<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934*
NORTH AMERICAN TECHNOLOGIES GROUP, INC.
(NAME OF ISSUER)
COMMON STOCK, $.001 PAR VALUE PER SHARE
(TITLE OF CLASS OF SECURITIES)
657193-10-8
(CUSIP NUMBER)
ROBERT H. CHANEY
R. CHANEY & PARTNERS-1993 L.P.
909 FANNIN, SUITE 1275
TWO HOUSTON CENTER
HOUSTON, TEXAS 77010-1006
(713) 753-1315
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON
AUTHORIZED TO RECEIVE NOTICES AND COMMUNICATIONS)
APRIL 5, 1996
(DATE OF EVENT WHICH REQUIRES FILING
OF THIS STATEMENT)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box. [ ]
Check the following box if a fee is being paid with this Statement. [X] (A
fee is not required only if the reporting person: (1) has a previous statement
on file reporting beneficial ownership of more than five percent of the class
of securities described in Item 1; and (2) has filed no amendment subsequent
thereto reporting beneficial ownership of less than five percent of such class.
See Rule 13d-7.)
NOTE: Six copies of this statement, including all exhibits, should be filed
with the Commission. See Rule 13d-1(a) for other parties to whom copies are to
be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities,
and for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the Act (however, see
the Notes).
Page 1 of 12
<PAGE> 2
CUSIP NO. 657193-10-8 SCHEDULE 13D
- --------------------------------------------------------------------------------
(1) Names of Reporting Persons/S.S. or I.R.S. Identification Nos. of Above
Persons
R. CHANEY & PARTNERS-1993 L.P.
- --------------------------------------------------------------------------------
(2) Check the Appropriate Box if a Member of a Group (See Instructions)
(a) [x] (1)
(b) [ ]
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(3) SEC Use Only
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(4) Source of Funds (See Instructions) OO (See Item 3)
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(5) Check Box if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e) [ ]
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(6) Citizenship or Place of Organization R. CHANEY & PARTNERS-1993 L.P.
IS A LIMITED PARTNERSHIP FORMED
UNDER THE LAWS OF THE STATE OF
TEXAS.
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Number of Shares (7) Sole Voting Power 0
Benefically ----------------------------------------------
Owend By
Each (8) Shared Voting Power 2,500,000(2)
Reporting ---------------------------------------------
Person With
(9) Sole Dispositive Power 0
---------------------------------------------
(10) Shared Dispositive Power 2,500,000(2)
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(11) Aggregate Amount Beneficially Owned by Each Reporting Person 2,500,000(3)
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(12) Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares
(See Instructions) [x](3)
- --------------------------------------------------------------------------------
(13) Percent of Class Represented by Amount in Row (11) 9.1%(3)
- --------------------------------------------------------------------------------
(14) Type of Reporting Person (See Instructions) PN
- --------------------------------------------------------------------------------
- ----------------------------------
(1)R. Chaney Partners - 1993 L.P., its sole general partner, R. Chaney &
Co. Inc., and the general partner's sole shareholder, Robert Chaney, have a
limited relationship with other Investors as described in Items 4, 5, and 6.
(2)Voting and dispositive power is shared among the Partnership, the
General Partner, and the Sole Shareholder (defined in Item 2).
(3)If the relationships described in Items 4, 5, and 6 constitute a group
for purposes of Rule 13d-5 of the Act, then the group may collectively own an
aggregate of 18,500,000 out of 43,400,632 shares or 42.6 percent of the Common
Stock based on the conversion and calculation procedures described in Item
5(a)'s The Partnership. The Partnership, the General Partner, and the Sole
Shareholder disclaim any beneficial ownership of the other Investors' (defined
in Item 6) shares and only claim beneficial ownership of the above-mentioned 2,
500,000 shares. Please see Item 5.
Page 2 of 12
<PAGE> 3
CUSIP NO. 657193-10-8 SCHEDULE 13D
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(1) Names of Reporting Persons/S.S. or I.R.S. Identification Nos. of Above
Persons
R. CHANEY & CO., INC.
- --------------------------------------------------------------------------------
(2) Check the Appropriate Box if a Member of a Group (See Instructions)
(a) [x] (1)
(b) [ ]
- --------------------------------------------------------------------------------
(3) SEC Use Only
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(4) Source of Funds (See Instructions) OO (See Item 3)
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(5) Check Box if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e) [ ]
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(6) Citizenship or Place of Organization R. CHANEY & CO., INC. IS A
CORPORATION ORGANIZED UNDER THE
LAWS OF THE STATE OF TEXAS.
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Number of Shares (7) Sole Voting Power 0
Benefically ---------------------------------------------
Owned By
Each (8) Shared Voting Power 2,500,000(2)
Reporting ---------------------------------------------
Person With
(9) Sole Dispositive Power 0
---------------------------------------------
(10) Shared Dispositive Power 2,500,000(2)
- -------------------------------------------------------------------------------
(11) Aggregate Amount Beneficially Owned by Each Reporting Person 2,500,000(3)
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(12) Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares
(See Instructions) [x](3)
- --------------------------------------------------------------------------------
(13) Percent of Class Represented by Amount in Row (11) 9.1%(3)
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(14) Type of Reporting Person (See Instructions) CO
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- ----------------------------------
(1)R. Chaney Partners - 1993 L.P., its sole general partner, R. Chaney &
Co. Inc., and the general partner's sole shareholder, Robert Chaney, have a
limited relationship with other Investors as described in Items 4, 5, and 6.
(2)Voting and dispositive power is shared among the Partnership, the
General Partner, and the Sole Shareholder (defined in Item 2).
(3)If the relationships described in Items 4, 5, and 6 constitute a group
for purposes of Rule 13d-5 of the Act, then the group may collectively own an
aggregate of 18,500,000 out of 43,400,632 shares or 42.6 percent of the Common
Stock based on the conversion and calculation procedures described in Item
5(a)'s The Partnership. The Partnership, the General Partner, and the Sole
Shareholder (defined in Item 2) disclaim any beneficial ownership of the other
Investors' shares and only claim beneficial ownership of the above-mentioned
2,500,000 shares. Please see Item 5.
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<PAGE> 4
CUSIP NO. 657193-10-8 SCHEDULE 13D
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(1) Names of Reporting Persons/S.S. or I.R.S. Identification Nos. of Above
Persons
ROBERT H. CHANEY
- --------------------------------------------------------------------------------
(2) Check the Appropriate Box if a Member of a Group (See Instructions)
(a) [x] (1)
(b) [ ]
- --------------------------------------------------------------------------------
(3) SEC Use Only
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(4) Source of Funds (See Instructions) OO (See Item 3)
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(5) Check Box if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e) [ ]
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(6) Citizenship or Place of Organization ROBERT H. CHANEY IS A CITIZEN OF
THE UNITED STATES.
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Number of Shares (7) Sole Voting Power 0
Benefically ----------------------------------------------
Owned By
Each (8) Shared Voting Power 2,500,000(2)
Reporting ----------------------------------------------
Person With
(9) Sole Dispositive Power 0
----------------------------------------------
(10) Shared Dispositive Power 2,500,000(2)
- --------------------------------------------------------------------------------
(11) Aggregate Amount Beneficially Owned by Each Reporting Person 2,500,000(3)
- --------------------------------------------------------------------------------
(12) Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares
(See Instructions) [x] (3)
- --------------------------------------------------------------------------------
(13) Percent of Class Represented by Amount in Row (11) 9.1%(3)
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(14) Type of Reporting Person (See Instructions) IN
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(1)R. Chaney Partners - 1993 L.P., its sole general partner, R. Chaney &
Co. Inc., and the general partner's sole shareholder, Robert Chaney, have a
limited relationship with other Investors as described in Items 4, 5, and 6.
(2)Voting and dispositive power is shared among the Partnership, the
General Partner, and the Sole Shareholder (defined in Item 2).
(3)If the relationships described in Items 4, 5, and 6 constitute a group
for purposes of Rule 13d-5 of the Act, then the group may collectively own an
aggregate of 18,500,000 out of 43,400,632 shares or 42.6 percent of the Common
Stock based on the conversion and calculation procedures described in Item
5(a)'s The Partnership. The Partnership, the General Partner, and the Sole
Shareholder (defined in Item 2) disclaim any beneficial ownership of the other
Investors' shares and only claim beneficial ownership of the above-mentioned
2,500,000 shares. Please see Item 5.
Page 4 of 12
<PAGE> 5
ITEM 1. SECURITY AND ISSUER
The class of equity securities to which this statement relates is
common stock, $.001 par value per share (the "Common Stock") of North American
Technologies Group, Inc., a Delaware corporation (the "Issuer"). The address
of the principal executive offices of the Issuer is 4710 Bellaire Boulevard,
Suite 301, Bellaire, Texas 77401.
ITEM 2. IDENTITY AND BACKGROUND
Item 2(a)-(c)
R. Chaney & Partners-1993 L.P. is a limited partnership formed under
the laws of Texas (the "Partnership"). Its principal business is investments.
The Partnership's principal business and office address is 909 Fannin, Suite
1275, Two Houston Center, Houston, Texas 77010-1006.
R. Chaney & Co., Inc. is the sole general partner of the Partnership
and is a corporation organized under the laws of the State of Texas (the
"General Partner"). Its principal business is investments. The General
Partner's principal business and office address is 909 Fannin, Suite 1275, Two
Houston Center, Houston, Texas 77010-1006.
The sole shareholder of the corporate General Partner is Robert H.
Chaney (the "Sole Shareholder"). Information regarding the Sole Shareholder
appears in the accompanying table.
The name, business address, present principal occupation or employment
of each of the executive officers and directors of corporate General Partner
and the name, principal business and address of any corporation or other
organization in which such employment is conducted, are set forth below:
<TABLE>
<CAPTION>
========================================================================================================================
EXECUTIVE OFFICERS AND DIRECTORS OF THE GENERAL PARTNER
========================================================================================================================
NAME, PRINCIPAL BUSINESS
ADDRESS OF ORGANIZATION
NAME AND CAPACITY IN PRINCIPAL IN WHICH PRINCIPAL
BUSINESS ADDRESS WHICH SERVES OCCUPATION OCCUPATION IS CONDUCTED
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Robert H. Chaney President, Chief President and R. Chaney & Co., Inc.
909 Fannin, Suite 1275 Executive Officer, Chief Executive 909 Fannin, Suite 1275
Two Houston Center and Chairman of the Officer Two Houston Center
Houston, Texas 77010-1006 Board Houston, Texas 77010-1006
- ------------------------------------------------------------------------------------------------------------------------
Jason Whitley Executive Vice Executive Vice R. Chaney & Co., Inc.
909 Fannin, Suite 1275 President President 909 Fannin, Suite 1275
Two Houston Center Two Houston Center
Houston, Texas 77010-1006 Houston, Texas 77010-1006
- ------------------------------------------------------------------------------------------------------------------------
Paula Pierce Secretary, Secretary, Treasurer, R. Chaney & Co., Inc.
909 Fannin, Suite 1275 Treasurer, and Vice and Vice President 909 Fannin, Suite 1275
Two Houston Center President Administration Two Houston Center
Houston, Texas 77010-1006 Administration Houston, Texas 77010-1006
========================================================================================================================
</TABLE>
Page 5 of 12
<PAGE> 6
Item 2(d)
During the past five years, none of the entities or individuals
identified in this Item 2 has been convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors).
Item 2(e)
During the last five years, none of the entities or individuals
identified in this Item 2 was a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such
proceeding was or is subject to a judgment, decree or final order enjoining
future violations of, or prohibiting or mandating activities subject to,
federal or state securities laws or finding any violation with respect to such
laws.
Item 2(f)
The Partnership was formed under the laws of the State of Texas. The
corporate General Partner is incorporated under the laws of the State of Texas.
The individuals identified in this Item 2 are all citizens of the United States
of America.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
The Partnership transferred the following as consideration to the
Issuer: (a) a 13.5 percent Convertible Subordinated Note of the Issuer
("Subordinated Note"), which in this case was issued in the principal amount of
$1,250,000 and payable to the Partnership and (b) a Stock Purchase Warrant of
the Issuer ("Surrendered Warrant"), which in this case represented the right to
purchase 1,250,000 shares of Common Stock (No. 1995-17) (both surrendered for
cancellation).
In exchange, the Issuer transferred the following to the Partnership:
(a) a Stock Certificate (No. 02) representing 12,500 shares of the Issuer's
Class of Series F Preferred Stock ("Preferred Stock"), (b) a Warrant issued by
the Issuer ("Warrant") to purchase 1,250,000 shares of Common Stock (No.
1996-03), and (c) approximately $92,000 in interest. Both the Preferred Stock
and the Warrant are immediately convertible into shares of Common Stock.
In accordance with Rule 13d-1(f)(2) promulgated under the Act, the
source and amount of funds or other consideration for Investors (defined in
Item 6) is listed in Schedule I.
ITEM 4. PURPOSE OF TRANSACTION
The Partnership, the General Partner, and the Sole Shareholder
acquired the securities for investment purposes.
The Issuer and Investors entered into a Stockholders' Agreement
(defined in Item 6). The Stockholders' Agreement's Section 4(b) states that
each of the Investors shall vote all of their shares of Common Stock and
Preferred Stock, then owned beneficially by such person (to the maximum extent
that such person has the right to vote or direct the vote of such shares), in
favor of electing Board of Director nominees designated pursuant to the
Purchase Agreement's Section 4.11 (the Purchase Agreement is defined in Item 6)
(overall, the "Voting Agreement"). Pursuant to the Purchase Agreement's
Section 4.11, the Issuer agreed to nominate to the Board of Directors, for as
long as the Preferred Stock is owned by the Investors or permitted transferees,
(i) four members designated by the holders of a majority in interest of the
Preferred Stock, at least one of whom shall be designated by NationsBanc
Capital Corporation ("NBCC")
Page 6 of 12
<PAGE> 7
so long as NBCC owns at least fifty percent of the Preferred Stock, (ii) four
members designated by the holders of Common Stock and the holders of a majority
in interest of the Preferred Stock, and (iii) one member designated jointly by
the holders of Common Stock and holders of a majority in interest of the
Preferred Stock. If the Issuer breaches any of the covenants or obligations
set forth in the Purchase Agreement and the breach remains uncured, the holders
of a majority in interest of the Preferred Stock shall be then entitled to
nominate and elect a majority of directors to the Issuer's Board of Directors,
at least two of whom shall be designees of NBCC.(4) In addition, the Voting
Agreement provides that the Investors agree to take no action to decrease the
number of Board members to less than nine.(5)
Except as set forth in this Item 4, the Partnership, the General
Partner, and/or the Sole Shareholder have no present plans or proposals that
relate to or would result in any of the actions specified in clauses (a)
through (j) of Item 4 of Schedule 13D.
The summary set forth in this Item 4 of Schedule 13D of certain
aspects of the transactions reported in this Schedule 13D does not purport to
be a complete description of, and is qualified in its entirety by reference to,
the provisions of the various agreements and documents attached as exhibits to
this Schedule 13D and incorporated herein by reference for all purposes.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER
Item 5(a)
The Partnership. The Partnership beneficially owns (1) a warrant to
purchase 1,250,000 shares of Common Stock (at an exercise price per share of
$1.00) as well as interest described in Item 3 and (2) 12,500 shares of
Preferred Stock that are initially convertible into 1,250,000 shares of Common
Stock following calculation procedures as set out in Section A(3) of the
Certificate of Designation relating to such Preferred Stock.(6) The number of
outstanding shares of Common Stock for purposes of this Schedule 13D is
27,400,632 shares.(7) Considering
- ----------------------------------
(4)The Issuer generally agreed to comply and cause its subsidiaries to
comply with this provision for so long as the Investors hold at least twenty
percent of the Preferred Stock (Purchase Agreement Section 4).
(5)The following individuals were elected as directors of the Issuer on
June 27, 1996: Douglas C. Williamson, Robert H. Chaney, Mark E. Leyerle,
Christopher Roser, William T. Aldrich, David M. Daniels, Edwin H. Knight,
Donovan W. Boyd and Tim B. Tarrillion. The first four individuals represent
nominees of the Investors pursuant to the Voting Agreement.
The Stockholders' Agreement also states that the Investors generally shall
not transfer any shares of Common Stock, Preferred Stock or Warrants to any
person or any entity reasonably determined by a majority of the Board of
Directors to be a competitor of the Company (Stockholders' Agreement Section
6). Pursuant to the Purchase Agreement, the Investors acting together in
concert five years after the Purchase Agreement's closing date, can implement
a reverse stock split which would (if consummated) create a Common Stock price
in excess of $12.00 per share, based on certain calculation assumptions
(Purchase Agreement Section 4.14).
(6)The Issuer's Certificate of Designation's Section A(3) provides that the
Preferred Stock shall be initially convertible (at the holder's option and at
any time) into the number of fully paid and nonassessable shares of Common
Stock which results from dividing the Series F Conversion Price (defined below)
per share in effect for such series at the time of the conversion into the per
share Series F Conversion Value (defined below) of such series. The initial
Conversion Price of the Preferred Stock (the "Series F Conversion Price") is
to be $1.00 per share, and the Conversion Value of the Preferred Stock (the
"Series F Conversion Value") is to be $100.00 per share. Therefore, each
share of Preferred Stock is convertible into 100 shares of Common Stock. This
conversion is subject to certain adjustments as detailed more fully in A(3) of
the Certificate of Designation. Subject to certain conversion rights, the
Company may redeem the shares of Preferred Stock at face value on or after
April 8, 2004. The Warrants are also subject to certain adjustments and
expire on April 8, 2004.
(7)The Issuer's most recent 10-QSB (filed with the Securities and Exchange
Commission on May 14, 1996) states that the number of outstanding shares of the
Issuer's Common Stock at the close of business on May 14, 1996 was 24,900,632.
Following Rule 13d-3(d), the 2,500,000 shares deemed to be benefically owned by
the Partnership were added to this number.
Page 7 of 12
<PAGE> 8
this form of conversion, the Partnership is deemed to beneficially own
2,500,000 shares out of the 27,400,632 shares, or 9.1 percent, of the Common
Stock.
The General Partner. The General Partner as the sole general partner
of the Partnership may be deemed to be the beneficial owner of all 2,500,000
shares of Common Stock beneficially owned by the Partnership that constitute
approximately 9.1 percent of the outstanding shares of Common Stock based on
the conversion and calculation procedures described in this Item's 5(a)'s The
Partnership.
Sole Shareholder. The Sole Shareholder of the General Partner of the
Partnership may be deemed to be the beneficial owner of all 2,500,000 shares of
Common Stock beneficially owned by the Partnership that constitute
approximately 9.1 percent of the outstanding shares of Common Stock based on
the conversion and calculation procedures described in this Item 5(a)'s The
Partnership.
Executive Officers and Director of the General Partner. Except as
otherwise described herein, none of the executive officers or director own any
of the Issuer's Common Stock.
Certain Relationships. The Partnership, the General Partner, and the
Sole Shareholder have a limited relationship with the other Investors to the
extent of the above-described provisions of the Voting Agreement. Such
relationships may constitute a group for the purpose of Rule 13d-5. Except as
otherwise described here in and to the Partnership's, the General Partner's,
and the Sole Shareholder's best knowledge, the Investors collectively may own
an aggregate of 18,500,000 out of 43,400,632 shares or 42.6 percent of the
Common Stock based on the conversion and calculation procedures described in
this Item 5(a)'s The Partnership. Because of the limited nature of their
relationship to the Investors, each of the Partnership, the General Partner,
and the Sole Shareholder disclaims any beneficial ownership of the other
Investors' shares and only claim beneficial ownership of the above-mentioned
2,500,000 shares.
Item 5(b)
The Partnership, the General Partner and the Sole Shareholder share
voting and dispositive power of these 2,500,000 shares. As stated above, the
Partnership, the General Partner, and the Sole Shareholder disclaim any
beneficial ownership or shared voting or dispositive power of the other
Investors' shares.
Item 5(c)
Except as otherwise described herein, none of the entities or
individuals described in Item 2 has effected any transaction in the Common
Shares of the Issuer during this time period commencing 60 days preceding the
date of the event that required the filing of this Schedule 13D through the
date hereof. (See n. 7).
Item 5(d)
No person other than the Partnership, the General Partner, or the Sole
Shareholder has the right to receive or the power to direct the receipt of
dividends from, or the proceeds from the sale of, Common Stock of the Issuer
with respect to which this filing is made.
- -----------------------------------
On July 10, 1996, the Issuer also issued to the Partnership 384
additional shares of Preferred Stock in conjunction with its payment of
dividends to holders of Preferred Stock in accordance with Section A of the
Issuer's Certificate of Designation as filed with Delaware's Office of the
Secretary of State on April 8, 1996. These additional shares also have the
same initial Series F Conversion Price and Series F Conversion Value as
described in note 6.
It is the reporting persons' understanding that the Issuer also has
issued on separate occassions in June 1996 an additional 437,589 shares of
Common Stock, which are outstanding. After July 10, 1996, the Issuer also
issued an additional 750,000 shares of Common Stock, which are also
outstanding. Information regarding these or any subsequent issuances will be
provided in an amendment to this Schedule 13D if required.
Page 8 of 12
<PAGE> 9
Item 5(e)
Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER
Except as set forth in Items 4 or 6 or in the Exhibits filed herewith,
there are no contracts, arrangements, understandings or relationships (legal or
otherwise) between any of the individuals or entities described in Item 2 or
between such persons and any other person with respect to the shares of Common
Stock deemed to be beneficially owned by the Partnership, the General Partner,
and the Sole Shareholder.
The Purchase Agreement. The Issuer and the Partnership entered into a
Stock and Warrant Purchase Agreement dated as of April 5, 1996 ("Purchase
Agreement"). Under the Purchase Agreement, the Issuer agreed to pay interest
and sell the Preferred Stock and the Warrant and the Partnership agreed to
receive interest and purchase the Preferred Stock and the Warrant as described
in Item 3. In addition to the Issuer, the parties to the Purchase Agreement
are as follows:
o NationsBanc Capital Corporation;
o R. Chaney & Partners-1993 L.P.;
o The CCG Charitable Remainder Unitrust #1;
o Harrison Interests, Ltd.;
o Robert L. Zinn;
o Natalie Z. Haar;
o Estate of Williams G. Helis, A Louisiana Partnership;
o Pecaut Capital Investors, L.P.;
o Pecaut Partners, A Limited Partnership;
o The Roser Partnership II, Ltd.;
o Katherine S. Evans;
o The Parade Fund;
o Robert D. Greenlee;
o Heptagon Investments, Ltd., A British Virgin Islands Company;
o EET, Inc. (Issuer's operating subsidiary);
o Industrial Pipe Fittings, Inc. (Issuer's operating
subsidiary);
o GAIA Technologies, Inc. (Issuer's operating subsidiary); and
o North American Environmental Group, Inc. (Issuer's operating
subsidiary).
The Purchase Agreement describes terms typical in an investment of
this nature including the matters described in Item 4 and the following
sections of the Purchase Agreement:
4. Covenants of the Parties. The Issuer agreed that, generally
for so long as the Investors hold at least 20 percent of the Preferred
Stock, the Issuer will and will cause its subsidiaries to comply with
the continuing obligations in the following sections of the Purchase
Agreement:
4.13 Option Pool. The Issuer will not establish a stock
grant, option plan or purchase plan, other employee stock
incentive program or agreement that in the aggregate exceeds 5
percent of the fully diluted Common Stock, subject to certain
conditions and exceptions. Initially, any options granted
under such a plan will have an exercise price of at least
$1.00 per share.
4.15 Restricted Corporate Actions. Without the approval
of the holders of a majority in interest of the Preferred
Stock, neither the Issuer nor any of the Issuer's subsidiaries
will repurchase, redeem or retire any shares of capital stock
Page 9 of 12
<PAGE> 10
of the Issuer other than pursuant to the Stockholders'
Agreement, the Purchase Agreement, and certain other
agreements.
4.22 Change of Control. The Issuer will not allow one or
more persons acting in concert, together with all affiliates,
to acquire in one or more related transactions, more than 50
percent of the shares of capital stock of the Issuer that are
then entitled to vote for the election of the directors of the
Issuer.
5. Registration Rights. The Issuer has agreed to provide certain
demand and piggy back registration rights.
7. Right of First Refusal on Issuance of New Securities. The
Issuer has agreed to grant to each Investor, who holds at least 20
percent of the Preferred Stock, a right of first refusal to purchase a
pro-rata proportion of new securities that the Issuer may propose to
sell and issue from time to time subject to certain conditions and
exceptions.
The Stockholders' Agreement. On April 5, 1996, the Issuer and
following parties ("Investors") entered into the Stockholders' Agreement
("Stockholders' Agreement"), which was amended also on April 5, 1996:
o Tim B. Tarrillion;
o Judith Knight Shields;
o David M. Daniels;
o Donovan W. Boyd;
o NationsBanc Capital Corporation;
o R. Chaney & Partners-1993 L.P.;
o The CCG Charitable Remainder Unitrust #1;
o Harrison Interests, Ltd.;
o Robert L. Zinn;
o Natalie Z. Haar;
o Estate of Williams G. Helis, A Louisiana Partnership;
o Pecaut Capital Investors, L.P.;
o Pecaut Partners, A Limited Partnership;
o The Roser Partnership II, Ltd.;
o Katherine S. Evans;
o The Parade Fund;
o Robert D. Greenlee; and
o Heptagon Investments, Ltd., A British Virgin Islands Company.
In addition to the matters referred to under Item 4, the Stockholders'
Agreement provides:
2. Right of First Refusal. Subject to certain conditions and
exceptions, if an Investor or a permitted assignee proposes to
transfer shares of Common or Preferred Stock or Warrants
("Securities") to a third party, the Investor or the permitted
assignee first must offer the Securities to the Issuer at the same
price and upon the same terms as the third-party offer. If the Issuer
does not purchase the Securities, the Investor or permitted assignee
must then offer the Securities to the other Investors or other
permitted
Page 10 of 12
<PAGE> 11
assignees at the same price and upon the same terms as the third-party
offer before a transfer is allowed to third parties.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
The information required by this Item 7 is set forth in the Index to
Exhibits accompanying this Schedule 13D filing.
Page 11 of 12
<PAGE> 12
SIGNATURES
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
July 15, 1996
R. CHANEY & PARTNERS-1993 L.P.
By: R. CHANEY & CO., INC., General
Partner
By: /s/ Robert H. Chaney
---------------------
Robert H. Chaney,
President and Chief
Executive Officer
R. CHANEY & CO., INC.
By: /s/ Robert H. Chaney
--------------------------------
Robert H. Chaney,
President and Chief
Executive Officer
/s/ Robert H. Chaney
----------------------------------------
Robert H. Chaney,
Sole Shareholder of R. Chaney & Co.,
Inc.
Page 12 of 12
<PAGE> 13
SCHEDULE I TO SCHEDULE 13D
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
To the best knowledge of the Partnership, the General Partner and the
Sole Shareholder, the following Investors transferred to the Issuer and
received in exchange the following consideration based on information provided
to the Partnership:
NationsBanc Capital Corporation transferred to the Issuer the
aggregate sum of $5,000,000 in exchange for 50,000 shares of Preferred
Stock (Stock Certificate No. 01) and a Warrant to purchase 5,000,000
shares of Common Stock (No. 1996-02).
CCG Charitable Remainder Unitrust #1 ("Trust") transferred to the
Issuer a Subordinated Note, which in this case was issued in the
principal amount of $750,000 and payable to the Trust, and a
Surrendered Warrant, which in this case represented the right to
purchase 750,000 shares of Common Stock (No. 1995-18). In exchange,
the Issuer transferred to the Trust: (a) 7,500 shares of Preferred
Stock (Stock Certificate No. 03), (b) a Warrant to purchase 750,000
shares of Common Stock (No. 1996-04) and (c) approximately $55,000 in
interest.
Harrison Interests, Ltd. ("Harrison") transferred to the Issuer a
Subordinated Note, which in this case was issued in the principal
amount of $500,000 and payable to Harrison, and a Surrendered Warrant,
which in this case represented the right to purchase 500,000 shares of
Common Stock (No. 1995-19). In exchange, the Issuer transferred to
Harrison: (a) 5,000 shares of Preferred Stock (Stock Certificate No.
04) (b) a Warrant to purchase 500,000 shares of Common Stock (No.
1996-05) and (c) approximately $37,000 in interest.
Robert L. Zinn transferred to the Issuer a Subordinated Note, which in
this case was issued in the principal amount of $100,000 and payable
to Robert L. Zinn, and a Surrendered Warrant, which in this case
represented the right to purchase 100,000 shares of Common Stock (No.
1995-20). In exchange, the Issuer transferred to Mr. Zinn: (a) 1,000
shares of Preferred Stock (Stock Certificate No. 05) (b) a Warrant to
purchase 100,000 shares of Common Stock (No. 1996-06) and (c)
approximately $7,400 in interest.
Natalie Haar transferred to the Issuer a Subordinated Note, which in
this case was issued in the principal amount of $50,000 and payable to
Natalie Haar, and a Surrendered Warrant, which in this case
represented the right to purchase 50,000 shares of Common Stock (No.
1995-21). In exchange, the Issuer transferred to Ms. Haar: (a) 500
shares of Preferred Stock (Stock Certificate No. 06) (b) a Warrant to
purchase 50,000 shares of Common Stock (No. 1996-07) and (c)
approximately $3,700 in interest.
The Estate of William G. Helis, a Louisiana partnership, ("Helis
Partnership") transferred to the Issuer (a) a Subordinated Note, which
in this case was issued in the principal amount of $50,000 and payable
to the Helis Partnership and (b) a Surrendered Warrant, which in this
case represented the right to purchase 50,000 shares of Common Stock
(No. 1995-22). In exchange, the Issuer transferred to the Helis
Partnership:
<PAGE> 14
(a) 500 shares of Preferred Stock (Stock Certificate No. 07), (b) a
Warrant to purchase 50,000 shares of Common Stock (No. 1996-08) and
(c) approximately $3,700 in interest.
Pecaut Capital Investors, L.P. transferred to the Issuer the aggregate
sum of $400,000 in exchange for 4,000 shares of Preferred Stock (Stock
Certificate No. 08) and a Warrant to purchase 400,000 shares of Common
Stock (No. 1996-09).
Pecaut Partners, a limited partnership, transferred to the Issuer the
aggregate sum of $100,000 in exchange for 1,000 shares of Preferred
Stock (Stock Certificate No. 09) and a Warrant to purchase 100,000
shares of Common Stock (No. 1996-10).
The Roser Partnership II, Ltd. transferred the aggregate sum of
$500,000 to the Issuer in exchange for 5,000 shares of Preferred Stock
(Stock Certificate No. 10) and a Warrant to purchase 500,000 shares of
Common Stock (No. 1996-11).
Katherine S. Evans transferred the aggregate sum of $100,000 to the
Issuer in exchange for 1,000 shares of Preferred Stock (Stock
Certificate No. 12) and a Warrant to purchase 100,000 shares of Common
Stock (No. 1996-13).
The Parade Fund transferred the aggregate sum of $100,000 to the
Issuer in exchange for 1,000 shares of Preferred Stock (Stock
Certificate No. 11) and a Warrant to purchase 100,000 shares of Common
Stock (No. 1996-12).
Robert D. Greenlee transferred the aggregate sum of $100,000 to the
Issuer in exchange for 1,000 shares of Preferred Stock (Stock
Certificate No. 13) and a Warrant to purchase 100,000 shares of Common
Stock (No. 1996-14).
Heptagon Investments, Ltd. transferred the aggregate sum of $250,000
to the Issuer in exchange for 2,500 shares of Preferred Stock (Stock
Certificate No. 14) and a Warrant to purchase 250,000 shares of Common
Stock (No. 1996-15).
<PAGE> 15
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
10.1 Stock and Warrant Purchase Agreement dated as of April 5, 1996, by and among the
signatories listed in Item 6.
10.2 Stockholders' Agreement dated as of April 5, 1996 by and among the parties listed in
Item 6.
10.3 Amendment No. 1 to the Stockholders' Agreement dated as of April 5, 1996, by and among
the same.
10.4 Joint Reporting Agreement dated as of July 15, 1996 by and among R. Chaney Partners-
1993 L.P., R. Chaney & Co., Inc., and Robert H. Chaney.
</TABLE>
<PAGE> 1
EX-10.1
THE SECURITIES PURCHASED PURSUANT TO THE TERMS OF THIS AGREEMENT HAVE NOT BEEN
REGISTERED UNDER EITHER THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933
ACT"), OR APPLICABLE STATE SECURITIES LAWS (THE "STATE ACTS"), AND SHALL NOT BE
SOLD, PLEDGED, HYPOTHECATED, DONATED OR OTHERWISE TRANSFERRED (WHETHER OR NOT
FOR CONSIDERATION) BY THE HOLDER EXCEPT BY REGISTRATION OR PURSUANT TO AN
EXEMPTION FROM REGISTRATION UPON THE ISSUANCE TO THE COMPANY OF A FAVORABLE
OPINION OF COUNSEL OR OTHER EVIDENCE REASONABLY SATISFACTORY TO THE COMPANY TO
THE EFFECT THAT ANY SUCH TRANSFER SHALL NOT BE IN VIOLATION OF THE 1933 ACT AND
THE STATE ACTS.
STOCK AND WARRANT PURCHASE AGREEMENT
North American Technologies Group, Inc., a Delaware corporation (the
"Company"), its Operating Subsidiaries (as defined herein) signatory hereto
(for purposes of SECTION 2 only), NationsBanc Capital Corporation, a Texas
corporation ("NBCC"), and the other parties signatory hereto (each an
"Investor" and, with NBCC, collectively, the "Investors") enter into this
Agreement, dated April 5, 1996, relating to the issuance by the Company of
certain of its securities.
SECTION 1. DESCRIPTION OF TRANSACTION
1.1 DESCRIPTION OF SECURITIES. The Company agrees to issue to the
Investors, and the Investors severally but not jointly agree to purchase from
the Company, shares of the Company's authorized but unissued Series F Preferred
Stock, $.001 par value per share (the "Preferred Shares", which shall include
any shares of Series F Preferred Stock issued as stock dividends and/or
payments-in-kind), as indicated on Exhibit A. The Preferred Shares will be
convertible into shares of the Company's Common Stock, $.001 par value per
share (the "Common Stock"), as provided in Exhibit B. In connection with the
issuance of the Preferred Shares, the Company will also issue to the Investors
warrants exercisable into shares of the Company's Common Stock (the
"Warrants"). Any securities of the Company issued or issuable upon conversion
of the Preferred Shares (and any Common Stock issued as stock dividends and/or
payments-in-kind on the Preferred Shares) are referred to as "Conversion
Shares." Any securities of the Company issued or issuable upon exercise of the
Warrants are referred to as "Warrant Shares."
1.2 CLOSING.
(a) The closing (the "Closing") of the sale of the Preferred
Shares and the Warrants will take place at the offices of Jenkens & Gilchrist,
a Professional Corporation, Houston, Texas, counsel for the Investors, at 1:00
p.m., on the date of this Agreement, or such other time and place as agreed to
by the parties (the "Closing Date"). At the Closing, the Company will deliver
the Preferred Shares and the Warrants being acquired by the Investors upon
payment of
<PAGE> 2
the purchase price by the Investors to the Company by either (a) wire transfer,
(b) certified or bank cashier's check, (c) surrender for cancellation by the
holders thereof of those certain 13 1/2% Convertible Subordinated Notes, due
September 22, 2000 (the "Notes"), and those certain Stock Purchase Warrants
(the "Purchase Warrants"), both issued pursuant to that certain Investment
Agreement, dated as of September 22, 1995 (the "Investment Agreement"), by and
among the Company and the signatories thereto, or (d) other form of payment
acceptable to the Company, as shown on Exhibit A. The Company will not be
obligated to issue any Preferred Shares or Warrants unless the Investors
purchase all the Preferred Shares and Warrants indicated on Exhibit A to be
purchased at the Closing, and the Company will pay to each holder of a
surrendered Note the amount of the accrued and unpaid interest on such Note to
the Closing Date, in accordance with the terms of such Note.
(b) In the event the Company does not at the Closing sell and
issue, and/or receive commitments to purchase, all 100,000 Preferred Shares
authorized herein to be issued and sold to the Investors, the Company may sell
and issue additional Preferred Shares at a subsequent closing (hereinafter
referred to as the "Deferred Closing"); provided, that (i) the aggregate
purchase price paid for Preferred Shares at the Closing referred to in SECTION
1.2(a) is at least $7,700,000 ($2,700,000 of which shall have come from the
surrender and cancellation of the Notes and Purchase Warrants), (ii) such sales
occur on or prior to May 15, 1996 at the same price and on the same terms and
conditions set forth herein, (iii) each purchaser at the Deferred Closing
executes the Stockholders' Agreement (as defined herein) and (iv) the aggregate
number of Preferred Shares sold at the Closing and the Deferred Closing do not
exceed the number of Preferred Shares authorized to be sold at the Closing; and
provided, further, that, for purposes of such Deferred Closing, each of the
conditions precedent set forth in SECTION 1.3 hereof shall be deemed to have
been met without any further action necessary on the part of the Company or its
counsel. At the Deferred Closing, upon execution of this Agreement and the
Stockholders' Agreement, a purchaser shall become a party hereto and shall be
included within the meaning of "Investor" hereunder, the shares of Series F
Preferred so issued shall be included within the term "Preferred Shares"
hereunder, the warrants so issued shall be included within the term "Warrants"
hereunder and Exhibit A shall be amended to include such Investors, without any
further consent or action on the part of the initial Investors. Each Investor
irrevocably waives any and all rights of first refusal or other rights in
respect of any Preferred Shares and/or Warrants purchased at a Deferred
Closing.
1.3 CONDITIONS TO CLOSING. The obligation of each Investor to
purchase and pay for the Preferred Shares to be purchased by each Investor at
the Closing is subject to the satisfaction at or prior to the Closing of each
of the following conditions:
(a) the Company shall have duly authorized and filed a Certificate
of Designations (the "Designations") with the Secretary of State of the State
of Delaware substantially in the form attached hereto as Exhibit B;
(b) each of the parties listed on the signature page hereto shall
have entered into a Stockholders' Agreement (the "Stockholders' Agreement"),
substantially in the form attached hereto as Exhibit C;
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<PAGE> 3
(c) the Company shall have issued the Warrants to be acquired by
the Investors, substantially in the form attached hereto as Exhibit D;
(d) Theodore J. Lee, counsel for the Company, shall have delivered
to each Investor a legal opinion, dated as of the Closing Date, in form and
substance reasonably satisfactory to the Investors;
(e) the Company shall have delivered to NBCC the information
required by the Small Business Administration (the "SBA"), including SBA Forms
480 (Size Status Declaration), 652 (Assurance of Compliance for
Nondiscrimination) and 1031 (Portfolio Financing Report), that is requested by
NBCC;
(f) the Company shall have obtained key man term life insurance
with insurer(s) of recognized responsibility in the amount of $1,000,000 (and
an additional $1,000,000 shall have been applied for) on Tim B. Tarrillion,
$500,000 on each of Donovan W. Boyd (and an additional $500,000 shall be
promptly after the Closing Date applied for), Judith Knight Shields and Michael
Bonem, and $1,700,000 on Ron Borah during the respective period or periods that
each such person is employed by the Company or any Subsidiary (as defined
herein), with the Company as the sole beneficiary of the proceeds of the
policies described herein (the "Key Man Insurance");
(g) the Company shall have delivered to each Investor the
financial statements referred to in SECTION 2.7 below (with a draft audit
letter from the Company's independent auditor); and
(h) the Company shall have delivered to each Investor:
(i) the Certificate of Incorporation of the Company and
all amendments thereto, certified by the Secretary of State of
Delaware;
(ii) (A) copies of the Company's and each Operating
Subsidiary's resolutions of the Board of Directors authorizing and
approving this Agreement and all of the transactions and agreements
contemplated hereby and thereby, (B) the Bylaws of the Company and (C)
the names of the officer or officers of the Company and each Operating
Subsidiary authorized to execute this Agreement and any and all
documents, agreements and instruments contemplated herein, all
certified by the Secretary of the Company to be true, correct,
complete and in full force and effect and unmodified as of the Closing
Date;
(iii) a good standing certificate for the Company and each
Operating Subsidiary from the Secretary of State of the jurisdiction
of organization of each and a certificate from each state where the
Company and each Operating Subsidiary is required (as provided in
SECTION 2.1 hereof) to be qualified as a foreign corporation showing
such qualification, dated as of a date within ten (10) days of the
Closing Date;
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<PAGE> 4
(iv) the consolidated budget/operating forecast of the
Company and the Subsidiaries;
(v) a certificate of the President of the Company, dated
as of the Closing Date, stating that the conditions specified in
SECTIONS 1.3(a)-(g) above have been fully satisfied; and
(vi) such other documents, instruments, and certificates
as the Investors may reasonably request.
SECTION 2. REPRESENTATIONS OF THE COMPANY
As part of the basis of this Agreement, the Company (which such
representations of the Company for the purposes of this SECTION 2 shall be
deemed to be both with respect to the Company itself and with respect to the
Company and the Subsidiaries, taken as a whole) and each Operating Subsidiary
signatory hereto, jointly and severally, represent to the Investors that:
2.1 ORGANIZATION. Each of the Company and EET, Inc., Industrial
Pipe Fittings, Inc., GAIA Technologies, Inc. and North American Environmental
Group, Inc. (collectively, the "Operating Subsidiaries" and each an "Operating
Subsidiary" and, with the other entities listed in Schedule 2.16 hereto,
collectively, the "Subsidiaries" and each a "Subsidiary") is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization, and except as described in Schedule 2.1, is
not required to be qualified to do business as a foreign corporation in any
other jurisdiction where the failure to so qualify would have a material
adverse effect on the Company and the Operating Subsidiaries. Schedule 2.1
sets forth the jurisdictions in which the Company and each Operating Subsidiary
is qualified.
2.2 CORPORATE POWER. The Company and each Operating Subsidiary
have all required corporate power and authority to own their respective
properties and to carry on their respective businesses as presently conducted
and as proposed to be conducted. The Company and each Operating Subsidiary
have all required corporate power and authority to enter into, deliver and
perform this Agreement and to fully carry out the transactions contemplated by
this Agreement. The copies of the Certificate or Articles, as applicable, of
Incorporation and Bylaws of the Company and each Operating Subsidiary, as
amended to date, which have been furnished to counsel for the Investors, are
true, correct and complete.
2.3 AUTHORIZATION. This Agreement and all documents executed
pursuant to this Agreement are valid and binding obligations of the Company and
the Operating Subsidiaries, as the case may be, enforceable according to their
terms, except as may be limited by (a) applicable bankruptcy, insolvency,
reorganization or other similar laws of general application relating to or
affecting the enforcement of creditor rights, (b) laws and judicial decisions
regarding indemnification for violations of federal securities laws, and (c)
the availability of specific performance or other equitable remedies. The
execution, delivery and performance of this Agreement and the issuance of the
Preferred Shares, the Warrants, the Conversion Shares and
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<PAGE> 5
zero (0) of the Warrant Shares have been duly authorized by all necessary
corporate action of the Company and the Operating Subsidiaries, as the case may
be.
2.4 GOVERNMENTAL AUTHORIZATION; THIRD PARTY CONSENTS. No
approval, consent, exemption, authorization, or other action by, or notice to,
or filing with, any governmental authority or any other individual,
corporation, partnership, trust, incorporated or unincorporated association,
joint venture, joint stock company, government (or an agency or political
subdivision thereof) or other entity of any kind is necessary or required in
connection with the execution, delivery, performance or enforcement against the
Company and the Operating Subsidiaries of this Agreement, or any other
documents executed pursuant to this Agreement, except for federal and state
securities filings.
2.5 CAPITALIZATION. The authorized and issued capital stock of
the Company and each Operating Subsidiary is as set forth in Schedule 2.5. All
of the presently outstanding shares of capital stock of the Company and each
Subsidiary have been validly authorized and issued and are fully paid and
nonassessable. The Preferred Shares have been validly authorized and, when
delivered and paid for pursuant to this Agreement, will be validly issued,
fully paid and nonassessable, and free of all encumbrances and restrictions,
except restrictions on transfer imposed by applicable securities laws, the
Certificate of Incorporation, the Stockholders' Agreement and/or this
Agreement. The relative rights, preferences, restrictions and other provisions
relating to the Preferred Shares are as set forth in Exhibit B. The Company
has authorized and reserved for issuance upon conversion of the Preferred
Shares not less than 15,000,000 shares of its Common Stock and upon exercise of
the Warrants zero (0) shares of its Common Stock (which as of the date hereof
is not sufficient to allow exercise of all of the Warrants purchased
hereunder), and the Conversion Shares and the Warrant Shares will be, when and
if issued, validly authorized and issued, fully paid and nonassessable, and
free of all encumbrances and restrictions, except restrictions on transfer
imposed by applicable securities laws, the Certificate of Incorporation, the
Stockholders' Agreement and/or this Agreement. Except as provided in Schedule
2.5, neither the Company nor any Subsidiary has issued any other shares of its
capital stock and there are no outstanding subscriptions, warrants, options,
calls, commitments, or other rights to purchase or acquire, or securities
convertible into or exchangeable for, any capital stock of the Company or any
Subsidiary. Except as disclosed on Schedule 2.5 or as contemplated under this
Agreement (and the other agreements executed in connection herewith), there are
no agreements to which the Company or any Subsidiary is a party or has
knowledge regarding the issuance, registration, voting, transfer of or
obligation (contingent or otherwise) of the Company or any Subsidiary to
repurchase or otherwise acquire or retire or redeem any of its outstanding
shares of capital stock.
2.6 PREEMPTIVE RIGHTS. There are no preemptive rights affecting
the issuance or sale of the Company's capital stock, except as described in
SECTION 7 hereof.
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<PAGE> 6
2.7 FINANCIAL STATEMENTS. Schedule 2.7 contains the following
financial statements of the Company:
its unaudited financial statements (consolidated
balance sheet and statements of income, retained earnings and
cash flows, including notes thereto) at December 31, 1995, and
for the fiscal year then ended (the balance sheet included
therein being the "Base Balance Sheet"), and its unaudited
financial statements (consolidated balance sheet and
statements of income, retained earnings and cash flow) as at
and for the period from January 1, 1996 through and until
February 29, 1996 (collectively, the "Financial Statements").
The Financial Statements have been prepared in accordance with
generally accepted accounting principles ("GAAP") applied on a consistent basis
throughout the periods indicated and with each other, except that the unaudited
interim Financial Statements do not contain footnotes required by GAAP. The
Financial Statements fairly present the consolidated financial condition and
operating results of the Company as of the dates, and for the periods,
indicated therein, subject in the case of the unaudited Financial Statements to
normal year-end and quarter-end adjustments. Except as set forth in the Base
Balance Sheet, neither the Company nor any Operating Subsidiary has any
liabilities, contingent or otherwise, other than (a) obligations under
contracts and commitments incurred in the ordinary course of business and not
required under GAAP to be reflected in the Base Balance Sheet and which,
individually or in the aggregate, are not material to the financial condition
or operating results of the Company or any Operating Subsidiary or (b) as set
forth on Schedule 2.7 hereto or as otherwise disclosed in this SECTION 2 or any
schedule hereto. Except as disclosed in the Financial Statements, on Schedule
2.7 hereto and for inter-company transactions with or between Operating
Subsidiaries, neither the Company nor any Subsidiary has any indebtedness for
borrowed money and none of them are a guarantor or indemnitor of any
indebtedness of any other person, firm or corporation. The Company and the
Subsidiaries maintain and will continue to maintain a standard system of
accounting established and administered in accordance with GAAP.
2.8 ABSENCE OF CERTAIN DEVELOPMENTS. Except as disclosed in
Schedule 2.8 or in the Financial Statements, since the date of the Base Balance
Sheet, (a) there has been no material adverse change in the financial condition
of either the Company or any of the Operating Subsidiaries, (b) neither the
Company nor any Operating Subsidiary has incurred any material liabilities or
material contingent liabilities, (c) the Company has not declared any dividends
or purchased any of its capital stock, other than as required by the terms of
the Series D Preferred Stock of the Company, (d) neither the Company nor any
Operating Subsidiary has entered into any material transactions outside the
ordinary course of business, (e) neither the Company nor any Operating
Subsidiary has waived a valuable right or cancelled any debt or claim held by
the Company or any Operating Subsidiary, (f) neither the Company nor any
Operating Subsidiary has made a loan to any officer, director, employee or
shareholder of the Company, or any agreement or commitment therefor, (g)
neither the Company nor any Operating Subsidiary has had or committed to any
increase, direct or indirect, in the compensation paid or payable to any
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<PAGE> 7
officer, director, employee or agent of the Company or any Operating
Subsidiary, except as required by written employment agreements to which the
Company or any Operating Subsidiary is a party (and which such increases are
described in Schedule 2.8), (h) neither the Company nor any Operating
Subsidiary has had any material loss, destruction or damage to any property,
whether or not insured, (i) neither the Company nor any Operating Subsidiary
has had any change in personnel or the terms and conditions of their
employment, (j) neither the Company nor any Operating Subsidiary has had any
acquisition or disposition of any assets (or any contract or arrangement
therefor), or any other transaction otherwise than for fair value in the
ordinary course of business, and (k) neither the Company nor any Operating
Subsidiary has committed itself to any of (a) through (j) above.
2.9 TAX MATTERS. All required tax returns of the Company and each
Subsidiary have been accurately prepared in all material respects and filed
(including applicable extensions), and all taxes and penalties required to be
paid with respect to the periods covered by such returns have been timely paid.
Neither the Company nor any Subsidiary is delinquent in the payment of any tax,
assessment or governmental charge, has had any tax deficiency proposed or
assessed against it that is still outstanding, or has executed any waiver still
in effect of any statute of limitations on the assessment or collection of any
tax. None of the federal or state income tax returns or state franchise tax
returns of either the Company or any Subsidiary has ever been audited by
governmental authorities. There is no pending dispute with any taxing
authority that, if determined adversely to the Company or any Operating
Subsidiary, would result in the assertion by any taxing authority of any
material tax deficiency, and neither the Company nor any Operating Subsidiary
has any knowledge of a proposed liability for any tax to be imposed upon the
Company's or any Subsidiary's properties or assets for which there is not an
adequate reserve reflected in the Financial Statements.
2.10 TITLE TO ASSETS; CONDITION OF ASSETS. Except as disclosed in
the notes to the Financial Statements and on Schedule 2.10, the Company and the
Operating Subsidiaries have good and indefeasible title to their respective
assets, including, without limitation, those reflected on the Base Balance
Sheet (other than those since disposed of in the ordinary course of business),
free and clear of all security interests, liens, charges and other
encumbrances, except for (a) liens for taxes not yet due and payable or being
contested in good faith in appropriate proceedings, and (b) encumbrances that
are incidental to the conduct of their respective businesses or ownership of
property, not incurred in connection with the borrowing of money or the
obtaining of credit, and which do not in the aggregate materially detract from
the value of the assets affected or materially impair their use by the Company
or such Operating Subsidiary, as the case may be. With respect to the assets
of the Company and each Operating Subsidiary that are leased, the Company or
such Operating Subsidiary, as the case may be, is in compliance with all
material provisions of such leases. The equipment and other tangible assets of
the Company and the Operating Subsidiaries are in good operating condition
(except for reasonable wear and tear), and have been reasonably maintained.
2.11 PROPRIETARY RIGHTS. Except as set forth in Schedule 2.11, the
Company and the Subsidiaries have ownership of all material copyrights,
trademarks, service marks and other proprietary rights used in their respective
businesses (collectively the "Intellectual Property").
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<PAGE> 8
Such copyrights, trademarks, service marks and other proprietary rights are
sufficient for its business as now conducted and as proposed to be conducted
without any conflict with, or infringement of, the rights of others. The
present products and services of the Company and the Operating Subsidiaries do
not infringe any patent, copyright, trademark or other proprietary rights of
others, neither the Company nor any Operating Subsidiary believes the Company
or any Operating Subsidiary is utilizing the inventions of any employee (or
person currently intended to be hired) created prior to his employment with the
Company or such Operating Subsidiary, as the case may be, which the Company or
such Operating Subsidiary, as the case may be, does not have rights to use, and
neither the Company nor any Operating Subsidiary has received any notice from
any third party of any such alleged infringement by the Company or such
Operating Subsidiary. The Company and the Operating Subsidiaries have taken
all necessary steps to establish and preserve their respective ownership,
licenses or rights of use of all material trademarks, service marks,
copyrights, trade secrets and other proprietary rights with respect to their
products, services and technology. Neither the Company nor any Operating
Subsidiary is aware of any infringement by others of its respective
Intellectual Property. Except as set forth on Schedule 2.11, there are no
outstanding options, licenses, or agreements of any kind relating to the
Intellectual Property, nor is the Company or any Operating Subsidiary bound by
or a party to any options, licenses, or agreements of any kind with respect to
the patents, trademarks, service marks, trade names, copyrights, trade secrets,
licenses, information and proprietary rights and processes of any other person
or entity. None of the agreements referred to in Schedule 2.11 gives the other
parties thereto any rights or interests in or to the Intellectual Property of
the Company or any Operating Subsidiary other than to use such Intellectual
Property solely in connection with the internal operations of their business
and neither they nor any other third party have the right to license,
sublicense, distribute or market all or part of the Company's or any Operating
Subsidiary's products, except as described on Schedule 2.11. Neither the
execution nor delivery of this Agreement, nor the carrying on of the Company's
and each Operating Subsidiary's business by the employees of the Company and
each Operating Subsidiary, nor the conduct of the Company's and each Operating
Subsidiary's business as proposed, will, to the best of the Company's and each
Operating Subsidiary's knowledge, conflict with or result in a material breach
of the terms, conditions, or provisions of, or constitute a material default
under, any contract, covenant or instrument under which any such employee is
now obligated.
2.12 MANUFACTURING AND MARKETING RIGHTS. Except as set forth in
Schedule 2.12, neither the Company nor any Operating Subsidiary has granted
rights to manufacture, produce, assemble, license, market or sell its products
to any other person and is not bound by any agreement that affects the
Company's or any Operating Subsidiary's exclusive right to develop,
manufacture, assemble, distribute, market or sell its products.
2.13 EFFECT OF TRANSACTIONS; COMPLIANCE WITH OBLIGATIONS. The
Company's and each Operating Subsidiary's execution and delivery of this
Agreement, and its performance of the transactions contemplated by this
Agreement, will not violate any judgment, decree or order, or any material
contract or obligation of the Company or any Operating Subsidiary, as the case
may be, or, to such entity's knowledge, any statute, rule or regulation of any
federal, state or local government or agency applicable to the Company or any
Operating Subsidiary, or any
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<PAGE> 9
material contract to which any employee of the Company or any Operating
Subsidiary is bound. Based upon the representations of the Investors, the
offer and sale of the Preferred Shares and the Warrants will be in compliance
with all applicable federal and state securities laws. No consent, approval or
filing with any regulatory agency is required to be taken by the Company or any
Operating Subsidiary in connection with the transactions contemplated by this
Agreement, except those which the Company or any Operating Subsidiary has
obtained or made in a timely manner, and except for any filing of Form D or any
applicable state blue sky filing that may be made by the Company after the
Closing.
2.14 LITIGATION. Except as disclosed in the Company's Commission
Documents (as defined herein) and/or the Financial Statements, there is no
litigation, arbitration or governmental proceeding or investigation pending or,
to the knowledge of the Company or any Operating Subsidiary, threatened (a)
against the Company or any Subsidiary, (b) affecting any of the properties or
assets of the Company or any Subsidiary, (c) that questions the validity of
this Agreement, or the right of the Company or any Operating Subsidiary to
enter into this Agreement or to consummate the transactions contemplated
hereby, or (d) against any officer, director, shareholder or employee of the
Company or any Subsidiary in such capacity or relating to his prior employment
relationships. Neither the Company nor any Operating Subsidiary is aware of
any unasserted claim that is likely to result in any litigation, arbitration or
legal or administrative proceeding against it or any other Subsidiary.
2.15 LEGAL COMPLIANCE. The Company and the Operating Subsidiaries
have all material franchises, permits, licenses and other rights and privileges
necessary to permit them to own their respective properties and to conduct
their respective businesses as presently conducted and as proposed to be
conducted. The business and operations of the Company and each Operating
Subsidiary have been, are being and will be conducted in all material respects
in accordance with all applicable laws, rules and regulations, and neither the
Company nor any Operating Subsidiary is in violation of any judgment, or to
such entity's knowledge, any law or regulation, the violation of which could
reasonably be expected to result in a material adverse effect on the Company or
such Operating Subsidiary.
2.16 SUBSIDIARIES; JOINT VENTURES. Except as described in Schedule
2.16 hereto, the Company does not have any direct or indirect subsidiaries, nor
any interests in partnerships, joint ventures, limited liability companies, or
other business entities. The Operating Subsidiaries are the only Subsidiaries
of the Company which either individually or in the aggregate, have any material
assets, liabilities or operations and which constitute "significant
subsidiaries" as defined in Rule 1-02 of Regulation S-X promulgated under the
Securities Act of 1933, as amended (the "Securities Act"). Each Subsidiary
named in Schedule 2.16 hereto is wholly owned by the Company, except as set
forth in Schedule 2.16 hereto, and the Company has no present intention of (a)
disposing of any of the capital stock of any such Subsidiary presently owned by
the Company or (b) allowing any Subsidiary to sell or otherwise dispose of any
material portion of such Subsidiary's assets, except for normal dispositions in
the ordinary course of business.
2.17 NO DEFAULTS; MATERIAL CONTRACTS. The Company and the
Operating Subsidiaries have in all respects performed all obligations required
to be performed by them and are not in
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default under any contract, commitment or instrument, and no event or condition
has occurred which, with the giving of notice or passage of time, or both,
would constitute such a default, except where the failure to perform any such
obligation, or except where any such default, would not reasonably be expected
to have a material adverse effect on the business assets, results of
operations, condition (financial or otherwise), or prospects of the Company and
its Operating Subsidiaries taken as a whole. Schedule 2.17 contains an
accurate list of all agreements, and any contracts or commitments, oral or
written, of the Company and each Operating Subsidiary, that require the
expenditure by the Company or such Operating Subsidiary of more than $100,000
over the term of such contract or commitment, or that are not terminable by the
Company or such Operating Subsidiary without penalty prior to the first
anniversary of this Agreement. Except as indicated on Schedule 2.17, (a)
neither the Company nor any Operating Subsidiary is under any material
obligation that cannot be performed by it on time and without substantial or
unusual expenditure of money and effort, or (b) any party having material
contracts with the Company or any Operating Subsidiary are, to the knowledge of
such entity, in compliance with such agreements in all material respects.
2.18 INSURANCE. The Company and the Subsidiaries maintain
insurance coverages which are adequate for the businesses being conducted, and
the properties owned or leased, by the Company and the Subsidiaries. The
Company has provided access to the Investors to correct and complete copies of
all such insurance policies of the Company and the Subsidiaries.
2.19 EMPLOYEE MATTERS; AFFILIATE TRANSACTIONS. Except as disclosed
in Schedule 2.19 or described in this Agreement, (a) neither the Company nor
any Operating Subsidiary has in effect or any obligation to put into effect any
employment agreements, deferred compensation, pension or retirement agreements
or arrangements, bonus, incentive or profit-sharing plans or arrangements, or
labor or collective bargaining agreements, (b) there are no existing or
proposed loans, leases, licenses or other such agreements or arrangements
between the Company or any Operating Subsidiary, on the one hand, and any
officer, director or stockholder of the Company or any Operating Subsidiary, on
the other hand and (c) neither the Company nor any Operating Subsidiary (i) is
a party to any contract with any labor union or organization representing any
employee, or any other employee representative, or (ii) has had at any time
during the past five years, nor to the knowledge of such entity is there now
threatened, any walkout, strike, picketing, work stoppage or any other similar
occurrence which has had or would have a material adverse effect on the assets,
business, prospects or operations of the Company and the Operating
Subsidiaries. The Company has made available to the Investors a true and
correct summary of the policies, if any, followed by the Company and each
Operating Subsidiary regarding confidentiality of sensitive information and
ownership of patents, know-how and other such matters relating to the business
of the Company and each Operating Subsidiary. Except as disclosed in Schedule
2.19, to the knowledge of the Company and the Operating Subsidiaries, (A) no
officer or other key employee of the Company or any Operating Subsidiary has
any present intention of terminating his employment with the Company or such
Operating Subsidiary, and (B) no key employee is bound by any agreement with
any other employer (past or present) that adversely affects the performance of
his duties as an employee of the Company or any such Operating Subsidiary or
the businesses of the Company or any such Operating Subsidiary.
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2.20 BROKERAGE. Except as listed in Schedule 2.20, there are no
claims for brokerage commissions, finder's fees or similar compensation in
connection with the transactions contemplated by this Agreement based on any
arrangement or agreement made by the Company or any Subsidiary, for which any
of the Investors are or could under any circumstance be liable.
2.21 DISCLOSURE. This Agreement, including the exhibits and
schedules hereto, and the other documents and certificates furnished by the
Company and/or any Subsidiary to the Investors or their counsel do not contain
any untrue statement of material fact or, when taken as a whole, omit any
material fact necessary in order to make the statements not misleading. There
is no fact known to the Company or any Operating Subsidiary that has not been
disclosed in the Commission Documents (as defined herein) or that the Company
and the Operating Subsidiaries have not disclosed to the Investors prior to the
date of this Agreement that materially adversely affects the business, assets,
properties, prospects or condition (financial or otherwise) of the Company or
any Operating Subsidiary or the ability of the Company or any Operating
Subsidiary to perform under this Agreement or to consummate the transactions
contemplated hereby.
2.22 EMPLOYEE BENEFIT PLANS. Except as set forth in Schedule 2.22
hereto, neither the Company nor any Operating Subsidiary maintains, sponsors,
or contributes to any program or arrangement that is an "employee pension
benefit plan," an "employee welfare benefit plan," or a "multiemployer plan,"
as those terms are defined in Sections 3(2), 3(1), and 3(37) of the Employee
Retirement Security Act of 1974, as amended. Except as listed in Schedule
2.22, neither the Company nor any Operating Subsidiary has any incentive or
benefit arrangements.
2.23 ENVIRONMENTAL.
(a) Except for items which could not reasonably be expected to
have a material adverse effect on the Company or any Subsidiary, no part of the
Company's or any of its Subsidiaries' assets, including, without limitation,
any real property owned or, to the knowledge of such entity after diligent and
appropriate inquiry by the officers of such entity, leased by any such entity,
is contaminated by any substance or material presently identified to be toxic,
a pollutant, a contaminant or a hazardous substance according to any Applicable
Environmental Law. Neither the Company nor any Subsidiary has caused or
suffered to occur any material discharge, release, spillage, emission,
uncontrolled loss, seepage or filtration of oil or petroleum or chemical
liquids or solids, liquid or gaseous products or hazardous waste or hazardous
substance at, from, upon, and under or within any real property owned or leased
by the Company or any Subsidiary, or any contiguous real property. Neither the
Company nor any Subsidiary has been and none of such entities has committed any
acts or omissions which could reasonably be expected to lead to the imposition
on the Company or any Subsidiary of material liability, or creation of a lien
on the Company's or any Subsidiary's assets, under any Applicable Environmental
Law.
(b) For purposes of this Section, "Applicable Environmental Law
and Laws" shall mean any law affecting real or personal property owned,
operated or leased by the Company or any Subsidiary or any other operation of
the Company or any Subsidiary in any way pertaining
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to health, safety, or the environment, including, without limitation, (i) the
Comprehensive Environmental Response, Conservation and Liability Act of 1980,
as amended by the Superfund Amendments and Reauthorization Act of 1986 (as
amended from time to time, herein referred to "CERCLA"), (ii) the Resource
Compensation and Recovery Act of 1976, as amended by the Used Oil Recycling Act
of 1980, the Solid Waste Disposal Act of 1980, and the Hazardous and Solid
Waste Amendments of 1984 (as amended from time to time, herein referred to as
"RCRA"), (iii) the Safe Drinking Water Act, as amended from time to time, (iv)
the Toxic Substances Control Act, as amended from time to time, (v) the Clean
Air Act, as amended from time to time, (vi) the Occupational Safety and Health
Act, as amended from time to time, and (vii) any laws which may now or
hereafter require removal of asbestos or other hazardous wastes or impose any
liability related to asbestos or other hazardous wastes. The terms "hazardous
substance", "petroleum", "release", and "threatened release" have the meanings
specified in CERCLA, and the terms "solid waste" and "disposal" (or "disposed")
have the meanings specified in RCRA; provided, however, that in the event
either CERCLA or RCRA is amended so as to broaden the meaning of any term
defined thereby, such broader meaning shall apply subsequent to the effective
date of such amendment with respect to all provisions of this Agreement; and
provided, further, however, that to the extent the laws of any nation,
province, state or political subdivision thereof in which any real or personal
property owned, operated or leased by the Company or any Subsidiary is located
or in which the Company or any Subsidiary conducts operations establish a
meaning for "hazardous substance", "petroleum", "release", "solid waste" or
"disposal" which is broader than that specified in either CERCLA or RCRA such
broader meaning shall apply.
2.24 AFFILIATED TRANSACTIONS. Schedule 2.24 hereto contains a
complete listing of all compensation and other agreements of the Company and
each Subsidiary with or for the benefit of any of their respective affiliates,
any shareholder of the Company and the Subsidiaries, respectively, or any
affiliate of any shareholder of the Company and the Subsidiaries, respectively,
other than inter-company transactions with or between Operating Subsidiaries.
Except for the employment contracts listed on Schedule 2.24 hereto, copies of
which have been provided to the Investors, neither the Company nor any
Operating Subsidiary have, as of the Closing Date, any written employment
contracts.
2.25 PRIVATE OFFERING. Neither the Company nor anyone acting on
its behalf has offered or will offer shares of the Company or any part thereof
or any similar securities for issuance or sale to, or solicit any offer to
acquire any of the same from, anyone so as to make the issuance and sale of the
Preferred Shares and the Warrants not exempt from the registration requirements
of Section 5 of the Securities Act; provided, however, that with respect to the
offer and sale thereof to the Investors, the Company is relying on the
representations, warranties and agreements of the Investors set forth herein.
All shares of capital stock of the Company have been offered and sold in
compliance with all applicable federal and state securities laws. Assuming
that the Investors representations and warranties contained in SECTION 3 of
this Agreement are true and correct at the Closing and the Deferred Closing,
the offer, issuance and sale of the Preferred Shares and the Warrants are and
will be exempt from the registration and prospectus delivery requirements of
the Securities Act, as currently in effect, and have been
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registered or qualified (or are exempt from registration and qualification)
under the registration, permit or qualification requirements of all applicable
state securities laws, as currently in effect.
2.26 COMMISSION DOCUMENTS. The Company has filed all registration
statements, proxy statements, reports and other documents required to be filed
by it under the Securities Act and the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and all amendments thereto; and the Company has
furnished the Investors copies of all of such documents, each as filed with the
Securities and Exchange Commission (the "Commission"), other than all exhibits
thereto, since January 1, 1994 (collectively, the "Commission Documents"), and
has furnished access to all other Commission Documents, and all exhibits
thereto; provided, however, that with respect to the Company's Proposed
Registration Statement on Form S-4 relating to its proposed acquisition of the
remaining shares of the capital stock of North American Environmental Group,
Inc., the Company has furnished all filed amendments to such Form S-4, which
such Form S-4 is not complete. Each Commission Document (as finally amended)
was true and accurate in all material respects and, except for such Form S-4
which is not complete, was in material compliance with the requirements of its
respective report form at the time such document was filed.
2.27 HOLDING COMPANY AND INVESTMENT COMPANY STATUS. Neither the
Company nor any Subsidiary is a "holding company," or a "subsidiary company" of
a "holding company,' or an "affiliate" of a "holding company," or a "public
utility," within the meaning of the Public Utility Holding Company Act of 1935,
as amended, or a "public utility" within the meaning of the Federal Power Act,
as amended. Neither the Company nor any Subsidiary is an "investment company"
or a company "controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended, or an "investment adviser" within
the meaning of the Investment Advisers Act of 1940, as amended.
SECTION 3. REPRESENTATIONS OF THE INVESTORS
As part of the basis of this Agreement, each Investor, severally and
not jointly, hereby represents that on the date hereof:
3.1 AUTHORIZATION. The execution of this Agreement and the
documents executed by the Investor pursuant to this Agreement have been
authorized by all necessary action on the part of the Investor, have been
executed and delivered, and constitute valid, legal, binding and enforceable
agreements of the Investor. Each Investor acquiring Preferred Shares in
exchange for a Note and Purchase Warrant represents and warrants, severally but
not jointly, that such Investor is the sole legal and beneficial owner of all
interests in such Note and Purchase Warrants, free and clear of all liens,
claims, charges, security interests or other encumbrances of any kind or
nature, and that, upon the delivery of the Note and Purchase Warrants to the
Company at the Closing, all legal and beneficial interests in the Note and
Purchase Warrants will have been surrendered for cancellation to the Company,
free and clear of any such liens, claims, charges, security interests or other
encumbrances. No consent, waiver or other authorization from any third party
is required in order for the Investor to surrender for cancellation such Note
and Purchase Warrants to the Company.
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3.2 INVESTMENT PURPOSE. The Investor is acquiring the Preferred
Shares and the Warrants for its own account, for investment, and not with a
view to any "distribution" within the meaning of the Securities Act. The
Investor has no present intention to make any transfer of the Preferred Shares
or the Warrants. No broker-dealer acted on behalf of the Investor in
connection with the offer or sale of the Preferred Shares or the Warrants.
3.3 RESTRICTIONS ON TRANSFERABILITY. The Investor understands
that because the Preferred Shares and the Warrants have not been registered
under the Securities Act and applicable state securities laws (based in part on
the representations, warranties and agreements of the Investor contained
herein), it cannot dispose of any of the Preferred Shares, Conversion Shares,
Warrants or Warrant Shares unless they are subsequently registered under the
Securities Act or exemptions from registration are available, and that the
Investor must bear the economic risk of an investment in such securities as a
result thereof. The Investor acknowledges and understands that, except as
provided in SECTION 5 of this Agreement, it has no registration rights.
Although it may be possible in the future to make limited public sales of the
Preferred Shares and/or Conversion Shares and/or the Warrants and/or the
Warrant Shares without registration under the Securities Act, Rule 144 is not
now available and there is no assurance that it will become available for such
purpose. By reason of these restrictions, the Investor understands that it may
be required to hold the Preferred Shares, the Conversion Shares, the Warrants
and the Warrant Shares for an indefinite period of time. The Investor
understands that each certificate representing the Preferred Shares, Conversion
Shares, Warrants and Warrant Shares, will bear appropriate state "blue sky"
legends and a legend substantially to the effect that:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
THESE SECURITIES MAY NOT BE SOLD, MORTGAGED, PLEDGED,
HYPOTHECATED OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR AN OPINION OF COUNSEL
OR OTHER EVIDENCE SATISFACTORY TO THE CORPORATION THAT
REGISTRATION IS NOT REQUIRED UNDER APPLICABLE SECURITIES
LAWS."
The Investor also acknowledges that appropriate stop transfer orders will be
noted on the Company's stock records for the securities bearing such legend.
3.4 STATUS OF INVESTOR. The Investor is knowledgeable and
experienced in making venture capital investments, including investments
similar to those securities to be acquired by it pursuant to this Agreement,
and is able to bear the economic risk of loss of its investment in the Company.
The Investor is an "accredited investor," as that term is defined in Rule
501(a) of Regulation D under the Securities Act or is a "purchaser," as that
term is defined in Rule 506 (b) (2) (ii) of Regulation D of the Securities Act.
The Investor's state of incorporation, organization or residence and principal
place of business, are listed on Exhibit A, and the Investor has not been
organized for purposes of investing in the Company.
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3.5 BROKERAGE. There are no claims for brokerage commissions,
finder's fees or similar compensation in connection with the transactions
contemplated by this Agreement based on any arrangement or agreement made by
the Investor, except as may otherwise be provided in Exhibit A, all of which
such claims shall be paid entirely by such Investor.
3.6 OWN ACCOUNT. The Investor is acting on its own behalf in
connection with the investigation and examination of the Company and its
decision to execute these documents.
3.7 RECEIPT OF INFORMATION. The Investor has received and
reviewed with such investment, legal, financial and other advisors as the
Investor has elected a copy of each of the documents furnished to the Investor
pursuant to SECTION 2.26 hereof. The Investor believes it has received all the
information it considers necessary or appropriate for deciding whether to
purchase the Preferred Shares and the Warrants. The Investor further
represents that it has had an opportunity to ask questions and receive answers
from the Company and each Subsidiary regarding the terms and conditions of the
offering of the Preferred Shares and the Warrants and the business, properties,
prospects, and financial condition of the Company and each Subsidiary and to
obtain additional information (to the extent the Company or any such Subsidiary
possessed such information or could acquire it without unreasonable effort or
expense) necessary to verify the accuracy of any information furnished to it or
to which it had access. The foregoing, however, does not limit or modify the
representations and warranties in SECTION 2 of this Agreement or the right of
the Investor to rely thereon.
SECTION 4. COVENANTS OF THE PARTIES.
The Company hereby covenants that, except as provided for below, for
so long as (a) the Investors hold at least twenty percent (20%) of the
Preferred Shares, with respect to the covenants contained in SECTIONS 4.4
through 4.22, excluding 4.7, and (b) the Investors hold any of the Preferred
Shares with respect to the covenants contained in SECTIONS 4.1 through 4.3 and
4.7, unless waived by at least two (2) holders of Preferred Shares holding in
the aggregate at least a two-thirds interest in the Preferred Shares then
outstanding, the Company will and will cause its Subsidiaries to comply with
the provisions of this SECTION 4.
4.1 FINANCIAL INFORMATION. The Company will maintain a system of
accounts in accordance with GAAP and procedures, keep full and complete
financial records and the Company will furnish to the Investors the following
reports:
(a) within fifty-five (55) days after the end of each quarterly
fiscal period in each fiscal year of the Company (other than the last quarterly
fiscal period of each such fiscal year), duplicate copies of,
(i) a consolidated balance sheet of the Company
and its Subsidiaries as at the end of such quarter, and
(ii) consolidated statements of income, changes in
shareholders' equity and cash flows of the Company and its
Subsidiaries, for such quarter,
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setting forth in each case in comparative form the figures for the
corresponding periods in the previous fiscal year, all in reasonable detail,
prepared in accordance with GAAP applicable to quarterly financial statements
generally, and certified by a senior financial officer of the Company as fairly
presenting, in all material respects, the financial position of the companies
being reported on and their results of operations and cash flows, subject to
changes resulting from year-end adjustments; provided, that delivery within the
time period specified above of copies of the Company's Quarterly Report on Form
10-Q (or, if the Company files with the Commission a Form 12b-25 with respect
to a particular 10-Q in accordance with the Exchange Act, no later than fifteen
(15) days after the filing of such Form) prepared in compliance with the
requirements therefor and filed with the Commission shall be deemed to satisfy
the requirements of this Section;
(b) within one hundred (100) days after the end of each fiscal
year of the Company, duplicate copies of,
(i) a consolidated balance sheet of the Company
and its Subsidiaries, as at the end of such year, and
(ii) consolidated statements of income, changes in
shareholders' equity and cash flows of the Company and its
Subsidiaries, for such year,
setting forth in each case in comparative form the figures for the previous
fiscal year, all in reasonable detail, prepared in accordance with GAAP and
accompanied by an opinion thereon of independent certified public accountants
of recognized national standing, which opinion shall state that such financial
statements present fairly, in all material respects, the financial position of
the companies being reported upon and their results of operations and cash
flows and have been prepared in conformity with GAAP, and the examination of
such accountants in connection with such financial statements has been made in
accordance with generally accepted auditing standards, and that such audit
provides a reasonable basis for such opinion in the circumstances; provided,
that delivery within the time period specified above (or, if the Company files
with the Commission a Form 12b-25 with respect to a particular 10-K in
accordance with the Exchange Act, no later than fifteen (15) days after the
filing of such Form) of the Company's Annual Report on Form 10-K for such
fiscal year, together with the Company's annual report to shareholders, if any,
prepared pursuant to Rule 14a-3 under the Exchange Act, prepared in accordance
with the requirements therefor and filed with the Commission, shall be deemed
to satisfy the requirements of this Section;
(c) promptly upon their becoming available, one copy of (i) each
financial statement, report, notice or proxy statement sent by the Company or
any Subsidiary to public securities holders generally, and (ii) each regular or
periodic report, each final registration statement (without exhibits except as
expressly requested by such holder), and each final prospectus and all
amendments thereto filed by the Company or any Subsidiary with the Commission
and of all press releases and other statements made available generally by the
Company or any Subsidiary to the public concerning developments that are
material;
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(d) promptly, and in any event within ten (10) days after a
Responsible Officer (as defined below) becoming aware of the existence of any
default in the performance of any covenant, obligation or agreement of the
Company hereunder or pursuant to any other document executed pursuant to the
terms of this Agreement or any material breach of any representation made by
the Company or any Operating Subsidiary hereunder (each, an "Event of Default")
or that any person has given any notice or taken any action with respect to a
claimed Event of Default, a written notice specifying the nature and period of
existence thereof and what action the Company is taking or proposes to take
with respect thereto (as used herein, the terms "Responsible Officer" shall
mean any of the following officers of the Company: the Chairman, the President,
the Chief Executive Officer, the Chief Operating Officer, the Chief Financial
Officer, the Treasurer, and Senior or Executive Vice Presidents and the
controller or the chief accounting officer (and any person who performs one of
the same functions under a different title));
(e) promptly, and in any event within thirty (30) days of receipt
thereof, copies of any notice to the Company or any Subsidiary from any
government entity relating to any order, ruling, statute or other law or
regulation that would reasonably be expected to have a material adverse effect
on the business, assets, results of operations, condition (financial or
otherwise), or prospects of the Company and its Subsidiaries considered as a
whole; and
(f) with reasonable promptness, such other data and information
relating to the business, operations, affairs, financial condition, assets or
properties of the Company or any Subsidiary or relating to the ability of the
Company or any Subsidiary to perform its obligations hereunder as from time to
time may be reasonably requested by any Investor.
4.2 ACCESS TO INFORMATION. The Company will permit any Investor
to inspect at the Investor's expense any of the properties or books and records
of the Company and any Subsidiary, to make copies of extracts from such books
and records at the Investor's expense and to discuss the affairs and condition
of the Company and the Subsidiaries with representatives of the Company and
such Subsidiaries, all to such reasonable extent and at such reasonable times
and intervals as such Investor may reasonably request. If any Investor
exercises the right to inspection it must, unless otherwise required by law, at
the request of the Company or a Subsidiary, as appropriate, sign an agreement
to hold in confidence any confidential information received as a result of such
inspection under circumstances indicating the confidentiality of such
information until such information has been publicly disclosed or until
disclosure is required by law or by court order.
4.3 USE OF PROCEEDS. The Company shall timely report to the SBA
the use of proceeds from the sale of the Preferred Shares and the Warrants on
SBA Form 1031 and will provide NBCC with a copy of such report as soon as
practicable after its filing with the SBA. In addition, the Company shall
promptly provide to NBCC or the SBA, as the case may be, all such information
specified in Section 610 of the SBA regulations. The Company and each
Subsidiary shall provide NBCC (in addition to the rights granted pursuant to
SECTION 4.2 hereof) and/or the SBA, upon written request from NBCC or the SBA,
as the case may be, access to the Company's and each Subsidiary's, as the case
may be, books and records to confirm the use of
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proceeds reported by the Company to the SBA on SBA Form 1031. The Company will
use the proceeds from the sale of the Preferred Shares and the Warrants for
only those purposes specified in such SBA Form 1031 and, notwithstanding
anything else to the contrary contained herein or therein, the Company shall
not use the proceeds from the sale of the Preferred Shares or the Warrants for
any restricted or ineligible purpose, as set forth in Section 720 of the SBA
regulations.
4.4 KEY MAN INSURANCE. The Company shall maintain the Key Man
Insurance.
4.5 INTELLECTUAL PROPERTY. From the date hereof, the Company and
each Subsidiary will use all reasonable efforts to keep confidential all
know-how, trade secrets, proprietary rights and other confidential intellectual
property and information which is material to the respective businesses or
prospective businesses of the Company and the Subsidiaries, and to provide the
Company and/or each Subsidiary with sufficient title to, ownership of, or
rights to such intellectual property as is or may become necessary for the
conduct of their respective businesses. From the date hereof, the Company and
each Subsidiary will use its best efforts to enter into such agreements with
its respective employees, consultants, licensees, customers and other third
parties as may be reasonably required to carry out its obligations under this
SECTION 4.5.
4.6 PRESERVATION OF CORPORATE EXISTENCE AND PROPERTY. Except as
otherwise determined by the Board of Directors to be in the best interests of
the Company, the Company and each Subsidiary will preserve, protect, and
maintain, (a) its corporate existence, and (b) all rights, franchises,
accreditation, privileges, and properties the failure of which to preserve,
protect, and maintain would reasonably be expected to have a material adverse
effect on the business, affairs, assets, prospects, operations, or condition,
financial or otherwise, of the Company and its Subsidiaries.
4.7 SBA REPORTS. Within twenty (20) days after NBCC shall have
made a request therefor, the Company and each Subsidiary will furnish to NBCC
in writing all information reasonably available to the Company and the
Subsidiaries that NBCC shall request with respect to the Company, the
Subsidiaries, or any firm or corporation in which the Company or any Subsidiary
may from time to time have or have had any interest, which is needed in
connection with the preparation of SBA forms or any other report or form that
NBCC may be required to make to any governmental agency or regulatory authority
in connection with its purchase and/or ownership of Preferred Shares, the
Warrants, the Conversion Shares and/or the Warrant Shares hereunder.
4.8 LIABILITY INSURANCE. The Company will use its best efforts to
maintain comprehensive liability insurance (including automobile liability
coverage) at regular premium rates with insurer(s) of recognized responsibility
in an amount which is commercially reasonable for the benefit of itself and the
Subsidiaries.
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4.9 NO IMPAIRMENT. The Company and the Subsidiaries will observe
and honor in good faith all rights of the Investors, under the terms of this
Agreement or any other documents executed in connection herewith, and will take
no action that would impair or otherwise prejudice such rights.
4.10 BOARD MEETINGS. The Company's Board of Directors shall meet
at least once in every fiscal quarter ending on the last day of March, June,
September and December of each year, beginning with the quarter ending on June
30, 1996. The Chairman of the Board of Directors shall meet with the
representatives of the Investors on the Board of Directors in a separate
meeting to be held immediately subsequent to each quarterly meeting of the
Board of Directors of the Company. The Board of Directors shall appoint a
Compensation Committee at or prior to June 30, 1996.
4.11 BOARD OF DIRECTORS.
(a) The Board of Directors of the Company shall, on the earlier of
June 30, 1996, or the 5th day following notice to the Company from holders of
at least two-thirds interest in the Preferred Shares then outstanding, consist
of no more than nine (9) members, composed of (i) four (4) members (three (3)
members at such time as at least one-third of the Preferred Shares issued at
the Closing, or any Deferred Closing, are no longer issued and outstanding)
designated by the holders of a majority in interest of the Preferred Shares (at
least one (1) of which shall be designated by NBCC so long as NBCC owns at
least fifty percent (50%) of the Preferred Shares purchased by it pursuant to
the terms hereof), (ii) four (4) members designated by the holders of Common
Stock (five (5) members at such time as the holders of the Preferred Shares are
entitled to designate three (3) members pursuant to the terms of clause (i)
above) and (iii) one (1) member designated jointly by the holders of the Common
Stock and the holders of a majority in interest of the Preferred Shares. The
size and composition of the Board is subject to the right of the Investors to
elect a majority of the Board as provided hereunder.
(b) Except as provided below in SECTION 4.11 (d), at any time that
the Company increases the size of its Board of Directors to a number greater
than nine (9), the holders of a majority in interest of the Preferred Shares
then issued and outstanding and the holders of the Common Stock shall each
designate the same number of additional new directors to fill any newly created
vacancies on the Board of Directors subsequent to the date of this Agreement.
(c) The Company agrees to propose the designees of the holders of
a majority in interest of the Preferred Shares (and the designee(s) of NBCC)
for election to its Board of Directors and to take all such action to effect
such election as are within its power. The rights and obligations under this
SECTION 4.11 shall terminate at such time as at least two-thirds of the
Preferred Shares issued at the Closing, and any Deferred Closing, are no longer
issued and outstanding; provided, however, that the majority in interest of the
Preferred Shares then outstanding shall continue to have the right to designate
one (1) member of the Board of Directors of the Company so long as at least ten
percent (10%) of the Preferred Shares issued at the Closing, or any Deferred
Closing, remain outstanding (which shall be the designee of NBCC in the event
NBCC owns any of such remaining ten percent (10%)).
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(d) If the Company shall breach any of the covenants or
obligations set forth in the Designations or any of its obligations, covenants
and/or agreements contained in (a) Sections 4.1 through 4.14, 4.17, 4.18, 4.19,
4.21, Section 5, Section 6, Section 7, or Section 8 herein, and such breach
remains uncured or unremedied for a period of ninety (90) days, (b) Section
4.17 herein, and such breach remains uncured or unremedied for thirty (30)
days, (c) Section 4.15 herein, and such breach remains uncured for a period of
fifteen (15) days or (d) Section 4.22, then in any such event, the holders of a
majority in interest of the Preferred Shares shall be entitled then and
thereafter to nominate and elect a majority of directors to the Company's Board
of Directors (at least two (2) of which shall be designees of NBCC). Any
vacancy on the Board of Directors occurring because of the death, resignation
or removal of a director elected by the holders of the Preferred Shares shall
be filled by the vote or written consent of the holders of a majority in
interest of the Preferred Shares; provided, however, that any designee of a
particular holder of Preferred Shares shall be replaced by such holder. A
director may be removed from the Board of Directors with or without cause by
the vote or consent of the holders of the outstanding class with voting power
entitled to elect him or her in accordance with the Delaware General
Corporation Law. Any such additional directors appointed pursuant to the terms
of this Section 4.11(d) shall resign from the Board of Directors at the first
regularly scheduled annual meeting of the shareholders of the Company
subsequent to the cure or remedy of the breach giving use to the holders of the
majority in interest of the Preferred Shares having the right to nominate and
elect a majority of the directors of the Board of Directors of the Company
pursuant to this Section.
(e) In the event that the Investors are entitled to a majority of
seats on the Company's Board of Directors, the Company agrees promptly to take
all actions necessary or appropriate (including, if necessary, amending the
Company's Certificate of Incorporation or Bylaws to increase the number of
seats on the Board of Directors) to nominate to the Company's Board of
Directors, such number of additional nominees designated by the holders of a
majority in interest of the Preferred Stock as are required to give such
designees of the Investors (and/or NBCC, as applicable) a majority of seats on
the Board of Directors.
(f) Any designees of the Investors serving on the Board of
Directors pursuant to this SECTION 4.11 shall have the right to be reimbursed,
upon reasonable notice and documentation of such costs and expenses to the
Company, for his or her reasonable costs of travel and out-of-pocket expenses
incurred in connection with his or her service on the Board of Directors.
4.12 DIRECTORS AND OFFICERS INSURANCE; INDEMNITY. On or prior to
June 30, 1996, and upon the request of the holders of a majority in interest of
the Preferred Shares, the Company will use its best efforts to obtain directors
and officers insurance at regular premium rates with insurers of recognized
responsibility in amounts and on terms comparable to other companies in the
same industry as the Company. The Company shall enter into indemnification
agreements with the designees of the Investors to the Company's Board of
Directors, in form and substance acceptable to such designees, on or prior to
such designees becoming members of the Board of Directors of the Company.
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4.13 OPTION POOL. The Company shall not establish a stock grant,
option plan or purchase plan, other employee stock incentive program or
agreement that in the aggregate exceeds five percent (5%) of the fully diluted
Common Stock of the Company (excluding options and warrants in existence on the
Closing Date) at the later of the Closing or the Deferred Closing (the "Option
Pool"). Any options granted pursuant to such plan at the Closing or within six
(6) months of the Closing Date shall have an exercise price of at least $1.00
per share. The provisions of this SECTION 4.13 shall be in addition to, and
not in any manner limit, obligations pursuant to any option, warrant,
employment agreement or other written obligation, agreement or commitment of
the Company or any Operating Subsidiary as of the date of this Agreement (which
such obligations shall be disclosed in Schedule 2.5).
4.14 REVERSE STOCK SPLIT. Subsequent to five (5) years from the
Closing Date and upon the request of the holders of a majority in interest of
the then outstanding Preferred Shares, the Company shall use its best efforts
(which shall include, if required by law, submitting such proposal to the
stockholders of the Company) to implement a reverse stock split which would, if
consummated, create a Common Stock price in excess of $12.00 per share,
assuming that the average of the price earnings ratio for the Company's Common
Stock over the sixty (60) days prior to the consummation of such reverse stock
split is projected to remain unchanged or improve after such reverse stock
split.
4.15 RESTRICTED CORPORATE ACTIONS. Neither the Company nor any of
the Subsidiaries will, without the approval of the holders of a majority in
interest of the Preferred Shares, take any of the following actions:
(a) make any loans or advances to any officers, directors or
affiliates of the Company or any Subsidiary, other than travel or miscellaneous
cash advances in the ordinary course of business and as provided for in
existing employment agreements;
(b) incur any obligation, contingent or otherwise, to guarantee
the debt or any other obligations or liabilities of any other person or entity
other than in the normal and ordinary course of business (not including inter-
company transactions with or between Operating Subsidiaries);
(c) mortgage, pledge, hypothecate or otherwise encumber any assets
or properties if, as a result thereof, more than fifty percent (50%) of the
aggregate book value of the assets of the Company or such Subsidiary would be
subject to a mortgage, pledge, hypothecation or other encumbrance;
(d) create any new non-wholly owned subsidiary, or permit any
Subsidiary to issue any equity securities to anyone other than the Company or a
wholly owned Subsidiary of the Company;
(e) engage in any line or lines of business activity other than
the businesses in which they are engaged on the Closing Date and lines of
business reasonably related thereto;
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(f) directly or indirectly acquire (whether by acquisition of
stock, assets or license rights, or by entering into a joint venture,
development agreement or otherwise) the business or operations of any other
corporation, person, or entity;
(g) repurchase any shares of any employee or stockholder that
would cause the Investors not to qualify their Conversion Shares and/or Warrant
Shares under Section 1202 of the Internal Revenue Code of 1986, as amended, as
qualified small business stock;
(h) enter into any transaction, including, without limitation, the
purchase, sale, or exchange of property or the rendering of any service, with
any affiliate of the Company or such Subsidiary (not including inter-company
transactions with or between Operating Subsidiaries), except in the ordinary
course of and pursuant to the reasonable requirements of the Company's or such
Subsidiary's business and upon fair and reasonable terms no less favorable to
the Company or such Subsidiary than would be obtained in a comparable
arms-length transaction with a person not an affiliate of the Company or such
Subsidiary;
(i) incur any additional Debt (as defined below) if, immediately
upon the incurrence of such Debt, the ratio of Consolidated Debt (as defined
below) to Consolidated Net Worth (as defined below) would be equal to or
greater than 1.0 to 1.0. As used in this SECTION 4.15(i), the term
"Consolidated Debt" shall mean, as of the date of determination, the total of
all Debt of the Company and its Subsidiaries outstanding on such date, after
eliminating all offsetting debits and credits between the Company and its
Subsidiaries and all other items required to be eliminated in the course of the
preparation of consolidated financial statements of the Company and its
Subsidiaries in accordance with GAAP. Notwithstanding anything contained
herein to the contrary, Consolidated Net Worth shall be deemed to include the
shares outstanding from time to time of the Company's Series D Convertible
Preferred Stock and Series E Convertible Preferred Stock, the Preferred Shares
and any series of preferred stock issued subsequent to the date hereof. As
used in this SECTION 4.15(i), the term "Consolidated Net Worth" shall mean, as
of the date of determination, the total assets of the Company and its
Subsidiaries which would be shown as assets on a consolidated balance sheet of
the Company and its Subsidiaries as of such time prepared in accordance with
GAAP, after eliminating all amounts properly attributable to minority
interests, if any, in the stock and surplus of Subsidiaries, minus the total
liabilities of the Company and its Subsidiaries which would be shown on a
consolidated balance sheet of the Company and its Subsidiaries as of such time
prepared in accordance with GAAP. As used in this SECTION 4.15(i), the term
"Debt" shall mean, with respect to a particular person, without duplication,
(i) its liabilities for borrowed money, (ii) its liabilities for the deferred
purchase price of property acquired by such person (including, without
limitation, all liabilities created or arising under any conditional sale or
other title retention agreement with respect to such property), (iii) the
amount of any obligation under a capital lease which would, under GAAP, appear
as a liability on the balance sheet of such person, (iv) all liabilities for
borrowed money secured by a lien with respect to any property owned by such a
person (whether or not it has assumed or otherwise become liable for such
liabilities), (v) accrued but unpaid interest on any of the liabilities of the
type described in CLAUSES (i) through (iv) above, and (vi) any guaranty of such
person with respect to the liabilities of the type described in CLAUSES (i)
through (v) above;
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(j) increase the number of shares under all stock option plans
above 2,500,000 shares of Common Stock (on a fully diluted basis and as
appropriately adjusted for recapitalizations, stock splits and the like),
excluding shares of Common Stock issued or to be issued pursuant to obligations
of the Company under any option, warrant, employment agreement or other written
obligation of the Company or any Subsidiary as of the date hereof (which such
obligations shall be disclosed in Schedule 2.5);
(k) sell, lease, transfer, assign, license or pledge any material
license, intellectual property right, patent or trade secret, except in the
ordinary course of business to end users, manufacturers or distributors of its
products or services and except for security interests granted to lenders for
money borrowed;
(l) repurchase, redeem or retire any shares of capital stock of
the Company other than pursuant to (i) the Stockholder's Agreement, (ii) this
Agreement, (iii) as required by the Series D Convertible Preferred Stock or
Series E Convertible Preferred Stock Certificate of Designations or as
permitted by the Preferred Shares Certificate of Designation, (iv) any
contractual rights to repurchase shares of Common Stock held by employees,
directors or consultants of the Company or the Subsidiaries upon termination of
their employment or services, (v) pursuant to the exercise of a contractual
right of first refusal held by the Company existing as of the date of this
Agreement or (vi) subsequently issued in connection with the Option Pool, or as
contemplated by SECTION 6 hereof; or
(m) consolidate or merge with or into any other business entity or
sell or transfer in a single transaction or a series of related transactions of
all or substantially all of the assets of the Company (or stock or assets of
any Subsidiary), or otherwise reorganize the Company (or any Subsidiary),
unless upon consummation of such merger or consolidation, the holders of voting
securities of the Company own directly or indirectly 51% or more of the voting
power to elect directors of the surviving, acquiring or consolidated
corporation, partnership or other entity, other than the possible sale of EET,
Inc.'s Austin operations as described on the Schedules hereto.
4.16 MINIMUM NET WORTH. The consolidated net worth of the Company,
as shown on the audited financial statements of the Company for the fiscal year
ended December 31, 2000, determined in accordance with GAAP, shall be greater
than or equal to $45,000,000.
4.17 RESERVATION OF SHARES. The Company shall use its best efforts
to promptly (which shall include among other efforts, holding a shareholders'
meeting with respect thereto not later than December 31, 1996) cause its
Certificate of Incorporation to be amended, or other required related action to
be taken, so as to cause a sufficient number of shares of Common Stock to be
available and to be reserved to permit the (a) conversion in full of all
Preferred Shares in accordance with the terms of this Agreement and the
Designations, and (b) exercise in full of all of the Warrants issued in
connection with this Agreement. In the event that, on the date an Investor
exercises its right to receive shares of Common Stock in accordance with the
terms of the Preferred Shares or a Warrant, there is not then available a
sufficient number of unreserved shares of Common Stock or shares reserved for
issuance in connection with the
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Preferred Shares or such Warrant to permit such conversion or exercise, then
the Company shall, in lieu thereof, issue as many shares of Common Stock so to
be received as are then available for conversion or exercise of the Preferred
Shares or such Warrant and immediately pay to such exercising Investor in cash,
an amount equal to the product of: (i) the then current fair market value of a
share of Common Stock less the then existing exercise price for those shares of
Preferred Stock or Warrants which could not be converted or exercised ,
multiplied by (ii) the number of shares of Common Stock that would otherwise be
required to have been delivered by the Company upon such conversion or exercise
but are then unavailable.
4.18 AUDITED FINANCIAL STATEMENTS. Within thirty (30) days of the
date of this Agreement, the Company shall deliver to the Investors its audited
financial statements as at and for the year ended December 31, 1995, which
shall not be materially different from those in Schedule 2.7.
4.19 ADDITIONAL KEY MAN INSURANCE. Within ninety (90) days of the
date of this Agreement, the Company shall have obtained, and delivered evidence
of, the additional life insurance applied for with respect to Tim B. Tarrillion
and Donovan W. Boyd, as referenced in SECTION 1.3(f).
4.20 OTHER PREFERRED STOCK. (a) On or prior to July 31, 1996, all
of the shares of the Company's Series D Convertible Preferred Stock shall have
been converted into shares of Common Stock. (b) On or prior to July 31, 1996,
the holders of all of the shares of the Company's Series E Convertible
Preferred Stock shall have entered into an agreement, in form and substance
reasonably acceptable to the holders of a majority in interest of the Preferred
Shares, whereby the rights of the holders of the Company's Series E Convertible
Preferred Stock in the event of a liquidation or a redemption shall be pari
passu with the rights of the holders of the Preferred Shares.
4.21 DELISTING. The Company shall use its best efforts not to
allow the shares of Common Stock to be delisted such that they are no longer
listed on any national securities exchange (including among others the NASDAQ
Small-Cap market).
4.22 CHANGE OF CONTROL. The Company shall not allow one or more
persons acting in concert, together with all affiliates, to acquire in one or
more related transactions, more than fifty percent (50%) of the shares of
capital stock of the Company that are then entitled to vote for the election of
the directors of the Company.
SECTION 5. REGISTRATION RIGHTS
5.1 DEFINITIONS. When used in this Section, unless otherwise
defined herein, the following terms shall have the respective meanings assigned
to them in this Section or in the sections, subsections or other subdivisions
or other documents referred to below:
"Demand Registration" shall have the meaning assigned to it in SECTION
5.2.
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"Holder" shall mean any Person that holds Registrable Securities.
"Lockup Period" shall mean the six-month period following the Closing
Date.
"Person" shall mean any individual, corporation, partnership, joint
venture, limited partnership, limited liability company, trust, unincorporated
organization or government or any agency or political subdivision thereof.
"Piggyback Registration" shall have the meaning assigned to it in
SECTION 5.3.
"Registrable Securities" shall mean (i) the Conversion Shares, (ii)
the Warrant Shares, and (iii) any securities issued or issuable with respect to
the foregoing shares by way of a stock dividend or stock split or in connection
with a combination of shares, recapitalization, merger, consolidation or other
reorganization.
"Registration Expenses" shall mean (i) all expenses incident to the
Company's performance of or compliance with the registration rights granted
hereunder, including (without limitation) all registration and filing fees,
fees and expenses of compliance with securities and blue sky laws, printing and
engraving expenses, messenger, telephone and delivery expenses, and fees and
disbursements of counsel for the Company, all independent certified public
accountants and underwriters (excluding discounts and commissions) and (ii) in
connection with each registration hereunder, the reasonable fees and
disbursements of no more than one counsel chosen by the holders of a majority
of the Registrable Securities included in such registration in an amount not to
exceed $10,000; provided, that, Registration Expenses shall not include any
Selling Expenses.
"Registration Request" shall have the meaning assigned to it in
SECTION 5.2.
"Registration Rights Expiration Point" shall mean the expiration of an
eight-year period commencing as of the Closing Date.
"Selling Expenses" shall mean underwriting discounts or commissions
and any selling commissions attributable to sales of Registrable Securities.
5.2 MANDATORY REGISTRATION. If, on or after the Lockup Period but
prior to the Registration Rights Expiration Point, and provided that at least
one year has elapsed since the most recent Registration Request (as defined
below), (a) Holders of at least twenty-five percent (25%) of the Registrable
Securities not theretofore registered pursuant to this SECTION 5, so long as
the aggregate gross proceeds to be received from such proposed offering is
expected to be not less than $500,000, or (b) Holders of at least fifty percent
(50%) of the Registrable Securities not theretofore registered pursuant to this
SECTION 5, so long as the aggregate gross proceeds to be received from such
proposed offering is expected to be not less than $1,000,000, request in
writing that the Company register under the Securities Act at least 25% of the
Registrable Securities not theretofore registered pursuant to this SECTION 5 (a
"Registration Request"), the Company shall promptly give written notice of such
Registration Request to all holders of
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Registrable Securities and will, as expeditiously as possible, use its best
efforts to effect the registration under the Securities Act of (i) the
Registrable Securities which the Company has been requested to register for
disposition in accordance with the intended method of disposition described in
the Registration Request and (ii) the Registrable Securities of any Holder that
elects to join in the Registration Request within twenty (20) days after
receipt of the above written notice from the Company. The Company may include
in any such registration (x) similar securities held by other parties with
registration rights and (y) similar securities that the Company desires to
register; provided, that, in connection with an underwritten offering, such
additional similar securities shall be reduced to a number, if any, that in the
reasonable opinion of the managing underwriters of such offering would not
adversely affect the marketability or offering price of the Registrable
Securities to be included in such offering. Notwithstanding anything herein to
the contrary, any registration requested pursuant to this SECTION 5.2 (a
"Demand Registration") will not be deemed to have been effected unless it has
become effective and remained effective no less than one hundred and eighty
(180) days; provided, further, that any such registration which does not become
effective after the Company has filed a registration statement in accordance
with the provisions of this SECTION 5.2 solely by reason of the refusal to
proceed of the Holder or Holders that have made or joined in the Registration
Request, including failure to comply with the provisions of this Agreement
(other than any refusal to proceed based upon the advice of counsel to such
Holder or Holders that the registration statement, or the prospectus contained
therein, contains 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 the light of the circumstances then existing, or that
such registration statement or such prospectus, or the distribution
contemplated thereby, otherwise violates or would, if such distribution using
such prospectus took place, violate any applicable state or federal securities
law) shall be deemed to have been effected by the Company at the request of
such Holder or Holders. This SECTION 5.2 shall not apply to a request for
registration on Form S-3 (or successor form) which shall be governed by SECTION
5.4. The Holders of Registrable Securities may make one (1) Demand
Registration pursuant to the terms of clause (a) above and two (2) Demand
Registrations pursuant to the terms of clause (b) above.
5.3 OPTIONAL REGISTRATIONS. If, on or after the Lockup Period but
prior to the Registration Rights Expiration Point, the Company proposes to
register any of its securities under the Securities Act other than (a) under
employee compensation or benefit programs, (b) an exchange offer or an offering
of securities solely to the existing stockholders or employees of the Company,
(c) pursuant to the acquisition by the Company of the remaining shares of the
capital stock of North American Environmental Group, Inc. that the Company does
not own as of the date of this Agreement, and (d) any registration conducted
solely in connection with a proposed acquisition by the Company or any of its
Subsidiaries, and the registration form to be used may be used for the
registration of Registrable Securities, the Company will give prompt written
notice to all holders of Registrable Securities of its intention to effect such
a registration and will include in such registration all Registrable Securities
with respect to which the Company has received written requests for inclusion
therein within twenty (20) days after the receipt of the Company's notice (a
"Piggyback Registration"). The Company shall use its best efforts to cause the
managing underwriters of a proposed underwritten offering to permit the
Registrable Securities requested to be included in the registration statement
(or registration statements) for
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such offering to be included therein on the same terms and conditions as any
similar securities of the Company included therein. Notwithstanding the
foregoing, if the Company gives notice of such a proposed registration, the
total number of Registrable Securities which shall be included in such
registration shall be reduced pro rata to such number, if any, as in the
reasonable opinion of the managing underwriters of such offering would not
adversely affect the marketability or offering price of all of the securities
proposed to be offered by the Company in such offering; provided, however, that
(i) if such Piggyback Registration is incident to a primary registration on
behalf of the Company, and to the extent not prohibited by any registration
rights agreements existing as of the date hereof, the securities to be included
in the registration statement (or registration statements) for any person other
than the Holders and the Company shall be first reduced prior to any such pro
rata reduction, and (ii) if such Piggyback Registration is incident to a
secondary registration on behalf of holders of securities of the Company, the
securities to be included in the registration statement (or registration
statements) for any person not exercising "demand" registration rights other
than the Holders shall be first reduced prior to any such pro rata reduction.
5.4 FORM S-3. If, on or after the Lockup Period but prior to the
Registration Rights Expiration Point, the Company is eligible to effect a
registration of its securities under Form S-3 (or a successor form), the
Holders will have the right to request and have effected unlimited
registrations of shares of Registrable Securities on Form S-3 as long as the
aggregate proposed offering price is not less than $500,000 for such
registration. Upon written request of a Holder delivered to the Company, the
Company will use all reasonable efforts to cause the registration of all shares
of Registrable Securities on Form S-3 or such successor form to the extent
requested by the Holder. All expenses incurred in connection with such
registration requested pursuant to this SECTION 5.4 shall be borne by the
Holder; provided, however, that if the Company for its own account or any other
holder of shares elects to register its shares as permitted below, the expenses
of such registration shall be borne pro rata by all parties to the registration
based upon the ratio that the number of such shares registered by such entity
bears to the total number of shares to be registered. In connection with any
such registration pursuant to this SECTION 5.4, the Company will in good faith
use its best efforts to keep such expenses to be incurred by the Holders at a
reasonable level (consistent with registrations of a similar nature and form).
Any registration statement filed pursuant to this SECTION 5.4 may include other
securities of the Company, with respect to which "piggy back" registration
rights have been granted, and may include securities of the Company being sold
for the account of the Company; provided, however, that any cutback shall be
dealt with in the same manner as provided in SECTION 5.3.
5.5 PROCEDURE FOR REGISTRATION. In connection with any request
that any Registrable Securities be registered pursuant to this Agreement, the
Company will use its best efforts to effect the registration of the Registrable
Securities in accordance with the intended method of disposition thereof, and
pursuant thereto the Company will use its best efforts to as expeditiously as
possible:
(a) prepare and file with the Commission a registration statement
on the appropriate form with respect to such Registrable Securities and use its
best efforts to cause such registration
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statement to become effective (provided that before filing a registration
statement or prospectus or any amendments or supplements thereto, the Company
will furnish to the counsel, if any, selected by the Holders of a majority of
the Registrable Securities covered by such registration statement copies of all
such documents proposed to be filed) (provided, however, that in connection
with a Demand Registration, the Company shall be deemed to have met its
obligations under this PARAGRAPH (a) so long as it files a registration
statement within six (6) months of a Registration Request);
(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 a period of not less than six (6) months or such shorter period
which will terminate when Registrable Securities covered by such registration
statement have been sold (but not before the expiration of the applicable
prospectus delivery period) and comply with the provisions of the Securities
Act with respect to the disposition of all securities covered by such
registration statement during such period in accordance with the intended
methods of disposition by the sellers thereof set forth in such registration
statement;
(c) furnish to each seller of Registrable Securities such number
of copies of such registration statement, each amendment and supplement
thereto, the prospectus included in such registration statement (including,
without limitation, each preliminary prospectus) and such other documents as
such seller may reasonably request in order to facilitate the disposition of
the Registrable Securities owned by such seller;
(d) use its best efforts to register or qualify such Registrable
Securities under such other securities or blue sky laws of such jurisdictions
within the United States as any seller reasonably requests and do any and all
other acts and things which may be reasonably necessary or advisable to enable
such seller to consummate the disposition in such jurisdictions of the
Registrable Securities owned by such seller (provided that the Company will not
be required to qualify generally to do business or subject itself to any
general service of process in any jurisdiction where it is otherwise not then
so subject);
(e) notify each seller of such Registrable Securities, 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 becomes
aware which requires the making of any change in the prospectus included in
such registration statement so that such document will not contain an untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, and,
at the request of any such seller, the Company will prepare a supplement or
amendment to such prospectus so that, as thereafter delivered to the purchasers
of such Registrable Securities, such prospectus will not contain an untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading;
(f) use its best efforts to cause all such Registrable Securities
to be listed on each securities exchange or exchanges, automated quotation
system or over-the-counter market upon which securities of the Company of the
same class are then listed;
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(g) enter into such customary agreements (including, without
limitation, underwriting agreements in customary form, substance, and scope)
and take all such other actions as the Holders of a majority of the Registrable
Securities being sold or the underwriters, if any, reasonably request in order
to expedite or facilitate the disposition of such Registrable Securities;
(h) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission and make generally available to its
security holders an earnings statement no later than ninety (90) days after the
end of the 12-month period beginning with the first day of the Company's first
full calendar quarter after the effective date of the registration statement,
which earnings statement shall satisfy the provisions of Section 11(a) of the
Securities Act and Rule 158 thereunder;
(i) in the event of the issuance of any stop order suspending the
effectiveness of a registration statement, or of any order suspending or
preventing the use of any related prospectus or suspending the disqualification
of any common stock included in such registration statement for sale in any
jurisdiction, the Company will use its best efforts promptly to obtain the
withdrawal of such order; and
(j) use its best efforts to cause such Registrable Securities
covered by such registration statement to be registered with or approved by
such other governmental agencies or authorities as may be necessary to enable
the sellers thereof to consummate the disposition of such Registrable
Securities.
5.6 REGISTRATION EXPENSES. The Company shall pay all Registration
Expenses in connection (a) the first three (3) Demand Registrations and (b)
each registration effected pursuant to SECTION 5.3 and, in any event, shall pay
its internal expenses (including, without limitation, all salaries and expenses
of its officers and employees performing legal and accounting duties, but
subject to the last sentence of this SECTION 5.6), the expense of any annual
audit and the fees and expenses incurred in connection with the listing of the
securities to be registered on each securities exchange on which similar
securities issued by the Company are then listed. All Registration Expenses in
connection with a Demand Registration other than the first three (3) Demand
Registrations shall be borne by the seller or sellers of Registrable Securities
pro rata based upon the number of Registrable Securities included in such
registration. All Selling Expenses incurred in connection with a registration
effected pursuant to the terms hereof shall be borne by the seller or sellers
of Registrable Securities pro rata based upon the number of Registrable
Securities included in such registration. Notwithstanding the foregoing,
however, if, in connection with any Demand Registration effected other than the
first three (3) Demand Registrations, the Company in good faith determines it
is necessary to hire or engage additional temporary employees or consultants in
connection with the preparation and consummation of such registration, the
reasonable fees, costs and expenses of such employees or consultants incurred
by the Company shall be borne by the seller or sellers of Registrable
Securities pro rata based upon the number of Registrable Securities included in
such registration.
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5.7 INDEMNIFICATION.
(a) The Company shall indemnify and hold harmless, with respect to
any registration statement filed by it, to the full extent permitted by law,
each holder of Registrable Securities covered by such registration statement,
and each other Person, if any, who controls such holder within the meaning of
Section 15 of the Securities Act (collectively, "Holder Indemnified Parties")
against all losses, claims, damages, liabilities and expenses, joint or several
to which any such Holder Indemnified Party may become subject under the
Securities Act, the Exchange Act, at common law or otherwise, insofar as such
losses, claims, damages, liabilities or expenses (or actions or proceedings,
whether commenced or threatened, in respect thereof) arise out of or are based
upon (i) any untrue statement or alleged untrue statement of a material fact
contained in any registration statement in which such Registrable Securities
were included as contemplated hereby or any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, (ii) any untrue statement or
alleged untrue statement of a material fact contained in any preliminary, final
or summary prospectus, together with the documents incorporated by reference
therein (as amended or supplemented if the Company shall have filed with the
Commission any amendment thereof or supplement thereto), or any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or (iii) any
violation by the Company of any federal, state or common law rule or regulation
applicable to the Company and relating to action of or inaction by the Company
in connection with any such registration; and in each such case, the Company
shall reimburse each such Holder Indemnified Party for any reasonable legal or
other expenses incurred by any of them in connection with investigating or
defending any such loss, claim, damage, liability, expense, action or
proceeding; provided, however, that the Company shall not be liable to any such
Holder Indemnified Party in any such case to the extent, that any such loss,
claim, damage, liability or expense (or action or proceeding, whether commenced
or threatened, in respect thereof) arises out of or is based upon any untrue
statement or alleged untrue statement or omission or alleged omission made in
such registration statement or amendment thereof or supplement thereto or in
any such preliminary, final or summary prospectus in reliance upon and in
conformity with written information furnished to the Company by or on behalf of
any such Holder Indemnified Party for use in the preparation thereof. Such
indemnity and reimbursement of expenses and other obligations shall remain in
full force and effect regardless of any investigation made by or on behalf of
the Holder Indemnified Parties and shall survive the transfer of such
securities by such Holder Indemnified Parties.
(b) Each holder of Registrable Securities participating in any
registration hereunder shall severally (and not jointly or jointly and
severally) indemnify and hold harmless, to the fullest extent permitted by law,
the Company, its directors, officers, employees and agents, and each Person who
controls the Company (within the meaning of Section 15 of the Securities Act)
(collectively, "Company Indemnified Parties") against all losses, claims,
damages, liabilities and expenses to which any Company Indemnified Party may
become subject under the Securities Act, the Exchange Act, at common law or
otherwise, insofar as such losses, claims, damages, liabilities or expenses (or
actions or proceedings, whether commenced or threatened, in respect
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<PAGE> 31
thereof) are caused by (i) any untrue statement or alleged untrue statement of
a material fact contained in any registration statement in which such holder's
Registrable Securities were included or 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, (ii) any untrue statement or
alleged untrue statement of a material fact contained in any preliminary, final
or summary prospectus, together with the documents incorporated by reference
therein (as amended or supplemented if the Company shall have filed with the
Commission any amendment thereof or supplement thereto), or the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading to the extent in the
cases described in CLAUSES (i) and (ii), that such untrue statement or omission
was furnished in writing by such holder for use in the preparation thereof, or
(iii) any violation by such holder of any federal, state or common law rule or
regulation applicable to such holder and relating to action of or inaction by
such holder in connection with any such registration. Such indemnity
obligation shall remain in full force and effect regardless of any
investigation made by or on behalf of the Company Indemnified Parties (except
as provided above) and shall survive the transfer of such securities by such
holder.
(c) Promptly after receipt by an indemnified party under SECTION
5.7(a) or SECTION 5.7(b) of written notice of the commencement of any action,
suit, proceeding, investigation or threat thereof made in writing with respect
to which a claim for indemnification may be made pursuant to this SECTION 5,
such indemnified party shall, if a claim in respect thereof is to be made
against an indemnifying party, give written notice to the indemnifying party of
the threat or commencement thereof; provided, however, that the failure to so
notify the indemnifying party shall not relieve it from any liability which it
may have to any indemnified party except to the extent that the indemnifying
party is actually prejudiced by such failure to give notice. If any such claim
or action referred to under SECTION 5.7(a) or SECTION 5.7(b) is brought against
any indemnified party and it then notifies the indemnifying party of the threat
or commencement thereof, the indemnifying party shall be entitled to
participate therein and, to the extent that it wishes, jointly with any other
indemnifying party similarly notified, to assume the defense thereof with
counsel reasonably satisfactory to such indemnified party. After notice from
the indemnifying party to such indemnified party of its election so to assume
the defense of any such claim or action, the indemnifying party shall not be
liable to such indemnified party under this SECTION 5 for any legal expenses of
counsel or any other expenses subsequently incurred by such indemnified party
in connection with the defense thereof other than reasonable costs of
investigation unless the indemnifying party has failed to assume the defense of
such claim or action or to employ counsel reasonably satisfactory to such
indemnified party. Under no circumstances will the indemnifying party be
obligated to pay the fees and expenses of more than one law firm for all
indemnified parties. The indemnifying party shall not be required to indemnify
the indemnified party with respect to any amounts paid in settlement of any
action, proceeding or investigation entered into without the written consent of
the indemnifying party, which consent shall not be unreasonably withheld. No
indemnifying party shall consent to the entry of any judgment or enter into any
settlement without the consent of the indemnified party unless (i) such
judgment or settlement does not impose any obligation or liability upon the
indemnified party other than the execution, delivery or approval thereof,
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and (ii) such judgment or settlement includes as an unconditional term thereof
the giving by the claimant or plaintiff to such indemnified party of a full
release and discharge from all liability in respect of such claim for all
persons that may be entitled to or obligated to provide indemnification or
contribution under this SECTION 5.
(d) Indemnification similar to that specified in the preceding
subsections of this SECTION 5 (with appropriate modifications) shall be given
by the Company and each seller of Registrable Securities with respect to any
required registration or qualification of securities under any state securities
or blue sky laws.
(e) If the indemnification provided for in this SECTION 5 is
unavailable to or insufficient to hold harmless an indemnified party under
SECTION 5.7(a) or SECTION 5.7(b), then each indemnifying party shall contribute
to the amount paid or payable by such indemnified party as a result of the
losses, claims, damages, liabilities or expenses (or actions or proceedings in
respect thereof) referred to in SECTION 5.7(a) or SECTION 5.7(b) in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party on the one hand and the indemnified party on the other in connection with
the statements, omissions, actions or inactions which resulted in such losses,
claims, damages, liabilities or expenses as well as any other relevant
equitable considerations. The relative fault of the indemnifying party and the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the indemnifying party or the indemnified party, any action or
inaction by any such party, and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such statement, omission,
action or inaction. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages, liabilities or expenses (or actions or
proceedings in respect thereof) pursuant to this SECTION 5.7(e) shall be deemed
to include, without limitation, any reasonable legal or other expenses incurred
by such indemnified party in connection with investigating or defending any
such action or claim (which shall be limited as provided in SECTION 5.7(c) if
the indemnifying party has assumed the defense of any such action in accordance
with the provisions thereof) which is the subject of this SECTION 5.7(e). No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. Promptly after
receipt by an indemnified party under this SECTION 5.7(e) of written notice of
the commencement of any action, suit, proceeding, investigation or threat
thereof made in writing with respect to which a claim for contribution may be
made against an indemnifying party under this SECTION 5.7(e), such indemnified
party shall, if a claim for contribution in respect thereof is to be made
against an indemnifying party, give written notice to the indemnifying party of
the commencement thereof (if the notice specified in SECTION 5.6(c) has not
been given with respect to such action); provided, however, that the failure to
so notify the indemnifying party shall not relieve it from any obligation to
provide contribution which it may have to any indemnified party under this
SECTION 5 except to the extent that the indemnifying party is actually
prejudiced by the failure to give notice. The parties hereto agree that it
would not be just and equitable if contribution pursuant to this Section were
determined by pro rata allocation or by any other method of allocation which
does not take account the equitable considerations referred to in this
paragraph.
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If indemnification is available under this SECTION 5, the indemnifying parties
shall indemnify each indemnified party to the fullest extent provided in
SECTIONS 5.7(a) and 5.7(b), without regard to the relative fault of said
indemnifying party or any other equitable consideration provided for in this
paragraph. The provisions of this paragraph shall be in addition to any other
rights to indemnification or contribution which any indemnified party may have
pursuant to law or contract, shall remain in full force and effect regardless
of any investigation made by or on behalf of any indemnified party, and shall
survive the transfer of securities by any such party. In connection with any
underwritten offering contemplated by this Agreement which includes Registrable
Securities, the Company and all sellers of Registrable Securities included in
any registration statement shall agree to customary provisions for
indemnification and contribution (consistent with the other provisions of this
SECTION 5) in respect of losses, claims, damages, liabilities and expenses of
the underwriters of such offering.
5.8 UNDERWRITING. If any registration effected pursuant to
SECTION 5.2 is an underwritten offering, or a best efforts underwritten
offering, the investment banker or investment bankers and manager or managers
that will administer the offering shall be mutually agreed upon by the Company
and the holders of a majority of the Registrable Securities to be included in
such offering. If any Piggyback Registration is an underwritten offering, the
Company shall have the right to select the investment banker or investment
bankers and manager or managers to administer the offering; provided, that such
investment bankers and managers must be reasonably satisfactory to the holders
of a majority of the Registrable Securities to be registered in such Piggyback
Registration, if any Person (other than the Company) has the right, in the case
of an underwritten secondary offering, to select the same.
5.9 RULE 144 REQUIREMENTS. The Company covenants to each Holder
that, to the extent that the Company shall be required to do so under the
Exchange Act, the Company shall (a) timely file the reports required to be
filed by it under the Exchange Act or the Securities Act (including, but not
limited to, the reports under Sections 13 and 15(d) of the Exchange Act
referred to in subparagraph (c)(1) of Rule 144 adopted by the Commission under
the Securities Act) and the rules and regulations adopted by the Commission
thereunder, and (b) take such further action as any Holder may reasonably
request, all to the extent required from time to time to enable such Holder to
sell Registrable Securities without registration under the Securities Act
within the limitations of the exemption provided by Rule 144 under the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission. Upon the request of
any Holder, the Company shall deliver to such Holder a written statement as to
whether it has complied with such requirements.
5.10 LIMITATIONS ON SUBSEQUENT REGISTRATION RIGHTS. From and after
the date of this Agreement, the Company will not enter into any agreement with
respect to its securities which is inconsistent with or violates the rights
granted to the holders of Registrable Securities in this Agreement.
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5.11 OBLIGATIONS OF HOLDERS IN A REGISTRATION. Each Holder agrees
as follows:
(a) If any Registrable Securities are included in a registration
statement, the holder thereof will not (until further notice) effect sales
thereof after receipt of telegraphic or written notice from the Company to
suspend sales to permit the Company to correct or update a registration
statement or prospectus; provided, that the obligations of the Company with
respect to maintaining any registration statement current and effective shall
be extended by a period of days equal to the period said suspension is in
effect.
(b) If any Registrable Securities are being registered in any
registration pursuant to this Agreement, the holder thereof will comply with
all anti-stabilization, manipulation and similar provisions of Section 10 of
the Exchange Act, as amended, and any rules promulgated thereunder by the
Commission and, at the request of the Company, will execute and deliver to the
Company and to any underwriter participating in such offering, an appropriate
agreement to such effect.
(c) At the end of any period during which the Company is obligated
to keep a registration statement current and effective as described herein, the
holders of Registrable Securities included in the registration statement shall
discontinue sales thereof pursuant to such registration statement.
(d) If any Registrable Securities are included in a registration
statement, the holder thereof will (i) furnish to the Company in writing such
information as is reasonably requested by the Company for use in the
registration statement (or any prospectus included therein), (ii) complete and
execute all customary questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents required by an underwriter relating
to the terms of the underwriting agreements and (iii) only sell such
Registrable Securities on the basis provided in any such underwriting
agreements.
5.12 MISCELLANEOUS. In connection with its obligations under this
SECTION 5, the Company shall have no obligation (a) to assist or cooperate in
the offering or disposition of the Registrable Securities or (b) to obtain a
commitment from an underwriter relative to the sale of the Registrable
Securities.
SECTION 6. DEFAULT REMEDIES.
6.1 REMEDIES. At any time after an Event of Default (as defined
in SECTION 4.1(d) other than an Event of Default relating to SECTIONS 4.16,
4.20 or 4.22), unless waived pursuant to the terms of SECTION 9.1, the
Investors shall have the right to sell ("Remedy") to the Company all or part of
the Preferred Shares held by such Investors on the Remedy Date (as defined
below) (the "Remedy Securities") pursuant to the following terms:
(a) In the event Investors wish to exercise their right to sell
the Remedy Securities, the Investors shall notify the Company at least sixty
(60) days prior to the effective Remedy Date of their intention to exercise
their Remedy right, the number of the Remedy Securities, and their
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intended Remedy Date, which date shall be no more than one hundred twenty (120)
days from the date of the notice; provided, however, that if a "fair market
value" determination made pursuant to SECTION 6.1(b) below extends beyond the
effective Remedy Date as specified in the notice above, then such effective
Remedy Date shall be ten (10) days after such "fair market value"
determination. For purposes of this SECTION 6, the term "Remedy Date" shall
mean each date on which Investors exercise their right to Remedy pursuant to
this SECTION 6, and Investors shall be deemed to have exercised a Remedy right
only upon the closing of such Remedy right as specified in SECTION 6.1(e)
hereto.
(b) The purchase price per share (the "Remedy Price") of the
Remedy Securities shall be the greater of (x) the "fair market value" (plus, if
not taken into account by the party or parties determining the fair market
value pursuant to (b)(i), (b)(ii) or (b)(iii) below, (a) any accrued or
declared but unpaid dividends payable on each of the Remedy Securities and (b)
interest, if any) of each of such Remedy Securities or (y) the initial purchase
price per Preferred Share hereunder (plus any accrued or declared but unpaid
dividends payable on the Remedy Securities, plus interest, if any). For
purposes of this SECTION 6, the term "fair market value" shall mean the fair
market value of such security on the Remedy Date, determined as follows:
(i) by written agreement of the Company and the Investors
exercising such Remedy right; or
(ii) if the Company and the Investors exercising such
Remedy right fail to reach a written agreement within thirty (30) days
after the notice given by the Investors exercising such Remedy right
pursuant to SECTION 6.1(a) above, the Company and the Investors
exercising such Remedy right shall together appoint an independent
appraiser to determine the "fair market value" of the Remedy
Securities, which shall be binding on the parties; or
(iii) if (x) the Company and the Investors are unable to
agree upon the choice of an independent appraiser under (ii) hereof
within forty (40) days after the notice given by the Investors
pursuant to SECTION 6.1(a) or (y) such appraiser, after being duly
selected, fails to determine the "fair market value" within thirty
(30) days of being selected, then the Company, on the one hand, and
the Investors exercising such Remedy right, on the other hand, shall
each appoint, within ten (10) days following the expiration of the
applicable time period under (x) or (y) above, an independent
appraiser, and the two appraisers together shall determine the "fair
market value." If only one appraiser is appointed during the 10-day
period referred to above, then such appraiser shall alone determine
the "fair market value," which determination shall be binding on the
Company and the Investors exercising such Remedy right. If both
appraisers are appointed within such 10-day period, and within thirty
(30) days after the appointment of the second of the two appraisers,
they cannot agree on the "fair market value" of the Remedy Securities,
then each appraiser shall prepare a separate appraisal report of the
fair market value ("FMV") of the Company and the "fair market value"
of the Remedy Securities within sixty (60) days after the appointment
of the second of the two appraisers, and if the lower of the two FMVs
of the Company is equal to at least 85% of the higher FMV
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of the Company, then the "fair market value" of the Remedy Securities
shall be the average of the "fair market value" of the Remedy
Securities as determined by the two appraisers. If only one of the
appraisers submits an appraisal report on or before such 60th day,
then the "fair market value" of the Remedy Securities shall be the
"fair market value" of the Remedy Securities as determined by such
report; or
(iv) if neither of the appraisers submits an appraisal
request on or before such 60th day, or if both appraisers submit an
appraisal report but the averaging requirements set forth in (iii)
above are not met, then the two appraisers shall promptly appoint a
third appraiser who shall determine the "fair market value" of the
Remedy Securities. If the two appraisers fail to appoint a third
appraiser as required hereunder, either party shall have the right to
submit the determination to arbitration under the rules and procedures
of the American Arbitration Association.
(c) The appraisers and arbitrators shall have access to all books
and records of the Company and the Subsidiaries and shall have the right to
examine all of its accounts, books, assets and equipment and do all things
fully and completely to enable them to arrive at the FMV of the Company and the
"fair market value" of the Remedy Securities. The cost of any appraisal
proceedings shall be paid one-half ( 1/2) by the Company and one-half ( 1/2) by
the Investors exercising such Remedy Right (pro rata). An appraiser making an
appraisal pursuant to this Agreement shall assume an all cash sale with respect
to the subject Remedy Securities and shall assume that the restrictions on
transfer specified in this Agreement, the Stockholders' Agreement and/or any
applicable federal or state securities law restrictions on transfer are not
applicable to such Remedy Securities. All appraisers appointed shall be
experienced and knowledgeable in the industry or industries in which the
Company does business. The "fair market value" determination pursuant to
SECTION 6.1(b)(iii) or SECTION 6.1(b)(iv) hereof, as the case may be, shall be
binding on the Company and the Investors exercising such Remedy Right.
(d) If the Company is unable to purchase all Remedy Securities
required to be purchased on a Remedy Date due to federal or state law
restrictions or due to any restriction imposed by any listing agreement with
any securities exchange to which the Company is then a party, Remedy Securities
shall be repurchased (on a pro rata basis from the holders of the Remedy
Securities based upon the Common Stock equivalents) from time to time, to the
extent the Company is legally permitted to do so, and the Remedy obligations of
the Company under this SECTION 6 will be a continuing obligation until the
Company's repurchase of all such Remedy Securities.
(e) On each Remedy Date (including any subsequent purchase closing
date if multiple purchases result from the application of SECTION 6.1(d)), the
Remedy closing shall occur at the Company's principal office. At the Remedy
closing, to the extent applicable, the Investors exercising such Remedy Right
shall deliver the Remedy Securities being sold, duly endorsed in blank,
accompanied by such supporting documents as may be necessary to pass to the
Company good title to the Remedy Securities, free and clear of all liens (other
than restrictions under applicable securities laws and/or the Stockholders'
Agreement). In consideration therefor, the Company shall deliver to each of
the Investors exercising such Remedy Right (i) payment, by
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certified check, cashier's check or wire transfer, of the aggregate Remedy
Price or (ii) at the option of the Company, a full recourse promissory note or
notes evidencing the aggregate Remedy Price (the "Remedy Notes"). Each Remedy
Note shall be secured by a pledge from the Company of the Remedy Securities for
which the Remedy Note is executed, and the Company hereby agrees to take all
actions and execute all documents (in form reasonably satisfactory to the
Investors exercising such Remedy Right) necessary or appropriate to properly
and fully secure each Remedy Note with the Remedy Securities transferred in
exchange therefor. In addition, each Remedy Note shall be in form reasonably
satisfactory to the Investors exercising such Remedy Right and shall in any
case, unless otherwise agreed to by the parties, (i) have a term of three (3)
years, (ii) provide for repayment of the aggregate Remedy Price at a rate of no
less than one-third per year, with principal and interest payable in equal
semi-annual installments, (iii) provide that the unpaid balance of the Remedy
Note shall accrue simple interest at the rate of 13.5% per annum from the date
of issuance until full payment of the aggregate Remedy Price is made and (iv)
provide that all amounts due under such Remedy Note may be accelerated and
declared immediately payable upon a default in any payment by the Company under
such Remedy Note, which is not cured within sixty (60) days.
6.2 TRANSFER OF REMEDY RIGHT. The Remedy Right granted hereunder
is not assignable except by an Investor to any party who acquires at least
fifty percent (50%) of the Preferred Shares originally issued to such Investor
hereunder (appropriately adjusted for recapitalizations, stock splits and the
like).
SECTION 7. RIGHT OF FIRST REFUSAL ON ISSUANCE OF NEW SECURITIES
7.1 GRANT OF RIGHT. The Company hereby grants to each Investor,
for so long as the Investors hold at least twenty percent (20%) of the
Preferred Shares, the right of first refusal to purchase its Pro Rata Share (as
defined below) of New Securities (as defined below) which the Company may, from
time to time, propose to sell and issue. A "Pro Rata Share," for purposes of
this right of first refusal, is the ratio that (a) the sum of the total number
of shares of Common Stock which are then held or obtainable by the Investor
(including those which each such Investor has the right to obtain pursuant to
exercise or conversion of any option, warrant, right or convertible security)
bears to (ii) the sum of the total number of shares of Common Stock then
outstanding and which are issuable pursuant to exercise or conversion of any
then outstanding options, warrants, rights or convertible securities.
7.2 NEW SECURITIES. Except as set forth below, "New Securities"
shall mean any shares of capital stock of the Company, including Common Stock
and any series of preferred stock, whether now authorized or not, and rights,
options or warrants to purchase said shares of Common Stock or preferred stock,
and securities of any type whatsoever that are, or may become, convertible into
or exchangeable for said shares of Common Stock or preferred stock.
Notwithstanding the foregoing, the term "New Securities" does not include (a)
the Conversion Shares, (b) Warrant Shares, (c) securities issued pursuant to
the acquisition of another corporation by the Company by merger, purchase of
all or substantially all of the assets or other reorganization whereby the
Company or its stockholders own more than seventy- five percent (75%) of the
voting power of the surviving or successor corporation, (d) securities issued
or sold
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in connection with the Option Pool, (e) securities issued pursuant to any
rights, agreements or convertible securities, including, without limitation,
options and warrants, provided that the rights of first refusal established by
this SECTION 7 applied with respect to the initial sale or grant by the Company
of such rights, agreements or convertible securities, (f) securities issued
pursuant to the conversion of shares of the Company's Series D Preferred Stock
or Series E Preferred Stock, (g) securities issued pursuant to any warrant,
option, agreement or convertible security of the Company outstanding as of the
date of this Agreement (and disclosed in Schedule 2.5), (h) securities exempt
from the registration requirements of the Securities Act as a result of
Regulation S promulgated under the Securities Act, (i) securities issued in
connection with the acquisition of the remaining shares of the capital stock of
North American Environmental Group, Inc. by the Company or (j) securities
issued in connection with any stock split, stock dividend or recapitalization
by the Company not involving new financing.
7.3 NOTICE. In the event the Company proposes to undertake an
issuance or sale of New Securities, it shall give the Investors written notice
of its intention, describing the amount and type of New Securities, and the
price and general terms upon which the Company proposes to issue the same.
Each Investor shall have thirty (30) days from the date of receipt of any such
notice to agree to purchase up to its respective Pro Rata Share of such New
Securities for the price and upon the general terms specified in the notice by
giving written notice to the Company and stating therein the quantity of New
Securities to be purchased.
7.4 ELIGIBLE SALES TO THIRD PARTIES. After giving the notice and
opportunity for each Investor to participate as required under SECTION 7.3
above, the Company shall have one hundred and twenty (120) days thereafter to
issue and sell the New Securities not elected nor eligible to be purchased by
the Investors at the price and upon the terms no more favorable to the
purchasers of such securities than specified in the Company's notice under
SECTION 7.3. In the event the Company has not sold such New Securities within
said one hundred and twenty (120) day period, the Company shall not thereafter
issue or sell any New Securities without first offering such securities in the
manner provided above.
7.5 ASSIGNMENT. The right of first refusal hereunder is not
assignable except by any Investor to any party who acquires at least fifty
percent (50%) of the Preferred Shares originally issued to such Investor
hereunder and/or Conversion Shares and the Warrant Shares (appropriately
adjusted for recapitalizations, stock splits and the like).
7.6 ACCREDITED INVESTOR. The rights granted to the Investors
pursuant to this Section 7 shall only be exercisable by an Investor who
demonstrates, at the time of exercise of such rights, to the reasonable
satisfaction of the Company, that (a) such Investor is an "accredited
investor," as defined in Regulation D promulgated under the Securities Act or
(b) another exemption from the registration requirements of the Securities Act
is available.
38
<PAGE> 39
SECTION 8. SPECIAL DEFAULT.
8.1 VIOLATION IN USE OF PROCEEDS. Notwithstanding anything herein
to the contrary, any breach by the Company of the reported use of proceeds
pursuant to SECTION 4.3 hereof (without the prior written consent of NBCC)
shall give each Investor the right, in its sole and absolute discretion, to
demand (and receive, upon thirty (30) days' notice of such demand) repayment by
the Company of the amounts paid by such Investor to the Company hereunder (plus
interest thereon at the highest legal rate permitted under applicable law or
SBA regulation). All such amounts due hereunder shall be paid to such Investor
by certified check, cashier's check or wire transfer. In the event an Investor
demands and receives such repayment, the Preferred Shares and Warrants issued
to such Investor pursuant to this Agreement (and the Conversion Shares and
Warrant Shares into which such Preferred Shares or Warrants may from time to
time have been converted or exercised for) shall be surrendered by such
Investor to the Company, duly endorsed in blank, accompanied by such supporting
documents as may be necessary to pass to the Company good title to such
securities, free and clear of all liens (other than restrictions under
applicable securities laws and/or the Stockholders' Agreement) and, at the
option of the Company, canceled by the Company. Notwithstanding the foregoing,
however, to the extent that SBA regulations permit the Company to cure any
default under this SECTION 8.1, the Company may cure such default prior to the
expiration of the 30-day notice period above, and in such case the rights of
the Investors to require the Company to repurchase any of their Preferred
Shares, Warrants, Conversion Shares and Warrant Shares to the Company under
this SECTION 8.1 shall cease with respect to such default. Any such cure shall
in no way be deemed to limit an Investor's rights under this SECTION 8.1 with
respect to any subsequent default. Nothing in this SECTION 8.1 shall be
construed to restrict or otherwise limit an Investor's right to seek all other
remedies available to it as provided hereunder, or at law or in equity,
including the remedy of specific performance. The provisions of this SECTION
8.1 shall expire upon evidence satisfactory to NBCC that the Company has
utilized the proceeds received pursuant to this Agreement in a manner that is
consistent with their use reported to the SBA on SBA Form 1031. The rights of
an Investor pursuant to this SECTION 8 shall not be transferrable or assignable
except to an affiliate of such Investor.
SECTION 9. GENERAL.
9.1 AMENDMENTS, WAIVERS AND CONSENTS. Except as otherwise
provided herein, any consents required and any waiver, amendment or other
action of the Investors or holders of the Preferred Shares and Warrants (or
Conversion Shares and Warrant Shares) may be made by consent(s) in writing
signed by at least two (2) holders of Preferred Shares holding in the aggregate
at least two-thirds of the Preferred Shares and Warrants (including, for such
purposes, any Conversion Shares or Warrant Shares into which any of the
Preferred Shares or Warrants have been converted into or exercised for that
have not been sold to the public). Any amendment or waiver made according to
this paragraph will be binding upon each holder of any securities purchased
under this Agreement at the time outstanding (including securities into which
such securities have been converted) and each future holder. Any amendment or
waiver by the Company must be made in writing.
39
<PAGE> 40
9.2 SURVIVAL; ASSIGNABILITY OF RIGHTS. All representations of the
parties made in this Agreement and in the certificates, exhibits, schedules or
other written information delivered or furnished by one party to the other in
connection with this Agreement will survive the delivery of the Preferred
Shares for a period of three (3) years. Except as otherwise expressly provided
for herein, all covenants and agreements made in this Agreement will survive
Closing, and will bind and inure to the benefit of the parties' successors and
assigns.
9.3 GOVERNING LAW. THIS AGREEMENT IS TO BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT GIVING
EFFECT TO THE CHOICE OF LAW PROVISIONS THEREOF.
9.4 COUNTERPARTS. This Agreement may be executed simultaneously
in any number of counterparts, each of which will be taken to be an original,
but such counterparts will together constitute one document.
9.5 NOTICES AND DEMANDS. Any notice or demand which is permitted
or required hereunder will be deemed to have been sufficiently received (except
as otherwise provided herein) (a) upon receipt when personally delivered, (b)
one (1) day after sent by overnight delivery or telecopy providing confirmation
or receipt of delivery, or (c) three (3) days after being sent by certified or
registered mail, postage and charges prepaid, return receipt requested to the
following addresses: if to the Company or an Operating Subsidiary, at the
address as shown on the signature page of this Agreement, or at any other
address designated by such corporation to the Investors in writing; if to the
Investors, at its mailing address as shown on Exhibit A, or at any other
address designated by the Investors to the Company in writing.
9.6 SEVERABILITY. If any provision of this Agreement is held
invalid under applicable law, such provision will be ineffective to the extent
of such invalidity, and such invalid provision will be modified to the extent
necessary to make it valid and enforceable. Any such invalidity will not
invalidate the remainder of this Agreement.
9.7 EXPENSES; SPECIFIC ENFORCEMENT. The Company will pay (a) all
costs and expenses that it incurs with respect to the negotiation, execution,
delivery and performance of this Agreement, and (b) the reasonable
out-of-pocket expenses of the Investors and the reasonable legal fees and
disbursements incurred by one counsel for the Investors (up to a maximum of
$25,000) with respect to this Agreement and the transactions contemplated
hereby. The Investors, other than Pecaut Capital Investors, L.P. and Pecaut
Partners, a limited partnership, designate Jenkens & Gilchrist, a Professional
Corporation, as their counsel for this transaction. The parties agree that the
rights created by this Agreement are unique and that the loss of any such right
is not susceptible to monetary quantification. Consequently, the parties agree
that an action for specific enforcement (including for temporary and/or
permanent injunctive relief) is a proper remedy for the breach of the
provisions of this Agreement, without the necessity of proving actual damages.
If either party is required to take any action to enforce its rights under this
Agreement, the prevailing party shall be entitled to its reasonable expenses,
including attorneys' fees, in connection with any such action.
40
<PAGE> 41
9.8 ENTIRE AGREEMENT. This Agreement (including the schedules and
exhibits hereto) and the agreements referenced as exhibits to this Agreement
constitute the entire agreement of the parties, and supersede any prior
agreements.
41
<PAGE> 42
The undersigned have executed this Agreement as of the day and year
first written above.
COMPANY:
NORTH AMERICAN TECHNOLOGIES GROUP,
INC.
By: /s/ Tim B. Tarrillion
-----------------------------------------------
Tim B. Tarrillion, President and Chief
Executive Officer
Address for notices:
4710 Bellaire Boulevard
Suite 301
Bellaire, TX 77401
Telephone: (713) 662-2699
Telecopy: (713) 662-3728
Attention: Tim B. Tarrillion
OPERATING SUBSIDIARIES:
EET, Inc.
By: /s/ Tim B. Tarrillion
-----------------------------------------------
Tim B. Tarrillion, Vice President
Address for notices:
4710 Bellaire Boulevard
Suite 301
Bellaire, TX 77401
Telephone: (713) 662-2699
Telecopy: (713) 662-3728
Attention: Tim B. Tarrillion
<PAGE> 43
Industrial Pipe Fittings, Inc.
By: /s/ Tim B. Tarrillion
------------------------------------------
Tim B. Tarrillion, Vice President
Address for notices:
4710 Bellaire Boulevard
Suite 301
Bellaire, TX 77401
Telephone: (713) 662-2699
Telecopy: (713) 662-3728
Attention: Tim B. Tarrillion
GAIA Technologies, Inc.
By: /s/ Tim B. Tarrillion
-----------------------------------------------
Tim B. Tarrillion, Vice President
Address for notices:
4710 Bellaire Boulevard
Suite 301
Bellaire, TX 77401
Telephone: (713) 662-2699
Telecopy: (713) 662-3728
Attention: Tim B. Tarrillion
North American Environmental Group, Inc.
By: /s/ Tim B. Tarrillion
-----------------------------------------------
Tim B. Tarrillion, Vice President
Address for notices:
4710 Bellaire Boulevard
Suite 301
Bellaire, TX 77401
Telephone: (713) 662-2699
Telecopy: (713) 662-3728
Attention: Tim B. Tarrillion
<PAGE> 44
NBCC:
NATIONSBANC CAPITAL CORPORATION
By: /s/ Douglas C. Williamson
-----------------------------------------------
Name: Douglas C. Williamson
Title: Senior Vice President
Address for notices:
901 Main Street, 66th Floor
Dallas, Texas 75202-2911
Telephone: 214-508-0979
Facsimile: 214-508-0604
Attention: Douglas C. Williamson
INVESTORS:
R. CHANEY & PARTNERS-1993 L.P.
By: R. CHANEY & CO., INC.
By: /s/ Robert H. Chaney
----------------------------------------
Robert H. Chaney, President & CEO
Address for notices:
909 Fannin, Suite 1275
Two Houston Center
Houston, TX 77010-1006
Telephone: 713-753-1315
Facsimile: 713-750-0021
Attention: Robert H. Chaney
<PAGE> 45
THE CCG CHARITABLE REMAINDER
UNITRUST #1
By: CCG VENTURE PARTNERS, LLC
By: /s/ Mark E. Leyerle
----------------------------------------
Mark E. Leyerle, Manager
Address for notices:
14450 T.C. Jester Blvd., #170
Houston, TX 77014
Telephone: 713-893-8331
Facsimile: 713-893-2420
Attention: Mark E. Leyerle
HARRISON INTERESTS, LTD.
By: /s/ Ed Knight
-----------------------------------------------
Ed Knight, Attorney-in-Fact
Address for notices:
Texas Commerce Bank Bldg., Suite 1900
Houston, TX 77002-3299
Telephone: 713-228-5911
Facsimile: 713-225-1565
Attention: Ed Knight
/s/ Robert L. Zinn
--------------------------------------------------
Robert L. Zinn
Address for notices:
c/o Zinn Petroleum Co.
1200 Smith, Suite 2910
Houston, TX 77002
Telephone: 713-655-9521
Facsimile: 713-655-9525
Attention: Robert L. Zinn
<PAGE> 46
/s/ Robert L. Zinn
--------------------------------------------------
Robert L. Zinn, as Attorney and
Agent-in-Fact for Natalie Z. Haar
Address for notices:
c/o Zinn Petroleum Co.
1200 Smith, Suite 2910
Houston, TX 77002
Telephone: 713-655-9521
Facsimile: 713-655-9525
Attention: Robert L. Zinn
ESTATE OF WILLIAM G. HELIS,
A LOUISIANA PARTNERSHIP
By: /s/ David A. Kerstein
-----------------------------------------------
David A. Kerstein, General Agent
Address for notices:
228 St. Charles Avenue, Suite 912
New Orleans, LA 70130
Telephone: 504-523-1831
Facsimile: 504-522-6486
Attention: David A. Kerstein
PECAUT CAPITAL INVESTORS, L.P.
By: /s/ Daniel Pecaut
-----------------------------------------------
Daniel Pecaut, General Partner
Address for notices:
511 6th Street
Sioux City, Iowa 51101
Telephone: 1-800-779-7326
Facsimile: 712-252-4996
Attention: Corey Wrenn
<PAGE> 47
PECAUT PARTNERS, A LIMITED PARTNERSHIP
By: /s/ Daniel Pecaut
-----------------------------------------------
Daniel Pecaut, General Partner
Address for notices:
511 6th Street
Sioux City, Iowa 51101
Telephone: 1-800-779-7326
Facsimile: 712-252-4996
Attention: Corey Wrenn
<PAGE> 48
THE ROSER PARTNERSHIP II, LTD.
By: Christopher W. Roser,
member of the General Partner,
Roser Ventures, LLC
/s/ Christopher W. Roser
-------------------------------------------------
Christopher W. Roser
KATHERINE S. EVANS
By: /s/ Christopher W. Roser
------------------------------------------
Christopher W. Roser
Attorney-in-Fact
<PAGE> 49
THE PARADE FUND
By: /s/ E J Crawford III
-------------------------------------------
Name: E J Crawford III
-------------------------------------------
Title: Managing Partner
-------------------------------------------
THE ROSER PARTNERSHIP II, LTD.
By: Christopher W. Roser,
member of the General Partner,
Roser Ventures, LLC
/s/ CHRISTOPHER W. ROSER
-------------------------------------------------
Christopher W. Roser
KATHERINE S. EVANS
By: /s/ CHRISTOPHER W. ROSER
-------------------------------------
Christopher W. Roser
Attorney-in-Fact
<PAGE> 50
/s/ Robert D. Greenlee
--------------------------------
Robert D. Greenlee
<PAGE> 51
HEPTAGON INVESTMENTS LTD
A British Virgin Island Company
By: /s/ Ian Barrett
---------------------------------------------
Name: IAN BARRETT
-------------------------------------------
Title: Managing Director
<PAGE> 52
EXHIBIT A
THE INVESTORS
Preferred Shares and Warrants Purchased
<TABLE>
<CAPTION>
Note
----
Name and Address Preferred Warrant Total Form of Interest
- ---------------- --------- ------- ----- ------- --------
Shares Shares Consideration Payment Payable
------ ------ ------------- ------- -------
<S> <C> <C> <C> <C> <C>
NationsBanc Capital Corporation 50,000 5,000,000 $5,000,000 Cash NA
901 Main Street
66th Floor
Dallas, TX 75202-2911
(a Texas corporation)
Telecopy: (214) 508-0604
R. Chaney & Partners - 12,500 1,250,000 $1,250,000 Conversion $91,880.86
1993 L.P.
909 Fannin, Suite 1275
Two Houston Center
Houston, TX 77010-1006
Telecopy: (713) 750-0021
The CCG Charitable Remainder 7,500 750,000 $750,000 Conversion $55,128.52
Unitrust #1
14450 T.C. Jester Blvd.
Suite 170
Houston, TX 77014
Telecopy: (713) 893-2420
Harrison Interests, Ltd. 5,000 500,000 $500,000 Conversion $36,752.34
Texas Commerce Bank
Bldg.
Suite 1900
Houston, TX 77002-3299
Telecopy: (713) 225-1565
Robert L. Zinn 1,000 100,000 $100,000 Conversion $7,350.47
c/o Zinn Petroleum Co.
1200 Smith, Suite 2910
Houston, TX 77002
Telecopy: (713) 655-9525
Natalie Z. Haar 500 50,000 $50,000 Conversion $3,675.23
c/o Zinn Petroleum Co.
1200 Smith, Suite 2910
Houston, TX 77002
Telecopy: (713) 655-9525
</TABLE>
<PAGE> 53
<TABLE>
<S> <C> <C> <C> <C> <C>
Estate of William G. Helis 500 50,000 $50,000 Conversion $3,675.23
228 St. Charles Ave.
Suite 912
New Orleans, LA 70130
Telecopy: (504) 522-6486
Pecaut Capital Investors, 4,000 400,000 $400,000 Cash NA
L.P.
511 6th Street
Sioux City, Iowa 51101
Telecopy: (712) 252-4996
Pecaut Partners, a Limited 1,000 100,000 $100,000 Cash NA
Partnership
511 6th Street
Sioux City, Iowa 51101
Telecopy: (712) 252-4996
Deferred Closings
- -----------------
The Roser Partnership II, 5,000 500,000 $500,000 Cash NA
Ltd.
1105 Spruce St.
Boulder, CO 80302
Telecopy: (303) 443-1885
Katherine S. Evans 1,000 100,000 $100,000 Cash NA
1105 Spruce St.
Boulder, CO 80302
Telecopy: (303) 443-1885
The Parade Fund 1,000 100,000 $100,000 Cash NA
333 Texas St.
Suite 2300
Shreveport, LA 71101
Telecopy: (318) 222-2696
Robert Greenlee 1,000 100,000 $100,000 Cash NA
2060 Broadway
Suite 400
Boulder, CO 80302
Telecopy: (303) 444-7968
Heptagon Investments, Ltd. 2,500 250,000 $250,000 Cash NA
5847 San Felipe
Suite 4540
Houston, TX 77057
Telecopy: (713) 953-7311
</TABLE>
<PAGE> 54
Other exhibits and schedules
to the Stock and Warrant
Purchase Agreement were
not included due to
length
<PAGE> 1
EX-10.2
STOCKHOLDERS' AGREEMENT
This Stockholders' Agreement (this "Agreement") is made and entered
into as of this 5th day of April 1996, by and among North American Technologies
Group, Inc., a Delaware corporation (the "Company"), Tim B. Tarrillion, Judith
Knight Shields, David M. Daniels and Donovan W. Boyd (each, a "Management
Stockholder", and collectively, the "Management Stockholders"), and certain
other stockholders of the Company listed on the signature pages hereto (each,
an "Investor", and collectively, the "Investors" and, together with the
Management Stockholders, the "Stockholders"). Additional persons may be added
to this Agreement as "Stockholders" if they so consent, which consent shall be
evidenced by execution of a signature page hereto.
R E C I T A L S:
A. Each of the Stockholders is now or may hereafter be the owner
of shares of the Company's Common Stock, $.001 par value per share (the "Common
Stock"), Series F Preferred Stock, $.001 par value per share (the "Preferred
Stock"), and/or Warrants (as defined herein).
B. The Investors and the Company are parties to that certain
Stock and Warrant Purchase Agreement, dated as of the date hereof (the
"Purchase Agreement").
C. The obligations of the Company and the Investors under the
Purchase Agreement are conditioned, among other things, upon the execution and
delivery of this Agreement by the Company, the Management Stockholders and the
Investors.
D. The Company, the Management Stockholders and the Investors
desire to be granted the rights created herein.
NOW, THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the undersigned parties
hereto agree as follows:
1. DEFINITIONS.
(a) All capitalized terms used and not otherwise defined
herein shall have the meanings given them in the Purchase Agreement.
(b) A "Permitted Transferee" shall mean a Stockholder's
or any Permitted Transferee's, as the case may be, Affiliate (as defined
herein), spouse, siblings, ancestors and descendants (whether natural or
adopted), any spouses of such siblings, ancestors or descendants, or any trust
for the benefit of such person or persons, provided that such Permitted
Transferee agrees to be bound by the terms of this Agreement.
<PAGE> 2
(c) An "Affiliate" shall mean, with respect to any
corporation, limited liability company, partnership, limited partnership, joint
venture, joint stock company, firm, company, syndicate, trust, estate,
association, governmental authority, business, organization or any other
incorporated or unincorporated entity (each a "Person"), any other Person that
directly or indirectly, through one or more intermediaries, controls or is
controlled by, or is under common control with, such Person.
(d) A "Remaining Pro Rata Share" shall mean the ratio
that (i) the sum of the number of shares of Common Stock then held by each
Eligible Offeree (as defined below) and the number of shares of Common Stock
issuable upon exercise of any options and warrants (including, without
limitation, the Warrants) and upon conversion of shares of Preferred Stock then
held by such Eligible Offeree bears to (ii) the sum of the total number of
shares of Common Stock then held by all Eligible Offerees and the number of
shares of Common Stock issuable upon exercise of any options and warrants
(including, without limitation, the Warrants) and upon conversion of all shares
of then outstanding Preferred Stock held by all Eligible Offerees.
(e) A "Co-Sale Pro Rata Share" shall mean the ratio that
(i) the sum of the number of shares of Common Stock then held by the Eligible
Seller (as defined below) and the number of shares of Common Stock issuable
upon exercise of any options and warrants (including, without limitation, the
Warrants) and upon conversion of shares of Preferred Stock then held by such
Eligible Seller bears to (ii) the sum of the total number of shares of Common
Stock then held by all Eligible Sellers and the number of shares of Common
Stock issuable upon exercise of any options and warrants (including, without
limitation, the Warrants) and upon conversion of all shares of then outstanding
Preferred Stock held by all Eligible Sellers plus the number of shares of
Common Stock then held by the Stockholder or Permitted Transferee proposing to
sell his or its shares of Common Stock or Preferred Stock or Warrants.
(f) "Warrants" shall mean the Warrants exercisable for
shares of the Company's Common Stock, issued or issuable pursuant to the
Purchase Agreement.
(g) A "Public Market Transaction" shall mean a sale,
transfer or assignment that complies with the "manner of sale" provisions set
out in Rule 144(f), as amended from time to time, promulgated by the Securities
and Exchange Commission under the Securities Act of 1933, as amended from time
to time.
2. RIGHT OF FIRST REFUSAL.
(a) Subject to the provisions of SECTION 5, in the event
that (i) a Management Stockholder (or his Permitted Transferee) or (ii) an
Investor (or his Permitted Transferee) owning in the aggregate one percent (1%)
or more of the Common Stock of the Company, including shares of Common Stock
issuable upon conversion of shares of Preferred Stock or upon exercise of any
Warrants (on a fully diluted basis and as adjusted to reflect any stock split,
stock dividend, recapitalization and the like), proposes to transfer any of his
or its shares of Common Stock or Preferred Stock or Warrants (or shares of
Common Stock issuable upon exercise of any Warrants),
2
<PAGE> 3
such Management Stockholder, Investor or Permitted Transferee shall give the
Company written notice of the price, terms and conditions of the proposed sale.
The Company shall have fifteen (15) days from the date of receipt of any such
notice to agree to purchase up to all of such securities, for the price and
upon the terms and conditions specified in the notice, by delivering written
notice to such Management Stockholder, Investor or Permitted Transferee stating
therein the quantity of securities to be purchased up to all of such
securities.
(b) In the event that the Company determines not to
purchase all of such securities that such Management Stockholder, Investor or
Permitted Transferee proposes to transfer within the fifteen (15) day period
specified in SECTION 2(A) hereof, such Management Stockholder, Investor or
Permitted Transferee shall then give the remaining Investors and/or the
remaining Investors' Permitted Transferees or Permitted Assigns (as defined in
SECTION 10) (collectively, the "Eligible Offerees") written notice of the
price, terms and conditions of the proposed sale (which shall be the same
price, terms and conditions specified in the notice to the Company pursuant to
SECTION 2(A) above). Each Eligible Offeree shall have fifteen (15) days from
the date of receipt of any such notice to agree to purchase up to his or its
Remaining Pro Rata Share of such securities, for the price and upon the terms
and conditions specified in the notice, by giving written notice to such
Management Stockholder, Investor or Permitted Transferee stating therein the
quantity of securities to be purchased up to his or its Remaining Pro Rata
Share. If any Eligible Offeree fails to agree to purchase his or its full
Remaining Pro Rata Share within such fifteen (15) day period, the Management
Stockholder, Investor or Permitted Transferee selling such securities will then
give the Eligible Offerees who did so agree (the "Electing Offerees") notice of
the number and amount of such securities which were not subscribed for. Such
notice may be by telephone if followed by written confirmation within two (2)
days. The Electing Offerees shall have five (5) days from the date of such
second notice to agree to purchase his or its Remaining Pro Rata Share (or such
greater amount as such Electing Offerees agree upon) of all or any part of the
securities not purchased by such other Eligible Offerees. For purposes of the
second election under this SECTION 2(B), securities held by Eligible Offerees
other than Electing Offerees shall be excluded from SECTION 1(D)(II) for the
definition of a "Remaining Pro Rata Share."
(c) Notwithstanding anything to the contrary in this
SECTION 2, the Company and the Eligible Offerees may not exercise the rights
set forth in this SECTION 2 unless they, individually or in the aggregate,
purchase all and not less than all, of the securities proposed to be
transferred pursuant to the notice to the Company pursuant to SECTION 2(A)
above.
(d) Subject to the provisions of SECTION 3, in the event
the Company and the Eligible Offerees fail to purchase all of the securities
proposed to be transferred within the said fifteen (15) day period in the case
of the Company, plus the fifteen (15) day period and the five (5) day period
specified above in the case of the Eligible Offerees and Electing Offerees,
respectively, such Management Stockholder, Investor or Permitted Transferee
shall have ninety (90) days thereafter to sell the securities proposed to be
transferred at the price and upon the terms and conditions no more favorable to
the purchasers of such securities than specified in the notice to the Company
pursuant to SECTION 2(A) above. In the event such Management Stockholder,
3
<PAGE> 4
Investor or Permitted Transferee has not sold the securities within said
ninety (90) day period, such Management Stockholder, Investor or Permitted
Transferee shall not thereafter sell any of his or its securities without
first offering such securities in the manner provided above.
3. RIGHT OF PARTICIPATION. Subject to the provisions of SECTION
5 and, notwithstanding the foregoing SECTION 2(D), during the term of this
Agreement, no Management Stockholder or Permitted Transferee of a Management
Stockholder (whether the first or a subsequent Permitted Transferee) and no
Investor or Permitted Transferee of an Investor (whether the first or a
subsequent Permitted Transferee) may sell, assign or transfer any of their
shares of Common Stock or Preferred Stock or any Warrants (or shares of Common
Stock issuable upon exercise of any Warrants) until the Investors and the
Investors' Permitted Transferees and Permitted Assigns (the "Eligible Sellers")
shall have been given the opportunity, exercisable within twenty (20) days from
the date of notice to the Eligible Sellers by such Management Stockholder,
Investor or such Permitted Transferee, to sell to the proposed transferee or
transferees, upon the same terms and conditions offered to the Management
Stockholder, Investor or such Permitted Transferee, its Co-Sale Pro Rata Share
of the securities proposed to be sold. If an Eligible Seller fails to notify
the Management Stockholder, Investor or such Permitted Transferee within[twenty
(20) days after the notice given pursuant hereto, it shall be deemed to have
waived its right under this SECTION 3. Any sale or transfer made pursuant to
this SECTION 3 shall be consummated within ninety (90) days of the date of the
notice given pursuant to SECTION 2(B) above and shall be conditioned upon the
agreement of the proposed transferee or transferees that such proposed
transferee or transferees will purchase each Eligible Seller's Co-Sale Pro Rata
Share of the securities proposed to be sold. The provisions of this SECTION 3
shall not be applicable to any Public Market Transaction.
4. VOTING AGREEMENT.
(a) INVESTOR NOMINEES. For so long as the Investors and
the Investors' Permitted Transferees or Permitted Assigns own any shares of
Preferred Stock, the Company agrees to nominate to, and the Management
Stockholders and their Permitted Transferees agree to use their best efforts to
cause to be elected to, the Company's Board of Directors, such designees as are
provided for in Section 4.11 of the Purchase Agreement.
(b) VOTING. In causing nominees to be elected to the
Company's Board of Directors in accordance with this SECTION 4, the Investors,
the Management Stockholders and their Permitted Transferees, shall vote all of
their shares of Common Stock, Preferred Stock, Conversion Shares and/or Warrant
Shares, if any, then owned beneficially (to the maximum extent that such person
has the right to vote or direct the vote of such shares) by such person in
favor of electing the nominees designated pursuant to SECTION 4(A) to the
Company's Board of Directors.
(c) BOARD OF DIRECTORS. Each Management Stockholder and
each Permitted Transferee of a Management Stockholder hereby covenants and
agrees that, except as consistent with the terms of SECTION 4(A), he or it
shall take no action to decrease the number of members on the Board of
Directors to less than nine (9).
4
<PAGE> 5
5. EXCEPTIONS; PROHIBITIONS.
(a) Each Stockholder may transfer any shares of Common
Stock, Preferred Stock or the Warrants (or shares of Common Stock issuable upon
exercise of any Warrants) to a Permitted Transferee provided that such
Permitted Transferee agrees to be bound by this Agreement, with respect to such
transferred shares of Common Stock, Preferred Stock or the Warrants (or shares
of Common Stock issuable upon exercise of any Warrants). Such transfers shall
not be subject to the provisions of SECTION 2 or SECTION 3.
(b) Except as otherwise provided in SECTION 5(C) below,
and notwithstanding anything in this Agreement to the contrary, the provisions
of this Agreement shall not apply to the sale, transfer or assignment of shares
of Common Stock by a Management Stockholder (and a Management Stockholder may
sell, transfer or assign shares of Common Stock without complying with any of
the terms of this Agreement), so long as both of the following conditions are
met:
(i) the number of shares of Common Stock included
in such sale, transfer or assignment, when aggregated with all
other sales, transfers and assignments made pursuant to this
SECTION 5(B) during the same calendar year by such Management
Stockholder, does not exceed the greater of (x) 15% of the
number of shares of Common Stock (determined on a fully
diluted basis, including all shares of Common Stock into which
any warrant, option or convertible security may be exercised,
exchanged or converted, as applicable) owned by such
Management Stockholder on the first day of such year or (y)
30,000 shares of Common Stock; and
(ii) such sale, transfer or assignment is either
(x) a sale, transfer or assignment to one or more of such
Management Stockholders' spouse, siblings, ancestors or
descendants (whether natural or adopted), any spouse of such
siblings, ancestors or descendants, or any trust for the
benefit of one or more of such persons, or to any charitable
or tax-exempt organization, foundation or educational
institution or (y) a Public Market Transaction.
Notwithstanding anything in this Agreement to the contrary, any shares of
Common Stock so sold, transferred or assigned as described above shall not be
subject to the restrictions, nor shall they be entitled to the rights, set out
in this Agreement, and the party or parties to whom such shares are sold,
transferred or assigned shall not be subject to the provisions, nor shall they
be entitled to the rights, set out in this Agreement with respect to such
shares.
(c) In addition to (and not by way of limitation of) the
other provisions of this Agreement, without the prior written consent of the
holders of a majority in interest of the total number of shares of Common
Stock, Preferred Stock and Warrants (counted on an as-converted into Common
Stock basis) then held by the Investors and the Investors' Permitted Assigns,
no Management Stockholder may sell, transfer or assign in the aggregate
(together with all other sales, transfers or assignments during the term of
this Agreement by such Management
5
<PAGE> 6
Stockholder) during the term of this Agreement a number of shares of Common
Stock that exceeds 50% of the number of shares of Common Stock (determined on a
fully diluted basis, including all shares of Common Stock into which any
warrant, option or convertible security may be exercised, exchanged or
converted, as applicable) owned of record or beneficially on the date of this
Agreement by such Management Stockholder. The provisions of this SECTION 5(C)
do not apply to any sale, transfer or assignment made pursuant to SECTION 5(A),
5(E) or 5(F) hereof.
(d) Notwithstanding anything in this Agreement to the
contrary, the provisions of this Agreement shall not apply to any shares of
Common Stock or options, warrants or rights to acquire shares of Common Stock
sold, transferred or assigned by a Management Stockholder prior to the date of
this Agreement, regardless of whether or not such shares are held by a
Permitted Transferee of such Management Stockholder; and any Permitted
Transferee of such Management Stockholder shall not be bound by the provisions
of this Agreement with respect to any such shares, options, warrants or rights
that were so sold, transferred or assigned to such Permitted Transferee prior
to the date of this Agreement.
(e) Notwithstanding any other provision of this Agreement
to the contrary, the provisions of this Agreement shall not apply to any shares
of Common Stock acquired by a Management Stockholder after the date hereof in a
Public Market Transaction; and such shares so acquired shall not be counted in
the number of shares held by such Management Stockholder for the purposes of
this Agreement, and such Management Stockholder shall not be subject to the
provisions or entitled to the rights set out in this Agreement with respect to
such shares.
(f) Notwithstanding anything in this Agreement to the
contrary, the provisions of this Agreement shall not apply to the sale,
transfer or assignment to the Company of any right to acquire shares of Common
Stock by a Management Stockholder in connection with a so-called "cashless"
exercise of an employee-related option agreement.
6. PROHIBITED STOCK SALES. Notwithstanding anything else to the
contrary in this Agreement, no Management Stockholder, Investor or Permitted
Transferee shall transfer any shares of Common Stock, Preferred Stock or the
Warrants (or shares of Common Stock issuable upon exercise of any Warrants) to
any person or entity reasonably determined by a majority of the Board of
Directors to be a competitor of the Company. The provisions of this SECTION 6
shall not apply to any sale, transfer or assignment that constitutes a Public
Market Transaction.
7. CHANGES IN STOCK. If, from time to time during the term of
this Agreement:
(a) there is a dividend of any security, stock split or
other change in the character or amount of any of the outstanding securities of
the Company, or
(b) there is any consolidation or merger immediately
following which stockholders of the Company hold more than 50% of the voting
equity securities of the surviving corporation,
6
<PAGE> 7
then, in such event, any and all new, substituted or additional securities or
other property (other than cash) to which any Management Stockholder, the
Investors or any holder of Preferred Stock, Conversion Shares or Warrant Shares
is entitled by reason of his ownership of the Preferred Shares, Conversion
Shares or Warrant Shares shall be immediately subject to the provisions of this
Agreement and be included for all purposes of this Agreement with the same
force and effect as the shares of Common Stock, Preferred Stock or the Warrants
presently subject to this Agreement and with respect to which such securities
or property were distributed.
8. LEGENDS. All certificates of the Management Stockholders
(other than certificates representing shares of Common Stock currently held in
broker accounts, all of which shall nonetheless remain subject to the other
provisions of this Agreement, and such Management Stockholder owning the same
shall indemnify the Company and the other parties to this Agreement for any
loss, cost or damage suffered as a result of the failure of any such
certificate to have a legend placed on it as described in this SECTION 8) and
the Investors representing any shares of Common Stock or Preferred Stock or the
Warrants (and any of the same transferred on or after the date hereof by any
such party to a Permitted Transferee) subject to the provisions of this
Agreement shall have endorsed thereon a legend to substantially the following
effect:
"THE RIGHT TO SELL, TRANSFER OR OTHERWISE DISPOSE OF OR PLEDGE
THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO CERTAIN
RESTRICTIONS, WHICH INCLUDE CO-SALE AND RIGHT OF FIRST REFUSAL
RESTRICTIONS ON THE SALE OF THE SECURITIES AND A VOTING AGREEMENT, SET
FORTH IN A STOCKHOLDERS' AGREEMENT. A COPY OF SUCH AGREEMENT IS ON
FILE AT THE CORPORATION'S PRINCIPAL PLACE OF BUSINESS AND ITS
REGISTERED OFFICE."
9. TRANSFER OF STOCK. The Company shall not: (a) permit any
transfer on its books of any shares of Common Stock or Preferred Stock or the
Warrants which shall have been sold or transferred in violation of any of the
provisions set forth in this Agreement or (b) treat as an owner of such shares
of Common Stock or Preferred Stock or the Warrants or accord the right to vote
as an owner or to pay dividends to any transferee to whom such shares of Common
Stock or Preferred Stock or the Warrants shall have been sold or transferred in
violation of any of the provisions set forth in this Agreement.
10. TRANSFER OF RIGHTS. The rights set forth in SECTION 2,
SECTION 3 and SECTION 4 are assignable or transferable by the Investors to any
party (upon the transfer of any shares of Preferred Stock, Conversion Shares,
Warrants and/or Warrant Shares by Investors to such party, an "Investor's
Permitted Assign") in connection with the sale of such securities to such
party, so long as such Investor's Permitted Assign agrees, in a written
instrument to be bound by the terms and provisions of this Agreement as if such
party were an Investor.
11. TERMINATION. Except as otherwise provided herein, this
Agreement shall terminate upon the earliest to occur of:
7
<PAGE> 8
(a) an agreement in writing by the Company, the
Management Stockholders (and/or their Permitted Transferees, as the case may
be), and the holders of a majority in interest of the Common Stock, Preferred
Stock and Warrants (counted on an as-converted into Common Stock basis) then
held by the Investors and the Investors' Permitted Transferees; or
(b) the consolidation, merger (but only with respect to a
consolidation or merger pursuant to which stockholders of the Company
(determined prior to such consolidation or merger) hold less than 50% of the
voting equity of the surviving corporation) or sale of all or substantially all
of the assets of the Company; or
(c) on the anniversary date of this Agreement in the year
2004; or
(d) in addition (and not by way of limitation of the
foregoing), all rights and obligations of any Management Stockholder and his or
her Permitted Transferees under this Agreement shall immediately terminate and
be of no further force or effect upon the termination of such Management
Stockholder's employment in all capacities with the Company and its
wholly-owned subsidiaries, regardless of the cause of such termination.
12. AMENDMENT. Any provision of this Agreement may be amended or
the observance thereof may be waived (either generally or in a particular
instance and either retroactively or prospectively) only with the written
consent of the Company, the Management Stockholders and their Permitted
Transferees holding a majority in interest of the shares of Common Stock then
held by such Management Stockholders or their Permitted Transferees on any
applicable date and the holders of a majority in interest of the total number
of shares of Common Stock, Preferred Stock and Warrants (counted on an
as-converted into Common Stock basis) then held by the Investors and the
Investors' Permitted Transferees. Any amendment or waiver effected in
accordance with this SECTION 12 shall be binding upon the Investors, each
Management Stockholder, each Permitted Transferee and the Company.
13. GOVERNING LAW. This Agreement and the legal relations between
the parties arising hereunder shall be governed by and interpreted in
accordance with the laws of the State of Delaware. The parties hereto agree to
submit to the jurisdiction of the federal and state courts of the State of
Texas with respect to the breach or interpretation of this Agreement or the
enforcement of any and all rights, duties, liabilities, obligations, powers,
and other relations between the parties arising under this Agreement.
14. ENTIRE AGREEMENT. This Agreement, and the Purchase Agreement,
including all exhibits, schedules and attachments thereto, constitute the full
and entire understanding and agreement between the parties regarding the
matters set forth herein. Except as otherwise expressly provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon the
successors, assigns, heirs, executors and administrators of the parties hereto.
15. NOTICES, ETC. Except as otherwise specifically provided
herein, all notices and other communications required or permitted hereunder
shall be in writing and shall be deemed
8
<PAGE> 9
effectively given upon personal delivery to the party to be notified or three
(3) days after deposit with the United States mail, by registered or certified
mail, postage prepaid, addressed (a) if to an Investor, at such Investor's
address as set forth on EXHIBIT A attached to the Purchase Agreement, or at
such other address as such Investor shall have furnished to the Company in
writing in accordance with this SECTION 15, (b) if to a Management Stockholder,
at such address as such Management Stockholder shall have last furnished the
Company in writing, or (c) if to the Company, at its principal office.
16. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
17. SPECIFIC PERFORMANCE. The Company, the Management
Stockholders and the Investors agree that the rights created by this Agreement
are unique, and that the loss of any such right is not susceptible to monetary
quantification. Consequently, the parties agree that an action for specific
performance (including for temporary and/or permanent injunctive relief) of the
obligations created by this Agreement is a proper remedy for the breach of the
provisions of this Agreement, without the necessity of proving actual damages.
If the parties hereto are forced to institute legal proceedings to enforce
their rights in accordance with the provisions of this Agreement, the
prevailing party shall be entitled to recover its reasonable expenses,
including attorneys' fees, in connection with any such action.
9
<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
"COMPANY"
NORTH AMERICAN TECHNOLOGIES
GROUP, INC.
a Delaware corporation
By: /s/ TIM B. TARRILLION
-----------------------------------
Name: Tim B. Tarrillion,
---------------------------------
Title: President
--------------------------------
"MANAGEMENT STOCKHOLDERS"
/s/ TIM B. TARRILLION
- ---------------------------------
Name: Tim B. Tarrillion
/s/ JUDITH KNIGHT SHIELDS
- ---------------------------------
Name: Judith Knight Shields
/s/ DAVID M. DANIELS
- ---------------------------------
Name: David M. Daniels
/s/ DONOVAN W. BOYD
- ---------------------------------
Name: Donovan W. Boyd
<PAGE> 11
"INVESTORS"
NATIONSBANC CAPITAL CORPORATION,
a Texas corporation
By: /s/ DOUGLAS C. WILLIAMSON
---------------------------------------
Name: Douglas C. Williamson
Title: Senior Vice President
R. CHANEY & PARTNERS - 1993 L.P.
By: R. Chaney & Co., Inc.
By: /s/ ROBERT H. CHANEY
----------------------------------
Robert H. Chaney, President & CEO
THE CCG CHARITABLE REMAINDER UNITRUST #1
By: CCG Venture Partners, LLC
By: /s/ MARK E. LEYERLE
----------------------------------
Mark E. Leyerle, Manager
HARRISON INTERESTS, LTD.
By: /s/ ED KNIGHT
---------------------------------------
Ed Knight, Attorney-in-Fact
/s/ ROBERT L. ZINN
- ------------------------------------------
Robert L. Zinn
/s/ ROBERT L. ZINN
- ------------------------------------------
Robert L. Zinn, as Attorney and
Agent-in-Fact for Natalie Haar
<PAGE> 12
ESTATE OF WILLIAM G. HELIS, A
LOUISIANA PARTNERSHIP
By:/s/ DAVID A. KERSTEIN
----------------------------------------------
David A. Kerstein, General Agent
PECAUT CAPITAL INVESTORS, L.P.
By:/s/ DANIEL PECAUT
----------------------------------------------
Daniel Pecaut, General Partner
PECAUT PARTNERS, A LIMITED PARTNERSHIP
By:/s/ DANIEL PECAUT
----------------------------------------------
Daniel Pecaut, General Partner
<PAGE> 13
THE ROSER PARTNERSHIP II, LTD.
By: Christopher W. Roser,
member of the General Partner,
Roser Ventures, LLC
/s/ Christopher W. Roser
- ---------------------------------------
Christopher W. Roser
KATHERINE S. EVANS
By: /s/ Christopher W. Roser
--------------------------------
Christopher W. Roser
Attorney-in-Fact
<PAGE> 14
THE PARADE FUND
By: /s/ E. J. CRAWFORD, III
-----------------------------------
Name: E. J. Crawford, III
---------------------------------
Title: Managing Partner
--------------------------------
<PAGE> 15
/s/ ROBERT D. GREENLEE
- -----------------------------------
Robert D. Greenlee
<PAGE> 16
HEPTAGON INVESTMENTS LTD
a British Virgin Island Company
By: /s/ IAN BARNETT
---------------------------------
Name: Ian Barnett
-------------------------------
Title: Managing Director
<PAGE> 1
EX-10.3
NORTH AMERICAN TECHNOLOGIES GROUP, INC.
AMENDMENT NO. 1 TO
STOCKHOLDERS' AGREEMENT
This Amendment No. 1 to Stockholders' Agreement (this "Amendment") is
made and entered into by and among North American Technologies Group, Inc., a
Delaware corporation (the "Company"), the Management Stockholders holding at
least a majority of the outstanding shares of Common Stock held by the
Management Stockholders (the "Sufficient Management Holders"), and the
Investors holding at least a majority of the outstanding shares of Common
Stock, Preferred Stock and Warrants (counted on an as-converted into Common
Stock basis) held by the Investors (the "Sufficient Investor Holders").
Capitalized terms used herein and not otherwise defined herein shall have the
meanings given them in the Stockholders' Agreement, dated as of April 5, 1996
(the "Agreement").
W I T N E S S E T H:
WHEREAS, Section 12 of the Agreement allows the Agreement to be
amended by a writing signed by the Company, the Sufficient Management Holders
and the Sufficient Investor Holders;
WHEREAS, in connection with a Deferred Closing (as defined in that
certain Stock and Warrant Purchase Agreement, dated April 5, 1996, by and among
the Company and the Investors), the parties deem it to be advisable to amend
certain provisions of the Agreement; and
WHEREAS, the parties hereto acknowledge that, but for their
willingness to enter into this Amendment, the Deferred Closing would not occur
and that this Amendment is a condition to the occurrence of such Deferred
Closing.
NOW, THEREFORE, for and in consideration of the premises and the
mutual agreements and covenants contained herein, and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. AMENDMENT TO SECTION 1. Section 1(b) of the Agreement is
hereby deleted and is amended to read in its entirety as follows:
"(b) A 'Permitted Transferee' shall mean a
Stockholder's or any Permitted Transferee's, as the case may
be, Affiliate (as defined herein), limited partners, spouse,
siblings, ancestors and descendants (whether natural or
adopted), any spouses of such siblings, ancestors or
descendants, or any trust for the benefit of such person or
persons, provided that such Permitted Transferee agrees to be
bound by the terms of this Agreement."
2. AMENDMENT TO SECTION 5. Section 5 of the Agreement is hereby
amended to add a new paragraph (g) to read in its entirety as follows:
<PAGE> 2
"(g) Notwithstanding anything in this Agreement to the
contrary, the provisions of this Agreement shall not apply to the
sale, transfer or assignment of any shares of Common Stock or options,
warrants or rights to acquire shares of Common Stock (but not
including the Preferred Stock prior to conversion into Common Stock),
held by an Investor; and any such transferee shall not be bound by,
or be able to enforce, the provisions of this Agreement with respect
to any such shares, options, warrants or rights that are held by any
such Investor."
3. EFFECTIVE DATE. The terms and provisions of this Amendment
shall be effective only upon the effectiveness of the Deferred Closing.
4. COUNTERPARTS. This Amendment may be signed in any number of
counterparts, each of which when so executed and delivered shall be an
original, but all of which such counterparts shall together constitute one and
the same instrument.
5. NO OTHER CHANGE. Except as provided for herein, the Agreement
shall remain unchanged.
IN WITNESS WHEREOF, this Amendment No. 1 to Stockholders' Agreement
has been duly executed by the undersigned as of the Effective Date.
THE COMPANY:
NORTH AMERICAN TECHNOLOGIES GROUP, INC.
By: /s/ TIM B. TARRILLION
------------------------------------------
Name:
------------------------------------------
Title:
-----------------------------------------
2
<PAGE> 3
SUFFICIENT MANAGEMENT HOLDERS:
/s/ TIM B. TARRILLION
-------------------------------------------------
Name: Tim B. Tarrillion
/s/ JUDITH KNIGHT SHIELDS
-------------------------------------------------
Name: Judith Knight Shields
/s/ DAVID M. DANIELS
-------------------------------------------------
Name: David M. Daniels
/s/ DONOVAN W. BOYD
-------------------------------------------------
Name: Donovan W. Boyd
SUFFICIENT INVESTOR HOLDERS:
NATIONSBANC CAPITAL CORPORATION,
a Texas corporation
By: /s/ DOUGLAS C. WILLIAMSON
-------------------------------------------
Name: Douglas C. Williamson
Title: Senior Vice President
R. CHANEY & PARTNERS - 1993 L.P.
By: R. Chaney & Co., Inc.
By: /s/ ROBERT H. CHANEY
---------------------------------------
Robert H. Chaney, President & CEO
THE CCG CHARITABLE REMAINDER UNITRUST #1
By: CCG Venture Partners, LLC
By: /s/ MARK E. LEYERLE
---------------------------------------
Mark E. Leyerle, Manager
3
<PAGE> 4
HARRISON INTERESTS, LTD.
By:/s/ ED KNIGHT
------------------------------------
Ed Knight, Attorney-in-Fact
/s/ ROBERT L. ZINN
---------------------------------------
Robert L. Zinn
/s/ ROBERT L. ZINN
---------------------------------------
Robert L. Zinn, as Attorney and
Agent-in-Fact for Natalie Haar
ESTATE OF WILLIAM G. HELIS, A
LOUISIANA PARTNERSHIP
By:
-----------------------------------
David A. Kerstein, General Agent
PECAUT CAPITAL INVESTORS, L.P.
By:/s/ DANIEL PECAUT
------------------------------------
Daniel Pecaut, General Manager
PECAUT PARTNERS, A LIMITED PARTNERSHIP
By:/s/ DANIEL PECAUT
------------------------------------
Daniel Pecaut, General Manager
4
<PAGE> 1
EX. 10.4
JOINT REPORTING AGREEMENT
In consideration of the mutual covenants herein contained, each of the
parties hereto represents to and agrees with the other parties as follows:
1. Such party acknowledges that it is required and eligible to
file a statement on Schedule 13D pertaining to the common stock, par value
$.001 per share ("Common Stock") of North American Technologies Group, Inc.
(the "Issuer"), to which this agreement is an exhibit, for the filing of the
information contained therein.
2. Such party is responsible for timely filing of such statement
and any amendments thereto, and for the completeness and accuracy of the
information concerning such party contained therein; provided that no such
party is responsible for the completeness or accuracy of the information
concerning the other party making the filing, unless such party knows or has
reason to believe that such information is inaccurate.
3. Such party agrees that such statement is filed by and on
behalf of each such party and that any amendment thereto will be filed on
behalf of each such party.
This agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original instrument, but all of such
counterparts taken together shall constitute but one agreement.
<PAGE> 2
Dated: July 15, 1996
R. CHANEY & PARTNERS-1993 L.P.
By: R. CHANEY & CO., INC., General Partner
By: /s/ Robert H. Chaney
-------------------------------
Robert H. Chaney,
President and Chief
Executive Officer
R. CHANEY & CO., INC.
By: /s/ Robert H. Chaney
--------------------------------
Robert H. Chaney,
President and Chief Executive Officer
/s/ Robert H. Chaney
--------------------------------------
Robert H. Chaney,
Sole Shareholder of R. Chaney & Co., Inc.
