<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
ELECTRIC & GAS TECHNOLOGY, INC.
(Name of Issuer)
Common Stock, $.01 par value
(Title of Class of Securities)
284853108
(CUSIP Number)
Neil Novikoff, Esq.
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, New York 10022-4677
(212) 821-8000
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
September 17, 1997
(Date of Event which Requires Filing 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 [ ].
<PAGE>
SCHEDULE 13D
CUSIP No. 284853108
1. NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Ladenburg Thalmann & Co. Inc.
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
a[ ]
b[x]
3. SEC USE ONLY
4. SOURCE OF FUNDS*
OO
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e) [ ]
6. CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
7. SOLE VOTING POWER
450,000
8. SHARED VOTING POWER
SHARES None
BENEFICIALLY
OWNED BY
REPORTING 9. SOLE DISPOSITIVE POWER
PERSON 450,000
WITH
10. SHARED DISPOSITIVE POWER
None
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
450,000
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* [ ]
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
5.2%
14. TYPE OF REPORTING PERSON*
CO, IA
<PAGE>
Item 1. Security and Issuer
This statement on Schedule 13D relates to shares of Common
Stock, $.01 par value per share (the "Common Stock"), of Electric & Gas
Technology, Inc., a Texas corporation (the "Company"). The principal executive
offices of the Company are located at 13636 Neutron Road, Dallas, Texas 75244.
Item 2. Identity and Background
This statement on Schedule 13D is being filed by Ladenburg
Thalmann & Co. Inc., a Delaware corporation ("Ladenburg"). Ladenburg is an
internationally recognized investment banking firm, which as part of its
investment banking business is continually engaged in providing financial
advisory services.
The name, business address, citizenship, present principal
occupation or employment, and the name and address of any corporation or other
organization in which such employment is conducted of each of the executive
officers and directors of Ladenburg are set forth in Appendix A attached hereto
and incorporated herein by reference.
During the past five years, neither Ladenburg nor, to the best
knowledge of Ladenburg, any person identified in Appendix A has been convicted
in a criminal proceeding (excluding traffic violations or similar misdemeanors).
On July 3, 1992, the Securities and Exchange Commission (the
"Commission") initiated an administrative proceeding against
<PAGE>
Ladenburg alleging violations of Sections 5(a) and (c) of the Securities Act of
1933, as amended. On November 11, 1993, the Commission imposed sanctions through
an offer of settlement that Ladenburg cease and desist any future violations of
such statutes and cause an independent review of its procedures with subsequent
audits. On or about November 5, 1993, the State of Idaho brought an
administrative proceeding against Ladenburg alleging violations of provisions of
Idaho Securities Act relating to registration requirements. On September 12,
1994, the State of Idaho issued an order through an offer of settlement finding
that Ladenburg violated such provisions of the Idaho Securities Act and pursuant
to which Ladenburg agreed to pay certain fines and comply with all of the
provisions of the Idaho Securities Act. On or about February 24, 1995, the State
of Vermont initiated an administrative proceeding against Ladenburg alleging
violation of provisions of the Vermont Securities Act relating to registration
requirements. On June 30, 1995, Ladenburg entered into a Consent Order with the
State of Vermont pursuant to which Ladenburg agreed to pay an administrative
penalty and costs of $24,000 and comply with all of the provisions of the
Vermont Securities Act. On February 8, 1996, the State of Michigan initiated an
administrative proceeding against Ladenburg alleging failure to comply with the
reporting requirements of the Michigan securities statute. On such date,
Ladenburg entered into a Consent Order with the State of Michigan pursuant to
which Ladenburg agreed to
<PAGE>
pay administrative costs of $2,500 and cease and desist from further acts which
violate the reporting requirements of the Michigan securities statute. On
October 17, 1996, the Chicago Board Options Exchange ("CBOE") initiated a
regulatory proceeding against Ladenburg alleging violations the Securities
Exchange Act of 1934, as amended and the rules promulgated thereunder (the
"Exchange Act Rules") in connection with the supervision of a former employee
who perpetrated a fraud. On June 16, 1997, CBOE issued an order through an offer
of settlement pursuant to which Ladenburg agreed to (i) a censure, (ii) pay a
fine of $125,000 and (iii) certain undertakings to better assure compliance by
its employees of the Exchange Act Rules.
On June 21, 1996, CBOE initiated a regulatory proceeding
against Jonathan J. Groveman, Vice Chairman of the Board of Ladenburg, alleging
violations of the Exchange Act Rules in connection with supervision of a former
employee who perpetrated a fraud. On June 4, 1997, CBOE issued an order through
an offer of settlement pursuant to which Mr. Groveman agreed to (i) a censure,
(ii) not supervise any Ladenburg employee for a period of six months and (iii)
retake the Series 24 exam. During the last five years, to the best knowledge of
Ladenburg, no other person identified in Appendix A has been a party to any
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
<PAGE>
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. Sources and Amounts of Funds or Other Consideration
Pursuant to a Letter Agreement (the "Agreement", a copy of
which is filed with this Schedule 13D as Exhibit 1 and incorporated herein by
reference), dated July 28, 1997, between the Company and Ladenburg, Ladenburg
was retained by the Company as its financial advisor. As part of the
consideration to Ladenburg for its services under the Agreement, the Company
agreed to issue to Ladenburg warrants to purchase (i) 150,000 shares of the
Common Stock at $2.00 per share upon execution of the Agreement and (ii) 300,000
shares of the Common Stock at a certain future date. On July 29, 1997, the
Company issued to Ladenburg a warrant (the "First Warrant") to purchase from the
Company 150,000 shares of Common Stock, at any time from time to time commencing
July 31, 1997, and prior to 5:00 p.m., New York City time then current, on July
31, 2001, at the purchase price of $2.00 per share. A copy of the First Warrant
is filed with this Schedule 13D as Appendix B to the Agreement.
On September 17, 1997, the Company issued to Ladenburg a
warrant (the "Second Warrant") to purchase from the Company 300,000 shares of
Common Stock, at any time from time to time commencing September 15, 1997, and
prior to 5:00 p.m., New York City time then current, on September 15, 2001, at
the purchase
<PAGE>
price of $2.3025 per share. A copy of the Second Warrant is filed with this
Schedule 13D as Exhibit 2 and incorporated herein by reference.
As of the date hereof, Ladenburg, by virtue of having sole
voting and dispositive power over the shares of the Common Stock issuable to
Ladenburg upon exercise of the First Warrant and the Second Warrant,
beneficially owns 450,000 shares of the Common Stock.
Item 4. Purpose of Transaction
Ladenburg acquired beneficial ownership of the securities to
have the right to acquire an equity interest in the Company. As of the date
hereof, Ladenburg is holding such securities solely for investment and has no
present plans or proposals with respect to any material change in the Company's
business or corporate structure or, generally, any other action referred to in
instructions (a) through (j) of Item 4 of the form of Schedule 13D. Depending on
market conditions and other factors, Ladenburg may continue purchases of the
Company's securities or may sell or otherwise dispose of all or portions of such
securities, if such sales and purchases would be desirable investments.
Item 5. Interest in Securities of the Issuer
As of the date hereof, Ladenburg beneficially owned 450,000
shares of the Common Stock (representing approximately
<PAGE>
5.2% of the Common Stock deemed outstanding on the date hereof).(1) As to all of
such shares, Ladenburg has the sole power to dispose or to direct the
disposition of such shares and the sole voting power with respect to such
shares.
Except as set forth herein, no transactions in the securities
of the Company were effected by Ladenburg within the 60 days prior to the date
of this filing.
Item 6. Contracts, Arrangements, Understandings, or Relationships with
Respect to Securities of the Issuer.
The securities were acquired pursuant to the Agreement, the
First Warrant and the Second Warrant, all of which are filed as exhibits to this
Schedule 13D. Except as otherwise set forth in this statement, to the best
knowledge of the undersigned, there are no contracts, arrangements,
understandings or relationships (legal or otherwise) with respect to the
securities of the Company.
Item 7. Material to be Filed as Exhibits
Exhibit 1. Letter Agreement, dated July 28, 1997, between Ladenburg and
the Company (with Appendices including Warrant for the Purchase of Common Stock
issued by the Company to Ladenburg on July 29, 1997).
Exhibit 2. Warrant for the Purchase of Shares of Common Stock issued by
the Company to Ladenburg on September 17, 1997.
- ----------------------
(1) Based on 8,250,416 shares of the Common Stock outstanding, as indicated in
the Company's Form 10-Q for the fiscal quarter ended April 30, 1997, plus
450,000 shares of Common Stock issuable to Ladenburg upon exercise of the First
Warrant and the Second Warrant.
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Signature
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.
LADENBURG THALMANN & CO. INC.
By: /s/ Robert B. Weintraub
Name: Robert B. Weintraub
Title: Senior Vice President
Dated: September 26, 1997
<PAGE>
Appendix A
Set forth below are the name and position of each of the
directors and executive officers of Ladenburg. The principal occupation of each
person listed below is his or her position with Ladenburg. The business address
of each person at Ladenburg is 590 Madison Avenue, New York, New York 10022.
Executive Officers
<TABLE>
<CAPTION>
Name Position Citizenship
- ---- -------- -----------
<S> <C> <C>
Ronald J. Kramer Chairman of the Board and Chief USA
Executive Officer
Peter M. Graham President USA
Howard L. Blum, Jr. Vice Chairman of the Board USA
Jonathan J. Groveman Vice Chairman of the Board USA
James T. Stevens Executive Vice President and Chief USA
Financial Officer
Robert B. Weintraub Senior Vice President, Secretary and USA
General Counsel
Herbert L. Hochberg Assistant Secretary USA
Salvatore Giardina Senior Vice President and Controller USA
Joan D. Levine Vice President - Operations USA
John H. Ruggiero Vice President and Director of USA
Compliance
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Directors
Principal Occupation and
Business Address
(if other than as indicated above)
Name Position Citizenship
- ---- -------- -----------
<S> <C> <C>
Ronald J. Kramer Chairman of the Board and Chief USA
Executive Officer
Peter M. Graham President USA
Howard L. Blum, Jr. Vice Chairman of the Board USA
Jonathan J. Groveman Vice Chairman of the Board USA
James T. Stevens Executive Vice President and Chief USA
Financial Officer
Herbert L. Hochberg Assistant Secretary USA
J. Michael Araiz Senior Managing Director USA
Paul C. Blackman Senior Managing Director USA
Larry Katz Senior Managing Director USA
Jay R. Petschek Senior Managing Director USA
Bharat Sahgal Senior Managing Director India
Wesley W. Sparks Managing Director USA
Andrew Zarnett Managing Director Canada
</TABLE>
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
- ------- ----------------------
Exhibit 1 Letter Agreement, dated July 28, 1997,
between Ladenburg and the Company
(with Appendices including Warrant for the Purchase
of Shares of Common Stock issued by the Company to
Ladenburg on July 29, 1997)
Exhibit 2 Warrant for the Purchase of Shares
of Common Stock issued by the Company
to Ladenburg on September 17, 1997
<PAGE>
EXHIBIT 1
[LADENBURG THALMANN LETTERHEAD]
July 28, 1997
Electric & Gas Technology, Inc.
13636 Neutron Road
Dallas, TX 75244-4410
Attention: Mr. S. Mort Zimmerman
Chairman and President
Dear Mr. Zimmerman:
This will confirm that Ladenburg Thalmann & Co. Inc. ("Ladenburg") has been
retained as a financial advisor to Electric & Gas Technology, Inc. (the
"Company") to perform such financial consulting services as the Company may
reasonably request. The term of this agreement (the "Agreement") shall extend
through May 30, 1999, provided, however, that either the Company or Ladenburg
may terminate this Agreement prior to such date and on or after February 1, 1998
as of the end of any month upon no less than 30 days' prior written notice.
As compensation for Ladenburg's services, the Company will pay Ladenburg a
quarterly fee of $12,500 commencing on August 1, 1997 and on the first day of
each succeeding three-month period following execution of this Agreement, for a
minimum period covering six months after execution of this Agreement. The
Company agrees to reimburse Ladenburg for reasonable external out-of-pocket
expenses (i.e., paid by Ladenburg to a third party) incurred in carrying out the
terms of this Agreement, including travel subject to prior approval by the
Company, courier, and disbursements. Internal costs such as telephone charges,
photocopying, etc. shall be borne by Ladenburg. These out-of-pocket expenses
will be payable from time to time promptly upon invoicing by Ladenburg therefor.
As further consideration to Ladenburg for entering into this Agreement, the
Company will issue to Ladenburg or its designees (with any such designees
subject to the approval of the Company provided that the Company's approval
shall not be unreasonably withheld), a warrant or warrants to purchase (i)
150,000 shares of the Company's common stock at $2.00 per share upon the
execution of this Agreement; and (ii) 300,000 shares of the Company's Common
Stock at a price equal to twenty (20%) percent above the market price with
market price to be determined by averaging the closing price of ELGT stock over
the ten (10) day trading period immediately following closing of the sale of
ELGT's subsidiary, Logic Design Metals, Inc. to Chatham
<PAGE>
Electric & Gas Technology, Inc.
July 28, 1997
Page 2
Technologies, Inc. (the "Logic") sale. The warrant for 300,000 shares shall be
issued within ten (10) days after pricing is determined. The terms and
conditions governing such issuance of warrants (i.e., the 150,000 and the
300,000) to be substantially in the form of Appendix B hereto annexed.
It is contemplated that from time to time the Company may request Ladenburg to
perform investment banking services (as distinguished from financial consulting
services) in connection with matters involving the Company, such as the private
placement of securities; mergers; acquisitions; divestitures; valuations; or
corporate reorganizations. Any fees which Ladenburg shall become entitled to
receive from the Company in connection with the performance of any such
investment banking services shall be set forth in the separate agreement between
the Company and Ladenburg and shall be in addition to the compensation provided
for herein. Neither the Company nor Ladenburg, however, shall have any
obligation to enter into any separate agreement, the terms and conditions of
which must be negotiated between Ladenburg and the Company.
In order to enable Ladenburg to render its services hereunder, the Company
agrees to provide to Ladenburg, among other things, all reasonable information
requested or required by Ladenburg, including, but not limited to, information
concerning historical and projected financial results and possible and known
litigious, environmental and other contingent liabilities. The Company also
agrees to make available to Ladenburg such representatives of the Company,
including, among others, directors, officers, employees, outside counsel and
independent certified public accountants, as Ladenburg may reasonably request.
The Company will promptly advise Ladenburg of any material changes in its
business or finances. The Company represents that all information made available
to Ladenburg by the Company will be complete and correct in all material
respects and will not contain any untrue statements of a material fact or omit
to state a material fact necessary in order to make the statement therein not
misleading in light of the circumstances under which such statements are made.
In rendering its services hereunder, Ladenburg will be using and relying
primarily on such information without independent verification thereof or
independent appraisal of any of the Company's assets. Ladenburg does not assume
responsibility for the accuracy or completeness of the information to which
reference is made hereto.
<PAGE>
Electric & Gas Technology, Inc.
July 28, 1997
Page 3
The services herein provided are to be rendered solely to the Company. They are
not being rendered by Ladenburg as an agent or as a fiduciary of the
shareholders of the Company and Ladenburg shall not have any liability or
obligation with respect to its services hereunder to such shareholders or any
other person, firm or corporation.
Upon request by the Company, Ladenburg will supply background information on its
key management personnel and shall notify the Company in writing regarding any
regulatory problems, investigations or sanctions affecting Ladenburg.
The Company and Ladenburg hereby agree to the terms and conditions of the
Indemnification Agreement attached hereto as Appendix A with the same force and
effect as if such terms and conditions were set forth at length herein.
This Agreement sets forth the entire understanding of the parties relating to
the subject matter hereof and supersedes and cancels any prior communications,
understandings and agreements between the parties. This Agreement cannot be
terminated or changed, nor can any of its provisions be waived, except by
written agreement signed by all parties hereto or except as otherwise provided
herein. This Agreement shall be binding upon and inure to the benefit of any
successors and assigns of the Company and Ladenburg.
This Agreement shall be governed by and construed to be in accordance with the
laws of the State of New York. Any dispute arising out of this Agreement shall
be adjudicated in the courts of the State of New York or in the federal courts
sitting in the Southern District of New York, and the Company hereby agrees that
service of process upon it by registered or certified mail at its address set
forth above shall be deemed adequate and lawful. The parties hereto shall
deliver notices to each other by personal delivery or by registered or certified
mail (return receipt requested) at the addresses set forth above.
Please confirm that the foregoing is in accordance with your understanding by
signing upon behalf of the Company and returning an executed copy of this
Agreement, and the warrant for 150,000 shares described herein, whereupon after
execution by Ladenburg this Agreement shall become binding between the Company
and Ladenburg. A telecopy of a signed original of this Agreement shall be
sufficient to bind the parties whose signatures appear hereon.
Very truly yours,
<PAGE>
Electric & Gas Technology, Inc.
July 28, 1997
Page 4
LADENBURG THALMANN & CO. INC.
By: /s/ Ronald J. Kramer
------------------------
Ronald J. Kramer
Chief Executive Officer
ACCEPTED AND AGREED TO:
ELECTRIC & GAS TECHNOLOGY, INC.
By: /s/ S. Mort Zimmerman
--------------------------
S. Mort Zimmerman
Chairman and President
Date: July 29, 1997
<PAGE>
APPENDIX A
INDEMNIFICATION AGREEMENT
Appendix A to Letter Engagement Agreement (the "Agreement"), dated July
28, 1997 by and between Electric & Gas Technology, Inc. (the "Company") and
Ladenburg Thalmann & Co. Inc. ("Ladenburg").
The Company agrees to indemnify and hold Ladenburg and its affiliates,
control persons, directors, officers, employees and agents (each an "Indemnified
Person") harmless from and against all losses, claims, damages, liabilities,
costs or expenses, including those resulting from any threatened or pending
investigation, action, proceeding or dispute whether or not Ladenburg or any
such other Indemnified Person is a party to such investigation, action,
proceeding or dispute, arising out of Ladenburg's entering into or performing
services under this Agreement. This indemnity shall also include Ladenburg's
and/or any such other Indemnified Person's reasonable attorneys' and
accountants' fees which shall be periodically reimbursed to Ladenburg and/or to
any such other Indemnified Person by the Company as they are incurred; provided,
however, that the indemnity herein set forth shall not apply where a court of
competent jurisdiction has made a final determination that Ladenburg acted in a
grossly negligent manner or engaged in willful misconduct in the performance of
its services hereunder which gave rise to the loss, claim, damages, liability,
cost or expense sought to be recovered hereunder (but pending any such final
determination the indemnification and reimbursement provisions hereinabove set
forth apply and the Company shall perform its obligations hereunder to reimburse
Ladenburg and/or each such other Indemnified Person periodically for its, his or
their fees as they are incurred). The Company also agrees that neither Ladenburg
nor any Indemnified Person shall have any liability (whether direct or indirect,
in contract or tort or otherwise) to the Company for or in connection with any
act or omission to act by Ladenburg as a result of its engagement under this
Agreement except for any such liability for losses, claims, damages, liabilities
or expenses incurred by the Company that is found in a final determination by a
court of competent jurisdiction to have resulted from Ladenburg's gross
negligence or willful misconduct. In the event of such determination by a court
of competent jurisdiction. Ladenburg shall (i) reimburse the Company for any
amounts paid to Ladenburg under this Indemnification Agreement; and (ii) pay all
losses as determined by the court reasonably incurred by the Company as a result
of Ladenburg's gross negligence or willful misconduct, including without
limitation, the Company's reasonable attorneys' and accountants' fees, provided
however that Ladenburg does not waive and shall retain all rights to
contribution and set-off.
A-1
<PAGE>
The Company reserves the right to appoint counsel to represent Ladenburg
in any action subject to the approval of Ladenburg which shall not be
unreasonably withheld.
If for any reason, the foregoing indemnification is unavailable to
Ladenburg or any such other Indemnified Person or insufficient to hold it
harmless, then the Company shall contribute to the amount paid or payable by
Ladenburg or any such other Indemnified Person as a result of such loss, claim,
damage or liability in such proportion as is appropriate to reflect not only the
relative benefits received by the Company and its shareholders on the one hand
and Ladenburg or any such other Indemnified Person on the other hand, but also
the relative fault of the Company and Ladenburg or any such other Indemnified
Person, as well as any relevant equitable considerations; provided that in no
event will the aggregate contribution by Ladenburg and any such other
Indemnified Person hereunder exceed the amount of fees actually received by
Ladenburg pursuant to this Agreement. The reimbursement, indemnity and
contribution obligations of the Company hereinabove set forth shall be in
addition to any liability which the Company may otherwise have and these
obligations and the other provisions hereinabove set forth shall be binding upon
and inure to the benefit of any successors, assigns, heirs and personal
representatives of the Company, Ladenburg and any other Indemnified Person.
The terms and conditions hereinabove set forth in this Appendix A shall
survive the termination and expiration of this Agreement and shall continue with
respect to any claim(s) commenced within a four (4) year period thereafter.
LADENBURG THALMANN & CO. INC.
By: /s/ Ronald J. Kramer
-------------------------
Ronald J. Kramer
Chief Executive Officer
ACCEPTED AND AGREED TO:
ELECTRIC & GAS TECHNOLOGY, INC.
AND ITS AFFILIATES AND RELATED ENTITIES
By: /s/ S. Mort Zimmerman
--------------------------
S. Mort Zimmerman
Chairman and President
Date: July 29, 1997
A-2
<PAGE>
APPENDIX B
WARRANT FOR THE PURCHASE OF SHARES OF COMMON STOCK
150,000 Shares
FOR VALUE RECEIVED, Electric & Gas Technology, Inc. (the "Company") a Texas
corporation, hereby certifies that Ladenburg Thalmann & Co. Inc., or its
permitted assigns are entitled to purchase from the Company, at any time from
time to time commencing July 31, 1997, and prior to 5:00 p.m., New York City
time then current, on July 31, 2001, fully paid and non-assessable shares of the
common stock, $0.01 par value, of the Company at the purchase price of $2.00 per
share. (Hereinafter, (i) said common stock, together with any other equity
securities which may be issued by the Company with respect thereto or in
substitution therefor, is referred to as the "Common Stock," (ii) the shares of
the Common Stock purchasable hereunder are referred to as the "Warrant Shares,"
(iii) the aggregate purchase price payable hereunder for the Warrant Shares is
referred to as the "Aggregate Warrant Price," (iv) the price payable hereunder
for each of the shares of the Warrant Shares is referred to as the "Per Share
Warrant Price" and (v) this warrant and all warrants hereafter issued in
exchange or substitution for this warrant are referred to as the "Warrants.")
The Aggregate Warrant Price is not subject to adjustment. The Per Share Warrant
Price is subject to adjustment as hereinafter provided; in the event of any such
adjustment, the number of Warrant Shares shall be adjusted by dividing the
Aggregate Warrant Price by the Per Shares Warrant Price in effect immediately
after such adjustment.
Exercise of Warrant.
This Warrant may be exercised, in whole at any time or in part from time
to time, commencing July 31, 1997 (the "Commencement Date"), and prior to 5:00
p.m., New York City time then current, on July 31, 2001 (the "Expiration Date"),
by the holder of this Warrant (the "Holder") by the surrender of this Warrant
(with the subscription form at the end hereof duly executed) at the address set
forth in Subsection 10(a) hereof, together with proper payment of the Aggregate
Warrant Price, or the proportionate part thereof if this Warrant is exercised in
part. Payment for the Warrant Shares shall be made by certified or official bank
check, payable to the order of the Company. If this Warrant is exercised in
part, this Warrant must be exercised for a number of whole shares of the Common
Stock, and the Holder is entitled to receive a new Warrant covering the number
of Warrant Shares in respect of which this Warrant has not been exercised and
setting forth the proportionate part of the
B-1
<PAGE>
Aggregate Warrant Price applicable to such Warrant Shares. Upon such exercise
and surrender of this Warrant, the Company will (i) issue a certificate or
certificates in the name of the Holder for the number of whole shares of the
Common Stock to which the Holder shall be entitled and (ii) deliver the other
securities and properties receivable upon the exercise of this Warrant, or the
proportionate part thereof if this Warrant is exercised in part, pursuant to the
provisions of this Warrant.
Reservation of Warrant Shares.
The Company agrees that, prior to the expiration of this Warrant, the
Company will at all times have authorized and in reserve, and will keep
available, solely for issuance or delivery upon the exercise of this Warrant,
such number of shares of the Common Stock and such amount of other securities
and properties as from time to time shall be deliverable to the Holder upon the
exercise of this Warrant, free and clear of all restrictions on sale or transfer
(except such as may be imposed under applicable federal and state securities
laws) and free and clear of all preemptive rights and all other rights to
purchase securities of the Company.
Protection Against Dilution.
If, at any time or from time to time after the date of this Warrant, the
Company shall (i) make a distribution on its capital stock in shares of Common
Stock, (ii) subdivide its outstanding shares of Common Stock into a greater
number of shares, (iii) combine its outstanding shares of Common Stock into a
smaller number of shares or (iv) issue by reclassification of its Common Stock
any shares of capital stock of the Company, the Per Share Warrant Price in
effect immediately prior to such action shall be adjusted so that the Holder of
any Warrant thereafter exercised shall be entitled to receive the number of
shares of Common Stock or other capital stock of the Company which he would have
owned or been entitled to receive immediately following the happening of any of
the events described above had such Warrant been exercised immediately prior
thereto. An adjustment made pursuant to this Section 3(a) shall become effective
immediately after the record date in the case of a distribution and shall become
effective immediately after the effective date in the case of a subdivision,
combination, or reclassification. If, as a result of an adjustment made pursuant
to this Section 3(a), the holder of any Warrant thereafter surrendered for
exercise shall become entitled to receive shares of two or more classes of
capital stock or shares of Common Stock and other capital stock of the Company,
the Board of Directors (whose determination shall be conclusive and shall be
described in a written notice to the Holder of any Warrant promptly after such
adjustment) shall determine the allocation of the adjusted Per Share Warrant
Price
B-2
<PAGE>
between or among shares of such classes or capital stock or shares of
Common Stock and other capital stock.
In case of any consolidation or merger to which the Company is a party
other than a merger or consolidation in which the Company is the continuing
corporation, or in case of any sale or conveyance to another entity of the
property of the Company as an entirety or substantially as an entirety, or in
the case of any statutory exchange of securities with another entity (including
any exchange effectuated in connection with a merger of any other corporation
with the Company), the Holder of this Warrant shall have the right thereafter to
convert such Warrant into the kind and amount of securities, cash or other
property which he would have owned or have been entitled to receive immediately
after such consolidation, merger, statutory exchange, sale or conveyance had
this Warrant been exercised immediately prior to the effective date of such
consolidation, merger, statutory exchange, sale or conveyance and in any such
case, if necessary, appropriate adjustment shall be made in the application of
the provisions set forth in this Section 3 with respect to the rights and
interests thereafter of the Holder of this Warrant to the end that the
provisions set forth in this Section 3 shall thereafter correspondingly be made
applicable, as nearly as may reasonably be, in relation to any shares of stock
or other securities or property thereafter deliverable on the exercise of this
Warrant. The above provisions of this Section 3(b) shall similarly apply to
successive consolidations, mergers, statutory exchanges, sales or conveyances.
Notice of any such consolidation, merger, statutory exchange, sale or
conveyance, and of said provisions so proposed to be made, shall be mailed to
the Holder not less than ten (10) days prior to such event. A sale of all or
substantially all of the assets of the Company for a consideration consisting
primarily of securities shall be deemed a consolidation or merger for the
foregoing purposes.
Whenever the Per Share Warrant Price is adjusted as provided in this
Section 3 and upon any modification of the rights of the Holder of this Warrant
in accordance with this Section 3, the Company shall, at its own expense, within
ten (10) days of such adjustment or modification, deliver to the Holder of this
Warrant a certificate of the Principal Financial Officer of the Company setting
forth the Per Share Warrant Price and the number of Warrant Shares after such
adjustment or the effect of such modification, a brief statement of the facts
requiring such adjustment or modification and the manner of computing the same.
Fully Paid Stock; Taxes.
The Company agrees that the shares of Common Stock represented by each
and every certificate for Warrant Shares delivered on the exercise of this
Warrant in accordance with the terms hereof shall, at the time of such delivery,
be validly
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<PAGE>
issued and outstanding fully paid and non-assessable and not subject to
preemptive rights or other contractual rights to purchase securities of the
Company, and the Company will take all such actions as may be necessary to
assure that the par value or stated value, if any, per share of the Common Stock
is at all times equal to or less than the then Per Share Warrant Price. The
Company further covenants and agrees that it will pay, when due and payable, any
and all federal and state stamp, original issue or similar taxes which may be
payable in respect of the issue of any Warrant Share or certificate therefor.
Registration Under Securities Act of 1933.
The Company agrees that if, at any time and, from time to time during
the period commencing on January 1, 1999 and ending on July 31, 2002, the Board
of Directors of the Company shall authorize the filing of a registration
statement (any such registration statement being sometimes hereinafter called a
"Subsequent Registration Statement") under the Act (otherwise than pursuant to
Section 5(a) hereof) in connection with the proposed offer of any of its
securities by it or any of its shareholders, the Company will (i) promptly
notify the Holder and all other registered Holders, if any, of other Warrants
and/or Warrant Shares that such Subsequent Registration Statement will be filed
and that the Warrant Shares which are then held, and/or which may be acquired
upon the exercise of the Warrants, by the Holder and such Holders will be
included in such Subsequent Registration Statement at the Holder's and such
Holders' request, (ii) cause such Subsequent Registration Statement to cover all
Warrant Shares which it has been so requested to include, (iii) cause such
Subsequent Registration Statement to become effective as soon as practicable and
to remain effective and current and (iv) take all other actions necessary under
any federal or state law or regulation of any governmental authority to permit
Warrant Shares which it has been so requested to include in such Subsequent
Registration Statement to be sold or otherwise disposed of and will maintain
such compliance with each such federal and state law and regulation of any
governmental authority for the period necessary for the Holder and such Holders
to effect the proposed sale or other disposition.
Whenever the Company is required pursuant to the provisions of this
Section 5 to include Warrant Shares in a registration statement, the Company
shall (i) furnish each Holder of any such Warrant Shares and each underwriter of
such Warrant Shares with such copies of the prospectus, including the
preliminary prospectus, conforming to the Act (and such other documents as each
such Holder or each such underwriter may reasonably request) in order to
facilitate the sale or distribution of the Warrant Shares, (ii) use its best
efforts to register or qualify such Warrant Shares under the blue sky laws (to
the extent applicable) of such jurisdiction or jurisdictions as the Holders of
any such
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<PAGE>
Warrant Shares and each underwriter of Warrant Shares being sold by such Holders
shall reasonably request and (iii) take such other actions as may be reasonably
necessary or advisable to enable such Holders and such underwriters to
consummate the sale or distribution in such jurisdiction or jurisdictions in
which such Holders shall have reasonably requested that the Warrant Shares be
sold.
The Company shall pay all expenses incurred in connection with any
registration or other action pursuant to the provisions of Section 5(a) and 5(b)
above, other than underwriting discounts and applicable transfer taxes relating
to the Warrant Shares.
The market price of Common Stock shall mean the price of a share of
Common Stock on the relevant date, determined on the basis of the last reported
sale price of the Common Stock as reported on the NASDAQ National Market System
("NASDAQ"), or, if there is no such reported sale on the day in question, on the
basis of the average of the closing bid and asked quotations as so reported, or,
if the Common Stock is not listed on NASDAQ, the last reported sale price of the
Common Stock on such other national securities exchange upon which the Common
Stock is listed, or, if the Common Stock is not listed on any national
securities exchange, on the basis of the average of the closing bid and asked
quotations on the day in question in the over-the-counter market as reported by
the National Association of Securities Dealers' Automated Quotations System, or,
if not so quoted, as reported by National Quotation Bureau, Incorporated or a
similar organization.
The Company agrees that if, at any two times during the period
commencing on January 1, 1999 and ending on December 31, 2001, the Holder and/or
the Holders of any other Warrants and/or Warrant Shares who or which shall hold
not less than 50% of the Warrants and/or Warrant Shares outstanding at such time
and not previously sold pursuant to this Section 5, request that the Company
file a registration statement under the Securities Act of 1933 (the "Act")
covering all or any of the Warrant Shares, the Company will (i) promptly notify
the Holder and all other registered holders, if any, of the Warrant and/or
Warrant Shares that such registration statement will be filed and that the
Warrant Shares which are then held, and/or which may be acquired upon the
exercise of Warrants, by the Holder and such Holders will be included in such
registration statement at the Holder's and such Holder's request, (ii) cause
such registration statement to cover all Warrant Shares which it has been so
requested to include, (iii) use its best efforts to cause such registration
statement to become effective as soon as practicable and to remain effective and
current and (iv) take all other action necessary under any federal or state law
or regulations of any governmental authority to permit all Warrant Shares which
it has been so requested to include in such registration statement to be
B-5
<PAGE>
sold or otherwise disposed of and will maintain such compliance with each such
federal and state law and regulation of any governmental authority for the
period necessary for the Holder and such Holders to effect the proposed sale or
other disposition. The Holders shall pay all expenses incurred in connection
with any registration or other action pursuant to the provisions of this
Section, including without limitation accountants and attorneys fees.
Indemnification.
The Company agrees to indemnify and hold harmless each selling holder of
Warrant Shares and each person who controls any such selling holder within the
meaning of Section 15 of the Act, and each and all of them, from and against any
and all losses, claims, damages, liabilities or actions, joint and several, to
which any selling holder of Warrant Shares or they or any of them may become
subject under the Act or otherwise and to reimburse the persons indemnified as
above for any legal or other expenses (including the cost of any investigation
and preparation) incurred by them in connection with any litigation or
threatened litigation, whether or not resulting in any liability, but only
insofar as such losses, claims, damages, liabilities or actions arise out of, or
are based upon, (i) any untrue statement or alleged untrue statement of a
material fact contained in any registration statement pursuant to which Warrant
Shares were registered under the Act (hereinafter called a "Registration
Statement"), any preliminary prospectus, the final prospectus or any amendment
or supplement thereto (or in any application or document filed in connection
therewith) or document executed by the Company based upon written information
furnished by or on behalf of the Company filed in any jurisdiction in order to
register or qualify the Warrant Shares under the securities laws thereof or the
omission or alleged omission to state therein a 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, or (ii) the employment
by the Company in any device, scheme or artifice to defraud, or the engaging by
the Company in any act, practice or course of business which operates or would
operate as a fraud or deceit, or any conspiracy with respect thereto, in which
the Company shall participate, in connection with the issuance and sale of any
of the Warrant Shares; provided, however, that (i) the indemnity agreement
contained in this (a) shall not extend to any selling holder of Warrant Shares
in respect if any such losses, claims, damages, liabilities or actions arising
out of, or based upon, any such untrue statement or alleged untrue statement, or
any such omission or alleged omission, if such statement or omission was based
upon and made in conformity with information furnished in writing to the Company
by a selling holder of Warrant Shares specifically for use in connection with
the preparation of such
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<PAGE>
Registration Statement, any final prospectus, any preliminary prospectus or any
such amendment or supplement thereto. The Company agrees to pay any legal and
other expenses for which it is liable under this (a) from time to time (but not
more frequently than monthly) within 30 days after its receipt of a bill
therefor.
Each selling holder of Warrant Shares, severally and not jointly, will
indemnify and hold harmless the Company, its directors, its officers who shall
have signed the Registration Statement and each person, if any, who controls the
Company within the meaning of Section 15 of the Act to the same extent as the
foregoing indemnity from the Company, but in each case to the extent, and only
to the extent that any statement in or omission from or alleged omission from
such Registration Statement, any final prospectus, any preliminary prospectus or
any amendment or supplement thereto was made in reliance upon information
furnished in writing to the Company by such selling holder specifically for use
in connection with the preparation of the Registration Statement, any final
prospectus or the preliminary prospectus or any such amendment or supplement
thereto; provided, however, that the obligation of any holder of Warrant Shares
to indemnify the Company under the provisions of this (b) shall be limited to
the product of the number of Warrant Shares being sold by the selling holder and
the market price of the Common Stock on the date of the sale to the public of
these Warrant Shares. Each selling holder of Warrant Shares agrees to pay any
legal and other expenses for which it is liable under this (b) from time to time
(but not more frequently than monthly) within 30 days after receipt of a bill
therefor.
If any action is brought against a person entitled to indemnification
pursuant to the foregoing Sections 6(a) or (b) (an "indemnified party") in
respect of which indemnity may be sought against a person granting
indemnification (an "indemnifying party") pursuant to such Sections, such
indemnified party shall promptly notify such indemnifying party in writing of
the Commencement thereof, but the omission so to notify the indemnifying party
of any such action shall not release the indemnifying party from any liability
it may have to such indemnified party otherwise than on account of the indemnity
agreement contained in (a) or (b) of this Section 6. In case any such action is
brought against an indemnified party and it notifies an indemnifying party of
the commencement thereof, the indemnifying party against which a claim is to be
made will be entitled to participate therein at its own expense and, to the
extent that it may wish, to assume at its own expense the defense thereof, with
counsel reasonably satisfactory to such the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
based upon advice of counsel that there may be legal defenses available to it
and/or
B-7
<PAGE>
other indemnified parties which are different from or additional to those
available to the indemnifying party, the indemnified party shall have the right
to select separate counsel to assume such legal defenses and otherwise to
participate in the defenses of such action on behalf of such indemnified party
or parties and (ii) in any event, the indemnified party shall be entitled to
have counsel chosen by such indemnified party participate in, but not conduct,
the defense at the expense of the indemnifying party. Upon receipt of notice
from the indemnifying party to such indemnified party of counsel, the
indemnifying party will not be liable to such indemnified party under this
Section 6 for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof unless (i) the
indemnified party shall have employed such counsel in connection with the
assumption of legal defenses in accordance with proviso (i) to the next
preceding sentence (it being understood, however, that the indemnifying party
shall not be liable for the expenses of more than one separate counsel), (ii)
the indemnifying party shall not have employed counsel reasonably satisfactory
to the indemnified party to represent the indemnified party within a reasonable
time after notice of commencement of the action or (iii) the indemnifying party
has authorized the employment of counsel for the indemnified party at the
expense of the indemnifying party. An indemnifying party shall not be liable for
any settlement of any action or proceeding effected without its written consent.
In order to provide for just and equitable contribution in circumstances
in which the indemnity agreement provided for in (a) of this Section 6 is
unavailable to a selling holder of Warrant Shares in accordance with its terms,
the Company and the selling holder of Warrant Shares shall contribute to the
aggregate losses, claims, damages and liabilities, of the nature contemplated by
said indemnity agreement, incurred by the Company and the selling holder of
Warrant Shares, in such proportions as is appropriate to reflect the relative
benefits received by the Company and the selling holder of Warrant Shares from
any offering of the Warrant Shares; provided, however, that if such allocation
is not permitted by applicable law or if the indemnified party failed to give
the notice required under (c) of this Section 6, then the relative fault of the
Company and the selling holder of Warrant Shares in connection with the
statements or omissions which resulted in such losses, claims, damages and
liabilities and other relevant equitable considerations will be considered
together with such relative benefits.
The respective indemnity and contribution agreements by the Company and
the selling holder of Warrant Shares in Section (a), (b), (c) and (d) of this
Section 6 shall remain operative and in full force and effect regardless of (i)
any investigation made by
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<PAGE>
any selling holder of Warrant Shares or by or on behalf of any person who
controls such selling holder or by the Company or any controlling person of the
Company or any director or any officer of the Company, (ii) payment for any of
the Warrant Shares or (iii) any termination of this Agreement and shall survive
the delivery of the Warrant Shares, and any successor of the Company, or of any
selling holder of Warrant Shares, or of any person who control the Company or of
any selling holder of Warrant Shares, as the case may be, shall be entitled to
the benefits of such respective indemnity and contribution agreements. The
respective indemnity and contribution agreements by the Company and the selling
holder of Warrant Shares contained in (a), (b), (c) and (d) of this Section 6
shall be in addition to any liability which the Company and the selling holder
of Warrant Share may otherwise have.
Limited Transferability.
This Warrant is not transferable or assignable by the Holder except (i)
to Ladenburg Thalmann & Co. Inc., any successor firm or corporation of Ladenburg
Thalmann & Co. Inc., (ii) to any of the officers or employees of Ladenburg
Thalmann & Co. Inc. or of any such successor firm or (iii) in the case of an
individual, pursuant to such individual's last will and testament or the laws of
descent and distribution and is so transferable only upon the books of the
Company which it shall cause to be maintained for the purpose. The Company may
treat the registered holder of this Warrant as he or it appears on the Company's
books at any time as the Holder for all purposes. The Company shall permit any
holder of a Warrant or his duly authorized attorney, upon written request during
ordinary business hours, to inspect and copy or make extracts from its books
showing the registered holders of Warrants. All Warrants will be dated the same
date as this Warrant.
By acceptance hereof, the Holder represents and warrants that this
Warrant is being acquired, and all Warrant Shares to be purchased upon the
exercise of this Warrant will be acquired, by the Holder solely for the account
of such Holder and not with a view to the fractionalization and distribution
thereof and will not be sold or transferred except in accordance with the
applicable provisions of the Act and the rules and regulations of the Securities
and Exchange Commission promulgated thereunder, and the Holder agrees that
neither this Warrant nor any of the Warrant Shares may be sold or transferred
except in accordance with the applicable provisions of the Act and the rules and
regulations of the Securities and Exchange Commission promulgated thereunder,
and the Holder agrees that neither this Warrant nor any of the Warrant Shares
may be sold or transferred except under cover of a Registration Statement under
the Act which is effective and current with respect to such Warrant Shares or
pursuant to an opinion, in form and substance reasonably
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<PAGE>
acceptable to the Company's counsel, that registration under the Act is not
required in connection with such sale or transfer. Any Warrant Shares issued
upon exercise of this Warrant shall bear the following legend:
"The Securities represented by this certificate have not been registered
under the Securities Act of 1933 and are restricted securities within the
meaning thereof. Such securities may not be sold or transferred except pursuant
to a Registration Statement under such Act which is effect and current with
respect to such securities or pursuant to an opinion of counsel reasonably
satisfactory to the issuer of such securities that such sale or transfer is
exempt from the registration requirements of such Act."
Loss, etc., of Warrant.
Upon receipt of evidence satisfactory to the Company of the loss, theft,
destruction or mutilation of this Warrant, and of indemnity reasonably
satisfactory to the Company, if lost, stolen or destroyed, and upon surrender
and cancellation of this Warrant, if mutilated, and upon reimbursement of the
Company's reasonable incidental expenses, the Company shall execute and deliver
to the Holder a new Warrant of like date, tenor and denomination.
Warrant Holder Not Shareholders.
Except as otherwise provided herein, this Warrant does not confer upon
the Holder any right to vote or to consent to or receive notice as shareholder
of the Company, as such, in respect of any matters whatsoever, or any other
rights or liabilities as a shareholder, prior to the exercise hereof.
Communication.
No notice or other communication under this Warrant shall be effective
unless, by any notice or other communication shall be effective and shall be
deemed to have been given if, the same is in writing and is mailed by
first-class mail, postage prepaid, addressed to:
the Company at 13636 Neutron Road, Dallas, TX 75244-4410, or
such other address as the Company has designated in writing to
the Holder; or
The Holder at 590 Madison Avenue, New York, NY 10022, or such
other address as the Holder has designated in writing to the
Company.
Headings.
The headings of this Warrant have been inserted as a matter of
convenience and shall not affect the construction hereof.
B-10
<PAGE>
Applicable Law.
This Warrant shall be governed by and construed in accordance with the
laws of the State of New York without giving effect to the principles of
conflicts of law thereof.
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<PAGE>
IN WITNESS WHEREOF, Electric & Gas Technology, Inc. has caused this
Warrant to be signed by its Chairman of the Board and its corporate seal to be
hereunto affixed and attested by its Secretary this 29th day of July, 1997.
ATTEST:
By: /s/ Marie Pajol By: /s/ S. Mort Zimmerman
-------------------- --------------------------
Secretary S. Mort Zimmerman
Chairman and President
[Corporate Seal]
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<PAGE>
SUBSCRIPTION
------------
The undersigned _________________________, pursuant to the provisions of
the foregoing Warrant, hereby agrees to subscribe for and purchase _______
shares of the Common Stock of __________ covered by said Warrant, and makes
payment therefor in full at the price per shares provided by said Warrant.
Dated: Signature:
Address:
B-13
<PAGE>
PARTIAL ASSIGNMENT
FOR VALUE RECEIVED, _________________________ hereby assigns and
transfers unto ____________________ the right to purchase _____________________
shares of the Common Stock of _____________ by the foregoing Warrant, and a
proportionate part of said Warrant and the attorney, to transfer that part of
said Warrant on the books of ___________________________.
Dated: Signature:
Address:
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<PAGE>
EXHIBIT 2
WARRANT FOR THE PURCHASE OF SHARES OF COMMON STOCK
300,000 Shares
FOR VALUE RECEIVED, Electric & Gas Technology, Inc. (the "Company") a
Texas corporation, hereby certifies that Ladenburg Thalmann & Co. Inc., or its
permitted assigns are entitled to purchase from the Company, at any time from
time to time commencing September 15, 1997, and prior to 5:00 p.m., New York
City time then current, on September 15, 2001, fully paid and nonassessable
shares of the common stock, $0.01 par value, of the Company at the purchase
price of $2.3025 per share. (Hereinafter, (i) said common stock, together with
any other equity securities which may be issued by the Company with respect
thereto or in substitution therefor, is referred to as the "Common Stock," (ii)
the shares of the Common Stock purchasable hereunder are referred to as the
"Warrant Shares," (iii) the aggregate purchase price payable hereunder for the
Warrant Shares is referred to as the "Aggregate Warrant Price," (iv) the price
payable hereunder for each of the shares of the Warrant Shares is referred to as
the "Per Share Warrant Price" and (v) this warrant and all warrants hereafter
issued in exchange or substitution for this warrant are referred to as the
"Warrants.") The Aggregate Warrant Price is not subject to adjustment. The Per
Share Warrant Price is subject to adjustment as hereinafter provided; in the
event of any such adjustment, the number of Warrant Shares shall be adjusted by
dividing the Aggregate Warrant Price by the Per Shares Warrant Price in effect
immediately after such adjustment.
Exercise of Warrant.
This Warrant may be exercised, in whole at any time or in part from time
to time, commencing September 15, 1997 (the "Commencement Date"), and prior to
5:00 p.m., New York City time then current, on September 15, 2001 (the
"Expiration Date"), by the holder of this Warrant (the "Holder") by the
surrender of this Warrant (with the subscription form at the end hereof duly
executed) at the address set forth in Subsection 10(a) hereof, together with
proper payment of the Aggregate Warrant Price, or the proportionate part thereof
if this Warrant is exercised in part. Payment for the Warrant Shares shall be
made by certified or official bank check, payable to the order of the Company.
If this Warrant is exercised in part, this Warrant must be exercised for a
number of whole shares of the Common Stock, and the Holder is entitled to
receive a new Warrant covering the number of Warrant Shares in respect of which
this Warrant has not been exercised and setting forth the proportionate part of
the Aggregate Warrant Price applicable to such Warrant Shares. Upon such
exercise and surrender of this Warrant, the Company will (i) issue a certificate
or certificates in the name of the Holder for
<PAGE>
the number of whole shares of the Common Stock to which the Holder shall be
entitled and (ii) deliver the other securities and properties receivable upon
the exercise of this Warrant, or the proportionate part thereof if this Warrant
is exercised in part, pursuant to the provisions of this Warrant.
Reservation of Warrant Shares.
The Company agrees that, prior to the expiration of this Warrant, the
Company will at all times have authorized and in reserve, and will keep
available, solely for issuance or delivery upon the exercise of this Warrant,
such number of shares of the Common Stock and such amount of other securities
and properties as from time to time shall be deliverable to the Holder upon the
exercise of this Warrant, free and clear of all restrictions on sale or transfer
(except such as may be imposed under applicable federal and state securities
laws) and free and clear of all preemptive rights and all other rights to
purchase securities of the Company.
Protection Against Dilution.
If, at any time or from time to time after the date of this Warrant, the
Company shall (i) make a distribution on its capital stock in shares of Common
Stock, (ii) subdivide its outstanding shares of Common Stock into a greater
number of shares, (iii) combine its outstanding shares of Common Stock into a
smaller number of shares or (iv) issue by reclassification of its Common Stock
any shares of capital stock of the Company, the Per Share Warrant Price in
effect immediately prior to such action shall be adjusted so that the Holder of
any Warrant thereafter exercised shall be entitled to receive the number of
shares of Common Stock or other capital stock of the Company which he would have
owned or been entitled to receive immediately following the happening of any of
the events described above had such Warrant been exercised immediately prior
thereto. An adjustment made pursuant to this Section 3(a) shall become effective
immediately after the record date in the case of a distribution and shall become
effective immediately after the effective date in the case of a subdivision,
combination, or reclassification. If, as a result of an adjustment made pursuant
to this Section 3(a), the holder of any Warrant thereafter surrendered for
exercise shall become entitled to receive shares of two or more classes of
capital stock or shares of Common Stock and other capital stock of the Company,
the Board of Directors (whose determination shall be conclusive and shall be
described in a written notice to the Holder of any Warrant promptly after such
adjustment) shall determine the allocation of the adjusted Per Share Warrant
Price between or among shares of such classes or capital stock or shares of
Common Stock and other capital stock.
In case of any consolidation or merger to which the Company is a party
other than a merger or consolidation in which
2
<PAGE>
the Company is the continuing corporation, or in case of any sale or conveyance
to another entity of the property of the Company as an entirety or substantially
as an entirety, or in the case of any statutory exchange of securities with
another entity (including any exchange effectuated in connection with a merger
of any other corporation with the Company), the Holder of this Warrant shall
have the right thereafter to convert such Warrant into the kind and amount of
securities, cash or other property which he would have owned or have been
entitled to receive immediately after such consolidation, merger, statutory
exchange, sale or conveyance had this Warrant been exercised immediately prior
to the effective date of such consolidation, merger, statutory exchange, sale or
conveyance and in any such case, if necessary, appropriate adjustment shall be
made in the application of the provisions set forth in this Section 3 with
respect to the rights and interests thereafter of the Holder of this Warrant to
the end that the provisions set forth in this Section 3 shall thereafter
correspondingly be made applicable, as nearly as may reasonably be, in relation
to any shares of stock or other securities or property thereafter deliverable on
the exercise of this Warrant. The above provisions of this Section 3(b) shall
similarly apply to successive consolidations, mergers, statutory exchanges,
sales or conveyances. Notice of any such consolidation, merger, statutory
exchange, sale or conveyance, and of said provisions so proposed to be made,
shall be mailed to the Holder not less than ten (10) days prior to such event. A
sale of all or substantially all of the assets of the Company for a
consideration consisting primarily of securities shall be deemed a consolidation
or merger for the foregoing purposes.
Whenever the Per Share Warrant Price is adjusted as provided in this
Section 3 and upon any modification of the rights of the Holder of this Warrant
in accordance with this Section 3, the Company shall, at its own expense, within
ten (10) days of such adjustment or modification, deliver to the Holder of this
Warrant a certificate of the Principal Financial Officer of the Company setting
forth the Per Share Warrant Price and the number of Warrant Shares after such
adjustment or the effect of such modification, a brief statement of the facts
requiring such adjustment or modification and the manner of computing the same.
Fully Paid Stock; Taxes.
The Company agrees that the shares of Common Stock represented by each
and every certificate for Warrant Shares delivered on the exercise of this
Warrant in accordance with the terms hereof shall, at the time of such delivery,
be validly issued and outstanding fully paid and non-assessable and not subject
to preemptive rights or other contractual rights to purchase securities of the
Company, and the Company will take all such actions as may be necessary to
assure that the par value or stated value, if any, per share of the Common Stock
is at all
3
<PAGE>
times equal to or less than the then Per Share Warrant Price. The Company
further covenants and agrees that it will pay, when due and payable, any and all
federal and state stamp, original issue or similar taxes which may be payable in
respect of the issue of any Warrant Share or certificate therefor.
Registration Under Securities Act of 1933.
The Company agrees that if, at any time and, from time to time during
the period commencing on January 1, 1999 and ending on September 15, 2002, the
Board of Directors of the Company shall authorize the filing of a registration
statement (any such registration statement being sometimes hereinafter called a
"Subsequent Registration Statement") under the Act (otherwise than pursuant to
Section 5(a) hereof) in connection with the proposed offer of any of its
securities by it or any of its shareholders, the Company will (i) promptly
notify the Holder and all other registered Holders, if any, of other Warrants
and/or Warrant Shares that such Subsequent Registration Statement will be filed
and that the Warrant Shares which are then held, and/or which may be acquired
upon the exercise of the Warrants, by the Holder and such Holders will be
included in such Subsequent Registration Statement at the Holder's and such
Holders' request, (ii) cause such Subsequent Registration Statement to cover all
Warrant Shares which it has been so requested to include, (iii) cause such
Subsequent Registration Statement to become effective as soon as practicable and
to remain effective and current and (iv) take all other actions necessary under
any federal or state law or regulation of any governmental authority to permit
all Warrant Shares which it has been so requested to include in such Subsequent
Registration Statement to be sold or otherwise disposed of and will maintain
such compliance with each such federal and state law and regulation of any
governmental authority for the period necessary for the Holder and such Holders
to effect the proposed sale or other disposition.
Whenever the Company is required pursuant to the provisions of this
Section 5 to include Warrant Shares in a registration statement, the Company
shall (i) furnish each Holder of any such Warrant Shares and each underwriter of
such Warrant Shares with such copies of the prospectus, including the
preliminary prospectus, conforming to the Act (and such other documents as each
such Holder or each such underwriter may reasonably request) in order to
facilitate the sale or distribution of the Warrant Shares, (ii) use its best
efforts to register or qualify such Warrant Shares under the blue sky laws (to
the extent applicable) of such jurisdiction or jurisdictions as the Holders of
any such Warrant Shares and each underwriter of Warrant Shares being sold by
such Holders shall reasonably request and (iii) take such other actions as may
be reasonably necessary or advisable to enable such Holders and such
underwriters to consummate the sale or distribution in such jurisdiction or
jurisdictions in which
4
<PAGE>
such Holders shall have reasonably requested that the
Warrant Shares be sold.
The Company shall pay all expenses incurred in connection with any
registration or other action pursuant to the provisions of Section 5(a) and 5(b)
above, other than underwriting discounts and applicable transfer taxes relating
to the Warrant Shares.
The market price of Common Stock shall mean the price of a share of
Common Stock on the relevant date, determined on the basis of the last reported
sale price of the Common Stock as reported on the NASDAQ National Market System
("NASDAQ"), or, if there is no such reported sale on the day in question, on the
basis of the average of the closing bid and asked quotations as so reported, or,
if the Common Stock is not listed on NASDAQ, the last reported sale price of the
Common Stock on such other national securities exchange upon which the Common
Stock is listed, or, if the Common Stock is not listed on any national
securities exchange, on the basis of the average of the closing bid and asked
quotations on the day in question in the over-the-counter market as reported by
the National Association of Securities Dealers' Automated Quotations System, or,
if not so quoted, as reported by National Quotation Bureau, Incorporated or a
similar organization.
The Company agrees that if, at any two times during the period
commencing on January 1, 1999 and ending on December 31, 2001, the Holder and/or
the Holders of any other Warrants and/or Warrant Shares who or which shall hold
not less than 50% of the Warrants and/or Warrant Shares outstanding at such time
and not previously sold pursuant to this Section 5, request that the Company
file a registration statement under the Securities Act of 1933 (the "Act")
covering all or any of the Warrant Shares, the Company will (i) promptly notify
the Holder and all other registered holders, if any, of the Warrant and/or
Warrant Shares that such registration statement will be filed and that the
Warrant Shares which are then held, and/or which may be acquired upon the
exercise of Warrants, by the Holder and such Holders will be included in such
registration statement at the Holder's and such Holder's request, (ii) cause
such registration statement to cover all Warrant Shares which it has been so
requested to include, (iii) use its best efforts to cause such registration
statement to become effective as soon as practicable and to remain effective and
current and (iv) take all other action necessary under any federal or state law
or regulations of any governmental authority to permit all Warrant Shares which
it has been so requested to include in such registration statement to be sold or
otherwise disposed of and will maintain such compliance with each such federal
and state law and regulation of any governmental authority for the period
necessary for the Holder and such Holders to effect the proposed sale or other
disposition. The Holders shall pay all expenses incurred in
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connection with any registration or other action pursuant to the provisions of
this Section, including without limitation accountants and attorneys fees.
Indemnification.
The Company agrees to indemnify and hold harmless each selling holder of
Warrant Shares and each person who controls any such selling holder within the
meaning of Section 15 of the Act, and each and all of them, from and against any
and all losses, claims, damages, liabilities or actions, joint and several, to
which any selling holder of Warrant Shares or they or any of them may become
subject under the Act or otherwise and to reimburse the persons indemnified as
above for any legal or other expenses (including the cost of any investigation
and preparation) incurred by them in connection with any litigation or
threatened litigation, whether or not resulting in any liability, but only
insofar as such losses, claims, damages, liabilities or actions arise out of, or
are based upon, (i) any untrue statement or alleged untrue statement of a
material fact contained in any registration statement pursuant to which Warrant
Shares were registered under the Act (hereinafter called a "Registration
Statement"), any preliminary prospectus, the final prospectus or any amendment
or supplement thereto (or in any application or document filed in connection
therewith) or document executed by the Company based upon written information
furnished by or on behalf of the Company filed in any jurisdiction in order to
register or qualify the Warrant Shares under the securities laws thereof or the
omission or alleged omission to state therein a 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, or (ii) the employment
by the Company in any device, scheme or artifice to defraud, or the engaging by
the Company in any act, practice or course of business which operates or would
operate as a fraud or deceit, or any conspiracy with respect thereto, in which
the Company shall participate, in connection with the issuance and sale of any
of the Warrant Shares; provided, however, that (i) the indemnity agreement
contained in this (a) shall not extend to any selling holder of Warrant Shares
in respect if any such losses, claims, damages, liabilities or actions arising
out of, or based upon, any such untrue statement or alleged untrue statement, or
any such omission or alleged omission, if such statement or omission was based
upon and made in conformity with information furnished in writing to the Company
by a selling holder of Warrant Shares specifically for use in connection with
the preparation of such Registration Statement, any final prospectus, any
preliminary prospectus or any such amendment or supplement thereto. The Company
agrees to pay any legal and other expenses for which it is liable under this (a)
from time to time (but not more
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frequently than monthly) within 30 days after its receipt of a bill therefor.
Each selling holder of Warrant Shares, severally and not jointly, will
indemnify and hold harmless the Company, its directors, its officers who shall
have signed the Registration Statement and each person, if any, who controls the
Company within the meaning of Section 15 of the Act to the same extent as the
foregoing indemnity from the Company, but in each case to the extent, and only
to the extent that any statement in or omission from or alleged omission from
such Registration Statement, any final prospectus, any preliminary prospectus or
any amendment or supplement thereto was made in reliance upon information
furnished in writing to the Company by such selling holder specifically for use
in connection with the preparation of the Registration Statement, any final
prospectus or the preliminary prospectus or any such amendment or supplement
thereto; provided, however, that the obligation of any holder of Warrant Shares
to indemnify the Company under the provisions of this (b) shall be limited to
the product of the number of Warrant Shares being sold by the selling holder and
the market price of the Common Stock on the date of the sale to the public of
these Warrant Shares. Each selling holder of Warrant Shares agrees to pay any
legal and other expenses for which it is liable under this (b) from time to time
(but not more frequently than monthly) within 30 days after receipt of a bill
therefor.
If any action is brought against a person entitled to indemnification
pursuant to the foregoing Sections 6(a) or (b) (an "indemnified party") in
respect of which indemnity may be sought against a person granting
indemnification (an "indemnifying party") pursuant to such Sections, such
indemnified party shall promptly notify such indemnifying party in writing of
the Commencement thereof, but the omission so to notify the indemnifying party
of any such action shall not release the indemnifying party from any liability
it may have to such indemnified party otherwise than on account of the indemnity
agreement contained in (a) or (b) of this Section 6. In case any such action is
brought against an indemnified party and it notifies an indemnifying party of
the commencement thereof, the indemnifying party against which a claim is to be
made will be entitled to participate therein at its own expense and, to the
extent that it may wish, to assume at its own expense the defense thereof, with
counsel reasonably satisfactory to such the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
based upon advice of counsel that there may be legal defenses available to it
and/or other indemnified parties which are different from or additional to those
available to the indemnifying party, the indemnified party shall have the right
to select separate counsel to assume such legal defenses and otherwise to
participate in the defenses
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of such action on behalf of such indemnified party or parties and (ii) in any
event, the indemnified party shall be entitled to have counsel chosen by such
indemnified party participate in, but not conduct, the defense at the expense of
the indemnifying party. Upon receipt of notice from the indemnifying party to
such indemnified party of counsel, the indemnifying party will not be liable to
such indemnified party under this Section 6 for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof unless (i) the indemnified party shall have employed such counsel in
connection with the assumption of legal defenses in accordance with proviso (i)
to the next preceding sentence (it being understood, however, that the
indemnifying party shall not be liable for the expenses of more than one
separate counsel), (ii) the indemnifying party shall not have employed counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party within a reasonable time after notice of commencement of the action or
(iii) the indemnifying party has authorized the employment of counsel for the
indemnified party at the expense of the indemnifying party. An indemnifying
party shall not be liable for any settlement of any action or proceeding
effected without its written consent.
In order to provide for just and equitable contribution in circumstances
in which the indemnity agreement provided for in (a) of this Section 6 is
unavailable to a selling holder of Warrant Shares in accordance with its terms,
the Company and the selling holder of Warrant Shares shall contribute to the
aggregate losses, claims, damages and liabilities, of the nature contemplated by
said indemnity agreement, incurred by the Company and the selling holder of
Warrant Shares, in such proportions as is appropriate to reflect the relative
benefits received by the Company and the selling holder of Warrant Shares from
any offering of the Warrant Shares; provided, however, that if such allocation
is not permitted by applicable law or if the indemnified party failed to give
the notice required under (c) of this Section 6, then the relative fault of the
Company and the selling holder of Warrant Shares in connection with the
statements or omissions which resulted in such losses, claims, damages and
liabilities and other relevant equitable considerations will be considered
together with such relative benefits.
The respective indemnity and contribution agreements by the Company and
the selling holder of Warrant Shares in Section (a), (b), (c) and (d) of this
Section 6 shall remain operative and in full force and effect regardless of (i)
any investigation made by any selling holder of Warrant Shares or by or on
behalf of any person who controls such selling holder or by the Company or any
controlling person of the Company or any director or any officer of the Company,
(ii) payment for any of the Warrant Shares or
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(iii) any termination of this Agreement and shall survive the delivery of the
Warrant Shares, and any successor of the Company, or of any selling holder of
Warrant Shares, or of any person who control the Company or of any selling
holder of Warrant Shares, as the case may be, shall be entitled to the benefits
of such respective indemnity and contribution agreements. The respective
indemnity and contribution agreements by the Company and selling holder of
Warrant Shares contained in (a), (b), (c) and (d) of this Section 6 shall be in
addition to any liability which the Company and the selling holder of Warrant
Share may otherwise have.
Limited Transferability.
This Warrant is not transferable or assignable by the Holder except (i)
to Ladenburg Thalmann & Co. Inc., any successor firm or corporation of Ladenburg
Thalmann & Co. Inc., (ii) to any of the officers or employees of Ladenburg
Thalmann & Co. Inc. or of any such successor firm or (iii) in the case of an
individual, pursuant to such individual's last will and testament or the laws of
descent and distribution and is so transferable only upon the books of the
Company which it shall cause to be maintained for the purpose. The Company may
treat the registered holder of this Warrant as he or it appears on the Company's
books at any time as the Holder for all purposes. The Company shall permit any
holder of a Warrant or his duly authorized attorney, upon written request during
ordinary business hours, to inspect and copy or make extracts from its books
showing the registered holders of Warrants. All Warrants will be dated the same
date as this Warrant.
By acceptance hereof, the Holder represents and warrants that this
Warrant is being acquired, and all Warrant Shares to be purchased upon the
exercise of this Warrant will be acquired, by the Holder solely for the account
of such Holder and not with a view to the fractionalization and distribution
thereof and will not be sold or transferred except in accordance with the
applicable provisions of the Act and the rules and regulations of the Securities
and Exchange Commission promulgated thereunder, and the Holder agrees that
neither this Warrant nor any of the Warrant Shares may be sold or transferred
except in accordance with the applicable provisions of the Act and the rules and
regulations of the Securities and Exchange Commission promulgated thereunder,
and the Holder agrees that neither this Warrant nor any of the Warrant Shares
may be sold or transferred except under cover of a Registration Statement under
the Act which is effective and current with respect to such Warrant Shares or
pursuant to an opinion, in form and substance reasonably acceptable to the
Company's counsel, that registration under the Act is not required in connection
with such sale or transfer. Any Warrant Shares issued upon exercise of this
Warrant shall bear the following legend:
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"The Securities represented by this certificate have not been registered
under the Securities Act of 1933 and are restricted securities within the
meaning thereof. Such securities may not be sold or transferred except pursuant
to a Registration Statement under such Act which is effect and current with
respect to such securities or pursuant to an opinion of counsel reasonably
satisfactory to the issuer of such securities that such sale or transfer is
exempt from the registration requirements of such Act."
Loss, etc., of Warrant.
Upon receipt of evidence satisfactory to the Company of the loss, theft,
destruction or mutilation of this Warrant, and of indemnity reasonably
satisfactory to the Company, if lost, stolen or destroyed, and upon surrender
and cancellation of this Warrant, if mutilated, and upon reimbursement of the
Company's reasonable incidental expenses, the Company shall execute and deliver
to the Holder a new Warrant of like date, tenor and denomination.
Warrant Holder Not Shareholders.
Except as otherwise provided herein, this Warrant does not confer upon
the Holder any right to vote or to consent to or receive notice as shareholder
of the Company, as such, in respect of any matters whatsoever, or any other
rights or liabilities as a shareholder, prior to the exercise hereof.
Communication.
No notice or other communication under this Warrant shall be effective
unless, by any notice or other communication shall be effective and shall be
deemed to have been given if, the same is in writing and is mailed by
first-class mail, postage prepaid, addressed to:
the Company at 13636 Neutron Road, Dallas, TX 75244-4410, or such
other address as the Company has designated in writing to the Holder;
or
The Holder at 590 Madison Avenue, New York, NY 10022, or such other
address as the Holder has designated in writing to the Company.
Headings.
The headings of this Warrant have been inserted as a matter of
convenience and shall not affect the construction hereof.
Applicable Law.
This Warrant shall be governed by and construed in accordance with the
laws of the State of New York without giving effect to the principles of
conflicts of law thereof.
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IN WITNESS WHEREOF, Electric & Gas Technology, Inc. has caused this
Warrant to be signed by its Chairman of the Board and its corporate seal to be
hereunto affixed and attested by its Secretary this 17th day of September, 1997.
ATTEST:
By: /s/ Marie Pajol By: /s/ S. Mort Zimmerman
--------------------- --------------------------
Secretary S. Mort Zimmerman
Chairman and President
[Corporate Seal]
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SUBSCRIPTION
------------
The undersigned ___________________, pursuant to the provisions of the
foregoing Warrant, hereby agrees to subscribe for and purchase _______ shares of
the Common Stock of ________________ covered by said Warrant, and makes payment
therefor in full at the price per shares provided by said Warrant.
Dated: Signature:
Address:
<PAGE>
PARTIAL ASSIGNMENT
------------------
FOR VALUE RECEIVED, _____________________ hereby assigns and transfers
unto _____________________ the right to purchase __________ shares of the Common
Stock of _____________________ by the foregoing Warrant, and a proportionate
part of said Warrant and the attorney, to transfer that part of said Warrant on
the books of _____________________.
Dated: Signature:
Address:
