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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS UNDER SECTION 12 (b)
OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
Probex Corp.
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(Name of Small Business Issuer in its Charter)
Colorado 33-0294243
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(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
1467 LeMay, Suite 111, Carrollton, Texas 75007
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(Address of Principal Executive Offices) (Zip Code)
(972) 466-1555
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(Registrants Telephone Number, Including Area Code)
Securities to be registered pursuant to Section 12 (b) of the Act:
Title of Each Class Name of Each Exchange On Which
To Be So Registered Each Class Is To Be Registered
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Common Stock, no par value American Stock Exchange
Securities to be registered pursuant to Section 12 (g) of the Act:
None
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(Title of Class)
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(Title of Class)
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PART I
References in this document to "us", "we", "our", "the Company" or "Probex"
refer to Probex Corp.
ITEM 1. DESCRIPTION OF BUSINESS.
Business Development
General
Probex is a development stage lubricating oil technology company that
is in the early stages of commercializing its proprietary re-refining technology
(ProTerra(TM)). The primary application of ProTerra is for the purification,
recycling, and upgrading of used lubricating oils. The Company has used the
majority of its resources since inception on the research and development of
ProTerra.
Probex was formed as a Colorado corporation in 1988 under the name
Conquest Ventures, Inc. It engaged in an unrelated line of business that had
been discontinued by 1994, when the Company acquired certain technology rights
from Probex Technologies, L.P. In connection with this acquisition, the Company
changed its name to Probex Corp. The acquired technology, which related to the
upgrading of heavy crude oil, became a platform for research and development
into the Company's present line of business. In 1995, the Company engaged in its
current line of business, and over the subsequent four years, the Company has
developed a proprietary re-refining process of oil which we believe provides
major performance advantages over known re-refining technologies. We developed
our technology through extensive pilot testing and the results have been
validated by a number of independent and reputable testing laboratories, as well
as by leading technical experts in the refining and base oil processing
industries. The Company believes it has attracted strong, experienced persons
with a depth of expertise in commercializing new technologies, managing early
stage companies, and in the waste oil and base oil industries.
We are presently engaged in the engineering design of our first
production facility, which will convert waste oil largely into premium base
oils. In June 1999, the Company entered into a $1,350,000 twelve-month purchase
option agreement for the first production site and is currently completing site
planning and permitting. This 22-acre site is in the city of Wellsville, Ohio
and is optimally located on the Ohio River in the center of large supply and
product markets, and includes a barge dock, significant tankage and a rail spur.
Our objective is to address the market's need for new outlets for the
estimated 5.3 billion gallons of available waste oil worldwide, as well as to
supply premium base oils that will comply with the new motor oil standards
expected to be implemented in the United States in mid-2000.
The Company's principal business address is 1467 LeMay, Suite 111,
Carrollton, Texas 75007. Our Internet site can be accessed at www.probex.com.
The Company's fiscal year end is September 30. Currently, the Company has 24
employees, of which 22 are full-time employees, located at the administrative
offices in Carrollton, Texas. Additionally, the Company has consulting
agreements with two entities providing services on a part-time basis.
Strategic Partners
The Company has a number of strategic relationships which we believe
are of material benefit and significance with respect to implementation of its
corporate goals. The Company has entered into discussions with the Hartford
Steam Boiler Inspection & Insurance Company regarding a System Performance
Insurance (SPI) Policy for the Company's core proprietary technology. SPI is a
customized form of "efficacy insurance"
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that facilitates the financing of projects that present technological risk. It
protects the interests of lenders and financial institutions from default in
repayment of long-term debt. SPI transfers the technological risk of
under-performance or non-performance that results from deficiencies in design,
materials, technology or construction. In the event of such under-performance or
project failure, the Hartford Steam Boiler Inspection & Insurance Company will
make debt service payments in direct proportion to the shortfall, less a
deductible. HSB Group, Inc. (NYSE-HSB), the parent company of The Hartford Steam
Boiler Inspection and Insurance Company, is a global provider of specialty
insurance products, engineering services, and management consulting. The
Hartford Steam Boiler Inspection and Insurance Company was founded in 1866 to
provide loss prevention service and insurance to businesses, industries and
institutions. Additionally, a separate wholly-owned subsidiary of HSB Group,
Inc., HSB-Engineering Finance Corporation has made a subordinated loan to the
Company.
In addition, principals of Environmental Resources Management, Inc.
(ERM) have invested directly in the Company, and we have retained ERM to perform
permitting work for the initial production plant in Wellsville, Ohio. See
"Management's Plan of Operation." Seven long established regional gatherers of
waste oil have executed letters of intent or made formal proposals to supply the
Company's plants. The Company is actively discussing an engineering,
procurement, construction, startup, operations, and maintenance contract for the
Company's plants with several preeminent international engineering firms. The
Company has retained Project Development Associates, LLC (PDA) to provide
project development management services. Jeffrey F. Lee, PDA Managing Principal,
was formerly lead counsel for a $1 billion-plus Bechtel Corporation operating
division, a senior development manager with Bechtel Enterprises, Inc., and
President and CEO of United Recycling, Inc. David Millman, PDA Principal, is a
former partner with ERM and a practicing professional engineer. These strategic
relationships, and others currently in development, are anticipated to
contribute materially to the rapid implementation of the Company's technology,
both on a domestic and an international basis.
Waste Oil Opportunity
Consumer and industrial lubricating oils, such as motor oils, are
comprised of base lube oil and a "package" of additives. The additives are
tailored to improve the operating characteristics of base lube oil in its
specific market application. During use, many of the additives are substantively
degraded, depleted, or contaminated, whereas the underlying base lube oil, one
of the most valuable petroleum products, remains largely unaffected. An
inexpensive process for precisely separating and recovering the valuable base
oil component of waste oil for reuse has been sought for decades.
Based on a study from the U.S. Department of Energy and the 1997 Report
from the National Petrochemical & Refiners Association Report on U.S.
Lubricating Oil Sales, approximately 1.3 billion gallons per year of used waste
oil are generated by automobiles, light trucks, and industrial engines and
machinery in the United States. About 430 million gallons annually are either
consumed at the point of generation (as in gas station space heaters) or not
recovered, and presumably a substantial portion of that amount is not properly
disposed of. Of the approximately 900 million gallons per year that are
collected, 142 million gallons are re-refined, and the balance is burned as low
grade fuel. Thus only 16% of the total amount of collected waste oil, and 11% of
the total amount of waste oil, is re-refined.
Worldwide, an estimated 5.3 billion gallons per year of waste oils are
generated. Collection and re-refining efforts are hindered by the lack of a cost
effective and environmentally sound technology that can provide a consistent and
valuable outlet for the waste oil. Otherwise, waste oil is exposed to the
pricing volatility associated with fuel market outlets and increasing regulatory
restrictions on air emissions from burner fuels.
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Current Waste Oil Re-Refining Technologies and Companies
An inexpensive process for precisely separating and recovering the
valuable base oil component of waste oil for reuse has been sought for decades.
In principle, highly sophisticated separation units utilized by the refining or
petrochemical-processing industries could be employed to effect this separation
with great precision. However, while employing this type of equipment, a thick
black sludge is created as the waste oil is heated. The black sludge results in
rapid fouling within the processing equipment and effectively aborts the
process.
To address the fouling problem, existing commercial re-refineries have
been forced to employ relatively ineffective and maintenance-intensive
separation equipment, such as wiped or thin film evaporators, which are designed
to resist fouling rather than provide effective separation. This, in turn, has
necessitated additional processing equipment and additional costs, to rectify
the shortcomings of the separation process in the wiped or thin film
evaporators. Such re-refineries at best, merely restore the base oil contained
within the used oil back to its original quality, rather than upgrade this to a
higher quality base oil.
New Motor Oil Standard
Passenger Car Motor Oils (PCMO) are licensed under a certification
system that is administered by the American Petroleum Institute (API).
API-licensed motor oils comprise the highest quality motor oils and represent
virtually all of the motor oils that are consumed in North America. API-licensed
lubricants are required by automotive manufacturers for use in cars and light
trucks in order to maintain adequate protection of the vehicle engine during use
and to preserve full coverage under most manufacturer engine warranties.
Periodically, a consortium of American and Japanese automobile and
engine manufacturers, who are members of the International Lubricant
Standardization and Approval Committee (ILSAC), review and revise standards for
licensed motor oils. The current standards, entitled GF-2, have been in effect
since November 1995. The revisions periodically set forth by ILSAC effectively
increase the performance standards for API-licensed lubricating oils that are
used in the engines of lighter transportation vehicles, such as cars and light
trucks. Improvements in fuel economy, reduced emissions, improved lubrication
under widely divergent temperature conditions, and suitability of motor oils to
new engine designs all factor into new industry standards set forth by ILSAC.
Moreover, there is a trend toward converging the domestic and international
standards into a common international standard, and other markets, such as
Europe, have standards that are even more demanding than the ILSAC/API
standards. The latest upgrade, ILSAC GF-3, is in final review and it is
presently anticipated that these new industry wide automotive engine oil
performance standards will become effective in mid-2000. Advance information
released by ILSAC about these standards has indicated that improved fuel
economy, reduced emissions, and reduced oil consumption will be significant
requirements of the new GF-3 standard.
Prior upgrades in ILSAC motor oil performance standards have been
largely addressable through improved lubricant additive performance, without
major performance improvements in the base oil component of the motor oil. In
contrast, the new GF-3 standards, in addition to requiring additive formulation
improvements, will require the use of significantly higher performance base oils
for the common viscosity grades. Twenty-five current North American base oil
manufacturing plants appear to meet the current GF-2 standards. GF-3 is expected
to drastically reduce this number. In management's opinion, there are, at most,
seven plants in North America that are currently capable of producing, or have
announced or appear likely to begin production of, GF-3 compliant base oils for
the 5W-30, 10W-30 and 10W-40 viscosity grades. Thus, the number of GF-3
compliant lighter viscosity base oil production plants is anticipated to
decrease from twenty-five to approximately seven.
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We anticipate producing a GF-3 compliant base oil and are positioning
the Company's premium base oil product to meet the demands of independent buyers
beginning in late 2000 or early 2001, concurrent with the completion of the
Company's first plant. Preliminary indications from industry sources are that
GF-3 compliant base oil pricing in the lighter viscosity grades will be in the
range of 10% to 50% above current prices of base oil that do not meet GF-3
specifications.
Supply and Product Markets
Supply Market
The waste oil collection industry in the U.S. is fragmented. The
largest and only national gatherer, Safety Kleen Corporation, collects
approximately 33% of all available waste oil. A number of mid-size regional
companies and hundreds of small local gatherers collect the balance of the
available waste oils. The Company intends to secure its waste oil collection
requirements by contracting, purchasing, or joint venturing with waste oil
gatherers to provide them a more stable and economically attractive waste oil
outlet. The Company has letters of intent or formal proposals for waste oil
supply in excess of 5,000 bpd from seven gathering companies, and the Company
believes the resulting agreements, if consummated, would meet the committed
supply requirement of its initial plant and a second plant to be developed. The
Company's goal is to develop supply arrangements totaling 9,000 bpd by mid-2000
for use in subsequent plants.
Product Market
The Company's proprietary re-refining technology separates waste oil
into three valuable products: (i) a high quality base lubricating oil suitable
for reuse in formulated lubricants, (ii) a fuel oil similar to an off- road or
marine diesel, and (iii) an asphalt flux or modifier. The established markets
for such re-refined products are large. Each Probex facility is expected to
supply less than 1.5% of U.S. base oil demand and less than 0.1% of U.S. fuel
oil and asphalt demand. See "Technology and Products."
Technology and Products
Consumer and industrial lubricating oils, such as motor oils, are
comprised of base lube oil and a "package" of additives. Additives are carefully
selected to improve the performance characteristics of the base lube oil in
specific market applications. During use, additives are substantively degraded,
depleted, or contaminated, while the underlying base lube oil, one of the most
valuable petroleum products, remains largely unaffected. Consequently, there is
an opportunity to recover the largely unaffected base oil portion. We believe
ProTerra will substantially improve the economics of waste oil re-refining by
enabling the re-refining of waste oils into premium quality base oils at much
lower costs than has been possible. At the same time, unlike any other
commercial re-refining process, rather than just restoring the original base
oil, ProTerra enhances it beyond original performance standards, according to
independent laboratory testing.
ProTerra is a logical extension of conventional crude oil refining
techniques that employs a unique set of operating parameters. ProTerra will
enable us to construct and operate re-refining plants utilizing conventional,
off-the-shelf, process equipment capable of achieving significant performance
improvements over current re-refining facility configurations.
ProTerra employs a relatively straightforward technique that, in the
initial processing stage, virtually eliminates waste oil's propensity to foul.
This key attribute allows us to apply proprietary adaptations of sophisticated,
yet conventional, distillation and separations technologies that before now
could not be effectively employed in processing waste oils. These technologies,
in parallel applications, employ commonly used refining and petrochemical
equipment and operate under conditions that are well understood, highly
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predictable, and robust. Furthermore, they have extremely low operating costs.
Most importantly, the distillation and separations processes are so effective
that they actually enhance the base oil product well beyond its original quality
by correcting certain shortcomings in its original manufacture.
Products
ProTerra separates waste oil into three valuable products, trademarked
under the names ProLube(TM), ProPower(TM), and ProBind(TM) as described below:
ProLube
The primary product created by ProTerra is ProLube, a premium quality
base lube oil, which in the typical domestic plant configuration is manufactured
in two or three viscosity grades. As has been confirmed by both independent
laboratories and prospective purchasers, ProTerra actually enhances the quality
of the underlying base lube oil contained in the waste oil.
The Company has provided samples of its base lube oils produced in its
pilot facility using ProTerra to Infineum (a joint venture of Shell and Exxon
chemical companies) and Lubrizol. Each additive company has confirmed both the
physical and chemical performance characteristics of ProLube base lube oil.
Specifically, ProLube has exhibited strong Noack performance (a test for
volatility at high temperatures), as well as positive low temperature and
oxidative stability properties, and therefore is expected to fare well in the
formulation of premium quality motor oil lubricants.
The Company's entry into the base oil markets, which represent
approximately 80% of the Company's projected revenues, may be timely. As
discussed above, upgraded, significantly tighter motor oil lubricant standards
(called GF-3) are expected to take effect in mid-2000, while the Company's
initial plant is being constructed. In management's opinion, the number of base
oil suppliers which are expected to meet the new GF-3 standards may decline from
the current twenty-five plants down to a maximum of seven plants for the 10W-30
and 5W-30 viscosity grades of motor oil recommended for most new cars. Because
of GF-3, most independent motor oil formulators (which include a number of major
companies such as Castrol and Valvoline) will be required to secure new base oil
suppliers in order to continue to manufacture the full range of viscosity grade
compliant motor oil products. The Company plans to produce GF-3 compliant base
oils and, if able to do so, we would be optimally positioned to meet the new
upgraded base oil requirements for independent motor oil formulators. The
Company anticipates that it can moderately discount pricing for its GF-3
compliant base lube oils and still achieve strong profit margins and returns on
capital.
Independent lubricant formulators in North America collectively
purchase over 700 million gallons per year, which is enough to support over 20
plants of the size the Company anticipates building domestically. Based on
discussions with firms in the industry, we believe that there is a strong desire
to maintain multiple base oil supply sources. Thus, the Company could provide a
strategically valuable source of supply for these independent formulators.
The Company intends to sell a large portion of the base lube oil
production from its initial facilities on a contract basis and is in discussions
with large and mid-size lubricant marketers, certain of which could purchase
base oil volumes supporting each Probex facility. The Company has also received
strong indications of interest in contractual supply arrangements for its fuel
oil and its asphalt flux from a number of large users. The Company intends to
market the non-contractual portions of its products on the spot market in order
to maximize total revenues.
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ProPower
ProPower fuel oil produced by ProTerra is a high quality, light
distillate similar to diesel fuel or home heating oil. The sulfur content of
ProPower precludes its use in very low sulfur over-the-road diesel applications,
but it is highly attractive as an off-road diesel, chiefly because of a cetane
index typically above 50. It also can be employed as a relatively low-sulfur,
low-ash, clean-burning light burner fuel. ProTerra also produces certain
secondary fuel products of lower quality; the bulk of those secondary fuel
by-products is expected to be used to fuel plant operations, with the remainder
(less than 5% of plant feed) directed to burner or blending markets at somewhat
lower values than ProPower will realize.
ProBind
The final product produced by ProTerra is ProBind, an asphalt flux, or
modifier, which is comprised primarily of the concentrated additives inherent
within used oil and therefore has numerous valuable performance enhancing
properties. Asphalt products often require specialty chemicals that enhance
high-temperature performance by promoting thickening at higher temperatures by
increasing elasticity at lower temperatures. Probex believes that ProBind will
be positioned against certain specialty chemical asphalt modifiers which are
currently priced higher than projected values, once testing and in-use
applications corroborate the higher value properties of ProBind.
Intellectual Property
Probex's intellectual property protection strategy is twofold. The
first element of the strategy is patent protection. Probex has filed for and
hopes to secure the broadest possible patent protection for the core elements of
its technology in as many major world markets as possible where patents are
recognized and enforced. Probex recently received a notice of allowance from the
United States Patent Office on all 42 pending claims on its primary patent
application, which relates to the de-fouling pretreatment portion of ProTerra.
The second element of Probex's strategy is the protection of its trade
secrets. Probex's patent applications were filed in 1997 and early 1998 before
the major portion of Probex's pilot testing program. Accordingly, essentially
all of the process condition optimizations developed through pilot testing, many
of which are essential to effective commercial operation of the process, are not
required to be disclosed under the patent office's "best method" rule because
their development post-dated Probex's patent filings. Probex presently intends
to maintain this information as a closely protected trade secret, thereby
providing a significant measure of intellectual property protection even in
markets where patents are effectively unenforceable.
Probex also has filed trademark applications on ProTerra, ProLube,
ProPower and ProBind, as well as Purifine, Purafine, Purefine and Profine, all
of which are pending.
Competition
Safety Kleen is the largest domestic re-refiner of used lubricating oil
into base lubricating oil, and therefore a prospective competitor of the
Company. Although, we believe they are not currently capable of producing GF-3
compliant base lube oils for the 10W-30 or 5W-30 viscosity grades. Using a
non-proprietary thin or wiped film process at a large facility in East Chicago,
Indiana, Safety Kleen currently re-refines 85 million gallons of used oil each
year into GF-2 and generic quality base lubricating oil, fuel and asphalt
byproducts. Evergreen employs a similar technology at a much smaller 12 million
gallon per year re-refinery in Northern California. Other competing technologies
include IFP/Viscolube's thermal deasphalting process, Universal Oil Products'
HyLube direct contact hydrogenation, KTI's process, and Interline's propane
extraction system.
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Utilizing its proprietary "Trailblazer" process, Texaco Corporation's
Marrero, Louisiana facility is currently re-refining approximately 45 million
gallons per year of used lubricating oil into various products including marine
diesel fuel, but not base lubricating oil. Therefore, we do not consider Texaco
to be a direct competitor.
Probex is a development stage company that has never generated revenues
from its current operations. While ProTerra has been validated by independent
and reputable testing laboratories, there can be no assurances that the Company
will be successful in entering the oil re-refining industry or generating
revenue. In addition, there are no assurances that the Company will be able to
secure equity and/or debt financing as needed to continue operations. Finally,
even if the Company completes its first plant and begins actual production, it
will be in a business that is highly competitive. Our competition includes
companies which are significantly larger and more established and as a result,
have better access to financing options.
Environmental/Governmental Consents
The Company's business operations are subject to certain federal, state
and local requirements which regulate health, safety, environment, zoning and
land-use. In September 1992, the Environmental Protection Agency enacted
regulations that govern the management of used oils. Although used oil directed
for recycling is not classified as a hazardous waste under federal law, certain
states do regulate used oil as hazardous wastes, which may affect the Company.
Operating and other permits are generally required for the Company's facilities,
including the planned plant in Wellsville. These permits, once issued, will be
subject to revocation, modification and renewal. Many of the environmental laws
and regulations applicable to the Company provide for substantial fines and
criminal sanctions for violations. It is possible that future developments, such
as stricter environmental laws, regulations or enforcement policies thereunder,
could affect the handling, manufacture, use, emission or disposal of substances
or pollutants at and in the Company plants. Moreover, some risk of environmental
costs and liabilities is inherent in particular operations and products of the
Company, as it is with other companies engaged in similar businesses. There can
be no assurance that material costs and liabilities will not be incurred. The
Company expects that, due to increasingly stringent environmental regulations
arising from current and future requirements of law, it may have significant
capital requirements for environmental projects in the future.
Reports to Security Holders
The public may read and copy any materials that the Company files with
the SEC at the SEC's Public Reference Room at 450 Fifth Street, N.W.,
Washington, D.C. 20549. The Public may obtain information on the operation of
the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC
maintains an Internet site (http://www.sec.gov) that contains reports, proxy and
information statements, and other information regarding issuers that file
electronically with the SEC. Additionally, our Internet site can be accessed at
www.probex.com.
ITEM 2. MANAGEMENT'S PLAN OF OPERATION
Since Probex is a development stage company and has not had revenues
from operations from inception, we are providing below our plan of operation for
the next 12 months.
Facility Implementation, Operation, and Financing
Probex has completed all material research and development activities
related to ProTerra, and we expect to complete a Design and Critical
Specifications Package (DCSP) by mid-2000. The DCSP will summarize Probex's
experience and knowledge developed over the past five years, including pilot
plant trials, process simulations, and research and industry experience. Among
the items included in the DCSP will be a
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detailed description of the battery limits process, offsites and utilities,
process flow diagrams, piping and instrumentation diagrams, mass balances,
equipment design notes, information management and process control systems, site
description and layout, and company standards.
Probex is in negotiations with a global engineer/constructor partner
for a turnkey engineering/procurement/construction (EPC) and anticipates a
preliminary agreement to be completed in the near future. This EPC agreement
will include contracts encompassing industry-standard design, material, and
workmanship warranties as well as appropriate and necessary credit-support
commitments. As mentioned previously, Probex secured from The Port Authority of
Columbiana County in Wellsville, Ohio a twelve-month option agreement to
purchase a site for its first domestic facility. This 22-acre site is optimally
located on the Ohio River in the center of large supply and product markets, and
includes a barge dock, 1.4 million gallons of tankage, a rail spur, and truck
and rail loading and unloading racks. Phase I and Phase II environmental studies
have been performed and the Wellsville, Ohio site is currently ready for
development.
We anticipate operating this initial plant facility under operations
and maintenance (O&M) contracts. The exact details and responsibilities of the
O&M contractor have yet to be determined. However, Probex envisions that the O&M
contractor would be responsible for the operation and maintenance for the entire
facility, including battery limit plant operations, material transfers, and
storage and maintenance (scheduled and unscheduled). Probex will secure
feedstock, market the products, and oversee facility operations and finances.
The Company is in negotiations with various debt and equity partners to
provide the financing for the initial facility and that financing will be used
to fund capital costs, working capital, construction period interest, and
financing expenses and fees.
In support of the plant financing, and as outlined previously, Probex
has in place letters of intent for sufficient used oil feedstock to support its
first domestic facility. With regard to technical risk coverage, we intend to
match any SPI Policy which may be issued by the Hartford Steam Boiler Inspection
& Insurance Company to cost, schedule, and performance guarantees from the
selected EPC firm. Finally, Probex is in the process of securing the product
offtake letters of intent and contracts necessary to provide the revenue streams
to support projected debt service requirements.
With respect to project equity, HSB Engineering Finance Corp. has
expressed an interest in providing up to $10 million of project equity and/or
investments subordinated to senior debt, once senior debt financing is
committed, if this type of investment is required. In addition, several firms
are currently performing due diligence related to making direct equity
investments in Probex. The Company recently completed and oversubscribed a $5
million private placement offering of Series A Preferred Stock by $0.4 million.
The private placement combined with Probex's current cash position, ability to
further access the public markets, the prospective HSB Engineering Finance Corp.
investment, as well as other prospective financing sources, provides reasonable
assurance as to Probex's ability to meet its initial plant equity requirements.
Additionally, the Company believes that joint ventures and licensing
are the preferred commercialization options for ProTerra in many markets outside
the United States. Probex has been invited to participate in facility expansion
programs in Europe and India. Probex believes that additional opportunities for
Probex facilities will develop, either on a joint venture or licensing basis, in
South America, Asia, Australia, and the Middle East. In addition, Probex has met
with the management team of a major European conglomerate which is actively
interested in employing ProTerra in at least one facility to be constructed in
Europe.
The Company does not anticipate a significant change in the number of
employees during the next 12-months, because the initial plant is anticipated to
be operated by O&M personnel who likely will not be employees of the Company.
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ITEM 3. DESCRIPTION OF PROPERTY
The Company is leasing its principal business space located at 1467
LeMay, Suite 111, Carrollton, Texas 75007. The term of the lease is three years
expiring in May 2001.
In June 1999, the Company secured from The Port Authority of Columbiana
County in Wellsville, Ohio a twelve-month option agreement, in the amount of
$1,350,000, to purchase a 22-acre site for its first domestic facility. The
Company has paid a $5,000 good faith deposit for the option agreement.
Additionally, the site and other surrounding property will be improved by
construction of an adjacent highway interchange primarily using federal funds.
The federal government has determined that no transfers of title to such land to
private industry may take place prior to completion of the highway interchange
that is projected to occur in 2001. Should the Company exercise the option to
purchase the land, then an interim lease agreement will be in effect until the
Seller certifies in writing that the highway interchange is complete. Rental
payments under the interim lease will be $20,000 per month and payments in total
shall be credited against the purchase price.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Security Ownership of Certain Beneficial Owners
The following table sets forth the number of shares of the Company's
Common Stock owned by each person who, as of November 24, 1999, was known by the
Company to own beneficially more than five percent (5%) of its Common Stock.
In general, a person is deemed to be a "beneficial owner" of a security
if that person has or shares the power to vote or direct the voting of such
security, or the power to dispose of or to direct the disposition of such
security. A person is also deemed to be a beneficial owner of any securities to
which the person has the right to acquire beneficial ownership within sixty (60)
days.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
Name and Amount And
Address Of Nature Of
Title Of Beneficial Beneficial Percent Of
Class Owner Owner Class
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common HSB Engineering Finance Corp. 2,587,288 (1) 11.0%
One State Street
Hartford, CT 06102
Common CEDE & Co. 2,084,420 10.0%
P.O. Box 222
Bowling Green Station
New York, NY 10041
Common Four Holdings Ltd. 1,967,694 (2) 9.2%
PO Box 150 Design House
Providenciales, Turks & Catcos Islands
British West Indies
Common Thomas G. Murray 1,918,956 (3) 9.0%
Senior Vice President
1467 LeMay, Suite 111
Carrollton, TX 75007
Common Alex D. Daspit 1,715,584 (4) 8.2%
Senior Vice President
1467 LeMay, Suite 111
Carrollton, TX 75007
- --------------------------------------------------------------------------------------------------
</TABLE>
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Notes:
1. Represents warrants to purchase stock at $0.01 per share through June 30,
2008.
2. Includes 466,364 shares acquirable pursuant to the exercise of warrants.
3. Includes 324,220 shares owned by Probex Technologies, LP (not affiliated
with the Company) for which Mr. Murray is an approximate 28% partner and
acts as managing member of its general partner. Mr. Murray disclaims
beneficial ownership of these shares. Excludes 490,000 shares acquirable
pursuant to the exercise of stock options that have not vested and includes
85,410 shares acquirable pursuant to the exercise of warrants.
4. Includes 85,000 shares acquirable pursuant to the exercise of warrants.
Excludes 400,000 shares acquirable pursuant to the exercise of stock
options and that have not vested.
Security Ownership of Management
The following sets forth the number of shares of the Company's common
stock beneficially owned by (1) the individual directors of the Company, (2) the
"named executive officers" (as defined in Item 6) of the Company and (3) all
officers and directors of the Company as a group as of November 24, 1999.
No officers or directors own shares of the Series A Preferred Stock.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Name and Address Amount And
Address Of Nature Of
Title Of Beneficial Beneficial Percent Of
Class Owner Title Owner Class
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Thomas G. Plaskett Chairman, CEO & President 353,750 (1) 1.7%
1467 LeNay, Suite 111
Carrollton, TX 75007
Common K. Bruce Jones Director 852,309 (2) 4.0%
88 S. Bishop Road
Santa Rosa Beach, FL 32459
Common Anthony J. Maselli Director 60,000 (3) 0.3%
109 North Road
Harwinton, CT 06791
Common Nicholas W. Hollingshad Advisory Director 832,400 (4) 3.8%
3204 Long Prairie Road, Suite C
Flower Mound, TX 75022
Common William A. Searles Advisory Director 295,600 (5) 1.4%
179 Hartshorne Rd.
Locust, NJ 07760
Common Thomas G. Murray Senior Vice President, 1,918,956 (6) 9.0%
1467 LeMay, Suite 111 Director
Carrollton, TX 75007
Common Alex D. Daspit Senior Vice President, 1,715,584 (7) 8.2%
1467 LeMay, Suite 111 Director
Carrollton, TX 75007
Common All Officers and Directors as a Group 10,263,862 (8) 39.0%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE> 12
Notes
1. Includes 185,000 shares acquirable pursuant to the exercise of warrants.
Excludes 165,000 shares acquirable pursuant to the exercise of warrants
that have not vested.
2. Includes 445,207 shares owned by CPM Partners, L.L.C. for which Mr. Jones
exercises voting control. Mr. Jones disclaims beneficial ownership of these
shares. Also includes 154,471 shares acquirable pursuant to the exercise of
warrants. Excludes 40,000 shares acquirable pursuant to the exercise of
warrants that have not vested.
3. All of these shares are acquirable pursuant to exercise of warrants.
Excludes 40,000 shares acquirable pursuant to the exercise of warrants that
have not vested.
4. Includes 832,400 shares owned by Probex Southwest Partnership LP for which
Mr. Hollingshad exercises voting control. Mr. Hollingshad disclaims
beneficial ownership of these shares.
5. All of these shares are acquirable pursuant to the exercise of warrants.
6. Includes 320,220 shares owned by Probex Technologies, LP for which Mr.
Murray is an approximate 28% partner and acts as managing member of its
general partner. Mr. Murray disclaims beneficial ownership of these shares.
Also includes 85,410 shares acquirable pursuant to the exercise of warrants
and excludes 490,000 shares acquirable pursuant to the exercise of stock
options that have not vested.
7. Includes 85,000 shares acquirable pursuant to the exercise of warrants.
Excludes 400,000 shares acquirable pursuant to the exercise of stock
options that have not vested.
8. Represents 12 persons and includes 2,045,000 shares acquirable pursuant to
the exercise of options, 1,507,608 shares acquirable pursuant to the
exercise of warrants, and 1,601,827 shares for which the officer or
director exercises voting rights but disclaims beneficial ownership.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
Directors and Executive Officers
The Directors and Executive Officers of the Company, their ages and
present positions held in the Company are as follows:
<TABLE>
<CAPTION>
Name Age Position Held
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Thomas G. Plaskett 56 Chairman of the Board, President &
Chief Executive Officer
K. Bruce Jones 58 Director
Anthony J. Maselli 37 Director
Nicholas W. Hollingshad 44 Advisory Director
William A. Searles 56 Advisory Director
Thomas G. Murray 41 Senior Vice President - Strategic
Planning & Industry Affairs, Director
Alex D. Daspit 45 Senior Vice President - Business
Planning & Product Development, Director
Martin R. MacDonald 37 Senior Vice President - Operations
- -----------------------------------------------------------------------------------------------
</TABLE>
12
<PAGE> 13
The Company's directors will serve in such capacity until the next
annual meeting of the Company's shareholders and until their successors have
been elected and qualified. The officers of the Company serve at the discretion
of the Company's directors.
Thomas G. Plaskett (age 56) has been a director of the Company since
June 1994 and President and Chief Executive Officer since September 1999. Since
1994, Mr. Plaskett has been a business consultant primarily in the merchant
bank/private investor arena working with several emerging technology companies.
Mr. Plaskett has broad-based experience at senior levels of major corporations,
having served as a Director, Interim CEO and President, and then Chairman of the
Board of Greyhound Bus Lines until March 1999. Prior to 1994, he was Chairman
and CEO of Pan Am Corporation and President and CEO of Continental Airlines. He
has been a director of Tandy Corp. since 1986 and a director of Smart and Final
Inc. since 1994. From 1992 to 1996, Mr. Plaskett was a director of Neostar
Retail Group, Inc. (formerly Babbage's, Inc.) and served as Chairman of Neostar
from September 1996 to December 1996. Neostar filed a petition for insolvency
under Federal bankruptcy laws in September 1996.
K. Bruce Jones (age 58) has been a director of the Company since May
1994. Mr. Jones is the founder and managing principal of K. Bruce Jones and
Associates, an investment management firm since June 1993. He has extensive
experience in the operation and financial management of emerging growth
companies. In addition, Mr. Jones has portfolio management and/or consulting
experience with C&S National Bank (later Invesco Capital Management). The
William O'Neill Company, Merrill Lynch Capital Markets, & Gateway Investment
Advisors. Currently, Mr. Jones serves on the boards of Clifton Mining Company,
Solomon Technologies, and Showcase Leather Holdings, Inc. Mr. Jones received a
B.A. in Political Science and a MBA from Emory University.
Anthony J. Maselli (age 37) has been a director of the Company since
June 1998 in conjunction with his company's investment in Probex. Mr. Maselli is
the Founder and Managing Director of HSB Engineering Finance Corporation, and a
Vice President of Hartford Steam Boiler Inspection & Insurance Company,
Technology Risks department since and has been with HSB since 1995. Prior to
joining HSB, Mr. Maselli worked for United American Energy Corporation from 1994
to 1995 and for Consolidated Edison Company of New York from 1984 to 1994. Mr.
Maselli has experience in technology assessment, project evaluation and all
aspects of project development, including project finance. He has been the key
individual in the development of several large industrial projects, including
independent power projects, manufacturing facilities and private corporation
development.
Nicholas W. Hollingshad (age 44) has been an Advisory Director of the
Company since April 1999 in conjunction with an investment by his company in
Probex. Mr. Hollingshad has been a principal of Environmental Resources
Management, an international industrial environmental firm since 1991.
Previously, he was a chemical engineer with Exxon and is a professional engineer
with over fifteen years experience in industrial environmental engineering and
eight years in chemical process engineering. Mr. Hollingshad received a Bachelor
of Chemica Engineering from the Georgia Institute of Technology in 1978.
William A. Searles (age 56) has been an Advisory Director of the
Company since 1999. Mr. Searles has been associated with American Physicians
Services Group, Inc. since 1989 as a director and since 1995 as Chairman of APS
Investment Services, Inc. He is has been a director of a private company,
Uncommon Care, Inc. since 1998 and a director of a public company, Prime Medical
Services, Inc. since 1989. Previous to 1989, He spent 25 years in various
positions with Wall Street investment banking firms, of which the last 9 years
as a limited partner with Bear Stearns. Mr. Searles received a Bachelor of
Science degree in Economics from Villanova University.
Thomas G. Murray (age 41) has been the Senior Vice President of
Strategic Planning & Industry Affairs since September 1999. He served as Chief
Executive Officer of the Company since joining the predecessor of
13
<PAGE> 14
Probex in July 1993 and has also been a Director of the Company since that time.
Mr. Murray was the Chief Executive Officer of InteCorp, an early-stage company
engaged in developing wireless pipeline monitoring systems. Mr. Murray received
his Master of Business Administration from Harvard Business School in 1984, and
graduated Phi Beta Kappa from Holy Cross College where he received his B.A. in
Economics in 1980.
Alex D. Daspit (age 45) has been the Senior Vice President of Business
Planning & Product Development since September 1999. He served as President of
the Company since September 1997. Mr. Daspit joined Probex in March 1994 in
conjunction with an investment in the Company, and has also been a Director
since that time. From 1986 to 1989, Mr. Daspit served as Senior Vice President
of Corporate Strategy for International Telecharge Inc. ("ITI"), and was
instrumental in ITI's growth from roughly $200,000 to in excess of $200 million
in annual revenues during his three-year tenure. Prior to joining ITI, he
independently developed and subsequently licensed to the entire U.S. welding
industry the pioneering inverter power supply for arc welding. Mr. Daspit
received a Master of Business Administration degree with distinction from the
Wharton School of Business.
Martin R. MacDonald (age 37) has been the Senior Vice President of
Operations since September 1999 and served as a Vice President of the Company
since joining Probex in 1995. He is a professional engineer experienced at all
levels of chemical processing system design, development, and management.
Previously, Mr. MacDonald was a Senior Engineer at Ferguson Industries from 1994
to 1995. At Ferguson, he managed project implementation of chemical processing
systems and plants, including conception, procurement, plant fabrication,
assembly, and final commissioning. Mr. MacDonald has conceived, engineered, and
commissioned new technologies such as the first high pressure ammonia injection
water treatment system, a high velocity galvanizing system, and a low emissions
ammonium polyphosphate production system, all of which are currently in
commercial use. He holds a Masters of Science degree in chemical engineering
from Queens University, Kingston, Ontario, Canada.
Significant Employees
Bruce A. Hall (age 43) has been the Chief Financial Officer of the
Company since September 1999 and served as Controller since joining Probex in
May 1999. Mr. Hall has served in numerous financial and operating positions with
companies in the hi-tech, manufacturing and real estate industries. Mr. Hall has
been Chief Financial Officer of two companies, including Aslan Real Estate, Ltd.
from January 1996 to May 1999 and Harris Adacom Systems, Inc. from 1993 to 1994
and has been the controller of international operations for Recognition
Equipment, Inc. from 1986 to 1991 and Harris Adacom, Inc. 1992 to 1993.
Additionally, Mr. Hall was a principal of the Capital Funding and Consulting
Group, L.C. from 1994 to 1996 and a senior auditor with Arthur Young & Co from
1983 to 1986. Mr. Hall holds both CPA and CMA certifications and received a
B.B.A. in Accounting/Finance from the University of Texas at Austin in 1983.
D. Yale Sage (age 45) has been the Vice President of Financial Planning
and Development since September 1999 and served as Chief Financial Officer from
March 1999 through September 1999. Mr. Sage was the President and Chief
Executive Officer of Claridge Capital Corporation from 1997 to March 1999, a
private investment and financial services company providing investment banking
services to corporate clients. He was President and Chief Operating Officer of
Seaboard Management Corporation from 1991 to 1997, a venture capital and
investment banking company, managing funds totaling over $50 million. Over the
past ten years, Mr. Sage has served in numerous financial and operating
positions with companies in the manufacturing, financial service and
entertainment industries. Previous to 1991, Mr. Sage has been Chief Financial
Officer of six companies, including Global Plastics, L.L.C., Gateway
International Development Corporation, and Groco Specialty Chemicals and
Coatings. Mr. Sage has been controller of The Vault Company and Federal Support
Corporation. Mr. Sage's prior business background includes Arthur Anderson &
Company and The First
14
<PAGE> 15
National Bank of Dallas. Mr. Sage received a B.B.A. in Finance from the
University of Texas at Austin in 1980.
John E. Fahey (age 59) has been the Vice President of Industry Sales &
Marketing for the Company since joining Probex in March 1999. Mr. Fahey is the
former Regional Sales Manager - Base Oil Sales, and Sales and Marketing Manager
of U.S. Government Sales, for Safety Kleen Oil Recovery Company, and was
employed with them for 8 years from 1990 to March 1999. He is responsible for
the Company's market analysis and positioning of Probex's base lubricating oils
with certain prospective purchasers. Mr. Fahey is a former President of the
Independent Lubricant Manufacturers Association (ILMA), which includes companies
purchasing approximately 25% of all U.S. base oil production.
Phil D. Pierce (age 58) has been the Vice President of Sales and Supply
for the Company since joining Probex in April 1999. From January 1993 to
February 1995, Mr. Pierce was Vice President of Sales & Operations for ProCycle
Oil & Metals in Dallas. From February 1995 to June 1996, he was Vice President &
General Manager for United Recycling, Inc. in Dallas. From July 1996 through
February 1999, he was General Manager of McPherson Oil & Environmental Energy in
Birmingham, Alabama. Mr. Pierce is responsible for base lubricating oil sales
for national and international accounts and waste oil supply arrangements.
Previously, Mr. Pierce was President and majority stockholder of Delta Petroleum
Products, Inc. ("Delta"), from 1972 to 1991, a major distributor of lubricants
and was responsible for all aspects of the business including sales, operations,
and administration. Mr. Pierce has served on national distribution councils
including Exxon, Shell, Citgo and other major companies.
Ronald Michael Falconer (age 55) has been the Director of Plant
Development of the Company since joining Probex in June 1999. Mr. Falconer has
concentrated on hydrocarbon processing plants and equipment throughout his
33-year engineering career. He has experience with all engineering disciplines
in the process plant environment relating to project development, implementation
of operational start-ups and process production. From July 1998 to June 1999, he
was an independent engineering consultant. From August 1997 to June 1998, he was
Vice President of Production Operations for Evergreen Oil, Inc. in Newport
Beach, California. From August 1996 to August 1997, he was General Manager of
Production for Evergreen Environmental Services in the United Kingdom. From
September 1994 to August 1996, he was Assistant Deputy General Manager of
Production for Wiraswasta Gemilang in Indonesia and from March 1991 to September
1994, he was President of Evergreen Oil in Northern California. Previous to
March 1991, positions include: Division President, Site Manager & Engineer;
Mohawk Lubricants Ltd., Site Engineer & Division General Manager; Gulf Oil. Past
accomplishments include the completion of a Canada wide project for community
noise reduction by all refineries, application of the first DCS control system
in a Canadian refinery, development of the world's first direct distillation and
hydro-finishing continuous re-refining process, and completion of the White Oil
R&D project in Wales. Mr. Falconer holds a Bachelor of Science degree in
Mechanical Engineering from Edinburgh University in Scotland. Mr. Falconer is a
Registered Chartered Member of the Institution of Mechanical Engineers in the
United Kingdom, and he is a Registered Professional Engineer in Ontario and
British Columbia, Canada, and is a former President of the Re-Refiners
Association of Canada.
Philip E. Keown (age 57) has been the Director of Engineering for the
Company since joining Probex in July 1999. From October 1998 to June 1999, Mr.
Keown provided Probex engineering consulting services through his company, CES
(Comprehensive Energy Services, Inc.), for which he was a principal since May
1995. From December 1985 to May 1995, Mr. Keown was the Fuels Contracting
Manager with General Electric, Industrial & Power Systems. Mr. Keown is a
Registered Professional Engineer in Texas and has published several
petrochemical related papers. Mr. Keown holds a Bachelor of Science degree in
Chemical Engineering from Auburn University.
15
<PAGE> 16
There are no family relationships among the Company's directors and
officers, nor are there any arrangements or understandings between any of the
directors or officers of the Company or any other person pursuant to which any
director or officer was or is to be selected as an director or officer.
ITEM 6. EXECUTIVE COMPENSATION
General
No officer of the Company received compensation in excess of $100,000
or any cash bonus payment during the fiscal years ended September 30, 1997,
1998, or 1999. Compensation does not include minor business related and other
expenses paid by the Company and such amounts in the aggregate do not exceed
$10,000. The Company's Chief Executive Officer since October 1999, Thomas G.
Plaskett has never been paid any cash compensation (salary or bonus), but has
instead been paid in the form of non-cash compensation as described below. The
Company's former Chief Executive Officer from inception to September 1999,
Thomas G. Murray was paid compensation of $71,686 including $45,000 of cash and
$26,686 of non-cash, $82,795 including $46,667 of cash and $36,128 of non-cash,
and $91,876 including $64,876 of cash and $27,000 of non-cash for the fiscal
years ended September 30, 1997, 1998 and 1999, respectively. Messrs. Plaskett
and Murray are referred to as the "named executive officers."
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
Awards
- --------------------------------------------------------------------------------------------------------------
Securities
Name Fiscal Restricted Underlying
And Year Stock Options/
Principal Ended Salary Bonus Award(s) SARs
Position 9/30 ($) ($) ($) (#)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
THOMAS G. PLASKETT
Chairman/CEO/President 1999 -- -- -- 350,000 (9)
Chairman of the Board 1998 -- -- -- --
Chairman of the Board 1997 -- 1,950 (3) -- --
THOMAS G. MURRAY
CEO & Senior VP 1999 64,876 (6) 27,000 (7) -- 490,000 (8)
CEO 1998 66,667 (4) 16,128 (5) -- --
CEO 1997 70,000 (1) 1,686 (2) -- --
</TABLE>
Notes:
Effective March 1, 1995, Mr. Murray was to be paid a total salary of
$70,000. However, due to cash flow constraints, the Board of Directors approved
an actual cash salary to be paid of $45,000 with the $25,000 remainder deferred.
Effective May 31, 1997, the Board of Directors approved the conversion of Mr.
Murray's cumulative deferred and unpaid salary for the period March 1, 1995 to
May 31, 1997 in the amount of $78,813 into Common Stock of the Company at $0.11
per share. The price per share was representative of recent private placement
offerings and Mr. Murray was issued 716,478 shares of Common Stock in June 1997.
The Company recorded the deferred salary as salaries and wages for the proper
accounting period in the Consolidated Financial Statements.
Effective June 30, 1998, the Board of Directors approved the conversion
of Mr. Murray's cumulative deferred and unpaid salary for the period June 1,
1997 to June 30, 1998 in the amount of $27,083 into Common Stock of the Company.
Additionally, the Board of Directors recognized the significant contribution Mr.
Murray made during the fiscal year ending September 30, 1998 and approved an
issuance of 32,257 shares of Common Stock of the Company as a performance bonus.
Both of these items were valued at $0.50 per share and as a result, Mr. Murray
was issued a total of 86,423 shares of Common Stock in July 1998. The Company
16
<PAGE> 17
recorded the deferred salary as salaries and wages and the performance bonus as
stock compensation expense for the proper accounting period in the Consolidated
Financial Statements.
Effective July 1, 1998, Mr. Murray was to be paid a total salary of
$65,000. However, due to cash flow constraints, the increase did not start until
September 1, 1998 and Mr. Murray was paid at the previously approved $45,000
annual amount. The Company has recorded the difference of $3,333 as an accrued
liability at September 30, 1999 and will propose to the Board that the amount be
paid in cash. The Company recorded the deferred salary as salaries and wages for
the proper accounting period in the Consolidated Financial Statements.
Effective June 4, 1999, the Board of Directors recognized the
significant contribution Mr. Murray made during the fiscal year ending September
30, 1999 and approved an issuance of 54,000 shares of Common Stock of the
Company as a performance bonus. The Company has recorded the issuance at a value
of $0.50 per share and recorded an amount of $27,000 as stock compensation
expense for the proper accounting period in the Consolidated Financial
Statements.
(1) The Salary amount for 1997 represents the following:
<TABLE>
<S> <C>
o $45,000 Cash compensation
o $25,000 Deferred salary for the period October 1, 1996 to September
------- 30, 1997.
o $70,000
=======
</TABLE>
(2) The Bonus amount for 1997 represents the following:
<TABLE>
<S> <C>
$ 1,686 Directors fees paid in stock as discussed in (8) below
=======
</TABLE>
(3) The Bonus amount for 1997 represents the following:
<TABLE>
<S> <C>
$ 1,950 Directors fees paid in stock as discussed in (8) below
=======
</TABLE>
(4) The Salary amount for 1998 represents the following:
<TABLE>
<S> <C>
o $46,667 Cash compensation
o $16,667 Deferred salary for the period October 1, 1997 to June 30,
1998.
o 3,333 Deferred salary for the period July 1, 1998 to August 31,
------- 1998.
$66,667
=======
</TABLE>
(5) The Bonus amount for 1998 represents the following:
<TABLE>
<S> <C>
$16,128 Performance bonus during fiscal 1998.
=======
</TABLE>
(6) The Salary amount for 1999 represents the following:
<TABLE>
<S> <C>
$64,876 Cash compensation
=======
</TABLE>
(7) The Bonus amount for 1999 represents the following:
<TABLE>
<S> <C>
$27,000 Performance bonus during fiscal 1999.
=======
</TABLE>
(8) In June 1999, the Board of Directors approved and the Company adopted a
Restricted Stock and Stock Option Plan for certain employees to purchase common
stock of the Company at $0.50 per share. Effective June 30, 1999, the Company
approved a plan to issue 2,750,000 stock options for employees of the Company.
The option price is $0.50 per share and each share is generally exercisable
after meeting five equally weighted goals over a maximum ten-year vesting
period. As of September 30, 1999, all of these options had been granted but none
had been vested or exercised. Mr. Murray was granted 490,000 options under this
plan.
17
<PAGE> 18
(9) In October 1999, Mr. Plaskett assumed the additional responsibilities
of Chief Executive Officer and President of the Company in addition to his
continuing role as Chairman of the Board. Mr. Plaskett is not paid any cash
compensation for these roles, however, he was granted 250,000 warrants to
purchase common stock of the Company at $1.00 per share for a five-year period.
50% of this award, or 125,000 warrants, vested immediately upon issuance and the
remaining 50%, or 125,000 warrants, will vest in the future in accordance with
the Company achieving certain milestones. Additionally, in August 1999, the
Board of Directors approved an issuance of 100,000 warrants to each outside
(non-employee) director to purchase Common Stock of the Company at $0.50 per
share for a five-year period. Mr. Plaskett received 100,000 warrants of which
40,000 vested immediately and the remaining 60,000 will vest subject to the
Company achieving certain performance milestones.
Options/SAR Grants Table
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
(INDIVIDUAL GRANTS)
---------------------------------------------------------------------------------------------------------
Percent of
Number of Total
Securities Options/SAR's
Name Underlying Granted To Exercise
And Options/SAR's Employees in of Base
Principal Granted Fiscal Year Price
Position (#) (%) ($/SH) Expiration Date
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Thomas G. Plaskett, Chairman,
CEO & President 40,000 (1) Directors Fees $0.50 8/28/2004
N/A
Thomas G. Plaskett, Chairman,
CEO & President 125,000 (2) 4% $1.00 9/30/2004
Thomas G. Murray, Former CEO,
Sr. VP -- (3) -- $0.50 6/30/2008
----------------------------------------------------------------------------------------------------------
</TABLE>
Notes:
(1) Represents five-year warrants granted to purchase Common Stock of the
Company as consideration for director's services. 100,000 warrants were
granted in total but only 40,000 have vested, and the remaining 60,000
will vest in the future in accordance with the Company achieving
certain performance milestones.
(2) Represents warrants granted to purchase Common Stock of the Company as
consideration for assuming the responsibilities of CEO and President in
October 1999. 250,000 warrants were granted in total but only 125,000
have vested, and the remaining 125,000 will vest in the future in
accordance with the Company achieving certain performance milestones.
(3) Mr. Murray was granted 490,000 options under the Company's Restricted
Stock and Stock Option Plan. The option price is $0.50 per share and
each share is generally exercisable after meeting five equally weighted
goals over a maximum ten-year vesting period. As of September 30, 1999,
none of these options had been vested.
Aggregated Options/SAR Exercises in Last Fiscal Year
And Fiscal Year End Option/SAR Values
18
<PAGE> 19
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION/SAR VALUES
- ------------------------------------------------------------------------------------------------------
Number Of
Unexercised Value Of Unexercised
Securities In-The Money
Underlying Options/SAR's at
Name Shares Options/SAR's 9/30/99 ($)
And Acquired on Value at 9/30/99 (#) Exercisable/
Principal Exercise Realized Exercisable/ Unexercisable
Position (#) (#) Unexercisable
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Thomas G. Plaskett, Chairman, -- -- 40,000 (1)/ $ 148,080 (4)/
CEO & President 60,000 (1) $ 98,720 (4)
Thomas G. Plaskett, Chairman, -- -- 125,000 (2)/ $ 308,500 (4)/
CEO & President 125,000 (2) $ 308,500 (4)
Thomas G. Murray, Former CEO, -- -- -- (3)/ $ -- (4)/
Sr. VP 490,000 (3) $1,209,320 (4)
- ------------------------------------------------------------------------------------------------------
</TABLE>
Notes:
(1) Represents five-year warrants granted to purchase Common Stock of the
Company as consideration for director's services. 100,000 warrants were
granted in total, of which 40,000 vested and the remaining 60,000 will
vest in the future in accordance with the Company achieving certain
performance milestones.
(2) Represents warrants granted to purchase Common Stock of the Company as
consideration for assuming the responsibilities of CEO and President in
October 1999. 250,000 warrants were granted in total, of which 125,000
vested and the remaining 125,000 will vest in the future in accordance
with the Company achieving certain performance milestones.
(3) Mr. Murray was granted 490,000 options under the Company's Restricted
Stock and Stock Option Plan. The option price is $0.50 per share and
each share is generally exercisable after meeting five equally weighted
goals over a maximum ten-year vesting period. As of September 30, 1999,
none of these options had been vested.
(4) Value based upon a price per share of $2.468 on November 24, 1999.
Compensation of Directors
The Company does not pay the Board of Directors fees for
attendance or similar remuneration. However, in December 1996, the
Company issued 579,720 shares of Common Stock to four directors (of
which two are officers) in recognition of services performed. Thomas G.
Plaskett, K. Bruce Jones and Alex D. Daspit were each issued 150,000
shares and Thomas G. Murray was issued 129,720 shares. The shares were
valued at $0.013 per share based upon an average book value calculation
of the Company at that time.
Additionally, in August 1999, the Board of Directors approved
an issuance of 100,000 warrants to each outside (non employee) director
to purchase Common Stock of the Company at $0.50 per share for a
five-year period ending August 2004, 40,000 of which are subject to
achievement of certain performance conditions. Thomas G. Plaskett, K.
Bruce Jones and Anthony J. Maselli were each issued 100,000 warrants.
The Company reimburses directors for any out-of-pocket
expenses incurred by them in conjunction with the business.
Employment Contracts and Termination of Employment, and Change-in-Control
Arrangements See "Certain Relationships and Related Transactions."
19
<PAGE> 20
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Anthony J. Maselli, a director of the Company since June 1998, is the
Founder and Managing Director of HSB Engineering Finance Corporation (HSB
Engineering) and a Vice President of the Technology Risks Department of Hartford
Steam Boiler Inspection & Insurance Company. Mr. Maselli has been with HSB
Engineering since 1995. On June 30, 1998, the Company and HSB Engineering, a
wholly-owned subsidiary of Hartford Steam Boiler Inspection & Insurance Company,
entered into an agreement whereby HSB Engineering will loan up to $1,500,000 for
working capital purposes. At September 30, 1999, $750,000 had been drawn by the
Company under this agreement and has been recorded as a current liability (due
June 30, 2000) in the Consolidated Financial Statements. In exchange for the
loan, the Company has granted a ten-year warrant to purchase shares of common
stock of the Company at $0.01 per share equal to 10% of the number of shares of
common stock outstanding on a fully diluted basis. The Company also granted HSB
Engineering certain rights for as long as the indebtedness is outstanding,
including:
o HSB Engineering can appoint one or more members of the
Company's Board of Directors as long as they hold securities
exercisable or convertible into at least 5% of the Company's
Common Stock.
o The Company may not participate in any significant transaction
without the approval of HSB Engineering. These significant
transactions include mergers, asset sales, changes in the
Company's authorized stock, amendments to the Company's bylaws
and articles of incorporation, liquidation and dissolution,
the commencement of bankruptcy or insolvency proceedings.
Additionally, HSB Engineering has the right to approve the
execution of certain material contracts, including certain
compensation and employment contracts and contracts
aggregating an amount of $100,000 or greater.
As a requirement of the loan, two of the Company's executive officers,
Thomas G. Murray and Martin R. MacDonald executed employment contracts with the
Company effective June 30, 1998 and expiring June 30, 2000. The terms of the
agreements include:
o A minimum base salary of $5,000 a month plus standard and
customary plans offered by the Company (incentive plans,
insurance, vacations, reimbursement of expenses)
o Termination for cause, without cause and for good reason.
o Non-solicitation agreement prohibiting inducement of employees
to leave the Company or any interference with employees or the
Company for a four (4) year period after leaving the Company.
o Covenant not to compete for a four (4) year period after
leaving the Company.
ITEM 8. DESCRIPTION OF SECURITIES
GENERAL
The Company is a Colorado corporation and its affairs are governed by
the Articles of Incorporation and the Bylaws of the Company and the Colorado
Business Corporation Act (the CBCA). The following description of the
Company's capital stock is qualified in all respects by the Articles and the
Bylaws, which will be filed as exhibits to the registration statement.
The authorized capital stock of the Company consists of 50,000,000
shares of Common Stock, no par value (the Common Stock), and 10,000,000 shares
of preferred stock, no par value (the Preferred Stock).
20
<PAGE> 21
COMMON STOCK
As of November 24, 1999, the Company had 444 holders of record of its
Common Stock. Holders of Common Stock do not have cumulative voting rights and
are entitled to one vote per share on all matters on which the holders of Common
Stock are entitled to vote. The Common Stock is not entitled to preemptive
rights and is not subject to redemption (including sinking fund provisions) or
conversion. Upon liquidation, dissolution or winding-up of the Company, the
assets (if any) legally available for distribution to shareholders are
distributable ratably among the holders of Common Stock after payment of all
debts and liabilities of the Company and the liquidation preferences of any
outstanding classes or series of Preferred Stock. All outstanding shares of
Common Stock are validly issued, fully paid and nonassessable. The rights,
preferences and privileges of holders of Common Stock will be subject to the
preferential rights of any outstanding classes or series of Preferred Stock that
the Company may issue in the future.
PREFERRED STOCK
The Board of Directors may, without further action of the shareholders
of the Company, issue shares of Preferred Stock in one or more series and fix or
alter the rights and preferences thereof, including the voting rights,
redemption provisions, dividend rights, dividend rates, liquidation preferences,
conversion rights and any other rights, preferences, privileges and restrictions
of any wholly unissued series of Preferred Stock. The rights of holders of
Common Stock will be subject to, and may be adversely affected by, the rights of
holders of any Preferred Stock.
On July 21, 1999, the Board of Directors approved a series of Preferred
Stock, which currently consists of up to 1,000,000 shares of Preferred Stock
(such amount may from time to time be increased or decreased by the Board of
Directors), designated as 10% Cumulative Convertible Series A Preferred Stock
(the Series A Preferred Stock). The Series A Preferred Stock, with respect to
rights on liquidation, winding up and dissolution, ranks senior to all classes
and series of Common Stock and may rank senior to other classes of Preferred
Stock. The Series A Preferred Stock has a liquidation preference of $10.00 per
share plus accrued and unpaid dividends, that is prior to the liquidation
preference of the Common Stock. The Series A Preferred Stock is entitled to
receive semi-annual dividends at the rate of $1.00 per annum payable either in
cash or shares of Common Stock, at the option of the Company. The holders of
Series A Preferred Stock are not entitled to vote, except for certain limited
matters and to the extent required by law. Each share of Series A Preferred
Stock is convertible at any time into 5.33333 shares of Common Stock and shall
be automatically converted, without further action on the part of the Company or
the holder thereof, into 5.33333 fully paid and nonassessable shares of Common
Stock on the date following any thirty-day trading period in which the average
daily closing price exceeds $5.625 per share. The Company will not issue any
fractional shares of Common Stock.
As of December 15, 1999, the Company had 44 holders of its Series A
Preferred Stock.
REGISTRATION RIGHTS
Holders of the Series A Preferred Stock (the Holders) have certain
rights to have shares of Common Stock issued upon conversion of the Series A
Preferred Stock registered under the Securities Act pursuant to the terms of
agreements between such Holders and the Company. Also, Holders of Warrants F, H,
K and N have certain rights to have shares of Common Stock issued under the
Securities Act pursuant to the terms of the agreements between such Holders and
the Company. For both the Holders of the Series A Preferred Stock and the
Holders of Warrants F, H, K and N, if at any time the Company proposes to file a
registration statement for purposes of effecting a public offering of securities
of the Company, the Company must notify the Holders of such proposed offering,
and upon their request, the Company must use its best efforts to register all
shares of Common Stock owned by the Holders. In such instances, the Company is
responsible for the expenses related to the registration of such shares.
21
<PAGE> 22
Pursuant to the terms of that certain Investor Rights Agreement between
the Company and HSB, dated as of June 30, 1998, holders of shares of Common
Stock have certain rights to have such shares registered under the Securities
Act. Specifically, the Holders have the right to demand that the Company use its
best efforts to register all their shares of Common Stock after a firm
commitment underwritten public offering pursuant to a registration statement to
be filed with the SEC. The Company shall only be obligated to effect two
registrations on demand. Additionally, if at any time the Company proposes to
register its securities under the Securities Act, the Company must notify the
Holders of such proposed offering, and upon their request, the Company must use
its best efforts to register all shares of Common Stock owned by such Holders.
In such instances, the Company is responsible for the expenses related to the
registration of such shares.
22
<PAGE> 23
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON
EQUITY AND OTHER SHAREHOLDER MATTERS.
Principal Market or Markets
Shares of the Company's Common Stock presently trade inactively on the
NASD over-the-counter bulletin board under the symbol "PRBX". The range of high
and low bid and ask for the Company's Common Stock for the last eight quarters
are:
<TABLE>
<CAPTION>
Bid Ask
--- ---
For the Quarter Ended: High Low High Low
- ---------------------- ------ ------- ------ -----
<S> <C> <C> <C> <C>
September 30, 1999 1.6875 1.40625 1.875 1.50
June 30, 1999 1.75 1.25 1.9375 1.375
March 31, 1999 1.75 .5625 2 .6875
December 31, 1998 .75 .25 1.3125 .75
September 30, 1998 2 .375 2.375 1
June 30, 1998 2.125 1.375 2.50 1.875
March 31, 1998 2.50 1 3 2
December 31, 1997 .125 .125 None None
</TABLE>
The high and low bid and ask information was obtained from National Quotation
Bureau, L.L.C. Over-the-counter market quotations reflect inter-dealer prices,
without retail mark-up, mark-down or commission, and may not represent actual
transactions.
The Company is in the process of submitting an application to list the
Common Stock on the American Stock Exchange under the symbol "PBX". The Transfer
Agent and Registrar for the Common Stock is Transfer Online.
Holders of Common Stock
As of November 24, 1999, the Company had 20,925,477 shareholders of
record of its Common Stock.
Dividends
Holders of shares of Common Stock are entitled to receive dividends in
cash, property or shares of the Company, as and when declared by the Board of
Directors, to the extent and in the manner permitted by law. During the last two
fiscal years, the Company did not pay dividends on Common Stock. The Company
does not anticipate paying dividends on its Common Stock at this time. Holders
of shares of Series A Preferred Stock are entitled to dividends as described in
Description of Securities.
23
<PAGE> 24
ITEM 2. LEGAL PROCEEDINGS.
The Company is not involved in any material pending legal proceeding.
The Company has received a letter from a former employer of a current employee
alleging violations of certain non-compete provisions in the employee's
employment contract with the former employer. The Company believes such claims
are without merit and intends to vigorously contest any claims asserted by the
former employer.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.
None.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.
<TABLE>
<CAPTION>
SECURITY ISSUED DATE ISSUED ISSUED TO CONSIDERATION EXEMPTION
- ------------------------- ------------------- -------------------- -------------------------------- -----------------
<S> <C> <C> <C> <C>
14,171 shares of Common January 1997 Four consultants Consulting services (1)
Stock
- ------------------------- ------------------- -------------------- -------------------------------- -----------------
470,000 shares of January - March Investors $0.25/share for a total of (1)
Common Stock 1997 $117,500 cash proceeds
- ------------------------- ------------------- -------------------- -------------------------------- -----------------
600,000 shares January 1997 Employee Services (1)
- ------------------------- ------------------- -------------------- -------------------------------- -----------------
Warrants for 150,000 February 1997 Officer of the $0.10/share (1)
shares of Common Stock Warrants expire Company
in 2001, to date
none have been
exercised.
- ------------------------- ------------------- -------------------- -------------------------------- -----------------
506,813 shares of February 1997 Three investors (i) Extension of maturity (1)
Common Stock date of a note payable to
one of the investors;
(ii) An equalization of
the difference in
conversion prices between
each investor's
$1.50/share offering and
the Company's $0.25/share
offering; and (iii) The
Company's inability to
effect timely repayment
of the principal and
interest on the note due
and payable
- ------------------------- ------------------- -------------------- -------------------------------- -----------------
</TABLE>
(1) Stock in connection with the sales of securities was issued in accordance
with the exemption from registration contained in Section 4(2) of the
Securities Act.
24
<PAGE> 25
<TABLE>
- ------------------------- ------------------- -------------------- -------------------------------- -----------------
<S> <C> <C> <C> <C>
2,295,067 shares of January 1997 All warrant holders $0.25/share for a total of (1)
Common Stock $574,000 cash proceeds and
future commitments of
approximately $300,000
- ------------------------- ------------------- -------------------- -------------------------------- -----------------
197,564 shares of April - June 1997 Nine investors, Extension of terms of a (1)
Common Stock one of which was $150,000 promissory note
an officer issued in April 1996
- ------------------------- ------------------- -------------------- -------------------------------- -----------------
553,000 shares of April - June 1997 Seven Consultants $0.25/share for consulting (1)
Common Stock services
- ------------------------- ------------------- -------------------- -------------------------------- -----------------
724,702 shares of May 1997 Investors $0.25/share for the conversion (1)
Common Stock of $162,500 of 12% convertible
notes issued in June 1996
- ------------------------- ------------------- -------------------- -------------------------------- -----------------
52,183 shares of Common May 1997 Two Employees $0.25/share for services (1)
Stock
- ------------------------- ------------------- -------------------- -------------------------------- -----------------
304,545 shares of May 1997 Investor $0.11/share exchange for (1)
Common Stock conversion of the $30,000 10%
convertible note issued in
March 1996
- ------------------------- ------------------- -------------------- -------------------------------- -----------------
1,220,000 shares of May 1997 Investors $0.11/per share for a total of (1)
Common Stock $130,000 cash proceeds
- ------------------------- ------------------- -------------------- -------------------------------- -----------------
1,908,631 shares of May 1997 Three officers $0.11/share for deferred and (1)
Common Stock unpaid compensation
- ------------------------- ------------------- -------------------- -------------------------------- -----------------
52,500 shares of Common July 1997 Four consultants $0.25/share for consulting (1)
Stock services
- ------------------------- ------------------- -------------------- -------------------------------- -----------------
1,193,000 shares of July - September Investors $0.25/share for a total of (1)
Common Stock 1997 $298,000 cash proceeds
- ------------------------- ------------------- -------------------- -------------------------------- -----------------
538,300 shares of September 1997 Two investors Conversion of 12% convertible (1)
Common Stock notes and accrued interest
- ------------------------- ------------------- -------------------- -------------------------------- -----------------
185,865 shares of September 1997 Investors Conversion of $150,000 12% (1)
Common Stock promissory notes plus accrued
interest
- ------------------------- ------------------- -------------------- -------------------------------- -----------------
1,915,344 shares of October 1997 Subscribed but not (1)
Common Stock issued in
September 1997
- ------------------------- ------------------- -------------------- -------------------------------- -----------------
327,786 shares of October - Investors $0.25/share for a total of (1)
Common Stock December 1997 $82,000 cash proceeds
- ------------------------- ------------------- -------------------- -------------------------------- -----------------
410,130 shares of October - Three consultants $0.25/share for consulting (1)
Common Stock December 1997 services
- ------------------------- ------------------- -------------------- -------------------------------- -----------------
</TABLE>
25
<PAGE> 26
<TABLE>
- ------------------------- ------------------- -------------------- -------------------------------- -----------------
<S> <C> <C> <C> <C>
151,667 shares of October - Two employees $0.25/share for services (1)
Common Stock December 1997
- ------------------------- ------------------- -------------------- -------------------------------- -----------------
179,952 shares of January 1998 Investor $0.25/share; retired (1)
Common Stock certificate and reissued new
certificate for 89,976
shares(2)
- ------------------------- ------------------- -------------------- -------------------------------- -----------------
269,976 shares of March 1998 Investors $0.50/share for a total of (1)
Common Stock approximately $135,000 cash
proceeds
- ------------------------- ------------------- -------------------- -------------------------------- -----------------
40,770 shares of Common March 1998 Investors $0.65/share for a total of (1)
Stock $26,500 cash proceeds; 12,230
additional shares issued April
1998(3)
- ------------------------- ------------------- -------------------- -------------------------------- -----------------
93,000 shares of Common April 1998 Investors $0.50/share representing (1)
Stock $46,500 cash proceeds;
subscribed but not issued by
the transfer agent in March
1998
- ------------------------- ------------------- -------------------- -------------------------------- -----------------
620,251 shares of April - June 1998 Investors $0.50/share for a total of (1)
Common Stock $310,126 cash proceeds
- ------------------------- ------------------- -------------------- -------------------------------- -----------------
208,976 shares of June 1998 Investors $0.50/share in exchange for (1)
Common Stock conversion of remaining
$100,000, plus accrued
interest of the 12% notes
issued June 1996
- ------------------------- ------------------- -------------------- -------------------------------- -----------------
161,895 shares of April - June 1998 Six consultants $0.50/share for consulting (1)
Common Stock services
- ------------------------- ------------------- -------------------- -------------------------------- -----------------
187,977 shares of April - June 1998 Five employees $0.50/share as special (1)
Common Stock performance bonuses
- ------------------------- ------------------- -------------------- -------------------------------- -----------------
50,000 shares July 1998 Employee Services (1)
- ------------------------- ------------------- -------------------- -------------------------------- -----------------
100,000 shares July 1998 Two Directors Services (1)
- ------------------------- ------------------- -------------------- -------------------------------- -----------------
240,111 shares of August 1998 Three officers $0.50/share for deferred and (1)
Common Stock unpaid compensation
- ------------------------- ------------------- -------------------- -------------------------------- -----------------
5,300 shares of Common August 1998 Employee $0.50/share for unpaid (1)
Stock compensation
- ------------------------- ------------------- -------------------- -------------------------------- -----------------
</TABLE>
(2) The 179,952 shares were subscribed but not issued by the Company's transfer
agent on December 31, 1997. The Company determined that the shares were issued
incorrectly on a pre-split basis and should have been 89,976 shares of Common
Stock at $0.50 per share on a post-split basis. The transfer agent retired the
179,952 share certificate and issued a new certificate in the amount of 89,976
shares.
(3) The Company determined that the investment should have been at $0.50 per
share instead of $0.65 per share, thus an additional 12,230 shares were issued
in April 1998.
26
<PAGE> 27
<TABLE>
- ------------------------- ------------------- -------------------- -------------------------------- -----------------
<S> <C> <C> <C> <C>
259,800 shares of January 1999 Investors One share of Common Stock and (1)
Common Stock one warrant exercisable at
$0.75/share for each $0.50
invested for a total of
$129,900 gross proceeds
- ------------------------- ------------------- -------------------- -------------------------------- -----------------
2,988,131 shares of February - April Investors One share of Common Stock (5)
Common Stock 1999 ($0.50) and one warrant
exercisable at $0.75/share for
each $0.50 invested, for a
total of $1,364,166 gross
proceeds(4)
- ------------------------- ------------------- -------------------- -------------------------------- -----------------
30,000 shares of Common March 1999 Two $0.50/share for consulting (1)
Stock consultants services
- ------------------------- ------------------- -------------------- -------------------------------- -----------------
63,100 shares of Common March 1999 Five Employees $0.50/share for services (1)
Stock
- ------------------------- ------------------- -------------------- -------------------------------- -----------------
1,176,471 shares of June - July 1999 Directors and One share of Common Stock and (1)
Common Stock; Officers one warrant exercisable for 2
1,176,471 of $1.00 years at $1.00/share and one
warrants and 117,647 of $0.10 warrant for each $0.425
$0.55 warrants were invested that is exercisable
issued as a result for 5 years at $0.55/share for
a total of $500,000 gross
proceeds
- ------------------------- ------------------- -------------------- -------------------------------- -----------------
1,440,800 shares of August 1999 Warrant Holders Call of Class Q Warrants for a (1)
Common Stock total of $1,080,600 gross
proceeds
- ------------------------- ------------------- -------------------- -------------------------------- -----------------
190,000 shares of July 1999 New Investors; Up to $5,000,000 of Series A (1)
Series A Preferred Stock subscribed but not Preferred Stock at
(as of 9/30/99) issued $10.00/share for a total of
$5.4 million
- ------------------------- ------------------- -------------------- -------------------------------- -----------------
</TABLE>
(4) The offering was over-subscribed and the Company agreed to accept the
additional subscriptions.
(5) Stock was issued in accordance with the exemption from registration in
connection with the sales of securities contained in Regulation D, Section 506.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Articles of Incorporation of the Company provide that to the
fullest extent permitted by applicable law, a director of the Company will not
be liable to the Company or its shareholders for monetary damages for an act or
omission in the director's capacity as a director.
The Colorado Business Corporation Act (CBCA) permits the
indemnification of directors, employees, officers and agents of Colorado
corporations. The Company's Articles and Bylaws provide that the Company shall
indemnify any person to the fullest extent permitted by law. Under the CBCA, an
officer or director may be indemnified if he acted in good faith and reasonably
believed that his conduct: (i) was in the best interests of the Company and if
he acted in his official capacity or (ii) was not opposed to the best interests
of the Company in all other cases. In addition, the indemnitee may not have
reasonable cause to believe that his conduct was unlawful in the case of a
criminal proceeding. In any case, the indemnitee may not have been found liable
to the Company for improperly receiving a personal benefit or for willful or
intentional misconduct in the
27
<PAGE> 28
performance of his duty to the Company. The Company (i) must indemnify an
officer or director for reasonable expenses if he is successful, (ii) may
indemnify an officer or director for such reasonable expenses unless he was
found liable for willful or intentional misconduct in the performance of his
duty to the Company, and (iii) may advance reasonable defense expenses if the
officer or director undertakes to reimburse the Company if he is later found not
to satisfy the standard for indemnification expenses.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers, and controlling persons of the
Company pursuant to the foregoing provisions, or otherwise, the Company has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.
28
<PAGE> 29
PROBEX CORPORATION
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 AND 1998
<PAGE> 30
[M.C. HUNTER & ASSOCIATES, CPAS AND CONSULTANTS LETTERHEAD]
INDEPENDENT AUDITOR'S REPORT
To the Shareholders and Board of Directors
PROBEX CORPORATION AND SUBSIDIARIES
We have audited the accompanying consolidated balance sheet of PROBEX
CORPORATION AND SUBSIDIARIES (a development stage company) as of September 30,
1999 and 1998, and the related consolidated statements of operations,
stockholders' equity, and cash flows for the years then ended and for the
period from April 1, 1988 (inception of operations) to September 30, 1999. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
PROBEX CORPORATION AND SUBSIDIARIES (a development stage company) as of
September 30, 1999 and 1998, and the results of their operations and their
cash flows for the years then ended and for the period from April 1, 1988
(inception of operations) to September 30, 1999, in conformity with generally
accepted accounting principles.
/s/ M.C. HUNTER & ASSOCIATES
December 10, 1999
<PAGE> 31
PROBEX CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
SEPTEMBER 30,
1999 1998
----------- -----------
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash in banks $ 2,658,055 $ 12,590
Employee receivable 8,708 15,362
Prepaid expense 13,687 --
----------- -----------
Total Current Assets 2,680,450 27,952
----------- -----------
PROPERTY AND EQUIPMENT
Lab and research equipment 892,850 666,843
Leasehold Improvements 66,489 59,374
Other 157,346 116,074
----------- -----------
1,116,685 842,291
Accumulated depreciation and amortization (324,301) (194,796)
----------- -----------
Total Property and Equipment 792,384 647,495
----------- -----------
INTANGIBLE ASSETS - PATENTS 15,150 --
RESTRICTED CASH 190,142 --
OTHER ASSETS 2,937 3,737
----------- -----------
Total Assets $ 3,681,063 $ 679,184
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements and Independent Auditor's Report
F-1
<PAGE> 32
PROBEX CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
SEPTEMBER 30,
1999 1998
----------- -----------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable, trade $ 285,784 $ 279,307
Payroll taxes withheld 1,980 5,302
Promissory note 750,000 --
Current portion of obligations under capital leases 9,701 --
Other current liabilities 1,848 499
Accrued expenses 252,032 27,400
----------- -----------
Total Current Liabilities 1,301,345 312,508
----------- -----------
LONG-TERM LIABILITIES
Promissory note -- 300,000
Obligations under capital leases 20,361 --
----------- -----------
Total Long-Term Liabilities 20,361 300,000
----------- -----------
Total Liabilities 1,321,706 612,508
=========== ===========
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Series A 10% Cumulative Convertible Preferred Stock, no par
value, authorized 10,000,000 shares, subscribed but not issued
190,000 at Sep. 30, 1999 and None at Sep. 30, 1998 1,608,227 --
Common Stock, no par value, authorized 37,500,000
shares, issued and outstanding - 18,932,029 at
Sep. 30, 1999 and 14,930,413 at Sep. 30, 1998 7,329,260 5,548,004
Common Stock, subscribed but not issued -
2,011,388 at Sep. 30, 1999 and None at Sep. 30, 1998 1,316,600 --
Deferred Stock Expense (5,209) (23,958)
Deficit Accumulated During Development Stage (7,889,521) (5,457,371)
----------- -----------
Total Stockholders' Equity 2,359,357 66,675
----------- -----------
Total Liabilities and Stockholders' Equity $ 3,681,063 $ 679,184
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements and Independent Auditor's Report
F-2
<PAGE> 33
PROBEX CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
PERIOD FROM
APRIL 1, 1988
TWELVE MONTHS ENDED (INCEPTION) TO
SEPTEMBER 30, SEPT. 30,
1999 1998 1997 1999
---------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
Revenue $ -- -- -- $ 86,729
COST OF REVENUE -- -- -- 173,493
----------- ----------- ----------- -----------
GROSS LOSS -- -- -- (86,764)
Operating Expenses
Salaries and wages 298,703 203,019 160,778 1,018,038
Research and development 1,202,864 521,427 311,693 2,662,094
Stock compensation expense 167,550 172,530 100,087 453,903
Stock services expense 65,000 170,980 163,324 410,427
Consulting fees -- 60,835 33,746 136,684
Legal fees 62,687 77,864 465 319,036
Directors fees -- -- 594 591
Accounting fees 30,909 49,129 23,369 145,726
Insurance 66,510 48,905 33,878 222,867
Payroll taxes 24,590 13,153 9,844 72,945
Travel and entertainment 136,939 64,101 45,231 340,169
Telephone 39,529 37,739 28,938 158,582
Vehicle expenses 1,611 457 -- 6,009
Office supplies 53,421 11,961 16,457 128,234
Rent 41,716 26,302 13,825 118,777
Depreciation 36,344 20,343 4,615 64,315
Marketing services 2,517 2,032 32,000 58,477
Stock transfer fees 4,541 5,487 4,201 15,468
Utilities 13,928 5,987 4,591 38,690
Miscellaneous 68,865 88,294 32,586 301,566
----------- ----------- ----------- -----------
Loss from Operations 2,318,224 1,580,546 1,020,220 6,759,360
----------- ----------- ----------- -----------
OTHER INCOME AND EXPENSE
Stock financing expense -- (561,567) (158,754) (720,321)
Loss on sale of land -- -- (47,109) (47,109)
Loss on sale of property and equipment -- -- (3,000) (158,797)
Interest expense (107,820) (11,959) (72,335) (197,883)
Miscellaneous income (expense) 11,017 (3,401) 7,876 11,075
----------- ----------- ----------- -----------
Total Other Income and Expense (96,803) (576,927) (273,322) (1,113,035)
----------- ----------- ----------- -----------
NET LOSS $ 2,415,027 $ 2,157,474 $ 1,293,542 $ 7,872,395
=========== =========== =========== ===========
NET LOSS PER SHARE $ 0.15 $ 0.17 $ 0.07
=========== =========== ===========
</TABLE>
See Notes to Consolidated Financial Statements and Independent Auditor's Report
F-3
<PAGE> 34
PROBEX CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Equity
Common Stock Accumulated
----------------------------------- During Total
Shares/Units Shares/Units Development Stockholders'
Issued Subscribed Amount Stage Equity
----------- ------------ -------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Net loss for the period April 1, 1988 (Inception)
to September 30, 1988 -- $ -- $ (14) $ (14)
Shares/Units issued:
Units issued August 1988 - $.000133 per share 27,500,000 3,667 3,667
Shares issued September 1988 - $.001 per share 10,000,000 10,000 10,000
Shares/Units subscribed but not paid or issued:
Units subscribed August 1988 - $.000133 per share 7,500,000 1,000 1,000
Shares subscribed September 1988 - $.001 per share 2,000,000 2,000 2,000
----------- ---------- ------- --------- ---------
BALANCE AT SEPTEMBER 30, 1988 37,500,000 9,500,000 $16,667 $ (14) $ 16,653
----------- ---------- ------- --------- ---------
</TABLE>
See Notes to Consolidated Financial Statements and Independent Accountants'
Auditor's Report
F-4
<PAGE> 35
PROBEX CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Equity
Common Stock Accumulated
----------------------------------- During Total
Shares/Units Shares/Units Development Stockholders'
Issued Subscribed Amount Stage Equity
----------- -------------- -------- ----------- ------------
<S> <C> <C> <C> <C> <C>
BALANCE AT SEPTEMBER 30, 1988 - CONTINUED 37,500,000 9,500,000 $ 16,667 $ (14) $ 16,653
Net loss for the year ended September 30, 1989 -- -- (5,707) (5,707)
Shares/Units Issued:
Issued June 1989 - subscribed at Sept 30, 1988 9,500,000 (9,500,000) -- -- --
Units Issued June 1989 - $.01 per share - public
offering 30,000,000 300,000 300,000
Stock offering costs from public offering -- (58,440) -- (58,440)
----------- ---------- -------- --------- --------
BALANCE AT SEPTEMBER 30, 1989 77,000,000 -- $258,227 $ (5,721) $ 252,506
----------- ---------- -------- --------- --------
Net loss for the year ended September 30, 1990 -- -- (253,512) (253,512)
Shares Issued / Sold:
Issued for acquisition of subsidiary - December
1989 308,000,000 --
Sold for divestiture of subsidiary - September
1990 (308,000,000) --
----------- ---------- -------- --------- --------
BALANCE AT SEPTEMBER 30, 1990 77,000,000 -- $258,227 $(259,233) $ (1,006)
----------- ---------- -------- --------- --------
</TABLE>
See Notes to Consolidated Financial Statements and Independent Accountants'
Auditor's Report
F-5
<PAGE> 36
PROBEX CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Equity
Common Stock Accumulated
------------------------------------ During Total
Shares/Units Shares/Units Development Stockholders'
Issued Subscribed Amount Stage Equity
------------ ---------- --------- ----------- ------------
<S> <C> <C> <C> <C> <C>
BALANCE AT SEPTEMBER 30, 1990 - CONTINUED 77,000,000 -- $ 258,227 $ (259,233) $ (1,006)
Activity for the year ended September 30, 1991 -- -- -- --
------------ ---------- --------- ----------- ------------
BALANCE AT SEPTEMBER 30, 1991 77,000,000 -- $ 258,227 $ (259,233) $ (1,006)
------------ ---------- --------- ----------- ------------
Net loss for the year ended September 30, 1992 -- -- (848) (848)
------------ ---------- --------- ----------- ------------
BALANCE AT SEPTEMBER 30, 1992 77,000,000 -- $ 258,227 $ (260,081) $ (1,854)
------------ ---------- --------- ----------- ------------
Net income for the year ended September 30, 1993 -- -- 889 889
Shares/Units Issued / Split:
Shares issued August 1993 - $.00003 per share for cash 308,000,000 8,000 -- 8,000
Shares/Units - reverse stock split - 200 for 1 - Sept 1993 (383,075,000) -- -- --
------------ ---------- --------- ----------- ------------
BALANCE AT SEPTEMBER 30, 1993 1,925,000 -- $ 266,227 $ (259,192) $ 7,035
------------ ---------- --------- ----------- ------------
</TABLE>
See Notes to Consolidated Financial Statements and
Independent Accountants' Auditor's Report
F-6
<PAGE> 37
PROBEX CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Equity
Common Stock Accumulated
---------------------------------------- During Total
Shares/Units Shares/Units Development Stockholders'
Issued Subscribed Amount Stage Equity
------------- ------------ ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE AT SEPTEMBER 30, 1993 - CONTINUED 1,925,000 -- $ 266,227 $ (259,192) $ 7,035
Net loss for the year ended September 30, 1994 -- -- (401,897) (401,897)
Shares/Units Issued / Split:
Shares/Units - reverse stock split - 3.20834 for
1 - Jan. 1994 (1,323,352) -- -- --
Shares issued for technology license March 1994 9,950,000 -- -- --
Units issued in private placement - $0.92 per unit
Issued March 1994 642,500 591,100 -- 591,100
Issued April 1994 45,000 41,400 -- 41,400
Issued May 1994 322,391 296,600 -- 296,600
Issued July 1994 22,500 20,700 -- 20,700
Issued August 1994 97,500 89,700 -- 89,700
Stock offering costs for private placement -- (134,413) -- (134,413)
---------- ---------- ----------- ----------- -----------
BALANCE AT SEPTEMBER 30, 1994 11,681,539 -- $ 1,171,314 $ (661,089) $ 510,225
---------- ---------- ----------- ----------- -----------
</TABLE>
See Notes to Consolidated Financial Statements and
Independent Accountants' Auditor's Report
F-7
<PAGE> 38
PROBEX CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Equity
Common Stock Accumulated
-------------------------------------- During Total
Shares/Units Shares/Units Development Stockholders'
Issued Subscribed Amount Stage Equity
-----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE AT SEPTEMBER 30, 1994 - CONTINUED 11,681,539 - $ 1,171,314 $ (661,089) $ 510,225
Shares Issued:
Issued for directors fees - July 1995 - $0.033 per share 300,000 9,900 9,900
- no cash and basis is average book value
Issued for financial advisory services - Sept.1995 - $0.033
per share - no cash and basis is average book value 46,995 1,551 1,551
Stock offering costs from private placement in 1994 - (5,635) - (5,635)
Stock offering costs from Convertible Notes private placement - (22,000) - (22,000)
-1995
Net loss for the year ended September 30, 1995 - - (413,655) (413,655)
---------------------------------------------------------------
BALANCE AT SEPTEMBER 30, 1995 12,028,534 - $ 1,155,130 $(1,074,744) $ 80,386
===============================================================
</TABLE>
See Notes to Consolidated Financial Statements and Independent Accountants'
Auditor's Report
F-8
<PAGE> 39
PROBEX CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Equity
Common Stock Accumulated
------------------------------------ During Total
Shares/Units Shares/Units Development Stockholders'
Issued Subscribed Amount Stage Equity
------------ ---------- --------- ----------- ------------
<S> <C> <C> <C> <C> <C>
BALANCE AT SEPTEMBER 30, 1995 - CONTINUED 12,028,534 -- $1,155,130 $(1,074,744) $ 80,386
Shares Issued:
Issued for employee services - Oct. '95/Apr. '96 - $0.013
per share - no cash and basis is average book value 556,627 7,236 7,236
Issued for financial advisory fees - Oct. '95/May-Aug '96
- $0.013 per share - no cash and basis is average book
value 72,333 940 940
Issued for consulting services - Nov. 1995 - $0.013 per
share - no cash and basis is average book value 5,000 65 65
Issued for compensation to officers - Feb. 1996 - $0.013
per share - no cash and basis is average book value 500,000 6,500 6,500
Issued for extension of payable terms - Apr. 1996 - $0.013
per share - no cash and basis is average book value 50,000 650 650
Issued by Transfer Agent in Error - Mar. / Apr. 1996 70,667 -- --
Issued for conversion of 12% Aug. 1995 Notes - May 1996 494,670 371,000 371,000
Subscribed for conversion of 12% Aug. 1995 Notes - Mar.
1996 -- 7,067 5,300 5,300
Issued for ind. contractor services - Mar./Apr-Aug '96
- $0.013 per share - no cash and basis is average book
value 39,090 508 508
Stock offering costs from Convertible Notes private placement
- 1995 -- (26,690) -- (26,690)
Net loss for the year ended September 30, 1996 -- (931,610) (931,610)
---------- ------- ---------- ----------- -----------
BALANCE AT SEPTEMBER 30, 1996 13,816,921 7,067 $1,520,640 $(2,006,354) $ (485,715)
========== ======= ========== =========== ===========
</TABLE>
See Notes to Consolidated Financial Statements and Independent Accountants'
Auditor's Report
F-9
<PAGE> 40
PROBEX CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock
-----------------------------------
Shares/Units Shares/Units
Issued Subscribed Amount
-----------------------------------
<S> <C> <C> <C>
BALANCE AT SEPTEMBER 30, 1996 - CONTINUED 13,816,921 7,067 $1,520,640
Shares Issued:
Issued for employee services - Dec. 1996 - $0.013 per share
- no cash and basis is average book value 125,000 1,625
Issued for directors services - Dec. 1996 - $0.013 per share
- no cash and basis is average book value 579,720 7,536
Issued for consulting services - Oct. '96/Dec. '96 - $0.013 per share
- no cash and basis is average book value 66,947 870
Issued for consulting services - Jan. 1997 - $0.25 per share
- no cash and basis is recent stock offerings 14,171 3,543
Units issued from conversion of warrants/new offer - $0.25 per share
Issued Jan-Mar 1997 470,000 117,500
Issued for employee services - Jan. 1997 - $0.25 per share
- no cash and basis is recent stock offerings 200,000 50,000
Issued for employee services - Jan. 1997 - $0.25 per share
- no cash and basis is recent stock offerings - vested over 2 yrs 400,000 100,000
Issued for loan extension - Feb. 1997 - $0.25 per share
- no cash and basis is recent stock offerings 6,813 1,703
Issued for loan extension - Feb. 1997 - $0.25 per share
- no cash and basis is recent stock offerings 500,000 107,660
Issued for stock that was subscribed - Apr 1997 - from Mar 1996
- no cash as the cash was received previously 7,067 (7,067)
Subscribed from conversion of warrant/new stock offer - Apr. 1997 - 190,000 47,500
----------------------------------
SUB-TOTAL - BALANCE AT SEPTEMBER 30, 1997 16,186,639 190,000 $ 1,958,577
==================================
</TABLE>
<TABLE>
<CAPTION>
Equity
Accumulated
Deferred During Total
Stock Development Stockholders'
Expense Stage Equity
---------------------------------------
<S> <C> <C> <C>
BALANCE AT SEPTEMBER 30, 1996 - CONTINUED $ - $(2,006,354) $(485,715)
Shares Issued:
Issued for employee services - Dec. 1996 - $0.013 per share
- no cash and basis is average book value 1,625
Issued for directors services - Dec. 1996 - $0.013 per share
- no cash and basis is average book value 7,536
Issued for consulting services - Oct. '96/Dec. '96 - $0.013 per share
- no cash and basis is average book value 870
Issued for consulting services - Jan. 1997 - $0.25 per share
- no cash and basis is recent stock offerings 3,543
Units issued from conversion of warrants/new offer - $0.25 per share
Issued Jan-Mar 1997 117,500
Issued for employee services - Jan. 1997 - $0.25 per share
- no cash and basis is recent stock offerings 50,000
Issued for employee services - Jan. 1997 - $0.25 per share
- no cash and basis is recent stock offerings - vested over 2 yrs (64,583) 35,417
Issued for loan extension - Feb. 1997 - $0.25 per share
- no cash and basis is recent stock offerings 1,703
Issued for loan extension - Feb. 1997 - $0.25 per share
- no cash and basis is recent stock offerings 107,660
Issued for stock that was subscribed - Apr 1997 - from Mar 1996
- no cash as the cash was received previously -
Subscribed from conversion of warrant/new stock offer - Apr. 1997 47,500
-----------------------------------
SUB-TOTAL - BALANCE AT SEPTEMBER 30, 1997 $ (64,583) $(2,006,354) $(112,361)
===================================
</TABLE>
See Notes to Consolidated Financial Statements and Independent Accountants'
Auditor's Report
F-10
<PAGE> 41
PROBEX CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock
------------------------------------------------
Shares/Units Shares/Units
Issued Subscribed Amount
------------------------------------------------
<S> <C> <C> <C>
SUB-TOTAL - BALANCE AT SEPTEMBER 30, 1997 16,186,639 190,000 $ 1,958,577
Issued from conversion of warrants/new offer - $0.25 per share
Issued Apr-Jun 1997 632,067 159,018
Issued for loan extension - 12% Notes Payable - $0.25 per share
Issued Apr-Jun 1997 197,564 49,391
Issued for consulting services - Apr.-Jun. 1997 - $0.25 per share
- no cash and basis is recent stock offerings 553,000 138,250
Issued for conversion of 12% Jun. '96 Notes-May 1997-$0.25 per share 724,702 180,175
- no cash and basis is recent stock offerings
Issued for employee services - May 1997 - $0.25 per share
- no cash and basis is recent stock offerings 52,183 13,046
Issued for conversion of 10% Mar. '96 Note-May 1997-$0.11 per share 304,545 33,499
Issued May 1997 - basis is agreed upon price
Issued for stock offering - $0.11 per share
Issued May 1997 - basis is agreed upon price 1,219,996 130,000
Issued for conversion-deferred compensation for three officers
- $0.11 per unit - no cash and basis is recent stock offerings 1,908,631 201,668
Stock offering costs - (5,251)
------------------------------------------------
SUB-TOTAL - BALANCE AT SEPTEMBER 30, 1997 21,779,327 190,000 $ 2,858,373
================================================
<CAPTION>
Equity
Accumulated
Deferred During Total
Stock Development Stockholders'
Expense Stage Equity (Equity)
-------------------------------------------------
<S> <C> <C> <C>
SUB-TOTAL - BALANCE AT SEPTEMBER 30, 1997 $ (64,583) $ (2,006,354) $ (112,361)
Issued from conversion of warrants/new offer - $0.25 per share
Issued Apr-Jun 1997 - 159,018
Issued for loan extension - 12% Notes Payable - $0.25 per share
Issued Apr-Jun 1997 49,391
Issued for consulting services - Apr.-Jun. 1997 - $0.25 per share
- no cash and basis is recent stock offerings 138,250
Issued for conversion of 12% Jun. '96 Notes-May 1997-$0.25 per share 180,175
- no cash and basis is recent stock offerings
Issued for employee services - May 1997 - $0.25 per share
- no cash and basis is recent stock offerings 13,046
Issued for conversion of 10% Mar. '96 Note-May 1997-$0.11 per share 33,499
Issued May 1997 - basis is agreed upon price
Issued for stock offering - $0.11 per share
Issued May 1997 - basis is agreed upon price - 130,000
Issued for conversion-deferred compensation for three officers
- $0.11 per unit - no cash and basis is recent stock offerings 201,668
Stock offering costs - (5,251)
--------------------------------------------
SUB-TOTAL - BALANCE AT SEPTEMBER 30, 1997 $ (64,583) $ (2,006,354) $ 787,435
============================================
</TABLE>
See Notes to Consolidated Financial Statements and
Independent Accountants' Auditor's Report
F-11
<PAGE> 42
PROBEX CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock
---------------------------------------
Shares/Units Shares/Units
Issued Subscribed Amount
------------ ------------ ----------
<S> <C> <C> <C>
SUB-TOTAL - BALANCE AT SEPTEMBER 30, 1997 21,779,327 190,000 $ 2,858,373
Issued for stock that was subscribed - Jul 1997 - from Jun 1997
- no cash as the cash was received previously 190,000 (190,000)
Issued for consulting services - Jul. 1997 - $0.25 per share
- no cash and basis is recent stock offerings 52,500 13,125
Issued from conversion of warrants/new offer - $0.25 per share - Issued Jul-Sep 1997 1,193,000 298,250
Cancelled that were issued by Transfer Agent in Error - Mar. / Apr. 1996 (70,667) --
Issued for conversion of 12% Jul / Aug. '96 Note-Sep 1997-$0.20 per share
Issued Sep 1997 - basis is agreed upon price 538,300 107,660
Issued for conversion of 12% Notes Payable-Apr 1996 - $0.25 per share
Issued Sep 1997 - basis is recent stock offerings 185,865 46,466
Cancelled for liquidation - Probex Technologies, L.P. - issued Mar 1994 (9,860,000) --
Issued for liquidation of Probex Technologies, L.P. - to partners of L.P. 7,610,692 --
Subscribed from conversion of warrant/new stock offer - Sep. 1997-$0.25 per share -- 1,682,218 398,554
Subscribed from conversion of 12% Jun '96 Notes - Sep. 1997
- no cash and basis is recent stock offerings 100,625 25,156
Subscribed from conversion of 12% Notes Payable-Apr 1996 -$0.25 per share
- no cash and basis is recent stock offerings 56,009 14,002
Subscribed from conversion of loan from officer - Sep 1997 -$0.25 per share
- no cash and basis is recent stock offerings 53,389 13,347
Subscribed from conversion of 10% Note - Mar 1996 -$0.25 per share
Issued Sep 1997 - no cash and basis is recent stock offerings 23,104 5,776
Net loss for the twelve months ended September 30, 1997 --
---------- --------- -----------
BALANCE AT SEPTEMBER 30, 1997 21,619,017 1,915,344 $ 3,780,710
========== ========= ===========
<CAPTION>
Equity
Accumulated
Deferred During Total
Stock Development Stockholders'
Expense Stage Equity
--------- ------------ ------------
<S> <C> <C> <C>
SUB-TOTAL - BALANCE AT SEPTEMBER 30, 1997 $ (64,583) $(2,006,354) $ 787,435
Issued for stock that was subscribed - Jul 1997 - from Jun 1997
- no cash as the cash was received previously --
Issued for consulting services - Jul. 1997 - $0.25 per share
- no cash and basis is recent stock offerings 13,125
Issued from conversion of warrants/new offer - $0.25 per share - Issued Jul-Sep 1997 298,250
Cancelled that were issued by Transfer Agent in Error - Mar. / Apr. 1996 --
Issued for conversion of 12% Jul / Aug. '96 Note-Sep 1997-$0.20 per share
Issued Sep 1997 - basis is agreed upon price 107,660
Issued for conversion of 12% Notes Payable-Apr 1996 - $0.25 per share
Issued Sep 1997 - basis is recent stock offerings 46,466
Cancelled for liquidation - Probex Technologies, L.P. - issued Mar 1994 --
Issued for liquidation of Probex Technologies, L.P. - to partners of L.P. --
Subscribed from conversion of warrant/new stock offer - Sep. 1997-$0.25 per share 398,554
Subscribed from conversion of 12% Jun '96 Notes - Sep. 1997
- no cash and basis is recent stock offerings 25,156
Subscribed from conversion of 12% Notes Payable-Apr 1996 -$0.25 per share
- no cash and basis is recent stock offerings 14,002
Subscribed from conversion of loan from officer - Sep 1997 -$0.25 per share
- no cash and basis is recent stock offerings 13,347
Subscribed from conversion of 10% Note - Mar 1996 -$0.25 per share
Issued Sep 1997 - no cash and basis is recent stock offerings 5,776
Net loss for the twelve months ended September 30, 1997 (1,293,542) (1,293,542)
--------- ----------- -----------
BALANCE AT SEPTEMBER 30, 1997 $ (64,583) $(3,299,897) $ 416,230
========= =========== ===========
</TABLE>
See Notes to Consolidated Financial Statements and
Independent Accountants' Auditor's Report
F-12
<PAGE> 43
PROBEX CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock
---------------------------------------- Deferred
Shares/Units Shares/Units Stock
Issued Subscribed Amount Expense
------------ ------------ ----------- ---------
<S> <C> <C> <C> <C>
BALANCE AT SEPTEMBER 30, 1997 - CONTINUED 21,619,017 1,915,344 $ 3,780,710 $ (64,583)
Issued for stock that was subscribed - Sep 1997, issued Oct 1997
- no cash as the cash was received previously 1,915,344 (1,915,344)
Issued for stock that was subscribed - Sep 1997, issued Oct 1997
- no cash as the cash was received previously 12,001 --
Issued for consulting services - Jul. 1997 - $0.25 per share
- no cash and basis is recent private stock sales 410,130 102,533
Issued for employee services - Dec. 1997 - $0.25 per share
- no cash and basis is recent private stock sales 151,667 37,917
Issued from private stock sale - $0.25 per share - Issued Jul-Sep 1997 327,786 81,947
Subscribed from private stock sale - Dec. 1997-$0.25 per share -- 179,952 44,988
----------- --------
SUB-TOTAL - BALANCE AT DECEMBER 31, 1997 24,435,945 179,952
=========== ========
REVERSE 2 FOR 1 STOCK SPLIT - DECEMBER 1997 / 2 / 2
----------- -------- ----------- ----------
BALANCE AT DECEMBER 31, 1997 12,218,042 89,976 4,048,094 (64,583)
Issued for correction of error - Jan.1998 - post-split
- no cash as the cash was received previously 89,976 (89,976)
Issued from private stock sale - $0.50 per share - Issued Jan-Mar 1998 300,746 154,988
Subscribed from private stock sale - Mar. 1998-$0.50 per share -- 93,000 46,500
----------- -------- ----------- ----------
SUB-TOTAL - BALANCE AT SEPTEMBER 30, 1998 12,608,764 93,000 $ 4,249,582 $ (64,583)
=========== ======== =========== ==========
<CAPTION>
Equity
Accumulated
During Total
Development Stockholders'
Stage Equity
------------ -------------
<S> <C> <C>
BALANCE AT SEPTEMBER 30, 1997 - CONTINUED $ (3,299,897) $ 416,230
Issued for stock that was subscribed - Sep 1997, issued Oct 1997
- no cash as the cash was received previously --
Issued for stock that was subscribed - Sep 1997, issued Oct 1997
- no cash as the cash was received previously --
Issued for consulting services - Jul. 1997 - $0.25 per share
- no cash and basis is recent private stock sales 102,533
Issued for employee services - Dec. 1997 - $0.25 per share
- no cash and basis is recent private stock sales 37,917
Issued from private stock sale - $0.25 per share - Issued Jul-Sep 1997 -- 81,947
Subscribed from private stock sale - Dec. 1997-$0.25 per share 44,988
SUB-TOTAL - BALANCE AT DECEMBER 31, 1997
REVERSE 2 FOR 1 STOCK SPLIT - DECEMBER 1997
------------ ---------
BALANCE AT DECEMBER 31, 1997 (3,299,897) 683,614
Issued for correction of error - Jan.1998 - post-split
- no cash as the cash was received previously --
Issued from private stock sale - $0.50 per share - Issued Jan-Mar 1998 -- 154,988
Subscribed from private stock sale - Mar. 1998-$0.50 per share 46,500
------------ ---------
SUB-TOTAL - BALANCE AT SEPTEMBER 30, 1998 $ (3,299,897) $ 885,102
============ =========
</TABLE>
See Notes to Consolidated Financial Statements and
Independent Accountants' Auditor's Report
F-13
<PAGE> 44
PROBEX CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock
------------------------------------- Deferred
Shares/Units Shares/Units Stock
Issued Subscribed Amount Expense
------------ ------------ --------- --------
<S> <C> <C> <C> <C>
SUB-TOTAL - BALANCE AT SEPTEMBER 30, 1998 12,608,764 93,000 $4,249,582 $(64,583)
Issued for stock that was subscribed - Mar 1998, issued Apr 1998
- no cash as the cash was received previously 93,000 (93,000)
Issued from private stock sale - $0.50 per share - Issued Apr-May 1998 620,251 310,126
Issued for conversion of 12% Notes Payable-Apr 1996 - $0.50 per share
Issued Apr 1998 - basis is recent stock offerings 208,976 104,488
Issued for correction of error - Mar.1998 - shares issued at $0.65 instead
of $0.50 - no cash as the cash was received previously 9,230
Issued for consulting services - Jun. 1998 - $0.50 per share
- no cash and basis is recent private stock sales 161,895 68,448
Issued for employee services - Jun. 1998 - $0.50 per share
- no cash and basis is recent private stock sales 162,975 81,488
Issued for employee services - Jun.1998 - $0.50 per share
- no cash and basis is recent stock offerings - vested over 3 yrs 25,002 12,501 (10,417)
Issued from private stock sale - $0.50 per share - Issued Aug 1998 22,000 11,000
Issued for exercise of employee options - Aug.1998 - $0.50 per share 52,200 26,100
Issued for loan incentive - Aug. 1998 - $0.50 per share
- no cash and basis is recent private stock sales 50,000 25,000
Issued for employee services - Jun. 1998 - $0.50 per share
- no cash and basis is recent private stock sales 245,411 122,706
Issued for termination of anti-dilutive agreement - Sep.1998 - $0.80 per
share - no cash and basis is estimated market value 670,709 536,567
Amortization of Deferred Stock Expense -- 51,042
Net loss for the twelve months ended September 30, 1998 --
------------ ------- ---------- --------
BALANCE AT SEPTEMBER 30,1998 14,930,413 -- $5,548,004 $(23,958)
============ ======= ========== ========
<CAPTION>
Accumulated
During Total
Development Stockholders'
Stage Equity
----------- -------------
<S> <C> <C>
SUB-TOTAL - BALANCE AT SEPTEMBER 30, 1998 $(3,299,897) $ 885,102
Issued for stock that was subscribed - Mar 1998, issued Apr 1998
- no cash as the cash was received previously --
Issued from private stock sale - $0.50 per share - Issued Apr-May 1998 -- 310,126
Issued for conversion of 12% Notes Payable-Apr 1996 - $0.50 per share
Issued Apr 1998 - basis is recent stock offerings 104,488
Issued for correction of error - Mar.1998 - shares issued at $0.65 instead
of $0.50 - no cash as the cash was received previously --
Issued for consulting services - Jun. 1998 - $0.50 per share
- no cash and basis is recent private stock sales 68,448
Issued for employee services - Jun. 1998 - $0.50 per share
- no cash and basis is recent private stock sales 81,488
Issued for employee services - Jun.1998 - $0.50 per share
- no cash and basis is recent stock offerings - vested over 3 yrs 2,083
Issued from private stock sale - $0.50 per share - Issued Aug 1998 -- 11,000
Issued for exercise of employee options - Aug.1998 - $0.50 per share 26,100
Issued for loan incentive - Aug. 1998 - $0.50 per share
- no cash and basis is recent private stock sales 25,000
Issued for employee services - Jun. 1998 - $0.50 per share
- no cash and basis is recent private stock sales 122,706
Issued for termination of anti-dilutive agreement - Sep.1998 - $0.80 per
share - no cash and basis is estimated market value 536,567
Amortization of Deferred Stock Expense 51,042
Net loss for the twelve months ended September 30, 1998 (2,157,474) (2,157,474)
----------- -----------
BALANCE AT SEPTEMBER 30,1998 $(5,457,371) $ 66,674
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements and Independent
Accountants' Auditor's Report
F-14
<PAGE> 45
PROBEX CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock Preferred Stock
Shares/Units Shares/Units Shares/Units
Issued Subscribed Amount Subscribed
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
BALANCE AT SEPTEMBER 30, 1998 - CONTINUED 14,930,413 -- $ 5,548,004
Issued from private stock sale - Oct-Dec 1998 - $0.50 per share 259,800 129,900
Issued from private stock sale - Jan.- Apr. 1999 - $0.50 per share 2,728,331 -- 1,364,166
Amortization of Deferred Stock Expense --
Issued for employee services - Mar. 1999 - $0.50 per share
- no cash and basis is recent private stock sales 63,100 31,550
Issued for consulting services - Mar. 1999 - $0.50 per share
- no cash and basis is recent private stock sales 30,000 65,000
Issued for employee services - Jul - Sep. 1999 - $0.50 per share 334,500 117,250
Issued from private sale - Sep 1999 - $.425 per share 585,885 249,000
Issued from exercise of warrants - Aug. 1999 - $0.75 per share 1,420,800 1,065,600
Private sale to Directors & Officers - Aug. 1999 - $0.425 per share 590,588 251,000
Common Stock offering costs (175,609)
Issued from private stock sale - Sep. 1999 - $10.00 per share 190,000
Preferred Stock offering costs
Preferred Stock dividend accrual
Net loss for the twelve months ended Sep 30, 1999 --
---------- --------- ----------- -------
BALANCE AT SEPTEMBER 30, 1999 18,932,029 2,011,388 $ 8,645,860 190,000
========== ========= =========== =======
<CAPTION>
Equity
Accumulated
Deferred During Total
Preferred Stock Stock Development Stockholders'
Amount Expense Stage Equity
-------------- ----------- ----------- --------------
<S> <C> <C> <C> <C>
BALANCE AT SEPTEMBER 30, 1998 - CONTINUED $ $ (23,958) $(5,457,371) $ 66,674
Issued from private stock sale - Oct-Dec 1998 - $0.50 per share -- 129,900
Issued from private stock sale - Jan.- Apr. 1999 - $0.50 per share 1,364,166
Amortization of Deferred Stock Expense 18,749 18,749
Issued for employee services - Mar. 1999 - $0.50 per share
- no cash and basis is recent private stock sales 31,550
Issued for consulting services - Mar. 1999 - $0.50 per share
- no cash and basis is recent private stock sales 65,000
Issued for employee services - Jul - Sep. 1999 - $0.50 per share 117,250
Issued from private sale - Sep 1999 - $.425 per share 249,000
Issued from exercise of warrants - Aug. 1999 - $0.75 per share 1,065,600
Private sale to Directors & Officers - Aug. 1999 - $0.425 per share 251,000
Common Stock offering costs (175,609)
Issued from private stock sale - Sep. 1999 - $10.00 per share 1,900,000 1,900,000
Preferred Stock offering costs (291,773) (291,773)
Preferred Stock dividend accrual (17,123) (17,123)
Net loss for the twelve months ended Sep 30, 1999 (2,415,027) (2,415,027)
----------- ----------- ----------- -----------
BALANCE AT SEPTEMBER 30, 1999 $ 1,608,227 $ (5,209) $(7,889,521) $ 2,359,358
=========== =========== =========== ===========
</TABLE>
See Notes to Consolidated Financial Statements and Independent
Accountants' Auditor's Report
F-15
<PAGE> 46
PROBEX CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
PERIOD FROM
APRIL 1, 1988
TWELVE MONTHS ENDED (INCEPTION) TO
SEPTEMBER 30, SEPT. 30,
CASH USED BY OPERATING ACTIVITIES 1999 1998 1997 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net Loss $(2,415,027) $(2,157,474) $(1,293,542) $(7,872,398)
Adjustments to reconcile net loss to cash
used by operating activities:
Depreciation expense 36,344 20,343 4,615 70,499
Depreciation expense charged to research and development 126,795 83,090 30,911 293,620
Non-cash items in research and development expense 196,497 -- -- 196,497
Loss on sale of equipment -- -- 3,000 155,378
Loss on sale of land -- -- 47,109 47,109
Interest expense - not paid 104,088 10,088 33,703 169,179
Stock compensation expense 167,550 172,530 100,087 440,167
Stock services expense 65,000 170,980 163,324 424,163
Stock financing expense -- 561,567 158,754 720,321
Loss on disposition of vehicle -- -- 3,419
Decrease (increase) in employee receivable 6,654 9,338 (3,613) (8,708)
Decrease (increase) in prepaid expense (13,687) 940 -- (13,687)
Increase (decrease) in payroll taxes withheld (3,322) 5,090 (155) 1,980
Increase in other assets 801 (2,938) -- (2,938)
Increase in other current liabilities 1,349 500 -- 1,849
Increase in accounts payable and accrued expenses 109,895 275,290 58,011 728,138
----------- ----------- ----------- -----------
Net Cash Used By Operating Activities (1,617,063) (850,655) (697,795) (4,645,411)
----------- ----------- ----------- -----------
CASH USED BY INVESTING ACTIVITIES
Purchase of property and equipment (504,525) (580,100) (111,172) (1,381,822)
Cost of patent registration (15,150) -- -- (15,150)
Purchase of land -- -- -- (178,111)
Purchase of equipment -- -- -- (200,201)
Proceeds from sale of equipment -- -- 45,000 45,000
Proceeds from sale of land -- -- 22,424 115,232
----------- ----------- ----------- -----------
Net Cash Used By Investing Activities (519,675) (580,100) (43,748) (1,615,052)
----------- ----------- ----------- -----------
CASH PROVIDED BY FINANCING ACTIVITIES
Increase in capital lease obligation 30,062 30,062
Proceeds from preferred stock subscribed - not issued 1,900,000 -- -- 1,900,000
Restricted cash from preferred stock subscribed - not issued (190,142) (190,142)
Issuance of common stock 1,743,064 670,049 752,112 4,529,492
Proceeds from common stock subscribed - not issued 1,316,600 -- 398,555 1,715,155
Proceeds from long-term note - purchase of land -- -- -- 140,000
Repayment of long-term note - purchase of land -- -- (11,392) (125,872)
Proceeds from issuance of notes payable - 12% -- 100,000 -- 250,000
Repayment of notes payable - 12% -- (100,000) (89,532) (189,532)
Proceeds from issuance of convertible notes - 12% -- -- 37,500 692,500
Proceeds from issuance of convertible notes - 10% -- -- -- 85,000
Proceeds from loan from officer -- -- 25,000 25,000
Repayment of loan from officer -- -- (13,346) (13,346)
Proceeds from issuance of promissory note - 15% 450,000 300,000 -- 750,000
Preferred stock offering costs (291,773) -- -- (291,773)
Common stock offering costs (175,609) -- (1,250) (406,253)
Proceeds from installment note payable -- -- 50,000 19,829
Repayment of installment note payable -- -- -- (1,603)
----------- ----------- ----------- -----------
Net Cash Provided By Financing Activities 4,782,202 970,048 1,147,647 8,918,517
----------- ----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH 2,645,465 (460,706) 406,104 2,658,055
----------- ----------- ----------- -----------
CASH, BEGINNING OF PERIOD 12,590 473,296 67,191 --
----------- ----------- ----------- -----------
CASH, END OF PERIOD $ 2,658,055 $ 12,590 $ 473,296 $ 2,658,055
=========== =========== =========== ===========
</TABLE>
See Notes to Consolidated Financial Statements and
Independent Accountants' Auditor's Report
F-16
<PAGE> 47
PROBEX CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THE TWELVE MONTHS ENDED SEPTEMBER 30, 1999
1. NATURE OF BUSINESS
The Company owns proprietary technology whose primary application is for the
purification, recycling, and upgrading of used lubricating oils. The Company
has generated no significant revenue to date and was in the development stage
through September 30, 1999.
2. SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION - The accompanying consolidated financial statements include the
accounts of PROBEX CORPORATION, (the "Company"), formerly Conquest Ventures,
Inc., and its wholly owned subsidiaries - Quadrex Corporation and Apollo Oil
Company. Significant intercompany transactions and balances have been
eliminated in consolidation.
PROPERTY AND EQUIPMENT AND DEPRECIATION METHODS - Fixed assets greater than
$1,000 are recorded at cost and depreciated over their estimated useful lives,
which range from three to five years, using the straight-line method. Equipment
leased under capital leases is amortized over the life of the respective lease.
INTANGIBLE ASSETS - Patents are being amortized on a straight-line basis over
17 years. No patent amortization has been recorded by the Company as of the
date of these Consolidated Financial Statements.
RESTRICTED CASH - At September 30, 1999, the Company had $190,142 of restricted
cash, classified as a non-current asset. This amount represents 10% of the
cumulative convertible preferred stock offering proceeds (plus accrued
interest) held in a separate interest bearing escrow account and not available
to the Company until certain incorporation documents are amended to reflect
stockholder approval of certain amendments.
OFFERING COSTS - The offering costs incurred by the Company in connection with
private placement offerings have been offset against the proceeds.
RESEARCH AND DEVELOPMENT - Research and development costs are charged to
expense when incurred.
DIVIDENDS - Dividends payable in accrued expenses have been offset against the
deficit accumulated during development stage.
F-17
<PAGE> 48
PROBEX CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THE TWELVE MONTHS ENDED SEPTEMBER 30, 1999
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ACCOUNTING ESTIMATES - When preparing financial statements in conformity with
generally accepted accounting principles, management must make estimates based
on future events which affect the reported amounts of assets and liabilities,
the disclosure of contingent assets and liabilities as of the date of the
financial statements, and revenues and expenses during the reporting period.
Actual results could differ from these estimates.
ACCUMULATED OTHER COMPREHENSIVE INCOME - As of the date of these Consolidated
Financial Statements, the Company has no components of other comprehensive
income as defined by Statement of Financial Accounting Standards No. 130.
NET LOSS PER COMMON SHARE - The Company has a complex capital structure that
requires a dual presentation of basic and diluted earnings per share ("EPS") on
the face of the income statement. The net loss per common share ("basic") is
computed by dividing the net loss for the period by the weighted average number
of shares outstanding during the period. The net loss per common share-assuming
dilution ("diluted") reflects the potential dilution that could occur if
securities (warrants and convertible debt for the Company) were exercised or
converted into common stock.
The following table summarizes the numerator and denominator elements of the
basic EPS computations.
FOR THE TWELVE MONTH PERIOD ENDING SEPTEMBER 30
<TABLE>
<CAPTION>
1999 1998 1997
----------- ---------- -----------
<S> <C> <C> <C>
LOSS (NUMERATOR) $2,415,027 $2,157,474 $1,293,542
SHARES (DENOMINATOR) 16,207,446 12,846,804 18,479,171
LOSS PER SHARE $0.15 $0.17 $0.07
</TABLE>
The Company's outstanding warrants, options and convertible preferred stock
were anti-dilutive for the twelve-month periods ending September 30, 1999,
1998, and 1997.
F-18
<PAGE> 49
PROBEX CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THE TWELVE MONTHS ENDED SEPTEMBER 30, 1999
3. STOCKHOLDERS' EQUITY
On September 30, 1993, the stockholders approved a 200-for-1 reverse stock
split and restatement of the number of shares authorized to 75,000,000. On
January 17, 1994 the stockholders approved another reverse stock split that
reduced the number of shares of outstanding common stock to 601,648.
In January 1994, the Company commenced a private placement of up to 1,850,000
units at $.92 per unit, each unit consisting of one share of common stock, a
one-half "A" warrant and a one-half "B" warrant. The "A" warrants were
exercisable until November 15, 1996 to purchase one share of common stock at
$1.50 per share. The "B" warrants were exercisable until February 15, 1996 to
purchase one share of common stock at $3.00 per share. None of the Class A or
Class B warrants related to this offering were ever exercised.
From March to September 30, 1994, the Company sold 1,129,891 units in a private
placement and received net cash proceeds of $978,786.
In March 1994, the Company issued 9,950,000 shares of common stock to Probex
Technologies, L.P., a Texas limited partnership ("Limited Partnership") a
majority of which is owned by certain officers and directors of the Company, in
exchange for an exclusive license to use, in Canada and the United States for
defined applications, a technology antecedent to that on which the planned
operations of the Company are based. No value was attributed to the
license/technology acquisition because of the license/technologies
indeterminable value. On June 30, 1996, this technology and license was
transferred to a former director of the Company, subject to the Company's
retention of all rights in used lubricating oil processing applications.
Simultaneously, certain officers of the Company purchased 90,000 shares of the
common stock from the Limited Partnership. After this transaction, the Limited
Partnership owned 9,860,000 shares of the Company's common stock.
On June 30, 1995, the Company purchased 28% ownership in the assets and
liabilities of the Limited Partnership. The Limited Partnership intends to
utilize its best efforts to liquidate the Limited Partnership. As the initial
step in this process, the Limited Partnership's stock certificate representing
9,860,000 common shares of the Company was cancelled in September 1997.
8,860,000 common shares were distributed to the partners of the partnership (of
which the majority are either officers or directors of the Company) with
1,000,000 common shares being retained by the Limited Partnership to secure
approximately $180,000 of outstanding liabilities on the Limited Partnership's
books. In December 1997, 151,560 common shares were utilized to extend loan
terms and convert certain loans and 424,220 common shares were surrendered as a
result of the Company's reverse stock split (see discussion later). In
September 1998, 100,000 common shares were utilized to pay certain liabilities.
As of September 30, 1999, the Limited Partnership owns 324,220 common shares
and has approximately $70,000 of outstanding liabilities - see Subsequent
Events Footnote.
F-19
<PAGE> 50
PROBEX CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THE TWELVE MONTHS ENDED SEPTEMBER 30, 1999
3. STOCKHOLDERS' EQUITY (CONTINUED)
It is anticipated that these outstanding liabilities will be resolved by
November 30, 1999 through the sale of a portion of the remaining common shares
held by the Limited Partnership. Then, any remaining shares of common stock
owned by the Limited Partnership will be distributed to the partners in
liquidation. See Subsequent Events Footnote.
In July 1995, the Company issued 300,000 shares of common stock as fees for two
of its outside directors.
In August 1995, the Company commenced a private placement offering of up to 350
units at $1,000 per unit, each unit consisting of $1,000 in principal amount of
12% Convertible Notes and 1,000 Class C warrants for the purpose of funding the
pilot phase of its initial production facility. The Notes bore interest at 12%
per annum commencing on the date of issuance and matured 180 days thereafter.
Each $1.00 of indebtedness evidenced by the Notes was convertible, at the
option of the holder thereof, into one share of common stock of the Company at
any time prior to the maturity thereof. Each Class C warrant entitled the
holder thereof to purchase one share of Common Stock at $1.50 per share and
unless called for redemption, was exercisable at any time within 910 days after
issuance, or through February 1998. In March 1996, the Company offered a
restructuring of the terms of this offering, which is discussed below. In
October 1995, the Company completed the 350-unit 1995 private placement
offering plus a 5-unit over-subscription. With the completion of the offering,
the Company realized net cash proceeds of $327,000 after paying a financial
advisory fee of $28,000.
In September 1995, the Company issued 46,995 shares of common stock to a
consultant for financial advisory services. Additionally, this consultant
received one-half of an "A" warrant exercisable until November 15, 1996, to
purchase one share of common stock at $1.50 per share and one-half of a "B"
warrant exercisable until February 15, 1996 to purchase one share of common
stock at $3.00 per share. Accordingly, the Company issued this consultant
23,498 "A" warrants and 23,497 "B" warrants. None of the Class A or Class B
warrants related to this offering were ever exercised.
In October 1995, the Company issued 550,000 shares of common stock to two
employees, subject to a repurchase right by the Company at $.01 per share if
the employees were to leave the Company before three years.
In October 1995, the Company issued 28,000 shares of common stock to a
consultant for financial advisory services.
F-20
<PAGE> 51
PROBEX CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THE TWELVE MONTHS ENDED SEPTEMBER 30, 1999
3. STOCKHOLDERS' EQUITY (CONTINUED)
In November 1995, the Company issued 5,000 shares of common stock to a
consultant for services performed.
In February 1996, the Company issued 500,000 shares of common stock to three
officers as compensation in the form of stock in lieu of cash payments. The
compensation was for performance recognition bonuses.
In March 1996, the Company offered a restructuring of the terms of the August
1995 private placement offering in that if the note holders would convert their
12% loan into Common Stock of the Company, the conversion rate would be reduced
from $1.00 per share to $0.75 per share. Additionally, the Company offered a
Class G warrant, exercisable through March 1998 to purchase one share of Common
Stock at $0.75 per share for each dollar of principal and accrued interest that
was converted into Common Stock. The previous warrant exercisable at $1.50 per
share was unaffected by this offer. By June 30, 1996, all of the investors had
agreed to the proposal and returned notifications to the Company. However, the
issuance of Common Stock for one investor (5 units) had not occurred as of
September 30, 1996, and the Company recorded the transaction as Common Stock
Subscribed in the Stockholder Equity section of the Financial Statements. The
Transfer Agent subsequently issued these shares to the investor in April 1997.
The Company then offered all warrant and debt holders the opportunity to
convert their holdings at $0.25 per share as noted below. Therefore, 35,000 of
the 355,000 Class C warrants at $1.50 per share were converted in June 1997 at
$0.25 per share and another 25,000 were converted at $0.25 per share in
September 1997. 7,067 of the 501,737 Class G warrants at $0.75 per share were
converted in June 1997 at $0.25 per share and another 35,334 were converted at
$0.25 per share in September 1997. Additionally, 230,000 of the Class C
warrants were retired in June 1997 and replaced with identical Class L warrants
that expired in April 1999. Additionally, 325,067 of the Class G warrants were
retired in June 1997 and replaced with identical Class M warrants, which
expired in March 1999.
In March and April of 1996, the Company's Transfer Agent issued 70,667 shares
of common stock as the result of an investors conversion of 12% Convertible
Notes. However, management believed that the Transfer Agent issued these shares
in error as the same number of shares had been issued in May 1996. The Company
communicated their position and evidence to support their conclusion to the
Transfer Agent; whereupon, the shares were cancelled in July 1997.
In March 1996, the Company issued 11,950 shares of common stock to an
independent contractor for programming services performed.
In April 1996, the Company issued 50,000 shares of common stock to a vendor for
an extension of terms of payment. Subsequently, the vendor forgave the payable.
F-21
<PAGE> 52
PROBEX CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THE TWELVE MONTHS ENDED SEPTEMBER 30, 1999
3. STOCKHOLDERS' EQUITY (CONTINUED)
In April 1996, the Company issued 6,627 shares to an employee as compensation
in the form of stock in lieu of cash payments. The compensation was for
performance recognition bonuses.
In April 1996, the Company issued 107,500 Class H warrants to an officer of the
Company as recognition for services rendered to the Company. The warrants are
exercisable at $0.50 per share for five years or through April 2001. The
Company has no redemption rights and none of the warrants had been exercised as
of September 30, 1999.
In April 1996, the Company issued 7,500 Class H warrants to a third party for a
short term $7,500 loan. The warrants are exercisable at $0.50 per share for
five years or through April 2001. The Company has no redemption rights and none
of the warrants had been exercised as of September 30, 1999.
In April 1996, the Company issued 210,000 Class H warrants to a consultant for
financial advisory services. The warrants are exercisable at $0.50 per share
for five years or through April 2001. The Company has no redemption rights and
none of the warrants had been exercised as of September 30, 1999.
In May 1996, the Company issued 9,333 shares of common stock to the placement
agent as compensation for its services.
In May 1996, the Company issued 14,000 shares of common stock to an independent
contractor for graphics professional services.
In June 1996, the Company awarded a stock grant of 75,000 shares of Common
Stock to an employee which vests over a three-year period, subject to continued
employment with the Company. In addition, due to cash flow difficulties
encountered by the Company in early 1997, this same employee was not paid for
certain work. The employee agreed to keep working without pay in exchange for
immediate vesting of the employee's grant of Common Stock. The employee has
since left the Company and was paid for all hours worked. The Company issued
75,000 shares of common stock to this individual in December 1996.
F-22
<PAGE> 53
PROBEX CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THE TWELVE MONTHS ENDED SEPTEMBER 30, 1999
3. STOCKHOLDERS' EQUITY (CONTINUED)
In June 1996, the Company started quotation of its Common Stock on the NASDAQ
Electronic Bulletin Board under the symbol "PRBX". However, there was no active
market for the Common Stock and the Company's listing was suspended. In January
1998, the Company's market maker made a re-application to the NASDAQ and the
re-listing was approved. As of September 30, 1999, the stock was trading at
$1.687 per share. The market is thin (few buyers or sellers), and none of the
shares of common stock issued to date have been registered under the Securities
Act or any of the securities laws or regulations of any state or other
jurisdiction.
In October and December 1996, the Company issued a total of 66,947 shares of
Common Stock to five consultants as compensation for services performed.
In December 1996, the Company issued a total of 579,720 shares of Common Stock
as fees for four of its directors.
In December 1996, the Company issued 50,000 shares of Common Stock to an
employee as compensation in lieu of cash payments.
In January 1997, the Company issued a total of 14,171 shares of Common Stock to
four consultants as compensation for services performed.
From January through March 1997, the Company sold 470,000 shares of Common
Stock at $0.25 per share, resulting in $117,500 of cash proceeds.
In January 1997, the Company issued 600,000 shares to an employee for services
rendered. 200,000 of these shares vested immediately and were released to the
employee. The remaining 400,000 shares are being held by the Company and will
vest to the employee over a two-year period. The Company recorded these 400,000
shares of stock issued as Deferred Stock Expense as a reduction in the
Stockholder's Equity section of the Consolidated Balance Sheet. As of September
30, 1999, all shares had vested and the company recorded compensation expense
at $0.25 per share with a corresponding reduction of the Deferred Stock Expense
on the Balance Sheet.
In February 1997, the Company issued warrants to an officer of the Company to
purchase 150,000 shares of the Company's common Stock at $0.10 per share. The
warrants expire in April 2001 and none of the warrants had been exercised as of
September 30, 1999.
F-23
<PAGE> 54
PROBEX CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THE TWELVE MONTHS ENDED SEPTEMBER 30, 1999
3. STOCKHOLDERS' EQUITY (CONTINUED)
In February 1997, the Company issued 506,813 shares of Common Stock to three
investors holding loans with the Company. 6,813 of the shares were for an
extension of the maturity date of a note payable with one of the investors. The
remaining 500,000 shares were calculated to equalize for the difference in
conversion prices between each investor's $1.50 per share offering and the
Company's $0.25 per share offering and for the Company's inability to effect
timely repayment of the principal and interest on the note payable due - See
Indebtedness Footnote.
In early 1997, the Company had short-term working capital requirements and
offered all warrant holders the opportunity to exercise any or all of their
warrants into common stock at a conversion price of $0.25 per share. From
January to September 1997, the Company issued 2,295,067 shares of Common Stock
at $0.25 per share under this program resulting in approximately $574,000 of
cash proceeds. The Company has also received future commitments of
approximately $300,000. Additionally, the Company offered all debt holders the
opportunity to convert any or all of their debt into common stock at a
conversion price of $0.25 per share. As a result, the Company retired
approximately $500,000 in outstanding debt.
From April through June 1997, the Company issued 197,564 shares for an
extension of the terms of the $150,000 Note Payable issued in April 1996 - See
Indebtedness Footnote.
From April through June 1997, the Company issued 553,000 shares of Common Stock
to seven consultants as compensation for services rendered at $0.25 per share.
In May 1997, the Company issued 724,702 shares of Common Stock at $0.25 per
share for the conversion of $162,500 of the 12% Notes Payable issued in June
1996 - see Indebtedness Footnote.
In May 1997, the Company issued 52,183 shares of Common Stock at $0.25 per
share to two employees as compensation for services rendered.
In May 1997, the Company issued 304,545 shares of Common Stock at $0.11 per
share for the conversion of the $30,000 10% Convertible Note from March 1996.
In May 1997, the Company sold approximately 1,220,000 shares of Common Stock at
$0.11 cents per share resulting in approximately $130,000 of cash proceeds.
In May 1997, the Company issued 1,908,631 shares of Common Stock at $0.11 per
share to three officers for deferred and unpaid compensation - See Commitments
and Contingencies Footnote.
F-24
<PAGE> 55
PROBEX CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THE TWELVE MONTHS ENDED SEPTEMBER 30, 1999
3. STOCKHOLDERS' EQUITY (CONTINUED)
In July 1997, the Company issued 52,500 shares of Common Stock at $0.25 per
share to four consultants as compensation for services rendered.
From July to September 1997, the Company sold 1,193,000 shares of Common Stock
at $0.25 per share resulting in approximately $298,000 of cash proceeds.
In September 1997, the Company issued 538,300 shares of Common Stock to two
investors (269,150 each) for the conversion of 12% Convertible Notes and
accrued interest - see Indebtedness Footnote.
In September 1997, the Company issued 185,865 shares of Common Stock to
investors for the conversion of the $150,000 12% Notes Payable and accrued
interest - see Indebtedness Footnote.
As of September 30, 1997, 1,915,344 shares of Common Stock were subscribed but
not issued by the Company's Transfer Agent. The Transfer Agent issued these
shares in October 1997.
From October to December 1997, the Company sold 327,786 shares of Common Stock
at $0.25 per share resulting in approximately $82,000 of cash proceeds.
From October to December 1997, the Company issued 410,130 shares of Common
Stock at $0.25 per share to three consultants as compensation for services
rendered.
From October to December 1997, the Company issued 151,667 shares of Common
Stock at $0.25 per share to two employees as compensation for services
rendered.
In December 1997, the Company's Board of Director's approved the restructuring
of the equity shares (or any equity equivalents) of the Company in the form of
a reverse split of the current ("old") shares of the Company, such that one new
share was issued for every two old shares (or any equity equivalents)
outstanding.
In January 1998, the Company issued 179,952 shares of Common Stock to an
investor at $0.25 per share, which were subscribed but not issued by the
Company's Transfer Agent as of December 31, 1997. The Company determined that
an incorrect number of shares were issued on a pre-split basis and should have
only been 89,976 shares of Common Stock at $0.50 per share on a post-split
basis. The Transfer Agent retired the 179,952 share certificate and issued a
new certificate in the amount of 89,976 shares.
F-25
<PAGE> 56
PROBEX CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THE TWELVE MONTHS ENDED SEPTEMBER 30, 1999
3. STOCKHOLDERS' EQUITY (CONTINUED)
In March 1998, the Company sold 269,976 shares of Common Stock at $0.50 per
share resulting in approximately $135,000 of cash proceeds.
In March 1998, the Company sold 40,770 shares of Common Stock at $0.65 per
share resulting in $26,500 of cash proceeds. Subsequently, the Company
determined that the sales price should have been at $0.50 per share instead of
$0.65 per share, or an additional 12,230 shares. The Transfer Agent issued
these shares in April 1998.
As of March 31, 1998, 93,000 shares of Common Stock representing $46,500 of
cash proceeds at $0.50 per share were subscribed but not issued by the
Company's Transfer Agent. The Transfer Agent issued these shares in April 1998.
From April to June 1998, the Company sold 620,251 shares of Common Stock at
$0.50 per share resulting in approximately $310,126 of cash proceeds.
In June 1998, the Company issued 208,976 shares of Common Stock at $0.50 per
share for the conversion of the remaining $100,000 plus accrued interest of 12%
Notes Payable issued in June 1996 - see Indebtedness Footnote.
From April to June 1998, the Company issued 161,895 shares of Common Stock at
$0.50 per share to six consultants as compensation for services rendered.
From April to June 1998, the Company issued 187,977 shares of Common Stock at
$0.50 per share to five employees as special performance bonuses. However,
25,000 of these shares were held by the Company to be distributed in accordance
with a vesting period as further discussed in the Commitments and Contingencies
Footnote. The Company has recorded these 25,000 shares of stock issued as
Deferred Stock Expense as a reduction in the Stockholder's Equity section of
the Consolidated Balance Sheet. As of September 30, 1999, the employee had
vested in all of the 25,000 shares and was recorded by the Company as Stock
Compensation Expense at $0.50 per share with a corresponding reduction of the
Deferred Stock Expense in Stockholders' equity.
In July 1998, the Board of Directors granted 50,000 shares to an employee and
100,000 shares to two directors as compensation for services as related to the
third party funding agreement discussed further in Commitments and
Contingencies.
In August 1998, the Company issued 240,111 shares of Common Stock at $0.50 per
share to three officers for deferred and unpaid compensation. Additionally, the
Company issued 5,300 shares of Common Stock at $0.50 per share to an employee
for unpaid compensation - See Commitments and Contingencies Footnote.
F-26
<PAGE> 57
PROBEX CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THE TWELVE MONTHS ENDED SEPTEMBER 30, 1999
3. STOCKHOLDERS' EQUITY (CONTINUED)
In December 1998, the Company initiated a private placement offering of up to
$250,000 at $0.70 per share. As a result of a subsequent private placement
offering (see discussion below), the terms of this offering were retroactively
revised in January 1999 to provide the investors for each $0.50 invested, one
share of common stock and one warrant exercisable at $0.75 per share. This
private placement offering was terminated in January 1999 with a total of
$129,900 gross proceeds received by the Company and 259,800 shares of Common
Stock issued.
In February 1999, the Company initiated a private placement offering to
existing and new investors of up to $700,000 at $0.50 per share. Under the
terms of this offering, for each $0.50 invested, the investor receives one
share of common stock and one Class Q warrant exercisable at $0.75 per share.
The offering was over subscribed and the Company agreed to accept the
additional subscriptions. This private placement offering was terminated in
April 1999 with a total of $1,364,166 gross proceeds received by the Company
and 2,988,131 shares of Common Stock issued.
In March 1999, the Company issued 30,000 shares of Common Stock at $0.50 per
share to two consultants (of which one is a director of the Company) as
compensation for services rendered. In March 1999, the Company issued 63,100
shares of Common Stock at $0.50 per share to five employees as compensation for
services rendered.
Effective July 1999, the Company exercised its right to call the 2,988,131
outstanding Class Q warrants issued in the private placement offering discussed
above. Pursuant to the call, warrant holders had a period of thirty days in
which to exercise their warrants. The warrant call was terminated in August
1999 with a total of $1,080,600 gross proceeds received by the Company
($1,065,600 as of the date of these Consolidated Financial Statements and
$15,000 subsequently) and 1,420,800 shares of Common Stock was issued.
As a result of the above private placement offerings, the Company paid $252,960
of placement fees that have been recorded as offering costs and offset against
the Common Stock proceeds in the Consolidated Financial Statements.
In June 1999, the Company initiated an exclusive offering to directors and
officers of the Company of up to $500,000 at $0.425 per share ($0.50 adjusted
for non-payment of agent commission - there is no broker for the offering).
Under the terms of this offering, for each $0.425 invested, the investor
received one share of common stock, one warrant exercisable for two years at
$1.00 per share and one 0.10 warrant for each $4.25 invested that is
exercisable for five years at $0.55 per share. This offering was completed in
July 1999 resulting in $500,000 gross proceeds received by the Company and
1,176,471 shares of Common Stock issued. Additionally, 1,176,471 of $1.00
warrants and 117,647 of $0.55 warrants were issued as a result of the offering.
F-27
<PAGE> 58
PROBEX CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THE TWELVE MONTHS ENDED SEPTEMBER 30, 1999
3. STOCKHOLDERS' EQUITY (CONTINUED)
In July 1999, the Company initiated a private placement offering to new
investors of up to $5,000,000 of 10% Cumulative Convertible Preferred Stock,
Series A at $10.00 per share. Each Preferred Share is convertible at the option
of the holder into 5.33333 shares of Common Stock of the Company or a $1.875
conversion price per Common Share. Each Preferred Share is entitled to receive
semi-annual dividends at the rate of $1.00 per annum payable either in cash or
in Common Stock, at the option of the Company. If the Common Stock option is
chosen, the Common Stock will be issued at a value of $1.50 per share.
As of September 30, 1999, the Company had received $1,900,000 of gross proceeds
and 190,000 shares of Preferred Stock were subscribed and not issued.
Additionally, $190,000 of the above gross proceeds (10%) is being held in a
separate interest bearing account and not available for use by the Company
until certain incorporation documents were approved by the Company's
stockholder's - See Subsequent Events Footnote.
As a result of the above Preferred Stock private placement offering, the
Company has paid $291,000 of expenses as of September 30, 1999 ($209,000 of
placement fees and $83,000 of legal fees) and these have been recorded as
offering costs and offset against the Preferred Stock proceeds in the
Consolidated Financial Statements.
4. INCOME TAX
All tax returns have been filed through September 30, 1998. The net operating
loss carryforward is approximately $4,500,000 which expires by 2013. No
deferred tax asset has been recognized since management believes that it is not
likely to be realized.
5. COMMITMENTS AND CONTINGENCIES
At certain times during the year the Company's demand deposits held in banks
exceeded the federally insured limit of $100,000 per account.
In November 1995, the Company received a promissory note of approximately
$11,000 from an employee for advances made in 1995 to the employee for medical
expenses incurred because of an automobile accident. The employee was expected
to pay the note back to the Company in March 1996 from insurance proceeds.
However, the insurance settlement was delayed and during 1996 the Company made
additional advances to the employee and set up a payroll deduction plan for
repayments. Additionally, the employee has on occasion generated certain
business for the Company and the Board of Directors has formally agreed to
apply twenty (20) percent of the earned revenues generated by the employee
toward repayment of the loan. In November 1996, the insurance proceeds were
received but were less than expected to pay off the loan. The note is secured
by common stock owned by the employee in the Company and payments against the
note are being deducted from each paycheck to the employee.
F-28
<PAGE> 59
PROBEX CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THE TWELVE MONTHS ENDED SEPTEMBER 30, 1999
5. COMMITMENTS AND CONTINGENCIES (CONTINUED)
At September 30, 1999, the Company has accrued $10,000 representing deferred
compensation for the period July 1, 1998 to August 31, 1998 for the three
officers discussed previously in Stockholders Equity. Effective September 1,
1998, the three officers are now being paid the full amount of their
compensation.
In February 1998, the Company moved to a new office space and signed a
three-year lease agreement. Monthly lease payments of $2,938 are due from June
1998 through May 2001.
On June 30, 1998, the Company and a third party entered an agreement whereby
the third party will loan up to $1,500,000 for working capital purposes.
Subject to certain conditions, the Company may draw $150,000 under the
agreement every thirty (30) days. Interest accrues at 15% annually and all
amounts drawn under the loan agreement mature on June 30, 2000. At September
30, 1999, $750,000 had been drawn by the Company under this agreement and is
included as a current liability in the Consolidated Balance Sheet - see
Indebtedness Footnote. However, earlier repayment could be required pursuant to
the loan agreement. In exchange for the loan, the Company has granted a
ten-year warrant to purchase shares of common stock of the Company at $0.01 per
share equal to 10% of the number of shares of common stock outstanding on a
fully diluted basis, subject to certain adjustments. At September 30, 1999, the
fully diluted number of shares that would be utilized to determine how many
warrants would be available to the third party is 30,794,731.
At June 30, 1998, the Company adopted a Restricted Stock and Stock Option Plan
for certain employees to purchase common stock of the Company at $0.50 per
share. As of June 30, 1998, options to purchase 152,200 shares of common stock
of the Company were granted to five employees (of which 100,000 were to an
officer of the Company). As of September 30, 1998, 52,200 of these options were
exercised and the remaining 100,000 options were terminated effective June 30,
1999. In July 1998, options to purchase 150,000 shares of common stock of the
Company were granted to two officers of the Company. In August 1998, options to
purchase 50,000 shares of common stock of the Company were granted to each
director of the Company. None of these director options had been exercised and
were terminated effective June 30, 1999.
Effective June 30, 1999, the Company approved a plan to issue 2,750,000 stock
options for employees of the Company. The terms of the options are an exercise
price of $0.50 per share and are generally exercisable after the Company meets
five equally weighted goals over a maximum ten-year vesting period. As of
September 30, 1999, all except 2,000 of these options had been granted but none
had been exercised. The Company has adopted APB 25 to account for this
stock-based compensation plan. In light of the plan being variable, the Company
has recognized no expense in these Consolidated Financial Statements.
F-29
<PAGE> 60
PROBEX CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THE TWELVE MONTHS ENDED SEPTEMBER 30, 1999
5. COMMITMENTS AND CONTINGENCIES (CONTINUED)
In June 1999, the Company secured from The Port Authority of Columbiana County
in Wellsville, Ohio, a twelve-month option agreement in the amount of
$1,350,000 to purchase a 22-acre site for its first domestic facility. The
Company has paid $5,000 for the option agreement. Additionally, the site and
other surrounding property will be improved by construction of an adjacent
highway interchange primarily using Federal Funds. The Federal Highway
Administration has determined that no transfers of title to such land to
private industry may take place prior to completion of the highway interchange
that is projected to occur in 2001. Should the Company exercise the option to
purchase the land, then an interim lease agreement will be in effect until the
Seller certifies in writing that the highway interchange is complete. Rental
payments under the interim lease will be $20,000 per month and payments in
total shall be credited against the purchase price.
The Company was committed to issue up to 125,000 shares of common stock to an
employee, subject to a vesting period and meeting certain prescribed goals as
determined by management. As of September 30, 1999, 27,475 of these shares had
been issued to the employee, but it is not expected that additional shares will
be issued pursuant to this agreement.
The following table summarizes activity and warrants outstanding for the year
ending September 30, 1999.
<TABLE>
<CAPTION>
CLASS O/S 9-30-98 GRANTED LAPSED EXERCISED O/S 9-30-99
----- ----------- ----------- ------------ ------------- -----------
<S> <C> <C> <C> <C> <C>
F 91,750 91,750
H 162,506 162,506
I 43,962 43,962 -
K 75,000 75,000
L 115,000 115,000 -
M 162,534 162,534 -
N 453,864 453,864
P 208,481 208,481
Q - 2,988,131 1,547,331 1,420,800 20,000
Qa - 272,833 272,833
R 100,000 100,000 -
R - 1,176,471 1,176,471
Ra - 117,647 117,647
S - 550,000 550,000
T - 200,000 200,000
U - 120,000 120,000
V 152,000 152,000
-
----- --------- --------- --------- --------- ---------
TOTAL 1,413,097 5,577,082 1,968,827 1,420,800 3,600,552
===== ========= ========= ========= ========= =========
</TABLE>
F-30
<PAGE> 61
PROBEX CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THE TWELVE MONTHS ENDED SEPTEMBER 30, 1999
5. COMMITMENTS AND CONTINGENCIES (CONTINUED)
The Company has committed to issue 25,000 shares of common stock to an
employee, subject to a three-year vesting period. As of June 30, 1998, all of
the 25,000 shares were issued by the Transfer Agent and held by the Company. Of
this amount, 4,167 has been earned and issued to the employee. The remaining
20,833 are being held by the Company and will be distributed to the employee
every six months in accordance with the above vesting period. See further
discussion in Stockholders Equity.
In September 1999, the Company's current Chairman of The Board of Directors
additionally assumed the responsibilities of Chief Executive Officer and
President. In recognition of these new responsibilities, the Board of Directors
granted 250,000 warrants to purchase Common Stock of the Company at $1.00 per
share for a five-year period, subject to certain vesting requirements.
6. INDEBTEDNESS
In October 1995, the Company offered and accepted $50,000 from an individual
investor. The terms of the investment were 50 units at $1,000 per unit, each
unit consisting of $1,000 in principal amount of 10% Convertible Notes and
1,000 Class D warrants. The Notes bear interest at 10% per annum commencing on
their date of issuance and maturing 270 days thereafter. Each $1.00 of
indebtedness evidenced by the Notes was convertible, at the option of the
holder thereof, into one share of common stock of the Company at any time prior
to the maturity thereof. Each Class D warrant entitled the holder thereof to
purchase one share of Common Stock at $1.50 per share and unless called for
redemption, was exercisable at any time within 910 days after issuance or
through May 1998. The investor, at its option, may redeem and exchange the
investment for any new security issued by the Company prior to repayment of the
indebtedness. In August 1996, the investor exchanged this instrument for a new
12% Convertible Note which bears interest at 12% per annum commencing on the
date of issuance and maturing on January 26, 1997. In January 1997, the
Convertible Note and accrued interest were due but the Company was unable to
pay the investor. In exchange for an extension of the Convertible Note, the
Company agreed to issue 250,000 shares to the investor which was calculated to
equalize for the difference in conversion prices between the two offerings and
for the Company's inability to effect timely repayment of the principal and
interest. The investor agreed to extend the maturity date of the Convertible
Note and in June 1997, the outstanding principal and interest were converted
into 269,150 shares at $0.25 per share - See Stockholders Equity Footnote. The
Class D warrant was retired in August 1997.
F-31
<PAGE> 62
PROBEX CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THE TWELVE MONTHS ENDED SEPTEMBER 30, 1999
5. INDEBTEDNESS (CONTINUED)
In October 1995, the Company purchased land in anticipation of the construction
of a plant facility for the processing and purification of used lubricating
oils. The purchase price was $165,000 for which the Company paid $25,000 cash
and exercised a $140,000 promissory note. The promissory note was for a 5-year
period and required monthly payments of $2,839 to be made by the Company. In
June 1996, the Company listed the above land for sale with a broker and a sale
was consummated in April 1997.
At September 30, 1996, the Company wrote down certain equipment to a net
realizable value of $55,000. Sale proceeds of $45,000 were realized along with
a $7,000 credit from a vendor. As a result, the Company recorded a loss of
$3,000 from the sale of the equipment. The land and improvements were valued at
historical cost of $178,111 with an outstanding mortgage payable of $108,578.
The Company sold the property for $145,000, received cash proceeds of $22,424
and recorded a $47,109 loss.
In March 1996, the Company offered and accepted $5,000 from an individual
investor. The terms of the investment were 5 units at $1,000 per unit, each
unit consisting of $1,000 in principal amount of 10% Convertible Notes and
1,000 Class J warrants. The Notes bore interest at 10% per annum commencing on
their date of issuance and matured 360 days thereafter. The indebtedness
evidenced by the Notes was convertible, at the option of the holder thereof,
into shares of common stock of the Company at a conversion rate of $0.75 of
indebtedness per share of Common Stock, at any time prior to the maturity
thereof. Each Class J warrant entitled the holder thereof to purchase one share
of Common Stock at $1.50 per share and unless called for redemption, was
exercisable at any time within two years after issuance or through March 1998.
The investor, at its option, may redeem and exchange the investment for any new
security issued by the Company prior to repayment of the indebtedness. In March
1997, the Convertible Note and accrued interest came due but the Company was
unable to pay the investor. The Company was in the process of a new $0.25 per
share offer for current warrant and debt holders (see Stockholders' Equity
Footnote). As a result, the investor agreed to extend the maturity date of the
Convertible Note and in September 1997, the outstanding principal and accrued
interest were converted into 23,104 shares at $0.25 per share.
F-32
<PAGE> 63
PROBEX CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THE TWELVE MONTHS ENDED SEPTEMBER 30, 1999
6. INDEBTEDNESS (CONTINUED)
In March 1996, the Company offered and accepted $30,000 from an investor. The
terms of the investment were 30 units at $1,000 per unit, each unit consisting
of $1,000 in principal amount of 10% Convertible Notes and 1,000 Class E
warrants. The Notes bore interest at 10% per annum commencing on their date of
issuance and matured 360 days thereafter. The indebtedness evidenced by the
Notes was convertible, at the option of the holder thereof, into shares of
common stock of the Company at a conversion rate of $0.75 of indebtedness per
share of Common Stock, at any time prior to the maturity thereof. Each Class E
warrant entitled the holder thereof to purchase one share of Common Stock at
$3.00 per share and unless called for redemption, was exercisable at any time
within two years after issuance or through March 1998. The investor, at its
option, could redeem and exchange the investment for any new security issued by
the Company prior to repayment of the indebtedness. In March 1997, the
Convertible Note and accrued interest came due but the Company was unable to
pay the investor. The Company was in the process of a new $0.25 per share offer
for existing warrant and debt holders - see Stockholders' Equity Footnote. As a
result, the investor agreed to extend the maturity date of the Convertible Note
and in May 1997, the outstanding principal and accrued interest were converted
into 304,545 shares at $0.25 per share.
In April 1996, the Company completed an agreement with nine investors (of which
one was an officer of the Company) and received $150,000 of cash proceeds. The
agreement provided for the issuance of nine-month promissory notes at 12%
interest, secured by property, plant and equipment, inventories and
rights/title/interest of the proprietary process technology of the Company. The
notes were due and payable not later than the end of January 1997.
Additionally, each of the note holders/stockholders received 1.25 Class "F"
warrants to purchase common stock at $1.00 per share for each dollar of
indebtedness for five years through April 2001. In January 1997, these notes
and accrued interest came due but the Company was unable to retire this debt.
In exchange for the consideration discussed below, the noteholders/stockholders
agreed to extend the maturity date to May 31, 1997 or earlier if the Company
consummated the planned sale of equipment and land.
In exchange for the extension of the maturity date, the Company issued 197,564
shares to the note holders/stockholders, representing 1.25 shares for each
dollar of principal and accrued interest outstanding as of January 1997.
Additionally, the Company committed to each note holder/stockholder, an
anti-dilutive provision which distributed additional shares to the note
holder/stockholder so as to keep their percent of holdings in the Company
constant from the date of their investment until that date that the earlier of
(1) the Company achieved $100,000 of monthly revenues for six consecutive
months or (2) the effective date of a firm commitment public offering which
will raise $3,000,000 for the Company occurs.
F-33
<PAGE> 64
PROBEX CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THE TWELVE MONTHS ENDED SEPTEMBER 30, 1999
6. INDEBTEDNESS (CONTINUED)
In May 1998, the Company offered to each of the noteholders/stockholders that
were party to the anti-dilutive agreement (see Stockholders' Equity Footnote)
to eliminate that provision. Each noteholder/stockholder was given the choice
either to receive common stock (on a pro-rata basis) of the Company based on a
value of $0.80 per share or five-year warrants to purchase common stock (on a
pro-rata basis) of the Company at $0.20 per share. Effective June 30, 1998, all
of the noteholders/stockholders accepted the offer and as a result of the
acceptance, the Company issued 670,709 shares of common stock and 208,449
warrants. Accordingly, the anti-dilution agreement was terminated.
In April 1997, as a result of cash proceeds received from the sale of equipment
and land, the Company partially repaid approximately $64,000 of the then
outstanding principal and interest leaving a balance due of approximately
$104,000. In September 1997, note holders/stockholders representing
approximately $60,000 of the remaining outstanding balance converted into
shares of common stock at $0.25 per share. The remaining note
holders/stockholders representing approximately $44,000 were paid in cash.
In June 1996, the Company offered and accepted $50,000 from an investor. The
terms of the investment were 50 units at $1,000 per unit, each unit consisting
of $1,000 in principal amount of 12% Convertible Notes and a security interest
in the property, plant and equipment, inventories and rights/title/interest of
the proprietary process technology of the Company. The Note bore interest at
12% per annum commencing on the date of issuance and matured 180 days
thereafter. The indebtedness evidenced by the Notes was convertible, at the
option of the holder thereof, into shares of common stock of the Company at a
conversion rate of $0.75 of indebtedness per share of Common Stock, at any time
prior to the maturity thereof. The investor, at its option, could redeem and
exchange the investment for any new security issued by the Company prior to
repayment of the indebtedness. In January 1997, the Convertible Note and
accrued interest came due but the Company was unable to pay the investor. In
exchange for extension of the Convertible Note, the Company agreed to issue
250,000 shares to the investor which was calculated to equalize for the
difference in conversion prices between the two offerings and to compensate for
the Company's inability to effect timely repayment of the principal and accrued
interest. The investor agreed to extend the maturity date of the Convertible
Note and in July 1997, the outstanding principal and interest were converted
into 269,150 shares at $0.25 per share.
F-34
<PAGE> 65
PROBEX CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THE TWELVE MONTHS ENDED SEPTEMBER 30, 1999
6. INDEBTEDNESS (CONTINUED)
In June 1996, the Company commenced a private placement offering of up to 20
units at $25,000 per unit ($500,000), each unit consisting of $25,000 in
principal amount of 12% unsecured Convertible Notes and 20,000 Class I warrants
for the purpose of working capital and the retirement of certain liabilities
related to equipment and development costs that had been previously incurred by
the Company. The Notes bore interest at 12% per annum (payable semiannually)
commencing on their date of issuance and matured 360 days thereafter. The
indebtedness evidenced by the Notes was convertible, at the option of the
holder thereof, into shares of common stock of the Company at a conversion rate
of $0.75 of indebtedness per share of Common Stock, at any time prior to the
maturity. Each Class I warrant entitled the holder thereof to purchase one
share of Common Stock at $2.50 per share and unless called for redemption, was
exercisable at any time within 910 days after issuance or through October 1998.
The offering period was extended to and terminated on October 31, 1996, at
which time 11.5 of the 20 available units had been sold for total proceeds of
$287,500. In 1997, the Company was in the process of a new $0.25 per share
offering and offered all warrant and debt holders the opportunity to convert
their warrant or debt at $0.25 per share. As a result, $187,500 of the $287,500
Convertible Notes plus accrued interest was converted into common stock at
$0.25 per share. Additionally, these same investors who converted their Notes
Payable also exercised their warrant options to purchase shares of common stock
at the new $0.25 per share price.
In June 1998, the Company offered the remaining four investors holding $100,000
(plus accrued interest) of Convertible Notes ($287,500 issued less $187,500
converted) the option to convert the indebtedness and accrued interest into
common stock at $0.50 per share. As a result, all of the $100,000 of principal
and accrued interest for three of the investors was converted into 208,976
shares of common stock. The fourth investor chose to have the accrued interest
paid in cash by the Company.
In July 1998, the Company offered and accepted $100,000 from two investors. The
terms of the investment were a 12% per annum secured note due September 15,
1998. In exchange for the funds, the Company granted 50,000 shares of common
stock to the investors. In September 1998, the note and accrued interest of
$1,118 was paid back to the investors from the proceeds of a working capital
loan discussed below.
F-35
<PAGE> 66
PROBEX CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THE TWELVE MONTHS ENDED SEPTEMBER 30, 1999
6. INDEBTEDNESS (CONTINUED)
In September 1998, the Company was funded $300,000 under the third party
working capital agreement discussed previously in Commitments and
Contingencies. $101,118 of the funds were utilized to pay off the investors
loan and accrued interest discussed above, $27,367 to pay legal expenses
associated with the loan, $30,000 to pay a closing fee to the third party and
the remaining funds were utilized by the Company for working capital purposes.
From October to December 1998, the Company was funded an additional $450,000
under the agreement and has recorded the $750,000 outstanding balance at
September 30, 1999 as a current liability (due June 2000) in the Consolidated
Financial Statements. Additionally, the Company has recorded $109,688 of
accrued interest on the loan as of September 30, 1999 in the Consolidated
Financial Statements.
7. LEASES
Included in property and equipment in the accompanying Consolidated Financial
Statements are the following assets held under capital leases:
<TABLE>
<CAPTION>
Sept. 30, Sept. 30,
1999 1998
--------- ---------
<S> <C> <C>
Lab and research equipment $43,159 $11,898
Less accumulated amortization 3,569 1,190
------- -------
Assets under capital leases, net 39,590 10,708
</TABLE>
The lab and research equipment for the above capital leases has unexpired terms
of two to three years. The Company also leases office equipment and its
operating facility under operating leases with unexpired terms ranging from one
to three years. Rental expense for operating leases amounted to $41,716,
$26,302 and $13,825 for 1999, 1998 and 1997 respectively.
F-36
<PAGE> 67
PROBEX CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THE TWELVE MONTHS ENDED SEPTEMBER 30, 1999
7. LEASES (CONTINUED)
At September 30, 1999, minimum lease payments under leases expiring subsequent
to September 30, 1999 are:
<TABLE>
<CAPTION>
Capital Operating
Year ended September 30: Leases Leases
- ------------------------ ------- ---------
<S> <C> <C>
2000 $12,899 $ 62,742
2001 12,438 39,410
2002 10,324 4,953
------- --------
Total minimum lease payments 35,661 $107,105
--------
Less amount representing interest (5,599)
-------
Present value of net minimum lease payments $30,062
-------
</TABLE>
8. LIQUIDITY AND CAPITAL RESOURCES
The Company is in the development stage and has incurred an accumulated deficit
of approximately $7,890,000 since inception. The Company has approximately
$1,301,000 of current liabilities against approximately $2,680,000 of current
assets, of which the majority is in cash. Of the current liabilities,
approximately $286,000 is accounts payable, $750,000 is a current promissory
note due June 2000 and approximately $252,000 is accrued liabilities. The
Company has been able to structure short term liquidity financing through
private placement offerings for the immediate future. As related to longer term
financing, the Company has reached an agreement with a third party to provide
up to $1,500,000 of funds (of which $750,000 has been funded) subject to
certain terms and conditions - See Commitments and Contingencies Footnote.
However, there can be no assurance that the Company may not experience
liquidity problems or obtain sufficient funding on a timely basis.
F-37
<PAGE> 68
PROBEX CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THE TWELVE MONTHS ENDED SEPTEMBER 30, 1999
9. SUBSEQUENT EVENTS
In July 1999, the Company initiated a private placement offering to new
investors of up to $5,000,000 of 10% Cumulative Convertible Preferred Stock,
Series A at $10.00 per share. Each Preferred Share is convertible at the option
of the holder into 5.33333 shares of Common Stock of the Company or a $1.875
conversion price per Common Share. Each Preferred Share is entitled to receive
semi-annual dividends at the rate of $1.00 per annum payable either in cash or
in Common Stock, at the option of the Company. If the Common Stock option is
chosen, the Common Stock would be issued at a value of $1.50 per share. The
Company has extended the offering through December 15, 1999 and as of the date
of these Consolidated Financial Statements, the Company had received $4,425,000
of gross proceeds and 442,500 shares of Preferred Stock were subscribed but not
issued. Additionally, $442,500 of the above gross proceeds (10%) is being held
in a separate interest bearing account and not available for use by the Company
until certain incorporation documents were approved by the Company's
stockholder's, expected to occur by December 31, 1999.
In October 1999, the Company negotiated a final settlement of an outstanding
obligation for legal services. The original amount of the obligation was
$110,000 and the Company reached an agreement to pay $20,000 in full settlement
of the obligation and has recorded the resulting settlement of approximately
$90,000 as reduction of stock issuance costs.
As of September 30, 1999, the Limited Partnership owning 324,220 common shares
had approximately $70,000 of outstanding liabilities. From October to November
1999, the Limited Partnership sold 55,912 shares of Common Stock at prices
ranging from $0.95 to $1.70 per share resulting in $64,336 of gross proceeds.
The proceeds were utilized to liquidate all of the outstanding liabilities of
the Limited Partnership and the remainder is being held in reserve for
distribution to the Limited Partnership partners. As of the date of these
Consolidated Financial Statements, the Limited Partnership owns 268,308 common
shares and has no obligations. The Limited Partnership is in the process of
being closed down and the remaining shares of common stock will be distributed
to the partners.
10. RECLASSIFICATION
Certain prior period items in these Consolidated Financial Statements have been
reclassified to conform with current presentation.
F-38
<PAGE> 69
PROBEX CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THE TWELVE MONTHS ENDED SEPTEMBER 30, 1999
11. SUPPLEMENTAL DISCLOSURE - STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Twelve Months Ended
-------------------
Sep. 30,1999 Sep. 30,1998
------------ ------------
<S> <C> <C>
Interest paid $ 1,496 $ 1,871
Income taxes paid $ -- $ --
NON CASH ACTIVITIES:
Stock issued for services $ 65,000 $170,980
Stock issued for compensation 167,550 172,530
Stock issued for financing -- 561,567
Accrued dividend payable 17,123 --
Accrued interest payable 106,188 3,500
Deferred stock amortization 18,749 10,417
Interest on 12% notes converted to stock -- 4,488
Interest on 15% promissory note -- 3,500
Conversion of 12% notes to common stock -- 100,000
Conversion of accrued payroll to stock -- 122,706
Negotiated settlement on legal fees 89,923 --
</TABLE>
F-39
<PAGE> 70
PROBEX CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THE TWELVE MONTHS ENDED SEPTEMBER 30, 1999
12. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The following is a summary of unaudited quarterly financial information for the
years ended September 30, 1999 and September 30, 1998.
(In dollars, except per share data)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Fiscal 1999
Quarter ended Dec. 31 Mar. 31 Jun. 30 Sep. 30
- ---------------------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Total Revenues $ -- $ -- $ -- $ --
Gross Margin -- -- -- --
Operating Loss 506,064 430,575 516,226 865,359
Net Loss 521,049 459,342 544,663 889,973
Net Loss Per Share $ .03 $ .03 $ .03 $ .06
- ---------------------------- ---------- ---------- ---------- ----------
- --------------------------------------------------------------------------------
Fiscal 1998
Quarter ended Dec. 31 Mar. 31 Jun. 30 Sep. 30
- ---------------------------- ---------- ---------- ---------- ----------
Total Revenues $ -- $ -- $ -- $ --
Gross Margin -- -- -- --
Operating Loss 414,578 251,699 407,845 462,407
Net Loss 414,762 252,423 411,731 1,054,898
Net Loss Per Share $ .04 $ .02 $ .03 $ .08
- ---------------------------- ---------- ---------- ---------- ----------
</TABLE>
F-40
<PAGE> 71
PART III
ITEM 1. INDEX TO EXHIBITS.
Exhibit
Number Description
3.1* Amended and Restated Articles of Incorporation, as filed with
the Colorado Secretary of State on December 30, 1999.
3.2 Bylaws of the Company, as amended to date.
4.1 Form of Common Stock Certificate.
4.2* Form of Series A 10% Cumulative Convertible Preferred Stock
Certificate.
4.3.1 Form of Class "F" Warrants, at $1.00 per share, post-split,
expiring April 26, 2001.
4.3.2 Form of Class "H" Warrants, at $1.00 per share, post-split,
expiring April 26, 2001.
4.3.3 Form of Class "K" Warrants, at $0.20 per share, post-split,
expiring April 26, 2001.
4.3.4 Form of Class "N" Warrants, at $1.00 per share expiring, from
August 15, 2002 to June 08, 2003.
4.3.5 Warrant to Purchase 10% of the then outstanding Common Stock
of the Company granted to HSB Engineering Finance Corporation
at $0.01 per share, effective June 30, 1998, and expiring on
June 30, 2008.
4.3.6 Form of Class "P" Warrants, at $0.20 per share expiring
September 2, 2003.
4.3.7 Form of Class "Q" Warrants, at $0.75 per share, exercised but
unissued.
4.3.8 Form of Class "Q-a" Warrants, at $0.55 per share expiring
April 16, 2004.
4.3.9 Form of Class "R" Warrants, at $1.00 per share expiring June
4, 2001.
4.3.10 Form of Class "R-a" Warrants, at $0.55 per share expiring June
4, 2004.
4.3.11 Form of Class "S" Warrant at $0.50 to $1.00 per share expiring
from August 28, 2002 to October 28, 2004.
4.3.12* Form of Class "T" Warrants, at $0.50 per share.
4.3.13* Form of Class "U" Warrants, at $0.50 per share expiring
January 31, 2004.
4.3.14* Form of Class "V" Warrants, at $1.875 per share of Preferred
Stock expiring December 15, 2004.
29
<PAGE> 72
10.1 1998 Omnibus Stock Option and Incentive Plan for the Company,
effective June 30, 1998.
10.2 Consulting Agreement between Grove Capital Corporation, a
Georgia corporation, and the Company, dated as of December 16,
1997.
10.3 Convertible Loan, Warrant and Security Agreement between HSB
Engineering Finance Corporation, Inc., a Delaware corporation,
and the Company, dated as of June 30, 1998.
10.4 Investors Rights Agreement between HSB Engineering Finance
Corporation, Inc., a Delaware corporation, and the Company,
dated as of June 30, 1998.
10.5 Employment Agreement between Martin MacDonald, a Texas
resident, and the Company, dated as of June 30, 1998.
10.6 Employment Agreement between Thomas Murray, a Texas resident,
and the Company, dated as of June 30, 1998.
10.7 Form of Invention Assignment and Confidentiality Agreement.
10.8 Project Development Advisory Agreement between Project
Development Associates, LLC., a Minnesota limited liability
company, and the Company, dated as of December 1, 1998.
10.9 Financial Advisory Fee Agreement between Silver Lake
Industries, Inc., a Texas corporation, Brycap Investments,
Inc., a Texas corporation, and the Company, dated as of March
29, 1999.
10.10 Financial Consulting Services Agreement between Travis Morgan
Securities, Inc. and the Company, dated as of April 16, 1999.
10.11 Option to Purchase or Lease Agreement between Columbia County
Port Authority, a body corporate and politic, and the Company,
dated as of June 1999.
10.12 Financial Consulting Services Agreement between National
Capital Merchant Group, Ltd., a Bahamian corporation, and the
Company, dated as of June 17, 1999.
10.13 Financial Advisory Fee Agreement between William M. Noble Jr.,
a Texas resident, and the Company, dated as of June 28, 1999.
10.14 Placement Agent Agreement between APS Financial Corporation, a
Colorado corporation, and the Company, dated as of July 21,
1999.
10.15 Financial Advisory Fee Agreement between APS Financial
Corporation, a Colorado corporation, and the Company, dated as
of August 6, 1999.
10.16 Financial Advisory Fee Agreement between Cambridge Strategies
Group, LLC, a Texas limited liability company, and the
Company, dated as of August 20, 1999.
30
<PAGE> 73
10.17 Financial Advisory Fee Agreement between Michael D. Billings,
a Texas resident, Henry F. Coffeen, a Texas resident, and the
Company, dated as of August 20, 1999.
27.1 Financial Data Schedule.
* To be filed by amendment.
ITEM 2. DESCRIPTION OF EXHIBITS.
See "Item 1. Index to Exhibits."
31
<PAGE> 74
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
the registrant caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
----------------------------------------
Probex Corp.
(Registrant)
Date: December 21, 1999 By: /s/ BRUCE A. HALL
--------------------------------- -------------------------------------
Bruce A. Hall, Chief Financial Officer
32
<PAGE> 75
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
3.1* Amended and Restated Articles of Incorporation, as filed with
the Colorado Secretary of State on December 30, 1999.
3.2 Bylaws of the Company, as amended to date.
4.1 Form of Common Stock Certificate.
4.2* Form of Series A 10% Cumulative Convertible Preferred Stock
Certificate.
4.3.1 Form of Class "F" Warrants, at $1.00 per share, post-split,
expiring April 26, 2001.
4.3.2 Form of Class "H" Warrants, at $1.00 per share, post-split,
expiring April 26, 2001.
4.3.3 Form of Class "K" Warrants, at $0.20 per share, post-split,
expiring April 26, 2001.
4.3.4 Form of Class "N" Warrants, at $1.00 per share expiring, from
August 15, 2002 to June 08, 2003.
4.3.5 Warrant to Purchase 10% of the then outstanding Common Stock
of the Company granted to HSB Engineering Finance Corporation
at $0.01 per share, effective June 30, 1998, and expiring on
June 30, 2008.
4.3.6 Form of Class "P" Warrants, at $0.20 per share expiring
September 2, 2003.
4.3.7 Form of Class "Q" Warrants, at $0.75 per share, exercised but
unissued.
4.3.8 Form of Class "Q-a" Warrants, at $0.55 per share expiring
April 16, 2004.
4.3.9 Form of Class "R" Warrants, at $1.00 per share expiring June
4, 2001.
4.3.10 Form of Class "R-a" Warrants, at $0.55 per share expiring June
4, 2004.
4.3.11 Form of Class "S" Warrant at $0.50 to $1.00 per share expiring
from August 28, 2002 to October 28, 2004.
4.3.12* Form of Class "T" Warrants, at $0.50 per share.
4.3.13* Form of Class "U" Warrants, at $0.50 per share expiring
January 31, 2004.
4.3.14* Form of Class "V" Warrants, at $1.875 per share of Preferred
Stock expiring December 15, 2004.
</TABLE>
<PAGE> 76
<TABLE>
<S> <C>
10.1 1998 Omnibus Stock Option and Incentive Plan for the Company,
effective June 30, 1998.
10.2 Consulting Agreement between Grove Capital Corporation, a
Georgia corporation, and the Company, dated as of December 16,
1997.
10.3 Convertible Loan, Warrant and Security Agreement between HSB
Engineering Finance Corporation, Inc., a Delaware corporation,
and the Company, dated as of June 30, 1998.
10.4 Investors Rights Agreement between HSB Engineering Finance
Corporation, Inc., a Delaware corporation, and the Company,
dated as of June 30, 1998.
10.5 Employment Agreement between Martin MacDonald, a Texas
resident, and the Company, dated as of June 30, 1998.
10.6 Employment Agreement between Thomas Murray, a Texas resident,
and the Company, dated as of June 30, 1998.
10.7 Form of Invention Assignment and Confidentiality Agreement.
10.8 Project Development Advisory Agreement between Project
Development Associates, LLC., a Minnesota limited liability
company, and the Company, dated as of December 1, 1998.
10.9 Financial Advisory Fee Agreement between Silver Lake
Industries, Inc., a Texas corporation, Brycap Investments,
Inc., a Texas corporation, and the Company, dated as of March
29, 1999.
10.10 Financial Consulting Services Agreement between Travis Morgan
Securities, Inc. and the Company, dated as of April 16, 1999.
10.11 Option to Purchase or Lease Agreement between Columbia County
Port Authority, a body corporate and politic, and the Company,
dated as of June 1999.
10.12 Financial Consulting Services Agreement between National
Capital Merchant Group, Ltd., a Bahamian corporation, and the
Company, dated as of June 17, 1999.
10.13 Financial Advisory Fee Agreement between William M. Noble Jr.,
a Texas resident, and the Company, dated as of June 28, 1999.
10.14 Placement Agent Agreement between APS Financial Corporation, a
Colorado corporation, and the Company, dated as of July 21,
1999.
10.15 Financial Advisory Fee Agreement between APS Financial
Corporation, a Colorado corporation, and the Company, dated as
of August 6, 1999.
10.16 Financial Advisory Fee Agreement between Cambridge Strategies
Group, LLC, a Texas limited liability company, and the
Company, dated as of August 20, 1999.
</TABLE>
<PAGE> 77
10.17 Financial Advisory Fee Agreement between Michael D. Billings,
a Texas resident, Henry F. Coffeen, a Texas resident, and the
Company, dated as of August 20, 1999.
27.1 Financial Data Schedule.
* To be filed by amendment.
<PAGE> 1
EXHIBIT 3.2
BYLAWS
of
CONQUEST VENTURES, INC.
<PAGE> 2
TABLE OF CONTENTS
Page
----
ARTICLE I - OFFICES .................................................... 1
1.1 Business Office ............................................. 1
1.2 Registered Office ........................................... 1
ARTICLE II - SHARES AND TRANSFER THEREOF ............................... 1
2.1 Regulation .................................................. 1
2.2 Certificates for Shares ..................................... 1
2.3 Cancellation of Certificates ................................ 2
2.4 Lost, Stolen or Destroyed Certificates ...................... 2
2.5 Transfer of Shares .......................................... 2
2.6 Transfer Agent .............................................. 3
2.7 Close of Transfer Book and Record Date....................... 3
ARTICLE III - SHAREHOLDERS AND MEETINGS THEREOF ....................... 4
3.1 Shareholders of Record ...................................... 4
3.2 Meetings .................................................... 4
3.3 Annual Meeting .............................................. 4
3.4 Special Meetings ............................................ 4
3.5 Notice ...................................................... 5
3.6 Meeting of all Shareholders ................................. 5
3.7 Voting Record ............................................... 5
3.8 Quorum ...................................................... 6
3.9 Manner of Acting ............................................ 6
3.10 Proxies ..................................................... 6
3.11 Voting of Shares ............................................ 6
3.12 Voting of Shares by Certain Holders ......................... 6
3.13 Informal Action by Shareholders ............................. 7
3.14 Voting by Ballot ............................................ 7
3.15 Cumulative Voting ........................................... 8
ARTICLE IV - DIRECTORS, POWERS AND MEETINGS ............................ 8
4.1 Board of Directors .......................................... 8
4.2 Regular Meetings ............................................ 8
4.3 Special Meetings ............................................ 8
4.4 Notice ...................................................... 8
4.5 Participation by Electronic Means ........................... 9
4.6 Quorum and Manner of Acting ................................. 9
4.7 Organization ................................................ 9
<PAGE> 3
TABLE OF CONTENTS
(Continued)
Page
----
4.8 Presumption of Assent ................................... 9
4.9 Informal Action by Directors ............................ 10
4.10 Vacancies ............................................... 10
4.11 Compensation ............................................ 10
4.12 Removal of Directors .................................... 10
4.13 Resignations ............................................ 10
4.14 General Powers .......................................... 11
ARTICLE V - OFFICERS ................................................. 11
5.1 Term and Compensation ................................... 11
5.2 Powers .................................................. 11
5.3 Compensation ............................................ 13
5.4 Delegation of Duties .................................... 13
5.5 Bonds ................................................... 13
5.6 Removal ................................................. 13
ARTICLE VI - FINANCE ................................................. 13
6.1 Reserve Funds ........................................... 13
6.2 Banking ................................................. 13
ARTICLE VII - DIVIDENDS .............................................. 14
ARTICLE VIII - CONTRACTS, LOANS AND CHECKS ........................... 14
8.1 Execution of Contracts .................................. 14
8.2 Loans ................................................... 14
8.3 Checks .................................................. 14
8.4 Deposits ................................................ 14
ARTICLE IX - FISCAL YEAR ............................................. 15
ARTICLE X - CORPORATE SEAL ........................................... 15
ARTICLE XI - AMENDMENTS .............................................. 15
ARTICLE XII - EXECUTIVE COMMITTEE .................................... 15
12.1 Appointment ............................................. 15
12.2 Authority ............................................... 15
12.3 Tenure and Qualifications ............................... 15
12.4 Meetings ................................................ 16
12.5 Quorum .................................................. 16
<PAGE> 4
TABLE OF CONTENTS
(Continued)
Page
----
12.6 Informal Action by Executive Committee ................. 16
12.7 Vacancies .............................................. 16
12.8 Resignations and Removal ............................... 16
12.9 Procedure .............................................. 16
ARTICLE XIII - EMERGENCY BYLAWS ..................................... 17
CERTIFICATE ......................................................... 18
<PAGE> 5
ARTICLE I
OFFICES
1.1 Business office. The principal office and place of business of the
corporation shall be at 1111 El Camino Real, Tustin, California 92680. The
corporation will not maintain an office in the State of Colorado. Other offices
and places of business may be established from time to time by resolution of the
Board of Directors or as the business of the corporation may require.
1.2 Registered office. The registered office of the corporation,
required by the Colorado Corporation Code to be maintained in the State of
Colorado, may be, but need not be, identical with the principal office in the
State of Colorado, and the address of the registered office may be changed from
time to time by the Board of Directors.
ARTICLE II
SHARES AND TRANSFER THEREOF
2.1 Regulation. The Board of Directors may make such rules and
regulations as it may deem appropriate concerning the issuance, transfer and
registration of certificates for shares of the corporation, including the
appointment of transfer agents and registrars.
2.2 Certificates for Shares. Certificates representing shares of the
corporation shall be respectively numbered serially for each class of shares, or
series thereof, as they are issued, shall be impressed with the corporate seal
or a facsimile thereof, and shall be signed by the Chairman or Vice Chairman of
the Board of Directors or by the President or a Vice-President and by the
Treasurer or an Assistant Treasurer or by the Secretary or an Assistant
Secretary; provided that any or all of the signatures may be facsimiles if the
certificate is countersigned by a transfer agent, or registered by a registrar,
other than the corporation itself or its employee. Each certificate shall state
the name of the corporation, the fact that the corporation is organized or
incorporated under the laws of the State of Colorado, the name of the person
to whom issued, the date of issue, the class (or series of any class), the
number of shares represented thereby and the par value of the shares represented
thereby or a statement that such shares are without par value. A statement of
the designations, preferences, qualifications, limitations, restrictions and
special or relative rights of the shares of each class shall be set forth in
full or summarized on the face or back of the certificates which the corporation
shall issue, or in lieu
-1-
<PAGE> 6
thereof, the certificate may set forth that such a statement or summary will be
furnished to any shareholder upon request without charge. Each shall be
otherwise in such form as may be prescribed by the Board of Directors and as
shall conform to the rules of any stock exchange on which the shares may be
listed. The corporation shall not issue certificates representing fractional
shares and shall not be obligated to make any transfers creating a fractional
interest in a share of stock. The corporation may, but shall not be obligated
to, issue scrip in lieu of any fractional shares, such scrip to have terms and
conditions specified by the Board of Directors.
2.3 Cancellation of Certificates. All certificates surrendered to the
corporation for transfer shall be cancelled and no new certificates shall be
issued in lieu thereof until the former certificate for a like number of shares
shall have been surrendered and cancelled except as herein provided with respect
to lost, stolen or destroyed certificates.
2.4 Lost Stolen or Destroyed Certificates. Any shareholder claiming
that his certificate for shares is lost, stolen or destroyed may make an
affidavit or affirmation of the fact and lodge the same with the Secretary of
the corporation, accompanied by a signed application for a new certificate.
Thereupon, and upon the giving of a satisfactory bond of indemnity to the
corporation not exceeding an amount double the value of the shares as
represented by such certificate (the necessity for such bond and the amount
required to be determined by the President and Treasurer of the corporation), a
new certificate may be issued of the same tenor and representing the same
number, class and series of shares as were represented by the certificate
alleged to be lost, stolen or destroyed.
2.5 Transfer of Shares. Subject to the terms of any shareholder
agreement relating to the transfer of shares or other transfer restrictions
contained in the Articles of incorporation or authorized therein, shares of the
corporation shall be transferable on the books of the corporation by the holder
thereof in person or by his duly authorized attorney, upon the surrender and
cancellation of a certificate or certificates for a like number of shares. Upon
presentation and surrender of a certificate for shares properly endorsed and
payment of all taxes therefor, the transferee shall be entitled to a new
certificate or certificates in lieu thereof. As against the corporation, a
transfer of shares can be made only on the books of the corporation and in the
manner hereinabove provided, and the corporation
-2-
<PAGE> 7
shall be entitled to treat the holder of record of any share as the owner
thereof and shall not be bound to recognize any equitable or other claim to or
interest in such share on the part of any other person, whether or not it shall
have express or other notice thereof, save as expressly provided by the statutes
of the State of Colorado.
2.6 Transfer Agent. Unless otherwise specified by the Board of
Directors by resolution, the Secretary of the corporation shall act as transfer
agent of the certificates representing the shares of stock of the corporation.
Be shall maintain a stock transfer book, the stubs in which shall set forth
among other things, the names and addresses of the holders of all issued shares
of the corporation, the number of shares held by each, the certificate numbers
representing such shares, the date of issue of the certificates representing
such shares, and whether or not such shares originate from original issue or
from transfer. Subject to Section 3.7, the names and addresses of the
shareholders as they appear on the stubs of the stock transfer book shall be
conclusive evidence as to who are the shareholders of record and as such
entitled to receive notice of the meetings of shareholders; to vote at such
meetings; to examine the list of the shareholders entitled to vote at meetings;
to receive dividends; and to own, enjoy and exercise any other property or
rights deriving from such shares against the corporation. Each shareholder shall
be responsible for notifying the Secretary in writing of any change in his name
or address and failure so to do will relieve the corporation, its directors,
officers and agents, from liability for failure to direct notices or other
documents, or pay over or transfer dividends or other property or rights, to a
name or address other than the name and address appearing on the stub of the
stock transfer book.
2.7 Close of Transfer Book and Record Date. For the purpose of
determining shareholders entitled to notice of or to vote at any meeting of
shareholders, or any adjournment thereof or entitled to receive payment of any
dividend, or in order to make a determination of shareholders for any other
proper purpose, the Board of Directors may provide that the stock transfer books
shall be closed for a stated period, but not to exceed, in any case, fifty
days. If the stock transfer books shall be closed for the purpose of determining
shareholders entitled to notice of, or to vote at a meeting of shareholders,
such books shall be closed for at least ten days immediately preceding such
meeting. In lieu of closing the stock transfer books, the Board of Directors may
fix in advance a date as the record date for any such determination of
shareholders, such date in any case to
-3-
<PAGE> 8
be not more than fifty days and, in case of a meeting of shareholders, not less
than ten days prior to the date on which the particular action requiring such
determination of shareholders is to be taken. If the stock transfer books are
not closed and no record date is fixed for the determination of shareholders
entitled to notice of or to vote at a meeting of shareholders, or shareholders
entitled to receive payment of a dividend, the date on which notice of the
meeting is mailed or the date on which the resolution of the Board of Directors
declaring such dividend is adopted, as the case may be, shall be the record date
for such determination of shareholders. When a determination of shareholders
entitled to vote at any meeting of shareholders has been made as provided in
this section, such determination shall apply to any adjournment thereof.
ARTICLE III
SHAREHOLDERS AND MEETINGS THEREOF
3.1 Shareholders of Record. Only shareholders of record on the books
of the corporation shall be entitled to be treated by the corporation as holders
in fact of the shares standing in their respective names, and the corporation
shall not be bound to recognize any equitable or other claim to, or interest in,
any shares on the part of any other person, firm or corporation, whether or not
it shall have express or other notice thereof, except as expressly provided by
the laws of Colorado.
3.2 Meetings. Meetings of shareholders shall be held at the principal
office of the corporation, or at such other place as specified from time to time
by the Board of Directors. If the Board of Directors shall specify another
location such change in location shall be recorded on the notice calling such
meeting.
3.3 Annual Meeting. The annual meeting of shareholders of the
corporation for the election of directors, and for the transaction of such
other business as may properly come before the meeting, shall be held at such
time as may be determined by the Board of Directors by resolution in conformance
with Colorado law. If the election of Directors shall not be held on the day
designated herein for any annual meeting of the shareholders, the Board of
Directors shall cause the election to be held at a special meeting of the
shareholders as soon thereafter as may be convenient.
3.4 Special Meetings. Special meetings of shareholders, for any purpose
or purposes, unless otherwise pre-
-4-
<PAGE> 9
scribed by statute, may be called by the President, the Board of Directors, the
holders of not less than one-tenth of all the shares entitled to vote at the
meeting, or legal counsel of the corporation as last designated by resolution of
the Board of Directors.
3.5 Notice. Written notice stating the place, day and hour of the
meeting and, in case of a special meeting, the purpose or purposes for which the
meeting is called, shall be delivered unless otherwise prescribed by statute not
less than ten days nor more than fifty days before the date of the meeting,
either personally or by mail, by or at the direction of the President, the
Secretary, or the officer or person calling the meeting to each shareholder of
record entitled to vote at such meeting; except that, if the authorized shares
are to be increased, at least thirty days' notice shall be given, and if the
sale of all or substantially all of the corporation's assets is to be voted
upon, at least twenty days' notice shall be given. Any shareholder may waive
notice of any meeting. Notice to shareholders of record, if mailed, shall be
deemed given as to any shareholder of record, when deposited in the United
States mail, addressed to the shareholder at his address as it appears on the
stock transfer books of the corporation, with postage thereon prepaid, but if
three successive letters mailed to the last-known address of any shareholder of
record are returned as undeliverable, no further notices to such shareholder
shall be necessary, until another address for such shareholder is made known to
the corporation.
3.6 Meeting of All Shareholders. If all of the shareholders shall
meet at any time and place, either within or without the State of Colorado, and
consent to the holding of a meeting at such time and place, such meeting shall
be valid without call or notice, and at such meeting any corporate action may
be taken.
3.7 Voting Record. The officer or agent having charge of the stock
transfer books for shares of the corporation shall make, at least ten days
before such meeting of shareholders, a complete record of the shareholders
entitled to vote at each meeting of shareholders or any adjournment thereof,
arranged in alphabetical order, with the address and the number of shares held
by each. The record, for a period of ten days prior to such meeting, shall be
kept on file at the principal office of the corporation, whether within or
without the State of Colorado, and shall be subject to inspection by any
shareholder for any purpose germane to the meeting at any time during usual
business hours. Such record shall be produced and kept open at the
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<PAGE> 10
time and place of the meeting and shall be subject to the inspection of any
shareholder for any purpose germane to the meeting during the whole time of the
meeting for the purposes thereof. The original stock transfer books shall be the
prima facie evidence as to who are the shareholders entitled to examine the
record or transfer books or to vote at any meeting of shareholders.
3.8 Quorum. A majority of the outstanding shares of the corporation
entitled to vote, represented in person or by proxy, shall constitute a quorum
at any meeting of shareholders, except as otherwise provided by the Colorado
Corporation Code and the Articles of Incorporation. In the absence of a quorum
at any such meeting, a majority of the shares so represented may adjourn the
meeting from time to time for a period not to exceed sixty days without further
notice. At such adjourned meeting at which a quorum shall be present or
represented, any business may be transacted which might have been transacted at
the meeting as originally noticed. The shareholders present at a duly organized
meeting may continue to transact business until adjournment, notwithstanding the
withdrawal of enough shareholders to leave less than a quorum.
3.9 Manner Of Acting. If a quorum is present, the affirmative vote of
the majority of the shares represented at the meeting and entitled to vote on
the subject matter shall be the act of the shareholders, unless the vote of a
greater proportion or number or voting by classes is otherwise required by
statute or by the Articles of incorporation or these Bylaws.
3.10 Proxies. At all meetings of shareholders a shareholder may vote in
person by proxy executed in writing by the shareholder or by his duly authorized
attorney in-fact. Such proxy shall be filed with the Secretary of the
corporation before or at the time of the meeting. No proxy shall be valid after
eleven months from the date of its execution, unless otherwise provided in the
proxy.
3.11 Voting of Shares. Unless otherwise provided by these Bylaws or
the Articles of Incorporation, each outstanding share entitled to vote shall be
entitled to one vote upon each matter submitted to a vote at a meeting of
shareholders, and each fractional share shall be entitled to a corresponding
fractional vote on each such matter.
3.12 Voting of Shares by Certain Holders. Shares standing in the name
of another corporation may be voted by such officer, agent or proxy as the
bylaws of such corpora-
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tion may prescribe, or, in the absence of such provision, as the Board of
Directors of such other corporation may determine. Shares standing in the name
of a deceased person, a minor ward or an incompetent person, may be voted by his
administrator, executor, court appointed guardian or conservator, either in
person or by proxy without a transfer of such shares into the name of such
administrator, executor, court appointed guardian or conservator. Shares
standing in the name of a trustee may be voted by him, either in person or by
proxy, but no trustee shall be entitled to vote shares held by him without a
transfer of such shares into his name. Shares standing in the name of a receiver
may be voted by such receiver, and shares held by or under the control of a
receiver may be voted by such receiver without the transfer thereof into his
name if authority so to do be contained in an appropriate order of the court by
which such receiver was appointed.
A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so transferred.
Neither shares of its own stock belonging to this corporation, nor shares of its
own stock held by it in a fiduciary capacity, nor shares of its own stock held
by another corporation if the majority of shares entitled to vote for the
election of directors of such corporation is held by this corporation may be
voted, directly or indirectly, at any meeting and shall not be counted in
determining the total number of outstanding shares at any given time. Redeemable
shares which have been called for redemption shall not be entitled to vote on
any matter and shall not be deemed outstanding shares on and after the date on
which written notice of redemption has been mailed to shareholders and a sum
sufficient to redeem such shares has been deposited with a bank or trust company
with irrevocable instruction and authority to pay the redemption price to the
holders of the shares upon surrender of certificates therefor.
3.13 Informal Action by Shareholders. Any action required or permitted
to be taken at a meeting of the shareholders may be taken without a meeting if a
consent in writing, setting forth the action so taken, shall be signed by all of
the shareholders entitled to vote with respect to the subject matter thereof.
3.14 Voting by Ballot. Voting on any question or in any election may be
by voice vote unless the presiding officer shall order or any shareholder shall
demand that voting be by ballot.
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3.15 Cumulative Voting. No shareholder shall be permitted to cumulate
his votes by giving one candidate as many votes as the number of such directors
multiplied by the number of his shares shall equal, or by distributing such
votes on the same principal among any number of candidates.
ARTICLE IV
DIRECTORS, POWERS AND MEETING
4.1 Board of Directors. The business and affairs of the corporation
shall be managed by a board of not less than three (3) nor more than seven (7)
directors; except that there shall be only as many directors as there are
shareholders in the event the outstanding shares are held of record by fewer
than three shareholders. Directors need not be shareholders of the corporation
or residents of the State of Colorado and who shall be elected at the annual
meeting of shareholders or some adjournment thereof. Directors shall hold office
until the next succeeding annual meeting of shareholders and until their
successors shall have been elected and shall qualify. The Board of Directors may
increase or decrease, to not less than three (3) nor more than seven (7), the
number of directors by resolution.
4.2 Regular Meetings. A regular, annual meeting of the Board of
Directors shall be held at the same place as, and immediately after, the annual
meeting of shareholders, and no notice shall be required in connection
therewith. The annual meeting of the Board of Directors shall be for the purpose
of electing officers and the transaction of such other business as may come
before the meeting. The Board of Directors may provide, by resolution, the time
and place, either within or without the State of Colorado, for the holding of
additional regular meetings without other notice than such resolution.
4.3 Special Meetings. Special meetings of the Board of Directors may be
called by or at the request of the President or any two directors. The person or
persons authorized to call special meetings of the Board of Directors may fix
any place, either within or without the State of Colorado, as the place for
holding any special meeting of the Board of Directors called by them.
4.4 Notice. Written notice of any special meeting of directors shall be
given as follows:
(a) By mail to each director at his business address at least
three days prior to the meeting; or
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(b) By personal delivery or telegram at least twenty-four hours
prior to the meeting to the business address of each director, or in the event
such notice is given on a Saturday, Sunday or holiday, to the residence address
of each director. If mailed, such notice shall be deemed to be delivered when
deposited in the United States mail, so addressed, with postage thereon prepaid.
If notice be given by telegram, such notice shall be deemed to be delivered when
the telegram is delivered to the telegraph company. Any director may waive
notice of any meeting. The attendance of a director at any meeting shall
constitute a waiver of notice of such meeting, except where a director attends a
meeting for the express purpose of objecting to the transaction of any business
because the meeting is not lawfully called or convened. Neither the business to
be transacted at, nor the purpose of, any regular or special meeting of the
Board of Directors need be specified in the notice or waiver of notice of such
meeting.
4.5 Participation by Electronic Means. Except as may be otherwise
provided by the Articles of Incorporation or Bylaws, members of the Board of
Directors or any committee designated by such Board may participate in a meeting
of the Board or committee by means of conference telephone or similar
communications equipment by which all persons participating in the meeting can
hear each other at the same time. Such participation shall constitute presence
in person at the meeting.
4.6 Quorum and Manner of Acting. A quorum at all meetings of the Board
of Directors shall consist of a majority of the number of directors then holding
office, but a smaller number may adjourn from time to time without further
notice, until a quorum is secured. The act of the majority of the directors
present at a meeting at which a quorum is present shall be the act of the Board
of Directors, unless the act of a greater number is required by the laws of the
State of Colorado or by the Articles of Incorporation or these Bylaws.
4.7 Organization. The Board of Directors shall elect a chairman to
preside at each meeting of the Board of Directors. The Board of Directors shall
elect a Secretary to record the discussions and resolutions of each meeting.
4.8 Presumption of Assent. A director of the corporation who
is present at a meeting of the Board of Directors at which action on any
corporate matter is taken shall be presumed to have assented to the action taken
unless his dissent shall be entered in the minutes of the meeting or
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unless he shall file his written dissent to such action with the person acting
as the Secretary of the meeting before the adjournment thereof or shall forward
such dissent by registered mail to the Secretary of the corporation immediately
after the adjournment of the meeting. Such right to dissent shall not apply to a
director who voted in favor of such action.
4.9 Informal Action By Directors. Any action required or permitted to
be taken by the Board of Directors, or a committee thereof, at a meeting may be
taken without a meeting if a consent in writing, setting forth the action so
taken, shall be signed by all the directors or all the committee members
entitled to vote with respect to the subject matter thereof.
4.10 Vacancies. Any vacancy occurring in the Board of Directors may be
filled by the affirmative vote of a majority of the remaining directors though
less than a quorum of the Board of Directors. A director elected to fill a
vacancy shall be elected for the unexpired term of his predecessor in office,
and shall hold such office until his successor is duly elected and shall
qualify. Any directorship to be filled by reason of an increase in the number
of directors shall be filled by the affirmative vote of a majority of the
directors then in office or by an election at an annual meeting, or at a special
meeting of shareholders called for that purpose. A director chosen to fill a
position resulting from an increase in the number of directors shall hold office
only until the next election of directors by the shareholders.
4.11 Compensation. By resolution of the Board of Directors and
irrespective of any personal interest of any of the members, each director may
be paid his expenses, if any, of attendance at each meeting of the Board of
Directors, and may be paid a stated salary as director or a fixed sum for
attendance at each meeting of the Board of Directors or both. No such payment
shall preclude any director from serving the corporation in any other capacity
and receiving compensation therefor.
4.12 Removal of Directors. Any director or directors of the corporation
may be removed at any time, with or without cause, in the manner provided in the
Colorado Corporation Code.
4.13 Resignations. A director of the corporation may resign at any time
by giving written notice to the Board of Directors, President or Secretary of
the corporation. The
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resignation shall take effect upon the date of receipt of such notice, or at
any later period of time specified therein. The acceptance of such resignation
shall not be necessary to make it effective, unless the resignation requires it
to be effective as such.
4.14 General Powers. The business and affairs of the corporation shall
be managed by the Board of Directors which may exercise all such powers of the
corporation and do all such lawful acts and things as are not by statute or by
the Articles of Incorporation or by these Bylaws directed or required to be
exercised or done by the shareholders. The directors shall pass upon any and all
bills or claims of officers for salaries or other compensation and, if deemed
advisable, shall contract with officers, employees, directors, attorneys,
accountants, and other persons to render services to the corporation.
ARTICLE V
OFFICERS
5.1 Term and Compensation. The elective officers of the corporation
shall consist of at least a President, a Secretary and a Treasurer, each of
whom shall be eighteen years or older and who shall be elected by the Board of
Directors at its annual meeting. Unless removed in accordance with procedures
established by law and these Bylaws, the said officers shall serve until the
next succeeding annual meeting of the Board of Directors and until their
respective successors are elected and shall qualify. Any number of offices, but
not more than two, may be held by the same person at the same time, except that
one person may not simultaneously hold the offices of President and Secretary.
The Board may elect or appoint such other officers and agents as it may deem
advisable, who shall hold office during the pleasure of the Board.
5.2 Powers. The officers of the corporation shall exercise and perform
the respective powers, duties and functions as are stated below, and as may be
assigned to them by the Board of Directors.
(a) The President shall be the chief executive officer of the
corporation and shall, subject to the control of the Board of Directors, have
general supervision, direction and control of the business and officers of the
corporation. He shall preside, when present, at all meetings of the shareholders
and of the Board of Directors unless a different chairman of such meetings is
elected by the Board of Directors.
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(b) In the absence or disability of the President, the
Vice-President or Vice-Presidents, if any, in order of their rank as fixed by
the Board of Directors, and if not ranked, the Vice-Presidents in the order
designated by the Board of Directors, shall perform all the duties of the
President, and when so acting shall have all the powers of, and be subject to
all the restrictions on the President. Each Vice-President shall have such
other powers and perform such other duties as may from time to time be assigned
to him by the president or the Board of Directors.
(c) The Secretary shall keep accurate minutes of all meetings of
the shareholders and the Board of Directors unless a different Secretary of such
meetings is elected by the Board of Directors. He shall keep, or cause to be
kept a record of the shareholders of the corporation and shall be responsible
for the giving of notice of meetings of the shareholders or the Board of
Directors. The Secretary shall be custodian of the records and of the seal of
the corporation and shall attest the affixing of the seal of the corporation
when so authorized. The Secretary or Assistant Secretary may sign all stock
certificates, as described in Section 2.2 hereof. The Secretary shall perform
all duties commonly incident to his office and such other duties as may from
time to time be assigned to him by the President or the Board of Directors.
(d) An Assistant Secretary may, at the request of the Secretary,
or in the absence or disability of the Secretary, perform all of the duties of
the Secretary. He shall perform such other duties as may be assigned to him by
the President or by the Secretary.
(e) The Treasurer, subject to the order of the Board of
Directors, shall have the care and custody of the money, funds, valuable papers
and documents of the corporation. He shall keep accurate books of accounts of
the corporation's transactions, which shall be the property of the corporation,
and shall render financial reports and statements of condition of the
corporation when so requested by the Board of Directors or President. The
Treasurer shall perform all duties commonly incident to his office and such
other duties as may from time to time be assigned to him by the President or
the Board of Directors. In the absence or disability of the President and
Vice-President or Vice-Presidents, the Treasurer shall perform the duties of the
President.
(f) An Assistant Treasurer may, at the request of the Treasurer,
or in the absence or disability of the Treasurer, perform all of the duties of
the Treasurer. He shall
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perform such other duties as, may be assigned to him by the President or by the
Treasurer.
5.3 Compensation. All officers of the corporation may receive salaries
or other compensation if so ordered and fixed by the Board of Directors. The
Board of Directors shall have authority to fix salaries in advance for stated
periods or render the same retroactive as the Board may deem advisable.
5.4 Delegation of Duties. In the event of absence or inability of any
officer to act, the Board of Directors may delegate the powers or duties of such
officer to any other officer, director or person whom it may select.
5.5 Bonds. If the Board of Directors by resolution shall so require,
any officer or agent of the corporation shall give bond to the
Corporation in such amount and with such surety as the Board of Directors may
deem sufficient, conditioned upon the faithful performance of their respective
duties and offices.
5.6 Removal. Any officer or agent may be removed by the Board of
Directors or by the executive committee, if any, whenever in its judgment the
best interest of the corporation will be served thereby, but such removal shall
be without prejudice to the contract rights, if any, of the person so removed.
Election or appointment of an officer or agent shall not, of itself, create
contract rights.
ARTICLE VI
FINANCE
6.1 Reserve Funds. The Board of Directors, in its uncontrolled
discretion, may set aside from time to time, out of the net profits or earned
surplus of the corporation, such sum or sums as it deems expedient as a reserve
fund to meet contingencies, for equalizing dividends, for maintaining any
property of the corporation, and for any other purpose.
6.2 Banking. The moneys of the corporation shall be deposited
in the name of the corporation in such bank or banks or trust company or
trust companies, as the Board of Directors shall designate, and may be drawn out
only on checks signed in the name of the corporation by such person or persons
as the Board of Directors, by appropriate resolution, may direct. Notes and
commercial paper, when authorized by the Board, shall be signed in the name of
the corporation by such officer or officers or agent or agents as shall
thereunto be authorized from time to time.
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ARTICLE VII
DIVIDENDS
Subject to the provisions of the Articles of Incorporation and the laws
of the State of Colorado, the Board of Directors may declare dividends whenever,
and in such amounts, as in the Board's opinion the condition of the affairs of
the corporation shall render such advisable.
ARTICLE VIII
CONTRACTS, LOANS AND CHECKS
8.1 Execution of Contracts. Except as otherwise provided by statute or
by these Bylaws, the Board of Directors may authorize any officer or agent of
the corporation to enter into any contract, or execute and deliver any
instrument in the name of, and on behalf of the corporation. Such authority may
be general or confined to specific instances and, unless so authorized, no
officer, agent or employee shall have any power to bind the corporation for any
purpose, except as may be necessary to enable the corporation to carry on its
normal and ordinary course of business.
8.2 Loans. No loans shall be contracted on behalf of the corporation
and no negotiable paper shall be issued in its name unless authorized by the
Board of Directors. When so authorized, any officer or agent of the
corporation may effect loans and advances at any time for the corporation from
any bank, trust company or institution, firm, corporation or individual. An
agent so authorized may make and deliver promissory notes or other evidence of
indebtedness of the corporation and may mortgage, pledge, hypothecate or
transfer any real or personal property held by the corporation as security for
the payment of such loans. Such authority, in the Board of Directors'
discretion, may be general or confined to specific instances.
8.3 Checks. Checks, notes, drafts and demands for money or
other evidence of indebtedness issued in the name of the corporation shall be
signed by such person or persons as designated by the Board of Directors and in
the manner the Board of Directors prescribes.
8.4 Deposits. All funds of the corporation not otherwise employed shall
be deposited from time to time to the credit of the corporation in such banks,
trust companies or other depositories as the Board of Directors may select.
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ARTICLE IX
FISCAL YEAR
The fiscal year of the corporation shall be the year adopted by
resolution of the Board of Directors.
ARTICLE X
CORPORATE SEAL
The Board of Directors shall provide a corporate seal which shall be
circular in form and shall have inscribed thereon the name of the corporation
and the state of incorporation and the words "CORPORATE SEAL".
ARTICLE XI
AMENDMENTS
These Bylaws may be altered, amended or repealed and new Bylaws may be
adopted by a majority of the Directors present at any meeting of the Board of
Directors of the corporation at which a quorum is present.
ARTICLE XII
EXECUTIVE COMMITTEE
12.1 Appointment. The Board of Directors by resolution adopted by
a majority of the full Board, may designate two or more of its members to
constitute an executive committee. The designation of such committee and the
delegation thereto of authority shall not operate to relieve the Board of
Directors, or any member thereof, of any responsibility imposed by law.
12.2 Authority. The executive committee, when the Board of Directors is
not in session shall have and may exercise all of the authority of the Board of
Directors except to the extent, if any, that such authority shall be limited by
the resolution appointing the executive committee and except also that the
executive committee shall not have the authority of the Board of Directors in
reference to amending the Articles of Incorporation, adopting a plan of merger
or consolidation, recommending to the shareholders the sale, lease or other
disposition of all or substantially all of the property and assets of the
corporation otherwise than in the usual and regular course of its business,
recommending to the shareholders a voluntary dissolution of the corporation or a
revocation thereof, or amending the Bylaws of the corporation.
12.3 Tenure and Qualifications. Each member of the executive committee
shall hold office until the next regular
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annual meeting of the Board of Directors following his designation.
12.4 Meetings. Regular meetings of the executive committee may be held
without notice at such time and places as the executive committee may fix from
time to time by resolution. Special meetings of the executive committee may be
called by any member thereof upon not less than one day's notice stating the
place, date and hour of the meeting, which notice may be written or oral, and if
mailed, shall be deemed to be delivered when deposited in the United States mail
addressed to the member of the executive committee at his business address. Any
member of the executive committee may waive notice of any meeting and no notice
of any meeting need be given to any member thereof who attends in person. The
notice of a meeting of the executive committee need not state the business
proposed to be transacted at the meeting.
12.5 Quorum. A majority of the members of the executive committee
shall constitute a quorum for the transaction of business at any meeting
thereof, and action of the executive committee must be authorized by the
affirmative vote of a majority of the members present at a meeting at which a
quorum is present.
12.6 Informal Action by Executive Committee. Any action required or
permitted to be taken by the executive committee at a meeting may be taken
without a meeting if a consent in writing, setting forth the action so taken,
shall be signed by all of the members of the committee entitled to vote with
respect to the subject matter thereof.
12.7 Vacancies. Any vacancy in the executive committee may be filled by
a resolution adopted by a majority of the full Board of Directors.
12.8 Resignations and Removal. Any member of the executive committee
may be removed at any time with or without cause by resolution adopted by a
majority of the full Board of Directors. Any member of the executive committee
may resign from the executive committee at any time by giving written notice to
the President or Secretary of the corporation, and unless otherwise specified
therein, the acceptance of such resignation shall not be necessary to make it
effective.
12.9 Procedure. The executive committee shall elect a presiding officer
from its members and may fix its own rules of procedure which shall not be
inconsistent with these Bylaws. It shall keep regular minutes of its proceedings
and report the same to the Board of Directors for its in-
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formation at the meeting thereof held next after the proceedings shall have
been taken.
ARTICLE XIII
EMERGENCY BYLAWS
The Emergency Bylaws provided for in this Article shall be operative
during any emergency in the conduct of the business of the corporation
resulting from an attack on the United States or any nuclear or atomic disaster,
notwithstanding any different provision in the preceding articles of the Bylaws
or in the Articles of Incorporation of the corporation or in the Colorado
Corporation Code. To the extent not inconsistent with the provisions of this
Article, the Bylaws provided in the preceding articles shall remain in effect
during such emergency and upon its termination the Emergency Bylaws shall cease
to be operative.
During any such emergency:
(a) A meeting of the Board of Directors may be called by any
officer or director of the corporation. Notice of the time and place of the
meeting shall be given by the person calling the meeting to such of the
directors as it may be feasible to reach by any available means of
communication. Such notice shall be given at such time in advance of the meeting
as circumstances permit in the judgment of the person calling the meeting.
(b) At any such meeting of the Board of Directors, a quorum
shall consist of the number of directors in attendance at such meeting.
(c) The Board of Directors, either before or during any such
emergency, may, effective in the emergency, change the principal office or
designate several alternative principal offices or regional offices, or
authorize the officers so to do.
(d) The Board of Directors, either before or during any such
emergency, may provide, and from time to time modify, lines of succession in
the event that during such an emergency any or all officers or agents of the
corporation shall for any reason be rendered incapable of discharging their
duties.
(e) No officer, director or employee acting in accordance with
these Emergency Bylaws shall be liable except for willful misconduct.
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(f) These Emergency Bylaws shall be subject to repeal or change
by further action of the Board of Directors or by action of the shareholders,
but no such repeal or change shall modify the provisions of the next preceding
paragraph with regard to action taken prior to the time of such repeal or
change. Any amendment of these Emergency Bylaws may make any further or
different provision that may be practical and necessary for the circumstances of
the emergency.
CERTIFICATE
I hereby certify that the foregoing Bylaws, consisting of 18 pages,
including this page, constitute the Bylaws of Conquest Ventures, Inc. adopted by
the Board of Directors of the corporation as of the 15th day of August, 1998.
/s/ [illegible]
----------------------------
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Article V of the Bylaws of the Company is hereby amended and restated
in its entirety to read as set forth below:
ARTICLE V
OFFICE OF THE CHIEF EXECUTIVE; OFFICERS
5.1 Office of the Executive. The corporation shall have an Office of
the Executive ("Office") which shall be comprised of three members ("Members").
The Office, subject to the control of the Board of Directors, shall have general
supervision, direction and control of the business and officers of the
corporation and shall otherwise be vested with the powers and responsibilities
traditionally conferred upon a president and chief executive officer of a
corporation. The Office shall be responsible for diligently causing and
directing the officers of the corporation to carry out any directives issued to
it by the Board of Directors. Any action taken by the Office, independent of a
directive issued by the Board of Directors, shall require the unanimous approval
of the Members. The Members shall meet periodically, but no less often than
weekly (unless the members shall otherwise agree) to consider and act upon
matters for the Company. In the event the members are unable to agree on a
particular course of action, notwithstanding Section 4.3 of these Bylaws, any
Member may request and convene a special meeting of the Board of Directors,
called in accordance with these Bylaws, for the purpose of submitting such
course of action to the Board of Directors for approval. Any Member may appoint
an alternate person to act in the place of such Member on a temporary basis;
provided, however, that any Member who appoints an alternate person to act in
his place for three consecutive meetings of the Office, upon the request of
any two Members, shall be required either to (a) resume his services as a Member
or (b) name a permanent replacement who, subject to the unanimous approval of
the remaining Members, shall be vested with all of the duties, responsibilities
and powers of a Member.
5.2 Officers; Term and Compensation. The elective officers of the
corporation shall consist of at least a President, a Secretary and a Treasurer,
each of whom shall be eighteen years or older and who shall be elected by the
Board of Directors at its annual meeting. Unless removed in accordance with
procedures established by law and these Bylaws, the said officers shall serve
until the next succeeding annual meeting of the Board of Directors and until
their respective successors are elected and shall qualify. Any number of
offices, but not more than two, may be held by the same person at the same time,
except that one person may not simultaneously hold the offices of President and
Secretary. The Board may elect or appoint such other officers and agents as
it may deem advisable, who shall hold office during the pleasure of the Board.
<PAGE> 24
5.3 Powers. The officers of the corporation shall exercise and perform
the respective powers, duties and functions as are stated below, and as may be
assigned to them by the Board of Directors.
(a) The President shall be responsible for carrying out the
directives of the Office and such other responsibilities as may be delegated to
him by the Board of Directors. He shall preside, when present, at all meetings
of the shareholders and of the Board of Directors unless a different chairman of
such meetings is elected by the Board of Directors.
(b) In the absence or disability of the President, the
vice-President or vice-Presidents, if any, in order of their rank as fixed by
the Board of Directors, and if not ranked, the vice-Presidents in the order
designated by the Board of Directors, shall perform all the duties of the
President, and when so acting shall have all the powers of, and be subject to
all the restrictions on the President. Each vice-President shall have such other
powers and perform such other duties as may from time to time be assigned to him
by the Office or the Board of Directors.
(c) The Secretary shall keep accurate minutes of all meetings of
the shareholders and the Board of Directors unless a different Secretary of such
meetings is elected by the Board of Directors. He shall keep, or cause to be
kept a record of the shareholders of the corporation and shall be responsible
for the giving of notice of meetings of the shareholders or the Board of
Directors. The Secretary shall be custodian of the records and of the seal of
the corporation and shall attest the affixing of the seal of the corporation
when so authorized. The Secretary or Assistant Secretary may sign all stock
certificates, as described in Section 2.2 hereof. The Secretary shall perform
all duties commonly incident to his office and such other duties as may from
time to time be assigned to him by the Office or the Board of Directors.
(d) An Assistant Secretary may, at the request of the Secretary, or
in the absence or disability of the Secretary, perform all of the duties of the
Secretary. He shall perform such other duties as may be assigned to him by the
Office or by the Secretary.
(e) The Treasurer, subject to the order of the Board of Directors,
shall have the care and custody of the money, funds, valuable papers and
documents of the corporation. He shall keep accurate books of accounts of the
corporation's transactions, which shall be the property of the corporation, and
shall render financial reports and statements of condition of the corporation
when so requested by the Board of Directors or the Office. The
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Treasurer shall perform all duties commonly incident to his office and such
other duties as may from time to time be assigned to him by the Office or the
Board of Directors. In the absence or disability of the President and
Vice-President or Vice-Presidents, the Treasurer shall perform the duties of
the President.
(f) An Assistant Treasurer may, at the request of the Treasurer, or
in the absence or disability of the Treasurer, perform all of the duties of the
Treasurer. He shall perform such other duties as may be assigned to him by the
Office or by the Treasurer.
(g) If a Chairman of the Board be elected, he shall preside at all
meetings of the shareholders and directors at which he may be present and shall
have such other duties, powers, and authority as may be prescribed elsewhere in
these Bylaws. The Board of Directors may delegate such other authority and
assign such additional duties to the Chairman of the Board, other than those
conferred by law exclusively upon the President, as it may from time to time
determine.
5.4 Compensation. All officers of the corporation may receive salaries
or other compensation if so ordered and fixed by the Board of Directors. The
Board of Directors shall have authority to fix salaries in advance for stated
periods or render the same retroactive as the Board may deem advisable.
5.5 Delegation of Duties. In the event of absence or inability of any
officer to act, the Board of Directors may delegate the powers or duties of such
officer to any other officer, director or person whom it may select.
5.6 Bonds. If the Board of Directors by resolution shall so require,
any officer or agent of the corporation shall give bond to the corporation in
such amount and with such surety as the Board of Directors may deem sufficient,
conditioned upon the faithful performance of their respective duties and
offices.
5.7 Removal. Any officer or agent may be removed by the Board of
Directors whenever in its judgment the best interest of the corporation will be
served thereby, but such removal shall be without prejudice to the contract
rights, if any, of the person so removed. Election or appointment of an of
officer or agent shall not, of itself, create contract rights.
-3-
<PAGE> 26
AMENDMENT TO BYLAWS OF
PROBEX CORP.
The amendment to Article V of the Bylaws set forth below were duly
adopted by the Board of Directors of the Company at a meeting held July 1, 1998,
but effective for all purposes as of October 1, 1997.
Article V of the Bylaws was amended to read in its entirety as
follows:
ARTICLE V
OFFICER
5.1 Officers; Term and Compensation. The elective officers of the
corporation shall consist of at least a Chief Executive Officer, a President, a
Secretary, a Treasurer, and may include, if so designated by the Board of
Directors, a Chairman of the Board and a Chief Financial Officer, each of whom
shall be eighteen years or older and who shall be elected by the Board of
Directors at its annual meeting. Unless removed in accordance with procedures
established by law and these Bylaws, the said officers shall serve until the
next succeeding annual meeting of the Board of Directors and until their
respective successors are elected and shall qualify. Any number of offices, but
not more than two, may be held by the same person at the same time, except that
one person may not simultaneously hold the offices of President and Secretary.
The Board may elect or appoint such other officers and agents as it may deem
advisable, who shall hold office during the pleasure of the Board.
5.2 Powers. The officers of the corporation shall exercise and perform
the respective powers, duties and functions as are stated below, and as may be
assigned to them by the Board of Directors.
(a) The Chairman of the Board shall preside at all meetings of the
shareholders and directors at which he may be present. If the Chairman of the
Board shall be designated as an officer of the corporation, he shall have such
other duties, powers, and authority as may be prescribed by the Board of
Directors. The Board of Directors may delegate such other authority and assign
such additional duties to the Chairman of the Board, other than those conferred
by law exclusively upon the Chief Executive Officer, as it may from time to time
determine.
(b) The Chief Executive Officer, subject to the control of the Board of
Directors, shall have general supervision, direction and control of the business
and officers of the corporation and shall otherwise be vested with the powers
and responsibilities traditionally conferred upon a chief
<PAGE> 27
executive officer of a corporation. The Chief Executive Officer shall be
responsible for diligently causing and directing the officers of the corporation
to carry out the duly approved directives issued to it by the Board of
Directors. He shall report directly to the Board or Directors and shall preside,
in the absence of the Chairman of the Board, at all meetings of the shareholders
and of the Board of Directors at which he may be present.
(c) The President, subject to the control of the Board of Directors and
the Chief Executive Officer, shall be vested with the powers and
responsibilities traditionally conferred upon a chief operating officer of a
corporation. In the absence or disability of the Chief Executive Officer, then
the President, subject to the control of the Board of Directors, shall perform
all of the duties of the Chief Executive Officer, and when so acting shall have
all the powers of, and be Subject to all the restrictions on, the Chief
Executive Officer.
(d) In the absence or disability of the President, the vice-President
or vice-Presidents, if any, in order of their rank as fixed by the Chief
Executive Officer and approved by the Board of Directors, and if not ranked by
the Chief Executive Officer, the vice-Presidents in the order designated by the
Board of Directors, shall perform all the duties of the President, and when so
acting shall have all the powers of, and be subject to all the restrictions on
the President. Each vice-President shall have such other powers and perform such
other duties as may from time to time be assigned to him by the Chief Executive
Officer or the Board of Directors.
(e) The Secretary shall keep accurate minutes of all meetings of the
shareholders and the Board of Directors unless a different Secretary of such
meetings is elected by the Board of Directors. He shall keep, or cause to be
kept a record of the shareholders of the corporation and shall be responsible
for the giving of notice of meetings of the shareholders or the Board of
Directors. The Secretary shall be custodian of the records and of the seal of
the corporation and shall attest the affixing of the seal of the corporation
when so authorized. The Secretary or Assistant Secretary may sign all stock
certificates, as described in Section 2.2 hereof. The Secretary shall perform
all duties commonly incident to his office and such other duties as may from
time to time be assigned to him by the Chief Executive Officer or the Board of
Directors.
(f) An Assistant Secretary may, at the request of the Secretary, or in
the absence or disability of the Secretary, perform all of the duties of the
Secretary. He shall perform such other duties as may be assigned to him by the
Chief Executive Officer or by the Secretary.
(g) The Treasurer, subject to the order of the Board of Directors,
shall have the care and custody of the money, funds, valuable papers and
documents of the corporation. He shall keep accurate books of accounts of the
corporation's transactions, which shall be the property of the corporation, and
shall render financial reports and statements of condition of the corporation
when so requested by the Board of Directors or the Chief Executive Officer. The
Treasurer shall perform all duties commonly incident to his office and such
other duties as may from time to time be assigned to him by the Chief Executive
Officer or the Board of Directors. In the absence or
<PAGE> 28
disability of the President and Vice-President or Vice-Presidents, the Treasurer
shall perform the duties of the President.
(h) An Assistant Treasurer may, at the request of the Treasurer, or in
the absence or disability of the Treasurer, perform all of the duties of the
Treasurer. He shall perform such other duties as may be assigned to him by the
Chief Executive Officer or by the Treasurer.
5.3 Compensation. All officers of the corporation may receive salaries
or other compensation if so ordered and fixed by the Board of Directors. The
Board of Directors shall have authority to fix salaries or other compensation in
advance for stated periods or render the same retroactive as the Board may deem
advisable.
5.4 Delegation of Duties. In the event of absence or inability of any
officer to act, the Board of Directors may delegate the powers or duties of
such officer to any other officer, director or person whom it may select.
5.5 Bonds. If the Board of Directors by resolution shall so require,
any officer or agent of the corporation shall give bond to the corporation in
such amount and with such surety as the Board of Directors may deems sufficient,
conditioned upon the faithful performance of their respective duties and
offices.
5.6 Removal. Any officer or agent may be removed by the Chief
Executive Officer or by the Board of Directors, whenever in their judgment the
best interest of the corporation will be served thereby, but such removal shall
be without prejudice to the contract rights, if any, of the person so removed.
Notwithstanding the foregoing, the Board of Directors shall retain the exclusive
authority to hire and remove the Chief Executive Officer and the President.
Election or appointment of an officer or agent shall not, of itself, create
contract rights.
<PAGE> 29
AMENDMENT TO BYLAWS OF
PROBEX CORP.
The amendment to Section 5.1 of Article V of the Bylaws set forth below
were duly adopted and made effective by the Board of Directors of the Company at
a meeting held October 28, 1999.
Section 5.1 of Article V of the Bylaws was amended to read in its
entirety as follows:
ARTICLE V
OFFICERS
5.1 Officers. Term and Compensation. The elective officers of the
corporation shall consist of at least a Chief Executive Officer, a President, a
Secretary, a Treasurer, and may include, if so designated by the Board of
Directors, a Chairman of the Board and a Chief Financial Officer, each of whom
shall be eighteen years or older and who shall be elected by the Board of
Directors at its annual meeting. Unless removed in accordance with procedures
established by law and these Bylaws, the said officers shall serve until the
next succeeding annual meeting of the Board of Directors and until their
respective successors are elected and shall qualify. Any number of offices may
be held by the same person at the same time, except that one person may not
simultaneously hold the offices of President and Secretary. The Board may
elect or appoint such other officers and agents as it may deem advisable, who
shall hold office during the pleasure of the Board.
<PAGE> 1
<TABLE>
<S> <C> <C>
RESTRICTED
PROBEX CORP. [SHARES]
INCORPORATED UNDER THE LAWS OF THE STATE OF COLORADO
SEE REVERSE SIDE FOR
CERTAIN DEFINITIONS
CUSIP ______
THIS CERTIFIES that
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK OF
PROBEX CORPORATION
transferable on the books of the Corporation by the holder hereof in person or by duly authorized attorney upon surrender of this
certificate properly endorsed. This certificate is not valid unless countersigned by the Transfer Agent and registered by the
Registrar. WITNESS the facsimile seal of the Corporation and the facsimile signatures of its duly authorized officers.
Dated:
/s/ [ILLEGIBLE] /s/ [ILLEGIBLE]
CHIEF EXECUTIVE OFFICER PRESIDENT
The shares of stock represented by this Registered and Countersigned:
certificate have not been registered TRANSFER ONLINE
under the Securities Act of 1933, as 227 SW Pine St., Suite 300, Portland, OR 97204
amended, and may not be sold or otherwise
transferred unless a compliance with the
registration provisions of such Act has By:
been made or unless availability of an -------------------------------------------
exemption from such registration AUTHORIZED OFFICER
provisions has been established, or
unless sold pursuant to Rule 144 under
the Securities Act of 1933.
</TABLE>
NOT VALID UNLESS COUNTERSIGNED BY TRANSFER AGENT
<PAGE> 2
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to the applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM -- as tenants in common UNIF GIF MIN ACT -- _____________ Custodian ___________
TEN ENT -- as tenants by the entireties (Cust) (Minor)
JT TEN -- as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as tenants Act __________________
in common (State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
For value received, __________________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
[ ]
_______________________________________________________________________________
_______________________________________________________________________________
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE
_______________________________________________________________________________
_______________________________________________________________________________
________________________________________________________________________ Shares
of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint ___________________________________________
Attorney to transfer the said stock on the books of the within named
Corporation with full power of substitution in the premises.
Dated, ___________
_______________________________________
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT
MUST CORRESPOND WITH THE NAME AS WRITTEN
ON THE FACE OF THE CERTIFICATE IN EVERY
PARTICULAR, WITHOUT ALTERATION OR
ENLARGEMENT, OR ANY CHANGE WHATEVER.
SIGNATURE MUST BE GUARANTEED BY A COMMERCIAL BANK OR TRUST COMPANY OR MEMBER
FIRM OF ONE OF THE FOLLOWING STOCK EXCHANGES: NEW YORK STOCK EXCHANGE, PACIFIC
STOCK EXCHANGE, AMERICAN STOCK EXCHANGE, MIDWEST STOCK EXCHANGE.
<PAGE> 1
EXHIBIT 4.3.1
- --------------------------------------------------------------------------------
THIS WARRANT AND ANY SECURITIES ACQUIRED UPON THE EXERCISE OF THIS
WARRANT HAVE NOT BEEN REGISTERED UNDER: (A) THE SECURITIES ACT OF 1933, AS
AMENDED, IN RELIANCE UPON THE EXEMPTIONS FROM REGISTRATION PROVIDED IN SECTIONS
3 AND 4 OF SUCH ACT AND REGULATION D PROMULGATED THEREUNDER; OR (B) ANY STATE
SECURITIES LAWS IN RELIANCE UPON APPLICABLE EXEMPTIONS THEREUNDER. THESE
SECURITIES MUST BE ACQUIRED FOR INVESTMENT ONLY FOR THE ACCOUNT OF THE INVESTOR
AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
OF THEM UNDER SUCH ACT AND ALL OTHER APPLICABLE SECURITIES LAWS OR AN OPINION OF
COUNSEL ACCEPTABLE TO THE CORPORATION OR ITS REPRESENTATIVES THAT SUCH SALE OR
TRANSFER WOULD NOT VIOLATE APPLICABLE SECURITIES LAWS OR REGULATIONS.
- --------------------------------------------------------------------------------
WARRANT NO. TO PURCHASE
SHARES OF COMMON STOCK
(NO PAR VALUE)
CLASS "F" WARRANT TO PURCHASE SHARES
OF COMMON STOCK OF
PROBEX CORP.
(A COLORADO CORPORATION)
PURCHASE PRICE PER SHARE: $0.50
EXPIRATION DATE: 5:00 P.M., DENVER, COLORADO TIME, ON APRIL 26, 2001
THIS CERTIFIES that, for value received,
is the registered owner and is entitled, subject to the terms and conditions of
this Warrant, until the Expiration Date, to purchase the number of shares set
forth above of the Common Stock, no par value (the "Common Stock"), of Probex
Corp. (the "Corporation") from the Corporation at the purchase price set forth
above. The number of shares of Common Stock that may be received upon the
exercise of the Warrants and the price to be paid for each share of Common Stock
are subject to adjustment from time to time as hereinafter set forth.
Section 1. EXERCISE OF WARRANTS. Subject to the provisions hereof, the
Warrants may be exercised in whole or in part until the Expiration Date, by
delivery of this Warrant to the Corporation with the exercise form duly executed
and payment of the purchase price (in cash or by certified or bank cashier's
check payable to the order of the Corporation) for each share purchased.
Section 2. CORPORATION'S COVENANTS AS TO COMMON STOCK. Shares
deliverable on the exercise of this Warrant shall, at delivery, be fully paid
and non-assessable, free from taxes, liens, and charges with respect to their
purchase. The Corporation shall at all times reserve and hold available
sufficient shares of Common Stock to satisfy all conversion and purchase rights
of outstanding convertible securities, options and warrants.
<PAGE> 2
CLASS "F" WARRANT NO. PAGE 2
Section 3. METHOD OF EXERCISE; FRACTIONAL SHARES. The purchase rights
represented by this Warrant are exercisable at the option of the registered
owner in whole at any time, or in part, from time to time, within the period
above specified, provided, however, that purchase rights are not exercisable
with respect to a fraction of a share of Common Stock. In lieu of issuing a
fraction of a share remaining after exercise of this Warrant as to all full
shares covered hereby, the Corporation shall either (1) pay therefor cash equal
to the same fraction of the then current Warrant purchase price per share or, at
its option, (2) issue scrip for the fraction, in registered or bearer form
approved by the board of directors of the Corporation, which shall entitle the
holder to receive a certificate for a full share of Common Stock on surrender of
scrip aggregating a full share. Scrip may become void after a reasonable period
(but not less than six months after the expiration date of this Warrant)
determined by the board of directors and specified in the scrip. In case of the
exercise of this Warrant for less than all the shares purchasable, the
Corporation shall cancel the Warrant and execute and deliver a new Warrant of
like tenor and date for the balance of the shares purchasable.
Section 4. ADJUSTMENT OF SHARES PURCHASABLE. The number of shares
purchasable hereunder and the purchase price per share are subject to adjustment
from time to time as specified in this Warrant.
Section 5. LIMITED RIGHTS OF OWNER. This Warrant does not entitle the
owner to any voting rights or other rights as a shareholder of the Corporation,
or to any other rights whatsoever except the rights herein expressed. No
dividends are payable or will accrue on this Warrant or the shares purchasable
hereunder until, and except to the extent that, this Warrant is exercised.
Section 6. EXCHANGE FOR OTHER DENOMINATIONS. This Warrant is
exchangeable, on its surrender by the registered owner to the Corporation, for
new Warrants of like tenor and date representing in the aggregate the right to
purchase the number of shares purchasable hereunder in denominations designated
by the registered owner at the time of surrender.
Section 7. REGISTRATION RIGHTS. "Piggy-back" registration rights
covering the resale of shares of the Common Stock purchased pursuant to this
Warrant shall attach to this Warrant in accordance with a registration rights
agreement to be delivered and executed by the Corporation at such times as
Corporation proposes to register any of the Common Stock under the Securities
Act of 1933, as amended.
Section 8 TRANSFER. Except as otherwise above provided, this Warrant is
transferable only on the books of the Corporation by the registered owner in
person or by attorney, on surrender of this Warrant, properly endorsed. However,
because this Warrant has not been registered under the Securities Act of 1933,
as amended, and applicable state securities laws, this Warrant may not be sold
or transferred in the absence of an effective registration of it under such Act
and all other applicable securities laws or an opinion of counsel acceptable to
the Corporation or its representatives that such sale or transfer would not
violate applicable securities laws or regulations. Any Common Stock purchased
upon exercise of this Warrant shall also be subject to the same restrictions on
transfer and will contain the same transfer legend found on the face of this
Warrant.
Section 9 RECOGNITION OF REGISTERED OWNER. Prior to due presentment for
registration of transfer of this Warrant, the Corporation may treat the
registered owner as the person exclusively entitled to receive notices and
otherwise to exercise rights hereunder.
Section 10. EFFECT OF STOCK SPLIT, ETC. If the Corporation, by stock
dividend, split, reverse split, reclassification of shares, or otherwise,
changes as a whole the outstanding Common Stock into a different number or class
of shares, then:
(a) the number and class of shares so changed shall, for the purposes
of this Warrant, replace the shares outstanding immediately prior to the change;
and
<PAGE> 3
CLASS "F" WARRANT NO. PAGE 3
(b) the Warrant purchase price in effect, and the number of shares
purchasable under this Warrant, immediately prior to the date upon which the
change becomes effective, shall be proportionately adjusted (the price to the
nearest cent). Irrespective of any adjustment or change in the Warrant purchase
price or the number of shares purchasable under this or any other Warrant of
like tenor, the Warrants theretofore and thereafter issued may continue to
express the Warrant purchase price per share and the number of shares
purchasable as were expressed in the Warrants when initially issued.
Section 11. EFFECT OF MERGER, ETC. If the Corporation consolidates with
or merges into another corporation, the registered owner shall thereafter be
entitled on exercise to purchase, with respect to each share of Common Stock
purchasable hereunder immediately before the consolidation or merger becomes
effective, the securities or other consideration to which a holder of one share
of Common Stock is entitled in the consolidation or merger to assure that all
the provisions of this Warrant shall thereafter be applicable, as nearly as
reasonably may be, to any securities or other consideration so deliverable on
exercise of this Warrant. The Corporation shall not consolidate or merge unless,
prior to consummation, the successor corporation (if other than the Corporation)
assumes the obligations of this Section 10 by written instrument executed and
mailed to the registered owner at the address of the owner on the books of the
Corporation. A sale or lease of all or substantially all the assets of the
Corporation for a consideration (apart from the assumption of obligations)
consisting primarily of securities is a consolidation or merger for the
foregoing purposes.
Section 12. NOTICE OF ADJUSTMENT. On the happening of an event
requiring an adjustment of the Warrant purchase price or the shares purchasable
hereunder, the Corporation shall forthwith give written notice to the registered
owner stating the adjusted Warrant purchase price and the adjusted number and
kind of securities or other property purchasable hereunder resulting from the
event and setting forth in reasonable detail the method of calculation and the
facts upon which the calculation is based. The board of directors of the
Corporation, acting in good faith, shall determine the calculation.
Section. 13 NOTICE AND EFFECT OF DISSOLUTION, ETC. In case a voluntary
or involuntary dissolution, liquidation, or winding up of the Corporation (other
than in connection with a consolidation or merger covered by Section 10 above)
is at any time proposed, the Corporation shall give at least 10 days' written
notice to the registered owner prior to the record date as of which holders of
Common Stock will be entitled to receive distributions as a result of the
proposed transaction. Such notice shall contain: (1) the date on which the
transaction is to take place; (2) the record date as of which holders of Common
Stock will be entitled to receive distributions as a result of the transaction;
(3) a brief description of the transaction; (4) a brief description of the
distributions to be made to holders of Common Stock as a result of the
transaction; and (5) an estimate of the fair value of the distributions. On the
date of the transaction, if it actually occurs, this Warrant and all rights
hereunder shall terminate.
Section 14. METHOD OF GIVING NOTICE; EXTENT REQUIRED. Notices shall be
given by first class mail, postage prepaid, addressed to the registered owner at
the address of the owner appearing in the records of the Corporation. No notice
to warrant holders is required except as specified in Sections 11 and 12.
Section 15. ACCESS TO INFORMATION. The Company will provide an
opportunity to any registered owner of this Warrant to ask questions of
management of the Company and to obtain information to the extent the Company
has the same in its possession prior to any exercise of the owner's rights to
purchase Common Stock under this Warrant. Requests for information and any other
questions concerning the business and affairs of the Company should be directed
to any officer of the Company at its main business offices.
<PAGE> 4
CLASS "F" WARRANT NO. PAGE 4
Witness the seal of the Corporation and the signatures of its
authorized officers.
Dated: (Seal) PROBEX CORP.
ATTEST:
_____________________________________ By:________________________________
Alex Daspit, Secretary Thomas G. Murray, President
<PAGE> 5
CLASS "F" WARRANT NO. PAGE 5
TRANSFER FORM
For value received, the undersigned hereby sells, assigns, and
transfers to
Name ___________________________________________________________________________
Address ________________________________________________________________________
this Warrant and irrevocable appoints attorney (with
full power of substitution) to transfer this Warrant on the books of the
Corporation.
Date:
_________________________________________
_________________________________________
(Please sign exactly as name appears on Warrant)
Taxpayer ID No. _____________________
In the presence of Signature guaranteed by
_________________________________________ _____________________________________
<PAGE> 6
CLASS "F" WARRANT NO. PAGE 6
EXERCISE FORM
The undersigned hereby: (1) irrevocably subscribes for
________________ shares of your Common Stock pursuant to this Warrant, and
encloses payment of $____________________ therefor; (2) requests that a
certificate for the shares be issued in the name of the undersigned and
delivered to the undersigned at the address below; and (3) if such number
of shares is not all of the shares purchasable hereunder, that a new
Warrant of like tenor for the balance of the remaining shares purchasable
hereunder be issued in the name of the undersigned and delivered to the
undersigned at the address below.
Date:
_________________________________________
_________________________________________
(Please sign exactly as name appears
on Warrant)
Address: ___________________________
_____________________________________
Taxpayer ID No. _____________________
<PAGE> 1
EXHIBIT 4.3.2
THIS WARRANT AND ANY SECURITIES ACQUIRED UPON THE EXERCISE OF THIS
WARRANT HAVE NOT BEEN REGISTERED UNDER: (A) THE SECURITIES ACT OF 1933, AS
AMENDED, IN RELIANCE UPON THE EXEMPTIONS FROM REGISTRATION PROVIDED IN SECTIONS
3 AND 4 OF SUCH ACT AND REGULATION D PROMULGATED THEREUNDER; OR (B) ANY STATE
SECURITIES LAWS IN RELIANCE UPON APPLICABLE EXEMPTIONS THEREUNDER. THESE
SECURITIES MUST BE ACQUIRED FOR INVESTMENT ONLY FOR THE ACCOUNT OF THE INVESTOR
AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
OF THEM UNDER SUCH ACT AND ALL OTHER APPLICABLE SECURITIES LAWS OR AN OPINION OF
COUNSEL ACCEPTABLE TO THE CORPORATION OR ITS REPRESENTATIVES THAT SUCH SALE OR
TRANSFER WOULD NOT VIOLATE APPLICABLE SECURITIES LAWS OR REGULATIONS.
WARRANT NO. TO PURCHASE
- ------------- SHARES OF COMMON STOCK
(NO PAR VALUE)
CLASS "H" WARRANT TO PURCHASE SHARES
OF COMMON STOCK OF
PROBEX CORP.
(A COLORADO CORPORATION)
PURCHASE PRICE PER SHARE: $0.50
EXPIRATION DATE: 5:00 P.M., DENVER, COLORADO TIME, ON APRIL 26, 2001
THIS CERTIFIES that, for value received,
is the registered owner and is entitled, subject to the terms and conditions of
this Warrant, until the Expiration Date, to purchase the number of shares set
forth above of the Common Stock, no par value (the "Common Stock"), of Probex
Corp. (the "Corporation") from the Corporation at the purchase price set forth
above. The number of shares of Common Stock that may be received upon the
exercise of the Warrants and the price to be paid for each share of Common Stock
are subject to adjustment from time to time as hereinafter set forth.
Section 1. EXERCISE OF WARRANTS. Subject to the provisions hereof, the
Warrants may be exercised in whole or in part until the Expiration Date, by
delivery of this Warrant to the Corporation with the exercise form duly executed
and payment of the purchase price (in cash or by certified or bank cashier's
check payable to the order of the Corporation) for each share purchased.
Section 2. CORPORATION'S COVENANTS AS TO COMMON STOCK. Shares
deliverable on the exercise of this Warrant shall, at delivery, be fully paid
and non-assessable, free from taxes, liens, and charges with respect to their
purchase. The Corporation shall at all times reserve and hold available
sufficient shares of Common Stock to satisfy all conversion and purchase rights
of outstanding convertible securities, options and warrants.
<PAGE> 2
CLASS "H" WARRANT NO. PAGE 2
Section 3. METHOD OF EXERCISE; FRACTIONAL SHARES. The purchase rights
represented by this Warrant are exercisable at the option of the registered
owner in whole at any time, or in part, from time to time, within the period
above specified, provided, however, that purchase rights are not exercisable
with respect to a fraction of a share of Common Stock. In lieu of issuing a
fraction of a share remaining after exercise of this Warrant as to all full
shares covered hereby, the Corporation shall either (1) pay therefor cash equal
to the same fraction of the then current Warrant purchase price per share or, at
its option, (2) issue scrip for the fraction, in registered or bearer form
approved by the board of directors of the Corporation, which shall entitle the
holder to receive a certificate for a full share of Common Stock on surrender of
scrip aggregating a full share. Scrip may become void after a reasonable period
(but not less than six months after the expiration date of this Warrant)
determined by the board of directors and specified in the scrip. In case of the
exercise of this Warrant for less than all the shares purchasable, the
Corporation shall cancel the Warrant and execute and deliver a new Warrant of
like tenor and date for the balance of the shares purchasable.
Section 4. ADJUSTMENT OF SHARES PURCHASABLE. The number of shares
purchasable hereunder and the purchase price per share are subject to adjustment
from time to time as specified in this Warrant.
Section 5. LIMITED RIGHTS OF OWNER. This Warrant does not entitle the
owner to any voting rights or other rights as a shareholder of the Corporation,
or to any other rights whatsoever except the rights herein expressed. No
dividends are payable or will accrue on this Warrant or the shares purchasable
hereunder until, and except to the extent that, this Warrant is exercised.
Section 6. EXCHANGE FOR OTHER DENOMINATIONS. This Warrant is
exchangeable, on its surrender by the registered owner to the Corporation, for
new Warrants of like tenor and date representing in the aggregate the right to
purchase the number of shares purchasable hereunder in denominations designated
by the registered owner at the time of surrender.
Section 7. REGISTRATION RIGHTS. "Piggy-back" registration rights
covering the resale of shares of the Common Stock purchased pursuant to this
Warrant shall attach to this Warrant in accordance with a registration rights
agreement to be delivered and executed by the Corporation at such times as
Corporation proposes to register any of the Common Stock under the Securities
Act of 1933, as amended.
Section 8 TRANSFER. Except as otherwise above provided, this Warrant is
transferable only on the books of the Corporation by the registered owner in
person or by attorney, on surrender of this Warrant, properly endorsed. However,
because this Warrant has not been registered under the Securities Act of 1933,
as amended, and applicable state securities laws, this Warrant may not be sold
or transferred in the absence of an effective registration of it under such Act
and all other applicable securities laws or an opinion of counsel acceptable to
the Corporation or its representatives that such sale or transfer would not
violate applicable securities laws or regulations. Any Common Stock purchased
upon exercise of this Warrant shall also be subject to the same restrictions on
transfer and will contain the same transfer legend found on the face of this
Warrant.
Section 9 RECOGNITION OF REGISTERED OWNER. Prior to due presentment for
registration of transfer of this Warrant, the Corporation may treat the
registered owner as the person exclusively entitled to receive notices and
otherwise to exercise rights hereunder.
Section 10. EFFECT OF STOCK SPLIT, ETC. If the Corporation, by stock
dividend, split, reverse split, reclassification of shares, or otherwise,
changes as a whole the outstanding Common Stock into a different number or class
of shares, then:
(a) the number and class of shares so changed shall, for the purposes
of this Warrant, replace the shares outstanding immediately prior to the change;
and
<PAGE> 3
CLASS "H" WARRANT NO. PAGE 3
(b) the Warrant purchase price in effect, and the number of shares
purchasable under this Warrant, immediately prior to the date upon which the
change becomes effective, shall be proportionately adjusted (the price to the
nearest cent). Irrespective of any adjustment or change in the Warrant purchase
price or the number of shares purchasable under this or any other Warrant of
like tenor, the Warrants theretofore and thereafter issued may continue to
express the Warrant purchase price per share and the number of shares
purchasable as were expressed in the Warrants when initially issued.
Section 11. EFFECT OF MERGER, ETC. If the Corporation consolidates with
or merges into another corporation, the registered owner shall thereafter be
entitled on exercise to purchase, with respect to each share of Common Stock
purchasable hereunder immediately before the consolidation or merger becomes
effective, the securities or other consideration to which a holder of one share
of Common Stock is entitled in the consolidation or merger to assure that all
the provisions of this Warrant shall thereafter be applicable, as nearly as
reasonably may be, to any securities or other consideration so deliverable on
exercise of this Warrant. The Corporation shall not consolidate or merge unless,
prior to consummation, the successor corporation (if other than the Corporation)
assumes the obligations of this Section 10 by written instrument executed and
mailed to the registered owner at the address of the owner on the books of the
Corporation. A sale or lease of all or substantially all the assets of the
Corporation for a consideration (apart from the assumption of obligations)
consisting primarily of securities is a consolidation or merger for the
foregoing purposes.
Section 12. NOTICE OF ADJUSTMENT. On the happening of an event
requiring an adjustment of the Warrant purchase price or the shares purchasable
hereunder, the Corporation shall forthwith give written notice to the registered
owner stating the adjusted Warrant purchase price and the adjusted number and
kind of securities or other property purchasable hereunder resulting from the
event and setting forth in reasonable detail the method of calculation and the
facts upon which the calculation is based. The board of directors of the
Corporation, acting in good faith, shall determine the calculation.
Section 13 NOTICE AND EFFECT OF DISSOLUTION, ETC. In case a voluntary
or involuntary dissolution, liquidation, or winding up of the Corporation (other
than in connection with a consolidation or merger covered by Section 10 above)
is at any time proposed, the Corporation shall give at least 10 days' written
notice to the registered owner prior to the record date as of which holders of
Common Stock will be entitled to receive distributions as a result of the
proposed transaction. Such notice shall contain: (1) the date on which the
transaction is to take place; (2) the record date as of which holders of Common
Stock will be entitled to receive distributions as a result of the transaction;
(3) a brief description of the transaction; (4) a brief description of the
distributions to be made to holders of Common Stock as a result of the
transaction; and (5) an estimate of the fair value of the distributions. On the
date of the transaction, if it actually occurs, this Warrant and all rights
hereunder shall terminate.
Section 14. METHOD OF GIVING NOTICE; EXTENT REQUIRED. Notices shall be
given by first class mail, postage prepaid, addressed to the registered owner at
the address of the owner appearing in the records of the Corporation. No notice
to warrant holders is required except as specified in Sections 11 and 12.
Section 15 ACCESS TO INFORMATION. The Company will provide an
opportunity to any registered owner of this Warrant to ask questions of
management of the Company and to obtain information to the extent the Company
has the same in its possession prior to any exercise of the owner's rights to
purchase Common Stock under this Warrant. Requests for information and any other
questions concerning the business and affairs of the Company should be directed
to any officer of the Company at its main business offices.
<PAGE> 4
CLASS "H" WARRANT NO. PAGE 4
Witness the seal of the Corporation and the signatures of its
authorized officers.
Dated: (Seal) PROBEX CORP.
ATTEST:
__________________________________ By:____________________________
Alex Daspit, Secretary Thomas G. Murray, President
<PAGE> 5
CLASS "H" WARRANT NO. PAGE 5
TRANSFER FORM
For value received, the undersigned hereby sells, assigns, and
transfers to
Name
----------------------------------
Address
-------------------------------
this Warrant and irrevocable appoints ___________________ attorney (with full
power of substitution) to transfer this Warrant on the books of the Corporation.
Date:
- ---------------------------
- ---------------------------
(Please sign exactly as name appears on Warrant)
Taxpayer ID No.
--------------------------------
In the presence of Signature guaranteed by
- --------------------------- ---------------------------
<PAGE> 6
CLASS "H" WARRANT NO. PAGE 6
EXERCISE FORM
The undersigned hereby: (1) irrevocably subscribes for
________________ shares of your Common Stock pursuant to this Warrant, and
encloses payment of $____________________ therefor; (2) requests that a
certificate for the shares be issued in the name of the undersigned and
delivered to the undersigned at the address below; and (3) if such number
of shares is not all of the shares purchasable hereunder, that a new
Warrant of like tenor for the balance of the remaining shares purchasable
hereunder be issued in the name of the undersigned and delivered to the
undersigned at the address below.
Date:
------------------------
------------------------
(Please sign exactly as name appears on Warrant)
Address: __________________________________
Taxpayer ID No. ____________________________
<PAGE> 1
EXHIBIT 4.3.3
THIS WARRANT AND ANY SECURITIES ACQUIRED UPON THE EXERCISE OF THIS
WARRANT HAVE NOT BEEN REGISTERED UNDER: (A) THE SECURITIES ACT OF 1933, AS
AMENDED, IN RELIANCE UPON THE EXEMPTIONS FROM REGISTRATION PROVIDED IN SECTIONS
3 AND 4 OF SUCH ACT AND REGULATION D PROMULGATED THEREUNDER; OR (B) ANY STATE
SECURITIES LAWS IN RELIANCE UPON APPLICABLE EXEMPTIONS THEREUNDER. THESE
SECURITIES MUST BE ACQUIRED FOR INVESTMENT ONLY FOR THE ACCOUNT OF THE INVESTOR
AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
OF THEM UNDER SUCH ACT AND ALL OTHER APPLICABLE SECURITIES LAWS OR AN OPINION OF
COUNSEL ACCEPTABLE TO THE CORPORATION OR ITS REPRESENTATIVES THAT SUCH SALE OR
TRANSFER WOULD NOT VIOLATE APPLICABLE SECURITIES LAWS OR REGULATIONS.
WARRANT NO. TO PURCHASE
- ------------- SHARES OF COMMON STOCK
(NO PAR VALUE)
CLASS "K" WARRANT TO PURCHASE SHARES
OF COMMON STOCK OF
PROBEX CORP.
(A COLORADO CORPORATION)
PURCHASE PRICE PER SHARE: $0.10
EXPIRATION DATE: 5:00 P.M., DENVER, COLORADO TIME, ON APRIL 26, 2001
THIS CERTIFIES that, for value received,
is the registered owner and is entitled, subject to the terms and conditions of
this Warrant, until the Expiration Date, to purchase the number of shares set
forth above of the Common Stock, no par value (the "Common Stock"), of Probex
Corp. (the "Corporation") from the Corporation at the purchase price set forth
above. The number of shares of Common Stock that may be received upon the
exercise of the Warrants and the price to be paid for each share of Common Stock
are subject to adjustment from time to time as hereinafter set forth.
Section 1. EXERCISE OF WARRANTS. Subject to the provisions hereof, the
Warrants may be exercised in whole or in part until the Expiration Date, by
delivery of this Warrant to the Corporation with the exercise form duly executed
and payment of the purchase price (in cash or by certified or bank cashier's
check payable to the order of the Corporation) for each share purchased.
Section 2. CORPORATION'S COVENANTS AS TO COMMON STOCK. Shares
deliverable on the exercise of this Warrant shall, at delivery, be fully paid
and non-assessable, free from taxes, liens, and charges with respect to their
purchase. The Corporation shall at all times reserve and hold available
sufficient shares of Common Stock to satisfy all conversion and purchase rights
of outstanding convertible securities, options and warrants.
<PAGE> 2
CLASS "K" WARRANT NO. PAGE 2
Section 3. METHOD OF EXERCISE; FRACTIONAL SHARES. The purchase rights
represented by this Warrant are exercisable at the option of the registered
owner in whole at any time, or in part, from time to time, within the period
above specified, provided, however, that purchase rights are not exercisable
with respect to a fraction of a share of Common Stock. In lieu of issuing a
fraction of a share remaining after exercise of this Warrant as to all full
shares covered hereby, the Corporation shall either (1) pay therefor cash equal
to the same fraction of the then current Warrant purchase price per share or, at
its option, (2) issue scrip for the fraction, in registered or bearer form
approved by the board of directors of the Corporation, which shall entitle the
holder to receive a certificate for a full share of Common Stock on surrender of
scrip aggregating a full share. Scrip may become void after a reasonable period
(but not less than six months after the expiration date of this Warrant)
determined by the board of directors and specified in the scrip. In case of the
exercise of this Warrant for less than all the shares purchasable, the
Corporation shall cancel the Warrant and execute and deliver a new Warrant of
like tenor and date for the balance of the shares purchasable.
Section 4. ADJUSTMENT OF SHARES PURCHASABLE. The number of shares
purchasable hereunder and the purchase price per share are subject to adjustment
from time to time as specified in this Warrant.
Section 5. LIMITED RIGHTS OF OWNER. This Warrant does not entitle the
owner to any voting rights or other rights as a shareholder of the Corporation,
or to any other rights whatsoever except the rights herein expressed. No
dividends are payable or will accrue on this Warrant or the shares purchasable
hereunder until, and except to the extent that, this Warrant is exercised.
Section 6. EXCHANGE FOR OTHER DENOMINATIONS. This Warrant is
exchangeable, on its surrender by the registered owner to the Corporation, for
new Warrants of like tenor and date representing in the aggregate the right to
purchase the number of shares purchasable hereunder in denominations designated
by the registered owner at the time of surrender.
Section 7. REGISTRATION RIGHTS. "Piggy-back" registration rights
covering the resale of shares of the Common Stock purchased pursuant to this
Warrant shall attach to this Warrant in accordance with a registration rights
agreement to be delivered and executed by the Corporation at such times as
Corporation proposes to register any of the Common Stock under the Securities
Act of 1933, as amended.
Section 8. TRANSFER. Except as otherwise above provided, this Warrant
is transferable only on the books of the Corporation by the registered owner in
person or by attorney, on surrender of this Warrant, properly endorsed. However,
because this Warrant has not been registered under the Securities Act of 1933,
as amended, and applicable state securities laws, this Warrant may not be sold
or transferred in the absence of an effective registration of it under such Act
and all other applicable securities laws or an opinion of counsel acceptable to
the Corporation or its representatives that such sale or transfer would not
violate applicable securities laws or regulations. Any Common Stock purchased
upon exercise of this Warrant shall also be subject to the same restrictions on
transfer and will contain the same transfer legend found on the face of this
Warrant.
Section 9. RECOGNITION OF REGISTERED OWNER. Prior to due presentment
for registration of transfer of this Warrant, the Corporation may treat the
registered owner as the person exclusively entitled to receive notices and
otherwise to exercise rights hereunder.
Section 10. EFFECT OF STOCK SPLIT, ETC. If the Corporation, by stock
dividend, split, reverse split, reclassification of shares, or otherwise,
changes as a whole the outstanding Common Stock into a different number or class
of shares, then:
<PAGE> 3
CLASS "K" WARRANT NO. PAGE 3
(a) the number and class of shares so changed shall, for the purposes
of this Warrant, replace the shares outstanding immediately prior to the change;
and
(b) the Warrant purchase price in effect, and the number of shares
purchasable under this Warrant, immediately prior to the date upon which the
change becomes effective, shall be proportionately adjusted (the price to the
nearest cent). Irrespective of any adjustment or change in the Warrant purchase
price or the number of shares purchasable under this or any other Warrant of
like tenor, the Warrants theretofore and thereafter issued may continue to
express the Warrant purchase price per share and the number of shares
purchasable as were expressed in the Warrants when initially issued.
Section 11. EFFECT OF MERGER, ETC. If the Corporation consolidates with
or merges into another corporation, the registered owner shall thereafter be
entitled on exercise to purchase, with respect to each share of Common Stock
purchasable hereunder immediately before the consolidation or merger becomes
effective, the securities or other consideration to which a holder of one share
of Common Stock is entitled in the consolidation or merger to assure that all
the provisions of this Warrant shall thereafter be applicable, as nearly as
reasonably may be, to any securities or other consideration so deliverable on
exercise of this Warrant. The Corporation shall not consolidate or merge unless,
prior to consummation, the successor corporation (if other than the Corporation)
assumes the obligations of this Section 10 by written instrument executed and
mailed to the registered owner at the address of the owner on the books of the
Corporation. A sale or lease of all or substantially all the assets of the
Corporation for a consideration (apart from the assumption of obligations)
consisting primarily of securities is a consolidation or merger for the
foregoing purposes.
Section 12. NOTICE OF ADJUSTMENT. On the happening of an event
requiring an adjustment of the Warrant purchase price or the shares purchasable
hereunder, the Corporation shall forthwith give written notice to the registered
owner stating the adjusted Warrant purchase price and the adjusted number and
kind of securities or other property purchasable hereunder resulting from the
event and setting forth in reasonable detail the method of calculation and the
facts upon which the calculation is based. The board of directors of the
Corporation, acting in good faith, shall determine the calculation.
Section 13. NOTICE AND EFFECT OF DISSOLUTION, ETC. In case a voluntary
or involuntary dissolution, liquidation, or winding up of the Corporation (other
than in connection with a consolidation or merger covered by Section 10 above)
is at any time proposed, the Corporation shall give at least 10 days' written
notice to the registered owner prior to the record date as of which holders of
Common Stock will be entitled to receive distributions as a result of the
proposed transaction. Such notice shall contain: (1) the date on which the
transaction is to take place; (2) the record date as of which holders of Common
Stock will be entitled to receive distributions as a result of the transaction;
(3) a brief description of the transaction; (4) a brief description of the
distributions to be made to holders of Common Stock as a result of the
transaction; and (5) an estimate of the fair value of the distributions. On the
date of the transaction, if it actually occurs, this Warrant and all rights
hereunder shall terminate.
Section 14. METHOD OF GIVING NOTICE; EXTENT REQUIRED. Notices shall be
given by first class mail, postage prepaid, addressed to the registered owner at
the address of the owner appearing in the records of the Corporation. No notice
to warrant holders is required except as specified in Sections 11 and 12.
Section 15. ACCESS TO INFORMATION. The Company will provide an
opportunity to any registered owner of this Warrant to ask questions of
management of the Company and to obtain information to the extent the Company
has the same in its possession prior to any exercise of the owner's rights to
purchase Common Stock under this Warrant. Requests for information and any other
questions concerning the business and affairs of the Company should be directed
to any officer of the Company at its main business offices.
Witness the seal of the Corporation and the signatures of its
authorized officers.
Dated: (Seal) PROBEX CORP.
<PAGE> 4
CLASS "K" WARRANT NO. PAGE 4
ATTEST:
_____________________________________ By:____________________________________
Alex Daspit, Secretary Martin MacDonald, Vice President
<PAGE> 5
CLASS "K" WARRANT NO. PAGE 5
TRANSFER FORM
For value received, the undersigned hereby sells, assigns, and
transfers to
Name
-----------------------
Address
--------------------
this Warrant and irrevocable appoints ------------------------------- attorney
(with full power of substitution) to transfer this Warrant on the books of the
Corporation.
Date:
- --------------------------------------
- --------------------------------------
(Please sign exactly as name appears on Warrant)
Taxpayer ID No. ----------------------
In the presence of Signature guaranteed by
- -------------------------------------- --------------------------------
<PAGE> 6
CLASS "K" WARRANT NO. PAGE 6
EXERCISE FORM
The undersigned hereby: (1) irrevocably subscribes for ----------------
shares of your Common Stock pursuant to this Warrant, and encloses payment of
$-------------------- therefor; (2) requests that a certificate for the shares
be issued in the name of the undersigned and delivered to the undersigned at the
address below; and (3) if such number of shares is not all of the shares
purchasable hereunder, that a new Warrant of like tenor for the balance of the
remaining shares purchasable hereunder be issued in the name of the undersigned
and delivered to the undersigned at the address below.
Date:
- -----------------------------------------
- -----------------------------------------
(Please sign exactly as name appears on Warrant)
Address:
---------------------------
---------------------------
Taxpayer ID No. -----------
<PAGE> 1
- --------------------------------------------------------------------------------
THIS WARRANT AND ANY SECURITIES ACQUIRED UPON THE EXERCISE OF THIS
WARRANT HAVE NOT BEEN REGISTERED UNDER: (A) THE SECURITIES ACT OF 1933, AS
AMENDED, IN RELIANCE UPON THE EXEMPTIONS FROM REGISTRATION PROVIDED IN SECTIONS
3 AND 4 OF SUCH ACT AND REGULATION D PROMULGATED THEREUNDER; OR (B) ANY STATE
SECURITIES LAWS IN RELIANCE UPON APPLICABLE EXEMPTIONS THEREUNDER. THESE
SECURITIES MUST BE ACQUIRED FOR INVESTMENT ONLY FOR THE ACCOUNT OF THE INVESTOR
AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
OF THEM UNDER SUCH ACT AND ALL OTHER APPLICABLE SECURITIES LAWS OR AN OPINION OF
COUNSEL ACCEPTABLE TO THE CORPORATION OR ITS REPRESENTATIVES THAT SUCH SALE OR
TRANSFER WOULD NOT VIOLATE APPLICABLE SECURITIES LAWS OR REGULATIONS.
- --------------------------------------------------------------------------------
WARRANT NO. TO PURCHASE
SHARES OF COMMON STOCK
(NO PAR VALUE)
CLASS "N" WARRANT TO PURCHASE SHARES
OF COMMON STOCK OF
PROBEX CORP.
(A COLORADO CORPORATION)
PURCHASE PRICE PER SHARE: $1.00
EXPIRATION DATE: 5:00 P.M., DENVER, COLORADO TIME, ON JUNE 8, 2003
THIS CERTIFIES that, for value received,
is the registered owner and is entitled, subject to the terms and conditions of
this Warrant, until the Expiration Date, to purchase the number of shares set
forth above of the Common Stock, no par value (the "Common Stock"), of Probex
Corp. (the "Corporation") from the Corporation at the purchase price set forth
above. The number of shares of Common Stock that may be received upon the
exercise of the Warrants and the price to be paid for each share of Common Stock
are subject to adjustment from time to time as hereinafter set forth.
Section 1. EXERCISE OF WARRANTS. Subject to the provisions hereof, the
Warrants may be exercised in whole or in part until the Expiration Date, by
delivery of this Warrant to the Corporation with the exercise form duly executed
and payment of the purchase price (in cash or by certified or bank cashier's
check payable to the order of the Corporation) for each share purchased.
Section 2. CORPORATION'S COVENANTS AS TO COMMON STOCK. Shares
deliverable on the exercise of this Warrant shall, at delivery, be fully paid
and non-assessable, free from taxes, liens, and charges with respect to their
purchase. The Corporation shall at all times reserve and hold available
sufficient shares of Common Stock to satisfy all conversion and purchase rights
of outstanding convertible securities, options and warrants.
Section 3. METHOD OF EXERCISE; FRACTIONAL SHARES. The purchase rights
represented by this Warrant are exercisable at the option of the registered
owner in whole at any time, or in part, from time to time, within the period
above specified, provided, however, that purchase rights are not exercisable
with respect to a fraction of a share of Common Stock. In lieu of issuing a
fraction of a share remaining after exercise of this Warrant as to all full
shares covered hereby, the Corporation shall either (1) pay therefor cash equal
to the same fraction of the then current Warrant purchase price per share or, at
its option,
<PAGE> 2
CLASS "N" WARRANT NO. PAGE 2
(2) issue scrip for the fraction, in registered or bearer form approved by the
board of directors of the Corporation, which shall entitle the holder to receive
a certificate for a full share of Common Stock on surrender of scrip aggregating
a full share. Scrip may become void after a reasonable period (but not less than
six months after the expiration date of this Warrant) determined by the board of
directors and specified in the scrip. In case of the exercise of this Warrant
for less than all the shares purchasable, the Corporation shall cancel the
Warrant and execute and deliver a new Warrant of like tenor and date for the
balance of the shares purchasable.
Section 4. ADJUSTMENT OF SHARES PURCHASABLE. The number of shares
purchasable hereunder and the purchase price per share are subject to adjustment
from time to time as specified in this Warrant.
Section 5. LIMITED RIGHTS OF OWNER. This Warrant does not entitle the
owner to any voting rights or other rights as a shareholder of the Corporation,
or to any other rights whatsoever except the rights herein expressed. No
dividends are payable or will accrue on this Warrant or the shares purchasable
hereunder until, and except to the extent that, this Warrant is exercised.
Section 6. EXCHANGE FOR OTHER DENOMINATIONS. This Warrant is
exchangeable, on its surrender by the registered owner to the Corporation, for
new Warrants of like tenor and date representing in the aggregate the right to
purchase the number of shares purchasable hereunder in denominations designated
by the registered owner at the time of surrender.
Section 7. REGISTRATION RIGHTS. "Piggy-back" registration rights
covering the resale of shares of the Common Stock purchased pursuant to this
Warrant shall attach to this Warrant in accordance with a registration rights
agreement to be delivered and executed by the Corporation at such times as
Corporation proposes to register any of the Common Stock under the Securities
Act of 1933, as amended.
Section 8. REDEMPTION. This Warrant, to the extent not then exercised,
may be redeemed by the Corporation at its option on 30 days written notice at a
redemption price of $0.01 per Warrant Share then issuable hereunder upon the
following conditions:
(a) if the closing bid price (or the last sale price) of the
Corporation's Common Stock, as reported by the principal exchange or quotation
service on which the Common Stock is traded, for any ten consecutive days is at
or above of $6.00 (U.S. Funds) per share; and,
(b) the Warrants have been registered under the Securities Act of
1933, as amended.
Section 9. TRANSFER. Except as otherwise above provided, this Warrant
is transferable only on the books of the Corporation by the registered owner in
person or by attorney, on surrender of this Warrant, properly endorsed. However,
because this Warrant has not been registered under the Securities Act of 1933,
as amended, and applicable state securities laws, this Warrant may not be sold
or transferred in the absence of an effective registration of it under such Act
and all other applicable securities laws or an opinion of counsel acceptable to
the Corporation or its representatives that such sale or transfer would not
violate applicable securities laws or regulations. Any Common Stock purchased
upon exercise of this Warrant shall also be subject to the same restrictions on
transfer and will contain the same transfer legend found on the face of this
Warrant.
Section 10. RECOGNITION OF REGISTERED OWNER. Prior to due presentment
for registration of transfer of this Warrant, the Corporation may treat the
registered owner as the person exclusively entitled to receive notices and
otherwise to exercise rights hereunder.
Section 11. EFFECT OF STOCK SPLIT, ETC. If the Corporation, by stock
dividend, split, reverse split, reclassification of shares, or otherwise,
changes as a whole the outstanding Common Stock into a different number or class
of shares, then:
(a) the number and class of shares so changed shall, for the purposes
of this Warrant, automatically replace the shares outstanding immediately prior
to the change even if the Holder does
<PAGE> 3
CLASS "N" WARRANT NO. PAGE 3
not exchange this Warrant for a new Warrant representing the actual number of
shares held as a result of stock split of other such changes, which the Holder
shall not be required to do; and
(b) the Warrant purchase price in effect, and the number of shares
purchasable under this Warrant, immediately prior to the date upon which the
change becomes effective, shall be proportionately adjusted (the price to the
nearest cent).
Section 12. EFFECT OF MERGER, ETC. If the Corporation consolidates with
or merges into another corporation, the registered owner shall thereafter be
entitled on exercise to purchase, with respect to each share of Common Stock
purchasable hereunder immediately before the consolidation or merger becomes
effective, the securities or other consideration to which a holder of one share
of Common Stock is entitled in the consolidation or merger to assure that all
the provisions of this Warrant shall thereafter be applicable, as nearly as
reasonably may be, to any securities or other consideration so deliverable on
exercise of this Warrant. The Corporation shall not consolidate or merge unless,
prior to consummation, the successor corporation (if other than the Corporation)
assumes the obligations of this Section 10 by written instrument executed and
mailed to the registered owner at the address of the owner on the books of the
Corporation. A sale or lease of all or substantially all the assets of the
Corporation for a consideration (apart from the assumption of obligations)
consisting primarily of securities is a consolidation or merger for the
foregoing purposes.
Section 13. NOTICE OF ADJUSTMENT. On the happening of an event
requiring an adjustment of the Warrant purchase price or the shares purchasable
hereunder, the Corporation shall forthwith give written notice to the registered
owner stating the adjusted Warrant purchase price and the adjusted number and
kind of securities or other property purchasable hereunder resulting from the
event and setting forth in reasonable detail the method of calculation and the
facts upon which the calculation is based. The board of directors of the
Corporation, acting in good faith, shall determine the calculation.
Section 14. NOTICE AND EFFECT OF DISSOLUTION, ETC. In case a voluntary
or involuntary dissolution, liquidation, or winding up of the Corporation (other
than in connection with a consolidation or merger covered by Section 10 above)
is at any time proposed, the Corporation shall give at least 10 days' written
notice to the registered owner prior to the record date as of which holders of
Common Stock will be entitled to receive distributions as a result of the
proposed transaction. Such notice shall contain: (1) the date on which the
transaction is to take place; (2) the record date as of which holders of Common
Stock will be entitled to receive distributions as a result of the transaction;
(3) a brief description of the transaction; (4) a brief description of the
distributions to be made to holders of Common Stock as a result of the
transaction; and (5) an estimate of the fair value of the distributions. On the
date of the transaction, if it actually occurs, this Warrant and all rights
hereunder shall terminate.
Section 15. METHOD OF GIVING NOTICE; EXTENT REQUIRED. Notices shall be
given by first class mail, postage prepaid, addressed to the registered owner at
the address of the owner appearing in the records of the Corporation. No notice
to warrant holders is required except as specified in Sections 11 and 12.
Section 16. ACCESS TO INFORMATION. The Company will provide an
opportunity to any registered owner of this Warrant to ask questions of
management of the Company and to obtain information to the extent the Company
has the same in its possession prior to any exercise of the owner's rights to
purchase Common Stock under this Warrant. Requests for information and any other
questions concerning the business and affairs of the Company should be directed
to any officer of the Company at its main business offices.
<PAGE> 4
CLASS "N" WARRANT NO. PAGE 4
Witness the seal of the Corporation and the signatures of its
authorized officers.
Dated: (Seal) PROBEX CORP.
ATTEST:
/s/ By:
- ---------------------------- -------------------------------------
Alex D. Daspit Thomas G. Murray
President Chief Executive Officer
<PAGE> 5
CLASS "N" WARRANT NO. PAGE 5
TRANSFER FORM
For value received, the undersigned hereby sells, assigns, and
transfers to
Name ___________________________________________________________________________
Address ________________________________________________________________________
this Warrant and irrevocable appoints __________________________________________
attorney (with full power of substitution) to transfer this Warrant on the books
of the Corporation.
Date:
_____________________________ _______________________________________________
(Please sign exactly as name appears on Warrant)
Taxpayer ID No. ______________________________
In the presence of Signature guaranteed by
_____________________________ ________________________________________________
<PAGE> 6
CLASS "N" WARRANT NO. PAGE 6
EXERCISE FORM
The undersigned hereby: (1) irrevocably subscribes for ________________
shares of your Common Stock pursuant to this Warrant, and encloses payment of
$____________________ therefor; (2) requests that a certificate for the shares
be issued in the name of the undersigned and delivered to the undersigned at the
address below; and (3) if such number of shares is not all of the shares
purchasable hereunder, that a new Warrant of like tenor for the balance of the
remaining shares purchasable hereunder be issued in the name of the undersigned
and delivered to the undersigned at the address below.
Date:
_____________________________ ________________________________________________
(Please sign exactly as name appears on Warrant)
Address:________________________________________
________________________________________________
Taxpayer ID No. ________________________________
<PAGE> 1
EXHIBIT 4.3.5
WARRANT
THE WARRANT EVIDENCED OR CONSTITUTED HEREBY, AND ALL SHARES OF COMMON STOCK
ISSUABLE HEREUNDER, HAVE BEEN AND WILL BE ISSUED WITHOUT REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED ("THE ACT") AND MAY NOT BE SOLD, OFFERED FOR
SALE, TRANSFERRED, PLEDGED OR HYPOTHECATED WITHOUT REGISTRATION UNDER THE ACT
UNLESS EITHER (i) THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL, IN FORM AND
SUBSTANCE REASONABLY SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT
REGISTRATION IS NOT REQUIRED IN CONNECTION WITH SUCH DISPOSITION OR (ii) THE
SALE OF SUCH SECURITIES IS MADE PURSUANT TO SECURITIES AND EXCHANGE COMMISSION
RULE 144.
WARRANT TO PURCHASE COMMON STOCK OF PROBEX CORPORATION
(Subject to Adjustment)
NO. O
THIS CERTIFIES THAT, for value received, HSB Engineering Finance
Corporation, or its permitted registered assigns ("HOLDER"), is entitled,
subject to the terms and conditions of this Warrant, at any time or from time to
time after June 30, 1998 (the "EFFECTIVE DATE"), and before 5:00 p.m. Central
Time on June 30, 2008 (the "EXPIRATION DATE"), to purchase from Probex
Corporation, a Colorado corporation (the "COMPANY"), 1,602,607 shares of Common
Stock of the Company at a price per share of $0.01 (the "PURCHASE PRICE"). Both
the number of shares of Common Stock purchasable upon exercise of this Warrant
and the Purchase Price are subject to adjustment and change as provided herein.
This Warrant is issued pursuant to the Convertible Loan, Warrant and Security
Agreement, dated June 30, 1998 (the "LOAN AGREEMENT"), between the Company and
Holder.
1. CERTAIN DEFINITIONS. As used in this Warrant the following terms shall have
the following respective meanings:
"Actively Traded" shall mean attainment of an average of 37,500 or more
shares per business day arm's length trading volume of Common Stock over a
period of twenty (20) trading days as reported by the over-the-counter or other
established quotation agencies.
"Fair Market Value" of a share of Common Stock as of a particular date
shall mean:
(a) If traded on a securities exchange or the Nasdaq National
Market, the Fair Market Value shall be deemed to be the average of the closing
prices of the Common Stock of the Company on such exchange or market over the 5
business days ending immediately prior to the applicable date of valuation;
<PAGE> 2
(b) If Actively Traded over-the-counter, the Fair Market Value
shall be deemed to be the average of the closing bid prices over the 30-day
period ending immediately prior to the applicable date of valuation; and
(c) If not Actively Traded over-the-counter or traded on a
securities exchange or the Nasdaq National Market, the Fair Market Value shall
be the value thereof, as agreed upon by the Company and the Holder; provided,
however, that if the Company and the Holder cannot agree on such value, such
value shall be determined by an independent valuation firm experienced in
valuing businesses such as the Company and jointly selected in good faith by the
Company and the Holder. Fees and expenses of the valuation firm shall be paid
for by the Company.
"Fully-Diluted" shall mean after giving effect to the exercise or
conversion, as applicable, of all outstanding options, warrants, and other
securities convertible or exchangeable for Common Stock.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended.
"Public Offering" shall mean after the date hereof any firm commitment
underwritten public offering of the Company's Common Stock pursuant to a
registration statement filed with the Securities and Exchange Commission.
"Registered Holder" shall mean any Holder in whose name this Warrant is
registered upon the books and records maintained by the Company.
"Warrant" as used herein, shall include this Warrant and any warrant
delivered in substitution or exchange therefor as provided herein.
"Warrant Shares" shall mean the shares of Common Stock to be issuable
upon exercise of this Warrant (or any shares of stock or other securities at the
time issuable upon exercise of this Warrant).
"Common Stock" shall mean the Common Stock of the Company and any other
securities at any time receivable or issuable upon exercise of this Warrant.
2. EXERCISE OF WARRANT
2.1. Payment. Subject to compliance with the terms and conditions of
this Warrant and applicable securities laws, this Warrant may be exercised, in
whole or in part at any time or from time to time, on or before the Expiration
Date by the delivery (including, without limitation, delivery by facsimile) of
the form of Notice of Exercise attached hereto as Exhibit 1 (the "NOTICE OF
EXERCISE"), duly executed by the Holder, at the principal office of the Company,
and as soon as practicable after such date, surrendering
(a) this Warrant at the principal office of the Company, and
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<PAGE> 3
(b) payment, (i) in cash (by check) or by wire transfer, (ii)
by cancellation by the Holder of indebtedness of the Company to the Holder; or
(iii) by a combination of (i) and (ii), of an amount equal to the product
obtained by multiplying the number of shares of Common Stock being purchased
upon such exercise by the then effective Purchase Price (the "EXERCISE AMOUNT"),
except that if Holder is subject to HSR Act Restrictions (as defined in Section
2.4 below), the Exercise Amount shall be paid to the Company within five (5)
business days of the termination of all HSR Act Restrictions.
2.2. Net Issue Exercise. In lieu of the payment methods set forth in
Section 2.1(b) above, the Holder may elect to exchange all or some of the
Warrant for shares of Common Stock equal to the value of the amount of the
Warrant being exchanged on the date of exchange. If Holder elects to exchange
this Warrant as provided in this Section 2.2, Holder shall tender to the Company
the Warrant for the amount being exchanged, along with written notice of
Holder's election to exchange some or all of the Warrant, and the Company shall
issue to Holder the number of shares of the Common Stock computed using the
following formula:
X = Y (A-B)
-------
A
Where X = the number of shares of Common Stock to be issued to
Holder.
Y = the number of shares of Common Stock purchasable under the
amount of the Warrant being exchanged (as adjusted to the date
of such calculation).
A = the Fair Market Value of one share of the Company's Common
Stock.
B = Purchase Price (as adjusted to the date of such
calculation).
All references herein to an "exercise" of the Warrant shall
include an exchange pursuant to this Section 2.2. Upon receipt of a written
notice of the Company's intention to raise capital by selling shares of Common
Stock in a Public Offering (the "PUBLIC OFFERING NOTICE"), which notice shall be
delivered to Holder at least forty-five (45) but not more than ninety (90) days
before the anticipated date of the filing with the Securities and Exchange
Commission of the registration statement associated with the Public Offering,
the Holder shall promptly notify the Company whether or not the Holder will
exercise this Warrant pursuant to this Section 2.2 prior to consummation of the
Public Offering. Notwithstanding whether or not a Public Offering Notice has
been delivered to Holder or any other provision of this Warrant to the contrary,
if Holder decides to exercise this Warrant while a registration statement is on
file with the Securities and Exchange Commission (the "SEC") in connection with
the Public Offering, this Warrant shall be deemed exercised on the consummation
of the Public Offering and the Fair Market Value of a share of Common Stock will
be the price at which one share of Common Stock was sold to the public in the
Public Offering. If Holder has elected to exercise this Warrant pursuant to this
Section 2.2 while a registration statement is on file with the Securities and
Exchange Commission in connection with a Public Offering and the Public Offering
is not consummated, then Holder's exercise of this Warrant shall not be
effective unless Holder confirms in writing Holder's intention to go forward
with the exercise of this Warrant.
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WARRANT
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2.3. "Easy Sale" Exercise. In lieu of the payment methods set forth in
Section 2.1(b) above, when permitted by law and applicable regulations
(including Nasdaq and NASD rules), the Holder may pay the Purchase Price through
a "same day sale" commitment from the Holder (and if applicable a broker-dealer
that is a member of the National Association of Securities Dealers (a "NASD
DEALER")), whereby the Holder irrevocably elects to exercise this Warrant and to
sell a portion of the Shares so purchased to pay for the Purchase Price and the
Holder (or, if applicable, the NASD Dealer) commits upon sale (or, in the case
of the NASD Dealer, upon receipt) of such Shares to forward the Purchase Price
directly to the Company.
2.4. Stock Certificates; Fractional Shares. As soon as practicable on
or after such date, the Company shall issue and deliver to the person or persons
entitled to receive the same a certificate or certificates for the number of
whole shares of Common Stock issuable upon such exercise, together with cash in
lieu of any fraction of a share equal to such fraction of the current Fair
Market Value of one whole share of Common Stock as of the date of exercise of
this Warrant. No fractional shares or scrip representing fractional shares shall
be issued upon an exercise of this Warrant.
2.5. HSR Act. The Company hereby acknowledges that exercise of this
Warrant by Holder may subject the Company and/or the Holder to the filing
requirements of the HSR Act and that Holder may be prevented from exercising
this Warrant until the expiration or early termination of all waiting periods
imposed by the HSR Act ("HSR ACT RESTRICTIONS"). If on or before the Expiration
Date Holder has sent the Notice of Exercise to Company and Holder has not been
able to complete the exercise of this Warrant prior to the Expiration Date
because of HSR Act Restrictions, the Holder shall be entitled to complete the
process of exercising this Warrant in accordance with the procedures contained
herein notwithstanding the fact that completion of the exercise of this Warrant
would take place after the Expiration Date or the completion of the Public
Offering.
2.6. Partial Exercise; Effective Date of Exercise. In case of any
partial exercise of this Warrant, the Company shall cancel this Warrant upon
surrender hereof and shall execute and deliver a new Warrant of like tenor and
date for the balance of the shares of Common Stock purchasable hereunder. This
Warrant shall be deemed to have been exercised immediately prior to the close of
business on the date of its surrender for exercise as provided above. However,
if Holder is subject to HSR Act filing requirements this Warrant shall be deemed
to have been exercised on the date immediately following the date of the
expiration of all HSR Act Restrictions. The person entitled to receive the
shares of Common Stock issuable upon exercise of this Warrant shall be treated
for all purposes as the holder of record of such shares as of the close of
business on the date the Holder is deemed to have exercised this Warrant.
3. VALID ISSUANCE: TAXES. All shares of Common Stock issued upon the exercise of
this Warrant shall be validly issued, fully paid and non-assessable, and the
Company shall pay all taxes and other governmental charges that may be imposed
in respect of the issue or delivery thereof. The Company shall not be required
to pay any tax or other charge imposed in connection with any transfer involved
in the issuance of any certificate for shares of Common Stock in any name other
than that of the Registered Holder of this Warrant, and in such case the Company
shall not be required to issue or deliver any stock certificate or security
until such tax
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WARRANT
<PAGE> 5
or other charge has been paid, or it has been established to the Company's
reasonable satisfaction that no tax or other charge is due.
4. ADJUSTMENT OF PURCHASE PRICE AND NUMBER OF SHARES. The number of shares of
Common Stock issuable upon exercise of this Warrant (or any shares of stock or
other securities or property receivable or issuable upon exercise of this
Warrant) and the Purchase Price are subject to adjustment upon occurrence of the
following events:
4.1. Adjustment for Stock Splits, Stock Subdivisions or Combinations of
Shares. The Purchase Price of this Warrant shall be proportionally decreased and
the number of Warrant Shares shall be proportionally increased to reflect any
stock split or subdivision of the Company's Common Stock. The Purchase Price of
this Warrant shall be proportionally increased and the number of Warrant Shares
shall be proportionally decreased to reflect any combination of the Company's
Common Stock.
4.2. Adjustment for Dividends or Distributions of Stock or Other
Securities or Property. In case the Company shall make or issue, or shall fix a
record date for the determination of eligible holders entitled to receive, a
dividend or other distribution with respect to the Common Stock (or any shares
of stock or other securities at the time issuable upon exercise of the Warrant)
payable in (a) securities of the Company or (b) assets (excluding cash dividends
paid or payable solely out of funds legally available therefor), then, in each
such case, the Holder of this Warrant on exercise hereof at any time after the
consummation, effective date or record date of such dividend or other
distribution, shall receive, in addition to the shares of Common Stock (or such
other stock or securities) issuable on such exercise prior to such date, and
without the payment of additional consideration therefor, the securities or such
other assets of the Company to which such Holder would have been entitled upon
such date if such Holder had exercised this Warrant on the date hereof and had
thereafter, during the period from the date hereof to and including the date of
such exercise, retained such shares and/or all other additional stock available
by it as aforesaid during such period giving effect to all adjustments called
for by this Section 4.
4.3. Reclassification. If the Company, by reclassification of
securities or otherwise, shall change any of the securities as to which purchase
rights under this Warrant exist into the same or a different number of
securities of any other class or classes, this Warrant shall thereafter
represent the right to acquire such number and kind of securities as would have
been issuable as the result of such change with respect to the securities that
were subject to the purchase rights under this Warrant immediately prior to such
reclassification or other change and the Purchase Price therefore shall be
appropriately adjusted, all subject to further adjustment as provided in this
Section 4. No adjustment shall be made pursuant to this Section 4.3 upon any
conversion or redemption of the Common Stock which is the subject of Section
4.5.
4.4. Adjustment for Capital Reorganization, Merger or Consolidation. In
case of any capital reorganization of the capital stock of the Company (other
than a combination, reclassification, exchange or subdivision of shares
otherwise provided for herein), or any merger or consolidation of the Company
with or into another corporation, or the sale of all or substantially all the
assets of the Company then, and in each such case, as a part of such
reorganization, merger, consolidation, sale or transfer, lawful provision shall
be made so that the
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WARRANT
<PAGE> 6
Holder of this Warrant shall thereafter be entitled to receive upon exercise of
this Warrant, during the period specified herein and upon payment of the
Purchase Price then in effect, the number of shares of stock or other securities
or property of the successor corporation resulting from such reorganization,
merger, consolidation, sale or transfer that a holder of the shares deliverable
upon exercise of this Warrant would have been entitled to receive in such
reorganization, consolidation, merger, sale or transfer if this Warrant had been
exercised immediately before such reorganization, merger, consolidation, sale or
transfer, all subject to further adjustment as provided in this Section 4. The
foregoing provisions of this Section 4.4 shall similarly apply to successive
reorganizations, consolidations, mergers, sales and transfers and to the stock
or securities of any other corporation that are at the time receivable upon the
exercise of this Warrant. If the per-share consideration payable to the Holder
hereof for shares in connection with any such transaction is in a form other
than cash or marketable securities, then the value of such consideration shall
be determined in good faith by the Company's Board of Directors. In all events,
appropriate adjustment (as determined in good faith by the Company's Board of
Directors) shall be made in the application of the provisions of this Warrant
with respect to the rights and interests of the Holder after the transaction, to
the end that the provisions of this Warrant shall be applicable after that
event, as near as reasonably may be, in relation to any shares or other property
deliverable after that event upon exercise of this Warrant.
4.5. Conversion of Common Stock. In case all or any portion of the
authorized and outstanding shares of Common Stock of the Company are redeemed or
converted or reclassified into other securities or property pursuant to the
Company's Articles of Incorporation or otherwise, or the Common Stock otherwise
ceases to exist, then, in such case, the Holder of this Warrant, upon exercise
hereof at any time after the date on which the Common Stock is so redeemed or
converted, reclassified or ceases to exist (the "TERMINATION DATE"), shall
receive, in lieu of the number of shares of Common Stock that would have been
issuable upon such exercise immediately prior to the Termination Date, the
securities or property that would have been received if this Warrant had been
exercised in full and the Common Stock received thereupon had been
simultaneously converted immediately prior to the Termination Date, all subject
to further adjustment as provided in this Warrant. Additionally, the Purchase
Price shall be immediately adjusted to equal the quotient obtained by dividing
(x) the aggregate Purchase Price of the maximum number of shares of Common Stock
for which this Warrant was exercisable immediately prior to the Termination Date
by (y) the number of shares of Common Stock of the Company for which this
Warrant is exercisable immediately after the Termination Date, all subject to
further adjustment as provided herein.
4.6. Adjustment for Issuance of Additional Shares of Common Stock.
Until consummation of a Public Offering, upon issuance by the Company of (1)
Common Stock, (2) any right, option or warrant to acquire Common Stock, (3) any
other stock convertible into Common Stock, or (4) any obligation or any share of
stock convertible into or exchangeable for Common Stock (including the
Additional Conversion Shares but excluding any Conversion Shares issued pursuant
to Section 5.7.6 of the Loan Agreement and any Warrant Shares adjusted pursuant
to this Section) (in the case of (2), (3) and (4), collectively, "Common Stock
Equivalents"), the number of Warrant Shares shall be adjusted as follows:
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WARRANT
<PAGE> 7
(a) if (i) Common Stock is issued and the consideration
received is (x) other than cash (including personal checks) or other immediately
available funds, or (y) cash (including personal checks) or other immediately
available funds in an amount less than $1.00 per share, or (ii) Common Stock
Equivalents are issued and the exercise, conversion or exchange price per share
of Common Stock is less than $1.00 per share of Common Stock, then the number of
Warrant Shares shall be increased by the following amount:
<TABLE>
<S> <C>
Number of Shares of Number of Warrant Shares Outstanding Prior to Issuance
Common Stock Issued or x
Issuable Upon Exercise of -------------------------------------------------------
Common Stock Equivalents -
Number of Shares of Common Stock Outstanding
(Fully-Diluted) Prior to Issuance
</TABLE>
(b) if (i) Common Stock is issued and the consideration
received is (x) cash (including personal checks) or other immediately available
funds in an amount equal to or greater than $1.00 per share but less than $1.50
per share, or (ii) Common Stock Equivalents are issued and the exercise,
conversion or exchange price per share of Common Stock is equal to or greater
than $1.00 per share but less than $1.50 per share of Common Stock, then the
number of Warrant Shares shall be increased by the following amount:
<TABLE>
<S> <C>
Number of Shares of Number of Warrant Shares Outstanding Prior to Issuance
Common Stock Issued or x x 0.50
Issuable Upon Exercise of ------------------------------------------------------- 0
Common Stock Equivalents Number of Shares of Common Stock Outstanding
(Fully-Diluted) Prior to Issuance
</TABLE>
5. CERTIFICATE AS TO ADJUSTMENTS. In each case of any adjustment in the Purchase
Price, or number or type of shares issuable upon exercise of this Warrant, the
Chief Financial Officer or Controller of the Company shall compute such
adjustment in accordance with the terms of this Warrant and prepare a
certificate setting forth such adjustment and showing in detail the facts upon
which such adjustment is based, including a statement of the adjusted Purchase
Price. The Company shall promptly send (by facsimile and by either first class
mail, postage prepaid or overnight delivery) a copy of each such certificate to
the Holder.
6. LOSS OR MUTILATION. Upon receipt of evidence reasonably satisfactory to the
Company of the ownership of and the loss, theft, destruction or mutilation of
this Warrant, and of indemnity reasonably satisfactory to it, and (in the case
of mutilation) upon surrender and cancellation of this Warrant, the Company will
execute and deliver in lieu thereof a new Warrant of like tenor as the lost,
stolen, destroyed or mutilated Warrant.
7. RESERVATION OF COMMON STOCK. The Company hereby covenants that at all times
there shall be reserved for issuance and delivery upon exercise of this Warrant
such number of shares of Common Stock or other shares of capital stock of the
Company as are from time to time issuable upon exercise of this Warrant and,
from time to time, will take all steps necessary to amend its Articles of
Incorporation to provide sufficient reserves of shares of Common Stock issuable
upon exercise of this Warrant (and shares of its Common Stock for issuance on
conversion of such Common Stock). All such shares shall be duly authorized, and
when issued upon such exercise, shall be validly issued, fully paid and
non-assessable, free and
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WARRANT
<PAGE> 8
clear of all liens, security interests, charges and other encumbrances or
restrictions on sale and free and clear of all preemptive rights, except
encumbrances or restrictions arising under federal or state securities laws.
Issuance of this Warrant shall constitute full authority to the Company's
officers who are charged with the duty of executing stock certificates to
execute and issue the necessary certificates for shares of Common Stock and
Common Stock upon the exercise of this Warrant.
8. TRANSFER AND EXCHANGE. Subject to the terms and conditions of this Warrant
and compliance with all applicable securities laws, this Warrant and all rights
hereunder may be transferred in whole or in part, on the books of the Company
maintained for such purpose at the principal office of the Company referred to
above, to any Registered Holder parent, subsidiary or affiliate, by the
Registered Holder hereof in person, or by duly authorized attorney, upon
surrender of this Warrant properly endorsed and upon payment of any necessary
transfer tax or other governmental charge imposed upon such transfer. Upon any
permitted partial transfer, the Company will issue and deliver to the Registered
Holder a new Warrant or Warrants with respect to the shares of Common Stock not
so transferred. Each taker and holder of this Warrant, by taking or holding the
same, consents and agrees that when this Warrant shall have been so endorsed,
the person in possession of this Warrant may be treated by the Company, and all
other persons dealing with this Warrant, as the absolute owner hereof for any
purpose and as the person entitled to exercise the rights represented hereby,
any notice to the contrary notwithstanding; provided, however that until a
transfer of this Warrant is duly registered on the books of the Company, the
Company may treat the Registered Holder hereof as the owner for all purposes.
9. RESTRICTIONS ON TRANSFER. The Holder, by acceptance hereof, agrees that,
absent an effective registration statement filed with the SEC under the
Securities Act of 1933, as amended (the "1933 ACT"), covering the disposition or
sale of this Warrant or the Common Stock issued or issuable upon exercise hereof
or the Common Stock issuable upon conversion thereof, as the case may be, and
registration or qualification under applicable state securities laws, such
Holder will not sell, transfer, pledge, or hypothecate any or all such Warrants
or Common Stock, as the case may be, unless either (i) the Company has received
an opinion of counsel, in form and substance reasonably satisfactory to the
Company, to the effect that such registration is not required in connection with
such disposition or (ii) the sale of such securities is made pursuant to SEC
Rule 144.
10. COMPLIANCE WITH SECURITIES LAWS. By acceptance of this Warrant, the holder
hereby represents, warrants and covenants that any shares of stock purchased
upon exercise of this Warrant or acquired upon conversion thereof shall be
acquired for investment only and not with a view to, or for sale in connection
with, any distribution thereof; that the Holder has had such opportunity as such
Holder has deemed adequate to obtain from representatives of the Company such
information as is necessary to permit the Holder to evaluate the merits and
risks of its investment in the company; that the Holder is able to bear the
economic risk of holding such shares as may be acquired pursuant to the exercise
of this Warrant for an indefinite period; that the Holder understands that the
shares of stock acquired pursuant to the exercise of this Warrant or acquired
upon conversion thereof will not be registered under the 1933 Act (unless
otherwise required pursuant to exercise by the Holder of the registration
rights,
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if any, previously granted to the registered Holder) and will be "restricted
securities" within the meaning of Rule 144 under the 1933 Act and that the
exemption from registration under Rule 144 will not be available for at least
one year from the date of exercise of this Warrant, subject to any special
treatment by the SEC for exercise of this Warrant pursuant to Section 2.2, and
even then will not be available unless a public market then exists for the
stock, adequate information concerning the Company is then available to the
public, and other terms and conditions of Rule 144 are complied with; and that
all stock certificates representing shares of stock issued to the Holder upon
exercise of this Warrant or upon conversion of such shares may have affixed
thereto a legend substantially in the following form:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES
LAWS OF ANY STATE. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON
TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT
AS PERMITTED UNDER THE ACT AND THE APPLICABLE STATE SECURITIES LAWS,
PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE
AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS
INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE
SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE
SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR
RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE
SECURITIES LAWS.
11. NO RIGHTS OR LIABILITIES AS STOCKHOLDERS. This Warrant shall not entitle the
Holder to any voting rights or other rights as a stockholder of the Company. In
the absence of affirmative action by such Holder to purchase Common Stock by
exercise of this Warrant, no provisions of this Warrant, and no enumeration
herein of the rights or privileges of the Holder hereof shall cause such Holder
hereof to be a stockholder of the Company for any purpose.
12. REGISTRATION RIGHTS. All shares of Common Stock issuable upon exercise of
this Warrant shall be "REGISTRABLE SECURITIES" or such other definition of
securities entitled to registration rights pursuant to the Investor Rights
Agreement, dated as of the date hereof, between the Company and Holder, and are
entitled, subject to the terms and conditions of that agreement, to all
registration rights granted to holders of Registrable Securities thereunder.
13. NOTICES. All notices and other communications from the Company to the Holder
shall be given in accordance with the Loan Agreement.
14. HEADINGS. The headings in this Warrant are for purposes of convenience in
reference only, and shall not be deemed to constitute a part hereof.
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15. LAW GOVERNING. This Warrant shall be construed and enforced in accordance
with, and governed by, the laws of the State of Connecticut.
16. NO IMPAIRMENT. The Company will not, by amendment of its Articles of
Incorporation or bylaws, or through reorganization, consolidation, merger,
dissolution, issue or sale of securities, sale of assets or any other voluntary
action, avoid or seek to avoid the observance or performance of any of the terms
of this Warrant, but will at all times in good faith assist in the carrying out
of all such terms and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the Registered Holder of this
Warrant against impairment. Without limiting the generality of the foregoing,
the Company (a) will not increase the par value of any shares of stock issuable
upon the exercise of this Warrant above the amount payable therefor upon such
exercise, and (b) will take all such action as may be necessary or appropriate
in order that the Company may validly and legally issue fully paid and
non-assessable shares of Common Stock upon exercise of this Warrant.
17. NOTICES OF RECORD DATE. In case:
17.1. the Company shall take a record of the holders of its Common
Stock (or other stock or securities at the time receivable upon the exercise of
this Warrant), for the purpose of entitling them to receive any dividend or
other distribution, or any right to subscribe for or purchase any shares of
stock of any class or any other securities or to receive any other right; or
17.2. of any consolidation or merger of the Company with or into
another corporation, any capital reorganization of the Company, any
reclassification of the Capital Stock of the Company, or any conveyance of all
or substantially all of the assets of the Company to another corporation in
which holders of the Company's stock are to receive stock, securities or
property of another corporation; or
17.3. of any voluntary dissolution, liquidation or winding-up of the
Company; or
17.4. of any redemption or conversion of all outstanding Common Stock;
then, and in each such case, the Company will mail or cause to be mailed to the
Registered Holder of this Warrant a notice specifying, as the case may be, (i)
the date on which a record is to be taken for the purpose of such dividend,
distribution or right, or (ii) the date on which such reorganization,
reclassification, consolidation, merger, conveyance, dissolution, liquidation,
winding-up, redemption or conversion is to take place, and the time, if any is
to be fixed, as of which the holders of record of Common Stock or (such stock or
securities as at the time are receivable upon the exercise of this Warrant),
shall be entitled to exchange their shares of Common Stock (or such other stock
or securities), for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, conveyance,
dissolution, liquidation or winding-up. Such notice shall be delivered at least
thirty (30) days prior to the date therein specified.
18. SEVERABILITY. If any term, provision, covenant or restriction of this
Warrant is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the
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terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated.
19. COUNTERPARTS. For the convenience of the parties, any number of counterparts
of this Warrant may be executed by the parties hereto and each such executed
counterpart shall be, and shall be deemed to be, an original instrument.
20. NO INCONSISTENT AGREEMENTS. The Company will not on or after the date of
this Warrant enter into any agreement with respect to its securities which is
inconsistent with the rights granted to the Holders of this Warrant or otherwise
conflicts with the provisions hereof. The rights granted to the Holders
hereunder do not in any way conflict with and are not inconsistent with the
rights granted to holders of the Company's securities under any other
agreements, except rights that have been waived.
21. SATURDAYS, SUNDAYS AND HOLIDAYS. If the Expiration Date falls on a Saturday,
Sunday or legal holiday, the Expiration Date shall automatically be extended
until 5:00 p.m. the next business day.
22. BINDING EFFECT. Pursuant to Section 14.17 of the Loan Agreement, this
Warrant shall not be binding upon either party until the Company successfully
conducts an Acceptance Test on crankcase used oil, as defined in and pursuant to
the Loan Agreement.
[SIGNATURES ON NEXT PAGE]
-11-
WARRANT
<PAGE> 12
IN WITNESS WHEREOF, the parties hereto have executed this Warrant as of
the Effective Date.
HSB ENGINEERING FINANCE CORPORATION,
A DELAWARE CORPORATION
By:
----------------------------------
Name:
---------------------------
Title:
--------------------------
PROBEX CORPORATION,
A COLORADO CORPORATION
By:
----------------------------------
Name:
---------------------------
Title:
--------------------------
By:
----------------------------------
Name:
---------------------------
Title:
--------------------------
-12-
WARRANT
<PAGE> 13
EXHIBIT 1
NOTICE OF EXERCISE
(To be executed upon exercise of Warrant)
PROBEX CORPORATION WARRANT NO. ___
The undersigned hereby irrevocably elects to exercise the right of purchase
represented by the within Warrant Certificate for, and to purchase thereunder,
the securities of Probex Corporation, as provided for therein, and (check the
applicable box):
o Tenders herewith payment of the exercise price in full in the form of
cash or a certified or official bank check in same-day funds in the
amount of $____________ for _________ such securities.
o Elects the Net Issue Exercise option pursuant to Section 2.2 of the
Warrant, and accordingly requests delivery of a net of ______________
of such securities, according to the following calculation:
X = Y (A-B) ( ) = (____) [(_____) - (_____)]
------- ---------------------------
A (_____)
Where X = the number of shares of Common Stock to be issued to
Holder.
Y = the number of shares of Common Stock purchasable under the
amount of the Warrant being exchanged (as adjusted to the date
of such calculation).
A = the Fair Market Value of one share of the Company's Common
Stock.
B = Purchase Price (as adjusted to the date of such
calculation).
o Elects the Easy Sale Exercise option pursuant to Section 2.3 of the
Warrant, and accordingly requests delivery of a net of ______________
of such securities.
Please issue a certificate or certificates for such securities in the name of,
and pay any cash for any fractional share to (please print name, address and
social security number):
Name:
----------------------------------------
Address:
----------------------------------------
Signature:
----------------------------------------
Note: The above signature should correspond exactly with the name on the first
page of this Warrant Certificate or with the name of the assignee appearing in
the assignment form below.
If said number of shares shall not be all the shares purchasable under the
within Warrant Certificate, a new Warrant Certificate is to be issued in the
name of said undersigned for the balance remaining of the shares purchasable
thereunder rounded up to the next higher whole number of shares.
<PAGE> 14
EXHIBIT 2
ASSIGNMENT
(To be executed only upon assignment of Warrant WARRANT NO. ___
Certificate)
For value received, hereby sells, assigns and transfers unto
________________________ the within Warrant Certificate, together with all
right, title and interest therein, and does hereby irrevocably constitute and
appoint ____________________________ attorney, to transfer said Warrant
Certificate on the books of the within-named Company with respect to the number
of Warrants set forth below, with full power of substitution in the premises:
<TABLE>
<CAPTION>
====================================================================================================================
<S> <C> <C>
NAME(S) OF ASSIGNEE(S) ADDRESS # OF WARRANTS
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
====================================================================================================================
</TABLE>
And if said number of Warrants shall not be all the Warrants represented by the
Warrant Certificate, a new Warrant Certificate is to be issued in the name of
said undersigned for the balance remaining of the Warrants registered by said
Warrant Certificate.
Dated: 19
---------------------------------------------------------
Signature:
---------------------------------------------------------
Notice: The signature to the foregoing Assignment must correspond to the name as
written upon the face of this security in every particular, without alteration
or any change whatsoever; signature(s) must be guaranteed by an eligible
guarantor institution (banks, stock brokers, savings and loan associations and
credit unions with membership in an approved signature guarantee medallion
program) pursuant to Securities and Exchange Commission Rule 17Ad-15.
<PAGE> 1
EXHIBIT 4.3.6
- --------------------------------------------------------------------------------
THIS WARRANT AND ANY SECURITIES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER: (A) THE SECURITIES ACT OF 1933, AS AMENDED, IN
RELIANCE UPON THE EXEMPTIONS FROM REGISTRATION PROVIDED IN SECTIONS 3 AND 4 OF
SUCH ACT AND/OR REGULATIONS D PROMULGATED THEREUNDER; OR (B) ANY STATE
SECURITIES LAWS IN RELIANCE UPON APPLICABLE EXEMPTIONS THEREUNDER. THESE
SECURITIES MUST BE ACQUIRED FOR INVESTMENT ONLY FOR THE ACCOUNT OF THE INVESTOR
AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SECURITIES LAWS OR AN
OPINION OF COUNSEL ACCEPTABLE TO THE CORPORATION OR ITS REPRESENTATIVES THAT
SUCH SALE OR TRANSFER WOULD NOT VIOLATE APPLICABLE SECURITIES LAWS OR
REGULATIONS.
- --------------------------------------------------------------------------------
WARRANT NO. TO PURCHASE
SHARES OF COMMON STOCK
(NO PAR VALUE)
CLASS "P" WARRANT TO PURCHASE SHARES
OF COMMON STOCK OF
PROBEX CORP.
(A COLORADO CORPORATION)
PURCHASE PRICE PER SHARE: $0.20
EXPIRATION DATE: 5:00 P.M., DENVER, COLORADO TIME, ON SEPTEMBER 2, 2003
THIS CERTIFIES that, for value received,
is the registered owner and is entitled, subject to the terms and conditions of
this Warrant, until the Expiration Date, to purchase the number of shares set
forth above of the Common Stock, no par value (the "Common Stock"), of Probex
Corp. (the "Corporation") from the Corporation at the purchase price set forth
above. The number of shares of Common Stock which may be received upon the
exercise of the Warrants and the price to be paid for each share of Common Stock
are subject to adjustment from time to time as hereinafter set forth.
1. EXERCISE OF WARRANTS. Subject to the provisions hereof, this Warrant may be
exercised in whole or in part until the Expiration Date, by delivery of this
Warrant to the Corporation with the exercise form duly executed and payment of
the purchase price (in cash or by certified or bank cashier's check made payable
to the order of the Corporation) for each share purchased.
2. CORPORATION'S COVENANTS AS TO COMMON STOCK. Shares deliverable on the
exercise of this Warrant shall, at delivery, be fully paid and non-assessible,
free from taxes, liens, and charges with respect to their purchase. The
Corporation shall at all times reserve and hold available sufficient shares of
Common Stock to satisfy all conversion and purchase rights of outstanding
convertible securities, options and warrants.
3. METHOD OF EXERCISE; FRACTIONAL SHARES. The purchase rights represented by
this Warrant are exercisable at the option of the registered owner in whole at
any time, or in part, from time to time, within the period above specified,
provided, however, that purchase rights are not exercisable with respect to a
<PAGE> 2
CLASS "P" WARRANT NO.
PAGE 2
fraction of a share of Common Stock. In lieu of issuing a fraction of a share
remaining after exercise of this Warrant as to all full shares covered hereby,
the Corporation shall either (1) pay therefor cash equal to the same fraction of
the then current Warrant purchase price per share or, at its option, (2) issue
scrip for the fraction, in registered or bearer form approved by the board of
directors of the Corporation, which shall entitle the holder to receive a
certificate for a full share of Common Stock on surrender of scrip aggregating a
full share. Scrip may become void after a reasonable period (but not less than
six months after the expiration date of this Warrant) determined by the board of
directors and specified in the scrip. In case of the exercise of this Warrant
for less than all the shares purchasable, the Corporation shall cancel the
Warrant and execute and deliver a new Warrant of like tenor and date for the
balance of the shares purchasable.
4. ADJUSTMENT OF SHARES PURCHASABLE. The number of shares purchasable hereunder
and the purchase price per share are subject to adjustment from time to time as
specified in this Warrant.
5. REDEMPTION. The Corporation may at any time redeem all or any part of this
Warrant at the option of the Corporation if any of the following prices of the
Common Stock exceeds $3.00 per share for five (5) consecutive trading days: (i)
the high bid price of the Corporation's Common Stock if the Common Stock is
traded over-the-counter, (ii) the closing trading price for the Common Stock if
traded on NASDAQ or (iii) the reported closing price for the Common Stock if
traded on any national or regional stock exchange (the "Triggering Event"). The
redemption price will be $0.001 per share of Common Stock purchasable pursuant
to this Warrant.
Notice of every such redemption shall be mailed, postage prepaid, to
the registered holder hereof at the addresses then appearing on the Warrant
transfer records of the Corporation, not less than thirty (30) days nor more
than sixty (60) days prior to the date fixed for such redemption which shall be
specified therein. At any time after notice has been given as above provided,
The Corporation may deposit the aggregate redemption price of this Warrant or
portion thereof to be redeemed with any bank or trust company named in such
notice, directed to be paid to the registered holder hereof on surrender of this
Warrant Certificate. Upon the making of such deposit, the registered holder
hereof shall have no interest in or claim against the Corporation with respect
to such portion of this Warrant to be redeemed except only (i) the right to
receive such money from such bank or trust company without interest, or (ii) the
right to exercise, before redemption date, any unexpired rights to purchase
Common Stock hereunder. In case less than all of the outstanding Class P
Warrants are to be redeemed, the Corporation may choose the Warrants to be
redeemed at the election of the Corporation, either by lot based on the Warrant
Certificates held of record or pro rata based on the respective number of shares
of Common Stock purchasable pursuant to Warrants held by each holder of the
Class P Warrants. If the holders of Class P Warrants which shall have been
called for redemption shall not, within one year after such deposit, claim the
amount deposited for the redemption thereof, any such bank or trust company
shall, upon demand, pay over to the Corporation such unclaimed amounts and
thereupon such bank or trust company and the Corporation shall be relieved of
all responsibility in respect thereof and to such holders.
6. LIMITED RIGHTS OF OWNER. This Warrant does not entitle the owner to any
voting rights or other rights as a shareholder of the Corporation, or to any
other rights whatsoever except the rights herein expressed. No dividends are
payable or will accrue on this Warrant or the shares purchasable hereunder
until, and except to the extent that, this Warrant is exercised.
7. EXCHANGE FOR OTHER DENOMINATIONS. This Warrant is exchangeable, on its
surrender by the registered owner to the Corporation, for new Warrants of like
tenor and date representing in the aggregate the right to purchase the number of
shares purchasable hereunder in denominations designated by the registered owner
at the time of surrender.
<PAGE> 3
CLASS "P" WARRANT NO.
PAGE 3
8. TRANSFER. Except as otherwise above provided, this Warrant is transferable
only on the books of the Corporation by the registered owner in person or by
attorney, on surrender of this Warrant, properly endorsed. However, because this
Warrant has not been registered under the Securities Act of 1993, as amended,
and applicable state securities laws, this Warrant may not be sold or
transferred in the absence of an effective registration of it under such Act and
all other applicable securities laws or an opinion of counsel acceptable to the
Corporation or its representatives that such sale or transfer would not violate
applicable securities laws or regulations. Any Common Stock purchased upon
exercise of this Warrant shall also be subject to the same restrictions on
transfer and will contain the same transfer legend found on the face of this
Warrant.
9. RECOGNITION OF REGISTERED OWNER. Prior to due presentment for registration of
transfer of this Warrant, the Corporation may treat the registered owner as the
person exclusively entitled to receive notices and otherwise to exercise rights
hereunder.
10. EFFECT OF STOCK SPLIT, ETC. If the Corporation, by stock dividend, split,
reverse split, reclassification or shares, or otherwise, changes as a whole the
outstanding Common Stock into a different number or class of shares, then:
(1) the number and class of shares so changed shall, for the purposes
of this Warrant, replace the shares outstanding immediately prior to the change;
and
(2) the Warrant purchase price in effect, and the number of shares
purchasable under this Warrant, immediately prior to the date upon which the
change becomes effective, shall be proportionately adjusted (the price to the
nearest cent). Irrespective of any adjustment or change in the Warrant purchase
price or the number of shares purchasable under this or any other Warrant of
like tenor, the Warrants theretofore and thereafter issued may continue to
express the Warrant purchase price per share and the number of shares
purchasable as were expressed in the Warrants when initially issued.
11. EFFECT OF MERGER, ETC. If the Corporation consolidates with or merges into
another corporation, the registered owner shall thereafter be entitled on
exercise to purchase, with respect to each share of Common Stock purchasable
hereunder immediately before the consolidation or merger becomes effective, the
securities or other consideration to which a holder or one share or Common Stock
is entitled in the consolidation or merger to assure that all the provisions or
this Warrant shall thereafter be applicable, as nearly as reasonable may be, to
any securities or other consideration so deliverable on exercise of this
Warrant. The Corporation shall not consolidate or merge unless, prior to
consummation, the successor corporation (if other than the Corporation) assumes
the obligations of this section 11 by written instrument executed and mailed to
the registered owner at the address of the owner on the books of the
Corporation. A sale or lease of all or substantially all the assets of the
Corporation for a consideration (apart from the assumption of obligations)
consisting primarily or securities is a consolidation or merger for the
foregoing purposes.
12. NOTICE OF ADJUSTMENT. On the happening of an event requiring an adjustment
of the Warrant purchase price or shares purchasable hereunder, the Corporation
shall forthwith give written notice to the registered owner stating the adjusted
Warrant purchase price and the adjusted number and kind of securities or other
property purchasable hereunder resulting from the event and setting forth in
reasonable detail the method of calculation and the facts upon which the
calculation is based. The board of directors of the Corporation, acting in good
faith, shall determine the calculation.
13. NOTICE AND EFFECT OF DISSOLUTION, ETC. In case a voluntary or involuntary
dissolution, liquidation, or winding up of the Corporation (other than in
connection with a consolidation or merger covered by Section 10 above) is at any
time proposed, the Corporation shall give at least 10 days' written notice to
the
<PAGE> 4
CLASS "P" WARRANT NO.
PAGE 4
registered owner prior to the record date as of which holders of Common Stock
will be entitled to receive distributions as a result of the proposed
transaction. Such notice shall contain: (1) the date on which the transaction is
to take place; (2) the record date as of which holders of Common Stock will be
entitled to receive distributions as a result of the transaction; (3) a brief
description of the transaction; (4) a brief description of the distributions to
be made to holders of Common Stock as a result of the transaction; and (5)an
estimate of the fair value of the distributions. On the date of the transaction,
if it actually occurs, this Warrant and all rights hereunder shall terminate.
14. METHOD OF GIVING NOTICE; EXTENT REQUIRED. Notices shall be given by first
class mail, postage prepaid, addressed to the registered owner at the address of
the owner appearing in the records of the Corporation. No notice to warrant
holders is required except as specified in Sections 11 and 12.
15. ACCESS TO INFORMATION. The Company will provide an opportunity to any
registered owner of this Warrant to ask questions of management of the Company
and to obtain information to the extent the Company has the same in its
possession prior to any exercise of the owner's rights to purchase Common Stock
under this Warrant. Requests for information and any other questions concerning
the business and affairs of the Company should be directed to any officer of the
Company at its main offices.
Witness the seal of the Corporation and the signatures of its
authorized officers.
Dates (Seal) PROBEX CORP.
ATTEST:
By:
- --------------------------- ------------------------------------
Alex D. Daspit Thomas G. Murray
President Chief Executive Officer
<PAGE> 5
CLASS "P" WARRANT NO. PAGE 5
TRANSFER FORM
For value received, the undersigned hereby sells, assigns, and
transfers to
Name_____________________________________________
Address_________________________________________________________________________
this Warrant and irrevocable appoints _______________________ attorney (with
full power of substitution) to transfer this Warrant on the books of the
Corporation.
Date:
_____________________________
________________________________________________
(Please sign exactly as name appears on Warrant)
Taxpayer ID No. ________________________________
In the presence of Signature guaranteed by
_____________________________ ________________________________________________
<PAGE> 6
CLASS "P" WARRANT NO. PAGE 6
EXERCISE FORM
The undersigned hereby: (1) irrevocably subscribes for ________________
shares of your Common Stock pursuant to this Warrant, and encloses payment of
$____________________ therefor; (2) requests that a certificate for the shares
be issued in the name of the undersigned and delivered to the undersigned at the
address below; and (3) if such number of shares is not all of the shares
purchasable hereunder, that a new Warrant of like tenor for the balance of the
remaining shares purchasable hereunder be issued in the name of the undersigned
and delivered to the undersigned at the address below.
Date:
____________________________
________________________________________________
(Please sign exactly as name appears on Warrant)
Address:________________________________________
________________________________________________
Taxpayer ID No._________________________________
<PAGE> 1
EXHIBIT 4.3.7
- --------------------------------------------------------------------------------
THIS WARRANT AND ANY SECURITIES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER: (A) THE SECURITIES ACT OF 1933, AS AMENDED, IN
RELIANCE UPON THE EXEMPTIONS FROM REGISTRATION PROVIDED IN SECTIONS 3 AND 4 OF
SUCH ACT AND/OR REGULATIONS D PROMULGATED THEREUNDER; OR (B) ANY STATE
SECURITIES LAWS IN RELIANCE UPON APPLICABLE EXEMPTIONS THEREUNDER. THESE
SECURITIES MUST BE ACQUIRED FOR INVESTMENT ONLY FOR THE ACCOUNT OF THE INVESTOR
AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SECURITIES LAWS OR AN
OPINION OF COUNSEL ACCEPTABLE TO THE CORPORATION OR ITS REPRESENTATIVES THAT
SUCH SALE OR TRANSFER WOULD NOT VIOLATE APPLICABLE SECURITIES LAWS OR
REGULATIONS.
- --------------------------------------------------------------------------------
WARRANT NO. TO PURCHASE
SHARES OF COMMON STOCK
(NO PAR VALUE)
CLASS "Q" WARRANT TO PURCHASE SHARES
OF COMMON STOCK OF
PROBEX CORP.
(A COLORADO CORPORATION)
PURCHASE PRICE PER SHARE: $0.75
EXPIRATION DATE: 5:00 P.M., DENVER, COLORADO TIME, ON APRIL 16TH, 2001
THIS CERTIFIES that, for value received,
is the registered owner and is entitled, subject to the terms and conditions of
this Warrant, until the Expiration Date, to purchase the number of shares set
forth above of the Common Stock, no par value (the "Common Stock"), of Probex
Corp. (the "Corporation") from the Corporation at the purchase price set forth
above. The number of shares of Common Stock which may be received upon the
exercise of the Warrants and the price to be paid for each share of Common Stock
are subject to adjustment from time to time as hereinafter set forth.
1. EXERCISE OF WARRANTS. Subject to the provisions hereof, this Warrant may be
exercised in whole or in part until the Expiration Date, by delivery of this
Warrant to the Corporation with the exercise form duly executed and payment of
the purchase price (in cash or by certified or bank cashier's check made payable
to the order of the Corporation) for each share purchased.
2. CORPORATION'S COVENANTS AS TO COMMON STOCK. Shares deliverable on the
exercise of this Warrant shall, at delivery, be fully paid and non-assessable,
free from taxes, liens, and charges with respect to their purchase. The
Corporation shall at all times reserve and hold available sufficient shares of
Common Stock to satisfy all conversion and purchase rights of outstanding
convertible securities, options and warrants.
3. METHOD OF EXERCISE; FRACTIONAL SHARES. The purchase rights represented by
this Warrant are exercisable at the option of the registered owner in whole at
any time, or in part, from time to time, within the period above specified,
provided, however, that purchase rights are not exercisable with respect to a
<PAGE> 2
CLASS "Q" WARRANT NO. PAGE 2
fraction of a share of Common Stock. In lieu of issuing a fraction of a share
remaining after exercise of this Warrant as to all full shares covered hereby,
the Corporation shall either (1) pay therefor cash equal to the same fraction of
the then current Warrant purchase price per share or, at its option, (2) issue
scrip for the fraction, in registered or bearer form approved by the board of
directors of the Corporation, which shall entitle the holder to receive a
certificate for a full share of Common Stock on surrender of scrip aggregating a
full share. Scrip may become void after a reasonable period (but not less than
six months after the expiration date of this Warrant) determined by the board of
directors and specified in the scrip. In case of the exercise of this Warrant
for less than all the shares purchasable, the Corporation shall cancel the
Warrant and execute and deliver a new Warrant of like tenor and date for the
balance of the shares purchasable.
4. ADJUSTMENT OF SHARES PURCHASABLE. The number of shares purchasable hereunder
and the purchase price per share are subject to adjustment from time to time as
specified in this Warrant.
5. REDEMPTION. The Corporation may at any time redeem all or any part of this
Warrant at the option of the Corporation if any of the following prices of the
Common Stock equals or exceeds $1.50 per share for five (5) consecutive trading
days: (i) the high bid price of the Corporation's Common Stock if the Common
Stock is traded over-the-counter, (ii) the closing trading price for the Common
Stock if traded on NASDAQ or (iii) the reported closing price for the Common
Stock if traded on any national or regional stock exchange (the "Triggering
Event"). The redemption price will be $0.001 per share of Common Stock
purchasable pursuant to this Warrant.
Notice of every such redemption shall be mailed, postage prepaid, to
the registered holder hereof at the addresses then appearing on the Warrant
transfer records of the Corporation, not less than thirty (30) days nor more
than sixty (60) days prior to the date fixed for such redemption which shall be
specified therein. At any time after notice has been given as above provided,
The Corporation may deposit the aggregate redemption price of this Warrant or
portion thereof to be redeemed with any bank or trust company named in such
notice, directed to be paid to the registered holder hereof on surrender of this
Warrant Certificate. Upon the making of such deposit, the registered holder
hereof shall have no interest in or claim against the Corporation with respect
to such portion of this Warrant to be redeemed except only (i) the right to
receive such money from such bank or trust company without interest, or (ii) the
right to exercise, before the redemption date, any un-expired rights to purchase
Common Stock hereunder. In case less than all of the outstanding Class Q
Warrants are to be redeemed, the Corporation may choose the Warrants to be
redeemed at the election of the Corporation, either by lot based on the Warrant
Certificates held of record or pro rata based on the respective number of shares
of Common Stock purchasable pursuant to Warrants held by each holder of the
Class Q Warrants. If the holders of Class Q Warrants which shall have been
called for redemption shall not, within one year after such deposit, claim the
amount deposited for the redemption thereof, any such bank or trust company
shall, upon demand, pay over to the Corporation such unclaimed amounts and
thereupon such bank or trust company and the Corporation shall be relieved of
all responsibility in respect thereof and to such holders.
6. LIMITED RIGHTS OF OWNER. This Warrant does not entitle the owner to any
voting rights or other rights as a shareholder of the Corporation, or to any
other rights whatsoever except the rights herein expressed. No dividends are
payable or will accrue on this Warrant or the shares purchasable hereunder
until, and except to the extent that, this Warrant is exercised.
7. EXCHANGE FOR OTHER DENOMINATIONS. This Warrant is exchangeable, on its
surrender by the registered owner to the Corporation, for new Warrants of like
tenor and date representing in the aggregate the right to purchase the number of
shares purchasable hereunder in denominations designated by the registered owner
at the time of surrender.
<PAGE> 3
CLASS "Q" WARRANT NO. PAGE 3
8. TRANSFER. Except as otherwise above provided, this Warrant is transferable
only on the books of the Corporation by the registered owner in person or by
attorney, on surrender of this Warrant, properly endorsed. However, because this
Warrant has not been registered under the Securities Act of 1993, as amended,
and applicable state securities laws, this Warrant may not be sold or
transferred in the absence of an effective registration of it under such Act and
all other applicable securities laws or an opinion of counsel acceptable to the
Corporation or its representatives that such sale or transfer would not violate
applicable securities laws or regulations. Any Common Stock purchased upon
exercise of this Warrant shall also be subject to the same restrictions on
transfer and will contain the same transfer legend found on the face of this
Warrant.
9. RECOGNITION OF REGISTERED OWNER. Prior to due presentment for registration of
transfer of this Warrant, the Corporation may treat the registered owner as the
person exclusively entitled to receive notices and otherwise to exercise rights
hereunder.
10. EFFECT OF STOCK SPLIT, ETC. If the Corporation, by stock dividend, split,
reverse split, reclassification or shares, or otherwise, changes as a whole the
outstanding Common Stock into a different number or class of shares, then:
(1) the number and class of shares so changed shall, for the purposes
of this Warrant, replace the shares outstanding immediately prior to the change;
and
(2) the Warrant purchase price in effect, and the number of shares
purchasable under this Warrant, immediately prior to the date upon which the
change becomes effective, shall be proportionately adjusted (the price to the
nearest cent). Irrespective of any adjustment or change in the Warrant purchase
price or the number of shares purchasable under this or any other Warrant of
like tenor, the Warrants theretofore and thereafter issued may continue to
express the Warrant purchase price per share and the number of shares
purchasable as were expressed in the Warrants when initially issued.
11. EFFECT OF MERGER, ETC. If the Corporation consolidates with or merges into
another corporation, the registered owner shall thereafter be entitled on
exercise to purchase, with respect to each share of Common Stock purchasable
hereunder immediately before the consolidation or merger becomes effective, the
securities or other consideration to which a holder or one share or Common Stock
is entitled in the consolidation or merger to assure that all the provisions or
this Warrant shall thereafter be applicable, as nearly as reasonable may be, to
any securities or other consideration so deliverable on exercise of this
Warrant. The Corporation shall not consolidate or merge unless, prior to
consummation, the successor corporation (if other than the Corporation) assumes
the obligations of this section 11 by written instrument executed and mailed to
the registered owner at the address of the owner on the books of the
Corporation. A sale or lease of all or substantially all the assets of the
Corporation for a consideration (apart from the assumption of obligations)
consisting primarily or securities is a consolidation or merger for the
foregoing purposes.
12. NOTICE OF ADJUSTMENT. On the happening of an event requiring an adjustment
of the Warrant purchase price or shares purchasable hereunder, the Corporation
shall forthwith give written notice to the registered owner stating the adjusted
Warrant purchase price and the adjusted number and kind of securities or other
property purchasable hereunder resulting from the event and setting forth in
reasonable detail the method of calculation and the facts upon which the
calculation is based. The board of directors of the Corporation, acting in good
faith, shall determine the calculation.
13. NOTICE AND EFFECT OF DISSOLUTION, ETC. In case a voluntary or involuntary
dissolution, liquidation, or winding up of the Corporation (other than in
connection with a consolidation or merger covered by Section 10 above) is at any
time proposed, the Corporation shall give at least 10 days' written notice to
the
<PAGE> 4
CLASS "Q" WARRANT NO. PAGE 4
registered owner prior to the record date as of which holders of Common Stock
will be entitled to receive distributions as a result of the proposed
transaction. Such notice shall contain: (1) the date on which the transaction is
to take place; (2) the record date as of which holders of Common Stock will be
entitled to receive distributions as a result of the transaction; (3) a brief
description of the transaction; (4) a brief description of the distributions to
be made to holders of Common Stock as a result of the transaction; and (5)an
estimate of the fair value of the distributions. On the date of the transaction,
if it actually occurs, this Warrant and all rights hereunder shall terminate.
14. METHOD OF GIVING NOTICE; EXTENT REQUIRED. Notices shall be given by first
class mail, postage prepaid, addressed to the registered owner at the address of
the owner appearing in the records of the Corporation. No notice to warrant
holders is required except as specified in Sections 11 and 12.
15. ACCESS TO INFORMATION. The Company will provide an opportunity to any
registered owner of this Warrant to ask questions of management of the Company
and to obtain information to the extent the Company has the same in its
possession prior to any exercise of the owner's rights to purchase Common Stock
under this Warrant. Requests for information and any other questions concerning
the business and affairs of the Company should be directed to any officer of the
Company at its main offices.
Witness the seal of the Corporation and the signatures of its
authorized officers.
Date (Seal) PROBEX CORP.
ATTEST:
By:
- -------------------------- --------------------------------------
Alex D. Daspit Thomas G.Murray
President Chief Executive Officer
<PAGE> 5
CLASS "Q" WARRANT NO. PAGE 5
TRANSFER FORM
For value received, the undersigned hereby sells, assigns, and
transfers to
Name__________________________________
Address_________________________________
this Warrant and irrevocable appoints _________________ attorney (with full
power of substitution) to transfer this Warrant on the books of the Corporation.
Date:
____________________________
________________________________________________
(Please sign exactly as name appears on Warrant)
Taxpayer ID No._________________________________
In the presence of Signature guaranteed by
____________________________ ________________________________________________
<PAGE> 6
CLASS "Q" WARRANT NO. PAGE 6
EXERCISE FORM
The undersigned hereby: (1) irrevocably subscribes for ______ shares of
your Common Stock pursuant to this Warrant, and encloses payment of ___________
therefor; (2) requests that a certificate for the shares be issued in the name
of the undersigned and delivered to the undersigned at the address below; and
(3) if such number of shares is not all of the shares purchasable hereunder,
that a new Warrant of like tenor for the balance of the remaining shares
purchasable hereunder be issued in the name of the undersigned and delivered to
the undersigned at the address below.
Date:
------------------------------------------------
(Please sign exactly as name appears on Warrant)
Address:
---------------------------------------
---------------------------------------
Taxpayer ID No.
------------------------------------------------
<PAGE> 1
EXHIBIT 4.3.8
THIS WARRANT AND ANY SECURITIES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER: (A) THE SECURITIES ACT OF 1933, AS AMENDED, IN
RELIANCE UPON THE EXEMPTIONS FROM REGISTRATION PROVIDED IN SECTIONS 3 AND 4 OF
SUCH ACT AND/OR REGULATIONS D PROMULGATED THEREUNDER; OR (B) ANY STATE
SECURITIES LAWS IN RELIANCE UPON APPLICABLE EXEMPTIONS THEREUNDER. THESE
SECURITIES MUST BE ACQUIRED FOR INVESTMENT ONLY FOR THE ACCOUNT OF THE INVESTOR
AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SECURITIES LAWS OR AN
OPINION OF COUNSEL ACCEPTABLE TO THE CORPORATION OR ITS REPRESENTATIVES THAT
SUCH SALE OR TRANSFER WOULD NOT VIOLATE APPLICABLE SECURITIES LAWS OR
REGULATIONS.
WARRANT NO. TO PURCHASE
SHARES OF COMMON STOCK
(NO PAR VALUE)
CLASS "Q-a" WARRANT TO PURCHASE SHARES
OF COMMON STOCK OF
PROBEX CORP.
(A COLORADO CORPORATION)
PURCHASE PRICE PER SHARE: $0.55
EXPIRATION DATE: 5:00 P.M., DALLAS, TEXAS TIME, ON APRIL 16TH, 2004
THIS CERTIFIES that, for value received,
is the registered owner and is entitled, subject to the terms and conditions of
this Warrant, until the Expiration Date, to purchase the number of shares set
forth above of the Common Stock, no par value (the "Common Stock"), of Probex
Corp. (the "Corporation") from the Corporation at the purchase price set forth
above. The number of shares of Common Stock which may be received upon the
exercise of the Warrants and the price to be paid for each share of Common Stock
are subject to adjustment from time to time as hereinafter set forth.
1. EXERCISE OF WARRANTS. Subject to the provisions hereof, this Warrant may be
exercised in whole or in part until the Expiration Date, by delivery of this
Warrant to the Corporation with the exercise form duly executed and payment of
the purchase price (in cash or by certified or bank cashier's check made payable
to the order of the Corporation) for each share purchased.
2. CORPORATION'S COVENANTS AS TO COMMON STOCK. Shares deliverable on the
exercise of this Warrant shall, at delivery, be fully paid and non-assessable,
free from taxes, liens, and charges with respect to their purchase. The
Corporation shall at all times reserve and hold available sufficient shares of
Common Stock to satisfy all conversion and purchase rights of outstanding
convertible securities, options and warrants.
3. METHOD OF EXERCISE; FRACTIONAL SHARES. The purchase rights represented by
this Warrant are exercisable at the option of the registered owner in whole at
any time, or in part, from time to time, within the period above specified,
provided, however, that purchase rights are not exercisable with respect to a
<PAGE> 2
CLASS "Q-a" WARRANT NO.
PAGE 2
fraction of a share of Common Stock. In lieu of issuing a fraction of a share
remaining after exercise of this Warrant as to all full shares covered hereby,
the Corporation shall either (1) pay therefor cash equal to the same fraction of
the then current Warrant purchase price per share or, at its option, (2) issue
scrip for the fraction, in registered or bearer form approved by the board of
directors of the Corporation, which shall entitle the holder to receive a
certificate for a full share of Common Stock on surrender of scrip aggregating a
full share. Scrip may become void after a reasonable period (but not less than
six months after the expiration date of this Warrant) determined by the board of
directors and specified in the scrip. In case of the exercise of this Warrant
for less than all the shares purchasable, the Corporation shall cancel the
Warrant and execute and deliver a new Warrant of like tenor and date for the
balance of the shares purchasable.
4. ADJUSTMENT OF SHARES PURCHASABLE. The number of shares purchasable hereunder
and the purchase price per share are subject to adjustment from time to time as
specified in this Warrant.
5. REDEMPTION. The Corporation has no redemption rights pursuant to this
Warrant.
6. LIMITED RIGHTS OF OWNER. This Warrant does not entitle the owner to any
voting rights or other rights as a shareholder of the Corporation, or to any
other rights whatsoever except the rights herein expressed. No dividends are
payable or will accrue on this Warrant or the shares purchasable hereunder
until, and except to the extent that, this Warrant is exercised.
7. EXCHANGE FOR OTHER DENOMINATIONS. This Warrant is exchangeable, on its
surrender by the registered owner to the Corporation, for new Warrants of like
tenor and date representing in the aggregate the right to purchase the number of
shares purchasable hereunder in denominations designated by the registered owner
at the time of surrender.
8. TRANSFER. Except as otherwise above provided, this Warrant is transferable
only on the books of the Corporation by the registered owner in person or by
attorney, on surrender of this Warrant, properly endorsed. However, because this
Warrant has not been registered under the Securities Act of 1933, as amended,
and applicable state securities laws, this Warrant may not be sold or
transferred in the absence of an effective registration of it under such Act and
all other applicable securities laws or an opinion of counsel acceptable to the
Corporation or its representatives that such sale or transfer would not violate
applicable securities laws or regulations. Any Common Stock purchased upon
exercise of this Warrant shall also be subject to the same restrictions on
transfer and will contain the same transfer legend found on the face of this
Warrant.
9, RECOGNITION OF REGISTERED OWNER. Prior to due presentment for registration of
transfer of this Warrant, the Corporation may treat the registered owner as the
person exclusively entitled to receive notices and otherwise to exercise rights
hereunder.
10. EFFECT OF STOCK SPLIT, ETC. If the Corporation, by stock dividend, split,
reverse split, reclassification or shares, or otherwise, changes as a whole the
outstanding Common Stock into a different number or class of shares, then:
(1) the number and class of shares so changed shall, for the purposes
of this Warrant, replace the shares outstanding immediately prior to the change;
and
(2) the Warrant purchase price in effect, and the number of shares
purchasable under this Warrant, immediately prior to the date upon which the
change becomes effective, shall be proportionately adjusted (the price to the
nearest cent). Irrespective of any adjustment or change in the Warrant purchase
price or the number of shares purchasable under this or any other Warrant of
like tenor, the Warrants theretofore and thereafter issued may continue to
express the Warrant purchase price per share and the number of shares
purchasable as were expressed in the Warrants when initially issued.
<PAGE> 3
Class "Q-a" Warrant No.
Page 3
11. EFFECT OF MERGER, ETC. If the Corporation consolidates with or merges into
another corporation, the registered owner shall thereafter be entitled on
exercise to purchase, with respect to each share of Common Stock purchasable
hereunder immediately before the consolidation or merger becomes effective, the
securities or other consideration to which a holder or one share or Common Stock
is entitled in the consolidation or merger to assure that all the provisions or
this Warrant shall thereafter be applicable, as nearly as reasonable may be, to
any securities or other consideration so deliverable on exercise of this
Warrant. The Corporation shall not consolidate or merge unless, prior to
consummation, the successor corporation (if other than the Corporation) assumes
the obligations of this section 11 by written instrument executed and mailed to
the registered owner at the address of the owner on the books of the
Corporation. A sale or lease of all or substantially all the assets of the
Corporation for a consideration (apart from the assumption of obligations)
consisting primarily or securities is a consolidation or merger for the
foregoing purposes.
12. NOTICE OF ADJUSTMENT. On the happening of an event requiring an adjustment
of the Warrant purchase price or shares purchasable hereunder, the Corporation
shall forthwith give written notice to the registered owner stating the adjusted
Warrant purchase price and the adjusted number and kind of securities or other
property purchasable hereunder resulting from the event and setting forth in
reasonable detail the method of calculation and the facts upon which the
calculation is based. The board of directors of the Corporation, acting in good
faith, shall determine the calculation.
13. NOTICE AND EFFECT OF DISSOLUTION, ETC. In case a voluntary or involuntary
dissolution, liquidation, or winding up of the Corporation (other than in
connection with a consolidation or merger covered by Section 11 above) is at any
time proposed, the Corporation shall give at least 10 days' written notice to
the registered owner prior to the record date as of which holders of Common
Stock will be entitled to receive distributions as a result of the proposed
transaction. Such notice shall contain: (1) the date on which the transaction is
to take place; (2) the record date as of which holders of Common Stock will be
entitled to receive distributions as a result of the transaction; (3) a brief
description of the transaction; (4) a brief description of the distributions to
be made to holders of Common Stock as a result of the transaction; and (5)an
estimate of the fair value of the distributions. On the date of the transaction,
if it actually occurs, this Warrant and all rights hereunder shall terminate.
14. METHOD OF GIVING NOTICE; EXTENT REQUIRED. Notices shall be given by first
class mail, postage prepaid, addressed to the registered owner at the address of
the owner appearing in the records of the Corporation. No notice to warrant
holders is required except as specified in Sections 12 and 13.
15. ACCESS TO INFORMATION. The Company will provide an opportunity to any
registered owner of this Warrant to ask questions of management of the Company
and to obtain information to the extent the Company has the same in its
possession prior to any exercise of the owner's rights to purchase Common Stock
under this Warrant. Requests for information and any other questions concerning
the business and affairs of the Company should be directed to any officer of the
Company at its main offices.
<PAGE> 4
Class "Q-a" Warrant No.
Page 4
Witness the seal of the Corporation and the signatures of its
authorized officers.
Date
--------------------- (Seal) PROBEX CORP.
ATTEST:
By:
- -------------------------------- ---------------------------------
Alex D. Daspit Thomas G. Murray
President Chief Executive Officer
<PAGE> 5
Class "Q-a" Warrant No.
Page 5
TRANSFER FORM
For value received, the undersigned hereby sells, assigns, and
transfers to
Name__________________________________
Address_________________________________
this Warrant and irrevocable appoints ________________ attorney (with full power
of substitution) to transfer this Warrant on the books of the Corporation.
Date:
- -----------------------------------------
-------------------------------------
(Please sign exactly as name
appears on Warrant)
Taxpayer ID No. _____________________
In the presence of Signature guaranteed by
- ----------------------------- -------------------------------------
<PAGE> 6
Class "Q-a" Warrant No.
Page 6
EXERCISE FORM
The undersigned hereby: (1) irrevocably subscribes for ________________
shares of your Common Stock pursuant to this Warrant, and encloses payment of
$____________________ therefor; (2) requests that a certificate for the shares
be issued in the name of the undersigned and delivered to the undersigned at the
address below; and (3) if such number of shares is not all of the shares
purchasable hereunder, that a new Warrant of like tenor for the balance of the
remaining shares purchasable hereunder be issued in the name of the undersigned
and delivered to the undersigned at the address below.
Date:
- ----------------------------
----------------------------------------
(Please sign exactly as name
appears on Warrant)
Address:_________________________________
_________________________________
Taxpayer ID No.__________________________
<PAGE> 1
EXHIBIT 4.3.9
- --------------------------------------------------------------------------------
THIS WARRANT AND ANY SECURITIES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER: (A) THE SECURITIES ACT OF 1933, AS AMENDED, IN
RELIANCE UPON THE EXEMPTIONS FROM REGISTRATION PROVIDED IN SECTIONS 3 AND 4 OF
SUCH ACT AND/OR REGULATIONS D PROMULGATED THEREUNDER; OR (B) ANY STATE
SECURITIES LAWS IN RELIANCE UPON APPLICABLE EXEMPTIONS THEREUNDER. THESE
SECURITIES MUST BE ACQUIRED FOR INVESTMENT ONLY FOR THE ACCOUNT OF THE INVESTOR
AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SECURITIES LAWS OR AN
OPINION OF COUNSEL ACCEPTABLE TO THE CORPORATION OR ITS REPRESENTATIVES THAT
SUCH SALE OR TRANSFER WOULD NOT VIOLATE APPLICABLE SECURITIES LAWS OR
REGULATIONS.
- --------------------------------------------------------------------------------
WARRANT NO. TO PURCHASE
SHARES OF COMMON STOCK
(NO PAR VALUE)
CLASS "R" WARRANT TO PURCHASE SHARES
OF COMMON STOCK OF
PROBEX CORP.
(A COLORADO CORPORATION)
PURCHASE PRICE PER SHARE: $1.00
EXPIRATION DATE: 5:00 P.M., DALLAS, TEXAS TIME, ON JUNE 4TH, 2001
THIS CERTIFIES that, for value received,
is the registered owner and is entitled, subject to the terms and conditions of
this Warrant, until the Expiration Date, to purchase the number of shares set
forth above of the Common Stock, no par value (the "Common Stock"), of Probex
Corp. (the "Corporation") from the Corporation at the purchase price set forth
above. The number of shares of Common Stock which may be received upon the
exercise of the Warrants and the price to be paid for each share of Common Stock
are subject to adjustment from time to time as hereinafter set forth.
1. EXERCISE OF WARRANTS. Subject to the provisions hereof, this Warrant may be
exercised in whole or in part until the Expiration Date, by delivery of this
Warrant to the Corporation with the exercise form duly executed and payment of
the purchase price (in cash or by certified or bank cashier's check made payable
to the order of the Corporation) for each share purchased.
2. CORPORATION'S COVENANTS AS TO COMMON STOCK. Shares deliverable on the
exercise of this Warrant shall, at delivery, be fully paid and non-assessable,
free from taxes, liens, and charges with respect to their purchase. The
Corporation shall at all times reserve and hold available sufficient shares of
Common Stock to satisfy all conversion and purchase rights of outstanding
convertible securities, options and warrants.
3. METHOD OF EXERCISE; FRACTIONAL SHARES. The purchase rights represented by
this Warrant are exercisable at the option of the registered owner in whole at
any time, or in part, from time to time, within the period above specified,
provided, however, that purchase rights are not exercisable with respect to a
<PAGE> 2
CLASS "R" WARRANT NO.
PAGE 2
fraction of a share of Common Stock. In lieu of issuing a fraction of a share
remaining after exercise of this Warrant as to all full shares covered hereby,
the Corporation shall either (1) pay therefor cash equal to the same fraction of
the then current Warrant purchase price per share or, at its option, (2) issue
scrip for the fraction, in registered or bearer form approved by the board of
directors of the Corporation, which shall entitle the holder to receive a
certificate for a full share of Common Stock on surrender of scrip aggregating a
full share. Scrip may become void after a reasonable period (but not less than
six months after the expiration date of this Warrant) determined by the board of
directors and specified in the scrip. In case of the exercise of this Warrant
for less than all the shares purchasable, the Corporation shall cancel the
Warrant and execute and deliver a new Warrant of like tenor and date for the
balance of the shares purchasable.
4. ADJUSTMENT OF SHARES PURCHASABLE. The number of shares purchasable hereunder
and the purchase price per share are subject to adjustment from time to time as
specified in this Warrant.
5. REDEMPTION. The Corporation has no redemption rights pursuant to this
Warrant.
6. LIMITED RIGHTS OF OWNER. This Warrant does not entitle the owner to any
voting rights or other rights as a shareholder of the Corporation, or to any
other rights whatsoever except the rights herein expressed. No dividends are
payable or will accrue on this Warrant or the shares purchasable hereunder
until, and except to the extent that, this Warrant is exercised.
7. EXCHANGE FOR OTHER DENOMINATIONS. This Warrant is exchangeable, on its
surrender by the registered owner to the Corporation, for new Warrants of like
tenor and date representing in the aggregate the right to purchase the number of
shares purchasable hereunder in denominations designated by the registered owner
at the time of surrender.
8. TRANSFER. Except as otherwise above provided, this Warrant is transferable
only on the books of the Corporation by the registered owner in person or by
attorney, on surrender of this Warrant, properly endorsed. However, because this
Warrant has not been registered under the Securities Act of 1933, as amended,
and applicable state securities laws, this Warrant may not be sold or
transferred in the absence of an effective registration of it under such Act and
all other applicable securities laws or an opinion of counsel acceptable to the
Corporation or its representatives that such sale or transfer would not violate
applicable securities laws or regulations. Any Common Stock purchased upon
exercise of this Warrant shall also be subject to the same restrictions on
transfer and will contain the same transfer legend found on the face of this
Warrant.
9. RECOGNITION OF REGISTERED OWNER. Prior to due presentment for registration of
transfer of this Warrant, the Corporation may treat the registered owner as the
person exclusively entitled to receive notices and otherwise to exercise rights
hereunder.
10. EFFECT OF STOCK SPLIT, ETC. If the Corporation, by stock dividend, split,
reverse split, reclassification or shares, or otherwise, changes as a whole the
outstanding Common Stock into a different number or class of shares, then:
(1) the number and class of shares so changed shall, for the purposes
of this Warrant, replace the shares outstanding immediately prior to the change;
and
(2) the Warrant purchase price in effect, and the number of shares
purchasable under this Warrant, immediately prior to the date upon which the
change becomes effective, shall be proportionately adjusted (the price to the
nearest cent). Irrespective of any adjustment or change in the Warrant purchase
price or the number of shares purchasable under this or any other Warrant of
like tenor, the Warrants theretofore and thereafter issued may continue to
express the Warrant purchase price per share and the number of shares
purchasable as were expressed in the Warrants when initially issued.
<PAGE> 3
CLASS "R" WARRANT NO.
PAGE 3
11. EFFECT OF MERGER, ETC. If the Corporation consolidates with or merges into
another corporation, the registered owner shall thereafter be entitled on
exercise to purchase, with respect to each share of Common Stock purchasable
hereunder immediately before the consolidation or merger becomes effective, the
securities or other consideration to which a holder or one share or Common Stock
is entitled in the consolidation or merger to assure that all the provisions or
this Warrant shall thereafter be applicable, as nearly as reasonable may be, to
any securities or other consideration so deliverable on exercise of this
Warrant. The Corporation shall not consolidate or merge unless, prior to
consummation, the successor corporation (if other than the Corporation) assumes
the obligations of this section 11 by written instrument executed and mailed to
the registered owner at the address of the owner on the books of the
Corporation. A sale or lease of all or substantially all the assets of the
Corporation for a consideration (apart from the assumption of obligations)
consisting primarily or securities is a consolidation or merger for the
foregoing purposes.
12. NOTICE OF ADJUSTMENT. On the happening of an event requiring an adjustment
of the Warrant purchase price or shares purchasable hereunder, the Corporation
shall forthwith give written notice to the registered owner stating the adjusted
Warrant purchase price and the adjusted number and kind of securities or other
property purchasable hereunder resulting from the event and setting forth in
reasonable detail the method of calculation and the facts upon which the
calculation is based. The board of directors of the Corporation, acting in good
faith, shall determine the calculation.
13. NOTICE AND EFFECT OF DISSOLUTION, ETC. In case a voluntary or involuntary
dissolution, liquidation, or winding up of the Corporation (other than in
connection with a consolidation or merger covered by Section 11 above) is at any
time proposed, the Corporation shall give at least 10 days' written notice to
the registered owner prior to the record date as of which holders of Common
Stock will be entitled to receive distributions as a result of the proposed
transaction. Such notice shall contain: (1) the date on which the transaction is
to take place; (2) the record date as of which holders of Common Stock will be
entitled to receive distributions as a result of the transaction; (3) a brief
description of the transaction; (4) a brief description of the distributions to
be made to holders of Common Stock as a result of the transaction; and (5)an
estimate of the fair value of the distributions. On the date of the transaction,
if it actually occurs, this Warrant and all rights hereunder shall terminate.
14. METHOD OF GIVING NOTICE; EXTENT REQUIRED. Notices shall be given by first
class mail, postage prepaid, addressed to the registered owner at the address of
the owner appearing in the records of the Corporation. No notice to warrant
holders is required except as specified in Sections 12 and 13.
15. ACCESS TO INFORMATION. The Company will provide an opportunity to any
registered owner of this Warrant to ask questions of management of the Company
and to obtain information to the extent the Company has the same in its
possession prior to any exercise of the owner's rights to purchase Common Stock
under this Warrant. Requests for information and any other questions concerning
the business and affairs of the Company should be directed to any officer of the
Company at its main offices.
<PAGE> 4
CLASS "R" WARRANT NO.
PAGE 4
Witness the seal of the Corporation and the signatures of its
authorized officers.
Date (Seal) PROBEX CORP.
------------
ATTEST:
By:
- ------------------------- ---------------------------------
Alex D. Daspit Thomas G. Murray
President Chief Executive Officer
<PAGE> 5
Class "R" Warrant No.
Page 5
TRANSFER FORM
For value received, the undersigned hereby sells, assigns, and
transfers to
Name__________________________________
Address_________________________________
this Warrant and irrevocable appoints __________________________
attorney (with full power of substitution) to transfer this Warrant on the books
of the Corporation.
Date:
_____________________________
________________________________________________
(Please sign exactly as name appears on Warrant)
Taxpayer ID No. ________________________________
In the presence of Signature guaranteed by
_____________________________ ________________________________________________
<PAGE> 6
Class "R" Warrant No.
Page 6
EXERCISE FORM
The undersigned hereby: (1) irrevocably subscribes for ________________
shares of your Common Stock pursuant to this Warrant, and encloses payment of
$____________________ therefor; (2) requests that a certificate for the shares
be issued in the name of the undersigned and delivered to the undersigned at the
address below; and (3) if such number of shares is not all of the shares
purchasable hereunder, that a new Warrant of like tenor for the balance of the
remaining shares purchasable hereunder be issued in the name of the undersigned
and delivered to the undersigned at the address below.
Date:
____________________________
________________________________________________
(Please sign exactly as name appears on Warrant)
Address:________________________________________
________________________________________________
Taxpayer ID No._________________________________
<PAGE> 1
EXHIBIT 4.3.10
- --------------------------------------------------------------------------------
THIS WARRANT AND ANY SECURITIES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER: (A) THE SECURITIES ACT OF 1933, AS AMENDED, IN
RELIANCE UPON THE EXEMPTIONS FROM REGISTRATION PROVIDED IN SECTIONS 3 AND 4 OF
SUCH ACT AND/OR REGULATIONS D PROMULGATED THEREUNDER; OR (B) ANY STATE
SECURITIES LAWS IN RELIANCE UPON APPLICABLE EXEMPTIONS THEREUNDER. THESE
SECURITIES MUST BE ACQUIRED FOR INVESTMENT ONLY FOR THE ACCOUNT OF THE INVESTOR
AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SECURITIES LAWS OR AN
OPINION OF COUNSEL ACCEPTABLE TO THE CORPORATION OR ITS REPRESENTATIVES THAT
SUCH SALE OR TRANSFER WOULD NOT VIOLATE APPLICABLE SECURITIES LAWS OR
REGULATIONS.
- --------------------------------------------------------------------------------
WARRANT NO. TO PURCHASE
SHARES OF COMMON STOCK
(NO PAR VALUE)
CLASS "R-a" WARRANT TO PURCHASE SHARES
OF COMMON STOCK OF
PROBEX CORP.
(A COLORADO CORPORATION)
PURCHASE PRICE PER SHARE: $0.55
EXPIRATION DATE: 5:00 P.M., DALLAS, TEXAS TIME, ON JUNE 4TH, 2004
THIS CERTIFIES that, for value received,
is the registered owner and is entitled, subject to the terms and conditions of
this Warrant, until the Expiration Date, to purchase the number of shares set
forth above of the Common Stock, no par value (the "Common Stock"), of Probex
Corp. (the "Corporation") from the Corporation at the purchase price set forth
above. The number of shares of Common Stock which may be received upon the
exercise of the Warrants and the price to be paid for each share of Common Stock
are subject to adjustment from time to time as hereinafter set forth.
1. EXERCISE OF WARRANTS. Subject to the provisions hereof, this Warrant may be
exercised in whole or in part until the Expiration Date, by delivery of this
Warrant to the Corporation with the exercise form duly executed and payment of
the purchase price (in cash or by certified or bank cashier's check made payable
to the order of the Corporation) for each share purchased..
2. CORPORATION'S COVENANTS AS TO COMMON STOCK. Shares deliverable on the
exercise of this Warrant shall, at delivery, be fully paid and non-assessable,
free from taxes, liens, and charges with respect to their purchase. The
Corporation shall at all times reserve and hold available sufficient shares of
Common Stock to satisfy all conversion and purchase rights of outstanding
convertible securities, options and warrants.
3. METHOD OF EXERCISE; FRACTIONAL SHARES. The purchase rights represented by
this Warrant are exercisable at the option of the registered owner in whole at
any time, or in part, from time to time, within the period above specified,
provided, however, that purchase rights are not exercisable with respect to a
<PAGE> 2
CLASS "R-a" WARRANT NO.
PAGE 2
fraction of a share of Common Stock. In lieu of issuing a fraction of a share
remaining after exercise of this Warrant as to all full shares covered hereby,
the Corporation shall either (1) pay therefor cash equal to the same fraction of
the then current Warrant purchase price per share or, at its option, (2) issue
scrip for the fraction, in registered or bearer form approved by the board of
directors of the Corporation, which shall entitle the holder to receive a
certificate for a full share of Common Stock on surrender of scrip aggregating a
full share. Scrip may become void after a reasonable period (but not less than
six months after the expiration date of this Warrant) determined by the board of
directors and specified in the scrip. In case of the exercise of this Warrant
for less than all the shares purchasable, the Corporation shall cancel the
Warrant and execute and deliver a new Warrant of like tenor and date for the
balance of the shares purchasable.
4. ADJUSTMENT OF SHARES PURCHASABLE. The number of shares purchasable hereunder
and the purchase price per share are subject to adjustment from time to time as
specified in this Warrant.
5. REDEMPTION. The Corporation has no redemption rights pursuant to this
Warrant.
6. LIMITED RIGHTS OF OWNER. This Warrant does not entitle the owner to any
voting rights or other rights as a shareholder of the Corporation, or to any
other rights whatsoever except the rights herein expressed. No dividends are
payable or will accrue on this Warrant or the shares purchasable hereunder
until, and except to the extent that, this Warrant is exercised.
7. EXCHANGE FOR OTHER DENOMINATIONS. This Warrant is exchangeable, on its
surrender by the registered owner to the Corporation, for new Warrants of like
tenor and date representing in the aggregate the right to purchase the number of
shares purchasable hereunder in denominations designated by the registered owner
at the time of surrender.
8. TRANSFER. Except as otherwise above provided, this Warrant is transferable
only on the books of the Corporation by the registered owner in person or by
attorney, on surrender of this Warrant, properly endorsed. However, because this
Warrant has not been registered under the Securities Act of 1933, as amended,
and applicable state securities laws, this Warrant may not be sold or
transferred in the absence of an effective registration of it under such Act and
all other applicable securities laws or an opinion of counsel acceptable to the
Corporation or its representatives that such sale or transfer would not violate
applicable securities laws or regulations. Any Common Stock purchased upon
exercise of this Warrant shall also be subject to the same restrictions on
transfer and will contain the same transfer legend found on the face of this
Warrant.
9, RECOGNITION OF REGISTERED OWNER. Prior to due presentment for registration of
transfer of this Warrant, the Corporation may treat the registered owner as the
person exclusively entitled to receive notices and otherwise to exercise rights
hereunder.
10. EFFECT OF STOCK SPLIT, ETC. If the Corporation, by stock dividend, split,
reverse split, reclassification or shares, or otherwise, changes as a whole the
outstanding Common Stock into a different number or class of shares, then:
(1) the number and class of shares so changed shall, for the purposes
of this Warrant, replace the shares outstanding immediately prior to the change;
and
(2) the Warrant purchase price in effect, and the number of shares
purchasable under this Warrant, immediately prior to the date upon which the
change becomes effective, shall be proportionately adjusted (the price to the
nearest cent). Irrespective of any adjustment or change in the Warrant purchase
price or the number of shares purchasable under this or any other Warrant of
like tenor, the Warrants theretofore and thereafter issued may continue to
express the Warrant purchase price per share and the number of shares
purchasable as were expressed in the Warrants when initially issued.
<PAGE> 3
CLASS "R-a" WARRANT NO.
PAGE 3
11. EFFECT OF MERGER, ETC. If the Corporation consolidates with or merges into
another corporation, the registered owner shall thereafter be entitled on
exercise to purchase, with respect to each share of Common Stock purchasable
hereunder immediately before the consolidation or merger becomes effective, the
securities or other consideration to which a holder or one share or Common Stock
is entitled in the consolidation or merger to assure that all the provisions or
this Warrant shall thereafter be applicable, as nearly as reasonable may be, to
any securities or other consideration so deliverable on exercise of this
Warrant. The Corporation shall not consolidate or merge unless, prior to
consummation, the successor corporation (if other than the Corporation) assumes
the obligations of this section 11 by written instrument executed and mailed to
the registered owner at the address of the owner on the books of the
Corporation. A sale or lease of all or substantially all the assets of the
Corporation for a consideration (apart from the assumption of obligations)
consisting primarily or securities is a consolidation or merger for the
foregoing purposes.
12. NOTICE OF ADJUSTMENT. On the happening of an event requiring an adjustment
of the Warrant purchase price or shares purchasable hereunder, the Corporation
shall forthwith give written notice to the registered owner stating the adjusted
Warrant purchase price and the adjusted number and kind of securities or other
property purchasable hereunder resulting from the event and setting forth in
reasonable detail the method of calculation and the facts upon which the
calculation is based. The board of directors of the Corporation, acting in good
faith, shall determine the calculation.
13. NOTICE AND EFFECT OF DISSOLUTION, ETC. In case a voluntary or involuntary
dissolution, liquidation, or winding up of the Corporation (other than in
connection with a consolidation or merger covered by Section 11 above) is at any
time proposed, the Corporation shall give at least 10 days' written notice to
the registered owner prior to the record date as of which holders of Common
Stock will be entitled to receive distributions as a result of the proposed
transaction. Such notice shall contain: (1) the date on which the transaction is
to take place; (2) the record date as of which holders of Common Stock will be
entitled to receive distributions as a result of the transaction; (3) a brief
description of the transaction; (4) a brief description of the distributions to
be made to holders of Common Stock as a result of the transaction; and (5)an
estimate of the fair value of the distributions. On the date of the transaction,
if it actually occurs, this Warrant and all rights hereunder shall terminate.
14. METHOD OF GIVING NOTICE; EXTENT REQUIRED. Notices shall be given by first
class mail, postage prepaid, addressed to the registered owner at the address of
the owner appearing in the records of the Corporation. No notice to warrant
holders is required except as specified in Sections 12 and 13.
15. ACCESS TO INFORMATION. The Company will provide an opportunity to any
registered owner of this Warrant to ask questions of management of the Company
and to obtain information to the extent the Company has the same in its
possession prior to any exercise of the owner's rights to purchase Common Stock
under this Warrant. Requests for information and any other questions concerning
the business and affairs of the Company should be directed to any officer of the
Company at its main offices.
<PAGE> 4
CLASS "R-a" WARRANT NO.
PAGE 4
Witness the seal of the Corporation and the signatures of its
authorized officers.
Date (Seal) PROBEX CORP.
----------------
ATTEST:
By:
- -------------------------- -------------------------------------
Alex D. Daspit Thomas G. Murray
President Chief Executive Officer
<PAGE> 5
CLASS "S" WARRANT NO.
PAGE 5
TRANSFER FORM
For value received, the undersigned hereby sells, assigns, and
transfers to
Name__________________________________
Address_________________________________
this Warrant and irrevocable appoints________________attorney (with full power
of substitution) to transfer this Warrant on the books of the Corporation.
Date:
- -----------------------------
------------------------------------------------
(Please sign exactly as name appears on Warrant)
Taxpayer ID No. ________________________________
In the presence of Signature guaranteed by
- ----------------------------- ------------------------------------------------
<PAGE> 6
CLASS "R-a" WARRANT NO.
PAGE 6
EXERCISE FORM
The undersigned hereby: (1) irrevocably subscribes for ________________
shares of your Common Stock pursuant to this Warrant, and encloses payment of
$____________________ therefor; (2) requests that a certificate for the shares
be issued in the name of the undersigned and delivered to the undersigned at the
address below; and (3) if such number of shares is not all of the shares
purchasable hereunder, that a new Warrant of like tenor for the balance of the
remaining shares purchasable hereunder be issued in the name of the undersigned
and delivered to the undersigned at the address below.
Date:
____________________________
________________________________________________
(Please sign exactly as name appears on Warrant)
Address:________________________________________
________________________________________________
Taxpayer ID No._________________________________
<PAGE> 1
EXHIBIT 4.3.11
THIS WARRANT AND ANY SECURITIES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER: (A) THE SECURITIES ACT OF 1933, AS AMENDED, IN
RELIANCE UPON THE EXEMPTIONS FROM REGISTRATION PROVIDED IN SECTIONS 3 AND 4 OF
SUCH ACT AND/OR REGULATIONS D PROMULGATED THEREUNDER; OR (B) ANY STATE
SECURITIES LAWS IN RELIANCE UPON APPLICABLE EXEMPTIONS THEREUNDER. THESE
SECURITIES MUST BE ACQUIRED FOR INVESTMENT ONLY FOR THE ACCOUNT OF THE INVESTOR
AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SECURITIES LAWS OR AN
OPINION OF COUNSEL ACCEPTABLE TO THE CORPORATION OR ITS REPRESENTATIVES THAT
SUCH SALE OR TRANSFER WOULD NOT VIOLATE APPLICABLE SECURITIES LAWS OR
REGULATIONS.
WARRANT NO. TO PURCHASE
SHARES OF COMMON STOCK
(NO PAR VALUE)
CLASS "S" WARRANT TO PURCHASE SHARES
OF COMMON STOCK OF
PROBEX CORP.
(A COLORADO CORPORATION)
PURCHASE PRICE PER SHARE:
EXPIRATION DATE: 5:00 P.M., DALLAS, TEXAS TIME, ON
THIS CERTIFIES that, for value received,
is the registered owner and is entitled, subject to the terms and conditions of
this Warrant, until the Expiration Date, to purchase the number of shares set
forth above of the Common Stock, no par value (the "Common Stock"), of Probex
Corp. (the "Corporation") from the Corporation at the purchase price set forth
above. The number of shares of Common Stock which may be received upon the
exercise of the Warrants and the price to be paid for each share of Common Stock
are subject to adjustment from time to time as hereinafter set forth.
1. EXERCISE OF WARRANTS. Subject to the provisions hereof, this Warrant may be
exercised in whole or in part until the Expiration Date, by delivery of this
Warrant to the Corporation with the exercise form duly executed and payment of
the purchase price (in cash or by certified or bank cashier's check made payable
to the order of the Corporation) for each share purchased.
2. CORPORATION'S COVENANTS AS TO COMMON STOCK. Shares deliverable on the
exercise of this Warrant shall, at delivery, be fully paid and non-assessable,
free from taxes, liens, and charges with respect to their purchase. The
Corporation shall at all times reserve and hold available sufficient shares of
Common Stock to satisfy all conversion and purchase rights of outstanding
convertible securities, options and warrants.
3. METHOD OF EXERCISE; FRACTIONAL SHARES. The purchase rights represented by
this Warrant are exercisable at the option of the registered owner in whole at
any time, or in part, from time to time, within the period above specified,
provided, however, that purchase rights are not exercisable with respect to a
<PAGE> 2
Class "S" Warrant No.
Page 2
fraction of a share of Common Stock. In lieu of issuing a fraction of a share
remaining after exercise of this Warrant as to all full shares covered hereby,
the Corporation shall either (1) pay therefor cash equal to the same fraction of
the then current Warrant purchase price per share or, at its option, (2) issue
scrip for the fraction, in registered or bearer form approved by the board of
directors of the Corporation, which shall entitle the holder to receive a
certificate for a full share of Common Stock on surrender of scrip aggregating a
full share. Scrip may become void after a reasonable period (but not less than
six months after the expiration date of this Warrant) determined by the board of
directors and specified in the scrip. In case of the exercise of this Warrant
for less than all the shares purchasable, the Corporation shall cancel the
Warrant and execute and deliver a new Warrant of like tenor and date for the
balance of the shares purchasable.
4. ADJUSTMENT OF SHARES PURCHASABLE. The number of shares purchasable hereunder
and the purchase price per share are subject to adjustment from time to time as
specified in this Warrant.
5. REDEMPTION. The Corporation has no redemption rights pursuant to this
Warrant.
6. LIMITED RIGHTS OF OWNER. This Warrant does not entitle the owner to any
voting rights or other rights as a shareholder of the Corporation, or to any
other rights whatsoever except the rights herein expressed. No dividends are
payable or will accrue on this Warrant or the shares purchasable hereunder
until, and except to the extent that, this Warrant is exercised.
7. EXCHANGE FOR OTHER DENOMINATIONS. This Warrant is exchangeable, on its
surrender by the registered owner to the Corporation, for new Warrants of like
tenor and date representing in the aggregate the right to purchase the number of
shares purchasable hereunder in denominations designated by the registered owner
at the time of surrender.
8. TRANSFER. Except as otherwise above provided, this Warrant is transferable
only on the books of the Corporation by the registered owner in person or by
attorney, on surrender of this Warrant, properly endorsed. However, because this
Warrant has not been registered under the Securities Act of 1933, as amended,
and applicable state securities laws, this Warrant may not be sold or
transferred in the absence of an effective registration of it under such Act and
all other applicable securities laws or an opinion of counsel acceptable to the
Corporation or its representatives that such sale or transfer would not violate
applicable securities laws or regulations. Any Common Stock purchased upon
exercise of this Warrant shall also be subject to the same restrictions on
transfer and will contain the same transfer legend found on the face of this
Warrant.
9. RECOGNITION OF REGISTERED OWNER. Prior to due presentment for registration of
transfer of this Warrant, the Corporation may treat the registered owner as the
person exclusively entitled to receive notices and otherwise to exercise rights
hereunder.
10. EFFECT OF STOCK SPLIT, ETC. If the Corporation, by stock dividend, split,
reverse split, reclassification or shares, or otherwise, changes as a whole the
outstanding Common Stock into a different number or class of shares, then:
(1) the number and class of shares so changed shall, for the purposes
of this Warrant, replace the shares outstanding immediately prior to the change;
and
(2) the Warrant purchase price in effect, and the number of shares
purchasable under this Warrant, immediately prior to the date upon which the
change becomes effective, shall be proportionately adjusted (the price to the
nearest cent). Irrespective of any adjustment or change in the Warrant purchase
price or the number of shares purchasable under this or any other Warrant of
like
<PAGE> 3
Class "S" Warrant No.
Page 3
tenor, the Warrants theretofore and thereafter issued may continue to express
the Warrant purchase price per share and the number of shares purchasable as
were expressed in the Warrants when initially issued.
11. EFFECT OF MERGER, ETC. If the Corporation consolidates with or merges into
another corporation, the registered owner shall thereafter be entitled on
exercise to purchase, with respect to each share of Common Stock purchasable
hereunder immediately before the consolidation or merger becomes effective, the
securities or other consideration to which a holder or one share or Common Stock
is entitled in the consolidation or merger to assure that all the provisions or
this Warrant shall thereafter be applicable, as nearly as reasonable may be, to
any securities or other consideration so deliverable on exercise of this
Warrant. The Corporation shall not consolidate or merge unless, prior to
consummation, the successor corporation (if other than the Corporation) assumes
the obligations of this section 11 by written instrument executed and mailed to
the registered owner at the address of the owner on the books of the
Corporation. A sale or lease of all or substantially all the assets of the
Corporation for a consideration (apart from the assumption of obligations)
consisting primarily or securities is a consolidation or merger for the
foregoing purposes.
12. NOTICE OF ADJUSTMENT. On the happening of an event requiring an adjustment
of the Warrant purchase price or shares purchasable hereunder, the Corporation
shall forthwith give written notice to the registered owner stating the adjusted
Warrant purchase price and the adjusted number and kind of securities or other
property purchasable hereunder resulting from the event and setting forth in
reasonable detail the method of calculation and the facts upon which the
calculation is based. The board of directors of the Corporation, acting in good
faith, shall determine the calculation.
13. NOTICE AND EFFECT OF DISSOLUTION, ETC. In case a voluntary or involuntary
dissolution, liquidation, or winding up of the Corporation (other than in
connection with a consolidation or merger covered by Section 11 above) is at any
time proposed, the Corporation shall give at least 10 days' written notice to
the registered owner prior to the record date as of which holders of Common
Stock will be entitled to receive distributions as a result of the proposed
transaction. Such notice shall contain: (1) the date on which the transaction is
to take place; (2) the record date as of which holders of Common Stock will be
entitled to receive distributions as a result of the transaction; (3) a brief
description of the transaction; (4) a brief description of the distributions to
be made to holders of Common Stock as a result of the transaction; and (5)an
estimate of the fair value of the distributions. On the date of the transaction,
if it actually occurs, this Warrant and all rights hereunder shall terminate.
14. METHOD OF GIVING NOTICE; EXTENT REQUIRED. Notices shall be given by first
class mail, postage prepaid, addressed to the registered owner at the address of
the owner appearing in the records of the Corporation. No notice to warrant
holders is required except as specified in Sections 12 and 13.
15. ACCESS TO INFORMATION. The Company will provide an opportunity to any
registered owner of this Warrant to ask questions of management of the Company
and to obtain information to the extent the Company has the same in its
possession prior to any exercise of the owner's rights to purchase Common Stock
under this Warrant. Requests for information and any other questions concerning
the business and affairs of the Company should be directed to any officer of the
Company at its main offices.
<PAGE> 4
Class "S" Warrant No.
Page 4
Witness the seal of the Corporation and the signatures of its
authorized officers.
Date______________________(Seal) PROBEX CORP.
ATTEST:
- -----------------------------------
Thomas G. Plaskett
Chief Executive Officer & President
<PAGE> 5
Class "S" Warrant No. 1 Page 5
TRANSFER FORM
For value received, the undersigned hereby sells, assigns, and
transfers to
Name__________________________________
Address_________________________________
this Warrant and irrevocable appoints ____________________________ attorney
(with full power of substitution) to transfer this Warrant on the books of the
Corporation.
Date:
- -----------------------------------------
-------------------------------------
(Please sign exactly as name
appears on Warrant)
Taxpayer ID No. ____________________
In the presence of Signature guaranteed by
- ----------------------------- ------------------------------------
<PAGE> 6
Class "S" Warrant No.
Page 6
EXERCISE FORM
The undersigned hereby: (1) irrevocably subscribes for ________________
shares of your Common Stock pursuant to this Warrant, and encloses payment of
$____________________ therefor; (2) requests that a certificate for the shares
be issued in the name of the undersigned and delivered to the undersigned at the
address below; and (3) if such number of shares is not all of the shares
purchasable hereunder, that a new Warrant of like tenor for the balance of the
remaining shares purchasable hereunder be issued in the name of the undersigned
and delivered to the undersigned at the address below.
Date:
- ----------------------------
----------------------------------------
(Please sign exactly as name
appears on Warrant)
Address:_________________________________
_________________________________
Taxpayer ID No.___________________________
<PAGE> 1
EXHIBIT 10.1
1998 OMNIBUS STOCK AND INCENTIVE PLAN
FOR
PROBEX CORP.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
1. Purpose.......................................................1
2. Definitions...................................................1
(a) "Affiliate"..........................................1
(b) "Award"..............................................1
(c) "Available Shares"...................................1
(d) "Board"..............................................1
(e) "Cause"..............................................1
(f) "Change in Control"..................................2
(g) "Change in Control Price"............................3
(h) "Code"...............................................3
(i) "Committee"..........................................3
(j) "Common Stock".......................................3
(k) "Company"............................................3
(l) "Consultant".........................................3
(m) "Date of Grant"......................................3
(n) "Director"...........................................3
(o) "Disability".........................................3
(p) "Effective Date".....................................3
(q) "Eligible Person"....................................4
(r) "Fair Market Value"..................................4
(s) "Holder".............................................4
(t) "Immediate Family"...................................4
(u) "Incentive Stock Option".............................4
(v) "Non-qualified Stock Option".........................4
(w) "Option".............................................4
(x) "Optionee"...........................................4
(y) "Option Price".......................................4
(z) "Option Proceeds"....................................5
(aa) "Outside Director"...................................5
(bb) "Parent".............................................5
(cc) "Performance Award"..................................5
(dd) "Performance Period".................................5
(ee) "Plan"...............................................5
(ff) "Plan Year"..........................................5
(gg) "Potential Change In Control"........................5
(hh) "Reacquired Shares"..................................5
(ii) "Restriction(s)".....................................5
(jj) "Restricted Period"..................................6
(kk) "Restricted Shares"..................................6
(ll) "Restricted Share Award".............................6
(mm) "Restricted Share Distributions".....................6
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C> <C>
(nn) "Share(s)"...........................................6
(oo) "Spread".............................................6
(pp) "Subsidiary".........................................6
(qq) "1933 Act"...........................................6
(rr) "1934 Act"...........................................6
3. Award of Available Shares.....................................6
4. Conditions for Grant of Awards................................7
5. Grant of Options..............................................8
6. Option Price..................................................9
7. Exercise of Options...........................................9
8. Exercisability of Options.....................................9
9. Termination of Option Period.................................10
10. Incentive Stock Options for 10% Shareholder..................10
11. Non-qualified Stock Options..................................10
12. Restricted Share Awards......................................11
13. Performance Awards...........................................11
14. Acceleration.................................................12
15. Adjustment of Available Shares...............................12
16. Transferability of Awards....................................14
17. Issuance of Shares...........................................14
18. Administration of the Plan...................................15
19. Tax Withholding..............................................16
20. Interpretation...............................................17
21. Amendment and Discontinuation of the Plan....................17
22. Section 83(b) Election.......................................17
23. Effective Date and Termination Date..........................18
</TABLE>
<PAGE> 4
1998 OMNIBUS STOCK AND INCENTIVE PLAN
FOR
PROBEX CORP.
1. PURPOSE. This Plan is a full amendment and restatement of the Probex Corp.
Restricted Stock and Stock Option Plan, and the purpose of this Plan is to
advance the interests of Probex Corp. and increase shareholder value by
providing additional incentives to attract, retain and motivate those qualified
and competent employees, Directors and Consultants upon whose efforts and
judgment its success is largely dependent.
2. DEFINITIONS. As used herein, the following terms shall have the meaning
indicated:
(a) "AFFILIATE" means any entity other than the Parent that is
designated by the Board as a participating employer under the Plan, provided
that the Parent directly or indirectly owns at least 20% of the combined voting
power of all classes of stock of such entity or at least 20% of the ownership
interests in such entity.
(b) "AWARD" shall mean either an Option, a Restricted Share Award, or a
Performance Award, except that where it shall be appropriate to identify the
specific type of Award, reference shall be made to the specific type of Award.
(c) "AVAILABLE SHARES" shall mean, at each time of reference, the total
number of Shares described in SECTION 3 with respect to which the Committee may
grant an Award, all of which Available Shares shall be held in the Parent's
treasury or shall be made available from authorized and unissued Shares.
(d) "BOARD" shall mean the Board of Directors of the Parent.
(e) "CAUSE" shall mean either (a) an Optionee's material failure or
refusal to perform his duties if Optionee has failed to cure such failure or
refusal to perform within thirty (30) days after the Company notifies Optionee
in writing of such failure or refusal to perform, or (b) that the Optionee is
involuntarily terminated from employment based upon his commission of any of the
following:
(i) an intentional act of fraud, embezzlement or theft in
connection with his duties or in the course of his employment with the
Company;
(ii) intentional wrongful damage to property of the
Company or any other willful gross misconduct that causes material
economic harm to the Company or that brings substantial discredit to
the Company's reputation;
(iii) intentional wrongful disclosure of trade secrets or
confidential information of the Company;
1
<PAGE> 5
(iv) willful violation of any law, rule or regulation
(other than traffic violations or similar offenses) or final cease and
desist order, including, but not limited to, a final, nonappealable
conviction of an Optionee for commission of a felony involving moral
turpitude; or
(v) intentional breach of fiduciary duty owed to the
Company involving personal profit.
For the purpose of this Agreement, no act, or failure to act, on the
part of the Optionee shall be deemed "intentional" unless the Board of Directors
finds, in its sole discretion, that the act or failure to act was done, or
omitted to be done, by the Optionee in other than good faith and without
reasonable belief that his action or omission was in the best interest of the
Company. Any determination that an Optionee has been terminated For Cause shall
be made by the Board of Directors in its sole and absolute discretion.
(f) "CHANGE IN CONTROL" shall mean the first to occur of (i) a merger,
consolidation, statutory share exchange or sale, lease, exchange or other
transfer (in one transaction or a series of related transactions) of all or
substantially all of the assets of the Company that requires the consent or vote
of the holders of the Parent's Common Stock, other than a consolidation, merger
or share exchange of the Parent in which the holders of the Parent's Common
Stock immediately prior to such transaction have the same proportionate
ownership of common stock of the surviving corporation immediately after such
transaction; (ii) the shareholders of the Parent approve any plan or proposal
for the liquidation or dissolution of the Company; (iii) the cessation of
control (by virtue of their not constituting a majority of Directors) of the
Board of Directors of the Parent by the individuals (the "Continuing Directors")
who (x) on the Effective Date were Directors or (y) become Directors after the
date of this Agreement and whose election or nomination for election by the
Parent's shareholders was approved by a vote of at least two-thirds of the
Directors then in office who were Directors at the Effective Date or whose
election or nomination for election was previously so approved; (iv) the
acquisition of beneficial ownership (within the meaning of Rule 13d-3 under the
Exchange Act) of an aggregate of 21% or more of the voting power of the Parent's
outstanding voting securities by any person or group (as such term is used in
Rule 13d-5 under the Exchange Act) who beneficially owned less than 15% of the
voting power of the Parent's outstanding voting securities on the Effective
Date, or the acquisition of beneficial ownership of an additional 6% of the
voting power of the Parent's outstanding voting securities by any person or
group who beneficially owned at least 15% of the voting power of the Parent's
outstanding voting securities on the Effective Date; provided, however, that
notwithstanding the foregoing, an acquisition shall not be described hereunder
if the acquiror is (x) a trustee or other fiduciary holding securities under an
employee benefit plan of the Company and acting in such capacity, (y) a
wholly-owned subsidiary of the Parent or a corporation owned, directly or
indirectly, by the shareholders of the Parent in the same proportions as their
ownership of voting securities of the Parent or (z) any other person whose
acquisition of shares of voting securities is approved in advance by a majority
of the Continuing Directors; or (v) in a Title 11 bankruptcy proceeding, the
appointment of a trustee or the conversion of a case involving the Company to a
case under Chapter 7.
2
<PAGE> 6
(g) "CHANGE IN CONTROL PRICE" shall mean the highest price per share
paid in any transaction reported on the NYSE or such other exchange or market as
is the principal trading market for the Common Stock, or paid or offered in any
bona fide transaction related to a Potential or actual Change in Control at any
time during the 60 day period immediately preceding such occurrence, in each
case as determined by the Committee.
(h) "CODE" shall mean the Internal Revenue Code of 1986, as now or
hereafter amended.
(i) "COMMITTEE" shall mean the a Committee composed entirely of
non-Employee Directors, not less than 2 in number, appointed by the Board,
unless, and to the extent, the Board is required to, or expressly elects to, act
as the Committee.
(j) "COMMON STOCK" shall mean the common stock, no par value, of the
Parent.
(k) "COMPANY" shall mean the Parent, its Subsidiaries and Affiliates,
except when it shall be appropriate to refer only to Probex Corp., then it shall
be referred to as "Parent".
(l) "CONSULTANT" shall mean any person or entity who or which is
engaged by the Company to render services but is not carried on the books of the
Company as an employee, and any director of the Employer whether compensated for
such services or not; provided that, in the event the Company registers any
security under Section 12 of the Securities Exchange Act of 1934, as amended,
the term Consultant shall thereafter not include Directors who are not
compensated for their services and are paid only a director's fee by the
Employer.
(m) "DATE OF GRANT" shall mean the date on which the Committee takes
formal action to grant an Award, provided that it is followed, as soon as
reasonably possible, by written notice to the Eligible Person receiving the
Award.
(n) "DIRECTOR" shall mean a member of the Board.
(o) "DISABILITY" shall mean a Holder's present incapacity resulting
from an injury or illness (either mental or physical) which, in the reasonable
opinion of the Committee based on such medical evidence as it deems necessary,
will result in death or can be expected to continue for a period of at least
twelve (12) months and will prevent the Holder from performing the normal
services required of the Holder by the Company, provided, however, that such
disability did not result, in whole or in part: (i) from chronic alcoholism;
(ii) from addiction to narcotics; (ii) from a felonious undertaking; or (iv)
from an intentional self-inflicted wound.
(p) "EFFECTIVE DATE" shall mean June 30, 1998.
3
<PAGE> 7
(q) "ELIGIBLE PERSON" shall mean employees of the Company who have
completed six months (or more) of employment or who are expressly designated as
eligible by the Committee, Consultants, and Directors, in each case limited to
those persons so described who the Committee determines have the capacity to
substantially contribute to the success of the Company.
(r) "FAIR MARKET VALUE" shall mean, as of a particular date, the
closing sale price of Shares, which shall be (i) if the Shares are listed or
admitted for trading on any United States national securities exchange, the last
reported sale price of the Shares on such exchange as reported in any newspaper
of general circulation, or (ii) if the Shares are quoted on NASDAQ, the closing
high bid quotation for such day on such system. If neither clause (i) nor clause
(ii) is applicable, the fair market value shall be determined by the Committee
by any fair and reasonable means.
(s) "HOLDER" shall mean, at each time of reference, each person
(including, but not limited to an Optionee) with respect to whom an Award is in
effect, except that where it should be appropriate to distinguish between a
Holder with respect to an Option and a Holder with respect to a different type
of Award, reference shall be made to Optionee; and provided further that to the
extent provided under, and subject to the conditions of, the Award, it shall
refer to the person who succeeds to the rights of the Holder upon the death of
the Holder.
(t) "IMMEDIATE FAMILY" means any child, stepchild, grandchild, parent
stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law,
son-in-law, daughter-in-law, brother-in-law, or sister-in-law, and shall include
adoptive relationships.
(u) "INCENTIVE STOCK OPTION" shall mean an Option that is an incentive
stock option as defined in Section 422 of the Code.
(v) "NON-QUALIFIED STOCK OPTION" shall mean an Option that is not an
Incentive Stock Option.
(w) "OPTION" (when capitalized) shall mean any Incentive Stock Option
and Non-qualified Stock Option granted under this Plan, except that, where it
shall be appropriate to identify a specific type of Option, reference shall be
made to the specific type of Option; provided, further, without limitation, that
a single Option may include both Incentive Stock Option and Non-qualified Stock
Option provisions.
(x) "OPTIONEE" shall mean a person to whom an Option is granted (often
referred to as a Holder).
(y) "OPTION PRICE" shall mean the price per Share which is required to
be paid by the Optionee in order to exercise his right to acquire the Share
under the terms of the Option.
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<PAGE> 8
(z) "OPTION PROCEEDS" shall mean the cash proceeds received by the
Company from the exercise of Options reduced by any such amounts previously used
to purchase Reacquired Shares.
(aa) "OUTSIDE DIRECTOR" means a member of the Board who is not an
officer or employee of the Company.
(bb) "PARENT" means Probex Corp., a Colorado corporation.
(cc) "PERFORMANCE AWARD" shall mean the award which is granted
contingent upon the attainment of the performance objectives during the
Performance Period, all as described more fully in SECTION 13.
(dd) "PERFORMANCE PERIOD" shall mean the period described in SECTION 13
with respect to which the performance objectives relate.
(ee) "PLAN" shall mean this 1998 Omnibus Stock and Incentive Plan For
Probex Corp.
(ff) "PLAN YEAR" shall mean the Parent's fiscal year.
(gg) "POTENTIAL CHANGE IN CONTROL" shall mean the first to occur of (i)
approval by shareholders of an agreement by the Parent, the consummation of
which would result in a Change in Control; or (ii) the acquisition of beneficial
ownership, directly or indirectly, by any entity, person or group (other than
the Company or any Company employee benefit plan) of securities of the Company
representing 5% or more of the combined voting power of the Parent's outstanding
securities and the adoption by the Committee of a resolution to the effect that
a Potential Change in Control has occurred for purposes of this Plan.
(hh) "REACQUIRED SHARES" shall mean Shares, if any, which are (i)
delivered to the Company in full or partial payment of the Option Price of an
Option, (ii) reacquired by the Company on the open market with the Option
Proceeds, or (iii) designated by the Board as being deemed to have been
reacquired as Reacquired Shares from authorized but unissued or treasury Shares
as of a specific future date and at the deemed reacquisition price on the deemed
reacquisition date; provided, in each case described in (ii) or (iii), that such
reacquisition is specifically approved and directed in writing by the Board, and
that, in the case of (iii) the deemed reacquisition price shall be the Fair
Market Value of the Shares on the deemed reacquisition date; and provided,
finally, that the aggregate of such Reacquired Shares may not exceed
seventy-five percent (75%) of the aggregate Shares (excluding Reacquired Shares)
authorized in SECTION 3.
(ii) "RESTRICTION(S)" shall mean the restrictions applicable to
Available Shares subject to an Award which prohibit the "transfer" of such
Available Shares, and which constitute "a substantial risk of forfeiture" of
such Available Shares, as those terms are defined under Section 83(a)(1) of the
Code.
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<PAGE> 9
(jj) "RESTRICTED PERIOD" shall mean the period during which Restricted
Shares shall be subject to Restrictions.
(kk) "RESTRICTED SHARES" shall mean the Available Shares granted to an
Eligible Person which are subject to Restrictions.
(ll) "RESTRICTED SHARE AWARD" shall mean the award of Restricted
Shares.
(mm) "RESTRICTED SHARE DISTRIBUTIONS" shall mean any amounts, whether
Shares, cash or other property (other than regular cash dividends) paid or
distributed by the Parent with respect to Restricted Shares during a Restricted
Period.
(nn) "SHARE(S)" shall mean a share or shares of Common Stock.
(oo) "SPREAD" shall mean the difference between the Option Price of the
Share(s), and the Fair Market Value of such Share(s), on the date of reference.
(pp) "SUBSIDIARY" shall mean any corporation (other than the Parent) in
any unbroken chain of corporations beginning with the Parent if, at the time of
the granting of the Award, each of the corporations, other than the last
corporation in the unbroken chain, owns stock possessing 50% or more of the
total combined voting power of all classes of stock in one of the other
corporations in such unbroken chain.
(qq) "1933 ACT" shall mean the Securities Act of 1933, as amended.
(rr) "1934 ACT" shall mean the Securities Exchange Act of 1934, as
amended.
3. AWARD OF AVAILABLE SHARES.
(a) As of the Effective Date, 2,750,000 Shares shall automatically, and
without further action, become Available Shares. To the extent any Award shall
terminate, expire or be canceled, or the Award shall be paid in cash, the
Available Shares subject to such Award (or with respect to which the Award is
measured), shall remain Available Shares. Such number shall be increased
automatically by the number of Reacquired Shares.
(b) Notwithstanding the forgoing, Incentive Stock Options may not be
issued in whole or in part with respect to Reacquired Shares; provided, further,
that where an Award other than an Incentive Stock Option is granted at a time
when Reacquired Shares are available for grant under the Plan (i.e. are not
subject to a previous grant), for purposes of this SECTION 3(b) the Award shall
be deemed granted with respect to Reacquired Shares, and to the extent an Award
granted with respect to Reacquired Shares shall terminate, expire or be
canceled, or the Award shall be paid in cash, the Available Shares subject to
such Award (or with respect to which the Award is measured), shall remain
Available Shares and continue to be considered Reacquired Shares for purposes of
this SECTION 3(b). The Administrator shall maintain records sufficient to carry
out the purposes of this SECTION 3(b).
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<PAGE> 10
4. CONDITIONS FOR GRANT OF AWARDS.
(a) Without limiting the generality of the provisions hereof which deal
specifically with each form of Award, Awards shall only be granted to such one
or more Eligible Persons as shall be selected by the Committee; provided
further, and without limitation, that nothing herein shall be deemed to prohibit
the Committee from granting an Award contingent on the Eligible Person receiving
the Award surrendering an existing Award, provided only that in the case of an
Award which is an Option, the Award being surrendered may not be substantially
the same as the Award being received except for having a higher Option Price per
Share.
(b) In granting Awards, the Committee shall take into consideration the
contribution the Eligible Person has made or may be reasonably expected to make
to the success of the Company and such other factors as the Committee shall
determine. The Committee shall also have the authority to consult with and
receive recommendations from officers and other personnel of the Company with
regard to these matters. The Committee may from time to time in granting Awards
under the Plan prescribe such other terms and conditions concerning such Awards
as it deems appropriate, including, without limitation, relating an Award to
achievement of specific goals established by the Committee or to the continued
employment of the Eligible Person for a specified period of time, provided that
such terms and conditions are not inconsistent with the provisions of this Plan.
(c) Incentive Stock Options may be granted only to Employees, and all
other Awards may be granted to either Employees, Consultants or Outside
Directors.
(d) The Plan shall not confer upon any Holder any right with respect to
continuation of employment by, or consulting relationship with, the Company, nor
shall it interfere in any way with his right or the Company's right to terminate
his employment, consulting relationship or Directorship at any time, nor shall
the reference to "Company" confer an employment relationship on a Consultant.
(e) The Awards granted to Eligible Persons shall be in addition to
regular salaries, pension, life insurance or other benefits related to their
service to the Company. Neither the Plan nor any Award granted under the Plan
shall confer upon any person any right to continuance of employment by the
Company; and provided, further, that nothing herein shall be deemed to limit the
ability of the Company to enter into any other compensation arrangements with
any Eligible Person.
(f) The Committee shall determine in each case whether periods of
military or government service shall constitute a continuation of employment for
the purposes of this Plan or any Award.
(g) Notwithstanding any provision hereof to the contrary, each Award
which in whole or in part involves the issuance of Available Shares may provide
for the issuance of such Available Shares for consideration consisting of such
consideration as the Committee may determine, including (without limitation) as
compensation for past services rendered.
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<PAGE> 11
5. GRANT OF OPTIONS.
(a) The Committee may grant to Optionees from time to time Options
alone, in addition to, or in tandem with, other Awards granted under the Plan
and/or cash Awards made outside of the Plan, to purchase some or all of the
Available Shares. An Option granted hereunder shall be either an Incentive Stock
Option or a Non-qualified Stock Option, shall be evidenced by a written
agreement that shall contain such provisions as shall be selected by the
Committee, which may incorporate the terms of this Plan by reference, and which
clearly shall state whether it is (in whole or in part) an Incentive Stock
Option or a Non-qualified Stock Option.
(b) The aggregate Fair Market Value (determined as of the Date of
Grant) of the Available Shares with respect to which any Incentive Stock Option
is exercisable for the first time by an Optionee during any calendar year under
the Plan and all such plans of the Company (as defined in Section 425 of the
Code) shall not exceed $100,000.
(c) A Non-qualified Stock Option shall not be transferable by the
Holder without the prior written consent of the Committee other than (i)
transfers by the Holder to a member of his or her Immediate Family or a trust
for the benefit of the optionee or a member of his or her Immediate Family, or
(ii) transfers by will or by the laws of descent and distribution. An Incentive
Stock Option shall not be transferable by the Holder otherwise than by will or
by the laws of descent and distribution. All Options shall be exercisable,
during the Holder's lifetime, only by the Holder.
(d) In the case of a Non-qualified Stock Option or a Holder who elects
to make a disqualifying disposition (as defined in Section 422(a)(1) of the
Code) of Shares acquired pursuant to the exercise of an Incentive Stock Option,
the Committee may provide that, at such time as the Company files an income tax
return on which it shows taxable income, or upon the later exercise of the
Non-qualified Stock Option or disqualifying disposition of an Incentive Stock
Option, the Optionee will be paid a cash bonus in an amount equal to some or all
of the federal and state, if any, income tax incurred (or deemed incurred) by
the Holder (i) as a result of such exercise or disqualifying disposition, and
(ii) as a result of the payment of such cash bonus; and provided, further, that
the amount of such cash bonus may be expressed in the case of an Non-Qualified
Stock Option as a percentage of the Spread on the date of exercise, and may be
expressed in the case of a disqualifying disposition as a percentage of the
ordinary income reportable as a result of such disqualifying disposition;
provided, further, that in each case the Committee shall determine the
percentage in its sole discretion and separately with respect to each Optionee
and each Option.
(e) If the Option agreement so provides at Date of Grant or (except in
the case of an Incentive Stock Option) is amended after Date of Grant and prior
to exercise to so provide (with the Holder's consent), the Committee may require
that all or part of the Shares to be issued with respect to the Spread take the
form of Restricted Stock, which shall be valued on the date of exercise on the
basis of the Fair Market Value of such Restricted Stock determined without
regard to the transferability and forfeiture restrictions involved.
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<PAGE> 12
(f) Without limitation, the Committee may condition the exercise of any
Option upon the attainment of specified performance goals or other factors as
the Committee may determine in its sole discretion. Unless specifically provided
to the contrary in the Option agreement, any such performance conditioned Option
shall vest twelve (12) months prior to its expiration if the conditions to
exercise have not theretofore been satisfied.
6. OPTION PRICE.
(a) The Option Price shall be any price determined by the Committee;
provided, however, that in the case of an Incentive Stock Option, the Option
Price shall not be less than one hundred percent (100%) of the Fair Market Value
per Share (as reasonably determined in the sole discretion of the Committee) on
the Date of Grant. Without limiting the generality of the forgoing, the
Committee may not reduce the Option Price of an existing Option.
(b) Unless further limited by the Committee in any Option, the Option
Price shall be paid solely in cash, by certified or cashier's check, by wire
transfer, by money order, with Shares (but only to the extent expressly
permitted under the terms of the Option), or by a combination of the above;
provided, however, that the Committee, in its discretion, may accept a personal
check in full or partial payment. Without limitation, in the Committee's sole
discretion (but only to the extent expressly permitted under the terms of the
Option), the Option Price of an Option can be paid in full or in part by the
surrender of Vested Shares subject to the Option or to any other Award
hereunder. If the Option Price is permitted to be, and is, paid in whole or in
part with Shares, the value of the Share(s) surrendered shall be their Fair
Market Value on the date surrendered.
7. EXERCISE OF OPTIONS. An Option shall be deemed exercised when (i) the
Committee has received written notice of such exercise in accordance with the
terms of the Option, and (ii) full payment of the aggregate Option Price of the
Available Shares as to which the Option is exercised has been made. Separate
stock certificates shall be issued by the Parent for any Available Shares
acquired as a result of exercising an Incentive Stock Option and a Non-qualified
Stock Option.
8. EXERCISABILITY OF OPTIONS.
(a) Each Option shall become exercisable in whole or in part and
cumulatively, and shall expire, according to the terms of the Option to the
extent not inconsistent with the express provisions of this Plan; provided,
further and without limitation, that each Option may have a different maximum
period of prior to its final expiration date.
(b) The Committee, in its sole discretion, may accelerate the date on
which all or any portion of an otherwise unexercisable Option may be exercised
or a restriction will lapse.
(c) Notwithstanding any provisions hereof to the contrary, no
outstanding Option shall be canceled, repriced, exchanged or otherwise treated
in a manner which would have the effect of reducing its Option Price.
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<PAGE> 13
9. TERMINATION OF OPTION PERIOD.
(a) As provided in SECTION 5, and without limitation, each Option shall
be evidenced by an agreement that may contain any provisions selected by the
Committee; provided, however, that in each case, unless terminated earlier under
the express terms of the Option, the unexercised portion of an Option shall
automatically and without notice terminate and become null and void on the
earlier of (i) the date that Optionee ceases to be employed by the Company, if
such cessation is for Cause, (ii) the anniversary of the date of the Optionee's
cessation of employment by reason of Optionee's death, (iii) the three month
anniversary of the date of Optionee's cessation of employment by reason of
Optionee's Disability (provided that this provision shall not apply to Options
granted prior to September 1, 1998), (iv) the tenth (10th) anniversary of the
Date of Grant; and (v) solely in the case of an Incentive Stock Option, three
months after the date that Optionee ceases to be employed by the Company
regardless of the reason therefor, other than a cessation by reason of death, in
which case the date of termination may be extended under the terms of the
Incentive Stock Option agreement.
(b) Notwithstanding any provision of SECTION 14(a) to the contrary, if
provided in an Option, the Committee may, by giving written notice
("CANCELLATION NOTICE"), cancel, effective upon the date of the consummation of
any of the transactions described in SUBSECTION 14(a), all or any portion of
such Option which remains unexercised on such date. Such Cancellation Notice
shall be given a reasonable period of time (but not less than 15 days) prior to
the proposed date of such cancellation, and may be given either before or after
shareholder approval of such corporate transaction.
10. INCENTIVE STOCK OPTIONS FOR 10% SHAREHOLDER. Notwithstanding any other
provisions of the Plan to the contrary, an Incentive Stock Option shall not be
granted to any person owning directly (or indirectly through attribution under
Section 425(d) of the Code) at the Date of Grant, stock possessing more than 10%
of the total combined voting power of all classes of stock of the Company (as
defined in Section 425 of the Code) at the Date of Grant, unless the Option
Price of such Incentive Stock Option is at least 110% of the Fair Market Value
on the Date of Grant of the Available Shares subject to such Incentive Stock
Option, and the period during which the Incentive Stock Option may be exercised
does not exceed five (5) years from the Date of Grant.
11. NON-QUALIFIED STOCK OPTIONS. Non-qualified Stock Options may be granted
hereunder and shall contain such terms and provisions as shall be determined by
the Committee, except that each such Non-qualified Stock Option (i) must be
clearly designated as a Non-qualified Stock Option; (ii) may be granted for
Available Shares which become exercisable in excess of the limits contained in
SUBSECTION 5(b); and (iii) shall not be subject to SECTION 10 hereof. If both
Incentive Stock Options and Non-qualified Stock Options are granted to an
Optionee, the right to exercise, to the full extent thereof, Options of either
type shall not be contingent in whole or in part upon the exercise of, or
failure to exercise, Options of the other type.
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<PAGE> 14
12. RESTRICTED SHARE AWARDS.
(a) Each Restricted Share Award shall be evidenced by an agreement that
may contain any provisions selected by the Committee, and not expressly in
conflict with a provision of the Plan. Except as otherwise provided in the
express terms and conditions of each Restricted Share Award, the Eligible Person
receiving the Restricted Share Award shall have all of the rights of a
shareholder with respect to such Restricted Shares including, but not limited
to, voting rights and the right to receive any dividends paid, subject only to
the retention provisions of the Restricted Share Distributions.
(b) The Restrictions on Restricted Shares shall lapse in whole, or in
installments, over whatever Restricted Period shall be selected by the
Committee; provided, however, that a complete lapse of Restrictions always shall
occur on or before the 9th anniversary of the Date of Grant.
(c) The Committee may accelerate the date on which Restrictions lapse
with respect to any Restricted Shares.
(d) During the Restricted Period, the certificates representing the
Restricted Shares, and any Restricted Share Distributions, shall be registered
in the Holder's name and bear a restrictive legend disclosing the Restrictions,
the existence of the Plan, and the existence of the applicable agreement
granting such Restricted Share Award. Such certificates shall be deposited by
the Holder with the Company, together with stock powers or other instruments of
assignment, each endorsed in blank, which will permit the transfer to the
Company of all or any portion of the Restricted Shares, and any assets
constituting Restricted Share Distributions, which shall be forfeited in
accordance with the applicable agreement granting such Restricted Share Award.
Restricted Shares shall constitute issued and outstanding Common Stock for all
corporate purposes and the Holder shall have all rights, powers and privileges
of a Holder of unrestricted Shares except that the Holder will not be entitled
to delivery of the stock certificates until all Restrictions shall have
terminated, and the Company will retain custody of all related Restricted Share
Distributions (which will be subject to the same Restrictions, terms, and
conditions as the related Restricted Shares) until the conclusion of the
Restricted Period with respect to the related Restricted Shares; and provided,
further, that any Restricted Share Distributions shall not bear interest or be
segregated into a separate account but shall remain a general asset of the
Company, subject to the claims of the Company's creditors, until the conclusion
of the applicable Restricted Period; and provided, finally, that any material
breach of any terms of the agreement granting the Restricted Share Award, as
reasonably determined by the Committee will cause a forfeiture of both
Restricted Shares and Restricted Share Distributions.
13. PERFORMANCE AWARDS.
(a) The Committee may grant Performance Awards, which may in the sole
discretion of the Committee represent a Share or be related to the increase in
value of a Share, or be contingent on the Company's achievement of the specified
performance measures during the Performance Period, including, without
limitation, performance shares, convertible preferred stock, convertible
debentures, exchangeable securities and Restricted Share Awards or Options
valued by reference to earnings per Share or Subsidiary performance, may be
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<PAGE> 15
granted either alone, in addition to, or in tandem with, other Awards and cash
awards made outside of the Plan. The Committee shall establish the performance
measures for each Performance Period, and such performance measures, and the
duration of any Performance Period, may differ with respect to each Eligible
Person who receives a Performance Award, or with respect to separate Performance
Awards issued to the same Eligible Person. The performance measures, the medium
of payment, the Performance Period(s) and any other conditions to the Company's
obligation to pay such Performance Award in full or in part, shall be set forth
in the written agreement evidencing each Performance Award.
(b) Unless otherwise expressly provided in the agreement evidencing the
Performance Award, the Holder of the Performance Award must remain employed by
the Company until the end of the Performance Period in order to be entitled to
any payment under such Performance Award; provided, however, that the Committee
expressly may provide in the agreement granting such Performance Award that such
Holder may become entitled to a specified portion of the amount earned under
such Performance Award based on one or more specified period(s) of time between
the Date of Grant of such Performance Award and such Holder's termination of
employment by the Company prior to the end of the Performance Period.
14. ACCELERATION.
(a) In the event the Holder's termination of employment with the
Company is by reason of the Holder's death, all Awards granted to the Holder
shall become fully exercisable, nonforfietable, or the Restricted Period shall
terminate as the case may be (hereafter, in this SECTION 14, such Award shall be
"accelerated").
(b) In the event of either a Change in Control, or a Potential Change
in Control, unless otherwise expressly provided by the Committee prior to such
event, (i) all Awards, shall become fully exercisable, nonforfeitable, or the
Restricted Period shall terminate, as the case may be (hereafter, in this
SECTION 14, such Award shall be "accelerated") and (ii) the value of all
outstanding Non-qualified Stock Options, Restricted Stock, and Outside Director
Options shall be cashed out on the basis of the Change in Control Price,
effective as the date of the Change in Control, or on such other date as the
Committee may determine prior to the Change in Control.
(c) Notwithstanding any provisions hereof to the contrary, if an Award
is accelerated under SUBSECTION 14(a) or (b), the portion of the Award which is
accelerated is limited to that portion which can be accelerated without causing
the Holder to have an "excess parachute payment" as determined under Section
280G of the Code, determined by taking into account all of the Holder's
"parachute payments" determined under Section 280G of the Code, all as
reasonably determined by the Committee.
15. ADJUSTMENT OF AVAILABLE SHARES.
(a) If at any time while the Plan is in effect or Awards with respect
to Available Shares are outstanding, there shall be any increase or decrease in
the number of issued and
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<PAGE> 16
outstanding Shares through the declaration of a stock dividend or through any
recapitalization resulting in a stock split-up, combination or exchange of
Shares, then and in such event:
(i) appropriate adjustment shall be made in the maximum
number of Available Shares which may be granted under SECTION 3, and in
the Available Shares which are then subject to each Award, so that the
same proportion of the Parent's issued and outstanding Common Stock
shall continue to be subject to grant under SECTION 3, and to such
Award, and
(ii) in addition, and without limitation, in the case of
each Award (including, without limitation, Options) which requires the
payment of consideration by the Holder in order to acquire Shares, an
appropriate adjustment shall be made in the consideration (including,
without limitation the Option Price) required to be paid to acquire the
each Share, so that (i) the aggregate consideration to acquire all of
the Shares subject to the Award remains the same and, (ii) so far as
possible (and without disqualifying an Incentive Stock Option) as
reasonably determined by the Committee in its sole discretion, the
relative cost of acquiring each Share subject to such Award remains the
same.
(b) The Committee may change the terms of Options outstanding under
this Plan, with respect to the Option Price or the number of Available Shares
subject to the Options, or both, when, in the Committee's judgment, such
adjustments become appropriate by reason of a corporate transaction (as defined
in Treasury Regulation Section 1.425-1(a)(1)(ii)); provided, however, that if by
reason of such corporate transaction an Incentive Stock Option is assumed or a
new option is substituted therefore, the Committee may only change the terms of
such Incentive Stock Option such that (i) the excess of the aggregate Fair
Market Value of the Shares subject to option immediately after the substitution
or assumption, over the aggregate option price of such Shares, is not more than
the excess of the aggregate Fair Market Value of all Available Shares subject to
the Option immediately before such substitution or assumption over the aggregate
Option Price of such Available Shares, and (ii) the new option, or the
assumption of the old Incentive Stock Option does not give the Optionee
additional benefits which he did not have under the old Incentive Stock Option.
(c) Except as otherwise expressly provided herein, the issuance by the
Parent of shares of its capital stock of any class, or securities convertible
into shares of capital stock of any class, either in connection with direct sale
to an unrelated party or for Fair Market Value, or upon the exercise of rights
or warrants to subscribe therefor, or upon conversion of shares or obligations
of the Parent convertible into such shares or other securities, shall not
affect, and no adjustment by reason thereof shall be made with respect to
Available Shares subject to Awards granted under the Plan.
(d) Without limiting the generality of the foregoing, the existence of
outstanding Awards with respect to Available Shares granted under the Plan shall
not affect in any manner the right or power of the Parent to make, authorize or
consummate (1) any or all adjustments, recapitalizations, reorganizations or
other changes in the Parent's capital structure or its business; (2) any merger
or consolidation of the Parent; (3) any issue by the Parent of debt
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<PAGE> 17
securities, or preferred or preference stock which would rank above the
Available Shares subject to outstanding Awards; (4) the dissolution or
liquidation of the Parent; (5) any sale, transfer or assignment of all or any
part of the assets or business of the Company; or (6) any other corporate act or
proceeding, whether of a similar character or otherwise.
16. TRANSFERABILITY OF AWARDS. Each Award shall provide that such Award
shall not be transferable by the Holder otherwise than by will or the laws of
descent and distribution, or, if so provided in the Award, (a) that such Award
is transferable, in whole or in part, without payment of consideration, to
members of the Holder's Immediate Family, to trusts for such Immediate Family
members, or to partnerships whose only partners are such Immediate Family
members, or (b) to a person or other entity for which the Holder is entitled to
a deduction for a "charitable contribution" under Section 170(a)(i) of the Code
(provided, in each such case that no further transfer by any such permitted
transferee(s) shall be permitted); provided, further, that in each case the
exercise of the Award will remain the power and responsibility of the Holder and
that so long as the Holder lives, only such Holder (even if pursuant to the
legal direction of the person to whom a charitable contribution has been made)
or his guardian or legal representative shall have the rights set forth in such
Award.
17. ISSUANCE OF SHARES. No Holder or other person shall be, or have any of
the rights or privileges of, the owner of Shares subject to an Award unless and
until certificates representing such Common Stock shall have been issued and
delivered to such Holder or other person. As a condition of any issuance of
Common Stock, the Committee may obtain such agreements or undertakings, if any,
as the Committee may deem necessary or advisable to assure compliance with any
such law or regulation including, but not limited to, the following:
(i) a representation, warranty or agreement by the Holder
to the Parent, at the time any Shares are transferred, that he is
acquiring the Shares to be issued to him for investment and not with a
view to, or for sale in connection with, the distribution of any such
Shares; and
(ii) a representation, warranty or agreement to be bound by
any legends that are, in the opinion of the Committee, necessary or
appropriate to comply with the provisions of any securities law deemed
by the Committee to be applicable to the issuance of the Shares and are
endorsed upon the Share certificates.
Share certificates issued to the Holder receiving such Shares who are
parties to any shareholders agreement or any similar agreement shall bear the
legends contained in such agreements. Notwithstanding any provision hereof to
the contrary, no Shares shall be required to be issued with respect to an Award
unless counsel for the Parent shall be reasonably satisfied that such issuance
will be in compliance with applicable Federal or state securities laws.
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18. ADMINISTRATION OF THE PLAN.
(a) The Plan shall be administered by the Committee and, except for the
powers reserved to the Board in SECTION 21 hereof, the Committee shall have all
of the administrative powers under Plan. If a Committee is not appointed by the
Board at the time of reference, the Plan shall be administered by the Board and
all references herein to the Committee shall refer to the Board. Notwithstanding
the forgoing, no member of the Committee may be present at discussions
concerning, or vote on, matters which materially affect his Award.
Notwithstanding any provision of the Plan to the contrary, the Board, exclusive
of the non-employee Directors, shall act exclusively as the Committee with
respect to all matters relating to the granting of, and administration of the
Plan with respect to, Awards to non-employee Directors.
(b) The Committee, from time to time, may adopt rules and regulations
for carrying out the purposes of the Plan and, without limitation, may delegate
all of what, in its sole discretion, it determines to be ministerial duties to
an officer of the Parent. The determinations under, and the interpretations of,
any provision of the Plan or an Award by the Committee shall, in all cases, be
in its sole discretion, and shall be final and conclusive.
(c) Any and all determinations and interpretations of the Committee
shall be made either (i) by a majority vote of the members of the Committee at a
meeting duly called, with at least 3 days prior notice and a general explanation
of the subject matter given to each member, or (ii) without a meeting, by the
written approval of all members of the Committee.
(d) No member of the Committee shall be liable for any action taken or
omitted to be taken by him or by any other member of the Committee with respect
to the Plan, and to the extent of liabilities not otherwise insured under a
policy purchased by the Company, the Company does hereby indemnify and agree to
defend and save harmless any member of the Committee with respect to any
liabilities asserted or incurred in connection with the exercise and performance
of their powers and duties hereunder, unless such liabilities are judicially
determined to have arisen out of such member's gross negligence, fraud or bad
faith. Such indemnification shall include attorney's fees and all other costs
and expenses reasonably incurred in defense of any action arising from such act
of commission or omission. Nothing herein shall be deemed to limit the Company's
ability to insure itself with respect to its obligations hereunder.
(e) In particular, and without limitation, the Committee shall have the
authority, consistent with the terms of the Plan:
(i) to select the officers, key employees of and
consultants to the Company to whom Awards may from time to time be
granted hereunder;
(ii) to determine whether and to what extent Awards are to
be granted hereunder to one or more eligible persons;
(iii) to determine the number of Shares to be covered by
each such Award granted hereunder;
15
<PAGE> 19
(iv) to determine the terms and conditions, not
inconsistent with the terms of the Plan, of any Award granted hereunder
(including, but not limited to, the Agreed Value and any restriction or
limitation, or any vesting acceleration or waiver of forfeiture
restrictions, based in each case on such factors as the Committee shall
determine, in its sole discretion); and to amend or waive any such
terms and conditions to the extent permitted by the Plan;
(v) to determine whether and under what circumstances an
Option may be settled in cash or Restricted Shares instead of Shares;
(vi) to determine whether, to what extent, and under what
circumstances Awards under the Plan are to be made, and operate, on a
tandem basis vis-a-vis other Awards under the Plan and/or cash awards
made outside of the Plan;
(vii) to determine whether and to what extent, and under
what circumstances Shares and other amounts payable with respect to an
Award shall be deferred either automatically or at the election of the
Holder (including providing for and determining the amount (if any) of
any deemed earnings on any deferred amount during any deferral period);
and
(viii) to determine whether to require payment of tax
withholding requirements in Shares and to impose any holding period
required to satisfy Section 16 under the Exchange Act.
(f) The Committee shall have the authority to adopt, alter, and repeal
such rules, guidelines, and practices governing the Plan as it shall, from time
to time, deem advisable; to interpret the terms and provisions of the Plan and
any Award issued under the Plan (and any agreements relating thereto); and to
otherwise supervise the administration of the Plan; provided, however, that to
the extent that this Plan otherwise requires the approval of the Board or the
shareholders of the Parent, all decisions of the Committee shall be subject to
such Board or shareholder approval. Subject to the foregoing, and without
limitation, all decisions made by the Committee pursuant to the provisions of
the Plan shall be made in the Committee's sole discretion and shall be final and
binding on all persons, including the Company and Holders.
19. TAX WITHHOLDING. On or immediately prior to the date on which a payment
is made to a Holder hereunder or, if earlier, the date on which an amount is
required to be included in the income of the Holder as a result of an Award, the
Holder shall be required to pay to the Company, in cash or in Shares (including,
but not limited to, the reservation to the Company of the requisite number of
Available Shares otherwise payable to such Holder with respect to such Award)
the amount which the Company reasonably determines to be necessary in order for
the Company to comply with applicable federal or state tax withholding
requirements, and the collection of employment taxes, if applicable; provided,
further, that the Committee may require that such payment be made in cash.
16
<PAGE> 20
20. INTERPRETATION.
(a) If any provision of the Plan is held invalid for any reason, such
holding shall not affect the remaining provisions hereof, but instead the Plan
shall be construed and enforced as if such provision had never been included in
the Plan.
(b) THIS PLAN SHALL BE GOVERNED BY THE LAWS OF THE STATE OF TEXAS.
(c) Headings contained in this Agreement are for convenience only and
shall in no manner be construed as part of this Plan.
(d) Any reference to the masculine, feminine, or neuter gender shall be
a reference to such other gender as is appropriate.
(e) The Plan is intended to constitute an "unfunded" plan for incentive
and deferred compensation. With respect to any payments not yet made to a
Holder, nothing contained herein shall give any such Holder any rights that are
greater than those of a general creditor of the Company. In its sole discretion,
the Committee may authorize the creation of trusts or other arrangements to meet
the obligations created under the Plan to deliver Common Stock or payments in
lieu of or with respect to Awards hereunder; provided, however, that, unless the
Committee otherwise determines with the consent of the affected Holder, the
existence of such trusts or other arrangements is consistent with the "unfunded"
status of the Plan.
(f) Nothing contained in this Plan shall prevent the Board from
adopting other or additional compensation arrangements, subject to shareholder
approval if such approval is required; and such arrangements may be either
generally applicable or applicable only in specific cases.
21. AMENDMENT AND DISCONTINUATION OF THE PLAN. The Board, or the Committee
(subject to the prior written authorization of the Board), may from time to time
amend the Plan or any Award; provided, however, that [except to the extent
provided in SECTION 9(b) AND 15 hereof] if there are Incentive Stock Options
outstanding on the date of amendment, no such amendment may, without approval by
the shareholders of the Parent, (a) increase the number of Available Shares with
respect to which Incentive Stock Options may be granted, or change the class of
Eligible Persons to which Incentive Stock Options may be granted, (b) permit the
granting of Incentive Stock Options which expire beyond the maximum 10-year
period described in SUBSECTION 9(a)(iv) or beyond the period described in
SUBSECTION 9(a)(v), or (c) extend the termination date of the Plan as set forth
in SECTION 24 with respect the granting of Incentive Stock Options; and
provided, further, that no amendment or suspension of the Plan or any Award
issued hereunder shall, except as specifically permitted in this Plan or under
the terms of such Award, substantially impair any Award previously granted to
any Holder without the consent of such Holder.
22. SECTION 83(b) ELECTION. If as a result of receiving an Award, a Holder
receives Restricted Shares subject to a "substantial risk of forfeiture", then
such Holder may elect under Section 83(b) of the Code to include in his gross
income, for his taxable year in which the Restricted Shares are transferred to
him, the excess of the Fair Market Value (determined
17
<PAGE> 21
without regard to any Restriction other than one which by its terms will never
lapse), of such Restricted Shares at the Date of Grant, over the amount paid for
the Restricted Shares. If the Holder makes the Section 83(b) election described
above, the Holder shall (i) make such election in a manner that is satisfactory
to the Committee, (ii) provide the Committee with a copy of such election, (iii)
agree to promptly notify the Company if any Internal Revenue Service or state
tax agent, on audit or otherwise, questions the validity or correctness of such
election or of the amount of income reportable on account of such election, and
(iv) agree to such federal and state income withholding as the Committee may
reasonably require in its sole and absolute discretion.
23. EFFECTIVE DATE AND TERMINATION DATE. The Plan shall be effective as of
its Effective Date, and shall terminate on the tenth anniversary of such
Effective Date.
PROBEX CORP.
--------------------------------
18
<PAGE> 1
EXHIBIT 10.2
CONSULTING AGREEMENT
BETWEEN GROVE CAPITAL CORPORATION.
AND PROBEX CORP.
This Agreement is made effective as of December 16, 1997, by and between Probex
Corp., of 4238 Spring Valley Road, Dallas, Texas 75244 (Company), a Colorado
corporation, and GROVE CAPITAL CORPORATION, a Georgia corporation (Consultant).
Company and Consultant are hereafter collectively referred to as parties.
Consultant has a background in financial structuring of projects.
Company has developed an innovative technology that rerefines used oils and
converts these into base lube oil, fuel oil, and asphalt. Company is proceeding
forward to employ such technology in an operating plant (Rerefining Facility)
through arrangements including procuring supply of used oil, arranging
purchasers of plant output products, securing a site, and procuring financing
for the engineering, procurement, construction, and commissioning of the
Rerefining Facility.
Company desires to have certain services (as defined below) provided by
Consultant, and Consultant agrees to provide such services (as defined below),
to facilitate procurement of financing, and improve the general design and
ultimate operations of the Rerefining Facility.
Therefore, the parties agree as follows:
1. DESCRIPTION OF SERVICES. Beginning on the date of this Agreement, Consultant
will assist Company in obtaining a system performance guarantee from Hartford
Steam Boiler & Inspection Company (the "Hartford Technical Guarantee")
2. PAYMENT. Upon the occurrence of the concluded financial closing of funding in
which the Hartford Technical Guarantee is employed, Company will issue to
Consultant 61,000 shares (after adjustment for stock dividends, splits, or
reverse stock splits subsequent to December 1, 1997) of Company common stock
in exchange for assisting in arranging the Hartford Technical Guarantee.
THE SHARES DESCRIBED ABOVE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OR
ANY OF THE SECURITIES LAWS OR REGULATIONS OF ANY STATE OR OTHER JURISDICTION.
NOTWITHSTANDING ANY PUBLISHED QUOTATIONS FOR ANY OF THE SECURITIES, THE
SECURITIES MAY NOT BE RESOLD UNLESS THEY ARE SUBSEQUENTLY REGISTERED UNDER SUCH
LAWS OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE. THE COMPANY INTENDS TO
UTILIZE ITS BEST EFFORTS TO REGISTER THE COMMON STOCK FOR RESALE BY CONSULTANT
ON A "PIGGY BACK" BASIS, IN CONNECTION WITH ANY FUTURE REGISTRATION OF ANY OTHER
SHARES OF THE COMPANY'S COMMON STOCK. HOWEVER, THE COMPANY HAS NO
1
PBX /s/ TGM GCC /s/ GKG
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<PAGE> 2
OBLIGATION TO SO REGISTER THE SHARES OF COMMON STOCK AND CONSULTANT SHOULD NOT
RELY ON THE EVENTUAL REGISTRATION OF THE COMMON STOCK IN ACCEPTING THESE SHARES
AS CONSIDERATION FOR SERVICES. ACCORDINGLY CONSULTANT MAY BE REQUIRED TO BEAR
THE ECONOMIC CONSEQUENCES OF HOLDING THE COMMON STOCK FOR AN INDEFINITE PERIOD
OF TIME. IN ADDITION CONSULTANT IS PROHIBITED FROM ANY SALES OF THE SHARES UNTIL
SUCH TIME AS THE REREFINING FACILITY HAS ACHIEVED SUCCESSFUL OPERATION AS
DEFINED IN THE ABOVE PARAGRAPH.
3. TERM/TERMINATION. This Agreement shall be effective for a period of 12
months. This Agreement may be extended under the same terms by mutual
agreement in writing between the Consultant and the Company.
4. RELATIONSHIP OF PARTIES. It is understood by the parties that Consultant is
an independent contractor with respect to Company, and not an employee of
Company. Company will not provide fringe benefits, including health insurance
benefits, paid vacation, or any other employee benefit, for the benefit of
Consultant. Consultant shall be responsible for any and all taxes pertaining
to this Agreement.
5. NOTICES. All notices required or permitted under this Agreement shall be in
writing and shall be deemed delivered when delivered in person or deposited
in the United States mail, postage prepaid, addressed as follows:
Company:
Thomas G. Murray
Chief Executive Officer
Probex Corp.
4238 Spring Valley Road
Dallas, Texas 75244
Consultant:
Gregory K. Grove
President
Grove Capital Corporation
Eleven Piedmont Center, Suite 611
3495 Piedmont Road, N. E.
Atlanta, GA 30305
Each party may change its address from time to time by either party by providing
written notice to the other in the manner set forth above.
2
PBX /s/ TGM GCC /s/ GKG
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<PAGE> 3
6. ENTIRE AGREEMENT. This Agreement contains the entire agreement of the parties
and there are no other promises or conditions in any other agreement whether
oral or written. This Agreement supersedes any prior written or oral agreements
between the parties. Each party expressly represents that they have not
executed, nor are they party to, any Agreement that is in contravention to this
Agreement, or that would render this Agreement invalid or unenforceable under
applicable laws.
7. AMENDMENT. This Agreement may be modified or amended only if the amendment is
made in writing and is signed by both parties.
8. SEVERABILITY. If any provision of this Agreement shall be held to be invalid
or unenforceable for any reason, the remaining provisions shall continue to be
valid and enforceable. If a court finds that any provision of this Agreement is
invalid or unenforceable, but that by limiting such provision it would become
valid and enforceable, then such provision shall be deemed to be written,
construed, and enforced as so limited.
9. WAIVER OF CONTRACTUAL RIGHT. The failure of either party to enforce any
provision of this Agreement shall not be construed as a waiver or limitation of
that party's right to subsequently enforce and compel strict compliance with
every provision of this Agreement.
10. APPLICABLE LAW. This Agreement shall be governed by the laws of the State of
Texas.
So signed and executed by the parties:
Company
Probex Corp.
By: /s/ Thomas G. Murray /s/ Alex Daspit
------------------------- -------------------
Thomas G. Murray Alex Daspit
Chief Executive Officer President
Consultant:
Grove Capital Corporation
By: /s/ Gregory K. Grove
------------------------
Name: Gregory K. Grove
Title: President
3
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<PAGE> 1
EXHIBIT 10.3
CONVERTIBLE LOAN, WARRANT AND SECURITY AGREEMENT
This Convertible Loan, Warrant and Security Agreement (the "LOAN
AGREEMENT") is entered into as of June 30, 1998 (the "EFFECTIVE DATE") by and
between Probex Corporation, a Colorado corporation (the "COMPANY"), and HSB
Engineering Finance Corporation, Inc., a Delaware corporation ("EFC").
WHEREAS, EFC is willing, pursuant to the terms and conditions of this
Loan Agreement, to loan the Company up to an aggregate amount of one million
five hundred thousand and no/100 dollars ($1,500,000.00) (the "LOAN AMOUNT")
which loan (the "LOAN") shall be made simultaneously with the grant of a warrant
to purchase shares of Common Stock of the Company equal to ten percent (10%) of
the number of shares of Common Stock outstanding, Fully-Diluted (except for
Conversion Shares as defined herein), at the time of issuance of such warrant
and shall be made on the terms and subject to the conditions set forth herein;
and
WHEREAS, the Company wishes to obtain such Loan, to issue EFC a warrant
to purchase capital stock of the Company on the terms and conditions of the
warrant in the form referenced herein (the "WARRANT") and to enter into certain
other agreements with EFC;
NOW, THEREFORE, the parties hereby agree as follows:
1. DEFINITIONS.
1.1 Certain Defined Terms. As used in this Loan Agreement, the
following terms shall have the following respective meanings:
"Acceptance Test" shall mean a test of the Company's
continuous run process on used oil at the Company's facility in Carrollton,
Texas, in which EFC shall have reasonably accepted samples of the resulting
product and the results of such test in writing within thirty (30) days of the
date of receipt by EFC of a notice by the Company submitting such product
samples and such results that the Company reasonably deems to be necessary for
acceptance.
"Accounts" shall mean all bona fide rights of the Company, now
existing or hereafter acquired, to payment for goods sold or leased or for
services rendered or for royalty payments or payments under any license, which
are not evidenced by an instrument or Chattel Paper, whether or not earned by
performance.
"Actively Traded" shall mean attainment of an average of
37,500 or more shares per business day arm's length trading volume of Common
Stock over a period of twenty (20) trading days as reported by the
over-the-counter or other established quotation agencies.
CONVERTIBLE LOAN, WARRANT
AND SECURITY AGREEMENT - Page 1
<PAGE> 2
"Affiliate" shall mean, for each party, any person or entity
that directly, or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, such party.
"Chattel Paper" shall mean a writing or writings which
evidence both a monetary obligation and a security interest in, or a lease of,
specific goods. When a transaction is evidenced both by such a security
agreement or a lease and by an instrument or a series of instruments, the group
of writings taken together constitutes Chattel Paper.
"Common Stock" shall mean the Company's common stock, no par
value.
"Contracts" shall mean all agreements, contracts, leases,
licenses, instruments, commitments (oral or written), indebtedness, liabilities
and other obligations to which the Company is a party or has a right to enforce.
"Conversion Shares" shall mean the number of shares of Common
Stock (or other voting security with the same rights and privileges of Common
Stock as of the date hereof) that shall be issued to EFC upon cancellation of
the unpaid principal balance of the Loan and surrender and cancellation of the
Warrant; which number shall be determined as follows: as adjusted pursuant to
Section 5.7, (a) upon execution of this Loan Agreement, the number of Conversion
Shares shall be equal to ten percent (10%) of the number of shares of Common
Stock outstanding, Fully-Diluted (except for shares issuable upon exercise of
the Warrant), (as adjusted pursuant to Section 5.7, the "INITIAL CONVERSION
SHARES") and (b) upon each Drawdown that causes the unpaid principal balance
(such unpaid principal balance is referred to as the "OUTSTANDING BALANCE") to
exceed $750,000, for each $150,000 or part thereof added to the Outstanding
Balance, the number of Conversion Shares shall be increased by a number of
shares of Common Stock equal to two percent (2%) of the number of shares of
Common Stock outstanding, Fully-Diluted, at the time of the Drawdown (as
adjusted pursuant to Section 5.7, the "ADDITIONAL CONVERSION SHARES"); provided,
however, that the number of Additional Conversion Shares shall not be increased
by such amount until the Outstanding Balance exceeds the highest Outstanding
Balance at any time during the term of the Loan.
"Fair Market Value" of a share of Common Stock as of a particular date
shall mean:
(a) If traded on a securities exchange or the Nasdaq National
Market, the Fair Market Value shall be deemed to be the average of the closing
prices of the Common Stock of the Company on such exchange or market over the
five (5) trading days ending immediately prior to the applicable date of
valuation;
(b) If Actively Traded over-the-counter, the Fair Market Value
shall be deemed to be the average of the closing bid prices over the thirty (30)
calendar day period ending immediately prior to the applicable date of
valuation; and
(c) If not Actively Traded over-the-counter or traded on a
securities exchange or the Nasdaq National Market , the Fair Market Value shall
be the value thereof, as agreed upon by the Company and EFC; provided, however,
that if the Company and EFC cannot agree on
CONVERTIBLE LOAN, WARRANT
AND SECURITY AGREEMENT - Page 2
<PAGE> 3
such value, such value shall be determined by an independent valuation firm
experienced in valuing businesses such as the Company and jointly selected in
good faith by the Company and EFC. Fees and expenses of the valuation firm shall
be paid for by the Company.
"Fully-Diluted" shall mean after giving effect to the exercise
or conversion, as applicable, of all outstanding options, warrants, and other
securities convertible or exchangeable for Common Stock.
"Lien" means any mortgage, deed of trust, or pledge, security
interest, hypothecation, assignment, assigned deposit, arrangement, encumbrance,
encroachment, lien (statutory or otherwise), claim, option, reservation, right
off way, easement, or defect of any kind, or preference, or priority, or other
security agreement or preferential arrangement of any kind of or nature
whatsoever (including, without limitation, any conditional sale or other title
retention agreement, any financing statement under the UCC, or under the
comparable law of any other jurisdiction).
"Mandatory Conversion Criteria" shall mean the aggregate Fair
Market Value of the Conversion Shares exceeds three times the sum of (x) the
greater of $750,000 or the highest Outstanding Balance at any time during the
term of the Loan plus (y) the unpaid accrued interest.
"Other Transaction Documents" shall mean the Note, the
Warrant, the Investor Rights Agreement, the Employment Agreements, and the
Invention Assignment and Confidentiality Agreements.
"Proceeds" shall mean whatever is received when Collateral or
Proceeds are sold, exchanged, collected or otherwise disposed of, both cash and
non-cash, including the proceeds of insurance payable by reason of loss of or
damage to Collateral or Proceeds.
"Proprietary Assets" shall mean all patents, patent
applications, trademarks, service marks, trade names, copyrights, moral rights,
maskworks, trade secrets, confidential and proprietary information, compositions
of matter, formulas, designs, proprietary rights, know-how and processes of the
Company including without limitation, the items listed on Section 7.8 to the
Disclosure Schedule to this Loan Agreement.
"Public Offering" shall mean any firm commitment underwritten
public offering of the Company's Common Stock pursuant to a registration
statement filed with the Securities and Exchange Commission after the date
hereof.
"Secured Obligations" shall mean all money, debts, obligations
and liabilities which now are or have been or at any time hereafter may be or
become due, owing or incurred by the Company to EFC, whether direct or indirect,
absolute or contingent, due or to become due, or now existing or hereafter
incurred, which may arise under, out of, or in connection with this Loan
Agreement and any other document made, delivered or given in connection
therewith or herewith, whether on account of principal, interest, royalties,
reimbursement obligations, fees, indemnities, costs, expenses, or otherwise.
CONVERTIBLE LOAN, WARRANT
AND SECURITY AGREEMENT - Page 3
<PAGE> 4
"UCC" shall mean the Uniform Commercial Code of the State of
Texas as in effect on the date hereof and as amended from time to time
hereafter.
1.2 Index of Other Defined Terms. In addition to the terms defined
above, the following terms shall have the respective meanings given thereto on
the pages indicated below:
<TABLE>
<S> <C>
A
ACT..............................................................................................................14
ACTION...........................................................................................................16
ARTICLES.........................................................................................................16
B
BALANCE SHEET DATE...............................................................................................17
BUSINESS PLAN....................................................................................................20
BYLAWS...........................................................................................................16
C
CERCLA...........................................................................................................19
CODE.............................................................................................................18
COLLATERAL........................................................................................................7
COMPANY...........................................................................................................1
COMPANY SALE......................................................................................................9
CONFIDENTIAL INFORMATION.........................................................................................26
D
DEFAULT..........................................................................................................22
DISCLOSING PARTY.................................................................................................26
DISCLOSURE SCHEDULE..............................................................................................13
DRAWDOWN..........................................................................................................5
DRAWDOWN NOTICE...................................................................................................5
E
EFC...............................................................................................................1
EFFECTIVE DATE....................................................................................................1
F
FINANCIAL STATEMENTS.............................................................................................17
I
INITIAL CONVERSION SHARES.........................................................................................2
INVESTORS RIGHTS AGREEMENT.......................................................................................12
L
LOAN..............................................................................................................1
LOAN AGREEMENT....................................................................................................1
LOAN AMOUNT.......................................................................................................1
M
MATURITY..........................................................................................................7
N
NON-DISCLOSING PARTY.............................................................................................26
NOTE..............................................................................................................5
</TABLE>
CONVERTIBLE LOAN, WARRANT
AND SECURITY AGREEMENT - Page 4
<PAGE> 5
<TABLE>
<S> <C>
O
OUTSTANDING BALANCE...............................................................................................2
P
PLANT FINANCING..................................................................................................22
R
REGISTRABLE SECURITIES............................................................................................9
S
SEC..............................................................................................................22
T
TERMINATION......................................................................................................27
TERMINATION DATE.................................................................................................11
W
WARRANT...........................................................................................................1
</TABLE>
2. LOAN. EFC will loan the Company the Loan Amount subject to the
terms and conditions set forth in this Loan Agreement. The Loan will be
evidenced by a Convertible Secured Promissory Note in substantially the form
attached hereto as Exhibit A (the "NOTE").
2.1. Structure of Loan. EFC will loan the Company the Loan
Amount in several drawdowns (each, a "DRAWDOWN") as described in and subject to
the terms and conditions set forth in this Loan Agreement. The Company may, but
is not obligated to, request and EFC shall fund Drawdowns in amounts equal to
$150,000, subject to satisfaction or waiver of the conditions described in
Section 2.4, provided that the Company may not request a Drawdown more often
than every thirty (30) days. Notwithstanding the foregoing sentence, if the
Company has prepaid any portion of the Outstanding Balance along with accrued
interest pursuant to Section 3, the Company may, but is not obligated to,
request and EFC shall fund a Drawdown in an amount equal to an integer multiple
of $150,000 up to and including an amount equal to the highest Outstanding
Balance at any time prior to such Drawdown, subject to satisfaction or waiver of
the conditions described in Section 2.4, provided that the Company may not
request such a Drawdown in excess of $150,000 more than once during the term of
this Loan Agreement.
2.2. Restrictive Covenant. The Company will not, directly or
indirectly, create, incur, assume, guarantee or otherwise become liable for any
other secured indebtedness unless such secured indebtedness is made by its terms
(or by the terms of any agreement governing such indebtedness) expressly
subordinated to this Loan and the Note. Section 7.6 of the Disclosure Schedule
(as defined below) lists all secured indebtedness of the Company as of the date
hereof and the lender or holder of each such secured indebtedness. Prior to
requesting any Drawdown, the Company shall enter into agreements with each such
lender or holder expressly subordinating such existing secured indebtedness to
this Loan and the Note.
2.3 Drawdown Procedure. The Company may request a Drawdown by
delivering a notice to EFC (a "DRAWDOWN NOTICE") and an Officers' Certificate as
described in
CONVERTIBLE LOAN, WARRANT
AND SECURITY AGREEMENT - Page 5
<PAGE> 6
Section 2.4(c). Within five (5) business days after receipt of the Drawdown
Notice and the Officers' Certificate, EFC shall deliver the funds by wire
transfer to an account designated in the Drawdown Notice.
2.4. Conditions to Drawdowns. The obligation of EFC to fund
each Drawdown is subject to the satisfaction or waiver of the following
conditions, at the time of each such Drawdown:
(a) No Default. The Company shall not be in default
under this Loan Agreement and the Other Transaction Documents, and there shall
not exist any event or circumstance which, with notice or lapse of time or both,
would constitute a default.
(b) Representations and Warranties. The
representations and warranties of the Company contained in this Loan Agreement
and the Other Transaction Documents shall have been true and correct in all
material respects on the date such representations and warranties were made, and
shall continue to be true and correct in all material respect at the time of the
Drawdown.
(c) Officers' Certificate. EFC shall have received
from the Company a certificate signed by two authorized officers of the Company
and any written delegations of authority, if applicable, and dated as of the
date of the Drawdown, certifying that the conditions to the Drawdown set forth
in Sections 2.1, 2.2 and 2.4 have been satisfied in full. Such authorized
officers are the Chief Executive Officer, the President and the Chief Financial
Officer who may each delegate such authority in writing to a Vice-President of
the Company.
(d) Subordination Agreements. The Company shall have
executed agreements with all other lenders or holders of secured indebtedness of
the Company expressly subordinating such secured indebtedness to this Loan and
the Note.
(e) Acceptance Tests. The Company shall have
successfully conducted an Acceptance Test on crankcase used oil. Prior to the
funding of any Drawdown in which the Outstanding Balance will exceed $750,000
after giving effect to such Drawdown, the Company shall have successfully
conducted an Acceptance Test on industrial used oil.
(f) Employment Agreements. The employees listed on
Schedule 2.4(f) shall have executed employment agreements substantially in the
form attached hereto as Exhibit D and such agreements shall be in full force and
effect.
(g) Invention Assignment and Confidentiality
Agreements. Each employee and officer of the Company shall have executed an
Invention Assignment and Confidentiality Agreement substantially in the form
attached hereto as Exhibit E or an employment or consulting agreement containing
substantially similar terms and such agreements shall be in full force and
effect. Each consultant and contractor with access to the Proprietary Assets
shall have executed an agreement mutually acceptable to EFC and the Company and
such agreements shall be in full force and effect.
CONVERTIBLE LOAN, WARRANT
AND SECURITY AGREEMENT - Page 6
<PAGE> 7
(h) Loan Amount. The Outstanding Balance shall be
less than the Loan Amount and after giving effect to such Drawdown the
Outstanding Balance will not exceed the Loan Amount.
3. LOAN TERM; INTEREST; REPAYMENT; PREPAYMENT. The term of the
Loan will begin on the Effective Date and end on June 30, 2000 (the "MATURITY");
subject to earlier maturity or termination at election of EFC or the Company,
respectively, pursuant to Section 5.2 or Section 14.16. Interest on the
Outstanding Balance will accrue at the rate of fifteen percent (15%) per annum,
calculated on the basis of a 360 day year and actual days elapsed, which
interest will accrue from the time of Drawdown to the day prior to repayment. To
the extent not previously converted pursuant to Section 5, the Company shall
repay the Outstanding Balance plus all interest accrued thereon at Maturity. The
Company may elect to prepay any portion of the Outstanding Balance along with
accrued interest without penalty; provided that no prepayment shall be for less
than $150,000 of the Outstanding Balance, unless the Outstanding Balance is less
than $150,000 in which case the prepayment shall not be less than the
Outstanding Balance plus accrued interest. Prepayments shall be applied first to
accrued interest and then to the Outstanding Balance.
4. COLLATERAL.
4.1. Security Interest. This Loan Agreement constitutes a
"security agreement" within the meaning of the UCC. In order to secure payment
and performance of the Secured Obligations, the Company hereby grants, assigns,
transfers, pledges, and sets over to EFC a first-priority security interest in
and Lien on all of the Company's Proprietary Assets, Contracts, Accounts,
Chattel Paper, and investment properties, now owned or hereafter acquired,
wherever located, with all increases to and replacements thereof, and all
Proceeds therefrom (collectively, the "COLLATERAL").
4.2. Care of Collateral. EFC shall have the right, but not the
obligation, to pay any taxes or levies on or with respect to the Collateral,
which payment shall be made for the account of Company and shall constitute part
of the Secured Obligations.
4.3. Financing Statements. At the request of EFC, the Company
will promptly join with EFC in executing such financing statements, continuation
statements, assignments, certificates and other documents with respect to the
Collateral, pursuant to the applicable Uniform Commercial Code and otherwise, as
EFC may request in order to enable EFC to perfect and from time to time to renew
the security interest granted, all in form satisfactory to EFC, and the Company
will pay the costs of filing the same in all public offices where EFC deems such
financing be necessary or desirable.
4.4. Impairment of Collateral. No impairment of, injury to, or
loss or destruction of any of the Collateral shall relieve the Company of any of
the Secured Obligations, except as may be specifically provided otherwise
herein.
4.5. Return of Collateral. Upon Termination and payment in
full of the Outstanding Balance (if not previously converted pursuant to Section
5) and all interest accrued
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AND SECURITY AGREEMENT - Page 7
<PAGE> 8
thereon and any other amounts due hereunder, EFC shall release its security
interest in, and return to the Company all Collateral hereunder within thirty
(30) calendar days of such occurrence and promptly join with the Company in
executing such releases and termination statements with respect to the
Collateral, pursuant to the applicable Uniform Commercial Code and otherwise, as
the Company may request in order to release the security interest granted, all
in form satisfactory to the Company, and the Company will pay the costs of
filing the same.
4.6. Further Assurances. The Company agrees that at any time
and from time to time, at its expense, the Company will promptly execute and
deliver all further instruments and documents, and take all further action that
EFC may request, in order to perfect and protect the security interests granted
or purported to be granted hereby and to enable EFC to exercise and enforce its
rights and remedies hereunder with respect to any Collateral.
4.7. EFC Appointed Attorney-in-Fact. The Company hereby
irrevocably appoints EFC as the Company's attorney-in-fact, with full authority
in the place and stead of the Company and in its name or otherwise, from time to
time in EFC's discretion and without notice to the Company, to take any action
and to execute any instrument which EFC may deem reasonably necessary or
advisable to accomplish the purposes of this Loan Agreement, after failure of
the Company to do so upon reasonable request of EFC, including without
limitation, to receive, endorse and collect all instruments made payable to the
Company representing any interest payment, principal payment or other payment in
respect of the Collateral or any part thereof and to give full discharge for the
same, when and to the extent permitted by this Loan Agreement.
4.8. EFC May Perform. Upon the occurrence and during the
continuance of an Event of Default, EFC may exercise the power of attorney
granted to it in Section 4.7 to (but shall not be obligated and shall have no
liability to any person for failure to) itself perform, or cause performance of,
this Loan Agreement, and the reasonable expenses of EFC incurred in connection
therewith shall be payable by the Company.
4.9. Company's Continuing Rights. Notwithstanding the security
interest in the Collateral granted to and created in favor of EFC under this
Loan Agreement, the Company shall have the right until one or more defaults
shall have occurred, to sell, lease or otherwise dispose of the Collateral and
to collect the Accounts in the ordinary course of the Company's business.
5. CONVERSION SHARES.
5.1. Optional Conversion Upon Maturity or Other Events. Upon
Maturity or Termination (as defined in Section 14.16), if the Mandatory
Conversion Criteria is not satisfied, EFC shall have the option to either (a)
waive repayment of the Outstanding Balance and acquire the Conversion Shares in
exchange for cancellation of the Outstanding Balance and surrender and
cancellation of the Warrant, provided, however, that the Company shall remain
obligated to pay the unpaid accrued interest promptly thereafter, or (b) retain
its right to repayment of the Outstanding Balance and unpaid interest accrued
thereon, retain the Warrant, and waive its right to acquire the Conversion
Shares. In the event of consummation of a Public Offering, EFC may
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AND SECURITY AGREEMENT - Page 8
<PAGE> 9
at any time within thirty (30) days prior to such Public Offering, acquire the
Conversion Shares in exchange for cancellation of the Outstanding Balance and
surrender and cancellation of the Warrant; provided, however, that the Company
shall remain obligated to pay the unpaid accrued interest promptly thereafter.
In the event of the acquisition (by merger, share purchase in one or more
transactions, by sale of all or substantially all the assets of the Company or
otherwise) by any person of more than 49% of the outstanding Common Stock
(excluding outstanding options, warrants and other securities convertible into
or exchangeable for Common Stock) of the Company (a "COMPANY SALE"), EFC may,
prior to such Company Sale, acquire the Conversion Shares in exchange for
cancellation of the Outstanding Balance and surrender and cancellation of the
Warrant; provided, however, that the Company shall remain obligated to pay the
unpaid accrued interest promptly thereafter.
5.2. Optional Acceleration Upon Company Sale. In the event of
consummation of a Company Sale or a Public Offering, in lieu of acquiring the
Conversion Shares, EFC may at any time thereafter, at its option and in its sole
discretion, by written notice to the Company, accelerate repayment of the Note,
in which case the Outstanding Balance and all interest accrued thereon shall be
due and payable immediately. In the event EFC elects such acceleration, if the
proceeds resulting from such Company Sale or Public Offering reflect the
satisfaction of the Mandatory Conversion Criteria, EFC shall be required, in
lieu of receiving payment of the Outstanding Balance, to acquire the Conversion
Shares in exchange for cancellation of the Outstanding Balance and surrender and
cancellation of the Warrant; provided, however, that the Company shall remain
obligated to pay the unpaid accrued interest promptly thereafter.
5.3. Mandatory Conversion. If at Maturity or Termination (as
defined in Section 14.16) the Mandatory Conversion Criteria is satisfied, EFC
shall be required, in lieu of receiving payment of the Outstanding Balance, to
acquire the Conversion Shares in exchange for cancellation of the Outstanding
Balance and surrender and cancellation of the Warrant; provided, however, that
the Company shall remain obligated to pay the unpaid accrued interest promptly
thereafter.
5.4. Exercise of Warrant. In the event, EFC elects to exercise
the Warrant prior to acquisition of any Conversion Shares, upon exercise of the
Warrant, the Company shall reduce the number of Conversion Shares by the number
of shares of Common Stock acquired pursuant to exercise of the Warrant.
5.5. Registration Rights. All of the acquired Conversion
Shares shall be "REGISTRABLE SECURITIES" or such other definition of securities
entitled to registration rights pursuant to the Investor Rights Agreement (as
defined in Section 6.2) and are entitled, subject to the terms and conditions of
that agreement, to all registration rights granted to holders of Registrable
Securities thereunder.
5.6. Reservation of Securities. The Company shall reserve, for
the life of the Loan, such securities as EFC is entitled to receive pursuant to
the acquisition of the Conversion Shares. Prior to the issuance of any equity
securities (or any instrument exercisable for or converted into equity
securities) and whenever otherwise required, the Company will amend its
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AND SECURITY AGREEMENT - Page 9
<PAGE> 10
Articles of Incorporation to ensure that there is a sufficient quantity of such
equity securities (and Common Stock into which such equity securities may be
convertible) that may be acquired as Conversion Shares.
5.7 Adjustment of Conversion Shares. The number of Conversion
Shares is subject to adjustment upon occurrence of the following events:
5.7.1. Adjustment for Stock Splits, Stock Subdivisions or
Combinations of Shares. The number of Conversion Shares shall be proportionally
increased to reflect any stock split or subdivision of the Company's Common
Stock. The number of Conversion Shares shall be proportionally decreased to
reflect any combination or reverse stock split of the Company's Common Stock.
5.7.2. Adjustment for Dividends or Distributions of Stock
or Other Securities or Property. In case the Company shall make or issue, or
shall fix a record date for the determination of eligible holders entitled to
receive, a dividend or other distribution with respect to the Common Stock (or
any shares of stock or other securities represented by the Conversion Shares)
payable in (a) securities of the Company or (b) assets (excluding cash dividends
paid or payable solely out of funds legally available therefor), then, in each
such case, without the payment of additional consideration therefor, the number
of Conversion Shares shall be adjusted as if EFC had acquired the Conversion
Shares on the date hereof and had thereafter, during the period from the date
hereof to and including the date of such acquisition, retained such Conversion
Shares giving effect to all adjustments called for by this Section 5.7.
5.7.3. Reclassification. If the Company, by
reclassification of securities or otherwise, shall change any of the securities
as to which the Conversion Shares exist into the same or a different number of
securities of any other class or classes, the Conversion Shares shall thereafter
consist of such number and kind of securities as would have been issuable as the
result of such change with respect to the securities that represented the
Conversion Shares immediately prior to such reclassification or other change,
all subject to further adjustment as provided in this Section 4. No adjustment
shall be made pursuant to this Section 5.7 upon any conversion or redemption of
the Common Stock which is the subject of Section 5.7.5.
5.7.4. Adjustment for Capital Reorganization or Company
Sale. In case of any capital reorganization of the capital stock of the Company
(other than a combination, reclassification, exchange or subdivision of shares
otherwise provided for herein), or a Company Sale, and in each such case, as a
part of such reorganization or Company Sale, lawful provision shall be made so
that EFC shall thereafter be entitled to acquire the Conversion Shares, during
the period specified herein, the number of shares of stock or other securities
or property of the successor corporation resulting from such reorganization,
merger, consolidation, sale or transfer that a holder of the shares constituting
the Conversion Shares would have been entitled to receive in such
reorganization, consolidation, merger, sale or transfer if the Conversion Shares
had been acquired immediately before such reorganization or Company Sale, all
subject to further adjustment as provided in this Section 5.7. The foregoing
provisions of this Section 5.7.4 shall similarly apply to successive
reorganizations or Company Sales and to the stock or securities of
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AND SECURITY AGREEMENT - Page 10
<PAGE> 11
any other corporation that are at the time receivable upon the acquisition of
the Conversion Shares.
5.7.5 Conversion of Common Stock. In case all or any
portion of the authorized and outstanding shares of Common Stock of the Company
are redeemed or converted or reclassified into other securities or property
pursuant to the Company's Articles of Incorporation or otherwise, or the Common
Stock otherwise ceases to exist, then, in such case, the EFC , upon the
acquisition of the Conversion Shares at any time after the date on which the
Common Stock is so redeemed or converted, reclassified or ceases to exist (the
"TERMINATION DATE"), shall receive, in lieu of the number of shares of Common
Stock that would have been issuable upon such acquisition immediately prior to
the Termination Date, the securities or property that would have been received
if the Conversion Shares had been acquired in full and the Common Stock received
thereupon had been simultaneously converted immediately prior to the Termination
Date, all subject to further adjustment as provided in this Section 5.7.
5.7.6. Adjustment for Issuance of Additional Shares of
Common Stock. Upon issuance by the Company of (1) Common Stock, (2) any right,
option or warrant to acquire Common Stock, (3) any other stock convertible into
Common Stock, or (4) any obligation or any share of stock convertible into or
exchangeable for Common Stock (including the Additional Conversion Shares but
excluding any Conversion Shares issued pursuant to this Section and any Warrant
Shares issued pursuant to Section 4.6 of the Warrant) (in the case of (2), (3)
and (4), collectively, "Common Stock Equivalents"), the number of Conversion
Shares shall be adjusted as follows:
(a) if (i) Common Stock is issued and the consideration
received is (x) other than cash (including personal checks) or other immediately
available funds, or (y) cash (including personal checks) or other immediately
available funds in an amount less than $1.00 per share, or (ii) Common Stock
Equivalents are issued and the exercise, conversion or exchange price per share
of Common Stock is less than $1.00 per share of Common Stock, then the number of
Conversion Shares shall be increased by the following amount:
<TABLE>
<S> <C>
Number of Shares of Number of Conversion Shares Outstanding Prior to Issuance
Common Stock Issued or x ________________________________________________
Issuable Upon Exercise of Common Number of Shares of Common Stock Outstanding
Stock Equivalents (Fully-Diluted) Prior to Issuance
</TABLE>
(b) if (i) Common Stock is issued and the consideration
received is (x) cash (including personal checks) or other immediately available
funds in an amount equal to or greater than $1.00 per share but less than $1.50
per share, or (ii) Common Stock Equivalents are issued and the exercise,
conversion or exchange price per share of Common Stock is equal to or greater
than $1.00 per share but less than $1.50 per share of Common Stock, then the
number of Conversion Shares shall be increased by the following amount:
CONVERTIBLE LOAN, WARRANT
AND SECURITY AGREEMENT - Page 11
<PAGE> 12
<TABLE>
<S> <C> <C>
Number of Shares of Number of Conversion Shares Outstanding Prior to Issuance
Common Stock Issued or x __________________________________________ x 0.50
Issuable Upon Exercise of Common Number of Shares of Common Stock Outstanding
Stock Equivalents (Fully-Diluted) Prior to Issuance
</TABLE>
5.8. Certificate as to Adjustments. In each case of any
adjustment in the number or type of Conversion Shares, the Chief Executive
Officer, President, Chief Financial Officer or Controller of the Company shall
compute such adjustment in accordance with the terms hereof and prepare a
certificate setting forth such adjustment and showing in detail the facts upon
which such adjustment is based. The Company shall promptly send (by facsimile
and by either first class mail, postage prepaid or overnight delivery) a copy of
each such certificate EFC.
6. OTHER TRANSACTION DOCUMENTS.
6.1. Warrant. On the date hereof, the Company shall issue to
EFC the Warrant in the form attached hereto as Exhibit B along with a
certificate signed by two authorized officers of the Company, and dated as of
the date of the Warrant, certifying that the number of shares of Common Stock
EFC is entitled to purchase pursuant to the Warrant is equal to ten percent
(10%) of the number of shares of Common Stock outstanding, Fully-Diluted (except
for Conversion Shares), at the time of issuance of such Warrant. Such authorized
officers are the Chief Executive Officer, the President and the Chief Financial
Officer.
6.2. Investor Rights Agreement. On the date hereof, the
Company shall execute the Investor Rights Agreement in the form attached hereto
as Exhibit C (the "INVESTOR RIGHTS AGREEMENT").
6.3. Note. On the date hereof, the Company shall execute the
Note attached hereto as Exhibit A.
6.4. Employment Agreements. On the date hereof, the Company
shall cause the employees listed on Schedule 2.4(f) to execute employment
agreements substantially in the form attached hereto as Exhibit D.
6.5. Invention Assignment and Confidentiality Agreements. On
the date hereof, the Company shall cause Thomas Murray, Alexander Daspit, and
Martin MacDonald to execute an Invention Assignment and Confidentiality
Agreement substantially in the form attached hereto as Exhibit E. Prior to the
date the Company shall have successfully conducted an Acceptance Test on
crankcase used oil, the Company shall cause each employee and officer of the
Company to execute an Invention Assignment and Confidentiality Agreement
substantially in the form attached hereto as Exhibit E and the Company shall
cause each consultant and contractor with access to the Proprietary Assets to
execute an agreement mutually acceptable to EFC and the Company.
7. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
hereby represents and warrants to EFC that, except as set forth in the schedule
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AND SECURITY AGREEMENT - Page 12
<PAGE> 13
("DISCLOSURE SCHEDULE") attached to this Loan Agreement as Schedule 7 (which
Disclosure Schedule shall be deemed to constitute part of these representations
and warranties), the statements in the following paragraphs of this Section 7
are all true and correct:
7.1. Organization, Good Standing and Qualification. The
Company is a corporation duly organized, validly existing and in good standing
under, and by virtue of, the laws of the State of Colorado and has all requisite
corporate power and authority to own its properties and assets and to carry on
its business as now conducted and as presently proposed to be conducted. The
Company is qualified to do business as a foreign corporation in each
jurisdiction where failure to be so qualified would have a material adverse
effect on its financial condition, business, prospects or operations.
7.2. Capitalization. The authorized capital stock of the
Company consists of the following:
(a) Common Stock. A total of 37,500,000 authorized shares
of Common Stock no par value of which approximately
13,000,000 shares are issued and outstanding.
(b) Options, Warrants, Reserved Shares. The Company has
reserved sufficient shares of its Common Stock for
possible issuance as Conversion Shares. Except for this
Loan Agreement and the Warrant, there are no options,
warrants, conversion privileges or other rights, or
agreements with respect to the issuance thereof,
presently outstanding to purchase any of the capital
stock of the Company. Apart from the exceptions noted in
this Section 7.2, no shares of the Company's outstanding
capital stock, or stock issuable upon exercise or
exchange of any outstanding options or other stock
issuable by the Company, are subject to any rights of
first refusal or other rights to purchase such stock
(whether in favor of Company or any other person),
pursuant to any agreement or commitment of Company.
(d) Outstanding Security Holders. Section 7.2(d) of the
Disclosure Schedule sets forth a complete list of all
outstanding shareholders of record, option holders and
other security holders of the Company as of the Effective
Date.
7.3. Subsidiaries. The Company does not presently own or
control, directly or indirectly, any interest in any other corporation,
partnership, trust, joint venture, association, or other entity.
7.4. Due Authorization; Consents. All corporate action on the
part of the Company, its officers, directors and shareholders has been taken
that is necessary for (a) the authorization, execution and delivery of, and the
performance of all obligations of the Company under this Loan Agreement, (b) the
authorization, execution and delivery of the Other Transaction Documents, (c)
the authorization, issuance, reservation for issuance and delivery of all of the
Conversion Shares and (d) the authorization, issuance, reservation for issuance
and
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AND SECURITY AGREEMENT - Page 13
<PAGE> 14
delivery of all of the equity securities issuable upon exercise of the Warrant.
This Loan Agreement and the Other Transaction Documents each constitute a valid
and binding obligation of the Company enforceable in accordance with its terms,
subject, as to enforcement of remedies, to applicable bankruptcy, insolvency,
moratorium, reorganization and similar laws affecting creditors' rights
generally and to general equitable principles. All consents, approvals and
authorizations of, and registrations, qualifications and filings with, any
federal or state governmental agency, authority or body, or any third party,
required in connection with the execution, delivery and performance of this Loan
Agreement and the Other Transaction Documents and the consummation of the
transactions contemplated hereby and thereby have been obtained.
7.5. Valid Issuance of Stock. The outstanding shares of the
capital stock of Company are duly and validly issued, fully paid and non
assessable, and such shares of such capital stock, and all outstanding options
and other securities of the Company have been issued in full compliance with the
registration and prospectus delivery requirements of the Securities Act of 1933,
as amended (the "ACT"), and the registration and qualification requirements of
all applicable state securities laws, or in compliance with applicable
exemptions therefrom, and all other provisions of applicable federal and state
securities laws, including, without limitation, anti-fraud provisions.
7.6. Liabilities. The Company has no material (as defined in
Section 7.9) indebtedness for borrowed money that the Company has directly or
indirectly created, incurred, assumed, or guaranteed, or with respect to which
the Company has otherwise become directly or indirectly liable other than such
indebtedness as disclosed in the Financial Statements (as defined in Section
7.17).
7.7. Title to Properties and Assets. The Company has good and
marketable title to its properties and assets (including, without limitation,
all of the Collateral) held in each case subject to no Lien of any kind except
for Liens for taxes that are not yet due and payable or, in the case of leased
real property, easements and other rights or restrictions of record that do not
materially impair the use or value of such property to the Company. With respect
to the property and assets it leases, the Company is in compliance with such
leases and, to the best of the Company's knowledge, the Company holds valid
leasehold interests in such assets free of any liens, encumbrances, security
interests or claims of any party other than the lessors of such property and
assets.
7.8. Status of Proprietary Assets.
(a) Ownership. The Company has full title and
ownership of, or has license to, all Proprietary Assets necessary to enable it
to carry on its business as now conducted and as presently proposed to be
conducted without any conflict with or infringement of the rights of others. To
the best of the Company's knowledge, Section 7.8 of the Disclosure Schedule
lists all of the material Proprietary Assets. To the best of the Company's
knowledge, no third party has any ownership right, title, interest, claim in or
Lien on any of the Company's Proprietary Assets and the Company has taken, and
in the future the Company will use its best efforts to take, all steps
reasonably necessary to preserve its legal rights in, and the secrecy of, all
its
CONVERTIBLE LOAN, WARRANT
AND SECURITY AGREEMENT - Page 14
<PAGE> 15
Proprietary Assets, except those for which disclosure is required for legitimate
business or legal reasons.
(b) Licenses; Other Agreements. The Company
has not granted, and, to the best of the Company's knowledge, there are not
outstanding, any options, licenses or agreements of any kind relating to any
Proprietary Asset of Company, nor is Company bound by or a party to any option,
license or agreement of any kind with respect to any of its Proprietary Assets.
The Company is not obligated to pay any royalties or other payments to third
parties with respect to the marketing, sale, distribution, manufacture, license
or use of any Proprietary Asset or any other property or rights.
(c) No Infringement. To the best of the
Company's knowledge, the Company has not violated or infringed, and is not
currently violating or infringing, and the Company has not received any
communications alleging that the Company (or any of its employees or
consultants) has violated or infringed or, by conducting its business as
proposed, would violate or infringe, any Proprietary Asset of any other person
or entity.
(d) No Breach by Employee. The Company is not
aware that any employee or consultant of the Company is obligated under any
agreement (including licenses, covenants or commitments of any nature) or
subject to any judgment, decree or order of any court or administrative agency,
or any other restriction that would interfere with the use of his or her best
efforts to carry out his or her duties for the Company or to promote the
interests of the Company or that would conflict with the Company's business as
proposed to be conducted. The carrying on of the Company's business by the
employees and contractors of the Company and the conduct of the Company's
business as presently proposed, will not, to the best of the Company's
knowledge, conflict with or result in a breach of the terms, conditions or
provisions of, or constitute a default under, any contract, covenant or
instrument under which any of such employees or contractors or the Company is
now obligated. The Company does not believe it is or will be necessary to
utilize any inventions of any employees of or consultants to the Company (or
persons the Company currently intends to hire) made prior to their employment by
the Company. To the best of the Company's knowledge, at no time during the
conception of or reduction of any of the Company's Proprietary Assets to
practice was any developer, inventor or other contributor to such patents
operating under any grants from any governmental entity or agency or private
source, performing research sponsored by any governmental entity or agency or
private source or subject to any employment agreement or invention assignment or
nondisclosure agreement or other obligation with any third party that could
adversely affect the Company's rights in such Proprietary Assets.
7.9. Material Contracts and Obligations. All agreements,
contracts, leases, licenses, instruments, commitments (oral or written),
indebtedness, liabilities and other obligations to which the Company is a party
or by which it is bound, excluding nondisclosure agreements and noncompetition
agreements in favor of the Company, that are (a) material to the conduct and
operations of its business and properties; (b) involve any of the officers,
directors, employees or shareholders of the Company; or (c) obligate the Company
to share, license or develop any product or technology are listed in Section 7.9
of the Disclosure Schedule and have been made available for inspection by EFC
and its counsel. For purposes of this Section 7.9 and
CONVERTIBLE LOAN, WARRANT
AND SECURITY AGREEMENT - Page 15
<PAGE> 16
Section 7.6, "material" shall mean any agreement, contract, indebtedness,
liability or other obligation either: (x) having an aggregate value, cost or
amount in excess of $20,000, or (y) not terminable by the Company upon thirty
days notice.
7.10. Litigation. There is no action, suit, proceeding, claim,
arbitration or investigation ("ACTION") pending (or, to the best of the
Company's knowledge, currently threatened) against the Company, its activities,
properties or assets or, to the best of the Company's knowledge, against any
officer, director or employee of the Company in connection with such officer's,
director's or employee's relationship with, or actions taken on behalf of the
Company. To the best of the Company's knowledge, there is no factual or legal
basis for any such Action that might result, individually or in the aggregate,
in any material adverse change in the business, properties, assets, financial
condition, affairs or prospects of the Company. By way of example but not by way
of limitation, there are no Actions pending or, to the best of the Company's
knowledge, threatened (or any basis therefor known to the Company) relating to
the prior employment of any of the Company's employees or consultants, their use
in connection with the Company's business of any information, technology or
techniques allegedly proprietary to any of their former employers, clients or
other parties, or their obligations under any agreements with prior employers,
clients or other parties. The Company is not a party to or subject to the
provisions of any order, writ, injunction, judgment or decree of any court or
government agency or instrumentality and there is no Action by the Company
currently pending or which the Company intends to initiate.
7.11. Governmental Consents. All consents, approvals, orders,
authorizations or registrations, qualifications, designations, declarations or
filings with any US., federal or state governmental authority on the part of
Company required in connection with the consummation of the transactions
contemplated herein shall have been obtained prior to and be effective as of the
Effective Date.
7.12. Compliance with Other Instruments. The Company is not
in, nor will the conduct of its business as proposed to be conducted result in,
any violation, breach or default of any term of the Company's Articles of
Incorporation (the "ARTICLES") or the Company's bylaws (the "BYLAWS") or in any
material respect of any term or provision of any mortgage, indenture, contract,
agreement or instrument to which the Company is a party or by which it may be
bound, or of any provision of any foreign or domestic state or federal judgment,
decree, order, statute, rule or regulation applicable to or binding upon the
Company. The execution, delivery and performance of and compliance with this
Loan Agreement and the consummation of the transactions contemplated hereby will
not result in any such violation or default, or be in conflict with or
constitute, with or without the passage of time or the giving of notice or both,
either a default under the Articles or Bylaws, or any agreement or contract of
the Company, or, to the best of the Company's knowledge, a violation of any
statutes, laws, regulations or orders, or an event which results in the creation
of any lien, charge or encumbrance upon any asset of the Company.
7.13. Disclosure. No representation or warranty by the Company
in this Loan Agreement or in any statement or certificate signed by any officer
of the Company furnished or to be furnished to EFC pursuant to this Loan
Agreement contains or will contain any untrue
CONVERTIBLE LOAN, WARRANT
AND SECURITY AGREEMENT - Page 16
<PAGE> 17
statement of a material fact or omits or will omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances in which they are made, not misleading.
7.14. Reserved.
7.15. Reserved.
7.16. Insurance. The Company has obtained, or will obtain
(within 15 days of the Effective Date) and will maintain, fire and casualty
insurance policies with extended coverage, sufficient in amount (subject to
reasonable deductibles) to allow it to replace any of its properties that might
be damaged or destroyed.
7.17. Financial Statements. Section 7.17 of the Disclosure
Schedule sets forth an audited balance sheet of the Company dated September 30,
1997, an audited income statement and statement of changes in cash flows of the
Company for its fiscal year ended September 30, 1997; and an unaudited balance
sheet of the Company dated March 31, 1998 (the "BALANCE SHEET DATE"), an
unaudited income statement of the Company for the period ended March 31, 1998
(all such financial statements being collectively referred to herein as the
"FINANCIAL STATEMENTS"). Such Financial Statements (a) are in accordance with
the books and records of the Company, (b) are true, correct and complete and
present fairly the financial condition of the Company at the date or dates
therein indicated and the results of operations for the period or periods
therein specified, and (c) have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis, except as to the
unaudited financial statements, for the omission of notes thereto and normal
year-end audit adjustments. Specifically, but not by way of limitation, the
respective balance sheets of the Financial Statements disclose all of the
Company's material debts, liabilities and obligations of any nature, whether due
or to become due, as of their respective dates (including, without limitation,
absolute liabilities, accrued liabilities, and contingent liabilities) to the
extent such debts, liabilities and obligations are required to be disclosed in
accordance with generally accepted accounting principles. The Company has good
and marketable title to all assets set forth on the balance sheets of the
Financial Statements, except for such assets as have been spent, sold or
transferred in the ordinary course of business since their respective dates.
7.18. Certain Actions. Except as set forth on Section 7.18 of
the Disclosure Schedule, since the Balance Sheet Date, the Company has not: (a)
declared or paid any dividends, or authorized or made any distribution upon or
with respect to any class or series of its capital stock; (b) incurred any
indebtedness for money borrowed or incurred any other liabilities individually
in excess of $20,000 or in excess of $30,000 in the aggregate; (c) made any
loans or advances to any person (other than employees, officers, directors,
shareholders, or contractors) in excess of $5,000; (d) made any loans or
advances to any employee, officer, director, shareholder or contractor, other
than ordinary advances for travel expenses; (e) sold, exchanged or otherwise
disposed of any material assets or rights other than the sale of inventory in
the ordinary course of its business; or (f) entered into any transactions,
individually in excess of $20,000, with any of its officers, directors or
employees or any entity controlled by any of such individuals.
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7.19. Activities Since Balance Sheet Date. Since the
Balance Sheet Date, there has not been:
(a) any damage, destruction or loss, whether or not
covered by insurance, materially and adversely
affecting the assets, properties, financial
condition, operating results, prospects or business
of the Company (as presently conducted and as
presently proposed to be conducted);
(b) any waiver by the Company of a valuable right or of
a material debt owed to it;
(c) any satisfaction or discharge of any lien, claim or
encumbrance or payment of any obligation by the
Company, except such a satisfaction, discharge or
payment made in the ordinary course of business that
is not material to the assets, properties, financial
condition, operating results or business of the
Company;
(d) any material change or amendment to a material
contract or arrangement by which the Company or any
of its assets or properties is bound or subject,
except for changes or amendments which are expressly
provided for or disclosed in this Loan Agreement;
(e) any material change in any compensation arrangement
or agreement with any present or prospective
employee, contractor or director not approved by the
Company's Board of Directors; or
(f) to the Company's knowledge, any other event or
condition of any character which would materially and
adversely affect the assets, properties, financial
condition, operating results or business of the
Company.
7.20. Tax Matters. The provisions for taxes in the
Financial Statements are sufficient for the payment of all accrued and unpaid
federal, state, county and local taxes of the Company, whether or not assessed
or disputed as of the date of each such balance sheet. There have been no
examinations or audits of any tax returns or reports by any applicable federal,
state or local governmental agency. The Company has duly filed all federal,
state, county and local tax returns required to have been filed by it and paid
all taxes shown to be due on such returns. There are in effect no waivers of
applicable statutes of limitations with respect to taxes for any year.
7.21. Tax Elections. The Company has not elected pursuant
to the Internal Revenue Code of 1986, as amended (the "CODE"), to be treated as
an "S" corporation or a collapsible corporation pursuant to Section 341(f) or
Section 1362(a) of the Code, nor has it made any other elections pursuant to the
Code (other than elections which relate solely to matters of accounting,
depreciation or amortization) which would have a material affect on the Company,
its financial condition, its business as presently conducted or presently
proposed to be conducted or any of its properties or material assets.
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7.22. Invention Assignment and Confidentiality Agreement. When
required by Article 6, each employee and officer of the Company shall have
entered into and executed an Invention Assignment and Confidentiality Agreement
substantially in the form attached to this Loan Agreement as Exhibit E or an
employment or consulting agreement containing substantially similar terms and
such agreement shall be in full force and effect. When required by Article 6,
each consultant and contractor with access to the Proprietary Assets shall have
entered into and executed an agreement mutually acceptable to EFC and the
Company and such agreement shall be in full force and effect.
7.23. Environmental Matters. During the period that the
Company has owned or leased its properties and facilities, (a) there have been
no disposals, releases or threatened releases of Hazardous Materials (as defined
below) on, from or under such properties or facilities, (b) neither the Company
nor, to the Company's knowledge, any third party, has used, generated,
manufactured or stored on, under or about such properties or facilities or
transported to or from such properties or facilities any Hazardous Materials.
The Company has no knowledge of any presence, disposals, releases or threatened
releases of Hazardous Materials on, from or under any of such properties or
facilities, which may have occurred prior to the Company having taken possession
of any of such properties or facilities. For purposes of this Loan Agreement,
the terms "disposal", "release", and "threatened release" shall have the
definitions assigned thereto by the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, 42 U.S. Section 9601 et seq., as amended
("CERCLA"). For the purposes of this Section, "Hazardous Materials" shall mean
any hazardous or toxic substance, material or waste which is regulated under, or
defined as a "hazardous substance", "pollutant", "contaminant", "toxic
chemical", "hazardous material", "toxic substance", or "hazardous chemical"
under (1) CERCLA; (2) the Emergency Planning and Community Right-to-Know Act, 42
U.S.C. Section 11001 et seq.; (3) the Hazardous Materials Transportation Act, 49
U.S.C. Section 1801, et seq.; (4) the Toxic Substances Control Act, 15 U.S.C.
Section 2601 et seq.; (5) the Occupational Safety and Health Act of 1970, 29
U.S.C. Section 651 et seq.; (6) regulations promulgated under any of the above
statutes; or (7) any applicable state or local statute, ordinance, rule, or
regulation that has a scope or purpose similar to those statutes identified
above.
7.24. Interested Party Transactions. Except as set forth on
Section 7.24 of the Disclosure Schedule, to the best knowledge of the Company,
no officer or director of the Company or any of its Affiliates or "associates"
(as defined in Rule 405 promulgated under the Securities Act of 1933, as
amended) of any such person has had, either directly or indirectly, a material
interest in: (a) any person or entity which purchases from or sells, licenses or
furnishes to the Company any goods, property, technology, intellectual or other
property rights or services; or (b) any contract or agreement to which the
Company is a party or by which it may be bound or affected.
7.25. Stock Restriction Agreements. Except as set forth on
Section 7.25 of the Disclosure Schedule, each person who, pursuant to any
benefit, bonus or incentive plan of the Company, holds any currently outstanding
shares of common stock or other securities of the Company or any option, warrant
or right to acquire such shares or other securities, has entered into or is
otherwise bound by, an agreement granting the Company (a) the right to
repurchase the
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shares for the original purchase price, or to cancel the option, warrant or
right, in the event the holder's employment or services with the Company
terminate for any reason, subject to release of such repurchase or cancellation
right on terms and conditions specified by the Board of Directors of the
Company, and (b) a right of first refusal with respect to all such shares. The
Company has furnished to EFC true and complete copies of the forms of all such
stock restriction agreements.
7.26. Business Plan. The business plan, including certain
supplementary materials regarding its business, operations, and the used oil
rerefining industry, prepared by the Company and delivered to EFC at or prior to
the date hereof (the "BUSINESS PLAN") was prepared in good faith and is not
materially misleading.
8. REPRESENTATIONS AND WARRANTIES OF EFC. EFC represents and
warrants to the Company as follows:
8.1. Investigation; Economic Risk. EFC acknowledges that it
has had an opportunity to discuss the business, affairs and current prospects of
the Company with its officers. EFC further acknowledges having had access to
information about the Company that it has requested. EFC acknowledges that it is
able to fend for itself in the transactions contemplated by this Loan Agreement
and has the ability to bear the economic risks of its investment pursuant to
this Loan Agreement.
8.2. Purchase for Own Account. The Warrant and the securities
issuable upon exercise or conversion thereof, the Note, and the Conversion
Shares will be acquired for EFC's own account, not as a nominee or agent, and
not with a view to or in connection with the sale or distribution of any part
thereof.
8.3. Exempt from Registration; Restricted Securities. EFC
understands that the sale of the Note, the Warrant and the securities issuable
upon exercise or conversion thereof, and the Conversion Shares will not be
registered under the Act on the ground that the sale provided for in this Loan
Agreement is exempt from registration under of the Act, and that the reliance of
the Company on such exemption is predicated in part on EFC's representations set
forth in this Loan Agreement. EFC understands that the Warrant and the
securities issuable upon exercise or conversion thereof, the Note, and the
Conversion Shares are restricted securities within the meaning of Rule 144 under
the Act, and must be held indefinitely unless they are subsequently registered
or an exemption from such registration is available.
8.4 Due Authorization; Consents. All corporate action on the
part of EFC, its officers, directors and shareholders has been taken that is
necessary for (a) the authorization, execution and delivery of, and the
performance of all obligations of EFC under this Loan Agreement and (b) the
authorization, execution and delivery of the Other Transaction Documents. This
Loan Agreement and the Other Transaction Documents each constitute a valid and
binding obligation of EFC enforceable in accordance with its terms, subject, as
to enforcement of remedies, to applicable bankruptcy, insolvency, moratorium,
reorganization and similar laws affecting creditors' rights generally and to
general equitable principles. All consents, approvals and authorizations of, and
registrations, qualifications and filings with, any
CONVERTIBLE LOAN, WARRANT
AND SECURITY AGREEMENT - Page 20
<PAGE> 21
federal or state governmental agency, authority or body, or any third party,
required in connection with the execution, delivery and performance of this Loan
Agreement and the Other Transaction Documents and the consummation of the
transactions contemplated hereby and thereby have been obtained.
9. COVENANTS OF THE COMPANY
The Company covenants to EFC as follows:
9.1. Use of Loan Proceeds. The Company will use the proceeds
from the Loan consistent with the Business Plan.
9.2 Implementation of Business Plan. The Company shall use its
best efforts to take all necessary actions to implement and carry out the
Business Plan.
9.3. No Further Liens. The Company will maintain good title
to, or the right to use, the Collateral, as the case may be, free and clear of
any Liens or restrictions on the transfer thereof except for Liens created
pursuant to this Loan Agreement or approved by EFC in writing. In any case, the
Liens granted to EFC hereby shall have priority over any other Liens or
restrictions as to the Collateral. The Borrower will defend such title against
the claims and demands of all persons and will not grant, create or permit to
attach or exist any mortgage, pledge, lien, levy, charge or other encumbrance
on, of or against any of the Collateral.
9.5. Place of Business. The Company shall maintain and keep
its principal place of business and its chief executive office at 1467 LeMay,
Suite 111, Carrollton, Texas 75007 and at no other location without prior
written notice to EFC. The Borrower shall maintain and keep its records
concerning the Collateral at such address and at no other location without prior
written notice to EFC.
9.6. Inspection Rights. EFC and any person EFC may designate
shall have the right to review all books and records, reports, accounts and
other financial documents of the Company pertaining to the Collateral and to
copy the same and to make excerpts therefrom, all at such reasonable times and
as often as EFC may reasonably request, upon prior written notice to the
Company, so long as such review and copying does not unreasonably interfere with
the business of the Company and EFC agrees to keep confidential, and not
disclose, except as may be required by law or court order, all information
obtained during such review of a confidential or proprietary nature (and not
otherwise known to EFC through other sources or publicly known).
9.7 Registration Rights Disclosure. Within thirty (30) days
after the date hereof, the Company shall deliver to EFC a certificate signed by
the Chief Executive Officer or the President of the Company certifying that the
schedule attached thereto contains a true and correct list of each person or
entity with rights (including piggyback registration rights) to have any
securities of the Company registered with the United States Securities and
Exchange Commission ("SEC") or any other governmental authority together with a
brief description of each such rights for each listed person or entity.
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10. DEFAULT. For purposes of this Loan Agreement, the term
"DEFAULT" shall include any of the following:
(a) The Company's breach of any of the covenants set forth in
Section 9 of this Loan Agreement;
(b) The representations and warranties of the Company
contained in this Loan Agreement and the Other Transaction Documents shall not
have been true and correct in all material respects on the date such
representations and warranties were made and on the date of each Drawdown;
(c) The Company's indebtedness for borrowed money is
accelerated as a result of a default or breach of or under any agreement for
such borrowed money, including but not limited to loan agreements, or material
breach under any real property lease agreements and capital equipment lease
agreements, by which Company is bound or obligated;
(d) The Company breaches any other agreement with EFC or EFC's
Affiliates; and
(e) The filing of a petition in bankruptcy or under any
similar insolvency law by the Company, the making of an assignment for the
benefit of creditors, or if any voluntary petition in bankruptcy or under any
similar insolvency law is filed against the Company and such petition is not
dismissed within sixty (60) days after the filing thereof.
Except for a Default pursuant to Section 10(d), upon each such Default,
the Company shall have thirty (30) days to cure such Default after receipt of
written notice of Default from EFC specifying the nature of the Company's
Default. If the Company is unable to cure its Default within such thirty (30)
day period, EFC may, at its option, accelerate repayment of the Outstanding
Balance in which case the Outstanding Balance and all interest accrued thereon
shall be due and payable immediately. Upon any Default of the Company hereunder,
EFC will have full recourse against the Company and may pursue any legal or
equitable remedies that has available to it. EFC shall have a full right of
offset for any amounts due upon such a Default against any amounts (including
royalties, if any) payable by EFC to the Company.
11. STANDSTILL AGREEMENT. Unless otherwise agreed to in writing by
the Company and except as otherwise provided for herein, neither EFC nor any
Affiliate of EFC will acquire a beneficial interest in excess of 33 1/3% of the
Common Stock prior to the later of (a) a Public Offering or (b) the termination
of this Loan Agreement pursuant to Section 14.16 hereof.
12. EFC's PARTICIPATION IN PLANT FINANCING. In the event the
Company obtains third party financing of one or more rerefineries, whether by
debt or equity financing ("PLANT FINANCING"), except for senior debt financing,
EFC (directly or through its Affiliates) will have the right, but not the
obligation, to invest at least $5,000,000 in one or both of the first two Plant
Financings concurrently with and at the same valuation and upon the same terms
as for the investor(s) in such Plant Financing(s).
13. FEES AND EXPENSES.
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13.1. Closing Fee. At the closing of the initial Drawdown, the
Company shall pay to EFC a closing fee equal to $30,000 in the form of a
cashier's or certified or check or by wire transfer in immediately available
funds to an account designated by EFC.
13.2 Expenses. The Company shall pay all of EFC's legal and
professional expenses associated with the transactions hereunder which were
incurred after March 12, 1998 and prior to the date hereof.
14. MISCELLANEOUS.
14.1. Governing Law. This Loan Agreement shall be governed in
all respects by and construed in accordance with the laws of the State of
Connecticut without regard to provisions regarding choice of laws.
14.2. Survival. The representations, warranties, covenants and
agreements made herein shall survive any investigation made by any party hereto
and the closing of the transactions contemplated hereby.
14.3. Successors and Assigns. Except as otherwise expressly
provided herein, the provisions hereof shall inure to the benefit of, and be
binding upon, the successors, assigns, heirs, executors and administrators of
the parties hereto whose rights or obligations hereunder are affected by such
amendments. This Loan Agreement and the rights and obligations therein may not
be assigned by EFC without the written consent of the Company except to an
Affiliate of EFC. This Loan Agreement and the rights and obligations therein may
not be assigned by the Company without the written consent of EFC.
14.4. Entire Agreement. This Loan Agreement, the Other
Transaction Documents and the Exhibits and Schedules hereto and thereto (all of
which are hereby expressly incorporated herein by this reference) constitute the
entire understanding and agreement between the parties with regard to the
subjects hereof and thereof; provided, however, that nothing in this Loan
Agreement shall be deemed to terminate or supersede the provisions of any
confidentiality and nondisclosure agreements executed by the parties hereto
prior to the date hereof, which agreements shall continue in full force and
effect until terminated in accordance with their respective terms.
14.5. Notices. Except as may be otherwise provided herein, all
notices, requests, waivers and other communications made pursuant to this Loan
Agreement shall be in writing and shall be conclusively deemed to have been duly
given (a) when hand delivered to the other party; (b) when received when sent by
facsimile at the address and number set forth below; (c) three business days
after deposit in the U.S. mail with first class or certified mail receipt
requested postage prepaid and addressed to the other party as set forth below;
or (d) the next business day after deposit with a national overnight delivery
service, postage prepaid, addressed to the parties as set forth below with
next-business-day delivery guaranteed, provided that the sending party receives
a confirmation of delivery from the delivery service provider.
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To EFC:
HSB Engineering Finance Corporation
One State Street
Hartford, CT 06102
Attn: John McManus
Tel: (860) 722-5444
Fax: (860) 722-5710
with copies to:
Gibson, Dunn & Crutcher LLP
333 South Grand Avenue
Los Angeles, CA 90071-3197
Attn: Bradford P. Weirick, Esq.
Tel: (213) 229-7765
Fax: (213) 229-7520
To the Company:
Probex Corporation
1467 LeMay, Suite 111
Carrollton, Texas 75007
Attn: Thomas Murray, Chief Executive Officer
Tel: (972) 466-1555
Fax: (972) 466-1556
with copies to:
Jenkens & Gilchrist, P.C.
1445 Ross Ave., Suite 3200
Dallas, Texas 75202-2799
Attn: Robert W. Dockery, Esq.
Tel: (214) 855-4163
Fax: (214) 855-4300
Each person making a communication hereunder by facsimile
shall promptly confirm by telephone to the person to whom such communication was
addressed each communication made by it by facsimile pursuant hereto but the
absence of such confirmation shall not affect the validity of any such
communication. A party may change or supplement the addresses given above, or
designate additional addresses, for purposes of this Section 14.5 by giving the
other party written notice of the new address in the manner set forth above.
14.6. Amendments. Any term of this Loan Agreement may be
amended only with the written consent of Company and EFC.
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14.7. Delays or Omissions. No delay or omission to exercise
any right, power or remedy accruing to the Company or to EFC, upon any breach or
default of any party hereto under this Loan Agreement, shall impair any such
right, power or remedy of the Company, or EFC nor shall it be construed to be a
waiver of any such breach or default, or an acquiescence therein, or of any
similar breach of default thereafter occurring; nor shall any waiver of any
other breach or default theretofore or thereafter occurring. Any waiver, permit,
consent or approval of any kind or character on the part of the Company or EFC
of any breach of default under this Loan Agreement or any waiver on the part of
the Company or EFC of any provisions or conditions of this Loan Agreement, must
be in writing and shall be effective only to the extent specifically set forth
in such writing. All remedies, either under this Loan Agreement, or by law or
otherwise afforded to the Company or EFC shall be cumulative and not
alternative.
14.8. Legal Fees. In the event of any action at law, suit in
equity or arbitration proceeding in relation to this Loan Agreement or any
securities of the Company issued or to be issued, the prevailing party, shall be
paid by the other party a reasonable sum for attorney's fees and expenses for
such prevailing party.
14.9. Finder's Fees. Each party (a) represents and warrants to
the other party hereto that it has retained no finder or broker in connection
with the transactions contemplated by this Loan Agreement, and (b) hereby agrees
to indemnify and to hold harmless the other party hereto from and against any
liability for any commission or compensation in the nature of a finder's fee of
any broker or other person or firm (and the costs and expenses of defending
against such liability or asserted liability) for which the indemnifying party
or any of its employees or representatives are responsible.
14.10. Titles and Subtitles. The titles of the paragraphs and
subparagraphs of this Loan Agreement are for convenience of reference only and
are not to be considered in construing this Loan Agreement.
14.11. Counterparts. This Loan Agreement may be executed in
any number of counterparts, each of which shall be an original, but all of which
together shall constitute one instrument.
14.12. Severability. Should any provision of this Loan
Agreement be determined to be illegal or unenforceable, such determination shall
not affect the remaining provisions of this Loan Agreement.
14.13. Protection of Confidential Information. Confidential or
proprietary information disclosed by either party under this Loan Agreement, as
well as the terms of this Loan Agreement and EFC's investment in the Company
(subject to Sections 14.14 below), shall be considered confidential information
(the "CONFIDENTIAL INFORMATION") and shall not be disclosed by the Company or
EFC to any third party. The Company or EFC shall immediately notify the other
party of any information that comes to its attention which might indicate that
there has been a loss of confidentiality with respect to the Confidential
Information. In the event that the Company or EFC is requested or becomes
legally compelled (by statute or regulation or by oral questions,
interrogatories, request for information or documents, subpoena, criminal or
CONVERTIBLE LOAN, WARRANT
AND SECURITY AGREEMENT - Page 25
<PAGE> 26
civil investigative demand or similar process, including without limitation, in
connection with any public or private offering of the Company's capital stock)
to disclose any of the Confidential Information, such party (the "DISCLOSING
PARTY") shall provide the other party (the "NON-DISCLOSING PARTY") with prompt
written notice of that fact so that the other party may seek (with the
cooperation and reasonable efforts of the Disclosing Party) a protective order,
confidential treatment or other appropriate remedy. In such event, the
Disclosing Party shall furnish only that portion of the Confidential Information
which is legally required and shall exercise reasonable efforts to obtain
reliable assurance that confidential treatment will be accorded the Confidential
Information to the extent reasonably requested by the Non-Disclosing Party. The
provisions of this Section 14.13 shall be in addition to, and not in
substitution for, the provisions of any separate nondisclosure agreement
executed by the parties hereto with respect to the transaction contemplated
hereby or such other information as may be protected by separate nondisclosure
agreements.
14.14 Disclosure of Terms; Press Releases. Notwithstanding the
provisions of Section 14.13 above, from and after the Closing, the Company may
disclose the existence and amount of this Loan Agreement and EFC's investment in
the Company. The Company shall not issue any press release or make any other
announcement to the general public or in any professional or trade publication
regarding this Loan Agreement or any of the terms hereof without the prior
consent of EFC, which consent shall not be unreasonably withheld.
Notwithstanding the foregoing, EFC may disclose its investment in the Company to
third parties or to the public at its discretion, and the Company shall have the
right to disclose to third parties any such information disclosed by EFC in a
press release or other public announcement. If the Company or EFC determines
that any disclosure not otherwise authorized by this Loan Agreement is required
by law or regulation, then the provisions of Section 14.13 regarding disclosure
of Confidential Information by a Disclosing Party shall govern.
14.15 Dispute Resolution. The parties agree to negotiate in
good faith to resolve any dispute between them regarding this Loan Agreement. If
the negotiations do not resolve the dispute to the reasonable satisfaction of
both parties, then each party shall nominate one senior officer of the rank of
Vice President or higher as its representative. These representatives shall,
within thirty (30) days of a written request by either party to call such a
meeting, meet in person and alone (except for one assistant for each party) and
shall attempt in good faith to resolve the dispute. If the disputes cannot be
resolved by such senior managers in such meeting, the parties agree that they
shall, if requested in writing by either party, meet within thirty (30) days
after such written notification for one day with an impartial mediator and
consider dispute resolution alternatives other than litigation. If an
alternative method of dispute resolution is not agreed upon within thirty (30)
days after the one day mediation, either party may begin litigation proceedings.
This procedure shall be a prerequisite before taking any additional action
hereunder.
14.16 Term and Termination. The term of this Loan Agreement
shall begin on the Effective Date and shall terminate on the date of Maturity,
provided that this Loan Agreement may be earlier terminated by the Company
("TERMINATION") five (5) business days after receipt by EFC of notice of the
Company's election to terminate this Loan Agreement, provided that the Company
has either (i) repaid the Outstanding Balance (unless converted by EFC pursuant
to Section 5.1) and all unpaid interest accrued thereon or (ii) has satisfied
the
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Mandatory Conversion Criteria on the date of EFC's receipt of such notice,
in which case this Loan Agreement may be terminated upon (a) issuance of the
Conversion Shares in exchange for cancellation of the Outstanding Balance and
surrender and cancellation of the Warrant and (b) repayment of all unpaid
interest accrued on the Outstanding Balance. Upon receipt of notice of the
Company's election to terminate this Loan Agreement pursuant to clause (ii)
above, interest on the Outstanding Balance shall cease to accrue, EFC shall
surrender the Warrant within five (5) business days thereafter for cancellation,
whereupon the Company shall issue the Conversion Shares within three (3)
business days thereafter. Upon any Termination hereunder, EFC shall return the
Collateral and release its security interests pursuant to Section 4.5.
14.17 Binding Effect. Notwithstanding the provisions above,
neither this Loan Agreement nor any of the Other Transaction Documents shall be
binding upon either party until the Company successfully conducts an Acceptance
Test on crankcase used oil, except for the definitions; the requirements to
execute and deliver the Other Transaction Documents and the certificates
described herein, as appropriate; the standstill agreement set forth in Section
11; and the provisions of Sections 14.1 to 14.15.
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IN WITNESS WHEREOF, the parties have executed this Convertible
Loan, Warrant and Security Agreement to be effective as of the date first above
written.
HSB ENGINEERING FINANCE CORPORATION,
A DELAWARE CORPORATION
By: /s/ JOHN McMANUS
------------------------------------------------
Name: John McManus
------------------------------------------
Title: VP and Counsel
----------------------------------------
PROBEX CORPORATION,
A COLORADO CORPORATION
By: /s/ THOMAS G. MURRAY
------------------------------------------------
Name: Thomas G. Murray
------------------------------------------
Title: CEO
----------------------------------------
By: /s/ ALEX D. PASPIT
------------------------------------------------
Name: Alex D. Paspit
------------------------------------------
Title: President
----------------------------------------
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AND SECURITY AGREEMENT - Page 28
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EXHIBIT A
CONVERTIBLE SECURED PROMISSORY NOTE
$1,500,000 Dallas, Texas
June 30, 1998
FOR VALUE RECEIVED, Probex Corporation ("Debtor"), promises to pay to the order
of HSB Engineering Finance Corporation ("EFC"), the principal sum of one million
five hundred thousand and no/100 Dollars ($1,500,000.00) or such lesser amount
as is advanced to the Debtor from time to time and to pay interest on the unpaid
outstanding principal of this Convertible Secured Promissory Note (this "Note"),
in accordance with Section 2 of this Note. This Note is delivered in connection
with that certain Convertible Loan, Warrant and Security Agreement of even date
(the "Loan Agreement") between Debtor and EFC.
1. Maturity. To the extent not previously cancelled in accordance with
the Loan Agreement, the Company shall repay the unpaid principal outstanding
balance and unpaid accrued interest on June 30, 2000 (the "Maturity Date");
provided, however, that earlier repayment may be required pursuant to the Loan
Agreement. All payments received shall be applied first against costs of
collection (if any), then against accrued and unpaid interest, then against
principal.
2. Interest. Interest shall begin to accrue on the unpaid principal
balance of this Note, if any, commencing on the date EFC transfers funds to
Debtor pursuant to this Note and the Loan Agreement (the "Drawdown") and
continuing until the day prior to repayment of this Note in full at the rate of
fifteen percent (15%) per annum calculated on the basis of a 360 day year and
actual days elapsed.
3. Prepayment; Acceleration. Debtor may elect to prepay any portion of
the unpaid principal balance and all accrued interest without penalty; provided,
that no prepayment shall be for less than $150,000 of the unpaid principal
balance, unless the unpaid principal balance is less than $150,000 in which case
the prepayment shall not be less than the unpaid principal balance plus accrued
interest. All prepayments shall be applied in the order provided in Section 1.
The unpaid principal balance of this Note is subject to acceleration as set
forth in the Loan Agreement. Following any such acceleration, in addition to
EFC's rights with respect to the collateral described in the Loan Agreement, EFC
will have full recourse against any tangible or intangible assets of Debtor, and
may pursue any legal or equitable remedies that are available to it.
4. Default. Debtor will be deemed to be in default hereunder and the
unpaid principal balance of this Note, together with all accrued interest
thereon, will become immediately due and payable on any Default under this Note
or the Loan Agreement.
<PAGE> 30
5. Restrictive Covenant. Debtor will not, directly or indirectly,
create, assume, guarantee or otherwise become liable for any other secured
indebtedness unless such secured indebtedness is made by its terms (or on terms
governing such secured indebtedness) expressly subordinated to this Note.
6. Miscellaneous.
(a) Debtor hereby waives presentment, demand, protest, notice of
dishonor, diligence and all other notices, any release or discharge arising from
any extension of time, discharge of a prior party, release of any or all of any
security given from time to time for this Note, or other cause of release or
discharge other than actual payment in full hereof.
(b) EFC shall not be deemed, by any act or omission, to have waived
any of its rights or remedies hereunder unless such waiver is in writing and
signed by EFC and then only to the extent specifically set forth in such
writing. A waiver with reference to one event shall not be construed as
continuing or as a bar to or waiver of any right or remedy as to a subsequent
event. No delay or omission of EFC to exercise any right, whether before or
after a default hereunder, shall impair any such right or shall be construed to
be a waiver of any right or default, and the acceptance at any time by EFC of
any past-due amount shall not be deemed to be a waiver of the right to require
prompt payment when due of any other amounts then or thereafter due and payable.
(c) Time is of the essence hereof. Upon any default hereunder, EFC
may exercise all rights and remedies provided for herein and by law or equity,
including, but not limited to, the right to immediate payment in full of this
Note.
(d) The remedies of EFC as provided herein, or any one or more of
them, or in law or in equity, shall be cumulative and concurrent, and may be
pursued singularly, successively or together at EFC's sole discretion, and may
be exercised as often as occasion therefor shall occur.
(e) It is expressly agreed that if this Note is referred to an
attorney or if suit is brought to collect or interpret this Note or any part
hereof or to enforce or protect any rights conferred upon EFC by this Note or
any other document evidencing or securing this Note, then Debtor promises and
agrees to pay all costs, including attorneys' fees, incurred by EFC.
(f) If any provisions of this Note would require Debtor to pay
interest hereon at a rate exceeding the highest rate allowed by applicable law,
Debtor shall instead pay interest under this Note at the highest rate permitted
by applicable law.
(g) This Note shall be governed by and construed in accordance with
and the laws of the State of Connecticut applicable to contracts wholly made and
performed in the State of Connecticut.
2
CONVERTIBLE SECURED
PROMISSORY NOTE
<PAGE> 31
(h) Notwithstanding the foregoing provisions, pursuant to Section
14.17 of the Loan Agreement, this Note shall not be an enforceable obligation of
Debtor until Debtor successfully conducts an Acceptance Test (as defined in the
Loan Agreement) on crankcase used oil, in which event this Note shall be deemed
to have been effective and binding as of the date hereof.
[SIGNATURE ON NEXT PAGE]
3
CONVERTIBLE SECURED
PROMISSORY NOTE
<PAGE> 32
IN WITNESS WHEREOF, Debtor has executed this Convertible Secured
Promissory Note as of the date first above written.
PROBEX CORPORATION,
A COLORADO CORPORATION
By:
------------------------------------------------
Name:
-----------------------------------------
Title:
-----------------------------------------
By:
------------------------------------------------
Name:
-----------------------------------------
Title:
-----------------------------------------
4
CONVERTIBLE SECURED
PROMISSORY NOTE
<PAGE> 1
EXHIBIT 10.4
PROBEX CORPORATION
INVESTOR RIGHTS AGREEMENT
This Investor Rights Agreement (this "AGREEMENT") is made and entered
into as of June 30, 1998 by and among Probex Corporation, a Colorado corporation
(the "COMPANY"), the stockholders signatory hereto, and HSB Engineering Finance
Corporation, a Delaware corporation (the "INVESTOR").
R E C I T A L S
A. The Investor has agreed to loan the Company (the "LOAN") up to the
aggregate amount of one million five hundred thousand dollars ($1,500,000) and
has agreed to acquire from the Company, and the Company has agreed to issue to
the Investor, a Warrant to acquire shares of the Company's Common Stock, no par
value (the "COMMON STOCK"), terms and conditions set forth in that certain
Convertible Loan, Warrant and Security Agreement, dated of even date herewith,
by and between the Company and the Investor (the "LOAN AGREEMENT") and the
Convertible Secured Promissory Note, dated of even date herewith (the "NOTE"),
by the Company.
B. Pursuant to the Loan Agreement, Investor has the right to acquire
additional shares of Common Stock (as defined in the Loan Agreement, the
"CONVERSION SHARES") upon the cancellation of the outstanding principal balance
on the Note and the surrender and cancellation of the Warrant.
C. The Loan Agreement provides that the Investor shall be granted
certain rights, as more fully set forth herein.
D. Capitalized terms not otherwise defined herein shall have the
meanings given such terms in the Loan Agreement.
NOW, THEREFORE, in consideration of the foregoing recitals, the mutual
promises hereinafter set forth, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. INFORMATION RIGHTS.
1.1 Information and Inspection Rights. The Company covenants and agrees
that, commencing on the date of this Agreement, for so long as the Investor
holds the Note, the Warrant or any Conversion Shares, the Company will deliver
to the Investor: (a) audited annual financial statements within 90 days after
the end of each fiscal year, (b) unaudited quarterly financial statements within
45 days of the end of each fiscal quarter; (c) an annual budget for the
following calendar year within 30 days prior to the end of each calendar year;
(d) such other financial statements as are prepared for the Company's internal
use, for the use of the Company's
<PAGE> 2
Board of Directors (the "BOARD"), or for public filing and (e) upon the written
request by the Investor, such other information as the Investor shall reasonably
request. The Company further covenants and agrees that, commencing on the date
of this Agreement, for so long as the Investor holds the Note, the Warrant or
any Conversion Shares, the Investor shall have standard inspection rights. These
information and inspection rights shall terminate upon consummation of the
Public Offering (as defined in the Loan Agreement) or upon the commencement of
the filing of periodic reports pursuant to the Securities Exchange Act of 1934,
as amended. Following the Public Offering, the Company shall deliver to the
Investor copies of the Company's 10-K's, 10-Q's, 8-K's and Annual Reports to
Shareholders promptly after such documents are filed with the SEC (as defined
below).
2. VOTING AGREEMENT.
2.1 Board Representation. So long as the Investor, together with its
Affiliates (as defined in the Loan Agreement), in the aggregate, holds Common
Stock representing (or has the right at any time in the future to acquire under
the Warrant or the Loan Agreement shares of Common Stock which, together with
any Common Stock owned by Investor, represents) at least 5% of the outstanding
Common Stock of the Company, Investor will be entitled to elect members (the
"REPRESENTATIVE(S)") of the Board and all committees thereof. The number of such
Representatives (the "SEATS") shall be the minimum number as is necessary to
equal or exceed twenty percent (20%) of the total number of voting members of
the Board or committee thereof, as applicable; and, in any event, as least one
Representative shall be elected as a member of the Board and all committees
thereof so long as the Investor is entitled to elect any Representatives as
provided above. The Investor shall nominate at least two nominees for each Seat
at least fourteen (14) days prior to such nominee's election to the Board. For
each Seat, the Company shall designate which of the two nominees shall be
elected. Upon such designation or, if at the end of such fourteen (14) day
period the Company shall have failed to designate a nominee to a Seat, upon the
Investor's designation of one of the two nominees for each Seat, the Company
shall take, or cause to be taken, all actions within its power to cause the
Representative(s) so designated to be elected to the Board, including
recommending to the stockholders of the Company that they vote for the election
to the Board of the individual or individuals designated by the Investor.
Each stockholder signatory hereto shall take all actions necessary to
vote all shares of stock entitled to vote thereon owned or held of record by
such stockholder at any annual or special meeting at which one or more directors
are elected in favor of the election as directors of those individuals
designated as the Representatives of the Investor. Each stockholder signatory
hereto shall take all actions by written consents in lieu of any such meeting
necessary to cause the election as director of those individuals designated as
Representatives of the Investors. Except as otherwise permitted in this Section
2.1, no stockholder signatory hereto shall take any action to remove any
Representative from office as director without Cause. Any Representative may be
removed as director for Cause (as defined below) at any time by the affirmative
vote of the holders of at least a majority of the outstanding shares entitled to
vote thereon. "CAUSE", for purposes of this Article 2 only, shall mean the
commission by a Representative of a felony which in the opinion of the majority
of the directors is injurious to the business reputation of the Company or the
commission by a Representative of an act constituting the reckless disregard of
his duties to the Company, bad faith, gross negligence, willful misconduct or
fraud. The removal of any Representative as director
2
INVESTOR RIGHTS AGREEMENT
<PAGE> 3
for Cause shall not prejudice the right of the Investors who nominated such
Representative to nominate pursuant to this Agreement a substitute director to
fill the vacancy created by such removal. Any Representative previously removed
as a director for Cause shall not be eligible thereafter to serve as a director
of the Company. If a Representative, as a result of death, disability,
resignation, removal (with or without Cause) or otherwise, cannot serve on the
Board, the Investors shall nominate an individual to fill such vacancy. Upon the
nomination of a Representative pursuant to this Section 2.1 to fill such
vacancy, if, under applicable law, such vacancy can be filled by the remaining
directors, then each director shall elect or appoint such Representative to the
Board. If, under applicable law, such vacancy cannot be filled by the remaining
directors, such director shall take all action necessary to convene, as promptly
as practicable, an annual or special meeting of the stockholders at which the
stockholders signatory hereto shall vote all shares entitled to vote thereon
owned or held of record by such stockholder to elect such Representative to the
Board.
The Company acknowledges that the Investor will likely have, from time
to time, information that may be of interest to the Company ("INFORMATION")
regarding a wide variety of matters including, by way of example only, (1)
Investor's technologies, plans and services, and plans and strategies relating
thereto, (2) current and future investments Investor has made, may make, may
consider or may become aware of with respect to other companies and other
technologies, products and services, including, without limitation,
technologies, products and services that may be competitive with the Company's,
and (3) developments with respect to the technologies, products and services,
and plans and strategies relating thereto, of other companies, including,
without limitation, companies that may be competitive with the Company. The
Company recognizes that a portion of such Information may be of interest to the
Company. Such Information may or may not be known by the Representative. The
Company, as a material part of the consideration for this Agreement, agrees that
Investor and its Representative shall have no duty to disclose any Information
to the Company or permit the Company to participate in any projects or
investments based on any Information, or to otherwise take advantage of any
opportunity that may be of interest to the Company if it were aware of such
Information, and hereby waives, to the extent permitted by law, any claim based
on the corporate opportunity doctrine or otherwise that could limit Investor's
ability to pursue opportunities based on such Information or that would require
Investor or Representative to disclose any such Information to the Company or
offer any opportunity relating thereto to the Company.
The Company shall, to the fullest extent permitted under applicable law
and the Company's articles of incorporation and bylaws, indemnify and hold
harmless, all of the directors, including each Representative, against any costs
or expenses (including reasonable attorneys' fees), judgments, fines, losses,
claims, damages and liabilities incurred in connection with, and amounts paid in
settlement of, any claim, action, suit, proceeding or investigation, whether
civil, criminal, administrative or investigative and wherever asserted, brought
or filed, arising out of or pertaining to any acts or omissions or alleged acts
or omissions by them in their capacities as members of the Board or any
committee thereof. The Company shall purchase or maintain in effect, if
available, directors' and officers' liability insurance covering all of the
directors, including the Representatives, on terms reasonably acceptable to the
Representatives, provided that the Company shall not be obligated to pay more
than $10,000 for the initial annual premium.
3
INVESTOR RIGHTS AGREEMENT
<PAGE> 4
2.2. Actions by the Board of Directors.
(a) Each transaction, or series of related transactions, to
which the Company will be a party and which is material to the Company taken as
a whole, shall require the approval of the Board in the manner specified in this
Section 2.2. Except as otherwise provided in Section 2.2(b), all actions of the
Board and committees thereof shall require the affirmative vote of the majority
of the directors present at a duly convened meeting of such Board or committee
thereof at which a quorum is present (or in lieu of a meeting, by the unanimous
written consent of the members of such Board or committee thereof); provided,
however, that in the event there is a vacancy on such Board or committee thereof
and an individual is nominated to fill such vacancy, the first order of business
shall be to fill such vacancy.
(b) Notwithstanding the fact that no vote may be required, or
that a lesser percentage vote may be specified by law, by the articles of
incorporation, the bylaws or otherwise, except as provided in subsection
2.2(b)(vii), so long as the Note remains outstanding, the Company shall not take
any action without the affirmative vote of at least one of the Representative
directors with respect to the below listed transactions (individually, a
"SIGNIFICANT TRANSACTION") provided, however, that, upon discharge and
cancellation of the Note, the Company may undertake a Significant Transaction
with the affirmative vote of a majority of the directors unless a Representative
director and at least one other director, who is not a Representative director
and not an employee or officer (or affiliate, associate, or relative of any such
employees or officers) of the Company, votes against such Significant
Transaction:
(i) any merger or consolidation involving the Company
(other than transactions involving the merger or consolidation
of a subsidiary with or into the Company or with or into a
subsidiary);
(ii) any sale, lease, exchange, transfer or other
disposition, directly or indirectly, any single transaction or
series of related transactions of all or substantially all of
the assets of the Company to or with any person other than
into or with a subsidiary of the Company;
(iii) any increase or reduction of, or change in, the
Company's authorized stock or the creation of any additional
class of capital stock of the Company;
(iv) any material amendment to or modification or
repeal of any provisions of the Company's articles of
incorporation, or the Company's bylaws or this Agreement;
(v) the dissolution of the Company or the adoption of
a plan of liquidation of the Company;
(vi) any action by the Company to commence any suit,
case, proceeding or other action (A) under any existing or
future law of any jurisdiction relating to bankruptcy,
insolvency, reorganization, or relief of debtors or seeking to
have an order for relief entered with respect to the Company
or seeking to adjudicate the Company a bankrupt or insolvent
or seeking reorganization,
4
INVESTOR RIGHTS AGREEMENT
<PAGE> 5
arrangement, adjustment, winding-up, liquidation, dissolution,
composition or other relief with respect to the Company or (B)
seeking appointment of a receiver, trustee, custodian or
other similar official for the Company or making a general
assignment for the benefit of the creditors of the Company;
and
(vii) until the earlier of termination of the Loan
Agreement or repayment, discharge and cancellation of the
Note, the approval of execution of any Material Contract (as
defined below).
(c) Material Contract. A "MATERIAL CONTRACT" shall mean the
following contracts to which the Company is a party: (i) any contract for the
lease of personal property to or from any other party providing for lease
payments in excess of $100,000 per annum; (ii) any contract for the purchase of
supplies, products or other personal property, or for the receipt of services,
the performance of which will result in a loss to the Company that would have a
material adverse effect or involve consideration in excess of $100,000; (iii)
any contract (including any license or sublicense of any intellectual property)
under which it has (a) created, incurred, assumed, or guaranteed any
indebtedness for borrowed money, or any capitalized lease obligation, in excess
of $100,000, except such indebtedness for which the proceeds shall be used to
repay, discharge and cancel the Note, or (b) imposed a lien on any of its
assets, tangible or intangible, which lien secures indebtedness outstanding in
an amount in excess of $100,000 or (c) guaranteed the financial obligation of
another party; (iv) any contract with affiliates of the Company other than
affiliates controlled by the Company; (v) any profit sharing, stock option,
stock purchase, stock appreciation, deferred compensation or other plan or
arrangement for the benefit of its current or former directors, officers and
employees requiring cash expenditures by the Company in excess of $100,000; (vi)
any collective bargaining agreement; (vii) any contract for the employment of
any individual on a full-time, part-time, consulting or other basis providing
annual compensation in excess of $100,000 and any contract with any director or
officer of the Company; (viii) any contract under which it has advanced or
loaned any amount to any of its directors, officers or employees, other than
advances for expenses of the Company incurred in the ordinary course of
business; (ix) any contract (including any license or sublicense of any
intellectual property) under which the consequences of a default or termination
would have a material adverse effect; (x) any contract with a customer for the
provision of the Company's products or services under which the Company has
received in excess of $100,000 during any twelve-month period; (xi) any contract
for the purchase, sale, license or sublicense of intellectual property the
performance of which involves consideration in excess of $100,000 per year;
(xii) any joint venture contract or arrangement involving a sharing of profits
or expenses; (xiii) any contract limiting the freedom of the Company to compete
in any line of business or in any geographic area or with any other party; or
(xiv) any contract the performance of which involves consideration in excess of
$100,000 per year.
3. REGISTRATION RIGHTS.
3.1 Definitions. For purposes of this Section 3:
(a) Registration. The terms "REGISTER," "REGISTERED," and
"REGISTRATION" refer to a registration effected by preparing and filing a
registration statement in compliance with the
5
INVESTOR RIGHTS AGREEMENT
<PAGE> 6
Securities Act of 1933, as amended, (the "SECURITIES ACT"), and the declaration
or ordering of effectiveness of such registration statement
(b) Registrable Securities. The term "REGISTRABLE SECURITIES"
means: (1) any Common Stock of the Company issued or to be issued (A) under the
Loan Agreement, (B) pursuant to conversion of the Warrant and (C) pursuant to
the Right of Participation or Right of Maintenance (as defined below), (2) any
shares of Common Stock of the Company issued (or issuable upon the conversion or
exercise of any warrant, right or other security) as a dividend or other
distribution with respect to, or in exchange for or in replacement of, any
shares of Common Stock and the other securities described in clause (1) of this
subsection (b) and (3) any other Common Stock of the Company owned or hereafter
acquired by the Investor. Notwithstanding the foregoing, "REGISTRABLE
SECURITIES" shall exclude any Registrable Securities sold by a person in a
transaction in which rights under this Section 3 are not assigned in accordance
with this Agreement or any Registrable Securities sold in a public offering,
whether sold pursuant to Rule 144 promulgated under the Securities Act, or in a
registered offering, or otherwise.
(c) Registrable Securities Then Outstanding. The number of
shares of "REGISTRABLE SECURITIES THEN OUTSTANDING" shall mean the number of
shares of Common Stock of the Company that are Registrable Securities and are
then issued and outstanding.
(d) Holder. For purposes of this Section 3, the term "HOLDER"
means any person signatory hereto owning of record Registrable Securities that
have not been sold to the public or pursuant to Rule 144 promulgated under the
Securities Act or any permitted assignee of record of such Registrable
Securities to whom rights under this Section 3 have been duly assigned in
accordance with this Agreement.
(e) SEC. The term "SEC" or "COMMISSION" means the U.S.
Securities and Exchange Commission.
3.2. Requested Registration.
(a) Requested Registration. If, after the date hereof, at any
time after the Company's firm commitment underwritten public offering of the
Company's Common Stock pursuant to a registration statement filed with the SEC
(the "PUBLIC OFFERING"), the Company shall receive from any Holder a written
request that the Company effect any registration, qualification or compliance
with respect to all or a part of the Registrable Securities that were issued
pursuant to conversion of the Warrant or issued pursuant to the Initial
Conversion Shares as defined in of the Loan Agreement (the "DEMAND REGISTRABLE
SECURITIES"), the Company will as soon as practicable, use its diligent best
efforts to effect such registration, qualification and compliance (including,
without limitation, the execution of an undertaking to file post-effective
amendments, appropriate qualification under the applicable blue sky or other
state securities laws and appropriate compliance with applicable regulations
issued under the Act and any other governmental requirements or regulations) as
may be so requested and as would permit or facilitate the sale and distribution
of all or such portion of the Demand Registrable Securities of such Holder(s) as
are specified in such request. Without limiting the generality of the foregoing,
the Company shall file a registration statement covering the Demand Registrable
Securities so
6
INVESTOR RIGHTS AGREEMENT
<PAGE> 7
requested to be registered as soon as practicable, but in any event within
forty-five (45) days after receipt of the request or requests of the Holders.
(b) Underwriting. If the Holders intend to distribute the
Demand Registrable Securities covered by their request by means of an
underwriting, they shall so advise the Company and shall designate the
underwriter or underwriters to be employed in connection therewith (who shall be
selected by the majority in interest of the Holders and who shall be subject to
the Company's right of reasonable approval) as a part of their request made
pursuant to Section 3.2(a). In such event, the right of any Holder to
registration pursuant to this Section 3.2 shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Demand Registrable Securities in the underwriting (unless otherwise mutually
agreed by a majority in interest of the Holders and such Holder) to the extent
provided herein. The Company shall (together with all Holders proposing to
distribute their securities through such underwriting) enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by a majority in interest of the Holders.
Notwithstanding any other provision of this Section 3.2, if the underwriter
advises the Holders in writing that marketing factors require a limitation of
the number of shares to be underwritten, the securities of the Company (other
than Demand Registrable Securities) held by officers or directors and by other
shareholders shall be excluded from such registration to the extent so required
by such limitation and if a limitation of the number of shares is still
required, then the Holders shall so advise all Holders of Demand Registrable
Securities that would otherwise be registered and underwritten pursuant hereto,
and the number of shares included in the registration and underwriting shall be
allocated among the Holders of Demand Registrable Securities requesting
registration in proportion, as nearly as practicable, to the total number of
Demand Registrable Securities held by such Holders at the time of filing of the
registration statement and requested to be included in the registration;
provided, however, that in each such case at least twenty-five percent (25%) of
the Demand Registrable Securities requested to be included in such registration
by the Holders shall be so included.
(c) Limitations. Notwithstanding the foregoing provisions of
this Section 3.2, the Holder's right to request registration of Demand
Registrable Securities under this Section 3.2 shall be subject to the following
limitations:
(1) The Company shall not be obligated to take any
action to effect any such registration, qualification or compliance pursuant to
this Section 3.2 after the Company has effected two (2) registrations,
qualifications or compliances pursuant to requests under this Section 3.2. A
registration, qualification or compliance shall not be deemed "effected" for
purpose of this Section 3.2 (i) unless it has become effective and is maintained
effective until all Demand Registrable Securities are sold thereunder, (ii) if,
after it has become effective, such registration is interfered with by any stop
order, injunction or other order or requirement of the SEC or any other
governmental agency, authority or body for any reason other than a material
misrepresentation or omission by the Holders of Demand Registrable Securities
included therein, or (iii) if the conditions to closing specified in the
purchase or underwriting agreement entered into in connection with such
registration are not satisfied other than by reason of some act or omission by
any of the Holders of Demand Registrable Securities included therein;
7
INVESTOR RIGHTS AGREEMENT
<PAGE> 8
(2) The Company shall not be obligated to effect any
registration hereunder in any particular jurisdiction in which the Company would
be required to qualify to do business in effecting such registration.
(3) The Company shall not be obligated to effect a
registration hereunder during the 180 day period beginning on the effective date
of the Company's Public Offering unless the underwriters managing the Public
Offering otherwise agree.
3.3 Piggyback Registrations. The Company shall notify all
Holders of Registrable Securities in writing at least thirty (30) days prior to
filing any registration statement under the Securities Act for purposes of
effecting a public offering of securities of the Company (including, but not
limited to, registration statements relating to secondary offerings of
securities of the Company), and will afford each such Holder an opportunity to
include in such registration statement all or any part of the Registrable
Securities then held by such Holder. Each Holder desiring to include in any such
registration statement all or any part of the Registrable Securities held by
such Holder shall, within twenty (20) days after receipt of the above-described
notice from the Company, so notify the Company in writing, and in such notice
shall inform the Company of the number of Registrable Securities such Holder
wishes to include in such registration statement. If a Holder decides not to
include all of its Registrable Securities in any registration statement
thereafter filed by the Company, such Holder shall nevertheless continue to have
the right to include any Registrable Securities in any subsequent registration
statement or registration statements as may be filed by the Company with respect
to offerings of its securities, all upon the terms and conditions set forth
herein. Except as otherwise provided herein, there shall be no limit on the
number of times the Holders may request registration of Registrable Securities
under this Section 3.3.
(a) Underwriting. If a registration statement under which the
Company gives notice under this Section 3.3 is for an underwritten offering,
then the Company shall so advise the Holders of Registrable Securities. In such
event, the right of any such Holder's Registrable Securities to be included in a
registration pursuant to this Section 3.3 shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their Registrable Securities through such
underwriting shall enter into an underwriting agreement in customary form with
the managing underwriter or underwriters selected for such underwriting
(including a market stand-off agreement of up to 180 days if required by such
underwriter or underwriters). Notwithstanding any other provision of this
Agreement, if the managing underwriter(s) determine(s) in good faith that
marketing factors require a limitation of the number of shares to be
underwritten, then the managing underwriter(s) may exclude up to all Registrable
Shares that are in excess of 15% of the aggregate number of shares to be
included in such offering (including the Registrable Shares) from the
registration and the underwriting, and the number of shares that may be included
in the registration and the underwriting shall be allocated, first to the
Company, and second, to each of the Holders requesting inclusion of their
Registrable Securities in such registration statement on a pro rata basis based
on the total number of Registrable Securities then held by each such Holder;
provided, however, that the right of the underwriter(s) to exclude shares
(including Registrable Securities) from the registration and underwriting as
described above shall be restricted so that all shares that are not Registrable
Securities and are held by any other person, including, without limitation, any
person who is an
8
INVESTOR RIGHTS AGREEMENT
<PAGE> 9
employee, officer or director of the Company (or any subsidiary of the Company),
shall first be excluded from such registration and underwriting before any
Registrable Securities are so excluded. If any Holder disapproves of the terms
of any such underwriting, such Holder may elect to withdraw therefrom by written
notice to the Company and the underwriter(s), delivered at least ten (10)
business days prior to the effective date of the registration statement. Any
Registrable Securities excluded or withdrawn from such underwriting shall be
excluded and withdrawn from the registration. For any Holder that is a
partnership, the Holder and the partners and retired partners of such Holder, or
the estates and family members of any such partners and retired partners and any
trusts for the benefit of any of the foregoing persons, and for any Holder that
is a corporation, the Holder and all corporations that are affiliates of such
Holder, shall be deemed to be a single "Holder," and any pro rata reduction with
respect to such Holder shall be based upon the aggregate amount of shares
carrying registration rights owned by all entities and individuals included in
such Holder, as defined in this sentence.
3.4 Obligations of the Company. Whenever required to effect the
registration of any Registrable Securities under this Agreement the Company
shall, as expeditiously as reasonably possible:
(a) Registration Statement. Prepare and file with the SEC a
registration statement with respect to such Registrable Securities and use its
best efforts to cause such registration statement to become effective, provided,
however, that the Company shall not be required to keep any such registration
statement effective for more than ninety (90) days.
(b) Amendments and Supplements. Prepare and file with the SEC
such amendments and supplements to such registration statement and the
prospectus used in connection with such registration statement as may be
necessary to comply with the provisions of the Securities Act with respect to
the disposition of all securities covered by such registration statement.
(c) Prospectuses. Furnish to the Holders such number of copies
of a prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the disposition of the Registrable
Securities owned by them that are included in such registration.
(d) Blue Sky. Use its best efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holders, provided that the Company shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a general consent
to service of process in any such states or jurisdictions.
(e) Underwriting. In the event of any underwritten public
offering, enter into and perform its obligations under an underwriting agreement
in usual and customary form, with the managing underwriter(s) of such offering.
Each Holder participating in such underwriting shall also enter into and perform
its obligations under such an agreement.
(f) Notification. Notify each Holder of Registrable Securities
covered by such registration statement at any time when a prospectus relating
thereto is required to be
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delivered under the Securities Act of the happening of any event as a result of
which the prospectus included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances then existing.
(g) Opinion and Comfort Letter. Furnish, at the request of any
Holder requesting registration of Registrable Securities, on the date that such
Registrable Securities are delivered to the underwriter(s) for sale, if such
securities are being sold through underwriters, or, if such securities are not
being sold through underwriters, on the date that the registration statement
with respect to such securities becomes effective, (i) an opinion, dated as of
such date, of the counsel representing the Company for the purposes of such
registration, in form and substance as is customarily given to underwriters in
an underwritten public offering and reasonably satisfactory to a majority in
interest of the Holders requesting registration, addressed to the underwriters,
if any, and to the Holders requesting registration of Registrable Securities and
(ii) a "comfort" letter dated as of such date, from the independent certified
public accountants of the Company, in form and substance as is customarily given
by independent certified public accountants to underwriters in an underwritten
public offering and reasonably satisfactory to a majority in interest of the
Holders requesting registration, addressed to the underwriters, if any, and to
the Holders requesting registration of Registrable Securities.
3.5 Furnish Information. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to Sections 3.2 or 3.3
that the selling Holders shall furnish to the Company such information regarding
themselves, the Registrable Securities held by them, and the intended method of
disposition of such securities as shall be required to timely effect the
Registration of their Registrable Securities.
3.6 Indemnification. In the event any Registrable Securities are
included in a registration statement under Sections 3.2 or 3.3:
(a) By the Company. To the extent permitted by law; the
Company will indemnify and hold harmless each Holder, the partners, officers and
directors of each Holder, any underwriter (as determined in the Securities Act)
for such Holder and each person, if any, who controls such Holder or underwriter
within the meaning of the Securities Act or the Securities Exchange Act of 1934,
as amended, (the "1934 ACT"), against any losses, claims, damages, or
Liabilities (joint or several) to which they may become subject under the
Securities Act, the 1934 Act or other federal or state law, insofar as such
losses, claims, damages, or liabilities (or actions in respect thereof) arise
out of or are based upon any of the following statements, omissions or
violations (collectively a "VIOLATION"):
(i) any untrue statement or alleged untrue statement
of a material fact contained in such registration statement,
including any preliminary prospectus or final prospectus
contained therein or any amendments or supplements thereto;
(ii) the omission or alleged omission to state
therein a material fact required to be stated therein, or
necessary to make the statements therein not misleading, or
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(iii) any violation or alleged violation by the
Company of the Securities Act, the 1934 Act, any federal or
state securities law or any rule or regulation promulgated
under the Securities Act, the 1934 Act or any federal or state
securities law in connection with the offering covered by such
registration statement;
and the Company will reimburse each such Holder, partner, officer or director,
underwriter or controlling person for any legal or other expenses reasonably
incurred by them, as incurred, in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, however, that the
indemnity agreement contained in this subsection 3.6(a) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of the Company (which consent
shall not be unreasonably withheld), nor shall the Company be liable in any such
case for any such loss, claim, damage, liability or action to the extent that it
arises out of or is based upon a Violation which occurs in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by such Holder, partner, officer, director, underwriter
or controlling person of such Holder.
(b) By Selling Holders. To the extent permitted by law, each
selling Holder will indemnify and hold harmless the Company, each of its
directors, each of its officers who have signed the registration statement, each
person, if any, who controls the Company within the meaning of the Securities
Act, any underwriter and any other Holder selling securities under such
registration statement or any of such other Holder's partners, directors or
officers or any person who controls such Holder within the meaning of the
Securities Act or the 1934 Act, against any losses, claims, damages or
liabilities (joint or several) to which the Company or any such director,
officer, controlling person, underwriter or other such Holder, partner or
director, officer or controlling person of such other Holder may become subject
under the Securities Act, the 1934 Act or other federal or state law, insofar as
such losses, claims, damages or liabilities (or actions in respect thereto)
arise out of or are based upon any Violation, in each case to the extent (and
only to the extent) that such Violation occurs in reliance upon and in
conformity with written information furnished by such Holder expressly for use
in connection with such registration; and each such Holder will reimburse any
legal or other expenses reasonably incurred by the Company or any such director,
officer, controlling person, underwriter or other Holder, partner, officer,
director or controlling person of such other Holder in connection with
investigating or defending any such loss, claim, damage, liability or action:
provided, however, that the indemnity agreement contained in this subsection
3.6(b) shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the consent
of the Holder, which consent shall not be unreasonably withheld; and provided,
further, that the total amounts payable in indemnity by a Holder under this
Section 3.6(b) in respect of any Violation shall not exceed the net proceeds
received by such Holder in the registered offering out of which such Violation
arises.
(c) Notice. Promptly after receipt by an indemnified party
under this Section 3.6 of notice of the commencement of any action (including
any governmental action), such indemnified party will, if a claim in respect
thereof is to be made against any indemnifying party under this Section 3.6,
deliver to the indemnifying party a written notice of the commencement thereof
and the indemnifying party shall have the right to participate in, and, to
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INVESTOR RIGHTS AGREEMENT
<PAGE> 12
the extent the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume the defense thereof with counsel
mutually satisfactory to the parties; provided, however, that an indemnified
party shall have the right to retain its own counsel, with the fees and expenses
to be paid by the indemnifying party, if representation of such indemnified
party by the counsel retained by the indemnifying party would be inappropriate
due to actual or potential conflict of interests between such indemnified party
and any other party represented by such counsel in such proceeding. The failure
to deliver written notice to the indemnifying party within a reasonable time of
the commencement of any such action shall relieve such indemnifying party of
liability to the indemnified party under this Section 3.6 to the extent the
indemnifying party is prejudiced as a result thereof, but the omission so to
deliver written notice to the indemnified party will not relieve it of any
liability that it may have to any indemnified party otherwise than under this
Section 3.6.
(d) Defect Eliminated in Final Prospectus. The foregoing
indemnity agreements of the Company and Holders are subject to the condition
that, insofar as they relate to any Violation made in a preliminary prospectus
but eliminated or remedied in the amended prospectus on file with the SEC at the
time the registration statement in question becomes effective or the amended
prospectus filed with the SEC pursuant to SEC Rule 424(b) (the "FINAL
PROSPECTUS"), such indemnity agreement shall not inure to the benefit of any
person if a copy of the Final Prospectus was timely furnished to the indemnified
party and was not furnished to the person asserting the loss, liability, claim
or damage at or prior to the time such action is required by the Securities Act.
(e) Contribution. In order to provide for just and equitable
contribution to joint liability under the Securities Act in any case in which
either (i) any Holder exercising rights under this Agreement, or any controlling
person of any such Holder, makes a claim for indemnification pursuant to this
Section 3.6 but it is judicially determined (by the entry of a final judgment or
decree by a court of competent jurisdiction and the expiration of time to appeal
or the denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that this Section 3.6 provides
for indemnification in such case, or (ii) contribution under the Securities Act
may be required on the part of any such selling Holder or any such controlling
person in circumstances for which indemnification is provided under this Section
3.6; then, and in each such case, the Company and such Holder will contribute to
the aggregate losses, claims, damages or liabilities to which they may be
subject (after contribution from others) in such proportion so that such Holder
is responsible for the portion represented by the percentage that the public
offering price of its Registrable Securities offered by and sold under the
registration statement bears to the public offering price of all securities
offered by and sold under such registration statement, and the Company and other
selling Holders are responsible for the remaining portion; provided, however,
that, in any such case: (A) no such Holder will be required to contribute any
amount in excess of the public offering price of all such Registrable Securities
offered and sold by such Holder pursuant to such registration statement; and (B)
no person or entity guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) will be entitled to contribution from
any person or entity who was not guilty of such fraudulent misrepresentation.
(f) Survival. The obligations of the Company and Holders under
this Section 3.5 shall survive until the fifth anniversary of the completion of
any offering of
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INVESTOR RIGHTS AGREEMENT
<PAGE> 13
Registrable Securities in a registration statement, regardless of the expiration
of any statutes of limitation or extensions of such statutes.
3.7 Expenses. All expenses incurred in connection with a registration
pursuant to Sections 3.2 and 3.3 (excluding underwriters' and brokers' discounts
and commissions relating to shares sold by the Holders and legal fees of counsel
for the Holders), including, without limitation all federal and "blue sky"
registration, filing and qualification fees, printers' and accounting fees, and
fees and disbursements of counsel for the Company, shall be borne by the
Company.
3.8 Termination of the Company's Obligations. The Company shall have no
obligations pursuant to Sections 3.2 or 3.3 with respect to any Registrable
Securities proposed to be sold by a Holder in a registration pursuant to
Sections 3.2 or 3.3 more than seven (7) years after the date of this Agreement,
or, if, in the opinion of counsel to the Company, all such Registrable
Securities proposed to be sold by a Holder may then be sold under Rule 144 in
one transaction without exceeding the volume limitations thereunder.
3.9 No Registration Rights to Third Parties. Without the prior written
consent of the Holders of a majority in interest of the Registrable Securities
then outstanding, the Company covenants and agrees that it shall not grant, or
cause or permit to be created, for the benefit of any person or entity any
registration rights of any kind (whether similar to the registration rights
described in this Article 3, or otherwise) relating to shares of the Company's
Common Stock or any other voting securities of the Company, other than rights
that are on a parity with or subordinate in right to the Investor.
4. RIGHT OF PARTICIPATION.
4.1 General. The Investor and any Affiliate of the Investor to which
rights under this Section 4 have been duly assigned in accordance with Section 9
(the Investor and each such assignee being hereinafter referred to as a
"PARTICIPATION RIGHTS HOLDER") shall have the right of first refusal to purchase
such Participation Rights Holder's Pro Rata Share (as defined below), of all (or
any part) of any New Securities (as defined in Section 4.3) that the Company may
from time to time issue after the date of this Agreement (the "RIGHT OF
PARTICIPATION") only to the extent the Participation Rights Holder has not
exercised its Right of Maintenance as described in Section 5. Each right to
purchase New Securities pursuant to this Section 4 shall be on the same terms
(other than price to the extent provided in Section 5.3 below and as closely as
practicable in the case of employee stock options) as the issuance of New
Securities that gave rise to the Right of Participation. Notwithstanding the
foregoing, the Participation Rights Holder shall not have the Right of
Participation with respect to the issuance of any New Securities to the extent
that (1) the Participation Rights Holder has not acquired (a) Conversion Shares
pursuant to the Loan Agreement, or (b) shares of Common Stock pursuant to the
Warrant and (2) such unacquired Conversion Shares and shares of Common Stock
issuable upon exercise of the Warrant have been adjusted according to their
respective terms. In the event the Participation Rights Holder's Right of
Participation involves employee stock options, the Company and the Participation
Rights Holder shall structure the Right of Participation in such a manner as to
avoid adverse tax consequences to such employees.
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INVESTOR RIGHTS AGREEMENT
<PAGE> 14
4.2 Pro Rata Share. A Participation Rights Holder's "PRO RATA SHARE"
for purposes of the Right of Participation is the ratio of (a) the number of
shares of Common Stock held by such Participation Rights Holder as of the date
of such Participation Notice (as defined in Section 4.4) plus the total number
of shares of Common Stock that such Participation Rights Holder has the right to
acquire at any time in the future pursuant to the Loan Agreement and the
Warrant, to (b) the difference between (i) the total number of shares of Common
Stock of the Company (and other voting securities of the Company, if any) then
outstanding (immediately prior to the issuance of New Securities giving rise to
the Right of Participation), and (ii) the number of Dilutive Securities (defined
below) issued since the last Notice Date (defined in Section 5.1) excluding any
Maintenance Securities (defined below) issued pursuant to the last Maintenance
Notice (defined in Section 5.6).
4.3 New Securities. "NEW SECURITIES" shall mean any Common Stock or
other voting capital stock of the Company, whether now authorized or not, and
rights, options or warrants to purchase such Common Stock (and any associated
debt securities issued therewith), and securities of any type whatsoever that
are, or may become, convertible or exchangeable into such Common Stock or other
capital stock, provided, however, that the term "New Securities" shall not
include:
(a) any securities other than Common Stock or other voting capital
stock (e.g., warrants or options to purchase Common Stock or
other capital stock) until such securities are vested and
exercisable;
(b) any shares of Common Stock issued under the terms of the Loan
Agreement, as such agreement may be amended, including the
Warrant and the Conversion Shares;
(c) any securities issued in connection with any stock split,
stock dividend or similar event in which all Participation
Rights Holders are entitled to participate on a pro rata
basis; or
(d) any securities issuable upon the exercise, conversion or
exchange of any securities described in (a), (b) or (c) above.
4.4 Procedures. In the event that the Company proposes to undertake an
issuance of New Securities (in a single transaction or a series of related
transactions), it shall give to each Participation Rights Holder written notice
of its intention to issue New Securities (the "PARTICIPATION NOTICE"),
describing the amount and the type of New Securities and the price and the
general terms upon which the Company proposes to issue such New Securities. Each
Participation Rights Holder shall have ten (10) business days from the date of
receipt of any such Participation Notice to agree in writing to purchase such
Participation Rights Holder's Pro Rata Share of such New Securities for the
price and upon the terms and conditions specified in the Participation Notice by
giving written notice to the Company and stating therein the quantity of New
Securities to be purchased (not to exceed such Participation Rights Holder's Pro
Rata Share). If any Participation Rights Holder fails to so agree in writing
within such ten (10) business day period to purchase such Participation Rights
Holder's full Pro Rata Share of an offering of New Securities, then such
Participation Rights Holder shall forfeit the right hereunder
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INVESTOR RIGHTS AGREEMENT
<PAGE> 15
to purchase that part of its Pro Rata Share of such New Securities that it did
not so agree to purchase. Such Participation Rights Holder shall purchase the
portion elected by such Participation Rights Holder concurrently with the
closing of the transaction triggering the Right of Participation.
4.5 Failure to Exercise. Upon the expiration of such ten (10) day
period, the Company shall have 120 days thereafter to sell the New Securities
described in the Participation Notice (with respect to which the Participation
Rights Holders' rights of first refusal hereunder were not exercised) at the
same or higher price and upon non-price terms not materially more favorable to
the purchasers thereof than specified in the Participation Notice. In the event
that the Company has not issued and sold such New Securities within such 120 day
period, then the Company shall not thereafter issue or sell any New Securities
without again first offering such New Securities to the Participation Rights
Holders pursuant to this Section 4.
4.6 Termination. The Right of Participation for the Investor and each
other Participation Rights Holder shall terminate upon the earlier of (1) the
first date that the Investor and its Affiliates collectively hold shares of
Common Stock or other voting securities and securities exercisable or
convertible into shares of Common Stock or other voting securities that number
less than one percent (1%) of the total number of outstanding shares of Common
Stock or (2) the date of the first Public Offering after the date hereof.
5. RIGHT OF MAINTENANCE.
5.1 General. The Investor and any Affiliate of the Investor to which
rights under this Section 5 have been duly assigned in accordance with Section 9
(the Investor and each such assignee being hereinafter referred to as a
"MAINTENANCE RIGHTS HOLDER") will, pursuant to the terms and conditions of this
Section 5, have the right to purchase shares of Common Stock or other voting
capital stock ("MAINTENANCE SECURITIES") from the Company at the Purchase Price
(as defined in Section 5.3) following the issuance by the Company of Dilutive
Securities (as defined in Section 5.2) that the Company may from time to time
issue after the date of this Agreement, solely in order to maintain such
Maintenance Rights Holder's Prior Percentage Interest (as defined in Section
5.4) in the Company (the "RIGHT OF MAINTENANCE") only to the extent the
Maintenance Rights Holder has not exercised its Right of Participation as
described in Section 4. Each right to purchase Maintenance Securities pursuant
to this Section 5 shall be on the same terms (other than price to the extent
provided in Section 5.3 below and as closely as practicable in the case of
employee stock options) as the issuance of the Dilutive Securities that gave
rise to the right to purchase such Maintenance Securities. Notwithstanding the
foregoing, the Maintenance Rights Holder shall not have the Right of Maintenance
with respect to the issuance of any Dilutive Securities to the extent that (1)
the Maintenance Rights Holder has not acquired (a) Conversion Shares pursuant to
the Loan Agreement or (b) shares of Common Stock pursuant to the Warrant and (2)
such unacquired Conversion Shares and shares of Common Stock issuable upon
exercise of the Warrant have been adjusted according to their respective terms.
In the event the Maintenance Rights Holder's Right of Maintenance involves
employee stock options, the Company and the Maintenance Rights Holder shall
structure the Right of Maintenance in such a manner as to avoid adverse tax
consequences to such employees.
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INVESTOR RIGHTS AGREEMENT
<PAGE> 16
5.2 Dilutive Securities. "DILUTIVE SECURITIES" means any Common
Stock or other voting capital stock of the Company, whether now authorized or
not, and rights, options or warrants to purchase such Common Stock (and any
associated debt securities issued therewith), and securities of any type
whatsoever that are, or may become, convertible or exchangeable into such Common
Stock or other capital stock; provided, however, that the term "Dilutive
Securities" does not include:
(a) any securities other than Common Stock or other
voting capital stock (e.g., warrants or options to
purchase Common Stock or other capital stock) until
such securities are vested and exercisable;
(b) any shares of Common Stock issued under the terms of
the Loan Agreement, as such agreement may be amended,
including the Warrant and the Conversion Shares;
(c) any securities issued in connection with any stock
split, stock dividend or similar event in which all
Maintenance Rights Holders are entitled to
participate on a pro rata basis; or
(d) any securities issuable upon the exercise, conversion
or exchange of any securities described in (a), (b)
or (c) above.
5.3 Purchase Price.
(a) Employee Stock. To the extent that the right to purchase
New Securities or Maintenance Securities arises out of the issuance of New
Securities or Dilutive Securities to employees, officers, directors,
contractors, advisors or consultants of the Company pursuant to incentive
agreements or incentive plans approved by the Board ("EMPLOYEE STOCK"), the per
share "PURCHASE PRICE" of the New Securities or Maintenance Securities shall
equal the average Market Price (as defined below) of such New Securities or
Maintenance Securities over the ten (10) trading days immediately preceding the
date on which the Maintenance Rights Holder or Participation Rights Holder, as
applicable, elects to purchase such New Securities or Maintenance Securities.
(b) Other Dilutive Securities. To the extent that the right to
purchase Maintenance Securities arises out of any issuance of New Securities or
Dilutive Securities other than Employee Stock, the per share "PURCHASE PRICE" of
the New Securities or Maintenance Securities shall equal the weighted average of
the per share prices at which such New Securities or Dilutive Securities were
issued. For purposes hereof, in the event that the issuance of any New
Securities or Dilutive Securities occurs upon the exercise, conversion or
exchange of other securities ("EXCHANGEABLE SECURITIES"), then the per share
price at which such New Securities or Dilutive Securities shall be deemed to
have been issued shall be the sum of (A) the per share amount paid upon such
exercise, conversion or exchange, plus (B) the per share amount
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INVESTOR RIGHTS AGREEMENT
<PAGE> 17
previously paid for the Exchangeable Securities (adjusted for any stock splits,
stock dividends or other similar events).
(c) Market Price. For purposes of this Section 5.3, "MARKET
PRICE" means, as to any New Securities or Maintenance Securities on a given day,
the average of the closing prices of such security's sales on all domestic
securities exchanges on which such security may at the time be listed, or, if
there have been no sales on any such exchange on such 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 National Market as of
4:00 P.M., New York time, on such day, or, if on any day such security is not
quoted in the NASDAQ National Market, 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. If at any time the Maintenance Securities are not listed on any
domestic securities exchange or quoted in the NASDAQ National Market or the
domestic over-the-counter market ("UNLISTED SECURITIES"), the "Market Price"
shall be the fair value thereof determined jointly by the Company and the
Maintenance Rights Holder or Participation Rights Holder, as applicable.
(d) Consideration Other than Cash. In the event that New
Securities or Dilutive Securities or Exchangeable Securities were issued for
consideration other than cash, the per share amounts paid for such New
Securities or Dilutive Securities or Exchangeable Securities shall be determined
jointly by the Company and the Maintenance Rights Holder or Participation Rights
Holder, as applicable.
(e) Appraiser. If the Company and the Maintenance Rights
Holder or Participation Rights Holder, as applicable, are unable to reach
agreement within a reasonable period of time with respect to (i) the Market
Price of Unlisted Securities, or (ii) the per share amounts paid for New
Securities or Dilutive Securities or Exchangeable Securities issued for
consideration other than cash, such Market Price or per share amounts paid, as
the case may be, shall be determined by an appraiser jointly selected by the
Company and the Maintenance Rights Holder or Participation Rights Holder, as
applicable. The determination of such appraiser shall be final and binding on
the Company and the Maintenance Rights Holder or Participation Rights Holder, as
applicable. The fees and expenses of such appraiser shall be paid for by the
Company.
5.4 Prior Percentage Interest. A Maintenance Rights Holder's "PRIOR
PERCENTAGE INTEREST" for purposes of the Right of Maintenance is the ratio of
(a) the number of shares of Common Stock held by such Maintenance Rights Holder
as of the date of such Maintenance Notice (as defined in Section 5.6) (the
"NOTICE DATE") plus the total number of shares of Common Stock that such
Maintenance Rights Holder has the right to acquire at any time in the future
pursuant to the Loan Agreement and the Warrant to (b) the difference between (i)
the total number of shares of Common Stock of the Company (and other voting
securities of the Company, if any) outstanding on the Notice Date, and (ii) the
total number of Dilutive Securities issued since the later of the date of this
Agreement or the last Notice Date excluding any Maintenance Securities (defined
below) issued pursuant to the last Maintenance Notice.
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INVESTOR RIGHTS AGREEMENT
<PAGE> 18
5.5 Maintenance Amount. A Maintenance Rights Holder's "MAINTENANCE
AMOUNT" with respect to any Maintenance Notice shall equal such number of
Maintenance Securities as is obtained by multiplying the number of Dilutive
Securities specified in such Maintenance Notice by such Maintenance Rights
Holder's Prior Percentage Interest, rounded to the nearest whole share.
5.6 Notice of Issuance. Within fifteen (15) business days of each
anniversary of this Agreement, and within fifteen (15) business days of each
issuance of Dilutive Securities which when cumulated with all prior issuances of
Dilutive Securities since the later of (i) the date of this Agreement, or (ii)
the date of the last Notice Date (subsequent to which the Maintenance Rights
Holder has had an opportunity to purchase Maintenance Securities), results in a
two percent (2%) reduction in a Maintenance Rights Holders' Prior Percentage
Interest, the Company shall give to each Maintenance Rights Holder written
notice (the "MAINTENANCE NOTICE") describing the number of Dilutive Securities
issued since such prior Notice Date and the non-price terms upon which the
Company issued such Dilutive Securities, and the Maintenance Amount of
Maintenance Securities that such Maintenance Rights Holder is entitled to
purchase as a result of such issuances.
5.7 Purchase of Maintenance Securities. Each Maintenance Rights Holder
shall have sixty (60) days from the receipt of a Maintenance Notice to elect to
purchase up to such Maintenance Rights Holder's Maintenance Amount of such
Maintenance Securities at the Purchase Price and upon the terms and conditions
specified in the Maintenance Notice. The closing of such purchase shall occur
within ten (10) days after such election to purchase. If any Maintenance Rights
Holder fails to elect to purchase such Maintenance Rights Holder's full
Maintenance Amount of Maintenance Securities within such sixty (60) day period,
then such Maintenance Rights Holder shall forfeit the right hereunder to
purchase that part of its Maintenance Amount that it did not so elect to
purchase.
5.8 Termination. The provisions of Sections 5.1 through 5.7 shall
terminate upon the earlier of (1) the first date that the Investor and its
Affiliates collectively hold shares of Common Stock or other voting securities
and securities exercisable or convertible into shares of Common Stock or other
voting securities that number less than one percent (1%) of the total number of
outstanding shares of Common Stock or (2) the date of the first Public Offering
after the date hereof.
6. PUT OPTION.
6.1. Right to Put the Registrable Securities. If, at any time two (2)
years after the date hereof, Investor desires to sell any or all of the
Registrable Securities then held by Investor and the Common Stock of the Company
is not traded on a securities exchange or the Nasdaq National Market or Actively
Traded over-the-counter (as defined in the Loan Agreement), then such Investor
may notify the Company in writing of the Investor's desire to sell such
Registrable Securities (the "PUT NOTICE") in which event, such Investor shall
have the right to sell (the "PUT RIGHT") such Registrable Securities to the
Company and the Company shall have the obligation to purchase such Registrable
Securities from such Investor at the Put Price (as defined below) as of the date
of receipt of the Put Notice; provided that (1) the Put Right shall be limited
to the number of Registrable Securities equal to the quotient of (x) three times
the highest Outstanding
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INVESTOR RIGHTS AGREEMENT
<PAGE> 19
Balance at any time during the Loan (as defined in the Loan Agreement), divided
by (y) the Put Price, and (2) the exercise of such Put Right does not violate
any applicable law or restrict the Company's eligibility to employ "pooling of
interests" accounting with respect to any pending acquisition, disposition or
reorganization transaction involving the Company or any subsidiary of the
Company. In the event that the purchase of such Registrable Securities is
prevented or delayed pursuant to the proviso in the immediately preceding
sentence, the Company shall promptly purchase at the Put Price such Registrable
Securities as soon as practicable after the restrictions with respect to such
purchase under applicable law or "pooling of interests" accounting rules lapse.
6.2 Put Price. For purposes of this Article 6, "PUT PRICE" means, as to
any Registrable Securities on a given day, the fair value thereof determined
jointly by the Company and the Investor. If the Company and the Investor are
unable to reach agreement within a reasonable period of time with respect to the
Put Price, such Put Price, shall be determined by an appraiser jointly selected
by the Company and the Investor. The determination of such appraiser shall be
final and binding on the Company and the Investor. The fees and expenses of such
appraiser shall be paid for by the Company.
6.3 Termination of Put Option. The rights of the Investor under
Sections 6.1 through 6.2 shall terminate on the fifth anniversary of the date
hereof.
7. STOCK TRANSFER RESTRICTIONS FOR KEY SHAREHOLDERS.
7.1 Key Shareholders. "KEY SHAREHOLDERS" shall mean the employees
listed on Schedule 7.1 to this Agreement.
7.2 Stock Transfer Restrictions. The Company shall not permit any Key
Shareholders to sell, transfer or otherwise dispose of any shares of Common
Stock in excess of the number of shares of Common Stock set forth on Schedule
7.1 to this Agreement for a period of two years after the date hereof without
the prior approval of the Investor other than transfers to trusts, custodial
accounts, or limited partnerships solely controlled by such Key Shareholder or
directly to immediate family members, which for purposes of this agreement shall
mean parents, siblings, children or spouse of such Shareholder, provided that
all beneficiaries or limited partners of such trusts, custodial accounts, or
limited partnerships consist of such Key Shareholder and/or immediate family
members of such Key Shareholder and that any such direct transfer to an
immediate family member shall include an irrevocable proxy allowing the Key
Shareholder the right to vote the transferred stock for the term provided for in
this Section. The Company shall use its best efforts to obtain from each Key
Shareholder a stock transfer agreement in the form attached hereto as Exhibit A.
The Company shall place a legend to such effect on the certificates of the
shares held by the Key Shareholders except for the certificates of the shares
set forth on Schedule 7.1 to this Agreement.
7.3 Stop Transfer Instructions. The Company shall issue stop transfer
instructions to its transfer agent prohibiting the transfer of shares of Common
Stock owned by such Key Employees except in accordance with the provisions of
this Agreement.
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INVESTOR RIGHTS AGREEMENT
<PAGE> 20
8. TAG-ALONG SALE RIGHTS.
8.1 Notice of Intended Disposition. In the event a Key Shareholder of
the Company desires to accept a bona fide third party offer for the transfer of
any or all of the Common Stock held by such shareholder (the shares subject to
such offer to be hereafter called the "TARGET SHARES"), the shareholder shall
promptly deliver to the Company and the Investor written notice of the intended
disposition ("DISPOSITION NOTICE") and the basic terms and conditions thereof,
including the identity of the proposed purchaser and the consideration involved.
8.2 Grant of Tag-Along Sale Rights Involving a Key Shareholder. If a
Key Shareholder proposes to enter into a transaction regarding the disposition
of Common Stock, the Investor shall have the right, exercisable upon written
notice to the Key Shareholder within fourteen (14) days after receipt of the Key
Shareholder's Disposition Notice, to participate in such sale of the Target
Shares on the same terms and conditions as those set forth in the Disposition
Notice. To the extent the Investor exercise such right of participation, the
number of shares of Target Shares that the Key Shareholder may sell in the
transaction shall be correspondingly reduced. The right of participation of the
Investor shall be subject to the terms and conditions set forth in this Section.
(a) For purposes of this Section 8.2, the Investor shall be
deemed to own the number of shares of Common Stock that the Investor
actually holds plus the number of shares of Common Stock that the
Investor has the right to acquire at any time in the future under the
Warrant or the Loan Agreement.
(b) The Investor may sell all or any part of a number of
shares of Common Stock of the Company equal to the product obtained by
multiplying (i) the aggregate number of shares of Common Stock covered
by the purchase offer by (ii) a fraction, the numerator of which is the
number of shares of Common Stock of the Company at the time owned by
the Investor and the denominator of which is the combined number of
shares of Common Stock of the Company at the time owned by the Key
Shareholder and the Investor.
(c) The Investor may effect its participation in the sale by
delivering to the Key Shareholder for transfer to the purchase offer or
one or more certificates, properly endorsed for transfer, which
represent the number of shares of Common Stock that it elects to sell
pursuant to this Section 8.2.
8.3 Payment of Proceeds. The stock certificates that the Investor
delivers to the shareholder pursuant to Section 8.2 shall be transferred by the
shareholder to the purchase offer or in consummation of the sale of the Common
Stock pursuant to the terms and conditions specified in the Disposition Notice
to the Investor, and the shareholder shall promptly thereafter remit to the
Investor that portion of the sale proceeds to which the Investor are entitled by
reason of their participation in such sale.
8.4 Non-exercise. The exercise or non-exercise of the rights of the
Investor hereunder to participate in one or more sales of Common Stock made by
any shareholder shall
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INVESTOR RIGHTS AGREEMENT
<PAGE> 21
not adversely affect their rights to participate in subsequent Common Stock
sales by any shareholder.
9. ASSIGNMENT AND AMENDMENT.
9.1 Assignment. Notwithstanding anything herein to the contrary, the
rights of the Investor may be assigned to any transferee of shares of Common
Stock held by the Investor as well as shares of Common Stock that the Investor
has the right to acquire at any time in the future pursuant to the Loan
Agreement and the Warrant, except that the rights of Investor pursuant to
Section 2.2 may only be assigned to an Affiliate of the Investor.
9.2 Amendment of Rights. Any provision of this Agreement may be amended
and the observance thereof may be waived (either generally or in a particular
instance and either retroactively or prospectively), only with the written
consent of the Company and Investor (or, in the case of an amendment or waiver
of any provision of Section 3 hereof, only with the written consent of the
Company and the Holders of a majority of the Registrable Securities then
outstanding and entitled to the registration rights set forth in Section 3
hereof. Any amendment or waiver effected in accordance with this Section 9.2
shall be binding upon the Investor, each Holder, each permitted successor or
assignee of such Investor or Holder and the Company.
9.3. Legended Stock. All shares of common stock held as of the date
hereof by all signatories hereto shall be legended to reflect the rights and
obligations granted herein.
10. CONFIDENTIALITY.
10.1 Protection of Confidential Information. Confidential or
proprietary information disclosed by either party under this Agreement, as well
as the terms of this Agreement and Investor's investment in the Company (subject
to Section 10.2 below), shall be considered confidential information (the
"CONFIDENTIAL INFORMATION") and shall not be disclosed by the Company or
Investor to any third party. The Company or Investor shall immediately notify
the other party of any information that comes to its attention which might
indicate that there has been a loss of confidentiality with respect to the
Confidential Information. In the event that the Company or Investor is requested
or becomes legally compelled (by statute or regulation or by oral questions,
interrogatories, request for information or documents, subpoena, criminal or
civil investigative demand or similar process, including without limitation, in
connection with any public or private offering of the Company's capital stock)
to disclose any of the Confidential Information, such party (the "DISCLOSING
PARTY") shall provide the other party (the "NON-DISCLOSING PARTY") with prompt
written notice of that fact so that the other party may seek (with the
cooperation and reasonable efforts of the Disclosing Party) a protective order,
confidential treatment or other appropriate remedy. In such event, the
Disclosing Party shall furnish only that portion of the Confidential Information
which is legally required and shall exercise reasonable efforts to obtain
reliable assurance that confidential treatment will be accorded the Confidential
Information to the extent reasonably requested by the Non-Disclosing Party. The
provisions of this Section 10.1 shall be in addition to, and not in substitution
for, the provisions of any separate nondisclosure agreement executed by the
parties hereto with respect to the transaction contemplated hereby.
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INVESTOR RIGHTS AGREEMENT
<PAGE> 22
10.2 Disclosure of Terms; Press Releases. Notwithstanding the
provisions of Section 10.1 above, from and after the Effective Date, the Company
may disclose the existence and terms of this Agreement and Investor's investment
in the Company solely to the Company's investors, investment bankers, lenders,
accountants, legal counsel, business partners, and bona fide prospective
investors, employees, lenders and business partners, in each case only where
such persons or entities have agreed not to disclose such information to any
third party. The Company shall not issue any press release or make any other
announcement to the general public or in any professional or trade publication
regarding Investor, this Agreement or any of the terms hereof without the prior
consent of Investor, which consent may be withheld at the sole discretion of
Investor. Notwithstanding the foregoing, Investor may disclose its investment in
the Company and the terms thereof to third parties or to the public at its
discretion, and the Company shall have the right to disclose to third parties
any such information disclosed by Investor in a press release or other public
announcement. If the Company or Investor determines that any disclosure not
otherwise authorized by this Agreement is required by law or regulation, then
the provisions of Section 10.1 regarding disclosure of Confidential Information
by a Disclosing Party shall govern.
11. GENERAL PROVISIONS.
11.1. Notices. Except as may be otherwise provided herein, all
notices, requests, waivers and other communications made pursuant to this
Agreement shall be in writing and shall be conclusively deemed to have been duly
given (a) when hand delivered to the other party; (b) when received when sent by
facsimile at the address and number set forth below, provided that the sending
party receives written confirmation of receipt; (c) three business days after
deposit in the U.S. mail with first class or certified mail receipt requested
postage prepaid and addressed to the other party as set forth below; or (d) the
next business day after deposit with a national overnight delivery service,
postage prepaid, addressed to the parties as set forth below with
next-business-day delivery guaranteed, provided that the sending party receives
a confirmation of delivery from the delivery service provider.
To Investor:
HSB Engineering Finance Corporation
One State Street
Hartford, CT 06102
Attn: John McManus, Vice President
Fax: (860) 722-5710
Tel: (860) 722-5444
With copies to:
Gibson, Dunn & Crutcher LLP
333 South Grand Avenue
Los Angeles, CA 90071-3197
Attn: Bradford P. Weirick, Esq.
Fax: (213) 229-7520
Tel: (213) 229-7765
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INVESTOR RIGHTS AGREEMENT
<PAGE> 23
To the Company:
Probex Corporation
1467 LeMay, Suite 111
Carrollton, Texas 75007
Attn: Thomas Murray, Chief Executive Officer
Fax: (972) 466-1556
Tel: (972) 466-1555
with copies to:
Jenkens & Gilchrist, P.C.
1445 Ross Ave., Suite 3200
Dallas, TX 75202-2799
Attn: Robert W. Dockery, Esq.
Fax: (214) 855-4300
Tel: (214) 855-4163
Each person making a communication hereunder by facsimile
shall promptly confirm by telephone to the person to whom such communication was
addressed each communication made by it by facsimile pursuant hereto but the
absence of such confirmation shall not affect the validity of any such
communication. A party may change or supplement the addresses given above, or
designate additional addresses, for purposes of this Section 11.1 by giving the
other party written notice of the new address in the manner set forth above.
11.2 Entire Agreement. This Agreement, together with the Loan
Agreement, the Other Transaction Documents (as defined in the Loan Agreement),
and all the Exhibits and Schedules, constitute and contain the entire agreement
and understanding of the parties with respect to the subject matter hereof and
supersedes any and all prior negotiations, correspondence, agreements,
understandings, duties or obligations between the parties respecting the subject
matter hereof.
11.3 Governing Law. This Agreement shall be governed by and construed
exclusively in accordance with the internal laws of the State of Connecticut as
applied to agreements entered into and to be performed entirely within
Connecticut, excluding that body of law relating to conflict of laws and choice
of law.
11.4 Severability. If one or more provisions of this Agreement are held
to be unenforceable under applicable law, then such provision(s) shall be
excluded from this Agreement and the balance of this Agreement shall be
interpreted as if such provision(s) were so excluded and shall be enforceable in
accordance with its terms.
11.5 Third Parties. Nothing in this Agreement, express or implied, is
intended to confer upon any person, other than the parties hereto and their
permitted successors and assigns, any rights or remedies under or by reason of
this Agreement.
11.6 Successors and Assigns. Subject to the provisions of Section 9.1,
the provisions of this Agreement shall inure to the benefit of, and shall be
binding upon, the successors and permitted assigns of the parties hereto.
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INVESTOR RIGHTS AGREEMENT
<PAGE> 24
11.7 Captions. The captions to sections of this Agreement have been
inserted for identification and reference purposes only and shall not be used to
construe or interpret this Agreement.
11.8 Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
11.9 Adjustments for Stock Splits, Etc. Wherever in this Agreement
there is a reference to a specific number of shares of Common Stock of the
Company, then, upon the occurrence of any subdivision, combination or stock
dividend of Common Stock, the specific number of shares so referenced in this
Agreement shall automatically be proportionally adjusted to reflect the affect
on the outstanding shares of such class or series of stock by such subdivision,
combination or stock dividend.
11.10 Sections. References to a "section" when used without further
attribution shall refer to the particular sections of this Agreement.
11.11 Binding Effect. Notwithstanding the provisions above, this
Agreement shall not be binding upon either party until the Company successfully
conducts an Acceptance Test (as defined in the Loan Agreement) on crankcase used
oil, in which event this Agreement shall be deemed to have been effective and
binding as of the date hereof.
[SIGNATURES ON NEXT PAGE]
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INVESTOR RIGHTS AGREEMENT
<PAGE> 25
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first above written.
PROBEX CORPORATION, HSB ENGINEERING FINANCE CORPORATION,
A COLORADO CORPORATION A DELAWARE CORPORATION
By: By:
------------------------------- ----------------------------------
Name: Name:
----------------------------- --------------------------------
Title: Title:
---------------------------- -------------------------------
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
SHAREHOLDERS
By:
-------------------------------
Name:
-----------------------------
25
INVESTOR RIGHTS AGREEMENT
<PAGE> 1
EXHIBIT 10.5
EXECUTIVE EMPLOYMENT
EMPLOYMENT AGREEMENT
This Agreement is made as of the 30th day of June, 1998, by and
between Probex Corporation, a Colorado corporation (the "Company"), acting on
its own behalf and on behalf of its successors and assigns and Martin
MacDonald, a Texas resident ("Executive").
WHEREAS, Executive is currently employed by the Company as
Vice-President.
WHEREAS, the Company believes that retention of Executive as a key
employee of the Company is an important factor in the continued success of the
business of the Company.
WHEREAS, the Company desires that Executive agree to remain in the
employ of the Company for an extended period.
WHEREAS, Executive is willing to make a commitment to remain in the
employ of the Company for such extended period upon the terms and conditions
set forth in this Agreement,
NOW, THEREFORE, for and in consideration of the mutual promises
contained herein, the sufficiency of which is hereby acknowledged, the Company
and Executive agree as follows:
1. TERM OF EMPLOYMENT
1.1 Term of Employment for purposes of this Agreement shall mean the
period of time commencing on the date hereof and ending twenty-four (24) months
thereafter (unless sooner terminated pursuant to this Agreement).
1.2 At the end of the Term of Employment, the employment of the
Executive will again be "at will", unless otherwise agreed to in writing by a
majority of the members of the Board of Directors of the Company (the "Board")
who are not employees or officers (or affiliates, associates, or relatives of
such employees or officers) of the Company (the "Outside Directors").
2. EMPLOYMENT
2.1 The Company agrees to employ Executive during the Term of
Employment and Executive agrees to accept such employment.
2.2 At the commencement of the Term of Employment, Executive shall be
employed as Vice-President. Executive shall have responsibility for operational
and engineering functions of the Company and such other duties as may be
assigned by the Chief Executive Officer pursuant to the Company's by-laws.
2.3 Except as may otherwise be approved in advance by the Board, and
except during vacation periods and reasonable periods of absence due to
sickness, personal injury or other
1
EXECUTIVE EMPLOYMENT AGREEMENT
<PAGE> 2
disability, Executive shall devote his full time throughout the Term of
Employment to the services required of him hereunder. Executive shall render
his services exclusively to the Company during the Term of Employment, and
shall use his best efforts, judgment and energy, to improve and advance the
business and interests of the Company in a manner consistent with the duties of
his position, provided, however, that Executive may conduct such other
activities during the Term of Employment as he deems appropriate and consistent
with his duties hereunder, including serving as a director of other companies
and engaging in civic and social responsibilities.
3. COMPENSATION AND BENEFITS
3.1 Base Salary. During the Term of Employment, Executive shall
receive a base salary of at least a monthly rate of $5,417, payable in
installments in accordance with the Company's customary payroll practices, but
no less frequently than monthly. Upon the consummation of the first financing
of an operating plant of the Company, Executive's base salary shall be
increased to at least $7,500 per month. Upon the successful commencement of
continuous operations of the Company's first operating plant, Executive's base
salary shall be increased to at least $10,000 per month. All compensation paid
to Executive under this Agreement shall be subject to any and all payroll and
withholding deductions as are required by the law of any applicable
jurisdiction (state, federal or otherwise) with taxing authority with respect
to such compensation.
3.2 Annual Bonus. During the Term of Employment, Executive shall
receive, in addition to a base salary, annual bonuses, provided that the annual
bonus program pursuant to which Executive shall receive such annual bonuses
shall require the approval of a majority of the Outside Directors.
3.3 Incentive Savings and Retirement Plans. In addition to base salary
and annual bonuses payable as provided above, Executive shall be entitled to
participate during the Term of Employment in all incentive, savings and
retirement plans and programs applicable to other senior executives of the
Company, provided that such incentive, savings and retirement plans and
programs shall require the approval of a majority of the Outside Directors.
3.4 Employee Welfare Benefit Plans. During the Term of Employment,
Executive and/or Executive's family, as the case may be, shall be eligible for
participation in and shall receive all benefits under welfare benefit plans
provided by the Company to the extent permitted by law, provided that such
welfare benefit plans shall require the approval of a majority of the Outside
Directors.
3.5 Stock Incentive Plans. During the Term of Employment, Executive
shall be eligible for participation in such other stock incentive plans (which,
by way of example only, may include, stock option plans, stock appreciation
rights plans, restricted stock plans, cheap stock plans, stock swap plans, and
performance share plans), if any, available to other senior executives of the
Company, provided that such stock incentive plans shall require the approval of
a majority of the Outside Directors.
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EXECUTIVE EMPLOYMENT AGREEMENT
<PAGE> 3
3.6 Expenses. During the Term of Employment, Executive shall be
entitled to receive prompt reimbursement for all reasonable business expenses
incurred in the performance of his employment by the Company in accordance with
the policies and procedures of the Company.
3.7 Vacation. During the Term of Employment, Executive shall be
entitled to paid vacation in accordance with the vacation policy of the
Company. Executive will also be entitled to carry over or be paid for any
unutilized paid vacation time due to Executive from prior years in accordance
with such policy.
4. TERMINATION OF EMPLOYMENT
4.1 Termination by the Company for Cause. The Company may terminate
Executive's employment for Cause without thereby giving rise to a breach of
this Agreement solely as a result of such termination. "Cause" means the
commission of an act of fraud, theft or dishonesty against the Company; arrest
or conviction for any felony; arrest or conviction for any misdemeanor
involving moral turpitude which might, in the Company's sole discretion, cause
embarrassment to the Company; willful or repeated tardiness or absenteeism;
substance abuse; insubordination; self-dealing; willful or repeated violation
of Company policy; willful or repeated non-performance or substandard
performance of duties; or violation of any state or federal laws, rules or
regulation in connection with or during performance of work. If Executive's
employment is terminated for Cause, the Company shall pay Executive his base
salary accrued through the date of such termination whereupon the Company shall
have no further obligations to Executive under this Agreement.
4.2 Termination by the Company without Cause. The Company may
terminate Executive's employment hereunder without Cause at any time upon
thirty (30) days notice to Executive without thereby giving rise to a breach of
this Agreement solely as a result of such termination. In the event of receipt
of such notice, Executive may immediately terminate Executive's employment and
elect to receive his base salary accrued through the date of termination plus a
severance benefit equal to the per diem rate of base salary multiplied by the
number of calendar days between the date Executive elects to immediately
terminate Executive's employment and the date sixty (60) days after receipt of
the Company's notice of termination without Cause.
4.3 Termination by Executive for Good Reason. Executive's employment
may be terminated by Executive for "Good Reason" without thereby giving rise to
a breach of this Agreement solely as a result of such termination. For purposes
of this Agreement "Good Reason" means (i) Executive's compensation or benefits
are materially reduced; (ii) the Company reduces the potential earnings of
Executive under any performance-based bonus or incentive plan of the Company as
the Company may elect to offer Executive; (iii) any purchaser, assign,
surviving corporation, or successor of the Company or its business or assets
(whether by acquisition, merger, liquidation, consolidation, reorganization,
sale or transfer of assets or business, or otherwise) fails or refuses to
expressly assume in writing this Agreement and all of the duties and
obligations of the Company hereunder; or (iv) the Company breaches any of the
provisions of this Agreement. Executive shall not be entitled to terminate for
Good Reason by reason of an isolated, insubstantial and inadvertent action
taken or failure not occurring in bad
3
EXECUTIVE EMPLOYMENT AGREEMENT
<PAGE> 4
faith and which is remedied by the Company promptly after receipt of written
notice thereof given by Executive. In the event of termination of his
employment by Executive for Good Reason pursuant to this Paragraph 4.3, the
Company shall pay Executive his base salary accrued through the date of
termination plus a severance benefit equal to the per diem rate of base salary
multiplied by sixty (60) days, whereupon, Executive shall be relieved of his
obligations under Paragraph 2 and the Company shall have no further obligations
to Executive under this Agreement.
4.4 Reserved.
4.5 Death. Executive's employment hereunder shall be terminated
(without thereby giving rise to a breach of this Agreement solely as a result
of such termination) automatically upon Executive's death during the Term of
Employment. In the event of such termination, the Company shall pay to
Executive's estate within 60 days after the date of Executive's death, all
benefits and compensation accrued hereunder prior to the date of Executive's
death.
4.6 Disability. Executive's employment hereunder shall be terminated
(without thereby giving rise to a breach of this Agreement solely as a result
of such termination) automatically upon Executive's Total Disability during the
Term of Employment. In the event of such termination, the Company shall pay to
Executive within 60 days after the date of termination under this Paragraph
4.6, all benefits and compensation accrued hereunder prior to the date of such
termination. "Total Disability" means an illness, injury or other
incapacitating condition as a result of which Executive is unable to perform
the services required to be performed under this Agreement of (i) forty-five
(45) consecutive days during the Term of Employment or (ii) a period or periods
aggregating more than sixty (60) days in any twelve (12) consecutive months.
Executive shall submit to such medical examinations as the Company may deem
desirable to determine whether a Total Disability exists.
5. CONFIDENTIAL INFORMATION,
NON-SOLICITATION AGREEMENT AND
COVENANT NOT TO COMPETE
5.1 Non-Disclosure of Confidential Information.
5.1.1. In connection with his employment with the Company,
Executive will have access to and become acquainted with various trade secrets
and other proprietary and confidential information of the Company. "Trade
secrets and other proprietary and confidential information" include but are not
limited to the following: (1) business, pricing, marketing, and cost data; (2)
technical information regarding the Company's products; (3) secret inventions;
(4) computer software; (5) computer software documentation; (6) confidential
customer information; (7) customer and supplier lists; (8) contents of
contracts and agreements with customers; (9) customer requirements and
specifications; and (10) designs, development techniques, and other products,
processes or formulae, whether or not developed or used by Executive. Executive
acknowledges that the Company has taken steps to keep trade secrets and other
proprietary and confidential information secret, including disclosing the
information only on a need-to-know basis, labeling documents as "confidential,"
and keeping confidential information in secure areas.
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EXECUTIVE EMPLOYMENT AGREEMENT
<PAGE> 5
Executive further acknowledges that the trade secrets and other proprietary and
confidential information have been developed or acquired by the Company through
expenditure of substantial time, effort, and money and provide the Company with
an advantage over competitors who do not know or use such trade secrets and
other proprietary and confidential information.
5.1.2. In consideration for access to trade secrets and other
proprietary and confidential information, Executive agrees that he will not
directly or indirectly disclose or use for any reason whatsoever any trade
secrets and other proprietary and confidential information obtained by him by
reason of his employment with the Company, except as required to conduct the
business of the Company or as authorized by express written permission of the
Board or as otherwise required by law.
5.1.3. Executive confirms that all trade secrets and other
proprietary and confidential information, and all documents reflecting such
information, remain the exclusive property of the Company. All business
records, papers, and documents kept or made by Executive relating to the
business of the Company shall be and remains the property of the Company and
shall remain in the possession of the Company during the term of Executive's
employment and at all times thereafter. Upon the termination of his employment
with the Company or upon the request of the Company at any time, Executive
shall promptly deliver to the Company, and shall retain no copies of, any
materials, records, and documents (in whatever form or medium) made by
Executive or coming into his possession concerning the business or affairs of
the Company provided that, if at the time of termination, Executive requests
retention of engineering documents for professional liability purposes,
Executive and the Company shall enter into a mutually agreeable arrangement
regarding custody and access to such engineering documents.
5.1.4. Executive acknowledges and agrees that the nature of
the trade secrets and other proprietary and confidential information to which
he will be given access may make it impossible for him to perform in the
capacity of officer, director, employee, agent, consultant, or representative
of any Competitor (as defined below) without disclosing or utilizing the trade
secrets and other proprietary and confidential information to which he will be
given access during the course of his employment. Executive further
acknowledges and agrees that the Company's products are marketed in a highly
competitive market.
5.2 Non-Solicitation Agreement.
5.2.1. Employees. Any attempt on the part of Executive to
induce others to leave the Company's employ, or any effort by Executive to
interfere with the Company's relationship with its other employees would be
harmful and damaging to the Company. Executive agrees that during the Term of
Employment and for a period of four years thereafter, Executive will not in any
way, directly or indirectly (i) induce or attempt to induce any employee of the
Company to quit employment with the Company; (ii) otherwise interfere with or
disrupt the Company's relationship with its employees; (iii) solicit, entice,
or hire away any employee of the Company; or (iv) hire or engage any employee
of the Company or any former employee of the Company whose employment with the
Company ceased less than one year before the date of such hiring or engagement.
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EXECUTIVE EMPLOYMENT AGREEMENT
<PAGE> 6
5.2.2. Customers. Executive agrees that during the Term of
Employment and for a period of four years thereafter, Executive will not divert
or attempt to divert from the Company any business the Company had enjoyed or
solicited from its customers during the twelve months preceding the date of
termination of his employment.
5.3 Covenant Not to Compete. In consideration of execution of this
Agreement, in consideration of Executive's continued employment, salary, bonus
and other benefits specified in this Agreement and in consideration of access
to trade secrets and other proprietary information of the Company, for the
Noncompetition Period, Executive will not:
(i) Accept a position as an officer, director,
employee, agent, consultant, representative of a Competitor (as
defined below). Executive acknowledges that the Company has performed
and will perform Competing Activities (as defined below) on a
nation-wide basis. Executive further acknowledges that the definition
of Prohibited Territory (as defined below) may prohibit him from
engaging in Competing Activities nation-wide.
(ii) Acquire or fail to dispose of any stock or
other ownership interest in any Competitor, other than investments
equal to less than one per cent of the outstanding stock of any class
issued by any publicly traded company.
(iii) Undertake any Competing Activities in the
Prohibited Territory for his own account.
5.4 Definitions.
5.4.1 "Noncompetition Period" means the period from the date
hereof to four years after Executive leaves the employ of the Company.
5.4.2 "Competing Activities" means the business of refining
and re-refining used oil.
5.4.3 "Prohibited Territory" means any area within one
thousand miles of a location in which the Company has engaged in or
demonstrated an intent to engage in Competing Activities within the twelve
calendar months preceding termination of Executive's employment.
5.4.4 "Competitor" means (A) a person or entity that is
engaged in Competing Activities in the Prohibited Territory or (B) any other
person or entity that, as of the date of Executive's termination, competes
directly with the Company or any of its subsidiaries in the Prohibited
Territory.
5.5 Remedy in the Event of Breach.
5.5.1. Without intending to limit the remedies available to
the Company, Executive acknowledges that a breach or threatened breach of any
of the covenants contained in
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EXECUTIVE EMPLOYMENT AGREEMENT
<PAGE> 7
Paragraphs 5.1 through 5.4 may result in material irreparable injury to the
Company or one of its subsidiaries for which there is no adequate remedy at
law, that it may not be possible to measure damages for such injuries
precisely, and that in the event of such a breach or threat thereof, the
Company shall be entitled to obtain a temporary restraining order, a
preliminary or permanent injunction, or other comparable provisional or
equitable relief restraining Executive from engaging in activities prohibited
by Paragraphs 5.1 through 5.4, and such other relief as may be required to
enforce specifically any of the covenants in such Sections. Executive agrees to
personal jurisdiction of any state or federal court in Dallas County, Texas in
any proceeding brought by the Company to enforce Executive's covenants under
Paragraphs 5.1 through 5.4.
5.5.2. Reserved.
5.5.3. If Executive materially breaches any of his
obligations under Paragraphs 5.1 through 5.4, in addition to any other remedies
available to Company under the Agreement, at law, or in equity, the Executive,
upon termination of his employment, shall forfeit his right to receive any
further payments described in this Agreement, including without limitation, any
salary and benefits that may be payable after the date of termination of
Executive's employment including without limitation any such benefits already
received that were prepaid prior to termination or paid after termination. To
the extent any payments and benefits already received are so forfeited,
Executive shall promptly return to the Company any payments and benefits
received by Executive after termination of his employment.
5.5.4. Nothing in this Agreement shall prevent the Company
from seeking equitable relief pursuant to this Paragraph 5.5.
5.6 Reformation. Executive agrees that the restrictions in Paragraphs
5.1 through 5.4 are reasonable in scope and duration in light of the Company's
business and competitors. If any provision of Paragraphs 5.1 through 5.5 is
held by a court or arbitrator to be unreasonable in scope or duration, the
court or arbitrator shall, to the extent permitted by law, reform such
provision so that it is enforceable, and enforce the applicable provision as so
reformed. Reformation pursuant to this Paragraph 5.6 shall not affect any other
provision of the Agreement or render the Agreement unenforceable or void.
5.7 Survival. The provisions of Paragraphs 5.1 through 5.6 of this
Agreement shall survive termination of the Agreement for any reason.
6. NOTICES AND COMMUNICATIONS
6.1 All notices and other communications hereunder shall be in writing
and shall be given when hand delivered to the other party or upon receipt if
sent by registered or certified mail, return receipt requested, postage prepaid
or sent by an express delivery service (e.g. Federal Express, UPS Next Day Air)
addressed to the parties at the addresses set forth below or such other address
as either party shall have furnished to the other in writing in accordance
herewith.
If to the Company: Probex Corporation
1467 LeMay St., Suite 111
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EXECUTIVE EMPLOYMENT AGREEMENT
<PAGE> 8
Carrollton, Texas 75007
Attention: President
If to Executive: Martin MacDonald
5945 W. Parker Rd., Apt. 433
Plano, TX 75093
7. MISCELLANEOUS
7.1 Non-Assignability. The rights and obligations extended by the
Company to Executive under this Agreement are personal to Executive and shall
not be assignable by Executive without the prior written consent of the
Company. Without limiting the foregoing, Executive acknowledges and consents to
the assignment of this Agreement by the Company to any parent, subsidiary or
affiliate of the Company, provided that no such assignment shall change the
definition of the "Company" herein. The obligations of the Company may be
assigned to other entities who expressly assume the obligations of the Company
hereunder, but Company shall not be released from its obligations except
pursuant to the prior written consent of Executive, which shall not be
unreasonably withheld.
7.2 Non-Exclusivity of Rights. Nothing in this Agreement shall prevent
or limit any rights of Executive to receive any benefits, bonus, incentive or
other payment provided by the Company to its salaried employees prior to the
date hereof, except for such rights as Executive may have specifically waived
in writing. Amounts which are vested benefits or which Executive is otherwise
entitled to receive under any plan or program of the Company shall be payable
in accordance with the terms of such plan or program.
7.3 Enforceability. This Agreement shall inure to the benefit of and
be enforceable by the parties hereto, and their respective heirs, personal
representatives, successors and assigns.
7.4 Applicable Law. This Agreement shall be governed by and construed
in accordance with the substantive laws of the State of Texas. The parties
hereto consent to the jurisdiction of the courts of the State of Texas.
7.5 Validity. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
7.6 Captions. The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect.
7.7 Amendments. This Agreement may not be amended or modified other
than by a written agreement executed by the parties hereto or their respective
heirs, representatives. successors and assigns, nor may any provision hereof be
waived except by a writing signed by the party waiving such provision.
7.8 Term. Unless earlier properly terminated by one of the parties
hereto, this Agreement shall terminate on the second anniversary of the date
hereof, except for the obligations concerning confidentiality, non-solicitation
agreements and the covenant not to
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EXECUTIVE EMPLOYMENT AGREEMENT
<PAGE> 9
compete set forth in Paragraph 5, which shall survive the termination of this
Agreement in accordance with their terms.
7.9 Execution of Agreement. This Agreement may be executed in
duplicate originals.
7.10 Entire Agreement. This Agreement contains the entire
understanding of the parties hereto with respect to the subject matter hereof.
IN WITNESS WHEREOF, the Company and Executive have caused this
Agreement to be executed as of the day and year first above written to become
effective upon the later of the date hereof or the date the Company
successfully conducts an Acceptance Test on crankcase used oil as defined in
and pursuant to the Convertible Loan, Warrant and Security Agreement, dated as
of June 30, 1998, by and between the Company and HSB Engineering Finance
Corporation, Inc., a Delaware corporation.
THE COMPANY EXECUTIVE
By:
-------------------------------- -------------------------------
Name: Martin MacDonald
------------------------------
Title:
-----------------------------
9
EXECUTIVE EMPLOYMENT AGREEMENT
<PAGE> 1
EXHIBIT 10.6
EMPLOYMENT AGREEMENT
This Agreement is made as of the 30th day of June, 1998, by and between
Probex Corporation, a Colorado corporation (the "Company"), acting on its own
behalf and on behalf of its successors and assigns and Thomas Murray, a Texas
resident ("Executive").
WHEREAS, Executive is currently employed by the Company as Chief
Executive Officer.
WHEREAS, the Company believes that retention of Executive as a key
employee of the Company is an important factor in the continued success of the
business of the Company.
WHEREAS, the Company desires that Executive agree to remain in the
employ of the Company for an extended period.
WHEREAS, Executive is willing to make a commitment to remain in the
employ of the Company for such extended period upon the terms and conditions set
forth in this Agreement,
NOW, THEREFORE, for and in consideration of the mutual promises
contained herein, the sufficiency of which is hereby acknowledged, the Company
and Executive agree as follows:
1. TERM OF EMPLOYMENT
1.1 Term of Employment for purposes of this Agreement shall mean the
period of time commencing on the date hereof and ending twenty-four (24) months
thereafter (unless sooner terminated pursuant to this Agreement).
1.2 At the end of the Term of Employment, the employment of the
Executive will again be "at will", unless otherwise agreed to in writing by a
majority of the members of the Board of Directors of the Company (the "Board")
who are not employees or officers (or affiliates, associates, or relatives of
such employees or officers) of the Company (the "Outside Directors").
2. EMPLOYMENT
2.1 The Company agrees to employ Executive during the Term of
Employment and Executive agrees to accept such employment.
2.2 At the commencement of the Term of Employment, Executive shall be
employed as Chief Executive Officer. Executive, subject to the control of the
Board of Directors, shall have general supervision, direction and control of the
business and officers of the Company and such other duties as may be assigned by
the Board of Directors.
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EXECUTIVE EMPLOYMENT AGREEMENT
<PAGE> 2
2.3 Except as may otherwise be approved in advance by the Board, and
except during vacation periods and reasonable periods of absence due to
sickness, personal injury or other disability, Executive shall devote his full
time throughout the Term of Employment to the services required of him
hereunder. Executive shall render his services exclusively to the Company during
the Term of Employment, and shall use his best efforts, judgment and energy, to
improve and advance the business and interests of the Company in a manner
consistent with the duties of his position, provided, however, that Executive
may conduct such other activities during the Term of Employment as he deems
appropriate and consistent with his duties hereunder, including serving as a
director of other companies and engaging in civic and social responsibilities.
3. COMPENSATION AND BENEFITS
3.1 Base Salary. During the Term of Employment, Executive shall
receive a base salary of at least a monthly rate of $5,417, payable in
installments in accordance with the Company's customary payroll practices, but
no less frequently than monthly. Upon the consummation of the first financing of
an operating plant of the Company, Executive's base salary shall be increased to
at least $7,500 per month. Upon the successful commencement of continuous
operations of the Company's first operating plant, Executive's base salary shall
be increased to at least $10,000 per month. All compensation paid to Executive
under this Agreement shall be subject to any and all payroll and withholding
deductions as are required by the law of any applicable jurisdiction (state,
federal or otherwise) with taxing authority with respect to such compensation.
3.2 Annual Bonus. During the Term of Employment, Executive shall
receive, in addition to a base salary, annual bonuses, provided that the annual
bonus program pursuant to which Executive shall receive such annual bonuses
shall require the approval of a majority of the Outside Directors.
3.3 Incentive Savings and retirement plans. In addition to base salary
and annual bonuses payable as provided above, Executive shall be entitled to
participate during the Term of Employment in all incentive, savings and
retirement plans and programs applicable to other senior executives of the
Company, provided that such incentive, savings and retirement plans and programs
shall require the approval of a majority of the Outside Directors.
3.4 Employee Welfare Benefit Plans. During the Term of Employment,
Executive and/or Executive's family, as the case may be, shall be eligible for
participation in and shall receive all benefits under welfare benefit plans
provided by the Company to the extent permitted by law, provided that such
welfare benefit plans shall require the approval of a majority of the Outside
Directors.
3.5 Stock Incentive Plans. During the Term of Employment, Executive
shall be eligible for participation in such other stock incentive plans (which,
by way of example only, may include, stock option plans, stock appreciation
rights plans, restricted stock plans, cheap stock plans, stock swap plans, and
performance share plans), if any, available to other senior
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EXECUTIVE EMPLOYMENT AGREEMENT
<PAGE> 3
executives of the Company, provided that such stock incentive plans shall
require the approval of a majority of the Outside Directors.
3.6 Expenses. During the Term of Employment, Executive shall be
entitled to receive prompt reimbursement for all reasonable business expenses
incurred in the performance of his employment by the Company in accordance with
the policies and procedures of the Company.
3.7 Vacation. During the Term of Employment, Executive shall be
entitled to paid vacation in accordance with the vacation policy of the Company.
Executive will also be entitled to carry over or be paid for any unutilized paid
vacation time due to Executive from prior years in accordance with such policy.
3.8 Comity. During the Term of Employment, if the Company shall enter
into any employment agreement with any other person with provisions more
beneficial to such other person than those contained in this Agreement, then
Executive shall be entitled to receive such beneficial provisions to the same
extent as granted in such employment agreement, provided that, if the Company
enters into an employment agreement with a person who is not employed by the
Company as of the Effective Date and such employment agreement contains a
provision relating to severance which is more beneficial to such person than the
severance provision of this Agreement, Executive shall be entitled to receive
such beneficial severance provision only with the consent of the Board of
Directors.
4. TERMINATION OF EMPLOYMENT
4.1 Termination by the Company for Cause. The Company may terminate
Executive's employment for Cause without thereby giving rise to a breach of this
Agreement solely as a result of such termination. "Cause" means the commission
of an act of fraud, theft or dishonesty against the Company; arrest or
conviction for any felony; arrest or conviction for any misdemeanor involving
moral turpitude which might, in the Company's sole discretion, cause
embarrassment to the Company; willful or repeated tardiness or absenteeism;
substance abuse; insubordination; self-dealing; willful or repeated violation of
Company policy, willful or repeated non-performance or substandard performance
of duties; or violation of any state or federal laws, rules or regulation in
connection with or during performance of work. If Executive's employment is
terminated for Cause, the Company shall pay Executive his base salary accrued
through the date of such termination whereupon the Company shall have no further
obligations to Executive under this Agreement.
4.2 Termination by the Company without Cause. The Company may terminate
Executive's employment hereunder without Cause at any time upon thirty (30) days
notice to Executive without thereby giving rise to a breach of this Agreement
solely as a result of such termination. In the event of receipt of such notice,
Executive may immediately terminate Executive's employment and elect to receive
his base salary accrued through the date of termination plus a severance benefit
equal to the per diem rate of base salary multiplied by the number of calendar
days between the date Executive elects to immediately terminate Executive's
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EXECUTIVE EMPLOYMENT AGREEMENT
<PAGE> 4
employment and the date sixty (60) days after receipt of the Company's notice of
termination without Cause.
4.3 Termination by Executive for Good Reason. Executive's employment
may be terminated by Executive for "Good Reason" without thereby giving rise to
a breach of this Agreement solely as a result of such termination. For purposes
of this Agreement "Good Reason" means (i) Executive's compensation or benefits
are materially reduced; (ii) the Company reduces the potential earnings of
Executive under any performance-based bonus or incentive plan of the Company as
the Company may elect to offer Executive; (iii) any purchaser, assign, surviving
corporation, or successor of the Company or its business or assets (whether by
acquisition, merger, liquidation, consolidation, reorganization, sale or
transfer of assets or business, or otherwise) fails or refuses to expressly
assume in writing this Agreement and all of the duties and obligations of the
Company hereunder; or (iv) the Company breaches any of the provisions of this
Agreement. Executive shall not be entitled to terminate for Good Reason by
reason of an isolated, insubstantial and inadvertent action taken or failure not
occurring in bad faith and which is remedied by the Company promptly after
receipt of written notice thereof given by Executive. In the event of
termination of his employment by Executive for Good Reason pursuant to this
Paragraph 4.3, the Company shall pay Executive his base salary accrued through
the date of termination plus a severance benefit equal to the per diem rate of
base salary multiplied by sixty (60) days, whereupon, Executive shall be
relieved of his obligations under Paragraph 2 and the Company shall have no
further obligations to Executive under this Agreement.
4.4 Reserved.
4.5 Death. Executive's employment hereunder shall be terminated
(without thereby giving rise to a breach of this Agreement solely as a result of
such termination) automatically upon Executive's death during the Term of
Employment. In the event of such termination, the Company shall pay to
Executive's estate within 60 days after the date of Executive's death, all
benefits and compensation accrued hereunder prior to the date of Executive's
death.
4.6 Disability. Executive's employment hereunder shall be terminated
(without thereby giving rise to a breach of this Agreement solely as a result of
such termination) automatically upon Executive's Total Disability during the
Term of Employment. In the event of such termination, the Company shall pay to
Executive within 60 days after the date of termination under this Paragraph 4.6,
all benefits and compensation accrued hereunder prior to the date of such
termination. "Total Disability" means an illness, injury or other incapacitating
condition as a result of which Executive is unable to perform the services
required to be performed under this Agreement of (i) forty-five (45) consecutive
days during the Term of Employment or (ii) a period or periods aggregating more
than sixty (60) days in any twelve (12) consecutive months. Executive shall
submit to such medical examinations as the Company may deem desirable to
determine whether a Total Disability exists.
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EXECUTIVE EMPLOYMENT AGREEMENT
<PAGE> 5
5. CONFIDENTIAL INFORMATION,
NON-SOLICITATION AGREEMENT AND
COVENANT NOT TO COMPETE
5.1 Non-Disclosure of Confidential Information.
5.1.1. In connection with his employment with the Company,
Executive will have access to and become acquainted with various trade secrets
and other proprietary and confidential information of the Company. "Trade
secrets and other proprietary and confidential information" include but are not
limited to the following: (1) business, pricing, marketing, and cost data; (2)
technical information regarding the Company's products; (3) secret inventions;
(4) computer software; (5) computer software documentation; (6) confidential
customer information; (7) customer and supplier lists; (8) contents of contracts
and agreements with customers; (9) customer requirements and specifications; and
(10) designs, development techniques, and other products, processes or formulae,
whether or not developed or used by Executive. Executive acknowledges that the
Company has taken steps to keep trade secrets and other proprietary and
confidential information secret, including disclosing the information only on a
need-to-know basis, labeling documents as "confidential," and keeping
confidential information in secure areas. Executive further acknowledges that
the trade secrets and other proprietary and confidential information have been
developed or acquired by the Company through expenditure of substantial time,
effort, and money and provide the Company with an advantage over competitors who
do not know or use such trade secrets and other proprietary and confidential
information.
5.1.2. In consideration for access to trade secrets and other
proprietary and confidential information, Executive agrees that he will not
directly or indirectly disclose or use for any reason whatsoever any trade
secrets and other proprietary and confidential information obtained by him by
reason of his employment with the Company, except as required to conduct the
business of the Company or as authorized by express written permission of the
Board or as otherwise required by law.
5.1.3. Executive confirms that all trade secrets and other
proprietary and confidential information, and all documents reflecting such
information, remain the exclusive property of the Company. All business records,
papers, and documents kept or made by Executive relating to the business of the
Company shall be and remains the property of the Company and shall remain in the
possession of the Company during the term of Executive's employment and at all
times thereafter. Upon the termination of his employment with the Company or
upon the request of the Company at any time, Executive shall promptly deliver to
the Company, and shall retain no copies of, any materials, records, and
documents (in whatever form or medium) made by Executive or coming into his
possession concerning the business or affairs of the Company provided that, if
at the time of termination, Executive requests retention of engineering
documents for professional liability purposes, Executive and the Company shall
enter into a mutually agreeable arrangement regarding custody and access to such
engineering documents.
5.1.4. Executive acknowledges and agrees that the nature of the
trade secrets and other proprietary and confidential information to which he
will be given access may make it
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EXECUTIVE EMPLOYMENT AGREEMENT
<PAGE> 6
impossible for him to perform in the capacity of officer, director, employee,
agent, consultant, or representative of any Competitor (as defined below)
without disclosing or utilizing the trade secrets and other proprietary and
confidential information to which he will be given access during the course of
his employment. Executive further acknowledges and agrees that the Company's
products are marketed in a highly competitive market.
5.2 Non-Solicitation Agreement.
5.2.1. Employees. Any attempt on the part of Executive to
induce others to leave the Company's employ, or any effort by Executive to
interfere with the Company's relationship with its other employees would be
harmful and damaging to the Company. Executive agrees that during the Term of
Employment and for a period of four years thereafter, Executive will not in any
way, directly or indirectly (i) induce or attempt to induce any employee of the
Company to quit employment with the Company; (ii) otherwise interfere with or
disrupt the Company's relationship with its employees; (iii) solicit, entice, or
hire away any employee of the Company; or (iv) hire or engage any employee of
the Company or any former employee of the Company whose employment with the
Company ceased less than one year before the date of such hiring or engagement.
5.2.2. Customers. Executive agrees that during the Term of
Employment and for a period of four years thereafter, Executive will not divert
or attempt to divert from the Company any business the Company had enjoyed or
solicited from its customers during the twelve months preceding the date of
termination of his employment.
5.3 Covenant Not to Compete. In consideration of execution of this
Agreement, in consideration of Executive's continued employment, salary, bonus
and other benefits specified in this Agreement and in consideration of access to
trade secrets and other proprietary information of the Company, for the
Noncompetition Period, Executive will not:
(i) Accept a position as an officer, director, employee,
agent, consultant, representative of a Competitor (as defined below).
Executive acknowledges that the Company has performed and will perform
Competing Activities (as defined below) on a nation-wide basis.
Executive further acknowledges that the definition of Prohibited
Territory (as defined below) may prohibit him from engaging in
Competing Activities nation-wide.
(ii) Acquire or fail to dispose of any stock or other
ownership interest in any Competitor, other than investments equal to
less than one per cent of the outstanding stock of any class issued by
any publicly traded company.
(iii) Undertake any Competing Activities in the Prohibited
Territory for his own account.
5.4 Definitions.
5.4.1 "Noncompetition Period" means the period from the date
hereof to four years after Executive leaves the employ of the Company.
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EXECUTIVE EMPLOYMENT AGREEMENT
<PAGE> 7
5.4.2 "Competing Activities" means the business of refining and
re-refining used oil.
5.4.3 "Prohibited Territory" means any area within one thousand
miles of a location in which the Company has engaged in or demonstrated an
intent to engage in Competing Activities within the twelve calendar months
preceding termination of Executive's employment.
5.4.4 "Competitor" means (A) a person or entity that is engaged
in Competing Activities in the Prohibited Territory or (B) any other person or
entity that, as of the date of Executive's termination, competes directly with
the Company or any of its subsidiaries in the Prohibited Territory.
5.5 Remedy in the Event of Breach.
5.5.1 Without intending to limit the remedies available to the
Company, Executive acknowledges that a breach or threatened breach of any of the
covenants contained in Paragraphs 5.1 through 5.4 may result in material
irreparable injury to the Company or one of its subsidiaries for which there is
no adequate remedy at law, that it may not be possible to measure damages for
such injuries precisely, and that in the event of such a breach or threat
thereof, the Company shall be entitled to obtain a temporary restraining order,
a preliminary or permanent injunction, or other comparable provisional or
equitable relief restraining Executive from engaging in activities prohibited by
Paragraphs 5.1 through 5.4, and such other relief as may be required to enforce
specifically any of the covenants in such Sections. Executive agrees to personal
jurisdiction of any state or federal court in Dallas County, Texas in any
proceeding brought by the Company to enforce Executive's covenants under
Paragraphs 5.1 through 5.4.
5.5.2. Reserved.
5.5.3. If Executive materially breaches any of his obligations
under Paragraphs 5.1 through 5.4, in addition to any other remedies available to
Company under the Agreement, at law, or in equity, the Executive, upon
termination of his employment, shall forfeit his right to receive any further
payments described in this Agreement, including without limitation, any salary
and benefits that may be payable after the date of termination of Executive's
employment including without limitation any such benefits already received that
were prepaid prior to termination or paid after termination. To the extent any
payments and benefits already received are so forfeited, Executive shall
promptly return to the Company any payments and benefits received by Executive
after termination of his employment.
5.5.4. Nothing in this Agreement shall prevent the Company from
seeking equitable relief pursuant to this Paragraph 5.5.
5.6 Reformation. Executive agrees that the restrictions in
Paragraphs 5.1 through 5.4 are reasonable in scope and duration in light of the
Company's business and competitors. If any provision of Paragraphs 5.1 through
5.5 is held by a court or arbitrator to be unreasonable in
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EXECUTIVE EMPLOYMENT AGREEMENT
<PAGE> 8
scope or duration, the court or arbitrator shall, to the extent permitted by
law, reform such provision so that it is enforceable, and enforce the applicable
provision as so reformed. Reformation pursuant to this Paragraph 5.6 shall not
affect any other provision of the Agreement or render the Agreement
unenforceable or void.
5.7 Survival. The provisions of Paragraphs 5.1 through 5.6 of this
Agreement shall survive termination of the Agreement for any reason.
6. NOTICES AND COMMUNICATIONS
6.1 All notices and other communications hereunder shall be in writing
and shall be given when hand delivered to the other party or upon receipt if
sent by registered or certified mail, return receipt requested, postage prepaid
or sent by an express delivery service (e.g. Federal Express, UPS Next Day Air)
addressed to the parties at the addresses set forth below or such other address
as either party shall have furnished to the other in writing in accordance
herewith.
If to the Company: Probex Corporation
1467 LeMay St., Suite 111
Carrollton, Texas 75007
Attention: President
If to Executive: Thomas Murray
184 Cooper Creek
Denton, Texas 76208
7. MISCELLANEOUS
7.1 Non-Assignability. The rights and obligations extended by the
Company to Executive under this Agreement are personal to Executive and shall
not be assignable by Executive without the prior written consent of the Company.
Without limiting the foregoing, Executive acknowledges and consents to the
assignment of this Agreement by the Company to any parent, subsidiary or
affiliate of the Company, provided that no such assignment shall change the
definition of the "Company" herein. The obligations of the Company may be
assigned to other entities who expressly assume the obligations of the Company
hereunder, but Company shall not be released from its obligations except
pursuant to the prior written consent of Executive, which shall not be
unreasonably withheld.
7.2 Non-Exclusivity of Rights. Nothing in this Agreement shall prevent
or limit any rights of Executive to receive any benefits, bonus, incentive or
other payment provided by the Company to its salaried employees prior to the
date hereof, except for such rights as Executive may have specifically waived in
writing. Amounts which are vested benefits or which Executive is otherwise
entitled to receive under any plan or program of the Company shall be payable in
accordance with the terms of such plan or program.
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EXECUTIVE EMPLOYMENT AGREEMENT
<PAGE> 9
7.3 Enforceability. This Agreement shall inure to the benefit of and be
enforceable by the parties hereto, and their respective heirs, personal
representatives, successors and assigns.
7.4 Applicable Law. This Agreement shall be governed by and construed
in accordance with the substantive laws of the State of Texas. The parties
hereto consent to the jurisdiction of the courts of the State of Texas.
7.5 Validity. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
7.6 Captions. The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect.
7.7 Amendments. This Agreement may not be amended or modified other
than by a written agreement executed by the parties hereto or their respective
heirs, representatives, successors and assigns, nor may any provision hereof be
waived except by a writing signed by the party waiving such provision.
7.8 Term. Unless earlier properly terminated by one of the parties
hereto, this Agreement shall terminate on the second anniversary of the date
hereof, except for the obligations concerning confidentiality, non-solicitation
agreements and the covenant not to compete set forth in Paragraph 5, which shall
survive the termination of this Agreement in accordance with their terms.
7.9 Execution of Agreement. This Agreement may be executed in duplicate
originals.
7.10 Entire Agreement. This Agreement contains the entire understanding
of the parties hereto with respect to the subject matter hereof.
IN WITNESS WHEREOF, the Company and Executive have caused this
Agreement to be executed as of the day and year first above written to become
effective upon the later of the date hereof or the date the Company successfully
conducts an Acceptance Test on crankcase used oil as defined in and pursuant to
the Convertible Loan, Warrant and Security Agreement, dated as of June 30, 1998,
by and between the Company and HSB Engineering Finance Corporation, Inc., a
Delaware corporation.
THE COMPANY EXECUTIVE
BY: /s/ Alex Daspit /s/ Thomas Murray
- --------------------------- ---------------------------------
Name: ALEX DASPIT Thomas Murray
--------------------
Title: PRESIDENT
--------------------
9
EXECUTIVE EMPLOYMENT AGREEMENT
<PAGE> 1
EXHIBIT 10.7
FORM OF
INVENTION ASSIGNMENT AND CONFIDENTIALITY AGREEMENT
In exchange for my becoming employed (or my employment being
continued) by PROBEX CORPORATION, or its subsidiaries, affiliates, or
successors (hereinafter referred to collectively as the "Company"), I hereby
agree to the following:
No Conflicting Employment
I will perform for the Company such duties as may be
designated by the Company from time to time. During my period of employment by
the Company, I will devote my best efforts to the interests of the Company and
will not engage in, without the prior written consent of the Company, other
employment or in any activities that could reasonably be expected to result in
an adverse effect to the Company.
Protection and Declaration of Inventions
As used in this Agreement, the term, "Inventions" means
designs, trademarks, discoveries, formulae, processes, manufacturing
techniques, trade secrets, inventions, improvements, ideas or copyrightable
works, including all rights to obtain, register, perfect, and enforce these
proprietary interests.
Without further compensation, I hereby agree promptly to
disclose to the Company and I hereby assign and agree to assign to the Company
or its designee, my entire right, title and interest in and to all Inventions
which I, solely or jointly, may conceive or reduce to practice or may have
previously conceived or reduced to practice during the period of my employment
with the Company:
(a) which pertain to the oil refining, re-refining or
petro-chemical industry or to any other line of business or activity of the
Company, which the Company intended to pursue prior to the disclosure of my
Invention as evidenced by the books and records of the Company,
(b) which are aided by the use of time, material or
facilities of the Company, whether or not during working hours, (other than
incidental use of the Company's personal computers or telephones prior to the
date hereof, provided that such use shall not have exceeded ten such occasions)
or
(c) which relate to any of my work during the period of my
employment with the Company from the date hereof whether or not during normal
working hours.
No rights are hereby conveyed in Inventions, if any, made by
me prior to my employment with the Company which are specifically identified in
a sheet attached to and made a part of this Agreement, if any (which attachment
contains no confidential
<PAGE> 2
information). However, the Company shall have the non-exclusive royalty free
right to use, within the oil refining, re-refining or petro-chemical industry
or any other line of business of the Company, which the Company intended to
pursue prior to the disclosure of my Invention as evidenced by the books and
records of the Company, any and all Inventions which I, solely or jointly, may
conceive, develop, or reduce to practice or may have previously conceived,
developed, or reduced to practice during the period of my employment with the
Company.
I agree to perform during and after my employment, all acts
deemed necessary or desirable by the Company to permit and assist it, at its
expense, to obtain and enforce the full benefits, enjoyment, rights, title and
interest throughout the world in the Inventions hereby assigned to the Company
as set forth in the paragraph above. Such acts may include, but are not limited
to, execution of documents and assistance or cooperation in legal proceedings.
In the event that the Company is unable for any reason
whatsoever to secure my signature to any lawful and necessary document required
to apply for or execute any patent, copyright or other applications with
respect to such Inventions (including renewals, extensions, continuations,
divisions or continuations in part thereof), I hereby irrevocably designate and
appoint the Company and its duly authorized officers and agents, as my agents
and attorneys-in-fact to act for and on my behalf and instead of me, to execute
and file any such application and to do all other lawfully permitted acts to
further the prosecution and issuance of patents, copyrights or other rights
thereon with the same legal force and effect as if executed by me.
I agree to disclose all Inventions solely or jointly
conceived or reduced to practice by me in confidence to the Company.
For purposes of this Agreement, an Invention will be deemed
to have been conceived when there shall have been formed in the mind of the
Inventor(s) a definite and permanent idea of the complete and operative
Invention such that only ordinary skill will be necessary to reduce the
Invention to practice, without extensive research or experimentation.
Confidential and Proprietary Information
As used in the Agreement, the term "Confidential Information"
means proprietary information, trade secret or knowledge belonging to the
Company, including without limitation (1) business, pricing, marketing, and
cost data; (2) technical information regarding the Company's products; (3)
secret Inventions owned by or assigned to the Company or assignable to the
Company pursuant to this agreement or similar agreements executed by other
employees of the Company; (4) computer software; (5) computer software
documentation; (6) confidential customer information; (7) customer and supplier
lists; (8) contents of contracts and agreements; (9) customer requirements and
specifications; (10) designs, development techniques, and other products,
processes, or formulae; and (11) any other information pertaining to any
aspects of the Company's business which is either information not known by
actual or potential competitors of the Company or is
-2-
<PAGE> 3
proprietary information of the Company or its customers or suppliers, whether
of a technical nature or otherwise.
I agree to hold in confidence and not, directly or
indirectly, to use or disclose, either during or after termination of my
employment with the Company any Confidential Information I obtain or create
during the period of my employment, whether or not during working hours, except
to the extent authorized by the Company, until such Confidential Information
becomes generally known. I agree not to make copies of such Confidential
Information except as authorized by the Company.
Return of Proprietary Materials
I agree that all Confidential Information is and shall remain
the property of the Company. Upon termination of my employment or upon an
earlier request of the Company, I will return or deliver to the Company all
tangible forms of such Confidential Information in my possession or control,
including but not limited to drawings, specifications, documents, records,
devices, models, or any other material and copies or reproductions thereof.
Prior Employment Information
I represent that my performance of all the terms of this
Agreement and as an employee of the Company does not and will not breach any
agreement to keep in confidence proprietary information, knowledge or data
acquired by me in confidence or in trust prior to my employment with the
Company, and I will not disclose to the Company, or induce the Company to use,
any inventions, confidential or proprietary information, or material belonging
to any previous employer or others. I agree not to enter into any agreement,
either written or oral, in conflict with the provisions of this Agreement. I
certify that, to the best of my information and belief, I am not a party to any
other agreement which will interfere with my full compliance of this Agreement.
Non-Solicitation of Employees
I understand that the Company's ability to operate its
business depends upon its ability to attract and retain skilled people, and
that the Company invests and will continue to invest substantial resources in
the training of its employees, and that candidates for employment having the
same abilities, knowledge, and skills as those employed by the Company may not
be generally available in the marketplace. I agree, therefore, that I will not,
for forty-eight months after the term of my employment, encourage or seek to
solicit or recruit any employee of the Company to terminate or alter his/her
relationship with the Company to the detriment of the Company.
Severability
If for any reason any of the terms of this Invention
Assignment and Confidentiality Agreement shall be deemed unenforceable, in
whole or in part, by a court of
-3-
<PAGE> 4
competent jurisdiction, I understand and agree that this shall not affect the
validity or enforceability of any other term of this agreement.
Binding Effect
This agreement (a) shall survive my employment by the
Company, (b) does not in any way restrict my right or the right of the Company
to terminate my employment, (c) will be for the benefit of successors and
assigns of the Company, and (d) is binding upon my heirs and legal
representatives, provided that this agreement shall not be binding until the
Company successfully conducts an Acceptance Test on crankcase used oil, as
defined in and pursuant to the Convertible Loan, Warrant and Security
Agreement, dated June 30, 1998, between the Company and HSB Engineering Finance
Corporation, in which event this agreement shall be deemed to have been
effective and binding as of the date hereof.
I certify and acknowledge that I have carefully read all of
the provisions of this Agreement and that I understand and willfully and
faithfully comply with such provisions.
- --------------------------------- ----------------------------------
Date Employee Signature
----------------------------------
Print Employee Name
-4-
<PAGE> 5
ATTACHMENT TO
CONFIDENTIALITY AND NON-DISCLOSURE AGREEMENT
for
-------------------------------
Name of Employee
LIST OF INVENTIONS
-5-
<PAGE> 1
EXHIBIT 10.8
PROJECT DEVELOPMENT ADVISORY AGREEMENT
This Project Development Advisory Agreement ("Agreement") is entered into
effective as of December 1, 1998 by and between Project Development Associates,
LLC, a Minnesota limited liability company having a principal place of business
of 885 Hunt Farm Road, Long Lake, Minnesota 55356 ("PDA") and Probex Corp., a
Colorado corporation having a principal place of business at 1467 LeMay Street,
Suite 111, Carrollton, Texas 75007, and its affiliates (the "Company").
WHEREAS, the Company is currently developing a used oil re-refining
facility (the "Initial Probex Facility");
WHEREAS, the Company plans on developing used oil re-refining facilities
other than the Initial Probex Facility (the "Other Probex Facilities")
(hereinafter, the Initial Probex Facility and the Other Probex Facilities are
referred to as the "Projects"); and
WHEREAS, the Company desires to engage general project development
advisory services with respect to the Projects (the "Services");
WHEREAS, PDA has agreed to assist the Company by performing the Services
in accordance with the terms and conditions set forth in this Agreement; and
NOW, THEREFORE, in consideration of the mutual promises hereinafter set
forth, and intending to be legally bound, the Company and PDA hereby agree as
follows:
1. ENGAGEMENT OF PDA. Subject to the terms and conditions hereof, the Company
hereby engages and appoints PDA as project development advisor for the Projects
and with respect to the Services and PDA hereby accepts its appointment and
engagement by the Company.
2. TERM. The term of this Agreement (the "Term") shall commence as of December
1, 1998 and shall continue until the Services are completed, unless sooner
terminated pursuant to a notice of termination given by either of the parties to
the other pursuant to Section 11 below; provided, however, if any party
introduced by PDA to the Company enters into an agreement to invest, purchase or
otherwise participate in any offerings of the Company on or before December 31,
1999, even if PDA is terminated by the Company, then PDA shall be entitled to
compensation pursuant to terms mutually acceptable to PDA and the Company.
3. DIRECTION, CONTROL AND COORDINATION. PDA shall perform the Services under the
direction and with the approval of the Company's Board of Directors and Chief
Executive Officer. PDA shall perform the Services in coordination and in
conjunction with the Company's management team and other project participants,
including but not limited to HSB Engineering Finance Corp. ("HSB").
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<PAGE> 2
4. SCOPE OF SERVICES. The Services shall include but not be limited to:
(a) Preparing a detailed milestone schedule work plan of the tasks
necessary to complete the financing of the Projects;
(b) Updating the Company's business plan to reflect the project financing
of the Projects;
(c) Preparing an estimated budget for the development period ("Development
Period Budget");
(d) Developing, arranging, drafting, and negotiating letters-of-intent and
the credit support engineering, procurement and construction contract(s),
feedstock supply agreements, off-take contracts, operation and maintenance
agreement(s), and other agreements appropriate and necessary to obtain the
project financing of the Projects;
(e) Selecting and negotiating with selected participants in the Project
commitments of cash and in-kind investment necessary to satisfy the Development
Period Budget (the "Development Period Funding" or "DPF") as well as the basic
structure of the company established as the legal entity for each Project (the
"Project Companies");
(f) Preparing and submitting to the Board periodic reports of the current
status of the financing for the Projects; and
(g) Other services as may be agreed between the Company and PDA.
5. STANDARD OF PERFORMANCE. PDA shall use its best reasonable efforts to perform
the Services as an advisor to Probex in a professional, efficient and effective
manner. PDA shall perform the Services in conjunction and cooperation with
the Company, and with the Company's concurrence as appropriate and necessary.
PDA makes no other warranty or guarantee, express or implied, with respect to
its performance of the Services.
6. DISCLAIMER AND LIMIT OF LIABILITY. PDA is not licensed, nor does it have the
capacity, to underwrite or guarantee the closing of the DPF or the financing of
the Projects. Other than as set forth in the last sentence of this Section 6,
PDA's sole liability for any of the Services which do not meet the standard set
forth in Section 5, above, shall be to perform or correct such Services at its
sole expense. Other than as set forth in the last sentence of this Section 6, in
no event shall a party to this Agreement or its employees, shareholders,
officers, directors, agents or lenders be liable for indirect or consequential
damages suffered by the other party to this Agreement or its officers,
directors, employees, shareholders, agents or lenders. The foregoing limitation
and exclusion of liability shall not be effective in the event of a party's
gross negligence, willful misconduct or bad faith, or to the extent prohibited
by applicable law.
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<PAGE> 3
7. DEDICATION OF RESOURCES. PDA shall devote such time, attention and energy as
is necessary to perform and discharge the duties and responsibilities under this
Agreement in an efficient, trustworthy, and businesslike manner. The Company
acknowledges that PDA has other duties outside of its duties under this
Agreement; however, PDA, with Managing Principal Jeffrey F. Lee taking the lead,
shall dedicate no less than the equivalent of two weeks of each calendar month
on a full time basis to the performance of the Services.
8. FEES. In consideration for the performance of the Services by PDA hereunder,
during the term of the Agreement the Company shall:
(a) Reimburse PDA monthly for all reasonable and necessary direct
out-of-pocket expenses incurred by PDA in the performance of the
Services and supported by reasonable documentation, subject to a monthly
maximum of $5,000 unless otherwise approved by Probex;
(b) Pay PDA $5,000 per month, payable on the last day of each month, the
payment of which may be deferred in the event that the working capital
of Probex (defined as current assets less current liabilities) is less
than $100,000 until such time as the working capital balance exceeds
$100,000, whereupon any prior deferred fees shall be paid in full;
(c) Pay PDA a success fee of $100,000 upon the closing of the financing for
the Initial Probex Facility if such financing closes within 12 months of
the date of execution of this Agreement and a success fee of $25,000
upon the closing of the financing of each of the subsequent four Other
Probex Facilities;
(d) Grant to PDA a seven-year warrant to purchase 100,000 shares of the
Company's common stock at $.50 per share upon the closing of the
financing for the Initial Probex Facility if such financing closes
within 12 months of the date of execution of this Agreement. Such
warrant shall be essentially identical in form and substance to the
document contained in Attachment A hereto. The Company shall grant to
PDA similar warrants to purchase 25,000 shares of the Company's common
stock upon the closing of the financing of each of the subsequent four
Other Probex Facilities; and
(e) If a party introduced to Probex by PDA provides funding to, or for the
benefit of, Probex, then Probex shall compensate PDA for such
introduction upon terms mutually agreeable to Probex and PDA.
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<PAGE> 4
9. STATUS. PDA is, and shall be deemed for all purposes to be, an independent
contractor, advisor and consultant, rather than a co-venturer, employee, agent
or other representative of the Company. PDA shall not have authority, and will
not represent itself as having authority, to enter into any agreement or incur
any obligation on behalf of the Company, except as expressly authorized by the
Company or HSB.
10. CONFIDENTIAL AND PROPRIETARY INFORMATION. PDA recognizes and acknowledges
that by reason of its performance of the Service to the Company (both during the
Term and before or after it) it has had and will continue to have access to
confidential information of the Company and its affiliates, including, without
limitation, information and knowledge pertaining to products and services
offered, inventions, innovations, designs, ideas, plans, trade secrets,
proprietary information, advertising, distribution and sales methods and
systems, and relationships between the Company and its affiliates and customers,
clients, suppliers and others who have business dealings with the Company and
its affiliates ("Confidential Information"). PDA acknowledges that such
Confidential Information is a valuable and unique asset and covenants that it
will not, either during or for five years after the term of this Agreement,
disclose any such Confidential Information to any person for any reason
whatsoever or use such Confidential Information (except as his duties hereunder
may require) without the prior written authorization of the Company, unless such
information is in the public domain through no fault of PDA or except as may be
required by law. Upon the Company's request, PDA will return all tangible
materials containing Confidential Information to the Company.
11. TERMINATION. Unless otherwise mutually agreed by Probex and PDA or as
stipulated in this Section 11, the term of this Agreement shall end upon the
closing of the financing for the Projects, at which point neither party shall
have further obligations to the other. Notwithstanding the foregoing, either
Probex or PDA may terminate this Agreement at any time upon thirty days written
notice to the other if, in the good faith judgment of such party, either the
Scope of Services or the Standard of Performance as described herein either has
not been fulfilled, or is deemed unlikely to be fulfilled, in the estimation of
the party providing such notice. In addition, after the Initial Probex Facility
has been financed, then either party may terminate this Agreement for its
convenience upon thirty days' written notice to the other. If following the
financing of the Initial Probex Facility Probex then elects to terminate for its
convenience, then those fees described under Section 8 (b) shall be terminated;
however, those fees for Other Project Facilities which are described under
Sections 8 (c) and (d) shall continue to be earned by PDA as long as PDA
provides ongoing general consulting and advisory services within PDA's areas of
competence and expertise on terms mutually agreeable to Probex and PDA, and in a
manner acceptable to Probex in its sole discretion.
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<PAGE> 5
12. INDEMNIFICATION
(a) The Company shall defend, indemnify, and hold harmless PDA, its
principals, officers, directors, employees and controlling persons (each of
which shall be an "indemnified party") from and against any and all losses,
claims, damages, liabilities or actions (collectively, "liabilities"), joint or
several, to which an indemnified party may become subject and to reimburse such
indemnified parties for any reasonable legal or other expenses (including the
cost of any investigation and preparation) incurred by them in connection with
any litigation or threatened litigation, whether or not resulting in any
liability, arising out of, or based upon, this Agreement.
(b) Notwithstanding the foregoing, the Company shall not be liable under
subsection 12 (a) immediately above for indemnification in respect of any
liabilities to the extent the same is determined, in a final judgment by a court
of competent jurisdiction, to have resulted from the willful misconduct, gross
negligence, or bad faith of any indemnified party.
(c) If any action is brought against an indemnified party in respect of
which indemnity may be sought against the Company, such indemnified party shall
promptly notify the Company in writing of the commencement of such action, but
the omission so to notify the Company shall not release the Company from any
liability it may have to such indemnified party except to the extent of actual
prejudice resulting therefrom. The Company shall not be liable for any
settlement of any action or proceeding effected without its prior written
consent.
13. CHOICE OF LAW. This Agreement shall be construed and enforced in accordance
with the law of the State of Texas without giving effect to any conflict of laws
provisions.
14. MODIFICATIONS: WAIVER. No modification or waiver of any provision of this
Agreement shall be valid unless it is in writing and signed by the party against
whom it is sought to be enforced. No waiver at any time of any provision of this
Agreement shall be deemed a waiver of any other provision of this Agreement at
that time or a waiver of that or any other provision at any other time.
15. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between
the parties with regard to the Services to be provided by PDA to the Company and
supersedes all prior agreements or understandings between the Company and PDA or
their agents with regard to the Services.
16. COUNTERPARTS. This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original and all of which taken together shall
constitute but one and the same agreement.
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<PAGE> 6
17. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties set forth herein shall survive the execution and delivery of this
Agreement and the consummation of any offering or transaction contemplated
hereby.
18. NOTICES. All notices, requests, consents and other communications hereunder
shall be in writing, shall be addressed to the receiving party's address set
forth below or to such other address as a party may designate by notice
hereunder, and shall be either (i) delivered by hand, (ii) made by telex,
telecopy or facsimile transmission, (iii) sent by overnight courier, or (iv)
sent by registered mail, return-receipt requested, postage prepaid.
If to PDA: Mr. Jeffrey F. Lee
Managing Principal
Project Development Associates, LLC
885 Hunt Farm Road
Long Lake, Minnesota 55356
Telephone: 612-476-0277
Facsimile: 612-476-0302
If to the Company: Mr. Thomas Murray, CEO
Probex Corporation
1467 LeMay Street, Suite 111
Carrollton, Texas 75007
Telephone: 972-466-1555
Facsimile: 972-466-1556
All notices, requests, consents and other communications hereunder shall be
deemed to have been given either (i) if by hand, at the time of the delivery
thereof to the receiving party at the address of such party set forth above,
(ii) if made by telex, telecopy or facsimile transmission, at the time that
receipt thereof has been acknowledged by electronic confirmation or otherwise,
(iii) if sent by overnight courier, on the next business day following the day
such notice is delivered to the courier service, or (iv) if sent by registered
mail, on the fifth business day following the day such mailing is made.
19. HEADINGS AND CAPTIONS. The headings and captions of the various subdivisions
of this Agreement are for convenience of reference only and shall in no way
modify or affect the meaning or construction of any of the terms or provisions
hereof.
20. NO WAIVER OF RIGHTS, POWERS AND REMEDIES. No failure or delay by a party
hereto in exercising any right, power or remedy under this Agreement, and no
course of dealing among the parties hereto, shall operate as a waiver of any
such right, power or remedy of the party. No single or partial exercise of any
right, power or remedy under this Agreement by a party hereto, nor any
abandonment or discontinuance of steps to enforce any such right, power or
remedy, shall preclude such party from any other or
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<PAGE> 7
further exercise thereof or the exercise of any other right, power or remedy
hereunder. The election of any remedy by a party hereto shall not constitute a
waiver of the right of such party to pursue other available remedies. No notice
or demand on a party not expressly required under this Agreement shall entitle
the party receiving such notice or demand to any other or further notice or
demand in similar or other circumstances or constitute a waiver of the rights of
the party giving such notice or demand to any other or further action in any
circumstances without such notice or demand.
IN WITNESS WHEREOF, PDA and the Company have signed this Agreement as of the
date of execution noted below.
Project Development Associates, LLC
By: /s/ Jeffrey F. Lee 28 July 1999
------------------------- -----------------
Name: Jeffrey F. Lee Date of Execution
Title: Managing Principal
Probex Corporation
By: /s/ Thomas G. Murray 30 July 1999
------------------------- ------------------
Name: Thomas Murray Date of Execution
Title: Chief Executive Officer
PBX PDA /s/ JFL
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<PAGE> 1
EXHIBIT 10.9
FINANCIAL ADVISORY FEE AGREEMENT
This Financial Advisory Fee Agreement (the "Agreement") is made and entered into
as of the 29th day of March, 1999 (the "Effective Date"), by and among Probex
Corporation, a Colorado corporation ("Probex"), Silver Lake Industries, Inc., a
Texas corporation ("Silver Lake") and Brycap Investments, Inc., a Texas
corporation ("brycap").
WHEREAS, Probex is desirous of engaging Silver Lake and Brycap in the capacity
of financial advisors specifically for the purpose of identifying and assisting
Probex in obtaining funding for the expansion of its operations, including but
not limited to, funding for the acquisition of certain sources of feedstock
supplies and the construction of one of more Probex plants (the "Proposed
Investment").
NOW, THEREFORE, in consideration of the premises and the covenants, agreements
and obligations set forth herein and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereby
covenant and agree as follows:
1. Definitions. As used in this Agreement, the following terms, shall have the
meanings indicated below:
"Advisors" means Silver Lake and Brycap, their affiliates' successors and
assigns.
"Affiliate" of a person shall mean any other person that directly, or indirectly
through one or more intermediaries, controls, or is controlled by, or is under
common control with, such person. For the purposes of this definition, "control"
means the power to direct the management and policies of a person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise.
"Additional Securities" means any debt or equity securities of Probex and/or any
of its Affiliates, issued after the Proposed Investment by any person included
on Exhibit "A" attached hereto and in accordance with the provisions set forth
in Section 3 of this Agreement.
"Approved Investor(s)" means those persons and their Affiliates listed on
Exhibit "A" attached hereto.
"Capital Provided" means the entire commitment made by an Approved Investor to
Probex at Closing (as defined below) regardless of whether such commitment is
for debt or equity.
"Closing" means the execution by Probex and an Approved Investor of binding
documentation evidencing the investment by an Approved Investor in the Proposed
Investment or in any Subsequent Transaction, regardless of whether such
investment takes the form of debt or equity.
"Subsequent Transaction" means any investment made by an Approved Investor in
Probex following and/or in addition to but under no circumstances including the
initial Proposed Investment and prior to March 29th, 2004.
<PAGE> 2
2. Fees Payable to Advisors Upon Closing of the Proposed Investment
(a) As consideration for services rendered by the Advisors, should any
one or more of the Approved Investors provide funding for the Proposed
Investment then the fees described below shall be due and payable to the
Advisors at Closing. The cash fees and warrants described in (i) and (ii) below
shall be paid 50% to Brycap and 50% to Silver Lake at Closing. The fee to be
paid to the Advisors by Probex shall be equal to the following:
(i) an amount in cash equal to three percent (3%) of the Capital
Provided by the Approved Investor(s); and
(ii) Five year warrants to purchase a number of shares of Probex common
stock equal to five percent (5%) of the Capital Provided divided by the price
per common share paid by the equity investors participating in the Proposed
Investment. The Advisors' exercise price for the warrants shall be the price per
common share paid by the equity investors participating in the Proposed
Investment. These warrants will be subject to a Warrant Holder's Agreement which
will be negotiated by the parties in good faith and will contain among other
things, a cashless conversion feature and registration rights commensurate with
those of the investors participating in the Proposed Investment.
3. Fees payable to the Advisors for Additional Capital Raised From Approved
Investors. It prior to March 29, 2004, Probex issues any Additional Securities
to an Approved Investor, regardless of whether or not such investor participated
in the Proposed Investment, then the Advisors shall be deemed to have earned and
Probex shall be obligated to pay to Advisors (a) a cash fee equal to one percent
(1%) of the Capital Provided by the Approved Investor(s); and (b) five year
warrants equal to two percent (2%) of the Capital Provided with shares issued
based upon the formula outlined in 2 (a) (ii) above. The Advisors' exercise
price for these warrants shall be the price per common share paid by the equity
investors participating in the Subsequent Transaction. Such fees and warrants
will be due and payable to Advisors at the closing of such Subsequent
Transactions.
4. Breakup Fees Payable to the Advisors. Probex agrees to pay the Advisors a
breakup fee in the event that Probex elects not to accept a firm commitment for
financing from a qualified financing source of the Approved Investors but does
enter into a financing with HSB Engineering Finance, Enron and/or an Affiliate
of either of these companies. Said breakup fee shall be equal to $5,000 per
month that the Advisors were engaged, up to a maximum of $20,000, and 5 year
warrants to purchase 10,000 shares of Probex common stock at a strike price
equal to the price paid per share by HSB and/or Enron.
5. Expenses. Probex agrees to reimburse Advisors, upon request made from time to
time, for its reasonable out-of pocket expenses incurred in connection with
Advisors' activities under this Agreement.
6. Indemnification - Probex agrees to indemnify Advisors and their respective
directors, officers, partners, employees, agents, and controlling persons
(Advisors and each such person being an "Indemnified Party") from and against
any and all losses, claims, damages and liabilities joint or several, related to
the Proposed Investment or any transaction contemplated by this Agreement and
will reimburse any Indemnified Party for all expenses (including fees and
expenses of counsel) as they are incurred in connection with the investigation
of, preparation for or defense of any pending or threatened claim or any action
or proceeding arising therefrom, whether or not such Indemnified Party is a
party
<PAGE> 3
and whether or not such claim, action or proceeding is initiated or brought by
Probex. Probex will not be liable under the foregoing indemnification provision
to the extent that any loss, claim damage or liability is found in a final
judgment by a court to have resulted from Advisors' gross negligence or willful
misconduct.
7. Termination. Advisors' engagement hereunder my be terminated by either Probex
or the Advisors at any time after June 30, 1999 upon written notice to that
effect to the other party, it being understood that the provisions relating to
the payment of fees (including breakup fees) and expenses, indemnifications,
contribution, settlements and the role and duties of the Advisors and Probex
shall survive any such termination.
8. Miscellaneous Provisions.
(a) Relationship. This agreement does not create and shall not be
construed to create, any joint venture or partnership between the parties. No
officer, employee, agent, servant, or independent contractor of the Advisors nor
their Affiliates shall at any time be deemed to be an employee, agent, servant,
or broker of Probex for any purpose whatsoever solely as a result of this
Agreement, and Advisors shall have no right or authority to assume or create any
obligation or liability, express or implied, on Probex's behalf, or to bind
Probex in any manner or thing whatsoever.
(b) Waiver. Notwithstanding anything to the contrary contained herein,
the failure of either party to seek a redress for violation, or to insist upon
the strict performance, of any covenant, agreement, provision, or condition
hereof shall not constitute a waiver of the terms of such covenant, agreement,
provision, or condition at subsequent times or of the terms of any other
covenant, agreement, provision, or condition, and each party shall have all
remedies provided herein with respect to any subsequent act which would have
originally constituted the violation hereunder.
(c) Governing Law. This Agreement and all questions relating to its
validity, interpretation, performance and enforcement (including without
limitation, provisions concerning limitations of action), shall be governed by
and construed in accordance with the internal laws of the State of Texas,
notwithstanding any conflict-of-laws doctrines of such state or other
jurisdiction to the contrary.
(d) Notices. Any notice, request, demand, consent or authorization
(hereinafter referred to as "Notice") required or permitted to be given under
this Agreement shall be in writing and shall be delivered either personally, by
courier or by facsimile to the address or facsimile number below:
If to Probex: If to Advisors:
Mr. Thomas G. Murray Mr. Hill T. Martin
Probex Corporation Silver Lake Industries, Inc.
1467 LeMay Suite 111 2811 McKinney Avenue, Suite 208
Carrollton, Texas 75007 Dallas, Texas 75204
Fax # (972) 466-1556 Fax # (214) 954-6434
(e) Entire Agreement. This Agreement constitutes the sole and only
agreement of the parties
<PAGE> 4
hereto and supersedes any prior understandings or written or oral agreements
between the parties respecting the subject matter herein.
(f) Multiple Counterparts. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed to be
an original, but all of which together constitute one and the same instrument.
(g) Amendments. This Agreement shall not be amended, changed or
modified or any provision thereof waived or discharged except in writing by
both parties.
(h) This Agreement shall be binding upon and inure to the benefit of
the heirs, personal representatives, successors and assigns of the parties
hereto.
(i) Advisors may add names to Exhibit "A" from time to time, provided
all such additions must be approved by Probex in writing.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the Effective Date,
PROBEX CORPORATION
By: /s/ Thomas G. Murray
-----------------------------------
Name: Thomas G. Murray
---------------------------------
Tide: CEO
---------------------------------
BRYCAP INVESTMENTS INC.
By: /s/ Bryant H. Palton
-------------------------
Name: /s/ Bryant H. Palton
-----------------------
Title: President
----------------------
SILVER LAKE INDUSTRIES, INC.
By: /s/ Hill T. Martin
-----------------------------------
Name: Hill T. Martin
---------------------------------
Title: President
--------------------------------
<PAGE> 5
EXHIBIT A
List of Approved Investors
Attached and made a part of that certain Financial Advisory Fee Agreement by and
between Probex Corporation and Silver Lake Industries, Inc. and Brycap
Investments, Inc,
<TABLE>
<S> <C>
Associated Energy Managers, Inc. Kisco Management Corporation
Bank One Leucadia National Corporation
Bank of America (NationsBank) Lim Rock Partners
Bank of Oklahoma MSD Capital Corporation
CIBC Oppenheimer Corp. Madison Dearborn Partners
Calpine Corporation McMullen Group
Cambrian Capital Corporation Natural Gas Partners
Capital Resource Partners Prudential Capital
Capstone Capital Corporation Roff Resources, LLC
Chase Bank SCF Partners
The Common Fund Shell Capital, Inc.*
EOS Partners Southern Company Energy Marketing, L.P.
Energy Marketing, L.P. Starr Securities, Inc,
ESL Investments Stratford Capital Partners LP/Stratford Equity
Encap Investments, Inc, (El Paso Energy) Partners, LP
Energy Spectrum Advisors, Inc. Stratford Industries
First Union Capital Markets Corp. TGF Management
Flemings, Inc. Texas Pacific
G. E. Capital Corp. The Beacon Group
Goldman, Sachs Capital Partners The Crossroads Group*
Harbourton Corporation Torch Energy Finance
Harvest Fund Partnership, LP Trust Company of the West
Highgate Holdings Union Bank of California
Hunt Financial Corporation Warburg Pincus
ING Barings Yorktown Partners, LLC
John Hancock Mutual Life Insurance Company
Johnston & Klein
</TABLE>
* To be addressed later.
<PAGE> 6
Amendment to Financial Advisory Fee Agreement
This Amendment is made and entered into as of this 10th day of June, 1999, by
and among Probex Corporation, a Colorado corporation ("Probex"), Silver Lake
Industries, Inc., a Texas corporation ("Silver Lake"), Brycap Investments, Inc.,
a Texas corporation ("Brycap") and David E. Schoenbaum, a Texas resident
("Schoenbaum").
Whereas Probex is desirous of Schoenbaum assisting Silver Lake and Brycap in
their financing activities under that certain Financial Advisory Fee Agreement
dated as of March 29, 1999 (the "Agreement"),
Now therefore, in consideration of the premises and the covenants, agreements
and obligations set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
The Agreement shall be amended as provided below:
1. The definition of "Advisors" shall be amended to read in its entirety
as follows:
"Advisors" shall mean Silver Lake, Brycap, and David E. Schoenbaum,
their affiliates, successors and assigns,
2 Section 2 shall be amended to read in its entirety as follows:
Fees Payable to Advisors Upon Closing of the Proposed Investment
(a) Except as provided in paragraph (b) below, as consideration for the
services rendered by the Advisors, should any one or more of the Approved
Investors provide funding for the Proposed Investment then the fees described
below shall be due and payable to the Advisors at Closing. The cash fees and
warrants described in (i) and (ii) below shall be paid in equal shares of 1/3
each to Brycap, Silver Lake and Schoenbaum at Closing. The total fees to be
paid to the Advisors by Probex under this paragraph (a) shall be equal to the
following:
(i) an amount of cash equal to six percent (6%) of the Capital
Provided by the Approved Investor(s); and
(ii) Five year warrants to purchase a number of shares of Probex common
stock equal to six percent (6%) of the Capital Provided divided by the price per
common share paid by the equity investors participating in the Proposed
Investment. The Advisors' exercise price for the warrants shall be the price per
common share paid by the equity investors participating in the Proposed
Investment. These warrants shall be subject to a Warrant Holder's Agreement
which will be negotiated by the parties in good faith and will contain among
other things, a cashless
<PAGE> 7
conversion feature and registration rights commensurate with those of the
investors participating in the Proposed Investment.
(b) Should Financial Security Assurance Inc. ("FSA"), or any other Approved
Investor to be listed on an Exhibit "B" to be appended hereto subject however to
the appearance of Probex Corp. for each such Approved Investor guarantee or
insure Probex's obligations to pay principal or interest with respect to any
issuance of debt by Probex, then in lieu of the fees payable under paragraph (a)
above, the fees described in subparagraphs (i) and (ii) below shall be due and
payable to the Advisors at Closing. The cash fees and warrants described in (i)
and (ii) below shall be paid in equal shares of 1/3 each to Brycap, Silver Lake
and Schoenbaum at Closing. The total fees to be paid to the Advisors by Probex
under this paragraph (b) shall be equal to the following:
(i) an amount of cash equal to four and one-half percent (4.5%) of
the Capital Provided by the Approved Investor(s); and
(ii) Five year warrants to purchase a number of shares of Probex common
stock equal to four and one-half percent (4.5%) of the Capital Provided divided
by the price per common share paid by the equity investors participating in the
Proposed Investment. The Advisors' exercise price for the warrants shall be the
price per common share paid by the equity investors participating in the
Proposed Investment. These warrants shall be subject to a Warrant Holder's
Agreement which will be negotiated by the parties in good faith and will contain
among other things, a cashless conversion feature and registration rights
commensurate with those of the investors participating in the Proposed
Investment.
3. Clauses (a) and (b) of Section 3 of the Agreement are amended to read
in their entirety as follows:
"(a) a cash fee equal to one and one-half percent (1.5%) of the Capital
Provided by the Approved Investor(s), and (b) five year warrants equal to three
percent (3.0%) of the Capital Provided with shares issued based upon the formula
outlined in Section 2(a)(ii) above."
4. Section 4 of the Agreement is amended to read in its entirety as
follows:
Consulting Fees Payable to the Advisors Probex agrees to pay each of
the Advisors a consulting fee in the event that Probex enters into a financing
with a person other than an Approved Investor. Said consulting fee shall be
equal to $2,500 per month per Advisor for each month that an Advisor was
engaged, up to a maximum of $ 10,000 per Advisor, and 5 year warrants payable to
each Advisor granting each advisor the right to purchase 10,000 shares of Probex
common stock at a strike price equal to the price paid by the entity or person
providing the aforementioned financing.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Amendment as of
<PAGE> 8
the date first written above.
Probex Corporation
By: /s/ Thomas G. Murray
---------------------
Name: Thomas G. Murray
Title: CEO
Brycap Investments
By: /s/ Bryant H. Palton
---------------------
Name: Bryant H. Palton
Title: President
Silver Lake Industries, Inc.
By: /s/ Hill T. Martin
---------------------
Name: Hill T. Martin
Title: President
/s/ David E. Schoenbaum
- -------------------------
David E. Schoenbaum
<PAGE> 9
EXHIBIT "A"
List of Approved Investors
Attached and made a part of that certain Financial Advisory Fee Agreement by and
between Probex Corporation and Silver Lake Industries, Inc. and Brycap
Investments, Inc.
<TABLE>
<S> <C>
Associated Energy Managers, Inc. Kisco Management Corporation
Bank One Leucadia National Corporation
Bank of America (NationsBank) Lime Rock Partners
Bank of Oklahoma MSD Capital Corporation
CIBC Oppenheimer Corp. Madison Dearborn Partners
Calpine Corporation McMullen Group
Cambrian Capital Corporation Natural Gas Partners
Capital Resource Partners Prudential Capital
Capstone Capital Corporation Roff Resources, LLC
Chase Bank SCF Partners
The Common Fund Shell Capital, Inc.*
EOS Partners Southern Company Energy Marketing, L. P.
ESL Investments Starr Securities, Inc.
Encap Investments Inc. (El Paso Energy) Stratford Capital Partners LP/Stratford Equity
Energy Spectrum Advisors, Inc. Partners, LP
First Union Capital Markets Corp. Stratford Industries
Flemings, Inc. TGF Management,
G. E. Capital Corp. Texas Pacific
Goldman, Sachs Capital Partners The Beacon Group
Harbourton Corporation The Crossroads Group*
Harvest Fund Partnership, LP Torch Energy Finance
Highgate Holdings Trust Company of the West
Hunt Financial Corporation Union Bank of California
ING Barings Warburg Pincus
John Hancock Mutual Life Insurance Company Yorktown Partners, LLC
Johnston & Klein
</TABLE>
* To be addressed later.
<PAGE> 10
SECOND AMENDMENT TO FINANCIAL ADVISORY FEE AGREEMENT
This Amendment is made and entered as of this 15th day of July, 1999, by and
among Probex Corporation, a Colorado corporation ("Probex"), Silver Lake
Industries, Inc., a Texas corporation ("Silver Lake"), Brycap Investments, Inc.,
a Texas corporation ("Brycap") and David E. Schoenbaum, a Texas resident ("DES")
(hereinafter Silver Lake, Brycap and DES are collectively referred to as "SBS").
Whereas, SBS and Probex wish to add certain parties as Approved Investors
included to Exhibit A of that certain Financial Advisory Fee Agreement by and
among SBS and Probex, as amended (the "Agreement"); and
Whereas, DES desires to register and list on Exhibit A such other investors who
may wish participate in Probex's financing:
Now therefore, in consideration of the premises and covenants, agreements, and
obligations set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged the parties hereto
agree as follows:
1. The following entities are hereby added to Exhibit A of the Agreement:
Dain Rauscher
JVW Investments
MBIA
Morgan Stanley Dean Witter Capital Partners
Chase Capital Partners
SG Capital Partners, LLC
First Reserve Corporation
Kayne Anderson Energy Fund, L.P.
Quantum Energy Partners
Relational Investors, LLC
2. For the purposes of this Second Amendment, all capitalized terms not defined
in this Second Amendment shall have the meanings assigned to them in the
Agreement.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this Second
Amendment as of the date first written above.
Probex Corporation
By: /s/ Thomas G. Murray
------------------------------
Name: Thomas G. Murray
-----------------------------
Title: CEO
-----------------------------
Brycap Investments
By: By: /s/ David Schoenbaum
------------------------------ ----------------------
Name: Bryant Patton Schoenbaum
Title: President
Silver Lake Industries, Inc.
By:
-----------------------------
Name: Hill T. Martin
Title: President
<PAGE> 1
EXHIBIT 10.10
[TRAVIS MORGAN LOGO]
FINANCIAL CONSULTING SERVICES AGREEMENT
THIS AGREEMENT, is made and entered into on this 16th day of APRIL, 1999 by and
between TRAVIS MORGAN SECURITIES, INC., having offices at 18952 MacArthur
Blvd., Suite 315, Irvine, California 92612 (hereafter referred to as
Consultant) and PROBEX CORP, having offices as 1467 LeMay, Suite 1 11,
Carrollton, Texas, 75007 (hereafter referred to as Client).
It is agreed by both parties that Consultant and Client will enter into a
binding agreement where Consultant will be retained as a non-exclusive financial
consultant for Probex Corp. as earlier defined in the 'LETTER OF ENGAGEMENT'
dated January 12th, 1999.
The Client desires to be assured of the association and services of the
Consultant in order to avail itself of the Consultant's experience, skills,
abilities, knowledge, and background to facilitate long range strategic
planning, and to advise the Client in business and/or financial matters and is
therefore willing to engage the Consultant upon the terms and conditions set
forth herein. Consultant shall also provide assistance with communications, as
needed, between the Client and the investors of the private placement offering
as defined in the 'LETTER OF ENGAGEMENT' dated January 12th, 1999
Client will pay a fee to Consultant of $1,500 per month for the duration of this
Agreement. In addition, Client shall pay an engagement fee of $1,500 upon
execution of this agreement. The payment(s) is due on the 15th day of each
effective thirty-day (30) period and will cover a service period of Twenty-Four
(24) Months. This Agreement is renewable, under the same terms, for an
additional Twelve (12) Months upon written approval from both parties.
It is understood that, as your non-exclusive financial consultant, Consultant
must in all instances rely upon the accuracy of information supplied to us from
Client's Management, Officers and Directors. The Client assumes full
responsibility for the accuracy and completeness of such information and Client
agrees to indemnify and hold harmless from all claims, cost or other expenses
incurred by any of them (including reasonable attorney's fees) arising out of or
due to the inaccuracies or incompleteness of the material or information
provided by client. The Client will approve all written material prior to
distribution.
Consultant shall at all times act as an independent contractor in the
transaction of its business and shall conduct its activities in accordance with
the rules and regulations of the Securities and Exchange Commission and the long
standing recognized industry business practices.
In witness Hereof, the parties have executed this document as of the date and
year below.
By /s/ Alex D. Daspit Date April 16, 1999
-------------------------- ----------------------------
Client/Company
Title President
--------------------------
By /s/ E. Andrew Sensenig Date April 16, 1999
-------------------------- ----------------------------
E. Andrew Sensenig
Title CHAIRMAN
--------------------------
<PAGE> 2
[TRAVIS MORGAN LOGO]
LETTER OF ENGAGEMENT
January 12th, 1999
PROBEX CORP.
1467 LEMAY, SUITE 111
CARROLLTON, TEXAS 75007
Dear Sirs;
Discussions have been held between you and Travis Morgan Securities,
Inc ("Agent") concerning a proposed private offering by Probex Corp.
(hereinafter the "Company"). The Agent hereby confirms its interest in
underwriting the proposed private placement.
1. Timetable. The parties hereto shall forthwith agree upon a timetable
for the filing of any necessary blue-sky filings and all other steps
necessary to effectuate the private offering at a date acceptable to
the Agent.
2. Agent's Counsel. The Broker Dealer Selling Agreement shall be prepared
by the Company, and the Company shall make all required filings with
respect to the SEC. All corporate proceedings undertaken by the Company
and other legal matters, which relate to the private offering and other
related transactions shall be satisfactory in all material respects to
counsel for the Agent.
3. Private Offering, Closing and Cold Comfort Letter. The Company proposes
to offer, on a non exclusive basis, through the Agent and/or an
underwriting group selected by the Agent up to One Million Four Hundred
Thousand Units at $.50 per unit for an aggregate total of $700,000.
Each unit is comprised of one share of common stock and one warrant to
purchase an additional share of common stock for a period of
twenty-four months at a price of $.75 per share. The Agent has an
over-allotment option to place up to an additional 10% of the shares
offered. The Agent contemplates to underwrite the offering on a
best-efforts basis.
4. Warrants and Options. Warrants and options issued and to be issued by
the Company within a specified time period shall be acceptable to the
Agent.
5. Future Sales. It is understood that during the period of the proposed
Offering and for one year from the date of the offering memorandum, the
Company will not sell any equity or long-term convertible-debt
securities at a price per share, or similar conversion price, which is
less than that of the current private offering without the Agent's
prior written consent, which may not be unreasonably withheld.
MEMBER NASD/SIPC INSURED
[TRAVIS MORGAN LETTERHEAD]
<PAGE> 3
6. Reciprocal Indemnification. It is understood that there is reciprocal
indemnification between the Company and the Agent as to certain
liabilities, including liabilities under the Securities Act of 1933, as
amended.
7. Information Available. It is understood and agreed between the Company
and the Agent that all documents and other information relating to the
Company's affairs will be made available upon request to the Agent and
its attorneys at the Agent's office or at the office of the Agent's
attorney and copies of any such document will be furnished upon request
to the Agent or its attorneys. Included within the documents which must
be made available as soon as possible are at least all Articles of
Incorporation and Amendments, By-Laws and Amendments, Minutes of all
the Company's Incorporations, Directors and Shareholders Meetings, all
financial statements and correct copies of any material contracts,
leases, and agreements to which the Company is a party. At the earliest
practicable date, the Company will furnish the Agent a business plan
showing projected cash flow (or deficiencies) covering a three-year
period. In addition, the Company will provide the Agent with unaudited
quarterly financial data.
8. Properties, Capital Structure, Dilution, Employee Benefit Plans. The
properties owned or held under option by the Company, the capital
structure of the Company immediately preceding the private offering,
the contemplated dilution to the private investor, and Company's
business plan shall be acceptable to the Agent. It is contemplated that
the Shares held by the investors in the private offering will
represent at least 10% of the outstanding Shares. At such time as
investors of the private offering come to own 10% of the outstanding
shares, it is understood that for one year from the date of the
offering memorandum, any future and/or presently contemplated employee
(including officers and/or directors) incentive plan (including royalty
plan), of whatever nature shall be fully disclosed to the Agent and any
new such plan shall be subject to the approval of the Agent, which
shall not be unreasonably withheld.
9. Blue-Sky Laws. It is understood and agreed between the Company and the
Agent that it shall be the obligation of the Company to qualify the
sale of the Company's common stock in such states as may be reasonably
designated by the Agent. The officers, directors and promoters of the
Company will comply with applicable Blue-Sky escrow requirements,
including those pertaining to the escrow of shares provided such escrow
shall in no event extend beyond a period of two years. The parties
hereto shall agree on the division of legal work pertaining to Blue-Sky
qualification.
10. Underwriting Discount. The Shares (including over-allotment shares)
will be placed to institutional and accredited investors by the Agent
and selling group members with a fee of TEN percent (10%), for shares
placed pursuant to their efforts, from the private offering prices. The
Agent may re-allow all or part of such fee to any member of the selling
group. In addition, a fee of FIVE percent (5%) shall be immediately
payable upon the exercise of any Warrants distributed to investors in
the private offering.
11. Agent's Due Diligence. It is understood that the Company shall pay a
fee of TWO percent (2%) to the Agent for its due diligence and
selling-group management efforts for shares placed pursuant to its
efforts. In the event the offering for any reason is not closed, the
Agent will not receive any portion of said due diligence fee and the
Company and the Agent shall be responsible, for their own expenses,
12. Agent's Expense Allowance. It is understood that the Company shall
reimburse the Agent for its expenses on a non-accountable basis in the
amount of THREE percent (3%), for shares placed pursuant to its
efforts. In the event the offering for any reason is not closed, the
Agent will not receive any portion of said expenses allowance, and the
Company and the Agent shall be responsible for their own expenses.
2
<PAGE> 4
13. Warrants. Upon termination of the offering, the Company will sell to
the Agent Common Stock Purchase Warrants, for a purchase price of
$.0001 per Warrant, entitling the Agent to purchase one share of the
Company's Common Stock for each ten shares of the Company's Common
Stock which have been sold in the offering, including, over-allotment
shares. The Warrants shall be non-exercisable for a period of twelve
(12) months following the date of the closing of the offering, However,
if the Company merges or reorganizes in such a way as to terminate the
Warrants, the Warrants may be exercised immediately prior to such
action. Also, the Warrants will contain anti-dilution provisions
acceptable to the Agent.
The Warrants will be exercisable for a period of FIVE (5) years. If the
Warrants are not exercised during this term, they shall by their terms
automatically expire, The exercise price of the Warrants shall be 110%
of the per share offering price. The Company will set aside and at all
times have available a sufficient number of shares of its Common Stock
to be issued upon the exercise of the Warrants to be sold to the Agent.
The Warrants will not be transferable to anyone for a period of TWELVE
(12) months alter the close of the offering, except to the officers of
the Agent.
14. Consulting Agreement. It is understood that the Company shall retain
the Agent as the Company's non-exclusive financial consultants for a
period of 24 months to commence on the closing of the offering, at a
monthly fee of $1,500, or an aggregate of $36,000. Pursuant to this
agreement, the Agents shall provide advisory services related to merger
and acquisition activity, corporate finance and other matters. This
agreement shall be completed and executed between the Company and the
Agent at such time that the Company has received Five Hundred thousand
dollars ($500,000) in gross proceeds from tile offering. In addition,
the Agent shall be given a right of first refusal on future public
offerings during the period of this consulting agreement.
15. Expenses. The Company shall bear all costs and expenses incident to
their issuance, offer, and delivery of the Shares, including all
expenses and fees incident to the filing of any required forms with the
SEC and/or NASDAQ, the costs and counsel fees of qualification under
state securities laws, and fees and disbursements of counsel and
accountants for the Company, costs for preparing and printing any
offering documents and cost of printing as many copies of the offering
documents as the Agent may deem necessary and related exhibits. The
Agent agrees to pay all fees and expenses of any legal counsel whom it
may employ to represent it separately in connection with or on account
of the proposed offering by the Company other than counsel fees
relating to blue-sky filings. To the extent blue-sky work is undertaken
by counsel to the Agent pursuant to paragraph 9 hereof, it shall be
separately billed to the Company and shall be the financial obligation
of the Company
16. Representations of the Company. The Company represents and warrants
that no officer, director or shareholder of the Company is a member of
the NASD, an employee or associated member of the NASD. The Company
represents and Warrants that it has not promised or represented to any
person that any part of the Shares will be directed or otherwise made
available to them in connection with the proposed private placement.
The Company represents that it has separately disclosed to the Agent
all potential conflicts of interest involving officers, directors,
principal shareholders and/or employees.
<PAGE> 5
17. 1934 Act Registration and Quarterly Reports to Shareholders, Quotation
on NASDAQ, Listing in Moody's, Transfer Agent. The Company represents
that, at a minimum, it comply with all mandated and necessary filing
requirements with the NASD and the SEC such as is required to maintain
a listing on the NASD Electronic Bulletin BOARD (NASD:EBB) The Company
will within 120 days from completion of the offering apply for
"listing" on a current basis, if not already listed on an exchange
acceptable to the Agent. The Company, if it does not already have one,
shall obtain a CUSIP number for its certificates and shall engage a
transfer agent acceptable the Agent.
18. Termination. The Company many, at its own discretion, terminate the
offering at any time with a minimum often (10) days written notice to
the Agent. Termination of the offering will relate wholly to the
private offering contemplated herein and have no effect on the
Consulting Agreement as defined in paragraph 14 should such terms have
been met prior to the written termination.
19. Statement of Intent. It is understood that this letter is merely a
letter and statement of intent and not a legally binding agreement
except as to matters set forth in Paragraphs 6, 12 and 15 hereof, The
Agent reserves the right in its uncontrolled discretion to determine
whether the offering can be successfully marketed through a selling
syndicate, and may, without any obligation to the Company, for any
reason, including, without limitation, the generality of the foregoing,
market conditions (both those relating to securities and commodities
generally and those relating to the Company's stock) and the reaction
of prospective members of the selling group to the proposed offering,
decline to proceed further with the offering. If this letter correctly
sets forth our understanding, please so indicate by signing and
returning to us tile enclosed copy of this letter.
Very truly yours,
TRAVIS MORGAN SECURITIES, INC.
By /s/ Joseph Cerbone
----------------------------
Joseph Cerbone, President
Understood and accepted
On 1/13 , 1998
---------------
By /s/ Alex D. Daspit
------------------------
(Signature)
Alex D. Daspit
-------------------------
(Name)
President
-------------------------
(Title)
4
<PAGE> 1
EXHIBIT 10.11
OPTION TO PURCHASE
THIS OPTION TO PURCHASE OR LEASE (this "Agreement") is entered into as
of June ___, 1999, by and between Columbiana County Port Authority, a body
corporate and politic (the "Authority"), and Probex Corporation, a Colorado
corporation, or its assignee ("Probex"),
WITNESSETH:
WHEREAS, the Authority is the owner of certain real property located in
Columbiana County, Ohio (the "Property"), more particularly described on Exhibit
A attached hereto and made a part hereof for all purposes; and
WHEREAS, the Authority is desirous of granting to Probex and Probex is
desirous of obtaining from the Authority, the exclusive, irrevocable right and
option to purchase the Property pursuant to the terms and conditions of the
Agreement for the purposes of erecting a used oil rerefining plant (the
"Facility").
NOW, THEREFORE, in consideration of $5,000, as well as approximately
$100,000 in expenses to be incurred by Probex with respect to this Agreement,
the Property, and the Facility during the Option Period (defined below) and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged by the Authority, the premises and the following mutual
covenants and agreements, the parties hereto covenant and agree as follows:
ARTICLE I
GRANT OF OPTIONS
Section 1.01. Grant of Purchase Option. (a) Upon and subject to the
terms and conditions set forth in this Agreement, the Authority hereby grants
and conveys to Probex the exclusive, irrevocable right and option to purchase
the Property (the "Purchase Option") for a purchase price (the "Purchase Price")
of $1,350,000.00. (b) The Authority shall use its best efforts (i) to purchase,
at a competitive price acceptable to Probex, the approximately 4.2 acres of
property owned by Norfolk Southern described on Exhibit B attached hereto and
made a part hereof for all purposes (the "Norfolk Southern Property") and (ii)
to obtain the release of any easements owned by Norfolk Southern which burden
the Property. If the Authority is successful in so purchasing the Norfolk
Southern Property, then the Norfolk Southern Property shall automatically be a
part of, and shall be included within the definition of, "Property" for all
purposes and shall be burdened by this Agreement, except that Probex shall be
responsible for the cost of the Norfolk Southern Property paid by Port Authority
if Probex elects to purchase such property from Authority. (c) The purchase and
sale of the Property pursuant to any exercise of the Purchase Option shall be
subject to the terms and conditions set forth herein and in a purchase agreement
(the "Purchase Agreement") substantially in the form attached hereto which shall
be more fully negotiated in good faith by the Authority and Probex prior to the
consummation of such purchase and sale of the Property.
<PAGE> 2
Section 1.02. Interim Lease. The "Property" and certain other immediate
surrounding land will be improved by construction of an adjacent highway
primarily using Federal funds, The Federal Highway Administration has determined
that no transfers of title to such land to private industry may take place prior
to completion of the interchange which is projected to occur on or before the
end of the second quarter of the Calendar Year 2001. In the event Probex
chooses to exercise the Purchase Option, then an Interim Lease shall
automatically then be deemed to be in effect between the parties which shall
remain in effect until Authority certifies to Probex in writing that the
interchange is complete. Rental payments under the Interim Lease shall be Twenty
Thousand Dollars ($20,000.00) per month which payments in total shall be
credited against the Purchase Price. Other terms and conditions of the Interim
Lease are set forth in Exhibit C attached hereto and made a part hereof for all
purposes. Closing on the Purchase shall occur in the offices of Authority within
20 business days of Authority's notice to Probex that the interchange is
complete.
Section 1.03. Term of the Option. The Purchase Option shall commence on
the date of this Agreement and shall continue until 5:00 p.m. Central Time
twelve (12) months from the date of this Agreement (the "Option Period").
Section 1.04 Exercise of the Option. Probex may exercise the Purchase
Option by execution and tender to the Authority of a written notice exercising
such Option. If Probex fails to exercise the Purchase Option in accordance with
the terms of this Agreement within the Option Period then the Options and the
rights thereunder of Probex shall automatically and immediately terminate
without notice.
ARTICLE II
DUE DILIGENCE AND TITLE MATTERS
Section 2.01. Environment Assessments. During the Option Period,
Probex, its agents and contractors, shall have the right to enter upon the
Property for the purpose of conducting inspections and investigations, preparing
surveys and site plans, and performing an environmental assessment of the
Property. The environmental assessment may include, but shall not be limited to
subsurface soil and water tests, as well as the testing of any underground
storage tanks and related equipment upon the Property. Probex shall assume all
risks involved in entering upon the Property for the performance of such
activities and shall indemnify and hold the Authority harmless from and against
all loss or expense by reason of all liability due to bodily injury, death of
persons, damage to property sustained by any party or any damage to the Property
arising out of or caused by such entry by Probex, its agents or contractors or
the negligence of Probex or its agents or contractors in the exercise of any of
Probex's rights under this section. Probex, its agents and contractors, shall
also have the right to make inquiries into or contact with, governmental
agencies concerning potentially hazardous substances on the Property without any
liability on the part of Probex, its agents or contractors, to the Authority as
a result thereof.
<PAGE> 3
Section 2.02. Survey. Title Commitment and Miscellaneous Documents.
(a) Within thirty (30) days after the exercise of the Option (and
updated within ninety (90) days) before any consummation of the purchase and
sale or lease of the Property, the Authority, with the cost for such expense to
be borne equally by the parties, shall furnish to Probex a currently dated
survey (the "Survey") of the Property prepared and certified by a duly licensed
professional engineer or surveyor reasonably acceptable to Probex and a title
company selected by Probex (the "Title Company") and sufficient to allow the
Title Company to delete the survey exception. The Survey shall reflect the
following:
(i) A certification to Probex, the Title Company and a lender
to be designated by Probex to the effect that the Survey (a) was made
on the ground as per the field notes shown thereon and correctly shows
the boundary lines and dimensions and the area of the Property (or any
separate parcels thereof), (b) correctly shows the location of all
buildings, structures, and other visible improvements on the Property,
(c) correctly shows the location and dimensions of all alleys, streets,
roads, rights-of-way, easements, and other matters of record of which
the surveyor has been advised affecting the Property according to the
legal description in such easements and other matters (with instrument
book, and page number indicated), (d) except as shown, no portion of
the Property is located within a special flood hazard area, (e) there
are no visible easements, rights-of-way, party walls or conflicts, (f)
there are no visible encroachments or adjoining premises, streets, or
alleys by any of said buildings, structures or other improvements, (g)
there are no visible encroachments on the Property by buildings,
structures, or other improvements situated on adjoining premises, and
(h) the distance from the nearest intersecting street and road is as
shown thereon.
(ii) The location of all improvements, street, highways,
rights-of-ways and easements appurtenant to, traversing, adjoining or
bounding the Property (which shall show all applicable recording data);
(iii) Any encroachments on the Property or protrusions on
adjacent land;
(iv) A metes and bounds description of the Property and the
total acres contained therein;
(v) The beginning point should be established by a monument
located at the beginning point, or by reference to a nearby monument;
(vi) A legally sufficient description for all necessary
easements for access to and from the Property to the nearest publicly
dedicated road or street and for water, storm and sanitary sewer,
electricity, gas and telephone utility service to the Property; and
(vii) The boundary line of highways and streets abutting the
Property and the width of said highways and streets, including any
proposed relocation, modification or widening thereof.
<PAGE> 4
(b) Within thirty (30) days after the exercise for the Purchase Option
and updated within ten (10) days before any consummation of the purchase and
sale of the Property, the Authority, at the Authority's sole cost and expense,
shall cause to be furnished to Probex a current title commitment (a
"Commitment") for an owner's policy of title insurance issued through the Title
Company setting forth the state of title to the Property and all objections or
exceptions thereto including, without limitation, rights-of-way, easements,
restrictions, reservations, covenants, liens, encumbrances, estates and other
conditions, if any, affecting the Property which would appear in an owner's
policy of title insurance, if issued. The Authority shall also cause to be
furnished to Probex, at the Authority's sole cost and expense, a copy of all
instruments creating such aforesaid objections or exceptions to title, if any,
contemporaneously with the furnishing of the Commitment.
ARTICLE III
PROVISIONS OF GENERAL APPLICATION
Section 3.01. Commissions. Probex and the Authority warrant and
represent to the other that neither has made any agreements for real estate
brokers', agents' or finders' fees or commissions by reason of the sale of the
Property, the execution of this Agreement or the consummation of the
transactions contemplated herein. Each party hereto hereby agrees to indemnify
and hold the other party harmless from claims made by any person for any such
fees or like compensation arising on account of such party's acts.
Section 3.02. Condemnation. In the event that any portion or a Property
shall be taken in condemnation or under the right of eminent domain after the
date of the Authority's execution hereof and before the consummation of the
purchase and sale of the Property, this Agreement, at the option of Probex, may
either: (a) be declared null and void and all payments or deposits made
hereunder with respect to the Property shall then immediately be returned to
Probex or (b) the proceeds received from such condemnation or right of eminent
domain proceeding shall be applied against, and pro tanto reduce, the purchase
price hereunder of the Property.
Section 3.03. Further Instruments. Each party hereto shall from time to
time execute and deliver such further instruments as the other party or its
counsel may reasonably request to effectuate the intent of this Agreement,
including, but not limited to, documents necessary for compliance with the laws,
ordinances, rules or regulations of any applicable governmental authorities.
Section 3.04. Governing Law. The parties hereto hereby expressly agree
that the terms and conditions hereof, and the subsequent performance hereunder,
shall be constructed and controlled by the laws of the State of Ohio.
Section 3.05. Headings. Article and Section headings used in this
Agreement are for convenience of reference only and shall not affect the
construction of any provision of this Agreement.
<PAGE> 5
Section 3.06. Entire Agreement; Alteration of Amendment. This Agreement
constitutes the entire agreement of the parties with respect to the subject
matter hereof. Except as incorporated herein by reference, any and all prior
agreements, whether written or oral are superseded hereby and are deemed null
and void and of no effect, The parties are not bound by any agreements,
understandings, conditions or inducements otherwise than are as expressly
referenced, set forth, or stipulate hereunder. No change, alteration, amendment,
modification or waiver of any of the terms or provisions hereof shall be valid
unless the same shall be in writing and signed by the parties hereto.
Section 3.07. Assignments. This Agreement shall be binding upon, and
inure to the benefit of, the Authority and Probex and their respective permitted
successors and assigns. This Agreement shall not be assignable by the Authority.
Probex shall not have the right to assign any or all of its rights or interest
herein without the Authority's prior written approval, which shall not be
unreasonably withheld.
Section 3.08. Notices. All notices, demands and requests provided for
hereunder shall be deemed given and received (a) when personally delivered; or
(b) on the fifth business day after the same are deposited in the United States
mail, postage prepaid, registered or certified mail, return receipt requested,
addressed to the applicable party at the address indicated below for such party,
or as to each party, at such other address as shall be designated by such party
in a written notice to the other party
TO THE AUTHORITY: Columbiana County Port Authority
1250 St. George Street
East Liverpool, Ohio 43920
Attention: Tracy Drake, Executive Director
TO PROBEX Probex Corporation
1467 LeMay Drive, Suite 112
Carrollton, Texas 75007-4923
Attention: Martin MacDonald, Vice President Operations
or at such other place as Probex or the Authority may from time to time
designate in written notice pursuant to the terms hereof.
Section 3.09. Conditions Precedent. Except as otherwise modified or
changed by this Agreement, the contingencies and/or conditions contained in that
certain letter dated April 20, 1999, addressed to the Authority from Probex are
incorporated herein by reference thereto and shall be conditions precedent to
performance by the parties under the Purchase Agreement or the Lease Agreement
regardless of whether expressly stated therein. The party for whose benefit a
condition exists may unilaterally waive same.
Section 3.10. Attorney's Fees. In the event that any party is required
to commence any action or proceeding or against the other concerning the subject
matter of this Agreement, the
<PAGE> 6
prevailing party therein shall be entitled to recover, in addition to any
amounts or relief otherwise awarded, all reasonable costs incurred in connection
therewith, including reasonable attorneys' fees.
Section 3.11. Disclosure for Foreign Investment in Real Property Tax
Act. The Authority shall furnish to Probex on or before the consummation of the
purchase and sale or lease of the Property a sworn Affidavit in form acceptable
to Probex stating under penalty of perjury that the Authority is not a "foreign
person" as such term is defined in Section 1445(f)(3) of the Internal Revenue
Code of 1954, as amended (the "Code") or such other evidence that Probex is not
required to withhold taxes from the purchase price under Section 1445(a) of the
Code as Probex may reasonably determine to meet the requirements of Section
1445(b)(4) and Section 1445(b)(5) of the Code. In the event the Authority does
not furnish the sworn Affidavit or such other evidence deemed satisfactory by
Probex as required by this Section 3.11, Probex may withhold (or may direct the
Title Company to withhold) from the cash funds payable to the Authority pursuant
to this Agreement, an amount equal to the amount required to be so withheld
pursuant to Section 1445(a) of the Code and such withheld funds shall be
deposited with the Internal Revenue Service as required by said Section 1445(a)
and the regulations promulgated thereunder.
Section 3.12. Invalidly of Any Provision. In the event that any
condition or covenant herein contained is held to be invalid or void by any
court of competent jurisdiction, the same shall be deemed severable from the
remainder of this Agreement and shall in no way affect any other covenant or
condition herein contained. If such condition, covenant or other provision shall
be deemed invalid due to its scope or breadth, such provision shall be deemed
valid to the extent of the scope or breadth permitted by law.
Section 3.13. Waiver of Rights. Notwithstanding anything set forth
herein to the contrary, if no notice of a default or waiver is required
hereunder and none has been given, neither party hereto shall be deemed to have
waived any rights which it may have hereunder until forty-eight (48) hours
following receipt by it (the "Waiving Party") of written notice from the other
party alerting the Waiving Party to the fact that the time for exercising any,
right or remedy hereunder has elasped without exercise thereof and such time for
exercise shall automatically be a period which ends forty-eight (48) hours after
such notice or will elapse pursuant to the terms of this Agreement not more than
forty-eight (48) hours following the date of such notice. If no action is taken
by the Waiving Party within the forty-eight (48) hour period following such
notice, said right shall conclusively be deemed to have been waived. The intent
of this section is to avoid unintentional waivers by either party hereto of any
of its rights hereunder.
<PAGE> 7
Section 3.14. Memorandum of Option. The Authority shall execute and
deliver to Probex a written memorandum of this Agreement which Probex may record
in the state, county or municipality in which the Property is located.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered as of the day and year first above written.
PROBEX: THE AUTHORITY:
Probex Corporation, Columbiana County Port Authority,
A Colorado corporation A body corporate and politic
By: /s/ Marty MacDonald By: /s/ Tracy V. Drake
------------------------- -------------------------------------
Name: Marty McDonald Name: Tracy V. Drake
------------------------- -----------------------------------
Title: Executive V.P. Title: Executive Director
------------------------- ----------------------------------
DATE: 07/07/99 DATE: 6/28/99
------------------------- ----------------------------------
<PAGE> 8
EXHIBIT "A"
COLUMBIANA COUNTY, OHIO
[MAP]
<PAGE> 1
EXHIBIT 10.12
NATIONAL CAPITAL MERCHANT GROUP, LTD.
SUITE 61, GROSVENOR CLOSE
SHIRLEY STREET - P.O. BOX N-7521
NASSAU, BAHAMAS
FINANCIAL CONSULTING SERVICES AGREEMENT
This Financial Consulting Services Agreement (the "Agreement") is
entered this 7th day of JUNE, 1999 by and between NATIONAL CAPITAL MERCHANT
GROUP, LTD. ("Consultant") a Bahamian corporation and PROBEX CORP. ("Client"), a
Colorado corporation, with reference to the following:
RECITALS
A. The Client desires to be assured of the association and services of
the Consultant in order to avail itself of the Consultant's experience, skills,
abilities, knowledge, and background to facilitate long range strategic
planning, and to advise the Client in business and/or financial matters and is
therefor willing to engage the Consultant upon the terms and conditions set
forth herein;
B. The Consultant agrees to be engaged and retained by the Client and
upon the terms and conditions set forth herein.
NOW, THEREFOR, in consideration of the foregoing, of the mutual
promises hereinafter set forth and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties
hereto agree as follows:
1. Engagement. Client hereby engages Consultant on a non-exclusive basis, and
Consultant hereby accepts the engagement to become a financial consultant to the
Client and to render such advice, consultation, information, and services to the
Directors and/or Officers of the Client regarding general financial and business
matters including, but not limited to:
A. Coordination and facilitation of an investor relations
program, including assistance with press releases,
Internet/Email distribution, RIBA and Industry/Trade Show
representation, etc. It is understood that the Consultant will
act primarily in a lead capacity in such efforts; however,
specific costs for each will be in addition to the financial
consulting fees defined herein. Any and all additional fees
must be pre-approved in writing by the Client;
B. Periodic reporting as to developments concerning the general
financial markets and public securities markets and industry
which may be of interest or concern to the Client or the
Client's business; and
C. Broker/dealer and institutional investor relations for Client.
Consultant shall have no power to bind Client to any contract or
obligation or to transact any business in Client's name or on behalf of Client
in any manner.
1
<PAGE> 2
2. Term. The term ("Term") of this Agreement shall commence on the date
hereof and continue for SIX (6) months. The Agreement may be extended upon
agreement by both parties upon terms and conditions agreed to by the parties,
unless or until the Agreement is terminated. Either party may cancel this
Agreement upon five days written notice in the event either party violates any
material provision of this Agreement and fails to cure such violation within
five (5) days of written notification of such violation from the other party.
Such cancellation shall not excuse the breach or non-performance by the other
party or relieve the breaching party of its obligation incurred prior to the
date of cancellation.
3. Compensation and Fees. As consideration for Consultant entering into
this Agreement, Client shall pay Consultant the following:
Warrants to purchase shares of restricted common stock of Client in the
amount of $ $50.00, (55,000) exercisable at $0.01 per share on or prior
to ONE (1) year from the date hereof. In addition, at the discretion of
the Client, up to another 50,000 warrants to purchase shares of
restricted common stock exercisable at $0.01 per share on or prior to
TWO (2) years from the date from issue, may be issued upon completion
of certain performance-based milestones. These milestones shall be
verbally agreed upon between the Client and Consultant.
The Shares, when issued to Consultant, will be duly authorized, validly
issued and outstanding, fully paid and nonassessable, not subject to any liens
or encumbrances and shall be issued to Consultant in accordance with a mutually
acceptable plan of issuance as to relieve securities or Consultant from
restrictions upon transferability of shares in compliance with applicable
registration provisions or exemptions.
The Client will pay an engagement fee of $550.00 to Consultant upon
execution of this agreement.
The Client will also reimburse Consultant for any written pre-approved
expenses that may be incurred in the course of executing the terms of this
agreement.
4. Exclusivity; Performance; Confidentiality. The services of
Consultant hereunder shall not be exclusive, and Consultant and its agents may
perform similar or different services for other persons or entities whether or
not they are competitors of Client. Consultant shall be required to expend only
such time as is necessary to services to Client in a commercially reasonable
manner. Consultant acknowledges and agrees that confidential and valuable
information proprietary to Client and obtained during its engagement by the
Client, shall not be, directly or indirectly, disclosed without the prior
express written consent of the Client, unless and until such information is
otherwise known to the public generally or is not otherwise secret and
confidential.
5. Independent Contractor. In its performance hereunder, Consultant and
its agents shall be an independent contractor. Consultant shall complete the
services required hereunder according to his own means and methods of work,
which shall be in the exclusive charge and control of Consultant and which shall
not be subject to the control or supervision of Client, except as to the results
of the work, Client acknowledges that nothing in this Agreement shall be
construed to require Consultant to provide services to Client at any specific
time, or in any specific place or manner.
2
<PAGE> 3
6. Miscellaneous. No waiver of any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of any other provision and no
waiver shall constitute a continuing waiver. No waiver shall be binding unless
executed in writing by the party making the waiver. No supplement, modification,
or amendment of this Agreement shall be binding unless executed in writing by
all parties. This Agreement constitutes the entire agreement between the parties
and supersedes any prior agreements and negotiations. There are no third party
beneficiaries of this Agreement.
IN WITNESS WHEREOF, the parties hereto have entered into this Agreement
on the date first written above.
"Client"
X /s/ Thomas G. Murray, CEO
------------------------------------
By: Thomas G. Murray, CEO
------------------------------------
For: Probex Corp.
------------------------------------
"Consultant"
X /s/ Darrel T. Uselton
------------------------------------
By: Darrel T. Uselton, Agent
------------------------------------
For: National Capital Merchant Group. Ltd.
DELIVERY INSTRUCTIONS
BY MAIL: National Capital Merchant Group, Ltd.
c/o The National Capital Companies
18952 MacArthur Blvd., Suite 315
Irvine, California 92612
BY DTC: Dominick & Dominick Securities
DTC # 5003 / BBS # T090
FBO National Capital Merchant Group, Ltd.
Acct # 49-6557-0
3
<PAGE> 1
EXHIBIT 10.13
FINANCIAL ADVISORY FEE AGREEMENT
This Financial Advisory Fee Agreement (the "Agreement") is made and entered into
as of the 28th day of June, 1999 (the "Effective Date"), by and among Probex
Corporation, a Colorado corporation ("Probex"), and William M. Noble Jr., a
Texas resident.
WHEREAS, Probex is desirous of engaging Noble in the capacity of financial
advisor specifically for the purpose of identifying and assisting Probex in
obtaining funding for the expansion of its operations, including but not limited
to, funding for the acquisition of certain sources of feedstock supplies and the
construction of one or more Probex plants (the "Proposed Investment").
NOW, THEREFORE, in consideration of the premises and the covenants, agreements
and obligations set forth herein and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereby
covenant and agree as follows:
1. Definitions. As used in this Agreement, the following terms shall have the
meanings indicated below:
"Advisor" means Noble, or his affiliates successors and assigns.
"Affiliate" of a person shall mean any other person that directly or indirectly
through one or more intermediaries, controls, or is controlled by, or is under
common control with, such person. For the purposes of this definition, "control"
means the power to direct the management and policies of a person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise.
"Additional Securities" means any debt or equity securities of Probex and/or any
of its Affiliates, issued after the Proposed Investment by any person included
on Exhibit "A" attached hereto and in accordance with the provisions set forth
in Section 3 of this Agreement.
"Approved Investor(s)" means those persons and their Affiliates listed on
Exhibit "A" attached hereto.
"Capital Provided" means the entire commitment made by an Approved Investor to
Probex at Closing (as defined below) regardless of whether such commitment is
for debt or equity.
"Closing" means the execution by Probex and an Approved Investor of binding
documentation evidencing the investment by an Approved Investor in the Proposed
Investment or in any Subsequent Transaction, regardless of whether such
investment takes the form of debt or equity.
"Subsequent Transaction" means any investment made by an Approved Investor in
Probex following and/or in addition to but under no circumstances including the
initial Proposed Investment and prior to May 28th, 2004.
<PAGE> 2
2. Fees Payable to Advisor, Upon Closing of the Proposed Investment. As
consideration for services rendered by the Advisor, should any one or more of
the Approved Investors provide funding for the Proposed Investment then the fees
described below shall be due and payable to the Advisor at Closing. The fee to
be paid to the Advisor shall be equal to the following:
(i) An amount in cash equal to six percent (6%) of the Capital Provided
by the Approved Investor(s); and
(ii) Five year warrants to purchase a number of shares of Probex common
stock equal to six percent (6%) of the Capital Provided divided by the price per
common share paid by the equity investors participating in the Proposed
Investment. The Advisor's exercise price for the warrants shall be the price per
common share paid by the equity investors participating in the Proposed
Investment. These warrants will be subject to a Warrant Holder's Agreement which
will be negotiated by the parties in good faith and will contain among other
things, a cashless conversion feature and registration rights commensurate with
those of the investors participating in the Proposed Investment.
3. Fees payable to the Advisor for Additional Capital Raised From Approved
Investors. If, prior to May 28, 2004, Probex issues any Additional Securities to
an Approved Investor, regardless of whether or not such investor participated in
the Proposed Investment, then the Advisor shall be deemed to have earned and
Probex shall be obligated to pay to Advisor (a) a cash fee equal to one percent
(1%) of the Capital Provided by the Approved Investor(s); and (b) five year
warrants equal to two percent (2%) of the Capital Provided with shares issued
based upon the formula outlined in 2 (a) (ii) above. The Advisor's exercise
price for these warrants shall be the price per common share paid by the equity
investors participating in the Subsequent Transaction. Such fees and warrants
will be due and payable to Advisor at the closing of such Subsequent
Transactions.
4. Expenses. Probex agrees to reimburse Advisor, upon request made from time to
time, for its reasonable out of-pocket expenses incurred in connection with
Advisor's activities under this Agreement.
5. Indemnification - Probex agrees to indemnify Advisor, and their respective
directors, officers, partners, employees, agents, and controlling persons
(Advisor and each such person being an "Indemnified Party") from and against any
and all losses, claims, damages and liabilities, joint or several, related to
the Proposed Investment or any transaction contemplated by this Agreement and
will reimburse any Indemnified Party for aft expenses (including fees and
expenses of counsel) as they are incurred in connection with the investigation
of, preparation for or defense of any pending or threatened claim or any action
or proceeding arising therefrom, whether or not such Indemnified Party is a
party and whether or not such claim action or proceeding is initiated or brought
by Probex. Probex will not be liable under the foregoing indemnification
provision to the extent that any loss, claim, damage or liability is found in a
final judgement by a court to have resulted from Advisor's gross negligence or
willful misconduct.
<PAGE> 3
6. Termination. Advisor's engagement hereunder may be terminated by either
Probex or the Advisor at any time after July 30, 1999 upon written notice to
that effect to the other party, it being understood that the provisions relating
to the payment of fees and expenses, indemnification's, contribution,
settlements and the role and duties of the Advisor and Probex shall survive any
such termination.
7. Miscellaneous Provisions.
(a) Relationship. This agreement does not create, and shall not be
construed to create, any joint venture or partnership between the parties. No
officer, employee, agent, servant, or independent contractor of the Advisor nor
their Affiliates shall at any time be deemed to be an employee, agent, servant,
or broker of Probex for any purpose whatsoever solely as a result of this
Agreement, and Advisor shall have no right or authority to assume or create any
obligation or liability, express or implied, on Probex's behalf, or to bind
Probex in any manner or thing whatsoever.
(b) Waiver. Notwithstanding anything to the contrary contained herein,
the failure of either party to seek a redress for violation, or to insist upon
the strict performance, of any covenant, agreement, provision, or condition
hereof shall not constitute a waiver of the terms of such covenant, agreement,
provision, or condition at subsequent times or of the terms of any other
covenant, agreement, provision, or condition, and each party shall have all
remedies provided herein with respect to any subsequent act which would have
originally constituted the violation hereunder.
(c) Governing Law. This Agreement and all questions relating to its
validity, interpretation, performance, and enforcement (including without
limitation, provisions concerning limitations of action), shall be governed by
and construed in accordance with the internal laws of the State of Texas,
notwithstanding any conflict-of-laws doctrines of such state or other
jurisdiction to the contrary.
(d) Notices. Any notice, request, demand, consent or authorization
(hereinafter referred to as "Notice") required or permitted to be given under
this Agreement shall be in writing and shall be delivered either personally, by
courier or by facsimile to the address or facsimile number below:
If to Probex: If to Advisor:
Mr. Thomas G. Murray
Probex Corporation Mr. William M. Noble Jr.
1467 LeMay, Suite 111 100 Highland Park Village, Suite 370
Carrollton, Texas 75007 Dallas, Texas 75205
Fax # (972) 466-1556 Fax # (214) 526-1231
(e) Entire Agreement. This Agreement constitutes the sole and only
agreement of the parties hereto and supersedes any prior understandings or
written or oral agreements between the parties respecting the subject matter
herein.
(f) Multiple Counterparts. This Agreement may be executed
simultaneously in two or more
<PAGE> 4
counterparts, each of which shall be deemed to be an original, but all of which
together constitute one and the same instrument.
(g) Amendments. This Agreement shall not be amended, changed or modified or any
provision thereof waived or discharged except in writing by both parties.
(h) This Agreement shall be binding upon and inure to the benefit of the heirs,
personal representatives, successors and assigns of the parties hereto.
(i) Advisor may add names to Exhibit "A" from time to time, provided all such
additions must be approved by Probex in writing.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the Effective Date.
PROBEX CORPORATION
By: /s/ Thomas G. Murray
-------------------------------
Name: Thomas G. Murray
------------------------------
Title: CEO
----------------------------
WILLIAM M. NOBLE Jr.
By: /s/ William Noble, Jr.
-------------------------------
<PAGE> 5
EXHIBIT A
1. Jim Vandeveer
2. Sam Wiley and Affiliated Companies
3. Mike Mullen
<PAGE> 1
EXHIBIT 10.14
APS FINANCIAL CORPORATION
July 21, 1999
CONFIDENTIAL
Probex Corp.
1467 LeMay, Suite 111
Carrollton, Texas 75007
Attention: Thomas G. Murray, Chief Executive Officer
Gentlemen:
The purpose of this letter (this "Letter Agreement") is to
confirm the engagement of APS Financial Corporation, a Colorado
corporation ("APS Financial") to act as exclusive placement agent to
the Probex Corp. (the "Company") in connection with a proposed private
placement (the "Placement") of the Company's 10% Cumulative Convertible
Preferred Stock (the "Securities"),
1. Engagement, It is expressly understood and acknowledged that APS
Financial's engagement hereunder does not constitute any commitment, expressed
or implied, on the part of APS Financial to purchase or place the Securities and
that the placement of the Securities by APS Financial will be made on a "best
efforts" basis,
(a) The Company will offer, on an exclusive basis, through APS
Financial, up to Five Million Dollars ($5,000,000) of the Securities. The
Securities will be sold for Ten Dollars per share ($10/ share). Upon written
consent of the Company, the Company will offer, through APS Financial on the
same terms and conditions provided herein, an additional Two Million Dollars
($2,000,000) in Securities, aggregating up to a total of Seven Million Dollars
($7,000,000). The Securities shall have such other rights and preferences as
shall agreed upon by APS Financial and the Company. Furthermore, purchasers of
the Securities shall receive "piggyback" registration rights with respect to the
Company common stock obtainable by them, through conversion or dividend, that
will be senior to all other registration rights except only those already
granted to HSB Engineering Finance Corporation (HSB) pursuant to that certain
Investors Rights Agreement dated June 30, 1998. Purchasers of the Securities
will be entitled to receive the annual audited, and quarterly unaudited,
financial statements at the same time as provided to HSB until such time as the
Company commences the filing of periodic reports pursuant to the Securities
Exchange Act of 1934.
(b) It is understood and agreed between the Company and APS Financial
that it shall be the obligation of the Company to (i) prepare, and provide an
adequate supply of, the offering memorandum (the "Memorandum"), subscription
materials and other related documentation (together with the Memorandum, the
"Offering Materials") and (ii) qualify the sales of the Securities (through
filing or other required action) with the Securities and Exchange Commission
(the "SEC") and under any other applicable state securities law or agency.
[SIPC LOGO]
[APS FINANCIAL CORPORATION LETTERHEAD]
<PAGE> 2
Probex Corp.
July 21, 1999
Page 2
(c) The Company represents and warrants that this Letter Agreement and
the transactions contemplated hereunder do not violate, conflict with, give rise
to any right of first refusal to purchase the Securities, or constitute a
default under, the terms, conditions or provisions of that certain Letter of
Engagement, dated January 12, 1999, by and between Travis Morgan Securities,
Inc. and the Company, or of any other contract to which the Company or any of
its affiliates is a party, including, without limitation, any underwriting
contracts, exclusivity contracts, investor rights agreements or rights of first
refusal.
(d) The Placement shall begin (the "Placement Opening Date") July 23,
1999, assuming delivery of the final Offering Memorandum to APS Financial and
the scheduling and mailing of notice, in compliance with all applicable legal
requirements, of the special meeting of shareholders of the Company to approve
all necessary amendments to the Company's Articles of Incorporation to authorize
the Placement and approve the terms of the Securities by the close of business
on July 23, 1999, If such conditions have not been satisfied by the close of
business July 23, 1999, then the Placement Opening Date shall be the first
business day on which both such conditions have been satisfied. Unless otherwise
extended by mutual agreement, APS Financial shall be entitled to terminate the
Placement in the event all necessary shareholder approvals have not been
obtained, and the necessary amendments to the Company's Articles of
Incorporation have not been filed by the close of business on August 10, 1999.
The Placement shall remain open for a period (the "Placement Period") of: (x)
sixty (60) days, and (y) thereafter; provided that the Company may close the
Placement Period at any time after the initial 60-day period upon ten (10) days
written notice to APS Financial. All terms, conditions and provisions of this
Letter Agreement will survive the close of the Placement Period. Notwithstanding
the foregoing, the Company may terminate (the "Termination Option") the
Placement if prior to the close of business August 13, 1999, or 15 business days
after the Placement Opening Date (if such date is not July 23, 1999) APS
Financial and/or the Company have not received subscriptions for Securities
totaling at least One Million Dollars ($1,000,000), and the associated cash
funding within ten calendar thereafter, Upon exercise of the Termination Option,
or termination of the Placement by APS Financial as provided above, APS
Financial will return all subscriptions received. The indemnification and
confidentiality obligations of the Company, provided herein, shall survive any
exercise of the Termination Option.
(e) In connection with its engagement hereunder, APS Financial
shall:
i. review the Offering Materials;
ii. assist the Company in formulating a marketing
strategy for the Securities and in developing
procedures and a timetable therefor,
iii. identify and contact prospective purchasers of the
Securities;
iv. advise the Company as to the timing, structure and
pricing of the Placement; and
<PAGE> 3
Probex Corp.
July 21, 1999
Page 3
V. provide such other investment banking services as are
customary for similar transactions which have been
mutually agreed upon by the Company and APS
Financial.
(f) The Company, and its affiliates, have not taken, and will not
take, any action, directly or indirectly, that may cause the Placement to fail
to be entitled to exemption from registration under federal or applicable state
securities laws or "blue sky" laws. APS Financial, and its affiliates, have not
taken, and will not take, any action, directly or indirectly, that may cause the
Placement to fail to be entitled to exemption from registration under federal or
applicable state securities laws or "blue sky" laws: provided the provisions of
this sentence shall not apply to any exemption from registration that is not
available due to APS Financial fulfilling its obligations pursuant to this
Letter Agreement.
(g) APS Financial may, at its own expense, place announcements or
advertisements in financial newspapers and journals describing its services
hereunder.
(h) The Company agrees that if the Termination Option is not
exercised, then if at any time prior to the second anniversary of the close of
the Placement Period, it shall sell any Securities or any other securities to
any person or entity to whom Securities were placed by APS Financial during the
Placement Period, the Company shall pay to APS Financial the Cash Placement Fee
pursuant to Section 3(a) of this Letter Agreement.
(i) The Company agrees that APS Financial, and its affiliates, may
at any time, hold long or short positions, may trade or otherwise effect
transactions for their own account or the accounts of customers, in securities
of the Company or other affiliates of the Company, and such transactions will
not constitute a conflict of interest hereunder; provided APS Financial agrees
not to effect or allow its affiliates to effect, any such transactions during
the Placement Period if such would violate applicable laws.
2. Fees, Expenses, and Advisory Board Position. As compensation for APS
Financial's services hereunder, the Company hereby agrees to pay and deliver,
promptly upon receipt of any proceeds from sales of the Securities, to APS
Financial, the fees and warrants as follows:
(a) Fees
(i) A Cash Placement Fee equal to Six Percent (6%) of the
total amount of the subscriptions for Securities;
(ii) A Due Diligence Fee equal to Two Percent (2%) of the
total amount of the subscriptions for Securities; and
(iii) An Unaccountable Expense Fee equal to Three Percent
(3%) of the total amount of the subscriptions for
Securities without in any way
3
<PAGE> 4
Probex Corp.
July 21, 1999
Page 4
limiting the indemnity obligations of the Company, it
is agreed and understood that in consideration for
the Unaccountable Expense Fee described above, APS
Financial will bear all of its own expenses incurred
in connection with performing its services under this
Letter Agreement,
(b) Warrants
Warrants entitling APS Financial, its employees, affiliates, agents, or
representatives, and their respective assigns or successors, to exercise an
option to purchase the APS Financial Shares (as defined herein), in whole or in
part, at any time, and from time to time, on or prior to the fifth anniversary
of the close of the Placement Period, at One Dollar and Eighty Seven and
One-Half Cents per share ($1.875/share). The APS Financial Shares means that
number of shares of the Company's no par value common stock (the "Common Stock")
equal to the product of: (i) the aggregate number of shares of the Securities
subscribed, multiplied by (ii) eighty percent (80%). Provided that the APS
Financial Shares shall be subject to adjustment for stock dividends or stock
splits in the same proportion as the increase of outstanding shares is to the
total authorized stock. All Common Stock acquirable upon exercise of the
warrants shall be subject to the same type and priority of registration rights
as provided to purchasers of the Securities pursuant to Section 1(a).
(c) Advisory Board Position
Until the third anniversary of the close of the Placement Period, and
provided the Company receives at least $2.5 million in gross proceeds from the
sale of the Securities, the Company shall designate a representative selected by
APS Financial to be an advisory director on the Company's Board of Directors,
and such advisory director shall in all respects be treated as a member of the
Company's Board of Directors, with the exception of voting rights, and shall be
entitled to the same notice, participation, information, and other rights as
afforded, from time to time, to the Company's voting board members: provided,
however that such advisory director shall be entitled to reimbursement of all
reasonable travel and lodging expenses incurred in attending meetings, and shall
be entitled to one-half of the compensation paid to regular board members
(whether in cash, stock or otherwise) in their capacity as board members. During
the three year period APS Financial shall be entitled to change the person
designated to be the advisory director upon written notice to the Company and
shall be entitled to have substitute representatives attend or otherwise
participate in meetings whenever the current designated advisory director is
unable to do so: provided that if the advisory director or substitute
representative is other than William A. Searles or George S. Conwill the Company
shall be entitled to approve such person, which approval shall not be
unreasonably withheld.
Notwithstanding the foregoing, not less than one year from the
anniversary date of the close of the Placement Period, the Company shall have
the option to terminate the Advisory Board position held by APS Financial if the
Preferred Shares have been forced to convert into common shares under the
terms of the Offering.
4
<PAGE> 5
Probex Corp.
July 21, 1999
Page 5
3. Indemnification. The Company agrees to indemnify APS Financial and
related persons and affiliates in accordance with the indemnification letter
attached hereto as Schedule A, the provisions of which are incorporated herein
in their entirety.
4. Disclosure.
(a) The Company recognizes and confirms that APS Financial, in acting
pursuant to this engagement, will be using information in reports and other
information provided by others, including, without limitation, information
provided by or on behalf of the Company, and that APS Financial does not assume
responsibility for and may rely, without independent verification, on the
accuracy and completeness of any such reports and information. The Company
hereby warrants that the Memorandum and other Offering Materials, and any other
information relating to the Company or the Placement, will not contain any
untrue statement of a material fact or omit to state any material fact necessary
to make the statements contained therein, in the light of circumstances under
which they were made, not misleading. The Company agrees to provide APS
Financial with (i) prompt notice of any material development affecting the
Company or the occurrence of any event or other change known to the Company that
could result in the Memorandum or other Offering Materials containing an untrue
statement of a material fact or omitting to state any material fact necessary to
make the statements contained therein, in the light of the circumstances under
which they were made, not misleading, (ii) copies of any financial reports as
soon as reasonably practicable and (iii) such other information concerning the
business and financial condition of the Company as APS Financial may from time
to time reasonably request. APS Financial will have the right to approve all
Offering Materials and other written communications furnished by or on behalf of
the Company in connection with the Placement and the Company will cause to be
furnished to APS Financial and the purchasers of the Securities, on the closing
date of the Placement, copies of such opinions of counsel and such other
documents, letters, certificates and opinions AS APS Financial or the purchasers
may reasonably request in form and substance reasonably satisfactory to APS
Financial and its counsel.
(b) The Company agrees that any information or advice rendered by
APS Financial or its representatives in connection with this engagement is for
the confidential use of the Company only and, except as otherwise required by
law, the Company will not and will not permit any third party to disclose or
otherwise refer to such advice or information in any manner without APS
Financial's prior written consent.
5. Binding Arbitration. In the event of any dispute relating to this
Letter Agreement, the same shall be referred to three arbitrators for binding
arbitration. The three arbitrators shall be selected, one each, by (i) the
Company, (ii) APS Financial, and (iii) mutual agreement of the two arbitrators
selected by the Company and APS Financial. Each arbitrator shall be a
knowledgeable, independent businessperson or professional. If either the Company
or APS Financial refuse or neglect to appoint an arbitrator within 30 days after
receipt of the written request for arbitration, the initiating party may appoint
a second arbitrator. If the two arbitrators
5
<PAGE> 6
Probex Corp.
July 21, 1999
Page 6
fail to agree on the selection of a third arbitrator within 30 days of their
appointment, each of them shall name three individuals, of whom the other shall
decline two, and the decision shall be made by drawing lots.
The Company shall bear and APS Financial shall bear their own expense
in an arbitration including their arbitrator fees and attorneys' fees. The
Company and APS Financial shall each bear half of the expense of the third
arbitrator. Any remaining costs of the arbitration proceedings shall be
apportioned by the three arbitrators.
The arbitration proceedings shall be conducted in accordance with the
commercial arbitration rules of the American Arbitration Association, except
that the Company and APS Financial shall be entitled to take discovery as
provided under Federal Rules of Civil Procedure Nos. 28 through 36 during a
period of ninety (90) days after the final arbitrator is appointed and the
arbitrators shall have the power to issue subpoenas, compel discovery, award
sanctions and grant injunctive relief. The arbitrators shall be entitled to
retain an independent attorney to advise them as to legal matters. The
arbitration hearings shall commence no sooner than one hundred twenty (120) days
after the date the final arbitrator is appointed and not later than one hundred
eighty (180) days after such date. The arbitration hearing shall be conducted
during normal working hours on business days without interruption or adjournment
of more than two days at any one time or six (6) days in the aggregate. The
arbitrators shall decide by a majority vote of the arbitrators. The arbitrators
shall deliver their decision to the Company and APS Financial in writing within
20 days after the conclusion of the arbitration hearing, which written decision
shall include detailed findings of fact and conclusions of law. There shall be
no appeal from their written decision, except as permitted by applicable law.
Any arbitration instituted pursuant to this Section shall be held in
Austin, Texas or such other city that is mutually agreeable to the Company and
APS Financial, with the precise location within such city being as agreed upon
by the Company and APS Financial or, absent such agreement, at a location within
such city designated by the American Arbitration Association's resident manager
in Austin, Texas.
Notwithstanding any other provision of this Section 5, nothing
contained in this Letter Agreement shall require arbitration of any issue for
which injunctive relief is properly sought by a party hereto; provided the
awarding of monetary damages may only be made through arbitration. The
arbitrators, if they find that any party has acted in a fraudulent manner with
respect to any representation contained in, or any transaction contemplated by,
this Letter Agreement, may award punitive damages to the victim of such
fraudulent conduct.
6. Miscellaneous. This agreement (a) shall be governed by and construed in
accordance with the laws of the State of Texas, regardless of the laws that
might otherwise govern under applicable principles of conflicts of law thereof,
(b) incorporates the entire understanding of the parties with respect to the
subject matter hereof and supersedes all previous agreements should
6
<PAGE> 7
Probex Corp.
July 21, 1999
Page 7
they exist with respect thereto, (c) may not be amended or modified except in a
writing executed by the Company and APS Financial and (d) shall be binding upon
and inure to the benefit of the Company, APS Financial, the other Indemnified
Parties and their respective successors and assigns, The Company and APS
Financial agree to waive trial by jury in any action, proceeding or counterclaim
brought by or on behalf of either party with respect to any matter whatsoever
relating to or arising out of any actual or proposed Placement or the engagement
of or performance by APS Financial hereunder. The Company acknowledges that APS
Financial, in connection with its engagement hereunder, is acting as an
independent contractor with duties owing solely to the Company and that nothing
in this agreement is intended to confer upon any other person any rights or
remedies hereunder or by reason hereof.
This agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original, but all of which shall constitute one
and the same agreement. Please confirm that the foregoing is in accordance with
your understanding of our agreement by signing and returning to us a copy of
this letter.
Very truly yours,
APS FINANCIAL:
APS Financial Corporation
By: /s/ George S. Conwill
_________________________________
Name: George S. Conwill
_______________________________
Title: President
Accepted and agreed to as of the date set forth above.
COMPANY:
PROBEX CORP.
By: /s/ Thomas G. Murray
__________________________
Name: Thomas G. Murray
________________________
Title: CEO
7
<PAGE> 8
Probex Corp.
July 21, 1999
Page 8
SCHEDULE A
The Company agrees to indemnify and hold harmless APS Financial, its
parent companies, subsidiaries, affiliates and their respective officers,
directors, employees, agents, attorneys and controlling persons (each an
"Indemnified Person") from and against any and all losses, claims, damages,
liabilities and expenses, joint or several, to which any such Indemnified Person
may become subject arising out of or in connection with the transactions
contemplated by the Letter Agreement to which this Schedule A is attached, or
any claim, litigation, investigation or proceedings relating to the foregoing
("Proceedings") regardless of whether any of such Indemnified Persons is a party
thereto, and to reimburse such Indemnified Persons for any legal or other
expenses as they are incurred in connection with investigating or defending any
of the foregoing, provided that the foregoing indemnification will not, as to
any Indemnified Person, apply to losses, claims, damages, liabilities or
expenses to the extent that they are finally judicially determined to have
resulted from the willful misconduct of such Indemnified Person. If for any
reason the foregoing indemnification is unavailable to any Indemnified Person or
insufficient to hold it harmless, then the Company shall contribute to the
amount paid or payable by such Indemnified Person as a result of such loss,
claim, damage, liability or expense in such proportion as is appropriate to
reflect not only the relative benefits received by the Company on the one hand
and such Indemnified Person on the other hand but also the relative fault of the
Company and such Indemnified Person, as well as any relevant equitable
considerations. It is hereby agreed that the relative benefits to the Company on
the one hand and all Indemnified Persons on the other hand shall be deemed to be
in the same proportion as (i) the total value received or proposed to be
received by the Company pursuant to any sale of the Securities (whether or not
consummated) bears to (ii) the fee paid or proposed to be paid to APS Financial
in connection with such sale. The indemnity, reimbursement and contribution
obligations of the Company under these paragraphs shall be in addition to any
liability which the Company may otherwise have to an Indemnified Person and
shall be binding upon and inure to the benefit of any successors, assigns, heirs
and personal representatives of the Company and any Indemnified Person.
Promptly after receipt by an Indemnified Person of notice of the
commencement of any Proceedings, such Indemnified Person will, if a claim in
respect thereof is to be made against the Company, notify the Company in writing
of the commencement thereof; provided that (i) the omission to so notify the
Company will not relieve it from any liability which it may have hereunder
except to the extent it has been materially prejudiced by such failure and (ii)
the omission to so notify the Company will not relieve it from any liability
which it may have to an Indemnified Person otherwise than on account of this
indemnity agreement. In case any such Proceedings are brought against any
Indemnified Person and it notifies the Company of the commencement thereof, the
Company will be entitled to participate therein, and to the extent that it may
elect by written notice delivered to the Indemnified Person, to assume the
defense thereof, with counsel reasonably satisfactory to such Indemnified
Person; provided that if the defendants in any such Proceedings include both the
Indemnified Person and the Company and the
8
<PAGE> 9
Probex Corp.
July 21, 1999
Page 9
Indemnified Person shall have concluded that there may be legal defenses
available to which are different from or additional to those available to the
Company, the Indemnified Person shall have the right to select separate counsel
to assert such legal defenses and to otherwise participate in the defense of
such Proceedings on behalf of such Indemnified Person. The Company will be
liable to such Indemnified Person for expenses incurred by the Indemnified
Person in connection with the defense thereof
APS Financial agrees to indemnify and hold harmless the Company, its
subsidiaries, affiliates and their respective officers, directors, employees,
agents, attorneys and controlling persons (each a "Company Indemnified Person")
from and against any and all losses, claims, damages, liabilities and expenses,
joint or several, to which any such Company Indemnified Person may become
subject arising out of or in connection with the transactions contemplated by
the Letter Agreement to which this Schedule A is attached, or any Proceedings
relating to the foregoing, regardless of whether any of such Company Indemnified
Persons is a party thereto, and to reimburse such Company Indemnified Persons
for any legal or other expenses as they are incurred in connection with
investigating or defending any of the foregoing, provided that the foregoing
indemnification will not apply unless, and only to the extent that, the amounts
for which the Company Indemnified Persons are seeking indemnification are
finally and judicially determined to have resulted from APS Financial providing
written information to the Company expressly for inclusion in the Offering
Materials, such written information was in fact included in the Offering
Materials, and such written information was false or materially inaccurate.
Except as otherwise provided for in this paragraph, the procedures for
indemnification by APS Financial, and the obligations of the Company Indemnified
Persons with respect thereto, shall be the same as provided above with respect
to the indemnity obligations of the Company.
Capitalized terms used but not defined in this Schedule A have the meanings
assigned to such terms in the Letter Agreement to which this Schedule A is
attached.
9
<PAGE> 10
[PROBEX LOGO] September 9, 1999
APS Financial Corporation
1301 Capital of Texas Highway
Suite B-220
Austin, Texas 78746
Re: Supplement to Engagement Letter
Gentlemen:
This letter is a supplement to and amends that certain Letter Agreement
(the "Engagement Letter") dated as July 21, 1999 between Probex Corp. (the
"Company") and APS Financial Corporation ("APS Financial"), pursuant to which
APS Financial was engaged to act as the exclusive placement agent to the Company
in connection with a private placement (the "Placement") of the Company's 10%
Cumulative Convertible Preferred Stock (the "Securities"). Capitalized terms
used without definition in this letter shall have the meanings set forth for
such terms in the Engagement Letter.
Pursuant to the Engagement Letter, the Company and APS Financial have
effected the Placement pursuant to a Confidential Offering Memorandum dated July
23, 1999 (the "Memorandum"). The parties hereby acknowledge that the Closing
Condition, as defined in the Memorandum, has been satisfied and the Minimum
Subscription Amount, as defined in the Memorandum, has been received by APS
Financial; provided, however, the parties have agreed to certain additional
provisions with respect to the release of the Minimum Subscription Amount, and
subsequent funds from the Placement, to the Company. These provisions are as
follows:
1. Effective upon the execution of this letter by all parties,
APS Financial shall release the Minimum Subscription Amount to the Company. The
Company immediately shall remit into an account established and controlled by
APS Financial (the "Refundable Deposit Account"), an amount equal to 10% of the
Minimum Subscription Amount. All funds in the Refundable Deposit Account shall
be refundable to the Company, subject to the terms and conditions provided
herein. The balance of the Minimum Subscription Amount shall be available to the
Company for the purposes set forth in the Memorandum. From and after the date
hereof until the termination of the Placement, upon receipt by the Company of
any
[PROBEX LETTERHEAD]
<PAGE> 11
APS Financial Corporation
September 9, 1999
Page 2
additional proceeds from the Placement, the Company shall remit to the
Refundable Deposit Account an amount equal to 10% of such proceeds.
2. APS Financial shall not release any of the funds from the
Refundable Deposit Account until the following events shall have occurred: (i)
the Company's Board of Directors shall have approved and recommended to the
shareholders of the Company an amendment and restatement of the Company's
Articles of Incorporation, as described below, and (ii) such amendment and
restatement shall have been approved and adopted by the shareholders of the
Company by the affirmative vote of the holders of at least a majority of the
outstanding shares of common stock of the Company. Such amended and restated
articles of incorporations shall clearly set forth the continuing right of the
Company to issue the Securities and to pay dividends thereon, and shall
otherwise be substantially in the form of Exhibit A attached hereto (with such
additional changes as shall be approved by the Board of Directors in the
exercise of its business judgment, provided that if any such additional changes
shall adversely affect the rights or preferences of the holders of the
Securities, such changes shall be subject to the affirmative vote of the holders
of a majority of the outstanding Securities, voting separately as a class). In
lieu of the foregoing, the Board of Directors may elect to reincorporate the
Company as a Texas, Nevada or Delaware corporation (or a corporation or other
entity domiciled in such other jurisdiction as the Board of Directors may
determine in the exercise of its business judgment). In such event, the articles
of incorporation or similar charter document of the surviving corporation shall
contain terms and provisions with respect to the Securities no less favorable to
the holders of the Securities than the terms and conditions set forth in the
attached Exhibit A. The conditions set forth in this paragraph 2 are referred to
herein as the "Refund Conditions."
3. Upon the satisfaction of the Refund Conditions on or before
December 31, 1999, APS Financial shall pay to the Company, on or before January
5, 2000, all principle, interest and other earnings in the Refundable Deposit
Account, whereupon this letter agreement shall terminate and neither party shall
have any other rights or obligations hereunder. In the event the Refund
Conditions have not been satisfied by the close of business on December 31,
1999, then APS Financial shall be entitled to all principle, interest and other
earnings in the Refundable Deposit Account, as an additional Cash Placement Fee.
Upon payment of such amount to APS Financial, this letter agreement shall
terminate and neither party shall have any other rights or obligations
hereunder.
<PAGE> 12
APS Financial Corporation
September 9, 1999
Page 3
This letter agreement is a supplement to, and shall be read together
with, the Engagement Letter, and to the extent not inconsistent with the terms
hereof, the terms of the Engagement Letter are hereby incorporated by reference
into this letter. Please confirm that the foregoing is in accordance with your
understanding of our agreement by signing and returning to us a copy of this
letter.
Very truly yours,
Probex Corp.
By: /s/ Alex D. Daspit
________________________________
Name: Alex D. Daspit
______________________________
Title: President
Accepted and agreed to as of the date set forth above:
APS Financial Corporation
By: /s/ George S. Conwill
_______________________________
Name: George S. Conwill
_____________________________
Title: President
<PAGE> 13
APS FINANCIAL CORPORATION
September 22, 1999
CONFIDENTIAL
Probex Corp.
1467 LeMay, Suite 111
Carrollton, Texas 75007
Re: Letter Agreement, dated July 21, 1999
Gentlemen:
This letter is to acknowledge that Probex Corp. and APS Financial
Corporation have mutually agreed to extend the Placement Period for the
Securities until Friday, October 22, 1999.
Very truly yours,
APS FINANCIAL:
APS Financial Corporation
BY: /s/ George S. Conwill
_______________________________
Name: George S. Conwill
_____________________________
Title: President
Accepted and agreed to as of the date set forth above.
COMPANY:
PROBEX CORP.
By: /s/ Alex D. Daspit
______________________________
Name: Alex D. Daspit
____________________________
Title: President
[SIPC LOGO]
[APS FINANCIAL CORPORATION LETTERHEAD]
<PAGE> 14
APS FINANCIAL CORPORATION
October 22, 1999
CONFIDENTIAL
Probex Corp.
1467 LeMay, Suite 111
Carrollton, Texas 75007
Re: Letter Agreement, dated July 21, 1999
Gentlemen:
This letter is to acknowledge that Probex Corp. and APS Financial
Corporation have mutually agreed to extend the Placement Period for the
Securities until Friday, November 4, 1999.
Very truly yours,
APS FINANCIAL:
APS Financial Corporation
By: /s/ George S. Conwill
_______________________________
Name: George S. Conwill
_____________________________
Title: President
Accepted and agreed to as of the date set forth above.
COMPANY:
PROBEX CORP.
By: /s/ Bruce Hall
_____________________________
Name: Bruce Hall
___________________________
Title: VP and CFO
[SIPC LOGO]
[APS FINANCIAL CORPORATION LETTERHEAD]
<PAGE> 15
APS FINANCIAL CORPORATION
November 4, 1999
CONFIDENTIAL
Probex Corp.
1467 LeMay, Suite 111
Carrollton, Texas 75007
Re: Letter Agreement, dated July 21, 1999
Gentlemen:
This letter is to acknowledge that Probex Corp. and APS Financial
Corporation have mutually agreed to extend the Placement Period for the
Securities until Wednesday, December 15, 1999.
Very truly yours,
APS FINANCIAL:
APS Financial Corporation
By: /s/ George S. Conwill
_______________________________
Name: George S. Conwill
_____________________________
Title: President
Accepted and agreed to as of the date set forth above.
COMPANY:
PROBEX CORP.
By: /s/ Bruce Hall
______________________________
Name: Bruce Hall
____________________________
Title: VP and CFO
[APS FINANCIAL CORPORATION LETTERHEAD]
[SIPC LOGO]
<PAGE> 1
EXHIBIT 10.15
FINANCIAL ADVISORY FEE AGREEMENT
This Financial Advisory Fee Agreement (the "Agreement") is made and entered into
as of the 6th day of August, 1999 (the "Effective Date"), by and among Probex
Corporation, a Colorado corporation ("Probex"), and APS Financial Corporation, a
Colorado corporation ("APS").
WHEREAS, Probex is desirous of engaging APS in the capacity of financial advisor
specifically for the purpose of identifying and assisting Probex in obtaining
funding for the expansion of its operations, including but not limited to,
funding for the construction of one or more Probex plants (the "Proposed
Investment").
NOW, THEREFORE, in consideration of the premises and the covenants, agreements
and obligations set forth herein and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereby
covenant and agree as follows:
1. Definitions. As used in this Agreement, the following terms shall have the
meanings indicated below:
"Advisors" means APS, their affiliates, successors and assigns.
"Affiliate" of a person shall mean any other person that directly or indirectly
through one or more intermediaries, controls, or is controlled by, or is under
common control with, such person. For the purposes of this definition,
"control" means the power to direct the management and policies of a person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise.
"Additional Securities" means any debt or equity securities of Probex and/or any
of its Affiliates, issued after the Proposed Investment by any person included
on Exhibit "A" attached hereto and in accordance with the provisions set forth
in Section 3 of this Agreement.
"Approved Investor(s)" means those persons and their Affiliates listed on
Exhibit "A" attached hereto.
"Capital Provided" means the entire funding made by an Approved Investor to
Probex at Closing (as defined below) regardless of whether such commitment is
for debt or equity.
"Closing" means the execution by Probex and an Approved Investor of binding
documentation evidencing the investment by an Approved Investor in the Proposed
Investment or in any Subsequent Transaction, regardless of whether such
investment takes the form of debt or equity.
"Subsequent Transaction" means any investment made by an Approved Investor in
Probex following and/or in addition to but under no circumstances including the
initial Proposed Investment and prior to August 6th, 2001.
<PAGE> 2
2. Fees Payable to Advisors Upon Closing of the Proposed Investment
(a) As consideration for services rendered by the Advisors, should any
one or more of the Approved Investors provide funding for the Proposed
Investment then the fees described below shall be due and payable to the
Advisors at Closing. The fee to be paid to the Advisors by Probex shall be equal
to the schedule below. This fee assumes no other brokerage fees payable by
Probex and would be reduced to a minimum of one half of the schedule below.
(i) an amount in cash equal to four and one-half percent
(4.5%) of the Capital Provided by the Approved
Investor(s); and
(ii) Five year warrants to purchase a number of shares of
Probex common stock equal to four and a half percent (4.5%) of the Capital
Provided divided by the price per common share paid by the equity investors
participating in the Proposed Investment. The Advisors' exercise price for the
warrants shall be the price per common share paid by the equity investors
participating in the Proposed Investment. These warrants will be subject to a
Warrant Holder's Agreement which will be negotiated by the parties in good faith
and will contain among other things, a cashless conversion feature and
registration rights commensurate with those of the investors participating in
the Proposed Investment.
3. Expense. Probex agrees to reimburse Advisors, upon request made from
time to time, for its reasonable out-of-pocket expenses incurred in connection
with Advisors' activities under this Agreement.
4. Indemnification. Probex agrees to indemnify Advisors, and their
directors, officers, partners employees, agents, and controlling persons
(Advisors and each such person being an "Indemnified Party") from and against
any and all losses, claims, damages and liabilities, joint or several, related
to the Proposed Investment or any transaction contemplated by this Agreement and
will reimburse any Indemnified Party for all expenses (including fees and
expenses of counsel) as they are incurred in connection with the investigation
of, preparation for or defense of any pending or threatened claim or any action
or proceeding arising therefrom, whether or not such Indemnified Party is a
party and whether or not such claim, action or proceeding is initiated or
brought by Probex. Probex will not be liable under the foregoing indemnification
provision to the extent that any loss, claim, damage or liability is found in a
final judgement by a court to have resulted from Advisors' gross negligence or
willful misconduct,
5. Termination. Advisors' engagement hereunder may be terminated by either
Probex or the Advisors at any time after September 15, 1999 upon written notice
to that effect to the other party, it being understood that the provisions
relating to the payment of fees (including breakup fees) and expenses,
indemnifications, contribution, settlements and the role and duties of the
Advisors and Probex shall survive any such termination.
6. Miscellaneous Provisions
(a) Relationship. This agreement does not create, and shall not be
construed to create, any joint
2
<PAGE> 3
venture or partnership between the parties. No officer, employee, agent,
servant, or independent contractor of the Advisors nor their Affiliates shall at
any time be deemed to be an employee, agent, servant, or broker of Probex for
any purpose whatsoever solely as a result or this Agreement, and Advisors shall
have no right or authority to assume or create any obligation or liability,
express or implied, on Probex's behalf, or to bind Probex in any manner or thing
whatsoever.
(b) Waiver. Notwithstanding anything to the contrary contained herein,
the failure of either party to seek it redress for violation, or to insist upon
the strict performance, of any covenant, agreement, provision, or condition
hereof shall not constitute a waiver of the terms of such covenant, agreement,
provision, or condition at subsequent times or of the terms of any other
covenant, agreement, provision, or condition, and each party shall have all
remedies provided herein with respect to any subsequent act which would have
originally constituted the violation hereunder.
(c) Governing Laws, This Agreement and all questions relating to its
validity, interpretation, performance, and enforcement (including without
limitation, provisions concerning limitations of action), shall be governed by
and construed in accordance with the internal laws of the State of Texas,
notwithstanding any conflict-of-laws doctrines of such state or other
jurisdiction to the contrary.
(d) Notices. Any notice, request, demand, consent or authorization
(hereinafter referred to as "Notice") required or permitted to be given under
this Agreement shall be in writing and shall be delivered either personally, by
courier or by facsimile to the address or facsimile number below:
If to Probex: If to Advisors:
Mr. Thomas G. Murray Mr. George S. Conwill
Probex Corporation APS Financial Corporation
1467 LeMay Way, Suite 111 1301 Capital of Texas Highway, B-220
Carrollton, Texas 75007 Austin, Texas 78746
Fax # (972) 466-1556 Fax # (512) 314-4462
(e) Entire Agreement. This Agreement constitutes the sole and only
agreement of the parties hereto and supersedes any prior understandings or
written or oral agreements between the parties respecting the subject matter
herein.
(f) Multiple Counterparts. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed to be
an original, but all of which together constitute one and the same instrument.
(g) Amendments. This Agreement shall not be amended, changed or
modified or any provision thereof waived or discharged except in writing by both
parties.
(h) This Agreement shall be binding upon and inure to the benefit of
the heirs, personal representatives, successors and assigns of the parties
hereto.
3
<PAGE> 4
(i) Advisors may add names to Exhibit "A" from time to time, provided
all such additions must be approved by Probex in writing.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the Effective Date.
PROBEX CORPORATION
By: /s/ Thomas G. Murray
___________________________
Name: Thomas G. Murray
_________________________
Title: CEO
APS FINANCIAL CORPORATION
By: /s/ George S. Conwill
___________________________
Name: George S. Conwill
_________________________
Title: President
4
<PAGE> 5
Exhibit "A"
5
<PAGE> 6
Exhibit "A"
List from Lee Burton of APS Financial Corp.
1) John Hancock Financial Services Group
2) The Principal Financial Group
3) Northwestern Mutual Group
4) Allstate Group
Thomas G. Murray 8/10/99
------------------ -----------
CEO Date
<PAGE> 1
EXHIBIT 10.16
FINANCIAL ADVISORY FEE AGREEMENT
This Financial Advisory Fee Agreement (the "Agreement") is made and entered
into as of the 20th day of August, 1999 (the "Effective Date"), between Probex
Corp., a Colorado corporation ("Probex"), and Cambridge Strategies Group, LLC, a
Texas limited liability corporation ("Cambridge").
WHEREAS, Probex is desirous of engaging Cambridge in the non-exclusive capacity
of financial advisors specifically for the purpose of identifying and assisting
Probex in obtaining funding for the expansion of its operations, including but
not limited to, funding for the acquisition of certain sources of feedstock
supplies and the construction of one or more Probex plants (the "Proposed
Investment").
NOW, THEREFORE, in consideration of the premises and the covenants, agreements
and obligations set forth herein and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereby
covenant and agree as follows:
1. Definitions. As used in this Agreement, the following terms shall have the
meanings indicated below:
"Advisors" means Cambridge, their affiliates, successors and assigns.
"Affiliate" of a person shall mean any other person that directly, or indirectly
through one or more intermediaries, controls, or is controlled by, or is under
common control with, such person. For the purposes of this definition, "control"
means the power to direct the management and policies of a person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise.
"Additional Securities" means any debt or equity securities of Probex and/or any
of its Affiliates, issued after the Proposed Investment by any person included
on Exhibit "A" attached hereto and in accordance with the provisions set forth
in Section 3 of this Agreement.
"Approved Investor(s)" means those persons and their Affiliates listed on
Exhibit "A" attached hereto.
"Capital Provided" means the entire funding made by an Approved Investor to
Probex at Closing (as defined below) regardless of whether such funding is for
debt or equity.
"Closing" means the execution by Probex and an Approved Investor of binding
documentation evidencing the investment by an Approved Investor in the Proposed
Investment or in any Subsequent Transaction, regardless of whether such
investment takes the form of debt or equity.
"Subsequent Transaction" means any investment made by an Approved Investor in
Probex following and/or in addition to but under no circumstances including the
initial Proposed Investment and prior to March 29th, 2004.
2. Fees Payable to Advisors Upon Closing of the Proposed Investment.
(a) As consideration for services rendered by the Advisors, should any
one or more of the
<PAGE> 2
Approved Investors provide funding for the Proposed Investment then the fees
described below shall be due and payable to the Advisors at Closing. The cash
fees and warrants described in (i) and (ii) below shall be paid to Advisors at
Closing. The fee to be paid to the Advisors by Probex shall be equal to the
following:
(i) an amount in cash equal to five percent (5%) of the first one
million dollars, four percent (4%) of the second million
dollars, three percent (3%) of the third million dollars, 2%
of the fourth million dollars, and one percent (1%) of each
additional million dollars of Capital Provided by the Approved
Investor(s); and
(ii) Five year warrants to purchase a number of shares of Probex
common stock equal to five percent (5%) of the Capital
Provided divided by the price per common share paid by the
equity investors participating in the Proposed Investment. The
Advisors' exercise price for the warrants shall be the price
per common share paid by the equity investors participating in
the Proposed Investment. These warrants will be subject to a
Warrant Holder's Agreement which will be negotiated by the
parties in good faith and will contain among other things, a
cashless conversion feature and registration rights
commensurate with those of the investors participating in the
Proposed Investment.
3. Fees payable to the Advisors for Additional Capital Raised From
Approved Investors. If prior to March 29, 2004, Probex issues any Additional
Securities to an Approved Investor, regardless of whether or not such investor
participated in the Proposed Investment, then the Advisors shall be deemed to
have earned and Probex shall be obligated to pay to Advisors (a) a cash fee
equal to one percent (1%) of the Capital Provided by the Approved Investor(s);
and (b) five year warrants equal to two percent (2%) of the Capital Provided
with shares issued based upon the formula outlined in 2(a)(ii) above. The
Advisors' exercise price for these warrants shall be the price per common share
paid by the equity investors participating in the Subsequent Transaction. Such
fees and warrants will be due and payable to Advisors at the closing of such
Subsequent Transactions.
4. Expenses. Probex agrees to reimburse Advisors, upon request made from
time to time, for its reasonable out-of-pocket expenses incurred in connection
with Advisors' activities under this Agreement.
5. Indemnification Probex agrees to indemnify Advisors, and their
respective directors, officers, partners, employees, agents, and controlling
persons (Advisors and each such person being an "Indemnified Party") from and
against any and all losses, claims, damages and liabilities, joint or several,
related to the Proposed Investment or any transaction contemplated by this
Agreement and will reimburse any Indemnified Party for all expenses (including
fees and expenses of counsel) as they are incurred in connection with the
investigation of, preparation for or defense of any pending or threatened claim
or any action or proceeding arising therefrom, whether or not such Indemnified
Party is a party and whether or not such claim, action or proceeding is
initiated or brought by Probex. Probex will not be liable under the foregoing
indemnification provision to the extent that any loss, claim, damage or
liability is found in a final judgement by a court to have resulted from
Advisors'
2
<PAGE> 3
gross negligence or willful misconduct.
6. Termination. Advisors' engagement hereunder may be terminated by
either Probex or the Advisors at any time after the close of the initial project
financing upon written notice to that effect to the other party, it being
understood that the provisions relating to the payment of fees (including
breakup fees) and expenses, indemnifications, contribution, settlements and the
role and duties of the Advisors and Probex shall survive any such termination.
7. Miscellaneous Provisions.
(a) Relationship. This agreement does not create, and shall not be
construed to create, any joint venture or partnership between the parties. No
officer, employee, agent, servant, or independent contractor of the Advisors nor
their Affiliates shall at any time be deemed to be an employee, agent, servant,
or broker of Probex for any purpose whatsoever solely as a result of this
Agreement, and Advisors shall have no right or authority to assume or create any
obligation or liability, express or implied, on Probex's behalf, or to bind
Probex in any manner or thing whatsoever.
(b) Waiver. Notwithstanding anything to the contrary contained herein,
the failure of either party to seek a redress for violation, or to insist upon
the strict performance, of any covenant, agreement, provision, or condition
hereof shall not constitute a waiver of the terms of such covenant, agreement,
provision, or condition at subsequent times or of the terms of any other
covenant, agreement, provision, or condition, and each party shall have all
remedies provided herein with respect to any subsequent act which would have
originally constituted the violation hereunder.
(c) Governing Law. This Agreement and all questions relating to its
validity, interpretation, performance, and enforcement (including without
limitation, provisions concerning limitations of action), shall be governed by
and construed in accordance with the internal laws of the State of Texas,
notwithstanding any conflict-of-laws. doctrines of such state or other
jurisdiction to the contrary.
(d) Notices. Any notice, request, demand, consent or authorization
(hereinafter referred to as "Notice") required or permitted to be given under
this Agreement shall be in writing and shall be delivered either personally, by
courier or by facsimile to the address or facsimile number listed below:
If to Probex: If to Advisors:
Mr. D. Yale Sage Mr. James Borchert
Probex Corporation Cambridge Strategies Group, LLC
1467 LeMay, Suite 111 P.O. Box 270336
Carrollton, Texas 75007 Flower Mound, Texas 752027-0336
Fax # (972) 466-1556 Fax # (972) 355-6417
3
<PAGE> 4
(e) Entire Agreement. This Agreement constitutes the sole and only
agreement of the parties hereto and supersedes any prior understandings or
written or oral agreements between the parties respecting the subject matter
herein.
(f) Multiple Counterparts. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed to be
an original, but all of which together constitute one and the same instrument.
(g) Amendments. This Agreement shall not be amended, changed or
modified or any provision thereof waived or discharged except in writing by both
parties.
(h) This Agreement shall be binding upon and inure to the benefit of
the heirs, personal representatives, successors and assigns of the parties
hereto.
(i) Advisors may add names to Exhibit "A" from time to time, provided
all such additions must be approved by Probex in writing.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the Effective Date.
PROBEX
By: ____________________________
Name: __________________________
Title: _________________________
CAMBRIDGE STRATEGIES GROUP
By: /s/ Thomas G. Murray
-----------------------------
Name: Thomas G. Murray
Title: CEO
4
<PAGE> 1
EXHIBIT 10.17
FINANCIAL ADVISORY FEE AGREEMENT
This Financial Advisory Fee Agreement (the "Agreement ") is made and entered
into as of the 7th day of May, 1999 (the "Effective Date"), by and among Probex
Corporation, a Colorado corporation ("Probex"), Michael D. Billings, a Texas
resident ("Billings") and Henry F. Coffeen, a Texas resident ("Coffeen")
WHEREAS, Probex is desirous of engaging Billings and Coffeen in the capacity of
financial advisors specifically for the purpose of identifying and assisting
Probex in obtaining funding for the expansion of its operations, including but
not limited to, funding for the acquisition of certain sources of feedstock
supplies and the construction of one or more Probex plants (the "Proposed
Investment").
NOW, THEREFORE, in consideration of the premises and the covenants, agreements
and obligations set forth herein and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereby
covenant and agree as follows:
1. Definitions. As used in this Agreement, the following terms shall have the
meanings indicated below:
"Advisors" means Billings and Coffeen, their affiliates, successors and assigns.
"Affiliate" of a person shall mean any other person that directly, or indirectly
through one or more intermediaries, controls, or is controlled by, or is under
common control with, such person. For the purposes of this definition, "control"
means the power to direct the management and policies of a person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise.
"Additional Securities" means any debt or equity securities of Probex and/or any
of its Affiliates, issued after the Proposed Investment by any person included
on Exhibit "A" attached hereto and in accordance with the provisions set forth
in Section 3 of this Agreement.
"Approved Investor(s)" means those persons and their Affiliates listed on
Exhibit "A" attached hereto.
"Capital Provided" means the entire commitment made by an Approved Investor to
Probex at Closing (as defined below) regardless of whether such commitment is
for debt or equity.
"Closing" means the execution by Probex and an Approved Investor of binding
documentation evidencing the investment by an Approved Investor in the Proposed
Investment or in any Subsequent Transaction, regardless of whether such
investment takes the form of debt or equity.
"Subsequent Transaction" means any investment made by an Approved Investor in
Probex following and/or in addition to but under no circumstances including the
initial Proposed Investment and prior to May 6th, 2004.
2. Fees Payable to Advisors Upon Closing of the Proposed Investment.
<PAGE> 2
(a) As consideration for services rendered by the Advisors, should any
one or more of the Approved Investors provide funding for the Proposed
Investment then the fees described below shall be due and payable to the
Advisors at Closing. The cash fees and warrants described in (i) and (ii) below
shall be paid 50% to Billings and 50% to Coffeen at Closing. The fee to be paid
to the Advisors by Probex shall be equal to the following:
(i) an amount in cash equal to six percent (6%) of the Capital
Provided by the Approved Investor(s); and
(ii) Five year warrants to purchase a number of shares of
Probex common stock equal to six percent (6%) of the Capital Provided divided by
the price per common share paid by the equity investors participating in the
Proposed Investment. The Advisors' exercise price for the warrants shall be the
price per common share paid by the equity investors participating in the
Proposed Investment. These warrants will be subject to a Warrant Holder's
Agreement which will be negotiated by the parties in good faith and will contain
among other things, a cashless conversion feature and registration rights
commensurate with those of the investors participating in the Proposed
Investment.
3. Fees payable to the Advisors for Additional Capital Raised From Approved
Investors. If, prior to May 6, 2004, Probex issues any Additional Securities to
an Approved Investor, regardless of whether or not such investor participated in
the Proposed Investment, then the Advisors shall be deemed to have earned and
Probex shall be obligated to pay to Advisors (a) a cash fee equal to one percent
(1%) of the Capital Provided by the Approved Investor(s); and (b) five year
warrants equal to two percent (2%) of the Capital Provided with shares issued
based upon the formula outlined in 2 (a) (ii) above. The Advisors' exercise
price for these warrants shall be the price per common share paid by the equity
investors participating in the Subsequent Transaction. Such fees and warrants
will be due and payable to Advisors at the closing of such Subsequent
Transactions.
4. Expenses. Probex agrees to reimburse Advisors, upon request made from time to
time, for its reasonable out-of-pocket expenses incurred in connection with
Advisors' activities under this Agreement.
5. Indemnification. Probex agrees to indemnify Advisors, and their respective
directors, officers, partners, employees, agents, and controlling persons
(Advisors and each such person being an "Indemnified Party") from and against
any and all losses, claims, damages and liabilities, joint or several, related
to the Proposed Investment or any transaction contemplated by this Agreement and
will reimburse any Indemnified Party for all expenses (including fees and
expenses of counsel) as they are incurred in connection with the investigation
of, preparation for or defense of any pending or threatened claim or any action
or proceeding arising therefrom, whether or not such Indemnified Party is a
party and whether or not such claim, action or proceeding is initiated or
brought by Probex. Probex will not be liable under the foregoing indemnification
provision to the extent that any loss, claim, damage or liability is found in a
final judgement by a court to have resulted from Advisors' gross negligence or
willful misconduct.
6. Termination. Advisors' engagement hereunder may be terminated by either
Probex or the Advisors at any time after June 30, 1999 upon written notice to
that effect to the other party, it being understood that the provisions relating
to the payment of fees and expenses, indemnification's, contribution,
settlements and the role and duties of the Advisors and Probex shall survive any
such
<PAGE> 3
termination.
7. Miscellaneous Provisions.
(a) Relationship. This agreement does not create, and shall not be
construed to create, any joint venture or partnership between the parties. No
officer, employee, agent, servant, or independent contractor of the Advisors nor
their Affiliates shall at any time be deemed to be an employee, agent, servant,
or broker of Probex for any purpose whatsoever solely as a result of this
Agreement, and Advisors shall have no right or authority to assume or create any
obligation or liability, express or implied, on Probex's behalf, or to bind
Probex in any manner or thing whatsoever.
(b) Waiver. Notwithstanding anything to the contrary contained herein,
the failure of either party to seek a redress for violation, or to insist upon
the strict performance, of any covenant, agreement, provision, or condition
hereof shall not constitute a waiver of the terms of such covenant, agreement,
provision, or condition at subsequent times or of the terms of any other
covenant, agreement, provision, or condition, and each party shall have all
remedies provided herein with respect to any subsequent act which would have
originally constituted the violation hereunder.
(c) Governing Law. This Agreement and all questions relating to its
validity, interpretation, performance, and enforcement (including without
limitation, provisions concerning limitations of action), shall be governed by
and construed in accordance with the internal laws of the State of Texas,
notwithstanding any conflict-of-laws doctrines of such state or other
jurisdiction to the contrary.
(d) Notices. Any notice, request, demand, consent or authorization
(hereinafter referred to as "Notice") required or permitted to be given under
this Agreement shall be in writing and shall be delivered either personally, by
courier or by facsimile to the address or facsimile number below:
If to Probex: If to Advisors:
Mr. Thomas G. Murray
Probex Corporation Mr. Michael D. Billings
1467 LeMay, Suite 111 3831 Turtlecreek Blvd. 7-E
Carrollton, Texas 75007 Dallas, Texas 75219
Fax # (972) 466-1556 Fax # (214) 526-2355
(e) Entire Agreement. This Agreement constitutes the sole and only
agreement of the parties hereto and supersedes any prior understandings or
written or oral agreements between the parties respecting the subject matter
herein.
(f) Multiple Counterparts. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed to be
an original, but all of which together constitute one and the same instrument.
(g) Amendments. This Agreement shall not be amended, changed or
modified or any provision thereof waived or discharged except in writing by both
parties.
<PAGE> 4
(h) This Agreement shall be binding upon and inure to the benefit of
the heirs, personal representatives, successors and assigns of the parties
hereto.
(i) Advisors may add names to Exhibit "A" from time to time, provided
all such additions must be approved by Probex in writing.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the Effective Date.
PROBEX CORPORATION
By: _____________________________
Name: ___________________________
Title: __________________________
MICHAEL D. BILLINGS HENRY F. COFFEEN
By:_________________________ By: _____________________________
EXHIBIT A
1. David Myatt
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> SEP-30-1999
<CASH> 2,848,197<F1>
<SECURITIES> 0
<RECEIVABLES> 8,708
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,680,450
<PP&E> 1,116,685
<DEPRECIATION> 324,301
<TOTAL-ASSETS> 3,681,063
<CURRENT-LIABILITIES> 1,301,345
<BONDS> 0
0
1,608,227<F2>
<COMMON> 8,645,860
<OTHER-SE> (7,894,730)
<TOTAL-LIABILITY-AND-EQUITY> 3,681,063
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 107,820
<INCOME-PRETAX> (2,415,027)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,318,224)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 00
<NET-INCOME> (2,415,027)
<EPS-BASIC> (0.15)
<EPS-DILUTED> (0.00)<F3>
<FN>
<F1>Includes $190,142 restricted cash related to cumulative convertible
preferred stock offering.
<F2>As of 12-15-99, there are 539,000 shares of cumulative convertible preferred
stock, recorded at $4,709,270, net of offering costs.
<F3>The Company's outstanding warrants, options and convertible preferred stock
were anti-dilutive for the twelve-month period ending September 30, 1999.
</FN>
</TABLE>
