Document:

Unassociated Document

 EXHIBIT 4.12

    

REGISTRATION RIGHTS AGREEMENT

 

 

This Registration Rights Agreement (this “Agreement”) is made and entered into as of date set forth on the signature page hereto by and between Balqon Corporation, a Nevada corporation (the “Company”), and each purchaser identified on the signature pages hereto (each, including its successors and assigns, a “Purchaser” and collectively, the “Purchasers”) effective as of the date this Agreement is executed by the Company.

 

This Agreement is made in connection with the issuance of Debentures and Warrants pursuant to a certain Securities Purchase Agreement by and between the Company and the Purchasers dated as of the date hereof (the “Securities Purchase Agreement”) and pursuant to the terms and conditions of the Company’s Confidential Private Placement Memorandum dated May 25, 2010, as amended by Supplement No. 1 to Confidential Private Placement Memorandum dated July 21, 2010 (the “Offering Memorandum”).

 

The Company is obligated to register for resale certain securities (including any shares of Common Stock issued or issuable upon any stock split, dividend or other distribution, recapitalization or similar event with respect to the foregoing, the “Previous Shares”) offered and sold under the terms of a Confidential Private Placement Memorandum dated March 23, 2009 and a certain Confidential Private Placement Memorandum dated September 22, 2009 as supplemented by that certain Supplement No. 1 to Confidential Private Placement Memorandum dated January 22, 2010.

 

The Company and the Purchaser hereby agree as follows:

 

1.   Definitions.  Capitalized terms used and not otherwise defined herein that are defined in the Securities Purchase Agreement shall have the meanings given such terms in the Securities Purchase Agreement.  As used in this Agreement, the following terms shall have the following meanings:

 

“Advice” shall have the meaning set forth in Section 6(d).

 

“Cut-back” and “Cut-back Shares” shall have the meanings set forth in Section 2(a).

 

“Effectiveness Period” shall have the meaning set forth in Section 2(a).

 

“Holder” or “Holders” means the holder or holders, as the case may be, from time to time of Registrable Securities.

 

“Indemnified Party” shall have the meaning set forth in Section 5(c).

 

“Indemnifying Party” shall have the meaning set forth in Section 5(c).

 

“Losses” shall have the meaning set forth in Section 5(a).

 

“Plan of Distribution” shall have the meaning set forth in Section 2(a).

 

“Proceeding” means an action, claim, suit, investigation or proceeding (including, without limitation, an investigation or partial proceeding, such as a deposition), whether commenced or threatened.

 

“Prospectus” means the prospectus included in a Registration Statement (including, without limitation, a prospectus that includes any information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated under the Securities Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Securities covered by a Registration Statement, and all other amendments and supplements to the Prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such Prospectus.

    

  

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“Registrable Securities” means all of (i) the Warrant Shares, and (ii) any shares of Common Stock issued or issuable upon any stock split, dividend or other distribution, recapitalization or similar event with respect to the foregoing.

 

“Registration Statement” means the registration statements required to be filed hereunder, including (in each case) the Prospectus, amendments and supplements to such registration statement or Prospectus, including pre- and post-effective amendments, all exhibits thereto, and all material incorporated by reference or deemed to be incorporated by reference in such registration statement.

 

“Rule 415” means Rule 415 promulgated by the Commission pursuant to the Securities Act, as such rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such rule.

 

“Rule 424” means Rule 424 promulgated by the Commission pursuant to the Securities Act, as such rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such rule.

 

“Selling Shareholder Questionnaire” shall have the meaning set forth in Section 3(a).

   

2.   Mandatory Registration.

 

(a)   Within one (1) calendar year after the First Closing Date, the Company shall prepare and file with the Commission a Registration Statement covering the resale of 100% of the Registrable Securities for an offering to be made on a continuous basis pursuant to Rule 415; provided, however, that if after the Company files a Registration Statement with the Commission covering the Registrable Securities the Commission takes the position that the offering of some or all of the securities included in the Registration Statement are not eligible to be made on a delayed or continuous basis under the provisions of Rule 415, the Company shall amend the Registration Statement prior to its effectiveness to remove from the Registration Statement such portion of the Registrable Securities (the “Cut-back Shares”) and/or agree to such restrictions and limitations on the registration and resale of the Registrable Securities as the Commission may require to assure the Company’s compliance with the requirements of Rule 415 (collectively, the “SEC Restrictions”).  The Registration Statement shall contain the “Plan of Distribution” section substantially in the form attached hereto as Annex A, with such changes as are reasonably required to respond to any comments to such section by the Commission and to comply with then applicable securities laws.  Subject to the terms of this Agreement, the Company shall use its commercially reasonable efforts to cause such Registration Statement to be declared effective under the Securities Act as promptly as possible after the filing thereof, and shall use reasonable efforts to keep such Registration Statement continuously effective under the Securities Act until the earlier of (A) the date that is two years after the Registration Statement is initially declared effective by the Commission, (B) the date on which there ceases to be outstanding any Registrable Securities, and (C) the date on which the Company receives an opinion from its legal counsel to the effect that Rule 144 is available for the resale of all Registrable Securities without the requirement for the Company to be in compliance with the current public information requirements of Rule 144 and without volume or manner of sale restrictions (the “Effectiveness Period”).

    

  

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(b)   Subject to the limitations contained in Section 2(a), if the Registration Statement required to be filed pursuant to Section 2(a) is not filed within one (1) calendar year after the First Closing Date (such failure being referred to as the “Event” and the Business Day on which such Event occurs is being referred to as “Event Date”), then on the Event Date and on each monthly anniversary of the Event Date (if the Event shall not have been cured by such date) until the applicable Event is cured, the Company shall pay to each Holder an amount in cash, as liquidated damages and not as a penalty, equal to 1.0% of the aggregate amount paid by such Holder for any Registrable Securities then held by such Holder and eligible to be included in such Registration Statement; provided, however, that the total amount of payments pursuant to this Section 2(b) shall not exceed ten percent (10%) of the aggregate amount paid by such Holder under the Purchase Agreement.  The foregoing liquidated damages shall be calculated as of each monthly anniversary of each such Event Date if the applicable Event shall not have been cured by such date.  If the Company fails to pay any liquidated damages pursuant to this Section in full within ten (10) Business Days after the date payable, the Company will pay interest thereon at a rate of 18% per annum (or such lesser maximum amount that is required to comply with applicable law) to the Holder, accruing daily from the date such liquidated damages are due until such amounts, plus all such interest thereon, are paid in full. The liquidated damages pursuant to the terms hereof shall apply on a daily pro rata basis for any portion of a month prior to the cure of an Event.  The foregoing notwithstanding, no liquidated damages pursuant to this Section 2(b) shall accrue on or as to any Cut-Back Shares.

 

(c)   The parties hereto agree that the Company will not be required to use a Registration Statement for any registration in which securities of the Company are sold to an underwriter for reoffering to the public, and the Company will in no event be required to cooperate with or pay for any such underwritten offering.

   

3.   Registration Procedures.  In connection with the Company’s registration obligations hereunder, the Company shall:

 

(a)   Not less than three trading days prior to the filing of each Registration Statement or any related Prospectus or any amendment or supplement thereto (including any document that would be incorporated or deemed to be incorporated therein by reference), the Company shall, (i) furnish to each Holder copies of the “Principal and Selling Stockholders” and “Plan of Distribution” sections of such Registration Statement, if such sections have been revised since the previous filing of such Registration Statement or any amendment or supplement thereto, which sections will be subject to the review of such Holders, and (ii) cause its officers and directors, counsel and independent certified public accountants to respond to such inquiries as shall be necessary, in the reasonable opinion of respective counsel, to conduct a reasonable investigation within the meaning of the Securities Act.  The Company shall not file a Registration Statement or any such Prospectus or any amendments or supplements thereto to which the Holders of a majority of the Registrable Securities included in such Registration Statement shall reasonably object in good faith, provided that, the Company is notified of such objection in writing no later than two trading days after the Holders have been so furnished copies of such documents.  In order to be included in such registration, each Holder agrees to furnish to the Company a completed questionnaire substantially in the form attached to this Agreement as Annex B (a “Questionnaire”) not less than 3 Business Days after written request therefore has been made by the Company.  The securities owned by any Holder who fails to timely forward to the Company the completed Questionnaire shall be excluded from the registration.

    

  

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(b)   (i) Prepare and file with the Commission such amendments, including post-effective amendments, to a Registration Statement and the Prospectus used in connection therewith as may be necessary to keep a Registration Statement continuously effective as to the Registrable Securities not subject to the Cut-Back for the Effectiveness Period; (ii) cause the related Prospectus to be amended or supplemented by any required Prospectus supplement (subject to the terms of this Agreement), and as so supplemented or amended to be filed pursuant to Rule 424; (iii) respond as promptly as reasonably possible to any comments received from the Commission with respect to a Registration Statement or any amendment thereto and, upon written request by the Holders of at least 25% of the Registrable Securities included in such Registration Statement, as promptly as reasonably possible provide such Holders with true and complete copies of all material written correspondence from and to the Commission relating to a Registration Statement; and (iv) comply in all material respects with the provisions of the Securities Act and the Exchange Act with respect to the disposition of all Registrable Securities covered by a Registration Statement during the applicable period in accordance (subject to the terms of this Agreement) with the intended methods of disposition by the Holders thereof set forth in such Registration Statement as so amended or in such Prospectus as so supplemented.

 

(c)   Use its commercially reasonable efforts to notify the Holders (which notice shall, pursuant to clauses (ii) through (vi) hereof, be accompanied by an instruction to suspend the use of the Prospectus until the requisite changes have been made) as promptly as reasonably possible and (if requested by Holders of at least an aggregate of 25% of the Registrable Securities included in a Registration Statement) confirm such notice in writing (i)(A) when a Prospectus or any Prospectus supplement or post-effective amendment to a Registration Statement has been filed; (B) when the Commission notifies the Company whether there will be a “review” of such Registration Statement and whenever the Commission comments in writing on such Registration Statement; and (C) with respect to a Registration Statement or any post-effective amendment, when the same has become effective; (ii) of any request by the Commission or any other federal or state governmental authority for amendments or supplements to a Registration Statement or Prospectus or for additional information; (iii) of the issuance by the Commission or any other federal or state governmental authority of any stop order suspending the effectiveness of a Registration Statement covering any or all of the Registrable Securities or the initiation of any Proceedings for that purpose; (iv) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction, or the initiation or threatening of any Proceeding for such purpose; (v) of the occurrence of any event or passage of time that makes the financial statements included in a Registration Statement ineligible for inclusion therein or any statement made in a Registration Statement or Prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires any revisions to a Registration Statement, Prospectus or other documents so that, in the case of a Registration Statement or the Prospectus, as the case may be, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; and (vi) the occurrence or existence of any pending corporate development with respect to the Company that the Company believes may be material and that, in the determination of the Company, makes it not in the best interest of the Company to allow continued availability of a Registration Statement or Prospectus; provided that any and all of such information shall be kept confidential by each Holder until such information otherwise becomes public, unless disclosure by a Holder is required by law; provided, further, that notwithstanding each Holder’s agreement to keep such information confidential, the Holders make no acknowledgement that any such information is material, non-public information.

   

  

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(d)   Use its commercially reasonable efforts to avoid the issuance of, or, if issued, obtain the withdrawal of (i) any order suspending the effectiveness of a Registration Statement, or (ii) any suspension of the qualification (or exemption from qualification) of any of the Registrable Securities for sale in any jurisdiction, at the earliest practicable moment.

 

(e)   Furnish to each Holder, without charge, to the extent requested in writing by such Holder, at least one conformed copy of each such Registration Statement and each amendment thereto, including financial statements and schedules, all documents incorporated or deemed to be incorporated therein by reference, and all exhibits to such Registration Statement (including those previously furnished or incorporated by reference) promptly after the filing of such documents with the Commission.

 

(f)   Promptly deliver to each Holder, without charge, as many copies of the Prospectus or Prospectuses (including each form of prospectus) and each amendment or supplement thereto as such Holder may reasonably request in writing in connection with resales by such Holder.  Subject to the terms of this Agreement, the Company hereby consents to the use of such Prospectus and each amendment or supplement thereto by each of the Holders in connection with the offering and sale of the Registrable Securities covered by such Prospectus and any amendment or supplement thereto, except after the giving on any notice pursuant to Section 3(c).

 

(g)   Prior to any resale of Registrable Securities by a Holder, use its commercially reasonable efforts to register or qualify or cooperate with the selling Holders in connection with the registration or qualification (or exemption from the registration or qualification) of such Registrable Securities for the resale by the Holder under the securities or Blue Sky laws of such jurisdictions within the United States as any Holder reasonably requests in writing, to keep each registration or qualification (or exemption therefrom) effective during the Effectiveness Period and to do any and all other acts or things reasonably necessary to enable the disposition in such jurisdictions of the Registrable Securities covered by each Registration Statement; provided, that the Company shall not be required to qualify generally to do business in any jurisdiction where it is not then so qualified, subject the Company to any material tax in any such jurisdiction where it is not then so subject or file a general consent to service of process in any such jurisdiction.

 

(h)   If requested by a selling Holder, cooperate with such Holder to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be delivered to a transferee pursuant to a Registration Statement, which certificates shall be free, to the extent permitted by applicable law, of all restrictive legends, and to enable such Registrable Securities to be in such denominations and registered in such names as any such Holder may request.

   

  

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(i)   Upon the occurrence of any event contemplated by this Section 3, as promptly as reasonably possible under the circumstances taking into account the Company’s good faith assessment of any adverse consequences to the Company and its stockholders of the premature disclosure of such event, prepare a supplement or amendment, including a post-effective amendment, to a Registration Statement or a supplement to the related Prospectus or any document incorporated or deemed to be incorporated therein by reference, and file any other required document so that, as thereafter delivered, neither a Registration Statement nor such Prospectus will contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.  If the Company notifies the Holders in accordance with clauses (ii) through (vi) of Section 3(c) above to suspend the use of any Prospectus until the requisite changes to such Prospectus have been made, then the Holders shall suspend use of such Prospectus.  The Company will use its commercially reasonable efforts to ensure that the use of the Prospectus may be resumed as promptly as is practicable.  The Company shall be entitled to exercise its right under this Section 3(i) to suspend the availability of a Registration Statement and Prospectus for a period not to exceed 40 trading days (which need not be consecutive days) in any 12 month period.

 

(j)   Comply with all applicable rules and regulations of the Commission until the end of the Effectiveness Period.

 

(k)   The Company may require each selling Holder to furnish to the Company a certified statement as to the number of shares of Common Stock beneficially owned by such Holder and the person who has voting and dispositive control over such shares.  The Company shall have no obligation to keep a Prospectus usable or to give notice that a Prospectus is not usable by a particular Holder, and the Company will have no liability for, to the extent such Prospectus is not usable by such Holder because current information with respect to such Holder is not included therein because such Holder has not provided information to the Company in accordance with Section 3(a) or this Section 3(k).

 

(l)   Notwithstanding any provision of this Agreement to the contrary, it shall not be a breach or violation of any obligation of the Company hereunder if the Company fails to take any action otherwise required hereunder because, in its reasonable determination, such action would require the Company to disclose material, non-public information that the Company has a bona fide business or legal reason for not disclosing regardless of whether the Company caused such material, non-public information to exist.

   

  

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4.   Registration Expenses.  All fees and expenses incident to the performance of or compliance with this Agreement by the Company shall be borne by the Company whether or not any Registrable Securities are sold pursuant to a Registration Statement.  The fees and expenses referred to in the foregoing sentence shall include, without limitation, (i) all registration and filing fees (including, without limitation, fees and expenses (A) with respect to filings required to be made with the trading market on which the Common Stock is then listed for trading, and (B) in compliance with applicable state securities or Blue Sky laws reasonably agreed to by the Company in writing (including without limitation, fees and disbursements of counsel for the Company in connection with Blue Sky qualifications or exemptions of the Registrable Securities and determination of the eligibility of the Registrable Securities for investment under the laws of such jurisdictions as requested in writing by the Holders), (ii) printing expenses (including, without limitation, expenses of printing certificates for Registrable Securities and of printing prospectuses if the printing of prospectuses is reasonably requested by the Holders of a majority of the Registrable Securities included in a Registration Statement), (iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of counsel for the Company, (v) Securities Act liability insurance, if the Company so desires such insurance, and (vi) fees and expenses of all other Persons retained by the Company in connection with the consummation of the transactions contemplated by this Agreement.  In addition, the Company shall be responsible for all of its internal expenses incurred in connection with the consummation of the transactions contemplated by this Agreement (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expense of any annual audit and the fees and expenses incurred in connection with the listing of the Registrable Securities on any trading market as required hereunder.  In no event shall the Company be responsible for any broker or similar commissions or, except to the extent provided for in the Transaction Documents, any legal fees or other costs of the Holders.

   

5.   Indemnification.

 

(a)   Indemnification by the Company.  The Company shall, notwithstanding any termination of this Agreement, indemnify and hold harmless each Holder, the officers, directors, agents, brokers (including brokers who offer and sell Registrable Securities as principal as a result of a pledge or any failure to perform under a margin call of Common Stock), investment advisors and employees of each of them, each Person who controls any such Holder (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) and the officers, directors, agents and employees of each such controlling Person, to the fullest extent permitted by applicable law, from and against any and all losses, claims, damages, liabilities, costs (including, without limitation, reasonable attorneys’ fees) and expenses (collectively, “Losses”), as incurred, arising out of or relating to any untrue or alleged untrue statement of a material fact contained in a Registration Statement, any Prospectus or any form of prospectus or in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or relating to any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein (in the case of any Prospectus or form of prospectus or supplement thereto, in light of the circumstances under which they were made) not misleading, except to the extent, but only to the extent, that (i) such untrue statements or omissions are based solely upon information regarding such Holder furnished in writing to the Company by such Holder expressly for use therein, or to the extent that such information relates to such Holder or such Holder’s proposed method of distribution of Registrable Securities and was reviewed and expressly approved or was not objected to in writing by such Holder expressly for use in a Registration Statement, such Prospectus or such form of Prospectus or in any amendment or supplement thereto (it being understood that each Holder has expressly approved Annex A hereto for this purpose) or (ii) in the case of an occurrence of an event of the type specified in Section 3(c)(ii)-(vi), the use by such Holder of an outdated or defective Prospectus after the Company has notified such Holder in writing that the Prospectus is outdated or defective and prior to the receipt by such Holder of the Advice contemplated in Section 6(d).  The Company shall notify the Holders promptly of the institution, threat or assertion of any Proceeding arising from or in connection with the transactions contemplated by this Agreement of which the Company is aware.

   

  

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(b)   Indemnification by Holders.  Each Holder shall, severally and not jointly, indemnify and hold harmless each other Holder, the Company, its directors, officers, agents and employees, each Person who controls the Company (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, agents or employees of such controlling Persons, to the fullest extent permitted by applicable law, from and against all Losses, as incurred, to the extent arising out of or based solely upon: (x) such Holder’s failure to comply with the prospectus delivery requirements of the Securities Act, or (y) in the case of an occurrence of an event of the type specified in Section 3(c)(ii)-(vi), the use by such Holder of an outdated or defective Prospectus after the Company has notified such Holder in writing that the Prospectus is outdated or  defective and prior to the receipt by such Holder of the Advice contemplated in Section 6(d) or (z) any untrue or alleged untrue statement of a material fact contained in any Registration Statement, any Prospectus, or any form of prospectus, or in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or relating to any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading (i) to the extent, but only to the extent, that such untrue statement or omission is contained in any information so furnished in writing by such Holder to the Company specifically for inclusion in such Registration Statement or such Prospectus or (ii) to the extent that such untrue statements or omissions are based solely upon information regarding such Holder furnished in writing to the Company by such Holder expressly for use therein, or to the extent that such information relates to such Holder or such Holder’s proposed method of distribution of Registrable Securities and was reviewed and expressly approved or was not objected to in writing by such Holder expressly for use in a Registration Statement (it being understood that each Holder has expressly approved Annex A hereto for this purpose), such Prospectus or such form of Prospectus or in any amendment or supplement thereto.  In no event shall the liability of any selling Holder hereunder be greater in amount than the dollar amount of the net proceeds received by such Holder upon the sale of the Registrable Securities giving rise to such indemnification obligation.

 

(c)   Conduct of Indemnification Proceedings. If any Proceeding shall be brought or asserted against any Person entitled to indemnity hereunder (an “Indemnified Party”), such Indemnified Party shall promptly notify the Person from whom indemnity is sought (the “Indemnifying Party”) in writing, and the Indemnifying Party shall have the right to assume the defense thereof, including the employment of counsel reasonably satisfactory to the Indemnified Party and the payment of all fees and expenses incurred in connection with defense thereof; provided, that the failure of any Indemnified Party to give such notice shall not relieve the Indemnifying Party of its obligations or liabilities pursuant to this Agreement, except (and only) to the extent that it shall be finally determined by a court of competent jurisdiction (which determination is not subject to appeal or further review) that such failure shall have prejudiced the Indemnifying Party.

 

An Indemnified Party shall have the right to employ separate counsel in any such Proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party or Parties unless:  (1) the Indemnifying Party has agreed in writing to pay such fees and expenses; (2) the Indemnifying Party shall have failed promptly to assume the defense of such Proceeding and to employ counsel reasonably satisfactory to such Indemnified Party in any such Proceeding; or (3) the named parties to any such Proceeding (including any impleaded parties) include both such Indemnified Party and the Indemnifying Party, and such Indemnified Party shall reasonably believe that a material conflict of interest is likely to exist if the same counsel were to represent such Indemnified Party and the Indemnifying Party (in which case, if such Indemnified Party notifies the Indemnifying Party in writing that it elects to employ separate counsel at the expense of the Indemnifying Party, the Indemnifying Party shall not have the right to assume the defense thereof and the reasonable fees and expenses of one separate counsel shall be at the expense of the Indemnifying Party).  The Indemnifying Party shall not be liable for any settlement of any such Proceeding effected without its written consent, which consent shall not be unreasonably withheld.  No Indemnifying Party shall, without the prior written consent of the Indemnified Party, effect any settlement of any pending Proceeding in respect of which any Indemnified Party is a party, unless such settlement includes an unconditional release of such Indemnified Party from all liability on claims that are the subject matter of such Proceeding.

    

  

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Subject to the terms of this Agreement, all reasonable fees and expenses of the Indemnified Party (including reasonable fees and expenses to the extent incurred in connection with investigating or preparing to defend such Proceeding in a manner not inconsistent with this Section) shall be paid to the Indemnified Party, as incurred, within ten trading days following written notice thereof to the Indemnifying Party; provided, that the Indemnified Party shall promptly reimburse the Indemnifying Party for that portion of such fees and expenses applicable to such actions for which such Indemnified Party is not entitled to indemnification hereunder, determined based upon the relative faults of the parties.

 

(d)   Contribution.  If the indemnification under Section 5(a) or 5(b) is unavailable to an Indemnified Party or insufficient to hold an Indemnified Party harmless for any Losses, then each Indemnifying Party shall contribute to the amount paid or payable by such Indemnified Party, in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party and Indemnified Party in connection with the actions, statements or omissions that resulted in such Losses as well as any other relevant equitable considerations. The relative fault of such Indemnifying Party and Indemnified Party shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission of a material fact, has been taken or made by, or relates to information supplied by, such Indemnifying Party or Indemnified Party, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such action, statement or omission.  The amount paid or payable by a party as a result of any Losses shall be deemed to include, subject to the limitations set forth in this Agreement, any reasonable attorneys’ or other reasonable fees or expenses incurred by such party in connection with any Proceeding to the extent such party would have been indemnified for such fees or expenses if the indemnification provided for in this Section was available to such party in accordance with its terms.

 

The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 5(d) were determined by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to in the immediately preceding paragraph.  Notwithstanding the provisions of this Section 5(d), no Holder shall be required to contribute, in the aggregate, any amount in excess of the amount by which the proceeds actually received by such Holder from the sale of the Registrable Securities subject to the Proceeding exceeds the amount of any damages that such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission, except in the case of fraud by such Holder.

 

The indemnity and contribution agreements contained in this Section are in addition to any liability that the Indemnifying Parties may have to the Indemnified Parties.

       

  

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6.   Miscellaneous.

 

(a)   Piggy-Back Registrations.  If at any time prior to the first anniversary of the First Closing Date there is not an effective Registration Statement covering all of the Registrable Securities and the Company shall determine to prepare and file with the SEC a registration statement relating to an offering for its own account or the account of others under the Securities Act of any of its equity securities, other than (i) a registration statement relating to an offering of the Previous Shares or (ii) a registration statement on Form S-4 or Form S-8 (each as promulgated under the Securities Act) or their then equivalents relating to equity securities to be issued solely in connection with any acquisition of any entity or business or equity securities issuable in connection with the stock option or other employee benefit plans, then the Company shall send to each Holder written notice of such determination and, if within fifteen (15) days after receipt of such notice, any such Holder shall so request in writing, the Company shall include in such registration statement all or any part of such Registrable Securities such holder requests to be registered, subject to customary underwriter cutbacks applicable to all holders of registration rights.

 

(b)   Remedies.  In the event of a breach by the Company or by a Holder, of any of their obligations under this Agreement, each Holder or the Company, as the case may be, in addition to being entitled to exercise all rights granted by law and under this Agreement, including recovery of damages, will be entitled to specific performance of its rights under this Agreement.  The Company and each Holder agree that monetary damages would not provide adequate compensation for any losses incurred by reason of a breach by it of any of the provisions of this Agreement and hereby further agrees that, in the event of any action for specific performance in respect of such breach, it shall waive the defense that a remedy at law would be adequate.

 

(c)   Compliance.  Each Holder covenants and agrees that it will comply with the prospectus delivery requirements of the Securities Act as applicable to it in connection with sales of Registrable Securities pursuant to a Registration Statement.

 

(d)   Discontinued Disposition.  Each Holder agrees by its acquisition of such Registrable Securities that, upon receipt of a notice from the Company of the occurrence of any event of the kind described in Section 3(d), such Holder will forthwith discontinue disposition of such Registrable Securities under a Registration Statement until such Holder’s receipt of the copies of the supplemented Prospectus and/or amended Registration Statement or until it is advised in writing (the “Advice”) by the Company that the use of the applicable Prospectus may be resumed, and, in either case, has received copies of any additional or supplemental filings that are incorporated or deemed to be incorporated by reference in such Prospectus or Registration Statement.  The Company will use its commercially reasonable efforts to ensure that the use of the Prospectus may be resumed as promptly as it practicable.

   

  

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(e)   Amendments and Waivers. The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the same shall be in writing and signed by the Company and the Holders of a majority of the then outstanding Registrable Securities.  If a Registration Statement does not register all of the Registrable Securities pursuant to a waiver or amendment done in compliance with the previous sentence, then the number of Registrable Securities to be registered for each Holder shall be reduced pro rata among all the Holders and each Holder having the right to designate which of its Registrable Securities shall be omitted from such Registration Statement. Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of Holders and that does not directly or indirectly affect the rights of other Holders may be given by Holders of all of the Registrable Securities to which such waiver or consent relates; provided, however, that the provisions of this sentence may not be amended, modified, or supplemented except in accordance with the provisions of the immediately preceding sentence.

 

(f)   Notices. All notices, requests, demands, consents, instructions or other communications required or permitted hereunder shall be in writing and shall be given in accordance with Section 5.4 of the Purchase Agreement and shall be deemed effectively given as described in Section 5.4 of the Purchase Agreement.

 

(g)   Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and permitted assigns of each of the parties and shall inure to the benefit of each Holder.  The Company may not assign its rights or obligations hereunder without the prior written consent of all of the Holders of the then-outstanding Registrable Securities except in the case of a merger (or similar transaction) in which case the surviving entity shall succeed to the rights and obligations of the Company.  Holders may assign their respective rights hereunder in the manner and to the Persons as set forth in the Purchase Agreement.

 

(h)   No Inconsistent Agreements.  The Company has not, as of the date hereof, nor shall the Company, during the period beginning on or after the date of this Agreement and ending at the end of the Effectiveness Period, enter into any agreement with respect to its securities without the prior written consent of all of the Holders of the then-outstanding Registrable Securities, that would conflict with the provisions hereof.

 

(i)   Execution and Counterparts.  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” 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” signature page were an original thereof.

    

  

11

  

    

(j)   Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of California, without regard to principles of conflicts of law thereof.

 

(k)   Cumulative Remedies.  The remedies provided herein are cumulative and not exclusive of any remedies provided by law.

 

(l)   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.

 

(m)   Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.

 

(n)   Independent Nature of Holders’ Obligations and Rights.  The obligations of each Holder hereunder are several and not joint with the obligations of any other Holder hereunder, and no Holder shall be responsible in any way for the performance of the obligations of any other Holder hereunder.  Nothing contained herein or in any other agreement or document delivered at any closing, and no action taken by any Holder pursuant hereto or thereto, shall be deemed to constitute the Holders as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Holders are in any way acting in concert with respect to such obligations or the transactions contemplated by this Agreement.  Each Holder shall be entitled to protect and enforce its rights, including without limitation the rights arising out of this Agreement, and it shall not be necessary for any other Holder to be joined as an additional party in any Proceeding for such purpose.

   

IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement as of the date first written above.

      

	 	

BALQON CORPORATION

	 
	 	 	 	 
	
 

	
By: 

	/s/ Balwinder Samra	 
	 	 	Name: Balwinder Samra	 
	 	 	Title: President	 
	 	 	 
Dated: July 29, 2010

	 

 

 

 

[SIGNATURE PAGE OF HOLDER FOLLOWS]

   

  

12

  

    

[SIGNATURE PAGE OF HOLDER – REGISTRATION RIGHTS AGREEMENT]

     

Name of Purchaser:___________________________________________________________________________________________________

Signature of Authorized Signatory of Purchaser:_____________________________________________________________________________

Name of Authorized Signatory:__________________________________________________________________________________________

Title of Authorized Signatory:___________________________________________________________________________________________

 

 

 

 

 

 

 

 

 

 

  

13

  

    

ANNEX A

 

Plan of Distribution

 

 

The selling security holders may, from time to time, sell any or all of their shares of common stock on any stock exchange, market or trading facility on which the shares are traded or quoted in private transactions.  These sales may be at prevailing market prices at the time of sale, or at privately negotiated prices.  The selling security holders may use any one or more of the following methods when selling shares of our common stock:

    

	 	●	

ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;

	 	 	 
	 	●	

block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction;

	 	 	 
	 	●	

purchases by a broker-dealer as principal and resale by the broker-dealer for its account;

	 	 	 
	 	●	

an exchange distribution in accordance with the rules of the applicable exchange;

	 	 	 
	 	●	

privately negotiated transactions;

	 	 	 
	 	●	

short sales;

	 	 	 
	 	●	

broker-dealers may agree with the selling security holders to sell a specified number of such shares at a stipulated price per share;

	 	 	 
	 	●	

a combination of any such methods of sale; and

	 	 	 
	 	●	

any other method permitted pursuant to applicable law.

       

The selling security holders may also sell shares of our common stock under Rule 144 under the Securities Act, if available, rather than under this prospectus.

 

Broker-dealers engaged by the selling security holders may arrange for other brokers-dealers to participate in sales.  Broker-dealers may receive commissions or discounts from the selling security holders (or, if any broker-dealer acts as agent for the purchaser of shares, from the purchaser) in amounts to be negotiated.  The selling security holders do not expect these commissions and discounts to exceed what is customary in the types of transactions involved.  Any profits on the resale of shares of common stock by a broker-dealer acting as principal might be deemed to be underwriting discounts or commissions under the Securities Act.  Discounts, concessions, commissions and similar selling expenses, if any, attributable to the sale of shares will be borne by a selling security holder.  The selling security holders may agree to indemnify any agent, dealer or broker-dealer that participates in transactions involving sales of the shares if liabilities are imposed on that person under the Securities Act.

    

  

A-1

  

     

The selling security holders may from time to time pledge or grant a security interest in some or all of the shares of common stock owned by them and, if they default in the performance of their secured obligations, the pledgees or secured parties may offer and sell the shares of common stock from time to time under this prospectus after we have filed a supplement to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act supplementing or amending the list of selling security holders to include the pledgee, transferee or other successors in interest as selling stockholders under this prospectus.

 

The selling security holders also may transfer the shares of common stock in other circumstances, in which case the transferees, pledgees or other successors in interest will be the selling beneficial owners for purposes of this prospectus and may sell the shares of common stock from time to time under this prospectus after we have filed a supplement to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act supplementing or amending the list of selling security holders to include the pledgee, transferee or other successors in interest as selling security holders under this prospectus.

 

The selling security holders and any broker-dealers or agents that are involved in selling the shares of common stock may be deemed to be “underwriters” within the meaning of the Securities Act in connection with such sales.  In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the shares of common stock purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act.

 

We are required to pay all fees and expenses incident to the registration of the shares of common stock.  We have agreed to indemnify the selling security holders against certain losses, claims, damages and liabilities, including liabilities under the Securities Act.

 

The selling security holders have advised us that they have not entered into any agreements, understandings or arrangements with any underwriters or broker-dealers regarding the sale of their shares of common stock, nor is there an underwriter or coordinating broker acting in connection with a proposed sale of shares of common stock by any selling security holder.  If we are notified by any selling security holder that any material arrangement has been entered into with a broker-dealer for the sale of shares of common stock, if required, we will file a supplement to this prospectus.  If the selling security holders use this prospectus for any sale of the shares of common stock, they will be subject to the prospectus delivery requirements of the Securities Act.

 

The anti-manipulation rules of Regulation M under the Exchange Act may apply to sales of our common stock and activities of the selling security holders.

 

 

 

 

 

A-2Exhibit 4.2

 

INTERMOLECULAR, INC.

 

COMMON STOCK WARRANT

 

Intermolecular, Inc. (the “Company”) hereby grants to the Holder set forth in Article I below (“Holder”), a warrant (a “Warrant”) to purchase the number of shares of the Company’s Common Stock (“Shares”) set forth below, subject to the terms and conditions of this Warrant, including the terms of the Notice attached hereto as Exhibit A.

 

I.                                         WARRANT TERMS

 

	
Holder:
    	
 
    	
Timane   S.a.r.l.
    
	
 
    	
 
    	
 
    
	
Issuance   Date:
    	
 
    	
June 20,   2008
    
	
 
    	
 
    	
 
    
	
Vesting   Commencement Date:
    	
 
    	
June 16,   2008
    
	
 
    	
 
    	
 
    
	
Exercise   Price per Share:
    	
 
    	
$1.02
    
	
 
    	
 
    	
 
    
	
Total   Number of Shares Granted:
    	
 
    	
180,000
    
	
 
    	
 
    	
 
    
	
Total   Exercise Price:
    	
 
    	
$183,600.00
    
	
 
    	
 
    	
 
    
	
Term/Expiration   Date:
    	
 
    	
June 15,   2018
    

 

Vesting Schedule:            The Shares subject to this Warrant shall vest according to the following schedule:

 

Forty-five thousand (45,000) Shares subject to the Warrant shall vest upon the first anniversary of the Vesting Commencement Date.  The remaining One Hundred Thirty-Five Thousand (135,000) Shares subject to the Warrant shall vest as follows:  1/48th of the Shares subject to the Warrant (rounded down to the next whole number of shares) shall vest on the first day of each full month thereafter, so that all of the Shares shall be vested on the first day of the forty-eight (48th) month after the Vesting Commencement Date.

 

Termination Period:        This  Warrant shall terminate immediately upon a Change of Control of Holder and the Holder shall have no right to exercise this Warrant whatsoever.  For so long as no Change of Control has occurred, this Warrant may be exercised, to the extent vested, for three (3) months after the later of (i) when Holder ceases to be a Service Provider, or (ii) when, in the case that Dr. Patrick Rabinzohn (“Rabinzohn”) becomes a Service Provider immediately after Holder ceases to be a Service Provider, such longer period as may be applicable upon the death or disability of Rabinzohn as provided herein, but in no event later than the Term/Expiration Date as provided above.

 

 

II.                                     AGREEMENT

 

1.                                       Issuance of Warrant.  The Company hereby issues to Holder a Warrant to purchase the number of Shares set forth in Article I above, at the exercise price per share set forth in Article I above (the “Exercise Price”).

 

2.                                       Exercise of Warrant.  This Warrant is exercisable as follows:

 

(a)                                  Right to Exercise.

 

(i)                                     This Warrant shall be exercisable cumulatively according to the vesting schedule set out in Article I.  For purposes of this Warrant, Shares subject to this Warrant shall vest based on Holder’s continued status as a Service Provider.

 

(ii)                                  This Warrant may not be exercised for a fraction of a Share.

 

(iii)                               In the event of Rabinzohn’s death or disability, or other termination of Holder’s or Rabinzohn’s status as a Service Provider, the exercisability of the Warrant is governed by Sections 8, 9 and 10 below.

 

(iv)                              In no event may this Warrant be exercised after the date of expiration of the term of this Warrant as set forth in Article I.

 

(v)                                 If this Warrant is exercised in respect of less than all of the Shares purchasable on such exercise at any time prior to the Term/Expiration Date, a new Warrant of like tenor exercisable for the remaining Shares may be issued and delivered to the Holder by the Company.  This Warrant or any part thereof surrendered in the exercise of the rights thereby evidenced shall thereupon be cancelled by the Company and retired.

 

(b)                                 Method of Exercise.  This Warrant shall be exercisable by written notice to the Company (in the form attached as Exhibit A) (the “Notice”).  The Notice must state the number of Shares for which the Warrant is being exercised, and such other representations and agreements with respect to such Shares as may be required by the Company.  The Notice must be signed by Holder and shall be delivered in person or by certified mail to the Secretary of the Company.  The Notice must be accompanied by payment of the Exercise Price plus payment of any applicable withholding tax.  This Warrant shall be deemed to be exercised upon receipt by the Company of such written Notice accompanied by the Exercise Price and payment of any applicable withholding tax.

 

No Shares shall be issued pursuant to the exercise of an Warrant unless such issuance and such exercise comply with all relevant provisions of law and the requirements of any stock exchange upon which the Shares may then be listed.  Assuming such compliance, for income tax purposes the Shares shall be considered transferred to Holder on the date on which the Warrant is exercised with respect to such Shares.

 

2

 

3.                                       Holder’s Representations.

 

(a)                                  The Holder has substantial experience in evaluating and investing in private placement transactions of securities of companies similar to the Company so that the Holder is capable of evaluating the merits and risks of its investment in the Company and has the capacity to protect its interests.

 

(b)                                 The Holder is acquiring the Warrant and the shares of Common Stock issuable upon exercise of the Warrant (collectively the “Securities”) for investment for its own account and not with a view to, or for resale in connection with, any distribution thereof.  The Holder understands that the Securities have not been registered under the Act by reason of a specific exemption from the registration provisions of the Act, which depends upon, among other things, the bona fide nature of the investment intent as expressed herein.  In this connection, the Holder understands that, in the view of the U.S. Securities and Exchange Commission (the “SEC”), the statutory basis for such exemption may be unavailable if this representation was predicated solely upon a present intention to hold the Securities for the minimum capital gains period specified under tax statutes, for a deferred sale, for or until an increase or decrease in the market price of the Securities or for a period of one year or any other fixed period in the future.

 

(c)                                  The Holder acknowledges that the Securities must be held indefinitely unless subsequently registered under the Act or an exemption from such registration is available.  The Holder is aware of the provisions of Rule 144 (“Rule 144”) promulgated under the Securities Act of 1933, as amended (the “Securities Act”) which permits limited resale of securities purchased in a private placement subject to the satisfaction of certain conditions, including, in case the securities have been held for more than one but less than one year, the existence of a public market for the shares, the availability of certain public information about the Company, the resale occurring not less than six months after a party has purchased and paid for the security to be sold, the sale being through a “broker’s transaction” or in a transaction directly with a “market maker” (as provided by Rule 144(f)) and the number of shares or other securities being sold during any three-month period not exceeding specified limitations.

 

(d)                                 The Holder further understands that at the time the Holder wishes to sell the Securities there may be no public market upon which such a sale may be effected, and that even if such a public market exists, the Company may not be satisfying the current public information requirements of Rule 144, and that in such event, the Holder may be precluded from selling the Securities under Rule 144 unless a) a one-year minimum holding period has been satisfied and b) the Holder was not at the time of the sale nor at any time during the three-month period prior to such sale an affiliate of the Company.

 

(e)                                  The Holder has had an opportunity to discuss the Company’s business, management and financial affairs with its management and an opportunity to review the Company’s facilities. The Holder understands that such discussions, as well as the written information issued by the Company, were intended to describe the aspects of the Company’s business and prospects which it believes to be material but were not necessarily a thorough or exhaustive description.

 

4.                                       Lock-Up Period.  Holder hereby agrees that if so requested by the Company or any representative of the underwriters (the “Managing Underwriter”) in connection with any registration of the offering of any securities of the Company under the Securities Act, Holder

 

3

 

shall not sell or otherwise transfer any Shares or other securities of the Company during the 180-day period (or such longer period as may be requested in writing by the Managing Underwriter and agreed to in writing by the Company) (the “Market Standoff Period”) following the effective date of a registration statement of the Company filed under the Securities Act; provided, however, that such restriction shall apply only to the first registration statement of the Company to become effective under the Securities Act that includes securities to be sold on behalf of the Company to the public in an underwritten public offering under the Securities Act.  The Company may impose stop-transfer instructions with respect to securities subject to the foregoing restrictions until the end of such Market Standoff Period and these restrictions shall be binding on any transferee of such Shares.  Notwithstanding the foregoing, the 180-day period may be extended for up to such number of additional days as is deemed necessary by the Company or the Managing Underwriter to continue coverage by research analysts in accordance with NASD Rule 2711 or any successor rule.

 

5.                                       Method of Payment.  Payment of the Exercise Price shall be by any of the following, or a combination thereof, at the election of Holder:

 

(a)                                  cash;

 

(b)                                 check;

 

(c)                                  with the consent of the Company, a full recourse promissory note bearing interest (at no less than such rate as is a market rate of interest and which then precludes the imputation of interest under the Code), payable upon such terms as may be prescribed by the Company and structured to comply with Applicable Laws;

 

(d)                                 with the consent of the Company, surrender of other Shares of Common Stock of the Company which (A) in the case of Shares acquired from the Company, have been owned by Holder for more than six (6) months on the date of surrender, and (B) have a Fair Market Value on the date of surrender equal to the Exercise Price of the Shares as to which the Warrant is being exercised;

 

(e)                                  with the consent of the Company, surrendered Shares issuable upon the exercise of the Warrant having a Fair Market Value on the date of exercise equal to the aggregate Exercise Price of the Warrant or exercised portion thereof;

 

(f)                                    with the consent of the Company, property of any kind which constitutes good and valuable consideration;

 

(g)                                 following the Public Trading Date, with the consent of the Company, delivery of a notice that Holder has placed a market sell order with a broker with respect to Shares then issuable upon exercise of the Warrant and that the broker has been directed to pay a sufficient portion of the net proceeds of the sale to the Company in satisfaction of the aggregate Exercise Price; provided, that payment of such proceeds is then made to the Company upon settlement of such sale; or

 

(h)                                 with the consent of the Company, any combination of the foregoing methods of payment.

 

4

 

6.                                       Restrictions on Exercise.  If the issuance of Shares upon such exercise or if the method of payment for such Shares would constitute a violation of any applicable federal or state securities or other law or regulation, then the Warrant may not be exercised.  The Company may require Holder to make any representation and warranty to the Company as may be required by any applicable law or regulation before allowing the Warrant to be exercised.

 

7.                                       Change of Control of Holder.  If there occurs a Change of Control of Holder, this Warrant shall terminate and the Holder shall have no right to exercise this Warrant for any shares, vested or unvested.

 

8.                                       Termination of Relationship.  If either Holder or Rabinzohn, as the case may be, ceases to be a Service Provider (other than, if applicable, by reason of Rabinzohn’s death or the total and permanent disability of Rabinzohn within the meaning of Code Section 22(e)(3)), Holder may exercise this Warrant during the Termination Period set out in Article I, to the extent the Warrant was vested at the date on which Holder or Rabinzohn, as the case may be, ceases to be a Service Provider.  To the extent that the Warrant is not vested at the date on which Holder or Rabinzohn, as the case may be, ceases to be a Service Provider, or if Holder does not exercise this Warrant within the time specified herein, the Warrant shall terminate.

 

9.                                       Disability of Holder.  If Rabinzohn ceases to be a Service Provider as a result of his or her total and permanent disability within the meaning of Code Section 22(e)(3), Holder may exercise the Warrant to the extent the Warrant was vested at the date on which Rabinzohn ceases to be a Service Provider, but only within twelve (12) months from such date (and in no event later than the expiration date of the term of this Warrant as set forth in Article I).  To the extent that the Warrant is not vested at the date on which Rabinzohn ceases to be a Service Provider, or if Holder does not exercise such Warrant within the time specified herein, the Warrant shall terminate.

 

10.                                 Death of Holder.  If Rabinzohn ceases to be a Service Provider as a result of the death of Holder, the vested portion of the Warrant may be exercised at any time within twelve (12) months following the date of death (and in no event later than the expiration date of the term of this Warrant as set forth in Article I) by Holder.  To the extent that the Warrant is not vested at the date of death, or if the Warrant is not exercised within the time specified herein, the Warrant shall terminate.

 

11.                                 Non-Transferability of Warrant.  This Warrant may not be transferred in any manner except that upon the liquidation, dissolution or winding-up of Holder (which for purposes of this Warrant shall not be deemed to be a Change of Control), this Warrant may be transferred to Rabinzohn.  If this Warrant has been transferred from Holder to Rabinzohn in accordance with the terms of this Warrant, it may not be further transferred in any matter by Rabinzohn except by will or by the laws of descent or distribution, and it may be exercised in accordance with the terms of this Warrant during the lifetime of Rabinzohn only by Rabinzohn.  The terms of this Warrant shall be binding upon the executors, administrators, heirs, successors and assigns of Holder.

 

12.                                 Term of Warrant.  This Warrant may be exercised only within the term set out in Article I.

 

5

 

13.                                 Loss, Theft, Destruction or Mutilation of Warrant. Upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and, in the case of loss, theft, or destruction, of indemnity reasonably satisfactory to it, and, if mutilated, upon surrender and cancellation of this Warrant, the Company will execute and deliver a new Warrant, having terms and conditions substantially identical to this Warrant, in lieu hereof.

 

14.                                 Restrictions on Shares.  Holder hereby agrees that Shares purchased upon the exercise of the Warrant shall be subject to such terms and conditions as the Company shall determine in its sole discretion, including, without limitation, restrictions on the transferability of Shares, and a right of first refusal in favor of the Company with respect to permitted transfers of Shares.

 

15.                                 Stock Fully Paid; Reservation of Shares.   All Shares, which may be issued upon the exercise of the rights represented by this Warrant, will, upon issuance, be fully paid and nonassessable. During the period within which the rights represented by this Warrant may be exercised, the Company will at all times have authorized, and reserved for issuance upon exercise of the purchase rights evidenced by this Warrant, a sufficient number of shares of Common Stock to provide for the exercise of the rights represented by this Warrant.

 

16.                                 Exercise Price Adjustments.  In the event of changes in the outstanding Common Stock by reason of stock dividends, split-ups, recapitalizations, reclassifications, mergers, consolidations, combinations or exchanges of shares, separations, reorganizations, liquidations, or the like, the number and class of shares available under the Warrant in the aggregate and the Exercise Price shall be correspondingly adjusted, as appropriate, by the Board.  The adjustment shall be such as will give the Holder of this Warrant upon exercise for the same aggregate Exercise Price the total number, class and kind of shares as it would have owned had the Warrant been exercised prior to the event and had it continued to hold such shares until after the event requiring adjustment.

 

17.                                 Definitions.  The following terms shall have the following definitions for use in this Warrant:

 

(a)                                  “Applicable Laws” means U.S. state corporate laws, U.S. federal and state securities laws, the Code, any stock exchange or quotation system on which the Common Stock is listed or quoted and the applicable laws of any foreign country or jurisdiction.

 

(b)                                 “Board” means the Board of Directors of the Company.

 

(c)                                  “Code” means the Internal Revenue Code of 1986, as amended, or any successor statute or statutes thereto.  Reference to any particular Code section shall include any successor section.

 

(d)                                 “Change of Control”, with respect to Timane S.a.r.l,, shall mean at any time Dr. Patrick Rabinzohn does not beneficially own one hundred percent (100%) of all the outstanding voting securities of the Holder.

 

(e)

 

6

 

(f)                                    “Consultant” means any consultant or adviser if: (i) the consultant or adviser renders bona fide services to the Company or any Parent or Subsidiary of the Company; and (ii) the services rendered by the consultant or adviser are not in connection with the offer or sale of securities in a capital-raising transaction and do not directly or indirectly promote or maintain a market for the Company’s securities.

 

(g)                                 “Director” means a member of the Board.

 

(h)                                 “Employee” means any person, including an Officer or Director, who is an employee (as defined in accordance with Section 3401(c) of the Code) of the Company or any Parent or Subsidiary of the Company.  A Service Provider shall not cease to be an Employee in the case of (i) any leave of absence approved by the Company or (ii) transfers between locations of the Company or between the Company, its Parent, any Subsidiary, or any successor.  Neither service as a Director nor payment of a director’s fee by the Company shall be sufficient, by itself, to constitute “employment” by the Company.

 

(i)                                     “Parent” means any corporation, whether now or hereafter existing (other than the Company), in an unbroken chain of corporations ending with the Company if each of the corporations other than the last corporation in the unbroken chain owns stock possessing more than fifty percent of the total combined voting power of all classes of stock in one of the other corporations in such chain.

 

(j)                                     “Public Trading Date” means the first date upon which Common Stock of the Company is listed (or approved for listing) upon notice of issuance on any securities exchange or designated (or approved for designation) upon notice of issuance as a national market security on an interdealer quotation system.

 

(k)                                  “Service Provider” means an Employee, Director or Consultant.

 

(l)                                     “Subsidiary” means any corporation, whether now or hereafter existing (other than the Company), in an unbroken chain of corporations beginning with the Company if each of the corporations other than the last corporation in the unbroken chain owns stock possessing more than fifty percent of the total combined voting power of all classes of stock in one of the other corporations in such chain.

 

(Signature Page Follows)

 

7

 

This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which shall constitute one document.

 

	
 
    	
INTERMOLECULAR, INC.
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   David E. Lazovsky
    
	
 
    	
 
    	
David   E. Lazovsky
    
	
 
    	
 
    	
President   and Chief Executive Officer
    

 

HOLDER ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO THE WARRANT HEREOF IS EARNED ONLY BY CONTINUING CONSULTANCY OF HOLDER (OR EMPLOYMENT OF RABINZOHN IN ACCORDANCE WITH THE TERMS HEREOF) AT THE WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS WARRANT OR ACQUIRING SHARES HEREUNDER).  HOLDER FURTHER ACKNOWLEDGES AND AGREES THAT NOTHING IN THIS AGREEMENT SHALL CONFER UPON HOLDER ANY RIGHT WITH RESPECT TO HOLDER’S OR RABINZOHN’S CONTINUATION OF EMPLOYMENT OR CONSULTANCY BY THE COMPANY, NOR SHALL IT INTERFERE IN ANY WAY WITH HOLDER’S RIGHT OR THE COMPANY’S RIGHT TO TERMINATE HOLDER’S OR RABINZOHN’S CONSUTANCY OR EMPLOYMENT AT ANY TIME, WITH OR WITHOUT CAUSE AND WITH OR WITHOUT PRIOR NOTICE.

 

Holder hereby accepts this Warrant subject to all of the terms and provisions hereof.  Holder has reviewed this Warrant in its entirety, has had an opportunity to obtain the advice of counsel prior to executing this Warrant and fully understands all provisions of the Warrant.  Holder hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Company upon any questions arising under this Warrant.  Holder further agrees to notify the Company upon any change in the contact address indicated below.

 

 

	
Dated:
    	
6/20/2008
    	
 
    	
TIMANE   S.A.R.L.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
/s/   Patrick Rabinzohn
    
	
 
    	
 
    	
By:   Dr. Patrick Rabinzohn
    
	
 
    	
 
    	
Title:   President and CEO
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Address:
    
	
 
    	
 
    	
6   Place Victor Hugo
    
	
 
    	
 
    	
38000   Grenoble
    
	
 
    	
 
    	
France
    

 

8

 

EXHIBIT A

 

INTERMOLECULAR, INC.

 

EXERCISE NOTICE

 

Intermolecular, Inc.

Attention: Stock Administration

 

1.             Exercise of Warrant.  Effective as of today,                       ,           , the undersigned (“Holder”) hereby elects to exercise Holder’s option to purchase                    shares of the Common Stock (the “Shares”) of Intermolecular, Inc. (the “Company”) pursuant to the Common Stock Warrant dated June     , 2008, (the “Warrant”).  Capitalized terms used herein without definition shall have the meanings given in the Warrant.

 

	
Issuance   Date:
    	
 
    	
June     ,   2008
    
	
 
    	
 
    	
 
    
	
Number   of Shares as to which Warrant is Exercised:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Exercise   Price per Share:
    	
 
    	
$1.02
    
	
 
    	
 
    	
 
    
	
Total   Exercise Price:
    	
 
    	
$
    
	
 
    	
 
    	
 
    
	
Certificate   to be issued in name of:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Cash   Payment delivered herewith:
    	
o
    	
 
    	
$
    
	
 
    	
 
    	
 
    	
 
    
	
Other   form of consideration delivered herewith:
    	
o
    	
 
    	
Form of   Consideration:
    
	
 
    	
 
    	
 
    	
$
    

 

2.             Representations of Holder.

 

(a)           The Holder has substantial experience in evaluating and investing in private placement transactions of securities of companies similar to the Company so that the Holder is capable of evaluating the merits and risks of its investment in the Company and has the capacity to protect its interests.

 

(b)           The Holder is acquiring the Shares issuable upon exercise of the Warrant (the “Securities”) for investment for its own account and not with a view to, or for resale in connection with, any distribution thereof.  The Holder understands that the Securities have not been registered under the Act by reason of a specific exemption from the registration provisions of the Act, which depends upon, among other things, the bona fide nature of the investment intent as expressed herein.  In this connection, the Holder understands that, in the view of the U.S. Securities and Exchange Commission (the “SEC”), the statutory basis for such exemption may be unavailable if this representation was predicated solely upon a present intention to hold the Securities for the minimum capital gains period specified under tax statutes, for a deferred sale, for or until an increase or

 

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decrease in the market price of the Securities or for a period of one year or any other fixed period in the future.

 

(c)           The Holder acknowledges that the Securities must be held indefinitely unless subsequently registered under the Act or an exemption from such registration is available.  The Holder is aware of the provisions of Rule 144 (“Rule 144”) promulgated under the Securities Act of 1933, as amended (the “Securities Act”) which permits limited resale of securities purchased in a private placement subject to the satisfaction of certain conditions, including, in case the existence of a public market for the shares, the availability of certain public information about the Company, the resale occurring not less than six months after a party has purchased and paid for the security to be sold, the sale being through a “broker’s transaction” or in a transaction directly with a “market maker” (as provided by Rule 144(f)) and the number of shares or other securities being sold during any three-month period not exceeding specified limitations.

 

(d)           The Holder further understands that at the time the Holder wishes to sell the Securities there may be no public market upon which such a sale may be effected, and that even if such a public market exists, the Company may not be satisfying the current public information requirements of Rule 144, and that in such event, the Holder may be precluded from selling the Securities under Rule 144 unless a) a six month minimum holding period has been satisfied and b) the Holder was not at the time of the sale nor at any time during the three-month period prior to such sale an affiliate of the Company.

 

(e)           The Holder has had an opportunity to discuss the Company’s business, management and financial affairs with its management and an opportunity to review the Company’s facilities. The Holder understands that such discussions, as well as the written information issued by the Company, were intended to describe the aspects of the Company’s business and prospects which it believes to be material but were not necessarily a thorough or exhaustive description.

 

3.             Rights as Stockholder.  Until the stock certificate evidencing Shares purchased pursuant to the exercise of the Warrant is issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to Shares subject to the Warrant, notwithstanding the exercise of the Warrant.  The Company shall issue (or cause to be issued) such stock certificate promptly after the Warrant is exercised.  No adjustment will be made for a dividend or other right for which the record date is prior to the date the stock certificate is issued, except as provided in this Warrant.

 

Holder shall enjoy rights as a stockholder until such time as Holder disposes of the Shares or the Company and/or its assignee(s) exercises the Right of First Refusal (as defined below) hereunder.  Upon such exercise, Holder shall have no further rights as a holder of the Shares so purchased except the right to receive payment for the Shares so purchased in accordance with the provisions of this Agreement, and Holder shall forthwith cause the certificate(s) evidencing the Shares so purchased to be surrendered to the Company for transfer or cancellation.

 

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4.             Holder’s Rights to Transfer Shares.

 

(a)           Company’s Right of First Refusal.  Before any Shares held by Holder or any permitted transferee (each, a “Holder”) may be sold, pledged, assigned, hypothecated, transferred, or otherwise disposed of (each, a “Transfer”), the Company or its assignee(s) shall have a right of first refusal to purchase the Shares proposed to be Transferred on the terms and conditions set forth in this Section (the “Right of First Refusal”).

 

(b)           Notice of Proposed Transfer.  In the event any Holder desires to Transfer any Shares, the Holder shall deliver to the Company a written notice (the “Notice”) stating:  (w) the Holder’s bona fide intention to sell or otherwise Transfer such Shares; (x) the name of each proposed purchaser or other transferee (“Proposed Transferee”); (y) the number of Shares to be Transferred to each Proposed Transferee; and (z) the bona fide cash price or other consideration for which the Holder proposes to Transfer the Shares (the “Offered Price”), and the Holder shall offer such Shares at the Offered Price to the Company or its assignee(s).

 

(c)           Exercise of Right of First Refusal.  Within thirty (30) days after receipt of the Notice, the Company and/or its assignee(s) may elect in writing to purchase all, but not less than all, of the Shares proposed to be Transferred to any one or more of the Proposed Transferees.  The purchase price will be determined in accordance with subsection (d) below.

 

(d)           Purchase Price.  The purchase price (“Purchase Price”) for the Shares repurchased under this Section shall be the Offered Price.  If the Offered Price includes consideration other than cash, the cash equivalent value of the non-cash consideration shall be determined by the Board in good faith.

 

(e)           Payment.  Payment of the Purchase Price shall be made, at the option of the Company or its assignee(s), in cash (by check), by cancellation of all or a portion of any outstanding indebtedness of the Holder to the Company (or, in the case of repurchase by an assignee, to the assignee), or by any combination thereof within thirty (30) days after receipt of the Notice or in the manner and at the times mutually agreed to by the Company and the Holder.

 

(f)            Holder’s Right to Transfer.  If all of the Shares proposed in the Notice to be Transferred are not purchased by the Company and/or its assignee(s) as provided in this Section, then the Holder may sell or otherwise Transfer such Shares to that Proposed Transferee at the Offered Price or at a higher price, provided that such sale or other Transfer is consummated within one hundred twenty (120) days after the date of the Notice and provided further that any such sale or other Transfer is effected in accordance with any applicable securities laws and the Proposed Transferee agrees in writing that the provisions of this Section shall continue to apply to the Shares in the hands of such Proposed Transferee.  If the Shares described in the Notice are not Transferred to the Proposed Transferee within such 120-day period, a new Notice shall be given to the Company, and the Company and/or its assignees shall again be offered the Right of First Refusal as provided herein before any Shares held by the Holder may be sold or otherwise Transferred.

 

(g)           Exception for Certain Family Transfers.  Anything to the contrary contained in this Section notwithstanding, the Transfer of any or all of the Shares during Holder’s lifetime or upon Holder’s death by will or intestacy to Holder’s Immediate Family or a trust for the benefit of Holder’s Immediate Family shall be exempt from the Right of First Refusal.  As used herein,

 

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“Immediate Family” shall mean spouse, lineal descendant or antecedent, father, mother, brother or sister or stepchild (whether or not adopted).  In such case, the transferee or other recipient shall receive and hold the Shares so Transferred subject to the provisions of this Section (including the Right of First Refusal) and there shall be no further Transfer of such Shares except in accordance with the terms of this Section.

 

(h)           Termination of Right of First Refusal.  The Right of First Refusal shall terminate as to all Shares upon a sale of Common Stock of the Company to the general public pursuant to a registration statement filed with and declared effective by the Securities and Exchange Commission under the Securities Act of 1933, as amended (a “Public Offering”).

 

(i)            Transfer Restrictions.  Any transfer or sale of the Share is subject to restrictions on transfer imposed by any applicable state and federal securities laws.  Any Transfer or attempted Transfer of any of the Shares not in accordance with the terms of this Agreement, including the Right of First Refusal provided in this Agreement, shall be void and the Company may enforce the terms of this Agreement by stop transfer instructions or similar actions by the Company and its agents or designees.

 

5.             Tax Consultation.  Holder understands that Holder may suffer adverse tax consequences as a result of Holder’s purchase or disposition of the Shares.  Holder represents that Holder has consulted with any tax consultants Holder deems advisable in connection with the purchase or disposition of the Shares and that Holder is not relying on the Company for any tax advice.

 

6.             Restrictive Legends and Stop-Transfer Orders.

 

(a)           Legends.  Holder understands and agrees that the Company shall cause the legends set forth below or legends substantially equivalent thereto, to be placed upon any certificate(s) evidencing ownership of the Shares together with any other legends that may be required by state or federal securities laws:

 

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE “ACT”) AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR, IN THE OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE THEREWITH.

 

THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AND RIGHT OF FIRST REFUSAL OPTIONS HELD BY THE ISSUER OR ITS ASSIGNEE(S) AS SET FORTH IN THE EXERCISE NOTICE BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH MAY BE

 

A-4

 

OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER.  SUCH TRANSFER RESTRICTIONS AND RIGHT OF FIRST REFUSAL ARE BINDING ON TRANSFEREES OF THESE SHARES.

 

(b)           Stop-Transfer Notices.  Holder agrees that, in order to ensure compliance with the restrictions referred to herein, the Company may issue appropriate “stop transfer” instructions to its transfer agent, if any, and that, if the Company transfers its own securities, it may make appropriate notations to the same effect in its own records.

 

(c)           Refusal to Transfer.  The Company shall not be required (i) to transfer on its books any Shares that have been sold or otherwise transferred in violation of any of the provisions of this Agreement or (ii) to treat as owner of such Shares or to accord the right to vote or pay dividends to any purchaser or other transferee to whom such Shares shall have been so transferred.

 

7.             Charges, Taxes and Expenses.  Except as otherwise provided herein, issuance of certificates for shares of Common Stock upon the exercise of this Warrant shall be made without charge to the Holder for any United States or state of the United States documentary stamp tax or other incidental expense with respect to the issuance of such certificate, all of which taxes and expenses shall be paid by the Company, and such certificates shall be issued in the name of the Holder.

 

8.             Successors and Assigns.  The Company may assign any of its rights under this Agreement to single or multiple assignees, and this Agreement shall inure to the benefit of the successors and assigns of the Company.  Subject to the restrictions on transfer herein set forth, this Agreement shall be binding upon Holder and his or her heirs, executors, administrators, successors and assigns.

 

9.             Interpretation.  Any dispute regarding the interpretation of this Agreement shall be submitted by Holder or by the Company forthwith to the Board, which shall review such dispute at its next regular meeting.  The resolution of such a dispute by the Board shall be final and binding on the Company and on Holder.

 

10.           Governing Law; Severability.  This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware excluding that body of law pertaining to conflicts of law.  Should any provision of this Agreement be determined by a court of law to be illegal or unenforceable, the other provisions shall nevertheless remain effective and shall remain enforceable.

 

11.           Notices.  Any notice required or permitted hereunder shall be in writing and shall be mailed by overnight courier, registered or certified mail, return receipt required, and postage pre-paid, or otherwise delivered by hand or by messenger, addressed as set forth below, or at such other address as the Company or the Holder hereof shall have furnished to the other party.

 

	
If   to the Company:
    	
Intermolecular, Inc.
    
	
 
    	
2865   Zanker Road
    
	
 
    	
San   Jose, CA 95134
    
	
 
    	
Attn:   Chief Financial Officer
    

 

A-5

 

	
If   to the Holder:
    	
Timane   S.a.r.l.
    
	
 
    	
6   Place Victor Hugo, 38000 Grenoble, France
    
	
 
    	
 
    
	
 
    	
Attn:   Dr. Patrick Rabinzohn
    

 

12.           Further Instruments.  The Holder hereby agrees to execute such further instruments and to take such further action as may be reasonably necessary to carry out the purposes and intent of this Agreement.

 

13.           Delivery of Payment.  Holder herewith delivers to the Company the full Exercise Price for the Shares, as well as any applicable withholding tax.

 

14.           Entire Agreement.  The Warrant is incorporated herein by reference.  This Agreement and the Warrant constitute the entire agreement of the parties and supersede in their entirety all prior undertakings and agreements of the Company and Holder with respect to the subject matter hereof.

 

	
Accepted   by:
    	
 
    	
Submitted   by:
    
	
 
    	
 
    	
 
    
	
INTERMOLECULAR, INC.
    	
 
    	
HOLDER
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
 
    	
 
    	
 
    
	
 
    	
David   E. Lazovsky
    	
 
    	
Holder
    
	
 
    	
President   and Chief Executive Officer
    	
 
    	
Timane   S.a.r.l.
    
	
 
    	
 
    	
 
    	
Attn:   Dr. Patrick Rabinzohn
    
	
 
    	
 
    	
6   Place Victor Hugo, 38000 Grenoble, France
    

 

A-6

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