Calgary-based Global Thermoelectric Inc. and Quantum Fuel Systems Technologies Worldwide, Inc. of California announced recently they have settled legal action commenced by Enbridge Inc. challenging the combination of Quantum and Global.
Enbridge owns all outstanding Global Series 2 Preferred Shares, valued recently at about $25 million. The parties have re-affirmed their commitment to commercializing Global’s solid oxide fuel cell (SOFC) technology.
In the settlement, Enbridge agreed to discontinue its legal action challenging the combination of Global and Quantum and agreed not to oppose the combination. Quantum, meanwhile, will guarantee Global’s dividend obligations under the terms of the Global Series 2 Preferred Shares and will cause Global to pay the minimum $500,000 Cdn of annual dividends in cash to the holder of the Series 2 Preferred Shares.
While Enbridge holds the Global Series 2 Preferred Shares, Enbridge will have the contractual right to one director on each of the Quantum board and the Global board following completion of the combination.
The combination agreement, which provided Global with two nominees on the Quantum board immediately following completion of the transaction, was amended to provide one of those two board seats to Enbridge.
Quantum also granted Enbridge the right to require Quantum to purchase all of the Global Series 2 Preferred Shares from Enbridge at a price of $15 million, plus any accrued and unpaid dividends on the shares.
Under terms of the agreement, Enbridge may exercise this “put” right as follows: (1) during the first three years subsequent to the combination in the event of a change of control of Quantum or the bankruptcy or insolvency of Quantum or Global; (2) between the first and third anniversary of the closing of the combination in the event Quantum’s unrestricted consolidated cash position falls below $25 million Cdn; or (3) any time between the third and fourth anniversary of the closing of the combination.
Quantum will assume Global’s obligations under Global’s existing joint development agreement with Enbridge.
For the two-year period following completion of the combination, Quantum committed to spend a minimum of $6 million annually on the development and commercialization of SOFC technology. Quantum’s position is that this financial commitment is within Global’s historical expenditures on SOFC development.
Quantum agreed to use reasonable commercial efforts to fund the commercialization of SOFC systems and technology and to secure additional outside funding to be used for SOFC commercialization.
The combination will be submitted to the shareholders of Quantum and Global for approval.
The transaction is expected to close in the third calendar quarter of 2003 subject to court approval, regulatory approvals and other customary closing conditions and subject to the timing of all such approvals.