<PAGE> 1
As filed with the Securities and Exchange Commission on August 7, 1998
Registration No. 333-_____________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------------------
MARCUM NATURAL GAS SERVICES, INC.
---------------------------------
(Exact name of Registrant as specified in its charter)
DELAWARE 84-1169358
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1675 BROADWAY, SUITE 2150
DENVER, COLORADO 80202
------------------------------------------------------------------------
(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)
A. BRADLEY GABBARD, EXECUTIVE VICE PRESIDENT
MARCUM NATURAL GAS SERVICES, INC.
1675 BROADWAY, SUITE 2150
DENVER, COLORADO 80202
(303) 592-5555
---------------------------------------------------------
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
PAUL R. HESS, ESQ.
KEGLER, BROWN, HILL & RITTER CO., L.P.A.
65 EAST STATE STREET, SUITE 1800
COLUMBUS, OHIO 43215
(614) 462-5400
-------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As
soon as practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [__]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. [X]
If this Form if filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [__]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [__]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [__]
<PAGE> 2
<TABLE>
CALCULATION OF REGISTRATION FEE
<CAPTION>
===================================================================================================================
Title of Each Class of Amount Proposed Maximum Proposed Maximum Amount of Registration
Securities to be to be Offering Price Aggregate Fee
Registered Registered Per Unit (1) Offering Price (1)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $.01 936,347 shares $6.00 (5) $5,618,082 (5) $1,657.33
per share, and related
Preferred Share Purchase
Rights (2) (3) (4)
- ------------------------------------------------------------------------------------------------------------------
Common Stock Purchase
Warrants (4) 155,081 warrants (6) (6) (6)
- ------------------------------------------------------------------------------------------------------------------
Total $5,618,082 $1,657.33
===================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 under the Securities Act of 1933, as amended (the
"Securities Act").
(2) Includes Preferred Share Purchase Rights to purchase shares of Series B
Preferred Stock, par value $.01 per share, of Marcum Natural Gas
Services, Inc. No separate consideration will be received for the
Preferred Share Purchase Rights which, prior to the occurrence of
certain prescribed events, are not exercisable, will be evidenced by
the certificates for Common Stock and will be transferable along with
and only with the Common Stock.
(3) Represents the number of shares of Common Stock issuable upon exercise
of Common Stock Purchase Warrants (the "Warrants") to be distributed at
no cost to holders of Common Stock after the effective date of this
Registration Statement.
(4) Pursuant to Rule 416 under the Securities Act, the Registration
Statement also covers an indeterminate number of additional Warrants
and shares of Common Stock issuable upon exercise of the Warrants as
may be issued pursuant to the anti-dilution provisions of the Warrants.
(5) Based upon a Warrant exercise price of $6.00 per share.
(6) Represents Warrants being registered for resale by a Selling
Securityholder in the same registration statement as the Common Stock
issuable upon exercise of the Warrants; accordingly, no separate
registration fee is required pursuant to Rule 457(g) under the
Securities Act.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED AUGUST 7, 1998
PROSPECTUS
MARCUM NATURAL GAS SERVICES, INC.
936,347 Shares of Common Stock
155,081 Common Stock Purchase Warrants
This Prospectus relates to the offering by Marcum Natural Gas Services,
Inc. a Delaware corporation (the "Company"), of 936,347 shares of Common Stock,
par value $.01 per share (the "Common Stock"), of the Company issuable upon the
exercise of 936,347 Common Stock Purchase Warrants (the "Warrants"). The Company
will distribute the Warrants as a dividend at no cost to holders of record of
its Common Stock as of the close of business on ____________, 1998 (the "Record
Date"), on the basis of one Warrant for every four shares of Common Stock held
by such holder as of the Record Date. No fractional Warrants will be issued. The
number of Warrants to be distributed to each holder will be rounded down to the
nearest whole Warrant. The Warrants will be transferable separately from the
Common Stock immediately upon distribution. The distribution of the Warrants by
the Company to its stockholders is referred to herein as the "Warrant
Distribution".
Each Warrant entitles the holder thereof to purchase one share of the
Company's Common Stock at an exercise price at $6.00 per share, subject to
adjustment in certain events, at any time during the period commencing on the
Record Date and ending at 5:00 p.m., Denver, Colorado time, on _______, 2003
(five years after the Record Date) (the "Warrant Expiration Date"). The Warrants
are redeemable at the option of the Company at a redemption price of $.01 per
Warrant at any time on at least 30 days prior written notice, if the closing
sale price of the Common Stock equals or exceeds $7.50 for 20 consecutive
trading days ending within 30 days prior to the date notice of redemption is
given, and if at such time there is a current effective registration statement
covering the Common Stock underlying the Warrants. Upon at least 30 days prior
written notice to all holders of Warrants, the Company has the right to reduce
the exercise price and/or extend the term of the Warrants. See "The Warrant
Distribution".
This Prospectus also relates to the resale by a certain selling
securityholder (the "Selling Securityholder") of 155,081 Warrants that it will
receive in, or may be entitled to receive as a result of, the Warrant
Distribution, subject to the resale limitations of a certain lock-up agreement
between the Selling Securityholder and the Company. Although the Company will
receive proceeds from the exercise of outstanding Warrants from time to time if
and when they are exercised, the Company will not receive any of the proceeds
from the sale of the Warrants by the Selling Securityholder. The Selling
Securityholder may from time to time offer for sale all or a portion of such
Warrants upon The Nasdaq Stock Market's SmallCap Market (the "Nasdaq SmallCap
Market") or on such other market or exchange on which the Warrants may from time
to time be trading, in privately negotiated transactions, through a combination
of such methods of sale, or otherwise, at fixed prices that may be changed, at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices, or at negotiated prices. The Selling Securityholder
may effect such transactions by selling the Warrants directly to purchasers
acting as principals for their own accounts or to or through brokers or dealers
acting as principals or as agents for their own accounts or for their customers.
Such brokers or dealers may receive compensation in the form of
1
<PAGE> 4
commissions, discounts or concessions from the Selling Securityholder and/or the
purchasers of the Warrants for whom such brokers or dealers act as agent, or to
whom they sell as principal, or both (which compensation to a particular broker
or dealer may be in excess of customary commissions). The Company has agreed to
pay all of the expenses incurred in connection with the registration of the
resale of the Warrants. See "Selling Securityholder".
The Common Stock is traded on The Nasdaq Stock Market's National Market
(the "Nasdaq National Market") under the symbol "MGAS". On August 6, 1998, the
last reported sale price of the Common Stock as reported on The Nasdaq National
Market was $2.31 per share. Prior to the date hereof, there has been no public
market for the Warrants. The Company intends to make application to have the
Warrants listed for trading on The Nasdaq SmallCap Market under the symbol
"MGASW".
----------------
A PURCHASE OF THE SECURITIES OFFERED HEREBY INVOLVES A HIGH DEGREE OF
RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 8 FOR A DESCRIPTION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE
SECURITIES OFFERED HEREBY.
-----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION, NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
==============================================================================
UNDERWRITING
DISCOUNTS AND
PRICE TO PUBLIC COMMISSIONS (1) PROCEEDS TO COMPANY (2)
- ------------------------------------------------------------------------------
Per Share $6.00 $0 $6.00
- ------------------------------------------------------------------------------
Total $5,618,082 $0 $5,618,082
==============================================================================
(1) The shares of Common Stock are being offered and sold directly by the
Company, and no discounts, commissions or other remuneration will be
paid to any person for soliciting purchases of the shares of Common
Stock underlying the Warrants.
(2) Before deducting expenses of the offering payable by the Company,
estimated at $80,000.
(3) Assuming the exercise of all Warrants to be distributed by the Company
in the Warrant Distribution.
A certificate evidencing the Warrants will be sent along with this Prospectus to
each holder of record of Common Stock on the Record Date. To the extent a
stockholder does not exercise or transfer his Warrants, his proportionate
interest in the equity ownership and voting power of the Company will be
reduced. The Warrants may not be exercised or sold by any person, and neither
this Prospectus nor any Warrant shall constitute an offer to sell or a
solicitation of an offer to purchase any shares of Common Stock, in any
jurisdiction in which such transactions would be unlawful.
The date of this Prospectus is ____________, 1998
2
<PAGE> 5
AVAILABLE INFORMATION
The Company is a reporting company subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and in accordance therewith files reports, proxy and information
statements and other information with the Securities and Exchange Commission
(the "Commission"). Such reports, proxy and information statements and other
information filed by the Company with the Commission can be inspected and copied
at the public reference facilities maintained by the Commission located at Room
1024 Judiciary Plaza, 450 Fifth Street, N.W., Room 204, Washington, D.C. 20549,
and at the Regional Offices of the Commission located at Seven World Trade
Center, Suite 1300, New York, New York 10048 and 500 West Madison Street, Suite
1400, Chicago, Illinois 60661. Copies of such material may also be obtained from
the Public Reference Section of the Commission at Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549 at prescribed rates. In addition, the
Company is required to file electronic versions of these documents with the
Commission through the Commission's Electronic Data Gathering, Analysis and
Retrieval (EDGAR) system. The Commission maintains a World Wide Web site at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission. The Company's Common Stock is listed on The Nasdaq National Market.
Reports, proxy and information statements and other information concerning the
Company can be inspected at the offices of The Nasdaq Stock Market, Inc., 1735 K
Street, N.W., Washington, D.C. 20006.
The Company has filed with the Commission a Registration Statement on
Form S-3 (together with all amendments, exhibits and schedules thereto, the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the securities offered hereby. This
Prospectus, which constitutes a part of the Registration Statement, does not
contain all of the information set forth in the Registration Statement, certain
parts of which are omitted in accordance with the rules and regulations of the
Commission. For further information with respect to the Company and the
securities offered hereby, reference is made to the Registration Statement.
Statements contained in this Prospectus as to the contents of any contract,
agreement or other document referred to are not necessarily complete. With
respect to each such contract, agreement or other document filed as an exhibit
to the Registration Statement, reference is made to the exhibit for a complete
description of the matter involved, and each such statement shall be deemed
qualified in its entirety by such reference to such contract, agreement or other
document. The Registration Statement may be inspected without charge at the
principal office of the Commission in Washington, D.C., and copies of all or any
part thereof may be obtained from the Commission at prescribed rates.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents have been filed by the Company with the
Commission pursuant to the Exchange Act and are hereby incorporated by reference
into this Prospectus:
(i) The Company's Annual Report on Form 10-KSB for the fiscal year
ended December 31, 1997;
(ii) The Company's Quarterly Report on Form 10-QSB for the quarterly
period ended March 31, 1998;
(iii) The Company's definitive Proxy Statement dated May 4, 1998 for
the Annual Meeting of Stockholders held on June 12, 1998;
(iv) The Company's Current Reports on Form 8-K filed with the
Commission on May 12, 1998 and July 7, 1998, and on Form 8-K/A filed with the
Commission on July 16, 1998; and
(v) The description of the Company's Common Stock, including the
description of the Company's Preferred Share Purchase Rights, contained in the
Company's Registration Statement on Form 8-A filed with the Commission on
January 10, 1993, as amended on Form 8-A/A Amendment No. 1 filed with the
Commission on April 3, 1998, including any amendments or reports filed with the
Commission for the purpose of updating such description.
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<PAGE> 6
All documents filed by the Company pursuant to Sections 13(a), 13(c),
14 and 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to termination of the offering made by this Prospectus shall be deemed to
be incorporated by reference into this Prospectus and to be a part of this
Prospectus from the date of filing of such documents. Any statement contained
herein or in a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in any
subsequently filed document which is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
The Company will provide without charge to each person who receives
this Prospectus, upon written or oral request of such person, a copy of any or
all documents incorporated by reference into this Prospectus, not including
exhibits to such documents unless such exhibits are themselves specifically
incorporated by reference into such documents. Copies of this Prospectus, as
amended or supplemented from time to time, and any other documents (or parts of
documents) that constitute part of this Prospectus under Section 10(a) of the
Securities Act will also be provided without charge to each such person, upon
written or oral request. Requests should be directed to Secretary, Marcum
Natural Gas Services, Inc., 1675 Broadway, Suite 2150, Denver, Colorado 80202,
telephone number (303) 592-5555.
FORWARD-LOOKING STATEMENTS
This Prospectus contains, under the captions "Prospectus Summary -- The
Company" and "Risk Factors", and incorporates by reference into this Prospectus
documents that contain, certain forward-looking statements within the meaning of
and made pursuant to the safe harbor provisions of Section 27A of the Securities
Act and Section 21E of the Exchange Act. Forward-looking statements include
statements concerning plans, objectives, goals, strategies, future events or
performance, and underlying assumptions and other statements which are other
than statements of historical facts. When used in this Prospectus or in the
documents incorporated by reference into this Prospectus, the words "may",
"will", "project", "intend", "continue", "believe", "anticipate", "estimate",
"expect" and similar expressions, as they relate to the Company or the Company's
management, are intended to identify forward-looking statements. Such
forward-looking statements are based on the current beliefs and expectations of
management as well as assumptions made by and information currently available to
management and are subject to, and are qualified by, risks and uncertainties
that could cause actual results to differ materially from those expressed or
implied by those statements. These risks and uncertainties include, but are not
limited to, the factors described under "Risk Factors", as well as other risks
and uncertainties discussed elsewhere in this Prospectus or in certain documents
incorporated by reference into this Prospectus. The Company does not intend to,
and assumes no responsibility to, update any forward-looking statements, whether
as a result of new information, future events or otherwise.
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<PAGE> 7
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be
read in conjunction with, the more detailed information and consolidated
financial statements, including the related notes thereto, appearing elsewhere
in this Prospectus or in documents incorporated by reference into this
Prospectus. Unless otherwise indicated, all share and per share data and
information in this Prospectus has been adjusted to reflect a 1-for-4 reverse
split of the Company's Common Stock effected on July 6, 1998. References to the
"Company" herein include Marcum Natural Gas Services, Inc. and its subsidiaries,
unless the context otherwise requires. Prospective investors should carefully
consider the information set forth in "Risk Factors."
THE COMPANY
The Company is a diversified provider of energy measurement products,
services and data management to the energy industry. The Company's operations
include the design, manufacture and distribution of automated energy consumption
monitoring and recording systems and the provision of natural gas measurement
services. The Company is also engaged in the management of natural gas
processing and related assets. The Company, incorporated in Delaware on April 5,
1991, is a holding company that conducts its operations through three directly
owned subsidiaries: Metretek, Incorporated ("Metretek"), Southern Flow
Companies, Inc. ("Southern Flow"), and Marcum Gas Transmission, Inc. ("MGT").
The Company's strategy is to position itself as an integrated provider
of natural gas support products and services. The natural gas industry is
characterized by relatively abundant domestic reserves, increasing demand,
volatile prices and regulatory changes such as those resulting from the
deregulation of the interstate pipeline industry. The Company's strategy is to
acquire, develop and operate businesses that are positioned to take advantage of
these trends. In implementing this strategy, the Company acquired substantially
all of the assets of the Southern Flow Companies division of Weatherford, a
provider of natural gas measurement services, and the Company acquired Metretek,
which designs, manufactures and sells automated systems to monitor and record
natural gas consumption of commercial and industrial customers of natural gas
utility companies.
Southern Flow provides a full range of natural gas measurement services
principally to customers involved in natural gas production, gathering,
transportation and processing. Metretek designs, manufactures and sells
commercial and industrial automatic meter readers ("C & I AMR") systems,
electronic corrector equipment and other energy measurement products, services
and data management. Metretek's C&I AMR systems provide utility companies and
energy service providers with accurate and timely consumption data required in
order for them to optimize the operation of their natural gas delivery system
and compete effectively in a deregulated environment. MGT currently manages two
business trusts that own and operate natural gas related assets.
On May 4, 1998, Metretek completed the acquisition of substantially all
of the assets and business of American Meter Software Corporation (formerly
known as Eagle Research Corporation) (the "Selling Securityholder"), pertaining
to electronic correctors and non-radio-frequency meter reading devices in the
natural gas and electric utility industry (the "American Meter Transaction").
The Selling Securityholder is a wholly-owned subsidiary of American Meter
Company ("American Meter"), which is ultimately controlled by Ruhrgas AG, a
German corporation. In consideration for the American Meter Transaction, the
Company and Metretek paid and delivered to the Selling Securityholder at the
closing an aggregate purchase price (the "American Meter Purchase Price")
consisting of $1,300,000 in cash, 439,560 unregistered shares of Common Stock of
the Company, and a $1,200,000 convertible subordinated promissory note ($600,000
of which is contingent upon Metretek exceeding certain sales targets, as
discussed below) (the "American Meter Note"). Up to $1,028,107 of the principal
balance of the American Meter Note is convertible at any time at the option of
the Selling Securityholder into up to 180,766 unregistered shares of Common
Stock of the Company at the rate of $5.6875 of principal per share. The American
Meter Purchase Price is subject to upward adjustment based upon Metretek's
actual sales of products in the business acquired from the Selling
Securityholder during the 18-month period commencing July 1, 1998. If Metretek's
annualized sales of products in the acquired business exceeds $3,900,000 during
such period, then the American Meter Purchase Price will be increased on a
dollar-for-dollar basis to the extent of such sales surplus, but the American
Meter Purchase Price will not be increased above $4,500,000 even if annualized
sales are greater than that amount. Any increase in the American Meter Purchase
Price will be effected by adjusting the principal balance of the American Meter
Note.
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<PAGE> 8
Metretek also entered into a License Agreement (the "American Meter
License Agreement") with American Meter and the Selling Securityholder,
providing for the license by American Meter and the Selling Securityholder to
Metretek of certain operating software, and the development, manufacture and
sale by Metretek to American Meter and the Selling Securityholder of certain
electronic components and related equipment pertaining to electronic temperature
and pressure correction to be imbedded within certain new rotary and turbine
meters of American Meter. The American Meter License Agreement also grants to
American Meter and its affiliates the right to sell Metretek products in the
United States and Canada at certain agreed-upon prices. American Meter and the
Selling Securityholder also entered into the five year Non-Competition Agreement
(the "American Meter Non-Competition Agreement") with the Company and Metretek,
pursuant to which American Meter and the Selling Securityholder agreed not to
compete with Metretek in the acquired business.
While the Company regularly engages in discussions relating to
potential acquisitions and dispositions, the Company has no present agreements
or commitments with respect to any material acquisition or disposition.
The Company's principal executive offices are located at 1675 Broadway,
Suite 2150, Denver, Colorado 80202, and its telephone number at that address is
(303) 592-5555.
THE WARRANT DISTRIBUTION
The Company is distributing at no cost to holders of record of its
Common Stock on the Record Date one Warrant for each four shares of Common Stock
held on the Record Date. No Warrants to purchase fractional shares will be
issued, but rather the number of Warrants to be distributed to each holder will
be rounded down to the nearest whole number of Warrants.
Warrant Distribution.................... Each holder of record of Common Stock
on the Record Date will receive one
Warrant for each four shares of Common
Stock held on the Record Date. An
aggregate of 936,347 Warrants will be
distributed. (1)
Record Date............................. _____________, 1998
Description of Warrants................. Each Warrant entitles the holder to
purchase from the Company one share of
Common Stock at an exercise price of
$6.00 per share, subject to adjustment
in certain events, at any time on or
after the Record Date until the
Warrant Expiration Date. The Warrants
will be evidenced by transferable
Warrant Certificates.
Warrant Expiration Date................. 5:00 p.m., Denver, Colorado time, on
___________, 2003 (five years after
the Record Date).
Redemption of Warrants.................. The Warrants are redeemable at he
option of the Company at a redemption
price of $.01 per Warrant at any time
on at least 30 days prior written
notice, if the closing sale price of
the Common Stock equals or exceeds
$7.50 for 20 consecutive trading days
ending within 30 days prior to the
date notice of redemption is given,
and if at such time there is a current
effective registration statement
covering the Common Stock underlying
the Warrants.
Securities Being Offered
by the Company..................... 936,347 shares of Common Stock
issuable upon the exercise of the
Warrants to be distributed in the
Warrant Distribution (1).
Securities Being Resold
by Selling Securityholder.......... 155,081 Warrants, subject to certain
lock-up restrictions (1).
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Common Stock Outstanding
Prior to the Warrant Distribution.. 3,564,626 shares (2).
Common Stock Outstanding
After the Warrant Distribution..... 4,500,973 shares (1)(2)(3).
Use of Proceeds......................... For general corporate purposes, which
may include working capital,
acquisitions and repayment of debt.
Trading Symbols......................... Common Stock: "MGAS" (Nasdaq National
Market)
Warrants: "MGASW" (Proposed) (Nasdaq
SmallCap Market)
Risk Factors............................ An investment in the securities
offered hereby involves a high degree
of risk. See "Risk Factors."
- -------------------------
(1) Includes up to 45,191 Warrants which are covered by the Prospectus and
which shall be issuable by the Company to the Selling Securityholder
upon the conversion of the American Meter Note, unless the Warrants are
redeemed and the American Meter Note is converted after the date of
redemption.
(2) Based on the number of shares of Common Stock outstanding on July 31,
1998. Excludes 418,284 shares of Common Stock issuable upon the
exercise of outstanding stock options and 96,620 shares of Common Stock
issuable upon the exercise of outstanding warrants as of July 31, 1998.
(3) Assuming the exercise of all Warrants. Subject to adjustment due to
rounding down to avoid fractional Warrants.
7
<PAGE> 10
RISK FACTORS
An investment in the securities offered hereby involves a high degree
of risk. Prospective investors should carefully consider the following risk
factors, in addition to the other information set forth in or incorporated into
this Prospectus, in connection with evaluating an investment in the securities
offered hereby.
HISTORY OF OPERATING LOSSES AND UNCERTAINTY OF AND FLUCTUATION IN
FUTURE RESULTS. Although the Company has reported income from continuing
operations in recent fiscal years and net income in recent fiscal quarters, the
Company has a history of incurring net losses since it commenced operations in
1991. As of March 31, 1998, the Company had an accumulated deficit of
approximately $21.2 million. For the three months ended March 31, 1998, the
Company had net income of $17,193. For the fiscal years ended December 31, 1997
and 1996, the Company had a net loss of $1,524,137 and $1,541,417, respectively,
but had income from continuing operations of $752,516 and $7,988, respectively.
Most of the Company's historical operating losses were incurred by its
compressed natural gas refueling station equipment business, which was sold in
1997. There is no assurance that the Company will be profitable in the future,
or the extent of any profits.
The Company's operating revenues will fluctuate in the future as a
result of a number of factors, some of which are outside the Company's control,
including the timing of orders, delays in internal product design projects, the
cyclicality and seasonality of the utilities industry, acceptance of new
products and new technology in the Company's markets, shifting customer bases,
Company expenditures on research and development, general economic conditions,
economic conditions in the utility industry, the effects of governmental
regulations and regulatory changes, capital expenditures and other costs
relating to the expansion of operations, the introduction of new services by the
Company or its competitors, the mix of services sold, pricing changes and new
service introductions by the Company and its competitors and prices charged by
suppliers and other factors set forth in this Prospectus.
DEPENDENCE ON UTILITY INDUSTRY; UNCERTAINTY RESULTING FROM MERGERS AND
ACQUISITIONS AND REGULATORY REFORM. Metretek derives substantially all of its
revenues from sales of its products and services to the utility industry. The
Company has experienced variability of operating results on both an annual and a
quarterly basis due primarily to utility purchasing patterns and delays of
purchasing decisions as a result of mergers and acquisitions in the utility
industry and changes or potential changes to the federal and state regulatory
frameworks within which the electric utility industry operates. The utility
industry, both domestic and foreign, is generally characterized by long
budgeting, purchasing and regulatory process cycles that can take up to several
years to complete. The Company's utility customers typically issue requests for
quotes and proposals, establish committees to evaluate the purchase, review
different technical options with vendors, analyze performance and cost/benefit
justifications and perform a regulatory review, in addition to applying the
normal budget approval process within a utility. Purchases of the Company's
products are, to a substantial extent, deferrable in the event that utilities
reduce capital expenditures as a result of mergers and acquisitions, pending or
unfavorable regulatory decisions, poor revenues due to weather conditions,
rising interest rates or general economic downturns, among other factors.
The domestic utility industry is currently the focus of regulatory
reform initiatives in virtually every state, which initiatives have resulted in
significant uncertainty for industry participants and raised concerns regarding
assets that would not be considered for recovery through ratepayer charges.
Consequently, many utilities are delaying purchasing decisions that involve
significant capital commitments. While the Company expects some states will act
on these regulatory reform initiatives in the near term, there can be no
assurance that the current regulatory uncertainty will be resolved in the near
future or that the advent of new regulatory frameworks will not have a material
adverse effect on the Company's business, financial condition or results of
operations. Moreover, in part as a result of the competitive pressures in the
utility industry arising from the regulatory reform process, many utility
companies are pursuing merger and acquisition strategies. The Company has
experienced considerable delays in purchase decisions by utilities that have
become parties to merger or acquisition transactions. Typically, such purchase
decisions are put on hold indefinitely when merger negotiations begin. The
pattern of merger and acquisition activity among utilities may continue for the
foreseeable future. If such merger
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and acquisition activity continues at its current rate or intensifies, the
Company's revenues may continue to be materially adversely affected.
NEED FOR ADDITIONAL FUNDS. The Company anticipates that it will have a
continuing need for funds to accomplish its goals in the future. In addition,
unanticipated events, over which the Company may have no control, could increase
the Company's operating costs or decrease its ability to generate revenues from
product and service sales. The Company anticipates, based on the Company's
currently proposed plans and assumptions relating to its operations, that the
proceeds of the Warrant Distribution, if any, together with projected cash flow
from operations and its available capacity under its current credit facility,
will be sufficient to satisfy its anticipated cash requirements. In the event
the Company's plans change, its assumptions change or prove to be inaccurate or
if projected cash flow from operations and/or the proceeds of this offering
prove to be insufficient to fund operations (including for reasons related to
unanticipated technical or other problems), the Company could be required to
seek additional financing. There is no assurance that the Company will be able
to raise needed funds on terms satisfactory to it, or that sufficient funds will
be available when needed to pursue its business plan. In addition, the terms of
the Company's existing credit facility prohibits the Company from incurring
additional indebtedness without lender consent. The Company's inability to
secure necessary funds to finance its business operations at the times and in
the amounts required could have a material adverse effect on its business,
financial condition and results of operations.
DEVELOPMENT OF NEW PRODUCTS AND NEW TECHNOLOGIES. The Company has made
and expects to continue to make substantial investments in technology relating
primarily to Metretek's business. The success of the Company, particularly with
respect to Metretek, depends to a significant extent on the development and
implementation of new product designs and technologies, as well as the
enhancement of its existing products. This product development will require
additional investments in order to maintain and enhance the Company's market
position. There can be no assurance that unforeseen problems will not occur with
respect to the Company's technology or products. Development schedules for new
products are subject to uncertainty and there can be no assurance that the
Company will meet its product development schedule. The Company has experienced
delays in new product development in the past and there can be no assurance that
delays will not be experienced in the future. Delays in new product development
can result from a number of causes, including changes in definition during the
development stage, initial failures of products or unexpected behavior of
products under certain conditions, failure of third-party supplied components to
meet specifications or lack of availability of such components, unplanned
interruptions with existing products that can result in reassignment of product
development resources, and other factors. Delays in the development and
availability of new products could have a material adverse effect on the
Company's business and operations. In addition, the Company's business may be
substantially adversely impacted if the Company is unable to keep abreast of the
latest technological developments, if the Company's existing technologies are
rendered obsolete or uneconomical, if the regulations or standards that are
developed are not favorable to the Company's product lines or if the Company's
competitors obtain more favorable market acceptance. There can be no assurance
that the Company will be successful in developing new products or enhancing its
existing products on a timely or cost-effective basis, or that such new products
or product enhancements will achieve market acceptance.
Also, the Company's ability to compete in new markets will depend upon
a number of factors including, without limitation, the Company's ability to
create demand for its products in such markets, its ability to manage its growth
effectively, the quality of its products, its ability to respond to changes in
its customers' businesses by updating existing products and introducing, in a
timely fashion, products which meet the needs of its customers and the ability
of the Company to respond rapidly to technological change. The failure of the
Company to do any of the foregoing could result in a material adverse effect on
its business, financial condition and results of operations. No assurance can be
given that the Company will be able to successfully compete in these markets, or
that it will be able to meet the technical specifications imposed by its
customers or potential customers.
PRIVATE PROGRAMS. MGT is in the business of managing business trusts
and similar entities formed to acquire and operate natural gas asset programs.
These private entities are financed by private placements of equity interests
raising capital to operate the programs. Such private energy programs involve
certain risks inherent to
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MGT as the manager of such programs, including risks due to adverse changes in
the success of the programs due to events, conditions and factors outside of the
control of MGT such as general and local conditions affecting the energy market,
changes in the regulatory environment, reliance upon supplies and customers,
hazards of energy facilities, changes in technology, unforseeable capital
expenditures and other similar factors.
RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS. The Company markets and
sells its Metretek products and services in certain international markets, and
Metretek has an established office in the United Kingdom. International
revenues, which are comprised of export sales to foreign markets from the United
States and sales by Metretek's U.K. subsidiary, were approximately 21% of
Metretek's revenues in fiscal 1997 and fiscal 1996, and approximately 8.7% and
8.4% of the Company's consolidated revenues in fiscal 1997 and fiscal 1996,
respectively. There are certain risks inherent in transacting business
internationally, such as changes in applicable laws and regulatory requirements,
export and import restrictions, export controls relating to technology, tariffs
and other trade barriers, less favorable intellectual property laws,
difficulties in staffing and managing foreign operations, longer payment cycles,
problems in collecting accounts receivable, political instability, fluctuations
in currency exchange rates, expatriation controls and potential adverse tax
consequences, any of which could adversely impact the success of the Company's
international activities. A portion of the Company's revenues from sales to
foreign entities is in the form of foreign currencies. The Company has no
hedging or similar foreign currency contracts, and fluctuations in the value of
foreign currencies could adversely impact the profitability of the Company's
foreign operations. There can be no assurance that one or more of such factors
will not have a material adverse effect on the Company's future international
activities and, consequently, on the Company's business, financial condition or
results of operations. The Company has limited experience in conducting its
business outside the United States and may encounter unforeseen difficulties in
conducting operations in foreign countries. In addition, while the Company's
current products are designed to meet relevant regulatory requirements of
foreign markets in which they are sold, any inability to obtain any required
foreign regulatory approval and any changes in foreign regulatory requirements
could have a material adverse effect on the Company's ability to conduct
business in such markets.
COMPETITION. The markets for the Company's products are highly
competitive and are characterized by rapidly changing technology, frequent
product performance improvements and evolving industry standards. The Company
believes that its future ability to compete effectively will depend, in part,
upon its ability to continue to improve product and process technologies and
develop new technologies in order to maintain the performance advantages of
products and processes relative to competitors, to adapt products and processes
to technological changes, to identify and adopt emerging industry standards and
to adapt to customer needs. Some of the Company's present and potential
competitors have substantially greater financial, marketing, technical,
manufacturing and other resources, name recognition and experience than the
Company. The Company's competitors may be able to respond more quickly to new or
emerging technologies and changes in customer requirements or to devote greater
resources to the development, promotion and sale of their products and services
than the Company. There can be no assurance that the Company will be able to
compete successfully in the future with any of these sources of competition. In
addition, there can be no assurance that competitive pressures will not result
in price erosion, reduced margins, loss of market share or other factors. Any of
the foregoing could have a material adverse effect on the Company's business,
financial condition and results of operations.
POTENTIAL ACQUISITIONS. Acquisitions have played an important role in
the implementation of the Company's business strategy, and the Company believes
that additional acquisitions are important to its growth, development and
continued ability to compete effectively in the marketplace. The Company
evaluates potential acquisitions and strategic investments on an ongoing basis.
In the event the Company were to identify an appropriate acquisition candidate,
there is no assurance that the Company would be able to successfully negotiate
the terms of any such acquisition, finance such acquisition and integrate such
acquired business, products or technologies into the Company's existing business
and operations. Furthermore, the integration of an acquired business could cause
a diversion of management time and resources. In addition, there can be no
assurance that any acquisition of new technology will lead to the successful
development of new products, or that any such new products, if developed, will
achieve market acceptance or prove to be profitable. There can be no assurance
that a given acquisition, when consummated, would not materially adversely
affect the Company's business, financial
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condition or results of operations. If the Company proceeds with one or more
significant acquisitions in which the consideration consists of cash, a
substantial portion of the Company's available cash (including the net proceeds
of the offering) could be used to consummate the acquisitions and may result in
increased indebtedness, interest and amortization expense or decreased operating
income, any of which could have a material adverse effect on the Company's
business, financial condition and results of operations. If the Company
consummates one or more significant acquisitions in which the consideration
consists of capital stock or securities convertible into capital stock, or is
financed with the net proceeds of the issuance of capital stock or securities
convertible into capital stock, stockholders of the Company could suffer a
significant dilution of their percentage ownership interests in the Company.
Except as otherwise set forth herein, the Company presently has no agreements or
commitments with respect to any material acquisition and there can be no
assurance that any such additional businesses will be acquired. In addition,
there can be no assurance that any such acquisitions, if made, will be
successful or that they will assist the Company in the accomplishment of its
long-term strategy.
LIMITED PROTECTION OF PROPRIETARY RIGHTS; POTENTIAL INFRINGEMENT OF
THIRD PARTY RIGHTS. The Company's success and ability to compete are dependent
in part upon its proprietary rights and technology. The Company relies on a
combination of patents, copyrights, trademark and trade secret laws to establish
and protect its rights in its products and proprietary technology. Although the
Company maintains certain patents related to its business, the Company does not
believe that its competitive position is dependent upon patent protection or
that its operations are dependent upon any individual patent. The Company
generally requires its employees and consultants to enter into nondisclosure and
assignment of invention agreements to limit use of, access to and distribution
of proprietary technology. There can be no assurance that the Company's means of
protecting its proprietary rights in the U.S. or abroad will be adequate. In
addition, the laws of some foreign countries may not protect the Company's
proprietary rights as fully or in the same manner as do the laws in the United
States. Despite the Company's efforts to protect is proprietary rights, it may
be possible for unauthorized third parties to copy, reverse engineer or
otherwise obtain, use or exploit aspects of the Company's products, develop
similar technology independently or otherwise obtain and use information that
the Company regards as proprietary. There can be no assurance that the Company's
competitors will not independently develop technologies similar or superior to
the Company's technology or design around the proprietary rights owned by the
Company. Although the Company is not aware that any of its products infringe on
the proprietary rights of third parties, there can be no assurance that others
will not assert claims of infringement in the future or that, if made, such
claims will not be successful.
YEAR 2000 COMPLIANCE. To the extent that the Company's software
applications contain source code that is unable to appropriately interpret the
upcoming calendar year "2000", some level of modification or even possibly
replacement of such source code or applications will be necessary. The Company
has initiated the process of analyzing its software applications and those of
its significant external suppliers, service providers and customers. However,
there can be no assurance that the Company will identify all such Year 2000
problems in its systems or in the computer systems of its suppliers, service
providers or customers in advance of their occurrence or that the Company's
suppliers and customers will be able to successfully rectify any problems that
are discovered. Although the expenses of the Company's efforts to identify and
address such problems, or the expenses or liabilities to which the Company may
become subject as a result of such problems, are not expected to have a material
adverse effect on the Company, there can be no assurance that the cost of
interruptions with the systems of suppliers, service providers or customers will
not have a material adverse effect on the Company's business, financial
condition or results of operations.
RISKS INHERENT IN NATURAL GAS OPERATIONS. The Company's operations are
subject to all the risks normally incident to the servicing and operation of
natural gas assets, including encountering unexpected pressures, explosions and
fires, which could result in personal injuries, loss of life, environmental
damage and other damage to the properties of the Company or others. These
activities involve numerous financial, business, regulatory, environmental,
operating and legal risks. Damages occurring as a result of these risks may give
rise to product liability claims against the Company. The Company has product
liability insurance generally providing up to $6,000,000 of coverage per
occurrence; however, in accordance with customary industry practice, the Company
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is not fully insured against these risks, nor are all such risks necessarily
insurable. Liability could exceed insurance, if any, and could have a material
adverse effect on the Company's business and operations.
GOVERNMENTAL REGULATION. The Company's business operations are subject
to various federal, state, local and foreign laws and regulations. There is no
assurance that laws and regulations either existing or enacted in the future or
the repeal or modification of current laws and regulations will not adversely
affect the Company's business and operations. Furthermore, amendments to
statutes and regulations and the Company's expansion into new areas could
require the Company to continually modify or alter methods of operations at
costs which could be substantial. There can be no assurance that the Company
will be able, for financial or other reasons, to comply with applicable laws and
regulations.
DEPENDENCE ON KEY PERSONNEL. The Company's success depends to a large
extent on its ability to attract and retain qualified technical and management
personnel, including the abilities and continued participation of its executive
officers and key employees. There can be no assurance that the Company will be
successful in hiring or retaining the requisite personnel. The loss of the
services of any of these persons could have a material adverse effect on the
Company's business and operations. The Company does not carry key-man insurance
policies on any of its officers, directors or employees.
DEPENDENCE ON BUSINESS RELATIONSHIPS TO ACHIEVE MARKET PENETRATION. A
key element of the Company's business strategy is the formation of corporate
relationships with other companies to provide products and services to existing
and new markets. The Company is currently investing, and plans to continue to
invest, significant resources to develop these relationships. The Company
believes that its success in penetrating new markets will depend in large part
on its ability to maintain these relationships and to cultivate additional or
alternative relationships. There can be no assurance that the Company will be
able to develop additional corporate relationships with such companies, that
existing relationships will continue or be successful in achieving their
purposes or that such companies will not form competing arrangements.
CONTROL BY OFFICERS, DIRECTORS AND AFFILIATES. As of July 31, 1998, the
officers, directors and other affiliates of the Company beneficially owned
approximately 1,026,726 shares of Common Stock (including shares issuable upon
the exercise or conversion of (i) presently exercisable stock options, (ii)
presently exercisable warrants (other than the Warrants), and (iii) the American
Meter Note, but excluding the Warrants), which shares constituted 26% of the
total outstanding shares of Common Stock prior to the Warrant Distribution
(assuming all options, warrants and risks (other than the Warrants) held by the
officers, directors and affiliates are exercised or converted). While the
Company is unaware of any agreement among such persons to act together with
respect to their Common Stock, if such persons should agree to act together,
they would be able to materially influence the outcome of all matters submitted
to a vote of the Company's stockholders. Such a concentration of ownership may
have an adverse effect on the market price of the Common Stock.
SHARES ELIGIBLE FOR FUTURE SALE. Virtually all of the Company's
outstanding shares of Common Stock are presently eligible for immediate sale in
the public market. Sales of substantial amounts of Common Stock into the public
market, or a perception that such sales could occur, and the existence of
options and warrants to purchase Common Stock representing an overhanging
obligation of the Company to sell additional Common Stock at prices that may be
below the then current market price of the Common Stock, could adversely affect
the market price of the Common Stock and could impair the Company's future
ability to raise capital through the sale of its equity securities. Also as of
July 31, 1998, options to purchase 418,284 shares of Common Stock and warrants
to purchase 96,620 shares of Common Stock were outstanding. The Selling
Securityholder has certain registration rights with respect to 620,326 shares of
Common Stock issued to it by the Company or issuable to it upon the conversion
of the American Meter Note, but the Selling Securityholder has agreed with the
Company not to sell any of the Warrants it receives in the Warrant Distribution
except subject to the limitations of a certain lock-up agreement.
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ANTI-TAKEOVER PROVISIONS. Certain provisions of (i) the Restated
Certificate of Incorporation, as amended (the "Certificate"), and the By-Laws,
as amended (the "By-Laws"), of the Company, including a fair price requirement,
a classified Board of Directors, anti-greenmail restrictions, super majority
vote requirements for certain fundamental corporate actions and certain
provisions relating to stockholder actions, (ii) the termination arrangements in
the employment contracts with certain executive officers of the Company, and
(iii) the Company's Rights Agreement, may have the effect of delaying or
preventing a change in control of the Company and may make more difficult the
removal of incumbent management even if such transactions could be beneficial to
stockholders. Further, Section 203 of the General Corporation Law of Delaware
prohibits the Company from engaging in certain business combinations with
interested stockholders. These provisions may have the effect of delaying or
preventing a change in control of the Company without action by the
stockholders, and therefore could adversely affect the market price of Common
Stock.
AUTHORIZATION AND ISSUANCE OF PREFERRED STOCK. The Board of Directors
of the Company is authorized to issue, without further stockholder approval, up
to 2,500,000 shares of Preferred Stock, par value $.01 per share (the "Preferred
Stock"), which consists of 1,000,000 shares of Series A Preferred Stock,
1,000,000 shares of Series B Preferred Stock and 500,000 shares of Series C
Preferred Stock. The terms of the Series A Preferred Stock and the Series C
Preferred Stock are fixed and include rights preferential to the Common Stock
with respect to dividends and liquidation preferences. The Board of Directors is
also authorized to establish the dividend rates, liquidation preferences, voting
rights, redemption and conversion terms and privileges with respect to the
Series B Preferred Stock without further stockholder approval. The Company may
in the future issue shares of Preferred Stock or create additional series and
classification of Preferred Stock. No shares of Preferred Stock are currently
issued and outstanding, and the Company has no current plan or intention to
issue any shares of Preferred Stock. The issuance of any shares of Preferred
Stock having rights superior to those of the Common Stock may result in a
decrease in the value or market price of the Common Stock and, further, could be
used by the Board of Directors as a means to prevent a change in control of the
Company. See "Description of Capital Stock - Preferred Stock."
NO DIVIDENDS. The Company has never paid any cash dividends and intends
to retain its earnings, if any, in the foreseeable future in order to finance
the operations and growth of the Company. In addition, the Company's credit
facility prohibits the payment of cash dividends without the consent of the
lender. Accordingly, it is anticipated that no dividends will be paid to holders
of the Common Stock in the foreseeable future.
VOLATILITY OF COMMON STOCK PRICE. The market price of the Company's
Common Stock has in the past been, and may in the future continue to be, highly
volatile. A variety of events, including quarter-to-quarter variations in
operating results, news announcements, trading volume, general trends in the
industry, overall market conditions, technological innovations or new products
by the Company or its competitors, revised earnings estimates or other comments
by analysts, general stock market trends and other factors, could result in wide
fluctuations in the market price of the Common Stock. Although the exercise
price of the Warrants has been determined in part by reference to and in excess
of the current market price of the Company's Common Stock as reported by the
Nasdaq National Market, no assurance can be given that the future market price
of the Common Stock will ever equal or exceed the exercise price of the
Warrants. In addition, it is possible that in some future period the Company's
operating results may be below the expectations of public market analysts and
investors. In such event, the price of the Company's Common Stock could be
materially adversely affected. Additionally, the stock market in general, and
the market for technology stocks in particular, have experienced extreme price
volatility in recent years. Volatility in price and volume has had a substantial
effect on the market prices of many technology companies for reasons unrelated
or disproportionate to the operating performance of such companies. These broad
market fluctuations could have a significant impact on the market price of the
Common Stock.
BROAD DISCRETION IN APPLICATION OF PROCEEDS. The estimated net proceeds
from this Offering will be applied to working capital and general corporate
purposes. Accordingly, the Board of Directors of the Company is retaining broad
discretion as to the application of such proceeds. See "Use of Proceeds."
POTENTIAL ADVERSE EFFECT OF REDEMPTION OF WARRANTS. The Warrants may be
redeemed by the Company at any time at a redemption price of $.01 per Warrant
upon at least 30 days prior written notice, provided that the
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market price of the Common Stock for 20 consecutive trading days ending within
30 days of the date notice is given equals or exceeds $7.50, subject to
adjustment under certain events. Redemption of the Warrants could force the
holders to exercise the Warrants and pay the exercise price at a time when it
may be disadvantageous for the holders to do so, sell the Warrants at the then
current market price when they might otherwise wish to hold the Warrants, or to
accept the redemption price, which is likely to be substantially less than the
market value of the Warrants at the time of redemption.
CURRENT REGISTRATION STATEMENT AND STATE BLUE SKY REGISTRATION.
Purchasers of the Warrants will have the right to exercise the Warrants only if
a current registration statement relating to the Common Stock underlying the
Warrants is then effective, and only if the issuance of such Common Stock has
been registered or qualified, or complies with an exemption from such
requirements, under the securities laws of the states and jurisdictions in which
the various Warrant holders reside. Although the Company intends to use its best
efforts to keep the Registration Statement current during the Warrant exercise
period, there is no assurance that it will be able to do so. The Warrants may be
deprived of any value if a current registration statement covering the
underlying Common Stock is not kept effective, if the issuance of such Common
Stock is not registered or qualified, or in compliance with applicable
exceptions from such requirements, in the states in which the Warrant holders
reside, or if the holder is unable to otherwise sell the Warrants in a public
market, should such a market exist.
IMMEDIATE AND SUBSTANTIAL DILUTION. Purchasers of Common Stock upon the
exercise of Warrants will experience an immediate and substantial dilution in
the net tangible book value of the Common Stock. To the extent outstanding
options to purchase shares of the Company's Common Stock are exercised, there
will be further dilution.
UNCERTAINTY OF STOCK PRICE AFTER WARRANT DISTRIBUTION. The Company
cannot be certain what effect the issuance of up to 936,347 Warrants in the
Warrant Distribution or of up to 936,347 shares of Common Stock upon the
exercise of Warrants at $6.00 per share will have on the market price of the
Common Stock.
DETERMINATION OF WARRANT EXERCISE PRICE. The exercise price of the
Warrants was arbitrarily determined by the Company and does not necessarily bear
any relation to the Company's book value, operating results, financial condition
or other established criteria of value. The exercise price of the Warrants is
substantially higher than the price the Common Stock is trading on the date of
this Prospectus or has traded in the recent past on the Nasdaq National Market.
The exercise price is not necessarily indicative of any future market price of
the Common Stock, and there is no assurance that the market price of the Common
Stock will equal or exceed the exercise price of the Warrants at any time during
or after the exercise period.
NO ASSURANCE OF PUBLIC MARKET FOR WARRANTS. Prior to the Warrant
Distribution, there has been no public market for the Warrants. Although the
Company intends to make application to list the Warrants on The Nasdaq SmallCap
Market, there can be no assurance that a regular trading market will develop for
the Warrants or, if developed, can be sustained throughout the exercise period
of the Warrants.
NASDAQ NATIONAL MARKET LISTING. The Company's Common Stock is currently
listed on The Nasdaq National Market. The continued listing of the Common Stock
is dependent upon the Company and the Common Stock meeting certain market
listing requirements, including, without limitation, a $1.00 minimum bid price
for the Common Stock and a $5 million market value of public float (shares not
owned by an officer, director or 10% shareholder of the Company). If the Company
is unable to satisfy this current listing criteria in the future and cannot
qualify for listing on The Nasdaq SmallCap Market, then the Common Stock will
only be eligible for trading in the over-the-counter market in the so-called
"pink sheets" or the "Electronic Bulletin Board" of the National Association of
Securities Dealers, Inc. ("NASD"). As a consequence of such delisting, an
investor could find it more difficult to dispose of, or to obtain accurate
quotations as to the price of, the Company's securities, and the reduction in
liquidity could materially adversely affect the Company's ability to issue
additional securities to secure additional financing.
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In addition, because the Company's Common Stock is listed on The Nasdaq
National Market, the issuance of the Warrants, the exercise of Warrants and the
sale of the shares of Common Stock issuable upon such exercise is subject to an
exemption from registration in most states. If the Common Stock were delisted
from The Nasdaq National Market, even if the Common Stock were listed on The
Nasdaq SmallCap Market, then such exemption would cease to apply, and the
Company would have to seek to qualify the exercise of Warrants in most states.
In such event, residents of jurisdictions in which the Warrants were not
registered or otherwise qualified for sale who acquired the Warrants from the
Company as a distribution, in open market purchases, or otherwise, would not be
able to exercise their Warrants unless and until the securities issuable
thereunder were registered in the applicable jurisdiction or an exemption from
registration was available, neither of which can be assured. Warrant holders
would have no choice but to attempt to sell the Warrants in a jurisdiction where
such sale is permissible or allow them to expire unexercised. The availability
of those exemptions, however, may be subject to certain conditions, including in
some cases, filing requirements prior to issuing shares of Common Stock upon
exercise.
In addition, if the Common Stock were delisted from trading on The
Nasdaq National Market and were not eligible for listing on The Nasdaq SmallCap
Market, and if the trading price of the Common Stock were to be below $5.00 per
share, trading in the Common Stock would also be subject to the requirements of
certain rules promulgated under the Exchange Act, which require additional
disclosure by broker-dealers in connection with any trades involving a stock
defined as a "penny stock" (generally, any non-Nasdaq equity security that has a
market price of less then $5.00 per share, subject to certain exceptions). Such
rules require the delivery, prior to any penny stock transaction, of a
disclosure schedule explaining the penny stock market and the risks associated
therewith, and impose various sales practice requirements on broker-dealers who
sell penny stocks to persons other than established customers and accredited
investors (generally institutions). For these types of transactions, the
broker-dealer must make a special suitability determination for the purchaser
and sale. The additional burdens imposed upon broker-dealers by such
requirements may discourage broker-dealers from effecting transactions in the
Common Stock, which could severely limit the market liquidity of the Common
Stock and the ability of purchasers in this offering to sell the Common Stock in
the secondary market.
USE OF PROCEEDS
The maximum net proceeds to the Company from the sale of the up to
936,347 shares of Common Stock issuable upon exercise of the Warrants to be
issued in or as a result of the Warrant Distribution are estimated to be
approximately $5,538,082 (assuming all the shares of Common Stock offered hereby
are purchased pursuant to the exercise of the Warrants and after deducting
estimated expenses of the Warrant Distribution of $80,000). The Company
currently intends to use the net proceeds from the exercise of the Warrants for
working capital and general corporate purposes, which may include future
acquisitions by the Company, repayment of bank debt or the American Meter Note,
purchase of new equipment and product development. While the Company regularly
engages in discussions relating to potential acquisitions and may consider using
portions of any net proceeds for acquisition opportunities that arise in the
future, the Company currently has no present agreements or commitments with
respect to any material acquisition. The actual use of proceeds may vary
depending on many factors, including changes in the Company's financial
condition, business opportunities available to the Company, changes in the
Company's planned operations and changes in the business climate. Any
application of net proceeds will be at the discretion of the Board of Directors
of the Company. Pending the use of the proceeds as set forth above, the net
proceeds will be invested in short-term marketable securities.
The Company will not receive any of the proceeds from the issuance of
the Warrants to holders of the Company's Common Stock as a dividend in the
Warrant Distribution or from any sale of the Warrants by the Selling
Securityholder.
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SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data of the Company and its
subsidiaries as of and for the years ended December 31, 1996 and 1997 have been
derived from the audited consolidated financial statements of the Company
incorporated by reference into this Prospectus. The selected consolidated
financial data of the Company and its subsidiaries as of and for the three
months ended March 31, 1997 and 1998 have been derived from the unaudited
consolidated financial statements of the Company incorporated by reference into
this Prospectus, which, in the opinion of management, contain all adjustments
(consisting only of normal recurring accruals) necessary for a fair presentation
of the consolidated financial condition and the results of operations of the
Company and its subsidiaries as of and for the periods presented. The selected
financial data for the three months ended March 31, 1998 are not necessarily
indicative of the results that may be expected for the full year ending December
31, 1998. The selected consolidated financial data set forth below should be
read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the consolidated financial statements
and the related notes thereto incorporated by reference into this Prospectus.
All share and per share data in the following table has been restated to reflect
the one-for-four reverse split of the Common Stock of the Company effected on
July 6, 1998.
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS
DECEMBER 31, ENDED MARCH 31,
-------------------- -------------------
1996 1997 1997 1998
---- ---- ---- ----
STATEMENT OF OPERATIONS DATA: (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Revenues:
Natural gas measurement sales and services......... $18,419 $20,390 $ 4,260 $4,450
Other.............................................. 596 827 99 219
------- ------- ------- ------
Total revenues................................ 19,015 21,217 4,359 4,669
Costs and expenses:
Cost of measurement sales and services............. 11,987 12,921 2,679 2,895
General and administrative......................... 3,705 3,803 1,023 986
Selling, marketing and service..................... 1,589 1,642 357 308
Depreciation and amortization...................... 907 945 234 237
Research and development........................... 730 1,062 217 214
Interest and other................................. 89 91 36 12
------- ------- ------- ------
Total costs and expenses...................... 19,007 20,464 4,546 4,652
------- ------- ------- ------
Income (loss) from continuing operations.............. 8 753 (187) 17
------- ------- ------- ------
Loss from discontinued operations..................... (1,549) (2,277) (1,579) 0
------- ------- ------- ------
Net income (loss)..................................... $(1,541) $(1,524) $(1,766) $ 17
======= ======= ======= ======
Income (loss) per basic common share:
Continuing operations.............................. $ 0.00 $ 0.24 $ (0.06) $ 0.00
Discontinued operations............................ (0.51) (0.74) (0.51) 0.00
------- ------- ------- ------
Net income (loss) per basic common share.............. $ (0.51) $ (0.50) $ (0.57) $ 0.00
======= ======= ======= ======
Income (loss) per basic common share -- assuming
dilution:
Continuing operations.............................. $ 0.00 $ 0.24 $ (0.06) $ 0.00
Discontinued operations............................ (0.51) (0.74) (0.51) 0.00
------- ------- ------- ------
Net income (loss) per common share -- assuming
dilution.............................................. $ (0.51) $ (0.50) $ (0.57) $ 0.00
======= ======= ======= ======
Weighted average common shares outstanding............ 3,025 3,076 3,072 3,083
Incremental shares from assumed conversion of
stock options...................................... 1 8 0 12
------- ------- ------- ------
Weighted average common shares assuming dilution...... 3,026 3,084 3,072 3,095
======= ======= ======= ======
</TABLE>
16
<PAGE> 19
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
-------------------- -------------------
1996 1997 1997 1998
---- ---- ---- ----
BALANCE SHEET DATA: (IN THOUSANDS)
<S> <C> <C> <C> <C>
Working capital....................................... $ 7,282 $ 6,285 $ 5,761 $ 6,930
Total assets.......................................... 19,589 18,679 17,502 18,501
Long term debt, excluding current maturities.......... 47 178 0 479
Total stockholders' equity............................ 17,292 15,849 15,604 15,952
</TABLE>
THE WARRANT DISTRIBUTION
The Company is distributing, at no cost, as a dividend to each holder
of its Common Stock of record as of the close of business on ______________,
1998, the Record Date, one Warrant for each four shares of Common Stock held on
the Record Date. A total of up to 936,347 Warrants will be issued in the Warrant
Distribution, including up to 45,191 Warrants issuable to the Selling
Securityholder upon the conversion of the American Meter Note, if and when the
Selling Securityholder elects to convert the American Meter Note, unless the
Warrants are redeemed by the Company and the American Meter Note is converted
after the close of business of the date fixed for redemption.
No Warrants to purchase fractional shares will be issued. The number of
Warrants to be issued to each stockholder will be rounded down to the nearest
whole Warrant. Warrant holders may (i) purchase Common Stock through the
exercise of their Warrants, (ii) trade their Warrants, or (iii) allow their
Warrants to expire unexercised.
The Warrants will be issued pursuant to the terms and conditions of a
Warrant Agency Agreement (the "Warrant Agreement") between the Company and
American Securities Transfer & Trust, Inc. (the "Warrant Agent"), as Warrant
Agent. The following description of the Warrants is not complete and is
qualified in its entirety by reference to the Warrant Agreement, which is an
exhibit to the Registration Statement of which this Prospectus is a part and is
available upon request to the Company.
TERMS OF THE WARRANTS
Each Warrant entitles the holder thereof to purchase one share of the
Company's Common Stock at an exercise price of $6.00 per share, subject to
adjustment in certain events, at any time during the period commencing on the
Record Date and ending at 5:00 p.m., Denver, Colorado time, on ___________, 2003
(five years after the Record Date). Warrants not exercised prior to the Warrant
Expiration Date will no longer be exercisable, but will become null and void and
will have no value. Upon at least 30 days prior written notice to all holders of
Warrants, the Company has the right to reduce the exercise price and/or to
extend the term of the Warrants.
The Warrants are redeemable at the option of the Company at a
redemption price of $.01 per Warrant at any time on at least 30 days prior
written notice, if the closing sale price of the Common Stock equals or exceeds
$7.50 for 20 consecutive trading days ending within 30 days prior to the date
notice of redemption is given, and if at such time there is a current effective
registration statement covering the Common Stock underlying the Warrants.
Holders of Warrants will have the right to exercise the Warrants until the close
of business on the date fixed for redemption.
No Warrants will be exercisable unless at the time of exercise there is
a current prospectus covering the shares of Common Stock issuable upon exercise
of such Warrants under an effective registration statement filed with the
Commission and such shares of Common Stock have been qualified for sale or are
exempt from qualification under the securities laws of the state of residence of
the holder of such Warrants. Although the Company intends to have all shares of
Common Stock so qualified for sale in those states where the Warrants are being
offered and to maintain a current prospectus relating thereto until the
expiration of the Warrants, subject to the terms of the Warrant Agreement, there
can be no assurance that it will be able to do so. The Company is also
17
<PAGE> 20
required to keep available a sufficient number of authorized shares of Common
Stock to permit exercise of the Warrants.
The exercise price of the Warrants and the number of shares of Company
Stock issuable upon exercise of the Warrants will be subject to adjustment to
protect against dilution in the event of stock dividends, stock splits,
combinations, subdivisions, reclassifications, reorganizations, mergers, and
similar corporate transactions. However, the Warrants are not subject to
adjustment for issuance of shares of Common Stock (or securities convertible
into or exercisable for Common Stock) at prices below the exercise price of the
Warrants.
The Company and the Warrant Agent may make such modifications to the
Warrants as they deem necessary and desirable that do not adversely affect the
interests of the Warrant holders. No other modification may be made to the
Warrants, without the consent of a majority of the Warrant holders.
DETERMINATION OF EXERCISE PRICE OF WARRANTS
The exercise price of the Warrants was arbitrarily determined by the
Company and does not necessarily bear any relation to the Company's book value,
operating results, financial condition or any other established criteria of
value, and should not be regarded as indicative of any future market price of
the Common Stock. The exercise price of the Warrants is substantially higher
than the price the Common Stock is trading on the date of this Prospectus or has
traded in the recent past on The Nasdaq National Market. No assurance can be
given that the market price of the Company's Common Stock will equal or exceed
the exercise price of the Warrants at any time during or after the exercise
period.
METHOD OF OFFERING
The Warrant Distribution is being made directly by the Company. The
Company will not pay any underwriting discounts or commissions, finders fees or
other remuneration in connection with any distribution of the Warrants or sales
of the shares of the underlying Common Stock offered hereby, other than the fees
paid to American Securities Transfer & Trust, Inc. as the Warrant Agent. The
Company estimates that the expenses of the Warrant Distribution will be
approximately $80,000.
The Warrants will be evidenced by certificates ("Warrant Certificates")
that will be distributed to holders of record of Common Stock by the Warrant
Agent, along with copies of this Prospectus, as soon as practicable after the
Record Date.
All commissions, fees and other expenses (including brokerage
commissions and transfer taxes) incurred in connection with the exercise of the
Warrants are the responsibility of the holders of the Warrants, and none of such
commissions, fees or expenses will be paid by the Company.
EXERCISE OF WARRANTS AND WARRANT AGENT
Warrant holders may exercise the Warrants by properly completing and
signing the subscription form on the Warrants including, if required, a
signature guarantee from an eligible institution, and mailing or delivering the
Warrants to the Warrant Agent, together with a payment of the aggregate exercise
price of the Warrants in full (in U.S. dollars) by such holder, to:
American Securities Transfer & Trust, Inc.
938 Quail Street, Suite 101
Denver, Colorado 80215
Telephone: (303) 234-5300
Facsimile: (303) 234-5340
A holder may exercise Warrants in whole or in part, but no Warrants may be
exercised for fractional shares of Common Stock.
18
<PAGE> 21
The exercise price will be considered to have been paid only upon
clearance of the wire transfer, certified or official bank check, bank draft or
money order tendered therefor. All funds received by the Warrant Agent from the
exercise of the Warrants will be deposited upon receipt. Pending issuance of
certificates representing shares of Common Stock, funds received for the
exercise of Warrants will be held in a segregated escrow account.
Once a holder has exercised a Warrant, the exercise may not be revoked.
To be accepted, the properly completed Warrants and payment with respect to the
exercise price of the Warrants must be received by the Warrant Agent before 5:00
p.m. Denver, Colorado time on ________, 200__. The instruction accompanying the
Warrants should be read carefully and followed in detail. WARRANTS SHOULD BE
SENT WITH PAYMENT TO THE WARRANT AGENT. DO NOT SEND WARRANTS TO THE COMPANY.
Certificates representing the shares of Common Stock subscribed for
will be issued and delivered as soon as practicable after payment of the
exercise price of the Warrants. Holders of Warrants, as such, will not have any
rights as stockholders of the Company until stock certificates representing the
shares of Common Stock subscribed for are issued to them.
The risk of method of delivery of all documents and payment is on the
holders of the Warrants, not the Company. If the mail is used, it is recommended
that payments be made by registered mail, properly insured, return receipt
requested, and that a sufficient number of days be allowed to ensure delivery to
the Warrant Agent before the expiration of the Warrants.
Questions relating to the method of exercise and requests for
additional copies of this Prospectus should be directed to the Warrant Agent at
the address set forth above.
TRANSFER OF WARRANTS
The Warrants will be transferable separately from the Common Stock
immediately upon distribution. The Company intends to make application to have
the Warrants listed for trading on The Nasdaq SmallCap Market under the symbol
"MGASW." However, there can be no assurance that a trading market for the
Warrants will develop or, if developed, can be sustained throughout the exercise
period of the Warrants.
NOMINEE HOLDERS
Holders on the Record Date who hold shares of Common Stock for the
account of others, such as brokers, trustees or depositories for securities (a
"Nominee Record Date Holder"), should contact the respective beneficial owners
of such shares as soon as possible to ascertain those beneficial owners'
intentions and to obtain instructions and certain beneficial owner certificates
with respect to their Warrants, all as included in the instruction distributed
by Nominee Record Date Holders to beneficial owners. If a beneficial owner so
instructs, the Nominee Record Date Holder should complete the appropriate
subscription form on the Warrants and submit them to the Warrant Agent with the
proper payment. In addition, beneficial owners of Common Stock or Warrants held
through such Nominee Record Date Holder should contact the Nominee Record Date
Holder and request the Nominee Record Date Holder to effect transactions in
accordance with the beneficial owner's instructions.
INTERPRETATION
All questions as to the validity, form, eligibility, including time of
receipt, and acceptance of any exercise will be determined by the Company, in
its sole discretion, which determination shall be final and binding. The Company
reserves the absolute right to reject any exercise if it is not in proper form
or if the acceptance thereof or the issuance of Common Stock pursuant thereto
could be deemed unlawful. The Company also reserves the right to waive any
defect with regard to any particular exercise. The Company shall not be under
any duty to give notification of any defects or irregularities in exercises, nor
shall it incur any liability for failure to give such notification. Warrants
will not be deemed to have been exercised until any such defects or
irregularities have been cured or waived within such time as the Company shall
determine. Warrant exercises with defects or irregularities
19
<PAGE> 22
which have not been cured or waived will be returned by the Company to the
appropriate holder of the Warrants as soon as practicable.
STATE AND FOREIGN SECURITIES LAWS
The Warrants may not be exercised by any person, and neither this
Prospectus nor any Warrants shall constitute an offer to sell or a solicitation
of an offer to purchase any shares of Common Stock, in any jurisdiction in which
such transactions would be unlawful. The Company believes that any action
required of the Company has been taken to permit exercises of the Warrants and
purchases of the Common Stock in all states in which holders of Warrants as of
the Record Date reside. No action has been taken in any jurisdiction outside the
United States to permit offers and sales of the Warrants or the Common Stock.
Consequently, the Company may reject subscriptions pursuant to the exercise of
Warrants by any holder of Warrants outside the United States, and the Company
may also reject subscriptions from holders in jurisdictions within the United
States if it should later determine that it may not lawfully issue shares or by
taking other actions in such jurisdiction.
POTENTIAL DILUTION
The Warrant Distribution may result in a significant dilution of the
voting interests of holders of the Company's Common Stock, depending on whether
such holders exercise their Warrants. Such dilution would reduce a Common Stock
holder's percentage ownership interest in the Company. As of July 31, 1998,
3,564,626 shares of Common Stock were issued and outstanding. If all the
Warrants to be issued in the Warrant Distribution are exercised (but no other
outstanding warrants or options are exercised and the American Meter Note is not
converted), then 4,455,782 shares of Common Stock will be outstanding (based on
the number of outstanding shares on July 31, 1998), and the percentage ownership
interest of a holder of Common Stock who does not exercise his Warrants (whether
because he trades or holds them, but does not exercise them) would be decreased
by approximately 20%.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the material anticipated federal income
tax consequences of the Warrant Distribution. This summary is based upon the
Internal Revenue Code of 1986, as amended (the "Code"), and the applicable
treasury regulations promulgated thereunder (the "Treasury Regulations"),
judicial authority and administrative rulings and practice, all as in effect on
the date hereof. Legislative, judicial or administrative rules and
interpretations are subject to change, potentially on a retroactive basis, at
any time and therefore could alter or modify the statements and conclusions set
forth below. For the purpose of this discussion, it is assumed that the Warrants
and the Common Stock are held as capital assets by United States persons (i.e.,
citizens or residents of the United States or domestic corporations). This
summary does not purport to be complete and does not address all aspects of
federal income taxation that may be relevant to a particular holder of Common
Stock or Warrants in light of such holder's personal investment circumstances,
holders holding Common Stock or Warrants as security for borrowings or those
holders subject to special treatment under the federal income tax laws (for
example, life insurance companies, tax-exempt organizations, foreign
corporations and nonresident alien individuals). The summary also does not
discuss any consequences of the Warrant Distribution under any state, local,
foreign, gift or estate tax laws. No ruling from the Internal Revenue Service
(the "Service") or opinion of counsel will be obtained regarding the federal
income tax consequences to the stockholders of the Company as a result of the
Reverse Split. ACCORDINGLY, EACH HOLDER IS ENCOURAGED TO CONSULT HIS OWN TAX
ADVISOR REGARDING THE SPECIFIC TAX CONSEQUENCES OF RECEIVING, HOLDING,
EXERCISING AND DISPOSING OF THE WARRANTY, INCLUDING THE APPLICATION AND EFFECT
OF STATE, LOCAL AND FOREIGN INCOME TAX LAWS.
20
<PAGE> 23
WARRANTS
Receipt of Warrants. The Company intends to treat the Warrant
Distribution as a nontaxable distribution pursuant to Section 305(a) of the
Code. Under the Company's intended treatment (i.e., treating the Warrant
Distribution as a nontaxable distribution), if a Warrant is exercised, the tax
basis of the Warrant in the hands of a holder will be determined by allocating
the holder's tax basis in his shares of Common Stock with respect to which the
Warrant was distributed between such shares of Common Stock and the Warrant, in
proportion to their relative fair market values on the date of distribution of
the Warrants (the "Warrant Distribution Date"). If, however, the fair market
value of the Warrant on the Warrant Distribution Date is less than 15% of the
fair market value of the shares of Common Stock with respect to which the
Warrant was distributed, the holder's tax basis in the Warrant will be deemed to
be zero unless the holder affirmatively elects, in accordance with Treasury
Regulations, to apportion his or her tax basis in accordance with the preceding
sentence. The holding period of a Warrant will include the holding period for
the shares of Common Stock with respect to which the Warrant was distributed.
However, the law applicable to the receipt of the Warrant Distribution
is not entirely clear and the Service may take the position that the Warrant
Distribution constitutes a taxable distribution under Section 301 of the Code.
In this event, a holder receiving a Warrant would be considered to have received
a distribution on the Warrant Distribution Date, in an amount equal to the fair
market value of the Warrant received. Although the Company has an accumulated
deficit in earnings and profits, to the extent the Company has current earnings
and profits in the taxable year of the Warrant Distribution, if the distribution
were treated as a taxable distribution, the distribution would be treated first
as a dividend taxable as ordinary income, next as a nontaxable recovery of the
adjusted tax basis in the Common Stock with respect to which the Warrant was
distributed and finally as gain from the sale or exchange of such Common Stock.
A holder's tax basis in a Warrant received in a taxable distribution would equal
the fair market value of the warrant as of the Warrant Distribution Date and the
holding period of the warrant would commence on the Distribution Date.
Exercise of Warrants. No gain or loss will be recognized by a holder of
Warrants upon exercise of the Warrants for cash. The adjusted tax basis of a
holder of Common Stock acquired upon exercise of Warrants will be equal to the
sum of the holder's adjusted tax basis in the exercised Warrants and the
exercise price of the Warrants. The holding period for Common Stock acquired
upon exercise of Warrants will commence on the date of such exercise.
Disposition of Warrants. The sale or other disposition of Warrants will
result in the recognition of gain or loss by the holder of such Warrant in an
amount equal to the difference between the amount realized and the holder's
adjusted tax basis in the Warrant (determined as discussed above). Gain or loss
will be capital gain or loss if the Warrant was held as a capital asset, and
will be long-term capital gain or loss if the Warrant has a holding period for
tax purposes of more than one year. As discussed above, the date on which the
holding period for the Warrant commences will depend on whether the Warrant is
treated as a non-taxable distribution or as a distribution taxable under Section
301 of the Code.
COMMON STOCK
The sale or other disposition of Common Stock acquired upon exercise of
a Warrant will result in the recognition of gain or loss by the holder of such
Common Stock in an amount equal to the difference between the amount realized
and the holder's adjusted tax basis in the Common Stock. Gain or loss will be
capital gain or loss if the Common Stock was held as a capital asset, and will
be long-term capital gain or loss if the Common Stock has a holding period for
tax purposes of more than one year. The holding period commences on the date
such Warrants are exercised.
TAX CONSEQUENCES TO THE COMPANY
The Company will not recognize any income or gain upon the distribution
of the Warrants, the exercise of the Warrants, or the expiration or redemption
of the Warrants.
21
<PAGE> 24
SELLING SECURITYHOLDER
The Selling Securityholder is American Meter Software Corporation
(formerly known as Eagle Research Corporation), a wholly-owned subsidiary of
American Meter Company, located at 105 Erskine Lane, Scott Depot, West Virginia
25560. The Warrants being offered by the Selling Securityholder pursuant to this
Prospectus consist of 155,081 Warrants to be issued to the Selling
Securityholder in the Warrant Distribution, including up to 45,191 Warrants
issuable upon the conversion of the American Meter Note (unless, if the Warrants
are called for redemption, such conversion occurs after the Warrants are
redeemed by the Company). Any such sale of the Warrants is subject to the terms
of a certain lock-up agreement ("Lock-Up Agreement") between the Selling
Securityholder and the Company. Under the terms of the Lock-Up Agreement, the
Selling Securityholder and its affiliates may not, until the earlier of the
Warrant Expiration Date or the date the Warrants are redeemed, if ever, directly
or indirectly, pursuant to this Prospectus, Rule 144 or otherwise, offer, sell,
grant any option to purchase or dispose of (or announce the same) any Warrants
without the prior written consent of the Company, except as follows: (i) during
any three-month period, 2% of the aggregate number of Warrants then outstanding
may be sold; and (ii) in the event the Company gives written notice of
redemption of the Warrants in accordance with the terms of the Warrant
Agreement, any or all of the Warrants may be sold. This Prospectus does not
cover the resale by the Selling Securityholder or any of its affiliates of any
shares of Common Stock whether acquired in connection with the American Meter
Transaction, upon conversion of the American Meter Note, upon exercise of the
Warrants, or otherwise.
As of July 31, 1998, the Selling Securityholder beneficially owned
620,326 shares of Common Stock, including 180,766 shares of Common Stock
issuable upon the conversion of the American Meter Note, representing 16.6% of
the shares of Common Stock of the Company outstanding plus the shares of Common
Stock issuable upon conversion of American Meter Note. Harry I. Skilton, the
President, Chief Executive Officer and a Director of American Meter and an
executive officer and a director of the Selling Securityholder beneficially owns
9,357 shares of Common Stock, including 6,857 shares issuable upon the exercise
of outstanding stock options, which represents approximately 0.3% of the
outstanding shares of Common Stock. The shares of Common Stock beneficially
owned by Mr. Skilton have not been included in the Selling Securityholder's
beneficial ownership. The Selling Securityholder has certain registration rights
with respect to the Common Stock beneficially owned by it. See "Description of
Capital Stock--Registration Rights." The Selling Securityholder and American
Meter are also parties with the Company and Metretek with respect to the
American Meter License Agreement and the American Meter Non-Competition
Agreement. See "Prospectus Summary--The Company".
Because the Selling Securityholder may sell all, some or none of the
Warrants its beneficial owns, no estimate or assurance can be given as to the
number of Warrants that will actually be sold by the Selling Securityholder.
The Company has been advised by the Selling Securityholder that the
Selling Securityholder, or its pledgees, donees, transferees or other successors
in interest, may from time to time offer for sale all or a portion of the
Warrants it receives in the Warrant Distribution in one or more transactions
(which may include block transactions or ordinary brokerage transactions) on The
Nasdaq SmallCap Market or on such other market or exchange on which the Warrants
may from time to time be trading, in privately negotiated transactions, through
a combination of such methods of sale, or otherwise, at fixed prices that may be
changed, at market prices prevailing at the time of sale, at prices related to
prevailing market prices, or at negotiated prices. The Selling Securityholder,
or its pledgees, donees, transferees or other successors in interest, may effect
such transactions by selling the Warrants directly to purchasers, acting as
principals for their own accounts, or by selling their Warrants to or through
brokers or dealers acting as principals for their own accounts or as agents for
their customers. In effecting such transactions, the brokers or dealers engaged
by the Selling Securityholder may arrange for other brokers or dealers to
participate. Such brokers or dealers may receive compensation in the form of
commissions, discounts or concessions from the Selling Securityholder and/or the
purchasers of the Warrants for whom such brokers or dealers act as agent, or to
whom they sell as principal, or both (which compensation to a particular broker
or dealer may be in excess of customary commissions).
22
<PAGE> 25
The Selling Securityholder, and any brokers, dealers or agents that
participate with the Selling Securityholder in the distribution of the Warrants,
may be deemed to be "underwriters" within the meaning of the Securities Act, in
which event any compensation received by such brokers, dealers or agents and any
profits received by them upon the resale of the Warrants as principal may be
deemed to be underwriting discounts and commissions for purposes of the
Securities Act.
To the extent required, the amount of the Warrants to be offered, the
purchase prices, the public offering prices, the names of any agents, brokers,
dealers or underwriters, and any applicable commissions or discounts with
respect to a particular offer will be set forth by the Company in a Prospectus
Supplement accompanying this Prospectus or, if appropriate, a post-effective
amendment to the Registration Statement.
Under applicable rules and regulations under the Exchange Act, any
person engaged in the distribution of the Warrants may be limited in its ability
to engage in market activities with respect to such Warrants or the Common
Stock. The Selling Securityholder and any other persons participating in the
sale or distribution of the Warrants will be subject to applicable provisions of
the Exchange Act and the rules and regulations thereunder, including, without
limitation, Regulation M, which provisions may limit the timing of purchases and
sales of the Warrants or the Common Stock by the Selling Securityholder or any
other such person. The foregoing may affect the marketability of the Warrants.
The Company has agreed to indemnify the Selling Securityholder against
certain liabilities, including liability under the Securities Act, or to
contribute to payments the Selling Securityholder may be required to make in
respect thereof. The Company has agreed to bear all expenses of the Warrants,
other than commissions, discounts, concessions, or other compensation payable to
brokers, dealers or underwriters in connection with such resale, which will be
borne by the Selling Securityholder.
Any or all of the sales or other transactions involving the Warrants
described above, whether effected by the Selling Securityholder, any broker,
dealer, agent or others, may be made pursuant to this Prospectus. In addition,
any Warrants that qualify for sale pursuant to Rule 144 under the Securities Act
may be sold under Rule 144 rather than pursuant to this Prospectus.
Offers or sales of the Warrants have not been registered or qualified
under the laws of any country, other than the United States. In order to comply
with the securities laws of certain states, if applicable, the Warrants may be
sold in such jurisdictions only through registered or licensed brokers or
dealers. In addition, in certain states the Warrants may not be sold unless the
Warrants have been registered or qualified for sale in such states or an
exemption from registration or qualification is available and is complied with.
No underwriter, broker, dealer or agent has been engaged by the Company
in connection with the distribution of the Warrants to which this Prospectus
relates. All costs associated with this offering will be paid by the Company,
provided the Company shall not be responsible for any discounts, commissions,
concessions or other compensation payable to brokers, dealers or agents in
connection with the sale of Warrants.
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 25,000,000
shares of Common Stock, par value $.01 per share, and 2,500,000 shares of
Preferred Stock, par value $.01 per share, of which 1,000,000 shares are
designated as Series A, 1,000,000 shares are designated as Series B, and 500,000
shares are designated as Series C. As of July 31, 1998, (i) 3,564,626 shares of
Common Stock and no shares of Preferred Stock were issued and outstanding, (ii)
options to purchase 418,284 shares of Common Stock were outstanding, and (iii)
warrants (not including the Warrants) exercisable for 96,220 shares of Common
Stock were outstanding. The following description of the Company's capital stock
does not purport to be complete but is qualified in its entirety by reference to
the Company's Certificate and By-laws and the other documents referred to
herein, which are exhibits to the Registration Statement, and to the General
Corporation Law of the State of Delaware (the "DGCL").
23
<PAGE> 26
COMMON STOCK
Holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of the stockholders. Such holders do
not have the right to cumulate their votes in the election of directors. Holders
of Common Stock are entitled to receive dividends when, as and if declared by
the Board of Directors out of funds legally available therefor. In the event of
a liquidation, dissolution or winding up of the Company, holders of Common Stock
have the right to a ratable portion of the assets remaining after satisfaction
of liabilities of the Company and subject to all liquidation preferences on any
outstanding shares of Preferred Stock. Holders of Common Stock have no
preemptive or preferential rights to purchase or subscribe for any part of any
additional securities or rights to convert their Common Stock into other
securities and are not subject to future calls or assessments by the Company.
Holders of Common Stock have no conversion, sinking fund or redemption rights.
All outstanding shares of Common Stock are, and all shares of Common Stock to be
issued upon exercise of the Warrants will, upon issuance and against payment as
contemplated herein, be fully paid and nonassessable.
PREFERRED STOCK
The Board of Directors is authorized, without further action by the
holders of Common Stock, to issue the Preferred Stock, from time to time, in one
or more series, and to designate the relative rights and preferences of the
Preferred Stock, when and if issued. Such rights and preferences may include
preferences on liquidation, redemption and conversion rights, voting rights,
dividends or other preferences, any of which may be dilutive of the interests of
the holders of the Common Stock and could adversely affect the voting power of
the holders of Common Stock. The issuance of Preferred Stock could also have the
effect of delaying or preventing a change in control of the Company and may have
an adverse effect on the rights of the holders of Common Stock.
All previously outstanding shares of Series A Preferred Stock, the
terms of which were fixed in connection with a previous transaction and would
need to be modified to facilitate any future issuances, have been converted into
Common Stock pursuant to their terms. The Board of Directors has not fixed any
of the rights or preferences of the Series B Preferred Stock. The Series C
Preferred Stock is to be issued in connection with the Rights Agreement
described below and has the following terms: cumulative quarterly dividends in
preference to the holders of Common Stock equal to the greater of $16.00 per
share or 100 times the dividend paid per share to holders of Common Stock; 100
votes per share; and a preference on liquidation equal to the greater of $64.00
per share or 100 times the amount payable per share to the holders of Common
Stock.
No shares of the Preferred Stock are presently outstanding, and the
Company has no current plans to issue any shares of Preferred Stock, except as
provided under "Rights Agreement" below.
WARRANTS
Warrants to be Issued in the Warrant Distribution. For a description of
the terms of the Warrants to be issued in the Warrant Distribution, see "The
Warrant Distribution."
Metretek Warrants. Pursuant to the Company's acquisition of Metretek,
the Company issued warrants to purchase Common Stock (the "Metretek Warrants")
to the holders of then outstanding warrants to purchase Metretek capital stock.
As of July 31, 1998, there were outstanding four series of Metretek Warrants to
purchase an aggregate of 36,620 shares of Common Stock (subject to adjustment in
certain events), with expiration dates ranging from 1999 to 2004 and exercise
prices ranging from $44.48 to $88.96 per share. The shares of Common Stock
issuable upon the exercise of the Metretek Warrants cannot be resold unless such
resale is registered under the Securities Act and under applicable state
securities laws or is made pursuant to an available exemption therefrom.
Other Warrants. The Company also has outstanding warrants to purchase
60,000 shares of Common Stock. Warrants to purchase 50,000 shares (the
"Consultanting Warrants") were issued to an unaffiliated consultant (the
"Consultant"). The Consulting Warrants are exercisable until March 13, 2003
(subject to earlier termination upon certain events), subject to vesting and
with exercise prices based upon an ascending market price
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<PAGE> 27
of the Common Stock, of which warrants to purchase 12,500 shares were vested at
on exercise price of $4.43 per share as of the date of this Prospectus. Warrants
to purchase 10,000 shares of Common Stock issued to an unaffiliated person are
exercisable until September 17, 1999 at an exercise price of $17.00 per share.
The shares of Common Stock issuable upon the exercise of such warrants cannot be
resold unless such resale is registered under the Securities Act and under
applicable state securities laws or is made pursuant to an available exemption
therefrom.
REGISTRATION RIGHTS
In connection with the American Meter Transaction, the Company granted
to the Selling Securityholder certain registration rights with respect to
620,326 shares of Common Stock issued to the Selling Securityholder, including
the shares of Common Stock issuable upon conversion of the American Meter Note.
The Selling Securityholder has the right to require the Company on one occasion
from May 4, 2000 until May 4, 2006 (or 90 days after the Selling
Securityholder's beneficial ownership of the Company's Common Stock becomes less
than 10%), to file a registration statement under the Securities Act in order to
register all or any part of its shares of Common Stock. The Company may in
certain circumstances defer such registration, and in an underwritten public
offering, the underwriters have the right, subject to certain limitations, to
limit the number of shares included in such registration. The Company is
obligated to pay the first $10,000 of the expenses of any demand registration,
and the Selling Securityholder will pay all other related thereto. In addition,
if the Company proposes to register any of its securities under the Securities
Act, either for its own account or for the account of other securityholders,
then the Selling Securityholder is entitled to notice of such registration and
is entitled to include its shares of Common Stock in such registration, at the
Company's expense, subject to customary underwriting and hold-back provisions.
The Selling Securityholder has declined to exercise its registration rights with
respect to this registration, except for the resale of the Warrants. See
"Selling Securityholder".
The holders of the Metretek Warrants have the right, under certain
circumstances, to require the Company to register the shares of Common Stock
issuable upon exercise of the Metretek Warrants under the Securities Act and
applicable state securities laws commencing in 1999. See "-- Metretek Warrants",
above.
The Company has also granted to the Consultant certain registration
rights with respect to the 50,000 shares of Common Stock (the "Consulting
Shares") issuable upon exercise of the Consulting Warrants. The Consultant has
the right to require the Company, on one occasion between September 13, 1998 and
March 13, 2003, to file a registration statement under the Securities Act in
order to register the Consulting Shares. The Company may in certain
circumstances defer such registration, and in an underwritten public offering,
the underwriters have the right, subject to certain limitations, to limit the
number of Consulting Shares included in such registration. The Company is
obligated to pay the first $10,000 of the expenses of any demand registration,
and the Consultant will pay all other expenses related thereto. In addition, if
the Company proposes to register any of its securities under the Securities Act,
then the Consultant is entitled to notice of such registration and is entitled
to include the Consulting Shares in such registration, at the Company's expense,
subject to customary underwriting and hold-back provisions. The Consultant has
declined to exercise its registration rights with respect to this registration.
See "-- Other Warrants", above.
DELAWARE BUSINESS COMBINATION STATUTE
The Company is subject to the provisions of Section 203 of the DGCL
(the "Business Combination Statute"). In general, the Business Combination
Statute prohibits a publicly-held Delaware corporation from engaging in certain
"business combinations" with an "interested stockholder" for a period of three
years after the time that such stockholder became an interested stockholder,
unless (i) prior to such time, the board of directors approved either the
business combination or the transaction which resulted in the stockholder
becoming an interested stockholder, (ii) the interested stockholder owned at
least 85% of the voting stock of the corporation outstanding upon consummation
of the transaction which resulted in the stockholder becoming an interested
stockholder, or (iii) the business combination is approved by the board of
directors and authorized at a meeting of stockholders (and not by written
consent) by the affirmative vote of the holders of at least two-thirds of the
outstanding voting stock, other than shares held by the interested stockholder.
A "business combination" is defined
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<PAGE> 28
broadly to include a merger, consolidation, sale or other disposition of assets
and certain other transactions resulting in the receipt of financial benefits by
the interested stockholder. An "interested stockholder" is defined as a person
who, together with affiliates and associates, beneficially owns (or within the
preceding three years, did beneficially own) 15% or more of the outstanding
voting stock.
The Business Combination Statute could have the effect of delaying,
deferring or preventing a change in control of the Company by means of a tender
offer, open market purchase, a proxy fight or otherwise. These provisions are
designed to encourage persons seeking to acquire control of the Company to
negotiate a transaction with the Board of Directors. To the extent these
provisions discourage takeover attempts, they could deprive stockholders of
opportunities to realize takeover premiums for their shares or could depress the
market price of the Common Stock.
RIGHTS AGREEMENT
On December 2, 1991, the Board of Directors of the Company declared a
dividend of one preferred share purchase right (a "Right") for each share of
Common Stock outstanding on December 2, 1991 (the "Rights Record Date"), and
further authorized the issuance of one Right for each share of Common Stock
issued after the Record Date until the earlier of the "Rights Distribution
Date," the "Rights Redemption Date" and the "Rights Expiration Date" (as such
terms are defined below). Each Right entitles the registered holder thereof to
purchase from the Company one one-hundredth of a share of Series C Preferred
Stock, par value $.01 per share (the "Series C Preferred Share"), of the Company
at a purchase price of $100.00 per one one-hundredth of a Series C Preferred
Share (the "Series C Preferred Share Purchase Price"), subject to adjustment.
The description and terms of the Rights set forth herein is not complete and is
quoted in its entirety by reference to the Rights Agreement, dated December 2,
1991, as amended (the "Rights Agreement"), between the Company and American
Securities Transfer & Trust, Inc., as rights agent.
Until the earlier to occur of (i) the tenth day after a public
announcement that a person or group of affiliated or associated persons (a
"Person") has become an Acquiring Person, or (ii) the tenth business day (or
such later date as may be determined by the Board of Directors of the Company
prior to such time as any Person becomes an Acquiring Person) after the date of
commencement, or the first public announcement of the intention to commence, a
tender offer or exchange offer with result in the beneficial ownership by a
person or group of 15% or more of the outstanding Common Stock (the earlier of
such dates being called the "Rights Distribution Date"), the Rights will be
evidenced by the certificates for Common Stock.
The term "Acquiring Person" is defined for purposes of the Rights
Agreement as any Person who beneficially owns 15% or more of the Common Stock
then outstanding, subject to certain exceptions for related parties set forth in
the Rights Agreement. Notwithstanding the foregoing, neither American Meter nor
any of its affiliates shall be deemed to be an "Acquiring Person," and no
"Rights Distribution Date" shall be deemed to have occurred, solely by reason of
the execution of the Purchase Agreement (or any amendment thereto in accordance
with the terms thereof) or the consummation of the transactions contemplated
thereby or by the beneficial ownership by American Meter and/or its affiliates
of up to, but not in excess of 25% of the Common Stock then outstanding.
However, a Person who obtains beneficial ownership of 15% or more of the
outstanding shares of Common Stock, either (i) by reason of share purchases by
the Company reducing the number of shares of Common Stock outstanding, or (ii)
inadvertently, as determined in good faith by the Board of Directors of the
Company, if such Person promptly divests itself of enough shares of Common Stock
so as to beneficially own less than 15% of the outstanding Common Stock, shall
not be an Acquiring Person.
The Rights Agreement provides that, until the Rights Distribution Date,
the Rights will be transferred with and only with the Common Stock, and the
surrender for transfer of any certificates for Common Stock will also constitute
the transfer of the Rights associated with the Common Stock represented by such
certificate. As soon as practicable following the Rights Distribution Date,
separate certificates evidencing the Rights (the "Right Certificates") will be
mailed to holders of record of the Common Stock as of the close of business on
the Rights Distribution Date, and such separate Right Certificates alone will
evidence the rights. The Rights are not exercisable until the Rights
Distribution Date. The Rights will expire on December 1, 2001 (the "Rights
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<PAGE> 29
Expiration Date"), unless the Rights Expiration Date is extended or unless the
Rights are earlier redeemed by the Registrant, in each case, as described below.
In the event any Person becomes an Acquiring Person, each holder of a Right,
other than Rights beneficially owned by an Acquiring Person (which will
thereafter be void), will thereafter have the right to receive upon exercise
that number of shares of Common Stock having a market value of two times the
Series C Preferred Share Purchase Price of the Right.
In the event that, at any time after the Rights Distribution Date, (i)
the Company is acquired in a merger or other business combination transaction,
(ii) any Person merges with and into the Company and the Company is the
surviving corporation, but the Common Stock is changed or exchanged, or (iii)
50% or more of the consolidated assets or earning power of the Company are sold
after a Person becomes an Acquiring Person, proper provision will be made so
that each holder of a Right, other than Rights beneficially owned by an
Acquiring Person (which have previously become voided as set forth above), will
thereafter have the right to receive, upon the exercise thereof at the then
current Series C Preferred Share Purchase Price of the Rights, that number of
shares of common stock of the acquiring company which at the time of such
transaction will have a market value of two times the exercise price of the
Right.
At any time after a Person becomes an Acquiring Person but before the
Acquiring Person becomes the beneficial owner of 50% or more of the outstanding
Common Stock, the Board of Directors of the Company may exchange the Rights
(other than Rights owned by the Acquiring Person which have become void), in
whole or in part, at an exchange ratio of one share of Common Stock per Right,
subject to an adjustment. At any time prior to the time a Person becomes an
Acquiring Person, the Board of Directors of the Company may redeem all, but not
less than all, of the Rights at a redemption price of $.01 per Right (such date
being called the "Rights Redemption Date").
The Rights Agreement may be amended by the Board of Directors of the
Company without the consent of the holders of the Rights; provided, however,
that from and after such time as any Person becomes an Acquiring Person, no such
amendment may adversely affect the interests of the holders of the Rights, and
except that the Board of Directors of the Company may not reduce the threshold
at which "Acquiring Person" status is obtained to less than the greater of (i)
the sum of .001% and the largest percentage of the outstanding Common Stock then
known by the Company to be beneficially owned by any Person (other than certain
related parties), and (ii) 10%. Until a Right is exercised, the holder thereof,
as such, will have no rights as a stockholder of the Registrant on terms not
approved by the Board of Directors of the Company, including, without
limitation, the right to vote or to receive dividends.
The Rights have certain anti-takeover effects. The Rights will cause
substantial dilution to a Person that attempts to acquire the Registrant on
terms not approved by the Board of Directors of the Company without conditioning
its offer on a substantial number of Rights being acquired. Accordingly, the
existence of the Rights may deter certain acquirers from making takeover
proposals or tender offers in which stockholders may otherwise desire to
participate. The Rights may be beneficial to management in a hostile tender
offer and may have an adverse impact on stockholders who may want to participate
in such tender offer. However, the Rights are not intended to prevent any
takeover, but rather are designed to enhance the ability of the Board of
Directors of the Company to negotiate with an acquirer on behalf of all the
stockholders. In addition, the Rights should in no way interfere with any proxy
contest. The Rights should not interfere with any merger or other business
combination approved by the Board of Directors of the Company, because the Board
of Directors of the Company may, at its option, at any time prior to such time
as any Person becomes an Acquiring Person, redeem all but not less than all of
the outstanding Rights.
TRANSFER AGENT
The Transfer Agent for the Common Stock and the Warrants is American
Securities Transfer & Trust, Inc., 938 Quail Street, Lakewood, Colorado 80215.
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<PAGE> 30
LEGAL MATTERS
Certain legal matters with respect to the legality of the issuance of
the Common Stock issuable upon exercise of the Warrants, and of the sale of the
Warrants by the Selling Securityholder, will be passed upon for the Company and
the Selling Securityholder by Kegler, Brown, Hill & Ritter Co., L.P.A.,
Columbus, Ohio.
EXPERTS
The financial statements incorporated into this Prospectus by reference
to the Company's Annual Report on Form 10-KSB for the year ended December 31,
1997 have been audited by Deloitte & Touche LLP, independent auditors, as stated
in their report, which is incorporated herein by reference, and have been so
incorporated in reliance upon the report of such firm given upon their authority
as experts in accounting and auditing.
The financial statements of Eagle Research Corporation included in the
Company's Current Report on Form 8-K/A, filed with the Commission on July 16,
1998, have been audited by Arthur Andersen, LLP, independent public accountants,
for the period indicated in their report with respect thereto, and are
incorporated herein in reliance upon the authority of such firm as experts in
accounting and auditing in giving such report.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Pursuant to Section 145 of the DGCL, the Company's Certificate requires
the Company to indemnify any person who is, or is threatened to be made, a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or in
the right of the Company), by reason of the fact that such person is or was an
officer or director of the Company, or is or was serving at the request of the
Company as a director, officer, employee or agent of another corporation or
enterprise. The indemnity includes expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement of such action, suit or
proceeding, provided that such person acted in good faith and in a manner such
person reasonably believed to be in or not opposed to the best interests of the
Company, and, for criminal proceedings, had no reasonable cause to believe such
person's conduct was unlawful. The Company also is required to indemnify the
same persons against expenses (including attorneys' fees) in connection with the
defense or settlement of an action by or in the right of the Company under the
same conditions, except that no indemnification is permitted without judicial
approval unless the person is successful on the merits or otherwise in the
defense of any action referred to above, in which case the Company must
indemnify such person against the expenses which such person actually and
reasonably incurred.
As permitted by Section 102(b)(7) of the DGCL, the Company's
Certificate also contains a provision eliminating each director's liability to
the Company or its stockholders for monetary damages except (i) for any breach
of the director's duty of loyalty to the Company or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the DGCL providing for
liability of directors for unlawful payment of dividends or unlawful stock
purchases or redemptions, or (iv) for any transaction from which a director
derived an improper personal benefit.
The Company maintains directors and officers liability insurance
coverage that insures its officers and directors against certain losses that may
arise out of their positions with the Company and insures the Company for
liabilities it may incur to indemnify its officers and directors.
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 Commission such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable.
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================================================================================
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OTHER PERSON.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO WHICH THIS PROSPECTUS
RELATES, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER
TO BUY TO ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS
NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY OFFER OR SALE
MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF
THIS PROSPECTUS.
------------------------
TABLE OF CONTENTS
PAGE
----
Available Information..............................3
Incorporation Of Certain Documents By Reference....3
Forward-Looking Statements.........................4
Prospectus Summary.................................5
Risk Factors.......................................8
Use Of Proceeds...................................15
Selected Consolidated Financial Data..............16
The Warrant Distribution..........................17
Certain Federal Income Tax Consequences...........20
Description Of Capital Stock......................23
Legal Matters.....................................28
Experts .........................................28
Indemnification Of Directors And Officers.........28
================================================================================
================================================================================
MARCUM NATURAL GAS SERVICES, INC.
936,347 SHARES OF
COMMON STOCK
155,081 COMMON STOCK
PURCHASE WARRANTS
----------
PROSPECTUS
----------
___________, 1998
================================================================================
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<PAGE> 32
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following expenses of the offering (other than underwriting
discounts and commissions), all of which are estimated (other than the SEC
Registration Fee and the Nasdaq Application Fee), will be paid by the
Registrant:
SEC Registration Fee........................ $ 1,657
Nasdaq Application Fee...................... 23,500
Blue Sky Fees and Expenses.................. 5,000
Transfer Agent's Fees....................... 4,000
Printing and Engraving Costs................ 18,000
Legal Fees and Expenses..................... 20,000
Accounting Fees and Expenses................ 5,000
Miscellaneous............................... 2,843
-------
Total............................. $80,000
=======
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Registrant is incorporated under the laws of the State of Delaware.
Section 145 of the General Corporation Law of the State of Delaware provides in
regard to indemnification of directors and officers as follows:
Section 145. Indemnification of Officers, Directors, Employees and
Agents; Insurance.
(a) A corporation shall have power to indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the corporation) by reason of the fact that the person is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by the person in connection with
such action, suit or proceeding if the person acted in good faith and in a
manner the person reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe the person's conduct was
unlawful. The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendre or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which the person reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that the person's
conduct was unlawful.
(b) A corporation shall have power to indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that the
person is or was a director, officer, employee or agent of the corporation, or
is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against expenses (including attorneys' fees) actually and
reasonably incurred by the person in connection with the defense or settlement
of such action or suit if the person acted in good faith and in a manner the
person reasonably believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the
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corporation unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all the circumstances
of the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other court shall deem proper.
(c) To the extent that a present or former director or
officer of a corporation has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred to in subsections (a) and (b)
of this section, or in defense of any claim, issue or matter therein, such
person shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by such person in connection therewith.
(d) Any indemnification under subsections (a) and (b) of
this section (unless ordered by a court) shall be made by the corporation only
as authorized in the specific case upon a determination that indemnification of
the present or former director, officer, employee or agent is proper in the
circumstances because the person has met the applicable standard of conduct set
forth in subsections (a) and (b) of this section. Such determination shall be
made, with respect to a person who is a director or officer at the time of such
determination, (1) by a majority vote of the directors who are not parties to
such action, suit or proceeding, even though less than a quorum, or (2) by a
committee of such directors designated by majority vote of such directors, even
though less than a quorum, or (3) if there are no such directors, or if such
directors so direct, by independent legal counsel in a written opinion, or (4)
by the stockholders.
(e) Expenses (including attorneys' fees) incurred by an
officer or director in defending any civil, criminal, administrative or
investigative action, suit or proceeding may be paid by the corporation in
advance of the final disposition of such action, suit or proceeding upon receipt
of an undertaking by or on behalf of such director or officer to repay such
amount if it shall ultimately be determined that such person is not entitled to
be indemnified by the corporation as authorized in this section. Such expenses
(including attorneys' fees) incurred by former directors and officers or other
employees and agents may be so paid upon such terms and conditions, if any, as
the corporation deems appropriate.
(f) The indemnification and advancement of expenses
provided by, or granted pursuant to, the other subsections of this section shall
not be deemed exclusive of any other rights to which those seeking
indemnification or advancement of expenses may be entitled under any bylaw,
agreement, vote of stockholders or disinterested directors or otherwise, both as
to action in such person's official capacity and as to action in another
capacity while holding such office.
(g) A corporation shall have power to purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against such person and incurred by such person in any such capacity,
or arising out of such person's status as such, whether or not the corporation
would have the power to indemnify such person against such liability under this
section.
(h) For purposes of this section, references to "the
corporation" shall include, in addition to the resulting corporation, any
constituent corporation (including any constituent of a constituent) absorbed in
a consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers, and employees
or agents, so that any person who is or was a director, officer, employee or
agent of such constituent corporation, or is or was serving at the request of
such constituent corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
shall stand in the same position under this section with respect to the
resulting or surviving corporation as such person would have with respect to
such constituent corporation if its separate existence had continued.
(i) For purposes of this section, references to "other
enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on a person with respect to any employee
benefit plan; and references to "serving at the request of the corporation"
shall include any service as a director,
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<PAGE> 34
officer, employee or agent of the corporation which imposes duties on, or
involves services by, such director, officer, employee or agent with respect to
an employee benefit plan, its participants or beneficiaries; and a person who
acted in good faith and in a manner such person reasonably believed to be in the
interest of the participants and beneficiaries of an employee benefit plan shall
be deemed to have acted in a manner "not opposed to the best interests of the
corporation" as referred to in this section.
(j) The indemnification and advancement of expenses
provided by, or granted pursuant to, this section shall, unless otherwise
provided when authorized or ratified, continue as to a person who has ceased to
be a director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such person.
(k) The Court of Chancery is hereby vested with exclusive
jurisdiction to hear and determine all actions for advancement of expenses or
indemnification brought under this section or under any bylaw, agreement, vote
of stockholders or disinterested directors, or otherwise. The Court of Chancery
may summarily determine a corporation's obligation to advance expenses
(including attorneys' fees).
In accordance with Section 102(b)(7) of the General Corporation Law of
the State of Delaware, the Registrant's Restated Certificate of Incorporation,
as amended, contains a provision eliminating the personal liability of a
director of the Registrant to the Registrant and its stockholders for monetary
damages for breach of fiduciary duty as a director, except for the liability of
a director for (i) any breach of the director's duty of loyalty to the
Registrant or its stockholders; (ii) acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law; (iii)
unlawful payment of dividends or unlawful stock purchases or redemptions; or
(iv) any transaction for which the director derived an improper personal
benefit.
Article Ninth of the Registrant's Restated Certificate of
Incorporation, as amended, provides in regard to indemnification of directors
and officers as follows:
A. The corporation may indemnify or agree to indemnify any person who
was or is a party or is threatened to be made a party, to any threatened,
pending, or completed action, suit, or proceeding, whether civil, criminal,
administrative, or investigative, other than an action by or in the right of the
corporation, by reason of the fact he is or was a director, officer, employee,
or agent of the corporation, or is or was serving at the request of the
corporation as a director, trustee, officer, employee, or agent of another
corporation (including a subsidiary of this corporation), domestic or foreign,
nonprofit or for profit, partnership, joint venture, trust, or other enterprise,
against expenses, including attorneys' fees, judgments, fines, and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit, or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and with respect to any criminal action or proceeding, had no
reasonably cause to believe his conduct was unlawful. The termination of any
action, suit, or proceeding by judgment, order, settlement, conviction, or upon
a plea of nolo contendre or its equivalent, shall not, of itself create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
corporation, and with respect to any criminal action or proceeding, he had
reasonable cause to believe that his conduct was unlawful.
B. The corporation may indemnify or agree to indemnify any person who
was or is a party, or is threatened to be made a party to any threatened,
pending, or completed action or suit by or in the right of the corporation to
procure a judgment in its favor by reason of the fact that he is or was a
director, officer, employee, or agent of the corporation, or is or was serving
at the request of the corporation as a director, trustee, officer, employee, or
agent of another corporation (including a subsidiary of this corporation),
domestic or foreign, nonprofit or for profit, partnership, joint venture, trust,
or other enterprise against expenses, including attorneys' fees, actually and
reasonably incurred by him in connection with the defense or settlement of such
action or suit if he acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interest of the corporation, except that no
indemnification shall be made in respect to any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless, and only to the extent that, the Court of Chancery, or the court in
which such action or suit was brought shall determine upon application that,
despite the
II-3
<PAGE> 35
adjudication of liability, but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses as
the Court of Chancery or other such court shall deem proper.
C. To the extent that a director, trustee, officer, employee, or agent
has been successful on the merits or otherwise in defense of any action, suit,
or proceeding referred to in sections A. and B. of this Article, or in defense
of any claim, issue, or matter therein, he shall be indemnified against
expenses, including attorneys' fees, actually and reasonably incurred by him in
connection therewith.
D. Any indemnification under sections A. and B. of this Article, unless
ordered by a court, shall be made by the corporation only as authorized in the
specific case upon a determination that indemnification of the director,
trustee, officer, employee, or agent is proper in the circumstances because he
has met the applicable standard of conduct set forth in sections A. and B. of
this Article. Such determination shall be made (1) by a majority vote of a
quorum consisting of directors of the indemnifying corporation who were not and
are not parties to or threatened with any such action, suit, or proceeding, or
(2) if such a quorum is not obtainable or if a majority vote of a quorum of
disinterested directors so directs, in a written opinion by independent legal
counsel other than an attorney, or a firm having associated with it an attorney,
who has been retained by or who has performed services for the corporation or
any person to be indemnified within the past five (5) years, or (3) by the
stockholders, or (4) by the Court of Chancery or the court in which such action,
suit, or proceeding was brought. Any determination made by the disinterested
directors under section D.(1) or by independent legal counsel under section
D.(2) of this Article shall be promptly communicated to the person who
threatened or brought the action or suit by or in the right of the corporation
under Section B. of this Article, and within ten (10) days after receipt of such
notification, such person shall have the right to petition the Court of Chancery
or the court in which such action or suit was brought to review the
reasonableness of such determination.
E. No director of the corporation shall be personally liable to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (1) for any breach of the director's
duty of loyalty to the corporation or its stockholders; (2) for acts or
omissions not in good faith or which involve intentional misconduct or knowing
violation of law; (3) under Section 174 of the Delaware General Corporation Law;
or (4) for any transaction from which the director derived an improper personal
benefit.
F. Expenses, including attorneys' fees, incurred in any action, suit,
or proceeding referred to in sections A. and B. of this Article, may be paid by
the corporation in advance of the final disposition of such action, suit, or
proceedings upon receipt of a written undertaking by or on behalf of the
director, trustee, officer, employee, or agent to repay such amount, if it shall
ultimately be determined that he is not entitled to be indemnified by the
corporation as authorized in this Article. If a majority vote of a quorum of
disinterested directors so directs by resolution, said written undertaking need
not be submitted to the corporation. Such a determination that a written
undertaking need not be submitted to the corporation shall in no way affect the
entitlement of indemnification as authorized by this Article.
G. The indemnification and advancement of expenses provided in this
Article shall not be deemed exclusive of any other rights to which those seeking
indemnification or advancement of expenses may be entitled under the Restated
Certificate or the bylaws or any agreement, vote of stockholders or
disinterested directors, or otherwise, both as to action in his official
capacity and as to action in another capacity while holding such office.
H. The corporation may purchase and maintain insurance on behalf of any
person who is or was a director, trustee, officer, employee, or agent of another
corporation (including a subsidiary of this corporation), domestic or foreign,
nonprofit or for profit, partnership, joint venture, trust, or other enterprise
against any liability asserted against him and incurred by him in any such
capacity or arising out of his status as such whether or not the corporation
would have the power to indemnify him against such liability under this Article.
I. For purposes of this Article, references to "the corporation" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, and employees or agents, so that
any person who is or was a director, officer,
II-4
<PAGE> 36
employee, or agent of such constituent corporation, or is or was serving at the
request of such constituent corporation as a director, officer, employee, or
agent of another corporation, partnership, joint venture, trust, or other
enterprise, shall stand in the same position under the provisions of this
Article with respect to the resulting or surviving corporation as he would have
with respect to such constituent corporation if its separate existence had
continued.
J. For purposes of this Article, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include any
excise taxes assessed on a person with respect to an employee benefit plan; and
references to "serving at the request of the corporation" shall include any
service as a director, officer, employee, or agent of the corporation which
imposes duties on, or involves services by, such director, officer, employee, or
agent with respect to an employee benefit plan, its participants, or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the corporation" as referred to in this
Article.
K. The indemnification and advancement of expenses provided by, or
granted pursuant to, this Article shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a director,
officer, employee, or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
In addition, the Registrant maintains a directors' and officers'
liability insurance policy covering its directors and officers against certain
losses, including liabilities under the Securities Act, incurred by them in such
capacities to the extent such losses are not indemnified by the Registrant.
ITEM 16. EXHIBITS
(2) PLAN OF PURCHASE, SALE, REORGANIZATION, ARRANGEMENT, LIQUIDATION OR
SUCCESSION:
(2.1) Asset Purchase Agreement, dated April 30, 1993, among
Weatherford [U.S.] Marcum Natural Gas Services, Inc.
(Incorporated by reference to Exhibit 2.1 to the Registrant's
Form 8-K filed on May 14, 1993.)
(2.2) Amended and Restated Agreement and Plan of Merger, dated as of
December 17, 1993, amended and restated as of January 31,
1994, among Marcum Natural Gas Services, Inc., Marcum
Acquisition Corp. and Metretek, Incorporated. (Incorporated by
reference to Appendix A of the Proxy Statement-Prospectus
filed as a part of Registrant's Registration Statement on Form
S-4, Registration No. 33-73874.)
(2.3) Asset Purchase Agreement, dated as of June 27, 1997, by and
between Natural Fuels Corporation, as buyer, and Marcum Fuel
Systems, Inc., DVCO Fuel Systems, Inc. and Marcum CNG Systems,
Inc., as seller. (Incorporated by reference to Exhibit 2.1 to
Registrant's Form 8-K filed on July 11, 1997.)
(2.4) Asset Purchase Agreement, dated as of March 23, 1998, by and
among Eagle Research Corporation, American Meter Company,
Metretek, Incorporated and Marcum Natural Gas Services, Inc.
(Incorporated by reference to Exhibit 2.6 of Registrant's Form
10-KSB for the year ended December 31, 1997).
(3) ARTICLES OF INCORPORATION AND BY-LAWS:
(3.1) Restated Certificate of Incorporation, as amended, of Marcum
Natural Gas Services, Inc. (Incorporated by reference to
Exhibit 3.1 to Registrant's Registration Statement on Form
S-18, Registration No. 33-44558.)
II-5
<PAGE> 37
(3.2) Certificate of Amendment to the Restated Certificate of
Incorporation, as amended, of Marcum Natural Gas Services,
Inc. (Incorporated by reference to Exhibit 3.1 of Registrant's
Form 8-K filed on July 7, 1998.)
(3.3) By-Laws of Marcum Natural Gas Services, Inc., as amended.
(Incorporated by reference to Exhibit 3.2 to Registrant's
Registration Statement on Form SB-2, Registration No.
33-82868.)
(4) INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING
INDENTURES:
(4.1) Specimen Common Stock Certificate. (Incorporated by reference
to Exhibit 4.1 to Registrant's Registration Statement on Form
S-18, Registration No. 33-44558.)
(4.2) Rights Agreement, dated as of December 2, 1991, between Marcum
Natural Gas Services, Inc. and American Securities Transfer,
Inc. (Incorporated by reference to Exhibit 10.6 to
Registrant's Registration Statement on Form S-18, Registration
No. 33-44558.)
(4.3) Amendment No. 1 to Rights Agreement, dated as of March 23,
1998, between Marcum Natural Gas Services, Inc. and American
Securities Transfer & Trust, Inc. (incorporated by reference
to Exhibit 2 to Registrant's Form 8-A/A Amendment No. 1 filed
April 3, 1998).
(4.4) Form of Common Stock Purchase Warrant.*
(4.5) Form of Warrant Agency Agreement between Marcum Natural Gas
Services, Inc. and American Securities Transfer & Trust, Inc.*
(4.6) Form of Lock-Up Agreement between Marcum Natural Gas Services,
Inc., Metretek, Incorporated, Eagle Research Corporation and
American Meter Company.**
(5) OPINION:
(5.1) Opinion of Kegler, Brown, Hill & Ritter Co., L.P.A.**
(23) CONSENTS OF EXPERTS AND COUNSEL:
(23.1) Deloitte & Touche LLP*
(23.2) Arthur Andersen LLP*
(23.3) Consent of Kegler, Brown, Hill & Ritter Co. L.P.A. (included
in Exhibit 5.1)**
(24) POWER OF ATTORNEY:
(24.1) Powers of Attorney of the Registrant and its executive
officers and directors (included on Signature Page).
- --------------------------
* Filed herewith.
** To be filed by amendment.
II-6
<PAGE> 38
ITEM 17. UNDERTAKINGS.
(a) Small Business Issuer will:
(1) File, during any period in which it offers or sells
securities, a post-effective amendment to this Registration
Statement to:
(i) Include any prospectus required by Section
10(a)(3) of the Securities Act.
(ii) Reflect in the prospectus any facts or
events which, individually or together,
represent a fundamental change in the
information in the Registration Statement;
and notwithstanding the forgoing, any
increase or decrease in volume of securities
offered (if the total dollar value of
securities offered would not exceed that
which was registered) and any deviation from
the low or high end of the estimated maximum
offering range may be reflected in the form
of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the
aggregate, the changes in the volume and
price represent no more than a 20% change in
the maximum aggregate offering price set
forth in the "Calculation of Registration
Fee" table in the effective Registration
Statement.
(iii) Include any additional or changed material
information on the plan of distribution.
(2) For determining liability under the Securities Act, treat
each post-effective amendment as a new registration statement
of the securities offered, and the offering of the securities
at that time to be the initial bona fide offering.
(3) File a post-effective amendment to remove from
registration any of the securities being registered that
remain unsold at the end of the offering.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors, officers and
controlling persons of the Small Business Issuer pursuant to the foregoing
provisions, or otherwise, the Small Business Issuer has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the Small Business Issuer of expenses incurred or paid by a
director, officer or controlling person of the Small Business Issuer in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Small Business Issuer will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
(d) The Small Business Issuer will:
(1) For determining any liability under the Securities Act,
treat the information omitted from the form of prospectus
filed as part of this Registration Statement in reliance upon
Rule 430A and contained in a form of prospectus filed by the
Small Business Issuer under Rule 424(b)(1) or (4) or 497(h)
under the Securities Act as part of this Registration
Statement as of the time the Commission declared if effective.
(2) For determining any liability under the Securities Act,
treat each post-effective amendment that contains a form of
prospectus as a new registration statement for the securities
offered in the registration statement, and that offering of
the securities at that time as the initial bona fide offering
of those securities.
II-7
<PAGE> 39
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Denver, State of Colorado on the 6th day of
August, 1998.
MARCUM NATURAL GAS SERVICES, INC.
By: /s/ W. Phillip Marcum
----------------------------------
W. Phillip Marcum, President
The Registrant and each person whose signature appears below hereby
constitutes and appoints W. Phillip Marcum, A. Bradley Gabbard and Paul R. Hess,
and each of them, with full power to act without the joinder of others, as his
or its true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him or it and in his or its name, place and
stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to sign any
registration statement for the same offering that is covered by this
Registration Statement that is to be effective upon filing pursuant to Rule
462(b) promulgated under the Securities Act of 1933, as amended, and all
post-effective amendments thereto, and to file the same, with all exhibits
thereto, and all other documents in connection therewith, with the Securities
and Exchange Commission, granting unto said attorneys-in-fact and agents and
each of them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully to
all intents and purposes as he or it might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents or any of
them, or their, his or its substitute or substitutes, may lawfully do or cause
to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement on Form S-3 has been signed below by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ W. Phillip Marcum President, Chief Executive Officer August 6, 1998
- ------------------------------------ and Director (Principal Executive
W. Phillip Marcum Officer)
/s/ A. Bradley Gabbard Executive Vice President, Chief Financial August 6, 1998
- ------------------------------------ Officer, Treasurer and Director
A. Bradley Gabbard (Principal Financial Officer)
/s/ Gary J. Zuiderveen Principal Accounting Officer, Controller August 6, 1998
- ------------------------------------ and Secretary (Principal Accounting
Gary J. Zuiderveen Officer)
/s/ Basil M. Briggs Director August 6, 1998
- ------------------------------------
Basil M. Briggs
/s/ Robert Lloyd Director August 6, 1998
- ------------------------------------
Robert Lloyd
/s/ Anthony D. Pell Director August 6, 1998
- ------------------------------------
Anthony D. Pell
/s/ Albert F. Thomasson Director August 6, 1998
- ------------------------------------
Albert F. Thomasson
/s/ Ronald W. McKee Director August 6, 1998
- ------------------------------------
Ronald W. McKee
/s/ Harry I. Skilton Director August 6, 1998
- ------------------------------------
Harry I. Skilton
</TABLE>
<PAGE> 40
MARCUM NATURAL GAS SERVICES, INC.
FORM S-3
EXHIBIT INDEX
-------------
EXHIBIT NUMBER EXHIBIT DESCRIPTION
- -------------- -------------------
4.4 Form of Common Stock Purchase Warrant*
4.5 Form of Warrant Agency Agreement between Marcum Natural
Gas Services, Inc. and American Securities Transfer &
Trust, Inc.*
4.6 Form of Lock-Up Agreement between Marcum Natural Gas
Services, Inc., Metretek, Incorporated, Eagle Research
Corporation and American Meter Company.**
5.1 Opinion of Kegler, Brown, Hill & Ritter Co., L.P.A.**
23.1 Consent of Deloitte & Touche LLP*
23.2 Consent of Arthur Andersen LLP*
23.3 Consent of Kegler, Brown, Hill & Ritter Co., L.P.A.
(Included in Exhibit 5.1)**
24.1 Powers of Attorney of the Registrant and its executive
officers and directors (included on Signature Page)
- ------------------------
* Filed herewith.
** To be filed by amendment.
<PAGE> 1
Exhibit 4.4
NO. W-_____________ _______ WARRANTS
COMMON STOCK PURCHASE WARRANT CERTIFICATE
MARCUM NATURAL GAS SERVICES, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
VOID (UNLESS EXTENDED) AFTER 5:00 P.M., DENVER, COLORADO TIME,
ON _______________, 2003
THIS CERTIFIES THAT, for value received,
or registered assigns (the "Registered Holder"), is the owner of the number of
Common Stock Purchase Warrants (the "Warrants") set forth above. Each Warrant
entitles the Registered Holder to purchase, subject to the terms and conditions
set forth in this Warrant Certificate and the Warrant Agreement (as hereinafter
defined), one fully paid and nonassessable share of Common Stock, par value $.01
per share (the "Common Stock"), of Marcum Natural Gas Services, Inc., a Delaware
corporation (the "Company"), at any time prior to at 5:00 p.m., Denver, Colorado
time, on ___________, 2003, upon the presentation and surrender of this Warrant
Certificate with the Election to Purchase Form on the reverse hereof duly
executed, at the corporate office of American Securities Transfer & Trust, Inc.
as Warrant Agent, or its successor (the "Warrant Agent"), accompanied by payment
of $6.00 per Warrant, subject to adjustment (the "Warrant Price"), and any and
all applicable taxes due in connection with the exercise of the Warrant, in
lawful money of the United States of America in cash or by official bank or
certified check made payable to the Warrant Agent for the account of the
Company.
This Warrant Certificate and each Warrant represented hereby are issued
pursuant to and are subject in all respects to the terms and conditions set
forth in the Warrant Agency Agreement (the "Warrant Agreement"), dated as of
__________, 1998, by and between the Company and the Warrant Agent. Reference is
hereby made to the Warrant Agreement for a more complete statement of the rights
and limitations of rights of the Registered Holders hereof, the rights and
duties of the Warrant Agent and the rights and obligations of the Company
thereunder. Copies of the Warrant Agreement are on file at the office of the
Warrant Agent.
In the event of certain contingencies provided for in the Warrant
Agreement, the Warrant Price and the number of shares of Common Stock subject to
purchase upon the exercise of each Warrant represented hereby are subject to
modification or adjustment.
Each Warrant represented hereby is exercisable at the option of the
Registered Holder, but no fractional shares of Common Stock will be issued. In
the case of the exercise of less than all the Warrants represented hereby, the
Company shall cancel this Warrant Certificate upon the surrender hereof and
shall execute and deliver a new Warrant Certificate or Warrant Certificates of
like tenor, which the Warrant Agent shall countersign, for the balance of such
Warrants.
<PAGE> 2
Exhibit 4.4
The term "Expiration Date" shall mean 5:00 p.m., Denver, Colorado time,
on ____________, 2003. If such date shall in the State of Colorado be a holiday
or a day on which banks are authorized to close, then the Expiration Date shall
mean 5:00 p.m., Denver, Colorado time, on the net day which in the State of
Colorado is not a holiday or a day on which banks are authorized to close.
This Warrant Certificate is exchangeable, upon the surrender hereof by
the Registered Holder at the corporate office of the Warrant Agent, for a new
Warrant Certificate or Warrant Certificates of like tenor representing an equal
aggregate number of Warrants, each of such new Warrant Certificates to represent
such number of Warrants as shall be designated by such Registered Holder at the
time of such surrender. Upon due presentment together with any tax or other
charge imposed in connection therewith, for registration of transfer of this
Warrant Certificate at such office, a new Warrant Certificate or Warrant
Certificates representing an equal aggregate number of Warrants will be issued
to the transferee in exchange therefor, subject to the limitations provided in
the Warrant Agreement.
If this Warrant Certificate shall be surrendered for exercise within
any period during which the transfer books for the Common Stock or other
securities purchasable upon the exercise of this Warrant Certificate are closed
for any purpose, the Warrant Agent shall not be required to make delivery of
certificates for the securities purchasable upon such exercise until the date of
the reopening of such transfer books.
The Company shall not be obligated to deliver any securities pursuant
to the exercise or sale of this Warrant Certificate unless a registration
statement under the Securities Act of 1933, as amended, is effective with
respect to such securities. The Company has filed a registration statement with
the Securities and Exchange Commission and has agreed that it will use its best
efforts to keep such registration statement effective while any of the Warrants
are outstanding. No Warrant represented hereby shall be exercised or sold by a
Registered Holder in any state or other jurisdiction where such exercise would
be unlawful.
Subject to the provisions of the Warrant Agreement, this Warrant may be
redeemed at the option of the Company, in whole or in part, at a redemption
price of $.01 per Warrant, at any time, provided that the average closing sale
price for the Company's Common Stock, as reported by the Nasdaq National Market
(or, if not listed as the Nasdaq National Market, as reported by the principal
stock market, stock exchange or recognized quotation system on which the Common
Stock is listed, traded or quoted), shall have, for 20 consecutive trading days
ending within 30 days prior to the date on which the Notice of Redemption (as
defined below) is given, equaled or exceeded $7.50 per share of the Company's
Common Stock (subject to adjustment in the event of any stock splits or other
similar events) and notice of redemption (the "Notice of Redemption") shall be
given not less than 30 days before the date fixed for redemption, all as
provided in the Warrant Agreement. On and after the date fixed for redemption,
the Registered Holder shall have no rights with respect to this Warrant except
to receive the $.01 per Warrant upon surrender of this Certificate.
<PAGE> 3
Prior to the exercise of any Warrant represented hereby, the Registered
Holder shall not be entitled to any rights of a stockholder of the Company,
including, without limitation, the right to vote or to receive dividends or
other distributions, and shall not be entitled to receive any notice of any
proceedings of the Company, except as provided in the Warrant Agreement.
Prior to due presentment for registration of transfer of this Warrant
Certificate, the Company and the Warrant Agent may deem and treat the Registered
Holder as the absolute owner hereof and of each Warrant represented hereby
(notwithstanding any notations of ownership or writing hereon made by anyone
other than a duly authorized officer of the Company or the Warrant Agent), for
all purposes and shall not be affected by any notice to the contrary.
This Warrant Certificate shall be governed by and construed in
accordance with the laws of the State of Delaware, without giving effect to
conflicts of laws principles.
This Warrant Certificate is not valid unless countersigned by the
Warrant Agent.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed, manually or in facsimile by two of its officers thereunto duly
authorized, and a facsimile of its corporate seal to be imprinted hereon.
Dated: _______________________, 1998
MARCUM NATURAL GAS SERVICES, INC.
By:
----------------------------------
W. Phillip Marcum, President
ATTEST:
By:
----------------------------------
Gary J. Zuiderveen, Secretary
COUNTERSIGNED:
AMERICAN SECURITIES TRANSFER & TRUST, INC.
as Warrant Agent
By:
--------------------------------
Authorized Officer
<PAGE> 4
MARCUM NATURAL GAS SERVICES, INC.
TRANSFER FEE $________ PER CERTIFICATE
The following abbreviations, when used in the inscription on the face
of this instrument, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<CAPTION>
<S> <C> <C>
TEN COM - as tenants in common UNIF GIFT 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 Act
survivorship and not as tenants in
common ___________________________
(State)
Additional abbreviations may also be used though not in the above list.
</TABLE>
ELECTION TO PURCHASE FORM
(To be Executed by the Holder In Order to Exercise
Warrants Represented by the Within Warrant Certificate)
To: MARCUM NATURAL GAS SERVICES, INC.
The undersigned Registered Holder hereby irrevocably elects to
exercise _____________ Warrants, represented by the within Warrant Certificate,
and to purchase the securities issuable upon exercise of such Warrants, and
requests that certificates for such securities be issued in the name of:
PLEASE INSERT SOCIAL SECURITY
OR TAX IDENTIFICATION NUMBER
- ------------------------------- ------------------------------
(Please print name and address)
- -------------------------------
- -------------------------------
- -------------------------------
and, if such number of Warrants shall not be all the Warrants represented by the
within Warrant Certificate, that a new Warrant Certificate for the balance of
such Warrants be registered in the name of, and delivered to the Registered
Holder at:
- ------------------------------- ------------------------------
(Please print)
- ------------------------------- ------------------------------
Dated: Signature X
------------------------- -------------------
NOTICE: The above signature must correspond with the name as written upon
the face of the within Warrant Certificate in every particular,
without alternation or enlargement or any change whatsoever, of if
signed by any other person the Form of Assignment hereon must be
duly executed and if the certificate representing the shares or
any Warrant Certificate representing Warrants not exercised is to
be registered in a name other than that in which the within
Warrant Certificate is registered, the signature of the holder
hereto must be guaranteed.
Signature Guaranteed:
---------------------------------------
<PAGE> 5
ASSIGNMENT
(To Be Executed by the Registered Holder In Order to
Assign Warrants Evidenced by the Within Warrant Certificate)
FOR VALUE RECEIVED, ________ hereby sells, assigns and transfers
unto____________________________
(Name)
____________________________ Warrants represented by the within Warrant
(Number of Warrants)
Certificate, and does hereby irrevocably constitute and appoint _______________
____________________________ attorney to transfer the Warrants evidenced by the
within Warrant Certificate on the books of the Company, with full power of
substitution.
Dated: _______________________________ Signature X __________________________
NOTICE: The above signature must correspond with the name as written upon the
face of the within Warrant Certificate in every particular, without alternation
or enlargement or any change whatsoever.
Signature Guaranteed ____________________________________
SIGNATURE MUST BE GUARANTEED BY A COMMERCIAL BANK OR TRUST COMPANY OR A MEMBER
FIRM OF THE NEW YORK STOCK EXCHANGE, PACIFIC STOCK EXCHANGE, AMERICAN STOCK
EXCHANGE, MIDWEST STOCK EXCHANGE OR BOSTON STOCK EXCHANGE.
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Exhibit 4.5
WARRANT AGENCY AGREEMENT
This WARRANT AGENCY AGREEMENT (this "Agreement") is made and entered
into as of ___________________, 1998, by and among MARCUM NATURAL GAS SERVICES,
INC., a Delaware corporation (the "Company"), and AMERICAN SECURITIES TRANSFER &
TRUST, INC., as Warrant Agent (the "Warrant Agent").
W I T N E S S E T H
WHEREAS, the Company has declared a dividend in the form of a warrant
(a "Warrant") to be exercisable for a period of five (5) years from the date of
issuance thereof to purchase one share of the Company's Common Stock at a
purchase price of $6.00 per share, for every four shares of Common Stock held by
a stockholder on __________, 1998; and
WHEREAS, the Company has filed with the Securities and Exchange
Commission a Registration Statement on Form S-3, Reg. No. 333-_____ , as
amended, for the registration, under the Securities Act of 1933, as amended, of,
among others, the issuance of the shares of Common Stock issuable upon exercise
of the Warrants; and
WHEREAS, the Company desires to provide for the issuance, registration,
transfer, exchange and exercise of certificates representing the Warrants; and
WHEREAS, the Company desires the Warrant Agent to act on behalf of the
Company, and the Warrant Agent is willing to so act, in connection with the
issuance, registration, transfer, and exchange of the Warrants, the issuance of
certificates representing the Warrants, the exercise of the Warrants, and the
rights of the holders thereof; and
WHEREAS, all acts and things have been done and performed which are
necessary to make the Warrants, when executed on behalf of the Company and
countersigned by or on behalf of the Warrant Agent, as provided herein, the
valid, binding and legal obligations of the Company, and to authorize the
execution and delivery of this Agreement;
NOW THEREFORE, in consideration of the premises and the mutual
agreements hereinafter set forth and for the purpose of defining the terms and
provisions of the Warrants and the certificates representing the Warrants and
the respective rights and obligations thereunder of the Company, the holders of
certificates representing the Warrants and the Warrant Agent, the parties hereto
hereby agree as follows:
SECTION 1. DEFINITIONS. As used herein, the following terms shall
have the following meanings, unless the context shall otherwise require:
(a) "Commission" shall mean the Securities and Exchange Commission.
(b) "Common Stock" shall mean Common Stock, par value $.01 per share,
of the Company, whether now or hereafter authorized.
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(c) "Corporate Office" shall mean the office of the Warrant Agent (or
its successor) at which at any particular time its principal business shall be
administered, which office is located on the date hereof at 938 Quail Street,
Suite 101, Lakewood, Colorado 80215.
(d) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(e) "Exercise Date" shall mean, subject to the provisions of Section 5,
as to any Warrant, the date on which the Warrant Agent shall have received both
(i) the Warrant Certificate representing such Warrant, and the Election to
Purchase Form thereon duly executed by the Registered Holder thereof or his
attorney duly authorized in writing, and (ii) payment in cleared funds, whether
made in cash, by wire transfer or by check made payable to the Warrant Agent, of
an amount in lawful money of the United States of America equal to the
applicable Warrant Price.
(f) "Initial Warrant Exercise Date" shall mean, as to each Warrant,
__________, 1998.
(g) "Record Date" shall mean, as to each Warrant, __________, 1998.
(h) "Redemption Date" shall mean the date fixed for the redemption of
the Warrants in accordance with the terms hereof.
(i) "Registered Holder" shall mean the person in whose name any
certificate representing a Warrant or Warrants shall be registered on the books
maintained by the Warrant Agent pursuant to Section 6.
(j) "Registration Statement" shall mean the Company's Registration
Statement on Form S-3 (SEC File No. 333-___________________), as amended.
(k) "Securities Act" shall mean the Securities Act of 1933, as amended.
(l) "Subsidiary" or "Subsidiaries" shall mean any corporation or
corporations, as the case may be, of which stock having ordinary power to elect
a majority of the board of directors of such corporation or corporations
(regardless of whether or not at the time the stock of any other class or
classes of such corporation shall have or may have voting power by reason of the
happening of any contingency) is at the time directly or indirectly owned by the
Company or by one or more Subsidiaries, or by the Company and one or more
Subsidiaries.
(m) "Transfer Agent" shall mean American Securities Transfer & Trust,
Inc. as the Company's transfer agent, or its authorized successor, as such.
(n) "Warrant" or the "Warrants" shall mean and include up to
___________________ Warrants to purchase __________________________ authorized
and unissued shares of Common Stock of the Company, each of such Warrants
initially evidencing the right to purchase one share of Common Stock.
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(o) "Warrant Certificate" shall mean a certificate representing each of
the Warrants substantially in the form attached hereto as Exhibit A.
(p) "Warrant Expiration Date" shall mean, unless the Warrants are
redeemed as provided in Section 9 hereof prior to such date, 5:00 p.m. (Denver,
Colorado time) on ________ __, 2003; provided, however, that if such date shall
in the State of Colorado be a holiday or a day on which banks are authorized to
close, then 5:00 pm. (Denver, Colorado time) on the next following day which in
the State of Colorado is not a holiday or a day on which banks are authorized to
close. Upon at least 30 days prior written notice to all Registered Holders, the
Company shall have the right to extend the Warrant Expiration Date.
(q) "Warrant Price" shall mean the exercise price of $6.00 per share of
Common Stock to be paid upon exercise of each Warrant in accordance with the
terms hereof, subject to adjustment from time to time pursuant to the provisions
of Section 8, and subject to the Company's right to reduce the Warrant Price
upon at least 30 days prior written notice to all Registered Holders.
(r) "Warrant Shares" shall mean and include up to ________ authorized
and unissued shares of Common Stock reserved for issuance on exercise of the
Warrants, and shall include any additional shares of Common Stock or other
property which may hereafter be issuable or deliverable on exercise of the
Warrants pursuant to Section 8.
SECTION 2. WARRANTS AND ISSUANCE OF WARRANT CERTIFICATES.
(a) Each Warrant shall initially entitle the Registered Holder of the
Warrant Certificate representing such Warrant to purchase one share of Common
Stock upon the exercise thereof at the Warrant Price at any time prior to the
Warrant Expiration Date, and otherwise in accordance with the terms hereof,
subject to modification and adjustment as provided in Section 8 hereof.
(b) On the Record Date, Warrant Certificates representing up to
___________Warrants to purchase up to an aggregate of ________ shares of Common
Stock, subject to modification and adjustment as provided in Section 8, shall be
executed by the proper officers of the Company and delivered to the Warrant
Agent.
(c) From time to time, the Company shall cause the Transfer Agent to
countersign and deliver stock certificates in required whole number
denominations upon the exercise of Warrants in accordance with this Agreement.
(d) From time to time, up to the Warrant Expiration Date, the Warrant
Agent shall countersign and deliver Warrant Certificates in required whole
number denominations to the Persons entitled thereto in connection with any
transfer or exchange permitted under this Agreement; provided, however, that no
Warrant Certificates shall be issued except (i) Warrant Certificates initially
issued hereunder, (ii) Warrant Certificates issued on or after the Initial
Warrant Exercise Date, upon the exercise of fewer than all Warrants represented
by any Warrant Certificate, to evidence any unexercised Warrants held by the
exercising Registered Holder, (iii)
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Warrant Certificates issued upon any transfer or exchange pursuant to Section 6;
(iv) Warrant Certificates issued in replacement of lost, stolen, destroyed or
mutilated Warrant Certificates pursuant to Section 7; and (v) at the option of
the Company, Warrant Certificates in such form as may be approved by its Board
of Directors, to reflect any adjustment or change in the Warrant Price, the
number of shares of Common Stock purchasable upon exercise of a Warrant or the
redemption price therefor.
SECTION 3. FORM AND EXECUTION OF WARRANT CERTIFICATES.
(a) Warrant Certificates shall be substantially in the form attached
hereto as Exhibit A and may have such letters, numbers or other marks of
identification or designation and such legends, summaries or endorsements
printed, lithographed or engraved thereon as the Company may deem appropriate
and as are not inconsistent with the provisions of this Agreement or as may be
required to comply with any law or with any rule or regulation made pursuant
thereto or with any rule or regulation of any stock exchange or stock market on
which the Warrants may be listed, or to conform to usage. The Warrant
Certificates shall be dated the date of issuance thereof (whether upon initial
issuance, transfer, exchange at in lieu of mutilated, lost, stolen, or destroyed
Warrant Certificates) and issued in registered form.
(b) Warrant Certificates shall be executed on behalf of the Company by
its Chairman of the Board, President or any Vice President and by its Treasurer
or Assistant Treasurer or its Secretary or an Assistant Secretary, by manual
signatures or by facsimile signatures printed thereon, and shall have imprinted
thereon a facsimile of the Company's seal. Warrant Certificates shall be
manually countersigned by the Warrant Agent and shall not be valid for any
purpose unless so countersigned. In case any officer of the Company who shall
have signed any of the Warrant Certificates shall cease to be such officer of
the Company before the date of issuance of the Warrant Certificates or before
countersignature by the Warrant Agent and issue and delivery thereof, such
Warrant Certificates may nevertheless be countersigned by the Warrant Agent,
issued and delivered with the same force and effect as though the person who
signed such Warrant Certificates had not ceased to be such officer of the
Company.
SECTION 4. EXERCISE.
(a) Warrants in denominations of one or whole number multiples thereof
may be exercised by the Registered Holder thereof at any time on or after the
Initial Warrant Exercise Date, but not after the Warrant Expiration Date, upon
the terms and subject to the conditions set forth herein and in the applicable
Warrant Certificate. A Warrant shall be deemed to have been exercised
immediately prior to the close of business on the Exercise Date, provided that
the Warrant Certificate representing such Warrant, with the exercise form
thereon duly executed by the Registered Holder thereof or his attorney duly
authorized in writing, together with payment in cash or by check made payable to
the Warrant Agent for the account of the Company of an amount in lawful money of
the United States of America equal to the applicable Warrant Price, have been
received by the Warrant Agent. The person entitled to receive the securities
deliverable upon such exercise shall be treated for all purposes as the holder
upon exercise thereof as of the close at business on the Exercise Date. As soon
as practicable on or after the Exercise Date, the Warrant Agent shall deposit
the proceeds received from the exercise of a Warrant and shall notify the
Company in writing of the exercise of such Warrant. Promptly
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following, and in any event within five business days after, the date of such
notice from the Warrant Agent, the Warrant Agent, on behalf of the Company,
shall cause to be issued and delivered by the Transfer Agent, to the person or
persons entitled to receive the same, a certificate or certificates for the
securities deliverable upon such exercise (plus a Warrant Certificate for any
remaining unexercised Warrants of the Registered Holder), unless prior to the
date of issuance of such certificates the Company shall instruct the Warrant
Agent to refrain from causing such issuance of certificates pending clearance of
checks received in payment of the Warrant Price pursuant to such Warrants. Upon
the exercise of any Warrants and clearance of the funds received, the Warrant
Agent shall promptly, and in no event later than three business days following
the day in which the funds clear, remit the payment received for the Warrant to
the Company or as the Company may direct in writing.
(b) No issuance of Warrant Shares shall be made unless there is an
effective registration statement under the Securities Act (or an exemption
therefrom), and registration or qualification of the Warrant Shares (or an
exemption therefrom) has been obtained from the state or other regulatory
authorities in the jurisdiction in which such Warrant Shares are sold. The
Company will provide to the Warrant Agent written confirmation of all such
registration or qualification, or an exemption therefrom, when requested by the
Warrant Agent.
(c) Notwithstanding any other provision of this Agreement to the
contrary, no issuance of the Warrant Shares shall be made, and the Company is
authorized to refuse to honor the exercise of any Warrant, if the exercise of
any Warrant would result, in the opinion of the Company's Board of Directors
upon advice of counsel, in the violation of law.
(d) Upon at least thirty (30) days prior written notice to all
Registered Holders of Warrants, the Company shall have the right to reduce the
Warrant Price and/or to extend the term of the Warrants beyond the Warrant
Expiration Date to a new Warrant Expiration Date.
SECTION 5. RESERVATION OF SHARES; REGISTRATION OF WARRANTS; LISTING OF
SECURITIES; PAYMENT OF TAXES; ETC.
(a) The Company shall at all times reserve and keep available out of
its authorized Common Stock, solely for the purpose of issuance upon exercise of
Warrants, such number of shares of Common Stock as shall then be issuable upon
the exercise of all outstanding Warrants. The Company covenants that, upon
exercise the Warrants and payment of the Warrant Price for the shares of Common
Stock underlying the Warrants, all shares of Common Stock which shall be
issuable upon exercise of the Warrants shall be duly and validly issued, fully
paid, nonassessable, free from all preemptive or similar rights, and free from
all taxes, liens and charges with respect to the issue thereof (other than those
which the Company shall promptly pay or discharge), and that upon issuance such
shares shall be listed on each national securities exchange, if any, on which
the other shares of outstanding Common Stock of the Company are then listed or
quoted, or if not then so listed or quoted on each place (whether the Nasdaq
Stock Market, Inc., the National Association of Securities Dealers OTC
Electronic Bulletin Board, the National Quotation Bureau "pink sheets" or
otherwise) on which the other shares of outstanding Common Stock are listed or
quoted.
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(b) The Company covenants that if the issuance of any Warrants
hereunder require registration with, or approval of, any governmental authority
under any federal securities law before such Warrants may be validly delivered
upon such issuance, then the Company shall, in good faith and as expeditiously
as reasonably possible, endeavor to secure such registration or approval if
necessary. The Company shall use reasonable efforts to obtain appropriate
approvals or registrations with respect to such Warrants under the "blue sky"
securities laws in all states which Registered Holders reside.
(c) The Company covenants that if any securities to be reserved for the
purpose of exercise of Warrants hereunder require registration with, or approval
of, any governmental authority under any federal securities law before such
securities may be validly issued or delivered upon such exercise, then the
Company shall in good faith and as expeditiously as reasonably possible,
endeavor to secure such registration or approval including, to file a
registration statement under the federal securities laws or a post-effective
amendment to a registration statement, use its best efforts to cause the same to
become effective, keep such registration statement current while any of the
Warrants are outstanding and deliver a prospectus which complies with Section
10(a)(3) of the Securities Act, to the Registered Holder exercising the Warrant
(except, if, in the opinion of counsel to the Company, such registration is not
required under the federal securities law or if the Company receives a letter
from the staff of the Commission stating that it would not take any enforcement
action if such registration is not affected). The Company shall use reasonable
efforts to obtain appropriate approvals or registrations with respect to such
securities under the "blue sky" securities laws of all states in which
Registered Holders reside. However, Warrants may not be exercised or sold by,
nor may shares of Common Stock or other securities be issued to, any Registered
Holder in any state or jurisdiction in which such exercise or sale would be
unlawful.
(d) The Company shall pay all documentary, stamp or similar taxes and
other governmental charges that may be imposed with respect to the issuance of
Warrants, or the issuance or delivery of any shares upon exercise of the
Warrants; provided, however, that if the shares of Common Stock are to be
delivered in a name other than the name of the Registered Holder of the Warrant
Certificate representing any Warrant being exercised, then no such delivery
shall be made unless the person requesting the same has paid to the Warrant
Agent the amount of transfer taxes or charges incident thereto, if any.
(e) The Warrant Agent is hereby irrevocably authorized to requisition
the Company's Transfer Agent from time to time for certificates representing
shares of Common Stock required upon exercise of the Warrants, and the Company
will authorize the Transfer Agent to comply with all such proper requisitions.
The Company shall file with the Warrant Agent a statement setting forth the name
and address of the Transfer Agent of the Company for shares of Common Stock
issuable upon exercise of the Warrants, unless the Warrant Agent and the
Transfer Agent are the same entity.
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SECTION 6. EXCHANGE AND REGISTRATION OF TRANSFER.
(a) Warrant Certificates may be exchanged for other Warrant
Certificates representing an equal aggregate number of Warrants of the same
class or may be transferred in whole or in part. Warrant Certificates to be so
exchanged shall be surrendered to the Warrant Agent at its Corporate Office, and
upon satisfaction of the terms and provisions hereof, the Company shall execute
and the Warrant Agent shall countersign, issue and deliver in exchange therefor
the Warrant Certificate or Certificates which the Registered Holder making the
exchange shall be entitled to receive.
(b) The Warrant Agent shall keep at its Corporate Office books in
which, subject to such reasonable regulations as it may prescribe, it shall
register Warrant Certificates and the transfer thereof in accordance with its
regular practice. Upon due presentment for registration of transfer of any
Warrant Certificate at such office, the Company shall execute and the Warrant
Agent shall issue and deliver to the transferee or transferees a new Warrant
Certificate or Certificates representing an equal aggregate number of Warrants.
(c) With respect to all Warrant Certificates presented for registration
of transfer, or for exchange or exercise, the subscription or assignment form,
as the case may be, on the reverse thereof shall be duly endorsed, or be
accompanied by a written instrument or instruments of transfer or subscription,
in form satisfactory to the Company and the Warrant Agent, duly executed by the
Registered Holder thereof or his attorney-in-fact duly authorized in writing.
(d) A service charge may be imposed by the Warrant Agent against a
Registered Holder for any exchange or registration of transfer of Warrant
Certificates. In addition, the Company may require payment by such holder of a
sum sufficient to cover any tax or other governmental charge that may be imposed
in connection therewith.
(e) All Warrant Certificates surrendered for exercise, or for exchange
in case of mutilated Warrant Certificates, shall be promptly canceled by the
Warrant Agent and thereafter retained by the Warrant Agent until termination of
this Agreement or resignation as Warrant Agent, or disposed of or destroyed, at
the direction of the Company.
(f) Prior to due presentment for registration of transfer thereof, the
Company and the Warrant Agent may deem and treat the Registered Holder of any
Warrant Certificate as the absolute owner thereof and of each Warrant
represented thereby (notwithstanding any notations of ownership or writing
thereon made by anyone other than a duly authorized officer of the Company or
the Warrant Agent) for all purposes and shall not be affected by any notice to
the contrary.
SECTION 7. LOSS OR MUTILATION OF WARRANT CERTIFICATES. Upon receipt by
the Company and the Warrant Agent of evidence satisfactory to them of the
ownership of and the loss, theft, destruction or mutilation of any Warrant
Certificate and (in case of loss, theft or destruction) of indemnity
satisfactory to them, and (in the case of mutilation) upon surrender and
cancellation thereof, the Company shall execute and the Warrant Agent shall (in
the absence of notice to the Company and/or Warrant Agent that the Warrant
Certificate has been acquired by a bona fide purchaser) countersign and deliver
to the Registered Holder in lieu thereof a new
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Warrant Certificate of like tenor representing an equal aggregate number of
Warrants. Applicants for a substitute Warrant Certificate shall comply with such
other reasonable regulations, provide such reasonable indemnification and pay
such other reasonable charges as the Warrant Agent or the Company may prescribe.
SECTION 8. ADJUSTMENT TO EXERCISE PRICE AND NUMBER OF SHARES OF COMMON
STOCK OR WARRANTS.
(a) In the event the Company shall, at any time or from time to time
after the Record date, issue any shares of Common Stock as a stock dividend to
the holders of Common Stock, or subdivide or combine the outstanding shares of
Common Stock into a greater or lesser number of shares (any such sale, issuance,
subdivision or combination being herein called a "Change of Shares"), then, and
thereafter upon each further Change of Shares, the applicable Warrant Price in
effect immediately prior to such Change of Shares shall be changed to a price
(including any applicable fraction of a cent) determined by multiplying the
Warrant Price in effect immediately prior thereto by a fraction, the numerator
of which shall be the sum of (a) the total number of shares of Common Stock
outstanding immediately prior to such Change of Shares and (b) the number of
shares of Common Stock which the aggregate consideration received by the Company
upon such sale, issuance, subdivision or combination (determined in accordance
with subsection (e) below) could have purchased at the then current Warrant
Price, and the denominator of which shall be the total number of shares of
Common Stock outstanding immediately after such Change of Shares.
(b) In the event of any reclassification or capital reorganization of
outstanding shares of Common Stock, or in case of any consolidation or merger of
the Company with or into another Company (other than a consolidation or merger
in which the Company is the continuing Company and which does not result in any
reclassification or capital reorganization of outstanding shares of Common
Stock), or in case of any sale or transfer to another Company of all or
substantially all of the assets of the Company (other than a sale/leaseback,
mortgage or other financing transaction), the Company shall cause effective
provision to be made so that each holder of a Warrant then outstanding shall, in
substitution for all rights theretofore represented by such Warrant, have the
right thereafter, by exercising such Warrant, to purchase the kind and number of
shares of stock or other securities or property (including cash) receivable upon
such reclassification or capital reorganization, consolidation, merger, sale or
transfer by a holder of the number of shares of Common Stock that might have
been purchased upon exercise of such Warrant, immediately prior to such
reclassification or capital reorganization, consolidation, merger, sale or
transfer. Any such provision shall include provision for adjustments that shall
be as nearly equivalent as may be practicable to the adjustments provided for in
this Section 8. The foregoing provisions shall similarly apply to successive
reclassifications or capital reorganizations of outstanding shares of Common
Stock and to successive consolidations, mergers, sales or transfers.
(c) Upon each adjustment of the applicable Warrant Price pursuant to
the provisions of this Section 8, the total number of shares of Common Stock or
other securities purchasable upon the exercise of each Warrant shall (subject to
the provisions contained in Section 8(b) hereof) be such number of shares of
Common Stock or other securities (calculated to the nearest hundredth)
purchasable at the applicable Warrant Price immediately prior to such adjustment
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multiplied by a fraction, the numerator of which shall be the applicable Warrant
Price in effect immediately prior to such adjustment and the denominator of
which shall be the applicable Warrant Price in effect immediately after such
adjustment.
(d) Irrespective of any adjustments or changes in the Warrant Price or
the number of shares of Common Stock purchasable upon exercise of the Warrants,
the Warrant Certificates theretofore and thereafter issued shall, unless the
Company shall exercise its option to issue new Warrant Certificates pursuant to
Section 2(d), continue to express the applicable Warrant Price per share and the
number of shares purchasable thereunder as were expressed in the Warrant
Certificates when the same were originally issued.
(e) After each adjustment of the Warrant Price pursuant to this Section
8, the Company shall promptly prepare a certificate signed by its Chairman of
the Board, President, or any Vice President, and by the Treasurer or an
Assistant Treasurer or the Secretary or an Assistant Secretary, of the Company
setting forth: (i) the applicable Warrant Price as so adjusted, (ii) the number
of shares of Common Stock or other securities or property purchasable upon
exercise of each Warrant after such adjustment, and, if the Company shall have
elected to adjust the number of Warrants, the number of Warrants to which the
registered holder of each warrant shall then be entitled, and (iii) a brief
statement of the facts accounting for such adjustment. The Company shall
promptly file such certificate with the Warrant Agent and cause a brief summary
thereof to be sent by ordinary first class mail to each Registered Holder of
Warrants at his last address as it shall appear on the registry books of the
Warrant Agent. No failure to mail such notice nor any defect therein or in the
mailing thereof shall affect the validity thereof. The affidavit of an officer
of the Warrant Agent or the Secretary or an Assistant Secretary of the Company
that such notice has been mailed shall, in the absence of fraud, be prima facie
evidence of the facts stated therein.
(f) For purposes of Section 8(a) and 8(b), the following provisions
shall also be applicable:
(i) The number of shares of Common Stock outstanding at any
given time shall include shares of Common Stock owned or held by or for the
account of the Company and the sale or issuance of such treasury shares or the
distribution of any such treasury shares shall not be considered a Change of
Shares for purposes of such Sections.
(ii) No adjustment of the Warrant Price shall be made unless
such adjustment would require an increase or decrease of at least $.05 in such
price; provided, however, that any adjustments which by reason of this clause
(ii) are not required to be made shall be carried forward and shall be made at
the time of and together with the next subsequent adjustment which, together
with any adjustment(s) so carried forward, shall require an increase or decrease
of at least $.05 in the Warrant Price then in effect hereunder.
(g) As used in this Section 8, the term "Common Stock" shall mean and
include the Company's Common Stock authorized on the date of the original issue
of the Warrants and shall also include any capital stock of any class of the
Company thereafter authorized which shall not be limited to a fixed sum or
percentage in respect of the rights of the holders thereof to participate in
dividends and in the distribution of assets upon the voluntary liquidation,
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dissolution or winding up of the Company; provided, however, that the shares
issuable upon exercise of the Warrants shall include only shares of such class
designated in the Company's Certificate of Incorporation, as from time to time
amended and/or restated, as Common Stock on the date of the original issue of
the Warrants or, (i) in the case of any reclassification, change, consolidation,
merger, sale or conveyance of the character referred to in Section 8(c), the
stock, securities or property provided for in such section, or (ii) in the case
of any reclassification or change in the outstanding shares of Common Stock
issuable upon exercise of the Warrants as a result of a subdivision or
combination or consisting of a change in par value, or from par value to no par
value, or from no par value to par value, such shares of Common Stock as so
reclassified or changed.
(h) Any determination as to whether an adjustment in the Warrant Price
in effect hereunder is required pursuant to this Section 8, or as to the amount
of any such adjustment, if required, shall be binding upon the holders of the
Warrants and the Company if made in good faith by the Board of Directors of the
Company.
(i) Before taking any action that would cause an adjustment pursuant to
this Section 8 hereof reducing the portion of the Warrant Price required to
purchase one share of capital stock below the then par value (if any) of a share
of such capital stock, the Company will use its best efforts to take any
corporate action which, in the opinion of its counsel, may be necessary in order
that the Company may validly and legally issue fully paid and nonassessable
shares of such capital stock.
SECTION 9. REDEMPTION.
(a) At any time the Company may, at its option, redeem the Warrants in
whole, but not in part, for a redemption price of $.01 per Warrant, on at least
thirty (30) days' prior written notice to the Registered Holders. The right to
redeem the Warrants may be exercised by the Company only in the event that (a)
during a period of at least twenty (20) consecutive trading days ending within
thirty (30) days preceding the date the Company gives written notice of the call
for redemption, the closing sale price for the Common Stock, as reported on the
Nasdaq National Market or the Nasdaq SmallCap Market or any national securities
exchange or any other stock market, stock exchange or stock quotation system
which constitutes the primary trading or quotation market for the Common Stock,
equals or exceeds $7.50 per share, subject to adjustment in the same events and
in the same proportion as cause adjustments to the Warrant Price, provided that
in the event the Common Stock is not traded on a given day or such market, the
average of the closing bid and asked prices of the Common Stock on such day
shall be substituted; (b) the Company has a registration statement (or a
post-effective amendment to an existing registration statement) pertaining to
the Warrant Shares effective under the Securities Act, which registration
statement would enable a Registered Holder to exercise the Warrants provided the
Registered Holder resides in a jurisdiction in which exercise is permitted; and
(c) the expiration of the notice period is prior to the Warrant Expiration Date.
In the event the Company exercises its right to redeem the Warrants, the Warrant
Expiration Date shall be deemed to be, and the Warrants will be exercisable
until the close of business on, the date fixed for redemption in such notice. If
any Warrant called for redemption is not exercised by such time, it will cease
to be exercisable and the Registered Holder thereof will be entitled only to the
redemption price of $0.01 per Warrant.
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(b) In case the Company shall exercise its right to redeem all of the
Warrants, it shall give or cause to be given notice to the Registered Holders of
the Warrants, by mailing to such Registered Holders a notice of redemption,
first class, postage prepaid, at their last address as shall appear on the
records of the Warrant Agent. Any notice mailed in the manner provided herein
shall be conclusively presumed to have been duly given, whether or not the
Registered Holder receives such notice.
(c) The notice of redemption shall specify (i) the redemption price,
(ii) the date fixed for redemption, which shall in no event be less than thirty
(30) days after the date of mailing of such notice, (iii) the place where the
Warrant Certificates shall be delivered and the redemption price shall be paid,
and (iv) that the right to exercise the Warrant shall terminate at 5:00 p.m.
(Denver, Colorado time) on the business day fixed for redemption. The date fixed
for the redemption of the Warrants shall be the "Redemption Date" for purposes
of this Agreement. No failure to mail such notice nor any defect therein or in
the mailing thereof shall affect the validity of the proceedings for such
redemption except as to a holder (A) to whom notice was not mailed or (B) whose
notice was defective. An affidavit of the Warrant Agent or the Secretary or
Assistant Secretary of the Company that notice of redemption has been mailed
shall, in the absence of fraud, be prima facie evidence of the facts stated
therein.
(d) Any right to exercise a Warrant shall terminate at 5:00 p.m.
(Denver, Colorado time) on the Redemption Date. The redemption price payable to
the Registered Holders shall be mailed to such persons at their addresses of
record.
(e) The Company shall as soon as practicable after the Redemption Date,
and in any event within 15 months thereafter, make "generally available to its
security holders" (within the meaning of Rule 158 under the Securities Act) an
earnings statement (which need not be audited) complying with Section 11(a) of
the Securities Act and covering a period of at least 12 consecutive months
beginning after the Redemption Date.
SECTION 10. FRACTIONAL WARRANTS AND FRACTIONAL SHARES. The Company
shall not be required to issue any Warrant Certificate evidencing a fraction of
a Warrant or to issue fractions of shares of securities on the exercise of the
Warrants, and any fractional interest in a Warrant alone shall be of no value
whatsoever. By accepting a Warrant Certificate, the holder thereof expressly
waives any right to receive a Warrant Certificate evidencing any fraction of a
Warrant, to receive any fractional share of securities upon exercise of a
Warrant, or to receive any value whatsoever upon exercise of a fractional
interest in a Warrant.
SECTION 11. WARRANT HOLDERS NOT DEEMED STOCKHOLDERS. No holder of
Warrants, as such, shall be entitled to vote or to receive dividends or be
deemed the holder of Common Stock that may at any time be issuable upon exercise
of such Warrants for any purpose whatsoever, nor shall anything contained herein
be construed to confer upon the holder of Warrants, as such, any of the rights
of a stockholder of the Company or any right to vote for, or receive notice as a
stockholder in respect of, the election of directors or upon any matter
submitted to stockholders at any meeting thereof, or to give or withhold consent
to any corporate action (whether upon any recapitalization, issue or
reclassification of stock, change of par value or change of stock to no par
value, consolidation, merger or transfer or otherwise) or any other matter, or
to receive notice of meetings, or to receive dividends or subscription rights,
until such
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Holder shall have exercised such Warrants and been issued shares of Common Stock
in accordance with the provisions hereof.
SECTION 12. RIGHTS OF ACTION. All rights of action with respect to this
Agreement are vested in the respective Registered Holders of the Warrants, and
any Registered Holder of a Warrant, without consent of the Warrant Agent or of
the holder of any other Warrant, may, in his own behalf and for his own benefit,
enforce against the Company his right to exercise his Warrants for the purchase
of shares of Common Stock in the manner provided in the Warrant Certificates and
this Agreement.
SECTION 13. AGREEMENT OF WARRANT HOLDERS. Every holder of a Warrant, by
his acceptance thereof, consents and agrees with the Company, the Warrant Agent
and every other holder of a Warrant that:
(a) The Warrants are transferable only on the registry books of the
Warrant Agent by the Registered Holder thereof in person or by his attorney duly
authorized in writing and only if the Warrant Certificates representing such
Warrants are surrendered the office of the Warrant Agent, duly endorsed or
accompanied a proper instrument of transfer satisfactory to the Warrant Agent
and the Company in their sole discretion, together with payment of any
applicable transfer taxes; and
(b) The Company and the Warrant Agent may deem and treat the person in
whose name the Warrant Certificate is registered as the holder and as the
absolute, true and lawful owner of the Warrants represented thereby for all
purposes, and neither the Company nor the Warrant Agent shall be affected by any
notice or knowledge to the contrary, except as otherwise expressly provided in
Section 6.
SECTION 14. CANCELLATION OF WARRANT CERTIFICATES. If the Company shall
purchase or acquire any Warrant or Warrants, the Warrant Certificate or Warrant
Certificates evidencing the same shall thereupon be delivered to the Warrant
Agent and canceled by it and retired. The Warrant Agent shall also cancel
Warrant Certificates following exercise of any or all of the Warrants
represented thereby or delivered to it for transfer, split-up, combination or
exchange.
SECTION 15. CONCERNING THE WARRANT AGENT.
(a) The Warrant Agent shall act hereunder as agent and in a ministerial
capacity for the Company, and its duties shall be determined solely by the
provisions hereof. The Warrant Agent shall not, by issuing and delivering
Warrant Certificates or by any other act hereunder, be deemed to make any
representations as to the validity, value or authorization of the Warrant
Certificates or the Warrants represented thereby or of any securities or other
property delivered upon exercise of any Warrant or whether any securities issued
upon exercise of any Warrant are fully paid and nonassessable.
(b) The Warrant Agent shall not at any time be under any duty or
responsibility to any holder of Warrant Certificates to make or cause to be made
any adjustment of the Warrant Price provided in this Agreement, or to determine
whether any fact exists which may require any
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such adjustments, or with respect to the nature or extent of any such
adjustment, when made, or with respect to the method employed in making the
same. The Warrant Agent shall not (i) be liable for any recital or statement of
facts contained herein or for any action taken, suffered or omitted by it in
reliance on any Warrant Certificate or other document of instrument believed by
it in good faith to be genuine and to have been signed or presented by the
proper party or parties, (ii) be responsible for any failure on the part of the
Company to comply with any of its covenants and obligations contained in this
Agreement or in any Warrant Certificate, or (iii) be liable for any act or
omission in connection with this Agreement except for its own negligence or
willful misconduct.
(c) The Warrant Agent may at any time consult with counsel satisfactory
to it and shall incur no liability or responsibility for any action taken,
suffered or omitted by it in good faith in accordance with the opinion or advice
of such counsel.
(d) Any notice, statement, instruction, request, direction, order or
demand of the Company shall be sufficiently evidenced by an instrument signed by
the Chairman of the Board, the President, any Vice President, the Secretary or
the Treasurer of the Company (unless other evidence in respect thereof is herein
specifically prescribed). The Warrant Agent shall not be liable for any action
taken, suffered or omitted by it in accordance with such notice, statement,
instruction, request, direction, order or demand believed by it to be genuine.
(e) The Company shall pay the Warrant Agent reasonable compensation for
its services hereunder and to reimburse it for its reasonable expenses
hereunder. The Company shall further indemnify the Warrant Agent and hold it
harmless against any and all losses, expenses and liabilities, including
judgments, costs and counsel fees, for anything done or omitted by the Warrant
Agent in the execution of its duties and powers hereunder except losses,
expenses and liabilities arising as a result of the Warrant Agent's negligence
or willful misconduct. In no case shall the Warrant Agent be liable for special,
indirect, incidental or consequential loss or damage of any kind whatsoever
(including but not limited to lost profits), even if the Warrants Agent has been
advised of the possibility of such loss or damage.
(f) The Warrant Agent may resign its duties and be discharged from all
further duties and liabilities hereunder (except liabilities arising as a result
of the Warrant Agent's own negligence or willful misconduct), after giving 30
days prior written notice to the Company. At least 15 days prior to the date
such resignation is to become effective, the Warrant Agent shall cause a copy of
such notice of resignation to be mailed to the Registered Holder of each Warrant
Certificate at the Company's expense. Upon such resignation, or any inability of
the Warrant Agent to act as such hereunder, the Company shall appoint a new
warrant agent in writing. If the Company shall fail to make such appointment
within a period of fifteen (15) days after it has been notified in writing of
such resignation by the resigning Warrant Agent, then the Registered Holder of
any Warrant Certificate may apply to any court of competent jurisdiction for the
appointment of a new warrant agent. Any new warrant agent, whether appointed by
the Company or by such a court shall be a bank or trust company having a capital
and surplus as shown by its last published report to its stockholders, of not
less than $100,000,000, or a stock transfer company. After acceptance in writing
of such appointment by the new warrant agent is received by the Company, such
new warrant agent shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named herein as the Warrant Agent,
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without any further assurance, conveyance, act or deed; but if for any reason it
shall be necessary or expedient to execute and deliver any further assurance,
conveyance, act or deed, the same shall be done at the expense of the Company
and shall be legally and validly executed and delivered by the resigning Warrant
Agent. Not later than the effective date of any such appointment the Company
shall file notice thereof with the resigning Warrant Agent and shall forthwith
cause a copy of such notice to be mailed to the Registered Holder of each
Warrant Certificate.
(g) Any Company into which the Warrant Agent or any new warrant agent
may be converted or merged, or any Company resulting from any consolidation to
which the Warrant Agent or any new warrant agent shall be a party, or any
Company succeeding to the trust business of the Warrant Agent or any new warrant
agent shall be a successor warrant agent under this Agreement without any
further act, provided that such Company is eligible for appointment as successor
to the warrant Agent under the provisions of the preceding paragraph. Any such
successor warrant agent shall promptly cause notice of its succession as warrant
agent to be mailed to the Company and to the Registered Holder of each Warrant
Certificate.
(h) The Warrant Agent, its subsidiaries and affiliates, and any of its
or their officers or directors, may buy and hold or sell Warrants or other
securities of the Company and otherwise deal with the Company in the same manner
and to the same extent and with like effects as though it were not Warrant
Agent. Nothing herein shall preclude the Warrant Agent from acting in any other
capacity for the Company or for any other legal entity.
SECTION 16. MODIFICATION OF AGREEMENT. The Warrant Agent and the
Company may by supplemental agreement make any changes or corrections in this
Agreement (i) that they shall deem appropriate to cure any ambiguity or to
correct any defective or inconsistent provision or manifest mistake or error
herein contained, or (ii) that they may deem necessary or desirable and which
shall not adversely affect the interests of the holders of Warrant Certificates;
provided, however, that this Agreement shall not otherwise be modified,
supplemented or altered in any respect except with the consent in writing of the
Registered Holders of Warrant Certificates representing not less than a majority
of the Warrants then outstanding; and provided, further, that no change in the
number or nature of the securities purchasable upon the exercise of any Warrant,
and a charge that increases the Warrant Price therefor, and no acceleration of
the Warrant Expiration Date of any Warrant, shall be made without the consent in
writing of the Registered Holder of the Warrant Certificate representing such
Warrant, other than such changes as are specifically prescribed or permitted by
this Agreement as originally executed.
SECTION 17. NOTICES. All notices, requests, consents and other
communications hereunder shall be in writing and shall be deemed to have been
made when delivered or mailed first class registered or certified mail, postage
prepaid as follows: if to the Registered Holder of a Warrant Certificate, at the
address of such holder as shown on the registry books maintained by the Warrant
Agent; if to the Company, at 1675 Broadway, Suite 2150, Denver, Colorado 80202
Attention: Secretary, or at such other address as may have been furnished to the
Warrant Agent in writing by the Company; or if to the Warrant Agent, at 938
Quail Street, Suite 101, Lakewood, Colorado 80215-5513.
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SECTION 18. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without
reference to principles of conflict of laws.
SECTION 19. BINDING EFFECT. This Agreement shall be binding upon and
inure to the benefit of the Company and the Warrant Agent and their respective
successors and assigns, and the Registered Holders from time to time of the
Warrant Certificates. Nothing in this Agreement is intended or shall be
construed to confer upon any other person any right, remedy or claim, in equity
or at law, or to impose upon any other person any duty, liability or obligation.
SECTION 20. FURTHER INSTRUMENTS. The parties shall execute and deliver
any and all such other instruments and shall take any and all such other actions
as may be reasonable or necessary to carry out the intention of this Agreement.
SECTION 21. SEVERABILITY. If any provision of this Agreement shall be
held, declared or pronounced void, voidable, invalid, unenforceable or
inoperative for any reason by any court of competent jurisdiction, government
authority or otherwise, such holding, declaration or pronouncement shall not
affect adversely any other provision of this Agreement, which shall otherwise
remain in full force and effect and be enforced in accordance with its terms,
and the effect of such holding, declaration or pronouncement shall be limited to
the territory or jurisdiction in which made.
SECTION 22. WAIVER. All the rights and remedies of any party under this
Agreement are cumulative and not exclusive of any other rights and remedies as
provided by law. No delay or failure on the part of any party in the exercise of
any right or remedy arising from a breach of this Agreement shall operate as a
waiver of any subsequent right or remedy arising from a subsequent breach of
this Agreement. The consent of any party where required hereunder to any act or
occurrence shall not be deemed to be a consent to any other action or
occurrence.
SECTION 23. ASSIGNABILITY. This Agreement may not be assigned by any
party hereto except by the express written consent of the other party, which
consent shall be obtained in compliance with the other provisions of this
Agreement.
SECTION 24. TERMINATION. This Agreement shall terminate at the close of
business on the Warrant Expiration Date or such earlier date upon which all
Warrants have been exercised, except that the Warrant Agent shall account to the
Company for cash held by it and the provisions of Section 15 shall survive such
termination.
SECTION 25. INTEGRATION. This Agreement embodies the entire agreement
and understanding between the parties and supersedes all prior agreements and
understandings relating to the subject matter hereof.
SECTION 26. HEADINGS. The headings of this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning thereof.
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SECTION 27. COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, but all of which
taken together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Warrant Agency
Agreement to be duly executed as of the date first above written.
COMPANY:
MARCUM NATURAL GAS SERVICES, INC.
By:
-------------------------------------
W. Phillip Marcum, President
WARRANT AGENT:
AMERICAN SECURITIES TRANSFER &
TRUST, INC.
By:
-------------------------------------
Authorized Officer
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Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
Marcum Natural Gas Services, Inc. on Form S-3 of our report dated March 12, 1998
(March 23, 1998 as to Note 8), appearing in the Annual Report on Form 10-KSB of
Marcum Natural Gas Services, Inc. for the year ended December 31, 1997 and to
the reference to us under the heading "Experts" in the Prospectus, which is part
of this Registration Statement.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Denver, Colorado
August 7, 1998
<PAGE> 1
Exhibit 23.2
CONSENT OF INDEPENDENT PUBLIC ACOUNTANTS
----------------------------------------
As independent public accountants, we hereby consent to the incorporation by
reference in this Registration Statement of Marcum Natural Gas Services, Inc. on
Form S-3 of our report dated March 23, 1998 on the Eagle Research Corporation
financial statements which report is included in the Marcum Natural Gas
Services, Inc.'s Form 8-K/A as filed on July 16, 1998.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Philadelphia, Pennsylvania
August 7, 1998
