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E
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F
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G
(D+E+F)
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%
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H
(C-G)
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I
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SUB
TOTAL OR TOTAL
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Exhibit 10.17
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Chevron
Energy Solutions Company,
a
division of Chevron U.S.A. Inc.
Chevron E5 Contract #:
4012
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CONSULTING
SERVICES AGREEMENT
Consultant:
Envision Solar International. Inc.
Consultant
Address:
4225 Executiv
e
Square
Suite 1000
Consultant
Phone:
858-768-5151
La Jolla. CA
92037
Taxpayer
Identification # (or SS #):
26-1342810
This
Consulting Services Agreement ("Contract") is entered into effective as of
October 23, 2008, by and between Consultant and Chevron Energy Solutions
Company, a division of Chevron U.S.A. Inc., a Pennsylvania corporation, with
principal offices at 345 California Street, 18
th
Floor, San Francisco, CA 94104 ("Company"). The parties hereto agree as
follows:
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1.
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Work
Orders
.
Under this Contract, Consultant shall provide the services (the
"Services") and Deliverables (as hereinafter defined), described on Work
Orders which shall, from time to time, be attached hereto and incorporated
herein by reference. Individual Work Orders issued under this Contract
shall constitute Amendments to this Contract and will be fully
incorporated herein. Each Work Order shall set forth the
s
cope
of work (for both Services and Deliverables) to be performed by
Consultant, payment amount and project schedule. The deliverables
identified in the Work Orders, and all notes, drafts, drawings, works
authored, inventions, and other information and materials created,
conceived, or reduced to practice by consultant in completing those
deliverables shall be collectively referred to herein as the
"Deliverables". Each Work Order shall be subject to all the terms
and
conditions of this Contract, but shall constitute a separate
and independent performance obligation of the part of Consultant and
payment obligation on the part of
Company.
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2.
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Use
of Subcontractors.
Consultant shall not subcontract, assign,
or transfer any of its rights or obligations under this Contract without
the prior written consent of Company. If Company so consents, Consultant
shall remain liable and responsible to Company for the work of any
subcontractor to the same extent as if the work had been performed by
Consultant,
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3.
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Changes in
Scone of Work.
Company requested changes in the Scope of Work,
including Services to be provided and Deliverables, and changes to
compensation and project schedule shall be made by a subsequently executed
Change Order, or new Work Order. Prior to issuing a Change Order or new
Work Order, Company
may
request
from Consultant a detailed estimate in writing of the cost for such extra
work, and its impact on current work and scheduled completion dates,
including (i) a description of work to be performed, including detailed
breakdown by identifiable tasks; (ii) the estimated cost of each task; and
(111) the expected dale or completion of each task. Consultant shall not
proceed with any such additional requested work prior to receiving written
Change Order or new Work Order authorizing the Consultant to perform the
requested changes. If Company requests certain changes to the work that
Consultant believes is outside an existing Scope ot Work, before
proceeding with such work, Consultant shall notify Company in writing
stating why it believes such work is not included in an existing Scope of
Work, and Consultant's estimate of the additional cost of such work and
additional time required to perform, if applicable. If the parties
disagree on whether or not certain work is within an existing Scope of
Work, Consultant shall proceed with performing such work under protest and
such dispute shall be resolved in accordance with Section 21, "Dispute
Resolution".
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4.
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Term
.
Consultant shall complete the Services and complete and deliver to
Company the Deliverables on or before the date set forth in the applicable
Work Order, unless this Contract is terminated earlier pursuant to Section
16. Notwithstanding the foregoing, Company may suspend or extend time for
Consultant's performance at any time, and from time-to-tlme, upon two (2)
days prior written notice. Thereafter, Consultant shall resume performance
as directed by Company. In the event of such suspension or extension,
Consultant shall be entitled to reimbursement for additional costs
reasonably and necessarily incurred by Consultant in effecting such
suspension or extension period, to the extent that such additional costs
are actually incurred, if claimed within thirty (30) days an,er resumption
of performance or early termination of the
Contract.
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5.
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Compensation
.
Company shall pay
Consultant for the Services and Deliverables to be performed and delivered
in connection with the work as described and identified in the applicable
Wurk Order. This amount includes all royalties or other charges for
patents, copyrights, trademarks, trade secrets used by Consultant in the
performance of this Contract; all allowances for wages, payroll burden
(i.e., insurance, payroll taxes, vacations, fringe benefits, etc.),
overhead, general and administrative expenses, local telephone calls,
postage, insurance, profits, fees; all social security, employment
withholdings and taxes, unemployment, gross receipts, income, sales, use,
occupation or cither taxes; and all costs and expenses of whatever kind,
except as otherwise expressly set forth in the applicable Work
Order.
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6.
|
Billing
and payment
.
Consultant shall bill Company monthly for work performed during the
month. Consultant shall submit to the Company monthly, on the form
provided by Company, a written requisition for payment showing the
aggregate value of the Work performed and completed through the iast
billing date, from which there shall be deducted retainage, subject to
approval by the Company of the amount of the evaluation of the Work stated
in each requisition,
IT IS
IMPFRATIVE
THAT THE COMPANY RECEIVE AN ORIGINAL, HARD COPY INVOICE
MONTHLY. Consultant
's
invoices shall set forth in reasonable detail the work performed
and amounts due. In addition, Consultant shall submit to Company with its
invoice, copies of receipts
for
each
Reimbursable Expense (as defined in the applicable Work Order) over $25.
Consultant shall provide copies of any other receipts
for
expenses for which Consultant has requested reimbursement promptly
upon Company's request. Consultant shall submit invoices and copies of
receipts to the address set forth in the applicable Work Order. Company
shall pay Consultant the undisputed amount of such invoices within
forty-five (46) days after Company's receipt and approval of the invoice.
Amounts not paid within forty-five (45) days shall accrue interest at a
rate of one percent
(1%)
per month. No payment to Subcontractor will be authorized until
Chevron ES receives a Payment and Performance Bond (if required), a
current Certificate of Insurance, and any Hen waivers and releases (as
required).
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7.
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Notice
.
All notices in connection with this Contract shall be in writing,
addressed to the addresses set forth below, and shall refer to Company's
Contract Number and the number of the applicable Work Order. All notices
or other communications so addressed shall be effective when received.
Either party may change its address
for
notices
by providing written notice to the
other.
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To:
Company (Project Manager)
Chevron
tnergy solutions Company,
a
division of Chevron U.S.A. Inc.
As
Specified on Work Order
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With
copy to:
Chevron
Energy Solutions Company,
a
division of Chevron U.S.A. Inc.
345
California Street, 18
th
Floor
S
an
Francisco, CA 94104
Attention:
Manager, Contract Services
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To
Consultant:
Envision
Solar International, Inc,
4225
Executive Square Suite 1000
La
Jolla, CA 92037
Attn:
Pamela Steven
Tel
No: 858.768.5151
Fax
No: 858.799,4592
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8.
|
Access
to Premises and Equipment.
Company will
arrange for access to premises, facilities, equipment, personnel, and data
to the extent reasonably required in order for Consultant to perform the
Services and provide the Deliverables. Such access shall be provided
during business hours as directed by Company, unless the parties agree on
other arrangements. Consultant agrees to comply, and to
cause its
employees, subcontractors, consultants
and
any other representatives to comply, with such arrangements,
including without limitation, any rules pertaining to use of designated
access areas, logging in and out of the premises, or securing permits or
identification required to enter the premises. Consultant shall not enter
any areas outside of those for which access
is
provided, without prior written permission from
Company.
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9.
|
Independent
Contractor
. In performing this Contract, Consultant agrees that it
is acting as an independent contractor and not as an employee or agent of
Company. As an independent contractor. Consultant
shall
not
be
eligible for any benefits Company may
provide
its employees. All persons, if any, hired by Consultant
shall be employees of Consultant and shall not be construed as employees
or agents of Company in any respect. Consultant shall be responsible for
all taxes, insurance and other costs and payments legally required to be
withheld or provided in connection with Consultant's performance of this
Contract, including without limitation, all withholding taxes, worker's
compensation insurance, and similar
costs.
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10.
|
Conflict Of
Interest.
Conflicts of interest relating to this Agreement are
strictly prohibited. Except as otherwise expressly provided
herein,
no Party nor any director, employee
or
agent
of
any Party shall give to or receive from any director, employee or
agent of any other Party any gift, entertainment or other favor of
significant value, or any commission, fee or rebate in connection with
this Agreement. Likewise, no Party nor any director, employee or agent
of
any Party, shall without prior notification thereof to all Parties
enter into any business relationship with any director, employee or agent
of another Party or of any Affiliate of another Party, unless such person
is acting for and on behalf of the other Party or any such Affiliate. A
Party shall promptly notify the other Parties of any violation of this
section and any consideration received as a result of such violation shall
be paid over or credited to the Party against whom
it was
charged. Any representative of any Party, authorized
by
that Party, may audit the records of the other Parties related to
this Agreement, including the expense records of the Party's employees
involved in this Agreement, upon reasonable notice and during regular
business hours, for the sole purpose of determining whether there has been
compliance
with this
Section
.
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11.
|
Non-Compete
.
During the term of this Contract, Consultant shall not accept any
employment or engage in any work for anyone other than the Company to
perform work for or on the specified facilities for which the Company has
hired the Consultant to provide consulting services as described
herein.
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12.
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Performance
.
Consultant represents to Company that Consultant possesses the degree ul"
skill and knowledge necessary to perform its obligations under this
Contract, and that the Services and Deliverables provided by Consultant
under this Contract shall be performed with the degree of skill and care
that is required by current, good and sound professional procedures and
practices, and in conformance with generally accepted professional
standards prevailing at the time the work is performed.
If
Consultant's performance of this Contract requires any permits,
licenses, or performance bonds, Consultant has obtained alt such permits,
licenses, and performance bonds, and shall maintain them in full force and
effect throughout the term of this Contract. Consultant shall provide
copies of all such permits, licenses, and performance bunds to Company,
upon request. Consultant shall comply with all applicable federal, state,
and local laws, codes, and regulations in performing this Contract
Consultant will, at its own expense, promptly and properly perform, at the
written request of Company, all corrective services necessary to conform
the Services and Deliverables to the foregoing representations. Consultant
understands and acknowledges that Company will
rely upon the
competence and completeness of Consultant
's
Services in fulfilling Company's contractual commitments to third
parties.
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13.
|
indemnification
.
Consultant shall indemnify Company, its directors, officers, agents, and
employees and Company's customers' directors, officers, agents and
employees against (i) Consultant's willful misconduct and /or negligent
acts or omissions in Consultant's performance of this Contract; (ii)
Consultant's breach of its covenants set forth in this Contract, including
without limitation, its failure to comply with all applicable laws
governing performance of the Services or to withhold taxes from its
compensation as required by law; (iii) for any and all taxes assessed
against Company that are included within the amounts paid to Consultant or
otherwise are amounts Consultant is responsible for under this Contract;
(iv) for any claim of infringement of any intellectual property rights
arising out of or in connection with Consultant's performance or this
contract; (v) for all
I033,
damage, expense and liability resulting from injury to or death of
any person or injury to property arising out of or in connection with
Consultant's negligent performance of this Contract. Consultant shall, on
Company's request, defend any action, claim, or suit asserting a claim
covered by this indemnity. Consultant shall pay all costs that may
be
incurred by Company
in enforcing this indemnity
, including reasonable attorneys'
fees.
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14.
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Confidential
Information
.
All oral or written records, reports, computer programs, written
procedures, materials, documents, data or information In whatever form
Company or its affiliates, agents or customers may provide Consultant in
connection with this Contract (the "Information") and all Deliverables
shall be considered the confidential and proprietary information of
Company. Consultant agrees not to disclose, and to cause its employees,
subcontractors and any other representatives not to disclose, any of the
Information or Deliverables to any third party or use any such Information
or Deliverables for any purpose other than the performance of this
Contract, without the prior written consent of Company. Without limiting
the foregoing, (i) if Consultant knew the same information or deliverables
before Company disclosed it or caused it to be disclosed to Consultant or
before Consultant created it for this Contract; (ii) if Consultant obtains
the same information or deliverable from a third party who did not receive
it directly or indirectly from Company or its affiliates, agents or
customers; or (iii) if such Information or Deliverable is, at the time of
disclosure by Consultant, in the public domain through no act or omission
of Consultant, Consultant may use or disclose such information or
deliverable as permitted by Consultant's other obligations. The
obligations imposed by this Section shall survive termination of this
Contract All Information and Deliverables shall be returned to Company at
the earlier of Company's request or termination or completion of this
Contract. As damages may not be an adequate remedy for Consultant's breach
of this Section, Consultant agrees that Company also shall be entitled to
the remedies of injunctive relief and specific performance for any breach
by Consultant of this Section or Section
15.
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15.
|
Ownership.
Company shall own all Information and Deliverables and all rights therein,
including without limitation, all patent, copyright, trademark, service
mark, trade secret or other intellectual property rights therein.
Consultant shaJJ obtain and/or retain no right, title or interest in or to
the Information and/or the Deliverables, including without limitation, any
patent, copyright, trademark, service mark, trade secret or other
intellectual property rights therein, and hereby assigns and transfers to
Company any such rights Consultant may have in such Information and
Deliverables-Consultant agrees that any copyrightable Deliverables are a
work for hire. Consultant further agrees to execute, deliver, and perform
all documents, acts, or things that may be necessary to assign or transfer
to Company the rights granted hereby. Notice of copyright ownership of
Company shall be placed by Consultant on all Deliverables in a manner and
location as to give reasonable notice of the claim of copyright. To
Consultant's actual knowledge, the Services and the Deliverables do not
infringe on the ownership or intellectual property rights of any third
party. Application for copyright and/or patent registration shall be the
responsibility of Company. Consultant shall deliver such Information and
Deliverables free and clear of all liens, claims, and encumbrances of any
kind. The obligations imposed by this Section shall survive termination of
this Contract.
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16.
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Termination
.
Company may terminate
this Contract or any Work Order hereto at any time for any reason by
providing two (2) days prior written notice to Consultant, such
termination to be effective at the end of the two (2) day notice period In
the event of such termination. Company shall pay Consultant for Services
and Deliverables satisfactorily performed and for all Reimbursable
Expenses, if any, incurred by Consultant on or before
the
effective date of
termination. Upon receipt of notice of termination from Company,
Consultant shall thereafter seek to minimize further charges under this
Contract or
the
applicable Work Order, whichever
has
been terminated. Unless earlier terminated, each Work Order
shall terminate effective as of the date set forth thereon, subject to any
extensions pursuant to Section 4.
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17.
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Access
to Work
and Records
,
Company shall have, during the term of the Contract and for two years
thereafter, access at all reasonable times to all of the Consultant's and
Consultant's subcontractors" personnel, accounts and
records
or all description pertaining to the Contract, including but not
limited to computer files, to verify or review the quantity, quality, and
progress of the Services, reimbursable costs, amounts claimed by the
Consultant, estimates of cost for fixed rates including those applicable
to proposed changes, and for any other reasonable
purposes.
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18.
|
Insurance.
Consultant shall maintain the following insurance coverage. An insurance
certificate (or copy of insurance policy) and a completed Federal Form W-9
must be provided to the Company at the time of execution of this Contract
and must be in effect during all periods of subsequent Work Orders.
Consultant is also responsible for Its subcontractors maintaining
sufficient limits of the same insurance
coverage.
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a) Workers'
Compensation and Employers' Liability.
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(i)
|
Workers'
Compensation insurance or self-insurance indicating compliance with any
applicable
labor codes, acts, laws or statutes, state or federal, where Consultant
performs
work.
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(ii)
|
Employers'
Liability insurance shall not be less than 31,000,000 for injury or death
each
accident.
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b)
Commercial G
eneral
Liability.
|
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(i)
|
Coverage
shall be at least as broad as the Insurance Services Office (ISO)
Commercial
General
Liability Coverage "occurrence" form, with no coverage
deletions,
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(ii)
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The
limit shall not be less than $1,000,000 each occurrence for bodily injury,
property
damage
and personal injury. If coverage is subject to a general aggregate limit,
this
aggregate
limit shall be twice the occurrence
limit.
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(iii)
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Coverage
shall: a) by "Additional Insured" endorsement add
as
insureds Company, its directors, officers, agents and employees
with respect to liability arising out of work performed by or for the
Consultant; and b) be endorsed to specify that the Consultant's insurance
is primary and that any insurance or self-insurance maintained by Company
shall not contribute with it.
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c) Business
Auto.
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(i)
|
Coverage
shall be at least as broad as the Insurance Services Office (ISO) Business
Auto
Coverage form covering Automobile Liability, codes
7
and O, for hired and non-
owned
autos.
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(ii)
|
The
limit shall not be less than $1,000,000 each accident for bodily injury
and property damage.
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(iii)
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Notwithstanding
the foregoing, Consultant indemnifies Company from all loss, claims,
costs,
and liabilities, resulting from or arising out of Consultant's use of any
automobile in
connection
with the performance of this
Contract.
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d) Professional
Liability Insurance.
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(i)
|
Errors
and Omissions Liability insurance appropriate to the Consultant's
profession.
Coverage
shall be for a professional error, act, or omission arising out of the
scope of
services
shown in the
Contract.
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(ii)
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The
limit shall not be less than $1,000,000 for each claim. If coverage is
subject to an
aggregate,
this anfjrGgate limit shall be twice each claim
limit.
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e)
Additional Insurance
Provisions
.
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(i)
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Simultaneous
with Consultant's execution of this Contract, Consultant shall furnish
Company
with certificates of insurance and endorsements of all required insurance
for
Consultant.
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(ii)
|
The
documentation shall state that coverage shall not be cancelled except
after thirty (30)
days
prior written notice has been given to
Company.
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(iii)
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The
documentation must be signed by
9
person authorized by that insurer to bind
coverage
on its behalf and shall be submitted to: Chevron Energy Solutions Company,
a
division
of Chevron U.S.A. Inc., 345 California Street, 18
th
Floor, San Francisco. CA
94104,
Attention; Contract
Administrator.
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(iv)
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Company
may inspect the original policies or require complete certified copies, at
any
time.
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(v)
|
Upon request, Consultant shall
furnish Company the same evidence of insurance for
the
subcontractors
as Company requires of
Consultant,
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19.
|
Limitation of
Liability
.
NOTWITHSTANOtNG ANYTHING
CONTAINED IN THIS CONTRACT TO THE CONTRARY, COMPANY SHALL NOT BE LIABLE TO
CONSULTANT FOR ANY SPECIAL, INDIRECT, CONSEQUENTIAL, OR
PUNITIVE DAMAGES ARISING OUT
OF THE
PERFORMANCE OF THIS CONTRACT, IRRESPECTIVE OF EITHER PARTY'S FAULT,
NEGLIGENCE (IN WHOLE OR PART), OR STRICT
LIABILITY.
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20.
|
Precautions
and
Protection to Property.
Consultant shall plan and perform all Services, including without
limitation,
any
Services to be performed on the premises of Company, its customers,
or other third parties, so as to safeguard persons and property from
injury, and to assure compliance with all reasonable and safe work
practices, and federal, state, and local laws, rules and regulations,
including without limitation, those applicable to work in areas adjacent
to electrically charged racililies. Company may require, at Company's
expense, the provision of any additional safeguards not in use but
considered necessary or prudent, in Company's reasonable judgment. As part
of these efforts, Consultant will assure that all of its employees,
subcontractors and any other representatives that perform any Services on
the premises of Company, its customers or other third parties refrain from
the use, abuse, possession, selling or purchasing of illegal drugs or
controlled substances, as defined under applicable federal or state law,
and from the use at any time (including without limitation at meals) of
alcohol, prescription drugs, or any other substance that could impair the
ability to perform the Services in accordance with this Contract or to
maintain a safe work place. Where reasonable cause exists to believe the
foregoing provision has been violated, Consultant shall notify Company and
take all appropriate steps to determine the existence of and eliminate any
violation.
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21.
|
Dispute
R
esolution
,
in
the event of a dispute, controversy, or claim arising out of or relating
to this Contract,
the
Parties shall confer and attempt to resolve such matter informally.
If such dispute or claim cannot be resolved in this manner, then
the
dispute or claim shall be referred first
to
the Parties' executive officers for their review and resolution. If
the dispute or claim still cannot be resolved by such officers, then the
matter shall be arbitrated and either Party may file a written demand for
arbitration with Judicial Arbitration & Mediation Services ("JAMS")
and shall send a copy of such demand to
the
other Party. The arbitration shall be conducted pursuant to the
appropriate JAMS Arbi
tration Rules in effect at the time the
arbitration is commenced. For amounts in excess of 5250,000, JAMS
Comprehensive Arbitration Rules and Procedures shall apply. For lesser
disputed amounts, JAMS Streamlined Arbitration Rules and Procedures shall
apply. The award rendered by the arbitrator shall be final and binding on
the Parties and shall be deemed enforceable in any court having
jurisdiction thereof and of the Parties. The arbitration shall be heard by
one arbitrator, who shall have experience in the general subject matter Lo
which the dispute relates- The arbitration shall take place at the JAMS
office geographically closest to the site where the Work or Services has
been performed.
Fee
Shifting: If either party ("Party") becomes involved in arbitration or
litigation ("Proceeding) arising from or relating to this Contract or the
performance of it, the court or arbitrator(s) in such Proceeding, or in a
separate proceeding, shall award to the prevailing Party or Parties alt
reasonable attorney fees, expert witness fees, and all other costs and
expenses incurred in, arising from, or relating to such
Proceeding.
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Hazardou
s_Materials
.
Consultant'
s_Duties Regarding
Management of Hazardous Materials:
consultant shall oe
responsible for complying with all Applicable Laws with respect to the
removal
and
proper disposal of all Hazardous Materials brought onto or generated by
Consultant or by any of
Its
Subcontractors in the course
o
f performing
the Work. Consultant shall defend, indemnify and hold the Company
and Customer harmless from and against any and all losses, damages,
expenses, fees, claims, costs and liabilities (including, but not limited
to, attorneys' fees and costs of litigation) arising out of or in any
manner related to the release or threatened released ot any Hazardous
Materials brought onto or generated by Consultant during the course of
performing the Work. It is expressly understood that this responsibility
includes protecting the Company and Customer from any clean-up
responsibility imposed on the Company or Customer under Applicable
Laws.
Consultant
shall not be responsible for any pre-existing Hazardous Materials at the
Site. Consultant shall provide written notice to the company immediately
upon the discovery of any pre-existing Hazardous Substances. Except in
case of emergency, Consultant, or any of its subcontractors, shall not
disturb, disrupt, remove," alter, dislodge, or otherwise handle any
pre-existing Hazardous Substances at the Site without the prior written
consent of the Company. As appropriate, the company will issue a Work
Order to Consultant for the removal of any pre-existing Hazardous
Substances from the Site. Consultant shall defend, indemnify and hold the
company and Customer harmless from and against any and all losses,
damages, expenses, fees, claims, costs and liabilities (including, but not
limited to, attorneys' fees and costs of litigation) arising directly out
of Consultant disturbing or causing a release of any Hazardous Substances
at the Site.
UNDER
NO CIRCUMSTANCES SHALL THE COMPANY BE LIABLE FOR ANY INJURY TO CONSULTANT
WHICH IS THE RESULT OF CONSULTANT'S EXPOSURE TO HAZARDOUS
SUBSTANCES.
The
term "Hazardous Materials" as used herein means any material that, because
of its quantity, concentration, or physical or chemical characteristics,
poses a significant present or potential hazard to human health and safety
or to the environment if released into the workplace or the
environment.
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23.
|
Chevron
.Policies
. Consultant
and agency
personnel are expected to comply with applicable Chevron and
Chevron ES Policies (such as the Contract and Travel Policies) and
Compliance Practices and Procedures (such as non-use of drugs,
anti-harassment, and cell phone usage guidelines). Consultant's supervisor
shall be responsible for informing the Consultant of applicable policies
and ensuring that they are
followed.
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24.
|
Miscellaneous
,
(a)
Choice of Laws
.
THIS
CONTRACT SHALL BE GOVERNED BY THE LAW OF THE STATE OF CALIFORNIA,
EXCLUDING ANY CONFLICTS OF LAWS PRINCIPLES THAT WOULD REQUIRE APPLICATION
OF THE LAW OF ANOTHER JURISDICTION,
(b)
Waiver
. The
waiver by either party of any provision of this Contract shall not be
deemed to be a waiver of the entire Contract, nor a continuing waiver of
the same provision, (c)
Severability
.
If any provision of this Contract is determined to be unenforceable, such
unenforceable provision shall be deemed deleted from this Contract and
this Contract shall be enforced without such provision, (d)
Prior Work
.
Services performed by Consultant pursuant to Company's authorization, but
before the execution of this Contract, shall be considered as having been
performed subject to the provisions of this
Contract
(e)
Publicity
.
Consultant shall not release any Information or Deliverables or any other
information relating to this Contract, including without limitation, its
existence, without the prior written approval of Company, and without
giving Company the opportunity to review and comment upon any requested
release, unless the disclosure is otherwise required by law. (f)
Entire
Agreement
- This Contract, including any applicable Work Order
attached hereto, contains the entire agreement and understanding between
the parties as to the subject matter of the Contract and supersedes all
prior or contemporaneous agreements, commitments, representations,
writings, and discussions between Company and Consultant, whether oral or
written, (g)
Public
Testimony
. If requested by Company, Consultant shall provide
testimony before the California Public Utilities Commission or any other
public agency to substantiate the Deliverables, at additional compensation
to the Consultant, (h)
Amendment
. This
Contract may not be amended except by a writing executed by both parties
hereto. No oral amendment shall be enforceable, even if supported by new
consideration, (i)
Conflicting
Terms
. In the event of any conflict between the terms of this
Contract and the terms of a Work Order, the terms of the Work Order shall
control, (j)
Energy Policy
Act
. Consultant agrees that for the Work
on
the
Project hereunder, Chevron ES shall be the "designer* as that term is
identified in the Energy
Policy
Act of 2005, and Chevron ES shall have the exclusive right to report to
any federal, state, or local agency, authority or other party, including
without limitation under Section 179(b) of the Energy Policy Act of 2005,
any tax benefit associated with the
Work.
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25.
|
Communication
.
Unless otherwise provided in writing, Consultant communications by and
with the Owner, Architect, Contractors, and other Consultants and
suppliers of the Company, regardless of tier, shall be through the
Company,
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26.
|
Data
_
Privacy
.
Consultant will
comply with all reasonable requests of Company with respect to protecting
personal data of Company employees, customers, and suppliers it receives
in connection with its performance of this Contract, including but not
limited to following Company's instructions in connection with processing
such personal data; implementing adequate security measures to protect
such personal data; not disclosing such pereonal
data
to any
third party without Company's written permission; and complying with all
applicable data privacy laws.
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27.
|
Successors and
Assigns
. This Agreement may not be assigned by either party in
whole or in part without the prior written consent of the other party,
which consent may not be unreasonably withheld or delayed; provided
however, that Company may assign this Agreement and all related agreements
without the consent of Consultant (i) to an affiliate; (ii) to an entity
that is controlled by, controls, or is under common control with Company;
or (iii) pursuant to a merger, consolidation, transfer of substantially
all its assets, or by operation of law; and provided further that Company
may assign its rights, but not its obligations, under this Agreement and
ail related agreements without the consent of Consultant to (x) a lender
providing financing to Company, or (y) a special purpose entity that is an
affiliate of or is controlled by such lender. This Agreement will be
binding on, enforceable by, and inure to the benefit of, the parties
hereto and their respective successors and permitted assigns. Any
assignment made in contravention of this clause shall be void and
unenforceable.
|
IN
WITNESS WHEREOF, the duly authorized representative of each of the parties
hereto has executed this Contract in duplicate originals to be effective as of
the date and year first written above.
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ENVISION
SOLAR INTERNATIONAL, INC.
|
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CHEVRON
ENERGY SOLUTIONS COMPANY
|
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A
division of Chevron U.S.A. Inc.
|
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By: /s/
Pamela Stevens
|
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By: William
Brookenborough
|
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Print
Name:
Pamela Stevens
|
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Print
Name:
William Brookenborough
|
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Its:
Chief Operating Officer
|
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General
manager - Operations
|
Exhibit 10.18
AMENDMENT
AGREEMENT
This
Amendment Agreement (this “
Agreement
”),
dated as of October 30, 2009, is entered into by and among Envision Solar
International, Inc., a California corporation (“
Company
”),
Envision Solar Construction, Inc., a California corporation, Envision Solar
Residential, Inc., a California corporation, and Envision Africa, LLC, a
Delaware limited liability company, (collectively, the “
Envision
Guarantors
” or “
Guarantors
”),
and Gemini Master Fund, Ltd., a Cayman Islands corporation (the “
Investor
”),
and Gemini Strategies, LLC (“
Collateral
Agent
”). The Company and the Guarantors are sometimes referred
to herein individually as an “
Envision
Entity
” and collectively as the “
Envision
Entities
”. Capitalized terms used herein, but not otherwise defined,
shall have the meanings ascribed to them in that certain Securities Purchase
Agreement, dated as of November 12, 2008, between the Company and the Investor
(the “
Purchase
Agreement
”).
R E C I T A L S
:
WHEREAS, the Company and the Investor
are party to the Purchase Agreement, pursuant to which the Company issued to the
Investor a Secured Bridge Note, dated November 12, 2008, in the principal amount
of $591,770.83 (the “
Note
”);
WHEREAS, the Guarantors have entered
into that certain Subsidiary Guarantee, dated as of November 12, 2008 (the
“
Guarantee
”),
pursuant to which each Guarantor has guaranteed the satisfaction of all the
obligations of the Company under the Transaction Documents;
WHEREAS,
the Company and the Guarantors have entered into that certain Security Agreement
and that certain Intellectual Property Security Agreement, each dated as of
November 12, 2008 (collectively, the “
Security
Agreements
”), pursuant to which the Company and the Guarantors have each
granted a security interest in its assets and properties to the Investor and the
Collateral Agent to secure the satisfaction of all the obligations of the
Envision Entities under the Transaction Documents;
WHEREAS,
the Company defaulted on the Note, and the Envision Entities and the Investor
entered into that certain Forbearance Agreement on or about April 11, 2009,
pursuant to which the Investor agreed to temporarily forbear from exercising its
rights and remedies under the Transaction Documents;
WHEREAS,
the Company wishes to become subject to the reporting requirements of the
Exchange Act and have its Common Stock listed or quoted on the Over-The-Counter
Bulletin Board (“
Bulletin
Board
”) and requires approximately $125,000 to effect such registration
and listing; and
WHEREAS,
the parties have agreed (a) to amend and restate the Note in the form of Exhibit
A attached hereto, pursuant to which, among other things, the Maturity Date of
the Note shall be extended and the Note shall be convertible into shares of
common stock of the Company, no par value per share (“
Common
Stock
”), in accordance with the terms thereof, and (b) the Investor shall
loan an additional $125,000 to the Company in consideration for the issuance of
a new Secured Bridge Note in the form of Exhibit A attached hereto (“
New Note
”
and together with the Note, the “
Notes
”),
each on the terms and conditions set forth herein;
A G R E E M E N
T
:
NOW, THEREFORE, in consideration of the
foregoing and subject to the terms and conditions herein contained,
and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
1.
ACKNOWLEDGMENTS.
1.1.
Acknowledgment of
Obligations
. The Investor and the Envision Entities hereby acknowledge,
confirm and agree that as of the date hereof, the Company is indebted to
Investor in respect of the Note in the amount of
$657,194.38
(the “
Note
Amount
”) (consisting of $591,770.83 principal amount plus
$65,423.55
of accrued interest at the default rate under the Note between the Maturity Date
under the Note (April 12, 2009) and the date hereof. The Note Amount
is unconditionally owing by Envision to the Investor, without offset, defense or
counterclaim of any kind, nature or description whatsoever.
1.2.
Acknowledgment of Security
Interests
. The Envision Entities hereby acknowledge, confirm
and agree that the Investor has and shall continue to have valid, enforceable
and perfected Liens upon and security interests in the assets and properties of
the Envision Entities heretofore granted to the Investor pursuant to, and having
first priority as set forth in, the Security Agreements, securing all
obligations under the Transaction Documents, including without limitation the
Note (as amended and restated hereby) and the New Note. The Envision
Entities hereby acknowledge, confirm and agree that the Investor has and shall
continue to have valid and enforceable assignments of the patents, trademarks
and other intellectual property and other assets assigned by the Envision
Entities, including without limitation those listed on the annexes to the
Security Agreements.
2.
AMENDMENT
AND RESTATEMENT OF NOTE
.
The Note shall
be amended and restated in the form attached hereto as
Exhibit A
(the “
Amended and
Restated Note
”), which shall provide, among other things, that (i) the
original principal face amount of the Note is $657,194.38, (ii) the Maturity
Date shall be extended until December 31, 2010, and (iii) the Note is
convertible into shares of Common Stock as set forth therein. Such
amended and restated Note shall be executed by the Company and delivered to the
Investor in exchange for the surrender of the original issued Note within five
(5) Business Days following the date hereof.
3.
NEW
NOTE
. The Investor has or shall prior to the close of business
on the date hereof advance $125,000 in loan proceeds to the Company, and the
Company shall execute, deliver and issue to the Investor the New Note within
five (5) Business Days following the date hereof to evidence the Company’s
obligations pursuant to such loan. The Company agrees that
contemporaneously herewith it shall enter into an escrow agreement with the
Investor’s counsel, as escrow agent (“
Escrow
Agent
”), in the form of
Exhibit C
attached hereto (“
Escrow
Agreement
”), pursuant to which all such funds advanced under the New Note
shall be deposited into an escrow account for the benefit of the Company (“
Escrow
Account
”) and distributed only in accordance with the terms of such
Escrow
Agreement
and Section 4.9 below. To effect a disbursement under the Escrow
Agreement, the Company shall deliver written notice (which may be by email)
(“
Disbursement
Notice
”) to the Investor specifying (a) the amount of such disbursement,
(b) the name, address and wire transfer instructions of the Person to which such
disbursement is to be made on behalf of the Company, (c) a description of the
use of such proceeds, together with an explanation as to why such use of
proceeds is included within the parameters set forth in Section 4.9 below, and
(d) such other information as may be reasonably requested by the
Investor. The Person to which such disbursement shall be made (i)
shall be the Person rendering services to the Company in connection with Section
4.1 or 4.9 and (ii) shall not be the Company or any direct or indirect Affiliate
of the Company. Promptly following receipt of any Disbursement
Notice, if the Investor approves of such disbursement in accordance with Section
4.9 below, the Investor shall instruct the Escrow Agent to disburse the amount
set forth in such Distribution Notice to such Person providing services set
forth therein. Upon the Company completing all expenses required in
connection with satisfying Section 4.1 below, it shall promptly notify the
Investor, and if any amount remains in the Escrow Account at such time, such
amount shall either be (1) disbursed to the Company, or (2) paid to the Investor
as repayment under the New Note, as may be elected by the Investor in its sole
discretion. The Investor shall instruct the Escrow Agent to disburse
such remaining amount in accordance with such election. If any amount
remains in the Escrow Account (x) on December 31, 2010 or (y) at any time
following any acceleration of the New Note by the Holder pursuant to Section
8(b) thereof, such amount shall be paid to the Investor as repayment under the
New Note, and the Investor shall so instruct the Escrow Agent to disburse such
remaining amount. The term “Note” under the Security Documents and
Subsidiary Guaranty is hereby amended to also include the New Note, and the
Company’s and its Subsidiaries’ obligations under the New Note, Subsidiary
Guaranty and other Transaction Documents shall be secured by all the assets of
the Company and its Subsidiaries as set forth in the Security
Documents.
4.
OTHER
AGREEMENTS
.
4.1
Exchange Act Reporting
Requirements; Reverse Split
. The Company shall cause the
Company to be subject to the reporting requirements of the Exchange Act and
listed or quoted for trading on the Bulletin Board on or prior to April 1, 2010
and shall promptly take any and all actions necessary and appropriate to
effectuate such Exchange Act registration and Bulletin Board listing, including
without limitation having the requisite independent audit of its financial
statements, filing a Form 10 with the Securities and Exchange Commission (“
Commission
”)
(and promptly amending such Form 10 in response to Commission comments), and
securing a market maker to file a listing application with the Bulletin
Board. At all times after such Form 10 becomes effective, the Company
shall have filed with the Commission all reports required to be filed by it
under the Exchange Act by issuers that are subject to the reporting requirements
of the Exchange Act (whether or not the Company is subject to the reporting
requirements of the Exchange Act), and the Company shall thereafter continue to
timely file (or obtain extensions in respect thereof and file within the
applicable grace period) all such reports with the Commission. Prior to the
filing of such Form 10, the Company shall effect a forward stock split of the
Company’s Common Stock (“
Split
”)
whereby each share of Common Stock outstanding is subdivided into between 20 and
60 shares of Common Stock (such figure, the “
Split
Factor
”), provided that the Split Factor shall be subject to approval by
the Investor. The Company
shall not
engage in a Reverse Merger Transaction without the prior written consent of the
Investor (which consent may be withheld in its sole discretion and which may be
conditioned upon any terms imposed by the Investor). The Company
shall not issue any equity securities or Common Stock Equivalents (as defined in
the Notes) without the prior written consent of the Investor, except for (i)
Common Stock issued or the issuance or grants of options to purchase Common
Stock pursuant to the Company’s stock option plans and employee stock purchase
plans outstanding as they exist on the date of this Agreement, (ii) Common Stock
issued to any of the Company’s creditors in connection with the satisfaction of
any of the Company’s Indebtedness to such creditors and (iii) equity securities
of the Company issued to investors in connection with a private placement or
series of private placements that result in aggregate proceeds to the Company of
up to $10 million,
provided
that (a) in each
case the Company shall notify the Investor in writing prior such issuance, and
(b) at the election of the Investor 25% of the proceeds of any such private
placement shall be paid directly to the Investor in repayment of the Amended and
Restated Note and New Note. The Company covenants and agrees that,
after such Form 10 becomes effective, neither it nor any other Person acting on
its behalf will provide the Investor or its agents or counsel with any
information that the Company believes constitutes material non-public
information, unless prior thereto the Investor shall have executed a written
agreement regarding the confidentiality and use of such information (the Company
understands and confirms that the Investor shall be relying on such covenant in
effecting transactions in securities of the Company). The Company
represents and warrants that it possesses, or believes it can obtain in a timely
manner, all documents and information necessary or appropriate for timely
complying with all terms contained in this paragraph, including without
limitation having the requisite financial statements prepared and audit
conducted.
4.2
Reservation of Common
Stock
. At all times hereafter the Company shall cause to be
authorized and reserved for issuance to the Investor from its duly authorized
capital stock, for issuance upon conversion of the Notes, a number of shares of
Common Stock equal to 125% of the number of Conversion Shares (as defined in the
Notes) issuable upon the full conversion of the Notes (without regard to any
beneficial ownership limitation contained therein).
4.3
References to Notes and
Transaction Documents
. All references in the Transaction
Documents and herein to (i) “Transaction Documents” shall be deemed to be
references to the Transaction Documents (as currently defined in the Purchase
Agreement and as amended by this Agreement), this Agreement, the Forbearance
Agreement, the Escrow Agreement, the New Note and the Lock-Up Agreements, and
(ii) “Note” or “Notes” shall be deemed to be references to collectively the
Note, as amended and restated hereby, and the New Note (together with any future
Notes issued to the Investor).
4.4
Rule
144
. The Company acknowledges and agrees that, for purposes of
Rule 144 promulgated under the Securities Act, the holding period for the
Conversion Shares issuable upon conversion of, or otherwise pursuant to, the
Note and/or the New Note shall have commenced on November 12, 2008 (the date of
original issuance of the Note, for the Note) and October 30, 2009 (the date of
original issuance of the New Note, for the New Note). Without
limiting the foregoing, if at any time it is determined that such holding period
does not relate back to such date, the Company will
promptly,
but no later than 30 days thereafter, cause the registration of all such
Conversion Shares under the Securities Act (without regard to any beneficial
ownership or issuance limitations contained in the Notes). In
connection with any registration of Conversion Shares pursuant to this Section,
the Company and the Investor shall enter into a registration rights agreement
containing customary and reasonable provisions regarding the registration of
securities under the Securities Act.
4.6
Disclosure
. The
Company and the Investors shall consult with each other in issuing any other
press releases with respect to the transactions contemplated hereby and other
press releases to be issued by the Company (subject to Section 4.1
above).
4.7
Security
Continued
. The Envision Entities’ obligations under all the
Transaction Documents, including without limitation this Agreement and the
Notes, shall be secured by all the assets of the Envision Entities pursuant to
the Security Agreements as if this Agreement, the Note (as amended and restated
hereby) and the New Note were each in effect at the time of execution of such
Security Agreements and referenced therein. The Company shall execute
such other agreements, documents and financing statements reasonably requested
by the Investor, which will be filed at the Company’s expense with the
applicable jurisdictions and authorities.
4.8
No
Legends
. After the date on which the Conversion Shares may be
sold without registration pursuant to Rule 144, the Company shall issue
certificates without any legends or restrictions thereon evidencing any
Conversion Shares, and any certificates with legends previously imprinted shall
be replaced with certificates without any legends.
4.9
Use of
Proceeds
. The Company shall use the $125,000 in loan proceeds
from the advance made by the Investor hereunder, as evidenced by the New Note,
solely in connection with expenses incurred by the Company in connection with
complying with Section 4.1 above, which shall include, without limitation, legal
and audit fees (including amounts payable to counsel in connection with amending
current agreements, converting liabilities into equity or subordinated notes and
adopting corporate governance measures consistent with being a publicly listed
company and amounts payable to unaffiliated third party experts in connection
with preparing the Company’s financial statements for an audit) and
disbursements for Commission filings and financial statements and transfer agent
fees and be subject to the prior written approval of the Investor, provided that
such expenses shall not include any overhead or costs of Company personnel or
stock option plan expenses and shall be substantially in accordance with
Schedule 4.9 attached.
4.10
IR/PR
. Contemporaneously
with the filing of the Form 10 with the Commission, the Company shall retain
NetGain Financial, Inc. as a consultant/advisor for public relations and
investor relations for the Company for one year on terms mutually acceptable to
the Company and NetGain Financial, Inc.
4.11
Forbearance
Shares
. The Company acknowledges and agrees that is has issued
10,000 shares of Common Stock pursuant to Section 3.1(f) of the Forbearance
Agreement in consideration for the forbearance set forth therein (“
Forbearance
Shares
”), but has failed to deliver a stock certificate
evidencing such Forbearance Shares. The Company shall deliver a stock
certificate evidencing such Forbearance Shares, with an issuance date of April
11, 2009, within five (5) Business Days following the date
hereof. The Company represents, acknowledges and agrees that (a) such
Forbearance
Shares have been and were duly and validly issued, fully paid and nonassessable,
and free and clear of all Liens, (b) upon the Split such Forbearance Shares will
be converted into such number of shares as is equal to 10,000 shares multiplied
by the Split Factor, and (c) for purposes of Rule 144 promulgated under the
Securities Act, the holding period for the Forbearance Shares shall have
commenced on April 11, 2009 (the date of the Forbearance
Agreement).
4.12
Lock Up
Agreements
. Within thirty (30) days from the date hereof, the
Company shall use its best efforts to cause each stockholder of the Company
categorized under “Founder Shares”, “Generating Assets Shareholders” and
“Nexcore Capital / FWG”, as indicated on Schedule 5.7 attached hereto, to
execute and deliver to the Investor a “lock-up agreement” in the form set forth
as Exhibit B attached hereto, irrevocably agreeing not to sell or otherwise
dispose of any shares of Common Stock until June 30, 2010.
4.13
Public Company
Shares
. In substitution for any shares of Common Stock which
would have been issued to the Investor in a Reverse Merger Transaction pursuant
to Section 4.8 of the Purchase Agreement, promptly following the Split
contemplated hereby the Company shall issue to the Investor 0.3125% of the
fully-diluted number of outstanding shares of Common Stock of the Company
(assuming conversion and exercise of all outstanding options, warrants and
convertible securities and including the issuance of any shares of Common Stock
or Common Stock Equivalents to NetGain Financial, Inc. or any other investor
relations or public relations firm) prior to the date thereof. All
shares of Common Stock issued pursuant to this paragraph shall be duly and
validly issued, fully paid and nonassessable, free and clear of all Liens
imposed by the Company.
5.
REPRESENTATIONS
AND WARRANTIES OF THE ENVISION ENTITIES
.
Each of the Envision Entities hereby
jointly and severally represents and warrants to the Investor as of the date
hereof:
5.1
Organization
. Such
Envision Entity is duly organized, validly existing and in good standing under
the laws of its organization.
5.2
Authorization
. Such
Envision Entity has the requisite corporate power and authority to execute,
deliver and perform this Agreement and the other Transaction Documents to which
it is a party. All corporate action on the part of such Envision
Entity and by its officers, directors and shareholders necessary for the
authorization, execution and delivery of, and the performance by such Envision
Entity of its obligations under this Agreement, the New Note and the other
Transaction Documents to which it is a party has been taken, and no further
consent or authorization of any other party is required.
5.3
Enforceability
. This
Agreement, the New Note and the other Transaction Documents to which such
Envision Entity is a party constitute such Envision Entity’s valid and legally
binding obligation, enforceable in accordance with its terms, subject to (i)
applicable bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium or other similar laws of general application relating to or affecting
the enforcement of creditors’ rights generally and (ii) general principles of
equity.
5.4
No
Conflicts
. The execution, delivery and performance of this
Agreement and the other Transaction Documents to which such Envision Entity is a
party, and the consummation of the transactions contemplated hereby and thereby,
will not result in any violation of any provisions of any of such Envision
Entity’s organizational documents or in a default under any provision of any
instrument or contract to which such Envision Entity is a party or by which any
of its assets are bound, or in violation of any provision of any governmental
requirement applicable to such Envision Entity or be in conflict with or
constitute, with or without the passage of time and giving of notice, either a
default under any such provision, instrument or contract or the triggering of
any preemptive or anti-dilution rights (including without limitation pursuant to
any “reset” or similar provisions) or rights of first refusal or first
offer.
5.5
Valid
Issuance
. The Note, as amended and restated hereby, has been
duly authorized and duly and validly issued, free and clear of any Liens imposed
by or through any of the Envision Entities. The New Note has been
duly authorized and, when issued and delivered in accordance with the terms of
this Agreement, will be duly and validly issued, free and clear of any Liens
imposed by or through any of the Envision Entities.
5.6
Bring-Down of
Representations and Covenants
. The representations and
warranties of the Company contained in the Purchase Agreement are in all
material respects true and complete on and as of the date hereof as though made
on and as of the date hereof. Each Envision Entity has in all
material respects complied with or performed all terms, covenants and conditions
to be complied with or performed by such party under the Transaction Documents
(except for repayment at the Maturity Date of the Note and the timely
deliverance of the Forbearance Shares).
5.7
Capitalization and
Indebtedness
. The current capitalization of the Company is as
set forth on Schedule 5.7 attached hereto, which includes, without limitation
(a) a list of all holders of Common Stock by name and number of shares held, (b)
a list of all holders of warrants and options by name and number of warrants and
options held, and (c) a list of holders of all other Common Stock Equivalents by
name and number and type of security held. Other than the Notes, the
Company does not have any Indebtedness except as set forth on Schedule 5.7
attached hereto. The Company shall cause all Indebtedness (other than
the Notes and the other items indicated on Schedule 5.7 as “Permitted
Indebtedness”) to be converted into Common Stock, at an effective price equal to
or greater than $10.00 per share (as such figure shall be appropriately and
equitably adjusted upon any stock split, stock dividend, recapitalization or
similar transaction), on or prior to the filing of the Form 10 as contemplated
in Section 4.1 above. Such items indicated on Schedule 5.7 as
“Permitted Indebtedness” shall be included as “Permitted Indebtedness” under the
Notes (provided such Indebtedness shall not be (a) secured, (b) paid or payable
prior to repayment in full of the Notes, (c) bear interest at a rate higher than
the Notes, or (d) have any terms more favorable than the Notes, except for the
credit card debt owed to Company executives indicated
thereon). Schedule 5.7 shall also include a schedule of all accounts
payable, broken down by creditor, amount owed, and approximate number of days
outstanding as of the date hereof.
5.8
No
Novation
. The amended and restated Note is being issued in
substitution for and not in satisfaction of the Note. The amended and
restated Note shall not constitute a novation or satisfaction and accord of the
Note. The Company hereby acknowledges and agrees that the amended and
restated Note shall amend, restate, modify, extend, renew and continue the terms
and provisions contained in the Note and shall not extinguish or release the
Company or any of its Subsidiaries under any Transaction Document or otherwise
constitute a novation of its obligations thereunder.
5.9.
Compliance
. Since
the date of original issuance of the Note, the Company and its subsidiaries have
not (a) other than Permitted Indebtedness, entered into, created, incurred,
assumed, guaranteed or suffered to exist any Indebtedness of any kind, or (b)
other than Permitted Liens (as defined in the Notes), entered into, created,
incurred, assumed or suffered to exist any Liens of any kind, on or with respect
to any of its or their property or assets now owned or hereafter acquired or any
interest therein or any income or profits therefrom. Without limiting
the foregoing, the convertible notes issued by the Company to John Evey are not
secured notwithstanding anything set forth therein, and the Company agrees to
cause John Evey to promptly enter into a written subordination agreement with
the Investor that is acceptable to the Investor in its sole and absolute
discretion.
6.
REPRESENTATIONS
AND WARRANTIES OF THE INVESTOR
.
The Investor represents and warrants to
the Company as of the date hereof:
6.1
Organization
. The
Investor is duly organized, validly existing and in good standing under the laws
of its organization.
6.2
Authorization
. The
Investor has the requisite corporate power and authority to execute, deliver and
perform this Agreement and the other Transaction Documents to which it is a
party. All corporate action on the part of the Investor and by its
officers, directors and shareholders necessary for the authorization, execution
and delivery of, and the performance by the Investor of its obligations under
this Agreement and the other Transaction Documents to which it is a party has
been taken, and no further consent or authorization of any other party is
required.
6.3
Enforceability
. This
Agreement and the other Transaction Documents to which the Investor is a party
constitute the Investor’s valid and legally binding obligation, enforceable in
accordance with its terms, subject to (i) applicable bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium or other similar laws of general
application relating to or affecting the enforcement of creditors’ rights
generally and (ii) general principles of equity.
6.4
No
Conflicts
. The execution, delivery and performance of this
Agreement and the other Transaction Documents to which the Investor is a party,
and the consummation of the transactions contemplated hereby and thereby, will
not result in any violation of any provisions of any of the Investor’s
organizational documents or in a default under any provision of any instrument
or contract to which the Investor is a party or by which any of its assets are
bound, or in violation of any provision of any governmental requirement
applicable to the Investor or be in conflict with or constitute, with or without
the passage of time and giving of notice, a default under any such provision,
instrument or contract.
6.5
Investor Status
. At
the time the Investor was offered the Notes, the Conversion Shares and the
Forbearance Shares, it was, and at the date hereof it is, and on each date on
which it converts any Notes it will be either: (i) an “accredited investor” as
defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the Securities
Act or (ii) a “qualified institutional buyer” as defined in Rule 144A(a) under
the Securities Act. The Investor is not required to be registered as a
broker-dealer under Section 15 of the Exchange Act.
6.6
Experience of
Investor
. The Investor, either alone or together with its
representatives, has such knowledge, sophistication and experience in business
and financial matters so as to be capable of evaluating the merits and risks of
the prospective investment in the Notes and the Conversion Shares, and has so
evaluated the merits and risks of such investment. The Investor is able to bear
the economic risk of an investment in the Notes and Conversion Shares and, at
the present time, is able to afford a complete loss of such
investment.
6.7
General Solicitation
.
The Investor is not purchasing the Notes or Conversion Shares as a result of any
advertisement, article, notice or other communication regarding the Notes or
Conversion Shares published in any newspaper, magazine or similar media or
broadcast over television or radio or presented at any seminar or any other
general solicitation or general advertisement..
7.
MISCELLANEOUS
7.1
Effect of this
Agreement
. Except as modified pursuant hereto, no other
changes or modifications to the original Transaction Documents are intended or
implied and in all other respects the original Transaction Documents are hereby
specifically ratified, restated and confirmed by all parties hereto as of the
effective date hereof. To the extent of conflict between the terms of
this Agreement and the original Transaction Documents, the terms of this
Agreement shall control. The Transaction Documents, including without
limitation this Agreement, shall be read and construed as one
agreement.
7.2
Costs and
Expenses
. The Company, the Envision Guarantors and the
Investor each absolutely and unconditionally agree to pay all of their own
expenses, including all fees and disbursements of any counsel in connection with
the preparation, negotiation, execution or delivery of this Agreement and any
agreements delivered in connection with the transactions contemplated hereby or
any of its directors, officers, members, managers, partners, employees, agents
or other representatives as a consequence of or in any way in connection with
the preparation, negotiation, execution or delivery of this Agreement and any
agreements prepared, negotiated, executed or delivered in connection with the
transactions contemplated hereby,
provided, however
, that the
Company shall pay the Investor $5,000 for its expenses incurred or to be
incurred by it in connection with the negotiation and preparation of this
Agreement and the other Transaction Documents to be delivered in connection
herewith and $2,500 for Escrow Agent fees, which amounts may be withheld from
the $125,000 being advanced by the Investor hereunder.
7.3
Further
Assurances
. The parties hereto shall execute and deliver such
additional documents and take such additional action as may be reasonably
necessary or desirable to effectuate the provisions and purposes of this
Agreement.
7.4
Merger
. This
Agreement and the documents executed in connection herewith represent the entire
expression of the agreement of Company, the Envision Guarantors and Investor
regarding the matters set forth herein. No modification, rescission,
waiver, release or amendment of any provision of this Agreement shall be made,
except by a written agreement signed by Company, the Envision Guarantors and
Investor.
7.5
Governing
Law
. The rights and obligations hereunder of each of the
parties hereto shall be governed by and interpreted and determined in accordance
with the internal laws of the State of New York without regard to principle of
conflicts of laws, but excluding any rule of law that would cause the
application of the law of any jurisdiction other than the laws of the State of
New York.
7.6
Binding
Effect
. This Agreement shall be binding upon and inure to the
benefit of each of the parties hereto and their respective heirs, executors,
administrators, successors and permitted assigns, as the case may
be.
7.7
Survival of Representations
and Warranties
. All representations and warranties made in
this Agreement or any other document furnished in connection with this Agreement
shall survive the execution and delivery of this Agreement and the other
documents, and no investigation by Investor or any closing shall affect the
representations and warranties or the right of Investor to rely upon
them.
7.8
Severability
. Any
determination that any provision of this Agreement or any application thereof is
invalid, illegal or unenforceable in any respect in any instance shall not
affect the validity, legality or enforceability of such provision in any other
instance, or the validity, legality or enforceability of any other provision of
this Agreement.
7.9
Reviewed by
Attorneys
. Company and the Envision Guarantors represent and
warrant that they (a) understand fully the terms of this Agreement and the
consequences of the execution and delivery of this Agreement, (b) have been
afforded an opportunity to have this Agreement reviewed by, and to discuss this
Agreement and all documents executed in connection herewith with, such attorneys
and other persons as Company may wish, and (c) have entered into this Agreement
and executed and delivered all documents in connection herewith of its own free
will and accord and without threat, duress or other coercion of any kind by any
person. The parties hereto acknowledge and agree that neither this
Agreement nor the other documents executed pursuant hereto shall be construed
more favorably in favor of one than the other based upon which party drafted the
same, it being acknowledged that all parties hereto contributed substantially to
the negotiation and preparation of this Agreement and the other documents
executed pursuant hereto or in connection herewith.
7.10
Mutual Waiver of Right of
Jury Trial
. THE COMPANY, THE ENVISION GUARANTORS, AND THE INVESTOR HEREBY
WAIVE THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING
OUT OF, OR IN ANY WAY RELATING TO: (A) THIS AGREEMENT, OR ANY OF THE
AGREEMENTS, INSTRUMENTS OR DOCUMENTS REFERRED TO HEREIN; (B) ANY OTHER PRESENT
OR FUTURE INSTRUMENT OR AGREEMENT BETWEEN THEM; OR (C) ANY CONDUCT, ACTS OR
OMISSIONS OF INVESTOR, ENVISION GUARANTORS OR COMPANY OR ANY OF THEIR RESPECTIVE
DIRECTORS, OFFICERS, MANAGERS, MEMBERS, PARTNERS, EMPLOYEES, AGENTS, ATTORNEYS
OR AFFILIATES; IN EACH OF THE FOREGOING CASES, WHETHER IN CONTRACT OR TORT OR
OTHERWISE.
7.11
Counterparts
. This
Agreement may be executed in any number of counterparts, but all of such
counterparts shall together constitute but one and the same
agreement. In making proof of this Agreement, it shall not be
necessary to produce or account for more than one counterpart thereof signed by
each of the parties hereto. Delivery of an executed counterpart of
this Agreement by telefacsimile or .pdf shall have the same force and effect as
delivery of an original executed counterpart of this Agreement.
[REMAINDER
OF THIS PAGE INTENTIONALLY LEFT BLANK]
IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed on the day and year first above written.
ENVISION SOLAR INTERNATIONAL,
INC.
, a California corporation
By:____
__/s/ Robert
Noble_
___________________________________
Name: Robert
Noble
Title: CEO
ENVISION SOLAR CONSTRUCTION,
INC.
, a California corporation
By:______
/s/ Robert
Noble_
___________________________________
Name: Robert
Noble
Title: CEO
ENVISION SOLAR RESIDENTIAL,
INC.
, a California corporation
By:______
/s/ Robert
Noble
____________________________________
Name: Robert
Noble
Title: CEO
ENVISION AFRICA, LLC
, a
Delaware limited liability company
By:_____
_/s/ Robert
Noble_
___________________________________
Name: Robert
Noble
Title: CEO
|
|
By:
GEMINI STRATEGIES, LLC, as investment
manager
|
By:
/s/ Steven
Winters
Name: Steven
Winters
Title: Managing
Member
|
|
GEMINI STRATEGIES, LLC
,
as Agent
|
By:
/s/ Steven
Winters
Name: Steven
Winters
Title: Managing Member
Exhibit
10.19
LOCK-UP
AGREEMENT
This Lock-Up Agreement ("
Agreement
") is made
as of the date set forth below by the undersigned ("
Holder
") in
connection with such Holder’s ownership of shares of Envision Solar
International, Inc., a California corporation (the "
Company
").
Whereas, Holder is the actual and/or
beneficial owner of shares of Common Stock (“
Common Stock
”) of the
Company;
Whereas,
Holder acknowledges and understands that the Company has entered into an
Amendment Agreement dated on or about the date hereof (“
Amendment Agreement
”)
with Gemini Master Fund, Ltd. (the “
Purchaser
”), pursuant
to which such Purchaser has, among other things, extended the maturity date of a
past due loan to the Company until December 31, 2010 and loaned additional funds
to the Company to enable it to become a public company (“
Transactions
”);
capitalized terms used herein and not otherwise defined shall have the meanings
set forth in the Amendment Agreement; and
Whereas,
Holder acknowledges and understands that, as a condition subsequent to
proceeding with the Transactions, the Purchaser has required that, and the
Company has agreed to obtain an agreement from each Holder that, such Holder
shall refrain from selling any securities of the Company during the “Restricted
Period”, where the “
Restricted Period
”
includes the period commencing on October 30, 2009 and ending on June 31,
2010;
NOW,
THEREFORE, for good and valuable consideration, the receipt and sufficiency of
which consideration are hereby acknowledged, Holder agrees as
follows:
1.
Share
Restriction
.
(a)
Holder
hereby irrevocably agrees that during the Restricted Period, Holder will not
(1) offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right or
warrant to purchase, or otherwise transfer or dispose of, directly or
indirectly, any shares of Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock or (2) enter into any swap or
other agreement that transfers, in whole or in part, any of the economic
consequences of ownership of the Common Stock, whether any such transaction
described in clause (1) or (2) above is to be settled by delivery of Common
Stock or such other securities, in cash or otherwise. The foregoing
sentence shall not apply in connection with an offer made to all shareholders of
the Company in connection with any merger, consolidation or similar transaction
involving the Company. In addition, Holder agrees that during the
Restricted Period the Holder will not make any demand for or exercise any right
with respect to the registration under the Securities Act of any shares of
Common Stock or any security convertible into or exercisable or exchangeable for
Common Stock.
(b)
In
furtherance of the foregoing, Holder further agrees that (i) the Company is
authorized to place "stop orders" on its books to prevent any transfer of shares
of Common Stock or other securities of the Company held by Holder in violation
of this Agreement, and (ii) the Company and any duly appointed transfer agent
for the registration or transfer of the securities described herein are hereby
authorized to decline to make any transfer of securities if such transfer would
constitute a violation or breach of this Agreement.
(c)
Any
subsequent issuance and/or acquisition of shares or the right to acquire shares
by or to Holder will be subject to the provisions of this
Agreement.
(d)
Notwithstanding
the foregoing restrictions on transfer, Holder may, at any time and from time to
time during the Restricted Period, transfer the Common Stock or other applicable
securities (i) as bona fide gifts or transfers by will or intestacy, (ii) to any
trust for the direct or indirect benefit of Holder or the immediate family of
Holder, provided that any such transfer shall not involve a disposition for
value, (iii) to a partnership of which the Holder is a general partner, provided
that, in the case of any gift or transfer described in clauses (i), (ii) or
(iii), each donee or transferee agrees in writing to be bound by the terms and
conditions contained herein in the same manner as such terms and conditions
apply to Holder. For purposes hereof, "immediate family" means any
relationship by blood, marriage or adoption, not more remote than first
cousin.
2.
Miscellaneous
.
(a)
At any
time and from time to time after the signing of this Agreement, Holder will
execute such additional instruments and take such action as may be reasonably
requested by the Purchaser to carry out the intent and purposes of this
Agreement.
(b)
This
Agreement shall be governed, construed and enforced in accordance with the laws
of the State of New York without regard to conflicts of laws principles that
would result in the application of the substantive laws of another jurisdiction,
except to the extent that the securities laws of the state in which Holder
resides and federal securities laws may apply. Any proceeding brought
to enforce this Agreement may be brought in courts sitting in New York County,
New York.
(c)
This
Agreement contains the entire agreement of Holder with respect to the subject
matter hereof. Holder hereby represents and warrants that Holder has
full power and authority to enter into this Agreement. This Agreement
shall be binding upon Holder, its legal representatives, heirs, successors and
assigns. This Agreement may be signed and delivered by facsimile and
such facsimile signed and delivered shall be enforceable.
(d)
The
Holder understands that the execution of this Agreement by Holder is a condition
subsequent to the Purchaser’s obligation to consummate the Transactions
contemplated by the Amendment Agreement and continue the loans advanced to the
Company under the Notes.
(e)
The
Purchaser is a third party beneficiary of this Agreement, with right of
enforcement.
[
Signature Page
Follows
]
IN WITNESS WHEREOF, and intending to be
legally bound hereby, Holder has executed this Agreement as of the date set
forth below.
HOLDER:
_
/s/ Robert
Noble__
____________________
(
Signature of
Holder
)
Robert Noble
_______________________________
(
Print Name of
Holder
)
October 30,
2009_
________________________
(
Date
)
COMPANY:
ENVISION
SOLAR INTERNATIONAL, INC.
By:
/s/ Robert
Noble
Name:
Robert Noble
Title: Chief Executive
Officer
3
Exhibit 10.20
20
Exhibit
10.21
THE
SECURITIES REPRESENTED HEREBY, OR INTO WHICH THIS NOTE IS CONVERTIBLE, HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF
(A)
AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS OR
(B)
AN
OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT
REQUIRED UNDER SAID ACT OR APPLICABLE STATE
SECURITIES
LAWS OR (II) UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT.
NOTWITHSTANDING
THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE
MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
ANY TRANSFEREE OF
THIS
NOTE SHOULD CAREFULLY REVIEW THE TERMS OF THIS NOTE. THE PRINCIPAL
AMOUNT
REPRESENTED BY THIS NOTE MAY BE LESS THAN THE AMOUNTS SET
FORTH
ON THE FACE HEREOF.
THIS
NOTE AND THE INDEBTEDNESS EVIDENCED HEREBY ARE SUBORDINATE IN THE
MANNER
AND TO THE EXTENT SET FORTH IN THAT CERTAIN SUBORDINATION
AGREEMENT
(THE "SUBORDINATION AGREEMENT") DATED AS OF SEPTEMBER 2009 AMONG ENVISION SOLAR
INTERNATIONAL, INC., A CALIFORNIA CORPORATION,
ENVISION
SOLAR CONSTRUCTION, INC., A CALIFORNIA CORPORATION, ENVISION
SOLAR
RESIDENTIAL, INC., A CALIFORNIA CORPORATION, ENVISION AFRICA, LLC, A DELAWARE
LIMITED LIABILITY COMPANY, JOHN EVEY, AND GEMINI MASTER FUND,
LTD.,
A CAYMAN ISLANDS CORPORATION, TO THE SENIOR INDEBTEDNESS (AS
DEFINED
IN THE SUBORDINATION AGREEMENT); AND EACH HOLDER OF THIS NOTE,
BY
ITS ACCEPTANCE HEREOF, SHALL BE BOUND BY THE PROVISIONS OF THE SUBORDINATION
AGREEMENT.
ENVISION
SOLAR INTERNATIONAL, INC.
AMENDED
AND RESTATED 10% SUBORDINATED CONVERTIBLE PROMISSORY NOTE
(non-negotiable)
|
$100,000.00
|
December
17, 2009
|
FOR VALUE
RECEIVED Envision Solar International, Inc., a California corporation (the
"
Company
"),
promises to pay to John Evey (the "
Holder
"), the
principal amount of One Hundred Two Thousand Two Hundred Thirty Five and Sixty
Two Cents ($102,235.62), or such lesser amount as shall equal the outstanding
principal amount hereof, together with simple interest on the unpaid principal
balance, commencing on October 1, 2009 at a rate equal to ten percent (10%) per
annum, computed on the basis of the actual number of days elapsed and a year of
365 days. All unpaid principal, together with any then accrued but unpaid
interest and any other amounts payable hereunder, unless previously converted
pursuant to Section 4 below, shall be due and payable on December 31, 2010 (the
"
Maturity
Date
");
provided
,
however
, that in the
event the Company receives more than $1,000,000 from any financing or series of
financings (whether related or unrelated), in the form or debt, equity or any
combination thereof, prior to the Maturity Date, 25% of the proceeds of any such
financing in excess of $1,000,000 shall be used to pay down this Note and all of
the other Notes (as hereinafter defined), pro rata;
provided
,
further
, that no
funds provided to the Company by Gemini Master Fund, Ltd. ("
Gemini
") or any
person or entity that co-invests with Gemini in the Company shall be credited
towards this $1,000,000 threshold. This Note is one of a series of subordinated
notes issued to certain trade creditors of the Company, on the date hereof, in
settlement of the Company's obligations to such creditors (together, the "
Notes
").
The
following is a statement of the rights of the Holder of this Note and the
conditions to which this Note is subject, and to which the Holder, by the
acceptance of this Note, agrees:
1.
Event of
Default
.
(a) For
purposes of this Note, an "
Event of Default
"
means:
(i) the
Company shall default in the payment of interest and/or
principal
on this Note; or
(ii) the
Company shall fail to materially perform any covenant,
term,
provision, condition, agreement or obligation of the Company under this Note
(other
than for non-payment) and such failure shall continue uncured for a period of
ten
(10)
business days after notice from the Holder of such failure; or
(iii) the
Company shall (1) become insolvent; (2) admit in
writing
its inability to pay its debts generally as they mature; (3) make an assignment
for
the
benefit of creditors or commence proceedings for its dissolution; or (4) apply
for or
consent
to the appointment of a trustee, liquidator or receiver for it or for a
substantial
part of
its property or business; or
(iv) a
trustee, liquidator or receiver shall be appointed for the
Company
or for a substantial part of its property or business without its consent and
shall
not be
discharged within thirty (30) days after such appointment; or
(v) any
governmental agency or any court of competent
jurisdiction
at the insistence of any governmental agency shall assume custody or control
of the
whole or any substantial portion of the properties or assets of the Company and
shall not
be dismissed within thirty (30) days thereafter; or
(vi) the
Company shall sell or otherwise transfer all or
substantially
all of its assets; or
(vii) bankruptcy,
reorganization, insolvency or liquidation
proceedings
or other proceedings, or relief under any bankruptcy law or any law for the
relief of
debt shall be instituted by or against the Company and, if instituted against
the
Company
shall not be dismissed within thirty (30) days after such institution, or the
Company
shall by any action or answer approve of, consent to, or acquiesce in any such
proceedings
or admit to any material allegations of, or default in answering a petition
filed in
any such proceeding.
(b) Upon
the occurrence of an Event of Default, the entire indebtedness with accrued
interest thereon due under this Note shall, at the option of the Holder, be
immediately due and payable without notice. Failure to exercise such option
shall not constitute a waiver of the right to exercise the same in the event of
any subsequent Event of Default.
2.
Seniority
. The
indebtedness evidenced by this Note is hereby expressly subordinated, in right
of payment to the prior payment in full of all of the Company's existing and
future Senior Indebtedness. The Holder shall execute any intercreditor agreement
requested by the Company to give effect to the foregoing seniority.
3.
Prepayment
. The
Company may, subject to the terms set forth in the Subordination Agreement,
prepay this Note at any time, in whole or in part, provided any such prepayment
will be applied first to the payment of expenses due under this Note, second to
interest accrued on this Note and third, if the amount of prepayment exceeds the
amount of all such expenses and accrued interest, to the payment of principal of
this Note.
4.
Conversion
. The
Holder may at his option elect to convert all or a portion of the outstanding
principal amount and unpaid accrued interest thereon as of such date into shares
of the Company's common stock (the "
Common Stock
"), in
accordance with this Section 4 at any time or from time to time (the "
Company Conversion
Shares
"). The Holder shall notify the Company in writing of the date on
which such conversion is to be effectuated (such date, the "
Conversion Date
").
The number of shares of Company Conversion Shares (calculated to the nearest
whole share) to which the Holder shall be entitled upon such conversion shall be
determined by dividing the outstanding principal amount and unpaid accrued
interest thereon to be converted by ten dollars ($10.00), as adjusted for any
stock dividend, stock split, stock combination, reclassification or similar
transaction (the "
Conversion Price
").
On the Conversion Date, the Holder shall surrender this Note to the Company or
its transfer agent, and the Holder shall receive from the Company share
certificates evidencing the Company Conversion Shares in the name or names in
which the Holder wishes such certificate or certificates for the Company
Conversion Shares to be issued and, if the entire principal amount is not
converted, a replacement note in the amount of the unconverted principal
amount.
5.
Miscellaneous
.
(a)
Loss, Theft, Destruction or
Mutilation of Note
. Upon receipt of evidence reasonably satisfactory to
the Company of the loss, theft, destruction or mutilation of
this Note
and, in the case of loss, theft or destruction, delivery of an indemnity
agreement reasonably satisfactory in form and substance to the Company or, in
the case of mutilation, on surrender and cancellation of this Note, the Company
shall execute and deliver, in lieu of this Note, a new note executed in the same
manner as this Note, in the same principal amount as the unpaid principal amount
of this Note and dated the date to which interest shall have been paid on this
Note or, if no interest shall have yet been so paid, dated the date of this
Note.
(b)
Payment
. All payments
under this Note shall be made in lawful tender of the United
States.
(c)
Waivers
. The Company
hereby waives notice of default, presentment or demand for payment, protest or
notice of nonpayment or dishonor and all other notices or demands relative to
this instrument.
(d)
Waiver and Amendment
.
Any provision of this Note may be amended, waived or modified only by an
instrument in writing signed by the party against which enforcement of the same
is sought
(e)
Notices
. Any notice
or other communication required or permitted to be given hereunder shall be in
writing sent by mail, facsimile with printed confirmation, nationally recognized
overnight carrier or personal delivery and shall be effective upon actual
receipt of such notice, to the following addresses until notice is received that
any such address or contact information has been changed:
To the
Company:
Envision
Solar International, Inc.
4225
Executive Square Suite 1000
La Jolla,
California 92037
Attn:
Chief Executive Officer
To
Holder:
Pegasus Enterprises, LP
4542 Ruffrer Street, Suite 387
San Diego, CA 92111
Attn: General Counsel
(f)
Successors and
Assigns
. This Note may not be assigned or transferred by the Holder
without the prior written consent of the Company. Subject to the preceding
sentence, the rights and obligations of the Company and the Holder of this Note
shall be binding upon and benefit the successors, permitted assigns, heirs,
administrators and permitted transferees of the parties.
(g)
Governing Law;
Jurisdiction
. THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO PRINCIPLES
OF CONFLICTS OF LAWS. EACH PARTY HERETO HEREBY IRREVOCABLY SUBMITS TO THE
EXCLUSIVE PERSONAL AND SUBJECT MATTER JURISDICTION OF THE
SUPREME
COURT OF THE STATE OF NEW YORK LOCATED IN THE BOROUGH OF MANHATTAN OVER ANY
SUIT, ACTION OR PROCEEDING ARISING OUT OF OR
RELATING
TO THIS NOTE. EACH PARTY HEREBY IRREVOCABLY WAIVES TO THE FULLEST EXTENT
PERMITTED BY LAW, (A) ANY OBJECTION THAT THEY MAY NOW OR HEREAFTER HAVE TO THE
VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT; AND (B)
ANY CLAIM THAT ANY
SUCH
SUIT, ACTION OR PROCEEDING HAS BEEN BROUGHT IN AN INCONVENIENT
FORUM.
FINAL JUDGMENT IN ANY SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT SHALL
BE CONCLUSIVE AND BINDING UPON EACH PARTY
DULY
SERVED WITH PROCESS THEREIN AND MAY BE ENFORCED IN THE COURTS OF THE
JURISDICTION OF WHICH EITHER PARTY OR ANY OF THEIR PROPERTY IS SUBJECT, BY A
SUIT UPON SUCH JUDGMENT.
[SIGNATURE
PAGE FOLLOWS]
IN
WITNESS WHEREOF, the Company has caused this Note to be executed as of the date
first above written by its duly authorized officer.
|
|
ENVISION
SOLAR INTERNATIONAL, INC.
|
|
|
|
|
|
|
|
|
By:
|
/s/
Robert Noble
|
|
|
|
|
Name:
Robert Noble
|
|
|
|
|
Title:
CEO
|
|
|
|
|
|
|
5
Exhibit
10.22
THE
SECURITIES REPRESENTED HEREBY, OR INTO WHICH THIS NOTE IS CONVERTIBLE, HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF
(A)
AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS OR
(B)
AN
OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT
REQUIRED UNDER SAID ACT OR APPLICABLE STATE
SECURITIES
LAWS OR (II) UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT.
NOTWITHSTANDING
THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE
MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
ANY TRANSFEREE OF
THIS
NOTE SHOULD CAREFULLY REVIEW THE TERMS OF THIS NOTE. THE PRINCIPAL
AMOUNT
REPRESENTED BY THIS NOTE MAY BE LESS THAN THE AMOUNTS SET
FORTH
ON THE FACE HEREOF.
THIS
NOTE AND THE INDEBTEDNESS EVIDENCED HEREBY ARE SUBORDINATE IN THE
MANNER
AND TO THE EXTENT SET FORTH IN THAT CERTAIN SUBORDINATION
AGREEMENT
(THE "SUBORDINATION AGREEMENT") DATED AS OF SEPTEMBER 2009 AMONG ENVISION SOLAR
INTERNATIONAL, INC., A CALIFORNIA CORPORATION,
ENVISION
SOLAR CONSTRUCTION, INC., A CALIFORNIA CORPORATION, ENVISION
SOLAR
RESIDENTIAL, INC., A CALIFORNIA CORPORATION, ENVISION AFRICA, LLC, A DELAWARE
LIMITED LIABILITY COMPANY, JOHN EVEY, AND GEMINI MASTER FUND,
LTD.,
A CAYMAN ISLANDS CORPORATION, TO THE SENIOR INDEBTEDNESS (AS
DEFINED
IN THE SUBORDINATION AGREEMENT); AND EACH HOLDER OF THIS NOTE,
BY
ITS ACCEPTANCE HEREOF, SHALL BE BOUND BY THE PROVISIONS OF THE SUBORDINATION
AGREEMENT.
ENVISION
SOLAR INTERNATIONAL, INC.
AMENDED
AND RESTATED 10% SUBORDINATED CONVERTIBLE PROMISSORY NOTE
(non-negotiable)
|
$102,235.62
|
December
31, 2010
|
FOR VALUE
RECEIVED Envision Solar International, Inc., a California corporation (the
"
Company
"),
promises to pay to John Evey (the "
Holder
"), the
principal amount of One Hundred Two Thousand Two Hundred Thirty Five and Sixty
Two Cents ($102,235.62), or such lesser amount as shall equal the outstanding
principal amount hereof, together with simple interest on the unpaid principal
balance, commencing on October 1, 2009 at a rate equal to ten percent (10%) per
annum, computed on the basis of the actual number of days elapsed and a year of
365 days. All unpaid principal, together with any then accrued but unpaid
interest and any other amounts payable hereunder, unless previously converted
pursuant to Section 4 below, shall be due and payable on December 31, 2010 (the
"
Maturity
Date
");
provided
,
however
, that in the
event the Company receives more than $1,000,000 from any financing or series of
financings (whether related or unrelated), in the form or debt, equity or any
combination thereof, prior to the Maturity Date, 25% of the proceeds of any such
financing in excess of $1,000,000 shall be used to pay down this Note and all of
the other Notes (as hereinafter defined), pro rata;
provided
,
further
, that no
funds provided to the Company by Gemini Master Fund, Ltd. ("
Gemini
") or any
person or entity that co-invests with Gemini in the Company shall be credited
towards this $1,000,000 threshold. This Note is one of a series of subordinated
notes issued to certain trade creditors of the Company, on the date hereof, in
settlement of the Company's obligations to such creditors (together, the "
Notes
").
This Note
amends, restates and supersedes in its entirety that certain 8% Secured
Convertible Note, dated March 10, 2009, issued by the Company to the Holder in
the principal
amount of
$50,000.00.
The
following is a statement of the rights of the Holder of this Note and the
conditions to which this Note is subject, and to which the Holder, by the
acceptance of this Note, agrees:
1.
Event of
Default
.
(a) For
purposes of this Note, an "
Event of Default
"
means:
(i) the
Company shall default in the payment of interest and/or
principal
on this Note; or
(ii) the
Company shall fail to materially perform any covenant,
term,
provision, condition, agreement or obligation of the Company under this Note
(other
than for non-payment) and such failure shall continue uncured for a period of
ten
(10)
business days after notice from the Holder of such failure; or
(iii) the
Company shall (1) become insolvent; (2) admit in
writing
its inability to pay its debts generally as they mature; (3) make an assignment
for
the
benefit of creditors or commence proceedings for its dissolution; or (4) apply
for or
consent
to the appointment of a trustee, liquidator or receiver for it or for a
substantial
part of
its property or business; or
(iv) a
trustee, liquidator or receiver shall be appointed for the
Company
or for a substantial part of its property or business without its consent and
shall
not be
discharged within thirty (30) days after such appointment; or
(v) any
governmental agency or any court of competent
jurisdiction
at the insistence of any governmental agency shall assume custody or control
of the
whole or any substantial portion of the properties or assets of the Company and
shall not
be dismissed within thirty (30) days thereafter; or
(vi) the
Company shall sell or otherwise transfer all or
substantially
all of its assets; or
(vii) bankruptcy,
reorganization, insolvency or liquidation
proceedings
or other proceedings, or relief under any bankruptcy law or any law for the
relief of
debt shall be instituted by or against the Company and, if instituted against
the
Company
shall not be dismissed within thirty (30) days after such institution, or the
Company
shall by any action or answer approve of, consent to, or acquiesce in any such
proceedings
or admit to any material allegations of, or default in answering a petition
filed in
any such proceeding.
(b) Upon
the occurrence of an Event of Default, the entire indebtedness with accrued
interest thereon due under this Note shall, at the option of the Holder, be
immediately due and payable without notice. Failure to exercise such option
shall not constitute a waiver of the right to exercise the same in the event of
any subsequent Event of Default.
2.
Seniority
. The
indebtedness evidenced by this Note is hereby expressly subordinated, in right
of payment to the prior payment in full of all of the Company's existing and
future Senior Indebtedness. The Holder shall execute any intercreditor agreement
requested by the Company to give effect to the foregoing seniority.
3.
Prepayment
. The
Company may, subject to the terms set forth in the Subordination Agreement,
prepay this Note at any time, in whole or in part, provided any such prepayment
will be applied first to the payment of expenses due under this Note, second to
interest accrued on this Note and third, if the amount of prepayment exceeds the
amount of all such expenses and accrued interest, to the payment of principal of
this Note.
4.
Conversion
. The
Holder may at his option elect to convert all or a portion of the outstanding
principal amount and unpaid accrued interest thereon as of such date into shares
of the Company's common stock (the "
Common Stock
"), in
accordance with this Section 4 at any time or from time to time (the "
Company Conversion
Shares
"). The Holder shall notify the Company in writing of the date on
which such conversion is to be effectuated (such date, the "
Conversion Date
").
The number of shares of Company Conversion Shares (calculated to the nearest
whole share) to which the Holder shall be entitled upon such conversion shall be
determined by dividing the outstanding principal amount and unpaid accrued
interest thereon to be converted by ten dollars ($10.00), as adjusted for any
stock dividend, stock split, stock combination, reclassification or similar
transaction (the "
Conversion Price
").
On the Conversion Date, the Holder shall surrender this Note to the Company or
its transfer agent, and the Holder shall receive from the Company share
certificates evidencing the Company Conversion Shares in the name or names in
which the Holder wishes such certificate or certificates for the Company
Conversion Shares to be issued and, if the entire principal amount is not
converted, a replacement note in the amount of the unconverted principal
amount.
5.
Miscellaneous
.
(a)
Loss, Theft, Destruction or
Mutilation of Note
. Upon receipt of evidence reasonably satisfactory to
the Company of the loss, theft, destruction or mutilation of
this Note
and, in the case of loss, theft or destruction, delivery of an indemnity
agreement reasonably satisfactory in form and substance to the Company or, in
the case of mutilation, on surrender and cancellation of this Note, the Company
shall execute and deliver, in lieu of this Note, a new note executed in the same
manner as this Note, in the same principal amount as the unpaid principal amount
of this Note and dated the date to which interest shall have been paid on this
Note or, if no interest shall have yet been so paid, dated the date of this
Note.
(b)
Payment
. All payments
under this Note shall be made in lawful tender of the United
States.
(c)
Waivers
. The Company
hereby waives notice of default, presentment or demand for payment, protest or
notice of nonpayment or dishonor and all other notices or demands relative to
this instrument.
(d)
Waiver and Amendment
.
Any provision of this Note may be amended, waived or modified only by an
instrument in writing signed by the party against which enforcement of the same
is sought
(e)
Notices
. Any notice
or other communication required or permitted to be given hereunder shall be in
writing sent by mail, facsimile with printed confirmation, nationally recognized
overnight carrier or personal delivery and shall be effective upon actual
receipt of such notice, to the following addresses until notice is received that
any such address or contact information has been changed:
To the
Company:
Envision
Solar International, Inc.
4225
Executive Square Suite 1000
La Jolla,
California 92037
Attn:
Chief Executive Officer
To
Holder:
(f)
Successors and
Assigns
. This Note may not be assigned or transferred by the Holder
without the prior written consent of the Company. Subject to the preceding
sentence, the rights and obligations of the Company and the Holder of this Note
shall be binding upon and benefit the successors, permitted assigns, heirs,
administrators and permitted transferees of the parties.
(g)
Governing Law;
Jurisdiction
. THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO PRINCIPLES
OF CONFLICTS OF LAWS. EACH PARTY HERETO HEREBY IRREVOCABLY SUBMITS TO THE
EXCLUSIVE PERSONAL AND SUBJECT MATTER JURISDICTION OF THE
SUPREME
COURT OF THE STATE OF NEW YORK LOCATED IN THE BOROUGH OF MANHATTAN OVER ANY
SUIT, ACTION OR PROCEEDING ARISING OUT OF OR
RELATING
TO THIS NOTE. EACH PARTY HEREBY IRREVOCABLY WAIVES TO THE FULLEST EXTENT
PERMITTED BY LAW, (A) ANY OBJECTION THAT THEY MAY NOW OR HEREAFTER HAVE TO THE
VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT; AND (B)
ANY CLAIM THAT ANY
SUCH
SUIT, ACTION OR PROCEEDING HAS BEEN BROUGHT IN AN INCONVENIENT
FORUM.
FINAL JUDGMENT IN ANY SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT SHALL
BE CONCLUSIVE AND BINDING UPON EACH PARTY
DULY
SERVED WITH PROCESS THEREIN AND MAY BE ENFORCED IN THE COURTS OF THE
JURISDICTION OF WHICH EITHER PARTY OR ANY OF THEIR PROPERTY IS SUBJECT, BY A
SUIT UPON SUCH JUDGMENT.
[SIGNATURE
PAGE FOLLOWS]
IN
WITNESS WHEREOF, the Company has caused this Note to be executed as of the date
first above written by its duly authorized officer.
|
|
ENVISION
SOLAR INTERNATIONAL, INC.
|
|
|
|
|
|
|
|
|
By:
|
/s/
Robert Noble
|
|
|
|
|
Name:
Robert Noble
|
|
|
|
|
Title:
CEO
|
|
|
|
|
|
|
5
Exhibit 10.23
AGREEMENT OF CONVEYANCE,
TRANSFER AND ASSIGNMENT OF ASSETS AND ASSUMPTION OF
OBLIGATIONS
This
Agreement of Conveyance, Transfer and Assignment of Assets and Assumption of
Obligations (“
Transfer
and Assumption Agreement
”) is made as of February 10, 2010, by
Casita Enterprises, Inc., a Nevada corporation (“
Assignor
”), and
Casita Enterprises Holdings, Inc., a Delaware corporation and a wholly owned
subsidiary of Assignor (“
Assignee
”).
WHEREAS, Assignee intends to commence
operations as a provider of computer network services for consumers in Mexico
(the “
Business
”);
and
WHEREAS, Assignor desires to convey,
transfer and assign to Assignee, and Assignee desires to acquire from Assignor,
all of the assets of Assignor relating to the operation of the Business, and in
connection therewith, Assignee has agreed to assume all of the liabilities of
Assignor relating to the Business, on the terms and conditions set forth
herein.
NOW
THEREFORE, in consideration of the mutual promises and agreements contained
herein, the parties hereto, intending to be legally bound hereby, agree as
follows:
Section 1
.
Assignment.
1.1.
Assignment
of Assets
. For good and valuable consideration, the receipt
and adequacy of which are hereby acknowledged by Assignor, Assignor does hereby
assign, grant, bargain, sell, convey, transfer and deliver to Assignee, and its
successors and assigns, all of Assignor’s right, title and interest in, to and
under the assets, properties and business, of every kind and description,
wherever located, real, personal or mixed, tangible or intangible, owned, held
or used in the conduct of the Business (the “
Assets
”), including,
but not limited to, the assets listed on
Exhibit A
hereto, and
identified in part by reference to Assignor’s most recent balance sheet as of
September 30, 2009, filed with the Securities and Exchange Commission as part of
Assignor’s predecessor’s quarterly report on Form 10-Q on November 13, 2009 (the
“
Balance
Sheet
”). Notwithstanding anything to the contrary contained
herein, the term Assets shall not include either the assets of or the business
conducted by Envision Solar International, Inc., a California
corporation;
1.2
Further
Assurances
. Assignor shall from time to time after the date
hereof at the request of Assignee and without further consideration execute and
deliver to Assignee such additional instruments of transfer and assignment,
including without limitation any bills of sale, assignments of leases, deeds,
and other recordable instruments of assignment, transfer and conveyance, in
addition to this Transfer and Assumption Agreement, as Assignee shall reasonably
request to evidence more fully the assignment by Assignor to Assignee of the
Assets.
Section 2
.
Assumption.
2.1
Assumed
Liabilities
. As of the date hereof, Assignee hereby assumes
and agrees to pay, perform and discharge, fully and completely, all liabilities,
commitments, contracts, agreements, obligations or other claims against
Assignor, whether known or unknown, asserted or unasserted, accrued or
unaccrued, absolute or contingent, liquidated or unliquidated, due or to become
due, and whether contractual, statutory, or otherwise associated with the
Business whenever arising (the “
Liabilities
”),
including, but not limited to, the Liabilities listed on
Exhibit B
, and
identified in part by reference to the Balance Sheet.
2.2
Further
Assurances
. Assignee shall from time to time after the date
hereof at the request of Assignor and without further consideration execute and
deliver to Assignor such additional instruments of assumption in addition to
this Transfer and Assumption Agreement as Assignor shall reasonably request to
evidence more fully the assumption by Assignee of the Liabilities.
Section
3
.
Headings
.
The
descriptive headings contained in this Transfer and Assumption Agreement are for
convenience of reference only and shall not affect in any way the meaning or
interpretation of this Transfer and Assumption Agreement.
Section
4
.
Governing
Law
. This Transfer and Assumption Agreement shall be governed
by and construed in accordance with the laws of the State of Delaware applicable
to contracts made and to be performed entirely within that state, except that
any conveyances of leaseholds and real property made herein shall be governed by
the laws of the respective jurisdictions in which such property is
located.
[
The remainder of this page is blank
intentionally
.]
IN WITNESS WHEREOF, this Transfer and
Assumption Agreement has been duly executed and delivered by the parties hereto
as of the date first above written.
CASITA ENTERPRISES, INC.
By:
/s/ Robert Noble
Robert Noble
Chief Executive
Officer
CASITA
ENTERPRISES HOLDINGS, INC.
By:
Casita Enterprises, Inc.,
Its
sole stockholder
By:
/s/ Robert Noble
Robert Noble
Chief Executive
Officer
Exhibit
A
(a)
All of
the equipment, computers, servers, hardware, appliances, implements, and all
other tangible personal property that are owned by Assignor and have been used
in the conduct of the Business;
(b)
all
inventory associated with the Business;
(c)
all real
property and real property leases to which Assignor is a party, and which affect
the Business or the Assets;
(d)
all
contracts to which Assignor is a party, or which affect the Business or the
Assets, including leases of personal property;
(e)
all
rights, claims and causes of action against third parties resulting from or
relating to the operation of the Business or the Assets, including without
limitation, any rights, claims and causes of action arising under warranties
from vendors and other third parties;
(f)
all
governmental licenses, permits, authorizations, consents or approvals affecting
or relating to the Business or the Assets;
(g)
all
accounts receivable, notes receivable, prepaid expenses and insurance and
indemnity claims to the extent related to any of the Assets or the
Business;
(h)
all
goodwill associated with the Assets and the Business;
(i)
all
business records, regardless of the medium of storage, relating to the Assets
and/or the Business, including without limitation, all schematics, drawings,
customer data, subscriber lists, statistics, promotional graphics, original art
work, mats, plates, negatives, accounting and financial information concerning
the Assets or Business;
(j)
Assignor’s
right to use the name “Casita Enterprises” and all other names used in
conducting the Business, and all derivations thereof, in connection with
Assignee’s future conduct of the Business;
(k)
all
internet domain names and URLs of the Business, software, inventions, art works,
patents, patent applications, processes, shop rights, formulas, brand names,
trade secrets, know-how, service marks, trade names, trademarks, trademark
applications, copyrights, source and object codes, customer lists, drawings,
ideas, algorithms, processes, computer software programs or applications (in
code and object code form), tangible or intangible proprietary information and
any other intellectual property and similar items and related rights owned by or
licensed to Assignor used in the Business, together with any goodwill associated
therewith and all rights of action on account of past, present and future
unauthorized use or infringement thereof; and
(l)
all other
privileges, rights, interests, properties and assets of whatever nature and
wherever located that are owned, used or intended for use in connection with, or
that are necessary to the continued conduct of, the Business as presently
conducted or planned to be conducted.
Exhibit
B
(a)
All
liabilities in respect of indebtedness of Assignor related to the
Business;
(b)
product
liability and warranty claims relating to any product or service of Assignor
associated with the Business;
(c)
taxes,
duties, levies, assessments and other such charges, including any penalties,
interests and fines with respect thereto, payable by Assignor to any federal,
provincial, municipal or other government, domestic or foreign, incurred in the
conduct of the Business;
(d)
liabilities
for salary, bonus, vacation pay, severance payments damages for wrongful
dismissal, or other compensation or benefits relating to Assignor’s employees
employed in the conduct of the Business;
(e)
any
liability or claim for liability (whether in contract, in tort or otherwise, and
whether or not successful) related to any lawsuit or threatened lawsuit or claim
(including any claim for breach or non-performance of any contract) based upon
actions, omissions or events relating to the Business; and
(f)
any
liability, ongoing duty or obligation, or any claim for liability or performance
of any ongoing duty or obligation arising under any and all contracts to which
Assignor is a party that relate to the Business or the Assets, or which affect
the Business or the Assets.
.
Exhibit 10.24
STOCK
PURCHASE AGREEMENT
THIS
STOCK PURCHASE AGREEMENT (this “
Agreement
”), dated as
of February 10, 2010, is made by and between Casita Enterprises, Inc., a Nevada
corporation (“
Seller
”), and each of
the individuals listed under the heading “Buyers” on the signature page
hereto (collectively, “
Buyers
”).
RECITALS
A. Seller
owns all of the issued and outstanding shares of common stock $0.001 par value
per share (the “
Shares
”) of Casita
Enterprises Holdings, Inc., a Delaware corporation (the “
Company
”), which
Shares constitute, as of the date hereof, all of the issued and outstanding
capital stock of the Company.
B. Buyers
hold 5,000,000 shares of common stock, $0.001 par value per share, of Seller
(the “
Purchase Price
Shares
”), and Buyers have agreed to transfer such shares back to Seller
for cancellation (the “
Repurchase
”).
C. In
connection with the Repurchase, Buyers wish to acquire from Seller, and Seller
wishes to transfer to Buyers, the Shares, upon the terms and subject to the
conditions set forth herein.
Accordingly,
the parties hereto agree as follows:
1.
Purchase and Sale of
Stock
.
(a)
Purchased Shares
.
Subject to the terms and conditions provided below, Seller shall sell and
transfer to Buyers and Buyers shall purchase from Seller, on the Closing Date
(as defined in Section 1(c)), all of the Shares.
(b)
Purchase
Price
. The purchase price for the Shares shall be the transfer
and delivery by Buyers to Seller of the Purchase Price Shares, deliverable as
provided in Section 2(b).
(c)
Closing
. The closing
of the transactions contemplated in this Agreement (the “
Closing
”) shall take
place as soon as practicable following the execution of this
Agreement. The date on which the Closing occurs shall be referred to
herein as the Closing Date (the “
Closing
Date
”).
2.
Closing
.
(a)
Transfer of Shares
.
At the Closing, Seller shall deliver to Buyers certificates representing the
Shares, duly endorsed to Buyers or as directed by Buyers, which delivery shall
vest Buyers with good and marketable title to all of the issued and outstanding
shares of capital stock of the Company, free and clear of all liens and
encumbrances.
(b)
Payment of Purchase
Price
. At the Closing, Buyers shall deliver to Seller a certificate or
certificates representing the Purchase Price Shares duly endorsed to Seller,
which delivery shall vest Seller with good and marketable title to the Purchase
Price Shares, free and clear of all liens and encumbrances.
3.
Representations and
Warranties of Seller
. Seller represents and warrants to Buyers as of the
date hereof as follows:
(a)
Corporate Authorization;
Enforceability
. The execution, delivery and performance by Seller of this
Agreement is within the corporate powers and has been, duly authorized by all
necessary corporate action on the part of Seller. This Agreement has been duly
executed and delivered by Seller and constitutes the valid and binding agreement
of Seller, enforceable against Seller in accordance with its terms, except to
the extent that its enforceability may be subject to applicable bankruptcy,
insolvency, reorganization, moratorium and similar Laws affecting the
enforcement of creditors’ rights generally and by general equitable
principles.
(b)
Governmental
Authorization
. The execution, delivery and performance by Seller of this
Agreement requires no consent, approval, Order, authorization or action by or in
respect of, or filing with, any Governmental Authority.
(c)
Non-Contravention;
Consents
. The execution, delivery and performance by Seller of this
Agreement and the consummation of the transactions contemplated hereby do not
(i) violate the certificate of incorporation or bylaws of Seller or (ii) violate
any applicable Law or Order.
(d)
Capitalization
. As of
the date hereof, Seller owns the Shares, which shares represent 100% of the
authorized, issued and outstanding capital stock of the Company. The Shares are
duly authorized, validly issued, fully-paid, non-assessable and free and clear
of any Liens.
4.
Representations and
Warranties of Buyers
. Buyers, jointly and severally, represent and
warrant to Seller as of the date hereof as follows:
(a)
Enforceability
. The
execution, delivery and performance by Buyers of this Agreement are within
Buyers’ powers. This Agreement has been duly executed and delivered by Buyers
and constitutes the valid and binding agreement of Buyers, enforceable against
Buyers in accordance with its terms, except to the extent that its
enforceability may be subject to applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles.
(b)
Governmental
Authorization
. The execution, delivery and performance by Buyers of this
Agreement require no consent, approval, Order, authorization or action by or in
respect of, or filing with, any Governmental Authority.
(c)
Non-Contravention;
Consents
. The execution, delivery and performance by Buyers of this
Agreement, and the consummation of the transactions contemplated hereby do not
violate any applicable Law or Order.
(d)
Purchase for
Investment
. Buyers are financially able to bear the economic
risks of acquiring an interest in the Company and the other transactions
contemplated hereby, and have no need for liquidity in this investment. Buyers
have such knowledge and experience in financial and business matters in general,
and with respect to businesses of a nature similar to the business of the
Company, so as to be capable of evaluating the merits and risks of, and making
an informed business decision with regard to, the acquisition of the Shares.
Buyers are acquiring the Shares solely for their own account and not with a view
to or for resale in connection with any distribution or public offering thereof,
within the meaning of any applicable securities laws and regulations, unless
such distribution or offering is registered under the Securities Act of 1933, as
amended (the “
Securities Act
”), or
an exemption from such registration is available. Buyers have (i) received all
the information they have deemed necessary to make an informed investment
decision with respect to the acquisition of the Shares, (ii) had an opportunity
to make such investigation as they have desired pertaining to the Company and
the acquisition of an interest therein, and to verify the information which is,
and has been, made available to them and (iii) had the opportunity to ask
questions of Seller concerning the Company. Buyers have received no public
solicitation or advertisement with respect to the offer or sale of the Shares.
Buyers realize that the Shares are “restricted securities” as that term is
defined in Rule 144 promulgated by the Securities and Exchange Commission under
the Securities Act, the resale of the Shares is restricted by federal and state
securities laws and, accordingly, the Shares must be held indefinitely unless
their resale is subsequently registered under the Securities Act or an exemption
from such registration is available for their resale. Buyers understand that any
resale of the Shares by them must be registered under the Securities Act (and
any applicable state securities law) or be effected in circumstances that, in
the opinion of counsel for the Company at the time, create an exemption or
otherwise do not require registration under the Securities Act (or applicable
state securities laws). Buyers acknowledge and consent that certificates now or
hereafter issued for the Shares will bear a legend substantially as
follows:
THE
SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR QUALIFIED UNDER
ANY APPLICABLE STATE SECURITIES LAWS (THE “STATE ACTS”), HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED
EXCEPT PURSUANT TO A REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND
QUALIFICATION UNDER THE STATE ACTS OR PURSUANT TO EXEMPTIONS FROM SUCH
REGISTRATION OR QUALIFICATION REQUIREMENTS (INCLUDING, IN THE CASE OF THE
SECURITIES ACT, THE EXEMPTIONS AFFORDED BY SECTION 4(1) OF THE SECURITIES ACT
AND RULE 144 THEREUNDER). AS A PRECONDITION TO ANY SUCH TRANSFER, THE ISSUER OF
THESE SECURITIES SHALL BE FURNISHED WITH AN OPINION OF COUNSEL OPINING AS TO THE
AVAILABILITY OF EXEMPTIONS FROM SUCH REGISTRATION AND QUALIFICATION AND/OR SUCH
OTHER EVIDENCE AS MAY BE SATISFACTORY THERETO THAT ANY SUCH TRANSFER WILL NOT
VIOLATE THE SECURITIES LAWS.
Buyers
understand that the Shares are being sold to them pursuant to the exemption from
registration contained in Section 4(1) of the Securities Act and that Seller is
relying upon the representations made herein as one of the bases for claiming
the Section 4(1) exemption.
(e)
Liabilities
. Following
the Closing, Seller will have no debts, liabilities or obligations relating to
the Company or its business or activities, whether before or after the Closing,
and there are no outstanding guaranties, performance or payment bonds, letters
of credit or other contingent contractual obligations that have been undertaken
by Seller directly or indirectly in relation to the Company or its business and
that may survive the Closing.
(f)
Title to Purchase Price
Shares
. Buyers are the sole record and beneficial owners of
the Purchase Price Shares. At Closing, Buyers will have good and marketable
title to the Purchase Price Shares, which Purchase Price Shares are, and at the
Closing will be, free and clear of all options, warrants, pledges, claims, liens
and encumbrances, and any restrictions or limitations prohibiting or restricting
transfer to Seller, except for restrictions on transfer as contemplated by
applicable securities laws.
5.
Indemnification and
Release
.
(a)
Indemnification
.
Buyers covenant and agree to jointly and severally indemnify, defend, protect
and hold harmless Seller, and its officers, directors, employees, stockholders,
agents, representatives and affiliates (collectively, together with Seller, the
“
Seller Indemnified
Parties
”) at all times from and after the date of this Agreement from and
against all losses, liabilities, damages, claims, actions, suits, proceedings,
demands, assessments, adjustments, costs and expenses (including specifically,
but without limitation, reasonable attorneys’ fees and expenses of
investigation), whether or not involving a third party claim and regardless of
any negligence of any Seller Indemnified Party (collectively, “
Losses
”), incurred by
any Seller Indemnified Party as a result of or arising from (i) any breach of
the representations and warranties of Buyers set forth herein or in certificates
delivered in connection herewith, (ii) any breach or nonfulfillment of any
covenant or agreement on the part of Buyers under this Agreement, (iii) any
debt, liability or obligation of the Company, whether incurred or arising prior
to the date hereof or after, (iv) any debt, liability or obligation of Seller
for actions taken prior to that certain merger by and between Seller, Envision
Acquisition Corp., a Delaware corporation, and Envision Solar International,
Inc., a California corporation (the “
Merger
”), including,
without limitation, any amounts due or owing to any former officer, director or
Affiliate of Seller, (v) the conduct and operations of the business of the
Company whether before or after the Closing, (vi) claims asserted against the
Company whether arising before or after the Closing, or (vii) any federal or
state income tax payable by Seller and attributable to the transaction
contemplated by this Agreement or activities prior to the Merger or with respect
to the Company after the Merger.
(b)
Third Party
Claims
.
(i) If
any claim or liability (a “
Third-Party Claim
”)
should be asserted against any of the Seller Indemnified Parties (the “
Indemnitee
”) by a
third party after the Closing for which Buyers have an indemnification
obligation under the terms of Section 5(a), then the Indemnitee shall notify
Buyers (the “
Indemnitor
”) within
20 days after the Third-Party Claim is asserted by a third party (said
notification being referred to as a “
Claim Notice
”) and
give the Indemnitor a reasonable opportunity to take part in any examination of
the books and records of the Indemnitee relating to such Third-Party Claim and
to assume the defense of such Third-Party Claim and in connection therewith and
to conduct any proceedings or negotiations relating thereto and necessary or
appropriate to
defend
the Indemnitee and/or settle the Third-Party Claim. The expenses (including
reasonable attorneys’ fees) of all negotiations, proceedings, contests, lawsuits
or settlements with respect to any Third-Party Claim shall be borne by the
Indemnitor. If the Indemnitor agrees to assume the defense of any Third-Party
Claim in writing within 20 days after the Claim Notice of such Third-Party Claim
has been delivered, through counsel reasonably satisfactory to Indemnitee, then
the Indemnitor shall be entitled to control the conduct of such defense, and
shall be responsible for any expenses of the Indemnitee in connection with the
defense of such Third-Party Claim so long as the Indemnitor continues such
defense until the final resolution of such Third-Party Claim. The Indemnitor
shall be responsible for paying all settlements made or judgments entered with
respect to any Third-Party Claim the defense of which has been assumed by the
Indemnitor. Except as provided in subsection (ii) below, both the Indemnitor and
the Indemnitee must approve any settlement of a Third-Party Claim. A failure by
the Indemnitee to timely give the Claim Notice shall not excuse Indemnitor from
any indemnification liability except only to the extent that the Indemnitor is
materially and adversely prejudiced by such failure.
(ii) If
the Indemnitor shall not agree to assume the defense of any Third-Party Claim in
writing within 20 days after the Claim Notice of such Third-Party Claim has been
delivered, or shall fail to continue such defense until the final resolution of
such Third-Party Claim, then the Indemnitee may defend against such Third-Party
Claim in such manner as it may deem appropriate and the Indemnitee may settle
such Third-Party Claim, in its sole discretion, on such terms as it may deem
appropriate. The Indemnitor shall promptly reimburse the Indemnitee for the
amount of all settlement payments and expenses, legal and otherwise, incurred by
the Indemnitee in connection with the defense or settlement of such Third-Party
Claim. If no settlement of such Third-Party Claim is made, then the Indemnitor
shall satisfy any judgment rendered with respect to such Third-Party Claim
before the Indemnitee is required to do so, and pay all expenses, legal or
otherwise, incurred by the Indemnitee in the defense against such Third-Party
Claim.
(c)
Non-Third-Party
Claims
. Upon discovery of any claim for which Buyers have an
indemnification obligation under the terms of this Section 5 which does not
involve a claim by a third party against the Indemnitee, the Indemnitee shall
give prompt notice to Buyers of such claim and, in any case, shall give Buyers
such notice within 30 days of such discovery. A failure by Indemnitee to timely
give the foregoing notice to Buyers shall not excuse Buyers from any
indemnification liability except to the extent that Buyers are materially and
adversely prejudiced by such failure.
(d)
Release
. Buyers,
on behalf of themselves and their Related Parties, hereby release and forever
discharge Seller and its individual, joint or mutual, past and present
representatives, Affiliates, officers, directors, employees, agents, attorneys,
stockholders, controlling persons, subsidiaries, successors and assigns
(individually, a “
Releasee
” and
collectively, “
Releasees
”) from any
and all claims, demands, proceedings, causes of action, orders, obligations,
contracts, agreements, debts and liabilities whatsoever, whether known or
unknown, suspected or unsuspected, both at law and in equity, which Buyers or
any of their Related Parties now have or have ever had against any Releasee.
Buyers hereby irrevocably covenant to refrain from, directly or indirectly,
asserting any claim or demand, or commencing, instituting or causing to be
commenced, any proceeding of any kind against any Releasee, based upon any
matter released hereby. “
Related
Parties
” shall mean,
with respect to Buyers, (i) any Person that directly or indirectly controls, is
directly or indirectly controlled by, or is directly or indirectly under common
control with Buyers, (ii) any Person in which Buyers hold a Material Interest or
(iii) any Person with respect to which any Buyer serves as a general partner or
a trustee (or in a similar capacity). For purposes of this definition, “
Material Interest
”
shall mean direct or indirect beneficial ownership (as defined in Rule 13d-3
under the Securities Exchange Act of 1934, as amended) of voting securities or
other voting interests representing at least ten percent (10%) of the
outstanding voting power of a Person or equity securities or other equity
interests representing at least ten percent (10%) of the outstanding equity
securities or equity interests in a Person.
6.
Definitions
. As used
in this Agreement:
(a) “
Affiliate
” means,
with respect to any Person, any other Person directly or indirectly controlling,
controlled by or under common control with the first Person. For the purposes of
this definition, “
Control
,” when used
with respect to any Person, means the possession, directly or indirectly, of the
power to (i) vote 10% or more of the securities having ordinary voting power for
the election of directors (or comparable positions) of such Person or (ii)
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise,
and the terms “
Controlling
” and
“
Controlled
”
have meanings correlative to the foregoing;
(b) “
Governmental
Authority
” means any domestic or foreign governmental or regulatory
authority;
(c) “
Law
” means any
federal, state or local statute, law, rule, regulation, ordinance, code, Permit,
license, policy or rule of common law;
(d) “
Lien
” means, with
respect to any property or asset, any mortgage, lien, pledge, charge, security
interest, encumbrance or other adverse claim of any kind in respect of such
property or asset. For purposes of this Agreement, a Person will be deemed to
own, subject to a Lien, any property or asset which it has acquired or holds
subject to the interest of a vendor or lessor under any conditional sale
agreement, capital lease or other title retention agreement relating to such
property or asset;
(e) “
Order
” means any
judgment, injunction, judicial or administrative order or decree;
(f) “
Permit
” means any
government or regulatory license, authorization, permit, franchise, consent or
approval; and
(h) “
Person
” means an
individual, corporation, partnership, limited liability company, association,
trust or other entity or organization, including a government or political
subdivision or an agency or instrumentality thereof.
7.
Miscellaneous
.
(a)
Counterparts
. This
Agreement may be signed in any number of counterparts, each of which will be
deemed an original but all of which together shall constitute one and the same
instrument.
(b)
Amendments and
Waivers
.
(i) Any
provision of this Agreement may be amended or waived if, but only if, such
amendment or waiver is in writing and is signed, in the case of an amendment, by
each party to this Agreement, or in the case of a waiver, by the party against
whom the waiver is to be effective.
(ii) No
failure or delay by any party in exercising any right, power or privilege
hereunder will operate as a waiver thereof nor will any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. The rights and remedies herein provided
will be cumulative and not exclusive of any rights or remedies provided by
Law.
(c)
Successors and
Assigns
. The provisions of this Agreement will be binding upon and inure
to the benefit of the parties hereto and their respective successors and
assigns;
provided
that
no party may assign, delegate or otherwise transfer (including by operation of
Law) any of its rights or obligations under this Agreement without the consent
of each other party hereto.
(d)
No Third Party
Beneficiaries
. This Agreement is for the sole benefit of the parties
hereto and their permitted successors and assigns and nothing herein expressed
or implied will give or be construed to give to any Person, other than the
parties hereto, those referenced in Section 5 above, and such permitted
successors and assigns, any legal or equitable rights hereunder.
(e)
Governing Law
. This
Agreement will be governed by, and construed in accordance with, the internal
substantive law of the State of New York.
(f)
Headings
. The
headings in this Agreement are for convenience of reference only and will not
control or affect the meaning or construction of any provisions
hereof.
(g)
Entire Agreement
.
This Agreement constitutes the entire agreement among the parties with respect
to the subject matter of this Agreement. This Agreement supersedes all prior
agreements and understandings, both oral and written, between the parties with
respect to the subject matter hereof of this Agreement.
(h)
Severability
. If any
provision of this Agreement or the application of any such provision to any
Person or circumstance is held invalid, illegal or unenforceable in any respect
by a court of competent jurisdiction, the remainder of the provisions of this
Agreement (or the application of such provision in other jurisdictions or to
Persons or circumstances other than those to which it was held invalid, illegal
or unenforceable) will in no way be affected, impaired or invalidated, and to
the extent permitted by applicable Law, any such provision will be restricted in
applicability or reformed to the minimum extent required for such provision to
be enforceable. This provision will be interpreted and enforced to give effect
to the original written intent of the parties prior to the determination of such
invalidity or unenforceability.
(i)
Notices
. Any
notice, request or other communication hereunder shall be given in writing and
shall be served either personally, by overnight delivery or delivered by mail,
certified return receipt and addressed to the following addresses:
(a) If
to Buyers:
c/o Jose
Cisneros
1093 East
Main Street, Suite 508
El Cajon,
California 92021
Casita
Enterprises, Inc.
7675
Dagget St, Suite 150
San
Diego, California 92111
Attention:
Robert Noble
[Signature
Page Follows]
[SIGNATURE
PAGE TO STOCK PURCHASE AGREEMENT]
IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and delivered, effective as of the date first above
written.
“SELLER”
CASITA ENTERPRISES, INC.
By:
/s/ Robert
Noble
Name:
Robert Noble
Title:
Chief Executive Officer
“BUYERS”
/s/
Jose
Cisneros
Jose
Cisneros
/s/ Lydia
Marcos
Lydia
Marcos
/s/
Marco
Martinez
Marco
Martinez
/s/
Paco
Sanchez
Paco
Sanchez
/s/
Don
Miguel
Don
Miguel
Exhibit 10.25
EMPLOYMENT AGREEMENT
THIS
EMPLOYMENT AGREEMENT
("Agreement")
is entered into by and between
Envision
Solar, LLC, a California limited liability company (the "Company"), and Robert
Noble,
an
individual ("Employee"), effective June 15, 2007 ("Effective Date"). The Company
desires
to retain
the services of Employee, and Employee desires to continue to be employed by the
Company
for the term of this Agreement.
NOW,
THEREFORE,
in the
consideration of the premises and the mutual covenants
and
agreements set forth herein, the Company and Employee, intending to be legally
bound,
hereby
agree as follows:
AGREEMENT
1.
Employment.
The
Company hereby employs Employee on an at-will basis for
the
position of Chief Executive Officer and President. Employee hereby accepts such
at-will
employment,
and agrees to perform services for the Company, upon the terms and conditions
set
forth in
this Agreement.
2.
Position
and Duties.
2.1
Duties.
During the term of this Agreement, Employee shall perform all
duties and functions customarily performed by the Chief
Executive Officer and President of a business of the size and nature similar to
that of the Company, and such other employment duties as the Company's Board of
Managers (the "Board") shall assign to him from time to time.
2.2
Competitive
Activities.
During the term of this Agreement Employee
shall not, directly or indirectly, either as an executive,
employer, consultant, agent, principal, partner, stockholder, member, manager,
officer, director, or in any other individual or representative capacity, engage
or participate in any business that is in competition in any manner whatsoever
with the business of the Company or any affiliate. This Agreement shall not be
interpreted to prohibit Employee from making passive personal investments or
conducting private business affairs if those activities do not materially
interfere with the services required under this Agreement. However; Employee
shall not directly or indirectly, acquire, hold, or retain any interest in any
business competing with or similar in nature to the business of the Company or
any affiliate.
3.
Compensation.
3.1
Salary.
As
compensation for services to be rendered by Employee under
this
Agreement, the Company shall pay to Employee an annual salary of One
Hundred and Twenty Thousand and 00/100 Dollars
($120,000.00) (the "Salary"), which shall be paid on a regular basis in
accordance with the Company's regular payroll procedures. In addition, Employee
shall receive an additional allowance of One Thousand and Two Hundred and 00/100
Dollars ($1,200.00) per month to cover automobile expenses, which do not include
parking and gas expenses.
3.2
Participation
in Benefit Plans.
Employee shall be included to the extent
eligible
thereunder in any and all plans of the Company providing general benefits for
the Company's employees, including, but not limited to, any group life
insurance, hospitalization, disability, medical, dental, Section 125 cafeteria,
pension, profit sharing, savings and stock bonus plans. Employee's participation
in any such plan or program shall be subject to the provisions, rules, and
regulations applicable thereto. Nothing in this Agreement shall impose on the
Company any affirmative obligation to establish any benefit plan. The Company
reserves the right to prospectively terminate or change benefit plans and
programs it offers to its employees at any time.
3.3
Unit
Options.
Employee shall receive options to purchase Units of the
Company
as more fully set forth in a Unit Option Agreement between Employee and the
Company dated, which is attached hereto as
Exhibit
A.
3.4
Expenses.
In accordance with the Company's policies established from
time to
time, the Company will pay or reimburse Employee for all reasonable and
necessary out-of-pocket expenses incurred by him in the performance of his
duties under this Agreement, provided that:
3.4.1 Each such item is of a type which qualifies it as a
proper item for deduction or capitalization by the Company for federal or state
income tax purposes, or, with respect to business meals, the item qualifies as a
partial deduction; and
3.4.2 Employee furnishes the Company with such records and
other documentary evidence as are customarily sufficient to satisfy the
requirement for substantiation of such expenditures as an income tax deduction
(or capitalization) pursuant to applicable federal and state statutes and/or
regulations.
4.
Annual
Vacation.
Employee
shall be entitled to 30 days vacation time each year
without
loss of compensation. In no event may Employee accrue more than 45 days of
vacation.
In the
event Employee at any time has accrued 45 days of vacation, no further vacation
shall
accrue
unless and until the accrued time is reduced to less than 45 days. Once this
maximum is
reached,
all further accruals will cease. Vacation accruals will recommence after
Employee has
taken
vacation and the accrued hours have been dropped below the 45-day maximum.
Employee
may be
absent from his employment for vacation only at such times as approved by the
Board.
5.
Compensation
upon Termination.
In the
event Employee's employment with
the
Company is terminated for any reason, voluntarily or involuntarily, Employee
shall be
entitled
to receive Employee's then current Salary accrued through the effective date of
termination,
plus accrued but unused vacation time. Employee shall not be entitled to further
compensation
upon termination.
6.
Proprietary
Matter.
Except
as permitted or directed by the company, Employee shall not during the term of
his employment or at any time thereafter divulge, furnish, disclose or
make
accessible (other than in the ordinary course of the business of the Company) to
anyone for
use in
any way any confidential, secret, or proprietary knowledge or information of the
Company
("Proprietary
Matter")
which Employee has acquired or become acquainted with or will acquire
or become
acquainted with, whether developed by himself or by others, including, but not
limited to, any trade secrets, confidential or secret designs, processes,
formulae, software or computer programs, plans, devices, or material (whether or
not patented or patentable, copyrighted or copyrightable) directly or indirectly
useful in any aspect of the business of the Company, any confidential customer,
distributor or supplier lists of the Company, any confidential or secret
development or research work of the Company, or other confidential, secret or
non-public aspects of the business of the Company. Employee acknowledges that
the Proprietary Matter. constitutes a unique and valuable asset of the Company
acquired at great time and expense by the Company, and that any disclosure or
other use of the Proprietary Matter other than for the sole benefit of the
Company would be wrongful and would cause irreparable harm to the Company. Both
during and after the term of this Agreement, Employee will refrain from any acts
or omissions that would reduce the value of Proprietary Matter to the Company.
The foregoing obligations of confidentiality, however, shall not apply to any
knowledge or information which is now published or which subsequently becomes
generally publicly known, other than as a direct or indirect result of the
breach of this Agreement by Employee.
7.
Inventions.
Any and
all inventions, innovations or improvements ("Inventions")
made,
developed or created by Employee (whether at the request or suggestion of the
Company
or
otherwise, whether alone or in conjunction with others, and whether during
regular hours of
work or
otherwise) during his employment by the Company which may be directly or
indirectly
useful
in, or relate to, the business of the Company shall be promptly and fully
disclosed by
Employee
to the Managers of the Company and shall be the Company's exclusive property,
and
Employee
shall promptly deliver to an appropriate representative of the Company as
designated
by the
Managers all papers, drawings, models, data and other material relating to any
inventions
made,
developed or created by him. Employee shall, at the request of the Company and
without
any
payment therefor, execute any documents necessary or advisable in the opinion of
the
Company's
counsel to direct issuance of patents or copyrights to the Company with respect
to
such
Inventions or to vest in the Company title to such Inventions. The expense of
securing any
such
patent or copyright shall be borne by the Company. Employee hereby irrevocably
designates
and appoints the Company and each of its duly authorized officers and agents as
Employee's agent and attorney-in-fact to act for and in Employee's behalf and
stead to execute
and file
any document(s) and to do all other lawfully permitted acts to further the
prosecution, issuance and enforcement of patents, copyrights and other
proprietary rights with the same force
and
effect as if executed and delivered by
Employee.
8.
Ventures.
If,
during the term of this Agreement, Employee is engaged in or
associated
with the planning or implementing of any project, program or venture involving
the
Company
and a third party or parties, all rights in the project, program or venture
shall belong to
the
Company and shall constitute a corporate opportunity belonging exclusively to
the Company.
Except as
expressly approved in writing by the Company, Employee shall not be entitled to
any
interest
in such project, program or venture or to any commission, finder's fee or other
compensation
in connection therewith, other than the compensation to be paid to Employee as
provided
in this Agreement.
9.
Copyright.
Employee
recognizes and understands that Employee's duties for the
Company
may include the preparation of materials, including software, written or graphic
materials,
and that any such materials conceived or written by Employee shall be "work made
for
- 3 -
hire" within the meaning of United States and other
applicable copyright laws. Employee understands that since such works are "works
made for hire," The Company will retain exclusive ownership of all rights in
such materials, including copyrights.
10.
Solicitation
of Customers.
During
his employment by the Company, Employee
will not,
either directly or indirectly, on his own behalf or in the service or on behalf
of others,
solicit,
divert or appropriate, or attempt to solicit, divert or appropriate, to any
competing
business
any customer or client of the Company, or any person or entity whose account has
been
solicited
by the Company.
11.
Solicitation
of Employees.
Employee
agrees that during his employment by the
Company
and for the one-year period following the termination of such employment for any
reason,
Employee shall not, either directly or indirectly, on his own behalf or in the
service or on
behalf of
others solicit, divert or hire away, or attempt to solicit, divert or hire away
any person
then
employed by the Company or any affiliate.
12.
Termination
Upon Notice.
This
Agreement and the employment created thereby
may be
terminated by the Company or Employee at any time, with or without cause, in the
absolute
and sole discretion of either party, upon the provision of written notice of
termination to
the other
party. It is understood that no employee or representative of the Company, other
than a
member of
the Board, has any authority to enter into any agreement for any specified
period of
time, or
to make any agreement contrary to the foregoing. Termination of this Agreement
pursuant
to this provision shall not prejudice any other remedy to which either party may
be
entitled
either at law, in equity, or under this
Agreement.
13.
Surrender
of Records and Property.
Upon
termination of his employment for
any
reason, Employee shall deliver promptly to the Company all records, manuals,
books, blank forms, documents, letters, memoranda, notes, notebooks, reports,
data, tables, and calculations or
copies
thereof, which are the property of the Company and which relate in any way to
the
business,
products, practices or techniques of the Company, and all other property of the
Company
and Proprietary Matter, including, but not limited to, all documents which in
whole or in part, contain any trade secrets or confidential information of the
Company, which in any of
these
cases are in his possession or under his control. If Employee purchases any
record book, ledger, or similar item to be used for keeping records of or
information regarding the business of
the
Company or its customers, Employee shall immediately notify the Company, which
shall
then
immediately reimburse Employee for the expense of such
purchase.
14.
Assignment.
This
Agreement shall not be assignable, in whole or in part, by
either
party without the written consent of the other party, except that the Company
may, without
the
consent of Employee, assign its rights and obligations under this Agreement to
any
corporation,
firm or other business entity (i) with or into which the Company may merge or
consolidate,
(ii) to which the Company may sell or transfer all or substantially all of its
assets, or
(iii) to
any Affiliate. Upon such assignment by the Company, the Company shall obtain the
assignees' written agreement enforceable by Employee to assume and perform, from
and after
the date
of such assignment, the terms, conditions, and provisions imposed by this
Agreement upon the Company. After any such assignment by the Company and such
written agreement by
the
assignee, the Company shall be discharged from all further liability hereunder
and such
assignee shall thereafter be deemed to be the Company for
the purposes of all provisions of this Agreement including this
section.
15.
Injunctive
Relief.
Employee agrees that it would be difficult to compensate the
Company fully for damages for any violation of the provisions of this Agreement,
including, without limitation, the provisions of Sections 6, 7, 8, 9, 10, 11 and
13. Accordingly, Employee specifically agrees that the Company shall be entitled
to temporary and permanent injunctive relief to enforce the provisions of this
Agreement. This provision with respect to injunctive
relief shall not,
however, diminish the right of the Company to claim and recover damages in
addition to injunctive relief.
16.
Arbitration.
16.1
Claims
Covered.
The parties shall settle by arbitration all statutory,
contractual and/or common law claims or controversies ("Claims") that the
Company may have against Employee, or that Employee may have against the Company
or any of its officers, directors, executives or agents in their capacity as
such or otherwise. Claims subject to arbitration include (i) claims for
discrimination (including but not limited to, age, disability, marital status,
medical condition, national origin, race, religion, sex, sexual harassment or
sexual orientation); (ii) claims for breach of any contract (express or
implied); (iii) claims for any federal, state or governmental law, statute,
regulation or ordinance; and (iv) tort claims (including but not limited to,
negligent or intentional injury, defamation and termination of employment in
violation of public policy).
16.2
Claims
Not Covered.
The arbitration of Claims shall not apply to (i) claims by
Employee for workers' compensation or unemployment insurance; (ii) claims which
even in the absence of these arbitration provisions could not have been
litigated in court or before any administrative proceeding under applicable
federal, state or local law; and (iii) claims by the Company for injunctive
and/or other equitable relief
16.3
Procedures.
Claims shall be settled by arbitration by a single, neutral arbitrator in
accordance with the Natural Rules for Resolution of Employment Disputes of the
American Arbitration Association. The parties shall have the right to take
depositions and obtain discovery regarding the subject matter of the arbitration
as provided in Title III of Part 4 (commencing with section 1985) of the
California Code of Civil Procedure. The arbitrator shall determine all questions
of fact and law relating to any Claim, including but not limited to, whether or
not any such Claim is subject to the arbitration provisions contained herein.
The arbitrator shall issue a written arbitration decision which shall include
essential findings and conclusions on which any award is based. Judgment upon
the award rendered by the arbitrator may be entered in any court having
jurisdiction. Each party shall pay the fees of its own attorneys, the expenses
of its witnesses and all other expenses connected with presenting its case,
except insofar as such fees or expenses are otherwise recoverable pursuant to a
statutory claim or cause of action, e.g., FEHA, ADEA or EEO claims. Other costs
of the arbitration, including the cost of any record or transcripts of the
arbitration, administrative fees, the fee of the arbitrator, and all other fees
and costs, shall be borne by the Company.
5
16.4
Remedies
.
Employee
understands that Employee is waiving the right to seek remedies in court,
including the right to a jury trial. The arbitrator shall be empowered to award
any relief which might have been available in a court of law or
equity.
16.5
Required
Notice and Statute of Limitations.
Arbitration shall be initiated by
serving or mailing a written notice to the other party within one year of the
date the complaining party has knowledge of the event first giving rise to the
claim. If the claim is not properly submitted in this time frame, all rights and
claims that the complaining party has or may have had against the other party
shall be waived and void, even if there is a federal or state statute of
limitations which would have given the complaining party more time to pursue the
claims. Any notice to be sent to the Company shall be delivered to the Chairman
of the Board of the Company or, if none, to any member of the Board. The notice
shall identify and describe the nature of all claims asserted and the facts upon
which such claims are based.
17.
Indemnification.
17.1
Indemnification
of Employee.
The Company shall, to the maximum extent permitted by law,
indemnify and hold Employee harmless for any acts or decisions made in good
faith while performing services for the Company. To the same extent, the Company
will pay, and subject to any legal limitations, advance all expenses, including
reasonable attorneys' fees and costs of court-approved settlements, actually and
necessarily incurred by Employee in connection with the defense of any action,
suit or proceeding and in connection with any appeal, which has been brought
against Employee by reason of his service as an officer or agent of the
Company.
17.2
Indemnification
of Company.
Employee shall indemnify and hold the Company harmless for
any acts or decisions made by Employee which constitute gross negligence or
misconduct. Employee shall pay, and subject to any legal limitations, advance
all expenses, including reasonable attorneys' fees and costs of court-approved
settlements, actually and necessarily incurred by the Company in connection with
the defense of any action, suit or proceeding and in connection with any appeal,
which has been brought against the Company by reason of the gross negligence or
misconduct of Employee.
18.
Miscellaneous.
18.1
Governing
Law.
This Agreement is made under and shall be governed by and construed
in accordance with the laws of the State of California.
18.2
Prior
Agreements.
This Agreement contains the entire agreement of the parties
relating to the subject matter hereof and supersedes all prior agreements and
understandings with respect to such subject matter. The parties hereto have made
no agreements, representations or warranties relating to the subject matter of
this Agreement which are not set forth herein.
18.3
Taxes.
The Company may withhold from any benefits payable under this Agreement
all federal, state, city or other taxes as shall be required pursuant to any law
or governmental regulation or ruling.
18.4
Successors.
18.4.1
Company's
Successors.
Any
successor to the Company (whether
direct or
indirect and whether by purchase, lease, merger, consolidation, liquidation or
otherwise)
or to all
or substantially all of the Company's business and/or assets shall assume the
Company's
obligations
under this Agreement and agree expressly to perform the obligations under this
Agreement in the same manner and to the same extent as the Company would be
required to
perform
such obligations in the absence of a succession. For all purposes under this
Agreement,
the term
"Company" shall include any successor to the Company's business and/or assets
which
executes
and delivers the assumption agreement described in this subsection or which
becomes bound by the terms of this Agreement by operation of
law.
18.4.2
Employee's
Successors.
The terms of this Agreement and all rights of Employee
hereunder shall inure to the benefit of, and be enforceable by, Employee's
personal or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees.
18.5
Amendments.
No
amendment or modification of this Agreement shall be
deemed
effective unless made in writing signed by the parties
hereto.
18.6
No
Waiver.
No term
or condition of this Agreement shall be deemed to
have been
waived nor shall there be any estoppel to enforce any provisions of this
Agreement,
except by
a statement in writing signed by the party against whom enforcement of the
waiver or
estoppel
is sought. Any written waiver shall not be deemed a continuing waiver unless
specifically
stated, shall operate only as to the specific term or condition waived and shall
not
constitute
a waiver of such term or condition waived and shall not constitute a waiver of
such
term or
condition for the future or as to any act other than that specifically
waived.
18.7
Severability.
To the extent any provision of this Agreement shall be invalid or unenforceable,
it shall be considered deleted herefrom and the remainder of such provision and
of this Agreement shall be unaffected and shall continue in full force and
effect.
18.8
Counterparts.
This
Agreement may be executed in any number of
counterparts,
each of which shall be deemed to be an original and all which together shall be
deemed to
be one and the same instrument.
18.9
Notices.
Any notice to Employee provided for in this Agreement shall be given by
personal delivery or by mailing such notice by first-class mail addressed to
Employee at the address specified on the execution page of the Agreement or at
such other address as Employee may designate by written notice to the Company.
All notices shall be deemed delivered upon personal delivery, or, if mailed in
accordance with this provision, three days after deposit in United States
mail.
[Signature page follows]
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THE
COMPANY:
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ENVISION
SOLAR, LLC
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a
California limited liability company
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By: /s/ Bill
Adelson
|
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Name:
Bill
Adelson
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Title:
COO
|
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EMPLOYEE:
|
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/s/
Robert Noble
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Robert
Noble
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Address
for Notice
|
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150
Hummingbird Hill
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Encinitas,
CA 92024
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8 -
Exhibit
10.26
ASSIGNMENT
OF EMPLOYMENT AGREEMENT
ASSIGNMENT OF EMPLOYMENT AGREEMENT
(this “
Agreement
”), dated as
of February 10, 2010 by and among Envision Solar International, Inc., a
California corporation (“
Envision
”), Casita
Enterprises, Inc., a Nevada corporation (“
Casita
”), and Robert
Noble (“
Executive
”).
WHEREAS, Envision and Executive have
entered into that certain Employment Agreement, dated as of June 15, 2007 (the
“
Employment
Agreement
”);
WHEREAS, Casita and Executive wish to
assign all of Envision’s, right, title and interest in, to and under the
Employment Agreement to Casita and Casita agrees to assume and accept such
assignments and Executive consents to such assignment.
NOW THEREFORE, Envision, Casita and
Executive agree as follows:
1.
Assignment and
Assumption
. Envision does hereby sell, assign and transfer (the “
Assignment
”) unto
Casita and its successors and assigns, all of its obligations, right, title and
interest in, to and under the Employment Agreement. Each of the
undersigned consents to the Assignment.
2.
Ratification
. Except
as assigned hereby, nothing herein contained shall otherwise modify, reduce,
amend or otherwise supplement the terms and provisions of the Employment
Agreement, which shall remain in full force and effect in accordance with its
terms.
3.
Governing
Law
. This Agreement shall be governed by, and be construed in
accordance with, the laws of the State of New York.
4.
Counterparts
. This
Agreement may be executed in one or more counterparts by the parties hereto in
separate counterparts, each of which when executed shall be deemed to be an
original and all of which together shall constitute one and the same
instrument.
[SIGNATURE
PAGE FOLLOWS]
IN
WITNESS WHEREOF, the parties hereto have duly executed this Assignment as of the
date first written above.
|
ENVISION
SOLAR INTERNATIONAL, INC.
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By:
|
/s/ Howard Smith
|
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Name: Howard
Smith
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Title: Chief
Financial Officer
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CASITA
ENTERPRISES, INC.
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By:
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/s/ Howard Smith
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Name: Howard
Smith
|
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Title: Chief
Financial Officer
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Executive
:
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/s/ Robert
Noble
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Robert
Noble
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Exhibit
10.27
THER EMPLOYMENT AGREEMENT
(“Agreement”) is entered into by and between Envision Solar
International, Inc., a California Corporation (the “Company”), and Joanna Tan,
an individual (“Employee”), effective February 2, 2009 (“Effective Date”). The
Company desires to retain the services of Employee, and Employee desires to
continue to be employed by the Company for the term of ther
Agreement.
NOW, THEREFORE
, in the
consideration of the premises and the mutual covenants and agreements set forth
herein, the Company and Employee, intending to be legally bound, hereby agree as
follows:
AGREEMENT
1.
Employment
.
The Company hereby
employs Employee on an at-will basis for the position of Executive Vice
President and Chief Operating Officer of Envision Solar International, Inc.
Employee hereby accepts such at-will employment, and agrees to perform services
for the Company, upon the terms and conditions set forth in ther
Agreement.
2.
Position and
Duties.
2.1
Duties
.
During the term of
ther Agreement, Employee shall perform all
duties
and functions customarily performed by an Executive Vice President of a business
of the size and nature similar to that of the Company, and such other employment
duties as the Company’s CEO shall reasonably assign to her from time to
time.
2.2
Competitive
Activities
.
During the term of
ther Agreement Employee
shall
not, directly or indirectly, either as an executive, employer, consultant,
agent, principal, partner, stockholder, member, manager, officer, director, or
in any other individual or representative capacity, engage or participate in any
business that is in competition in any manner whatsoever with the business of
the Company or any affiliate. Ther Agreement shall not be interpreted to
prohibit Employee from making passive personal investments or conducting private
business affairs if those activities do not materially interfere with the
services required under ther Agreement. However, Employee shall not directly or
indirectly, acquire, hold, or retain any interest in any business competing with
or similar in nature to the business of the Company or any
affiliate.
3.
Compensation.
3.1
Salary
.
As compensation for
services to be rendered by Employee under
ther
Agreement, the Company shall pay to Employee an annual salary of One Hundred
Sixty Five Thousand and 00/100 Dollars ($165,000.00) (the “Salary”), which shall
be paid on a regular basis in accordance with the Company’s regular payroll
procedures (exception: see 3.5 below).
3.2
Participation
in Benefit Plans
.
Employee shall be
included to the extent
eligible
thereunder in any and all plans of the Company providing general benefits for
the Company’s employees, including, but not limited to, any group life
insurance, hospitalization, disability, medical, dental, Section 125 cafeteria,
pension, profit sharing, savings and stock bonus plans. Employee’s participation
in any such plan or program shall be subject to the provisions, rules, and
regulations applicable thereto. Nothing in ther Agreement shall impose on the
Company
any affirmative obligation to establish any benefit plan. The Company reserves
the right to prospectively terminate or change benefit plans and programs it
offers to its employees at any time.
3.3
Options
.
Employee shall be
entitled to receive options to purchase
Common
Stock of the Company under the same terms and conditions as other senior level
executives.
3.4
Expenses
.
In accordance with
the Company’s policies established from
time to
time, the Company will pay or reimburse Employee for all reasonable and
necessary out-of-pocket expenses incurred by her in the performance of her
duties under ther Agreement, provided that:
3.4.1
Each such item is of a type which qualifies it as a proper item for deduction or
capitalization by the Company for federal or state income tax purposes, or, with
respect to business meals, the item qualifies as a partial deduction;
and
3.4.2
Employee furnishes the Company with such records and other documentary evidence
as are customarily sufficient to satisfy the requirement for substantiation of
such expenditures as an income tax deduction (or capitalization) pursuant to
applicable federal and state statutes and/or regulations.
3.5
Equity in
Lieu of Salary
.
For a period of up
to six months, or until
Company
secures additional financing of at least $500,000, Employee agrees to accept
options in lieu of Salary at the following conversion rate:
# of Common Shares (as
defined below) x 2 = # of options with FMV strike price.
# of Common Shares = Amount
of salary forgiven divided by (FMV) $/share (at the time of salary
earned).
4.
Annual
Vacation
.
Employee shall be
entitled to 30 days vacation time each year without loss of compensation. In no
event may Employee accrue more than 45 days of vacation. In the event Employee
at any time has accrued 45 days of vacation, no further vacation shall accrue
unless and until the accrued time is reduced to less than 45 days. Once ther
maximum is reached, all further accruals will cease. Vacation accruals will
recommence after Employee has taken vacation and the accrued hours have been
dropped below the 45-day maximum.
5.
Compensation
upon Termination
.
In the event
Employee’s employment with the Company is terminated for any reason, voluntarily
or involuntarily, Employee shall be entitled to receive Employee’s then current
Salary accrued (subject to 3.5 above) through the effective date of termination,
plus accrued but unused vacation time. Employee shall not be entitled to further
compensation upon termination.
6.
Proprietary
Matter
.
Except as permitted or directed by the company, Employee shall not during the
term of her employment or at any time thereafter divulge, furnish, disclose or
make accessible (other than in the ordinary course of the business of the
Company) to anyone for use in any way any confidential, secret, or proprietary
knowledge or information of the Company
(“Proprietary
Matter”) which Employee has acquired or become acquainted with or will acquire
or become acquainted with, whether developed by herself or by others, including,
but not limited to, any trade secrets, confidential or secret designs,
processes, formulae, software or computer programs, plans, devices, or material
(whether or not patented or patentable, copyrighted or copyrightable) directly
or indirectly useful in any aspect of the business of the Company, any
confidential customer, distributor or supplier lists of the Company, any
confidential or secret development or research work of the Company, or other
confidential, secret or non-public aspects of the business of the Company.
Employee acknowledges that the Proprietary Matter constitutes a unique and
valuable asset of the Company acquired at great time and expense by the Company,
and that any disclosure or other use of the Proprietary Matter other than for
the sole benefit of the Company would be wrongful and would cause irreparable
harm to the Company. Both during and after the term of ther Agreement, Employee
will refrain from any acts or omissions that would reduce the value of
Proprietary Matter to the Company. The foregoing obligations of confidentiality,
however, shall not apply to any knowledge or information which is now published
or which subsequently becomes generally publicly known, other than as a direct
or indirect result of the breach of ther Agreement by Employee.
7.
Inventions
.
Any and all
inventions, innovations or improvements (“Inventions”) made, developed or
created by Employee (whether at the request or suggestion of the Company or
otherwise, whether alone or in conjunction with others, and whether during
regular hours of work or otherwise) during her employment by the Company which
may be directly or indirectly useful in, or relate to, the business of the
Company shall be promptly and fully disclosed by Employee to the Managers of the
Company and shall be the Company’s exclusive property, and Employee shall
promptly deliver to an appropriate representative of the Company as designated
by the Managers all papers, drawings, models, data and other material relating
to any inventions made, developed or created by her. Employee shall, at the
request of the Company and without any payment therefor, execute any documents
necessary or advisable in the opinion of the Company’s counsel to direct
issuance of patents or copyrights to the Company with respect to such Inventions
or to vest in the Company title to such Inventions. The expense of securing any
such patent or copyright shall be borne by the Company. Employee hereby
irrevocably designates and appoints the Company and each of its duly authorized
officers and agents as Employee’s agent and attorney-in-fact to act for and in
Employee’s behalf and stead to execute and file any document(s) and to do all
other lawfully permitted acts to further the prosecution, issuance and
enforcement of patents, copyrights and other proprietary rights with the same
force and effect as if executed and delivered by Employee.
8.
Ventures
.
If, during the term
of the Agreement, Employee is engaged in or associated with the planning or
implementing of any project, program or venture involving the Company and a
third party or parties, all rights in the project, program or venture shall
belong to the Company and shall constitute a corporate opportunity belonging
exclusively to the Company. Except as expressly approved in writing by the
Company, Employee shall not be entitled to any interest in such project, program
or venture or to any commission, finder’s fee or other compensation in
connection therewith, other than the compensation to be paid to Employee as
provided in the Agreement.
9.
Copyright
.
Employee recognizes
and understands that Employee’s duties for the Company may include the
preparation of materials, including software, written or graphic
materials,
and that any such materials conceived or written by Employee shall be “work made
for hire” within the meaning of United States and other applicable copyright
laws. Employee understands that since such works are “works made for hire,” The
Company will retain exclusive ownership of all rights in such materials,
including copyrights.
10.
Solicitation
of Customers
.
During her
employment by the Company, Employee will not, either directly or indirectly, on
her own behalf or in the service or on behalf of others, solicit, divert or
appropriate, or attempt to solicit, divert or appropriate, to any competing
business any customer or client of the Company, or any person or entity whose
account has been solicited by the Company.
11.
Solicitation
of Employees
.
Employee agrees
that during her employment by the Company and for the one-year period following
the termination of such employment for any reason, Employee shall not, either
directly or indirectly, on her own behalf or in the service or on behalf of
others solicit, divert or hire away, or attempt to solicit, divert or hire away
any person then employed by the Company or any affiliate.
12.
Termination
Upon Notice
.
Ther Agreement and
the employment created thereby may be terminated by the Company or Employee at
any time, with or without cause, in the absolute and sole discretion of either
party, upon the provision of written notice of termination to the other party.
It is understood that no employee or representative of the Company, other than
the CEO, has any authority to enter into any agreement for any specified period
of time, or to make any agreement contrary to the foregoing. Termination of ther
Agreement pursuant to ther provision shall not prejudice any other remedy to
which either party may be entitled either at law, in equity, or under ther
Agreement.
13.
Surrender
of Records and Property
.
Upon termination of
her employment for any reason, Employee shall deliver promptly to the Company
all records, manuals, books, blank forms, documents, letters, memoranda, notes,
notebooks, reports, data, tables, and calculations or copies thereof, which are
the property of the Company and which relate in any way to the business,
products, practices or techniques of the Company, and all other property of the
Company and Proprietary Matter, including, but not limited to, all documents
which in whole or in part, contain any trade secrets or confidential information
of the Company, which in any of these cases are in her possession or under her
control. If Employee purchases any record book, ledger, or similar item to be
used for keeping records of or information regarding the business of the Company
or its customers, Employee shall immediately notify the Company, which shall
then immediately reimburse Employee for the expense of such
purchase.
14.
Assignment
.
Ther Agreement
shall not be assignable, in whole or in part, by either party without the
written consent of the other party, except that the Company may, without the
consent of Employee, assign its rights and obligations under ther Agreement to
any corporation, firm or other business entity (i) with or into which the
Company may merge or consolidate, (ii) to which the Company may sell or transfer
all or substantially all of its assets, or (iii) to any Affiliate. Upon such
assignment by the Company, the Company shall obtain the assignees’ written
agreement enforceable by Employee to assume and perform, from and after the date
of such assignment, the terms, conditions, and provisions imposed by ther
Agreement upon the Company. After any such assignment by the Company and such
written agreement by
the
assignee, the Company shall be discharged from all further liability hereunder
and such assignee shall thereafter be deemed to be the Company for the purposes
of all provisions of ther Agreement including ther section.
15.
Injunctive
Relief
.
Employee agrees that it would be difficult to compensate the Company fully for
damages for any violation of the provisions of ther Agreement, including,
without limitation, the provisions of Sections 6, 7, 8, 9, 10, 11 and 13.
Accordingly, Employee specifically agrees that the Company shall be entitled to
temporary and permanent injunctive relief to enforce the provisions of ther
Agreement. Ther provision with respect to injunctive relief shall not, however,
diminish the right of the Company to claim and recover damages in addition to
injunctive relief.
16.
Arbitration.
16.1
Claims
Covered
.
The parties shall settle by arbitration all statutory, contractual and/or common
law claims or controversies (“Claims”) that the Company may have against
Employee, or that Employee may have against the Company or any of its officers,
directors, executives or agents in their capacity as such or otherwise. Claims
subject to arbitration include (i) claims for discrimination (including but not
limited to, age, disability, marital status, medical condition, national origin,
race, religion, sex, sexual harassment or sexual orientation); (ii) claims for
breach of any contract (express or implied); (iii) claims for any federal, state
or governmental law, statute, regulation or ordinance; and (iv) tort claims
(including but not limited to, negligent or intentional injury, defamation and
termination of employment in violation of public policy).
16.2
Claims
Not Covered
.
The arbitration of
Claims shall not apply to (i) claims by Employee for workers’ compensation or
unemployment insurance; (ii) claims which even in the absence of these
arbitration provisions could not have been litigated in court or before any
administrative proceeding under applicable federal, state or local law; and
(iii) claims by the Company for injunctive and/or other equitable
relief.
16.3
Procedures
.
Claims shall be
settled by arbitration by a single, neutral arbitrator in accordance with the
Natural Rules for Resolution of Employment Disputes of the American Arbitration
Association. The parties shall have the right to take depositions and obtain
discovery regarding the subject matter of the arbitration as provided in Title
III of Part 4 (commencing with section 1985) of the California Code of Civil
Procedure. The arbitrator shall determine all questions of fact and law relating
to any Claim, including but not limited to, whether or not any such Claim is
subject to the arbitration provisions contained herein. The arbitrator shall
issue a written arbitration decision which shall include essential findings and
conclusions on which any award is based. Judgment upon the award rendered by the
arbitrator may be entered in any court having jurisdiction. Each party shall pay
the fees of its own attorneys, the expenses of its witnesses and all other
expenses connected with presenting its case, except insofar as such fees or
expenses are otherwise recoverable pursuant to a statutory claim or cause of
action, e.g., FEHA, ADEA or EEO claims. Other costs of the arbitration,
including the cost of any record or transcripts of the arbitration,
administrative fees, the fee of the arbitrator, and all other fees and costs,
shall be borne by the Company.
- 5
-
16.4
Remedies
.
Employee
understands that Employee is waiving the right to seek remedies in court,
including the right to a jury trial. The arbitrator shall be empowered to award
any relief which might have been available in a court of law or
equity.
16.5
Required
Notice and Statute of Limitations
.
Arbitration shall
be initiated by serving or mailing a written notice to the other party within
one year of the date the complaining party has knowledge of the event first
giving rise to the claim. If the claim is not properly submitted in ther time
frame, all rights and claims that the complaining party has or may have had
against the other party shall be waived and void, even if there is a federal or
state statute of limitations which would have given the complaining party more
time to pursue the claims. Any notice to be sent to the Company shall be
delivered to the Chairman of the Board of the Company or, if none, to any member
of the Board. The notice shall identify and describe the nature of all claims
asserted and the facts upon which such claims are based.
17.
Indemnification.
17.1
Indemnification
of Employee
.
The Company shall,
to the maximum extent permitted by law, indemnify and hold Employee harmless for
any acts or decisions made in good faith while performing services for the
Company. To the same extent, the Company will pay, and subject to any legal
limitations, advance all expenses, including reasonable attorneys’ fees and
costs of court-approved settlements, actually and necessarily incurred by
Employee in connection with the defense of any action, suit or proceeding and in
connection with any appeal, which has been brought against Employee by reason of
her service as an officer or agent of the Company.
18.
Miscellaneous.
18.1
Governing
Law
.
Ther Agreement is made under and shall be governed by and construed in
accordance with the laws of the State of California.
18.2
Prior
Agreements
.
Ther Agreement
contains the entire agreement of the parties relating to the subject matter
hereof and supersedes all prior agreements and understandings with respect to
such subject matter. The parties hereto have made no agreements, representations
or warranties relating to the subject matter of ther Agreement which are not set
forth herein.
18.3
Taxes
.
The Company may
withhold from any benefits payable under ther Agreement all federal, state, city
or other taxes as shall be required pursuant to any law or governmental
regulation or ruling.
18.4
Successors.
18.4.1
Company’s
Successors
.
Any successor to
the Company (whether direct or indirect and whether by purchase, lease, merger,
consolidation, liquidation or otherwise) or to all or substantially all of the
Company’s business and/or assets shall assume the Company’s obligations under
ther Agreement and agree expressly to perform the obligations under ther
Agreement in the same manner and to the same extent as the Company would be
required to perform such obligations in the absence of a succession. For all
purposes under ther Agreement,
the term
“Company” shall include any successor to the Company’s business and/or assets
which executes and delivers the assumption agreement described in ther
subsection or which becomes bound by the terms of ther Agreement by operation of
law.
18.4.2
Employee’s
Successors
.
The terms of ther
Agreement and all rights of Employee hereunder shall inure to the benefit of,
and be enforceable by, Employee’s personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and
legatees.
18.5
Amendments
.
No amendment or
modification of ther Agreement shall be deemed effective unless made in writing
signed by the parties hereto.
18.6
No
Waiver
.
No term or condition of ther Agreement shall be deemed to have been waived nor
shall there be any estoppel to enforce any provisions of ther Agreement, except
by a statement in writing signed by the party against whom enforcement of the
waiver or estoppel is sought. Any written waiver shall not be deemed a
continuing waiver unless specifically stated, shall operate only as to the
specific term or condition waived and shall not constitute a waiver of such term
or condition waived and shall not constitute a waiver of such term or condition
for the future or as to any act other than that specifically
waived.
18.7
Severability
.
To the extent any
provision of ther Agreement shall be invalid or unenforceable, it shall be
considered deleted herefrom and the remainder of such provision and of ther
Agreement shall be unaffected and shall continue in full force and
effect.
18.8
Counterparts
.
Ther Agreement may
be executed in any number of counterparts, each of which shall be deemed to be
an original and all which together shall be deemed to be one and the same
instrument.
18.9
Notices
.
Any notice to Employee provided for in ther Agreement shall be given by personal
delivery or by mailing such notice by first-class mail addressed to Employee at
the address specified on the execution page of the Agreement or at such other
address as Employee may designate by written notice to the Company. All notices
shall be deemed delivered upon personal delivery, or, if mailed in accordance
with ther provision, three days after deposit in United States
mail.
THE
COMPANY:
ENVISION
SOLAR, LLC
a
California limited liability company
By:
/s/ Robert
Noble
Name: Robert Noble
Title: CEO
EMPLOYEE:
/s/ Joanna Tan
Joanna
Tan
Address
for Notice:
13333 Mango Drive
De
l
Mar, CA
92014
- 8 -
Exhibit 10.28
ASSIGNMENT
OF EMPLOYMENT AGREEMENT
ASSIGNMENT OF EMPLOYMENT AGREEMENT
(this “
Agreement
”), dated as
of February 10, 2010 by and among Envision Solar International, Inc., a
California corporation (“
Envision
”), Casita
Enterprises, Inc., a Nevada corporation (“
Casita
”), and Joanna
Tan (“
Executive
”).
WHEREAS, Envision and Executive have
entered into that certain Employment Agreement, dated as of February 2, 2009
(the “
Employment
Agreement
”);
WHEREAS, Casita and Executive wish to
assign all of Envision’s, right, title and interest in, to and under the
Employment Agreement to Casita and Casita agrees to assume and accept such
assignments and Executive consents to such assignment.
NOW THEREFORE, Envision, Casita and
Executive agree as follows:
1.
Assignment and
Assumption
. Envision does hereby sell, assign and transfer
(the “
Assignment
”) unto
Casita and its successors and assigns, all of its obligations, right, title and
interest in, to and under the Employment Agreement. Each of the
undersigned consents to the Assignment.
2.
Ratification
. Except
as assigned hereby, nothing herein contained shall otherwise modify, reduce,
amend or otherwise supplement the terms and provisions of the Employment
Agreement, which shall remain in full force and effect in accordance with its
terms.
3.
Governing
Law
. This Agreement shall be governed by, and be construed in
accordance with, the laws of the State of New York.
4.
Counterparts
. This
Agreement may be executed in one or more counterparts by the parties hereto in
separate counterparts, each of which when executed shall be deemed to be an
original and all of which together shall constitute one and the same
instrument.
[SIGNATURE
PAGE FOLLOWS]
IN
WITNESS WHEREOF, the parties hereto have duly executed this Assignment as of the
date first written above.
|
ENVISION
SOLAR INTERNATIONAL, INC.
|
|
|
|
|
By:
|
/s/ Robert Noble
|
|
|
Name: Robert
Noble
|
|
|
Title: Chief Executive
Officer
|
|
|
|
|
|
|
|
CASITA
ENTERPRISES, INC.
|
|
|
|
|
By:
|
/s/ Robert Noble
|
|
|
Name: Robert
Noble
|
|
|
Title: Chief
Executive Officer
|
|
|
|
|
|
|
|
Executive
:
|
|
|
|
|
/s/
Joanna
Tan
|
|
|
Exhibit
10.29
Interim Services Agreement
September
1, 2009
Robert
Noble. CEO
Envision
Solar International, Inc.
'1225
Executive Square Suite
1000.
La Jolla,
CA 92037
Dear
Bob:
Tatum,
LLC ("Tatum," "we," "us" or "our") is pleased that Envision Solar International.
Inc. ("Company," "you" or
"your")
has selected us
to provide you with outsourced interim services. The
services
(the "Services")
and tees will be more particularly described on the Schedule attached hereto and
will be provided by the individual resource (the "Tatum Resource") identified on
such Schedule. Schedules for
additional
Tatum Resources may he added
from time to
time upon
the
mutual
written
agreement of the parties. In
addition,
upon the request of
the Company and the execution of an additional Schedule to this agreement, Tatum
will provide search Services to the Company.
Engagement
The Tatum Resource will be one of
Tatum's employees or
members,
and we will be solely
responsible
for
determining
the conditions,
terms
and
payment of compensation
and
benefits
for the
Tatum Resource.
You will be solely responsible
for
providing the
Tatum
Resource day-to-day guidance.
supervision.
direction,
assistance and other information
necessary
for the successful and timely
completion of the
Services. Tatum will have no
oversight,
control, or authority over the Tatum
Resource
with respect to
the Services.
The
Company acknowledges that
it is solely responsible for the sufficiency
of the Services for its purposes. The
Company will designate a management-level individual to be
responsible for overseeing the
Services, and the Tatum Resource will report directly to such individual
with respect to the
provision of the Services. Unless the Tatum Resource is acting as an executive
officer
of the Company and
is
authorized by the
Company
to make such
decision, the Company will not permit
or require the Tatum Resource to be the
ultimate decision making authority for any material decision
relating to your business, including,
without limitation, any proposed merger, acquisition, recapitalization,
financial strategy or
restructuring.
Fees
and Expenses.
You will pay
us the tees set forth
on
the applicable
Schedule.
In addition to our
standard professional service
fees. we
will charge an administrative fee equal
to 5% of our professional
Service
fees, which
covers
ancillary administrative costs such
as technology,
communication,
and
supplies. In addition, you will
reimburse Tatum directly for all pre-approved travel and out-of-pocket
expenses incurred in
connection with this agreement (including any Schedules).
Payment
Terms.
Payments to Tatum
should be made within 30 days of receipt of invoice by electronic transfer in
accordance with the instructions set forth below or such alternative
instructions as provided by
us from time to time. Any amounts not
paid when due may be subject to a periodic service charge equal
to the lesser of 1.5% per month and the
maximum amount allowed under applicable law, until such
amounts
arc paid in full. including assessed service charges. In lieu of terminating
this agreement, we
may
suspend the provision of
any Services if amounts owed are not paid in accordance with the terms of
this
agreement.
Bank Name
and Address: Silicon Valley Bank, 3003 Tasman Drive, Santa Clara, CA
95054
Beneficiary:
Tatum. LLC
Beneficiary
Account Number: 3300599791
ABA Transit/Routing Number: 121140399
Please
reference
Company name in
the body
of the payment.
Effective
Date and Termination_
This
agreement will he effective as of the earlier of (0 the date Tatum
begins providing Services
to the
Company, and (ii) the date of the last
signature to this agreement as
indicated on the signature page.
In
the event that a party
commits a breach of this agreement (including
any Schedule) and fails to cure the
same within
10
days following delivery by
the non-breaching party of
written notice specifying the nature of
the breach. the non-breaching party may terminate this agreement
or the applicable Schedule effective
upon written notice of such termination. The termination rights
set
forth in this Section are in addition
to and not
in lieu of the termination rights set
forth in each of the
Schedules.
Hiring
the Tatum Resource Outside of a
Tatum
Agreement.
The parties
recognize and agree that
Tatum is responsible for introducing
the Tatum Resources to the Company. Therefore, if at any time during the time
frame in which a
Tatum
Resource
is providing
Services to the Company and for a period
of 12-months thereafter, other than in
connection
with this
agreement
or another
Tatum agreement, the
Company
or any
of its subsidiaries
or affiliates employs such Tatum
Resource
,
or engages
such
Tatum
Resource as an independent contractor,
the Company will
pay Tatum
a placement
fee in an
amount equal
to 50% of
Tatum's Annualized Fees
(as defined below) The amount will be
due and payable to Tatum
upon written demand to the Company.
"Annualized Fees" means the equivalent of what Tatum would
receive under this agreement for such
Tatum Resource on a full-time annual basis plus the maximum
amount of any bonus for which
Tatum was eligible with
respect to the then
-
current bonus year for the
Tatum Resource. You will have the
opportunity to make the Tatum Resource a permanent_ full
-
time
member
of
the Company at any
time during
the term
of this Schedule by entering into
another form of
Tatum
agreement, the terms of which will be negotiated at such
time.
Warranties
and Disclaimers.
We
disclaim
all
representations and warranties,
whether express. implied
or statutory, including, but not
limited to any warranties of quality, performance, merchantability, or
fitness of use or purpose.
Without limiting the foregoing, we make no representation or warranty with
respect to the Tatum
Resource or the Services provided hereunder, and we will not be responsible for
any
action taken by you in
following or declining to follow any of the Tatum Resource's advice
or
recommendations. The Services provided
by
Tatum
and the Tatum
Resource hereunder
are
for the
sole
benefit of the Company and not any
unnamed third parties. The Services will not constitute an audit,
review. opinion,
or
compilation,
or
any other
type
of financial statement reporting
or attestation
engagement that
is subject to
the
rules of the AICPA or other similar
state or national professional bodies
or laws and will not result in an
opinion or any form of assurance on internal controls.
Limitation of Liability;
Indemnity.
(a)
Tatum's
liability in any and all categories and for any and all causes arising under
this agreement, whether based in contract, tort, negligence, strict liability or
otherwise, will. in the aggregate, not exceed the actual fees paid by you to us
over the previous two months' of the agreement with respect to the Tatum
Resource from whom the
liability
arises.
In no event will we be
liable for incidental,
consequential, punitive, indirect or special
damages, including, without limitation, interruption or loss of business, profit
or goodwill. As
a condition for
recovery of any liability, you must assert any claim
against us within
three months after discovery or 60 days after the termination or expiration of
the applicable Schedule under which the liability arises, whichever is
earlier
(b)
You agree
to indemnify us and the Tatum
Resource to the
full extent
permitted by law for any losses, costs, damages, and expenses (including
reasonable attorneys' fees), as they are incurred, in
connection
with any cause of action, suit, or other proceeding arising in connection with
the Tatum Resource's services to you.
Insurance.
To the extent the Company has
directors' and officers' liability insurance in effect, the
Company will provide such insurance
coverage for any Tatum Resource serving as an officer or executive
of the Company under this agreement at
no additional cost to the Tatum Resource, along with written
evidence to Tatum or the Tatum Resource
that the Tatum Resource is covered by such insurance.
Furthermore, the Company will maintain
such insurance coverage
with
respect to occurrences arising
during the term of this agreement for
at least three years following the termination or expiration of the
applicable Schedule or will purchase a
directors' and officers' extended reporting period or "tail" policy
to cover the Tatum Resource for such
three year period.
Governing
and
Witness Fees.
(a)
This
agreement will be governed by and construed in accordance with the laws of the
State of California. without regard to conflicts of laws
provisions.
(b)
If the
parties are unable to resolve any dispute arising out of or in connection with
this agreement, the parties agree and stipulate that any such disputes will be
settled by binding arbitration in accordance with the
Commercial
Arbitration Rules of
the American Arbitration Association ("AAA"). The arbitration will
be
conducted in the San Diego,
California office of the
AAA
by a single arbitrator
selected
by the parties according to the rules
of the AAA, and the decision of
the
arbitrator will be final
and
binding on both parties. In the event that the parties fail to agree on the
selection of the arbitrator within 30 days after either
party's
request for arbitration
under
this Section. the
arbitrator will be chosen by the
AAA.
The
arbitrator may in his or her
discretion order documentary discovery but will not allow depositions without a
showing of compelling need. The arbitrator will render his or her decision
within
90 days after the call for
arbitration. Judgment on the
award of the
arbitrator
may
be entered in and
enforced by
any court of competent jurisdiction. The arbitrator will have
no
authority to award damages
in excess
nr in
contravention
of this
agreement
and may
not
amend or disregard any provision of this
agreement,
including this section. Notwithstanding the foregoing, either party may seek
appropriate injunctive relief from any court of competent jurisdiction,
and Tatum
may pursue payment of
any unpaid amounts
due
under this agreement through any court of competent
jurisdiction.
(c)
In
the event any member or employee of
Tatum (including, without limitation. any Tatum
Resource)
is requested or authorized by you or is
required by government regulation, subpoena or other
legal process to produce documents or
appear as witnesses in connection with any action, suit or other
proceeding
initiated
by a
third party against you or by you
against a third party. you will, so
long as Tatum
is not a party to
the proceeding in which the information is sought, reimburse Tatum for its
member's or employee's
professional time (based on customary rates) and expenses, as well as the fees
and expenses of its
counsel,
incurred in responding to such
requests. This provision is in addition to and
not in lieu of any indemnification
obligations the Company may have under this agreement.
Miscellaneous.
(a)
This
agreement together with all Schedules
constitutes the entire agreement between the
parties with regard to the subject
matter hereof and supersedes any and all agreements, whether oral or
written. between the
parties with respect to its subject matter. No amendment or modification to this
agreement
will be valid
unless
in writing and signed by both
parties.
(b)
If
any
portion of this agreement is found to
be invalid or unenforceable, such provision
will be deemed severable from
the remainder of
this agreement
and will not cause the invalidity or
unenforceability of the remainder of
this agreement, except to the extent that the severed provision
deprives
either
party of a substantial portion of
its
bargain.
(c)Neither
party will be deemed to have waived any rights or remedies accruing under this
agreement
unless such waiver is in writing and signed by the party electing to waive the
right or remedy. The waiver by any party of a breach or violation of any
provision of this agreement will not operate or be construed as a waiver of any
subsequent breach
of such
provision or any other provision of this agreement.
(d)
Neither
party will be liable for any delay or failure to perform under this
agreement
(other than with respect
to payment obligations) to the extent such delay or failure is a result
of an act of
God, war, earthquake, civil
disobedience. court order, labor dispute, or other cause beyond such party's
reasonable
control.
(e)
You may
not assign your rights or obligations under this agreement without the
express
written
consent of Tatum. Nothing in this agreement will confer any rights upon any
person or entity other than the parties hereto and their respective successors
and permitted assigns and the Tatum Resources.
(f)
The
expiration or termination of this agreement or any Schedule will not destroy
or
diminish
the binding force and effect of any of the provisions of this agreement or any
Schedule that expressly, or by reasonable implication, come into or continue in
effect on
or after such expiration or termination, including, without
limitation,
provisions
relating
to
payment
of fees
and expenses (including
witness fees and expenses and liquidated damage
fees), governing law, arbitration, limitation of liability and
indemnity.
(g)
You agree
to reimburse Tatum for all costs and expenses incurred by Tatum in
enforcing
collection
of any monies due under this agreement. including, without limitation,
reasonable attorneys' fees. court costs and arbitration fees.
(h)
You agree
to allow us to
use the
Company's logo and name on Tatum's
website and
other
marketing
materials for the sole purpose of identifying the Company as a client of Tatum.
Tatum will not use the Company's logo or name in any press release or general
circulation advertisement without the Company's prior written
consent.
We
appreciate the
opportunity
to serve you and believe this agreement accurately
reflects
our mutual
understanding
of the
terms upon which the Services will be provided. We would be
pleased to discuss this agreement with you at your convenience. If the foregoing
is in accordance with your understanding,
please
sign a
copy of
this
agreement
and
return it to
my
attention.
Sincerely,
Tatum, LLC
/s/ Mark Neilson
Mark Neilson
Managing Partner - San Diego
Accepted and Agreed:
Envision Solar International, Inc.
By:
Robert Noble
Name:
Robert Noble
Title:
CEO
Date:
9/1/09
Schedule
to Interim Services Agreement
This Schedule is entered into in
connection
with
that certain Interim Services
Agreement. dated
September
1, 2009 (the "Agreement"), by and between Tatum, LLC ("Tatum," "we," "us" or
"our") and Envision Solar International. Inc. ("Company." "you" or "your") and
will be governed by the terms and conditions of the Agreement.
Tatum
Resource Name: Howard Smith
Position:
Part
-
time: Chief
Financial
Officer &
Executive
Vice
President
Company
Supervisor:
Robert
Noble,
CEO
Start
Date: September 2, 2009
End Date:
Estimated to be December 31, 2009 but may be modified as mutually
agreed.
Replacement:
If you
are
dissatisfied with the
Services provided by the Tatum Resource(s). we will
immediately
remove the Tatum Resource(s) and
endeavor to furnish a replacement as soon as reasonably
practical. We do not guarantee that we
will be able to find a suitable replacement.
Termination:
Either party may terminate
this Schedule at any time for any reason upon notice to the
other
party;
provided,
however. the parties will endeavor to provide
as much
notice as possible
prior to
termination. preferably
two weeks.
Fees: You will pay Tatum
520,000
per
month for the Tatum
Resource. prorated for billing periods
less
than one month.
Tatum
Resource will work from the Company's
offices for at least three days per week
and be accessible remotely for the
balance of each week by phone and email.
Payroll
taxes and employee benefits:
You will
not be responsible
for
payroll
taxes or employee benefits
since
the Tatum Resource will
not be
an
employee of the
Company.
Expenses:
You will directly reimburse Tatum
Resource
for
reasonable and
customary business
expenses,
including
parking related expenses, as
submitted
and pi e
-
approved
by you.
Billings:
Tatum will bill monthly for Services in arrears of the provision of such
Services as follows
payable
within 30 days of invoice date:
·
25% of
fees billed will be payable in cash;
·
75%
of
fees billed will be payable in qualified employee stock
options;
|
°
|
a
Share
calculation: Amount
of
fees
deferred divided by Fair Market Value
per share, at
the
time
of services
equals
the
number of shares.
Option calculation: Number of
shares
calculated above
times
two
equals
the
number of stock
options to be issued with a
Fair
Market
Value
above strike price.
|
·
Within 15
days of
execution
of
agreement:
$2,500 (applied of cash
portion
of
fees)
Permanent Engagement: You will
have the opportunity to make the Tatum Resource a permanent,
full
-
time member of the Company at any time during the term of
this Schedule by entering into another form of Tatum agreement, the terms of
which will be negotiated at such time.
In the
event of a conflict between the terms and conditions of this Schedule and the
Agreement, the terms and conditions of the Agreement will control.
|
Tatum,
LLC
|
|
Envision
Solar International, Inc.
|
|
|
|
|
|
By: /s/ Mark
C. Neilson
|
|
/s/ Robert
Noble
|
|
Name: Mark
C. Neilson
|
|
Name: Robert
Noble
|
|
Title: managing
Partner-San Diego
|
|
CEO
|
|
Date:
9-1-09
|
|
Date:
9-1-09
|
Exhibit
10.30
ASSIGNMENT
OF INTERIM SERVICES AGREEMENT
ASSIGNMENT OF INTERIM SERVICES
AGREEMENT
(this “
Agreement
”), dated as
of February10, 2010 by and among Envision Solar International, Inc., a
California corporation (“
Envision
”), Casita
Enterprises, Inc., a Nevada corporation (“
Casita
”), and Tatum,
LLC (“
Tatum
”).
WHEREAS, Envision and Tatum have
entered into that certain Interim Services Agreement, dated as of September 1,
2009 (the “
Interim
Services Agreement
”);
WHEREAS, Casita and Tatum wish to
assign all of Envision’s, right, title and interest in, to and under the Interim
Services Agreement to Casita and Casita agrees to assume and accept such
assignments and Tatum consents to such assignment.
NOW THEREFORE, Envision, Casita and
Tatum agree as follows:
1.
Assignment and
Assumption
. Envision does hereby sell, assign and transfer
(the “
Assignment
”) unto
Casita and its successors and assigns, all of its obligations, right, title and
interest in, to and under the Interim Services Agreement. Each of the
undersigned consents to the Assignment.
2.
Ratification
. Except
as assigned hereby, nothing herein contained shall otherwise modify, reduce,
amend or otherwise supplement the terms and provisions of the Interim Services
Agreement, which shall remain in full force and effect in accordance with its
terms.
3.
Governing
Law
. This Agreement shall be governed by, and be construed in
accordance with, the laws of the State of New York.
4.
Counterparts
. This
Agreement may be executed in one or more counterparts by the parties hereto in
separate counterparts, each of which when executed shall be deemed to be an
original and all of which together shall constitute one and the same
instrument.
[SIGNATURE
PAGE FOLLOWS]
IN
WITNESS WHEREOF, the parties hereto have duly executed this Assignment as of the
date first written above.
|
ENVISION
SOLAR INTERNATIONAL, INC.
|
|
|
|
|
By:
|
/s/ Robert Noble
|
|
|
Name: Robert
Noble
|
|
|
Title: Chief Executive
Officer
|
|
|
|
|
|
|
|
CASITA
ENTERPRISES, INC.
|
|
|
|
|
By:
|
/s/ Robert Noble
|
|
|
Name: Robert
Noble
|
|
|
Title: Chief
Executive Officer
|
|
|
|
|
|
|
|
TATUM
:
|
|
|
|
|
|
|
|
Exhibit 99.1
Envision
Solar International, Inc. and Subsidiaries
Consolidated
Financial Statements
December
31, 2008 and 2007
Envision
Solar International, Inc. and Subsidiaries
Table of
Contents
|
|
Page
(s)
|
|
Report
of Independent Register Public Accounting Firm
|
1
|
|
|
|
|
Consolidated
Balance Sheets
|
2
|
|
|
|
|
Consolidated
Statement of Operations
|
3
|
|
|
|
|
Consolidated
Statements of Changes in Stockholders’ Equity (Deficiency)
|
4
|
|
|
|
|
Consolidated
Statements of Cash Flows
|
5
|
|
|
|
|
Notes
to Consolidated Financial Statements
|
6 -
22
|
|
|
|
Report
of Independent Registered Public Accounting Firm
To the
Board of Directors and Shareholders of:
Envision
Solar International, Inc.
We have
audited the accompanying consolidated balance sheets of Envision Solar
International, Inc. and Subsidiaries as of December 31, 2008 and 2007 and the
related consolidated statements of operations, changes in stockholders’ equity,
and cash flows for each of the two years in the period ended December 31,
2008. These consolidated financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion
on these consolidated financial statements based on our
audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that
we plan and perform the audits to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall consolidated financial
statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Envision Solar International, Inc.
and Subsidiaries as of December 31, 2008 and 2007 and the consolidated results
of its operations and its cash flows for each of the two years in the period
ended December 31, 2008 in conformity with accounting principles generally
accepted in the United States of America.
The
accompanying consolidated financial statements have been prepared assuming the
Company will continue as a going concern. As discussed in Note 2 to
the consolidated financial statements, the Company reported a net loss of
$9,595,342 and $3,282,592 in 2008 and 2007, respectively, and used cash for
operating activities of $2,898,044 and $1,276,670 in 2008 and 2007,
respectively. At December 31, 2008, the Company had a working capital
deficiency, stockholders' deficiency and accumulated deficit of $1,550,307,
$1,157,819 and $13,164,806, respectively. These matters raise
substantial doubt about the Company’s ability to continue as a going
concern. Management's plans as to these matters are also described in
Note 2. The consolidated financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/
Salberg
& Company, P.A.
SALBERG & COMPANY, P.A.
Boca Raton, Florida
February 10, 2010
|
Envision
Solar International, Inc. and Subsidiaries
|
|
|
|
|
|
|
|
|
|
|
Consolidated
Balance Sheets
|
|
|
|
|
December
31,
|
|
|
Assets
|
|
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
Current
Assets
|
|
|
|
|
|
|
|
Cash
|
|
$
|
3,083
|
|
|
$
|
257,753
|
|
|
Accounts
Receivable, net
|
|
|
173,798
|
|
|
|
60,269
|
|
|
Prepaid
and other current assets, net
|
|
|
70,663
|
|
|
|
87,068
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Current Assets
|
|
|
247,544
|
|
|
|
405,090
|
|
|
|
|
|
|
|
|
|
|
|
|
Property
and Equipment, net
|
|
|
359,098
|
|
|
|
227,427
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
Assets
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
33,390
|
|
|
|
19,240
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Other Assets
|
|
|
33,390
|
|
|
|
19,240
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Assets
|
|
$
|
640,032
|
|
|
$
|
651,757
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
and Stockholders' Equity (Deficit)
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
Liabilities
|
|
|
|
|
|
|
|
|
|
Accounts
Payable
|
|
$
|
990,357
|
|
|
$
|
106,789
|
|
|
Accounts
Payable - Related Party
|
|
|
41,374
|
|
|
|
15,979
|
|
|
Accrued
Expenses
|
|
|
58,990
|
|
|
|
61,624
|
|
|
Sales
Tax Payable
|
|
|
36,828
|
|
|
|
-
|
|
|
Billings
in excess of costs on uncompleted contract
|
|
|
56,831
|
|
|
|
-
|
|
|
Note
Payable-Officer
|
|
|
18,700
|
|
|
|
-
|
|
|
Note
Payable
|
|
|
591,771
|
|
|
|
-
|
|
|
Deferred
Revenue
|
|
|
3,000
|
|
|
|
62,700
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Current Liabilities
|
|
|
1,797,851
|
|
|
|
247,092
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments
and Contingencies (Note 9)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
Equity (Deficit)
|
|
|
|
|
|
|
|
|
|
Common
Stock, no par value, 10,000,000 shares authorized,
|
|
|
4,648,852
|
|
|
|
2,142,576
|
|
|
841,263
and 763,702 shares issued and outstanding
|
|
|
|
|
|
|
|
|
|
at
December 31, 2008 and 2007, respectively
|
|
|
|
|
|
|
|
|
|
Additional
Paid-in-Capital
|
|
|
7,358,135
|
|
|
|
1,831,553
|
|
|
Accumulated
Deficit
|
|
|
(13,164,806
|
)
|
|
|
(3,569,464
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total
Stockholders' Equity (Deficit)
|
|
|
(1,157,819
|
)
|
|
|
404,665
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Liabilities and Stockholders' Equity (Deficit)
|
|
$
|
640,032
|
|
|
$
|
651,757
|
|
|
|
|
|
|
|
|
|
|
|
The
Accompanying notes are an integral part of these Consolidated Financial
Statements.
|
Envision
Solar International, Inc. and Subsidiaries
|
|
|
|
|
|
|
|
|
|
|
Consolidated
Statements of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For
the Year Ended December 31,
|
|
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
2,418,391
|
|
|
$
|
52,661
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Materials
|
|
|
1,338,289
|
|
|
|
38,238
|
|
|
Consultants
|
|
|
47,642
|
|
|
|
25,742
|
|
|
Consultants-related
party
|
|
|
-
|
|
|
|
66,167
|
|
|
Design
|
|
|
14,450
|
|
|
|
-
|
|
|
Subcontractors
|
|
|
1,448,627
|
|
|
|
-
|
|
|
Other
Cost of Revenues
|
|
|
46,456
|
|
|
|
17,600
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Cost of Revenues
|
|
|
2,895,464
|
|
|
|
147,747
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
Loss
|
|
|
(477,073
|
)
|
|
|
(95,086
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Expenses (including stock based compensation expense
|
|
|
|
|
|
|
|
|
|
of
$4,363,912 for the year ended December 31, 2008 and
$1,831,553
|
|
|
|
|
|
|
|
|
|
for
the year ended December 31, 2007)
|
|
|
9,076,473
|
|
|
|
3,186,706
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
From Operations
|
|
|
(9,553,546
|
)
|
|
|
(3,281,792
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Other
Income (Expense)
|
|
|
|
|
|
|
|
|
|
Interest
Expense
|
|
|
(32,376
|
)
|
|
|
-
|
|
|
Total
Other Income (Expense)
|
|
|
(32,376
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(Loss) Before Income Tax
|
|
|
(9,585,922
|
)
|
|
|
(3,281,792
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Income
Tax Expense
|
|
|
(9,420
|
)
|
|
|
(800
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss
|
|
$
|
(9,595,342
|
)
|
|
$
|
(3,282,592
|
)
|
|
|
|
|
|
|
|
|
|
|
The
Accompanying notes are an integral part of these Consolidated Financial
Statements
|
Envision
Solar International Inc. and Subsidiaries
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
Statements of Changes of Stockholders' Equity (Deficit)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years
Ended December 31, 2008 and 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock
|
|
|
Additional
Paid-in-Capital
|
|
|
Accumulated
|
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Deficit
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at June 12, 2006 (Inception)
|
|
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
issued for cash
|
|
|
255,000
|
|
|
|
155,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
155,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss from June 12, 2006 (Inception) to December 31, 2006
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(286,872
|
)
|
|
|
(286,872
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at December 31, 2006
|
|
|
255,000
|
|
|
|
155,000
|
|
|
|
-
|
|
|
|
(286,872
|
)
|
|
|
(131,872
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
issued as compensation
|
|
|
49,994
|
|
|
|
49,994
|
|
|
|
-
|
|
|
|
-
|
|
|
|
49,994
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion
of debt from related party to stock
|
|
|
238,875
|
|
|
|
238,875
|
|
|
|
-
|
|
|
|
-
|
|
|
|
238,875
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
Issued for Cash
|
|
|
199,848
|
|
|
|
1,998,480
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,998,480
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
offering costs
|
|
|
-
|
|
|
|
(299,773
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(299,773
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock issued as part of offering costs
|
|
|
19,985
|
|
|
|
199,850
|
|
|
|
-
|
|
|
|
-
|
|
|
|
199,850
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
based offering costs
|
|
|
-
|
|
|
|
(199,850
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(199,850
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
option expense
|
|
|
-
|
|
|
|
-
|
|
|
|
1,831,553
|
|
|
|
-
|
|
|
|
1,831,553
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss 2007
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(3,282,592
|
)
|
|
|
(3,282,592
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at December 31, 2007
|
|
|
763,702
|
|
|
|
2,142,576
|
|
|
|
1,831,553
|
|
|
|
(3,569,464
|
)
|
|
|
404,665
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value
of options issued to seller of company acquired
|
|
|
-
|
|
|
|
-
|
|
|
|
1,157,676
|
|
|
|
-
|
|
|
|
1,157,676
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
issued to seller of company acquired
|
|
|
10,000
|
|
|
|
100,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
100,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value
of options granted to reduce the outstanding liabilities from certain
vendors
|
|
|
-
|
|
|
|
-
|
|
|
|
14,994
|
|
|
|
-
|
|
|
|
14,994
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock issued for cash
|
|
|
67,311
|
|
|
|
2,692,444
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,692,444
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
raising fees incurred during the year
|
|
|
-
|
|
|
|
(296,168
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(296,168
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
Option Expense
|
|
|
-
|
|
|
|
-
|
|
|
|
4,353,912
|
|
|
|
-
|
|
|
|
4,353,912
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
issued for services
|
|
|
250
|
|
|
|
10,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
10,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss 2008
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(9,595,342
|
)
|
|
|
(9,595,342
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at December 31, 2008
|
|
|
841,263
|
|
|
$
|
4,648,852
|
|
|
$
|
7,358,135
|
|
|
$
|
(13,164,806
|
)
|
|
$
|
(1,157,819
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
Accompanying notes are an integral part of these Consolidated Financial
Statements
|
|
|
|
|
|
|
|
|
Envision
Solar International, Inc. and Subsidiaries
|
|
|
|
|
|
|
|
|
|
|
Consolidated
Statements of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
Ended December 31,
|
|
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
Net
Loss
|
|
$
|
(9,595,342
|
)
|
|
$
|
(3,282,592
|
)
|
|
Adjustments to Reconcile Net loss to
Net Cash Used in Operating Activities
|
|
|
|
|
|
|
|
|
|
Amortization of prepaid
interest
|
|
|
32,108
|
|
|
|
-
|
|
|
Depreciation and
Amortization
|
|
|
52,105
|
|
|
|
17,829
|
|
|
Bad debt
expense
|
|
|
105,955
|
|
|
|
14,071
|
|
|
Goodwill
impairment
|
|
|
1,358,254
|
|
|
|
-
|
|
|
Common stock issued for
services
|
|
|
10,000
|
|
|
|
49,994
|
|
|
Trademark
impairment
|
|
|
68,827
|
|
|
|
-
|
|
|
Compensation expense
related to grant of stock options
|
|
|
4,353,912
|
|
|
|
1,831,553
|
|
|
Changes in assets and
liabilities
|
|
|
|
|
|
|
|
|
|
(Increase)decrease
in:
|
|
|
|
|
|
|
|
|
|
Accounts
Receivable
|
|
|
(219,484
|
)
|
|
|
(61,830
|
)
|
|
Prepaid Expenses and other
current assets
|
|
|
86,068
|
|
|
|
(99,578
|
)
|
|
Deposits
|
|
|
(14,150
|
)
|
|
|
(19,240
|
)
|
|
Increase(decrease)
in:
|
|
|
|
|
|
|
|
|
|
Accounts
Payable
|
|
|
806,984
|
|
|
|
106,789
|
|
|
Accounts Payable - related
party
|
|
|
25,395
|
|
|
|
74,736
|
|
|
Accrued
Expenses
|
|
|
(2,635
|
)
|
|
|
28,898
|
|
|
Sales Tax
Payable
|
|
|
36,828
|
|
|
|
-
|
|
|
Billings in excess of costs
on uncompleted contract
|
|
|
56,831
|
|
|
|
-
|
|
|
Deferred
Revenue
|
|
|
(59,700
|
)
|
|
|
62,700
|
|
|
NET
CASH USED IN OPERATING ACTIVITIES
|
|
|
(2,898,044
|
)
|
|
|
(1,276,670
|
)
|
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Cash paid in
acquisition
|
|
|
(9,000
|
)
|
|
|
-
|
|
|
Purchase of
trademark
|
|
|
(71,200
|
)
|
|
|
-
|
|
|
Purchase of
Equipment
|
|
|
(181,402
|
)
|
|
|
(224,256
|
)
|
|
NET
CASH USED IN INVESTING ACTIVITIES
|
|
|
(261,602
|
)
|
|
|
(224,256
|
)
|
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Sale of Common
Stock
|
|
|
2,692,444
|
|
|
|
1,998,480
|
|
|
Capital Raising
costs
|
|
|
(296,168
|
)
|
|
|
(299,773
|
)
|
|
Proceeds from
Issuance of notes payable
|
|
|
490,000
|
|
|
|
-
|
|
|
Proceeds from notes
payable from-shareholders
|
|
|
18,700
|
|
|
|
-
|
|
|
NET
CASH PROVIDED BY FINANCING ACTIVITIES
|
|
|
2,904,976
|
|
|
|
1,698,707
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
INCREASE (DECREASE) IN CASH
|
|
|
(254,670
|
)
|
|
|
197,781
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH
AT BEGINNING OF YEAR
|
|
|
257,753
|
|
|
|
59,972
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH
AT END OF YEAR
|
|
$
|
3,083
|
|
|
$
|
257,753
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
Disclosure of Cash Flow Information:
|
|
|
|
|
|
|
|
|
|
Interest
Expense
|
|
$
|
32,376
|
|
|
$
|
-
|
|
|
Income
Tax
|
|
$
|
(9,420
|
)
|
|
$
|
800
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
Disclosure of Non-Cash Investing and Financing Activities:
|
|
|
|
|
|
|
|
|
|
Conversion of note
payable to a related party to common stock
|
|
$
|
-
|
|
|
$
|
238,875
|
|
|
Common stock issued
as offering costs
|
|
$
|
-
|
|
|
$
|
199,850
|
|
|
Stock-based fees
paid for acquisition
|
|
$
|
1,257,676
|
|
|
$
|
-
|
|
|
Conversion of
accounts payable to common stock
|
|
$
|
14,994
|
|
|
$
|
-
|
|
|
Original issue
discount on note payable
|
|
$
|
101,771
|
|
|
$
|
-
|
|
The
Accompanying notes are an integral part of these Consolidated Financial
Statements
ENVISION
SOLAR INTERNATIONAL INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2008 and 2007
|
1.
|
NATURE
OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
|
CORPORATE
ORGANIZATION
The
Company was incorporated on June 12, 2006 as a limited liability company
(“LLC”), under the name Envision Solar, LLC. In September 2007, the
company was reorganized as a California C Corporation and issued one share of
common stock for each outstanding member unit in the LLC. The change
in capitalization to common stock from member equity has been retroactively
applied to all periods presented in the accompanying consolidated financial
statements. Also during 2007, the Company formed various wholly owned
subsidiaries to account for its planned future operations. All
references to “us”, “we”, “our”, “Envision” or “the Company”, refer to Envision
Solar, LLC or the newly formed Corporation and its wholly-owned
subsidiaries unless otherwise stated.
In 2007,
the Company established a series of subsidiaries: 1. Envision Energy Group, Inc.
2. Envision Solar Construction Company, Inc. 3. Envision
Solar Design, Inc. 4. Envision Solar Development, Inc.
5. Envision Solar Operation & Management, Inc.
6. Envision Solar Residential, Inc. 7. Envision Solar
Technology, Inc. and 8. Greenshade Network, Inc. In
addition, in 2008, the Company established one other subsidiary, Envision Africa
LLC, a wholly owned LLC. During 2008 only two were operational, with
Envision Africa anticipated to become operational in the future. The
remaining subsidiaries were dissolved with the Secretary of State of California
in 2008. The two operational subsidiaries included in these
consolidated financial statements are: Envision Solar Residential,
Inc. and Envision Solar Construction Company, Inc.
NATURE
OF OPERATIONS
Envision
Solar (“the Company”) is a solar project and technology developer providing
turn-key design/build solutions for commercial, industrial, institutional and
residential projects. Founded by award-winning sustainable design
architects with extensive international business development and industrial
design expertise, the Company strives to be first-to-market and the leading
worldwide brand in solar parking arrays. The Company has two lines of
business, ParkSolar
SM
for
commercial, industrial and government projects, and LifeSystems
SM
for
residential and light commercial products and projects. Both groups have
envisioned, invented and engineered the leading next generation, patent pending,
“solar integrated building systems™” (SIBS™) which are providing the foundation
for the lowest cost, most highly engineered solutions available for the massive
future worldwide market for solar parking array installations.
The
Company’s business model includes vertical integration of all key capabilities
required for the full, turn-key “single-point-of-contract™” implementation of
each project. These capabilities include project planning and
management, design, construction, operations and maintenance, and structured
finance. The Company is continuing to secure its position as the key participant
at the convergence of solar energy and the real estate and building
industry.
The
Company operates with the following trade names: ParkSolar
SM
:
Commercial Scale Solar Parking Arrays, LifeSystems
SM
:
Residential Component-Based Solar Integrated Buildings, and GreenShade.
SM
PRINCIPALS
OF CONSOLIDATION
The
consolidated financial statements include the accounts of Envision Solar
International Inc. and its wholly-owned subsidiaries. All significant
inter-company balances and transactions have been eliminated in the
consolidation.
USE
OF ESTIMATES
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates. Significant estimates in the accompanying consolidated
financial statements include the allowance for doubtful accounts receivable,
depreciable lives of property and equipment, fair value allocation in an
acquisition, valuation of goodwill and trademarks, valuation of share-based
payments and the valuation allowance on deferred tax assets.
ENVISION
SOLAR INTERNATIONAL INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2008 and 2007
CONCENTRATIONS
Concentration of Credit
Risk
Financial instruments that
potentially subject us to concentrations of credit risk consist of cash and
accounts receivable.
The Company maintains its cash in
bank and financial institution deposits that at times may exceed federally
insured limits. The Company has not experienced any losses in such
accounts from inception through December 31, 2008. As of December 31,
2008 and 2007, there was approximately $0 and $94,539, respectively, in excess
of federally insured limits.
Concentration of Accounts
Receivable
At December 31, 2008 and 2007,
customers that each accounted for more than 10% of our gross accounts receivable
individually were as follows:
|
|
|
2008
|
|
|
2007
|
|
|
Customer
1
|
|
|
-
|
|
|
|
49
|
%
|
|
Customer
2
|
|
|
-
|
|
|
|
20
|
%
|
|
Customer
3
|
|
|
28
|
%
|
|
|
-
|
|
|
Customer
4
|
|
|
24
|
%
|
|
|
-
|
|
|
Customer
5
|
|
|
14
|
%
|
|
|
-
|
|
Concentration of
Revenues
For the year ended December 31, 2008
and 2007, customers that each represented more than 10% of our net revenues were
as follows:
|
|
|
2008
|
|
|
2007
|
|
|
Customer
A
|
|
|
-
|
|
|
|
56
|
%
|
|
Customer
B
|
|
|
-
|
|
|
|
23
|
%
|
|
Customer
C
|
|
|
-
|
|
|
|
20
|
%
|
|
Customer
D
|
|
|
50
|
%
|
|
|
-
|
|
|
Customer
E
|
|
|
29
|
%
|
|
|
-
|
|
CASH
AND CASH EQUIVALENTS
For the
purposes of the consolidated statements of cash flows, the Company
considers all highly liquid investments with an original maturity of three
months or less when purchased to be cash equivalents. There were no
cash equivalents at December 31, 2008 or 2007.
ACCOUNTS
RECEIVABLE
Accounts
receivable are customer obligations due under normal trade
terms. Management reviews accounts receivable on a monthly basis to
determine if any receivables will potentially be
uncollectible. Management’s evaluation includes several factors
including the aging of the accounts receivable balances, a review of significant
past due accounts, our historical write-off experience, net of recoveries and
economic conditions. The Company includes any accounts receivable
balances that are determined to be uncollectible, along with a general reserve,
in its overall allowance for doubtful accounts. After all attempts to
collect a receivable have failed, the receivable is written off against the
allowance.
ENVISION
SOLAR INTERNATIONAL INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2008 and 2007
PROPERTY,
EQUIPMENT AND DEPRECIATION
Property
and equipment is recorded at cost. Depreciation is computed using the
straight-line method based on the estimated useful lives of the related assets
of 5 to 7 years. Leasehold improvements are amortized over the lesser
of the lease term or the useful life of the
improvements. Expenditures for maintenance and repairs along with
fixed assets below our capitalization threshold are expensed as
incurred.
WEBSITE
AND OTHER SOFTWARE DEVELOPMENT COSTS
In
accordance with EITF Issue No. 00-2, the Company accounts for its website
development costs in accordance with Statement of Position No. 98-1, “Accounting
for the Costs of Computer Software Developed or Obtained for Internal Use” (“SOP
98-1”). The Company also applies SOP 98-1 to its other software
development or purchase costs of software for internal use. These
costs are included in property and equipment in the accompanying consolidated
financial statements.
SOP 98-1
requires the expensing of all costs of the preliminary project stage and the
training and application maintenance stage and the capitalization of all
internal or external direct costs incurred during the application development
stage. The Company amortizes the capitalized cost of software
developed or obtained for internal use over an estimated life of five
years.
IMPAIRMENT
OF LONG-LIVED ASSETS
The
Company accounts for long-lived assets in accordance with the provisions of
Statement of Financial Accounting Standards (“SFAS”) No. 144, “Accounting
for the Impairment or Disposal of Long-Lived Assets.” This statement
requires that long-lived assets and certain identifiable intangibles be reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of
assets to be held and used is measured by a comparison of the carrying amount of
an asset to future undiscounted net cash flows expected to be generated by the
asset. If such assets are considered to be impaired, the impairment
to be recognized is measured by the amount by which the carrying amount of the
assets exceeds the fair value of the assets. Assets to be disposed of
are reported at the lower of the carrying amount or fair value less costs to
sell.
REVENUE
AND COST RECOGNITION
Revenues consist of design fees for the design of solar systems and arrays, and
revenues from sales, construction and installation of the same.
Revenues
from design services are recognized as earned.
Construction contracts are generally
short term (less than one year duration) and revenues and related costs are
recognized using the “completed contract method” of accounting in accordance
with Statement of Position 81-1, “Accounting for Performance of
Construction-Type and Certain Production Type Contracts”. Under this
method, contract costs are accumulated as deferred assets and billings and/or
cash received are recorded to a deferred revenue liability account, during the
periods of construction, but no revenues, costs, or profits are recognized in
operations until the period upon completion of the contract. Costs
include direct material, direct labor and subcontract labor. A
contract is considered complete when all costs except insignificant items have
been incurred and the installation is operating according to specifications or
has been accepted by the customer. Corporate general and
administrative expenses are charged to the periods as
incurred. However, in the event a loss on a contract is foreseen, the
Company will recognize the loss as it is incurred.
The
deferred asset (accumulated contract costs) in excess of the deferred liability
(billings and/or cash received) is classified as a current asset under costs in
excess of billings on uncompleted contracts. The deferred liability
(billings and/or cash received) in excess of the deferred asset (accumulated
contract costs) is classified under current liabilities as billings in excess of
costs on uncompleted contracts. Contract retentions are included in
accounts receivable.
ENVISION
SOLAR INTERNATIONAL INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2008 and 2007
The
Company includes shipping and handling fees billed to customers as revenues and
shipping and handling costs as cost of revenues. The company does not
provide any warranties on its products other than those passed on to its
customers from its manufacturers, if any.
Additionally,
the Company follows the guidance of Emerging Issues Task Force (EITF) Issue 01-9
“Accounting for Consideration Given by a Vendor to a Customer” and (EITF) Issue
02-16 “Accounting By a Customer (Including a Reseller) for Certain
Considerations Received from Vendors.” Accordingly, any incentives
received from vendors are recognized as a reduction of the cost of
products. Cash incentives provided to our customers are recognized as
a reduction of the related sale price, and therefore, are a reduction in
sales.
RESEARCH
AND DEVELOPMENT
In
accordance with Statement of Financial Accounting Standards No. 2,
“Accounting for Research and Development Costs” expenditures for research and
development of the Company’s products are expensed when incurred, and are
included in operating expenses. The Company recognized research and
development costs of $127,337 for the year ending December 31, 2008 and $13,785
for the year ending December 31, 2007.
ADVERTISING
The
Company conducts advertising for the promotion of its products and
services. In accordance with SOP 93-7, advertising costs are charged
to operations when incurred; such amounts aggregated $18,845 in 2008 and $395 in
2007.
STOCK-BASED
COMPENSATION
At
inception, the Company adopted SFAS No. 123(R), “Share Based Payment” and
related interpretations. SFAS No. 123(R) requires companies to
estimate and recognize the fair value of stock-based awards to employees and
directors. The value of the portion of an award that is ultimately
expected to vest is recognized as an expense over the requisite service periods
using the straight-line attribution method.
The
Company estimated the fair value of each stock option at the grant date by using
the Black-Scholes option pricing model.
INCOME
TAXES
Prior to
September 12, 2007 the Company operated as an LLC and thus had no income tax
exposure. Effective September 12, 2007, the Company accounts for
income taxes pursuant to the provisions of SFAS No. 109, “Accounting for
Income Taxes,” which requires, among other things, an asset and liability
approach to calculating deferred income taxes. The asset and
liability approach requires the recognition of deferred tax assets and
liabilities for the expected future tax consequences of temporary differences
between the carrying amounts and the tax bases of assets and
liabilities. A valuation allowance is provided to offset any net
deferred tax assets for which management believes it is more likely than not
that the net deferred asset will not be realized.
Beginning
September 12, 2007, the Company adopted the provisions of the FASB’s Financial
Interpretation Number 48 (FIN. 48),
Accounting for Uncertain Income Tax
Positions.
When tax returns are filed, it is highly certain
that some positions taken would be sustained upon examination by the taxing
authorities, while others are subject to uncertainty about the merits of the
position taken or the amount of the position that would be ultimately
sustained. In accordance with the guidance of FIN 48, the benefit of
a tax position is recognized in the financial statements in the period during
which, based on all available evidence, management believes it is more likely
than not that the position will be sustained upon examination, including the
resolution of appeals or litigation processes, if any. Tax positions
taken are not offset or aggregated with other positions. Tax
positions that meet the more-likely-than-not recognition threshold are measured
as the largest amount of tax benefit that is more than 50 percent likely of
being realized upon settlement with the applicable taxing
authority. The portion of the benefits associated with tax positions
taken that exceeds the amount measured as described above should be reflected as
a liability for unrecognized tax benefits in the accompanying balance sheet
along with any associated interest and penalties that would be payable to the
taxing authorities upon examination. The Company believes its tax
positions are all highly certain of being upheld upon examination. As
such, the Company has not recorded a liability for unrecognized tax
benefits. As of December 31, 2008, tax years 2007 and 2008 remain
open for IRS audit. The Company has received no notice of audit from
the IRS for any of the open tax years.
ENVISION
SOLAR INTERNATIONAL INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2008 and 2007
Effective
September 12, 2007, the Company adopted FASB Staff Position FIN 48-1,
Definition of Settlement in FASB
Interpretation No. 48
, (“FSP FIN 48-1”), which was issued on
May 2, 2007. FSP FIN 48-1 amends FIN 48 to provide guidance on
how an entity should determine whether a tax position is effectively settled for
the purpose of recognizing previously unrecognized tax benefits. The
term “effectively settled” replaces the term “ultimately settled” when used to
describe recognition, and the terms “settlement” or “settled” replace the terms
“ultimate settlement” or “ultimately settled” when used to describe measurement
of a tax position under FIN 48. FSP FIN 48-1 clarifies that a tax
position can be effectively settled upon the completion of an examination by a
taxing authority without being legally extinguished. For tax
positions considered effectively settled, an entity would recognize the full
amount of tax benefit, even if the tax position is not considered more likely
than not to be sustained based solely on the basis of its technical merits and
the statute of limitations remains open. The adoption of FSP FIN 48-1 did not
have an impact on the accompanying consolidated financial
statements.
FAIR
VALUE OF FINANCIAL INSTRUMENTS
We measure our financial assets and
liabilities in accordance with generally accepted accounting principles. For
certain of our financial instruments, including cash, accounts receivable,
accounts payable, accrued expenses and short term loans the carrying amounts
approximate fair value due to their short maturities.
Effective January 1, 2008, we adopted
accounting guidance for financial assets and liabilities. The adoption did not
have a material impact on our results of operations, financial position or
liquidity. This standard defines fair value, provides guidance for measuring
fair value and requires certain disclosures. This standard does not require any
new fair value measurements, but rather applies to all other accounting
pronouncements that require or permit fair value measurements. This guidance
does not apply to measurements related to share-based payments. This guidance
discusses valuation techniques, such as the market approach (comparable market
prices), the income approach (present value of future income or cash flow), and
the cost approach (cost to replace the service capacity of an asset or
replacement cost). The guidance utilizes a fair value hierarchy that prioritizes
the inputs to valuation techniques used to measure fair value into three broad
levels. The following is a brief description of those three levels:
Level
1: Observable inputs such as quoted prices (unadjusted) in active
markets for identical assets or liabilities.
Level
2: Inputs other than quoted prices that are observable, either directly or
indirectly. These include quoted prices for similar assets or liabilities in
active markets and quoted prices for identical or similar assets or liabilities
in markets that are not active.
Level
3: Unobservable inputs in which little or no market data exists, therefore
developed using estimates and assumptions developed by us, which
reflect those that a market participant would use.
We
currently measure and report at fair value our intangible assets. The
fair value of intangible assets including goodwill has been determined using the
present value of estimated future cash flows method. The following
table summarizes our financial assets and liabilities measured at fair value on
a recurring basis as of December 31, 2008 (in thousands):
|
|
|
Balance
at
December
31, 2008
|
|
Quoted
Prices in
Active
Markets for
Identical
Assets
|
|
Significant
other Observable
Inputs
|
|
Significant
Unobservable
Inputs
|
|
|
|
|
|
(Level
1)
|
|
(Level
2)
|
|
(Level
3)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
Goodwill
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
|
Trademarks
|
|
-
|
|
-
|
|
-
|
|
-
|
|
Total
Financial Assets
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
ENVISION
SOLAR INTERNATIONAL INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2008 and 2007
Following
is a roll forward through December 31, 2008 of the fair value of intangible
assets: (in thousands):
|
Balance
at December 31, 2007
|
|
$
|
-
|
|
|
Cumulative
effect of adoption of accounting principle
|
|
|
-
|
|
|
Balance
at January 1, 2008
|
|
|
-
|
|
|
Fair
value recorded for goodwill
|
|
|
1,358,254
|
|
|
Fair
value recorded for trademarks
|
|
|
71,200
|
|
|
Amortization
of trademarks
|
|
|
(2,373
|
)
|
|
Change
in fair value included in net loss
|
|
|
(1,427,081
|
)
|
|
Ending
balance at December 31, 2008
|
|
$
|
-
|
|
NEW
ACCOUNTING PRONOUNCEMENTS
In May 2009, the Financial Accounting
Standards Board (“FASB”) issued an accounting standard that became part of ASC
Topic 855, “Subsequent Events”. ASC Topic 855 establishes general
standards of accounting for and disclosure of events that occur after the
balance sheet date but before financial statements are issued or are available
to be issued. ASC Topic 855 sets forth (1) the period after the
balance sheet date during which management of a reporting entity should evaluate
events or transactions that may occur for potential recognition or disclosure in
the financial statements, (2) the circumstances under which an entity should
recognize events or transactions occurring after the balance sheet date in its
financial statements and (3) the disclosures that an entity should make about
events or transactions that occurred after the balance sheet
date. ASC Topic 855 is effective for interim or annual financial
periods ending after June 15, 2009. The adoption of ASC Topic 855 did
not have a material effect on the Company’s consolidated financial
statements.
In June 2009, the FASB issued an
accounting standard whereby the FASB Accounting Standards Codification
(“Codification”) will be the single source of authoritative nongovernmental U.S.
generally accepted accounting principles. Rules and interpretive
releases of the SEC under authority of federal securities laws are also sources
of authoritative GAAP for SEC registrants. ASC Topic 105 is effective
for interim and annual periods ending after September 15, 2009. All
existing accounting standards are superseded as described in ASC Topic
105. All other accounting literature not included in the Codification
is non-authoritative. The Codification is not expected to have a
significant impact on the Company’s consolidated financial
statements.
As
reflected in the accompanying consolidated financial statements for the year
ended December 31, 2008 and 2007, the Company had net losses of $9,595,342 and
$3,282,592 respectively (which includes stock based compensation of $4,363,912
in 2008 and $1,831,553 in 2007) and cash used in operations of $2,898,044 and
$1,276,670, respectively. Additionally at December 31, 2008 and 2007, the
Company had an accumulated deficit of $13,164,806 and $3,569,464, respectively
and a stockholders’ deficit and working capital deficiency of $1,157,819 and
$1,550,307 at December 31, 2008. Throughout 2008 and 2007, the
Company received funds through private offerings of approximately $2,700,000 in
2008 and $2,000,000 in 2007, before deducting cash offering costs of $296,168
and $299,773 respectively. In addition, subsequent to December 31,
2008, based on the passage of time since the December 31, 2008 balance sheet
date and other mitigating factors, management believes that the Company has not
met its expected needs required to support its operations for the next 12 months
through December 31, 2010.
Pursuant
to a plan of merger between Casita Enterprises and the Company, Envision expects
to execute a merger agreement whereby it will become a wholly owned subsidiary
of Casita Enterprises. Casita Enterprises is an
over-the-counter-bulletin board listed company whose assets consist principally
of cash and other miscellaneous assets. At the time of merger, which
is expected to occur not later than February 11, 2010, Casita is expected to
hold approximately $200,000 in cash. In addition, Envision, which
will be a publicly traded company following the merger, expects to conduct a
capital raising process whereby it will raise not less than
$600,000. These funds are expected to be sufficient to cover monthly
operating expenses as well as meet minimum payments with respect to the
Company’s liabilities over the next twelve months.
ENVISION
SOLAR INTERNATIONAL INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2008 and 2007
|
3.
|
COSTS
IN EXCESS OF BILLINGS (BILLINGS IN EXCESS OF COSTS) ON UNCOMPLETED
CONTRACTS AND ACCOUNTS RECEIVABLE
|
Costs in excess of billings on
uncompleted contracts represent accumulated contract costs that exceeded
billings and/or cash received on uncompleted contracts.
At December 31, 2008 and 2007, there
were no costs in excess of billings on uncompleted contracts.
Billings in excess of costs on
uncompleted contracts represents billings and/or cash received that exceed
accumulated contract costs on uncompleted contracts. There were no
billings in excess of costs on uncompleted contracts at December 31,
2007.
At December 31, 2008 billings in excess
of costs on uncompleted contracts consisted of the following:
|
Billings
and/or cash receipts on uncompleted contracts
|
|
$
|
309,465
|
|
|
Less:
Uncompleted contract costs
|
|
|
(252,634
|
)
|
|
Billings
in excess of costs on uncompleted contracts
|
|
$
|
56,831
|
|
The Company records accounts receivable
related to its construction contracts and its design services, based on billings
or on amounts due under the contractual terms. Allowance for doubtful
accounts is based upon the Company's policy. Any amounts considered
recoverable under the customer’s surety bonds are treated as contingent gains
and recognized only when received. Accounts receivable throughout the
year may decrease based on payments received, credits for change orders, or back
charges incurred.
At December 31, 2008 and 2007, accounts
receivable were as follows:
|
|
|
December 31,
2008
|
|
|
December 31,
2007
|
|
|
Accounts
Receivable
|
|
$
|
277,070
|
|
|
$
|
61,830
|
|
|
Less:
Allowance for doubtful accounts
|
|
|
(103,272
|
)
|
|
|
(1,561
|
)
|
|
Accounts
Receivable, Net
|
|
$
|
173,798
|
|
|
$
|
60,269
|
|
Bad debt expense for 2008 and 2007 was
$105,955 and $1,561, respectively.
|
4.
|
PREPAID
EXPENSES AND OTHER CURRENT ASSETS
|
Prepaid
expenses and other current assets are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
December 31,
2008
|
|
|
December 31,
2007
|
|
|
Prepaid
Health Insurance
|
|
$
|
-
|
|
|
$
|
3,080
|
|
|
Prepaid
Rent
|
|
|
-
|
|
|
|
22,737
|
|
|
Non-Trade
Receivables, net
|
|
|
-
|
|
|
|
33,518
|
|
|
Prepaid
interest
|
|
|
69,633
|
|
|
|
|
-
|
|
Other
|
|
|
1,030
|
|
|
|
27,734
|
|
|
Total
prepaid expenses and other current assets
|
|
$
|
70,663
|
|
|
$
|
87,069
|
|
At December 31, 2007, the Company had
other non-trade receivables of $12,510 for expenses to be reimbursed to the
company by strategic partners, which was fully reserved at December 31,
2007. Additionally, another $33,518 at December 31, 2008 was due from
a vendor at December 31, 2007, that was subsequently paid in
2008. Prepaid interest of $69,633 relates to the note payable of
$591,771 as the note was issued at a $101,771 discount. A total of
$32,128 of prepaid interest was amortized to interest expense in
2008.
ENVISION
SOLAR INTERNATIONAL INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2008 and 2007
|
5.
|
PROPERTY
AND EQUIPMENT
|
Property
and equipment consists of the following:
|
|
|
|
|
|
|
|
|
|
|
Est.
Useful
Lives
|
|
December 31,
2008
|
|
|
December 31,
2007
|
|
|
Computer
equipment and software
|
5
years
|
|
$
|
145,015
|
|
|
$
|
95,847
|
|
|
Furniture
and fixtures
|
7
years
|
|
|
197,169
|
|
|
|
127,458
|
|
|
Leasehold
improvements
|
5
years
|
|
|
60,399
|
|
|
|
14,195
|
|
|
Office
equipment
|
5
years
|
|
|
24,076
|
|
|
|
7,756
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
property and equipment
|
|
|
$
|
426,659
|
|
|
$
|
245,256
|
|
|
Less
accumulated depreciation
|
|
|
|
(67,561
|
)
|
|
|
(17,829
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Property
and Equipment, Net
|
|
|
$
|
359,098
|
|
|
$
|
227,427
|
|
Total depreciation expense for 2008 and
2007 was $49,732 and $17,829, respectively.
6. ACCRUED
EXPENSES
The
major components of accrued expenses are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
December 31,
2008
|
|
|
December 31,
2007
|
|
|
Accrued
vacation
|
|
$
|
42,115
|
|
|
$
|
27,969
|
|
|
Accrued
officer salary
|
|
|
16,875
|
|
|
|
-
|
|
|
Other
accrued expenses
|
|
|
-
|
|
|
|
33,655
|
|
|
Total
accrued expenses
|
|
$
|
58,990
|
|
|
$
|
61,624
|
|
7.
NOTE PAYABLE - OFFICER
In 2008 one of the Company’s officers
advanced the cost for various expenses on behalf of the company. As a result in
June 2008, the Company issued the shareholder a note in the amount of $18,700.
The note bears interest at 5% and is due and payable with accrued interest on or
before May 31, 2009. The note was not paid at maturity and the balance was
included in the $34,246 principal balance of a new note executed in October 2009
and due December 31, 2009. The officer resigned in November 2009. As of February
2010, this note was in default for payment of principal and interest. (see Note
13)
8.
NOTE PAYABLE
In November 2008, the Company entered
into a five-month $591,771 promissory note with Gemini Master Fund, Ltd. (the
"holder" or "lender") as bridge financing to an equity raise. Under the terms of
the note, $101,771 of prepaid interest was included in the note balance of which
$10,000 was a loan fee. The note bears interest at the rate of 7% annum on the
$500,000 net subscription amount, plus a 15% fee on the subscription amount,
plus 15% of the 7% per annum interest (effective interest in approximately 49%)
with a default rate of 20% per annum. The note was due April 11, 2009 and is
secured by substantially all assets of the Company and its subsidiaries and is
unconditionally guaranteed by all the subsidiaries. Under the terms of the note,
the outstanding principal and interest can be converted into equity at a 10%
discount from any reverse merger financing in the event the company enters into
a “reverse merger” with a publicly traded Company. Additionally, promptly
following the consummation of a reverse merger transaction, the Company shall
issue the lender such number of shares of public Company common stock such that
following the reverse merger the lender shall own 0.3125% of the fully-diluted
number of outstanding shares of common stock of the public company.
ENVISION
SOLAR INTERNATIONAL INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2008 and 2007
Subsequent to December 31, 2008, the
note came due and the Company was unable to fulfill its obligations under the
original terms of the note. In April 2009, the Company and the lender entered
into a forbearance agreement, which extended the due date to December 31, 2009.
Under the terms of the forbearance agreement, the interest rate changed to 15%
and the Company issued 10,000 shares of its common stock to the lender in
consideration of this agreement. This was not considered a troubled debt
restructure or debt modification under generally accepted accounting principles.
The shares were valued at the most recent common stock offering and sale price
of $40 per share resulting in a $400,000 value, which was recorded as a debt
discount and is being amortized through the new maturity date of December 31,
2009. Interest only payments would start being due monthly in arrears in the
first calendar month after which the Company raises $100,000 from all capital
raising transactions.
Interest expense under this note in
2008 was $32,138 and prepaid interest was $69,633 at December 31,
2008.
On October 30, 2009, the Company
entered into a second amendment to the loan agreement. This amendment increases
the interest rate at 20% retroactive to April 11, 2009 through October 30, 2009,
adjusts the per annum interest to 12% starting November 1, 2009 (default rate of
20%), extends the maturity to December 31, 2010 and adds a conversion feature to
allow conversion at the holder’s option to common stock at $10 per share. The
$591,771 note was amended to add accrued interest of $65,423 to the principal
balance resulting in a new principal balance of $657,194. Additionally, a new
second note was issued for $125,000 with proceeds of $117,500, net of issue
costs of $7,500, which was deposited into an escrow account for purposes of the
Company paying expenses for the cost of becoming a publicly held company. This
new note has the same terms of the amended note. Interest under both notes is
due on the first business day of each calendar quarter starting January 4, 2010,
however, upon three days advance notice, the Company may elect to add such
interest to the note principal balance effectively making the interest due at
note maturity. With regard to the conversion feature of both notes, the
conversion rights contain price protection whereby if the Company sells equity
or converts existing instruments to common stock at a price less than the $10
conversion price, the conversion price will be adjusted downward to the sale
price. Furthermore, if the Company issues new rights, warrants, options or other
common stock equivalents at an exercise price less than the $10 conversion
price, then the conversion price shall be adjusted downward to a new price based
on a stipulated formula. The holder may not convert the debt if it results in
the holder beneficially holding more than 9.9% of the Company common stock. The
holder is subject to a lock-up agreement on the debt and underlying shares from
October 30, 2009 through June 30, 2010. This October 30, 2009 amendment was
considered a debt extinguishment under generally accepted accounting principles
due to the addition of the conversion feature. The accounting effect was to
fully amortize the remaining debt discount at October 30, 2009, remove the old
debt and record the new debt.
9.
COMMITMENTS AND CONTINGENCIES
Leases:
On March
26, 2007, the Company entered into a lease agreement for its corporate office on
a month-to-month basis beginning May 1, 2007, in La Jolla, California. Monthly
rent at the premise is approximately $6,140 per month. Subsequent to December
31, 2007, the Company entered into an amended lease agreement at the same
location in order to expand operations. The new lease had a commencement date of
April 1, 2008 and is for a period of three years with an escalating yearly base
rent beginning at $16,505. Future minimum lease payments as of December 31, 2008
for the amended lease agreement with non-cancelable terms in excess of one year
are as follows:
ENVISION
SOLAR INTERNATIONAL INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2008 and 2007
|
Year
Ended December 31,
|
|
|
|
|
2009
|
|
|
202,497
|
|
|
2010
|
|
|
208,413
|
|
|
2011
|
|
|
52,473
|
|
|
Total
|
|
$
|
463,383
|
|
Rent expense was $163,879 and $71,940
for the years ended December 31, 2008 and 2007, respectively.
During 2009, the Company entered into
litigation with the landlord due to the Company’s default on rental payments and
in December 2009 the Company abandoned the premises. (See Legal
Matters below)
Legal
Matters:
From time
to time, we may be involved in litigation relating to claims arising out of our
operations in the normal course of business. As of December 31, 2008,
there were no pending or threatened lawsuits that could reasonably be expected
to have a material effect on the results of our operations except for the
following:
In August
2008, the Company received a letter from a contractor asserting that $400,000
was owed resulting from an alleged breach of contract. The Company denies any
liability under the agreement and facts of the assertion and rejected the
claim. No further communications have been had to date and based on
the information available at this time, it is not possible to determine the
possible outcome of this matter.
The
Company is a party to a wrongful termination suit filed by former
employee. The employee was an “at-will” employee under California
employment law. The plaintiff claims that he was promised a job as in-house
counsel, which never materialized. ESII successfully demurred to Plaintiff’s
complaint. Plaintiff amended complaint, ESII answered it and it is now
undergoing discovery process to obtain evidence to disprove the Plaintiff's
allegations. The Company denies any liability under the agreement and facts of
the assertion and rejected the claim. No further communications have
been had to date and based on the information available at this time, it is not
possible to determine the possible outcome of this matter, however, as the
Company does not believe it is probable the plaintiff will prevail, no amounts
have been accrued as of December 31, 2008.
The
Company is a party to a lawsuit filed in July 2009 with a company owned by one
its shareholders. The lawsuit alleges fraud in misrepresenting signed
contracts in the 2008 Private Placement Memorandum and seeks to recover $250,000
in investments made in the private placement and approximately $166,000 plus
interest at 10% from April 1, 2009 in monies owed for project work in 2008 and
2009. In connection with the litigation the Company is responding to discovery
of documents. The Company denies any liability under the lawsuit and
has rejected the claim. No further communications have been had to
date and based on the information available at this time, it is not possible to
determine the possible outcome of this matter. The amounts owned
under project work aggregating approximately $124,000 have been accrued as
accounts payable as of December 31, 2008. The amounts owned under
project work aggregating approximately $166,000 have been accrued as accounts
payable as of September 30, 2009.
The
Company is a party to a lawsuit with its former landlord whereby the landlord
claims that the Company broke its lease with respect to the rental of office
space which housed the Company’s headquarters. The Company attempted
to renegotiate the remaining term of its lease at a lower rate but the proposal
was rejected by the Landlord. The Company vacated premises on December 20, 2009
and landlord repossessed premises on January 1, 2010. Plaintiff seeks damages
for past rent due, interest and attorney’s fees. The Company does not
deny the breach of its lease and is attempting to work out a settlement. As of
December 31, 2009, the Company has accrued approximately $268,000 representing
the fair value of the future rent due under the abandoned lease. (see Note
15)
On February 4, 2010, Continental
Maritime filed a complaint for breach of contract. The plaintiff provided steel
columns and associated labor to Company as part of UC-San Diego Solar Parking
Structure project. The claim is for approximately $140,000. The Agreement was
entered into on June 9. 2008. Due to project cost overruns and capital raise
shortfalls in 2008 and 2009, the Company was unable to make payments on the
remaining balance. The Company is reviewing the claim to assess its
liability if any under the lawsuit and the basis for the claim. No further
communications have been had to date and based on the information available at
this time, it is not possible to determine the possible outcome of this matter.
The Company has accrued payables to this vendor of approximately $132,000 at
September 30, 2009.
ENVISION
SOLAR INTERNATIONAL INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2008 and 2007
There are
no proceedings in which any of our directors, officers or affiliates, or any
registered or beneficial shareholder, is an adverse party or has a material
interest adverse to our interest.
Other
Commitments:
The Company enters into various
contracts or agreements in the normal course of business whereby such contracts
or agreements may contain commitments. During 2008 and 2007, the
Company entered into agreements to act as a reseller for certain vendors; joint
development contracts with third parties; referral agreements where the Company
would pay a referral fee to the referrer for business generated; sales agent
agreements whereby sales agents would received a fee equal to a percentage of
revenues generated by the agent; business development agreements and strategic
alliance agreements where both parties agree to cooperate and provide business
opportunities to each other and in some instances, provide for a right of first
refusal with respect to certain projects of the other parties; agreements with
vendors where the vendor may provide marketing, public relations, technical
consulting or subcontractor services and financial advisory agreements where the
financial advisor would receive a fee and/or commission for raising capital for
the Company. All expenses and liabilities relating to such contracts
were recorded in accordance with generally accepted accounting principles during
2008 and 2007 and as of December 31, 2008 and 2007. Although such
agreements increase the risk of legal actions against the Company for potential
non-compliance, there are no firm commitments in such agreements as of December
31, 2008 and 2007.
Effective December 19, 2006, the
Company entered into an agreement with a manufacturer who owns the trademarks
“Solar Grove” and “Solar Tree”. Under the terms of the agreement, the
manufacturer is to provide products to the Company on a per unit basis and the
Company is to pay the manufacturer a royalty, set at 0.25% of revenue, for each
project sold under the above-mentioned trademarks, less the fees for the product
provided by the manufacturer. The Company also had the right to
purchase the above-mentioned trademarks during the term of the agreement which
purchase cancels any future royalties. In November 2008, the Company
exercised its option to purchase the trademarks for
$71,200. Royalties owed in 2007 and 2008 were de
minimis. In 2008 the Company amortized $2,373 of the trademarks and
then wrote off the remaining balance of $68,827 trademarks under the impairment
provisions since there is not a justifiable means to document its future
value. This impairment charge is included in operating
expenses.
Upon the signing of customer contracts,
the Company enters into various other agreements with third party vendors who
will provide services and/or products to the Company. Such vendor
agreements typically call for a deposit along with certain other payments based
on the delivery of goods or services. Payments made by the Company
before the completion of projects are treated as prepaid assets and due to the
contractual nature of the agreement; the Company may be contingently liable for
other payments required under the agreement.
10. COMMON
STOCK
Shares
issued
Issuances
of the Company’s common stock during the years ended December 31, 2008 and
2007 as follows:
Shares
Issued for Cash
2007
From April through November 2007,
199,848 shares of common stock were issued at $10.00 per share aggregately, for
$1,998,480 cash.
Offering costs paid were $299,773 cash
and 19,985 common shares valued at the $10.00 sale price of $199,850 and were
offset against the proceeds in common stock on the accompanying consolidated
financial statements.
ENVISION
SOLAR INTERNATIONAL INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2008 and 2007
2008
During 2008, the Company issued 67,311
shares of common stock for cash at $40.00 per share. The gross
proceeds from these issuances were $2,692,444. The Company also
incurred capital raising fees of $296,168 related to the sale and issuance of
the aforementioned common stock.
Shares
Issued as Finders Fees
2007
In November, in accordance with our
selling agreement for the 2007 private placement, 19,985 shares of common stock
were issued as partial finder’s fee compensation related to the raising of
equity. The shares were valued at $199,850 based on the
contemporaneous stock sale price of $10.00 per share and offset against the
proceeds in the common stock account.
Shares
Issued as Compensation
2007
In early
2007, 49,994 shares of common stock were issued as compensation to employees
with a value of $49,994 based upon the then most recent cash sales price of
$1.00 per share.
2008
In 2008, the Company issued 250 shares
of stock valued at $40.00 per share or an aggregate $10,000 based on the
contemporaneous sale price in exchange for non-employee services rendered to the
company. The expense was fully recognized on the grant date as
services were completed.
Shares
Issued in Conversion of Other Liabilities
2007
In early 2007, 238,875 shares of common
stock were issued upon conversion of other liabilities from a related party, in
the amount of $238,895 based upon the then most recent cash sales price of $1.00
per share.
Shares
Issued in Connection with Acquisition of a Company
2008
In January 2008, the Company issued
10,000 shares to the seller in an acquisition. The shares were valued
at the contemporaneous sale price of $10.00 per share resulting in a $100,000
value, which was recorded as part of the purchase accounting (see Note
14).
The
Company issued options to certain Company vendors in exchange for the vendors
reducing their obligations to the Company. The Company issued options
valued at $14,994 to these vendors. (See Notes 11 and
14)
11. STOCK
OPTIONS AND WARRANTS
In 2008,
the Board approved the 2008 Stock Option Plan, which authorizes 200,000 shares
under the plan. Exercise rights may not expire more than three months
after the date of termination of the employee but may expire in less time as
stipulated in the individual grant notice. For disability or death
the optionee or estate will generally have up to twelve months to exercise their
options. For certain options the Company may have rights of first
refusal for a stipulated period of time, under a separate stock restriction
agreement, whereby if the holder exercise the options and then desires to sell
the underlying shares, the Company has the right to repurchase such shares at a
price to which the holder has agreed to sell them to a third party.
ENVISION
SOLAR INTERNATIONAL INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2008 and 2007
In 2007,
the Company authorized the 2007 Unit Option Plan when the Company was a limited
liability company. Options granted under this plan were exchanged one
for one for options of Envision Solar International, Inc. upon conversion to a
corporation from an LLC. (See Note 1)
Stock
Options
At inception in 2006, the Company
adopted the provisions of Statement of Financial Accounting Standards
123(Revised 2004), Share-Based Payment (“SFAS 123R”). SFAS 123R
establishes standards surrounding the accounting for transactions in which an
entity exchanges its equity instruments for goods or services. SFAS
123R focuses primarily on accounting for transactions in which an entity obtains
employee services in share-based payment transactions, such as options issued
under the Company’s Stock Option Plans. The Company’s stock option
compensation expense was $4,353,912 and $1,831,553 for the years ended
December 31, 2008 and 2007, respectively, and there was $2,523,862 of total
unrecognized compensation cost related to unvested options granted under the
Company’s options plans as of December 31, 2008. This stock
option expense will be recognized through December 2012.
The fair value of each option is
estimated on the date of grant using the Black-Scholes option-pricing
model. This model incorporates certain assumptions for inputs
including a risk-free market interest rate, expected dividend yield of the
underlying common stock, expected option life and expected volatility in the
market value of the underlying common stock. We used the following
assumptions for options issued in fiscal 2008 and 2007:
|
|
2008
|
2007
|
|
Expected
volatility
|
106%
|
74%
|
|
Expected
lives
|
2-10
Years
|
7
Years
|
|
Risk-free
interest rate
|
2%
|
2.20%
|
|
Expected
dividend yield
|
None
|
None
|
The Black-Scholes option-pricing model
was developed for use in estimating the fair value of traded options, which have
no vesting restrictions and are fully transferable. In addition,
option valuation models require the input of highly subjective assumptions
including the expected stock price volatility. Because the Company’s
stock options and warrants have characteristics different from those of its
traded stock, and because changes in the subjective input assumptions can
materially affect the fair value estimate, in management’s opinion, the existing
models do not necessarily provide a reliable single measure of the fair value of
such stock options. The risk free interest rate is based upon quoted
market yields for United States Treasury debt securities with a term similar to
the expected term. The expected dividend yield is based upon the
Company’s history of having never issued a dividend and management’s current
expectation of future action surrounding dividends. As the Company
was not publicly traded during the time of the option grants, expected
volatility in 2008 and 2007 was based on the comparative company method where
other, publicly traded companies within the same industry as us, were used as
the benchmark for our calculation. The Expected lives for such grants
were based on the simplified method for employees or on the contractual terms of
the options or warrants for non-employees.
All options qualify as equity pursuant
to EITF 00-19 “Accounting for Derivative Financial Instruments Indexed to, and
Potentially Settled in, a Company’s Own Stock”. Option activity for
the years ended December 31, 2008 and 2007 under the 2007 Plan is as
follows:
ENVISION
SOLAR INTERNATIONAL INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2008 and 2007
|
|
|
Number
of Options
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Outstanding
at December 31, 2006
|
|
|
-
|
|
|
$
|
-
|
|
|
Granted
|
|
|
441,860
|
|
|
|
10.00
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
Forfeited
|
|
|
-
|
|
|
|
-
|
|
|
Expired
|
|
|
-
|
|
|
|
-
|
|
|
Outstanding
at December 31, 2007
|
|
|
441,860
|
|
|
$
|
10.00
|
|
|
Exercisable
at December 31, 2007
|
|
|
263,323
|
|
|
$
|
10.00
|
|
|
Weighted
average grant date fair value
|
|
|
|
|
|
$
|
6.96
|
|
|
Granted
|
|
|
348,224
|
|
|
|
25.18
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
Forfeited
|
|
|
(179,075
|
)
|
|
|
23.25
|
|
|
Expired
|
|
|
-
|
|
|
|
-
|
|
|
Outstanding
at December 31, 2008
|
|
|
611,009
|
|
|
$
|
14.77
|
|
|
Exercisable
at December 31, 2008
|
|
|
560,643
|
|
|
$
|
15.27
|
|
|
Weighted
average grant date fair value
|
|
|
|
|
|
$
|
16.18
|
|
The following table summarizes
information about employee stock options under the 2008 Stock Option Plan
outstanding at December 31, 2008:
|
Options
Outstanding
|
|
|
Options
Exercisable
|
|
|
Range
of Exercise Price
|
|
|
Number
Outstanding at December 31, 2008
|
|
|
Weighted
Average Remaining Contractual Life
|
|
|
Weighted
Average Exercise Price
|
|
|
Aggregate
Intrinsic Value
|
|
|
Number
Exercisable
at
December
31, 2008
|
|
|
Weighted
Average Exercise Price
|
|
|
Aggregate
Intrinsic Value
|
|
|
$
|
10-40
|
|
|
|
611,009
|
|
|
8.52
Years
|
|
|
$
|
14.77
|
|
|
$
|
9,024,577
|
|
|
|
560,643
|
|
|
$
|
15.27
|
|
|
$
|
8,560,577
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
611,009
|
|
|
|
-
|
|
|
$
|
14.77
|
|
|
$
|
9,024,577
|
|
|
|
560,643
|
|
|
$
|
15.27
|
|
|
$
|
8,560,577
|
|
Included
in the 2008 grants are to certain Company vendors in exchange for the vendors
reducing their obligations to the Company. The Company issued options
valued at $14,994 to these vendors. There was no gain or loss on
these settlements.
Warrants
In
connection with the asset purchase agreement (see Note 14), the Company reduced
an assumed liability of $8,006 through the issuance of 800 warrants with an
exercise price of $0.01. The warrants expire in seven years and were
valued at $8,006 using the Black-Sholes option-pricing model with the following
assumptions: share value $10, exercise price $0.01, expected volatility of 74%,
expected life 7 years, risk free interest rate 2.20%. The quantity of
these options is variable based on the liability of $8,006 divided by the lesser
of (i) $10 or (ii) a preferred stock sale price in a future
offering.
During 2008, the Company issued 4,712
warrants directly related to its stock offering as finder fees. These
warrants were valued at $141,687, using the Black-Sholes option-pricing model
with the following assumptions: share value $40, exercise price $40.00, expected
volatility of 106%, expected life 5 years, risk free interest rate
2.21%. There was not accounting effect as the warrant were issued as
an offering cost to be offset against the gross proceeds of the offering and
charged to additional paid-in capital.
12. INCOME
TAXES
There was
no income tax expense for period from June 12, 2006 (inception) to September 11,
2007 since the Company was a limited liability company taxed as pass through
entity to its members and there was no income tax expense for the period from
September 12, 2007 to December 31, 2007 or for the year ended December 31, 2008
due to the Company’s net losses.
ENVISION
SOLAR INTERNATIONAL INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2008 and 2007
The
blended Federal and State tax rate of 39.83% applies to loss before
taxes. The Company’s tax expense differs from the “expected” tax
expense for Federal income tax purposes, (computed by applying the United States
Federal tax rate of 34% to loss before taxes), as
follows:
|
|
|
Year
ended December 31,
|
|
|
|
|
2008
|
|
|
2007
|
|
|
Computed
“expected” tax expense (benefit)
|
|
$
|
(3,262,416
|
)
|
|
$
|
(1,116,081
|
)
|
|
Reduction
of “expected” tax expense (benefit) for pre-incorporation period from
January 1, 2007 to September 11, 2007
|
|
|
-
|
|
|
|
236,359
|
|
|
State
taxes, net of federal benefit
|
|
|
(476,033
|
)
|
|
|
(150,674
|
)
|
|
Goodwill
impairment and other non-deductible items
|
|
|
488,331
|
|
|
|
1,671
|
|
|
Change
in deferred tax asset valuation allowance
|
|
|
3,250,018
|
|
|
|
1,028,725
|
|
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Deferred
income taxes reflect the net tax effects of temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes and
the amounts used for income tax purposes. The effects of temporary
differences that gave rise to significant portions of deferred tax assets and
liabilities at December 31 are as follows:
|
|
|
2008
|
|
|
2007
|
|
|
Deferred
tax assets:
|
|
|
|
|
|
|
|
Accrued
vacation
|
|
$
|
16,776
|
|
|
$
|
11,141
|
|
|
Accrued
salaries
|
|
|
6,722
|
|
|
|
|
|
|
Charitable
contributions
|
|
|
899
|
|
|
|
220
|
|
|
Reserve
for bad debt
|
|
|
41,138
|
|
|
|
5,605
|
|
|
Stock
options
|
|
|
2,463,943
|
|
|
|
729,588
|
|
|
Net
operating loss carryforward
|
|
|
1,775,943
|
|
|
|
295,126
|
|
|
Total
gross deferred tax assets
|
|
|
4,305,421
|
|
|
|
1,041,680
|
|
|
Less:
Deferred tax asset valuation allowance
|
|
|
(4,278,843
|
)
|
|
|
(1,028,725
|
)
|
|
Total
net deferred tax assets
|
|
|
26,578
|
|
|
|
12,955
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
tax liabilities:
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
(26,578
|
)
|
|
|
(12,955
|
)
|
|
Total
deferred tax liabilities
|
|
|
(26,578
|
)
|
|
|
(12,955
|
)
|
|
Total
net deferred taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
The
valuation allowance at December 31, 2008 was $4,278,843. The increase
in the valuation allowance during 2008 was $3,250,118.
At
December 31, 2008, the Company has a net operating loss carry forward of
approximately $4,458,000 available to offset future net income through
2028. The NOL expires during the years 2013 to 2028. The
utilization of the net operating loss carryforwards is dependent upon the
ability of the Company to generate sufficient taxable income during the
carryforward period. In the event that a significant change in
ownership of the Company occurs as a result of the Company’s issuance of common
stock, the utilization of the NOL carry forward will be subject to limitation
under certain provisions of the Internal Revenue Code. Management does not
presently believe that such a change has occurred.
13. RELATED
PARTY TRANSACTIONS
Accounts Payable and Related
Party Vendor Payments
At
December 31, 2008 and 2007, the Company owed its Chief Executive Officer (CEO)
$41,374 and $15,979, respectively. For the year ended December 31,
2007, the Company made payments to a related party firm where our current CEO
formerly held an equity stake, included in costs of sales, totaling
$66,167.
ENVISION
SOLAR INTERNATIONAL INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2008 and 2007
Note Payable to
Officer
In 2008 one of the Company’s officers
advanced the cost for various expenses on behalf of the company. As a
result in June 2008, the Company issued the shareholder a note in the amount of
$18,700. The note bears interest at 5% and is due and payable with
accrued interest on or before May 31, 2009. The note was not paid at maturity
and the balance was included in the $34,246 principal balance of a new note
executed in October 2009 and due December 31, 2009. The officer
resigned in November 2009. As of February 2010, this note was in
default for payment of principal and interest. (see Note 7)
Conversion of Note by
Related Party to Equity
In early
2007, the Company’s CEO converted a $238,875 note payable into 238,875 shares of
common stock (See Note 10).
14. ACQUISITION
In January 2008, the company acquired
the assets and assumed the liabilities of a company, Generating Assets,
LLC. The purchase price included cash of $9,000, 10,000 shares of
common stock of the Company valued at the contemporaneous sale price of $10 per
share or $100,000 and options to purchase 168,980 common shares such options
valued at $1,157,676. The total purchase price was
$1,266,676. The Company entered into this asset purchase agreement
with an individual who then became an officer of the Company. The
Company acquired all right, title and interest, including the name “Generating
Assets, LLC”, along with all intellectual property of the company, all
transferable or assignable licenses, all of the rights, title and interest to
certain contracts and the right to negotiate final agreements for predetermined
contracts. The Company assumed $91,578 of liabilities and assumed all
obligations under the assigned contracts. All of the intangible
rights were assigned to goodwill since the assigned contracts were not executed
and there was no other value to intangibles. At the end of the year
2008, the company wrote off as an impairment charge all the $1,358,254 goodwill
related to this asset purchase since the future value and current value of the
goodwill is not readily discernible. This impairment charge is
included in operating expenses.
In connection with the above
acquisition, the Company issued 1,020 options in exchange for another assumed
liability of $6,988. The options were valued at the same $6,988 value
of the liability using the black-scholes pricing method.
The Company accounted for this
acquisition using the purchase method of accounting.
The final
allocation of fair value of the assets acquired and liabilities assumed was as
follows:
|
Goodwill
|
|
$
|
1,358,254
|
|
|
Liabilities
|
|
|
(91,578
|
)
|
|
Purchase
Price
|
|
$
|
1,266,676
|
|
There were no material operations of
Generating Assets, LLC through the acquisition date.
15. SUBSEQUENT
EVENTS
From
March 2009 through September 30, 2009, the Company granted to employees 61,631
ten-year common stock options exercisable at $10.00 per share. The
options were fully vested on the grant dates.
During
the nine months ended September 30, 2009, $2,449,014 was recognized for previous
and current year granted stock options which vested.
ENVISION
SOLAR INTERNATIONAL INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2008 and 2007
In April
2009, the Company issued 10,000 common shares to a lender as a loan extension
fee whereby the $591,771 note payable due date was extended to December 31,
2009. (See Note 8).
On
October 30, 2009, the note payable was amended a second time to extend the
maturity to December 31, 2010, add a conversion feature and modify the
interest rate both retroactively and prospectively, and accrued interest to the
note principal. In addition, the lender loaned an additional $125,000
to the Company under the same terms as the amended note (see Note
8).
During
2009, a lender advanced $50,000 in March and $50,000 in September to the
Company. On October 1, 2009, the Company executed a 10% convertible
promissory note for $102,236, which includes the total $100,000 principal
advanced plus $2,236 of accrued interest. This note is due December
31, 2010. This note is convertible to common shares at $10.00 per
share. There was no beneficial conversion feature at the note
date. However if the Company receives greater than $100,000 debt or
equity financing proceeds, 25% of amount in excess of $100,000 shall be used to
pay down the note. This note is subordinate to the Gemini Master
Funds notes.
On
December 17, 2009, the Company executed a convertible promissory note for
$100,000 to a new landlord in lieu of paying rent for one year for new office
space. The interest is 10% per annum and the note principal and
interest are due on December 18, 2010. However if the Company
receives greater than $100,000 debt or equity financing proceeds, 25% of amount
in excess of $100,000 shall be used to pay down the note. This note
is subordinate to all existing senior indebtness of the Company. The
note is convertible at $10.00 per share. There was no beneficial
conversion feature at the note date.
In
December 2009, the Company abandoned the office premises which was subject to a
lease agreement. In accordance with generally accepted accounting
principles the Company has accrued the fair value of the remaining lease payment
aggregating approximately $268,000. The fair value was computed based
on the present value of the remaining lease payments. (see Note 9)
On
December 16, 2009 the Company executed a letter of intent to be acquired by an
inactive publicly-held company in a transaction contemplated to be treated as a
recapitalization of the Company. It is intended that just subsequent
to consummation of the acquisition, the shareholders of the Company will retain
approximately 67% of the voting common stock of the public company before
consideration of unexercised common stock options and warrants.
Management
evaluated all activity of the Company through February 11, 2010 (the issue date
of the Company’s consolidated financial statements) and concluded that no
subsequent events have occurred that would require recognition in the
consolidated financial statements.
22
Exhibit 99.2
Envision
Solar International, Inc. and Subsidiaries
Consolidated
Financial Statements
September
30, 2009 and 2008
(Unaudited)
Envision
Solar International, Inc. and Subsidiaries
Table of
Contents
|
|
Page
(s)
|
|
Consolidated
Balance Sheets
|
1
|
|
|
|
|
Consolidated
Statement of Operations (unaudited)
|
2
|
|
|
|
|
Consolidated
Statements of Cash Flows (unaudited)
|
3
|
|
|
|
|
Notes
to Consolidated Financial Statements (unaudited)
|
4 -
11
|
|
|
|
|
Envision
Solar International, Inc. and Subsidiaries
|
|
|
|
|
|
|
|
|
|
Consolidated
Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
Current
Assets
|
|
|
|
|
|
|
|
Cash
|
|
$
|
20,376
|
|
|
$
|
3,083
|
|
|
Accounts
Receivable, net
|
|
|
39,488
|
|
|
|
173,798
|
|
|
Prepaid
and other current asset
|
|
|
-
|
|
|
|
70,663
|
|
|
Costs in excess of billings on uncompleted contract
|
|
|
14,254
|
|
|
|
-
|
|
|
Total
Current Assets
|
|
|
74,118
|
|
|
|
247,544
|
|
|
|
|
|
|
|
|
|
|
|
|
Property
and Equipment, net
|
|
|
313,700
|
|
|
|
359,098
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
Assets
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
33,390
|
|
|
|
33,390
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Other Assets
|
|
|
33,390
|
|
|
|
33,390
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Assets
|
|
$
|
421,208
|
|
|
$
|
640,032
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
and Stockholders' Equity (Deficit)
|
|
|
|
|
|
|
|
|
|
|
|
Current
Liabilities
|
|
|
|
|
|
|
|
|
|
Accounts
Payable
|
|
$
|
1,122,545
|
|
|
$
|
990,357
|
|
|
Accounts
Payable - Related Party
|
|
|
1,168
|
|
|
|
41,374
|
|
|
Accrued
Expenses
|
|
|
415,245
|
|
|
|
58,990
|
|
|
Sales
Tax Payable
|
|
|
36,828
|
|
|
|
36,828
|
|
|
Billings
in excess of costs on uncompleted contracts
|
|
|
125,324
|
|
|
|
56,831
|
|
|
Note
Payable-Officer
|
|
|
34,204
|
|
|
|
18,700
|
|
|
Note
Payable-net of discount
|
|
|
452,377
|
|
|
|
591,771
|
|
|
Note
Payable-Evey
|
|
|
100,000
|
|
|
|
-
|
|
|
Deferred
Revenue
|
|
|
-
|
|
|
|
3,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Current Liabilities
|
|
|
2,287,691
|
|
|
|
1,797,851
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments
and Contingencies (Note 5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
Equity (Deficit)
|
|
|
|
|
|
|
|
|
|
Common
Stock, no par value, 10,000,000 shares authorized, 851,263 and 841,263
shares issued and outstanding at September 30, 2009 and December 31, 2008,
respectively
|
|
|
5,048,852
|
|
|
|
4,648,852
|
|
|
Additional
Paid-in-Capital
|
|
|
9,807,150
|
|
|
|
7,358,135
|
|
|
Accumulated
Deficit
|
|
|
(16,722,485
|
)
|
|
|
(13,164,806
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total
Stockholders' Equity (Deficit)
|
|
|
(1,866,483
|
)
|
|
|
(1,157,819
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total
Liabilities and Stockholders' Equity (Deficit)
|
|
$
|
421,208
|
|
|
$
|
640,032
|
|
The
Accompanying notes are an integral part of these Consolidated Financial
Statements
|
Envision
Solar International, Inc. and Subsidiaries
|
|
|
|
|
|
|
|
|
|
Consolidated
Statements of Operations
|
|
|
|
|
|
|
|
|
|
Nine
Months Ended September 30,
|
|
(Unaudited)
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
715,522
|
|
|
$
|
973,018
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Materials
|
|
|
-
|
|
|
|
923,398
|
|
|
Consultants
|
|
|
331,647
|
|
|
|
126,212
|
|
|
Design
|
|
|
9,900
|
|
|
|
52,995
|
|
|
Subcontractors
|
|
|
-
|
|
|
|
14,276
|
|
|
Other Cost of Revenues
|
|
|
24,869
|
|
|
|
194,091
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Cost of Revenues
|
|
|
366,416
|
|
|
|
1,310,972
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
Profit (Loss)
|
|
|
349,106
|
|
|
|
(337,954
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Expenses (including stock based compensation expense
|
|
|
|
|
|
|
|
|
|
of $2,449,014 for the nine months ended September 30, 2009 and
$4,350,496
|
|
|
|
|
|
|
for the nine months ended September 30, 2008)
|
|
|
3,549,654
|
|
|
|
8,057,987
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
From Operations
|
|
|
(3,200,548
|
)
|
|
|
(8,395,941
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Other
Income (Expense)
|
|
|
|
|
|
|
|
|
|
Other
Income
|
|
|
33,692
|
|
|
|
48,543
|
|
|
Interest
Expense
|
|
|
(387,604
|
)
|
|
|
-
|
|
|
Total
Other Income (Expense)
|
|
|
(353,912
|
)
|
|
|
48,543
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(Loss) Before Income Tax
|
|
|
(3,554,460
|
)
|
|
|
(8,347,398
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Income
Tax Expense
|
|
|
3,219
|
|
|
|
8,408
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss
|
|
$
|
(3,557,679
|
)
|
|
$
|
(8,355,806
|
)
|
The
Accompanying notes are an integral part of these Consolidated Financial
Statements
|
Envision
Solar International, Inc. and Subsidiaries
|
|
|
|
|
|
Consolidated
Statements of Cash Flows
|
|
|
|
|
|
Nine
Months Ended September 30,
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
Net
Loss
|
|
$
|
(3,557,679
|
)
|
|
$
|
(8,355,806
|
)
|
|
Adjustments
to Reconcile Net loss to Net Cash Used in Operating
Activities:
|
|
|
|
|
|
|
|
|
|
Depreciation and
Amortization
|
|
|
45,398
|
|
|
|
24,866
|
|
|
Bad debt
expense
|
|
|
72,101
|
|
|
|
-
|
|
|
Common stock issued
for services
|
|
|
-
|
|
|
|
10,000
|
|
|
Compensation
expense related to grant of stock options
|
|
|
2,449,015
|
|
|
|
4,350,496
|
|
|
Goodwill
impairment
|
|
|
-
|
|
|
|
1,358,254
|
|
|
Amortization of
Discount on Loan
|
|
|
260,606
|
|
|
|
-
|
|
|
Amortization of
prepaid interest
|
|
|
69,633
|
|
|
|
-
|
|
|
Changes
in assets and liabilities
|
|
|
|
|
|
|
|
|
|
(Increase)
decrease in:
|
|
|
|
|
|
|
|
|
|
Accounts
Receivable
|
|
|
62,209
|
|
|
|
(622,064
|
)
|
|
Prepaid Expenses
and other current assets
|
|
|
1,030
|
|
|
|
32,003
|
|
|
Costs in excess of
billings on uncompleted contract
|
|
|
(14,254
|
)
|
|
|
-
|
|
|
Deposits
|
|
|
-
|
|
|
|
(17,350
|
)
|
|
Increase
(decrease) in:
|
|
|
|
|
|
|
|
|
|
Accounts
Payable
|
|
|
132,188
|
|
|
|
980,050
|
|
|
Accounts Payable -
related party
|
|
|
(40,206
|
)
|
|
|
-
|
|
|
Accrued
Expenses
|
|
|
356,255
|
|
|
|
5,477
|
|
|
Billings in excess
of costs on uncompleted contracts
|
|
|
68,493
|
|
|
|
49,000
|
|
|
Deferred
Revenue
|
|
|
(3,000
|
)
|
|
|
(62,700
|
)
|
|
NET
CASH USED IN OPERATING ACTIVITIES
|
|
|
(98,211
|
)
|
|
|
(2,247,774
|
)
|
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Cash paid in
acquisition
|
|
|
-
|
|
|
|
(9,000
|
)
|
|
Purchase of
Equipment
|
|
|
-
|
|
|
|
(181,403
|
)
|
|
NET
CASH USED IN INVESTING ACTIVITIES
|
|
|
-
|
|
|
|
(190,403
|
)
|
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Sale of Common
Stock, net
|
|
|
-
|
|
|
|
2,325,076
|
|
|
Proceeds from
Issuance of notes payable
|
|
|
100,000
|
|
|
|
-
|
|
|
Proceeds from notes
payable from shareholders
|
|
|
15,504
|
|
|
|
-
|
|
|
NET
CASH FROM FINANCING ACTIVITIES
|
|
|
115,504
|
|
|
|
2,325,076
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
INCREASE (DECREASE) IN CASH
|
|
|
17,293
|
|
|
|
(113,101
|
)
|
|
|
|
|
|
|
|
|
|
|
|
CASH
AT BEGINNING OF PERIOD
|
|
|
3,083
|
|
|
|
257,753
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH
AT END OF PERIOD
|
|
$
|
20,376
|
|
|
$
|
144,652
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosure of Cash Flow
Information:
|
|
|
|
|
|
|
|
|
|
Interest
Expense
|
|
$
|
387,604
|
|
|
$
|
-
|
|
|
Income
Tax
|
|
$
|
3,219
|
|
|
$
|
800
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosure of Non-Cash Investing and
Financing Activities:
|
|
|
|
|
|
|
|
|
|
Stock based fees
paid for acquisition
|
|
$
|
-
|
|
|
$
|
1,257,676
|
|
|
Conversion of
accounts payable to common stock
|
|
$
|
-
|
|
|
$
|
14,994
|
|
|
Common stock paid
as load fee and recorded as debt discount
|
|
$
|
400,000
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
The
Accompanying notes are an integral part of these Consolidated Financial
Statements
ENVISION
SOLAR INTERNATIONAL INC. AND SUBSIDIARIES
CONDENSED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2009
(Unaudited)
1.
NATURE
OF OPERATIONS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Corporate
Organization
The
Company was incorporated on June 12, 2006 as a limited liability company
(“LLC”), under the name Envision Solar, LLC. In September 2007, the
company was reorganized as a California C Corporation and issued one share of
common stock for each outstanding member unit in the LLC. The change
in capitalization to common stock from member equity has been retroactively
applied to all periods presented in the accompanying consolidated financial
statements. Also during 2007, the Company formed various wholly owned
subsidiaries to account for its planned future operations. All
references to “us”, “we”, “our”, “Envision” or “the Company”, refer to Envision
Solar, LLC or the newly formed Corporation and subsidiaries unless
otherwise stated.
In 2007,
the Company established a series of subsidiaries: 1. Envision Energy Group, Inc.
2. Envision Solar Construction Company, Inc. 3. Envision
Solar Design, Inc. 4. Envision Solar Development, Inc.
5. Envision Solar Operation & Management, Inc.
6. Envision Solar Residential, Inc. 7. Envision Solar
Technology, Inc. and 8. Greenshade Network, Inc. In
addition, in 2008 the Company established one other subsidiary Envision Africa
LLC, a wholly owned LLC. During 2008, only two were operational, with
Envision Africa anticipated to become operational in the future. The
remaining subsidiaries were dissolved with the Secretary of State of California
in 2008. The two operational subsidiaries included in these
consolidated financial statements are: Envision Solar Residential,
Inc. and Envision Solar Construction Company, Inc.
Nature
of Operations
Envision
Solar (“the Company”) is a solar project and technology developer providing
turn-key design/build solutions for commercial, industrial, institutional and
residential projects. Founded by award-winning sustainable design
architects with extensive international business development and industrial
design expertise, the Company strives to be first-to-market and the leading
worldwide brand in solar parking arrays. The Company has two lines of
business, ParkSolar
SM
for
commercial, industrial and government projects, and LifeSystems
SM
for
residential and light commercial products and projects. Both groups have
envisioned, invented and engineered the leading next generation, patent pending,
“solar integrated building systems™” (SIBS™) which are providing the foundation
for the lowest cost, most highly engineered solutions available for the massive
future worldwide market for solar parking array installations.
The
Company’s business model includes vertical integration of all key capabilities
required for the full, turn-key “single-point-of-contract™” implementation of
each project. These capabilities include project planning and
management, design, construction, operations and maintenance. The
Company is continuing to secure its position as the key participant at the
convergence of solar energy and the real estate and building
industry.
The
Company operates with the following trade names: ParkSolar
SM
:
Commercial Scale Solar Parking Arrays, LifeSystems
SM
:
Residential Component-Based Solar Integrated Buildings, and GreenShade.
SM
Basis
of Presentation
The
interim condensed consolidated financial statements included herein have been
prepared by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. In the opinion
of the Company’s management, all adjustments (consisting of normal recurring
adjustments and reclassifications and non-recurring adjustments) necessary to
present fairly our results of operations and cash flows for the nine months
ended September 30, 2009 and 2008 and our financial position as of September 30,
2009 have been made. The results of operations for such interim
periods are not necessarily indicative of the operating results to be expected
for the full year.
ENVISION
SOLAR INTERNATIONAL INC. AND SUBSIDIARIES
CONDENSED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2009
(Unaudited)
Certain
information and disclosures normally included in the notes to the annual
financial statements have been condensed or omitted from these interim financial
statements. Accordingly, these interim condensed financial statements
should be read in conjunction with the consolidated financial statements and
notes thereto for the fiscal year ended December 31, 2008. The
December 31, 2008 balance sheet is derived from those statements.
Principals
of Consolidation
The
consolidated financial statements include the accounts of Envision Solar
International Inc. and its wholly-owned subsidiaries. All significant
inter-company balances and transactions have been eliminated in the
consolidation.
Use
of Estimates
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates. Significant estimates in the accompanying consolidated
financial statements include the allowance for doubtful accounts receivable,
depreciable lives of property and equipment, valuation of share-based payments
and the valuation allowance on deferred tax assets.
Concentrations
Concentration of Credit
Risk
Financial
instruments that potentially subject us to concentrations of credit risk consist
of cash and accounts receivable.
The
Company maintains its cash in bank and financial institution deposits that at
times may exceed federally insured limits. The Company has not
experienced any losses in such accounts from inception, through September 30,
2009.
Concentration of Accounts
Receivable
At
September 30, 2009 customers that each accounted for 10% or more of our
gross accounts receivable individually were as follows:
|
|
|
|
Customer
1
|
54%
|
|
Customer
2
|
14%
|
|
Customer
3
|
10%
|
Concentration of
Revenues
For the
nine months ended September 30, 2009, customers that each represented 10% or
more of our net revenues were as follows:
|
|
|
|
Customer
A
|
45%
|
|
Customer
B
|
35%
|
|
Customer
C
|
13%
|
ENVISION
SOLAR INTERNATIONAL INC. AND SUBSIDIARIES
CONDENSED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2009
(Unaudited)
Fair
Value of Financial Instruments
The
Company’s financial instruments, including cash, accounts receivable, accounts
payable, accrued expenses and short term loans, are carried at historical cost
basis. At September 30, 2009, the carrying amounts of these instruments
approximated their fair values because of the short-term nature of these
instruments.
New
Accounting Pronouncements
In May
2009, the Financial Accounting Standards Board (“FASB”) issued an accounting
standard that became part of ASC Topic 855, “Subsequent Events”. ASC
Topic 855 establishes general standards of accounting for and disclosure of
events that occur after the balance sheet date but before financial statements
are issued or are available to be issued. ASC Topic 855 sets forth
(1) the period after the balance sheet date during which management of a
reporting entity should evaluate events or transactions that may occur for
potential recognition or disclosure in the financial statements, (2) the
circumstances under which an entity should recognize events or transactions
occurring after the balance sheet date in its financial statements and (3) the
disclosures that an entity should make about events or transactions that
occurred after the balance sheet date. ASC Topic 855 is effective for
interim or annual financial periods ending after June 15, 2009. The
adoption of ASC Topic 855 did not have a material effect on the Company’s
consolidated financial statements.
In June
2009, the FASB issued an accounting standard whereby the FASB Accounting
Standards Codification (“Codification”) will be the single source of
authoritative nongovernmental U.S. generally accepted accounting
principles. Rules and interpretive releases of the SEC under
authority of federal securities laws are also sources of authoritative GAAP for
SEC registrants. ASC Topic 105 is effective for interim and annual
periods ending after September 15, 2009. All existing accounting
standards are superseded as described in ASC Topic 105. All other
accounting literature not included in the Codification is
non-authoritative. The Codification did not have a significant
impact on the Company’s consolidated financial statements.
2. GOING
CONCERN
As
reflected in the accompanying consolidated financial statements for the nine
months ended September 30, 2009 the company had a net losses of $3,557,679
(which includes stock based compensation for options of $2,449,014 and
amortization of stock based loan fees of $260,600) and cash used in
operations of $98,211. Additionally at September 30, 2009 the Company
had an accumulated deficit of $16,722,485 and a stockholders’ deficit of
$1,866,483.
Pursuant
to a plan of merger between Casita Enterprises and the Company, Envision expects
to execute a merger agreement whereby it will become a wholly owned subsidiary
of Casita Enterprises. Casita Enterprises is an
over-the-counter-bulletin board listed company whose assets consist principally
of cash and other miscellaneous assets. At the time of merger, which
is expected to occur not later than February 11, 2010, Casita is expected to
hold approximately $200,000 in cash. In addition, Envision, which
will be a publicly traded company following the merger, expects to conduct a
capital raising process whereby it will raise not less than
$600,000. These funds are expected to be sufficient to cover monthly
operating expenses as well as meet minimum payments with respect to the
Company’s liabilities over the next twelve months.
3. NOTE
PAYABLE - OFFICER
In 2008,
one of the Company’s officers advanced the cost for various expenses on behalf
of the company. As a result in June 2008, the Company issued the
shareholder a note in the amount of $18,700. The note bears interest
at 5% and was due and payable with accrued interest on or before May 31,
2009. The note was not paid at maturity and the balance was included in the
$34,246 principal balance of a new note executed in October 2009 and due
December 31, 2009. The officer resigned in November 2009. As of
February 2010 this note was in default for payment of principal and
interest.
ENVISION
SOLAR INTERNATIONAL INC. AND SUBSIDIARIES
CONDENSED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2009
(Unaudited)
4. NOTE
PAYABLE
In
November 2008 the Company entered into a five-month $591,771 promissory note
with Gemini Master Fund, Ltd. (the "holder" or "lender") as bridge financing to
an equity raise. Under the terms of the note, $101,771 of prepaid
interest was included in the note balance of which $10,000 was a loan
fee.. The note bears interest at the rate of 7% annum on the $500,000
net subscription amount, plus a 15% fee on the subscription amount, plus 15% of
the 7% per annum interest (effective interest in approximately 49%) with a
default rate of 20% per annum. The note was due April 11, 2009 and is
secured by substantially all assets of the Company and its subsidiaries and is
unconditionally guaranteed by all the subsidiaries. Under the terms
of the note, the outstanding principal and interest can be converted into equity
at a 10% discount from any reverse merger financing in the event the company
enters into a “reverse merger” with a publicly traded
Company. Additionally, promptly following the consummation of a
reverse merger transaction, the Company shall issue the lender such number of
shares of public Company common stock such that following the reverse merger the
lender shall own 0.3125% of the fully-diluted number of outstanding shares of
common stock of the public company.
Subsequent
to December 31, 2008, the note came due and the Company was unable to fulfill
its obligations under the original terms of the note. In April 2009,
the company and the lender entered into a forbearance agreement, which extended
the due date to December 31, 2009. Under the terms of the forbearance
agreement, the interest rate changed to 15% and the Company issued 10,000 shares
of its common stock to the lender in consideration of this
agreement. This was not considered a troubled debt restructure or
debt modification under generally accepted accounting principals. The
shares were valued at the most recent common stock offering and sale price of
$40 per share resulting in a $400,000 value, which was recorded as a debt
discount and is being amortized through the new maturity date of December 31,
2009. Amortization of the loan fee to interest expense through September 30,
2009 was $260,606 and the discount at September 30, 2009 was
$139,394. Interest only payments would start being due monthly in
arrears in the first calendar month after which the Company raises $100,000 from
all capital raising transactions.
Interest
expense under this note in 2008 was $32,138 and prepaid interest was $69,633 at
December 31, 2008.Interest expense under this note in 2009 was $109,587 and
accrued interest at September 30, 2009 was $39,945.
On
October 30, 2009, the Company entered into a second amendment to the loan
agreement. This amendment increases the interest rate at 20%
retroactive to April 11, 2009 through October 30, 2009, adjusts the per annum
interest to 12% starting November 1, 2009 (default rate of 20%), extends the
maturity to December 31, 2010 and adds a conversion feature to allow conversion
at the holder’s option to common stock at $10 per share. The $591,771
note was amended to add accrued interest of $65,423 to the principal balance
resulting in a new principal balance of $657,194. Additionally a new
second note was issued for $125,000 with proceeds of $117,500, net of issue
costs of $7,500, which was deposited into an escrow account for purposes of the
Company paying expenses for the cost of becoming a publicly held
company. This new note has the same terms of the amended
note. Interest under both notes is due on the first business day of
each calendar quarter starting January 4, 2010, however, upon three days advance
notice, the Company may elect to add such interest to the note principal balance
effectively making the interest due at note maturity. With regard to the
conversion feature of both notes, the conversion rights contain price protection
whereby if the Company sells equity or converts existing instruments to common
stock at a price less than the $10 conversion price, the conversion price will
be adjusted downward to the sale price. Furthermore, if the Company
issues new rights, warrants, options or other common stock equivalents at an
exercise price less than the $10 conversion price, then the conversion price
shall be adjusted downward to a new price based on a stipulated
formula. The holder may not convert the debt if it results in the
holder beneficially holding more than 9.9% of the Company common
stock.
ENVISION
SOLAR INTERNATIONAL INC. AND SUBSIDIARIES
CONDENSED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2009
(Unaudited)
The
holder is subject to a lock-up agreement on the debt and underlying shares from
October 30, 2009 through June 30, 2010. This October 30, 2009
amendment was considered a debt extinguishment under generally accepted
accounting principals due to the addition of the conversion feature. The
accounting effect was to fully amortize the remaining debt discount at October
30, 2009, remove the old debt and record the new debt.
5. COMMITMENTS
AND CONTINGENCIES
Leases:
On March
26, 2007, the Company entered into a lease agreement for its corporate office on
a month-to-month basis beginning May 1, 2007, in La Jolla,
California. Monthly rent at the premise is approximately $6,140 per
month. Subsequent to December 31, 2007, the Company entered into an
amended lease agreement at the same location in order to expand
operations. The new lease had a commencement date of April 1, 2008
and is for a period of three years with an escalating yearly base rent beginning
at $16,505.
Rent
expense was $137,127 for the nine months ended September 30, 2009.
During
2009, the Company entered into litigation with the landlord due to the Company’s
default on rental payments and in December 2009 the Company abandoned the
premises. (See Legal Matters below)
Legal Matters:
From time
to time, we may be involved in litigation relating to claims arising out of our
operations in the normal course of business. As of September 30,
2009, there were no pending or threatened lawsuits that could reasonably be
expected to have a material effect on the results of our operations except for
the following:
In August
2008, the Company received a letter from a contractor asserting that $400,000
was owed resulting from an alleged breach of contract. The Company denies any
liability under the agreement and facts of the assertion and rejected the
claim. No further communications have been had to date and based on
the information available at this time, it is not possible to determine the
possible outcome of this matter.
The
Company is a party to a wrongful termination suit filed by former
employee. The employee was an “at-will” employee under California
employment law. The plaintiff claims that he was promised a job as in-house
counsel, which never materialized. ESII successfully demurred to Plaintiff’s
complaint. The plaintiff amended the complaint, ESII answered it and it is
now undergoing discovery process to obtain evidence to disprove the Plaintiff's
allegations. The Company denies any liability under the agreement and facts of
the assertion and rejected the claim. No further communications have
been had to date and based on the information available at this time, it is not
possible to determine the possible outcome of this matter however as the Company
does not believe it is probable the plaintiff will prevail, no amounts have been
accrued as of December 31, 2008 or September 31, 2009..
The
Company is a party to a lawsuit filed in July 2009 with a Company owned by one
its shareholders. The lawsuit alleges fraud in misrepresenting signed
contracts in the 2008 Private Placement Memorandum and seeks to recover $250,000
in investments made in the private placement and approximately $166,000 plus
interest at 10% from April 1, 2009 in monies owed for project work in 2008 and
2009. In connection with the litigation the Company is responding to discovery
of documents. The Company denies any liability under the law suit and
has rejected the claim. No further communications have been had to
date and based on the information available at this time, it is not possible to
determine the possible outcome of this matter. The amounts owned
under project work aggregating approximately $166,000 have been accrued as
accounts payable as of September 30, 2009.
The
Company is a party to a lawsuit with its former landlord whereby the landlord
claims that the Company broke its lease with respect to the rental of office
space which housed the Company’s headquarters. The Company attempted
to renegotiate the remaining term of its lease a at lower rate but the proposal
was rejected by the Landlord. . The Company vacated premises on
December 20, 2009 and landlord repossessed premises on January 1, 2010.
Plaintiff seeks damages for past rent due, interest and attorney’s
fees. The Company does not deny the breach of its lease and is
attempting to work out a settlement. As of December 31, 2009 the Company has
accrued approximately $268,000 representing the fair value of the future rent
due under the abandoned lease. (see Note 15)
ENVISION
SOLAR INTERNATIONAL INC. AND SUBSIDIARIES
CONDENSED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2009
(Unaudited)
On
February 4, 2010, Continental Maritime filed a complaint for breach of contract.
The plaintiff provided steel columns and associated labor to the Company as part
of UC-San Diego Solar Parking Structure project. The claim is for approximately
$140,000. The Agreement was entered into on June 9. 2008. Due to project cost
overruns and capital raise shortfalls in 2008 and 2009, the Company was unable
to make payments on the remaining balance. The Company is reviewing
the claim to assess its liability if any under the law suit and the basis for
the claim. No further communications have been had to date and based on
the information available at this time, it is not possible to determine the
possible outcome of this matter. The Company has accrued payables to this vendor
of approximately $132,000 at September 30, 2009.
There are
no proceedings in which any of our directors, officers or affiliates, or any
registered or beneficial shareholder, is an adverse party or has a material
interest adverse to our interest.
Other Commitments:
The
Company enters into various contracts or agreements in the normal course of
business whereby such contracts or agreements may contain
commitments. During 2008 and 2007 the Company entered into agreements
to act as a reseller for certain vendors; joint development contracts with third
parties; referral agreements where the Company would pay a referral fee to the
referrer for business generated; sales agent agreements whereby sales agents
would received a fee equal to a percentage of revenues generated by the agent;
business development agreements and strategic alliance agreements where both
parties agree to cooperate and provide business opportunities to each other and
in some instances, provide for a right of first refusal with respect to certain
projects of the other parties; agreements with vendors where the vendor may
provide marketing, public relations, technical consulting or subcontractor
services and financial advisory agreements where the financial advisor would
receive a fee and/or commission for raising capital for the
Company. All expenses and liabilities relating to such contracts were
recorded in accordance with generally accepted accounting principles during 2008
and 2007 and as of December 31, 2008 and 2007. Although such
agreements increase the risk of legal actions against the Company for potential
non-compliance, there are no firm commitments in such agreements as of September
30, 2009.
Effective
December 19, 2006, the Company entered into an agreement with a manufacturer who
owns the trademarks “Solar Grove” and “Solar Tree”. Under the terms
of the agreement, the manufacturer is to provide products to the Company on a
per unit basis and the Company is to pay the manufacturer a royalty, set at
0.25% of revenue, for each project sold under the above-mentioned trademarks,
less the fees for the product provided by the manufacturer. The
Company also had the right to purchase the above-mentioned trademarks during the
term of the agreement which purchase cancels any future royalties. In
November 2008, the Company exercised its option to purchase the trademarks for
$71,200. Royalties owed in 2007 and 2008 were de
minimis. In 2008 the Company amortized $2,373 of the trademarks and
then wrote off the remaining balance of $68,827 trademarks under the impairment
provisions since there is not a justifiable means to document its future
value. This impairment charge is included in operating expenses in
2008.
Upon the
signing of customer contracts, the Company enters into various other agreements
with third party vendors who will provide services and/or products to the
Company. Such vendor agreements typically call for a deposit along
with certain other payments based on the delivery of goods or
services. Payments made by the Company before the completion of
projects are treated as prepaid assets and due to the contractual nature of the
agreement; the Company may be contingently liable for other payments required
under the agreement.
ENVISION
SOLAR INTERNATIONAL INC. AND SUBSIDIARIES
CONDENSED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2009
(Unaudited)
6. COMMON
STOCK
Shares issued
Issuances
of the Company’s common stock during the nine months ended September 30, 2009
are as follows:
Shares Issued in Connection
with the Extension of Loan.
As
discussed above in Note 4 the company issued 10,000 shares of stock with a value
of $400,000 based upon the most recent sale of common shares at $40 per share..
This amount was recorded as a discount against the note and is being amortized
to interest expense over the life of the note through December 31,
2009. Amortization of the loan fee to interest expense through
September 30, 2009 was $260,606.
7. STOCK
OPTIONS
From
March 2009 through September 30, 2009, the Company granted to employees 61,631
ten-year common stock options exercisable at $10.00 per share. The options were
fully vested on the grant dates.
During
the nine months ended September 30, 2009, $2,449,014 was recognized for previous
and current year granted stock options which vested.
8. RELATED
PARTY TRANSACTIONS
Accounts Payable and Related
Party Vendor Payments
At
September 30, 2009, the Company owed its Chief Executive Officer (CEO)
$1,168.
As of
September 30, 2009 the Company owed one of its officers/shareholders $34,204.
The note bears interest at 5%. The note was due on December 31, 2009
and was not paid.
9. SUBSEQUENT
EVENTS
On
October 30, 2009, the $591,771 note payable (see Note 4) was amended a second
time to extend the maturity to December 31, 2010, add a conversion feature
and modify the interest rate both retroactively and prospectively, and accrued
interest to the note principal. In addition, the lender loaned an
additional $125,000 to the Company under the same terms as the amended
note.
During
2009, a lender advanced $50,000 in March and $50,000 in September to the
Company. On October 1, 2009, the Company executed a 10% convertible
promissory note for $102,236, which includes the total $100,000 principal
advanced plus $2,236 of accrued interest. This note is due December
31, 2010. This note is convertible to common shares at $10.00 per
share. There was no beneficial conversion feature at the note
date. However if the Company receives greater than $100,000 debt or
equity financing proceeds, 25% of amount in excess of $100,000 shall be used to
pay down the note. This note is subordinate to the Gemini Master
Funds notes.
On
December 17, 2009, the Company executed a convertible promissory note for
$100,000 to a new landlord in lieu of paying rent for one year for new office
space. The interest is 10% per annum and the note principal and
interest are due on December 18, 2010. However if the Company
receives greater than $100,000 debt or equity financing proceeds, 25% of amount
in excess of $100,000 shall be used to pay down the note. This note
is subordinate to all existing senior indebtness of the Company. The
note is convertible at $10.00 per share. There was no beneficial
conversion feature at the note date.
ENVISION
SOLAR INTERNATIONAL INC. AND SUBSIDIARIES
CONDENSED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2009
(Unaudited)
In
December 2009, the Company abandoned the office premises which was subject to a
lease agreement. In accordance with generally accepted accounting
principles the Company has accrued the fair value of the remaining lease payment
aggregating approximately $268,000. The fair value was computed based
on the present value of the remaining lease payments.
On
December 16, 2009, the Company executed a letter of intent to be acquired by an
inactive publicly-held company in a transaction contemplated to be treated as a
recapitalization of the Company. It is intended that just subsequent
to consummation of the acquisition, the shareholders of the Company will retain
approximately 67% of the voting common stock of the public company before
consideration of unexercised common stock options and warrants.
Management
evaluated all activity of the Company through February 11, 2010 (the issue date
of the Company’s consolidated financial statements) and concluded that no
subsequent events have occurred that would require recognition in the
consolidated financial statements.
11
Exhibit 99.3
Casita
Inc
PRO-FORMA
FINANCIAL STATEMENTS
September
30, 2009
(Unaudited)
Casita
Inc
CONTENTS
|
PAGE
|
1
|
PRO-FORMA
COMBINED BALANCE SHEET AT SEPTEMBER 30, 2009,
(Unaudited)
|
|
|
|
|
|
PAGE
|
2
|
PRO-FORMA
COMBINED STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTMEBER 30,
2009 (Unaudited)
|
|
|
|
|
|
PAGE
|
3
|
SIGNIFICANT
NOTES AND ASSUMPTIONS TO PRO-FORMA COMBINED FINANCIAL STATEMENTS
(Unaudited)
|
|
Casitas
Inc
Pro
Forma Combined Balance Sheet
September
30, 2009
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro
Forma Adjustments
|
|
|
|
|
|
ASSETS
|
|
Envision
Solar Interantional, Inc
|
|
|
Casita,
Inc
|
|
|
Dr
|
|
|
Cr
|
|
|
Pro
Forma
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and Cash Equivalents
|
|
|
20,376
|
|
|
|
165
|
|
(1)
|
|
|
|
|
165
|
|
|
|
20,376
|
|
|
Trade
Accounts Receivable
|
|
|
39,488
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
39,488
|
|
|
Costs
in excess of billings on uncompleted contracts
|
|
|
14,254
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,254
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
Total
Current Assets
|
|
|
74,118
|
|
|
|
165
|
|
|
|
|
|
|
|
|
|
|
74,118
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Property, Plant and Equipment
|
|
|
313,700
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
313,700
|
|
|
Deposits
|
|
|
33,390
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33,390
|
|
|
Total
Other Assets
|
|
|
347,090
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
347,090
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Assets
|
|
|
421,208
|
|
|
|
165
|
|
|
|
|
|
|
|
|
|
|
421,208
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS'
EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
Payable
|
|
|
1,122,545
|
|
|
|
100
|
|
(1)
|
|
100
|
|
|
|
|
|
|
|
1,122,545
|
|
|
Accounts
Payable-related party
|
|
|
1,168
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,168
|
|
|
Accrued
expenses
|
|
|
415,245
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
415,245
|
|
|
Sales
tax Payable
|
|
|
36,828
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36,828
|
|
|
Billings
in excess of costs on uncompleted contracts
|
|
|
125,324
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
125,324
|
|
|
Niotes
Payable Officer
|
|
|
34,204
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
34,204
|
|
|
Note
Payable net of discount
|
|
|
452,377
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
452,377
|
|
|
Note
Payable-Evey
|
|
|
100,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000
|
|
|
Loan
Paayble Director
|
|
|
|
|
|
|
18,145
|
|
(1)
|
|
18,145
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Current Liabilities
|
|
|
2,287,691
|
|
|
|
18,245
|
|
|
|
|
|
|
|
|
|
|
|
2,287,691
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Liabilities
|
|
|
2,287,691
|
|
|
|
18,245
|
|
|
|
|
|
|
|
|
|
|
|
2,287,691
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock
|
|
|
5,048,852
|
|
|
|
9,000
|
|
(2)
|
|
5,013,852
|
|
|
|
|
|
|
|
39,000
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
5,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
Paid-In Capital
|
|
|
9,807,150
|
|
|
|
27,000
|
|
(1)
|
|
|
|
|
|
23,080
|
|
|
|
14,817,002
|
|
|
|
|
|
|
|
|
|
|
|
(2)
|
|
|
|
|
|
4,959,772
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
deficit
|
|
|
(16,722,485
|
)
|
|
|
(54,080
|
)
|
(2)
|
|
|
|
|
|
54,080
|
|
|
|
(16,722,485
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Stockholders' Equity
|
|
|
(1,866,483
|
)
|
|
|
(18,080
|
)
|
|
|
|
|
|
|
|
|
|
|
(1,866,483
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Liabilities and Stockholders' Equity
|
|
|
421,208
|
|
|
|
165
|
|
|
|
|
|
|
|
|
|
|
|
421,208
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See
Summary of Significant Notes and Assumptions to Pro Forma Financial
Statements
|
Casita
Inc
Proforma
Statement of Operations
Nine
Months Ended September 30, 2009
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro
Forma Adjustments
|
|
|
Nine
Months Ended
|
|
|
|
|
Historical
|
|
|
|
Dr
|
|
Cr
|
|
|
September
30, 2009
|
|
|
|
|
Envision
Solar International Inc
|
|
|
Casita,
Inc
|
|
|
|
|
|
|
|
|
Pro
Forma
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
715,522
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
$
|
715,522
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
Materials
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
Consultants
|
|
|
331,647
|
|
|
|
|
|
|
|
|
|
|
|
|
|
331,647
|
|
|
Desgin
|
|
|
9,900
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,900
|
|
|
Subcontractors
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
Other
Cost of Revenues
|
|
|
24,869
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24,869
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Cost of Revenues
|
|
|
366,416
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
366,416
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
Profit
|
|
|
349,106
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
349,106
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling,
General and Administrative Expenses
|
|
|
3,549,654
|
|
|
|
12,542
|
|
(3)
|
|
|
|
|
12,542
|
|
|
|
3,549,654
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Operating Income (loss)
|
|
|
(3,200,548
|
)
|
|
|
(12,542
|
)
|
|
|
|
|
|
|
|
|
|
(3,200,548
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
Inceom (Expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
Income
|
|
|
33,692
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33,692
|
|
|
Interest
Expense
|
|
|
(387,604
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(387,604
|
)
|
|
Total
Other Income (Expense)
|
|
|
(353,912
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
(353,912
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(Loss) Before Income Tax Expense
|
|
|
(3,554,460
|
)
|
|
|
(12,542
|
)
|
|
|
|
|
|
|
|
|
|
(3,554,460
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
Tax Expense
|
|
|
3,219
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,219
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Income (Loss)
|
|
$
|
(3,557,679
|
)
|
|
$
|
(12,542
|
)
|
|
|
|
|
|
|
|
|
$
|
(3,557,679
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See
Summary of Significant Notes and Assumptions to Pro Forma Financial
Statements
Casita
Inc.
SIGNIFICANT NOTES AND
ASSUMPTIONS TO PRO-FORMA FINANCIAL STATEMENTS
(Unaudited)
|
(1)
|
The
accompanying unaudited pro-forma financial information reflects the
financial statements of Casita, Inc. and Envision Solar International,
Inc. regarding a planned acquisition of Envision Solar International, Inc.
The pro-forma adjustments to the balance sheet give effect to the
acquisition as if it occurred on September 30, 2009 and the pro-forma
statement of operations gives effect to the acquisition as if it occurred
on January 1, 2009. The acquisition is treated as a
recapitalization of Envision Solar International, Inc. since Casita Inc.
is an inactive publicly held corporation and the stockholders of Envision
Solar International, Inc. will obtain a controlling 67% interest in the
voting common stock of Casita Inc. as a result of the
acquisition. Accordingly, the assets and liabilities of Casita
Inc. are recorded at their historical cost on the books of Envision Solar
International, Inc with a balancing charge to additional paid-in
capital. In addition, the common stock issued to the Envision
Solar International, Inc. stockholders is recorded as common stock at par
value with a balancing charge to additional paid-in
capital. Under recapitalization accounting, the historical
results of operations are those of Envision Solar International, Inc. and
the results of operations of Casita, Inc. are included only from the
acquisition date.
|
|
(2)
|
Significant
assumptions include (a) the stock holders of Envision Solar International,
Inc. are issued 8,000,000 new Casita Inc. common shares, (b) a
transfer of all assets and liabilities of Casita, Inc. to its wholly owned
subsidiary, Casita Enterprise Holdings, Inc. (“Splitco”) and then transfer
of all common shares of Splitco to certain former shareholders of Casita,
Inc. in exchange for the cancellation of 5,000,000 common shares of
Casita, Inc. by such shareholders (c) Casita, Inc forward
splits its common stock by 3.25 (d) no operations of
Casita Inc.. are included from the acquisition date since it is assumed
that if Envision Solar International, Inc. obtained control of Casita Inc
on January 1, 2009 the operations of Casita, Inc. would have ceased at
that time. In addition, no transactions that may have occurred
subsequent to September 30, 2009 have been
considered.
|
|
(3)
|
The
following reflect the pro forma adjustments as of September 30,
2009
|
First
adjustment is to reflect the split off and to reflect the related cancellation
of 5,000,000 outstanding shares of common stock with a par value of
$.001.
|
Accounts
Payable
|
|
$
|
100
|
|
|
|
|
|
Loan
Payable Director
|
|
$
|
18,145
|
|
|
|
|
|
Common
Stock
|
|
$
|
5,000
|
|
|
|
|
|
Additional
Paid in Capital
|
|
|
|
|
|
$
|
23,080
|
|
|
Cash
|
|
|
|
|
|
$
|
165
|
|
Casita
Inc.
SIGNIFICANT NOTES AND
ASSUMPTIONS TO PRO-FORMA FINANCIAL STATEMENTS
(Unaudited)
The
second adjustment is to reflect the issuance of 8,000,000 common shares to
Envision Solar International, Inc. and adjustment of the common stock to
39,000,000 shares outstanding and to eliminate the accumulated deficit of
Casita, Inc.
|
Common
Stock
|
|
$
|
5,013,852
|
|
|
|
|
|
|
Accumulated
Deficit
|
|
|
|
|
|
$
|
54,080
|
|
|
Additional
Paid in Capital
|
|
|
|
|
|
$
|
4,959,772
|
|
The third
adjustment removes the operations of Casita, Inc. from January 1,
2009.
4
