SECURITIES AND EXCHANGE COMMISSION,
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
ONSITE ENERGY CORPORATION
(Name of Issuer)
Class A Common Stock, Par Value $.001 Per Share
(Title of Class of Securities)
68284P 10 8
(CUSIP Number)
Rita A. Sharpe
President
Westar Capital, Inc.
818 Kansas Avenue
Topeka, Kansas 66612
-----------------------------------------------------
75-8020
(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)
Copy to:
John K Rosenberg, Esq.
818 Kansas Avenue
Topeka, Kansas 66612
(785)575-6535
-----------------------------------------------------
October 31, 1997
(Date of Event Which Requires Filing of This Statement)
If the filing person has previously filed a statement on Schedule 13G
to report the acquisition which is the subject of this Schedule 13D, and
is filing this schedule because of Rule 13d-1(b)(3)
or (4), check the following box. [ ]
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SCHEDULE 13D
CUSIP NO. 68284P 10 8
(1) Names of reporting persons Westar Capital, Inc.
S.S. or I.R.S. Identification Nos. of above persons 48-1092416
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(2) Check the appropriate box if a member of a group (a) [ ]
(see instructions) (b) [ X ]
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(3) SEC use only
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(4) Source of Funds (see instructions) WC, OO
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(5) Check if disclosure of legal proceedings is required
pursuant to Items 2(d) or 2(e) [ ]
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(6) Citizenship or place of organization State of Kansas
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Number of shares beneficially owned by each reporting person with:
(7) Sole voting power ..............................4,714,500
(8) Shared voting power ....................................0
(9) Sole dispositive power .........................4,714,500
(10) Shared dispositive power .................... 0
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(11) Aggregate amount beneficially owned by each
reporting person 4,714,500
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(12) Check if the aggregate amount in Row (11) excludes
certain shares (see instructions) [ ]
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(13) Percent of class represented by amount in row (11) 30.1%
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(14) Type of reporting person (see instructions) CO
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Item 1. Security and Issuer.
This Statement on Schedule 13D ("Statement") relates to the Class A Common
Stock, par value $.001 per share ("Common Stock"), of Onsite Energy Corporation
("Company"). The principal executive offices of the Company are at 701 Palomar
Airport Road, Suite 200, Carlsbad, California 92009.
Item 2. Identity and Background.
This Statement is filed on behalf of Westar Capital, Inc., a Kansas corporation
("Reporting Person"). The Reporting Person is a holding company that owns
subsidiaries that deal in gathering, processing, and marketing natural gas, as
well as investments in energy-related technology development and monitored
security. The address of the principal business and office of the Reporting
Person is 818 S. Kansas Ave., Topeka, Kansas 66601.
The Reporting Person is a wholly-owned subsidiary of Western Resources, Inc., a
Kansas corporation ("WRI"). Exhibit A hereto, which is incorporated herein by
reference, sets forth the name, the business address and the present principal
occupation or employment (and the name, principal business and address of any
corporation or other organization in which such employment is conducted) of the
executive officers and directors of the Reporting Person and WRI. To the
knowledge of the Reporting Person, each of the persons named on Exhibit A is a
United States Citizen.
During the five years prior to the date hereof, neither the Reporting Person,
WRI nor, to the Reporting Person's knowledge, any executive officer or director
of the Reporting Person or WRI (i) has been convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors) or (ii) has been a party
to a civil proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is subject to a judgment,
decree or final order enjoining future violations of, or prohibiting or
mandating activities subject to, federal or state securities laws or finding any
violation with respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration.
Pursuant to a Plan and Agreement of Reorganization, dated as of October 28,
1997, by and between Westar Energy, Inc., Westar Business Services, Inc. and the
Company, one million seven hundred thousand (1,700,000) shares of Common Stock
of the Company were acquired by the Reporting Person as a result of a
reorganization, pursuant to which the Company acquired all of the shares of
Westar Business Services, Inc., a wholly owned subsidiary of Westar Energy, Inc.
(the Reporting Person's sister corporation), for such shares. In addition,
800,000 shares of Common Stock is held in escrow for the Reporting Person
pending the completion of certain post-closing transactions. If such
transactions are not concluded prior to March 1, 1998, the shares will be
forfeited by the Reporting Person.
Pursuant to a Stock Purchase Agreement, dated as of October 28, 1997, by and
between the Company and the Reporting Person, the Reporting Person purchased on
October 31, 1997 (a) two million (2,000,000) shares of Common Stock for an
aggregate of one million dollars ($1,000,000), and (b) two hundred thousand
(200,000) shares of Series C Convertible Cumulative Preferred Stock
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Shares ("Preferred Stock") for an aggregate of one million dollars ($1,000,000)
with available cash. Each share of Preferred Stock may be converted into five
shares of Common Stock of the Company.
The foregoing description of the Plan and Agreement of Reorganization and the
Stock Subscription Agreement is a summary of certain of their provisions and
reference is made to a copy of each which are attached hereto as Exhibits B and
C, respectively, and incorporated herein by reference for all of their terms and
conditions
Item 4. Purpose of Transaction.
The Reporting Person acquired all of the Common Stock held by it and the right
to acquire the Preferred Stock in its normal course of business and in
connection with an investment by the Reporting Person in the capital stock of
the company and a reorganization of Westar Business Services, Inc. as a result
of negotiations between the Reporting Person and the Company and open market
purchases. By reason of its stock ownership, the right to appoint directors to
the Company, and certain rights granted to it under the Stock Subscription
Agreement, Plan and Agreement of Reorganization, Stockholders Agreement,
Registration Rights Agreement, and Certificate of Designations, (as more fully
described in Item 6), the Reporting Person may be in a position to influence
whether the Company engages in certain corporate transactions including those
transactions enumerated under paragraphs (a) through (j) of Item 4 of Schedule
13d.
Rita A. Sharpe, Chairman and President of the Reporting Person is a director of
the Company and as such may be in a position to influence whether the Company
engages in certain corporate transactions including those transactions
enumerated under paragraphs (a) through (j) of Item 4 of Schedule 13d.
The Reporting Person shall continually review its ownership in the Company and,
based on its evaluation of market and economic conditions, applicable regulatory
requirements, the Reporting Person's contractual obligations entered into in
connection with such investment, the Company's business prospects and future
developments, it may from time to time determine to modify its investment in the
Company through any available means, including open market purchases or sales or
privately negotiated transactions or actions of the type enumerated in clauses
(a) through (j) of Item 4 of Schedule 13D.
Except as indicated in this Statement or as may result from the execution of the
Stock Subscription Agreement, the Stockholders Agreement, the Plan and Agreement
of Reorganization or the Certificate of Designation (each as described in Item
6), the Reporting Person currently has no specific plans or proposals that
relate to or would result in any of the matters described in subparagraphs (a)
through (j) of Item 4 of Schedule 13D.
Item 5. Interest in Securities of the Issuer.
Based on the Company's Form 10-KSB for the year ended June 30, 1997, the Company
had a total of 10,944,172 shares of Common Stock outstanding as of June 30,
1997. As a result of a purchase of 2,000,000 shares of Common Stock pursuant to
the Stock Purchase Agreement, the acquisition of 1,700,000 shares of Common
Stock pursuant to the Plan and Agreement of Reorganization, the right to acquire
1,000,000 shares of Common Stock upon conversion of the Preferred Shares, and
14,500 shares of Common Stock acquired by the Reporting Person prior to the date
hereof, as
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described below. The Reporting Person beneficially owns 4,714,500 shares of
Common Stock, constituting 30.1% of the Company's total outstanding Common
Stock, as determined in accordance with Rule 13d-3 under the Securities Exchange
Act of 1934, as amended ("Exchange Act"), has the sole power to vote or direct
the vote of 4,714,500 shares of Common Stock, and has sole power to dispose of
4,714,500 shares of Common Stock.
Since September 1, 1997, the Reporting Person has purchased 14,500 shares of
Common Stock of the Company in open market transactions. Set forth below is a
table identifying and describing all such transactions:
Common Shares Price per Share Date of Purchase
7,500 .24 9/18/97
7,500 .26 9/18/97
In addition, 800,000 shares of Common Stock is held in escrow for the Reporting
Person pending the completion of certain post-closing transactions. If such
transactions are not concluded prior to March 1, 1998, the shares will be
forfeited by the Reporting Person.
Except as set forth in this Statement, neither the Reporting Person, WRI nor, to
the best of the Reporting Person's knowledge, any executive officer or director
of the Reporting Person or WRI beneficially owns any Common Stock or has engaged
in any transaction in any such shares during the sixty day period immediately
preceding the date hereof.
Item 6. Contracts, Arrangements, Understandings or Relationships
With Respect to Securities of the Issuer.
On October 28, 1997, the Company, the Reporting Person, and others executed the
following agreements related to this transaction:
a. a Stock Subscription Agreement, dated as of October 28, 1997 (the "Stock
Subscription Agreement"),
b. a Plan and Agreement of Reorganization, dated as of October 28, 1997
(the "Plan and Agreement"),
c. a Stockholders Agreement, dated as of October 28, 1997 (the
"Stockholders Agreement"), and
d. a Registration Rights Agreement, dated as of October 28, 1997 (the
"Registration Rights Agreement"),
for the purposes, among others, of assuring continuity in management and
ownership of the Company. Under terms of the Stock Subscription Agreement, the
Reporting Person will limit its ownership of Preferred and Common Stock ("Voting
Stock") in the Company to 45% of the outstanding Voting Stock on a fully diluted
basis for a period of five years from the purchase of the Voting Stock (October
31, 1997) unless the Reporting Person receives the Company's permission to
exceed such limit. In addition, on October 24, 1997, the Company filed with the
Secretary of
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State of Delaware, a Certificate of Designations related to the Preferred Stock
which provides the Reporting Person certain rights as described below.
Pursuant to the terms of the Stock Subscription Agreement, the Reporting Person
has preemptive rights to purchase its pro rata share of any New Security (as
defined in the Stock Subscription Agreement) offerings of the Company at the
Average Closing Price (as defined in the Stock Subscription Agreement) for such
shares except that, prior to December 31, 1998, in the case of a purchase of
shares in connection with the Company's acquisition of another corporation or
substantially all of its assets, the price to be paid by the Reporting Person
shall not be less than $1.00 nor more than $2.00 per share. In the event that a
third party makes an unsolicited bona fide publicly announced offer to acquire
control of the Company pursuant to a tender offer, merger, consolidation, share
exchange, purchase of a substantial portion of assets, business combination or
other similar transaction (a "Third Party Offer") and the Company thereafter (i)
issues a statement recommending the Third Party Offer to its shareholders or
(ii) the Company either issues a statement not recommending the Third Party
Offer or takes no position with respect to such offer but is required by a court
to furnish the party making the Third Party Offer a list of shareholders of the
Company, the Reporting Person may, without being in violation of the 45%
standstill agreement, make a counter-offer to acquire the Company. The Reporting
Person also has the right, exercisable between June 30, 1998 and December 31,
1998, to purchase an additional two million (2,000,000) shares of Common Stock
at the Average Closing Price, but not below $1.00 or above $2.00 per share.
Pursuant to the terms of the Stockholders Agreement, the Reporting Person has
the right to nominate a number of directors equal to the number to which it
would be entitled to nominate if all of its stock in the Company were voted
cumulatively. Prior to conversion of the Preferred Stock to Common Stock, the
number of such directors is reduced by one. The Stockholders other than the
Reporting Person are required to vote in favor of the Reporting Person's
nominees and the Reporting Person is required to vote in favor of the nominees
of the other Stockholders. The Stockholders Agreement terminates after five
years or in the event the Reporting Person's stockholdings in the Company fall
below 10%.
The Common Shares purchased by the Reporting Person under the Stock Subscription
Agreement and the Plan and Agreement of Reorganization (including Common Stock
issued upon conversion of the Preferred Shares) are not registered under the
Securities Act of 1933, as amended. The Company and the Reporting Person have
entered into a Registration Rights Agreement dated October 21, 1997 granting the
Reporting Person three demand registrations and unlimited piggyback registration
rights with respects to the Common Shares (including Common Stock issued upon
conversion of the Preferred Shares).
Pursuant to the Certificate of Designation for the Preferred Stock, upon the
failure of the Company to pay quarterly dividends for any four quarters (a
"Default Event") and for the duration of the Default Event, the Reporting
Person, as the holder of the Preferred Stock prior to conversion, in addition to
any other voting rights it may have, shall be entitled to vote (voting as a
class by a majority of the outstanding shares thereof) for the election to the
Board of Directors of the Company of such number of members thereof as equals at
any given time a majority of the number of members of the Board of Directors.
Each share of Preferred Stock is convertible at any time at the option of the
Reporting Person into five fully paid and nonassessable shares of Common Stock.
At the option of the Company, beginning six months after issuance of the
Preferred Stock and ending two years after such issuance, the Preferred Stock
must be converted to Common Stock upon demand by the
Page 6 of 7 Pages
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Company to the Reporting Person issued no later than 5 days after any period of
20 consecutive trading days in which the Company's Common Stock trades above
$2.00 per share.
The foregoing description of the Plan and Agreement of Reorganization, Stock
Subscription Agreement, Stockholders Agreement, Registration Rights Agreement,
and Certificate of Designations are a summary of certain of their provisions and
reference is made to a copy of such Agreements which are attached hereto as
Exhibit B, C, D, E, and F, respectively.
Except as described in this Statement neither the Reporting Person, WRI nor, to
the best of the Reporting Person's knowledge, any executive officer or director
of the Reporting Person or WRI has any contract, arrangement, understanding or
relationship with one or more security holder of the Company or others, with
respect to the purchase, holding, voting or disposition of Common Shares or
other securities of the Company which are convertible or exercisable into Common
Shares. Each of such persons reserves the right to enter into any such contract,
arrangement, understanding or relations in the future.
Item 7. Material to be Filed as Exhibits.
Exhibit A: List of Officers and Directors of the Reporting Person and
Western Resources, Inc.
Exhibit B: Plan and Agreement of Reorganization, dated as of October 28, 1997 by
and among the Reporting Party, the Company, Westar Business Services, Inc., and
Westar Energy, Inc.
Exhibit C: Stock Subscription Agreement, dated as of October 28, 1997, by and
among the Reporting Person and the Company.
Exhibit D: Stockholders Agreement, dated as of October 28, 1997 by and among the
Reporting Party, Richard T. Sperberg, William M. Gary, III, Proactive Partners,
L.P., and Lagunitas Partners, L.P.
Exhibit E: Registration Rights Agreement, dated October 28, 1997, between the
Company and the Reporting Person.
Exhibit F: Certificate of Designations for Preferred Stock.
After reasonable inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
WESTAR CAPITAL, INC.
By: /s/ Rita A. Sharpe
Rita A. Sharpe
President
Dated: November 10, 1997
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Executive Officers and Directors of
Westar Capital, Inc. ("Westar") and
Western Resources, Inc. ("WRI")
Name Position Address
Rita A. Sharpe President, Westar 1112 Oak Tree Drive
Lawrence, KS 66049
Marilyn K. Dalton Secretary and Treasurer, 3321 SW Jardine Court
Westar Topeka, Kanas 66611
John E. Hayes, Chairman of the Board, 1535 SW Pembroke Lane
Jr. Chief Executive Officer, Topeka, Kansas 66604
WRI
David C. Wittig President and Director, WRI #5, Westboro Place
Topeka, Kansas 66604
Steven L. Kitchen Executive Vice President 10047 SW 101st Street
and Chief Financial Auburn, Kansas 66042
Officer, WRI
Director, Westar
Carl M. Koupal Executive Vice President, 3768 SW Clarion Park Drive
Chief Administrative Topeka, Kansas 66610
Officer , WRI
John K. Rosenberg Executive Vice President 5450 SW Fairlawn
and General Counsel, WRI Topeka, Kansas 66610
Jerry D. Controller, WRI 3624 SE Arrowhead Drive
Courington Director, Westar Topeka, Kansas 66605
Frank J. Becker Director, WRI 4408 Heritage Drive
Lawrence, Kansas 66047
Gene A. Budig Director, WRI 40 Mercer Street
Princeton, New Jersey 08540
C. Q. Chandler Director, WRI 1515 Foliage Court
Wichita, Kansas 67206
Thomas R. Director, WRI 9215 Killarney
Clevenger Wichita, Kansas 67206
John C. Dicus Director, WRI 1524 Lakeside Drive
Topeka, Kansas 66604
David H. Hughes Director, WRI 2110 W. 67th Terrace
Shawnee Mission, Kansas
66208
Russell W. Meyer, Director, WRI 600 Tara Court
Jr. Wichita, Kansas 67206
John H. Robinson Director, WRI 3223 W. 67th Street
Shawnee Mission, Kansas
66208
Louis W. Smith Director, WRI 11705 Brookwood
Leawood, Kansas 66211
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PLAN AND AGREEMENT OF REORGANIZATION
This PLAN AND AGREEMENT OF REORGANIZATION (the "Agreement") is entered
into as of this 28th day of October, 1997, by and among Onsite Energy
Corporation, a Delaware corporation ("Onsite"), Westar Business Services, Inc.,
a Kansas corporation ("WBS"), Westar Energy, Inc. ("Westar Energy"), a Kansas
corporation and the sole shareholder of WBS), and Westar Capital, Inc., a Kansas
corporation ("Westar Capital").
PLAN OF REORGANIZATION
The transaction contemplated by this Agreement is intended to be a "tax
free" exchange (the "Reorganization") as contemplated by the provisions of
Section 368(a)(1)(B) of the Internal Revenue Code of 1986, as amended. However,
no representation is made nor has an opinion been obtained that the transaction
qualifies for Section 368(a)(1)(B) treatment. Onsite will offer to acquire 100%
of WBS's issued and outstanding capital stock, consisting solely of Common
Stock, no par value (the "WBS Shares"), in exchange for shares of Onsite's
voting common stock, par value $0.001 per share. Upon the consummation of the
transfer of WBS Shares and the issuance of the Exchange Stock to Westar Capital
as set forth in Sections 1 and 2 herein below, WBS will be a wholly-owned
subsidiary of Onsite.
AGREEMENT
SECTION 1
TRANSFER OF WBS SHARES
1.1 Delivery of WBS Shares. Westar Energy, the sole shareholder of WBS
as of the closing date as such term is defined in Section 3.1 hereof (the
"Closing Date"), shall transfer, assign, convey and deliver to Onsite, at the
Closing, as such term is defined in Section 3.1 hereof (the "Closing"),
certificates representing 100% of the WBS Shares. The transfer of all WBS Shares
shall be made free and clear of all liens, mortgages, pledges, encumbrances or
charges, whether disclosed or undisclosed, except as Westar Energy and Onsite
shall have otherwise agreed in writing prior to the Closing.
SECTION 2
ISSUANCE OF ONSITE STOCK
TO WESTAR CAPITAL
2.1 Issuance and Delivery of Exchange Stock. As consideration for the
transfer, assignment, conveyance and delivery of the WBS Shares hereunder, on
the Closing Date, Onsite shall deliver the "Exchange Stock" as follows:
(a) to Westar Capital, 1.7 million shares of Onsite voting
common stock, in exchange for all shares of WBS Common Stock
outstanding immediately prior to the Closing Date; and
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(b) to Bartel Eng Linn & Schroder as Escrow Agent, 800,000
shares of Onsite voting common stock to be delivered to Westar
Capital in the event that WBS has executed a contract with (i)
the Kansas City, Kansas School District (KCK) for a minimum of
$3 million, or (ii) Health Midwest for a minimum of $2
million, before March 1, 1998, pursuant to the Escrow
Agreement and Instructions attached hereto as Exhibit A.
2.2 No Lien or Encumbrances on Exchange Stock. The issuance of the
Exchange Stock shall be made free and clear of all liens, mortgages, pledges,
encumbrances or charges, whether disclosed or undisclosed, except as Westar
Energy and Onsite shall have otherwise agreed in writing. As provided herein and
immediately prior to the Closing Date, WBS shall have issued and outstanding one
thousand (1,000) shares of WBS Common Stock.
2.3 Restrictions on the Exchange Stock. None of the Exchange Stock
issued to Westar Capital shall, at the time of Closing, be registered under
federal or state securities laws but, rather, the Exchange Stock shall be issued
pursuant to an exemption therefrom. All of such shares shall bear a legend
worded substantially as follows:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR OFFERED FOR
SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE
SECURITIES UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAW OR AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION
IS NOT REQUIRED."
Onsite's transfer agent shall annotate its records to reflect the
restrictions on transfer embodied in the legend set forth above. There shall be
no requirement that Onsite register the Exchange Stock under the Securities Act
of 1933, as amended (the "Securities Act"), except as set forth in the
Registration Rights Agreement between Westar Capital and Onsite of even date
herewith, nor shall WBS, Westar Energy or Westar Capital be required to register
any WBS Shares under the Securities Act.
2.4 Stockholders' Agreement. The Exchange Stock shall also be subject
to certain restrictions as set forth in the Stockholders Agreement dated October
28, 1997, between certain Onsite Shareholders and Westar Capital, and shall
contain a legend to that effect.
1039(6).nks November 10, 1997
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SECTION 3
CLOSING
3.1 Closing of Transaction; Closing Date. The Closing of the
Reorganization (the "Closing") shall take place on October 31, 1997, (the
"Closing Date") provided all of the conditions precedent provided for in Section
7 shall have been satisfied or waived and all deliveries provided for in
Sections 3.2 and 3.3 have been made. The Closing shall take place simultaneously
at the offices of Bartel Eng Linn & Schroder, 300 Capitol Mall, Suite 1100,
Sacramento, California, at the offices of WBS, 818 Kansas Avenue, Topeka,
Kansas, and at the offices of Onsite, 701 Palomar Airport Road, Suite 200,
Carlsbad, California.
3.2 Deliveries on the Closing Date by WBS and Westar Energy. WBS and
Westar Energy shall deliver or cause to be delivered to Onsite the following on
or before the Closing Date:
(a) a copy of the minutes and/or consent of WBS's Board of
Directors authorizing WBS to close the transaction described by this
Agreement;
(b) a Certificate of Good Standing for WBS issued not more
than thirty days prior to the Closing by the Kansas Secretary of State;
(c) certified copies of WBS's Articles and Bylaws, as amended
to the Closing Date;
(d) copies of WBS's unaudited financial statements for the
years ended December 31, 1995 and December 31, 1996, and unaudited
financial statements for the period ended September 30, 1997, certified
to be true and complete copies;
(e) share certificates representing all of the shares of WBS
Common Stock, sufficiently endorsed by stock powers for transfer to
Onsite pursuant to the terms and conditions of this Agreement;
(f) a certified resolution of Westar Energy forgiving that
portion of that certain note by and between WBS and Westar Energy for
which WBS has responsibility for repayment or liability;
(g) copies of the resignation letters of the directors and
officers of WBS;
(h) a certificate signed by WBS's President dated as of the
Closing Date stating that all of WBS's representations and warranties
set forth in this Agreement
1039(6).nks November 10, 1997
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are true and correct and that all of the conditions of this Agreement applicable
to the Closing Date have been satisfied or waived;
(i) a certificate signed by the President of Westar Energy
dated as of the Closing Date stating that all of the representations
and warranties by WBS and/or Westar Energy set forth in this Agreement
are true and correct and that all of the conditions of this Agreement
applicable to the Closing Date have been satisfied or waived;
(j) a certificate signed by the President of Westar Capital
dated as of the Closing Date stating that all of the representations
and warranties by Westar Capital set forth in this Agreement are true
and correct and that all of the conditions of this Agreement applicable
to the Closing Date have been satisfied or waived; and
(k) a copy of the Non-Compete Agreement between Western
Resources, Inc. and Onsite, attached hereto as Exhibit B, executed by
Western Resources, Inc.
3.3 Deliveries on the Closing Date by Onsite to Westar Energy. Onsite
shall deliver, or cause to be delivered, to Westar Energy the following on or
before the Closing Date:
(a) Share certificates evidencing the appropriate number of
shares of Onsite Common Stock in accordance with the provisions of
Section issued in the name of Westar Capital;
(b) a copy of the minutes and/or consents of Onsite's Board of
Directors authorizing Onsite to take the necessary steps toward Closing
the transaction described by this Agreement;
(c) a copy of a Certificate of Good Standing for Onsite issued
not more than thirty days prior to the Closing by the Delaware
Secretary of State;
(d) a certificate signed by Onsite's Chief Executive Officer
dated as of the Closing Date stating that all of Onsite's
representations and warranties set forth in this Agreement are true and
correct and that all of the conditions of this Agreement applicable to
the Closing Date have been satisfied or waived; and
(e) an opinion of counsel in the form attached hereto as
Exhibit C.
(f) a copy of the Purchase Agreement between Onsite and Westar
Energy in the form attached hereto as Exhibit D.
1039(6).nks November 10, 1997
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3.4 Filings; Cooperation. WBS, Westar Energy, Westar Capital and Onsite
shall, on request and without further consideration, cooperate with one another
by furnishing or using their best efforts to cause others to furnish any
additional information and/or executing and delivering or using their best
efforts to cause others to execute and deliver any additional documents and/or
instruments, and doing or using their best efforts to cause others to do any and
all such other things as may be reasonably required by the parties or their
counsel to consummate or otherwise implement the transactions contemplated by
this Agreement.
SECTION 4
REPRESENTATIONS AND WARRANTIES BY WBS, WESTAR ENERGY,
AND WESTAR CAPITAL
4.1 Representations and Warranties of WBS and Westar Energy. Subject to
the schedules attached hereto and incorporated herein by this reference (which
schedules shall be acceptable to Onsite), WBS and Westar Energy, jointly and
severally, represent and warrant to Onsite as follows:
(a) Organization and Good Standing. WBS is a corporation duly
organized, validly existing and in good standing under the laws of Kansas, and
has all requisite power and authority to own or lease properties and to carry on
business as now being conducted and as proposed to be conducted. WBS is duly
qualified and in good standing in each jurisdiction in which the nature of its
properties, assets or business requires such qualification.
(b) Capitalization. WBS's authorized capital stock consists of
1,000 shares, all of which are Common Stock, no par value, of which all are
issued and currently outstanding or will be issued and outstanding as of the
Closing Date. All of such outstanding shares are validly issued, fully paid and
non-assessable. WBS does not have any other equity securities or instruments
convertible into equity securities authorized, issued or outstanding.
(c) WBS Authority to Execute Agreement. The shareholders of
WBS, if required, and WBS's board of directors, pursuant to the power and
authority legally vested in them, have duly authorized the execution and
delivery by WBS of this Agreement, and have duly agreed to each of the
transactions hereby contemplated. WBS has the power and authority to execute and
deliver this Agreement, to approve the transactions hereby contemplated and to
take all other actions required to be taken by it pursuant to the provisions
hereof. WBS has taken all actions required by law, its Articles of
Incorporation, as amended, or otherwise to authorize the execution and delivery
of this Agreement. This Agreement is valid and binding upon WBS in accordance
with its terms. Neither the execution and delivery of this Agreement nor the
consummation of the transactions
1039(6).nks November 10, 1997
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contemplated hereby will constitute a violation or breach of the Articles of
Incorporation, as amended, or the Bylaws, as amended, of WBS, or any agreement,
stipulation, order, writ, injunction, decree, law, rule or regulation applicable
to WBS.
(d) Westar Energy Authority to Execute Agreement. The
shareholders of Westar Energy, if required, and Westar Energy's board of
directors, pursuant to the power and authority legally vested in them, have duly
authorized the execution and delivery of this Agreement, and have duly agreed to
each of the transactions hereby contemplated. Westar Energy has the power and
authority to execute and deliver this Agreement, to approve the transactions
hereby contemplated and to take all other actions required to be taken by it
pursuant to the provisions hereof. Westar Energy has taken all actions required
by law, its Articles of Incorporation, as amended, or otherwise to authorize the
execution and delivery of this Agreement. This Agreement is valid and binding
upon Westar Energy in accordance with its terms. Neither the execution and
delivery of this Agreement nor the consummation of the transactions contemplated
hereby will constitute a violation or breach of the Articles of Incorporation,
as amended, or the Bylaws, as amended, of Westar Energy, or any agreement,
stipulation, order, writ, injunction, decree, law, rule or regulation applicable
to Westar Energy.
(e) Subsidiaries. WBS has no subsidiaries and no other
material investments, directly or indirectly, or other material financial
interest in any other corporation or business organization, joint venture or
partnership of any kind whatsoever.
(f) Stock Free from Encumbrances. Westar Energy is the legal
and beneficial owner of the WBS Shares, free of any liens and encumbrances, and
no other party has any right to assert an interest, inchoate or otherwise, in
any of the WBS Shares.
(g) Financial Statements. WBS's financial statements are true,
complete and correct in all material respects and have been prepared in
accordance with past practices, applied on a basis consistent with prior
accounting periods, present fairly the financial position and the results of
operations and changes in financial positions for the periods indicated and have
accurately recorded all material revenues and expenses of WBS on an accrual
basis as reflected in the books and records of WBS. The books of account of WBS
fully and fairly reflect all of the material transactions of WBS.
(h) Marketable Title. WBS has good and marketable title to all
of its material properties and assets, free and clear of any material
imperfection of title, security interest, lien, claim or encumbrance of any kind
except for the lien of taxes not yet due and payable, and assets or properties
held under valid and subsisting leases which are in full force and effect and
with which WBS is not in default with or without notice or lapse of time.
1039(6).nks November 10, 1997
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(i) Use of Westar Name. On the Closing Date, WBS shall change
its name to a name of Onsite's choosing which does not include the word
"Westar." After Closing, WBS's right to use the names "Westar," "Westar Business
Services," "Westar Business Services, Inc." or any service name or mark related
to Westar Energy or Western Resources, Inc. shall be controlled by the
Transition Agreement between Onsite, WBS, Westar Energy, Westar Capital and
Western Resources, Inc., attached hereto as Exhibit E.
(j) Absence of Certain Changes. Since the date of the most
recent available unaudited financial statements specified in Section 4.1(g)
above, to WBS's knowledge there has been no material change in WBS's financial
condition, assets or liabilities.
(k) Absence of Undisclosed Liabilities. Except as disclosed on
WBS's most recent available balance sheet and, to WBS's knowledge, WBS has no
other liabilities, other than those incurred in the ordinary course of business,
secured or unsecured and whether accrued, absolute, contingent, direct, indirect
or otherwise, which would be individually, or in the aggregate, material to the
results of operations or financial condition of WBS as of the Closing Date.
(l) Employee Obligations. Except as provided for in Section
8.1(g), WBS has no liabilities to any of its employees or any governmental
authority or private insurer, in connection with employee compensation and
benefits, including but not limited to: (i) unpaid wages/salary, including
unpaid overtime compensation whether accrued, absolute, contingent, direct,
indirect or otherwise, (ii) participation in WBS's medical and dental plans,
(iii) long-term disability plan payments, and (iv) workers' compensation
expenses, including settlement amounts.
(m) Litigation. There are no outstanding orders, judgments,
injunctions, awards or decrees of any court, governmental or regulatory body or
arbitration tribunal against WBS or its properties. There are no actions, suits
or proceedings pending, or, to the knowledge of WBS, threatened against or
affecting WBS, any of its officers or directors relating to their positions as
such, or any of its properties, at law or in equity, or before or by any
federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, in connection with the
business, operations or affairs of WBS which might result in any material
adverse change in the operations or financial condition of WBS, or which might
prevent or materially impede the consummation of the transactions under this
Agreement.
(n) Tax Matters. All federal, foreign, state and local tax
returns, reports and information statements required to be filed by or with
respect to the activities of WBS have been filed for all the years and periods
for which such returns and statements were due, including extensions thereof.
WBS has not incurred any liability with respect to any federal,
1039(6).nks November 10, 1997
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foreign, state or local taxes except in the ordinary and regular course of
business. WBS is not delinquent in the payment of any such tax or assessment,
and no deficiencies for any amount of such tax have been proposed or assessed.
(o) Compliance with Laws. To WBS's knowledge, the operations
and affairs of WBS do not violate any law, ordinance, rule or regulation
currently in effect, or any order, writ, injunction or decree of any court or
governmental agency, the violation of which would substantially and adversely
affect the business, financial condition or operations of WBS.
(p) Operating Authorities. To WBS's knowledge, WBS has all
material operating authorities, governmental certificates and licenses, permits,
authorizations and approvals ("Permits") required to conduct its business as
presently conducted. Except as otherwise disclosed in this Agreement, during the
last two years, there has not been any notice or adverse development regarding
such Permits; such Permits are in full force and effect; no material violations
are or have been recorded in respect of any Permit; and no proceeding is pending
or, to WBS's knowledge, threatened to revoke or limit any Permit.
(q) Books and Records. The books and records of WBS are
complete and correct, are maintained in accordance with good business practice
and accurately present and reflect, in all material respects, all of the
transactions therein described, and there have been no transactions involving
WBS which properly should have been set forth therein and which have not been
accurately so set forth.
(r) Minute Book. The Minute Book of WBS as delivered to Onsite
contains complete and correct records of all meetings and other corporate
actions of the Boards of Directors (including any committee established by the
Directors) and the shareholders of WBS, as maintained by it, and is maintained
pursuant to the requirements of the jurisdictions of its incorporation.
(s) Contracts. A true, correct, and complete copy of each of
WBS's active contracts (the "Contracts") is included in the business records
located at WBS's business. WBS has duly performed in all material respects all
obligations to be performed by it under the Contracts at or prior to the Closing
Date and has received no notice from any other party thereto that it is in
default in any material respect under any of its obligations thereunder. No
other party to any Contract is in default in any material respect under any of
its obligations thereunder. To WBS's knowledge, no condition or state of facts
exists that with notice or the passage of time, or both, would constitute a
default by WBS under any Contract, and each Contract is in full force and effect
and enforceable by WBS against all other parties thereto in all material
respects.
1039(6).nks November 10, 1997
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(t) Finder's Fee. WBS and Westar Energy are not liable or
obligated to pay any finder's, agent's, broker's or consultant's fee arising out
of or in connection with this Agreement or the transactions contemplated by this
Agreement, and WBS and Westar Energy have done nothing to cause Onsite to incur
any liability to any party for any finder's, agent's, broker's or consultant's
fee arising out of or in connection with this Agreement or the transactions
contemplated by this Agreement.
4.2 Representations and Warranties of Westar Capital.
Westar Capital represents and warrants to Onsite as follows:
(a) Westar Capital Authority to Execute Agreement. The
shareholders of Westar Capital, if required, and Westar Capital's board of
directors, pursuant to the power and authority legally vested in them, have duly
authorized the execution and delivery of this Agreement, and have duly agreed to
each of the transactions hereby contemplated. Westar Capital has the power and
authority to execute and deliver this Agreement, to approve the transactions
hereby contemplated and to take all other actions required to be taken by it
pursuant to the provisions hereof. Westar Capital has taken all actions required
by law, its Articles of Incorporation, as amended, or otherwise to authorize the
execution and delivery of this Agreement. This Agreement is valid and binding
upon Westar Capital in accordance with its terms. Neither the execution and
delivery of this Agreement nor the consummation of the transactions contemplated
hereby will constitute a violation or breach of the Articles of Incorporation,
as amended, or the Bylaws, as amended, of Westar Capital, or any agreement,
stipulation, order, writ, injunction, decree, law, rule or regulation applicable
to Westar Capital.
(b) Purchase Entirely for Own Account. This Agreement is made by
---------------------------------
Onsite in reliance upon Westar Capital's representation to Onsite, which by
Westar Capital's execution of this Agreement Westar Capital hereby confirms,
that the Exchange Stock to be issued to Westar Capital hereunder will be
acquired for investment purposes for Westar Capital's own account, not as a
nominee or agent, and not with a view to the resale or distribution of any part
thereof in violation of applicable federal and state securities laws. By
executing this Agreement, Westar Capital further represents that Westar Capital
does not have any contract, undertaking, agreement or arrangement with any
person to sell, transfer or grant participations to such person or to any third
person, with respect to any of the Exchange Stock. A transfer of the Exchange
Stock to an Affiliate by Westar Capital shall not be deemed to be a violation
of this provision. As used herein, the term "Affiliate" shall mean, with
respect to any person, any other person that directly or indirectly through one
or more intermediaries controls or is controlled by or is under common control
with such person.
(c) Reliance Upon Westar Capital's Representations.
Westar Capital understands that the Exchange Stock has not been registered under
the Securities Act on the
1039(6).nks November 10, 1997
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grounds that the transactions contemplated by this Agreement and the issuance of
the Exchange Stock is exempt from registration under the Securities Act pursuant
to Section 4(2) thereof, and Regulation D promulgated thereunder, and that the
Onsite's reliance on such exemption is predicated on Westar Capital's
representations set forth herein.
(d) Receipt of Information. Westar Capital has received
information and had the opportunity to ask questions of Onsite management and
has considered such information in evaluating the terms and conditions of the
offering of the Exchange Stock, and the business, properties, prospects and
financial condition of Onsite, and in deciding to accept the Exchange Stock. The
foregoing, however, does not limit or modify the representations and warranties
of Onsite in Section 5.1 hereof or the right of Westar Capital to rely thereon.
(e) Investment Experience. Westar Capital represents that it
is experienced in evaluating and investing in securities of companies and
acknowledges that it is able to fend for itself, can bear the economic risk of
the investment, and has such knowledge and experience in financial and business
matters that it is capable of evaluating the merits and risks of the investment
in the Exchange Stock. WBS, Westar Energy and Westar Capital further represent
that none of them has been organized solely for the purpose of acquiring the
Exchange Stock.
(f) Accredited Investor. Westar Capital represents that it is
an "accredited investor" as that term is defined in Regulation D, 17 C.F.R.
230.501(a).
(g) Restricted Securities. Westar Capital understands that the
Exchange Stock issued, or to be issued, hereunder may not be sold, transferred,
or otherwise disposed of without registration under the Securities Act or an
exemption therefrom, and that in the absence of an effective registration
statement covering the Exchange Stock, or an available exemption from
registration under the Securities Act, the Exchange Stock must be held
indefinitely. In particular, Westar Capital is aware that the Exchange Stock may
not be sold pursuant to Rule 144, 17 C.F.R. 230.144, unless all of the
conditions of that Rule are met.
4.3 Disclosure. WBS and Westar Energy, jointly and severally, have
disclosed all events, conditions and facts materially affecting the business and
prospects of WBS. No representation or warranty by WBS or Westar Energy in this
Agreement, nor any statement or certificate furnished or to be furnished to
Onsite by WBS or Westar Energy pursuant hereto, or in connection with the
transactions contemplated hereby, knowingly contains or will contain any untrue
statement of a material fact, or omits or will omit to state a material fact
necessary to make the statements contained therein not misleading.
1039(6).nks November 10, 1997
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SECTION 5
REPRESENTATIONS AND WARRANTIES BY ONSITE
5.1 Representations and Warranties of Onsite. Onsite represents and
warrants to WBS as follows:
(a) Organization and Good Standing. Onsite is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has full corporate power and authority to own or lease its
properties and to carry on its business as now being conducted and as proposed
to be conducted.
(b) Capitalization. Onsite's authorized capital stock consists
of (a) 24 million shares of Common Stock, 0.001 par value, of which 23,999,000
are designated Class A Common Stock, of which 12,944,172 are currently
outstanding and held by approximately 217 shareholders of record, and (b) one
million shares of preferred stock, $0.001 par value, of which two hundred
thousand (200,000) are issued and currently outstanding.
(c) Authority to Execute Agreement. The Board of Directors of
Onsite, pursuant to the power and authority legally vested in it, has duly
authorized the execution and delivery by Onsite of this Agreement, and has duly
agreed to each of the transactions hereby contemplated. Onsite has the power and
authority to execute and deliver this Agreement, to approve the transactions
hereby contemplated and to take all other actions required to be taken by it
pursuant to the provisions hereof. Onsite has taken all actions required by law,
its Articles of Incorporation, as amended, or otherwise to authorize the
execution and delivery of this Agreement. This Agreement is valid and binding
upon Onsite. Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will constitute a violation
or breach of the Articles of Incorporation, as amended, or the Bylaws, as
amended, of Onsite, or any agreement, stipulation, order, writ, injunction,
decree, law, rule or regulation applicable to Onsite.
(d) Subsidiaries. Except as set forth in Schedule 5.1(d),
Onsite has no subsidiaries, no other investments, directly or indirectly, and no
other financial interest in any other corporation or business organization,
joint venture or partnership of any kind whatsoever.
(e) Financial Statements. Onsite has delivered to WBS, prior
to the Closing Date, copies of Onsite's audited financial statements for each of
the three years ended June 30, 1995, 1996 and 1997, which are true and complete
and have been prepared in accordance with generally accepted accounting
principles applied on a basis consistent with past practice.
1039(6).nks November 10, 1997
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(f) Absence of Certain Changes. Since the audited financial
statements in Onsite's Form 10-KSB for the year ended June 30, 1997, to Onsite's
knowledge, there has been no material change in Onsite's financial condition,
assets or liabilities.
(g) Absence of Undisclosed Liabilities. Except to the extent
reflected in Onsite's most recent financial statements in Onsite's Form 10-KSB
for the year ended June 30, 1997, and to Onsite's knowledge, Onsite has no other
liabilities, other than those incurred in the ordinary course of business,
secured or unsecured and whether accrued, absolute, contingent, direct, indirect
or otherwise except the expenses in connection with the acquisition of WBS,
which would be materially adverse, individually or in the aggregate, to the
results of operation or financial condition of Onsite.
(h) Litigation. Other than as disclosed in the auditors
response letter dated September 25, 1997 and previously provided to Westar
Energy, there are no outstanding orders, judgments, injunctions, awards or
decrees of any court, governmental or regulatory body or arbitration tribunal
against Onsite or its properties. There are no actions, suits or proceedings
pending, or, to the knowledge of Onsite, threatened against or relating to
Onsite. Onsite is not in default under or with respect to any judgment, order,
writ, injunction or decree of any court or of any federal, state, municipal or
other governmental authority, department, commission, board, agency or other
instrumentality.
(i) Tax Matters. All federal, foreign, state and local tax
returns, reports and information statements required to be filed by or with
respect to the activities of Onsite have been filed for all the years and
periods for which such returns and statements were due, including extensions
thereof. Onsite has not incurred any liability with respect to any federal,
foreign, state or local taxes except in the ordinary and regular course of
business. Onsite is not delinquent in the payment of any such tax or assessment,
and no deficiencies for any amount of such tax have been proposed or assessed.
(j) Compliance with Laws. To Onsite's knowledge, the
operations and affairs of Onsite do not violate any law, ordinance, rule or
regulation currently in effect, or any order, writ, injunction or decree of any
court or governmental agency, the violation of which would substantially and
adversely affect the business, financial condition or operations of Onsite.
(k) Reports and Other Information. All material reports,
documents and information required to be filed with the Securities and Exchange
Commission with respect to Onsite have been filed. Since January 1, 1996, Onsite
has made all filings required to be made in compliance with the Securities Act,
and, to Onsite's knowledge, such did not omit to state any material fact
necessary in order to make the statements contained therein not misleading in
light of the circumstances under which such statements were made as of their
respective dates of filing.
(l) Operating Authorities. To Onsite's knowledge, Onsite
has all material operating authorities, governmental certificates and licenses,
permits, authorizations and
1039(6).nks November 10, 1997
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approvals ("Permits") required to conduct its business as presently conducted.
During the last 2 years, there has not been any notice or adverse development
regarding such Permits; such Permits are in full force and effect; no material
violations are or have been recorded in respect of any Permit; and no proceeding
is pending or, to Onsite's knowledge, threatened to revoke or limit any Permit.
(m) Books and Records. The books and records of Onsite are
complete and correct, are maintained in accordance with good business practice
and accurately present and reflect, in all material respects, all of the
transactions therein described, and there have been no transactions involving
Onsite which properly should have been set forth therein and which have not been
accurately so set forth.
(n) Finder's Fees. Onsite is not liable or obligated to pay
any finder's, agent's, broker's or consultant's fee arising out of or in
connection with this Agreement or the transactions contemplated by this
Agreement.
5.2 Disclosure. Onsite has disclosed all events, conditions and facts
materially affecting the business and prospects of Onsite. No representation or
warranty by Onsite in this Agreement, nor any statement or certificate furnished
or to be furnished to WBS by Onsite pursuant hereto, or in connection with the
transactions contemplated hereby, knowingly contains or will contain any untrue
statement of a material fact, or omits or will omit to state a material fact
necessary to make the statements contained therein not misleading.
SECTION 6
CONDUCT OF PARTIES PENDING CLOSING
6.1 Conduct of WBS Business Pending Closing. WBS covenants that,
pending the Closing Date:
(a) No change will be made in WBS's Articles of Incorporation
or bylaws other than such changes as may be first approved in writing by Onsite.
(b) Subject to the protection provided by Section 8.8 herein,
WBS has given or will give to Onsite, its accountants and other representatives
full access during normal business hours throughout the period prior to the
Closing Date, to all of WBS's properties, books, contracts, commitments, and
records, and has furnished or will furnish Onsite during such period with all
such information concerning WBS's affairs as Onsite may reasonably request.
(c) WBS's business will be conducted only in the ordinary
course, except as approved in writing by Onsite.
1039(6).nks November 10, 1997
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(d) WBS will not consider any inquiries or proposals relating
to the possible merger or reorganization of WBS or a purchase of its assets,
except to the extent that they may be legally obligated to do so in which case
Onsite shall be notified in writing.
(e) Except for the contracts related to KCK, Health Midwest,
and Mid-States referenced in Section and other than in the ordinary course of
business, unless such contract or commitment is less than $50,000, no contract
or commitment will be entered into by or on behalf of WBS or indebtedness
otherwise incurred, except with the prior consent of Onsite.
(f) No material increases in annual compensation to employees
shall be made and no employment agreements shall be entered into with any
employees of WBS.
(g) WBS shall not dispose of any of its assets, except in
connection with the "Appliances Business," or in the ordinary course of
business.
(h) WBS will use its best efforts to preserve WBS's business
intact; and to preserve the goodwill of those having business relations with
WBS.
6.2 Conduct of Onsite Pending Closing. Onsite covenants that,
pending the Closing:
(a) Onsite's business will be conducted only in the
ordinary course.
(b) Except for the designation of the Series C Preferred
Stock, no change will be made in Onsite's Articles of Incorporation or bylaws
other than such changes as may be first approved in writing by WBS.
(c) Onsite will not consider any inquiries or proposals
relating to the possible merger or reorganization of Onsite or a purchase of its
assets, except to the extent that they may be legally obligated to do so in
which case Westar Energy shall be notified in writing.
(d) Onsite has given or will give to WBS and/or Westar Energy,
its accountants and other representatives, full access during normal business
hours throughout the period prior to the Closing Date, to all of Onsite's
properties, books, contracts, commitments, and records, and has furnished or
will furnish WBS during such period with all such information concerning
Onsite's affairs as WBS may reasonably request.
SECTION 7
CONDITIONS PRECEDENT TO CLOSING
7.1 Conditions Precedent to Closing. All obligations of Onsite and WBS
under this Agreement are subject to the fulfillment, prior to or at the Closing
Date, of all conditions herein set forth, including, but not limited to, receipt
by the appropriate party of
1039(6).nks November 10, 1997
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all deliveries required by Sections 3.2 and 3.3 herein, and fulfillment, prior
to the Closing Date, of each of the following conditions:
(a) WBS's, Westar Energy's, and Onsite's representations,
warranties and covenants contained in this Agreement shall be true at the time
of the Closing Date as though such representations, warranties and covenants
were made at such time.
(b) WBS shall have performed and complied with all agreements
and conditions required by this Agreement to be performed or complied with prior
to or at the Closing Date.
(c) Westar Energy shall have performed and complied with all
agreements and conditions required by this Agreement to be performed or complied
with prior to or at the Closing Date.
(d) Onsite shall have performed and complied with all
agreements and conditions required by this Agreement to be performed or complied
with prior to or at the Closing Date.
(e) Effective as of the Closing Date, WBS's director(s) shall
have resigned from the board and appointed new director(s), as nominated by
letter from Onsite's Chief Executive Officer.
(f) The Stock Subscription Agreement, and related agreements,
between Onsite and Westar Capital shall have closed.
(g) Effective as of the Closing Date, WBS's officer(s) shall
have resigned from such positions.
(h) The Transition Agreement, attached hereto as Exhibit E,
between Onsite and Western Resources, Inc. shall have been executed and
delivered.
(i) The Separation Plan attached hereto as Exhibit F (the
"Separation Plan") shall have been adopted by Onsite.
SECTION 8
ADDITIONAL COVENANTS OF THE PARTIES
8.1 Employees. Upon the Closing, all of WBS's employees shall be
terminated and Onsite shall offer employment to each of WBS's employees on an
"at will" basis with a severance package as set forth in the Separation Plan.
1039(6).nks November 10, 1997
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(a) Offer of Employment. At least one calendar day prior to
the Closing Date, Onsite shall make an offer of "at will" employment to every
employee listed by WBS on Schedule 8.1(a) attached hereto, which offer shall
include cash compensation as indicated next to such employee's name on Schedule
8.1(a) and inclusion of such employee in the employee benefit plans of Onsite,
including but not limited to government-mandated plans ("Offer of Employment").
(b) Acceptance of an Offer of Employment. Acceptance of the
Offer of Employment will be effective only upon the receipt by Onsite via
facsimile, or by written acceptance delivered to Rita A. Sharpe, not later than
8:00 a.m. Central Standard Time on November 3, 1997, ("Offer Acceptance
Deadline") on a form to be provided by Onsite with the Offer of Employment. If
the acceptance of the Offer of Employment is not received by Onsite before 8:00
a.m. Central Standard Time on November 3, 1997, then it shall be deemed
rejected. An individual who rejects an Offer of Employment shall not become a
"Continuing Employee," and Onsite shall have no obligation to such individual,
except as provided in paragraph (c) below. Each employee of WBS who accepts an
Offer of Employment and commences active full-time employment is referred to in
this Agreement as a "Continuing Employee."
(c) Declining Employee. In the event that a WBS employee
listed in Schedule 8.1(a) is required by Onsite under the Offer of Employment
and as a condition of employment to report to work at a location more than 35
miles from such individual's work location prior to the Closing (provided such
new work location is not actually closer to the employee's residence) and such
individual does not accept the Offer of Employment (a "Declining Employee"),
Onsite agrees to pay Westar Energy and Westar Energy agrees to pay the Declining
Employee an amount equal to the amount Onsite would have paid the Declining
Employee under paragraphs 4(a), (b) or (c) of the Separation Plan if the
Declining Employee was eligible for benefits under the Separation Plan. It is
specifically recognized that no Declining Employee shall be deemed an employee
of Onsite by virtue of such payment, nor shall any Declining Employee be
eligible for the insurance benefits set forth in paragraph 4(d) of the
Separation Plan.
(d) Severance. Each Continuing Employee who is terminated from
employment by Onsite within one year after the Closing Date shall, if such
Continuing Employee is eligible for separation pay and benefits in accordance
with the Separation Plan, receive the separation pay and benefits provided in
the Separation Plan. Onsite shall adopt the Separation Plan at Closing and keep
such Separation Plan in effect for 12 months thereafter.
(e) Employment at will. Nothing in this Agreement nor the
Separation Plan shall be construed to imply that Onsite has assumed any
obligation not expressly set forth herein or alter the fact that each Continuing
Employee shall be an employee at will.
(f) Benefit Plans. Onsite shall make available to Continuing
Employees and their eligible dependents (i) Onsite's policies, programs, and
plans in effect, as of the
1039(6).nks November 10, 1997
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date hereof, and (ii) workers' compensation, unemployment compensation, and all
other government-mandated plans. Onsite's benefit plans shall not provide for
ineligibility for benefits for any Continuing Employee and their eligible
dependents based on a preexisting condition unless, immediately as of the
Closing Date, such conditions also resulted in ineligibility for benefits for
such Continuing Employee or their eligible dependent, as the case may be, under
WBS's benefit plans.
(g) Westar Energy's Obligations. After the Closing, Westar
Energy shall have responsibility for all wages and salaries accrued to the Offer
Acceptance Deadline, all payroll taxes incurred prior to the Offer Acceptance
Deadline, and the following benefit payments: (i) all medical or dental expenses
incurred prior to the Offer Acceptance Deadline by any WBS employee and
individuals covered under any employee's participation in WBS's medical and
dental plans in accordance with WBS's group insurance policy extension
provisions; (ii) all payments for sick leave taken by any WBS employee prior to
the Offer Acceptance Deadline (although this Agreement shall not create or
impose any right to payments which did not otherwise exist); (iii) all long-term
disability plan payments relating to disabilities which commenced prior to the
Offer Acceptance Deadline; (iv) benefit expenses incurred by any WBS employee or
eligible dependent, as the case may be, prior to the Offer Acceptance Deadline
under WBS's benefit plans, (v) workers' compensation expenses, including
settlement amounts, arising from or related to events occurring prior to the
Offer Acceptance Deadline; (vi) all payments for accrued and unused vacation
time, and (vii) expenses, including settlement amounts, incurred with respect to
WBS employees for workers' compensation claims arising out of occurrences which
occurred prior to the Offer Acceptance Deadline.
(h) Onsite's Obligations. Onsite shall be responsible for all
benefits of Continuing Employees and their eligible dependents which are
incurred after the Offer Acceptance Deadline and are payable under the terms and
conditions of Onsite's benefit plans. With respect to workers' compensation and
any other government-mandated plans, this Section shall not be construed to
violate applicable statutes or regulations. Where permissible, any liabilities
(other than those Westar Energy has agreed to retain) under workers'
compensation and other government-mandated plans shall be transferred from
Westar to Onsite as of the Offer Acceptance Deadline. Where such transfer is
prohibited by law, this provision is intended to establish that primary
responsibility as between Westar Energy and Onsite for any liabilities, other
than those liabilities which Westar Energy has agreed to retain, shall be borne
by Onsite.
(i) Separation Arrangements. Effective as of the Offer
Acceptance Deadline, Onsite shall establish and adopt the Separation Plan, as
set forth in Exhibit F attached hereto, for the benefit of all Continuing
Employees. Onsite shall maintain the Separation Plan for a period of at least
one year from the Closing Date. The costs incurred, directly or indirectly,
under the Separation Plan in connection with the termination of any Continuing
Employee after the Closing Date, shall be borne exclusively by Onsite. "Years of
Service" for each Continuing Employee as such term is used in the Separation
Plan is set forth in Schedule 8.1(a). If, at any time within 12 calendar months
after the date of
1039(6).nks November 10, 1997
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termination of employment of any Continuing Employee, Westar Energy hires such
Continuing Employee, then Westar Energy shall promptly pay to Onsite an amount
equal to the total amount paid by Onsite to such terminated Continuing Employee
under the Separation Plan.
8.2 Offices. Onsite shall cause WBS to maintain offices in Topeka and
Kansas City, Kansas as long as it makes good business sense.
8.3 Covenant Not to Compete. To secure the interests of Onsite
hereunder, Westar Energy covenants and agrees that it will employ best efforts
to not, directly or indirectly, for the five years following the Closing Date,
anywhere in the states of Kansas, Missouri, Oklahoma, California, New Jersey,
New York, Massachusetts, Pennsylvania, Maryland, Virginia, Florida, Washington,
Arizona, Texas and Illinois, unless otherwise authorized by Onsite in writing:
(a) solicit any customer of WBS or Onsite for services of the
Businesses, either directly or indirectly, or any current customer, regardless
of where located; or
(b) participate in the ownership, management, operation or
control of, or have any financial interest in or be connected with, or engage in
or aid or knowingly assist anyone else, in the conduct of the following
activities (collectively referred to as the "Businesses"):
(i) Reverse osmosis water treatment except for
Western Resources facilities not currently served by WBS;
(ii) construction and installation of electric
substations and other electrical equipment for use by
industrial and governmental entities within systems owned by
them, other than for emergency repairs and maintenance
performed by Western Resources and its regulated affiliates
for such entities or for its own system. This does not include
services provided by Western Resources and its regulated
affiliates as part of its electric and gas business as
currently regulated; or
(iii) comprehensive design and installation of
equipment and services for the purpose of reducing energy
costs.
Provided, however, that, during such five year period, if Westar Energy
or any of its affiliates should acquire a company which engages in the
Businesses, Westar Energy or such affiliate will offer to sell such Businesses
to Onsite, and Onsite and Westar Energy or such affiliate will negotiate in good
faith to consummate such sale. In the event Onsite and Westar Energy or such
affiliate are unable to agree to the terms of such sale, the parties shall
retain a third-party appraiser to set the sale price. In the event Onsite and
Westar Energy or such affiliate do not consummate a sale based on the price
recommended by the third-party
1039(6).nks November 10, 1997
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<PAGE>
appraiser, Westar Energy or its affiliate may retain and operate such Businesses
and will not by virtue of such activities be deemed to be in violation of this
covenant not to compete.
It is not a violation of this Agreement for Western Resources or an
affiliate to acquire or hold a passive interest not in excess of 5% of the
outstanding equity in an entity engaged in the Businesses.
8.4 Taxes. Westar Energy shall pay, to Onsite or to the appropriate
taxing authority, any and all tax liability incurred by WBS prior to the Closing
Date, including taxes which have been incurred but are not yet assessed, due
and/or payable.
8.5 Cooperation. WBS, Westar Energy, and Onsite will cooperate with
each other and their respective agents in carrying out the transactions
contemplated by this Agreement, and in delivering all documents and instruments
deemed reasonably necessary or useful by the other party.
8.6 Expenses. Each of the parties hereto shall pay all of its
respective costs and expenses (including attorneys' and accountants' fees,
finder's and consultant's fees, costs and expenses) incurred in connection with
this Agreement and the consummation of the transactions contemplated herein.
8.7 Publicity. Prior to the Closing Date, any written news releases
and/or other shareholder communication by any party pertaining to this Agreement
or the transactions contemplated herein shall be submitted to the other parties
for their review and approval prior to such news release and/or other
shareholder communication; provided, however, that (a) such approval shall not
be unreasonably withheld, and (b) such review and approval shall not be required
of disclosures required to comply, in the judgment of counsel, with federal or
state securities or corporate laws or policies.
Each party shall provide the other reasonable opportunity, considering
the urgency of the disclosure of a particular matter, to review and comment upon
disclosures required to comply, in the judgment of counsel, with federal or
state securities or corporate laws or policies.
8.8 Confidentiality. While each party is obligated to provide access to
and furnish information in accordance with this Agreement, it is understood and
agreed that such disclosure and information obtained as a result of such
disclosure are proprietary and confidential in nature. Each party agrees to hold
such information in confidence and not to reveal any such information to any
person who is not a party to this Agreement, or an officer, director or key
employee thereof, and not to use the information obtained for any purpose other
than assisting in its due diligence inquiry, unless such information was
obtained without restriction from an alternative source or if the disclosure of
such information is required by law. This Section shall survive the execution
and delivery of this Agreement, the Closing and the consummation of the
transaction called for by this
1039(6).nks November 10, 1997
19
<PAGE>
Agreement and shall not be limited to the time period otherwise set forth in
Section 10 below.
SECTION 9
TERMINATION
9.1 Mutual Termination. WBS and Onsite may agree to mutually terminate
this Agreement prior to Closing without any liability to each other.
9.2 Termination upon Breach. Either party may terminate this Agreement
upon a material breach of this Agreement by the other.
SECTION 10
SURVIVAL OF REPRESENTATIONS AND
WARRANTIES
10.1 As to WBS. The representations and warranties of WBS contained
herein shall survive the execution and delivery of this Agreement, the Closing
and the consummation of the transactions called for by this Agreement for a
period of 2 years from the date of this Agreement unless a lesser time period is
specified.
10.2 As to Westar Energy. The representations and warranties of Westar
Energy contained herein shall survive the execution and delivery of this
Agreement, the Closing and the consummation of the transactions called for by
this Agreement for a period of 2 years from the date of this Agreement unless a
lesser time period is specified.
10.3 As to Onsite. The representations and warranties of Onsite
contained herein shall survive the execution and delivery of this Agreement, the
Closing and the consummation of the transactions called for by this Agreement
for a period of 2 years from the date of this Agreement unless a lesser time
period is specified.
SECTION 11
MISCELLANEOUS
11.1 Entire Agreement, Amendments. This Agreement (including the
Exhibits and Schedules hereto) contains the entire agreement between the parties
with respect to the transactions contemplated hereby, and supersedes all
negotiations, representations, warranties, commitments, offers, contracts, and
writings prior to the date hereof.
11.2 Binding Agreement. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective assigns and
successors in interest; provided
1039(6).nks November 10, 1997
20
<PAGE>
that neither this Agreement nor any right hereunder shall be assignable by
Onsite or WBS without the prior written consent of the other parties.
11.3 Indemnification.
(a) By Onsite. Onsite covenants and agrees to defend,
indemnify and hold harmless WBS and each of its officers, directors, employees,
agents, advisors and shareholders and affiliates, as such persons existed prior
to the Closing Date (collectively, the "WBS Indemnitees") from and against, any
loss, liability, damage or expense (including reasonable attorneys' fees and
costs) which any WBS Indemnitee may suffer, sustain or become subject to as a
result of a breach of any representation, warranty or covenant by Onsite
contained in this Agreement.
(b) By WBS. WBS covenants and agrees to defend, indemnify and
hold harmless Onsite and each of its officers, directors, employees, agents,
advisors and shareholders and affiliates, as such persons existed prior to the
Closing Date (collectively, the "Onsite Indemnitees") from and against any loss,
liability, damage or expense (including reasonable attorneys' fees and costs)
which any Onsite Indemnitee may suffer, sustain or become subject to, as a
result of a breach of any representation, warranty or covenant by WBS contained
in this Agreement.
(c) By Westar Energy. Westar Energy covenants and agrees to
defend, indemnify and hold harmless Onsite and each of its officers, directors,
employees, agents, advisors and shareholders and affiliates, as such persons
existed prior to the Closing Date (collectively, the "Onsite Indemnitees") from
and against any loss, liability, damage or expense (including reasonable
attorneys' fees and costs) which any Onsite Indemnitee may suffer, sustain or
become subject to, as a result of a breach of any representation, warranty or
covenant by WBS and/or Westar Energy contained in this Agreement.
(d) By Westar Capital. Westar Capital covenants and agrees to
defend, indemnify and hold harmless Onsite and each of its officers, directors,
employees, agents, advisors and shareholders and affiliates, as such persons
existed prior to the Closing Date (collectively, the "Onsite Indemnitees") from
and against any loss, liability, damage or expense (including reasonable
attorneys' fees and costs) which any Onsite Indemnitee may suffer, sustain or
become subject to, as a result of a breach of any representation, warranty or
covenant by Westar Capital contained in this Agreement.
11.4 Dispute Resolution. No party to this Agreement shall be entitled
to take legal action with respect to any dispute relating hereto until it has
complied in good faith with the following alternative dispute resolution
procedures. This Section shall not apply to the extent it is deemed necessary to
take legal action immediately to preserve a party's adequate remedy.
(a) Negotiation. The parties shall attempt promptly and in
good faith to resolve any dispute arising out of or relating to this Agreement,
through negotiations between
1039(6).nks November 10, 1997
21
<PAGE>
representatives who have authority to settle the controversy. Any party may give
the other party written notice of any such dispute not resolved in the normal
course of business. Within 20 days after delivery of the notice, representatives
of both parties shall meet at a mutually acceptable time and place, and
thereafter as often as they reasonably deem necessary, to exchange information
and to attempt to resolve the dispute, until the parties conclude that the
dispute cannot be resolved through unassisted negotiation. Negotiations
extending sixty days after notice shall be deemed at an impasse, unless
otherwise agreed by the parties.
If a negotiator intends to be accompanied at a meeting by an attorney,
the other negotiator(s) shall be given at least three working days' notice of
such intention and may also be accompanied by an attorney. All negotiations
pursuant to this clause are confidential and shall be treated as compromise and
settlement negotiations for purposes of the Federal and state Rules of Evidence.
(b) ADR Procedure. If a dispute with more than $20,000.00 at
issue has not been resolved within 60 days of the disputing party's notice, a
party wishing resolution of the dispute ("Claimant") shall initiate assisted
Alternative Dispute Resolution ("ADR") proceedings as described in this Section.
Once the Claimant has notified the other party ("Respondent") of a desire to
initiate ADR proceedings, the proceedings shall be governed as follows: By
mutual agreement, the parties shall select the ADR method they wish to use. That
ADR method may include arbitration, mediation, mini-trial, or any other method
which best suits the circumstances of the dispute. The parties shall agree in
writing to the chosen ADR method and the procedural rules to be followed within
30 days after receipt of notice of intent to initiate ADR proceedings. To the
extent the parties are unable to agree on procedural rules in whole or in part,
the current Center for Public Resources, Inc. ("CPR") Model Procedure for
Mediation of Business Disputes, CPR Model Mini-trial Procedure, or CPR
Commercial Arbitration Rules--whichever applies to the chosen ADR method--shall
control, to the extent such rules are consistent with the provisions of this
Section. If the parties are unable to agree on an ADR method, the method shall
be arbitration.
The parties shall select a single Neutral (as defined by CPR) third
party to preside over the ADR proceedings, by the following procedure: Within 15
days after an ADR method is established, the Claimant shall submit a list of 5
acceptable Neutrals to the Respondent. Each Neutral listed shall be sufficiently
qualified, including demonstrated neutrality, experience and competence
regarding the subject matter of the dispute. A Neutral who is an attorney or
former judge shall be deemed to have adequate experience. None of the Neutrals
may be present or former employees, attorneys, or agents of either party. The
list shall supply information about each Neutral, including address, and
relevant background and experience (including education, employment history and
prior ADR assignments). Within 15 days after receiving the Claimant's list of
Neutrals, the Respondent shall select one Neutral from the list, if at least one
individual on the list is acceptable to the Respondent. If none on the list are
acceptable to the Respondent, the Respondent shall submit a list of 5 Neutrals,
together with the above background information, to the Claimant. Each of the
Neutrals shall meet the conditions stated above regarding the Claimant's
1039(6).nks November 10, 1997
22
<PAGE>
Neutrals. Within 15 days after receiving the Respondent's list of Neutrals, the
Claimant shall select one Neutral, if at least one individual on the list is
acceptable to the Respondent. If none on the list are acceptable to the
Claimant, then the parties shall request assistance from the CPR to select a
Neutral.
The ADR proceeding shall take place within 30 days after the Neutral
has been selected. The Neutral shall issue a written decision within 30 days
after the ADR proceeding is complete. Each party shall be responsible for an
equal share of the costs of the ADR proceeding. The parties agree that any
applicable statute of limitations shall be tolled during the pendency of the ADR
proceedings, and no legal action may be brought in connection with this
Agreement during the pendency of an ADR proceeding.
The Neutral's written decision shall become final and binding on the
parties, unless a party objects in writing within 30 days of receipt of the
decision. The objecting party may then file a lawsuit in any court allowed by
this Agreement. The Neutral's written decision shall be admissible in the
objecting party's lawsuit.
11.5 Amendments and Waivers. Any term of this Agreement may be amended
and the observance of any term of this Agreement may be waived (either generally
or in a particular instance and either retroactively or prospectively), only
with the written consent of the parties. Any amendment or waiver effected in
accordance with this paragraph shall be binding upon all of the parties. A
waiver by any party hereto of a default in the performance of this Agreement
shall not operate as a waiver of any future or other default, whether of a like
or different kind.
11.6 Severability. If one or more provisions of this Agreement are held
to be unenforceable under applicable law, such provision shall be excluded from
this Agreement and the parties shall use their efforts to substitute provisions
of substantially the same effect. The balance of the Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms.
11.7 Governing Law. This Agreement shall be construed in
accordance with the laws of the State of California.
11.8 Notices. All notices or other communications required hereunder
shall be in writing and shall be sufficient in all respects and shall be deemed
delivered after 5 days if sent via registered or certified mail, postage
prepaid; the next day if sent by overnight courier service; or one business day
after transmission, if sent by facsimile to the following:
(i) If to Onsite: Onsite Energy Corporation
701 Palomar Airport Rd., Suite 200
Carlsbad, CA 92009
Fax: (760) 931-2405
Attn: Richard T. Sperberg
1039(6).nks November 10, 1997
23
<PAGE>
with a copy to: Bartel Eng Linn & Schroder
300 Capitol Mall, Suite 1100
Sacramento, CA 95814
Fax: (916) 442-3442
Attn: Scott E. Bartel, Esq.
(ii) If to WBS, Westar Energy and/or Westar Capital:
Westar Energy, Inc.
PO Box 889
818 Kansas Avenue
Topeka, KS 66601
Fax: (785) 575-1771
Attn: Rita A. Sharpe
with a copy to: Westar Energy, Inc.
PO Box 889
818 Kansas Avenue
Topeka, KS 66601
Fax: (785) 575-1771
Attn: John K. Rosenberg
Any party hereto may change its address for purposes hereof by notice to all
other parties hereto.
1039(6).nks November 10, 1997
24
<PAGE>
11.9 Counterparts; Signatures. This Agreement may be executed in one or
more counterparts, each of which may be deemed an original, but all of which
together shall constitute one and the same instrument. This Agreement may be
executed by a party and sent to the other parties via facsimile transmission and
the facsimile transmitted copy shall have the same integrity, force and effect
as an original document.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
ONSITE ENERGY CORPORATION, WESTAR BUSINESS SERVICES,
a Delaware corporation INC., a Kansas corporation
By: By:
Richard T. Sperberg, Rita A. Sharpe,
President President
WESTAR ENERGY, INC.,
a Kansas corporation
By:
,
President
WESTAR CAPITAL, INC.,
a Kansas corporation
By: ,
President
1039(6).nks November 10, 1997
25
<PAGE>
EXHIBITS
Exhibit A-- Escrow Agreement and Instructions
Exhibit B-- Non-compete Agreement (Western Resources)
Exhibit C-- Opinion of Counsel
Exhibit D-- Purchase Agreement (Mid-States)
Exhibit E-- Transition Agreement
Exhibit F-- Separation Plan
1039(6).nks November 10, 1997
26
<PAGE>
SCHEDULE LIST
WBS
Schedule 8.1(a) Employees
Onsite
Schedule 5.1(d) Subsidiaries and Affiliates
1039(6).nks November 10, 1997
27
<PAGE>
EXHIBIT F
SEPARATION PLAN
1. SCOPE. This Plan shall be effective for a twelve (12) month period following
the Closing as defined in the Plan and Agreement of Reorganization by and among
Onsite Energy Corporation ("Onsite"), Westar Business Services, Inc. ("WBS"),
and Westar Energy, Inc. (the "Agreement"). Any rights to benefits under this
Plan shall expire at the end of such twelve (12) month period. This Plan is
limited to Continuing Employees, as that term in defined in the Agreement. A
copy of this Plan will be provided to each Continuing Employee.
2. DEFINITIONS. The following terms are defined for the purpose of this
Plan only.
a. TERMINATION FOR CAUSE. "Termination for Cause" shall mean
termination by Onsite upon any ground for which disciplinary action, including
termination, is prescribed under any of Onsite's procedures or practices.
b. TERMINATION FOR GOOD REASON. Termination by the Continuing Employee
of employment with Onsite for "Good Reason" shall mean termination based on one
of the following events which Onsite has not corrected following thirty days'
notice by the Continuing Employee:
(1) a reduction by Onsite in the Continuing Employee's
compensation and benefits as specified in the Offer of Employment, as that term
is defined in the Agreement;
(2) Onsite's requiring the Continuing Employee to report to a
work location which is more than 35 miles from his/her work location immediately
prior to the Closing (provided such new work location is not actually closer to
the Continuing Employee's residence), except for reasonably required travel on
Onsite's business.
In no event shall the Continuing Employee claim Termination for Good
Reason more than thirty (30) days after the first occurrence of one of the
events above.
c. CONTINUING EMPLOYEE. Each employee of WBS who accepts an Offer of
Employment from Onsite and commences active full-time employment is referred to
in this Agreement as a "Continuing Employee." An individual who rejects an Offer
of Employment shall not become a "Continuing Employee," and Onsite shall have no
obligation to such individual.
d. ELIGIBLE EMPLOYEE. "Eligible Employees" are determined under
Section 3 and shall include only "Continuing Employees."
1039(6).nks November 10, 1997
1
<PAGE>
e. YEARS OF SERVICE. "Years of Service" shall mean, for the purpose of
determining severance pay under this Plan, the number of years that an Eligible
Employee has been employed by WBS or its subsidiaries or predecessor companies.
This includes total years of employment with WBS, excluding any breaks in
service. Partial years of service of more than six months shall be counted as
full years, provided any single calendar year will be counted only once.
3. ELIGIBILITY. Continuing Employees shall be eligible for the benefits provided
in Section 4 if, within 12 months after the Closing, their employment is
terminated (other than by reason of death or disability entitling the employee
to long-term disability benefits under Onsite's long-term disability plan) by
the Continuing Employee for Good Reason, or by Onsite, other than for
Termination for Cause. The benefits provided in this severance plan shall not
accrue in the case of any employee termination (including voluntary termination)
except as specified in this paragraph.
4. BENEFITS. Continuing Employees who become Eligible Employees pursuant
to Section 3 above, shall be eligible for the following:
a. For Continuing Employees who were in WBS pay-grades 33, 32, 31 and
30, a payment in an amount equal to three (3) weeks of salary for each Year of
Service, payable over time as such payment would have become due if the
Continuing Employee had not been terminated. In no event shall such payments be
less than thirteen (13) weeks of salary nor more than fifty-two (52) weeks of
salary. For Continuing Employees in these pay-grades who remain unemployed at
the end of the period that begins with the date of termination and continues for
a number of weeks (including partial weeks if applicable) equal to the number of
weeks of salary used to compute the Continuing Employee's severance described
above, an additional payment in the amount equal to one week of salary for each
Year of Service shall be paid over time as such payment would have become due if
the Continuing Employee had not been terminated. In no event shall such
additional payment be less than six (6) weeks of salary, nor more than thirteen
(13) weeks of salary.
b. For Continuing Employees who were in WBS pay-grades 29, 28, 27, 26,
25, 24, 23, 22, 21 and 20, a payment in an amount equal to two (2) weeks of
salary for each Year of Service, payable over time as such payment would have
become due if the Continuing Employee had not been terminated. In no event shall
such payment be less than thirteen (13) weeks of salary, nor more than
thirty-nine (39) weeks of salary.
c. For non-exempt or hourly Continuing Employees, a payment in an
amount equal to one and one-half (1 1/2) weeks of wages for each Year of
Service, payable over time as such payment would have become due if the
Continuing Employee had not been terminated. In no event shall such payment be
less than eight (8) weeks of wages, nor more than twenty-six (26) weeks of
wages.
d. Continued medical and dental insurance coverage by Onsite on
the same basis as other Continuing Employees of Onsite for a period of time
equal to the Eligible
1039(6).nks November 10, 1997
2
<PAGE>
Employee's total weeks of severance pay. Such coverage may be discontinued
earlier by Onsite in the event that the Eligible Employee becomes employed and
the Eligible Employee's new employer has a comparable insurance program. The
comparability of the new employer's program to that of Onsite is to be
determined by Onsite.
5. NON-MITIGATION. No Continuing Employee shall be required to mitigate, by
seeking employment or otherwise, the amount of any payment that Onsite becomes
obligated to make under this plan. However, the benefits accruing pursuant to
this Plan to an Eligible Employee shall cease upon the employment of such
Eligible Employee by Westar Energy, Inc. or Western Resources, Inc. within
twelve months of termination of employment with Onsite.
6. MISCELLANEOUS. Onsite may deduct from all severance payments any taxes
required by law to be withheld therefrom and any required employee contributions
for medical or dental coverage for the period of time that it is continued.
7. COST OF ENFORCEMENT. Onsite will pay all attorneys' fees and other
costs incurred by a Continuing Employee to enforce any provision of this
Separation Plan.
NOTHING IN THIS SEPARATION PLAN NOR THE AGREEMENT AND PLAN OF REORGANIZATION
SHALL BE CONSTRUED AS GIVING ANY PERSON THE RIGHT TO BE RETAINED IN THE
EMPLOYMENT OF ONSITE, WBS OR WESTAR ENERGY. NOTHING IN THIS SEPARATION PLAN OR
THE AGREEMENT AND PLAN OF REORGANIZATION SHALL AFFECT THE RIGHT OF ONSITE OR WBS
TO DISMISS AN EMPLOYEE FOR ANY REASON WITHOUT LIABILITY. THE EMPLOYEES SUBJECT
TO THIS PLAN ARE EMPLOYEES AT WILL OF WBS OR ONSITE AND NOTHING IN THIS PLAN OR
THE EMPLOYMENT AGREEMENT SHALL BE CONSTRUED AS A CONTRACT OF EMPLOYMENT, IMPLIED
OR OTHERWISE.
1039(6).nks November 10, 1997
3
<PAGE>
Plan and Agreement of Reorganization
Schedule 5.1(d)
Onsite Subsidiaries and Affiliates
Current Subsidiaries:
1) Western Energy Management, Inc. (Inactive)
Current Partnerships/Joint Ventures:
1) American Private Power II -- Onsite is General Partner of an
inactive partnership
2) Silent Joint Venture with G. L. Griffin Co., Inc. for
performance bond related to contract with State of Washington
3) Joint Venture Letter of Agreement with NESI - joint
development of energy performance contracts with specific customers
4) PRM Alliance Agreement - Agreement to provide marketing
services and jointly develop opportunities for power
management services and energy efficiency projects
Ownership Interests:
1) National Energy Service Companies Preferred Product Group, LLC
- Onsite is a founding member of an LLC which is negotiating
purchasing agreements with manufacturers of energy efficient
equipment
<PAGE>
October 31, 1997
Westar Energy, Inc.
P. O. Box 889
818 Kansas Avenue
Topeka, KS 66601
Re: Onsite Energy Corporation
Opinion Letter Pursuant to Plan and Agreement of
Reorganization
Ladies and Gentlemen:
We act as counsel for Onsite Energy Corporation, a Delaware corporation
(the "Company"), in connection with the Plan and Agreement of Reorganization
dated October 28, 1997, by and among the Company, Westar Business Services,
Inc., a Kansas corporation ("WBS"), Westar Energy, Inc. ("Westar Energy"), and
Westar Capital, Inc. ("Agreement"). This letter is delivered to Westar Energy at
the request of the Company pursuant to Section 3.3(e) of the Agreement. Except
as otherwise defined herein, the capitalized terms in this letter shall have the
meanings ascribed to them in the Agreement.
This Opinion Letter is governed by, and shall be interpreted in
accordance with, the Legal Opinion Accord (the "Accord") of the ABA Section of
Business Law (1991). As a consequence, it is subject to a number of
qualifications, exceptions, definitions, limitations on coverage and other
limitations, all as more particularly described in the Accord, and this Opinion
Letter should be read in conjunction therewith. In addition, this Opinion Letter
shall be governed by, and shall be interpreted in accordance with, the
"California Provisions" and the "California Generic Exception" as defined in the
Business Law Section of the California State Bar Report on the Third-Party Legal
Opinion Report of the ABA Section of Business Law (dated May 1992), and is
therefore subject to a number of additional qualifications, exceptions, and
understandings, all as more particularly described in the California Provisions
and California Generic Exception, and this Opinion Letter should also be read in
conjunction therewith. The law covered by the opinions expressed herein is
limited to the Federal Law of the United States and the Law of the States of
California and Delaware.
<PAGE>
Westar Energy, Inc.
October 31, 1997
Page 2
Whenever our opinion herein with respect to the existence or absence of
facts or circumstances is qualified by the phrase "to the best of our
knowledge", it is intended to indicate that during the course of our
representation, no information has come to our attention that would give us
actual knowledge of the existence of such facts or circumstances. However, we
have not undertaken any special or independent investigation to determine the
existence or absence of such facts or circumstances, and no inference as to our
knowledge of the existence of such facts or circumstances should be drawn merely
from our representation herein.
Based upon and subject to the foregoing, as of the date hereof, we are
of the opinion that:
1. The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware, has all requisite
corporate power and authority to carry on its business as now conducted, and to
own, lease and operate any properties related to its business, except where the
failure to have such power and authority would not have a material adverse
effect. The Company is qualified to do business as a foreign corporation in the
State of California, and to our knowledge, in all other jurisdictions in which
such qualification is required other than those in which failure to qualify
would not have a material adverse effect on the Company's operations or
financial condition.
2. The Company has all requisite legal and corporate power to execute
and deliver the Agreement and to carry out and perform its obligations under the
Agreement.
3. The Agreement, when executed and delivered, constitutes a valid,
legally binding and enforceable obligation of the Company, except as the
enforceability may be subject to or limited by laws of general application
relating to bankruptcy, insolvency or the relief of debtors and other laws of
general application affecting enforcement of creditors' rights generally, or
rules of law and principles of equity governing specific performance, injunctive
relief or other equitable remedies, regardless of whether such enforceability is
considered in a proceeding in equity or at law.
4. The execution, delivery and performance of the Agreement
by the Company will not result in a violation of any provision of
<PAGE>
Westar Energy, Inc.
October 31, 1997
Page 3
its Certificate of Incorporation or Bylaws as in effect on and as of the Closing
Date or, to our knowledge, of any provision of any material mortgage, indenture,
agreement, instrument or contract to which it is a party, of any provision of
any federal or state judgment, writ, decree, order, statute, rule or
governmental regulation applicable to the Company in any manner which would be
material to the Agreement, the conduct of the Company's business or its
financial condition.
5. The Common Stock, when sold, issued, and delivered for the
consideration expressed in, and in compliance with, the provisions of the
Agreement will be duly authorized, validly issued, fully paid and nonassessable.
The phrase "Primary Lawyer Group," as used in the Accord, is hereby
modified and for purposes of applying the Accord to this Opinion Letter the
Primary Lawyer Group means Scott E. Bartel, Esq.
and Daniel B. Eng, Esq. of our firm.
Our opinion is limited solely to matters set forth herein. This letter
is provided to you solely for your benefit and in connection with the
transactions provided for in or contemplated by the Agreement, and shall not be
relied upon by any other person or for any other purpose without our prior
written consent.
Very truly yours,
<PAGE>
STOCK SUBSCRIPTION AGREEMENT
THIS STOCK SUBSCRIPTION AGREEMENT (the "Agreement"), dated as of
October 28, 1997, is made and entered into by and between Onsite Energy
Corporation, a Delaware corporation (the "Company"), and Westar Capital, Inc., a
Kansas corporation (the "Investor").
W I T N E S S E T H
WHEREAS, the Company, in order to finance its operations, desires to
issue an aggregate of Two Million (2,000,000) shares of its Class A Common Stock
(the "Onsite Common Stock") and Two Hundred Thousand (200,000) shares of its
Series C Convertible Preferred Stock (the "Onsite Preferred Stock")
(collectively, the "Onsite Stock") to the Investor upon the terms and conditions
contained herein; and
WHEREAS, Investor desires to purchase Two Million (2,000,000) shares of
the Onsite Common Stock and Two Hundred Thousand (200,000) shares of the Onsite
Preferred Stock upon upon the terms and subject to the conditions set forth
herein.
NOW, THEREFORE, for and in consideration of the premises and of the
mutual representations, warranties, covenants, and agreements set forth in this
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
1. CONTEMPLATED TRANSACTIONS AND CLOSING.
1.1. Purchase of Common Stock. Upon the terms and subject to the
conditions set forth in this Agreement, on the Closing Date (as provided for in
Section 1.5), the Investor shall purchase from the Company, and the Company
shall issue and sell to the Investor, two million (2,000,000) shares of the
Company's Class A Common Stock, par value $0.001 per share (the "Onsite Common
Stock"). The purchase of the Onsite Common Stock shall occur at the Closing as
specified in Section 1.5.
1.2. Consideration for Onsite Common Stock. In consideration of the
purchase in Section 1.1, at the Closing specified in Section 1.5, the Investor
shall pay to the Company $0.50 per share in immediately available United States
Dollars, in an aggregate amount equal to One Million Dollars ($1,000,000) for
the Onsite Common Stock.
1.3. Purchase of Series C Convertible Preferred Stock. Upon the terms
and subject to the conditions set forth in this Agreement, on the Closing Date
(as provided for in Section 1.5), the Investor shall purchase from the Company,
and the Company shall issue and sell to the Investor, two hundred thousand
(200,000) shares of the Company's Series C Convertible
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Preferred Stock, par value $0.001 per share (the "Onsite Preferred Stock"). The
purchase of the Onsite Preferred Stock shall occur at the Closing as specified
in Section 1.5.
1.4. Consideration for Onsite Preferred Stock. In consideration of the
purchase in Section 1.3, at the Closing specified in Section 1.5, the Investor
shall pay to the Company $5.00 per share in immediately available United States
Dollars, in an aggregate amount equal to One Million Dollars ($1,000,000) for
the Onsite Preferred Stock.
1.5. The Closing; Closing Date. The transactions contemplated hereby
shall be consummated at a closing (the "Closing"), which shall take place
simultaneously at 7:30 A.M. Pacific Standard Time on October 31, 1997, at the
offices of Bartel Eng Linn & Schroder, 300 Capitol Mall, Suite 1100, Sacramento,
California 95814, the offices of the Company, 701 Palomar Airport Road, Suite
200, Carlsbad, California 92009, and the offices of the Investor, 818 Kansas
Avenue, Topeka, Kansas 66612. The Closing may also be held at such other time
and place as may be agreed upon by the parties. The date of the Closing is
referred to herein as the "Closing Date" and all transactions contemplated
herein to occur at the Closing shall be deemed to occur on the Closing Date and
all transfers and assignments of title shall vest and be deemed effective on the
Closing Date.
1.6. Deliveries at the Closing. Upon the terms and conditions set forth
in this Agreement, the Investor and the Company shall make the following
deliveries at the Closing on the Closing Date:
1.6.1. Deliveries by the Investor at the Closing. At or before
the Closing, the Investor shall deliver to the Company the following:
(a) Two Million Dollars ($2,000,000) in immediately
available United States funds in cash or by a wire
transfer in accordance with written instructions from
the Company; and
(b) a certificate, executed by the Investor and dated
as of the Closing Date, certifying that all of the
representations and warranties set forth in Section 3
hereof are true and correct in all material respects
and that all of the conditions set forth in Section 4
hereof have been satisfied.
1.6.2. Deliveries by the Company at the Closing. At the
Closing, the Company shall deliver to the Investor the following:
(a) Share certificates evidencing two million
(2,000,000) shares of the Onsite Common Stock issued
in the name of the Investor;
(b) share certificates evidencing two hundred
thousand (200,000) shares of the Onsite Preferred
Stock issued in the name of the Investor;
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(c) a certificate, executed by the Company and dated
as of the Closing Date, certifying that all of the
representations and warranties set forth in Section 2
hereof are true and correct in all material respects
and that all of the conditions set forth in Section 5
hereof have been satisfied; and
(d) an opinion of counsel in the form attached
hereto as Exhibit A.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby represents and warrants to Investor that:
2.1. Due Organization: Good Standing and Corporate Power. The Company
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and has all requisite corporate power and
authority to carry on its business, and to own, lease and operate any properties
related to such business, except where the failure to have such power and
authority would not individually or in the aggregate have a Material Adverse
Effect (as defined below). The Company is duly qualified or licensed to do
business and in good standing in the State of California. For purposes of this
Agreement, a "Material Adverse Effect" shall mean an event that could reasonably
be expected to have a material adverse effect on the business of the Company, or
on its results of operations, properties or financial condition; for purposes of
this definition, any event which reasonably could be expected to result in a
potential liability to the Company either individually or in the aggregate in
excess of Fifty Thousand Dollars ($50,000) will be deemed to have a Material
Adverse Effect.
2.2. Capitalization. The Company's authorized capital stock consists of
(a) 24 million shares of Common Stock, $0.001 par value, of which 23,999,000 are
designated Class A Common Stock, of which 10,944,172 are currently outstanding
and held by approximately 217 shareholders of record, and (b) one million shares
of preferred stock, $0.001 par value, of which none are issued and currently
outstanding. Schedule 2.2 sets forth the names and share ownership of each
Company shareholder owning over 5% of Company's outstanding common stock as of
the date of this Agreement. Except as set forth in the notes to the financial
statements contained in the Company's Form 10-KSB for the year ended June 30,
1997, there are no equity securities or debt obligations of the Company
authorized, issued or outstanding and there are no outstanding options,
warrants, agreements, contracts, calls, commitments or demands of any character,
preemptive or otherwise, other than this Agreement, relating to any of the
Company's capital stock, there is no outstanding security of any kind
convertible into the Company's capital stock, and there is no outstanding
security with a claim on dividends prior or senior to the Onsite Preferred
Stock.
2.3. Authorization.
2.3.1. All corporate action on the part of the
Company, its officers, directors and stockholders necessary for the sale and
issuance of the Onsite Stock pursuant hereto and the
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performance of the Company's obligations hereunder has been taken or will be
taken prior to the Closing.
2.3.2. The Onsite Stock, when issued, sold and delivered for
the consideration expressed and in compliance with the provisions of this
Agreement, will be duly authorized, validly issued, fully paid and
nonassessable, and will be free of restrictions on transfer other than
restrictions on transfer under this Agreement and under applicable federal and
state securities laws.
2.4. No Conflict; No Consents or Approvals Required. Neither the
execution and delivery of this Agreement by the Company, nor the consummation by
the Company of the transactions contemplated hereby will:
(a) conflict with or violate any provision of
the Certificate of Incorporation or Bylaws of the Company;
(b) conflict with or violate any law, rule,
regulation, ordinance, order, writ, injunction, judgment or decree applicable
to the Company or by which it or any of its properties or assets are bound or
affected; or
(c) conflict with or result in any breach of or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination or
cancellation of, or result in the creation of any lien, charge or encumbrance
on any of the respective properties or assets of it pursuant to any of
the terms, conditions or provisions of, any material note, bond, mortgage,
indenture, deed of trust, lease, permit, license, franchise, authorization,
agreement or other instrument or obligation to which the Company is a party or
by which the Company or any of its properties or assets is bound or affected.
2.5. Litigation. There is no action, suit, proceeding, or investigation
pending or, currently threatened against the Company which questions the
validity of this Agreement or the right of the Company to enter into it, or to
consummate the transactions contemplated hereby, or which might have, either
individually or in the aggregate, a Material Adverse Effect. The Company is not
a party or subject to the provisions of any order, writ, injunction, judgment or
decree of any court or government agency or instrumentality.
2.6. Title to Properties and Assets. Except for the security interests
granted to those persons specified in Schedule 2.6, and except for liens for
taxes not yet due and payable, the Company has good and marketable title to all
of its properties and assets used in and necessary to the conduct of its
business and has good and marketable title to its leasehold interests, in each
case subject to no material mortgage, pledge, lien or encumbrance.
2.7. Financial Statements. The Company has made available to the
Investor a true and complete copy of the audited financial statements of the
Company, for the fiscal years ended
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June 30, 1995, June 30, 1996 and June 30, 1997, and related statements of income
and cash flows for the years ended June 30, 1995, June 30, 1996 and June 30,
1997 and changes in stockholders' equity for the period from July 1, 1994 to
June 30, 1997, as contained in the Company's Annual Reports on Form 10-KSB for
the fiscal years ended June 30, 1997 and June 30, 1996. All such financial
statements are complete and correct, are in accordance with the books and
records of the Company, present fairly the financial condition for the periods
indicated, and have been prepared in accordance with generally accepted
accounting principles ("GAAP") applied on a basis consistent with past practice.
2.8. No Material Adverse Change. Since the Company's report on Form
10-KSB for the fiscal year ended June 30, 1997, there has been no material
adverse change in the business, operations or financial condition or prospects
of the Company.
2.9. Reports and Other Information. All material reports, documents and
information required to be filed with the Securities and Exchange Commission
with respect to the Company have been filed. Since January 1, 1996, the Company
has made all filings required to be made in compliance with the Securities Act
of 1933, as amended (the "Securities Act"), and such did not omit to state any
material fact necessary in order to make the statements contained therein not
misleading in light of the circumstances under which such statements were made
as of their respective dates of filing.
2.10. Statements and Reports True and Correct. The financial statements
identified in Section 2.7 were and are true and correct as of the dates thereof.
The financial statements identified in Section 2.7 contain no untrue statements
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
3. REPRESENTATIONS AND WARRANTIES OF INVESTOR.
The Investor represents and warrants that:
3.1. Authorization. All action on the part of the Investor, including
any action by its officers, directors and stockholders, necessary for the
purchase of the Onsite Stock pursuant hereto and the performance of the
Investor's obligations hereunder has been taken or will be taken prior to the
Closing.
3.2. Purchase Entirely for Own Account. This Agreement is made with the
Investor in reliance upon such Investor's representation to the Company, which
by the Investor's execution of this Agreement the Investor hereby confirms, that
the Onsite Stock to be purchased by the Investor will be acquired for investment
purposes for the Investor's own account, not as a nominee or agent, and not with
a view to the resale or distribution of any part thereof in violation of
applicable federal and state securities laws. By executing this Agreement, the
Investor further represents that the Investor does not have any contract,
undertaking, agreement or arrangement with any person to sell, transfer or grant
participations to such person or to any
1055(3).nks 5 November 10, 1997
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third person, with respect to any of the Onsite Stock. A transfer of the Onsite
Stock to an Affiliate by Investor shall not be deemed to be a violation of this
provision. As used herein, the term "Affiliate" shall mean, with respect to any
person, any other person that directly or indirectly through one or more
intermediaries controls or is controlled by or is under common control with such
person.
3.3. Reliance Upon Investor's Representations. Investor understands
that the Onsite Stock has not been registered under the Securities Act on the
grounds that the transactions contemplated by this Agreement and the issuance of
the Securities hereunder is exempt from registration under the Securities Act
pursuant to Section 4(2) thereof, and Regulation D promulgated thereunder, and
that the Company's reliance on such exemption is predicated on the Investor's
representations set forth herein.
3.4. Receipt of Information. The Investor has received information and
had the opportunity to ask questions of the Company's management and has
considered such information in evaluating the terms and conditions of the
offering of the Onsite Stock, and the business, properties, prospects and
financial condition of the Company, and in deciding to accept the Onsite Stock.
The foregoing, however, does not limit or modify the representations and
warranties of the Company in Section 2 hereof or the right of the Investor to
rely thereon.
3.5. Investment Experience. The Investor represents that it is
experienced in evaluating and investing in securities of companies and
acknowledges that it is able to fend for itself, can bear the economic risk of
the investment, and has such knowledge and experience in financial and business
matters that it is capable of evaluating the merits and risks of the investment
in the Onsite Stock. The Investor further represents that it has not been
organized solely for the purpose of acquiring the Onsite Stock.
3.6. Accredited Investor. The Investor represents that it is an
"accredited investor" as that term is defined in Regulation D,
17 C.F.R. 230.501(a).
3.7. Restricted Securities. The Investor understands that the Onsite
Stock issued, or to be issued, hereunder may not be sold, transferred, or
otherwise disposed of without registration under the Securities Act or an
exemption therefrom, and that in the absence of an effective registration
statement covering the Onsite Stock, or an available exemption from registration
under the Securities Act, the Onsite Stock must be held indefinitely. In
particular, the Investor is aware that the Onsite Stock may not be sold pursuant
to Rule 144, 17 C.F.R.
230.144, unless all of the conditions of that Rule are met.
4. CONDITIONS OF INVESTOR'S OBLIGATIONS AT CLOSING.
The obligations of the Investor under this Agreement are subject to the
fulfillment on or before the Closing Date of each of the following conditions,
the waiver of which shall not be effective against the Investor unless consented
to by Investor in writing:
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4.1. Representations and Warranties. The representations and warranties
of the Company contained in Section 2 hereof shall be true and correct in all
material respects on and as of the Closing Date.
4.2. Performance. The Company shall have performed and complied with
all agreements, obligations, and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Closing Date.
4.3. Qualifications. All authorizations, approvals, or permits, if any,
of any governmental authority or regulatory body that are required in connection
with the lawful issuance and sale of the Onsite Stock pursuant to this Agreement
shall be duly obtained and effective as of the Closing Date.
4.4. Proceedings and Documents. All corporate and other proceedings in
connection with the transactions contemplated to occur on the Closing Date and
all documents incident thereto shall be reasonably satisfactory in form and
substance to the Investor, or Investor's counsel, as the case may be.
4.5. Execution of Related Agreements. The following agreements between
the parties shall have been executed and delivered between the parties to such
agreements:
(a) the Stockholders Agreement attached hereto as
Exhibit B between the Investor and Onsite Stockholders (as
defined in such agreement). All such action shall have been
taken as may be necessary to elect Investor's designee to the
Board of Directors of the Company, effective upon Closing, as
provided in the Stockholders Agreement;
(b) the Registration Rights Agreement attached hereto
as Exhibit C between Company and Investor; and
(c) the Plan and Agreement of Reorganization between
the Company, Westar Business Services, Inc., Westar Energy,
Inc., and Westar Capital, Inc.
5. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING.
The obligations of the Company to the Investor under this Agreement are
subject to the fulfillment on or before the Closing Date of each of the
following conditions by the Investor, the waiver of which shall not be effective
unless consented thereto in writing:
5.1. Representations and Warranties. The representations and warranties
of the Investor contained in Section 3 hereof shall be true and correct in all
material respects on and as of the Closing Date.
1055(3).nks 7 November 10, 1997
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5.2. Qualifications. All authorizations, approvals, or permits, if any,
of any governmental authority or regulatory body that are required in connection
with the lawful issuance and sale of the Onsite Stock pursuant to this Agreement
shall be duly obtained and effective as of the Closing Date.
5.3. Performance. The Investor shall have performed and complied with
all agreements, obligations, and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Closing Date.
6. RESTRICTIONS ON TRANSFERABILITY OF SECURITIES; COMPLIANCE WITH
SECURITIES ACT.
6.1. Restrictions on Transferability. The Onsite Stock shall not be
transferable, except upon the conditions specified in this Section. The Investor
will cause any successor or proposed transferee of the Onsite Stock to agree to
take and hold the Onsite Stock subject to the conditions specified in this
Section. The Investor acknowledges the restrictions upon its right to transfer
the Onsite Stock set forth in this Section.
6.2. Restrictive Legend. Each certificate representing the Onsite Stock
shall (unless otherwise permitted or unless the securities evidenced by such
certificate shall have been registered under the Securities Act) be stamped or
otherwise imprinted with a legend in the following form (in addition to any
legend required under applicable state securities laws):
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR OFFERED FOR
SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE
SECURITIES UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAW OR AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION
IS NOT REQUIRED."
Upon request of the holder of such a certificate, the Company shall
remove the foregoing legend from the certificate or issue to such holder a new
certificate therefor free of any transfer legend, if, with such request, the
Company shall have received the opinion referred to in Section 6.3.1.
6.3. Notice of Proposed Transfer.
6.3.1. Notice. Prior to any proposed transfer of any of the
Onsite Stock, the Investor shall give written notice to the Company of its
intention to effect such transfer. Each such notice shall describe the manner
and circumstances of the proposed transfer in sufficient detail, and shall be
accompanied by a written opinion of legal counsel reasonably satisfactory to the
Company, addressed to the Company and reasonably satisfactory in form and
substance to the Company's counsel, to the effect that the proposed transfer of
the Onsite Stock may be
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effected without registration under the Securities Act, whereupon the Investor
shall be entitled to transfer the Onsite Stock, subject to the restrictions
contained in this Agreement, in accordance with the terms of the notice
delivered by the Investor to the Company.
6.3.2. Certificate for Transferred Onsite Stock. Each
certificate evidencing the Onsite Stock transferred as above provided shall bear
the appropriate restrictive legend set forth in Section 6.2 above, except that
such certificate shall not bear such restrictive legend if the opinion of
counsel referred to above is to the further effect that such legend is not
required in order to establish compliance with any provisions of the Securities
Act. Each transferee of the Onsite Stock shall agree with respect to those
securities to be bound by the terms of this subsection.
6.4. Standstill Agreement.
6.4.1. Investor agrees that for a period of five (5) years
from the date of this Agreement (the "Standstill Period"), except as otherwise
permitted or contemplated by this Agreement, Investor will not, directly or
indirectly, nor will it permit any of its affiliates, as that term is defined in
Section 3.2 hereof, to, from or after the date such person becomes an affiliate,
without the prior approval of a majority vote of the directors of the Company's
board of directors (a "Requisite Board Vote") who are not the designated
directors of the Investor or otherwise affiliates of Investor (the
"Disinterested Directors") do any of the following:
(a) acquire, or offer to acquire, whether by
purchase, gift or by joining a partnership or other group (as
defined in Section 13(d)(3) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")), any shares of the
Company's common or preferred stock (collectively, the "Voting
Stock"), securities convertible into, exchangeable for, or
exercisable for Voting Stock which would result in the
Investor holding in excess of forty-five percent (45%) of the
Company's outstanding securities on a fully diluted basis at
the time of any such proposed acquisition, except as
contemplated by this Agreement; or
(b) (i) solicit, initiate or participate in any
"solicitation" of "proxies" or become a "participant" in any
"election contest" (as such terms are defined or used in
Regulation 14A under the Exchange Act, disregarding clause
(iv) of Rule 14a-1(1)(2) and including any exempt solicitation
pursuant to Rule 14a-2(b)(1)); call, or in any way participate
in a call, for any special meeting of stockholders of the
Company (or take any action with respect to acting by written
consent of the stockholders); request or take any action to
obtain or retain any list of holders of any securities of the
Company; initiate or propose any stockholder proposal or
participate in the making of, or solicit stockholders for the
approval of, one or more stockholder proposals relating to the
Company's Voting Stock; (ii) deposit any Voting Stock in a
voting trust or subject them to any voting agreement or
arrangements, except as provided for herein; (iii) form, join,
or in any way participate in a group with respect to any
shares of Voting Stock, or any
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securities the ownership thereof would make the owner a
beneficial owner of Voting Stock; (iv) otherwise act to
control or influence the Company or the management, the
Disinterested Directors, policies or affairs of the Company;
(v) disclose any intent, purpose, plan or proposal with
respect to this Agreement or the Company, its affiliates or
the board of directors, management, policies, or affairs or
securities or assets of the Company or its affiliates that is
securities or assets of the Company or its Affiliates that is
not consistent with this Agreement or the Purchase Agreement,
including any intent, purpose, plan or proposal that is
conditioned upon, or that would require the Company or any of
its Affiliates to make public disclosure relating to any such
intent, purpose, plan, proposal or condition; or (vi) assist,
advise, encourage or act in concert with any person with
respect to, or seek to do, any of the foregoing.
6.4.2. If, at any time four or more quarterly dividends, whether or not
consecutive, on the Series C Convertible Preferred Stock shall be in default, in
whole or in part, if the Investor has exercised its rights to elect a majority
of the directors of the Company's board, all directors shall be entitled to vote
pursuant to Section 6.4.1 above. Such modification to the provisions of Section
6.4.1 shall continue until all dividends accrued on the Series C Convertible
Preferred Stock shall have been paid or set apart for payment, at which time
Section 6.4.1 shall again be in force as written.
6.4.3. Nothing in this Agreement shall preclude or prevent Investor
from making a counter-offer to acquire the Company in the event that a third
party makes an unsolicited bona fide publicly announced offer to acquire control
of the Company pursuant to a tender offer, merger, consolidation, share
exchange, purchase of a substantial portion of assets, business combination or
other similar transaction (a "Third Party Offer") and (B) the Company thereafter
(i) issues a statement recommending the Third Party Offer to its shareholders or
(ii) the Company either issues a statement not recommending the Third Party
Offer or takes no position with respect to such offer but is required by a court
to furnish the party making the Third Party Offer a list of shareholders of the
Company.
6.5. Investor's Preemptive Rights. The Company hereby grants to the
Investor the right, on the terms (including the limitations contained in Section
6.4) set forth below, to purchase the Investor's pro rata share of New
Securities (as defined below) which the Company may, from time to time, propose
to sell and issue for cash or other consideration. The pro rata share is the
ratio of (x) the underlying Common Stock and Preferred Stock on a fully diluted
basis held by the Investor at the time the New Securities are to be sold, or
otherwise transferred, to (y) the total number of shares of common stock then
issued and outstanding plus the number of shares of underlying common stock
represented by all then outstanding securities convertible at a price below the
then Average Closing Price, as that term is defined in Section 7.1, into or
exercisable at a price below the then Average Closing Price, as that term is
defined in Section 7.1, for shares of common stock held by any Person. The right
shall be subject to the following provisions:
1055(3).nks 10 November 10, 1997
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In the case of securities to be issued pursuant to the acquisition of
another corporation or entity by the Company by merger, purchase of all or
substantially all of the assets or other reorganization whereby the Company
shall become the owner of more than 50% of the voting power of such corporation,
the price at which the Investor may exercise its pre-emption rights shall be the
Average Closing Price, as that term is defined in Section 7.1, for the twenty
day period ending the day before a public announcement of the merger or other
transaction is made; provided, however, that prior to December 31, 1998, such
price shall be at least $1.00, but not more than $2.00.
"New Securities" shall mean any authorized but unissued shares, and any
treasury shares, of capital stock of the Company and all rights, options or
warrants to purchase capital stock, and securities of any type whatsoever that
are, or may become, convertible into Common Stock; provided, however, that the
term "New Securities" does not include:
- securities issued under this Agreement;
- shares of Class A Common issued upon conversion of
options and warrants issued and outstanding as of the Closing Date;
- securities issued in connection with any stock split, stock
dividend or reclassification of Class A Common distributable on a pro
rata basis to all holders of Class A Common;
- shares of Class A Common issued pursuant to options
outstanding and/or granted after the date hereof to any senior
management personnel or directors or pursuant to any Employee Benefit
Plan as that term is defined in SEC Rule 405 entered into by the
Company and approved by the Company's Board of Directors.
In the event the Company proposes to undertake an issuance of New
Securities, it shall give the Investor reasonable written notice of its
intention, describing the type of New Securities, the consideration and the
general terms upon which the Company proposes to issue the same. The Investor
shall have a reasonable time under the circumstances to agree to purchase its
pro rata share of such New Securities for the cash or cash equivalent
consideration and upon the general terms specified in the notice by giving
written notice to the Company and stating therein the quantity of New Securities
to be purchased. The New Securities shall be purchased simultaneously with the
closing of the offering of the New Securities if practical, but in no event
later than 15 days after the closing at the Company's election.
The purchase rights granted under this Section shall be exercisable
only by the Investor and its successors but not its assigns, unless such assign
is an affiliate of the Investor. Upon request of the Investor or its successors,
the Company will promptly inform the requesting party in writing of (x) the
number of shares of common stock issued and outstanding and (y) the number of
shares of underlying common stock represented by then outstanding securities
convertible into or exercisable for shares of common stock held by any Person,
in each case as
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of the date of such notice by the Company. The right of the Investor or
successor to the private preemptive right herein provided shall be determined on
the basis of the information contained in such notice, irrespective of any
exercise of options or conversion rights or like rights to acquire shares of
Common Stock of the Company after the date of such notice.
7. ADDITIONAL COVENANTS OF THE PARTIES.
7.1. Right to Purchase Additional Shares of Class A Common Stock.
Investor may, at its option and upon notice to the Company, between June 30,
1998 and December 31, 1998, purchase an additional two million shares of Class A
Common Stock at a per share price equal to the Average Closing Price of the
Class A Common Stock, but in no event less than $1.00 per share nor greater than
$2.00 per share. The purchase of the additional shares shall be completed within
5 business days.
"Average Closing Price" shall mean the average closing price for the
Company's Class A Common Stock for a period of 20 consecutive trading days as
quoted on a national securities exchange, or, if the Company's Class A Common
Stock is not traded on a national securities exchange, then on the NASDAQ Stock
Market, or, if the Company's Class A Common Stock is not traded on the NASDAQ
Stock Market, then on the OTC Bulletin Board or similar public market.
7.2. Call for Additional Shares of Series C Convertible Preferred
Stock. Provided that the Company is not in default with respect to the dividends
on the Series C Convertible Preferred Stock, the Company may, at its option and
upon 10 business days' written notice to the Investor, until December 31, 1998,
require Investor to purchase up to an additional four hundred thousand shares of
Series C Convertible Preferred Stock at $5.00 per share, using up to two
separate calls of at least 100,000 shares each, but limited to one such call per
quarter. The purchase of the additional shares shall be completed within 5
business days.
7.3. Securities Law Filings Undertaking. So long as the Investor is a
holder of the Company's common stock or preferred stock, the Company will use
its best efforts to maintain adequate public information as is necessary or
appropriate such that the Company qualifies to use a Form S-3 Registration
Statement and such that the Investor may transfer any of the Company's common
stock or preferred stock held by it pursuant to Rule 144 under the Securities
Act. All such filings shall be made at the Company's expense.
8. REGISTRATION RIGHTS.
8.1. Demand and Piggy-back Rights. The Company shall enter into a
Registration Rights Agreement in the form attached hereto as Exhibit C, pursuant
to which the Investor shall be granted demand registration rights and piggy-back
registration rights.
1055(3).nks 12 November 10, 1997
<PAGE>
9. MISCELLANEOUS
9.1. Entire Agreement. This Agreement and the schedules and other
documents referred to herein constitute the entire agreement among the parties
and no party shall be liable or bound to any other party in any manner by any
warranties, representations, or covenants except as specifically set forth
herein or therein.
9.2. Survival of Warranties. The warranties, representations and
covenants of the Company and the Investor, jointly and severally, contained in
or made pursuant to this Agreement shall survive the execution and delivery of
this Agreement and the Closing Date.
9.3. Successors and Assigns. Except as otherwise provided herein, the
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties. Nothing in
this Agreement, express or implied, is intended to confer upon any party other
than the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
9.4. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of California.
9.5. Counterparts. This Agreement may be executed in one or more
counterparts, each of which may be deemed an original, but all of which together
shall constitute one and the same instrument. This Agreement may be executed by
a party and sent to the other parties via facsimile transmission and the
facsimile transmitted copy shall have the same integrity, force and effect as an
original document.
9.6. Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
9.7. Notices. All notices or other communications required hereunder
shall be in writing and shall be sufficient in all respects and shall be deemed
delivered after 5 days if sent via registered or certified mail, postage
prepaid; the next day if sent by overnight courier service; or one business day
after transmission, if sent by facsimile, to the following:
If to Company : Onsite Energy Corporation
701 Palomar Airport Rd., #200
Carlsbad, CA 92009
Attn: Richard T. Sperberg
Fax: (760) 931-2405
1055(3).nks 13 November 10, 1997
<PAGE>
with copies to: Bartel Eng Linn & Schroder
300 Capitol Mall, Suite 1100
Sacramento, CA 95814
Attn: Scott E. Bartel, Esq.
Fax: (916) 442-3442
If to Investor: Westar Capital, Inc.
PO Box 889
818 Kansas Avenue
Topeka, KS 66601
Attn: Rita A. Sharpe
Fax: (785) 575-1771
with copies to: Westar Capital, Inc.
PO Box 889
818 Kansas Avenue
Topeka, KS 66601
Attn: John K. Rosenberg
Fax: (785) 575-1788
Any party hereto may change its address for purposes hereof by notice to all
other parties hereto.
9.8. Dispute Resolution. No party to this Agreement shall be entitled
to take legal action with respect to any dispute relating hereto until it has
complied in good faith with the following alternative dispute resolution
procedures. This Section shall not apply to the extent it is deemed necessary to
take legal action immediately to preserve a party's adequate remedy.
9.8.1. Negotiation. The parties shall attempt promptly and in
good faith to resolve any dispute arising out of or relating to this Agreement,
through negotiations between representatives who have authority to settle the
controversy. Any party may give the other party written notice of any such
dispute not resolved in the normal course of business. Within 20 days after
delivery of the notice, representatives of both parties shall meet at a mutually
acceptable time and place, and thereafter as often as they reasonably deem
necessary, to exchange information and to attempt to resolve the dispute, until
the parties conclude that the dispute cannot be resolved through unassisted
negotiation. Negotiations extending sixty days after notice shall be deemed at
an impasse, unless otherwise agreed by the parties.
If a negotiator intends to be accompanied at a meeting by an attorney,
the other negotiator(s) shall be given at least three working days' notice of
such intention and may also be accompanied by an attorney. All negotiations
pursuant to this clause are confidential and shall be treated as compromise and
settlement negotiations for purposes of the Federal and state Rules of Evidence.
1055(3).nks 14 November 10, 1997
<PAGE>
9.8.2. ADR Procedure. If a dispute with more than $20,000.00
at issue has not been resolved within 60 days of the disputing party's notice, a
party wishing resolution of the dispute ("Claimant") shall initiate assisted
Alternative Dispute Resolution ("ADR) proceedings as described in this Section.
Once the Claimant has notified the other ("Respondent") of a desire to initiate
ADR proceedings, the proceedings shall be governed as follows: By mutual
agreement, the parties shall select the ADR method they wish to use. That ADR
method may include arbitration, mediation, mini-trial, or any other method which
best suits the circumstances of the dispute. The parties shall agree in writing
to the chosen ADR method and the procedural rules to be followed within 30 days
after receipt of notice of intent to initiate ADR proceedings. To the extent the
parties are unable to agree on procedural rules in whole or in part, the current
Center for Public Resources ("CPR") Model Procedure for Mediation of Business
Disputes, CPR Model Mini-trial Procedure, or CPR Commercial Arbitration
Rules--whichever applies to the chosen ADR method--shall control, to the extent
such rules are consistent with the provisions of this Section. If the parties
are unable to agree on an ADR method, the method shall be arbitration.
The parties shall select a single Neutral third party to preside over
the ADR proceedings, by the following procedure: Within 15 days after an ADR
method is established, the Claimant shall submit a list of 5 acceptable Neutrals
to the Respondent. Each Neutral listed shall be sufficiently qualified,
including demonstrated neutrality, experience and competence regarding the
subject matter of the dispute. A Neutral who is an attorney or former judge
shall be deemed to have adequate experience. None of the Neutrals may be present
or former employees, attorneys, or agents of either party. The list shall supply
information about each Neutral, including address, and relevant background and
experience (including education, employment history and prior ADR assignments).
Within 15 days after receiving the Claimant's list of Neutrals, the Respondent
shall select one Neutral from the list, if at least one individual on the list
is acceptable to the Respondent. If none on the list are acceptable to the
Respondent, the Respondent shall submit a list of 5 Neutrals, together with the
above background information, to the Claimant. Each of the Neutrals shall meet
the conditions stated above regarding the Claimant's Neutrals. Within 15 days
after receiving the Respondent's list of Neutrals, the Claimant shall select one
Neutral, if at least one individual on the list is acceptable to the Respondent.
If none on the list are acceptable to the Claimant, then the parties shall
request assistance from the Center for Public Resources, Inc., to select a
Neutral.
The ADR proceeding shall take place within 30 days after the Neutral
has been selected. The Neutral shall issue a written decision within 30 days
after the ADR proceeding is complete. Each party shall be responsible for an
equal share of the costs of the ADR proceeding. The parties agree that any
applicable statute of limitations shall be tolled during the pendency of the ADR
proceedings, and no legal action may be brought in connection with this
Agreement during the pendency of an ADR proceeding.
The Neutral's written decision shall become final and binding on the
parties, unless a party objects in writing within 30 days of receipt of the
decision. The objecting party may then
1055(3).nks 15 November 10, 1997
<PAGE>
file a lawsuit in any court allowed by this Agreement. The Neutral's written
decision shall be admissible in the objecting party's lawsuit.
9.9. Amendments and Waivers. Any term of this Agreement may be amended
and the observance of any term of this Agreement may be waived (either generally
or in a particular instance and either retroactively or prospectively), only
with the written consent of the parties. Any amendment or waiver effected in
accordance with this paragraph shall be binding upon the Investor, its
successors or assigns, and each future holder of such securities and the
Company. A waiver by any party hereto of a default in the performance of this
Agreement shall not operate as a waiver of any future or other default, whether
of a like or different kind.
9.10. Severability. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the parties shall use their efforts to substitute
provisions of substantially the same effect. The balance of the Agreement shall
be interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms.
9.11. Counterparts; Signatures. This Agreement may be executed in one
or more counterparts, each of which may be deemed an original, but all of which
together shall constitute one and the same instrument. This Agreement may be
executed by a party and sent to the other parties via facsimile transmission and
the facsimile transmitted copy shall have the same integrity, force and effect
as an original document.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
COMPANY:
Onsite Energy Corporation
By:
Richard T. Sperberg, President
INVESTOR:
Westar Capital, Inc.
By:
Rita A. Sharpe, President
1055(3).nks 16 November 10, 1997
<PAGE>
Stock Subscription Agreement
Schedule 2.2
Onsite Shareholders (Greater than 5% Ownership)
(as of 10/28/97)
Name Share Ownership
ProActive Partners, L.P. 1,599,172
Lagunitas Partners, L.P. 820,477
Richard T. Sperberg 1,810,912
William M. Gary 1,725,912
<PAGE>
Stock Subscription Agreement
Schedule 2.6
Security Interest in Onsite Assets
Secured Party Assets Subject to Security Interest
EUA Cogenex Corp. Contracts and revenues associated with SCE
DSM contract and associated security deposits
Copelco Capital/Minolta Business Systems Copier
Ikon Capital/Cash-Lewis Telecopier
Dana Commercial Credit Computer equipment
ProActive Partners, L.P. General security in all Onsite assets
(securing Letter of Credit)
Richard T. Sperberg General security in all Onsite assets
(securing indemnification agreement)
<PAGE>
October 31, 1997
Westar Capital, Inc.
P. O. Box 889
818 Kansas Avenue
Topeka, KS 66601
Re: Onsite Energy Corporation
Opinion Letter Pursuant to Stock Subscription Agreement
Ladies and Gentlemen:
We act as counsel for Onsite Energy Corporation, a Delaware corporation
(the "Company"), in connection with the Stock Subscription Agreement dated
October 28, 1997, between Westar Capital, Inc., a Kansas corporation ("Westar"),
and the Company ("Agreement"). This letter is delivered to Westar at the request
of the Company pursuant to Section 1.6.2.(d) of the Agreement. Except as
otherwise defined herein, the capitalized terms in this letter shall have the
meanings ascribed to them in the Agreement.
This Opinion Letter is governed by, and shall be interpreted in
accordance with, the Legal Opinion Accord (the "Accord") of the ABA Section of
Business Law (1991). As a consequence, it is subject to a number of
qualifications, exceptions, definitions, limitations on coverage and other
limitations, all as more particularly described in the Accord, and this Opinion
Letter should be read in conjunction therewith. In addition, this Opinion Letter
shall be governed by, and shall be interpreted in accordance with, the
"California Provisions" and the "California Generic Exception" as defined in the
Business Law Section of the California State Bar Report on the Third-Party Legal
Opinion Report of the ABA Section of Business Law (dated May 1992), and is
therefore subject to a number of additional qualifications, exceptions, and
understandings, all as more particularly described in the California Provisions
and California Generic Exception, and this Opinion Letter should also be read in
conjunction therewith. The law covered by the opinions expressed herein is
limited to the Federal Law of the United States and the Law of the States of
California and Delaware.
<PAGE>
Westar Capital, Inc.
October 31, 1997
Page 2
Whenever our opinion herein with respect to the existence or absence of
facts or circumstances is qualified by the phrase "to the best of our
knowledge", it is intended to indicate that during the course of our
representation, no information has come to our attention that would give us
actual knowledge of the existence of such facts or circumstances. However, we
have not undertaken any special or independent investigation to determine the
existence or absence of such facts or circumstances, and no inference as to our
knowledge of the existence of such facts or circumstances should be drawn merely
from our representation herein.
Based upon and subject to the foregoing, as of the date hereof, we are
of the opinion that:
1. The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware, has all requisite
corporate power and authority to carry on its business as now conducted, and to
own, lease and operate any properties related to its business, except where the
failure to have such power and authority would not have a material adverse
effect. The Company is qualified to do business as a foreign corporation in the
State of California, and to our knowledge, in all other jurisdictions in which
such qualification is required other than those in which failure to qualify
would not have a material adverse effect on the Company's operations or
financial condition.
2. The Company has all requisite legal and corporate power to execute
and deliver the Agreement and to carry out and perform its obligations under the
Agreement.
3. The Agreement, when executed and delivered, constitutes a valid,
legally binding and enforceable obligation of the Company, except as the
enforceability may be subject to or limited by laws of general application
relating to bankruptcy, insolvency or the relief of debtors and other laws of
general application affecting enforcement of creditors' rights generally, or
rules of law and principles of equity governing specific performance, injunctive
relief or other equitable remedies, regardless of whether such enforceability is
considered in a proceeding in equity or at law.
4. The execution, delivery and performance of the Agreement
by the Company will not result in a violation of any provision of
<PAGE>
Westar Capital, Inc.
October 31, 1997
Page 3
its Certificate of Incorporation or Bylaws as in effect on and as of the Closing
Date or, to our knowledge, of any provision of any material mortgage, indenture,
agreement, instrument or contract to which it is a party, of any provision of
any federal or state judgment, writ, decree, order, statute, rule or
governmental regulation applicable to the Company in any manner which would be
material to the Agreement, the conduct of the Company's business or its
financial condition.
5. The Common Stock and Preferred Stock, when sold, issued, and
delivered for the consideration expressed in, and in compliance with, the
provisions of the Agreement will be duly authorized, validly issued, fully paid
and nonassessable.
The phrase "Primary Lawyer Group," as used in the Accord, is hereby
modified and for purposes of applying the Accord to this Opinion Letter the
Primary Lawyer Group means Scott E. Bartel, Esq.
and Daniel B. Eng, Esq. of our firm.
Our opinion is limited solely to matters set forth herein. This letter
is provided to you solely for your benefit and in connection with the
transactions provided for in or contemplated by the Agreement, and shall not be
relied upon by any other person or for any other purpose without our prior
written consent.
Very truly yours,
<PAGE>
STOCKHOLDERS AGREEMENT OF ONSITE ENERGY CORPORATION
THIS STOCKHOLDERS AGREEMENT, dated October 28, 1997 (the "Agreement"),
is made and entered into by and among the following parties: (i) the
shareholders of Onsite Energy Corporation identified in Exhibit A hereto (the
"Onsite Shareholders"); and (ii) Westar Capital, Inc., a Kansas corporation
("Capital").
RECITALS
WHEREAS, Capital and Onsite Energy Corporation, a Delaware corporation
("Onsite") have entered into a Stock Subscription Agreement dated October 28,
1997 (the "Stock Subscription Agreement") pursuant to which, among other things,
Westar shall acquire shares of the Class A Common Stock of Onsite, par value
$0.001 ("Onsite Common Stock"), and shares of the Series C Convertible Preferred
Stock of Onsite, par value $0.001 ("Onsite Preferred Stock");
WHEREAS, Section 4.5(a) of the Stock Subscription Agreement provides as
a condition precedent to closing that the Onsite Shareholders and Capital shall
have entered into a voting agreement wherein Capital shall have the right to
elect one director, upon the initial issuance of the Onsite Common Stock, with
rights to elect additional directors accruing as set forth herein;
WHEREAS, Capital and Onsite are parties to that certain Plan and
Agreement of Reorganization dated October 28, 1997 (the "Reorganization
Agreement") pursuant to which, among other things, Westar shall receive shares
of the Class A Common Stock of Onsite, par value $0.001 ("Onsite Common Stock");
WHEREAS, Section 2.4 of the Reorganization Agreement also
provides for a Stockholders Agreement; and
WHEREAS, the parties desire to enter into this Stockholders Agreement
for the purpose of effectuating the intent of Section 4.5(a) of the Stock
Subscription Agreement and Section 2.4 of the Reorganization Agreement.
NOW, THEREFORE, for the mutual promises contained herein and in the
Stock Subscription Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the Onsite Shareholders
and Capital hereby AGREE AS FOLLOWS:
1. Shares Subject to Agreement. The number of shares of
Onsite Common Stock listed opposite the names of the Onsite
Shareholders in Exhibit A hereto shall be subject to this
1058(4).nks 1 November 10, 1997
<PAGE>
Agreement. Exhibit A is incorporated herein and made a part of this Agreement by
this reference. In addition, the number of shares of Onsite Common Stock listed
opposite the name of Capital in Exhibit B hereto, and all Onsite Class A Common
shares underlying the number of shares of Onsite Preferred Stock listed opposite
the name of Capital in Exhibit B shall be subject to this Agreement. Exhibit B
is incorporated herein and made a part of this Agreement by this reference.
2. Right to Nominate Directors. Upon the initial issuance
of the Onsite Common Stock and Onsite Preferred Stock pursuant to
the Stock Subscription Agreement, Capital shall have the right to
recommend one director to the nominating committee of the Onsite
board of directors. Thereafter, except as provided in this
Agreement, Capital shall be entitled to recommend additional
directors, calculated as if all of its stockholdings, and the
stockholdings of its sister corporation, Westar Energy, Inc., a
Kansas corporation ("Energy") had been converted into Onsite Common
Stock and were voted cumulatively with all classes of Onsite's
voting stock and as if the board of directors were not classified
and all director terms were expiring; provided, however, that prior
to conversion of Capital's preferred stock into Onsite Common
Stock, the number of directors Capital shall be entitled to
recommend shall be reduced by one below the number Capital would be
entitled to recommend under cumulative voting, and provided
further, that, during the term of this Agreement, the number of
directors Capital is entitled to recommend in no event shall be
reduced below one.
Provided, however, that nothing provided herein shall reduce the right
of the holders of the Series C Preferred Stock to elect additional directors in
the event of default in payment of preferred dividends as provided in the
Certificate of Designation of Series C Convertible Preferred Stock.
3. Agreement to Nominate Directors and Vote Shares. The parties agree
that the nominating committee of the Onsite board of directors shall have the
right to nominate the remaining directors for the board of Onsite. All shares
subject to this Agreement as identified in Section 1 above shall vote in favor
of all of the nominees of both Capital and the Onsite nominating committee at
all elections of directors of Onsite held during the term of this Agreement.
4. Agreement to Take Necessary Steps. In the event the nominating
committee of the Onsite board of directors does not implement the
recommendations of Capital as provided in Section 2, the parties to this
Agreement shall take all necessary steps to nominate and elect Capital's
representatives.
1058(4).nks 2 November 10, 1997
<PAGE>
5. Share Certificate Legend. Each certificate representing the Onsite
Common Stock and Onsite Preferred Stock held by the Onsite Shareholders and by
Capital and subject to this Agreement shall be stamped or otherwise imprinted
with a legend in the following form (in addition to any legend required under
applicable securities laws):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A
STOCKHOLDERS AGREEMENT DATED OCTOBER 28, 1997 BY AND BETWEEN CERTAIN
SHAREHOLDERS OF ONSITE ENERGY CORPORATION AND WESTAR CAPITAL, INC., A
COPY OF WHICH MAY BE OBTAINED FREE OF CHARGE FROM THE COMPANY UPON
REQUEST.
Upon the sale of the Onsite Common Stock and/or the Onsite Preferred
Stock subject to this Agreement (i) by any of the Onsite Shareholders and with
the written consent of Capital (which consent shall not be unreasonably withheld
or delayed) or, (ii) by Capital and with the written consent of the Onsite
Shareholders holding a majority of the shares subject to this Agreement (which
consent shall not be unreasonably withheld or delayed), each new share
certificate issued in connection with such sale and receipt of the appropriate
written consent shall be free of the foregoing legend.
6. Termination of Agreement. This Agreement shall terminate the earlier
of: (i) five (5) years after the date first written above, or (ii) the date upon
which the stockholdings of Capital and its affiliates counted as if converted to
Onsite Common Stock, falls below 10% of the outstanding Common Stock of the
Company on a fully-diluted basis, calculated by adding the total number of
shares of common stock then issued and outstanding to the number of shares of
underlying common stock represented by all then outstanding (i) preferred stock
convertible into common stock, and (ii) any other outstanding securities
convertible into or exercisable for shares of common stock held by any Person,
which are at a price below the then Average Closing Price, as that term is
defined in Section 7.1 of the Stock Subscription Agreement.
7. Merger or Consolidation. If Onsite is merged into or consolidated
with another corporation, or all or substantially all of the assets of Onsite
are transferred to another corporation, then the term "Onsite" shall be
construed to include the successor corporation; and the Onsite Shareholders and
Capital shall receive and hold under this Agreement any shares of the successor
corporation received by them as a result of their ownership of shares held by
them under this Agreement before the merger, consolidation, or transfer.
Certificates issued and outstanding under this Agreement at the time of the
merger, consolidation, or transfer may remain outstanding, but the Onsite
Shareholders and Capital may, at their discretion, substitute for these voting
certificates new certificates in appropriate form.
1058(4).nks 3 November 10, 1997
<PAGE>
8. Necessary Acts. The parties shall perform any acts, including
executing any documents, that may be reasonably necessary to carry out fully the
provisions and intent of this Agreement.
9. Entire Agreement. This Agreement and the Exhibits and other
documents referred to herein constitute the entire agreement among the parties
and no party shall be liable or bound to any other party in any manner by any
warranties, representations, or covenants except as specifically set forth
herein or therein.
10. Assignment. Neither this Agreement nor any duties, rights or
obligations under this Agreement may be assigned by either party without the
prior written consent of the other, which consent shall not be unreasonably
withheld or delayed, except Capital may assign this Agreement to an affiliate
without consent.
11. Successors and Assigns. Except as otherwise provided herein, the
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors, heirs and assigns of the parties.
Nothing in this Agreement, express or implied, is intended to confer upon any
party other than the parties hereto or their respective successors, heirs and
assigns any rights, remedies, obligations, or liabilities under or by reason of
this Agreement, except as expressly provided in this Agreement.
12. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of California.
13. Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
14. Notices. All notices or other communications required hereunder
shall be in writing and shall be sufficient in all respects and shall be deemed
delivered after 5 days if sent via registered or certified mail, postage
prepaid; the next day if sent by overnight courier service; or one business day
after transmission, if sent by facsimile to the following:
If to an Onsite Shareholder:
The address appearing for him or her
on Exhibit A attached hereto
with copies to: Onsite Energy Corporation
701 Palomar Airport Road, Suite 200
Carlsbad, CA 92009
Attn: Richard T. Sperberg
Fax: (760) 931-2405
1058(4).nks 4 November 10, 1997
<PAGE>
Bartel Eng Linn & Schroder
300 Capitol Mall, Suite 1100
Sacramento, CA 95814
Attn: Scott E. Bartel, Esq.
Fax: (916) 442-3442
If to Capital: Westar Capital, Inc.
PO Box 889
818 Kansas Avenue
Topeka, KS 66601
Attn: Rita A. Sharpe
Fax: (785) 575-1771
with copies to: Westar Capital, Inc.
PO Box 889
818 Kansas Avenue
Topeka, KS 66601
Attn: John K. Rosenberg
Fax: (785) 575-1788
Any party hereto may change its address for purposes hereof by notice to all
other parties hereto.
15. Remedies. The parties agree that in addition to all other remedies
available at law or in equity, the parties shall be entitled to specific
performance of the obligations of each party to this Agreement and immediate
injunctive relief. The parties also agree that if an action is brought in equity
to enforce a party's obligations, no party shall argue, as a defense, that there
is an adequate remedy at law.
16. Dispute Resolution. Notwithstanding Section 15 above with respect
to immediate injunctive relief, no party to this Agreement shall be entitled to
take legal action with respect to any dispute relating hereto until it has
complied in good faith with the following alternative dispute resolution
procedures. This Section shall not apply to the extent it is deemed necessary to
take legal action immediately to preserve a party's adequate remedy.
a. Negotiation. The parties shall attempt
promptly and in good faith to resolve any dispute arising out of or relating to
this Agreement, through negotiations between representatives who have authority
to settle the controversy. Any party may give the other party written notice of
any such dispute not resolved in the normal course of business. Within 20 days
after delivery of the notice, representatives of both parties shall meet at a
mutually acceptable time and place, and thereafter as often as they reasonably
deem necessary, to exchange information and to attempt to resolve the dispute,
until the parties conclude that the dispute cannot be resolved through
unassisted negotiation.
1058(4).nks 5 November 10, 1997
<PAGE>
Negotiations extending sixty days after notice shall be deemed at an impasse,
unless otherwise agreed by the parties.
If a negotiator intends to be accompanied at a meeting by an attorney,
the other negotiator(s) shall be given at least three working days' notice of
such intention and may also be accompanied by an attorney. All negotiations
pursuant to this clause are confidential and shall be treated as compromise and
settlement negotiations for purposes of the Federal and state Rules of Evidence.
b. ADR Procedure. If a dispute with more than
$20,000.00 at issue has not been resolved within 60 days of the disputing
party's notice, a party wishing resolution of the dispute ("Claimant") shall
initiate assisted Alternative Dispute Resolution ("ADR") proceedings as
described in this Section. Once the Claimant has notified the other
("Respondent") of a desire to initiate ADR proceedings, the proceedings shall be
governed as follows: By mutual agreement, the parties shall select the ADR
method they wish to use. That ADR method may include arbitration, mediation,
mini-trial, or any other method which best suits the circumstances of the
dispute. The parties shall agree in writing to the chosen ADR method and the
procedural rules to be followed within 30 days after receipt of notice of intent
to initiate ADR proceedings. To the extent the parties are unable to agree on
procedural rules in whole or in part, the current Center for Public Resources
("CPR") Model Procedure for Mediation of Business Disputes, CPR Model Mini-trial
Procedure, or CPR Commercial Arbitration Rules--whichever applies to the chosen
ADR method--shall control, to the extent such rules are consistent with the
provisions of this Section. If the parties are unable to agree on an ADR method,
the method shall be arbitration.
The parties shall select a single Neutral (as defined by CPR) third
party to preside over the ADR proceedings, by the following procedure: Within 15
days after an ADR method is established, the Claimant shall submit a list of 5
acceptable Neutrals to the Respondent. Each Neutral listed shall be sufficiently
qualified, including demonstrated neutrality, experience and competence
regarding the subject matter of the dispute. A Neutral who is an attorney or
former judge shall be deemed to have adequate experience. None of the Neutrals
may be present or former employees, attorneys, or agents of either party. The
list shall supply information about each Neutral, including address, and
relevant background and experience (including education, employment history and
prior ADR assignments). Within 15 days after receiving the Claimant's list of
Neutrals, the Respondent shall select one Neutral from the list, if at least one
individual on the list is acceptable to the Respondent. If none on the list are
acceptable to the Respondent, the Respondent shall submit a list of 5 Neutrals,
together with the above background information, to the Claimant. Each of the
Neutrals shall meet the conditions stated
1058(4).nks 6 November 10, 1997
<PAGE>
above regarding the Claimant's Neutrals. Within 15 days after receiving the
Respondent's list of Neutrals, the Claimant shall select one Neutral, if at
least one individual on the list is acceptable to the Respondent. If none on the
list are acceptable to the Claimant, then the parties shall request assistance
from the Center for Public Resources, Inc., to select a Neutral.
The ADR proceeding shall take place within 30 days after the Neutral
has been selected. The Neutral shall issue a written decision within 30 days
after the ADR proceeding is complete. Each party shall be responsible for an
equal share of the costs of the ADR proceeding. The parties agree that any
applicable statute of limitations shall be tolled during the pendency of the ADR
proceedings, and no legal action may be brought in connection with this
Agreement during the pendency of an ADR proceeding.
The Neutral's written decision shall become final and binding on the
parties, unless a party objects in writing within 30 days of receipt of the
decision. The objecting party may then file a lawsuit in any court allowed by
this Agreement. The Neutral's written decision shall be admissible in the
objecting party's lawsuit.
17. Amendments and Waivers. Any term of this Agreement may be amended
and the observance of any term of this Agreement may be waived (either generally
or in a particular instance and either retroactively or prospectively), only
with the written consent of the parties. Any amendment or waiver effected in
accordance with this paragraph shall be binding upon the parties, their
successors, heirs or assigns, and each future holder of such securities. A
waiver by any party hereto of a default in the performance of this Agreement
shall not operate as a waiver of any future or other default, whether of a like
or different kind.
18. Severability. If one or more provisions of this Agreement are held
to be unenforceable under applicable law, such provision shall be excluded from
this Agreement and the parties shall use their efforts to substitute provisions
of substantially the same effect. The balance of this Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms.
19. Counterparts; Signatures. This Agreement may be executed in one or
more counterparts, each of which may be deemed an original, but all of which
together shall constitute one and the same instrument. This Agreement may be
executed by a party and sent to the other parties via facsimile transmission and
the facsimile transmitted copy shall have the same integrity, force and effect
as an original document.
1058(4).nks 7 November 10, 1997
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
ONSITE SHAREHOLDERS:
By:
Richard T. Sperberg, an individual
By:
William M. Gary, III, an individual
PROACTIVE PARTNERS, L.P.
By:
Charles McGettigan, General Partner
of ProActive Investment Managers, LP
General Partner
LAGUNITAS PARTNERS, L.P.
By:
Jon D. Gruber, General Partner of
Gruber & McBaine Capital Management,
General Partner
CAPITAL:
Westar Capital, Inc.
By:
Rita A. Sharpe, President
1058(4).nks 8 November 10, 1997
<PAGE>
EXHIBIT A
ONSITE SHAREHOLDERS AND SHARES SUBJECT TO THIS AGREEMENT
Shareholder and Address Shares
Richard T. Sperberg 1,216,097
6823 El Fuerte
Carlsbad, CA 92009
William M. Gary 1,159,016
3775 San Gregorio
San Diego, CA 92130
Proactive Partners, LP 1,073,905
c/o Charles McGettigan
50 Osgood Place, Penthouse
San Francisco, CA 94133
Lagunitas Partners, LP 550,982
50 Osgood Place, Penthouse
San Francisco, CA 94133
4,000,000
<PAGE>
EXHIBIT B
CAPITAL SHARES
Common Shares Purchased Pursuant to
Stock Subscription Agreement 2,000,000
Common Shares Underlying 200,000 Series C
Preferred Shares Purchased Pursuant to
Stock Subscription Agreement 1,000,000
Common Shares to be Exchanged for Westar in accordance with
Business Services Plan and Agreement
Reorganization
Other Common Shares and Preferred Shares in accordance with
Purchased Pursuant to Stock Stock Subscription
Subscription Agreement Agreement
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is made and
entered into as of October 28, 1997, by and among Onsite Energy Corporation, a
Delaware corporation (the "Company"), and Westar Capital, Inc. a Kansas
corporation (the "Investor").
This Agreement is made pursuant to the Stock Subscription Agreement
dated as of the date hereof by and between the Company and the Investor (the
"Stock Subscription Agreement") and pursuant to the Plan and Agreement of
Reorganization of even date herewith to which the Company and the Investor are
parties (the "Reorganization Agreement"). In order to induce the Investor to
enter into the Stock Subscription Agreement and the Reorganization Agreement,
the Company has agreed to provide the registration rights set forth in this
Agreement.
The parties hereby agree as follows:
1. Definitions
Capitalized terms used herein without definition shall have
their respective meanings set forth in the Stock Subscription Agreement. As used
in this Agreement, the following capitalized terms shall have the following
meanings:
Common Stock: The Common Stock issued by the Company to the
Investor pursuant to the Stock Subscription Agreement and pursuant to the
Reorganization Agreement.
Convertible Preferred Stock: The Series C Convertible
Preferred Stock issued by the Company to the Investor pursuant to the Stock
Subscription Agreement.
Demand Registration: See Section 3 hereof.
Exchange Act: The Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated by the SEC thereunder.
Person: An individual, partnership, corporation, joint
venture, association, joint-stock company, trust, unincorporated organization,
or a government or agency or political subdivision thereof, including without
limitation, any "person" as defined in Section 13(d) of the Exchange Act.
Piggyback Registration: See Section 4 hereof.
Prospectus: The Prospectus included in any Registration
Statement (including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A), 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 such 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.
1059(1).nks 1 November 10, 1997
<PAGE>
Registrable Securities: All shares of Common Stock issued by
the Company to the Investor pursuant to the Stock Subscription Agreement and the
Reorganization Agreement, and all shares issued or issuable by the Company upon
the conversion of the Convertible Preferred Stock, including all shares of
Common Stock received in respect thereof, whether by reason of a stock split,
reclassification or stock dividend thereon, upon original issuance thereof and
at all times subsequent thereto until, in the case of any such security, (i) it
is effectively registered under the Securities Act and disposed of in accordance
with the Registration Statement covering it, or (ii) it is sold pursuant to Rule
144 (or any similar provisions then in force) under the Securities Act (unless
such sale is to an affiliate of the Investor).
Registration Expenses: See Section 7 hereof.
Registration Statement: Any registration statement of the
Company which covers any of the Registrable Securities pursuant to the
provisions of this Agreement, including the Prospectus, amendments and
supplements to such Registration Statement, including post-effective amendments,
all exhibits and all material incorporated by reference or deemed to be
incorporated by reference in such Registration Statement.
Securities Act: The Securities Act of 1933, as amended from
time to time, and the rules and regulations promulgated by the SEC thereunder.
SEC: The Securities and Exchange Commission.
Underwritten registration or underwritten offering: A
registration in which securities of the Company are sold to an underwriter for
reoffering to the public.
2. Securities Subject to this Agreement
(a) Registrable Securities. The securities entitled to
the benefits of this Agreement are the Investor's Registrable Securities.
(b) Restriction on Transfer. Each certificate representing any
Registrable Security shall be imprinted with a legend substantially in the
following form and a similar legend with respect to applicable state securities
law, if required:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, TRANSFERRED,
HYPOTHECATED OR OTHERWISE ASSIGNED EXCEPT PURSUANT TO (i) A REGISTRATION
STATEMENT RELATING TO THE SECURITIES WHICH IS EFFECTIVE UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, (ii) RULE 144 UNDER SUCH ACT, OR (iii) AN OPINION OF
COUNSEL OR OTHER EVIDENCE SATISFACTORY TO THE COMPANY THAT AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF SUCH ACT OR ANY APPLICABLE STATE SECURITIES LAWS IS
AVAILABLE.
Prior to any proposed transfer of any of such Registrable
Securities (other than under circumstances described in Sections 3 or 4 hereof),
and so long as such securities bear the restrictive legend required under this
paragraph (b), the holder thereof shall deliver to the Company (except in
transactions demonstrated to the Company's reasonable satisfaction to be in
compliance with Rule 144 or other available exemption under the Securities Act,
or any substantially similar successor rule of the
1059(1).nks 2 November 10, 1997
<PAGE>
SEC either (i) a written opinion of legal counsel reasonably satisfactory to the
Company to the effect that the proposed transfer of such securities may be
effected without registration or qualification under the Securities Act and any
applicable state securities laws, or (ii) a "no action" letter from the SEC (and
any necessary state securities administrators) to the effect that the proposed
transfer of such securities without registration will not result in a
recommendation by the staff of the SEC (or such administrators) that action be
taken with respect thereto, whereupon the holder of such securities shall be
entitled to transfer such securities in accordance with the terms of such
opinion or "no action" letter.
The Company shall remove the legend or legends from a
certificate if it receives a written opinion of legal counsel reasonably
satisfactory to the Company to the effect that such legend or legends are not
required in order to establish compliance with any provision of the Securities
Act or applicable state securities law.
3. Demand Registration of Registrable Securities
(a) Requests for Registration. Subject to the provisions of
Section 3(b) hereof, the Investor may make a written request (the "Registration
Request") to the Company for registration under and in accordance with the
provisions of the Securities Act of all or part of their Registrable Securities
(the "Demand Registration"). The Company shall as promptly as practicable, and
in no event later than forty-five (45) days after the Registration Request is
made, prepare and file with the SEC a Registration Statement covering all of the
Registrable Securities requested to be included by the Investor. The
Registration Request made pursuant to this Section 3(a) shall specify the number
of shares of the Registrable Securities to be registered and shall also specify
the intended methods of disposition thereof.
(b) Number of Demand Registrations. The Company shall be
obligated to effect not more than three (3) Demand Registrations.
(c) Priority on Demand Registration. If any of the Registrable
Securities registered pursuant to Demand Registrations are to be sold in one or
more firm commitment underwritten offerings, and the managing underwriter or
underwriters advise the Company and the Investor in writing that in their
opinion the total number or dollar amount of Registrable Securities requested to
be included in such registration is sufficiently large to adversely affect the
success of such offering, the Company shall include, on behalf of the Investor,
in such firm commitment underwritten offering the number of shares of
Registrable Securities which, in the opinion of such managing underwriter or
underwriters, can be sold without any adverse affect on the offering.
(d) Withdrawal. The Investor may, before such Registration
Statement becomes effective, withdraw its Registrable Securities from sale,
should the terms of sale not be reasonably satisfactory to it; however, such
Demand Registration shall be deemed to have occurred for the purposes of Section
3(b) hereof, unless such withdrawal is more than 5 days prior to the effective
date of such Registration Statement. If there is no other seller after the
withdrawal of the Investor, the Investor shall pay all of the out-of-pocket
expenses of the Company incurred in connection with such registration within
thirty (30) days after receipt of a written itemization of such expenses.
(e) Selection of Underwriters. If any Demand Registration is
in the form of an underwritten offering, the Company will select and obtain the
investment banker or investment bankers and manager or managers that will
administer the offering.
1059(1).nks 3 November 10, 1997
<PAGE>
4. Piggyback Registrations
(a) Right to Piggyback. Whenever the Company proposes (whether
or not for its own account) to register any of its equity securities under the
Securities Act except with respect to a registration statement (i) on Form S-8
or any successor form to such Form or (ii) filed in connection with an exchange
offer or relating to a transaction pursuant to Rule 145 of the Securities Act,
the Company shall give written notice to the Investor of its intention to effect
such a registration not later than thirty (30) days prior to the anticipated
date of filing with the SEC of a Registration Statement with respect to such
registration. Such notice shall offer the Investor the opportunity to include in
such Registration Statement such Registrable Securities as the Investor may
request (a "Piggyback Registration"). Subject to the provisions of Sections 4(b)
and 4(c) hereof, the Company shall include in each such Piggyback Registration
all Registrable Securities with respect to which the Company has received a
written request for inclusion therein within fifteen (15) days after the receipt
by the Investor of the Company's notice. No registration effected pursuant to a
request or requests referred to in this Section 4 shall be deemed Demand
Registrations pursuant to Section 3. Upon the giving of notice of a proposed
registration by the Company pursuant to this Section 4(a), the Investor may
exercise only its rights to Piggyback Registration and not Demand Registration
as to the Company's proposed registration.
(b) Priority on Primary Registration. If a Piggyback
Registration is being made with respect to an underwritten primary registration
on behalf of the Company and the managing underwriter or underwriters advise the
Company in writing that in their opinion the total number or dollar amount of
securities of any class requested to be included in such registration is
sufficiently large to adversely affect the success of such offering, the Company
shall include in such registration: (1) first, all securities the Company
proposes to sell to the public, the proceeds of which shall go to the Company,
(2) second, up to the full number of Registrable Securities requested to be
included in such registration in excess of the number or dollar amount of
securities the Company proposes to sell which, in the opinion of such managing
underwriter or underwriters, can be sold without adversely affecting the
offering.
(c) Priority on Secondary Registrations. If a Piggyback
Registration is being made with respect to an underwritten secondary
registration on behalf of holders of the securities of the Company, and the
managing underwriters advise the Company in writing that in their opinion the
dollar amount or number of securities of any class requested to be included in
such registration is sufficiently large to adversely affect the success of such
offering, the Company shall include in such registration (1) first, up to the
full number of securities requested to be included therein by holders exercising
demand registration rights which in the opinion of such underwriter can be sold
without adversely affecting the offering and (2) second, up to the full number
of Registrable Securities requested to be included in such registration in
excess of the number or dollar amount of securities which holders exercising
demand registration rights propose to sell, which, in the opinion of such
managing underwriter or underwriters, can be sold without adversely affecting
the offering.
5. Hold-Back Agreements
(a) Restrictions on Public Sale by the Investor. The Investor
agrees, if requested by the managing underwriter or underwriters in any
underwritten offering (to the extent timely notified in writing by the Company
or the managing underwriter or underwriters) of the Company's securities covered
by a Registration Statement, not to effect any public sale or distribution of
any Registrable Securities not included in such Registration Statement,
including a sale pursuant to Rule 144 under the Securities Act (except as part
of such underwritten registration), during the ten (10) day period prior to,
1059(1).nks 4 November 10, 1997
<PAGE>
and during the forty-five (45) day period beginning on, the effective date of
each underwritten offering made pursuant to such Registration Statement,
provided that Investor shall not be obligated to delay the public sale or
distribution of Registrable Securities for a period in excess of one hundred ten
(110) days in any twelve-month period. Such forty-five (45) day period shall be
extended with regard to the Registrable Securities to such longer period as may
be agreed to in writing by the Investor.
The foregoing provisions shall not apply to the Investor if it
is prevented by applicable statute or regulation from entering into any such
agreement; provided that the Investor shall undertake, in its request to
participate in any such underwritten offering, not to effect any public sale or
distribution of the applicable Registrable Securities commencing on the date of
sale of such applicable class of Registrable Securities pursuant to such a
Registration Statement unless it has provided forty-five (45) days prior written
notice of such sale or distribution to the managing underwriter or underwriters.
(b) Restrictions on Public Sale by the Company and Others. The
Company agrees, (i) without the written consent of the managing underwriter or
underwriters in an underwritten offering of Registrable Securities covered by a
Registration Statement filed by the Company pursuant to Section 3 or 4 hereof,
not to effect any public or private sale or distribution of its securities,
including a sale pursuant to Regulation D under the Securities Act, during the
ten (10) day period prior to, and during the one hundred fifty (150) day period
beginning on, the effective date of an underwritten offering made pursuant to a
Registration Statement (except as part of such underwritten registration or
pursuant to registrations on Form S-8 or any successor form or relating to a
transaction pursuant to Rule 145 of the Securities Act) and (ii) to use its best
efforts to obtain the written agreement of, and to cause each holder of more
than five percent (5%) of any class of its securities purchased from it at any
time (other than in a registered public offering) not to effect any
registration, public sale or distribution of any such securities during such
period, including a sale pursuant to Rule 144 under the Securities Act (except
as part of such underwritten registration, if otherwise permitted).
6. Registration Procedures
In connection with the Company's obligations to file a
Registration Statement pursuant to Section 3 hereof, the Company shall use its
reasonable best efforts to effect such registration to permit the sale of such
Registrable Securities in accordance with the intended method or methods of
disposition thereof, and pursuant thereto the Company shall as expeditiously as
practicable:
(a) Filing; Review - prepare and file with the SEC as soon as
practical, but in no event later than the time periods specified herein a
Registration Statement relating to the Demand Registration on any appropriate
form under the Securities Act, which form shall be available for the sale of the
Registrable Securities in accordance with the intended method or methods of
distribution thereof, and use its reasonable best efforts to cause such
Registration Statement to become effective and remain effective as provided
herein; provided that at least fifteen (15) days before filing a Registration
Statement or Prospectus or any amendments or supplements thereto, including
documents incorporated or deemed to be incorporated by reference in the
Registration Statement after the initial filing of any Registration Statement,
the Investor, its counsel and the managing underwriters, if any, copies of all
such documents proposed to be filed (excluding exhibits unless otherwise
requested), which documents shall be subject to the review of the Investor, its
counsel and managing underwriters, and the Company shall not file any
Registration Statement or amendment thereto or any Prospectus or any supplement
thereto (including such documents incorporated or deemed to be incorporated by
reference) to which the Investor or the managing underwriters, if any, shall
reasonably object on a timely basis;
1059(1).nks 5 November 10, 1997
<PAGE>
(b) Amendments; Supplements - prepare and file with the SEC
such amendments and post-effective amendments to a Registration Statement as may
be necessary to keep such Registration Statement continuously effective for the
applicable period; cause the related Prospectus to be supplemented by any
required prospectus supplement and as so supplemented to be filed pursuant to
Rule 424 (or any similar provisions then in force) under the Securities Act; and
comply with the provisions of the Securities Act with respect to the disposition
of all securities covered by such Registration Statement during the applicable
period in accordance with the intended methods of disposition by the sellers
thereof set forth in such Registration Statement or supplement to such
Prospectus;
(c) Notice of Events - notify the Investor, its counsel and
the managing underwriters, if any, promptly, and (if requested by any such
Person) confirm such notice in writing, (1) when a Prospectus or any prospectus
supplement or post-effective amendment has been filed, and, with respect to a
Registration Statement or any post-effective amendment, when the same has become
effective, (2) of any request by the SEC for amendments or supplements to a
Registration Statement or related Prospectus or for additional information to be
included in any Registration Statement or Prospectus or otherwise, (3) of the
issuance by the SEC of any stop order suspending the effectiveness of a
Registration Statement or the initiation of any proceedings for that purpose,
(4) if at any time the representations and warranties of the Company
contemplated by paragraph (m) below cease to be true and correct, (5) of the
receipt by the Company of any notification with respect to the suspension of the
qualification of any of the Registrable Securities for sale in any jurisdiction
or the initiation or threatening of any proceeding for such purpose, (6) of the
happening of any event which makes any statement made in the Registration
Statement, the Prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue or which requires the making of any
changes in the Registration Statement or Prospectus so that they shall 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
(with respect to a Prospectus, in light of the circumstances in which they were
made) not misleading, and (7) of the reasonable determination of the Company
that a post-effective amendment to a Registration Statement would be
appropriate;
(d) Suspension - make every reasonable effort to obtain the
withdrawal of any order suspending the effectiveness of a Registration Statement
or the lifting of any suspension of the qualification or exemption from
qualification of any of the Registrable Securities for sale in any jurisdiction,
as soon as practicable;
(e) Additional Information - if requested by the managing
underwriters, if any, or the Investor, to immediately incorporate in a
prospectus supplement or post-effective amendment such information as the
managing underwriters, if any, and the Investor agree should be included therein
as required by applicable law; and make all required filings of such prospectus
supplement or post-effective amendment as soon as practicable after the Company
has received notification of the matters to be incorporated therein; provided,
however, that the Company shall not be required to take any of the actions in
this Section 6(e) which are not, in the opinion of counsel for the Company, in
its sole discretion, in compliance with applicable law;
(f) Copies - furnish to the Investor's counsel and each
managing underwriter, without charge, a signed copy of the Registration
Statement and any post-effective amendment thereto, including financial
statements and schedules, all documents incorporated therein by reference and
all exhibits (including those incorporated by reference);
1059(1).nks 6 November 10, 1997
<PAGE>
(g) Prospectuses - deliver to the Investor and to the
underwriters, if any, without charge, as many copies of the Prospectus
(including each preliminary prospectus) and any amendment or supplement thereto
as may be reasonably requested; the Company consents to the use of such
Prospectus or any amendment or supplement thereto by the Investor and the
underwriters, if any, in connection with the offering and sale of the
Registrable Securities covered by such Prospectus or any amendment or supplement
thereto;
(h) Blue Sky - prior to any public offering of Registrable
Securities, register or qualify or cooperate with the Investor, the
underwriters, if any, and their respective counsel in connection with the
registration or qualification of such Registrable Securities for offer and sale
under the securities or blue sky laws of such jurisdictions within the United
States as the Investor or underwriter reasonably requests in writing, keep each
such registration or qualification effective during the period such Registration
Statement is required to be kept effective and do any and all other acts or
things necessary or advisable to enable the disposition in such jurisdictions of
the Registrable Securities covered by the applicable Registration Statement;
provided that the Company shall not be required to qualify to do business in any
jurisdiction where it is not then so qualified or to take any action which would
subject it to general service of process in any such jurisdiction where it is
not then so subject;
(i) Certificates - cooperate with the Investor and the
managing underwriters, if any, to facilitate the timely preparation and delivery
of certificates representing Registrable Securities to be sold and not bearing
any restrictive legends; and enable such Registrable Securities to be in such
denominations and registered in such names as the managing underwriters may
request at least two (2) business days prior to any sale of Registrable
Securities to the underwriters;
(j) Corrections - upon the occurrence of any event
contemplated by Section 6(c)(6) above, prepare a supplement or post-effective
amendment to the applicable Registration Statement or related Prospectus or any
document incorporated therein by reference or file any other required document
so that, as thereafter delivered to the purchasers of the Registrable Securities
being sold thereunder, such Prospectus shall not contain an untrue statement of
a material fact or omit to state any material fact necessary to make the
statements therein, in light of the circumstances in which they were made, not
misleading;
(k) Listing - if requested in writing by the Investor, use its
reasonable best efforts to cause all Registrable Securities covered by the
Registration Statement to be listed on each securities exchange, if any, on
which similar securities issued by the Company are then listed;
(l) CUSIP; Transfer Agent; Registrar - provide a CUSIP number,
transfer agent and registrar for all Registrable Securities being registered,
not later than the effective date of the applicable Registration Statement
covering such securities;
(m) Other Agreements; Opinions - enter into such agreements
(including an underwriting agreement in form, scope and substance as is
customary in underwritten offerings) and take all such other actions as the
Investor or the underwriters, if any, may reasonably request, or any and all
such other actions reasonably required in connection therewith in order to
expedite or facilitate the disposition of such Registrable Securities and in
such connection, whether or not an underwriting agreement is entered into and
whether or not the registration is an underwritten registration, (1) make such
representations and warranties, if any, to the Investor and to enter into any
indemnity arrangement with the underwriters in form, substance and scope as are
customarily made by issuers to underwriters
1059(1).nks 7 November 10, 1997
<PAGE>
in underwritten offerings and confirm the same if and when reasonably requested;
(2) obtain opinions of counsel to the Company and updates thereof (which counsel
and opinions shall be reasonably satisfactory in form, scope and substance to
the managing underwriters, if any, or if the offering is not underwritten, then
to Investor's counsel) addressed to the Investor covering the matters
customarily covered in opinions requested in underwritten offerings; (3) use its
best efforts to obtain "cold comfort" letters and updates thereof from the
Company's independent certified public accountants addressed to the
underwriters, if any, such letters to be in customary form and covering matters
of the type customarily covered in "cold comfort" letters obtained by
underwriters in connection with underwritten offerings; and (4) the Company
shall deliver such documents and certificates as may be reasonably requested by
the Investor or the managing underwriters, if any, to evidence compliance with
clause (j) above and with any customary conditions contained in the underwriting
agreement or other agreement entered into by the Company. The above shall be
done at each closing under such underwriting or similar agreement or as to the
extent required thereunder;
(n) Access - make available for inspection by a representative
of the Investor, any underwriter, if any, and any attorney, accountant or other
agent retained by the Investor or underwriter, all pertinent financial and other
records, corporate documents and properties of the Company (collectively
"Records"), and cause the Company's officers, directors and employees to supply
all information reasonably requested by any such representative, underwriter,
attorney or accountant in connection with such Registration Statement; provided
that any Records which the Company determines to be confidential and which it
notifies the representative, underwriter, attorney or accountant are
confidential, shall not be disclosed by such individuals unless (i) such Records
are in the public domain or (ii) disclosure of such Records is required by court
or administrative order or applicable law;
(o) Other Agencies - use its reasonable best efforts to cause
the Registrable Securities covered by each Registration Statement to be
registered with or approved by such other government agencies or authorities as
may be necessary to the Investor or the underwriters, if any, to consummate the
disposition of such Registrable Securities in the United States;
(p) Compliance - use its reasonable best efforts to comply
with all applicable rules and regulations of the SEC and make generally
available to its security holders earning statements satisfying the provisions
of Section 11(a) of the Securities Act and Rule 158 thereunder, no later than
forty-five (45) days after the end of any twelve (12) month period (or ninety
(90) days after the end of any twelve (12) month period if such period is a
fiscal year) (i) commencing at the end of any fiscal quarter in which
Registrable Securities are sold to underwriters in a firm commitment or best
efforts underwritten offering and (ii) if not sold to underwriters in such an
offering, commencing on the first day of the first fiscal quarter of the Company
after the effective date of a Registration Statement, which statements shall
cover said twelve (12) month periods; and
(q) Certificates - on or before the effective date of a
registration, provide the transfer agent with printed certificates for the
Registrable Securities which are in a form eligible for deposit with The
Depositary Trust Company.
The Company may require the Investor to furnish to the Company
such information regarding the distribution of such securities and such other
information as the Company may from time to time reasonably request in writing,
and the Company may exclude from such registration the Registrable Securities of
the Investor for unreasonably failing to furnish such information within a
reasonable time after receiving such request.
1059(1).nks 8 November 10, 1997
<PAGE>
The Investor agrees by acquisition of such Registrable
Securities that, upon receipt of any notice from the Company of the happening of
any event of the kind described in Section 6(c)(2), 6(c)(3), 6(c)(5) or 6(c)(6),
the Investor will forthwith discontinue disposition of such Registrable
Securities covered by such Registration Statement or Prospectus until receipt of
the copies of the supplemented or amended prospectus contemplated by Section
6(j), or until it is advised in writing (the "Advice") by the Company that the
use of the applicable Prospectus may be resumed, and has received copies of any
additional or supplemental filings which are incorporated by reference in such
Prospectus, and if so directed by the Company, the Investor shall deliver to the
Company all copies, other than permanent filed copies then in Investor's
possession, of the Prospectus covering such Registrable Securities current at
the time of receipt of such notice.
7. Registration Expenses
All fees and expenses incident to the Company's performance of
or compliance with this Agreement, including without limitation (a) all
registration and filing fees, including all expenses incident to filings
required to be made with the National Association of Securities Dealers, Inc. or
listing on any securities exchange, fees and expenses of compliance with
securities or blue sky laws (including reasonable fees and disbursements of
counsel for the underwriters in connection with blue sky qualifications of the
Registrable Securities and determination of the eligibility of any of the
Registrable Securities for investment under the laws of such jurisdictions as
the managing underwriters or the Investor may designate in accordance with
Section 6(h)), fees and expenses of compliance with state insurance or other
governmental regulations and rating agency fees, (b) printing expenses,
messenger, telephone and delivery expenses, and other internal expenses, (c) all
fees and disbursements of counsel for the Company and of all independent
certified public accountants of the Company (including the expenses of any
special audit and "cold comfort" letters required by or incident to such
performance), (d) fees and expenses of underwriters (excluding discounts,
commissions or fees of underwriters, selling brokers, dealer managers or similar
securities industry professionals relating to the distribution of the
Registrable Securities and legal expenses of selling holders and the
underwriters but including the fees and expenses of any "qualified independent
underwriter" or other independent appraiser participating in an offering
pursuant to Section 3 of Schedule E to the By-Laws of the National Association
of Securities Dealers, Inc.), (e) securities acts liability insurance if the
Company so desires and (f) fees and expenses of other Persons retained by the
Company (all such included expenses being herein called "Registration Expenses")
shall be borne by the Company whether or not any of the Registration Statements
become effective. Notwithstanding any of the foregoing, the Investor upon sales
of Registrable Securities shall bear its own expenses for all underwriting
commissions applicable to such sales and any legal fees of counsel hired by the
Investor.
The Company shall pay its general expenses (including, without
limitation, all salaries and expenses of its officers and employees performing
legal or accounting duties), the expense of any audit, and the fees and expenses
incurred in connection with the listing of the securities to be registered on
each securities exchange on which similar securities issued by the Company are
then listed.
8. Miscellaneous
(a) Successor and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties.
1059(1).nks 9 November 10, 1997
<PAGE>
(b) Counterparts. This Agreement may be executed in two or
more counterparts and by the parties hereto in separate counterparts (including
by facsimile signatures), each of which when so executed shall be deemed to be
an original and all of which taken together shall constitute one and the same
Agreement.
(c) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(d) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of California.
(e) Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.
(f) Entire Agreement. This Agreement is intended by the
parties as a final expression of their Agreement and intended to be a complete
and exclusive statement of the Agreement and understanding of the parties hereto
in respect of the subject matter contained herein. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein with respect to the registration rights granted by the Company with
respect to the securities issued pursuant to the Stock Subscription Agreement
and the Reorganization Agreement. This Agreement supersedes all prior Agreements
and understandings between the parties with respect to such subject matter.
(g) Notices. All notices or other communications required
hereunder shall be in writing and shall be sufficient in all respects and shall
be deemed delivered after 5 days if sent via registered or certified mail,
postage prepaid; the next day if sent by overnight courier service; or one
business day after transmission if sent by facsimile, to the following:
If to Company : Onsite Energy Corporation
701 Palomar Airport Rd., #200
Carlsbad, CA 92009
Attn: Richard T. Sperberg
Fax: (760) 931-2405
with copies to: Bartel Eng Linn & Schroder
300 Capitol Mall, Suite 1100
Sacramento, CA 95814
Attn: Scott E. Bartel, Esq.
Fax: (916) 442-3442
If to Investor: Westar Capital, Inc.
PO Box 889
818 Kansas Avenue
Topeka, KS 66601
Attn: Rita A. Sharpe
Fax: (785) 575-1771
1059(1).nks 10 November 10, 1997
<PAGE>
with copies to: Westar Capital, Inc.
PO Box 889
818 Kansas Avenue
Topeka, KS 66601
Attn.: John K. Rosenberg
Fax: (785) 575-1788
Any party hereto may change its address for purposes hereof by notice to all
other parties hereto.
(h) Dispute Resolution. No party to this agreement shall be
entitled to take legal action with respect to any dispute relating hereto until
it has complied in good faith with the following alternative dispute resolution
procedures. This section shall not apply to the extent it is deemed necessary to
take legal action immediately to preserve a party's adequate remedy.
(i) Negotiation. The parties shall attempt
promptly and in good faith to resolve any dispute arising out of or
relating to this Contract, through negotiations between representatives
who have authority to settle the controversy. Any party may give the other
party(ies) written notice of any such dispute not resolved in the normal
course of business. Within 20 days after delivery of the notice,
representatives of both parties shall meet at a mutually acceptable time and
place, and thereafter as often as they reasonably deem necessary, to
exchange information and to attempt to resolve the dispute, until the parties
conclude that the dispute cannot be resolved through unassisted negotiation.
Negotiations extending sixty days after notice shall be deemed at an impasse,
unless otherwise agreed by the parties.
If a negotiator intends to be accompanied at a meeting by an attorney,
the other negotiator(s) shall be given at least three working days' notice of
such intention and may also be accompanied by an attorney. All negotiations
pursuant to this clause are confidential and shall be treated as compromise and
settlement negotiations for purposes of the Federal and state Rules of Evidence.
(ii) ADR Procedure. If a dispute with more than
$20,000.00 at issue has
not been resolved within 60 days of the disputing party's notice, a party
wishing resolution of the dispute ("Claimant") shall initiate assisted
Alternative Dispute Resolution ("ADR") proceedings as described in this Section.
Once the Claimant has notified the other party ("Respondent") of a desire to
initiate ADR proceedings, the proceedings shall be governed as follows: By
mutual agreement, the parties shall select the ADR method they wish to use. That
ADR method may include arbitration, mediation, mini-trial, or any other method
which best suits the circumstances of the dispute. The parties shall agree in
writing to the chosen ADR method and the procedural rules to be followed within
30 days after receipt of notice of intent to initiate ADR proceedings. To the
extent the parties are unable to agree on procedural rules in whole or in part,
the current Center for Public Resources ("CPR") Model Procedure for Mediation of
Business Disputes, CPR Model Mini-trial Procedure, or CPR Commercial Arbitration
Rules--whichever applies to the chosen ADR method--shall control, to the extent
such rules are consistent with the provisions of this Section. If the parties
are unable to agree on an ADR method, the method shall be arbitration.
The parties shall select a single Neutral (as defined by CPR) third
party to preside over the ADR proceedings, by the following procedure: Within 15
days after an ADR method is established, the Claimant shall submit a list of 5
acceptable Neutrals to the Respondent. Each Neutral listed shall be sufficiently
qualified, including demonstrated neutrality, experience and competence
regarding the subject
1059(1).nks 11 November 10, 1997
<PAGE>
matter of the dispute. A Neutral shall be deemed to have adequate experience if
an attorney or former judge. None of the Neutrals may be present or former
employees, attorneys, or agents of either party. The list shall supply
information about each Neutral, including address, and relevant background and
experience (including education, employment history and prior ADR assignments).
Within 15 days after receiving the Claimant's list of Neutrals, the Respondent
shall select one Neutral from the list, if at least one individual on the list
is acceptable to the Respondent. If none on the list are acceptable to the
Respondent, the Respondent shall submit a list of 5 Neutrals, together with the
above background information, to the Claimant. Each of the Neutrals shall meet
the conditions stated above regarding the Claimant's Neutrals. Within 15 days
after receiving the Respondent's list of Neutrals, the Claimant shall select one
Neutral, if at least one individual on the list is acceptable to the Respondent.
If none on the list are acceptable to the Claimant, then the parties shall
request assistance from CPR to select a Neutral.
The ADR proceeding shall take place within 30 days after the Neutral
has been selected. The Neutral shall issue a written decision within 30 days
after the ADR proceeding is complete. Each party shall be responsible for an
equal share of the costs of the ADR proceeding. The parties agree that any
applicable statute of limitations shall be tolled during the pendency of the ADR
proceedings, and no legal action may be brought in connection with this
agreement during the pendency of an ADR proceeding.
The Neutral's written decision shall become final and binding on the
parties, unless a party objects in writing within 30 days of receipt of the
decision. The objecting party may then file a lawsuit in any court allowed by
this Contract. The Neutral's written decision shall be admissible in the
objecting party's lawsuit.
(i) Amendments and Waivers. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the parties. Any amendment or
waiver effected in accordance with this paragraph shall be binding upon the
Investor, its successors or assigns, and each future holder of such securities
and the Company. A waiver by any party hereto of a default in the performance of
this Agreement shall not operate as a waiver of any future or other default,
whether of a like or different kind.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
ONSITE ENERGY CORPORATION WESTAR CAPITAL, INC.
By: _________________________ By: ______________________
Richard T. Sperberg,
President President
1059(1).nks 12 November 10, 1997
<PAGE>
CERTIFICATE OF DESIGNATIONS
of
SERIES C CONVERTIBLE PREFERRED STOCK
of
ONSITE ENERGY CORPORATION
Pursuant to Section 151(g) of the General Corporation Law
of the State of Delaware
Onsite Energy Corporation, a Delaware corporation (the "Company"),
certifies that pursuant to the authority contained in its Certificate of
Incorporation, as amended, and in accordance with the provisions of Section
151(g) of the General Corporation Law of the State of Delaware, its Board of
Directors (the "Board of Directors") has adopted the following resolution
creating a series of its Preferred Stock, $0.001 par value, designating a
segment thereof as Series C Convertible Preferred Stock;
WHEREAS, the Certificate of Incorporation of the Company presently
authorizes the issuance of one million shares of Preferred Stock, $0.001 par
value, in one or more series upon terms and conditions that are to be designated
by the Board of Directors;
WHEREAS, in order to accommodate a business purpose deemed proper by the
Board of Directors, i.e., to facilitate a private placement of securities which
when completed will generate additional working capital for the Company, the
Board of Directors does hereby seek to provide for the designation of a segment
of the Company's Preferred Stock as "Series C Convertible Preferred Stock;"
WHEREAS, the terms, conditions, voting rights, preferences, limitations and
special rights of the Series C Convertible Preferred Stock in their entirety are
as provided herein.
NOW THEREFORE, be it:
RESOLVED, that a series of the class of authorized Preferred Stock, $0.001
par value, of the Company hereinafter designated "Series C Convertible Preferred
Stock," is hereby created, and that the designation and amount thereof and the
voting powers, preferences and relative participating, optional and other
special rights of the shares of such series, and the qualifications, limitations
or restrictions thereof are as follows:
Section 1. Designation and Amount.
The shares of such series shall be designated as the "Series C Convertible
Preferred Stock" (the "Series C Convertible Preferred Stock") and the number of
shares initially constituting such series shall be 1,000,000.
1057(3).nks 1 November 10, 1997
<PAGE>
Section 2. Dividends and Distributions.
(a) Each holder of a share of Series C Convertible Preferred Stock in
preference to the holders of shares of the Company's common stock, $0.001 par
value (the "Common Stock"), and of any other capital stock of the Company
ranking junior to the Series C Convertible Preferred Stock as to payment of
dividends, shall be entitled, when and as declared by the Board, and out of any
funds legally available therefor, to an annual dividend at the rate of 9.75% of
the liquidation preference of the Series C Convertible Preferred Stock per
annum. Provided that the declaration and payment of dividends by the Company is
permissible under the General Corporation Law of the State of Delaware, the
Board of Directors shall declare a dividend on the Series C Convertible
Preferred Stock quarterly. Dividend payments to the holders of shares of Series
C Convertible Preferred Stock shall be payable in cash on the 15th day of the
first month of each quarter (January, April, July, October) by delivery of a
check to each entitled holder's address which is registered with the Secretary
of the Company.
(b) Dividends payable pursuant to paragraph (a) of this Section 2 shall
begin to accrue from the date of original issue of the Series C Convertible
Preferred Stock with the first dividend to be paid on January 15, 1998 and
thereafter shall be cumulative. Dividends paid on the shares of Series C
Convertible Preferred Stock in an amount less than the total amount of such
dividends at the time accrued and payable on such shares shall be allocated pro
rata on a share-by-share basis among all such shares at the time outstanding.
(c) During the period beginning with the issuance of the Series C
Convertible Preferred Stock and ending two years after such issuance, any change
(i) in the Internal Revenue Code of 1986, as amended to the date hereof (the
"Code") or the regulations thereunder as in effect on the date hereof or (ii) in
the interpretation thereof by any Court, administrative body, or the Internal
Revenue Service, the result of which cause the holders of Series C Convertible
Preferred Stock not to be eligible to claim the 80% dividends received deduction
provided by Section 243 of the Code (the "Dividends Received Deduction") with
respect to dividends on the Series C Convertible Preferred Stock (other than
partly or wholly as a result of such holder's failure to meet the current
requirements of Section 243 of the Code) may, at the option of such holders, be
considered a Forced Conversion as defined in Section 5(d) of such Series C
Convertible Preferred Stock to Class A Common Stock, as defined in Section 5(d)
hereof. In the event of such Forced Conversion, the Company shall pay any
affected holder which thereafter and within two years of the issuance of such
Series C Convertible Preferred Stock exercises its option to convert any of its
Series C Convertible Preferred Stock to Class A Common Stock an amount equal to
the payments which would be due such holder under Section 5(d)(i) of this
Agreement as though the Company had exercised its right to require conversion of
such Series C Convertible Preferred Stock pursuant to Section 5(d).
(d) Notwithstanding anything to the contrary set forth at paragraphs
(a) or (b) of this Section 2, prior to the second anniversary of the issuance of
the Series C Convertible Preferred Stock, the Company shall have the option to
pay dividends by delivery to the holders of the Series C Convertible Preferred
Stock, such additional number of shares of the Company's Series
1057(3).nks 2 November 10, 1997
<PAGE>
C Convertible Preferred Stock as may be determined by dividing the total
dividend payment due to each holder by the liquidation preference of the Series
C Convertible Preferred Stock.
(e) The holders of shares of Series C Convertible Preferred Stock shall
not be entitled to receive any dividends or other distributions except as
provided in this Certificate of Designations of Series C Convertible Preferred
Stock.
Section 3. Voting Rights.
(a) Holders of Series C Convertible Preferred Stock shall be entitled
to vote on all matters to be presented to the stockholders and shall have a
number of votes equal to the number of shares of Class A Common Stock into which
the Series C Convertible Preferred Stock is convertible as of record date.
(b) Unless required by law, such votes shall be counted together with
all other shares of stock of the Company having general voting power and not
separately as a class.
(c) If, at any time four or more quarterly dividends, whether or not
consecutive, on the Series C Convertible Preferred Stock shall be in default, in
whole or in part, the holders of the Series C Convertible Preferred Stock shall
be entitled to elect the smallest number of Directors as would constitute a
majority of the Board of Directors, and the holders of the Class A Common Stock
as a class shall be entitled to elect the remaining Directors. Such voting
rights shall continue until all dividends accrued on the Series C Convertible
Preferred Stock shall have been paid or set apart for payment, at which time
such voting power shall cease until a like default in payment recurs.
At any time after the voting power to elect a majority of the Board of
Directors shall have become vested in the holders of the Series C Convertible
Preferred Stock as provided in this paragraph, the Secretary of the Company may,
and on the request of the record holders of at least 10 percent of the Series C
Convertible Preferred Stock then outstanding addressed to the Secretary at the
principal executive office of the Company, shall call a special meeting of the
shareholders for the election of directors, to be held at the place and on the
notice provided in the Bylaws of the Company for the holding of annual meetings.
If notice of the requested meeting is not given within 20 days after receipt of
the request for the meeting, then a person designated by the record holders of
at least 10 percent of the Series C Convertible Preferred Stock then outstanding
may call such a special meeting at the place and on the notice above provided,
and for that purpose shall have access to the stock books of the Company. At any
meeting so called or at any annual meeting held while the holders of the Series
C Convertible Preferred Stock have the voting power to elect a majority of the
Board of Directors, the holders of a majority of the then outstanding Series C
Convertible Preferred Stock, present in person or by proxy, shall constitute a
quorum for the election of Directors as provided in this paragraph. The terms of
office of all persons who are directors of the Company at the time of the
meeting shall terminate upon the election at the meeting by the holders of the
Series C Convertible Preferred Stock of the number of directors they are
entitled to elect, and the persons so elected
1057(3).nks 3 November 10, 1997
<PAGE>
as directors by the holders of the Series C Convertible Preferred Stock,
together with the persons, if any, elected as directors by the holders of the
Class A Common Stock, shall constitute the duly elected directors of the
Company. In the event the holders of Class A Common Stock fail to elect the
number of Directors that they are entitled to elect at the meeting, the
resulting vacancies may be filled by the directors who are elected.
Whenever the voting rights of holders of the Series C Convertible
Preferred Stock shall cease as provided in this paragraph (c), the term of
office of all persons who are at the time directors of the Company shall
terminate upon election of their successors by the holders of the Class A Common
Stock.
Section 4. Liquidation, Dissolution, Winding Up or Certain Mergers or
Consolidations.
(a) If the Company shall adopt a plan of liquidation or of dissolution,
or commence a voluntary case under the federal bankruptcy laws or any other
applicable state or federal bankruptcy, insolvency or similar law, or consent to
the entry of an order for relief in any involuntary case under such law or to
the appointment of a receiver, liquidator, assignee, custodian, trustee or
sequestrator (or similar official) of the Company or of any substantial part of
its property, or make an assignment for the benefit of its creditors, or admit
in writing its inability to pay its debts generally as they become due and on
account of such event the Company shall liquidate, dissolve or wind up, or
engage in a merger, plan of reorganization or consolidation, then and in that
event, no distribution shall be made to the holders of shares of Common Stock,
unless, prior thereto, the holders of the Series C Convertible Preferred Stock
shall have first received an amount in cash or equivalent value in securities or
other consideration equal to the "liquidation preferences" thereof.
If upon any such liquidation, dissolution, winding up, merger, plan of
reorganization or consolidation, the amount so payable or distributable does not
equal or exceed the "liquidation preferences" of the Series C Convertible
Preferred Stock, then, and in that event, the amount of cash so payable, shall
be distributed ratably to the holders of the Series C Convertible Preferred
Stock on the basis of the number of shares of Series C Convertible Preferred
Stock held. After payment in full of the "liquidation preferences" owed to the
holders of the Series C Convertible Preferred Stock, the holders of the Common
Stock shall be entitled, to the exclusion of the holders of the Series C
Convertible Preferred Stock, to share in all remaining assets of the Company in
accordance with their respective interests.
For the purposes hereof, the term "liquidation preferences" shall mean
$5.00 per share plus an amount equal to all accrued and unpaid dividends
thereon, whether or not earned or declared, up to and including the date full
payment shall be tendered to the holders of the Series C Convertible Preferred
Stock.
(b) Except as provided in subparagraph (a) above, neither the
consolidation, merger or other business combination of the Company with or into
any other person or persons nor the sale, lease, exchange or conveyance of all
or any part of the property, assets or business of the
1057(3).nks 4 November 10, 1997
<PAGE>
Company to a Person or Persons other than the holders of the Company's Common
Stock, shall be deemed to be a liquidation, dissolution or winding up of the
Company for purposes of this Section 4.
Section 5. Conversion.
(a) Subject to the provisions for adjustment hereinafter set forth,
each share of Series C Convertible Preferred Stock shall be convertible in the
manner hereinafter set forth into fully paid and nonassessable shares of Common
Stock. Commencing upon issuance (the "Conversion Date"), each share of Series C
Convertible Preferred Stock may, at the option of the holder thereof, be
converted into five (5) shares of Class A Common Stock.
(b) The number of shares of Class A Common Stock into which each share
of Series C Convertible Preferred Stock is convertible shall be subject to
adjustment from time to time as follows:
(i) In case the Company shall at any time or from time to time
declare a dividend, or make a distribution, on the outstanding shares of Common
Stock in shares of Common Stock or subdivide or reclassify the outstanding
shares of Common Stock into a greater number of shares or combine or reclassify
the outstanding shares of Common Stock into a smaller number of shares of Common
Stock, then, and in each case,
(A) the number of shares of Class A Common Stock
into which each share of Series C Convertible Preferred Stock is convertible
shall be adjusted so that the holder of each share thereof shall be entitled to
receive, upon the conversion thereof, the number of shares of Class A Common
Stock which the holder of a share of Series C Convertible Preferred Stock
would have been entitled to receive after the happening of any of the events
described above had such share been converted immediately prior to the
happening of such event or the record date therefor, whichever is earlier; and
(B) an adjustment made pursuant to this clause
(i) shall become effective (1) in the case of any such dividend or
distribution, immediately after the close of business on the record date for
the determination of holders of shares of Class A Common Stock entitled
to receive such dividend or distribution, or (2) in the case of any such
subdivision, reclassification or combination, at the close of business on
the day upon which such corporate action becomes effective.
(C) In case the Company shall be a party to any
transaction (including, without limitation, a merger, consolidation, sale of all
or substantially all of the Company's assets or recapitalization of the Common
Stock and excluding (A) any transaction to which clause (i) of this paragraph
(b) applies, and (B) a merger or consolidation in which the Company is the
surviving corporation in which the previously outstanding Common Stock shall
be changed into or, pursuant to the operation of law or the terms of the
transaction to which the Company is a party, exchanged for different
securities of the Company or common stock or other
1057(3).nks 5 November 10, 1997
<PAGE>
securities of another corporation or interests in a noncorporate entity or other
property (including cash) or any combination of any of the foregoing), then, as
a condition of the consummation of such transaction, lawful and adequate
provision shall be made so that each holder of shares of Series C Convertible
Preferred Stock shall be entitled, upon conversion, to an amount per share equal
to the greater of (i) (A) the aggregate amount of stock, securities, cash and/or
any other property (payable in kind), as the case may be, into which or which
each share of Class A Common Stock is changed or exchanged times (B) the number
of shares of Class A Common Stock into which a share of Series C Convertible
Preferred Stock is convertible immediately prior to the consummation of such
transaction, or (ii) the "liquidation preferences" defined in Section 4(a)
hereof.
(D) In case the Company shall be a party to a
transaction described in subparagraph (b) (ii) above resulting in the change or
exchange of the Company's Class A Common Stock then, from and after the date
of announcement of the pendency of such subparagraph (b) (ii) transaction
until the effective date thereof, each share of Series C Convertible Preferred
Stock may be converted, at the option of the holder thereof, into shares of
Class A Common Stock on the terms and conditions set forth in this Section 5,
and if so converted during such period, such holder shall be entitled to
receive such consideration in exchange for such holder's shares of Class A
Common Stock as if such holder had been the holder of such shares of Class A
Common Stock as of the record date for such change or exchange of the Class A
Common Stock.
(c) The holder of any shares of Series C Convertible Preferred Stock
may exercise his right to convert such shares into shares of Class A Common
Stock by surrendering for such purpose to the Company, at the offices of the
Company, 701 Palomar Airport Road, Suite 200, Carlsbad, California 92009, or any
successor location, a certificate or certificates representing the shares of
Series C Convertible Preferred Stock to be converted with the form of election
to convert (the "Election to Convert") on the reverse side of the stock
certificate completed and executed as indicated, thereby stating that such
holder elects to convert all or a specified whole number of such shares in
accordance with the provisions of this Section 5 and specifying the name or
names in which such holder wishes the certificate or certificates for shares of
Class A Common Stock to be issued. In case the Election to Convert shall specify
a name or names other than that of such holder, it shall be accompanied by
payment of all transfer or other taxes payable upon the issuance of shares of
Class A Common Stock in such name or names that may be payable in respect of any
issue or delivery of shares of Class A Common Stock on conversion of Series C
Convertible Preferred Stock pursuant hereto. The Company will have no
responsibility to pay any taxes with respect to the Series C Convertible
Preferred Stock. As promptly as practicable after the surrender of such
certificate or certificates and the receipt of the Election to Convert, and, if
applicable, payment of all transfer or other taxes (or the demonstration to the
satisfaction of the Company that such taxes have been paid), the Company shall
deliver instructions to its transfer agent to delivered (i) certificates
representing the number of validly issued, fully paid and nonassessable full
shares of Class A Common Stock to which the holder of shares of Series C
Convertible Preferred Stock so converted shall be entitled and (ii) if less than
the full number of shares of Series C Convertible Preferred Stock evidenced by
1057(3).nks 6 November 10, 1997
<PAGE>
the surrendered certificate or certificates are being converted, a new
certificate or certificates, of like tenor, for the number of shares evidenced
by such surrendered certificate or certificates less the number of shares
converted. Such conversion shall be deemed to have been made at the close of
business on the date of giving of the Election to Convert and of such surrender
of the certificate or certificates representing the shares of Series C
Convertible Preferred Stock to be converted so that the rights of the holder
thereof as to the shares being converted shall cease except for the right to
receive shares of Class A Common Stock in accordance herewith, and the person
entitled to receive the shares of Class A Common Stock shall be treated for all
purposes as having become the record holder of such shares of Class A Common
Stock at such time. The Company shall not be required to convert, and no
surrender of shares of Series C Convertible Preferred Stock shall be effective
for that purpose, while the transfer books of the Company for the Common Stock
are closed for any purpose (but not for any period in excess of seven (7)
calendar days); but the surrender of shares of Series C Convertible Preferred
Stock for conversion during any period while such books are so closed shall
become effective for conversion immediately upon the reopening of such books, as
if the conversion had been made on the date such shares of Series C Convertible
Preferred Stock were surrendered.
(d) The Company shall have the right to require the conversion of the
Series C Convertible Preferred Stock to into Class A Common Stock, if the
Average Closing Price of the Company's Class A Common Stock is equal to or
exceeds $2.00 per share, under the following terms and conditions ("Forced
Conversion"):
(i) During the period beginning six months after the issuance
of the Series C Convertible Preferred Stock and ending two years after
such issuance, upon written notice to the holders of the Series C
Convertible Preferred Stock, the Company may force the conversion of
the Series C Convertible Preferred Stock by issuing that number of
Class A Common Stock into which the then outstanding shares of Series C
Convertible Preferred Stock would be convertible and by paying the
holders of the Series C Convertible Preferred Stock (a) accrued and
unpaid dividends to date, (b) an additional amount which would have
accrued to the Series C Convertible Stock holders had the Series C
Convertible Preferred Shares been held for two years from the original
date of issuance, not including any dividends already paid, and (c) an
additional amount sufficient to make such holders' net after-tax
proceeds equal to the net after-tax proceeds from Series C Convertible
Preferred Share dividends such holders would have received from the
date of such payment until the second anniversary of the issuance of
such Series C Convertible Preferred Shares in the absence of Company's
exercise a Forced Conversion.
(ii) Beginning on the second anniversary of the issuance of
the Series C Convertible Preferred Stock, upon written notice to the
holders of the Series C Convertible Preferred Stock, the Company may
force the conversion of the Series C Convertible Preferred Stock by
issuing that number of Class A Common Stock into which the then
outstanding shares of Series C Convertible Preferred Stock would be
1057(3).nks 7 November 10, 1997
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convertible and by paying the holders of the Series C Convertible
Preferred Stock any accrued and unpaid dividends to date.
(iii) The notice of mandatory conversion must be sent within 5
days of the last day of any period of 20 or more consecutive days
during which the Company trades at a price in excess of $2.00 per
share.
(iv) "Average Closing Price" shall mean the average closing
price for the Company's Class A Common Stock for a period of 20
consecutive trading days as quoted on a national securities exchange,
or, if Company's Class A Common Stock is not traded on a national
securities exchange, then on the NASDAQ Stock Market, or, if the
Company's Class A Common Stock is not traded on the NASDAQ Stock
Market, then on the OTC Bulletin Board or similar public market.
(e) Upon conversion of any shares of Series C Convertible Preferred
Stock, the holder thereof shall be entitled to receive any accrued dividends in
respect of the shares so converted, which dividends shall be prorated from the
most recent dividend payment date to the date of conversion.
(f) In connection with the conversion of any shares of Series C
Convertible Preferred Stock, no fractions of shares of Class A Common Stock
shall be issued, but in lieu thereof the Company shall pay a cash adjustment in
respect of such fractional interest in an amount equal to such fractional
interest multiplied by the conversion rate of $5.00 as adjusted under paragraph
(b) of this Section 5.
(g) The disposition of the shares of Class A Common Stock into which
each share of Series C Convertible Preferred Stock is convertible may be subject
to limitations contained within the Stock Subscription Agreement entered into
and closed on or about the 24th day of October, 1997, by and among the Company
and Westar Capital, Inc., and the Company or the Company's transfer agent is
directed to take notice of any such provisions.
(h) The Company shall at all times reserve and keep available out of
its authorized but unissued shares of Class A Common Stock, solely for the
purposes of effecting the conversion of the shares of Series C Convertible
Preferred Stock, such number of its shares of Class A Common Stock as shall from
time to time be sufficient to effect the conversion of all outstanding shares of
Series C Convertible Preferred Stock; and if at any time the number of
authorized but unissued shares of Class A Common Stock shall not be sufficient
to effect the conversion of all then outstanding shares of Series C Convertible
Preferred Stock, the Company will take such corporate action as may, in the
opinion of its counsel, be necessary to increase its authorized but unissued
shares of Class A Common Stock to such number of shares as shall be sufficient
for such purpose.
(i) Any notice required or permitted by this Section 5 or any other
provision contained herein to be given to a holder of Series C Convertible
Preferred Stock or to the
1057(3).nks 8 November 10, 1997
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Company shall be in writing and be deemed given upon the earlier of (1) personal
delivery to such holder at the address appearing on the books of the Company,
(2) actual receipt or three (3) days after the same has been deposited by first
class mail in the United States mail, postage prepaid, and addressed to the
holder at the address appearing on the books of the Company, (3) actual receipt
or three (3) days after the same has been sent via an overnight courier service,
and addressed to the holder at the address appearing on the books of the
Company, or (4) sending of facsimile to such holder at the facsimile number
provided by such holder to the Secretary of the Company.
(j) The Company shall not amend its Certificate of Incorporation or
participate in any reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary action for the
purpose of avoiding or seeking to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Company, but will at all
times in good faith assist in carrying out all such action as may be reasonably
necessary or appropriate in order to protect the conversion rights of the holder
of Series C Convertible Preferred Stock against dilution or other impairment.
Section 6. Reports as to Adjustments.
Whenever the number of shares of Class A Common Stock into which each share
of Series C Convertible Preferred Stock is convertible is adjusted as provided
in Section 5 hereof, the Company shall promptly mail to the holders of record of
the outstanding shares of Series C Convertible Preferred Stock at their
respective addresses as the same shall appear in the Company's stock records, or
send by facsimile at the facsimile number provided by such holders to the
Secretary of the Corporation, a notice stating that the number of shares of
Class A Common Stock into which the shares of Series C Convertible Preferred
Stock are convertible has been adjusted and setting forth the new number of
shares of Class A Common Stock (or describing the new stock, securities, cash or
other property) into which each share of Series C Convertible Preferred Stock is
convertible, as a result of such adjustment, a brief statement of the facts
requiring such adjustment and the computation thereof, and when such adjustment
became effective.
Section 7. Redemption. The Series C Convertible Preferred Stock is not
redeemable.
Section 8. Notices of Record Date.
In the event of (1) any taking by the Company of a record of the
holders of any class or series of securities for the purpose of determining the
holders thereof who are entitled to receive any dividend or other distribution
or (2) any reclassification or recapitalization of the capital stock of the
Company or any voluntary or involuntary dissolution, liquidation or winding up
of the Company, the Company shall send by personal delivery to such holder at
the address appearing on the books of the Company, by first class mail
addressed, postage prepaid, and addressed to the holder at the address appearing
on the books of the Company, or by sending of facsimile to such holder at the
facsimile number provided by such holder to the Secretary of
1057(3).nks 9 November 10, 1997
<PAGE>
the Company, at least 30 days prior to the record date specified therein, a
notice specifying (A) the date on which any such record is to be taken for the
purpose of such dividend or other distribution and a description of such
dividend or distribution, (B) the date on which any such reorganization,
reclassification, dissolution, liquidation or winding up is expected to become
effective, and (C) the time, if any is to be fixed, as to when the holders of
record of Series C Convertible Preferred Stock shall be entitled to exchange
their Series C Convertible Preferred Stock for securities or other property
deliverable upon such reorganization, reclassification, dissolution, liquidation
or winding up.
Section 9. Certain Restrictions.
Without the consent of a majority of the outstanding Series C
Convertible Preferred Stock, the Company shall not (A) issue any additional
equity security equal to or higher in seniority than the Series C Convertible
Preferred Stock, (B) declare or pay dividends, or make any other distributions,
on any shares of Common Stock or other capital stock ranking equal or junior
(either as to dividends or upon liquidation, dissolution or winding up) to the
Series C Convertible Preferred Stock; (C) redeem or purchase or otherwise
acquire for consideration any shares of Common Stock or other capital stock
ranking equal or junior (either as to dividends or upon liquidation, dissolution
or winding up) to the Series C Convertible Preferred Stock; or (D) purchase or
otherwise acquire for consideration any shares of Series C Convertible Preferred
Stock.
Section 10. Reacquired Shares.
Any shares of Series C Convertible Preferred Stock converted, purchased or
otherwise acquired by the Company in any manner whatsoever shall be retired and
cancelled promptly after the acquisition thereof, and, if necessary to provide
for the lawful purchase of such shares, the capital represented by such shares
shall be reduced in accordance with the General Corporation Law of the State of
Delaware. All such shares shall upon their cancellation become authorized but
unissued shares of Preferred Stock, $0.001 par value, of the Company and may be
reissued as part of another series of Preferred Stock, $0.001 par value, of the
Company.
Section 11. Certain Definitions.
For the purposes of the Certificate of Designations of Series C Convertible
Preferred Stock which embodies this resolution:
"Trading Day" means a day on which the principal national securities
exchange on which the Common Stock is listed or admitted to trading is open for
the transaction of business or, if the Common Stock is not listed or admitted to
trading on any national securities exchange, any day other than a Saturday,
Sunday, or a day on which banking institutions in the State of California are
authorized or obligated by law or executive order to close.
1057(3).nks 10 November 10, 1997
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Certificate of
Designations of Series C Convertible Preferred Stock to be duly executed by its
President and attested to by its Secretary and has caused its corporate seal to
be affixed hereto, this 23rd day of October, 1997.
ONSITE ENERGY CORPORATION
By:______________________________________
Richard T. Sperberg, President
ATTEST:
By:__________________________________
William M. Gary, III, Secretary
1057(3).nks 11 November 10, 1997
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