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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): SEPTEMBER 13, 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.
On September 13, 1999, Metretek Technologies, Inc., a Delaware
corporation (the "Registrant"), together with its wholly-owned subsidiaries
Metretek, Incorporated, a Florida corporation, and Southern Flow Companies,
Inc., a Delaware corporation, entered into an amendment (the "Loan Amendment")
to that certain Loan and Security Agreement, dated as of April 14, 1998 (the
"Loan Agreement"), with National Bank of Canada, a Canadian chartered bank (the
"Bank"). The Loan Amendment amends the terms of the $5,000,000 credit facility
("Credit Facility") provided under the Loan Agreement. The Registrant entered
into the Loan Amendment in order to facilitate its Internet-based, eBusiness
Project (the "eBusiness Project") with Scient Corporation, a Delaware
corporation ("Scient"), and the Consulting and Joint Venture Arrangement with
Mercator Energy Incorporated, a Colorado corporation ("Mercator").
The Loan Amendment, a copy of which is filed as an exhibit hereto,
amends certain covenants in the Loan Agreement, including the Registrant's
minimum annual net income (or maximum annual net loss in 1999), minimum tangible
net worth and minimum debt service coverage ratio. The Loan Amendment permits
the Registrant to utilize up to $700,000 of the Credit Facility to finance
expenditures on the first phase of the eBusiness Project. Under the Loan
Amendment, the Registrant can utilize the Credit Facility, within the terms of
its loan availability, for expenditures on the eBusiness Project above the
initial $700,000 level only if the Registrant matches such additional
expenditures with equivalent amounts of additional cash from either new equity,
indebtedness made subordinate to the Credit Facility on terms acceptable to the
Lender, or net income. In consideration for the Bank entering into the Loan
Amendment and restructuring the Credit Facility, the Registrant paid the Bank a
fee of $10,000 and issued to the Bank a warrant (the "Bank Warrant") to purchase
20,000 shares of Common Stock, par value $.01 per share (the "Common Stock"), of
the Registrant. The Bank Warrant is exercisable for three years at an exercise
price of $5.00 per share of Common Stock. The Bank has registration rights with
respect to the Common Stock issuable upon the exercise of the Bank Warrant.
The Registrant has entered into a strategic relationship with Scient to
assist the Registrant in designing and creating the eBusiness Project, which is
intended to enable the Registrant to take its measurement information products,
services and data measurement technologies to a broader market of end-users of
natural gas and electricity. The Registrant anticipates that the costs of the
eBusiness Project, which involves several phases, will require estimated
expenditures of approximately between $4 and $5 million over the next nine to
twelve months. The Registrant has the right to terminate the eBusiness Project
on 30 days notice, with maximum additional expenditures of $100,000. The Loan
Amendment is intended to provide the financing for the first phase of the
eBusiness Project, estimated to cost approximately $700,000. In order to finance
the remaining phases and the completion of the eBusiness Project, the Registrant
will need to raise additional funds 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 Bank. There can be no assurance
that such additional funds will be available to the Registrant or that, if
available, such funds can be obtained on terms favorable to the Registrant or on
terms acceptable to the Bank. In the event the Registrant cannot obtain
sufficient additional funds, then the Registrant will not be able to complete
the eBusiness Project. The inability of the Registrant to complete the eBusiness
Project could have a material adverse effect on the Registrant's business,
financial condition and results of operations. In connection with the eBusiness
Project, the Registrant has issued to Scient a warrant (the "Scient Warrant") to
purchase 125,000 shares of Common Stock of Registrant. The Scient Warrant has a
three year term and becomes exercisable in one year at exercise prices split
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between $5.00 and $10.00. Scient has registration rights with respect to the
Common Stock underlying the Scient Warrant.
The Registrant has also entered into a Consulting and Joint Venture
Agreement (the "Mercator Consulting Agreement") with Mercator, pursuant to which
Mercator will provide consulting services to TotalEnergyPlan, Inc., a Delaware
corporation ("TEP"), a newly formed and wholly-owned subsidiary of the
Registrant. TEP was formed to operate and conduct the Registrant's
TotalEnergyPlan(TM) business, which is a proprietary turn-key data collection
and software management system that enables commercial users of natural gas and
electricity to monitor and manage energy purchases and consumption. Mercator is
a Denver-based natural gas services and brokerage company that since 1994 has
acted as broker-agent for both producers and users. Pursuant to the Mercator
Consulting Agreement, Mercator will provide consulting services to TEP for a fee
of $7,500 per month. The term of the Mercator Consulting Agreement is six
months, renewable by mutual consent for six additional months. In connection
with the Mercator Consulting Agreement, Mercator received an option to purchase
up to 25% of the capital stock of TEP for a purchase price equal to 25% of TEP's
cumulative net loss (adjusted by adding back depreciation and amortization),
which is exercisable only during the term of the Consulting Agreement. The
Registrant also issued to Mercator a warrant (the "Mercator Warrant") to
purchase 60,000 shares of Common Stock of the Registrant. The Mercator Warrant
has a three year term and vests over a period of eighteen months, with exercise
prices ranging between $4.50 and $5.50. Mercator has registration rights with
respect to the Common Stock underlying the Mercator Warrant.
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 of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended. From time to time, the Registrant 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,
among other matters, (1) the Registrant's plans, intentions, beliefs and
expectations with respect to its future prospects, including the eBusiness
Project, the Registrant's strategic relationships with Scient and Mercator, and
the Registrant's TotalEnergyPlan(TM) business; (2) expected expenditures on the
eBusiness Project; (3) the sufficiency of funds from the Credit Facility under
the Loan Agreement to finance the first phase of the eBusiness Project; and (4)
the Registrant's ability to raise sufficient additional capital, from the sale
of equity, debt, assets or otherwise, to complete the eBusiness Project.
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 Registrant'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 Registrant's strategic relationships with Scient and Mercator;
(4) changes in the energy industry in general and the natural gas and
electricity industry in particular; (5) the Registrant's
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ability to successfully implement, and the market's acceptance of, Metretek's
"TotalPlan(TM)" and "TotalEnergyPlan(TM)" offerings; (6) the ability of the
Registrant to raise sufficient funds to finance the eBusiness Project, and the
willingness of the Bank to consent to the terms of such financing arrangements;
(7) the capital resources, technological requirements and internal business
plans of the natural gas and electricity utilities industry; (8) technological
and market changes within the natural gas industry; (9) the complexity,
uncertainty and time constraints associated with the development and market
acceptance of new product and service designs and technologies; (10) general
economic and business conditions; (11) the Registrant's ability to successfully
integrate and utilize the product lines and business acquired from American
Meter, including the risks that revenues from the acquired business could be
lower than expected and that related costs could be higher than expected; (12)
the impact and timing of the deregulation of the various energy markets; (13)
utility purchasing patterns and delays and potential changes to the federal and
state regulatory frameworks within which the utility industry operates; (14)
risks and uncertainties associated with Year 2000 issues; (15) fluctuations in
quarterly operating results; (16) effects of a change in product mix on the
Registrant's expected gross margins and net income; (17) the effects of any
corporate acquisitions, dispositions or other corporate transactions; (18) risks
associated with international operations; (19) the amount of additional proceeds
from the disposition of the remaining net assets and other revenues from
discontinued operations; (20) the receipt and timing of future customer orders;
(21) the impact of competitive factors affecting the Registrant's operations,
including the introduction of competitor's products, services and technologies
by competitors; (22) unexpected events affecting the Registrant's ability to
obtain funds from operations, debt or equity to finance operations, pay interest
and other obligations, and fund needed capital expenditures and other
investments; (23) the Registrant's ability to protect its proprietary
information and technology; (24) the impact of current and future laws and
government regulations affecting the energy industry in general and the natural
gas industry in particular; and (25) other risks and uncertainties that are
discussed in this Form 8-K or that are discussed from time to time in the
Registrant's other reports and filings with the Securities and Exchange
Commission. The Registrant does not intend, and assumes no responsibility, to
update any oral or written forward-looking statements made by the Registrant.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) EXHIBITS
10.1 Second Amendment to Loan and Security Agreement and
Loan Documents, dated as of September 13, 1999, by
and among National Bank of Canada, Metretek
Technologies, Inc., Southern Flow Companies, Inc.,
Metretek, Incorporated and Sigma VI, Inc.
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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: September 13, 1999
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METRETEK TECHNOLOGIES, INC.
FORM 8-K
DATED SEPTEMBER 13, 1999
EXHIBIT INDEX
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EXHIBIT NO. DESCRIPTION
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10.1 Second Amendment to Loan and Security
Agreement and Loan Documents, dated as of
September 13, 1999, by and among National
Bank of Canada, Metretek Technologies, Inc.,
Southern Flow Companies, Inc., Metretek,
Incorporated and Sigma VI, Inc.
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EXHIBIT 10.1
SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT
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AND LOAN DOCUMENTS
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THIS SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT AND LOAN DOCUMENTS
(this "Amendment"), dated as of September 13, 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 (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. The Borrower has requested that Lender permit Borrower to incur certain
expenditures in connection with the Web Project (as defined herein) and
that Lender revise certain financial covenants to reflect Borrower's
expenditures in connection with the Web Project, and Lender has agreed
to the above subject to the terms and conditions set forth in this
Amendment.
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:
1. Revision to Loan Agreement. The Loan Agreement is hereby amended as follows:
1. Web Project. The Loan Agreement is amended by adding a new Article
13A immediately after Article 13 and prior to Article 14 which shall read as
follows:
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ARTICLE 13A
EXPENDITURES IN CONNECTION WITH WEB PROJECT.
--------------------------------------------
(a) As used in this Agreement, the following terms shall have the
following meanings:
i. "Web Project" means any and all activities of any nature
whatsoever related directly or indirectly to the development
or implementation of a web-based delivery system for energy
acquisition services, including without limitation all
activities undertaken pursuant to the Agreement, executed July
27, 1999, between Metretek Technologies and Scient Corporation
or any other agreement between any Metretek Technologies and
Scient.
ii. "Web Project Expenditures" means any and all expenditures
related directly or indirectly to the Web Project.
(b) Borrower shall be entitled to incur Web Project Expenditures in an
amount of up to $700,000 in the aggregate after the date hereof;
provided that on the date Borrower incurs any such Web Project
Expenditure (i) no Event Default shall have occurred and no event that
with notice or the passage of time would constitute an Event of Default
shall have occurred, (ii) the Loan Availability shall exceed the
aggregate unpaid principal amount of all Loans by at least $300,000 and
there shall be no accounts payable of Borrower which are more than 60
days past due, other than those which are the subject of a bonafide
dispute and which are paid promptly after the dispute is resolved.
(c) In addition to the amount set forth in (b) above, Borrower may
incur Web Project Expenditures in an amount equal to the sum of (i) new
equity contributed to the Borrower after the date hereof, which equity
contribution must be on terms and conditions reasonably acceptable to
the Lender; (ii) indebtedness incurred after the date hereof for the
purpose of financing Web Project Expenditures, which indebtedness must
be unsecured, fully subordinate to the Loans, not repaid until the
Loans have been repaid in full and otherwise be on terms and conditions
and in form and substance acceptable to Lender in its sole discretion;
and (iii) the net income of Metretek Technologies after June 30, 1999;
provided that at the time of such Web Project Expenditures, the
conditions in (b)(i) and (b)(ii) above are complied with.
2. Covenants. The Loan Agreement is hereby further amended by amending
subsections (ii), (iv) and (v) of section 12(q) in their entirety, (Financial
Covenants) to read as follows:
(ii) Marcum's consolidated combined minimum tangible net worth (as such
term is defined in accordance with GAAP and including any and all
subordinate debt which has been approved by Lender in this Agreement or
otherwise in its sole discretion) shall not be less than the amounts
set forth below for the period set forth below:
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<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 $7,400,000 plus 90% of Marcum's net
12/31/00 income for the fiscal year ended
12/31/99
- ----------------------------------------------------------------------------
1/1/01 up to and including $7,400,000 plus 90% of Marcum's net
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>
(iv) Marcum, on a consolidated basis, shall maintain net profit before taxes and
before extraordinary gains (as such terms are defined in accordance with GAAP)
determined on a combined basis of at least the amount set forth below for the
period set forth below:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
Financial Period Net Profit Before Taxes and
---------------- ---------------------------
Extraordinary Gains
-------------------
- ----------------------------------------------------------------------------
<S> <C>
Fiscal year ended 12/31/99 ($650,000)
- ----------------------------------------------------------------------------
Fiscal year ended 12/31/00 $400,000
- ----------------------------------------------------------------------------
Fiscal year ended 12/31/01 $400,000
- ----------------------------------------------------------------------------
</TABLE>
Borrower's compliance with this subsection (iv) shall be determined without
regard to Web Project Expenditures permitted pursuant to Article 13A and such
permitted Web Project Expenditures shall be disregarded in such calculation.
(v) The ratio of Marcum's consolidated earnings before interest, taxes,
depreciation, amortization and extraordinary gains to interest expense (as such
terms are defined in accordance with GAAP) and determined on a combined basis
shall not be less than 2.0 to 1.0 for each fiscal year. Borrower's compliance
with this subsection (v) shall be determined without regard to Web Project
Expenditures permitted pursuant to Article 13A and such permitted Web Project
Expenditures shall be disregarded in such calculation.
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2. Warrants. In consideration for Lender entering into this Amendment, Borrower
agrees within 30 days after the date hereof (a) to deliver to Lender warrants to
purchase 20,000 shares of Metretek Technologies common stock at a price of $5.00
per share, exercisable at any time within three years after the date hereof and
substantially in the form of Exhibit A attached hereto, and (b) file, obtain
effectiveness as soon thereafter as reasonably practicable and maintain
effective at all times a Form S-3 registration statement covering the shares to
be issued pursuant to the warrants which will allow such stock to be freely sold
without any securities law restrictions. Failure to deliver such warrants or
effect and maintain such registration shall, at Lender's option, constitute an
event of default.
3. Loan Documents.
1. 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.
2. 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. (a) In consideration for Lender entering into this
Amendment, Borrower shall pay to Lender an amendment fee equal to $10,000
payable upon the execution of this Agreement.
(b) In addition to the amendment fee described in subsection
(a) above, 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 has occurred under the Loan 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.
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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.
3. 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.
4. 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.
5. Execution of this Amendment is not intended to and shall not
constitute a waiver by the Lender of any Event of Default or
event that with notice or the passage of time, or both, would
constitute an Event of Default.
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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/ W. Phillip Marcum
---------------------------------------
W. Phillip Marcum
President and Chief Executive Officer
METRETEK, INCORPORATED, a Florida
corporation
By: /s/ W. Phillip Marcum
---------------------------------------
W. Phillip Marcum
Chairman and Chief Executive Officer
SOUTHERN FLOW COMPANIES, INC., a Delaware
corporation
By: /s/ W. Phillip Marcum
---------------------------------------
W. Phillip Marcum
Chairman and Chief Executive Officer
PLEDGOR:
SIGMA VI, INC., a Florida corporation
By: /s/ W. Phillip Marcum
---------------------------------------
W. Phillip Marcum
Vice President
LENDER:
NATIONAL BANK OF CANADA, a Canadian
chartered bank
By: /s/ Raymond L. Yager
---------------------------------------
Raymond L. Yager
Vice President
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