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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): December 9, 1999
METRETEK TECHNOLOGIES, 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 5. OTHER EVENTS.
THE PRIVATE PLACEMENT
GENERAL DESCRIPTION. On December 9, 1999, Metretek Technologies, Inc.,
a Delaware corporation (the "Company"), entered into a Securities Purchase
Agreement (as amended, the "Securities Purchase Agreement") and related
agreements with certain funds, and with an account established by an
institutional investor, for which DDJ Capital Management, LLC is the investment
manager or an investment advisor (the "DDJ Investors"). Pursuant to the
Securities Purchase Agreement, the DDJ Investors agreed to purchase in a private
placement, subject to certain conditions described below, 3,000 units ("Units"),
at a price of $2,000 per Unit, for an aggregate purchase price of $6,000,000 in
cash. Each Unit consists of 200 shares of the Company's Common Stock, par value
$.01 per share ("Common Stock"), one share of Series B Preferred Stock, par
value $.01 per share ("Preferred Stock"), and warrants ("Warrants") to purchase
100 shares of Common Stock. The Securities Purchase Agreement provides for the
issuance of the Units to the DDJ Investors in two closings ("Closings"). On
December 9, 1999, the Company issued and sold to the DDJ Investors 1,450 Units
for an aggregate purchase price of $2,900,000 (the "First Closing"). At the
"Second Closing", the Company will issue and sell to the DDJ Investors 1,550
additional Units for an aggregate purchase price of $3,100,000 in cash, subject
to reduction as set forth below. The Second Closing will occur promptly after
the date the stockholders approve the Private Placement (the "Private Placement
Proposal") at a special meeting of the stockholders (the "Special Meeting"), if
certain other conditions described herein, are met. The Special Meeting is
expected to be held in early February 2000.
Among other things, the Second Closing is conditioned upon additional
institutional investors or other "accredited investors" (as such term is defined
in Regulation D promulgated under the Securities Act of 1933, as amended (the
"Securities Act")) ("Additional Investors") purchasing no less than 3,000
additional Units and no more than 4,000 additional Units, at a price dependent
upon market conditions. The DDJ Investors and the Additional Investors are
collectively referred to in this Form 8-K as the "Purchasers." The Additional
Investors will enter into the Securities Purchase Agreement and the Registration
Rights Agreement (as defined below), will receive Warrants and will purchase
Units at the Second Closing. If the economic terms of the sale of Units to the
Additional Investors is more favorable than the economic terms of the sale of
the Units to the DDJ Investors, such as a lower per Unit purchase price, then,
DDJ Investors will be entitled to receive the same economic benefit with respect
to all Units they purchased in the First Closing or in the Second Closing,
whether through refund, redemption, exchange or otherwise, such as by a
reduction in the purchase price of the Units to be purchased by the DDJ
Investors in the Second Closing.
The offer, sale and issuance of the Units to the DDJ Investors and to
the Additional Investors is referred to in this Form 8-K as the "Private
Placement". As discussed below, the primary purpose of the Private Placement is
to raise capital to enable the Company to develop its Internet business, repay
certain outstanding indebtedness, and otherwise fund general working capital
requirements, as more fully described below. Consummation of the Second Closing
is conditioned upon, among other things, the approval of the Private Placement
Proposal by the stockholders of the Company.
TRANSFER RESTRICTIONS. The issuance of the shares of Common Stock, the
shares of Series B Preferred Stock and the Warrants in the Private Placement,
including the issuance of shares of Common Stock upon conversion of the Series B
Preferred Stock and upon exercise of the Warrants, has not been registered under
the Securities Act or any state securities laws. Such securities may not be
offered, sold or otherwise transferred by the holders thereof unless such offer,
sale or transfer is registered under the Securities Act and applicable state
securities laws, or made pursuant to valid
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exemption from such registration requirements. All securities issued in the
Private Placement bear or will bear a legend to that effect.
REGISTRATION RIGHTS. Concurrently with and pursuant to the Securities
Purchase Agreement, the Company entered into the Registration Rights Agreement,
dated as of December 9, 1999 (the "Registration Rights Agreement"), with the DDJ
Investors. The Additional Investors will also become parties to the Registration
Rights Agreement. Pursuant to the terms of the Registration Rights Agreement,
the Company is required to file, on or before February 7, 2000, a Form S-3
"shelf" registration statement (the "Shelf Registration Statement") with the
Securities and Exchange Commission covering the resale of (i) the shares of
Series B Preferred Stock issued in the Private Placement, and (ii) the shares of
Common Stock issued in the Private Placement, including the shares of Common
Stock issuable upon conversion of the Series B Preferred Stock and upon exercise
of the Warrants included in the Units (collectively, the "Registrable
Securities"). If the Shelf Registration Statement (i) is not filed with the SEC
on or prior to February 7, 2000, or has not become effective on or prior to May
9, 2000, or (ii) is filed and declared effective but its effectiveness is
suspended for any reason (without being succeeded immediately by a replacement
shelf registration statement filed and declared effective) for a period of time
(including any suspension period as discussed below) which shall exceed 30 days
in the aggregate, then the Company will be required to pay liquidated damages to
each holder of Registrable Securities. The amount of liquidated damages payable
during any period in which a registration default shall have occurred and be
continuing is that amount which is equal to $1.00 per 1,000 shares of
Registrable Securities per week and shall increase by an amount equal to $0.10
per 1,000 shares of Registrable Securities at the end of each subsequent two
week period up to a maximum of $3.20. In addition, pursuant to the Registration
Rights Agreement, the holders of Registrable Securities have certain "piggyback"
registration rights in connection with registration statements filed by the
Company, on its own behalf or on behalf of any of its stockholders, with respect
to the Registrable Securities. The Company will pay all expenses, other than
underwriting and brokerage discounts and commissions and other selling expenses,
of all such registrations.
BOARD REPRESENTATION. Pursuant to the terms of the Securities Purchase
Agreement and the Series B Preferred Stock, the holders of a majority of the
outstanding shares of Series B Preferred Stock, voting together as a separate
class, are entitled to elect one member of the Company's Board of Directors, so
long as an aggregate of at least 2,000 shares of Series B Preferred Stock remain
outstanding. In addition, pursuant to a letter agreement between the Company and
DDJ Capital Management, LLC, the Company agreed to recommend that its
stockholders approve an amendment to the terms of the Series B Preferred Stock
providing that, in the event the Company fails to redeem the Series B Preferred
Stock in accordance with its terms, the holders of the Series B Preferred Stock
will have the right to elect a majority of the Company's Board of Directors
until such time as all shares of Series B Preferred Stock have been redeemed by
the Company.
CONDITIONS TO SECOND CLOSING. The Second Closing of the sale of Units
in the Private Placement is subject to certain conditions. The conditions to the
obligation of the DDJ Investors to purchase Units at the Second Closing include
the following:
o the Company shall have sold no less than 3,000 Units and no
more than 4,000 Units to the Additional Investors;
o market conditions, at the time of the Second Closing, shall
not be such that, in the reasonable judgment of the Purchasers
in the Second Closing, the purchase and sale of the Units at
the Second Closing on the terms set forth in the Securities
Purchase Agreement do not reflect appropriate market terms;
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o the representations and warranties of the Company contained in
the Securities Purchase Agreement shall continue to be true
and correct at the time of the Second Closing;
o the Company shall have complied with all agreements and
covenants contained in the Securities Purchase Agreement
required to be performed by it prior to or at the Second
Closing; and
o the Company shall have obtained all requisite consents and
approvals.
The conditions to the obligation of the Company to issue and sell Units
at the Second Closing include the following:
o the stockholders of the Company shall have duly adopted the
Private Placement Proposal in accordance with Nasdaq
requirements; and
o the Company shall have received a fairness opinion from
Hanifen Imhoff, Inc., which states that the Private Placement
is fair, from a financial point of view, to the Company.
INDEMNIFICATION. The Company has agreed to indemnify and hold harmless
each Purchaser and its respective affiliates, and their employees, officers,
partners, members, directors and agents from and against any and all losses,
claims, damages, liabilities, costs and expenses in connection with or arising
out of any breach by the Company of any of its representations, warranties or
covenants in the Securities Purchase Agreement or in the related agreements or
any third party proceeding in connection therewith.
EXPENSES. The Company has agreed to pay all reasonable, documented,
out-of-pocket fees and expenses actually incurred by the Purchasers in
connection with the Private Placement.
MANAGEMENT RIGHTS. By separate letter agreement, the Company has
granted to the DDJ Investors the right to receive information and to submit
proposals to and consult with management regarding the Company's operations and
financial condition.
TERMS OF THE SERIES B PREFERRED STOCK
The holders of the Series B Preferred Stock are entitled to significant
rights, preferences and privileges as a result of their investment in the
Company. These rights, preferences and privileges are summarized below. The
terms of the Series B Preferred Stock are set forth in the Certificate of
Designation establishing the terms of the Series B Preferred Stock, which was
filed with the Secretary of State of the State of Delaware on December 9, 1999
and is included as an exhibit to this Form 8-K. The following summary of certain
key terms of the Series B Preferred Stock is not complete and is qualified in
its entirety by, and should be read in conjunction with, the Certificate of
Designation attached as an exhibit hereto.
AMOUNT. The Company has authorized a total of 1,000,000 shares of
Series B Preferred Stock, of which up to 7,000 shares will be issued in the
Private Placement.
DIVIDENDS. The holders of shares of Series B Preferred Stock are
entitled, in preference to the holders of any other class of capital stock of
the Company, to receive cash dividends on a quarterly basis, at the rate per
annum of 8%, when, as and if declared by the Company. The dividends on the
Series B Preferred Stock are cumulative and so long as at least 1,000 shares of
Series B Preferred Stock
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are outstanding and such dividends have not been paid in full, no dividends
shall be paid or declared on, and the Company cannot purchase, redeem or
acquire, any shares of Common Stock or any other class of capital stock of the
Company ranking junior to or on parity with the Series B Preferred Stock. In
addition, in the event that the Company declares or pays any cash or Common
Stock dividends on the Common Stock, the Company must also declare and pay to
the holders of the Series B Preferred Stock, the same dividends or distributions
based upon the number of shares of Common Stock into which the shares of Series
B Preferred Stock are then convertible.
LIQUIDATION PREFERENCE. Upon any voluntary or involuntary liquidation,
dissolution or winding-up of the Company, the holders of Series B Preferred
Stock will be entitled to receive, out of the assets of the Company available
for distribution to stockholders, before any payment or distribution will be
paid on any Common Stock or any other class of stock ranking on liquidation
junior to the Series B Preferred Stock, an amount in cash equal to $1,000 per
share of Series B Preferred Stock held by such holder, plus accrued but unpaid
dividends, if any (the "Liquidation Preference"). In the event the assets of the
Company available for distribution to the holders of Series B Preferred Stock
are insufficient to permit payment in full of the Liquidation Preference, then
all such assets will be distributed ratably among the holders of the Preferred
Stock. If the holders of Series B Preferred Stock would have received more than
the Liquidation Preference if they had converted their Series B Preferred Stock
into Common Stock immediately prior to the liquidation event, then they shall
receive such greater amount.
REDEMPTION. On December 9, 2004, the Company is required to redeem all
outstanding shares of Series B Preferred Stock at the amount of the Liquidation
Preference.
In addition, the holders of Series B Preferred Stock may, by majority
vote, elect either to participate in, or to have their shares of Series B
Preferred Stock redeemed upon the occurrence of, any of the following events:
o certain mergers or consolidations of the Company;
o the sale or transfer of all or substantially all of the
properties and assets of the Company;
o any purchase by any person or group of capital stock of the
Company causing such person or group to own a majority of the
voting power of the Company; or
o the redemption or repurchase of a majority of the voting power
of the capital stock of the Company.
The Company has agreed to provide an adequate remedy to the DDJ
Investors in the event it fails to redeem all of the Series B Preferred Stock
pursuant to the terms thereof. The amendment to the terms of the Series B
Preferred Stock relating to Board representation of the holders of Series B
Preferred Stock, as described below under "Special Class Voting Rights -- Board
Representation", will be the remedy, if a proposed amendment to Article Fourth
of the Company's Restated Certificate of Incorporation, as amended (the
"Restated Certificate"), relating to the Company's Preferred Stock which the
Board of Directors intends to submit to the stockholders at the Special Meeting
(the "Preferred Stock Proposal") is adopted by the stockholders at the Special
Meeting. If the Preferred Stock Proposal is not adopted, then the DDJ Investors
will not be obligated to purchase Units at the Second Closing and will be
entitled to contractual remedies, including, without limitation, the payment of
interest at an interest rate on the liquidation amount of the Series B Preferred
Stock that the Company fails to redeem.
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Furthermore, in the event that, at any time commencing after December
9, 2000, the market price of the Common Stock equals or exceeds 200% of the
Conversion Price (as defined below) then in effect for 20 out of a period of 30
consecutive trading days, then the Company shall have the right to redeem the
Series B Preferred Stock at a purchase price per share equal to the Liquidation
Preference.
CONVERSION RIGHTS. Commencing June 9, 2000, each share of Series B
Preferred Stock will be convertible, at the option of the holder thereof, into
the number of shares of Common Stock equal to the Liquidation Preference divided
by the "Conversion Price" per share then in effect. The initial "Conversion
Price" is $5.9334 (the "Initial Conversion Price"), which equals approximately
168 shares of Common Stock per share of Series B Preferred Stock, based upon a
Liquidation Preference of $1,000 per share of Series B Preferred Stock. On
December 9, 2000, the Conversion Price will be reset to the lower of (i) the
Initial Conversion Price, (ii) the Conversion Price then in effect, if it has
been adjusted pursuant to the anti-dilution provision of the Series B Preferred
Stock discussed below, or (iii) 110% of the sum of (a) the average closing bid
price of the Common Stock for the 30 trading days immediately preceding such
date, plus (b) the fair market value of any securities, cash or assets (other
than dividends paid exclusively in cash or Common Stock) distributed to the
holders of Series B Preferred Stock, but the Conversion Price will not, in any
event, be reduced by more than 50% of the Conversion Price then in effect.
Therefore, if the Series B Preferred Stock is not converted into Common Stock
prior to December 9, 2000, the Series B Preferred Stock may become convertible
into Common Stock at a rate which is below the prevailing market price of the
Common Stock on the Date. If the Conversion Price is so adjusted, then the
holders of Series B Preferred Stock will not, for a period of 90 days after the
adjustment, sell, pledge or transfer any capital stock of the Company, or, for a
period of 30 days after the adjustment, purchase (although they can convert
their Series B Preferred Stock or exercise their Warrants) any shares of Common
Stock to cover any "short" position.
The Conversion Price, and the number of shares of Common Stock of the
Company (or the number and kind of other securities or rights) into which each
share of Series B Preferred Stock is convertible, are also subject to adjustment
pursuant to the anti-dilution provisions of the Series B Preferred Stock as set
forth in the Certificate of Designation. These anti-dilution provisions include
the following:
o If the number of shares of Common Stock outstanding is
increased by a stock dividend or other distribution payable in
shares of Common Stock, or by a subdivision or split-up of the
outstanding shares of Common Stock into a greater number of
shares of Common Stock, then the Conversion Price will be
proportionally decreased so that the number of shares of
Common Stock issuable upon conversion of the Series B
Preferred Stock shall be increased in proportion to the
increase of outstanding shares of Common Stock.
o If the number of shares of Common Stock outstanding is
decreased by a combination or reverse split of the outstanding
shares of Common Stock, then the Conversion Price will be
proportionately increased so that the number of shares of
Common Stock issuable upon conversion of the Series B
Preferred Stock shall be decreased in proportion to such
decrease in outstanding shares of Common Stock.
o If the Company issues any Common Stock at a price, or any
options, rights, warrants or other securities convertible into
or exchangeable for shares of Common Stock (other than certain
shares and options to officers, director or employees under
the Company's employee plans, certain shares issuable upon the
exercise of outstanding warrants or other rights, or
securities issuable upon conversion of the Series B Preferred
Stock or
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upon exercise of the Warrants) at a purchase price, conversion
price or exercise price (as applicable) per share less than
the greater of the market price of the Common Stock or the
Conversion Price in effect immediately prior to such issuance,
then the Conversion Price will be reduced pursuant to a
"weighted price anti-dilution" formula, thereby entitling the
holders of the Series B Preferred Stock to receive additional
shares of Common Stock upon conversion.
o If the Company distributes to all holders of shares of Common
Stock evidences of its indebtedness, shares of any class or
series of capital stock, other securities, cash or assets
(excluding cash dividends or distributions of shares of its
Common Stock), then, if they so elect by majority vote, the
holders of outstanding shares of Series B Preferred Stock
shall be entitled to, either (i) receive such distribution
upon conversion, be entitled to covert each share of Series B
Preferred Stock into the consideration or if the holder has
converted its holdings of Series B Preferred Stock into Common
Stock as of the payment date, or (ii) have the Conversion
Price of the Series B Preferred Stock proportionately reduced.
GENERAL VOTING RIGHTS. The holders of the Series B Preferred Stock are
not entitled to vote on matters presented to the holders of Common Stock
generally, except as expressly provided by law or in the Certificate of
Designation.
SPECIAL CLASS VOTING RIGHTS - BOARD REPRESENTATION. The holders of the
Series B Preferred Stock, voting together as a separate class, have the right to
elect one member of the Company's Board of Directors, so long as at least 2,000
shares of Series B Preferred Stock remain outstanding. All other directors will
be elected by the holders of Common Stock and of any other class of capital
stock of the Company that has the right to vote in the election of directors.
The Company has agreed to recommend at the Special Meeting that its
stockholders approve an amendment to the terms of the Series B Preferred Stock
providing that, in the event the Company fails for any reason to redeem the
Series B Preferred Stock in full in accordance with its terms, then the size of
the Board of Directors will be increased to allow the holders of the Series B
Preferred Stock to elect a sufficient number of additional directors to
constitute a majority of the Board of Directors, to serve until the Company pays
in full the redemption price for the shares of Series B Preferred Stock to be
redeemed. Thereafter, the size of the Board of Directors will be reduced to its
size in effect prior to the redemption default.
SPECIAL CLASS VOTING RIGHTS -- RIGHT TO VETO CERTAIN TRANSACTIONS. So
long as at least 1,000 shares of Series B Preferred Stock remain outstanding,
the Company may not, without the consent of the holders of at least a majority
of the shares of Series B Preferred Stock then outstanding, voting as a single
class, take any of the following actions:
o enter into any merger, consolidation, recapitalization,
reorganizational or like transaction involving the Company or
any of its subsidiaries;
o liquidate or dissolve the Company;
o sell or transfer all or substantially all of the assets or
properties of the Company;
o dispose of assets in one or more transactions for
consideration in excess of $1,000,000 without approval of the
Board of Directors of the Company; or
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o incur indebtedness for money borrowed, except for borrowings
under the Company's primary credit agreement of up to
$3,000,000.
In addition, so long as any shares of Series B Preferred Stock remain
outstanding, the Company may not, without the consent of the holders of at least
a majority of the shares then outstanding, voting as a single class, take any of
the following actions:
o issue any equity security, or securities exchangeable or
convertible into equity securities or measured by the
Company's earnings or profit, other than Series C Preferred
Stock or securities of the Company, or its Internet
subsidiaries, that rank junior to the Series B Preferred Stock
as to liquidation, dividend and redemption rights;
o redeem, repurchase or otherwise acquire for value any equity
security of the Company (other than the Series B Preferred
Stock in accordance with its terms); or
o amend the Restated Certificate, By-Laws or other charter
documents of the Company or any of its subsidiaries.
WARRANTS
Each Warrant included in the Units being sold in the Private Placement
entitles the holder thereof to purchase one share of Common Stock at the then
current "Exercise Price". The Warrants are initially exercisable at an exercise
price equal to $6.7425 (the "Initial Exercise Price"). The Initial Exercise
Price will be reset on December 9, 2000 to the lower of (i) the Initial
Conversion Price, (ii) the Exercise Price then in effect, if it has been
adjusted pursuant to the anti-dilution provision of the Warrants, or (iii) 125%
of the average closing bid price of the Common Stock for the 30 trading days
immediately preceding such date. The Exercise Price is subject to further
adjustment pursuant to certain anti-dilution provisions, which are substantially
the same as the anti-dilution provisions of the Series B Preferred Stock
described in "Terms of the Series B Preferred Stock - Conversion Rights" above.
The Warrants are immediately detachable from the Units, can be exercised at any
time commencing March 9, 2000, and expire December 9, 2004. In lieu of paying
the Exercise Price in cash, holders of Warrants may exercise such Warrants by
delivering to the Company shares of Common Stock of the Company with a fair
market value equal to the Exercise Price. Alternatively, holders of Warrants may
make a "cashless" exercise of the Warrants and recover, upon exercise and
without making any payments (of cash, Common Stock or any other asset), a "net"
number of shares of Common Stock determined by a formula based on the amount the
trading price of the Common Stock exceeds the Exercise Price then in effect.
PRIVATE PLACEMENT AGENT
The Company has engaged First Albany Corporation to serve as its
exclusive placement agent in connection with the Private Placement. The Company
will pay to First Albany Corporation a fee equal to two percent (2%) of the
gross proceeds received by the Company in the Private Placement, plus customary
fees and expenses.
USE OF PROCEEDS
The gross proceeds from the Private Placement, if 6,000 Units (the
minimum required for the Second Closing) are sold at a purchase price of $2,000
per Unit and if the other conditions to the
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Second Closing are met, will be $12,000,000. Because the actual amount of gross
proceeds will depend upon (i) the consummation of the Second Closing, (ii) the
number of Units (between 3,000 and 4,000 Units) sold to the Additional
Investors, and (iii) the price of the Units sold to the Additional Investors
(which will depend on market conditions and, if less than $2,000 per Unit, will
also reduce the Company's proceeds from the First Closing), the Company cannot
provide any assurance of the actual amount of gross proceeds from the Private
Placement.
The gross proceeds of $2,900,000 from the First Closing will be used
primarily to finance, in part, the development of the Company's Internet
business. Any additional proceeds received by the Company in the Second Closing
will be used by the Company for development of its Internet business, repayment
of certain indebtedness, payment of its expenses associated with the Private
Placement, and for general corporate and working capital purposes.
REASONS FOR THE PRIVATE PLACEMENT
The Company is selling the Units in the Private Placement primarily to
raise funds it needs to satisfy short-term capital requirements to finance the
development of its Internet business. The Company expects that the initial
development of its eBusiness, which will allow the Company to define and develop
its eBusiness market, products and services and to launch a fully functional
website to conduct its eBusiness, will cost approximately $5,000,000, consisting
of consulting fees and technology costs.
The Company will also use a portion of the proceeds of the Private
Placement to fund certain long term capital requirements. These long-term
capital requirements include the potential repayment of a convertible promissory
note issued to American Meter Company in connection with the acquisition of a
business acquired from American Meter (an expected $600,000 principal balance
due May 2002), and the repayment of outstanding indebtedness (approximately
$2,100,000 as of September 30, 1999) under its credit facility with its
principal lender which expires May 2001. In addition, the Company will utilize
the proceeds of the Private Placement to finance its working capital needs and
the expansion of its business operations, including potentially providing the
funds to finance an acquisition opportunity, if one were to arise. The Company
has no present agreement or arrangement for any such acquisition opportunities.
The Company has recently focused a major part of its business strategy
upon the development of an Internet-based business, also referred to as an
eBusiness. The Company is currently developing and operating its eBusiness
through two wholly-owned subsidiaries, Metretek Internet Services, Inc.
("Metretek Internet") and TotalPlan, Inc. ("TotalPlan"). In furtherance of this
business strategy, the Company has entered into a strategic relationship with
Scient, a leading eBusiness consultant and advisor, to assist the Company in
designing, developing and creating its eBusiness. The goal of the eBusiness is
to enable the Company to take its measurement information products, services and
data management technologies to a broader market of end users of natural gas and
electricity by creating a comprehensive market place on the Internet for energy
consumers and suppliers to take advantage of deregulated energy markets. The
Company's initial focus, which is the principal reason for the Private
Placement, is to develop and launch an Internet-based transactional website.
The Company estimates that this initial development phase of its
eBusiness will require estimated expenditures of approximately $5,000,000,
consisting of consulting fees and expenses payable to Scient and costs of
acquiring the requisite technology, including hardware and software, as well as
research and development costs. The Company expects that after this initial
development stage is completed and its website is launched, the further
development and growth of its eBusiness,
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including staffing, organizational and start-up expenses, marketing costs and
additional capital expenditures, will require significant additional funds. In
order to so develop and expand its eBusiness, the Company will need to raise the
significant additional funds beyond the proceeds of the Private Placement, from
the proceeds of public or private equity financing, debt financing or from other
sources. Any such capital raising will be subject to the consent of the
Company's lender on its credit facility, if its credit facility is then in
effect. In addition, any such capital raising will be subject to any required
consents from the holders of Series B Preferred Stock, as described above. There
can be no assurance that such additional funds will be available to the Company
in the future or that, if available, such funds can be obtained on terms
favorable to the Company, and on terms acceptable to the Company's lender, if
its consent is required, and on terms acceptable to the holders of the Series B
Preferred Stock, if their consent is required. The inability of the Company to
raise sufficient additional funds, beyond the proceeds of the Private Placement,
to meet the capital requirements of its eBusiness could have a material adverse
effect on its business, financial condition and results of operations.
STOCKHOLDER APPROVAL
The Company's Common Stock is listed on the Nasdaq National Market. Due
to certain rules of the Nasdaq Stock Market, Inc. that may be applicable to the
Private Placement, the Company will submit the Private Placement to its
stockholders for their ratification and approval. Stockholder approval of the
Private Placement is not otherwise required as a matter of Delaware law or other
applicable laws or rules or by the Company's Restated Certificate or Amended and
Restated By-Laws.
As a result of the issuance of the Common Stock included in the Units
issued to the DDJ Investors in the First Closing, the DDJ Investors, in the
aggregate, own 290,000 shares of Common Stock, and have the right to acquire an
additional 389,379 shares of Common Stock upon the conversion of the Preferred
Stock (based upon the Initial Conversion Price) and upon the exercise of the
Warrants. The terms of the Securities Purchase Agreement prohibit the Company
from issuing to the DDJ Investors (including the 290,000 shares of Common Stock
issued at the First Closing plus all other shares of Common Stock issuable upon
conversion of the Series B Preferred Stock and exercise of the Warrants issued
at the First Closing, 696,809 or more shares of Common Stock, which constitutes
20% of the number of shares of Common Stock outstanding on the date preceding
the First Closing, without stockholder approval of this Private Placement
Proposal. In addition, the Second Closing is conditioned, among other things,
upon stockholder approval of this Private Placement Proposal. If stockholder
approval of the Private Placement Proposal is obtained, the Company will be able
to issue and sell up to an additional 5,550 Units, including 1,110,000 shares of
Common Stock included in such Units, and will be permitted to issue all shares
of Common Stock issuable upon conversion of the Series B Preferred Stock and
upon exercise of the Warrants included in the Units.
If stockholder approval of the Private Placement is not obtained, then
the shares of Common Stock, shares of Series B Preferred Stock and Warrants
which were issued to the DDJ Investors in the First Closing will remain
outstanding, but the Second Closing will not occur and the Company will not be
able to sell any additional Units in the Private Placement, and the Company will
not be permitted to issue more than 406,809 shares of Common Stock upon the
conversion of the Series B Preferred Stock or the exercise of the Warrants,
collectively, issued at the First Closing to the DDJ Investors, irrespective of
the Conversion Price or Exercise Price, respectively, from time to time in
effect. In addition, if the Conversion Price of the Series B Preferred Stock is
materially reduced due either to the reset provisions or the anti-dilution
provisions, then the Company will not be able to issue all the shares of Common
Stock issuable upon such conversion or exercise without violating the Nasdaq
Rules, and the Company could be subject to delisting from Nasdaq if such excess
shares of Common Stock are issued by the Company. In the Securities Purchase
Agreement, the Company has agreed to
10
<PAGE> 11
repurchase any Series B Preferred Stock or Warrants at a price based upon the
market value of the underlying Common Stock to the extent the conversion or
exercise thereof would violate the Nasdaq Rules.
LISTING AND REGISTRATION OF SECURITIES BEING ISSUED
Neither the Series B Preferred Stock nor the Warrants issued in the
Private Placement will be listed on the Nasdaq Stock Market, any national
securities exchange or any other stock market, stock exchange or stock trading
system. The Company has agreed to apply for the listing on the Nasdaq National
Market of the shares of Common Stock issued as part of the Units, as well as the
shares of Common Stock issuable upon conversion of the Series B Preferred Stock
or upon exercise of the Warrants.
The issuance of the Units in the First Closing was not, and the
issuance of Units in the Second Closing will not be, registered under the
Securities Act or any state securities laws. However, the Common Stock and the
Series B Preferred Stock issued as part of the Units, and the Common Stock
issuable upon conversion of the Series B Preferred Stock or upon exercise of the
Warrants, will be registered for public resale by the holders thereof pursuant
to a Form S-3 "shelf" registration statement filed by the Company with the SEC
in accordance with the registration rights of the Purchasers. See "The Private
Placement -- Registration Rights" above.
AMENDMENT TO STOCKHOLDER RIGHTS AGREEMENT
The Board of Directors also approved an amendment to the Company's
Rights Agreement at the same time that it approved the Private Placement. The
amendment to the Rights Agreement prevents the Private Placement, including the
Purchasers' acquisition of the Common Stock, Series B Preferred Stock and the
Warrants included in the Units, and the Purchasers' acquisition of Common Stock
upon conversion of the Series B Preferred Stock or upon exercise of the
Warrants, from triggering the protections contained in the Rights Agreement.
AMENDMENT TO CREDIT FACILITY
In connection with the Private Placement, the Company and National Bank
of Canada, the Company's lender under its credit facility (the "Lender"),
entered into the Third Amendment to Loan and Security Agreement and Loan
Documents (the "Loan Amendment"). Pursuant to the Loan Amendment, the Lender
waived all applicable restrictions and limitations in the credit facility
relating to the Private Placement, other than the right of the Company to redeem
the Series B Preferred Stock, and redefined certain covenants of the Company to
include the Series B Preferred Stock in the Company's tangible net worth.
FORWARD LOOKING STATEMENTS
This Form 8-K contains certain forward-looking statements within the
meaning of and made pursuant to the safe harbor provisions of Section 27A of the
Securities Act and Section 21E of the Securities Exchange Act of 1934, as
amended. From time to time, the Company may publish or otherwise make available
forward-looking statements of this nature. Forward-looking statements include
statements concerning plans, objectives, goals, strategies, future events or
performance, and underlying assumptions and other statements which are other
than statements or historical facts. The words "may", "could", "will",
"project", "intend", "continue", "believe", "anticipate", "estimate", "expect"
and similar predictive, future tense or forward-looking terminology, are
intended to identify forward-looking statements. Examples of forward-looking
statements include statements regarding,
11
<PAGE> 12
among other matters, the Company's plans, intentions, beliefs and expectations
with respect to its future prospects, including its eBusiness, and the Company's
ability to raise sufficient additional capital, from the sale of equity, debt,
assets or otherwise, to successfully develop and market its eBusiness. Such
forward-looking statements are based on the current plans, intentions, beliefs
and expectations of management as well as assumptions made by and information
currently available to management. Forward-looking statements are not guarantees
of future performance or events but are subject to, and are qualified by, risks
and uncertainties that could cause actual results to differ materially from
those expressed or implied by those statements. These risks and uncertainties
include, but are not limited to, (1) the Company's ability to successfully
develop and implement an Internet-based business; (2) the emergence and growth
of a market for online energy information and services; (3) the success of the
Company's strategic relationships; (4) changes in the energy industry in general
and the natural gas and electricity industry in particular; (5) the Company's
ability to successfully implement, and the market's acceptance of, its
"TotalPlan(TM)" offering; (6) the ability of the Company to raise sufficient
funds to finance the eBusiness; (7) the impact of current and future laws and
government regulations affecting the energy industry in general and the natural
gas industry in particular; and (8) other risks and uncertainties that are
discussed in this Form 8-K or that are discussed from time to time in the
Company's other reports and filings with the Securities and Exchange Commission.
The Company does not intend, and assumes no responsibility, to update any oral
or written forward-looking statements made by the Company.
12
<PAGE> 13
SUMMARY
The foregoing summary of the provisions of the Securities Purchase
Agreement, the Certificate of Designation, the Registration Rights Agreement,
and the Warrants is qualified in its entirety by reference to, and should be
read in conjunction with, such documents, which are fixed as exhibits to the
Form 8-K and incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) EXHIBITS
4.1 Securities Purchase Agreement, dated as of December
9, 1999, as amended, by and among Metretek
Technologies, Inc., State Street Bank & Trust,
(solely in its capacity as Trustee for General Motors
Employees Global Group Pension Trust as directed by
DDJ Capital Management, LLC, and not in its initial
capacity), DDJ Canadian High Yield Fund and B III-A
Capital Partners, L.P. (the "DDJ Investors")
4.2 Certificate of Designation of Series B Preferred
Stock, filed with the Secretary of State of the State
of Delaware on December 9, 1999
4.3 Form of Common Stock Purchase Warrant issued on
December 9, 1999 by Metretek Technologies, Inc. to
the DDJ Investors
4.4 Registration Rights Agreement, dated as of December
9, 1999, by and among Metretek Technologies, Inc. and
the DDJ Investors
4.5 Letter Agreement, dated as of December 20, 1999,
between Metretek Technologies, Inc. and DDJ Capital
Management, LLC
10.1 Third Amendment to Loan and Security Agreement and
Loan Documents, dated as of December 16, 1999 but
effective as of December 8, 1999, among National Bank
of Canada, Metretek Technologies, Inc., Southern Flow
Companies, Inc., Metretek, Incorporated and Sigma VI,
Inc.
13
<PAGE> 14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
METRETEK TECHNOLOGIES, INC.
By: /s/ W. Phillip Marcum
-------------------------------------
W. Phillip Marcum
President and Chief Executive Officer
Dated: December 22, 1999
14
<PAGE> 15
METRETEK TECHNOLOGIES, INC.
FORM 8-K
DATED DECEMBER 9, 1999
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
----------- -----------
4.1 Securities Purchase Agreement, dated as of December
9, 1999, as amended, by and among Metretek
Technologies, Inc., State Street Bank & Trust,
(solely in its capacity as Trustee for General Motors
Employees Global Group Pension Trust as directed by
DDJ Capital Management, LLC, and not in its initial
capacity), DDJ Canadian High Yield Fund and B III-A
Capital Partners, L.P. (the "DDJ Investors")
4.2 Certificate of Designation of Series B Preferred
Stock, filed with the Secretary of State of the State
of Delaware on December 9, 1999
4.3 Form of Common Stock Purchase Warrant issued on
December 9, 1999 by Metretek Technologies, Inc. to
the DDJ Investors
4.4 Registration Rights Agreement, dated as of December
9, 1999, by and among Metretek Technologies, Inc. and
the DDJ Investors
4.5 Letter Agreement, dated as of December 20, 1999,
between Metretek Technologies, Inc. and DDJ Capital
Management, LLC
10.1 Third Amendment to Loan and Security Agreement and
Loan Documents, dated as of December 16, 1999 but
effective as of December 8, 1999, among National Bank
of Canada, Metretek Technologies, Inc., Southern Flow
Companies, Inc., Metretek, Incorporated and Sigma VI,
Inc.
<PAGE> 1
EXHIBIT 4.1
================================================================================
METRETEK TECHNOLOGIES, INC.
------------------------
SECURITIES PURCHASE AGREEMENT
------------------------
UP TO 6,000 UNITS
EACH CONSISTING OF ONE SHARE OF
SERIES B PREFERRED STOCK,
200 SHARES OF COMMON STOCK
AND
ONE WARRANT TO PURCHASE 100 SHARES OF COMMON STOCK
OF
METRETEK TECHNOLOGIES, INC.
Dated as of December 9, 1999
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
1. PURCHASE AND SALE OF THE SHARES..........................................................................1
1.1. Description of Securities.......................................................................1
1.2. Initial Purchase and Sale.......................................................................2
1.3. Second Purchase and Sale........................................................................2
1.4. Closing Expenses................................................................................2
1.5. Use of Proceeds.................................................................................2
2. INITIAL CLOSING AND SECOND CLOSING.......................................................................3
2.1. Initial Closing.................................................................................3
2.2. Second Closing..................................................................................4
3. CONDITIONS OF OBLIGATIONS OF THE PURCHASERS AT THE CLOSING...............................................4
3.1. Representations and Warranties..................................................................4
3.2. Authorization...................................................................................5
3.3. Certificate of Designations.....................................................................5
3.4. Registration Rights Agreement...................................................................5
3.5. Opinion of Counsel..............................................................................5
3.6. Special Stockholders Meeting; Nasdaq Approval...................................................5
3.7. All Proceedings Satisfactory....................................................................5
3.8. No Violation or Injunction......................................................................5
3.9. Delivery of Documents...........................................................................6
3.10. Absence of Certain Changes or Events............................................................6
3.11. Compliance With Securities Laws.................................................................6
3.12. Government and Third Party Permits, Consents, Etc...............................................7
3.13. Stockholder Rights Agreement....................................................................7
3.14. Payment of Out-of-Pocket Expenses...............................................................7
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY............................................................8
4.1. Organization and Existence......................................................................8
4.2. Power and Authority.............................................................................8
4.3. No Violation....................................................................................8
4.4. Licenses, etc...................................................................................9
4.5. Litigation......................................................................................9
4.6. Commission Filings.............................................................................10
4.7. Material Adverse Change........................................................................11
4.8. Limitation on Subsidiary Payment Restrictions..................................................11
4.9. Tax Returns and Payments.......................................................................11
4.10. Investment Company Act; Public Utility Holding Company Act; Divesture
Commerce Act...................................................................................12
4.11. Corporate Structure; Capitalization............................................................12
</TABLE>
(i)
<PAGE> 3
<TABLE>
<CAPTION>
Page
<S> <C>
4.12. Environmental Matters..........................................................................13
4.13. Properties and Assets..........................................................................13
4.14. No Default.....................................................................................14
4.15. Compliance With Law............................................................................14
4.16. Brokers' Fees..................................................................................14
4.17. Books and Records..............................................................................14
4.18. Outstanding Debt...............................................................................14
4.19. Other Relationships............................................................................14
4.20. Employee Programs..............................................................................15
4.21. Private Offerings..............................................................................17
4.22. Insurance......................................................................................17
4.23. Employment Practices...........................................................................17
4.24. Material Contracts and Obligations.............................................................18
4.25. Intellectual Property..........................................................................18
4.26. Accounts Receivable............................................................................20
5. CONDITIONS OF OBLIGATIONS OF THE COMPANY AT THE CLOSING.................................................20
5.1. Representations and Warranties.................................................................20
5.2. Government and Third Party Permits, Consents, Etc..............................................20
5.3. Certificate of Designations....................................................................20
5.4. Special Stockholders Meeting; Nasdaq Approval..................................................20
5.5. No Violation or Injunction.....................................................................21
6. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.........................................................21
6.1. Status.........................................................................................21
6.2. Power and Authority; Enforceability............................................................21
6.3. Securities Representations.....................................................................22
6.4. Margin Compliance..............................................................................22
6.5. Source of Funds................................................................................23
6.6. Brokers' Fees..................................................................................23
6.7. Post-Reset Standstill..........................................................................23
7. COVENANTS OF THE COMPANY................................................................................23
7.1. Special Stockholders Meeting...................................................................23
7.2. General Covenants of the Company...............................................................24
7.3. Compliance Certificate.........................................................................26
7.4. Restrictions on Action by the Company..........................................................27
7.5. Board of Directors.............................................................................28
7.6. Exchange at Second Closing.....................................................................28
8. RESTRICTIONS ON TRANSFER................................................................................28
8.1. Restrictive Legends............................................................................28
8.2. Removal of Legends.............................................................................29
</TABLE>
(ii)
<PAGE> 4
<TABLE>
<CAPTION>
Page
<S> <C>
8.3. Transfer Information...........................................................................29
9. DEFINITIONS.............................................................................................29
10. INDEMNIFICATION.........................................................................................33
10.1. Indemnification; Expenses, Etc.................................................................33
10.2. Survival of Representations and Warranties.....................................................35
11. MISCELLANEOUS...........................................................................................35
11.1. Notices, Etc...................................................................................35
11.2. Severability...................................................................................36
11.3. Amendment and Waiver...........................................................................37
11.4. Successors and Assigns.........................................................................37
11.5. Descriptive Headings...........................................................................37
11.6. Governing Law..................................................................................37
11.7. Service of Process.............................................................................37
11.8. Counterparts...................................................................................38
11.9. Disclosure to Other Persons....................................................................38
11.10. Waiver of Jury Trial...........................................................................38
</TABLE>
(iii)
<PAGE> 5
SCHEDULES
Schedule 1.2 Initial Purchase
Schedule 1.3 Second Purchase
Schedule 1.5 Use of Proceeds
Schedule 3.10 Absence of Certain Changes
Schedule 4.1 Subsidiaries; Qualifications
Schedule 4.6 Commission Reports
Schedule 4.7 Material Adverse Change
Schedule 4.8 Subsidiary Payment Restrictions
Schedule 4.9 Tax Matters
Schedule 4.11 Capitalization
Schedule 4.12 Environmental Matters
Schedule 4.13 Properties and Assets
Schedule 4.16 Finder's Fees
Schedule 4.18 Outstanding Debt
Schedule 4.19 Other Relationships
Schedule 4.20 Employee Programs
Schedule 4.22 Insurance
Schedule 4.24 Material Contracts
Schedule 4.25 Intellectual Property
Schedule 4.26 Accounts Receivable
Schedule 7.1(b) Stockholders Meeting Matters
Schedule 7.4 Subsidiary Security Issuances
Schedule L Liens
(iv)
<PAGE> 6
EXHIBITS
EXHIBIT A Certificate of Designations
EXHIBIT B Registration Rights Agreement
EXHIBIT C Opinion of Kegler, Brown, Hill & Ritter Co., LPA.
EXHIBIT D Indemnification Agreement
EXHIBIT E Amendment to Rights Agreement
EXHIBIT F Joinder Agreement
(v)
<PAGE> 7
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (the "AGREEMENT") dated as of December 9,
1999 by and among METRETEK TECHNOLOGIES, INC., a Delaware corporation (the
"COMPANY"), and each of the purchasers listed on the signature pages hereto
(each, a "PURCHASER," and collectively, the "PURCHASERS"). Unless otherwise
defined, capitalized terms used in this Agreement are defined in Section 9
hereof; references to a "SCHEDULE" or an "EXHIBIT" are, unless otherwise
specified, to a Schedule or an Exhibit attached to this Agreement; references to
a "section," a "subsection," a "paragraph" or a "clause" are, unless otherwise
specified, to a section, a subsection, a paragraph or a clause, respectively, of
this Agreement.
WITNESSETH
WHEREAS, the Company wishes to sell up to 6,000 investment units ("UNITS")
each consisting of (i) one share of its "Series B Preferred Stock" par value
$.01 per share (the "CONVERTIBLE PREFERRED STOCK"), (ii) 200 shares of its
common stock, par value $.01 per share ("COMMON STOCK"), and (iii) warrants to
purchase 100 shares of Common Stock ("WARRANTS"), in each case, in the amounts
and on the terms and conditions set forth herein;
WHEREAS, the Company has duly authorized the issuance of up to 6,000 shares
of Convertible Preferred Stock, the issuance of up to 1,200,000 shares of Common
Stock, the issuance of Warrants to purchase up to 600,000 shares of Common
Stock, and the execution and delivery of this Agreement, upon the terms and
subject to the conditions set forth herein; and
WHEREAS, the Purchasers are willing to purchase and the Company is willing
to sell the aggregate number of shares of Convertible Preferred Stock and Common
Stock and Warrants set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. PURCHASE AND SALE OF THE SHARES.
1.1. DESCRIPTION OF SECURITIES. For purposes of this Agreement, the shares
of Convertible Preferred Stock to be acquired by the Purchasers from the Company
hereunder are referred to as the "CONVERTIBLE PREFERRED SHARES," the shares of
Common Stock to be acquired by the Purchasers from the Company hereunder are
referred to as the "INITIAL COMMON SHARES," the shares of Common Stock issuable
upon conversion of the Convertible Preferred Shares and exercise of the Warrants
are referred to as the "CONVERSION SHARES," and the Convertible Preferred
Shares, the Initial Common Shares, the Warrants and the Conversion Shares are
sometimes referred to herein as the "SECURITIES."
<PAGE> 8
1.2. INITIAL PURCHASE AND SALE. Upon the terms and subject to the
conditions set forth herein, and in reliance on the representations and
warranties set forth in Section 4 hereof, each Purchaser shall severally
purchase from the Company, and the Company shall issue and sell to each of the
Purchasers, at the Initial Closing (as defined in Section 2.1), the number of
Units set forth opposite the name of such Purchaser in SCHEDULE 1.2 at a
purchase price of $2,000 per Investment Unit for an aggregate purchase price in
the amount set forth opposite the name of such Purchaser in SCHEDULE 1.2, and
the Company shall without further action grant the Purchasers the rights set
forth herein. All Units sold hereunder shall be immediately detachable into
their component Securities. All payments under this Agreement shall be made by
wire transfer of immediately available funds to an account designated by the
Company.
1.3. SECOND PURCHASE AND SALE. Upon the terms and subject to the conditions
contained herein, and in reliance on the representations and warranties set
forth in Sections 4 and 5, on the fifth business day after the Special
Stockholders' Meeting (as defined on Section 7.1(b)) or such other place and on
such date as agreed upon by the parties hereto, each Purchaser shall severally
purchase from the Company, and the Company shall issue and sell to each of the
Purchasers, at the Second Closing (as defined in Section 2.2), the number of
Units set forth opposite the name of such Purchaser in SCHEDULE 1.3 (which
Schedule will be completed after the date of this Agreement pursuant to the
joinder agreement attached hereto as EXHIBIT F) at a purchase price of $2,000
per Unit for an aggregate purchase price in the amount set forth opposite the
name of such Purchaser in SCHEDULE 1.3. Such Units are referred to herein as the
"Additional Units."
1.4. CLOSING EXPENSES. The Company agrees to pay, prior to or on the
Initial Closing and Second Closing, as applicable, to the Purchasers an amount
equal to all reasonable documented fees, expenses and disbursements of the
Purchasers and the Purchasers' Special Counsel reflected in statements of the
Purchasers and such counsel rendered prior to or on the date of such Closing;
PROVIDED, HOWEVER, that such statements provided prior to or on the such date
may be a good faith estimate of such expenses and the Purchasers and Purchasers'
Special Counsel reserve the right to balance such statements within thirty (30)
days following such date.
1.5. USE OF PROCEEDS. The proceeds from the issuance of the Units at the
Initial Closing and Second Closing shall be used by the Company in accordance
with SCHEDULE 1.5.
1.6. NASDAQ LIMITATION.
(a) Notwithstanding any provision to the contrary in this Agreement,
the Certificate of Designations for the Convertible Preferred Stock or in the
Warrants, in no event shall (i) Purchasers be entitled to convert any shares of
Convertible Preferred Stock into shares of Common Stock, or to purchase any
shares of Common Stock upon the exercise of any Warrants, to the extent that,
after such conversion or exercise, the sum of (A) the number of shares of Common
Stock issued by the Company in connection with the transactions contemplated by
this Agreement, and (B) the number of shares of Common Stock issuable upon the
conversion of the shares of Convertible Preferred Stock or upon the exercise of
the
2
<PAGE> 9
Warrants with respect to which the determination of this provision is being
made, would equal or exceed 696,809 shares of Common Stock, such amount being
equal to 20.0% of the shares of Common Stock of the Company outstanding on the
date prior to the date of this Agreement, unless and until the stockholders of
the Company authorize and approve the Stockholder Meeting Matter at the Special
Stockholders' Meeting.
(b) If at any time the Purchasers are prohibited from converting
Convertible Preferred Stock or exercising Warrants by the provisions of Section
1.6(a), then (i) the Company shall use its best efforts to obtain all approvals
(including without limitation stockholder approvals) that may be necessary to
remove such prohibition and (ii) the Purchasers shall have the right, but not
the obligation, at any time and from time to time as long as the prohibition of
Section 1.6(a) is in effect, to sell to the Company, and the Company shall be
obligated to purchase upon receiving written notice thereof from the Purchasers
(the "Put Notice"), the Purchasers' pro rata share of any or all shares of
Convertible Preferred Stock and Warrants that the Purchasers may not then
convert or exercise by reason of Section 1.6(a) (a "Put").
The closing of a Put shall take place by mail within five (5) business
days after receipt by the Company of the related Put Notice. At the closing of a
Put, the Purchasers shall deliver (1) a certificate or certificates representing
at least that number of shares of Convertible Preferred Stock to be purchased by
the Company and (2) certificates representing at least that number of Warrants
to be purchased by the Company, and the Company shall deliver to the Purchasers
(i) by wire transfer of immediately available funds to an account or accounts
designated in writing by the Purchasers, the Put Purchase Price and (ii)
certificates and Warrants representing the balance of the shares of Convertible
Preferred Stock and Warrants not purchased hereunder but delivered pursuant to
subclause (1) immediately above.
The "Put Purchase Price" shall be equal to the sum of (1) the number
of shares of Convertible Preferred Stock being purchased by the Company
multiplied by the Convertible Preferred Stock Put Price, plus (2) the number of
Warrants being purchased by the Company multiplied by the Warrant Put Price. The
"Convertible Preferred Stock Put Price" shall be equal to the greater of (A) the
Convertible Liquidation Preference Amount (as defined in Section A.4(a) of the
Certificate of Designations) and (B) the product of (x) the number of shares
into which one share of Convertible Preferred Stock may be converted (assuming
the prohibition of Section 1.6(a) is not in effect) times (y) the Current Market
Price (as defined in the Warrants). The "Warrant Put Price" shall be equal to
the Current Market Price (as defined in the Warrants) minus the Exercise Price
(as defined in the Warrants) then in effect.
(c) If at any time the Company is prohibited by the terms of any
agreement with its senior lender from purchasing shares of Convertible Preferred
Stock or Warrant under Section 1.6(b), then from and after the date of the
applicable Put Notice, the Company shall pay to the Purchasers exercising the
Put Notice, compounding on a quarterly basis (pro-rated for the first quarter)
on each March 31, June 30, September 30 and December 31, an amount equal to the
Rate (as defined below) times the applicable Put Purchase Price (calculated as
if the purchase
3
<PAGE> 10
were not prohibited). The "Rate" shall initially be one percent (1%) and shall
increase at the beginning of each quarter by a further one percent (1%) up to
the maximum amount permitted by law until the securities covered in the Put
Notice have been duly redeemed, converted or exercised.
2. INITIAL CLOSING AND SECOND CLOSING.
2.1. INITIAL CLOSING. The closing of the purchase and sale of the Units
pursuant to Section 1.2 hereof and the other transactions contemplated hereby
(the "INITIAL CLOSING") shall take place at the offices of Goodwin, Procter &
Hoar LLP, Exchange Place, Boston, Massachusetts on the date hereof, or such
other place and on such date as agreed upon by the parties hereto (such date on
which the Closing shall have actually occurred, the "INITIAL CLOSING DATE"). At
or before the Initial Closing, the Company will take all steps necessary to have
the Certificate of Designations attached hereto as EXHIBIT A (the "CERTIFICATE
OF DESIGNATIONS") duly approved by its Board of Directors and, if necessary, its
stockholders, and duly filed with the Secretary of State of the State of
Delaware. At the Initial Closing, the Company will deliver or cause to be
delivered to each of the Purchasers, a single share certificate representing
that number of shares of Convertible Preferred Stock specified opposite such
Purchaser's name on SCHEDULE 1.2, a single share certificate representing that
number of shares of Common Stock specified opposite such Purchaser's name on
SCHEDULE 1.2, and a warrant certificate or certificates exercisable for the
aggregate number of shares of Common Stock specified opposite such Purchaser's
name on SCHEDULE 1.2 in such denominations as such Purchaser may specify, each
dated the Initial Closing Date and registered in such Purchaser's name or its
nominee as directed by the Purchaser, against payment in full of the purchase
price therefor in the amount specified in Section 1.2 hereof.
2.2. SECOND CLOSING. The closing of the purchase and sale of the Additional
Units pursuant to Section 1.3 hereof (the "SECOND CLOSING") shall take place at
the offices of Goodwin, Procter & Hoar LLP, Exchange Place, Boston,
Massachusetts on the fifth business day after the Special Stockholders' Meeting
(as defined in Section 7.1(b), or such other place and on such date as agreed
upon by the parties hereto (the "SECOND CLOSING DATE"). At the Second Closing,
the Company will deliver or cause to be delivered to each of the Purchasers, a
single share certificate representing that number of shares of Convertible
Preferred Stock specified opposite such Purchaser's name on SCHEDULE 1.3, a
single share certificate representing that number of shares of Common Stock
specified opposite such Purchaser's name on SCHEDULE 1.3, and a warrant
certificate or certificates exercisable for the aggregate number of shares of
Common Stock specified opposite such Purchaser's name on SCHEDULE 1.3 in such
denominations as such Purchaser may specify, each dated the Second Closing Date
and registered in such Purchaser's name or its nominee as directed by such
Purchaser, against payment of the purchase price therefor in the amount
specified in Section 1.3 hereof.
4
<PAGE> 11
3. CONDITIONS OF OBLIGATIONS OF THE PURCHASERS AT THE CLOSING.
The Purchasers' obligation to purchase and pay for the Units at the Initial
Closing and the Second Closing, as applicable (in either case, referred to
hereinafter as the "Closing") shall be subject to compliance by the Company with
its agreements and covenants herein contained required to be performed prior to
or concurrent with the applicable Closing and to the fulfillment, to the
Purchasers' satisfaction, on or before and at the Initial Closing Date or the
Second Closing Date, as applicable (in either case, referred to hereinafter as
the "Closing Date") of the following conditions, provided that any or all of the
following conditions may be waived with respect to a particular Closing, in
whole or in part, by the Purchasers in their sole and absolute discretion:
3.1. REPRESENTATIONS AND WARRANTIES. The representations and warranties of
the Company made in Section 4 hereof shall have been true and correct when made
and on and as of the Closing Date (except to the extent any of the
representations and warranties specifically apply or relate to a prior date, in
which case such representations and warranties shall have been true and correct
as of such prior date).
3.2. AUTHORIZATION. The Board of Directors and, to the extent required by
law, the rules of the Nasdaq Stock Market Inc.'s National Market ("NASDAQ") or
the terms of the Company's Charter Documents, the stockholders of the Company
shall have duly adopted resolutions in form reasonably satisfactory to the
Purchasers authorizing, and shall have taken all action necessary for the
purpose of, consummating the transactions contemplated hereby and in the Other
Transaction Documents in accordance with the terms hereof and thereof,
respectively.
3.3. CERTIFICATE OF DESIGNATIONS. The Board of Directors and, if necessary,
the stockholders of the Company shall have duly adopted the Certificate of
Designations and the Certificate of Designations shall have been duly filed with
the Secretary of State of the State of Delaware.
3.4. REGISTRATION RIGHTS AGREEMENT. The Company and the Purchasers shall
have duly entered into the Registration Rights Agreement substantially in the
form of Exhibit B, the Purchasers shall have received fully-executed
counterparts of the Registration Rights Agreement, and such agreement shall be
in full force and effect.
3.5. OPINION OF COUNSEL. The Purchasers shall have received from counsel
for the Company, Kegler, Brown, Hill & Ritter Co., L.P.A., dated the Closing
Date, an opinion in the form attached hereto as EXHIBIT C.
3.6. SPECIAL STOCKHOLDERS MEETING; NASDAQ APPROVAL. On or prior to the
Second Closing Date, the Company's stockholders shall have duly approved by the
requisite vote under applicable Nasdaq rules the Stockholder Meeting Matter (as
defined in Section 7.1(b)) at the Special Stockholders Meeting.
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3.7. ALL PROCEEDINGS SATISFACTORY. All corporate, organizational and other
proceedings taken prior to or at the Closing in connection with the transactions
contemplated by this Agreement and the Other Transaction Documents, and all
documents and evidences incident hereto and thereto, shall be reasonably
satisfactory in form and substance to the Purchasers, and the Purchasers shall
have received copies thereof and other materials as they may reasonably request
in connection therewith.
3.8. NO VIOLATION OR INJUNCTION. The consummation of the transactions
contemplated by this Agreement and the Other Transaction Documents shall not be
in violation of any law or regulation and shall not be subject to any
injunction, stay or restraining order that has not been reversed or overturned.
3.9. DELIVERY OF DOCUMENTS. The Company shall have executed and delivered
to the Purchasers (or shall have caused to be executed and delivered to the
Purchasers by the appropriate Persons) the following:
(a) Certificate(s) for the Convertible Preferred Shares;
(b) Certificate(s) for the Initial Common Shares;
(c) Warrants executed by the Company;
(d) a certificate of the Secretary of the Company setting forth (i)
copies of the resolutions referred to in Section 3.2 hereof and confirming
that such resolutions have not been modified, rescinded or amended and are
in full force and effect as of the Closing Date, (ii) a copy of the
Company's Certificate of Incorporation (certified by the Secretary of State
of the State of Delaware as of a recent date) and By-laws, each as in
effect on and immediately following the Closing Date, and (iii) such other
matters as the Purchasers may reasonably request;
(e) a certificate as to the matters described in Section 3.1 hereof
executed by the President, the Chief Financial Officer or any Vice
President of the Company;
(f) a copy of a certificate issued by the Secretary of State of the
State of Delaware certifying that the Company is in good standing as of a
date reasonably close to the Closing Date; and
(g) a copy of a certificate issued by the appropriate Secretary of
State of the state of organization of each Subsidiary certifying that, to
the extent applicable, each such Subsidiary is in good standing in such
state.
3.10. ABSENCE OF CERTAIN CHANGES OR EVENTS. Since September 30, 1999,
except as set forth on SCHEDULE 3.10, the Company shall have conducted its
business only in the ordinary course and there shall not have been any event,
act or condition which has had, or can
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reasonably be expected to have, a Material Adverse Effect. As a condition to the
Second Closing, (i) market conditions at the time of the Second Closing shall
not be such that, in the reasonable judgment of the Purchasers, the purchase and
sale of the Additional Units on the terms set forth in this Agreement does not
reflect appropriate market terms and (ii) the Company shall have sold at the
Second Closing a number of Units equal to 6,000 minus the number of Units sold
at the Initial Closing.
3.11. COMPLIANCE WITH SECURITIES LAWS. The offering, issuance and sale of
the Convertible Preferred Shares, the Initial Common Shares and the Warrants
under this Agreement shall have complied with (or be exempt from) all applicable
requirements of the U.S. Federal securities laws and any applicable state
securities or Blue Sky laws.
3.12. GOVERNMENT AND THIRD PARTY PERMITS, CONSENTS, ETC. The Company shall
have duly applied for and obtained all material approvals from each Government
Authority, or pursuant to any material agreement to which the Company is a party
or to which it or any of its material assets is subject, which are required to
be applied for and obtained by the Company in connection with this Agreement,
the Other Transaction Documents or any other agreements and documents
contemplated hereby or thereby and in connection herewith or therewith; and such
approvals shall remain in effect upon consummation of the transactions
contemplated by this Agreement and the Other Transaction Documents, and all
applicable waiting periods, including, without limitation, the waiting period
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), if required, with respect to such contemplated transactions, shall
have expired without any action being taken by any competent Government
Authority and no law or regulation shall be applicable which restrains or
prevents, or imposes adverse conditions upon, such contemplated transactions.
3.13. STOCKHOLDER RIGHTS AGREEMENT. The Rights Agreement dated December 2,
1991 (the "Rights Agreement"), between Marcum Natural Gas Services, Inc. and
American Securities Transfer, Inc. (the "Rights Agent") is in full force and
effect and shall not be modified, amended or supplemented without the consent of
the Purchasers, except as provided below. The Board of Directors of the Company
has taken all necessary action under the Rights Agreement such that neither the
Purchasers nor any of their respective Affiliates or Associates (as such terms
are defined in the Rights Agreement) will become an "Acquiring Person" under the
Rights Agreement, no "Shares Acquisition Date" or "Distribution Date" (as such
terms are defined in the Rights Agreement) will occur under the Rights
Agreement, and no holder of any Rights (as such term is defined in the Rights
Agreement) issued pursuant to the Rights Agreement will be entitled to receive
any benefits under the Rights Agreement, in each case as a result of the
approval, execution or delivery of, or performance by the parties under, this
Agreement or the consummation of the transactions contemplated by this
Agreement, including without limitation, the issuance of the Securities or
conversion or exercise of any Securities. From and after the date of this
Agreement, the Company shall not take any action that would cause anything in
the preceding sentence to no longer be true. At the Closing, the Company and the
Rights Agent shall enter into an amendment to the Rights Agreement in the form
set forth in Exhibit E attached hereto, which provides, among other things, that
the Purchasers' ownership of the Securities will not cause either of the
Purchasers or any of their respective Affiliates or Associates to become an
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<PAGE> 14
"Acquiring Person" under the Rights Agreement, and that no "Shares Acquisition
Date" or "Distribution Date" will occur under the Rights Agreement as a result
of the Purchasers' ownership of the Securities.
3.14. PAYMENT OF OUT-OF-POCKET EXPENSES. The Company shall have paid
contemporaneously with the Closing, the reasonable, documented, out-of-pocket
fees and expenses actually incurred by the Purchasers in connection with the
transactions and other matters contemplated by this Agreement and the Other
Transaction Documents (including without limitation the reasonable, documented
fees, expenses and disbursements of Purchasers' Special Counsel, accountants and
other advisors and professional consultants and all costs relating to any
required filings under the HSR Act).
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
In order to induce the Purchasers to enter into this Agreement and the
Other Transaction Documents and to purchase the Units, the Company represents
and warrants to the Purchasers, as of the date hereof and as of the Closing Date
(except to the extent any of the following representations or warranties
specifically apply or relate to a prior date, in which event the Company
represents and warrants as of such prior date), as follows:
4.1. ORGANIZATION AND EXISTENCE. Each of the Company and its Subsidiaries
(i) is a duly organized and validly existing corporation in good standing under
the laws of the jurisdiction of its incorporation, (ii) has the requisite
corporate power and authority to own its material properties and assets and to
transact the business in which it is engaged or presently proposes to engage and
(iii) has duly qualified, registered, is licensed and authorized to do business
and is in good standing as a foreign corporation in every jurisdiction in which
it owns or leases real property or in which the nature of its business requires
it to be so qualified, registered, licensed and/or authorized, except where the
failure to be so qualified, registered, licensed or authorized would not have a
Material Adverse Effect. The Company has heretofore delivered to the Purchasers
complete and correct copies of the Certificate of Incorporation and By-Laws of
the Company and all Subsidiaries, each as amended to date and as presently in
effect (collectively, with respect to any such Person, "CHARTER DOCUMENTS"). A
list of all Subsidiaries of the Company and all jurisdictions in which the
Company or any Subsidiary is qualified, registered or licensed to do business is
disclosed in SCHEDULE 4.1.
4.2. POWER AND AUTHORITY; ENFORCEABILITY. The execution, delivery and
performance by the Company of its obligations under the Transaction Documents
and the issuance and sale to the Purchasers of the Convertible Preferred Shares,
the Initial Common Shares and the Warrants pursuant to this Agreement and the
authorization, issuance and delivery by the Company of the Conversion Shares are
within the Company's corporate power and have been duly authorized by all
necessary corporate action on the part of the Company. The Company has, or on
the Closing Date will have, duly executed and delivered each Transaction
Document and each Transaction Document constitutes, or will constitute, the
legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms
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<PAGE> 15
except to the extent that its enforceability may be subject to applicable
bankruptcy, insolvency, reorganization, moratorium, or similar laws now or
hereafter in effect affecting creditor's rights generally and to general
equitable principles.
4.3. NO VIOLATION. Neither the execution, delivery or performance by the
Company of its obligations under the Transaction Documents nor compliance by it
with the terms and provisions thereof nor the consummation of the transactions
contemplated thereunder, (i) contravene or violate the Charter Documents of the
Company or any Subsidiary, (ii) require any authorization, approval,
qualification or formal exemption from, or other action by or in respect of, or
filing of a declaration or registration with, any court, Government Authority,
agency or official or other Person (except for (A) such as have been obtained or
will be obtained at the Special Stockholders Meeting prior to consummation of
any sale or issuance requiring such authorization, (B) such as may be required
under the Securities Act or state securities or Blue Sky laws, (C) such as may
be required for the redemption of the Convertible Preferred Shares under the
Loan and Security Agreement, dated as of April 14, 1998, as amended, among
National Bank of Canada, the Company and certain of its subsidiaries or (D) such
as would not have a Material Adverse Effect); (iii) will contravene any
applicable provision of any law, statute, rule, regulation, order, writ,
injunction or decree of any court or Government Authority or (iv) will conflict
or be inconsistent with or result in any breach of, or require the consent of
any Person under, any of the terms, covenants, conditions or provisions of, or
constitute a default under, or result in the creation or imposition of (or the
obligation to create or impose) any Lien upon any of the property or assets of
the Company or any Subsidiary pursuant to the terms of any indenture, mortgage,
deed of trust, agreement or other instrument to which the Company or any
Subsidiary is a party or by which it or any of its material property or assets
is bound or to which it may be subject, except in the case of clause (iv) for
such conflicts, inconsistencies, breaches, defaults, events of default or Liens
which would not have a Material Adverse Effect.
4.4. LICENSES, ETC. Each of the Company and its Subsidiaries have obtained
and hold in full force and effect, all franchises, licenses, permits,
certificates, authorizations, qualifications, accreditations, easements, rights
of way and other rights, consents and approvals, and made all filings, which are
necessary for the operation of their respective businesses as presently
conducted (individually, a "LICENSE" and collectively, "LICENSES"), except where
such failure to do so would not have a Material Adverse Effect. Except as would
not have a Material Adverse Effect, each License is valid and current and the
Company and its Subsidiaries are in compliance with the terms thereof, with to
the Company's knowledge, no conflict with the valid rights of others. Except as
would not have a Material Adverse Effect, (i) no event has occurred which
permits, or after notice or lapse of time or both would permit, the revocation
or termination of any License and (ii) the Company and its Subsidiaries have
filed all applications currently necessary for renewal or extension of the
Licenses and all such applications have been granted without conditions. To the
Company's knowledge, there exists no fact that would result in the denial of an
application or renewal, or the revocation, modification, nonrenewal or
suspension of any of the Licenses.
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4.5. LITIGATION. Except as set forth in SCHEDULE 4.5, there is no action,
suit, proceeding or investigation pending or, to the Company's knowledge after
due inquiry, threatened against or affecting the Company or any Subsidiary, any
of their Properties, or any director or executive officer of the Company or any
Subsidiary in their capacity as such, before or by any court or arbitrator or
any Government Authority within the United States which (individually or in the
aggregate) (i) will result in an impairment or loss of the Company's or any
Subsidiary title to any material Property or diminish the value thereof or
impede the operation of any such material Property, (ii) has resulted in or has
impaired or will impair the ability of the Company or any Subsidiary's to
perform in all material respects any obligation which the Company or any
Subsidiary has or will have under any Transaction Document to which the Company
or any Subsidiary is a party, or (iii) otherwise could have a Material Adverse
Effect. Neither the Company nor any Subsidiary has violated or is in default
under (except as set forth in SCHEDULE 4.5) and there does not exist any event
or condition which, after notice or lapse of time or both, would constitute such
a default under), any term of its Charter Documents, or, except as would not
have a Material Adverse Effect, of any term of any agreement, instrument,
judgment, decree, order, statute, exemption, injunction, law or other Government
regulation, rule or ordinance applicable to the Company or any Subsidiary or to
which the Company or any Subsidiary is bound, or to any Properties of the
Company or any Subsidiary.
4.6. COMMISSION FILINGS.
(a) The Company has heretofore delivered to the Purchasers true and
complete copies of its (i) Annual Report on Form 10-KSB for the fiscal year
ended December 31, 1998, (ii) Quarterly Report on Form 10-QSB for each of the
fiscal quarters ended March 31, and June 30, 1999 and September 30, 1999, (iii)
Proxy Statement for the annual meeting of stockholders held on June 7, 1999, and
(iv) all other reports or registration statements filed by the Company with the
Securities and Exchange Commission (the "COMMISSION") since January 1, 1999, in
each case as filed with the Commission.
(b) Except as set forth in SCHEDULE 4.6, the Company has filed all
required forms, reports and documents with the Commission since February 13,
1992 (collectively, the "COMMISSION REPORTS"), all of which were prepared in
accordance with the applicable requirements of the Securities Act of 1933, as
amended, and the Securities Exchange Act of 1934, as amended, in all material
respects. Except to the extent, if any, as may have been appropriately disclosed
in a Commission Report filed subsequent thereto and prior to the date hereof as
of their respective dates, the Commission Reports did not, at the time they were
filed, contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, and complied as to form and substance in all material respects with
all applicable requirements of law.
(c) Each of the consolidated financial statements (including, in each
case, any related notes thereto) contained in the Commission Reports has been
prepared in
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accordance with GAAP applied on a consistent basis throughout the periods
involved, and each fairly presents in accordance with the consolidated financial
position of the Company and its Subsidiaries as at the date thereof and the
consolidated results of their operations and changes in cash flow for the
periods indicated [in all material respects,] except as may be indicated in the
consolidated financial statements contained in a Commission Report filed
subsequent thereto and prior to the date hereof, and except that the unaudited
interim financial statements were or are subject to normal and recurring
year-end adjustments which were not or are not expected to be material in
amount.
(d) Except as set forth in the Commission Reports, neither the
Company nor any of its Subsidiaries has any liabilities or obligations of any
nature (whether accrued, absolute, contingent or otherwise) which would be
required to be reflected on a consolidated balance sheet of the Company and its
subsidiaries, or in the notes thereto, prepared in accordance with GAAP, except
for liabilities or obligations (a) incurred in the ordinary course of business
since September 30, 1999, or (b) any liability or obligation existing at
September 30, 1999 which, individually or in the aggregate, is not material to
the Company and its Subsidiaries taken as a whole as of such date.
4.7. MATERIAL ADVERSE CHANGE. Except as set forth in the Commission Reports
or in SCHEDULE 4.7, since September 30, 1999, there has been (a) to the best
knowledge of the Company, no event, act or condition which has had, or could
reasonably be expected to have, a Material Adverse Effect, (b) no obligation or
liability (contingent or other) incurred by the Company or any of its
Subsidiaries, other than obligations and liabilities incurred in the ordinary
course of business, and no Lien placed on any of the properties of the Company
which remains in existence on the date hereof, other than Permitted Liens, (c)
no acquisition or disposition of any material assets by the Company or any
Subsidiary (or any contract or arrangement therefor), or any other material
transaction, otherwise than for fair value in the ordinary course of business
and (d) no declaration or payment of any dividends or other distributions upon
the Capital Stock of the Company or redemption, retirement, repurchase or other
acquisition by the Company or any Subsidiary of any of the Company's Capital
Stock.
4.8. LIMITATION ON SUBSIDIARY PAYMENT RESTRICTIONS. Except as set forth on
SCHEDULE 4.8, neither the Company nor any of its Subsidiaries is subject to any
consensual restriction on the ability of any Subsidiary (a) to pay dividends or
make any other distributions on such Subsidiary's Capital Stock to, or pay any
indebtedness owing to, or repurchase or redeem any of such Subsidiary's Capital
Stock from, the Company or any other Subsidiary of the Company, (b) to make any
loans or advances to the Company or any other Subsidiary of the Company, or (c)
to transfer any of its Property or assets to the Company or any other
Subsidiary.
4.9. TAX RETURNS AND PAYMENTS. The Company, its Subsidiaries, and any
predecessors to the Company or any Subsidiary, have filed or obtained extensions
of all Tax Returns heretofore required by law to be filed by any of them and all
such Tax Returns were correct and complete in all material respects. All Taxes
for which the Company or any
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Subsidiary is liable have been paid in full or are adequately provided for in
accordance with GAAP on the financial statements of the applicable Person,
except to the extent such failure would not have a Material Adverse Effect. All
amounts required by law to be withheld, collected or provided for by the Company
or any Subsidiary, including deposits with respect to Taxes constituting
employees' income withholding taxes, have been duly withheld, collected or
provided for and have been paid over to the proper federal, provincial, state,
municipal or local authority, to the extent due and payable, or are held by the
applicable Person for such payment. No Liens arising from or in connection with
Taxes have been filed and are currently in effect against the Company or any
Subsidiary, except for Liens for Taxes which are not yet due or which are being
contested in good faith and as to which reserves have been set aside on the
books of the Company or such Subsidiary, as applicable, to the extent required
by GAAP. The Company and its Subsidiaries, including any predecessors thereto,
have not executed or filed with any taxing authority any agreement or document
extending, or having the effect of extending, the period for assessment or
collection of any Taxes. The federal income Tax Returns of the Company and its
Subsidiaries, and any predecessors thereto, have been examined by the IRS, or
the statute of limitations with respect to federal income Taxes has expired, for
all tax years to and including the fiscal year ended December 31, 1998 and any
deficiencies have been paid in full or appropriate action or appropriate
reserves therefor in accordance with GAAP have been established on the Company's
or such Subsidiary's books. Except as set forth in SCHEDULE 4.9, neither the
Company nor any Subsidiary is a party to any tax sharing agreement or
arrangement. Except as set forth in SCHEDULE 4.9, no audits or investigations
are pending or, to the Company's knowledge, threatened with respect to any Tax
Returns or Taxes of the Company or any Subsidiary, or any predecessor thereto.
4.10. INVESTMENT COMPANY ACT; PUBLIC UTILITY HOLDING COMPANY ACT; DIVESTURE
COMMERCE ACT. Neither the Company nor any of its Subsidiaries is, or will be (i)
an "investment company" or a company "controlled" by an "investment company,"
within the meaning of the Investment Company Act, (ii) a "holding company" or a
"subsidiary company" of a "holding company" or an "affiliate" of either a
"holding company" or a "subsidiary company" within the meaning of the Public
Utility Holding Company Act of 1935, as amended, or (iii) a "rail carrier," or a
Person controlled by or affiliated with a "rail carrier," within the meaning of
Title 49, U.S.C. Neither the Company nor any of its Subsidiaries is a "carrier"
or other Person to which 49 U.S.C. Section 11301(b)(1) is applicable.
4.11. CORPORATE STRUCTURE; CAPITALIZATION. As of the date hereof and as of
the Closing Date, SCHEDULE 4.11 sets forth, both before and after giving effect
to the transactions contemplated under the Transaction Documents, the number of
authorized and issued shares of Capital Stock of each of the Company and its
Subsidiaries, the par value thereof, and the registered owner(s) of the shares
of Capital Stock of each subsidiary thereof. All of such Capital Stock has been
duly and validly issued and is fully paid and non-assessable and, in the case of
Capital Stock of the Subsidiaries, is owned of record and beneficially by the
Company. The Convertible Preferred Shares and the Initial Common Shares are,
and, upon conversion of the Convertible Preferred Shares and exercise of the
Warrants, the Conversion Shares will be, duly and validly issued, fully-paid and
non-assessable. As of the date hereof and as of the
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Closing Date, except as set forth in SCHEDULE 4.11, neither the Company nor any
Subsidiary has outstanding any securities convertible into or exchangeable for
its Capital Stock or any other equity interest nor does the Company or any
Subsidiary have outstanding any rights to subscribe for or to purchase, or any
options for the purchase of, or any agreements providing for the issuance
(contingent or otherwise) of, or any calls, commitments or claims of any
character relating to, its Capital Stock or other obligations or commitments of
any kind whatsoever to issue, sell or otherwise dispose of, any shares of or
other equity interests in the Company or any of its Subsidiaries. Except as
contemplated by the Transaction Documents, neither the Company or any of its
Subsidiaries are subject to any obligation (contingent or otherwise) to
repurchase or otherwise acquire or retire any of their Capital Stock. There are
no voting trusts or other agreements or understandings to which the Company or
any of its Subsidiaries is a party with respect to the voting of its Capital
Stock.
4.12. ENVIRONMENTAL MATTERS.
(a) Neither the Company nor any Subsidiary (i) has any liability
under any Environmental Law which could have a Material Adverse Effect, or has
not violated any Environmental Law which violation could have a Material Adverse
Effect; (ii) has entered into or been subject to any judgment, consent decree,
compliance order, or administrative order with respect to any environmental or
health and safety matter which could have a Material Adverse Effect and (iii)
has received any request for information, notice, demand letter, administrative
inquiry, or formal or informal complaint or claim from any Person with respect
to any environmental or health and safety matter or the enforcement of any
Environmental Law which could have a Material Adverse Effect.
(b) (i) All properties owned, operated, leased, or used by the
Company and its Subsidiaries and any facilities and operations thereon comply
with applicable Environmental Laws except for such non-compliance as would not
have a Material Adverse Effect; (ii) the Company and its Subsidiaries have not
generated, transported, used, stored, treated, manufactured, refined,
transferred, produced, processed, disposed of, or managed any Hazardous
Materials, except in accordance with applicable Environmental Laws [or except as
would not have a Material Adverse Effect]; (iii) the Company and its
Subsidiaries have not effected, and have no knowledge of, any release of a
Hazardous Material at, on, in or under any property presently or formerly owned,
operated, leased, or used by the Company or any Subsidiary and (iv) no Lien has
been imposed by any Government Authority on any property, facility, machinery,
or equipment owned, operated, leased, or used by the Company or any Subsidiary
in connection with the presence of any Hazardous Material.
(c) Except as set forth in SCHEDULE 4.12, the Company and its
Subsidiaries (i) do not presently own, operate, lease or use any property on
which underground storage tanks are or, to the Company's knowledge, were
located; (ii) have never placed underground storage tanks on any property owned,
operated, leased or used by the Company or any Subsidiary; (iii) have never
removed underground storage tanks from any property presently or
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formerly owned, operated, leased or used by the Company, except in compliance
with all Environmental Laws or except as would not have a Material Adverse
Effect.
4.13. PROPERTIES AND ASSETS. The Company and each Subsidiary has good
record and marketable title to all material real Property which it owns in fee
and has good record and defensible title to all of its other material Properties
and assets (tangible or intangible) which it owns, in each case free and clear
of all Liens, other than Permitted Liens. All of the material leases for the
operation of their respective properties and assets under which the Company and
its Subsidiaries hold any material Property or assets, real or personal, are
valid, subsisting and enforceable and afford peaceful and undisturbed possession
of the subject matter of the lease, and no material default by the Company or
any Subsidiary exists under any of the provisions thereof. All buildings,
machinery and equipment of the Company and its Subsidiaries are in good repair
and working order, except for ordinary wear and tear, and except as could have a
Material Adverse Effect. All material current and proposed uses of such property
or assets of the Company and its Subsidiaries are permitted as of right and no
regulation or ordinance interferes with such current or proposed uses. To the
knowledge of the Company, there is no pending or formally proposed change in any
such laws, regulations or ordinances which could have a Material Adverse Effect.
No condemnation, appropriation or similar proceeding is pending or, to the
Company's knowledge, threatened against any material real Property owned by the
Company or any Subsidiary. Except as disclosed in SCHEDULE 4.13 or as would not
have a Material Adverse Effect, the Property of the Company and its Subsidiaries
is not subject to any agreements containing preferential purchase rights or
consent to assignment provisions that must be complied with prior to the
consummation of this Agreement and the other Transaction Documents and the
transactions contemplated hereby and thereby.
4.14. NO DEFAULT. Neither the Company nor any Subsidiary is in default
under or with respect to any material agreement, instrument or undertaking to
which it is a party or by which it or any of its property is bound, except
where, in the aggregate, all such defaults would not have a Material Adverse
Effect.
4.15. COMPLIANCE WITH LAW. Each of the Company and its Subsidiaries is in
full compliance with all laws, rules, regulations, orders, judgments, writs and
decrees, except where the failure to be in compliance would not have a Material
Adverse Effect.
4.16. BROKERS' FEES. Except as set forth on Schedule 4.16, neither the
Company nor any Subsidiary has any obligation to any Person in respect of any
finder's, brokers', investment banking or other similar fees in connection with
any of the Transaction Documents.
4.17. BOOKS AND RECORDS. The minute books of the Company contain complete
and accurate records of all meetings and other corporate actions of the
Company's Board of Directors and committees thereof and accurately reflect in
all material respects all transactions referred to therein.
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4.18. OUTSTANDING DEBT. Except as set forth on SCHEDULE 4.18, at and as of
the date hereof and as of the Closing Date, neither the Company nor any of its
Subsidiaries will have outstanding any debt for borrowed money, or obligations
or liabilities evidenced by bonds, debentures, notes or other similar
instruments or under capital leases. SCHEDULE 4.18 contains a complete and
accurate list of all material guaranties, assumptions, purchase agreements and
similar agreements and arrangements whereby the Company or any of its
Subsidiaries is or may become directly or indirectly liable or responsible for
the indebtedness or other obligations of another Person, except for negotiable
instruments endorsed for collection or deposit in the ordinary course of its
business.
4.19. OTHER RELATIONSHIPS. Except as set forth in SCHEDULE 4.19:
(a) None of the Company or any of its Subsidiaries nor any officer of
any of the foregoing has any interest (other than as non-controlling holders of
securities of a publicly-traded company), either directly or indirectly, in any
Person (whether as an employee, officer, director, more than five percent (5%)
shareholder, agent, independent contractor, security holder, creditor,
consultant or otherwise) that presently (i) provides any services or engages in
any activity which is the same or competitive with any activity or business in
which the Company or any of its Subsidiaries is now engaged, (ii) is a supplier
of, customer of, creditor of, or has an existing contractual relationship with,
the Company or any of its Subsidiaries, or (iii) has any direct or indirect
interest in any asset or property used by the Company or any of its Subsidiaries
or any property, real or personal, tangible or intangible, that is necessary for
the conduct of the business of the Company or any of its Subsidiaries; and
(b) No stockholder, director, officer or employee of the Company or
any of its Subsidiaries of any such Person is a party to any transaction (other
than as a stockholder, director, officer or employee) with the Company or any of
its Subsidiaries providing for the furnishing of services by, or rental of real
or personal property from, or otherwise requiring cash payments to any such
Person.
4.20. EMPLOYEE PROGRAMS. SCHEDULE 4.20 sets forth a list of every
Employee Program (as defined below) maintained by the Company or any of its
Subsidiaries at any time during the six-year period ending on the Closing Date
or with respect to which a liability of the Company or any of its Subsidiaries
exists. Except as set forth on SCHEDULE 4.20, each Employee Program (other than
a Multiemployer Plan (as defined below)) which has been maintained by the
Company during the six-year period ending on the Closing Date and which has been
intended to qualify under Section 401(a) or Section 501(c)(9) of the Code has
received a favorable determination or approval letter from the IRS regarding its
qualification under such Section or the remedial amendment period under Section
401(b) of the Code has not yet expired with respect to such Employee Program
and, to the Company's knowledge, nothing has occurred that would adversely
affect such qualification since the date of such letter or application for a
determination or approval letter has been timely made and, to the Company's
knowledge, no reason exists why a favorable determination or approval shall not
be granted. Except as set forth on SCHEDULE 4.20, the Company and its
Subsidiaries do not know of any
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failure of any party to comply with any laws applicable with respect to the
Employee Programs that have been maintained by the Company or any of its
Subsidiaries, and no such failure will result from completion of the
transactions contemplated hereby. Except as set forth on SCHEDULE 4.20 with
respect to any Employee Program ever maintained by the Company or any of its
Subsidiaries, there has been no "prohibited transaction," as defined in Section
406 of ERISA or Code Section 4975, or breach of any duty under ERISA or other
applicable law or any agreement which in any such case could subject the Company
or any of its Subsidiaries to material liability either directly or indirectly
(including, without limitation, through any obligation of indemnification or
contribution) for any damages, penalties, or taxes, or any other loss or
expense. No litigation or Government administrative proceeding (or
investigation) or other proceeding (other than those relating to routine claims
for benefits) is pending or threatened with respect to any such Employee Program
(other than a Multiemployer Plan). No event or omission has occurred which would
cause any Employee Program to lose its qualification or otherwise fail to
satisfy the relevant requirements to provide tax-favored benefits under the
applicable Code Section (including without limitation Code Sections 105, 125,
401(a) and 501(c)(9)). Each asset held under any such Employee Program may be
liquidated or terminated without the imposition of any redemption fee, surrender
charge or comparable liability.
None of the Company or its Subsidiaries have incurred any liability under
Title IV of ERISA which has not been paid in full prior to the Closing. None of
the Company or any of its Subsidiaries participates currently or has ever
participated in or is required currently or has ever been required to contribute
to or otherwise participate in any plan, program or arrangement subject to Title
IV of ERISA or Code Section 412. None of the Company or its Subsidiaries
participates currently or has ever participated in or is required currently or
has ever been required to contribute to or otherwise participate in any
Multiemployer Plan (as defined below). Except as disclosed on SCHEDULE 4.20,
none of the Employee Programs which is a welfare plan maintained by the Company
or any of its Subsidiaries provides health care or any other non-pension
benefits to any employees after their employment is terminated (other than as
required by Part 6 of Subtitle B of Title I of ERISA or comparable statutes or
regulations) or has ever promised to provide such post-termination benefits.
Each Employee Program required to be listed on SCHEDULE 4.20 may be amended,
terminated, or otherwise modified by the Company or its Subsidiaries to the
greatest extent permitted by applicable law, including the elimination of any
and all future benefit accruals under any Employee Program and no employee
communications or provision of any Employee Program document has failed to
effectively reserve the right of the Company or its Subsidiaries to so amend,
terminate or otherwise modify such Employee Program.
For purposes of this Section 4.20:
(a) "EMPLOYEE PROGRAM" means (A) any employee benefit plan within the
meaning of Section 3(3) of ERISA and employee benefit plans (such as foreign or
excess benefit plans) which are not subject to ERISA, and (B) if for employees
generally or any subgroup of employees generally, any stock option plans, bonus
or incentive award plans,
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severance pay policies or agreements, deferred compensation arrangements,
supplemental income arrangements, vacation plans, and all other employee benefit
plans, agreements, and arrangements not described in (A) above, and (C) any
trust used to fund benefits under the foregoing maintained by the Company or any
of its Subsidiaries.
(b) An entity "MAINTAINS" an Employee Program if such entity
sponsors, contributes to, or provides benefits under such Employee Program, or
has any obligation (by agreement or under applicable law) to contribute to or
provide benefits under such Employee Program, or if such Employee Program
provides benefits to or otherwise covers employees of such entity (or, in
respect of such employees, their spouses, dependents, or beneficiaries).
(c) "MULTIEMPLOYER PLAN" means a (pension or non-pension) employee
benefit plan to which more than one employer contributes and which is maintained
pursuant to one or more collective bargaining agreements.
(d) Each reference to the "Company" or any "Subsidiary" includes any
entity which has ever been considered a single employer with such entity under
ERISA Section 4001(b) or part of the same "controlled group" as such entity for
purposes of ERISA Section 302(d)(8)(C).
4.21. PRIVATE OFFERINGS. No form of general solicitation or general
advertising, including, but not limited to, advertisements, articles, notices or
other communications, published in any newspaper, magazine or similar medium or
broadcast over television or radio, or any seminar or meeting whose attendees
have been invited by any general solicitation or general advertising, was used
by the Company or any of its Subsidiaries or any of their respective
representatives, or, to the Company's knowledge, any other Person acting on
behalf of the Company or any of its Subsidiaries in connection with the offering
of the Securities. Neither the Company nor any of its Subsidiaries nor any
Person acting on the Company's or any such Subsidiaries' behalf, has directly or
indirectly offered Securities for sale to, or sold or solicited any offer to buy
any of the same from, or otherwise approached or negotiated in respect thereof
with any Person or Persons other than the Purchasers and other investors who the
Company reasonably believed had such knowledge and experience in financial and
business matters that they were capable of evaluating the merits and risks of
purchasing the Securities. The Company further represents to the Purchasers
that, assuming the accuracy of the representations of the Purchasers as set
forth in Section 6 hereof, neither the Company nor any of its Subsidiaries, nor
any Person acting on the Company's or any such Subsidiary's behalf, as
applicable, has taken or will take any action which would subject the issue and
sale of the Securities to the provisions of Section 5 of the Securities Act,
except as contemplated by the Transaction Documents. The Company and its
Subsidiaries have not sold the Securities to anyone other than the Purchasers
designated in this Agreement. No shares of Convertible Preferred Stock and no
securities containing the same terms as the Warrants have been issued and sold
by the Company or any of its Subsidiaries prior to the date hereof.
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4.22. INSURANCE. Except as set forth on SCHEDULE 4.22 attached hereto, the
Company maintains in full force and effect policies of insurance and bonds of
the type and in amounts customarily carried by Persons conducting business
similar to that currently conducted by the Company and its Subsidiaries. There
is no claim in excess of $15,000 by the Company or any of its Subsidiaries
pending under any of such policies or bonds as to which coverage has been
questioned, reserved, denied or disputed by the underwriters of such policies or
bonds or their agents. The Company has no knowledge of any threatened
termination of any such policies or bonds.
4.23. EMPLOYMENT PRACTICES. Neither the Company nor any Subsidiary is a
party to or in the process of negotiating any collective bargaining or labor
agreement or union contract. As of the date of this Agreement, except as would
not have a Material Adverse Effect, there is no (a) charge, complaint or suit
pending or, to the Company's knowledge, threatened against the Company or any
Subsidiary respecting employment, hiring for employment, terminating from
employment, employment practices, employment discrimination, terms and
conditions of employment, safety, wrongful termination, or wages and hours, (b)
unfair labor practice charge or complaint pending or, to the Company's
knowledge, threatened against, or decision or order in effect and binding on,
the Company or any Subsidiary before or of the National Labor Relations Board,
(c) grievance or arbitration proceeding arising out of or under collective
bargaining agreements pending or, to the Company's knowledge, threatened against
the Company or any Subsidiary (d) strike, labor dispute, slow-down, work
stoppage or other interference with work pending or, to the Company's knowledge,
threatened against the Company or any Subsidiary, or (e) to the Company's
knowledge, union organizing activities or union representation question
threatened or existing with respect to any groups of employees of the Company or
any Subsidiary. All payments due from the Company or any Subsidiary on account
of employee health and welfare insurance and vacation pay have been paid or
accrued as a liability on the books of the Company or any Subsidiary. There are
no complaints or charges against the Company or any Subsidiary pending or, to
the best of the Company's knowledge after due inquiry, threatened to be filed
with any Government Authority based on, arising out of, in connection with, or
otherwise relating to the employment or termination of employment by the Company
or any Subsidiary which could have a Material Adverse Effect.
4.24. MATERIAL CONTRACTS AND OBLIGATIONS. Set out on SCHEDULE 4.24 hereto
is a list of all material agreements of any nature to which the Company or any
of its Subsidiaries are a party or by which they are bound, including without
limitation (a) each agreement which requires future expenditures by the Company
or any of its Subsidiaries in any one year in excess of $250,000 and (b) all
employment and consulting agreements, employee benefit, bonus, pension,
profit-sharing, stock option and stock purchase and similar plans and
arrangements. The Company, each Subsidiary and, to the Company's knowledge, each
other party thereto have in all material respects performed all the obligations
required to be performed by them to date, have received no notice of default and
are not in default (with due notice or lapse of time or both) under any lease,
agreement or contract described in subsections (a) or (b) above that could have
a Material Adverse Effect. All of the agreements and contracts described above
are valid, binding and in full force and effect with respect to the Company or
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<PAGE> 25
the respective Subsidiary, except as would not have a Material Adverse Effect.
Neither the Company nor any of its Subsidiaries has any present expectation or
intention of not fully performing all its obligations under each such lease,
contract or other agreement, and the Company has no knowledge of any breach or
anticipated breach by the other party to any contract or commitment to which the
Company or any Subsidiary is a party.
4.25. INTELLECTUAL PROPERTY.
(a) Except as described in SCHEDULE 4.25 and except as would not have
a Material Adverse Effect, the Company has exclusive ownership of, or exclusive
license to use, all patent, copyright, trade secret, trademark, or other
proprietary rights used in the business of the Company and its Subsidiaries
(collectively, "INTELLECTUAL PROPERTY"). There are no claims or demands of any
other Person pertaining to any of such Intellectual Property and no proceedings
have been instituted, or are pending or, to the Company's knowledge, threatened,
which challenge the rights of the Company in respect thereof. Except as would
not have a Material Adverse Effect the Company has the right to use, free and
clear of claims or rights of other Persons, all customer lists, billing systems
or other processes, computer software systems, data compilations, and other
information required for or incident to their business as presently conducted or
contemplated.
(b) All trademarks, trademark applications and registrations and
registered copyrights which are owned by or licensed to the Company or its
Subsidiaries or used or to be used by the Company or its Subsidiaries in their
business as presently conducted, and which are material to the Company, are
listed in SCHEDULE 4.25. All of such trademarks and trade names, trademark
applications and registrations and registered copyrights have been duly
registered in, filed in or issued by the United States Patent and Trademark
Office, the United States Register of Copyrights, or the corresponding offices
of other jurisdictions as identified in SCHEDULE 4.25, and have been properly
maintained and renewed in accordance with all applicable provisions of law and
administrative regulations in the United States and each such jurisdiction,
except when the failure to do so would not have a Material Adverse Effect.
(c) All material licenses or other agreements under which the Company
or any of its Subsidiaries is granted rights in Intellectual Property are listed
in SCHEDULE 4.25. All such licenses or other agreements are in full force and
effect and there is no default by any party thereto.
(d) Except as would not have a Material Adverse Effect, the Company
has taken all steps required in accordance with sound business practice and
business judgment to establish and preserve its ownership of all material
copyright, trade secret and other proprietary rights with respect to their
products and technology. To the Company's knowledge, the Company has not made
any such information available to any Person other than employees of the Company
or its Subsidiaries except pursuant to written agreements requiring the
recipients to maintain the confidentiality of such information and appropriately
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restricting the use thereof. To the Company's knowledge, there are no material
infringements by others of any of its Intellectual Property rights.
(e) Except as set forth on Schedule 4.25, to the Company's knowledge,
the present business, activities and products of the Company and its
Subsidiaries does not infringe any intellectual property of any other Person,
except as would not have a Material Adverse Effect. Except as set forth on
SCHEDULE 4.25, no proceeding charging the Company or any of its Subsidiaries
with infringement of any adversely held Intellectual Property has been filed or
is, to the Company's knowledge, threatened to be filed, except as would not have
a Material Adverse Effect. To the Company's knowledge, the Company and its
Subsidiaries are not making any unauthorized use of any confidential information
or trade secrets of any Person, including without limitation any former employer
of any past or present employee of the Company and its Subsidiaries. Neither the
Company nor, to the Company's knowledge, any of its employees have any
agreements or arrangements with any Persons other than the Company related to
confidential information or trade secrets of such Persons or restricting any
such employee's engagement in business activities of any nature.
4.26. ACCOUNTS RECEIVABLE. Except as set forth on SCHEDULE 4.26, all
accounts receivable of the Company that are reflected in the Commission Reports
represent, and as of the Closing Date (except to the extent collected in cash
before such date) will represent, valid obligations to the Company of third
parties (who are unrelated to the Company, or any Affiliate thereof) arising
from sales actually made or services actually performed by the Company and its
Subsidiaries in the ordinary course of business. To the best of the Company's
knowledge, each such account receivable is a valid obligation of the account
debtor enforceable in accordance with its terms, free and clear of all
encumbrances, set-offs, adverse claims, assessments, defaults, prepayment,
defenses and conditions precedent. The Company is the true and lawful owner of
each such account receivable and has good and clear title to each such
receivable, free and clear of all Liens other than Permitted Liens.
5. CONDITIONS OF OBLIGATIONS OF THE COMPANY AT THE CLOSING.
The Company's obligation to issue and sell the Units and to enter this
Agreement and the Other Transaction Documents at the Closing shall be subject to
compliance by each Purchaser with its agreements and covenants herein contained
and to the fulfillment, to the Company's satisfaction, on or before and at the
Closing Date of the following conditions, provided that any or all of the
following conditions may be waived, in whole or in part, by the Company in its
sole and absolute discretion:
5.1. REPRESENTATIONS AND WARRANTIES. The representations and warranties of
each Purchaser made in Section 6 hereof shall have been true and correct when
made and on and as of the Closing Date.
5.2. GOVERNMENT AND THIRD PARTY PERMITS, CONSENTS, ETC. The Company shall
have duly applied for and obtained all material approvals from each Government
Authority, or
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<PAGE> 27
pursuant to any material agreement to which the Company is a party or to which
it or any of its material assets is subject, which are required in connection
with this Agreement or the Other Transaction Documents and such approvals shall
remain in effect upon consummation of the transactions contemplated by this
Agreement and the Other Transaction Documents, and all applicable waiting
periods, including, without limitation, the waiting period required under the
HSR Act with respect to such contemplated transactions, shall have expired
without any action being taken by any competent Government Authority and no law
or regulation shall be applicable which restrains or prevents, or imposes
adverse conditions upon, such contemplated transactions.
5.3. CERTIFICATE OF DESIGNATIONS. The Board of Directors and, if necessary,
the stockholders of the Company shall have duly adopted the Certificate of
Designations and the Certificate of Designations shall have been duly filed with
the Secretary of State of the State of Delaware.
5.4. SPECIAL STOCKHOLDERS MEETING; NASDAQ APPROVAL. On or prior to the
Second Closing Date, the Company's stockholders shall have duly approved by the
requisite vote under applicable Nasdaq rules the Stockholder Meeting Matter (as
defined in Section 7.1(b)) at the Special Stockholders Meeting.
5.5. NO VIOLATION OR INJUNCTION. The consummation of the transactions
contemplated by this Agreement and the Other Transaction Documents shall not be
in violation of any law or regulation and shall not be subject to any
injunction, stay or restraining order that has not been reversed or overturned.
5.6. PURCHASE PRICE. The Purchasers shall have paid the applicable purchase
price to the Company in accordance with Section 1 hereof.
5.7. FAIRNESS OPINION. The Company shall have received an opinion, prior to
the Second Closing Date, from Hanifen, Imhoff, Inc., Investment Bankers, in form
and substance reasonably satisfactory to the Company, substantially to the
effect that the consideration to be received by the Company at the Second
Closing under the terms of this Agreement is fair, from a financial point of
view, to the Company.
6. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.
In order to induce the Company to enter into this Agreement and the Other
Transaction Documents and to issue and sell the Units, each Purchaser severally
represents and warrants to the Company, as of the date hereof and as of the
Closing Date (except to the extent that any of the following representations or
warranties specifically apply or relate to a prior date, in which event such
Purchaser represents and warrants as of such prior date), as to itself only, as
follows:
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6.1. STATUS. Such Purchaser (i) is a duly organized and validly existing
limited liability company, partnership or trust fund in good standing under the
laws of the jurisdiction of its incorporation or formation and (ii) has the
requisite power and authority to acquire and own the Securities.
6.2. POWER AND AUTHORITY; ENFORCEABILITY. The execution, delivery and
performance by such Purchaser of its obligations under the Transaction Documents
to which such Purchaser is a party and the purchase by such Purchaser of the
Units Securities pursuant to this Agreement are within such Purchaser's
corporate, limited liability company or partnership power and have been duly
authorized by all necessary corporate, limited liability or partnership action
on the part of such Purchaser. Such Purchaser has, or on the Closing Date will
have, duly executed and delivered each Transaction Document to which it is a
party and each such Transaction Document constitutes or will constitute such
Purchaser's legal, valid and binding obligation, enforceable in accordance with
its terms except to the extent that its enforceability may be subject to
applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws
affecting creditor's rights generally and to general equitable principles.
6.3. SECURITIES REPRESENTATIONS.
(a) Such Purchaser is (i) an "accredited investor" as that term is
defined in Rule 501 promulgated under the Securities Act, (ii) knowledgeable,
sophisticated and experienced in financial and business matters as to be capable
of evaluating the merits and risks of its investment in the Securities, (iii)
capable of bearing the economic risk of such investments, including a complete
loss of its investment in the Securities, and (iv) able, by reason of the
business and financial experience of its officers, partners, and, employees and
agents and professional advisors (who are not affiliated with or compensated in
any way by the Company or any of its affiliates or selling agents) to protect
its own interests in connection with the transactions described in this
agreement and the related documents.
(b) Such Purchaser is acquiring the Securities for its own account
and not with a view towards the public sale or distribution of such Securities,
unless such public sale or distribution is properly registered under the
Securities Act or exempt from the registration requirements thereof.
(c) Such Purchaser understands that the Securities are being offered
and sold to it pursuant to and a reliance upon certain exemptions from the
registration requirements of the Securities Act and applicable state securities
laws and that the Company is relying upon the truth and accuracy of, and the
Purchaser's compliance with, the representation, warranties, agreements,
acknowledgments and understandings of such Purchaser set forth herein in order
to determine the availability of such exemptions and the eligibility of such
Purchaser to acquire the Securities.
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<PAGE> 29
(d) Such Purchaser understands that any subsequent offer or sale of
the securities by the Purchaser must be registered under the Securities Act and
applicable state, securities laws or exempt from the registration requirements
thereof.
(e) The Company has furnished or otherwise made available to such
Purchaser or its agents, all documents, information and materials relating to
the business, affairs, operations or condition of the Company and to this
transaction which have been requested by or on behalf of such Purchaser. In
addition, such Purchaser and its agents have been given the opportunity to ask
questions of, and to receive the answers from, the Company concerning its
business, affairs, operations and conditions, as well as the terms and
conditions of the Securities and other related matters, and has received
complete and satisfactory answers to all such inquiries. In evaluating the
suitability of an investment in the Securities, the Purchaser has not relied
upon any representations or other information (whether oral or written) made by
or on behalf of the Company other than as expressly set forth in this Agreement.
6.4. MARGIN COMPLIANCE. Such Purchaser is not relying, directly or
indirectly, on any "margin stock" (as defined in Regulation U of the Federal
Reserve Board) as collateral for the Securities. Such Purchaser is not a
broker-dealer subject to Regulation T of the Federal Reserve Board.
6.5. SOURCE OF FUNDS. If any part of the funds to be used to purchase the
Securities constitutes assets of any employee benefit plan within the meaning of
Section 3 of ERISA, either (i) such Securities are being purchased pursuant to
an available exemption from the provisions of 406 of ERISA and Section 4975 of
the Code or (ii) the assets do not constitute "plan assets" as defined in ERISA.
6.6. BROKERS' FEES. No Purchaser has any obligation to any Person in
respect of any finder's, brokers', investment banking or other similar fees in
connection with any of the Transaction Documents.
6.7. POST-RESET STANDSTILL. If the Exercise Price (as defined in the
Warrants) or the Conversion Price (as defined in the Certificate of
Designations) is adjusted pursuant to Section 2.2 of the Warrants or Section
A.7(a) of the Certificate of Designations, respectively, then the Purchasers and
their assigns shall not, for a period of ninety (90) days after such adjustment,
sell, pledge or otherwise transfer any Capital Stock of the Company (other than
to their respective Affiliates) and shall not, for a period of thirty (30) days
after such adjustment, purchase any Capital Stock of the Company (except that
they may exercise Warrants or convert Convertible Preferred Shares) for the
purpose of covering a "short" position; provided, however, that the restrictions
of this Section 6.7 shall terminate prior to the end of the foregoing periods
upon written notice of redemption of the Convertible Preferred Stock given by
the Company pursuant to Section A.5(a)(iii) of the Certificate of Designations.
Notwithstanding the foregoing, State Street Bank & Trust, in its capacity as
Trustee for General
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<PAGE> 30
Motors Employees Global Group Pension Trust, shall only be subject to the
limitations of this Section 6.7 with respect to accounts managed or advised by
DDJ Capital Management, LLC.
7. COVENANTS OF THE COMPANY.
7.1. SPECIAL STOCKHOLDERS MEETING.
(a) PROXY STATEMENT; OTHER FILINGS. As promptly as practicable, the
Company shall (i) prepare and file with the Commission under the Exchange Act a
Proxy Statement with respect to the Special Stockholders Meeting containing the
information required to be included therein, (ii) after consultation with the
Purchasers, use its best efforts to promptly respond to any comments by the
Commission with respect to the Proxy Statement and any preliminary version
thereof and (iii) promptly after clearance by the Commission, mail the Proxy
Statement to its stockholders. The term "PROXY STATEMENT" shall mean such proxy
statement, as the case may be, and all related proxy materials at the time such
documents initially are mailed to the Company's stockholders, and all amendments
or supplements thereto, if any, similarly filed and mailed. The Company shall
give the Purchasers and the Purchasers' Special Counsel a reasonable opportunity
to review and comment upon the Proxy Statement prior to its being filed with the
Commission and shall give the Purchasers and the Purchasers' Special Counsel a
reasonable opportunity to review all amendments and supplements to the Proxy
Statement and all responses to requests for additional information and replies
to comments prior to their being filed with, or sent to, the Commission and, in
the case of the Proxy Statement and any amendments or supplements thereto, prior
to its being disseminated to the Company's stockholders. The Company shall
promptly notify the Purchasers of the receipt of any comments on, or any request
for amendments or supplements to, the Proxy Statement by the Commission or any
other governmental entity or official, and the Company shall supply the
Purchasers with copies of all correspondence between it and each of its
Subsidiaries and representatives, on the one hand, and the Commission or the
members of its staff or any other appropriate governmental official, on the
other hand, with respect to the Proxy Statement. The information provided and to
be provided by the Purchasers and the Company, respectively, for use in the
Proxy Statement shall, on both the date the Proxy Statement is first mailed to
the Company's stockholders as referred to in Section 7.1(b) hereof and the date
the Special Stockholders Meeting is held, not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they are made, not misleading, or necessary to correct any statement in
any earlier communication with respect to the solicitation of proxies for the
stockholders' meeting which shall have become false or misleading, and shall
comply in all material respects as to form and substance with all applicable
requirements of law. The Purchasers and the Company agree to correct promptly
any such information provided by them for use in the Proxy Statement which, to
their respective knowledge, shall have become false or misleading.
(b) SPECIAL STOCKHOLDERS MEETING. In order to consummate the issuance
of the Additional Units and the transactions contemplated hereby in connection
therewith (the
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<PAGE> 31
"STOCKHOLDERS MEETING MATTER"), the Company, acting through the Board of
Directors, shall take all action necessary in accordance with applicable law and
the Company's Charter Documents to duly call, give notice of, convene and hold a
special meeting of its stockholders as promptly as practicable (but in no event
later than 90 days after the Initial Closing Date) to consider and vote upon the
approval of the Stockholders Meeting Matter and to take such other action as is
necessary or desirable to consummate the transactions contemplated hereby (the
"SPECIAL STOCKHOLDERS MEETING"). Except to the extent required by law or the
Company's Charter Documents or as set forth in SCHEDULE 7.1(b), the Company
shall not present any other matter at the Special Stockholders Meeting except
for the matters contemplated by this Agreement. The Proxy Statement shall
contain the determination and the recommendation of the Board of Directors that
the stockholders of the Company approve the Stockholders Meeting Matter and the
transactions contemplated hereby and the Company, acting through the Board of
Directors, shall use its best efforts to obtain such approval. The Purchasers
and the Company shall coordinate and cooperate with respect to the foregoing
matters at the Company's expense.
7.2. GENERAL COVENANTS OF THE COMPANY.
(a) The Company covenants and agrees that so long as at least 1,000
shares of Convertible Preferred Stock are outstanding, the Company shall file
with the Commission the annual reports and quarterly reports and the
information, documents and other reports that are required to be filed with the
Commission pursuant to Sections 13 and 15 of the Exchange Act, whether or not
the Company has or is required to have a class of securities registered under
the Exchange Act and whether or not the Company is then subject to the reporting
requirements of the Exchange Act, at the time the Company is or would be
required to file the same with the Commission and, promptly after the Company is
or would be required to file such reports, information or documents with the
Commission, to mail copies of such reports, information and documents to the
holders of the Convertible Preferred Stock and the Conversion Shares.
(b) USE OF PROCEEDS. The Company shall use all of the proceeds from
the Closing in the manner set forth in SCHEDULE 1.5 hereto.
(c) COMPLIANCE WITH LAW. The Company shall, and shall cause each of
its Subsidiaries to, comply with all applicable laws, rules, statutes,
regulations, decrees and orders of, and all applicable restrictions imposed by,
all Government bodies, domestic or foreign, in respect of the conduct of their
business and the ownership of their properties, except where the failure to
comply could not reasonably be expected to have a Material Adverse Effect.
(d) CORPORATE EXISTENCE AND OTHER INTANGIBLES. The Company shall do
or cause to be done all things necessary to preserve and keep in full force and
effect its corporate existence and the corporate, partnership or other existence
of each of its material Subsidiaries in accordance with the respective
organizational documents of such Subsidiary and the rights (charter and
statutory), licenses and franchises of the Company and each of its Subsidiaries;
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<PAGE> 32
PROVIDED, HOWEVER, that the Company shall not be required to preserve any such
right, license or franchise, or the corporate, partnership or other existence of
any Subsidiary, if the Board of Directors of the Company shall determine, in the
exercise of business judgment, that the preservation thereof is no longer
desirable in the conduct of the business of the Company and its Subsidiaries
taken as a whole.
The Company shall, and shall cause each of its Subsidiaries to, do or cause
to be done, all things necessary to preserve and keep in full force and effect
its patents, trademarks, service marks, trade names, copyrights, franchises,
licenses, permits, certificates, authorizations, qualifications, accreditations,
easements, rights of way and other rights, consents and approvals, except where
the failure to so preserve any of the foregoing could not reasonably be expected
to, individually or in the aggregate, result in a Material Adverse Effect.
(e) ACCOUNTING METHODS. Unless consistent with GAAP, the Company will
not, and it will not permit any Subsidiary to, change or introduce any new
method of accounting which differs in any substantive respect from the
accounting as reflected in the Commission Reports.
(f) INDEMNIFICATION OF DIRECTORS; PAYMENT OF DIRECTORS' EXPENSES. The
Company shall (i) at all times maintain provisions in its By-laws (as they may
be amended from time to time) indemnifying any member of the Board of Directors
of the Company chosen by the Purchasers pursuant to Section 7.5 against
liability and limiting such liability, both to the maximum extent permitted
under the laws of the State of Delaware, (ii) enter into an Indemnification
Agreement in the form attached hereto as EXHIBIT D with any such member of the
Board of Directors, and (iii) promptly reimburse any such member of the Board of
Directors of the Company for his or her reasonable out-of-pocket expenses in
accordance with the regular policies of the Company's Board of Directors
incurred in attending each meeting of the Board of Directors of the Company or
any committee thereof of which he or she is a member.
(g) DIRECTORS AND OFFICERS LIABILITY INSURANCE. The Company shall
obtain and maintain standard directors and officers liability insurance coverage
with a financially sound and reputable insurance company to the extent such
coverage is available on commercially reasonable terms.
(h) CONFLICTING AGREEMENTS. The Company shall not, and shall not
permit any of its Subsidiaries to, enter into any agreement or instrument (or
amend any existing agreement or instrument) that prohibits the Company from
repurchasing or redeeming the Convertible Preferred Stock in accordance with the
terms of the Certificate of Incorporation or issuing Common Stock upon
conversion of the Convertible Preferred Stock or exercise of the Warrants.
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(i) INVESTMENT COMPANY ACT. The Company shall not become an
"investment company" subject to registration under the Investment Company Act of
1940, as amended.
(j) FURTHER INSTRUMENTS AND ACTS. The Company shall, and shall cause
each of its Subsidiaries to, execute and deliver such further instruments and do
such further acts as any holder of Securities acquired directly or indirectly
pursuant to this Agreement may deem reasonably necessary or proper to carry out
more effectively the purposes of this Agreement and the Other Transaction
Documents.
7.3. COMPLIANCE CERTIFICATE. So long as at least 1,000 shares of
Convertible Preferred Stock shall remain outstanding, the Company shall deliver
to the Purchasers (or their assignees), within forty-five (45) days after the
end of each fiscal year of the Company, and within forty-five (45) days after
the end of each of the first three quarters of each fiscal year of the Company,
an Officers' Certificate stating that (i) a review of the activities of the
Company and its Subsidiaries during the preceding fiscal year or quarter, as the
case may be, has been made to determine whether the Company has kept, observed,
performed and fulfilled all of its obligations under this Agreement and the
Securities, (ii) such review was supervised by the Officers of the Company
signing such certificate, and (iii) to the best knowledge of each Officer
signing such certificate, the Company has in all material respects kept,
observed, performed and fulfilled the covenants contained in this Agreement and
is not in default in any material respect in the performance or observance of
any of the terms, provisions and conditions of this Agreement.
7.4. RESTRICTIONS ON ACTION BY THE COMPANY. As long as (i) at least 1,000
shares of Convertible Preferred Stock are held by the Purchasers, or (ii)
Warrants or shares representing at least 1,000 shares of Common Stock are held
by the Purchasers and there is not a registration statement in effect covering
all such shares of Common Stock, without the prior written consent of Purchasers
holding at least a majority of the Common Stock represented by the Securities
held by the Purchasers (which consent shall not be unreasonably withheld), the
Company shall not, and the Company shall cause the Company's Subsidiaries not
to, directly or indirectly, enter into an agreement with respect to, or effect,
or permit, any:
(i) merger or consolidation of the Company or any Subsidiary
with any other Person, recapitalization, reorganization or other like
transaction involving the Company or any Subsidiary, or liquidation or
dissolution of the Company or any Subsidiary;
(ii) sale or transfer of all or substantially all of the
Company's consolidated properties or assets;
(iii) disposition of assets in one or more transactions for
consideration in excess of $1,000,000 without the approval of the
Board of Directors of the Company;
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<PAGE> 34
(iv) issuance of any equity securities or any securities
exchangeable or convertible into equity securities or measured by
earnings or profit of the Company or any Subsidiary, provided that the
Company (and the Subsidiaries set forth on Schedule 7.4) may issue
securities that rank junior to the Convertible Preferred Stock as to
liquidation, dividend and redemption rights;
(v) redemption, repurchase or other acquisition for value of any
equity security of the Company;
(vi) amendment of the Company's or any Subsidiary's Charter
Documents; or
(vii) incurrence of indebtedness for money borrowed, except for
borrowings under the Company's primary credit agreement of up to
$3,000,000.
The restriction on repurchases contained in Section 7.4(v) shall not apply to
the repurchase by the Company of up to 250,000 shares of Common Stock pursuant
to the terms of restrictive agreements under which the Corporation has the
option to repurchase such shares from employees, officers, directors,
consultants, or other persons performing services for the Company or any
Subsidiary upon the occurrence of certain events.
7.5. BOARD OF DIRECTORS. So long as any at least 2,000 shares of
Convertible Preferred Stock are outstanding, Purchasers (or their transferees)
holding a majority of the outstanding Convertible Preferred Stock shall have the
right to designate one person as a Director of the Company in accordance with
the Certificate of Designations. The Company shall use its best efforts to cause
any such designee to be nominated, elected and continued as a Director of the
Company and not to be removed for any reason other than in connection with the
designation and election of a successor in accordance with the Certificate of
Designations.
7.6. EXCHANGE AT SECOND CLOSING. If for any reason the economic terms of
the transactions to be consummated at the Second Closing are more favorable to
the Purchasers than the economic terms of the Initial Closing (other than the
fact that, solely because the Second Closing will occur after the First Closing,
the Convertible Preferred Stock issued at the Second Closing will become
convertible, and the Warrants issued at the Second Closing will become
exercisable, sooner than the Convertible Preferred Stock and Warrants issued at
the First Closing), then the Purchasers who purchased Securities at the Initial
Closing shall be entitled to receive the economic benefit of the Second Closing
with respect to such initially purchased securities, whether through refund,
redemption, exchange or otherwise.
8. RESTRICTIONS ON TRANSFER.
8.1. RESTRICTIVE LEGENDS. Except as otherwise permitted by this Section
8.1, each Convertible Preferred Share, Initial Common Share, Warrant and
Conversion Share issued
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<PAGE> 35
pursuant to this Agreement shall be stamped or otherwise imprinted with a legend
in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, NOR PURSUANT
TO THE SECURITIES OR "BLUE SKY" LAWS OF ANY STATE. SUCH SECURITIES MAY
NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE
ASSIGNED, EXCEPT IN ACCORDANCE WITH APPLICABLE "BLUE SKY" LAWS AND
PURSUANT TO A REGISTRATION STATEMENT WITH RESPECT TO SUCH SECURITIES
WHICH IS EFFECTIVE UNDER SUCH ACT OR AN EXEMPTION FROM REGISTRATION
UNDER SUCH ACT.
The Company shall maintain a copy of this Agreement and any amendments
thereto on file in its principal office, and will make such copy available
during normal business hours for inspection to any party thereto or will provide
such copy to any holder of Convertible Preferred Shares, Initial Common Shares,
Warrants or Conversion Shares upon such holder's request. The legend requirement
of this Section 8.1 shall terminate when the applicable securities are
transferred pursuant to an effective registration statement under the Securities
Act or may be sold pursuant to Rule 144(k) under the Securities Act without
regard to the volume or manner of sale limitations set forth therein.
8.2. REMOVAL OF LEGENDS. Whenever the legend requirement imposed by Section
8.1 shall terminate, the respective holders of Convertible Preferred Shares,
Initial Common Shares, Warrants or Conversion Shares for which such legend
requirements have terminated shall be entitled to receive from the Company, at
the Company's expense, new certificates representing such Convertible Preferred
Shares, Initial Common Shares, Warrants or Conversion Shares, as applicable,
without such legend.
8.3. TRANSFER INFORMATION. The holder of each Convertible Preferred Share,
Initial Common Share, Warrants or Conversion Share bearing the restrictive
legend set forth in Section 8.1 above agrees with respect to any transfer of
such security, upon reasonable request from the Company to such holder, to give
to the Company written information describing the transferee and the
circumstances of such transfer necessary to establish the availability of an
exemption from the registration requirements of the Securities Act.
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<PAGE> 36
9. DEFINITIONS.
As used herein the following terms have the following respective meanings:
"AFFILIATE" means with respect to any Person, any "person" or "group"
(as such terms are used in Sections 13(d) and 14(d) of the Exchange Act)
directly or indirectly controlling or controlled by or under common control with
such Person, provided that, for purposes of this definition, "control"
(including, with correlative meanings, the terms "controlled by" and "under
common control with"), as used with respect to any Person, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities or by contract or otherwise.
"AGREEMENT" means this Agreement, as amended, modified or supplemented
from time to time, together with any exhibits, schedules or other attachments
thereto.
"BOARD OF DIRECTORS" means the Board of Directors of the Company or
any committee thereof duly authorized to act on behalf of such Board.
"BUSINESS DAY" means any day other than a day on which banks are
authorized or required to be closed in the State of New York.
"CAPITAL STOCK" means any and all shares, interests, participations,
rights in or other equivalents (however designated) of capital stock of a
corporation, and any rights, warrants or options exchangeable for or convertible
into such capital stock and any and all equivalent ownership interests in a
Person (other than a Corporation).
"CODE" means the Internal Revenue Code of 1986, and the rules and
regulations thereunder, as amended from time to time.
"COMMISSION" means the United States Securities and Exchange
Commission or any other Federal agency at the time administering the Securities
Act, the Exchange Act and other securities laws.
"COMPANY" has the meaning ascribed thereto in the introduction hereof,
and shall include all successors and assigns of the Company.
"ENVIRONMENTAL LAWS" means all federal, state, local and foreign laws
and regulations relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water, ground
water, land surface or subsurface strata), including without limitation, laws
and regulations relating to emissions, discharges, releases or threatened
releases of Materials of Environmental Concern, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Materials of Environmental Concern.
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<PAGE> 37
"ERISA" means the Employee Retirement Income Security Act of 1974, and
the rules and regulations thereunder, as amended from time to time.
"EXCHANGE ACT" means the Securities Exchange Act of 1934 and the rules
and regulations of the Commission promulgated thereunder, as amended.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, which are applicable as of the date of
determination.
"GOVERNMENT AUTHORITY" means any nation or government, any state,
provincial or political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"HAZARDOUS MATERIAL" means and includes any hazardous waste as defined
or regulated under any Environmental Law.
"INVESTMENT ADVISERS ACT" shall mean the Investment Advisors Act of
1940, and the rules and regulations promulgated thereunder, as such may be
amended or supplemented from time to time.
"IRS" means the Internal Revenue Service or any successor agency.
"LIEN" means any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), or preference, priority or
other security agreement of any kind or nature whatsoever, including, without
limitation, any conditional sale or other title retention agreement, any
financing lease having substantially the same effect as any of the foregoing.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on the
financial condition, revenues, properties, assets, business or operations of the
Company and its Subsidiaries taken as a whole.
"MATERIALS OF ENVIRONMENTAL CONCERN" means and includes chemicals,
pollutants, contaminants, wastes, toxic substances, petroleum and petroleum
products.
"OTHER TRANSACTION DOCUMENTS" means, collectively, the Securities and
any and all agreements, certificates, instruments and other documents
contemplated thereby or executed and delivered in connection therewith or with
this Agreement.
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<PAGE> 38
"PERMITTED LIENS" means (i) any minor imperfection of title with
respect to such asset which does materially adversely affect the value of such
asset or materially interfere with the present use and continuation of such
present use of such asset in the business of the Company; (ii) Liens that are
not related to mortgages or other financial encumbrances, and any other stated
effects, which do not, individually or in the aggregate, materially detract from
the value, or, as presently used or occupied, materially interfere with the
present occupancy or use of such asset; (iii) Liens in favor of the Company or
any of its Subsidiaries; (iv) Liens on property of a Person existing at the time
such Person is merged into or consolidated with, or acquired by, the Company or
any of its Subsidiaries, provided that such Liens were in existence prior to the
contemplation of such merger, consolidation or acquisition and do not extend to
any assets other than those of the Person merged into, consolidated with or
acquired by the Company or any such Subsidiary; (v) Liens on property existing
at the time of acquisition thereof by the Company or any of its Subsidiaries,
provided that such Liens were in existence prior to the contemplation of such
acquisition; (vi) Liens to secure the performance of statutory obligations,
surety or appeal bonds, performance bonds, reimbursement obligations in respect
of letters of credit and self-insurance programs or other obligations of a like
nature incurred in the ordinary course of business; (vii) Liens existing on the
date of this Agreement and set forth on SCHEDULE L hereto; (viii) (A) Liens for
taxes, assessments or Government charges or claims and (B) mechanics',
materialmen's and similar Liens, in each case that are not yet delinquent or
that are being contested in good faith by appropriate proceedings promptly
instituted and diligently concluded, provided that any reserve or other
appropriate provision as shall be required in conformity with GAAP shall have
been made therefor; and (ix) Liens in respect of extensions, renewals,
refundings or refinancings of any Indebtedness secured by the Liens referred to
in clauses (iii), (iv), (v) and (vii) above; provided that the Liens in
connection with such renewal, extensions, renewals, refundings or refinancings
shall be limited to all or part of the specific property which was subject to
the original Lien and shall not secure an aggregate principal amount of
indebtedness which is greater than the aggregate principal amount of
indebtedness previously secured (together with any interest capitalized in
connection with such refinancing).
"PERSON" means any natural person, sole proprietorship, partnership,
joint venture, trust, incorporated organization, limited liability company,
association, corporation, institution, public benefit corporation, entity or
government body (whether federal, state, county, city, municipal or otherwise,
including, without limitation, any instrumentality, division, agency, commission
or department thereof).
"PROPERTY" or "PROPERTY" means any assets or property of any kind or
nature whatsoever, real, personal, or mixed (including fixtures), whether
tangible or intangible.
"PURCHASERS" has the meaning ascribed thereto in the introduction
hereof, and shall include all successors and permitted assigns of the
Purchasers.
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<PAGE> 39
"PURCHASERS' SPECIAL COUNSEL" means Goodwin, Procter & Hoar LLP, a
limited liability partnership including professional corporations, acting as
counsel to the Purchasers in connection with the transactions contemplated
hereunder.
"SECURITIES ACT" means the Securities Act of 1933, and the rules and
regulations of the Commission promulgated thereunder, as amended.
"SUBSIDIARY" means with respect to any Person, any corporation,
association or other business entity of which securities representing more than
fifty percent (50%) of the combined voting power of the total Voting Stock (or
in the case of an association or other business entity which is not a
corporation, more than fifty percent (50%) of the equity interest) is at the
time owned or controlled, directly or indirectly, by that Person or one or more
Subsidiaries of that Person or a combination thereof. When used herein without
reference to any Person, Subsidiary means a Subsidiary of the Company.
"TAX RETURN" means any return, declaration, report, claim for refund
or information, return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"TAX" and "TAXES" means all present and future taxes, surtaxes,
duties, levies, imposts, rates, fees, assessments, withholdings and other
charges of any nature (including income, corporate, capital (including large
corporations), net worth, sales, consumption, use, transfer, goods and services,
value-added, stamp, registration, franchise, withholding, payroll, employment,
excise, business, and property) imposed by any Government Entity, including
without limitation any ad valorem, property, production, excise, severance,
windfall profit and similar taxes, together with any fines, interest, penalties
or other additions on, to, in lieu, for non-collection of or in respect of those
taxes, surtaxes, duties, levies, imposts, rates, fees, assessments, withholdings
and other charges.
"TRANSACTION DOCUMENTS" means, collectively, this Agreement and the
Other Transaction Documents.
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<PAGE> 40
In addition to the foregoing, the following terms are defined in the
following Sections of this Agreement:
<TABLE>
<CAPTION>
Term Defined in Section
---- ------------------
<S> <C>
"Charter Documents"....................................................4.1
"Closing"..............................................................3
"Closing Date".........................................................3
"Commission"...........................................................4.6(a)
"Commission Reports"...................................................4.6(b)
"Common Stock".........................................................1.1
"Conversion Shares"....................................................1.1
"Convertible Preferred Stock"..........................................1.1
"Convertible Preferred Stock"..........................Introductory Statement
"Employee Program".....................................................4.30(a)
"HSR Act"..............................................................3.12
"Indemnified Party" and "Indemnified Parties".........................10.1(a)
"Initial Closing"......................................................2.1
"Initial Closing Date".................................................2.1
"Initial Common Shares"................................................1.1
"Intellectual Property"................................................4.25
"License"..............................................................4.4
"Losses"..............................................................10.1(a)
"Multiemployer Plan"...................................................4.20(c)
"Proxy Statement"......................................................7.1(a)
"Purchasers"...........................................Introductory Statement
"Securities"...........................................................1.1
"Second Closing".......................................................2.2
"Second Closing Date"..................................................2.2
"Special Stockholders Meeting".........................................7.1(b)
"Stockholders Meeting Matter"..........................................7.1(b)
"Units"...............................................Introductory Statement
</TABLE>
10. INDEMNIFICATION
10.1. INDEMNIFICATION; EXPENSES, ETC.
(a) The Company agrees to indemnify and hold harmless the Purchasers,
their respective Affiliates, and the employees, officers, partners, members,
directors, and agents of the Purchasers and their respective Affiliates
(individually, an "INDEMNIFIED PARTY" and, collectively the "INDEMNIFIED
PARTIES") from and against any and all losses, claims, damages, liabilities,
costs (including the costs of preparation and reasonable attorneys' fees) and
expenses (including expenses of investigation) (collectively, "LOSSES") incurred
or suffered by an Indemnified Party (i) in connection with or arising out of any
breach of any warranty, or
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<PAGE> 41
the inaccuracy of any representation, as the case may be, made by the Company,
or the failure of the Company to fulfill any agreement or covenant contained in
this Agreement or (ii) in connection with any proceeding against the Company or
any Indemnified Party brought by any third party arising out of or in connection
with the Transaction Documents or the transactions contemplated hereby or
thereby, as the case may be, or any action taken in connection herewith or
therewith (or any other document or instrument executed herewith or pursuant
hereto or thereto), whether or not the transactions contemplated by this
Agreement are consummated or whether or not any Indemnified Party is a formal
party to any proceeding; PROVIDED, HOWEVER, that the Company shall not be liable
for any losses resulting from action on the part of any Indemnified Party which
is finally determined in such proceeding to be an act of gross negligence or
willful misconduct by such Indemnified Party. The Company agrees promptly to
reimburse any Indemnified Party for all such Losses as they are incurred or
suffered by such Indemnified Party which are demonstrated to the reasonable
satisfaction of the Company.
Except as otherwise provided herein, the Company agrees (for the benefit of
the Purchasers) to pay, and to hold each of the Purchasers harmless from and
against, all costs and expenses (including, without limitation, reasonable
attorneys' fees, expenses and disbursements), if any, incurred in connection
with the enforcement against the Company of this Agreement or any Other
Transaction Document to which the Company is a party or in connection herewith
or therewith in any action in which a Purchaser shall prevail or in any action
in which a Purchaser shall in good faith assert any provision of any of the
foregoing as a defense.
(b) If any Indemnified Party is entitled to indemnification
hereunder, such Indemnified Party shall give prompt notice to the Company of any
claim or of the commencement of any proceeding against the Company or any
Indemnified Party brought by any third party with respect to which such
Indemnified Party seeks indemnification pursuant hereto; PROVIDED, HOWEVER, that
the failure so to notify the Company shall not relieve the Company from any
obligation or liability except to the extent the Company is prejudiced by such
failure. The Company shall have the right, exercisable by giving written notice
to an Indemnified Party promptly after the receipt of written notice from such
Indemnified Party of such claim or proceeding, to assume, at the expense of the
Company, the defense of any such claim or proceeding with counsel reasonably
satisfactory to such Indemnified Party. The Indemnified Party or Parties will
not be subject to any liability for any settlement made without its or their
consent (but such consent will not be unreasonably withheld). The Company shall
not consent to entry of any judgment or enter into any settlement that does not
include as an unconditional term thereof the giving by claimant or plaintiff to
such Indemnified Party or Parties of a release, in form and substance
satisfactory to the Indemnified Party or Parties, from all liability in respect
of such claim, litigation or proceeding.
(c) In addition to any other obligations of the Company to indemnify
the Purchasers pursuant to any of the Transaction Documents, the Company will
pay, and will save the Purchasers and each other holder of any of the Securities
harmless from liability for
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<PAGE> 42
the payment of, all expenses arising in connection with the transactions
contemplated by the Transaction Documents, including, without limitation: (a)
all document production and duplication charges and the reasonable fees, charges
and expenses of Purchaser's Special Counsel (whether arising before or after the
Closing Date), the transactions contemplated hereby and any subsequent proposed
modification of, or proposed consent under, this Agreement, whether or not such
proposed modification shall be effected or such proposed consent granted; (b)
the costs of obtaining a private placement CUSIP number from Standard & Poor's
Corporation for the Securities; (c) the costs and expenses, including attorneys'
fees, incurred by the Purchasers in enforcing any rights under this Agreement or
in responding to any subpoena or other legal process issued in connection with
this Agreement or the transactions contemplated hereby or thereby or by reason
of the Purchasers' having acquired any of the Securities, including, without
limitation, costs and expenses incurred by the Purchasers in any bankruptcy
case; (d) the cost of delivering to the Purchasers' principal office, insured to
its satisfaction, the Units delivered to the Purchasers hereunder and any
Securities delivered to the Purchasers upon any substitution of Securities
pursuant to this Agreement or any of the Transaction Documents and of the
Purchasers' delivering any Securities, insured to their satisfaction, upon any
such substitution; and (e) the reasonable out-of-pocket expenses incurred by the
Purchasers in connection with such transactions and any such amendments or
waivers.
10.2. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties contained in this Agreement or the Other Transaction Documents or
made in writing by or on behalf of the Company in connection with the
transactions contemplated by this Agreement or the Other Transaction Documents
shall survive for the duration of any statutes of limitation applicable thereto,
the execution and delivery of this Agreement, any investigation at any time made
by the Purchasers or on the Purchasers' behalf, the purchase of the Securities
by the Purchasers under this Agreement and any disposition of or payment on the
Securities.
11. MISCELLANEOUS
11.1. NOTICES, ETC. Any notice or communication under this Agreement shall
be duly given if in writing and delivered in person, mailed by registered or
certified mail, postage prepaid, return receipt requested or delivered by
telecopier or overnight air courier guaranteeing next day delivery to the
other's address:
If to the Company: Metretek Technologies, Inc.
World Trade Center
1675 Broadway
Suite 2150
Denver, CO 80202
Fax: (303) 592-5556
Tel: (303) 592-5555
Attn: W. Phillip Marcum, Chairman
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<PAGE> 43
With a copy to: Kegler, Brown, Hill & Ritter Co, L.P.A.
Capitol Square
Suite 1800
65 East State Street
Columbus, OH 43215-4294
Attn: Paul R. Hess, Esq.
If to the Purchasers: c/o DDJ Capital Management, LLC
141 Linden Street, Suite S-4
Wellesley, Massachusetts 02181
Attn: General Counsel
Fax: (617) 283-8555
Tel: (617) 283-8500
With a copy to: Goodwin, Procter & Hoar LLP
Exchange Place
Boston, Massachusetts 02109
Attn: Laura Hodges Taylor, P.C.
Fax: (617) 570-8150
Tel: (617) 570-1536
The Company or the Purchaser by notice to the other may designate
additional or different addresses for subsequent notices or communications.
All notices and communications shall be deemed to have been duly given: at
the time delivered by hand, if personally delivered; the date receipt is
acknowledged, if mailed by registered or certified mail; when answered back, if
telecopied; and the next Business Day after timely delivery to the courier, if
sent by overnight air courier guaranteeing next day delivery.
11.2. SEVERABILITY. Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof or affecting the validity or enforceability of such
provisions in any other jurisdiction.
11.3. AMENDMENT AND WAIVER. This Agreement may be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may be given, provided that the same are in writing and signed by the Company
and Purchasers (or their assignees) holding at least a majority of the Common
Stock issued or issuable pursuant to this Agreement (including upon exercise of
the Warrants and conversion of the Convertible Preferred Stock).
11.4. SUCCESSORS AND ASSIGNS. Whenever in this Agreement any of the parties
hereto are referred to, such reference shall be deemed to include the successors
and assigns of such
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<PAGE> 44
party; and all covenants, promises and agreements by or on behalf of the
respective parties which are contained in this Agreement shall bind and inure to
the benefit of the successors and assigns of all other parties. The terms and
provisions of this Agreement and the Other Transaction Documents shall inure to
the benefit of and shall be binding upon any assignee or transferee of a
Purchaser, and in the event of such transfer or assignment, the rights and
privileges herein conferred upon a Purchaser shall automatically extend to and
be vested in, and become an obligation of, such transferee or assignee, all
subject to the terms and conditions hereof. In connection therewith, such
transferee or assignee may disclose all documents and information which such
transferee or assignee now or hereafter may have relating to the Transaction
Documents, the Company, any other Persons referred to herein or any of the
business of any of the foregoing entities, subject to full compliance with
Section 11.9 hereof.
11.5. DESCRIPTIVE HEADINGS. The headings in this Agreement are for purposes
of reference only and shall not limit or otherwise affect the meaning hereof.
11.6. GOVERNING LAW. THIS AGREEMENT AND THE SECURITIES SHALL BE CONSTRUED
AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED
BY, THE INTERNAL LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD TO PRINCIPLES OF
CONFLICT OF LAW.
11.7. SERVICE OF PROCESS. The Company (a) hereby irrevocably submits itself
to the jurisdiction of the state courts of the Commonwealth of Massachusetts and
to the jurisdiction of the United States District Court for the District of
Massachusetts for the purpose of any suit, action or other proceeding arising
out of or based upon this Agreement, the Other Transaction Documents or the
subject matter hereof or thereof brought by the Purchaser or its successors or
assigns and (b) hereby waives, and agrees not to assert, by way of motion, as a
defense, or otherwise, in any such suit, action or proceeding, any claim that it
is not subject personally to the jurisdiction of the above-named courts, that
its property is exempt or immune from attachment or execution, that the suit,
action or proceeding is brought in an inconvenient forum, that the venue of the
suit, action or proceeding is improper or that this Agreement or the subject
matter hereof may not be enforced in or by such court. The Company hereby
consents to service of process by registered mail at the address to which
notices are to be given. The Company agrees that its submission to jurisdiction
and its consent to service of process by mail is made for the express benefit of
the Purchasers. Final judgment against the Company in any such action, suit or
proceeding shall be conclusive and may be enforced in other jurisdictions (a) by
suit, action or proceeding on the judgment, a certified or true copy of which
shall be conclusive evidence of the fact and of the amount of any indebtedness
or liability of the Company therein described or (b) in any other manner
provided by or pursuant to the laws of such other jurisdiction; PROVIDED,
HOWEVER, that the Purchasers may at their option bring suit or institute other
judicial proceedings against the Company or any of the Company's assets in any
state or federal court of the United States or in any country or place where the
Company or such assets may be found.
38
<PAGE> 45
11.8. COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, and it shall not
be necessary in making proof of this Agreement to produce or account for more
than one such counterpart.
11.9. DISCLOSURE TO OTHER PERSONS. The Purchasers agree to keep
confidential any financial information delivered by the Company pursuant to this
Agreement (other than information that is publicly available) and such other
non-public proprietary information delivered by the Company that is clearly
designated in writing to be or otherwise known by the Purchasers to be
confidential; PROVIDED, HOWEVER, that nothing herein shall prevent the
Purchasers from disclosing such information: (a) to any prospective purchaser
who agrees in writing to be bound by this Section 11.9, (b) to any Affiliate,
director, officer, employee, agent and professional consultant of any
prospective purchasers, in its capacity as such or any actual purchaser,
participant, assignee, or transferee of the Purchasers' or prospective
purchaser's rights under any Securities that agrees in writing to be bound by
this Section 11.9, (c) upon order of any court or administrative agency having
jurisdiction over such party, (d) upon the request or demand of any regulatory
agency or authority having jurisdiction over such party, (e) which has been
publicly disclosed through no breach of the Purchasers, (f) which has been
obtained from any Person that is not a party hereto or an Affiliate of any such
party, (g) in connection with the exercise of any remedy hereunder, (h) to the
certified public accountants for the Purchasers or as required in summary
financial or descriptive business information disclosed by the Purchasers as
part of their regular reports to investors or partners, or (i) as otherwise
expressly contemplated by this Agreement. In order to permit the Company to
remove or limit any order, request or demand or to obtain confidential treatment
for any disclosure pursuant to (c) or (d) above, the Purchasers will use
reasonable efforts to inform the Company of any such request for disclosure
prior to disclosure. Nothing in this Section 11.9 shall be construed to create
or give rise to any fiduciary duty on the part of the Purchasers to the Company.
11.10. WAIVER OF JURY TRIAL. THE PARTIES HERETO HEREBY WAIVE TRIAL BY JURY
IN ANY LITIGATION, SUIT OR PROCEEDING, IN ANY COURT WITH RESPECT TO, IN
CONNECTION WITH, OR ARISING OUT OF THIS AGREEMENT, ANY OTHER TRANSACTION
DOCUMENTS, OR ANY INSTRUMENT OR DOCUMENT DELIVERED PURSUANT TO THIS AGREEMENT OR
ANY OTHER TRANSACTION DOCUMENTS, OR THE VALIDITY, PROTECTION, INTERPRETATION,
COLLECTION OR ENFORCEMENT THEREOF, PROVIDED, HOWEVER, THAT WITH RESPECT TO ANY
COMPULSORY COUNTERCLAIM (I.E., A CLAIM BY ONE PARTY AGAINST ANOTHER PARTY WHICH
IF NOT BROUGHT IN SUCH ACTION WOULD RESULT IN THE PARTY BRINGING SUCH CLAIM
BEING FOREVER BARRED FROM BRINGING SUCH CLAIM), THE PARTY BRING SUCH CLAIM SHALL
HAVE THE RIGHT TO RAISE SUCH COMPULSORY COUNTERCLAIM IN ANY SUCH LITIGATION.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
39
<PAGE> 46
SECURITIES PURCHASE AGREEMENT
COMPANY SIGNATURE PAGE
IN WITNESS WHEREOF, the undersigned, being duly authorized, has executed
this Agreement on behalf of the Company as of the date first above written.
METRETEK TECHNOLOGIES, INC., a
Delaware corporation
By: /s/ A. Bradley Gabbard
----------------------------------
Name: A. Bradley Gabbard
Title: Executive Vice President
S-1
<PAGE> 47
SECURITIES PURCHASE AGREEMENT
PURCHASER SIGNATURE PAGE
State Street Bank & Trust, solely
in its capacity as Trustee for
General Motors Employees Global
Group Pension Trust as directed by
DDJ Capital Management, LLC, and
not in its individual capacity
By: /s/ Michael Connors
--------------------------------
Name: Michael Connors
Title: Assistant Vice President
S-2
<PAGE> 48
DDJ Canadian High Yield Fund
By: DDJ Capital Management, LLC,
its attorney-in-fact
By: /s/ David J. Breazzano
---------------------------------
Name: David J. Breazzano
Title: Member
S-3
<PAGE> 49
B III-A Capital Partners, L.P.
By: GP III-A, LLC, its General
Partner
By: DDJ Capital management, LLC,
Manager
By: /s/ David J. Breazzano
---------------------------------
Name: David J. Breazzano
Title: Member
S-4
<PAGE> 50
AMENDMENT NO. 1 TO SECURITIES PURCHASE AGREEMENT
Reference is hereby made to the Securities Purchase Agreement dated
December 9, 1999 (the "Purchase Agreement") by and between Metretek
Technologies, Inc. (the "Company") and the undersigned Purchasers (capitalized
terms not defined herein shall have the meanings given them in the Purchase
Agreement).
For good and valuable consideration, the parties agree as follows:
The parties agree that notwithstanding anything to the contrary in the
Purchase Agreement, the Company shall have the right to sell and issue up to
5,550 Units at the Second Closing. It shall remain a condition to the obligation
of the Purchasers to purchase Units at the Second Closing that the Company shall
have sold at the Second Closing at least 4,550 Units. In all other respects the
Purchase Agreement shall remain in full force and effect without modification or
waiver.
[END OF TEXT]
<PAGE> 51
In witness whereof, the parties hereto have caused this Amendment No. 1
to be executed as of December 21, 1999.
Metretek Technologies, Inc., a
Delaware corporation
By: /s/ A. Bradley Gabbard
----------------------------------------
Name: A. Bradley Gabbard
Title: Executive Vice President
State Street Bank & Trust, solely in its
Capacity as Trustee for General Motors Employee
Global Group Pension Trust as directed by DDJ
Capital Management, LLC, and not in its
individual capacity
By: /s/ Michael Connors
----------------------------------------
Name: Michael Connors
Title: Assistant Vice President
DDJ Canadian High Yield Fund
By: DDJ Capital Management, LLC
its attorney-in-fact
By: /s/ David J. Breazzano
----------------------------------------
Name: David J. Breazzano
Title: Member
B III-A Capital Partners, L.P.
By: GP III-A, LLC, its General Partner
By: DDJ Capital Management, LLC, Manager
By: /s/ David J. Breazzano
----------------------------------------
Name: David J. Breazzano
Title: Member
<PAGE> 1
EXHIBIT 4.2
CERTIFICATE OF DESIGNATION
OF
SERIES B PREFERRED STOCK
OF
METRETEK TECHNOLOGIES, INC.
PURSUANT TO SECTION 151 OF THE
GENERAL CORPORATION LAW OF THE STATE OF DELAWARE
Metretek Technologies, Inc., a Delaware corporation (the
"Corporation"), does hereby certify that, pursuant to the authority contained in
Article Fourth of its Restated Certificate of Incorporation, as amended, and in
accordance with the provisions of Section 151 of the General Corporation Law of
the State of Delaware, the Board of Directors of the Corporation has duly
adopted the following resolution:
RESOLVED, that, pursuant to the authority vested in the Board of
Directors by the Restated Certificate of Incorporation, as amended (the
"Restated Certificate"), the Board of Directors hereby authorizes the issuance
of shares of Series B Preferred Stock, par value $.01 per share, of the
Corporation and hereby fixes the designation, powers, preferences and relative,
participating, optional and other rights of such shares, and the qualifications,
limitations and restrictions thereof, in addition to those set forth in the
Restated Certificate, as follows:
"PREFERRED SERIES B:
1. Designation. A total of 1,000,000 shares of the Corporation's
Preferred Stock shall be designated as a class known as Series B Preferred
Stock, par value $0.01 per share (the "Convertible Preferred Stock"). All of the
preferential amounts to be paid to the holders of the Convertible Preferred
Stock as provided in this Section A shall be paid or set apart for payment
before the payment or setting apart for payment of any amount for, or the
distribution of any property of the Corporation to, the holders of any other
equity securities of the Corporation, whether now or hereafter authorized.
2. Election of Directors. So long as an aggregate of at least 2,000
shares of Convertible Preferred Stock remain outstanding, the holders of
outstanding shares of Convertible Preferred Stock shall, voting together as a
separate class, be entitled to elect one (1) Director. Such Director shall be
the individual receiving the greatest number of affirmative votes of the
outstanding shares of Convertible Preferred Stock (the "Convertible Preferred
Stock Director Designee"), with each share of Convertible Preferred Stock
entitled to one (1) vote, and with
<PAGE> 2
votes cast against such person and votes withheld having no legal effect. Each
Director so elected shall hold office in accordance with the terms for directors
elected at such meeting as provided by law, the Certificate of Incorporation, as
amended, or the by-laws of the Corporation in effect at the time, provided that
such Director shall in any event cease to hold office at such time as the
holders of Convertible Preferred Stock are no longer entitled to elect a
Director in accordance with this Section A.2. The election of the Convertible
Preferred Stock Director Designee by the holders of the Convertible Preferred
Stock shall occur (i) at the annual meeting of holders of capital stock, (ii) at
any special meeting of holders of capital stock, (iii) at any special meeting of
holders of Convertible Preferred Stock called by holders of a majority of the
outstanding shares of Convertible Preferred Stock (a "Majority Interest") or
(iv) by the written consent of holders of not less than sixty-six and two-thirds
percent (66 2/3%) of the outstanding shares of Convertible Preferred Stock (a
"Two Thirds Interest"). If at any time when any share of Convertible Preferred
Stock is outstanding the Convertible Preferred Stock Director Designee should
cease to be a Director for any reason, the vacancy shall only be filled by the
vote or written consent of holders of the outstanding shares of Convertible
Preferred Stock, voting together as a separate class, in the manner and on the
basis specified above. The holders of a majority of the outstanding shares of
Convertible Preferred Stock, may, in their sole discretion, determine to elect
fewer than one (1) Convertible Preferred Stock Director Designee from time to
time, and during any such period the Board of Directors nonetheless shall be
deemed duly constituted. The holders of Common Stock and the holders of any
other class of capital stock of the Company with the right to vote in the
election of directors, voting together as a single class, shall be entitled to
elect the remaining members of the Board of Directors.
3. Dividends. The holders of shares of Convertible Preferred Stock
shall be entitled, in preference to the holders of any and all other classes of
capital stock of the Corporation, to receive, when, as and if declared by the
Board of Directors, out of funds legally available therefor, cumulative
dividends on the Convertible Preferred Stock in cash at the rate per annum of
eight percent (8%) (the "Dividend Rate") of the Initial Liquidation Preference
or $80.00 per share of Convertible Preferred Stock (adjusted appropriately for
stock splits, stock dividends, recapitalizations and the like with respect to
the Convertible Preferred Stock, and subject to adjustment pursuant to Section
A.5(e) hereof) as of the original issuance date of the Convertible Preferred
Stock (for any such issuance, the "Convertible Preferred Original Issuance
Date"), subject to proration for partial years on the basis of a 365-day year,
compounded quarterly on March 31, June 30, September 30 and December 31 of each
year (the "Convertible Cumulative Dividend"). Such dividends will accumulate
commencing as of the Convertible Preferred Original Issuance Date and shall be
cumulative, to the extent unpaid, whether or not they have been declared and
whether or not the Corporation may legally pay the dividends. Such dividends
shall become due and payable with respect to any shares of Convertible Preferred
Stock as provided in Sections A.4, A.5 and A.6. Dividends paid in an amount less
than the total amount of such dividends at the time accumulated and payable on
all outstanding shares of Convertible Preferred Stock shall be allocated pro
rata on a share-by-share basis among all such shares at the time outstanding. So
long as at least 1,000 shares of Convertible Preferred Stock are outstanding and
the Convertible Cumulative Dividends have not been paid in full: (a) no dividend
whatsoever (other than dividends paid in stock) shall be paid or declared, and
no distribution shall be made, on any Common Stock or other capital stock of the
Corporation ranking with regard to dividend rights, rights upon a Liquidation
Event (as defined in Section A.4 below) or an Extraordinary Transaction (as
defined in Section A.5(a)(ii) below) or redemption rights junior
<PAGE> 3
to or on a parity with the Convertible Preferred Stock; and (b) except as
provided in Section A.8(c), no shares of Common Stock or other capital stock of
the Corporation ranking with regard to dividend rights, rights upon a
Liquidation Event or an Extraordinary Transaction or redemption rights junior to
or on a parity with the Convertible Preferred Stock shall be purchased, redeemed
or acquired by the Corporation and no monies shall be paid into or set aside or
made available for a sinking fund for the purchase, redemption or acquisition
thereof.
In addition to Convertible Cumulative Dividends, the holders of
Convertible Preferred Stock shall be entitled to receive dividends out of funds
legally available therefor at such times and in such amounts as the Board of
Directors may determine in its sole discretion; provided, however, that no cash
or Common Stock dividend may be declared or paid on any shares of Common Stock
unless at the same time a dividend is declared or paid on all outstanding shares
of Convertible Preferred Stock, with holders of Convertible Preferred Stock and
Common Stock sharing in any such dividends as if they constituted a single class
of stock and with each holder of shares of Convertible Preferred Stock entitled
to receive such dividends based on the number of shares of Common Stock into
which such shares of Convertible Preferred Stock are then convertible in
accordance with Section A.6 hereof.
4. Liquidation.
(a) Liquidation Preference. Upon any liquidation, dissolution
or winding up of the Corporation and its subsidiaries, whether voluntary or
involuntary (a "Liquidation Event"), each holder of outstanding shares of
Convertible Preferred Stock shall be entitled to be paid out of the assets of
the Corporation available for distribution to stockholders, whether such assets
are capital, surplus or earnings, and before any amount shall be paid or
distributed to the holders of Common Stock or of any other stock ranking on
liquidation junior to the Convertible Preferred Stock, an amount in cash, equal
to (i) $1,000 per share of Convertible Preferred Stock held by such holder
(adjusted appropriately for stock splits, stock dividends, recapitalizations and
the like with respect to the Convertible Preferred Stock) (the "Initial
Liquidation Preference"), plus (ii) any accumulated but unpaid dividends to
which such holder of outstanding shares of Convertible Preferred Stock is then
entitled, if any, pursuant to Sections A.3, A.5(e) and A.5(f) hereof (the sum of
clauses (i) and (ii) being referred to herein as the "Convertible Liquidation
Preference Amount"); provided, however, that if upon any Liquidation Event, the
amounts payable with respect to the Convertible Liquidation Preference Amount
are not paid in full, the holders of the Convertible Preferred Stock shall share
ratably in any distribution of assets in proportion to the full respective
preferential amounts to which they are entitled; and provided further, however,
that if upon any Liquidation Event the holders of the outstanding shares of
Convertible Preferred Stock would have received more than the Convertible
Liquidation Preference Amount in the event their shares were converted into
Common Stock immediately prior to such Liquidation Event and such shares of
Common Stock pursuant to Section A.6(a) received a liquidating distribution or
distributions from the Corporation, then each holder of Convertible Preferred
Stock shall receive as a distribution from the Corporation in connection with
such Liquidation Event an amount equal to the amount that would be paid if such
holder's shares of Convertible Preferred Stock were converted into Common Stock
immediately prior to such Liquidation Event pursuant to A.6(a). The provisions
of this Section A.4 shall not in any way limit the right of the holders of
Convertible Preferred Stock to elect to convert their shares of Convertible
Preferred Stock into Common Stock pursuant to Section A.6 prior to or in
connection with any Liquidation
<PAGE> 4
Event. Upon any Liquidation Event, holders of fractional shares of Convertible
Preferred Stock shall receive proportionate payments in respect thereof.
(b) Notice. Prior to the occurrence of any Liquidation Event,
the Corporation will furnish each holder of Convertible Preferred Stock notice
in accordance with Section A.9 hereof, together with a certificate prepared by
the chief financial officer of the Corporation describing in detail the facts of
such Liquidation Event, stating in detail the amount(s) per share of Convertible
Preferred Stock each holder of Convertible Preferred Stock would receive
pursuant to the provisions of Section A.4(a) hereof pursuant to clauses (i),
(ii) and (iii) or the proviso of Section A.4(a) and stating in detail the facts
upon which such amounts were determined.
5. Redemption; Preferential Payment in Extraordinary Transactions.
(a) Redemption.
(i) Time Based Redemption. On December 9, 2004, the
Corporation shall redeem all of the outstanding shares of Convertible Preferred
Stock held by each holder of Convertible Preferred Stock. The redemption price
for each share of Convertible Preferred Stock redeemed pursuant to this Section
A.5(a)(i) shall be the per share Convertible Liquidation Preference Amount (as
defined in Section A.4(a) above) (the "Convertible Redemption Price").
(ii) Redemption upon Extraordinary Transactions. Upon
the occurrence of an "Extraordinary Transaction," the holders of not less than a
Majority Interest may elect (i) to have the Convertible Preferred Stock redeemed
in connection with the Extraordinary Transaction or (ii) otherwise to
participate in the Extraordinary Transaction.
"Extraordinary Transaction" means any of the following: (A) a merger or
consolidation of the Corporation with or into another corporation (with respect
to which less than a majority of the outstanding voting power of the surviving
or consolidated corporation is held by stockholders of the Corporation
immediately prior to such event), (B) the sale or transfer of all or
substantially all of the properties and assets of the Corporation and its
subsidiaries, (C) any purchase by any party (or group of affiliated parties) of
shares of capital stock of the Corporation (either through a negotiated stock
purchase or a tender for such shares), the effect of which is that such party
(or group of affiliated parties) that did not beneficially own a majority of the
voting power of the outstanding shares of capital stock of the Corporation
immediately prior to such purchase beneficially owns at least a majority of such
voting power immediately after such purchase, or (D) the redemption or
repurchase of shares representing a majority of the voting power of the
outstanding shares of capital stock of the Corporation immediately prior to such
redemption.
As a condition to the effectiveness of any Extraordinary Transaction,
unless the holders of Convertible Preferred Stock shall have elected to convert
their shares of Convertible Preferred Stock into Common Stock in accordance with
the provisions of Section A.6 prior to the effective date of such Extraordinary
Transaction, the Corporation shall either (1) if redemption is elected, on the
effective date of such Extraordinary Transaction, redeem all (but not less than
all) of the outstanding shares of Convertible Preferred Stock held by each
holder of Convertible Preferred Stock for an amount equal to the Convertible
Redemption Price, such amount to be payable in
<PAGE> 5
cash or, at the election of such holder or holders, in the same form of
consideration as is paid to the holders of Common Stock in such Extraordinary
Transaction, or (2) if the holders elect to participate in the relevant
transaction (such as a merger) on terms acceptable to them, take such actions as
shall be sufficient to facilitate such participation (including executing a
merger agreement including an exchange ratio reflecting the provisions hereof)
(on terms giving such holders the right to the Convertible Redemption Price as a
preferential amount, in which event such amount shall be paid in cash or, at the
election of such holders, in the same form of consideration as is paid to the
holders of Common Stock in such Extraordinary Transaction, but in preference to
and before any amount is paid or otherwise distributed to the holders of the
Common Stock or any other stock ranking with regard to dividend rights, rights
upon a Liquidation Event or an Extraordinary Transaction, or redemption rights
junior to the Convertible Preferred Stock, in which event such preferential
amount shall be deemed to have been distributed to the holders of the
Convertible Preferred Stock as if in a Liquidation Event). For purposes of this
Section A.5(a)(ii), a sale of substantially all of the assets of the Corporation
and its subsidiaries shall mean the sale or other disposition other than in the
ordinary course of business of more than 75% of such assets, by reference to the
book value or the fair market value of such assets, determined on a consolidated
basis under generally accepted accounting principles.
Notwithstanding the foregoing, if upon any Extraordinary Transaction
the holders of the outstanding shares of Convertible Preferred Stock would
receive more than the Convertible Redemption Price in the event their shares
were converted into Common Stock immediately prior to such Extraordinary
Transaction and such shares of Common Stock were purchased or otherwise
participated in such Extraordinary Transaction, then each holder of Convertible
Preferred Stock shall receive from the Corporation or the relevant purchaser, as
applicable, upon the election by a Majority Interest to redeem or otherwise
participate in such Extraordinary Transaction, an amount equal to the amount per
share that would be paid if the shares of Common Stock receivable upon
conversion of the Convertible Preferred Stock were being acquired in the
Extraordinary Transaction at the same price per share as is paid for other
shares of Common Stock, which amount shall be paid in the same form of
consideration as is paid to holders of Common Stock, as if each share of
Convertible Preferred Stock had been converted into the number of shares of
Common Stock issuable upon the conversion of such share of Convertible Preferred
Stock immediately prior to such Extraordinary Transaction. Also, notwithstanding
the foregoing, in connection with the acquisition of the Convertible Preferred
Stock in an Extraordinary Transaction which is to be accounted for by the
acquiring entity as a pooling of interests, the holders of shares of Convertible
Preferred Stock shall receive upon such election to redeem or otherwise
participate, if so required for the application of such accounting treatment,
and in lieu of cash, the number of shares of common stock of such entity having
a value equal to the amount otherwise payable to the holders of Convertible
Preferred Stock in such Extraordinary Transaction pursuant to this Section
A.5(a)(ii) and having the same registered status or registration rights as any
other shares in such transaction. The Corporation shall not participate in any
Extraordinary Transaction or make or agree to have made any payments to the
holders of shares of Common Stock or any other stock ranking junior to the
Convertible Preferred Stock unless the holders of the Convertible Preferred
Stock shall have received the full preferential amount to which they are
entitled hereunder in an Extraordinary Transaction.
<PAGE> 6
The foregoing election shall be made by such holders giving the
Corporation and each other holder of Convertible Preferred Stock not less than
five (5) business days prior written notice, which notice shall set forth the
date for such redemption or participation in an Extraordinary Transaction, as
applicable. The provisions of this Section A.5 shall not in any way limit the
right of the holders of Convertible Preferred Stock to elect to convert their
shares into shares of Common Stock pursuant to Section A.6 prior to or in
connection with any Extraordinary Transaction.
(iii) Redemption at the Option of the Company. In the
event that, at any time commencing on the Anniversary Date (as defined in
Section A.7(a)), the market price of the Common Stock equals or exceeds 200% of
the Conversion Price then in effect for 20 out of a period of 30 consecutive
trading days (any period of 30 days where this condition has been met being
referred to herein as a "Redemption Period"), then the Company shall have the
right, in its discretion during any Redemption Period or within the 30 days
immediately following the Redemption Period, to send 30 days' prior written
notice to each holder of Convertible Preferred Stock and after such 30-day
period, to redeem all outstanding shares of Convertible Preferred Stock at a
redemption price equal to the Convertible Redemption Price; provided, that no
such redemption may be effected if at any time between the giving of the notice
of redemption and the date on which redemption is to occur there is not in
effect a registration statement covering the sale by the holders thereof of all
shares of Common Stock issuable upon conversion of the Convertible Preferred
Stock.
(b) Valuation of Distribution Securities. Any securities or
other consideration to be delivered to the holders of the Convertible Preferred
Stock, if so elected in connection with a redemption or upon any Extraordinary
Transaction in accordance with the terms hereof, shall be valued as follows:
(i) If traded on a nationally recognized securities
exchange or inter-dealer quotation system, the value shall be deemed to be the
average of the closing prices of the securities on such exchange or system over
the 30-day period ending three (3) business days prior to the closing of such
Extraordinary Transaction;
(ii) If traded over-the-counter, the value shall be
deemed to be the average of the closing bid prices over the 30-day period ending
three (3) business days prior to the closing of such Extraordinary Transaction;
and
(iii) If there is no active public market, the value
shall be the fair market value thereof, as mutually determined by the
Corporation and the holders of not less than a Two Thirds Interest, provided
that if the Corporation and the holders of not less than a Two Thirds Interest
are unable to reach agreement, then by independent appraisal by a mutually
agreed to investment banker, the fees of which shall be paid by the Corporation.
(c) Notice by Corporation. Prior to the occurrence of any
Extraordinary Transaction, the Corporation will furnish each holder of
Convertible Preferred Stock notice in accordance with Section A.9 hereof,
together with a certificate prepared by the chief financial officer of the
Corporation describing in detail all material terms of such Extraordinary
Transaction, including without limitation the consideration to be delivered in
connection with
<PAGE> 7
such Extraordinary Transaction, the valuation of the Corporation at the time of
such Extraordinary Transaction and the identities of the parties to the
Extraordinary Transaction.
(d) Purchase Date and Price. Upon the election of the holders
of not less than a Majority Interest to cause the Corporation to redeem
Convertible Preferred Stock or otherwise to participate in an Extraordinary
Transaction pursuant to Section A.5(a)(ii), each holder of Convertible Preferred
Stock shall be deemed to have elected to cause the shares held by such holder to
be so redeemed or to so participate. Any date upon which a redemption or other
acquisition is to occur in accordance with Section A.5(a) shall be referred to
as a "Redemption Date." If at a Redemption Date shares of Convertible Preferred
Stock are unable to be redeemed (as contemplated by Section A.5(e) below), then
holders of Convertible Preferred Stock shall also be entitled to interest and
dividends pursuant to Sections A.5(e) and (f) below. The aggregate applicable
redemption price elected to be payable in cash pursuant to Section A.5(a) shall
be payable in cash in immediately available funds to the respective holders on
the Redemption Date (subject to Section A.5(e)), except as otherwise
contemplated by Section A.5(a)(ii). Upon any redemption as provided herein,
holders of fractional shares shall receive proportionate amounts in respect
thereof. Until the aggregate applicable redemption price has been paid for all
shares of Convertible Preferred Stock being redeemed or acquired: (A) no
dividend whatsoever shall be paid or declared, and no distribution shall be
made, on any capital stock of the Corporation; and (B) except as permitted by
Section A.8(c), no shares of capital stock of the Corporation (other than in
accordance with this Section A.5) shall be purchased, redeemed or acquired by
the Corporation and no monies shall be paid into or set aside or made available
for a sinking fund for the purchase, redemption or acquisition thereof.
(e) Redemption Prohibited. If, at a Redemption Date, the
Corporation is prohibited under Section 160 of the General Corporation Law of
the State of Delaware from redeeming all shares of Convertible Preferred Stock
for which redemption is required hereunder, then it shall redeem such shares on
a pro-rata basis among the holders of Convertible Preferred Stock in proportion
to the full respective redemption amounts to which they are entitled hereunder
to the extent possible and shall redeem the remaining shares to be redeemed as
soon as the Corporation is not prohibited from redeeming some or all of such
shares under Section 160 of the General Corporation Law of the State of
Delaware, subject to the last paragraph of Section A.8. Any shares of
Convertible Preferred Stock not redeemed shall remain outstanding and entitled
to all of the rights and preferences provided in this Section A. The Corporation
shall take such action as shall be necessary or appropriate to review and
promptly remove any impediment to its ability to redeem Convertible Preferred
Stock under the circumstances contemplated by this Section A.5(e). In the event
that the Corporation fails for any reason to redeem shares for which redemption
is required pursuant to this Section A.5, including without limitation due to a
prohibition of such redemption under the General Corporation Law of the State of
Delaware, then during the period from the applicable Redemption Date through the
date on which such shares are redeemed, the applicable Dividend Rate shall
increase by 2% per annum and shall increase by an additional .5% at the end of
each six (6) month period thereafter until the Redemption Price (as so
increased) is paid in full, subject to a maximum rate of 15% per annum.
(f) Dividend After Redemption Date. From and after a
Redemption Date, no shares of Convertible Preferred Stock subject to redemption
shall be entitled to dividends, if any,
<PAGE> 8
as contemplated by Section A.3; provided, however, that in the event that shares
of Convertible Preferred Stock are unable to be redeemed and continue to be
outstanding in accordance with Section A.5(e), such shares shall continue to be
entitled to dividends and interest thereon as provided in Sections A.3 and
A.5(e) until the date on which such shares are actually redeemed by the
Corporation.
(g) Surrender of Certificates. Upon receipt of the applicable
Convertible Redemption Price by certified check or wire transfer (in the event
such price is to be paid in cash), each holder of shares of Convertible
Preferred Stock to be redeemed shall surrender the certificate or certificates
representing such shares to the Corporation, duly assigned or endorsed for
transfer (or accompanied by duly executed stock powers relating thereto), or, in
the event the certificate or certificates are lost, stolen or missing, shall
deliver an affidavit or agreement satisfactory to the Corporation to indemnify
the Corporation from any loss incurred by it in connection therewith (an
"Affidavit of Loss") with respect to such certificates at the principal
executive office of the Corporation or the office of the transfer agent for the
Convertible Preferred Stock or such office or offices in the continental United
States of an agent for redemption as may from time to time be designated by
notice to the holders of Convertible Preferred Stock, and each surrendered
certificate shall be canceled and retired; provided, however, that if the
Corporation is prohibited from redeeming all shares of Convertible Preferred
Stock as provided in Section A.5(e) or such redemption is a partial redemption
of the shares of Convertible Preferred Stock held by a holder, the holder shall
not be required to surrender said certificate(s) to the Corporation until said
holder has received a new stock certificate for those shares of Convertible
Preferred Stock not so redeemed.
(h) Further Restrictions on Redemption. Notwithstanding
anything herein to the contrary, the Convertible Preferred Stock shall not be
redeemed hereunder unless (i) all obligations of the Corporation under the Loan
and Security Agreement dated April 14, 1998 among the Corporation, certain of
its subsidiaries, and National Bank of Canada, as agent and as a lender, and the
other lenders from time to time party thereto (collectively, the "Lender") shall
have been or is concurrently paid in full, or (ii) the Lenders shall have
consented to such redemption. If the Corporation is prohibited from redeeming
the Convertible Preferred Stock hereunder, the holders of Convertible Preferred
Stock shall be entitled to the provisions of Section A.5(e) and A.5(f) hereof.
6. Conversion. The holders of the Convertible Preferred Stock shall
have the following conversion rights:
(a) Conversion Upon Election of Holder. Any holder of shares
of Convertible Preferred Stock shall be entitled at any time after June 9, 2000,
upon written election and without the payment of any additional consideration,
to cause any or all of such holder's shares of Convertible Preferred Stock to be
converted into the number of shares of Common Stock resulting from dividing the
Conversion Value (as defined in this Section A.6(a)) per share in effect for the
Convertible Preferred Stock at the time of conversion, as the numerator, by the
per share Conversion Price (as defined in this Section A.6(a)) of the
Convertible Preferred Stock, as the denominator, with fractional shares treated
proportionately. The number of shares of Common Stock into which a share of a
Convertible Preferred Stock is convertible is hereinafter referred to as the
"Conversion Rate." Upon the filing of this Certificate of Designation with the
<PAGE> 9
Secretary of State of Delaware the "Conversion Price" per share of Convertible
Preferred Stock shall be $5.9334, and the per share "Conversion Value" of
Convertible Preferred Stock shall be the sum of $1,000 plus per share
accumulated but unpaid dividends on the Convertible Preferred Stock at the time
of conversion. The Conversion Price per share of Convertible Preferred Stock and
the Conversion Rate shall be subject to adjustment from time to time as provided
in Section A.7 hereof.
(b) Procedure for Conversion. Upon election to convert
pursuant to Section A.6(a), the relevant holder of Convertible Preferred Stock
shall surrender the certificate or certificates representing the Convertible
Preferred Stock being converted, duly assigned or endorsed for transfer to the
Corporation (or accompanied by duly executed stock powers relating thereto), at
the principal executive office of the Corporation or the offices of the transfer
agent for the Convertible Preferred Stock or such office or offices in the
continental United States of an agent for conversion as may from time to time be
designated by notice to the holders of the Convertible Preferred Stock by the
Corporation, or shall deliver an Affidavit of Loss with respect to such
certificates. The issuance by the Corporation of Common Stock upon a conversion
of Convertible Preferred Stock pursuant to Section A.6(a) hereof shall be
effective as of the surrender of the certificate or certificates for the
Convertible Preferred Stock to be converted, duly assigned or endorsed for
transfer to the Corporation (or accompanied by duly executed stock powers
relating thereto), or as of the delivery of an Affidavit of Loss. Upon surrender
of a certificate representing Convertible Preferred Stock for conversion, or
delivery of an Affidavit of Loss, the Corporation shall issue and send by hand
delivery, by courier or by first class mail (postage prepaid) to the holder
thereof or to such holder's designee, at the address designated by such holder,
certificates for the number of shares of Common Stock to which such holder shall
be entitled upon conversion (rounded to the nearest whole share) plus, if
applicable, a cash payment in the amount of any accumulated but unpaid dividends
and other amounts as contemplated by Section A.6(a) in respect of the shares of
Convertible Preferred Stock. The issuance of certificates for Common Stock upon
conversion of Convertible Preferred Stock will be made without charge to the
holders of such shares for any issuance tax in respect thereof or other costs
incurred by the Corporation in connection with such conversion and the related
issuance of such stock. If a conversion of Convertible Preferred Stock upon a
Liquidation Event or an Extraordinary Transaction occurs and the holders of the
Common Stock issued on such conversion elect to participate, the Corporation
shall make appropriate provisions for the Common Stock issued upon such
conversion to be treated on the same basis as all other Common Stock in such
Liquidation Event or Extraordinary Transaction.
(c) Reservation of Stock Issuable Upon Conversion. The
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock solely for the purpose of effecting the
conversion of the shares of Convertible Preferred Stock such number of its
shares of Common Stock as shall from time to time be sufficient to effect the
conversion of all outstanding shares of Convertible Preferred Stock; and if at
any time the number of authorized but unissued shares of Common Stock shall not
be sufficient to effect the conversion of all of the then outstanding shares of
Convertible Preferred Stock, the Corporation will take such corporate action as
may be necessary to increase its authorized but unissued shares of Common Stock
to such number of shares as shall be sufficient for such purpose.
<PAGE> 10
(d) No Closing of Transfer Books. The Corporation shall not
close its books against the transfer of shares of Convertible Preferred Stock in
any manner which would interfere with the timely conversion of any shares of
Convertible Preferred Stock.
7. Adjustments. The Conversion Price in effect from time to time shall
be subject to adjustment from and after the Convertible Preferred Original
Issuance Date and regardless of whether any shares of Convertible Preferred
Stock are then issued and outstanding as follows:
(a) Adjustment upon Change in Market Value. If on December 9,
2000 (the "Anniversary Date") the product of (a) 1.10 multiplied by (b) the sum
of (i) the average closing bid price of the Common Stock for the 30 trading days
immediately preceding the Anniversary Date, plus (ii) on an as-converted, per
share basis, the fair market value on the Anniversary Date (as determined in
good faith by the Board of Directors and reasonably agreed to by a Two-Thirds
Interest, except that if the distribution includes any securities, the fair
market value of such securities shall be determined by reference to Section
A.5(b) hereof) of any securities, cash or assets (excluding any dividend or
distribution paid exclusively in cash or in Common Stock) which prior to the
Anniversary Date are distributed or made payable to the holders of Convertible
Preferred Stock (such product the "Reset Price"), is less than the Conversion
Price then in effect, then the Conversion Price shall be adjusted to equal the
Reset Price and shall be subject to further adjustment as provided herein;
provided, however, that in no event shall the Conversion Price be reduced by
more than 50% pursuant to this Section A.7(a). Any dispute as to fair market
value hereunder shall be resolved by independent appraisal by a mutually agreed
investment banker, the fees of which shall be paid by the Corporation.
(b) Dividends and Stock Splits. If the number of shares of
Common Stock (which term for purposes of this Section A.7 shall include all
common stock of the Corporation) outstanding at any time after the date hereof
is increased by a stock dividend or distribution payable in shares of Common
Stock or by a subdivision or split-up of shares of Common Stock, then, on the
date such payment is made or such change is effective, the Conversion Price
shall be appropriately decreased so that the number of shares of Common Stock
issuable on conversion of any shares of Convertible Preferred Stock shall be
increased in proportion to such increase of outstanding shares of Common Stock.
(c) Reverse Stock Splits. If the number of shares of Common
Stock outstanding at any time after the date hereof is decreased by a
combination or reverse split of the outstanding shares of Common Stock, then, on
the effective date of such combination or reverse split, the Conversion Price
shall be appropriately increased so that the number of shares of Common Stock
issuable on conversion of any shares of Convertible Preferred Stock shall be
decreased in proportion to such decrease in outstanding shares of Common Stock.
(d) Sale of Common Stock. In the event the Corporation shall
at any time, or from time to time, issue, sell or exchange any shares of Common
Stock (including shares held in the Corporation's treasury but excluding (I) up
to 1,211,236 shares and options issued to officers, directors or employees of
the Corporation or upon the exercise of options or other rights issued to such
officers, directors or employees pursuant to the Corporation's stock option,
stock purchase and related employee plans (II) up to 1,555,150 shares issuable
upon exercise of warrants or other rights issued by the Company prior to the
first date any shares of Convertible Preferred
<PAGE> 11
Stock are issued or (III) any securities issuable upon conversion of the
Convertible Preferred Stock or exercise of warrants issued pursuant to the
Securities Purchase Agreement dated December 9, 1999 (the "Purchase Agreement")
(the "Excluded Shares")), for a consideration per share (the "Purchase Price")
less than the greater of (a) the Market Price (as hereinafter defined) of the
Common Stock in effect immediately prior to the issuance, sale or exchange of
such shares or (b) the Conversion Price in effect immediately prior to the
issuance, sale or exchange of such shares, then, and thereafter successively
upon each such issuance, sale or exchange, the Conversion Price in effect
immediately prior to the issuance, sale or exchange of such shares shall be
reduced to an amount determined by multiplying such Conversion Price by a
fraction:
(i) the numerator of which shall be (X) the number of
shares of Common Stock of all classes outstanding immediately prior to the
issuance of such additional shares of Common Stock (excluding treasury shares
but including all shares of Common Stock issuable upon conversion or exercise of
any outstanding Convertible Preferred Stock, options, warrants, rights or
convertible securities having an exercise or conversion price less than such
Purchase Price), plus (Y) the number of shares of Common Stock which the net
aggregate consideration received by the Corporation for the total number of such
additional shares of Common Stock so issued would purchase at the Conversion
Price (prior to adjustment), and
(ii) the denominator of which shall be (X) the number
of shares of Common Stock of all classes outstanding immediately prior to the
issuance of such additional shares of Common Stock (excluding treasury shares
but including all shares of Common Stock issuable upon conversion or exercise of
any outstanding Convertible Preferred Stock, options, warrants, rights or
convertible securities having an exercise or conversion price less than such
Purchase Price), plus (Y) the number of such additional shares of Common Stock
so issued.
The "Market Price" of the Common Stock on any date shall mean the last
sale price, regular way, or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on the New York Stock Exchange or,
if the Common Stock is not listed or admitted to trading on the New York Stock
Exchange, as reported in the principal consolidated transaction reporting system
with respect to securities listed on the principal national securities exchange
on which the Common Stock is listed or admitted to trading or, if the Common
Stock is not listed or admitted to trading on any national securities exchange,
the last quoted price, or if not so quoted, the average of the high bid and low
asked prices in the over-the-counter market, as reported by the Nasdaq Stock
Market, Inc.'s Automated Quotation System or, if such system is no longer in
use, the principal other automated quotation system that may then be in use, or
if the Common Stock is not quoted by any such organization, the average of the
closing bid and asked prices as furnished by a professional market maker making
a market in the Common Stock that is selected by the Board of Directors of the
Company, or, if there is no such professional market maker, such amount as an
independent investment banking firm selected by the Board of Directors of the
Company determines to be the value of a share of Common Stock.
(e) Sale of Options, Rights or Convertible Securities. In the
event the Corporation shall at any time or from time to time, issue options,
warrants or rights to subscribe for shares of Common Stock, or issue any
securities convertible into or exchangeable for shares
<PAGE> 12
of Common Stock (other than any options or warrants for Excluded Shares), for a
Purchase Price (determined by dividing the Net Aggregate Consideration (as
determined below) by the aggregate number of shares of Common Stock that would
be issued if all such options, warrants, rights or convertible securities were
exercised or converted to the fullest extent permitted by their terms) less than
the greater of (a) the Market Price in effect immediately prior to the issuance,
sale or exchange of such shares or (b) the Conversion Price in effect
immediately prior to the issuance of such options or rights or convertible or
exchangeable securities, then the Conversion Price in effect immediately prior
to the issuance of such options, warrants or rights or securities shall be
reduced to an amount determined by multiplying such Conversion Price by a
fraction:
(i) the numerator of which shall be (X) the number of
shares of Common Stock of all classes outstanding immediately prior to the
issuance of such options, rights or convertible securities (excluding treasury
shares but including all shares of Common Stock issuable upon conversion or
exercise of any outstanding Convertible Preferred Stock, options, warrants,
rights or convertible securities having an exercise or conversion price less
than such Purchase Price), plus (Y) the number of shares of Common Stock which
the total amount of consideration received by the Corporation for the issuance
of such options, warrants, rights or convertible securities plus the minimum
amount set forth in the terms of such security as payable to the Corporation
upon the exercise or conversion thereof (the "Net Aggregate Consideration")
would purchase at the Conversion Price prior to adjustment, and
(ii) the denominator of which shall be (X) the number
of shares of Common Stock of all classes outstanding immediately prior to the
issuance of such options, warrants, rights or convertible securities (excluding
treasury shares but including all shares of Common Stock issuable upon
conversion or exercise of any outstanding Convertible Preferred Stock, options,
warrants, rights or convertible securities having an exercise or conversion
price less than such Purchase Price), plus (Y) the aggregate number of shares of
Common Stock that would be issued if all such options, warrants, rights or
convertible securities were exercised or converted.
(f) Expiration or Change in Price. If the consideration per
share provided for in any options or rights to subscribe for shares of Common
Stock or any securities exchangeable for or convertible into shares of Common
Stock, changes at any time (other than as a result of the operation of the
antidilution provision of this Section A.7 or the antidilution provisions of
certain Warrants issued by the Corporation pursuant to the Purchase Agreement),
the Conversion Price in effect at the time of such change shall be readjusted to
the Conversion Price which would have been in effect at such time had such
options or convertible securities provided for such changed consideration per
share (determined as provided in Section A.7(d) hereof), at the time initially
granted, issued or sold; provided, that such adjustment of the Conversion Price
will be made only as and to the extent that the Conversion Price effective upon
such adjustment remains less than or equal to the Conversion Price that would be
in effect if such options, rights or securities had not been issued. No
adjustment of the Conversion Price shall be made under this Section A.7 upon the
issuance of any additional shares of Common Stock which are issued pursuant to
the exercise of any warrants, options or other subscription or purchase rights
or pursuant to the exercise of any conversion or exchange rights in any
convertible securities if an adjustment shall previously have been made upon the
issuance of such warrants, options or other rights. Any adjustment of the
Conversion Price shall be disregarded if, as, and when the rights to acquire
shares of
<PAGE> 13
Common Stock upon exercise or conversion of the warrants, options, rights or
convertible securities which gave rise to such adjustment expire or are canceled
without having been exercised, so that the Conversion Price effective
immediately upon such cancellation or expiration shall be equal to the
Conversion Price in effect at the time of the issuance of the expired or
canceled warrants, options, rights or convertible securities, with such
additional adjustments as would have been made to that Conversion Price had the
expired or canceled warrants, options, rights or convertible securities not been
issued.
(g) Other Adjustments. In case the Company shall, by dividend,
distribution or otherwise, distribute to all holders of its Common Stock
evidences of its indebtedness, shares of any class or series of capital stock,
other securities, cash or assets (excluding (i) any options, rights or warrants
referred to in Section A.7(e), and (ii) any dividend or distribution paid
exclusively in cash or in Common Stock), then, at the election of a Majority
Interest, either (A) adequate provision shall be made so that holders of
Convertible Preferred Stock shall receive upon conversion thereof, in addition
to the number of shares of Common Stock receivable thereupon, the evidence of
indebtedness, shares of any class or series of capital stock, securities of any
issuer other than the Corporation, cash or assets which they would have received
had the Convertible Preferred Stock been converted into Common Stock as to the
date referenced for the payment of such distribution (the "Reference Date"), or
(B) the Conversion Price shall be reduced so that such price shall equal the
price determined by multiplying the Conversion Price in effect immediately prior
to the effectiveness of the Conversion Price reduction contemplated by this
Section A.7(g) by a fraction, the numerator of which shall be the Market Price
(determined as provided in Section A.7(d) per share of the Common Stock on the
Reference Date less the fair market value (as determined, subject to the last
sentence of this Section A.7(g), in good faith by the Board of Directors, whose
determination shall be conclusive and described in a resolution of the Board of
Directors), on the Reference Date, of such number or amount of the evidences of
indebtedness, shares of capital stock, securities, cash and assets that is so
distributed to a holder of one share of Common Stock, and the denominator shall
be such Market Price per share of the Common Stock, such reduction to become
effective immediately prior to the opening of business on the day following the
Reference Date. Notwithstanding any other provision of this Section A.7(g), if
any shares of capital stock distributed to a holder of Common Stock are listed
or admitted to trading on any national securities exchange or on the Nasdaq
Stock Market, or quoted on any other automated quotation system that may then be
in use, for the five consecutive trading days prior to and including the
Reference Date, or will be listed or admitted to trading or quoted thereon as of
(but not prior to) the Reference Date for the ten consecutive trading days
subsequent to and including the Reference Date, then, the Board of Directors, in
making its determination of the fair market value of such number of shares of
capital stock that are so distributed to a holder of one share of Common Stock,
shall make such determination by reference to the Market Price (as determined by
reference to Section 7(d)) of such shares of capital stock as of the Reference
Date.
(h) Reorganization, etc. If the Common Stock issuable upon the
conversion of the Convertible Preferred Stock shall be changed into the same or
different number of shares of any class or classes of stock, whether by
reclassification or otherwise (other than a subdivision or combination of shares
or stock dividend provided for above, or a reorganization, merger, consolidation
or sale of assets provided for elsewhere in this Section A.7), then and in each
such event the holder of each share of Convertible Preferred Stock shall have
the right thereafter to
<PAGE> 14
convert such share into the kind and amount of shares of stock and other
securities and property receivable upon such reorganization, reclassification or
other change, by holders of the number of shares of Common Stock into which such
shares of Convertible Preferred Stock might have been converted immediately
prior to such reorganization, reclassification or change, all subject to further
adjustment as provided herein.
(i) Mergers and Other Reorganizations. Unless such transaction
is an Extraordinary Transaction in which the holders of the Convertible
Preferred Stock elect redemption or otherwise participate (in which case Section
A.5(a)(ii) shall apply and this subsection shall not apply), if at any time or
from time to time there shall be a capital reorganization of the Common Stock
(other than a subdivision, combination, reclassification or exchange of shares
provided for elsewhere in this Section A.7) or a merger or consolidation of the
Corporation with or into another corporation or the sale of all or substantially
all of the Corporation's properties and assets to any other person, then, to the
extent permitted by law, as part of and as a condition to the effectiveness of
such reorganization, merger, consolidation or sale, lawful and adequate
provision shall be made so that the holders of the Convertible Preferred Stock
shall thereafter be entitled to receive upon conversion of the Convertible
Preferred Stock the number of shares of stock or other securities or property of
the Corporation, or of the successor corporation resulting from such merger or
consolidation or sale, to which a holder of Common Stock would have been
entitled in connection with such capital reorganization, merger, consolidation,
or sale. In any such case, appropriate provisions shall be made with respect to
the rights of the holders of the Convertible Preferred Stock after the
reorganization, merger, consolidation or sale to the end that the provisions of
this Section A.7 (including, without limitation, provisions for adjustment of
the applicable Conversion Price and the number of shares purchasable upon
conversion of the Convertible Preferred Stock) shall thereafter be applicable,
as nearly as may be, with respect to any shares of stock, securities or assets
to be deliverable thereafter upon the conversion of the Convertible Preferred
Stock.
(j) Calculations. All calculations under this Section A.7
shall be made to the nearest cent or to the nearest one hundredth (1/100) of a
share, as the case may be.
(k) Certificate. Upon the occurrence of each adjustment or
readjustment pursuant to this Section A.7, the Corporation at its expense shall
promptly compute such adjustment or readjustment in accordance with the terms
hereof and prepare and furnish to each holder of Convertible Preferred Stock a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based. The Corporation
shall, upon written request at any time of any holder of Convertible Preferred
Stock, furnish or cause to be furnished to such holder a like certificate
setting forth (i) such adjustments and readjustments, (ii) the Conversion Price
before and after such adjustment or readjustment, and (iii) the number of shares
of Common Stock and the amount, if any, of other property which at the time
would be received upon the conversion of such holder's shares of Convertible
Preferred Stock.
(l) Disputes. In the event of a dispute in connection with an
adjustment hereunder, the Corporation will cause independent certified public
accountants of recognized national standing (which may be the regular auditors
of the Corporation) selected by the Corporation to verify such computation
(other than any computation of the fair value of property
<PAGE> 15
as determined in good faith by the Board of Directors of the Corporation) and
prepare a report setting forth such adjustment or readjustment and showing in
reasonable detail the method of calculation thereof and the facts upon which
such adjustment or re-adjustment is based. The Corporation will forthwith mail a
copy of each such report to the holders of Convertible Preferred Stock and will,
upon the written request at any time of any such holder, furnish to such holder
a like report setting forth the Conversion Price at the time in effect and
showing in reasonable detail how it was calculated. The Corporation will also
keep copies of all such reports at its principal office and will cause the same
to be available for inspection at such office during normal business hours by
any holder of Convertible Preferred Stock or any prospective purchaser of such
stock designated by the holder thereof.
(m) Multiple Adjustments. If any single transaction or event
would require adjustment of the Conversion Price 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 holders of the Convertible Preferred Stock.
(n) Minimum Adjustment. No adjustment in the Conversion Price
shall be required to be made unless and until such adjustment would require a
change of at least one percent (1%) of the Conversion Price then in effect;
provided, however, that any adjustment that would not be required to be made
shall be taken into account and in subsequent adjustment.
8. Covenants.
(a) So long as at least 1,000 shares of Convertible Preferred
Stock shall be outstanding, the Corporation shall not, without first having
provided written notice of such proposed action to each holder of outstanding
shares of Convertible Preferred Stock and having obtained the affirmative vote
or written consent of the holders of not less than a Majority Interest, voting
as a single class, with each share of Convertible Preferred Stock entitling the
holder thereof to one vote per share of Convertible Preferred Stock held by such
holder, directly or indirectly (which consent shall not be unreasonably
withheld), enter into an agreement with respect to, or effect, or permit, any:
(i) merger or consolidation of the Corporation or any
of its subsidiaries with any other person or entity,
recapitalization, reorganization or other like transaction
involving the Corporation or any of its subsidiaries, or
liquidation or dissolution of the Corporation or any of its
subsidiaries;
(ii) sale or transfer of all or substantially all of
the Corporation's consolidated properties or assets;
(iii) disposition of assets in one or more
transactions for consideration in excess of $1,000,000 without
the approval of the Board of Directors of the Corporation; or
(iv) incurrence of indebtedness for money borrowed,
except for borrowings under the Corporation's primary credit
agreement of up to $3,000,000.
<PAGE> 16
(b) So long as any shares of Convertible Preferred Stock shall
be outstanding, the Corporation shall not, without first having provided written
notice of such proposed action to each holder of outstanding shares of
Convertible Preferred Stock and having obtained the affirmative vote or written
consent of the holders of not less than a Majority Interest, voting as a single
class, with each share of Convertible Preferred Stock entitling the holder
thereof to one vote per share of Convertible Preferred Stock held by such
holder, directly or indirectly, enter into an agreement with respect to, or
effect, or permit, any:
(i) issuance of any equity securities (including
Convertible Preferred Stock, except as contemplated by the
Purchase Agreement) or any securities exchangeable or
convertible into equity securities or measured by earnings or
profit of the Corporation or any of its subsidiaries (other
than Series C Preferred Stock); provided, that the Corporation
or any subsidiary permitted to do so under the Purchase
Agreement may issue securities that rank junior to the
Convertible Preferred Stock as to liquidation, dividend and
redemption rights;
(ii) redemption, repurchase or other acquisition for
value of any equity security of the Corporation (other than
redemption of the Convertible Preferred Stock in accordance
with the terms hereof); or
(iii) amendment of the Corporation's or any of its
subsidiaries' certificate of incorporation, bylaws or other
charter documents as in effect on the date of filing of this
Certificate of Designations.
(c) The prohibition on repurchases contained in Section
A.8(b)(i) shall not apply to the repurchase by the Corporation of up to 250,000
shares of Common Stock pursuant to the terms of restrictive agreements under
which the Corporation has the option to repurchase such shares from employees,
officers, directors, consultants, or other persons performing services for the
Corporation or any subsidiary upon the occurrence of certain events.
Further, the Corporation shall not, by amendment of its Certificate of
Incorporation or through any Extraordinary Transaction or other reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities, agreement or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Corporation but shall at all times in good faith assist in the
carrying out of all the provisions of this Section A and in the taking of all
such action as may be necessary or appropriate in order to protect the rights of
the holders of the Convertible Preferred Stock against impairment. Without
limitation of the foregoing, the Corporation shall take such action as shall be
necessary or appropriate, to the extent reasonably within its control, to remove
promptly any impediments to its ability to redeem Convertible Preferred Stock
under the circumstances contemplated by Section A.5(e). Any successor to the
Corporation shall agree, as a condition to such succession, to carry out and
observe the obligations of the Corporation hereunder with respect to the
Convertible Preferred Stock.
<PAGE> 17
9. Notice.
(a) Liquidation Events, Extraordinary Transactions, Etc. In
the event (i) the Corporation establishes a record date to determine the holders
of any class of securities who are entitled to receive any dividend or other
distribution or who are entitled to vote at a meeting (or by written consent) in
connection with any of the transactions identified in clause (ii) hereof, or
(ii) any Liquidation Event (as defined in Section A.4) or any Extraordinary
Transaction (as defined in Section A.5), becomes reasonably likely to occur, the
Corporation shall mail or cause to be mailed by first class mail (postage
prepaid) to each holder of Convertible Preferred Stock at least twenty (20) days
prior to such record date specified therein or the expected effective date of
any such transaction, whichever is earlier, a notice specifying (A) the date of
such record date for the purpose of such dividend or distribution or meeting or
consent and a description of such dividend or distribution or the action to be
taken at such meeting or by such consent, (B) the date on which any such
Liquidation Event, Extraordinary Transaction or public offering is expected to
become effective, and (C) the date on which the books of the Corporation shall
close or a record shall be taken with respect to any such event.
(b) Waiver of Notice. The holder or holders of not less than a
Two Thirds Interest of the outstanding shares of Convertible Preferred Stock
may, at any time upon written notice to the Corporation, waive any notice
provisions specified herein for the benefit of such holders, and any such waiver
shall be binding upon all holders of such securities.
(c) General. In the event that the Corporation provides any
notice, report or statement to any holder of Common Stock, the Corporation shall
at the same time provide a copy of any such notice, report or statement to each
holder of outstanding shares of Convertible Preferred Stock.
10. No Reissuance of Convertible Preferred Stock. No share or shares of
Convertible Preferred Stock acquired by the Corporation by reason of redemption,
purchase, conversion or otherwise shall be reissued, and all such shares shall
be canceled, retired and eliminated from the shares which the Corporation shall
be authorized to issue.
11. Contractual Rights of Holders. The various provisions set forth
herein for the benefit of the holders of the Convertible Preferred Stock shall
be deemed contract rights enforceable by them, including without limitation, one
or more actions for specific performance.
12. Notices. Any notice required by any provision of this Section A to
be given to the holders of shares of Convertible Preferred Stock shall be deemed
given three (3) business days after being deposited in the United States mail,
postage pre-paid and registered or certified, and addressed to each holder of
record at such holder's address appearing on the stock records of the Company."
* * * * * * *
<PAGE> 18
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Designation of Series B Preferred Stock to be duly executed by its Executive
Vice President and attested to by its Secretary this 9th day of December, 1999.
METRETEK TECHNOLOGIES, INC.
By: /s/ A. Bradley Gabbard
-------------------------------
A. Bradley Gabbard
Executive Vice President
ATTEST:
/s/ Gary J. Zuiderveen
- ------------------------------
Gary J. Zuiderveen, Secretary
<PAGE> 1
EXHIBIT 4.3
THIS WARRANT AND THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, NOR PURSUANT TO THE SECURITIES OR
"BLUE SKY" LAWS OF ANY STATE AND MAY NOT BE OFFERED, ASSIGNED, TRANSFERRED,
SOLD, OR OTHERWISE DISPOSED OF, EXCEPT IN ACCORDANCE WITH APPLICABLE "BLUE SKY"
LAWS AND PURSUANT TO A REGISTRATION STATEMENT WITH RESPECT TO SUCH SECURITIES
WHICH IS EFFECTIVE UNDER SUCH ACT OR AN EXEMPTION FROM REGISTRATION UNDER SUCH
ACT.
No. ____ December 9, 1999
COMMON STOCK PURCHASE WARRANT
-----------------------
THIS CERTIFIES THAT ______________________ (the "Holder"), for value
received and subject to the terms and conditions set forth in this Warrant (the
"Warrant"), is entitled to purchase at any time prior to the Expiration Date (as
defined herein) from Metretek Technologies, Inc., a Delaware corporation (the
"Company"), any or all of _____________ duly authorized, validly issued, fully
paid and nonassessable shares of common stock, par value $.01 per share (the
"Common Stock"), at a purchase price of $6.7425 per share (the "Initial Exercise
Price").
This Warrant is originally issued in connection with the execution and
delivery of the Securities Purchase Agreement dated as of December 9, 1999 (the
"Securities Purchase Agreement") by and among the Company, the Holder and the
other purchasers named therein. This Warrant evidences the right to purchase an
aggregate of _______________ shares of Common Stock, subject to adjustment as
provided herein. Certain capitalized terms used in this Warrant are defined in
Section 12 hereof.
1. EXERCISE OF WARRANT.
1.1 MANNER OF EXERCISE; PAYMENT.
1.1.1 This Warrant may be exercised by the Holder, in whole or in
part, during normal business hours on any Business Day after March 9, 2000 and
on or prior to the Expiration Date, by surrender of this Warrant to the Company
at its principal office identified in Section 11.2(a) hereof, accompanied by a
subscription in substantially the form attached to this Warrant duly executed by
the Holder and accompanied by payment as follows, at the option of the Holder:
either (i) by certified or bank cashier's check made payable to the
<PAGE> 2
Company or by wire transfer of immediately available funds to an account
designated by the Company in an amount equal to, or (ii) shares of Common Stock
with an aggregate Current Market Price equal to, the product of (a) the number
of shares of Common Stock for which this Warrant is being exercised multiplied
by (b) the Exercise Price (such product the "Total Exercise Price"). The Holder
shall thereupon be entitled to receive the number of duly authorized, validly
issued, fully paid and nonassessable shares of Common Stock (or Other
Securities) determined as provided in Sections 2 through 4 hereof.
1.1.2 As an alternative to paying the Total Exercise Price in cash or
Common Stock, the Holder may elect instead to receive upon exercise of this
Warrant, upon surrender of this Warrant to the Company at its principal office
identified in Section 11.2(a) hereof, accompanied by a subscription in
substantially the form attached to this Warrant duly executed by the Holder, a
number of duly authorized, validly issued, fully paid and nonassessable shares
of Common Stock (or Other Securities) equal to (a) the difference between (x)
the product of (aa) the number of shares of Common Stock (or Other Securities)
which the Holder would as of the date of exercise be entitled to receive upon
exercise of this Warrant, multiplied by (bb) the Current Market Price as of the
date of exercise of each such share of Common Stock (or such Other Securities)
so receivable upon such exercise, minus (y) the product of (aa) the number of
shares determined in (x)(aa) above, multiplied by (bb) the Exercise Price, such
difference divided by (b) the Current Market Price of the Common Stock (or Other
Securities) as of the date of exercise.
1.2 EXPIRATION DATE. This Warrant shall expire at 5:00 p.m. Eastern
Daylight Time on December 9, 2004 (the "Expiration Date").
1.3 EFFECTIVENESS OF EXERCISE. The exercise of this Warrant shall be
deemed to have been effected immediately prior to the close of business on the
Business Day on which this Warrant shall have been surrendered to the Company as
provided in Section 1.1 hereof, and at such time the Person or Persons in whose
name or names any certificate or certificates for shares of Common Stock (or
Other Securities) shall be issuable upon such exercise as provided in Section
1.4 hereof shall be deemed to have become the holder or holders of record
thereof.
1.4 DELIVERY OF STOCK CERTIFICATES AND CASH. As soon as practicable after
the exercise of this Warrant, and in any event within three (3) Business Days
thereafter, the Company will deliver to the Holder any cash to be paid to the
Holder pursuant to Section 1.1 hereof and, at its expense (including the payment
by it of any applicable issue taxes), will cause to be issued in the name of and
delivered to the Holder or, subject to Section 8 hereof, as the Holder (upon
payment by the Holder of any applicable transfer taxes) may direct, a
certificate or certificates for the number of duly authorized, validly issued,
fully paid and nonassessable shares of Common Stock (or Other Securities) to
which the Holder shall be entitled upon such exercise (rounded to the nearest
whole share) plus, in lieu of any fractional share to which the Holder would
otherwise be entitled, cash in an amount equal to the same
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<PAGE> 3
fraction of the Current Market Price per share on the Business Day next
preceding the date of such exercise. If the Warrant has been exercised in part,
the Company shall also deliver at such time to the Holder a new Warrant of like
tenor exercisable for the balance of the shares of Common Stock for which this
Warrant may be exercised.
2. ADJUSTMENT OF STOCK ISSUABLE UPON EXERCISE
2.1 GENERAL; NUMBER OF SHARES; EXERCISE PRICE. The number of shares of
Common Stock which the Holder shall be entitled to receive upon the exercise
hereof shall be the number of shares of Common Stock originally issuable upon
the exercise of this Warrant as adjusted, from time to time, pursuant to this
Section 2. The "Exercise Price," which shall initially be the Initial Exercise
Price, shall be adjusted and readjusted from time to time as provided in this
Section 2 and, as so adjusted and readjusted, shall remain in effect until a
further adjustment or readjustment thereof is required by this Section 2.
2.2 ADJUSTMENT UPON CHANGE IN MARKET VALUE. If on December 9, 2000 (the
"Anniversary Date"), the product of (a) 1.25 multiplied by (b) the average
closing bid price of the Common Stock for the 30 trading days immediately
preceding the Anniversary Date (the "Reset Price"), is less than the Exercise
Price then in effect, then the Exercise Price shall be adjusted to equal the
Reset Price and shall be subject to further adjustment as provided herein.
2.3 The Exercise Price in effect and number of shares for which this
Warrant is exercisable shall be subject to adjustment from and after the date of
issuance of this Warrant as follows:
2.3.1 DIVIDENDS AND STOCK SPLITS; REVERSE STOCK SPLITS. If the number
of shares of Common Stock (which term for purposes of this Section 2.3 shall
include all common stock of the Company) outstanding at any time after the date
hereof is increased by a stock dividend payable in shares of Common Stock or by
a subdivision or split-up of shares of Common Stock or decreased by a
combination or reverse split of the outstanding shares of Common Stock, then, on
the date such payment is made or such change is effective, the Exercise Price in
effect immediately prior to such action shall be adjusted by multiplying such
Exercise Price by a fraction, the numerator of which is the number of shares of
Common Stock outstanding immediately before such event, and the denominator of
which is the number of shares of Common Stock outstanding immediately after such
event.
2.3.2 SALE OF COMMON STOCK. In the event the Company shall at any
time, or from time to time, issue, sell or exchange any shares of Common Stock
(including shares held in the Company's treasury but excluding up to (I)
1,211,236 shares and options issued to officers, directors or employees of the
Company or upon the exercise of options or other rights issued to such officers,
directors or employees pursuant to the Company's stock option, stock purchase
and related employee plans (II) up to 1,555,150 shares issuable upon exercise of
warrants or other rights issued by the Company prior to the date this Warrant
was issued, or
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<PAGE> 4
(III) any securities issuable upon conversion of the Company's Series B
Preferred Stock or exercise of warrants issued pursuant to the Securities
Purchase Agreement (the "Excluded Shares")), for a consideration per share (the
"Purchase Price") less than the greater of (a) the Market Price of the Common
Stock in effect immediately prior to the issuance, sale or exchange of such
shares or (b) the Exercise Price in effect immediately prior to the issuance,
sale or exchange of such shares, then, and thereafter successively upon each
such issuance, sale or exchange, the Exercise Price in effect immediately prior
to the issuance, sale or exchange of such shares shall be reduced to an amount
determined by multiplying such Exercise Price by a fraction:
(A) the numerator of which shall be (X) the number of shares of Common
Stock of all classes outstanding immediately prior to the issuance of
such additional shares of Common Stock (excluding treasury shares but
including all shares of Common Stock issuable upon conversion or
exercise of any outstanding options, warrants, rights or convertible
securities having an exercise or purchase price less than such
Purchase Price), plus (Y) the number of shares of Common Stock which
the net aggregate consideration received by the Company for the total
number of such additional shares of Common Stock so issued would
purchase at the Exercise Price (prior to adjustment), and
(B) the denominator of which shall be (X) the number of shares of Common
Stock of all classes outstanding immediately prior to the issuance of
such additional shares of Common Stock (excluding treasury shares but
including all shares of Common Stock issuable upon conversion or
exercise of any outstanding options, warrants, rights or convertible
securities having an exercise or purchase price less than such
Purchase Price), plus (Y) the number of such additional shares of
Common Stock so issued.
2.3.3 SALE OF OPTIONS, RIGHTS OR CONVERTIBLE SECURITIES. In the event
the Company shall at any time or from time to time, issue options, warrants or
rights to subscribe for shares of Common Stock, or issue any securities
convertible into or exchangeable for shares of Common Stock (other than any
options or warrants for Excluded Shares), for a Purchase Price (determined by
dividing the Net Aggregate Consideration (as determined below) by the aggregate
number of shares of Common Stock that would be issued if all such options,
warrants, rights or convertible securities were exercised or converted to the
fullest extent permitted by their terms) less than the greater of (a) the Market
Price in effect immediately prior to the issuance, sale or exchange of such
shares or (b) the Exercise Price in effect immediately prior to the issuance of
such options or rights or convertible or exchangeable securities, then the
Exercise Price in effect immediately prior to the issuance of such options,
warrants or rights or securities shall be reduced to an amount determined by
multiplying such Exercise Price by a fraction:
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<PAGE> 5
(A) the numerator of which shall be (X) the number of shares of Common
Stock of all classes outstanding immediately prior to the issuance of
such options, rights or convertible securities (excluding treasury
shares but including all shares of Common Stock issuable upon
conversion or exercise of any outstanding options, warrants, rights or
convertible securities having an exercise or purchase price less than
such Purchase Price), plus (Y) the number of shares of Common Stock
which the total amount of consideration received by the Company for
the issuance of such options, warrants, rights or convertible
securities plus the minimum amount set forth in the terms of such
security as payable to the Company upon the exercise or conversion
thereof (the "Net Aggregate Consideration") would purchase at the
Exercise Price prior to adjustment, and
(B) the denominator of which shall be (X) the number of shares of Common
Stock of all classes outstanding immediately prior to the issuance of
such options, warrants, rights or convertible securities (excluding
treasury shares but including all shares of Common Stock issuable upon
conversion or exercise of any outstanding options, warrants, rights or
convertible securities having an exercise or purchase price less than
such Purchase Price), plus (Y) the aggregate number of shares of
Common Stock that would be issued if all such options, warrants,
rights or convertible securities were exercised or converted.
2.3.4 EXPIRATION OR CHANGE IN PRICE. If the consideration per share
provided for in any options or rights to subscribe for shares of Common Stock or
any securities exchangeable for or convertible into shares of Common Stock,
changes at any time (other than as a result of the operation of the antidilution
provisions of this Section 2 or the antidilution provisions relating to the
Company's preferred stock), the Exercise Price in effect at the time of such
change shall be readjusted to the Exercise Price which would have been in effect
at such time had such options or convertible securities provided for such
changed consideration per share, at the time initially granted, issued or sold;
PROVIDED, that such adjustment of the Exercise Price will be made only as and to
the extent that the Exercise Price effective upon such adjustment remains less
than or equal to the Exercise Price that would be in effect if such options,
rights or securities had not been issued. No adjustment of the Exercise Price
shall be made under this Section 2.3.4 upon the issuance of any additional
shares of Common Stock which are issued pursuant to the exercise of any
warrants, options or other subscription or purchase rights or pursuant to the
exercise of any conversion or exchange rights in any convertible securities if
an adjustment shall previously have been made upon the issuance of such
warrants, options or other rights. Any adjustment of the Exercise Price shall be
disregarded if, as, and when the rights to acquire shares of Common Stock upon
exercise or conversion of the warrants, options, rights or convertible
securities which gave rise to such adjustment expire or are canceled without
having been exercised, so that the Exercise Price effective immediately upon
such cancellation or expiration shall be equal to the Exercise Price in effect
at the time of the issuance of the expired or canceled warrants, options, rights
or convertible securities, with such additional adjustments as would have been
made to that
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<PAGE> 6
Exercise Price had the expired or canceled warrants, options, rights or
convertible securities not been issued.
2.3.5 ADJUSTMENT OF NUMBER OF SHARES FOR WHICH WARRANT IS EXERCISABLE.
Upon each adjustment in the Exercise Price pursuant to this Section 2, the
number of shares of Common Stock purchasable hereunder shall be adjusted, to the
next larger whole share, to the product obtained by multiplying the number of
shares purchasable immediately prior to such adjustment in the Exercise Price by
a fraction (i) the numerator of which shall be the Exercise Price immediately
prior to such adjustment and (ii) the denominator of which shall be the Exercise
Price immediately thereafter.
2.3.6 OTHER ADJUSTMENTS. In the event the Company shall make or issue,
or fix a record date for the determination of holders of Common Stock entitled
to receive, a dividend or other distribution payable in securities of the
Company other than shares of Common Stock, then and in each such event lawful
and adequate provision shall be made so that the Holder of this Warrant shall
receive upon exercise hereof in addition to the number of shares of Common Stock
receivable thereupon, the number of securities of the Company which the Holder
would have received had the Warrant been exercised in full on the date of such
event and had the Holder thereafter, during the period from the date of such
event to and including the date of conversion, retained such securities
receivable by the Holder as aforesaid during such period, giving application to
all adjustments called for during such period under this Section 2 as applied to
such distributed securities.
2.3.7 REORGANIZATION, ETC. If the Common Stock issuable upon the
exercise of this Warrant shall be changed into the same or different number of
shares of any class or classes of stock, whether by reclassification or
otherwise (other than a subdivision or combination of shares or stock dividend
provided for above, or a reorganization, merger, consolidation or sale of assets
provided for elsewhere in this Section 2), then and in each such event the
Holder of this Warrant shall have the right thereafter to receive upon exercise
hereof the kind and amount of shares of stock and other securities and property
receivable upon such reorganization, reclassification or other change, by
holders of the number of shares of Common Stock for which this Warrant might
have been exercised immediately prior to such reorganization, reclassification
or change, all subject to further adjustment as provided herein.
2.3.8 MERGERS AND OTHER REORGANIZATIONS. If at any time or from time
to time there shall be a capital reorganization of the Common Stock (other than
a subdivision, combination, reclassification or exchange of shares provided for
elsewhere in this Section 2) or a merger or consolidation of the Company with or
into another Company or the sale of all or substantially all of the Company's
properties and assets to any other person, then, as part of and as a condition
to the effectiveness of such reorganization, merger, consolidation or sale,
lawful and adequate provision shall be made so that the Holder of this Warrant
shall thereafter be entitled to receive upon exercise hereof the number of
shares of stock or other securities or property of the Company, or of the
successor Company resulting from such merger or
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<PAGE> 7
consolidation or sale, to which a holder of Common Stock would have been
entitled in connection with such capital reorganization, merger, consolidation,
or sale. In any such case, appropriate provisions shall be made with respect to
the rights of the Holder of this Warrant after the reorganization, merger,
consolidation or sale to the end that the provisions of this Section 2
(including, without limitation, provisions for adjustment of the applicable
Exercise Price and the number of shares purchasable upon exercise of this
Warrant) shall thereafter be applicable, as nearly as may be, with respect to
any shares of stock, securities or assets to be deliverable thereafter upon the
exercise of this Warrant.
2.3.9 CALCULATIONS. All calculations under this Section 2 shall be
made to the nearest cent or to the nearest one hundredth (1/100) of a share, as
the case may be.
2.3.10 MULTIPLE ADJUSTMENTS. If any single transaction or event would
require adjustment of the Exercise Price 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.
2.3.11 MINIMUM ADJUSTMENT. No adjustment in the Exercise Price shall
be required to be made unless and until such adjustment would require a change
of at least one percent (1%) of the Exercise Price then in effect; provided,
however, that any adjustment that would not be required to be made shall be
taken into account and in subsequent adjustment.
2.3.12 CERTIFICATE. Upon the occurrence of each adjustment or
readjustment pursuant to this Section 2, the Company at its expense shall
promptly compute such adjustment or readjustment in accordance with the terms
hereof and prepare and furnish to the Holder a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. The Company shall, upon written request at
any time of the Holder, furnish or cause to be furnished to such holder a like
certificate setting forth (i) such adjustments and readjustments, (ii) the
Exercise Price before and after such adjustment or readjustment, and (iii) the
number of shares of Common Stock and the amount, if any, of other property which
at the time would be received upon the exercise of this Warrant.
3. OTHER DILUTIVE EVENTS. In case any event shall occur as to which the
provisions of Section 2 hereof are not strictly applicable but the failure to
make any adjustment would not, in the opinion of the Holder, fairly protect the
purchase rights represented by this Warrant in accordance with the essential
intent and principles of such Section, then, in each such case, at the request
of the Holder, the Company shall appoint a firm of independent investment
bankers of recognized national standing (which shall be completely independent
of the Company and shall be reasonably satisfactory to the Holder), which shall
give their opinion upon the adjustment, if any, on a basis consistent with the
essential intent and principles established in Section 2 hereof, necessary to
preserve, without dilution or expansion, the
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<PAGE> 8
purchase rights represented by this Warrant. Upon receipt of such opinion, the
Company shall promptly mail a copy thereof to the Holder and shall make the
adjustments described therein.
4. NO DILUTION OR IMPAIRMENT. The Company will not, by amendment of its
certificate of incorporation or through any consolidation, merger,
reorganization, transfer of assets, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of this Warrant, but will at all times in good faith assist
in the carrying out of all such terms and in the taking of all such action as
may be necessary or appropriate in order to protect the rights of the holder of
this Warrant against dilution or other impairment. Without limiting the
generality of the foregoing, the Company (a) will not permit the par value of
any shares of stock receivable upon the exercise of this Warrant to exceed the
amount payable therefor upon such exercise, (b) will take all such action as may
be necessary or appropriate in order that the Company may validly and legally
issue fully paid and nonassessable shares of stock on the exercise of the
Warrants from time to time outstanding, and (c) will not take any action which
results in any adjustment of the Exercise Price if the total number of shares of
Common Stock (or Other Securities) issuable after the action upon the exercise
of all of the Warrants would exceed the total number of shares of Common Stock
(or Other Securities) then authorized by the Company's certificate of
incorporation and available for the purpose of issue upon such exercise.
5. DISPUTES REGARDING ADJUSTMENTS. In the event of a dispute in connection
with an adjustment under this Warrant, the Company will cause independent
certified public accountants of recognized national standing (which may be the
regular auditors of the Company) selected by the Company to verify such
computation (other than any computation of the fair value of property as
determined in good faith by the Board of Directors of the Company) and prepare a
report setting forth such adjustment or readjustment and showing in reasonable
detail the method of calculation thereof and the facts upon which such
adjustment or re-adjustment is based. The Company will forthwith mail a copy of
each such report to the Holder and will, upon the written request at any time of
the Holder, furnish to the Holder a like report setting forth the Exercise Price
at the time in effect and showing in reasonable detail how it was calculated.
The Company will also keep copies of all such reports at its office maintained
pursuant to Section 11.2(a) hereof and will cause the same to be available for
inspection at such office during normal business hours by the Holder or any
prospective purchaser of a Warrant designated by the holder thereof.
6. NOTICES OF CORPORATE ACTION. In the event of
(a) any taking by the Company of a record of the holders of any class
of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any
class or any other securities or property, or to receive any other right,
or
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<PAGE> 9
(b) any capital reorganization of the Company, any reclassification
or recapitalization of the capital stock of the Company or any
consolidation or merger involving the Company and any other Person or any
transfer of all or substantially all the assets of the Company to any other
Person, or
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
the Company will mail to the Holder a notice specifying (i) the date or expected
date on which any such record is to be taken for the purpose of such dividend,
distribution or right, and the amount and character of such dividend,
distribution or right and (ii) the date or expected date on which any such
reorganization, reclassification, recapitalization, consolidation, merger,
transfer, dissolution, liquidation or winding-up is to take place, the time, if
any such time is to be fixed, as of which the holders of record of Common Stock
(or Other Securities) shall be entitled to exchange their shares of Common Stock
(or Other Securities) for the securities or other property deliverable upon such
reorganization, reclassification, recapitalization, consolidation, merger,
transfer, dissolution, liquidation or winding-up and a description in reasonable
detail of the transaction. Such notice shall be mailed at least twenty (20) days
prior to the date specified in (i) or (ii) above.
7. REGISTRATION OF COMMON STOCK. The shares of Common Stock (and Other
Securities) issuable upon exercise of this Warrant shall constitute Securities
(as such term is defined in the Registration Rights Agreement). The Holder of
this Warrant shall be entitled to all of the benefits afforded to a holder of
any such Securities under the Registration Rights Agreement and the Holder, by
its acceptance of this Warrant, agrees to be bound by and agrees to the terms
and conditions of the Registration Rights Agreement applicable to the Holder as
a holder of such Securities.
8. RESTRICTIVE LEGENDS. Except as otherwise permitted by this Section 8, each
certificate for Common Stock (or Other Securities) issued upon the exercise of
this Warrant, each certificate issued upon the direct or indirect transfer of
any such Common Stock (or Other Securities), this Warrant originally issued
pursuant to the Securities Purchase Agreement and each Warrant issued upon
direct or indirect transfer or in substitution for any Warrant pursuant to
Section 11 hereof shall be transferable only upon satisfaction of the conditions
specified in Section 8 of the Securities Purchase Agreement and in this Section
8 and shall be stamped or otherwise imprinted with legends in substantially the
form required by Section 8 of the Securities Purchase Agreement.
Notwithstanding any other provision of this Section 8 or of the Securities
Purchase Agreement, no opinion of counsel shall be necessary for a transfer of
Restricted Securities by the holder thereof to a subsidiary, shareholder,
partner or other affiliate of such holder, if the transferee agrees in writing
to be subject to the terms hereof to the same extent as if such transferee were
the original Holder of this Warrant.
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9. AVAILABILITY OF INFORMATION. The Company will use its best efforts to
comply with the reporting requirements of Sections 13 and 15 of the Exchange Act
and will use its best efforts to comply with all other public information
reporting requirements of the Commission (including pursuant to Rule 144 and
144A promulgated by the Commission under the Securities Act) from time to time
in effect and relating to the availability of an exemption from the Securities
Act for the sale of any Restricted Securities. The Company will also cooperate
with each holder of any Restricted Securities in supplying such information as
may be necessary for such holder to complete and file any information reporting
forms presently or hereafter required by the Commission as a condition to the
availability of an exemption from the Securities Act for the sale of any
Restricted Securities. The Company will furnish to the Holder of this Warrant,
promptly upon their becoming available, copies of all financial statements,
reports, notices and proxy statements sent or made available generally by the
Company to its stockholders, and copies of all regular and periodic reports and
all registration statements and prospectuses filed by the Company with any
securities exchange or with the Commission.
10. RESERVATION OF STOCK. The Company will at all times reserve and keep
available, solely for issuance and delivery upon exercise of this Warrant, the
number of shares of Common Stock (or Other Securities) from time to time
issuable upon exercise of this Warrant. All shares of Common Stock (or Other
Securities) issuable upon exercise of this Warrant shall be duly authorized and,
when issued upon such exercise, shall be validly issued and, in the case of
shares, fully paid and nonassessable with no liability on the part of the
holders thereof.
11. OWNERSHIP, TRANSFER AND SUBSTITUTION OF WARRANTS.
11.1 OWNERSHIP OF WARRANTS. The Company may treat the person in whose name
this Warrant is registered on the register kept at the office of the Company or
at the office of its transfer agent maintained pursuant to Section 11.2(a)
hereof as the owner and Holder thereof for all purposes, notwithstanding any
notice to the contrary. This Warrant may be exercised by a new Holder without a
new Warrant first having been issued.
11.2 OFFICE; TRANSFER AND EXCHANGE OF WARRANTS:
(a) Company will maintain an office in Denver, Colorado where
notices, presentations and demands in respect of this Warrant may be made
upon it. Such office shall be maintained at World Trade Center, 1675
Broadway, Suite 2150, Denver, Colorado 80202 until such time as the Company
shall notify the holders of this Warrant of any change of location of such
office.
(b) The Company shall cause to be kept at its office maintained
pursuant to Section 11.2(a) hereof or at the office of its transfer agent a
register for the registration and transfer of this Warrant. The name and
address of the Holder of this Warrant, the
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transfers thereof and the names and addresses of transferees of this
Warrant shall be registered in such register. The Person in whose name this
Warrant shall be so registered shall be deemed and treated as the owner and
Holder thereof for all purposes of this Warrant, and the Company shall not
be affected by any notice or knowledge to the contrary.
(c) Upon the surrender of this Warrant, properly endorsed, for
registration of transfer or for exchange at the office of the Company
maintained pursuant to Section 11.2(a) hereof, the Company at its expense
will execute and deliver to or upon the order of the Holder thereof a new
Warrant or Warrants of like tenor, in the name of such Holder or as such
Holder (upon payment by such holder of any applicable transfer taxes) may
direct, calling in the aggregate on the face thereof for the number of
shares of Common Stock called for on the face of the Warrant so
surrendered.
11.3 REPLACEMENT OF WARRANT. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such mutilation, upon surrender of such
Warrant for cancellation at the office of the Company maintained pursuant to
Section 11.2(a) hereof, and, if reasonably requested by the Company, upon
receipt of an indemnity (which may include a bond or other surety at the request
of the Company) reasonably acceptable to the Company, the Company at its expense
will execute and deliver, in lieu thereof, a new Warrant of like tenor and
denomination and dated the date hereof.
11.4 SECURITIES LAW REPRESENTATIONS. The Holder and each transferee of this
Warrant or of the securities issuable upon the exercise of this Warrant, by its
acceptance of this Warrant or the transfer thereof or of any shares of Common
Stock (or Other Securities) issuable upon exercise of this Warrant, each hereby
represents and warrants that this Warrant and the shares of Common Stock (or
Other Securities) issuable upon exercise of this Warrant are being acquired and
will be acquired for investment purposes for the account of the Holder of such
securities, without intention of resale or distribution thereof that is not in
compliance with the Securities Act and applicable state securities laws.
11.5 TRANSFER TAXES. The Company shall not be required to pay any federal
or state transfer tax or charge that may be payable in respect of any transfer
involved in the transfer or delivery of this Warrant or the issuance or delivery
of certificates for Common Stock (or Other Securities) in a name other than that
of the registered Holder of this Warrant unless and until any and all such taxes
and charges shall have been paid by the Holder of this Warrant or until it has
been established to the Company's reasonable satisfaction that no such tax or
charge is due.
12. DEFINITIONS.
Anniversary Date. As defined in Section 2.2.
11
<PAGE> 12
Business Day. Any day other than a Saturday or Sunday or a day on which
commercial banking institutions in Boston, Massachusetts, New York, New York or
Denver, Colorado are authorized by law to be closed. Any reference to "days"
(unless Business Days are specified) shall mean calendar days.
Commission. The Securities and Exchange Commission or any other federal
agency at the time administering the Securities Act.
Common Stock. As defined in the introduction to this Warrant, such term to
include any stock into which such Common Stock shall have been changed or any
stock resulting from any reclassification of such Common Stock, and all other
stock of any class or classes (however designated) of the Company the holders of
which have the right, without limitation as to amount, either to all or to a
share of the balance of current dividends and liquidating dividends after the
payment of dividends and distributions on any shares entitled to preference.
Company. As defined in the introduction to this Warrant, such term to
include any corporation which shall succeed to or assume the obligations of the
Company hereunder in compliance with Section 2 hereof.
Current Market Price. With respect to the Common Stock, on any date
specified herein, the average of the Market Price during the period of the most
recent 10 consecutive trading days ending on such date.
Exchange Act. The Securities Exchange Act of 1934, or any similar federal
statute, and the rules and regulations of the Commission thereunder, all as the
same shall be in effect at the time.
Excluded Shares. As defined in Section 2.3.2.
Exercise Price. As defined in Section 2.1.
Expiration Date. As defined in Section 1.2.
Holder. The original holder of this Warrant identified in the introduction
and any Person to whom this Warrant is transferred.
Initial Exercise Price. As defined in the introduction to this Warrant.
Market Price. With respect to the Common Stock, on any date shall mean the
last sale price, regular way, or, in case no such sale takes place on such day,
the average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on the New York Stock Exchange or,
if the Common Stock is not listed or admitted to trading on the New
12
<PAGE> 13
York Stock Exchange, as reported in the principal consolidated transaction
reporting system with respect to securities listed on the principal national
securities exchange on which the Common Stock is listed or admitted to trading
or, if the Common Stock is not listed or admitted to trading on any national
securities exchange, the last quoted price, or if not so quoted, the average of
the high bid and low asked prices in the over-the-counter market, as reported by
the Nasdaq Stock Market, Inc.'s Automated Quotation System or, if such system is
no longer in use, the principal other automated quotation system that may then
be in use, or if the Common Stock is not quoted by any such organization, the
average of the closing bid and asked prices as furnished by a professional
market maker making a market in the Common Stock that is selected by the Board
of Directors of the Company, or, if there is no such professional market maker,
such amount as an independent investment banking firm selected by the Board of
Directors of the Company determines to be the value of a share of Common Stock.
Other Securities. Any stock (other than Common Stock) and other securities
of the Company or any other Person which the Holder at any time shall be
entitled to receive, or shall have received, upon the exercise of the Warrant,
in lieu of or in addition to Common Stock, or which at any time shall be
issuable or shall have been issued in exchange for or in replacement of Common
Stock, or Other Securities pursuant to Section 3 hereof or otherwise.
Person. A corporation, an association, a partnership, a limited liability
company, an organization, a business, an individual, a government or political
subdivision thereof or a governmental agency.
Purchase Price. As defined in Section 2.3.2.
Registration Rights Agreement. The Registration Rights Agreement in the
form of EXHIBIT B to the Securities Purchase Agreement, as from time to time in
effect.
Reset Price. As defined in Section 2.2.
Restricted Securities. All of the following: (a) this Warrant, (b) any
shares of Common Stock (or Other Securities) which have been issued upon the
exercise of this Warrant, and (c) unless the context otherwise requires, any
shares of Common Stock (or Other Securities) which are at the time issuable upon
the exercise of this Warrant.
Securities Act. The Securities Act of 1933, or any similar federal statute,
and the rules and regulations of the Commission thereunder, all as the same
shall be in effect at the time.
Securities Purchase Agreement. As defined in the introduction to this
Warrant.
Total Exercise Price. As defined in Section 1.1.
13
<PAGE> 14
13. REMEDIES. The Company stipulates that the remedies at law of the Holder in
the event of any default or threatened default by the Company in the performance
of or compliance with any of the terms of this Warrant are not and will not be
adequate and that such terms may be specifically enforced by a decree for the
specific performance of any agreement contained herein or by an injunction but
only in the event of and against a violation by the Company of any of the terms
hereof or otherwise.
14. NO RIGHTS OR LIABILITIES AS STOCKHOLDER. Nothing contained in this Warrant
shall be construed as conferring upon the Holder any rights as a stockholder of
the Company (including but not limited to voting or receiving distributions to
stockholders) or as imposing any obligation on the Holder to purchase any
securities or as imposing any liabilities on the Holder as a stockholder of the
Company, whether such obligation or liabilities are asserted by the Company or
by creditors of the Company.
15. NOTICES. Except as otherwise provided in this Warrant, notices and other
communications under this Warrant shall be in writing and shall be delivered, or
mailed by registered or certified mail, return receipt requested, or by a
nationally recognized overnight courier, postage prepaid, addressed, (a) if to
the Holder, at the address set forth in the register kept at the office of the
Company maintained pursuant to Section 11.2(a) hereof or such other address as
the Holder shall have furnished to the Company in writing, or (b) if to the
Company, at its address maintained pursuant to Section 11.2(a) hereof, to the
attention of the President, or at such other address, or to the attention of
such other officer, the Company shall have furnished to the Holder in writing.
This Warrant and all other documents delivered in connection with the
transactions contemplated by the Securities Purchase Agreement embody the entire
agreement and understanding between the Holder and the Company and supersede all
prior agreements and understandings relating to the subject matter hereof.
16. GOVERNING LAW. This Warrant shall be construed and enforced in accordance
with and governed by the laws of the State of Delaware without regard to its
conflict of laws provisions.
17. AMENDMENTS. This Warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought.
14
<PAGE> 15
18. HEADINGS. The Section headings in this Warrant are for purposes of
convenience only and shall not constitute a part hereof.
METRETEK TECHNOLOGIES, INC.
By:________________________
Name:
Title:
15
<PAGE> 16
FORM OF SUBSCRIPTION
Date:
Metretek Technologies, Inc.
World Trade Center
1675 Broadway
Suite 2150
Denver, CO 80202
The undersigned registered Holder of the within Warrant hereby irrevocably
exercises such Warrant for, and purchases thereunder, ___________ shares of
COMMON STOCK [pursuant to Section 1.1.2 of the Warrant] [pursuant to Section
1.1.1 of the Warrant and herewith makes payment of [cash equal to] [________
shares of Common Stock with a value of] $__________ therefor], and requests that
a certificate for such shares be issued in the name of _________________ and be
delivered to ________________ at the address stated below.
Signed: [ ]
By:______________________
Name:
Title:
Address: [ ]
Address for delivery of certificate:[ ]
<PAGE> 1
EXHIBIT 4.4
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (the "Agreement") dated as of December 9,
1999 by and among Metretek Technologies, Inc., a Delaware corporation (the
"Company"), and each Holder (as hereinafter defined) executing a signature page
hereto.
This Agreement is made pursuant to a certain Securities Purchase
Agreement of even date herewith by and among the Company and the purchasers
named therein (the "Purchase Agreement"). In order to induce the purchasers to
enter into the Purchase Agreement, the Company has agreed to provide the
registration rights set forth in this Agreement. The execution of this Agreement
is a condition to the closing of the transactions contemplated by the Purchase
Agreement.
In consideration of the foregoing, the parties hereby agree as follows:
Section 1. Definitions.
As used in this Agreement, the following terms shall have the following
meanings:
"Advice" has the meaning set forth in Section 4.
"Affiliate" means, with respect to any specified Person, any other
Person who, directly or indirectly, controls, is controlled by, or is under
common control with such specified Person.
"Business Day" means any day other than a day on which banks are
authorized or required to be closed in the State of New York.
"Commission" means the United States Securities and Exchange
Commission.
"Common Stock" means the common stock, par value $.01 per share, of the
Company.
"Company" has the meaning set forth in the preamble and shall include
the Company's successors by merger, acquisition, reorganization or otherwise.
"Controlling Persons" has the meaning set forth in Section 6(a).
"Damages" has the meaning set forth in Section 6(a).
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, or any successor statute, and the rules and regulations of
the Commission promulgated thereunder.
<PAGE> 2
"Holder" means (i) each Person (other than the Company and its
Affiliates) who is a signatory to this Agreement as listed on Schedule 1 hereto
and (ii) each Person (other than the Company and its Affiliates) to whom a
Holder transfers Securities, as provided in Section 11 hereof, if such
Securities remain Registrable Securities.
"Holders' Counsel" means Goodwin, Procter & Hoar LLP, special counsel
to the Holders, or any successor counsel selected by Holders of a majority in
interest of the Registrable Securities.
"Inspectors" has the meaning set forth in Section 4(m).
"NASD" has the meaning set forth in Section 4(q).
"Nasdaq" has the meaning set forth in Section 4(o).
"Objection Notice" has the meaning set forth in Section 4(a).
"Objecting Party" has the meaning set forth in Section 4(a).
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, limited liability company,
unincorporated organization or government or other agency or political
subdivision thereof.
"Piggy-Back Registration" has the meaning set forth in Section 3(a).
"Prospectus" means the prospectus included in any Registration
Statement (including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part of an effective
Registration Statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable
Securities covered by such Registration Statement, and all other amendments and
supplements to the prospectus, including post-effective amendments, and all
material incorporated by reference or deemed to be incorporated by reference in
such prospectus.
"Public Offering" means a public offering of Securities registered on
Form S-11 or Form S-3 (or any successor or equivalent forms) under the
Securities Act for the Company's own or others' account.
"Purchase Agreement" means the Securities Purchase Agreement, dated as
of the date hereof, between the Company and the Holders pursuant to which the
Securities are being issued, as amended, modified or supplemented from hereto
time, together with any exhibits, schedules or other attachments thereto.
"Records" has the meaning set forth in Section 4(m).
"Registrable Securities" means the Securities; provided, however, that
any Securities shall cease to be Registrable Securities when (i) a Registration
Statement covering such
<PAGE> 3
Registrable Securities has been declared effective and such Registrable
Securities have been disposed of by the holder thereof pursuant to such
effective Registration Statement, (ii) such Registrable Securities are
transferred by the holder thereof to any Person (other than a Holder) pursuant
to Rule 144 (or any successor rule or similar provision then in effect, but not
Rule 144A) under the Securities Act, including a sale pursuant to the provisions
of Rule 144(k), or (iii) such Securities shall have ceased to be outstanding.
"Registration Expenses" has the meaning set forth in Section 5.
"Registration Statement" means any registration statement of the
Company that covers any of the Registrable Securities pursuant to the provisions
of this Agreement (including any Shelf Registration Statement and any
registration statement pursuant to which a Piggy-Back Registration is effected),
and all amendments and supplements to any such registration statement, including
post-effective amendments, in each case including the Prospectus, all exhibits,
and all material incorporated by reference or deemed to be incorporated by
reference in such registration statement.
"Required Filing Date" has the meaning set forth in Section 2(a).
"Securities" means (i) all shares of Common Stock held by any Holder,
(ii) all shares of Common Stock issued or issuable to any Holder upon the
conversion of any convertible securities or the exercise of any options,
warrants or other rights to subscribe for, purchase or otherwise acquire Common
Stock, (iii) all shares of the Company's Series B Preferred Stock held by any
holder, and (iv) all shares of Common Stock directly or indirectly issued or
issuable in respect of the securities referred to in clauses (i), (ii) and (iii)
above by way of stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation, or other
reorganization.
"Securities Act" means the Securities Act of 1933, as amended from time
to time, or any successor statute, and the rules and regulations of the
Commission promulgated thereunder.
"Shelf Registration Statement" has the meaning set forth in Section
2(a).
"Suspension Notice" has the meaning set forth in Section 4.
"Suspension Period" has the meaning set forth in Section 4.
"Target Effective Date" means the date 90 days after the Required
Filing Date.
"Target Effective Period" means the period of time between the date on
which a Shelf Registration Statement is actually declared effective and the
later of (i) the date which is 36 months following the date hereof, and (ii) the
date which is three months after the date on which a Holder ceases to be an
Affiliate of the Company in the opinion of counsel for the Company.
"Target Filing Date" has the meaning set forth in Section 2(a).
<PAGE> 4
Section 2. Shelf Registration.
(a) Filing; Effectiveness. As soon as practicable but not
later than the sixtieth (60th) day following the date hereof (the "Required
Filing Date"), the Company shall prepare and file with the Commission a "shelf"
registration statement (the "Shelf Registration Statement") on the appropriate
form for an offering to be made on a continuous basis pursuant to Rule 415 under
the Securities Act (or any successor rule or similar provision then in effect)
covering all of the Registrable Securities. The Company shall use its best
efforts to have the Shelf Registration Statement declared effective on or before
the Target Effective Date and to keep such Shelf Registration Statement
continuously effective for the Target Effective Period. Any Holder of
Registrable Securities shall be permitted to withdraw all or any part of the
Registrable Securities from a Shelf Registration Statement at any time prior to
the effective date of such Shelf Registration Statement.
(b) Supplements; Amendments. The Company agrees, if necessary,
to supplement or amend the Shelf Registration Statement, as required by the
rules, regulations or instructions applicable to the registration form used by
the Company for such Shelf Registration Statement or by the Securities Act or as
requested (which request shall result in the filing of a supplement or
amendment) by any Holder of Registrable Securities to which such Shelf
Registration Statement relates, and the Company agrees to furnish to the
Holders, Holders' Counsel and any managing underwriter copies of any such
supplement or amendment prior to its being used and/or filed with the
Commission.
(c) Liquidated Damages. If the Shelf Registration Statement is
not filed on or before the Required Filing Date, the Company shall pay
liquidated damages to each Holder in an amount equal to $1.00 per 1,000 shares
of the Registrable Securities per week beginning on the Required Filing Date. If
the Shelf Registration Statement is filed, but has not become effective on or
before the Target Effective Date, the Company shall pay liquidated damages to
each Holder in an amount equal to $1.00 per 1,000 shares of the Registrable
Securities per week beginning on the Target Effective Date. The weekly
liquidated damages payable by the Company to the Holders as a result of a late
filing or a late declaration of effectiveness shall increase by an amount equal
to $.10 per 1,000 shares of the Registrable Securities two weeks after the
Required Filing Date or the Target Effective Date, as the case may be, and shall
thereafter increase by an amount equal to $.10 per 1,000 shares of the
Registrable Securities at the end of each subsequent two week period for so long
as the Shelf Registration Statement is not filed or is not declared effective,
up to a maximum of $3.20. If a stop order is imposed or if for any other reason
the effectiveness of the Shelf Registration Statement is suspended during the
Target Effective Period, then the Company shall pay liquidated damages to each
Holder of the Registrable Securities in an amount equal to $1.00 per 1,000
shares of Registrable Securities per week beginning on the date of such stop
order or other suspension of effectiveness. The weekly liquidated damages
payable by the Company to the Holders as a result of the imposition of a stop
order or such other suspension of the effectiveness of the Shelf Registration
Statement during the Target Effective Period shall increase by an amount equal
to $.10 per 1,000 shares of the Registrable Securities two weeks after the stop
order was imposed or the effectiveness of the Shelf Registration Statement was
otherwise suspended and shall thereafter increase by an amount equal to $.10 per
1,000 shares of the Registrable Securities at the end of each subsequent two
week period for so long as such stop order remains in effect or the
effectiveness of the Shelf
<PAGE> 5
Registration Statement continues to be suspended, up to a maximum of $3.20. For
purposes of the two preceding sentences, the Holders will not be entitled to
receive liquidated damages under this Agreement during a Suspension Period (as
hereinafter defined) except to the extent permitted by Section 5 of this
Agreement. The Registrable Securities with respect to which liquidated damages
shall accrue and be payable in accordance with this Section 2(c) shall be those
Registrable Securities held by the Holders which are included or proposed to be
included in the Shelf Registration Statement. Notwithstanding the foregoing, the
liquidated damage provisions set forth in this paragraph shall not apply to the
extent that the Registrable Securities are covered by another registration
statement or by a successor registration statement to the Shelf Registration
Statement, in either case to the same extent and providing for the same method
of distribution as were provided in the Shelf Registration Statement.
The liquidated damages payable by the Company to the Holders pursuant
to this Section 2(c) shall be deemed to commence accruing on the day on which
the event triggering such liquidated damages occurs. Such liquidated damages
shall cease to accrue (i) with respect to the liquidated damages payable as a
result of the Company's failure to file the Shelf Registration Statement on or
prior to the Required Filing Date, on the day after the Shelf Registration
Statement is filed, (ii) with respect to the liquidated damages payable as a
result of the Company's failure to have the Shelf Registration Statement
declared effective on or prior to the Target Effective Date, on the day after
the Shelf Registration Statement is declared effective, or (iii) with respect to
the liquidated damages payable as a result of the imposition of a stop order or
the suspension for any other reason of the effectiveness of the Shelf
Registration Statement, on the day after the stop order is withdrawn or the
effectiveness of the Shelf Registration Statement is otherwise reinstated.
Notwithstanding the foregoing, if the sole reason why (i) the Company
has not filed the Shelf Registration Statement on or before the Required Filing
Date and/or (ii) the Shelf Registration Statement has not become effective on or
before the Target Effective Date, is because the Holders did not provide the
Company with information which is required to be disclosed in the Shelf
Registration Statement and which the Company requested the Holders to so provide
in writing at least 15 days prior to the Required Filing Date and/or the Target
Effective Date, as the case may be, the Company's obligation to pay liquidated
damages with respect to such late filing or such late declaration of
effectiveness will not begin to accrue until five business days after the
Holders have provided such information to the Company.
The Company shall pay the liquidated damages due with respect to any
Registrable Securities at the end of each week during which such liquidated
damages accrue and, to the extent such liquidated damages are not paid when due,
shall thereafter accrue dividends at a rate equal to the U.S. prime rate plus 5%
per annum. Liquidated damages shall be paid to the Holders of Registrable
Securities entitled to receive such liquidated damages by wire transfer in
immediately available funds to the accounts designated by such Holders.
The parties hereto agree that the liquidated damages provided for in
this Section 2 constitute a reasonable estimate as of the date hereof of the
damages that will be suffered by Holders of Registrable Securities by reason of
the failure of the Shelf Registration Statement to be filed, to be declared
effective and/or to remain effective, as the case may be, in accordance with
this Agreement. However, the right of the Holders to be paid the liquidated
damages
<PAGE> 6
provided for in this Section 2(c) is not intended to be and shall not be
construed or deemed to be an exclusive remedy, it being understood that the
Holders shall have the full right to pursue all available remedies at law or in
equity for any breach by the Company of any of its obligations under this
Agreement.
The liquidated damages provisions of this Section 2(c) shall not apply
if the offering of Registrable Securities pursuant to such Shelf Registration
Statement shall be in the form of an underwritten offering, unless the Holders
can demonstrate that the failure of the Company to file the Shelf Registration
Statement on or before the Required Filing Date, and/or the failure of the
Registration Statement to become effective on or before the Target Effective
Date was due solely or primarily to the acts or omissions of the Company or its
officers, directors, employees, counsel or other representatives.
(d) Effective Registration. A registration statement will not
be deemed to have been effected as a Shelf Registration Statement unless such
Shelf Registration Statement has been declared effective by the Commission and
the Company has complied in all material respects with its obligations under
this Agreement with respect thereto; provided, however, that if, after a Shelf
Registration Statement has been declared effective, the offering of Registrable
Securities pursuant to such Shelf Registration Statement is interfered with by
any stop order, injunction or other order or requirement of the Commission or
any other governmental agency or court, such Shelf Registration Statement will
be deemed not to have become effective during the period of such interference
until the offering of Registrable Securities pursuant to such Shelf Registration
Statement may legally resume. If a Shelf Registration Statement is deemed not to
have been effected, then the Company shall continue to be obligated to effect
such Shelf Registration Statement pursuant to this Section 2.
(e) Selection of Underwriter. If the Holders of a majority of
the Registrable Securities requested to be included in such Shelf Registration
Statement so elect, the offering of Registrable Securities pursuant to such
Shelf Registration Statement shall be in the form of an underwritten offering.
If they so elect, the Holders of a majority of the Registrable Securities
requested to be included in such Shelf Registration Statement shall select one
or more nationally recognized firms of investment bankers to act as the
book-running managing underwriter or underwriters in connection with such
offering and shall select any additional investment bankers and managers to be
used in connection with the offering; that such selection shall be subject to
the consent of the Company, which consent shall not be unreasonably withheld.
(f) Inclusion of Other Securities. The Company shall be
entitled to include in the Shelf Registration Statement shares of Common Stock
for the account of its other security holders which have "piggy-back"
registration rights. Notwithstanding the foregoing, if the managing underwriter
or underwriters of any such Shelf Registration Statement which is an
underwritten offering have informed, in writing, the Company and the Holders
that it is their opinion that the total number of shares which the Company, the
Holders of Registrable Securities and any other Persons participating in such
registration intend to include in such offering is such as to be likely to
materially and adversely affect the success of such offering and/or its
marketing price or other terms, then the Company shall not be entitled to
include such other shares of Common Stock and the number of shares to be offered
for the account of all Persons (other than the Holders) participating in such
Shelf Registration Statement shall be reduced or limited (to
<PAGE> 7
zero if necessary) pro rata in proportion to the respective number of shares
requested to be included in such offering by such Persons to the extent
necessary to reduce the total number of shares included in such Shelf
Registration Statement to the number of shares, if any, recommended by such
managing underwriter or underwriters.
Section 3. Piggy-Back Registration.
(a) Request for Registration. Each time the Company proposes
to file a registration statement under the Securities Act with respect to an
offering for cash by the Company for its own account or for the account of any
of its securityholders of any class of equity security (other than (i) a
registration statement on Form S-4 or S-8 (or any substitute or successor form
that is adopted by the Commission) or (ii) a registration statement filed in
connection with an exchange offer or the offering of securities solely to the
Company's existing securityholders), then the Company shall give written notice
of such proposed filing to each Holder of Registrable Securities as soon as
practicable (but in no event less than twenty (20) days before the anticipated
filing date), and such notice shall offer such Holder the opportunity to
register such number of shares of Registrable Securities as each such Holder may
request (which request must be made in writing and shall specify the Registrable
Securities intended to be disposed of by such Holder and the intended method of
distribution thereof) (a "Piggy-Back Registration"). The Company shall permit,
or, if the offering relating to a Piggy-Back Registration is an underwritten
offering, shall use its best efforts to cause the managing underwriter or
underwriters of such proposed underwritten offering to permit, the Registrable
Securities requested to be included in such Piggy-Back Registration to be
included on the same terms and conditions as any similar securities of the
Company or any other securityholder included therein and shall permit, or use
its best efforts to cause such managing underwriter or underwriters to permit,
the sale or other disposition of such Registrable Securities in accordance with
such Holder's intended method of distribution thereof. Any Holder shall have the
right to withdraw its request for inclusion of its Registrable Securities in any
registration statement pursuant to this Section 3 by giving written notice to
the Company of such withdrawal. The Company may withdraw a Piggy-Back
Registration at any time prior to the time it becomes effective, provided that
the Company shall give immediate notice of such withdrawal to the Holders who
requested Registrable Securities to be included in such Piggy-Back Registration
and shall reimburse such Holders for all reasonable out-of-pocket expenses
(including counsel fees and expenses) incurred prior to such withdrawal.
(b) Reduction of Offering. If the managing underwriter or
underwriters of any such Piggy-Back Registration which is an underwritten
offering have informed, in writing, the Holders requesting inclusion of
Registrable Securities in such offering that it is their opinion that the total
number of shares which the Company, Holders of Registrable Securities and any
other Persons participating in such registration intend to include in such
offering is such as to materially and adversely affect the success of such
offering, then the number of shares to be offered for the account of all Persons
participating in such Piggy-Back Registration shall be reduced or limited (to
zero if necessary) and the Company shall include in the registration the maximum
number of securities which it is so advised can be sold without the adverse
effect, allocated as follows:
<PAGE> 8
(i) First, the securities proposed to be registered
by the Company for its own account;
(ii) Second, the securities proposed to be registered
by the Company pursuant to the exercise by any Person of a "demand"
right requesting the registration of securities of the Company pursuant
to an agreement with the Company in existence as of the date of this
Agreement;
(iii) Third, the securities proposed to be registered
by the Company, other than for its own account, including, without
limitation, the Registrable Securities duly requested to be included in
the registration by the Holders and the Shares required to be
registered by the Company pursuant to the exercise by any Person other
than a Holder of Registrable Securities, of its piggy-back rights.
All reductions in shares included in a Registration Statement shall be
allocated pro rata in proportion to the respective number of shares requested to
be included in such offering by such Persons to the extent necessary to reduce
the total number of shares requested to be included in such offering to the
number of shares, if any, recommended by such managing underwriter or
underwriters.
Although the specific shares of Common Stock disposed of pursuant to a
Piggy-Back Registration will cease to be Registrable Securities, the mere
registration of Registrable Securities under this Section 3 shall not relieve
the Company of its obligation to effect or maintain a Shelf Registration
Statement pursuant to Section 2. No failure by the Holders to elect a Piggy-Back
Registration under this Section 3 or to complete the sale of Registrable
Securities pursuant to the registration statement effected in connection
therewith, and no withdrawal of Registrable Securities from a Piggy-Back
Registration, shall relieve the Company of any other obligation under this
Agreement, including without limitation, the Company's obligations under
Sections 4 and 5.
Section 4. Registration Procedures.
In connection with the obligations of the Company to effect or cause
the registration of any Registrable Securities pursuant to the terms and
conditions of this Agreement, the Company shall use its best efforts to effect
the registration and sale of such Registrable Securities in accordance with the
intended method of distribution thereof as quickly as reasonably practicable,
and in connection therewith:
(a) The Company shall prepare and file with the Commission a
Registration Statement on the appropriate form under the Securities
Act, which Registration Statement shall comply as to form in all
material respects with the requirements of the applicable form and
include all financial statements required by the Commission to be filed
therewith, and use its best efforts to cause such Registration
Statement to become effective and remain effective in accordance with
the provisions of this Agreement; provided, however, that, at least
five (5) Business Days prior to filing a Registration Statement or
Prospectus and three (3) Business Days prior to filing any amendments
or supplements thereto, including documents incorporated by reference
after the initial filing
<PAGE> 9
of the Registration Statement, the Company shall furnish to the Holders
of the Registrable Securities covered by such Registration Statement,
Holders' Counsel and the underwriters, if any, draft copies of all such
documents proposed to be filed, which documents will be subject to the
review of Holders' Counsel and the underwriters, if any, and the
Company will not, unless required by law or this Agreement, file any
Registration Statement or amendment thereto or any Prospectus or any
supplement thereto to which Holders holding a majority of the
Registrable Securities covered by such Registration Statement or the
underwriters with respect to such Securities, if any, shall object;
provided, however, that any such objection to the filing of any
Registration Statement or amendment thereto or any Prospectus or
supplement thereto shall be made by written notice (the "Objection
Notice") delivered to the Company no later than five (5) or three (3)
Business Days, as applicable, after the party or parties asserting such
objection (the "Objecting Party") receives draft copies of the
documents that the Company proposes to file. The Objection Notice shall
set forth the objections and the specific areas in the draft documents
where such objections arise. The Company shall have five (5) Business
Days after receipt of the Objection Notice to correct such deficiencies
to the reasonable satisfaction of the Objecting Party, and will notify
each Holder of any stop order issued or threatened by the Commission in
connection therewith and shall use its best efforts to prevent the
entry of such stop order or, if entered, to have such stop order
withdrawn at the earliest possible moment.
(b) The Company shall promptly prepare and file with the
Commission such amendments and post-effective amendments to the
Registration Statement as may be necessary to keep such Registration
Statement effective for as long as the Company is required to keep such
Registration Statement effective pursuant to the terms hereof; shall
cause the Prospectus to be supplemented by any required Prospectus
supplement, and, as so supplemented, to be filed pursuant to Rule 424
under the Securities Act; and shall comply with the provisions of the
Securities Act applicable to it with respect to the disposition of all
Registrable Securities covered by such Registration Statement during
the applicable period in accordance with the intended methods of
disposition by the Holders set forth in such Registration Statement or
amendment thereto or such Prospectus or supplement thereto;
(c) The Company shall promptly furnish to any Holder and the
underwriters, if any, without charge, such number of conformed copies
of such Registration Statement and any post-effective amendment thereto
and such number of copies of the Prospectus (including each preliminary
Prospectus) and any amendments or supplements thereto, any documents
incorporated by reference therein and such other documents as any such
Holder or underwriter may request in order to facilitate the public
sale or other disposition of the Registrable Securities being sold by
such Holder.
(d) The Company shall, on or prior to the date on which a
Registration Statement is declared effective, (i) use its best efforts
to register, or qualify the Registrable Securities covered by such
Registration Statement under the securities or "blue sky" laws of each
of the 50 states of the United States (or such jurisdictions as any
Holder, Holders' counsel or underwriter may request) or obtain
appropriate exemptions therefrom; (ii) do any and all other acts and
things which may be necessary to enable the
<PAGE> 10
Holders of Registrable Securities included in such Registration
Statement to consummate the disposition of such Registrable Securities
in accordance with their intended method of distribution thereof; (iii)
use its best efforts to keep each such state securities or "blue sky"
registration or qualification (or exemption therefrom) effective during
the period in which the Company is required to keep the Registration
Statement effective; and (iv) do any and all other acts or things which
may be necessary or advisable to enable the Holders of Registrable
Securities included in such Registration Statement to complete the
disposition in such jurisdictions of such Registrable Securities in
accordance with their intended method of distribution thereof;
provided, however, that the Company shall not be required (A) to
qualify to do business in any jurisdiction where it would not otherwise
be required to so qualify but for this Section 4(d) or (B) to file any
general consent to service of process.
(e) The Company shall use its best efforts to cause the
Registrable Securities covered by a Registration Statement to be
registered with or approved by such other governmental agencies or
authorities as may be necessary by virtue of the business and
operations of the Company to enable the Holders to consummate the
disposition of such Registrable Securities in accordance with their
intended method of distribution thereof.
(f) The Company shall promptly notify each Holder, Holders'
Counsel and any underwriter and (if requested by any such Person)
confirm such notice in writing, (i) when a Registration Statement or a
Prospectus or any post-effective amendment or any Prospectus supplement
has been filed and, with respect to a Registration Statement or any
post-effective amendment, when the same has become effective, (ii) of
any request by the Commission or any state securities authority for
amendments and supplements to a Registration Statement and Prospectus
or for additional information after the Registration Statement has
become effective, (iii) of the issuance by the Commission of any stop
order suspending the effectiveness of a Registration Statement or the
initiation or threatening of any proceedings for that purpose, (iv) of
the issuance by any state securities commission or other regulatory
authority of any order suspending the registration or qualification or
exemption from registration or qualification of any of the Registrable
Securities under state securities or "blue sky" laws or the initiation
of any proceedings for that purpose, (v) if, between the effective date
of a Registration Statement and the closing of any sale of Registrable
Securities covered thereby, the representations and warranties of the
Company contained in any underwriting agreement, securities sales
agreement or other similar agreement, if any, relating to the offering
of such Registrable Securities cease to be true and correct in all
material respects, and (vi) of the happening of any event which makes
any statement of a material fact made in a Registration Statement or
related Prospectus untrue or which requires the making of any changes
in such Registration Statement or Prospectus so that such Registration
Statement or Prospectus will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; and, as
promptly as practicable thereafter, prepare and file an amendment to
such Registration Statement with the Commission and furnish to the
Holders and any underwriter a supplement or amendment to such
Prospectus so that, as thereafter deliverable to the purchasers of such
Registrable Securities, such Prospectus will not contain any untrue
statement of a
<PAGE> 11
material fact or omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading.
(g) The Company shall make generally available to the Holders
an earnings statement satisfying the provisions of Section 11(a) of the
Securities Act no later than 30 days after the end of the 12-month
period beginning with the first day of the Company's first fiscal
quarter commencing after the effective date of a Registration
Statement, which earnings statement shall cover said 12-month period,
and which requirement will be deemed to be satisfied if the Company
timely files complete and accurate information on Forms 10-Q, 10-K and
8-K under the Exchange Act and otherwise complies with Rule 158 under
the Securities Act.
(h) The Company shall promptly use its best efforts to prevent
the issuance of any order suspending the effectiveness of a
Registration Statement, and, if any such order suspending the
effectiveness of a Registration Statement is issued, shall promptly use
its best efforts to obtain the withdrawal of such order at the earliest
possible moment.
(i) The Company shall, if reasonably requested by the managing
underwriter or underwriters, if any, Holders' Counsel, or any Holder
promptly incorporate in a Prospectus supplement or post-effective
amendment such information as such managing underwriter or underwriters
or Holder or Holders' Counsel reasonably requests to be included
therein, including, without limitation, with respect to the Registrable
Securities being sold by such Holder to such underwriter or
underwriters, the purchase price being paid therefor by such
underwriter or underwriters and any other terms of an underwritten
offering of the Registrable Securities to be sold in such offering, and
the Company shall promptly make all required filings of such Prospectus
supplement or post-effective amendment.
(j) The Company shall, as promptly as practicable after the
filing with the Commission of any document which is incorporated by
reference into a Registration Statement (in the form in which it was
incorporated), deliver a copy of each such document to each of the
Holders and to Holders' Counsel.
(k) The Company shall cooperate with the Holders and the
managing underwriter or underwriters, if any, to facilitate the timely
preparation and delivery of certificates (which shall not bear any
restrictive legends unless required under applicable law) representing
Registrable Securities sold under a Registration Statement to the
purchasers thereof, and enable such Registrable Securities to be in
such denominations and registered in such names as the managing
underwriter or underwriters, if any, or such Holders may request and
keep available and make available to the Company's transfer agent prior
to the effectiveness of such Registration Statement a supply of such
certificates.
(l) The Company shall enter into such customary agreements
(including, if applicable, an underwriting agreement in customary form)
and take such other actions as the Holders or the underwriters retained
by the Holders participating in an underwritten public offering, if
any, may reasonably request in order to expedite or facilitate the
<PAGE> 12
disposition of Registrable Securities (the Holders may, at their
option, require that any or all of the representations, warranties and
covenants of the Company to or for the benefit of any underwriters also
be made to and for the benefit of the Holders).
(m) The Company shall promptly make available to each Holder,
any underwriter participating in any disposition of Registrable
Securities pursuant to a Registration Statement, and any attorney,
accountant or other agent or representative retained by any such Holder
or underwriter (collectively, the "Inspectors"), all financial and
other records, pertinent corporate documents and properties of the
Company (collectively, the "Records"), as shall be reasonably necessary
to enable them to exercise their due diligence responsibility, and
cause the Company's officers, directors and employees to supply all
information requested by any such Inspector in connection with such
Registration Statement.
(n) The Company shall furnish to each Holder of Registrable
Securities included in such offering and to each underwriter, if any, a
signed counterpart, addressed to such Holder or underwriter, of (i) an
opinion or opinions of counsel to the Company, and (ii) a comfort
letter or comfort letters from the Company's independent public
accountants, each in customary form and covering matters of the type
customarily covered by opinions or comfort letters, as the case may be.
(o) The Company shall use its best efforts to cause the
Registrable Securities included in a Registration Statement (if the
Company and the Registrable Securities so qualify) (i) to be listed on
each national securities exchange, if any, on which similar securities
issued by the Company are then listed, or (ii) if similar securities of
the Company are not then listed, to be authorized for quotation or
listing, as applicable, on the Nasdaq Stock Market, Inc.'s ("Nasdaq")
National Market.
(p) The Company shall provide a CUSIP number for all
Registrable Securities covered by a Registration Statement which do not
then have a CUSIP number not later than the effective date of such
Registration Statement.
(q) The Company shall cooperate with each Holder and each
underwriter participating in the disposition of Registrable Securities
and their respective counsel in connection with any filings required to
be made with the National Association of Securities Dealers, Inc.
("NASD").
(r) The Company shall, during the period when the Prospectus
is required to be delivered under the Securities Act, promptly file all
documents required to be filed with the Commission pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act.
(s) The Company shall appoint or maintain a transfer agent and
registrar for all Registrable Securities covered by a Registration
Statement not later than the effective date of such Registration
Statement.
(t) In connection with an underwritten offering, the Company
shall participate, to the extent reasonably requested by the managing
underwriter for the
<PAGE> 13
offering or the Holders, in customary efforts to sell the securities
being offered, including without limitation, participating in "road
shows," at the expense of the Holders.
(u) If a Holder proposes to sell a block of Registrable
Securities with a value in excess of $1 million, the Company shall make
members of the management of the Company available for reasonable
selling efforts, including senior management attendance at road shows,
provided, however, that the selling Holder or Holders shall reimburse
the Company for its reasonable out-of-pocket expenses actually incurred
at the request of such selling Holder or Holders in connection with
such selling efforts.
(v) If the Registrable Securities are of a class of securities
that is listed on a national securities exchange, the Company shall
file copies of any Prospectus with such exchange in compliance with
Rule 153 under the Securities Act so that the Holders shall benefit
from the prospectus delivery procedures described therein.
In the case of a Shelf Registration Statement, each Holder, upon
receipt of any notice (a "Suspension Notice") from the Company of the happening
of any event of the kind described in Section 4(f)(vi), shall forthwith
discontinue disposition of the Registrable Securities pursuant to the Shelf
Registration Statement covering such Registrable Securities until such Holder's
receipt of the copies of the supplemented or amended Prospectus contemplated by
Section 4(f) or until such Holder is advised in writing (the "Advice") by the
Company that the use of the Prospectus may be resumed, and such Holder has
received copies of any additional or supplemental filings which are incorporated
by reference in the Prospectus, and, if so directed by the Company, such Holder
will, or will request the managing underwriter or underwriters, if any, to,
deliver to the Company (at the Company's expense) all copies, other than
permanent file copies then in such Holder's possession, of the Prospectus
covering such Registrable Securities current at the time of receipt of such
notice; provided, however, that the Company shall not give a Suspension Notice
until after the Shelf Registration Statement has been declared effective and
shall not give more than one Suspension Notice during any period of 12
consecutive months and in no event shall the period from the date on which any
Holder receives a Suspension Notice to the date on which any Holder receives
either the Advice or copies of the supplemented or amended Prospectus
contemplated by Section 4(f) (the "Suspension Period") exceed thirty (30) days.
In the event that the Company shall give any Suspension Notice, (i) the Company
shall use its best efforts and take such actions as are reasonably necessary to
render the Advice and end the Suspension Period as promptly as practicable and
(ii) the time periods for which a Shelf Registration Statement is required to be
kept effective pursuant to Section 2 hereof shall be extended by the number of
days during the Suspension Period. If any Suspension Period exceeds thirty (30)
days or more than one Suspension Notice is given during any 12 consecutive
months, the Company shall pay liquidated damages to each Holder of Registrable
Securities in an amount equal to $1.00 per 1,000 shares of the Registrable
Securities included in the Shelf Registration Statement per week beginning on
the 31st day of such Suspension Period or the date of such additional Suspension
Notice, as the case may be. The weekly liquidated damages payable by the Company
to the Holders as a result of the continuance of a Suspension Period beyond 30
days or as a result of the giving of more than one Suspension Notice during any
12 months shall increase by an amount equal to $.10 per 1,000 shares of the
Registrable Securities two weeks after the event triggering such liquidated
damages and shall thereafter increase by an amount equal to $.10 per 1,000
shares of the Registrable Securities at the end of each subsequent two week
period for so long as
<PAGE> 14
the event triggering such liquidated damages has not been eliminated, up to a
limit of $3.20 per 1,000 shares. The Company shall pay the liquidated damages
due with respect to any Registrable Securities at the end of each week during
which such damages accrue. Liquidated damages shall be paid to the Holders of
Registrable Securities entitled to receive such liquidated damages by wire
transfer in immediately available funds to the accounts designated by such
Holders.
If any Registration Statement refers to any Holder by name or otherwise
as the holder of any securities of the Company, then such Holder shall have the
right to require (i) the insertion therein of language, in form and substance
reasonably satisfactory to such Holder and the Company, to the effect that the
holding by such Holder of such securities is not to be construed as a
recommendation by such Holder of the investment quality of the Company's
securities covered thereby and that such holding does not imply that such Holder
will assist in meeting any future financial requirements of the Company, or (ii)
in the event that such reference to such Holder by name or otherwise is not
required by the Securities Act or any similar Federal or state securities or
"blue sky" statute and the rules and regulations thereunder then in force, the
deletion of the reference to such Holder.
Section 5. Registration Expenses. Any and all expenses incident to the
Company's performance of or compliance with this Agreement, including without
limitation, all Commission and securities exchange, Nasdaq or NASD registration,
listing and filing fees, all fees and expenses incurred in connection with
compliance with state securities or "blue sky" laws (including reasonable fees
and disbursements of one counsel for any underwriters or Holder in connection
with the state securities or "blue sky" qualifications of the Registrable
Securities), printing expenses, messenger and delivery expenses, internal
expenses (including, without limitation, all salaries and expenses of the
Company's officers and employees performing legal or accounting duties), all
expenses for word processing, printing and distributing any Registration
Statement, any Prospectus, any amendments or supplements thereto, any
underwriting agreements, securities sales agreements and other documents
relating to the performance of and compliance with this Agreement, the fees and
expenses incurred in connection with the listing of the Registrable Securities,
the fees and disbursements of counsel for the Company and of the independent
certified public accountants of the Company (including the expenses of any
comfort letters or costs associated with the delivery by independent certified
public accountants of a comfort letter or comfort letter requested pursuant to
Section 4(n), Securities Act liability insurance (if the Company elects to
obtain such insurance), the reasonable fees and expenses of any special experts
or other Persons retained by the Company in connection with any registration,
the reasonable fees and disbursements of one Holders' counsel, the reasonable
fees and disbursements of one counsel to Holders advised by DDJ Capital
Management, and any reasonable out-of-pocket expenses of the Holders and their
agents, including any reasonable travel costs (but excluding brokerage and
underwriting discounts, fees and commissions and transfer taxes, if any,
relating to the sale or disposition of Registrable Securities) (all such
expenses being herein called "Registration Expenses"), will be borne by the
Company whether or not the Shelf Registration Statement or Piggy-Back
Registration to which such expenses relate becomes effective.
<PAGE> 15
Section 6. Holdback Agreement.
(a) Subject to the conditions set forth below in this Section
6, each Holder agrees that, in connection with a Piggy-Back Registration which
is an underwritten offering and pursuant to which the majority of the securities
to be sold are to be sold for the account of the Company, if requested by the
Company and the managing underwriter of such offering, then such Holder shall
not, to the extent so requested, directly or indirectly sell, transfer or
dispose of any Common Stock (or other securities) of the Company held by such
Holder within seven (7) days prior or one hundred eighty (180) days (or such
lesser period as the managing underwriter may permit) after the effective date
of the registration statement for the Piggy-Back registration except pursuant to
such Piggy-Back Registration. If requested by the managing underwriter, the
Holders shall execute a separate agreement to the foregoing effect, in form
reasonably satisfactory to the Holders, the Company and the managing
underwriter. The Company may impose stop-transfer instructions with respect to
the securities subject to the foregoing restriction. Notwithstanding the
foregoing, any obligation of the Holders under this Section 6 or any agreement
entered into pursuant to this Section 6 shall immediately terminate upon their
receipt from the Company of the redemption notice described in Section
A.5(a)(iii) of the Certificate of Designation of the Company's Series B
Preferred Stock. Notwithstanding the foregoing, State Street Bank & Trust, in
its capacity as Trustee for General Motors Employees Global Group Pension Trust,
shall only be subject to the limitations of this Section with respect to
accounts managed or advised by DDJ Capital Management, LLC.
(b) It shall be a condition to the Holders' holdback
obligation and obligation to enter into separate agreements under Section 6(a)
that all officers, directors and Persons who beneficially own at least 10% of
the Company's Common Stock (calculated in the same manner as required by Section
13(d) of the Exchange Act and the regulations thereunder except that all
securities convertible into or exercisable or exchangeable into the Company's
Common Stock ("Convertible Securities") owned by such Persons shall be included
in the calculation regardless of whether such Convertible Securities are
exercisable within 60 days) (collectively the "Holdback Parties") (i) are
subject to the same holdback obligations and enter into similar separate
agreements and (ii) have not received any additional consideration in any form
for entering into such obligations and agreements.
(c) The Company and the managing underwriter shall notify the
Holders in the event that any restriction contained herein is waived for the
benefit of any Holdback Party or any agreement entered into pursuant to Section
6(a) or similar agreement entered into by any Holdback Party is amended in any
way, including shortening the 180 day holdback period, and shall provide to the
Holders the benefit, if they so choose, of any such waiver or amendment. If any
Holdback Party is permitted to sell a certain number of shares of Common Stock
prior to the expiration of the 180 day holdback period, each of the Holders
shall be entitled to be released from its holdback obligations and permitted to
sell a number of shares of Common Stock equal to the greater of (i) the number
of shares that the released Person is permitted to sell or (B) the percentage of
such released Person's shares that the released Person is permitted to sell.
<PAGE> 16
Section 7. Selling Holders' Obligations.
(a) Provision of Information. It shall be a condition
precedent to the obligation of the Company hereunder to register the Registrable
Securities of any Holder, that such Holder, and any underwriter selected by such
Holder in an underwritten public offering, furnish to the Company such
information regarding itself, the Registrable Securities held by it, the
intended method of distribution of such Securities and such other information as
the Company shall from time to time reasonably request and that shall be
reasonably required to effect the registration of such Holder's Registrable
Securities.
(b) Underwriting Agreement. Each Holder participating in an
underwritten offering pursuant to Section 2 or 3 agrees to enter into a
customary underwriting agreement on terms reasonably satisfactory to the
managing underwriter.
Section 8. Indemnification and Contribution.
(a) Indemnification by the Company. The Company agrees to
indemnify and hold harmless, to the full extent permitted by law, each Holder,
its partners, officers, directors, trustees, stockholders, employees, agents and
investment advisers, and each Person who controls such Holder within the meaning
of either Section 15 of the Securities Act or Section 20 of the Exchange Act, or
is under common control with, or is controlled by, such Holder, together with
the partners, officers, directors, trustees, stockholders, employees, agents and
investment advisors of such controlling Person (collectively, the "Controlling
Persons"), from and against all losses, claims, damages, liabilities and
expenses (including, without limitation, any legal or other fees and expenses
incurred by any Holder or any such Controlling Person in connection with
defending or investigating any action or claim in respect thereof)
(collectively, the "Damages") to which such Holder, its partners, officers,
directors, trustees, stockholders, employees, agents and investment advisers,
and any such Controlling Person, may become subject under the Securities Act or
otherwise, insofar as such Damages (or proceedings in respect thereof) arise out
of or are based upon any untrue or alleged untrue statement of material fact
contained in any Registration Statement (or any amendment thereto) pursuant to
which Registrable Securities were registered under the Securities Act, including
all documents incorporated therein by reference, or are caused by any omission
or alleged omission to state therein a material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, or arise out of or are based upon any untrue statement or
alleged untrue statement of a material fact contained in any Prospectus (as
amended or supplemented if the Company shall have furnished any amendments or
supplements thereto), or are caused by any omission or alleged omission to state
therein a material fact necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading; provided, however,
that the Company shall not be liable for Damages to any Holder under this
Section 8(a) to the extent that any such Damages (i) arise out of or are based
upon any such untrue statement or omission which is based upon information
relating to such Holder furnished in writing to the Company by such Holder
expressly for use in any such Registration Statement (or any amendment thereto)
or Prospectus (or amendment or supplement thereto); or (ii) were caused by the
fact that such Holder sold Securities to a Person as to whom it shall be
established that there was not sent or given, or deemed sent or given pursuant
to Rule 153 under the Securities Act, at the time of or prior to the written
confirmation of such sale, a copy of the Prospectus as then
<PAGE> 17
amended or supplemented if, and only if, (a) the Company has previously
furnished such amended or supplemented Prospectus to such Holder and to the
exchange, if any, on which the Registrable Securities are listed, and (b) such
Damages were caused by any untrue statement or omission or alleged untrue
statement or omission contained in the Prospectus so delivered which was
corrected in such amended or supplemented Prospectus. In connection with an
underwritten offering, the Company will indemnify the underwriters thereof,
their officers and directors and each Person who controls such underwriters
(within the meaning of either Section 15 of the Securities Act or Section 20 of
the Exchange Act) to the same extent as provided above for the Holders of
Registrable Securities with respect to information provided by the underwriter
specifically for inclusion therein.
(b) Indemnification by the Holders. Each Holder agrees,
severally and not jointly, to indemnify and hold harmless the Company, its
directors and officers and each Person, if any, who controls the Company within
the meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act from and against all Damages to the same extent as the foregoing
indemnity from the Company to such Holder, but only to the extent such Damages
arise out of or are based upon any untrue statement of a material fact contained
in any Registration Statement (or any amendment thereto) or Prospectus (or any
amendment or supplement thereto) or are caused by any omission to state therein
a material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, which untrue statement
or omission is based upon information relating to such Holder furnished in
writing to the Company by such Holder expressly for use in any such Registration
Statement (or any amendment thereto) or any such Prospectus (or any amendment or
supplement thereto); provided, however, that such Holder shall not be obligated
to provide such indemnity to the extent that such Damages result from the
failure of the Company to promptly amend or take action to correct or supplement
any such Registration Statement or Prospectus on the basis of corrected or
supplemental information furnished in writing to the Company by such Holder
expressly for such purpose. In no event shall the liability of any Holder of
Registrable Securities hereunder be greater in amount than the amount of the
proceeds received by such Holder upon the sale of the Registrable Securities
giving rise to such indemnification obligation.
(c) Indemnification Procedures. In case any proceeding
(including any governmental investigation) shall be instituted involving any
Person in respect of which indemnity may be sought pursuant to either paragraph
(a) or (b) above, such Person (the "indemnified party") shall promptly notify
the Person against whom such indemnity may be sought (the "indemnifying party")
in writing and the indemnifying party shall have the right to assume the defense
and retain counsel reasonably satisfactory to the indemnified party to represent
the indemnified party and any others the indemnifying party may designate in
such proceedings and shall pay the fees and disbursements of such counsel
relating to such proceeding. The failure of an indemnified party to notify the
indemnifying party with respect to a particular proceeding shall not relieve the
indemnifying party from any obligation or liability (i) which it may have
pursuant to this Agreement if the indemnifying party is not substantially
prejudiced by such failure to so notify it or (ii) which it may have otherwise
than pursuant to this Agreement. In any such proceeding, any indemnified party
shall have the right to retain its own counsel, but the fees and expenses of
such counsel shall be at the expense of such indemnified party unless (i) the
indemnifying party and the indemnified party shall have mutually agreed to
<PAGE> 18
the retention of such counsel, or (ii) the indemnifying party fails promptly to
assume the defense of such proceeding or fails to employ counsel reasonably
satisfactory to such indemnified party, or (iii) (A) the named parties to any
such proceeding (including any impleaded parties) include both such indemnified
party or an Affiliate of such indemnified party and any indemnifying party or an
Affiliate of such indemnifying party, (B) there may be one or more defenses
available to such indemnified party or any Affiliate of such indemnified party
that are different from or additional to those available to any indemnifying
party or any Affiliate of any indemnifying party and (C) such indemnified party
shall have been advised by such counsel that there may exist a conflict of
interest between or among such indemnified party or any Affiliate of such
indemnified party and such indemnifying party or any Affiliate of such
indemnifying party, in which case, if such indemnified party notifies the
indemnifying party in writing that it elects to employ separate counsel of its
choice at the expense of the indemnifying party, the indemnifying party shall
not have the right to assume the defense thereof and such counsel shall be at
the expense of the indemnifying party, it being understood, however, that unless
there exists a conflict among indemnified parties, the indemnifying parties
shall not, in connection with any one such proceeding or separate but
substantially similar or related proceedings in the same jurisdiction, arising
out of the same general allegations or circumstances, be liable for the fees and
expenses of more than one separate firm of attorneys (together with appropriate
local counsel) at any time for such indemnified parties. The indemnifying party
shall not be liable for any settlement of any proceeding effected without its
written consent but, if settled with such consent or if there be a final
judgment for the plaintiff, the indemnifying party agrees to indemnify each
indemnified party from and against any loss or liability by reason of such
settlement or judgment. No indemnifying party shall, without the prior written
consent of each indemnified party, effect any settlement of any pending or
threatened proceeding in respect of which such indemnified party is a party, and
indemnity could have been sought hereunder by such indemnified party, unless
such settlement includes an unconditional release of such indemnified party from
all liability on all claims that are the subject matter of such proceeding with
no payment by such indemnified party of consideration in connection with such
settlement.
(d) Contribution. If the indemnification from the indemnifying
party provided for in this Section 8 is found, pursuant to a final judicial
determination not subject to appeal, to be unavailable to an indemnified party
hereunder or insufficient in respect of any Damages incurred by such indemnified
party, then each indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the Damages paid or payable by such indemnified party
in such proportion as is appropriate to reflect the relative fault of the
indemnifying party and the indemnified parties in connection with the actions or
omissions that resulted in such Damages, as well as any other relevant equitable
considerations. The relative fault of such indemnifying party and indemnified
parties shall be determined by reference to, among other things, whether any
action or omission in question, including any untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact,
has been made by, or relates to information supplied by, such indemnifying party
or indemnified parties, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action. The amount paid
or payable by a party as a result of the Damages referred to above shall be
deemed to include, subject to the limitations set forth in Section 8(c), any
legal or other expenses reasonably incurred by such party in connection with any
investigation or proceeding.
<PAGE> 19
The parties hereto agree that it would not be just or equitable if
contribution pursuant to this Section 8(d) were determined by pro rata
allocation or by any other method of allocation that does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 8(d), no underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Registrable Securities underwritten by it and distributed to
the public were offered to the public (less any underwriting discounts or
commissions) exceeds the amount of any damages which such underwriter has
otherwise been required to pay by reason of an untrue or alleged untrue
statement or omission or alleged omission, and no selling Holder shall be
required to contribute any amount in excess of the amount by which the total net
proceeds received by such selling Holder with respect to Registrable Securities
sold by such selling Holder exceeds the amount of any damages which such selling
Holder has otherwise been required to pay by reason of an untrue statement or
alleged untrue statement or omission or alleged omission. Each Holder's
obligation to contribute pursuant to this Section 8(d) is several and not joint
and shall be determined by reference to the proportion that the proceeds of the
offering received by such Holder bears to the total proceeds of the offering
received by all the Holders. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The remedies provided for in this Section 8 are not exclusive
and shall not limit any rights or remedies that may otherwise be available to
any indemnified party at law or in equity.
Notwithstanding the foregoing, if indemnification is available under
paragraph (a) or (b) of this Section 8, the indemnifying parties shall indemnify
each indemnified party to the full extent provided in such paragraphs without
regard to the relative fault of said indemnifying party or indemnified party or
any other equitable consideration provided for in this Section 8(d).
Section 9. Rule 144. The Company covenants that it will file any
reports required to be filed by it under the Securities Act and the Exchange
Act, and the rules and regulations adopted by the Commission thereunder (or, if
the Company is not required to file such reports, it will, upon the request of
any Holder, make publicly available other information so long as necessary to
permit sales of the Registrable Securities under Rule 144 under the Securities
Act), and it will take such further action as any Holder may reasonably request,
all to the extent required from time to time to enable such Holder to sell
Registrable Securities without registration under the Securities Act within the
limitation of the exemptions provided by (a) Rule 144 under the Securities Act,
as such Rule may be amended from time to time, or (b) any successor rule or
similar provision or regulation hereafter adopted by the Commission. Upon the
request of any Holder, so long as such Holder owns any Registrable Securities,
the Company will deliver to such Holder a written statement as to whether it has
complied with such requirements.
Section 10. Rule 144A. The Company covenants that it will file all
reports required to be filed by it under the Securities Act and the Exchange
Act, and the rules and regulations adopted by the Commission thereunder (or if
the Company is not required to file such reports, it will, upon the request of
any Holder, make available other information so long as necessary to permit
sales of the Registrable Securities pursuant to Rule 144A under the Securities
Act), and it will take such further action as any Holder may reasonably request,
all to the extent required from time to time to enable such Holder to sell
Registrable Securities without registration under the Securities Act within the
limitation of the exemptions provided by (a) Rule 144A, as such rule may be
amended from time to time, or (b) any successor rule or similar provision or
regulation hereafter adopted by the Commission.
<PAGE> 20
Section 11. Transfer of Registration Rights.
The right to register Registrable Securities granted to the Holders
pursuant to this Agreement may be transferred (but only with all related
obligations) by a Holder to any Person that acquires Registrable Securities, but
only if (i) the transferring Holder gives the Company written notice of such
transfer, identifying the name and address of the transferee and the securities
involved; and (ii) the transferee agrees in writing to be bound by the terms,
conditions and obligations of this Agreement.
Section 12. Miscellaneous.
(a) No Inconsistent Agreements. The Company has not entered
into nor will the Company on or after the date of this Agreement enter into any
agreement which is inconsistent with the rights granted to the Holders of
Registrable Securities in this Agreement or otherwise conflicts with the
provisions hereof. The rights granted to the Holders hereunder do not in any way
conflict with and are not inconsistent with the rights granted to the holders of
the Company's other issued and outstanding securities under any such agreements.
(b) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given unless the Company has obtained the written consent of Holders
of at least a majority in interest of the outstanding Registrable Securities
affected by such amendment, modification, supplement, waiver or consent;
provided, however, that, no amendment, modification, supplement, waiver or
consent to any departure from the provisions of Section 4 hereof (other than any
immaterial amendment, modification, supplement, waiver or consent) shall be
effective as against any Holder of Registrable Securities unless consented to in
writing by such Holder.
(c) Notices. All notices and other communications provided for
or permitted hereunder shall be in writing and shall be deemed to have been duly
given if delivered personally or sent by telecopier, registered or certified
mail (return receipt requested), postage prepaid or courier to the parties at
their respective addresses set forth on the signature pages hereof (or at such
other address for any party as shall be specified by like notice, provided that
notices of a change of address shall be effective only upon receipt thereof).
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five (5) Business
Days after being deposited in the mail, postage prepaid, if mailed; by confirmed
receipt of transmission, if telecopied; and on the next Business Day if timely
delivered to a courier guaranteeing overnight delivery.
(d) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors, permitted assigns and transferees
of each of the parties.
(e) Counterparts. This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
<PAGE> 21
(f) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(g) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York without regard to
principles or rules of conflicts of law.
(h) Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstances, is
held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions contained herein shall not be in any way
impaired thereby, it being intended that all of the rights and privileges of the
Holders shall be enforceable to the fullest extent permitted by law.
(i) Entire Agreement. This Agreement is intended by the
parties as a final expression of their agreement and is intended to be the
complete and exclusive statement of the agreement and understanding of the
parties hereto in respect of the subject matter contained herein. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
(j) Attorneys' Fees. In any action or proceeding brought to
enforce any provision of this Agreement or where any provision hereof is validly
asserted as a defense, the successful party shall, to the extent permitted by
applicable law, be entitled to recover reasonable attorneys' fees in addition to
any other available remedy.
(k) Further Assurances. Each party shall cooperate and take
such action as may be reasonably requested by another party in order to carry
out the provisions and purposes of this Agreement and the transactions
contemplated hereby.
(l) Remedies. In the event of a breach or a threatened breach
by any party to this Agreement of its obligations under this Agreement, any
party injured or to be injured by such breach will be entitled to specific
performance of its rights under this Agreement or to injunctive relief, in
addition to being entitled to exercise all rights provided in this Agreement and
granted by law. The parties agree that the provisions of this Agreement shall be
specifically enforceable, it being agreed by the parties that remedies at law
for violations hereof, including monetary damages, are inadequate and that the
right to object in any action for specific performance or injunctive relief
hereunder on the basis that a remedy at law would be adequate is waived.
<PAGE> 22
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
Metretek Technologies, Inc.
By: /s/ A. Bradley Gabbard
---------------------------------
Name: A. Bradley Gabbard
Title: Executive Vice President
Notice Information: World Trade Center
1675 Broadway, Suite 2150
Denver, CO 80202
Attn:
Telecopier:
State Street Bank & Trust, solely in its capacity
as Trustee for General Motors Employees Global
Group Pension Trust as directed by DDJ Capital
Management, LLC, and not in its individual capacity
By: /s/ Michael Connors
-------------------------------
Name: Michael Connors
Title: Assistant Vice President
State Street Bank and Trust Company
DDJ Canadian High Yield Fund
By: DDJ Capital Management, LLC,
its attorney-in-fact
By: /s/ David J. Breazzano
---------------------------------
Name: David J. Breazzano
Title: Member
<PAGE> 23
B III-A Capital Partners, L.P.
By: GP III-A, LLC, its General Partner
By: DDJ Capital management, LLC, Manager
By: /s/ David J. Breazzano
---------------------------------
Name: David J. Breazzano
Title: Member
Notice Information: 141 Linden Street
Wellesley, MA 02482
Attn: Wendy Schnipper Clayton, Esq.
Telecopier: (781) 283-8541
<PAGE> 1
EXHIBIT 4.5
December 20, 1999
DDJ Capital Management, LLC
141 Linden Street
Wellesley, MA 02482
Re: Metretek Technologies, Inc.
---------------------------
Ladies and Gentlemen:
Reference is made to the Securities Purchase Agreement between Metretek
Technologies, Inc. (the "Company") and the Purchasers named therein, dated
December 9, 1999 (the "Purchase Agreement"). Capitalized terms not defined
herein have the meanings given them in the Purchase Agreement. Reference is also
made to the letter agreement between the Company and DDJ Capital Management, LLC
dated December 9, 1999 (the "Side Letter").
In furtherance of the transactions contemplated by the Side Letter, and
in consideration of the agreement of funds and accounts managed by DDJ Capital
Management, LLC to purchase Units at the Initial Closing and conditional
agreement to purchase Units at the Second Closing and the Company's agreements
herein, the parties hereto agree as follows:
1. The Company shall include in the Proxy Statement, and recommend that
the stockholders of the Company approve as part of the Stockholders Meeting
Matter, the amendments to the Company's Certificate of Incorporation described
herein. The Company shall use its best efforts to obtain the approval of its
stockholders (whether at the Special Stockholders Meeting or otherwise) and the
Bank of Canada.
2. Immediately after the Special Stockholders Meeting the Company shall
make all filings with the Delaware Secretary of State necessary to amend and
restate Section A.2 of the Series B Preferred Stock to read as follows if the
stockholders of the Company have approved such amendments:
"2. Election of Directors.
----------------------
(a) So long as an aggregate of at least 2,000 shares of
Convertible Preferred Stock remain outstanding, the holders of outstanding
shares of Convertible Preferred Stock shall, voting together as a separate
class, be entitled to elect one (1) Director. Such Director shall be the
individual receiving the greatest number of affirmative votes of the outstanding
shares of Convertible Preferred Stock (the "Convertible Preferred Stock Director
Designee"), with each share of Convertible Preferred Stock entitled to one (1)
vote, and with votes cast
<PAGE> 2
against such person and votes withheld having no legal effect. Each Director so
elected shall hold office until a new Convertible Preferred Stock Director
Designee is elected Director as provided below, provided that such Director
shall in any event cease to hold office at such time as the holders of
Convertible Preferred Stock are no longer entitled to elect a Director in
accordance with this Section A.2. The election of the Convertible Preferred
Stock Director Designee by the holders of the Convertible Preferred Stock shall
occur (i) at the annual meeting of holders of Common Stock, (ii) if there is
then no Convertible Preferred Stock Director Designee serving as a Director, at
any special meeting of holders of capital stock, (iii) if there is then no
Convertible Preferred Stock Director Designee serving as a Director, at any
special meeting of holders of Convertible Preferred Stock called by holders of a
majority of the outstanding shares of Convertible Preferred Stock (a "Majority
Interest") or (iv) in lieu of an election at a meeting, by the written consent
of holders of not less than sixty-six and two-thirds percent (662/3%) of the
outstanding shares of Convertible Preferred Stock (a "Two Thirds Interest"). If
at any time when any share of Convertible Preferred Stock is outstanding the
Convertible Preferred Stock Director Designee should cease to be a Director for
any reason, the vacancy shall only be filled by the vote or written consent of
holders of the outstanding shares of Convertible Preferred Stock, voting
together as a separate class, in the manner and on the basis specified above.
The holders of a majority of the outstanding shares of Convertible Preferred
Stock, may, in their sole discretion, determine to elect fewer than one (1)
Convertible Preferred Stock Director Designee from time to time, and during any
such period the Board of Directors nonetheless shall be deemed duly constituted.
The holders of Common Stock and the holders of any other class or series of
capital stock of the Company with the right to vote in the election of directors
shall be entitled to elect the remaining members of the Board of Directors.
(b) Notwithstanding the provisions of paragraph 2(a) above, in
the event that the Corporation fails for any reason to redeem the Convertible
Preferred Stock in full in accordance with the terms of Section A.5(a) hereof,
then the number of Directors on the Corporation's Board of Directors shall
immediately and without any action taken by the Corporation or any of its
stockholders, be increased by the minimum such number as is necessary to ensure
that the directors elected under this paragraph 2(b) (the "Default Preferred
Directors") will constitute a majority of the Corporation's Board of Directors,
and the holders of the Convertible Preferred Stock shall be entitled to elect
the Default Preferred Directors, with each share of Convertible Preferred Stock
entitled to one (1) vote. Each Default Preferred Director so elected shall hold
office in accordance with the terms for directors elected at such meeting as
provided by law, the Certificate of Incorporation, as amended, or the by-laws of
the Corporation in effect at the time, provided that such Director shall in any
event cease to hold office at such time as the holders of Convertible Preferred
Stock are no longer entitled to elect Default Preferred Directors in accordance
with this Section A.2(b). The election of the Default Preferred Directors by the
holders of the Convertible Preferred Stock shall occur (i) at the annual meeting
of holders of Common Stock, (ii) if there is then no Convertible Preferred Stock
Director Designee serving as a Director, at any special meeting of holders of
capital stock, (iii) if there is then no Convertible Preferred Stock Director
Designee serving as a Director, at any special meeting of holders of Convertible
Preferred Stock called by a Majority Interest or (iv) in lieu of an election at
a meeting, by the written consent of holders of a Two
<PAGE> 3
Thirds Interest. If at any time when any share of Convertible Preferred Stock is
outstanding any Default Preferred Director should cease to be a Director for any
reason, the vacancy shall only be filled by the vote or written consent of
holders of the outstanding shares of Convertible Preferred Stock, voting
together as a separate class, in the manner and on the basis specified above.
The holders of a majority of the outstanding shares of Convertible Preferred
Stock may, in their sole discretion, determine to elect fewer than all of the
Default Preferred Directors from time to time, and during any such period the
Board of Directors nonetheless shall be deemed duly constituted. Upon full
payment by the Corporation of all amounts payable to the holders of the
Convertible Preferred Stock pursuant to Section A.5(a) hereof, including any
interest thereon, which the Board of Directors shall cause to be made by the
Corporation as soon as is lawful and practicable, the right of the holders of
Convertible Preferred Stock to elect Default Preferred Directors under this
paragraph 2(a) shall terminate, the terms of all such Default Preferred
Directors shall forthwith cease, and the number of Directors shall forthwith be
reduced by an amount equal to the number of Default Preferred Directors which
the holders of the Convertible Preferred Stock were previously entitled to elect
hereunder.
(c) Whenever the holders of Convertible Preferred Stock are entitled to
take any action under either paragraph (a) or (b) of this Section A.2(b), a
Majority Interest shall have the right to fix any record date and the date, time
and location, to the extent applicable, of any meeting or written consent
referred to therein and to send any required notices. If a Majority Interest
requests that the Corporation take any of such actions, it will do so
immediately. The Corporation will not take any action, including amending its
Certificate of Incorporation or bylaws, which is inconsistent with the intent or
purposes of Section A.2."
3. The terms of the Side Letter shall remain in full force and effect
unless and until the amendments referred to in paragraph 2. above have been
filed with the Secretary of State of Delaware and have become effective in
accordance with applicable law.
<PAGE> 4
Sincerely,
METRETEK TECHNOLOGIES, INC.
By: /s/ A. Bradley Gabbard
----------------------------
Name: A. Bradley Gabbard
Title: Executive Vice President
Acknowledge and agreed:
DDJ CAPITAL MANAGEMENT
By: /s/ Judy K. Mencher
----------------------------
Name: Judy K. Mencher
Title: Member
<PAGE> 1
EXHIBIT 10.1
THIRD AMENDMENT TO
LOAN AND SECURITY AGREEMENT AND LOAN DOCUMENTS
THIS THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT AND LOAN DOCUMENTS
(this "Amendment"), dated as of December 16, 1999 but effective for all purposes
as of December 8, 1999, is between NATIONAL BANK OF CANADA, a Canadian chartered
bank ("Lender"), METRETEK TECHNOLOGIES, INC. (f/k/a Marcum Natural Gas Services,
Inc.), a Delaware corporation ("Metretek Technologies"), METRETEK, INCORPORATED,
a Florida corporation ("Metretek Inc."), and SOUTHERN FLOW COMPANIES, INC., a
Delaware corporation (each, a "Borrower", and collectively, "Borrower" or
"Borrowers"), and SIGMA VI, INC., a Florida corporation ("Pledgor").
Recitals
A. Lender, Borrowers and Pledgor entered into a Loan and Security
Agreement dated April 14, 1998, as amended by an Amendment to Loan and
Security Agreement and Loan Documents dated as of June 8, 1999, and as
further amended by a Second Amendment to Loan and Security Agreement
and Loan Documents dated as of September 13, 1999 (as amended, the
"Loan Agreement"), providing for the Metretek Loans and the Southern
Flow Loans, as more fully set forth in the Loan Agreement. Defined
terms used herein and not defined herein shall have the meaning set
forth in the Loan Agreement. On June 8, 1999, Metretek Technologies
changed its name from Marcum Natural Gas Services, Inc. to Metretek
Technologies, Inc.
B. The Loans are secured by the Collateral.
C. Metretek Technologies has advised Lender that Metretek Technologies
proposes to enter into a transaction pursuant to which it will issue
and sell 7,000 units in Metretek Technologies and that each unit will
consist of 200 shares of Common Stock, one share of a newly designated
Series B Preferred Stock (convertible into Common Stock), and 100
Common Stock Purchase Warrants. The transaction (the "Transaction") is
set forth more fully in a memo dated December 7, 1999 from Paul R.
Hess, Esq. to Robert H. Bach, Esq., as modified by a memorandum dated
December 16, 1999, (collectively the "Memo").
D. The purpose of this Amendment is (a) for Lender to waive certain
defaults under the Loan Agreement arising out of the Transaction, and
(b) for Borrower and Lender to amend certain covenants and conditions
in the Loan Agreement as a result of the Transaction.
Agreement
IN CONSIDERATION of the foregoing and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Lender, Borrowers and Pledgor agree as follows:
<PAGE> 2
1. Waiver.
(a) Lender hereby waives the violation of Section 12(k) of the Loan
Agreement (which would occur unless Lender executed and delivered this
Amendment) arising solely as a result of the issuance of shares and warrants
contemplated by the Transaction as described in the Memo.
(b) Lender hereby waives the violation of Section 12(o) of the Loan
Agreement (which would occur unless Lender executed and delivered this
Amendment) arising solely as a result of Metretek Technologies amending their
organizational documents in connection with the Transaction as described in the
Memo.
(c) Lender hereby waives any Event of Default that may occur under
Section 14(j) of the Loan Agreement arising solely as a result of any change of
control that may be caused by the issuance of shares and warrants contemplated
by the Transaction as described in the Memo.
Nothing herein is intended to or shall waive any other Event of Default under
the Loan Agreement arising out of the Transaction or otherwise or any event that
with notice, the passage of time or both may become an Event of Default under
the Loan Agreement arising out of the Transaction or otherwise.
2. Revision to Loan Agreement. The Loan Agreement is hereby amended as follows:
a. Definitions. The Loan Agreement is hereby amended by adding a new
definition of Series B Preferred Stock as Section 1(dd) to read as follows:
"Series B Preferred Stock" means the 7,000 shares of Series B
Preferred Stock issued in connection with the Transaction as
described in the Memo.
b. Covenants. The Loan Agreement is hereby amended by amending section
12(l) (and subsections (ii) and (iii) of section 12(q) in their entirety,
(Financial Covenants) to read as follows:
12(l) No Borrower shall declare or pay any dividend or other
distribution (whether in cash or in kind) of any kind on any class of
its stock except (i) as set forth in Section 13 below, (ii) for the
transactions described on Exhibit F attached hereto, and (iii) pursuant
to the terms of the Series B Preferred Stock (provided that there is no
Event of Default).
12(q)(ii) Metretek Technologies' consolidated combined minimum tangible
net worth (as such term is defined in accordance with GAAP and
including (A) all subordinate debt which has been approved by Lender in
its sole discretion, and (B) Series B Preferred Stock (whether or not
properly includable under GAAP)) shall not be less than the amounts set
forth below for the period set forth below:
<PAGE> 3
<TABLE>
<CAPTION>
- --------------------------------------- -------------------------------------
Financial Period Minimum Tangible Net Worth
- --------------------------------------- -------------------------------------
<S> <C>
from the date hereof up to and $7,050,000
including 12/30/99
- --------------------------------------- -------------------------------------
12/31/99 $7,400,000
1/1/00 up to and including 12/31/00 $7,400,000 plus 90% of Marcum's net
income for the fiscal year ended
12/31/99
- --------------------------------------- -------------------------------------
1/1/01 $7,400,000 plus 90% of Marcum's net
up to and including 12/31/01 income for the fiscal year ended
12/31/99 plus 90% of Marcum's net income
for the fiscal year ended 12/31/00
- --------------------------------------- -------------------------------------
</TABLE>
12(q)(iii) The ratio of Metretek Technologies' consolidated combined
total liabilities to tangible net worth (as such terms are defined in
accordance with GAAP and including (A) all subordinated debt which has
been approved by Lender in its sole discretion, and (B) any Series B
Preferred Stock (whether or not properly includable under GAAP)) shall
not exceed 2.00 to 1.0 at any time.
3. Loan Documents.
a. Lender, Borrowers and Pledgor agree that any and all notes or
other documents executed in connection with the Loans
(collectively, the "Loan Documents") are hereby amended to
reflect the amendments set forth herein and that no further
amendments to any Loan Documents are required to reflect the
foregoing.
b. All references in any document to the Loan Agreement or any
other Loan Document shall refer to the Loan Agreement or such
Loan Document as amended pursuant to this Amendment.
4. Fees and Expenses. Borrower shall pay or cause to be paid all of the expenses
incurred by the Lender in connection with the transactions contemplated by this
Amendment, including, without limitation, the reasonable fees and disbursements
of Lender's attorneys and their staff, and any recording and filing fees,
charges and expenses. If Borrower fails to pay such fees within 15 days after
written request by Lender, such failure shall constitute an Event of Default.
5. Representations and Warranties. Each Borrower and Pledgor hereby certifies to
the Lender that as of the date of this Amendment (taking into consideration the
transactions contemplated by this Amendment), all of such Borrower's or
Pledgor's representations and warranties contained in the Loan Agreement and all
Loan Documents are true, accurate and complete in all material respects, and no
Event of Default or event that with notice or the passage of time or both would
constitute an Event of Default (other than as waived by Lender pursuant to this
Amendment) has occurred under the Loan
<PAGE> 4
Agreement or any Loan Document. Without limiting the generality of the
foregoing, each Borrower and Pledgor represents and warrants that the execution
and delivery of this Amendment has been authorized by all necessary action on
the part of such Borrower or Pledgor, that the person executing this Amendment
on behalf of such Borrower is duly authorized to do so and that this Amendment
constitutes the legal, valid, binding and enforceable obligation of such
Borrower or Pledgor.
6. Additional Documents. Each Borrower and Pledgor shall execute and deliver to
Lender at any time and from time to time such additional amendments to the Loan
Agreement and the Loan Documents as the Lender may request to confirm and carry
out the transactions contemplated hereby or to confirm, correct and clarify the
security for the Loan.
7. Continuation of the Loan Agreement, Etc. Except as specified in this
Amendment, the provisions of the Loan Agreement and the Loan Documents shall
remain in full force and effect, and if there is a conflict between the terms of
this Amendment and those of the Loan Agreement or the Loan Documents, the terms
of this Amendment shall control.
8. Miscellaneous.
a. This Amendment shall be governed by and construed under the
laws of the State of Colorado and shall be binding upon and
inure to the benefit of the parties hereto and their
successors and permissible assigns.
b. This Amendment may be executed in two or more counterparts,
each of which shall be deemed an original and all of which
together shall constitute one instrument.
c. This Amendment and all documents to be executed and delivered
hereunder may be delivered in the form of a facsimile copy,
subsequently confirmed by delivery of the originally executed
document.
d. This Amendment constitutes the entire agreement between
Borrowers, Pledgor and the Lender concerning the subject
matter of this Amendment. This Amendment may not be amended or
modified orally, but only by a written agreement executed by
each Borrower and Pledgor and the Lender and designated as an
amendment or modification of the Loan Agreement as amended by
this Amendment.
e. This Third Amendment is in substitution of and replaces in its
entirety the Third Amendment to Loan and Security Agreement
and loan documents dated as of December 8, 1999 (and effective
as of that date), which Third Amendment dated as of December
8, 1999 (and effective as of that date), shall hereinafter be
null and void.
REMAINDER OF PAGE INTENTIONALLY BLANK
<PAGE> 5
EXECUTED as of the date first set forth above.
BORROWERS:
METRETEK TECHNOLOGIES, INC., a Delaware
corporation (f/k/a Marcum Natural Gas
Services, Inc.)
By: /s/ A. Bradley Gabbard
--------------------------------
A. Bradley Gabbard
Executive Vice President
METRETEK, INCORPORATED, a Florida
corporation
By: /s/ A. Bradley Gabbard
--------------------------------
A. Bradley Gabbard
Executive Vice President
SOUTHERN FLOW COMPANIES, INC., a Delaware
corporation
By: /s/ A. Bradley Gabbard
--------------------------------
A. Bradley Gabbard
Executive Vice President
PLEDGOR:
SIGMA VI, INC., a Florida corporation
By: /s/ A. Bradley Gabbard
--------------------------------
A. Bradley Gabbard
Executive Vice President
<PAGE> 6
LENDER:
NATIONAL BANK OF CANADA, a Canadian
chartered bank
By: /s/ Raymond L. Yager
--------------------------------
Raymond L. Yager
Vice President
