File No. 70-7201
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________________________
FORM U-1
POST-EFFECTIVE AMENDMENT NO. 13
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
________________________________________
Names of Companies filing this statement and addresses of principal
executive offices:
Leidy Hub, Inc.
10 Lafayette Square
Buffalo, New York 14203
(formerly Enerop Corporation)
Name of Top Registered Holding Company
NATIONAL FUEL GAS COMPANY
Names and Addresses of Agents for Service:
G. T. Wehrlin, Secretary D. F. Smith
Leidy Hub, Inc. 10 Lafayette Square
10 Lafayette Square Buffalo, New York 14203
Buffalo, New York 14203
It is respectfully requested that the Commission send copies of all
notices, orders and communications to:
Kyle G. Storie
10 Lafayette Square
Buffalo, New York 14203
Item 1. Description of Proposed Transaction.
Effective December 29, 1993, Enerop Corporation, a New
York business corporation, changed its name to Leidy Hub, Inc.
("Leidy"). Leidy is a wholly-owned subsidiary of National Fuel Gas
Company ("National"). National is a public utility holding company
registered under the Public Utility Holding Company Act of 1935, as
amended ("Act"). Neither National, nor any of the subsidiaries of
National other than Leidy, join in this Post-Effective Amendment to
the Application Declaration on file in this proceeding.
A. History of this file to date.
Metscan, Inc. ("Metscan") is a New York corporation with
its principal place of business located at 1450 Rochester Street,
Lima, New York, 14485. Metscan developed a low cost and efficient
electronic automatic meter reading device ("AMD"), that provides an
economical and efficient method of reading residential natural gas
utility meters. The AMD is a microprocessor which is affixed to a
gas meter and which accumulates and stores information regarding
natural gas usage by a customer and transmits it by telephone line to
a computer. This information is then available for billing purposes.
The Metscan system, i.e., the attachment of the AMD to a gas meter,
and its connection by telephone line to a computer (i) improves meter
reading efficiency, as accurate readings can be received
electronically, (ii) enhances meter security and theft detection,
because actual consumption data is phoned in monthly (or possibly
daily) and the AMD has a tamper alarm, and (iii) enhances consumption
monitoring by the ability to provide daily consumption data.
National Fuel Gas Distribution Corporation
("Distribution"), National's public utility subsidiary and an
affiliate of Leidy, worked with Metscan in conducting a small
field-test of the Metscan system in the fall of 1985. Both
Distribution and Metscan were satisfied with the results. Therefore,
National requested, and on May 1, 1986 received, an order in this
file (HCAR. No. 35-24081) authorizing it to lend Metscan the sum of
$200,000 in exchange for a promissory note. Pursuant to this Order,
National was authorized to convert this note to 80,000 shares of
Class C Preferred Stock of Metscan at $2.50 per share.
In 1987, Distribution installed more than 1,600 Metscan
AMDs in its service territory in Erie, Pennsylvania and Buffalo, New
York, as part of an expanded test program. This program confirmed
the reliability and accuracy of the Metscan AMDs and their potential
to provide accuracy and save money for Distribution.
On March 18, 1988, National and Leidy received an order in
this file (HCAR. No. 35-24604), which (i) authorized National to make
a $442,500 contribution to the capital of Leidy, and to assign to
Leidy its $200,000 investment in Metscan and the accompanying option
to purchase Metscan stock, and (ii) authorized Leidy to contribute
$442,500 to Metscan Technology Partners (the "Partnership") in return
for a 9.96% interest in the Partnership. The $442,500 contribution
to Leidy's capital investment occurred on March 25, 1988. On
February 1, 1989, National assigned to Leidy its $200,000 investment
in Metscan and the accompanying option to purchase Metscan stock.
Pursuant to a third order in this file, issued on April
27, 1989 (HCAR. No. 35-24874), the SEC authorized the conversion of
Leidy's aggregate $642,500 investment in Metscan and the Partnership
to 257,000 shares of common stock of a new corporate entity to be
formed by the "rollup" of Metscan and the Partnership. The rollup
occurred on May 17, 1989. The entity formed by the rollup was
designated Metscan Acquisition Corp. ("MAC"). On July 10, 1989, MAC
changed its name to Metscan, Inc. ("Metscan"). As part of this
rollup, all preexisting Metscan or Partnership notes, all preexisting
Metscan preferred stock, all preexisting options, and all preexisting
Partnership interests, which were either convertible into common
stock of Metscan, or exercisable for common stock of Metscan, were so
converted or exercised, or were modified to be exercisable into
common stock of MAC and then exercised. Also, all Metscan shares
were exchanged for an equal number of shares of common stock of MAC.
(All MAC shares are now Metscan shares by virtue of the
aforementioned name change.)
Thus, as a result of all of the aforementioned actions,
Leidy owned 257,000 shares of Metscan common stock, at a cost of
$642,500, in mid-1989.
Leidy in 1990 requested, and obtained, a fourth order in
this file, which was issued on September 7, 1990 (HCAR. No.
35-25143). This order permitted Leidy to acquire 143,000 additional
shares of Metscan common stock for $357,500 ($2.50 per share), and
39,500 shares of Metscan preferred stock, $4 par value for $158,000
($4 per share). Those shares were acquired on September 26, 1990.
Leidy received a fifth order in regard to this file on
July 21, 1991 (HCAR. No. 35-25346). This order authorized Leidy to
purchase 17,000 additional shares of Metscan preferred stock for
$68,000. Leidy's total investment in Metscan to date is $1,226,000.
B. The proposed transaction.
On September 15, 1993, Leidy (then Enerop) entered into
the Class B Convertible Preferred Stock Purchase Agreement attached
as Exhibit B-14 (the "Purchase Agreement") whereby, subject to
approval of the Commission as sought in this Amendment, Leidy will
purchase 29,167 shares of newly issued Metscan, Inc. Class B
Convertible Preferred Stock ("Class B Preferred"). The several
purchasers listed in Schedule I of the Purchase Agreement (the "Other
Purchasers") also bought Class B Preferred in the amounts indicated
on Schedule I. The purchase price for the Class B Preferred is $1.20
per share. The entire capital investment of all purchasers is
$3,250,000.00 of which Leidy would be investing $35,000.00. This
$35,000.00 is being held in escrow pending approval of this Amendment
(See Exhibit B-19).
The issuance of the Series B Preferred will dilute Leidy's
ownership interest in Metscan from 9.83% of all outstanding shares to
5.53% of all outstanding shares (See "Exhibit B-15"). Additionally,
as set forth in the Restated Certificate of Incorporation of Metscan,
Inc. ("Exhibit A-3") the Series B Preferred Shareholders will have
certain preferential rights regarding (i) election of Board members,
(ii) payment of dividends, and (iii) liquidation rights as well as
other protective provisions. This will effectively reduce Leidy's
control over Metscan because Leidy has such a small percentage of the
Series B Prefered vis-a-vis the Other Purchasers. The capital
infusion by the Other Purchasers and Leidy will, however, allow
Metscan to continue to operate and further develop its products, thus
enhancing the possibility of Leidy receiving a return on its total
investment.
Metscan will use the $35,000.00 investment for working
capital and/or to fund ongoing product development efforts.
Metscan has operated, and will continue to operate, as a
business, and will in this connection, among other things, conduct
manufacturing, sales and related activities essential to the
commercial success of its automatic meter reading system, either
directly or through agents under its control. Leidy has not
undertaken, and will not undertake, Metscan's business activities.
Ongoing business dealings between Leidy and Metscan have been and are
expected to continue to be conducted in the ordinary course of
business.
Leidy will not, directly or indirectly, lend or in any
manner extend credit to, nor indemnify, nor make any donation or
capital contribution to, Metscan, without prior Commission approval.
Item 2. Fees Commissions and Expenses
None.
Item 3. Applicable Statutory Provisions.
Sections 9(a) and 10 of the Act and Rules 23 and 24 are
considered to be applicable to the proposed transaction.
Applicable Statutory
Provision Transaction.
Sections 9(a) and 10, Acquisition by Leidy of 29,167
Rules 23 and 24. shares of Metscan Series B
Preferred Stock.
It is believed that the proposed acquisition is in the
interests of investors, consumers and the public, and will not unduly
complicate the capital structure of Leidy.
To the extent that the proposed transaction is considered
by the Commission to require authorization, approval or exemption
under any section of the Act or provision of the Rules or Regulations
other than those specifically set forth herein, request for such
authorization, approval or exemption is hereby made.
Item 4. Regulatory Approval.
No consent or approval of any state commission or any
federal commission (other than the Securities and Exchange
Commission) is required with respect to the transaction proposed
herein.
Item 5. Procedures.
The Commission is requested to issue a supplemental order
pursuant to the provisions of Rule 23 permitting this Post-Effective
Amendment to become effective on or before March 31, 1994. If a
hearing is ordered, Applicant waives a recommended decision by a
hearing officer or other responsible officer of the Commission. Applicant
consents that the Office of Public Utility Regulation may
assist in the preparation of the commission's decision and/or order
and requests that the Commission's order become effective upon
issuance.
Item 6. Exhibits and Financial Statements.
A-3 Restated Certificate of Incorporation of
Metscan, Inc.
B-14 Class B Convertible Preferred Stock Agreement
Between Metscan, Inc. and the several
purchasers on Schedule I, dated as of
September 15, 1993.
B-15 Metscan, Inc. Shares Issued and Outstanding
as of December 31, 1993.
B-16 Registration Rights Agreement.
B-17 Shareholders' Agreement.
B-18 Agreement dated September 16, 1993.
B-19 Termination of Shareholders' Agreement dated
May 17, 1989.
B-20 Escrow Agreement.
F-5 Legal opinion of Kyle G. Storie, counsel
for Leidy.
G-1 Proposed form of Notice.
S-5 Enerop Corporation balance sheet at
September 30, 1993.
S-6 Enerop Corporation income statement for
12 months ended September 30, 1993.
S-7 Metscan, Inc. balance sheet at
September 30, 1993.
S-8 Metscan, Inc. income statement for
12 months ended September 30, 1993.
SIGNATURES
Pursuant to the requirements of the Public Utility Holding
Company Act of 1935, the undersigned companies have duly caused this
Post-Effective Amendment to be signed on their behalf by the
undersigned thereunto duly authorized.
Dated: March 18, 1994 LEIDY HUB, INC.
By: /s/G. T. Wehrlin
G. T. Wehrlin, Secretary
RESTATED CERTIFICATE OF INCORPORATION
- -of-
METSCAN, INC.
Under Section 807 of the Business Corporation Law
The undersigned, being the President and Secretary, respectively, of Metscan,
Inc., pursuant to Section 807 of the Business Corporation law, do hereby
certify:
1. The name of the Corporation is Metscan, Inc. (hereinafter called
"Corporation"). The Corporation was formed under the name Metscan Acquisition
Corp.
2. The original Certificate of Incorporation was filed in the State of New
York on March 22, 1989.
3. The Certificate of Incorporation is hereby amended as follows:
a. To reduce the number of authorized shares of Class A Preferred Shares,
par value $4.00, from 575,000 shares to 574,500, and to change the rights,
preferences and limitations of the Class A Preferred Shares described in
Section 3, as set forth in its entirety below. The 500 Class A Preferred
Shares to be eliminated are unissued shares.
b. To authorize the issuance of 3,762,107 shares of Class B Convertible
Preferred Shares, par value $.01, having the rights, preferences and
limitations described in Section 3, as set forth in its entirety below.
4. The text of the Certificate of Incorporation as amended thereby is hereby
restated as amended to read as herein set forth in full:
The name of the Corporation is METSCAN INC. (hereinafter
referred to as the "Corporation"). The name the Corporation was formed under
was Metscan Acquisition Corp.
The purposes for which it is to be formed are as follows:
To engage in any lawful act or activity for which corporations may be organized
under the Business Corporation Law, provided that the corporation shall not
engage in any act or activity requiring the consent or approval of any state
official, department, board, agency or other body without such consent or
approval first being obtained.
To engage in the business of developing, manufacturing, selling, and otherwise
dealing in personal property and to buy, sell, own, mortgage, or lease real
property.
To establish, conduct, and carry on the business as set forth herein either
directly, through subsidiaries or agents, or in conjunction with others whether
as operating agents, joint ventures, or partners.
To engage in any and all activities connected with or growing out of any of the
foregoing purposes, whether alone or in association with other, provided such
activities may be lawfully engaged in by business corporations.
The foregoing shall be construed both as objects and powers, in furtherance,
and not in limitation, of the general powers conferred by the laws of the State
of New York, and it is hereby expressly provided that the enumeration herein of
specific objects and powers shall not be held to limit or restrict in any way
the general powers of the corporation.
The aggregate number of shares which the corporation shall have
authority to issue is 24,336,607, which shares shall be classified as follows:
a. 20,000,000 Common Shares having a par value of $0.001 each.
b. 574,500 Class A Preferred Shares having a par value of $4.00 each.
c. 3,762,107 Class B Convertible Preferred Shares having a par value of $.01
each.
The Class A Preferred Shares and the Class B Convertible Preferred Shares
(sometimes collectively referred to as the "Preferred Shares") shall have the
rights, preferences and limitations set forth below:
Voting Rights.
General. Except as may be otherwise provided in this Certificate
of Incorporation or by law, the Class B Convertible Preferred Shares and Class
A Preferred Shares shall vote together with all other classes and series of
shares of the Corporation as a single class on all actions to be taken by the
Shareholders of the Corporation. Each Class B Convertible Preferred Share and
each Class A Preferred Share shall entitle the holder thereof to such number of
votes per share on each such action as shall equal the number of Common Shares
(including fractions of a share) into which each Class B Convertible Preferred
Share and Class A Preferred Share, respectively, is then convertible.
Board Size. The Corporation shall not, without the written
consent or affirmative vote of the holders of at least sixty-seven percent
(67%) of the then outstanding shares of Class B Convertible Preferred Shares,
given in writing or by vote at a a meeting, consenting or voting (as the case
may be) separately as a class, increase the maximum number of directors
constituting the Board of Directors to a number in excess of five.
Board Seats. The holders of the Class B Convertible Preferred
Shares, voting as a separate class, shall be entitled to elect two directors of
the Corporation. The holders of the Class A Preferred Shares and the Common
Shares, voting together as a single class, shall be entitled to elect two
directors of the Corporation. The holders of the Class A Preferred Shares, the
Class B Convertible Preferred Shares and the Common Shares, voting together as
a single class, shall be entitled to elect one director of the Corporation.
Notwithstanding the foregoing or anything else to the contrary provided in this
Certificate of Incorporation, if the Corporation fails or refuses, for any
reason or for no reason, to redeem on any Redemption Date (as defined in
Section 3.8) all of the Class B Convertible Preferred Shares required to be
redeemed on such Redemption Date in accordance with the terms and provisions of
Section 3.8, the holders of the Class B Convertible Preferred Shares, voting
together as a separate class, shall be entitled to elect three of the directors
of the Corporation or such larger number as constitutes a majority. In such
case, the holders of the Class A Preferred Shares and the Common Shares, voting
together as a single class, shall be entitled to elect one director of the
Corporation, and the holders of the Class A Preferred Shares, the Class B
Convertible Preferred Share and the Common Shares, voting together as a single
class, shall be entitled to elect one director of the Corporation. At any
meeting held for the purpose of electing directors, the presence in person or
by proxy of (x) the holders of a majority of the Class B Convertible Preferred
Shares then outstanding shall constitute a quorum for purposes of the election
of directors to be elected solely by the holders of the Class B Convertible
Preferred Shares, (y) the holders of the majority of the shares of Class A
Preferred Shares then outstanding shall constitute a quorum for purposes of the
election of directors to be elected jointly by the holders of the Class A
Preferred Shares and the Common Shares and (z) the holders of a majority of the
combined voting power of the Class A Preferred Shares, Class B Convertible
Preferred Shares, and Common Shares then outstanding shall constitute a quorum
for purposes of the election of the director to be elected jointly by the
holders of the Class A Preferred Shares, the Class B Convertible Preferred
Shares and the Common Shares. A vacancy in any directorship elected by the
holders of the Class B Convertible Preferred Shares shall be filled only by
vote or written consent of the holders of the Class B Convertible Preferred
Shares; a vacancy in any directorship elected jointly by the holders of the
Class A Preferred Shares and the Common Shares shall be filled only by vote of
the holders of the Class A Preferred Shares and the Common Shares; and a
vacancy in the directorship elected jointly by the holders of the Class A
Preferred Shares, the Class B Convertible Preferred Shares and the Common
Shares shall be filled only by vote of the Class A Preferred Shares, the Class
B Convertible Preferred Shares and the Common Shares as provided above.
Notwithstanding the foregoing, the Shareholders, as a whole or by class, may
take action by written consent in lieu of a meeting to the extent provided by
law.
Dividends
Dividends on Class B Convertible Preferred Shares. The holders
of the Class B Convertible Preferred Shares shall be entitled to receive, out
of funds legally available therefor, when and if declared by the Board of
Directors, quarterly dividends at the rate per annum of $.096 per share (the
"Class B Accruing Dividends"). Class B Accruing Dividends shall accrue from
day to day from September ____, 1993 whether or not earned or declared, shall
be cumulative, and shall be deemed declared and payable upon any liquidation,
dissolution or winding up of the Corporation pursuant to Section 3.3,
conversion of the Class B Convertible Preferred Shares pursuant to Section 3.6,
or redemption of Class B Convertible Preferred Shares pursuant to Section 3.8.
The holders of the Class B Convertible Preferred Shares may, by notice to the
Corporation within ten days of the giving of the notice by the Corporation
pursuant to Section 3.6.9, elect to receive any cash dividends declared by the
Board of Directors in the form of additional shares of Class B Convertible
Preferred Shares for a purchase price (in the form of cash dividends foregone)
of $1.20 per share of Class B Convertible Preferred Shares. No fractional
shares of Class B Convertible Preferred Shares shall be issued in connection
with any such election.
Dividends on Class A Preferred Shares. The holders of the Class
A Preferred Shares shall be entitled to receive, out of funds legally
available therefore, when and if declared by the Board of Directors, annual
cumulative dividends at the rate per annum of $.28 per share (the "Class A
Accruing Dividends"). Class A Accruing Dividends shall accrue from the date of
original issue of such shares whether or not earned or declared, and shall be
cumulative. The holders of the Class A Preferred Shares may, by notice to the
Corporation within ten days of the giving of written notice by the Corporation
that a dividend has been declared, elect to receive any cash dividends declared
by the Board of Directors in the form of additional shares of Class A Preferred
Shares for a purchase price (in the form of cash dividends foregone) of $4.00
per share of Class A Preferred Shares. No fractional shares of Class A
Preferred Shares shall be issued in connection with any such election. The
provisions of this Section 3.2.2 shall apply to and include all Class A
Preferred Shares and the dividends thereon, from the date of original issue of
such shares (including all accrued but unpaid dividends on the Class A
Preferred Shares as of the date of this amended Restated Certificate of
Incorporation), whether prior to or subsequent to the date of this Restated
Certificate of Incorporation.
Priority of Dividends. No dividends shall be paid upon, or set
apart for payment upon the Class A Preferred Shares or on the Common Shares
unless all accumulated dividends on the Class B Convertible Preferred Shares
have been paid in full or declared and set apart for payment. No dividends
shall be paid upon, or set apart for payment upon the Common Shares unless all
accumulated dividends on the Class B Convertible Preferred Shares and Class A
Preferred Shares have been paid in full or declared and set apart for payment.
The Board of Directors, in their discretion, may declare and pay dividends
concurrently on the Class B Convertible Preferred Shares, the Class A Preferred
Shares and the Common Shares for any dividend period of any fiscal year when
such dividends are applicable to such shares; provided, however, that all
accumulated dividends on the Class B Convertible Preferred Shares have been
paid in full before any dividends are paid on the Class A Preferred Shares and
the Common Shares, and all accumulated dividends on the Class A Preferred
Shares have been paid in full before any dividends are paid on the Common
Shares.
Liquidation Rights
Class B Convertible Preferred Shares. Upon any liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
the holders of the Class B Convertible Preferred Shares shall first be
entitled, before any distribution or payment is made upon any Share ranking on
liquidation junior to the Class B Convertible Preferred Share, to be paid an
amount equal to $1.20 per share plus, in the case of each Share, an amount
equal to all Class B Accruing Dividends unpaid thereon (whether or not
declared) and any other dividends declared but unpaid thereon, computed to the
date payment thereof is made available, such amount payable with respect to one
share of Class B Convertible Preferred Shares being sometimes referred to as
the "Class B Liquidation Preference Payment" and with respect to all Class B
Convertible Preferred Share being sometimes referred to as the "Class B
Liquidation Preference Payments." If upon such liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, the assets to
be distributed among the holders of Class B Convertible Preferred Shares shall
be insufficient to permit payment in full to the holders of Class B Convertible
Preferred Shares of the Class B Liquidation Preference Payments, then the
entire assets of the Corporation to be so distributed shall be distributed
ratably among the holders of Class B Convertible Preferred Shares.
Class A Preferred Shares. Upon any liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, the holders of
the Class A Preferred Shares shall be entitled, after the holders of the Class
B Convertible Preferred Shares are paid the full Class B Liquidation Preference
Payments but before any distribution or payment is made upon any Share ranking
on liquidation junior to the Class A Preferred Share, to be paid an amount
equal to $4.00 per share plus, in the case of each Share, an amount equal to
all dividends declared but unpaid thereon ( but not including Class A Accruing
Dividends to the extent not declared), computed to the date payment thereof is
made available, such amount payable with respect to one share of Class A
Preferred Shares being sometimes referred to as the "Class A Liquidation
Preference Payment" and with respect to all Class A Preferred Shares being
sometimes referred to as the "Class A Liquidation Preference Payments." If
upon such liquidation, dissolution or winding up of the Corporation, whether
voluntary or involuntary, the assets to be distributed among the holders of
Class A Preferred Shares shall be insufficient to permit payment in full to the
holders of Class A Preferred Shares of the Class A Liquidation Preference
Payments, then the entire assets of the Corporation to be so distributed
remaining after distribution of the Class B Liquidation Preference Payments
shall be distributed ratably among the holders of Class A Preferred Shares.
Distribution of Remaining Assets. Upon any such liquidation,
dissolution or winding up of the Corporation, immediately after the holders of
Class B Convertible Preferred Shares shall have been paid in full the Class B
Liquidation Preference Payments and the holders of Class A Preferred Shares
shall have been paid in full the Class A Liquidation Preference Payments, the
remaining net assets of the Corporation available for distribution shall be
distributed ratably among the holders of Class A Preferred Shares, Class B
Convertible Preferred Shares and Common Shares (with each share of Class A
Preferred Shares and Class B Convertible Preferred Shares being deemed, for
such purpose, to be equal to the number of shares of Common Shares (including
fractions of a share) into which such share of Class A Preferred Shares and
Class B Convertible Preferred Shares is convertible immediately prior to the
close of business on the business day fixed for such distribution). Written
notice of such liquidation, dissolution or winding up, stating a payment date
and the place where said payments shall be made, shall be delivered in person,
mailed by certified or registered mail, return receipt requested, not less than
20 days prior to the payment date stated therein, to the holders of record of
Class B Convertible Preferred Shares and Class A Preferred Shares, such notice
to be addressed to each such holder at its address as shown by the records of
the Corporation. The consolidation or merger of the Corporation into or with
any other entity or entities which results in the exchange of outstanding
shares of the Corporation for securities or other consideration issued or paid
or caused to be issued or paid by any such entity or affiliate thereof (other
than a merger to reincorporate the Corporation in a different jurisdiction),
the sale, lease, abandonment, transfer or other disposition by the Corporation
of all or substantially all its assets, and the issuance of capital shares or
obligations or rights to acquire capital shares resulting in a change of
control of the Corporation or giving another person the right to acquire
control of the Corporation shall be deemed to be a liquidation, dissolution or
winding up of the Corporation within the meaning of the provisions of this
Section 3.3. For purposes hereof, the Class A Preferred Shares and the Common
Shares shall rank on liquidation junior to the Class B Convertible Preferred
Shares.
Appraisal. If any of the assets of the Corporation are to be
distributed other than in cash under this Section 3.3 or for any purpose, then
the Board of Directors of the Corporation shall promptly engage independent
competent appraisers to determine the value of the assets to be distributed to
the holders of Preferred Shares or Common Shares. The Corporation shall, upon
receipt of such appraiser's valuation, give prompt written notice to each
holder of Preferred Shares or Common Shares of the appraiser's valuation.
Protective Provisions for Class B Convertible Preferred Shares.
At any time when Class B Convertible Preferred Shares are outstanding, except
where the vote or written consent of the holders of a greater number of shares
of the Corporation is required by law or by this Certificate of Incorporation,
and in addition to any other vote required by law, after approval of the Board
of Directors, without the approval of the holders of at least sixty-seven
percent (67%) of the then outstanding shares of Class B Convertible Preferred
Shares, given in writing or by vote at a meeting, consenting or voting (as the
case may be) separately as a class, the Corporation will not:
Create or authorize the creation of any additional class or
series of shares of capital stock; increase the authorized number of shares of
Class B Convertible Preferred Shares or any other class or series of capital
stock; or create or authorize any obligation or security convertible into
shares of Class B Convertible Preferred Shares or any other class or series of
capital stock, whether any such creation, authorization or increase shall be by
means of amendment to the Certificate of Incorporation or by merger,
consolidation or otherwise;
Issue more than an aggregate of 3,762,107 shares of Class B
Convertible Preferred Shares (without regard to whether any shares of Class B
Convertible Preferred Shares have been redeemed, repurchased or retired
following their issuance) or issue any other capital stock or obligation or
security convertible into shares of capital stock;
Consent to any liquidation, dissolution or winding up of the
Corporation or consolidate or merge into or with any other entity or entities
or sell, lease, abandon, transfer or otherwise dispose of all or substantially
all its assets;
Amend, alter or repeal its Certificate of Incorporation;
Amend, later or repeal its bylaws to increase the authorized
number of directors;
Employ or terminate the employment of any person performing the
responsibilities of a Chief Executive Officer, Chief Operating Officer,
President, Chief Financial Officer, Chief Technology Officer or Chief
Marketing/Sales Officer;
Purchase or set aside any sums for the purchase of, or pay any
dividend or make any distribution on, any shares of capital stock other than
the Class B Convertible Preferred Shares unless all unpaid Class B Accruing
Dividends on the Class B Convertible Preferred Shares shall have been paid in
full, except for dividends or other distributions payable on the Common Shares
solely in the form of additional Common Shares and except for the purchase of
Common Shares from former employees of the Corporation who acquired such shares
directly from the Corporation, if each such purchase is made pursuant to
contractual rights held by the Corporation relating to the termination of
employment of such former employee and the purchase price does not exceed the
original issue price paid by such former employee to the Corporation for such
shares; or
Redeem or otherwise acquire any Class B Convertible Preferred
Shares except as expressly authorized in Section 3.8 hereof or pursuant to a
purchase offer made pro rata to all holders of Class B Convertible Preferred
Shares on the basis of the aggregate number of outstanding shares of Class B
Convertible Preferred Shares then held by each such holder.
Protective Provisions for Class A Preferred Shares. So long as
any Class A Preferred Shares shall be outstanding, the Corporation shall not
without first obtaining the approval (by vote or written consent, as provided
by law) of the holders of at least 66-2/3% of the outstanding number of Class A
Preferred Shares alter or change the rights, preferences, or privileges of
Class A Preferred Shares so as materially adversely to affect the Class A
Preferred Shares.
Conversion Rights of Class B Convertible Preferred Shares. The
holders of Class B Convertible Preferred Shares shall have the following
conversion rights:
Right to Convert. Subject to the terms and conditions of this
Section 3.6, the holder of any share or shares of Class B Convertible Preferred
Shares shall have the right, at its option at any time, to convert any such
shares of Class B Convertible Preferred Shares (except that upon any
liquidation of the Corporation the right of conversion shall terminate at the
close of business on the business day fixed for payment for the amount
distributable on the Class B Convertible Preferred Shares) into such number of
fully paid and non assessable Common Shares as obtained by (i) multiplying the
number of Class B Convertible Preferred Shares so to be converted by $1.20 and
(ii) dividing the result of the conversion price of $1.20 per share or, in the
case an adjustment of such price has taken place pursuant to the further
provisions of this Section 3.6, then by the conversion price as last adjusted
and in effect at the date any share or shares of Class B Convertible Preferred
Shares are surrendered for conversion (such price, or such price as last
adjusted, being referred to as the "Class B Conversion Price"). Such rights of
conversion shall be exercised by the holder thereof by giving written notice
that the holder elects to convert a stated number of Class B Convertible
Preferred Shares into Common Shares and by surrender of a certificate or
certificates for the shares so to be converted to the Corporation at its
principal office (or such other office or agency of the Corporation as the
Corporation may designate by notice in writing to the holders of the Class B
Convertible Preferred Shares) at any time during its usual business hours on
the date set forth in such notice, together with a statement of the name or
names (with address) in which the certificate or certificates for Common Shares
shall be issued.
Issuance of Certificates; Time Conversion Effected. Promptly
after the receipt for the written notice referred to in Section 3.6.1 and
surrender of the certificate or certificates for the share or shares of Class B
Convertible Preferred Shares to be converted, the Corporation shall issue and
deliver, or cause to be issued and delivered, to the holder, registered in such
name or names as such holder may direct, a certificate or certificates for the
number of whole shares of Common Shares issuable upon the conversion of such
share or shares of Class B Convertible Preferred Shares. To the extent
permitted by law, such conversion shall be deemed to have been effected and the
Class B Conversion Price shall be determined as of the close of business on the
date on which such written notice shall have been received by the Corporation
and the certificate or certificates for such share or shares shall have been
surrendered as aforesaid, and at such time the rights of the holder of such
share or shares of Class B Convertible Preferred Shares shall cease, and the
person or persons in whose name or names any certificate or certificates for
Common Shares shall be issuable upon such conversion shall be deemed to have
become the holder or holders of record of the shares represented thereby.
Fractional Shares; Dividends; Partial Conversion. No fractional
shares shall be issued upon conversion of Class B Convertible Preferred Shares
into Common Shares and no payment or adjustment shall be made upon any
conversion on account of any cash dividends on the Common Share issued upon
such conversion. At the time of each conversion, the Corporation shall pay in
cash an amount equal to all dividends (including Class B Accruing Dividends
which shall be deemed declared) declared and unpaid on the shares of Class B
Convertible Preferred Shares surrendered for conversion to the date upon which
such conversion is deemed to take place as provided in Section 3.6.2. In case
the number of Class B Convertible Preferred Shares represented by the
certificate or certificates surrendered pursuant to Section 3.6.1 exceeds the
number of shares converted, the Corporation shall, upon such conversion,
execute and deliver to the holder, at the expense of the Corporation, a new
certificate or certificates for the number of shares of Class B Convertible
Preferred Shares represented by the certificate or certificates surrendered
which are not to be converted. If any fractional share of a Common Share
would, except for the provisions of the first sentence of this Section 3.6.3,
be delivered upon such conversion, the Corporation, in lieu of delivering such
fractional share, shall pay to the holder surrendering the Class B Convertible
Preferred Share for conversion an amount in cash equal to the current market
price of such fractional share as determined in good faith by the Board of
Directors of the Corporation.
Adjustment of Price Upon Issuance of Common Shares. Except as
provided in Section 3.6.5, if, on or before December 31, 1993, the Corporation
shall issue or sell, or is, in accordance with Sections 3.6.4.1 through
3.6.4.7, deemed to have issued or sold, any Common Shares for a consideration
per share less than the Class B Conversion Price in effect immediately prior to
the time of such issue or sale, then, forthwith upon each such issuance or
sale, the Class B Conversion Price shall be reduced to a price equal to the
price per share of Common Shares issued or deemed to have been issued for a
consideration per share less than the then existing Class B Conversion Price.
Except as provided in Section 3.6.5, if, after December 31, 1993, and whenever
the Corporation shall issue or sell, or is, in accordance with Sections 3.6.4.1
through Section 3.6.4.7, deemed to have issued or sold, any Common Shares for a
consideration per share less than the Class B Conversion Price in effect
immediately prior to the time of such issue or sale, then, forthwith upon such
issue or sale, the Class B Conversion Price shall be reduced to the price
determined by dividing (i) an amount equal to the sum of (a) the number of
Common Shares outstanding immediately prior to such issue or sale multiplied by
the then existing Class B Conversion Price and (b) the consideration, if any,
received by the Corporation upon such issue or sale, by (ii) the total number
of Common Shares outstanding immediately after such issue or sale.
For the purposes of this Section 3.6.4, the following shall also be
applicable:
Issuance of Rights or Options. In case at any time the
Corporation shall in any manner grant (whether directly or by assumption in a
merger or otherwise) any warrants or other rights to subscribe for or to
purchase, or any options for the purchase of, Common Shares or any stock or
security convertible into or exchangeable for Common Shares (such warrants,
rights or options being called "Options" and such convertible or exchangeable
stock or securities being called "Convertible Securities") whether or not such
Options or the right to convert or exchange any such Convertible Securities are
immediately exercisable, and the price per share for which Common Shares are
issuable upon the exercise of such Options or upon the conversion or exchange
of such Convertible Securities (determined by dividing (i) the total amount, if
any, received or receivable by the Corporation as consideration for the
granting of such Options, plus the minimum aggregate amount of additional
consideration payable to the Corporation upon the exercise of all such Options,
plus, in the case of such Options which relate to Convertible Securities, the
minimum aggregate amount of additional consideration, if any, payable upon the
issue or sale of such Convertible Securities and upon the conversion or
exchange thereof, by (ii) the total maximum number of Common Shares issuable
upon the exercise of such Options or upon the conversion or exchange of all
such Convertible Securities issuable upon the exercise of such Options) shall
be less than the Class B Conversion Price in effect immediately prior to the
time of the granting of such Options, then the total maximum number of Common
Shares issuable upon the exercise of such Options or upon conversion or
exchange of the total maximum amount of such Convertible Securities issuable
upon the exercise of such Options shall be deemed to have been issued for such
price per share as of the date of granting of such Options or the issuance of
such Convertible Securities and thereafter shall be deemed to be outstanding.
Except as otherwise provided in Section 3.6.4.3, no adjustment of the Class B
Conversion Price shall be made upon the actual issue of such Common Shares or
of such Convertible Securities upon exercise of such Options or upon the actual
issue of such Common Shares upon conversion or exchange of such Convertible
Securities.
Issuance of Convertible Securities. In case the Corporation
shall in any manner issue (whether directly or by assumption in a merger or
otherwise) or sell any Convertible Securities, whether or not the rights to
exchange or convert any such Convertible Securities are immediately
exercisable, and the price per share for which Common Shares are issuable upon
such conversion or exchange (determined by dividing (i) the total amount
received or receivable by the Corporation as consideration for the issue or
sale of such Convertible Securities, plus the minimum aggregate amount of
additional consideration, if any, payable to the Corporation upon the
conversion or exchange thereof, by (ii) the total maximum number of Common
Shares issuable upon the conversion or exchange of all such Convertible
Securities) shall be less than the Class B Conversion Price in effect
immediately prior to the time of such issue or sale, then the total maximum
number of Common Shares issuable upon conversion or exchange of all such
Convertible Securities shall be deemed to have been issued for such price per
share as of the date of the issue or sale of such Convertible Securities and
thereafter shall be deemed to be outstanding, provided that (a) except as
otherwise provided in Section 3.6.4.3, no adjustment of the Class B Conversion
Price shall be made upon the actual issue of such Common Shares upon conversion
or exchange of such Convertible Securities and (b) if any such issue or sale of
such Convertible Securities is made upon exercise of any Options to purchase
any such Convertible Securities for which adjustments of the Class B Conversion
Price have been or are to be made pursuant to other provisions of this Section
3.6.4, no further adjustment of the Class B Conversion Price shall be made by
reason of such issue or sale.
Change in Option Price or Conversion Rate. Upon the happening of
any of the following events, namely, if the purchase price provided for in any
Option referred to in Section 3.6.4.1, the additional consideration, if any,
payable upon the conversion or exchange of any Convertible Securities referred
to in Section 3.6.4.1 or 3.6.4.2, or the rate at which Convertible Securities
referred to in Section 3.6.4.1 or 3.6.4.2 are convertible into or exchangeable
for Common Shares shall change at any time (including, but not limited to,
changes under or by reason of provisions designed to protect against dilution),
the Class B Conversion Price in effect at the time of such event shall
forthwith be readjusted to the Class B Conversion Price which would have been
in effect at such time had such Options or Convertible Securities still
outstanding provided for such changed purchase price, additional consideration
or conversion rate, as the case may be, at the time initially granted, issued
or sold, but only if as a result of such adjustment the Class B Conversion
Price then in effect hereunder is thereby reduced; and on the termination of
any such Option or any such right to convert or exchange such Convertible
Securities, the Class B Conversion Price then in effect hereunder shall
forthwith be increased to the Class B Conversion Price which would have been in
effect at the time of such termination had such Option or Convertible
Securities, to the extent outstanding immediately prior to such termination,
never been issued.
Share Dividends. In case the Corporation shall declare a
dividend or make any other distribution upon any Shares of the Corporation
payable in Common Shares (except for dividends or distributions upon the Common
Shares), Options or Convertible Securities, any Common Shares, Options or
Convertible Securities, as the case may be, issuable in payment of such
dividend or distribution shall be deemed to have been issued or sold without
consideration.
Consideration for Shares. In case any Common Shares, Options or
Convertible Securities shall be issued or sold for cash, the consideration
received therefore shall be deemed to be the amount received by the Corporation
therefor, without deduction therefrom of any expenses incurred or any
underwriting commissions or concessions paid or allowed by the Corporation in
connection therewith. In case any Common Shares, Options or Convertible
Securities shall be issued or sold for a consideration other than cash, the
amount of the consideration other than cash received by the Corporation shall
be deemed to be the fair value of such consideration as determined in good
faith by the Board of Directors of the Corporation, without deduction of any
expenses incurred or any underwriting commissions or concessions paid or
allowed by the Corporation in connection therewith. In case any Options shall
be issued in connection with the issue and sale of other securities of the
Corporation, together comprising one integral transaction in which no specific
consideration is allocated to such Options by the parties thereto, such Options
shall be deemed to have been issued for such consideration as determined in
good faith by the Board of Directors of the Corporation.
Record Date. In case the Corporation shall take a record of the
holders of its Common Shares for the purpose of entitling them (i) to receive a
dividend or other distribution payable in Common Shares, Options or Convertible
Securities or (ii) to subscribe for or purchase Common Shares, Options or
Convertible Securities, then such record date shall be deemed to be the date of
the issue or sale of the shares of Common Shares deemed to have been issued or
sold upon the declaration of such dividend or the making of such other
distribution or the date of the granting of such right of subscription or
purchase, as the case may be.
Treasury Shares. The number of Common Shares outstanding at any
given time shall not include shares owned or held by or for the account of the
Corporation, and the disposition of any such shares shall be considered an
issue or sale of Common Shares for the purpose of this Section 3.6.4.
Certain Issues of Common Shares Excepted. Anything herein to the
contrary notwithstanding, the Corporation shall not be required to make any
adjustment of the Class B Conversion Price in the case of the issuance from and
after the date of filing of these terms of the Class B Convertible Preferred
Shares of (x) Common Shares in connection with the conversion of up to 574,500
Class A Convertible Preferred Shares and (y) up to 933,480 shares and rights to
acquire Common Shares to directors, officers, employees or consultants of the
Corporation in connection with their service to the Corporation and (z) Common
Shares issued in connection with the exercise of Common Stock Purchase Warrants
granted on September 13, 1993 for an aggregate of 45,416 Common Shares at an
exercise price of $1.20 per share; provided that, in the case of clause (y),
the issuance of such shares, or rights to acquire such shares, has been
approved by unanimous vote of the Board of Directors of the Corporation.
Subdivision or Combination of Common Shares. In case the
Corporation shall at any time subdivide (by any stock split, stock dividend or
otherwise) its outstanding shares of Common Shares into a greater number of
shares, the Class B Conversion Price in effect immediately prior to such
subdivision shall be proportionately reduced, and, conversely, in case the
outstanding shares of Common Shares shall be combined into a smaller number of
shares, the Class B Conversion Price in effect immediately prior to such
combination shall be proportionately increased. In the case of any such
subdivision, no further adjustment shall be made pursuant to Section 3.6.4.4.
by reason thereof.
Reorganization or Reclassification. If any capital
reorganization or reclassification of the capital stock of the Corporation
shall be effected in such a way that holders of Common Shares shall be entitled
to receive stock, securities or assets with respect to or in exchange for
Common Shares, then, as a condition of such reorganization or reclassification,
lawful and adequate provisions shall be made whereby each holder of Class B
Convertible Preferred Shares shall thereupon have the right to receive, upon
the basis and upon the terms and conditions specified herein and in lieu of
Common Shares immediately theretofore receivable upon the conversion of such
share or shares of Class B Convertible Preferred Shares, such shares of stock,
securities or assets as may be issued or payable with respect to or in exchange
for a number of outstanding shares of such Common Shares equal to the number of
such Common Shares immediately theretofore receivable upon such conversion had
such reorganization or reclassification taken place, and in any such case
appropriate provisions shall be made with respect to the rights and interests
of such holder to the end that the provisions hereof (including without
limitation provisions for adjustments of the Class B Conversion Price) shall
thereafter be applicable, as nearly as may be, in relation to any shares to
stock, securities or assets thereafter deliverable upon the exercise of such
conversion rights.
Notice of Adjustment. Upon any adjustment of the Class B
Conversion Price, then and in each such case the Corporation shall give written
notice thereof, by delivery in person, certified or registered mail, return
receipt requested, addressed to each holder of Class B Convertible Preferred
Shares at the address of such holder as shown on the books of the Corporation,
which notice shall state the Class B Conversion Price resulting from such
adjustment, setting forth in reasonable detail the method upon which such
calculation is based.
Other Notices. In case at any time:
the Corporation shall declare any dividend upon any class of its
capital stock payable in cash or stock or make any other distribution to the
holders of any class of its capital stock;
the Corporation shall offer for subscription pro rata to the
holders of any class of its capital stock any additional shares of stock of any
class or other rights;
there shall be any capital reorganization or reclassification of
the capital stock of the Corporation, or a consolidation or merger of the
Corporation with or into another entity or entities, or a sale, lease,
abandonment, transfer or other disposition of all or substantially all of the
assets of the Corporation; or
there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Corporation;
then, in any one or more of said cases, the Corporation shall give, by
delivery in person, certified or registered mail, return receipt requested,
addressed to each holder of any Class B Convertible Preferred Shares at the
address of such holder as shown on the books of the Corporation, (a) at least
twenty (20) days prior written notice of the date on which the books of the
Corporation shall close or a record shall be taken for such dividend,
distribution or subscription rights or for determining rights to vote in
respect of any such reorganization, reclassification, consolidation, merger,
disposition, dissolution, liquidation or winding up and (b) in the case of any
such reorganization, reclassification, consolidation, merger, disposition,
dissolution, liquidation or winding up, at least twenty (20) days prior written
notice of the date when the same shall take place. Such notice in accordance
with the foregoing clause (a) shall also specify, in the case of any such
dividend, distribution or subscription rights, the date on which the holders of
its capital stock shall be entitled thereto and such notice in accordance with
the foregoing clause (b) shall also specify the date on which the holders of
its capital stock shall be entitled to exchange their shares for securities or
other property deliverable upon such reorganization, reclassification,
consolidation, merger, disposition, reclassification, consolidation, merger,
disposition, dissolution, liquidation or winding up, as the case may be.
Shares to be Reserved. The Corporation will at all times reserve
and keep available out of its authorized Common Shares, solely for the purpose
of issuance upon the conversion of Class B Convertible Preferred Shares as
herein provided, such number of Common Shares as shall then be issuable upon
the conversion of all outstanding shares of Class B Convertible Preferred
Shares. The Corporation covenants that all Common Shares which shall be so
issued shall be duly and validly issued and fully paid and non assessable and
free from all taxes, liens and charges with respect to the issue thereof, and,
without limiting the generality of the foregoing, the Corporation covenants
that it will from time to time take all such action as may be requisite to
assure that the par value per share of the Common Shares is at all times equal
to or less than the Class B Conversion Price in effect at the time. The
Corporation will take all such action as may be necessary to assure that all
such Common Shares may be so issued without violation of any applicable law or
regulation, or of any requirement of any national securities exchange upon
which the Common Shares may be listed. The Corporation will not take any
action which results in any adjustment of the Class B Conversion Price if the
total number of Common Shares issued and issuable after such action upon
conversion of the Class B Convertible Preferred Shares would exceed the total
number of shares of Common Shares then authorized by the Certificate of
Incorporation.
No Reissuance of Class B Convertible Preferred Shares. Class B
Convertible Preferred Shares which are converted or redeemedinto Common Shares
as provided herein shall not be reissued.
Issue Tax. The issuance of certificates for Common Shares upon
conversion of Class B Convertible Preferred Shares shall be made without charge
to the holders thereof for any issuance tax in respect thereof, provided that
the Corporation shall be not required to pay any tax which may be payable in
respect of any transfer involved in the issuance and delivery of any
certificate in a name other than that of the holder of the Class B Convertible
Preferred Shares which is being converted.
Closing of Books. The Corporation will at no time close its
transfer books against the transfer of any Class B Convertible Preferred Shares
or of Common Shares issued or issuable upon the conversion of Class B
Convertible Preferred Shares in any manner which interferes with the timely
conversion of such Class B Convertible Preferred Shares, except as may
otherwise be required to comply with applicable securities laws.
Definition of Common Shares. As used in this Section 3.6, the
term "Common Shares" shall mean and include the Corporation's authorized Common
Shares, par value $0.001 per share, as constituted on the date of filing of
these terms of the Class B Convertible Preferred Shares, and shall also include
any capital stock of any class of the Corporation thereafter authorized which
shall neither be limited to a fixed sum or percentage in respect of the rights
of the holders thereof to participate in dividends nor entitled to a preference
in the distribution of assets upon the voluntary or involuntary liquidation,
dissolution or winding up of the Corporation; provided that the Common Shares
receivable upon conversion of Class B Convertible Preferred Shares shall
include only shares designated as Common Shares of the Corporation on the date
of filing of this instrument, or in case of any reorganization or
reclassification of the outstanding shares thereof, the stock, securities or
assets provided for in Section 3.6.7.
Mandatory Conversion. If at any time the Corporation shall
effect a firm commitment underwritten public offering of Common Shares in which
(i) the aggregate price paid for such shares by the public shall be at least
$5,000,000 and (ii) the price paid by the public for such shares shall be at
least $8.00 per share (appropriately adjusted to reflect the occurrence of any
event described in Section 3.6.6), then effective upon the closing of the sale
of such shares by the Corporation pursuant to such public offering, all
outstanding Class B Convertible Preferred Shares shall automatically convert to
Common Shares on the basis set forth in this Section 3.6. Holders of Class B
Convertible Preferred Shares so converted may deliver to the Corporation at its
principal office (or such other office or agency of the Corporation as the
Corporation may designate by notice in writing to such holders) during its
usual business hours, the certificate or certificates for the shares so
converted. As promptly as practicable thereafter, the Corporation shall issue
and deliver to such holder a certificate or certificates for the number of
whole shares of Common Shares to which such holder is entitled, together with
any cash dividends and payment in lieu of fractional shares to which such
holder may be entitled pursuant to Section 3.6.3. Until such time as a holder
of Class B Convertible Preferred Shares shall surrender his or its certificates
therefor as provided above, such certificates shall be deemed to represent the
Common Shares to which such holder shall be entitled upon the surrender thereof.
Conversion Rights of Class A Preferred Shares. The holders of
Class A Preferred Shares shall have conversion rights as follows ("Class A
Conversion Rights"):
Right to Convert. Each Class A Preferred Share shall be
convertible, at the option of the holder thereof, at any time after the date of
issue to July 2, 1995 at the office of the Corporation or any transfer agent
for Common Shares at the then effective Class A Conversion Rate.
Automatic Conversion. All Class A Preferred Shares shall
automatically be converted into Common Shares at its then effective Class A
Conversion Rate immediately upon the happening of any of the following events:
Upon the closing of a firm commitment underwritten public
offering of Common Shares of the Corporation pursuant to an effective
registration statement under the Securities Act of 1933, as amended, covering
the offer and sale of Common Shares of the Corporation for the account of the
Corporation in which the aggregate gross proceeds received by the Corporation
at the public offering equals or exceeds $5,000,000.00.
Upon the unanimous written consent of the holders of all
outstanding Class A Preferred Shares or upon the vote of the holders of a
majority of all outstanding Class A Preferred Shares at a duly called meeting
of holders of Class A Preferred Shares, to cause all Class A Preferred Shares
to be converted to Common Shares.
Class A Conversion Rate. The Class A Conversion Rate shall be
one Common Share for one Class A Preferred Share, subject to adjustment from
time to time, which shall be made as follows:
In the event that the Corporation shall at any time subdivide or
combine in a greater or lesser number of Common Shares then outstanding, the
number of Common Shares issuable upon conversion of the Class A Preferred
Shares shall be proportionately increased in the case of subdivision or
decreased in the case of combination, effective in either case at the close of
business on the date when such subdivision or combination shall become
effective.
In the event that the Corporation shall be consolidated with or
merged into any other corporation, provision shall be made as to the terms of
such consolidation or merger so that any holder of Class A Preferred Shares may
thereafter receive in lieu of each Common Share otherwise issuable upon him
upon conversion of his Class A Preferred Shares the same kind and amount of
securities as may de distributable with respect to each such Common Share of
the Corporation upon such consolidation or merger.
Mechanics of Conversion. Before any holder of Class A Preferred
Shares shall be entitled to convert the same into Common Shares pursuant to
Section 3.7.1, he shall surrender the certificate or certificates therefor,
duly endorsed, at the office of the Corporation or of any transfer agent for
the Class A Preferred Shares and shall give written notice to the Corporation
at such office that he elects to convert the same. The Corporation shall, as
soon as practicable thereafter, issue and deliver at such office to such holder
of Class A Preferred Shares a certificate or certificates for the number of
Common Shares to which he shall be entitled as aforesaid. Such conversion
shall be deemed to have been made immediately prior to the close of business on
the date of such surrender of the Class A Preferred Shares to be converted, and
the person or persons entitled to receive the Common Shares issuable upon such
conversion shall be treated for all purposes as the record holder or holders of
such Common Shares on such date.
Reservation of Shares Issuable Upon Conversion. The Corporation
shall at all times reserve and keep available out of its authorized but
unissued shares of Common Shares solely for the purpose of effecting the
conversion of the Class A Preferred Shares such number of its Common Shares as
shall from time to time be sufficient to effect the conversion of all
outstanding Class A Preferred Shares; and if at any time the number of
authorized but unissued Common Shares shall not be sufficient to effect the
conversion of all then outstanding Class A Preferred Shares, the Corporation
will take such corporate action as may, in the opinion of its counsel, be
necessary to increase its authorized but unissued Common Shares to such number
of shares as shall be sufficient for such purpose.
Redemption of Class B Convertible Preferred Shares. The Class B
Convertible Preferred Shares shall be redeemed as follows:
Mandatory Redemption. On the 10th business day following June 30
of each of the calendar years 1996, 1997 and 1998 (each a "Redemption Date"),
the Corporation shall, at the request of each holder of Class B Convertible
Preferred Shares, redeem a number of shares of Class B Convertible Preferred
Shares equal to 33-1/3%, 50% and 100%, respectively, of the number of Class B
Convertible Preferred Shares owned by such holder on the May 31 preceding the
applicable Redemption Date. A holder wishing so to be redeemed shall give
written notice thereof, by delivery in person, certified or registered mail,
return receipt requested, addressed to the Corporation by the May 31 preceding
the Redemption Date. The Corporation's obligations under this Section 3.8.1
may be waived by a vote of the holders of sixty-seven percent (67%) of the
Class B Convertible Preferred Shares. A holder, in its notice requesting
redemption, may request that a greater number of its shares be redeemed than
that specified above (but not larger than the maximum number of shares the
Corporation could be required to redeem on the next two Redemption Dates) and,
if a holder shall so elect, the Corporation shall be required to redeem such
greater number of shares as the holder shall specify; provided that the
Corporation may pay the Redemption Price (as defined below) for the number of
Class B Convertible Preferred Shares required to be redeemed as a result of
such election in excess of the number specified in the first sentence of this
Section 3.8.1 by delivering a note bearing interest at eight percent (8%) per
annum maturing on the Redemption Date following the next Redemption Date;
provided further that the Corporation shall have no obligations under this
sentence to the extent compliance therewith would cause it to violate
applicable law (including the New York Business Corporations Law).
Redemption Price and Payment. The Class B Convertible Preferred
Shares to be redeemed on any Redemption Date shall be redeemed by paying for
each share in cash an amount equal to $1.20 per share plus, in the case of each
share, an amount equal to all unpaid Class B Accruing Dividends and all other
declared dividends computed to such Redemption Date, such amount being referred
to as the "Redemption Price". Such payment shall be made in full on the
applicable Redemption Date to the holders entitled thereto.
Redemption Mechanics. At least twenty (20) but no more than
thirty (30) days prior to each Redemption Date, written notice (the "Redemption
Notice") shall be given by the Corporation by delivery in person, certified or
registered mail, return receipt requested, to each holder of record (at the
close of business on the business day next preceding the day on which the
Redemption Notice is given) of Class B Convertible Preferred Shares notifying
such holder of the redemption and specifying the Redemption Price, such
Redemption Date, the number of Class B Convertible Preferred Shares to be
redeemed from such holder and the place where said Redemption Price shall be
payable. The Redemption Notice shall be addressed to each holder at his
address as shown by the records of the Corporation. From and after the close
of business on a Redemption Date, unless there shall have been a default in the
payment of the Redemption Price, all rights of holders of Class B Convertible
Preferred Shares (except the right to receive the Redemption Price) shall cease
with respect to the shares to be redeemed on such Redemption Date, and such
shares shall not thereafter be transferred on the books of the Corporation or
be deemed to be outstanding for any purpose whatsoever. If the funds of the
Corporation legally available for redemption of Class B Convertible Preferred
Shares are insufficient to redeem the total number of Class B Convertible
Preferred Shares to be redeemed on such Redemption Date, the holders of such
shares shall share ratably in any funds legally available for redemption of
such shares according to the respective amounts which would be payable to them
if the full number of shares to be redeemed on such Redemption Date were
actually redeemed. The Class B Convertible Preferred Shares required to be
redeemed but not so redeemed shall remain outstanding and entitled to all
rights and preferences provided herein. <PAGE>
when additional funds of the
Corporation are legally available for the
redemption of such Class B Convertible Preferred Shares, such funds will be
used, at the end of the next succeeding fiscal quarter, to redeem the balance
of such shares, or such portion thereof for which funds are then legally
available, on the basis set forth above, until all shares required to be
redeemed hereunder have been redeemed.
Redeemed or Otherwise Acquired Shares to be Retired. Any Class B
Convertible Preferred Shares redeemed pursuant to this Section 3.8 or otherwise
acquired by the Corporation in any manner whatsoever shall be cancelled and
shall not under any circumstances be reissued; and the Corporation may from
time to time take such appropriate corporate action as may be necessary to
reduce accordingly the number of authorized shares of Class B Convertible
Preferred Shares.
Redemption Rights of Class A Preferred Shares. The Preferred
Shares may be redeemed by the Corporation on July 3, 1995 or anytime thereafter
at par value, plus all dividends declared but unpaid thereon (but not including
Class A Accruing Dividends to the extent not declared).
Amendments. No provision of the terms of the Class B Convertible
Preferred Shares may be amended, modified or waived without the written consent
or affirmative vote of the holders of at least sixty-seven percent (67%) of the
then outstanding Class B Convertible Preferred Shares.
The office of the Corporation shall be located in the County of
Monroe, State of New York.
The Secretary of State of the State of New York is hereby
designed as the agent of the Corporation upon whom process in any action or
proceeding against it may be served, and the address to which the Secretary of
State shall mail a copy of any process served on him against the Corporation is
1450 Rochester Road, Lima, New York 14485.
No shareholder shall have any preemptive right to purchase shares
or other securities to be issued, or subjected to rights or options to
purchase, as such right is defined and construed under the laws of the State of
New York.
This Restatement of the Certificate of Incorporation was authorized by the
Unanimous Written Consent of Directors followed by the consent of the
shareholders at a special meeting held on September 14, 1993.
IN WITNESS WHEREOF, the undersigned have signed this Certificate this ____ day
of September, 1993 and hereby affirms the truth of the statements contained
herein under penalty of perjury.
/s/George Georgiades
George Georgiades, President
/s/Alan S. Lockwood
Alan S. Lockwood, Assistant Secretary
EXHIBIT B-14
EXECUTION COPY
CLASS B CONVERTIBLE PREFERRED STOCK
PURCHASE AGREEMENT
between
METSCAN, INC.
and
THE SEVERAL PURCHASERS NAMED IN SCHEDULE I
Dated as of September 15, 1993
TABLE OF CONTENTS
Page
ARTICLE I THE PREFERRED SHARES 1
SECTION 1.01 Issuance, Sale and Delivery of
the Preferred Shares 1
SECTION 1.02 Closing 1
SECTION 1.03 Additional Closing 2
ARTICLE II REPRESENTATIONS AND WARRANTIES
OF THE COMPANY 2
SECTION 2.01 Organization, Qualifications
and Corporate Power 2
SECTION 2.02 Authorization of Agreements, Etc. 3
SECTION 2.03 Validity 4
SECTION 2.04 Authorized Capital Stock 4
SECTION 2.05 Financial Statements 5
SECTION 2.06 Events Subsequent to the Date
of the Balance Sheet 6
SECTION 2.07 Litigation; Compliance with Law 6
SECTION 2.08 Proprietary Information
of Third Parties 7
SECTION 2.09 Patents, Trademarks, Etc. 8
SECTION 2.10 Title to Properties 8
SECTION 2.11 Leasehold Interests 9
SECTION 2.12 Insurance 9
SECTION 2.13 Taxes 9
SECTION 2.14 Other Agreements 10
SECTION 2.15 Loans and Advances 12
SECTION 2.16 Assumptions, Guarantees, Etc. of
Indebtedness of Other Persons 12
SECTION 2.17 Significant Customers and
Suppliers 12
SECTION 2.18 Governmental Approvals 13
SECTION 2.19 Disclosure 13
SECTION 2.20 Offering of the Preferred Shares 13
SECTION 2.21 Brokers 14
SECTION 2.22 Officers 14
SECTION 2.23 Transactions with Affiliates 14
SECTION 2.24 Employees 14
SECTION 2.25 U.S. Real Property Holding
Corporation 15
SECTION 2.26 Environmental Protection 15
SECTION 2.27 ERISA 16
SECTION 2.28 Foreign Corrupt Practices Act 17
SECTION 2.29 Federal Reserve Regulations 17
Page
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE
PURCHASERS 17
ARTICLE IV CONDITIONS TO THE OBLIGATIONS OF THE
PURCHASERS 18
ARTICLE V COVENANTS OF THE COMPANY 21
SECTION 5.01 Financial Statements, Reports, Etc. 21
SECTION 5.02 Right of Participation 22
SECTION 5.03 Reserve for Conversion Shares 24
SECTION 5.04 Corporate Existence 24
SECTION 5.05 Properties, Business, Insurance 24
SECTION 5.06 Inspection, Consultation and
Advice 24
SECTION 5.07 Restrictive Agreements Prohibited. 25
SECTION 5.08 Transactions with Affiliates 25
SECTION 5.09 Expenses of Directors 25
SECTION 5.10 Use of Proceeds 25
SECTION 5.11 Board of Directors Meetings 25
SECTION 5.12 Compensation 26
SECTION 5.13 By-laws 26
SECTION 5.14 Performance of Contracts 26
SECTION 5.15 Vesting of Reserved Employee
Shares 26
SECTION 5.16 Employee Nondisclosure and
Developments Agreements 27
SECTION 5.17 Activities of Subsidiaries 27
SECTION 5.18 Compliance with Laws 27
SECTION 5.19 Keeping of Records and Books
of Account 27
SECTION 5.20 Change in Nature of Business 27
SECTION 5.21 U.S. Real Property Interest
Statement 27
SECTION 5.22 International Investment Survey
Act of 1976 28
SECTION 5.23 Rule 144A Information 28
SECTION 5.24 Compensation and
Audit Committees 28
SECTION 5.25 Business Goals 29
SECTION 5.26 Business Plan 29
SECTION 5.27 Provision of Information to
Board of Directors 29
SECTION 5.28 OEM Business Development 29
SECTION 5.29 Shareholder Meeting if Dividends
are to be Paid in Stock 29
SECTION 5.30 Actions of Subsidiaries 30
Page
ARTICLE VI MISCELLANEOUS 30
SECTION 6.01 Expenses 30
SECTION 6.02 Survival of Agreements 30
SECTION 6.03 Brokerage 30
SECTION 6.04 Parties in Interest 30
SECTION 6.05 Notices 31
SECTION 6.06 Governing Law 31
SECTION 6.07 Entire Agreement 31
SECTION 6.08 Counterparts 31
SECTION 6.09 Amendments 31
SECTION 6.10 Severability 31
SECTION 6.11 Titles and Subtitles 31
SECTION 6.12 Certain Defined Terms 32
SECTION 6.13 Certain Conflicts 32
INDEX TO SCHEDULES
SCHEDULE I Purchasers
SCHEDULE II Disclosure Schedule
SCHEDULE III Security Holders
SCHEDULE IV(A)
and (B) Agreements
INDEX TO EXHIBITS
EXHIBIT A Form of Registration Rights Agreement
EXHIBIT B Form of Shareholders Agreement
EXHIBIT C Charter and All Amendments Thereto
EXHIBIT D Form of Employee Nondisclosure and Developments
Agreement
EXHIBIT E Legal Opinion of Boylan, Brown, Code, Fowler &
Wilson
CLASS B CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT dated
as of September 15, 1993 between METSCAN, INC., a New York
corporation (the "Company"), and the several purchasers named in
the attached Schedule I (individually a "Purchaser" and
collectively the "Purchasers").
WHEREAS, the Company wishes to issue and sell to the
Purchasers an aggregate of up to 3,762,107 shares (the "Preferred
Shares") of the authorized but unissued Class B Convertible
Preferred Stock, $.01 par value, (the "Class B Convertible
Preferred Stock") of the Company; and
WHEREAS, the Purchasers, severally, wish to purchase the
Preferred Shares on the terms and subject to the conditions set
forth in this Agreement;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained in this Agreement, the parties agree
as follows:
ARTICLE I
THE PREFERRED SHARES
SECTION 1.01 Issuance, Sale and Delivery of the Preferred
Shares. The Company agrees to issue and sell to each Purchaser,
and each Purchaser hereby agrees to purchase from the Company,
the number of Preferred Shares set forth opposite the name of
such Purchaser under the heading "Number of Preferred Shares to
be Purchased" on Schedule I, at the aggregate purchase price set
forth opposite the name of such Purchaser under the heading
"Aggregate Purchase Price for Preferred Shares" on Schedule I.
SECTION 1.02 Closing. The closing shall take place at the
offices of Testa, Hurwitz & Thibeault, Exchange Place, 53 State
Street, Boston, Massachusetts 02109, at 10:00 a.m., Boston time,
on September 16, 1993, or at such other location, date and time
as may be agreed upon between the Purchasers and the Company
(such closing being called the "Closing" and such date and time
being called the "Closing Date"). At the Closing, the Company
shall issue and deliver to each Purchaser a stock certificate or
certificates in definitive form, registered in the name of such
Purchaser, representing the Preferred Shares being purchased by
it at the Closing. As payment in full for the Preferred Shares
being purchased by it under this Agreement, and against delivery
of the stock certificate or certificates therefor as aforesaid,
on the Closing Date each Purchaser shall (i) deliver to the
Company a check payable to the order of the Company, in the
amount set forth opposite the name of such Purchaser under the
heading "Aggregate Purchase Price for Preferred Shares" on
Schedule I, (ii) transfer such sum to the account of the Company
by wire transfer, (iii) deliver to the Company for cancellation
promissory notes issued by the Company in the amount of such sum,
or (iv) deliver or transfer such sum to the Company by any
combination of such methods of payments.
SECTION 1.03 Additional Closing. After the Closing Date and
on or prior to October 31, 1993 the Company may, in its sole
discretion and without obtaining the consent of any Purchaser,
hold an additional closing or additional closings at such date
and time as may be agreed upon by the Company and subsequent
purchasers (such additional closing or additional closings being
called the "Additional Closing" and such date or dates and time
or times being called the "Additional Closing Date") at which the
Company may issue and sell up to the number of Preferred Shares
equal to the difference between 3,762,107 and the number of
Preferred Shares previously sold on the Closing Date. The sale
of Preferred Shares pursuant to this Section 1.03 shall be on the
same terms and conditions as the sale of the Preferred Shares
pursuant to Section 1.02 hereof and shall be effected by the
execution by any purchaser of a counterpart of this Agreement.
Upon such execution, each such purchaser shall be deemed to be a
Purchaser for all purposes of this Agreement and Schedule I shall
be amended to include such purchaser.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Purchasers that,
except as set forth in the Disclosure Schedule attached as
Schedule II (which Disclosure Schedule makes explicit reference
to the particular representation or warranty as to which
exception is taken, which in each case shall constitute the sole
representation and warranty as to which such exception shall
apply):
SECTION 2.01 Organization, Qualifications and Corporate
Power.
(a) The Company is a corporation duly incorporated,
validly existing and in good standing under the laws of the State
of New York and is duly licensed or qualified to transact
business as a foreign corporation and is in good standing in each
jurisdiction in which the nature of the business transacted by it
or the character of the properties owned or leased by it requires
such licensing or qualification. The Company has the corporate
power and authority to own and hold its properties and to carry
on its business as now conducted and as proposed to be conducted,
to execute, deliver and perform this Agreement, the Registration
Rights Agreement with the Purchasers in the form attached as
Exhibit A (the "Registration Rights Agreement"), and the
Shareholders Agreement with the Purchasers and the other parties
thereto named in paragraph (h) of Article IV of this Agreement,
in the form attached as Exhibit B (the "Shareholders Agreement"),
to issue, sell and deliver the Preferred Shares and to issue and
deliver the shares of Common Stock, $.001 par value, of the
Company ("Common Stock") issuable upon conversion of the
Preferred Shares (the "Conversion Shares").
(b) Except for shares of stock of Metscan Europe Limited,
the Company does not (i) own of record or beneficially, directly
or indirectly, (A) any shares of capital stock or securities
convertible into capital stock of any other corporation or
(B) any participating interest in any partnership, joint venture
or other non-corporate business enterprise or (ii) control,
directly or indirectly, any other entity. Metscan Europe Limited
is a corporation duly incorporated, validly existing and in good
standing under the laws of the United Kingdom and is duly
licensed or qualified to transact business as a foreign
corporation and is in good standing in each jurisdiction in which
the nature of the business transacted by it or the character of
the properties owned or leased by it requires such licensing or
qualification. Metscan Europe Limited has the corporate power
and authority to own and hold its properties and to carry on its
business as now conducted and as proposed to be conducted. All
of the outstanding shares of capital stock of Metscan Europe
Limited are owned beneficially and of record by the company free
and clear of any liens, charges, restrictions, claims and
encumbrances of any nature whatsoever; and there are no
outstanding subscriptions, warrants, options, convertible
securities, or other rights (contingent or other) pursuant to
which Metscan Europe Limited is or may become obligated to issue
any shares of its capital stock to any person other than the
Company. As used in Sections 2.06 through 2.17, 2.21, 2.23 and
2.26 through 2.29 inclusive, the term "Company" shall mean the
Company and Metscan Europe Limited.
SECTION 2.02 Authorization of Agreements, Etc.
(a) The execution and delivery by the Company of this
Agreement, the Registration Rights Agreement and the Shareholders
Agreement, the performance by the Company of its obligations
hereunder and thereunder, the issuance, sale and delivery of the
Preferred Shares and the issuance and delivery of the Conversion
Shares have been duly authorized by all requisite corporate
action and will not violate any provision of law, any order of
any court or other agency of government, the Certificate of
Incorporation of the Company, as amended (the "Charter") or the
By-laws of the Company, as amended, or any provision of any
indenture, agreement or other instrument to which the Company or
any of its properties or assets is bound, or conflict with,
result in a breach of or constitute (with due notice or lapse of
time or both) a default under any such indenture, agreement or
other instrument, or result in the creation or imposition of any
lien, charge, restriction, claim or encumbrance of any nature
whatsoever upon any of the properties or assets of the Company.
No provision of the Shareholders Agreement violates, conflicts
with, results in a breach of or constitutes (with notice or lapse
of time or both) a default by any other party under any other
indenture, agreement or instrument.
(b) The Preferred Shares have been duly authorized and,
when issued in accordance with this Agreement, will be validly
issued, fully paid and nonassessable shares of Class B
Convertible Preferred Stock with no personal liability attaching
to the ownership thereof except for any such personal liability
arising under New York Business Corporation Law Section 630, and
will be free and clear of all liens, charges, restrictions,
claims and encumbrances imposed by or through the Company except
as set forth in the Registration Rights Agreement. The
Conversion Shares have been duly reserved for issuance upon
conversion of the Preferred Shares and, when so issued, will be
duly authorized, validly issued, fully paid and nonassessable
shares of Common Stock with no personal liability attaching to
the ownership thereof except for any such personal liability
arising under New York Business Corporation Law Section 630 and
will be free and clear of all liens, charges, restrictions,
claims and encumbrances imposed by or through the Company except
as set forth in the Registration Rights Agreement. Neither the
issuance, sale or delivery of the Preferred Shares nor the
issuance or delivery of the Conversion Shares is subject to any
preemptive right of stockholders of the Company or to any right
of first refusal or other right in favor of any person.
SECTION 2.03 Validity. This Agreement has been duly
executed and delivered by the Company and constitutes a valid and
binding obligation of the Company, enforceable in accordance with
its terms. The Registration Rights Agreement and the
Shareholders Agreement,when executed and delivered in accordance
with this Agreement, will constitute, valid and binding
obligations of the Company, enforceable in accordance with their
respective terms.
SECTION 2.04 Authorized Capital Stock. The authorized
capital stock of the Company consists of (i) 574,500 shares of
Class A Preferred Shares, par value $4.00 per share,
(ii) 3,762,107 shares of Class B Convertible Preferred Stock, and
(iii) 20,000,000 shares of Common Stock. Immediately prior to
the Closing, 5,468,746 shares of Common Stock and 574,500 shares
of Class A Convertible Preferred Stock will be validly issued and
outstanding, fully paid and nonassessable with no personal
liability attaching to the ownership thereof except for any such
personal liability arising under New York Business Corporation
Law Section 630, and no shares of Class B Convertible Preferred
Stock will have been issued. The stockholders of record and
holders of subscriptions, warrants, options, convertible
securities, and other rights (contingent or other) to purchase or
otherwise acquire equity securities of the Company, and the
number of shares of Common Stock and Class A Convertible
Preferred Stock and the number of such subscriptions, warrants,
options, convertible securities, and other such rights held by
each, are as set forth in the attached Schedule III. The
designations, powers, preferences, rights, qualifications,
limitations and restrictions in respect of each class and series
of authorized capital stock of the Company are as set forth in
the Charter, a copy of which is attached as Exhibit C, and all
such designations, powers, preferences, rights, qualifications,
limitations and restrictions are valid, binding and enforceable
and in accordance with all applicable laws. Except as set forth
in the attached Schedule III, (i) no person owns of record or is
known to the Company to own beneficially any share of Common
Stock, (ii) no subscription, warrant, option, convertible
security, or other right (contingent or other) to purchase or
otherwise acquire equity securities of the Company is authorized
or outstanding and (iii) there is no commitment by the Company to
issue shares, subscriptions, warrants, options, convertible
securities, or other such rights or to distribute to holders of
any of its equity securities any evidence of indebtedness or
asset. Except as provided for in the Charter or as set forth in
the attached Schedule III, the Company has no obligation
(contingent or other) to purchase, redeem or otherwise acquire
any of its equity securities or any interest therein or to pay
any dividend or make any other distribution in respect thereof.
Except for the Shareholders Agreement,to the best of the
Company's knowledge there are no voting trusts or agreements,
stockholders' agreements, pledge agreements, buy-sell agreements,
rights of first refusal, preemptive rights or proxies relating to
any securities of the Company (whether or not the Company is a
party thereto). All of the outstanding securities of the Company
were issued in compliance with all applicable Federal and state
securities laws.
SECTION 2.05 Financial Statements. The Company has
furnished to the Purchasers the audited balance sheet of the
Company as of December 31, 1992 and the related audited
statements of income, stockholders' equity and cash flows of the
Company for the year ended December 31, 1992, and the unaudited
balance sheet of the Company as of June 30, 1993 (the "Balance
Sheet") and the related unaudited statements of income,
stockholders' equity and cash flows of the Company for the six
months ended June 30, 1993. All such financial statements have
been prepared in accordance with generally accepted accounting
principles consistently applied (except that such unaudited
financial statements do not contain all of the required
footnotes) and fairly present the financial position of the
Company as of December 31, 1992 and June 30, 1993, respectively,
and the results of their operations and cash flows for the year
ended December 31, 1992 and the six months ended June 30, 1993,
respectively. Since the date of the Balance Sheet, (i) there has
been no change in the assets, liabilities or financial condition
of the Company from that reflected in the Balance Sheet except
for changes in the ordinary course of business which in the
aggregate have not been materially adverse and (ii) none of the
business, prospects, financial condition, operations, property or
affairs of the Company has been materially adversely affected by
any occurrence or development, individually or in the aggregate,
whether or not insured against.
SECTION 2.06 Events Subsequent to the Date of the Balance
Sheet. Since the date of the Balance Sheet, the Company has not
(i) issued any stock, bond or other corporate security,
(ii) borrowed any amount or incurred or become subject to any
liability (absolute, accrued or contingent), except current
liabilities incurred and liabilities under contracts entered into
in the ordinary course of business, (iii) discharged or satisfied
any lien or encumbrance or incurred or paid any obligation or
liability (absolute, accrued or contingent) other than current
liabilities shown on the Balance Sheet and current liabilities
incurred since the date of the Balance Sheet in the ordinary
course of business, (iv) declared or made any payment or
distribution to stockholders or purchased or redeemed any share
of its capital stock or other security, (v) mortgaged, pledged,
encumbered or subjected to lien any of its assets, tangible or
intangible, other than liens of current real property taxes not
yet due and payable, (vi) sold, assigned or transferred any of
its tangible assets except in the ordinary course of business, or
cancelled any debt or claim, (vii) sold, assigned, transferred or
granted any exclusive license with respect to any patent,
trademark, trade name, service mark, copyright, trade secret or
other intangible asset, (viii) suffered any loss of property or
waived any right of substantial value whether or not in the
ordinary course of business, (ix) made any change in officer
compensation except in the ordinary course of business and
consistent with past practice, (x) made any material change in
the manner of business or operations of the Company, (xi) entered
into any transaction except in the ordinary course of business or
as otherwise contemplated hereby or (xii) entered into any
commitment (contingent or otherwise) to do any of the foregoing.
SECTION 2.07 Litigation; Compliance with Law. There is no
(i) action, suit, claim, proceeding or investigation pending or,
to the best of the Company's knowledge, threatened against or
affecting the Company, 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, (ii) arbitration proceeding relating to the Company
pending under collective bargaining agreements or otherwise or
(iii) governmental inquiry pending or, to the best of the
Company's knowledge, threatened against or affecting the Company
(including without limitation any inquiry as to the qualification
of the Company to hold or receive any license or permit), and
there is no basis for any of the foregoing. The Company has not
received any opinion or memorandum or legal advice from legal
counsel to the effect that it is exposed, from a legal
standpoint, to any liability or disadvantage which may be
material to its business, prospects, financial condition,
operations, property or affairs. The Company is not in default
with respect to any order, writ, injunction or decree known to or
served upon the Company of any court or of any Federal, state,
municipal or other governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign. There is
no action or suit by the Company pending or threatened against
others. The Company has complied with all laws, rules,
regulations and orders applicable to its business, operations,
properties, assets, products and services, the Company has all
necessary permits, licenses and other authorizations required to
conduct its business as conducted and as proposed to be
conducted, and the Company has been operating its business
pursuant to and in compliance with the terms of all such permits,
licenses and other authorizations. There is no existing law,
rule, regulation or order, and the Company after due inquiry is
not aware of any proposed law, rule, regulation or order, whether
Federal, state, county or local, which would prohibit or restrict
the Company from, or otherwise materially adversely affect the
Company in, conducting its business in any jurisdiction in which
it is now conducting business or in which it proposes to conduct
business.
SECTION 2.08 Proprietary Information of Third Parties. To
the best of the Company's knowledge, no third party has claimed
or has reason to claim that any person employed by or affiliated
with the Company has (a) violated or may be violating any of the
terms or conditions of his employment, non-competition or non-
disclosure agreement with such third party, (b) disclosed or may
be disclosing or utilized or may be utilizing any trade secret or
proprietary information or documentation of such third party or
(c) interfered or may be interfering in the employment
relationship between such third party and any of its present or
former employees. No third party has requested information from
the Company which suggests that such a claim might be
contemplated. To the best of the Company's knowledge, no person
employed by or affiliated with the Company has employed or
proposes to employ any trade secret or any information or
documentation proprietary to any former employer, and to the best
of the Company's knowledge, no person employed by or affiliated
with the Company has violated any confidential relationship which
such person may have had with any third party, in connection with
the development, manufacture or sale of any product or proposed
product or the development or sale of any service or proposed
service of the Company, and the Company has no reason to believe
there will be any such employment or violation. To the best of
the Company's knowledge, none of the execution or delivery of
this Agreement, or the carrying on of the business of the Company
as officers, employees or agents by any officer, director or key
employee of the Company, or the conduct or proposed conduct of
the business of the Company, will conflict with or result in a
breach of the terms, conditions or provisions of or constitute a
default under any contract, covenant or instrument under which
any such person is obligated.
SECTION 2.09 Patents, Trademarks, Etc. Set forth in
Schedule II is a list and brief description of all domestic and
foreign patents, patent rights, patent applications, trademarks,
trademark applications, service marks, service mark applications,
trade names and copyrights, and all applications for such which
are in the process of being prepared, owned by or registered in
the name of the Company, or of which the Company is a licensor or
licensee or in which the Company has any right, and in each case
a brief description of the nature of such right. The Company
owns or possesses adequate licenses or other rights to use all
patents, patent applications, trademarks, trademark applications,
service marks, service mark applications, trade names,
copyrights, manufacturing processes, formulae, trade secrets,
customer lists and know how (collectively, "Intellectual
Property") necessary or desirable to the conduct of its business
as conducted and as proposed to be conducted, and no claim is
pending or, to the best of the Company's knowledge, threatened to
the effect that the operations of the Company infringe upon or
conflict with the asserted rights of any other person under any
Intellectual Property, and there is no basis for any such claim
(whether or not pending or threatened). No claim is pending or,
to the best of the Company's knowledge, threatened to the effect
that any such Intellectual Property owned or licensed by the
Company, or which the Company otherwise has the right to use, is
invalid or unenforceable by the Company, and, to the best of the
Company's knowledge, there is no basis for any such claim
(whether or not pending or threatened). All prior art known to
the Company which may be or may have been pertinent to the
examination of any United States patent or patent application
listed in Schedule II has been cited to the United States Patent
and Trademark Office. To the best of the Company's knowledge,
all technical information developed by and belonging to the
Company which has not been patented has been kept confidential.
The Company has not granted or assigned to any other person or
entity any right to manufacture, have manufactured, assemble or
sell the products or proposed products or to provide the services
or proposed services of the Company.
SECTION 2.10 Title to Properties. The Company has good,
clear and marketable title to its properties and assets reflected
on the Balance Sheet or acquired by it since the date of the
Balance Sheet (other than properties and assets disposed of in
the ordinary course of business since the date of the Balance
Sheet), and all such properties and assets are free and clear of
mortgages, pledges, security interests, liens, charges, claims,
restrictions and other encumbrances (including without
limitation, easements and licenses), except for liens for current
taxes not yet due and payable and minor imperfections of title,
if any, not material in nature or amount and not materially
detracting from the value or impairing the use of the property
subject thereto or impairing the operations or proposed
operations of the Company, including, without limitation, the
ability of the Company to secure financing using such properties
and assets as collateral. To the best of the Company's knowledge
after due inquiry, there are no condemnation, environmental,
zoning or other land use regulation proceedings, either
instituted or planned to be instituted, which would adversely
affect the use or operation of the Company's properties and
assets for their respective intended uses and purposes, or the
value of such properties, and the Company has not received notice
of any special assessment proceedings which would affect such
properties and assets.
SECTION 2.11 Leasehold Interests. Each lease or agreement
to which the Company is a party under which it is a lessee of
any property, real or personal, is a valid and subsisting
agreement, duly authorized and entered into, without any default
of the Company thereunder and, to the best of the Company's
knowledge, without any default thereunder of any other party
thereto. No event has occurred and is continuing which, with due
notice or lapse of time or both, would constitute a default or
event of default by the Company under any such lease or agreement
or, to the best of the Company's knowledge, by any other party
thereto. The Company's possession of such property has not been
disturbed and, to the best of the Company's knowledge after due
inquiry, no claim has been asserted against the Company adverse
to its rights in such leasehold interests.
SECTION 2.12 Insurance. The Company holds valid policies
covering all of the insurance required to be maintained by it
under Section 5.05.
SECTION 2.13 Taxes. The Company has filed all tax returns,
Federal, state, county and local, required to be filed by it, and
the Company has paid all taxes shown to be due by such returns as
well as all other taxes, assessments and governmental charges
which have become due or payable, including without limitation
all taxes which the Company is obligated to withhold from amounts
owing to employees, creditors and third parties. The Company has
established adequate reserves for all taxes accrued but not yet
payable. All tax elections have been made by the Company in
accordance with generally accepted practice. The Federal income
tax returns of the Company have never been audited by the
Internal Revenue Service. No deficiency assessment with respect
to or proposed adjustment of the Company's Federal, state, county
or local taxes is pending or, to the best of the Company's
knowledge, threatened. There is no tax lien, whether imposed by
any Federal, state, county or local taxing authority, outstanding
against the assets, properties or business of the Company.
Neither the Company nor any of its present or former stockholders
has ever filed an election pursuant to Section 1362 of the
Internal Revenue Code of 1986, as amended (the "Code"), that the
Company be taxed as an S corporation. The Company's net
operating losses for Federal income tax purposes, as set forth in
the financial statements referred to in Section 2.05, are not
(other than as described in such financial statements) subject to
any limitations imposed by Section 382 of the Code and the full
amount of such net operating losses are available to offset the
taxable income of the Company for the current fiscal year and, to
the extent not so used, succeeding fiscal years. Consummation of
the transactions contemplated by this Agreement or by any other
agreement, understanding or commitment (contingent or otherwise)
to which the Company is a party or by which it is otherwise bound
will not have the effect of limiting the Company's ability to use
such net operating losses in full to offset such taxable income.
SECTION 2.14 Other Agreements. Except as set forth in the
attached Schedule IV(A), the Company is not a party to or
otherwise bound by any written or oral agreement, instrument,
commitment or restriction which individually or in the aggregate
could materially adversely affect the business, prospects,
financial condition, operations, property or affairs of the
Company. Except as set forth in the attached Schedule IV(B), the
Company is not a party to or otherwise bound by any written or
oral:
(a) distributor, dealer, manufacturer's representative
or sales agency agreement which is not terminable on less
than ninety (90) days' notice without cost or other liability
to the Company (except for agreements which, in the
aggregate, are not material to the business of the Company);
(b) sales agreement which entitles any customer to a
rebate or right of set-off, to return any product to the
Company after acceptance thereof or to delay the acceptance
thereof, or which varies in any material respect from the
Company's standard form agreements;
(c) agreement with any labor union (and, to the
knowledge of the Company, no organizational effort is being
made with respect to any of its employees);
(d) agreement with any supplier containing any
provision permitting any party other than the Company to
renegotiate the price or other terms, or containing any pay-
back or other similar provision, upon the occurrence of a
failure by the Company to meet its obligations under the
agreement when due or the occurrence of any other event;
(e) agreement for the future purchase of fixed assets
or for the future purchase of materials, supplies or
equipment in excess of its normal operating requirements;
(f) agreement for the employment of any officer,
employee or other person (whether of a legally binding nature
or in the nature of informal understandings) on a full-time
or consulting basis which is not terminable on notice without
cost or other liability to the Company, except normal
severance arrangements and accrued vacation pay;
(g) bonus, pension, profit-sharing, retirement,
hospitalization, insurance, stock purchase, stock option or
other plan, agreement or understanding pursuant to which
benefits are provided to any employee of the Company (other
than group insurance plans applicable to employees
generally);
(h) agreement relating to the borrowing of money or to
the mortgaging or pledging of, or otherwise placing a lien or
security interest on, any asset of the Company;
(i) guaranty of any obligation for borrowed money or
otherwise;
(j) voting trust or agreement, stockholders' agreement,
pledge agreement, buy-sell agreement or first refusal or
preemptive rights agreement relating to any securities of the
Company;
(k) agreement, or group of related agreements with the
same party or any group of affiliated parties, under which
the Company has advanced or agreed to advance money or has
agreed to lease any property as lessee or lessor;
(l) agreement or obligation (contingent or otherwise)
to issue, sell or otherwise distribute or to repurchase or
otherwise acquire or retire any share of its capital stock or
any of its other equity securities;
(m) assignment, license or other agreement with respect
to any form of intangible property (other than "shrink-wrap"
license agreements for widely available commercial software);
(n) agreement under which it has granted any person any
registration rights, other than the Registration Rights
Agreement;
(o) agreement under which it has limited or restricted
its right to compete with any person in any respect;
(p) other agreement or group of related agreements with
the same party involving more than $10,000 or continuing over
a period of more than six months from the date or dates
thereof (including renewals or extensions optional with
another party), which agreement or group of agreements is not
terminable by the Company without penalty upon notice of
thirty (30) days or less, but excluding any agreement or
group of agreements with a customer of the Company for the
sale, lease or rental of the Company's products or services
if such agreement or group of agreements was entered into by
the Company in the ordinary course of business; or
(q) other agreement, instrument, commitment, plan or
arrangement, a copy of which would be required to be filed
with the Securities and Exchange Commission (the
"Commission") as an exhibit to a registration statement on
Form S-1 if the Company were registering securities under the
Securities Act of 1933, as amended (the "Securities Act").
The Company, and to the best of the Company's knowledge after due
inquiry, each other party thereto have in all material respects
performed all the obligations required to be performed by them to
date (or each non-performing party has received a valid,
enforceable and irrevocable written waiver with respect to its
non-performance), have received no notice of default and are not
in default (with due notice or lapse of time or both) under any
agreement, instrument, commitment, plan or arrangement to which
the Company is a party or by which it or its property may be
bound. The Company has no present expectation or intention of
not fully performing all its obligations under each such
agreement, instrument, commitment, plan or arrangement, and the
Company has no knowledge of any breach or anticipated breach by
the other party to any agreement, instrument, commitment, plan or
arrangement to which the Company is a party. The Company is in
full compliance with all of the terms and provisions of its
Charter and By-laws, as amended.
SECTION 2.15 Loans and Advances. The Company does not have
any outstanding loans or advances to any person and is not
obligated to make any such loans or advances, except, in each
case, for advances to employees of the Company in respect of
reimbursable business expenses anticipated to be incurred by them
in connection with their performance of services for the Company.
SECTION 2.16 Assumptions, Guaranties, Etc. of Indebtedness
of Other Persons. The Company has not assumed, guaranteed,
endorsed or otherwise become directly or contingently liable on
any indebtedness of any other person (including, without
limitation, liability by way of agreement, contingent or
otherwise, to purchase, to provide funds for payment, to supply
funds to or otherwise invest in the debtor, or otherwise to
assure the creditor against loss), except for guaranties by
endorsement of negotiable instruments for deposit or collection
in the ordinary course of business.
SECTION 2.17 Significant Customers and Suppliers. No
customer or supplier which was significant to the Company during
the period covered by the financial statements referred to in
Section 2.05 or which has been significant to the Company
thereafter, has terminated, materially reduced or threatened to
terminate or materially reduce its purchases from or provision of
products or services to the Company, as the case may be.
SECTION 2.18 Governmental Approvals. Subject to the
accuracy of the representations and warranties of the Purchasers
set forth in Article III, no registration or filing with, or
consent or approval of or other action by, any Federal, state or
other governmental agency or instrumentality is or will be
necessary for the valid execution, delivery and performance by
the Company of this Agreement, the Registration Rights Agreement
and the Shareholders Agreement, the issuance, sale and delivery
of the Preferred Shares or, upon conversion thereof, the issuance
and delivery of the Conversion Shares, other than (i) filings
pursuant to state securities laws (all of which filings have been
made by the Company, other than those which are required to be
made after the Closing and which will be duly made on a timely
basis) in connection with the sale of the Preferred Shares and
(ii) with respect to the Registration Rights Agreement, the
registration of the shares covered thereby with the Commission
and filings pursuant to state securities laws.
SECTION 2.19 Disclosure. Neither this Agreement, nor any
Schedule or Exhibit to this Agreement, nor the Private Placement
Memorandum of the Company dated February 1993 (the "Private
Placement Memorandum"), contains an untrue statement of a
material fact or omits a material fact necessary to make the
statements contained herein or therein not misleading. None of
the statements, documents, certificates or other items prepared
or supplied by the Company with respect to the transactions
contemplated hereby contains an untrue statement of a material
fact or omits a material fact necessary to make the statements
contained therein not misleading. There is no fact which the
Company has not disclosed to the Purchasers and their counsel in
writing and of which the Company is aware which materially and
adversely affects or could materially and adversely affect the
business, prospects, financial condition, operations, property or
affairs of the Company. The financial projections and other
estimates contained in the Private Placement Memorandum were
prepared by the Company based on the Company's experience in the
industry and on assumptions of fact and opinion as to future
events which the Company, at the date of the issuance of the
Private Placement Memorandum, believed to be reasonable, but
which the Company cannot and does not assure or guarantee the
attainment of in any manner. As of the date hereof no facts have
come to the attention of the Company which would, in its opinion,
require the Company to revise or amplify the assumptions
underlying such projections and other estimates or the
conclusions derived therefrom.
SECTION 2.20 Offering of the Preferred Shares. Neither the
Company nor any person authorized or employed by the Company as
agent, broker, dealer or otherwise in connection with the
offering or sale of the Preferred Shares or any security of the
Company similar to the Preferred Shares has offered the Preferred
Shares or any such similar security for sale to, or solicited any
offer to buy the Preferred Shares or any such similar security
from, or otherwise approached or negotiated with respect thereto
with, any person or persons, and neither the Company nor any
person acting on its behalf has taken or will take any other
action (including, without limitation, any offer, issuance or
sale of any security of the Company under circumstances which
might require the integration of such security with Preferred
Shares under the Securities Act or the rules and regulations of
the Commission thereunder), in either case so as to subject the
offering, issuance or sale of the Preferred Shares to the
registration provisions of the Securities Act.
SECTION 2.21 Brokers. The Company has no contract,
arrangement or understanding with any broker, finder or similar
agent with respect to the transactions contemplated by this
Agreement, other than an agreement to pay Punk, Ziegel & Knoell
five percent (5%) of the gross proceeds to be received by the
Company from the offering of the Preferred Shares.
SECTION 2.22 Officers. Set forth in Schedule II is a list
of the names of the officers of the Company, together with the
title or job classification of each such person and the total
compensation anticipated to be paid to each such person by the
Company in 1993. None of such persons has an employment
agreement or understanding, whether oral or written, with the
Company, which is not terminable on notice by the Company without
cost or other liability to the Company, other than accrued
vacation pay.
SECTION 2.23 Transactions With Affiliates. No director,
officer, employee or stockholder of the Company, or member of the
family of any such person, or any corporation, partnership, trust
or other entity in which any such person, or any member of the
family of any such person, has a substantial interest or is an
officer, director, trustee, partner or holder of more than 5% of
the outstanding capital stock thereof, is a party to any
transaction with the Company, including any contract, agreement
or other arrangement providing for the employment of, furnishing
of services by, rental of real or personal property from or
otherwise requiring payments to any such person or firm.
SECTION 2.24 Employees. Each of the officers of the
Company, each key employee and each other employee now employed
by the Company who has access to confidential information of the
Company is listed in Schedule II and has executed an Employee
Nondisclosure and Developments Agreement substantially in the
form of Exhibit D (collectively, the "Employee Nondisclosure and
Developments Agreements"), and such agreements are in full force
and effect. No officer or key employee of the Company has
advised the Company (orally or in writing) that he intends to
terminate employment with the Company. The Company has complied
in all material respects with all applicable laws relating to the
employment of labor, including provisions relating to wages,
hours, equal opportunity, collective bargaining and the payment
of Social Security and other taxes, and with the Employee
Retirement Income Security Act of 1974, as amended ("ERISA").
SECTION 2.25 U.S. Real Property Holding Corporation. The
Company is not now and has never been a "United States real
property holding corporation", as defined in Section 897(c)(2) of
the Code and Section 1.897-2(b) of the Regulations promulgated by
the Internal Revenue Service, and the Company has filed with the
Internal Revenue Service all statements, if any, with its United
States income tax returns which are required under Section 1.897-
2(h) of such Regulations.
SECTION 2.26 Environmental Protection. The Company has not
caused or allowed, or contracted with any party for, the
generation, use, transportation, treatment, storage or disposal
of any Hazardous Substances (as defined below) in connection with
the operation of its business or otherwise. The Company, the
operation of its business, and any real property that the Company
owns, leases or otherwise occupies or uses (the "Premises") are
in compliance with all applicable Environmental Laws (as defined
below) and orders or directives of any governmental authorities
having jurisdiction under such Environmental Laws, including,
without limitation, any Environmental Laws or orders or
directives with respect to any cleanup or remediation of any
release or threat of release of Hazardous Substances. The
Company has not received any citation, directive, letter or other
communication, written or oral, or any notice of any proceeding,
claim or lawsuit, from any person arising out of the ownership or
occupation of the Premises, or the conduct of its operations, and
the Company is not aware of any basis therefor. The Company has
obtained and is maintaining in full force and effect all
necessary permits, licenses and approvals required by all
Environmental Laws applicable to the Premises and the business
operations conducted thereon (including operations conducted by
tenants on the Premises), and is in compliance with all such
permits, licenses and approvals. The Company has not caused or
allowed a release, or a threat of release, of any Hazardous
Substance onto, at or near the Premises, and, to the best of the
Company's knowledge, neither the Premises nor any property at or
near the Premises has ever been subject to a release, or a threat
of release, of any Hazardous Substance. For the purposes of this
Agreement, the term "Environmental Laws" shall mean any Federal,
state or local law or ordinance or regulation pertaining to the
protection of human health or the environment, including, without
limitation, the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. Sections 9601, et seq.,
the Emergency Planning and Community Right-to-Know Act, 42 U.S.C.
Sections 11001, et seq., and the Resource Conservation and
Recovery Act, 42 U.S.C. Sections 6901, et seq. For purposes of
this Agreement, the term "Hazardous Substances" shall include oil
and petroleum products, asbestos, polychlorinated biphenyls, urea
formaldehyde and any other materials classified as hazardous or
toxic under any Environmental Laws.
SECTION 2.27 ERISA. Except as listed in Schedule II,
neither the Company nor any entity required to be aggregated with
the Company under Sections 414(b), (c), (m) or (n) of the Code
sponsors, maintains, has any obligation to contribute to, has any
liability under, or is otherwise a party to, any Benefit Plan.
For purposes of this Agreement, "Benefit Plan" shall mean any
plan, fund, program, policy, arrangement or contract, whether
formal or informal, which is in the nature of (i) an employee
pension benefit plan (as defined in Section 3(2) of ERISA) or
(ii) an employee welfare benefit plan (as defined in Section 3(1)
of ERISA). With respect to each Benefit Plan listed in
Schedule II, to the extent applicable:
(a) Each such Benefit Plan has been maintained and
operated in all material respects in compliance with its
terms and with all applicable provisions of ERISA, the Code
and all regulations, rulings and other authority issued
thereunder;
(b) All contributions required by law to have been made
under each such Benefit Plan (without regard to any waivers
granted under Section 412 of the Code) to any fund or trust
established thereunder or in connection therewith have been
made by the due date thereof;
(c) Each such Benefit Plan intended to qualify under
Section 401(a) of the Code is the subject of a favorable
unrevoked determination letter issued by the Internal Revenue
Service as to its qualified status under the Code, which
determination letter may still be relied upon as to such tax
qualified status, and no circumstances have occurred that
would adversely affect the tax qualified status of any such
Benefit Plan;
(d) The actuarial present value of all accrued benefits
under each such Benefit Plan subject to Title IV of ERISA did
not, as of the latest valuation date of such Benefit Plan,
exceed the then current value of the assets of such Benefit
Plan allocable to such accrued benefits, all as based upon
the actuarial assumptions and methods currently used for such
Benefit Plan;
(e) None of such Benefit Plans that are "employee
welfare benefit plans" as defined in Section 3(1) of ERISA
provides for continuing benefits or coverage for any
participant or beneficiary of a participant after such
participant's termination of employment; and
(f) Neither the Company nor any trade or business
(whether or not incorporated) under common control with the
Company within the meaning of Section 4001 of ERISA has, or
at any time has had, any obligation to contribute to any
"multiemployer plan" as defined in Section 3(37) of ERISA.
SECTION 2.28 Foreign Corrupt Practices Act. The Company has
not taken any action which would cause it to be in violation of
the Foreign Corrupt Practices Act of 1977, as amended, or any
rules and regulations thereunder. To the best of the Company's
knowledge after due inquiry, there is not now, and there has
never been, any employment by the Company of, or beneficial
ownership in the Company by, any governmental or political
official in any country in the world.
SECTION 2.29 Federal Reserve Regulations. The Company is
not engaged in the business of extending credit for the purpose
of purchasing or carrying margin securities (within the meaning
of Regulation G of the Board of Governors of the Federal Reserve
System), and no part of the proceeds of the Preferred Shares will
be used to purchase or carry any margin security or to extend
credit to others for the purpose of purchasing or carrying any
margin security or in any other manner which would involve a
violation of any of the regulations of the Board of Governors of
the Federal Reserve System.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser severally represents and warrants to the
Company that:
(a) it is an "accredited investor" within the meaning
of Rule 501 under the Securities Act and was not organized
for the specific purpose of acquiring the Preferred Shares or
has either alone or with its representatives, such knowledge
and experience in financial and business matters that it is
capable of evaluating the merits and risks of the purchase of
the Preferred Shares, is able to bear the economic risk of
the investment and can afford the complete loss of the
investment;
(b) it has had an opportunity to discuss the Company's
business, management and financial affairs with the Company's
management;
(c) the Preferred Shares being purchased by it are
being acquired for its own account for the purpose of
investment and not with a view to or for sale in connection
with any distribution thereof;
(d) it understands that (i) the Preferred Shares and
the Conversion Shares have not been registered under the
Securities Act by reason of their issuance in a transaction
exempt from the registration requirements of the Securities
Act pursuant to Section 4(2) thereof or Rule 505 or 506
promulgated under the Securities Act, (ii) the Preferred
Shares and, upon conversion thereof, the Conversion Shares
must be held indefinitely unless a subsequent disposition
thereof is registered under the Securities Act or is exempt
from such registration, (iii) the Preferred Shares and the
Conversion Shares will bear a legend to such effect and
(iv) the Company will make a notation on its transfer books
to such effect; and
(e) if it sells any Conversion Shares pursuant to
Rule 144A promulgated under the Securities Act, it will take
all necessary steps in order to perfect the exemption from
registration provided thereby, including (i) obtaining on
behalf of the Company information to enable the Company to
establish a reasonable belief that the purchaser is a
qualified institutional buyer and (ii) advising such
purchaser that Rule 144A is being relied upon with respect to
such resale.
ARTICLE IV
CONDITIONS TO THE OBLIGATIONS
OF THE PURCHASERS
The obligation of each Purchaser to purchase and pay for the
Preferred Shares being purchased by it on the Closing Date is, at
its option, subject to the satisfaction, on or before the Closing
Date, of the following conditions:
(a) Opinion of Company's Counsel. The Purchasers shall
have received from Boylan, Brown, Code, Fowler & Wilson,
counsel for the Company, an opinion dated the Closing Date,
in form and scope satisfactory to the Purchasers and their
counsel and attached hereto as Exhibit E.
(b) Representations and Warranties to be True and
Correct. The representations and warranties contained in
Article II shall be true, complete and correct on and as of
the Closing Date with the same effect as though such
representations and warranties had been made on and as of
such date, and the President and Treasurer of the Company
shall have certified to such effect to the Purchasers in
writing.
(c) Performance. The Company shall have performed and
complied with all agreements contained herein required to be
performed or complied with by it prior to or at the Closing
Date, and the President and Treasurer of the Company shall
have certified to the Purchasers in writing to such effect
and to the further effect that all of the conditions set
forth in this Article IV have been satisfied.
(d) All Proceedings to be Satisfactory. All corporate
and other proceedings to be taken by the Company in
connection with the transactions contemplated hereby and all
documents incident thereto shall be satisfactory in form and
substance to the Purchasers and their counsel, and the
Purchasers and their counsel shall have received all such
counterpart originals or certified or other copies of such
documents as they reasonably may request.
(e) Purchase by Other Purchasers. Each Purchaser shall
have purchased and paid for the Preferred Shares being
purchased by it on the Closing Date, and Company shall have
obtained the benefits of at least $3,500,000 of capital
through the purchase of $3,250,000 of Preferred Shares and
the agreement of Equitable Resources to subordinate $250,000
of debt under the terms of a letter agreement with the
Company dated September 14, 1993.
(f) Supporting Documents. The Purchasers and their
counsel shall have received copies of the following
documents:
(i) (A) the Charter, certified as of a recent date
by the Secretary of State of the State of New York and
(B) a certificate of said Secretary dated as of a recent
date as to the due incorporation and good standing of
the Company, the payment of all excise taxes by the
Company and listing all documents of the Company on file
with said Secretary.
(ii) a certificate of the Secretary or an Assistant
Secretary of the Company dated the Closing Date and
certifying: (A) that attached thereto is a true and
complete copy of the By-laws of the Company as in effect
on the date of such certification; (B) that attached
thereto is a true and complete copy of all resolutions
adopted by the Board of Directors or the stockholders of
the Company authorizing the execution, delivery and
performance of this Agreement, the Registration Rights
Agreement and the Shareholders Agreement,the issuance,
sale and delivery of the Preferred Shares and the
reservation, issuance and delivery of the Conversion
Shares, and that all such resolutions are in full force
and effect and are all the resolutions adopted in
connection with the transactions contemplated by this
Agreement, the Registration Rights Agreement and the
Shareholders Agreement; (C) that the Charter is in the
form attached thereto; and (D) to the incumbency and
specimen signature of each officer of the Company
executing this Agreement, the Registration Rights
Agreement and the Shareholders Agreement, the stock
certificates representing the Preferred Shares and any
certificate or instrument furnished pursuant hereto, and
a certification by another officer of the Company as to
the incumbency and signature of the officer signing the
certificate referred to in this clause (ii); and
(iii) such additional supporting documents and other
information with respect to the operations and affairs
of the Company as the Purchasers or their counsel
reasonably may request.
(g) Registration Rights Agreement. The Company shall
have executed and delivered the Registration Rights
Agreement.
(h) Shareholders Agreement. The Shareholders Agreement
shall have been executed and delivered by the Company and
each of the other parties thereto.
(i) Charter. The Charter shall read in its entirety as
set forth in Exhibit C.
(j) Election of Directors. The number of directors
constituting the entire Board of Directors shall have been
fixed at five and the following persons shall have been
elected as directors and shall each hold such position as of
the Closing Date: Scott Jones and Paul Purcell as the
directors elected solely by the holders of the Class B
Convertible Preferred Stock voting as a single class, Allan
Scott and Jeremiah Ayres as the directors elected jointly by
the holders of the Class A Convertible Preferred Stock and
the Common Stock, voting together as a single class, and
George Georgiades as the director elected jointly by the
holders of the Common Stock, the Class A Convertible
Preferred Stock and the Class B Convertible Preferred Stock,
voting together as a single class.
(k) Preemptive Rights. All stockholders of the Company
having any preemptive, first refusal, anti-dilution or other
rights with respect to the issuance of the Preferred Shares
or the Conversion Shares shall have irrevocably waived the
same in writing.
(l) Fees of Purchasers' Counsel. The Company shall
have paid in accordance with Section 6.01 the fees and
disbursements of Purchasers' counsel invoiced at the Closing.
All such documents shall be satisfactory in form and substance to
the Purchasers and their counsel.
ARTICLE V
COVENANTS OF THE COMPANY
The Company covenants and agrees with each of the Purchasers
as follows:
SECTION 5.01 Financial Statements, Reports, Etc. The
Company shall furnish to each Purchaser that holds at least
400,000 Preferred Shares (appropriately adjusted to reflect stock
splits, stock dividends, combinations of shares and the like with
respect to the Class B Convertible Preferred Stock):
(a) within ninety (90) days after the end of each
fiscal year of the Company a consolidated balance sheet of
the Company and its subsidiaries as of the end of such fiscal
year and the related consolidated statements of income,
stockholders' equity and cash flows for the fiscal year then
ended, prepared in accordance with generally accepted
accounting principles and certified by a firm of independent
public accountants of recognized national standing selected
by the Board of Directors of the Company;
(b) within thirty (30) days after the end of each
month in each fiscal year (other than the last month in
each fiscal year) a consolidated balance sheet of the
Company and its subsidiaries and the related consolidated
statements of income, stockholders' equity and cash
flows, unaudited but prepared in accordance with generally
accepted accounting principles and certified by the Chief
Financial Officer of the Company, such consolidated balance
sheet to be as of the end of such month and such
consolidated statements of income, stockholders' equity
and cash flows to be for such month and for the period from
the beginning of the fiscal year to the end of such month,
in each case with comparative statements for the prior
fiscal year, provided that the Company's obligations under
this Section 5.01(b) shall terminate upon the completion of a
firm commitment underwritten public offering of the Company's
securities;
(c) at the time of delivery of each annual financial
statement pursuant to Section 5.01(a), a certificate executed
by the Chief Financial Officer of the Company stating that
such officer has caused this Agreement and the Class B
Convertible Preferred Stock to be reviewed and has no
knowledge of any default by the Company in the performance or
observance of any of the provisions of this Agreement or the
Class B Convertible Preferred Stock or, if such officer has
such knowledge, specifying such default and the nature
thereof;
(d) at the time of delivery of each monthly statement
pursuant to Section 5.01(b), a management narrative report
explaining all significant variances from forecasts and all
significant current developments in staffing, marketing,
sales and operations;
(e) no later than thirty (30) days prior to the start
of each fiscal year, consolidated capital and operating
expense budgets, cash flow projections, income and loss
projections, salary and staffing plans and a written
strategic business plan for the Company and its subsidiaries
in respect of such fiscal year, all itemized in reasonable
detail and reflecting milestones on a monthly basis, and,
promptly after preparation, any revisions to any of the
foregoing;
(f) promptly following receipt by the Company, each
audit response letter, accountant's management letter and
other written report submitted to the Company by its
independent public accountants in connection with an annual
or interim audit of the books of the Company or any of its
subsidiaries;
(g) promptly after the commencement thereof, notice of
all actions, suits, claims, proceedings, investigations and
inquiries of the type described in Section 2.07 that could
materially adversely affect the Company or any of its
subsidiaries;
(h) promptly upon sending, making available or filing
the same, all press releases, reports and financial
statements that the Company sends or makes available to its
stockholders or directors or files with the Commission; and
(i) promptly, from time to time, such other information
regarding the business, prospects, financial condition,
operations, property or affairs of the Company and its
subsidiaries as such Purchaser reasonably may request.
SECTION 5.02 Right of Participation. The Company shall,
prior to any proposed issuance by the Company of any of its
securities (other than debt securities with no equity feature),
offer to each Purchaser by written notice the right, for a period
of thirty (30) days, to purchase for cash at an amount equal to
the price or other consideration for which such securities are to
be issued, a number of such securities so that, after giving
effect to such issuance (and the conversion, exercise and
exchange into or for (whether directly or indirectly) shares of
Common Stock of all such securities that are so convertible,
exercisable or exchangeable), such Purchaser will continue to
maintain its same proportionate equity ownership in the Company
as of the date of such notice (treating each Purchaser, for the
purpose of such computation, as the holder of the number of
shares of Common Stock which would be issuable to such Purchaser
upon conversion, exercise and exchange of all securities
(including but not limited to the Preferred Shares) held by such
Purchaser on the date such offer is made, that are convertible,
exercisable or exchangeable into or for (whether directly or
indirectly) shares of Common Stock and assuming the like
conversion, exercise and exchange of all such other securities
held by other persons); provided, however, that the participation
rights of the Purchasers pursuant to this Section 5.02 shall not
apply to securities issued (A) upon conversion of any of the
shares of Class A Convertible Preferred Stock or Preferred
Shares, (B) as a stock dividend or upon any subdivision of shares
of Common Stock, provided that the securities issued pursuant to
such stock dividend or subdivision are limited to additional
shares of Common Stock, (C) pursuant to subscriptions, warrants,
options, convertible securities, or other rights which are listed
in Schedule III as being outstanding on the date of this
Agreement, (D) solely in consideration for the acquisition
(whether by merger or otherwise) by the Company or any of its
subsidiaries of all or substantially all of the stock or assets
of any other entity, (E) pursuant to a firm commitment public
offering, (F) pursuant to the exercise of options to purchase
Common Stock granted to directors, officers, employees or
consultants of the Company in connection with their service to
the Company, not to exceed in the aggregate 933,480 shares
(appropriately adjusted to reflect stock splits, stock dividends,
combinations of shares and the like with respect to the Common
Stock) less the number of shares (as so adjusted) issued pursuant
to subscriptions, warrants, options, convertible securities, or
other rights outstanding on the date of this Agreement and listed
in Schedule III pursuant to clause (C) above (the shares exempted
by this clause (F) being hereinafter referred to as the "Reserved
Employee Shares"), and (G) upon the exercise of any right which
was issued in compliance with the terms of this Section 5.02.
The Company's written notice to the Purchasers shall describe the
securities proposed to be issued by the Company and specify the
number, price and payment terms. Each Purchaser may accept the
Company's offer as to the full number of securities offered to it
or any lesser number, by written notice thereof given by it to
the Company prior to the expiration of the aforesaid thirty (30)
day period, in which event the Company shall promptly sell and
such Purchaser shall buy, upon the terms specified, the number of
securities agreed to be purchased by such Purchaser. The Company
shall be free at any time after thirty (30) days but prior to
ninety (90) days after the date of its notice of offer to the
Purchasers, to offer and sell to any third party or parties the
remainder of such securities proposed to be issued by the Company
(limited to the securities not agreed by the Purchasers to be
purchased by them), at a price and on payment terms no less
favorable to the Company than those specified in such notice of
offer to the Purchasers. However, if such third party sale or
sales are not consummated within such ninety (90) day period, the
Company shall not sell such securities as shall not have been
purchased within such period without again complying with this
Section 5.02.
SECTION 5.03 Reserve for Conversion Shares. The Company
shall at all times reserve and keep available out of its
authorized but unissued shares of Common Stock, for the purpose
of effecting the conversion of the Preferred Shares and otherwise
complying with the terms of this Agreement, such number of its
duly authorized shares of Common Stock as shall be sufficient to
effect the conversion of the Preferred Shares from time to time
outstanding or otherwise to comply with the terms of this
Agreement. If at any time the number of authorized but unissued
shares of Common Stock shall not be sufficient to effect the
conversion of the Preferred Shares or otherwise to comply with
the terms of this Agreement, the Company will forthwith take such
corporate action as may be necessary to increase its authorized
but unissued shares of Common Stock to such number of shares as
shall be sufficient for such purposes. The Company will obtain
any authorization, consent, approval or other action by or make
any filing with any court or administrative body that may be
required under applicable state securities laws in connection
with the issuance of shares of Common Stock upon conversion of
the Preferred Shares.
SECTION 5.04 Corporate Existence. The Company shall
maintain and, except as otherwise permitted by Section 5.17 cause
each of its subsidiaries to maintain, their respective corporate
existence, rights and franchises in full force and effect.
SECTION 5.05 Properties, Business, Insurance. The Company
shall maintain and cause each of its subsidiaries to maintain as
to their respective properties and business, with financially
sound and reputable insurers, insurance against such casualties
and contingencies and of such types and in such amounts as is
customary for companies similarly situated, which insurance shall
be deemed by the Company to be sufficient.
SECTION 5.06 Inspection, Consultation and Advice. The
Company shall permit and cause each of its subsidiaries to permit
each Purchaser that holds at least 400,000 Preferred Shares
(appropriately adjusted to reflect stock splits, stock dividends,
combinations of shares and the like with respect to the Class B
Convertible Preferred Stock) and such persons as it may
designate, at such Purchaser's expense, to visit and inspect any
of the properties of the Company and its subsidiaries, examine
their books and take copies and extracts therefrom, discuss the
affairs, finances and accounts of the Company and its
subsidiaries with their officers, employees and public
accountants (and the Company hereby authorizes said accountants
to discuss with such Purchaser and such designees such affairs,
finances and accounts), and consult with and advise the
management of the Company and its subsidiaries as to their
affairs, finances and accounts, all at reasonable times and upon
reasonable notice.
SECTION 5.07 Restrictive Agreements Prohibited. Neither the
Company nor any of its subsidiaries shall become a party to any
agreement which by its terms restricts the Company's performance
of this Agreement, the Registration Rights Agreement, the
Shareholders Agreement or the Charter.
SECTION 5.08 Transactions with Affiliates. Except for
transactions contemplated by this Agreement or as otherwise
approved by the Board of Directors, neither the Company nor any
of its subsidiaries shall enter into any transaction with any
director, officer, employee or holder of more than 5% of the
outstanding capital stock of any class or series of capital stock
of the Company or any of its subsidiaries, member of the family
of any such person, or any corporation, partnership, trust or
other entity in which any such person, or member of the family of
any such person, is a director, officer, trustee, partner or
holder of more than 5% of the outstanding capital stock thereof,
except for transactions on customary terms related to such
person's employment.
SECTION 5.09 Expenses of Directors. The Company shall
promptly reimburse in full, each director of the Company who is
not an employee of the Company for all of his reasonable out-of-
pocket expenses incurred in attending each meeting of the Board
of Directors of the Company or any Committee thereof. The
Company shall obtain directors and officers insurance in amounts
and on terms customary for business comparable to the Company by
no later than December 31, 1993.
SECTION 5.10 Use of Proceeds. The Company shall use the
proceeds from the sale of the Preferred Shares solely for working
capital.
SECTION 5.11 Board of Directors Meetings. The Company shall
use its best efforts to ensure that meetings of its Board of
Directors are held at least once each month. The Company shall
permit each Purchaser who does not have a representative sitting
on the Board of Directors who holds of record or beneficially at
least 400,000 Preferred Shares and/or Conversion Shares
(appropriately adjusted to reflect stock splits, stock dividends,
combinations of shares and the like with respect to the Class B
Convertible Preferred Stock or the Common Stock) or its designee
to have one representative attend each meeting of the Board of
Directors of the Company and to participate in all discussions
during each such meeting. The Company shall send to each such
Purchaser and designee the notice of the time and place of such
meeting in the same manner and at the same time as it shall send
such notice to its directors or committee members, as the case
may be. The Company shall also provide to each such Purchaser
and designee copies of all notices, reports, minutes and consents
at the time and in the manner as they are provided to the Board
of Directors or committee, except for information reasonably
designated as proprietary information by the Board of Directors.
SECTION 5.12 Compensation. The Company shall not pay to its
management compensation in excess of that compensation
customarily paid to management in companies of similar size, of
similar maturity, and in similar businesses without the unanimous
written consent of those members of the Company's Board of
Directors elected solely by the holders of Class B Convertible
Preferred Stock.
SECTION 5.13 By-laws. The Company shall at all times cause
its By-laws to provide that, (a) unless otherwise required by the
laws of the State of New York, (i) any two directors and (ii) any
holder or holders of at least 25% of the outstanding shares of
Class B Convertible Preferred Stock, shall have the right to call
a meeting of the Board of Directors or stockholders and (b) the
number of directors fixed in accordance therewith shall in no
event conflict with any of the terms or provisions of the Class B
Convertible Preferred Stock as set forth in the Charter. The
Company shall at all times maintain provisions in its By-laws
and/or Charter indemnifying all directors against liability and
absolving all directors from liability to the Company and its
stockholders to the maximum extent permitted under the laws of
the State of New York.
SECTION 5.14 Performance of Contracts. The Company shall
not amend, modify, terminate, waive or otherwise alter, in whole
or in part, any of the Employee Nondisclosure and Developments
Agreements or the Non-Competition Agreements without the
unanimous written consent of those members of the Company's Board
of Directors elected solely by the holders of Class B Convertible
Preferred Stock.
SECTION 5.15 Vesting of Reserved Employee Shares. The
Company shall not grant to any of its employees options to
purchase Reserved Employee Shares which will become exercisable
at a rate in excess of 20% per annum from the date of such grant
without the unanimous written consent of those members of the
Company's Board of Directors elected solely by the holders of
Class B Convertible Preferred Stock. The terms of the employee
options for Reserved Employee Shares shall provide that, so long
as any Preferred Shares remain outstanding, Reserved Employee
Shares issued pursuant to the exercise of employee options will
be held in a voting trust that will vote all the shares it holds
in the same way that the majority of the shares not held by the
voting trust are voted in any meeting (or action by written
consent) in which such Reserved Employee Shares are entitled to
vote. Reserved Employee Shares held in such voting trust will be
transferable, subject to the terms of the Shareholders'
Agreement, without restriction and the holder of an interest in
the voting trust will be entitled to all the rights to which he
would otherwise be entitled if he held directly the shares
represented by his interest in the voting trust.
SECTION 5.16 Employee Nondisclosure and Developments
Agreements. The Company shall use its best efforts to obtain,
and shall cause its subsidiaries to use their best efforts to
obtain, an Employee Nondisclosure and Developments Agreement in
substantially the form of Exhibit D from all future officers, key
employees and other employees who will have access to
confidential information of the Company or any of its
subsidiaries, upon their employment by the Company or any of its
subsidiaries.
SECTION 5.17 Activities of Subsidiaries. The Company shall
not permit any subsidiary to consolidate or merge into or with or
sell or transfer all or substantially all its assets, except that
any subsidiary may (i) consolidate or merge into or with or sell
or transfer assets to any other subsidiary, or (ii) merge into or
sell or transfer assets to the Company. The Company shall not
sell or otherwise transfer any shares of capital stock of any
subsidiary, except to the Company or another subsidiary, or
permit any subsidiary to issue, sell or otherwise transfer any
shares of its capital stock or the capital stock of any
subsidiary, except to the Company or another subsidiary. The
Company shall not permit any subsidiary to purchase or set aside
any sums for the purchase of, or pay any dividend or make any
distribution on, any shares of its stock, except for dividends or
other distributions payable to the Company or another subsidiary.
SECTION 5.18 Compliance with Laws. The Company shall
comply, and cause each subsidiary to comply, with all applicable
laws, rules, regulations and orders, noncompliance with which
could materially adversely affect its business or condition,
financial or otherwise.
SECTION 5.19 Keeping of Records and Books of Account. The
Company shall keep, and cause each subsidiary to keep, adequate
records and books of account, in which complete entries will be
made in accordance with generally accepted accounting principles
consistently applied, reflecting all financial transactions of
the Company and such subsidiary, and in which, for each fiscal
year, all proper reserves for depreciation, depletion,
obsolescence, amortization, taxes, bad debts and other purposes
in connection with its business shall be made.
SECTION 5.20 Change in Nature of Business. The Company
shall not make, or permit any subsidiary to make, any material
change in the nature of its business as set forth in the Private
Placement Memorandum.
SECTION 5.21 U.S. Real Property Interest Statement. The
Company shall provide prompt written notice to each Purchaser
following any "determination date" (as defined in Treasury
Regulation Section 1.897-2(c)(i)) on which the Company becomes a
United States real property holding corporation. In addition,
upon a written request by any Purchaser, the Company shall
provide such Purchaser with a written statement informing the
Purchaser whether such Purchaser's interest in the Company
constitutes a U.S. real property interest. The Company's
determination shall comply with the requirements of Treasury
Regulation Section 1.897-2(h)(1) or any successor regulation, and
the Company shall provide timely notice to the Internal Revenue
Service, in accordance with and to the extent required by
Treasury Regulation Section 1.897-2(h)(2) or any successor
regulation, that such statement has been made. The Company's
written statement to any Purchaser shall be delivered to such
Purchaser within ten (10) days of such Purchaser's written
request therefor. The Company's obligation to furnish a written
statement pursuant to this Section 5.21 shall continue
notwithstanding the fact that a class of the Company's stock may
be regularly traded on an established securities market.
SECTION 5.22 International Investment Survey Act of 1976.
The Company shall use its best efforts to file on a timely basis
all reports required of it under 22 U.S.C. Section 3104, or any
similar statute, relating to a foreign person's direct or
indirect investment in the Company.
SECTION 5.23 Rule 144A Information. The Company shall, at
all times during which it is neither subject to the reporting
requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), nor exempt from
reporting pursuant to Rule 12g3-2(b) under the Exchange Act,
provide in writing, upon the written request of any Purchaser or
a prospective buyer of Preferred Shares or Conversion Shares from
any Purchaser, all information required by Rule 144A(d)(4)(i) of
the General Regulations promulgated by the Commission under the
Securities Act ("Rule 144A Information"). The Company also
shall, upon the written request of any Purchaser, cooperate with
and assist such Purchaser or any member of the National
Association of Securities Dealers, Inc. PORTAL system in applying
to designate and thereafter maintain the eligibility of the
Preferred Shares or Conversion Shares for trading through PORTAL.
The Company's obligations under this Section 5.23 shall at all
times be contingent upon the relevant Purchaser's obtaining from
the prospective buyer of Preferred Shares or Conversion Shares a
written agreement to take all reasonable precautions to safeguard
the Rule 144A Information from disclosure to anyone other than a
person who will assist such buyer in evaluating the purchase of
any Preferred Shares or Conversion Shares.
SECTION 5.24. Compensation and Audit Committees. The
Company shall, by amending its By-laws or otherwise, establish
and maintain a Compensation Committee and an Audit Committee of
the Board of Directors, each of which shall consist of three
directors, one of whom (on each Committee) may be a director
elected jointly by the holders of the Common Stock and the
Class A Convertible Preferred Stock and two of whom (on each
Committee) shall be directors elected solely by the holders of
Class B Convertible Preferred Stock. No compensation or other
remuneration shall be paid to, and no capital stock of the
Company shall be issued or granted to, any director, officer or
employee of, or any consultant or adviser to, the Company or any
of its subsidiaries, without the approval of the Compensation
Committee. No employee stock option plan, employee stock
purchase plan, employee restricted stock plan or other employee
stock plan shall be established without the approval of the
Compensation Committee. The Audit Committee shall select
(subject to the approval of the Board of Directors) and provide
instructions to the Company's auditors.
SECTION 5.25. Business Goals. The Company agrees to
complete and submit to the Board of Directors for its approval
within one month of the Closing Date a prioritized plan
summarizing by department the operating, financial and staffing
goals the Company intends to achieve by December 31, 1993,
June 30, 1994, and December 31, 1994. These business goals will
be consistent with the Company's current financial projections.
These business goals will be reviewed by the Board of Directors
when establishing management compensation, including salary,
bonus, options and other forms of remuneration.
SECTION 5.26. Business Plan. The Company will prepare and
submit to the Board of Directors for its approval a business plan
for the three years ending December 31, 1996. This business plan
will make provision for establishing a relationship with a
corporate partner or completing a private placement of equity
securities of the Company by June 30, 1994.
SECTION 5.27. Provision of Information to Board of
Directors. The Company shall provide to each director, at the
time required to be furnished to qualified Purchasers pursuant to
Section 5.1(e), the information called for in such Section.
SECTION 5.28. OEM Business Development. The Company agrees
to use its best efforts to hire a qualified senior executive by
December 31, 1993 to assume responsibility for OEM business
development.
SECTION 5.29 Shareholder Meetings.
(a) If any holder of Class A Preferred Stock or Class B
Convertible Preferred Stock gives notice of his election to
receive stock in lieu of any cash dividends declared by the Board
of Directors in accordance with Sections 3.2.1 and 3.2.2 of the
Company's Restated Certificate of Incorporation, then the Company
will forthwith submit to the Shareholders of the Company an
amendment to the Company's Restated Certificate of Incorporation
increasing the authorized number of shares of Class A Preferred
Stock or Class B Convertible Preferred Stock, as the case may be,
to such number as is necessary to pay stock in lieu of cash
dividends to holders who have elected such manner of payment.
(b) If an aggregate of 3,762,107 Preferred Shares are
not sold by the Company under the terms of this Agreement on or
before October 31, 1993, then the Company will forthwith submit
to the Shareholders of the Company an amendment to the Company's
Restated Certificate of Incorporation decreasing the authorized
number of shares of Class B Convertible Preferred Stock to the
number actually sold.
SECTION 5.30 Actions of Subsidiaries. The Company agrees
that no material transactions not in the ordinary course of
business will be entered into by any current or future subsidiary
of the Company unless approved by a majority of the members of
the Board of Directors of the Company in advance.
ARTICLE VI
MISCELLANEOUS
SECTION 6.01 Expenses. Each party hereto will pay its own
expenses in connection with the transactions contemplated hereby,
whether or not such transactions shall be consummated, provided,
however, that the Company shall pay the fees and disbursements of
the Purchasers' special counsel, Testa, Hurwitz & Thibeault, in
connection with such transactions and any subsequent amendment,
waiver, consent or enforcement thereof.
SECTION 6.02 Survival of Agreements. All covenants,
agreements, representations and warranties made herein or in the
Registration Rights Agreement, the Shareholders Agreement, or any
certificate or instrument delivered to the Purchasers pursuant to
or in connection with this Agreement, the Registration Rights
Agreement or the Shareholders Agreement, shall survive the
execution and delivery of this Agreement, the Registration Rights
Agreement and the Shareholders Agreement, the issuance, sale and
delivery of the Preferred Shares, and the issuance and delivery
of the Conversion Shares, and all statements contained in any
certificate or other instrument delivered by the Company
hereunder or thereunder or in connection herewith or therewith
shall be deemed to constitute representations and warranties made
by the Company.
SECTION 6.03 Brokerage. Each party hereto will indemnify
and hold harmless the others against and in respect of any claim
for brokerage or other commissions relative to this Agreement or
to the transactions contemplated hereby, based in any way on
agreements, arrangements or understandings made or claimed to
have been made by such party with any third party.
SECTION 6.04 Parties in Interest. All representations,
covenants and agreements contained in this Agreement by or on
behalf of any of the parties hereto shall bind and inure to the
benefit of the respective successors and assigns of the parties
hereto whether so expressed or not. Without limiting the
generality of the foregoing, all representations, covenants and
agreements benefiting the Purchasers shall inure to the benefit
of any and all subsequent holders from time to time of Preferred
Shares or Conversion Shares.
SECTION 6.05 Notices. All notices, requests, consents and
other communications hereunder shall be in writing and shall be
delivered in person, mailed by certified or registered mail,
return receipt requested, addressed as follows:
(a) if to the Company, at 1450 Rochester Street (Route
15A), Lima, New York 14485, Attention: President, with a
copy to Robert Brown, Esq., Boylan, Brown, Code, Fowler &
Wilson, 900 Midtown Tower, Rochester, New York 14604; and
(b) if to any Purchaser, at the address of such
Purchaser set forth in Schedule I, with a copy to
Katherine M. Todd, Esq., Testa, Hurwitz & Thibeault, Exchange
Place, 53 State Street, Boston, Massachusetts 02109;
or, in any such case, at such other address or addresses as shall
have been furnished in writing by such party to the others.
SECTION 6.06 Governing Law. This Agreement shall be
governed by and construed in accordance with the laws of the
State of New York.
SECTION 6.07 Entire Agreement. This Agreement, including
the Schedules and Exhibits hereto, constitutes the sole and
entire agreement of the parties with respect to the subject
matter hereof. All Schedules and Exhibits hereto are hereby
incorporated herein by reference.
SECTION 6.08 Counterparts. This Agreement may be executed
in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the
same instrument.
SECTION 6.09 Amendments. This Agreement may not be amended
or modified, and no provisions hereof may be waived, without the
written consent of the Company and the holders of at least
sixty-seven percent (67%) of the outstanding shares of Common
Stock issued or issuable upon conversion of the Preferred Shares.
SECTION 6.10 Severability. If any provision of this
Agreement shall be declared void or unenforceable by any judicial
or administrative authority, the validity of any other provision
and of the entire Agreement shall not be affected thereby.
SECTION 6.11 Titles and Subtitles. The titles and subtitles
used in this Agreement are for convenience only and are not to be
considered in construing or interpreting any term or provision of
this Agreement.
SECTION 6.12 Certain Defined Terms. As used in this
Agreement, the following terms shall have the following meanings
(such meanings to be equally applicable to both the singular and
plural forms of the terms defined):
(a) "person" shall mean an individual, corporation,
trust, partnership, joint venture, unincorporated
organization, government agency or any agency or political
subdivision thereof, or other entity.
(b) "subsidiary" shall mean, as to the Company, any
corporation of which more than 50% of the outstanding stock
having ordinary voting power to elect a majority of the Board
of Directors of such corporation (irrespective of whether or
not at the time stock of any other class or classes of such
corporation shall have or might have voting power by reason
of the happening of any contingency) is at the time directly
or indirectly owned by the Company, or by one or more of its
subsidiaries, or by the Company and one or more of its
subsidiaries.
SECTION 6.13 Certain Conflicts. The Company and each of the
Purchasers is aware that affiliates of Purchaser Enertek
Partners, L.P. ("Enertek") engage in a wide range of activities
and perform research on a contractual basis for third parties and
themselves, that these research activities could cause technology
of the Company to become obsolete or noncompetitive, that the
Company has no right to any such research results and that
neither Enertek nor such affiliates have any duty to make such
results available to the Company or to warn or protect the
Company with respect thereto. Enertek agrees that Enertek's
affiliates are not entitled to information about the Company or
its technology which could be used in Enertek's affiliates'
research activities.
[REMAINDER OF PAGE LEFT BLANK INTENTIONALLY]
IN WITNESS WHEREOF, the Company and the Purchasers have
executed this Agreement as of the day and year first above
written.
METSCAN, INC.
By: /s/George Georgiades
[Corporate Seal] Title: President
Attest:
/s/Robert S. Brown
Secretary
PURCHASERS:
NEW YORK
BUSINESS VENTURE
PARTNERSHIP
By: NEW YORK VENTURE
ASSOCIATES L.P.,
General Partner
By: /s/James J. O'Neill
James J. O'Neill
For the Managing Partner
PURCHASERS:
/s/Jess L. Besler
Jess L. Besler
PURCHASERS:
/s/Scott T. Jones
Scott T. Jones
PURCHASERS:
/s/Peter A. Fried
Peter A. Fried
PURCHASERS:
/s/James J. O'Neill
James J. O'Neill
PURCHASERS:
/s/Sherry Croasdale
Sherry Croasdale
PURCHASERS:
ENERTEK PARTNERS, L.P.
By: Scientific Advances, Inc.
General Partner
By:/s/Paul F. Purcell
Paul F. Purcell
Vice President
PURCHASERS:
WILMINGTON SECURITIES, INC.
By:/s/Darlene Clarke
Title: Vice President
PURCHASERS:
EQUITABLE RESOURCES ENERGY
COMPANY
By: /s/Jeremiah J. Ayres
Title: Senior Vice President
PURCHASERS:
CU GAS, a division of Canadian
Utilities Limited
By: /s/Allan Scott
Title: Vice President Finance &
Planning
PURCHASERS:
ENEROP CORPORATION
By: /s/D. J. Seeley
Title: Director
AGREEMENT TO PURCHASE METSCAN
CLASS B CONVERTIBLE PREFERRED SHARES
Enerop hereby agrees to purchase, on October 22, 1993, 29,167 Metscan, Inc.
Class B Convertible Preferred Shares at $1.20 per share for a total purchase
commitment of $35,000. This purchase is part of an offering of Class B
Convertible Preferred Shares with a minimum aggregate investment of $3.5
million and a maximum of $4.5 million and shall be made in accordance with the
terms of the Class B Convertible Preferred Stock Purchase Agreement dated
September __, 1993.
It is understood and agreed that the Agreement provides for possible additional
investment by Electra Innvotec (Electra). Should El
any or all of the 29,167 Metscan, Inc. Class B Preferred Shares, Enerop agrees
to permit Metscan, Inc. to sell such 29,167 Series B Preferred Shares (of the
corporation) to Electra and Metscan agrees that Enerop shall no longer be
obligated to purchase such 29,167 Class B Convertible Preferred Shares.
This agreement to purchase is contingent upon approval from the SEC pursuant to
the Public Utility Holding Company Act.
ENEROP METSCAN
/s/D. J. Seeley /s/George Georgiades
George Georgiades
Date: Date:
SCHEDULE I
PURCHASERS
Name Purchase Price Number of Shares
New York Business Venture $1,500,000 1,250,000
Partnership
Jess L. Besler 150,000 125,000
Scott T. Jones 126,000 105,000
Peter A. Fried 24,000 20,000
James J. O'Neill 20,000 16,667
Sherri Croasdale 10,000 8,333
Enertek Partners, L.P. 750,000 625,000
Wilmington Securities, Inc. 45,000 37,500
Equitable Resources Energy Company 250,000 208,333
* Equitable Resources Energy 240,000 200,000
Company
* CU Gas, a division of Canadian 100,000 83,333
Utilities Limited
* Enerop Corporation 35,000 29,167
TOTAL $3,250,000 2,708,333
* These investors have deoposited the consideration for their shares in escrow,
pursuant to the terms of the attached Escrow Agreement.
<TABLE>
<CAPTION>
EXHIBIT B-15
METSCAN, INC.
SHARES ISSUED AND OUTSTANDING
AS OF DECEMBER 31, 1993
Prefer-
red A % of Preferred % of
Common # % of # of Prefer- B # of Prefer- % of
of Shares Common Shares red A Shares red B Total Total
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CU Gas 1,000,000 18.29% 254,500 44.30% 83,333 3.08% 1,337,833 15.29%
Enerop Corporation 400,000 7.31% 56,500 9.83% 0* 0.00% 456,500* 5.22%*
Equitable Resources
Energy Company 2,750,000 50.29% 254,500 44.30% 408,333 15.08% 3,412,833 39.00%
Newport America
Corporation 240,000 4.39% 9,000 1.57% 0 0.00% 249,000 2.85%
Wilmington
Securities, Inc. 616,913 11.28% 0 0.00% 37,500 1.39% 654,413 7.48%
Management 461,833 8.44% 0 0.00% 0 0.00% 461,833 5.28%
Enertek Partners, L.P. 0 0.00% 0 0.00% 625,000 23.08% 625,000 7.14%
New York Business
Venture Partnership 0 0.00% 0 0.00% 1,250,000 46.17% 1,250,000 14.28%
Jess L. Belser 0 0.00% 0 0.00% 125,000 4.62% 125,000 1.43%
Scott T. Jones 0 0.00% 0 0.00% 133,333 4.92% 133,333 1.52%
Peter A. Fried 0 0.00% 0 0.00% 20,000 0.74% 20,000 0.23%
James J. O'Neill 0 0.00% 0 0.00% 16,667 0.62% 16,667 0.19%
Sherri Croasdale 0 0.00% 0 0.00% 8,333 0.31% 8,333 0.10%
_________ _______ _______ _______ _________ _______ _________ _______
Total 5,468,746 100.00% 574,500 100.00% 2,707,500* 100.00% 8,750,746* 100.00%
</TABLE>
*Does not include 29,167 to be purchased by Leidy, whereupon Leidy will own
5.53% of Metscan. (485,667/8,799,913)
EXHIBIT B-16
EXECUTION COPY
EXHIBIT A
REGISTRATION RIGHTS AGREEMENT
September 16, 1993
To each of the several Purchasers
named in Schedule I to the Class B
Convertible Preferred Stock Purchase
Agreement of even date herewith
Dear Sirs:
This will confirm that in consideration of your
agreement on the date hereof to purchase an aggregate of
3,762,107 shares (the "Preferred Shares") of Class B Convertible
Preferred Stock, $.01 par value ("Preferred Stock"), of Metscan,
Inc., a New York corporation (the "Company"), pursuant to the
Class B Convertible Preferred Stock Purchase Agreement of even
date herewith (the "Purchase Agreement") between the Company and
you and as an inducement to you to consummate the transactions
contemplated by the Purchase Agreement, the Company covenants and
agrees with each of you as follows:
1. Certain Definitions. As used in this Agreement,
the following terms shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange
Commission, or any other federal agency at the time
administering the Securities Act.
"Common Stock" shall mean the Common Stock, $.001 par
value, of the Company, as constituted as of the date of this
Agreement.
"Conversion Shares" shall mean shares of Common Stock
issued upon conversion of the Preferred Shares.
"Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, or any similar federal statute, and the
rules and regulations of the Commission thereunder, all as
the same shall be in effect at the time.
"Registration Expenses" shall mean the expenses so
described in Section 8.
"Restricted Stock" shall mean the Conversion Shares,
excluding Conversion Shares which have been (a) registered
under the Securities Act pursuant to an effective
registration statement filed thereunder and disposed of in
accordance with the registration statement covering them or
(b) publicly sold pursuant to Rule 144 under the Securities
Act. For purposes of Sections 4, 5, 6, 13(a) and 13(d), the
term "Restricted Stock" shall be deemed to include the number
of shares of Restricted Stock which would be issuable to a
holder of Preferred Shares upon conversion of all shares of
Preferred Stock held by such holder at such time, provided,
however, that the only securities which the Company shall be
required to register pursuant to this Agreement shall be
shares of Common Stock, and provided, further, however, that,
in any underwritten public offering contemplated by
Sections 4, 5, and 6, the holders of Preferred Shares shall
be entitled to sell such Preferred Shares to the underwriters
for conversion and sale of the shares of Common Stock issued
upon conversion thereof.
"Securities Act" shall mean the Securities Act of 1933,
as amended, or any similar federal statute, and the rules and
regulations of the Commission thereunder, all as the same
shall be in effect at the time.
"Selling Expenses" shall mean the expenses so described
in Section 8.
2. Restrictive Legend. Each certificate representing
Preferred Shares or Conversion Shares shall, except as otherwise
provided in this Section 2 or in Section 3, be stamped or
otherwise imprinted with a legend substantially in the following
form:
"THESE SECURITIES ARE NOT REGISTERED UNDER STATE OR
FEDERAL SECURITIES LAWS AND MAY NOT BE OFFERED,
SOLD, PLEDGED (EXCEPT A PLEDGE PURSUANT TO THE TERMS
OF WHICH ANY OFFER OR SALE UPON FORECLOSURE WOULD BE
MADE IN A MANNER THAT WOULD NOT VIOLATE THE
REGISTRATION PROVISIONS OF FEDERAL OR STATE
SECURITIES LAWS), HYPOTHECATED, OR OTHERWISE
DISTRIBUTED FOR VALUE, NOR MAY THESE SECURITIES BE
TRANSFERRED ON THE BOOKS OF THE COMPANY IN THE
ABSENCE OF SUCH REGISTRATION OR PROOF OF A VALID
EXEMPTION THEREFROM."
A certificate shall not bear such legend if in the opinion of
counsel satisfactory to the Company (it being agreed that Testa,
Hurwitz & Thibeault shall be satisfactory) the securities being
sold thereby may be publicly sold without registration under the
Securities Act and any applicable state securities laws.
3. Notice of Proposed Transfer. Prior to any proposed
transfer of any Preferred Shares or Conversion Shares (other than
under the circumstances described in Sections 4, 5 or 6), the
holder thereof shall give written notice to the Company of its
intention to effect such transfer. Each such notice shall
describe the manner of the proposed transfer and, if requested by
the Company, shall be accompanied by an opinion of counsel
satisfactory to the Company (it being agreed that Testa,
Hurwitz & Thibeault shall be satisfactory) to the effect that the
proposed transfer may be effected without registration under the
Securities Act and any applicable state securities laws,
whereupon the holder of such stock shall be entitled to transfer
such stock in accordance with the terms of its notice; provided,
however, that no such opinion of counsel shall be required for a
transfer to one or more partners of the transferor (in the case
of a transferor that is a partnership) or to an affiliated
corporation (in the case of a transferor that is a corporation).
Each certificate for Preferred Shares or Conversion Shares
transferred as above provided shall bear the legend set forth in
Section 2, except that such certificate shall not bear such
legend if (i) such transfer is in accordance with the provisions
of Rule 144 (or any other rule permitting public sale without
registration under the Securities Act) or (ii) the opinion of
counsel referred to above is to the further effect that the
transferee and any subsequent transferee (other than an affiliate
of the Company) would be entitled to transfer such securities in
a public sale without registration under the Securities Act.
Stock transferred in accordance with this paragraph 3 will
continue to be subject to that certain Shareholders' Agreement
dated as of the date hereof between the Company and certain of
its Stockholders. The restrictions provided for in this
Section 3 shall not apply to securities which are not required to
bear the legend prescribed by Section 2 in accordance with the
provisions of that Section.
4. Required Registration. (a) At any time after
January 1, 1996, any holder of Restricted Stock may request the
Company to register under the Securities Act all or any portion
of the shares of Restricted Stock held by such requesting holder
or holders for sale in the manner specified in such notice.
Notwithstanding anything to the contrary contained herein, no
request may be made under this Section 4 within 180 days after
the effective date of a registration statement filed by the
Company covering a firm commitment underwritten public offering.
(b) Following receipt of any notice under this
Section 4, the Company shall immediately notify all holders of
Restricted Stock from whom notice has not been received and shall
use its best efforts to register under the Securities Act, for
public sale in accordance with the method of disposition
specified in such notice from requesting holders, the number of
shares of Restricted Stock specified in such notice and in all
notices received by the Company from other holders within 30 days
after the giving of such notice by the Company. If such method
of disposition shall be an underwritten public offering, the
holders of a majority of the shares of Restricted Stock to be
sold in such offering may designate the managing underwriter of
such offering, subject to the approval of the Company, which
approval shall not be unreasonably withheld or delayed. The
Company shall be obligated to register Restricted Stock pursuant
to this Section 4 on two occasions only, provided, however, that
if, after the Company shall have effected two such registrations,
any holder of Restricted Stock still holds shares of Restricted
Stock representing more than one-third of the shares of
Restricted Stock purchased by such holder pursuant to this
Agreement, the Company shall be obligated to register Restricted
Stock at such holder's request on a third occasion, and,
provided, further, that such obligation shall be deemed satisfied
only when a registration statement covering all shares of
Restricted Stock specified in notices received as aforesaid, for
sale in accordance with the method of disposition specified by
the requesting holders, shall have become effective and, if such
method of disposition is a firm commitment underwritten public
offering, all such shares shall have been sold pursuant thereto.
(c) The Company shall be entitled to include in any
registration statement referred to in this Section 4, for sale in
accordance with the method of disposition specified by the
requesting holders, shares of Common Stock to be sold by the
Company for its own account, except as and to the extent that, in
the opinion of the managing underwriter (if such method of
disposition shall be an underwritten public offering), such
inclusion would adversely affect the marketing of the Restricted
Stock to be sold. Except for registration statements on
Form S-4, S-8 or any successor thereto, the Company will not file
with the Commission any other registration statement with respect
to its Common Stock, whether for its own account or that of other
stockholders, from the date of receipt of a notice from
requesting holders pursuant to this Section 4 until the
completion of the period of distribution of the registration
contemplated thereby.
5. Incidental Registration. If the Company at any
time (other than pursuant to Section 6) proposes to register any
of its securities under the Securities Act for sale to the
public, whether for its own account or for the account of other
security holders or both (except with respect to registration
statements on Forms S-4, S-8 or another form not available for
registering the Restricted Stock for sale to the public), each
such time it will give written notice to all holders of
outstanding Restricted Stock of its intention to do so. Upon the
written request of any such holder, received by the Company
within 30 days after the giving of any such notice by the
Company, to register any of its Restricted Stock, the Company
will use its best efforts to cause the Restricted Stock as to
which registration shall have been so requested to be included in
the securities to be covered by the registration statement
proposed to be filed by the Company, all to the extent requisite
to permit the sale or other disposition by the holder of such
Restricted Stock so registered. In the event that any
registration pursuant to this Section 5 shall be, in whole or in
part, an underwritten public offering of Common Stock, the number
of shares of Restricted Stock to be included in such an
underwriting may be reduced (pro rata among the requesting
holders based upon the number of shares of Restricted Stock owned
by such holders) if and to the extent that the managing
underwriter shall be of the opinion that such inclusion would
adversely affect the marketing of the securities to be sold by
the Company therein, provided, however, that such number of
shares of Restricted Stock shall not be reduced if any shares are
to be included in such underwriting for the account of any person
other than the Company or requesting holders of Restricted Stock.
Notwithstanding the foregoing provisions, the Company may
withdraw any registration statement referred to in this Section 5
without thereby incurring any liability to the holders of
Restricted Stock.
6. Registration on Form S-3. If at any time (i) a
holder or holders of Preferred Shares or Restricted Stock request
that the Company file a registration statement on Form S-3 or any
successor thereto for a public offering of all or any portion of
the shares of Restricted Stock held by such requesting holder or
holders, the reasonably anticipated aggregate price to the public
of which would exceed $500,000, and (ii) the Company is a
registrant entitled to use Form S-3 or any successor thereto to
register such shares, then the Company shall use its best efforts
to register under the Securities Act on Form S-3 or any successor
thereto, for public sale in accordance with the method of
disposition specified in such notice, the number of shares of
Restricted Stock specified in such notice. Whenever the Company
is required by this Section 6 to use its best efforts to effect
the registration of Restricted Stock, each of the procedures and
requirements of Section 4 (including but not limited to the
requirement that the Company notify all holders of Restricted
Stock from whom notice has not been received and provide them
with the opportunity to participate in the offering) shall apply
to such registration, provided, however, that there shall be no
limitation on the number of registrations on Form S-3 which may
be requested and obtained under this Section 6, and provided,
further, however, that the restriction contained in the first
sentence of Section 4(a) shall not apply to any registration on
Form S-3 which may be requested and obtained under this
Section 6.
7. Registration Procedures. If and whenever the
Company is required by the provisions of Sections 4, 5 or 6 to
use its best efforts to effect the registration of any shares of
Restricted Stock under the Securities Act, the Company will, as
expeditiously as possible:
(a) prepare and file with the Commission a registration
statement (which, in the case of an underwritten public offering
pursuant to Section 4, shall be on Form S-1 or other form of
general applicability satisfactory to the managing underwriter
selected as therein provided) with respect to such securities and
use its best efforts to cause such registration statement to
become and remain effective for the period of the distribution
contemplated thereby (determined as hereinafter provided);
(b) prepare and file with the Commission such
amendments and supplements to such registration statement and the
prospectus used in connection therewith as may be necessary to
keep such registration statement effective for the period
specified in paragraph (a) above and comply with the provisions
of the Securities Act with respect to the disposition of all
Restricted Stock covered by such registration statement in
accordance with the sellers' intended method of disposition set
forth in such registration statement for such period;
(c) furnish to each seller of Restricted Stock and to
each underwriter such number of copies of the registration
statement and the prospectus included therein (including each
preliminary prospectus) as such persons reasonably may request in
order to facilitate the public sale or other disposition of the
Restricted Stock covered by such registration statement;
(d) use its best efforts to register or qualify the
Restricted Stock covered by such registration statement under the
securities or "blue sky" laws of such jurisdictions as the
sellers of Restricted Stock or, in the case of an underwritten
public offering, the managing underwriter reasonably shall
request, provided, however, that the Company shall not for any
such purpose be required to qualify generally to transact
business as a foreign corporation in any jurisdiction where it is
not so qualified or to consent to general service of process in
any such jurisdiction;
(e) use its best efforts to list the Restricted Stock
covered by such registration statement with any securities
exchange on which the Common Stock of the Company is then listed;
(f) immediately notify each seller of Restricted Stock
and each underwriter under such registration statement, at any
time when a prospectus relating thereto is required to be
delivered under the Securities Act, of the happening of any event
of which the Company has knowledge as a result of which the
prospectus contained in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits
to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in light
of the circumstances then existing;
(g) if the offering is underwritten and at the request
of any seller of Restricted Stock, use its best efforts to
furnish on the date that Restricted Stock is delivered to the
underwriters for sale pursuant to such registration: (i) an
opinion dated such date of counsel representing the Company for
the purposes of such registration, addressed to the underwriters
and to such seller, covering such matters with respect to the
registration statement and the prospectus included therein as are
customarily covered in opinions of issuer's counsel, and (ii) a
letter dated such date from the independent public accountants
retained by the Company, addressed to the underwriters and to
such seller, covering such matters with respect to the
registration statement and prospectus contained therein and the
financial statements and other financial information contained in
each of them as well as such other financial matters (including
information as to the period ending no more than five business
days prior to the date of such letter) as are customarily covered
in accountants' "comfort letters" delivered in connection with a
registered public offering; and
(h) make available for inspection by each seller of
Restricted Stock, any underwriter participating in any
distribution pursuant to such registration statement, and any
attorney, accountant or other agent retained by such seller or
underwriter, all financial and other records, pertinent corporate
documents and properties of the Company, and cause the Company's
officers, directors and employees to supply all information
reasonably requested by any such seller, underwriter, attorney,
accountant or agent in connection with such registration
statement.
For purposes of Section 7(a) and 7(b) and of
Section 4(c), the period of distribution of Restricted Stock in a
firm commitment underwritten public offering shall be deemed to
extend until each underwriter has completed the distribution of
all securities purchased by it, and the period of distribution of
Restricted Stock in any other registration shall be deemed to
extend until the earlier of the sale of all Restricted Stock
covered thereby and 120 days after the effective date thereof.
In connection with each registration hereunder, the
sellers of Restricted Stock will furnish to the Company in
writing such information with respect to themselves and the
proposed distribution by them as reasonably shall be necessary in
order to assure compliance with federal and applicable state
securities laws.
In connection with each registration pursuant to
Sections 4, 5 or 6 covering an underwritten public offering, the
Company and each seller agree to enter into a written agreement
with the managing underwriter selected in the manner herein
provided in such form and containing such provisions as are
customary in the securities business for such an arrangement
between such underwriter and companies of the Company's size and
investment stature.
8. Expenses. All expenses incurred by the Company in
complying with Sections 4, 5 and 6, including, without
limitation, all registration and filing fees, printing expenses,
fees and disbursements of counsel and independent public
accountants for the Company, fees and expenses (including counsel
fees) incurred in connection with complying with state securities
or "blue sky" laws, fees of the National Association of
Securities Dealers, Inc., transfer taxes, fees of transfer agents
and registrars, costs of insurance and fees and disbursements of
one counsel for the sellers of Restricted Stock, but excluding
any Selling Expenses, are called "Registration Expenses". All
underwriting discounts and selling commissions applicable to the
sale of Restricted Stock are called "Selling Expenses".
The Company will pay all Registration Expenses in
connection with each registration statement under Sections 4, 5
or 6. All Selling Expenses in connection with each registration
statement under Sections 4, 5 or 6 shall be borne by the
participating sellers in proportion to the number of shares sold
by each, or by such participating sellers other than the Company
(except to the extent the Company shall be a seller) as they may
agree.
9. Indemnification and Contribution. (a) In the
event of a registration of any of the Restricted Stock under the
Securities Act pursuant to Sections 4, 5 or 6, the Company will
indemnify and hold harmless each seller of such Restricted Stock
thereunder, each underwriter of such Restricted Stock thereunder
and each other person, if any, who controls such seller or
underwriter within the meaning of the Securities Act, against any
losses, claims, damages or liabilities, joint or several, to
which such seller, underwriter or controlling person may become
subject under the Securities Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in any
registration statement under which such Restricted Stock was
registered under the Securities Act pursuant to Sections 4, 5 or
6, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereof, or arise out of
or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will
reimburse each such seller, each such underwriter and each such
controlling person for any legal or other expenses reasonably
incurred by them in connection with investigating or defending
any such loss, claim, damage, liability or action, provided,
however, that the Company will not be liable in any such case if
and to the extent that any such loss, claim, damage or liability
arises out of or is based upon an untrue statement or omission so
made in conformity with information furnished by any such seller,
any such underwriter or any such controlling person in writing
specifically for use in such registration statement or
prospectus.
(b) In the event of a registration of any of the
Restricted Stock under the Securities Act pursuant to Sections 4,
5 or 6, each seller of such Restricted Stock thereunder,
severally and not jointly, will indemnify and hold harmless the
Company, each person, if any, who controls the Company within the
meaning of the Securities Act, each officer of the Company who
signs the registration statement, each director of the Company,
each underwriter and each person who controls any underwriter
within the meaning of the Securities Act, against all losses,
claims, damages or liabilities, joint or several, to which the
Company or such officer, director, underwriter or controlling
person may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any
untrue statement of any material fact contained in the
registration statement under which such Restricted Stock was
registered under the Securities Act pursuant to Sections 4, 5 or
6, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereof, or arise out of
or are based upon the omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse the Company and each
such officer, director, underwriter and controlling person for
any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim,
damage, liability or action, provided, however, that such seller
will be liable hereunder in any such case if and only to the
extent that any such loss, claim, damage or liability arises out
of or is based upon an untrue statement or omission made in
reliance upon and in conformity with information pertaining to
such seller, as such, furnished in writing to the Company by such
seller specifically for use in such registration statement or
prospectus, and provided, further, however, that the liability of
each seller hereunder shall be limited to the proportion of any
such loss, claim, damage, liability or expense which is equal to
the proportion that the public offering price of the shares sold
by such seller under such registration statement bears to the
total public offering price of all securities sold thereunder,
but not in any event to exceed the proceeds received by such
seller from the sale of Restricted Stock covered by such
registration statement.
(c) Promptly after receipt by an indemnified party
hereunder of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be
made against the indemnifying party hereunder, notify the
indemnifying party in writing thereof, but the omission so to
notify the indemnifying party shall not relieve it from any
liability which it may have to such indemnified party other than
under this Section 9 and shall only relieve it from any liability
which it may have to such indemnified party under this Section 9
if and to the extent the indemnifying party is prejudiced by such
omission. In case any such action shall be brought against any
indemnified party and it shall notify the indemnifying party of
the commencement thereof, the indemnifying party shall be
entitled to participate in and, to the extent it shall wish, to
assume and undertake the defense thereof with counsel
satisfactory to such indemnified party, and, after notice from
the indemnifying party to such indemnified party of its election
so to assume and undertake the defense thereof, the indemnifying
party shall not be liable to such indemnified party under this
Section 9 for any legal expenses subsequently incurred by such
indemnified party in connection with the defense thereof other
than reasonable costs of investigation and of liaison with
counsel so selected, provided, however, that, if the defendants
in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have
reasonably concluded that there may be reasonable defenses
available to it which are different from or additional to those
available to the indemnifying party or if the interests of the
indemnified party reasonably may be deemed to conflict with the
interests of the indemnifying party, the indemnified party shall
have the right to select a separate counsel and to assume such
legal defenses and otherwise to participate in the defense of
such action, with the expenses and fees of such separate counsel
and other expenses related to such participation to be reimbursed
by the indemnifying party as incurred.
(d) In order to provide for just and equitable
contribution to joint liability under the Securities Act in any
case in which either (i) any holder of Restricted Stock
exercising rights under this Agreement, or any controlling person
of any such holder, makes a claim for indemnification pursuant to
this Section 9 but it is judicially determined (by the entry of a
final judgment or decree by a court of competent jurisdiction and
the expiration of time to appeal or the denial of the last right
of appeal) that such indemnification may not be enforced in such
case notwithstanding the fact that this Section 9 provides for
indemnification in such case or (ii) contribution under the
Securities Act may be required on the part of any such selling
holder or any such controlling person in circumstances for which
indemnification is provided under this Section 9; then, and in
each such case, the Company and such holder will contribute to
the aggregate losses, claims, damages or liabilities to which
they may be subject (after contribution from others) in such
proportion so that such holder is responsible for the portion
represented by the percentage that the public offering price of
its Restricted Stock offered by the registration statement bears
to the public offering price of all securities offered by such
registration statement, and the Company is responsible for the
remaining portion; provided, however, that, in any such case,
(A) no such holder will be required to contribute any amount in
excess of the public offering price of all such Restricted Stock
offered by it pursuant to such registration statement; and (B) no
person or entity guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) will be
entitled to contribution from any person or entity who was not
guilty of such fraudulent misrepresentation.
10. Changes in Common Stock or Preferred Stock. If,
and as often as, there is any change in the Common Stock or the
Preferred Stock by way of a stock split, stock dividend,
combination or reclassification, or through a merger,
consolidation, reorganization or recapitalization, or by any
other means, appropriate adjustment shall be made in the
provisions hereof so that the rights and privileges granted
hereby shall continue with respect to the Common Stock or the
Preferred Stock as so changed.
11. Rule 144 Reporting. With a view to making
available the benefits of certain rules and regulations of the
Commission which may at any time permit the sale of the
Restricted Stock to the public without registration, at all times
after 90 days after any registration statement covering a public
offering of securities of the Company under the Securities Act
shall have become effective, the Company agrees to:
(a) make and keep public information available, as
those terms are understood and defined in Rule 144 under the
Securities Act;
(b) use its best efforts to file with the Commission in
a timely manner all reports and other documents required of the
Company under the Securities Act and the Exchange Act; and
(c) furnish to each holder of Restricted Stock
forthwith upon request a written statement by the Company as to
its compliance with the reporting requirements of such Rule 144
and of the Securities Act and the Exchange Act, a copy of the
most recent annual or quarterly report of the Company, and such
other reports and documents so filed by the Company as such
holder may reasonably request in availing itself of any rule or
regulation of the Commission allowing such holder to sell any
Restricted Stock without registration.
12. Representations and Warranties of the Company. The
Company represents and warrants to you as follows:
(a) The execution, delivery and performance of this
Agreement by the Company have been duly authorized by all
requisite corporate action and will not violate any provision of
law, any order of any court or other agency of government, the
Charter or By-laws of the Company or any provision of any
indenture, agreement or other instrument to which it or any or
its properties or assets is bound, conflict with, result in a
breach of or constitute (with due notice or lapse of time or
both) a default under any such indenture, agreement or other
instrument or result in the creation or imposition of any lien,
charge or encumbrance of any nature whatsoever upon any of the
properties or assets of the Company.
(b) This Agreement has been duly executed and delivered
by the Company and constitutes a valid and binding obligation of
the Company, enforceable in accordance with its terms.
13. Miscellaneous.
(a) All covenants and agreements contained in this
Agreement by or on behalf of any of the parties hereto shall bind
and inure to the benefit of the respective successors and assigns
of the parties hereto (including without limitation transferees
of any Preferred Shares or Restricted Stock), whether so
expressed or not. Each Purchaser hereunder, and each successor
or assignee thereof, agrees to send the Company a notice of any
transfer of Restricted Stock by it promptly following such
transfer.
(b) All notices, requests, consents and other
communications hereunder shall be in writing and shall be
delivered in person, mailed by certified or registered mail,
return receipt requested, addressed as follows:
(i) if to the Company or any other party hereto,
at the address of such party set forth in the Purchase
Agreement;
(ii) if to any subsequent holder of Preferred
Shares or Restricted Stock, to it at such address as may have
been furnished to the Company in writing by such holder;
or, in any case, at such other address or addresses as shall have
been furnished in writing to the Company (in the case of a holder
of Preferred Shares or Restricted Stock) or to the holders of
Preferred Shares or Restricted Stock (in the case of the Company)
in accordance with the provisions of this paragraph.
(c) This Agreement shall be governed by and construed
in accordance with the laws of the State of New York.
(d) This Agreement may not be amended or modified, and
no provision hereof may be waived, without the written consent of
the Company and the holders of at least sixty-seven percent (67%)
of the outstanding shares of Restricted Stock.
(e) This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
(f) The obligations of the Company to register shares
of Restricted Stock under Sections 4, 5 or 6 shall terminate on
the tenth anniversary of the date of this Agreement.
(g) If requested in writing by the underwriters for the
initial underwritten public offering of securities of the
Company, each holder of Restricted Stock who is a party to this
Agreement and each assignee of the rights of such holder under
this Agreement shall agree not to sell publicly any shares of
Restricted Stock or any other shares of Common Stock (other than
shares of Restricted Stock or other shares of Common Stock being
registered in such offering), without the consent of such
underwriters, for a period of not more than 120 days following
the effective date of the registration statement relating to such
offering; provided, however, that all persons entitled to
registration rights with respect to shares of Common Stock who
are not parties to this Agreement, all other persons selling
shares of Common Stock in such offering, all persons holding in
excess of 1% of the capital stock of the Company on a fully
diluted basis and all executive officers and directors of the
Company shall also have agreed not to sell publicly their Common
Stock under the circumstances and pursuant to the terms set forth
in this Section 13(g).
(h) Notwithstanding the provisions of Section 7(a), the
Company's obligation to file a registration statement, or cause
such registration statement to become and remain effective, shall
be suspended at the Company's option upon notice to the holders
of rights under this Agreement for a period not to exceed 90 days
in any 24-month period if there exists at the time material non-
public information relating to the Company which, in the
reasonable opinion of the Company, should not be disclosed.
(i) The Company shall not grant to any third party any
registration rights more favorable than any of those contained
herein, so long as any of the registration rights under this
Agreement remains in effect.
(j) If any provision of this Agreement shall be held to
be illegal, invalid or unenforceable, such illegality, invalidity
or unenforceability shall attach only to such provision and shall
not in any manner affect or render illegal, invalid or
unenforceable any other provision of this Agreement, and this
Agreement shall be carried out as if any such illegal, invalid or
unenforceable provision were not contained herein.
Please indicate your acceptance of the foregoing by signing
and returning the enclosed counterpart of this letter, whereupon
this Agreement shall be a binding agreement between the Company
and you.
Very truly yours,
METSCAN, INC.
By: /s/George Georgiades
Title: President
AGREED TO AND ACCEPTED as of the date
first above written.
Purchasers named in Schedule I to the
Purchase Agreement:
NEW YORK BUSINESS VENTURE
PARTNERSHIP
By: NEW YORK VENTURE ASSOCIATES, L.P.,
General Partner
By: /s/James J. O'Neill
For the Managing Partner
AGREED TO AND ACCEPTED as of the date
first above written.
Purchasers named in Schedule I to the
Purchase Agreement:
/s/Jess L. Besler
Jess L. Besler
AGREED TO AND ACCEPTED as of the date
first above written.
Purchasers named in Schedule I to the
Purchase Agreement:
/s/Scott T. Jones
Scott T. Jones
AGREED TO AND ACCEPTED as of the date
first above written.
Purchasers named in Schedule I to the
Purchase Agreement:
/s/Peter A. Fried
Peter A. Fried
AGREED TO AND ACCEPTED as of the date
first above written.
Purchasers named in Schedule I to the
Purchase Agreement:
/s/James J. O'Neill
James J. O'Neill
AGREED TO AND ACCEPTED as of the date
first above written.
Purchasers named in Schedule I to the
Purchase Agreement:
/s/Sherry Croasdale
Sherry Croasdale
AGREED TO AND ACCEPTED as of the date
first above written.
Purchasers named in Schedule I to the
Purchase Agreement:
ENERTEK PARTNERS, L.P.
By: Scientific Advances, Inc.
General Partner
By: /s/Paul F. Purcell
Paul F. Purcell
Vice President
AGREED TO AND ACCEPTED as of the date
first above written.
Purchasers named in Schedule I to the
Purchase Agreement:
WILMINGTON SECURITIES, INC.
By: /s/Darlene Clarke
Title: Vice President
AGREED TO AND ACCEPTED as of the date
first above written.
Purchasers named in Schedule I to the
Purchase Agreement:
EQUITABLE RESOURCES ENERGY COMPANY
By: /s/Jeremiah J. Ayres
Title: Senior Vice President
AGREED TO AND ACCEPTED as of the date
first above written.
Purchasers named in Schedule I to the
Purchase Agreement:
CU GAS, a division of Canadian Utilities
Limited
By: /s/Allan Scott
Title: Vice President Finance & Planning
AGREED TO AND ACCEPTED as of the date
first above written.
Purchasers named in Schedule I to the
Purchase Agreement:
ENEROP CORPORATION
By: /s/D. J. Seeley
Title: Director
EXHIBIT B-17
EXECUTION COPY
EXHIBIT B
SHAREHOLDERS' AGREEMENT
SHAREHOLDERS AGREEMENT dated as of September 16, 1993 among
METSCAN, INC., a New York corporation (the "Company"), and those
persons whose names and addresses are set forth on Schedule I
attached hereto (individually a "Shareholder" and collectively
the "Shareholders").
WHEREAS, each of the Shareholders presently owns the number
of shares of Common Stock, Class A Convertible Preferred Stock
and Class B Convertible Preferred Stock of the Company set forth
on Schedule I attached hereto; and
WHEREAS, the parties to this Agreement desire to impose
certain restrictions and obligations on themselves and on the
Stock (as defined below) owned by the Shareholders and to provide
for an arrangement governing certain dispositions of such Stock.
NOW, THEREFORE, the parties hereto hereby agree as follows:
SECTION 1. Definitions. As used herein, the following terms
shall have the following respective meanings:
(a) Eligible Shareholder shall mean each Shareholder,
except an Option Shareholder.
(b) Event of Option shall mean the occurrence of one or
more of the following events:
(i) a Shareholder shall be declared bankrupt; file a
voluntary petition under any bankruptcy or insolvency law, or
become subject to an involuntary petition under any bankruptcy
or insolvency law which petition is not dismissed within
thirty (30) days of its date; petition for the appointment of
a receiver or assignment of his shares of Stock for the
benefit of creditors, or become subject to such a petition or
assignment which petition is not dismissed within thirty (30)
days of its date;
(ii) a writ of attachment or levy or other court order
shall be entered which shall prevent a Shareholder from
exercising his voting and other rights with respect to any
shares of Stock;
(iii) a Shareholder shall sell or transfer any shares
of Stock in violation of the terms of this Agreement;
(iv) a Shareholder shall be subject to a divorce,
separation proceeding or settlement agreement pursuant to
which shares of Stock are to be acquired by or transferred,
directly or indirectly, to the spouse of such Shareholder; or
(v) a Shareholder who is currently employed in any
capacity by the Company or any of its subsidiaries shall for
any reason, including, without limitation, death, disability
or involuntary removal with or without cause, cease to be
employed in any capacity by the Company or any of its
subsidiaries.
An Event of Option shall be deemed to be continuing until the
procedures set forth in Section 4 hereof with respect to the
shares of Stock affected thereby have been exhausted.
(c) Fair Value Per Share shall mean, as of the date of
determination, the fair value of each share of Stock determined in
good faith by the Board of Directors of the Company, except as
otherwise determined pursuant to this Section 1(c). The Company
shall promptly notify the Option Shareholder to whom the
applicable Event of Option has occurred, of such determination.
If the Option Shareholder to whom the Event of Option has occurred
objects in writing to the determination within ten (10) days of
his receipt of notice of such determination pursuant to the
preceding sentence, then such Fair Value Per Share shall be
determined by an independent appraiser selected by the Company.
(d) Intended Offeree shall have the meaning attributable
to it in Section 3 of this Agreement.
(e) Notice of Acceptance shall mean the written notice
delivered pursuant to Section 3 hereof by the Company and/or one
or more Eligible Shareholders, as the case may be, accepting the
offer of an Option Shareholder to sell certain shares of Stock at
the purchase price and on the terms specified in such offer.
(f) Notice of Election to Purchase shall mean the
written notice delivered pursuant to Sections 4(a) and/or 4(b) of
this Agreement by the Company and/or one or more Eligible
Shareholders, as the case may be, exercising the option to
purchase certain shares of Stock as to which an Event of Option
has occurred, at the Fair Value Per Share.
(g) Notice of Intention to Sell shall mean the written
notice delivered pursuant to Section 3 hereof by an Option
Shareholder to the Company and/or the Eligible Shareholders, as
the case may be, evidencing such Option Shareholder's intent to
sell shares of Stock and offering such shares of Stock at the
purchase price and on the terms specified by such Option
Shareholder in such notice.
(h) Option Shareholder shall mean any Shareholder
proposing to Sell his Stock, which has delivered a Notice of
Intention to Sell pursuant to Section 3 hereof, or any Shareholder
as to which an Event of Option has occurred, and in each case, as
appropriate, his heirs, representatives or assigns.
(i) Option Stock shall have that meaning attributable to
it in Section 4(a) of this Agreement.
(j) Prohibited Transferee shall mean any individual,
corporation, firm or other legal entity receiving or holding any
shares of Stock, directly or indirectly, as the result of the
occurrence of an Event of Option, except pursuant to the terms of
this Agreement.
(k) Proportionate Percentage shall mean the pro rata
percentage of the number of shares of Stock being offered by an
Option Shareholder or subject to an Event of Option, which each
Eligible Shareholder shall be entitled to purchase. Such pro rata
percentage, as to each Eligible Shareholder, shall be the
percentage figure which expresses the ratio between the number of
shares of Common Stock owned by such Eligible Shareholder and the
aggregate number of shares of Common Stock owned by all Eligible
Shareholders (treating each Eligible Shareholder, for purposes of
such computation, as the holder of the number of shares of Common
Stock which would be issuable to such Eligible Shareholder upon
conversion, exercise and exchange of all securities (including but
not limited to the Preferred Shares) held by such Eligible
Shareholder on the date such offer is made, that are convertible,
exercisable or exchangeable into or for (whether directly or
indirectly) shares of Common Stock and assuming the like
conversion, exercise and exchange of all such other securities
held by other persons).
(l) Sell, as to any Stock, shall mean to sell, or in any
other way, directly or indirectly, transfer, assign, pledge,
hypothecate, mortgage, distribute, encumber or otherwise dispose
of all or any part of such Stock either voluntarily or
involuntarily.
(m) Shareholders shall have the meaning assigned thereto
in the Recitals of this Agreement and shall include any other
person who becomes a party hereto as contemplated by Sections
2(b), 2(c), 3(e) and 13 hereof.
(n) Stock shall mean (1) the presently issued and
outstanding shares of Common Stock, $.001 par value, Class A
Convertible Preferred Stock, $4.00 par value, and Class B
Convertible Preferred Stock, $.01 par value, of the Company, (2)
any shares of capital stock of the Company into which such shares
may be converted or for which they may be exchanged and (3) any
additional shares of Common Stock, Class A Convertible Preferred
Stock and Class B Convertible Preferred Stock hereafter issued and
outstanding.
SECTION 2. General Limitations on Sales of Stock. Each
Shareholder hereby agrees that he shall not at any time during the
term of this Agreement Sell any Stock except:
(a) by sale in accordance with Sections 3 or 4 hereof;
(b) by pledge which creates a mere security interest in
the Stock, provided that the pledgee thereof is an individual and
shall have agreed in writing in advance to be bound by and comply
with all provisions of this Agreement to the same extent as if he
were a Shareholder;
(c) by gift to any member of his immediate family or to
any trust for the benefit of any such immediate family member or
the Shareholder, provided that any such transferee shall have
agreed in writing in advance to be bound by and comply with all
provisions of this Agreement to the same extent as if such
transferee were a Shareholder; or
(d) by transfer to a person that, directly or indirectly
through one or more intermediaries, controls or is controlled by,
or is under common control with, the person specified, provided
that any such transferee shall have agreed in writing in advance
to be bound by and comply with all provisions of this Agreement to
the same extent as if such transferee were a Shareholder and
provided further that such transfer does not violate any
applicable state and federal securities laws; or
(e) by distribution to one or more general or limited
partners of the Shareholder (in the case of a Shareholder that is
a partnership), provided that such distribution does not violate
any applicable state and federal securities laws; or
(f) by sale as part of a public offering of the
Company's Stock, which offering results in the termination of this
Agreement pursuant to Section 8 hereof.
SECTION 3. Right of First Refusal on Sale of Stock to Third
Parties. Except as otherwise expressly provided herein, each
Shareholder hereby agrees that he shall not Sell any Stock except
for cash or cash equivalents pursuant to an unconditional bona
fide written offer from a third party (the "Intended Offeree"),
and then only in accordance with the following procedures:
(a) Right of the Company. Such Option Shareholder shall
first deliver to the Company a written Notice of Intention to
Sell, naming the bona fide Intended Offeree and offering all or
any part of the Stock intended to be sold at the purchase price
and on the terms identical to those specified in the bona fide
written offer from the Intended Offeree. The offer set forth in
the written Notice of Intention to Sell shall be irrevocable for a
period of twenty (20) days after delivery thereof, and the Company
shall have the assignable right and option for such twenty (20)
day period to accept all or any portion of the shares of Stock so
offered at the purchase price and on the terms stated therein.
Such acceptance shall be made by delivering a written Notice of
Acceptance to the Option Shareholder within said twenty (20) day
period. If the Company or its assignee fails to accept the offer
to purchase within such twenty (20) period, or accepts the offer
by delivering a written Notice of Acceptance with respect to some
but not all of the shares of Stock so offered, then the Option
Shareholder shall deliver to each Eligible Shareholder a written
Notice of Intention to Sell, naming the bona fide Intended Offeree
and offering the remaining shares of Stock to be sold by the
Option Shareholder at the same purchase price and on the same
terms as specified in the written Notice of Intention to Sell
first delivered to the Company.
(b) Right of the Eligible Shareholders. Upon receipt of
the written Notice of Intention to Sell from the Option
Shareholder pursuant to Section 3(a), each Eligible Shareholder
shall have the right and option to accept (on a pro rata basis)
from such Option Shareholder all or any portion of the remaining
shares of Stock at the purchase price and on the terms stated
therein. The offer set forth in the written Notice of Intention
to Sell shall be irrevocable for twenty (20) days after delivery
thereof. The offer may be accepted within such twenty (20) day
period by transmitting a written Notice of Acceptance of the offer
with respect to all or any portion of such Eligible Shareholder's
Proportionate Percentage of such remaining shares of Stock to the
Company and to such Option Shareholder. Each Eligible Shareholder
who is accepting the offer with respect to his full Proportionate
Percentage hereunder may also specify, simultaneously with the
acceptance of such offer, that he is accepting, in addition to his
Proportionate Percentage, all or any portion of the remaining
shares of Stock which other Eligible Shareholders do not accept;
provided, however, that if such acceptances by all Eligible
Shareholders are for a number of shares of Stock exceeding the
number of remaining shares of Stock available for sale pursuant to
the written Notice of Intention to Sell, then each Eligible
Shareholder accepting more than his full Proportionate Percentage
shall be entitled to purchase that number of such remaining shares
of Stock which bears the same ratio to such remaining shares of
Stock as each such Eligible Shareholder's holdings of shares of
Common Stock bear to all the holdings of shares of Common Stock of
all Eligible Shareholders accepting more than their full
Proportionate Percentage (treating each Eligible Shareholder, for
purposes of such computation, as the holder of the number of
shares of Common Stock which would be issuable to such Eligible
Shareholder upon conversion, exercise and exchange of all
securities (including but not limited to the Preferred Shares)
held by such Eligible Shareholder on the date such offer is made,
that are convertible, exercisable or exchangeable into or for
(whether directly or indirectly) shares of Common Stock and
assuming the like conversion, exercise and exchange of all such
other securities held by other persons).
(c) Sales. Sales of Stock under the terms of Sections
3(a) and 3(b) shall be made at the offices of the Company on a
mutually acceptable business day within thirty (30) days after the
expiration of the last of the aforesaid periods. Delivery of any
certificates or other instruments evidencing such Stock duly
endorsed for transfer to the Company, its assignee and/or the
Eligible Shareholders, as the case may be, shall be made on such
date against payment of the purchase price therefor.
(d) Remaining Shares. If effective acceptance shall not
be received pursuant to Sections 3(a) and 3(b) above with respect
to all shares of Stock offered for sale pursuant to the Notice of
Intention to Sell, then the Option Shareholder may sell to the
Intended Offeree all or any part of the remaining shares of Stock
so offered for sale at a price not less than the price, and on
terms not more favorable to the purchaser thereof, than the terms
stated in the Notice of Intention to Sell, at any time within
twenty (20) days after the expiration of the last of the offers
required by Sections 3(a) and 3(b) above. In the event the
remaining shares of Stock are not sold by the Option Shareholder
during such twenty (20) day period, the right of the Option
Shareholder to sell such remaining shares of Stock shall expire
and the obligations of this Section 3 shall be reinstated.
(e) Shareholder Status. Anything contained in this
Section 3 to the contrary notwithstanding, any purchaser of Stock
pursuant to this Section 3 who is not a Shareholder shall agree in
writing in advance to be bound by and comply with all provisions
of this Agreement and shall be deemed to be a Shareholder for all
purposes of this Agreement. The name, address and number of
shares of Stock acquired by such purchaser shall be added to
Schedule I attached hereto.
(f) Competitors. Each Shareholder covenants and agrees
not to offer or sell any shares of Stock to any person which, in
the reasonable opinion of the Board of Directors of the Company,
is a competitor or potential competitor of the Company.
SECTION 4. Event of Option.
(a) Option of the Company. If an Event of Option shall
occur, the Option Shareholder as to which such Event of Option has
occurred shall promptly notify the Company in writing of the
occurrence of such Event of Option. The Company shall, upon
receipt of such written notice from the Option Shareholder, or, if
earlier, upon actually receiving notice of the occurrence of an
Event of Option, promptly commence determination of the Fair Value
Per Share in accordance with Section 1(d). Upon the completion of
such determination in accordance with Section 1(d), the Company
shall have the right and option to purchase from such Option
Shareholder or the Prohibited Transferee, as the case may be, for
cash, and at the Fair Value Per Share, all or any portion of the
shares of Stock as to which such Event of Option has occurred (the
"Option Stock"). Such option shall be irrevocable for thirty (30)
days from the date of the final determination of the Fair Value
Per Share. The option may be exercised within such thirty (30)
day period by transmitting a written Notice of Election to
Purchase all or any portion of the Option Stock to such Option
Shareholder or the Prohibited Transferee, as the case may be. If
the option is not exercised by the Company with respect to all of
the shares of Option Stock within such thirty (30) day period,
then the Company shall deliver to each Eligible Shareholder a
notice stating the occurrence of an Event of Option and the
determination of the Fair Value Per Share.
(b) Option of the Eligible Shareholders. Upon receipt
of the notice from the Company stating the occurrence of an Event
of Option and the determination of the Fair Value Per Share
pursuant to Section 4(a), each Eligible Shareholder shall have the
right and option to purchase (on a pro rata basis) from such
Option Shareholder or the Prohibited Transferee, as the case may
be, for cash, and at the Fair Value Per Share, all or any portion
of the remaining shares of Option Stock. Such option shall be
irrevocable for thirty (30) days from the date of delivery of such
notice to the Eligible Shareholders. The option may be exercised
within such thirty (30) day period by transmitting a written
Notice of Election to Purchase all or any portion of such Eligible
Shareholder's Proportionate Percentage of such remaining shares of
Option Stock to the Company and to such Option Shareholder or the
Prohibited Transferee, as the case may be. Each Eligible
Shareholder who is exercising his option to purchase his full
Proportionate Percentage hereunder may also specify,
simultaneously with the exercise of the option, that he is
electing, in addition to his Proportionate Percentage, to purchase
all or any portion of the remaining shares of Option Stock which
other Eligible Shareholders do not elect to purchase; provided,
however, that if such elections requested by all Eligible
Shareholders exceed the number of remaining shares of Option Stock
available for purchase pursuant to such elections, then each
Eligible Shareholder electing to purchase additional shares shall
be entitled to purchase that number of such remaining shares of
Option Stock which bears the same ratio to such remaining shares
of Option Stock as each such Eligible Shareholder's holdings of
shares of Common Stock bear to all the holdings of shares of
Common Stock of all Eligible Shareholders exercising such
additional elections (treating each Eligible Shareholder, for
purposes of such computation, as the holder of the number of
shares of Common Stock which would be issuable to such Eligible
Shareholder upon conversion, exercise and exchange of all
securities (including but not limited to the Preferred Shares)
held by such Eligible Shareholder on the date such offer is made,
that are convertible, exercisable or exchangeable into or for
(whether directly or indirectly) shares of Common Stock and
assuming the like conversion, exercise and exchange of all such
other securities held by other persons).
(c) Sales. Sales of shares of Option Stock effected
under the terms of Sections 4(a) or 4(b) hereof shall be made at
the offices of the Company on a mutually acceptable business day
within thirty (30) days after the first to occur of (i) the
expiration of the last of the thirty (30) day option periods
required by Sections 4(a) and 4(b), or (ii) the receipt of written
Notices of Election to Purchase all of the shares of Option Stock.
Delivery of certificates or other instruments evidencing such
shares of Stock duly endorsed for transfer shall be made on such
date against payment of the purchase price therefor.
SECTION 5. Failure to Deliver Stock. If an Option
Shareholder becomes obligated to sell Stock under this Agreement
and fails to deliver such Stock in accordance with the terms of
this Agreement, the Company, its assignee and/or any Eligible
Shareholder, as the case may be, may, at its option and in
addition to all other remedies it or he may have, send to the
Option Shareholder the purchase price for such Stock as is herein
specified. Thereupon, the Company, upon written notice to the
applicable Option Shareholder (a) shall cancel on its books the
certificate or certificates representing the Stock to be sold, and
(b) shall issue, in lieu thereof, in the name of the Company, its
assignee and/or such Eligible Shareholder(s), as the case may be,
a new certificate or certificates representing such Stock, and
thereupon all of the Option Shareholder's rights in and to such
Stock shall terminate.
SECTION 6. Voting.
(a) Each Shareholder expressly agrees to vote shares of
his or its Stock to elect George Georgiades, as long as he remains
Chief Executive Officer of the Company, as the director elected
jointly by the holders of the Common Stock, the Class A
Convertible Preferred Stock and the Class B Convertible Preferred
Stock, voting together as a single class.
(b) Each Shareholder expressly agrees to vote his or its
Stock in favor of a proposal by the Company (i) to increase the
number of authorized shares of the Class A Convertible Preferred
Stock or Class B Convertible Preferred Stock, as the case may be,
to such number as is necessary to pay Stock in lieu of cash
dividends to Shareholders who have properly elected such manner of
payment, and (ii) to decrease the number of authorized shares of
the Class B Convertible Preferred Stock to the number actually
sold if an aggregate of 3,762,107 Preferred Shares are not sold by
the Company under the terms of the Class B Convertible Preferred
Stock Purchase Agreement on or before October 31, 1993.
SECTION 7. Specific Enforcement. Each Shareholder expressly
agrees that the Company and the other Shareholders will be
irreparably damaged if this Agreement is not specifically
enforced. Upon a breach or threatened breach of the terms,
covenants and/or conditions of this Agreement by a Shareholder or
the Company, the non-breaching parties shall, in addition to all
other remedies, each be entitled to a temporary or permanent
injunction, without showing any actual damage, and/or a decree for
specific performance, in accordance with the provisions hereof.
SECTION 8. Legend on Stock Certificates. Each certificate
representing the Stock shall bear the following legend, until such
time as the Stock represented thereby is no longer subject to the
provisions hereof:
"The shares of stock represented by this certificate are
subject to, transferable, and may be voted, only in
accordance with the terms and conditions of an Agreement
entered into effective as of September __, 1993, by and
between Metscan, Inc. and its Shareholders, a copy of
which is on file in the office of the Secretary of the
Corporation."
SECTION 9. Duration of Agreement. This Agreement shall
terminate on the earlier of (a) the effective date of a fully
underwritten public offering by the Company of its Common Stock
pursuant to an effective registration under the Securities Act of
1933, as amended, or (b) termination pursuant to Section 12 of
this Agreement.
SECTION 10. Severability; Governing Law. If any provision of
this Agreement shall be determined to be illegal and unenforceable
by any court of law, the remaining provisions shall be severable
and enforceable in accordance with their terms. This Agreement
shall be governed by, and construed in accordance with, the laws
of the State of New York.
SECTION 11. Benefits of Agreement. This Agreement shall be
binding upon and inure to the benefit of the parties and their
respective successors and assigns, legal representatives and
heirs.
SECTION 12. Notices. All notices or advice to be given or
otherwise made to any party to this Agreement shall be deemed to
be sufficient if contained in a written instrument, delivered in
person or by first class registered or certified mail, postage
prepaid, addressed to such party at the address set forth below or
at such other address as may hereafter be designated in writing by
the addressee to the addressor:
If to the Company: George Georgiades, President
Metscan, Inc.
1540 Rochester St. (Rt. 15A)
Lima, New York 14485
With a copy to: Robert Brown, Esq.
Boylan, Brown, Code, Fowler &
Wilson
900 Midtown Tower
Rochester, NY 14604
If to a Shareholder: At his respective address as set
forth on Schedule I attached
hereto.
With a copy to: Katherine M. Todd, Esq.
Testa, Hurwitz & Thibeault
Exchange Place
53 State Street
Boston, MA 02109
SECTION 13. Modification. Except as otherwise provided
herein, neither this Agreement nor any provision hereof can be
modified, changed, discharged or terminated except by an
agreement in writing signed by the Company and the holders of
66-2/3% of the voting power of all shares of Stock then subject
to this Agreement.
SECTION 14. Additional Parties. Additional persons may
become parties to this Agreement and may become Shareholders
hereunder by a writing signed by the proposed new parties and the
Company, and each Shareholder hereby agrees to be bound by the
terms of this Agreement as it shall extend to, and as applied to,
such additional parties.
SECTION 15. Waiver. No waiver of any breach or default
hereunder shall be considered valid unless in writing, and no
such waiver shall be deemed a waiver of any subsequent breach or
default of the same or similar nature.
SECTION 16. Captions. The captions herein are inserted for
convenience only and shall not define, limit, extend or describe
the scope of this Agreement or affect the construction hereof.
SECTION 17. Nouns and Pronouns. Whenever the context may
require, any pronouns used herein shall include the corresponding
masculine, feminine or neuter forms, and the singular form of
names and pronouns shall include the plural and vice-versa.
SECTION 18. Merger Provision. This Agreement constitutes
the entire agreement among the parties pertaining to the subject
matter hereof and supersedes all prior and contemporaneous
agreements and understandings of the parties in connection
therewith.
SECTION 19. Counterparts. This Agreement may be executed in
one or more counterparts, each of which shall be deemed to be an
original, but all of which taken together shall constitute one
and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the day, month and year first above written.
METSCAN, INC.
By: /s/George Georgiades
Title: President
SHAREHOLDERS:
NEW YORK
BUSINESS VENTURE
PARTNERSHIP
By: NEW YORK VENTURE
ASSOCIATES L.P.,
General Partner
By: /s/James J. O'Neill
James J. O'Neill
For the Managing Partner
SHAREHOLDERS:
/s/Jess L. Besler
Jess L. Besler
SHAREHOLDERS:
/s/Scott T. Jones
Scott T. Jones
SHAREHOLDERS:
/s/Peter A. Fried
Peter A. Fried
SHAREHOLDERS:
/s/James J. O'Neill
James J. O'Neill
SHAREHOLDERS:
/s/Sherry Croasdale
Sherry Croasdale
SHAREHOLDERS:
ENERTEK PARTNERS, L.P.
By: Scientific Advances, Inc.
General Partners
By: /s/Paul F. Purcell
Paul F. Purcell
Vice President
SHAREHOLDERS:
WILMINGTON SECURITIES, INC.
By: /s/Darlene Clarke
Title: Vice President
SHAREHOLDERS:
EQUITABLE RESOURCES ENERGY
COMPANY
By: /s/Jeremiah J. Ayres
Title: Senior Vice President
SHAREHOLDERS:
CU GAS, a division of Canadian
Utilities Limited
By: /s/Allan Scott
Title: Vice President Finance &
Planning
SHAREHOLDERS:
ENEROP CORPORATION
By: /s/D. J. Seeley
Title: Director
SHAREHOLDERS:
NATIONAL FUEL GAS COMPANY
By: /s/D. J. Seeley
Title: Senior Vice President
SHAREHOLDERS:
NEWPORT AMERICA
By: /s/Robert W. Owens
Title:
METSCAN, INC.
SCHEDULE I
List of Shareholders
No. of
Class of Shares of
Name and Address Stock Owned Stock Owned
Equitech - division of Common 2,750,000
Equitable Resources Energy Company Class "A", Pfd. 254,500
420 Boulevard of the Allies
Pittsburgh, PA 15219
Attn: Jeremiah J. Ayres
Equitable Resources Energy Company Class "B", Conv. Pfd. 208,333
420 Boulevard of the Allies Class "B", Conv. Pfd.** 200,000
Pittsburgh, PA 15219
Attn: Jeremiah J. Ayres
Enerop Corporation Common 400,000
10 Lafayette Square Class "A", Pfd. 56,500
Buffalo, NY 14203 Class "B", Conv. Pfd.** 29,167
Attn: David Smith
Newport America Corporation Common 240,000
100 Weybosset Street Class "A", Pfd. 9,000
Providence, RI 02903
Attn: Robert W. Owens
Hillman 1984 Ltd. Partnership Common 30,846
Wilmington Trust Center, Suite 1006
Rodney Square North
Wilmington, DE 19801
Attn: Darlene Clarke
(with a copy to Russell Ayres, Esq.)
Wilmington Securities, Inc. Common 586,067
Wilmington Trust Center, Suite 1006 Class "B", Conv. Pfd. 37,500
Rodney Square North
Wilmington, DE 19801
Attn: Darlene Clarke
(with a copy to Russell Ayres, Esq.)
CU GAS - division of Common 1,000,000
Canadian Utilities Limited Class "A", Pfd. 254,500
10035-105th Street Class "B", Pfd.** 83,333
Edmonton, Alberta, CANADA T5J 2V6
Attn: Allan Scott
George Georgiades* Common 221,500
7 Creekside Drive
Honeoye Falls, NY 14472
Donald Eckert* Common 40,000
167 Champlain Way
Manchester, NY 14505
Daniel Fagan* Common 6,500
7288 Dennisport Lane
Victor, New York 14564
Estate of David G. Good Common 1,000
RD #2, 8842 Wesley Road
Holcomb, NY 14469
Thomas Hawks, II Common 61,000
Glen Cottage
RD #1, 6484 Cook's Point Road
Naples, NY 14512
William M. Keenan* Common 5,000
6 Olympus Drive
Macedon, NY 14502
Peter Millar* Common 9,333
375 Parrish Road
Honeoye Falls, NY 14472
Michael O'Brien* Common 68,000
3 Blanford Land
Fairport, NY 14450
Armando Scachetti Common 1,000
21 Bridgewood Drive
Rochester, NY 14612
Robert J. Seymour Common 2,500
849 Curran Road
Shortsville, NY 14584
Leslie Thompson* Common 5,000
1100 Cheese Factory Road
Honeoye Falls, NY 14472
Michael Tyson Common 40,000
78 Misty Pine Road
Fairport, NY 14450
Barbara Keller Common 1,000
6501 Fisher Hill Road
Canandaigua, NY 14424
New York Business Venture Partnership Class "B", Conv. Pfd. 1,250,000
One Rockefeller Plaza
New York, NY 10020
Jess L. Besler Class "B", Conv. Pfd. 125,000
Scott T. Jones Class "B", Conv. Pfd. 105,000
Peter A. Fried Class "B", Conv. Pfd. 20,000
James J. O'Neill Class "B", Conv. Pfd. 16,667
Sherri Croasdale Class "B", Conv. Pfd. 8,333
Enertek Partners, L.P. Class "B", Conv. Pfd. 625,000
601 West Fifth Avenue
Columbus, Ohio 43201
* Metscan, Inc. employee
** These investors have deposited the consideration for their shares in escrow,
pursuant to the terms of an Escrow Agreement, dated September 15, 1993.
EXHIBIT B-18
AGREEMENT
September 16, 1993
The undersigned Metscan, Inc. (the "Company") and certain of its
stockholders hereby confirm their mutual agreement with respect to
the following items. Capitalized terms used in this Agreement,
unless otherwise defined herein, shall have the meaning ascribed to
such terms in the Class B Convertible Preferred Stock Purchase
Agreement of even date (the "Purchase Agreement").
1. The Company and its management will continue to seek
capital as necessary to grow the Company from appropriate
sources including equity investors, development contracts,
strategic partners, and other sources.
2. The Company, including its management and current major
shareholders, are committed to pursue an initial public
offering of common stock of the Company or other liquidity
path by the end of 1995, assuming commercial success.
This Agreement supplements the Purchase Agreement as applicable
between the parties hereto as specifically set forth in this
Agreement. The Purchase Agreement (as supplemented pursuant to the
terms of this Agreement) remains in full force and effect and the
terms of this Agreement shall not be interpreted to restrict or
limit, in any manner, the rights of the parties under the Purchase
Agreement.
[REMAINDER OF PAGE LEFT BLANK INTENTIONALLY]
IN WITNESS WHEREOF, the undersigned parties hve hereunto set
their hands and seals as of the date first written above.
METSCAN, INC.
By: /s/George Georgiades
Title: President
[Corporate Seal]
Attest Individually
/s/Robert By:/s/George Georgiades
Secretary
NEW YORK BUSINESS VENTURE
PARTNERSHIP
By: NEW YORK VENTURE
ASSOCIATES L.P.,
General Partner
By: /s/James J. O'Neill
James J. O'Neill
For the Managing Partner
/s/Jess L. Besler
Jess L. Besler
/s/Scott T. Jones
Scott T. Jones
/s/Peter A. Fried
Peter A. Fried
/s/James J. O'Neill
James J. O'Neill
/s/Sherry Croasdale
Sherry Croasdale
ENERTEK PARTNERS, L.P.
By: Scientific Advances, Inc.
General Partner
By:/s/Paul F. Purcell
Paul F. Purcell
Title: Vice President
WILMINGTON SECURITIES, INC.
By: /s/Darlene Clarke
Title: Vice President
EQUITABLE RESOURCES ENERGY
COMPANY
By: /s/Jeremiah J. Ayres
Title: Senior Vice President
CU GAS, a division of Canadian
Utilities Limited
By: /s/Allan Scott
Title: Vice President Finance &
Planning
ENEROP CORPORATION
By: /s/D. J. Seeley
Title: Director
NEWPORT AMERICA
By: /s/Robert W. Owens
Title:
EXHIBIT B-19
TERMINATION OF SHAREHOLDERS' AGREEMENT
The undersigned hereby agree to terminate, effective as of
September 15, 1993, the Shareholders' Agreement dated May 17,
1989, pursuant to Section 8.1 of that Agreement between the
Shareholders set forth on Schedule A (individually referred to as
"Shareholder" and collectively as "Shareholders"), and Metscan,
Inc. (formerly known as Metscan Acquisition Corp.), a New York
Corporation with its principal office at 1450 Rochester Road,
Lima, New York 14485 (the "Corporation").
IN WITNESS WHEREOF, and intending to be legally bound, the
parties have executed this Agreement and intend that it be
effective as of September 15, 1993.
EQUITABLE RESOURCES ENERGY COMPANY
By: /s/Jeremiah J. Ayres
EQUITECH, a division of EQUITABLE RESOURCES ENERGY
COMPANY
By: /s/Jeremiah J. Ayres
ENEROP CORPORATION
By: /s/D. J. Seeley
NATIONAL FUEL GAS COMPANY
By: /s/D. J. Seeley
NEWPORT AMERICA CORPORATION
By: /s/Robert W. Owens
Vice President & Treasurer
CU GAS, a division of Canadian Utilities Limited
By: /s/Allan Scott
WILMINGTON SECURITIES, INC.
By: /s/Darlene Clarke
HILLMAN 1984 LIMITED PARTNERSHIP
By: Wilmington Securities, Inc.
General Partner
By: /s/Darlene Clarke
/s/George Georgiades
George Georgiades
METSCAN, INC.
By: /s/George Georgiades
EXHIBIT B-20
ESCROW AGREEMENT
This Agreement is made this ____ day of September, 1993, by
and among those Investors set forth in Schedule A (the
"Investors"), METSCAN, INC. (the "Company"), and BOYLAN, BROWN,
CODE, FOWLER & WILSON, 900 Midtown Tower, Rochester, New York
(the "Escrow Agent").
WHEREAS, the Investors have entered into agreements to
purchase Class B Convertible Preferred Shares of the Company as
set forth on the respective Agreement to Purchase Metscan Class B
Convertible Preferred Shares attached hereto (the "Agreements");
and
WHEREAS, the Consummation of the Agreements is contingent on
subsequent events as related therein; and
WHEREAS, the Escrow Agent has agreed to hold the Agreements,
the consideration recited therein, and the certificates for the
shares pending the subsequent events.
NOW, THEREFORE, in consideration of the mutual promises
hereinafter set forth and other good and valuable consideration
had and received by each of the parties hereto, the Investors,
the Company, and the Escrow Agent agree as follows:
1. The Collateral. The Investors have delivered to the Escrow
Agent the Agreements and the consideration for the Shares,
and the Company has delivered to the Escrow Agent the
certificates representing the Shares.
2. Duties of the Escrow Agent.
2.1 The Escrow Agent agrees to hold the Collateral in
safekeeping until delivery of the Collateral is
required under the terms of this Agreement.
2.2 The Escrow Agent agrees to receive any increase in the
Collateral and to hold the same as part of the
Collateral.
2.3 The Escrow Agent agrees to receive any distribution
upon dissolution and liquidation of the issuer of any
Collateral; to surrender such Collateral or any part
thereof in exchange therefor; and to hold the net cash
receipts from any such distribution as part of the
Collateral.
2.4 The Escrow Agent agrees to deliver the Collateral in
accordance with the terms of this Agreement.
3. Delivery of Collateral.
3.1 If, on October 22, 1993, the Escrow Agent has received
notice that Electra Innvotec has made an investment in
the Company which releases the Investors' obligation to
purchase the Shares as provided in the respective
Agreements, then the Escrow Agent shall deliver the
consideration for the shares to the Investors, and the
certificates representing the shares to the Company to
be cancelled. If not, the Escrow Agent shall deliver
the consideration to the Company and the certificates
to the respective Investors.
3.2 If the Escrow Agent receives a written objection to
delivery of the Collateral, it shall so advise all
parties. The Escrow Agent shall continue to hold the
Collateral in escrow until mutually instructed in
writing by the parties hereto as to the disposition of
the Collateral. If, however, the Investors and the
Company are unable to agree as to the disposition of
the Collateral within forty-five (45) days of the
specified delivery date, the Escrow Agent is authorized
to interplead the Collateral into the registry of a
court of competent jurisdiction in Monroe County, New
York and stand fully discharged from further
responsibility under the Escrow Agreement.
3.3. In addition to the foregoing conditions, Escrow Agent
shall not deliver the consideration for the purchase by
Enerop to the Company until it receives notice that
Enerop has received approval from the Securities and
Exchange Commission for its investment. If such
approval is not received by December 31, 1993, Escrow
Agent shall return the consideration to Enerop and the
certificate for shares to the Company.
4. Indemnification of Escrow Agent. The Company agrees to
indemnify the Escrow Agent for any expense or liability it
may incur, including attorneys' fees, regarding the holding
or delivery of the Collateral, or interpleading the
Collateral into court, except to the extent that the expense
and/or liability is incurred as the result of the Escrow
Agent's willful misconduct.
5. Expenses of Escrow Agent. The Company agrees to reimburse
the Escrow Agent for any reasonable expenses it may incur as
a result of holding the Collateral.
6. Miscellaneous Provisions.
6.1 The Escrow Agent shall serve without bond or fee.
6.2 This Agreement shall be construed under the laws of the
State of New York.
6.3 This Agreement may be modified or terminated only by a
writing signed by all parties hereto.
IN WITNESS WHEREOF, this Agreement is signed this ____ day of
September, 1993.
Investors Company
EQUITABLE METSCAN, INC.
By:____________________________ By:/s/George Georgiades
George Georgiades, President
Escrow Agent
ENEROP CORPORATION BOYLAN, BROWN, CODE,
FOWLER & WILSON
By:/s/D. J. Seeley By:/s/Allan S. Lockwood
Alan S. Lockwood
CU GAS
By:_______________________________
WILMINGTON SECURITIES, INC.
By:_______________________________
EXHIBIT F-5
March 18, 1994
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Leidy Hub, Inc. ("Leidy") (formerly Enerop Corporation)
No. 70-7201
Gentlemen:
In connection with Post-Effective Amendment No. 13 to the
Application-Declaration as amended in the above file (the "filing"),
I am of the opinion that (i) Metscan, Inc. is validly organized and
duly existing under the laws of the State of New York, and (ii) in
the event the proposed transactions are consummated in accordance
with the filing and with any Order of the Commission respecting the
filing:
(a) All state laws that I deem applicable to the proposed
transactions will have been complied with;
(b) The securities proposed to be acquired with be
validly issued, fully paid and nonassessable, and the
holders thereof will be entitled to the rights and
privileges appertaining thereto as set forth in the
Metscan, Inc. Restated Certificate of Incorporation,
as amended; and
(c) Leidy will legally acquire the securities proposed to
be acquired; and
(d) The consummation of the proposed transaction will not
violate the legal rights of holders of securities
issued by Leidy or any associate company thereof.
I consent to the use of this opinion as part of said filing.
Very truly yours,
/s/Kyle G. Storie
Kyle G. Storie
EXHIBIT F-5
EXHIBIT G-1
UNITED STATES OF AMERICA
before the
SECURITIES AND EXCHANGE COMMISSION
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
Release No.
___________________________________
In the Matter of
LEIDY HUB, INC.
10 Lafayette Square
Buffalo, New York 14203
(70-7201)
___________________________________
NOTICE OF PROPOSAL BY LEIDY HUB, INC. TO ACQUIRE 29,167 SERIES B
PREFERRED SHARES OF METSCAN, INC.
Leidy Hub, Inc. ("Leidy") (formerly Enerop Corporation), 10
Lafayette Square, Buffalo, New York 14203, a wholly-owned subsidiary
of National Fuel Gas Company ("National"), a registered holding
company, has filed a post-effective amendment under Sections 9(a) and
10 of the Act to the application-declaration which was filed under
Sections 6(a), 7, 9(a), 10 and 12(b) of the Act and Rule 45. A
notice in this matter was last issued by the Commission on July 21,
1991 (HCAR No. 25346).
By orders dated May 1, 1986 and March 18, 1988 (HCAR Nos.
24081 and 24604, respectively), the Commission authorized, in
relevant part: (1) National to loan $200,000 to Metscan, Inc.
("Metscan"), a New York corporation that has developed an electronic
meter reading system ("Metscan System"), and to receive an option to
convert the note ("Note") evidencing the loan into 80,000 shares of
Metscan's preferred stock, at a price of $2,50 per share; (2)
National to assign the Note and option from Metscan to Enerop; (3)
National to provide Enerop $442,500 as a contribution to capital,
which funds Enerop was authorized to invest, together with third
parties, in Metscan Technology Partners ("Partnership"), a New York
partnership formed by Metscan, after which Enerop would own
approximately 9.96% of the Partnership; and (4) the Partnership and
Metscan to be reorganized as a corporation before the end of 1989,
and Enerop to acquire approximately 7.23% of the common stock of the
new corporation.
The March 18, 1988 order contained a reservation of
jurisdiction over this reorganization which was released by order
dated April 27, 1989 (HCAR No. 24874). The reorganization occurred
on May 17, 1989, and the new corporation was called Metscan
Acquisition Corporation ("MAC"). Pursuant to the reorganization, the
Note and Enerop's Partnership interest attributable to the $442,500
investment were converted into 80,000 shares and 177,000 shares of
MAC common stock, respectively, at a conversion rate of $2.50 per
share. MAC subsequently changed its name to Metscan, Inc.
("Metscan"), and the 257,000 shares that Enerop then owned
represented 6.0% of the total shares of Metscan common stock
outstanding, and 5.1% of that total if shares subject to outstanding
warrants and employees' options were included.
By order dated September 7, 1990 (HCAR No. 25143), the
Commission authorized Enerop to acquire an additional 143,000 shares
of Metscan common stock for $357,500 ($2.50 per share), and 39,500
shares of Metscan preferred stock for $158,000 ($4 per share).
Enerop received a fifth order in regard to this file on
July 21, 1991 (HCAR No. 35-25346) authorizing it to purchase 17,000
additional shares of Metscan preferred stock for $68,000 ($4 per
share).
On December 29, 1993, Enerop changed its name to Leidy Hub,
Inc. Leidy now proposes to purchase 29,167 shares of Metscan Series
B Preferred Stock. Upon consummation of this acquisition, Enerop
will own 9.8% of Metscan's Series A Preferred Stock 1% of Metscan's
Series B Preferred Stock and 7.3% of Metscan's common stock. In all,
Leidy will own 5.22% of all the outstanding shares of Metscan stock.
Its total investment in Metscan will then be $1,261,000. Leidy
desires to make this investment as it believes that it will be
prudent and profitable investment. It believes that the Metscan
System is an economical and effective method of reading meters and
furnishing other useful information to utilities. The Metscan System
also enhances meter security, theft detection and consumption
monitoring.
It is stated that no state or federal commission, other
than this Commission, has jurisdiction over the proposed transactions.
The application-declaration, this and prior post-effective
amendments, and any amendments thereto are available for public
inspection through the Commission's Office of Public Reference.
Interested persons wishing to comment or request a hearing should
submit their views in writing by _____________________, to the
Secretary, Securities and Exchange Commission, Washington, D.C.
20549, and serve a copy on the applicant-declaration at the address
specified above. Proof of service (by affidavit or, in the case of
an attorney at law, by certificate) should be filed with the re
Any request for a hearing shall identify specifically the issues of
fact or law that are disputed. A person who so requests will be
notified of any hearing, if ordered, and will receive a copy of any
application-declaration, as filed, and as it may be further amended,
may be granted and permitted to become effective.
EXHIBIT S-5
ENEROP CORPORATION
BALANCE SHEET
AS OF 09-31-93
CURRENT PRIOR YEAR
ASSETS MONTH MONTH
_______ ___________
PROPERTY, PLANT & EQUIPMENT:
GAS PLANT IN SERVICE $3,208 $3,208
CONST. WORK IN PROG 0 0
_________ __________
3,208 3,208
LESS: RESERVE FOR DDA -3,208 -3,208
_________ __________
0 -0
_________ __________
CURRENT ASSETS:
CASH 18,672 91,392
TEMPORARY CASH ITEMS 0 0
NOTES RECEIVABLE 0 0
ACCOUNTS RECEIVABLE 0 0
MATERIALS & SUPPLIES 0 0
PREPAYMENTS 6,063 8,201
_________ __________
CURRENT ASSETS 24,735 99,592
_________ __________
OTHER ASSETS:
OTHER INVESTMENTS 812,593 1,277,593
OTHER DEFERRED DEBIT 1,873 2,040
_________ __________
OTHER ASSETS 814,466 1,279,632
_________ __________
TOTAL ASSETS 839,201 1,379,224
_________ __________
_________ __________
ENEROP CORPORATION
BALANCE SHEET
AS OF 09-30-93
CURRENT PRIOR YEAR
MONTH MONTH
_________ ___________
LIABILITIES & STOCKHOLDERS
EQUITY
CAPITAL STOCK $1 PAR:
AUTHORIZED 4000 SHR $0 $0
ISSUED & OUTSTANDING 4,000 4,000
CAPITAL IN EXCESS 396,000 396,000
PAID-IN-CAPITAL 642,500 642,500
__________ ___________
CAPITAL STOCK $1 PAR $1,042,500 $1,042,500
__________ ___________
BALANCE, OCTOBER 1 -200,439 -222,719
NET INCOME/LOSS (-) -279,577 22,280
DIVIDENDS 0 0
__________ ___________
TOTAL STOCKHOLDERS EQUITY 562,484 842,061
LONG-TERM DEBT:
ADV FROM ASSOC COMP 0 0
__________ ___________
LONG-TERM DEBT $0 $0
__________ ___________
TOTAL CAPITALIZATION 562,484 842,061
__________ ___________
CURRENT & ACCRUED:
NOTES PAYABLE ASSOC 300,000 400,000
ACCOUNTS PAYABLE 858 1,304
FEDERAL INCOME TAXES 24,535 10,785
OTHER ACCRUED TAXES -3 -3
__________ ___________
CURRENT & ACCRUED $325,390 $412,086
__________ ___________
OPERATING RESERVES:
ACCUM DFD INC TAX -48,673 125,077
__________ ___________
OPERATING RESERVES $-48,673 125,077
TOTAL LIABILITIES 276,717 537,163
__________ ___________
TOTAL LIABILITIES & EQUITY 839,201 1,379,224
__________ ___________
__________ ___________
EXHIBIT S-6
<TABLE>
ENEROP CORPORATION
INCOME STATEMENT
AS OF 09-30-93
<CAPTION>
- ---------- CURRENT MONTH -------- -------- YEAR TO DATE -------- -----12 MONTHS ENDED
INCR/(DECR)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR YEAR ACTUAL INCR/(DECR) PRIOR YEAR ACTUAL INCR/(DECR) ACTUAL CURR/PRIOR
__________ _________ ___________ __________ _________ ___________ __________ __________
__________ _________ ___________ __________ _________ ___________ __________ __________
OPERTING REV DEDUCTS:
9 17 8 OPERATIONS EXPENSE 1,224 185 -1,039 185 -1,039
14 14 0 DEPRECIATION 166 166 0 166 0
4,865 -1,190 -6,055 INCOME TAXES-CURRENT 10,773 24,908 14,135 24,908 14,135
0 -173,750 -173,750 PROV FOR DFD INC TAX 0 -173,750 -173,750 -173,750 -173,750
0 2,311 2,311 OTHER TAXES 300 3,911 3,611 3,911 3,611
__________ _________ ___________ __________ _________ ___________ __________ __________
4,888 -172,486 -177,486 12,463 -144,580 -157,043 -144,580 -157,043
__________ _________ ___________ __________ _________ ___________ __________ __________
-4,888 172,598 177,486 OPERATING INCOME/LOSS (-) -12,463 144,580 157,043 144,580 157,043
__________ _________ ___________ __________ _________ ___________ __________ __________
OTHER INCOME:
17,203 -253 -17,456 MISCELLANEOUS 54,051 87,530 33,479 87,530 33,479
__________ _________ ___________ __________ _________ ___________ __________ __________
17,203 -253 -17,456 54,051 87,530 33,479 87,530 33,479
__________ _________ ___________ __________ _________ ___________ __________ __________
12,315 172,345 160,030 GROSS INCOME/LOSS (-) 41,588 232,110 190,522 232,110 190,522
__________ _________ ___________ __________ _________ ___________ __________ __________
OTHER DEDUCTIONS:
1,295 841 -454 INTEREST-ASSOC EXP 19,264 11,688 -7,576 11,688 -7,576
0 0 0 INTEREST-OTHER 43 0 -43 0 -43
0 500,000 500,000 MISCELLANEOUS 0 500,00 500,000 500,000 500,000
__________ _________ ___________ __________ _________ ___________ __________ __________
1,295 500,841 499,546 19,307 511,688 492,381 511,688 492,381
TAXES - OTHER INC & DED:
0 0 0 FEDERAL-CURRENT 0 0 0 0 0
__________ _________ ___________ __________ _________ ___________ __________ __________
0 0 0 0 0 0 0 0
__________ _________ ___________ __________ _________ ___________ __________ __________
11,020 -328,496 -339,516 NET INCOME/LOSS (-) 22,281 -279,578 -301,859 -279,578 -301,859
__________ _________ ___________ __________ _________ ___________ __________ __________
__________ _________ ___________ __________ _________ ___________ __________ __________
</TABLE>
EXHIBIT S-7
METSCAN, INC.
BALANCE SHEET
SEPTEMBER, 1993
CASH 2,352
ACCOUNTS RECEIVABLE 2,194
INVENTORY 1,025
OTHER 29
_______
CURRENT ASSETS 5,600
FIXED ASSETS 2,103
LESS: DEPRECIATION 852
_______
NET FIXED ASSETS 1,251
OTHER ASSETS 53
TOTAL ASSETS 6,904
_______
_______
ACCOUNTS PAYABLE & ACCRUED EXPENSES 3,347
LINE OF CREDIT 400
NOTES PAYABLE 748
NOTES PAYABLE-LEASES 0
CUSTOMER DEPOSITS 347
_______
CURRENT LIABILITIES 4,842
MORTGAGE PAYABLE 320
COMMON STOCK 5
PREFERRED STOCK 2,322
ADDITIONAL PAID IN CAPITAL 5,412
RETAINED EARNINGS (5,997)
_______
TOTAL EQUITY 1,742
TOTAL LIABILITIES & EQUITY 6,904
_______
_______
EXHIBIT S-8
METSCAN, INC.
SEPTEMBER, 1993
INCOME STATEMENT
MONTH YEAR TO DATE
_______ ____________
PRODUCT SALES 1,590 7,944
R & D SALES 590 2,358
_______ ____________
TOTAL SALES 2,180 10,302
PRODUCT COST OF SALES 903 4,737
R & D COST OF SALES 590 2,358
OVERHEAD 142 967
WARRANTY 16 155
_______ ____________
TOTAL 1,651 8,217
GROSS MARGIN 529 2,085
OPERATING EXPENSES
SALES & MARKETING 204 1,504
ENGINEERING 91 628
ADMINISTRATION 52 425
_______ ____________
TOTAL 347 2,557
OPERATING INCOME 182 (472)
OTHER INCOME EXPENSE
INTEREST EXPENSE 17 112
OTHER 38 141
_______ ____________
TOTAL OTHER (INC) EXP 55 253
PRE-TAX INCOME (LOSS) 127 (725)
