PURCHASE AGREEMENT
This PURCHASE AGREEMENT (this "AGREEMENT"), dated as of June 28, 2000,
is entered into by and between VALENCE TECHNOLOGY, INC., a Delaware corporation
(the "COMPANY"), with offices at 301 Conestoga Way, Henderson, NV 89015 and
ACQUA WELLINGTON VALUE FUND LTD., a limited liability company organized under
the laws of the Commonwealth of the Bahamas with offices c/o Fortis Fund
Services (Bahamas) Ltd., Montague Sterling Centre, East Bay Street, P.O. Box
SS-6238, Nassau, Bahamas (the "Buyer"), for the purchase and sale of shares of
the common stock, .001 par value per share (the "COMMON STOCK"), of the Company
and warrants to purchase additional shares of Common Stock (the "WARRANTS") by
the Buyer, in the manner, and upon the terms, provisions and conditions set
forth in this Agreement.
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to the Buyer and
Buyer shall purchase shares of Common Stock and Warrants; and
WHEREAS, such purchase and sale will be made in reliance upon the
provisions of Section 4(2) and Regulation S ("Regulation S") of the United
States Securities Act of 1933, as amended and regulations promulgated thereunder
(the "SECURITIES ACT"), or upon such other exemption from the registration
requirements of the Securities Act as may be available with respect to any or
all of the purchases of Common Stock and Warrants to be made hereunder.
NOW, THEREFORE, in consideration of the representations, warranties and
agreements contained herein and other good and valuable consideration, the
receipt and legal adequacy of which is hereby acknowledged by the parties, the
Company and the Buyer hereby agree as follows:
1. AGREEMENT TO SUBSCRIBE; PRICING.
(a) Upon the following terms and subject to the conditions contained
herein, the Buyer hereby subscribes for a total of 846,665 shares of the
Company's Common Stock (the "SHARES") at a price of $14.7638 per share and
Warrants to purchase 169,333 shares of Common Stock for an aggregate purchase
price of $12,500,000 (the "PURCHASE PRICE"). The Warrants shall have an exercise
price equal to $18.4547.
(b) The Company has authorized and has reserved and covenants to
continue to reserve, free of preemptive rights and other similar contractual
rights of stockholders, a sufficient number of its authorized but unissued
shares of its Common Stock, to effect the issuance of the Shares and exercise of
the Warrants. Any shares of Common Stock issuable upon exercise of the Warrants
(and such shares when issued) are herein referred to as the "WARRANT SHARES".
The Shares, the Warrants and the Warrant Shares are sometimes collectively
referred to as the "SECURITIES".
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(c) The closing under this Agreement shall take place at the offices of
the Company at 10:00 a.m. (eastern time) upon the satisfaction of each of the
conditions set forth in Section 5 hereof (the "CLOSING DATE").
2. REGISTRATION STATEMENT. On or before the 45th day after the Closing Date
(the "FILING DATE"), the Company shall cause to be filed with the Securities and
Exchange Commission (the "Commission") a registration statement on Form S-3 (or
any other comparable form) to register for resale the Shares and the Warrant
Shares on the terms and subject to the conditions set forth in the Registration
Rights Agreement attached hereto as Exhibit A. The Company shall use its
reasonable best efforts to take all steps necessary to cause the registration
statement to be declared effective within (i) 120 days after the Closing Date or
(ii) 5 business days of the date on which the Commission informs the Company
that it may request the acceleration of the effectiveness of the registration
statement (the "EFFECTIVENESS DATE").
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE BUYER. The Buyer
represents and warrants to the Company, and covenants for the benefit of the
Company, as of the date hereof as follows:
(a) This Agreement has been duly authorized, validly executed and
delivered by the Buyer and constitutes a valid and binding agreement and
obligation of the Buyer enforceable against the Buyer in accordance with its
terms, subject to limitations on enforcement by general principles of equity and
bankruptcy or other laws affecting the enforcement of creditors' rights
generally;
(b) The Buyer has received and carefully reviewed copies of the Public
Documents (as hereinafter defined). No representations or warranties have been
made to the Buyer by the Company, the officers or directors of the Company, or
any agent, employee or affiliate of any of them, except as specifically set
forth herein or as set forth in the other documents expressly referred to
herein. The Buyer understands that no Federal, state, local or foreign
governmental body or regulatory authority has made any finding or determination
relating to the fairness of an investment in any of the Securities and that no
Federal, state, local or foreign governmental body or regulatory authority has
recommended or endorsed, or will recommend or endorse, any investment in any of
the Securities. The Buyer, in making the decision to purchase the Shares and the
Warrants, has relied upon independent investigation made by it and has not
relied on any information or representations made by third parties;
(c) The Buyer understands that the Shares and the Warrants are being
offered and sold to it in reliance on specific provisions of Federal and state
securities laws and that the Company is relying upon the truth and accuracy of
the representations, warranties, agreements, acknowledgments and understandings
of the Buyer set forth herein for purposes of qualifying for exemptions from
registration under the Securities Act, and applicable state securities laws;
(d) The Buyer is an "accredited investor" as defined under Rule 501 of
Regulation D promulgated under the Securities Act and is not a U.S. Person (as
defined in Rule 902 of Regulation S of the Securities Act);
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(e) The Buyer (i) is and will be acquiring the Shares and the Warrants
for such Buyer's own account, and not with a view to any resale or distribution
of the Shares or the Warrants in whole or in part, in violation of the
Securities Act or any applicable securities laws and (ii) has not offered or
sold any of the Securities and has no present intention or agreement to divide
any of the Securities with others for purposes of selling, offering,
distributing or otherwise disposing of any of the Securities;
(f) The offer and sale of the Securities is intended to be exempt from
registration under the Securities Act, by virtue of Section 4(2) and Regulation
S promulgated under the Securities Act. The Buyer understands that the Shares
and the Warrants purchased hereunder have not been, and may never be, registered
under the Securities Act; that none of the Securities can be sold, transferred,
assigned, pledged or subjected to any lien or security interest unless they are
first registered under the Securities Act and such state and other securities
laws as may be applicable or in the opinion of counsel for the Company an
exemption from registration under the Securities Act is available (and then the
Securities may be sold, transferred, assigned, pledged or subjected to a lien or
security interest only in compliance with such exemption and all applicable
state and other securities laws); and that the following legends will be placed
upon the certificate for the Securities:
" THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY STATE SECURITIES LAWS AND MAY NOT BE
EXERCISED BY OR ON BEHALF OF ANY U.S. PERSON, OR SOLD, TRANSFERRED,
ASSIGNED, PLEDGED OR HYPOTHECATED OR OTHERWISE DISPOSED OF UNLESS IN
ACCORDANCE WITH REGULATION S OF THE ACT, REGISTERED UNDER THAT ACT AND
UNDER APPLICABLE STATE SECURITIES LAWS OR VALENCE TECHNOLOGY, INC.
(THE "COMPANY") SHALL HAVE RECEIVED AN OPINION, IN FORM, SCOPE AND
SUBSTANCE REASONABLY ACCEPTABLE TO THE COMPANY, OF COUNSEL WHO IS
REASONABLY ACCEPTABLE TO THE COMPANY THAT REGISTRATION OF SUCH
SECURITIES UNDER THE SECURITIES ACT AND UNDER THE PROVISIONS OF
APPLICABLE FEDERAL AND STATE SECURITIES LAWS IS NOT REQUIRED."
(g) The Buyer (i) has such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks of an
investment in the Company; and (ii) recognizes that such Buyer's investment in
the Company involves a high degree of risk;
(h) The Buyer is capable of evaluating the risks and merits of an
investment in the Securities by virtue of its experience as an investor and its
knowledge, experience, and
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sophistication in financial and business matters and such Buyer is capable of
bearing the entire loss of its investment in the Securities;
(i) The Buyer is neither a registered broker-dealer nor an affiliate of
a registered broker-dealer;
(j) The Buyer did not make its investment decision to purchase the
Shares and Warrants based on, and was not introduced to the Company by virtue
of, any form of general solicitation or general advertising, including, but not
limited to advertisements, articles, press releases, notices or other
communications generally published, or the filing or amending of any
registration statement by the Company;
(k) The Buyer is not a "U.S. Person" within the meaning of Rule 902(k)
of Regulation S; and
(l) The document effecting this purchase and sale has been executed by
the Buyer outside the "United States" (as defined in Rule 902(l) of Regulation
S). The Buyer is acquiring the Securities in an "offshore transaction" (as
defined in Rule 902(h) of Regulation S). The Securities were not offered to the
Buyer in the United States and at the time of execution of this Agreement and
the time of any offer to the Buyer to purchase the Securities hereunder, the
Buyer was physically outside of the United States.
4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY. The Company
represents and warrants to the Buyer, and covenants for the benefit of the Buyer
as of the date hereof, as follows:
(a) The Company has been duly incorporated and is validly existing and
in good standing under the laws of the State of Delaware, with full corporate
power and authority to own, lease and operate its properties and to conduct its
business as currently conducted, and is duly registered and qualified to conduct
its business and is in good standing in each jurisdiction or place where the
nature of its properties or the conduct of its business requires such
registration or qualification, except where the failure to register or qualify
is not reasonably anticipated to have a Material Adverse Effect. For purposes of
this Agreement, "Material Adverse Effect" shall mean any effect on the business,
results of operations, assets or financial condition of the Company that is
material and adverse to the Company and its subsidiaries, taken as a whole
and/or any condition, circumstance, or situation that would prohibit the Company
from entering into and performing any of its obligations under this Agreement in
any material respect;
(b) The Company has furnished the Buyer with copies of the Company's
most recent Annual Report on Form 10-K (the "FORM 10-K") filed with the
Commission, its Form 10-Q for the quarterly period ended December 26, 1999 (the
"FORM 10-Q"; collectively with the Form 10-K and other Form 8-K's filed since
February 14, 2000, the "PUBLIC DOCUMENTS"). The Public Documents at the time of
their filing did not include any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements contained
therein, in light of the circumstances under which they were made, not
misleading;
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(c) The Shares have been duly authorized by all necessary corporate
action and, when paid for by the Buyer and issued in accordance with the terms
hereof, shall be validly issued, will be fully paid and non-assessable. The
Warrant and the Warrant Shares have been duly authorized by all necessary
corporate action and, when the Warrant Shares are paid for and issued in
accordance with the terms of the Warrant, such Warrant Shares shall be validly
issued, fully paid and non-assessable;
(d) This Agreement has been duly authorized, validly executed and
delivered on behalf of the Company and is a valid and binding agreement and
obligation of the Company enforceable against the Company in accordance with its
terms, subject to limitations on enforcement by general principles of equity and
by bankruptcy or other laws affecting the enforcement of creditors' rights
generally, and the Company has full power and authority to execute and deliver
this Agreement and the other agreements and documents contemplated hereby and to
perform its obligations hereunder and thereunder;
(e) The execution and delivery of this Agreement and the Registration
Rights Agreement, the issuance of any of the Securities and the consummation of
the transactions contemplated by this Agreement and the Registration Rights
Agreement by the Company, will not conflict with or result in a breach of or a
default under any of the terms or provisions of, the Company's certificate of
incorporation or by-laws, or of any material provision of any indenture,
mortgage, deed of trust or other material agreement or instrument to which the
Company is a party or by which it or any of its material properties or assets is
bound, any material provision of any law, statute, rule, regulation, or any
existing applicable decree, judgment or order by any court, Federal or state
regulatory body, administrative agency, or other governmental body having
jurisdiction over the Company, or any of its material properties or assets or
will result in the creation or imposition of any material lien, charge or
encumbrance upon any material property or assets of the Company or any of its
subsidiaries pursuant to the terms of any agreement or instrument to which any
of them is a party or by which any of them may be bound or to which any of their
property or any of them is subject where such breach or default, violation,
creation or imposition, or otherwise, would result in a Material Adverse Effect;
(f) Except as disclosed herein, and based upon the representations and
warranties of the Buyer set forth herein, no authorization, approval, filing
with or consent of any governmental body is required for the issuance and sale
of the Securities to the Buyer pursuant to this Agreement;
(g) Except as described in the Public Documents, there is no action,
suit or proceeding before or by any court or governmental agency or body,
domestic or foreign, now pending against or affecting the Company, or any of its
properties, which would reasonably be anticipated to result in a Material
Adverse Effect;
(h) Since February 14, 2000, no Material Adverse Effect has occurred or
exists with respect to the Company except as disclosed in the Public Documents;
(i) The Company has, to its knowledge, sufficient title and ownership
of all trademarks, service marks, trade names, copyrights, patents, trade
secrets and other proprietary
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rights necessary for its business as now conducted and as proposed to be
conducted as described in the Public Documents without any conflict with or
infringement of the rights of others. Except as set forth in the Public
Documents, there are no material outstanding options, licenses or agreements of
any kind relating to the foregoing, nor is the Company bound by or party to any
material options, licenses or agreements of any kind with respect to the
trademarks, service marks, trade names, copyrights, patents, trade secrets,
licenses and other proprietary rights of any other person or entity;
(j) The Company has complied and will comply with all applicable
federal and state securities laws in connection with the offer, issuance and
sale of the Shares and the Warrants hereunder. Neither the Company nor anyone
acting on its behalf, directly or indirectly, has or will sell, offer to sell or
solicit offers to buy any of the Securities, or similar securities to, or
solicit offers with respect thereto from, or enter into any preliminary
conversations or negotiations relating thereto with, any person, or has taken or
will take any action, in any such case, so as to bring the issuance and sale of
any of the Securities under the registration provisions of the Securities Act
subject to the representations of Buyer set forth in Article 3 of this
Agreement. The Company is a "reporting issuer" as defined in Rule 902 of
Regulation S and will remain a reporting issuer for at least one year from the
date hereof;
(k) As set forth in Section 2 of this Agreement, the Company shall
cause a registration statement registering the Shares and the Warrant Shares to
be filed no later than the Filing Date and to be declared effective no later
than the Effectiveness Date, will comply with all requirements related to any
registration statement filed pursuant to this Agreement or the Registration
Rights Agreement, and will not take any action or file any document (whether or
not permitted by the Securities Act or the rules promulgate thereunder) to
terminate or suspend such registration or to terminate or suspend its reporting
and filing obligations under the Securities Exchange Act of 1934, as amended
(the "EXCHANGE ACT"), or Securities Act, except as permitted herein or in
accordance with the terms of the Registration Rights Agreement. Prior to the
effectiveness of the registration statement set forth in Section 2, the Company
will take all action necessary to list and continue the listing or trading of
its Common Stock on the Nasdaq National Market system or any relevant market or
system, if applicable, and will comply in all respects with the Company's
reporting, filing and other obligations under the bylaws or rules of the
National Association of Securities Dealers, Inc. and the Nasdaq system or any
relevant market or system;
(l) The Company covenants and agrees that if the Company fails to
register the Shares and the Warrant Shares under the terms and conditions of the
Registration Rights Agreement or such registration shall no longer be effective,
then for so long as any of the Shares and the Warrant Shares remain outstanding
and continue to be "restricted securities" within the meaning of Rule 144 under
the Securities Act that may not be resold pursuant to Rule 144(k) of the
Securities Act, the Company shall, in order to permit resales of the Shares and
the Warrant Shares pursuant to Regulation S under the Securities Act (a)
continue to file all material required to be filed pursuant to Section 13(a) or
15(d) of the Exchange Act and (b) not knowingly engage in directed selling
efforts in connection with the resale of securities by the Buyer under
Regulation S;
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(m) The Company and the Buyer agree that the Buyer will suffer damages
if the Company fails to deliver the Shares to the Buyer on the Closing Date (an
"EVENT"). The Company and the Buyer further agree that it would not be feasible
to ascertain the extent of such damages with precision. Accordingly, if an Event
occurs and continues for ten (10) trading days on the Nasdaq National Market
(each a "TRADING DAY"), the Company shall pay, in cash or restricted shares of
Common Stock, at the option of the Buyer, as liquidated damages for such failure
and not as a penalty (the "LIQUIDATED DAMAGES") to the Buyer an amount equal to
two percent (2%) of the Purchase Price for the initial thirty (30) days and each
additional thirty (30) day period thereafter until such failure has been cured,
which shall be pro-rated for such periods less than thirty (30) days (the
"PERIODIC AMOUNT");
(n) Except as required by law, the Company may not issue a press
release or otherwise make a public statement or announcement with respect to
this Agreement or any related agreement, including, but not limited to, the
Registration Rights Agreement and the Warrant, without the prior consent of the
Buyer;
(o) The Company may enter into any agreement with a third party, the
principal purpose of which is to secure financing for the Company ("OTHER
FINANCING") without the prior consent of the Buyer. However, prior to the
receipt of effectiveness of the registration statement covering the Shares and
Warrant Shares, as set forth in Section 2, the Buyer shall have the option to
amend the Purchase Price to the absolute terms of the Other Financing; and
(p) In connection with the offer and sale of the Securities, no
distributor or any affiliates or any person acting on behalf of the Company or
any affiliate of the Company or any distributor has engaged in any "directed
selling efforts" (as such term is defined under Regulation S) nor conducted any
general solicitation relating to the offer to persons residing within the United
States or to "U.S. Persons" (as the term is defined under Regulation S).
5. CONDITIONS PRECEDENT.
(a) The parties shall have executed and delivered this Agreement and
the Registration Rights Agreement.
(b) The Company shall have delivered certificates evidencing the Shares
and the Warrants to the Buyer.
(c) The Buyer shall have delivered to the Company the funds as payment
in full of the Purchase Price for the Shares and the Warrants.
(d) The representations and warranties of each of the Company and the
Buyer shall be true and correct in all material respects as of the date when
made and as of the Closing Date as though made at that time, except for
representations and warranties that are expressly made as of a particular date,
which shall be true and correct in all material respects as of such date.
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(e) From the date hereof to the Closing Date, trading in the Company's
Common Stock shall not have been suspended by the Commission (except for any
suspension of trading of limited duration agree to by the Company, which
suspension shall be terminated prior to the Closing Date), and, at any time
prior to the Closing Date, trading in securities generally as reported by NASDAQ
National Market shall not have been suspended or limited, or minimum prices
shall not have been established on securities whose trades are reported by
Americans Stock Exchange, or on the New York Stock Exchange, nor shall a banking
moratorium have been declared either by the United States or New York State
authorities, not shall there have occurred any material outbreak or escalation
of hostilities or other national or international calamity or crisis of such
magnitude in its effect on, or any material adverse change in any financial
market which, in each case, in the judgment of the Company, makes it
impracticable or inadvisable to issue the Shares.
(f) Since February 14, 2000, no Material Adverse Effect shall have
occurred.
(g) The Buyer shall have received a legal opinion in substantially the
form annexed hereto as Exhibit B.
6. GOVERNING LAW; CONSENT TO JURISDICTION. This Agreement shall be governed
by and interpreted in accordance with the laws of the State of New York without
giving effect to the rules governing the conflicts of laws. Each of the parties
consents to the exclusive jurisdiction of the Federal courts whose districts
encompass any part of the City of New York in connection with any dispute
arising under this Agreement and hereby waives, to the maximum extent permitted
by law, any objection, including any objection based on FORUM NON CONVENIENS, to
the bringing of any such proceeding in such jurisdictions. Each party waives its
right to a trial by jury. Each party to this Agreement irrevocably consents to
the service of process in any such proceeding by the mailing of copies thereof
by registered or certified mail, postage prepaid, to such party at its address
set forth herein or its agent. Nothing herein shall affect the right of any
party to serve process in any other manner permitted by law.
7. NOTICES. All notices and other communications provided for or permitted
hereunder shall be made in writing by hand delivery, express overnight courier,
registered first class mail, overnight courier, or telecopier, initially to the
address set forth below, and thereafter at such other address, notice of which
is given in accordance with the provisions of this Section.
(a) if to the Company:
Valence Technology, Inc.
301 Conestoga Way
Henderson, Nevada 89015
Tel. No.: (702) 558-1015
Fax No.: (702) 558-1310
Attn: Jay L. King
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with a copy to:
Troop Steuber Pasich Reddick & Tobey, LLP
2029 Century Park East, Suite 2400
Los Angeles, CA 90067
Tel. No.: (310) 728-3362
Fax No.: (310) 728-2362
Attn: Lisa H. Klein
(b) if to the Buyer:
Acqua Wellington Value Fund Ltd.
c/o Fortis Fund Services (Bahamas) Ltd.
Montague Sterling Centre
East Bay Street, P.O. Box SS-6238
Nassau, Bahamas
Tel. No.: (242) 394-2700
Fax No.: (242) 394-9667
Attn: Mr. Anthony L. M. Inder Rieden
with a copy to:
Parker Chapin LLP
The Chrysler Building
405 Lexington Avenue
New York, New York 10174
Attn: Christopher S. Auguste
Tel. No.: (212) 704-6000
Fax No.: (212) 704-6288
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; three (3) business days
after being deposited in the mail, postage prepaid, if mailed; the next business
day after being deposited with an overnight courier, if deposited with a
nationally recognized, overnight courier service; when receipt is acknowledged,
if telecopied.
8. ENTIRE AGREEMENT; AMENDMENT. This Agreement, and the exhibits hereto,
including the Registration Rights Agreement and the Warrants, constitute the
entire understanding and agreement of the parties with respect to the subject
matter hereof and supersedes all prior and/or contemporaneous oral or written
proposals or agreements relating thereto all of which are merged herein. This
Agreement may not be amended or any provision hereof waived in whole or in part,
except by a written instrument signed by the Company and a majority of the
holders of the Securities.
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9. COUNTERPARTS. This Agreement may be executed by facsimile signature and
in counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
[end of page]
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IN WITNESS WHEREOF, this Agreement was duly executed on the date first
written above.
VALENCE TECHNOLOGY, INC.
By: /S/ JAY L. KING
-----------------------------------
Name: Jay L. King
Title:
ACQUA WELLINGTON VALUE FUND LTD.
By:_____________________________________
Name:
Title:
