File No. 70-8341
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 11 (POST-EFFECTIVE) TO
FORM U-1 APPLICATION
UNDER THE
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
_____________________________
PUBLIC SERVICE COMPANY OF OKLAHOMA
212 East 6th Street
Tulsa, Oklahoma 74119-1212
(Name of company or companies filing this statement and address
of principal executive offices)
_______________________________
CENTRAL AND SOUTH WEST CORPORATION
(Name of top registered holding company parent)
________________________________
Shirley S. Briones,
Treasurer
Public Service Company of Oklahoma
212 East 6th Street
Tulsa, Oklahoma 74119-1212
Wendy G. Hargus,
Treasurer
Central and South West Corporation
1616 Woodall Rodgers Freeway
Dallas, Texas 75202
Joris M. Hogan, Esq.
Milbank, Tweed, Hadley & McCloy
1 Chase Manhattan Plaza
New York, New York 10005
(Names and addresses of agents for service)
Public Service Company of Oklahoma ("PSO" or the
"Company"), an Oklahoma corporation, is a wholly owned electric
public utility subsidiary of Central and South West Corporation
("CSW"), a Delaware corporation and a registered holding company
under the Public Utility Holding Company Act of 1935, as amended
(the "Act"). PSO hereby amends Item 6 to the Form U-1
Application in File No. 70-8341 to reflect the filing herewith of
Exhibits 27 and 28. In all other respects the Application as
previously filed will remain the same.
Item 6. Exhibits and Financial Statements.
Exhibit 25 - Preliminary opinion of Milbank, Tweed,
Hadley & McCloy, counsel to CSW and the
Company (previously filed).
Exhibit 26 - Final or "past tense" opinion of
Milbank, Tweed, Hadley & McCloy, counsel
to CSW and the Company (to be filed with
Certificate of Notification).
Exhibit 27 - Financial Statements per books and pro
forma as of March 31, 1996 of Excel,
PSO, and CSW and consolidated
subsidiaries.
Exhibit 28 - Stock Purchase and Exchange Agreement
dated December 20, 1995, among Excel,
ML Partnership, the Brock Foundation,
North Star and PSO.
Exhibit 28 - Proposed Notice of Proceeding
(previously filed).
S I G N A T U R E
Pursuant to the requirements of the Public Utility
Holding Company Act of 1935, as amended, the undersigned company
has duly caused this to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: August 12, 1996
PUBLIC SERVICE COMPANY OF OKLAHOMA
By:/s/WENDY G. HARGUS
Wendy G. Hargus,
Treasurer
INDEX OF EXHIBITS
EXHIBIT TRANSMISSION
NUMBER EXHIBIT METHOD
- ------- ------- ------------
25 Preliminary opinion of Milbank, ---
Tweed, Hadley & McCloy, counsel to
CSW and the Company )previously
filed).
26 Final or "past tense" opinion of ---
Milbank, Tweed, Hadley & McCloy,
counsel to CSW and the Company (to
be filed with Certificate of
Notification).
27 Financial Statements per books and Electronic
pro forma as of March 31, 1995 of
Excel, PSO, and CSW and
consolidated subsidiaries.
28 Stock Purchase and Exchange Electronic
Agreement dated December 20, 1995,
among Excel, ML Partnership, the
Brock Foundation, North Star and
PSO.
29 Proposed Notice of Proceeding
(previously filed). ---
INDEX EXHIBIT 27
TO
FINANCIAL STATEMENTS Page
Number
CENTRAL AND SOUTH WEST CORPORATION AND SUBSIDIARY COMPANIES
Consolidated Balance Sheets - Per Books and Pro Forma
as of December 31, 1995 2 - 3
Consolidated Statement of Income for the Twelve Months Ended
December 31, 1995 4
Consolidated Statement of Retained Earnings for the Twelve Months
EndedDecember 31, 1995 5
Statements of Long-Term Debt Outstanding as of December 31, 1995 6 - 9
Statements of Preferred Stock Outstanding as of December 31, 1995 10
CENTRAL AND SOUTH WEST CORPORATION (CORPORATE)
Balance Sheets - Per Books and Pro Forma as of December 31, 1995 11
Statement of Income for the Twelve Months Ended December 31, 1995 12
PUBLIC SERVICE COMPANY OF OKLAHOMA
Balance Sheets - Per Books and Pro Forma as of December 31, 1995 13 - 14
Statement of Income for the Twelve Months Ended December 31, 1995 15
Statement of Retained Earnings for the Twelve Months Ended
December 31, 1995 16
PRO FORMA ADJUSTMENTS TO CSW AND PSO BALANCE SHEETS 17
STATEMENT OF CHANGES: CSW, CSW CORPORATE AND PSO 18
CAPITALIZATION RATIOS: CSW, CSW CORPORATE AND PSO - Per books and
Pro forma 19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS: CSW, CSW CORPORATE
AND PSO 20
EXCEL TECHNOLOGIES, LTD
(Excel Technologies, LTD. is not a CSW Subsidiary)
Balance Sheet as of December 31, 1995 21 - 22
Statements of Income for the Twelve Months Ended December 31, 1995;
March 31, 1996; March 31, 1995 and March 31, 1994 23 - 26
STATEMENT OF CHANGES: EXCEL 27
<PAGE>
CENTRAL AND SOUTH WEST CORPORATION
AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
PER BOOKS AND PRO FORMA
AS OF DECEMBER 31, 1995
UNAUDITED
(Millions)
Per Pro Forma Pro
Books Adjustments Forma
-------- -------- -------
ASSETS
PLANT
Electric utility
Production $5,888 $5,888
Transmission 1,484 1,484
Distribution 3,799 3,799
General 1,209 1,209
Construction work in progress 346 346
Nuclear fuel 165 165
Gas 869 869
Other diversified 18 18
------- -------
13,778 13,778
Less - Accumulated depreciation 4,761 4,761
------- ------ -------
9,017 9,017
------- ------ -------
CURRENT ASSETS
Cash and temporary cash investments 401 401
National Grid assets held for sale 100 100
Accounts receivable * 1,093 * 1,093
Materials and supplies, at average cost 188 188
Electric fuel inventory, substantially at
average cost 129 129
Gas inventory/products for resale 13 13
Prepayments and other 115 115
------- ------ -------
2,039 2,039
------- ------ -------
DEFERRED CHARGES AND OTHER ASSETS
Deferred plant costs 514 514
Mirror CWIP asset - net 312 312
Other non-utility investments * 296 * 296
Income tax related regulatory assets, net 253 253
Goodwill 1,074 1,074
Other 364 364
------- ------ -------
2,813 2,813
------- ------ -------
$13,869 $0 $13,869
======= ====== =======
* The Pro Forma Adjustments do not materially effect CSW's Balance Sheet.
Please see Pro Forma Adjustments, Page 17.
<PAGE>
CENTRAL AND SOUTH WEST CORPORATION
AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
PER BOOKS AND PRO FORMA
AS OF DECEMBER 31, 1995
UNAUDITED
(Millions)
Per Pro Forma Pro
Books Adjustments Forma
-------- -------- -------
CAPITALIZATION AND LIABILITIES
CAPITALIZATION
Common Stock Equity -
Common stock, $3.50 par value,
authorized 350,000,000 shares;
issued and outstanding 192,300,000 shares $675 $675
Paid-in capital 610 610
Retained earnings 1,893 1,893
------- ------ -------
Total Common Stock Equity 3,178 3,178
Preferred stock
Not subject to mandatory redemption 292 292
Subject to mandatory redemption 34 34
Long-term debt 3,914 3,914
------- ------ -------
Total Capitalization 7,418 7,418
------- ------ -------
Minority Interest 202 202
------- ------ -------
CURRENT LIABILITIES
Long-term debt/preferred stock
due within twelve months 30 30
Short-term debt 692 692
Short-term debt - CSW Credit 646 646
Accounts payable 595 595
Accrued taxes 228 228
Accrued interest * 77 * 77
Provision for SEEBOARD acceptances 1,001 1,001
Other 156 156
------- ------ -------
3,425 3,425
------- ------ -------
DEFERRED CREDITS
Income taxes 2,306 2,306
Investment tax credits 306 306
Other 212 212
------- ------ -------
2,824 2,824
------- ------ -------
$13,869 $0 $13,869
======= ====== =======
* The Pro Forma Adjustments do not materially effect CSW's Balance Sheet.
Please see Pro Forma Adjustments, Page 17.
<PAGE>
CENTRAL AND SOUTH WEST CORPORATION
AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF INCOME
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1995
UNAUDITED
(Millions)
OPERATING REVENUES $3,735
--------
OPERATING EXPENSES AND TAXES
Fuel and purchased power 1,184
Gas purchased for resale 372
Gas extraction and marketing 109
Other operating 629
Restructuring charges (36)
Maintenance 161
Depreciation and amortization 384
Taxes, other than income 171
Income taxes 105
--------
3,079
--------
OPERATING INCOME 656
--------
OTHER INCOME AND DEDUCTIONS
Mirror CWIP liability amortization 41
Other 58
--------
99
INCOME BEFORE INTEREST CHARGES 755
--------
INTEREST CHARGES
Interest on long-term debt 284
Interest on short-term debt and other 50
--------
334
--------
NET INCOME 421
Preferred stock dividends 19
--------
NET INCOME FOR COMMON STOCK $402
========
<PAGE>
CENTRAL AND SOUTH WEST CORPORATION
AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF RETAINED EARNINGS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1995
UNAUDITED
(Millions)
RETAINED EARNINGS AT DECEMBER 31, 1994 $1,824
Add: Net income for common stock 402
--------
2,226
Deduct: Common stock dividends 329
True-up of prior period liability 4
--------
RETAINED EARNINGS AT DECEMBER 31, 1995 $1,893
========
<PAGE>
CENTRAL AND SOUTH WEST CORPORATION
AND SUBSIDIARY COMPANIES
STATEMENT OF LONG-TERM DEBT OUTSTANDING
AS OF DECEMBER 31, 1995
UNAUDITED
(Millions)
CENTRAL POWER AND LIGHT COMPANY
First mortgage bonds -
Series J, 6-5/8%, due January 1, 1998 $28
Series L, 7%, due February 1, 2001 36
Series T, 7-1/2%, due December 15, 2014 112
Series AA, 7-1/2%, due March 1, 2020 50
Series BB, 6%, due October 1, 1997 200
Series CC, 7-1/4%, due October 1, 2004 100
Series DD, 7-1/8%, due December 1, 1999 25
Series EE, 7-1/2%, due December 1, 2002 115
Series FF, 6-7/8%, due February 1, 2003 50
Series GG, 7-1/8%, due February 1, 2008 75
Series HH, 6%, due April 1, 2000 100
Series II, 7-1/2%, due April 1, 2023 100
Series JJ, 7-1/2%, due May 1, 1999 100
Series KK, 6-5/8%, due July 1, 2005 200
Installment sales agreements -
Pollution control bonds
Series 1984, 7-7/8%, due September 15, 2014 6
Series 1986, 7-7/8%, due December 1, 2016 60
Series 1993, 6%, due July 1, 2028 120
Series 1995, 6-1/10%, due July 1, 2028 101
Series 1995, variable, due November 1, 2015 41
Unamortized discount (6)
Unamortized costs of reacquired debt (95)
--------
$1,518
--------
<PAGE>
CENTRAL AND SOUTH WEST CORPORATION
AND SUBSIDIARY COMPANIES
STATEMENT OF LONG-TERM DEBT OUTSTANDING (Continued)
AS OF DECEMBER 31, 1995
UNAUDITED
(Millions)
PUBLIC SERVICE COMPANY OF OKLAHOMA
First mortgage bonds -
Series J, 5-1/4%, due March 1, 1996 $25
Series K, 7-1/4%, due January 1, 1999 25
Series L, 7-3/8%, due March 1, 2002 30
Series S, 7-1/4%, due July 1, 2003 65
Series T, 7-3/8%, due December 1, 2004 50
Series U, 6-1/4%, due April 1, 2003 35
Series V, 7-3/8%, due April 1, 2023 100
Series W, 6-1/2%, due June 1, 2005 50
Installment sales agreements -
Pollution control bonds
Series A, 5.9%, due December 1, 2007 35
Series 1984 7-7/8, due September 15, 2014 13
Unamortized discount (5)
Unamortized costs of reacquired debt (19)
Amount to be redeemed within one year (25)
--------
$379
--------
<PAGE>
CENTRAL AND SOUTH WEST CORPORATION
AND SUBSIDIARY COMPANIES
STATEMENT OF LONG-TERM DEBT OUTSTANDING (Continued)
AS OF DECEMBER 31, 1995
UNAUDITED
(Millions)
SOUTHWESTERN ELECTRIC POWER COMPANY
First mortgage bonds -
Series V, 7-3/4%, due June 1, 2004 $40
Series W, 6-1/8%, due September 1, 1999 40
Series X, 7%, due September 1, 2007 90
Series Y, 6-5/8%, due February 1, 2003 55
Series Z, 7-1/4%, due July 1, 2023 45
Series AA, 5-1/4%, due April 1, 2000 45
Series BB, 6-7/8%, due October 1, 2025 80
1976 Series A, 6.2%, due November 1, 2006 7
1976 Series B, 6.2%, due November 1, 2006 1
Installment sales agreements -
Pollution control bonds
1978 Series A, 6%, due January 1, 2008 14
Series 1986, 8.2%, due July 1, 2014 82
1991 Series A, 8.2%, due August 1, 2011 17
1991 Series B, 6.9%, due November 1, 2004 12
Series 1992, 7.6%, due January 1, 2019 54
Bank loan, variable rate, due June 15, 2000 50
Railcar lease obligations 14
Unamortized costs of reacquired debt (43)
Amount to be redeemed within one year (4)
--------
$599
--------
WEST TEXAS UTILITIES COMPANY
First mortgage bonds -
Series P, 7-3/4%, due July 1, 2007 25
Series Q, 6-7/8%, due October 1, 2002 35
Series R, 7%, due October 1, 2004 40
Series S, 6-1/8%, due February 1, 2004 40
Series T, 7-1/2%, due April 1, 2000 40
Series U, 6-3/8%, due October 1, 2005 80
Installment sales agreement -
Pollution control bonds
Series 1984, 7-7/8%, due September 15, 2014 44
Unamortized discount and premium (2)
Unamortized costs of reacquired debt (29)
--------
$273
--------
<PAGE>
CENTRAL AND SOUTH WEST CORPORATION
AND SUBSIDIARY COMPANIES
STATEMENT OF LONG-TERM DEBT OUTSTANDING (Continued)
AS OF DECEMBER 31, 1995
UNAUDITED
(millions)
SEEBOARD plc
Eurobond, 8-1/2%, due October 3, 2005 $155
Unamortized discount and premium (1)
--------
$154
--------
TRANSOK, INC.
Note payable, 8.960%, due April 17, 2017 $15
Note payable, 8.280%, due April 16, 2007 3
Note payable, 7.712%, due April 16, 2002 3
Note payable, 7.712%, due April 22, 2002 17
Note payable, 8.625%, due May 21, 2012 5
Note payable, 7.106%, due May 20, 1999 3
Note payable, 7.694%, due May 20, 2004 1
Note payable, 7.762%, due May 22, 2003 2
Note payable, 7.106%, due May 21, 1999 5
Note payable, 7.694%, due May 28, 2004 2
Note payable, 7.762%, due June 3, 2003 4
Note payable, 7.694%, due June 2, 2004 2
Note payable, 8.625%, due August 27, 2012 5
Note payable, 7.712%, due August 26, 2002 5
Note payable, 7.712%, due August 26, 2002 1
Note payable, 7.712%, due August 28, 2002 14
Note payable, 7.106%, due December 1, 1999 15
Note payable, 7.694%, due March 1, 2004 10
Note payable, 7.694%, due March 1, 2004 3
Note payable, 7.694%, due December 15, 2004 2
Note payable, 7.694%, due December 15, 2004 1
Note payable, 7.694%, due March 1, 2004 1
Note payable, 7.712%, due May 15, 2002 5
Note payable, 7.712%, due May 15, 2002 5
Note payable, 7.762%, due December 23, 2003 11
Note payable, 6.875%, due March 18, 2005 1
Note payable, 6.875%, due March 18, 2005 1
Note payable, 6.875%, due March 1, 2005 6
Note payable, 6.875%, due March 24, 2005 5
Note payable, 6.875%, due March 28, 2005 12
Note payable, 7.750%, due April 24, 2023 10
Note payable, 6.875%, due April 25, 2005 3
Note payable, 7.750%, due April 26, 2023 5
Note payable, 6.875%, due April 26, 2005 7
Note payable, 7.762%, due April 29, 2003 2
Note payable, 7.694%, due April 30, 2004 1
Note payable, 6.875%, due May 5, 2005 1
Note payable, 7.070%, due May 5, 2008 1
Note payable, 7.694%, due January 12, 2004 5
--------
$200
--------
CENTRAL AND SOUTH WEST CORPORATION
Credit facility(for SEEBOARD purchase), 6.287%, due
November 13, 2000 731
--------
$731
CENTRAL AND SOUTH WEST SERVICES, INC. --------
Term loan facility, Variable rate, due
December 1, 2001 60
--------
$60
--------
TOTAL CONSOLIDATED $3,914
========
<PAGE>
CENTRAL AND SOUTH WEST CORPORATION
AND SUBSIDIARY COMPANIES
STATEMENT OF PREFERRED STOCK OUTSTANDING
AS OF DECEMBER 31, 1995
UNAUDITED
(Millions)
NOT SUBJECT TO MANDATORY REDEMPTION
CENTRAL POWER AND LIGHT COMPANY
4.00% Series, 100,000 shares $10
4.20% Series, 75,000 shares 7
7.12% Series, 260,000 shares 26
8.72% Series, 500,000 shares 50
Auction Money Market, 750,000 shares 75
Auction Series A, 425,000 shares 42
Auction Series B, 425,000 shares 43
Issuance expense (3)
--------
$250
--------
PUBLIC SERVICE COMPANY OF OKLAHOMA
4.00% Series, 97,900 shares $10
4.24% Series, 100,000 shares 10
--------
$20
--------
SOUTHWESTERN ELECTRIC POWER COMPANY
5.00% Series, 75,000 shares $8
4.65% Series, 25,000 shares 2
4.28% Series, 60,000 shares 6
--------
$16
--------
WEST TEXAS UTILITIES COMPANY
4.40% Series, 60,000 shares 6
--------
Total Consolidated $292
========
SUBJECT TO MANDATORY REDEMPTION
SOUTHWESTERN ELECTRIC POWER COMPANY
6.95% Series, 352,000 shares $36
Amount to be redeemed within one year (2)
--------
Total Consolidated $34
========
<PAGE>
CENTRAL AND SOUTH WEST CORPORATION
BALANCE SHEETS
PER BOOKS AND PRO FORMA
AS OF DECEMBER 31, 1995
UNAUDITED
(Millions)
Per Pro Forma Pro
Books Adjustments Forma
-------- -------- --------
ASSETS
Electric Utility
General $4 $4
Less - Accumulated depreciation (1) (1)
-------- -------- --------
NET PLANT 3 3
INVESTMENTS IN COMMON STOCK
OF SUBSIDIARY COMPANIES (at equity) 3,338 3,338
-------- -------- --------
CURRENT ASSETS
Cash and temporary cash investments 11 11
Advances to affiliates 410 410
Accounts receivable - Affiliated 831 831
Prepayments and other 14 14
-------- -------- --------
1,266 1,266
-------- -------- --------
DEFERRED CHARGES AND OTHER ASSETS 50 50
-------- -------- --------
$4,657 $0 $4,657
======== ======== ========
CAPITALIZATION
Common Stock Equity -
Common stock, $3.50 par value;
authorized 350,000,000 shares;
issued and outstanding 192,900,000
shares $675 $675
Paid-in capital 610 610
Retained earnings 1,893 1,893
-------- -------- --------
Total Common Stock Equity 3,178 3,178
-------- -------- --------
Long-term debt 731 731
-------- -------- --------
Total Capitalization 3,909 3,909
-------- -------- --------
CURRENT LIABILITIES
Short-term debt 692 692
Accounts payable and other 19 19
-------- -------- --------
711 711
-------- -------- --------
DEFERRED CREDITS 37 37
-------- -------- --------
$4,657 $0 $4,657
======== ======== ========
<PAGE>
CENTRAL AND SOUTH WEST CORPORATION
STATEMENT OF INCOME
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1995
UNAUDITED
(Millions)
INCOME
Equity in earnings of subsidiaries
Central Power and Light Company $192
Public Service Company of Oklahoma 81
Southwestern Electric Power Company 114
West Texas Utilities Company 34
SEEBOARD plc 10
Transok, Inc. 25
CSW Credit, Inc. 8
CSW Energy, Inc. 8
CSW Leasing, Inc. 0
CSW International, Inc. (3)
CSW Communications, Inc. (1)
Central and South West Services, Inc. 0
Other Income 44
-------
$512
-------
EXPENSES AND TAXES
General and administrative expenses 75
Interest expense 58
Federal income taxes (26)
Other 3
-------
110
-------
NET INCOME $402
=======
<PAGE>
PUBLIC SERVICE COMPANY OF OKLAHOMA
BALANCE SHEETS
PER BOOKS AND PRO FORMA
AS OF DECEMBER 31, 1995
UNAUDITED
(Millions)
Per Pro Forma Pro
Books Adjustments Forma
-------- -------- --------
ASSETS
ELECTRIC UTILITY PLANT
Production $939 $939
Transmission 364 364
Distribution 712 712
General 183 183
Construction work in progress 57 57
-------- -------- --------
2,255 2,255
Less - Accumulated depreciation 924 924
-------- -------- --------
1,331 1,331
-------- -------- --------
CURRENT ASSETS
Cash and temporary cash investments 1 1
Accounts receivable * 18 * 18
Materials and supplies, at average cost 41 41
Fuel inventory, at LIFO cost 16 16
Accumulated deferred income taxes 10 10
Prepayments 2 2
-------- -------- --------
88 88
-------- -------- --------
DEFERRED CHARGES AND OTHER ASSETS * 62 * 62
-------- -------- --------
$1,481 $0 $1,481
======== ======== ========
* The Pro Forma Adjustments do not materially effect PSO's Balance Sheet.
Please see Pro Forma Adjustments, Page 17.
<PAGE>
PUBLIC SERVICE COMPANY OF OKLAHOMA
BALANCE SHEETS
PER BOOKS AND PRO FORMA
AS OF DECEMBER 31, 1995
UNAUDITED
(Millions)
Per Pro Forma Pro
Books Adjustments Forma
-------- -------- --------
CAPITALIZATION AND LIABILITIES
CAPITALIZATION
Common stock, $15 par value;
authorized 11,000,000 shares;
issued 10,482,000 shares;
outstanding 9,013,000 shares $158 $158
Paid-in capital 180 180
Retained earnings 150 150
-------- -------- --------
Total common stock equity 488 488
Preferred stock 20 20
Long-term debt 379 379
-------- -------- --------
Total capitalization 887 887
-------- -------- --------
CURRENT LIABILITIES
Long-term debt due within twelve months 25 25
Advances from affiliates 71 71
Payable to affiliates 40 40
Accounts payable 23 23
Payables to customers 33 33
Accrued taxes 27 27
Accrued interest * 9 * 9
Other 8 8
-------- -------- --------
236 236
-------- -------- --------
DEFERRED CREDITS
Income taxes 264 264
Investment tax credits 46 46
Income tax related regulatory
liabilities, net 42 42
Other 6 6
-------- -------- --------
358 358
-------- -------- --------
$1,481 $0 $1,481
======== ======== ========
* The Pro Forma Adjustments do not materially effect PSO's Balance Sheet.
Please see Pro Forma Adjustments, Page 17.
<PAGE>
PUBLIC SERVICE COMPANY OF OKLAHOMA
STATEMENT OF INCOME
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1995
UNAUDITED
(Millions)
ELECTRIC OPERATING REVENUE $691
--------
OPERATING EXPENSES AND TAXES
Fuel 273
Purchased power 24
Other operating 117
Restructuring charges (1)
Maintenance 35
Depreciation and amortization 68
Taxes, other than income 25
Income taxes 38
--------
579
--------
OPERATING INCOME 112
--------
OTHER INCOME AND DEDUCTIONS
Allowance for equity funds used during construction 1
Other 2
--------
3
--------
INCOME BEFORE INTEREST CHARGES 115
--------
INTEREST CHARGES
Interest on long-term debt 30
Interest on short-term debt and other 3
--------
33
--------
NET INCOME 82
PREFERRED STOCK DIVIDENDS 1
--------
NET INCOME FOR COMMON STOCK $81
========
<PAGE>
PUBLIC SERVICE COMPANY OF OKLAHOMA
STATEMENT OF RETAINED EARNINGS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1995
UNAUDITED
(Millions)
RETAINED EARNINGS AT DECEMBER 31, 1994 $124
Add: Net income (loss) for common stock 81
--------
205
Deduct: Common stock dividends 55
--------
RETAINED EARNINGS AT DECEMBER 31, 1995 $150
========
<PAGE>
CENTRAL AND SOUTH WEST CORPORATION
AND SUBSIDIARY COMPANIES
PRO FORMA ADJUSTMENTS TO BALANCE SHEETS
DECEMBER 31, 1995
UNAUDITED
(Thousands)
DR CR
-------- --------
CENTRAL AND SOUTH WEST CORPORATION AND SUBSIDIARY COMPANIES
Other non-utility investments 22
Accrued Interest 22
To convert accrued interest on Excel Debentures to
Excel Preferred Stock, Series E
Other non-utility investments 347
Accounts Receivable 347
To remove Excel receivable through Excel's issuance of
Excel Common Stock, class B and Preferred Stock, Series
C and E
Other non-utility investments 2,350
(Excel Preferred Stock, Series E)
Other non-utility investments 119
(Excel Preferred Stock, Series A)
Other non-utility investments 2,231
(Excel Preferred Stock, Series B)
To record exchange of Excel Preferred Stock, Series A and
B for Excel Preferred Stock, Series E
PUBLIC SERVICE COMPANY OF OKLAHOMA
Deferred charges and other assets 22
Accrued Interest 22
To convert accrued interest on Excel Debentures to
Excel Preferred Stock, Series E
Deferred charges and other assets 347
Accounts Receivable 347
To remove Excel receivable through Excel's issuance of Excel
Common Stock, class B and Preferred Stock, Series C and E
Deferred charges and other assets 2,350
(Excel Preferred Stock, Series E)
Deferred charges and other assets 119
(Excel Preferred Stock, Series A)
Deferred charges and other assets 2,231
(Excel Preferred Stock, Series B)
To record exchange of Excel Preferred Stock, Series A and
B for Excel Preferred Stock, Series E
<PAGE>
CENTRAL AND SOUTH WEST CORPORATION
AND SUBSIDIARY COMPANIES
STATEMENT OF CHANGES
There has been a significant change in the financial statements of Central
and South West Corporation and subsidiary companies subsequent to December 31,
1995. A wholly owned subsidiary of Central and South West Corporation, Transok,
Inc. was sold to Tejas Gas Corporation on June 6, 1996 for approximately $890
million.
<PAGE>
CENTRAL AND SOUTH WEST CORPORATION
AND SUBSIDIARY COMPANIES
CAPITALIZATION RATIOS
PER BOOKS AND PRO FORMA
AS OF DECEMBER 31, 1995
Common
Stock Preferred Long-term
Equity Stock Debt(*)
-------- -------- --------
Central and South West Corporation
and Subsidiary Companies
(Consolidated) Per books 42.8% 4.4% 52.8%
Central and South West Corporation
and Subsidiary Companies
(Consolidated) Pro forma 42.8% 4.4% 52.8%
Central and South West Corporation (Corporate)
Per books 81.3% 0.0% 18.7%
Central and South West Corporation (Corporate)
Pro forma 81.3% 0.0% 18.7%
Public Service Company of Oklahoma
Per books 55.0% 2.3% 42.7%
Public Service Company of Oklahoma
Pro forma 55.0% 2.3% 42.7%
(*) Central and South West Corporation and Subsidiary Companies includes
Transok's Medium-Term Notes Payable
<PAGE>
CENTRAL AND SOUTH WEST CORPORATION
AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The notes to consolidated financial statements included in Central and
South West Corporation's 1995 Annual Report on Form 10-K are hereby incorporated
by reference and made a part of this report.
Page
Reference
1995 Annual Report on Form 10-K pages 2-32 through 2-67
<PAGE>
EXCEL TECHNOLOGIES, LTD.
(Excel Technologies, LTD. is not a CSW Subsidiary)
BALANCE SHEETS
PER BOOKS AND PRO FORMA
AS OF DECEMBER 31, 1995
UNAUDITED
(Thousands)
ASSETS
CURRENT ASSETS
Cash $817
Accounts Receivable, Net 92
Inventory 75
Prepaid Expenses 4
--------
TOTAL CURRENT ASSETS 988
--------
FIXED ASSETS
Systems, Equipment and Vehicles 744
Accumulated Depreciation (245)
--------
NET FIXED ASSETS 499
--------
OTHER ASSETS 281
--------
TOTAL ASSETS $1,768
========
<PAGE>
EXCEL TECHNOLOGIES, LTD.
(Excel Technologies, LTD. is not a CSW Subsidiary)
BALANCE SHEETS
PER BOOKS AND PRO FORMA
AS OF DECEMBER 31, 1995
UNAUDITED
(Thousands)
LIABILITIES AND STOCKHOLDER'S DEFICIT
CURRENT LIABILITIES
Short Term Debt $200
Accounts Payable 143
Deferred Sales 82
Current Portion of Long Term Debt 289
Current Portion of Capital Lease Obligations 26
Accrued Liabilities 167
--------
TOTAL CURRENT LIABILITIES 907
--------
LONG TERM LIABILITIES
Long Term Debt 769
Capital Lease Obligations 12
Unearned Interest Revenue 34
--------
TOTAL LONG TERM LIABILITIES 815
--------
TOTAL LIABILITIES 1,722
--------
STOCKHOLDER'S DEFICIT
Capital Stock and Additional Paid-in Capital 4,399
Retained Deficit (3,806)
Current Loss (547)
--------
TOTAL STOCKHOLDER'S DEFICIT 46
--------
TOTAL LIABILITIES AND STOCKHOLDER'S DEFICIT $1,768
========
<PAGE>
EXCEL TECHNOLOGIES, LTD.
(Excel Technologies, LTD. is not a CSW Subsidiary)
STATEMENT OF INCOME
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1995
UNAUDITED
(Thousands)
REVENUES $1,103
COSTS AND EXPENSES
Cost of products sold and service of performance
based systems 184
Research and development 190
Selling, general and administrative 1,534
--------
TOTAL COSTS AND EXPENSES 1,908
--------
OPERATING LOSS (805)
--------
INTEREST EXPENSE, net 265
--------
NET LOSS $(1,070)
========
<PAGE>
EXCEL TECHNOLOGIES, LTD.
(Excel Technologies, LTD. is not a CSW Subsidiary)
STATEMENT OF INCOME
FOR THE TWELVE MONTHS ENDED MARCH 31, 1996
UNAUDITED
(Thousands)
REVENUES $1,450
COSTS AND EXPENSES
Cost of products sold and service of performance
based systems 219
Research and development 182
Selling, general and administrative 1,362
--------
TOTAL COSTS AND EXPENSES 1,763
--------
OPERATING LOSS (313)
--------
INTEREST EXPENSE, net 234
--------
NET LOSS $ (547)
========
<PAGE>
EXCEL TECHNOLOGIES, LTD.
(Excel Technologies, LTD. is not a CSW Subsidiary)
STATEMENT OF INCOME
FOR THE TWELVE MONTHS ENDED MARCH 31, 1995
UNAUDITED
(Thousands)
REVENUES $604
COSTS AND EXPENSES
Cost of products sold and service of performance
based systems 94
Research and development 411
Selling, general and administrative 2,243
--------
TOTAL COSTS AND EXPENSES 2,748
--------
OPERATING LOSS (2,144)
--------
INTEREST EXPENSE, net 144
--------
NET LOSS $(2,288)
========
<PAGE>
EXCEL TECHNOLOGIES, LTD.
(Excel Technologies, LTD. is not a CSW Subsidiary)
STATEMENT OF INCOME
FOR THE TWELVE MONTHS ENDED MARCH 31, 1994
UNAUDITED
(Thousands)
REVENUES $443
COSTS AND EXPENSES
Cost of products sold and service of performance
based systems 45
Research and development 301
Selling, general and administrative 1,267
--------
TOTAL COSTS AND EXPENSES 1,613
--------
OPERATING LOSS (1,170)
--------
INTEREST EXPENSE, net 92
--------
NET LOSS $(1,262)
========
<PAGE>
EXCEL TECHNOLOGIES, LTD.
(Excel Technologies, LTD. is not a CSW Subsidiary)
STATEMENT OF CHANGES
There have been no significant changes in the financial statements of
Excel Technologies, LTD. subsequent to December 31, 1995 other than in the
ordinary course of business.
STOCK PURCHASE AND EXCHANGE AGREEMENT
This Stock Purchase and Exchange Agreement (the "Agreement")
is entered into this _____ day of December, 1995, by and among
Excel Energy Technologies, Ltd., a Delaware corporation (the
"Company"); NorthStar Energy Group, a Texas general partnership
("NorthStar"), ML Oklahoma Venture Partners, Limited Partnership,
an Oklahoma limited partnership (the "Partnership"); Public
Service Company of Oklahoma, an Oklahoma corporation ("PSO"); and
The John and Donnie Brock Foundation, an Oklahoma corporation
("Brock").
WITNESSETH:
In consideration of the agreements and benefits set forth
herein and other good and valuable consideration, the receipt of
which is hereby acknowledged, the Company, NorthStar, the
Partnership, PSO, Brock and Spavinaw agree as follows:
1. DEFINITIONS
For purposes hereof, the following terms shall have the
meanings set forth below:
1.1 "Ancillary Agreements" shall mean the Amendment to
Shareholder Agreement, the Amendment to Registration Agreement
and the Consulting Agreement described in Section 6.2.
1.2 "Closing" shall have the meaning set forth in Section
6.1.
1.3 "Common Stock" shall mean the Company's common stock,
$0.01 par value per share, and any capital stock of the Company
which has the right to participate in the distribution of
earnings and assets of the Company without limit as to amount or
percentage, into which common stock may hereafter be reclassified
by appropriate amendment to the Company's Certificate of
Incorporation.
1.4 "Class A Common Stock" shall mean the Class A Common
Stock of the Company, $0.01 par value.
1.5 "Class B Common Stock" shall mean the Class B Common
Stock of the Company, $0.01 par value.
1.6 "Debentures" shall mean the 9% Subordinated Debentures
of the Company issued in favor of the Partnership, PSO and Brock
in the aggregate principal amount of $850,000.
1.7 "Development Agreement" shall mean the Amended and
Restated Consulting and Research and Development Agreement dated
October 14, 1993, between the Company and PSO, as amended.
1.8 "Financial Statements" shall have the meaning set forth
in Section 4.7.
1.9 "PSO Closing" shall have the meaning set forth in
Section 6.4.
1.10 "Purchaser(s)" shall mean NorthStar, the Partnership,
PSO and Brock.
1.11 "Series A Preferred Stock" shall mean shares of the
Company's Series A Convertible Participating Preferred Stock,
$0.01 par value.
1.12 "Series B Preferred Stock" shall mean shares of the
Company's Series B Convertible Participating Preferred Stock,
$0.01 par value.
1.13 "Series C Preferred Stock" shall mean shares of the
Company's Series C Convertible Participating Preferred Stock,
$0.01 par value.
1.14 "Series D Preferred Stock" shall mean shares of the
Company's Series D Convertible Participating Preferred Stock,
$0.01 par value.
1.15 "Series E Preferred Stock" shall mean shares of the
Company's Series E Convertible Participating Preferred Stock,
$0.01 par value.
1.16 "Series F Preferred Stock" shall mean shares of the
Company's Series F Convertible Participating Preferred Stock,
$0.01 par value.
1.17 "Series G Preferred Stock" shall mean shares of the
Company's Series G Convertible Participating Preferred Stock,
$0.01 par value.
2. PURCHASE AND SALE OF SERIES C PREFERRED
STOCK AND COMMON STOCK
2.1 Purchase and Sale. Subject to the terms and conditions
herein stated, the Company agrees to sell, assign, transfer and
deliver to NorthStar and PSO, and NorthStar and PSO separately
agree to purchase from the Company the following:
(a) NorthStar shall purchase 3,374 shares of Series C
Preferred Stock; and
(b) NorthStar shall purchase 1,687 shares of Class A
Common Stock; and
(c) PSO shall purchase 590 shares of Series C
Preferred Stock; and
(d) PSO shall purchase 1,749 shares of Series F
Preferred Stock; and
(e) PSO shall purchase 648 shares of Class B Common
Stock.
2.2 Terms of Series C Preferred Stock and Series F
Preferred Stock. The Series C Preferred Stock shall have the
rights, powers, qualifications, restrictions and preferences
provided for in the form of Certificate of Designations for the
Series C Preferred Stock attached hereto as Exhibit "A". The
Series F Preferred Stock shall have the rights, powers,
qualifications, restrictions and preferences provided for in the
form of Certificate of Designations for the Series F Preferred
Stock attached hereto as Exhibit "B".
2.3 Purchase Price. In full consideration for the purchase
by NorthStar and by PSO of the capital stock described in
Section 2.1,
(a) at the Closing, NorthStar shall pay $600,000.00
for the Series C Preferred Stock to be issued under Section
2.1(a);
(b) at the Closing, NorthStar shall pay $16.87 for the
Common Stock to be issued under Section 2.1(b); and
(c) at the PSO Closing, PSO shall pay $87,423.07 for
the Series C Preferred Stock to be issued under Section 2.1(c).
Such purchase price to be paid by PSO shall be represented by the
cancellation of obligations in the amount of $87,423.07 owed by
the Company to PSO as a consulting fee and Type I System
obligations pursuant to the Development Agreement.
(d) at the PSO Closing, PSO shall pay $259,157.53 for
the Series F Preferred Stock to be issued under Section 2.1(d).
Such purchase price to be paid by PSO shall be represented by the
cancellation of obligations in the amount of $259,157.53 owed by
the Company to PSO as a consulting fee and Type I System
obligations pursuant to the Development Agreement.
(e) at the PSO Closing, PSO shall pay $6.48 for the
Class B Common Stock to be issued under Section 2.1(e). Such
purchase price to be paid by PSO shall be represented by the
cancellation of obligations in the amount of $6.48 owed by the
Company to PSO as a consulting fee and Type I System obligations
pursuant to the Development Agreement.
3. EXCHANGE OF DEBENTURES AND PREFERRED STOCK
3.1 Exchange of Debentures. At the Closing, PSO, the
Partnership and Brock each shall exchange the Debentures owned by
each of such parties for the number of shares of Series D
Preferred Stock, in the case of the Partnership and Brock, and
Series E Preferred Stock, in the case of PSO, which results from
the division of the outstanding principal and accrued interest
under the respective Debentures by $188.39 (fractional shares
shall not be issued but shall be paid for at the rate of $188.39
per share). At the Closing, PSO, the Partnership and Brock shall
deliver to the Company the instrument representing such parties'
respective Debentures, and the Company shall deliver to each of
such parties a certificate representing the applicable number of
shares of Series D Preferred Stock, in the case of the
Partnership and Brock, and Series E Preferred Stock, in the case
of PSO (and any payment for fractional shares).
3.2 Waiver and Release Regarding Debentures. Upon the
consummation of the transactions contemplated by Section 3.1 and
as of the time of such consummation, each of PSO, the Partnership
and Brock (i) waives all of such party's rights under such
party's Debenture, including but not limited to any right to
receive payments from the Company, and (ii) releases the Company
from any and all of the Company's other obligations and
liabilities under the Debentures.
3.3 Exchange of Preferred Stock. At the Closing, (i) PSO
shall exchange the 3,882 shares of Series A Preferred Stock which
it currently owns for 624 shares of Series E Preferred Stock,
(ii) PSO shall exchange the 61,336 shares of Series B Preferred
Stock which it currently owns for 9,864 shares of Series E
Preferred Stock, and (iii) the Partnership shall exchange the
16,304 shares of Series A Preferred Stock which it currently owns
for 2,622 shares of Series D Preferred Stock. At the Closing,
PSO and the Partnership shall each deliver to the Company the
stock certificates representing the shares of stock to be
exchanged, and the Company shall deliver to PSO and the
Partnership stock certificates representing the number of shares
set forth above.
3.4 Waiver and Release Regarding Preferred Stock. Upon the
consummation of the transactions contemplated by Section 3.3 and
as of the time of such consummation, each of PSO and the
Partnership (i) waives all of such party's rights under the
Series A Preferred Stock and Series B Preferred Stock, as the
case may be, including but not limited to any right to receive
dividends, and (ii) releases the Company from any and all of the
Company's other obligations and liabilities under the Series A
Preferred Stock and Series B Preferred Stock.
3.5 Terms of Series D and Series E Preferred Stock. The
Series D Preferred Stock and the Series E Preferred Stock shall
have the rights, powers, qualifications, restrictions and
preferences provided for in the form of Certificate of
Designations for each of the Series D and Series E Preferred
Stock attached hereto as Exhibit "C".
4. INSTALLED ENERGY MANAGEMENT SYSTEMS
4.1 Restatement. Under the Development Agreement, PSO
purchased 26 Type II Systems (as defined in the Development
Agreement) for evaluation and system development purposes. The
Company and PSO stipulate and agree that the Company continues to
have a $367,583 financial obligation to PSO solely relating to
Type II System purchases. The Company reaffirms that the Type II
Systems are the property of PSO.
4.2 EMS Services. The Company acknowledges a continuing
service obligation to monitor, maintain, upgrade, bill and
collect Shared Savings (as defined in the Development Agreement)
from the Type II System customers for as long as PSO owns the
Type II Systems and this Agreement remains in effect. For
performing the obligations described herein, Excel shall be
allowed to retain, from each Type II System it manages on PSO's
behalf, all amounts collected under each EMS Agreement (as
defined in the Development Agreement) after PSO has received
annual payments on a quarterly basis equal to the following:
Minimum Annual Payment Amount
Year 1 (1996) 15% of Stipulated Amount
Years 2 through 4 (1997-1999) 42% of Stipulated Amount
Quarterly payments are to be made by Excel to PSO on March 31,
June 30, September 30 and December 31 of each year in the amounts
set forth in Exhibit "D" attached hereto and made a part hereof.
The entire amount of the minimum payments set forth above shall
be payable by the Company, whether or not the Shared Savings from
the Type II Systems equal the amount of the minimum payment. The
Company agrees to use its best efforts to renew the EMS
Agreements as they expire with each customer through 1999. If a
Type II System customer does not renew, the Company agrees to
provide PSO with substitute collateral which is reasonably
satisfactory to PSO.
4.3 Research. The Company acknowledges the research
significance of all the energy-related information collected and
will continue collecting and maintaining a data base that may be
utilized by PSO. The Company agrees to maintain this information
and assist PSO in any analysis of the information at no cost to
PSO.
4.4 Termination. The Company and PSO agree that, effective
upon the Closing without further action by the parties, the
Development Agreement shall be terminated and of no further force
or effect other than for the purpose of the definitions referred
to above. The Company and PSO each release the other from any
and all claims or liabilities under the Development Agreement.
5. OPTION
5.1 Option. For a period commencing on the date of the
Closing and ending on the date six months later, subject to
Section 5.1(c) below, NorthStar shall have the option to purchase
from the Company 877 shares of Series G Preferred Stock at an
exercise price of $228.05 per share. Such option shall be
exercisable one time for all, but not less than all of such
shares, by the giving of written notice to the Company within the
period of the effectiveness of such option. The consummation of
the purchase of shares of Series G Preferred Stock pursuant to
such option shall occur within ten business days after the
exercise thereof. Said option shall be subject to the following:
(a) If the number of shares of Common Stock
outstanding at any time after the date hereof is increased by a
stock dividend payable in shares of Common Stock or by a
subdivision or split-up of shares of the Company's Common Stock,
then, following the record date fixed for the determination of
holders of Common Stock entitled to receive such stock dividend,
subdivision, or split-up, the exercise price for the Common Stock
issuable upon the exercise of said option shall be appropriately
decreased and the number of shares of Common Stock issuable upon
the exercise of said option will be appropriately increased in
proportion to such increase in the number of outstanding shares
of the Company's Common Stock.
(b) If the number of shares of Common Stock
outstanding at any time after the date hereof is decreased by a
combination or reverse stock split of the outstanding shares of
the Company's Common Stock, then, following the record date of
such combination or reverse stock split, the exercise price for
the Common Stock shall be appropriately increased and the number
of shares of Common Stock issuable upon the exercise of said
option will be appropriately decreased in proportion to such
decrease in the number of outstanding shares of Common Stock.
(c) Notwithstanding the foregoing, if during the final
two months of the six month period of this option the Company
sells shares of its capital stock for a total purchase price of
$200,000 at a price per share of no less than $228.05 per share,
NorthStar shall have ten days following the closing of such sale
in which to exercise this option, and following such ten day
period this option shall terminate.
(d) At the discretion of the Company, a Certificate of
Designations, Voting Powers and Rights of Series G Convertible
Participating Preferred Stock shall not be filed until this
option is exercised. The terms of the Series G Preferred Stock
shall be substantially the same as the terms of the Series C
Preferred Stock, except that appropriate changes shall be made to
reflect a price per share of $228.05 rather than $177.83.
(e) In the event of the exercise of this option by
NorthStar, the exercise price payable by NorthStar shall not be
counted for the purposes of Section 7.15 of the Series C and
Series G Preferred Stock as part of a sale of capital stock for a
total purchase price of at least $600,000. Upon the occurrence
of a conversion to Series D and Series E Preferred Stock pursuant
to said Section 7.15, this option shall become exercisable for
shares of Series D Preferred Stock.
6. CLOSING AND ADDITIONAL AGREEMENTS
6.1 Closing. The closing (the "Closing") of the
transactions contemplated by this Agreement, other than the
transactions to be completed at the PSO Closing shall take place
at 10:00 a.m. at the offices of Conner & Winters, A Professional
Corporation, 2400 First Place Tower, 15 East 5th Street, Tulsa,
Oklahoma 74103, on December 19, 1995, or at such other time or
place as the parties hereto shall by written instrument
designate.
6.2 Execution of Ancillary Agreements. At Closing the
Company and the other parties hereto, to the extent applicable,
shall execute or cause to be executed and delivered and the
Ancillary Agreements, which are as follows: (i) the Amendment to
Shareholder Agreement in substantially the form set forth in
Exhibit "E" attached hereto; (ii) the Amendment to Registration
Agreement in substantially the form set forth in Exhibit "F"
attached hereto; and (iii) the Consulting Agreement in
substantially the form set forth in Exhibit "G" attached hereto.
In addition, the Company and NorthStar shall execute an agreement
regarding distribution rights in connection with the Company's
products and services.
6.3 Closing Deliveries. At the Closing and the PSO
Closing, as applicable, (i) the Company shall deliver to the
other parties hereto resolutions of the Board Directors of the
Company authorizing the execution, delivery and performance of
this Agreement and the transactions described herein, which
resolutions shall be certified by the Secretary as being true
correct copies of the originals thereof; (ii) the parties hereto
shall execute and deliver all of the documents provided for
herein.
6.4 PSO Closing. The closing of the purchases by PSO (the
"PSO Closing") provided for in Section 2.1(c), Section 2.1(d) and
Section 2.1(e) shall take place at the time and at the place
agreed by the parties not later than five business days after the
satisfaction of the conditions set forth in Section 9.2 hereof.
6.5 Termination of 1993 Agreement. The Company, PSO and
the Partnership agree that, effective upon the Closing and
without further action by the parties, the Debenture, Common
Stock and Preferred Stock Purchase Agreement dated October 14,
1993 (the "1993 Agreement"), among the Company, PSO and the
Partnership, shall be terminated and of no further force or
effect. The Company, PSO and the Partnership each release the
other such parties from any and all claims or liabilities under
the 1993 Agreement.
7. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants that the following
statements are true and correct as of the date hereof and will be
true and correct at the Closing, except as expressly qualified or
modified herein or on the Disclosure Statement attached hereto as
Exhibit "H".
7.1 Qualified Oklahoma Business Venture. The Company is an
Oklahoma business venture (as defined in Title 68, Okla. Stat.
Ann. Section 2357 et seq.), and is a business which provides goods and
services and which (i) has at least 50% of its employees or
assets located in Oklahoma, (ii) needs financial assistance in
order to commence or expand such business, and (iii) is not
engaged in oil and gas exploration, real estate development or
sales, retail sales of food or clothing, farming, ranching,
banking, or lending or investing funds in other businesses.
7.2 Organization and Good Standing. The Company is a
corporation duly organized, validly existing, and in good
standing under the laws of the State of Delaware and has full
corporate power and authority to enter into and perform its
obligations under this Agreement, the Ancillary Agreements, the
Common Stock, and the Series C Preferred Stock, the Series D
Preferred Stock, the Series E Preferred Stock and the Series F
Preferred Stock, and to own its properties and to carry on its
business as presently conducted and as proposed to be conducted.
The Company is duly qualified to do business as a foreign
corporation in every jurisdiction in which the failure to so
qualify would have a material adverse effect upon the Company.
7.3 Capitalization. As of the Closing and following the
Company's 1 for 1,000 reverse stock split, but prior to the
consummation of the transactions contemplated hereby, the
authorized capital stock of the Company consists of 680,000
shares of Class A Common Stock, of which 141 shares are issued
and outstanding, 20,000 shares of Class B Common Stock, of which
no shares are issued and outstanding, and 300,000 shares of
Preferred Stock, of which 136,336 shares are designated as Series
A Preferred Stock, 20,186 of which are issued and outstanding,
and 61,336 shares which are designated as Series B Preferred
Stock, all of which are issued and outstanding. Except (i) as
provided herein, (ii) the outstanding shares of Series A and
Series B Preferred Stock, and (iii) as otherwise set forth on
Exhibit "H", at the Closing, there will not be outstanding, nor
will the Company be subject to any agreement under which there
may become outstanding, any right to purchase, or security
convertible into or exchangeable for, any capital stock of the
Company, including, but not limited to, options, warrants, or
rights. The Company is under no obligation (contingent or
otherwise) to purchase or otherwise acquire or retire any of its
securities. Except as set forth in the Shareholder Agreement
dated as of October 14, 1993, as amended, there are no agreements
in existence which require the Company to elect any person to its
Board of Directors or otherwise pertain to the voting of any
capital stock of the Company.
7.4 Agreements Binding. This Agreement, each of the
Ancillary Agreements, the Common Stock, the Series C Preferred
Stock, the Series D Preferred Stock, the Series E Preferred Stock
and the Series F Preferred Stock, have been or will be duly
authorized, executed and delivered by the Company and, when so
executed and delivered, each is or will be a valid and legally
binding obligation of the Company, enforceable in accordance with
its terms, except as limited by applicable bankruptcy, insolvency
reorganization and moratorium laws and other laws affecting
enforcement of creditor's rights generally and by general
principles of equity.
7.5 No Violation. The execution, delivery and performance
of this Agreement, the Ancillary Agreements, the Common Stock,
the Series C Preferred Stock, the Series D Preferred Stock, the
Series E Preferred Stock and the Series F Preferred Stock, have
been duly authorized by the Company's Board of Directors and, to
the extent necessary, the shareholders of the Company, and will
not violate any law or any order of any court or government
agency applicable to the Company, as amended, as the case may be,
or the Certificate of Incorporation or Bylaws of the Company, as
amended, and will not result in any breach of or default under,
or result in the creation of any encumbrance upon any of the
assets of the Company pursuant to the terms of any agreement or
instrument by which the Company or any of its assets may be
bound. No approval of or filing with any governmental authority
is required for the Company to enter into, execute or perform
this Agreement, the Ancillary Agreements, the Common Stock, the
Series C Preferred Stock, the Series D Preferred Stock, the
Series E Preferred Stock and the Series F Preferred Stock.
7.6 No Brokers. No brokers, finders or similar fees will
be payable by either the Company or any of the other parties
hereto in connection with the transactions contemplated by this
Agreement.
7.7 Financial Statements. The Company has delivered to
each of the other parties hereto its unaudited balance sheet as
of October 31, 1995, and income statement for the period then
ending (the "Financial Statements"). The Financial Statements
(i) present fairly the financial condition of the Company as of
their respective dates and results of operations for periods then
ended, (ii) are in accordance with the books and records of the
Company, and (iii) are prepared in accordance with generally
accepted accounting principles consistently applied except for
the elimination of required footnotes. There have been no
material transactions out of the ordinary course of business
which have taken place since the date of the most recent
Financial Statements.
7.8 Additional Liabilities. At the date of the most recent
balance sheet (the "Balance Sheet") contained in the Financial
Statements, (i) the Company had no material liabilities of any
nature (matured or unmatured, fixed or contingent) required by
generally accepted accounting principles to be provided for in
the Balance Sheet or described in the notes thereto which were
not provided for in the Balance Sheet or described in the notes
thereto, and (ii) all reserves established by the Company and set
forth in the Balance Sheet were adequate for the purposes for
which they were established.
7.9 Litigation. The Company is not engaged in, or to its
knowledge threatened with, any litigation or any governmental
proceeding, and, to the best of the Company's knowledge, there is
no valid basis for any such litigation or proceeding. There are
no investigations, proceedings or actions of any kind or nature
pending or, to the knowledge of the Company, threatened against
the Company by any federal, state or local governmental or
administrative authority or agency, nor are there any outstanding
orders of such administrative authorities or agencies limiting
the Company in the operation of its business.
7.10 Existence of Defaults. Except as to any defaults which
may exist prior to the Closing with respect to the Series A
Preferred Stock and Series B Preferred Stock and the Debentures,
the Company is not in default of any of its material obligations,
and no event has occurred and is continuing under the provisions
of any instrument, document or agreement which, with the lapse of
time or the giving of notice or both, would constitute a default
thereunder.
7.11 Governmental Action. No authorization, consent or
approval of, or filing with, any court or any federal, state or
local governmental authority or agency is required in connection
with the execution and delivery of this Agreement or the
issuance, sale and delivery of the Common Stock, the Series C
Preferred Stock, the Series D Preferred Stock, the Series E
Preferred Stock or the Series F Preferred Stock.
7.12 Statements and Other Documents Not Misleading. Nothing
in this Agreement, including all exhibits thereto and all
documents or instruments heretofore furnished by the Company to
the other parties hereto in connection with the transactions
contemplated hereby, contains or will contain any untrue
statement of any material fact or omits or will omit to state any
material fact required to be stated in order to make such
statement, document or instrument not misleading. There is no
fact known to the Company which materially adversely affects or
will affect the business, prospects, financial condition or
affairs of the Company or any of the Company's properties or
assets which have not been set forth in this Agreement, the
exhibits or schedules hereto or other documents furnished to the
Purchasers on or prior to the date hereof in connection with the
transactions contemplated hereby.
8. REPRESENTATIONS AND WARRANTIES
OF THE PURCHASERS
Each Purchaser represents and warrants severally and not
jointly and only with respect to itself that the following
statements are true and correct as of the date hereof and will be
true and correct at the Initial Closing.
8.1 Acquisition for Own Account. The Purchaser is
acquiring the securities described in Section 2, Section 3, and
Section 5 (collectively, the "Securities") solely for the
Purchaser's own account for investment and not with a view to, or
for resale in connection with, any distribution of the Securities
within the coverage of the Securities Act of 1933, as amended
(the "Act"), and the rules and regulations promulgated
thereunder. The Purchaser has no agreement or other arrangement,
formal or informal, with any person to sell, transfer or pledge
any part of the Securities which would guarantee the Purchaser
any profit or protect the Purchaser against any loss with respect
to the Securities. Further, the Purchaser has no plans to enter
into any such agreement or arrangement, and consequently, the
Purchaser acknowledges that it must bear the economic risk of an
investment in the Securities for an indefinite period of time.
8.2 Limitations on Resale and Transfer. The Purchaser is
aware of and furthermore acknowledges being informed that the
Securities have not been registered under the Act, and the
Purchaser has been advised that no party has undertaken an
obligation to the Purchaser to cause the Securities to be
registered under the Act or otherwise exempted from the Act and
applicable state securities laws, now or in the future, except as
may otherwise be provided in the Registration Agreement dated
October 14, 1993, as amended. The Purchaser further acknowledges
that the Securities will be "restricted" as defined in Rule 144
promulgated under the Act and that the Purchaser cannot sell,
transfer, encumber or distribute the Securities without the
permission of the Company, unless the Securities are registered
under the Act and any applicable state securities laws or unless
an exemption is, in the opinion of the Company's counsel,
available to the Purchaser under the Act any applicable state
securities laws. The Purchaser further understands and
acknowledges that the restrictions on the transfer of the
Securities set forth herein will be noted on the books of the
Company and that the certificates representing ownership of the
Securities will bear typewritten legends setting forth all such
restrictions on the Securities' transferability.
8.3 Independent Investigation and Advisors. The Purchaser
has read and retained the Company's business plan and financial
statements and has had sufficient opportunity to make further
inquiries of the Company in order to verify or supplement the
information set forth in the business plan and financial
statements and that any information so requested has been made
available to the Purchaser's full and complete satisfaction. The
Purchaser has knowledge and experience in business and financial
matters and with respect to investments generally so as to enable
the Purchaser to utilize such information to evaluate the risk
and merits of its investment and to make an informed investment
decision and/or the Purchaser has relied upon the Purchaser's
independent investigation of the Company and/or those of the
Purchaser's representatives including the Purchaser's own legal,
tax, business and other advisors who have been given the
opportunity to examine all relevant documents concerning the
Purchaser's purchase of the Securities and to obtain any
additional information deemed necessary to verify the accuracy of
the information provided.
8.4 No Brokers. No brokers, finders or similar fees will
be payable by either the Company or the Purchaser in connection
with the transactions contemplated by this Agreement.
8.5 Speculative Nature and Risk. The Purchaser recognizes
the speculative nature and risk of loss inherent in this type of
investment and realizes that it may suffer a complete loss of its
investment. The Securities constitute an investment which is
suitable and consistent with the Purchaser's investment program
and the Purchaser's financial situation enables it to bear the
risks of this investment. The Purchaser represents that it has
adequate means of providing for its current needs and possible
contingencies, and that it has no need for liquidity of this
investment.
8.6 No Conflicts. The execution, delivery and performance
of this Agreement by the Purchaser shall not violate any law,
result in a breach of any agreement or otherwise breach any
obligation as to which the Purchaser may be bound or as to which
any partners of the Purchaser may be bound if the Purchaser is a
partnership.
9. CONDITIONS TO CLOSING
9.1 Conditions to Initial Closing. The obligations of the
Purchasers to consummate the Closing shall each be subject to the
satisfaction of the following conditions precedent at or before
the Closing.
(a) Ancillary Agreements. The Purchasers and the
Company shall all have each executed and delivered this Agreement
and the Ancillary Agreements.
(b) Performance of Agreement. The Company shall have
performed all of its covenants and obligations under this
Agreement.
(c) Representations and Warranties Correct. The
representations and warranties of the Company contained in
Section 7 of this Agreement shall be true and correct in all
material respects when made, except as directly affected by the
consummation of the transaction hereby or expressly consented to
in writing by the parties hereto.
(d) Reverse Stock Split. The Company shall have
effected a 1 for 1,000 reverse stock split.
9.2 Conditions to PSO Closing. The obligation of PSO to
consummate the PSO Closing hereunder shall be subject to the
satisfaction of the following conditions precedent in addition to
those conditions set forth in Section 9.1 above:
(a) Closing Complete. The Closing shall have been
completed and all parties shall have performed their obligations
at such closing.
(b) SEC Approval. PSO shall have obtained the
approval of the Securities and Exchange Commission pursuant to
the Public Utility Holding Company Act of 1935 (the "Holding
Company Act") at or before the PSO Closing, to consummate the
transactions contemplated in this Agreement. PSO shall pursue in
good faith the approval from the SEC pursuant to the Holding
Company Act. PSO will provide periodic status reports to the
Partnership, Brock, NorthStar and the Company regarding the
status of the filing. PSO agrees that it will use its reasonable
efforts to obtain such approval, but PSO makes no representations
or warranties to the Company or to the Partnership, Brock or
NorthStar that such approval will be obtained.
9.3 PSO Closing Date. In the event that the PSO Closing
does not occur on or before February 20, 1995, solely because PSO
has not received the approval required by Section 9.2(b) above,
PSO shall have no further rights, obligations or liabilities with
respect to the purchases by PSO provided for in Section 2.1(c),
Section 2.1(d) and Section 2.1(e), other than any liability that
may arise in the event PSO should fail to pursue in good faith or
use reasonable efforts to obtain SEC approval pursuant to Section
9.2(b) herein.
10. INDEMNIFICATION
10.1 Indemnity by Company. The Company agrees to and does
hereby indemnify and hold the Purchasers, their successors,
assigns and general partners and their officers, directors,
agents, and employees harmless from and against any and all loss,
damage, liability, injury, cost and expense (including attorneys
fees) due to or arising out of any breach of any warranty,
representation, agreement, covenant or statement contained in
this Agreement or any exhibit or schedule attached hereto;
provided, however, that the Company shall have no such obligation
until the aggregate of Claims under this paragraph shall exceed
$100,000, at which point the Company will be obligated to
indemnify the indemnified parties relating back to the first
dollar of such indemnified claim.
10.2 Indemnity by Purchasers. Each Purchaser severally and
not jointly agrees to and does hereby indemnify and hold the
Company, its successors and assigns, and its officers, directors,
agents and employees, harmless from and against any and all loss,
damage, liability, injury, cost and expense (including attorneys'
fees) due to or arising out of any breach of any representation
or warranty by such Purchaser contained in this Agreement or any
exhibit or schedule attached hereto; provided, however, that
there shall be no such obligation until the aggregate of claims
against any such Purchaser shall exceed $100,000, at which point
such obligation will be to indemnify the indemnified parties
relating back to the first dollar of such indemnified claim.
11. MISCELLANEOUS
11.1 Survival of Representations. All representations,
warranties and agreements contained herein or made in writing by
Company and the Purchasers in connection with the transactions
contemplated hereby except any representation, warranty or
agreement as to which compliance may have been appropriately
waived, shall survive the execution and delivery of this
Agreement for a period of one year.
11.2 Waiver of Conditions. At any time or times during the
term hereof, the Company may waive fulfillment of any one or more
the conditions to its obligations in whole or in part, and the
Purchasers may waive fulfillment of any one or more of the
foregoing conditions to their obligation, in whole or in part, by
delivering to the other party a written waiver or waivers of
fulfillment thereof to the extent specified in such written
waiver
or waivers.
11.3 Partial Invalidity. If any term, covenant or condition
this Agreement or the application thereof to any person or
circumstance shall, to any extent, be invalid or unenforceable,
the remainder of this Agreement, or the application of such term,
covenant or condition to persons or circumstances other than
those as to which it is held invalid or unenforceable, shall not
be affected thereby and each term, covenant or condition of this
Agreement shall be valid and be enforced to the fullest extent
permitted by law.
11.4 Notices. Any notice relating to this Agreement shall
be deemed sufficiently given and served for all purposes if given
by telegram filed, charges prepaid, or a writing deposited in the
United States mail, postage prepaid and registered or certified
within the Continental United States, addressed as follows:
If to the Company:
Excel Energy Technologies, Ltd.
2530 East 71st Street
Tulsa, Oklahoma 74136
Attention: Kevin L. Jordan, President
with a copy to:
R. Kevin Redwine
Conner & Winters
2400 First Place Tower
15 East Fifth Street
Tulsa, Oklahoma 74103-4391
If to NorthStar:
NorthStar Energy Group
5 Country Place
Arlington, Texas 76016
Attention: Stan Royal, Managing Partner
with a copy to:
R. F. Leyendecker
Rural Route 5
Box 418
Huron, South Dakota 57350
If to the Partnership:
ML Oklahoma Venture Partners, Limited Partnership
6100 South Yale, Suite 2019
Tulsa, Oklahoma 74136
Attention: C. James Bode
with a copy to:
C. Bretton Crane
Pray, Walker, Jackman, Williamson & Marlar
900 Oneok Plaza
Tulsa, Oklahoma 74103
If to PSO:
Public Service Company of Oklahoma
212 East 6th Street
Tulsa, Oklahoma 74119
Attention: David Thomison
with a copy to:
H. Wayne Cooper
Doerner, Sanders, Daniel & Anderson
320 South Boston
Tulsa, Oklahoma 74103-3725
If to Brock or Spavinaw:
John Brock
15 East 5th Street, Suite 4030
Tulsa, Oklahoma 74103
Any notice so duly sent by mail shall be deemed given two
(2) days after deposit in a proper governmental mailing facility
and any notice given by telegram shall be deemed given on the day
such notice is delivered to the telegram company, charges paid.
11.5 Successors and Assigns. This Agreement shall inure to
the benefit of and be binding upon the successors and assigns of
the parties hereto and no liability or obligation arising
hereunder may be assigned by any party hereto.
11.6 Law Governing. This Agreement shall be construed and
interpreted in accordance with and governed and enforced in all
respects by the laws of the State of Oklahoma.
11.7 Headings. The section, subsection and paragraph
headings throughout this Agreement are for convenience and
reference only, and the words contained therein shall not be held
to expand, modify, amplify or aid in the interpretation,
construction or meaning of this Agreement.
11.8 Counterparts. This Agreement may be executed in any
number of counterparts, each signed by different persons and all
of said counterparts together shall constitute one and the same
instrument, and such instrument shall be deemed to have been
made, executed and delivered on the date first hereinabove
written, irrespective of the time or times when the same or any
counterparts thereof actually may have been executed and
delivered.
11.9 Entire Agreement. This Agreement and the exhibits
contain the entire agreement of the parties hereto and may not be
modified, altered or changed in any manner whatsoever, except by
a written agreement signed by the parties hereto.
EXCEL ENERGY TECHNOLOGIES, LTD.
By:
Kevin L. Jordan, President
NORTHSTAR ENERGY GROUP
By:
Title:
ML OKLAHOMA VENTURE PARTNERS,
LIMITED PARTNERSHIP,
an Oklahoma limited partnership
By: MLOK Co., Limited Partnership,
its Managing General Partner
By: Merrill Lynch Venture Capital
Inc., its General Partner
By:
Title:
PUBLIC SERVICE COMPANY OF OKLAHOMA
By:
Title:
THE JOHN AND DONNIE BROCK FOUNDATION
By:
Title:
LIST OF EXHIBITS
Exhibit "A" Certificate of Designations, Voting Powers
and Rights of Series C Convertible
Participating Preferred Stock
Exhibit "B" Certificate of Designations, Voting Powers
and Rights of Series F Convertible
Participating Preferred Stock
Exhibit "C" Certificate of Designations, Voting Powers
and Rights of Series D and Series E
Convertible Participating Preferred Stock
Exhibit "D" Amortization Schedule
Exhibit "E" Amendment to Shareholder Agreement
Exhibit "F" Amendment to Registration Agreement
Exhibit "G" Consulting Agreement
Exhibit "H" Disclosure Statement
EXHIBIT A
CERTIFICATE OF DESIGNATIONS, VOTING POWERS AND
RIGHTS OF SERIES C CONVERTIBLE PARTICIPATING
PREFERRED STOCK OF EXCEL ENERGY TECHNOLOGIES, LTD.
Excel Energy Technologies, Ltd., a corporation organized and
existing under the Delaware General Corporation Law (the "Compa-
ny"), DOES HEREBY CERTIFY:
That, pursuant to authority conferred upon the Board of
Directors by the Company's Certificate of Incorporation, as
amended, and pursuant to the provisions of Section 151 of the
Delaware General Corporation Law, as amended, said Board of
Directors, at a meeting thereof duly called, convened and
constituted on December 18, 1995, at which a quorum was present
and acting throughout, adopted the following resolutions
providing for the creation and issuance of a series of shares of
the Company's authorized preferred stock designated as "Series C
Convertible Participating Preferred Stock":
RESOLVED, that the Board of Directors hereby establishes and
designates a new series of the Company's authorized but unissued
preferred stock and that the designation and amount thereof and
the relative rights, preferences, qualifications, limitations and
restrictions thereof are as follows:
1. Designation and Amount. The shares of this series of
preferred stock shall be designated as "Series C Convertible
Participating Preferred Stock," $0.01 par value per share, and
the number of shares constituting this series shall be 8,000.
2. Certain Definitions. The following terms shall have
the respective meanings indicated.
(a) Additional Shares of Common Stock shall mean all
shares of Common Stock issued (or, pursuant to Section
7.2(c), deemed to be issued) by the Company after the
Original Issue Date other than shares of Common Stock issued
in connection with a stock dividend, subdivision or
combination referred to in Section 7.2(d) and other than
shares of Common Stock issued or issuable at any time:
(i) upon conversion of shares of Series C, Series
D, Series E, Series F or Series G Preferred Stock; or
(ii) in an aggregate amount of up to 6,683 shares
(which number shall be proportionately adjusted in the
case of recapitalizations, stock splits, stock
dividends or combinations of shares) of Common Stock
and Options therefor (including shares of Common Stock
issuable upon exercise of Options which were issued on
or before the Original Issue Date) to officers,
directors and employees of the Company; or
(iii) as a dividend or distribution on the
Series C, Series D, Series E, Series F or Series G
Preferred Stock; or
(iv) upon conversion of the Company's 9%
Subordinated Debentures; or
(v) upon the exercise of any presently
outstanding options or warrants.
(b) Common Stock shall mean the Company's Class A
Voting Common Stock, $0.01 par value per share, the
Company's Class B Non-Voting Common Stock, $0.01 par value
per share, and any capital stock of the Company which has
the right to participate in the distribution of earnings and
assets of the Company without limit as to amount or
percentage, into which common stock may hereafter be
reclassified by appropriate amendment to the Company's
Certificate of Incorporation.
(c) Common Stock Deemed Outstanding shall mean at any
given time, the number of shares of Common Stock actually
outstanding at such time plus (to the extent applicable) the
number of shares of Common Stock deemed to be outstanding
pursuant to Section 7 below.
(d) Convertible Securities shall mean any securities
of the Company convertible into or exchangeable for (through
one or more conversions or exchanges) Common Stock.
Convertible Securities shall include any evidences of
indebtedness, any capital stock of the Company (other than
the Series C, Series D, Series E, Series F or Series G
Preferred Stock) or other securities convertible into or
exchangeable for Common Stock.
(e) Junior Stock shall mean the Common Stock and any
other capital stock of the Company including the Series D
and Series E Preferred Stock, but excluding the Series C,
Series F and Series G Preferred Stock.
(f) Liquidation Value shall mean, as to each share of
Preferred Stock, the sum of $177.83.
(g) Market Price of any security shall mean the
average of the closing prices of such security's sales on
all securities exchanges on which such security may at the
time be listed, or, if there have been no sales on any such
exchange on any day, the average of the highest bid and
lowest asked prices on all such exchanges at the end of such
day, or, if on any day such security is not so listed, the
average of the representative bid and asked prices quoted in
the NASDAQ System as of 4:00 p.m., New York time, or, if on
any day such security is not quoted in the NASDAQ System,
the average of the highest bid and lowest asked prices on
such day in the domestic over-the-counter market as reported
by the National Quotation Bureau, Incorporated, or any
similar successor organization, in each such case averaged
over a period of 21 days consisting of the day as of which
"Market Price" is being determined and the 20 consecutive
business days prior to such day. If at any time such
security is not listed on any securities exchange or quoted
in the NASDAQ System or the over-the-counter market, the
"Market Price" will be the fair value thereof determined
jointly by the Company and the holders of a majority of the
Series C Preferred Stock. If such parties are unable to
reach agreement within a reasonable period of time, such
fair value will be determined by an independent appraiser
jointly selected by the Company and the holders of a
majority of the Series C Preferred Stock.
(h) DGCL shall mean the Delaware General Corporation
Law, as amended from time to time.
(i) Options shall mean rights, options or warrants to
subscribe for, purchase or otherwise acquire either Common
Stock or Convertible Securities.
(j) Original Issue Date shall mean December 20, 1995.
(k) Person shall mean an individual, a partnership, a
corporation, an association, a joint stock company, a trust,
a joint venture, a limited liability company, an
unincorporated organization and a government entity or any
department, agency or political subdivision thereof.
(l) Series C Preferred Stock shall mean the Company's
Series C Preferred Stock, $0.01 par value, having the
relative rights, preferences, qualifications, limitations
and restrictions set forth herein.
(m) Series D Preferred Stock shall mean the Company's
Series D Convertible Participating Preferred Stock, $0.01
par value.
(n) Series E Preferred Stock shall mean the Company's
Series E Convertible Participating Preferred Stock, $0.01
par value.
(o) Series F Preferred Stock shall mean the Company's
Series F Convertible Participating Preferred Stock, $0.01
par value.
(p) Series G Preferred Stock shall mean the Company's
Series G Convertible Participating Preferred Stock, $0.01
par value.
(q) Subsidiary means any corporation of which the
shares of stock having a majority of the general voting
power in electing the board of directors are, at the time as
of which any determination is being made, owned by the
Company either directly or indirectly through a Subsidiary.
3. Dividends. No dividends shall be paid on the Common
Stock unless dividends shall also be paid on the Series C
Preferred Stock. Further, no dividends shall be paid on the
Junior Stock during any time in which the Company is in default
with respect to a redemption of the Series C Preferred Stock
hereunder.
4. Redemption.
4.1 Company's Right to Require Redemption. At the option
of the Company, the Company shall redeem, at any time prior to
the date twelve months after the Original Issue Date, all of the
outstanding shares of Series C Preferred Stock by paying in cash
therefor $266.75 per share of Series C Preferred Stock (as
adjusted for any stock dividends, combinations or splits with
respect to such shares) plus all accrued but unpaid dividends on
such shares. Further at the option of the Company, the Company
shall redeem, at any time after the date twelve months after the
Original Issue Date and prior to the date 24 months after the
Original Issue Date, all of the outstanding shares of Series C
Preferred Stock by paying in cash therefor, $355.66 per share of
Series C Preferred Stock (as adjusted for any stock dividends,
combinations or splits with respect to such shares) plus all
accrued but unpaid dividends on such shares. Any such redemption
pursuant to this Section 4.1 shall be completed no later than 30
days after the Company notifies the holder of the exercise of its
option to redeem. Following receipt of the Company's notice of
the exercise of its option to redeem pursuant to this Section 4.1
and for a period of ten days thereafter, the holder shall have
the right to exercise its rights of conversion pursuant to
Section 7 hereof.
4.2 Holder's Right to Require Redemption. At the option of
a holder of outstanding shares of Series C Preferred Stock, upon
notice from any such holder delivered to the Company no later
than December 31, 1997, the Company shall redeem, as of June 30,
1998, the number of shares of Series C Preferred Stock held by
such holder that is specified in the request for redemption by
paying in cash therefor $177.83 per share of Series C Preferred
Stock (as adjusted for any stock dividends, combinations or
splits with respect to such shares) plus all accrued but unpaid
dividends on such shares.
5. Voting Rights.
5.1 Vote On All Matters. Except as otherwise required by
law or provided herein, the holders of the Series C Preferred
Stock shall be entitled to notice of any stockholder's meeting
and to vote, together with the holders of all other voting
capital stock of the Company, including the holders of Common
Stock, as one class upon any matter submitted to the shareholders
for a vote on the basis that each holder of Series C Preferred
Stock shall have a number of votes equal to the number of shares
of Common Stock into which the Series C Preferred Stock held by
him is then convertible, as adjusted from time to time under
Section 7 hereof. For matters to be voted on by the Series C
Preferred Stock, Common Stock and all other voting capital stock
of the Company together as one class, a quorum shall consist of a
majority of the votes attributable to the Common Stock, Series C
Preferred Stock and all other voting capital stock of the
Company.
5.2 Shareholder Agreements. No provision of this Section 5
shall affect the enforceability of shareholder voting agreements
including, without limitation, voting trusts, pertaining to the
election of directors or other matters.
6. Liquidation Preference.
6.1 General.
(a) Subject to the remaining provisions of this
Section 6, in the event of any liquidation, dissolution, or
winding up of the affairs of the Company, whether voluntary
or involuntary, after payment or provision for payment of
the debts and liabilities of the Company, the holders of the
Series C Preferred Stock shall be entitled to receive, out
of the remaining assets of the Company, the Liquidation
Value in cash (as adjusted for any stock dividends,
combinations or splits with respect to such shares) for each
of the shares of Series C Preferred Stock they then hold,
plus an amount equal to all dividends accumulated and unpaid
on each such share (including any interest thereon or other
charges related thereto) through the date fixed for
distribution, before any distribution shall be made to the
holders of any shares of Junior Stock. If upon any
liquidation, dissolution or winding up of the affairs of the
Company, whether voluntary or involuntary, the assets of the
Company available for distribution to shareholders shall be
insufficient to permit the payment to the holders of the
Series C Preferred Stock of the aforesaid preferential
amounts, then the entire assets of the Company shall be
distributed ratably among the holders of the Series C,
Series F and Series G Preferred Stock, on a pari passu
basis, in proportion to the preferential amount each holder
is otherwise entitled to receive.
(b) After payment to the holders of the Series C
Preferred Stock of the amounts set forth in Section 6.1(a)
above, and if payment shall have been made in full to the
holders of the Series D, Series E, Series F and Series G
Preferred Stock pursuant to such holders' liquidation
preferences, and so long as a Terminating Event (as defined
below) has not occurred, the entire remaining assets and
funds of the Company legally available for distribution, if
any, shall be distributed among the holders of the Common
Stock and the Series C, Series D, Series E, Series F and
Series G Preferred Stock in proportion to the shares of
Common Stock then held by them and the shares of Common
Stock which they then have the right to acquire upon
conversion of the shares of Series C, Series D, Series E,
Series F and Series G Preferred Stock then held by them.
Once a Terminating Event has occurred, after payment to the
Holders of the Series C Preferred Stock of the amount set
forth in Section 6.1(a) above, the entire remaining assets
and funds of the Company legally available for distribution,
if any, shall be distributed among the holders of the Junior
Stock according to their respective shares and priorities.
A "Terminating Event" shall be deemed to have occurred on
the earlier of any of the following events: (i) sale by the
Company of not less than $2,200,000 of equity securities
after the Original Issue Date hereof at a price per share of
at least $518.07 per share of Common Stock on an as-
converted basis, as adjusted for any stock dividends,
combinations, or splits with respect to said shares;
(ii) the Company has achieved audited after tax net income
for any two consecutive fiscal years in excess of $1,000,000
per year; or (iii) the sale by the Company of all or
substantially all of its assets or the merger of the Company
into or with any person if the holders of the outstanding
voting shares of the Company prior thereto do not retain a
majority of the voting power of the surviving person and in
such transaction the consideration in such sale equals at
least $518.07 per share of common stock, or its equivalent.
6.2 Merger or Consolidation. For purposes of this
Section 6, a liquidation, dissolution, or winding up of the
Company shall be deemed to be occasioned by, and include, in
addition to the liquidation, dissolution and winding up of the
Company, the Company's sale of all or substantially all of its
assets, the merger or consolidation of the Company into or with
any other Person if the holders of the outstanding voting shares
of the Company prior to such merger or consolidation do not
retain a majority of the voting power of the surviving Person,
the sale of a majority of the Company's intellectual property
assets or the Company conducts a public offering of its
securities not sufficient to cause an automatic conversion of the
Series C Preferred Stock under Section 7.3 hereof. For such
purposes, the exchange of securities of the surviving Person for
securities of the Company shall be deemed to constitute a merger
or consolidation of the Company.
6.3 Fair Value. The fair value of the assets or property
to be distributed or exchanged to or with the holders of the
Series C Preferred Stock in the event of a liquidation,
dissolution or winding up of the Company pursuant to Section 6.2
shall be determined by the Board of Directors of the Company in
good faith, provided that any securities to be delivered to the
holders of Series C Preferred Stock or Common Stock under this
Section 6 shall be valued at Market Value.
6.4 No Restriction on Surplus. No provision of this
Section 6 shall in any manner, prior to any liquidation,
dissolution, or winding up of the affairs of the Company, whether
voluntary or otherwise, create or deemed to create any
restrictions upon the surplus of the Company or prohibit the
payment of dividends on the capital stock of the Company out of
the funds of the Company legally available therefor, nor shall
any such restrictions or prohibition be in any manner inferred
from the provisions of this Section 6.
7. Conversion.
7.1 Conversion Procedure.
(a) Subject to the provisions of Section 5.2 above,
any holder of Series C Preferred Stock may convert all or
any portion of the Series C Preferred Stock (including any
fraction of a share of Series C Preferred Stock) held by
such holder into a number of fully paid and non-assessable
shares of the Company's Common Stock computed by multiplying
the number of shares of Series C Preferred Stock to be
converted by $177.83 and dividing the result by the
Conversion Price (as defined below) then in effect.
(b) Each conversion of Series C Preferred Stock will
be deemed to have been effected as of the close of business
on the date on which the certificate or certificates
representing the Series C Preferred Stock to be converted
have been surrendered at the principal office of the
Company. At such time as such conversion has been effected,
the rights of the holder of such Series C Preferred Stock as
such holder will cease and the Person or Persons in whose
name or names any certificate or certificates for shares of
Common Stock are to be issued upon such conversion will be
deemed to have been the holder or holders of record of the
shares of Common Stock represented thereby.
(c) As soon as possible after a conversion has been
effected (but in any event within five business days in the
case of subparagraph (i) below), the Company will deliver to
the converting holder:
(i) A certificate or certificates representing
the number of shares of Common Stock issuable by reason
of such conversion in such name or names and such
denomination or denominations as the converting holder
has specified;
(ii) Subject to the provisions of Section 3.3,
payment in an amount equal to all accrued dividends
with respect to each share of Series C Preferred Stock
converted, which have not been paid prior thereto, plus
the amount payable under subparagraph (g) below with
respect to such conversion; and
(iii) A certificate representing any Series C
Preferred Stock which was represented by the
certificate or certificates delivered to the Company in
connection with such conversion but which was not
converted.
(d) Subject to the provisions of Section 3.3, if for
any reason the Company is unable to pay any accrued
dividends on the Series C Preferred Stock being converted,
the Company will pay such dividends to the converting holder
as soon thereafter funds of the Company are legally
available for such payment. At the request of any such
convertible holder, the Company will provide such holder
with written evidence of its obligation to such holder.
(e) The issuance of certificates for shares of Common
Stock upon conversion of Series C Preferred Stock will be
made without charge to the holders of such Series C
Preferred Stock for any issuance tax in respect thereof or
other cost incurred by the Company in connection with such
conversion and the related issuance of shares of Common
Stock. Upon conversion of each share of Series C Preferred
Stock, the Company will take all such actions as are
necessary in order to insure that the Common Stock issuable
with respect to such conversion will be validly issued,
fully paid and nonassessable.
(f) The Company will not close its books against the
transfer of Series C Preferred Stock or of Common Stock
issued or issuable upon conversion of Series C Preferred
Stock in any manner which interferes with the timely
conversion of Series C Preferred Stock.
7.2 Conversion Price and Adjustments.
(a) The initial Conversion Price at which shares of
Common Stock shall be deliverable upon conversion of the
Series C Preferred Stock will be $177.83 per share. The
initial Conversion Price is subject to adjustment as
hereinafter provided.
(b) Except in the case of an event for which the
Conversion Price shall be adjusted pursuant to Section
7.2(d), no adjustment in the Conversion Price shall be made
in respect of the issuance of Additional Shares of Common
Stock unless the consideration per share for an Additional
Share of Common Stock issued or deemed to be issued by the
Company is less than the Conversion Price for the Series C
Preferred Stock in effect on the date of, and immediately
prior to, such issue.
(c) In the event the Company at any time or from time
to time after the Original Issue Date shall issue any
Options or Convertible Securities or shall fix a record date
for the determination of holders of any class of securities
entitled to receive any such Options or Convertible
Securities, then the following shall apply:
(i) The maximum number of shares of Common Stock
issuable upon the exercise of such Options or, in the
case of Convertible Securities and Options therefor,
the conversion or exchange of such Convertible
Securities, shall be deemed to be Additional Shares of
Common Stock issued as of the time of such issue or, in
case such a record date shall have been fixed, as of
the close of business on such record date; provided,
that if such Options or Convertible Securities by their
terms provide, with the passage of time or otherwise,
for any change in the minimum amount of consideration
payable to the Company, or any change in the maximum
number of shares of Common Stock issuable upon the
exercise, conversion, or exchange thereof other than
changes which may occur as a result of anti-dilution
provisions (for which each Conversion Price shall be
readjusted based on the provisions of this Section 7
when each such change is effective), the consideration
per share (determined pursuant to Section 7.2(d)
hereof) for Common Stock issuable pursuant to such
Options or Convertible Securities shall be the minimum
consideration per share that could at any time result,
taking into consideration all subsequent changes in the
minimum amount of consideration payable to the Company
and/or in the maximum number of shares of Common Stock
issuable upon the exercise, conversion, or exchange;
and provided further, that Additional Shares of Common
Stock shall not be deemed to have been issued unless
the consideration per share of such Additional Shares
of Common Stock would be less than the Conversion Price
in effect on the date of and immediately prior to such
issue or such record date.
(ii) No further adjustment in the Conversion Price
shall be made upon the subsequent issue of Convertible
Securities or shares of Common Stock upon the exercise
of such Options or conversion or exchange of such
Convertible Securities.
(iii) Upon the expiration of any such Options
or any rights of conversion or exchange of such
Convertible Securities which shall not have been
exercised, the Conversion Price computed upon the
original issue thereof (or upon the occurrence of a
record date with respect thereto), and any subsequent
adjustments based thereon, shall, upon such expiration,
be recomputed (provided that recomputation shall not
affect any Series C Preferred Stock converted or
tendered for conversion prior to such exercise or
expiration) as if:
(A) in the case of Convertible Securities or
Options for Common Stock, the only Additional
Shares of Common Stock issued were shares of
Common Stock, if any, actually issued upon the
exercise of such Options or the conversion or
exchange of such Convertible Securities and the
consideration received therefor was the
consideration actually received by the Company for
the issue of all such Options that were exercised
plus the consideration actually received by the
Company upon such exercise, or for the issue of
all such Convertible Securities which were
actually converted or exchanged, plus the
additional consideration, if any, actually
received by the Company upon such conversion or
exchange; and
(B) in the case of Options for Convertible
Securities, only the Convertible Securities, if
any, actually issued upon the exercise thereof
were issued at the time of issue of such Options,
and the consideration received by the Company for
the Additional Shares of Common Stock deemed to
have been then issued was the consideration
actually received by the Company for the issue of
all such Options that were exercised, plus the
consideration deemed to have been received by the
Company upon the issue of the Convertible
Securities with respect to which such Options were
actually exercised.
(iv) No readjustment pursuant to clause (iii)
above shall have the effect of increasing the
Conversion Price to an amount which exceeds such
Conversion Price on the original adjustment date
immediately prior to the original adjustment. If
Additional Shares of Common Stock were issued between
the original adjustment date and the readjustment date
(other than Common Stock issued upon exercise of the
Options or conversion of the Convertible Securities
that are the subject of the readjustment), the
Conversion Price on the readjustment date shall be
recomputed (but only if a lower Conversion Price
results therefrom) by treating the readjusted
Conversion Price as the Conversion Price in effect on
the original adjustment date and adjusting such
Conversion Price for all issuances of Additional Shares
of Common Stock (other than Common Stock issued upon
exercise of the Options or conversion of the
Convertible Securities that are the subject of the
readjustment) occurring between the original adjustment
date and the readjustment date.
(d) The Conversion Price shall be adjusted in
accordance with the following provisions:
(i) In the event the Company at any time or from
time to time after the Original Issue Date shall
declare or pay any dividend on the Common Stock payable
in Common Stock, or effect a subdivision or combination
of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a
dividend in Common Stock), then and in any such event,
the Conversion Price shall be proportionately decreased
in the case of a stock dividend or subdivision and
proportionately increased in the case of a combination
of shares effective, in the case of such dividend,
immediately after the close of business on the record
date for the determination of holders of Common Stock
entitled to receive such dividend or, in the case of a
subdivision or combination, at the close of business
immediately prior to the date upon which such corporate
action becomes effective.
(ii) In event the Company shall issue Additional
Shares of Common Stock, (including Additional Shares of
Common Stock deemed to be issued pursuant to Section
7.2(e)), without consideration or for a consideration
per share less than the Conversion Price for the Series
C Preferred Stock in effect on the date of and
immediately prior to such issue, then and in each such
event, the Conversion Price shall be reduced
concurrently with such issue of shares, to the
consideration per share actually received by the
Company for such Additional Shares of Common Stock.
(e) For purposes of this Section 7.2, the
consideration received by the Company for the issue of any
Additional Shares of Common Stock shall be computed as
follows:
(i) Insofar as it consists of cash, such
consideration shall consist of the aggregate amount of
cash received by the Company excluding amounts paid or
payable for accrued interest or accrued dividends.
Insofar as it consists of property other than cash,
such consideration shall be computed at the fair value
thereof at the time of such issue, as determined in
good faith by the Board of Directors of the Company. In
the event Additional Shares of Common Stock are issued
together with other securities or other assets of the
Company for consideration which covers both, such
consideration shall be the proportion of such
consideration so received, computed as determined in
good faith by the Board of Directors of the Company.
(ii) For the purpose of computing the initial
adjustment of each Conversion Price pursuant to Section
7.2(c)(i) the consideration per share received by the
Company for Additional Shares of Common Stock deemed to
have been issued pursuant to Section 7.2(c)(i) shall be
determined by dividing the total amount, if any,
received or receivable by the Company as consideration
for the issue of such Options or Convertible
Securities, plus the minimum aggregate amount of
additional consideration payable to the Company upon
the exercise of such Options or the conversion or
exchange of such Convertible Securities, or in the case
of Options for Convertible Securities, the exercise of
such Options for Convertible Securities and the
conversion or exchange of such Convertible Securities,
by the maximum number of shares of Common Stock
issuable upon the exercise of such Options or the
conversion or exchange of such Convertible Securities.
(f) In the event the Company at any time or from time
to time makes, or fixes a record date for the determination
of holders of Common Stock entitled to receive a dividend or
other distribution payable in securities of the Company
other than shares of Common Stock, then and in each such
event provision shall be made so that each holder of Series
C Preferred Stock shall receive upon conversion thereof, in
addition to the number of shares of Common Stock receivable
thereupon, the amount of securities of the Company which he
would have received had his Series C Preferred Stock been
converted into Common Stock on the record date of such event
and had he thereafter, during the period from the record
date of such event to and including the date of conversion,
retained such securities receivable by him as aforesaid
during such period, subject to all other adjustments called
for during such period under this Section 7.2 with respect
to the rights of the holders of the Series C Preferred
Stock.
7.3 Automatic Conversion. Each share of Series C Preferred
Stock shall automatically be converted into shares of Common
Stock at the then applicable Conversion Price in the event of the
closing of a firm commitment underwritten public offering
pursuant to an effective registration statement under the
Securities Act of 1933, as amended, covering the offer and sale
of Common Stock for the account of the Company to the public at
an aggregate offering price to the public (prior to the deduction
of underwriting commissions and expenses) equal to or in excess
of $10,000,000, resulting in the market equity capitalization of
the Company equal to or in excess of $30,000,000, and resulting
in the listing of the Company's Common Stock on a national
securities exchange or on the National Association of Securities
Dealers National Market System. In the event of such an
offering, the person(s) entitled to receive the Common Stock
issuable upon such conversion of Series C Preferred Stock shall
not be deemed to have converted such Series C Preferred Stock
until immediately prior to the closing of such sale of
securities, except that any such person may specify an earlier
time for conversion in accordance with this Section 7.
7.4 No Impairment. The Company will not, by amendment of
its Certificate of Incorporation or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other voluntary action, avoid or seek
to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Company, but will at all
times in good faith assist in the carrying out of all the provi-
sions of this Section 7 and in the taking of all such action as
may be necessary or appropriate in order to protect the
conversion rights of the holders of the Series C Preferred Stock
against impairment.
7.5 Certificate as to Adjustments. Upon the occurrence of
each adjustment or readjustment of the Conversion Price pursuant
to this Section 7, the Company, at its expense, shall promptly
compute such adjustment or readjustment in accordance with the
terms hereof and furnish to each holder of Series C Preferred
Stock a certificate setting forth such adjustment or readjustment
and showing in detail the facts upon which such adjustment or
readjustment is based. The Company shall, upon the written
request at any time of any holder of Series C Preferred Stock,
furnish or cause to be furnished to such holder a like
certificate setting forth (i) such adjustments and readjustments,
(ii) each Conversion Price at the time in effect, and (iii) the
number of shares of Common Stock and the amount, if any, of other
property which at the time would be received upon the conversion
of each series of Series C Preferred Stock.
7.6 Reservation of Stock Issuable Upon Conversion. The
Company shall at all times reserve and keep available out of its
authorized but unissued shares of Common Stock, solely for the
purpose of effecting the conversion of the Series C Preferred
Stock, such number of its shares of Common Stock as shall from
time to time be sufficient to effect a conversion of all
outstanding shares of Series C Preferred Stock and if at any time
the number of authorized but unissued shares of Common Stock
shall not be sufficient to effect the conversion of all of the
then outstanding shares of Series C Preferred Stock, the Company
shall promptly seek such corporate action as may, in the opinion
of its counsel, be necessary to increase its authorized but
unissued shares of Common Stock to such number of shares as shall
be sufficient for such purpose.
7.7 Payment of Taxes. The Company shall pay all issue
taxes and other governmental charges (other than income or other
taxes imposed upon profits realized by the recipient) that may be
imposed in respect of the issue or delivery of shares of Common
Stock or other securities or property upon conversion of shares
of Series C Preferred Stock. Provided, however that the Company
shall not be obligated to pay any tax or other charge imposed in
connection with any transfer involved in the issue and delivery
of shares of Common Stock or other securities in any name other
than that in which the shares of Series C Preferred Stock were
registered.
7.8 No Reissue. Any shares of Series C Preferred Stock
that are converted by the holder or redeemed by the Company shall
not be reissued and the certificates representing such shares
shall be appropriately cancelled on the books of the Company.
7.9 Reclassification; Recapitalizations. In the event of
any reclassification of the Common Stock or recapitalization
involving Common Stock (other than a change in par value or as a
result of a stock dividend, subdivision, or combination of shares
or any event described in Section 7.2(d)), each holder of Series
C Preferred Stock shall thereafter be entitled to receive and
provisions shall be made therefor in an agreement relating to the
reclassification or recapitalization, upon conversion of Series C
Preferred Stock, the kind and number of shares of Common Stock or
other securities or property (including cash) of the Company, to
which such holder of Series C Preferred Stock would have been
entitled if he had held the number of shares of Common Stock of
the Company into which the Series C Preferred Stock held by him
was convertible immediately prior to such reclassification or
recapitalization; and in any such case appropriate adjustment
shall be made in the application of the provisions herein set
forth with respect to the rights and interests thereafter of the
holders of the Series C Preferred Stock, to the end that the
provisions set forth herein (including the specific changes and
other adjustments to each Conversion Price), shall thereafter be
applicable, as nearly as reasonably may be, in relation to any
shares, other securities, or property thereafter receivable upon
conversion of the Series C Preferred Stock.
7.10 Notices. In the event that the Company shall propose
at any time:
(a) to declare any dividend or distribution upon its
Common Stock, whether in cash, property, stock or other
securities, whether or not a regular cash dividend and
whether or not out of earnings or earned surplus;
(b) to offer for subscription pro rata to the holders
of any class or series of its stock any additional shares of
stock of any class or series or other rights;
(c) to effect any reclassification or recapitalization
of its Common Stock outstanding involving a change in the
Common Stock; or
(d) to merge or consolidate with or into any other
corporation, or sell, lease or convey all or substantially
all its property or business, or to liquidate, dissolve or
wind up;
then, in connection with each event, the Company shall send to
the holders of Series C Preferred Stock:
(i) at least 20 days prior written notice of the
date on which a record shall be taken for such
dividend, distribution or subscription rights (and
specifying the date on which the holders of Common
Stock shall be entitled thereto) or for determining
rights to vote in respect of the matters referred to in
(a) and (b) above; and
(ii) in the case of the matters referred to in (c)
and (d) above, at least 20 days prior written notice of
the date when the same shall take place (and specifying
the date on which the holders of Common Stock shall be
entitled to exchange their Common Stock for securities
or other property deliverable upon the occurrence of
such event or such earlier date, if any, on which a
record shall be taken of the holders of Common Stock
who shall be entitled to exchange their Common Stock).
7.11 Manner of Notice. Any notice required by this Section
7 shall be deemed given if given by certified mail, postage
prepaid, return receipt requested, addressed to the holders of
Series C Preferred Stock at the address for each such holder as
shown on the books of the Company.
7.12 Fractional Shares. No fractional share shall be issued
upon the conversion of any share or shares of Series C Preferred
Stock. All shares of Common Stock (including fractions thereof)
issuable upon conversion of more than one share of Series C
Preferred Stock by a holder thereof shall be aggregated for
purposes of determining whether the conversion would result in
the issuance of any fractional share. If, after such aggregation,
the conversion would result in the issuance of a fraction of a
share of Common Stock, the Company shall, in lieu of issuing any
fractional share, pay the holder otherwise entitled to such
fraction a sum in cash equal to the Market Value of such fraction
on the date of conversion.
7.13 Certain Events. If any event occurs of the type
contemplated by the provisions of this Section 7 but not
expressly provided for by such provisions, then the Company's
Board of Directors will make an appropriate adjustment in the
Conversion Price so as to protect the rights of the holders of
the Series C Preferred Stock. Provided, that no such adjustment
will increase the Conversion Price as otherwise determined
pursuant to this Section 7 or decrease the number of shares of
Common Stock issuable upon conversion of each share of the Series
C Preferred Stock.
7.14 Purchase Rights. If at any time the Company grants,
issues or sells any Options, Convertible Securities or rights to
purchase stock, warrants, securities or other property pro rata
to the record holders of any class of Common Stock (the "Purchase
Rights"), then each holder of Series C Preferred Stock will be
entitled to acquire, upon the terms applicable to such Purchase
Rights, the aggregate Purchase Rights which such holder could
have acquired if such holder had held the number of shares of
Common Stock acquirable upon conversion of such holder's Series C
Preferred Stock immediately before the date on which a record is
taken for the grant, issuance or sale of such Purchase Rights,
or if no such record is taken, the date as of which the record
holders of Common Stock are to be determined for the grant, issue
or sale of such Purchase Rights.
7.15 Conversion to Series D and Series E Preferred
Stock. Each share of Series C Preferred Stock shall be
automatically converted into one share of Series D Preferred
Stock in the event the Company sells shares of its capital stock
for a total purchase price of at least $600,000 at a price per
share of at least $177.83 (which number shall be proportionately
adjusted in the case of recapitalizations, stock splits, stock
dividends or combinations of shares). In addition, provided that
neither the Company nor the holders have previously delivered a
notice of redemption pursuant to Section 4.1 or Section 4.2
hereof, upon the date 24 months from the Original Issue Date each
share of Series C Preferred Stock shall be automatically
converted into one share of Series D Preferred Stock.
8. Covenants. In addition to any other rights provided by
law or agreement, so long as any share of Series C Preferred
Stock shall be outstanding, the Company shall not, without first
obtaining the affirmative vote or written consent of the holders
of not less than 60% of the outstanding shares of Series C
Preferred Stock:
(a) amend or repeal any provision of, or add any
provision to, the Company's Certificate of Incorporation or
bylaws if such action would alter or change the preferences,
rights, privileges or powers of, or the restrictions
provided for the benefit of, the Series C Preferred Stock,
or increase or decrease the number of shares of the Series C
Preferred Stock authorized hereby;
(b) authorize or issue shares of any class of stock
not authorized herein having any preference or priority as
to dividends or assets superior to or on a parity with any
such preference or priority of the Series C Preferred Stock,
or authorize or issue shares of stock of any class or any
bonds, debentures, notes or other obligations convertible
into or exchangeable for, or having option rights to
purchase, any shares of any other class or series of stock
of the Company having any preference or priority as to
dividends or assets superior to or on a parity with any such
preference or priority of the Series C Preferred Stock;
(c) reclassify any Junior Stock into shares having any
preference or priority as to dividends or assets superior to
or on a parity with any such preference or priority of the
Series C Preferred Stock; or
(d) grant any security interest in or otherwise
encumber the Company's patents, technology and other
intellectual property rights, except with respect to any
security interests or other encumbrances now or hereafter
granted in favor of (i) Liberty Bank and Trust Company of
Tulsa, National Association, not exceeding $800,000 plus
interest, or (ii) Jerry Dillon to secure indebtedness not
exceeding the principal amount of $325,000 plus accrued
interest, which security interests or other encumbrances are
specifically permitted without consent.
(e) amend or repeal any provision of this Section 8.
IN WITNESS WHEREOF, the Company has caused this Certificate
to be signed by its President and attested by its Secretary, this
19th day of December, 1995.
EXCEL ENERGY TECHNOLOGIES,
LTD.
ATTEST:
[seal]
By:
By: Kevin L. Jordan,
President
Secretary
EXHIBIT "B"
CERTIFICATE OF DESIGNATIONS, VOTING POWERS AND
RIGHTS OF SERIES F CONVERTIBLE PARTICIPATING
PREFERRED STOCK OF EXCEL ENERGY TECHNOLOGIES, LTD.
Excel Energy Technologies, Ltd., a corporation organized and
existing under the Delaware General Corporation Law (the "Compa-
ny"), DOES HEREBY CERTIFY:
That, pursuant to authority conferred upon the Board of
Directors by the Company's Certificate of Incorporation, as
amended, and pursuant to the provisions of Section 151 of the
Delaware General Corporation Law, as amended, said Board of
Directors, at a meeting thereof duly called, convened and
constituted on December 18, 1995, at which a quorum was present
and acting throughout, adopted the following resolutions
providing for the creation and issuance of a series of shares of
the Company's authorized preferred stock designated as "Series F
Convertible Participating Preferred Stock":
RESOLVED, that the Board of Directors hereby establishes and
designates a new series of the Company's authorized but unissued
preferred stock and that the designation and amount thereof and
the relative rights, preferences, qualifications, limitations and
restrictions thereof are as follows:
1. Designation and Amount. The shares of this series of
preferred stock shall be designated as "Series F Convertible
Participating Preferred Stock," $0.01 par value per share, and
the number of shares constituting this series shall be 6,000.
2. Certain Definitions. The following terms shall have
the respective meanings indicated.
(a) Additional Shares of Common Stock shall mean all
shares of Common Stock issued (or, pursuant to Section
7.2(c), deemed to be issued) by the Company after the
Original Issue Date other than shares of Common Stock issued
in connection with a stock dividend, subdivision or
combination referred to in Section 7.2(d) and other than
shares of Common Stock issued or issuable at any time:
(i) upon conversion of shares of Series C, Series
D, Series E, Series F or Series G Preferred Stock; or
(ii) in an aggregate amount of up to 6,683 shares
(which number shall be proportionately adjusted in the
case of recapitalizations, stock splits, stock
dividends or combinations of shares) of Common Stock
and Options therefor (including shares of Common Stock
issuable upon exercise of Options which were issued on
or before the Original Issue Date) to officers,
directors and employees of the Company; or
(iii) as a dividend or distribution on the
Series C, Series D, Series E, Series F or Series G
Preferred Stock; or
(iv) upon conversion of the Company's 9%
Subordinated Debentures; or
(v) upon the exercise of any presently
outstanding options or warrants.
(b) Common Stock shall mean the Company's Class A
Voting Common Stock, $0.01 par value per share, the
Company's Class B Non-Voting Common Stock, $0.01 par value
per share, and any capital stock of the Company which has
the right to participate in the distribution of earnings and
assets of the Company without limit as to amount or
percentage, into which common stock may hereafter be
reclassified by appropriate amendment to the Company's
Certificate of Incorporation.
(c) Common Stock Deemed Outstanding shall mean at any
given time, the number of shares of Common Stock actually
outstanding at such time plus (to the extent applicable) the
number of shares of Common Stock deemed to be outstanding
pursuant to Section 7 below.
(d) Convertible Securities shall mean any securities
of the Company convertible into or exchangeable for (through
one or more conversions or exchanges) Common Stock.
Convertible Securities shall include any evidences of
indebtedness, any capital stock of the Company (other than
the Series C, Series D, Series E, Series F or Series G
Preferred Stock) or other securities convertible into or
exchangeable for Common Stock.
(e) Junior Stock shall mean the Common Stock and any
other capital stock of the Company including the Series D
and Series E Preferred Stock, but excluding the Series C,
Series F and Series G Preferred Stock.
(f) Liquidation Value shall mean, as to each share of
Preferred Stock, the sum of $177.83.
(g) Market Price of any security shall mean the
average of the closing prices of such security's sales on
all securities exchanges on which such security may at the
time be listed, or, if there have been no sales on any such
exchange on any day, the average of the highest bid and
lowest asked prices on all such exchanges at the end of such
day, or, if on any day such security is not so listed, the
average of the representative bid and asked prices quoted in
the NASDAQ System as of 4:00 p.m., New York time, or, if on
any day such security is not quoted in the NASDAQ System,
the average of the highest bid and lowest asked prices on
such day in the domestic over-the-counter market as reported
by the National Quotation Bureau, Incorporated, or any
similar successor organization, in each such case averaged
over a period of 21 days consisting of the day as of which
"Market Price" is being determined and the 20 consecutive
business days prior to such day. If at any time such
security is not listed on any securities exchange or quoted
in the NASDAQ System or the over-the-counter market, the
"Market Price" will be the fair value thereof determined
jointly by the Company and the holders of a majority of the
Series C Preferred Stock. If such parties are unable to
reach agreement within a reasonable period of time, such
fair value will be determined by an independent appraiser
jointly selected by the Company and the holders of a
majority of the Series C Preferred Stock.
(h) DGCL shall mean the Delaware General Corporation
Law, as amended from time to time.
(i) Options shall mean rights, options or warrants to
subscribe for, purchase or otherwise acquire either Common
Stock or Convertible Securities.
(j) Original Issue Date shall mean December 20, 1995.
(k) Person shall mean an individual, a partnership, a
corporation, an association, a joint stock company, a trust,
a joint venture, a limited liability company, an
unincorporated organization and a government entity or any
department, agency or political subdivision thereof.
(l) Series C Preferred Stock shall mean the Company's
Series C Convertible Participating Preferred Stock, $0.01
par value.
(m) Series D Preferred Stock shall mean the Company's
Series D Convertible Participating Preferred Stock, $0.01
par value.
(n) Series E Preferred Stock shall mean the Company's
Series E Convertible Participating Preferred Stock, $0.01
par value.
(o) Series F Preferred Stock shall mean the Company's
Series F Preferred Stock, $0.01 par value, having the
relative rights, preferences, qualifications, limitations
and restrictions set forth herein.
(p) Series G Preferred Stock shall mean the Company's
Series G Convertible Participating Preferred Stock, $0.01
par value.
(q) Subsidiary means any corporation of which the
shares of stock having a majority of the general voting
power in electing the board of directors are, at the time as
of which any determination is being made, owned by the
Company either directly or indirectly through a Subsidiary.
3. Dividends. No dividends shall be paid on the Common
Stock unless dividends shall also be paid on the Series F
Preferred Stock. Further, no dividends shall be paid on the
Junior Stock during any time in which the Company is in default
with respect to a redemption of the Series F Preferred Stock.
4. Redemption.
4.1 Company's Right to Require Redemption. At the option
of the Company, the Company shall redeem, at any time prior to
the date twelve months after the Original Issue Date, all of the
outstanding shares of Series F Preferred Stock by paying in cash
therefor $266.75 per share of Series F Preferred Stock (as
adjusted for any stock dividends, combinations or splits with
respect to such shares) plus all accrued but unpaid dividends on
such shares. Further at the option of the Company, the Company
shall redeem, at any time after the date twelve months after the
Original Issue Date and prior to the date 24 months after the
Original Issue Date, all of the outstanding shares of Series F
Preferred Stock by paying in cash therefor, $355.66 per share of
Series F Preferred Stock (as adjusted for any stock dividends,
combinations or splits with respect to such shares) plus all
accrued but unpaid dividends on such shares. Any such redemption
pursuant to this Section 4.1 shall be completed no later than 30
days after the Company notifies the holder of the exercise of its
option to redeem. Following receipt of the Company's notice of
the exercise of its option to redeem pursuant to this Section 4.1
and for a period of ten days thereafter, the holder shall have
the right to exercise its rights of conversion pursuant to
Section 7 hereof.
4.2 Holder's Right to Require Redemption. At the option of
a holder of outstanding shares of Series F Preferred Stock, upon
notice from any such holder delivered to the Company no later
than December 31, 1997, the Company shall redeem, as of June 30,
1998, the number of shares of Series F Preferred Stock held by
such holder that is specified in the request for redemption by
paying in cash therefor $177.83 per share of Series F Preferred
Stock (as adjusted for any stock dividends, combinations or
splits with respect to such shares) plus all accrued but unpaid
dividends on such shares.
5. Voting Rights.
5.1 Non-Voting. The Series F Preferred Stock shall be non-
voting.
5.2 Voting Upon Conversion of Series F Preferred Stock. So
long as any shares of Series F Preferred Stock or shares of
Common Stock issued upon the conversion of shares of Series F
Preferred are held of record by Public Service Company of
Oklahoma, Central and South West Corporation, or any of their
respective "subsidiaries" as defined in the Public Utility
Holding Company Act of 1935, as amended (collectively and
individually, a "PSO Affiliate"), the shares of Common Stock into
which such shares of Series F Preferred Stock are convertible or
have been converted shall have no voting rights, provided that
such shares of Common Stock, or any portion thereof, shall have
full voting rights upon the transfer of such shares to any holder
which is not a PSO Affiliate. Such shares of Common Stock, while
held by one of the PSO Affiliates, shall not be counted for
quorum purposes or otherwise for the purpose of determining the
number of shares of outstanding stock entitled to vote on any
matter. The provisions of this Section 5.2 shall continue in
force with respect to such shares of Common Stock regardless of
whether any shares of Preferred Stock are then outstanding and
shall be recorded on the stock records of the Company. Upon the
transfer of shares of Series F Preferred Stock by a PSO Affiliate
to any person not a PSO Affiliate, each share of Series F
Preferred Stock so transferred shall automatically convert to a
share of Series C Preferred Stock.
5.3 Shareholder Agreements. No provision of this Section 5
shall affect the enforceability of shareholder voting agreements
including, without limitation, voting trusts, pertaining to the
election of directors or other matters.
6. Liquidation Preference.
6.1 General.
(a) Subject to the remaining provisions of this
Section 6, in the event of any liquidation, dissolution, or
winding up of the affairs of the Company, whether voluntary
or involuntary, after payment or provision for payment of
the debts and liabilities of the Company, the holders of the
Series F Preferred Stock shall be entitled to receive, out
of the remaining assets of the Company, the Liquidation
Value in cash (as adjusted for any stock dividends,
combinations or splits with respect to such shares) for each
of the shares of Series F Preferred Stock they then hold,
plus an amount equal to all dividends accumulated and unpaid
on each such share (including any interest thereon or other
charges related thereto) through the date fixed for
distribution, before any distribution shall be made to the
holders of any shares of Junior Stock. If upon any
liquidation, dissolution or winding up of the affairs of the
Company, whether voluntary or involuntary, the assets of the
Company available for distribution to shareholders shall be
insufficient to permit the payment to the holders of the
Series C Preferred Stock of the aforesaid preferential
amounts, then the entire assets of the Company shall be
distributed ratably among the holders of the Series C,
Series F and Series G Preferred Stock, on a pari passu
basis, in proportion to the preferential amount each holder
is otherwise entitled to receive.
(b) After payment to the holders of the Series F
Preferred Stock of the amounts set forth in Section 6.1(a)
above, and if payment shall have been made in full to the
holders of the Series C, Series D, Series E and Series G
Preferred Stock pursuant to such holders' liquidation
preferences, and so long as a Terminating Event (as defined
below) has not occurred, the entire remaining assets and
funds of the Company legally available for distribution, if
any, shall be distributed among the holders of the Common
Stock and the Series C, Series D, Series E, Series F and
Series G Preferred Stock in proportion to the shares of
Common Stock then held by them and the shares of Common
Stock which they then have the right to acquire upon
conversion of the shares of Series C, Series D, Series E,
Series F and Series G Preferred Stock then held by them.
Once a Terminating Event has occurred, after payment to the
Holders of the Series F Preferred Stock of the amount set
forth in Section 6.1(a) above, the entire remaining assets
and funds of the Company legally available for distribution,
if any, shall be distributed among the holders of the Junior
Stock according to their respective shares and priorities.
A "Terminating Event" shall be deemed to have occurred on
the earlier of any of the following events: (i) sale by the
Company of not less than $2,200,000 of equity securities
after the Original Issue Date hereof at a price per share of
at least $518.07 per share of Common Stock on an as-
converted basis, as adjusted for any stock dividends,
combinations, or splits with respect to said shares;
(ii) the Company has achieved audited after tax net income
for any two consecutive fiscal years in excess of $1,000,000
per year; or (iii) the sale by the Company of all or
substantially all of its assets or the merger of the Company
into or with any person if the holders of the outstanding
voting shares of the Company prior thereto do not retain a
majority of the voting power of the surviving person and in
such transaction the consideration in such sale equals at
least $518.07 per share of common stock, or its equivalent.
6.2 Merger or Consolidation. For purposes of this
Section 6, a liquidation, dissolution, or winding up of the
Company shall be deemed to be occasioned by, and include, in
addition to the liquidation, dissolution and winding up of the
Company, the Company's sale of all or substantially all of its
assets, the merger or consolidation of the Company into or with
any other Person if the holders of the outstanding voting shares
of the Company prior to such merger or consolidation do not
retain a majority of the voting power of the surviving Person,
the sale of a majority of the Company's intellectual property
assets or the Company conducts a public offering of its
securities not sufficient to cause an automatic conversion of the
Series F Preferred Stock under Section 7.3 hereof. For such
purposes, the exchange of securities of the surviving Person for
securities of the Company shall be deemed to constitute a merger
or consolidation of the Company.
6.3 Fair Value. The fair value of the assets or property
to be distributed or exchanged to or with the holders of the
Series F Preferred Stock in the event of a liquidation,
dissolution or winding up of the Company pursuant to Section 6.2
shall be determined by the Board of Directors of the Company in
good faith, provided that any securities to be delivered to the
holders of Series F Preferred Stock or Common Stock under this
Section 6 shall be valued at Market Value.
6.4 No Restriction on Surplus. No provision of this
Section 6 shall in any manner, prior to any liquidation,
dissolution, or winding up of the affairs of the Company, whether
voluntary or otherwise, create or deemed to create any
restrictions upon the surplus of the Company or prohibit the
payment of dividends on the capital stock of the Company out of
the funds of the Company legally available therefor, nor shall
any such restrictions or prohibition be in any manner inferred
from the provisions of this Section 6.
7. Conversion.
7.1 Conversion Procedure.
(a) Subject to the provisions of Section 5.2 above,
any holder of Series F Preferred Stock may convert all or
any portion of the Series F Preferred Stock (including any
fraction of a share of Series F Preferred Stock) held by
such holder into a number of fully paid and non-assessable
shares of the Company's Common Stock computed by multiplying
the number of shares of Series F Preferred Stock to be
converted by $177.83 and dividing the result by the
Conversion Price (as defined below) then in effect.
(b) Each conversion of Series F Preferred Stock will
be deemed to have been effected as of the close of business
on the date on which the certificate or certificates
representing the Series F Preferred Stock to be converted
have been surrendered at the principal office of the
Company. At such time as such conversion has been effected,
the rights of the holder of such Series F Preferred Stock as
such holder will cease and the Person or Persons in whose
name or names any certificate or certificates for shares of
Common Stock are to be issued upon such conversion will be
deemed to have been the holder or holders of record of the
shares of Common Stock represented thereby.
(c) As soon as possible after a conversion has been
effected (but in any event within five business days in the
case of subparagraph (i) below), the Company will deliver to
the converting holder:
(i) A certificate or certificates representing
the number of shares of Common Stock issuable by reason
of such conversion in such name or names and such
denomination or denominations as the converting holder
has specified;
(ii) Subject to the provisions of Section 3.3,
payment in an amount equal to all accrued dividends
with respect to each share of Series F Preferred Stock
converted, which have not been paid prior thereto, plus
the amount payable under subparagraph (g) below with
respect to such conversion; and
(iii) A certificate representing any Series F
Preferred Stock which was represented by the
certificate or certificates delivered to the Company in
connection with such conversion but which was not
converted.
(d) Subject to the provisions of Section 3.3, if for
any reason the Company is unable to pay any accrued
dividends on the Series F Preferred Stock being converted,
the Company will pay such dividends to the converting holder
as soon thereafter funds of the Company are legally
available for such payment. At the request of any such
convertible holder, the Company will provide such holder
with written evidence of its obligation to such holder.
(e) The issuance of certificates for shares of Common
Stock upon conversion of Series F Preferred Stock will be
made without charge to the holders of such Series F
Preferred Stock for any issuance tax in respect thereof or
other cost incurred by the Company in connection with such
conversion and the related issuance of shares of Common
Stock. Upon conversion of each share of Series F Preferred
Stock, the Company will take all such actions as are
necessary in order to insure that the Common Stock issuable
with respect to such conversion will be validly issued,
fully paid and nonassessable.
(f) The Company will not close its books against the
transfer of Series F Preferred Stock or of Common Stock
issued or issuable upon conversion of Series F Preferred
Stock in any manner which interferes with the timely
conversion of Series F Preferred Stock.
7.2 Conversion Price and Adjustments.
(a) The initial Conversion Price at which shares of
Common Stock shall be deliverable upon conversion of the
Series F Preferred Stock will be $177.83 per share. The
initial Conversion Price is subject to adjustment as
hereinafter provided.
(b) Except in the case of an event for which the
Conversion Price shall be adjusted pursuant to Section
7.2(d), no adjustment in the Conversion Price shall be made
in respect of the issuance of Additional Shares of Common
Stock unless the consideration per share for an Additional
Share of Common Stock issued or deemed to be issued by the
Company is less than the Conversion Price for the Series F
Preferred Stock in effect on the date of, and immediately
prior to, such issue.
(c) In the event the Company at any time or from time
to time after the Original Issue Date shall issue any
Options or Convertible Securities or shall fix a record date
for the determination of holders of any class of securities
entitled to receive any such Options or Convertible
Securities, then the following shall apply:
(i) The maximum number of shares of Common Stock
issuable upon the exercise of such Options or, in the
case of Convertible Securities and Options therefor,
the conversion or exchange of such Convertible
Securities, shall be deemed to be Additional Shares of
Common Stock issued as of the time of such issue or, in
case such a record date shall have been fixed, as of
the close of business on such record date; provided,
that if such Options or Convertible Securities by their
terms provide, with the passage of time or otherwise,
for any change in the minimum amount of consideration
payable to the Company, or any change in the maximum
number of shares of Common Stock issuable upon the
exercise, conversion, or exchange thereof other than
changes which may occur as a result of anti-dilution
provisions (for which each Conversion Price shall be
readjusted based on the provisions of this Section 7
when each such change is effective), the consideration
per share (determined pursuant to Section 7.2(d)
hereof) for Common Stock issuable pursuant to such
Options or Convertible Securities shall be the minimum
consideration per share that could at any time result,
taking into consideration all subsequent changes in the
minimum amount of consideration payable to the Company
and/or in the maximum number of shares of Common Stock
issuable upon the exercise, conversion, or exchange;
and provided further, that Additional Shares of Common
Stock shall not be deemed to have been issued unless
the consideration per share of such Additional Shares
of Common Stock would be less than the Conversion Price
in effect on the date of and immediately prior to such
issue or such record date.
(ii) No further adjustment in the Conversion Price
shall be made upon the subsequent issue of Convertible
Securities or shares of Common Stock upon the exercise
of such Options or conversion or exchange of such
Convertible Securities.
(iii) Upon the expiration of any such Options
or any rights of conversion or exchange of such
Convertible Securities which shall not have been
exercised, the Conversion Price computed upon the
original issue thereof (or upon the occurrence of a
record date with respect thereto), and any subsequent
adjustments based thereon, shall, upon such expiration,
be recomputed (provided that recomputation shall not
affect any Series F Preferred Stock converted or
tendered for conversion prior to such exercise or
expiration) as if:
(A) in the case of Convertible Securities or
Options for Common Stock, the only Additional
Shares of Common Stock issued were shares of
Common Stock, if any, actually issued upon the
exercise of such Options or the conversion or
exchange of such Convertible Securities and the
consideration received therefor was the
consideration actually received by the Company for
the issue of all such Options that were exercised
plus the consideration actually received by the
Company upon such exercise, or for the issue of
all such Convertible Securities which were
actually converted or exchanged, plus the
additional consideration, if any, actually
received by the Company upon such conversion or
exchange; and
(B) in the case of Options for Convertible
Securities, only the Convertible Securities, if
any, actually issued upon the exercise thereof
were issued at the time of issue of such Options,
and the consideration received by the Company for
the Additional Shares of Common Stock deemed to
have been then issued was the consideration
actually received by the Company for the issue of
all such Options that were exercised, plus the
consideration deemed to have been received by the
Company upon the issue of the Convertible
Securities with respect to which such Options were
actually exercised.
(iv) No readjustment pursuant to clause (iii)
above shall have the effect of increasing the
Conversion Price to an amount which exceeds such
Conversion Price on the original adjustment date
immediately prior to the original adjustment. If
Additional Shares of Common Stock were issued between
the original adjustment date and the readjustment date
(other than Common Stock issued upon exercise of the
Options or conversion of the Convertible Securities
that are the subject of the readjustment), the
Conversion Price on the readjustment date shall be
recomputed (but only if a lower Conversion Price
results therefrom) by treating the readjusted
Conversion Price as the Conversion Price in effect on
the original adjustment date and adjusting such
Conversion Price for all issuances of Additional Shares
of Common Stock (other than Common Stock issued upon
exercise of the Options or conversion of the
Convertible Securities that are the subject of the
readjustment) occurring between the original adjustment
date and the readjustment date.
(d) The Conversion Price shall be adjusted in
accordance with the following provisions:
(i) In the event the Company at any time or from
time to time after the Original Issue Date shall
declare or pay any dividend on the Common Stock payable
in Common Stock, or effect a subdivision or combination
of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a
dividend in Common Stock), then and in any such event,
the Conversion Price shall be proportionately decreased
in the case of a stock dividend or subdivision and
proportionately increased in the case of a combination
of shares effective, in the case of such dividend,
immediately after the close of business on the record
date for the determination of holders of Common Stock
entitled to receive such dividend or, in the case of a
subdivision or combination, at the close of business
immediately prior to the date upon which such corporate
action becomes effective.
(ii) In event the Company shall issue Additional
Shares of Common Stock, (including Additional Shares of
Common Stock deemed to be issued pursuant to Section
7.2(e)), without consideration or for a consideration
per share less than the Conversion Price for the Series
F Preferred Stock in effect on the date of and
immediately prior to such issue, then and in each such
event, the Conversion Price shall be reduced
concurrently with such issue of shares, to the
consideration per share actually received by the
Company for such Additional Shares of Common Stock.
(e) For purposes of this Section 7.2, the
consideration received by the Company for the issue of any
Additional Shares of Common Stock shall be computed as
follows:
(i) Insofar as it consists of cash, such
consideration shall consist of the aggregate amount of
cash received by the Company excluding amounts paid or
payable for accrued interest or accrued dividends.
Insofar as it consists of property other than cash,
such consideration shall be computed at the fair value
thereof at the time of such issue, as determined in
good faith by the Board of Directors of the Company. In
the event Additional Shares of Common Stock are issued
together with other securities or other assets of the
Company for consideration which covers both, such
consideration shall be the proportion of such
consideration so received, computed as determined in
good faith by the Board of Directors of the Company.
(ii) For the purpose of computing the initial
adjustment of each Conversion Price pursuant to Section
7.2(c)(i) the consideration per share received by the
Company for Additional Shares of Common Stock deemed to
have been issued pursuant to Section 7.2(c)(i) shall be
determined by dividing the total amount, if any,
received or receivable by the Company as consideration
for the issue of such Options or Convertible
Securities, plus the minimum aggregate amount of
additional consideration payable to the Company upon
the exercise of such Options or the conversion or
exchange of such Convertible Securities, or in the case
of Options for Convertible Securities, the exercise of
such Options for Convertible Securities and the
conversion or exchange of such Convertible Securities,
by the maximum number of shares of Common Stock
issuable upon the exercise of such Options or the
conversion or exchange of such Convertible Securities.
(f) In the event the Company at any time or from time
to time makes, or fixes a record date for the determination
of holders of Common Stock entitled to receive a dividend or
other distribution payable in securities of the Company
other than shares of Common Stock, then and in each such
event provision shall be made so that each holder of Series
F Preferred Stock shall receive upon conversion thereof, in
addition to the number of shares of Common Stock receivable
thereupon, the amount of securities of the Company which he
would have received had his Series F Preferred Stock been
converted into Common Stock on the record date of such event
and had he thereafter, during the period from the record
date of such event to and including the date of conversion,
retained such securities receivable by him as aforesaid
during such period, subject to all other adjustments called
for during such period under this Section 7.2 with respect
to the rights of the holders of the Series F Preferred
Stock.
7.3 Automatic Conversion. Each share of Series F Preferred
Stock shall automatically be converted into shares of Common
Stock at the then applicable Conversion Price in the event of the
closing of a firm commitment underwritten public offering
pursuant to an effective registration statement under the
Securities Act of 1933, as amended, covering the offer and sale
of Common Stock for the account of the Company to the public at
an aggregate offering price to the public (prior to the deduction
of underwriting commissions and expenses) equal to or in excess
of $10,000,000, resulting in the market equity capitalization of
the Company equal to or in excess of $30,000,000, and resulting
in the listing of the Company's Common Stock on a national
securities exchange or on the National Association of Securities
Dealers National Market System. In the event of such an
offering, the person(s) entitled to receive the Common Stock
issuable upon such conversion of Series C Preferred Stock shall
not be deemed to have converted such Series F Preferred Stock
until immediately prior to the closing of such sale of
securities, except that any such person may specify an earlier
time for conversion in accordance with this Section 7.
7.4 No Impairment. The Company will not, by amendment of
its Certificate of Incorporation or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other voluntary action, avoid or seek
to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Company, but will at all
times in good faith assist in the carrying out of all the provi-
sions of this Section 7 and in the taking of all such action as
may be necessary or appropriate in order to protect the
conversion rights of the holders of the Series F Preferred Stock
against impairment.
7.5 Certificate as to Adjustments. Upon the occurrence of
each adjustment or readjustment of the Conversion Price pursuant
to this Section 7, the Company, at its expense, shall promptly
compute such adjustment or readjustment in accordance with the
terms hereof and furnish to each holder of Series F Preferred
Stock a certificate setting forth such adjustment or readjustment
and showing in detail the facts upon which such adjustment or
readjustment is based. The Company shall, upon the written
request at any time of any holder of Series F Preferred Stock,
furnish or cause to be furnished to such holder a like
certificate setting forth (i) such adjustments and readjustments,
(ii) each Conversion Price at the time in effect, and (iii) the
number of shares of Common Stock and the amount, if any, of other
property which at the time would be received upon the conversion
of each series of Series F Preferred Stock.
7.6 Reservation of Stock Issuable Upon Conversion. The
Company shall at all times reserve and keep available out of its
authorized but unissued shares of Common Stock, solely for the
purpose of effecting the conversion of the Series F Preferred
Stock, such number of its shares of Common Stock as shall from
time to time be sufficient to effect a conversion of all
outstanding shares of Series F Preferred Stock and if at any time
the number of authorized but unissued shares of Common Stock
shall not be sufficient to effect the conversion of all of the
then outstanding shares of Series F Preferred Stock, the Company
shall promptly seek such corporate action as may, in the opinion
of its counsel, be necessary to increase its authorized but
unissued shares of Common Stock to such number of shares as shall
be sufficient for such purpose.
7.7 Payment of Taxes. The Company shall pay all issue
taxes and other governmental charges (other than income or other
taxes imposed upon profits realized by the recipient) that may be
imposed in respect of the issue or delivery of shares of Common
Stock or other securities or property upon conversion of shares
of Series F Preferred Stock. Provided, however that the Company
shall not be obligated to pay any tax or other charge imposed in
connection with any transfer involved in the issue and delivery
of shares of Common Stock or other securities in any name other
than that in which the shares of Series F Preferred Stock were
registered.
7.8 No Reissue. Any shares of Series F Preferred Stock
that are converted by the holder or redeemed by the Company shall
not be reissued and the certificates representing such shares
shall be appropriately cancelled on the books of the Company.
7.9 Reclassification; Recapitalizations. In the event of
any reclassification of the Common Stock or recapitalization
involving Common Stock (other than a change in par value or as a
result of a stock dividend, subdivision, or combination of shares
or any event described in Section 7.2(d)), each holder of Series
F Preferred Stock shall thereafter be entitled to receive and
provisions shall be made therefor in an agreement relating to the
reclassification or recapitalization, upon conversion of Series F
Preferred Stock, the kind and number of shares of Common Stock or
other securities or property (including cash) of the Company, to
which such holder of Series F Preferred Stock would have been
entitled if he had held the number of shares of Common Stock of
the Company into which the Series F Preferred Stock held by him
was convertible immediately prior to such reclassification or
recapitalization; and in any such case appropriate adjustment
shall be made in the application of the provisions herein set
forth with respect to the rights and interests thereafter of the
holders of the Series F Preferred Stock, to the end that the
provisions set forth herein (including the specific changes and
other adjustments to each Conversion Price), shall thereafter be
applicable, as nearly as reasonably may be, in relation to any
shares, other securities, or property thereafter receivable upon
conversion of the Series F Preferred Stock.
7.10 Notices. In the event that the Company shall propose
at any time:
(a) to declare any dividend or distribution upon its
Common Stock, whether in cash, property, stock or other
securities, whether or not a regular cash dividend and
whether or not out of earnings or earned surplus;
(b) to offer for subscription pro rata to the holders
of any class or series of its stock any additional shares of
stock of any class or series or other rights;
(c) to effect any reclassification or recapitalization
of its Common Stock outstanding involving a change in the
Common Stock; or
(d) to merge or consolidate with or into any other
corporation, or sell, lease or convey all or substantially
all its property or business, or to liquidate, dissolve or
wind up;
then, in connection with each event, the Company shall send to
the holders of Series C Preferred Stock:
(i) at least 20 days prior written notice of the
date on which a record shall be taken for such
dividend, distribution or subscription rights (and
specifying the date on which the holders of Common
Stock shall be entitled thereto) or for determining
rights to vote in respect of the matters referred to in
(a) and (b) above; and
(ii) in the case of the matters referred to in (c)
and (d) above, at least 20 days prior written notice of
the date when the same shall take place (and specifying
the date on which the holders of Common Stock shall be
entitled to exchange their Common Stock for securities
or other property deliverable upon the occurrence of
such event or such earlier date, if any, on which a
record shall be taken of the holders of Common Stock
who shall be entitled to exchange their Common Stock).
7.11 Manner of Notice. Any notice required by this Section
7 shall be deemed given if given by certified mail, postage
prepaid, return receipt requested, addressed to the holders of
Series F Preferred Stock at the address for each such holder as
shown on the books of the Company.
7.12 Fractional Shares. No fractional share shall be issued
upon the conversion of any share or shares of Series F Preferred
Stock. All shares of Common Stock (including fractions thereof)
issuable upon conversion of more than one share of Series F
Preferred Stock by a holder thereof shall be aggregated for
purposes of determining whether the conversion would result in
the issuance of any fractional share. If, after such aggregation,
the conversion would result in the issuance of a fraction of a
share of Common Stock, the Company shall, in lieu of issuing any
fractional share, pay the holder otherwise entitled to such
fraction a sum in cash equal to the Market Value of such fraction
on the date of conversion.
7.13 Certain Events. If any event occurs of the type
contemplated by the provisions of this Section 7 but not
expressly provided for by such provisions, then the Company's
Board of Directors will make an appropriate adjustment in the
Conversion Price so as to protect the rights of the holders of
the Series F Preferred Stock. Provided, that no such adjustment
will increase the Conversion Price as otherwise determined
pursuant to this Section 7 or decrease the number of shares of
Common Stock issuable upon conversion of each share of the Series
F Preferred Stock.
7.14 Purchase Rights. If at any time the Company grants,
issues or sells any Options, Convertible Securities or rights to
purchase stock, warrants, securities or other property pro rata
to the record holders of any class of Common Stock (the "Purchase
Rights"), then each holder of Series F Preferred Stock will be
entitled to acquire, upon the terms applicable to such Purchase
Rights, the aggregate Purchase Rights which such holder could
have acquired if such holder had held the number of shares of
Common Stock acquirable upon conversion of such holder's Series F
Preferred Stock immediately before the date on which a record is
taken for the grant, issuance or sale of such Purchase Rights,
or if no such record is taken, the date as of which the record
holders of Common Stock are to be determined for the grant, issue
or sale of such Purchase Rights.
7.15 Conversion to Series D and Series E Preferred
Stock. Each share of Series F Preferred Stock shall be
automatically converted into one share of Series E Preferred
Stock in the event the Company sells shares of its capital stock
for a total purchase price of at least $600,000 at a price per
share of at least $177.83 (which number shall be proportionately
adjusted in the case of recapitalizations, stock splits, stock
dividends or combinations of shares). In addition, provided that
neither the Company nor the holders have previously delivered a
notice of redemption pursuant to Section 4.1 or Section 4.2
hereof, upon the date 24 months from the Original Issue Date each
share of Series F Preferred Stock shall be automatically
converted into one share of Series E Preferred Stock.
8. Covenants. In addition to any other rights provided by
law or agreement, so long as any share of Series F Preferred
Stock shall be outstanding, the Company shall not, without first
obtaining the affirmative vote or written consent of the holders
of not less than 60% of the outstanding shares of Series F
Preferred Stock:
(a) amend or repeal any provision of, or add any
provision to, the Company's Certificate of Incorporation or
bylaws if such action would alter or change the preferences,
rights, privileges or powers of, or the restrictions
provided for the benefit of, the Series F Preferred Stock,
or increase or decrease the number of shares of the Series F
Preferred Stock authorized hereby;
(b) authorize or issue shares of any class of stock
not authorized herein having any preference or priority as
to dividends or assets superior to or on a parity with any
such preference or priority of the Series F Preferred Stock,
or authorize or issue shares of stock of any class or any
bonds, debentures, notes or other obligations convertible
into or exchangeable for, or having option rights to
purchase, any shares of any other class or series of stock
of the Company having any preference or priority as to
dividends or assets superior to or on a parity with any such
preference or priority of the Series F Preferred Stock;
(c) reclassify any Junior Stock into shares having any
preference or priority as to dividends or assets superior to
or on a parity with any such preference or priority of the
Series F Preferred Stock; or
(d) grant any security interest in or otherwise
encumber the Company's patents, technology and other
intellectual property rights, except with respect to any
security interests or other encumbrances now or hereafter
granted in favor of (i) Liberty Bank and Trust Company of
Tulsa, National Association, not exceeding $800,000 plus
interest, or (ii) Jerry Dillon to secure indebtedness not
exceeding the principal amount of $325,000 plus accrued
interest, which security interests or other encumbrances are
specifically permitted without consent.
(e) amend or repeal any provision of this Section 8.
IN WITNESS WHEREOF, the Company has caused this Certificate
to be signed by its President and attested by its Secretary, this
19th day of December, 1995.
EXCEL ENERGY TECHNOLOGIES,
LTD.
ATTEST:
[seal]
By:
By: Kevin L. Jordan,
President
Secretary
EXHIBIT "C"
CERTIFICATE OF DESIGNATIONS, VOTING POWERS AND
RIGHTS OF SERIES D AND SERIES E CONVERTIBLE PARTICIPATING
PREFERRED STOCK OF EXCEL ENERGY TECHNOLOGIES, LTD.
Excel Energy Technologies, Ltd., a corporation organized and
existing under the Delaware General Corporation Law (the "Compa-
ny"), DOES HEREBY CERTIFY:
That, pursuant to authority conferred upon the Board of
Directors by the Company's Certificate of Incorporation, as
amended, and pursuant to the provisions of Section 151 of the
Delaware General Corporation Law, as amended, said Board of
Directors, at a meeting thereof duly called, convened and
constituted on December 18, 1995, at which a quorum was present
and acting throughout, adopted the following resolutions
providing for the creation and issuance of a series of shares of
the Company's authorized preferred stock designated as "Series D
Convertible Participating Preferred Stock" and a series of shares
of the Company's authorized preferred stock designated as "Series
E Convertible Participating Preferred Stock":
RESOLVED, that the Board of Directors hereby establishes and
designates two new series of the Company's authorized but
unissued preferred stock and that the designation and amount
thereof and the relative rights, preferences, qualifications,
limitations and restrictions thereof are as follows:
1. Designation and Amount. The preferred stock shall be
divided into series. The first series of shares of preferred
stock shall be designated as "Series D Convertible Participating
Preferred Stock," $0.01 par value per share, and the number of
shares constituting this series shall be 28,000 and the second
series of preferred stock shall be designated as "Series E
Convertible Participating Preferred Stock," par value $0.01 per
share, and the number of shares constituting this series shall be
20,000.
2. Certain Definitions. The following terms shall have
the respective meanings indicated.
(a) Additional Shares of Common Stock shall mean all
shares of Common Stock issued (or, pursuant to Section
7.2(c), deemed to be issued) by the Company after the
Original Issue Date other than shares of Common Stock issued
in connection with a stock dividend, subdivision or
combination referred to in Section 7.2(d) and other than
shares of Common Stock issued or issuable at any time:
(i) upon conversion of shares of Series C, Series
D, Series E, Series F or Series G Preferred Stock; or
(ii) in an aggregate amount of up to 6,683 shares
(which number shall be proportionately adjusted in the
case of recapitalizations, stock splits, stock
dividends or combinations of shares) of Common Stock
and Options therefor (including shares of Common Stock
issuable upon exercise of Options which were issued on
or before the Original Issue Date) to officers,
directors and employees of the Company; or
(iii) as a dividend or distribution on the
Series C, Series D, Series E, Series F or Series G
Preferred Stock; or
(iv) upon conversion of the Company's 9%
Subordinated Debentures; or
(v) upon the exercise of any presently
outstanding options or warrants.
(b) Common Stock shall mean the Company's common
stock, $0.01 par value per share, and any capital stock of
the Company which has the right to participate in the
distribution of earnings and assets of the Company without
limit as to amount or percentage, into which common stock
may hereafter be reclassified by appropriate amendment to
the Company's Certificate of Incorporation.
(c) Common Stock Deemed Outstanding shall mean at any
given time, the number of shares of Common Stock actually
outstanding at such time plus (to the extent applicable) the
number of shares of Common Stock deemed to be outstanding
pursuant to Section 7 below.
(d) Convertible Securities shall mean any securities
of the Company convertible into or exchangeable for (through
one or more conversions or exchanges) Common Stock.
Convertible Securities shall include any evidences of
indebtedness, any capital stock of the Company (other than
the Series C, Series D, Series E, Series F or Series G
Preferred Stock) or other securities convertible into or
exchangeable for Common Stock.
(e) Dividend Payment Date shall mean the last day of
March, June, September and December of each year, with the
first Dividend Payment Date being March 31, 1996.
(f) Dividend Period shall mean the period beginning on
any Dividend Payment Date and ending on the day before the
succeeding Dividend Payment Date; provided, however, that
the first Dividend Period for each share of Preferred Stock
shall commence on January 1, 1996 (although dividends are
not payable until the first Dividend Payment Date), and the
last Dividend Period for each share of Preferred Stock shall
end on the date such share is redeemed by the Company.
(g) Junior Stock shall mean the Common Stock and any
other capital stock of the Company other than the Series C,
Series D, Series E, Series F and Series G Preferred Stock.
(h) Liquidation Value shall mean, as to each share of
Series D Preferred Stock, the sum of $188.39 and, as to each
share of Series E Preferred Stock, the sum of $188.39.
(i) Market Price of any security shall mean the
average of the closing prices of such security's sales on
all securities exchanges on which such security may at the
time be listed, or, if there have been no sales on any such
exchange on any day, the average of the highest bid and
lowest asked prices on all such exchanges at the end of such
day, or, if on any day such security is not so listed, the
average of the representative bid and asked prices quoted in
the NASDAQ System as of 4:00 p.m., New York time, or, if on
any day such security is not quoted in the NASDAQ System,
the average of the highest bid and lowest asked prices on
such day in the domestic over-the-counter market as reported
by the National Quotation Bureau, Incorporated, or any
similar successor organization, in each such case averaged
over a period of 21 days consisting of the day as of which
"Market Price" is being determined and the 20 consecutive
business days prior to such day. If at any time such
security is not listed on any securities exchange or quoted
in the NASDAQ System or the over-the-counter market, the
"Market Price" will be the fair value thereof determined
jointly by the Company and the holders of a majority of the
Preferred Stock. If such parties are unable to reach
agreement within a reasonable period of time, such fair
value will be determined by an independent appraiser jointly
selected by the Company and the holders of a majority of the
Preferred Stock.
(j) Minimum Cash Flow shall mean, for the twelve month
period in question, the net income after tax of the Company,
plus depreciation for such period, and less all required
payments of principal on debt of the Company, all calculated
in accordance with generally accepted accounting principles,
of an amount in excess of $600,000.
(k) DGCL shall mean the Delaware General Corporation
Law, as amended from time to time.
(l) Options shall mean rights, options or warrants to
subscribe for, purchase or otherwise acquire either Common
Stock or Convertible Securities.
(m) Original Issue Date shall mean December 20, 1995.
(n) Person shall mean an individual, a partnership, a
corporation, an association, a joint stock company, a trust,
a joint venture, a limited liability company, an
unincorporated organization and a government entity or any
department, agency or political subdivision thereof.
(o) Preferred Stock shall mean collectively the
Company's Series D Preferred Stock and Series E Preferred
Stock.
(p) Series C Preferred Stock shall mean the Company's
Series C Convertible Participating Preferred Stock, $0.01
par value.
(q) Series D Preferred Stock shall mean the Company's
Series D Convertible Participating Preferred Stock, $0.01
par value, having the relative rights, preferences,
qualifications, limitations and restrictions set forth
herein.
(r) Series E Preferred Stock shall mean the Company's
Series E Convertible Participating Preferred Stock, $0.01
par value, having the relative rights, preferences,
qualifications, limitations and restrictions set forth
herein.
(s) Series F Preferred Stock shall mean the Company's
Series F Convertible Participating Preferred Stock, $0.01
par value.
(t) Series G Preferred Stock shall mean the Company's
Series G Convertible Participating Preferred Stock, $0.01
par value.
(u) Subsidiary means any corporation of which the
shares of stock having a majority of the general voting
power in electing the board of directors are, at the time as
of which any determination is being made, owned by the
Company either directly or indirectly through a Subsidiary.
3. Dividends.
3.1 Right and Payment. The holders of the Series D and
Series E Preferred Stock shall be paid cumulative cash dividends
at the annual rate of $12.25 and $12.25, per share, respectively.
Dividends shall accrue daily and accrued dividends for any period
of less than one year shall be computed on the basis of the
number of days elapsed out of a 360-day year. Dividends shall be
payable in quarterly installments on each Dividend Payment Date
in the amount accrued to such Dividend Payment Date; provided
however, that dividends shall be required to be paid only (i) to
the extent the Company may lawfully do so under the DGCL and
(ii) if the Company has exceeded Minimum Cash Flow for the twelve
month period ending as of the end of the month immediately
preceding the last month of the Dividend Period; and, provided
further, that notwithstanding any other provision of this
Certificate of Designations, if the Company may not lawfully
under the DGCL pay all the dividends it is required to pay under
this Section 3 on any Dividend Payment Date, it shall pay on such
date all the dividends it may lawfully pay ratably in proportion
to the respective dividend rates fixed for the Series D and
Series E Preferred Stock and pro rata among the holders of each
such series and, at the earliest time or times thereafter when it
may lawfully pay any or all of the balance of such dividends, it
shall do so. If the Company does not pay dividends on any
Dividend Payment Date because it has failed to exceed Minimum
Cash Flow, it shall pay such dividends at a later time when it
may lawfully do so under the DGCL and following approval of such
payment by the Company's Board of Directors. Dividends on each
share of the Preferred Stock shall commence to accrue and shall
be cumulative from January 1, 1996, whether or not they are
earned, declared, or lawfully payable under the DGCL. The first
payment of dividends shall not be due until March 31, 1996. If
any dividend which is required to be paid on any Dividend Payment
Date is not paid for any reason, such unpaid dividend shall
thereafter bear interest at the higher of (i) eighteen percent
(18%) per annum, or (ii) the prime rate charged by Chase
Manhattan Bank, N.A. to its commercial customers, plus three
percentage points per annum.
3.2 Priority and Dividend Participation. The Company shall
make no distribution to the holders of Junior Stock in any fiscal
year except as permitted in this Section 3.2. "Distribution" in
this Section 3.2 means the transfer of cash or property without
consideration, whether by way of dividend or otherwise (except a
dividend in shares of the Company), or the purchase or redemption
of shares of the Company for cash or property, but does not
include repurchase of shares from a terminated employee or
consultant of the Company within the terms of an agreement
applicable to such an employee providing for such repurchase.
The Company shall make no distributions to the holders of Junior
Stock in any fiscal year unless and until dividends have been
declared and paid on the Preferred Stock at the applicable rate
specified in Section 3.1 (including all accumulated dividends
whether or not the Company was at the time required to pay such
dividends under this Section 3) in or for all fiscal quarters in
such fiscal year. If the Company has paid the holders of
Preferred Stock the full amounts to which they are entitled under
the preceding provisions and shall elect to declare additional
dividends in any fiscal year out of funds legally available
therefor (other than to other series of preferred stock), such
additional dividends shall be declared and shall be paid on both
the Preferred Stock and the Common Stock (and any other classes
of capital stock, to the extent applicable) equally, with the
Preferred Stock for this purpose being deemed converted into such
number of shares of Common Stock (including fractions of a share)
as each such share of Preferred Stock is convertible on the date
the dividend is declared. Further, no dividends shall be paid on
the Junior Stock during any time in which the Company is in
default with respect to a redemption of the Preferred Stock
hereunder.
3.3 Conversion. Upon conversion of a share of Preferred
Stock into Common Stock all accumulated dividends, declared but
unpaid dividends and the dividend preference for the current
fiscal year on each share of Preferred Stock so converted shall
be payable by the Company to the holder of such share in cash.
Provided, that to the extent such dividend cannot be legally
declared and paid or to the extent the holder elects at the time
of such conversion, the holder shall be entitled to receive
additional shares of Common Stock on conversion equal to the
number of shares that the unpaid dividends on converted shares of
Preferred Stock would purchase at the then effective Conversion
Price.
4. Right to Require Redemption. At the option of the
holders of a majority of the outstanding shares of Preferred
Stock, the Company shall redeem, at any time after July 1, 1998,
but prior to June 30, 1999, the number of shares of Preferred
Stock held by such holder that is specified in a request for
redemption delivered to the Company by the holder by paying in
cash therefor, $188.39 per share of Series D Preferred Stock, and
$188.39 per share of Series E Preferred Stock (as adjusted for
any stock dividends, combinations or splits with respect to such
shares) plus all accrued but unpaid dividends on such shares (the
"Redemption Price"); such redemption to be completed no later
than 30 days after the Company receives a request from a holder
pursuant to this Section 4. Notwithstanding the foregoing, the
holders of the Preferred Stock shall not be entitled to
redemption during any time in which the Company is in default
with respect to a redemption of the Series C, Series F or
Series G Preferred Stock.
5. Voting Rights.
5.1 Vote On All Matters. Except as otherwise required by
law or provided herein, the holders of the Series D Preferred
Stock (but not the holders of Series E Preferred Stock) shall be
entitled to notice of any stockholder's meeting and to vote,
together with the holders of all other voting capital stock of
the Company, including the holders of Common Stock, as one class
upon any matter submitted to the shareholders for a vote on the
basis that each holder of Series D Preferred Stock shall have a
number of votes equal to the number of shares of Common Stock
into which the Series D Preferred Stock held by him is then
convertible, as adjusted from time to time under Section 7
hereof. For matters to be voted on by the Series D Preferred
Stock, Common Stock and all other voting capital stock of the
Company together as one class, a quorum shall consist of a
majority of the votes attributable to the Common Stock, Series D
Preferred Stock and all other voting capital stock of the
Company. The Series E Preferred Stock shall be non-voting.
5.2 Voting Upon Conversion of Series E Preferred Stock. So
long as any shares of Series E Preferred Stock or shares of
Common Stock issued upon the conversion of shares of Series E
Preferred are held of record by Public Service Company of
Oklahoma, Central and South West Corporation, or any of their
respective "subsidiaries" as defined in the Public Utility
Holding Company Act of 1935, as amended (collectively and
individually, a "PSO Affiliate"), the shares of Common Stock into
which such shares of Series E Preferred Stock are convertible or
have been converted shall have no voting rights, provided that
such shares of Common Stock, or any portion thereof, shall have
full voting rights upon the transfer of such shares to any holder
which is not a PSO Affiliate. Such shares of Common Stock, while
held by one of the PSO Affiliates, shall not be counted for
quorum purposes or otherwise for the purpose of determining the
number of shares of outstanding stock entitled to vote on any
matter. The provisions of this Section 5.2 shall continue in
force with respect to such shares of Common Stock regardless of
whether any shares of Preferred Stock are then outstanding and
shall be recorded on the stock records of the Company. Upon the
transfer of shares of Series E Preferred Stock by a PSO Affiliate
to any person not a PSO Affiliate, each share of Series E
Preferred Stock so transferred shall automatically convert to a
share of Series D Preferred Stock.
5.3 Shareholder Agreements. No provision of this Section 5
shall affect the enforceability of shareholder voting agreements
including, without limitation, voting trusts, pertaining to the
election of directors or other matters.
6. Liquidation Preference.
6.1 General.
(a) Subject to the remaining provisions of this
Section 6, in the event of any liquidation, dissolution, or
winding up of the affairs of the Company, whether voluntary
or involuntary, after payment or provision for payment of
the debts and liabilities of the Company, and after payment
shall have been made in full to the holders of the Series C,
Series F and Series G Preferred Stock pursuant to such
holders' liquidation preference, the holders of the
Preferred Stock shall be entitled to receive, out of the
remaining assets of the Company, the Liquidation Value in
cash (as adjusted for any stock dividends, combinations or
splits with respect to such shares) for each of the shares
of Preferred Stock they then hold, plus an amount equal to
all dividends accumulated and unpaid on each such share
(including any interest thereon or other charges related
thereto) through the date fixed for distribution, before any
distribution shall be made to the holders of any shares of
Junior Stock. The Series D and Series E Preferred Stock
shall rank on a parity as to the receipt of the respective
preferential amounts for each such series upon the
occurrence of such event. If upon any liquidation,
dissolution or winding up of the affairs of the Company,
whether voluntary or involuntary, the assets of the Company
available for distribution to shareholders shall be
insufficient to permit the payment to the holders of the
Preferred Stock of the aforesaid preferential amounts, then
the entire assets of the Company available for distribution
to the holders of the Series D and Series E Preferred Stock
shall be distributed ratably among the holders of the Series
D and Series E Preferred Stock in proportion to the
preferential amount each holder is otherwise entitled to
receive.
(b) After payment to the holders of the Preferred
Stock of the amounts set forth in Section 6.1(a) above, and
so long as a Terminating Event (as defined below) has not
occurred, the entire remaining assets and funds of the
Company legally available for distribution, if any, shall be
distributed among the holders of the Common Stock and the
Series C, Series D, Series E, Series F and Series G
Preferred Stock in proportion to the shares of Common Stock
then held by them and the shares of Common Stock which they
then have the right to acquire upon conversion of the shares
of Preferred Stock then held by them. Once a Terminating
Event has occurred, after payment to the Holders of the
Preferred Stock of the amount set forth in Section 6.1(a)
above, the entire remaining assets and funds of the Company
legally available for distribution, if any, shall be
distributed among the holders of the Junior Stock according
to their respective shares and priorities. A "Terminating
Event" shall be deemed to have occurred on the earlier of
any of the following events: (i) sale by the Company of not
less than $2,200,000 of equity securities after the Original
Issue Date hereof at a price per share of at least $518.07
per share of Common Stock on an as-converted basis, as
adjusted for any stock dividends, combinations, or splits
with respect to said shares; (ii) the Company has achieved
audited after tax net income for any two consecutive fiscal
years in excess of $1,000,000 per year; or (iii) the sale by
the Company of all or substantially all of its assets or the
merger of the Company into or with any person if the holders
of the outstanding voting shares of the Company prior
thereto do not retain a majority of the voting power of the
surviving person and in such transaction the consideration
in such sale equals at least $518.07 per share of common
stock, or its equivalent.
6.2 Merger or Consolidation. For purposes of this
Section 6, a liquidation, dissolution, or winding up of the
Company shall be deemed to be occasioned by, and include, in
addition to the liquidation, dissolution and winding up of the
Company, the Company's sale of all or substantially all of its
assets, the merger or consolidation of the Company into or with
any other Person if the holders of the outstanding voting shares
of the Company prior to such merger or consolidation do not
retain a majority of the voting power of the surviving Person,
the sale of a majority of the Company's intellectual property
assets or the Company conducts a public offering of its
securities not sufficient to cause an automatic conversion of the
Preferred Stock under Section 7.3 hereof. For such purposes, the
exchange of securities of the surviving Person for securities of
the Company shall be deemed to constitute a merger or
consolidation of the Company.
6.3 Fair Value. The fair value of the assets or property
to be distributed or exchanged to or with the holders of the
Preferred Stock in the event of a liquidation, dissolution or
winding up of the Company pursuant to Section 6.2 shall be
determined by the Board of Directors of the Company in good
faith, provided that any securities to be delivered to the
holders of Preferred Stock or Common Stock under this Section 6
shall be valued at Market Value.
6.4 No Restriction on Surplus. No provision of this
Section 6 shall in any manner, prior to any liquidation,
dissolution, or winding up of the affairs of the Company, whether
voluntary or otherwise, create or deemed to create any
restrictions upon the surplus of the Company or prohibit the
payment of dividends on the capital stock of the Company out of
the funds of the Company legally available therefor, nor shall
any such restrictions or prohibition be in any manner inferred
from the provisions of this Section 6.
7. Conversion.
7.1 Conversion Procedure.
(a) Subject to the provisions of Section 5.2 above,
any holder of Preferred Stock may convert all or any portion
of the Preferred Stock (including any fraction of a share of
Preferred Stock) held by such holder into a number of fully
paid and non-assessable shares of the Company's Common Stock
computed by multiplying the number of shares of Preferred
Stock to be converted by $188.39 and dividing the result by
the Conversion Price (as defined below) then in effect.
(b) Each conversion of Preferred Stock will be deemed
to have been effected as of the close of business on the
date on which the certificate or certificates representing
the Preferred Stock to be converted have been surrendered at
the principal office of the Company. At such time as such
conversion has been effected, the rights of the holder of
such Preferred Stock as such holder will cease and the
Person or Persons in whose name or names any certificate or
certificates for shares of Common Stock are to be issued
upon such conversion will be deemed to have been the holder
or holders of record of the shares of Common Stock
represented thereby.
(c) As soon as possible after a conversion has been
effected (but in any event within five business days in the
case of subparagraph (i) below), the Company will deliver to
the converting holder:
(i) A certificate or certificates representing
the number of shares of Common Stock issuable by reason
of such conversion in such name or names and such
denomination or denominations as the converting holder
has specified;
(ii) Subject to the provisions of Section 3.3,
payment in an amount equal to all accrued dividends
with respect to each share of Preferred Stock
converted, which have not been paid prior thereto, plus
the amount payable under subparagraph (g) below with
respect to such conversion; and
(iii) A certificate representing any Preferred
Stock which was represented by the certificate or
certificates delivered to the Company in connection
with such conversion but which was not converted.
(d) Subject to the provisions of Section 3.3, if for
any reason the Company is unable to pay any accrued
dividends on the Preferred Stock being converted, the
Company will pay such dividends to the converting holder as
soon thereafter funds of the Company are legally available
for such payment. At the request of any such convertible
holder, the Company will provide such holder with written
evidence of its obligation to such holder.
(e) The issuance of certificates for shares of Common
Stock upon conversion of Preferred Stock will be made
without charge to the holders of such Preferred Stock for
any issuance tax in respect thereof or other cost incurred
by the Company in connection with such conversion and the
related issuance of shares of Common Stock. Upon conversion
of each share of Preferred Stock, the Company will take all
such actions as are necessary in order to insure that the
Common Stock issuable with respect to such conversion will
be validly issued, fully paid and nonassessable.
(f) The Company will not close its books against the
transfer of Preferred Stock or of Common Stock issued or
issuable upon conversion of Preferred Stock in any manner
which interferes with the timely conversion of Preferred
Stock.
7.2 Conversion Price and Adjustments.
(a) The initial Conversion Price at which shares of
Common Stock shall be deliverable upon conversion of the
Preferred Stock will be $188.39 per share with respect to
the Series D Preferred Stock and $188.39 per share with
respect to the Series E Preferred Stock. The initial
Conversion Price is subject to adjustment as hereinafter
provided.
(b) Except in the case of an event for which the
Conversion Price shall be adjusted pursuant to Section
7.2(d), no adjustment in the Conversion Price shall be made
in respect of the issuance of Additional Shares of Common
Stock unless the consideration per share for an Additional
Share of Common Stock issued or deemed to be issued by the
Company is less than the Conversion Price for the Preferred
Stock in effect on the date of, and immediately prior to,
such issue.
(c) In the event the Company at any time or from time
to time after the Original Issue Date shall issue any
Options or Convertible Securities or shall fix a record date
for the determination of holders of any class of securities
entitled to receive any such Options or Convertible
Securities, then the following shall apply:
(i) The maximum number of shares of Common Stock
issuable upon the exercise of such Options or, in the
case of Convertible Securities and Options therefor,
the conversion or exchange of such Convertible
Securities, shall be deemed to be Additional Shares of
Common Stock issued as of the time of such issue or, in
case such a record date shall have been fixed, as of
the close of business on such record date; provided,
that if such Options or Convertible Securities by their
terms provide, with the passage of time or otherwise,
for any change in the minimum amount of consideration
payable to the Company, or any change in the maximum
number of shares of Common Stock issuable upon the
exercise, conversion, or exchange thereof other than
changes which may occur as a result of anti-dilution
provisions (for which each Conversion Price shall be
readjusted based on the provisions of this Section 7
when each such change is effective), the consideration
per share (determined pursuant to Section 7.2(d)
hereof) for Common Stock issuable pursuant to such
Options or Convertible Securities shall be the minimum
consideration per share that could at any time result,
taking into consideration all subsequent changes in the
minimum amount of consideration payable to the Company
and/or in the maximum number of shares of Common Stock
issuable upon the exercise, conversion, or exchange;
and provided further, that Additional Shares of Common
Stock shall not be deemed to have been issued unless
the consideration per share of such Additional Shares
of Common Stock would be less than the Conversion Price
in effect on the date of and immediately prior to such
issue or such record date.
(ii) No further adjustment in the Conversion Price
shall be made upon the subsequent issue of Convertible
Securities or shares of Common Stock upon the exercise
of such Options or conversion or exchange of such
Convertible Securities.
(iii) Upon the expiration of any such Options
or any rights of conversion or exchange of such
Convertible Securities which shall not have been
exercised, the Conversion Price computed upon the
original issue thereof (or upon the occurrence of a
record date with respect thereto), and any subsequent
adjustments based thereon, shall, upon such expiration,
be recomputed (provided that recomputation shall not
affect any Preferred Stock converted or tendered for
conversion prior to such exercise or expiration) as if:
(A) in the case of Convertible Securities or
Options for Common Stock, the only Additional
Shares of Common Stock issued were shares of
Common Stock, if any, actually issued upon the
exercise of such Options or the conversion or
exchange of such Convertible Securities and the
consideration received therefor was the
consideration actually received by the Company for
the issue of all such Options that were exercised
plus the consideration actually received by the
Company upon such exercise, or for the issue of
all such Convertible Securities which were
actually converted or exchanged, plus the
additional consideration, if any, actually
received by the Company upon such conversion or
exchange; and
(B) in the case of Options for Convertible
Securities, only the Convertible Securities, if
any, actually issued upon the exercise thereof
were issued at the time of issue of such Options,
and the consideration received by the Company for
the Additional Shares of Common Stock deemed to
have been then issued was the consideration
actually received by the Company for the issue of
all such Options that were exercised, plus the
consideration deemed to have been received by the
Company upon the issue of the Convertible
Securities with respect to which such Options were
actually exercised.
(iv) No readjustment pursuant to clause (iii)
above shall have the effect of increasing the
Conversion Price to an amount which exceeds such
Conversion Price on the original adjustment date
immediately prior to the original adjustment. If
Additional Shares of Common Stock were issued between
the original adjustment date and the readjustment date
(other than Common Stock issued upon exercise of the
Options or conversion of the Convertible Securities
that are the subject of the readjustment), the
Conversion Price on the readjustment date shall be
recomputed (but only if a lower Conversion Price
results therefrom) by treating the readjusted
Conversion Price as the Conversion Price in effect on
the original adjustment date and adjusting such
Conversion Price for all issuances of Additional Shares
of Common Stock (other than Common Stock issued upon
exercise of the Options or conversion of the
Convertible Securities that are the subject of the
readjustment) occurring between the original adjustment
date and the readjustment date.
(d) The Conversion Price shall be adjusted in
accordance with the following provisions:
(i) In the event the Company at any time or from
time to time after the Original Issue Date shall
declare or pay any dividend on the Common Stock payable
in Common Stock, or effect a subdivision or combination
of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a
dividend in Common Stock), then and in any such event,
the Conversion Price shall be proportionately decreased
in the case of a stock dividend or subdivision and
proportionately increased in the case of a combination
of shares effective, in the case of such dividend,
immediately after the close of business on the record
date for the determination of holders of Common Stock
entitled to receive such dividend or, in the case of a
subdivision or combination, at the close of business
immediately prior to the date upon which such corporate
action becomes effective.
(ii) In event the Company shall issue Additional
Shares of Common Stock, (including Additional Shares of
Common Stock deemed to be issued pursuant to
Section 7.2(e)), without consideration or for a
consideration per share less than the Conversion Price
for the Preferred Stock in effect on the date of and
immediately prior to such issue, then and in each such
event, the Conversion Price shall be reduced
concurrently with such issue of shares, to the
consideration per share actually received by the
Company for such Additional Shares of Common Stock.
(e) For purposes of this Section 7.2, the
consideration received by the Company for the issue of any
Additional Shares of Common Stock shall be computed as
follows:
(i) Insofar as it consists of cash, such
consideration shall consist of the aggregate amount of
cash received by the Company excluding amounts paid or
payable for accrued interest or accrued dividends.
Insofar as it consists of property other than cash,
such consideration shall be computed at the fair value
thereof at the time of such issue, as determined in
good faith by the Board of Directors of the Company. In
the event Additional Shares of Common Stock are issued
together with other securities or other assets of the
Company for consideration which covers both, such
consideration shall be the proportion of such
consideration so received, computed as determined in
good faith by the Board of Directors of the Company.
(ii) For the purpose of computing the initial
adjustment of each Conversion Price pursuant to Section
7.2(c)(i) the consideration per share received by the
Company for Additional Shares of Common Stock deemed to
have been issued pursuant to Section 7.2(c)(i) shall be
determined by dividing the total amount, if any,
received or receivable by the Company as consideration
for the issue of such Options or Convertible
Securities, plus the minimum aggregate amount of
additional consideration payable to the Company upon
the exercise of such Options or the conversion or
exchange of such Convertible Securities, or in the case
of Options for Convertible Securities, the exercise of
such Options for Convertible Securities and the
conversion or exchange of such Convertible Securities,
by the maximum number of shares of Common Stock
issuable upon the exercise of such Options or the
conversion or exchange of such Convertible Securities.
(f) In the event the Company at any time or from time
to time makes, or fixes a record date for the determination
of holders of Common Stock entitled to receive a dividend or
other distribution payable in securities of the Company
other than shares of Common Stock, then and in each such
event provision shall be made so that each holder of
Preferred Stock shall receive upon conversion thereof, in
addition to the number of shares of Common Stock receivable
thereupon, the amount of securities of the Company which he
would have received had his Preferred Stock been converted
into Common Stock on the record date of such event and had
he thereafter, during the period from the record date of
such event to and including the date of conversion, retained
such securities receivable by him as aforesaid during such
period, subject to all other adjustments called for during
such period under this Section 7.2 with respect to the
rights of the holders of the Preferred Stock.
7.3 Automatic Conversion. Each share of Preferred Stock
shall automatically be converted into shares of Common Stock at
the then applicable Conversion Price in the event of the closing
of a firm commitment underwritten public offering pursuant to an
effective registration statement under the Securities Act of
1933, as amended, covering the offer and sale of Common Stock for
the account of the Company to the public at an aggregate offering
price to the public (prior to the deduction of underwriting
commissions and expenses) equal to or in excess of $10,000,000,
resulting in the market equity capitalization of the Company
equal to or in excess of $30,000,000, and resulting in the
listing of the Company's Common Stock on a national securities
exchange or on the National Association of Securities Dealers
National Market System. In the event of such an offering, the
person(s) entitled to receive the Common Stock issuable upon such
conversion of Preferred Stock shall not be deemed to have
converted such Preferred Stock until immediately prior to the
closing of such sale of securities, except that any such person
may specify an earlier time for conversion in accordance with
this Section 7.
7.4 No Impairment. The Company will not, by amendment of
its Certificate of Incorporation or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other voluntary action, avoid or seek
to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Company, but will at all
times in good faith assist in the carrying out of all the provi-
sions of this Section 7 and in the taking of all such action as
may be necessary or appropriate in order to protect the
conversion rights of the holders of the Preferred Stock against
impairment.
7.5 Certificate as to Adjustments. Upon the occurrence of
each adjustment or readjustment of the Conversion Price pursuant
to this Section 7, the Company, at its expense, shall promptly
compute such adjustment or readjustment in accordance with the
terms hereof and furnish to each holder of Preferred Stock a
certificate setting forth such adjustment or readjustment and
showing in detail the facts upon which such adjustment or
readjustment is based. The Company shall, upon the written
request at any time of any holder of Preferred Stock, furnish or
cause to be furnished to such holder a like certificate setting
forth (i) such adjustments and readjustments, (ii) each
Conversion Price at the time in effect, and (iii) the number of
shares of Common Stock and the amount, if any, of other property
which at the time would be received upon the conversion of each
series of Preferred Stock.
7.6 Reservation of Stock Issuable Upon Conversion. The
Company shall at all times reserve and keep available out of its
authorized but unissued shares of Common Stock, solely for the
purpose of effecting the conversion of the Preferred Stock, such
number of its shares of Common Stock as shall from time to time
be sufficient to effect a conversion of all outstanding shares of
Preferred Stock and if at any time the number of authorized but
unissued shares of Common Stock shall not be sufficient to effect
the conversion of all of the then outstanding shares of Preferred
Stock, the Company shall promptly seek such corporate action as
may, in the opinion of its counsel, be necessary to increase its
authorized but unissued shares of Common Stock to such number of
shares as shall be sufficient for such purpose.
7.7 Payment of Taxes. The Company shall pay all issue
taxes and other governmental charges (other than income or other
taxes imposed upon profits realized by the recipient) that may be
imposed in respect of the issue or delivery of shares of Common
Stock or other securities or property upon conversion of shares
of Preferred Stock. Provided, however that the Company shall not
be obligated to pay any tax or other charge imposed in connection
with any transfer involved in the issue and delivery of shares of
Common Stock or other securities in any name other than that in
which the shares of Preferred Stock were registered.
7.8 No Reissue. Any shares of Preferred Stock that are
converted by the holder or redeemed by the Company shall not be
reissued and the certificates representing such shares shall be
appropriately cancelled on the books of the Company.
7.9 Reclassification; Recapitalizations. In the event of
any reclassification of the Common Stock or recapitalization
involving Common Stock (other than a change in par value or as a
result of a stock dividend, subdivision, or combination of shares
or any event described in Section 7.2(d)), each holder of
Preferred Stock shall thereafter be entitled to receive and
provisions shall be made therefor in an agreement relating to the
reclassification or recapitalization, upon conversion of
Preferred Stock, the kind and number of shares of Common Stock or
other securities or property (including cash) of the Company, to
which such holder of Preferred Stock would have been entitled if
he had held the number of shares of Common Stock of the Company
into which the Preferred Stock held by him was convertible
immediately prior to such reclassification or recapitalization;
and in any such case appropriate adjustment shall be made in the
application of the provisions herein set forth with respect to
the rights and interests thereafter of the holders of the
Preferred Stock, to the end that the provisions set forth herein
(including the specific changes and other adjustments to each
Conversion Price), shall thereafter be applicable, as nearly as
reasonably may be, in relation to any shares, other securities,
or property thereafter receivable upon conversion of the
Preferred Stock.
7.10 Notices. In the event that the Company shall propose
at any time:
(a) to declare any dividend or distribution upon its
Common Stock, whether in cash, property, stock or other
securities, whether or not a regular cash dividend and
whether or not out of earnings or earned surplus;
(b) to offer for subscription pro rata to the holders
of any class or series of its stock any additional shares of
stock of any class or series or other rights;
(c) to effect any reclassification or recapitalization
of its Common Stock outstanding involving a change in the
Common Stock; or
(d) to merge or consolidate with or into any other
corporation, or sell, lease or convey all or substantially
all its property or business, or to liquidate, dissolve or
wind up;
then, in connection with each event, the Company shall send to
the holders of Preferred Stock:
(i) at least 20 days prior written notice of the
date on which a record shall be taken for such
dividend, distribution or subscription rights (and
specifying the date on which the holders of Common
Stock shall be entitled thereto) or for determining
rights to vote in respect of the matters referred to in
(a) and (b) above; and
(ii) in the case of the matters referred to in (c)
and (d) above, at least 20 days prior written notice of
the date when the same shall take place (and specifying
the date on which the holders of Common Stock shall be
entitled to exchange their Common Stock for securities
or other property deliverable upon the occurrence of
such event or such earlier date, if any, on which a
record shall be taken of the holders of Common Stock
who shall be entitled to exchange their Common Stock).
7.11 Manner of Notice. Any notice required by this Section
7 shall be deemed given if given by certified mail, postage
prepaid, return receipt requested, addressed to the holders of
Preferred Stock at the address for each such holder as shown on
the books of the Company.
7.12 Fractional Shares. No fractional share shall be issued
upon the conversion of any share or shares of Preferred Stock.
All shares of Common Stock (including fractions thereof) issuable
upon conversion of more than one share of Preferred Stock by a
holder thereof shall be aggregated for purposes of determining
whether the conversion would result in the issuance of any
fractional share. If, after such aggregation, the conversion
would result in the issuance of a fraction of a share of Common
Stock, the Company shall, in lieu of issuing any fractional
share, pay the holder otherwise entitled to such fraction a sum
in cash equal to the Market Value of such fraction on the date of
conversion.
7.13 Certain Events. If any event occurs of the type
contemplated by the provisions of this Section 7 but not
expressly provided for by such provisions, then the Company's
Board of Directors will make an appropriate adjustment in the
Conversion Price so as to protect the rights of the holders of
the Preferred Stock. Provided, that no such adjustment will
increase the Conversion Price as otherwise determined pursuant to
this Section 7 or decrease the number of shares of Common Stock
issuable upon conversion of each share of the Preferred Stock.
7.14 Purchase Rights. If at any time the Company grants,
issues or sells any Options, Convertible Securities or rights to
purchase stock, warrants, securities or other property pro rata
to the record holders of any class of Common Stock (the "Purchase
Rights"), then each holder of Preferred Stock will be entitled to
acquire, upon the terms applicable to such Purchase Rights, the
aggregate Purchase Rights which such holder could have acquired
if such holder had held the number of shares of Common Stock
acquirable upon conversion of such holder's Preferred Stock
immediately before the date on which a record is taken for the
grant, issuance or sale of such Purchase Rights, or if no such
record is taken, the date as of which the record holders of
Common Stock are to be determined for the grant, issue or sale of
such Purchase Rights.
8. Covenants. In addition to any other rights provided by
law or agreement, so long as any share of Preferred Stock shall
be outstanding, the Company shall not, without first obtaining
the affirmative vote or written consent of the holders of not
less than 60% of the outstanding shares of Preferred Stock:
(a) amend or repeal any provision of, or add any
provision to, the Company's Certificate of Incorporation or
bylaws if such action would alter or change the preferences,
rights, privileges or powers of, or the restrictions
provided for the benefit of, the Preferred Stock, or
increase or decrease the number of shares of the Preferred
Stock authorized hereby;
(b) authorize or issue shares of any class of stock
not authorized herein having any preference or priority as
to dividends or assets superior to or on a parity with any
such preference or priority of the Preferred Stock, or
authorize or issue shares of stock of any class or any
bonds, debentures, notes or other obligations convertible
into or exchangeable for, or having option rights to
purchase, any shares of any other class or series of stock
of the Company having any preference or priority as to
dividends or assets superior to or on a parity with any such
preference or priority of the Preferred Stock;
(c) reclassify any Junior Stock into shares having any
preference or priority as to dividends or assets superior to
or on a parity with any such preference or priority of the
Preferred Stock; or
(d) amend or repeal any provision of this Section 8.
IN WITNESS WHEREOF, the Company has caused this Certificate
to be signed by its President and attested by its Secretary, this
19th day of December, 1995.
EXCEL ENERGY TECHNOLOGIES,
LTD.
ATTEST:
[seal]
By:
By: Kevin L. Jordan,
President
Secretary
EXHIBIT "D"
PSO ENERGY MANAGEMENT SYSTEMS
Payment No. Payment Date Payment Amount
1 03/31/96 $13,784.39
2 06/30/96 $13,784.39
3 09/30/96 $13,784.39
4 12/31/96 $13,784.39 Year 1 Total $55,137.56
5 03/31/97 $38,600.80
6 06/30/97 $38,600.80
7 09/30/97 $38,600.80
8 12/31/97 $38,600.80 Year 2 Total $154,403.20
9 03/31/98 $38,600.80
10 06/30/98 $38,600.80
11 09/30/98 $38,600.80
12 12/31/98 $38,600.80 Year 3 Total $154,403.20
13 03/31/99 $38,600.80
14 06/30/99 $38,600.80
15 09/30/99 $38,600.80
16 12/31/99 $38,600.80 Year 4 Total $154,403.20
Total Payments $518,347.16
EXHIBIT "E"
AMENDMENT
TO
SHAREHOLDER AGREEMENT
This Amendment to Shareholder Agreement (this "Amendment"),
dated as of the _____ day of December, 1995, is by and among
Excel Energy Technologies, Ltd., a Delaware corporation (the
"Company"), ML Oklahoma Venture Partners, Limited Partnership, an
Oklahoma limited partnership (the "Partnership"), Public Service
Company of Oklahoma, an Oklahoma corporation ("PSO"), The John
and Donnie Brock Foundation, an Oklahoma corporation ("Brock"),
and Spavinaw Partners Limited Partnership, an Oklahoma limited
partnership ("Spavinaw"), Kevin L. and Molly Jordan
(collectively, "Jordan"), Paul N. and Susan Hildebrand
(collectively, "Hildebrand"), the non-management shareholder
listed on the signature line hereof and NorthStar Energy Group, a
Texas general partnership ("NorthStar").
WHEREAS, the parties hereto, with the exception of
NorthStar, are parties to the Shareholder Agreement among the
shareholders of the Company dated October 14, 1993, as amended
pursuant to the Amendment to Shareholder Agreement dated
December 8, 1994 (the "Shareholder Agreement"); and
WHEREAS, NorthStar has agreed to invest in the Company, and
NorthStar has required as a condition to making such investment
that the parties hereto enter into this Amendment whereby, among
other things, NorthStar shall become a party to the Shareholder
Agreement;
NOW, THEREFORE, in consideration of the sum of Ten Dollars
($10.00) and other good and valuable consideration, the receipt
and adequacy of which are hereby acknowledged, the parties agree
as follows:
1. Capitalized terms not otherwise defined herein shall
have the defined meanings given to such terms in the Shareholder
Agreement.
2. NorthStar is hereby added as a party to the Shareholder
Agreement as one of the Investors and Shareholders, and NorthStar
hereby ratifies and agrees to be bound by the Shareholder
Agreement.
3. Section 1(c) of the Shareholder Agreement is amended to
read in its entirety as follows:
(c) "Stock" means all shares of capital
stock of the Company.
4. Section 1(e) of the Shareholder Agreement is deleted in
its entirety.
5. Section 2(d)(ii)(d) of the Shareholder Agreement is
amended to read in its entirety as follows:
(d) an aggregate of up to 6,683 shares
(which number shall be proportionately
adjusted in the case of recapitalization,
stock splits, stock dividends and
combinations of shares) of Common Stock and
options therefor to officers, directors and
employees of the Company as stock grants,
incentive stock options, non-qualified stock
options or other stock-based compensation.
6. Section 2(d)(ii) of the Shareholder Agreement is
amended to add a subsection (i) which reads in its entirety as
follows:
(i) the shares of the Company's Class A
Common Stock, Class B Common Stock, Series C
Convertible Participating Preferred Stock,
Series D Convertible Participating Preferred
Stock, Series E Convertible Participating
Preferred Stock, Series F Convertible
Participating Preferred Stock and Series G
Convertible Participating Preferred Stock
issued or issuable pursuant to the Stock
Purchase and Exchange Agreement (the "1995
Purchase Agreement") dated of even date
herewith among the Company, the Partnership,
PSO, Brock and NorthStar, and any shares of
the Company's capital stock issued upon
conversion of any of such shares issued
pursuant to the 1995 Purchase Agreement or
upon the exercise of any option granted
pursuant to the 1995 Purchase Agreement.
7. Section 8 of the Shareholder Agreement is amended to
add a subsection (k) which reads in its entirety as follows:
(j) the issuance of: the shares of the
Company's Class A Common Stock, Class B
Common Stock, Series C Convertible
Participating Preferred Stock, Series D
Convertible Participating Preferred Stock,
Series E Convertible Participating Preferred
Stock, Series F Convertible Participating
Preferred Stock and Series G Convertible
Participating Preferred Stock issued or
issuable pursuant to the 1995 Purchase
Agreement and any shares of the Company's
capital stock issued upon conversion of any
such shares issued pursuant to the 1995
Purchase Agreement or upon the exercise of
any option granted pursuant to the 1995
Purchase Agreement.
8. Section 9 of the Shareholder Agreement is amended to
read in its entirety as follows:
9. Board of Directors. The Shareholders agree
to vote their shares of Stock such that:
(a) Board of Directors. The Company's
Board of Directors will have six members,
consisting of one person appointed by PSO,
one person appointed by the Partnership, one
person appointed by Brock, one person
appointed by NorthStar, one person appointed
by Jordan and one person appointed by
Hildebrand. Any vacancy, however created,
shall be filled by the nominee of the
Shareholder or Shareholders who nominated the
Director whose death, incapacity, resignation
or removal caused the vacancy. At such time
as any of such Shareholders having the right
to appoint a board member cease to own any
shares of Stock, such Shareholder's right to
appoint a board member shall cease and the
number of members of the Board of Directors
shall be accordingly decreased. Upon the
approval of at least five of the six members
of the Board of Directors, the number of
members of the Board of Directors shall be
increased from six to seven, and the newly
created seat shall be filled by a person
selected by the Board of Directors.
(b) Compliance with Agreements. The
Shareholders will refrain from voting their
shares in favor of corporate actions that
would be in contravention of the Purchase
Agreement, any of the Company's outstanding
capital stock and the Registration Agreement.
9. Section 17 of the Shareholder Agreement is amended to
read in its entirety as follows:
17. Amendments. This Agreement may be
amended at any time and from time to time, in
whole or in part, or may be terminated by an
instrument in writing setting forth the
particulars of such amendment or termination,
as the case may be, duly executed by (i) the
Company, (ii) any three of the Partnership,
PSO, Brock and NorthStar, and (iii) the
holders of a majority of the Stock held by
all other Shareholders who are Shareholders
at the time of such amendment or termination.
10. Pursuant to Section 17 of the Shareholder Agreement,
the Company, the Partnership, PSO and Brock hereby consent and
agree to this Amendment. Further pursuant to Section 17 of the
Shareholder Agreement, Jordan and Hildebrand and the undersigned
non-management shareholder, as the holders of a majority of the
Stock held by all other Shareholders, including one Shareholder
who is not a member of management of the Company, also consent
and agree to this Amendment.
11. Except as expressly amended or supplemented herein, the
parties hereby ratify all of the terms and conditions of the
Shareholder Agreement.
12. This Amendment shall inure to the benefit of, and shall
be binding upon, the parties hereto and their respective heirs,
personal representatives, successors and assigns.
13. This Amendment may be executed in separate
counterparts, all of which taken together shall constitute one
agreement.
IN WITNESS WHEREOF, the parties have executed this Amendment
as of the date first above written.
EXCEL ENERGY TECHNOLOGIES, LTD.
By:
Name:
Title:
ML OKLAHOMA VENTURE PARTNERS,
LIMITED PARTNERSHIP
By: MLOK CO., LIMITED PARTNERSHIP,
its managing general partner
By: MERRILL LYNCH VENTURE CAPITAL
INC., its general partner
By:
Name:
Title:
PUBLIC SERVICE COMPANY OF OKLAHOMA
By:
Name:
Title:
Kevin L. Jordan
Molly Jordan
Paul N. Hildebrand
Susan Hildebrand
THE JOHN AND DONNIE BROCK FOUNDATION
By:
Name:
Title:
NORTHSTAR ENERGY GROUP
By:
Name:
Title:
NONMANAGEMENT SHAREHOLDER:
EXHIBIT
"F"
AMENDMENT
TO
REGISTRATION AGREEMENT
This Amendment to Registration Agreement (this "Amendment"),
dated as of the _____ day of December, 1995, is by and among
Excel Energy Technologies, Ltd., a Delaware corporation (the
"Company"), ML Oklahoma Venture Partners, Limited Partnership, an
Oklahoma limited partnership (the "Partnership"), Public Service
Company of Oklahoma, an Oklahoma corporation ("PSO"), Kevin L.
and Molly Jordan (collectively, "Jordan"), Paul N. and Susan
Hildebrand (collectively, "Hildebrand"), the non-management
shareholder listed on the signature line hereof (Jordan,
Hildebrand, and said non-management shareholder are hereinafter
sometimes collectively referred to as the "Other Shareholders"),
The John and Donnie Brock Foundation, an Oklahoma corporation
("Brock"), and NorthStar Energy Group, a Texas general
partnership ("NorthStar").
WHEREAS, the parties hereto, with the exception of
NorthStar, are parties to the Registration Agreement among
certain of the shareholders of the Company dated October 14,
1993, as amended by the Amendment to Registration Agreement dated
December 8, 1994 (the "Registration Agreement"); and
WHEREAS, NorthStar has agreed to invest in the Company, and
NorthStar has required as a condition to making such investment
that the parties hereto enter into this Amendment whereby, among
other things, NorthStar shall become a party to the Registration
Agreement;
NOW, THEREFORE, in consideration of the sum of Ten Dollars
($10.00) and other good and valuable consideration, the receipt
and adequacy of which are hereby acknowledged, the parties agree
as follows:
1. Capitalized terms not otherwise defined herein shall
have the defined meanings given to such terms in the Registration
Agreement.
2. NorthStar hereby added as a party to the Registration
Agreement in the same capacity as the parties named as Purchasers
therein, and NorthStar hereby ratifies and agrees to be bound by
the Registration Agreement.
3. The term "Purchaser Registrable Securities" as defined
in Section 8 of the Registration Agreement, shall be deemed to
include (i) any shares of Class A Common Stock issued by the
Company pursuant to the Stock Purchase and Exchange Agreement the
"1995 Purchase Agreement") dated as of the date hereof among the
Company, the Partnership, PSO, Brock and NorthStar and shares of
Class A Common Stock issued or issuable upon the conversion of
shares of Series C Convertible Participating Preferred Stock,
Series D Convertible Participating Preferred Stock, Series E
Convertible Participating Preferred Stock, Series F Convertible
Participating Preferred Stock, Series G Convertible Participating
Preferred Stock and Class B Common Stock issued pursuant to the
1995 Purchase Agreement, and (ii) any securities issued or
issuable with respect to the Class A Common Stock referred to in
clause (i) by way of a stock dividend or stock split or in
connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization, and (iii) any
other shares of Class A Common Stock held by Persons holding
securities described in clauses (i) and (ii) above.
4. Pursuant to Section 9(d) of the Registration Agreement,
the Partnership, PSO and Brock, hereby consent and agree to this
Amendment.
5. Section 9(d) of the Registration Agreement is amended
to read in its entirety as follows:
(d) Amendments and Waivers. Except as
otherwise provided herein, the provisions of
this Agreement may be amended and the Company
may take any action herein prohibited, or
omit to perform any act herein required to be
performed by it, only if the Company has
obtained the written consent of any three of
the Partnership, PSO, Brock and NorthStar.
6. Except as expressly amended or supplemented herein, the
parties hereby ratify all of the terms and conditions of the
Registration Agreement.
7. This Amendment shall inure to the benefit of, and shall
be binding upon, the parties hereto and their respective heirs,
personal representatives, successors and assigns.
8. This Amendment may be executed in separate
counterparts, all of which taken together shall constitute one
agreement.
IN WITNESS WHEREOF, the parties have executed this Amendment
as of the date first above written.
EXCEL ENERGY TECHNOLOGIES, LTD.
By:
Name:
Title:
ML OKLAHOMA VENTURE PARTNERS,
LIMITED PARTNERSHIP
By: MLOK CO., LIMITED PARTNERSHIP,
its managing general partner
By: MERRILL LYNCH VENTURE CAPITAL
INC., its general partner
By:
Name:
Title:
PUBLIC SERVICE COMPANY OF OKLAHOMA
By:
Name:
Title:
Kevin L. Jordan
Molly Jordan
Paul N. Hildebrand
Susan Hildebrand
THE JOHN AND DONNIE BROCK
FOUNDATION
By:
Name:
Title:
NORTHSTAR ENERGY GROUP
By:
Name:
Title:
NONMANAGEMENT SHAREHOLDER:
EXHIBIT "G"
CONSULTING AGREEMENT
This Agreement, dated as of the _____ day of December, 1995,
is by and between Excel Energy Technologies, Ltd., a Delaware
corporation ("Excel"), and NorthStar Energy Group, a Texas
general partnership ("Consultant").
W I T N E S S E T H:
WHEREAS, Excel desires to retain the services of Consultant
and Consultant desires to be engaged by Excel upon the terms and
conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the agreements herein
contained, the parties hereto agree as follows:
1. Engagement. During the period commencing on the date
hereof and ending on the date two years from the date hereof,
Consultant shall act as a consultant to Excel to render, at
reasonable times, consulting and advisory services to Excel with
regard to Excel's business. Such services shall be performed in
such manner and in such places as may be reasonably requested by
Excel from time to time upon reasonable notice.
2. Compensation. As compensation for its services
hereunder, during the term hereof Excel shall pay to Consultant a
non-refundable monthly consulting and retainer fee of $5,000.00
which shall be payable in arrears on the last day of each month.
Such fee shall be prorated in the event of partial months. Any
amounts not paid when due shall bear interest at the rate of 18%
per annum.
3. Independent Contractor. Both Excel and Consultant
agree that Consultant will act as an independent contractor in
the performance of its duties under this Agreement. Accordingly,
Consultant shall be responsible for payment of all taxes,
including federal, state and local taxes arising out of
Consultant's activities pursuant this Agreement, including by way
of illustration and not limitation, federal and state income tax,
social security tax, unemployment taxes and any other taxes or
business license fees. As a consultant to Excel, Consultant
shall act solely in an advisory capacity and shall not have
authority to act for Excel with respect to any matter.
4. Termination Upon Certain Events. Notwithstanding
anything contained herein to the contrary, this Agreement shall
automatically terminate as of (i) the closing of an offering by
Excel in which Excel sells shares of its capital stock for a
total purchase price of at least $600,000 at a price per share of
at least $177.83, and (ii) the redemption by the Company of all
of the outstanding shares of its Series C Convertible
Participating Preferred Stock and Series G Convertible
Participating Preferred Stock, if any.
5. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Oklahoma.
6. Other Agreements. Consultant warrants that it has no
obligations inconsistent herewith and that the execution and
performance of this Agreement by it will not constitute a breach
of any other agreement or obligations by which it is bound.
7. Miscellaneous. The language of this Agreement and all
parts hereof shall in all cases be construed as a whole,
according to its fair meaning, and not strictly for or against
either party hereto. No waiver of any provision hereof by any
party hereto shall be binding unless such waiver shall be
evidenced by a writing signed by such party. This Agreement may
not be modified in any manner except by instruments in writing
signed by both parties hereto. The headings of the various
sections in this Agreement are solely for purpose of convenience
and shall not be relied upon in construing any provision hereof.
8. Successors and Assigns. This Agreement shall not be
assignable by Consultant without the consent of Excel. This
Agreement shall be binding upon and shall inure to the benefit of
Excel and Consultant and their respective successors and
permitted assigns.
EXECUTED as of the date first above written.
EXCEL ENERGY TECHNOLOGIES, LTD.
By:
Kevin L. Jordan, President
NORTHSTAR ENERGY GROUP
By:
Name:
Title:
EXHIBIT "H"
DISCLOSURE STATEMENT
(1) The Company anticipates the issuance of up to 6,683 shares
(post 1 for 1,000 reverse stock split) (which number shall
be proportionately adjusted in the case of recapitalization,
stock splits, stock dividends and combinations of shares) of
common stock and options therefor to officers, directors and
employees of the Company as stock grants, incentive stock
options, non-qualified stock options or other stock-based
compensation.
(2) The Shareholder Agreement dated October 14, 1993, as
amended, among the Company and the shareholders of the
Company, provides for certain preemptive rights, rights of
first offer, rights of co-sale and other rights relating to
the ownership of the Company's securities.
(3) The Debenture, Common Stock and Preferred Stock Purchase
Agreement dated October 14, 1993, among the Company, the
Partnership and PSO, at sections 6.3 and 6.4 thereof,
contains certain provisions which relate to the sale,
purchase and conversion of the Company's securities by PSO.
(4) The Company has granted options to purchase the Company's
common stock to certain employees as follows (number of
shares and exercise price are shown on a before 1 for 1,000
reverse stock split basis):
Date Number of Option
Employee Granted Shares Price
Arnold, Dina 11/08/95 200 $20.00
Allen, Ali 11/08/95 200 $20.00
Gerstenberger, Roger 11/08/95 200 $20.00
Briggs, Ron 11/08/95 100 $20.00
Mow, Bruce 11/08/95 200 $20.00
Roller, Ron 11/06/95 200 $20.00
Furguson, Mark 11/06/95 200 $20.00
Brazell, Kyle 11/06/95 200 $20.00
Total Number of Shares: 1,500
(5) The Company has outstanding the following Stock Subscription
Warrants exercisable at $30.67 per share (all numbers on a
pre-reverse split basis):
December 8, 1994 ML Oklahoma Venture Partners 4,445 shares
Limited Partnership
December 9, 1994 Spavinaw Partners Limited 5,706 shares
Partnership
April 17, 1995 Public Service Company 5,706 shares
of Oklahoma
