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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): MAY 4, 1998
MARCUM NATURAL GAS SERVICES, INC.
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(Exact name of Registrant as specified in its charter)
DELAWARE 0-19793 84-11698358
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(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification No.)
1675 BROADWAY, SUITE 2150, DENVER, COLORADO 80202
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (303) 592-5555
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NOT APPLICABLE
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(Former name or former address, if changed since last report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On May 4, 1998 (the "Closing Date"), Metretek, Incorporated
("Metretek"), a Florida corporation and a wholly-owned subsidiary of Marcum
Natural Gas Services, Inc., a Delaware corporation (the "Company"), completed
the purchase of substantially all of the assets and business of Eagle Research
Corporation, a West Virginia corporation ("Eagle"), pertaining to electronic
correctors and non-radio-frequency meter reading devices in the natural gas and
electric utility industry, pursuant to the provisions of an Asset Purchase
Agreement (the "Purchase Agreement"), dated as of March 23, 1998, by and among
American Meter Company, a Delaware corporation ("American Meter"), Eagle,
Metretek and the Company. Eagle is a wholly-owned subsidiary of American Meter,
which is ultimately controlled by Ruhrgas AG, a German corporation.
Prior to the acquisition, the business of Eagle consisted of the
design, manufacture and sale of a diversified line of electronic measurement
process control and telemetry systems to utility companies and contractors which
support utility companies in the natural gas and petroleum industries. The
assets acquired by Metretek include certain inventory, equipment, trademarks and
technology of Eagle and American Meter used in the above-described business, but
exclude accounts receivable, accounts payable and certain inventory, equipment,
software and other assets attributable to that portion of Eagle's business not
being acquired by Metretek. Pursuant to the Purchase Agreement, Metretek did not
assume any of Eagle's ongoing debts, liabilities or obligations, except for
certain transitional employee costs and product warranty obligations. The assets
and business of Eagle acquired by Metretek are being moved to and will be
operated out of Metretek's existing facility in Melbourne, Florida.
In consideration for the purchase of the assets and business, the
Company and Metretek paid and delivered to Eagle at the closing an aggregate
purchase price (the "Purchase Price") consisting of $1,300,000 in cash,
1,758,242 shares of common stock, par value $.01 per share ("Common Stock"), of
the Company valued at $2,032,967, and a $1,200,000 convertible subordinated
promissory note (the "Note"). The Purchase Price is subject to downward
adjustment based upon Metretek's actual sales of products in the business
acquired from Eagle during the 18-month period commencing July 1, 1998. If
Metretek's annualized sales of products in the acquired business are less than
$4,500,000 during such period, then the Purchase Price will be decreased on a
dollar-for-dollar basis to the extent of such sales deficit, but the Purchase
Price will not be reduced below $3,900,000 even if annualized sales are less
than that amount. Any reduction in the Purchase Price will be effected by
reducing the principal balance of the Note. The Purchase Price is also subject
to upward or downward adjustment based upon certain changes in Eagle's inventory
between December 31, 1997 and the Closing Date, and any adjustment will be paid
in cash.
The cash portion of the Purchase Price was funded from the Company's
cash on hand. Depending on the Company's cash flow, the Company may utilize
approximately $500,000 of its credit facility with National Bank of Canada to
increase its cash on hand. The Purchase Price paid by the Company in connection
with the acquisition was determined as the result of arms-length negotiations
between the Company and American Meter.
Up to $1,028,107 of the principal balance of the Note is convertible at
any time at the option of Eagle into up to 723,064 unregistered shares of Common
Stock of the Company at the rate of $1.421875 of principal per share; provided,
however, that in no event shall the aggregate number of shares of Common Stock
to be issued by the Company pursuant to the Purchase Agreement exceed
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19.99% of the aggregate number of shares of Common Stock of the Company
outstanding on the date preceding the Closing Date. The Note bears interest on
the unpaid principal balance thereof at a fixed rate equal to 7.5% per annum,
payable quarterly in arrears, due and payable four years from the Closing Date,
and may be prepaid at any time without penalty or premium.
Pursuant to the Purchase Agreement, the Company granted Eagle the
one-time option to cause the shares of Common Stock issued to Eagle on the
Closing Date, plus the shares of Common Stock issuable to Eagle upon the
conversion of the Note, to be registered under the Securities Act of 1933, as
amended, and applicable state securities laws. The Company has also granted
Eagle certain piggy-back registration rights to include such shares of Common
Stock in any registration statement filed by the Company, subject to customary
underwriter cutbacks.
On the Closing Date, Metretek also entered into a License Agreement
(the "License Agreement") with American Meter and Eagle, providing for the
license by American Meter and Eagle to Metretek of certain operating software,
and the development, manufacture and sale by Metretek to American Meter and
Eagle 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 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 Eagle have also entered into a Non-Competition
Agreement, dated May 4, 1998 ("Non-Competition Agreement"), with the Company and
Metretek, pursuant to which American Meter and Eagle have agreed not to compete
with Metretek in the acquired business for five (5) years from the Closing Date,
and all such parties have mutually agreed to confidentiality covenants.
On the Closing Date, Harry I. Skilton, President, Chief Executive
Officer and a director of American Meter and Vice President of Eagle, became a
member of the Board of Directors of the Company.
The foregoing description of the terms of Metretek's acquisition of
certain assets and business of Eagle and of the related transactions is
qualified in its entirety by reference to the Purchase Agreement, which is
attached as Exhibit 2.6 to the Company's Form 10-KSB for the fiscal year ended
December 31, 1997 and incorporated herein by this reference, and the Note, the
License Agreement and the Non-Competition Agreement, which are attached as
exhibits to this Form 8-K and incorporated herein by this reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED
Pursuant to Item 7(a)(4), financial statements and pro forma
financial information with respect to the acquired business required to be filed
herewith are not included in this Current Report on Form 8-K but will be filed
by amendment within 60 days after the date this Current Report on Form 8-K was
required to be filed.
(b) PRO FORMA FINANCIAL INFORMATION
See note under Item 7(a) above.
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(c) EXHIBITS
2.1 Asset Purchase Agreement, dated as of March 23, 1998,
by and among American Meter Company, Eagle Research
Corporation, Marcum Natural Gas Services, Inc. and
Metretek, Incorporated (Incorporated by reference to
Exhibit 2.6 to the Company's Annual Report on Form
10-KSB for the fiscal year ended December 31, 1997).
10.1 Convertible Subordinated Promissory Note, made May 4,
1998, by Marcum Natural Gas Services, Inc. and
Metretek, Incorporated to the order of Eagle Research
Corporation.
10.2 License Agreement, dated as of May 4, 1998, by and
among American Meter Company, Eagle Research
Corporation and Metretek, Incorporated.
10.3 Non-Competition Agreement, dated as of May 4, 1998,
by and among American Meter Company, Eagle Research
Corporation, Marcum Natural Gas Services, Inc. and
Metretek, Incorporated.
99.1 Press release, dated May 4, 1998, announcing the
completion of the acquisition of certain assets and
business of American Meter Company.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
MARCUM NATURAL GAS SERVICES, INC.
By: /s/ W. Phillip Marcum
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W. Phillip Marcum
President and Chief Executive Officer
Dated: May 12, 1998
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MARCUM NATURAL GAS SERVICES, INC.
FORM 8-K
DATED MAY 4, 1998
EXHIBIT INDEX
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EXHIBIT NO. DESCRIPTION
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10.1 Convertible Subordinated Promissory Note, made May 4,
1998, by Marcum Natural Gas Services, Inc. and Metretek,
Incorporated to the order of Eagle Research Corporation.
10.2 License Agreement, dated as of May 4, 1998, by and among
American Meter Company, Eagle Research Corporation and
Metretek, Incorporated.
10.3 Non-Competition Agreement, dated as of May 4, 1998, by and
among American Meter Company, Eagle Research Corporation,
Marcum Natural Gas Services, Inc. and Metretek,
Incorporated.
99.1 Press release, dated May 4, 1998, announcing the
completion of the acquisition of certain assets and
business of American Meter Company.
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EXHIBIT 10.1
CONVERTIBLE, SUBORDINATED PROMISSORY NOTE
-----------------------------------------
$ 1,200,000.00 Melbourne, Florida
May 4, 1998
FOR VALUE RECEIVED, the undersigned, Metretek, Incorporated, a Florida
corporation (the "Purchaser"), and Marcum Natural Gas Services, Inc., a Delaware
corporation ("Marcum" and, collectively with Purchaser, the "Maker"), hereby
promises to pay to the order of Eagle Research Corporation, a West Virginia
corporation (the "Payee"), and assigns, at its principal office located at Scott
Depot, West Virginia or at such other place as the Payee or other holder hereof
(the "Holder") may from time to time designate in writing, in lawful money of
the United States of America, the principal sum of One Million Two Hundred
Thousand and No/100 Dollars ($1,200,000.00), subject to reduction as provided in
Section 8 hereof, together with interest on the unpaid balance of such principal
sum at the rate provided in Section 2 hereof.
1. REPAYMENT OF PRINCIPAL. The principal sum of this Note shall be due
and payable on May 4, 2002, in a single installment in an amount equal to the
entire principal sum of this Note then outstanding.
2. INTEREST. This Note shall bear interest on the unpaid principal sum
from the date hereof at the rate per annum equal to seven and one-half percent
(7.50%) Interest on this Note shall be computed on the basis of the actual
number of days elapsed (including the first day but excluding the last day)
during which the unpaid principal sum is outstanding, divided by a year of 365
or 366 days, as the case may be. Accrued, unpaid interest on the outstanding
principal sum of this Note shall be due and payable quarterly in arrears on the
first day of each July, October, January and March, commencing July 1, 1998, and
at the maturity of this Note (however such maturity shall occur). All payments
shall be applied first to accrued, unpaid interest and the balance, if any,
applied to the outstanding principal sum of this Note. All past due principal of
and interest on this Note shall bear interest from the due date thereof (whether
by acceleration or otherwise) until paid at the rate per annum equal to ten and
one-half percent (10.5%), provided that in no event shall such interest rate
exceed the maximum interest rate permitted by law.
3. PREPAYMENT. The Maker shall have the right to prepay the outstanding
principal sum of this Note, in whole at any time or in part from time to time,
without premium or penalty, subject only to the provisions of Section 4(a)
hereof.
4. CONVERSION. This Note is convertible into shares of common stock,
par value $.01 per share ("Common Shares"), of Marcum upon the terms and subject
to the conditions set forth in this Section 4.
(a) CONVERSION OPTION. At the option of the Holder, upon the
terms and subject to the conditions set forth in this Section 4, this Note may
be converted into Common Shares (i) at any time on or after the date hereof, in
increments of no less than $250,000, or (ii) for a period of thirty (30) days
commencing on the date the Maker gives notice to the Holder ("Prepayment
Notice") of its
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intention to prepay all or a portion (in excess of $100,000) of the outstanding
principal sum of this Note (the "Prepayment Payment"), in increments no less
than the lesser of the Prepayment Amount or $250,000. In the event and to the
extent the Holder converts all or a portion of the Prepayment Amount and Marcum
delivers the Common Shares into which such portion was converted, then Maker's
obligation to make that portion of the Prepayment Amount shall be deemed to be
fulfilled by delivery to Holder of the Common Shares into which such portion was
converted.
(b) CONVERSION RATE. This Note may be converted into Common
Shares at the initial conversion rate of one Common Share for each $1.421875 of
the principal sum of this Note, subject to adjustment as described below.
(c) CONVERSION PROCEDURE. In order to convert this Note into
Common Shares, the Holder must (i) complete, sign and deliver to Marcum the
Conversion Notice attached to this Note as Exhibit A, (ii) surrender this Note
to Marcum, (iii) furnish appropriate endorsements and transfer documents if
required by Marcum, and (iv) pay any transfer or similar tax, if required. The
date upon which Marcum receives the duly signed and completed Conversion Notice,
the Note and all other required documentation and fees is referred to herein as
the "Conversion Date." As promptly as practicable after the Conversion Date,
Marcum shall issue and deliver one or more certificates for the whole number of
Common Shares issuable upon such conversion, together with an cash payment in
lieu of any fractional Common Shares. Such conversion shall be deemed effective
immediately prior to the close of business on the Conversion Date, and at such
time the rights of the Holder with respect to the indebtedness evidenced hereby
shall cease. The Holder shall not be entitled to receive any cash dividends
payable to holders of Common Shares as of any record date before the Conversion
Date.
(e) FRACTIONAL SHARES. No fractional Common Shares shall be
issued upon conversion of this Note but, in lieu thereof, Marcum will pay to the
Holder an amount in cash based upon the Conversion Rate.
(f) CONVERSION RATE ADJUSTMENT FOR CERTAIN GENERAL EVENTS.
(i) GENERAL EVENTS. The Conversion Rate is subject to
adjustment upon the occurrence of any of the following events: (A) the issuance
of Common Shares as a dividend or a distribution with respect to the Common
Shares; (B) the subdivision of the outstanding Common Shares into a greater
number of shares; (C) the combination of the outstanding Common Shares into a
smaller number of shares; (D) the issuance to all holders of Common Shares of
certain rights or warrants entitling them to subscribe for or purchase Common
Shares (or securities convertible into Common Shares) at a price less than the
lesser of the then current market price per Common Share or the Conversion Rate;
and (E) the distribution to all holders of Common Shares of shares of capital
stock (other than Common Shares), evidences of indebtedness of Marcum or of
other non-cash assets (including securities but excluding those rights,
warrants, dividends and distributions referred to above or paid in cash).
(ii) ADJUSTMENT.
(A) GENERALLY. In the event of the
occurrence of any of the foregoing events, then the Conversion Rate in effect
immediately prior to such event shall be adjusted so that, upon the conversion
of the Note the Holder receives the number of Common Shares or other Securities
or assets which it would have received immediately following such event if it
had converted the Note
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immediately prior to the record date relative to such event. Any adjustment of
the Conversion Rate shall become effective immediately after the record date, in
the case of a dividend or distribution, and immediately after the effective
date, in the case of a subdivision, combination or reclassification. All
calculations under this Section 4(f) shall be made to the nearest 1/100th of a
cent.
(B) 1% MINIMUM ADJUSTMENT. No adjustment in
the Conversion Rate will be required to be made unless and until such adjustment
that would require a change of at least one percent (1%) of the Conversion Rate
then in effect; provided, however, that any adjustment that would not be
required to be made shall be taken into account in any subsequent adjustment.
(C) MULTIPLE ADJUSTMENTS. If any event would
require adjustment of the Conversion Rate pursuant to more than one of the
provisions described above, only one adjustment shall be made, and such
adjustment shall be in the amount of the adjustment having the highest absolute
value to the Holder.
(D) EVENTS NOT REQUIRING ADJUSTMENT. Except
as set forth in this Section 4, the Conversion Rate shall not be adjusted for
the issuance of Common Shares or securities convertible into or exchangeable for
Common Shares or securities granting the right to purchase any of the foregoing.
No adjustments shall be made for a event referred to above if the Holder is
entitled to participate in the event on the basis and with notice that the Board
of Directors of Marcum determines to be fair and appropriate in light of the
basis and notice on which the holders of Common Shares participate in the event.
No adjustments need to be made for rights to purchase Common Shares pursuant to
a company plan for reinvestment of dividends or interest. No adjustments need to
be made for a change in the par value of the Common Shares.
(E) SPECIAL AUTHORITY. Marcum reserves the
right to make such reductions in the Conversion Rate in addition to these
required in the foregoing provisions as it considers to be advisable in order
that any event treated for federal income tax purposes as a dividend of stock or
stock rights will not be taxable to the recipients.
(F) NOTICES OF ADJUSTMENTS. Whenever the
Conversion Rate is adjusted, the Company will promptly mail to the Holder a
notice of the adjustment.
(g) MERGERS, CONSOLIDATIONS, AND SALE OF ASSETS. In the event
the Company shall be a party to any transaction (including without limitation
(i) any recapitalization or reclassification of the Common Shares (other than a
change in par value, or from par value to no par value, or from no par value to
par value, or as a result of a subdivision or combination of the Common Shares),
(ii) any consolidation or merger of the Company with or into another person or
any merger of another person into the Company (other than a merger that does not
result in a reclassification, conversion, exchange or cancellation of the Common
Shares), (iii) any sale or transfer of all or substantially all of the assets of
the Company, or (iv) any compulsory share exchange) pursuant to which either the
Common Shares shall be converted into the right to receive other securities,
cash or other property, or in the case of a sale or transfer of all or
substantially all of the assets of the Company, the holders of the Common Shares
shall be entitled to receive other securities, cash or other property, then
appropriate provision shall be made as part of the terms of such transaction so
that Holder shall have the right thereafter to convert this Note only into the
kind and amount of the securities, cash or other property that would have been
receivable upon such recapitalization, reclassification, consolidation, merger,
sale, transfer or share exchange by a holder of the number of Common Shares
issuable upon conversion of such Note
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immediately prior to such recapitalization, reclassification, consolidation,
merger, sale, transfer or share exchange.
(h) VOLUNTARY REDUCTION IN CONVERSION RATE. The Maker from
time to time may, to the extent permitted by law, reduce the Conversion Rate of
this Note by any amount for any period of at least twenty (20) days, in which
case the Maker shall give at least fifteen (15) days prior written notice of
such reduction.
(i) RESERVATION OF COMMON SHARES. Marcum shall at all times
reserve and keep available out of its authorized but unissued Common Shares,
solely for the purpose of effecting the conversion of this Note, such number of
Common Shares as shall from time to time be sufficient to effect the conversion
of the then outstanding principal sum of the Note. If at any time the number of
authorized but unissued Common Shares shall not be sufficient to effect the
conversion of this Note, then Marcum shall take such corporate action as may be
necessary to increase its authorized but unissued Common Shares to such number
of Common Shares as shall be sufficient for such purpose.
(j) COST OF CONVERSION. Marcum shall pay all documentary,
stamp or other transactional taxes attributable to the issuance or delivery of
Common Shares upon conversion of this Note. However, Holder shall be required to
pay any taxes which may be payable in respect of any transfer involved in the
issuance or delivery of any certificate for such Common Shares in a name other
than that of the Holder.
(k) COMMON SHARE LIMITATION. Notwithstanding any other
provision of the Note to the contrary, in no event shall the aggregate number of
Common Shares to be issued by Marcum upon conversion of the Note when added to
the aggregate number of Common Shares issued by Marcum to Purchaser upon the
closing of the Purchase Agreement, exceed 19.99% of the aggregate number of
Common Shares outstanding as of the date immediately prior to the date hereof.
5. SUBORDINATION.
(a) SUBORDINATION OF PAYMENT. The indebtedness evidenced by
this Note is subordinated and junior in right of payment to the prior payment in
full of all indebtedness of the Company and its subsidiaries to any bank, or
other financial institution for money borrowed under any loan agreement, credit
agreement, promissory note or similar instruments ("Bank Debt"). No payment of
principal or interest on that Note may be paid (i) if any Bank Debt is not paid
when due and any applicable grace period with respect to such default has ended
and such default has not been cured or waived or ceased to exist, or (ii) if the
maturity of any Bank Debt has been accelerated because of a default by Marcum.
(b) DISSOLUTION, LIQUIDATION AND BANKRUPTCY. Upon any
distribution of assets of Marcum to creditors upon any dissolution, winding-up,
liquidation or reorganization, whether voluntary or involuntary, or in
bankruptcy, insolvency, receivership or other proceeding, all principal premium,
if any, and interest due or to become due on all Bank Debt must be paid in full
before the Holder is entitled to receive or retain any payments.
(c) SUBROGATION. Upon satisfaction of all claims of all Bank
Debt then outstanding, the rights of the Holder shall be subrogated to the
rights of the Holders of Bank Debt to receive payments or distributions
applicable to Bank Debt until all amounts owing on this Note are paid in full.
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(d) CERTAIN DISTRIBUTIONS. In the event that, notwithstanding
the foregoing, a payment or distribution of assets of Marcum of any kind in
contravention of any of the provisions set forth in this Section 5(e) pertaining
to subordination, whether in cash, property or securities, including, without
limitation, by way of set-off or otherwise, in respect of the Note before all
Bank Debt is paid in full, then such payment or distribution shall be held by
the Holder in trust for the benefit of Holders of Bank Debt or their
representatives to the extent necessary to make payment in full of all Bank Debt
remaining unpaid, after giving effect to any concurrent payment or distribution
or provision therefor, to or for the holders of Bank Debt.
6. DEBT COVENANT.
(a) COVENANTS. Marcum covenants and agrees that, so long as
Maker has any obligations to Payee under this Note, Marcum shall observe and
perform the following financial covenants, unless the Payee shall otherwise
consent in writing:
(i) CONSOLIDATED TANGIBLE NET WORTH. Marcum's
consolidated tangible net worth (as such term is defined in accordance with GAAP
and including any and all subordinate debt which has been approved by Lender in
it sole discretion) shall not be less than $6,700,000, calculated as of the end
of each fiscal quarter.
(ii) DEBT SERVICE COVERAGE RATIO. The ratio of
Marcum's earnings before interest, taxes, depreciation, amortization and
extraordinary gains to interest expense (as such terms are defined in accordance
with GAAP) shall not be less than 1.8 to 1.0, calculated as of the end of each
fiscal quarter.
(b) COMPUTATION. For purposes of computing the debt covenants
set forth in Section 6(a) hereof:
(i) The term GAAP means Generally Accepted Accounting
Principles, applied on a consistent basis by Marcum, as set forth in Opinions of
the Accounting Principles Board of the American Institute of Certified Public
Accountants and/or in statements of the Financial Accounting Standards Board
and/or their respective successors, and which are applicable in the
circumstances as of the date of question.
(ii) The financial covenants with respect to Marcum
shall be computed based upon Marcum's consolidated financial statements which
include the accounts of Marcum and its subsidiaries after elimination of
inter-company accounts and transactions.
7. DEFAULT.
(a) EVENTS OF DEFAULT. Each of the following shall be deemed
an "Event of Default":
(i) The failure of the Maker to pay interest on the
Note within thirty (30) days of the date when the same becomes due and payable;
(ii) The failure of the Maker to pay the principal
sum of this Note on the date when the same becomes due and payable;
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(iii) The failure of the Maker to convert the
principal sum of the Note into Common Shares (as defined below) upon the terms
and subject to the conditions set forth in this Note;
(iv) The failure of the Maker to observe or perform
any of its other covenants set forth in this Note, which failure continues for a
period of thirty (30) days after receipt of notice by the Holder of such
failure;
(v) The commencement by the Maker of a voluntary
proceeding seeking liquidation, reorganization or other relief with respect to
itself or its debts under any bankruptcy, insolvency or other similar law now or
hereafter in effect, or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or a substantial part of
its property, or the consent by the Maker to any such relief or to the
appointment of or taking possession by any such official in an involuntary case
or other proceeding commenced against it, or the making by the Maker of a
general assignment for the benefit of creditors; or
(vi) The commencement of an involuntary proceeding
against the Maker seeking liquidation, reorganization, or other relief with
respect to it or its debts under any bankruptcy, insolvency or other similar law
now or hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official for it or a substantial part of
its property, which involuntary proceeding remains undismissed and unstayed for
a period of sixty (60) days.
(b) REMEDIES UPON DEFAULT. If an Event of Default under this
Note shall occur and be continuing, the Holder shall have the right to declare
the outstanding principal sum of and accrued interest to the date of
acceleration on this Note then outstanding to be due and payable by giving
written notice to the Maker to that effect, and upon the Company's receipt of
such Notice, the principal sum of and accrued interest on this Note shall become
due and payable. In addition, if an Event of Default shall occur and be
continuing, the Holder may pursue any available remedy to collect the payment of
principal or interest on this Note or to enforce the performance of any
provision of this Note. The Holder shall have the right to waive any past or
existing default or Event of Default and its consequences Note.
8. ASSET PURCHASE AGREEMENT AND CONVERTIBLE NOTE ADJUSTMENT. This Note
is the "Convertible Note" provided for in that certain Asset Purchase Agreement,
dated March 23, 1998 (the "Agreement"), by and among Payee, American Meter
Company, Purchaser and Marcum and is executed by Maker as part of the
consideration for the sale by Payee to Purchaser of the "Assets" (as that term
is defined in the Agreement). The principal sum of this Note shall be reduced by
the amount of any "Convertible Note Adjustment", as such term is defined, at the
time and in the manner that such reduction is provided for in Section 2.4 of the
Agreement.
9. WAIVER OF PROCEDURAL DEFENSES. Makers and each endorser, surety and
guarantor hereby waives presentment for payment, demand for payment, notice of
non-payment or dishonor, protest, notice of protest, notice of acceleration or
maturity, and any and all other notices and demands whatsoever, and agree to
remain bound until the principal and interest are paid in full, notwithstanding
any extensions of time for payment which may be granted, even though the period
of extension may be indefinite, and notwithstanding any inaction by or failure
to asset any legal right available to the Holder.
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10. SEVERABILITY. If any provision of this Note or application thereof
to any person or circumstance is held invalid, such invalidity shall not affect
other provisions of this Note which can be given effect without the invalid
provisions, and to this end the provisions of this Note shall be severable.
11. GOVERNING LAW. This Note shall be governed by and construed in
accordance with the laws of the State of Delaware, without giving effect to
principles of conflict or choice of law.
12. NO WAIVER. No delay or omission of the Holder to exercise any right
or power arising under this Note shall impair any such right or power or be
construed to be a waiver of any such right or power, nor shall the action or
nonaction of the Holder in case of default on the part of Maker impair any right
or power resulting therefrom.
13. SUCCESSORS AND ASSIGNS. This Note shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
permitted assigns. Neither this Note nor the rights nor obligations herein may
be assigned by the Maker without the prior written consent of the Holder;
provided, however, that the Maker has the right at all times to assign any of
its respective rights or obligations under this Note to a direct or indirect
wholly-owned subsidiary of the Maker, wholly-owned provided that, in the event
of such assignment, the Maker shall remain liable for all of its respective
obligations hereunder.
MAKER:
METRETEK, INCORPORATED
By: /s/ W. Phillip Marcum
---------------------------------
Its: Chief Executive Officer
--------------------------------
MARCUM NATURAL GAS SERVICES, INC.
By: /s/ W. Phillip Marcum
---------------------------------
Its: President
--------------------------------
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EXHIBIT A
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CONVERSION NOTICE
-----------------
The undersigned, the Holder of the enclosed Convertible, Subordinated
Promissory Note (the "Note"), hereby irrevocably elects to exercise its option
to convert the Note into shares of common stock, par value per unit $.01 per
share ("Common Shares"), of Marcum Natural Gas Services, Inc. in the following
amount:
$
--------------------
The undersigned requests that a certificate for such Common Shares be
issued in the name of and delivered to:
-------------------------
(Name)
-------------------------
(Address)
-------------------------
-------------------------
(City, State, Zip Code)
-------------------------
(Employer Identification Number)
Dated: Signature:
-------------------- -------------------------
<PAGE> 1
EXHIBIT 10.2
LICENSE AGREEMENT
-----------------
This Agreement is made and entered into as of the 4th day of May, 1998,
by and between Eagle Research Corporation, a West Virginia corporation with its
corporate offices at 105 Erskine Lane, Scott Depot, WV 25560 ("Eagle"), American
Meter Company, a Delaware corporation with its principal corporate offices at
300 Welsh Road, Horsham, PA 19044-2234 ("AMCO"), and Metretek, Incorporated, a
Florida corporation ("Metretek") with its corporate offices at 300 North Drive,
Melbourne, FL 32934. Eagle and Meter collectively shall be referred to
hereinafter as "AMCO". All references to Metretek hereinafter shall include
Metretek and its Affiliates.
WITNESSETH:
In consideration of the mutual covenants, conditions and agreements
herein contained, the parties agree as follows:
1. Definitions.
------------
A. "Action" shall have the meaning ascribed to it in Paragraph 18
of this Agreement.
B. "Advanced Function" shall mean SCADA, AMR, or any other
application or function that is different than the functions
or applications that are able to be performed by Metretek
systems as they exist of the Effective Date.
C. "Affiliate" shall mean an entity directly or indirectly
controlling, controlled by or under common control with a
party to this Agreement; and for these purposes, "control"
shall mean ownership of twenty percent (20%) or more of the
voting power.
D. "AMCO New Application" shall have the meaning ascribed to it
in Paragraph 14 of this Agreement.
E. "AMR" shall mean residential automated meter reading.
<PAGE> 2
F. "Application" shall mean any software program designed by
either party for use with Pantheon, but shall not include the
Pantheon Platform.
G. "Asset Purchase Agreement" shall mean the asset purchase
agreement between the Parties of even date herewith.
H. "Confidential Information" shall have the meaning ascribed to
it in Paragraph 25 of this Agreement.
I. "Converted Customers" shall have the meaning ascribed to it in
Paragraph 5.A of this Agreement.
J. "EM" stands for electronic measurement which is the remote
reading of time use histories or load profile data from
electronic correctors and pulse accumulator devices for the
purpose of billing energy usage measured by commercial gas and
electric meters.
K. "Effective Date" shall mean the date on which this Agreement
is entered into.
L. "Existing Customer" shall mean a customer of Metretek existing
on the Effective Date; provided that, an Existing Customer
shall be deemed a "New Customer" if a sale of an Advanced
Function to the Existing Customer occurs after the Effective
Date.
M. "Full Manufacturing Cost" shall mean the cost of materials
plus the cost of direct labor and the cost of factory overhead
in making a product. The calculation of Full Manufacturing
Cost shall not include selling expenses, research and
development costs or expenses or general and administrative
expenses.
N. "Initial Period" shall have the meaning ascribed to it in
Paragraph 15.B of this Agreement.
O. "Metretek Applications" shall have the meaning ascribed to it
in Paragraph 14 of this Agreement.
2
<PAGE> 3
P. "Most Favored Nation Basis" shall mean the lowest price at
which a party licenses or sells the relevant product in
comparable quantities to other customers during the Term;
provided, however, that the term "Most Favored Nation Basis"
when used with respect to the licensing of Pantheon shall not
include pricing afforded by AMCO to GE Capital Global Energy
Services pursuant to its agreement with AMCO.
Q. "New Customer" shall mean (i) a customer of Metretek existing
after the Effective Date that was not a customer of Metretek
prior to the Effective Date which buys Metretek manufactured
hardware in addition to Pantheon and which Metretek materially
assists in introducing and/or marketing to or (ii) an Existing
Customer that buys an Advanced Function after the Effective
Date.
R. "Pantheon" shall mean AMCO's proprietary software with such
trademark, including the Pantheon Platform, AMCO New
Applications, the phrase "Pantheon by American Meter" and all
other products listed in Exhibit B hereto. The Pantheon
Platform and such products and services may from time to time
during the term of this Agreement be added to or improved by
AMCO upon notice to Metretek; provided that, in the event
AMCO, or any assignee thereof, no longer offers backup support
services for Pantheon, Metretek shall have access to the
source code pursuant to the Escrow Agreement specified in
Exhibit D.
S. "Pantheon Platform" shall have the meaning ascribed to it in
Exhibit B.
T. "Parties" shall mean collectively Eagle, AMCO and Metretek.
U. "Prime Rate" shall mean the rate of interest from time to time
published by the Wall Street Journal, New York, New York, as
the "Prime Rate," presently designated under the category of
"Money Rates" and defined therein as the base rate on
corporate loans posted by at least 75% of the nation's 30
largest banks, as the same may fluctuate from
3
<PAGE> 4
time to time. In the event more than one "Prime Rate" shall be
so published, the "Prime Rate" for purposes hereof shall be
the highest such published "Prime Rate."
V. "Product" shall have the meaning ascribed to it in Paragraph
18 of this Agreement.
W. "Protocol" shall have the meaning ascribed to it in Paragraph
24.A of this Agreement.
X. "Relevant Market" shall mean utilities or other companies
engaged in the sale of natural gas at retail to the general
public to which Pantheon is sold to perform EM applications
relating to natural gas and electricity. The Relevant Market
shall in no event include industrial accounts, sales of AMR
applications to residential customers, or sales of Pantheon to
utilities to perform SCADA applications.
Y. "SCADA" stands for supervisory control and data acquisition
which is the reading of remote sensors, through a
communications network, in real time or near real time for the
purpose of controlling or managing utility or industrial
operations.
Z. "Term" shall have the meaning ascribed to it in Paragraph 2 of
this Agreement.
AA. "Termination Date" shall mean the date specified in Paragraph
22 of this Agreement.
2. Appointment.
------------
AMCO hereby appoints Metretek and its Affiliates as non-exclusive value
added reseller-distributor for Pantheon and all trademark, copyright
and other intellectual property rights associated with Pantheon
throughout the world to utilities, end users and other clients in the
Relevant Market beginning on the Effective Date and ending on the
Termination Date (the "Term"), and in such connection AMCO grants to
Metretek during the Term the following nonexclusive, nontransferable
license for Pantheon, AMCO New Applications and jointly owned
Application software in accordance with the terms and conditions of
this Agreement; provided, however, that copies of Pantheon shall be
made only by AMCO:
4
<PAGE> 5
A. the right to grant perpetual nonexclusive sublicenses of
Pantheon for use by utilities, end users and other clients in
the Relevant Market provided that AMCO shall promptly receive
full information regarding the identity of such sublicensees
and be fully paid by Metretek with respect to such
sublicensees in accordance with this Agreement;
B. the royalty-free right (except for the payment by Metretek of
third party software royalties to AMCO) based upon current
price list to use authorized copies of Pantheon for training
and demonstration purposes; and
C. the right to establish, maintain and terminate sublicense
agreements with clients and end users in the Relevant Market.
The prices, terms and conditions charged by Metretek with
respect to such sublicensees are the sole responsibility of
Metretek, provided only that such terms and conditions do not
conflict with any of the terms and conditions of this
Agreement and Metretek shall promptly pay the license fee
provided for in this Agreement. AMCO will provide Metretek
with a price schedule setting forth AMCO's suggested
sublicense fees for Pantheon.
3. Pricing of Pantheon
-------------------
A. Except as provided in Paragraphs 3.B and 12.D, AMCO shall
license Pantheon to Metretek on a Most Favored Nation Basis.
Exhibit A, as amended from time to time in accordance with
subparagraph B of this Paragraph 3, sets forth AMCO's current
list market price and AMCO's Most Favored Nation Basis prices.
At Metretek's request, but no more often than once each
calendar quarter, AMCO will verify that Metretek is receiving
Most Favored Nation Basis pricing by delivering a certificate
of the Chief Financial Officer of AMCO to such effect.
5
<PAGE> 6
B. Any increase of prices on the Pantheon price schedule shall be
effective upon no less than thirty (30) days notice of such
change; provided that, any outstanding quotation on the
effective date of the price change shall not be affected by
the price change for the period ending on the sixtieth (60th)
day following the issuance of such quotation. Any decrease of
prices on the Pantheon price schedule shall be effective
immediately.
C. Metretek shall maintain records of its Pantheon sublicenses
and usage in order to enable AMCO to appropriately charge
Metretek in accordance with AMCO's current discounted price
schedules. Metretek shall issue a purchase order itemized by
line item corresponding to Exhibit A. AMCO shall control all
licensing and activation of purchased products. AMCO (at
AMCO's sole expense) may conduct audits of Metretek records
relating to Pantheon at reasonable frequency and with
reasonable notice; provided that, if the results of such audit
demonstrate an error in the amounts reported to AMCO of
greater than ten percent (10%), Metretek shall pay for the
cost of such audit.
D. Any action taken by Metretek to attempt to circumvent the
pricing structure established by Exhibit A shall be considered
a breach of this Agreement; and Metretek shall use
commercially reasonable efforts in preventing any such actions
by its sublicensees.
4. Payment.
--------
AMCO shall submit monthly invoices with respect to outstanding Pantheon
sublicenses and usage in the preceding month. Payment of invoices shall
be due within thirty (30) days of invoice date. Interest shall be
charged at a rate equal to the Prime Rate per annum on late payments.
6
<PAGE> 7
5. Fee Structure; Account Responsibility
-------------------------------------
A. For licenses (in the case of AMCO) or sublicenses (in the case
of Metretek) of Pantheon to New Customers to perform EM
applications or for licenses (in the case of AMCO) or
sublicenses (in the case of Metretek) of Pantheon to Existing
Customers to perform EM applications as part of the expansion,
conversion or replacement of software capabilities in an
existing Metretek system ("Converted Customers"), the
following shall apply:
(i) If the license (or sublicense) fee
attributable to Pantheon is less than forty
thousand dollars ($40,000) (a) Metretek
shall be responsible for installing
Pantheon, managing the account and for
providing Pantheon front-line maintenance
and support to the customer and (b) Metretek
shall receive Most Favored Nation Basis
pricing on Pantheon; and
(ii) If the license (or sublicense) fee
attributable to Pantheon is forty thousand
dollars ($40,000) or more (a) AMCO shall be
responsible for installing Pantheon,
managing the account and for providing
Pantheon front-line maintenance and support
to the customer and (b) Metretek shall
receive a commission equal to (x) the
percentage discount from list prices
represented by Most Favored Nation Basis
pricing for Pantheon, multiplied by forty
thousand dollars ($40,000) plus (y) ten
percent (10%) of the license fee
attributable to Pantheon multiplied by the
portion of the license fee attributable to
Pantheon in excess of forty thousand dollars
($40,000); provided, however that if a
Converted Customer requests that Metretek be
responsible for installing Pantheon,
managing the account and for providing
Pantheon front-line maintenance and support
to the Converted Customer and if AMCO
consents to allow Metretek to assume
7
<PAGE> 8
such duties, the fee structure set forth in
this Paragraph 5.A(ii) shall be inapplicable
and the fee structure set forth in Paragraph
5.A(i) shall govern.
(iii) If the fee structure set forth in Paragraph
5.A(ii) is applicable, Metretek shall also
receive a commission in the amount of five
percent (5%) of the amount of any future
license fees attributable to Pantheon for
such customers for a period of eighteen (18)
months after the initial license fee.
B. For licenses of Pantheon to New Customers or Existing
Customers to perform SCADA or AMR applications, Metretek shall
receive a commission in the amount of five percent (5%) of the
license fee AMCO receives from such customer with respect to
the Pantheon license and AMCO shall be responsible for
installing Pantheon, managing the account and for providing
Pantheon front-line maintenance and support to the customer.
Metretek shall also receive a commission in the amount of five
percent (5%) of the value of any future license fees for
Pantheon AMCO receives from such customer for a period of
eighteen (18) months after the initial sale is completed.
6. Metretek Other Obligations.
---------------------------
A. During the period beginning with the Closing Date and ending
one hundred twenty (120) days thereafter (the "Feasibility
Period"), Metretek (with the full cooperation of AMCO) shall
exercise its good faith commercial efforts to prove to
Metretek's reasonable satisfaction, based upon the results of
testing at Metretek customers acting as "beta" sites, the
capability and functionality of the operation of Pantheon in
connection with Metretek hardware products. If despite its
good faith commercial efforts, Metretek is unable to so prove
the capability and functionality of Pantheon during the
Feasibility
8
<PAGE> 9
Period, (i) Metretek shall as soon as possible, but not later
than the last day of the Feasibility Period, report the nature
of the remaining issues to AMCO; (ii) Metretek (with AMCO's
full cooperation) shall continue to exercise its good faith
commercial efforts to resolve the remaining issues; (iii) the
Feasibility Period shall be extended for such period necessary
to resolve such issues; and (iv) Metretek shall report to AMCO
at no less than thirty (30) day intervals during the
Feasibility Period (as so extended) on the status of any
remaining issues.
B. After the expiration of the Feasibility Period (either when
remaining issues with respect to the functionality and
capability of Pantheon within such period are resolved to
Metretek's reasonable satisfaction, provided such resolution
occurs within an eighteen (18) month period after the Closing
Date, or Metretek's failure to render timely and reasonably
adequate reports to AMCO required hereinabove in subparagraph
A of this Paragraph 6, Metretek shall only sell software
systems that utilize Pantheon to New Customers and Metretek
agrees that during the Term after the expiration of the
Feasibility Period, it will not sell, license, or otherwise
promote or market any products containing software
substantially similar to Pantheon, or software that performs
functions substantially similar to those performed by
Pantheon, including, without limitation, managing energy
management information, subject to a commercially reasonable
phase-in period with respect to sales material and outstanding
customer orders and quotes and jobs in process; provided,
however, nothing in this Paragraph 6 shall be construed to
prohibit Metretek from providing support or providing upgrades
or enhancements to Existing Customers for any Metretek
software products utilized by Existing Customers. After the
expiration of the Feasibility Period, Metretek shall, and
9
<PAGE> 10
shall cause its personnel to, utilize its good faith
commercial efforts to convert Existing Customers to Converted
Customers.
C. If Metretek successfully converts at least twenty-five (25) of
its Existing Customers to Converted Customers each with a
license fee (in the case of AMCO) or sublicense fee (in the
case of Metretek) attributable to Pantheon in excess of twenty
five thousand dollars ($25,000) before the second (2nd)
anniversary of the expiration of the Feasibility Period, the
following shall apply to any such Converted Customer in excess
of twenty-five (25) until the end of such period:
(i) if the license (or sublicense) fee
attributable to Pantheon is less than forty
thousand dollars ($40,000), or if a customer
requests that Metretek be responsible for
installing Pantheon, managing the account
and for providing Pantheon front-line
maintenance and support to the customer and
AMCO agrees to allow Metretek to assume such
duties, Metretek shall receive an additional
discount of ten percent (10%) off the Most
Favored Nation Basis price otherwise payable
by Metretek for Pantheon pursuant to
Paragraph 3 of this Agreement for each
Converted Customer in excess of twenty-five
(25).
(ii) if the license (or sublicense) fee
attributable to Pantheon exceeds forty
thousand dollars ($40,000), the commission
payable to Metretek pursuant to Paragraph
5.A(ii)(b)(y) shall be one hundred ten
percent (110%) times the amount otherwise
payable to Metretek pursuant to such
Paragraph 5.A(ii)(b)(y).
D. Metretek shall assign to the marketing, installation and
maintenance of Pantheon adequate, trained personnel. After the
expiration of the Feasibility Period, Metretek shall
10
<PAGE> 11
cause its personnel to exercise their good faith commercial
efforts to generate Pantheon sales, including without
limitation, presenting Pantheon at appropriate industry trade
shows that Metretek decides to attend, keeping its
distribution channels supplied with sufficient marketing
materials, providing customary incentive programs for its
sales representatives regarding Pantheon, and in general using
its good faith commercial efforts to license Pantheon.
E. Metretek shall use its good faith commercial efforts to
develop and complete electronic components and related
equipment pertaining to both electronic temperature and
pressure correction (and not electronic temperature only) to
be integrated within certain rotary and turbine meters
manufactured by AMCO that AMCO designates. Metretek shall sell
such electronic components to AMCO at Full Manufacturing Cost
plus ten percent (10%). Metretek shall commence the design of
such product within sixty (60) days of the date of this
Agreement and complete the design to AMCO's satisfaction
within a commercially reasonable time.
7. Joint Obligations of Metretek and Amco.
---------------------------------------
Metretek and AMCO will each provide all reasonable marketing assistance
and cooperation relating to Pantheon requested by the other party,
including but not limited to the following:
(i) Coordinating sales calls (including those on bids
outstanding as of the Effective Date); and
(ii) Cooperating and working together to market and sell
Pantheon to New Customers.
11
<PAGE> 12
8. AMCO Other Obligations.
-----------------------
AMCO shall utilize its good faith commercial efforts to use Metretek's
measurement system and hardware as the preferred system with AMCO's
Pantheon resellers.
9. Pricing of Metretek Products to AMCO.
-------------------------------------
A. AMCO (and its affiliates) shall be entitled to resell all
Metretek manufactured hardware throughout the Continental
United States and Canada and Metretek shall sell such hardware
to AMCO at the lower of (i) Most Favored Nation Basis pricing
less fifteen percent (15%) and (ii) Full Manufacturing Cost
plus twenty percent (20%).
B. At AMCO's request, but no more often than once each calendar
quarter, Metretek will verify that AMCO is receiving pricing
on Metretek manufactured hardware in accordance with Paragraph
9.A and 9.B by delivering a certificate of the Chief Financial
Officer of Metretek to such effect.
C. Any increase of prices shall be effective upon no less than
thirty (30) days notice of such change; provided that, any
outstanding quotation on the effective date of the price
change shall not be affected by the price change for the
period ending on the sixtieth (60th) day following the
issuance of such quotation. Any decrease of prices on Metretek
manufactured hardware shall be effective immediately.
D. Payment for Metretek manufactured hardware shall be governed
by the same provisions as set forth in Paragraph 4 with
relation to payment for Pantheon by Metretek.
10. Trademark, Copyright.
---------------------
AMCO hereby accords Metretek and its Affiliates the right to use the
name "Pantheon" and such other related AMCO trademarks, trade names,
copyrights, trade secrets and related
12
<PAGE> 13
intellectual property rights in connection with the Pantheon products.
Metretek agrees to use the trademark Pantheon solely in connection with
Pantheon and to identify the product as "Pantheon by American Meter" in
its product advertisements and labeling; and provided that, Metretek
shall have the right to indicate its connection to Pantheon in
advertising and labels such as "Licensed, Sold and Serviced by
Metretek". Metretek agrees to abide by all of AMCO's obligations
regarding the licensed software included in Pantheon, which obligations
are summarized in Exhibit C to this Agreement. Metretek will produce
and include the copyright notices and other restrictive and proprietary
legends from the original, on all copies, partial copies, and
derivative works, all of which shall be subject to the provisions of
this Agreement. AMCO warrants to Metretek that (i) AMCO is the sole
legal and beneficial owner of Pantheon and all intellectual property
rights associated therewith other than with respect to the third party
software embedded in Pantheon for which AMCO has a valid license; and
(ii) AMCO shall diligently prosecute and take all commercially
reasonable steps to maintain the intellectual property rights related
to Pantheon in full force and effect for the duration of this
Agreement.
11. AMCO's Shipment.
----------------
Upon receiving an order from Metretek specifying the customer and the
software options ordered, AMCO shall promptly send an invoice to
Metretek reflecting such order and shall promptly (subject to their
currently available version) create a customer copy of Pantheon, with
individually designated customer name and identification and ship the
version of Pantheon ordered in accordance with its normal delivery
schedule.
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<PAGE> 14
12. Training.
---------
A. AMCO shall certify (or otherwise give its formal approval for)
to Metretek employees to develop Applications of the Pantheon
product using the standard Application tools built into
Pantheon and AMCO shall have the right to audit Applications
at random.
B. Qualified, trained personnel of AMCO shall provide initial
training and new release training at no cost to Metretek for
each new Pantheon release and at least once per year at a
location chosen by AMCO a class of at least five (5) and not
to exceed fifteen (15) Metretek designated employees. Metretek
shall pay all travel, meal and lodging expenses of such
personnel. AMCO may at its discretion provide such training on
video or training software; provided that a live question and
answer period shall supplement the prepared materials.
Metretek shall pay AMCO for any additional training at AMCO's
standard rates. The training obligations of AMCO in this
Paragraph 12.B set forth AMCO's training obligations vis-a-vis
Metretek in their entirety. In acknowledgment of the
foregoing, Metretek accepts responsibility for providing
long-term support training for its employees in connection
with Pantheon.
C. Metretek may use Pantheon for training and demonstration
purposes for reasonable periods at no cost to Metretek,
provided that Metretek shall pay AMCO for third party software
royalties.
D. AMCO shall license Metretek copies of Pantheon, AMCO New
Applications and jointly owned Application software to be used
for development or customer support purposes and not for
resale. Such licenses shall be at a fifty percent (50%)
discount from AMCO's list market price as set forth in Exhibit
A, as amended from time to time in accordance with Paragraph
3.B of this Agreement.
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<PAGE> 15
13. Improvements.
-------------
AMCO shall exercise its good faith commercial efforts to develop,
improve and support Pantheon. Metretek shall provide AMCO with key
market requirements, developments and specifications necessary to serve
the market. From time to time, AMCO or Metretek may request the expert
assistance of the other in developing changes to Pantheon to improve or
enhance such product. Such assistance shall be provided and paid for as
agreed to by the parties. All improvements or enhancements to the
Pantheon Platform shall be the sole property of AMCO.
14. New Applications.
-----------------
AMCO shall have the sole ownership of new Application software for
Pantheon developed solely by AMCO ("AMCO New Applications"). The
parties shall jointly own all Application software developed jointly by
them. Metretek shall have sole ownership of Application software
developed by Metretek ("Metretek Applications"), and Metretek shall
accord AMCO the rights to license and adapt and modify Metretek
Applications solely for use by end users. Metretek shall license
Metretek Applications to AMCO at discounts generally equal to the
discounts accorded Metretek by AMCO specified in Paragraph 3. AMCO
acknowledges that Metretek may offer customers pricing for Metretek
Applications that does not separately itemize Pantheon. Accordingly, if
such is the case, the parties shall engage in good faith discussions
regarding such pricing to AMCO which includes a reasonable
approximation of the Metretek Application value and the discounts
accorded Metretek by AMCO hereunder. Without regard to this Paragraph
14 and any other provision of this Agreement, Metretek shall not
develop modules to replace any module specified in Exhibit B to this
Agreement.
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<PAGE> 16
15. Support Services.
-----------------
A. Each Party shall provide at its sole cost and expense the
front line primary support for Pantheon and products or
services into which Pantheon is integrated for all customers
for which such Party has account responsibility. Such
front-line support shall include all communication to all
customers for which such Party has account responsibility. In
the event of termination of this Agreement due to a default by
Metretek hereunder, AMCO shall in its sole discretion assume
Metretek's obligations to provide front line support or
continue to allow Metretek to provide front line support, and
in such latter instance, allow Metretek to retain the
information for the application development package necessary
to provide such front line support. AMCO shall provide backup
support as follows:
(i) reasonable telephone support (8:00 a.m. to 5:00 p.m,
Monday through Friday, E.S.T., excepting holidays)
for Metretek support personnel for matters that
cannot be resolved by Metretek support personnel; and
(ii) a two level Internet database/help desk for problems
and solutions with a response time for e-mail
inquiries to the help desk within twenty-four (24)
hours (business days) and integrator inquiries during
normal business hours within three (3) hours;
provided that, the Parties shall implement a method
of expedited response for true emergency problems
outside of normal business hours.
AMCO shall use commercially reasonable efforts to respond
promptly to all requests for support and remedy all support
requests within a reasonable time so as to minimize a
customer's inability to use the product as licensed.
B. In consideration of AMCO's provision of backup support,
Metretek shall pay AMCO support fees equal to twelve percent
(12%) of the fees payable to Metretek in connection
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<PAGE> 17
with sublicensees of Pantheon. AMCO shall not increase or
otherwise modify its fee for the provision of backup support
hereunder until the first anniversary of the Effective Date
(the "Initial Period"). After the Initial Period, AMCO may
increase or otherwise modify its fee for the provision of
backup support hereunder, but solely in response and to the
extent of any increase in third party fees charged to AMCO
related to the provision of backup support, upon 30 days'
written notice to Metretek. Support fees shall be invoiced on
a monthly basis payable within thirty (30) days of the invoice
date. Interest shall be charged at the Prime Rate on late
payments. AMCO shall also provide on-site customer service at
Metretek's request. Such service shall be paid to AMCO by
Metretek at AMCO's standard rates.
C. Metretek shall be required to pay AMCO for backup support with
respect to any Metretek customer which is using Pantheon
whether or not such customer contracts with Metretek for front
line support.
16. Source Code Escrow
------------------
If Metretek so elects, AMCO and Metretek shall enter into the form of
Escrow Agreement specified in Exhibit D hereto, which shall provide
that in an Event of Default (as such term is defined in such Exhibit
D), the Pantheon source code shall be transferred to Metretek solely
for its internal use in servicing Pantheon licensed to Metretek
customers. For these purposes, an Event of Default will include a sale
of the Pantheon business to a third party where the third party does
not assume AMCO's obligations under this Agreement.
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<PAGE> 18
17. Warranty.
---------
AMCO warrants that it has and will maintain all rights necessary to
grant to Metretek the rights specified in this Agreement. AMCO warrants
that its performance under this Agreement does not and will not
conflict with any other agreement or obligation. AMCO warrants that
Pantheon does not and will not contain any disabling or harmful code
and will handle data, computations and processing without error
regarding millennial dates (E.G., Year 2000); provided that, the
warranty set forth in this sentence shall not include the license
management code which is included in Pantheon. AMCO warrants that
Pantheon shall operate substantially in conformity with the
documentation distributed with each version of Pantheon for all periods
in which AMCO provides backup support services for Pantheon pursuant to
Paragraph 15 of this Agreement. During the warranty period, AMCO shall
determine to either repair or replace defective software at its sole
option and at AMCO's sole expense. AMCO shall not be responsible or
liable for any failure caused by Metretek Application or modifications
made to Pantheon by Metretek, its agents or Metretek customers or for
Pantheon's failure to meet the requirements of Metretek customers. AMCO
MAKES NO OTHER EXPRESS OR IMPLIED WARRANTY OF ANY KIND, INCLUDING BUT
NOT LIMITED TO ANY IMPLIED WARRANTY OF FITNESS FOR A PARTICULAR
PURPOSE, WARRANTIES OF MERCHANTABILITY OR WARRANTIES RELATED TO THE
PERFORMANCE OF THE PRODUCT.
18. Infringement Indemnity
----------------------
AMCO shall indemnify, defend and hold Metretek and its respective
officers, directors, employees and agents harmless against any claim,
suit, or other proceeding ("Action") brought against Metretek based
upon or arising out of an allegation that Pantheon, any AMCO New
18
<PAGE> 19
Application, or any other product licensed by AMCO to Metretek under
this Agreement ("Product") is not owned by AMCO, conflicts with any
AMCO agreement or permit, or infringes upon any patent, copyright,
trademark, or other proprietary right of a third party, provided that
AMCO is promptly notified in writing of such Action. AMCO shall pay all
damages awarded, settlement amounts, and all costs and expenses
associated with such Action, including Metretek's reasonable attorneys'
fees. If the use of any Product is enjoined or if AMCO believes that
such use may be enjoined, AMCO shall, at its option and expense, either
promptly procure the right for Metretek to continue use of such Product
or, if the performance thereof will not thereby be materially adversely
affected, promptly replace or modify such Product so that it becomes
noninfringing. If none of the foregoing are reasonably feasible
regarding the remedy for an injunction, AMCO shall refund to Metretek
the aggregate payments made for the infringing Product.
19. Limitation of Liability.
------------------------
Except as provided in Paragraph 18, AMCO's liability for any claim
related to this Agreement, regardless of the form of action (whether in
contract or tort, including negligence or statute) will in no event
exceed the fees payable to AMCO attributable to the client or end user
giving rise to the claim; and in no event will AMCO be liable for any
indirect, special, consequential or punitive damage, including lost
profits or savings even if Metretek has advised AMCO of the possibility
of such damage. Metretek's liability for any claim related to this
Agreement or the performance of its obligations hereunder will in no
event exceed the amount of the license fees attributable to the client
or end-user transaction giving rise to the claim; and in no event shall
Metretek be liable for any indirect, special, consequential damages or
the like or punitive
19
<PAGE> 20
damages, including lost profits or savings even if AMCO has advised
Metretek of the possibility of such damage.
20. AMCO's Rates.
-------------
AMCO shall have the right to review and amend its standard labor rates
with notice to Metretek.
21. Noncompetition.
---------------
A. Metretek (including its Affiliates) agrees not to:
(i) during the term of this Agreement after the
expiration of the Feasibility Period, sell any other
software product that is designed for the principal
purpose of managing energy measurement information
subject to a commercially reasonable phase-in
referred to in Paragraph 6 hereof; and
(ii) hire any of AMCO's Automated Systems Business Unit
employees or software developers, engineers or
consultants until after the fifth (5th) anniversary
of the Termination Date (except as permitted by the
Asset Purchase Agreement).
B. AMCO (and its Affiliates) agrees not to (i) during the term of
this Agreement sell Pantheon or any other software product
that is designed for the principal purpose of managing energy
measurement information to any Existing Customer or New
Customer; and (ii) hire any of Metretek's employees during the
period of this Agreement until after the fifth (5th)
anniversary of the Termination Date.
20
<PAGE> 21
22. Termination.
------------
Unless previously terminated in accordance herewith, this Agreement
shall remain in force and effect initially five (5) years until the
fifth (5th) anniversary of the Effective Date (the "Termination Date").
Thereafter, and unless previously terminated in accordance herewith,
the Agreement shall be automatically renewed for two (2) year periods
unless either party shall notify the other of its intent to terminate
this Agreement at least ninety (90) days prior to any possible
Termination Date. Either party shall have the right to terminate this
Agreement upon a material breach by the other party of any one of its
obligations or covenants contained herein upon not less than sixty (60)
days prior written notice to the other specifying the nature of such
breach, and the failure by the breaching party to remedy such breach
within sixty (60) days after receiving said notification. Termination
of this Agreement by either party for any reason shall not affect any
order or proposal which has been consummated or is outstanding prior to
the Termination Date. Notwithstanding any termination of this
Agreement, Metretek's and AMCO's rights and obligations (including but
not limited to fees for backup support services) with respect to any
Pantheon sublicenses prior to the Termination Date, and any Pantheon
sublicenses arising out of any order or proposal which is pending on
the Termination Date shall continue. Without limitation of the
preceding sentence, fees for backup support services shall continue for
the longer of the term of the sublicense or as long as the sublicensee
continues to use Pantheon.
23. Arbitration.
------------
Any unresolved dispute under this Agreement shall be determined by
arbitration. The moving party shall notify the other party of the
matter in dispute and appoint one (1) arbitrator and notify the other
of such appointment, and such other party shall appoint one (1)
arbitrator within
21
<PAGE> 22
ten (10) days after such notice. If the party so notified fails to
appoint an arbitrator, the party making the request shall be entitled
to designate two (2) arbitrators. The two (2) arbitrators shall elect a
third. The written decision of the majority of the arbitrators shall be
binding and shall be enforceable in any court of competent
jurisdiction. The arbitration shall be conducted in Washington, D.C. in
accordance with the rules of the American Arbitration Association.
24. Protocol and Information Exchange.
----------------------------------
A. Metretek hereby grants AMCO a nonexclusive, nontransferable
license to all relevant protocol, drivers and code
(collectively, "Protocol") for the sole purpose of developing
software interfaces and drivers for Pantheon applications.
Such new software interfaces and drivers developed by AMCO
shall be deemed AMCO New Applications under this Agreement and
may be used for all Pantheon customers of AMCO, including
other value added resellers-distributors. In no event shall
AMCO utilize the Protocol, or any part thereof, in the
manufacture or design of any hardware devices.
B. In order to aid the parties in the performance of their
obligations under this Agreement, within thirty (30) days of
the Effective Date, Metretek shall provide AMCO with a list of
Existing Customers.
25. Nondisclosure.
--------------
A. The Parties agree, both during the term of this Agreement and
for a period of three (3) years after the Termination Date,
and of all licenses granted hereunder, to hold confidential
information which is confidential to the other ("Confidential
Information"), as more fully described below. The Parties
agree not to disclose or make each other's confidential
information available, in any form, to any third party,
excluding such party's
22
<PAGE> 23
agents or representatives, or to use each other's confidential
information for any purpose other than as specified in this
Agreement. Each party agrees to take all reasonable steps to
ensure that Confidential Information is not disclosed or
distributed by its employees or agents (who have access to
same because of and only on a need to know basis) in violation
of any provisions of this Agreement. A party's Confidential
Information shall include Pantheon's, Metretek Applications'
and AMCO Applications' design, software tool suppliers, the
Pantheon price list, customers, Protocol, Metretek price list,
Metretek costs, Metretek customers, Metretek hardware and
software and other information clearly marked as Confidential,
but shall not include information which:
(i) is or becomes a part of the public domain through no
act or omission of any Party;
(ii) was in the other party's lawful possession prior to
such access or to the disclosure of same and has not
been obtained by such other party either directly or
indirectly from the party hereto granting such access
or making such disclosure, all of which is so
documented by such other party;
(iii) is lawfully disclosed to the other party by a third
party without restriction on such disclosure; or
(iv) with respect to information that is the same as or
substantially identical to the Confidential
Information as is independently developed and is so
documented by the other party. The contents of this
Agreement may not be disclosed unless both parties
consent to such disclosure in writing.
B. Metretek may disclose Pantheon's design and software tool
suppliers to its customers provided that they sign a
nondisclosure agreement with Metretek naming AMCO as the
beneficiary thereof prior to their use or access to Pantheon
and agreeing to a minimum
23
<PAGE> 24
the nondisclosure requirements specified in this Paragraph.
Metretek and its customers may not decompile, disassemble or
reverse engineer Pantheon. Metretek's sole obligation with
respect to Metretek customers shall be to promptly notify AMCO
so that AMCO may take such actions as it determines are
appropriate.
C. In the event of a breach or threatened breach of this
Paragraph 25, the Parties agree that the damage may not be an
adequate remedy; therefore, in addition to any other legal or
equitable remedies, either party shall be entitled to
injunctive relief against such breach.
26. General.
--------
A. This Agreement (including any Exhibits attached hereto) shall
constitute the entire agreement between the parties and all
prior and collateral agreements, understandings or
representations of any kind with respect to the subject matter
hereof are hereby terminated.
B. Any modification or waiver of any provision of this Agreement
shall be binding only if set forth in writing and signed by
both parties and shall be effective only to the extent set
forth in such modification or waiver.
C. Any notice required or permitted under the terms of this
Agreement shall be in writing and delivered in person or
mailed and will be deemed given when either mailed or
personally delivered to
If to AMCO:
Eagle Research Corporation
General Manager
105 Erskine Lane
Scott Depot, WV 25560
24
<PAGE> 25
AMCO
300 Welsh Road
Building One
Horsham, PA 19044-2234
Attn: Harry Skilton
With a copy to:
Swidler & Berlin, Chtd.
3000 K Street, N.W., Suite 300
Washington, D.C. 20007
Attn: Kenneth I. Schaner
If to Metretek:
Metretek, Incorporated
300 North Drive
Melbourne, FL 32934.
Attn: Ronald McKee, CEO
Marcum Natural Gas Services, Inc.
1675 Broadway, Suite 2150
Denver, CO 80202
Attn: W. Phillip Marcum, President
With a copy to:
Kegler, Brown, Hill & Ritter
Capitol Square, Suite 1800
65 East State Street
Columbus, OH 43215-4294
Attn: Paul R. Hess
D. The relationship between the parties hereto before and during
the term of this Agreement shall be that of vendor and vendee.
Neither AMCO nor Metretek, or their respective agents and
employees shall (i) under no circumstances be, nor shall they
hold themselves out to be, agents, employees or
representatives of the other; (ii) enter into contracts or
commitments in the name of or on behalf of the other; or (iii)
be liable for any personal injury or property damage caused by
or resulting from any act of the other, their respective
employees, agents or representatives. Each party shall
indemnify and hold the
25
<PAGE> 26
other harmless from and against any liability, damage, costs
or expenses resulting from personal 8 injury or physical
property damage caused by the gross negligence or willful
misconduct of the other and, in the case of Metretek, its sale
of Pantheon, and, in the case of AMCO, its sale of Metretek
products.
E. Except for an assignment to an Affiliate, neither parties'
rights pursuant to this Agreement may be assigned or otherwise
transferred without the consent of the other.
F. From time to time, AMCO or Metretek may develop statements
regarding this Agreement, the relationship between the
Parties, and the Pantheon sales results (the "Statements").
The Statements shall be mutually agreed upon by the Parties
writing and following such agreement may be disclosed by
either Party without restriction, subject to any restrictions
on confidential information as set forth in Paragraph 25 of
this Agreement.
G. References herein to the Exhibits shall be as they are
modified from time to time.
H. This Agreement may be executed in one or more counterparts,
each of which shall for all purposes be deemed to be an
original and all of which shall constitute the same
instrument.
27. Governing Law.
--------------
This Agreement shall be construed and enforced in accordance with the
laws of the Commonwealth of Pennsylvania, without reference to such
commonwealth's conflict of law principles.
[SIGNATURE PAGE FOLLOWS.]
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<PAGE> 27
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the day and year first above written.
METRETEK, INCORPORATED AMERICAN METER COMPANY
BY: /s/ Ron W. McKee BY: /s/ Harry I. Skilton
---------------------------- --------------------------------
TITLE: President TITLE: President and CEO
------------------------- -----------------------------
DATE: May 4, 1998 DATE: May 4, 1998
------------------------- ------------------------------
EAGLE RESEARCH CORPORATION
BY: /s/ Harry I. Skilton
--------------------------------
TITLE: Vice President
-----------------------------
DATE: May 4, 1998
------------------------------
27
<PAGE> 1
EXHIBIT 10.3
NON-COMPETITION AGREEMENT
-------------------------
THIS NON-COMPETITION AGREEMENT (the "Agreement") is made and entered
into this 4th day of May, 1998, by and among Eagle Research Corporation, a West
Virginia corporation ("Seller"), American Meter Company, a Delaware corporation
("American Meter"), Metretek, Incorporated, a Florida corporation ("Purchaser"),
and Marcum Natural Gas Services, Inc., a Delaware corporation ("Marcum").
W I T N E S S E T H:
--------------------
WHEREAS, Seller, American Meter, Purchaser and Marcum are parties to a
certain Asset Purchase Agreement, dated March 23, 1998 ("Purchase Agreement"),
providing for the sale by Seller to Purchaser of certain assets of Seller; and
WHEREAS, in order to induce Purchaser and Marcum to enter into the
Purchase Agreement and to perform their obligations thereunder, and pursuant to
Sections 5.16 and 6.7 of the Purchase Agreement providing that the parties
hereto covenant to execute and deliver this Agreement as a condition to their
respective obligations under the Purchase Agreement, the parties hereto desire
to provide certain non-competition covenants upon the terms and conditions set
forth in this Agreement;
NOW, THEREFORE, in consideration of the premises and of the covenants
and agreements set forth herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto,
intending to be legally bound hereby, agree as follows:
SECTION 1. DEFINITIONS. For purposes of this Agreement, the following
terms and phrases shall have the respective meanings set forth below:
(a) AFFILIATE. The term "Affiliate" means, with respect to any
party hereto, any Person directly or indirectly controlling, controlled by or
under common control with such party, including, without limitation, a Person
with respect to which such party possesses, directly or indirectly, the power to
direct or cause the direction of its management and policies, whether through
the ownership of voting securities, by contract or otherwise.
(b) BUSINESS. The term "Business" means the development,
design, manufacture, assembly, packaging, construction, installation, sale,
distribution, marketing, lease, license and sublicense of electronic correctors,
pulse accumulators and transistors and modems and other non-RF meter reading
devices similar in function, and the provision of services related thereto, in
electronic measurement systems for utility, industrial and commercial gas and
electric customers.
(c) CLOSING DATE. The term "Closing Date" shall have the
meaning given to such term in the Purchase Agreement.
(d) COMPETITIVE PRODUCT. The term "Competitive Product" means
any product or related service included in the Business or similar thereto in
function.
<PAGE> 2
(e) DIRECTLY OR INDIRECTLY. The phrase "directly or
indirectly" (whether or not capitalized) shall be broadly construed so as to
encompass any attempt by a party to circumvent the intent of the covenants and
limitations imposed hereunder, including participation with Affiliates of such
party.
(f) NON-COMPETE PERIOD. The term "Non-Compete Period" means
that period of time commencing on the date hereof and continuing until five (5)
years from the Closing Date.
(g) PERSON. The term "Person" means any individual,
corporation, partnership, limited liability company, joint venture or other
firm, business, association, enterprise or entity.
(h) SUBSIDIARY. The term "Subsidiary" means, with respect to
any party hereto, a Person of which such party owns, directly or indirectly, a
majority of the voting power.
SECTION 2. COVENANT NOT TO COMPETE.
(a) COVENANT. Each of Seller and American Meter hereby agrees,
for itself and its Affiliates (except that as to any of its Affiliates that are
not wholly-owned subsidiaries, then this covenant shall only apply in the U.S.
and Canada), that neither it nor any of its Affiliates shall, directly or
indirectly, during the Non-Compete Period, whether alone or together in
association with others, and whether as a principal, agent, owner, shareholder,
officer, director, partner, member, manager, operator, lender, supplier,
distributor, employee, proprietor, investor, independent contractor, lender,
licenser, licensee, co-venturer, consultant or in any other capacity whatsoever,
engage in the Business or invest in, have a financial interest in, lend money or
to be in any way connected or affiliated with, or render advice, services or
financial assistance to, any Person engaged in the Business, anywhere in the
world.
(b) EXCEPTIONS. Notwithstanding any provision of this
Agreement to the contrary, nothing set forth herein shall prevent (i) American
Meter or Seller or any of their Subsidiaries from designing and constructing a
Competitive Product, but only if, after receipt of written request from American
Meter (or one of its Subsidiaries) to design or construct such Competitive
Product, Purchaser or one of its Affiliates gives written notice to American
Meter that it elects not to manufacture such competitive Product or (A) does not
commence the design or construction of such Competitive Product within sixty
(60) days of receipt of such request (or such later time thereafter that is
commercially reasonable to commence such design or construction), (B) complete
the design and construction to American Meter's reasonable satisfaction within a
commercially reasonable time thereafter, and (C) furnish the Competitive Product
to American Meter at "Full Manufacturing Cost" (as such term is defined in the
License Agreement, of even date herewith, among American Meter, Seller and
Purchaser,) plus 10%, if the Competitive Product is an integral part of meters
manufactured by American Meter or any of its Subsidiaries, and at "Full
Manufacturing Cost" plus 20%, in all other cases; (ii) American Meter or Seller
or any of their Affiliates from, as a part of an acquisition of the capital
stock or assets of another Person, acquiring a business ("Acquired Business")
that, among other things, engages in the business (the "Competitive Business")
of the design or construction of Competitive Products and continues to engage in
the Competitive Business, provided that (x) the revenues of the Competitive
Business are not more than twenty percent (20%) of the total revenues of the
Acquired Business, (y) it disposes of the Competitive Business within one (1)
year of such acquisition if the expiration of the one (1) year period is within
the Non-Compete Period, and (z) it offers Purchaser and its Affiliates a right
of first refusal to acquire the Competitive Business on the same
2
<PAGE> 3
or no less favorable terms and conditions as offered by any third party; or
(iii) an Affiliate of American Meter from selling a custom self-contained
measurement and regulating station (the "Station") which includes a Competitive
Product if the purchaser of the Station designates a Competitive Product to be
included in the station despite such Affiliate's good faith efforts to utilize a
product manufactured by Purchaser.
SECTION 3. COVENANT REGARDING BUSINESS RELATIONSHIPS. Each of Seller
and American Meter hereby agrees, for itself and its Affiliates, that neither it
nor any of its Affiliates shall, directly or indirectly, during the Non-Compete
Period, (a) solicit or induce any customer, client, lender, lessor, lessee,
licensor, licensee, supplier, distributor, consultant, independent contractor or
agent of Purchaser or any of its Affiliates engaged in the Business to terminate
its engagement by or other relationship with Purchaser or any of its Affiliates
engaged in the Business with respect to Competitive Products, (b) interfere in
any business relationship between Purchaser or any of its Affiliates engaged in
the Business and any other Person with respect to Competitive Products, or (c)
publicly disparage Purchaser or any of its Affiliates, or any of their
directors, officers, shareholders, employees or agents, in connection with the
Business.
SECTION 4. COVENANT REGARDING CONFIDENTIAL INFORMATION. Each of the
parties hereto hereby agrees, for itself and its Affiliates, that it and its
Affiliates shall at all times (during and after the Non-Compete Period) keep and
maintain Confidential Information (as defined below) confidential, and further
agrees that neither it nor any of its Affiliates shall, at any time, either
directly or indirectly, use any Confidential Information for its own benefit or
for the benefit of any other Person or divulge, disclose, communicate or
otherwise reveal any Confidential Information to any Person in any manner
whatsoever, except (i) information that is publicly available other than by
virtue of a direct or indirect disclosure by it, or (ii) to the extent otherwise
required by court order; provided, however, that the obligation of Purchaser and
Marcum and their Affiliates under this Section 4 shall not apply with respect to
information related to the Assets and Business (as such terms are defined in the
Purchase Agreement) being acquired by Purchaser under the Purchase Agreement. As
used herein, "Confidential Information" means any and all information relating
to the "Business" or relating to the parties hereto, including, without
limitation, trade secrets, know-how, intellectual properties, inventions,
financial and sales information, pricing policies, price lists, customer lists,
business plans, products, marketing strategies, budgets, methods and manner of
operations, creditors, lenders, debtors, distributors, wholesalers, licensees,
licensors, lessees, lessors, others having business relationships with other
parties hereto, processes, marketing techniques and methods, computer programs
and software, engineering and technical data, drawings, designs, contracts,
agreements, licenses, leases, permits, raw materials, supplies, formulas,
samples, research and development, or any other information known to be or
considered to be proprietary or confidential.
SECTION 5. INTERPRETATION OF COVENANTS. Each of the parties hereto
acknowledges and agrees that the duration and area for which the covenant not to
compete and other covenants set forth in this Agreement as to be effective are
fair and reasonable and are reasonably required for the protection of Marcum and
Purchaser and their business and good will. In the event that any court
determines that any portion of the time period or the area, or both of them, are
unreasonable, arbitrary or against public policy as to any covenant and that
such covenant is to that extent unenforceable, illegal or invalid, each party
hereto agrees that the covenant shall be amended to delete therefrom such
provision or portion determined to be unenforceable, illegal or invalid so that
the covenant shall remain in full force and effect for the greatest time period
and in the greatest area that would render it enforceable, legal and valid. The
parties intend that each covenant shall be deemed to be a series of
3
<PAGE> 4
separate covenants, one for each and every county of each and every state of the
United States of America and one for each and every political subdivision of
each and every other country in which the covenant not to compete or other
covenant is intended to be effective and is not proscribed by law.
SECTION 6. WAIVER OF DEFENSE. Each of the parties hereto, for itself
and its Affiliates, hereby expressly waives any objection to or defense in
respect of the geographical scope or duration of the restriction on competition
and other covenants for the protection of the business of the Company provided
in Sections 2, 3 and 4 of this Agreement. Each of the parties hereto also
acknowledges and agrees that the covenants set forth herein are of material
importance to the other parties hereto, that the parties hereto have conditioned
their obligations to consummate the transactions contemplated by the Purchase
Agreement upon the execution, delivery and performance by the other parties
hereto of this Agreement, and that each party hereto is relying on the covenants
of the other parties hereto as set forth herein.
SECTION 7. EQUITABLE REMEDIES. Each of the parties hereto acknowledges
and agrees that its obligations set forth in this Agreement are of special,
unique and personal character which give them a peculiar value to the other
parties hereto, that the other parties hereto will suffer immediate significant
and irreparable harm to their good will and business which cannot be reasonably
or adequately compensated by money damages alone in the event such party
repudiates or breaches the provisions hereof or threatens or attempts to do so,
and that the provisions of this Agreement are reasonable and necessary to
protect the business and the good will of the other parties hereto. Each of the
parties hereto therefore expressly agrees that, in addition to all other rights
and remedies which the other parties hereto may have at law or in equity or by
reason of any other agreement, the other parties hereto shall be entitled to
obtain a temporary, preliminary and/or permanent injunction and other equitable
relief in order to prevent or restrain any such breach by such party or any of
its Affiliates and/or other Persons acting directly or indirectly in concert or
in participation with it, and the other parties hereto shall not be required to
post a bond or other security or to prove actual damages as a condition for the
granting of such relief.
SECTION 8. GENERAL PROVISIONS.
(a) GOVERNING LAW. This Agreement shall in all respects be
governed by and construed in accordance with the internal substantive laws of
the State of Florida, without giving effect to any principles or rules of
conflicts or choice of laws. Any action, suit or other proceeding seeking to
enforce any right, remedy, obligation, duty, covenant or provision of, or
arising out of, this Agreement shall be brought and entered against any party
hereto exclusively in any federal or state court of the State of Florida or of
the United States located in the State of Florida. Each party hereto irrevocably
submits to the personal jurisdiction of any such court and irrevocably waives,
to the fullest extent of the law, any objection that it may now or hereafter
have to the laying of venue in any such court and any claim that such action,
suit or proceeding has been brought in an inconvenient form.
(b) SUCCESSORS AND ASSIGNS. This Agreement and all of the
provisions hereof shall inure to the benefit of, and be binding upon, the
parties hereto and their respective successors and permitted assigns. Neither
this Agreement nor any of the rights, interests or obligations hereunder shall
be assigned (by operation of law or otherwise) by any of the parties hereto
without the prior written consent of the other parties hereto, except that the
rights and interests of Purchaser in this Agreement can be assigned to another
Person acquiring the Purchaser in a merger or sale of substantially all of its
assets.
4
<PAGE> 5
(c) AMENDMENT. This Agreement may not be amended, supplemented
or modified in any manner, in whole or in part, except by a written instrument
signed all parties hereto that specifies that it amends, supplements or modifies
this Agreement.
(d) NOTICES. Any and all notices, requests, demands and other
communications required or permitted to be given hereunder shall be in writing
and shall be deemed to have been duly given if delivered personally, or if sent
by facsimile transmission (upon receipt of confirmation of delivery), on the
next business day if sent by overnight courier service, or three business days
after being sent by first class registered or certified U.S. Mail, postage
prepaid, return receipt requested, to the parties at the following addresses:
If to Purchaser and/or Marcum:
Metretek, Incorporated
300 North Drive
Melbourne, FL 32934
Attn: Ronald W. McKee
Telephone: 407-259-9700
Facsimile: 407-259-2900
Marcum Natural Gas Services, Inc.
1675 Broadway, Suite 2150
Denver, Colorado 80202
Attn: W. Phillip Marcum
Telephone: 303-592-5555
Facsimile: 303-592-5556
With a copy to:
Kegler, Brown, Hill & Ritter
65 E. State Street, Suite 1800
Columbus, OH 43215
Attn: Paul R. Hess, Esq.
Telephone: 614-462-5400
Facsimile: 641-464-2634
If to Seller and/or American Meter:
Eagle Research Corporation
105 Erskine Lane
Scott Depot, West Virginia 25560
Attn: Harry I. Skilton
Telephone: 304-757-3300
Facsimile: 304-757-0381
5
<PAGE> 6
American Meter Company
300 Welsh Road, Building One
Horsham, Pennsylvania 19044
Attn: Harry I. Skilton
Telephone: 215-830-1800
Facsimile: 215-830-1893
With a copy to:
Swidler & Berlin, Chtd.
3000 K Street, N.W., Suite 300
Washington, D.C. 20007-5116
Attn: Kenneth I. Schaner, Esq.
Telephone: 202-424-7500
Facsimile: 202-424-7643
Any party may change its designated address by giving written notice thereof to
all other parties hereto in the manner provided in this Section 8(d). Any party
hereto may send any notice, request, demand or other communication to the
intended recipient at the address above by using any of the means (such as
telecopy, telex, expedited courier, messenger, ordinary mail or electronic
mail), but no such notice, demand, request or other communication shall be
deemed to have been given until it is actually received by the recipient.
(e) SEVERABILITY. If, for any reason, any provision of this
Agreement or any covenant set forth herein is held to be invalid, illegal or
unenforceable, such invalidity, illegality or unenforceability shall not affect
the validity, legality or enforceability of any other provision of this
Agreement, and each other provision of this Agreement shall continue in full
force and effect to the maximum extent permitted by law.
(f) WAIVER. No term or condition of this Agreement shall be
deemed to have been waived, nor shall there be an estoppel against the
enforcement of any provision of this Agreement, except by written instrument of
the party charged with such waiver or estoppel. The failure of a party to insist
upon strict adherence to any provision of this Agreement on one or more
occasions shall not be considered a continuing waiver or deprive that party of
the right thereafter to insist upon strict adherence to that provision or any
other provision of this Agreement.
(g) NO THIRD PARTY BENEFICIARIES. Except as expressly provided
in this Agreement, this Agreement does not confer or create and is intended by
the parties hereto to confer or create, and shall not be construed as conferring
or creating, upon any Person other than the parties hereto and their successors
and permitted assigns, any rights, privileges or causes of action under or by
reason of this Agreement.
(h) HEADINGS. The headings used in this Agreement are solely
for convenience of reference and shall not be considered or given any effect in
construing or interpreting this Agreement.
(i) CUMULATIVE REMEDIES. Each and every right and remedy
conferred upon Purchaser and Marcum under this Agreement shall be in addition to
any other right or remedy hereunder or otherwise existing at law, in equity or
by agreement.
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<PAGE> 7
(j) COUNTERPARTS. This Agreement may be executed in one or
more counterparts, including counterparts executed by less than all parties
hereto, each of which shall be deemed an original, but all of which together
shall constitute one and the same instrument.
(k) ENTIRE AGREEMENT. This Agreement and Sections 5.16, 6.7,
7.4 and 8.3 of the Purchase Agreement constitute the full and entire
understanding and agreement of the parties hereto with respect to the subject
matter hereof and thereof, and supersede all prior and contemporaneous
arrangements, agreements and understandings, oral or written, among the parties
hereto with respect to the subject matter herein.
[The next page is the signature page]
7
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have caused this Non-Competition
Agreement to be duly executed and delivered by their respective duly authorized
officers as of the date first set forth above.
EAGLE RESEARCH CORPORATION
By: /s/ Harry I. Skilton
---------------------------------------
Its: Vice President
--------------------------------------
AMERICAN METER COMPANY
By: /s/ Harry I. Skilton
---------------------------------------
Its: President and Chief Executive Officer
--------------------------------------
METRETEK, INCORPORATED
By: /s/ W. Phillip Marcum
---------------------------------------
Its: Chief Executive Officer
--------------------------------------
MARCUM NATURAL GAS SERVICES, INC.
By: /s/ W. Phillip Marcum
---------------------------------------
Its: President
--------------------------------------
8
<PAGE> 1
EXHIBIT 99.1
PRESS RELEASE
-------------
MARCUM NATURAL GAS SERVICES ANNOUNCES CLOSING
OF ACQUISITION AND NEW $5 MILLION BANK DEBT FACILITY
DENVER, May 4 / PRNewswire/ -- Marcum Natural Gas Services, Inc.
(Nasdaq: MGAS), a diversified provider of energy measurement products, services
and data management to the energy industry, today announced that its
wholly-owned subsidiary, Metretek, Incorporated, completed the acquisition of
certain assets and product lines of American Meter Company.
Metretek, located in Melbourne, Florida, designs, manufactures and
sells automated systems to monitor and record the natural gas consumption of
industrial and commercial consumers. The product lines acquired by Metretek
include electronic gas volume correctors, electronic gas flow computers,
electronic pressure recorders and pulse accumulator transmitters. Metretek will
relocate manufacturing, engineering, sales and marketing for the acquired
product lines to its headquarters in Melbourne.
Total consideration paid for the assets and product lines was
approximately $4.5 million, consisting of $1.3 million in cash, 1,758,242 shares
of Marcum common stock, and a $1.2 million subordinated convertible note
payable. The note bears interest at the annual rate of 7.5% and is due and
payable in full on the fourth anniversary date of closing. Approximately 86% of
the face amount of the note may be converted, at the option of American Meter,
into 723,064 shares of Marcum common stock at the rate of $1.42 per common share
at any time prior to the due date of the note. The note is further subject to
reduction in the event that certain sales performance criteria related to the
acquired products are not met.
As a result of the closing, American Meter will become the largest
shareholder in Marcum, with an initial common stock position of approximately
12.4%. Harry I. Skilton, President and CEO of American Meter, will join the
board of directors of Marcum, effective immediately.
According to W. Phillip Marcum, President and Chairman of Marcum
Natural Gas Services, "The Company is very excited about this transaction, and
the opportunity to have Mr. Skilton join our board. Mr. Skilton brings a breadth
of industry knowledge and insight which should enhance our efforts in the
continued development of Metretek's business." Mr. Marcum added that "the
acquisition of American Meter product lines is an extremely opportunistic event
for Metretek. This transaction achieves a major broadening of Metretek's product
lines and should allow Metretek to further penetrate its traditional markets.
Also, the acquisition is expected to be accretive to revenues, earnings,
earnings per share and cash flow."
In conjunction with the transaction, Marcum also closed on a $5 million
bank debt facility with the National Bank of Canada. Marcum expects that
approximately $500,000 of the borrowing base under the new facility may be used
to fund the acquisition, with the remainder of the facility available for future
purposes.
In addition to Metretek, Marcum's operations include two wholly-owned
subsidiaries: Southern Flow Companies, Inc., a large independent natural gas
measurement services company; and Marcum Gas Transmission, Inc., which manages
energy-related midstream and other service facilities.
Statements in this press release that look forward in time, which
include everything other than historical information, are forward-looking
statements made pursuant to the safe harbor provision of the Private Securities
Litigation reform Act of 1995. Such forward-looking statements are subject to
risks and uncertainties which could cause actual results to differ materially
from those projected or implied. These risks and uncertainties include, but are
not limited to, the ability of Marcum to integrate the acquired American Meter
product lines into its business, and the time, amount and value of future
<PAGE> 2
sales of such product lines, the impact and timing of the deregulation of the
various energy segments, changes in the natural gas utilities industry, the
energy industry in general and the natural gas industry in particular, the
impact of competition, product development and product acceptance risks, and the
risks and uncertainties described from time to time in the Company's filings
with the Securities and Exchange Commission, including the most recent report on
Form 10-KSB. The Company assumes no responsibility to update the information
included in this press release.
SOURCE Marcum Natural Gas Services, Inc.
-0- 05/04/98
/CONTACT: W. Phillip Marcum of Marcum Natural Gas Services, Inc., 303-592-5555;
Ronald W. McKee of Metretek, Incorporated, 407-259-9700; or Harry I. Skilton of
American Meter Company, 215-830-1801/
/Web site: http://www.americanmeter.com/
/Web site: http://www.metretek.com/
/Web site: http://www.mgas.com/
(MGAS)
2
