<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL ___, 1997.
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------------
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
--------------------------
DEEPTECH INTERNATIONAL INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 76-0289338
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
--------------------------
DEEPTECH INTERNATIONAL INC.
TEXAS COMMERCE TOWER, SUITE 7500
600 TRAVIS
HOUSTON, TEXAS 77002
(713) 224-7400
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)
--------------------------
With Copies to:
DONALD V. WEIR
DEEPTECH INTERNATIONAL INC.
TEXAS COMMERCE TOWER, SUITE 7500
600 TRAVIS
HOUSTON, TEXAS 77002
(713) 224-7400
(Name, address, including zip code, and telephone number, including
area code, of agent for service)
--------------------------
RICK L. BURDICK, P.C.
AKIN, GUMP, STRAUSS, HAUER & FELD, L.L.P.
1900 PENNZOIL PLACE-SOUTH TOWER
711 LOUISIANA STREET
HOUSTON, TEXAS 77002
(713) 220-5800
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time to
time after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: [ ]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box: [X]
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering: [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering: [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box: [ ]
--------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
======================================================================================================================
AMOUNT OF
TITLE OF EACH CLASS AMOUNT TO BE PROPOSED PROPOSED REGISTRATION
OF SECURITIES TO BE REGISTERED REGISTERED OFFERING PRICE (2) AGGREGATE OFFERING PRICE FEE
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $.01
per share (1) 9,206,363 $ 6.50(2) $ 59,841,359(2) $18,134
- ----------------------------------------------------------------------------------------------------------------------
Common Stock Purchase Warrants 1,891,946 $4.3778(3) $ 8,282,576(3) (4)
======================================================================================================================
</TABLE>
<PAGE> 2
(1) Includes 3,122,174 shares of Common Stock which are currently outstanding
and 6,084,189 which are issuable upon exercise of outstanding warrants and
options, including the Warrants. Pursuant to Rule 416, additional
securities are being registered as may be required for issuance pursuant to
the anti-dilution provisions of the Warrants.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c), on the basis of the average high and low prices of
the Common Stock on the Nasdaq National Market on March 31, 1997.
(3) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(g). The offering price for the Warrants is based upon
the average price per share of Common Stock at which the Warrants can be
exercised.
(4) Pursuant to Rule 457(g), no separate fee is being paid with respect to the
Warrants since the shares of Common Stock being offered pursuant thereto
are also being registered.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
================================================================================
<PAGE> 3
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
[DeepTech Logo]
PROSPECTUS
SUBJECT TO COMPLETION, DATED APRIL ____, 1997
9,206,363 SHARES OF COMMON STOCK
1,891,946 COMMON STOCK PURCHASE WARRANTS
DEEPTECH INTERNATIONAL INC.
---------------------
This Prospectus relates to 9,206,363 shares (the "Shares") of common stock,
par value $.01 per share ("Common Stock"), of DeepTech International Inc., a
Delaware corporation ("DeepTech") and warrants to purchase 1,891,946 shares of
Common Stock (the "Warrants," and collectively with the Shares, the
"Securities"). The Warrants were issued by DeepTech under various agreements
and arrangements and are immediately exercisable. The Warrants entitle the
holders to purchase shares of Common Stock at a specified exercise price
ranging from $4.00 to $4.50 per share until the expiration of the Warrants
pursuant to their respective terms ranging from July 15, 1998 to July 15, 2000.
See "Description of Warrants." There are 3,122,174 of the Shares currently
outstanding and 6,084,189 are issuable upon exercise of outstanding warrants
and options, including the Warrants. The Securities may be offered from time
to time (the "Offering") by persons (the "Selling Stockholders") who have
acquired such Securities in certain private placements, other transactions not
involving a public offering or who otherwise do not have an available exemption
from registration. The Securities are being registered under the Securities
Act of 1933, as amended (the "Securities Act"), on behalf of the Selling
Stockholders in order to permit the public sale or other public distribution of
the Securities.
The Securities may be sold or distributed from time to time by or for the
account of the Selling Stockholders, or by their pledgees on behalf of the
Selling Stockholders, in transactions (which may involve crosses and block
transactions) on the Nasdaq National Market ("Nasdaq") or any national
securities exchange or U.S. inter-dealer quotation system of a registered
national securities association on which the Securities are then listed, in the
over-the-counter market, in one or more privately negotiated transactions
(including sales pursuant to pledges), through the writing of options on the
Shares, in a combination of such methods of distribution, or by any other
legally available means. This Prospectus also may be used, with the Company's
consent, by donees of the Selling Stockholders, or by other persons acquiring
Securities who wish to offer and sell such Securities under circumstances
requiring or making desirable its use. Such methods of sale may be conducted
by the Selling Stockholders at market prices prevailing at the time of sale, at
prices related to such prevailing market prices or at prices otherwise
negotiated. The Selling Stockholders may effect such transactions directly, or
indirectly through broker-dealers or agents acting on their behalf and, in
connection with such sales, such broker-dealers or agents may receive
compensation in the form of commissions or discounts from the Selling
Stockholders and/or the purchasers of the Securities for whom they may act as
agent or to whom they sell Securities as principal or both (which commissions
or discounts might be in excess of customary commissions). To the extent
required, the names of the agents or broker-dealers, and applicable commissions
or discounts and any other required information with respect to any particular
offer of Securities by the Selling Stockholders, will be set forth in a
Prospectus Supplement. See "Plan of Distribution."
DeepTech will not receive any of the proceeds from the sale of the
Securities offered hereby although it may receive up to an aggregate of
$34,361,843 in connection with the exercise of outstanding warrants and
options, including the Warrants, to purchase Shares included as a part of the
Offering. DeepTech will bear all expenses incident to the registration of the
Securities under federal and state securities laws and the sale of the
Securities hereunder other than expenses incident to the delivery of the
Securities to be sold by the Selling Stockholders, including any transfer taxes
payable on any Securities, and any commissions and discounts payable to
underwriters, agents or dealers.
The Common Stock is quoted on Nasdaq under the symbol "DEEP." On March 31,
1997, the last reported sale price for the Common Stock as reported by Nasdaq
was $6.50 per share. DeepTech had 18,598,311 shares of Common Stock issued and
outstanding as of March 31, 1997. At March 31, 1997, DeepTech had outstanding
warrants and options to acquire 9,643,284 shares of Common Stock. The Warrants
are not listed on an exchange or quoted on Nasdaq, and it is not anticipated
that application will be made to list the Warrants.
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE MATTERS SET FORTH UNDER
THE CAPTION "RISK FACTORS" LOCATED ON PAGE 3 OF THIS PROSPECTUS.
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<PAGE> 4
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------------
AVAILABLE INFORMATION
DeepTech is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended, and the rules and regulations promulgated
thereunder (the "Exchange Act"), and, in accordance therewith, files reports,
proxy and information statements and other information with the Securities and
Exchange Commission (the "SEC"). The reports, proxy and information statements
and other information concerning DeepTech can be inspected and copied at the
public reference facilities maintained by the SEC at Judiciary Plaza, Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the SEC's
regional offices located at Suite 1400, 500 West Madison Street, Chicago,
Illinois 60661 and at Seven World Trade Center, 13th Floor, New York, New York
10048. Copies of such material can also be obtained from the SEC at prescribed
rates through the Public Reference Section of the SEC at 450 Fifth Street,
N.W., Washington, D.C. 20549. Such documents also may be obtained through the
website maintained by the SEC at http://www.sec.gov. Such reports, proxy
statements and other information may also be inspected at the offices of Nasdaq
at 1735 K Street, N.W., Washington, D.C. 20006.
DeepTech has filed with the SEC a Registration Statement on Form S-3 under
the Securities Act with respect to the Securities (such registration statement,
including all amendments and supplements thereto, is hereinafter referred to as
the "Registration Statement"). This Prospectus, which forms a part of the
Registration Statement, does not contain all of the information set forth in
the Registration Statement, certain parts of which have been omitted in
accordance with the rules and regulations of the SEC. Statements contained in
this Prospectus as to the contents of any contract, agreement or other document
are not necessarily complete and in each instance reference is made to the copy
of such contract, agreement or other document filed as an exhibit to the
Registration Statement or incorporated herein by reference, and each such
statement is deemed qualified in its entirety by such reference. The
Registration Statement and exhibits thereto may be inspected without charge at
the public reference facilities maintained by the SEC, regional offices of the
SEC and offices of the SEC and Nasdaq referred to above, and copies thereof may
be obtained from the SEC at prescribed rates.
<PAGE> 5
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, filed by DeepTech with the SEC pursuant to the
Exchange Act, are incorporated herein by reference and made a part of this
Prospectus:
(i) DeepTech's Annual Report on Form 10-K for the fiscal year
ended June 30, 1996;
(ii) DeepTech's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1996; and
(iii) DeepTech's Quarterly Report on Form 10-Q for the quarter ended
December 31, 1996.
All reports and other documents filed by DeepTech with the SEC pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
Prospectus and prior to the termination of the Offering shall be deemed
incorporated by reference in this Prospectus and to be a part hereof from the
date of filing of such documents. Any statement contained in this Prospectus
or in a document incorporated or deemed to be incorporated by reference in this
Prospectus shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained in this Prospectus or in
any other subsequently filed document that also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
DeepTech undertakes to provide without charge to each person to whom a copy
of this Prospectus has been delivered, upon the written or oral request of such
person, a copy of any or all of the documents incorporated by reference herein,
other than the exhibits to such documents, unless such exhibits are
specifically incorporated by reference into the information that this
Prospectus incorporates. Written or oral requests for such copies should be
directed to DeepTech International Inc., Texas Commerce Tower, Suite 7500, 600
Travis, Houston, Texas 77002, Attention: Corporate Secretary, telephone number
(713) 224-7400.
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<PAGE> 6
RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION SET FORTH IN THIS PROSPECTUS,
PROSPECTIVE PURCHASERS OF THE SECURITIES SHOULD CONSIDER CAREFULLY THE
FOLLOWING RISK FACTORS IN EVALUATING AN INVESTMENT IN DEEPTECH.
Unless the context otherwise requires, references in this Prospectus to
"DeepTech" shall mean DeepTech International Inc., a Delaware corporation, and
references to the "Company" or its operations shall mean DeepTech and its
operating subsidiaries (the "Subsidiaries"), Leviathan Gas Pipeline Company
(indirectly 85%-owned) ("Leviathan"), Tatham Offshore, Inc. (37%-owned) ("Tatham
Offshore"), RIGCO North America, L.L.C. (indirectly 100%-owned), Deepwater
Production Systems, Inc. (100%-owned) ("Deepwater Systems"), Deepflex Production
Services, Inc. (100%-owned) ("Deepflex"), Offshore Gas Marketing, Inc.
(80%-owned) ("Offshore Marketing") and Offshore Gas Processors, Inc. (85%-owned)
("Offshore Processors"), and their respective operations. Leviathan is the
general partner of Leviathan Gas Pipeline Partners, L.P., a publicly-traded
master limited partnership. References to the "Partnership" contained herein
shall mean Leviathan Gas Pipeline Partners, L.P. and its subsidiaries.
Certain of the following risk factors relate particularly to Leviathan, the
Partnership and Tatham Offshore. The risk factors relating to the Partnership
and Leviathan may adversely affect the value of DeepTech's interest in
Leviathan and the ability of the Partnership to pay management fees to DeepTech
or to make distributions to Leviathan. The risk factors relating to Tatham
Offshore may adversely affect the value of DeepTech's interest in Tatham
Offshore and the ability of Tatham Offshore to pay management fees to DeepTech
or make advances or distribute earnings or meet its obligations under the
Tatham Offshore Subordinated Notes and any other intercompany indebtedness
owing to DeepTech. The inability of Leviathan and/or Tatham Offshore to make
such payments to DeepTech would have a material adverse effect upon DeepTech's
ability to pay its operating expenses and service its debt obligations.
SUBSTANTIAL LEVERAGE OF THE COMPANY
DeepTech is highly leveraged. At December 31, 1996, the Company had
stockholders' equity of $21.4 million and total consolidated long-term
indebtedness of approximately $158.5 million, of which $65 million was
attributable to RIGCO. In addition, DeepTech incurred substantial indebtedness
as a result of the issuance of $82 million aggregate principal amount of 12%
Senior Secured Notes due in the year 2000 (the "Senior Notes") in March 1994
(the "Debt Offering"). The indenture relating to the Senior Notes (the "Senior
Note Indenture") contains covenants that, among other things, require DeepTech
to meet certain collateral coverage tests and restrict the ability of DeepTech
to incur additional indebtedness, create or incur liens, make capital
expenditures, effect certain assets sales and engage in certain mergers or
similar transactions. Further, substantially all material assets of DeepTech
have been pledged to secure the Senior Notes. Any inability of DeepTech to
service its obligations in respect of the Senior Notes or other indebtedness
could have a significant adverse affect on the market value and marketability of
the Securities.
DeepTech expects that the Company will remain highly leveraged for the
foreseeable future, with important consequences to stockholders of DeepTech,
including the following: (i) the ability of the Company to obtain additional
financing for working capital, acquisitions, advances or contributions to the
subsidiaries for capital expenditures or other corporate purposes, should it
need to do so, may be impaired; (ii) all or a substantial portion of the
Company's cash flow from operations will be required to be dedicated to the
payment of the Company's interest expense and principal payment obligations;
(iii) the Company is more highly leveraged than many of its competitors, which
may place it at a competitive disadvantage; and (iv) the Company's degree of
leverage may make it more vulnerable to a downturn in its business or the
economy generally. If the Company is unable to generate sufficient cash flow
from operations and obtain additional sources of financing, the Company may be
required to refinance all or a portion of its debt, sell certain of its assets
or both. There can be no assurance that any such refinancing or asset sales
would suffice to meet interest and principal payments as they become due. The
failure to make such payments as they come due would have a material adverse
effect on DeepTech.
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<PAGE> 7
DEEPTECH'S HOLDING COMPANY STRUCTURE; DEPENDENCE ON THE SUBSIDIARIES
DeepTech is a holding company whose material assets consist primarily
of the stock of the Subsidiaries. As a result, DeepTech is dependent upon
management fees paid to it pursuant to management agreements with each of the
Subsidiaries, quarterly dividends funded by distributions from the Partnership
and interest on and the repayment of debt by the Subsidiaries to pay its
operating expenses, service its debt obligations, including the Senior Notes,
and satisfy any mandatory repurchase obligations relating to the Senior Notes.
Loan agreements to which certain Subsidiaries are, or may in the future become,
parties may restrict the ability of such Subsidiaries to make payments to
DeepTech. The Company anticipates that additional Subsidiaries may enter into
credit arrangements that may prohibit or otherwise restrict their ability to
pay dividends and make advances to DeepTech. In addition, distributions in
respect of the Partnership's Common Units, which are owned indirectly by
DeepTech, may only be made after all minimum distributions payable in respect
of the Partnership's Preference Units have been paid in full. The failure of
(i) a Subsidiary to pay management fees or repay principal or interest on its
intercompany debt or (ii) the Partnership to make distributions could have a
material adverse effect on DeepTech's financial condition and results of
operations.
RELIANCE ON KEY PERSONNEL; CONCENTRATION OF OWNERSHIP
The Company is dependent upon the services of its executive officers
and key employees, including Thomas P. Tatham, Chairman of the Board and Chief
Executive Officer of DeepTech. The loss of these services, in general, and of
Mr. Tatham, in particular, could have a material adverse effect on the Company.
Taking into account the effect of exercising options, Mr. Tatham currently
beneficially owns 45.3% of the Common Stock of DeepTech and the other executive
officers and directors of DeepTech beneficially own approximately an additional
14.8% of the Common Stock. Accordingly, Mr. Tatham and such other executive
officers and directors, if they voted together, would have the ability to elect
all of DeepTech's directors and control the outcome of all matters submitted to
a vote of DeepTech's stockholders. In addition, so long as Mr. Tatham owns more
than one-third of DeepTech's outstanding Common Stock, Mr. Tatham acting alone
would be able to prevent certain actions that require the affirmative vote of at
least two-thirds of DeepTech's outstanding Common Stock.
REPURCHASE OF SENIOR NOTES UPON A CHANGE OF CONTROL, INCREASED LEVERAGE BY
THE PARTNERSHIP, TATHAM CONVERSION EVENT OR A DECLINE IN THE VALUE OF
COLLATERAL
The Senior Note Indenture provides that upon the occurrence of a
Change of Control, Partnership Leverage Event or Tatham Conversion Event (each
as defined in the Senior Note Indenture), DeepTech shall be required to offer
to holders of the Senior Notes to repurchase any and all of the Senior Notes at
a purchase price equal to 101%, 100% and 101%, respectively, of the aggregate
principal amount, plus accrued and unpaid interest, if any, to the date of
purchase. In addition, the Senior Note Indenture provides that if DeepTech's
Asset Coverage Ratio (as defined in the Senior Note Indenture) falls below
specified levels, DeepTech is required to offer to repurchase, at a purchase
price equal to 100% of the principal amount thereof, plus accrued and unpaid
interest, if any, an amount of Senior Notes sufficient to increase the Asset
Coverage Ratio to not less than specified levels. There can be no assurance
that DeepTech will have sufficient resources to purchase the Senior Notes if it
is required to do so under the terms of the Senior Note Indenture. This
provision may also adversely affect the ability of DeepTech to obtain
additional financing in the future. No assurance can be given that the terms
of any future indebtedness will not contain cross default provisions based on a
Change of Control or other defaults under the Senior Note Indenture.
POSSIBLE DEPRESSING EFFECT OF FUTURE SALES OF DEEPTECH COMMON STOCK
No predictions can be made as to the effect, if any, that future sales
of the Shares, the availability of Common Stock for sale or the perception that
such sales could occur, will have on the market price of the Common Stock. In
addition, DeepTech has issued and may issue in the future Common Stock and/or
options or warrants to purchase Common Stock pursuant to exemptions from
registration available under the Securities Act
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<PAGE> 8
in connection with its business activities. Such securities are subject to
restrictions on resale in accordance with the Securities Act and the
regulations promulgated thereunder. However, if such shares are registered for
sale to the public or sales are permitted pursuant to Rule 144 or another
available exemption from registration under the Securities Act, such securities
may be sold into the public market. The issuance and subsequent resale of a
substantial number of shares of Common Stock, or a perception that such sales
could occur, could have a material adverse effect on the market price of the
Common Stock.
PERFORMANCE OF THE PARTNERSHIP DEPENDS ON THROUGHPUT LEVELS
The future performance of the Partnership will depend, in part, on the
throughput levels achieved by the Partnership's natural gas pipelines (the "Gas
Pipelines"), and the Poseidon Oil Pipeline (collectively with the Gas
Pipelines, the "Pipelines") and any future pipelines constructed by the
Partnership. Throughput levels on each Pipeline will be affected by a number
of factors, including the production rates and reserve lives of wells connected
to each Pipeline. The proved reserves that are available for transportation on
the Pipelines are depleting assets and, as such, will be produced over a finite
period. Each of the Pipelines must access additional reserves to offset the
natural decline of production from existing wells connected to the Pipelines.
The long term prospects of the Partnership are, therefore, dependent upon the
development of additional reserves in areas accessible to the Pipelines and the
interconnection and transportation by the Pipelines of production from, such
additional reserves. The reserve prospects in the Flextrend (water depths of
600 to 1,500 feet) and Deepwater (water depths over 1,500 feet) areas of the
Gulf of Mexico will require significant capital expenditures by others for
exploration and development drilling and the installation of production
facilities and pipeline extensions to interconnect with a Pipeline.
Development of additional reserves in these areas could be adversely affected
by relatively low prices for oil and gas, capital budget limitations or the
lack of available capital. Accordingly, no assurance can be given that such
reserves exist or, if they do exist, as to the timing of their discovery or
development or their availability to or interconnection with the Pipelines.
Furthermore, even if such additional reserves exist and are ultimately
produced, no assurance can be given that all the production therefrom will be
interconnected with or transported by the Pipelines since the Partnership will
compete for such transportation with other pipelines on the basis of numerous
factors, including geographic proximity to such production, cost of connection,
available capacity, transportation rates and access to onshore markets.
REGULATION BY THE FERC OF THE REGULATED PIPELINES AND CHANGING REGULATORY
ENVIRONMENT
Certain of the pipelines operated by the Partnership (the "Regulated
Pipelines") are classified as a "natural gas company" by the Natural Gas Act of
1938, as amended. Consequently the Federal Energy Regulatory Commission (the
"FERC") has jurisdiction over the Regulated Pipelines with respect to
transportation of gas, rates and charges, construction of new facilities,
extension or abandonment of services and facilities, accounts and records,
depreciation and amortization policies and certain other matters. In addition,
the Regulated Pipelines, where required, hold certificates of public
convenience and necessity issued by the FERC covering their facilities,
activities and services. The Regulated Pipelines may not charge or collect
more than the maximum rates on file with the FERC. In the event of an adverse
outcome with respect to any rate case of a Regulated Pipeline, the
Partnership's cash flow could be materially adversely affected. Given the
extent of regulation of the Regulated Pipelines by the FERC, the extensive
changes in FERC policy in recent years, the evolving nature of regulation and
the possibility for additional changes, no assurance can be given regarding the
likely regulations and restrictions under which the Pipelines will be operating
in the future or the effect such regulations and restrictions will have on the
Pipeline's financial position, results of operations and cash flows. Further,
although only the Regulated Pipelines are currently subject to rate regulation
by the FERC, all of the Pipelines are subject to regulation by various federal
authorities. There can be no assurance that laws and regulations currently
enacted or to be enacted in the future will not adversely affect the Pipelines.
HIGH DEPENDENCE ON DEVELOPMENTAL AND EXPLORATORY DRILLING ACTIVITIES
The success of Tatham Offshore is largely dependent upon the success
of its developmental and exploratory drilling activities. The Partnership is
also engaged in developmental drilling activities. Drilling
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<PAGE> 9
involves numerous risks, including the risk that no commercially productive gas
or oil reservoirs will be encountered. The cost of drilling, completing and
operating wells is often uncertain, and drilling operations may be curtailed,
delayed or canceled as a result of a variety of factors, including unexpected
drilling conditions, pressure or irregularities in formations, equipment
failures or accidents, weather conditions and shortages or delays in the
delivery of the requisite equipment. In addition, to the extent Tatham
Offshore or the Partnership acquire additional properties, 3-D seismic and
other advanced technology may require greater pre-drilling expenditures than
traditional drilling strategies. There can be no assurance as to the success
of Tatham Offshore or Partnership drilling activities.
SUBSTANTIAL FUTURE CAPITAL REQUIREMENTS OF TATHAM OFFSHORE
To implement the development of its oil and gas properties, Tatham
Offshore intends to seek additional capital through a combination of other
funding sources that may include traditional reserve base borrowings, joint
venture partnerships, vendor financings, production pay financings and
offerings of debt and equity securities. Cash flows from operations, to the
extent available, will also be used to fund some expenditures. Tatham
Offshore's ability to access additional capital will depend on the success of
prior exploratory and development drilling and the status of various capital
markets at the time such capital is sought. Accordingly, there can be no
assurance that sufficient capital will be available to Tatham Offshore from any
source or that, if available, it will be on terms acceptable to Tatham
Offshore. Should sufficient financing not be available because costs are
higher than estimated or otherwise, the development and exploration of Tatham
Offshore's properties would be delayed and, accordingly, the implementation of
Tatham Offshore's business strategy would be adversely affected.
VOLATILITY OF OIL AND GAS PRICES
Tatham Offshore and the Partnership's future financial condition and
results of operations are particularly dependent upon the prices received for
their oil and gas production and the costs of acquiring, developing and
producing reserves. Oil and gas prices have historically been volatile and are
likely to continue to be volatile in the future. Prices for oil and gas are
subject to fluctuations in response to relatively minor changes in supply,
market uncertainty and a variety of additional factors which are beyond the
control of Tatham Offshore and the Partnership. These factors include
political stability in the Middle East and elsewhere, the foreign supply of oil
and gas, the price of foreign imports, the level of consumer product demand,
government regulations and taxes, the price and availability of alternative
fuels and the overall economic environment. A decrease in oil and gas prices
could adversely affect the financial condition and results of operations of
Tatham Offshore and the Partnership.
OPERATING RISKS; DEEPER WATER RISKS
The oil and gas operations of the Company, particularly the
Partnership and Tatham Offshore, are subject to all of the risks and hazards
typically associated with the exploration for, and/or the development and
production of, oil and gas in the Gulf and any other areas in which the
Partnership or Tatham Offshore may, in the future, conduct such activities.
Risks in drilling operations include blowouts, oil spills, fires and offshore
risks such as capsizing, collision, hurricanes and other adverse weather and
sea conditions. Such risks can result in personal injury and loss of life and
substantial damage to or destruction of oil and gas wells, platforms,
production facilities or other property, suspension of operations and
liabilities to third parties, any and all of which could adversely affect the
Partnership or Tatham Offshore.
Most of the Company's oil and gas properties are located in water
depths of greater than 600 feet. Drilling operations in such water depths are
by their nature more difficult than drilling operations conducted in shallower
water depths because they require the application of more advanced drilling
technologies, possibly resulting in significantly higher drilling costs. It is
anticipated that some of the Company's wells will be completed utilizing subsea
completion techniques which involve the installation of subsea wellheads and
equipment with tie-back lines to adjacent production facilities. The
installation of these facilities requires the use of advanced technologies,
including the use of remote installation mechanics. Such operations involve a
higher risk of
6
<PAGE> 10
encountering mechanical difficulties and equipment failures which, if
encountered, could result in significant cost overruns.
The Company's operations also could result in liability for oil
spills, discharge of hazardous materials and other environmental damages. In
accordance with customary industry practices, the Company maintains insurance
against some, but not all, of such risks and some, but not all, of such losses.
There can be no assurance, however, that such insurance will continue to be
available to or carried by the Company or, if available and carried, will be
adequate to cover the Company's liability in all circumstances. The occurrence
of an event not fully covered by insurance could have a material adverse effect
on the financial position and results of operations of the Company. In
addition, the Company may be liable for environmental damages caused by
previous owners of property purchased by the Company, which liabilities would
not be covered by insurance.
RISKS OF OFFSHORE CONTRACT DRILLING SERVICES
The Company's experience in the contract drilling business is limited.
RIGCO currently has two semisubmersible drilling rigs, the FPS Laffit Pincay and
the FPS Bill Shoemaker. The FPS Laffit Pincay has only been performing
contract drilling services in the Gulf of Mexico since February 1996. The FPS
Bill Shoemaker is currently undergoing an extensive upgrade, repair and
refurbishment program to enable it to perform contract drilling services. The
ability of RIGCO to fund its future debt service obligations under the RIGCO
credit facility is dependent upon the successful refurbishment of the FPS Bill
Shoemaker and the leasing of both the FPS Laffit Pincay and the FPS Bill
Shoemaker at appropriate rates.
The Company's contract drilling business is substantially dependent
upon the condition of the oil and gas industry, the level of exploration and
production expenditures as well as the supply of drilling rigs capable of
competing with the Company's semisubmersible drilling rigs. The demand for
contract drilling services is directly influenced by oil and gas prices,
expectations about future oil and gas prices, the cost of exploration and
production activities, the sale and expiration dates of leases and government
regulations. Historically in periods of depressed natural gas prices, the
demand for drilling and related services has declined leading to low day rates
and low utilization of available equipment. In addition, even in an environment
of stronger natural gas prices and increased drilling activity, movement of
existing rigs, refurbishment of older rigs or new construction could increase
the supply of rigs available and therefore adversely affect day rates and
utilization levels. The Company cannot predict the timing or extent of the
future level of demand of the Company's drilling services or whether recent
increases in day rates and utilization rates will be sustained.
The Company anticipates that the capital requirements necessary to
complete the upgrades on the FPS Bill Shoemaker will be funded with proceeds
from the RIGCO credit facility or from cash on hand, that the refurbishment
program will be completed as currently scheduled and that the FPS Bill
Shoemaker will successfully begin performing contract drilling services.
However, there can be no assurance that the refurbishment of the FPS Bill
Shoemaker will be completed as scheduled or that the costs to complete the
refurbishment will not exceed the funds available for that purpose, or that the
FPS Bill Shoemaker will be successfully leased for contract drilling service.
Should sufficient financing not be available because costs are higher than
estimated or otherwise, the refurbishment of the FPS Bill Shoemaker would be
delayed and the ability of RIGCO to service its debt requirements under the
RIGCO credit facility would be adversely affected.
REGULATIONS
The production and development operations of the Partnership and the
exploration, development and production operations of the Company are subject
to regulation at the federal and state levels. Such regulation includes
requiring permits for the drilling of wells and maintaining bonding and
insurance requirements in order to drill or operate wells, and regulating the
location of wells, the method of drilling and casing wells, the surface use and
restoration of properties upon which wells are drilled and the plugging and
abandoning of wells. Exploration, production and development operations are
also subject to various conservation laws and regulations. These include the
regulation of the size of drilling and spacing units or proration units, the
density of wells that may be drilled, the levels of production and the
unitization or pooling of gas and oil properties. No assurance can be given
regarding the likely regulations and restrictions under which the Company's
development and production activities may be conducted in the future or the
effect such regulations and restrictions will have on the Company's financial
position, results of operations and cash flows.
The operations of certain of the Subsidiaries, particularly those of
Tatham Offshore and the Partnership, are subject to extensive federal, state
and local regulatory requirements relating to environmental affairs, health and
safety, waste management and chemical products. Governmental authorities have
the power to enforce compliance with these regulations and permits and
violators are subject to civil and criminal penalties, including civil fines,
injunctions or both. Third parties may also have the right to pursue legal
actions to enforce compliance. Future developments such as stricter laws,
regulations or enforcement policies thereunder could significantly increase the
cost of compliance with environmental laws and regulations. Moreover, as with
other companies engaged in similar or related businesses, some risks,
environmental costs and liabilities are inherent in the operations of certain
of the Subsidiaries due to their handling of hydrocarbon products, and there
can be no assurance that material environmental costs and liabilities will not
be incurred by such Subsidiaries.
UNCERTAINTY OF ESTIMATES OF RESERVES AND FUTURE NET RESERVES
There are numerous uncertainties inherent in estimating oil and
natural gas reserves and their estimated values, including many factors beyond
the control of the producer. The reserve data incorporated by reference into
this Prospectus represent only estimates, which have been prepared by
independent petroleum engineers. Reservoir engineering is a subjective process
of estimating underground accumulations of oil and natural gas that cannot be
measured in an exact manner. Estimates of economically recoverable oil and gas
reserves and of future net cash flows necessarily depend upon a number of
variable factors and assumptions, such as historical production from the area
compared with production from other producing areas, the assumed effects of
regulations by government agencies and assumptions concerning future oil and
gas prices, future operating costs, geologic success, severance and excise
taxes, development costs and workover and remedial costs, all of which may in
fact vary considerably from actual results. For these reasons, estimates of
the economically recoverable quantities of oil and natural gas attributable to
any particular group of properties, classifications of such reserves based on
risk of recovery and estimates of the future net cash flows expected therefrom
prepared by different engineers or by the same engineers at different times may
vary substantially and such reserve estimates may be subject to downward or
upward adjustment based upon such factors, particularly with respect to new
discoveries
7
<PAGE> 11
and to estimates of proved undeveloped reserves, which comprise a substantial
portion of the Company's reserves. Actual production, revenues and expenditures
with respect to the Company's reserves will likely vary from estimates, and
such variances may be material.
The present values of estimated future net cash flows incorporated by
reference into this Prospectus should not be construed as the current market
value of the estimated oil and natural gas reserves attributable to the
Company's properties. In accordance with applicable requirements of the SEC,
the estimated discounted future net cash flows from proved reserves are
generally based on prices and costs as of the date of the estimate, whereas
actual future prices and costs may be materially higher or lower. Actual
future net cash flows also will be affected by factors such as the amount and
timing of actual production, supply and demand for oil and natural gas,
curtailments or increases in consumption by gas purchasers and changes in
governmental regulations or taxation. The timing of actual future net cash
flows from proved reserves, and their actual present value, will be affected by
the timing of both the production and the incurrence of expenses in connection
with the development and production of oil and gas properties. In addition,
the calculation of present value of the future net revenues using a 10%
discount as required by the SEC, is not necessarily the most appropriate
discount factor based on interest rates in effect from time to time and risks
associated with the Company's reserves or the oil and gas industry in general.
LEGAL PROCEEDINGS
The Company is and may in the future become a party to various legal and
environmental proceedings which have arisen or may arise in the ordinary course
of its business. No assurance can be given with respect to the outcome of
these legal proceedings and the effect such outcomes may have on the Company.
CONFLICTS OF INTEREST
DeepTech is a diversified energy company engaged, through its
operating subsidiaries, in offshore contract drilling services and the
acquisition, development, production, processing, transportation and marketing
of, and the exploration for, oil and gas. DeepTech is currently a party to
certain material contracts with the Subsidiaries and/or their affiliates and
such entities have also entered into material contracts among themselves.
DeepTech anticipates that DeepTech, the Subsidiaries and the respective
affiliates of DeepTech and the Subsidiaries will enter into additional material
contracts and agreements. In addition, certain officers and directors of
DeepTech are also officers and/or directors of the Subsidiaries and their
affiliates and such officers and directors have entered into material contracts
and agreements with such entities. Although the Senior Note Indenture
permits DeepTech to enter into transactions with its affiliates only if each
such transaction, or series of related transactions, on whole, is on terms no
less favorable to DeepTech than those that could be obtained in a comparable
arm's-length transaction with a non- affiliate, such transactions involving
amounts of less than $2.5 million only require the authorization of officers of
DeepTech even if such officers have an interest in such transactions. In
addition, DeepTech manages each of the Subsidiaries pursuant to management
agreements. DeepTech is not prohibited under the management agreements from
engaging, directly or indirectly, in other business activities in which the
respective Subsidiaries will have no economic interest. Certain conflicts may
arise as a result of existing and future transactions between DeepTech and its
affiliates. These conflicts may be resolved in favor of such affiliates and
such resolution may have a material adverse effect on DeepTech.
COMPETITION
The energy industry is highly competitive. The Company competes in
the areas of property acquisitions and the development, production, gathering,
transportation, and marketing of, and exploration for oil and gas with major
interstate pipeline companies, major oil companies, other independent oil and
gas concerns and individual producers and operators. Many of these competitors
have substantially greater financial and other resources than the Company. For
a number of years, depressed oil and gas prices and an oversupply of drilling
rigs have adversely affected the offshore drilling market. In addition, RIGCO
has significant competition from many other offshore drilling contractors in
all of the areas in which it operates. Activity levels in areas in which RIGCO
8
<PAGE> 12
operates, including the U.S. Gulf of Mexico, increased in 1995 and 1996 due, in
part, to increased oil and natural gas prices and increased levels of
exploration and production activities. RIGCO has experienced
a corresponding increase in day rates. RIGCO cannot predict the extent to
which current market conditions will continue.
THE COMPANY
DeepTech is a diversified energy company engaged, through its operating
subsidiaries, in offshore contract drilling services and the acquisition,
development, production, processing, transportation and marketing of, and the
exploration for, oil and gas. DeepTech was formed in October 1989 and, since
that time, has significantly expanded its operations, primarily through
acquisitions. DeepTech's Common Stock trades on Nasdaq under the trading
symbol "DEEP."
The Company believes that its holding company structure facilitates
operations by enabling each Subsidiary to focus its attention on a specific
aspect of the oil and gas industry while isolating it from the regulatory
obligations and potential liabilities of the other Subsidiaries. In addition,
such structure enables the Company to attract and retain key personnel by
issuing to such personnel direct minority equity interests in the Subsidiary
for which they work.
The principal executive office of DeepTech is located at Texas Commerce
Tower, Suite 7500, 600 Travis, Houston, Texas 77002, and its telephone number
is (713) 224-7400.
USE OF PROCEEDS
DeepTech will not receive any of the proceeds from the sale of the
Securities offered hereby, although it may receive up to an aggregate of
$34,361,843 in connection with the exercise of outstanding warrants and options,
including the Warrants, to purchase Shares included as a part of the
Offering. DeepTech will bear all expenses incident to the registration of the
Securities under federal and state securities laws and the sale of the
Securities hereunder other than expenses incident to the delivery of the
Securities to be sold by Selling Stockholders, including any transfer taxes
payable on any Securities, and any commissions and discounts payable to
underwriters, agents or dealers. See "Plan of Distribution."
DESCRIPTION OF WARRANTS
DeepTech has issued warrants to purchase Common Stock to noteholders,
employees, directors and financial institutions under various agreements and
arrangements. In December 1996, DeepTech extended an offer to certain of its
warrantholders whereby the exercise period for certain vested warrants could be
extended for one, two, or three years in consideration for the immediate
exercise of 25%, 37.5% or 50%, respectively, of the warrants so designated by
each warrantholder. As a result of this offer, on December 31, 1996, DeepTech
issued 1,080,701 shares of Common Stock pursuant to the exercise of warrants at
prices ranging from $4.00 to $4.50 per share of Common Stock and extended the
exercise period on 1,894,446 warrants. The Warrants registered pursuant to the
Registration Statement are 1,891,946 of the 1,894,446 warrants for which the
exercise period was extended pursuant to the arrangement discussed above.
The Warrants are each issued pursuant to agreements between DeepTech and
the Warrantholders. The following summary of the terms of the Warrants is not
intended to be complete. The terms of the respective warrant agreements, the
forms of which have been filed as exhibits to the Registration Statement, are
incorporated by reference herein, and this description is qualified in its
entirety by reference thereto. Certain Warrantholders acquired their Warrants
from the original warrantholders or their transferees in transactions exempt
from registration under the Securities Act. Each Warrant entitles the holder
thereof to purchase the stated number of shares of Common Stock, subject to
adjustment in certain circumstances. The Warrants are exercisable at any time
prior to their stated expiration. DeepTech has authorized and reserved for
issuance that number of shares of Common Stock sufficient to provide for the
exercise of the Warrants. When delivered, each share of Common Stock will be
fully paid and non-assessable. No fractional shares will be issued upon
exercise of the Warrants, but the Company will pay the cash value of any
fractional shares otherwise issuable. Warrants may be exercised by notice to
DeepTech accompanied by payment of the aggregate exercise price for the shares
of Common Stock being acquired.
9
<PAGE> 13
The exercise price and the number of shares of Common Stock purchasable
upon the exercise of the Warrants are subject to adjustment in certain events,
including (i) the issuance of a stock dividend to holders of shares of Common
Stock, (ii) decrease in the number of shares of Common Stock by combination of
the outstanding shares of Common Stock, (iii) the distribution by DeepTech of
stock, other securities or assets with respect to or in exchange for Common
Stock in connection with certain capital reorganizations, reclassifications,
consolidations or mergers, (iv) the issuance of rights, options or warrants to
holders of shares of Common Stock entitling such holders to purchase shares of
Common Stock for a consideration per share less than the then current Warrant
exercise price, (v) any distribution by DeepTech of shares of capital stock
other than Common Stock, evidences of indebtedness or assets (excluding cash
dividends paid from retained earnings) or rights or warrants to subscribe for
or purchase any of its securities, and (vi) any sale or issuance by DeepTech of
shares of Common Stock, or rights, options or warrants or convertible or
exchangeable securities containing the right to subscribe for or purchase
shares of such Common Stock, at a price per share of Common Stock less than the
then current Warrant exercise price.
No adjustment will be made for (a) the issuance of shares of Common Stock
upon the exercise of the Warrants, (b) the issuance of shares of Common Stock
by DeepTech upon receipt of the then current market price for the Common Stock
if there is a public market or in an arm's-length transaction with third
persons not affiliated with DeepTech for consideration equal to the fair market
value of such shares, or (c) shares of Common Stock issuable upon the exercise
of stock options granted to employees of DeepTech pursuant to a qualified stock
option plan approved by DeepTech's Board of Directors.
Holders of Warrants are not entitled, by virtue of being such holders, to
receive dividends or to consent or to receive notice as shareholders in respect
to any meeting of shareholders for the election of directors of DeepTech or any
other matter, or to vote at any such meeting, or any right whatsoever as
shareholders of DeepTech.
Certain Warrantholders (indicated by footnote on the table below) have a
put option pursuant to the terms of their Warrants. The put option grants the
Warrantholder the right to require the Company to purchase the Warrant, or if
the Warrant has been exercised, all of the shares of Common Stock then held by
the Warrantholder pursuant to exercise of such Warrant, upon the occurrence of
a Put Event (as defined in the Warrant). A Put Event is deemed to occur if (i)
DeepTech is acquired by merger, consolidation or other business combination by
any person or group of persons (other than Thomas P. Tatham) or (ii) the
acquisition, directly or indirectly, by any person or group of persons (other
than Thomas P. Tatham) of 50% or more of the capital stock of DeepTech or 50%
or more of the assets of DeepTech, in either case, by way of negotiated
purchase or otherwise. The purchase price upon exercise of a put option is
calculated by a formula using the highest price per share paid to shareholders
of the Company in such Put Event, or the cash value of any non-cash
consideration paid to the Shareholders, as determined by mutual agreement of
the Warrantholder and the Company or in the alternative, by determination of an
investment banking firm selected by the Warrantholder and the Company.
The Warrants also contain certain demand and piggyback registration
rights; indemnification agreements related to such registrations; certain
affirmative covenants of DeepTech and notice requirements of certain corporate
actions.
The table below includes certain information concerning the Warrants.
<TABLE>
<CAPTION>
WARRANT HOLDER NUMBER EXERCISE PRICE EXPIRATION DATE
-------------- ------ -------------- ---------------
<S> <C> <C> <C>
Citicorp USA, Inc. 618,750 $4.50 7/15/98
Citicorp USA, Inc. 328,125(1) $4.00 12/15/98
John E. Drury 26,666 $4.50 7/15/98
Alfred F. King III 2,500(1) $4.00 12/15/99
David N. King 2,500(1) $4.00 12/15/99
Lehman Brothers Holdings, Inc. 666,667 $4.50 7/15/2000
Jansen Noyes, Jr. 937(1) $4.00 12/15/99
Jansen Noyes, Jr. & Alfred King, Jr. TTEE U/W 1,250(1) $4.00 12/15/99
Nancy Noyes King FBO Alfred King III
Jansen Noyes, Jr. & Alfred King, Jr. TTEE U/W 1,250(1) $4.00 12/15/99
Nancy Noyes King FBO David N. King
</TABLE>
10
<PAGE> 14
<TABLE>
<CAPTION>
WARRANT HOLDER NUMBER EXERCISE PRICE EXPIRATION DATE
-------------- ------ -------------- ---------------
<S> <C> <C> <C>
Jansen Noyes, Jr. & Alfred King, Jr. TTEE U/W 1,250(1) $4.00 12/15/99
Nancy Noyes King FBO Susan K. Stickney
Christine M. Sanders 3,750(1) $4.00 12/15/98
Don A. Sanders 117,500 $4.50 7/15/98
Don A. Sanders 45,000(1) $4.00 12/15/98
Katherine V. Sanders 45,000(1) $4.00 12/15/98
Albert Stickney III 1,318(1) $4.00 12/15/99
Susan K. Stickney 4,372(1) $4.00 12/15/99
Roger B. Vincent, Sr. 25,111(1) $4.00 12/15/98
</TABLE>
(1) These Warrants each contain certain put options discussed above.
11
<PAGE> 15
SELLING STOCKHOLDERS
The following tables set forth the name of each Selling Stockholder, the
number of Securities owned by each Selling Stockholder immediately prior to the
Offering, the number of Securities registered hereby that each Selling
Stockholder may offer in the Offering, the number of Securities to be owned by
each Selling Stockholder upon completion of the Offering as contemplated hereby
and the percentage of total Securities to be owned by each Selling Stockholder
upon completion of the Offering as contemplated hereby. However, because the
Selling Stockholders may offer all or a portion of the Securities at any time
and from time to time after the date hereof, the exact number of Securities that
each Selling Stockholder may retain upon completion of the Offering cannot be
determined at this time. To the knowledge of DeepTech, none of the Selling
Stockholders has had any material relationship with the Company except as set
forth in the footnotes to the following table and as more fully described
elsewhere in this Prospectus (including the information incorporated by
reference in this Prospectus).
<TABLE>
<CAPTION>
NUMBER OF
SHARES TO BENEFICIAL
BE OFFERED OWNERSHIP
BENEFICIAL FOR THE AFTER THE OFFERING
OWNERSHIP OF SELLING ---------------------------
SHARES PRIOR STOCKHOLDER'S NUMBER PERCENT
SELLING STOCKHOLDER TO THE OFFERING ACCOUNT OF SHARES OF CLASS
------------------- --------------- ------------- --------- --------
<S> <C> <C> <C> <C>
Thomas P. Tatham 9,925,469(1)(2) 3,341,666 6,583,803 30.1%
Alpha Marine Services, Inc. 100,000(3) 100,000 0 *
Citicorp USA, Inc. 946,875(4) 946,875 0 *
Citicorp North America, Inc. 315,625 315,625 0 *
DLJ Capital Corporation 1,391,675(5) 1,019,823 0 *
John E. Drury 35,556(6) 35,556 0 *
Bradbury Dyer, III 1,223 1,223 0 *
The Equitable Life Assurance Society 0 *
of the United States 325,744(7) 55,641
F-W Oil Interests, Inc. 200,000 200,000 0 *
Alfred F. King III 4,000(8) 4,000 0 *
David N. King 4,000(8) 4,000 0 *
Scott M. Kleberg 2,459 2,459 0 *
Tom Landry, Jr. 9,766 9,766 0 *
Lehman Brothers Holdings, Inc. 1,333,334(9)(10) 1,333,334 0 *
LFC Energy Equipment, Ltd. 5,469 5,469 0 *
Metropolitan Life Insurance Company 0 *
Separate Account EN 200,000(11) 200,000
M. H. Whittier Corp. 71,094 71,094 0 *
Mike Mullen 8,240 8,240 0 *
Jansen Noyes, Jr. 1,500(12) 1,500 0 *
Jansen Noyes, Jr. & Alfred King, Jr.
TTEE U/W Nancy Noyes King
FBO Alfred King III 2,000(13) 2,000 0 *
Jansen Noyes, Jr. & Alfred King, Jr.
TTEE U/W Nancy Noyes King
FBO David N. King 2,000(14) 2,000 0 *
Jansen Noyes, Jr. & Alfred King, Jr.
TTEE U/W Nancy Noyes King
FBO Susan K. Stickney 2,000(15) 2,000 0 *
Roy T. Oliver 7,364 7,364 0 *
Marshall B. Payne, Nominee 3,682 3,682 0 *
Christine M. Sanders 5,000(16) 5,000 0 *
Don A. Sanders 883,167(17) 216,667 666,500 3.6%
Katherine U. Sanders 60,000(18) 60,000 0 *
Grant E. Sims 745,000(19) 445,000 300,000 1.6%
Albert Stickney III 2,109(20) 2,109 0 *
Susan K. Stickney 7,000(21) 7,000 0 *
Glenn H. Tatham 347,730(22) 50,000 297,730 1.6%
Roger B. Vincent, Sr. 33,482(23)(24) 33,482 0 *
Steven A. Webster 13,293(25) 13,293 0 *
</TABLE>
12
<PAGE> 16
<TABLE>
<CAPTION>
NUMBER OF
SHARES TO BENEFICIAL
BE OFFERED OWNERSHIP
BENEFICIAL FOR THE AFTER THE OFFERING
OWNERSHIP OF SELLING ---------------------------
SHARES PRIOR STOCKHOLDER'S NUMBER PERCENT
SELLING STOCKHOLDER TO THE OFFERING ACCOUNT OF SHARES OF CLASS
------------------- --------------- ------------- --------- --------
<S> <C> <C> <C> <C>
H. G. Wellington & Co. Inc.
Retirement Account FBO Charles
E. Murphy, Jr. 6,741(26) 6,741 0 *
Westgate International, L.P. 672,973(27) 672,973 0 *
Wharton Associates 5,859 5,859 0 *
Whitman & Ransom Retirement Plan
FBO William R. Ziegler 10,000(28) 10,000 0 *
William R. Ziegler 4,922 4,922 0 *
---------- --------- --------- ----
Total 17,696,351 9,206,363 7,848,033 35.1%
========== ========= ========= ====
</TABLE>
*less than 1%
<TABLE>
<CAPTION>
NUMBER OF BENEFICIAL
WARRANTS TO BE OWNERSHIP
BENEFICIAL OFFERED FOR THE AFTER THE OFFERING
OWNERSHIP OF SELLING -------------------------
WARRANTS PRIOR STOCKHOLDER'S NUMBER PERCENT
SELLING STOCKHOLDER TO THE OFFERING ACCOUNT OF WARRANTS OF CLASS
------------------- --------------- --------------- ----------- --------
<S> <C> <C> <C> <C>
Citicorp USA, Inc. 946,875 946,875 0 *
John E. Drury 26,666 26,666 0 *
Alfred F. King III 2,500 2,500 0 *
David N. King 2,500 2,500 0 *
Lehman Brothers Holdings, Inc. 666,667(10) 666,667 0 *
Jansen Noyes, Jr. 937 937
Jansen Noyes, Jr. & Alfred King, Jr.
TTEE U/W Nancy Noyes King FBO
Alfred King III 1,250 1,250 0 *
Jansen Noyes, Jr. & Alfred King, Jr.
TTEE U/W Nancy Noyes King FBO
David N. King 1,250 1,250 0 *
Jansen Noyes, Jr. & Alfred King, Jr.
TTEE U/W Nancy Noyes King FBO
Susan K. Stickney 1,250 1,250 0 *
Christine M. Sanders 3,750 3,750 0 *
Don A. Sanders 162,500 162,500 0
Katherine U. Sanders 45,000 45,000 0 *
Albert Stickney III 1,318 1,318 0 *
Susan K. Stickney 4,372 4,372 0 *
Roger B. Vincent, Sr. 25,111(24) 25,111 0 *
--------- --------- --- ---
Total 1,891,946 1,891,946 0 0%
========= ========= === ===
</TABLE>
*less than 1%
(1) Thomas P. Tatham is the Chairman and Chief Executive Officer of DeepTech,
and Chairman of Tatham Offshore and Leviathan Gas Pipeline Company.
(2) Includes 3,291,666 shares issuable upon the exercise of outstanding
warrants.
(3) Laney Chouest, a director of DeepTech, owns 30% of Alpha Marine Services,
Inc.
(4) Consists of 946,875 shares issuable upon the exercise of outstanding
warrants.
(5) Includes 1,019,823 shares issuable upon the exercise of outstanding
warrants.
(6) Includes 26,666 shares issuable upon the exercise of outstanding warrants.
(7) Includes 55,641 shares issuable upon the exercise of outstanding warrants.
(8) Includes 2,500 shares issuable upon the exercise of outstanding warrants.
(9) Includes 666,667 shares issuable upon the exercise of outstanding warrants.
13
<PAGE> 17
(10) A subsidiary of Lehman Brothers Holdings, Inc. (the "Lehman Lender") has
extended a loan to a wholly-owned indirect subsidiary of the Company,
RIGCO, pursuant to a syndicated Credit Agreement dated as of September 30,
1996 among RIGCO, as borrower, the other financial institutions (including
the Lehman Lender) from time to time parties thereto (the "RIGCO Lenders")
as amended (the "RIGCO Credit Agreement"). As additional consideration for
making the loan to RIGCO, another subsidiary of Lehman Brothers Holdings,
Inc. received warrants to purchase common stock of RIGCO.
(11) Consists of 200,000 shares issuable upon the exercise of outstanding
warrants.
(12) Includes 937 shares issuable upon the exercise of outstanding warrants.
(13) Includes 1,250 shares issuable upon the exercise of outstanding warrants.
(14) Includes 1,250 shares issuable upon the exercise of outstanding warrants.
(15) Includes 1,250 shares issuable upon the exercise of outstanding warrants.
(16) Includes 3,750 shares issuable upon the exercise of outstanding warrants.
(17) Includes 162,500 shares issuable upon the exercise of outstanding
warrants.
(18) Includes 45,000 shares issuable upon the exercise of outstanding warrants.
(19) Includes 300,000 shares issuable upon the exercise of outstanding stock
options.
(20) Includes 1,318 shares issuable upon the exercise of outstanding warrants.
(21) Includes 4,372 shares issuable upon the exercise of outstanding warrants.
(22) Glenn H. Tatham is the son of Thomas P. Tatham.
(23) Includes 25,111 shares issuable upon the exercise of outstanding warrants.
(24) Roger B. Vincent, Sr. is a Director of Tatham Offshore, and is a director
of an affiliate of Springwell Corporation, which served as a financial
advisor to the Company from April 1991 through November 1993. The Shares
and Warrants consist of securities held by record by Delaware Charter and
Guarantee Trust Company TTEE FBO Roger B. Vincent, Sr. IRA R/O.
(25) Includes 8,371 shares issuable upon the exercise of outstanding warrants.
(26) Consists of 6,741 shares issuable upon the exercise of outstanding
warrants.
(27) Westgate International, L.P. is also the beneficial owner of 850,000
shares of Series A Preferred Stock of Tatham Offshore and 25,000 shares of
Tatham Offshore Common Stock. A director of Tatham Offshore is employed
by a company which provides services to Westgate International, L.P.
(28) Consists of 10,000 shares issuable upon the exercise of outstanding
warrants.
14
<PAGE> 18
PLAN OF DISTRIBUTION
The Securities may be sold or distributed from time to time by or for the
account of the Selling Stockholders, or their pledgees on behalf of the Selling
Stockholders, in transactions (which may involve crosses and block
transactions) on Nasdaq or any national securities exchange or U.S.
inter-dealer quotation system of a registered national securities association
on which the Securities are then listed, in the over-the-counter market, in one
or more privately negotiated transactions (including pledges and gifts),
through the writing of options on the Securities, in a combination of such
methods of distribution or by any other legally available means. Such methods
of sale may be conducted by the Selling Stockholders at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices or at prices otherwise negotiated. The Selling Stockholders may effect
such transactions directly, or indirectly through broker-dealers or agents
acting on their behalf and, in connection with such sales, such broker-dealers
or agents may receive compensation in the form of commissions or discounts from
the Selling Stockholders and/or the purchasers of the Securities for whom they
may act as agent or to whom they sell Securities as principal or both (which
commissions or discounts might be in excess of customary commissions). To the
extent required, the names of the agents or broker- dealers, and applicable
commissions or discounts and any other required information with respect to any
particular offer of Securities by the Selling Stockholders, will be set forth
in a Prospectus Supplement.
The Selling Stockholders and any such underwriters, brokers, dealers or
agents that participate in such distribution may be deemed to be "underwriters"
within the meaning of the Securities Act, and any discounts, commissions or
concessions received by any such underwriters, brokers, dealers or agents might
be deemed to be underwriting discounts and commissions under the Securities
Act. Neither DeepTech nor the Selling Stockholders can presently estimate the
amount of such compensation. DeepTech knows of no existing arrangements
between any Selling Stockholder and any other Selling Stockholder, underwriter,
broker, dealer or other agent relating to the sale or distribution of the
Securities.
Under applicable rules and regulations under the Exchange Act, any person
engaged in a distribution of any of the Securities may not simultaneously
engage in market activities with respect to the Common Stock for a period of
nine business days prior to the commencement of such distribution. In addition
and without limiting the foregoing, the Selling Stockholders will be subject to
applicable provisions of the Exchange Act; including without limitation Rules
10b-5, 10b-6 and 10b-7, which provisions may limit the timing of purchases and
sales of any of the Securities by the Selling Stockholders. All of the
foregoing may affect the marketability of the Common Stock.
DeepTech will not receive any of the proceeds from the sale of the
Securities offered hereby, but will bear all expenses incident to the
registration of the Securities under federal and state securities laws and the
sale of the Securities hereunder other than expenses incident to the delivery
of the Securities to be sold by the Selling Stockholders, including any
transfer taxes payable on any Securities, and any commissions and discounts
payable to underwriters, agents or dealers.
In order to comply with certain states' securities laws, if applicable,
the Securities will be sold in such jurisdictions only through registered or
licensed brokers or dealers. In addition, in certain states the Common Stock
may not be sold unless the Common Stock has been registered or qualified for
sale in such state or an exemption from registration or qualification is
available and is complied with.
LEGAL MATTERS
The validity of the Securities offered hereby will be passed upon for the
Company by Akin, Gump, Strauss, Hauer & Feld, L.L.P. Akin, Gump, Strauss,
Hauer & Feld, L.L.P. owns 235,357 shares of common stock of the Company.
EXPERTS
The audited consolidated financial statements of DeepTech and its
Subsidiaries incorporated by reference in this Prospectus have been audited by
Price Waterhouse LLP, independent accountants, as indicated in their report with
respect thereto and are included in reliance upon the authority of said firm as
experts in auditing and accounting.
The reports of Ryder Scott Company Petroleum Engineers, independent
petroleum engineers, and Netherland, Sewell & Associates, Inc., independent
petroleum engineers, and the respective information with
15
<PAGE> 19
respect to estimated reserves contained therein incorporated by reference in
this Prospectus and the Registration Statement have been so included in
reliance upon the authority of said firms as experts with respect to the
matters contained therein.
UNCERTAINTY OF FORWARD LOOKING STATEMENTS
Certain statements and information in this Prospectus (including documents
incorporated herein by reference, see "Incorporation of Certain Documents by
Reference") constitute forward-looking statements within the meaning of the
Federal Private Securities Litigation Reform Act of 1995. Such forward-looking
statements are typically punctuated by words or phrases such as "anticipate,"
"estimate," "projects," "management believes," "DeepTech believes" and words or
phrases of similar import. Such statements are subject to certain risks,
uncertainties or assumptions. Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove incorrect,
actual results may vary materially from those anticipated, estimated or
projected. Among the key factors that may have a direct bearing on DeepTech's
results and financial condition are: (i) competitive practices in the oil and
gas industry in which DeepTech competes, (ii) fluctuations in oil and gas
prices, (iii) environmental liabilities to which the Company may become subject
in the future which are not covered by an indemnity or insurance, (iv) the
impact of current and future laws and governmental regulations (particularly
environmental regulations) affecting the oil and gas industry in general and
the Company's operations in particular and (v) the ability of DeepTech and its
subsidiaries to secure additional capital to fund its operations.
16
<PAGE> 20
No dealer, salesperson or other person has been authorized to give any
information or to make any representations other than those contained in or
incorporated by reference in this Prospectus in connection with the offer made
by this Prospectus and, if given or made, such information or representations
must not be relied upon as having been authorized by the Company or the Selling
Stockholders. Neither the delivery of this Prospectus nor any sale made
hereunder shall under any circumstances create an implication that there has
been no change in the affairs of the Company since the date hereof. This
Prospectus does not constitute an offer to sell or the solicitation of an offer
to buy any security other than the shares of Common Stock and Common Stock
Purchase Warrants offered hereby, nor does it constitute an offer to sell or a
solicitation of an offer to buy any shares of Common Stock or Common Stock
Purchase Warrants by anyone in any jurisdiction in which such offer or
solicitation is not authorized, or in which the person making such offer or
solicitation is not qualified to do so, or to any person to whom it is unlawful
to make such offer or solicitation.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information . . . . . . . . . . . .
Incorporation of Certain Documents
by Reference . . . . . . . . . . . . . . .
Risk Factors . . . . . . . . . . . . . . . .
The Company . . . . . . . . . . . . . . . . .
Recent Developments . . . . . . . . . . . . .
Use of Proceeds . . . . . . . . . . . . . . .
Description of Warrants . . . . . . . . . . .
Selling Stockholders . . . . . . . . . . . .
Plan of Distribution . . . . . . . . . . . .
Legal Matters . . . . . . . . . . . . . . . .
Experts . . . . . . . . . . . . . . . . . . .
Uncertainty of Forward
Looking Statements . . . . . . . . . . . .
</TABLE>
9,206,363 SHARES OF COMMON STOCK
1,891,946 COMMON STOCK PURCHASE WARRANTS
DEEPTECH
INTERNATIONAL INC.
PROSPECTUS
APRIL [___], 1997
<PAGE> 21
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated expenses, other than
underwriting discounts and commissions, payable by the Registrant in connection
with the issuance and distribution of the securities being registered hereby.
<TABLE>
<S> <C>
Securities and Exchange Commission Filing Fee . . . . . . $ 18,134
Printing Costs . . . . . . . . . . . . . . . . . . . . . . $ *
Legal Fees and Expenses . . . . . . . . . . . . . . . . . $ *
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . $ *
Total . . . . . . . . . . . . . . . . . . . . . . . . $ *
</TABLE>
- ----------------
* To be filed by amendment.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Certificate of Incorporation of DeepTech entitles the Board of
Directors to provide for indemnification of directors and officers to the
fullest extent provided by law, except for liability (i) for any breach of the
directors' duty of loyalty to DeepTech or its stockholders, (ii) for acts of
omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) for unlawful payments of dividends, or for
unlawful stock purchases or redemptions, or (iv) for any transaction from which
the director derived an improper personal benefit.
Article VII of the Bylaws of DeepTech provide that to the fullest extent
and in the manner provided by the laws of the State of Delaware and
specifically as is permitted under Section 145 of the General Corporation Law
of the State of Delaware, DeepTech shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative, other than an action by or in the right of DeepTech, by
reason of the fact that such person is or was a director, officer, employee or
agent of DeepTech, or is or was serving at the request of DeepTech as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses, including attorneys' fees,
judgments, fines and amounts paid in settlement actually and reasonably
incurred in connection with such action, suit, or proceeding if he acted in
good faith and in a manner he reasonably believed to be in and not opposed to
the best interests of DeepTech, and with respect to any criminal action or
proceeding, he had no reasonable cause to believe his conduct was unlawful.
Determination of any action, suit, or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did not act in a
good faith and in a manner which he reasonably believed to be in and not
opposed to the best interests of DeepTech, and with respect to any criminal
action or proceeding, had reasonable cause to believe that his conduct was
lawful.
The Bylaws provide that DeepTech shall indemnify any person who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of DeepTech to procure a judgment
in its favor by reason of the fact that he is or was a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against expenses, including attorneys' fees, actually and
reasonably incurred by him in connection with the defense or settlement of such
action or suit if he acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of DeepTech, except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable for negligence or
misconduct in the performance of his duty to DeepTech unless the court orders
otherwise.
II-1
<PAGE> 22
ITEM 16. EXHIBITS
The following exhibits are filed as part of this Registration Statement:
Exhibit
Number Exhibit Description
- ------- -------------------
4.1 Form of Stock Certificate of Common Stock of DeepTech (filed as
Exhibit 4.1 to DeepTech's Registration Statement on Form S-1,
File No. 33-76999, and incorporated herein by reference).
4.2 Common Stock Purchase Warrant dated December 31, 1996 issued by
DeepTech to each of the Holders listed on Schedule I thereto.
4.3 Common Stock Purchase Warrant dated January 21, 1997 between
DeepTech and Citicorp USA Inc.
4.4 DeepTech Warrant Agreement dated February 16, 1996 between
DeepTech and Donald A. Sanders.
4.5 DeepTech Warrant Agreement dated February 16, 1996 between DeepTech
and John Drury.
4.6 Amendment No. 1 to Warrant Agreement dated December 31, 1996
between DeepTech and each Lender listed on Schedule I thereto.
4.7 Warrant Agreement dated February 16, 1996 between DeepTech and
each of the Lenders listed on Schedule I thereto.
4.8 Amendment No. 1 to Warrant Agreement dated December 31, 1996
between DeepTech and Lehman Commercial Paper Inc.
4.9 Amendment No. 1 to Warrant Agreement dated December 31, 1996 among
DeepTech, Citicorp USA, Inc., Donald A. Sanders and Thomas P.
Tatham.
4.10 Warrant Certificate issued by DeepTech on the date and to the
holders listed on Schedule I thereto.
5.1* Opinion of Akin, Gump, Strauss, Hauer & Feld, L.L.P.
23.1 Consent of Price Waterhouse LLP
23.2 Consent of Ryder Scott Company Petroleum Engineers, Independent
Petroleum Engineers
23.3 Consent of Netherland, Sewell & Associates, Inc. Independent
Petroleum Engineers.
23.4 Consent of Akin, Gump, Strauss, Hauer & Feld, L.L.P. (included in
its opinion filed as Exhibit 5.1).
24.1 Powers of Attorney (included on the signature pages attached
hereto).
- ------------
* To be filed by amendment.
ITEM 17. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes as follows:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement to include any
material information with respect to the plan of distribution not previously
disclosed in the Registration Statement or any material change to such
information in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered herein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to section 13(a) or section 15(d) of the
Exchange Act that is incorporated by reference in the registration statement
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(c) Insofar, as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act, and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
II-2
<PAGE> 23
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Houston, Texas on April 7, 1997.
DEEPTECH INTERNATIONAL INC.
(Registrant)
By: /s/ THOMAS P. TATHAM
------------------------------------
Thomas P. Tatham
Chairman of the Board and
Chief Executive Officer
Each person whose signature appears below constitutes and appoints Thomas
P. Tatham, Donald V. Weir, Dennis A. Kunetka and Janet E. Sikes, and each of
them (with full power to each of them to act alone), his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign on his behalf individually and in each capacity stated
below any amendment, including post-effective amendments and amendments
thereto, to this Registration Statement and any other registration statement
(and any amendments thereto) filed for the purpose of registering additional
shares of Common Stock pursuant to Rule 462 under the Securities Act, and to
file the same, with all exhibits thereto and other documents in connection
therewith, with the Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or any of them, or their substitutes, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ THOMAS P. TATHAM Chairman and Chief Executive Officer April 7, 1997
- --------------------------------------- (Principal Executive Officer)
Thomas P. Tatham
/s/ DONALD V. WEIR Chief Financial Officer and Director April 7, 1997
- --------------------------------------- (Principal Financial Officer)
Donald V. Weir
/s/ JANET E. SIKES Secretary, Treasurer and Director April 7, 1997
- --------------------------------------- (Principal Accounting Officer)
Janet E. Sikes
/s/ CONRAD P. ALBERT Director April 7, 1997
- ---------------------------------------
Conrad P. Albert
Director April , 1997
- ---------------------------------------
Laney Chouest
Director April , 1997
- ---------------------------------------
Charles M. Darling, IV
Director April , 1997
- ---------------------------------------
Ralph Eads
/s/ ROBERT E. FOX Director April 4, 1997
- ---------------------------------------
Robert E. Fox
</TABLE>
II-3
<PAGE> 24
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ STEVEN L. GIRARD Director April 7, 1997
- ---------------------------------------
Steven L. Gerard
/s/ MICHAEL H. LAM Director April 7, 1997
- ---------------------------------------
Michael H. Lam
/s/ BEN T. HARRIS Director April 7, 1997
- ---------------------------------------
Ben T. Morris
Director April , 1997
- ---------------------------------------
Nancy K. Quinn
/s/ GRANT E. SIMS Director, Senior Vice President April 7, 1997
- ---------------------------------------
Grant E. Sims
</TABLE>
II-4
<PAGE> 25
EXHIBIT INDEX
Exhibit
Number Exhibit Description
- ------- -------------------
4.1 Form of Stock Certificate of Common Stock of DeepTech (filed as
Exhibit 4.1 to DeepTech's Registration Statement on Form S-1,
File No. 33-76999, and incorporated herein by reference).
4.2 Common Stock Purchase Warrant dated December 31, 1996 issued by
DeepTech to each of the Holders listed on Schedule I thereto.
4.3 Common Stock Purchase Warrant dated January 21, 1997 between
DeepTech and Citicorp USA Inc.
4.4 DeepTech Warrant Agreement dated February 16, 1996 between
DeepTech and Donald A. Sanders.
4.5 DeepTech Warrant Agreement dated February 16, 1996 between DeepTech
and John Drury.
4.6 Amendment No. 1 to Warrant Agreement dated December 31, 1996
between DeepTech and each Lender listed on Schedule I thereto.
4.7 Warrant Agreement dated February 16, 1996 between DeepTech and
each of the Lenders listed on Schedule I thereto.
4.8 Amendment No. 1 to Warrant Agreement dated December 31, 1996
between DeepTech and Lehman Commercial Paper Inc.
4.9 Amendment No. 1 to Warrant Agreement dated December 31, 1996 among
DeepTech, Citicorp USA, Inc., Donald A. Sanders and Thomas P.
Tatham.
4.10 Warrant Certificate issued by DeepTech on the date and to the
holders listed on Schedule I thereto.
5.1* Opinion of Akin, Gump, Strauss, Hauer & Feld, L.L.P.
23.1 Consent of Price Waterhouse LLP
23.2 Consent of Ryder Scott Company Petroleum Engineers, Independent
Petroleum Engineers
23.3 Consent of Netherland, Sewell & Associates, Inc. Independent
Petroleum Engineers.
23.4 Consent of Akin, Gump, Strauss, Hauer & Feld, L.L.P. (included in
its opinion filed as Exhibit 5.1).
24.1 Powers of Attorney (included on the signature pages attached
hereto).
- ------------
* To be filed by amendment.
<PAGE> 1
EXHIBIT 4.2
SCHEDULE I
COMMON STOCK PURCHASE WARRANTS
BETWEEN DEEPTECH INTERNATIONAL INC. AND
THE HOLDERS LISTED BELOW
Pursuant to Item 601(a) of Regulation S-K, the Common Stock Purchase
Warrants, dated December 31, 1996, issued by DeepTech International Inc. to
each of the following Holders have been omitted because all of such warrants
are substantially identical in all material respects except as to the items
scheduled below.
<TABLE>
<CAPTION>
# OF EXPIRATION
HOLDER WARRANTS DATE
(a) (b) (c)
------ -------- -----------
<S> <C> <C>
Susan K. Stickney 4,372 12/15/99
Christine M. Sanders 3,750 12/15/99
David N. King 2,500 12/15/99
Albert Stickney III 1,318 12/15/99
Jansen Noyes, Jr. and Alfred King Jr. TTEE U/W Nancy 1,250 12/15/99
Noyes King FBO David N. King
Jansen Noyes, Jr. and Alfred King Jr. TTEE U/W Nancy 1,250 12/15/99
Noyes King FBO Alfred King III
Jansen Noyes, Jr. and Alfred King Jr. TTEE U/W Nancy 1,250 12/15/99
Noyes King FBO Susan K. Stickney
Jansen Noyes Jr. 937 12/15/99
Don A. Sanders 45,000 12/15/98
Katherine U. Sanders 45,000 12/15/98
Delaware Charter and Guarantee Trust Company TTEE FBO 25,111 12/15/98
Robert B. Vincent, Sr. IRA R/O
Alfred F. King III 2,500 12/15/99
</TABLE>
<PAGE> 2
================================================================================
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE
STATE SECURITIES LAWS, AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF
SUCH REGISTRATION OR AN EXEMPTION THEREFROM.
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
DEEPTECH INTERNATIONAL INC.
COMMON STOCK PURCHASE WARRANT
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
This certifies that, for good and valuable consideration, DeepTech
International Inc., a Delaware corporation (the "Company"), grants to
(a)________________ (the "Lender") or registered assigns (the "Warrantholder"),
the right to subscribe for and purchase from the Company (b)_________________
validly issued, fully paid and nonassessable shares (the "Warrant Shares") of
the Company's Common Stock, par value $.01 per share (the "Common Stock"), at
the purchase price per share of $4.00 (the "Exercise Price"), at any time and
from time to time prior to 5:00 p.m., New York City time, on
(c)_________________, all subject to the terms, conditions, limitations and
adjustments herein set forth.
================================================================================
<PAGE> 3
1. Duration and Exercise of Warrant; Limitation on Exercise; Payment of
Taxes.
1.1 Duration and Exercise of Warrant. This Warrant may be
exercised by the Warrantholder by (a) the surrender of this Warrant to the
Company, with a duly executed Exercise Form specifying the number of Warrant
Shares to be purchased, during normal business hours on any Business Day and
(b) the delivery of payment to the Company, for the account of the Company, by
cash or by certified check, of the Exercise Price for the number of Warrant
Shares specified in the Exercise Form in lawful money of the United States of
America. The Company agrees that such Warrant Shares shall be deemed to be
issued to the Warrantholder as the record holder of such Warrant Shares as of
the close of business on the date on which this Warrant shall have been
surrendered and payment made for the Warrant Shares as aforesaid. A stock
certificate or certificates for the Warrant Shares specified in the Exercise
Form shall be delivered to the Warrantholder as promptly as practicable, and in
any event within 10 days, thereafter. The stock certificate or certificates so
delivered shall be in denominations of 100 shares each or such lesser or
greater denominations as may be specified by the Warrantholder in the Exercise
Form. If this Warrant shall have been exercised only in part, the Company
shall, at the time of delivery of the stock certificate or certificates,
deliver to the Warrantholder a new Warrant evidencing the rights to purchase
the remaining Warrant Shares, which new Warrant shall in all other respects be
identical with this Warrant. No adjustments shall be made on Warrant Shares
issuable on the exercise of this Warrant for any cash dividends paid or payable
to holders of record of Common Stock prior to the date as of which the
Warrantholder shall be deemed to be the record holder of such Warrant Shares.
1.2 Payment of Taxes. The issuance of certificates for Warrant
Shares shall be made without charge to the Warrantholder for any stock transfer
or other issuance tax in respect thereto; provided, however, that the
Warrantholder shall be required to pay any and all taxes which may be payable
in respect of any transfer involved in the issuance and delivery of any
certificate in a name other than that of the then Warrantholder as reflected
upon the books of the Company.
1.3 Divisibility of Warrant. This Warrant may be divided into
warrants of one share or multiples thereof, upon surrender at the principal
office of the Company, without charge to any Warrantholder. Upon such
division, the Warrants may be transferred of record as the then Warrantholder
may specify without charge to such Warrantholder (other than any applicable
transfer taxes).
1.4 Deferred Amount and Limitation on Exercise.
(a) Subject to section 1.4(b), if this Warrant has not
theretofore been exercised in whole or in part, the Warrantholder may, at its
option, on 30 days' prior written notice delivered to the Company, elect to
receive from the Company on December 15, 1995 an amount (the "Deferred Amount")
equal to the amount that would accrue on the outstanding principal amount of
the portion of the Loan made by the Lender on a cumulative compounded basis at
the rate of 10% per annum from the date such portion of the Loan was made until
the earlier of (A) the date such portion of the Loan has been paid in full and
(B) December 15, 1995. Should the Warrantholder so elect to receive the
Deferred Amount and the Deferred Amount is paid to the Warrantholder in full on
December 15, 1995, this Warrant shall not thereafter be exercisable and the
Warrantholder shall promptly surrender this Warrant to the Company for
cancellation.
(b) If a Default occurs at any time, this Warrant shall
continue to remain in effect and shall be exercisable in accordance with the
terms hereof and the Warrantholder shall receive the Deferred Amount on the
date the portion of the Loan made by the Lender is paid in full.
(c) The Deferred Amount shall be calculated by the
Warrantholder and, absent manifest error, such calculation shall be binding on
the Company.
-2-
<PAGE> 4
2. Restrictions on Transfer: Restrictive Legends. Except as otherwise
permitted by this section 2, each War-rant shall (and each Warrant issued upon
direct or indirect transfer or in substitution for any Warrant pursuant to
section 4 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, OR ANY APPLICABLE
STATE SECURITIES LAWS, AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF
SUCH REGISTRATION OR AN EXEMPTION THEREFROM."
Except as otherwise permitted by this section 2, each stock
certificate for Warrant Shares issued upon the exercise of any Warrant and each
stock certificate issued upon the direct or indirect transfer of any such
Warrant Shares 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, OR ANY APPLICABLE
STATE SECURITIES LAWS, AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF
SUCH REGISTRATION OR AN EXEMPTION THEREFROM."
Notwithstanding the foregoing, the Warrantholder may require the
Company to issue a Warrant or a stock certificate for Warrant Shares, in each
case without a legend, if such Warrant or such Warrant Shares, as the case may
be, have been registered for resale under the Securities Act.
3. Reservation and Registration of Shares, Etc.
The Company covenants and agrees that all Warrant Shares which are
issued upon the exercise of this Warrant will, upon issuance, be validly
issued, fully paid and nonassessable and free from all taxes, liens, security
interests, charges, and other encumbrances with respect to the issuance
thereof, other than taxes in respect of any transfer occurring
contemporaneously with such issuance. The Company further covenants and agrees
that, during the period within which this Warrant may be exercised, the Company
will at all times have authorized and reserved, and keep available free from
preemptive rights, a sufficient number of shares of Common Stock to provide for
the exercise of the rights represented by this Warrant. The Company further
covenants and agrees that it will, from time to time, take all such action as
may be required to assure that the par value per share of the Warrant Shares is
at all times equal to or less than the then effective Exercise Price.
4. Exchange, Loss or Destruction of Warrant.
Subject to the terms and conditions hereof, upon surrender of-this
Warrant to the Company with a duly executed Assignment Form and funds
sufficient to pay any transfer tax, the Company shall, without charge, execute
and deliver a new Warrant or Warrants of like tenor in the name of the assignee
named in such Assignment Form and this Warrant shall promptly be canceled.
Upon receipt by the Company of evidence reasonably satisfactory to it of the
loss, theft, destruction or mutilation of this Warrant and, in the case of
loss, theft or destruction, of such bond or indemnification as the Company may
reasonably require, and, in the case of such mutilation, upon surrender and
cancellation of this Warrant, the Company will execute and deliver a new
Warrant of like tenor. The term "Warrant" as used herein shall be deemed to
include any warrants issued in substitution or exchange for this Warrant.
5. Ownership of Warrant.
The Company may deem and treat the person in whose name this Warrant
is registered as the holder and owner hereof (notwithstanding any notations of
ownership or writing hereon made by anyone other than the Company)
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for all purposes and shall not be affected by any notice to the contrary, until
presentation of this Warrant for registration of transfer as provided in
section 4.
6. Certain Adjustments.
6.1 The number of Warrant Shares purchasable upon the exercise of
this Warrant and the Exercise Price shall be subject to adjustment as follows:
(a) Stock Dividends. If at any time after the date of the
issuance of this Warrant (i) the Company shall fix a record date for the
issuance of any stock dividend payable in shares of Common Stock or (ii) the
number of shares of Common Stock shall have been increased by a subdivision or
split-up of shares of Common Stock, then, on the record date fixed for the
determination of holders of Common Stock entitled to receive such dividend or
immediately after the effective date of subdivision or split-up, as the case
may be, the number of shares to be delivered upon exercise of this Warrant will
be increased so that the Warrant-holder will be entitled to receive the number
of Shares of Common Stock that such Warrantholder would have owned immediately
following such action had this Warrant been exercised immediately prior
thereto, and the Exercise Price will be adjusted as provided below in paragraph
(g)(i).
(b) Combination of Stock. If the number of shares of Common
Stock outstanding at any time after the date of the issuance of this Warrant
shall have been decreased by a combination of the outstanding shares of Common
Stock, then, immediately after the effective date of such combination, the
number of shares of Common Stock to be delivered upon exercise of this Warrant
will be decreased so that the Warrantholder thereafter will be entitled to
receive the number of shares of Common Stock that such Warrantholder would have
owned immediately following such action had this Warrant been exercised
immediately prior thereto, and the Exercise Price will be adjusted as provided
below in paragraph (g)(i).
(c) Reorganization. If any capital reorganization of the
Company, or any reclassification of the Common Stock, or any consolidation of
the Company with or merger of the Company with or into any other person or any
sale, lease or other transfer of all or substantially all of the assets of the
Company to any other person, shall be effected in such a way that the holders
of Common Stock shall be entitled to receive stock, other securities or assets
(whether such stock, other securities or assets are issued or distributed by
the Company or another person) with respect to or in exchange for Common Stock,
then, upon exercise of this Warrant the Warrantholder shall have the right to
receive the kind and amount of stock, other securities or assets receivable
upon such reorganization, reclassification, consolidation, merger or sale,
lease or other transfer that such Warrantholder would have been entitled to
receive upon exercise of this Warrant had this Warrant been exercised
immediately before such reorganization, reclassification, consolidation, merger
or sale, lease or other transfer, subject to adjustments that shall be as
nearly equivalent as may be practicable to the adjustments provided for in this
section 6.
(d) Stock and Rights Offering. (i) If at any time after the
date of issuance of this Warrant, the Company shall issue to all holders of its
Common Stock or sell or fix a record date for the issuance to all holders of
its Common Stock of (A) Common Stock or (B) rights, options or warrants
entitling the holders thereof to subscribe for or purchase Common Stock (or
securities convertible or exchangeable into or exercisable for Common Stock),
in any such case, at a price per share (or having a conversion, exchange or
exercise price per share) that is less than the Exercise Price then,
immediately after the date of such issuance or sale, the number of shares of
Common Stock to be delivered upon exercise of this Warrant shall be increased
so that the Warrantholder thereafter will be entitled to receive the number of
shares of Common Stock determined by multiplying the number of shares of Common
Stock such Warrantholder would have been entitled to receive immediately before
the date of such issuance or sale by a fraction, the denominator of which will
be the number of shares of Common Stock outstanding on such date plus the
number of shares of Common Stock that the
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<PAGE> 6
aggregate offering price of the total number of shares so offered for
subscription or purchase (or the aggregate initial conversion price, exchange
price or exercise price of the convertible securities or exchangeable
securities or rights, options or warrants, as the case may be, so offered)
would purchase at the Exercise Price, and the numerator of which will be the
number of shares of Common Stock outstanding on such date plus the number of
additional shares of Common Stock offered for subscription or purchase (or into
which the convertible or exchangeable securities or rights, options or warrants
so offered are initially convertible or exchangeable or exercisable, as the
case may be), and the Exercise Price shall be adjusted as provided below in
paragraph (g)(i).
(ii) If the Company shall, at any time after the
date of issuance of this Warrant distribute to all holders of Common
Stock any shares of capital stock of the Company (other than Common
Stock) or evidences of its indebtedness or assets (excluding cash
dividends or distributions paid from retained earnings of the Company)
or rights or warrants to subscribe for or purchase any of its
securities (excluding those referred to in paragraph (d)(i) above)
(any of the foregoing being hereinafter in this paragraph (d)(ii)
called the "Securities"), then in each such case, unless the Company
elects to reserve shares or other units of such Securities for
distribution to the Warrantholder upon exercise of this Warrant so
that, in addition to the shares of the Common Stock to which such
Warrantholder is entitled, such Warrantholder will receive upon such
exercise the amount and kind of such Securities which such
Warrant-holder would have received if the Warrantholder had,
immediately prior to the record date for the distribution of the
Securities, exercised this Warrant, then the number of shares of
Common Stock to be delivered to such Warrantholder upon exercise of
this Warrant shall be increased so that the Warrantholder thereafter
shall be entitled to receive the number of shares of Common Stock
determined by multiplying the number of shares the Warrantholder would
have been entitled to receive immediately before such record date, had
the Warrant-holder exercised this Warrant immediately prior thereto,
by a fraction, the denominator of which shall be the Closing Price (as
hereinafter defined) per share of Common Stock on such record date
minus the then fair market value (as reasonably determined by the
Board of Directors of the Company), of the portion of the capital
stock or assets or evidences of indebtedness so distributed or of such
rights or warrants applicable to one share of Common Stock and the
numerator of which shall be the Closing Price of the Common stock, and
the Exercise Price shall be adjusted as provided below in paragraph
(g)(i). The term "Closing Price" shall mean the closing price per
share of the Common Stock on the principal national securities
exchange on which the Common Stock is listed or admitted to trading
or, if not listed or traded on any such exchange, on the National
Market System of the National Association of Securities Dealers
Automated Quotations System ("NASDAQ"), or if not listed or traded on
any such exchange or system, the average of the bid and asked price
per share on NASDAQ or, if there are no such quotations for the Common
Stock, the fair market value per share of the Common Stock as
reasonably determined by the Board of Directors of the Company.
(iii) In case the Company shall, directly or
indirectly, issue or sell any Additional Securities at a price per
share (or having a conversion, exchange or exercise price per share)
lower than the Exercise Price then, immediately after the date of such
issuance or sale, the number of shares of Common Stock to be delivered
upon exercise of this Warrant shall be increased so that the
Warrantholder thereafter will be entitled to receive the number of
shares of Common Stock determined by multiplying the number of shares
of Common Stock the Warrantholder would have been entitled to receive
immediately before the date of such issuance or sale by a fraction,
the denominator of which will be the number of shares of Common Stock
outstanding on such date plus the number of shares of Common Stock
that the aggregate offering price of the total number of shares so
offered for subscription or purchase (or the aggregate initial
conversion price, exchange price or exercise price of the convertible
securities or exchangeable securities or rights, options or warrants,
as the case may be, so offered) would purchase at the Exercise Price,
and the numerator of which will be the number of shares of Common
Stock outstanding on such date plus the number of Additional
Securities offered for
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subscription or purchase (or into which the convertible or
exchangeable securities or rights, options or warrants so offered are
initially convertible, exchangeable or exercisable, as the case may
be), and the Exercise Price shall be appropriately adjusted as
provided below in paragraph (g)(i).
(e) Fractional Shares. No fractional shares of Common Stock
or scrip shall be issued to the Warrantholder in connection with the exercise
of this Warrant. Instead of any fractional shares of Common Stock that would
otherwise be issuable to the Warrant-holder, the Company will pay to the
Warrantholder a cash adjustment in respect of such fractional interest in an
amount equal to that fractional interest of the then current Closing Price per
share of Common Stock.
(f) Carryover. Notwithstanding any other provision of this
section 6, no adjustment shall be made to the number of shares of Common Stock
to be delivered to the Warrantholder (or to the Exercise Price) if such
adjustment represents less than 1% of the number of shares to be so delivered,
but any lesser adjustment shall be carried forward and shall be made at the
time and together with the next subsequent adjustment which together with any
adjustments so carried forward shall amount to 1% or more of the number of
shares to be so delivered.
(g) Exercise Price Adjustment.
(i) Whenever the number of Warrant Shares
purchasable upon the exercise of this Warrant is adjusted, as herein
provided, the Exercise Price payable upon the exercise of this Warrant
shall be adjusted by multiplying such Exercise Price immediately prior
to such adjustment by a fraction, of which the numerator shall be the
number of Warrant Shares purchasable upon the exercise of this Warrant
immediately prior to such adjustment, and of which the denominator
shall be the number of Warrant Shares purchasable immediately
thereafter.
(ii) The Exercise Price shall be reduced by the per
share amount of all cash dividends paid to holders of Common Stock
prior to the exercise of this Warrant. Such per share amount shall be
calculated by dividing all such cash dividends paid by the number of
shares of Common Stock issued, outstanding, entitled to, and receiving
such cash dividends.
(h) Superseding Adjustment. If, at any time after any adjustment of
the number of shares of Common Stock to be delivered upon exercise of this
Warrant and any corresponding adjustment to the Exercise Price shall have been
made pursuant to this section 6.1 as the result of any issuance of rights,
options or warrants, and such rights, options or warrants shall thereafter
expire and all or a portion of such rights, options or warrants shall have not
been exercised, then such previous adjustments shall be rescinded and annulled
and the number of shares of Common Stock to be delivered upon exercise of this
Warrant and the Exercise Price shall be recomputed to give effect thereto.
6.2 Other Dilutive-Events. In case any event shall occur as to
which the provisions of section 6.1 are not strictly applicable but the failure
to make any adjustment would not 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, the Company shall, at its expense, appoint a
firm of independent public accountants of recognized national standing (who
shall be appointed at the Company's expense and who may be the independent
public accountants regularly employed by the Company), to issue a report which
shall determine the adjustment, if any, on a basis consistent with the
essential intent and principles established in section 6.1, necessary to
preserve, without dilution, the purchase rights represented by this Warrant.
Upon receipt of such report, the Company will promptly mail a copy thereof to
the Warrant- holder and shall make the adjustments described therein.
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<PAGE> 8
6.3 No Adjustment for Employee Stock Option Plan or Permitted
Issuances. Notwithstanding anything to the contrary contained elsewhere in
this section 6, no adjustment in the number of Warrant Shares purchasable upon
the exercise of this Warrant or in the Exercise Price shall be made (i) with
respect to Common Stock or Additional Securities issued to employees of the
Company pursuant to a qualified stock option plan of the Company which is
approved by the Board of Directors of the Company or (ii) as a result of a
Permitted Issuance. The provisions of this section 6 providing for the
adjustment in the number of Warrant Shares purchasable upon the exercise of
this Warrant and in the Exercise Price shall apply at any time only with
respect to the Warrant Shares that have not at such time been purchased by the
Warrantholder as a result of the exercise of this Warrant.
6.4 Notice of Adjustment. Whenever the number of Warrant Shares
or the Exercise Price of such Warrant Shares is adjusted, as herein provided,
the Company shall promptly mail by first class, postage prepaid, to the
Warrantholder, notice of such adjustment or adjustments and a certificate of a
firm of independent public accountants of recognized national standing selected
by the Board of Directors of the Company (who shall be appointed at the
Company's expense and who may be the independent public accountants regularly
employed by the Company) setting forth the number of Warrant Shares and the
Exercise Price of such Warrant Shares after such adjustment, setting forth a
brief statement of the facts requiring such adjustment and setting forth the
computation by which such adjustment was made.
7. Registration Rights.
7.1 Demand Registration.
(a) At any time after the effective date of the first
registration statement under the Securities Act for a public offering of
Securities of the Company to the general public, the holder of Registrable
Securities may deliver to the Company a written request that the Company
register any or all of the Registrable Securities. The Company shall, as soon
as practicable following receipt of such request, effect the registration under
the Securities Act of all Registrable Securities specified in the request of
such holder.
(b) The Company is obligated to effect only one registration
pursuant to this Section 7.1.
7.2 Piggyback Registration. In each and every registration of
Securities of the Company (other than shares of Common Stock for a qualified
employee stock option plan approved by the Board of Directors of the Company)
proposed to be effected under the Securities Act at any time, the Company will
give notice to the holder of Registrable Securities of such proposed
registration at least 60 days prior to the filing of any registration statement
and will, as soon as practicable following receipt of a written request of such
holder, include all Registrable Securities specified in the request of such
holder in such proposed registration.
7.3 Obligations of the Company. When required under the terms of
this Warrant to effect the registration of the Registrable Securities, the
Company shall, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement or
statements or similar documents (collectively, the "Registration Statement")
with respect to all Registrable Securities requested by the holder of
Registrable Securities to be included in such registration, and use its best
efforts to cause the Registration Statement to become effective and keep the
Registration Statement effective pursuant to Rule 415 at all times, which
Registration Statement (including any amendments or supplements thereto and
prospectuses contained therein) shall 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 in
which they were made, not misleading.
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<PAGE> 9
(b) Prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to the Registration Statement and
the prospectus used in connection with the Registration Statement as may be
necessary to keep the Registration Statement effective at all times until all
Registrable Securities covered by such Registration Statement have been
disposed and to comply with the provisions of the Securities Act with respect
to the disposition of all securities covered by the Registration Statement.
(c) Furnish promptly to the holders of Registrable Securities
such numbers of copies of a prospectus, including a preliminary prospectus, and
all amendments and supplements thereto, in conformity with the requirements of
the Securities Act, and such other documents as the holders of Registrable
Securities may reasonably request in order to facilitate the disposition of the
Registrable Securities.
(d) Subject to the provisions of section 7.3(e), use its best
efforts to register and qualify the Registrable Securities covered by the
Registration Statement under such other securities or Blue Sky laws of such
jurisdictions as shall be reasonably requested by the holders of Registrable
Securities and to prepare and file in those jurisdictions such amendments
(including post-effective amendments) and supplements and to take such other
actions as may be necessary to maintain such registration and qualification in
effect at all times, and to take all other actions necessary or advisable to
enable the disposition of such Registrable Securities in such jurisdictions,
provided that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions or to provide any
undertaking or make any change in its charter or bylaws which the Board of
Directors of the Company determines to be contrary to the best interest of the
Company and its stockholders.
(e) In the event any offering made pursuant to Section 7.1(a)
is to be made through underwriters, select underwriters for the offering who
are reasonably satisfactory to the holders of the Registrable Securities, enter
into and perform its obligations under an underwriting agreement, in usual and
customary form, including, without limitation, customary indemnification and
contribution obligations, with the managing underwriters(s) of such offering.
The holders of Registrable Securities shall also enter into and perform their
customary obligations under any such agreement including, without limitation,
customary indemnification and contribution obligations. If the managing
underwriter of a proposed public offering shall advise the Company in writing
that, in its opinion, the distribution of the Registrable Securities requested
to be included in the registration concurrently with the securities being
registered by the Company or any demanding security holder would materially and
adversely affect the distribution of such securities by the Company or such
demanding security holders, then all selling security holders (including the
holder of such Registrable Securities) shall reduce the amount of securities
each intended to distribute through such offering on a pro rata basis.
(f) Notify the holders of Registrable Securities at any time
when a prospectus relating to Registrable Securities covered by the
Registration Statement is required to be delivered under the Securities Act, of
the happening of any event as a result of which the prospectus included in the
Registration Statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein
or necessary to make the statements therein not misleading in light of the
circumstances then existing. The Company shall promptly amend or supplement
the Registration Statement to correct any such untrue statement or omission.
(g) Notify the holders of Registrable Securities of the
issuance by the SEC of any stop order suspending the effectiveness of the
Registration Statement or the initiation of any proceedings for that purpose.
The Company will make every reasonable effort to prevent the issuance of any
stop order and, if any stop order is issued, to obtain the lifting thereof at
the earliest possible time.
(h) Permit a single firm of counsel designated as sellers'
counsel by the holders of Registrable Securities to review the Registration
Statement and all amendments and supplements thereto at a reasonable
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<PAGE> 10
period of time prior to their filing, and, with respect to any offering made
pursuant to section 7.1(a), shall not file any document in a form to which such
counsel reasonably objects.
(i) Make generally available to its security holders as soon
as practicable, but not later than 90 days after the close of the period
covered thereby, an earnings statement (in form complying with the provisions
of Rule 158 under the Securities Act) covering a 12 month period beginning not
later than the first day of the Company's fiscal quarter next following the
effective date of the Registration Statement.
(j) Furnish on the date that Registrable Securities are
delivered to any underwriters for sale in connection with a registration
pursuant to this section 7 (i) an opinion, dated such date, of the counsel
representing the Company for the purposes of such registration, in form and
substance as is customarily given to underwriters in an underwritten public
offering, addressed to the underwriters and (ii) a letter dated such date, from
the independent certified public accountants of the Company, in form and
sub-stance as is customarily given by independent certified public accountants
to underwriters in an underwritten public offering, addressed to the
underwriters.
(k) Make available for inspection by any holder of
Registrable Securities, any underwriters participating in the offering pursuant
to the registration and the counsel, accountants or other agents retained by
any holder of Registrable Securities or any such underwriter, all pertinent
financial and other records, corporate documents and properties of the Company,
and cause the Company's officers, directors and employees to supply all
information reasonably requested by the holders of Registrable Securities or
any such underwriters in connection with the registration.
(l) If the Common Stock is then listed on a national
securities exchange, use its best efforts to cause the Registrable Securities
to be listed on such exchange. If the Common Stock is not then listed on a
national securities exchange, use its best efforts to facilitate the reporting
of the Common Stock on NASDAQ.
(m) Provide a transfer agent and registrar, which may be a
single entity, for the Registrable Securities not later than the effective date
of the Registration Statement.
(n) Take all actions reasonably necessary to facilitate the
timely preparation and delivery of certificates (not bearing any restrictive
legend) representing the Registrable Securities to be sold pursuant to the
Registration Statement and to enable such certificates to be in such
denominations and registered in such names as the holders of Registrable
Securities or any underwriters may reasonably request.
(o) Take all other actions reasonably necessary to expedite
and facilitate disposition by the holders of Registrable Securities of the
Registrable Securities pursuant to the Registration Statement.
7.4 Furnish Information. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this section 7 with
respect to each holder of Registrable Securities that such holder shall furnish
to the Company such information regarding itself, the Registrable Securities
held by such holder, and the intended method of disposition of such securities
as shall be reasonably required to effect the registration of such Registrable
Securities and shall execute such documents in connection with such
registration as the Company may reasonably request.
7.5 Expenses of Registration. All expenses other than
underwriting discounts and commissions incurred in connection with
registration, filings or qualifications pursuant to sections 7.1, 7.2 and 7.3,
including, without limitation, all registration, listing, filing and
qualification fees, printers and accounting fees, the fees and disbursements of
counsel for the Company and the reasonable fees and disbursements of one firm
of counsel for the holders of Registrable Securities, shall be borne by the
Company.
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7.6 Indemnification. In the event any Registrable Securities are
included in a Registration Statement pursuant to this section 7:
(a) To the extent permitted by law, the Company will
indemnify and hold harmless each holder of Registrable Securities, the
directors, if any, of such holders, the officers, if any, of such holders who
sign the Registration Statement, each person, if any, who controls such
holders, any underwriter (as defined in the Securities Act) for such holders
and each person, if any, who controls any such underwriter within the meaning
of the Securities Act or the Exchange Act, against any losses, claims, damages,
expenses or liabilities (joint or several) to which any of them may become
subject under the Securities Act, the Exchange Act or otherwise, insofar as
such losses, claims, damages, expenses or liabilities (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out of
or are based upon any of the following statements, omissions or violations
(collectively, a "Violation"): (i) any, untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement, including
any preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein, in light of the circumstances in which they were
made, not misleading or (iii) any violation or alleged violation by the Company
of the Securities Act, the Exchange Act, any state securities law or any rule
or regulation promulgated under the Securities Act, the Exchange Act or any
state securities law; and the Company will reimburse each holder of Registrable
Securities and each such underwriter or controlling person, promptly as such
expenses are incurred, for any legal or other expenses reasonably incurred by
them in connection with investigating or defending any such loss, claim,
damage, liability, action or proceeding; provided, however, that the indemnity
agreement contained in this section 7.6(a) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Company, which consent shall
not be unreasonably withheld, nor shall the Company be liable in any such case
for any such loss, claim, damage, liability or action to the extent that it
arises out of or is based upon a Violation which occurs in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by any such holder, underwriter or controlling person,
as the case may be. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of the holders of
Registrable Securities or any such underwriter or controlling, person and shall
survive the transfer of the Registrable Securities by the original
Warrantholder or any subsequent transferee.
(b) To the extent permitted by law, each holder of
Registrable Securities, severally and not jointly, will indemnify and hold
harmless the Company, each of its directors, each of its officers who have
signed the Registration Statement, each person, if any, who controls the
Company within the meaning of the Securities Act or the Exchange Act, any
underwriter and any other stockholder selling securities pursuant to the
Registration Statement or any of its directors or officers or any person who
controls such holder or underwriter, against any losses, claims, damages or
liabilities (joint or several) to which any of them may become subject, under
the Securities Act, the Exchange Act or other federal or state law, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any Violation, in each case to the extent (and
only to the extent) that such Violation occurs in reliance upon and in
conformity with written information furnished by such holder expressly for use
in connection with such registration; and such holder will reimburse any legal
or other expenses reasonably incurred by any of them in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the indemnity agreement contained in this section
7.6(b) shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the consent
of such holder, which consent shall not be unreasonably withheld; and provided
further, that each holder of Registrable Securities shall be liable under this
paragraph (b) for only that amount of losses, claims, damages and liabilities
as does not exceed the proceeds actually received by such holder as a result of
the sale of Registrable Securities pursuant to such registration.
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(c) Promptly after receipt by an indemnified party under
this section 7.6 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect
thereof is to be made against any indemnifying party under this section 7.6,
deliver to the indemnifying party a written notice of the commencement thereof
and the indemnifying party shall have the right to participate in and, to the
extent the indemnifying party so desires, jointly with any other indemnifying
party similarly noticed, to assume control of the defense thereof with counsel
mutually satisfactory to the parties; provided, however, that an indemnified
party shall have the right to retain its own counsel, with the fees and
expenses to be paid by the indemnifying party, if, in the reasonable opinion of
counsel for the indemnified party representation of such indemnified party by
the counsel retained by the indemnifying party would be inappropriate due to
actual or potential differing interests between such indemnified party and any
other party represented by counsel for the indemnifying party in such
proceeding. The failure to deliver written notice to the indemnifying party
within a reasonable time of the commencement of any such action shall relieve
such indemnifying party of any liability to the indemnified party under this
section 7.6 only to the extent prejudicial to its ability to defend such
action, but the omission so to deliver written notice to the indemnifying party
will not relieve it of any liability that it may have to any indemnified party
otherwise than under this section 7.6. The indemnification required by this
section 7.6 shall be made by periodic payments of the amount thereof during the
course of the investigation or defense, promptly as such expense, loss, damage
or liability is incurred.
(d) To the extent any indemnification by an indemnifying
party is prohibited or limited by law, the indemnifying party agrees to make
the maximum contribution with respect to any amounts for which it would
otherwise be liable under this section 7.6 to the extent permitted by law,
provided that (i) no contribution shall be made under circumstances where the
maker would not have been liable for indemnification under the fault standards
set forth in this section 7.6, (ii) no seller of Registrable Securities guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any seller of
Registrable Securities who was not guilty of such fraudulent misrepresentation
and (iii) contribution by any seller of Registrable Securities shall be limited
in amount to the net amount of proceeds received by such seller from the sale
of such Registrable Securities.
7.7 Reports Under Securities Exchange Act of 1934. With a view to
making available to the holders of Registrable Securities the benefits of SEC
Rule 144 promulgated under the Securities Act and any other rule or regulation
of the SEC that may at any time permit the Warrantholder to sell securities of
the Company to the public without registration, the Company agrees to:
(a) make and keep public information available, as those
terms are understood and defined in SEC Rule 144, at all times after 90 days
after the effective date of the first registration statement filed by the
Company for the offering of its securities to the general public;
(b) file with the SEC in a timely manner all reports and
other documents required of the Company under the Securities Act and the
Exchange Act; and
(c) furnish to each holder of Registrable Securities, so long
as such holder owns any Registrable Securities, forthwith upon request (i) a
written statement by the Company that it has complied with the reporting
requirements of SEC Rule 144 (at any time after 90 days after the effective
date of the first registration statement filed by the Company), the Securities
Act and the Exchange Act (at any time after it has become subject to such
reporting requirements), (ii) a copy of the most recent annual or quarterly
report of the Company and such other reports and documents so filed by the
Company and (iii) such other information as may be reasonably requested in
availing the holders of Registrable Securities of any rule or regulation of the
SEC which permits the selling of any such securities without registration.
- 11 -
<PAGE> 13
7.8 Assignment of Registration Rights. The rights to have the
Company register Registrable Securities pursuant to this section 7 shall be
deemed to have been assigned by the Warrantholder to its transferee or assignee
upon the assignment or transfer of the Registrable Securities pursuant to
section 4 hereof without any action on the part of the Warrantholder or such
transferee or assignee and the provisions of this Warrant shall be binding upon
and accrue to the benefit of such assignee or transferee and its successors and
assigns. For purposes of section 7 of this Agreement (i) the term "Holders of
Registrable Securities" as used shall include permitted assignees and (ii) the
terms "register," "registered" and "registration" shall refer to a registration
effected by preparing and filing a registration statement or statements or
similar documents in compliance with the Securities Act and pursuant to Rule
415 and the declaration or ordering of effectiveness of such registration
statement or document by the SEC.
8. 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
(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 party or any transfer of all or substantially all the assets of
the Company to any other party, or
(c) any voluntary or involuntary dissolution, liquidation or
winding up of the Company, the Company will mail to the Warrantholder
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 any 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 and 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. Such notice shall be mailed at least 30 days prior to the
date therein specified, in the case of any date referred to in the
foregoing subdivision (i), and at least 30 days prior to the date
therein specified, in the case of the date referred to in the
foregoing subdivision (ii).
9. Put Option.
9.1 Put Option. The Company hereby grants to the Warrantholder
the right and option (the "Put Option") to require the Company upon the
occurrence of a Put Event, on the terms and conditions set forth herein, to
purchase this Warrant or, if this Warrant had theretofore been exercised, all,
but not less than all, of the Warrant Shares then held by the Warrantholder.
9.2 Notices. In addition to the obligations of the Company under
section 8, within two days following the occurrence of any action or event that
could result in the occurrence of a Put Event, including without limitation,
the execution of a letter of intent or binding agreement, the Company shall
notify the Warrantholder of (i) such action or event, (ii) the date on which
the Put Event is expected to occur, (iii) the nature of the Put Event, (iv) the
consideration to be paid to the Company or any shareholder of the Company on
such Put Event and (v) such other information as the Warrantholder shall
reasonably request.
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<PAGE> 14
9.3 Exercise of Put Option. At any time within 10 days following
the delivery by the Company of the notice referred to in section 9.2 but in any
event, prior to the occurrence of the Put Event, the Warrantholder may, but
shall not be obligated to, deliver notice to the Company stating that the
Warrantholder is exercising the Put Option. If the Warrantholder delivers such
notice and a Put Event occurs, the Company shall purchase this Warrant or all,
but not less than all, of the Warrant Shares then held by the Warrantholder, as
the case may be, on the terms and in the manner specified in sections 9.4 and
9.5.
9.4 Purchase Price. The purchase price for this Warrant or the
Warrant Shares, as the case may be, shall be equal to the product of (i) the
number of Warrant Shares then issuable upon the exercise of this Warrant or the
number of Warrant Shares then held by the Warrantholder, as the case may be,
multiplied by (ii) in the event of the occurrence of a Put Event specified in
clause (i) or (ii)(A) of the definition of Put Event set forth below, the
highest price per share paid to shareholders of the Company in such Put Event
or, in the event of the occurrence of a Put Event specified in clause (ii)(B)
of the definition of Put Event set forth below, the quotient obtained by
dividing (x) the aggregate purchase price paid to the Company in such Put Event
less, in the case of any Put Event, the aggregate payment the Warrantholder
would make to the Company if the Warrants of such Warrantholder were exercised
by (y) the number of shares of Common Stock then outstanding calculated on a
fully diluted basis assuming all of the Warrants are exercised. For purposes
of determining the number of Warrant Shares issuable upon the exercise of this
Warrant in making the calculation set forth above, effect shall be given to any
adjustment provided herein in the number of Warrant Shares issuable upon the
exercise of this Warrant as a result of the occurrence of the Put Event. The
cash value of any non- cash consideration paid to the shareholders of the
Company in a Put Event specified in clause (i) or (ii)(A) of the definition of
Put Event set forth below or to the Company in a Put Event specified in clause
(ii)(B) of the definition of Put Event set forth below shall be determined by
the good faith mutual agreement of the Warrantholder and the Company, or if no
such agreement can be reached within 30 days following the date on which notice
of the exercise of the Put Option is received by the Company, by an investment
banking firm mutually agreeable to the Warrantholder and the Company and
experienced in evaluating companies engaged in the line of business which the
Company is then engaged. The determination of any such investment banking firm
hereunder shall be final and binding upon the Company and the Warrantholder.
The fees of any such investment banking firm shall be paid one-half by the
Warrantholder and one-half by the Company.
9.5 Closing. The closing of any purchase hereunder of this
Warrant or the Warrant Shares, as the case may be, shall be held at the offices
of the Company simultaneously with or immediately prior to the closing of the
Put Event. At such closing, the Warrantholder shall deliver to the Company
this Warrant or the Warrant Shares, as the case may be, duly endorsed for
transfer and the Company shall deliver to the Warrantholder a certified or
official bank check for the purchase price thereof.
10. Definitions. As used herein, unless the context otherwise requires,
the following terms have the following respective meanings:
Additional Securities: all shares, (including treasury shares) of
Common Stock, rights, options, warrants or convertible or exchangeable
securities containing the right to subscribe for or purchase shares of Common
Stock, issued or sold by the Company after the date hereof, excluding (i) any
shares of Common Stock, rights, options, warrants or convertible or
exchangeable securities (or shares of Common Stock issued upon conversion,
exchange or exercise, as the case may be, of such rights, options, warrants or
convertible or exchangeable securities) for which, an adjustment has been made
pursuant to section 6.1(a) or clauses (i) or (ii) of section 6.1(d), (ii) the
Warrant Shares and (iii) shares of Common Stock issued upon conversion,
exchange or exercise, as the case may be, of rights, options, warrants or
convertible or exchangeable securities, for which an adjustment has been made
in accordance with section 6.1(d)(iii) upon issuance of such rights, options,
warrants or convertible or exchangeable securities.
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<PAGE> 15
Assignment Form: an Assignment Form in the form annexed hereto as
Exhibit B.
Business Day: any day other than a Saturday, Sunday or a day on which
national banks are authorized by law to close in the City of New York.
Current Market Price: in respect of any share of Common Stock if there
shall then be a public market for the Common Stock, the average of the daily
market prices for 10 consecutive Business Days commencing 15 days before such
date; the daily market price for each such Business Day being (i) the last sale
price on such day on the principal stock exchange on which such Common Stock is
then listed or admitted to trading, (ii) if no sale takes place on such day on
any such exchange, the average of the last reported closing bid and asked
prices on such day as officially quoted on any such exchange, (iii) if the
Common Stock is not then listed or admitted to trading on any stock exchange,
the average of the last reported closing bid and asked prices on such day in
the over-the-counter market, as furnished by the NASDAQ, or the National
Quotation Bureau, Inc., (iv) if neither such corporation at the time is engaged
in the business of reporting such prices, as furnished by any similar firm then
engaged in such business, or (v) if there is no such firm, as furnished by any
member of the National Association of Securities Dealers, Inc. (the "NASD")
selected mutually by the Warrantholder and the Company or, if they cannot agree
upon such selection, as selected by two such members of the NASD, one of which
shall be selected by the Warrantholder and one of which shall be selected by
the Company.
Default: the occurrence of the event of default specified in Section
12(a) of the Loan Agreement or the exercise of the acceleration rights
specified in clause (I) of Section 12 of the Loan Agreement.
Exchange Act: the Securities Exchange Act of 1934, as amended, or any
similar federal statute, and the rules and regulations of the SEC thereunder,
all as the same shall be in effect at the time.
Exercise Form: an Exercise Form in the form annexed hereto as
Exhibit A.
Loan: as defined in the Loan Agreement.
Loan Agreement: the Loan and Security Agreement, dated as of December
15, 1992, among the Company, Citibank, N.A., as Agent, and the Lenders named
therein.
Permitted Issuances: (i) the issuance of shares of Common Stock upon
exercise of this Warrant, (ii) if there shall then be a public market for the
Common Stock, the issuance of shares of Common Stock upon receipt by the
Company of the Current Market Price therefor and (iii) at any time prior to the
time there is a public market for the Common Stock, the issuance of shares of
Common Stock in an arm's-length transaction with third persons not affiliated
with the Company for consideration equal to the fair value of such shares as
determined in good faith by the Board of Directors of the Company. Any
determination by the Board of Directors of the Company pursuant to the
preceding sentence may be challenged in good faith by the holders of all
remaining unexercised warrants issued pursuant to the Loan Agreement entitling
such holders to purchase at least 51% of the shares of Common Stock issuable
under such then exercised warrants and any dispute shall be resolved by an
investment banking firm of reorganized national standing selected and paid for
by the Company and reasonably acceptable to such holders or by any other method
as is then agreed to by the Company and such holders.
Put Event: the occurrence of any of the following: (i) the Company is
acquired by merger, consolidation or other business combination by any person
or group of persons (other than Thomas P. Tatham) or (ii) the acquisition,
directly or indirectly, by any person or group of persons (other than Thomas P.
Tatham) of (A) more than 50% of the capital stock of the Company or (B) more
than 50% of the assets of the Company, in either case, by way of negotiated
purchase or otherwise. For purposes hereof, the determination of whether
persons shall be
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<PAGE> 16
deemed to be acting as a "group of persons" shall be made in accordance with
the provisions of Section 13(d)(3) of the Exchange Act.
Registrable Securities: (i) the Warrant Shares and other securities
issued or issuable upon exercise of this Warrant and (ii) any securities issued
or issuable with respect to any Common Stock or other securities referred to in
subdivision (i) by way of stock dividend or stock split or in connection with a
combination or other reorganization or otherwise.
Rule 415: Rule 415 under the Securities Act or any successor rule
providing for offering securities on a continuous basis.
SEC: the Securities and Exchange commission or any other federal
agency at the time administering the Securities Act or the Exchange Act,
whichever is the relevant statute for the particular purpose.
Securities Act: the Securities Act of 1933, as amended, or any similar
federal statute, and the rules and regulations of the SEC thereunder, all as
the same shall be in effect at the time.
11. Miscellaneous.
11.1 Entire Agreement. This Warrant constitutes the entire
agreement between the Company and the Warrantholder with respect to the
Warrants.
11.2 Binding Effects; Benefits. This Warrant shall inure to the
benefit of and shall be binding upon the Company and the Warrantholder and
their respective heirs, legal representatives, successors and assigns. Nothing
in this Warrant, expressed or implied, is intended to or shall confer on any
person other than the Company and the Warrantholder, or their respective heirs,
legal representatives, successors or assigns, any rights, remedies, obligations
or liabilities under or by reason of this Warrant.
11.3 Amendments and Waivers. This Warrant may not be modified or
amended except by an instrument or instruments in writing signed by the party
against whom enforcement of any such modification or amendment is sought.
Either the Company or the Warrantholder may, by an instrument in writing, waive
compliance by the other party with any term or provision of this Warrant on the
part of such other party hereto to be performed or complied with. The waiver
by any such party of a breach of any term or provision of this Warrant shall
not be construed as a waiver of any subsequent breach.
11.4 Section and Other Headings. The section and other headings
contained in this Warrant are for reference purposes only and shall not be
deemed to be a part of this Warrant or to affect the meaning or interpretation
of this Warrant.
11.5 Further Assurances. Each of the Company and the Warrantholder
shall do and perform all such further acts and things and execute and deliver
all such other certificates, instruments and documents as the Company or the
Warrantholder may, at any time and from time to time, reasonably request in
connection with the performance of any of the provisions of this Agreement.
11.6 Notices. All notices and other communications required or
permitted to be given under this Warrant shall be in writing and shall be
deemed to have been duly given if delivered personally or sent by mail, postage
prepaid, to the parties hereto at the following addresses or to such other
address as any party hereto shall hereafter specify by notice to the other
party hereto:
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<PAGE> 17
(a) if to the Company, addressed to:
DeepTech International Inc.
7500 Texas Commerce Tower
600 Travis
Houston, Texas 77002
Attention: Thomas P. Tatham
(b) if to the Warrantholder, addressed to the address of such
Warrantholder appearing on the books of the Company. Except as otherwise
provided herein, all such notices and communications shall be deemed to have
been received on the date of delivery thereof, if delivered personally, or on
the third Business Day after the mailing thereof.
11.7 Separability. Any term or provision of this Warrant which is
invalid or unenforceable in any jurisdiction shall as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the terms and provisions of this Warrant or
affecting the validity or enforceability of any of the terms or provisions of
this Warrant in any other jurisdiction.
11.8 GOVERNING LAW. THIS WARRANT SHALL BE DEEMED TO BE A CONTRACT
MADE UNDER THE LAWS OF THE STATE OF NEW YORK AND FOR ALL PURPOSES SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF SUCH STATE.
11.9 No Rights or Liabilities as Stockholder. Nothing contained in
this Warrant shall be determined as conferring upon the Warrantholder any
rights as a stockholder of the Company or as imposing any liabilities on the
Warrantholder to purchase any securities whether such liabilities are asserted
by the Company or by creditors or stockholders of the Company or otherwise.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed
by its duly authorized officer.
DEEPTECH INTERNATIONAL INC.
By:
-------------------------------------------------
Name:
-----------------------------------------------
Title:
----------------------------------------------
Dated: December 31, 1996
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<PAGE> 1
EXHIBIT 4.3
================================================================================
THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS
WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND MAY NOT BE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION
THEREFROM UNDER SUCH ACT.
* * * * * * * * * * * * * * * * * * * * * * * * * * *
DEEPTECH INTERNATIONAL INC.
COMMON STOCK PURCHASE WARRANT
* * * * * * * * * * * * * * * * * * * * * * * * * * *
This certifies that, for good and valuable consideration,
DeepTech International Inc., a Delaware corporation (the "Company"), grants to
Citicorp USA Inc. (the "Lender") or registered assigns (the "Warrantholder"),
the right to subscribe for and purchase from the Company 328,125 validly
issued, fully paid and nonassessable shares (the "Warrant Shares") of the
Company's Common Stock, par value $.01 per share (the "Common Stock"), at the
purchase price per share of $4.00 (the "Exercise Price"), at any time and from
time to time prior to 5:00 p.m., New York City time, on December 15, 1998, all
subject to the terms, conditions, limitations and adjustments herein set forth.
================================================================================
<PAGE> 2
1. Duration and Exercise of Warrant; Limitation on Exercise; Payment of
Taxes.
1.1 Duration and Exercise of Warrant. This Warrant may be
exercised by the Warrantholder by (a) the surrender of this Warrant to the
Company, with a duly executed Exercise Form specifying the number of Warrant
Shares to be purchased, during normal business hours on any Business Day and
(b) the delivery of payment to the Company, for the account of the Company, by
cash or by certified check, of the Exercise Price for the number of Warrant
Shares specified in the Exercise Form in lawful money of the United States of
America. The Company agrees that such Warrant Shares shall be deemed to be
issued to the Warrantholder as the record holder of such Warrant Shares as of
the close of business on the date on which this Warrant shall have been
surrendered and payment made for the Warrant Shares as aforesaid. A stock
certificate or certificates for the Warrant Shares specified in the Exercise
Form shall be delivered to the Warrantholder as promptly as practicable, and in
any event within 10 days, thereafter. The stock certificate or certificates so
delivered shall be in denominations of 100 shares each or such lesser or
greater denominations as may be specified by the Warrantholder in the Exercise
Form. If this Warrant shall have been exercised only in part, the Company
shall, at the time of delivery of the stock certificate or certificates,
deliver to the Warrantholder a new Warrant evidencing the rights to purchase
the remaining Warrant Shares, which new Warrant shall in all other respects be
identical with this Warrant. No adjustments shall be made on Warrant Shares
issuable on the exercise of this Warrant for any cash dividends paid or payable
to holders of record of Common Stock prior to the date as of which the
Warrantholder shall be deemed to be the record holder of such Warrant Shares.
1.2 Payment of Taxes. The issuance of certificates for Warrant
Shares shall be made without charge to the Warrantholder for any stock transfer
or other issuance tax in respect thereto; provided, however, that the
Warrantholder shall be required to pay any and all taxes which may be payable
in respect of any transfer involved in the issuance and delivery of any
certificate in a name other than that of the then Warrantholder as reflected
upon the books of the Company.
1.3 Divisibility of Warrant. This Warrant may be divided into
warrants of one share or multiples thereof, upon surrender at the principal
office of the Company, without charge to any Warrantholder. Upon such
division, the Warrants may be transferred of record as the then Warrantholder
may specify without charge to such Warrantholder (other than any applicable
transfer taxes).
1.4 Deferred Amount and Limitation on Exercise.
(a) Subject to section 1.4(b), if this Warrant has not
theretofore been exercised in whole or in part, the Warrantholder may,
at its option, on 30 days' prior written notice delivered to the
Company, elect to receive from the Company on December 15, 1995 an
amount (the "Deferred Amount") equal to the amount that would accrue
on the outstanding principal amount of the portion of the Loan made by
the Lender on a cumulative compounded basis at the rate of 10% per
annum from the date such portion of the Loan was made until the
earlier of (A) the date such portion of the Loan has been paid in full
and (B) December 15, 1995. Should the Warrantholder so elect to
receive the Deferred Amount and the Deferred Amount is paid to the
Warrantholder in full on December 15, 1995, this Warrant shall not
thereafter be exercisable and the Warrantholder shall promptly
surrender this Warrant to the Company for cancellation.
<PAGE> 3
(b) If a Default occurs at any time, this Warrant shall
continue to remain in effect and shall be exercisable in accordance
with the terms hereof and the Warrantholder shall receive the Deferred
Amount on the date the portion of the Loan made by the Lender is paid
in full.
(c) The Deferred Amount shall be calculated by the
Warrantholder and, absent manifest error, such calculation shall be
binding on the Company.
2. Restrictions on Transfer: Restrictive Legends. Except as otherwise
permitted by this section 2, each Warrant shall (and each Warrant issued upon
direct or indirect transfer or in substitution for any Warrant pursuant to
section 4 shall) be stamped or otherwise imprinted with a legend in
substantially the following form:
"THIS WARRANT AND ANY SHARES ACQUIRED UPON EXERCISE OF THIS
WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER SUCH ACT."
Except as otherwise permitted by this section 2, each stock certificate for
Warrant Shares issued upon the exercise of any Warrant and each stock
certificate issued upon the direct or indirect transfer of any such Warrant
Shares shall be stamped or otherwise imprinted with a legend in substantially
the following form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT
BE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION
THEREFROM UNDER SUCH ACT."
Notwithstanding the foregoing, the Warrantholder may require the
Company to issue a Warrant or a stock certificate for Warrant Shares, in each
case without a legend, if such Warrant or such Warrant Shares, as the case may
be, have been registered for resale under the Securities Act.
3. Reservation and Registration of Shares, Etc,
The Company covenants and agrees that all Warrant Shares which are
issued upon the exercise of this Warrant will, upon issuance, be validly
issued, fully paid and nonassessable and free from all taxes, liens, security
interests, charges, and other encumbrances with respect to the issuance
thereof, other than taxes in respect of any transfer occurring
contemporaneously with such issuance. The Company further covenants and agrees
that, during the period within which this Warrant may be exercised, the Company
will at all times have authorized and reserved, and keep available free from
preemptive rights, a sufficient number of shares of Common Stock to provide for
the exercise of the rights represented by this Warrant. The Company further
covenants and agrees that it will, from time to time, take all such action as
may be required to assure that the par value per share of the Warrant Shares is
at all times equal to or less than the then effective Exercise Price.
2
<PAGE> 4
4. Exchange, Loss or Destruction of Warrant.
Subject to the terms and conditions hereof, upon surrender of-this
Warrant to the Company with a duly executed Assignment Form and funds
sufficient to pay any transfer tax, the Company shall, without charge, execute
and deliver a new Warrant or Warrants of like tenor in the name of the assignee
named in such Assignment Form and this Warrant shall promptly be canceled.
Upon receipt by the Company of evidence reasonably satisfactory to it of the
loss, theft, destruction or mutilation of this Warrant and, in the case of
loss, theft or destruction, of such bond or indemnification as the Company may
reasonably require, and, in the case of such mutilation, upon surrender and
cancellation of this Warrant, the Company will execute and deliver a new
Warrant of like tenor. The term "Warrant" as used herein shall be deemed to
include any warrants issued in substitution or exchange for this Warrant.
5. Ownership of Warrant.
The Company may deem and treat the person in whose name this Warrant
is registered as the holder and owner hereof (notwithstanding any notations of
ownership or writing hereon made by anyone other than the Company) for all
purposes and shall not be affected by any notice to the contrary, until
presentation of this Warrant for registration of transfer as provided in
section 4.
6. Certain Adjustments.
6.1 The number of Warrant Shares purchasable upon the exercise of
this Warrant and the Exercise Price shall be subject to adjustment as follows:
(a) Stock Dividends. If at any time after the date of
the issuance of this Warrant (i) the Company shall fix a record date
for the issuance of any stock dividend payable in shares of Common
Stock or (ii) the number of shares of Common Stock shall have been
increased by a subdivision or split-up of shares of Common Stock,
then, on the record date fixed for the determination of holders of
Common Stock entitled to receive such dividend or immediately after
the effective date of subdivision or split-up, as the case may be, the
number of shares to be delivered upon exercise of this Warrant will be
increased so that the Warrantholder will be entitled to receive the
number of Shares of Common Stock that such Warrantholder would have
owned immediately following such action had this Warrant been
exercised immediately prior thereto, and the Exercise Price will be
adjusted as provided below in paragraph (g)(i).
(b) Combination of Stock. If the number of shares of
Common Stock outstanding at any time after the date of the issuance of
this Warrant shall have been decreased by a combination of the
outstanding shares of Common Stock, then, immediately after the
effective date of such combination, the number of shares of Common
Stock to be delivered upon exercise of this Warrant will be decreased
so that the Warrantholder thereafter will be entitled to receive the
number of shares of Common Stock that such Warrantholder would have
owned immediately following such action had this Warrant been
exercised immediately prior thereto, and the
3
<PAGE> 5
Exercise Price will be adjusted as provided below in paragraph (g)(i).
(c) Reorganization. If any capital reorganization of the
Company, or any reclassification of the Common Stock, or any
consolidation of the Company with or merger of the Company with or
into any other person or any sale, lease or other transfer of all or
substantially all of the assets of the Company to any other person,
shall be effected in such a way that the holders of Common Stock shall
be entitled to receive stock, other securities or assets (whether such
stock, other securities or assets are issued or distributed by the
Company or another person) with respect to or in exchange for Common
Stock, then, upon exercise of this Warrant the Warrantholder shall
have the right to receive the kind and amount of stock, other
securities or assets receivable upon such reorganization,
reclassification, consolidation, merger or sale, lease or other
transfer that such Warrantholder would have been entitled to receive
upon exercise of this Warrant had this Warrant been exercised
immediately before such reorganization, reclassification,
consolidation, merger or sale, lease or other transfer, subject to
adjustments that shall be as nearly equivalent as may be practicable
to the adjustments provided for in this section 6.
(d) Stock and Rights offering. (i) If at any time after
the date of issuance of this Warrant, the Company shall issue to all
holders of its Common Stock or sell or fix a record date for the
issuance to all holders of its Common Stock of (A) Common Stock or (B)
rights, options or warrants entitling the holders thereof to subscribe
for or purchase Common Stock (or securities convertible or
exchangeable into or exercisable for Common Stock), in any such case,
at a price per share (or having a conversion, exchange or exercise
price per share) that is less than the Exercise Price then,
immediately after the date of such issuance or sale, the number of
shares of Common Stock to be delivered upon exercise of this Warrant
shall be increased so that the Warrantholder thereafter will be
entitled to receive the number of shares of Common Stock determined by
multiplying the number of shares of Common Stock such Warrantholder
would have been entitled to receive immediately before the date of
such issuance or sale by a fraction, the denominator of which will be
the number of shares of Common Stock outstanding on such date plus the
number of shares of Common Stock that the aggregate offering price of
the total number of shares so offered for subscription or purchase (or
the aggregate initial conversion price, exchange price or exercise
price of the convertible securities or exchangeable securities or
rights, options or warrants, as the case may be, so offered) would
purchase at the Exercise Price, and the numerator of which will be the
number of shares of Common Stock outstanding on such date plus the
number of additional shares of Common Stock offered for subscription
or purchase (or into which the convertible or exchangeable securities
or rights, options or warrants so offered are initially convertible or
exchangeable or exercisable, as the case may be), and the Exercise
Price shall be adjusted as provided below in paragraph (g)(i).
(ii) If the Company shall, at any time after the
date of issuance of this Warrant distribute to all holders of
Common Stock any shares of capital stock of the Company (other
than Common Stock) or evidences of its indebtedness or
4
<PAGE> 6
assets (excluding cash dividends or distributions paid from
retained earnings of the Company) or rights or warrants to
subscribe for or purchase any of its securities (excluding
those referred to in paragraph (d)(i) above) (any of the
foregoing being hereinafter in this paragraph (d)(ii) called
the "Securities"), then in each such case, unless the Company
elects to reserve shares or other units of such Securities for
distribution to the Warrantholder upon exercise of this
Warrant so that, in addition to the shares of the Common Stock
to which such Warrantholder is entitled, such Warrantholder
will receive upon such exercise the amount and kind of such
Securities which such Warrantholder would have received if the
Warrantholder had, immediately prior to the record date for
the distribution of the Securities, exercised this Warrant,
then the number of shares of Common Stock to be delivered to
such Warrantholder upon exercise of this Warrant shall be
increased so that the Warrantholder thereafter shall be
entitled to receive the number of shares of Common Stock
determined by multiplying the number of shares the
Warrantholder would have been entitled to receive immediately
before such record date, had the Warrantholder exercised this
Warrant immediately prior thereto, by a fraction, the
denominator of which shall be the Closing Price (as
hereinafter defined) per share of Common Stock on such record
date minus the then fair market value (as reasonably
determined by the Board of Directors of the Company), of the
portion of the capital stock or assets or evidences of
indebtedness so distributed or of such rights or warrants
applicable to one share of Common Stock and the numerator of
which shall be the Closing Price of the Common stock, and the
Exercise Price shall be adjusted as provided below in
paragraph (g)(i). The term "Closing Price" shall mean the
closing price per share of the Common Stock on the principal
national securities exchange on which the Common Stock is
listed or admitted to trading or, if not listed or traded on
any such exchange, on the National Market System of the
National Association of Securities Dealers Automated
Quotations System ("NASDAQ"), or if not listed or traded on
any such exchange or system, the average of the bid and asked
price per share on NASDAQ or, if there are no such quotations
for the Common Stock, the fair market value per share of the
Common Stock as reasonably determined by the Board of
Directors of the Company.
(iii) In case the Company shall, directly or
indirectly, issue or sell any Additional Securities at a price
per share (or having a conversion, exchange or exercise price
per share) lower than the Exercise Price then, immediately
after the date of such issuance or sale, the number of shares
of Common Stock to be delivered upon exercise of this Warrant
shall be increased so that the Warrantholder thereafter will
be entitled to receive the number of shares of Common Stock
determined by multiplying the number of shares of Common Stock
the Warrantholder would have been entitled to receive
immediately before the date of such issuance or sale by a
fraction, the denominator of which will be the number of
shares of Common Stock outstanding on such date plus the
number of shares of Common Stock that the aggregate offering
price of the total number of shares so offered for
subscription or purchase (or the aggregate
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<PAGE> 7
initial conversion price, exchange price or exercise price of
the convertible securities or exchangeable securities or
rights, options or warrants, as the case may be, so offered)
would purchase at the Exercise Price, and the numerator of
which will be the number of shares of Common Stock outstanding
on such date plus the number of Additional Securities offered
for subscription or purchase (or into which the convertible or
exchangeable securities or rights, options or warrants so
offered are initially convertible, exchangeable or
exercisable, as the case may be), and the Exercise Price shall
be appropriately adjusted as provided below in paragraph
(g)(i).
(e) Fractional Shares. No fractional shares of Common
Stock or scrip shall be issued to the Warrantholder in connection with
the exercise of this Warrant. Instead of any fractional shares of
Common Stock that would otherwise be issuable to the Warrantholder,
the Company will pay to the Warrantholder a cash adjustment in respect
of such fractional interest in an amount equal to that fractional
interest of the then current Closing Price per share of Common Stock.
(f) Carryover. Notwithstanding any other provision of
this section 6, no adjustment shall be made to the number of shares of
Common Stock to be delivered to the Warrantholder (or to the Exercise
Price) if such adjustment represents less than 1% of the number of
shares to be so delivered, but any lesser adjustment shall be carried
forward and shall be made at the time and together with the next
subsequent adjustment which together with any adjustments so carried
forward shall amount to 1% or more of the number of shares to be so
delivered.
(g) Exercise Price Adjustment.
(i) Whenever the number of Warrant Shares
purchasable upon the exercise of this Warrant is adjusted, as
herein provided, the Exercise Price payable upon the exercise
of this Warrant shall be adjusted by multiplying such Exercise
Price immediately prior to such adjustment by a fraction, of
which the numerator shall be the number of Warrant Shares
purchasable upon the exercise of this Warrant immediately
prior to such adjustment, and of which the denominator shall
be the number of Warrant Shares purchasable immediately
thereafter.
(ii) The Exercise Price shall be reduced by the
per share amount of all cash dividends paid to holders of
Common Stock prior to the exercise of this Warrant. Such per
share amount shall be calculated by dividing all such cash
dividends paid by the number of shares of Common Stock issued,
outstanding, entitled to, and receiving such cash dividends.
(h) Superseding Adjustment. If, at any time after any
adjustment of the number of shares of Common Stock to be delivered
upon exercise of this Warrant and any corresponding adjustment to the
Exercise Price shall have been made pursuant to this section 6.1 as
the result of any issuance of rights, options or warrants, and such
rights, options or warrants shall thereafter expire and all or a
portion of such rights, options or warrants shall have not
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<PAGE> 8
been exercised, then such previous adjustments shall be rescinded and
annulled and the number of shares of Common Stock to be delivered upon
exercise of this Warrant and the Exercise Price shall be recomputed to
give effect thereto.
6.2 Other Dilutive-Events. In case any event shall occur as to
which the provisions of section 6.1 are not strictly applicable but the failure
to make any adjustment would not 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, the Company shall, at its expense, appoint a
firm of independent public accountants of recognized national standing (who
shall be appointed at the Company's expense and who may be the independent
public accountants regularly employed by the Company), to issue a report which
shall determine the adjustment, if any, on a basis consistent with the
essential intent and principles established in section 6.1, necessary to
preserve, without dilution, the purchase rights represented by this Warrant.
Upon receipt of such report, the Company will promptly mail a copy thereof to
the Warrantholder and shall make the adjustments described therein.
6.3 No Adjustment for Employee Stock Option Plan or Permitted
Issuances. Notwithstanding anything to the contrary contained elsewhere in
this section 6, no adjustment in the number of Warrant Shares purchasable upon
the exercise of this Warrant or in the Exercise Price shall be made (i) with
respect to Common Stock or Additional Securities issued to employees of the
Company pursuant to a qualified stock option plan of the Company which is
approved by the Board of Directors of the Company or (ii) as a result of a
Permitted Issuance. The provisions of this section 6 providing for the
adjustment in the number of Warrant Shares purchasable upon the exercise of
this Warrant and in the Exercise Price shall apply at any time only with
respect to the Warrant Shares that have not at such time been purchased by the
Warrantholder as a result of the exercise of this Warrant.
6.4 Notice of Adjustment. Whenever the number of Warrant Shares
or the Exercise Price of such Warrant Shares is adjusted, as herein provided,
the Company shall promptly mail by first class, postage prepaid, to the
Warrantholder, notice of such adjustment or adjustments and a certificate of a
firm of independent public accountants of recognized national standing selected
by the Board of Directors of the Company (who shall be appointed at the
Company's expense and who may be the independent public accountants regularly
employed by the Company) setting forth the number of Warrant Shares and the
Exercise Price of such Warrant Shares after such adjustment, setting forth a
brief statement of the facts requiring such adjustment and setting forth the
computation by which such adjustment was made.
7. Registration Rights.
7.1 Demand Registration.
(a) At any time after the effective date of the first
registration statement under the Securities Act for a public offering
of Securities of the Company to the general public, the holder of
Registrable Securities may deliver to the Company a written request
that the Company register any or all of the Registrable Securities.
The Company shall, as soon as practicable following receipt of such
request, effect the registration under
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<PAGE> 9
the Securities Act of all Registrable Securities specified in the
request of such holder.
(b) The Company is obligated to effect only one
registration pursuant to this Section 7.1.
7.2 Piggyback Registration. In each and every registration of
Securities of the Company (other than shares of Common Stock for a qualified
employee stock option plan approved by the Board of Directors of the Company)
proposed to be effected under the Securities Act at any time, the Company will
give notice to the holder of Registrable Securities of such proposed
registration at least 60 days prior to the filing of any registration statement
and will, as soon as practicable following receipt of a written request of such
holder, include all Registrable Securities specified in the request of such
holder in such proposed registration.
7.3 Obligations of the Company. When required under the terms of
this Warrant to effect the registration of the Registrable Securities, the
Company shall, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement or
statements or similar documents (collectively, the "Registration
Statement") with respect to all Registrable Securities requested by
the holder of Registrable Securities to be included in such
registration, and use its best efforts to cause the Registration
Statement to become effective and keep the Registration Statement
effective pursuant to Rule 415 at all times, which Registration
Statement (including any amendments or supplements thereto and
prospectuses contained therein) shall 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 in which they were made, not misleading.
(b) Prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to the
Registration Statement and the prospectus used in connection with the
Registration Statement as may be necessary to keep the Registration
Statement effective at all times until all Registrable Securities
covered by such Registration Statement have been disposed and to
comply with the provisions of the Securities Act with respect to the
disposition of all securities covered by the Registration Statement.
(c) Furnish promptly to the holders of Registrable
Securities such numbers of copies of a prospectus, including a
preliminary prospectus, and all amendments and supplements thereto, in
conformity with the requirements of the Securities Act, and such other
documents as the holders of Registrable Securities may reasonably
request in order to facilitate the disposition of the Registrable
Securities.
(d) Subject to the provisions of section 7.3(e), use its
best efforts to register and qualify the Registrable Securities
covered by the Registration Statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested
by the holders of Registrable Securities and to prepare and file in
those jurisdictions such amendments (including post-effective
amendments) and supplements and to take such other
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<PAGE> 10
actions as may be necessary to maintain such registration and
qualification in effect at all times, and to take all other actions
necessary or advisable to enable the disposition of such Registrable
Securities in such jurisdictions, provided that the Company shall not
be required in connection therewith or as a condition thereto to
qualify to do business or to file a general consent to service of
process in any such states or jurisdictions or to provide any
undertaking or make any change in its charter or bylaws which the
Board of Directors of the Company determines to be contrary to the
best interest of the Company and its stockholders.
(e) In the event any offering made pursuant to Section
7.1(a) is to be made through underwriters, select underwriters for the
offering who are reasonably satisfactory to the holders of the
Registrable Securities, enter into and perform its obligations under
an underwriting agreement, in usual and customary form, including,
without limitation, customary indemnification and contribution
obligations, with the managing underwriters(s) of such offering. The
holders of Registrable Securities shall also enter into and perform
their customary obligations under any such agreement including,
without limitation, customary indemnification and contribution
obligations. If the managing underwriter of a proposed public
offering shall advise the Company in writing that, in its opinion, the
distribution of the Registrable Securities requested to be included in
the registration concurrently with the securities being registered by
the Company or any demanding security holder would materially and
adversely affect the distribution of such securities by the Company or
such demanding security holders, then all selling security holders
(including the holder of such Registrable Securities) shall reduce the
amount of securities each intended to distribute through such offering
on a pro rata basis.
(f) Notify the holders of Registrable Securities at any
time when a prospectus relating to Registrable Securities covered by
the Registration Statement is required to be delivered under the
Securities Act, of the happening of any event as a result of which the
prospectus included in the Registration Statement, as then in effect,
includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then
existing. The Company shall promptly amend or supplement the
Registration Statement to correct any such untrue statement or
omission.
(g) Notify the holders of Registrable Securities of the
issuance by the SEC of any stop order suspending the effectiveness of
the Registration Statement or the initiation of any proceedings for
that purpose. The Company will make every reasonable effort to
prevent the issuance of any stop order and, if any stop order is
issued, to obtain the lifting thereof at the earliest possible time.
(h) Permit a single firm of counsel designated as
sellers' counsel by the holders of Registrable Securities to review
the Registration Statement and all amendments and supplements thereto
at a reasonable period of time prior to their filing, and, with
respect to any offering made pursuant to section 7.1(a), shall not
file any document in a form to which such counsel reasonably objects.
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(i) Make generally available to its security holders as
soon as practicable, but not later than 90 days after the close of the
period covered thereby, an earnings statement (in form complying with
the provisions of Rule 158 under the Securities Act) covering a 12
month period beginning not later than the first day of the Company's
fiscal quarter next following the effective date of the Registration
Statement.
(j) Furnish on the date that Registrable Securities are
delivered to any underwriters for sale in connection with a
registration pursuant to this section 7 (i) an opinion, dated such
date, of the counsel representing the Company for the purposes of such
registration, in form and substance as is customarily given to
underwriters in an underwritten public offering, addressed to the
underwriters and (ii) a letter dated such date, from the independent
certified public accountants of the Company, in form and substance as
is customarily given by independent certified public accountants to
underwriters in an underwritten public offering, addressed to the
underwriters.
(k) Make available for inspection by any holder of
Registrable Securities, any underwriters participating in the offering
pursuant to the registration and the counsel, accountants or other
agents retained by any holder of Registrable Securities or any such
underwriter, all pertinent financial and other records, corporate
documents and properties of the Company, and cause the Company's
officers, directors and employees to supply all information reasonably
requested by the holders of Registrable Securities or any such
underwriters in connection with the registration.
(l) If the Common Stock is then listed on a national
securities exchange, use its best efforts to cause the Registrable
Securities to be listed on such exchange. If the Common Stock is not
then listed on a national securities exchange, use its best efforts to
facilitate the reporting of the Common Stock on NASDAQ.
(m) Provide a transfer agent and registrar, which may be
a single entity, for the Registrable Securities not later than the
effective date of the Registration Statement.
(n) Take all actions reasonably necessary to facilitate
the timely preparation and delivery of certificates (not bearing any
restrictive legend) representing the Registrable Securities to be sold
pursuant to the Registration Statement and to enable such certificates
to be in such denominations and registered in such names as the
holders of Registrable Securities or any underwriters may reasonably
request.
(o) Take all other actions reasonably necessary to
expedite and facilitate disposition by the holders of Registrable
Securities of the Registrable Securities pursuant to the Registration
Statement.
7.4 Furnish Information. It shall be a condition
precedent to the obligations of the Company to take any action pursuant to this
section 7 with respect to each holder of Registrable Securities that such
holder shall furnish to the Company such information regarding itself, the
Registrable Securities held by such holder, and the intended method
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<PAGE> 12
of disposition of such securities as shall be reasonably required to effect the
registration of such Registrable Securities and shall execute such documents in
connection with such registration as the Company may reasonably request.
7.5 Expenses of Registration. All expenses other than
underwriting discounts and commissions incurred in connection with
registration, filings or qualifications pursuant to sections 7.1, 7.2 and 7.3,
including, without limitation, all registration, listing, filing and
qualification fees, printers and accounting fees, the fees and disbursements of
counsel for the Company and the reasonable fees and disbursements of one firm
of counsel for the holders of Registrable Securities, shall be borne by the
Company.
7.6 Indemnification. In the event any Registrable Securities are
included in a Registration Statement pursuant to this section 7:
(a) To the extent permitted by law, the Company will
indemnify and hold harmless each holder of Registrable Securities, the
directors, if any, of such holders, the officers, if any, of such
holders who sign the Registration Statement, each person, if any, who
controls such holders, any underwriter (as defined in the Securities
Act) for such holders and each person, if any, who controls any such
underwriter within the meaning of the Securities Act or the Exchange
Act, against any losses, claims, damages, expenses or liabilities
(joint or several) to which any of them may become subject under the
Securities Act, the Exchange Act or otherwise, insofar as such losses,
claims, damages, expenses or liabilities (or actions or proceedings,
whether commenced or threatened, in respect thereof) arise out of or
are based upon any of the following statements, omissions or
violations (collectively, a "Violation"): (i) any untrue statement or
alleged untrue statement of a material fact contained in the
Registration Statement, including any preliminary prospectus or final
prospectus contained therein or any amendments or supplements thereto,
(ii) the omission or alleged omission to state therein a material fact
required to be stated therein, or necessary to make the statements
therein, in light of the circumstances in which they were made, not
misleading or (iii) any violation or alleged violation by the Company
of the Securities Act, the Exchange Act, any state securities law or
any rule or regulation promulgated under the Securities Act, the
Exchange Act or any state securities law; and the Company will
reimburse each holder of Registrable Securities and each such
underwriter or controlling person, promptly as such expenses are
incurred, for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim,
damage, liability, action or proceeding; provided, however, that the
indemnity agreement contained in this section 7.6(a) shall not apply
to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent
of the Company, which consent shall not be unreasonably withheld, nor
shall the Company be liable in any such case for any such loss, claim,
damage, liability or action to the extent that it arises out of or is
based upon a Violation which occurs in reliance upon and in conformity
with written information furnished expressly for use in connection
with such registration by any such holder, underwriter or controlling
person, as the case may be. Such indemnity shall remain in full force
and effect regardless of any investigation made by or on behalf of the
holders of Registrable Securities or any such underwriter or
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<PAGE> 13
controlling person and shall survive the transfer of the Registrable
Securities by the original Warrantholder or any subsequent transferee.
(b) To the extent permitted by law, each holder of
Registrable Securities, severally and not jointly, will indemnify and
hold harmless the Company, each of its directors, each of its officers
who have signed the Registration Statement, each person, if any, who
controls the Company within the meaning of the Securities Act or the
Exchange Act, any underwriter and any other stockholder selling
securities pursuant to the Registration Statement or any of its
directors or officers or any person who controls such holder or
underwriter, against any losses, claims, damages or liabilities (joint
or several) to which any of them may become subject, under the
Securities Act, the Exchange Act or other federal or state law,
insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any Violation, in each
case to the extent (and only to the extent) that such Violation occurs
in reliance upon and in conformity with written information furnished
by such holder expressly for use in connection with such registration;
and such holder will reimburse any legal or other expenses reasonably
incurred by any of them in connection with investigating or defending
any such loss, claim, damage, liability or action; provided, however,
that the indemnity agreement contained in this section 7.6(b) shall
not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the
consent of such holder, which consent shall not be unreasonably
withheld; and provided further, that each holder of Registrable
Securities shall be liable under this paragraph (b) for only that
amount of losses, claims, damages and liabilities as does not exceed
the proceeds actually received by such holder as a result of the sale
of Registrable Securities pursuant to such registration.
(c) Promptly after receipt by an indemnified party under
this section 7.6 of notice of the commencement of any action
(including any governmental action), such indemnified party will, if a
claim in respect thereof is to be made against any indemnifying party
under this section 7.6, deliver to the indemnifying party a written
notice of the commencement thereof and the indemnifying party shall
have the right to participate in and, to the extent the indemnifying
party so desires, jointly with any other indemnifying party similarly
noticed, to assume control of the defense thereof with counsel
mutually satisfactory to the parties; provided, however, that an
indemnified party shall have the right to retain its own counsel, with
the fees and expenses to be paid by the indemnifying party, if, in the
reasonable opinion of counsel for the indemnified party representation
of such indemnified party by the counsel retained by the indemnifying
party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party
represented by counsel for the indemnifying party in such proceeding.
The failure to deliver written notice to the indemnifying party within
a reasonable time of the commencement of any such action shall relieve
such indemnifying party of any liability to the indemnified party
under this section 7.6 only to the extent prejudicial to its ability
to defend such action, but the omission so to deliver written notice
to the indemnifying party will not relieve it of any liability that it
may have to any
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indemnified party otherwise than under this section 7.6. The
indemnification required by this section 7.6 shall be made by periodic
payments of the amount thereof during the course of the investigation
or defense, promptly as such expense, loss, damage or liability is
incurred.
(c) To the extent any indemnification by an indemnifying
party is prohibited or limited by law, the indemnifying party agrees
to make the maximum contribution with respect to any amounts for which
it would otherwise be liable under this section 7.6 to the extent
permitted by law, provided that (i) no contribution shall be made
under circumstances where the maker would not have been liable for
indemnification under the fault standards set forth in this section
7.6, (ii) no seller of Registrable Securities guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any seller of
Registrable Securities who was not guilty of such fraudulent
misrepresentation and (iii) contribution by any seller of Registrable
Securities shall be limited in amount to the net amount of proceeds
received by such seller from the sale of such Registrable Securities.
7.7 Reports Under Securities Exchange Act of 1934. With a view to
making available to the holders of Registrable Securities the benefits of SEC
Rule 144 promulgated under the Securities Act and any other rule or regulation
of the SEC that may at any time permit the Warrantholder to sell securities of
the Company to the public without registration, the Company agrees to:
(a) make and keep public information available, as those
terms are understood and defined in SEC Rule 144, at all times after
90 days after the effective date of the first registration statement
filed by the Company for the offering of its securities to the general
public;
(b) file with the SEC in a timely manner all reports and
other documents required of the Company under the Securities Act and
the Exchange Act; and
(c) furnish to each holder of Registrable Securities, so
long as such holder owns any Registrable Securities, forthwith upon
request (i) a written statement by the Company that it has complied
with the reporting requirements of SEC Rule 144 (at any time after 90
days after the effective date of the first registration statement
filed by the Company), the Securities Act and the Exchange Act (at any
time after it has become subject to such reporting requirements), (ii)
a copy of the most recent annual or quarterly report of the Company
and such other reports and documents so filed by the Company and (iii)
such other information as may be reasonably requested in availing the
holders of Registrable Securities of any rule or regulation of the SEC
which permits the selling of any such securities without registration.
7.8 Assignment of Registration Rights. The rights to have the
Company register Registrable Securities pursuant to this section 7 shall be
deemed to have been assigned by the Warrantholder to its transferee or assignee
upon the assignment or transfer of the Registrable Securities pursuant to
section 4 hereof without any action on the part of the Warrantholder or such
transferee or assignee and the provisions of this Warrant shall be binding upon
and accrue to the benefit of such assignee
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or transferee and its successors and assigns. For purposes of section 7 of
this Agreement (i) the term "Holders of Registrable Securities" as used shall
include permitted assignees and (ii) the terms "register," "registered" and
"registration" shall refer to a registration effected by preparing and filing a
registration statement or statements or similar documents in compliance with
the Securities Act and pursuant to Rule 415 and the declaration or ordering of
effectiveness of such registration statement or document by the SEC.
8. 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
(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 party or any transfer of all or substantially all the assets of
the Company to any other party, or
(c) any voluntary or involuntary dissolution, liquidation
or winding up of the Company,
the Company will mail to the Warrantholder 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 any 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 and 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. Such
notice shall be mailed at least 30 days prior to the date therein specified, in
the case of any date referred to in the foregoing subdivision (i), and at least
30 days prior to the date therein specified, in the case of the date referred
to in the foregoing subdivision (ii).
9. Put Option.
9.1 Put Option. The Company hereby grants to the Warrantholder
the right and option (the "Put Option") to require the Company upon the
occurrence of a Put Event, on the terms and conditions set forth herein, to
purchase this Warrant or, if this Warrant had theretofore been exercised, all,
but not less than all, of the Warrant Shares then held by the Warrantholder.
9.2 Notices. In addition to the obligations of the Company under
section 8, within two days following the occurrence of any action or event that
could result in the occurrence of a Put Event, including
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without limitation, the execution of a letter of intent or binding agreement,
the Company shall notify the Warrantholder of (i) such action or event, (ii)
the date on which the Put Event is expected to occur, (iii) the nature of the
Put Event, (iv) the consideration to be paid to the Company or any shareholder
of the Company on such Put Event and (v) such other information as the
Warrantholder shall reasonably request.
9.3 Exercise of Put Option. At any time within 10 days following
the delivery by the Company of the notice referred to in section 9.2 but in any
event, prior to the occurrence of the Put Event, the Warrantholder may, but
shall not be obligated to, deliver notice to the Company stating that the
Warrantholder is exercising the Put Option. If the Warrantholder delivers such
notice and a Put Event occurs, the Company shall purchase this Warrant or all,
but not less than all, of the Warrant Shares then held by the Warrantholder, as
the case may be, on the terms and in the manner specified in sections 9.4 and
9.5.
9.4 Purchase Price. The purchase price for this Warrant or the
Warrant Shares, as the case may be, shall be equal to the product of (i) the
number of Warrant Shares then issuable upon the exercise of this Warrant or the
number of Warrant Shares then held by the Warrantholder, as the case may be,
multiplied by (ii) in the event of the occurrence of a Put Event specified in
clause (i) or (ii)(A) of the definition of Put Event set forth below, the
highest price per share paid to shareholders of the Company in such Put Event
or, in the event of the occurrence of a Put Event specified in clause (ii)(B)
of the definition of Put Event set forth below, the quotient obtained by
dividing (x) the aggregate purchase price paid to the Company in such Put Event
less, in the case of any Put Event, the aggregate payment the Warrantholder
would make to the Company if the Warrants of such Warrantholder were exercised
by (y) the number of shares of Common Stock then outstanding calculated on a
fully diluted basis assuming all of the Warrants are exercised. For purposes
of determining the number of Warrant Shares issuable upon the exercise of this
Warrant in making the calculation set forth above, effect shall be given to any
adjustment provided herein in the number of Warrant Shares issuable upon the
exercise of this Warrant as a result of the occurrence of the Put Event. The
cash value of any non- cash consideration paid to the shareholders of the
Company in a Put Event specified in clause (i) or (ii)(A) of the definition of
Put Event set forth below or to the Company in a Put Event specified in clause
(ii)(B) of the definition of Put Event set forth below shall be determined by
the good faith mutual agreement of the Warrantholder and the Company, or if no
such agreement can be reached within 30 days following the date on which notice
of the exercise of the Put Option is received by the Company, by an investment
banking firm mutually agreeable to the Warrantholder and the Company and
experienced in evaluating companies engaged in the line of business which the
Company is then engaged. The determination of any such investment banking firm
hereunder shall be final and binding upon the Company and the Warrantholder.
The fees of any such investment banking firm shall be paid one-half by the
Warrantholder and one-half by the Company.
9.5 Closing. The closing of any purchase hereunder of this
Warrant or the Warrant Shares, as the case may be, shall be held at the offices
of the Company simultaneously with or immediately prior to the closing of the
Put Event. At such closing, the Warrantholder shall deliver to the Company
this Warrant or the Warrant Shares, as the case may be, duly endorsed for
transfer and the Company shall deliver to the Warrantholder a certified or
official bank check for the purchase price thereof.
15
<PAGE> 17
10. Definitions. As used herein, unless the context otherwise requires,
the following terms have the following respective meanings:
Additional Securities: all shares, (including treasury shares) of
Common Stock, rights, options, warrants or convertible or exchangeable
securities containing the right to subscribe for or purchase shares of Common
Stock, issued or sold by the Company after the date hereof, excluding (i) any
shares of Common Stock, rights, options, warrants or convertible or
exchangeable securities (or shares of Common Stock issued upon conversion,
exchange or exercise, as the case may be, of such rights, options, warrants or
convertible or exchangeable securities) for which, an adjustment has been made
pursuant to section 6.1(a) or clauses (i) or (ii) of section 6.1(d), (ii) the
Warrant Shares and (iii) shares of Common Stock issued upon conversion,
exchange or exercise, as the case may be, of rights, options, warrants or
convertible or exchangeable securities, for which an adjustment has been made
in accordance with section 6.1(d)(iii) upon issuance of such rights, options,
warrants or convertible or exchangeable securities.
Assignment Form: an Assignment Form in the form annexed hereto as
Exhibit B.
Business Day: any day other than a Saturday, Sunday or a day on which
national banks are authorized by law to close in the City of New York.
Current Market Price: in respect of any share of Common Stock if there
shall then be a public market for the Common Stock, the average of the daily
market prices for 10 consecutive Business Days commencing 15 days before such
date; the daily market price for each such Business Day being (i) the last sale
price on such day on the principal stock exchange on which such Common Stock is
then listed or admitted to trading, (ii) if no sale takes place on such day on
any such exchange, the average of the last reported closing bid and asked
prices on such day as officially quoted on any such exchange, (iii) if the
Common Stock is not then listed or admitted to trading on any stock exchange,
the average of the last reported closing bid and asked prices on such day in
the over-the-counter market, as furnished by the NASDAQ, or the National
Quotation Bureau, Inc., (iv) if neither such corporation at the time is engaged
in the business of reporting such prices, as furnished by any similar firm then
engaged in such business, or (v) if there is no such firm, as furnished by any
member of the National Association of Securities Dealers, Inc. (the "NASD")
selected mutually by the Warrantholder and the Company or, if they cannot agree
upon such selection, as selected by two such members of the NASD, one of which
shall be selected by the Warrantholder and one of which shall be selected by
the Company.
Default: the occurrence of the event of default specified in
Section 12(a) of the Loan Agreement or the exercise of the acceleration rights
specified in clause (I) of Section 12 of the Loan Agreement.
Exchange Act: the Securities Exchange Act of 1934, as amended, or any
similar federal statute, and the rules and regulations of the SEC thereunder,
all as the same shall be in effect at the time.
Exercise Form: an Exercise Form in the form annexed hereto as
Exhibit A.
16
<PAGE> 18
Loan: as defined in the Loan Agreement.
Loan Agreement: the Loan and Security Agreement, dated as of December
15, 1992, among the Company, Citibank, N.A., as Agent, and the Lenders named
therein.
Permitted Issuances: (i) the issuance of shares of Common Stock upon
exercise of this Warrant, (ii) if there shall then be a public market for the
Common Stock, the issuance of shares of Common Stock upon receipt by the
Company of the Current Market Price therefor and (iii) at any time prior to the
time there is a public market for the Common Stock, the issuance of shares of
Common Stock in an arm's-length transaction with third persons not affiliated
with the Company for consideration equal to the fair value of such shares as
determined in good faith by the Board of Directors of the Company. Any
determination by the Board of Directors of the Company pursuant to the
preceding sentence may be challenged in good faith by the holders of all
remaining unexercised warrants issued pursuant to the Loan Agreement entitling
such holders to purchase at least 51% of the shares of Common Stock issuable
under such then exercised warrants and any dispute shall be resolved by an
investment banking firm of reorganized national standing selected and paid for
by the Company and reasonably acceptable to such holders or by any other method
as is then agreed to by the Company and such holders.
Put Event: the occurrence of any of the following: (i) the Company is
acquired by merger, consolidation or other business combination by any person
or group of persons (other than Thomas P. Tatham) or (ii) the acquisition,
directly or indirectly, by any person or group of persons (other than Thomas P.
Tatham) of (A) more than 50% of the capital stock of the Company or (B) more
than 50% of the assets of the Company, in either case, by way of negotiated
purchase or otherwise. For purposes hereof, the determination of whether
persons shall be deemed to be acting as a "group of persons" shall be made in
accordance with the provisions of Section 13(d)(3) of the Exchange Act.
Registrable Securities: (i) the Warrant Shares and other securities
issued or issuable upon exercise of this Warrant and (ii) any securities issued
or issuable with respect to any Common Stock or other securities referred to in
subdivision (i) by way of stock dividend or stock split or in connection with a
combination or other reorganization or otherwise.
Rule 415: Rule 415 under the Securities Act or any successor rule
providing for offering securities on a continuous basis.
SEC: the Securities and Exchange commission or any other federal
agency at the time administering the Securities Act or the Exchange Act,
whichever is the relevant statute for the particular purpose.
Securities Act: the Securities Act of 1933, as amended, or any similar
federal statute, and the rules and regulations of the SEC thereunder, all as
the same shall be in effect at the time.
11. Miscellaneous.
11.1 Entire Agreement. This Warrant constitutes the entire
agreement between the Company and the Warrantholder with respect to the
Warrants.
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<PAGE> 19
11.2 Binding Effects; Benefits. This Warrant shall inure to the
benefit of and shall be binding upon the Company and the Warrantholder and
their respective heirs, legal representatives, successors and assigns. Nothing
in this Warrant, expressed or implied, is intended to or shall confer on any
person other than the Company and the Warrantholder, or their respective heirs,
legal representatives, successors or assigns, any rights, remedies, obligations
or liabilities under or by reason of this Warrant.
11.3 Amendments and Waivers. This Warrant may not be modified or
amended except by an instrument or instruments in writing signed by the party
against whom enforcement of any such modification or amendment is sought.
Either the Company or the Warrantholder may, by an instrument in writing, waive
compliance by the other party with any term or provision of this Warrant on the
part of such other party hereto to be performed or complied with. The waiver
by any such party of a breach of any term or provision of this Warrant shall
not be construed as a waiver of any subsequent breach.
11.4 Section and Other Headings. The section and other headings
contained in this Warrant are for reference purposes only and shall not be
deemed to be a part of this Warrant or to affect the meaning or interpretation
of this Warrant.
11.5 Further Assurances. Each of the Company and the Warrantholder
shall do and perform all such further acts and things and execute and deliver
all such other certificates, instruments and documents as the Company or the
Warrantholder may, at any time and from time to time, reasonably request in
connection with the performance of any of the provisions of this Agreement.
11.6 Notices. All notices and other communications required or
permitted to be given under this Warrant shall be in writing and shall be
deemed to have been duly given if delivered personally or sent by mail, postage
prepaid, to the parties hereto at the following addresses or to such other
address as any party hereto shall hereafter specify by notice to the other
party hereto:
(a) if to the Company, addressed to:
DeepTech International Inc.
7500 Texas Commerce Tower
600 Travis
Houston, Texas 77002
Attention: Thomas P. Tatham
(b) if to the Warrantholder, addressed to the
address of such Warrantholder appearing on the books of the
Company.
Except as otherwise provided herein, all such notices and communications shall
be deemed to have been received on the date of delivery thereof, if delivered
personally, or on the third Business Day after the mailing thereof.
11.7 Separability. Any term or provision of this Warrant which is
invalid or unenforceable in any jurisdiction shall as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the terms and provisions of this Warrant or
affecting the validity or enforceability of
18
<PAGE> 20
any of the terms or provisions of this Warrant in any other jurisdiction.
11.8 GOVERNING LAW. THIS WARRANT SHALL BE DEEMED TO BE A CONTRACT
MADE UNDER THE LAWS OF THE STATE OF NEW YORK AND FOR ALL PURPOSES SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF SUCH STATE.
11.9 No Rights or Liabilities as Stockholder. Nothing contained in
this Warrant shall be determined as conferring upon the Warrantholder any
rights as a stockholder of the Company or as imposing any liabilities on the
Warrantholder to purchase any securities whether such liabilities are asserted
by the Company or by creditors or stockholders of the Company or otherwise.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed
by its duly authorized officer.
DEEPTECH INTERNATIONAL INC.
By:
-
Name:
Title:
Dated: January 21, 1997
19
<PAGE> 1
EXHIBIT 4.4
DEEPTECH WARRANT AGREEMENT
WARRANT AGREEMENT, dated as of February 16, 1996 (the
"Agreement"), between DEEPTECH INTERNATIONAL INC., a Delaware corporation (the
"Company"), and Donald A. Sanders (the "Lender").
W I T N E S S E T H :
WHEREAS, the Company, as maker, issued that certain Amended
and Restated Promissory Note dated as of February 16, 1996 payable to the
Lender, as payee, in the aggregate principal amount of four hundred eighty
thousand dollars ($480,000) (as the same may be amended, supplemented or
otherwise modified from time to time, the "DeepTech Note");
WHEREAS, in order to induce the Lender to make the loan to the
Company under the Note, the Company has agreed to execute and deliver this
Agreement and to issue to the Lender the warrants hereinafter described;
NOW, THEREFORE, in consideration of the premises herein
contained the parties hereto agree as follows:
1. DEFINITIONS
As used in this Agreement the following terms have the
respective meanings set forth below:
"Additional Shares of Common Stock" shall mean all shares of
Common Stock issued by the Company after the Closing Date, other than Warrant
Stock.
"Affiliate" shall mean as to any Person (the "Primary
Person"), any Person which, directly or indirectly, is in control of, is
controlled by, or is under common control with, the Primary Person. For
purposes of this definition, control of a Person shall mean the power, directly
or indirectly, to (i) vote 10% or more of the securities having ordinary voting
power for the election of directors of such Person or (ii) direct or cause the
direction of the management and policies of such Person whether by contract or
otherwise.
"Appraised Value" shall mean, in respect of any share of
Common Stock on any date herein specified, the fair market value of such share
of Common Stock (determined without giving effect to any discount for (i) a
minority interest or (ii) any lack of liquidity of the Common Stock or to the
fact that the Company may have no class of equity registered under the Exchange
Act) as of the last day of the most recent fiscal month to end within 60 days
prior to such date specified, based on the quotient obtained by dividing (x)
the value of the Company, as determined by an investment banking firm selected
in accordance with the terms of Section 14, by (y) the number of Fully Diluted
Outstanding shares of Common Stock.
"Book Value" shall mean, in respect of any share of Common
Stock on any date herein specified, the consolidated book value of the Company
applicable to Common Stock as of the last day of the month immediately
preceding such date, divided by the number of Fully Diluted Outstanding shares
<PAGE> 2
2
of Common Stock as determined in accordance with GAAP by a firm of independent
certified public accountants of recognized national standing selected by the
Company and reasonably acceptable to the Required Holders.
"Business Day" shall mean any day that is not a Saturday or
Sunday or a day on which banks are required or permitted to be closed in the
State of New York.
"Closing Date" shall mean the date the Warrants are initially
issued.
"Commission" shall mean the Securities and Exchange Commission
or any other federal agency then administering the Securities Act and other
federal securities laws.
"Common Stock" shall mean the common stock, $.01 par value per
share, of the Company, as constituted on the Closing Date, and any capital
stock into which such Common Stock may thereafter be changed, and shall also
include (i) capital stock of the Company of any other class (regardless of how
denominated) issued to the holders of shares of Common Stock upon any
reclassification thereof which is also not preferred as to dividends or assets
over any other class of stock of the Company and which is not subject to
redemption and (ii) shares of common stock of any successor or acquiring
corporation (as defined in Section 4.8) received by or distributed to the
holders of Common Stock of the Company in the circumstances contemplated by
Section 4.8.
"Contractual Obligation" shall mean, as to any Person, any
provision of any security issued by such Person or of any agreement, instrument
or other undertaking for which such Person is a party or by which it or any of
its property is bound.
"Convertible Securities" shall mean evidences of indebtedness,
shares of stock or other securities which are convertible into or exchangeable,
with or without payment of additional consideration in cash or property, for
Additional Shares of Common Stock, either immediately or upon the occurrence of
a specified date or a specified event.
"Current Market Price" shall mean, in respect of any share of
Common Stock on any date herein specified, (a) if there shall then be a public
market for the Common Stock, the average of the daily market prices for 10
consecutive Business Days commencing 15 days before such date; the daily market
price for each such Business Day being (i) the last sale price on such day on
the principal stock exchange on which such Common Stock is then listed or
admitted to trading, (ii) if no sale takes place on such day on any such
exchange, the average of the last reported closing bid and asked prices on such
day as officially quoted on any such exchange, (iii) if the Common Stock is not
then listed or admitted to trading on any stock exchange, the average of the
last reported closing bid and asked prices on such day in the over-the-counter
market, as furnished by the National Association of Securities Dealers
Automated Quotations System or the National Quotation Bureau, Inc., (iv) if
neither such corporation at the time is engaged in the business of reporting
such prices, as furnished by any similar firm then engaged in such business, or
(v) if there is no such firm, as furnished by any member of the NASD selected
mutually by the Required Holders and the Company or, if they cannot agree upon
such selection, as selected by two such members of the NASD, one of which shall
be selected by the Required Holders and one of which shall be selected by the
Company; or (b) at any time prior to the time there is a public market for the
Common Stock, the fair market value per share of Common Stock on such date as
mutually determined in good faith by the Required Holders and the board of
directors of the Company (determined without giving effect to any discount for
a minority interest, any restrictions on transferability or any lack of
liquidity of the Common Stock or to the fact that the Company has no class of
equity registered under the Exchange Act), such fair market value to be
determined by reference to the cash price that would be paid between a fully
informed buyer and seller under no compulsion to buy or sell, provided that (i)
if Current Market Price is being determined in connection with an issuance of
shares of Common Stock, warrants, options or Convertible Securities solely to
one or more Affiliates of the Company, then if so requested by the Required
Holders, Current Market Price shall be the Appraised Value; and (ii) Current
Market Price shall never be less than Book Value.
<PAGE> 3
3
"Current Warrant Price" shall mean, in respect of a share of
Common Stock at any date herein specified, $4.50 (which is the closing price
per share of the Common Stock on January 22, 1996 as reported on the National
Association of Securities Dealers Automated Quotation Systems), as adjusted
pursuant to this Agreement.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, or any similar federal statute, and the rules and regulations of
the Commission thereunder, all as the same shall be in effect from time to
time.
"Exercise Period" shall mean the period during which the
Warrants are exercisable pursuant to Section 2.2.
"Expiration Date" shall mean July 15, 1997.
"Fully Diluted Outstanding" shall mean, when used with
reference to Common Stock, at any date as of which the number of shares thereof
is to be determined, all shares of Common Stock Outstanding at such date and
all shares of Common Stock issuable in respect of the Warrants and other
options or warrants to purchase, or securities convertible into, shares of
common stock outstanding on such date which would be deemed outstanding in
accordance with GAAP for purposes of determining book value or net income per
share.
"GAAP" shall mean generally accepted accounting principles in
the United States of America as from time to time in effect.
"Holder" shall mean each Person in whose name the Warrants or
any Warrant Stock are registered on the books of the Company maintained for
such purpose.
"NASD" shall mean the National Association of Securities
Dealers, Inc., or any successor corporation thereto.
"Other Property" shall have the meaning set forth in Section
4.8.
"Outstanding" shall mean, when used with reference to Common
Stock, at any date as of which the number of shares thereof is to be
determined, all issued shares of Common Stock, except shares then owned or held
by or for the account of the Company or any Subsidiary, and shall include all
shares issuable in respect of outstanding scrip or any certificates
representing fractional interests in shares of Common Stock.
"Permitted Issuances" shall mean (i) the issuance of shares of
Common Stock upon exercise of the Warrants, (ii) the issuance of shares of
Common Stock pursuant to the securities identified on Schedule I hereto, (iii)
if there shall then be a public market for the Common Stock, the issuance of
shares of Common Stock upon receipt by the Company of the Current Market Price
therefor described in clause (a) of the definition of "Current Market Price",
(iv) the issuance of shares relating to any benefit plan, stock option plan or
any other compensation plan or arrangement offered solely to the officers,
directors, employees and/or consultants of the Company and its Affiliates which
plan or arrangement complies with Rule 16b-3 under the Exchange Act, and (v) at
any time prior to the time there is a public market for the Common Stock, the
issuance of shares of Common Stock in an arm's length transaction with third
Persons not affiliated with the Company for consideration equal to the fair
value of such shares as determined in good faith by the Board of Directors of
the Company. Any determination by the Board of Directors of the Company
pursuant to the preceding sentence may be challenged in good faith by Holders
of Warrants exercisable for in excess of 51% of the aggregate number of shares
of Common Stock then purchasable upon exercise of all Warrants, whether or not
then exercisable, and any dispute shall be resolved by an investment banking
firm of reorganized national standing selected and paid for by the Company and
reasonably acceptable to such Holders or by any other method as is then agreed
to by the Company and such Holders.
<PAGE> 4
4
"Person" shall mean any individual, sole proprietorship,
partnership, joint venture, trust, incorporated organization, association,
corporation, institution, public benefit corporation, entity or government
(whether federal, state, county, city, municipal or otherwise, including,
without limitation, any instrumentality, division, agency, body or department
thereof).
"Public Company" shall have the meaning set forth in Section
13.1.
"Registrable Securities" shall have the meaning set forth in
Section 9.3.
"Required Holders" shall mean the Holders of Warrants
exercisable for in excess of 50% of the aggregate number of shares of Common
Stock then purchasable upon exercise of all outstanding Warrants, whether or
not then exercisable.
"Requirement of Law" shall mean, as to any Person, the
certificate of incorporation and by-laws or other organizational or governing
documents of such Person, and any law, treaty, rule or regulation or
determination of an arbitration or a court or other governmental authority, in
each case applicable to or binding on such Person or any of the property
thereof or to which such Person or any of its property is subject.
"Restricted Common Stock" shall mean shares of Common Stock
which are, or which upon their issuance on the exercise of this Warrant would
be, evidenced by a certificate bearing the restrictive legend set forth in
Section 9.1.
"Securities Act" shall mean the Securities Act of 1933, as
amended, 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.
"Subsidiary" shall mean any Person of which an aggregate of
more than 50% of the outstanding stock or other ownership interests having
ordinary voting power to elect a majority of the board of directors or other
managers of such Person (irrespective of whether, at the time, stock or other
ownership interests of any other class or classes of such Person shall have or
might have voting power by reason of the happening of any contingency) is at
the time, directly or indirectly, owned legally or beneficially by the Company
and/or one or more Subsidiaries of the Company.
"Transfer Notice" shall have the meaning set forth in Section
9.2.
"Warrant Certificate" shall mean a certificate evidencing one
or more Warrants, substantially in the form of Exhibit A hereto, with such
changes therein as may be required to reflect any adjustments made pursuant to
Section 4.
"Warrant Price" shall mean an amount equal to (i) the number
of shares of Common Stock being purchased upon exercise of Warrants pursuant to
Section 2.2, multiplied by (ii) the Current Warrant Price as of the date of
such exercise.
"Warrant Stock" shall mean the shares of Common Stock
purchased by the Holders of the Warrants upon the exercise thereof.
"Warrants" shall mean the warrants issued pursuant to this
Agreement and shall include all warrants issued upon transfer, division or
combination of, or in substitution for, any thereof. All Warrants shall at all
times be identical as to terms and conditions and date, except as to the number
of shares of Common Stock for which they may be exercised. A Warrant shall
entitle the holder thereof to purchase from the Company one share of Common
Stock (subject to adjustment as provided in Section 4).
<PAGE> 5
5
2. ISSUANCE; EXERCISE OF WARRANT
2.1. Issuance of Warrants. The Company hereby agrees to
issue in favor of the Lender, on the Closing Date, 106,667 Warrants. On the
Closing Date the Company shall deliver to the Lender Warrant Certificates
evidencing the Warrants issued to the Lender. Each Warrant issued on the
Closing Date shall entitle the Holder thereof to purchase from the Company one
share of Common Stock (subject to adjustment as provided in Section 4).
2.2. Manner of Exercise. The Holder may at any time and from
time to time, from and after the Closing Date and until 5:00 P.M., New York
City time, on the Expiration Date, exercise the Warrants evidenced by a Warrant
Certificate, on any Business Day, for all or any part of the number of shares
of Common Stock purchasable thereunder.
In order to exercise the Warrants, in whole or in part, a
Holder shall deliver to the Company at its principal office at 7400 Texas
Commerce Tower, 600 Travis, Houston, Texas 77002, Attention: Thomas P. Tatham,
or at the office or agency designated by the Company pursuant to Section 12,
(i) a written notice of such Holder's election to exercise the Warrants, which
notice shall specify the number of shares of Common Stock to be purchased, (ii)
payment of the Warrant Price in the manner provided below, and (iii) the
Warrant Certificate or Warrant Certificates evidencing the Warrants. Such
notice shall be substantially in the form of the form of election to purchase
appearing at the end of the Warrant Certificate as Exhibit A, duly executed by
such Holder or its agent or attorney. Upon receipt thereof, the Company shall,
as promptly as practicable, and in any event within three (3) Business Days
thereafter, execute or cause to be executed and deliver or cause to be
delivered to such Holder a certificate or certificates representing the
aggregate number of full shares of Common Stock issuable upon such exercise,
together with cash in lieu of any fraction of a share, as hereinafter provided.
The stock certificate or certificates so delivered shall be, to the extent
possible, in such denomination or denominations as such Holder shall request in
the notice and shall be registered in the name of Holder or, subject to Section
9, such other name as shall be designated in the notice. The Warrants shall be
deemed to have been exercised and such certificate or certificates shall be
deemed to have been issued, and such Holder or any other Person so designated
to be named therein shall be deemed to have become a holder of record of such
shares for all purposes, as of the date the notice, together with the check or
checks representing payment of the Warrant Price and the Warrant Certificate or
Warrant Certificates, is received by the Company as described above and all
taxes required to be paid by such Holder, if any, pursuant to Section 2.3 prior
to the issuance of such shares have been paid. If the Warrants evidenced by a
Warrant Certificate shall have been exercised, the Company shall, at the time
of delivery of the certificate or certificates representing Warrant Stock,
deliver to Holder a new Warrant Certificate evidencing the rights of Holder to
purchase the unpurchased shares of Common Stock represented by the old Warrant
Certificate, which new Warrant Certificate shall in all other respects be
identical with the old Warrant Certificate. Notwithstanding any provision
herein to the contrary, the Company shall not be required to register shares in
the name of any Person who acquired any Warrant or any Warrant Stock otherwise
than in accordance with this Agreement.
Payment of the Warrant Price shall be made at the option of
the Holder (i) by certified or official bank check or (ii) if such Holder shall
then be a lender under the DeepTech Note, by such Holder's applying as credit,
on a dollar-for-dollar basis, an amount of outstanding principal and accrued
interest due under the DeepTech Note equal to the Warrant Price, such request
to be evidenced by delivery of the DeepTech Note to the Company together with
written instructions to the Company setting forth the amount of such credit and
authorizing the Company to cancel the DeepTech Note and, in the event there is
still principal outstanding under the DeepTech Note, to issue a replacement
promissory note or notes to the holder of the DeepTech Note in accordance with
such instructions or (iii) in immediately available funds or (iv) any
combination thereof.
2.3. Payment of Taxes. All shares of Common Stock issuable
upon the exercise of Warrants pursuant to the terms hereof shall be validly
issued, fully paid and nonassessable and without any preemptive rights. The
Company shall pay all expenses in connection with, and all taxes and other
governmental charges that may be imposed with respect to, the issuance or
delivery thereof, unless such
<PAGE> 6
6
tax or charge is imposed by law upon Holder, in which case such taxes or
charges shall be paid by Holder. The Company shall not be required, however,
to pay any tax or other charge imposed in connection with any transfer involved
in the issue of any certificate for shares of Warrant Stock issuable upon
exercise of Warrants in any name other than that of Holder, and in such case
the Company shall not be required to issue or deliver any stock certificate
until such tax or other charge has been paid or it has been established to the
satisfaction of the Company that no such tax or other charge is due.
2.4. Fractional Shares. The Company shall not be required to
issue a fractional share of Common Stock upon the exercise of Warrants. As to
any fraction of a share which the Holder of Warrants would otherwise be
entitled to purchase upon such exercise, the Company shall pay a cash
adjustment in respect of such final fraction in an amount equal to the same
fraction of the Current Market Price per share of Common Stock on the date of
exercise.
2.5. Continued Validity. A Holder of shares of Warrant Stock
(other than a holder who acquires such shares after the same have been publicly
sold pursuant to a Registration Statement under the Securities Act) shall
continue to be entitled with respect to such shares to all rights to which it
would have been entitled as Holder under Sections 6, 7, 9, 10, 11, 13 and 16 of
this Agreement. The Company will, at the time of each exercise of Warrants
upon the request of the Holder of the shares of Warrant Stock issued upon the
exercise thereof, acknowledge in writing, in form reasonably satisfactory to
such Holder, its continuing obligation to afford to such Holder all such
rights; provided, however, that if such Holder shall fail to make any such
request, such failure shall not affect the continuing obligation of the Company
to afford to such Holder all such rights.
3. TRANSFERS, DIVISION AND COMBINATION
3.1. Transfer. Subject to compliance with Section 9,
transfer of Warrants, in whole or in part, shall be registered on the books of
the Company to be maintained for such purpose, upon surrender of the Warrant
Certificate representing such Warrants at the principal office of the Company
referred to in Section 2.2 or the office or agency designated by the Company
pursuant to Section 12, together with a written assignment substantially in the
form of Exhibit B to the Warrant Certificate duly executed by the Holder or its
agent or attorney, an opinion of Holder's or transferee's counsel delivered to
the Company in connection with such transfer (which opinion shall be reasonably
satisfactory to the Company) that such transfer is being effected pursuant to
an effective registration statement under the Securities Act or an exemption
from registration thereunder and funds sufficient to pay any transfer taxes
payable by such Holder upon the making of such transfer. Upon such surrender
and, if required, such payment, the Company shall, subject to Section 9,
execute and deliver a new Warrant Certificate or Warrant Certificates in the
name of the assignee or assignees and in the denomination specified in such
instrument of assignment, and shall issue to the assignor a new Warrant
Certificate or Warrant Certificates evidencing the portion of the old Warrant
Certificate not so assigned, and the old Warrant Certificate shall promptly be
cancelled. A Warrant, if properly assigned in compliance with Section 9, may
be exercised by a new Holder for the purchase of shares of Warrant Stock
without having a new Warrant Certificate or Warrant Certificates issued. If
requested by the Company, a new Holder shall acknowledge in writing, in form
reasonably satisfactory to the Company, such Holder's continuing obligation
under Section 9.
3.2. Division and Combination. Subject to Section 9, any
Warrant Certificate may be divided or combined with other Warrant Certificates
upon presentation hereof at the aforesaid office or agency of the Company,
together with a written notice specifying the names and denominations in which
new Warrant Certificates are to be issued, signed by a Holder or its agent or
attorney. Subject to compliance with Section 3.1 as to any transfer which may
be involved in such division or combination, the Company shall execute and
deliver a new Warrant Certificate or Warrant Certificates in exchange for the
Warrant Certificate or Warrant Certificates to be divided or combined in
accordance with such notice.
<PAGE> 7
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3.3. Expenses. The Company shall prepare, issue and deliver
at its own expense (other than transfer taxes) the new Warrant Certificate or
Warrant Certificates under this Section 3.
3.4. Maintenance of Books. The Company agrees to maintain,
at its aforesaid office or agency, books for the registration and the
registration of transfer and exchange of the Warrants and the Warrant Stock.
4. ADJUSTMENTS
The number of shares of Warrant Stock for which Warrants are
exercisable, and the price at which such shares may be purchased upon exercise
of Warrants, shall be subject to adjustment from time to time as set forth in
this Section 4. The Company promptly shall give each Holder written notice of
any event described below which requires an adjustment pursuant to this Section
4 at the time of such event.
4.1. Stock Dividends, Subdivisions and Combinations. If at
any time after January 22, 1996 the Company shall:
(a) take a record of the holders of its Common Stock for the
purpose of entitling them to receive a dividend payable in, or other
distribution of, Additional Shares of Common Stock,
(b) subdivide its outstanding shares of Common Stock into a
larger number of shares of Common Stock, or
(c) combine its outstanding shares of Common Stock into a
smaller number of shares of Common Stock,
then (i) the number of shares of Common Stock for which a Warrant is
exercisable immediately after the occurrence of any such event shall be
adjusted to equal the number of shares of Common Stock which a record holder of
the same number of shares of Common Stock for which a Warrant is exercisable
immediately prior to the occurrence of such event would own or be entitled to
receive after the happening of such event, and (ii) the Current Warrant Price
shall be adjusted to equal the Current Warrant Price multiplied by a fraction,
the numerator of which shall be the number of shares of Common Stock for which
a Warrant is exercisable immediately prior to the adjustment and the
denominator of which shall be the number of shares for which a Warrant is
exercisable immediately after such adjustment.
4.2. Certain Other Distributions. If at any time after
January 22, 1996 the Company shall take a record of the holders of its Common
Stock for the purpose of entitling them to receive any dividend or other
distribution of:
(a) cash;
(b) any evidences of its indebtedness (other than Convertible
Securities), any shares of its stock (other than Additional Shares of
Common Stock or Convertible Securities) or any other securities or
property of any nature whatsoever (other than cash); or
(c) any warrants or other rights to subscribe for or purchase
any evidences of its indebtedness (other than Convertible Securities),
any shares of its stock (other than Additional Shares of Common Stock
or Convertible Securities) or any other securities or property of any
nature whatsoever;
then (i) the number of shares of Common Stock for which a Warrant is
exercisable shall be adjusted to equal the product obtained by multiplying the
number of shares of Common Stock for which a Warrant is exercisable immediately
prior to such adjustment by a fraction (A) the numerator of which shall be the
<PAGE> 8
8
Current Market Price per share of Common Stock at the date of taking such
record and (B) the denominator of which shall be such Current Market Price per
share of Common Stock, minus the amount allocable to one share of Common Stock
of any such cash so distributable and of the fair value (as determined in good
faith by the Board of Directors of the Company and supported by an opinion from
an investment banking firm of recognized national standing acceptable to the
Required Holders) of any and all such evidences of indebtedness, shares of
stock, other securities or property or warrants or other subscription or
purchase rights so distributable, and (ii) the Current Warrant Price shall be
adjusted to equal (A) the Current Warrant Price multiplied by the number of
shares of Common Stock for which a Warrant is exercisable immediately prior to
the adjustment divided by (B) the number of shares for which a Warrant is
exercisable immediately after such adjustment. A reclassification of the
Common Stock (other than a change in par value, or from par value to no par
value or from no par value to par value) into shares of Common Stock and shares
of any other class of stock shall be deemed a distribution by the Company to
the holders of its Common Stock of such shares of such other class of stock
within the meaning of this Section 4.2 and, if the outstanding shares of Common
Stock shall be changed into a larger or smaller number of shares of Common
Stock as a part of such reclassification, such change shall be deemed a
subdivision or combination, as the case may be, of the outstanding shares of
Common Stock within the meaning of Section 4.1.
4.3. Issuance of Additional Shares of Common Stock. (a) (i)
If at any time after January 22, 1996 the Company shall (except as hereinafter
provided) issue or sell any Additional Shares of Common Stock, other than
Permitted Issuances, for consideration in an amount per Additional Share of
Common Stock less than the Current Market Price, then the Current Warrant Price
shall be reduced to a price determined by dividing (A) an amount equal to the
sum of (X) the number of shares of Common Stock Outstanding immediately prior
to such issuance or sale multiplied by the then existing Current Warrant Price,
plus (Y) the consideration, if any, received by the Company upon such issuance
or sale, by (B) the total number of shares of Common Stock Outstanding
immediately after such issuance or sale and (ii) upon each adjustment of the
Current Warrant Price as a result of the calculations made pursuant to this
Section 4, each Warrant outstanding prior to the making of the adjustment in
the Current Warrant Price shall thereafter be treated as that number of
Warrants, and shall evidence the right to purchase, at the adjusted Current
Warrant Price, that number of shares of Common Stock outstanding, obtained by
(i) multiplying the number of shares of Common Stock for which a Warrant is
exercisable immediately prior to the adjustment by the Current Warrant Price in
effect immediately prior to the adjustment, and (ii) dividing the product so
obtained by the Current Warrant Price obtained immediately after such
adjustment of the Current Warrant Price.
(b) The provisions of paragraph (a) of Section 4.3 shall not
apply to any issuance of Additional Shares of Common Stock for which an
adjustment is provided under Section 4.1 or 4.2. No adjustment of the number
of shares of Common Stock for which a Warrant shall be exercisable shall be
made under paragraph (a) of Section 4.3 upon the issuance of any Additional
Shares of Common Stock which are issued pursuant to the exercise of any
warrants or other subscription or purchase rights or pursuant to the exercise
of any conversion or exchange rights in any Convertible Securities, if any such
adjustment shall previously have been made upon the issuance of such warrants
or other rights or upon the issuance of such Convertible Securities (or upon
the issuance of any warrant or other rights therefor) pursuant to Section 4.4
or Section 4.5.
4.4. Issuance of Warrants or Other Rights. (a) If at any
time after January 22, 1996 the Company shall take a record of the holders of
its Common Stock for the purpose of entitling them to receive a dividend or
distribution of, or shall in any manner (whether directly or by assumption in a
merger in which the Company is the surviving corporation) issue or sell, any
warrants or other rights to subscribe for or purchase any Additional Shares of
Common Stock or any Convertible Securities, whether or not the rights to
exchange or convert thereunder are immediately exercisable, and if the price
per share for which Common Stock is issuable upon the exercise of such warrants
or other rights or upon conversion or exchange of such Convertible Securities
shall be less than the Current Market Price in effect immediately prior to the
time of such distribution, issue or sale, then: (i) the number of shares of
Common Stock for which a Warrant is exercisable shall be adjusted to equal the
product obtained by
<PAGE> 9
9
multiplying the number of shares of Common Stock for which a Warrant is
exercisable immediately prior to the taking of such record or such issuance or
sale by a fraction (A) the numerator of which is the number of shares of Common
Stock which would be Outstanding immediately after the issuance or sale of the
maximum number of Additional Shares of Common Stock issuable pursuant to all
such warrants or other rights or necessary to effect the conversion or exchange
of all such Convertible Securities, and (B) the denominator of which is the
number of shares of Common Stock Outstanding immediately prior to the taking of
such record or the issuance or sale of such warrants or other rights; and (ii)
the Current Warrant Price shall be adjusted as provided in Section 4.3(a) on
the basis that (A) the maximum number of Additional Shares of Common Stock
issuable pursuant to all such warrants or other rights or necessary to effect
the conversion or exchange of all such Convertible Securities shall be deemed
to have been issued and outstanding, (B) the price per share for such
Additional Shares of Common Stock shall be deemed to be the lowest possible
price per share in any range of prices per share at which such Additional
Shares of Common Stock are available to such holders, and (C) the Company shall
be deemed to have received all of the consideration payable therefor, if any,
as of the date of the actual issuance of such warrants or other rights. No
further adjustments of the Current Warrant Price or number of Warrants shall be
made upon the actual issuance of such Common Stock or of such Convertible
Securities upon exercise of such warrants or other rights or upon the actual
issuance of such Common Stock upon such conversion or exchange of such
Convertible Securities.
(b) If any Additional Share of Common Stock issuable pursuant
to all such warrants or other rights or necessary to effect the conversion or
exchange of all such Convertible Securities is issuable in exchange for
consideration in an amount per such Additional Share of Common Stock equal to
or more than the greater of the Current Warrant Price and the Current Market
Price at the time such record is taken or such warrants or other rights are
issued or sold, then the Current Warrant Price as to the number of shares of
Common Stock for which a Warrant is exercisable prior to the adjustment under
Section 4.4(a)(i) shall not change, and the Current Warrant Price for each of
the incremental number of shares of Common Stock for which this Warrant becomes
exercisable after such adjustment shall be equal to the fair value of such
consideration per Additional Share of Common Stock.
4.5. Issuance of Convertible Securities. (a) If at any time
the Company shall take a record of the holders of its Common Stock for the
purpose of entitling them to receive a distribution of, or shall in any manner
(whether directly or by assumption in a merger in which the Company is the
surviving corporation) issue or sell, any Convertible Securities, whether or
not the rights to exchange or convert thereunder are immediately exercisable,
and if the price per share for which Common Stock is issuable upon such
conversion or exchange shall be less than the Current Market Price in effect
immediately prior to the time of such issue or sale of Convertible Securities,
then: (i) the number of shares of Common Stock for which a Warrant is
exercisable shall be adjusted to equal the product obtained by multiplying the
number of shares of Common Stock for which a Warrant is exercisable immediately
prior to the taking of such record or such issuance or sale by a fraction (A)
the numerator of which is the number of shares of Common Stock which would be
Outstanding immediately after the issuance or sale of the maximum number of
Additional Shares of Common Stock necessary to effect the conversion or
exchange of all such Convertible Securities, and (B) the denominator of which
is the number of shares of Common Stock Outstanding immediately prior to the
taking of such record or the issuance or sale of such Convertible Securities;
and (ii) the Current Warrant Price shall be adjusted as provided in Section
4.3(a) on the basis that (A) the maximum number of Additional Shares of Common
Stock necessary to effect the conversion or exchange of all such Convertible
Securities shall be deemed to have been issued and outstanding, (B) the price
per share of such Additional Shares of Common Stock shall be deemed to be the
lowest possible price in any range of prices at which such Additional Shares of
Common Stock are available to such holders, and (C) the Company shall be deemed
to have received all of the consideration payable therefor, if any, as of the
date of actual issuance of such Convertible Securities. No adjustment of the
Current Warrant Price shall be made under this Section 4.5 upon the issuance of
any Convertible Securities which are issued pursuant to the exercise of any
warrants or other subscription or purchase rights therefor, if any such
adjustment shall previously have been made upon the issuance of such warrants
or other rights pursuant to Section 4.4. No further adjustments of the Current
Warrant Price shall be made upon the actual issue of such Common Stock upon
conversion or exchange of such Convertible Securities and, if any issue or sale
of such Convertible Securities is made upon
<PAGE> 10
10
exercise of any warrant or other right to subscribe for or to purchase or any
warrant or other right to purchase any such Convertible Securities for which
adjustments of the Current Warrant Price have been or are to be made pursuant
to other provisions of this Section 4, no further adjustments of the Current
Warrant Price or number of Warrants shall be made by reason of such issue or
sale.
(b) If any Additional Share of Common Stock issuable upon
conversion or exchange of all such Convertible Securities is issuable in
exchange for consideration in an amount per such Additional Share of Common
Stock equal to the Current Market Price at the time such record is taken or
such Convertible Securities are issued or sold, then the Current Warrant Price
as to the number of shares of Common Stock for which this Warrant is
exercisable prior to the adjustment under Section 4.5(a)(i) shall not change,
but the Current Warrant Price for each of the incremental number of shares of
Common Stock for which a Warrant becomes exercisable after such adjustment
shall be equal to the fair value of such consideration per Additional Share of
Common Stock.
4.6. Superseding Adjustment. If, at any time after any
adjustment of the number of shares of Common Stock for which a Warrant is
exercisable shall have been made pursuant to Section 4.4 or Section 4.5 as the
result of any issuance of warrants, options, rights or Convertible Securities,
and such warrants, options or rights, or the right of conversion or exchange in
such other Convertible Securities, shall expire, and all or a portion of such
warrants, options or rights, or the right of conversion or exchange with
respect to all or a portion of such other Convertible Securities, as the case
may be, shall not have been exercised, then such previous adjustment shall be
rescinded and annulled and the Additional Shares of Common Stock which were
deemed to have been issued by virtue of the computation made in connection with
the adjustment so rescinded and annulled shall no longer be deemed to have been
issued by virtue of such computation. Thereupon, a recomputation shall be made
of the effect of such warrants, rights or options or other Convertible
Securities on the then outstanding Warrants, but not on any then outstanding
Warrant Stock, on the basis of treating the number of Additional Shares of
Common Stock or other property, if any, theretofore actually issued or issuable
pursuant to the previous exercise of any such warrants, rights or options or
any such right of conversion or exchange, as having been issued on the date or
dates of any such exercise and for the consideration actually received and
receivable therefor.
4.7. Other Provisions Applicable to Adjustments under this
Section. The following provisions shall be applicable to the making of
adjustments of the number of shares of Common Stock for which a Warrant is
exercisable provided for in this Section 4:
(a) Computation of Consideration. To the extent that any
Additional Shares of Common Stock or any Convertible Securities or any
warrants, options or other rights to subscribe for or purchase any
Additional Shares of Common Stock or any Convertible Securities shall
be issued for cash consideration, the consideration received by the
Company therefor shall be the amount of the cash received by the
Company therefor, or, if such Additional Shares of Common Stock or
Convertible Securities are offered by the Company for subscription,
the subscription price, or, if such Additional Shares of Common Stock
or Convertible Securities are sold to underwriters or dealers for
public offering without a subscription offering, the initial public
offering price (in any such case subtracting any amounts paid or
receivable for accrued interest or accrued dividends, but not
subtracting any compensation, discounts or expenses paid or incurred
by the Company for and in the underwriting of, or otherwise in
connection with, the issuance thereof). To the extent that such
issuance shall be for a consideration other than cash, then, except as
herein otherwise expressly provided, the amount of such consideration
shall be deemed to be the fair value of such consideration at the time
of such issuance as mutually determined in good faith by the Required
Holders and the Board of Directors of the Company. In case any
Additional Shares of Common Stock or any Convertible Securities or any
warrants or other rights to subscribe for or purchase such Additional
Shares of Common Stock or Convertible Securities shall be issued in
connection with any merger in which the Company issues any securities,
the amount of consideration therefor shall be deemed to be the fair
value, as mutually determined in good faith by the Required Holders
and the Board of Directors of the Company, of such portion of the
assets and business of the nonsurviving corporation as the
<PAGE> 11
11
Required Holders and such Board in good faith shall mutually determine
to be attributable to such Additional Shares of Common Stock,
Convertible Securities, warrants or other rights, as the case may be.
The consideration for any Additional Shares of Common Stock issuable
pursuant to any warrants, options or other rights to subscribe for or
purchase the same shall be the consideration received by the Company
for issuing such warrants or other rights plus the additional
consideration payable to the Company upon exercise of such warrants or
other rights. The consideration for any Additional Shares of Common
Stock issuable pursuant to the terms of any Convertible Securities
shall be the consideration, if any, received by the Company for
issuing warrants or other rights to subscribe for or purchase such
Convertible Securities, plus the consideration paid or payable to the
Company in respect of the subscription for or purchase of such
Convertible Securities, plus the additional consideration, if any,
payable to the Company upon the exercise of the right of conversion or
exchange in such Convertible Securities. In case of the issuance at
any time of any Additional Shares of Common Stock or Convertible
Securities in payment or satisfaction of any dividends upon any class
of stock other than Common Stock, the Company shall be deemed to have
received for such Additional Shares of Common Stock or Convertible
Securities a consideration equal to the amount of such dividend so
paid or satisfied.
(b) When Adjustments to Be Made. The adjustments required by
this Section 4 shall be made whenever and as often as any specified
event requiring an adjustment shall occur, except that any adjustment
that would otherwise be required may be postponed (except in the case
of a subdivision or combination of shares of the Common Stock, as
provided for in Section 4.1) up to, but not beyond, the date of
exercise of any Warrants if such adjustment either by itself or with
other adjustments not previously made adds or subtracts less than 1%
to the number of shares of Common Stock for which the Warrants
initially issued pursuant to this Agreement are exercisable
immediately prior to the making of such adjustment. Any adjustment
representing a change of less than such minimum amount (except as
aforesaid) which is postponed shall be carried forward and made as
soon as such adjustment, together with other adjustments required by
this Section 4 and not previously made, would result in a minimum
adjustment or on the date of exercise. For the purpose of any
adjustment, any specified event shall be deemed to have occurred at
the close of business on the date of its occurrence.
(c) Fractional Interests. In computing adjustments under
this Section 4, fractional interests in Common Stock resulting from an
issuance of additional Warrants to any Holder pursuant to this Section
4 shall be taken into account to the nearest 1/10th of a share.
(d) When Adjustment Not Required. If the Company shall take
a record of the holders of its Common Stock for the purpose of
entitling them to receive a dividend or distribution or subscription
or purchase rights and shall, thereafter and before the distribution
to stockholders thereof, legally abandon its plan to pay or deliver
such dividend, distribution, subscription or purchase rights, then
thereafter no adjustment shall be required by reason of the taking of
such record and any such adjustment previously made in respect thereof
shall be rescinded and annulled.
(e) Escrow of Warrant Stock. If after any property becomes
distributable pursuant to this Section 4 by reason of taking of any
record of the holders of Common Stock, but prior to the occurrence of
the event for which such record is taken, any Holder exercises
Warrants, any Additional Shares of Common Stock issuable upon exercise
by reason of such adjustment shall be deemed the last shares of Common
Stock for which this Warrant is exercised (notwithstanding any other
provision to the contrary herein) and such shares or other property
shall be held in escrow for Holder by the Company to be issued to
Holder upon and to the extent that the event actually takes place,
upon payment of the then Current Warrant Price. Notwithstanding any
other provision to the contrary herein, if the event for which such
record was taken fails to occur or is rescinded, then such escrowed
shares shall be cancelled by the Company and escrowed property
returned.
<PAGE> 12
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(f) Challenge to Good Faith Determination. Whenever the
Board of Directors of the Company shall be required to make a
determination in good faith of the fair value of any item under this
Section 4, such determination may be challenged in good faith by the
Required Holders, and any dispute shall be resolved by an investment
banking firm of recognized national standing selected and paid for by
the Company and reasonably acceptable to such Holders.
4.8. Reorganization, Reclassification, Merger, Consolidation
or Disposition of Assets. In case the Company shall reorganize its capital,
reclassify its capital stock, consolidate or merge with and into another
corporation (where the Company is not the surviving corporation or where there
is a change in or distribution with respect to the Common Stock of the
Company), or sell, transfer or otherwise dispose of all or substantially all
its property, assets or business to another corporation and, pursuant to the
terms of such reorganization, reclassification, merger, consolidation or
disposition of assets, shares of common stock of the successor or acquiring
corporation, or any cash, shares of stock or other securities or property of
any nature whatsoever (including warrants or other subscription or purchase
rights) in addition to or in lieu of common stock of the successor or acquiring
corporation ("Other Property"), are to be received by or distributed to the
holders of Common Stock of the Company, then each Holder shall have the right
thereafter to receive, upon exercise of a Warrant, solely the number of shares
of common stock of the successor or acquiring corporation or of the Company, if
it is the surviving corporation, and Other Property receivable upon or as a
result of such reorganization, reclassification, merger, consolidation, sale,
transfer or disposition by a holder of the number of shares of Common Stock for
which a Warrant is exercisable immediately prior to such event. In case of any
such reorganization, reclassification, merger, consolidation, sale, transfer or
disposition, the successor or acquiring corporation (if other than the Company)
shall expressly assume the due and punctual observance and performance of each
and every covenant and condition of this Agreement to be performed and observed
by the Company and all the obligations and liabilities hereunder, subject to
such modifications as may be deemed appropriate (as determined by resolution of
the Board of Directors of the Company) in order to provide for adjustments of
shares of the Common Stock for which a Warrant is exercisable which shall be as
nearly equivalent as practicable to the adjustments provided for in this
Section 4. For purposes of this Section 4.8 "common stock of the successor or
acquiring corporation" shall include stock of such corporation of any class
which is not preferred as to dividends or assets over any other class of stock
of such corporation and which is not subject to redemption and shall also
include any evidences of indebtedness, shares of stock or other securities
which are convertible into or exchangeable for any such stock, either
immediately or upon the arrival of a specified date or the happening of a
specified event and any warrants or other rights to subscribe for or purchase
any such stock. The foregoing provisions of this Section 4.8 shall similarly
apply to successive reorganizations, reclassifications, mergers,
consolidations, sales, transfers or dispositions.
5. NOTICES TO WARRANT HOLDERS
5.1. Notice of Adjustments. Whenever the number of shares of
Common Stock for which a Warrant is exercisable, or whenever the price at which
a share of such Common Stock may be purchased upon exercise of the Warrants,
shall be adjusted pursuant to Section 4, the Company shall forthwith prepare a
certificate to be executed by the chief financial officer of the Company
setting forth, in reasonable detail, the event requiring the adjustment and the
method by which such adjustment was calculated (including a description of the
basis on which the Board of Directors of the Company determined the fair value
of any evidences of indebtedness, shares of stock, other securities or property
or warrants or other subscription or purchase rights referred to in Section 4),
specifying the number of shares of Common Stock for which a Warrant is
exercisable and (if such adjustment was made pursuant to Section 4.8)
describing the number and kind of any other shares of stock or Other Property
for which a Warrant is exercisable, and any change in the purchase price or
prices thereof, after giving effect to such adjustment or change. As of the
date of this Agreement, no such certificate is required to be delivered. The
Company shall promptly cause a signed copy of such certificate to be delivered
to each Holder in accordance with Section 16.2. The Company shall keep at its
office or agency designated pursuant to Section 12 copies of all such
certificates and cause the same to be available for inspection at
<PAGE> 13
13
said office during normal business hours by any Holder or any prospective
purchaser of a Warrant designated by a Holder thereof.
5.2. Notice of Certain Corporate Action. Each Holder shall
be entitled to the same rights to receive notice of corporate action as any
holder of Common Stock.
6. REPRESENTATIONS AND WARRANTIES
The Company hereby represents and warrants as follows:
(a) The Company is a corporation duly organized and validly
existing under the laws of the State of Delaware, has the power and
authority to execute and deliver this Agreement and the Warrant
Certificates, to issue the Warrants and to perform its obligations
under this Agreement and the Warrant Certificates.
(b) The execution, delivery and performance by the Company of
this Agreement and the Warrant Certificates, the issuance of the
Warrants and the issuance of the Warrant Stock upon exercise of the
Warrants have been duly authorized by all necessary corporate action
and do not and will not violate, or result in a breach of, or
constitute a default under or require any consent under, or result in
the creation of any lien or security interest upon the assets of the
Company pursuant to, any Requirement of Law or any Contractual
Obligation binding upon the Company.
(c) This Agreement has been duly executed and delivered by
the Company and constitutes a legal, valid, binding and enforceable
obligation of the Company. When the Warrants and the Warrant
Certificates have been issued as contemplated hereby, (i) the Warrants
and the Warrant Certificates will constitute legal, valid, binding and
enforceable obligations of the Company and (ii) the Warrant Stock,
when issued upon exercise of the Warrants in accordance with the terms
hereof, will be duly authorized, validly issued, fully paid and
nonassessable shares of Common Stock with no personal liability
attaching to the ownership thereof.
(d) (i) The total number of shares of all classes of stock
that the Company shall on the Closing Date have authority to issue is
110,000,000 shares, consisting solely of (i) 100,000,000 shares of
Common Stock, par value $.01 per share, of which, after giving effect
to the transactions contemplated herein and all other issuances of
capital stock of the Company on or prior to the Closing Date,
16,614,918 shares of Common Stock will be issued and outstanding and
11,831,750 shares of Common Stock will be reserved for future issuance
for the purposes described in Schedule I, and (ii) 10,000,000 shares
of preferred stock par value $.01 per share, none of which were issued
and outstanding on the Closing Date. The delivery hereunder by the
Company to the Lender of the Warrants issued on the Closing Date will
transfer and convey to the Lender good and marketable title to such
Warrants and, upon exercise of such Warrants in accordance with this
Agreement, good and marketable title to the Common Stock purchased
upon such exercise, free and clear of all preemptive rights, liens,
charges and encumbrances, except for restrictions on transfer set
forth in this Agreement or arising under the Federal and state
securities laws. Except as set forth in this paragraph (d), the
Company does not have outstanding any stock or securities convertible
into or exchangeable for any shares of its stock, nor, except as so
set forth, does it have outstanding any agreements, rights or options
entitling any person to subscribe for or to purchase any capital stock
or securities convertible into or exchangeable for any of its shares
of stock. The Company is not subject to any obligation (contingent or
otherwise) to repurchase or otherwise acquire or retire any shares of
its capital stock.
(e) The Company has provided to the Holder a copy of the
Company's most recent Annual Report on Form 10-K and Quarterly Reports
on Form 10-Q filed since the date of the
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14
most recent Annual Report on Form 10-K. The information contained in
such disclosure documents, as of the date thereof, does not contain
any untrue statement of a material fact and does not omit to state a
material fact necessary in order to make the statements made, in light
of the circumstances under which they were made, not misleading.
6.2. Warrant Holders. Each Holder hereby represents and
warrants as follows:
(a) It is acquiring the Warrants for its own account, as
principal, for the purpose of investment and not with a view to or for
sale in connection with any distribution thereof. Each Holder hereby
represents that it will not offer to sell, sell or otherwise dispose
of any of the Warrants or any Warrant Stock in violation of the
Securities Act or any other applicable state or federal securities
laws.
(b) It has to its satisfaction reviewed the business and
affairs of the Company and understands the risks of, and other
considerations relating to, its receipt of the Warrant Stock. Such
Holder has been furnished a copy of the Company's most recent Annual
Report on Form 10-K and Quarterly Reports on Form 10-Q filed since the
date of the most recent Annual Report on Form 10-K, and all other
public information requested by it relating to the Company and its
activities and proposed activities.
(c) It has sufficient knowledge and experience in business
and financial matters to be capable of utilizing the information made
available to it to fully and completely evaluate the merits and risks
of owning the Warrant Stock.
(d) it has been furnished with or given adequate access to
such information about the Company and the Warrants as it has
requested, (ii) it has made its own independent inquiry and
investigation into, and based thereon has formed an independent
judgment concerning, the Company, (iii) it is able to bear the
economic risks of the investment in the Common Stock upon exercise of
the Warrants, (iv) it has such knowledge and experience in financial
and business matters as to be capable of evaluating the merits and
risks of an investment in the Company and (v) it is an "accredited
investor" within the meaning of "accredited investor" under Regulation
D of the Securities Act of 1933, as amended.
7. CERTAIN COVENANTS
7.1. No Impairment. The Company shall not by any action
including, without limitation, amending its certificate of incorporation or
through any reorganization, transfer of assets, consolidation, merger,
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
Agreement, but will at all times in good faith assist in the carrying out of
all such terms and in the taking of all such actions as may be necessary or
appropriate to protect the rights of each Holder against impairment. Without
limiting the generality of the foregoing, the Company will use reasonable good
faith efforts to obtain all such authorizations, exemptions or consents from
any public regulatory body having jurisdiction thereof as may be necessary to
enable the Company to perform its obligations under this Agreement.
Upon the request of a Holder, the Company will at any time
during the period this Agreement is in effect acknowledge in writing, in form
satisfactory to such Holder, the continuing validity of this Agreement and the
obligations of the Company hereunder.
7.2. Reservation and Authorization of Common Stock;
Registration with or Approval of any Governmental Authority. From and after the
Closing Date, the Company shall at all times reserve and keep available for
issue upon the exercise of Warrants such number of its authorized but unissued
shares of Common Stock as will be sufficient to permit the exercise in full of
all outstanding Warrants. All shares of Common Stock which shall be so
issuable, when issued upon exercise of any Warrants and payment therefor in
accordance with the terms of this Agreement, shall be duly and validly issued
and fully paid and nonassessable, and not subject to preemptive rights.
<PAGE> 15
15
Before taking any action which would cause an adjustment
reducing the Current Warrant Price below the then par value, if any, of the
shares of Common Stock issuable upon exercise of the Warrants, the Company
shall take any corporate action which may be necessary in order that the
Company may validly and legally issue fully paid and nonassessable shares of
such Common Stock at such adjusted Current Warrant Price.
Before taking any action which would result in an adjustment
in the number of shares of Common Stock for which a Warrant is exercisable or
in the Current Warrant Price, the Company shall obtain all such authorizations
or exemptions thereof, or consents thereto, as may be necessary from its
stockholders, any public regulatory body or bodies having jurisdiction thereof.
If any shares of Common Stock required to be reserved for
issuance upon exercise of Warrants require registration or qualification with
any governmental before such shares may be so issued, the Company will in good
faith and as expeditiously as possible and at its expense endeavor to cause
such shares to be duly registered.
8. TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS
In the case of all dividends or other distributions by the
Company to the holders of its Common Stock with respect to which any provision
of Section 4 refers to the taking of a record of such holders, the Company will
in each such case take such a record and will take such record as of the close
of business on a Business Day. The Company will not at any time, except upon
dissolution, liquidation or winding up of the Company, close its stock transfer
books or Warrant transfer books so as to result in preventing or delaying the
exercise or transfer of any Warrants or any Warrant Stock.
9. RESTRICTIONS ON TRANSFERABILITY
The Warrants and the Warrant Stock shall not be transferred
before satisfaction of the conditions specified in this Section 9, which
conditions are intended to ensure compliance with the provisions of the
Securities Act with respect to the transfer of any Warrant or any Warrant
Stock. Each Holder, by entering into this Agreement and accepting the
Warrants, agrees to be bound by the provisions of this Section 9.
9.1. Restrictive Legend. Except as otherwise provided in
this Section 9, each certificate representing Warrants or Warrant Stock, 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, or any
applicable state securities laws, and may not be sold or transferred
in the absence of such registration or an exemption therefrom. Such
securities are subject to the restrictions and privileges specified in
a Warrant Agreement, dated as of February 16, 1996, between the
Company and the initial holders of securities named therein, a copy of
which is on file with the Secretary of the Company and will be
furnished without charge to the holder hereof upon written request,
and the holder of this certificate agrees to be bound thereby."
9.2. Notice of Proposed Transfers; Requests for Registration.
Prior to any transfer of any Warrants or any shares of Restricted Common Stock,
the Holder of such Warrants or Restricted Common Stock shall give five days'
prior written notice to the Company of such Holder's intention to effect such
transfer (a "Transfer Notice"). Holder agrees that it will not sell, transfer
or otherwise dispose of Warrants or any shares of Restricted Common Stock, in
whole or in part, except pursuant to an effective registration statement under
the Securities Act or an exemption from registration thereunder. Each
certificate, if any, evidencing such shares of Restricted Common Stock issued
upon such transfer shall bear the restrictive legend set forth in Section 9.1,
and each Warrant Certificate issued upon such
<PAGE> 16
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transfer shall bear the restrictive legend set forth in Section 9.1, unless in
either case such transfer is pursuant to an effective registration statement
under the Securities Act or in the opinion of the transferee's or Holder's
counsel delivered to the Company in connection with such transfer (which
opinion shall be reasonably satisfactory to the Company) such legend is not
required in order to ensure compliance with the Securities Act.
The Holders of Warrants and Warrant Stock shall have the right
to require registration of such Warrants or Warrant Stock pursuant to Sections
9.3 and 9.4.
9.3. Required Registration. (a) After receipt of a written
request from the Holders of Warrants and/or Warrant Stock representing at least
50% of the total of (i) all shares of Warrant Stock then subject to purchase
upon exercise of all Warrants and (ii) all shares of Warrant Stock then
outstanding, requesting that the Company effect the registration of the
Warrants, the shares of Common Stock issuable upon the exercise of such
Holders' Warrants or of any of such Holders' Warrant Stock under the Securities
Act (all such securities collectively referred to as the "Registrable
Securities") and specifying the intended method or methods of disposition
thereof, the Company shall promptly notify all Holders of Warrants and Warrant
Stock in writing of the receipt of such request and each Holder, in lieu of
exercising its rights under Section 9.4, may elect (by written notice sent to
the Company within ten Business Days from the date of such Holder's receipt of
the aforementioned Company's notice) to have its Registrable Securities
included in such registration thereof pursuant to this Section 9.3(a).
Thereupon the Company shall, as expeditiously as is possible (and, in any
event, within 60 days after the request for registration), effect the
registration under the Securities Act of all Registrable Securities which the
Company has been so requested to register by such Holders for sale, subject to
the next sentence, all to the extent required to permit the disposition (in
accordance with the intended method or methods thereof, as aforesaid) of the
Registrable Securities so registered. If the managing underwriter of a
proposed public offering shall advise the Company in writing that, in its
opinion, the distribution of the Registrable Securities requested to be
included in the registration by the Holders would materially and adversely
affect the distribution of such securities, then all Holders selling
Registrable Securities shall reduce the amount of Registrable Securities each
intended to distribute through such offering on a pro rata basis. The Company
shall not be required to effect a registration hereunder if the Board of
Directors of the Company determines in the exercise of its reasonable judgment
that, due to a pending or contemplated acquisition or disposition, to effect
any such registration at such time would have a material adverse effect on the
Company, in which case such registration may be deferred for a single period
not to exceed ninety (90) days, provided the Company shall not register any of
its equity securities prior to the registration deferred under this sentence
except for registrations on Form S-4 and Form S-8; and in any event, the
Company shall not be required to effect more than two registrations of any
Registrable Securities pursuant to this Section 9.3(a). If the Company shall
defer a registration as set forth above, the Required Holders shall have the
right to withdraw the registration request by giving written notice to the
Company within 30 days after the receipt of the notice of deferral and, in the
event of such withdrawal, such registration request shall not be counted for
purposes of the number of registrations to which Holder is entitled pursuant to
this Section 9.3(a).
(b) Lockup.
(i) Subject to clause (ii) below, the Company agrees
not to effect any public sale or distribution of any Registrable
Securities or any similar securities, or any securities convertible
into or exchangeable or exercisable for Registrable Securities or such
similar securities (other than any such sale or distribution pursuant
to registrations on Form S-4 and Form S-8), commencing on the date the
Company receives a request from any Holder under Section 9.3(a) and
continuing until 120 days after the commencement of the related
underwritten offering under Section 9.3(a) (the "Lockup Period"),
where the managing underwriter so requests.
(ii) Notwithstanding anything to the contrary in
clause (i) above, (A) nothing in this Section 9.3(b) shall prevent or
impair the ability of other security holders of the Company holding
securities of the Company that give them, as of the date of this
Agreement, demand
<PAGE> 17
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registration rights with respect to Registrable Securities from
exercising their demand registration rights at any time during the
Lockup Period and (B) if at any time during the Lockup Period the
Company proposes to file on its behalf and/or on behalf of any of its
security holders a Registration Statement under the Securities Act on
any form (other than a Form S-4 or S-8 or any similar successor form
or any other registration statement relating to an exchange offer or
offering of securities solely to the Company's existing security
holders or employees), then the registration request of the Holder
requesting registration pursuant to Section 9.3(a) shall be deemed to
be an incidental registration in accordance with Section 9.4 and (x)
such registration shall not count as one of the two registration
requests available to such Holder pursuant to Section 9.3(a) and (y)
if the offering resulting from such registration shall be reduced in
size for any reason, such reduction shall not be made from the
Registrable Securities of any Holders entitled to register securities
pursuant to Section 9.3(a), but shall be made from the allocations of
all other parties (including the Company) registering their
securities.
9.4. Incidental Registration. If the Company at any time
proposes to file on its behalf and/or on behalf of any of its security holders
("the demanding security holders") a Registration Statement under the
Securities Act on any form (other than a Registration Statement on Form S-4 or
S-8 or any similar or successor form or any other registration statement
relating to an exchange offer or offering of securities solely to the Company's
existing security holders or employees), it will give written notice to all
Holders of Warrants or Warrant Stock at least twenty (20) days before the
anticipated date of initial filing with the Commission of such Registration
Statement, which notice shall set forth the Company's intention to effect such
a registration, the class or series and number of equity securities proposed to
be registered and the intended method of disposition of the securities proposed
to be registered by the Company. The notice shall offer to include in such
filing the aggregate number of shares of Registrable Securities, as such
Holders may request. Nothing in this Section 9.4 shall preclude the Company
from discontinuing the registration of its securities being effected on its
behalf under this Section 9.4 at any time prior to the effective date of the
registration relating thereto.
Each Holder desiring to have Registrable Securities registered
under this Section 9.4 shall advise the Company in writing within fifteen (15)
days after the date of receipt of such offer from the Company, setting forth
the amount of such Registrable Securities for which registration is requested.
The Company shall thereupon include in such filing the number of shares of
Registrable Securities for which registration is so requested, subject to the
next sentence, and shall use its best efforts to effect registration under the
Securities Act of such securities. If the managing underwriter of a proposed
public offering shall advise the Company in writing that, in its opinion, the
distribution of the Registrable Securities requested to be included in the
registration concurrently with the securities being registered by the Company
or any demanding security holder would materially and adversely affect the
distribution of such securities by the Company or such demanding security
holders, then all selling security holders shall reduce the amount of
securities each intended to distribute through such offering on a pro rata
basis.
9.5. Registration Procedures. If the Company is required by
the provisions of this Section 9 to use its best efforts to effect the
registration of any of its securities under the Securities Act, the Company
will, as expeditiously as possible:
(a) prepare and file with the Commission a Registration
Statement with respect to such securities and use its best efforts to
cause such Registration Statement to become and remain effective for
the period described in paragraph (b) below;
(b) prepare and file with the Commission such amendments and
supplements to such Registration Statement and the prospectus used in
connection therewith as may be necessary to keep such Registration
Statement effective and to comply with the provisions of the
Securities Act with respect to the sale or other disposition of all
securities covered by such Registration Statement until the earlier of
such time as all of such securities have been disposed of in a public
offering and the expiration of 180 days;
<PAGE> 18
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(c) furnish to such selling security holders or underwriter
such number of copies of a summary prospectus or other prospectus,
including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents, as such
selling security holders or underwriters may reasonably request;
(d) use its best efforts to register or qualify the
securities covered by such Registration Statement under such other
securities or blue sky laws of such jurisdictions within the United
States as each holder of such securities shall request (provided,
however, the Company shall not be obligated to qualify as a foreign
corporation to do business under the laws of any jurisdiction in which
it is not then qualified or to file any general consent to service or
process), and do such other reasonable acts and things as may be
required of it to enable such holder to consummate the disposition in
such jurisdiction of the securities covered by such Registration
Statement;
(e) unless waived in writing by each Holder of Registrable
Securities being included in such registration pursuant to Section
9.3, use its best efforts to obtain from either a nationally
recognized underwriter or investment banker or an underwriter or
investment banker reasonably acceptable to such Holder a firm
commitment (pursuant to an underwriting agreement in customary form)
to underwrite the public offering of the securities covered by such
Registration Statement;
(f) furnish, at the request of any Holder requiring or
requesting registration of Registrable Securities pursuant to Section
9.3 or 9.4, on the date that such Registrable Securities are delivered
to the underwriters for sale pursuant to such registration or, if such
Registrable Securities are not being sold through underwriters, on the
date that the Registration Statement with respect to such Registrable
Securities becomes effective, (1) an opinion, dated such date, of the
independent counsel representing the Company for the purposes of such
registration, addressed to the underwriters, or if such Registrable
Securities are not being sold through underwriters, then to the
Holders making such request, stating that such Registration Statement
has become effective under the Securities Act and that (i) to the best
knowledge of such counsel, no stop order suspending the effectiveness
thereof has been issued and no proceedings for that purpose have been
instituted or are pending before or contemplated by the Commission,
(ii) the Registration Statement, the related prospectus, and each
amendment or supplement thereto, comply as to form in all material
respects with the requirements of the Securities Act and the
applicable rules and regulations of the Commission thereunder (except
no opinion need be expressed with respect to the inclusion and content
of the financial statements and notes thereto and related schedules
and other financial, statistical or expertized information), (iii) to
the best knowledge of such counsel, the descriptions in the
Registration Statement or the prospectus, or any amendment or
supplement thereto, of all legal matters and contracts and other legal
documents or instruments known to such counsel, insofar as such
statements constitute a summary of legal matters, documents and
proceedings, are accurate and fairly present in all material respects
the information required to be shown, and (iv) to the best knowledge
of such counsel, such counsel does not know of any legal or
governmental proceedings, pending or contemplated, required to be
described in the Registration Statement or prospectus, or any
amendment or supplement thereto, which are not described as required,
nor of any contracts or documents or instruments of a character
required to be described in the Registration Statement or prospectus,
or any amendment or supplement thereto, or to be filed as exhibits to
the Registration Statement which are not described and filed or
incorporated by reference as required; such counsel shall also confirm
that it has no reason to believe that either the Registration
Statement or the prospectus, or any amendment or supplement thereto
contains any untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which made, not
misleading; and (2) a letter dated such date, from the independent
certified public accountants of the Company, addressed to the
underwriters, or if such Registrable Securities are not being sold
through underwriters, then to the Holder making such request and, if
such accountants refuse to deliver such letter to such Holder, then to
the Company stating that they are independent certified public
accountants within the meaning of the Securities Act and that, in the
opinion of
<PAGE> 19
19
such accountants, the financial statements and other financial data of
the Company included in the Registration Statement or the prospectus,
or any amendment or supplement thereto, comply as to form in all
material respects with the applicable accounting requirements of the
Securities Act. Such opinion of counsel shall additionally cover such
other legal matters with respect to the registration in respect of
which such opinion is being given as such Holders of Registrable
Securities may reasonably request. Such letter from the independent
certified public accountants shall additionally cover such other
financial matters (including information as to the period ending not
more than five (5) Business Days prior to the date of such letter)
with respect to the registration in respect of which such letter is
being given as such Holders of Registrable Securities may reasonably
request;
(g) enter into customary agreements (including an
underwriting agreement in customary form) and take such other actions
as are reasonably required in order to expedite or facilitate the
disposition of such Registrable Securities; and
(h) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make available
to its security holders, as soon as reasonably practicable, but not
later than 18 months after the effective date of the Registration
Statement, an earnings statement covering the period of at least 12
months beginning with the first full month after the effective date of
such Registration Statement, which earnings statements shall satisfy
the provisions of Section 11(a) of the Securities Act.
It shall be a condition precedent to the obligation of the
Company to take any action pursuant to this Section 9 in respect of the
securities which are to be registered at the request of any Holder of
Registrable Securities that such Holder shall furnish to the Company such
information regarding the securities held by such Holder and the intended
method of disposition thereof as the Company shall reasonably request and as
shall be required in connection with the action taken by the Company.
9.6. Expenses. All expenses incurred in complying with
Section 9, including, without limitation, all registration and filing fees
(including all expenses incident to filing with the NASD), printing expenses,
fees and disbursements of counsel for the Company, the reasonable fees and
expenses of one counsel for the selling security holders (selected by the
Person holding a majority of the securities being registered), expenses of any
special audits incident to or required by any such registration and expenses of
complying with the securities or blue sky laws of any jurisdictions pursuant to
Section 9.5(d), shall be paid by the Company, except that (a) the Company shall
not be liable for any discount or commission to any underwriter in respect of
the securities sold by such Holder of Registrable Securities and (b) the
Company shall not be obligated to pay more than $200,000 in connection with
registration made pursuant to Section 9.3.
9.7. Indemnification and Contribution. (a) In the event of
any registration of any of the Registrable Securities under the Securities Act
pursuant to this Section 9, the Company shall indemnify and hold harmless the
Holder of such Registrable Securities, such Holder's directors, officers,
employees, agents and attorneys and each other Person (including each
underwriter) who participated in the offering of such Registrable Securities
and each other Person, if any, who controls such Holder or such participating
Person within the meaning of the Securities Act, against any losses, claims,
damages, liabilities or expenses, joint or several (including, without limiting
the foregoing, the legal expenses incurred in connection with any such action,
suit or proceeding), to which such Holder or any such director, officer,
employee, agent, attorney or participating Person or controlling Person may
become subject under the Securities Act or any other statute or at common law,
insofar as such losses, claims, damages, liabilities or expenses (or actions in
respect thereof) arise out of or are based upon (i) any alleged untrue
statement of any material fact contained in any Registration Statement under
which such securities were registered under the Securities Act, any preliminary
prospectus or final prospectus contained therein, or any amendment or
supplement thereto, or (ii) any alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, and shall reimburse such Holder or such director, officer,
employee, agent, attorney or participating Person
<PAGE> 20
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or controlling Person for any legal or any other expenses incurred by such
Holder or such director, officer, employee, agent, attorney or participating
Person or controlling Person in connection with investigating or defending any
such loss, claim, damage, liability, expense or action; provided, however, that
the Company shall not be liable in any such case to the extent that any such
loss, claim, damage, liability or expense arises out of or is based upon any
alleged untrue statement or alleged omission made in such Registration
Statement, preliminary prospectus, prospectus or amendment or supplement in
reliance upon and in conformity with written information furnished to the
Company by such Holder specifically for use therein and in the case of any
non-underwritten offering, to the extent that any such losses, claims, damages,
liabilities or expenses result from the fact that a current copy of the
prospectus was not sent or given to the person asserting any such losses,
claims, damages, liabilities or expenses at or prior to the written
confirmation of the sale of the securities concerned to such person if it is
determined that it was the responsibility of such Holder to provide such person
with a current copy of the prospectus and such current copy of the prospectus
would have cured the defect giving rise to such losses, claims, damages,
liabilities or expenses. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such Holder or such
director, officer or participating Person or controlling Person, and shall
survive the transfer of such securities by such Holder.
(b) Each Holder of any Registrable Securities, by acceptance
thereof, agrees to indemnify and hold harmless the Company, its directors,
officers, employees, agents and attorneys and each other Person, if any, who
controls the Company within the meaning of the Securities Act against any
losses, claims, damages, liabilities or expenses, joint or several, to which
the Company or any such director or officer or any such Person may become
subject under the Securities Act or any other statute or at common law, insofar
as such losses, claims, damages, liabilities or expenses (or actions in respect
thereof) arise out of or are based upon information in writing provided to the
Company by such Holder of such Registrable Securities contained, on the
effective date thereof, in any Registration Statement under which securities
were registered under the Securities Act at the request of such Holder, any
preliminary prospectus or final prospectus contained therein, or any amendment
or supplement thereto or the fact that in the case of any non-underwritten
offering, a current copy of the prospectus was not sent to the Person asserting
such losses, claims, damages, liabilities or expenses at or prior to the
written confirmation of the sale of the securities with respect to such Person
if it is determined that it was the responsibility of such Holder to provide
such Person with a current copy of the prospectus and such current copy would
have cured the defect giving rise to such losses, claims, damages, liabilities
or expenses; provided, however, that such Warrant Holder's obligation under
this Section 9.7(b) to indemnify and hold harmless the Company shall in no
event exceed the lesser of (A) damage attributable solely to the inclusion of
such written information in such Registration Statement, preliminary
prospectus, final prospectus, or amendment or supplement suffered by the Person
or Persons whose claims gave rise to such losses, claims, damages or
liabilities and (B) the net proceeds received by such Holder from the sale of
its Registerable Securities.
(c) If the indemnification provided for in this Section 9
from the indemnifying party is unavailable to an indemnified party hereunder in
respect of any losses, claims, damages, liabilities or expenses referred to
herein, then the indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party and indemnified parties in connection with the actions which resulted in
such losses, claims, damages, liabilities or expenses, 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 in question, including any untrue or alleged untrue
statement of a material fact or 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 under this Section 9 as a result
of the losses, claims, damages, liabilities and expenses referred to above
shall be deemed to include any legal or other fees or expenses reasonably
incurred by such party in connection with any investigation or proceeding.
<PAGE> 21
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The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 9.7(c) were determined by
pro rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to in the immediately
preceding paragraph. Notwithstanding the provisions of this subsection (c), no
Holder shall be required to contribute any amount in excess of the net proceeds
received by it upon the sale of its securities pursuant to the Registration
Statement to which the losses, claims, damages, liabilities and expenses
referred to above relate. 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 obligations of each of the Holders under this
subsection (c) to contribute are several and not joint.
(d) Conduct of Indemnification Proceedings. Any person or
entity entitled to indemnification hereunder shall (i) give prompt written
notice to the indemnifying party after the receipt by the indemnified party of
a written notice of the commencement of any action, suit, proceeding or
investigation or threat thereof made in writing for which such indemnified
party will claim indemnification or contribution pursuant to this Agreement;
provided, however, that the failure of any indemnified party to give notice as
provided herein shall not relieve the indemnifying party of its obligations
under Section 9.7 hereof, except to the extent that the indemnifying party is
actually prejudiced by such failure to give notice, and (ii) unless in such
indemnified party's reasonable judgment a conflict of interest may exist
between such indemnified and indemnifying parties with respect to such claim,
permit such indemnifying party to assume the defense of such claim with counsel
reasonably satisfactory to the indemnified party. If the indemnifying party is
entitled to, and does, assume the defense of such claim, the indemnified party
shall have the right to employ separate counsel and to participate in the
defense thereof, but the fees and expenses of such counsel shall be borne by
the indemnified party. Whether or not such defense is assumed by the
indemnifying party, the indemnifying party shall not be subject to any
liability for any settlement made without its consent (but such consent will
not be unreasonably withheld). No indemnifying party shall be permitted to
consent to the entry of any judgment or to enter into any settlement that does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such indemnified party of a release from all liability in respect
of such claim or litigation. An indemnifying party who is not entitled to, or
elects not to, assume the defense of a claim shall not be obligated to pay the
fees and expenses of more than one counsel in any one jurisdiction for all
parties indemnified by such indemnifying party with respect to such claim,
unless in the reasonable judgment of any indemnified party a conflict of
interest may exist between such indemnified party and any other of such
indemnified parties with respect to such claim, in which event the indemnifying
party shall be obligated to pay the fees and expenses of such additional
counsel or counsels.
9.8. Termination of Restrictions. Notwithstanding the
foregoing provisions of Section 9, the restrictions imposed by this Section
upon the transferability of the Warrants, the Warrant Stock and the Restricted
Common Stock (or Common Stock issuable upon the exercise of the Warrants) and
the legend requirement of Section 9.1 shall terminate as to any particular
Warrant or share of Warrant Stock or Restricted Common Stock (or Common Stock
issuable upon the exercise of the Warrants) (i) when and so long as such
security shall have been effectively registered under the Securities Act and
disposed of pursuant thereto, or (ii) when the holder thereof shall have
delivered to the Company the written opinion of counsel to such holder, which
opinion shall be reasonably satisfactory to the Company, stating that such
legend is not required in order to ensure compliance with the Securities Act.
Whenever the restrictions imposed by Section 9 shall terminate as to any
Warrants or any Restricted Common Stock, as hereinabove provided, the Holder
thereof shall be entitled to receive from the Company, at the expense of the
Company, a new Warrant Certificate or a new certificate representing such
Common Stock, as the case may be, not bearing the restrictive legend set forth
in Section 9.1.
9.9. Listing on Securities Exchange. If the Company shall
list any shares of Common Stock on any securities exchange, it will, at its
expense, use its best efforts to list thereon, maintain and, when necessary,
increase such listing of, all shares of Common Stock issued or, to the extent
permissible under the applicable securities exchange rules, issuable upon the
exercise of the Warrants so long as any shares of Common Stock shall be so
listed during any such Exercise Period.
<PAGE> 22
22
9.10. Selection of Managing Underwriters. The managing
underwriter or underwriters for any offering of Registrable Securities to be
registered pursuant to Section 9.3 shall be an underwriter or underwriters of
nationally recognized standing selected by the Company.
10. SUPPLYING INFORMATION
The Company shall cooperate with each Holder of a Warrant and
each Holder of Restricted Common Stock in supplying such information as may be
reasonably 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 Warrant or Restricted Common Stock.
11. LOSS OR MUTILATION
Upon receipt by the Company from any Holder of evidence
reasonably satisfactory to it of the ownership of and the loss, theft,
destruction or mutilation of a certificate representing Warrants or Warrant
Stock and indemnity reasonably satisfactory to it (it being understood that the
written agreement of the Lender or an Affiliate thereof shall be sufficient
indemnity) and in case of mutilation upon surrender and cancellation hereof or
thereof, the Company will execute and deliver in lieu hereof or thereof a new
Warrant or new stock certificate as the case may be, of like tenor to such
Holder; provided, in the case of mutilation, no indemnity shall be required if
the certificate representing Warrants or Warrant Stock in identifiable form is
surrendered to the Company for cancellation.
12. OFFICE OF THE COMPANY
As long as any of the Warrants remain outstanding, the Company
shall maintain an office or agency (which may be the principal executive
offices of the Company) where the Warrants may be presented for exercise,
registration or transfer, division or combination as provided herein.
13. FINANCIAL AND BUSINESS INFORMATION
13.1. Quarterly Information. Except during any period when
the Company either (i) is subject to the reporting requirements of Section
15(d) of the Exchange Act, or (ii) has securities registered under Section
12(b) or 12(g) of the Exchange Act (such status being referred to as being a
"Public Company"), the Company will deliver to each Holder, as soon as
practicable after the end of each quarterly fiscal period in each fiscal year
of the Company, and in any event within 45 days thereafter, a copy of the
unaudited consolidated balance sheet as at the close of such quarter, and the
related unaudited consolidated statements of income, shareholders' equity and
cash flow of the Company and its Subsidiaries for that portion of the fiscal
year ending as of the close of such quarter. Such financial statements shall
be prepared by the Company in accordance with GAAP (subject to normal year end
adjustments and the inclusion of footnotes) and accompanied by the
certification of the Company's chief executive officer or chief financial
officer that, to the best of his knowledge, such financial statements are
complete and correct in all material respects and fairly present in accordance
with GAAP (subject to normal year end adjustments and the inclusions of
footnotes) the consolidated financial position, the consolidated statements of
income, shareholder equity and cash flow of the Company and its Subsidiaries as
at the end of such quarter and for such year-to-date period, as the case may
be.
13.2. Annual Information. Except during any period when the
Company is a Public Company, the Company will deliver to each Holder as soon as
practicable after the end of each fiscal year of the Company, and in any event
within 90 days thereafter, one copy of:
<PAGE> 23
23
(i) an audited consolidated balance sheet of the Company and
its Subsidiaries as at the end of such year, and
(ii) audited consolidated statements of income, shareholders'
equity and cash flow of the Company and its Subsidiaries for such year;
setting forth in each case in comparative form the figures for the
corresponding periods in the previous fiscal year; all prepared in accordance
with GAAP, and which audited financial statements shall be accompanied by (i) a
certification of the chief executive officer or chief financial officer of the
Company that, to the best of his knowledge, all such financial statements are
complete and correct in all material respects and present fairly in accordance
with GAAP the consolidated financial position of the Company and its
Subsidiaries as at the end of such fiscal year and for the period then ended,
(ii) an opinion thereon of the independent certified public accountants
regularly retained by the Company, or any other firm of independent certified
public accountants of recognized national standing selected by the Company, and
(iii) a report of such independent certified public accountants confirming any
adjustment made pursuant to Section 4 during such year.
13.3. Filings. The Company will file on or before the
required date all required regular or periodic reports (pursuant to the
Exchange Act) with the Commission and will deliver to each Holder promptly upon
their becoming available one copy of each report, notice or proxy statement
sent by the Company to its stockholders generally, and of each regular or
periodic report (pursuant to the Exchange Act) and any Registration Statement,
prospectus or written communication (other than transmittal letters) (pursuant
to the Securities Act), filed by the Company with (i) the Commission or (ii)
any securities exchange on which shares of Common Stock are listed.
14. APPRAISAL
The determination of the Appraised Value per share of Common
Stock shall be made by an investment banking firm of nationally recognized
standing selected by the Company and acceptable to the Required Holders. If
the investment banking firm selected by the Company is not acceptable to the
Required Holders and the Company and the Required Holders cannot agree on a
mutually acceptable investment banking firm, then the Required Holders and the
Company shall each choose one such investment banking firm and the respective
chosen firms shall agree on another investment banking firm which shall make
the determination. The Company shall retain, at its sole cost, such investment
banking firm as may be necessary for the determination of Appraised Value
required by the terms of this Agreement.
15. LIMITATION OF LIABILITY; NO RIGHTS AS STOCKHOLDER
No provision hereof, in the absence of affirmative action by
any Holder to purchase shares of Common Stock, and no enumeration herein of the
rights or privileges of any Holder, shall give rise to any liability of such
Holder for the purchase price of any Common Stock or as a stockholder of the
Company, whether such liability is asserted by the Company or by creditors of
the Company. Except as may otherwise be provided by law or by separate
agreement between a Holder and the Company, no Holder, as such, shall be
entitled to vote or be deemed the holder of Common Stock or any other
securities (other than Warrants) of the Company which may at any time be
issuable on the exercise hereof, nor shall anything contained herein be
construed to confer upon any Holder the rights of a stockholder of the Company
or the right to vote for the election of directors or upon any matters
submitted to stockholders at any meeting thereof, or to give or withhold
consent to any corporate action or to receive notice of meetings or other
actions affecting stockholders (except as provided herein), or to receive
dividends or otherwise, until the Warrants shall have been exercised in
accordance with the terms and conditions hereof.
<PAGE> 24
24
16. MISCELLANEOUS
16.1. Nonwaiver and Expenses. No course of dealing or any
delay or failure to exercise any right hereunder on the part of any Holder
shall operate as a waiver of such right or otherwise prejudice such Holder's
rights, powers or remedies. If the Company fails to make, when due, any
payments provided for hereunder, or fails to comply with any other provision of
this Agreement, the Company shall pay to the applicable Holders such amounts as
shall be sufficient to cover any costs and expenses including, but not limited
to, reasonable attorneys' fees, including those of appellate proceedings,
incurred by the Holders in collecting any amounts due pursuant hereto or in
otherwise enforcing any of its rights, powers or remedies hereunder.
16.2. Notice Generally. Any notice, demand, request,
consent, approval, declaration, delivery or other communication hereunder to be
made pursuant to the provisions of this Agreement shall be sufficiently given
or made if in writing and either delivered in person with receipt acknowledged
or sent by registered or certified mail, return receipt requested, postage
prepaid, telex, telecopier or overnight air courier guaranteeing next day
delivery, addressed as follows:
(a) If to any Holder, at its last known address appearing on
the books of the Company maintained for such purpose.
(b) If to the Company at:
Deeptech International, Inc.
7400 Texas Commerce Tower
600 Travis
Houston, Texas 77002
Attention: Thomas P. Tatham
Telecopy No.: (713) 224-7574
with a copy to:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.,
1900 Pennzoil Place - South Tower
711 Louisiana Street
Houston, Texas 77002
Attention: Rick L. Burdick
Telecopy No.: (713) 236-0822
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration, delivery or other communication hereunder shall
be deemed to have been duly given or served on the date on which personally
delivered, with receipt acknowledged, or three (3) Business Days after the same
shall have been deposited in the United States mail.
16.3. Indemnification. Except to the extent otherwise
provided in Section 9.7 the Company agrees to indemnify and hold harmless each
Holder, its officers, directors, employees, agents, and attorneys from and
against any liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, claims, costs, attorneys' fees, expenses and disbursements of
any kind which may be imposed upon, incurred by or asserted against such Holder
relating to or arising out of (i) such Holder's exercise of the Warrants and/or
ownership of any shares of Warrant Stock issued in consequence thereof, or (ii)
any litigation to which such Holder is made a party in its capacity as a
stockholder or warrantholder of the Company; provided, however, that the
Company will not be liable hereunder to the extent that any liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, claims,
costs, attorneys' fees, expenses or disbursements (A) arise from or relate to
any material violation by such Holder of any law or regulation applicable to it
or (B) are found in a final non-appealable judgment by a court to have resulted
from such Holder's gross negligence, bad faith or willful
<PAGE> 25
25
misconduct or material violation of law. The procedures to be followed for
claims of indemnification under this Section 16.3 shall be as set forth in
Section 9.7(d).
16.4. Remedies. Each Holder of Warrants and Warrant Stock,
in addition to being entitled to exercise all rights granted by law, including
recovery of damages, will be entitled to specific performance of its rights
under Section 9 of this Agreement. The Company agrees that monetary damages
would not be adequate compensation for any loss incurred by reason of a breach
by it of the provisions of Section 9 of this Agreement and hereby agrees to
waive the defense in any action for specific performance that a remedy at law
would be adequate.
16.5. Successors and Assigns. Subject to the provisions of
Section 3.1 and 9, this Agreement and the rights evidenced hereby shall inure
to the benefit of and be binding upon the successor of the Company and the
successors and assigns of any Holder. The provisions of this Agreement are
intended to be for the benefit of all Holders from time to time of the Warrants
and Warrant Stock, and shall be enforceable by any such Holder.
16.6. Amendment. This Agreement may be modified or amended
or the provisions hereof waived with the written consent of the Company and the
Required Holders, provided that no Warrant may be modified or amended to reduce
the number of shares of Common Stock for which such Warrant is exercisable or
to increase the price at which such shares may be purchased upon exercise of
such Warrant (before giving effect to any adjustment as provided therein)
without the prior written consent of the Holder thereof.
16.7. Severability. Wherever possible, each provision of
this Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Agreement.
16.8. Headings. The headings used in this Agreement are for
the convenience of reference only and shall not, for any purpose, be deemed a
part of this Agreement.
16.9. Governing Law; Consent to Jurisdiction and Venue. In
all respects, including all matters of construction, validity and performance,
this Agreement and the obligations arising hereunder shall be governed by, and
construed and enforced in accordance with, the laws of the State of New York
applicable to contracts made and performed in such state, without regard to the
principles thereof regarding conflict of laws, and any applicable laws of the
United States of America. THE COMPANY CONSENTS TO PERSONAL JURISDICTION,
WAIVES ANY OBJECTION AS TO JURISDICTION OR VENUE, AND AGREES NOT TO ASSERT ANY
DEFENSE BASED ON LACK OF JURISDICTION OR VENUE, IN THE COUNTY OF NEW YORK,
STATE OF NEW YORK. Service of process on the Company or any Holder in any
action arising out of or relating to this Agreement shall be effective if
mailed to such party in accordance with the procedures and requirements set
forth in Section 16.2. Nothing herein shall preclude any Holder or the Company
from bringing suit or taking other legal action in any other jurisdiction.
16.10. MUTUAL WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING
IN CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND
ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH
APPLICABLE STATE AND FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE
PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH
APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS 25
THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO
TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO ENFORCE OR DEFEND
ANY RIGHTS OR REMEDIES UNDER THIS AGREEMENT.
<PAGE> 26
26
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first above written.
DEEPTECH INTERNATIONAL INC.
By_______________________________
Name:
Title:
[LENDER]
By_______________________________
Name:
Title:
<PAGE> 27
EXHIBIT A
To Warrant
Agreement
[FORM OF WARRANT CERTIFICATE]
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES
LAWS, AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR
AN EXEMPTION THEREFROM. SUCH SECURITIES ARE SUBJECT TO THE RESTRICTIONS AND
PRIVILEGES SPECIFIED IN THE WARRANT AGREEMENT, DATED AS OF FEBRUARY 16, 1996,
BETWEEN DEEPTECH INTERNATIONAL INC. AND THE INITIAL HOLDER OF SECURITIES NAMED
THEREIN, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY AND WILL
BE FURNISHED WITHOUT CHARGE TO THE HOLDER HEREOF UPON WRITTEN REQUEST, AND THE
HOLDER OF THIS CERTIFICATE AGREES TO BE BOUND THEREBY.
No. __-__
WARRANT CERTIFICATE
DEEPTECH INTERNATIONAL INC.
This Warrant Certificate certifies that Don A. Sanders, or
registered assigns, is the registered holder of 106,667 Warrants (the
"Warrants") to purchase shares of common stock of Deeptech International Inc.
(the "Company"). Each Warrant entitles the holder, but only subject to the
conditions set forth herein and in the Warrant Agreement referred to below, to
purchase from the Company before 5:00 p.m., New York City time, on the
Expiration Date, as such term is defined in the Warrant Agreement, one fully
paid and nonassessable share of common stock of the Company (a "Warrant Share")
at a price (the "Exercise Price") of $4.50 per Warrant Share payable in lawful
money of the United States of America (subject to adjustment as provided in
Section 4 of the Warrant Agreement), or, as provided in Section 2.2 of the
Warrant Agreement, by applying such amounts as credit for outstanding principal
and interest due under certain debt of the Company, upon surrender of this
Warrant Certificate, execution of the annexed Election to Purchase Form and
payment of the Exercise Price at the office of the Company at 7400 Texas
Commerce Tower, 600 Travis, Houston, Texas 77002 or such other address as the
Company may specify in writing to the registered holder of the Warrants
evidenced hereby. The Exercise Price is subject to adjustment prior to the
Expiration Date upon the occurrence of certain events as set forth in the
Warrant Agreement. The Company may deem and treat the registered holders of
the Warrants evidenced hereby as the absolute owner thereof (notwithstanding
any notation of ownership or other writing hereon made by anyone), for the
purpose of any exercise hereof and of any distribution to the holders hereof,
and for all other purposes.
Warrant Certificates, when surrendered at the office of the
Company at the above-mentioned office address or at the Company's headquarters
by the registered holder hereof in person or by a legal representative duly
authorized in writing, may be exchanged, in the manner and subject to the
limitations provided in the Warrant Agreement, but without payment of any
service charge, for another Warrant Certificate or Warrant Certificates of like
tenor evidencing in the aggregate a like number of Warrants.
Upon due presentment for registration of transfer of this
Warrant Certificate at the office of the Company at the above-mentioned
address, a new Warrant Certificate or Warrant Certificates of like tenor and
evidencing in the aggregate a like number of Warrants shall be issued to the
transferee in exchange for this Warrant Certificate to the transferee(s) and,
if less than all the Warrants evidenced hereby are to be transferred, the
registered holder hereof, subject to the limitations provided in the Warrant
Agreement, without charge except for any tax or other governmental charge
imposed in connection therewith.
This Warrant Certificate is one of the Warrant Certificates
referred to in the Warrant Agreement, dated as of February 16, 1996, between
the Company and the initial holder of Warrants party
<PAGE> 28
2
thereto (the "Warrant Agreement"). Said Warrant Agreement is hereby
incorporated by reference in and made a part of this instrument and is hereby
referred to for a description of the rights, limitation of rights, obligations,
duties and immunities thereunder of the Company and the holders, and in the
event of any conflict between the terms of this Warrant Certificate and the
provisions of the Warrant Agreement, the provisions of the Warrant Agreement
shall control.
<PAGE> 29
IN WITNESS WHEREOF, the Company has caused this
Warrant Certificate to be duly executed and its corporate seal to be impressed
hereon and attached by its Secretary.
Dated: February 16, 1996
DEEPTECH INTERNATIONAL INC.
By_________________________________
Title:
(CORPORATE SEAL)
ATTEST:
__________________________
Secretary
<PAGE> 30
EXHIBIT A TO
WARRANT CERTIFICATE
ELECTION TO PURCHASE FORM
[To be executed only upon exercise of Warrants]
The undersigned registered owner of this Warrant Certificate
irrevocably exercises _____ Warrants for the purchase of ______ Shares of
Common Stock of Deeptech International Inc. and herewith makes payment
therefor, all at the price and on the terms and conditions specified in this
Warrant Certificate and the Warrant Agreement and requests that certificates
for the shares of Common Stock hereby purchased (and any securities or other
property issuable upon such exercise) be issued in the name of and delivered to
________________ whose address is ___________________ and, if such shares of
Common Stock shall not include all of the shares of Common Stock issuable as
provided in this Warrant Certificate, that a new Warrant Certificate of like
tenor and date for the balance of the shares of Common Stock issuable hereunder
be delivered to the undersigned.
______________________________
(Name of Registered Owner)
______________________________
(Signature of Registered Owner)
______________________________
(Street Address)
______________________________
(City) (State) (Zip Code)
<PAGE> 31
EXHIBIT B TO
WARRANT CERTIFICATE
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of this
Warrant Certificate hereby sells, assigns and transfers unto the assignee named
below all of the rights of the undersigned under this Warrant Certificate, with
respect to the number of shares of Common Stock set forth below:
Name and Address of Assignee No. of Shares of Common Stock
and does hereby irrevocably constitute and appoint ________________
attorney-in-fact to register such transfer on the books of Deeptech
International Inc. maintained for the purpose, with full power of substitution
in the premises.
Dated:_________________________
Name:__________________________
Signature:_____________________
Witness:_______________________
The assignee named above hereby agrees to purchase and take
the Warrant Certificate pursuant to and in accordance with the terms and
conditions of the Warrant Agreement, dated as of February 16, 1996, between
Deeptech International Inc. and the initial holder named therein and agrees to
be bound thereby.
Dated:___________________________
Name:____________________________
Signature:________________________
<PAGE> 32
<TABLE>
<CAPTION>
SCHEDULE I TO WARRANT AGREEMENT
DATE OF NUMBER OF EXERCISE
OPTION HOLDER WARRANT WARRANTS PRICE
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
DTI Funding, Inc. & Assignees 12/14/93 137,079 $13.50
DTI Funding, Inc. & Assignees 12/14/93 33,460 $13.50
Wilrig 11/8/94 1,100,000 $10.00
Highwood Partners, L.P. 12/5/95 372,973 $5.00
Highwood Partners, L.P. - Contingent 12/5/95 100,000 $5.00
DLJ & Assignees 2/19/93 1,182,872 $4.25
DLJ & Assignees 2/19/93 178,575 $4.25
Citicorp USA, Inc. 12/15/92 437,500 $4.00
Citicorp USA, Inc. 2/16/96 1,000,000.5 $4.50
Chemical Bank 7/20/92 250,000 $4.00
Lehman Commercial Paper Inc. 2/16/96 1,333,333.5 $4.50
Sandpiper & Co. 12/15/92 200,000 $4.00
Donald A. Sanders 12/15/92 60,000 $4.00
Katherine U. Sanders 12/15/92 60,000 $4.00
Del. Chtr. Guar. & Trust FBO R.B. Vincent IRA 12/15/92 33,482 $4.00
Anatar Investments Defined Benefit Plan 12/15/92 25,112 $4.00
Maged F. Riad and John C. Oran, Trustees
Under Whitman & Ranson Ret. Savings
Plan FBO William R. Ziegler 12/15/92 10,000 $4.00
Steven A. Webster 12/15/92 8,371 $4.00
Susan K. Stickney 12/15/92 7,000 $4.00
William R. Ziegler 12/15/92 6,741 $4.00
Chris M. Sanders 12/15/92 5,000 $4.00
Roberto Marsella 12/15/92 4,185 $4.00
David N. King 12/15/92 4,000 $4.00
Alfred King III 12/15/92 4,000 $4.00
Albert Stickney III 12/15/92 2,109 $4.00
Jansen Noyes, Jr. & Alfred King, Jr.
TTEE U/W Nancy Noyes King FBO
David N. King 12/15/92 2,000 $4.00
Jansen Noyes, Jr. & Alfred King, Jr.
TTEE U/W Nancy Noyes King FBO
Alfred King III 12/15/92 2,000 $4.00
Jansen Noyes, Jr. & Alfred King, Jr.
TTEE U/W Nancy Noyes King FBO Susan K. Stickney 12/15/92 2,000 $4.00
Jansen Noyes, Jr. 12/15/92 1,500 $4.00
Mike Willis 6/11/90 87,938 $3.41
Don A. Sanders 2/16/96 106,667 $4.50
John Drury 2/16/96 35,555 $4.50
------
TOTAL PER OPTION EXHIBIT SCHEDULE 6,793,453
OTHER OPTIONS ISSUED TO EMPLOYEES/DIRECTORS:
Gary Coburn 5/12/94 5,000 $13.50
Gary Huxford 5/12/94 1,000 $13.50
Thomas P. Tatham 12/1/94 100,000 $10.15
Thomas P. Tatham 2/16/96 333,333 $4.50
Thomas P. Tatham 2/16/96 1,333,333 $4.50
Grant E. Sims 12/1/94 50,000 $10.15
Donald V. Weir 12/1/94 50,000 $10.15
Donald S. Taylor 12/1/94 50,000 $10.15
Harry J. Briscoe 12/1/94 50,000 $10.15
Robert H. Williams 12/1/94 50,000 $10.15
</TABLE>
<PAGE> 33
2
<TABLE>
<CAPTION>
DATE OF NUMBER OF EXERCISE
OPTION HOLDER WARRANT WARRANTS PRICE
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
John H. Gray 12/1/94 50,000 $10.15
Thomas P. Tatham 9/8/95 300,000 $5.00
Grant E. Sims 12/1/92 75,000 $4.25
Grant E. Sims 12/1/92 75,000 $4.25
Grant E. Sims 12/1/92 75,000 $4.25
Harvey Fleisher 11/14/95 150,000 $4.00
Ben T. Morris 10/26/95 150,000 $4.00
Paul Thompson, III 10/26/95 150,000 $4.00
Laney Chouest/Alpha Marine Services 10/26/95 150,000 $4.00
Nancy Quinn 10/26/95 150,000 $4.00
Robert Fox 10/26/95 150,000 $4.00
Phil Clarke 10/26/95 150,000 $4.00
Mike Lam 10/26/95 150,000 $4.00
Donald V. Weir 11/14/95 125,000 $4.00
Grant Sims 11/14/95 100,000 $4.00
John Gray 11/14/95 100,000 $4.00
Keith Forman 11/14/95 50,000 $4.00
Antoine Gautreaux 11/14/95 75,000 $4.00
Eddie Moses 11/14/95 75,000 $4.00
Janet E. Sikes 11/14/95 75,000 $4.00
Kenneth E. Beeney 11/14/95 75,000 $4.00
Diana Walters 11/14/95 75,000 $4.00
James Lytal 11/14/95 50,000 $4.00
Jeff Lucas 11/14/95 50,000 $4.00
John Pike 11/14/95 50,000 $4.00
Ed Gibbon 11/14/95 50,000 $4.00
Dennis A. Kunetka 11/14/95 30,000 $4.00
Clyde Nath 10/25/95 30,000 $4.00
Lari Paradee 11/14/95 25,000 $4.00
Gary Hobbs 11/14/95 25,000 $4.00
Steve Noe 11/14/95 20,000 $4.00
Bill Moss 11/14/95 20,000 $4.00
Eddie Mitchell 11/14/95 20,000 $4.00
Wayne Lammert 11/14/95 10,000 $4.00
Ken Bass 11/14/95 10,000 $4.00
Director deferred comp - September 9/30/95 7,690 $4.00
Deferred Comp Plan - July 11/14/95 7,188 $4.00
Deferred Comp Plan - August 11/14/95 7,188 $4.00
Deferred Comp Plan - September 11/14/95 7,188 $4.00
Deferred Comp Plan - November 11/30/95 7,188 $4.00
Deferred Comp Plan - December 12/31/95 7,188 $4.00
Deferred Comp Plan - February 1/31/96 7,188 $4.00
Director deferred comp - July 7/31/95 4,690 $4.00
Director deferred comp - August 8/31/95 4,690 $4.00
Director deferred comp - November 11/30/95 7,504 $4.00
Director deferred comp - December 12/31/95 7,504 $4.00
Director deferred comp - February 1/31/96 7,504 $4.00
Director deferred comp - October 10/31/95 10,716 $3.99
Deferred Comp Plan - October 11/14/95 7,205 $3.99
---------
TOTAL OPTIONS ISSUED TO EMPLOYEES/DIRECTORS 5,038,297
---------
TOTAL OPTIONS OUTSTANDING AT 1/31/96 11,831,750
==========
</TABLE>
<PAGE> 34
WARRANT AGREEMENT
To Purchase Common Stock of
DeepTech International, Inc.
<PAGE> 1
EXHIBIT 4.5
DEEPTECH WARRANT AGREEMENT
WARRANT AGREEMENT, dated as of February 16, 1996 (the
"Agreement"), between DEEPTECH INTERNATIONAL INC., a Delaware corporation (the
"Company"), and JOHN DRURY (the "Lender").
W I T N E S S E T H :
WHEREAS, the Company, as maker, issued that certain Amended
and Restated Promissory Note dated as of February 16, 1996 payable to the
Lender, as payee, in the aggregate principal amount of one hundred sixty
thousand dollars ($160,000) (as the same may be amended, supplemented or
otherwise modified from time to time, the "DeepTech Note");
WHEREAS, in order to induce the Lender to make the loan to the
Company under the Note, the Company has agreed to execute and deliver this
Agreement and to issue to the Lender the warrants hereinafter described;
NOW, THEREFORE, in consideration of the premises herein
contained the parties hereto agree as follows:
1. DEFINITIONS
As used in this Agreement the following terms have the
respective meanings set forth below:
"Additional Shares of Common Stock" shall mean all shares of
Common Stock issued by the Company after the Closing Date, other than Warrant
Stock.
"Affiliate" shall mean as to any Person (the "Primary
Person"), any Person which, directly or indirectly, is in control of, is
controlled by, or is under common control with, the Primary Person. For
purposes of this definition, control of a Person shall mean the power, directly
or indirectly, to (i) vote 10% or more of the securities having ordinary voting
power for the election of directors of such Person or (ii) direct or cause the
direction of the management and policies of such Person whether by contract or
otherwise.
"Appraised Value" shall mean, in respect of any share of
Common Stock on any date herein specified, the fair market value of such share
of Common Stock (determined without giving effect to any discount for (i) a
minority interest or (ii) any lack of liquidity of the Common Stock or to the
fact that the Company may have no class of equity registered under the Exchange
Act) as of the last day of the most recent fiscal month to end within 60 days
prior to such date specified, based on the quotient obtained by dividing (x)
the value of the Company, as determined by an investment banking firm selected
in accordance with the terms of Section 14, by (y) the number of Fully Diluted
Outstanding shares of Common Stock.
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"Book Value" shall mean, in respect of any share of Common
Stock on any date herein specified, the consolidated book value of the Company
applicable to Common Stock as of the last day of the month immediately
preceding such date, divided by the number of Fully Diluted Outstanding shares
of Common Stock as determined in accordance with GAAP by a firm of independent
certified public accountants of recognized national standing selected by the
Company and reasonably acceptable to the Required Holders.
"Business Day" shall mean any day that is not a Saturday or
Sunday or a day on which banks are required or permitted to be closed in the
State of New York.
"Closing Date" shall mean the date the Warrants are initially
issued.
"Commission" shall mean the Securities and Exchange Commission
or any other federal agency then administering the Securities Act and other
federal securities laws.
"Common Stock" shall mean the common stock, $.01 par value per
share, of the Company, as constituted on the Closing Date, and any capital
stock into which such Common Stock may thereafter be changed, and shall also
include (i) capital stock of the Company of any other class (regardless of how
denominated) issued to the holders of shares of Common Stock upon any
reclassification thereof which is also not preferred as to dividends or assets
over any other class of stock of the Company and which is not subject to
redemption and (ii) shares of common stock of any successor or acquiring
corporation (as defined in Section 4.8) received by or distributed to the
holders of Common Stock of the Company in the circumstances contemplated by
Section 4.8.
"Contractual Obligation" shall mean, as to any Person, any
provision of any security issued by such Person or of any agreement, instrument
or other undertaking for which such Person is a party or by which it or any of
its property is bound.
"Convertible Securities" shall mean evidences of indebtedness,
shares of stock or other securities which are convertible into or exchangeable,
with or without payment of additional consideration in cash or property, for
Additional Shares of Common Stock, either immediately or upon the occurrence of
a specified date or a specified event.
"Current Market Price" shall mean, in respect of any share of
Common Stock on any date herein specified, (a) if there shall then be a public
market for the Common Stock, the average of the daily market prices for 10
consecutive Business Days commencing 15 days before such date; the daily market
price for each such Business Day being (i) the last sale price on such day on
the principal stock exchange on which such Common Stock is then listed or
admitted to trading, (ii) if no sale takes place on such day on any such
exchange, the average of the last reported closing bid and asked prices on such
day as officially quoted on any such exchange, (iii) if the Common Stock is not
then listed or admitted to trading on any stock exchange, the average of the
last reported closing bid and asked prices on such day in the over-the-counter
market, as furnished by the National Association of Securities Dealers
Automated Quotations System or the National Quotation Bureau, Inc., (iv) if
neither such corporation at the time is engaged in the business of reporting
such prices, as furnished by any similar firm then engaged in such business, or
(v) if there is no such firm, as furnished by any member of the NASD selected
mutually by the Required Holders and the Company or, if they cannot agree upon
such selection, as selected by two such members of the NASD, one of which shall
be selected by the Required Holders and one of which shall be selected by the
Company; or (b) at any time prior to the time there is a public market for the
Common Stock, the fair market value per share of Common Stock on such date as
mutually determined in good faith by the Required Holders and the board of
directors of the Company (determined without giving effect to any discount for
a minority interest, any restrictions on transferability or any lack of
liquidity of the Common Stock or to the fact that the Company has no class of
equity registered under the Exchange Act), such fair market value to be
determined by reference to the cash price that would be paid between a fully
informed buyer and seller under no compulsion to buy or sell, provided that (i)
if
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Current Market Price is being determined in connection with an issuance of
shares of Common Stock, warrants, options or Convertible Securities solely to
one or more Affiliates of the Company, then if so requested by the Required
Holders, Current Market Price shall be the Appraised Value; and (ii) Current
Market Price shall never be less than Book Value.
"Current Warrant Price" shall mean, in respect of a share of
Common Stock at any date herein specified, $4.50 (which is the closing price
per share of the Common Stock on January 22, 1996 as reported on the National
Association of Securities Dealers Automated Quotation Systems), as adjusted
pursuant to this Agreement.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, or any similar federal statute, and the rules and regulations of
the Commission thereunder, all as the same shall be in effect from time to
time.
"Exercise Period" shall mean the period during which the
Warrants are exercisable pursuant to Section 2.2.
"Expiration Date" shall mean July 15, 1997.
"Fully Diluted Outstanding" shall mean, when used with
reference to Common Stock, at any date as of which the number of shares thereof
is to be determined, all shares of Common Stock Outstanding at such date and
all shares of Common Stock issuable in respect of the Warrants and other
options or warrants to purchase, or securities convertible into, shares of
common stock outstanding on such date which would be deemed outstanding in
accordance with GAAP for purposes of determining book value or net income per
share.
"GAAP" shall mean generally accepted accounting principles in
the United States of America as from time to time in effect.
"Holder" shall mean each Person in whose name the Warrants or
any Warrant Stock are registered on the books of the Company maintained for
such purpose.
"NASD" shall mean the National Association of Securities
Dealers, Inc., or any successor corporation thereto.
"Other Property" shall have the meaning set forth in Section
4.8.
"Outstanding" shall mean, when used with reference to Common
Stock, at any date as of which the number of shares thereof is to be
determined, all issued shares of Common Stock, except shares then owned or held
by or for the account of the Company or any Subsidiary, and shall include all
shares issuable in respect of outstanding scrip or any certificates
representing fractional interests in shares of Common Stock.
"Permitted Issuances" shall mean (i) the issuance of shares of
Common Stock upon exercise of the Warrants, (ii) the issuance of shares of
Common Stock pursuant to the securities identified on Schedule I hereto, (iii)
if there shall then be a public market for the Common Stock, the issuance of
shares of Common Stock upon receipt by the Company of the Current Market Price
therefor described in clause (a) of the definition of "Current Market Price",
(iv) the issuance of shares relating to any benefit plan, stock option plan or
any other compensation plan or arrangement offered solely to the officers,
directors, employees and/or consultants of the Company and its Affiliates which
plan or arrangement complies with Rule 16b-3 under the Exchange Act, and (v) at
any time prior to the time there is a public market for the Common Stock, the
issuance of shares of Common Stock in an arm's length transaction with third
Persons not affiliated with the Company for consideration equal to the fair
value of such shares as determined in good faith by the Board of Directors of
the Company. Any
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determination by the Board of Directors of the Company pursuant to the
preceding sentence may be challenged in good faith by Holders of Warrants
exercisable for in excess of 51% of the aggregate number of shares of Common
Stock then purchasable upon exercise of all Warrants, whether or not then
exercisable, and any dispute shall be resolved by an investment banking firm of
reorganized national standing selected and paid for by the Company and
reasonably acceptable to such Holders or by any other method as is then agreed
to by the Company and such Holders.
"Person" shall mean any individual, sole proprietorship,
partnership, joint venture, trust, incorporated organization, association,
corporation, institution, public benefit corporation, entity or government
(whether federal, state, county, city, municipal or otherwise, including,
without limitation, any instrumentality, division, agency, body or department
thereof).
"Public Company" shall have the meaning set forth in Section
13.1.
"Registrable Securities" shall have the meaning set forth in
Section 9.3.
"Required Holders" shall mean the Holders of Warrants
exercisable for in excess of 50% of the aggregate number of shares of Common
Stock then purchasable upon exercise of all outstanding Warrants, whether or
not then exercisable.
"Requirement of Law" shall mean, as to any Person, the
certificate of incorporation and by-laws or other organizational or governing
documents of such Person, and any law, treaty, rule or regulation or
determination of an arbitration or a court or other governmental authority, in
each case applicable to or binding on such Person or any of the property
thereof or to which such Person or any of its property is subject.
"Restricted Common Stock" shall mean shares of Common Stock
which are, or which upon their issuance on the exercise of this Warrant would
be, evidenced by a certificate bearing the restrictive legend set forth in
Section 9.1.
"Securities Act" shall mean the Securities Act of 1933, as
amended, 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.
"Subsidiary" shall mean any Person of which an aggregate of
more than 50% of the outstanding stock or other ownership interests having
ordinary voting power to elect a majority of the board of directors or other
managers of such Person (irrespective of whether, at the time, stock or other
ownership interests of any other class or classes of such Person shall have or
might have voting power by reason of the happening of any contingency) is at
the time, directly or indirectly, owned legally or beneficially by the Company
and/or one or more Subsidiaries of the Company.
"Transfer Notice" shall have the meaning set forth in Section
9.2.
"Warrant Certificate" shall mean a certificate evidencing one
or more Warrants, substantially in the form of Exhibit A hereto, with such
changes therein as may be required to reflect any adjustments made pursuant to
Section 4.
"Warrant Price" shall mean an amount equal to (i) the number
of shares of Common Stock being purchased upon exercise of Warrants pursuant to
Section 2.2, multiplied by (ii) the Current Warrant Price as of the date of
such exercise.
"Warrant Stock" shall mean the shares of Common Stock
purchased by the Holders of the Warrants upon the exercise thereof.
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"Warrants" shall mean the warrants issued pursuant to this
Agreement and shall include all warrants issued upon transfer, division or
combination of, or in substitution for, any thereof. All Warrants shall at all
times be identical as to terms and conditions and date, except as to the number
of shares of Common Stock for which they may be exercised. A Warrant shall
entitle the holder thereof to purchase from the Company one share of Common
Stock (subject to adjustment as provided in Section 4).
2. ISSUANCE; EXERCISE OF WARRANT
2.1. Issuance of Warrants. The Company hereby agrees to
issue in favor of the Lender, on the Closing Date, 35,555 Warrants. On the
Closing Date the Company shall deliver to the Lender Warrant Certificates
evidencing the Warrants issued to the Lender. Each Warrant issued on the
Closing Date shall entitle the Holder thereof to purchase from the Company one
share of Common Stock (subject to adjustment as provided in Section 4).
2.2. Manner of Exercise. The Holder may at any time and from
time to time, from and after the Closing Date and until 5:00 P.M., New York
City time, on the Expiration Date, exercise the Warrants evidenced by a Warrant
Certificate, on any Business Day, for all or any part of the number of shares
of Common Stock purchasable thereunder.
In order to exercise the Warrants, in whole or in part, a
Holder shall deliver to the Company at its principal office at 7400 Texas
Commerce Tower, 600 Travis, Houston, Texas 77002, Attention: Thomas P. Tatham,
or at the office or agency designated by the Company pursuant to Section 12,
(i) a written notice of such Holder's election to exercise the Warrants, which
notice shall specify the number of shares of Common Stock to be purchased, (ii)
payment of the Warrant Price in the manner provided below, and (iii) the
Warrant Certificate or Warrant Certificates evidencing the Warrants. Such
notice shall be substantially in the form of the form of election to purchase
appearing at the end of the Warrant Certificate as Exhibit A, duly executed by
such Holder or its agent or attorney. Upon receipt thereof, the Company shall,
as promptly as practicable, and in any event within three (3) Business Days
thereafter, execute or cause to be executed and deliver or cause to be
delivered to such Holder a certificate or certificates representing the
aggregate number of full shares of Common Stock issuable upon such exercise,
together with cash in lieu of any fraction of a share, as hereinafter provided.
The stock certificate or certificates so delivered shall be, to the extent
possible, in such denomination or denominations as such Holder shall request in
the notice and shall be registered in the name of Holder or, subject to Section
9, such other name as shall be designated in the notice. The Warrants shall be
deemed to have been exercised and such certificate or certificates shall be
deemed to have been issued, and such Holder or any other Person so designated
to be named therein shall be deemed to have become a holder of record of such
shares for all purposes, as of the date the notice, together with the check or
checks representing payment of the Warrant Price and the Warrant Certificate or
Warrant Certificates, is received by the Company as described above and all
taxes required to be paid by such Holder, if any, pursuant to Section 2.3 prior
to the issuance of such shares have been paid. If the Warrants evidenced by a
Warrant Certificate shall have been exercised, the Company shall, at the time
of delivery of the certificate or certificates representing Warrant Stock,
deliver to Holder a new Warrant Certificate evidencing the rights of Holder to
purchase the unpurchased shares of Common Stock represented by the old Warrant
Certificate, which new Warrant Certificate shall in all other respects be
identical with the old Warrant Certificate. Notwithstanding any provision
herein to the contrary, the Company shall not be required to register shares in
the name of any Person who acquired any Warrant or any Warrant Stock otherwise
than in accordance with this Agreement.
Payment of the Warrant Price shall be made at the option of
the Holder (i) by certified or official bank check or (ii) if such Holder shall
then be a lender under the DeepTech Note, by such Holder's applying as credit,
on a dollar-for-dollar basis, an amount of outstanding principal and accrued
interest due under the DeepTech Note equal to the Warrant Price, such request
to be evidenced by
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delivery of the DeepTech Note to the Company together with written instructions
to the Company setting forth the amount of such credit and authorizing the
Company to cancel the DeepTech Note and, in the event there is still principal
outstanding under the DeepTech Note, to issue a replacement promissory note or
notes to the holder of the DeepTech Note in accordance with such instructions
or (iii) in immediately available funds or (iv) any combination thereof.
2.3. Payment of Taxes. All shares of Common Stock issuable
upon the exercise of Warrants pursuant to the terms hereof shall be validly
issued, fully paid and nonassessable and without any preemptive rights. The
Company shall pay all expenses in connection with, and all taxes and other
governmental charges that may be imposed with respect to, the issuance or
delivery thereof, unless such tax or charge is imposed by law upon Holder, in
which case such taxes or charges shall be paid by Holder. The Company shall
not be required, however, to pay any tax or other charge imposed in connection
with any transfer involved in the issue of any certificate for shares of
Warrant Stock issuable upon exercise of Warrants in any name other than that of
Holder, and in such case the Company shall not be required to issue or deliver
any stock certificate until such tax or other charge has been paid or it has
been established to the satisfaction of the Company that no such tax or other
charge is due.
2.4. Fractional Shares. The Company shall not be required to
issue a fractional share of Common Stock upon the exercise of Warrants. As to
any fraction of a share which the Holder of Warrants would otherwise be
entitled to purchase upon such exercise, the Company shall pay a cash
adjustment in respect of such final fraction in an amount equal to the same
fraction of the Current Market Price per share of Common Stock on the date of
exercise.
2.5. Continued Validity. A Holder of shares of Warrant Stock
(other than a holder who acquires such shares after the same have been publicly
sold pursuant to a Registration Statement under the Securities Act) shall
continue to be entitled with respect to such shares to all rights to which it
would have been entitled as Holder under Sections 6, 7, 9, 10, 11, 13 and 16 of
this Agreement. The Company will, at the time of each exercise of Warrants
upon the request of the Holder of the shares of Warrant Stock issued upon the
exercise thereof, acknowledge in writing, in form reasonably satisfactory to
such Holder, its continuing obligation to afford to such Holder all such
rights; provided, however, that if such Holder shall fail to make any such
request, such failure shall not affect the continuing obligation of the Company
to afford to such Holder all such rights.
3. TRANSFERS, DIVISION AND COMBINATION
3.1. Transfer. Subject to compliance with Section 9,
transfer of Warrants, in whole or in part, shall be registered on the books of
the Company to be maintained for such purpose, upon surrender of the Warrant
Certificate representing such Warrants at the principal office of the Company
referred to in Section 2.2 or the office or agency designated by the Company
pursuant to Section 12, together with a written assignment substantially in the
form of Exhibit B to the Warrant Certificate duly executed by the Holder or its
agent or attorney, an opinion of Holder's or transferee's counsel delivered to
the Company in connection with such transfer (which opinion shall be reasonably
satisfactory to the Company) that such transfer is being effected pursuant to
an effective registration statement under the Securities Act or an exemption
from registration thereunder and funds sufficient to pay any transfer taxes
payable by such Holder upon the making of such transfer. Upon such surrender
and, if required, such payment, the Company shall, subject to Section 9,
execute and deliver a new Warrant Certificate or Warrant Certificates in the
name of the assignee or assignees and in the denomination specified in such
instrument of assignment, and shall issue to the assignor a new Warrant
Certificate or Warrant Certificates evidencing the portion of the old Warrant
Certificate not so assigned, and the old Warrant Certificate shall promptly be
cancelled. A Warrant, if properly assigned in compliance with Section 9, may
be exercised by a new Holder for the purchase of shares of Warrant Stock
without having a new Warrant Certificate or Warrant Certificates issued. If
requested by the Company, a new Holder shall
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acknowledge in writing, in form reasonably satisfactory to the Company, such
Holder's continuing obligation under Section 9.
3.2. Division and Combination. Subject to Section 9, any
Warrant Certificate may be divided or combined with other Warrant Certificates
upon presentation hereof at the aforesaid office or agency of the Company,
together with a written notice specifying the names and denominations in which
new Warrant Certificates are to be issued, signed by a Holder or its agent or
attorney. Subject to compliance with Section 3.1 as to any transfer which may
be involved in such division or combination, the Company shall execute and
deliver a new Warrant Certificate or Warrant Certificates in exchange for the
Warrant Certificate or Warrant Certificates to be divided or combined in
accordance with such notice.
3.3. Expenses. The Company shall prepare, issue and deliver
at its own expense (other than transfer taxes) the new Warrant Certificate or
Warrant Certificates under this Section 3.
3.4. Maintenance of Books. The Company agrees to maintain,
at its aforesaid office or agency, books for the registration and the
registration of transfer and exchange of the Warrants and the Warrant Stock.
4. ADJUSTMENTS
The number of shares of Warrant Stock for which Warrants are
exercisable, and the price at which such shares may be purchased upon exercise
of Warrants, shall be subject to adjustment from time to time as set forth in
this Section 4. The Company promptly shall give each Holder written notice of
any event described below which requires an adjustment pursuant to this Section
4 at the time of such event.
4.1. Stock Dividends, Subdivisions and Combinations. If at
any time after January 22, 1996 the Company shall:
(a) take a record of the holders of its Common Stock for the
purpose of entitling them to receive a dividend payable in, or other
distribution of, Additional Shares of Common Stock,
(b) subdivide its outstanding shares of Common Stock into a
larger number of shares of Common Stock, or
(c) combine its outstanding shares of Common Stock into a
smaller number of shares of Common Stock,
then (i) the number of shares of Common Stock for which a Warrant is
exercisable immediately after the occurrence of any such event shall be
adjusted to equal the number of shares of Common Stock which a record holder of
the same number of shares of Common Stock for which a Warrant is exercisable
immediately prior to the occurrence of such event would own or be entitled to
receive after the happening of such event, and (ii) the Current Warrant Price
shall be adjusted to equal the Current Warrant Price multiplied by a fraction,
the numerator of which shall be the number of shares of Common Stock for which
a Warrant is exercisable immediately prior to the adjustment and the
denominator of which shall be the number of shares for which a Warrant is
exercisable immediately after such adjustment.
4.2. Certain Other Distributions. If at any time after
January 22, 1996 the Company shall take a record of the holders of its Common
Stock for the purpose of entitling them to receive any dividend or other
distribution of:
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(a) cash;
(b) any evidences of its indebtedness (other than Convertible
Securities), any shares of its stock (other than Additional Shares of
Common Stock or Convertible Securities) or any other securities or
property of any nature whatsoever (other than cash); or
(c) any warrants or other rights to subscribe for or purchase
any evidences of its indebtedness (other than Convertible Securities),
any shares of its stock (other than Additional Shares of Common Stock
or Convertible Securities) or any other securities or property of any
nature whatsoever;
then (i) the number of shares of Common Stock for which a Warrant is
exercisable shall be adjusted to equal the product obtained by multiplying the
number of shares of Common Stock for which a Warrant is exercisable immediately
prior to such adjustment by a fraction (A) the numerator of which shall be the
Current Market Price per share of Common Stock at the date of taking such
record and (B) the denominator of which shall be such Current Market Price per
share of Common Stock, minus the amount allocable to one share of Common Stock
of any such cash so distributable and of the fair value (as determined in good
faith by the Board of Directors of the Company and supported by an opinion from
an investment banking firm of recognized national standing acceptable to the
Required Holders) of any and all such evidences of indebtedness, shares of
stock, other securities or property or warrants or other subscription or
purchase rights so distributable, and (ii) the Current Warrant Price shall be
adjusted to equal (A) the Current Warrant Price multiplied by the number of
shares of Common Stock for which a Warrant is exercisable immediately prior to
the adjustment divided by (B) the number of shares for which a Warrant is
exercisable immediately after such adjustment. A reclassification of the
Common Stock (other than a change in par value, or from par value to no par
value or from no par value to par value) into shares of Common Stock and shares
of any other class of stock shall be deemed a distribution by the Company to
the holders of its Common Stock of such shares of such other class of stock
within the meaning of this Section 4.2 and, if the outstanding shares of Common
Stock shall be changed into a larger or smaller number of shares of Common
Stock as a part of such reclassification, such change shall be deemed a
subdivision or combination, as the case may be, of the outstanding shares of
Common Stock within the meaning of Section 4.1.
4.3. Issuance of Additional Shares of Common Stock. (a) (i)
If at any time after January 22, 1996 the Company shall (except as hereinafter
provided) issue or sell any Additional Shares of Common Stock, other than
Permitted Issuances, for consideration in an amount per Additional Share of
Common Stock less than the Current Market Price, then the Current Warrant Price
shall be reduced to a price determined by dividing (A) an amount equal to the
sum of (X) the number of shares of Common Stock Outstanding immediately prior
to such issuance or sale multiplied by the then existing Current Warrant Price,
plus (Y) the consideration, if any, received by the Company upon such issuance
or sale, by (B) the total number of shares of Common Stock Outstanding
immediately after such issuance or sale and (ii) upon each adjustment of the
Current Warrant Price as a result of the calculations made pursuant to this
Section 4, each Warrant outstanding prior to the making of the adjustment in
the Current Warrant Price shall thereafter be treated as that number of
Warrants, and shall evidence the right to purchase, at the adjusted Current
Warrant Price, that number of shares of Common Stock outstanding, obtained by
(i) multiplying the number of shares of Common Stock for which a Warrant is
exercisable immediately prior to the adjustment by the Current Warrant Price in
effect immediately prior to the adjustment, and (ii) dividing the product so
obtained by the Current Warrant Price obtained immediately after such
adjustment of the Current Warrant Price.
(b) The provisions of paragraph (a) of Section 4.3 shall not
apply to any issuance of Additional Shares of Common Stock for which an
adjustment is provided under Section 4.1 or 4.2. No adjustment of the number
of shares of Common Stock for which a Warrant shall be exercisable shall be
made under paragraph (a) of Section 4.3 upon the issuance of any Additional
Shares of Common Stock
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which are issued pursuant to the exercise of any warrants or other subscription
or purchase rights or pursuant to the exercise of any conversion or exchange
rights in any Convertible Securities, if any such adjustment shall previously
have been made upon the issuance of such warrants or other rights or upon the
issuance of such Convertible Securities (or upon the issuance of any warrant or
other rights therefor) pursuant to Section 4.4 or Section 4.5.
4.4. Issuance of Warrants or Other Rights. (a) If at any
time after January 22, 1996 the Company shall take a record of the holders of
its Common Stock for the purpose of entitling them to receive a dividend or
distribution of, or shall in any manner (whether directly or by assumption in a
merger in which the Company is the surviving corporation) issue or sell, any
warrants or other rights to subscribe for or purchase any Additional Shares of
Common Stock or any Convertible Securities, whether or not the rights to
exchange or convert thereunder are immediately exercisable, and if the price
per share for which Common Stock is issuable upon the exercise of such warrants
or other rights or upon conversion or exchange of such Convertible Securities
shall be less than the Current Market Price in effect immediately prior to the
time of such distribution, issue or sale, then: (i) the number of shares of
Common Stock for which a Warrant is exercisable shall be adjusted to equal the
product obtained by multiplying the number of shares of Common Stock for which
a Warrant is exercisable immediately prior to the taking of such record or such
issuance or sale by a fraction (A) the numerator of which is the number of
shares of Common Stock which would be Outstanding immediately after the
issuance or sale of the maximum number of Additional Shares of Common Stock
issuable pursuant to all such warrants or other rights or necessary to effect
the conversion or exchange of all such Convertible Securities, and (B) the
denominator of which is the number of shares of Common Stock Outstanding
immediately prior to the taking of such record or the issuance or sale of such
warrants or other rights; and (ii) the Current Warrant Price shall be adjusted
as provided in Section 4.3(a) on the basis that (A) the maximum number of
Additional Shares of Common Stock issuable pursuant to all such warrants or
other rights or necessary to effect the conversion or exchange of all such
Convertible Securities shall be deemed to have been issued and outstanding, (B)
the price per share for such Additional Shares of Common Stock shall be deemed
to be the lowest possible price per share in any range of prices per share at
which such Additional Shares of Common Stock are available to such holders, and
(C) the Company shall be deemed to have received all of the consideration
payable therefor, if any, as of the date of the actual issuance of such
warrants or other rights. No further adjustments of the Current Warrant Price
or number of Warrants shall be made upon the actual issuance of such Common
Stock or of such Convertible Securities upon exercise of such warrants or other
rights or upon the actual issuance of such Common Stock upon such conversion or
exchange of such Convertible Securities.
(b) If any Additional Share of Common Stock issuable pursuant
to all such warrants or other rights or necessary to effect the conversion or
exchange of all such Convertible Securities is issuable in exchange for
consideration in an amount per such Additional Share of Common Stock equal to
or more than the greater of the Current Warrant Price and the Current Market
Price at the time such record is taken or such warrants or other rights are
issued or sold, then the Current Warrant Price as to the number of shares of
Common Stock for which a Warrant is exercisable prior to the adjustment under
Section 4.4(a)(i) shall not change, and the Current Warrant Price for each of
the incremental number of shares of Common Stock for which this Warrant becomes
exercisable after such adjustment shall be equal to the fair value of such
consideration per Additional Share of Common Stock.
4.5. Issuance of Convertible Securities. (a) If at any time
the Company shall take a record of the holders of its Common Stock for the
purpose of entitling them to receive a distribution of, or shall in any manner
(whether directly or by assumption in a merger in which the Company is the
surviving corporation) issue or sell, any Convertible Securities, whether or
not the rights to exchange or convert thereunder are immediately exercisable,
and if the price per share for which Common Stock is issuable upon such
conversion or exchange shall be less than the Current Market Price in effect
immediately prior to the time of such issue or sale of Convertible Securities,
then: (i) the number of shares of Common Stock for which a Warrant is
exercisable shall be adjusted to equal the product obtained by multiplying the
number of shares of Common Stock for which a Warrant is exercisable
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immediately prior to the taking of such record or such issuance or sale by a
fraction (A) the numerator of which is the number of shares of Common Stock
which would be Outstanding immediately after the issuance or sale of the
maximum number of Additional Shares of Common Stock necessary to effect the
conversion or exchange of all such Convertible Securities, and (B) the
denominator of which is the number of shares of Common Stock Outstanding
immediately prior to the taking of such record or the issuance or sale of such
Convertible Securities; and (ii) the Current Warrant Price shall be adjusted as
provided in Section 4.3(a) on the basis that (A) the maximum number of
Additional Shares of Common Stock necessary to effect the conversion or
exchange of all such Convertible Securities shall be deemed to have been issued
and outstanding, (B) the price per share of such Additional Shares of Common
Stock shall be deemed to be the lowest possible price in any range of prices at
which such Additional Shares of Common Stock are available to such holders, and
(C) the Company shall be deemed to have received all of the consideration
payable therefor, if any, as of the date of actual issuance of such Convertible
Securities. No adjustment of the Current Warrant Price shall be made under
this Section 4.5 upon the issuance of any Convertible Securities which are
issued pursuant to the exercise of any warrants or other subscription or
purchase rights therefor, if any such adjustment shall previously have been
made upon the issuance of such warrants or other rights pursuant to Section
4.4. No further adjustments of the Current Warrant Price shall be made upon
the actual issue of such Common Stock upon conversion or exchange of such
Convertible Securities and, if any issue or sale of such Convertible Securities
is made upon exercise of any warrant or other right to subscribe for or to
purchase or any warrant or other right to purchase any such Convertible
Securities for which adjustments of the Current Warrant Price have been or are
to be made pursuant to other provisions of this Section 4, no further
adjustments of the Current Warrant Price or number of Warrants shall be made by
reason of such issue or sale.
(b) If any Additional Share of Common Stock issuable upon
conversion or exchange of all such Convertible Securities is issuable in
exchange for consideration in an amount per such Additional Share of Common
Stock equal to the Current Market Price at the time such record is taken or
such Convertible Securities are issued or sold, then the Current Warrant Price
as to the number of shares of Common Stock for which this Warrant is
exercisable prior to the adjustment under Section 4.5(a)(i) shall not change,
but the Current Warrant Price for each of the incremental number of shares of
Common Stock for which a Warrant becomes exercisable after such adjustment
shall be equal to the fair value of such consideration per Additional Share of
Common Stock.
4.6. Superseding Adjustment. If, at any time after any
adjustment of the number of shares of Common Stock for which a Warrant is
exercisable shall have been made pursuant to Section 4.4 or Section 4.5 as the
result of any issuance of warrants, options, rights or Convertible Securities,
and such warrants, options or rights, or the right of conversion or exchange in
such other Convertible Securities, shall expire, and all or a portion of such
warrants, options or rights, or the right of conversion or exchange with
respect to all or a portion of such other Convertible Securities, as the case
may be, shall not have been exercised, then such previous adjustment shall be
rescinded and annulled and the Additional Shares of Common Stock which were
deemed to have been issued by virtue of the computation made in connection with
the adjustment so rescinded and annulled shall no longer be deemed to have been
issued by virtue of such computation. Thereupon, a recomputation shall be made
of the effect of such warrants, rights or options or other Convertible
Securities on the then outstanding Warrants, but not on any then outstanding
Warrant Stock, on the basis of treating the number of Additional Shares of
Common Stock or other property, if any, theretofore actually issued or issuable
pursuant to the previous exercise of any such warrants, rights or options or
any such right of conversion or exchange, as having been issued on the date or
dates of any such exercise and for the consideration actually received and
receivable therefor.
4.7. Other Provisions Applicable to Adjustments under this
Section. The following provisions shall be applicable to the making of
adjustments of the number of shares of Common Stock for which a Warrant is
exercisable provided for in this Section 4:
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(a) Computation of Consideration. To the extent that any
Additional Shares of Common Stock or any Convertible Securities or any
warrants, options or other rights to subscribe for or purchase any
Additional Shares of Common Stock or any Convertible Securities shall
be issued for cash consideration, the consideration received by the
Company therefor shall be the amount of the cash received by the
Company therefor, or, if such Additional Shares of Common Stock or
Convertible Securities are offered by the Company for subscription,
the subscription price, or, if such Additional Shares of Common Stock
or Convertible Securities are sold to underwriters or dealers for
public offering without a subscription offering, the initial public
offering price (in any such case subtracting any amounts paid or
receivable for accrued interest or accrued dividends, but not
subtracting any compensation, discounts or expenses paid or incurred
by the Company for and in the underwriting of, or otherwise in
connection with, the issuance thereof). To the extent that such
issuance shall be for a consideration other than cash, then, except as
herein otherwise expressly provided, the amount of such consideration
shall be deemed to be the fair value of such consideration at the time
of such issuance as mutually determined in good faith by the Required
Holders and the Board of Directors of the Company. In case any
Additional Shares of Common Stock or any Convertible Securities or any
warrants or other rights to subscribe for or purchase such Additional
Shares of Common Stock or Convertible Securities shall be issued in
connection with any merger in which the Company issues any securities,
the amount of consideration therefor shall be deemed to be the fair
value, as mutually determined in good faith by the Required Holders
and the Board of Directors of the Company, of such portion of the
assets and business of the nonsurviving corporation as the Required
Holders and such Board in good faith shall mutually determine to be
attributable to such Additional Shares of Common Stock, Convertible
Securities, warrants or other rights, as the case may be. The
consideration for any Additional Shares of Common Stock issuable
pursuant to any warrants, options or other rights to subscribe for or
purchase the same shall be the consideration received by the Company
for issuing such warrants or other rights plus the additional
consideration payable to the Company upon exercise of such warrants or
other rights. The consideration for any Additional Shares of Common
Stock issuable pursuant to the terms of any Convertible Securities
shall be the consideration, if any, received by the Company for
issuing warrants or other rights to subscribe for or purchase such
Convertible Securities, plus the consideration paid or payable to the
Company in respect of the subscription for or purchase of such
Convertible Securities, plus the additional consideration, if any,
payable to the Company upon the exercise of the right of conversion or
exchange in such Convertible Securities. In case of the issuance at
any time of any Additional Shares of Common Stock or Convertible
Securities in payment or satisfaction of any dividends upon any class
of stock other than Common Stock, the Company shall be deemed to have
received for such Additional Shares of Common Stock or Convertible
Securities a consideration equal to the amount of such dividend so
paid or satisfied.
(b) When Adjustments to Be Made. The adjustments required by
this Section 4 shall be made whenever and as often as any specified
event requiring an adjustment shall occur, except that any adjustment
that would otherwise be required may be postponed (except in the case
of a subdivision or combination of shares of the Common Stock, as
provided for in Section 4.1) up to, but not beyond, the date of
exercise of any Warrants if such adjustment either by itself or with
other adjustments not previously made adds or subtracts less than 1%
to the number of shares of Common Stock for which the Warrants
initially issued pursuant to this Agreement are exercisable
immediately prior to the making of such adjustment. Any adjustment
representing a change of less than such minimum amount (except as
aforesaid) which is postponed shall be carried forward and made as
soon as such adjustment, together with other adjustments required by
this Section 4 and not previously made, would result in a minimum
adjustment or on the date of exercise. For the purpose of any
adjustment, any specified event shall be deemed to have occurred at
the close of business on the date of its occurrence.
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(c) Fractional Interests. In computing adjustments under
this Section 4, fractional interests in Common Stock resulting from an
issuance of additional Warrants to any Holder pursuant to this Section
4 shall be taken into account to the nearest 1/10th of a share.
(d) When Adjustment Not Required. If the Company shall take
a record of the holders of its Common Stock for the purpose of
entitling them to receive a dividend or distribution or subscription
or purchase rights and shall, thereafter and before the distribution
to stockholders thereof, legally abandon its plan to pay or deliver
such dividend, distribution, subscription or purchase rights, then
thereafter no adjustment shall be required by reason of the taking of
such record and any such adjustment previously made in respect thereof
shall be rescinded and annulled.
(e) Escrow of Warrant Stock. If after any property becomes
distributable pursuant to this Section 4 by reason of taking of any
record of the holders of Common Stock, but prior to the occurrence of
the event for which such record is taken, any Holder exercises
Warrants, any Additional Shares of Common Stock issuable upon exercise
by reason of such adjustment shall be deemed the last shares of Common
Stock for which this Warrant is exercised (notwithstanding any other
provision to the contrary herein) and such shares or other property
shall be held in escrow for Holder by the Company to be issued to
Holder upon and to the extent that the event actually takes place,
upon payment of the then Current Warrant Price. Notwithstanding any
other provision to the contrary herein, if the event for which such
record was taken fails to occur or is rescinded, then such escrowed
shares shall be cancelled by the Company and escrowed property
returned.
(f) Challenge to Good Faith Determination. Whenever the
Board of Directors of the Company shall be required to make a
determination in good faith of the fair value of any item under this
Section 4, such determination may be challenged in good faith by the
Required Holders, and any dispute shall be resolved by an investment
banking firm of recognized national standing selected and paid for by
the Company and reasonably acceptable to such Holders.
4.8. Reorganization, Reclassification, Merger, Consolidation
or Disposition of Assets. In case the Company shall reorganize its capital,
reclassify its capital stock, consolidate or merge with and into another
corporation (where the Company is not the surviving corporation or where there
is a change in or distribution with respect to the Common Stock of the
Company), or sell, transfer or otherwise dispose of all or substantially all
its property, assets or business to another corporation and, pursuant to the
terms of such reorganization, reclassification, merger, consolidation or
disposition of assets, shares of common stock of the successor or acquiring
corporation, or any cash, shares of stock or other securities or property of
any nature whatsoever (including warrants or other subscription or purchase
rights) in addition to or in lieu of common stock of the successor or acquiring
corporation ("Other Property"), are to be received by or distributed to the
holders of Common Stock of the Company, then each Holder shall have the right
thereafter to receive, upon exercise of a Warrant, solely the number of shares
of common stock of the successor or acquiring corporation or of the Company, if
it is the surviving corporation, and Other Property receivable upon or as a
result of such reorganization, reclassification, merger, consolidation, sale,
transfer or disposition by a holder of the number of shares of Common Stock for
which a Warrant is exercisable immediately prior to such event. In case of any
such reorganization, reclassification, merger, consolidation, sale, transfer or
disposition, the successor or acquiring corporation (if other than the Company)
shall expressly assume the due and punctual observance and performance of each
and every covenant and condition of this Agreement to be performed and observed
by the Company and all the obligations and liabilities hereunder, subject to
such modifications as may be deemed appropriate (as determined by resolution of
the Board of Directors of the Company) in order to provide for adjustments of
shares of the Common Stock for which a Warrant is exercisable which shall be as
nearly equivalent as practicable to the adjustments provided for in this
Section 4. For purposes of this Section 4.8 "common stock of the successor or
acquiring corporation" shall include stock of such corporation of any class
which is not preferred as to dividends or assets over
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any other class of stock of such corporation and which is not subject to
redemption and shall also include any evidences of indebtedness, shares of
stock or other securities which are convertible into or exchangeable for any
such stock, either immediately or upon the arrival of a specified date or the
happening of a specified event and any warrants or other rights to subscribe
for or purchase any such stock. The foregoing provisions of this Section 4.8
shall similarly apply to successive reorganizations, reclassifications,
mergers, consolidations, sales, transfers or dispositions.
5. NOTICES TO WARRANT HOLDERS
5.1. Notice of Adjustments. Whenever the number of shares of
Common Stock for which a Warrant is exercisable, or whenever the price at which
a share of such Common Stock may be purchased upon exercise of the Warrants,
shall be adjusted pursuant to Section 4, the Company shall forthwith prepare a
certificate to be executed by the chief financial officer of the Company
setting forth, in reasonable detail, the event requiring the adjustment and the
method by which such adjustment was calculated (including a description of the
basis on which the Board of Directors of the Company determined the fair value
of any evidences of indebtedness, shares of stock, other securities or property
or warrants or other subscription or purchase rights referred to in Section 4),
specifying the number of shares of Common Stock for which a Warrant is
exercisable and (if such adjustment was made pursuant to Section 4.8)
describing the number and kind of any other shares of stock or Other Property
for which a Warrant is exercisable, and any change in the purchase price or
prices thereof, after giving effect to such adjustment or change. As of the
date of this Agreement, no such certificate is required to be delivered. The
Company shall promptly cause a signed copy of such certificate to be delivered
to each Holder in accordance with Section 16.2. The Company shall keep at its
office or agency designated pursuant to Section 12 copies of all such
certificates and cause the same to be available for inspection at said office
during normal business hours by any Holder or any prospective purchaser of a
Warrant designated by a Holder thereof.
5.2. Notice of Certain Corporate Action. Each Holder shall
be entitled to the same rights to receive notice of corporate action as any
holder of Common Stock.
6. REPRESENTATIONS AND WARRANTIES
The Company hereby represents and warrants as follows:
(a) The Company is a corporation duly organized and validly
existing under the laws of the State of Delaware, has the power and
authority to execute and deliver this Agreement and the Warrant
Certificates, to issue the Warrants and to perform its obligations
under this Agreement and the Warrant Certificates.
(b) The execution, delivery and performance by the Company of
this Agreement and the Warrant Certificates, the issuance of the
Warrants and the issuance of the Warrant Stock upon exercise of the
Warrants have been duly authorized by all necessary corporate action
and do not and will not violate, or result in a breach of, or
constitute a default under or require any consent under, or result in
the creation of any lien or security interest upon the assets of the
Company pursuant to, any Requirement of Law or any Contractual
Obligation binding upon the Company.
(c) This Agreement has been duly executed and delivered by
the Company and constitutes a legal, valid, binding and enforceable
obligation of the Company. When the Warrants and the Warrant
Certificates have been issued as contemplated hereby, (i) the Warrants
and the Warrant Certificates will constitute legal, valid, binding and
enforceable obligations of the Company and (ii) the Warrant Stock,
when issued upon exercise of the Warrants in
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accordance with the terms hereof, will be duly authorized, validly
issued, fully paid and nonassessable shares of Common Stock with no
personal liability attaching to the ownership thereof.
(d) (i) The total number of shares of all classes of stock
that the Company shall on the Closing Date have authority to issue is
110,000,000 shares, consisting solely of (i) 100,000,000 shares of
Common Stock, par value $.01 per share, of which, after giving effect
to the transactions contemplated herein and all other issuances of
capital stock of the Company on or prior to the Closing Date,
16,614,918 shares of Common Stock will be issued and outstanding and
11,831,750 shares of Common Stock will be reserved for future issuance
for the purposes described in Schedule I, and (ii) 10,000,000 shares
of preferred stock par value $.01 per share, none of which were issued
and outstanding on the Closing Date. The delivery hereunder by the
Company to the Lender of the Warrants issued on the Closing Date will
transfer and convey to the Lender good and marketable title to such
Warrants and, upon exercise of such Warrants in accordance with this
Agreement, good and marketable title to the Common Stock purchased
upon such exercise, free and clear of all preemptive rights, liens,
charges and encumbrances, except for restrictions on transfer set
forth in this Agreement or arising under the Federal and state
securities laws. Except as set forth in this paragraph (d), the
Company does not have outstanding any stock or securities convertible
into or exchangeable for any shares of its stock, nor, except as so
set forth, does it have outstanding any agreements, rights or options
entitling any person to subscribe for or to purchase any capital stock
or securities convertible into or exchangeable for any of its shares
of stock. The Company is not subject to any obligation (contingent or
otherwise) to repurchase or otherwise acquire or retire any shares of
its capital stock.
(e) The Company has provided to the Holder a copy of the
Company's most recent Annual Report on Form 10-K and Quarterly Reports
on Form 10-Q filed since the date of the most recent Annual Report on
Form 10-K. The information contained in such disclosure documents, as
of the date thereof, does not contain any untrue statement of a
material fact and does not omit to state a material fact necessary in
order to make the statements made, in light of the circumstances under
which they were made, not misleading.
6.2. Warrant Holders. Each Holder hereby represents and warrants
as follows:
(a) It is acquiring the Warrants for its own account, as
principal, for the purpose of investment and not with a view to or for
sale in connection with any distribution thereof. Each Holder hereby
represents that it will not offer to sell, sell or otherwise dispose
of any of the Warrants or any Warrant Stock in violation of the
Securities Act or any other applicable state or federal securities
laws.
(b) It has to its satisfaction reviewed the business and
affairs of the Company and understands the risks of, and other
considerations relating to, its receipt of the Warrant Stock. Such
Holder has been furnished a copy of the Company's most recent Annual
Report on Form 10-K and Quarterly Reports on Form 10-Q filed since the
date of the most recent Annual Report on Form 10-K, and all other
public information requested by it relating to the Company and its
activities and proposed activities.
(c) It has sufficient knowledge and experience in business
and financial matters to be capable of utilizing the information made
available to it to fully and completely evaluate the merits and risks
of owning the Warrant Stock.
(d) it has been furnished with or given adequate access to
such information about the Company and the Warrants as it has
requested, (ii) it has made its own independent inquiry and
investigation into, and based thereon has formed an independent
judgment concerning, the
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Company, (iii) it is able to bear the economic risks of the investment
in the Common Stock upon exercise of the Warrants, (iv) it has such
knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risks of an investment in the
Company and (v) it is an "accredited investor" within the meaning of
"accredited investor" under Regulation D of the Securities Act of
1933, as amended.
7. CERTAIN COVENANTS
7.1. No Impairment. The Company shall not by any action
including, without limitation, amending its certificate of incorporation or
through any reorganization, transfer of assets, consolidation, merger,
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
Agreement, but will at all times in good faith assist in the carrying out of
all such terms and in the taking of all such actions as may be necessary or
appropriate to protect the rights of each Holder against impairment. Without
limiting the generality of the foregoing, the Company will use reasonable good
faith efforts to obtain all such authorizations, exemptions or consents from
any public regulatory body having jurisdiction thereof as may be necessary to
enable the Company to perform its obligations under this Agreement.
Upon the request of a Holder, the Company will at any time
during the period this Agreement is in effect acknowledge in writing, in form
satisfactory to such Holder, the continuing validity of this Agreement and the
obligations of the Company hereunder.
7.2. Reservation and Authorization of Common Stock;
Registration with or Approval of any Governmental Authority. From and after the
Closing Date, the Company shall at all times reserve and keep available for
issue upon the exercise of Warrants such number of its authorized but unissued
shares of Common Stock as will be sufficient to permit the exercise in full of
all outstanding Warrants. All shares of Common Stock which shall be so
issuable, when issued upon exercise of any Warrants and payment therefor in
accordance with the terms of this Agreement, shall be duly and validly issued
and fully paid and nonassessable, and not subject to preemptive rights.
Before taking any action which would cause an adjustment
reducing the Current Warrant Price below the then par value, if any, of the
shares of Common Stock issuable upon exercise of the Warrants, the Company
shall take any corporate action which may be necessary in order that the
Company may validly and legally issue fully paid and nonassessable shares of
such Common Stock at such adjusted Current Warrant Price.
Before taking any action which would result in an adjustment
in the number of shares of Common Stock for which a Warrant is exercisable or
in the Current Warrant Price, the Company shall obtain all such authorizations
or exemptions thereof, or consents thereto, as may be necessary from its
stockholders, any public regulatory body or bodies having jurisdiction thereof.
If any shares of Common Stock required to be reserved for
issuance upon exercise of Warrants require registration or qualification with
any governmental authority under any federal or state law (otherwise than as
provided in Section 9) before such shares may be so issued, the Company will in
good faith and as expeditiously as possible and at its expense endeavor to
cause such shares to be duly registered.
8. TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS
In the case of all dividends or other distributions by the
Company to the holders of its Common Stock with respect to which any provision
of Section 4 refers to the taking of a record of such holders, the Company will
in each such case take such a record and will take such record as of the close
of business on a Business Day. The Company will not at any time, except upon
dissolution, liquidation
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or winding up of the Company, close its stock transfer books or Warrant
transfer books so as to result in preventing or delaying the exercise or
transfer of any Warrants or any Warrant Stock.
9. RESTRICTIONS ON TRANSFERABILITY
The Warrants and the Warrant Stock shall not be transferred
before satisfaction of the conditions specified in this Section 9, which
conditions are intended to ensure compliance with the provisions of the
Securities Act with respect to the transfer of any Warrant or any Warrant
Stock. Each Holder, by entering into this Agreement and accepting the
Warrants, agrees to be bound by the provisions of this Section 9.
9.1. Restrictive Legend. Except as otherwise provided in
this Section 9, each certificate representing Warrants or Warrant Stock, 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, or any
applicable state securities laws, and may not be sold or transferred
in the absence of such registration or an exemption therefrom. Such
securities are subject to the restrictions and privileges specified in
a Warrant Agreement, dated as of February 16, 1996, between the
Company and the initial holders of securities named therein, a copy of
which is on file with the Secretary of the Company and will be
furnished without charge to the holder hereof upon written request,
and the holder of this certificate agrees to be bound thereby."
9.2. Notice of Proposed Transfers; Requests for Registration.
Prior to any transfer of any Warrants or any shares of Restricted Common Stock,
the Holder of such Warrants or Restricted Common Stock shall give five days'
prior written notice to the Company of such Holder's intention to effect such
transfer (a "Transfer Notice"). Holder agrees that it will not sell, transfer
or otherwise dispose of Warrants or any shares of Restricted Common Stock, in
whole or in part, except pursuant to an effective registration statement under
the Securities Act or an exemption from registration thereunder. Each
certificate, if any, evidencing such shares of Restricted Common Stock issued
upon such transfer shall bear the restrictive legend set forth in Section 9.1,
and each Warrant Certificate issued upon such transfer shall bear the
restrictive legend set forth in Section 9.1, unless in either case such
transfer is pursuant to an effective registration statement under the
Securities Act or in the opinion of the transferee's or Holder's counsel
delivered to the Company in connection with such transfer (which opinion shall
be reasonably satisfactory to the Company) such legend is not required in order
to ensure compliance with the Securities Act.
The Holders of Warrants and Warrant Stock shall have the right
to require registration of such Warrants or Warrant Stock pursuant to Sections
9.3 and 9.4.
9.3. Required Registration. (a) After receipt of a written
request from the Holders of Warrants and/or Warrant Stock representing at least
50% of the total of (i) all shares of Warrant Stock then subject to purchase
upon exercise of all Warrants and (ii) all shares of Warrant Stock then
outstanding, requesting that the Company effect the registration of the
Warrants, the shares of Common Stock issuable upon the exercise of such
Holders' Warrants or of any of such Holders' Warrant Stock under the Securities
Act (all such securities collectively referred to as the "Registrable
Securities") and specifying the intended method or methods of disposition
thereof, the Company shall promptly notify all Holders of Warrants and Warrant
Stock in writing of the receipt of such request and each Holder, in lieu of
exercising its rights under Section 9.4, may elect (by written notice sent to
the Company within ten Business Days from the date of such Holder's receipt of
the aforementioned Company's notice) to have its Registrable Securities
included in such registration thereof pursuant to this Section 9.3(a).
Thereupon the Company shall, as expeditiously as is possible (and, in any
event, within 60 days after the request for
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registration), effect the registration under the Securities Act of all
Registrable Securities which the Company has been so requested to register by
such Holders for sale, subject to the next sentence, all to the extent required
to permit the disposition (in accordance with the intended method or methods
thereof, as aforesaid) of the Registrable Securities so registered. If the
managing underwriter of a proposed public offering shall advise the Company in
writing that, in its opinion, the distribution of the Registrable Securities
requested to be included in the registration by the Holders would materially
and adversely affect the distribution of such securities, then all Holders
selling Registrable Securities shall reduce the amount of Registrable
Securities each intended to distribute through such offering on a pro rata
basis. The Company shall not be required to effect a registration hereunder if
the Board of Directors of the Company determines in the exercise of its
reasonable judgment that, due to a pending or contemplated acquisition or
disposition, to effect any such registration at such time would have a material
adverse effect on the Company, in which case such registration may be deferred
for a single period not to exceed ninety (90) days, provided the Company shall
not register any of its equity securities prior to the registration deferred
under this sentence except for registrations on Form S-4 and Form S-8; and in
any event, the Company shall not be required to effect more than two
registrations of any Registrable Securities pursuant to this Section 9.3(a).
If the Company shall defer a registration as set forth above, the Required
Holders shall have the right to withdraw the registration request by giving
written notice to the Company within 30 days after the receipt of the notice of
deferral and, in the event of such withdrawal, such registration request shall
not be counted for purposes of the number of registrations to which Holder is
entitled pursuant to this Section 9.3(a).
(b) Lockup.
(i) Subject to clause (ii) below, the Company agrees
not to effect any public sale or distribution of any Registrable
Securities or any similar securities, or any securities convertible
into or exchangeable or exercisable for Registrable Securities or such
similar securities (other than any such sale or distribution pursuant
to registrations on Form S-4 and Form S-8), commencing on the date the
Company receives a request from any Holder under Section 9.3(a) and
continuing until 120 days after the commencement of the related
underwritten offering under Section 9.3(a) (the "Lockup Period"),
where the managing underwriter so requests.
(ii) Notwithstanding anything to the contrary in
clause (i) above, (A) nothing in this Section 9.3(b) shall prevent or
impair the ability of other security holders of the Company holding
securities of the Company that give them, as of the date of this
Agreement, demand registration rights with respect to Registrable
Securities from exercising their demand registration rights at any
time during the Lockup Period and (B) if at any time during the Lockup
Period the Company proposes to file on its behalf and/or on behalf of
any of its security holders a Registration Statement under the
Securities Act on any form (other than a Form S- 4 or S-8 or any
similar successor form or any other registration statement relating to
an exchange offer or offering of securities solely to the Company's
existing security holders or employees), then the registration request
of the Holder requesting registration pursuant to Section 9.3(a) shall
be deemed to be an incidental registration in accordance with Section
9.4 and (x) such registration shall not count as one of the two
registration requests available to such Holder pursuant to Section
9.3(a) and (y) if the offering resulting from such registration shall
be reduced in size for any reason, such reduction shall not be made
from the Registrable Securities of any Holders entitled to register
securities pursuant to Section 9.3(a), but shall be made from the
allocations of all other parties (including the Company) registering
their securities.
9.4. Incidental Registration. If the Company at any time
proposes to file on its behalf and/or on behalf of any of its security holders
("the demanding security holders") a Registration Statement under the
Securities Act on any form (other than a Registration Statement on Form S-4 or
S-8 or any similar or successor form or any other registration statement
relating to an exchange offer or offering of securities solely to the Company's
existing security holders or employees), it will give written
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notice to all Holders of Warrants or Warrant Stock at least twenty (20) days
before the anticipated date of initial filing with the Commission of such
Registration Statement, which notice shall set forth the Company's intention to
effect such a registration, the class or series and number of equity securities
proposed to be registered and the intended method of disposition of the
securities proposed to be registered by the Company. The notice shall offer to
include in such filing the aggregate number of shares of Registrable
Securities, as such Holders may request. Nothing in this Section 9.4 shall
preclude the Company from discontinuing the registration of its securities
being effected on its behalf under this Section 9.4 at any time prior to the
effective date of the registration relating thereto.
Each Holder desiring to have Registrable Securities registered
under this Section 9.4 shall advise the Company in writing within fifteen (15)
days after the date of receipt of such offer from the Company, setting forth
the amount of such Registrable Securities for which registration is requested.
The Company shall thereupon include in such filing the number of shares of
Registrable Securities for which registration is so requested, subject to the
next sentence, and shall use its best efforts to effect registration under the
Securities Act of such securities. If the managing underwriter of a proposed
public offering shall advise the Company in writing that, in its opinion, the
distribution of the Registrable Securities requested to be included in the
registration concurrently with the securities being registered by the Company
or any demanding security holder would materially and adversely affect the
distribution of such securities by the Company or such demanding security
holders, then all selling security holders shall reduce the amount of
securities each intended to distribute through such offering on a pro rata
basis.
9.5. Registration Procedures. If the Company is required by
the provisions of this Section 9 to use its best efforts to effect the
registration of any of its securities under the Securities Act, the Company
will, as expeditiously as possible:
(a) prepare and file with the Commission a Registration
Statement with respect to such securities and use its best efforts to
cause such Registration Statement to become and remain effective for
the period described in paragraph (b) below;
(b) prepare and file with the Commission such amendments and
supplements to such Registration Statement and the prospectus used in
connection therewith as may be necessary to keep such Registration
Statement effective and to comply with the provisions of the
Securities Act with respect to the sale or other disposition of all
securities covered by such Registration Statement until the earlier of
such time as all of such securities have been disposed of in a public
offering and the expiration of 180 days;
(c) furnish to such selling security holders or underwriter
such number of copies of a summary prospectus or other prospectus,
including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents, as such
selling security holders or underwriters may reasonably request;
(d) use its best efforts to register or qualify the
securities covered by such Registration Statement under such other
securities or blue sky laws of such jurisdictions within the United
States as each holder of such securities shall request (provided,
however, the Company shall not be obligated to qualify as a foreign
corporation to do business under the laws of any jurisdiction in which
it is not then qualified or to file any general consent to service or
process), and do such other reasonable acts and things as may be
required of it to enable such holder to consummate the disposition in
such jurisdiction of the securities covered by such Registration
Statement;
(e) unless waived in writing by each Holder of Registrable
Securities being included in such registration pursuant to Section
9.3, use its best efforts to obtain from either a nationally
recognized underwriter or investment banker or an underwriter or
investment banker reasonably acceptable to such Holder a firm
commitment (pursuant to an underwriting agreement in
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customary form) to underwrite the public offering of the securities
covered by such Registration Statement;
(f) furnish, at the request of any Holder requiring or
requesting registration of Registrable Securities pursuant to Section
9.3 or 9.4, on the date that such Registrable Securities are delivered
to the underwriters for sale pursuant to such registration or, if such
Registrable Securities are not being sold through underwriters, on the
date that the Registration Statement with respect to such Registrable
Securities becomes effective, (1) an opinion, dated such date, of the
independent counsel representing the Company for the purposes of such
registration, addressed to the underwriters, or if such Registrable
Securities are not being sold through underwriters, then to the
Holders making such request, stating that such Registration Statement
has become effective under the Securities Act and that (i) to the best
knowledge of such counsel, no stop order suspending the effectiveness
thereof has been issued and no proceedings for that purpose have been
instituted or are pending before or contemplated by the Commission,
(ii) the Registration Statement, the related prospectus, and each
amendment or supplement thereto, comply as to form in all material
respects with the requirements of the Securities Act and the
applicable rules and regulations of the Commission thereunder (except
no opinion need be expressed with respect to the inclusion and content
of the financial statements and notes thereto and related schedules
and other financial, statistical or expertized information), (iii) to
the best knowledge of such counsel, the descriptions in the
Registration Statement or the prospectus, or any amendment or
supplement thereto, of all legal matters and contracts and other legal
documents or instruments known to such counsel, insofar as such
statements constitute a summary of legal matters, documents and
proceedings, are accurate and fairly present in all material respects
the information required to be shown, and (iv) to the best knowledge
of such counsel, such counsel does not know of any legal or
governmental proceedings, pending or contemplated, required to be
described in the Registration Statement or prospectus, or any
amendment or supplement thereto, which are not described as required,
nor of any contracts or documents or instruments of a character
required to be described in the Registration Statement or prospectus,
or any amendment or supplement thereto, or to be filed as exhibits to
the Registration Statement which are not described and filed or
incorporated by reference as required; such counsel shall also confirm
that it has no reason to believe that either the Registration
Statement or the prospectus, or any amendment or supplement thereto
contains any untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which made, not
misleading; and (2) a letter dated such date, from the independent
certified public accountants of the Company, addressed to the
underwriters, or if such Registrable Securities are not being sold
through underwriters, then to the Holder making such request and, if
such accountants refuse to deliver such letter to such Holder, then to
the Company stating that they are independent certified public
accountants within the meaning of the Securities Act and that, in the
opinion of such accountants, the financial statements and other
financial data of the Company included in the Registration Statement
or the prospectus, or any amendment or supplement thereto, comply as
to form in all material respects with the applicable accounting
requirements of the Securities Act. Such opinion of counsel shall
additionally cover such other legal matters with respect to the
registration in respect of which such opinion is being given as such
Holders of Registrable Securities may reasonably request. Such letter
from the independent certified public accountants shall additionally
cover such other financial matters (including information as to the
period ending not more than five (5) Business Days prior to the date
of such letter) with respect to the registration in respect of which
such letter is being given as such Holders of Registrable Securities
may reasonably request;
(g) enter into customary agreements (including an
underwriting agreement in customary form) and take such other actions
as are reasonably required in order to expedite or facilitate the
disposition of such Registrable Securities; and
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<PAGE> 20
(h) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make available
to its security holders, as soon as reasonably practicable, but not
later than 18 months after the effective date of the Registration
Statement, an earnings statement covering the period of at least 12
months beginning with the first full month after the effective date of
such Registration Statement, which earnings statements shall satisfy
the provisions of Section 11(a) of the Securities Act.
It shall be a condition precedent to the obligation of the
Company to take any action pursuant to this Section 9 in respect of the
securities which are to be registered at the request of any Holder of
Registrable Securities that such Holder shall furnish to the Company such
information regarding the securities held by such Holder and the intended
method of disposition thereof as the Company shall reasonably request and as
shall be required in connection with the action taken by the Company.
9.6. Expenses. All expenses incurred in complying with
Section 9, including, without limitation, all registration and filing fees
(including all expenses incident to filing with the NASD), printing expenses,
fees and disbursements of counsel for the Company, the reasonable fees and
expenses of one counsel for the selling security holders (selected by the
Person holding a majority of the securities being registered), expenses of any
special audits incident to or required by any such registration and expenses of
complying with the securities or blue sky laws of any jurisdictions pursuant to
Section 9.5(d), shall be paid by the Company, except that (a) the Company shall
not be liable for any discount or commission to any underwriter in respect of
the securities sold by such Holder of Registrable Securities and (b) the
Company shall not be obligated to pay more than $200,000 in connection with
registration made pursuant to Section 9.3.
9.7. Indemnification and Contribution. (a) In the event of
any registration of any of the Registrable Securities under the Securities Act
pursuant to this Section 9, the Company shall indemnify and hold harmless the
Holder of such Registrable Securities, such Holder's directors, officers,
employees, agents and attorneys and each other Person (including each
underwriter) who participated in the offering of such Registrable Securities
and each other Person, if any, who controls such Holder or such participating
Person within the meaning of the Securities Act, against any losses, claims,
damages, liabilities or expenses, joint or several (including, without limiting
the foregoing, the legal expenses incurred in connection with any such action,
suit or proceeding), to which such Holder or any such director, officer,
employee, agent, attorney or participating Person or controlling Person may
become subject under the Securities Act or any other statute or at common law,
insofar as such losses, claims, damages, liabilities or expenses (or actions in
respect thereof) arise out of or are based upon (i) any alleged untrue
statement of any material fact contained in any Registration Statement under
which such securities were registered under the Securities Act, any preliminary
prospectus or final prospectus contained therein, or any amendment or
supplement thereto, or (ii) any alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, and shall reimburse such Holder or such director, officer,
employee, agent, attorney or participating Person or controlling Person for any
legal or any other expenses incurred by such Holder or such director, officer,
employee, agent, attorney or participating Person or controlling Person in
connection with investigating or defending any such loss, claim, damage,
liability, expense or action; provided, however, that the Company shall not be
liable in any such case to the extent that any such loss, claim, damage,
liability or expense arises out of or is based upon any alleged untrue
statement or alleged omission made in such Registration Statement, preliminary
prospectus, prospectus or amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by such Holder
specifically for use therein and in the case of any non-underwritten offering,
to the extent that any such losses, claims, damages, liabilities or expenses
result from the fact that a current copy of the prospectus was not sent or
given to the person asserting any such losses, claims, damages, liabilities or
expenses at or prior to the written confirmation of the sale of the securities
concerned to such person if it is determined that it was the responsibility of
such Holder to provide such person with a current copy of the prospectus and
such current copy of the prospectus would have cured the defect giving rise to
such
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<PAGE> 21
losses, claims, damages, liabilities or expenses. Such indemnity shall remain
in full force and effect regardless of any investigation made by or on behalf
of such Holder or such director, officer or participating Person or controlling
Person, and shall survive the transfer of such securities by such Holder.
(b) Each Holder of any Registrable Securities, by acceptance
thereof, agrees to indemnify and hold harmless the Company, its directors,
officers, employees, agents and attorneys and each other Person, if any, who
controls the Company within the meaning of the Securities Act against any
losses, claims, damages, liabilities or expenses, joint or several, to which
the Company or any such director or officer or any such Person may become
subject under the Securities Act or any other statute or at common law, insofar
as such losses, claims, damages, liabilities or expenses (or actions in respect
thereof) arise out of or are based upon information in writing provided to the
Company by such Holder of such Registrable Securities contained, on the
effective date thereof, in any Registration Statement under which securities
were registered under the Securities Act at the request of such Holder, any
preliminary prospectus or final prospectus contained therein, or any amendment
or supplement thereto or the fact that in the case of any non-underwritten
offering, a current copy of the prospectus was not sent to the Person asserting
such losses, claims, damages, liabilities or expenses at or prior to the
written confirmation of the sale of the securities with respect to such Person
if it is determined that it was the responsibility of such Holder to provide
such Person with a current copy of the prospectus and such current copy would
have cured the defect giving rise to such losses, claims, damages, liabilities
or expenses; provided, however, that such Warrant Holder's obligation under
this Section 9.7(b) to indemnify and hold harmless the Company shall in no
event exceed the lesser of (A) damage attributable solely to the inclusion of
such written information in such Registration Statement, preliminary
prospectus, final prospectus, or amendment or supplement suffered by the Person
or Persons whose claims gave rise to such losses, claims, damages or
liabilities and (B) the net proceeds received by such Holder from the sale of
its Registerable Securities.
(c) If the indemnification provided for in this Section 9
from the indemnifying party is unavailable to an indemnified party hereunder in
respect of any losses, claims, damages, liabilities or expenses referred to
herein, then the indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party and indemnified parties in connection with the actions which resulted in
such losses, claims, damages, liabilities or expenses, 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 in question, including any untrue or alleged untrue
statement of a material fact or 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 under this Section 9 as a result
of the losses, claims, damages, liabilities and expenses referred to above
shall be deemed to include any legal or other fees or expenses reasonably
incurred by such party in connection with any investigation or proceeding.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 9.7(c) were determined by
pro rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to in the immediately
preceding paragraph. Notwithstanding the provisions of this subsection (c), no
Holder shall be required to contribute any amount in excess of the net proceeds
received by it upon the sale of its securities pursuant to the Registration
Statement to which the losses, claims, damages, liabilities and expenses
referred to above relate. 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 obligations of each of the Holders under this
subsection (c) to contribute are several and not joint.
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(d) Conduct of Indemnification Proceedings. Any person or
entity entitled to indemnification hereunder shall (i) give prompt written
notice to the indemnifying party after the receipt by the indemnified party of
a written notice of the commencement of any action, suit, proceeding or
investigation or threat thereof made in writing for which such indemnified
party will claim indemnification or contribution pursuant to this Agreement;
provided, however, that the failure of any indemnified party to give notice as
provided herein shall not relieve the indemnifying party of its obligations
under Section 9.7 hereof, except to the extent that the indemnifying party is
actually prejudiced by such failure to give notice, and (ii) unless in such
indemnified party's reasonable judgment a conflict of interest may exist
between such indemnified and indemnifying parties with respect to such claim,
permit such indemnifying party to assume the defense of such claim with counsel
reasonably satisfactory to the indemnified party. If the indemnifying party is
entitled to, and does, assume the defense of such claim, the indemnified party
shall have the right to employ separate counsel and to participate in the
defense thereof, but the fees and expenses of such counsel shall be borne by
the indemnified party. Whether or not such defense is assumed by the
indemnifying party, the indemnifying party shall not be subject to any
liability for any settlement made without its consent (but such consent will
not be unreasonably withheld). No indemnifying party shall be permitted to
consent to the entry of any judgment or to enter into any settlement that does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such indemnified party of a release from all liability in respect
of such claim or litigation. An indemnifying party who is not entitled to, or
elects not to, assume the defense of a claim shall not be obligated to pay the
fees and expenses of more than one counsel in any one jurisdiction for all
parties indemnified by such indemnifying party with respect to such claim,
unless in the reasonable judgment of any indemnified party a conflict of
interest may exist between such indemnified party and any other of such
indemnified parties with respect to such claim, in which event the indemnifying
party shall be obligated to pay the fees and expenses of such additional
counsel or counsels.
9.8. Termination of Restrictions. Notwithstanding the
foregoing provisions of Section 9, the restrictions imposed by this Section
upon the transferability of the Warrants, the Warrant Stock and the Restricted
Common Stock (or Common Stock issuable upon the exercise of the Warrants) and
the legend requirement of Section 9.1 shall terminate as to any particular
Warrant or share of Warrant Stock or Restricted Common Stock (or Common Stock
issuable upon the exercise of the Warrants) (i) when and so long as such
security shall have been effectively registered under the Securities Act and
disposed of pursuant thereto, or (ii) when the holder thereof shall have
delivered to the Company the written opinion of counsel to such holder, which
opinion shall be reasonably satisfactory to the Company, stating that such
legend is not required in order to ensure compliance with the Securities Act.
Whenever the restrictions imposed by Section 9 shall terminate as to any
Warrants or any Restricted Common Stock, as hereinabove provided, the Holder
thereof shall be entitled to receive from the Company, at the expense of the
Company, a new Warrant Certificate or a new certificate representing such
Common Stock, as the case may be, not bearing the restrictive legend set forth
in Section 9.1.
9.9. Listing on Securities Exchange. If the Company shall
list any shares of Common Stock on any securities exchange, it will, at its
expense, use its best efforts to list thereon, maintain and, when necessary,
increase such listing of, all shares of Common Stock issued or, to the extent
permissible under the applicable securities exchange rules, issuable upon the
exercise of the Warrants so long as any shares of Common Stock shall be so
listed during any such Exercise Period.
9.10. Selection of Managing Underwriters. The managing
underwriter or underwriters for any offering of Registrable Securities to be
registered pursuant to Section 9.3 shall be an underwriter or underwriters of
nationally recognized standing selected by the Company.
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10. SUPPLYING INFORMATION
The Company shall cooperate with each Holder of a Warrant and
each Holder of Restricted Common Stock in supplying such information as may be
reasonably 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 Warrant or Restricted Common Stock.
11. LOSS OR MUTILATION
Upon receipt by the Company from any Holder of evidence
reasonably satisfactory to it of the ownership of and the loss, theft,
destruction or mutilation of a certificate representing Warrants or Warrant
Stock and indemnity reasonably satisfactory to it (it being understood that the
written agreement of the Lender or an Affiliate thereof shall be sufficient
indemnity) and in case of mutilation upon surrender and cancellation hereof or
thereof, the Company will execute and deliver in lieu hereof or thereof a new
Warrant or new stock certificate as the case may be, of like tenor to such
Holder; provided, in the case of mutilation, no indemnity shall be required if
the certificate representing Warrants or Warrant Stock in identifiable form is
surrendered to the Company for cancellation.
12. OFFICE OF THE COMPANY
As long as any of the Warrants remain outstanding, the Company
shall maintain an office or agency (which may be the principal executive
offices of the Company) where the Warrants may be presented for exercise,
registration or transfer, division or combination as provided herein.
13. FINANCIAL AND BUSINESS INFORMATION
13.1. Quarterly Information. Except during any period when
the Company either (i) is subject to the reporting requirements of Section
15(d) of the Exchange Act, or (ii) has securities registered under Section
12(b) or 12(g) of the Exchange Act (such status being referred to as being a
"Public Company"), the Company will deliver to each Holder, as soon as
practicable after the end of each quarterly fiscal period in each fiscal year
of the Company, and in any event within 45 days thereafter, a copy of the
unaudited consolidated balance sheet as at the close of such quarter, and the
related unaudited consolidated statements of income, shareholders' equity and
cash flow of the Company and its Subsidiaries for that portion of the fiscal
year ending as of the close of such quarter. Such financial statements shall
be prepared by the Company in accordance with GAAP (subject to normal year end
adjustments and the inclusion of footnotes) and accompanied by the
certification of the Company's chief executive officer or chief financial
officer that, to the best of his knowledge, such financial statements are
complete and correct in all material respects and fairly present in accordance
with GAAP (subject to normal year end adjustments and the inclusions of
footnotes) the consolidated financial position, the consolidated statements of
income, shareholder equity and cash flow of the Company and its Subsidiaries as
at the end of such quarter and for such year-to-date period, as the case may
be.
13.2. Annual Information. Except during any period when the
Company is a Public Company, the Company will deliver to each Holder as soon as
practicable after the end of each fiscal year of the Company, and in any event
within 90 days thereafter, one copy of:
(i) an audited consolidated balance sheet of the Company and
its Subsidiaries as at the end of such year, and
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<PAGE> 24
(ii) audited consolidated statements of income, shareholders'
equity and cash flow of the Company and its Subsidiaries for such year;
setting forth in each case in comparative form the figures for the
corresponding periods in the previous fiscal year; all prepared in accordance
with GAAP, and which audited financial statements shall be accompanied by (i) a
certification of the chief executive officer or chief financial officer of the
Company that, to the best of his knowledge, all such financial statements are
complete and correct in all material respects and present fairly in accordance
with GAAP the consolidated financial position of the Company and its
Subsidiaries as at the end of such fiscal year and for the period then ended,
(ii) an opinion thereon of the independent certified public accountants
regularly retained by the Company, or any other firm of independent certified
public accountants of recognized national standing selected by the Company, and
(iii) a report of such independent certified public accountants confirming any
adjustment made pursuant to Section 4 during such year.
13.3. Filings. The Company will file on or before the
required date all required regular or periodic reports (pursuant to the
Exchange Act) with the Commission and will deliver to each Holder promptly upon
their becoming available one copy of each report, notice or proxy statement
sent by the Company to its stockholders generally, and of each regular or
periodic report (pursuant to the Exchange Act) and any Registration Statement,
prospectus or written communication (other than transmittal letters) (pursuant
to the Securities Act), filed by the Company with (i) the Commission or (ii)
any securities exchange on which shares of Common Stock are listed.
14. APPRAISAL
The determination of the Appraised Value per share of Common
Stock shall be made by an investment banking firm of nationally recognized
standing selected by the Company and acceptable to the Required Holders. If
the investment banking firm selected by the Company is not acceptable to the
Required Holders and the Company and the Required Holders cannot agree on a
mutually acceptable investment banking firm, then the Required Holders and the
Company shall each choose one such investment banking firm and the respective
chosen firms shall agree on another investment banking firm which shall make
the determination. The Company shall retain, at its sole cost, such investment
banking firm as may be necessary for the determination of Appraised Value
required by the terms of this Agreement.
15. LIMITATION OF LIABILITY; NO RIGHTS AS STOCKHOLDER
No provision hereof, in the absence of affirmative action by
any Holder to purchase shares of Common Stock, and no enumeration herein of the
rights or privileges of any Holder, shall give rise to any liability of such
Holder for the purchase price of any Common Stock or as a stockholder of the
Company, whether such liability is asserted by the Company or by creditors of
the Company. Except as may otherwise be provided by law or by separate
agreement between a Holder and the Company, no Holder, as such, shall be
entitled to vote or be deemed the holder of Common Stock or any other
securities (other than Warrants) of the Company which may at any time be
issuable on the exercise hereof, nor shall anything contained herein be
construed to confer upon any Holder the rights of a stockholder of the Company
or the right to vote for the election of directors or upon any matters
submitted to stockholders at any meeting thereof, or to give or withhold
consent to any corporate action or to receive notice of meetings or other
actions affecting stockholders (except as provided herein), or to receive
dividends or otherwise, until the Warrants shall have been exercised in
accordance with the terms and conditions hereof.
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16. MISCELLANEOUS
16.1. Nonwaiver and Expenses. No course of dealing or any
delay or failure to exercise any right hereunder on the part of any Holder
shall operate as a waiver of such right or otherwise prejudice such Holder's
rights, powers or remedies. If the Company fails to make, when due, any
payments provided for hereunder, or fails to comply with any other provision of
this Agreement, the Company shall pay to the applicable Holders such amounts as
shall be sufficient to cover any costs and expenses including, but not limited
to, reasonable attorneys' fees, including those of appellate proceedings,
incurred by the Holders in collecting any amounts due pursuant hereto or in
otherwise enforcing any of its rights, powers or remedies hereunder.
16.2. Notice Generally. Any notice, demand, request,
consent, approval, declaration, delivery or other communication hereunder to be
made pursuant to the provisions of this Agreement shall be sufficiently given
or made if in writing and either delivered in person with receipt acknowledged
or sent by registered or certified mail, return receipt requested, postage
prepaid, telex, telecopier or overnight air courier guaranteeing next day
delivery, addressed as follows:
(a) If to any Holder, at its last known address appearing on
the books of the Company maintained for such purpose.
(b) If to the Company at:
Deeptech International, Inc.
7400 Texas Commerce Tower
600 Travis
Houston, Texas 77002
Attention: Thomas P. Tatham
Telecopy No.: (713) 224-7574
with a copy to:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.,
1900 Pennzoil Place - South Tower
711 Louisiana Street
Houston, Texas 77002
Attention: Rick L. Burdick
Telecopy No.: (713) 236-0822
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration, delivery or other communication hereunder shall
be deemed to have been duly given or served on the date on which personally
delivered, with receipt acknowledged, or three (3) Business Days after the same
shall have been deposited in the United States mail.
16.3. Indemnification. Except to the extent otherwise
provided in Section 9.7 the Company agrees to indemnify and hold harmless each
Holder, its officers, directors, employees, agents, and attorneys from and
against any liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, claims, costs, attorneys' fees, expenses and disbursements of
any kind which may be imposed upon, incurred by or asserted against such Holder
relating to or arising out of (i) such Holder's exercise of the Warrants and/or
ownership of any shares of Warrant Stock issued in consequence thereof, or (ii)
any litigation to which such Holder is made a party in its capacity as a
stockholder or warrantholder of the Company; provided, however, that the
Company will not be liable hereunder to the extent that any liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, claims,
costs, attorneys' fees, expenses or disbursements (A) arise from or relate to
any material violation by such Holder of any law or regulation applicable to it
or (B) are found in a final
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non-appealable judgment by a court to have resulted from such Holder's gross
negligence, bad faith or willful misconduct or material violation of law. The
procedures to be followed for claims of indemnification under this Section 16.3
shall be as set forth in Section 9.7(d).
16.4. Remedies. Each Holder of Warrants and Warrant Stock,
in addition to being entitled to exercise all rights granted by law, including
recovery of damages, will be entitled to specific performance of its rights
under Section 9 of this Agreement. The Company agrees that monetary damages
would not be adequate compensation for any loss incurred by reason of a breach
by it of the provisions of Section 9 of this Agreement and hereby agrees to
waive the defense in any action for specific performance that a remedy at law
would be adequate.
16.5. Successors and Assigns. Subject to the provisions of
Section 3.1 and 9, this Agreement and the rights evidenced hereby shall inure
to the benefit of and be binding upon the successor of the Company and the
successors and assigns of any Holder. The provisions of this Agreement are
intended to be for the benefit of all Holders from time to time of the Warrants
and Warrant Stock, and shall be enforceable by any such Holder.
16.6. Amendment. This Agreement may be modified or amended
or the provisions hereof waived with the written consent of the Company and the
Required Holders, provided that no Warrant may be modified or amended to reduce
the number of shares of Common Stock for which such Warrant is exercisable or
to increase the price at which such shares may be purchased upon exercise of
such Warrant (before giving effect to any adjustment as provided therein)
without the prior written consent of the Holder thereof.
16.7. Severability. Wherever possible, each provision of
this Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Agreement.
16.8. Headings. The headings used in this Agreement are for
the convenience of reference only and shall not, for any purpose, be deemed a
part of this Agreement.
16.9. Governing Law; Consent to Jurisdiction and Venue. In
all respects, including all matters of construction, validity and performance,
this Agreement and the obligations arising hereunder shall be governed by, and
construed and enforced in accordance with, the laws of the State of New York
applicable to contracts made and performed in such state, without regard to the
principles thereof regarding conflict of laws, and any applicable laws of the
United States of America. THE COMPANY CONSENTS TO PERSONAL JURISDICTION,
WAIVES ANY OBJECTION AS TO JURISDICTION OR VENUE, AND AGREES NOT TO ASSERT ANY
DEFENSE BASED ON LACK OF JURISDICTION OR VENUE, IN THE COUNTY OF NEW YORK,
STATE OF NEW YORK. Service of process on the Company or any Holder in any
action arising out of or relating to this Agreement shall be effective if
mailed to such party in accordance with the procedures and requirements set
forth in Section 16.2. Nothing herein shall preclude any Holder or the Company
from bringing suit or taking other legal action in any other jurisdiction.
16.10. MUTUAL WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING
IN CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND
ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH
APPLICABLE STATE AND FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE
PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH
APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS 25
THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO
TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO ENFORCE OR DEFEND
ANY RIGHTS OR REMEDIES UNDER THIS AGREEMENT.
26
<PAGE> 27
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first above written.
DEEPTECH INTERNATIONAL INC.
By Donald V. Weir
----------------------------------------
Name: Donald V. Weir
Title: Chief Financial Officer
JOHN DRURY
/s/ John Drury
------------------------------------------
27
<PAGE> 28
EXHIBIT A
To Warrant
Agreement
[FORM OF WARRANT CERTIFICATE]
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES
LAWS, AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR
AN EXEMPTION THEREFROM. SUCH SECURITIES ARE SUBJECT TO THE RESTRICTIONS AND
PRIVILEGES SPECIFIED IN THE WARRANT AGREEMENT, DATED AS OF FEBRUARY 16, 1996,
BETWEEN DEEPTECH INTERNATIONAL INC. AND THE INITIAL HOLDER OF SECURITIES NAMED
THEREIN, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY AND WILL
BE FURNISHED WITHOUT CHARGE TO THE HOLDER HEREOF UPON WRITTEN REQUEST, AND THE
HOLDER OF THIS CERTIFICATE AGREES TO BE BOUND THEREBY.
No. __-__
WARRANT CERTIFICATE
DEEPTECH INTERNATIONAL INC.
This Warrant Certificate certifies that John Drury, or
registered assigns, is the registered holder of 35,555 Warrants (the
"Warrants") to purchase shares of common stock of Deeptech International Inc.
(the "Company"). Each Warrant entitles the holder, but only subject to the
conditions set forth herein and in the Warrant Agreement referred to below, to
purchase from the Company before 5:00 p.m., New York City time, on the
Expiration Date, as such term is defined in the Warrant Agreement, one fully
paid and nonassessable share of common stock of the Company (a "Warrant Share")
at a price (the "Exercise Price") of $4.50 per Warrant Share payable in lawful
money of the United States of America (subject to adjustment as provided in
Section 4 of the Warrant Agreement), or, as provided in Section 2.2 of the
Warrant Agreement, by applying such amounts as credit for outstanding principal
and interest due under certain debt of the Company, upon surrender of this
Warrant Certificate, execution of the annexed Election to Purchase Form and
payment of the Exercise Price at the office of the Company at 7400 Texas
Commerce Tower, 600 Travis, Houston, Texas 77002 or such other address as the
Company may specify in writing to the registered holder of the Warrants
evidenced hereby. The Exercise Price is subject to adjustment prior to the
Expiration Date upon the occurrence of certain events as set forth in the
Warrant Agreement. The Company may deem and treat the registered holders of
the Warrants evidenced hereby as the absolute owner thereof (notwithstanding
any notation of ownership or other writing hereon made by anyone), for the
purpose of any exercise hereof and of any distribution to the holders hereof,
and for all other purposes.
Warrant Certificates, when surrendered at the office of the
Company at the above-mentioned office address or at the Company's headquarters
by the registered holder hereof in person or by a legal representative duly
authorized in writing, may be exchanged, in the manner and subject to the
limitations provided in the Warrant Agreement, but without payment of any
service charge, for another Warrant Certificate or Warrant Certificates of like
tenor evidencing in the aggregate a like number of Warrants.
Upon due presentment for registration of transfer of this
Warrant Certificate at the office of the Company at the above-mentioned
address, a new Warrant Certificate or Warrant Certificates of like tenor and
evidencing in the aggregate a like number of Warrants shall be issued to the
transferee in exchange for this Warrant Certificate to the transferee(s) and,
if less than all the Warrants evidenced hereby are to be transferred, the
registered holder hereof, subject to the limitations provided in the Warrant
Agreement, without charge except for any tax or other governmental charge
imposed in connection therewith.
1
<PAGE> 29
2
This Warrant Certificate is one of the Warrant Certificates
referred to in the Warrant Agreement, dated as of February 16, 1996, between
the Company and the initial holder of Warrants party thereto (the "Warrant
Agreement"). Said Warrant Agreement is hereby incorporated by reference in and
made a part of this instrument and is hereby referred to for a description of
the rights, limitation of rights, obligations, duties and immunities thereunder
of the Company and the holders, and in the event of any conflict between the
terms of this Warrant Certificate and the provisions of the Warrant Agreement,
the provisions of the Warrant Agreement shall control.
<PAGE> 30
IN WITNESS WHEREOF, the Company has caused this
Warrant Certificate to be duly executed and its corporate seal to be impressed
hereon and attached by its Secretary.
Dated: February 16, 1996
DEEPTECH INTERNATIONAL INC.
By_________________________________
Title:
(CORPORATE SEAL)
ATTEST:
__________________________
Secretary
<PAGE> 31
EXHIBIT A TO
WARRANT CERTIFICATE
ELECTION TO PURCHASE FORM
[To be executed only upon exercise of Warrants]
The undersigned registered owner of this Warrant Certificate
irrevocably exercises _____ Warrants for the purchase of ______ Shares of
Common Stock of Deeptech International Inc. and herewith makes payment
therefor, all at the price and on the terms and conditions specified in this
Warrant Certificate and the Warrant Agreement and requests that certificates
for the shares of Common Stock hereby purchased (and any securities or other
property issuable upon such exercise) be issued in the name of and delivered to
________________ whose address is ___________________ and, if such shares of
Common Stock shall not include all of the shares of Common Stock issuable as
provided in this Warrant Certificate, that a new Warrant Certificate of like
tenor and date for the balance of the shares of Common Stock issuable hereunder
be delivered to the undersigned.
______________________________
(Name of Registered Owner)
______________________________
(Signature of Registered Owner)
______________________________
(Street Address)
______________________________
(City) (State) (Zip Code)
1
<PAGE> 32
EXHIBIT B TO
WARRANT CERTIFICATE
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of this
Warrant Certificate hereby sells, assigns and transfers unto the assignee named
below all of the rights of the undersigned under this Warrant Certificate, with
respect to the number of shares of Common Stock set forth below:
Name and Address of Assignee No. of Shares of Common Stock
____________________________ _____________________________
and does hereby irrevocably constitute and appoint ________________
attorney-in-fact to register such transfer on the books of Deeptech
International Inc. maintained for the purpose, with full power of substitution
in the premises.
Dated:_________________________
Name:__________________________
Signature:_____________________
Witness:_______________________
The assignee named above hereby agrees to purchase and take
the Warrant Certificate pursuant to and in accordance with the terms and
conditions of the Warrant Agreement, dated as of February 16, 1996, between
Deeptech International Inc. and the initial holder named therein and agrees to
be bound thereby.
Dated:___________________________
Name:____________________________
Signature:_______________________
1
<PAGE> 1
EXHIBIT 4.6
SCHEDULE I
AMENDMENT NO. 1 TO WARRANT AGREEMENT DATED DECEMBER 31, 1996 BETWEEN
DEEPTECH INTERNATIONAL INC. AND
THE LENDERS LISTED BELOW
Pursuant to Item 601(a) of Regulation S-K, an Amendment No. 1 to
Warrant Agreement dated December 31, 1996 between DeepTech International Inc.
and each Lender listed below have been omitted because each of such agreements
are substantially identical in all material respects except as to the items
scheduled below.
LENDER
Donald A. Sanders
John Drury
<PAGE> 2
AMENDMENT NO. 1 TO WARRANT AGREEMENT
This Amendment No. 1 (the "Amendment") to that certain Warrant
Agreement dated as of February 16, 1996 (the "Agreement") between DEEPTECH
INTERNATIONAL INC., a Delaware corporation (the "Company"), and
_____________________ (the "Lender"), is entered into as of the 31st day of
December, 1996 (the "Amendment"), between the Company and the Lender.
W I T N E S S E T H :
WHEREAS, the Company and the Lender are parties to the Agreement;
WHEREAS, the Lender is the registered owner of 100% of the Warrants;
WHEREAS, in order to induce the Lender to exercise a portion of the
Warrants, Lender agreed to extend the Expiration Date under the Agreement;
NOW, THEREFORE, in consideration of the premises herein contained the
parties hereto agree as follows:
1. Definitions. Unless otherwise defined herein, terms defined
in the Agreement are used herein as therein defined.
2. Amendment to Section 1 of the Agreement. Section 1 of the
Agreement is hereby amended by deleting "July 15, 1997" at the end of the
definition of "Expiration Date" and replacing it with "July 15, 1998, or as
otherwise defined in a Warrant Certificate."
3. No Other Amendments. Except as expressly amended hereby, the
Agreement shall remain in full force and effect in accordance with its terms,
without any waiver, amendment or modification to any provision thereof.
4. Counterparts. This Amendment may be executed by one or more
of the parties hereto on any number of separate counterparts and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument.
5. Applicable Law. THIS AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
6. Headings. The headings used in this Amendment are for the
convenience of reference only and shall not, for any purpose, be deemed a part
of this Amendment.
7. Entire Agreement. This Amendment and the Agreement, and the
other agreements and certificates executed pursuant hereto and thereto, if any,
constitute the entire agreement and supersede all prior (oral or written) or
oral contemporaneous proposals or agreements, all previous negotiations and all
other communications or understandings between the parties hereto and thereto
with respect to the subject matter hereof and thereof.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed as of the date first above written.
DEEPTECH INTERNATIONAL INC.
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
[LENDER]
----------------------------------
<PAGE> 1
EXHIBIT 4.7
SCHEDULE I
WARRANT AGREEMENTS BETWEEN
DEEPTECH INTERNATIONAL INC. AND THE LENDERS LISTED BELOW
Pursuant to Item 601(a) of Regulation S-K, Warrant Agreements dated
February 16, 1996 between DeepTech International Inc. and the Lenders listed
below have been omitted because both of such Warrant Agreements are
substantially identical in all material respects except as to the items
scheduled below.
LENDER
- ------
Citicorp USA, Inc.
Lehman Commercial Paper Inc.
<PAGE> 2
DEEPTECH WARRANT AGREEMENT
WARRANT AGREEMENT, dated as of February 16, 1996 (the
"Agreement"), between DEEPTECH INTERNATIONAL INC., a Delaware corporation (the
"Company"), and _________________________ (the "Lender").
W I T N E S S E T H :
WHEREAS, DeepFlex Production Services, Inc. (the "Borrower"),
a wholly-owned subsidiary of the Company, certain lenders (including the
Lender) and Citicorp USA, Inc., as Administrative Agent, are parties to the
Credit Agreement dated as of February 16, 1996 (as the same may be amended,
supplemented or otherwise modified from time to time, the "Credit Agreement"),
pursuant to which, among other things, such lenders (including the Lender) made
term loans to the Borrower;
WHEREAS, in order to induce the Lender to execute and deliver
the Credit Agreement and to make such term loan to the Borrower the Company has
agreed to execute and deliver this Agreement and to issue to the Lender the
warrants hereinafter described;
NOW, THEREFORE, in consideration of the premises herein
contained the parties hereto agree as follows:
1. DEFINITIONS
As used in this Agreement the following terms have the
respective meanings set forth below:
"Additional Shares of Common Stock" shall mean all shares of
Common Stock issued by the Company after the Closing Date, other than Warrant
Stock.
"Affiliate" shall mean as to any Person (the "Primary
Person"), any Person which, directly or indirectly, is in control of, is
controlled by, or is under common control with, the Primary Person. For
purposes of this definition, control of a Person shall mean the power, directly
or indirectly, to (i) vote 10% or more of the securities having ordinary voting
power for the elec the management and policies of such Person whether by
contract or otherwise.
"Appraised Value" shall mean, in respect of any share of
Common Stock on any date herein specified, the fair market value of such share
of Common Stock (determined without giving effect to any discount for (i) a
minority interest or (ii) any lack of liquidity of the Common Stock or to the
fact that the Company may have no class of equity registered under the Exchange
Act) as of the last day of the most recent fiscal month to end within 60 days
prior to such date specified, based on the quotient obtained by dividing (x)
the value of the Company, as determined by an investment banking firm selected
in accordance with the terms of Section 14, by (y) the number of Fully Diluted
Outstanding shares of Common Stock.
<PAGE> 3
2
"Book Value" shall mean, in respect of any share of Common
Stock on any date herein specified, the consolidated book value of the Company
applicable to Common Stock as of the last day of the month immediately
preceding such date, divided by the number of Fully Diluted Outstanding shares
of Common Stock as determined in accordance with GAAP by a firm of independent
certified public accountants of recognized national standing selected by the
Company and reasonably acceptable to the Required Holders.
"Business Day" shall mean any day that is not a Saturday or
Sunday or a day on which banks are required or permitted to be closed in the
State of New York.
"Closing Date" shall mean the date the Warrants are initially
issued.
"Commission" shall mean the Securities and Exchange Commission
or any other federal agency then administering the Securities Act and other
federal securities laws.
"Common Stock" shall mean the common stock, $.01 par value per
share, of the Company, as constituted on the Closing Date, and any capital
stock into which such Common Stock may thereafter be changed, and shall also
include (i) capital stock of the Company of any other class (regardless of how
denominated) issued to the holders of shares of Common Stock upon any
reclassification thereof which is also not preferred as to dividends or assets
over any other class of stock of the Company and which is not subject to
redemption and (ii) shares of common stock of any successor or acquiring
corporation (as defined in Section 4.8) received by or distributed to the
holders of Common Stock of the Company in the circumstances contemplated by
Section 4.8.
"Contractual Obligation" shall mean, as to any Person, any
provision of any security issued by such Person or of any agreement, instrument
or other undertaking for which such Person is a party or by which it or any of
its property is bound.
"Convertible Securities" shall mean evidences of indebtedness,
shares of stock or other securities which are convertible into or exchangeable,
with or without payment of additional consideration in cash or property, for
Additional Shares of Common Stock, either immediately or upon the occurrence of
a specified date or a specified event.
"Current Market Price" shall mean, in respect of any share of
Common Stock on any date herein specified, (a) if there shall then be a public
market for the Common Stock, the average of the daily market prices for 10
consecutive Business Days commencing 15 days before such date; the daily market
price for each such Business Day being (i) the last sale price on such day on
the principal stock exchange on which such Common Stock is then listed or
admitted to trading, (ii) if no sale takes place on such day on any such
exchange, the average of the last reported closing bid and asked prices on such
day as officially quoted on any such exchange, (iii) if the Common Stock is not
then listed or admitted to trading on any stock exchange, the average of the
last reported closing bid and asked prices on such day in the over-the-counter
market, as furnished by the National Association of Securities Dealers
Automated Quotations System or the National Quotation Bureau, Inc., (iv) if
neither such corporation at the time is engaged in the business of reporting
such prices, as furnished by any similar firm then engaged in such business, or
(v) if there is no such firm, as furnished by any member of the NASD selected
mutually by the Required Holders and the Company or, if they cannot agree upon
such selection, as selected by two such members of the NASD, one of which shall
be selected by the Required Holders and one of which shall be selected by the
Company; or (b) at any time prior to the time there is a public market for the
Common Stock, the fair market value per share of Common Stock on such date as
mutually determined in good faith by the Required Holders and the board of
directors of the Company (determined without giving effect to any discount for
a minority interest, any restrictions on transferability or any lack of
liquidity of the Common Stock or to the fact that the Company has no class of
equity registered under the Exchange Act), such fair market value to be
determined by reference to the cash price that would be paid between a fully
informed buyer and seller under no compulsion to buy or sell, provided that (i)
if
<PAGE> 4
3
Current Market Price is being determined in connection with an issuance of
shares of Common Stock, warrants, options or Convertible Securities solely to
one or more Affiliates of the Company, then if so requested by the Required
Holders, Current Market Price shall be the Appraised Value; and (ii) Current
Market Price shall never be less than Book Value.
"Current Warrant Price" shall mean, in respect of a share of
Common Stock at any date herein specified, $4.50 (which is the closing price
per share of the Common Stock on January 22, 1996 as reported on the National
Association of Securities Dealers Automated Quotation Systems), as adjusted
pursuant to this Agreement.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, or any similar federal statute, and the rules and regulations of
the Commission thereunder, all as the same shall be in effect from time to
time.
"Exercise Period" shall mean the period during which the
Warrants are exercisable pursuant to Section 2.2.
"Expiration Date" shall mean July 15, 1997.
"Fully Diluted Outstanding" shall mean, when used with
reference to Common Stock, at any date as of which the number of shares thereof
is to be determined, all shares of Common Stock Outstanding at such date and
all shares of Common Stock issuable in respect of the Warrants and other
options or warrants to purchase, or securities convertible into, shares of
common stock outstanding on such date which would be deemed outstanding in
accordance with GAAP for purposes of determining book value or net income per
share.
"GAAP" shall mean generally accepted accounting principles in
the United States of America as from time to time in effect.
"Holder" shall mean each Person in whose name the Warrants or
any Warrant Stock are registered on the books of the Company maintained for
such purpose.
"NASD" shall mean the National Association of Securities
Dealers, Inc., or any successor corporation thereto.
"Other Property" shall have the meaning set forth in Section
4.8.
"Outstanding" shall mean, when used with reference to Common
Stock, at any date as of which the number of shares thereof is to be
determined, all issued shares of Common Stock, except shares then owned or held
by or for the account of the Company or any Subsidiary, and shall include all
shares issuable in respect of outstanding scrip or any certificates
representing fractional interests in shares of Common Stock.
"Permitted Issuances" shall mean (i) the issuance of shares of
Common Stock upon exercise of the Warrants, (ii) the issuance of shares of
Common Stock pursuant to the securities identified on Schedule I hereto, (iii)
if there shall then be a public market for the Common Stock, the issuance of
shares of Common Stock upon receipt by the Company of the Current Market Price
therefor described in clause (a) of the definition of "Current Market Price",
(iv) the issuance of shares relating to any benefit plan, stock option plan or
any other compensation plan or arrangement offered solely to the officers,
directors, employees and/or consultants of the Company and its Affiliates which
plan or arrangement complies with Rule 16b-3 under the Exchange Act, and (v) at
any time prior to the time there is a public market for the Common Stock, the
issuance of shares of Common Stock in an arm's length transaction with third
Persons not affiliated with the Company for consideration equal to the fair
value of such shares as determined in good faith by the Board of Directors of
the Company. Any
<PAGE> 5
4
determination by the Board of Directors of the Company pursuant to the
preceding sentence may be challenged in good faith by Holders of Warrants
exercisable for in excess of 51% of the aggregate number of shares of Common
Stock then purchasable upon exercise of all Warrants, whether or not then
exercisable, and any dispute shall be resolved by an investment banking firm of
reorganized national standing selected and paid for by the Company and
reasonably acceptable to such Holders or by any other method as is then agreed
to by the Company and such Holders.
"Person" shall mean any individual, sole proprietorship,
partnership, joint venture, trust, incorporated organization, association,
corporation, institution, public benefit corporation, entity or government
(whether federal, state, county, city, municipal or otherwise, including,
without limitation, any instrumentality, division, agency, body or department
thereof).
"Public Company" shall have the meaning set forth in Section
13.1.
"Registrable Securities" shall have the meaning set forth in
Section 9.3.
"Required Holders" shall mean the Holders of Warrants
exercisable for in excess of 50% of the aggregate number of shares of Common
Stock then purchasable upon exercise of all outstanding Warrants, whether or
not then exercisable.
"Requirement of Law" shall mean, as to any Person, the
certificate of incorporation and by-laws or other organizational or governing
documents of such Person, and any law, treaty, rule or regulation or
determination of an arbitration or a court or other governmental authority, in
each case applicable to or binding on such Person or any of the property
thereof or to which such Person or any of its property is subject.
"Restricted Common Stock" shall mean shares of Common Stock
which are, or which upon their issuance on the exercise of this Warrant would
be, evidenced by a certificate bearing the restrictive legend set forth in
Section 9.1.
"Securities Act" shall mean the Securities Act of 1933, as
amended, 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.
"Subsidiary" shall mean any Person of which an aggregate of
more than 50% of the outstanding stock or other ownership interests having
ordinary voting power to elect a majority of the board of directors or other
managers of such Person (irrespective of whether, at the time, stock or other
ownership interests of any other class or classes of such Person shall have or
might have voting power by reason of the happening of any contingency) is at
the time, directly or indirectly, owned legally or beneficially by the Company
and/or one or more Subsidiaries of the Company.
"Transfer Notice" shall have the meaning set forth in Section
9.2.
"Warrant Certificate" shall mean a certificate evidencing one
or more Warrants, substantially in the form of Exhibit A hereto, with such
changes therein as may be required to reflect any adjustments made pursuant to
Section 4.
"Warrant Price" shall mean an amount equal to (i) the number
of shares of Common Stock being purchased upon exercise of Warrants pursuant to
Section 2.2, multiplied by (ii) the Current Warrant Price as of the date of
such exercise.
"Warrant Stock" shall mean the shares of Common Stock
purchased by the Holders of the Warrants upon the exercise thereof.
<PAGE> 6
5
"Warrants" shall mean the warrants issued pursuant to this
Agreement and shall include all warrants issued upon transfer, division or
combination of, or in substitution for, any thereof. All Warrants shall at all
times be identical as to terms and conditions and date, except as to the number
of shares of Common Stock for which they may be exercised. A Warrant shall
entitle the holder thereof to purchase from the Company one share of Common
Stock (subject to adjustment as provided in Section 4).
2. ISSUANCE; EXERCISE OF WARRANT
2.1. Issuance of Warrants. The Company hereby agrees to
issue in favor of the Lender, on the Closing Date, Warrants in an amount equal
to the number of Warrants listed opposite the Lender's name on Exhibit B
hereto. On the Closing Date the Company shall deliver to the Lender Warrant
Certificates evidencing the Warrants issued to the Lender. Each Warrant issued
on the Closing Date shall entitle the Holder thereof to purchase from the
Company one share of Common Stock (subject to adjustment as provided in Section
4).
2.2. Manner of Exercise. The Holder may at any time and from
time to time, from and after the Closing Date and until 5:00 P.M., New York
City time, on the Expiration Date, exercise the Warrants evidenced by a Warrant
Certificate, on any Business Day, for all or any part of the number of shares
of Common Stock purchasable thereunder.
In order to exercise the Warrants, in whole or in part, a
Holder shall deliver to the Company at its principal office at 7400 Texas
Commerce Tower, 600 Travis, Houston, Texas 77002, Attention: Thomas P. Tatham,
or at the office or agency designated by the Company pursuant to Section 12,
(i) a written notice of such Holder's election to exercise the Warrants, which
notice shall specify the number of shares of Common Stock to be purchased, (ii)
payment of the Warrant Price in the manner provided below, and (iii) the
Warrant Certificate or Warrant Certificates evidencing the Warrants. Such
notice shall be substantially in the form of the form of election to purchase
appearing at the end of the Warrant Certificate as Exhibit A, duly executed by
such Holder or its agent or attorney. Upon receipt thereof, the Company shall,
as promptly as practicable, and in any event within three (3) Business Days
thereafter, execute or cause to be executed and deliver or cause to be
delivered to such Holder a certificate or certificates representing the
aggregate number of full shares of Common Stock issuable upon such exercise,
together with cash in lieu of any fraction of a share, as hereinafter provided.
The stock certificate or certificates so delivered shall be, to the extent
possible, in such denomination or denominations as such Holder shall request in
the notice and shall be registered in the name of Holder or, subject to Section
9, such other name as shall be designated in the notice. The Warrants shall be
deemed to have been exercised and such certificate or certificates shall be
deemed to have been issued, and such Holder or any other Person so designated
to be named therein shall be deemed to have become a holder of record of such
shares for all purposes, as of the date the notice, together with the check or
checks representing payment of the Warrant Price and the Warrant Certificate or
Warrant Certificates, is received by the Company as described above and all
taxes required to be paid by such Holder, if any, pursuant to Section 2.3 prior
to the issuance of such shares have been paid. If the Warrants evidenced by a
Warrant Certificate shall have been exercised, the Company shall, at the time
of delivery of the certificate or certificates representing Warrant Stock,
deliver to Holder a new Warrant Certificate evidencing the rights of Holder to
purchase the unpurchased shares of Common Stock represented by the old Warrant
Certificate, which new Warrant Certificate shall in all other respects be
identical with the old Warrant Certificate. Notwithstanding any provision
herein to the contrary, the Company shall not be required to register shares in
the name of any Person who acquired any Warrant or any Warrant Stock otherwise
than in accordance with this Agreement.
Payment of the Warrant Price shall be made at the option of
the Holder (i) by certified or official bank check or (ii) if such Holder shall
then be a lender under the Credit Agreement, by such Holder's transferring to
the Company an amount of the outstanding term loans of such Holder (including
<PAGE> 7
6
principal of and accrued and unpaid interest thereon) under the Credit
Agreement equal to the Warrant Price or (iii) in immediately available funds or
(iv) any combination thereof.
2.3. Payment of Taxes. All shares of Common Stock issuable
upon the exercise of Warrants pursuant to the terms hereof shall be validly
issued, fully paid and nonassessable and without any preemptive rights. The
Company shall pay all expenses in connection with, and all taxes and other
governmental charges that may be imposed with respect to, the issuance or
delivery thereof, unless such tax or charge is imposed by law upon Holder, in
which case such taxes or charges shall be paid by Holder. The Company shall
not be required, however, to pay any tax or other charge imposed in connection
with any transfer involved in the issue of any certificate for shares of
Warrant Stock issuable upon exercise of Warrants in any name other than that of
Holder, and in such case the Company shall not be required to issue or deliver
any stock certificate until such tax or other charge has been paid or it has
been established to the satisfaction of the Company that no such tax or other
charge is due.
2.4. Fractional Shares. The Company shall not be required to
issue a fractional share of Common Stock upon the exercise of Warrants. As to
any fraction of a share which the Holder of Warrants would otherwise be
entitled to purchase upon such exercise, the Company shall pay a cash
adjustment in respect of such final fraction in an amount equal to the same
fraction of the Current Market Price per share of Common Stock on the date of
exercise.
2.5. Continued Validity. A Holder of shares of Warrant Stock
(other than a holder who acquires such shares after the same have been publicly
sold pursuant to a Registration Statement under the Securities Act) shall
continue to be entitled with respect to such shares to all rights to which it
would have been entitled as Holder under Sections 6, 7, 9, 10, 11, 13 and 16 of
this Agreement. The Company will, at the time of each exercise of Warrants
upon the request of the Holder of the shares of Warrant Stock issued upon the
exercise thereof, acknowledge in writing, in form reasonably satisfactory to
such Holder, its continuing obligation to afford to such Holder all such
rights; provided, however, that if such Holder shall fail to make any such
request, such failure shall not affect the continuing obligation of the Company
to afford to such Holder all such rights.
3. TRANSFERS, DIVISION AND COMBINATION
3.1. Transfer. Subject to compliance with Section 9,
transfer of Warrants, in whole or in part, shall be registered on the books of
the Company to be maintained for such purpose, upon surrender of the Warrant
Certificate representing such Warrants at the principal office of the Company
referred to in Section 2.2 or the office or agency designated by the Company
pursuant to Section 12, together with a written assignment substantially in the
form of Exhibit B to the Warrant Certificate duly executed by the Holder or its
agent or attorney, an opinion of Holder's counsel delivered to the Company in
connection with such transfer (which opinion shall be reasonably satisfactory
to the Company) that such transfer is being effected pursuant to an effective
registration statement under the Securities Act or an exemption from
registration thereunder and funds sufficient to pay any transfer taxes payable
by such Holder upon the making of such transfer. Upon such surrender and, if
required, such payment, the Company shall, subject to Section 9, execute and
deliver a new Warrant Certificate or Warrant Certificates in the name of the
assignee or assignees and in the denomination specified in such instrument of
assignment, and shall issue to the assignor a new Warrant Certificate or
Warrant Certificates evidencing the portion of the old Warrant Certificate not
so assigned, and the old Warrant Certificate shall promptly be cancelled. A
Warrant, if properly assigned in compliance with Section 9, may be exercised by
a new Holder for the purchase of shares of Warrant Stock without having a new
Warrant Certificate or Warrant Certificates issued. If requested by the
Company, a new Holder shall acknowledge in writing, in form reasonably
satisfactory to the Company, such Holder's continuing obligation under Section
9.
<PAGE> 8
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3.2. Division and Combination. Subject to Section 9, any
Warrant Certificate may be divided or combined with other Warrant Certificates
upon presentation hereof at the aforesaid office or agency of the Company,
together with a written notice specifying the names and denominations in which
new Warrant Certificates are to be issued, signed by a Holder or its agent or
attorney. Subject to compliance with Section 3.1 as to any transfer which may
be involved in such division or combination, the Company shall execute and
deliver a new Warrant Certificate or Warrant Certificates in exchange for the
Warrant Certificate or Warrant Certificates to be divided or combined in
accordance with such notice.
3.3. Expenses. The Company shall prepare, issue and deliver
at its own expense (other than transfer taxes) the new Warrant Certificate or
Warrant Certificates under this Section 3.
3.4. Maintenance of Books. The Company agrees to maintain,
at its aforesaid office or agency, books for the registration and the
registration of transfer and exchange of the Warrants and the Warrant Stock.
4. ADJUSTMENTS
The number of shares of Warrant Stock for which Warrants are
exercisable, and the price at which such shares may be purchased upon exercise
of Warrants, shall be subject to adjustment from time to time as set forth in
this Section 4. The Company promptly shall give each Holder written notice of
any event described below which requires an adjustment pursuant to this Section
4 at the time of such event.
4.1. Stock Dividends, Subdivisions and Combinations. If at
any time after January 22, 1996 the Company shall:
(a) take a record of the holders of its Common Stock for the
purpose of entitling them to receive a dividend payable in, or other
distribution of, Additional Shares of Common Stock,
(b) subdivide its outstanding shares of Common Stock into a
larger number of shares of Common Stock, or
(c) combine its outstanding shares of Common Stock into a
smaller number of shares of Common Stock,
then (i) the number of shares of Common Stock for which a Warrant is
exercisable immediately after the occurrence of any such event shall be
adjusted to equal the number of shares of Common Stock which a record holder of
the same number of shares of Common Stock for which a Warrant is exercisable
immediately prior to the occurrence of such event would own or be entitled to
receive after the happening of such event, and (ii) the Current Warrant Price
shall be adjusted to equal the Current Warrant Price multiplied by a fraction,
the numerator of which shall be the number of shares of Common Stock for which
a Warrant is exercisable immediately prior to the adjustment and the
denominator of which shall be the number of shares for which a Warrant is
exercisable immediately after such adjustment.
4.2. Certain Other Distributions. If at any time after
January 22, 1996 the Company shall take a record of the holders of its Common
Stock for the purpose of entitling them to receive any dividend or other
distribution of:
(a) cash;
<PAGE> 9
8
(b) any evidences of its indebtedness (other than Convertible
Securities), any shares of its stock (other than Additional Shares of
Common Stock or Convertible Securities) or any other securities or
property of any nature whatsoever (other than cash); or
(c) any warrants or other rights to subscribe for or purchase
any evidences of its indebtedness (other than Convertible Securities),
any shares of its stock (other than Additional Shares of Common Stock
or Convertible Securities) or any other securities or property of any
nature whatsoever;
then (i) the number of shares of Common Stock for which a Warrant is
exercisable shall be adjusted to equal the product obtained by multiplying the
number of shares of Common Stock for which a Warrant is exercisable immediately
prior to such adjustment by a fraction (A) the numerator of which shall be the
Current Market Price per share of Common Stock at the date of taking such
record and (B) the denominator of which shall be such Current Market Price per
share of Common Stock, minus the amount allocable to one share of Common Stock
of any such cash so distributable and of the fair value (as determined in good
faith by the Board of Directors of the Company and supported by an opinion from
an investment banking firm of recognized national standing acceptable to the
Required Holders) of any and all such evidences of indebtedness, shares of
stock, other securities or property or warrants or other subscription or
purchase rights so distributable, and (ii) the Current Warrant Price shall be
adjusted to equal (A) the Current Warrant Price multiplied by the number of
shares of Common Stock for which a Warrant is exercisable immediately prior to
the adjustment divided by (B) the number of shares for which a Warrant is
exercisable immediately after such adjustment. A reclassification of the
Common Stock (other than a change in par value, or from par value to no par
value or from no par value to par value) into shares of Common Stock and shares
of any other class of stock shall be deemed a distribution by the Company to
the holders of its Common Stock of such shares of such other class of stock
within the meaning of this Section 4.2 and, if the outstanding shares of Common
Stock shall be changed into a larger or smaller number of shares of Common
Stock as a part of such reclassification, such change shall be deemed a
subdivision or combination, as the case may be, of the outstanding shares of
Common Stock within the meaning of Section 4.1.
4.3. Issuance of Additional Shares of Common Stock. (a) (i)
If at any time after January 22, 1996 the Company shall (except as hereinafter
provided) issue or sell any Additional Shares of Common Stock, other than
Permitted Issuances, for consideration in an amount per Additional Share of
Common Stock less than the Current Market Price, then the Current Warrant Price
shall be reduced to a price determined by dividing (A) an amount equal to the
sum of (X) the number of shares of Common Stock Outstanding immediately prior
to such issuance or sale multiplied by the then existing Current Warrant Price,
plus (Y) the consideration, if any, received by the Company upon such issuance
or sale, by (B) the total number of shares of Common Stock Outstanding
immediately after such issuance or sale and (ii) upon each adjustment of the
Current Warrant Price as a result of the calculations made pursuant to this
Section 4, each Warrant outstanding prior to the making of the adjustment in
the Current Warrant Price shall thereafter be treated as that number of
Warrants, and shall evidence the right to purchase, at the adjusted Current
Warrant Price, that number of shares of Common Stock outstanding, obtained by
(i) multiplying the number of shares of Common Stock for which a Warrant is
exercisable immediately prior to the adjustment by the Current Warrant Price in
effect immediately prior to the adjustment, and (ii) dividing the product so
obtained by the Current Warrant Price obtained immediately after such
adjustment of the Current Warrant Price.
(b) The provisions of paragraph (a) of Section 4.3 shall not
apply to any issuance of Additional Shares of Common Stock for which an
adjustment is provided under Section 4.1 or 4.2. No adjustment of the number
of shares of Common Stock for which a Warrant shall be exercisable shall be
made under paragraph (a) of Section 4.3 upon the issuance of any Additional
Shares of Common Stock which are issued pursuant to the exercise of any
warrants or other subscription or purchase rights or pursuant to the exercise
of any conversion or exchange rights in any Convertible Securities, if any such
<PAGE> 10
9
adjustment shall previously have been made upon the issuance of such warrants
or other rights or upon the issuance of such Convertible Securities (or upon
the issuance of any warrant or other rights therefor) pursuant to Section 4.4
or Section 4.5.
4.4. Issuance of Warrants or Other Rights. (a) If at any
time after January 22, 1996 the Company shall take a record of the holders of
its Common Stock for the purpose of entitling them to receive a dividend or
distribution of, or shall in any manner (whether directly or by assumption in a
merger in which the Company is the surviving corporation) issue or sell, any
warrants or other rights to subscribe for or purchase any Additional Shares of
Common Stock or any Convertible Securities, whether or not the rights to
exchange or convert thereunder are immediately exercisable, and if the price
per share for which Common Stock is issuable upon the exercise of such warrants
or other rights or upon conversion or exchange of such Convertible Securities
shall be less than the Current Market Price in effect immediately prior to the
time of such distribution, issue or sale, then: (i) the number of shares of
Common Stock for which a Warrant is exercisable shall be adjusted to equal the
product obtained by multiplying the number of shares of Common Stock for which
a Warrant is exercisable immediately prior to the taking of such record or such
issuance or sale by a fraction (A) the numerator of which is the number of
shares of Common Stock which would be Outstanding immediately after the
issuance or sale of the maximum number of Additional Shares of Common Stock
issuable pursuant to all such warrants or other rights or necessary to effect
the conversion or exchange of all such Convertible Securities, and (B) the
denominator of which is the number of shares of Common Stock Outstanding
immediately prior to the taking of such record or the issuance or sale of such
warrants or other rights; and (ii) the Current Warrant Price shall be adjusted
as provided in Section 4.3(a) on the basis that (A) the maximum number of
Additional Shares of Common Stock issuable pursuant to all such warrants or
other rights or necessary to effect the conversion or exchange of all such
Convertible Securities shall be deemed to have been issued and outstanding, (B)
the price per share for such Additional Shares of Common Stock shall be deemed
to be the lowest possible price per share in any range of prices per share at
which such Additional Shares of Common Stock are available to such holders, and
(C) the Company shall be deemed to have received all of the consideration
payable therefor, if any, as of the date of the actual issuance of such
warrants or other rights. No further adjustments of the Current Warrant Price
or number of Warrants shall be made upon the actual issuance of such Common
Stock or of such Convertible Securities upon exercise of such warrants or other
rights or upon the actual issuance of such Common Stock upon such conversion or
exchange of such Convertible Securities.
(b) If any Additional Share of Common Stock issuable pursuant
to all such warrants or other rights or necessary to effect the conversion or
exchange of all such Convertible Securities is issuable in exchange for
consideration in an amount per such Additional Share of Common Stock equal to
or more than the greater of the Current Warrant Price and the Current Market
Price at the time such record is taken or such warrants or other rights are
issued or sold, then the Current Warrant Price as to the number of shares of
Common Stock for which a Warrant is exercisable prior to the adjustment under
Section 4.4(a)(i) shall not change, and the Current Warrant Price for each of
the incremental number of shares of Common Stock for which this Warrant becomes
exercisable after such adjustment shall be equal to the fair value of such
consideration per Additional Share of Common Stock.
4.5. Issuance of Convertible Securities. (a) If at any time
the Company shall take a record of the holders of its Common Stock for the
purpose of entitling them to receive a distribution of, or shall in any manner
(whether directly or by assumption in a merger in which the Company is the
surviving corporation) issue or sell, any Convertible Securities, whether or
not the rights to exchange or convert thereunder are immediately exercisable,
and if the price per share for which Common Stock is issuable upon such
conversion or exchange shall be less than the Current Market Price in effect
immediately prior to the time of such issue or sale of Convertible Securities,
then: (i) the number of shares of Common Stock for which a Warrant is
exercisable shall be adjusted to equal the product obtained by multiplying the
number of shares of Common Stock for which a Warrant is exercisable immediately
prior to the taking of such record or such issuance or sale by a fraction (A)
the numerator of which is the number of shares of Common Stock which would be
Outstanding immediately after the
<PAGE> 11
10
issuance or sale of the maximum number of Additional Shares of Common Stock
necessary to effect the conversion or exchange of all such Convertible
Securities, and (B) the denominator of which is the number of shares of Common
Stock Outstanding immediately prior to the taking of such record or the
issuance or sale of such Convertible Securities; and (ii) the Current Warrant
Price shall be adjusted as provided in Section 4.3(a) on the basis that (A) the
maximum number of Additional Shares of Common Stock necessary to effect the
conversion or exchange of all such Convertible Securities shall be deemed to
have been issued and outstanding, (B) the price per share of such Additional
Shares of Common Stock shall be deemed to be the lowest possible price in any
range of prices at which such Additional Shares of Common Stock are available
to such holders, and (C) the Company shall be deemed to have received all of
the consideration payable therefor, if any, as of the date of actual issuance
of such Convertible Securities. No adjustment of the Current Warrant Price
shall be made under this Section 4.5 upon the issuance of any Convertible
Securities which are issued pursuant to the exercise of any warrants or other
subscription or purchase rights therefor, if any such adjustment shall
previously have been made upon the issuance of such warrants or other rights
pursuant to Section 4.4. No further adjustments of the Current Warrant Price
shall be made upon the actual issue of such Common Stock upon conversion or
exchange of such Convertible Securities and, if any issue or sale of such
Convertible Securities is made upon exercise of any warrant or other right to
subscribe for or to purchase or any warrant or other right to purchase any such
Convertible Securities for which adjustments of the Current Warrant Price have
been or are to be made pursuant to other provisions of this Section 4, no
further adjustments of the Current Warrant Price or number of Warrants shall be
made by reason of such issue or sale.
(b) If any Additional Share of Common Stock issuable upon
conversion or exchange of all such Convertible Securities is issuable in
exchange for consideration in an amount per such Additional Share of Common
Stock equal to the Current Market Price at the time such record is taken or
such Convertible Securities are issued or sold, then the Current Warrant Price
as to the number of shares of Common Stock for which this Warrant is
exercisable prior to the adjustment under Section 4.5(a)(i) shall not change,
but the Current Warrant Price for each of the incremental number of shares of
Common Stock for which a Warrant becomes exercisable after such adjustment
shall be equal to the fair value of such consideration per Additional Share of
Common Stock.
4.6. Superseding Adjustment. If, at any time after any
adjustment of the number of shares of Common Stock for which a Warrant is
exercisable shall have been made pursuant to Section 4.4 or Section 4.5 as the
result of any issuance of warrants, options, rights or Convertible Securities,
and such warrants, options or rights, or the right of conversion or exchange in
such other Convertible Securities, shall expire, and all or a portion of such
warrants, options or rights, or the right of conversion or exchange with
respect to all or a portion of such other Convertible Securities, as the case
may be, shall not have been exercised, then such previous adjustment shall be
rescinded and annulled and the Additional Shares of Common Stock which were
deemed to have been issued by virtue of the computation made in connection with
the adjustment so rescinded and annulled shall no longer be deemed to have been
issued by virtue of such computation. Thereupon, a recomputation shall be made
of the effect of such warrants, rights or options or other Convertible
Securities on the then outstanding Warrants, but not on any then outstanding
Warrant Stock, on the basis of treating the number of Additional Shares of
Common Stock or other property, if any, theretofore actually issued or issuable
pursuant to the previous exercise of any such warrants, rights or options or
any such right of conversion or exchange, as having been issued on the date or
dates of any such exercise and for the consideration actually received and
receivable therefor.
4.7. Other Provisions Applicable to Adjustments under this
Section. The following provisions shall be applicable to the making of
adjustments of the number of shares of Common Stock for which a Warrant is
exercisable provided for in this Section 4:
(a) Computation of Consideration. To the extent that any
Additional Shares of Common Stock or any Convertible Securities or any
warrants, options or other rights to subscribe for or purchase any
Additional Shares of Common Stock or any Convertible Securities
<PAGE> 12
11
shall be issued for cash consideration, the consideration received by
the Company therefor shall be the amount of the cash received by the
Company therefor, or, if such Additional Shares of Common Stock or
Convertible Securities are offered by the Company for subscription,
the subscription price, or, if such Additional Shares of Common Stock
or Convertible Securities are sold to underwriters or dealers for
public offering without a subscription offering, the initial public
offering price (in any such case subtracting any amounts paid or
receivable for accrued interest or accrued dividends, but not
subtracting any compensation, discounts or expenses paid or incurred
by the Company for and in the underwriting of, or otherwise in
connection with, the issuance thereof). To the extent that such
issuance shall be for a consideration other than cash, then, except as
herein otherwise expressly provided, the amount of such consideration
shall be deemed to be the fair value of such consideration at the time
of such issuance as mutually determined in good faith by the Required
Holders and the Board of Directors of the Company. In case any
Additional Shares of Common Stock or any Convertible Securities or any
warrants or other rights to subscribe for or purchase such Additional
Shares of Common Stock or Convertible Securities shall be issued in
connection with any merger in which the Company issues any securities,
the amount of consideration therefor shall be deemed to be the fair
value, as mutually determined in good faith by the Required Holders
and the Board of Directors of the Company, of such portion of the
assets and business of the nonsurviving corporation as the Required
Holders and such Board in good faith shall mutually determine to be
attributable to such Additional Shares of Common Stock, Convertible
Securities, warrants or other rights, as the case may be. The
consideration for any Additional Shares of Common Stock issuable
pursuant to any warrants, options or other rights to subscribe for or
purchase the same shall be the consideration received by the Company
for issuing such warrants or other rights plus the additional
consideration payable to the Company upon exercise of such warrants or
other rights. The consideration for any Additional Shares of Common
Stock issuable pursuant to the terms of any Convertible Securities
shall be the consideration, if any, received by the Company for
issuing warrants or other rights to subscribe for or purchase such
Convertible Securities, plus the consideration paid or payable to the
Company in respect of the subscription for or purchase of such
Convertible Securities, plus the additional consideration, if any,
payable to the Company upon the exercise of the right of conversion or
exchange in such Convertible Securities. In case of the issuance at
any time of any Additional Shares of Common Stock or Convertible
Securities in payment or satisfaction of any dividends upon any class
of stock other than Common Stock, the Company shall be deemed to have
received for such Additional Shares of Common Stock or Convertible
Securities a consideration equal to the amount of such dividend so
paid or satisfied.
(b) When Adjustments to Be Made. The adjustments required by
this Section 4 shall be made whenever and as often as any specified
event requiring an adjustment shall occur, except that any adjustment
that would otherwise be required may be postponed (except in the case
of a subdivision or combination of shares of the Common Stock, as
provided for in Section 4.1) up to, but not beyond, the date of
exercise of any Warrants if such adjustment either by itself or with
other adjustments not previously made adds or subtracts less than 1%
to the number of shares of Common Stock for which the Warrants
initially issued pursuant to this Agreement are exercisable
immediately prior to the making of such adjustment. Any adjustment
representing a change of less than such minimum amount (except as
aforesaid) which is postponed shall be carried forward and made as
soon as such adjustment, together with other adjustments required by
this Section 4 and not previously made, would result in a minimum
adjustment or on the date of exercise. For the purpose of any
adjustment, any specified event shall be deemed to have occurred at
the close of business on the date of its occurrence.
(c) Fractional Interests. In computing adjustments under
this Section 4, fractional interests in Common Stock resulting from an
issuance of additional Warrants to any Holder pursuant to this Section
4 shall be taken into account to the nearest 1/10th of a share.
<PAGE> 13
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(d) When Adjustment Not Required. If the Company shall take
a record of the holders of its Common Stock for the purpose of
entitling them to receive a dividend or distribution or subscription
or purchase rights and shall, thereafter and before the distribution
to stockholders thereof, legally abandon its plan to pay or deliver
such dividend, distribution, subscription or purchase rights, then
thereafter no adjustment shall be required by reason of the taking of
such record and any such adjustment previously made in respect thereof
shall be rescinded and annulled.
(e) Escrow of Warrant Stock. If after any property becomes
distributable pursuant to this Section 4 by reason of taking of any
record of the holders of Common Stock, but prior to the occurrence of
the event for which such record is taken, any Holder exercises
Warrants, any Additional Shares of Common Stock issuable upon exercise
by reason of such adjustment shall be deemed the last shares of Common
Stock for which this Warrant is exercised (notwithstanding any other
provision to the contrary herein) and such shares or other property
shall be held in escrow for Holder by the Company to be issued to
Holder upon and to the extent that the event actually takes place,
upon payment of the then Current Warrant Price. Notwithstanding any
other provision to the contrary herein, if the event for which such
record was taken fails to occur or is rescinded, then such escrowed
shares shall be cancelled by the Company and escrowed property
returned.
(f) Challenge to Good Faith Determination. Whenever the
Board of Directors of the Company shall be required to make a
determination in good faith of the fair value of any item under this
Section 4, such determination may be challenged in good faith by the
Required Holders, and any dispute shall be resolved by an investment
banking firm of recognized national standing selected and paid for by
the Company and reasonably acceptable to such Holders.
4.8. Reorganization, Reclassification, Merger, Consolidation
or Disposition of Assets. In case the Company shall reorganize its capital,
reclassify its capital stock, consolidate or merge with and into another
corporation (where the Company is not the surviving corporation or where there
is a change in or distribution with respect to the Common Stock of the
Company), or sell, transfer or otherwise dispose of all or substantially all
its property, assets or business to another corporation and, pursuant to the
terms of such reorganization, reclassification, merger, consolidation or
disposition of assets, shares of common stock of the successor or acquiring
corporation, or any cash, shares of stock or other securities or property of
any nature whatsoever (including warrants or other subscription or purchase
rights) in addition to or in lieu of common stock of the successor or acquiring
corporation ("Other Property"), are to be received by or distributed to the
holders of Common Stock of the Company, then each Holder shall have the right
thereafter to receive, upon exercise of a Warrant, solely the number of shares
of common stock of the successor or acquiring corporation or of the Company, if
it is the surviving corporation, and Other Property receivable upon or as a
result of such reorganization, reclassification, merger, consolidation, sale,
transfer or disposition by a holder of the number of shares of Common Stock for
which a Warrant is exercisable immediately prior to such event. In case of any
such reorganization, reclassification, merger, consolidation, sale, transfer or
disposition, the successor or acquiring corporation (if other than the Company)
shall expressly assume the due and punctual observance and performance of each
and every covenant and condition of this Agreement to be performed and observed
by the Company and all the obligations and liabilities hereunder, subject to
such modifications as may be deemed appropriate (as determined by resolution of
the Board of Directors of the Company) in order to provide for adjustments of
shares of the Common Stock for which a Warrant is exercisable which shall be as
nearly equivalent as practicable to the adjustments provided for in this
Section 4. For purposes of this Section 4.8 "common stock of the successor or
acquiring corporation" shall include stock of such corporation of any class
which is not preferred as to dividends or assets over any other class of stock
of such corporation and which is not subject to redemption and shall also
include any evidences of indebtedness, shares of stock or other securities
which are convertible into or exchangeable for any such stock, either
immediately or upon the arrival of a specified date or the happening of a
specified event and any warrants or other rights to subscribe for or purchase
any such
<PAGE> 14
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stock. The foregoing provisions of this Section 4.8 shall similarly apply to
successive reorganizations, reclassifications, mergers, consolidations, sales,
transfers or dispositions.
5. NOTICES TO WARRANT HOLDERS
5.1. Notice of Adjustments. Whenever the number of shares of
Common Stock for which a Warrant is exercisable, or whenever the price at which
a share of such Common Stock may be purchased upon exercise of the Warrants,
shall be adjusted pursuant to Section 4, the Company shall forthwith prepare a
certificate to be executed by the chief financial officer of the Company
setting forth, in reasonable detail, the event requiring the adjustment and the
method by which such adjustment was calculated (including a description of the
basis on which the Board of Directors of the Company determined the fair value
of any evidences of indebtedness, shares of stock, other securities or property
or warrants or other subscription or purchase rights referred to in Section 4),
specifying the number of shares of Common Stock for which a Warrant is
exercisable and (if such adjustment was made pursuant to Section 4.8)
describing the number and kind of any other shares of stock or Other Property
for which a Warrant is exercisable, and any change in the purchase price or
prices thereof, after giving effect to such adjustment or change. As of the
date of this Agreement, no such certificate is required to be delivered. The
Company shall promptly cause a signed copy of such certificate to be delivered
to each Holder in accordance with Section 16.2. The Company shall keep at its
office or agency designated pursuant to Section 12 copies of all such
certificates and cause the same to be available for inspection at said office
during normal business hours by any Holder or any prospective purchaser of a
Warrant designated by a Holder thereof.
5.2. Notice of Certain Corporate Action. Each Holder shall
be entitled to the same rights to receive notice of corporate action as any
holder of Common Stock.
6. REPRESENTATIONS AND WARRANTIES
The Company hereby represents and warrants as follows:
(a) The Company is a corporation duly organized and validly
existing under the laws of the State of Delaware, has the power and
authority to execute and deliver this Agreement and the Warrant
Certificates, to issue the Warrants and to perform its obligations
under this Agreement and the Warrant Certificates.
(b) The execution, delivery and performance by the Company of
this Agreement and the Warrant Certificates, the issuance of the
Warrants and the issuance of the Warrant Stock upon exercise of the
Warrants have been duly authorized by all necessary corporate action
and do not and will not violate, or result in a breach of, or
constitute a default under or require any consent under, or result in
the creation of any lien or security interest upon the assets of the
Company pursuant to, any Requirement of Law or any Contractual
Obligation binding upon the Company.
(c) This Agreement has been duly executed and delivered by
the Company and constitutes a legal, valid, binding and enforceable
obligation of the Company. When the Warrants and the Warrant
Certificates have been issued as contemplated hereby, (i) the Warrants
and the Warrant Certificates will constitute legal, valid, binding and
enforceable obligations of the Company and (ii) the Warrant Stock,
when issued upon exercise of the Warrants in accordance with the terms
hereof, will be duly authorized, validly issued, fully paid and
nonassessable shares of Common Stock with no personal liability
attaching to the ownership thereof.
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(d) (i) The total number of shares of all classes of stock
that the Company shall on the Closing Date have authority to issue is
110,000,000 shares, consisting solely of (i) 100,000,000 shares of
Common Stock, par value $.01 per share, of which, after giving effect
to the transactions contemplated herein and all other issuances of
capital stock of the Company on or prior to the Closing Date,
16,614,918 shares of Common Stock will be issued and outstanding and
7,689,528 shares of Common Stock will be reserved for future issuance
for the purposes described in Schedule I, and (ii) 10,000,000 shares
of preferred stock par value $.01 per share, none of which were issued
and outstanding on the Closing Date. The delivery hereunder by the
Company to the Lender of the Warrants issued on the Closing Date will
transfer and convey to the Lender good and marketable title to such
Warrants and, upon exercise of such Warrants in accordance with this
Agreement, good and marketable title to the Common Stock purchased
upon such exercise, free and clear of all preemptive rights, liens,
charges and encumbrances, except for restrictions on transfer set
forth in this Agreement or arising under the Federal and state
securities laws. Except as set forth in this paragraph (d), the
Company does not have outstanding any stock or securities convertible
into or exchangeable for any shares of its stock, nor, except as so
set forth, does it have outstanding any agreements, rights or options
entitling any person to subscribe for or to purchase any capital stock
or securities convertible into or exchangeable for any of its shares
of stock. The Company is not subject to any obligation (contingent or
otherwise) to repurchase or otherwise acquire or retire any shares of
its capital stock.
(e) The Company has provided to the Holder a copy of the
Company's most recent Annual Report on Form 10-K and Quarterly Reports
on Form 10-Q filed since the date of the most recent Annual Report on
Form 10-K. The information contained in such disclosure documents, as
of the date thereof, does not contain any untrue statement of a
material fact and does not omit to state a material fact necessary in
order to make the statements made, in light of the circumstances under
which they were made, not misleading.
6.2. Warrant Holders. Each Holder hereby represents and warrants
as follows:
(a) It is acquiring the Warrants for its own account, as
principal, for the purpose of investment and not with a view to or for
sale in connection with any distribution thereof. Each Holder hereby
represents that it will not offer to sell, sell or otherwise dispose
of any of the Warrants or any Warrant Stock in violation of the
Securities Act or any other applicable state or federal securities
laws.
(b) It has to its satisfaction reviewed the business and
affairs of the Company and understands the risks of, and other
considerations relating to, its receipt of the Warrant Stock. Such
Holder has been furnished a copy of the Company's most recent Annual
Report on Form 10-K and Quarterly Reports on Form 10-Q filed since the
date of the most recent Annual Report on Form 10-K, and all other
public information requested by it relating to the Company and its
activities and proposed activities.
(c) It has sufficient knowledge and experience in business
and financial matters to be capable of utilizing the information made
available to it to fully and completely evaluate the merits and risks
of owning the Warrant Stock.
(d) it has been furnished with or given adequate access to
such information about the Company and the Warrants as it has
requested, (ii) it has made its own independent inquiry and
investigation into, and based thereon has formed an independent
judgment concerning, the Company, (iii) it is able to bear the
economic risks of the investment in the Common Stock upon exercise of
the Warrants, (iv) it has such knowledge and experience in financial
and business matters as to be capable of evaluating the merits and
risks of an investment in the Company and
<PAGE> 16
15
(v) it is an "accredited investor" within the meaning of "accredited
investor" under Regulation D of the Securities Act of 1933, as
amended.
7. CERTAIN COVENANTS
7.1. No Impairment. The Company shall not by any action
including, without limitation, amending its certificate of incorporation or
through any reorganization, transfer of assets, consolidation, merger,
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
Agreement, but will at all times in good faith assist in the carrying out of
all such terms and in the taking of all such actions as may be necessary or
appropriate to protect the rights of each Holder against impairment. Without
limiting the generality of the foregoing, the Company will use reasonable good
faith efforts to obtain all such authorizations, exemptions or consents from
any public regulatory body having jurisdiction thereof as may be necessary to
enable the Company to perform its obligations under this Agreement.
Upon the request of a Holder, the Company will at any time
during the period this Agreement is in effect acknowledge in writing, in form
satisfactory to such Holder, the continuing validity of this Agreement and the
obligations of the Company hereunder.
7.2. Reservation and Authorization of Common Stock;
Registration with or Approval of any Governmental Authority. From and after the
Closing Date, the Company shall at all times reserve and keep available for
issue upon the exercise of Warrants such number of its authorized but unissued
shares of Common Stock as will be sufficient to permit the exercise in full of
all outstanding Warrants. All shares of Common Stock which shall be so
issuable, when issued upon exercise of any Warrants and payment therefor in
accordance with the terms of this Agreement, shall be duly and validly issued
and fully paid and nonassessable, and not subject to preemptive rights.
Before taking any action which would cause an adjustment
reducing the Current Warrant Price below the then par value, if any, of the
shares of Common Stock issuable upon exercise of the Warrants, the Company
shall take any corporate action which may be necessary in order that the
Company may validly and legally issue fully paid and nonassessable shares of
such Common Stock at such adjusted Current Warrant Price.
Before taking any action which would result in an adjustment
in the number of shares of Common Stock for which a Warrant is exercisable or
in the Current Warrant Price, the Company shall obtain all such authorizations
or exemptions thereof, or consents thereto, as may be necessary from its
stockholders, any public regulatory body or bodies having jurisdiction thereof.
If any shares of Common Stock required to be reserved for
issuance upon exercise of Warrants require registration or qualification with
any governmental authority under any federal or state law (otherwise than as
provided in Section 9) before such shares may be so issued, the Company will in
good faith and as expeditiously as possible and at its expense endeavor to
cause such shares to be duly registered.
8. TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS
In the case of all dividends or other distributions by the
Company to the holders of its Common Stock with respect to which any provision
of Section 4 refers to the taking of a record of such holders, the Company will
in each such case take such a record and will take such record as of the close
of business on a Business Day. The Company will not at any time, except upon
dissolution, liquidation or winding up of the Company, close its stock transfer
books or Warrant transfer books so as to result in preventing or delaying the
exercise or transfer of any Warrants or any Warrant Stock.
<PAGE> 17
16
9. RESTRICTIONS ON TRANSFERABILITY
The Warrants and the Warrant Stock shall not be transferred
before satisfaction of the conditions specified in this Section 9, which
conditions are intended to ensure compliance with the provisions of the
Securities Act with respect to the transfer of any Warrant or any Warrant
Stock. Each Holder, by entering into this Agreement and accepting the
Warrants, agrees to be bound by the provisions of this Section 9.
9.1. Restrictive Legend. Except as otherwise provided in
this Section 9, each certificate representing Warrants or Warrant Stock, 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, or any
applicable state securities laws, and may not be sold or transferred
in the absence of such registration or an exemption therefrom. Such
securities are subject to the restrictions and privileges specified in
a Warrant Agreement, dated as of February 16, 1996, between the
Company and the initial holders of securities named therein, a copy of
which is on file with the Secretary of the Company and will be
furnished without charge to the holder hereof upon written request,
and the holder of this certificate agrees to be bound thereby."
9.2. Notice of Proposed Transfers; Requests for Registration.
Prior to any transfer of any Warrants or any shares of Restricted Common Stock,
the Holder of such Warrants or Restricted Common Stock shall give five days'
prior written notice to the Company of such Holder's intention to effect such
transfer (a "Transfer Notice"). Holder agrees that it will not sell, transfer
or otherwise dispose of Warrants or any shares of Restricted Common Stock, in
whole or in part, except pursuant to an effective registration statement under
the Securities Act or an exemption from registration thereunder. Each
certificate, if any, evidencing such shares of Restricted Common Stock issued
upon such transfer shall bear the restrictive legend set forth in Section 9.1,
and each Warrant Certificate issued upon such transfer shall bear the
restrictive legend set forth in Section 9.1, unless in either case such
transfer is pursuant to an effective registration statement under the
Securities Act or in the opinion of the transferee's or Holder's counsel
delivered to the Company in connection with such transfer (which opinion shall
be reasonably satisfactory to the Company) such legend is not required in order
to ensure compliance with the Securities Act.
The Holders of Warrants and Warrant Stock shall have the right
to require registration of such Warrants or Warrant Stock pursuant to Sections
9.3 and 9.4.
9.3. Required Registration. (a) After receipt of a written
request from the Holders of Warrants and/or Warrant Stock representing at least
50% of the total of (i) all shares of Warrant Stock then subject to purchase
upon exercise of all Warrants and (ii) all shares of Warrant Stock then
outstanding, requesting that the Company effect the registration of the
Warrants, the shares of Common Stock issuable upon the exercise of such
Holders' Warrants or of any of such Holders' Warrant Stock under the Securities
Act (all such securities collectively referred to as the "Registrable
Securities") and specifying the intended method or methods of disposition
thereof, the Company shall promptly notify all Holders of Warrants and Warrant
Stock in writing of the receipt of such request and each Holder, in lieu of
exercising its rights under Section 9.4, may elect (by written notice sent to
the Company within ten Business Days from the date of such Holder's receipt of
the aforementioned Company's notice) to have its Registrable Securities
included in such registration thereof pursuant to this Section 9.3(a).
Thereupon the Company shall, as expeditiously as is possible (and, in any
event, within 60 days after the request for registration), effect the
registration under the Securities Act of all Registrable Securities which the
Company has been so requested to register by such Holders for sale, subject to
the next sentence, all to the extent required to permit the disposition (in
accordance with the intended method or methods thereof, as aforesaid) of the
Registrable Securities so registered. If the managing underwriter of a
proposed
<PAGE> 18
17
public offering shall advise the Company in writing that, in its opinion, the
distribution of the Registrable Securities requested to be included in the
registration by the Holders would materially and adversely affect the
distribution of such securities, then all Holders selling Registrable
Securities shall reduce the amount of Registrable Securities each intended to
distribute through such offering on a pro rata basis. The Company shall not be
required to effect a registration hereunder if the Board of Directors of the
Company determines in the exercise of its reasonable judgment that, due to a
pending or contemplated acquisition or disposition, to effect any such
registration at such time would have a material adverse effect on the Company,
in which case such registration may be deferred for a single period not to
exceed ninety (90) days, provided the Company shall not register any of its
equity securities prior to the registration deferred under this sentence except
for registrations on Form S-4 and Form S-8; and in any event, the Company shall
not be required to effect more than two registrations of any Registrable
Securities pursuant to this Section 9.3(a). If the Company shall defer a
registration as set forth above, the Required Holders shall have the right to
withdraw the registration request by giving written notice to the Company
within 30 days after the receipt of the notice of deferral and, in the event of
such withdrawal, such registration request shall not be counted for purposes of
the number of registrations to which Holder is entitled pursuant to this
Section 9.3(a).
(b) Lockup.
(i) Subject to clause (ii) below, the Company agrees
not to effect any public sale or distribution of any Registrable
Securities or any similar securities, or any securities convertible
into or exchangeable or exercisable for Registrable Securities or such
similar securities (other than any such sale or distribution pursuant
to registrations on Form S-4 and Form S-8), commencing on the date the
Company receives a request from any Holder under Section 9.3(a) and
continuing until 120 days after the commencement of the related
underwritten offering under Section 9.3(a) (the "Lockup Period"),
where the managing underwriter so requests.
(ii) Notwithstanding anything to the contrary in
clause (i) above, (A) nothing in this Section 9.3(b) shall prevent or
impair the ability of other security holders of the Company holding
securities of the Company that give them, as of the date of this
Agreement, demand registration rights with respect to Registrable
Securities from exercising their demand registration rights at any
time during the Lockup Period and (B) if at any time during the Lockup
Period the Company proposes to file on its behalf and/or on behalf of
any of its security holders a Registration Statement under the
Securities Act on any form (other than a Form S- 4 or S-8 or any
similar successor form or any other registration statement relating to
an exchange offer or offering of securities solely to the Company's
existing security holders or employees), then the registration request
of the Holder requesting registration pursuant to Section 9.3(a) shall
be deemed to be an incidental registration in accordance with Section
9.4 and (x) such registration shall not count as one of the two
registration requests available to such Holder pursuant to Section
9.3(a) and (y) if the offering resulting from such registration shall
be reduced in size for any reason, such reduction shall not be made
from the Registrable Securities of any Holders entitled to register
securities pursuant to Section 9.3(a), but shall be made from the
allocations of all other parties (including the Company) registering
their securities.
9.4. Incidental Registration. If the Company at any time
proposes to file on its behalf and/or on behalf of any of its security holders
("the demanding security holders") a Registration Statement under the
Securities Act on any form (other than a Registration Statement on Form S-4 or
S-8 or any similar or successor form or any other registration statement
relating to an exchange offer or offering of securities solely to the Company's
existing security holders or employees), it will give written notice to all
Holders of Warrants or Warrant Stock at least twenty (20) days before the
anticipated date of initial filing with the Commission of such Registration
Statement, which notice shall set forth the Company's intention to effect such
a registration, the class or series and number of equity securities proposed to
be registered and the intended method of disposition of the securities proposed
to be
<PAGE> 19
18
registered by the Company. The notice shall offer to include in such filing
the aggregate number of shares of Registrable Securities, as such Holders may
request. Nothing in this Section 9.4 shall preclude the Company from
discontinuing the registration of its securities being effected on its behalf
under this Section 9.4 at any time prior to the effective date of the
registration relating thereto.
Each Holder desiring to have Registrable Securities registered
under this Section 9.4 shall advise the Company in writing within fifteen (15)
days after the date of receipt of such offer from the Company, setting forth
the amount of such Registrable Securities for which registration is requested.
The Company shall thereupon include in such filing the number of shares of
Registrable Securities for which registration is so requested, subject to the
next sentence, and shall use its best efforts to effect registration under the
Securities Act of such securities. If the managing underwriter of a proposed
public offering shall advise the Company in writing that, in its opinion, the
distribution of the Registrable Securities requested to be included in the
registration concurrently with the securities being registered by the Company
or any demanding security holder would materially and adversely affect the
distribution of such securities by the Company or such demanding security
holders, then all selling security holders shall reduce the amount of
securities each intended to distribute through such offering on a pro rata
basis.
9.5. Registration Procedures. If the Company is required by
the provisions of this Section 9 to use its best efforts to effect the
registration of any of its securities under the Securities Act, the Company
will, as expeditiously as possible:
(a) prepare and file with the Commission a Registration
Statement with respect to such securities and use its best efforts to
cause such Registration Statement to become and remain effective for
the period described in paragraph (b) below;
(b) prepare and file with the Commission such amendments and
supplements to such Registration Statement and the prospectus used in
connection therewith as may be necessary to keep such Registration
Statement effective and to comply with the provisions of the
Securities Act with respect to the sale or other disposition of all
securities covered by such Registration Statement until the earlier of
such time as all of such securities have been disposed of in a public
offering and the expiration of 180 days;
(c) furnish to such selling security holders or underwriter
such number of copies of a summary prospectus or other prospectus,
including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents, as such
selling security holders or underwriters may reasonably request;
(d) use its best efforts to register or qualify the
securities covered by such Registration Statement under such other
securities or blue sky laws of such jurisdictions within the United
States as each holder of such securities shall request (provided,
however, the Company shall not be obligated to qualify as a foreign
corporation to do business under the laws of any jurisdiction in which
it is not then qualified or to file any general consent to service or
process), and do such other reasonable acts and things as may be
required of it to enable such holder to consummate the disposition in
such jurisdiction of the securities covered by such Registration
Statement;
(e) unless waived in writing by each Holder of Registrable
Securities being included in such registration pursuant to Section
9.3, use its best efforts to obtain from either a nationally
recognized underwriter or investment banker or an underwriter or
investment banker reasonably acceptable to such Holder a firm
commitment (pursuant to an underwriting agreement in customary form)
to underwrite the public offering of the securities covered by such
Registration Statement;
(f) furnish, at the request of any Holder requiring or
requesting registration of Registrable Securities pursuant to Section
9.3 or 9.4, on the date that such Registrable Securities
<PAGE> 20
19
are delivered to the underwriters for sale pursuant to such
registration or, if such Registrable Securities are not being sold
through underwriters, on the date that the Registration Statement with
respect to such Registrable Securities becomes effective, (1) an
opinion, dated such date, of the independent counsel representing the
Company for the purposes of such registration, addressed to the
underwriters, or if such Registrable Securities are not being sold
through underwriters, then to the Holders making such request, stating
that such Registration Statement has become effective under the
Securities Act and that (i) to the best knowledge of such counsel, no
stop order suspending the effectiveness thereof has been issued and no
proceedings for that purpose have been instituted or are pending
before or contemplated by the Commission, (ii) the Registration
Statement, the related prospectus, and each amendment or supplement
thereto, comply as to form in all material respects with the
requirements of the Securities Act and the applicable rules and
regulations of the Commission thereunder (except no opinion need be
expressed with respect to the inclusion and content of the financial
statements and notes thereto and related schedules and other
financial, statistical or expertized information), (iii) to the best
knowledge of such counsel, the descriptions in the Registration
Statement or the prospectus, or any amendment or supplement thereto,
of all legal matters and contracts and other legal documents or
instruments known to such counsel, insofar as such statements
constitute a summary of legal matters, documents and proceedings, are
accurate and fairly present in all material respects the information
required to be shown, and (iv) to the best knowledge of such counsel,
such counsel does not know of any legal or governmental proceedings,
pending or contemplated, required to be described in the Registration
Statement or prospectus, or any amendment or supplement thereto, which
are not described as required, nor of any contracts or documents or
instruments of a character required to be described in the
Registration Statement or prospectus, or any amendment or supplement
thereto, or to be filed as exhibits to the Registration Statement
which are not described and filed or incorporated by reference as
required; such counsel shall also confirm that it has no reason to
believe that either the Registration Statement or the prospectus, or
any amendment or supplement thereto contains any untrue statement of a
material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances in which made, not misleading; and (2) a letter dated
such date, from the independent certified public accountants of the
Company, addressed to the underwriters, or if such Registrable
Securities are not being sold through underwriters, then to the Holder
making such request and, if such accountants refuse to deliver such
letter to such Holder, then to the Company stating that they are
independent certified public accountants within the meaning of the
Securities Act and that, in the opinion of such accountants, the
financial statements and other financial data of the Company included
in the Registration Statement or the prospectus, or any amendment or
supplement thereto, comply as to form in all material respects with
the applicable accounting requirements of the Securities Act. Such
opinion of counsel shall additionally cover such other legal matters
with respect to the registration in respect of which such opinion is
being given as such Holders of Registrable Securities may reasonably
request. Such letter from the independent certified public
accountants shall additionally cover such other financial matters
(including information as to the period ending not more than five (5)
Business Days prior to the date of such letter) with respect to the
registration in respect of which such letter is being given as such
Holders of Registrable Securities may reasonably request;
(g) enter into customary agreements (including an
underwriting agreement in customary form) and take such other actions
as are reasonably required in order to expedite or facilitate the
disposition of such Registrable Securities; and
(h) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make available
to its security holders, as soon as reasonably practicable, but not
later than 18 months after the effective date of the Registration
Statement, an earnings statement covering the period of at least 12
months beginning with the first full month after the
<PAGE> 21
20
effective date of such Registration Statement, which earnings
statements shall satisfy the provisions of Section 11(a) of the
Securities Act.
It shall be a condition precedent to the obligation of the
Company to take any action pursuant to this Section 9 in respect of the
securities which are to be registered at the request of any Holder of
Registrable Securities that such Holder shall furnish to the Company such
information regarding the securities held by such Holder and the intended
method of disposition thereof as the Company shall reasonably request and as
shall be required in connection with the action taken by the Company.
9.6. Expenses. All expenses incurred in complying with
Section 9, including, without limitation, all registration and filing fees
(including all expenses incident to filing with the NASD), printing expenses,
fees and disbursements of counsel for the Company, the reasonable fees and
expenses of one counsel for the selling security holders (selected by the
Person holding a majority of the securities being registered), expenses of any
special audits incident to or required by any such registration and expenses of
complying with the securities or blue sky laws of any jurisdictions pursuant to
Section 9.5(d), shall be paid by the Company, except that (a) the Company shall
not be liable for any discount or commission to any underwriter in respect of
the securities sold by such Holder of Registrable Securities and (b) the
Company shall not be obligated to pay more than $200,000 in connection with
registration made pursuant to Section 9.3.
9.7. Indemnification and Contribution. (a) In the event of
any registration of any of the Registrable Securities under the Securities Act
pursuant to this Section 9, the Company shall indemnify and hold harmless the
Holder of such Registrable Securities, such Holder's directors, officers,
employees, agents and attorneys and each other Person (including each
underwriter) who participated in the offering of such Registrable Securities
and each other Person, if any, who controls such Holder or such participating
Person within the meaning of the Securities Act, against any losses, claims,
damages, liabilities or expenses, joint or several (including, without limiting
the foregoing, the legal expenses incurred in connection with any such action,
suit or proceeding), to which such Holder or any such director, officer,
employee, agent, attorney or participating Person or controlling Person may
become subject under the Securities Act or any other statute or at common law,
insofar as such losses, claims, damages, liabilities or expenses (or actions in
respect thereof) arise out of or are based upon (i) any alleged untrue
statement of any material fact contained in any Registration Statement under
which such securities were registered under the Securities Act, any preliminary
prospectus or final prospectus contained therein, or any amendment or
supplement thereto, or (ii) any alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, and shall reimburse such Holder or such director, officer,
employee, agent, attorney or participating Person or controlling Person for any
legal or any other expenses incurred by such Holder or such director, officer,
employee, agent, attorney or participating Person or controlling Person in
connection with investigating or defending any such loss, claim, damage,
liability, expense or action; provided, however, that the Company shall not be
liable in any such case to the extent that any such loss, claim, damage,
liability or expense arises out of or is based upon any alleged untrue
statement or alleged omission made in such Registration Statement, preliminary
prospectus, prospectus or amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by such Holder
specifically for use therein and in the case of any non-underwritten offering,
to the extent that any such losses, claims, damages, liabilities or expenses
result from the fact that a current copy of the prospectus was not sent or
given to the person asserting any such losses, claims, damages, liabilities or
expenses at or prior to the written confirmation of the sale of the securities
concerned to such person if it is determined that it was the responsibility of
such Holder to provide such person with a current copy of the prospectus and
such current copy of the prospectus would have cured the defect giving rise to
such losses, claims, damages, liabilities or expenses. Such indemnity shall
remain in full force and effect regardless of any investigation made by or on
behalf of such Holder or such director, officer or participating Person or
controlling Person, and shall survive the transfer of such securities by such
Holder.
<PAGE> 22
21
(b) Each Holder of any Registrable Securities, by acceptance
thereof, agrees to indemnify and hold harmless the Company, its directors,
officers, employees, agents and attorneys and each other Person, if any, who
controls the Company within the meaning of the Securities Act against any
losses, claims, damages, liabilities or expenses, joint or several, to which
the Company or any such director or officer or any such Person may become
subject under the Securities Act or any other statute or at common law, insofar
as such losses, claims, damages, liabilities or expenses (or actions in respect
thereof) arise out of or are based upon information in writing provided to the
Company by such Holder of such Registrable Securities contained, on the
effective date thereof, in any Registration Statement under which securities
were registered under the Securities Act at the request of such Holder, any
preliminary prospectus or final prospectus contained therein, or any amendment
or supplement thereto or the fact that in the case of any non-underwritten
offering, a current copy of the prospectus was not sent to the Person asserting
such losses, claims, damages, liabilities or expenses at or prior to the
written confirmation of the sale of the securities with respect to such Person
if it is determined that it was the responsibility of such Holder to provide
such Person with a current copy of the prospectus and such current copy would
have cured the defect giving rise to such losses, claims, damages, liabilities
or expenses; provided, however, that such Warrant Holder's obligation under
this Section 9.7(b) to indemnify and hold harmless the Company shall in no
event exceed the lesser of (A) damage attributable solely to the inclusion of
such written information in such Registration Statement, preliminary
prospectus, final prospectus, or amendment or supplement suffered by the Person
or Persons whose claims gave rise to such losses, claims, damages or
liabilities and (B) the net proceeds received by such Holder from the sale of
its Registerable Securities.
(c) If the indemnification provided for in this Section 9
from the indemnifying party is unavailable to an indemnified party hereunder in
respect of any losses, claims, damages, liabilities or expenses referred to
herein, then the indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party and indemnified parties in connection with the actions which resulted in
such losses, claims, damages, liabilities or expenses, 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 in question, including any untrue or alleged untrue
statement of a material fact or 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 under this Section 9 as a result
of the losses, claims, damages, liabilities and expenses referred to above
shall be deemed to include any legal or other fees or expenses reasonably
incurred by such party in connection with any investigation or proceeding.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 9.7(c) were determined by
pro rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to in the immediately
preceding paragraph. Notwithstanding the provisions of this subsection (c), no
Holder shall be required to contribute any amount in excess of the net proceeds
received by it upon the sale of its securities pursuant to the Registration
Statement to which the losses, claims, damages, liabilities and expenses
referred to above relate. 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 obligations of each of the Holders under this
subsection (c) to contribute are several and not joint.
(d) Conduct of Indemnification Proceedings. Any person or
entity entitled to indemnification hereunder shall (i) give prompt written
notice to the indemnifying party after the receipt by the indemnified party of
a written notice of the commencement of any action, suit, proceeding or
investigation or threat thereof made in writing for which such indemnified
party will claim indemnification or contribution pursuant to this Agreement;
provided, however, that the failure of any
<PAGE> 23
22
indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under Section 9.7 hereof, except to the
extent that the indemnifying party is actually prejudiced by such failure to
give notice, and (ii) unless in such indemnified party's reasonable judgment a
conflict of interest may exist between such indemnified and indemnifying
parties with respect to such claim, permit such indemnifying party to assume
the defense of such claim with counsel reasonably satisfactory to the
indemnified party. If the indemnifying party is entitled to, and does, assume
the defense of such claim, the indemnified party shall have the right to employ
separate counsel and to participate in the defense thereof, but the fees and
expenses of such counsel shall be borne by the indemnified party. Whether or
not such defense is assumed by the indemnifying party, the indemnifying party
shall not be subject to any liability for any settlement made without its
consent (but such consent will not be unreasonably withheld). No indemnifying
party shall be permitted to consent to the entry of any judgment or to enter
into any settlement that does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such indemnified party of a release from
all liability in respect of such claim or litigation. An indemnifying party
who is not entitled to, or elects not to, assume the defense of a claim shall
not be obligated to pay the fees and expenses of more than one counsel in any
one jurisdiction for all parties indemnified by such indemnifying party with
respect to such claim, unless in the reasonable judgment of any indemnified
party a conflict of interest may exist between such indemnified party and any
other of such indemnified parties with respect to such claim, in which event
the indemnifying party shall be obligated to pay the fees and expenses of such
additional counsel or counsels.
9.8. Termination of Restrictions. Notwithstanding the
foregoing provisions of Section 9, the restrictions imposed by this Section
upon the transferability of the Warrants, the Warrant Stock and the Restricted
Common Stock (or Common Stock issuable upon the exercise of the Warrants) and
the legend requirement of Section 9.1 shall terminate as to any particular
Warrant or share of Warrant Stock or Restricted Common Stock (or Common Stock
issuable upon the exercise of the Warrants) (i) when and so long as such
security shall have been effectively registered under the Securities Act and
disposed of pursuant thereto, or (ii) when the holder thereof shall have
delivered to the Company the written opinion of counsel to such holder, which
opinion shall be reasonably satisfactory to the Company, stating that such
legend is not required in order to ensure compliance with the Securities Act.
Whenever the restrictions imposed by Section 9 shall terminate as to any
Warrants or any Restricted Common Stock, as hereinabove provided, the Holder
thereof shall be entitled to receive from the Company, at the expense of the
Company, a new Warrant Certificate or a new certificate representing such
Common Stock, as the case may be, not bearing the restrictive legend set forth
in Section 9.1.
9.9. Listing on Securities Exchange. If the Company shall
list any shares of Common Stock on any securities exchange, it will, at its
expense, use its best efforts to list thereon, maintain and, when necessary,
increase such listing of, all shares of Common Stock issued or, to the extent
permissible under the applicable securities exchange rules, issuable upon the
exercise of the Warrants so long as any shares of Common Stock shall be so
listed during any such Exercise Period.
9.10. Selection of Managing Underwriters. The managing
underwriter or underwriters for any offering of Registrable Securities to be
registered pursuant to Section 9.3 shall be an underwriter or underwriters of
nationally recognized standing selected by the Company.
10. SUPPLYING INFORMATION
The Company shall cooperate with each Holder of a Warrant and
each Holder of Restricted Common Stock in supplying such information as may be
reasonably 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 Warrant or Restricted Common Stock.
<PAGE> 24
23
11. LOSS OR MUTILATION
Upon receipt by the Company from any Holder of evidence
reasonably satisfactory to it of the ownership of and the loss, theft,
destruction or mutilation of a certificate representing Warrants or Warrant
Stock and indemnity reasonably satisfactory to it (it being understood that the
written agreement of the Lender or an Affiliate thereof shall be sufficient
indemnity) and in case of mutilation upon surrender and cancellation hereof or
thereof, the Company will execute and deliver in lieu hereof or thereof a new
Warrant or new stock certificate as the case may be, of like tenor to such
Holder; provided, in the case of mutilation, no indemnity shall be required if
the certificate representing Warrants or Warrant Stock in identifiable form is
surrendered to the Company for cancellation.
12. OFFICE OF THE COMPANY
As long as any of the Warrants remain outstanding, the Company
shall maintain an office or agency (which may be the principal executive
offices of the Company) where the Warrants may be presented for exercise,
registration or transfer, division or combination as provided herein.
13. FINANCIAL AND BUSINESS INFORMATION
13.1. Quarterly Information. Except during any period when
the Company either (i) is subject to the reporting requirements of Section
15(d) of the Exchange Act, or (ii) has securities registered under Section
12(b) or 12(g) of the Exchange Act (such status being referred to as being a
"Public Company"), the Company will deliver to each Holder, as soon as
practicable after the end of each quarterly fiscal period in each fiscal year
of the Company, and in any event within 45 days thereafter, a copy of the
unaudited consolidated balance sheet as at the close of such quarter, and the
related unaudited consolidated statements of income, shareholders' equity and
cash flow of the Company and its Subsidiaries for that portion of the fiscal
year ending as of the close of such quarter. Such financial statements shall
be prepared by the Company in accordance with GAAP (subject to normal year end
adjustments and the inclusion of footnotes) and accompanied by the
certification of the Company's chief executive officer or chief financial
officer that, to the best of his knowledge, such financial statements are
complete and correct in all material respects and fairly present in accordance
with GAAP (subject to normal year end adjustments and the inclusions of
footnotes) the consolidated financial position, the consolidated statements of
income, shareholder equity and cash flow of the Company and its Subsidiaries as
at the end of such quarter and for such year-to-date period, as the case may
be.
13.2. Annual Information. Except during any period when the
Company is a Public Company, the Company will deliver to each Holder as soon as
practicable after the end of each fiscal year of the Company, and in any event
within 90 days thereafter, one copy of:
(i) an audited consolidated balance sheet of the Company and
its Subsidiaries as at the end of such year, and
(ii) audited consolidated statements of income, shareholders'
equity and cash flow of the Company and its Subsidiaries for such
year;
setting forth in each case in comparative form the figures for the
corresponding periods in the previous fiscal year; all prepared in accordance
with GAAP, and which audited financial statements shall be accompanied by (i) a
certification of the chief executive officer or chief financial officer of the
Company that, to the best of his knowledge, all such financial statements are
complete and correct in all material respects and present fairly in accordance
with GAAP the consolidated financial position of the Company and its
Subsidiaries as at the end of such fiscal year and for the period then ended,
(ii) an opinion thereon of the independent certified public accountants
regularly retained by the Company, or any other
<PAGE> 25
24
firm of independent certified public accountants of recognized national
standing selected by the Company, and (iii) a report of such independent
certified public accountants confirming any adjustment made pursuant to Section
4 during such year.
13.3. Filings. The Company will file on or before the
required date all required regular or periodic reports (pursuant to the
Exchange Act) with the Commission and will deliver to each Holder promptly upon
their becoming available one copy of each report, notice or proxy statement
sent by the Company to its stockholders generally, and of each regular or
periodic report (pursuant to the Exchange Act) and any Registration Statement,
prospectus or written communication (other than transmittal letters) (pursuant
to the Securities Act), filed by the Company with (i) the Commission or (ii)
any securities exchange on which shares of Common Stock are listed.
14. APPRAISAL
The determination of the Appraised Value per share of Common
Stock shall be made by an investment banking firm of nationally recognized
standing selected by the Company and acceptable to the Required Holders. If
the investment banking firm selected by the Company is not acceptable to the
Required Holders and the Company and the Required Holders cannot agree on a
mutually acceptable investment banking firm, then the Required Holders and the
Company shall each choose one such investment banking firm and the respective
chosen firms shall agree on another investment banking firm which shall make
the determination. The Company shall retain, at its sole cost, such investment
banking firm as may be necessary for the determination of Appraised Value
required by the terms of this Agreement.
15. LIMITATION OF LIABILITY; NO RIGHTS AS STOCKHOLDER
No provision hereof, in the absence of affirmative action by
any Holder to purchase shares of Common Stock, and no enumeration herein of the
rights or privileges of any Holder, shall give rise to any liability of such
Holder for the purchase price of any Common Stock or as a stockholder of the
Company, whether such liability is asserted by the Company or by creditors of
the Company. Except as may otherwise be provided by law or by separate
agreement between a Holder and the Company, no Holder, as such, shall be
entitled to vote or be deemed the holder of Common Stock or any other
securities (other than Warrants) of the Company which may at any time be
issuable on the exercise hereof, nor shall anything contained herein be
construed to confer upon any Holder the rights of a stockholder of the Company
or the right to vote for the election of directors or upon any matters
submitted to stockholders at any meeting thereof, or to give or withhold
consent to any corporate action or to receive notice of meetings or other
actions affecting stockholders (except as provided herein), or to receive
dividends or otherwise, until the Warrants shall have been exercised in
accordance with the terms and conditions hereof.
16. MISCELLANEOUS
16.1. Nonwaiver and Expenses. No course of dealing or any
delay or failure to exercise any right hereunder on the part of any Holder
shall operate as a waiver of such right or otherwise prejudice such Holder's
rights, powers or remedies. If the Company fails to make, when due, any
payments provided for hereunder, or fails to comply with any other provision of
this Agreement, the Company shall pay to the applicable Holders such amounts as
shall be sufficient to cover any costs and expenses including, but not limited
to, reasonable attorneys' fees, including those of appellate proceedings,
incurred by the Holders in collecting any amounts due pursuant hereto or in
otherwise enforcing any of its rights, powers or remedies hereunder.
<PAGE> 26
25
16.2. Notice Generally. Any notice, demand, request,
consent, approval, declaration, delivery or other communication hereunder to be
made pursuant to the provisions of this Agreement shall be sufficiently given
or made if in writing and either delivered in person with receipt acknowledged
or sent by registered or certified mail, return receipt requested, postage
prepaid, telex, telecopier or overnight air courier guaranteeing next day
delivery, addressed as follows:
(a) If to any Holder, at its last known address appearing on
the books of the Company maintained for such purpose.
(b) If to the Company at:
Deeptech International, Inc.
7400 Texas Commerce Tower
600 Travis
Houston, Texas 77002
Attention: Thomas P. Tatham
Telecopy No.: (713) 224-7574
with a copy to:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.,
1900 Pennzoil Place - South Tower
711 Louisiana Street
Houston, Texas 77002
Attention: Rick L. Burdick
Telecopy No.: (713) 236-0822
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration, delivery or other communication hereunder shall
be deemed to have been duly given or served on the date on which personally
delivered, with receipt acknowledged, or three (3) Business Days after the same
shall have been deposited in the United States mail.
16.3. Indemnification. Except to the extent otherwise
provided in Section 9.7 the Company agrees to indemnify and hold harmless each
Holder, its officers, directors, employees, agents, and attorneys from and
against any liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, claims, costs, attorneys' fees, expenses and disbursements of
any kind which may be imposed upon, incurred by or asserted against such Holder
relating to or arising out of (i) such Holder's exercise of the Warrants and/or
ownership of any shares of Warrant Stock issued in consequence thereof, or (ii)
any litigation to which such Holder is made a party in its capacity as a
stockholder or warrantholder of the Company; provided, however, that the
Company will not be liable hereunder to the extent that any liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, claims,
costs, attorneys' fees, expenses or disbursements (A) arise from or relate to
any material violation by such Holder of any law or regulation applicable to it
or (B) are found in a final non-appealable judgment by a court to have resulted
from such Holder's gross negligence, bad faith or willful misconduct or
material violation of law. The procedures to be followed for claims of
indemnification under this Section 16.3 shall be as set forth in Section
9.7(d).
16.4. Remedies. Each Holder of Warrants and Warrant Stock,
in addition to being entitled to exercise all rights granted by law, including
recovery of damages, will be entitled to specific performance of its rights
under Section 9 of this Agreement. The Company agrees that monetary damages
would not be adequate compensation for any loss incurred by reason of a breach
by it of the provisions of Section 9 of this Agreement and hereby agrees to
waive the defense in any action for specific performance that a remedy at law
would be adequate.
<PAGE> 27
26
16.5. Successors and Assigns. Subject to the provisions of
Section 3.1 and 9, this Agreement and the rights evidenced hereby shall inure
to the benefit of and be binding upon the successor of the Company and the
successors and assigns of any Holder. The provisions of this Agreement are
intended to be for the benefit of all Holders from time to time of the Warrants
and Warrant Stock, and shall be enforceable by any such Holder.
16.6. Amendment. This Agreement may be modified or amended
or the provisions hereof waived with the written consent of the Company and the
Required Holders, provided that no Warrant may be modified or amended to reduce
the number of shares of Common Stock for which such Warrant is exercisable or
to increase the price at which such shares may be purchased upon exercise of
such Warrant (before giving effect to any adjustment as provided therein)
without the prior written consent of the Holder thereof.
16.7. Severability. Wherever possible, each provision of
this Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Agreement.
16.8. Headings. The headings used in this Agreement are for
the convenience of reference only and shall not, for any purpose, be deemed a
part of this Agreement.
16.9. Governing Law; Consent to Jurisdiction and Venue. In
all respects, including all matters of construction, validity and performance,
this Agreement and the obligations arising hereunder shall be governed by, and
construed and enforced in accordance with, the laws of the State of New York
applicable to contracts made and performed in such state, without regard to the
principles thereof regarding conflict of laws, and any applicable laws of the
United States of America. THE COMPANY CONSENTS TO PERSONAL JURISDICTION,
WAIVES ANY OBJECTION AS TO JURISDICTION OR VENUE, AND AGREES NOT TO ASSERT ANY
DEFENSE BASED ON LACK OF JURISDICTION OR VENUE, IN THE COUNTY OF NEW YORK,
STATE OF NEW YORK. Service of process on the Company or any Holder in any
action arising out of or relating to this Agreement shall be effective if
mailed to such party in accordance with the procedures and requirements set
forth in Section 16.2. Nothing herein shall preclude any Holder or the Company
from bringing suit or taking other legal action in any other jurisdiction.
16.10. MUTUAL WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING
IN CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND
ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH
APPLICABLE STATE AND FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE
PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH
APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS 25
THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO
TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO ENFORCE OR DEFEND
ANY RIGHTS OR REMEDIES UNDER THIS AGREEMENT.
<PAGE> 28
27
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first above written.
DEEPTECH INTERNATIONAL INC.
By:/s/Donald V. Weir
----------------------------
Name: Donald V. Weir
Title: Chief Financial Officer
CITICORP USA, INC.
By:/s/Gordon D. Treco
-------------------------
Name: Gordon D. Treco
Title: Vice President
<PAGE> 29
EXHIBIT A
To Warrant
Agreement
[FORM OF WARRANT CERTIFICATE]
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES
LAWS, AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR
AN EXEMPTION THEREFROM. SUCH SECURITIES ARE SUBJECT TO THE RESTRICTIONS AND
PRIVILEGES SPECIFIED IN THE WARRANT AGREEMENT, DATED AS OF FEBRUARY 16, 1996,
BETWEEN DEEPTECH INTERNATIONAL INC. AND THE INITIAL HOLDER OF SECURITIES NAMED
THEREIN, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY AND WILL
BE FURNISHED WITHOUT CHARGE TO THE HOLDER HEREOF UPON WRITTEN REQUEST, AND THE
HOLDER OF THIS CERTIFICATE AGREES TO BE BOUND THEREBY.
No. __-__
WARRANT CERTIFICATE
DEEPTECH INTERNATIONAL INC.
This Warrant Certificate certifies that Lehman Commercial
Paper Inc., or registered assigns, is the registered holder of 1,333,333.5
Warrants (the "Warrants") to purchase shares of common stock of Deeptech
International Inc. (the "Company"). Each Warrant entitles the holder, but only
subject to the conditions set forth herein and in the Warrant Agreement
referred to below, to purchase from the Company before 5:00 p.m., New York City
time, on the Expiration Date, as such term is defined in the Warrant Agreement,
one fully paid and nonassessable share of common stock of the Company (a
"Warrant Share") at a price (the "Exercise Price") of $4.50 per Warrant Share
payable in lawful money of the United States of America (subject to adjustment
as provided in Section 4 of the Warrant Agreement), or, as provided in Section
2.2 of the Warrant Agreement, by the transfer of certain debt to the Company,
upon surrender of this Warrant Certificate, execution of the annexed Election
to Purchase Form and payment of the Exercise Price at the office of the Company
at 7400 Texas Commerce Tower, 600 Travis, Houston, Texas 77002 or such other
address as the Company may specify in writing to the registered holder of the
Warrants evidenced hereby. The Exercise Price is subject to adjustment prior
to the Expiration Date upon the occurrence of certain events as set forth in
the Warrant Agreement. The Company may deem and treat the registered holders
of the Warrants evidenced hereby as the absolute owner thereof (notwithstanding
any notation of ownership or other writing hereon made by anyone), for the
purpose of any exercise hereof and of any distribution to the holders hereof,
and for all other purposes.
Warrant Certificates, when surrendered at the office of the
Company at the above-mentioned office address or at the Company's headquarters
by the registered holder hereof in person or by a legal representative duly
authorized in writing, may be exchanged, in the manner and subject to the
limitations provided in the Warrant Agreement, but without payment of any
service charge, for another Warrant Certificate or Warrant Certificates of like
tenor evidencing in the aggregate a like number of Warrants.
Upon due presentment for registration of transfer of this
Warrant Certificate at the office of the Company at the above-mentioned
address, a new Warrant Certificate or Warrant Certificates of like tenor and
evidencing in the aggregate a like number of Warrants shall be issued to the
transferee in exchange for this Warrant Certificate to the transferee(s) and,
if less than all the Warrants evidenced hereby are to be transferred, the
registered holder hereof, subject to the limitations provided in the Warrant
Agreement, without charge except for any tax or other governmental charge
imposed in connection therewith.
<PAGE> 30
2
This Warrant Certificate is one of the Warrant Certificates
referred to in the Warrant Agreement, dated as of February 16, 1996, between
the Company and the initial holder of Warrants party thereto (the "Warrant
Agreement"). Said Warrant Agreement is hereby incorporated by reference in and
made a part of this instrument and is hereby referred to for a description of
the rights, limitation of rights, obligations, duties and immunities thereunder
of the Company and the holders, and in the event of any conflict between the
terms of this Warrant Certificate and the provisions of the Warrant Agreement,
the provisions of the Warrant Agreement shall control.
<PAGE> 31
IN WITNESS WHEREOF, the Company has caused this
Warrant Certificate to be duly executed and its corporate seal to be impressed
hereon and attached by its Secretary.
Dated: February 16, 1996
DEEPTECH INTERNATIONAL INC.
By_________________________________
Title:
(CORPORATE SEAL)
ATTEST:
__________________________
Secretary
<PAGE> 32
EXHIBIT A TO
WARRANT CERTIFICATE
ELECTION TO PURCHASE FORM
[To be executed only upon exercise of Warrants]
The undersigned registered owner of this Warrant Certificate
irrevocably exercises _____ Warrants for the purchase of ______ Shares of
Common Stock of Deeptech International Inc. and herewith makes payment
therefor, all at the price and on the terms and conditions specified in this
Warrant Certificate and the Warrant Agreement and requests that certificates
for the shares of Common Stock hereby purchased (and any securities or other
property issuable upon such exercise) be issued in the name of and delivered to
________________ whose address is ___________________ and, if such shares of
Common Stock shall not include all of the shares of Common Stock issuable as
provided in this Warrant Certificate, that a new Warrant Certificate of like
tenor and date for the balance of the shares of Common Stock issuable hereunder
be delivered to the undersigned.
______________________________
(Name of Registered Owner)
______________________________
(Signature of Registered Owner)
______________________________
(Street Address)
______________________________
(City) (State) (Zip Code)
<PAGE> 33
EXHIBIT B TO
WARRANT CERTIFICATE
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of this
Warrant Certificate hereby sells, assigns and transfers unto the assignee named
below all of the rights of the undersigned under this Warrant Certificate, with
respect to the number of shares of Common Stock set forth below:
Name and Address of Assignee No. of Shares of Common Stock
- ---------------------------- -----------------------------
and does hereby irrevocably constitute and appoint ________________
attorney-in-fact to register such transfer on the books of Deeptech
International Inc. maintained for the purpose, with full power of substitution
in the premises.
Dated:_________________________
Name:__________________________
Signature:_____________________
Witness:_______________________
The assignee named above hereby agrees to purchase and take
the Warrant Certificate pursuant to and in accordance with the terms and
conditions of the Warrant Agreement, dated as of February 16, 1996, between
Deeptech International Inc. and the initial holder named therein and agrees to
be bound thereby.
Dated:_________________________
Name:__________________________
Signature:_____________________
<PAGE> 34
EXHIBIT B
To Warrant
Agreement
WARRANT REGISTER
See Schedule I attached hereto.
<PAGE> 35
<TABLE>
<CAPTION>
Schedule I To
Warrant Agreement
DATE OF NUMBER OF EXERCISE
OPTION HOLDER WARRANT WARRANTS PRICE
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
DTI Funding, Inc. & Assignees 12/14/93 137,079 $13.50
DTI Funding, Inc. & Assignees 12/14/93 33,460 $13.50
Wilrig 11/8/94 1,100,000 $10.00
Highwood Partners, L.P. 12/5/95 372,973 $5.00
Highwood Partners, L.P. - Contingent 12/5/95 100,000 $5.00
DLJ & Assignees 2/19/93 1,182,872 $4.25
DLJ & Assignees 2/19/93 178,575 $4.25
Citicorp USA, Inc. 12/15/92 437,500 $4.00
Citicorp USA, Inc. 2/16/96 1,000,000 $4.50
Chemical Bank 7/20/92 250,000 $4.00
Lehman Commercial Paper Inc. 2/16/96 1,333,333.5 $4.50
Sandpiper & Co. 12/15/92 200,000 $4.00
Donald A. Sanders 12/15/92 60,000 $4.00
Katherine U. Sanders 12/15/92 60,000 $4.00
Del. Chtr. Guar. & Trust FBO R.B. Vincent IRA 12/15/92 33,482 $4.00
Anatar Investments Defined Benefit Plan 12/15/92 25,112 $4.00
Maged F. Riad and John C. Oran, Trustees
Under Whitman & Ranson Ret. Savings
Plan FBO William R. Ziegler 12/15/92 10,000 $4.00
Steven A. Webster 12/15/92 8,371 $4.00
Susan K. Stickney 12/15/92 7,000 $4.00
William R. Ziegler 12/15/92 6,741 $4.00
Chris M. Sanders 12/15/92 5,000 $4.00
Roberto Marsella 12/15/92 4,185 $4.00
David N. King 12/15/92 4,000 $4.00
Alfred King III 12/15/92 4,000 $4.00
Albert Stickney III 12/15/92 2,109 $4.00
Jansen Noyes, Jr. & Alfred King, Jr.
TTEE U/W Nancy Noyes King FBO
David N. King 12/15/92 2,000 $4.00
Jansen Noyes, Jr. & Alfred King, Jr.
TTEE U/W Nancy Noyes King FBO
Alfred King III 12/15/92 2,000 $4.00
Jansen Noyes, Jr. & Alfred King, Jr.
TTEE U/W Nancy Noyes King FBO Susan K. Stickney 12/15/92 2,000 $4.00
Jansen Noyes, Jr. 12/15/92 1,500 $4.00
Mike Willis 6/11/90 87,938 $3.41
------------ ---------
TOTAL PER OPTION EXHIBIT SCHEDULE 6,651,230.5
-----------
OTHER OPTIONS ISSUED TO EMPLOYEES/DIRECTORS:
Gary Coburn 5/12/94 5,000 $13.50
Gary Huxford 5/12/94 1,000 $13.50
Thomas P. Tatham 12/1/94 100,000 $10.15
Thomas P. Tatham 2/16/96 333,333.5 $4.50
Grant E. Sims 12/1/94 50,000 $10.15
Donald V. Weir 12/1/94 50,000 $10.15
Donald S. Taylor 12/1/94 50,000 $10.15
Harry J. Briscoe 12/1/94 50,000 $10.15
Robert H. Williams 12/1/94 50,000 $10.15
John H. Gray 12/1/94 50,000 $10.15
</TABLE>
<PAGE> 36
2
<TABLE>
<CAPTION>
DATE OF NUMBER OF EXERCISE
OPTION HOLDER WARRANT WARRANTS PRICE
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Thomas P. Tatham 9/8/95 300,000 $5.00
Grant E. Sims 12/1/92 75,000 $4.25
Grant E. Sims 12/1/92 75,000 $4.25
Grant E. Sims 12/1/92 75,000 $4.25
Harvey Fleisher 11/14/95 150,000 $4.00
Ben T. Morris 10/26/95 150,000 $4.00
Paul Thompson, III 10/26/95 150,000 $4.00
Laney Chouest/Alpha Marine Services 10/26/95 150,000 $4.00
Nancy Quinn 10/26/95 150,000 $4.00
Robert Fox 10/26/95 150,000 $4.00
Phil Clarke 10/26/95 150,000 $4.00
Mike Lam 10/26/95 150,000 $4.00
Donald V. Weir 11/14/95 125,000 $4.00
Grant Sims 11/14/95 100,000 $4.00
John Gray 11/14/95 100,000 $4.00
Keith Forman 11/14/95 50,000 $4.00
Antoine Gautreaux 11/14/95 75,000 $4.00
Eddie Moses 11/14/95 75,000 $4.00
Janet E. Sikes 11/14/95 75,000 $4.00
Kenneth E. Beeney 11/14/95 75,000 $4.00
Diana Walters 11/14/95 75,000 $4.00
James Lytal 11/14/95 50,000 $4.00
Jeff Lucas 11/14/95 50,000 $4.00
John Pike 11/14/95 50,000 $4.00
Ed Gibbon 11/14/95 50,000 $4.00
Dennis A. Kunetka 11/14/95 30,000 $4.00
Clyde Nath 10/25/95 30,000 $4.00
Lari Paradee 11/14/95 25,000 $4.00
Gary Hobbs 11/14/95 25,000 $4.00
Steve Noe 11/14/95 20,000 $4.00
Bill Moss 11/14/95 20,000 $4.00
Eddie Mitchell 11/14/95 20,000 $4.00
Wayne Lammert 11/14/95 10,000 $4.00
Ken Bass 11/14/95 10,000 $4.00
Director deferred comp - September 9/30/95 7,690 $4.00
Deferred Comp Plan - July 11/14/95 7,188 $4.00
Deferred Comp Plan - August 11/14/95 7,188 $4.00
Deferred Comp Plan - September 11/14/95 7,188 $4.00
Deferred Comp Plan - November 11/30/95 7,188 $4.00
Deferred Comp Plan - December 12/31/95 7,188 $4.00
Deferred Comp Plan - February 1/31/96 7,188 $4.00
Director deferred comp - July 7/31/95 4,690 $4.00
Director deferred comp - August 8/31/95 4,690 $4.00
Director deferred comp - November 11/30/95 7,504 $4.00
Director deferred comp - December 12/31/95 7,504 $4.00
Director deferred comp - February 1/31/96 7,504 $4.00
Director deferred comp - October 10/31/95 10,716 $3.99
Deferred Comp Plan - October 11/14/95 7,205 $3.99
---------
TOTAL OPTIONS ISSUED TO EMPLOYEES/DIRECTORS 3,704,964
---------
TOTAL OPTIONS OUTSTANDING AT 1/31/96 10,356,914.5
============
</TABLE>
<PAGE> 1
EXHIBIT 4.8
AMENDMENT NO. 1 TO WARRANT AGREEMENT
This Amendment No. 1 (the "Amendment") to that certain Warrant
Agreement dated as of February 16, 1996 (the "Agreement"), between DEEPTECH
INTERNATIONAL INC., a Delaware corporation (the "Company"), and LEHMAN
COMMERCIAL PAPER INC. (the "Lender"), is entered into as of the 31st day of
December, 1996 (the "Amendment"), between the Company and LEHMAN BROTHERS
HOLDINGS INC. ("Holder").
W I T N E S S E T H :
WHEREAS, the Company and the Lender are parties to the Agreement;
WHEREAS, the Holder is the registered owner of 100% of the Warrants;
WHEREAS, in order to induce the Holder to exercise a portion of the
Warrants, the Lender agreed to extend the Expiration Date under the Agreement;
NOW, THEREFORE, in consideration of the premises herein contained the
parties hereto agree as follows:
1. Definitions. Unless otherwise defined herein, terms defined
in the Agreement are used herein as therein defined.
2. Amendment to Section 1 of the Agreement. Section 1 of the
Agreement is hereby amended by deleting "July 15, 1997" at the end of the
definition of "Expiration Date" and replacing it with "July 15, 2000, or as
otherwise defined in any Warrant Certificate."
3. No Other Amendments. Except as expressly amended hereby, the
Agreement shall remain in full force and effect in accordance with its terms,
without any waiver, amendment or modification to any provision thereof.
4. Counterparts. This Amendment may be executed by one or more
of the parties hereto on any number of separate counterparts and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument.
5. Applicable Law. THIS AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
6. Headings. The headings used in this Amendment are for the
convenience of reference only and shall not, for any purpose, be deemed a part
of this Amendment.
7. Entire Agreement. This Amendment and the Agreement, and the
other agreements and certificates executed pursuant hereto and thereto, if any,
constitute the entire agreement and supersede all prior (oral or written) or
oral contemporaneous proposals or agreements, all previous negotiations and all
other communications or understandings between the parties hereto and thereto
with respect to the subject matter hereof and thereof.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed as of the date first above written.
DEEPTECH INTERNATIONAL INC.
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
LEHMAN BROTHERS HOLDINGS INC.
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
<PAGE> 1
EXHIBIT 4.9
AMENDMENT NO. 1 TO WARRANT AGREEMENT
This Amendment No. 1 (the "Amendment") to that certain Warrant
Agreement dated as of February 16, 1996 (the "Agreement"), between DEEPTECH
INTERNATIONAL INC., a Delaware corporation (the "Company"), and CITICORP USA,
INC. (the "Lender"), is entered into as of the 31st day of December, 1996 (the
"Amendment"), among the Company, CITICORP USA, INC., DONALD A. SANDERS, AND
THOMAS P. TATHAM, collectively the ("Holders").
W I T N E S S E T H :
WHEREAS, the Company and the Lender are parties to the Agreement;
WHEREAS, collectively, the Holders are the registered owners of an
aggregate of 100% of the Warrants;
WHEREAS, in order to induce the Holders to exercise a portion of the
Warrants, the Company agreed to extend the Expiration Date under the Agreement
in exchange for a Holder's exercise of a portion of his or its Warrants;
NOW, THEREFORE, in consideration of the premises herein contained the
parties hereto agree as follows:
1. Definitions. Unless otherwise defined herein, terms defined
in the Agreement are used herein as therein defined.
2. Amendment to Section 1 of the Agreement. The definition of
"Expiration Date" in Section 1 of the Agreement is hereby amended by deleting
the "." at the end of the sentence and adding the following: ", or as otherwise
defined in any Warrant Certificate."
3. No Other Amendments. Except as expressly amended hereby, the
Agreement shall remain in full force and effect in accordance with its terms,
without any waiver, amendment or modification to any provision thereof.
4. Counterparts. This Amendment may be executed by one or more
of the parties hereto on any number of separate counterparts and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument.
5. Applicable Law. THIS AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
6. Headings. The headings used in this Amendment are for the
convenience of reference only and shall not, for any purpose, be deemed a part
of this Amendment.
7. Entire Agreement. This Amendment and the Agreement, and the
other agreements and certificates executed pursuant hereto and thereto, if any,
constitute the entire agreement and supersede all prior (oral or written) or
oral contemporaneous proposals or agreements, all previous negotiations and all
other communications or understandings between the parties hereto and thereto
with respect to the subject matter hereof and thereof.
<PAGE> 2
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed as of the date first above written.
DEEPTECH INTERNATIONAL INC.
By:
-------------------------------
Name:
----------------------------
Title:
---------------------------
CITICORP USA, INC.
By:
-------------------------------
Name:
----------------------------
Title:
---------------------------
DONALD A. SANDERS
----------------------------------
THOMAS P. TATHAM
----------------------------------
2
<PAGE> 1
EXHIBIT 4.10
SCHEDULE I
WARRANT CERTIFICATES ISSUED BY
DEEPTECH INTERNATIONAL INC.
Pursuant to Item 601(a) of Regulation S-K, Warrant Certificates dated
December 31, 1996 issued by DeepTech International Inc. to each Holder listed
below on the date listed below have been omitted because all of such Warrant
Certificates are substantially identical in all material respects except as to
the items scheduled below.
<TABLE>
<CAPTION>
DATE OF
NUMBER WARRANT
HOLDER OF WARRANTS EXPIRATION DATE CERTIFICATE
- ------ ----------- --------------- -----------
(a) (b) (c) (d)
<S> <C> <C>
Citicorp USA, Inc. 618,750 July 15, 1998 January 21, 1997
John E. Drury 26,666 July 15, 1998 December 31, 1996
Lehman Brothers Holdings, Inc. 666,667 July 15, 2000 December 31, 1996
Donald A. Sanders 37,500 July 15, 1998 December 31, 1996
Donald A. Sanders 80,000 July 15, 1998 December 31, 1996
</TABLE>
<PAGE> 2
WARRANT CERTIFICATE
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES
LAWS, AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR
AN EXEMPTION THEREFROM. SUCH SECURITIES ARE SUBJECT TO THE RESTRICTIONS AND
PRIVILEGES SPECIFIED IN THE WARRANT AGREEMENT, DATED AS OF FEBRUARY 16, 1996,
BETWEEN DEEPTECH INTERNATIONAL INC. AND THE INITIAL HOLDER OF SECURITIES NAMED
THEREIN, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY AND WILL
BE FURNISHED WITHOUT CHARGE TO THE HOLDER HEREOF UPON WRITTEN REQUEST, AND THE
HOLDER OF THIS CERTIFICATE AGREES TO BE BOUND THEREBY.
No. _____
WARRANT CERTIFICATE
DEEPTECH INTERNATIONAL INC.
This Warrant Certificate certifies that (a) _________________,
or registered assigns, is the registered holder of (b)____________ Warrants (the
"Warrants") to purchase shares of common stock of Deeptech International Inc.
(the "Company"). Each Warrant entitles the holder, but only subject to the
conditions set forth herein and in the Warrant Agreement referred to below, to
purchase from the Company before 5:00 p.m., New York City time, on the
Expiration Date (c), as such term is defined in the Warrant Agreement, one
fully paid and nonassessable share of common stock of the Company (a "Warrant
Share") at a price (the "Exercise Price") of $4.50 per Warrant Share payable in
lawful money of the United States of America (subject to adjustment as provided
in Section 4 of the Warrant Agreement), or, as provided in Section 2.2 of the
Warrant Agreement, by the transfer of certain debt to the Company, upon
surrender of this Warrant Certificate, execution of the annexed Election to
Purchase Form and payment of the Exercise Price at the office of the Company at
7400 Texas Commerce Tower, 600 Travis, Houston, Texas 77002 or such other
address as the Company may specify in writing to the registered holder of the
Warrants evidenced hereby. The Exercise Price is subject to adjustment prior
to the Expiration Date upon the occurrence of certain events as set forth in
the Warrant Agreement. The Company may deem and treat the registered holders
of the Warrants evidenced hereby as the absolute owner thereof (notwithstanding
any notation of ownership or other writing hereon made by anyone), for the
purpose of any exercise hereof and of any distribution to the holders hereof,
and for all other purposes.
Warrant Certificates, when surrendered at the office of the
Company at the above-mentioned office address or at the Company's headquarters
by the registered holder hereof in person or by a legal representative duly
authorized in writing, may be exchanged, in the manner and subject to the
limitations provided in the Warrant Agreement, but without payment of any
service charge, for another Warrant Certificate or Warrant Certificates of like
tenor evidencing in the aggregate a like number of Warrants.
<PAGE> 3
Upon due presentment for registration of transfer of this
Warrant Certificate at the office of the Company at the above-mentioned
address, a new Warrant Certificate or Warrant Certificates of like tenor and
evidencing in the aggregate a like number of Warrants shall be issued to the
transferee in exchange for this Warrant Certificate to the transferee(s) and,
if less than all the Warrants evidenced hereby are to be transferred, the
registered holder hereof, subject to the limitations provided in the Warrant
Agreement, without charge except for any tax or other governmental charge
imposed in connection therewith.
This Warrant Certificate is one of the Warrant Certificates
referred to in the Warrant Agreement, dated as of February 16, 1996, between
the Company and the initial holder of Warrants party thereto (the "Warrant
Agreement"). Said Warrant Agreement is hereby incorporated by reference in and
made a part of this instrument and is hereby referred to for a description of
the rights, limitation of rights, obligations, duties and immunities thereunder
of the Company and the holders, and in the event of any conflict between the
terms of this Warrant Certificate and the provisions of the Warrant Agreement,
the provisions of the Warrant Agreement shall control.
2
<PAGE> 4
IN WITNESS WHEREOF, the Company has caused this Warrant
Certificate to be duly executed and its corporate seal to be impressed hereon
and attached by its Secretary.
Dated: (d)_____________________
DEEPTECH INTERNATIONAL INC.
By_________________________________
Title:
(CORPORATE SEAL)
ATTEST:
___________________________________________
Its: __________________________________
3
<PAGE> 5
EXHIBIT A TO
WARRANT CERTIFICATE
ELECTION TO PURCHASE FORM
[To be executed only upon exercise of Warrants]
The undersigned registered owner of this Warrant Certificate
irrevocably exercises _____ Warrants for the purchase of ______ Shares of
Common Stock of Deeptech International Inc. and herewith makes payment
therefor, all at the price and on the terms and conditions specified in this
Warrant Certificate and the Warrant Agreement and requests that certificates
for the shares of Common Stock hereby purchased (and any securities or other
property issuable upon such exercise) be issued in the name of and delivered to
________________ whose address is ___________________ and, if such shares of
Common Stock shall not include all of the shares of Common Stock issuable as
provided in this Warrant Certificate, that a new Warrant Certificate of like
tenor and date for the balance of the shares of Common Stock issuable hereunder
be delivered to the undersigned.
______________________________
(Name of Registered Owner)
______________________________
(Signature of Registered Owner)
______________________________
(Street Address)
______________________________
(City) (State) (Zip Code)
<PAGE> 6
EXHIBIT B TO
WARRANT CERTIFICATE
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of this
Warrant Certificate hereby sells, assigns and transfers unto the assignee named
below all of the rights of the undersigned under this Warrant Certificate, with
respect to the number of shares of Common Stock set forth below:
Name and Address of Assignee No. of Shares of Common Stock
- ---------------------------- -----------------------------
and does hereby irrevocably constitute and appoint ________________
attorney-in-fact to register such transfer on the books of Deeptech
International Inc. maintained for the purpose, with full power of substitution
in the premises.
Dated:_________________________
Name:__________________________
Signature:_____________________
Witness:_______________________
The assignee named above hereby agrees to purchase and take
the Warrant Certificate pursuant to and in accordance with the terms and
conditions of the Warrant Agreement, dated as of February 16, 1996, between
Deeptech International Inc. and the initial holder named therein and agrees to
be bound thereby.
Dated:___________________________
Name:____________________________
Signature:________________________
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-3 of our report dated September 16, 1996 appearing on page
F-32 of DeepTech International Inc.'s Annual Report on Form 10-K for the year
ended June 30, 1996. We also consent to the reference to us under the heading
"Experts" in such Registration Statement.
PRICE WATERHOUSE LLP
Houston, Texas
April 4, 1997
<PAGE> 1
Exhibit 23.2
CONSENT OF INDEPENDENT PETROLEUM ENGINEERS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-3 of the use of our report, Estimated Net Reserves and
Income Data Attributable to Certain Leasehold and Royalty Interests of Tatham
Offshore, Inc., dated as of June 30, 1996, and all references to our firm
appearing in DeepTech International Inc.'s Annual Report on Form 10-K for the
fiscal year ended June 30, 1996.
Ryder Scott Company
Petroleum Engineers
Houston, Texas
April 4, 1997
<PAGE> 1
Exhibit 23.3
CONSENT OF INDEPENDENT PETROLEUM ENGINEERS AND GEOLOGISTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-3 of our reserve report dated as of June 30, 1996, and to
all references to our firm appearing in DeepTech International Inc.'s Annual
Report on Form 10-K for the fiscal year ended June 30, 1996.
Netherland, Sewell & Associates, Inc.
Dallas, Texas
April 5, 1997
