UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities and Exchange Commission
Date of report: January 26, 1996
ELECTRIC & GAS TECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)
TEXAS 0-14754 75-0259192
(State or other juris- (Commission file)
I.R.S. Employer Identif-
dicition of incorporation
ication No.)
or organization)
13636 Neutron Road, Dallas, Texas 75244-4410
(Address of principal executive offices, including zip code)
Registrant telephone number (including area code) (214) 934-8797
_________________________________________________________________
_____________
Current report on Form 8-K
Page 1
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FORM 8-K
ELECTRIC & GAS TECHNOLOGY, INC.
Item 2. Acquisition or Disposition of Assets.
Electric & Gas Technology, Inc. ("ELGT") signed a "Letter of
Intent" to acquire 80% of a privately owned company, Cooper
Manufacturing Corporation ("Cooper") in exchange for preferred
stock of ELGT valued at approximately $2,000,000 from two
individuals who had recently acquired Cooper from Allied Products
Corporation ("Allied"). On September 23, 1995, such Letter of
Intent was amended to permit the parties in reaching a definitive
purchase and sales agreement by December 31, 1995. The
additional time was needed to complete an adequate investigation
of Cooper's current financial and business status. ELGT and its
affiliate agreed to arrange for interim financing and to help
establish a line of credit for Cooper with a bank during this due
diligence period. Allied, the former unaffiliated owner of
Cooper was owed approximately $1,000,000 by Cooper and was
personally guaranteed by the two individual owners. The Allied
note was secured by all the assets of Cooper and a pledge of 100%
of the believed to be outstanding stock of Cooper.
During the due diligence period, ELGT became aware of
numerous problems, inaccurate information, undisclosed creditors
and others who allege were sold a portion Cooper's common stock.
Based on these mounting adverse disclosures, ELGT in order to
protect itself and its affiliates investment and advances to
Cooper, entered into a "Note Purchase Agreement" with Allied. On
December 15, 1995, ELGT closed on the Note Purchase Agreement
with Allied, thereby obtaining Allied's right, title and interest
in and to the Promissory Note and all security existing therefor
and obligation of Cooper under this note and the Facility
Agreement formerly executed by Cooper and its shareholders in
exchange for $100,0000 in cash and a newly issued, 90,000 shares
of, Series A, $10.00 par value, Preferred stock of ELGT. The
promissory note was due on December 31, 1995 and demand for
payment was made on Cooper and its guarantors.
The individuals who's stock was pledged and who personally
guaranteed the Allied Note, petitioned the court on behalf of
Cooper to file for protection under the U.S. Bankruptcy laws in a
Houston, Texas court. A hearing was held on January 17, 1996 and
reconvened on January 19, 1996 in which the court deferred any
decision pending settlement negotiations between the parties.
ELGT believes the filing was improper as those individuals who
petitioned the court as debtors in possession did not have
standing for such petition. Although the outcome of any
bankruptcy proceeding cannot be determined, ELGT believes it has
the only secured creditor position and first rights to the assets
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of Cooper. Further, ELGT and its affiliate believes they will
recover their investment and advances to Cooper and secure
ownership of Cooper for the future.
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Item 7. Financial Statements and Exhibits.
4.7 Resolution Designating and Specifying
Preference and Rights of Series A, 7%
Convertible Preferred Stock.
10.35 Letter of Intent and amendment
thereto, between Electric & Gas
Technology, Inc. and Messrs.
Kenneth Brown and Joe Poe.
10.36 Note Purchase Agreement, between
Electric & Gas Technology, Inc. and
Allied Products Corporation.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned hereunto duly authorized.
ELECTRIC & GAS TECHNOLOGY,
INC.
By: /s/ Edmund W. Bailey
Edmund W. Bailey
Vice President and CFO
Date: January 26, 1996
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INDEX TO EXHIBIT
Sequentially
Number
Exhibit No. Description Page
4.7 Resolution Designating and Specifying Preference and
1-9
Rights of Series A, 7% Convertible Preferred Stock.
10.35 Letter of Intent and amendment thereto, between
10-14
Electric & Gas Technology, Inc. and Messrs. Kenneth
Brown and Joe Poe.
10.36 Note Purchase Agreement, between Electric & Gas
15-21
Technology, Inc. and Allied Products Corporation.
5
STATEMENT OF RESOLUTION
ESTABLISHING SERIES OF SHARES
TO THE SECRETARY OF STATE
OF THE STATE OF TEXAS:
Pursuant to the provisions of Article 2.13 ofthe Texas
Business Corporation Act, the undersigned corporationsubmits the
following statement for the purpose of establishing and
designating a series of shares and fixing anddetermining the
relative rights and preferences thereof:
1. The name of the corporation is Electric & Gas
Technology, Inc.
2. The following resolution, establishing and designating
a series of shares and fixing and determining the relative rights
and preferences thereof, was duly adopted by the board of
directors of the corporation on December 15, 1995:
ELECTRIC & GAS TECHNOLOGY, INC.
(A Texas Corporation)
RESOLUTION DESIGNATING AND
SPECIFYING PREFERENCES AND
RIGHTS OF SERIES A, 7% CONVERTIBLE PREFERRED STOCK
RESOLVED, That the following designation and statement of
preferences, rights and other provisions of and applying to the
"Series A, 7% Convertible Preferred Stock" of the Company is
hereby adopted:
1. Statement of Series Designation and Issuance.
The Company has authorized 5,000,000 shares of preferred
stock, par value $10.00 per share (the "Authorized Preferred")
and none of such Authorized Preferred has been issued or is
outstanding. The Company hereby designates 90,000 shares of such
Authorized Preferred as the "Series A, 7% Convertible Preferred
Stock" of the Company and authorizes issuance of the Series A, 7%
Convertible Preferred Stock, upon and having the terms,
preferences, rights and other provisions provided for under the
Texas Business Corporation Act, as in effect from time to time,
the Articles of Incorporation of the Company, as now amended and
as in effect from time to time, and this Resolution.
2. Issuance.
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The Series A, 7% Convertible Preferred Stock shall be issued
to and initially registered in the name of Allied Products
Corporation as contemplated by that certain Note Purchase
Agreement of even date herewith between the Company and Allied
Products Corporation.
3. Terms, Provisions and Rights of Series A, 7%
Convertible Preferred Stock.
1. Par Value. The par value of each share of the
Series A, 7% Convertible Preferred Stock is $10.00.
2. Dividends.
(a) The holders of Series A, 7% Convertible Preferred
Stock, in preference to the holders of Common Stock and of
any other stock ranking as to dividends junior to the Series
A, 7% Convertible Preferred Stock, shall be entitled to
receive cumulative dividends in cash at a dividend rate of
$.70 (70 ) per share per annum and no more, such dividends
to be payable quarterly on the last day of March, June,
September and December in each year commencing March 31,
1996 (each such date being hereinafter called a "dividend
date" and each of the quarterly periods ending on a dividend
date being hereinafter called a "dividend period" and the
first dividend period being from the date of issuance of the
Series A, 7% Convertible Preferred Stock until March 31,
1996), and such dividends shall accrue from and after the
date on which such shares of Series A, 7% Convertible
Preferred Stock shall first be issued.
(b) Such dividends shall be cumulative from the date
on which such shares of Series A, 7% Convertible Preferred
Stock shall be first issued (whether or not in any dividend
period or periods there shall be surplus of the Corporation
legally available for the payment of such dividends) so
that, if dividends in respect of any dividend period shall
not have been paid upon, or declared and a sum sufficient
for payment thereof not set apart for the dividends on, the
Series A, 7% Convertible Preferred Stock, the amount of the
deficiency in such dividends shall be fully paid (or
declared and a sum sufficient for payment thereof set apart
and placed in an insured interest bearing account of a
national or state bank) before any dividend shall be
declared or paid, or any sum be set apart for or applied to
the purchase or redemption of, any shares of Common Stock or
any class of stock ranking as to dividends junior to the
Series A, 7% Convertible Preferred Stock.
(c) If, on any dividend date, the surplus of the
Corporation legally available for the payment of dividends
is not sufficient to enable payment of the full accrued
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dividends on all shares of Series A, 7% Convertible
Preferred Stock then outstanding at the rate fixed as
aforesaid, then, in such event, there shall be paid on such
dividend date, to the full extent of the surplus of the
Corporation legally available for dividends, to the holders
of Series A, 7% Convertible Preferred Stock, dividends in
amounts proportionate to the full accrued dividends to which
they are respectively entitled. No dividends shall be paid
upon or declared or set apart for any share of Preferred
Stock other than the Series A, 7% Convertible Preferred
Stock for any dividend period unless at the same time a like
proportionate dividend for the same dividend period at the
respective rates fixed as aforesaid shall be paid upon or
declared and a sum sufficient for the payment thereof set
apart for all shares of Series A, 7% Convertible Preferred
Stock then issued and outstanding.
3. Redemption. The shares of the Series A, 7%
Convertible Preferred Stock shall be subject to redemption
as follows:
(a) Redemption Incident to Underwriting and Other
Provisions.
(i) Subject to the other provisions of this subsection
3(a), all shares of Series A, 7% Convertible Preferred Stock
issued and outstanding shall be redeemed incident to and as
a condition to any "underwriting" (defined below) that
occurs at any time during the approximately two (2) year
period expiring on December 31, 1997, and redemption shall
be effected at (A) the redemption price of $10.00 per share,
plus (B) in each case a sum equal to all dividends (whether
or not earned or declared) on such shares accrued and unpaid
thereon to and including the date of redemption, provided
that the holders of Series A, 7% Convertible Preferred Stock
may elect to have the redemption price be determined on the
basis of the value of such stock as if conversion rights had
been exercised.
(ii) Less than all the outstanding shares of Series A,
7% Convertible Preferred Stock may be redeemed incident to
an "underwriting" only upon consent of the holders of 2/3 or
more of the outstanding Series A, 7% Convertible Preferred
Stock, and the shares to be redeemed shall be determined pro
rata, with all fractions being rounded to the next highest
full share.
(iii) At such time or times prior to the date
fixed for redemption, as the Board of Directors shall
determine for purposes of redemption pursuant to this
subsection 3(a), written notice of any redemption of shares
of Series A, 7% Convertible Preferred Stock, specifying the
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date fixed for redemption, the redemption price and the
place of redemption, shall be mailed to each holder of
record of the shares of Series A, 7% Convertible Preferred
Stock to be redeemed in a postage prepaid envelope at his
address of record, not more than fifty (50) nor less than
twenty (20) days prior to the date fixed for redemption,
calling upon such holder to surrender to the Corporation on
or after such date at the principal office of the
Corporation designated in such notice, his certificate or
certificates representing the number of shares specified in
such notice of redemption. On or after the date fixed in
such notice of redemption, each holder of shares of Series
A, 7% Convertible Preferred Stock to be redeemed shall
present and surrender his certificate or certificates for
such shares to the Corporation at the place designated in
such notice and thereupon the redemption price of such
shares shall be paid to or on the order of the person whose
name appears on the records of the Corporation as the holder
of the shares designated for redemption. If less than all
the shares owned by a holder of Series A, 7% Convertible
Preferred Stock are then to be redeemed in compliance with
this subsection (3)(a), the notice shall also specify the
number of shares thereof which are to be redeemed and the
number of the certificates representing such shares, and a
new certificate shall be issued to such holder representing
the unredeemed shares without cost to such holder.
(iv) Unless default be made in the payment in full of
the redemption price plus any accrued and unpaid dividends,
dividends on the shares of Series A, 7% Convertible
Preferred Stock called for redemption shall cease to accrue
on the redemption date, and all rights of the holders of
such shares as shareholders of the Corporation by reason of
the ownership of such shares shall cease on the redemption
date, except the right to receive the amount payable upon
redemption of such shares, on presentation and surrender of
the respective certificates representing such shares.
(v) Series A, 7% Convertible Preferred Stock redeemed
in accordance with this subsection 3(a) shall be cancelled
and not reissued and the number of shares of Series A, 7%
Convertible Preferred Stock which the Corporation shall have
authority to issue shall be decreased by the number of
shares so redeemed.
(vi) Notwithstanding the foregoing provisions of this
subsection 3(a) if any dividends on the Series A, 7%
Convertible Preferred Stock are accrued and unpaid, no
shares of the Series A, 7% Convertible Preferred Stock shall
be redeemed unless all outstanding shares of the Series A,
7% Convertible Preferred Stock are simultaneously redeemed,
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and the Corporation shall not purchase or otherwise acquire
any shares of the Series A, 7% Convertible Preferred Stock.
(vii) An "underwriting" is the issuance and/or
sale of stock, notes or other "securities" of the
Corporation to the public or through a private placement
effected by or through an investment banker, broker, broker-
dealer, securities exchange or "NASDAQ" occurring on or
before December 31, 1997.
(b) Mandatory Redemption. If and so long as shares of
Series A, 7% Convertible Preferred Stock are outstanding, if
the Corporation shall directly or indirectly sell, lease,
abandon, or otherwise dispose of all or substantially all of
its property or assets, or consolidate with or merge into
any other person, partnership or corporation (other than a
wholly owned subsidiary of the Corporation), then the
Corporation shall, prior to or simultaneously with such
sale, lease, abandonment, or other disposition or such
consolidation or merger, redeem, out of funds legally
available for such purpose, all the shares of Series A, 7%
Convertible Preferred Stock then outstanding at a redemption
price of $10.00 per share plus an amount equal to all
dividends (whether or not earned or declared) on such shares
accrued and unpaid thereon to and including the mandatory
redemption date, such payment to be made on such mandatory
redemption date in accordance with paragraph (a) of this
Section 3 including, without limitation, subparagraph (iii)
of said paragraph (a).
4. Rights on Liquidation, Dissolution or Winding Up.
(a) Upon the involuntary liquidation, distribution or
sale of assets, or involuntary dissolution or winding up of
the Corporation or upon the voluntary liquidation,
distribution or sale of assets, or voluntary dissolution or
winding up of the Corporation, the holders of the shares of
Series A, 7% Convertible Preferred Stock, out of the assets
of the Corporation available for distribution to its
shareholders, a sum in cash equal to $10.00 plus an amount
equal to all dividends on such shares accrued and unpaid
thereon to the date of final distribution, before any
payment or distribution shall be made on the Common Stock or
on any other class of stock ranking as to dividends or upon
liquidation junior to the Series A, 7% Convertible Preferred
Stock.
(b) If upon any such liquidation, distribution or sale
of assets, dissolution or winding up of the Corporation,
whether voluntary or involuntary, its assets available for
distribution to its shareholders shall be insufficient to
permit the payment in full of the respective amounts to
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which the holders of all outstanding Series A, 7%
Convertible Preferred Stock, are entitled as provided in
paragraph (a) of this Section 4, the entire remaining assets
of the Corporation available for distribution to its
shareholders shall be distributed among the holders of
Series A, 7% Convertible Preferred Stock in amounts
proportionate to the full preferential amounts to which they
would be respectively entitled if all amounts payable on or
with respect to such shares were paid in full.
(c) In the event of any liquidation, distribution or
sale of assets, dissolution or winding up of the
Corporation, whether voluntary or involuntary, after payment
shall have been made to the holders of shares of Series A,
7% Convertible Preferred Stock and any other class or
classes of stock ranking upon liquidation on parity with the
Series A, 7% Convertible Preferred Stock, the holders of
shares of any class or classes of stock ranking upon
liquidation junior to the Series A, 7% Convertible Preferred
Stock shall be entitled, to the exclusion of the holders of
shares of Series A, 7% Convertible Preferred Stock, to
share, according to their respective rights and preferences,
in all remaining assets of the Corporation available for
distribution to its shareholders.
5. Voting.
(a) Subject to the provisions of any applicable law or
of the By-laws of the Corporation as from time to time
amended, with respect to the closing of the transfer books
or the fixing of a record date for the determination of
shareholders entitled to vote, at each meeting of
shareholders each holder of record of shares of Series A, 7%
Convertible Preferred Stock shall be entitled to one vote
per share on each matter on which the holders of record of
shares of Common Stock shall be entitled to vote, voting
together, and not by classes, with the holders of record of
shares of Common Stock, and each such record holder of
shares of Series A, 7% Convertible Preferred Stock shall be
entitled to the same notice of any such meeting of
shareholders as isfurnished to such holders of Common Stock.
(b) In case any one or more of the following events
shall have occurred and be continuing, that is to say: a
breach, default or other failure of the Corporation to
perform under, comply with or observe its agreements,
covenants, representations, or any term of the Note Purchase
Agreement of even date with Allied Products Corporation; a
failure or default by the Corporation in paying or declaring
two (2) or more required dividends or distributions on the
Series A, 7% Convertible Preferred Stock (whether or not
consecutive);
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then, and in such event the number of directors constituting
the Board of Directors of the Corporation shall be increased
by one (1) member of the Board of Directors, and the holders
of Series A, 7% Convertible Preferred Stock shall have, in
addition to any other voting rights, the special right, to
the exclusion of all other classes (whether preferred,
common or otherwise) of stock of the Corporation, voting
together as a class to elect persons to fill such newly
created directorship (and to fill any vacancies in the
membership of the Board of Directors arising when the
position of any director so elected by the Series A, 7%
Convertible Preferred Stock becomes vacant until such time
as the special right of the holders of Series A, 7%
Convertible Preferred Stock to vote separately as a class
for the election of directors pursuant to this paragraph (b)
of Section 5 shall terminate as set forth below). Whenever
such special right of holders of shares of Series A, 7%
Convertible Preferred Stock shall have vested, it may be
exercised initially either at a special meeting of such
holders called as provided below, or at any annual meeting
of shareholders and thereafter at annual meetings of
shareholders. The special right of holders of shares of
Series A, 7% Convertible Preferred Stock, to elect members
of the Board of Directors as aforesaid shall continue until
such time as the event or events giving rise to such special
right of the holders of shares of Series A, 7% Convertible
Preferred Stock so to vote for the election of directors
shall have been cured or shall cease to exist or shall have
been waived by the holders of at least sixty-six and two-
thirds percent (66-2/3%) of all the shares of Series A, 7%
Convertible Preferred Stock outstanding, in writing or by a
vote at a meeting of such shareholders for that purposes, at
which time such special rights shall terminate, subject to
revesting in the event of the occurrence of any of the
foregoing events giving rise to such special right.
6. Restrictions on Issuance of Other Securities.
At any time that shares of Series 1995 Cumulative
Preferred Stock are issued and outstanding, the Corporation
shall not issue any preferred or other stock that is senior
to the Series 1995 Convertible Preferred Stock with respect
to dividends or distributions, redemption or rights incident
to redemption, or other similar rights of the Series 1995
Convertible Preferred Stock, or any security or obligation
that is convertible into or exchangeable or exercisable for
such senior stock. The Corporation may issue up to, but not
more than, 90,000 shares of preferred or other stock that is
on a parity with the Series 1995 Convertible Preferred Stock
with respect to dividends or distributions, redemption or
rights incident to redemption, or other similar rights of
the Series 1995 Convertible Preferred Stock, or any security
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or obligation that is convertible into or exchangeable or
exercisable for such senior stock.
7. Covenant to Maintain Registration; Conversions.
(a) At all times that any of the Series A, 7%
Convertible Preferred Stock is outstanding, the Corporation
shall be in compliance with, and maintain registration of
its common stock (in amounts sufficient to permit conversion
of the Series A, 7% Convertible Preferred Stock into
properly registered, publicly traded stock) under, all
applicable federal and state securities laws, rules and
regulations. In this regard, the Corporation will timely
and properly file all registration and reporting papers
required or advisable under such laws, rules and
regulations.
(b) At any time and from time to time, the holder(s)
of Series A, 7% Convertible Preferred Stock shall have the
option to convert shares of Series A, 7% Convertible
Preferred Stock into common stock of the Corporation, at the
ratio of two (2) shares of common stock for each one (1)
share of Series A, 7% Convertible Preferred Stock. The
Corporation shall at all times have authorized and maintain
the availability for issuance of sufficient common stock to
effect such conversion. At all times when any of the Series
A, 7% Convertible Preferred Stock is issued and outstanding,
the Corporation shall not: take, authorize, or agree to
take or authorize any action that would limit, impair or
restrict the ability of the Corporation to comply with and
observe or perform its obligations, covenants and duties
with respect to the Series A, 7% Convertible Preferred
Stock, or that would dilute the proportionate interest, on
the date of its issuance, of the holders of the Series A, 7%
Convertible Preferred Stock in, or to be acquired upon
conversion of such Series A, 7% Preferred Stock into, common
stock.
(c) Shares of Series A, 7% Convertible Preferred Stock
of the Corporation that are redeemed or that are converted
into common stock of the Corporation shall be tendered to
the Secretary of the Corporation or the Corporation's
transfer agent accompanied by a copy of the notice of
redemption or by a notice of election to convert from the
registered owner of such shares of Series A, 7% Convertible
Preferred Stock, as the case may be, and the Secretary of
the Corporation or the Corporation's transfer agent and the
Corporation shall forthwith take all acts necessary and
appropriate to pay the redemption price for, or issue and
cause to be issued the requisite shares of common stock upon
conversion, as the case may be. If called for redemption,
shares of the Series A, 7% Convertible Preferred Stock of
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the Corporation may be converted (at the election of the
registered owner thereof) at any time up to and including
(but not after) the date of redemption.
Dated: December 15, 1995.
Electric & Gas Technology, Inc.
By /s/ S. Mort Zimmerman
S. Mort Zimmerman
Chairman of the Board &
President
And /s/ Marie Pazol
Marie Pazol
Secretary
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9
THE STATE OF TEXAS
COUNTY OF DALLAS
I, Joe B. Abbey , a notary public, do hereby certify
that on this 15 day of December , 19 95 , personally
appeared before me S. Mort Zimmerman and Marie
Pazol , who, being by me first duly sworn, declared that
[he/she] is the President and Secretary of Electric & Gas
Technology, Inc. , that [he/she] signed the foregoing document
as President and secretary of the corporation and that the
statements therein contained are true.
(SEAL)
/s/ Joe B Abbey
Notary Public in and for
the State of Texas
Joe B Abbey
Printed Name of Notary
My Commission Expires: August 23,
1997
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July 13, 1995
Messrs: Kenneth Brown
Joe Poe
Cooper Manufacturing Corporation
12900 Preston Road Suite 900
Dallas, Texas 75230
LETTER OF INTENT
Gentlemen:
The purpose of this letter is to express our serious
willingness and intent to pursue a plan of acquisition or merger
by and between Messrs. Kenneth Brown and Joe Poe, (hereinafter
referred to a "Brown/Poe") who own 100% of the issued and
outstanding stock of Cooper Manufacturing Co. (hereinafter
referred to as "Cooper") and Electric & Gas Technology, Inc.
(ELGT).
Cooper has delivered to ELGT certain purchase orders
supported by bank Letter of Credit, lists of proposals to several
International customers and unaudited financial statements of
Cooper, all of which are attached hereto as Exhibit "A".
Based on verification and confirmation by ELGT of said
information to the satisfaction of ELGT, the following would be
basic highlights of an agreement by and between the parties
hereto:
1. ELGT would establish a new corporate subsidiary or
affiliate to be named Cooper Industrial International, Inc.
(CII), or similar name) into which we would transfer
approximately $2 million of ELGT preferred convertible stock.
The common stock is presently trading on the NASDAQ National
Market System and valued at approximately $3.00 per share.
2. The preferred stock would have a priority par value of
$20.00 per share and would be convertible at the option of CII
into common stock of ELGT valued at $8.00 per share based on one
share of preferred for 2.5 shares of ELGT common.
3. CII would issue to ELGT a total of two million shares
(2,000,000) of CII in exchange for said preferred stock of ELGT
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based on a tax free exchange of stock.
Messrs: Brown
Poe
Page 2.
4. CII would then immediately issue to Brown/Poe:
A. A total of 500,000 shares of CII in a tax free
exchange for 100% of the stock of Cooper transferred to CII,
which ELGT understands is presently pledged to Allied Products,
Inc.
B. In addition Brown/Poe would be issued an option to
acquire 100% of the $2 million ELGT convertible preferred stock
or up to an additional 30% of Cooper stock based on formula where
said shares would be issued based on future earnings of Cooper
and attached hereto as Exhibit "B".
C. thus CIT would have a beginning certified net
worth of $ 2 million with 2.5 million shares outstanding. The
balance shares of Cooper would then be consolidated with CII.
5. ELGT would then supply financial corporate guarantees
for the purpose of obtaining loans and financial funding for
completing production and inventory purchased for the existing
orders on the books of Cooper.
6. In addition ELGT could establish a legal and proper tax
shelter to minimize income taxes for Cooper from its future
earnings.
7. The then existing management of Cooper would remain as
officers and ELGT would supply a designated CFO following
completion of the transaction. A mutually agreed employment or
consulting arrangement is to be made with Brown and Poe.
8. Messrs. Brown and Poe are presently owed $650,000 by
Cooper. ELGT will cause Cooper to execute a promissory note in
the amount of $200,000 to Gateway Bank with proceeds paid to
Brown and Poe and to issue to Brown and Poe $450,000 of a $20.00
par value ELGT redeemable preferred stock convertible into ELGT
common at $5.00 per share all in accordance with S.E.C. rules.
Upon signing of this Letter of Intent the following would be
activated:
1. ELGT would cause Gateway National Bank to lend $300,000 to
Cooper secured by the Polar contract and release of the existing
collateral.
2. ELGT will additionally cause Gateway National Bank to lend
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$200,000 to Cooper which will be a portion of the $650,000 owed
by Cooper to Brown and Poe with proceeds of said loan to be paid
to Brown and Poe.
Messrs: Brown
Poe
Page 3.
3. ELGT would authorize its accountants to engage on a "high
spot" audit to verify the financial condition of Cooper which
could be completed in a period of perhaps seven business days.
4. ELGT would send its representative to visit the Brady (or
Houston or North Dakota) plants to review production operations.
5. ELGT would immediately pursue financing by offering its
financial guarantee to Maxwell Sterling for $2.8 million and for
SBA and XM bank loans from Gateway National Bank.
6. ELGT will meet with a Cooper representative to analyze
existing accounts payable in order to make contact with key
suppliers to help workout certain past due payables.
7. ELGT would authorize its attorneys to prepare a definitive
agreement following receipt of a satisfactory accounting report
from the high spot audit. However, prior to execution of the
definitive agreement, ELGT is willing to initiate and cause
financing for Cooper with the understanding that the definitive
agreement will be signed as soon as possible but during August of
1995. In the event for any reason whatsoever a final agreement
is not executed then Brown and Poe will be required to replace or
repay said ELGT/Gateway financing on mutually agreed basis.
Electric & Gas Technology, Inc.
/s/ S. Mort Zimmerman
S. Mort Zimmermann
Chairman of the Board and President
The above is approved and agreed to this 12th day of July, 1995.
Cooper Manufacturing Corporation
/s/ Kenneth Brown
Kenneth Brown
/s/ Joe Poe
Joe Poe
SMZ:mp
12
CC: Jim Taylor
<PAGE>
AMENDMENT TO LETTER OF INTENT
Amendment to Letter of Intent, dated July 13, 1995, by and
between Electric & Gas Technology, Inc. ("ELGT") and Kenneth D.
Brown and Joe A. Poe, ("Brown and Poe").
The purpose of thus amendment is to supplement and amend
certain terms and provisions of the above-referenced Letter of
Intent in the following fashion:
1. ELGT will make available immediately to Cooper
Manufacturing Corporation ("Cooper") One Hundred Thousand and
No/00 Dollars ($100,000) which Cooper will then pay to Brown and
Poe as a reduction of the balance of the Three Hundred Fifty
Thousand and No/00 Dollars ($350,000) owed to them jointly.
2. ELGT will immediately establish a line of credit for
Cooper in the amount of Four Hundred Thousand and N0/100 Dollars
($400,000) to utilize for working capital.
3. ELGT will assume absolute control of the business
operations, bank accounts, etc. of Cooper.
4. Cooper will be required to utilize sixty percent (60%)
of accounts receivable, contract down payments, and all
unincumbered cash flow into Cooper other than the Four Hundred
Thousand and No/100 Dollar ($400,000) referred to above, to repay
monies still owed Brown and Poe in the amount of Two Hundred
Fifty Thousand and No/100 Dollars ($250,000).
5. The parties agree that the original Letter of Intent
shall be extended until December 31, 1995 and ELGT will use its
best efforts to implement the terms of such Letter of Intent and
will enter into a definitive purchase and sale agreement prior to
that date. During the extension period, the parties will use
their best efforts to enter into the necessary agreements with
Allied Products Corporation, Texas Central Bank and Totisa, in
order that the financing and business plan of the Company may be
stabilized.
6. Poe and Brown agree to transfer their stock ownership
(pledged to Allied) in Cooper Eighty-Five percent (85%) to Mr.
Edmund Bailey and Fifteen percent (15%) to Mr. Jim Taylor, which
stocks shall be held during the term of the extension, in trust
for Brown and Poe, and shall be returned to Poe and Brown if the
Purchase and Sale Agreement is not finalized during the term of
the Letter of Intent. This portion of the agreement may be
mutually extended for financing purposes by written agreement by
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and among the parties.
7. It is the intention of ELGT to receive bids from
Cardwell International and others for turn key production of
Cooper Rigs and ELGT is authorized to negotiate equity positions
with Cardwell
and/or with its President. Mr. Art Teichgraeber, however, such
negotiations will in no way dilute Brown and Poe of the ultimate
20 percent ownership unless otherwise agreed in writing. The
parties agree that prior to contacting any potential equity
investors in the Company they will notify the other party prior
to such contact. Poe and Brown agreed that they will, if
necessary, make available to ELGT one percent (1%) of their
additional thirty percent options, if necessary, in order to
close a mutually satisfactory transaction with a potential
investor.
8. Ms. Carolyn Brown will be retained on a consulting
contract at the rate of $1600.000 per month during the Letter of
Intent term.
9. ELGT agrees to cause Cooper to pay Brown and Poe's
reasonable travel expenses in relation to Cooper's business.
10. Poe and Brown will remain employees of the Company,
however, their compensation will be deferred until such time as a
definitive agreement is entered into by and between the parties,
however, they will remain on Company insurance, etc.
All other terms and conditions of the original Letter of
Intent dated July 13, 1995 shall remain in full force and effect.
Executed this 22nd day of September, 1995.
ELECTRIC & GAS TECHNOLOGY, INC.
By: /s/ S. Mort Zimmerman
S. Mort Zimmerman
Chairman and President
/s/ Joe Poe
Joe Poe
/s/ Kenneth D. Brown
Kenneth D. Brown
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NOTE PURCHASE AGREEMENT
This NOTE PURCHASE AGREEMENT (the "Agreement"),dated to be
effective as of the 15th day of December, 1995, by and between
ALLIED PRODUCTS CORPORATION ("Allied") and ELECTRIC & GAS
TECHNOLOGY, INC. ("ELGT").
INTRODUCTORY PROVISIONS
The following provisions are a part of thisAgreement and
form the basis for this Agreement.
Cooper Manufacturing Corp., a Texas corporation ("Cooper"),
is obligated to Allied under terms and conditions of a Facility
Agreement dated March 16, 1995, a Restated and Amended Facility
Agreement dated September 30, 1995, and a Promissory Note in the
amount of one million dollars dated September 30, 1995 the
("Note").
A. Joe Poe ("Poe"), Ken Brown ("Brown") and Cindy Brown have
executed certain guarantees and stock pledges to secure the
obligations of Cooper under the above Facility Agreement and
Restated and Amended Facility Agreement, the Promissory Note and
related Security Agreement(s).
B. ELGT is desirous of purchasing all of Allied's interest in
and to the Promissory Note and security therefore, including
without limitation the security agreements (exclusive of the
Costa Rican Security Agreement which has never been signed) and
specific guaranties described in paragraph 4(a)-(c) of the
Restated and Amended Facility Agreement (save and except certain
obligations in favor of Allied described below).
Now, therefore, for and in consideration of the foregoing
and for other good and valuable consideration, the receipt and
sufficiency of which are acknowledged and confessed, the parties
hereto agree as follows:
I.
Allied assigns to ELGT all of its right, title, and interest
(except as specifically reserved below) in and to the Promissory
Note and all security existing therefor and obligations of Cooper
in connection therewith, including without limitation, security
and obligations under or in connection with that certain Facility
Agreement dated to be effective as of March 16, 1995 executed by
Cooper; the Restated and Amended Facility Agreement dated and
effective as of September 30, 1995 executed by Cooper; the
Promissory Note dated September 30, 1995, in the original
principal amount of one million dollars ($1,000,000.00) executed
by Cooper; the Specific Guaranty executed by Poe to be effective
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September 30, 1995; the Specific Guaranty executed by Brown and
Cindy Brown to be effective September 30, 1995; the Supplemental
Security Agreement executed by Poe to be effective September 30,
1995; the Supplemental Security Agreement executed by Brown to be
effective September 30, 1995, and the Amended and Restated
Security Agreement executed by Cooper to be effective September
30, 1995 (collectively the "Security Documents"); provided,
however, that nothing contained herein shall be deemed or
construed to waive, release, or in any way impair the "Reserved
Obligations" as defined below.
As used herein, the term "Reserved Obligations" shall mean
and refers to (a) the Obligations (as such term is defined in the
Facility) of Cooper to Allied described in or arising out of
paragraphs 1, 3, and 11 of the Restated and Amended Facility
Agreement and (b) the non-exclusive right of Allied to enforce
the covenants and agreements of Cooper under or pursuant to the
Restated and Amended Facility Agreement (excluding only the
covenant to pay the New Note and provide security therefor under
the Security Documents) in order to ensure performance by Cooper
of the obligations described in clause (a) above. The Reserved
Obligations include, without limitation, Cooper's obligations to
defend, indemnify and hold harmless Allied with respect to
certain pending litigation described in Schedule 1 hereto.
Allied retains and does not assign to ELGT the Reserved
Obligations. ELGT agrees that neither ELGT nor any of its
affiliates or subsidiaries shall release the guaranties of Poe
and Brown unless and until the Reserved Obligations shall have
been fully discharged. ELGT acknowledges that all assets
existing to secure the Note are burdened by the Reserved
Obligations and cannot be conveyed, transferred, or assigned free
and clear of the Reserved Obligations. In addition to, but
without limitation of the foregoing, to the extent that any
affiliate or subsidiary of ELGT acquires, directly or indirectly,
and whether by voluntary conveyance, foreclosure, conveyance in
lieu of foreclosure, or any other means, a controlling interest
in Cooper or acquires greater than 50% in value of the assets of
Cooper, ELGT shall cause such affiliate or subsidiary to assume
and agree to be bound by, each and every one of the Reserved
Obligations, as fully and for all purposes as if such party had
originally entered into same; provided, however, that such
assumption shall be nonrecourse except to the extent of the
assets so acquired, which assets shall serve such assumption, and
the Reserved Obligations. ELGT covenants and agrees that it
shall not acquire in its name either a controlling interest in
Cooper or greater than 50% in value of the assets of Cooper. The
obligations of ELGT under and pursuant to this paragraph shall
survive the assignment of the Note and Security Documents from
Allied to ELGT.
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II.
A. Concurrently with the execution and delivery of this
Agreement by Allied, ELGT will pay to Allied the sum of One
Hundred Thousand and No/100 Dollars ($100,000.00), and, promptly
upon request, ELGT shall reimburse Allied for Allied's attorney's
fees incurred in this transaction, not to exceed $10,000.00.
B. ELGT will issue to Allied ninety thousand shares
(90,000) of a ten dollar ($10.00) par value cumulative,
convertible preferred stock with a dividend of seventy cents
($.70) per share, concurrently with the execution and delivery of
this Agreement by Allied, with rights and obligations as more
particularly described in the form of Resolution Designating and
Specifying Preferences and Rights of Series 1995 Convertible
Preferred Stock (the "Designation") attached hereto and made a
part hereof.
III.
The preferred stock shall be convertible, at Allied's
option, into common stock of ELGT, based on two (2) shares of
common stock for each one (1) share of preferred (which is based
on five dollars ($5.00) per share of the common stock or up to
one hundred eighty thousand (180,000) shares).
IV.
All securities of ELGT including the preferred stock and
converted common stock will at the time of delivery to Allied
have been validly issued and shall be in compliance with all the
Rules and Regulations of the Securities and Exchange Commission
and related federal laws and any other appropriate governmental
agencies and applicable state law. Prior to closing, appropriate
corporate action, including the execution and filing of the
attached form of the Designation shall be taken by ELGT to
authorize and specify the rights of the Preferred Stock issued or
to be issued to Allied pursuant to this Agreement, all in form
and substance acceptable to Allied.
V.
Dividends on the preferred stock will be paid quarterly.
The preferred stock and any common stock received upon conversion
of the preferred will become freely tradeable pursuant to Rule
144 promulgated pursuant to the authority granted in the
Securities Exchange Act of 1934. The parties to this contract
anticipate the two (2) year holding period will apply and that
the tacking provisions of Rule 144 will be available, and on the
issuance of the preferred stock to Allied.
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VI.
ELGT will use its best efforts, at the option of Allied, to
cause the sale of such of the converted (common) stock pursuant
to Rule 144 of the Securities Exchange Act of 1934 for the
benefit of Allied. Should there be any deficiency resulting from
the sale of stock for less than nine hundred thousand dollars
($900,000.00), (which deficiency shall equal $900,000.00 minus
the aggregate proceeds of the sale of the converted stock) or if
public NASDAQ sale of converted (common) stock by Allied is not
lawfully permitted (subject only to compliance with volume
restrictions of Rule 144) so that Allied or ELGT, on behalf of
Allied, may not lawfully sell such converted (common) stock on
the public NASDAQ market, said deficiency will be paid by ELGT on
a payment schedule mutually agreed between ELGT and Allied, not
to exceed a period of nine (9) months after Allied gives notice
to ELGT of the deficiency. The obligation of ELGT to pay such
deficiency shall survive assignment of the Note and Security
Documents by Allied to ELGT and be and remain the binding
obligation of ELGT.
VII.
In the event, prior to the expiration of twenty-four (24)
months from the effective date hereof, ELGT obtains an acceptable
underwriting from an investment broker, a portion of the proceeds
will be used to acquire all (or any remaining portion) of the
preferred stock then held by Allied at par value plus accrued and
unpaid dividends or the value of the common stock into which the
preferred can be converted, whichever is greater.
VIII.
Deliveries at Closing. On even date herewith or at such
time as indicated, Allied will deliver to ELGT acceptable to ELGT
the following:
A. The original Promissory Note dated September 30, 1995
in the amount of one million dollars ($1,000,000.00) executed by
Cooper to Allied duly endorsed to ELGT as follows:
Transferred and assigned to Electric & Gas Technology,
Inc., without recourse or warranty effective as of
December 15, 1995, pursuant to a Note Purchase
Agreement of even date.
ALLIED PRODUCTS CORPORATION
By:
Name:
Title:
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B. The originals of the Facility Agreement, Restated and
Amended Facility Agreement, and each of the Security Documents,
with notation of assignment of ELGT without recourse or warranty
as indicated in A above.
C. Resolutions of the Executive Committee of the Board of
Directors of Allied authorizing the transactions contemplated
hereby.
IX.
Deliveries at closing. On an even date herewith or at such
other time as indicated, ELGT shall deliver to Allied in the form
and content acceptable to Allied the following:
A. A certificate representing ninety thousand (90,000)
shares of ELGT ten dollar ($10.00) per value cumulative,
convertible stock. The dividend of seventy cents ($0.70) per
share.
B. Corporate resolutions for ELGT authorizing all
transactions covered hereby.
C. Cash of $100,000.
D. Evidence of authority, including without limitation the
filed Designation as required pursuant to Paragraph IV hereof,
and in the form attached hereto.
X.
The following representations and warranties of Allied are
the sole and exclusive representations and warranties of Allied
in this transaction:
A. To the best of Allied's actual knowledge, there are no
actions, suits or proceedings pending against or affecting Allied
involving the validity or enforceability of the Promissory Note
or documents securing same, or otherwise involving Allied and its
relationship with Cooper, except as set forth on Schedule 1
attached hereto.
B. As of the date hereof, the outstanding principal
balance on the Note is $1,000,000.00, and to the best of Allied's
actual knowledge, the Note represents the valid and subsisting
obligation of Cooper Manufacturing Corp., and the guaranties
represent the valid and subsisting obligations of the respective
guarantors.
C. Allied has not heretofore transferred or conveyed its
interest in the Note or Security Documents.
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XI.
Until the Promissory Note has been paid in full and the
Reserved Obligations discharged or released, ELGT will give
Allied prompt notice of (i) any actions, suit or proceeding by or
against either Poe, Brown, Cindy Brown, Cooper and ELGT or
against either of them at law or equity before any governmental
authority or any of the same that may be threatened and (ii) the
occurrence of any event of default under this agreement or any of
the Security Documents or the occurrence of an event which with
the giving of notice of the passage of time or both will become
an event of default hereunder or under the Security Documents,
which notice shall describe such event and the period of time of
its existence and any action taken with respect thereto.
XII.
This agreement and the documents executed in connection
herewith, including the Promissory Note, the security documents,
the Facility Agreement, and the Restated and Amended Facility
Agreement represented the final agreement between the parties and
may not be contradicted by evidence of prior, contemporaneous or
subsequent oral agreements of the parties. There are no
unwritten oral agreements between the parties.
XIII.
ELGT shall not be obligated to obtain Allied's consent to
the exercise of any remedies that may be available to ELGT under
or pursuant to the Note or any of the Security Documents.
XIV.
This agreement shall be binding upon the parties hereto and
their respective permitted successors and assigns, and the terms
and provisions hereof shall survive the transactions contemplated
hereby and shall be and remain binding upon the parties hereto.
Executed as of the date first hereinabove written.
/s/ Kenneth B. Light /s/ S. Mort Zimmerman
Allied Products Corporation Electric and Gas
Technology, Inc.
By: Kenneth B. Light By: S. Mort Zimmerman
Title: Executive Vice President Title: President
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Schedule 1 to Note Purchase Agreement
Allied Products Corporation
Summary of Current Litigation re Cooper Manufacturing Corporation
Note: Neither Allied nor its counsel makes any representation,
express or implied, regarding the likelihood of an adverse result
in any of the following described litigation, or of the amount of
recovery in the event of such result. References to the "base
claim" amount below are provided for information only and do not
include attorneys fees, costs, etc.
1. Hickman Sales and Service, Inc. v. Allied Products
Corporation and Cooper Manufacturing Corporation, Cause No.
_________ in the Northwest Judicial District, Williams
County, North Dakota. Suit for commissions, related to a
sale of two rigs which occurred after the sale of the Cooper
Division by Allied. Plaintiff claims services were
performed at the "joint request" of Allied and Cooper.
Amount claimed: $27,166.14.
2. Stewart & Stevenson, Inc. v. Allied Products Corporation and
Cooper Manufacturing Corporation, Cause No. D-97,641, In the
358th Judicial District Court, Ector County, Texas. Suit on
sworn account on charges incurred by Cooper after sale of
the Cooper Division by Allied. Plaintiff alleging
partnership/joint venture in attempt to bring Allied within
joint and several liability. Base claim is $78,191.15.
3. Linden Air Freight, Inc. v. Cooper Manufacturing Corporation
and Allied Products Corporation, Cause No. 139-95, In the
198th Judicial District Court, McCulloch County, Texas.
Suit on sworn account on charges incurred after sale of the
Cooper Division. Plaintiff's counsel was unaware of the
corporate hierarchy and is considering non-suiting Allied
Products but may proceed with same approach as plaintiff in
Stewart & Stevenson above. Base claim is $51,088.36.
4. Clemtex, Inc. v. Allied Products Corporation aka and dba
Allied Products Corp., Loadcraft - Cooper Manufacturing
Corporation and Loadcraft-Cooper, Cause No. 646,347, In the
County Civil Court of Law No. 1, Harris County, Texas. Suit
on sworn account on charges incurred after sale of the
Cooper Division. Plaintiff's counsel was unaware of Allied's
sale to Cooper Manufacturing and will non-suit Allied
Products. Base claim is $6,870.00.
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