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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
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Commission file number 0-23634
KFX INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 84-1079971
(State or other jurisdiction of (I.R.S. EMPLOYER
incorporation or organization) IDENTIFICATION NUMBER)
1999 BROADWAY, SUITE 3200, DENVER, COLORADO USA 80202
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(303) 293-2992
(REGISTRANT'S TELEPHONE NUMBER INCLUDING AREA CODE)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days.
Yes [X] No [_]
On May 7, 1999 there were 23,951,740 shares of the Registrant's common stock
outstanding.
1
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KFX INC.
FORM 10-Q QUARTERLY REPORT
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999
TABLE OF CONTENTS
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PAGE NO.
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PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets - March 31, 1999 (Unaudited) and December 31, 1998 ............ 3
Consolidated Statements of Operations - Three Months Ended
March 31, 1999 and 1998 (Unaudited) ................................................... 4
Consolidated Statements of Cash Flows - Three Months Ended
March 31, 1999 and 1998 (Unaudited) ................................................... 5
Notes to Consolidated Financial Statements (Unaudited) .................................... 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations ................................................................. 8
Item 3. Quantitative and Qualitative Disclosures About Market Risk ............................ 13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings ..................................................................... 14
Item 2. Changes in Securities and Use of Proceeds ............................................. 14
Item 3. Defaults Upon Senior Securities ....................................................... 14
Item 4. Submission of Matters to a Vote of Security Holders ................................... 14
Item 5. Other Information ..................................................................... 14
Item 6. Exhibits and Reports on Form 8-K ...................................................... 15
Signatures ..................................................................................... 16
</TABLE>
2
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KFX INC.
PART I--FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31,
1999 DECEMBER 31,
(UNAUDITED) 1998
--------------------------------
<S> <C> <C>
ASSETS
Current:
Cash and cash equivalents............................................ $ 3,897,670 $ 5,649,992
Accounts receivable.................................................. 238,947 952,977
Accounts receivable - affiliates..................................... 342,903 193,842
Unbilled revenue..................................................... 187,502 -
Prepaid expenses and other...................................... 178,474 207,995
------------ ------------
Total current assets............................................. 4,845,496 7,004,806
------------ ------------
Property, plant and equipment, net of accumulated depreciation......... 3,003,858 3,243,812
Patents, net of accumulated amortization............................... 2,592,300 2,722,069
Investment in and advances to KFX Fuel Partners, L.P................... 3,533,879 3,779,412
Investment in K-Fuel, LLC.............................................. 127,465 159,967
Investment in Charco Redondo, LLC...................................... 629,238 629,238
Goodwill - net of accumulated amortization............................. 1,968,717 2,066,669
Debt issue costs, net of accumulated amortization...................... 1,615,565 1,738,565
Prepaid royalty........................................................ 498,000 498,500
Other assets........................................................... 845,257 829,251
------------ ------------
$ 19,659,775 $ 22,672,289
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current:
Accounts payable..................................................... $ 198,255 $ 188,578
Accrued expenses..................................................... 148,182 247,011
Deferred revenue..................................................... 248,702 381,000
Accounts payable to affiliates....................................... 471,504 471,504
Interest payable..................................................... 195,274 531,007
Current maturities of long-term debt................................. 676,167 704,207
------------ ------------
Total current liabilities......................................... 1,938,084 2,523,307
------------ ------------
Long-term debt, less current maturities................................ 709,626 890,793
Convertible debentures................................................. 17,000,000 17,000,000
------------ ------------
Total liabilities................................................. 19,647,710 20,414,100
------------ ------------
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.001 par value, 20,000,000 shares authorized;
None issued....................................................... - -
Common stock, $.001 par value, 80,000,000 shares authorized;
23,951,740 and 23,951,740 shares issued and outstanding........... 23,952 23,952
Additional paid-in capital........................................... 48,304,942 48,304,942
Accumulated deficit.................................................. (48,316,829) (46,070,705)
------------ ------------
Total stockholders' equity........................................ 12,065 2,258,189
------------ ------------
$ 19,659,775 $ 22,672,289
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
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KFX INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
UNAUDITED
THREE MONTHS ENDED MARCH 31,
1999 1998
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OPERATING REVENUES
Software licenses and services......................................... $ 377,132 $ -
Contract revenue....................................................... 179,025 244,695
----------- -----------
Total operating revenues............................................. 556,157 244,695
----------- -----------
OPERATING COSTS AND EXPENSES
Cost of software licenses and services................................. 240,335 -
Marketing, general and administrative expenses......................... 1,204,155 817,811
Software research and development...................................... 22,804 -
Demonstration plant and laboratory operations.......................... 119,597 201,497
Depreciation and amortization.......................................... 703,375 574,883
----------- -----------
Total operating costs and expenses................................... 2,290,266 1,594,191
----------- -----------
OPERATING INCOME (LOSS)................................................ (1,734,109) (1,349,496)
Interest and other income.............................................. 57,281 154,771
Interest expense....................................................... (291,261) (284,058)
Equity in loss of unconsolidated affiliates............................ (278,035) (17,618)
----------- -----------
Loss before income taxes............................................... (2,246,124) (1,496,401)
Income tax benefit..................................................... - -
----------- -----------
NET LOSS............................................................... $(2,246,124) $(1,496,401)
=========== ===========
BASIC AND DILUTED NET LOSS PER COMMON SHARE............................ $(.09) $(.06)
=========== ===========
Weighted average common shares outstanding............................. 23,952,000 23,926,000
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
4
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KFX INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
UNAUDITED
THREE MONTHS ENDED MARCH 31,
1999 1998
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OPERATING ACTIVITIES:
Net loss................................................................. $(2,246,124) $(1,496,401)
Adjustments to reconcile net loss to cash
used in operating activities:
Depreciation and amortization.......................................... 703,375 574,883
Warrants issued for services........................................... - 196,000
Equity in loss of unconsolidated affiliates............................ 278,049 17,618
Unbilled and unearned revenue, net..................................... (319,800) -
Other.................................................................. (100,000) -
Changes in operating assets and liabilities, net of assets and
liabilities acquired:
Accounts receivable, including from affiliates......................... 559,949 3,313
Accounts payable (including to affiliates) and accrued expenses........ 10,845 128,636
Interest payable....................................................... (335,733) (320,226)
Prepaids & other....................................................... 11,410 (146,385)
----------- -----------
Cash used in operating activities............................................ (1,438,029) (1,042,562)
----------- -----------
INVESTING ACTIVITIES:
Purchases of equipment................................................... (44,030) (7,000)
Pending patent applications.............................................. (34,097) (100,112)
Investments in KFX Fuel Partners, L.P.................................... - (126,053)
Investments in K-Fuel, LLC............................................... - (9,690)
Investments in Charco Redondo, LLC....................................... - (375,771)
Purchase of controlling assets of Pegasus Technologies, LLC, net of
cash acquired......................................................... - (1,615,555)
Other.................................................................... (26,959) -
----------- -----------
Cash used in investing activities............................................ (105,086) (2,234,181)
----------- -----------
FINANCING ACTIVITIES:
Payments on notes payable................................................ (209,207) (5,000)
----------- -----------
Cash used in financing activities............................................ (209,207) (5,000)
----------- -----------
Increase (decrease) in cash and cash equivalents............................. (1,752,322) (3,281,743)
Cash and cash equivalents, beginning of period............................... 5,649,992 14,078,773
----------- -----------
Cash and cash equivalents, end of period..................................... $ 3,897,670 $10,797,030
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest................................................... $ 626,883 $ 604,284
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
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KFX INC.
CONSOLIDATED STATEMENT OF CASH FLOWS - (CONTINUED)
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Three Months Ended March 31, 1999
- ---------------------------------
None.
Three Months Ended March 31, 1998
- ---------------------------------
In January 1998, the Company converted $170,000 of current accounts
payable at December 31, 1997 related to general corporate legal services into a
promissory note.
On March 23, 1998, the Company issued $600,000 in promissory notes and
granted purchase options for 75,000 shares of the Company's common stock under
the Company's 1996 Stock Option and Incentive Plan in connection with the
Company's acquisition of a 60 percent interest of Pegasus Technologies, LLC.
Using the Black-Scholes option-pricing model, the stock options were valued at
$144,750; this amount is included in goodwill and acquisition costs related to
the acquisition of Pegasus Technologies, LLC. See Note 2.
Also in connection with the Pegasus Technologies, LLC acquisition, the
Company granted purchase options for 100,000 shares of the Company's common
stock under the Company's 1996 Stock Option and Incentive Plan to a consultant
relating to certain acquisition activities. Using the Black-Scholes option-
pricing model, the stock options were valued at $109,000; this amount is
included in goodwill and acquisition costs related to the acquisition of Pegasus
Technologies, LLC.
The accompanying notes are an integral part of these consolidated financial
statements.
6
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KFX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (UNAUDITED)
NOTE 1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements include
the accounts of KFX Inc. ("KFX" or the "Company") and its wholly-owned
subsidiaries, Net Power Solutions, LLC ("NPS") and KFX Wyoming Inc. ("KFXW"),
and its majority-owned subsidiaries, Pegasus Technologies, Limited ("Pegasus"),
KFX Technology, Inc. ("KFXT"), and Heartland Fuels Corporation ("HFC"). The
Company's 51 percent interest in K-Fuel, L.L.C. ("K-Fuel, LLC"), and its 5
percent interest in KFX Fuel Partners, L.P. ("KFP") are accounted for as equity
investments as the Company does not have the authority or ability to
independently control or manage these entities. All significant intercompany
transactions have been eliminated in consolidation.
The consolidated financial statements at March 31, 1999, and for the
three months ended March 31, 1999 and 1998 are unaudited. In the opinion of the
Company's management, all adjustments, consisting of only normal recurring
adjustments, necessary for a fair statement of the results for the interim
periods have been made. Certain reclassifications have been made to the 1998
financial statements to conform to the current year presentation.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. These financial statements should be
read in conjunction with the audited financial statements and notes to financial
statements for the year ended December 31, 1998 included in the Company's Form
10-K. The accounting policies used in the preparation of these unaudited
quarterly financial statements are the same as those policies used in the
preparation of the audited annual financial statements except as modified for
appropriate interim accounting policies. The results of operations for the
three months ended March 31, 1999 are not necessarily indicative of the results
of operations expected for the year ended December 31, 1999.
NOTE 2. PEGASUS TECHNOLOGIES, LIMITED.
On March 23, 1998, the Company acquired a 60 percent interest in
Pegasus, an Ohio limited liability company that develops and markets computer
software products intended to optimize combustion and provide related benefits
in coal-fired electric utility power plants. The purchase price totaled
$2,574,000 and consisted of a cash payment of $1,100,000, $600,000 in four-year
promissory notes, the agreement to provide an immediate capital contribution of
$500,000 and certain costs related to the acquisition.
Of the total purchase price, approximately $2,435,000 was allocated to
goodwill, since at date of acquisition fair value of the underlying net assets
of Pegasus was negative and there were no significant assets nor any research
and development in process. Goodwill is being amortized over five years.
Unaudited pro forma operating results for the quarter ended March 31,
1998 as if the acquisition of Pegasus had occurred as of January 1, 1998 are
summarized as follows:
<TABLE>
<S> <C>
Operating revenues............................ $ 293,459
Net loss...................................... (1,843,266)
Basic and diluted net loss per common share... (.08)
</TABLE>
7
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KFX INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This 10-Q filing contains, in addition to historical information, forward-
looking statements within the meaning of Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended, that include risks and uncertainties. This Form 10-Q should be read in
conjunction with the Company's Form 10-K for the year ended December 31, 1998
and Management's Discussion and Analysis of Financial Condition and Results of
Operations included therein. The Company's actual results may differ materially
from those anticipated in these forward-looking statements.
The forward looking statements contained in this filing include, among
others, statements regarding the Company's goals for 1999; availability of
potential funding sources; expected future operating results and financial
condition; outcome of discussions with one of the Company's partners in the
development of K-Fuel; potential impact of and proposed solutions for certain
operational issues at the KFP Facility; expected K-Fuel Technology licenses;
results of test burns of K-Fuel; expected results of further test burns of K-
Fuel; anticipated markets for the Company's products and services; and potential
expansions of product and service offerings and related potential sources of
capital. Important factors that could cause actual results to differ materially
from those anticipated include, but are not limited to, adverse market and
various other conditions that could inhibit the Company's ability to obtain
financing; competition and technological developments by competitors; lack of
market interest in the Company's existing and any new products and services;
changes in environmental, electric utility and other governmental regulations;
availability of Section 29 tax credits; actions of the Company's strategic
partners; breadth or degree of protection available to the Company's
intellectual property; availability of key management and skilled personnel;
unanticipated problems that arise from research and development activities; cost
overruns, delays and damage that may occur in developing, permitting, financing
and constructing K-Fuel production facilities; and domestic and international
economic and political conditions. The Company does not undertake to update,
revise or correct any of the forward-looking statements.
RESULTS OF OPERATIONS - THREE MONTHS ENDED MARCH 31, 1999 VS. THREE MONTHS ENDED
MARCH 31, 1998
The principal factors impacting the Company's results of operations in the
first quarter of 1999, as compared to the first quarter of 1998, are the
acquisition of Pegasus Technologies, Limited (Pegasus) in late March 1998 and
the start up of operations at the KFX Fuel Partners' (KFP) facility in April
1998, in which KFx holds a 5% interest.
Revenues in 1999 were approximately $311,000 higher than 1998 due primarily
to approximately $377,000 in revenues attributable to Pegasus and its sister
subsidiary, Net Power Solutions, LLC (NPS). This increase was partially offset
by a decline in contract revenues approximating $66,000, due to a high level of
K-Fuel related contract work in the first quarter of 1998 in connection with
preparations for the start up of operations at the KFP facility in April 1998.
Operating costs and expenses in 1999 were approximately $696,000 higher
than 1998 principally due to Pegasus and NPS costs in 1999, which include the
following elements:
<TABLE>
<S> <C>
Cost of software licenses and services $ 240,000
Marketing, general and administrative expenses 697,000
Research and development 23,000
Depreciation and amortization 143,000
----------
Total $1,103,000
==========
</TABLE>
8
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KFX INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
Offsetting these increases are declines totaling approximately $407,000 in
1999 operating costs and expenses. These declines included approximately
$310,000 in marketing, general and administrative expenses attributable
primarily to professional services and other expenses incurred in 1998 in
connection with due diligence activities related to the Company's potential
entry into the activated carbon business and other environmental and energy
technology projects. There were no comparable expenses in the first quarter of
1999. In addition, costs and expenses associated with the K-Fuel demonstration
plant and laboratory operations declined in 1999 by approximately $82,000 due to
a higher level of 1998 activity associated with preparations for the start-up of
the KFP facility in April 1998.
Interest income is lower in 1999 due to a corresponding decrease in average
cash balances. The increase from 1998 to 1999 in equity in loss of
unconsolidated affiliates approximating $260,000 is due primarily to losses from
KFP in the first quarter of 1999 approximating $245,000, compared to no income
or loss in the first quarter of 1998 since KFP's facility in Gillette, Wyoming
had not yet commenced operations.
On March 1, 1999 the Company announced that the first commercial burn of K-
Fuel has been successfully completed. During February 1999, approximately 12,000
tons of K-Fuel was utilized to conduct a burn at Indiana-Kentucky Electric
Corporation's Clifty Creek generating station in southern Indiana. Initial
results of the test burn indicate that K-Fuel appeared to produce: a) a
reduction in nitrogen oxide (NOx) emissions while maintaining full load yet
reducing auxiliary power, b) no unusual slagging or fouling of the boiler, c) a
reduction in the fuel pulverizing operations, d) no spontaneous combustion and
e) an improvement in boiler efficiency. Indiana-Kentucky Electric's fuel is
procured by American Electric Power (AEP), which has requested additional unit
train shipments of K-Fuel. The results from this commercial scale burn generally
confirm the results of the test burn performed by the Southern Research
Institute in June 1998. It is also expected that K-Fuel produced a reduction in
sulfur dioxide (SO2) and carbon dioxide (CO2) emissions but Clifty Creek's
instrumentation precluded clear quantification of these emissions. Additional
burns at Clifty Creek are expected to clarify these benefits. The handling
characteristics of K-Fuel were acceptable with proper use of the power station's
existing dust suppressant system. KFx is working with TCK to improve the
handling characteristics of K-Fuel.
Thermo Ecoteck Corporations (TCK), the operating partner and 95% owner of
KFP began reporting operating results from the KFP Gillette, Wyoming facility
(KFP Facility) in April 1998. Although the KFP Facility is operating and
producing commercially salable product, TCK has encountered difficulties in
optimizing its performance to achieve optimal and sustained operation. TCK
continues to experience operational problems related to tar and fines residue
build-up within the system during production and other product quality issues
related to product dusting. TCK has stated that it will continue to explore
solutions to these problems, but that it does not intend to provide significant
amounts of additional capital to implement operational solutions. If any
proposed solutions do require significant amounts of additional capital, TCK has
stated that it may pursue alternatives including but not limited to seeking
alternative sources of capital, such as another partner; reducing the expected
output of the KFP Facility; or terminating its participation in KFP by selling
the facility or its partnership interest. KFx is working with TCK in pursuit of
a resolution of the operational problems at the KFP Facility and of TCK's
participation in KFP. Given the operating history of the KFP Facility, however,
any of these alternatives could have a material adverse effect on KFx's
financial position and results of operations. KFx's investment in KFP at March
31, 1999 was $3.5 million. Because the K-Fuel technology being employed at the
KFP Facility is new, no assurance can be given that other difficulties will not
arise or that TCK, KFP or KFx will be able to correct any problems that do
arise. KFP is involved in a dispute with the primary construction contractor
regarding the withholding of $5.9 million in payments under the construction
contracts related to the KFP Facility. TCK has stated that it believes that the
KFP Facility's continuing
9
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KFX INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
operational problems are largely related to deficient design and construction
and has filed a counterclaim in excess of $29 million against the contractor for
damages. The ultimate outcome of these disputes cannot be predicted with
certainty, but in the Company's opinion, they will not have a material adverse
impact on the Company's financial position or results of operations.
LIQUIDITY AND CAPITAL RESOURCES
During the first quarter of 1999 the Company used approximately $1.4
million of cash for its operating activities, including those associated with a)
developing the NPS/Pegasus business, b) continued activities related to the
development of K-Fuel, c) the pursuit of opportunities to expand its product and
service offerings and d) general corporate activities. The Company expects most
or all of its cash requirements over the balance of 1999 with respect to day-to-
day operations and debt service requirements will be satisfied by a) cash on
hand, which as of May 7, 1999 was approximately $3.4 million; b) certain
revenues under technical subcontracts to be performed for KFP; c) certain
contract revenues relating to a research and development program conducted by
the Company; and d) revenues related to the operations of NPS/Pegasus (although
material positive net operating cash flows related to NPS/Pegasus are not
expected to materialize until late 1999 or later). In addition, the Company
expects to receive a significant payment during the second quarter of 1999, in
connection with negotiations with one of the Company's partners in the
development of K-Fuel. The Company also believes there is potential for
additional funding in 1999 from: (i) fees from licensing new K-Fuel facilities;
and (ii) funding from potential partners in connection with opportunities to
expand the Company's product and service offerings to the power industry.
Depending on the outcome of various uncertainties, including those
discussed herein, the Company may be required to seek additional debt and/or
equity financing in mid-2000 for general operating purposes. If acquisitions or
significant capital investments are made in this time period, the need to seek
additional debt and/or equity financing may be accelerated. In addition, the
timing of collection of NPS/Pegasus accounts receivable and other working
capital items could significantly alter the Company's needs for at least
temporary financing. There can be no assurance that the Company will not need at
least temporary financing during 1999 and that, if financing is required in
1999, that it will be available when needed and on satisfactory terms, if at
all.
The Company does not expect to derive material net income or positive net
operating cash flows from its ownership interest in KFP in the foreseeable
future. The Company's net production royalty (after fulfilling related royalty
obligations) if the KFP Facility were to reach full production is projected to
be less than $200,000 per year. The potential for Section 29 tax credit for the
KFP production of K-Fuel represents additional potential value but since the
Company has a net operating loss carryforward, it is most likely that a
structured transaction would be required to generate any significant value from
the potential Section 29 tax credit. Management is considering potential Section
29 structured transactions but the value, amount or likelihood of any such
transaction is not determinable at this time.
The Company expects no additional stock purchases by TCK in 1999. Under
the terms of the Stock Purchase Agreement with TCK, the next possible investment
by TCK is not until a period of time beginning in January 2000 and expiring in
July 2001. There are no assurances that TCK will make any investments in the
Company at that time. Additionally, the Stock Purchase Agreement prohibits the
Company from issuing shares of Common Stock to other investors unless at least
90 percent of the proceeds from such stock issuances are used to invest in K-
Fuel production facilities. Furthermore, in the event of any stock issuances by
the Company, TCK's Warrant "A" may be subject to certain adjustments that
increase the number of shares available to TCK under Warrant "A."
10
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KFX INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
Should the Company be required to seek any additional debt or equity
financing, the ability of the Company to do so will be affected by an existing
agreement with TCK and by the terms of the Convertible Debentures. With respect
to TCK, the Company must obtain TCK's consent to sell any Common Stock or to
incur any indebtedness other than indebtedness that is secured only by the
assets of a particular project and is non-recourse to the Company and its
subsidiaries. With respect to the Convertible Debentures, the Company may only
incur unsecured indebtedness of up to $8.0 million (of which not in excess of
approximately $.7 million was outstanding as of May 7, 1999) and indebtedness
that is secured only by the assets of a particular project and is non-recourse
to the Company and its subsidiaries.
There are no assurances that any of these potential funding sources will
materialize, and the Company does not currently have any commitments with
respect to any such funding sources. If the overall outcome of the various
uncertainties affecting the Company is not favorable, the Company may be forced
to seek debt and/or equity financing on terms and conditions that may be
unfavorable to the Company, if available at all. If the Company requires
additional financing and cannot obtain it when needed, it may default on
payments when due.
YEAR 2000 COMPLIANCE
Like many other companies, the Company is aware of the problems associated
with the "Year 2000 issue." This issue centers on certain computer systems being
unable to recognize the year 2000 as a valid date or possibly interpreting a
date in the format of "00" as the year 1900 rather than the year 2000. This
system issue creates risk for the Company from unforeseen problems in its own
computer systems and from third parties with which the Company conducts
business. Such failures of the Company's and third parties' computer systems
could potentially have a material adverse impact on the Company's business,
financial condition and results of operations.
The Company is currently engaged in a process to evaluate the potential
impacts of the Year 2000 issue and implement remedial actions. In 1998, the
Company engaged a third party consultant to complete an analysis of its
information technology ("IT") and non-IT systems, such as office and other
hardware containing embedded technology, in its executive offices. The Company
completed remediation steps recommended as a result of this analysis at a
nominal cost. Future upgrades to these systems and/or new acquisitions are
subjected to a similar analysis with the assistance of the third party
consultant. The Company substantially completed similar analyses at the offices
of Pegasus during 1998. Based on the results of these analyses, management
believes that the IT and non-IT systems of its executive offices and the offices
of Net Power Solutions and Pegasus are Year 2000 compliant and does not believe
that there is a significant risk to the Company's future business operations.
In addition, during 1998, the Company substantially completed an assessment
of the impact that the Year 2000 issue may have on other systems that support
the Company's operations, including but not limited to, supplier systems,
shipper systems, systems of suppliers of banking and other financial services,
environmental control systems and building security systems. This analysis was
largely based on interviews, certifications and other correspondence. At this
time, the Company cannot determine the effects, if any, that any non-compliant
systems of such third parties may have on the Company's business, financial
condition or results of operations, and there can be no assurance that such
effects, if any, would not be material. Nevertheless, based on the analyses
performed to date, management does not expect these third party systems to
present a significant Year 2000 risk to the Company's business, financial
condition or results of operations.
11
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KFX INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
The Company has engaged a third party consultant to perform an analysis of
its non-IT systems at its laboratory facility near Gillette Wyoming. This
location does not have any IT systems. Once this analysis is complete the
Company plans to implement any recommended remedial actions, which based on the
analysis performed to date, are expected to be at a nominal cost and are
expected to be completed during the second quarter of 1999.
The Company has also been advised that KFP has undertaken appropriate Year
2000 analyses with respect to its IT and non-IT systems, including its
manufacturing equipment. These analyses are not yet complete, but the Company
has been advised that KFP will implement any necessary remedial actions, which
based on the analysis performed to date, are estimated to be at a nominal cost.
Such analyses and any remedial actions are expected to be completed in the third
quarter of 1999.
With respect to Year 2000 issue compliance of Pegasus' NeuSIGHT and related
software products, Pegasus personnel have performed extensive analysis, with the
assistance of third party consultants, and believe that such products are Year
2000 compliant. The remediation costs relative to these products was nominal.
To date, the costs incurred by the Company with respect to the Year 2000
issue have not been material. The Company cannot estimate future costs until
the analyses referred to in the preceding paragraphs are completed. The Company
expects, however, but can provide no assurances, that the future costs will not
be material.
The Company does not expect the impact of the Year 2000 issue will be
material in the systems assessed or being assessed. The Company plans, however,
to continue to monitor this issue with respect to the various computer systems
that it relies on, directly and indirectly, and will take additional steps as it
considers prudent to minimize the potential adverse impact of this issue,
including performing additional analysis and related remediation, as may appear
necessary. In addition, if the Company determines that it will not be able to
achieve Year 2000 compliance in a function that is critical to the future of the
Company, it will immediately develop contingency plans and will attempt to
quantify any impacts of any failure to timely correct non Year 2000 compliant
computer systems. There can be no assurance that the Company will discover all
Year 2000 issues in the course of its assessment or be able to implement timely
and cost effective remedial actions for the Year 2000 issues that it does
discover, such that the Year 2000 issue will not have a material adverse impact
on the Company's business, financial condition and results of operations.
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KFX INC.
ITEM 3. QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
The Company is not currently subject to a significant level of direct
market risk related to interest rates, foreign currency exchange rates,
commodity prices or equity prices. The Company has no derivative instruments or
any floating rate debt and does not expect to derive a material amount of its
revenues from interest bearing securities. Currently the Company has no
significant foreign operations. To the extent that the Company establishes
significant foreign operations in the future, it will attempt to mitigate risks
associated with foreign currency exchange rates contractually and through the
use of hedging activities and other means considered appropriate. The Company
is indirectly exposed to fluctuations in fuel commodity prices. To the extent
that fuel prices rise, there may be a tendency for greater demand for certain of
the Company's products and services since K-Fuel and NeuSIGHT have been shown to
result in lower usage of coal and coal beneficiated fuel products when used to
generate electric power. The Company's fuel-related products provide various
environmental benefits that management believes significantly mitigate the fuel
commodity risk associated with the Company's business. The Company holds no
equity market securities, but does face equity market risk relative to its own
equity securities. This risk is most likely to be manifested by influencing the
Company's ability to raise debt or equity financing, if needed.
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KFX INC.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
No legal proceedings were initiated or terminated, nor were there any
material developments in existing legal proceedings during the quarter ended
March 31, 1999.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
There were no changes in the rights of the Company's Common Stock and
there were no sales of unregistered securities during the quarter ended March
31, 1999.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
During the quarter ended March 31, 1999, there has not been a material
default with respect to any of the Company's or the Company's subsidiaries'
indebtedness.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter has been submitted to a vote of security holders during the
quarter ended March 31, 1999.
ITEM 5. OTHER INFORMATION
There are no matters to report under this item for the quarter ended
March 31, 1999.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
Exhibit 4.1 Common Stock Purchase Warrant dated January 30, 1998 between the
Company and George D. Crowley, Jr.
Exhibit 4.2 Common Stock Purchase Warrant dated January 15, 1996 between the
Company and Richard C. Whitner
Exhibit 4.3 Common Stock Purchase Warrant dated January 15, 1997 between the
Company and Richard C. Whitner
Exhibit 4.4 Company Stock Purchase Warrant dated January 30, 1998 between the
Company and John F. Reim
Exhibit 4.5 Company Stock Purchase Warrant dated June 19, 1997 and Amendment
No. 2 dated August 3, 1998 between the Company and Peter G. Martin
Exhibit 4.6 Common Stock Purchase Warrant dated August 2, 1995 and Amendment
No. 1 dated August 3, 1998 between the Company and Peter G. Martin
Exhibit 4.7 Common Stock Purchase Warrant dated January 15, 1997 between the
Company and Dawson Mathis
Exhibit 4.8 Common Stock Purchase Warrant dated November 15, 1996 and
Amendment No. 1 dated August 3, 1998 between the Company and
Innovative Research Associates, Inc.
Exhibit 4.9 Common Stock Purchase Warrant dated January 15, 1997 between the
Company and John P. Venners
Exhibit 10.1 Stock Purchase Agreement dated March 26, 1997 between the Company
and Theodore Venners
Exhibit 10.2 Professional Installation Services Master Agreement dated March 5,
1999, between Net Power Solutions, a subsidiary of the Company,
and the Energy Systems Group of Science Applications International
Corporation**
Exhibit 10.3 1999 Stock Incentive Plan/1/
Exhibit 27.1 Financial Data Schedule
** Confidential treatment requested with respect to portions of this Exhibit.
/1/ Document previously filed with the U.S. Securities and Exchange Commission
on May 4, 1999 as Annex A-1 of the Company's Proxy Statement on Schedule 14A and
incorporated herein by reference.
(B) REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the quarterly period ended
March 31, 1999.
______________
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
KFX Inc.
/s/ Seth L. Patterson
----------------------
Seth L. Patterson
Executive Vice President & Chief Financial Officer
(Principal Financial and Accounting Officer)
Date: May 17, 1999
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EXHIBIT 4.1
THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFIED UNDER
ANY APPLICABLE STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED, HYPOTHECATED OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION AND
QUALIFICATION WITHOUT AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY STATING
THAT SUCH REGISTRATION AND QUALIFICATION IS NOT REQUIRED.
50,000 SHARES
COMMON STOCK PURCHASE WARRANT
OF KFx INC.
January 30, 1998
------------------------------------------------------
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
THIS IS TO CERTIFY that, for value received and subject to the provisions
hereinafter set forth, George D. Crowley, Jr., an individual with his principal
place of business at Two Wisconsin Circle, Suite 850, Chevy Chase, Maryland
20815 (the "Warrant Holder") (or his assigns), is entitled to purchase from KFx
Inc, a Delaware corporation ("Company") Fifty Thousand (50,000) shares (the
"Warrant Shares") of the Company's $.001 par value common stock (the "Common
Stock" or "Shares"), for an aggregate purchase price equal to $3.75 multiplied
by Fifty Thousand (50,000) shares ("Aggregate Original Warrant Price"), all on
and subject to the terms, provisions and conditions hereinafter set forth. This
Warrant may be exercised as to all or part (comprising a whole number) of the
Shares represented hereby at any time or times before January 30, 2001
("Expiration Date"). This Warrant shall be void and of no effect, and all
rights, restrictions, and obligations hereunder shall cease to the extent not
exercised prior to the Expiration Date.
ARTICLE I
EXERCISE OF WARRANT
Section 1.1 Duration. Subject to the provisions of Sections 1.2 and 1.4
hereof, this Warrant may be exercised at any time on or after 9:00 a.m., Denver,
Colorado time, on January 30, 1998 and at or before 5:00 p.m., Denver, Colorado
time, on January 30, 2001 (or, if such day is not a business day, at or before
5:00 p.m., Denver, Colorado time, on the next following business day). If this
Warrant is not exercised on or before the Expiration Date, it shall become void,
and all rights hereunder shall thereupon cease.
<PAGE>
Section 1.2 Exercise of Warrant. Subject to the conditions contained
herein, this Warrant may be exercised in whole or in part at any time or times
before the Expiration Date by the surrender of this Warrant or any duly
authorized replacements hereto (with a duly executed subscription agreement in
the form attached hereto) at the principal office of the Company in Denver,
Colorado, and upon payment to the Company of the Aggregate Original Warrant
Price (or, if exercised in part, upon payment to the Company of the applicable
proportionate part of the Aggregate Original Warrant Price) for each Share so
purchased in lawful money of the United States, or by check, or postal or
express money order payable in United States dollars to the order of the Company
or by funds wired to an account as specified by the Company, and upon compliance
with and subject to the conditions set forth herein.
Upon receipt of this Warrant with the form of exercise duly executed and
accompanied by payment of the Aggregate Original Warrant Price for the shares of
Common Stock for which this Warrant is then being exercised, the Company will
cause to be issued certificates for the total number of whole Warrant Shares (as
provided in Article V hereof) for which this Warrant is being exercised in such
denominations as are required for delivery to the Warrant Holder, and the
Company shall thereupon deliver such certificates to the Warrant Holder or his
assignee.
In case the Warrant Holder shall exercise this Warrant with respect to less
than all of the shares of Common Stock that may be purchased under this Warrant,
the Company will execute a new Warrant substantially in the form of this Warrant
for the balance of the shares of Common Stock that may be purchased upon
exercise of this Warrant and deliver such new Warrant to the Warrant Holder.
The Company shall pay any and all transfer taxes payable in connection with
the issue of this Warrant or the issue of any Warrant Shares upon exercise of
this Warrant. The Company shall not, however, be required to pay any tax which
may be payable in respect of any transfer involved in the issuance or delivery
of this Warrant or the Warrant Shares in a name other than that of the Warrant
Holder at the time of surrender, and until the payment of such tax the Company
shall not be required to issue such Warrant Shares.
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Section 1.3 Warrant Holder Representation and Certificate Legend.
Unless the issuance of the Warrant Shares shall have been registered under the
Securities Act of 1933, as amended (the "1933 Act"), as a condition of its
delivery of certificates for the Warrant Shares or upon the split-up,
combination, exchange, transfer or loan of the Warrant, the Company may require
the Warrant Holder (including the transferee of the Warrant in whose name the
Warrant Shares are to be registered) to deliver to the Company, in writing,
representations regarding the Warrant Holder's sophistication, investment
intent, acquisition for his own account and such other matters as are reasonable
and customary for purchasers of securities in an unregistered private offering.
The Company may place conspicuously upon each new Warrant and upon each
certificate representing the Warrant Shares a legend substantially in the
following form, the terms of which are agreed to by the Warrant Holder
(including each transferee):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED SOLELY
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "1933 ACT"), OR ANY STATE SECURITIES LAW. SUCH
SHARES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF SUCH REGISTRATION OR AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY THAT SUCH SALE, OFFER, PLEDGE OR HYPOTHECATION IS EXEMPT FROM THE
REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF THE 1933 ACT AND OF
ANY APPLICABLE STATE SECURITIES LAWS.
The Company need not register a transfer of this Warrant or the Warrant
Shares unless the conditions specified in such legend are satisfied. Subject to
the transfer restrictions set forth in this Article I and in Articles IX and X
herein, this Warrant is transferable, in whole or in part, on the books of the
Company, upon surrender of this Warrant to the Company, together with a written
assignment duly executed by the Warrant Holder.
Section 1.4 Vesting. This Warrant shall vest and be exercisable
effective January 30, 1998.
Section 1.5 Exercise Price. The initial exercise price shall be $3.75
per share (the "Exercise Price").
ARTICLE II
ANTIDILUTION
Section 2.1 Subdivisions or Combinations. In case the Company shall at
any time after the date of this Warrant (i) subdivide the outstanding Shares or
(ii) combine the outstanding Shares into a smaller number of Shares, the
Exercise Price and the
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number and kind of Shares receivable upon exercise, in effect at the time of the
effective date of such subdivision or combination, shall be proportionately
adjusted so that the holder of the Warrant exercised after such time shall be
entitled to receive the same percentage and kind of shares which, if the Warrant
had been exercised immediately prior to such date, the holder would have owned
upon such exercise and been entitled to receive by virtue of such subdivision or
combination. Such adjustment shall be made successively whenever any event
listed above shall occur and shall be retroactive to the record date, if any,
for such event. Any adjustment made pursuant to this Section 2.1 shall become
effective immediately upon the effective date of such event retroactive to the
record date, if any, for such event. All calculations made under this Section
2.1 shall be made to the nearest cent or to the nearest Share, as the case may
be.
Section 2.2 Reorganization, Reclassification or Consolidation. In case
of any capital reorganization of the Company, or of any reclassification of
Shares (other than a change in par value, or from par value to no par value, or
from no par value to par value, or as a result of subdivision or combination),
or in case of the consolidation of the Company with or the merger of the Company
into any other person (other than a consolidation or merger in which the Company
is the continuing corporation) or of the sale of the properties and assets of
the Company as, or substantially as, an entirety to any other corporation, the
Warrant shall after such reorganization, reclassification, consolidation, merger
or sale be exercisable, upon the terms and conditions specified in this
Agreement, for the number of shares of stock or other securities, cash or other
property to which a holder of the number of Shares purchasable (at the time of
such reorganization, reclassification, consolidation, merger or sale) upon
exercise of the Warrant would have been entitled upon such reorganization,
reclassification, consolidation, merger or sale; and in any such case, if
necessary, the provisions set forth in this Section 2.2 with respect to the
rights and interests thereafter of the holders of the Warrant shall be
appropriately adjusted so as to be applicable, as nearly as may reasonably be,
to any shares of stock or other securities, cash or other property thereafter
deliverable on the exercise of the Warrant. The subdivision or combination of
Shares at any time outstanding into a greater or lesser number of Shares shall
not be deemed to be a reclassification of the Common
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<PAGE>
Stock for the purposes of this Section 2.2. The Company shall not effect any
such consolidation, merger or sale unless prior to or simultaneously with the
consummation thereof the successor corporation (if other than the Company)
resulting from such consolidation or merger or the person purchasing such assets
or other appropriate corporation or entity shall assume, by written instrument
executed and delivered to the Company's and successor person's transfer agent,
if any, the obligation to deliver to the holders of the Warrant such shares of
stock, other securities, cash or other property as, in accordance with the
foregoing provisions, such holders may be entitled to purchase and the other
obligations of the Company under this Warrant.
Section 2.3 Notices to the Warrant Holder. Upon any adjustment of the
Exercise Price or of the number or kind of Shares for which the outstanding
Warrant may be exercised pursuant to Article II, the Company, within 20 calendar
days thereafter, shall cause to be given to all of the holders of the Warrant,
at such holders' addresses appearing on the register or other records maintained
for such purpose, an officer's certificate showing the adjusted Exercise Price
and setting forth in reasonable detail the method of calculation and the facts
upon which such calculations are based and setting forth the number of Shares
purchasable upon exercise of the Warrant after such adjustment. Where
appropriate, such notice may be given in advance and included as a part of the
notice required to be mailed under the other provisions of this Article II.
In case:
(a) of any consolidation or merger to which the Company is a party and
for which approval of any stockholders of the Company is required, or of
the conveyance or transfer of the properties and assets of the Company as,
or substantially as, an entirety, or of any capital reorganization or any
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, or as a
result of a subdivision or combination); or
(b) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company;
5
<PAGE>
then the Company shall cause to be mailed to the Warrant Holder at his address
appearing on the register or other records maintained by the Company for such
purpose, at least 20 calendar days (or 10 calendar days in any case specified in
clauses (a) or (b) above) prior to the applicable record or effective date
hereinafter specified a written notice stating the date on which any such
consolidation, merger, conveyance, transfer, reorganization, reclassification,
dissolution, liquidation or winding up is expected and that holders of record of
shares of Common Stock shall be entitled to exchange such shares for securities,
cash or other property, if any, deliverable upon such consolidation, merger,
conveyance, transfer, reorganization, reclassification, dissolution, liquidation
or winding up. The failure to give the notice required by this Section 2.3 or
any defect therein shall not affect the legality or validity of any
consolidation, merger, conveyance, transfer, reorganization, dissolution,
liquidation or winding up or the vote upon any action.
ARTICLE III
MERGERS, CONSOLIDATIONS, SALES AND
OTHER REORGANIZATIONS
6
<PAGE>
In the case of any consolidation or merger of the Company with another
entity, or the sale or all or substantially all or its assets to another entity,
or any reorganization or reclassification of the Common Stock or other equity
securities of the Company, then, as a condition of such consolidation, merger,
sale, reorganization or reclassification, lawful and adequate provision shall be
made whereby the holder of this Warrant shall thereafter have the right to
receive upon the basis and upon the terms and conditions specified herein and in
lieu of the shares of Common Stock immediately theretofore purchasable
hereunder, such shares of stock, securities or assets as may (by virtue of such
consolidation, merger, sale, reorganization or reclassification) be issued or
payable with respect to or in exchange for a number of outstanding shares of
Common Stock equal to the number of shares of Common Stock immediately
theretofore so purchasable hereunder had such consolidation, merger, sale,
reorganization or reclassification not taken place, and in any such case
appropriate provisions shall be made with respect to the rights and interests of
the holder of this Warrant to the end that the provisions hereof shall
thereafter be applicable, as nearly as may be, in relation to any shares of
stock, securities or assets thereafter deliverable upon exercise of this
Warrant. The Company shall not effect any such consolidation, merger, sale or
reorganization, unless prior to or simultaneously with the consummation thereof,
the successor entity (if other than the Company) resulting from such
consolidation, merger or reorganization or the entity purchasing such assets
shall assume by written instrument executed and mailed or delivered to the
holder of this Warrant, the obligations to deliver to such holder such shares of
stock, securities or assets as, in accordance with the foregoing provisions,
such holder may be entitled to receive. Notwithstanding anything herein to the
contrary, in the event that any shareholders of the Company have an opportunity
to sell or exchange their shares of Common Stock pursuant to a consolidation,
merger, sale or reorganization or otherwise, each of the holders of the Warrant
may, if they so decide in their sole discretion, immediately exercise the
Warrant in whole or in part and, at their option sell or exchange any or all of
the Common Stock thereafter owned by such holders upon terms and conditions no
less favorable than those upon which the other shareholders are selling or
exchanging their shares of Common Stock.
7
<PAGE>
ARTICLE IV
FRACTIONAL SHARES
Anything contained herein to the contrary notwithstanding, the Company
shall not be required to issue any fraction of a share in connection with the
exercise of this Warrant, and in any case where the Warrant Holder would, except
for the provisions of this Article IV, be entitled under the terms of this
Warrant to receive a fraction of a share upon the exercise of this Warrant, the
Company shall upon the exercise of this Warrant and receipt of the Exercise
Price, issue the largest number of whole shares purchasable upon exercise of
this Warrant. The Company shall not be required to make any cash or other
adjustment in respect of such fraction of a share to which the Warrant Holder
would otherwise be entitled. The Warrant Holder, by the acceptance of this
Warrant, expressly waives his right to receive a certificate for any fraction of
a share upon exercise hereof.
ARTICLE V
FULLY PAID STOCK; TAXES
The Company covenants and agrees that the shares of stock represented by
each and every certificate representing Common Stock to be delivered on the
exercise of the purchase rights herein provided for shall, at the time of such
delivery, be validly issued and outstanding and be fully paid and nonassessable.
The Company further covenants and agrees that it will pay when due and payable
any and all Federal, State and local taxes which may be payable in connection
with the issuance of this Warrant or any Common Stock or certificates therefor
or the exercise of the rights provided for pursuant to the provisions hereof,
including without limitation any such taxes relating to the exercise of any
purchase, conversion, or other rights contained herein, but specifically
excluding any Federal, State or local income taxes owing by the holders of the
Warrant.
8
<PAGE>
ARTICLE VI
CLOSING OF TRANSFER BOOKS
The right to exercise this Warrant shall not be suspended during any period
that the stock transfer books of the Company may be closed. The Company shall
not be required, however, to deliver certificates representing shares of its
Common Stock upon such exercise while such books are duly closed for any
purpose, but the Company may postpone the delivery of the certificates for such
Common Stock until the opening of such books, and they shall, in such case, be
delivered forthwith upon the opening thereof, or as soon as practicable
thereafter.
ARTICLE VII
REPLACEMENT OF WARRANT
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
such loss, theft or destruction, upon delivery to the Company of indemnity or
security reasonably satisfactory to it and reimbursement to the Company of all
reasonable expenses incidental thereto, or, in the case of any such mutilation,
upon surrender and cancellation of this Warrant, the Company will make and
deliver a new Warrant of like tenor, in lieu of this Warrant.
ARTICLE VIII
RESERVATION OF SHARES
The Company shall at all times reserve and keep available out of its
authorized shares of Common Stock, solely for the purpose of issuance upon the
exercise of this Warrant, such number of shares of Common Stock as shall be
issuable upon the exercise of this Warrant. The Company covenants and agrees
that, upon exercise of this Warrant and payment of the Purchase Price therefor,
all shares of Common Stock issuable upon such exercise shall be duly and validly
issued, fully paid and non-assessable.
9
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ARTICLE IX
RESTRICTIONS ON TRANSFERABILITY
OF WARRANTS AND SHARES; COMPLIANCE WITH LAWS
Section 9.1 In General. This Warrant and the Warrant Shares issued upon
the exercise hereof shall not be transferable except upon the conditions
hereinafter specified, which conditions are intended to insure compliance with
the provisions of the 1933 Act (or any similar Federal statute at the time in
effect) and any applicable State securities laws in respect of the transfer of
this Warrant or any such Warrant Shares.
Section 9.2 Restrictive Legends. Each Warrant shall bear on the face
thereof a legend substantially in the form of the notice endorsed on the first
page of this Warrant. Each certificate for shares of Common Stock initially
issued upon the exercise of any Warrant and each certificate for shares of
Common Stock issued to a subsequent transferee of such certificate shall, unless
otherwise permitted by the provisions of this Section 9.2, bear on the face
thereof a legend reading substantially as follows:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED SOLELY
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "1933 ACT"), OR ANY STATE SECURITIES LAW. SUCH
SHARES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF SUCH REGISTRATION OR AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY THAT SUCH SALE, OFFER, PLEDGE OR HYPOTHECATION IS EXEMPT FROM THE
REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF THE 1933 ACT AND OF
ANY APPLICABLE STATE SECURITIES LAWS. THE SHARES REPRESENTED BY THIS
CERTIFICATE ARE SUBJECT TO THE TERMS AND CONDITIONS OF THAT CERTAIN WARRANT
AGREEMENT DATED JANUARY 30, 1998, PURSUANT TO WHICH THEY WERE ISSUED.
In the event that a registration statement covering the Warrant Shares
shall become effective under the 1933 Act and under any applicable State
securities laws or in the event that the Company shall receive an opinion
of counsel satisfactory to it that, in the opinion of such counsel, such
legend is not, or is no longer, necessary or required (including, without
limitation, because of the availability of
10
<PAGE>
the exemption afforded by Rule 144 of the General Rules and Regulations of
the Securities and Exchange Commission), the Company shall, or shall
instruct its transfer agents and registrars to, remove such legend from the
certificates evidencing the Warrant Shares or issue new certificates
without such legend in lieu thereof. All fees and expenses of counsel in
connection with the rendition of the opinion provided for in this Section
9.2 shall be paid by the holder.
Section 9.3 Notice of Proposed Transfer; Registration Not Required. The
holder of this Warrant or of any Warrant Shares, by acceptance thereof, agrees
to give prior written notice to the Company of such holder's intention to
transfer such Warrant or the Warrant Shares relating thereto (or any portion
thereof) describing briefly the manner and circumstances of the proposed
transfer. Promptly after receiving such written notice, the Company shall
present copies thereof to Company counsel and to counsel designated by such
holder, who may be an employee of such holder. If in the opinion of each such
counsel the proposed transfer may be affected without registration or
qualification of such Warrant or the Warrant Shares under any Federal or State
law, the Company, as promptly as practicable, shall notify such holder of such
opinion and of the terms and conditions, if any, to be observed, whereupon such
holder shall be entitled to transfer such Warrant or Warrant Shares, all in
accordance with the terms of the notice delivered to such holder by the Company.
If either of such counsel is unable to render such an opinion (in which case
said counsel shall set forth in writing the basis for the legal conclusions in
this regard), the Company shall promptly notify such holder that the proposed
transfer described in the written notice given pursuant to this subsection may
not be effected without such registration or qualification or without compliance
with the conditions of an exemptive regulation of the Commission and any
applicable State Securities regulatory authority. Such holder shall not be
entitled to effect such transfer until such registration, qualification,
exemption or other compliance has become effective. All fees and expenses of
counsel in connection with the rendition of the opinions provided for in this
subsection shall be paid by the holder requesting the transfer.
ARTICLE X
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RIGHT OF FIRST REFUSAL
In the event any holder of Warrants or Warrant Shares ("Offeror") proposes
to sell all or any portion of the Warrants or Warrant Shares owned by the holder
to a person or entity other than an affiliate of the holder, the Offeror shall
first deliver to the Company a written notice ("Notice of Proposed Sale")
specifying the name and address of the proposed purchaser ("Proposed
Purchaser"), the number of Warrants or Warrant Shares proposed to be sold to the
Proposed Purchaser ("Offered Shares"), and all of the terms, including the
price, of the proposed sale and stating that the Company has the right to
purchase the Offered Shares in accordance with the following terms:
(i) During the 30-day period following receipt of the Notice of
Proposed Sale ("Exercise Period"), the Company shall have the right to
purchase all (but not less than all) of the Offered Shares, at the price
and on the terms specified in the Notice of Proposed Sale. The company
shall give written notice of its election to the Offeror during the
Exercise Period.
(ii) If the Offered Shares have not been purchased by the Company as
specified herein, the Offeror shall have the right, but only for a period
of six (6) months after the expiration of the Exercise Period, to sell the
Offered Shares to the Proposed Purchaser at the price specified in the
Notice of Proposed Sale.
(iii) Warrants or Warrant Shares sold to a Proposed Purchaser as
provided herein shall continue to be subject to the provisions of this
Warrant, and the Company shall not be obligated to issue a new Warrant
therefor in the name of such Proposed Purchaser unless that Proposed
Purchaser agrees in writing to become bound by the terms hereof.
(iv) For purposes of this Article X an affiliate shall mean each and
every corporation, partnership, person, or other entity controlling,
controlled by, or under common control with, the holder of any Warrant or
Warrant Shares.
ARTICLE XI
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MISCELLANEOUS
Section 11.1 Warrant Holder As Owner. Prior to due presentment for
registration of transfer of this Warrant, the Company may deem and treat the
Warrant Holder as the absolute owner of this Warrant (notwithstanding any
notation of ownership or other writing hereon) for the purpose of any exercise
hereof and for all other purposes, and the Company shall not be affected by any
notice to the contrary.
Section 11.2 Warrant Holder Not Shareholder. This Warrant does not
confer upon the holder hereof any right to vote or to consent or to receive
notice as a shareholder of the Company, as such, in respect of any matters
whatsoever, or any other rights or liabilities as a shareholder, prior to the
exercise hereof as hereinbefore provided.
Section 11.3 Warrant Holder Representation. Notwithstanding anything to
the contrary herein, the Warrant Holder represents and warrants that (a) it
acknowledges that the Warrant and the Warrant Shares have not been registered
under the 1933 Act or any state securities laws, (b) the Warrants and the
Warrant Shares (unless such Warrants and/or Warrant Shares, as the case may be,
are registered under the 1933 Act and applicable state securities laws) are
being and will be issued pursuant to an exemption from registration for
nonpublic offerings or offerings to one or more accredited investors, (c) that
the Warrant Holder is acquiring the Warrant and will acquire the Warrant Shares
(unless such Warrants and/or Warrant Shares are registered under the 1933 Act
and applicable state securities laws) for his own account and not with a view
toward their distribution, (d) the Warrant Holder is experienced in making
investments of this nature and has the necessary sophistication to be able to
evaluate the merits of this investment and (e) the Warrant Holder will not sell,
offer for sale, pledge or otherwise hypothecate the Warrant or the Warrant
Shares (unless such shares are registered under the 1933 Act and applicable
state securities laws) in the absence of an opinion of counsel reasonably
acceptable to the Company, that the sale, offer for sale, pledge or
hypothecation of the Warrant and Warrant Shares is exempt from the registration
and prospectus delivery requirements of the 1933 Act and applicable state
securities laws.
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Section 11.4 Partial Exercise and Partial Assignment.
(a) If this Warrant is exercised in part only, the holder shall upon
surrender hereof be entitled to receive a new Warrant, registered in the
name of the holder or its nominee. This Warrant may be assigned either in
whole or in part by surrender of this Warrant at the principal office of
the Company in Denver, Colorado (with the assignment or, as the case may
be, partial assignment form at the end hereof duly executed). If this
Warrant is assigned, a new Warrant shall be issued to the holder hereof,
registered in the name of such holder or its nominee. The assignee shall
also be entitled to receive a new Warrant, registered in the name of such
assignee or its nominee.
(b) Subject to the provisions of paragraph (a) of this Section 11.4
this Warrant and the Warrant Shares may not be sold or otherwise disposed
of except as follows:
(i) to a person who, in the opinion of counsel reasonably
satisfactory to the Company, is a person to whom this Warrant or the
Warrant Shares may legally be transferred without registration and without
the delivery of a current prospectus under the 1933 Act with respect
thereto and then only against receipt of an agreement of such person to
comply with the provisions of this Warrant with respect to any resale or
other disposition of such securities; or
(ii) to any person upon delivery of a prospectus then meeting the
requirements of the 1933 Act relating to such securities (as to which a
registration statement under the 1933 Act shall then be in effect) and the
offering thereof for such sale or disposition.
Section 11.5 Successors. All the covenants, agreements, representations
and warranties contained in this Warrant shall bind the parties hereto and their
respective heirs, executors, administrators, distributees, successors and
assigns.
Section 11.6 Severability. Should any part of this Warrant for any
reason be declared invalid, such decision shall not affect the validity of any
remaining portion, which remaining portion
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shall remain in force and effect as if this Warrant had been executed with the
invalid portion thereof eliminated, and it is hereby declared the intention of
the parties hereto that they would have executed and accepted the remaining
portion of this Warrant without including therein any such part, parts or
portion which may, for any reason, be hereafter declared invalid.
Section 11.7 Notices. Any notices required to be given pursuant to the
terms hereof shall be given (unless otherwise herein expressly provided) in
writing and either (i) personally delivered, (ii) sent by certified, return
receipt requested, (iii) sent by prepaid overnight courier, or (iv) transmitted
by telecopier or similar device, with confirmation of receipt. Notices shall be
addressed, if to holder of Warrants or Warrant Shares, to:
George D. Crowley, Jr.
Two Wisconsin Circle, Suite 850
Chevy Chase, MD 20815
or to such other address of such holder appearing in the register maintained by
the Company, and if to the Company, to:
KFx Inc.
1999 Broadway, Suite 3200
Denver, CO 80202
Attn: Chief Financial Officer
For purposes of this Warrant, any notice sent by mail shall be demand given
on the date deposited in the mail.
Section 11.8 Headings. The Article headings in this Warrant are inserted
for purposes of convenience only and shall have no substantive effect.
Section 11.9 Law Governing. This Warrant is delivered in the State of
Colorado and shall be construed and enforced in accordance with, and governed
by, the laws of the State of Colorado.
Section 11.10 Amendments and Modifications. This Warrant may be amended or
modified only with the prior written consent of the holder hereof.
15
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16
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WITNESS the seal of the Company and the signatures of its duly authorized
officers.
KFx Inc.
-----------------------------------------
Theodore Venners, Chief Executive Officer
(SEAL)
-----------------------------------------
R. G. Swenson, Secretary
17
<PAGE>
KFx INC.
SUBSCRIPTION FORM
(To be executed by the Registered Holder
in order to Exercise the Warrant)
The undersigned hereby irrevocably elects to exercise the right to purchase
__________ shares (the "Shares") of common stock, $.001 par value (the "Common
Stock") of KFx Inc. (the "Company") covered by the Common Stock Purchase Warrant
dated ____________, ____ (the "Warrant") and herewith makes payment of the
purchase price of such Shares in accordance with the terms of the Warrant. The
undersigned requests a certificate for such Shares to be registered in the name
of _____________________, whose address is ___________________________________
_________________. If said number of Shares is less than all of the Shares
issuable under the Warrant, the undersigned further requests that a new warrant
representing the right to acquire the remaining balance of the Shares to be
registered in the name __________________________________, whose address is
______________________________________________________.
The undersigned hereby represents and warrants that:
(a) the Shares have not been registered under the Securities Act of
1933, as amended (the "Act") or any state securities laws,
(b) the Shares (unless such Shares are registered under the Act and
applicable state securities laws) are being and will be issued pursuant to
an exemption from registration for nonpublic offerings or offerings to one
or more accredited investors,
(c) he is acquiring the Shares (unless such Shares are registered
under the Act and applicable state securities laws) for his own account and
not with a view toward their distribution,
(d) he is experienced in making investments of this nature and has
the necessary sophistication to be able to evaluate the merits of this
investment, and
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(e) he will not sell, offer for sale, pledge or otherwise hypothecate
the Shares (unless such Shares are registered under the Act and applicable
state securities laws) in the absence of an opinion of counsel reasonably
acceptable to the Company, that the sale, offer for sale, pledge or
hypothecation of the Shares is exempt from the registration and prospectus
delivery requirements of the Act and applicable state securities laws.
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<PAGE>
(f) the Shares are being acquired in accordance with and subject to
the terms, provisions and conditions of the Warrant, to all of which he
hereby expressly assent.
Very truly yours,
____________________________
Print Name: ____________________________
Address: ____________________________
____________________________
Receipt of the above is hereby acknowledged:
KFx Inc.
By: ________________________
Title: ________________________
Date: ________________________
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<PAGE>
ASSIGNMENT
----------
FOR VALUE RECEIVED ______________________________________ hereby sells,
assigns and transfers unto _______________________________________ the within
Warrant and all rights evidenced thereby and does irrevocably constitute and
appoint, __________________ _____________________ as attorney-in-fact, to
transfer the said Warrant on the books of the within named Company.
_______________________________
Dated:____________________
PARTIAL ASSIGNMENT
------------------
FOR VALUE RECEIVED ________________________________________ hereby sells,
assigns and transfers unto ________________________________________ that portion
of the within Warrant and the rights evidenced thereby which will on the date
hereof entitle the holder to purchase ____________ shares of Common Stock of
_______________________________, irrevocably constitute and appoint
_____________________________, attorney-in-fact, to transfer that part of the
said Warrant on the books of the within named Company.
_______________________________
Dated:____________________
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EXHIBIT 4.2
THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFIED UNDER
ANY APPLICABLE STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED, HYPOTHECATED OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION AND
QUALIFICATION WITHOUT AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY STATING
THAT SUCH REGISTRATION AND QUALIFICATION IS NOT REQUIRED.
100,000 SHARES
COMMON STOCK PURCHASE WARRANT
OF KFx INC.
January 15, 1996
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
THIS IS TO CERTIFY that, for value received and subject to the provisions
hereinafter set forth, Richard C. Whitner, an individual with his principal
place of business at 1800 North Kent Street, Suite 1104, Arlington, Virginia
22209 (the "Warrant Holder") (or his assigns), is entitled to purchase from KFx
Inc, a Delaware corporation ("Company") One Hundred Thousand (100,000) shares
(the "Warrant Shares") of the Company's $.001 par value common stock (the
"Common Stock" or "Shares"), for an aggregate purchase price equal to $4.00
multiplied by One Hundred Thousand (100,000) shares ("Aggregate Original Warrant
Price"), all on and subject to the terms, provisions and conditions hereinafter
set forth. This Warrant may be exercised as to all or part (comprising a whole
number) of the Shares represented hereby at any time or times before December
15, 1999 ("Expiration Date"). This Warrant shall be void and of no effect, and
all rights, restrictions, and obligations hereunder shall cease to the extent
not exercised prior to the Expiration Date.
ARTICLE I
EXERCISE OF WARRANT
Section 1.1 Duration. Subject to the provisions of Sections 1.2 and 1.4
hereof, this Warrant may be exercised at any time on or after 9:00 a.m., Denver,
Colorado time, on January 15, 1996 and at or before 5:00 p.m., Denver, Colorado
time, on December 15, 1999 (or, if such day is not a business day, at or before
5:00 p.m., Denver, Colorado time, on the next following business day). If this
Warrant is not exercised on or before the Expiration Date, it shall become void,
and all rights hereunder shall thereupon cease.
<PAGE>
Section 1.2 Exercise of Warrant. Subject to the conditions contained
herein, this Warrant may be exercised in whole or in part at any time or times
before the Expiration Date by the surrender of this Warrant or any duly
authorized replacements hereto (with a duly executed subscription agreement in
the form attached hereto) at the principal office of the Company in Denver,
Colorado, and upon payment to the Company of the Aggregate Original Warrant
Price (or, if exercised in part, upon payment to the Company of the applicable
proportionate part of the Aggregate Original Warrant Price) for each Share so
purchased in lawful money of the United States, or by check, or postal or
express money order payable in United States dollars to the order of the Company
or by funds wired to an account as specified by the Company, and upon compliance
with and subject to the conditions set forth herein.
Upon receipt of this Warrant with the form of exercise duly executed and
accompanied by payment of the Aggregate Original Warrant Price for the shares of
Common Stock for which this Warrant is then being exercised, the Company will
cause to be issued certificates for the total number of whole Warrant Shares (as
provided in Article V hereof) for which this Warrant is being exercised in such
denominations as are required for delivery to the Warrant Holder, and the
Company shall thereupon deliver such certificates to the Warrant Holder or his
assignee.
In case the Warrant Holder shall exercise this Warrant with respect to less
than all of the shares of Common Stock that may be purchased under this Warrant,
the Company will execute a new Warrant substantially in the form of this Warrant
for the balance of the shares of Common Stock that may be purchased upon
exercise of this Warrant and deliver such new Warrant to the Warrant Holder.
The Company shall pay any and all transfer taxes payable in connection with
the issue of this Warrant or the issue of any Warrant Shares upon exercise of
this Warrant. The Company shall not, however, be required to pay any tax which
may be payable in respect of any transfer involved in the issuance or delivery
of this Warrant or the Warrant Shares in a name other than that of the Warrant
Holder at the time of surrender, and until the payment of such tax the Company
shall not be required to issue such Warrant Shares.
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<PAGE>
Section 1.3 Warrant Holder Representation and Certificate Legend.
Unless the issuance of the Warrant Shares shall have been registered under the
Securities Act of 1933, as amended (the "1933 Act"), as a condition of its
delivery of certificates for the Warrant Shares or upon the split-up,
combination, exchange, transfer or loan of the Warrant, the Company may require
the Warrant Holder (including the transferee of the Warrant in whose name the
Warrant Shares are to be registered) to deliver to the Company, in writing,
representations regarding the Warrant Holder's sophistication, investment
intent, acquisition for his own account and such other matters as are reasonable
and customary for purchasers of securities in an unregistered private offering.
The Company may place conspicuously upon each new Warrant and upon each
certificate representing the Warrant Shares a legend substantially in the
following form, the terms of which are agreed to by the Warrant Holder
(including each transferee):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED SOLELY
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "1933 ACT"), OR ANY STATE SECURITIES LAW. SUCH
SHARES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF SUCH REGISTRATION OR AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY THAT SUCH SALE, OFFER, PLEDGE OR HYPOTHECATION IS EXEMPT FROM THE
REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF THE 1933 ACT AND OF
ANY APPLICABLE STATE SECURITIES LAWS.
The Company need not register a transfer of this Warrant or the Warrant
Shares unless the conditions specified in such legend are satisfied. Subject to
the transfer restrictions set forth in this Article I and in Articles IX and X
herein, this Warrant is transferable, in whole or in part, on the books of the
Company, upon surrender of this Warrant to the Company, together with a written
assignment duly executed by the Warrant Holder.
Section 1.4 Vesting. This Warrant shall vest and be exercisable
effective January 15, 1996.
Section 1.5 Exercise Price. The initial exercise price shall be $4.00
per share (the "Exercise Price").
ARTICLE II
ANTIDILUTION
Section 2.1 Subdivisions or Combinations. In case the Company shall at
any time after the date of this Warrant (i) subdivide the outstanding Shares or
(ii) combine the outstanding Shares into a smaller number of Shares, the
Exercise Price and the number and kind of Shares receivable upon exercise, in
effect at the time of the effective date of such subdivision or combination,
shall be
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<PAGE>
proportionately adjusted so that the holder of the Warrant exercised after such
time shall be entitled to receive the same percentage and kind of shares which,
if the Warrant had been exercised immediately prior to such date, the holder
would have owned upon such exercise and been entitled to receive by virtue of
such subdivision or combination. Such adjustment shall be made successively
whenever any event listed above shall occur and shall be retroactive to the
record date, if any, for such event. Any adjustment made pursuant to this
Section 2.1 shall become effective immediately upon the effective date of such
event retroactive to the record date, if any, for such event. All calculations
made under this Section 2.1 shall be made to the nearest cent or to the nearest
Share, as the case may be.
Section 2.2 Reorganization, Reclassification or Consolidation. In case
of any capital reorganization of the Company, or of any reclassification of
Shares (other than a change in par value, or from par value to no par value, or
from no par value to par value, or as a result of subdivision or combination),
or in case of the consolidation of the Company with or the merger of the Company
into any other person (other than a consolidation or merger in which the Company
is the continuing corporation) or of the sale of the properties and assets of
the Company as, or substantially as, an entirety to any other corporation, the
Warrant shall after such reorganization, reclassification, consolidation, merger
or sale be exercisable, upon the terms and conditions specified in this
Agreement, for the number of shares of stock or other securities, cash or other
property to which a holder of the number of Shares purchasable (at the time of
such reorganization, reclassification, consolidation, merger or sale) upon
exercise of the Warrant would have been entitled upon such reorganization,
reclassification, consolidation, merger or sale; and in any such case, if
necessary, the provisions set forth in this Section 2.2 with respect to the
rights and interests thereafter of the holders of the Warrant shall be
appropriately adjusted so as to be applicable, as nearly as may reasonably be,
to any shares of stock or other securities, cash or other property thereafter
deliverable on the exercise of the Warrant. The subdivision or combination of
Shares at any time outstanding into a greater or lesser number of Shares shall
not be deemed to be a reclassification of the Common Stock for the purposes of
this Section 2.2. The Company shall not effect any such consolidation, merger
or sale unless prior to or simultaneously with the consummation thereof the
successor corporation (if other than the Company) resulting from such
consolidation or merger or the person purchasing such assets or other
appropriate corporation or entity shall assume, by written instrument executed
and delivered to the Company's and successor person's transfer agent, if any,
the obligation to deliver to the holders of the Warrant such shares of stock,
other securities, cash or other property as, in accordance with the foregoing
provisions, such holders may be entitled to purchase and the other obligations
of the Company under this Warrant.
Section 2.3 Notices to the Warrant Holder. Upon any adjustment of the
Exercise Price or of the number or kind of Shares for which the outstanding
Warrant may be exercised pursuant to Article II, the Company, within 20 calendar
days thereafter, shall cause to be given to all of the holders of the Warrant,
at such holders' addresses appearing on the register or other records maintained
for such purpose, an officer's certificate showing the adjusted Exercise Price
and setting forth in reasonable detail the method of calculation and the facts
upon which such calculations are based and setting forth the number of Shares
purchasable upon exercise of the Warrant after such
4
<PAGE>
adjustment. Where appropriate, such notice may be given in advance and included
as a part of the notice required to be mailed under the other provisions of this
Article II.
In case:
(a) of any consolidation or merger to which the Company is a party and
for which approval of any stockholders of the Company is required, or of
the conveyance or transfer of the properties and assets of the Company as,
or substantially as, an entirety, or of any capital reorganization or any
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, or as a
result of a subdivision or combination); or
(b) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company;
then the Company shall cause to be mailed to the Warrant Holder at his address
appearing on the register or other records maintained by the Company for such
purpose, at least 20 calendar days (or 10 calendar days in any case specified in
clauses (a) or (b) above) prior to the applicable record or effective date
hereinafter specified a written notice stating the date on which any such
consolidation, merger, conveyance, transfer, reorganization, reclassification,
dissolution, liquidation or winding up is expected and that holders of record of
shares of Common Stock shall be entitled to exchange such shares for securities,
cash or other property, if any, deliverable upon such consolidation, merger,
conveyance, transfer, reorganization, reclassification, dissolution, liquidation
or winding up. The failure to give the notice required by this Section 2.3 or
any defect therein shall not affect the legality or validity of any
consolidation, merger, conveyance, transfer, reorganization, dissolution,
liquidation or winding up or the vote upon any action.
ARTICLE III
MERGERS, CONSOLIDATIONS, SALES AND
OTHER REORGANIZATIONS
5
<PAGE>
In the case of any consolidation or merger of the Company with another
entity, or the sale or all or substantially all or its assets to another entity,
or any reorganization or reclassification of the Common Stock or other equity
securities of the Company, then, as a condition of such consolidation, merger,
sale, reorganization or reclassification, lawful and adequate provision shall be
made whereby the holder of this Warrant shall thereafter have the right to
receive upon the basis and upon the terms and conditions specified herein and in
lieu of the shares of Common Stock immediately theretofore purchasable
hereunder, such shares of stock, securities or assets as may (by virtue of such
consolidation, merger, sale, reorganization or reclassification) be issued or
payable with respect to or in exchange for a number of outstanding shares of
Common Stock equal to the number of shares of Common Stock immediately
theretofore so purchasable hereunder had such consolidation, merger, sale,
reorganization or reclassification not taken place, and in any such case
appropriate provisions shall be made with respect to the rights and interests of
the holder of this Warrant to the end that the provisions hereof shall
thereafter be applicable, as nearly as may be, in relation to any shares of
stock, securities or assets thereafter deliverable upon exercise of this
Warrant. The Company shall not effect any such consolidation, merger, sale or
reorganization, unless prior to or simultaneously with the consummation thereof,
the successor entity (if other than the Company) resulting from such
consolidation, merger or reorganization or the entity purchasing such assets
shall assume by written instrument executed and mailed or delivered to the
holder of this Warrant, the obligations to deliver to such holder such shares of
stock, securities or assets as, in accordance with the foregoing provisions,
such holder may be entitled to receive. Notwithstanding anything herein to the
contrary, in the event that any shareholders of the Company have an opportunity
to sell or exchange their shares of Common Stock pursuant to a consolidation,
merger, sale or reorganization or otherwise, each of the holders of the Warrant
may, if they so decide in their sole discretion, immediately exercise the
Warrant in whole or in part and, at their option sell or exchange any or all of
the Common Stock thereafter owned by such holders upon terms and conditions no
less favorable than those upon which the other shareholders are selling or
exchanging their shares of Common Stock.
ARTICLE IV
FRACTIONAL SHARES
Anything contained herein to the contrary notwithstanding, the Company
shall not be required to issue any fraction of a share in connection with the
exercise of this Warrant, and in any case where the Warrant Holder would, except
for the provisions of this Article IV, be entitled under the terms of this
Warrant to receive a fraction of a share upon the exercise of this Warrant, the
Company shall upon the exercise of this Warrant and receipt of the Exercise
Price, issue the largest number of whole shares purchasable upon exercise of
this Warrant. The Company shall not be required to make any cash or other
adjustment in respect of such fraction of a share to which the Warrant Holder
would otherwise be entitled. The Warrant Holder, by the acceptance of this
Warrant, expressly waives his right to receive a certificate for any fraction of
a share upon exercise hereof.
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<PAGE>
ARTICLE V
FULLY PAID STOCK; TAXES
The Company covenants and agrees that the shares of stock represented by
each and every certificate representing Common Stock to be delivered on the
exercise of the purchase rights herein provided for shall, at the time of such
delivery, be validly issued and outstanding and be fully paid and nonassessable.
The Company further covenants and agrees that it will pay when due and payable
any and all Federal, State and local taxes which may be payable in connection
with the issuance of this Warrant or any Common Stock or certificates therefor
or the exercise of the rights provided for pursuant to the provisions hereof,
including without limitation any such taxes relating to the exercise of any
purchase, conversion, or other rights contained herein, but specifically
excluding any Federal, State or local income taxes owing by the holders of the
Warrant.
ARTICLE VI
CLOSING OF TRANSFER BOOKS
The right to exercise this Warrant shall not be suspended during any period
that the stock transfer books of the Company may be closed. The Company shall
not be required, however, to deliver certificates representing shares of its
Common Stock upon such exercise while such books are duly closed for any
purpose, but the Company may postpone the delivery of the certificates for such
Common Stock until the opening of such books, and they shall, in such case, be
delivered forthwith upon the opening thereof, or as soon as practicable
thereafter.
ARTICLE VII
REPLACEMENT OF WARRANT
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
such loss, theft or destruction, upon delivery to the Company of indemnity or
security reasonably satisfactory to it and reimbursement to the Company of all
reasonable expenses incidental thereto, or, in the case of any such mutilation,
upon surrender and cancellation of this Warrant, the Company will make and
deliver a new Warrant of like tenor, in lieu of this Warrant.
7
<PAGE>
ARTICLE VIII
RESERVATION OF SHARES
The Company shall at all times reserve and keep available out of its
authorized shares of Common Stock, solely for the purpose of issuance upon the
exercise of this Warrant, such number of shares of Common Stock as shall be
issuable upon the exercise of this Warrant. The Company covenants and agrees
that, upon exercise of this Warrant and payment of the Purchase Price therefor,
all shares of Common Stock issuable upon such exercise shall be duly and validly
issued, fully paid and non-assessable.
ARTICLE IX
RESTRICTIONS ON TRANSFERABILITY
OF WARRANTS AND SHARES; COMPLIANCE WITH LAWS
Section 9.1 In General. This Warrant and the Warrant Shares issued upon
the exercise hereof shall not be transferable except upon the conditions
hereinafter specified, which conditions are intended to insure compliance with
the provisions of the 1933 Act (or any similar Federal statute at the time in
effect) and any applicable State securities laws in respect of the transfer of
this Warrant or any such Warrant Shares.
Section 9.2 Restrictive Legends. Each Warrant shall bear on the face
thereof a legend substantially in the form of the notice endorsed on the first
page of this Warrant. Each certificate for shares of Common Stock initially
issued upon the exercise of any Warrant and each certificate for shares of
Common Stock issued to a subsequent transferee of such certificate shall, unless
otherwise permitted by the provisions of this Section 9.2, bear on the face
thereof a legend reading substantially as follows:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED SOLELY
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "1933 ACT"), OR ANY STATE SECURITIES LAW. SUCH
SHARES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF SUCH REGISTRATION OR AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY THAT SUCH SALE, OFFER, PLEDGE OR HYPOTHECATION IS EXEMPT FROM THE
REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF THE 1933 ACT AND OF
ANY APPLICABLE STATE SECURITIES LAWS. THE SHARES REPRESENTED BY THIS
CERTIFICATE ARE SUBJECT TO THE TERMS AND CONDITIONS OF THAT CERTAIN WARRANT
AGREEMENT DATED JANUARY 15, 1996, PURSUANT TO WHICH THEY WERE ISSUED.
In the event that a registration statement covering the Warrant Shares
shall become effective under the 1933 Act and under any applicable State
securities laws or in the event that the Company
8
<PAGE>
shall receive an opinion of counsel satisfactory to it that, in the opinion of
such counsel, such legend is not, or is no longer, necessary or required
(including, without limitation, because of the availability of the exemption
afforded by Rule 144 of the General Rules and Regulations of the Securities and
Exchange Commission), the Company shall, or shall instruct its transfer agents
and registrars to, remove such legend from the certificates evidencing the
Warrant Shares or issue new certificates without such legend in lieu thereof.
All fees and expenses of counsel in connection with the rendition of the opinion
provided for in this Section 9.2 shall be paid by the holder.
Section 9.3 Notice of Proposed Transfer; Registration Not Required. The
holder of this Warrant or of any Warrant Shares, by acceptance thereof, agrees
to give prior written notice to the Company of such holder's intention to
transfer such Warrant or the Warrant Shares relating thereto (or any portion
thereof) describing briefly the manner and circumstances of the proposed
transfer. Promptly after receiving such written notice, the Company shall
present copies thereof to Company counsel and to counsel designated by such
holder, who may be an employee of such holder. If in the opinion of each such
counsel the proposed transfer may be affected without registration or
qualification of such Warrant or the Warrant Shares under any Federal or State
law, the Company, as promptly as practicable, shall notify such holder of such
opinion and of the terms and conditions, if any, to be observed, whereupon such
holder shall be entitled to transfer such Warrant or Warrant Shares, all in
accordance with the terms of the notice delivered to such holder by the Company.
If either of such counsel is unable to render such an opinion (in which case
said counsel shall set forth in writing the basis for the legal conclusions in
this regard), the Company shall promptly notify such holder that the proposed
transfer described in the written notice given pursuant to this subsection may
not be effected without such registration or qualification or without compliance
with the conditions of an exemptive regulation of the Commission and any
applicable State Securities regulatory authority. Such holder shall not be
entitled to effect such transfer until such registration, qualification,
exemption or other compliance has become effective. All fees and expenses of
counsel in connection with the rendition of the opinions provided for in this
subsection shall be paid by the holder requesting the transfer.
ARTICLE X
RIGHT OF FIRST REFUSAL
In the event any holder of Warrants or Warrant Shares ("Offeror") proposes
to sell all or any portion of the Warrants or Warrant Shares owned by the holder
to a person or entity other than an affiliate of the holder, the Offeror shall
first deliver to the Company a written notice ("Notice of Proposed Sale")
specifying the name and address of the proposed purchaser ("Proposed
Purchaser"), the number of Warrants or Warrant Shares proposed to be sold to the
Proposed Purchaser ("Offered Shares"), and all of the terms, including the
price, of the proposed sale and stating that the Company has the right to
purchase the Offered Shares in accordance with the following terms:
(i) During the 30-day period following receipt of the Notice of
Proposed Sale ("Exercise Period"), the Company shall have the right to
purchase all (but not less than all)
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of the Offered Shares, at the price and on the terms specified in the
Notice of Proposed Sale. The company shall give written notice of its
election to the Offeror during the Exercise Period.
(ii) If the Offered Shares have not been purchased by the Company as
specified herein, the Offeror shall have the right, but only for a period
of six (6) months after the expiration of the Exercise Period, to sell the
Offered Shares to the Proposed Purchaser at the price specified in the
Notice of Proposed Sale.
(iii) Warrants or Warrant Shares sold to a Proposed Purchaser as
provided herein shall continue to be subject to the provisions of this
Warrant, and the Company shall not be obligated to issue a new Warrant
therefor in the name of such Proposed Purchaser unless that Proposed
Purchaser agrees in writing to become bound by the terms hereof.
(iv) For purposes of this Article X an affiliate shall mean each and
every corporation, partnership, person, or other entity controlling,
controlled by, or under common control with, the holder of any Warrant or
Warrant Shares.
ARTICLE XI
MISCELLANEOUS
Section 11.1 Warrant Holder As Owner. Prior to due presentment for
registration of transfer of this Warrant, the Company may deem and treat the
Warrant Holder as the absolute owner of this Warrant (notwithstanding any
notation of ownership or other writing hereon) for the purpose of any exercise
hereof and for all other purposes, and the Company shall not be affected by any
notice to the contrary.
Section 11.2 Warrant Holder Not Shareholder. This Warrant does not
confer upon the holder hereof any right to vote or to consent or to receive
notice as a shareholder of the Company, as such, in respect of any matters
whatsoever, or any other rights or liabilities as a shareholder, prior to the
exercise hereof as hereinbefore provided.
Section 11.3 Warrant Holder Representation. Notwithstanding anything to
the contrary herein, the Warrant Holder represents and warrants that (a) it
acknowledges that the Warrant and the Warrant Shares have not been registered
under the 1933 Act or any state securities laws, (b) the Warrants and the
Warrant Shares (unless such Warrants and/or Warrant Shares, as the case may be,
are registered under the 1933 Act and applicable state securities laws) are
being and will be issued pursuant to an exemption from registration for
nonpublic offerings or offerings to one or more accredited investors, (c) that
the Warrant Holder is acquiring the Warrant and will acquire the Warrant Shares
(unless such Warrants and/or Warrant Shares are registered under the 1933 Act
and applicable state securities laws) for his own account and not with a view
toward their distribution, (d) the Warrant Holder is experienced in making
investments of this nature and has the necessary
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sophistication to be able to evaluate the merits of this investment and (e) the
Warrant Holder will not sell, offer for sale, pledge or otherwise hypothecate
the Warrant or the Warrant Shares (unless such shares are registered under the
1933 Act and applicable state securities laws) in the absence of an opinion of
counsel reasonably acceptable to the Company, that the sale, offer for sale,
pledge or hypothecation of the Warrant and Warrant Shares is exempt from the
registration and prospectus delivery requirements of the 1933 Act and applicable
state securities laws.
Section 11.4 Partial Exercise and Partial Assignment.
(a) If this Warrant is exercised in part only, the holder shall upon
surrender hereof be entitled to receive a new Warrant, registered in the
name of the holder or its nominee. This Warrant may be assigned either in
whole or in part by surrender of this Warrant at the principal office of
the Company in Denver, Colorado (with the assignment or, as the case may
be, partial assignment form at the end hereof duly executed). If this
Warrant is assigned, a new Warrant shall be issued to the holder hereof,
registered in the name of such holder or its nominee. The assignee shall
also be entitled to receive a new Warrant, registered in the name of such
assignee or its nominee.
(b) Subject to the provisions of paragraph (a) of this Section 11.4
this Warrant and the Warrant Shares may not be sold or otherwise disposed
of except as follows:
(i) to a person who, in the opinion of counsel reasonably
satisfactory to the Company, is a person to whom this Warrant or the
Warrant Shares may legally be transferred without registration and without
the delivery of a current prospectus under the 1933 Act with respect
thereto and then only against receipt of an agreement of such person to
comply with the provisions of this Warrant with respect to any resale or
other disposition of such securities; or
(ii) to any person upon delivery of a prospectus then meeting the
requirements of the 1933 Act relating to such securities (as to which a
registration statement under the 1933 Act shall then be in effect) and the
offering thereof for such sale or disposition.
Section 11.5 Successors. All the covenants, agreements, representations
and warranties contained in this Warrant shall bind the parties hereto and their
respective heirs, executors, administrators, distributees, successors and
assigns.
Section 11.6 Severability. Should any part of this Warrant for any
reason be declared invalid, such decision shall not affect the validity of any
remaining portion, which remaining portion shall remain in force and effect as
if this Warrant had been executed with the invalid portion thereof eliminated,
and it is hereby declared the intention of the parties hereto that they would
have executed and accepted the remaining portion of this Warrant without
including therein any such part, parts or portion which may, for any reason, be
hereafter declared invalid.
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Section 11.7 Notices. Any notices required to be given pursuant to the
terms hereof shall be given (unless otherwise herein expressly provided) in
writing and either (i) personally delivered, (ii) sent by certified, return
receipt requested, (iii) sent by prepaid overnight courier, or (iv) transmitted
by telecopier or similar device, with confirmation of receipt. Notices shall be
addressed, if to holder of Warrants or Warrant Shares, to:
Richard C. Whitner
1800 North Kent Street, Suite 1104
Arlington, Virginia 22209
or to such other address of such holder appearing in the register maintained by
the Company, and if to the Company, to:
KFx Inc.
1999 Broadway, Suite 3200
Denver, CO 80202
Attn: Chief Financial Officer
For purposes of this Warrant, any notice sent by mail shall be demand given
on the date deposited in the mail.
Section 11.8 Headings. The Article headings in this Warrant are inserted
for purposes of convenience only and shall have no substantive effect.
Section 11.9 Law Governing. This Warrant is delivered in the State of
Colorado and shall be construed and enforced in accordance with, and governed
by, the laws of the State of Colorado.
Section 11.10 Amendments and Modifications. This Warrant may be amended or
modified only with the prior written consent of the holder hereof.
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WITNESS the seal of the Company and the signatures of its duly authorized
officers.
KFx Inc.
-----------------------------------------
Theodore Venners, Chief Executive Officer
(SEAL)
-----------------------------------------
R. G. Swenson, Secretary
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<PAGE>
KFx INC.
SUBSCRIPTION FORM
(To be executed by the Registered Holder
in order to Exercise the Warrant)
The undersigned hereby irrevocably elects to exercise the right to purchase
_________________ shares (the "Shares") of common stock, $.001 par value (the
"Common Stock") of KFx Inc. (the "Company") covered by the Common Stock Purchase
Warrant dated January 15, 1996 (the "Warrant") and herewith makes payment of the
purchase price of such Shares in accordance with the terms of the Warrant. The
undersigned requests a certificate for such Shares to be registered in the name
of _____________________, whose address is ______________________. If said
number of Shares is less than all of the Shares issuable under the Warrant, the
undersigned further requests that a new warrant representing the right to
acquire the remaining balance of the Shares to be registered in the name
__________________________________, whose address
is________________________________________.
The undersigned hereby represents and warrants that:
(a) the Shares have not been registered under the Securities Act of
1933, as amended (the "Act") or any state securities laws,
(b) the Shares (unless such Shares are registered under the Act and
applicable state securities laws) are being and will be issued pursuant to
an exemption from registration for nonpublic offerings or offerings to one
or more accredited investors,
(c) he is acquiring the Shares (unless such Shares are registered
under the Act and applicable state securities laws) for his own account and
not with a view toward their distribution,
(d) he is experienced in making investments of this nature and has the
necessary sophistication to be able to evaluate the merits of this
investment, and
(e) he will not sell, offer for sale, pledge or otherwise hypothecate
the Shares (unless such Shares are registered under the Act and applicable
state securities laws) in the absence of an opinion of counsel reasonably
acceptable to the Company, that the sale, offer for sale, pledge or
hypothecation of the Shares is exempt from the registration and prospectus
delivery requirements of the Act and applicable state securities laws.
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(f) the Shares are being acquired in accordance with and subject to
the terms, provisions and conditions of the Warrant, to all of which he
hereby expressly assent.
Very truly yours,
___________________________
Print Name: ___________________________
Address: ___________________________
___________________________
Receipt of the above is hereby acknowledged:
KFx Inc.
By: ________________________
Title: ________________________
Date: ______________________
2
<PAGE>
ASSIGNMENT
----------
FOR VALUE RECEIVED ______________________________________ hereby sells,
assigns and transfers unto _______________________________________ the within
Warrant and all rights evidenced thereby and does irrevocably constitute and
appoint, _______________________________________ as attorney-in-fact, to
transfer the said Warrant on the books of the within named Company.
_______________________________
Dated:__________________
PARTIAL ASSIGNMENT
------------------
FOR VALUE RECEIVED ________________________________________ hereby sells,
assigns and transfers unto ________________________________________ that portion
of the within Warrant and the rights evidenced thereby which will on the date
hereof entitle the holder to purchase ____________ shares of Common Stock of
_______________________________, irrevocably constitute and appoint
_____________________________, attorney-in-fact, to transfer that part of the
said Warrant on the books of the within named Company.
_______________________________
Dated:__________________
<PAGE>
EXHIBIT 4.3
THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFIED UNDER
ANY APPLICABLE STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED, HYPOTHECATED OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION AND
QUALIFICATION WITHOUT AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY STATING
THAT SUCH REGISTRATION AND QUALIFICATION IS NOT REQUIRED.
33,333 SHARES
COMMON STOCK PURCHASE WARRANT
OF KFx INC.
January 15, 1997
----------------
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
THIS IS TO CERTIFY that, for value received and subject to the provisions
hereinafter set forth, Richard C. Whitner, as Assignee of Public Relations of
America, LTD., with his principal place of business at 1800 North Kent Street,
Suite 1104, Arlington, Virginia 22209 (the "Warrant Holder") (or its assigns),
is entitled to purchase from KFx Inc, a Delaware corporation ("Company") thirty-
three thousand three hundred thirty-three shares (the "Warrant Shares") of the
Company's $.001 par value common stock (the "Common Stock" or "Shares"), for an
aggregate purchase price equal to $4.00 multiplied by thirty-three thousand
three hundred thirty-three (33,333) shares ("Aggregate Original Warrant Price"),
all on and subject to the terms, provisions and conditions hereinafter set
forth. This Warrant may be exercised as to all or part (comprising a whole
number) of the Shares represented hereby at any time or times on or before
November 5, 1999 ("Expiration Date"). This Warrant shall be void and of no
effect, and all rights, restrictions, and obligations hereunder shall cease to
the extent not exercised prior to the Expiration Date. This Warrant is issued
in partial exchange for a Warrant issued by the Company to Public Relations of
America, LTD., on November 6, 1996, in the amount of one hundred thousand
shares.
ARTICLE I
EXERCISE OF WARRANT
Section 1.1 Duration. Subject to the provisions of Sections 1.2 and 1.4
hereof, this Warrant may be exercised at any time on or after 9:00 a.m., Denver,
Colorado time, on January 15, 1997 and at or before 5:00 p.m., Denver, Colorado
time, on November 5, 1999 (or, if such day is not a business day, at or before
5:00 p.m., Denver, Colorado time, on the next following business day). If this
Warrant is not exercised on or before the Expiration Date, it shall become void,
and all rights hereunder shall thereupon cease.
<PAGE>
Section 1.2 Exercise of Warrant. Subject to the conditions contained
herein, this Warrant may be exercised in whole or in part at any time or times
before the Expiration Date by the surrender of this Warrant or any duly
authorized replacements hereto (with a duly executed subscription agreement in
the form attached hereto) at the principal office of the Company in Denver,
Colorado, and upon payment to the Company of the Aggregate Original Warrant
Price (or, if exercised in part, upon payment to the Company of the applicable
proportionate part of the Aggregate Original Warrant Price) for each Share so
purchased in lawful money of the United States, or by check, or postal or
express money order payable in United States dollars to the order of the Company
or by funds wired to an account as specified by the Company, and upon compliance
with and subject to the conditions set forth herein.
Upon receipt of this Warrant with the form of exercise duly executed and
accompanied by payment of the Aggregate Original Warrant Price for the shares of
Common Stock for which this Warrant is then being exercised, the Company will
cause to be issued certificates for the total number of whole Warrant Shares (as
provided in Article V hereof) for which this Warrant is being exercised in such
denominations as are required for delivery to the Warrant Holder, and the
Company shall thereupon deliver such certificates to the Warrant Holder or his
assignee.
In case the Warrant Holder shall exercise this Warrant with respect to less
than all of the shares of Common Stock that may be purchased under this Warrant,
the Company will execute a new Warrant substantially in the form of this Warrant
for the balance of the shares of Common Stock that may be purchased upon
exercise of this Warrant and deliver such new Warrant to the Warrant Holder.
The Company shall pay any and all transfer taxes payable in connection with
the issue of this Warrant or the issue of any Warrant Shares upon exercise of
this Warrant. The Company shall not, however, be required to pay any tax which
may be payable in respect of any transfer involved in the issuance or delivery
of this Warrant or the Warrant Shares in a name other than that of the Warrant
Holder at the time of surrender, and until the payment of such tax the Company
shall not be required to issue such Warrant Shares.
<PAGE>
Section 1.3 Warrant Holder Representation and Certificate Legend.
Unless the issuance of the Warrant Shares shall have been registered under the
Securities Act of 1933, as amended (the "1933 Act"), as a condition of its
delivery of certificates for the Warrant Shares or upon the split-up,
combination, exchange, transfer or loan of the Warrant, the Company may require
the Warrant Holder (including the transferee of the Warrant in whose name the
Warrant Shares are to be registered) to deliver to the Company, in writing,
representations regarding the Warrant Holder's sophistication, investment
intent, acquisition for his own account and such other matters as are reasonable
and customary for purchasers of securities in an unregistered private offering.
The Company may place conspicuously upon each new Warrant and upon each
certificate representing the Warrant Shares a legend substantially in the
following form, the terms of which are agreed to by the Warrant Holder
(including each transferee):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED SOLELY
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "1933 ACT"), OR ANY STATE SECURITIES LAW. SUCH
SHARES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF SUCH REGISTRATION OR AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY THAT SUCH SALE, OFFER, PLEDGE OR HYPOTHECATION IS EXEMPT FROM THE
REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF THE 1933 ACT AND OF
ANY APPLICABLE STATE SECURITIES LAWS.
The Company need not register a transfer of this Warrant or the Warrant
Shares unless the conditions specified in such legend are satisfied. Subject to
the transfer restrictions set forth in this Article I and in Articles IX and X
herein, this Warrant is transferable, in whole or in part, on the books of the
Company, upon surrender of this Warrant to the Company, together with a written
assignment duly executed by the Warrant Holder.
Section 1.4 Vesting. This Warrant shall vest and be exercisable
effective January 15, 1997.
Section 1.5 Exercise Price. The initial exercise price shall be $4.00
per share (the "Exercise Price").
ARTICLE II
ANTIDILUTION
Section 2.1 Subdivisions or Combinations. In case the Company shall at
any time after the date of this Warrant (i) subdivide the outstanding Shares or
(ii) combine the outstanding Shares into a smaller number of Shares, the
Exercise Price and the number and kind of Shares receivable upon exercise, in
effect at the time of the effective date of such subdivision or combination,
shall be proportionately adjusted so that the holder of the Warrant exercised
after such time shall be entitled
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<PAGE>
to receive the same percentage and kind of shares which, if the Warrant had been
exercised immediately prior to such date, the holder would have owned upon such
exercise and been entitled to receive by virtue of such subdivision or
combination. Such adjustment shall be made successively whenever any event
listed above shall occur and shall be retroactive to the record date, if any,
for such event. Any adjustment made pursuant to this Section 2.1 shall become
effective immediately upon the effective date of such event retroactive to the
record date, if any, for such event. All calculations made under this Section
2.1 shall be made to the nearest cent or to the nearest Share, as the case may
be.
Section 2.2 Reorganization, Reclassification or Consolidation. In case
of any capital reorganization of the Company, or of any reclassification of
Shares (other than a change in par value, or from par value to no par value, or
from no par value to par value, or as a result of subdivision or combination),
or in case of the consolidation of the Company with or the merger of the Company
into any other person (other than a consolidation or merger in which the Company
is the continuing corporation) or of the sale of the properties and assets of
the Company as, or substantially as, an entirety to any other corporation, the
Warrant shall after such reorganization, reclassification, consolidation, merger
or sale be exercisable, upon the terms and conditions specified in this
Agreement, for the number of shares of stock or other securities, cash or other
property to which a holder of the number of Shares purchasable (at the time of
such reorganization, reclassification, consolidation, merger or sale) upon
exercise of the Warrant would have been entitled upon such reorganization,
reclassification, consolidation, merger or sale; and in any such case, if
necessary, the provisions set forth in this Section 2.2 with respect to the
rights and interests thereafter of the holders of the Warrant shall be
appropriately adjusted so as to be applicable, as nearly as may reasonably be,
to any shares of stock or other securities, cash or other property thereafter
deliverable on the exercise of the Warrant. The subdivision or combination of
Shares at any time outstanding into a greater or lesser number of Shares shall
not be deemed to be a reclassification of the Common Stock for the purposes of
this Section 2.2. The Company shall not effect any such consolidation, merger
or sale unless prior to or simultaneously with the consummation thereof the
successor corporation (if other than the Company) resulting from such
consolidation or merger or the person purchasing such assets or other
appropriate corporation or entity shall assume, by written instrument executed
and delivered to the Company's and successor person's transfer agent, if any,
the obligation to deliver to the holders of the Warrant such shares of stock,
other securities, cash or other property as, in accordance with the foregoing
provisions, such holders may be entitled to purchase and the other obligations
of the Company under this Warrant.
Section 2.3 Notices to the Warrant Holder. Upon any adjustment of the
Exercise Price or of the number or kind of Shares for which the outstanding
Warrant may be exercised pursuant to Article II, the Company, within 20 calendar
days thereafter, shall cause to be given to all of the holders of the Warrant,
at such holders' addresses appearing on the register or other records maintained
for such purpose, an officer's certificate showing the adjusted Exercise Price
and setting forth in reasonable detail the method of calculation and the facts
upon which such calculations are based and setting forth the number of Shares
purchasable upon exercise of the Warrant after such
4
<PAGE>
adjustment. Where appropriate, such notice may be given in advance and included
as a part of the notice required to be mailed under the other provisions of this
Article II.
In case:
(a) of any consolidation or merger to which the Company is a party and
for which approval of any stockholders of the Company is required, or of
the conveyance or transfer of the properties and assets of the Company as,
or substantially as, an entirety, or of any capital reorganization or any
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, or as a
result of a subdivision or combination); or
(b) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company;
then the Company shall cause to be mailed to the Warrant Holder at his address
appearing on the register or other records maintained by the Company for such
purpose, at least 20 calendar days (or 10 calendar days in any case specified in
clauses (a) or (b) above) prior to the applicable record or effective date
hereinafter specified a written notice stating the date on which any such
consolidation, merger, conveyance, transfer, reorganization, reclassification,
dissolution, liquidation or winding up is expected and that holders of record of
shares of Common Stock shall be entitled to exchange such shares for securities,
cash or other property, if any, deliverable upon such consolidation, merger,
conveyance, transfer, reorganization, reclassification, dissolution, liquidation
or winding up. The failure to give the notice required by this Section 2.3 or
any defect therein shall not affect the legality or validity of any
consolidation, merger, conveyance, transfer, reorganization, dissolution,
liquidation or winding up or the vote upon any action.
ARTICLE III
MERGERS, CONSOLIDATIONS, SALES AND
OTHER REORGANIZATIONS
5
<PAGE>
In the case of any consolidation or merger of the Company with another
entity, or the sale or all or substantially all or its assets to another entity,
or any reorganization or reclassification of the Common Stock or other equity
securities of the Company, then, as a condition of such consolidation, merger,
sale, reorganization or reclassification, lawful and adequate provision shall be
made whereby the holder of this Warrant shall thereafter have the right to
receive upon the basis and upon the terms and conditions specified herein and in
lieu of the shares of Common Stock immediately theretofore purchasable
hereunder, such shares of stock, securities or assets as may (by virtue of such
consolidation, merger, sale, reorganization or reclassification) be issued or
payable with respect to or in exchange for a number of outstanding shares of
Common Stock equal to the number of shares of Common Stock immediately
theretofore so purchasable hereunder had such consolidation, merger, sale,
reorganization or reclassification not taken place, and in any such case
appropriate provisions shall be made with respect to the rights and interests of
the holder of this Warrant to the end that the provisions hereof shall
thereafter be applicable, as nearly as may be, in relation to any shares of
stock, securities or assets thereafter deliverable upon exercise of this
Warrant. The Company shall not effect any such consolidation, merger, sale or
reorganization, unless prior to or simultaneously with the consummation thereof,
the successor entity (if other than the Company) resulting from such
consolidation, merger or reorganization or the entity purchasing such assets
shall assume by written instrument executed and mailed or delivered to the
holder of this Warrant, the obligations to deliver to such holder such shares of
stock, securities or assets as, in accordance with the foregoing provisions,
such holder may be entitled to receive. Notwithstanding anything herein to the
contrary, in the event that any shareholders of the Company have an opportunity
to sell or exchange their shares of Common Stock pursuant to a consolidation,
merger, sale or reorganization or otherwise, each of the holders of the Warrant
may, if they so decide in their sole discretion, immediately exercise the
Warrant in whole or in part and, at their option sell or exchange any or all of
the Common Stock thereafter owned by such holders upon terms and conditions no
less favorable than those upon which the other shareholders are selling or
exchanging their shares of Common Stock.
ARTICLE IV
FRACTIONAL SHARES
Anything contained herein to the contrary notwithstanding, the Company
shall not be required to issue any fraction of a share in connection with the
exercise of this Warrant, and in any case where the Warrant Holder would, except
for the provisions of this Article IV, be entitled under the terms of this
Warrant to receive a fraction of a share upon the exercise of this Warrant, the
Company shall upon the exercise of this Warrant and receipt of the Exercise
Price, issue the largest number of whole shares purchasable upon exercise of
this Warrant. The Company shall not be required to make any cash or other
adjustment in respect of such fraction of a share to which the Warrant Holder
would otherwise be entitled. The Warrant Holder, by the acceptance of this
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<PAGE>
Warrant, expressly waives his right to receive a certificate for any fraction of
a share upon exercise hereof.
ARTICLE V
FULLY PAID STOCK; TAXES
The Company covenants and agrees that the shares of stock represented by
each and every certificate representing Common Stock to be delivered on the
exercise of the purchase rights herein provided for shall, at the time of such
delivery, be validly issued and outstanding and be fully paid and nonassessable.
The Company further covenants and agrees that it will pay when due and payable
any and all Federal, State and local taxes which may be payable in connection
with the issuance of this Warrant or any Common Stock or certificates therefor
or the exercise of the rights provided for pursuant to the provisions hereof,
including without limitation any such taxes relating to the exercise of any
purchase, conversion, or other rights contained herein, but specifically
excluding any Federal, State or local income taxes owing by the holders of the
Warrant.
ARTICLE VI
CLOSING OF TRANSFER BOOKS
The right to exercise this Warrant shall not be suspended during any period
that the stock transfer books of the Company may be closed. The Company shall
not be required, however, to deliver certificates representing shares of its
Common Stock upon such exercise while such books are duly closed for any
purpose, but the Company may postpone the delivery of the certificates for such
Common Stock until the opening of such books, and they shall, in such case, be
delivered forthwith upon the opening thereof, or as soon as practicable
thereafter.
ARTICLE VII
REPLACEMENT OF WARRANT
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
such loss, theft or destruction, upon delivery to the Company of indemnity or
security reasonably satisfactory to it and reimbursement to the Company of all
reasonable expenses incidental thereto, or, in the case of any such mutilation,
upon surrender and cancellation of this Warrant, the Company will make and
deliver a new Warrant of like tenor, in lieu of this Warrant.
7
<PAGE>
ARTICLE VIII
RESERVATION OF SHARES
The Company shall at all times reserve and keep available out of its
authorized shares of Common Stock, solely for the purpose of issuance upon the
exercise of this Warrant, such number of shares of Common Stock as shall be
issuable upon the exercise of this Warrant. The Company covenants and agrees
that, upon exercise of this Warrant and payment of the Purchase Price therefor,
all shares of Common Stock issuable upon such exercise shall be duly and validly
issued, fully paid and non-assessable.
ARTICLE IX
RESTRICTIONS ON TRANSFERABILITY
OF WARRANTS AND SHARES; COMPLIANCE WITH LAWS
Section 9.1 In General. This Warrant and the Warrant Shares issued upon
the exercise hereof shall not be transferable except upon the conditions
hereinafter specified, which conditions are intended to insure compliance with
the provisions of the 1933 Act (or any similar Federal statute at the time in
effect) and any applicable State securities laws in respect of the transfer of
this Warrant or any such Warrant Shares.
Section 9.2 Restrictive Legends. Each Warrant shall bear on the face
thereof a legend substantially in the form of the notice endorsed on the first
page of this Warrant. Each certificate for shares of Common Stock initially
issued upon the exercise of any Warrant and each certificate for shares of
Common Stock issued to a subsequent transferee of such certificate shall, unless
otherwise permitted by the provisions of this Section 9.2, bear on the face
thereof a legend reading substantially as follows:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED SOLELY
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "1933 ACT"), OR ANY STATE SECURITIES LAW. SUCH
SHARES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF SUCH REGISTRATION OR AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY THAT SUCH SALE, OFFER, PLEDGE OR HYPOTHECATION IS EXEMPT FROM THE
REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF THE 1933 ACT AND OF
ANY APPLICABLE STATE SECURITIES LAWS. THE SHARES REPRESENTED BY THIS
CERTIFICATE ARE SUBJECT TO THE TERMS AND CONDITIONS OF THAT CERTAIN WARRANT
AGREEMENT DATED JANUARY 15, 1997, PURSUANT TO WHICH THEY WERE ISSUED.
8
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In the event that a registration statement covering the Warrant Shares
shall become effective under the 1933 Act and under any applicable State
securities laws or in the event that the Company shall receive an opinion
of counsel satisfactory to it that, in the opinion of such counsel, such
legend is not, or is no longer, necessary or required (including, without
limitation, because of the availability of the exemption afforded by Rule
144 of the General Rules and Regulations of the Securities and Exchange
Commission), the Company shall, or shall instruct its transfer agents and
registrars to, remove such legend from the certificates evidencing the
Warrant Shares or issue new certificates without such legend in lieu
thereof. All fees and expenses of counsel in connection with the rendition
of the opinion provided for in this Section 9.2 shall be paid by the
holder.
Section 9.3 Notice of Proposed Transfer; Registration Not Required. The
holder of this Warrant or of any Warrant Shares, by acceptance thereof, agrees
to give prior written notice to the Company of such holder's intention to
transfer such Warrant or the Warrant Shares relating thereto (or any portion
thereof) describing briefly the manner and circumstances of the proposed
transfer. Promptly after receiving such written notice, the Company shall
present copies thereof to Company counsel and to counsel designated by such
holder, who may be an employee of such holder. If in the opinion of each such
counsel the proposed transfer may be affected without registration or
qualification of such Warrant or the Warrant Shares under any Federal or State
law, the Company, as promptly as practicable, shall notify such holder of such
opinion and of the terms and conditions, if any, to be observed, whereupon such
holder shall be entitled to transfer such Warrant or Warrant Shares, all in
accordance with the terms of the notice delivered to such holder by the Company.
If either of such counsel is unable to render such an opinion (in which case
said counsel shall set forth in writing the basis for the legal conclusions in
this regard), the Company shall promptly notify such holder that the proposed
transfer described in the written notice given pursuant to this subsection may
not be effected without such registration or qualification or without compliance
with the conditions of an exemptive regulation of the Commission and any
applicable State Securities regulatory authority. Such holder shall not be
entitled to effect such transfer until such registration, qualification,
exemption or other compliance has become effective. All fees and expenses of
counsel in connection with the rendition of the opinions provided for in this
subsection shall be paid by the holder requesting the transfer.
ARTICLE X
RIGHT OF FIRST REFUSAL
In the event any holder of Warrants or Warrant Shares ("Offeror") proposes
to sell all or any portion of the Warrants or Warrant Shares owned by the holder
to a person or entity other than an affiliate of the holder, the Offeror shall
first deliver to the Company a written notice ("Notice of Proposed Sale")
specifying the name and address of the proposed purchaser ("Proposed
Purchaser"), the number of Warrants or Warrant Shares proposed to be sold to the
Proposed Purchaser ("Offered
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Shares"), and all of the terms, including the price, of the proposed sale and
stating that the Company has the right to purchase the Offered Shares in
accordance with the following terms:
(i) During the 30-day period following receipt of the Notice of
Proposed Sale ("Exercise Period"), the Company shall have the right to
purchase all (but not less than all) of the Offered Shares, at the price
and on the terms specified in the Notice of Proposed Sale. The company
shall give written notice of its election to the Offeror during the
Exercise Period.
(ii) If the Offered Shares have not been purchased by the Company as
specified herein, the Offeror shall have the right, but only for a period
of six (6) months after the expiration of the Exercise Period, to sell the
Offered Shares to the Proposed Purchaser at the price specified in the
Notice of Proposed Sale.
(iii) Warrants or Warrant Shares sold to a Proposed Purchaser as
provided herein shall continue to be subject to the provisions of this
Warrant, and the Company shall not be obligated to issue a new Warrant
therefor in the name of such Proposed Purchaser unless that Proposed
Purchaser agrees in writing to become bound by the terms hereof.
(iv) For purposes of this Article X an affiliate shall mean each and
every corporation, partnership, person, or other entity controlling,
controlled by, or under common control with, the holder of any Warrant or
Warrant Shares.
ARTICLE XI
MISCELLANEOUS
Section 11.1 Warrant Holder As Owner. Prior to due presentment for
registration of transfer of this Warrant, the Company may deem and treat the
Warrant Holder as the absolute owner of this Warrant (notwithstanding any
notation of ownership or other writing hereon) for the purpose of any exercise
hereof and for all other purposes, and the Company shall not be affected by any
notice to the contrary.
Section 11.2 Warrant Holder Not Shareholder. This Warrant does not
confer upon the holder hereof any right to vote or to consent or to receive
notice as a shareholder of the Company, as such, in respect of any matters
whatsoever, or any other rights or liabilities as a shareholder, prior to the
exercise hereof as hereinbefore provided.
Section 11.3 Warrant Holder Representation. Notwithstanding anything to
the contrary herein, the Warrant Holder represents and warrants that (a) it
acknowledges that the Warrant and the Warrant Shares have not been registered
under the 1933 Act or any state securities laws, (b) the Warrants and the
Warrant Shares (unless such Warrants and/or Warrant Shares, as the case may be,
are registered under the 1933 Act and applicable state securities laws) are
being and will be issued pursuant to an exemption from registration for
nonpublic offerings or offerings to one or more
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<PAGE>
accredited investors, (c) that the Warrant Holder is acquiring the Warrant and
will acquire the Warrant Shares (unless such Warrants and/or Warrant Shares are
registered under the 1933 Act and applicable state securities laws) for his own
account and not with a view toward their distribution, (d) the Warrant Holder is
experienced in making investments of this nature and has the necessary
sophistication to be able to evaluate the merits of this investment and (e) the
Warrant Holder will not sell, offer for sale, pledge or otherwise hypothecate
the Warrant or the Warrant Shares (unless such shares are registered under the
1933 Act and applicable state securities laws) in the absence of an opinion of
counsel reasonably acceptable to the Company, that the sale, offer for sale,
pledge or hypothecation of the Warrant and Warrant Shares is exempt from the
registration and prospectus delivery requirements of the 1933 Act and applicable
state securities laws.
Section 11.4 Partial Exercise and Partial Assignment.
(a) If this Warrant is exercised in part only, the holder shall upon
surrender hereof be entitled to receive a new Warrant, registered in the
name of the holder or its nominee. This Warrant may be assigned either in
whole or in part by surrender of this Warrant at the principal office of
the Company in Denver, Colorado (with the assignment or, as the case may
be, partial assignment form at the end hereof duly executed). If this
Warrant is assigned, a new Warrant shall be issued to the holder hereof,
registered in the name of such holder or its nominee. The assignee shall
also be entitled to receive a new Warrant, registered in the name of such
assignee or its nominee.
(b) Subject to the provisions of paragraph (a) of this Section 11.4
this Warrant and the Warrant Shares may not be sold or otherwise disposed
of except as follows:
(i) to a person who, in the opinion of counsel reasonably
satisfactory to the Company, is a person to whom this Warrant or the
Warrant Shares may legally be transferred without registration and without
the delivery of a current prospectus under the 1933 Act with respect
thereto and then only against receipt of an agreement of such person to
comply with the provisions of this Warrant with respect to any resale or
other disposition of such securities; or
(ii) to any person upon delivery of a prospectus then meeting the
requirements of the 1933 Act relating to such securities (as to which a
registration statement under the 1933 Act shall then be in effect) and the
offering thereof for such sale or disposition.
Section 11.5 Successors. All the covenants, agreements, representations
and warranties contained in this Warrant shall bind the parties hereto and their
respective heirs, executors, administrators, distributees, successors and
assigns.
Section 11.6 Severability. Should any part of this Warrant for any
reason be declared invalid, such decision shall not affect the validity of any
remaining portion, which remaining portion
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shall remain in force and effect as if this Warrant had been executed with the
invalid portion thereof eliminated, and it is hereby declared the intention of
the parties hereto that they would have executed and accepted the remaining
portion of this Warrant without including therein any such part, parts or
portion which may, for any reason, be hereafter declared invalid.
Section 11.7 Notices. Any notices required to be given pursuant to the
terms hereof shall be given (unless otherwise herein expressly provided) in
writing and either (i) personally delivered, (ii) sent by certified, return
receipt requested, (iii) sent by prepaid overnight courier, or (iv) transmitted
by telecopier or similar device, with confirmation of receipt. Notices shall be
addressed, if to holder of Warrants or Warrant Shares, to:
Richard C. Whitner
1800 North Kent Street, Suite 1104
Arlington, Virginia 22209
or to such other address of such holder appearing in the register maintained by
the Company, and if to the Company, to:
KFx Inc.
1999 Broadway, Suite 3200
Denver, CO 80202
Attn: Chief Financial Officer
For purposes of this Warrant, any notice sent by mail shall be demand given
on the date deposited in the mail.
Section 11.8 Headings. The Article headings in this Warrant are inserted
for purposes of convenience only and shall have no substantive effect.
Section 11.9 Law Governing. This Warrant is delivered in the State of
Colorado and shall be construed and enforced in accordance with, and governed
by, the laws of the State of Colorado.
Section 11.10 Amendments and Modifications. This Warrant may be amended or
modified only with the prior written consent of the holder hereof.
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WITNESS the seal of the Company and the signatures of its duly authorized
officers.
KFx Inc.
_________________________________________
Theodore Venners, Chief Executive Officer
(SEAL)
_________________________________________
R. G. Swenson, Secretary
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[INTENTIONALLY LEFT BLANK]
<PAGE>
KFx INC.
SUBSCRIPTION FORM
(To be executed by the Registered Holder
in order to Exercise the Warrant)
The undersigned hereby irrevocably elects to exercise the right to purchase
__________ shares (the "Shares") of common stock, $.001 par value (the "Common
Stock") of KFx Inc. (the "Company") covered by the Common Stock Purchase Warrant
dated ____________, ____ (the "Warrant") and herewith makes payment of the
purchase price of such Shares in accordance with the terms of the Warrant. The
undersigned requests a certificate for such Shares to be registered in the name
of _____________________, whose address is __________________________________.
If said number of Shares is less than all of the Shares issuable under the
Warrant, the undersigned further requests that a new warrant representing the
right to acquire the remaining balance of the Shares to be registered in the
name __________________________________, whose address is ___________________.
The undersigned hereby represents and warrants that:
(a) the Shares have not been registered under the Securities Act of
1933, as amended (the "Act") or any state securities laws,
(b) the Shares (unless such Shares are registered under the Act and
applicable state securities laws) are being and will be issued pursuant to
an exemption from registration for nonpublic offerings or offerings to one
or more accredited investors,
(c) he is acquiring the Shares (unless such Shares are registered
under the Act and applicable state securities laws) for his own account and
not with a view toward their distribution,
(d) he is experienced in making investments of this nature and has the
necessary sophistication to be able to evaluate the merits of this
investment, and
(e) he will not sell, offer for sale, pledge or otherwise hypothecate
the Shares (unless such Shares are registered under the Act and applicable
state securities laws) in the absence of an opinion of counsel reasonably
acceptable to the Company, that the sale, offer for sale, pledge or
hypothecation of the Shares is exempt from the registration and prospectus
delivery requirements of the Act and applicable state securities laws.
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<PAGE>
(f) the Shares are being acquired in accordance with and subject to
the terms, provisions and conditions of the Warrant, to all of which he
hereby expressly assent.
Very truly yours,
____________________________
Print Name: ____________________________
Address: ____________________________
____________________________
Receipt of the above is hereby acknowledged:
KFx Inc.
By: ________________________
Title: ________________________
Date: ________________________
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<PAGE>
ASSIGNMENT
----------
FOR VALUE RECEIVED ______________________________________ hereby sells,
assigns and transfers unto _______________________________________ the within
Warrant and all rights evidenced thereby and does irrevocably constitute and
appoint, __________________ _____________________ as attorney-in-fact, to
transfer the said Warrant on the books of the within named Company.
_____________________________________
Dated: _______________________________
PARTIAL ASSIGNMENT
------------------
FOR VALUE RECEIVED ________________________________________ hereby sells,
assigns and transfers unto ________________________________________ that portion
of the within Warrant and the rights evidenced thereby which will on the date
hereof entitle the holder to purchase ____________ shares of Common Stock of
_______________________________, irrevocably constitute and appoint
_____________________________, attorney-in-fact, to transfer that part of the
said Warrant on the books of the within named Company.
_____________________________________
Dated: _______________________________
<PAGE>
EXHIBIT 4.4
THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFIED UNDER
ANY APPLICABLE STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED, HYPOTHECATED OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION AND
QUALIFICATION WITHOUT AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY STATING
THAT SUCH REGISTRATION AND QUALIFICATION IS NOT REQUIRED.
50,000 SHARES
COMMON STOCK PURCHASE WARRANT
OF KFx INC.
January 30, 1998
------------------------------------------------------------------
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
THIS IS TO CERTIFY that, for value received and subject to the provisions
hereinafter set forth, John F. Reim, an individual with his principal place of
business at Two Wisconsin Circle, Suite 850, Chevy Chase, Maryland 20815 (the
"Warrant Holder") (or his assigns), is entitled to purchase from KFx Inc, a
Delaware corporation ("Company") Fifty Thousand (50,000) shares (the "Warrant
Shares") of the Company's $.001 par value common stock (the "Common Stock" or
"Shares"), for an aggregate purchase price equal to $3.75 multiplied by Fifty
Thousand (50,000) shares ("Aggregate Original Warrant Price"), all on and
subject to the terms, provisions and conditions hereinafter set forth. This
Warrant may be exercised as to all or part (comprising a whole number) of the
Shares represented hereby at any time or times before January 30, 2001
("Expiration Date"). This Warrant shall be void and of no effect, and all
rights, restrictions, and obligations hereunder shall cease to the extent not
exercised prior to the Expiration Date.
ARTICLE I
EXERCISE OF WARRANT
Section 1.1 Duration. Subject to the provisions of Sections 1.2 and 1.4
hereof, this Warrant may be exercised at any time on or after 9:00 a.m., Denver,
Colorado time, on January 30, 1998 and at or before 5:00 p.m., Denver, Colorado
time, on January 30, 2001 (or, if such day is not a business day, at or before
5:00 p.m., Denver, Colorado time, on the next following business day). If this
Warrant is not exercised on or before the Expiration Date, it shall become void,
and all rights hereunder shall thereupon cease.
<PAGE>
Section 1.2 Exercise of Warrant. Subject to the conditions contained
herein, this Warrant may be exercised in whole or in part at any time or times
before the Expiration Date by the surrender of this Warrant or any duly
authorized replacements hereto (with a duly executed subscription agreement in
the form attached hereto) at the principal office of the Company in Denver,
Colorado, and upon payment to the Company of the Aggregate Original Warrant
Price (or, if exercised in part, upon payment to the Company of the applicable
proportionate part of the Aggregate Original Warrant Price) for each Share so
purchased in lawful money of the United States, or by check, or postal or
express money order payable in United States dollars to the order of the Company
or by funds wired to an account as specified by the Company, and upon compliance
with and subject to the conditions set forth herein.
Upon receipt of this Warrant with the form of exercise duly executed and
accompanied by payment of the Aggregate Original Warrant Price for the shares of
Common Stock for which this Warrant is then being exercised, the Company will
cause to be issued certificates for the total number of whole Warrant Shares (as
provided in Article V hereof) for which this Warrant is being exercised in such
denominations as are required for delivery to the Warrant Holder, and the
Company shall thereupon deliver such certificates to the Warrant Holder or his
assignee.
In case the Warrant Holder shall exercise this Warrant with respect to less
than all of the shares of Common Stock that may be purchased under this Warrant,
the Company will execute a new Warrant substantially in the form of this Warrant
for the balance of the shares of Common Stock that may be purchased upon
exercise of this Warrant and deliver such new Warrant to the Warrant Holder.
The Company shall pay any and all transfer taxes payable in connection with
the issue of this Warrant or the issue of any Warrant Shares upon exercise of
this Warrant. The Company shall not, however, be required to pay any tax which
may be payable in respect of any transfer involved in the issuance or delivery
of this Warrant or the Warrant Shares in a name other than that of the Warrant
Holder at the time of surrender, and until the payment of such tax the Company
shall not be required to issue such Warrant Shares.
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<PAGE>
Section 1.3 Warrant Holder Representation and Certificate Legend.
Unless the issuance of the Warrant Shares shall have been registered under the
Securities Act of 1933, as amended (the "1933 Act"), as a condition of its
delivery of certificates for the Warrant Shares or upon the split-up,
combination, exchange, transfer or loan of the Warrant, the Company may require
the Warrant Holder (including the transferee of the Warrant in whose name the
Warrant Shares are to be registered) to deliver to the Company, in writing,
representations regarding the Warrant Holder's sophistication, investment
intent, acquisition for his own account and such other matters as are reasonable
and customary for purchasers of securities in an unregistered private offering.
The Company may place conspicuously upon each new Warrant and upon each
certificate representing the Warrant Shares a legend substantially in the
following form, the terms of which are agreed to by the Warrant Holder
(including each transferee):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED SOLELY
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "1933 ACT"), OR ANY STATE SECURITIES LAW. SUCH
SHARES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF SUCH REGISTRATION OR AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY THAT SUCH SALE, OFFER, PLEDGE OR HYPOTHECATION IS EXEMPT FROM THE
REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF THE 1933 ACT AND OF
ANY APPLICABLE STATE SECURITIES LAWS.
The Company need not register a transfer of this Warrant or the Warrant
Shares unless the conditions specified in such legend are satisfied. Subject to
the transfer restrictions set forth in this Article I and in Articles IX and X
herein, this Warrant is transferable, in whole or in part, on the books of the
Company, upon surrender of this Warrant to the Company, together with a written
assignment duly executed by the Warrant Holder.
Section 1.4 Vesting. This Warrant shall vest and be exercisable
effective January 30, 1998.
Section 1.5 Exercise Price. The initial exercise price shall be $3.75
per share (the "Exercise Price").
ARTICLE II
ANTIDILUTION
Section 2.1 Subdivisions or Combinations. In case the Company shall at
any time after the date of this Warrant (i) subdivide the outstanding Shares or
(ii) combine the outstanding Shares into a smaller number of Shares, the
Exercise Price and the number and kind of Shares receivable upon exercise, in
effect at the time of the effective date of such subdivision or combination,
shall be
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<PAGE>
proportionately adjusted so that the holder of the Warrant exercised after such
time shall be entitled to receive the same percentage and kind of shares which,
if the Warrant had been exercised immediately prior to such date, the holder
would have owned upon such exercise and been entitled to receive by virtue of
such subdivision or combination. Such adjustment shall be made successively
whenever any event listed above shall occur and shall be retroactive to the
record date, if any, for such event. Any adjustment made pursuant to this
Section 2.1 shall become effective immediately upon the effective date of such
event retroactive to the record date, if any, for such event. All calculations
made under this Section 2.1 shall be made to the nearest cent or to the nearest
Share, as the case may be.
Section 2.2 Reorganization, Reclassification or Consolidation. In case
of any capital reorganization of the Company, or of any reclassification of
Shares (other than a change in par value, or from par value to no par value, or
from no par value to par value, or as a result of subdivision or combination),
or in case of the consolidation of the Company with or the merger of the Company
into any other person (other than a consolidation or merger in which the Company
is the continuing corporation) or of the sale of the properties and assets of
the Company as, or substantially as, an entirety to any other corporation, the
Warrant shall after such reorganization, reclassification, consolidation, merger
or sale be exercisable, upon the terms and conditions specified in this
Agreement, for the number of shares of stock or other securities, cash or other
property to which a holder of the number of Shares purchasable (at the time of
such reorganization, reclassification, consolidation, merger or sale) upon
exercise of the Warrant would have been entitled upon such reorganization,
reclassification, consolidation, merger or sale; and in any such case, if
necessary, the provisions set forth in this Section 2.2 with respect to the
rights and interests thereafter of the holders of the Warrant shall be
appropriately adjusted so as to be applicable, as nearly as may reasonably be,
to any shares of stock or other securities, cash or other property thereafter
deliverable on the exercise of the Warrant. The subdivision or combination of
Shares at any time outstanding into a greater or lesser number of Shares shall
not be deemed to be a reclassification of the Common Stock for the purposes of
this Section 2.2. The Company shall not effect any such consolidation, merger
or sale unless prior to or simultaneously with the consummation thereof the
successor corporation (if other than the Company) resulting from such
consolidation or merger or the person purchasing such assets or other
appropriate corporation or entity shall assume, by written instrument executed
and delivered to the Company's and successor person's transfer agent, if any,
the obligation to deliver to the holders of the Warrant such shares of stock,
other securities, cash or other property as, in accordance with the foregoing
provisions, such holders may be entitled to purchase and the other obligations
of the Company under this Warrant.
Section 2.3 Notices to the Warrant Holder. Upon any adjustment of the
Exercise Price or of the number or kind of Shares for which the outstanding
Warrant may be exercised pursuant to Article II, the Company, within 20 calendar
days thereafter, shall cause to be given to all of the holders of the Warrant,
at such holders' addresses appearing on the register or other records maintained
for such purpose, an officer's certificate showing the adjusted Exercise Price
and setting forth in reasonable detail the method of calculation and the facts
upon which such calculations are based and setting forth the number of Shares
purchasable upon exercise of the Warrant after such
4
<PAGE>
adjustment. Where appropriate, such notice may be given in advance and included
as a part of the notice required to be mailed under the other provisions of this
Article II.
In case:
(a) of any consolidation or merger to which the Company is a party and
for which approval of any stockholders of the Company is required, or of
the conveyance or transfer of the properties and assets of the Company as,
or substantially as, an entirety, or of any capital reorganization or any
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, or as a
result of a subdivision or combination); or
(b) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company;
then the Company shall cause to be mailed to the Warrant Holder at his address
appearing on the register or other records maintained by the Company for such
purpose, at least 20 calendar days (or 10 calendar days in any case specified in
clauses (a) or (b) above) prior to the applicable record or effective date
hereinafter specified a written notice stating the date on which any such
consolidation, merger, conveyance, transfer, reorganization, reclassification,
dissolution, liquidation or winding up is expected and that holders of record of
shares of Common Stock shall be entitled to exchange such shares for securities,
cash or other property, if any, deliverable upon such consolidation, merger,
conveyance, transfer, reorganization, reclassification, dissolution, liquidation
or winding up. The failure to give the notice required by this Section 2.3 or
any defect therein shall not affect the legality or validity of any
consolidation, merger, conveyance, transfer, reorganization, dissolution,
liquidation or winding up or the vote upon any action.
ARTICLE III
MERGERS, CONSOLIDATIONS, SALES AND
OTHER REORGANIZATIONS
5
<PAGE>
In the case of any consolidation or merger of the Company with another
entity, or the sale or all or substantially all or its assets to another entity,
or any reorganization or reclassification of the Common Stock or other equity
securities of the Company, then, as a condition of such consolidation, merger,
sale, reorganization or reclassification, lawful and adequate provision shall be
made whereby the holder of this Warrant shall thereafter have the right to
receive upon the basis and upon the terms and conditions specified herein and in
lieu of the shares of Common Stock immediately theretofore purchasable
hereunder, such shares of stock, securities or assets as may (by virtue of such
consolidation, merger, sale, reorganization or reclassification) be issued or
payable with respect to or in exchange for a number of outstanding shares of
Common Stock equal to the number of shares of Common Stock immediately
theretofore so purchasable hereunder had such consolidation, merger, sale,
reorganization or reclassification not taken place, and in any such case
appropriate provisions shall be made with respect to the rights and interests of
the holder of this Warrant to the end that the provisions hereof shall
thereafter be applicable, as nearly as may be, in relation to any shares of
stock, securities or assets thereafter deliverable upon exercise of this
Warrant. The Company shall not effect any such consolidation, merger, sale or
reorganization, unless prior to or simultaneously with the consummation thereof,
the successor entity (if other than the Company) resulting from such
consolidation, merger or reorganization or the entity purchasing such assets
shall assume by written instrument executed and mailed or delivered to the
holder of this Warrant, the obligations to deliver to such holder such shares of
stock, securities or assets as, in accordance with the foregoing provisions,
such holder may be entitled to receive. Notwithstanding anything herein to the
contrary, in the event that any shareholders of the Company have an opportunity
to sell or exchange their shares of Common Stock pursuant to a consolidation,
merger, sale or reorganization or otherwise, each of the holders of the Warrant
may, if they so decide in their sole discretion, immediately exercise the
Warrant in whole or in part and, at their option sell or exchange any or all of
the Common Stock thereafter owned by such holders upon terms and conditions no
less favorable than those upon which the other shareholders are selling or
exchanging their shares of Common Stock.
ARTICLE IV
FRACTIONAL SHARES
Anything contained herein to the contrary notwithstanding, the Company
shall not be required to issue any fraction of a share in connection with the
exercise of this Warrant, and in any case where the Warrant Holder would, except
for the provisions of this Article IV, be entitled under the terms of this
Warrant to receive a fraction of a share upon the exercise of this Warrant, the
Company shall upon the exercise of this Warrant and receipt of the Exercise
Price, issue the largest number of whole shares purchasable upon exercise of
this Warrant. The Company shall not be required to make any cash or other
adjustment in respect of such fraction of a share to which the Warrant Holder
would otherwise be entitled. The Warrant Holder, by the acceptance of this
Warrant, expressly waives his right to receive a certificate for any fraction of
a share upon exercise hereof.
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ARTICLE V
FULLY PAID STOCK; TAXES
The Company covenants and agrees that the shares of stock represented by
each and every certificate representing Common Stock to be delivered on the
exercise of the purchase rights herein provided for shall, at the time of such
delivery, be validly issued and outstanding and be fully paid and nonassessable.
The Company further covenants and agrees that it will pay when due and payable
any and all Federal, State and local taxes which may be payable in connection
with the issuance of this Warrant or any Common Stock or certificates therefor
or the exercise of the rights provided for pursuant to the provisions hereof,
including without limitation any such taxes relating to the exercise of any
purchase, conversion, or other rights contained herein, but specifically
excluding any Federal, State or local income taxes owing by the holders of the
Warrant.
ARTICLE VI
CLOSING OF TRANSFER BOOKS
The right to exercise this Warrant shall not be suspended during any period
that the stock transfer books of the Company may be closed. The Company shall
not be required, however, to deliver certificates representing shares of its
Common Stock upon such exercise while such books are duly closed for any
purpose, but the Company may postpone the delivery of the certificates for such
Common Stock until the opening of such books, and they shall, in such case, be
delivered forthwith upon the opening thereof, or as soon as practicable
thereafter.
ARTICLE VII
REPLACEMENT OF WARRANT
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
such loss, theft or destruction, upon delivery to the Company of indemnity or
security reasonably satisfactory to it and reimbursement to the Company of all
reasonable expenses incidental thereto, or, in the case of any such mutilation,
upon surrender and cancellation of this Warrant, the Company will make and
deliver a new Warrant of like tenor, in lieu of this Warrant.
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ARTICLE VIII
RESERVATION OF SHARES
The Company shall at all times reserve and keep available out of its
authorized shares of Common Stock, solely for the purpose of issuance upon the
exercise of this Warrant, such number of shares of Common Stock as shall be
issuable upon the exercise of this Warrant. The Company covenants and agrees
that, upon exercise of this Warrant and payment of the Purchase Price therefor,
all shares of Common Stock issuable upon such exercise shall be duly and validly
issued, fully paid and non-assessable.
ARTICLE IX
RESTRICTIONS ON TRANSFERABILITY
OF WARRANTS AND SHARES; COMPLIANCE WITH LAWS
Section 9.1 In General. This Warrant and the Warrant Shares issued upon
the exercise hereof shall not be transferable except upon the conditions
hereinafter specified, which conditions are intended to insure compliance with
the provisions of the 1933 Act (or any similar Federal statute at the time in
effect) and any applicable State securities laws in respect of the transfer of
this Warrant or any such Warrant Shares.
Section 9.2 Restrictive Legends. Each Warrant shall bear on the face
thereof a legend substantially in the form of the notice endorsed on the first
page of this Warrant. Each certificate for shares of Common Stock initially
issued upon the exercise of any Warrant and each certificate for shares of
Common Stock issued to a subsequent transferee of such certificate shall, unless
otherwise permitted by the provisions of this Section 9.2, bear on the face
thereof a legend reading substantially as follows:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED SOLELY
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "1933 ACT"), OR ANY STATE SECURITIES LAW. SUCH
SHARES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF SUCH REGISTRATION OR AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY THAT SUCH SALE, OFFER, PLEDGE OR HYPOTHECATION IS EXEMPT FROM THE
REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF THE 1933 ACT AND OF
ANY APPLICABLE STATE SECURITIES LAWS. THE SHARES REPRESENTED BY THIS
CERTIFICATE ARE SUBJECT TO THE TERMS AND CONDITIONS OF THAT CERTAIN WARRANT
AGREEMENT DATED JANUARY 30, 1998, PURSUANT TO WHICH THEY WERE ISSUED.
In the event that a registration statement covering the Warrant Shares
shall become effective under the 1933 Act and under any applicable State
securities laws or in the event
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that the Company shall receive an opinion of counsel satisfactory to it
that, in the opinion of such counsel, such legend is not, or is no longer,
necessary or required (including, without limitation, because of the
availability of the exemption afforded by Rule 144 of the General Rules and
Regulations of the Securities and Exchange Commission), the Company shall,
or shall instruct its transfer agents and registrars to, remove such legend
from the certificates evidencing the Warrant Shares or issue new
certificates without such legend in lieu thereof. All fees and expenses of
counsel in connection with the rendition of the opinion provided for in
this Section 9.2 shall be paid by the holder.
Section 9.3 Notice of Proposed Transfer; Registration Not Required. The
holder of this Warrant or of any Warrant Shares, by acceptance thereof, agrees
to give prior written notice to the Company of such holder's intention to
transfer such Warrant or the Warrant Shares relating thereto (or any portion
thereof) describing briefly the manner and circumstances of the proposed
transfer. Promptly after receiving such written notice, the Company shall
present copies thereof to Company counsel and to counsel designated by such
holder, who may be an employee of such holder. If in the opinion of each such
counsel the proposed transfer may be affected without registration or
qualification of such Warrant or the Warrant Shares under any Federal or State
law, the Company, as promptly as practicable, shall notify such holder of such
opinion and of the terms and conditions, if any, to be observed, whereupon such
holder shall be entitled to transfer such Warrant or Warrant Shares, all in
accordance with the terms of the notice delivered to such holder by the Company.
If either of such counsel is unable to render such an opinion (in which case
said counsel shall set forth in writing the basis for the legal conclusions in
this regard), the Company shall promptly notify such holder that the proposed
transfer described in the written notice given pursuant to this subsection may
not be effected without such registration or qualification or without compliance
with the conditions of an exemptive regulation of the Commission and any
applicable State Securities regulatory authority. Such holder shall not be
entitled to effect such transfer until such registration, qualification,
exemption or other compliance has become effective. All fees and expenses of
counsel in connection with the rendition of the opinions provided for in this
subsection shall be paid by the holder requesting the transfer.
ARTICLE X
RIGHT OF FIRST REFUSAL
In the event any holder of Warrants or Warrant Shares ("Offeror") proposes
to sell all or any portion of the Warrants or Warrant Shares owned by the holder
to a person or entity other than an affiliate of the holder, the Offeror shall
first deliver to the Company a written notice ("Notice of Proposed Sale")
specifying the name and address of the proposed purchaser ("Proposed
Purchaser"), the number of Warrants or Warrant Shares proposed to be sold to the
Proposed Purchaser ("Offered Shares"), and all of the terms, including the
price, of the proposed sale and stating that the Company has the right to
purchase the Offered Shares in accordance with the following terms:
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(i) During the 30-day period following receipt of the Notice of
Proposed Sale ("Exercise Period"), the Company shall have the right to
purchase all (but not less than all) of the Offered Shares, at the price
and on the terms specified in the Notice of Proposed Sale. The company
shall give written notice of its election to the Offeror during the
Exercise Period.
(ii) If the Offered Shares have not been purchased by the Company as
specified herein, the Offeror shall have the right, but only for a period
of six (6) months after the expiration of the Exercise Period, to sell the
Offered Shares to the Proposed Purchaser at the price specified in the
Notice of Proposed Sale.
(iii) Warrants or Warrant Shares sold to a Proposed Purchaser as
provided herein shall continue to be subject to the provisions of this
Warrant, and the Company shall not be obligated to issue a new Warrant
therefor in the name of such Proposed Purchaser unless that Proposed
Purchaser agrees in writing to become bound by the terms hereof.
(iv) For purposes of this Article X an affiliate shall mean each and
every corporation, partnership, person, or other entity controlling,
controlled by, or under common control with, the holder of any Warrant or
Warrant Shares.
ARTICLE XI
MISCELLANEOUS
Section 11.1 Warrant Holder As Owner. Prior to due presentment for
registration of transfer of this Warrant, the Company may deem and treat the
Warrant Holder as the absolute owner of this Warrant (notwithstanding any
notation of ownership or other writing hereon) for the purpose of any exercise
hereof and for all other purposes, and the Company shall not be affected by any
notice to the contrary.
Section 11.2 Warrant Holder Not Shareholder. This Warrant does not
confer upon the holder hereof any right to vote or to consent or to receive
notice as a shareholder of the Company, as such, in respect of any matters
whatsoever, or any other rights or liabilities as a shareholder, prior to the
exercise hereof as hereinbefore provided.
Section 11.3 Warrant Holder Representation. Notwithstanding anything to
the contrary herein, the Warrant Holder represents and warrants that (a) it
acknowledges that the Warrant and the Warrant Shares have not been registered
under the 1933 Act or any state securities laws, (b) the Warrants and the
Warrant Shares (unless such Warrants and/or Warrant Shares, as the case may be,
are registered under the 1933 Act and applicable state securities laws) are
being and will be issued pursuant to an exemption from registration for
nonpublic offerings or offerings to one or more accredited investors, (c) that
the Warrant Holder is acquiring the Warrant and will acquire the Warrant Shares
(unless such Warrants and/or Warrant Shares are registered under the 1933 Act
and applicable state securities laws) for his own account and not with a view
toward their distribution,
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(d) the Warrant Holder is experienced in making investments of this nature and
has the necessary sophistication to be able to evaluate the merits of this
investment and (e) the Warrant Holder will not sell, offer for sale, pledge or
otherwise hypothecate the Warrant or the Warrant Shares (unless such shares are
registered under the 1933 Act and applicable state securities laws) in the
absence of an opinion of counsel reasonably acceptable to the Company, that the
sale, offer for sale, pledge or hypothecation of the Warrant and Warrant Shares
is exempt from the registration and prospectus delivery requirements of the 1933
Act and applicable state securities laws.
Section 11.4 Partial Exercise and Partial Assignment.
(a) If this Warrant is exercised in part only, the holder shall upon
surrender hereof be entitled to receive a new Warrant, registered in the
name of the holder or its nominee. This Warrant may be assigned either in
whole or in part by surrender of this Warrant at the principal office of
the Company in Denver, Colorado (with the assignment or, as the case may
be, partial assignment form at the end hereof duly executed). If this
Warrant is assigned, a new Warrant shall be issued to the holder hereof,
registered in the name of such holder or its nominee. The assignee shall
also be entitled to receive a new Warrant, registered in the name of such
assignee or its nominee.
(b) Subject to the provisions of paragraph (a) of this Section 11.4
this Warrant and the Warrant Shares may not be sold or otherwise disposed
of except as follows:
(i) to a person who, in the opinion of counsel reasonably
satisfactory to the Company, is a person to whom this Warrant or the
Warrant Shares may legally be transferred without registration and without
the delivery of a current prospectus under the 1933 Act with respect
thereto and then only against receipt of an agreement of such person to
comply with the provisions of this Warrant with respect to any resale or
other disposition of such securities; or
(ii) to any person upon delivery of a prospectus then meeting the
requirements of the 1933 Act relating to such securities (as to which a
registration statement under the 1933 Act shall then be in effect) and the
offering thereof for such sale or disposition.
Section 11.5 Successors. All the covenants, agreements, representations
and warranties contained in this Warrant shall bind the parties hereto and their
respective heirs, executors, administrators, distributees, successors and
assigns.
Section 11.6 Severability. Should any part of this Warrant for any
reason be declared invalid, such decision shall not affect the validity of any
remaining portion, which remaining portion shall remain in force and effect as
if this Warrant had been executed with the invalid portion thereof eliminated,
and it is hereby declared the intention of the parties hereto that they would
have executed and accepted the remaining portion of this Warrant without
including therein any such part, parts or portion which may, for any reason, be
hereafter declared invalid.
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Section 11.7 Notices. Any notices required to be given pursuant to the
terms hereof shall be given (unless otherwise herein expressly provided) in
writing and either (i) personally delivered, (ii) sent by certified, return
receipt requested, (iii) sent by prepaid overnight courier, or (iv) transmitted
by telecopier or similar device, with confirmation of receipt. Notices shall be
addressed, if to holder of Warrants or Warrant Shares, to:
John F. Reim
Two Wisconsin Circle, Suite 850
Chevy Chase, MD 20815
or to such other address of such holder appearing in the register maintained by
the Company, and if to the Company, to:
KFx Inc.
1999 Broadway, Suite 3200
Denver, CO 80202
Attn: Chief Financial Officer
For purposes of this Warrant, any notice sent by mail shall be demand given
on the date deposited in the mail.
Section 11.8 Headings. The Article headings in this Warrant are inserted
for purposes of convenience only and shall have no substantive effect.
Section 11.9 Law Governing. This Warrant is delivered in the State of
Colorado and shall be construed and enforced in accordance with, and governed
by, the laws of the State of Colorado.
Section 11.10 Amendments and Modifications. This Warrant may be amended or
modified only with the prior written consent of the holder hereof.
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WITNESS the seal of the Company and the signatures of its duly authorized
officers.
KFx Inc.
_________________________________________
Theodore Venners, Chief Executive Officer
(SEAL)
_________________________________________
R. G. Swenson, Secretary
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KFx INC.
SUBSCRIPTION FORM
(To be executed by the Registered Holder
in order to Exercise the Warrant)
The undersigned hereby irrevocably elects to exercise the right to purchase
__________ shares (the "Shares") of common stock, $.001 par value (the "Common
Stock") of KFx Inc. (the "Company") covered by the Common Stock Purchase Warrant
dated ____________, ____ (the "Warrant") and herewith makes payment of the
purchase price of such Shares in accordance with the terms of the Warrant. The
undersigned requests a certificate for such Shares to be registered in the name
of _____________________, whose address is __________________________________.
If said number of Shares is less than all of the Shares issuable under the
Warrant, the undersigned further requests that a new warrant representing the
right to acquire the remaining balance of the Shares to be registered in the
name __________________________________, whose address is
______________________________________________________.
The undersigned hereby represents and warrants that:
(a) the Shares have not been registered under the Securities Act of
1933, as amended (the "Act") or any state securities laws,
(b) the Shares (unless such Shares are registered under the Act and
applicable state securities laws) are being and will be issued pursuant to
an exemption from registration for nonpublic offerings or offerings to one
or more accredited investors,
(c) he is acquiring the Shares (unless such Shares are registered
under the Act and applicable state securities laws) for his own account and
not with a view toward their distribution,
(d) he is experienced in making investments of this nature and has the
necessary sophistication to be able to evaluate the merits of this
investment, and
(e) he will not sell, offer for sale, pledge or otherwise hypothecate
the Shares (unless such Shares are registered under the Act and applicable
state securities laws) in the absence of an opinion of counsel reasonably
acceptable to the Company, that the sale, offer for sale, pledge or
hypothecation of the Shares is exempt from the registration and prospectus
delivery requirements of the Act and applicable state securities laws.
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(f) the Shares are being acquired in accordance with and subject to
the terms, provisions and conditions of the Warrant, to all of which he
hereby expressly assent.
Very truly yours,
____________________________
Print Name: ____________________________
Address: ____________________________
____________________________
Receipt of the above is hereby acknowledged:
KFx Inc.
By: ________________________
Title: ________________________
Date: ________________________
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<PAGE>
ASSIGNMENT
----------
FOR VALUE RECEIVED ______________________________________ hereby sells,
assigns and transfers unto _______________________________________ the within
Warrant and all rights evidenced thereby and does irrevocably constitute and
appoint, __________________ _____________________ as attorney-in-fact, to
transfer the said Warrant on the books of the within named Company.
________________________________
Dated: ___________________________
PARTIAL ASSIGNMENT
------------------
FOR VALUE RECEIVED ________________________________________ hereby sells,
assigns and transfers unto ________________________________________ that portion
of the within Warrant and the rights evidenced thereby which will on the date
hereof entitle the holder to purchase ____________ shares of Common Stock of
_______________________________, irrevocably constitute and appoint
_____________________________, attorney-in-fact, to transfer that part of the
said Warrant on the books of the within named Company.
________________________________
Dated: ___________________________
<PAGE>
EXHIBIT 4.5
THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFIED UNDER
ANY APPLICABLE STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED, HYPOTHECATED OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION AND
QUALIFICATION WITHOUT AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY STATING
THAT SUCH REGISTRATION AND QUALIFICATION IS NOT REQUIRED.
50,000 SHARES
COMMON STOCK PURCHASE WARRANT
OF KFx INC.
June 19, 1997
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
THIS IS TO CERTIFY that, for value received and subject to the provisions
hereinafter set forth, Peter G. Martin, an individual with his principal place
of business at 48 Ogden Place, Dobbs Ferry, New York 10522 (the "Warrant
Holder") (or his assigns), is entitled to purchase from KFx Inc, a Delaware
corporation ("Company")50,000 shares (the "Warrant Shares") of the Company's
$.001 par value common stock (the "Common Stock" or "Shares"), for an aggregate
purchase price equal to $4.375 multiplied by fifty thousand (50,000) shares
("Aggregate Original Warrant Price"), all on and subject to the terms,
provisions and conditions hereinafter set forth. This Warrant may be exercised
as to all or part (comprising a whole number) of the Shares represented hereby
at any time or times before August 2, 1998 ("Expiration Date"). This Warrant
shall be void and of no effect, and all rights, restrictions, and obligations
hereunder shall cease to the extent not exercised prior to the Expiration Date.
This Warrant replaces the Warrant for 50,000 shares dated August 2, 1995 and
expiring August 2, 1997.
ARTICLE I
EXERCISE OF WARRANT
Section 1.1 Duration. Subject to the provisions of Sections 1.2 and 1.4
hereof, this Warrant may be exercised at any time on or after 5:00 p.m., Denver,
Colorado time, on June 19, 1997 and at or before 5:00 p.m., Denver, Colorado
time, on August 2, 1998 (or, if such day is not a business day, at or before
5:00 p.m., Denver, Colorado time, on the next following business day). If this
Warrant is not exercised on or before the Expiration Date, it shall become void,
and all rights hereunder shall thereupon cease.
<PAGE>
Section 1.2 Exercise of Warrant. Subject to the conditions contained
herein, this Warrant may be exercised in whole or in part at any time or times
before the Expiration Date by the surrender of this Warrant or any duly
authorized replacements hereto (with a duly executed subscription agreement in
the form attached hereto) at the principal office of the Company in Denver,
Colorado, and upon payment to the Company of the Aggregate Original Warrant
Price (or, if exercised in part, upon payment to the Company of the applicable
proportionate part of the Aggregate Original Warrant Price) for each Share so
purchased in lawful money of the United States, or by check, or postal or
express money order payable in United States dollars to the order of the Company
or by funds wired to an account as specified by the Company, and upon compliance
with and subject to the conditions set forth herein.
Upon receipt of this Warrant with the form of exercise duly executed and
accompanied by payment of the Aggregate Original Warrant Price for the shares of
Common Stock for which this Warrant is then being exercised, the Company will
cause to be issued certificates for the total number of whole Warrant Shares (as
provided in Article V hereof) for which this Warrant is being exercised in such
denominations as are required for delivery to the Warrant Holder, and the
Company shall thereupon deliver such certificates to the Warrant Holder or his
assignee.
In case the Warrant Holder shall exercise this Warrant with respect to less
than all of the shares of Common Stock that may be purchased under this Warrant,
the Company will execute a new Warrant substantially in the form of this Warrant
for the balance of the shares of Common Stock that may be purchased upon
exercise of this Warrant and deliver such new Warrant to the Warrant Holder.
The Company shall pay any and all transfer taxes payable in connection with
the issue of this Warrant or the issue of any Warrant Shares upon exercise of
this Warrant. The Company shall not, however, be required to pay any tax which
may be payable in respect of any transfer involved in the issuance or delivery
of this Warrant or the Warrant Shares in a name other than that of the Warrant
Holder at the time of surrender, and until the payment of such tax the Company
shall not be required to issue such Warrant Shares.
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Section 1.3 Warrant Holder Representation and Certificate Legend.
Unless the issuance of the Warrant Shares shall have been registered under the
Securities Act of 1933, as amended (the "1933 Act"), as a condition of its
delivery of certificates for the Warrant Shares or upon the split-up,
combination, exchange, transfer or loan of the Warrant, the Company may require
the Warrant Holder (including the transferee of the Warrant in whose name the
Warrant Shares are to be registered) to deliver to the Company, in writing,
representations regarding the Warrant Holder's sophistication, investment
intent, acquisition for his own account and such other matters as are reasonable
and customary for purchasers of securities in an unregistered private offering.
The Company may place conspicuously upon each new Warrant and upon each
certificate representing the Warrant Shares a legend substantially in the
following form, the terms of which are agreed to by the Warrant Holder
(including each transferee):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED SOLELY
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "1933 ACT"), OR ANY STATE SECURITIES LAW. SUCH
SHARES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF SUCH REGISTRATION OR AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY THAT SUCH SALE, OFFER, PLEDGE OR HYPOTHECATION IS EXEMPT FROM THE
REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF THE 1933 ACT AND OF
ANY APPLICABLE STATE SECURITIES LAWS.
The Company need not register a transfer of this Warrant or the Warrant
Shares unless the conditions specified in such legend are satisfied. Subject to
the transfer restrictions set forth in this Article I and in Articles IX and X
herein, this Warrant is transferable, in whole or in part, on the books of the
Company, upon surrender of this Warrant to the Company, together with a written
assignment duly executed by the Warrant Holder.
Section 1.4 Vesting. This Warrant shall vest and be exercisable
effective June 19, 1997.
Section 1.5 Exercise Price. The initial exercise price shall be $4.375
per share (the "Exercise Price").
ARTICLE II
ANTIDILUTION
Section 2.1 Subdivisions or Combinations. In case the Company shall at
any time after the date of this Warrant (i) subdivide the outstanding Shares or
(ii) combine the outstanding Shares into a smaller number of Shares, the
Exercise Price and the number and kind of Shares receivable upon exercise, in
effect at the time of the effective date of such subdivision or combination,
shall be proportionately adjusted so that the holder of the Warrant exercised
after such time shall be entitled to receive the same percentage and kind of
shares which, if the Warrant had been exercised
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immediately prior to such date, the holder would have owned upon such exercise
and been entitled to receive by virtue of such subdivision or combination. Such
adjustment shall be made successively whenever any event listed above shall
occur and shall be retroactive to the record date, if any, for such event. Any
adjustment made pursuant to this Section 2.1 shall become effective immediately
upon the effective date of such event retroactive to the record date, if any,
for such event. All calculations made under this Section 2.1 shall be made to
the nearest cent or to the nearest Share, as the case may be.
Section 2.2 Reorganization, Reclassification or Consolidation. In case
of any capital reorganization of the Company, or of any reclassification of
Shares (other than a change in par value, or from par value to no par value, or
from no par value to par value, or as a result of subdivision or combination),
or in case of the consolidation of the Company with or the merger of the Company
into any other person (other than a consolidation or merger in which the Company
is the continuing corporation) or of the sale of the properties and assets of
the Company as, or substantially as, an entirety to any other corporation, the
Warrant shall after such reorganization, reclassification, consolidation, merger
or sale be exercisable, upon the terms and conditions specified in this
Agreement, for the number of shares of stock or other securities, cash or other
property to which a holder of the number of Shares purchasable (at the time of
such reorganization, reclassification, consolidation, merger or sale) upon
exercise of the Warrant would have been entitled upon such reorganization,
reclassification, consolidation, merger or sale; and in any such case, if
necessary, the provisions set forth in this Section 2.2 with respect to the
rights and interests thereafter of the holders of the Warrant shall be
appropriately adjusted so as to be applicable, as nearly as may reasonably be,
to any shares of stock or other securities, cash or other property thereafter
deliverable on the exercise of the Warrant. The subdivision or combination of
Shares at any time outstanding into a greater or lesser number of Shares shall
not be deemed to be a reclassification of the Common Stock for the purposes of
this Section 2.2. The Company shall not effect any such consolidation, merger
or sale unless prior to or simultaneously with the consummation thereof the
successor corporation (if other than the Company) resulting from such
consolidation or merger or the person purchasing such assets or other
appropriate corporation or entity shall assume, by written instrument executed
and delivered to the Company's and successor person's transfer agent, if any,
the obligation to deliver to the holders of the Warrant such shares of stock,
other securities, cash or other property as, in accordance with the foregoing
provisions, such holders may be entitled to purchase and the other obligations
of the Company under this Warrant.
Section 2.3 Notices to the Warrant Holder. Upon any adjustment of the
Exercise Price or of the number or kind of Shares for which the outstanding
Warrant may be exercised pursuant to Article II, the Company, within 20 calendar
days thereafter, shall cause to be given to all of the holders of the Warrant,
at such holders' addresses appearing on the register or other records maintained
for such purpose, an officer's certificate showing the adjusted Exercise Price
and setting forth in reasonable detail the method of calculation and the facts
upon which such calculations are based and setting forth the number of Shares
purchasable upon exercise of the Warrant after such adjustment. Where
appropriate, such notice may be given in advance and included as a part of the
notice required to be mailed under the other provisions of this Article II.
In case:
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(a) of any consolidation or merger to which the Company is a party and
for which approval of any stockholders of the Company is required, or of
the conveyance or transfer of the properties and assets of the Company as,
or substantially as, an entirety, or of any capital reorganization or any
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, or as a
result of a subdivision or combination); or
(b) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company;
then the Company shall cause to be mailed to the Warrant Holder at his address
appearing on the register or other records maintained by the Company for such
purpose, at least 20 calendar days (or 10 calendar days in any case specified in
clauses (a) or (b) above) prior to the applicable record or effective date
hereinafter specified a written notice stating the date on which any such
consolidation, merger, conveyance, transfer, reorganization, reclassification,
dissolution, liquidation or winding up is expected and that holders of record of
shares of Common Stock shall be entitled to exchange such shares for securities,
cash or other property, if any, deliverable upon such consolidation, merger,
conveyance, transfer, reorganization, reclassification, dissolution, liquidation
or winding up. The failure to give the notice required by this Section 2.3 or
any defect therein shall not affect the legality or validity of any
consolidation, merger, conveyance, transfer, reorganization, dissolution,
liquidation or winding up or the vote upon any action.
ARTICLE III
MERGERS, CONSOLIDATIONS, SALES AND
OTHER REORGANIZATIONS
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In the case of any consolidation or merger of the Company with another
entity, or the sale or all or substantially all or its assets to another entity,
or any reorganization or reclassification of the Common Stock or other equity
securities of the Company, then, as a condition of such consolidation, merger,
sale, reorganization or reclassification, lawful and adequate provision shall be
made whereby the holder of this Warrant shall thereafter have the right to
receive upon the basis and upon the terms and conditions specified herein and in
lieu of the shares of Common Stock immediately theretofore purchasable
hereunder, such shares of stock, securities or assets as may (by virtue of such
consolidation, merger, sale, reorganization or reclassification) be issued or
payable with respect to or in exchange for a number of outstanding shares of
Common Stock equal to the number of shares of Common Stock immediately
theretofore so purchasable hereunder had such consolidation, merger, sale,
reorganization or reclassification not taken place, and in any such case
appropriate provisions shall be made with respect to the rights and interests of
the holder of this Warrant to the end that the provisions hereof shall
thereafter be applicable, as nearly as may be, in relation to any shares of
stock, securities or assets thereafter deliverable upon exercise of this
Warrant. The Company shall not effect any such consolidation, merger, sale or
reorganization, unless prior to or simultaneously with the consummation thereof,
the successor entity (if other than the Company) resulting from such
consolidation, merger or reorganization or the entity purchasing such assets
shall assume by written instrument executed and mailed or delivered to the
holder of this Warrant, the obligations to deliver to such holder such shares of
stock, securities or assets as, in accordance with the foregoing provisions,
such holder may be entitled to receive. Notwithstanding anything herein to the
contrary, in the event that any shareholders of the Company have an opportunity
to sell or exchange their shares of Common Stock pursuant to a consolidation,
merger, sale or reorganization or otherwise, each of the holders of the Warrant
may, if they so decide in their sole discretion, immediately exercise the
Warrant in whole or in part and, at their option sell or exchange any or all of
the Common Stock thereafter owned by such holders upon terms and conditions no
less favorable than those upon which the other shareholders are selling or
exchanging their shares of Common Stock.
ARTICLE IV
FRACTIONAL SHARES
Anything contained herein to the contrary notwithstanding, the Company
shall not be required to issue any fraction of a share in connection with the
exercise of this Warrant, and in any case where the Warrant Holder would, except
for the provisions of this Article IV, be entitled under the terms of this
Warrant to receive a fraction of a share upon the exercise of this Warrant, the
Company shall upon the exercise of this Warrant and receipt of the Exercise
Price, issue the largest number of whole shares purchasable upon exercise of
this Warrant. The Company shall not be required to make any cash or other
adjustment in respect of such fraction of a share to which the Warrant Holder
would otherwise be entitled. The Warrant Holder, by the acceptance of this
Warrant, expressly waives his right to receive a certificate for any fraction of
a share upon exercise hereof.
6
<PAGE>
ARTICLE V
FULLY PAID STOCK; TAXES
The Company covenants and agrees that the shares of stock represented by
each and every certificate representing Common Stock to be delivered on the
exercise of the purchase rights herein provided for shall, at the time of such
delivery, be validly issued and outstanding and be fully paid and nonassessable.
The Company further covenants and agrees that it will pay when due and payable
any and all Federal, State and local taxes which may be payable in connection
with the issuance of this Warrant or any Common Stock or certificates therefor
or the exercise of the rights provided for pursuant to the provisions hereof,
including without limitation any such taxes relating to the exercise of any
purchase, conversion, or other rights contained herein, but specifically
excluding any Federal, State or local income taxes owing by the holders of the
Warrant.
ARTICLE VI
CLOSING OF TRANSFER BOOKS
The right to exercise this Warrant shall not be suspended during any period
that the stock transfer books of the Company may be closed. The Company shall
not be required, however, to deliver certificates representing shares of its
Common Stock upon such exercise while such books are duly closed for any
purpose, but the Company may postpone the delivery of the certificates for such
Common Stock until the opening of such books, and they shall, in such case, be
delivered forthwith upon the opening thereof, or as soon as practicable
thereafter.
ARTICLE VII
REPLACEMENT OF WARRANT
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
such loss, theft or destruction, upon delivery to the Company of indemnity or
security reasonably satisfactory to it and reimbursement to the Company of all
reasonable expenses incidental thereto, or, in the case of any such mutilation,
upon surrender and cancellation of this Warrant, the Company will make and
deliver a new Warrant of like tenor, in lieu of this Warrant.
7
<PAGE>
ARTICLE VIII
RESERVATION OF SHARES
The Company shall at all times reserve and keep available out of its
authorized shares of Common Stock, solely for the purpose of issuance upon the
exercise of this Warrant, such number of shares of Common Stock as shall be
issuable upon the exercise of this Warrant. The Company covenants and agrees
that, upon exercise of this Warrant and payment of the Purchase Price therefor,
all shares of Common Stock issuable upon such exercise shall be duly and validly
issued, fully paid and non-assessable.
ARTICLE IX
RESTRICTIONS ON TRANSFERABILITY
OF WARRANTS AND SHARES; COMPLIANCE WITH LAWS
Section 9.1 In General. This Warrant and the Warrant Shares issued upon
the exercise hereof shall not be transferable except upon the conditions
hereinafter specified, which conditions are intended to insure compliance with
the provisions of the 1933 Act (or any similar Federal statute at the time in
effect) and any applicable State securities laws in respect of the transfer of
this Warrant or any such Warrant Shares.
Section 9.2 Restrictive Legends. Each Warrant shall bear on the face
thereof a legend substantially in the form of the notice endorsed on the first
page of this Warrant. Each certificate for shares of Common Stock initially
issued upon the exercise of any Warrant and each certificate for shares of
Common Stock issued to a subsequent transferee of such certificate shall, unless
otherwise permitted by the provisions of this Section 9.2, bear on the face
thereof a legend reading substantially as follows:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED SOLELY
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "1933 ACT"), OR ANY STATE SECURITIES LAW. SUCH
SHARES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF SUCH REGISTRATION OR AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY THAT SUCH SALE, OFFER, PLEDGE OR HYPOTHECATION IS EXEMPT FROM THE
REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF THE 1933 ACT AND OF
ANY APPLICABLE STATE SECURITIES LAWS. THE SHARES REPRESENTED BY THIS
CERTIFICATE ARE SUBJECT TO THE TERMS AND CONDITIONS OF THAT CERTAIN WARRANT
AGREEMENT DATED JUNE 19, 1997, PURSUANT TO WHICH THEY WERE ISSUED.
In the event that a registration statement covering the Warrant Shares
shall become effective under the 1933 Act and under any applicable State
securities laws or in the event that the Company shall receive an opinion of
counsel satisfactory to it that, in the opinion of such counsel, such legend
8
<PAGE>
is not, or is no longer, necessary or required (including, without limitation,
because of the availability of the exemption afforded by Rule 144 of the General
Rules and Regulations of the Securities and Exchange Commission), the Company
shall, or shall instruct its transfer agents and registrars to, remove such
legend from the certificates evidencing the Warrant Shares or issue new
certificates without such legend in lieu thereof. All fees and expenses of
counsel in connection with the rendition of the opinion provided for in this
Section 9.2 shall be paid by the holder.
Section 9.3 Notice of Proposed Transfer; Registration Not Required. The
holder of this Warrant or of any Warrant Shares, by acceptance thereof, agrees
to give prior written notice to the Company of such holder's intention to
transfer such Warrant or the Warrant Shares relating thereto (or any portion
thereof) describing briefly the manner and circumstances of the proposed
transfer. Promptly after receiving such written notice, the Company shall
present copies thereof to Company counsel and to counsel designated by such
holder, who may be an employee of such holder. If in the opinion of each such
counsel the proposed transfer may be affected without registration or
qualification of such Warrant or the Warrant Shares under any Federal or State
law, the Company, as promptly as practicable, shall notify such holder of such
opinion and of the terms and conditions, if any, to be observed, whereupon such
holder shall be entitled to transfer such Warrant or Warrant Shares, all in
accordance with the terms of the notice delivered to such holder by the Company.
If either of such counsel is unable to render such an opinion (in which case
said counsel shall set forth in writing the basis for the legal conclusions in
this regard), the Company shall promptly notify such holder that the proposed
transfer described in the written notice given pursuant to this subsection may
not be effected without such registration or qualification or without compliance
with the conditions of an exemptive regulation of the Commission and any
applicable State Securities regulatory authority. Such holder shall not be
entitled to effect such transfer until such registration, qualification,
exemption or other compliance has become effective. All fees and expenses of
counsel in connection with the rendition of the opinions provided for in this
subsection shall be paid by the holder requesting the transfer.
ARTICLE X
RIGHT OF FIRST REFUSAL
In the event any holder of Warrants or Warrant Shares ("Offeror") proposes
to sell all or any portion of the Warrants or Warrant Shares owned by the holder
to a person or entity other than an affiliate of the holder, the Offeror shall
first deliver to the Company a written notice ("Notice of Proposed Sale")
specifying the name and address of the proposed purchaser ("Proposed
Purchaser"), the number of Warrants or Warrant Shares proposed to be sold to the
Proposed Purchaser ("Offered Shares"), and all of the terms, including the
price, of the proposed sale and stating that the Company has the right to
purchase the Offered Shares in accordance with the following terms:
(i) During the 30-day period following receipt of the Notice of
Proposed Sale ("Exercise Period"), the Company shall have the right to
purchase all (but not less than all) of the Offered Shares, at the price
and on the terms specified in the Notice of Proposed Sale. The company
shall give written notice of its election to the Offeror during the
Exercise Period.
9
<PAGE>
(ii) If the Offered Shares have not been purchased by the Company as
specified herein, the Offeror shall have the right, but only for a period
of six (6) months after the expiration of the Exercise Period, to sell the
Offered Shares to the Proposed Purchaser at the price specified in the
Notice of Proposed Sale.
(iii) Warrants or Warrant Shares sold to a Proposed Purchaser as
provided herein shall continue to be subject to the provisions of this
Warrant, and the Company shall not be obligated to issue a new Warrant
therefor in the name of such Proposed Purchaser unless that Proposed
Purchaser agrees in writing to become bound by the terms hereof.
(iv) For purposes of this Article X an affiliate shall mean each and
every corporation, partnership, person, or other entity controlling,
controlled by, or under common control with, the holder of any Warrant or
Warrant Shares.
ARTICLE XI
MISCELLANEOUS
Section 11.1 Warrant Holder As Owner. Prior to due presentment for
registration of transfer of this Warrant, the Company may deem and treat the
Warrant Holder as the absolute owner of this Warrant (notwithstanding any
notation of ownership or other writing hereon) for the purpose of any exercise
hereof and for all other purposes, and the Company shall not be affected by any
notice to the contrary.
Section 11.2 Warrant Holder Not Shareholder. This Warrant does not
confer upon the holder hereof any right to vote or to consent or to receive
notice as a shareholder of the Company, as such, in respect of any matters
whatsoever, or any other rights or liabilities as a shareholder, prior to the
exercise hereof as hereinbefore provided.
Section 11.3 Warrant Holder Representation. Notwithstanding anything to
the contrary herein, the Warrant Holder represents and warrants that (a) it
acknowledges that the Warrant and the Warrant Shares have not been registered
under the 1933 Act or any state securities laws, (b) the Warrants and the
Warrant Shares (unless such Warrants and/or Warrant Shares, as the case may be,
are registered under the 1933 Act and applicable state securities laws) are
being and will be issued pursuant to an exemption from registration for
nonpublic offerings or offerings to one or more accredited investors, (c) that
the Warrant Holder is acquiring the Warrant and will acquire the Warrant Shares
(unless such Warrants and/or Warrant Shares are registered under the 1933 Act
and applicable state securities laws) for his own account and not with a view
toward their distribution, (d) the Warrant Holder is experienced in making
investments of this nature and has the necessary sophistication to be able to
evaluate the merits of this investment and (e) the Warrant Holder will not sell,
offer for sale, pledge or otherwise hypothecate the Warrant or the Warrant
Shares (unless such shares are registered under the 1933 Act and applicable
state securities laws) in the absence of an opinion of counsel reasonably
acceptable to the Company, that the sale, offer for sale, pledge or
10
<PAGE>
hypothecation of the Warrant and Warrant Shares is exempt from the registration
and prospectus delivery requirements of the 1933 Act and applicable state
securities laws.
Section 11.4 Partial Exercise and Partial Assignment.
(a) If this Warrant is exercised in part only, the holder shall upon
surrender hereof be entitled to receive a new Warrant, registered in the
name of the holder or its nominee. This Warrant may be assigned either in
whole or in part by surrender of this Warrant at the principal office of
the Company in Denver, Colorado (with the assignment or, as the case may
be, partial assignment form at the end hereof duly executed). If this
Warrant is assigned, a new Warrant shall be issued to the holder hereof,
registered in the name of such holder or its nominee. The assignee shall
also be entitled to receive a new Warrant, registered in the name of such
assignee or its nominee.
(b) Subject to the provisions of paragraph (a) of this Section 11.4
this Warrant and the Warrant Shares may not be sold or otherwise disposed
of except as follows:
(i) to a person who, in the opinion of counsel reasonably
satisfactory to the Company, is a person to whom this Warrant or the
Warrant Shares may legally be transferred without registration and without
the delivery of a current prospectus under the 1933 Act with respect
thereto and then only against receipt of an agreement of such person to
comply with the provisions of this Warrant with respect to any resale or
other disposition of such securities; or
(ii) to any person upon delivery of a prospectus then meeting the
requirements of the 1933 Act relating to such securities (as to which a
registration statement under the 1933 Act shall then be in effect) and the
offering thereof for such sale or disposition.
Section 11.5 Successors. All the covenants, agreements, representations
and warranties contained in this Warrant shall bind the parties hereto and their
respective heirs, executors, administrators, distributees, successors and
assigns.
Section 11.6 Severability. Should any part of this Warrant for any
reason be declared invalid, such decision shall not affect the validity of any
remaining portion, which remaining portion shall remain in force and effect as
if this Warrant had been executed with the invalid portion thereof eliminated,
and it is hereby declared the intention of the parties hereto that they would
have executed and accepted the remaining portion of this Warrant without
including therein any such part, parts or portion which may, for any reason, be
hereafter declared invalid.
Section 11.7 Notices. Any notices required to be given pursuant to the
terms hereof shall be given (unless otherwise herein expressly provided) in
writing and either (i) personally delivered, (ii) sent by certified, return
receipt requested, (iii) sent by prepaid overnight courier, or (iv) transmitted
by telecopier or similar device, with confirmation of receipt. Notices shall be
addressed, if to holder of Warrants or Warrant Shares, to:
11
<PAGE>
Peter G. Martin
48 Ogden Place
Dobbs Ferry, New York 10522
or to such other address of such holder appearing in the register maintained by
the Company, and if to the Company, to:
KFx Inc.
1999 Broadway, Suite 3200
Denver, CO 80202
Attn: Chief Financial Officer
For purposes of this Warrant, any notice sent by mail shall be demand given
on the date deposited in the mail.
Section 11.8 Headings. The Article headings in this Warrant are inserted
for purposes of convenience only and shall have no substantive effect.
Section 11.9 Law Governing. This Warrant is delivered in the State of
Colorado and shall be construed and enforced in accordance with, and governed
by, the laws of the State of Colorado.
Section 11.10 Amendments and Modifications. This Warrant may be amended or
modified only with the prior written consent of the holder hereof.
WITNESS the seal of the Company and the signatures of its duly authorized
officers.
KFx Inc.
(SEAL)
--------------------------------
Theodore Venners, Chairman & CEO
--------------------------------
R. G. Swenson, Secretary
12
<PAGE>
KFx INC.
SUBSCRIPTION FORM
(To be executed by the Registered Holder
in order to Exercise the Warrant)
The undersigned hereby irrevocably elects to exercise the right to purchase
__________ shares (the "Shares") of common stock, $.001 par value (the "Common
Stock") of KFx Inc. (the "Company") covered by the Common Stock Purchase Warrant
dated ____________, ____ (the "Warrant") and herewith makes payment of the
purchase price of such Shares in accordance with the terms of the Warrant. The
undersigned requests a certificate for such Shares to be registered in the name
of _____________________, whose address is ____________________________________
________________. If said number of Shares is less than all of the Shares
issuable under the Warrant, the undersigned further requests that a new warrant
representing the right to acquire the remaining balance of the Shares to be
registered in the name __________________________________, whose address is
______________________________________________________.
The undersigned hereby represents and warrants that:
(a) the Shares have not been registered under the Securities Act of
1933, as amended (the "Act") or any state securities laws,
(b) the Shares (unless such Shares are registered under the Act and
applicable state securities laws) are being and will be issued pursuant to
an exemption from registration for nonpublic offerings or offerings to one
or more accredited investors,
(c) he is acquiring the Shares (unless such Shares are registered
under the Act and applicable state securities laws) for his own account and
not with a view toward their distribution,
(d) he is experienced in making investments of this nature and has the
necessary sophistication to be able to evaluate the merits of this
investment, and
(e) he will not sell, offer for sale, pledge or otherwise hypothecate
the Shares (unless such Shares are registered under the Act and applicable
state securities laws) in the absence of an opinion of counsel reasonably
acceptable to the Company, that the sale, offer for sale, pledge or
hypothecation of the Shares is exempt from the registration and prospectus
delivery requirements of the Act and applicable state securities laws.
1
<PAGE>
(f) the Shares are being acquired in accordance with and subject to
the terms, provisions and conditions of the Warrant, to all of which he
hereby expressly assent.
Very truly yours,
____________________________
Print Name: ____________________________
Address: ____________________________
____________________________
Receipt of the above is hereby acknowledged:
KFx Inc.
By: ________________________
Title: ________________________
Date: ________________________
2
<PAGE>
ASSIGNMENT
----------
FOR VALUE RECEIVED ______________________________________ hereby sells,
assigns and transfers unto _______________________________________ the within
Warrant and all rights evidenced thereby and does irrevocably constitute and
appoint, _______________________________________ as attorney-in-fact, to
transfer the said Warrant on the books of the within named Company.
---------------------------------------
Dated:
---------------------------
PARTIAL ASSIGNMENT
------------------
FOR VALUE RECEIVED ________________________________________ hereby sells,
assigns and transfers unto ________________________________________ that portion
of the within Warrant and the rights evidenced thereby which will on the date
hereof entitle the holder to purchase ____________ shares of Common Stock of
_______________________________, irrevocably constitute and appoint
_____________________________, attorney-in-fact, to transfer that part of the
said Warrant on the books of the within named Company.
---------------------------------------
Dated:
---------------------------
<PAGE>
AMENDMENT NO. 2 TO COMMON STOCK PURCHASE WARRANT
This Amendment No. 2 to Common Stock Purchase Warrant (this
"Amendment"), is made by and between KFx Inc., a Delaware corporation (the
"Company") and Peter G. Martin, an individual ("Warrant Holder"), as of this 3rd
day of August 1998. The Company and Warrant Holder are sometimes collectively
referred to herein as the "Parties."
WHEREAS, the Parties entered into that certain Common Stock Purchase
Warrant dated June 19, 1997 in the amount of 50,000 shares (the "Warrant
Agreement");
WHEREAS, the Company amended the Warrant Agreement on June 19, 1997 to
extend the expiration of the Warrant Agreement to August 2, 1998;
WHEREAS, the Parties now desire to amend the Warrant Agreement pursuant to the
terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth in the Warrant Agreement and as hereinafter set forth, and other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Parties agree as follows:
1. The introduction paragraph of the Warrant Agreement is hereby
amended in its entirety to read as follows:
THIS IS TO CERTIFY that, for value received and subject to the
provisions hereinafter set forth, Peter G. Martin, an individual
with his principal place of business at 48 Ogden Place, Dobbs
Ferry, New York 10522 (the "Warrant Holder") (or his assigns),
is entitled to purchase from KFx Inc., a Delaware corporation
("Company") 50,000 shares (the "Warrant Shares") of the
Company's $.001 par value common stock (the "Common Stock" or
"Shares"), for an aggregate purchase price equal to $4.375
multiplied by fifty thousand (50,000) shares ("Aggregate
Original Warrant Price"), all on and subject to the terms,
provisions and conditions hereinafter set forth. This Warrant
may be exercised as to all or part (comprising a whole number)
of the Shares represented hereby at any time or times before
August 2, 2001 ("Expiration Date"). This Warrant shall be void
and of no effect, and all rights, restrictions, and obligations
hereunder shall cease to the extent not exercised prior to the
Expiration Date.
2. Section 1.1 of the Warrant Agreement is hereby amended in their
entirety to read as follows:
Section 1.1 Duration. Subject to the provisions of Section 1.2
and 1.4 hereof, this Warrant may be exercised at any time on or
after 5:00 p.m., Denver, Colorado time, on June 19, 1997 and at
or before 5:00 p.m., Denver Colorado time on August 2, 2001 (or,
if such day is not a business day, at or before 5:00 p.m.,
Denver, Colorado time, on the next following business day). If
this Warrant is not exercised
<PAGE>
on or before the Expiration Date, it shall become void, and all
rights hereunder shall thereupon cease.
2. All capitalized terms used and not otherwise defined herein
shall have the same meanings as set forth in the Warrant
Agreement.
3. As expressly modified by the terms hereof, the terms and
provisions of the Warrant Agreement shall remain in full force
and effect as originally written.
4. Signatures on this Amendment may be communicated by facsimile
transmission and shall be binding upon the Parties transmitting
the same by facsimile transmission. If executed in counterparts,
this Amendment will be as effective as if simultaneously
executed.
2
<PAGE>
WITNESS, the seal of the Company and the signatures of its duly
authorized officers.
KFx Inc.
---------------------------------------------------
Seth L. Patterson
Executive Vice President & Chief Executive Officer
---------------------------------------------------
Rudolph G. Swenson, Secretary
The undersigned hereby consents to this Amendment as required by Section
11.10 of the Warrant Agreement.
--------------------------------------------------
Peter G. Martin, an individual
3
<PAGE>
EXHIBIT 4.6
THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFIED UNDER
ANY APPLICABLE STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED, HYPOTHECATED OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION AND
QUALIFICATION WITHOUT AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY STATING
THAT SUCH REGISTRATION AND QUALIFICATION IS NOT REQUIRED.
25,000 SHARES
COMMON STOCK PURCHASE WARRANT
OF KFx INC.
August 2, 1995
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
THIS IS TO CERTIFY that, for value received and subject to the provisions
hereinafter set forth, Peter G. Martin, an individual with his principal place
of business at 48 Ogden Place, Dobbs Ferry, New York 10522 (the "Warrant
Holder") (or his assigns), is entitled to purchase from KFx Inc, a Delaware
corporation ("Company")25,000 shares (the "Warrant Shares") of the Company's
$.001 par value common stock (the "Common Stock" or "Shares"), for an aggregate
purchase price equal to $4.00 multiplied by twenty five thousand (25,000) shares
("Aggregate Original Warrant Price"), all on and subject to the terms,
provisions and conditions hereinafter set forth. This Warrant may be exercised
as to all or part (comprising a whole number) of the Shares represented hereby
at any time or times before August 2, 1998 ("Expiration Date"). This Warrant
shall be void and of no effect, and all rights, restrictions, and obligations
hereunder shall cease to the extent not exercised prior to the Expiration Date.
ARTICLE I
EXERCISE OF WARRANT
Section 1.1 Duration. Subject to the provisions of Sections 1.2 and 1.4
hereof, this Warrant may be exercised at any time on or after 9:00 a.m., Denver,
Colorado time, on August 2, 1995 and at or before 5:00 p.m., Denver, Colorado
time, on August 2, 1998 (or, if such day is not a business day, at or before
5:00 p.m., Denver, Colorado time, on the next following business day). If this
Warrant is not exercised on or before the Expiration Date, it shall become void,
and all rights hereunder shall thereupon cease.
Section 1.2 Exercise of Warrant. Subject to the conditions contained
herein, this Warrant may be exercised in whole or in part at any time or times
before the Expiration Date by
<PAGE>
the surrender of this Warrant or any duly authorized replacements hereto (with a
duly executed subscription agreement in the form attached hereto) at the
principal office of the Company in Denver, Colorado, and upon payment to the
Company of the Aggregate Original Warrant Price (or, if exercised in part, upon
payment to the Company of the applicable proportionate part of the Aggregate
Original Warrant Price) for each Share so purchased in lawful money of the
United States, or by check, or postal or express money order payable in United
States dollars to the order of the Company or by funds wired to an account as
specified by the Company, and upon compliance with and subject to the conditions
set forth herein.
Upon receipt of this Warrant with the form of exercise duly executed and
accompanied by payment of the Aggregate Original Warrant Price for the shares of
Common Stock for which this Warrant is then being exercised, the Company will
cause to be issued certificates for the total number of whole Warrant Shares (as
provided in Article V hereof) for which this Warrant is being exercised in such
denominations as are required for delivery to the Warrant Holder, and the
Company shall thereupon deliver such certificates to the Warrant Holder or his
assignee.
In case the Warrant Holder shall exercise this Warrant with respect to less
than all of the shares of Common Stock that may be purchased under this Warrant,
the Company will execute a new Warrant substantially in the form of this Warrant
for the balance of the shares of Common Stock that may be purchased upon
exercise of this Warrant and deliver such new Warrant to the Warrant Holder.
The Company shall pay any and all transfer taxes payable in connection with
the issue of this Warrant or the issue of any Warrant Shares upon exercise of
this Warrant. The Company shall not, however, be required to pay any tax which
may be payable in respect of any transfer involved in the issuance or delivery
of this Warrant or the Warrant Shares in a name other than that of the Warrant
Holder at the time of surrender, and until the payment of such tax the Company
shall not be required to issue such Warrant Shares.
Section 1.3 Warrant Holder Representation and Certificate Legend.
Unless the issuance of the Warrant Shares shall have been registered under the
Securities Act of 1933, as amended (the "1933 Act"), as a condition of its
delivery of certificates for the Warrant Shares or upon the split-up,
combination, exchange, transfer or loan of the Warrant, the Company may require
the Warrant Holder (including the transferee of the Warrant in whose name the
Warrant Shares are to be registered) to deliver to the Company, in writing,
representations regarding the Warrant Holder's sophistication, investment
intent, acquisition for his own account and such other matters as are reasonable
and customary for purchasers of securities in an unregistered private offering.
The Company may place conspicuously upon each new Warrant and upon each
certificate representing the Warrant Shares a legend substantially in the
following form, the terms of which are agreed to by the Warrant Holder
(including each transferee):
2
<PAGE>
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED SOLELY
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "1933 ACT"), OR ANY STATE SECURITIES LAW. SUCH
SHARES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF SUCH REGISTRATION OR AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY THAT SUCH SALE, OFFER, PLEDGE OR HYPOTHECATION IS EXEMPT FROM THE
REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF THE 1933 ACT AND OF
ANY APPLICABLE STATE SECURITIES LAWS.
The Company need not register a transfer of this Warrant or the Warrant
Shares unless the conditions specified in such legend are satisfied. Subject to
the transfer restrictions set forth in this Article I and in Articles IX and X
herein, this Warrant is transferable, in whole or in part, on the books of the
Company, upon surrender of this Warrant to the Company, together with a written
assignment duly executed by the Warrant Holder.
Section 1.4 Vesting. This Warrant shall vest and be exercisable
effective August 3, 1995.
Section 1.5 Exercise Price. The initial exercise price shall be $4.00
per share (the "Exercise Price").
ARTICLE II
ANTIDILUTION
Section 2.1 Subdivisions or Combinations. In case the Company shall at
any time after the date of this Warrant (i) subdivide the outstanding Shares or
(ii) combine the outstanding Shares into a smaller number of Shares, the
Exercise Price and the number and kind of Shares receivable upon exercise, in
effect at the time of the effective date of such subdivision or combination,
shall be proportionately adjusted so that the holder of the Warrant exercised
after such time shall be entitled to receive the same percentage and kind of
shares which, if the Warrant had been exercised immediately prior to such date,
the holder would have owned upon such exercise and been entitled to receive by
virtue of such subdivision or combination. Such adjustment shall be made
successively whenever any event listed above shall occur and shall be
retroactive to the record date, if any, for such event. Any adjustment made
pursuant to this Section 2.1 shall become effective immediately upon the
effective date of such event retroactive to the record date, if any, for such
event. All calculations made under this Section 2.1 shall be made to the nearest
cent or to the nearest Share, as the case may be.
Section 2.2 Reorganization, Reclassification or Consolidation. In case
of any capital reorganization of the Company, or of any reclassification of
Shares (other than a change in par value, or from par value to no par value, or
from no par value to par value, or as a result of subdivision or combination),
or in case of the consolidation of the Company with or the merger of the Company
into any other person (other than a consolidation or merger in which the Company
is the continuing
3
<PAGE>
corporation) or of the sale of the properties and assets of the Company as, or
substantially as, an entirety to any other corporation, the Warrant shall after
such reorganization, reclassification, consolidation, merger or sale be
exercisable, upon the terms and conditions specified in this Agreement, for the
number of shares of stock or other securities, cash or other property to which a
holder of the number of Shares purchasable (at the time of such reorganization,
reclassification, consolidation, merger or sale) upon exercise of the Warrant
would have been entitled upon such reorganization, reclassification,
consolidation, merger or sale; and in any such case, if necessary, the
provisions set forth in this Section 2.2 with respect to the rights and
interests thereafter of the holders of the Warrant shall be appropriately
adjusted so as to be applicable, as nearly as may reasonably be, to any shares
of stock or other securities, cash or other property thereafter deliverable on
the exercise of the Warrant. The subdivision or combination of Shares at any
time outstanding into a greater or lesser number of Shares shall not be deemed
to be a reclassification of the Common Stock for the purposes of this Section
2.2. The Company shall not effect any such consolidation, merger or sale unless
prior to or simultaneously with the consummation thereof the successor
corporation (if other than the Company) resulting from such consolidation or
merger or the person purchasing such assets or other appropriate corporation or
entity shall assume, by written instrument executed and delivered to the
Company's and successor person's transfer agent, if any, the obligation to
deliver to the holders of the Warrant such shares of stock, other securities,
cash or other property as, in accordance with the foregoing provisions, such
holders may be entitled to purchase and the other obligations of the Company
under this Warrant.
Section 2.3 Notices to the Warrant Holder. Upon any adjustment of the
Exercise Price or of the number or kind of Shares for which the outstanding
Warrant may be exercised pursuant to Article II, the Company, within 20 calendar
days thereafter, shall cause to be given to all of the holders of the Warrant,
at such holders' addresses appearing on the register or other records maintained
for such purpose, an officer's certificate showing the adjusted Exercise Price
and setting forth in reasonable detail the method of calculation and the facts
upon which such calculations are based and setting forth the number of Shares
purchasable upon exercise of the Warrant after such adjustment. Where
appropriate, such notice may be given in advance and included as a part of the
notice required to be mailed under the other provisions of this Article II.
In case:
(a) of any consolidation or merger to which the Company is a party and
for which approval of any stockholders of the Company is required, or of
the conveyance or transfer of the properties and assets of the Company as,
or substantially as, an entirety, or of any capital reorganization or any
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, or as a
result of a subdivision or combination); or
(b) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company;
then the Company shall cause to be mailed to the Warrant Holder at his address
appearing on the register or other records maintained by the Company for such
purpose, at least 20 calendar days (or
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<PAGE>
10 calendar days in any case specified in clauses (a) or (b) above) prior to the
applicable record or effective date hereinafter specified a written notice
stating the date on which any such consolidation, merger, conveyance, transfer,
reorganization, reclassification, dissolution, liquidation or winding up is
expected and that holders of record of shares of Common Stock shall be entitled
to exchange such shares for securities, cash or other property, if any,
deliverable upon such consolidation, merger, conveyance, transfer,
reorganization, reclassification, dissolution, liquidation or winding up. The
failure to give the notice required by this Section 2.3 or any defect therein
shall not affect the legality or validity of any consolidation, merger,
conveyance, transfer, reorganization, dissolution, liquidation or winding up or
the vote upon any action.
ARTICLE III
MERGERS, CONSOLIDATIONS, SALES AND
OTHER REORGANIZATIONS
In the case of any consolidation or merger of the Company with another
entity, or the sale or all or substantially all or its assets to another entity,
or any reorganization or reclassification of the Common Stock or other equity
securities of the Company, then, as a condition of such consolidation, merger,
sale, reorganization or reclassification, lawful and adequate provision shall be
made whereby the holder of this Warrant shall thereafter have the right to
receive upon the basis and upon the terms and conditions specified herein and in
lieu of the shares of Common Stock immediately theretofore purchasable
hereunder, such shares of stock, securities or assets as may (by virtue of such
consolidation, merger, sale, reorganization or reclassification) be issued or
payable with respect to or in exchange for a number of outstanding shares of
Common Stock equal to the number of shares of Common Stock immediately
theretofore so purchasable hereunder had such consolidation, merger, sale,
reorganization or reclassification not taken place, and in any such case
appropriate provisions shall be made with respect to the rights and interests of
the holder of this Warrant to the end that the provisions hereof shall
thereafter be applicable, as nearly as may be, in relation to any shares of
stock, securities or assets thereafter deliverable upon exercise of this
Warrant. The Company shall not effect any such consolidation, merger, sale or
reorganization, unless prior to or simultaneously with the consummation thereof,
the successor entity (if other than the Company) resulting from such
consolidation, merger or reorganization or the entity purchasing such assets
shall assume by written instrument executed and mailed or delivered to the
holder of this Warrant, the obligations to deliver to such holder such shares of
stock, securities or assets as, in accordance with the foregoing provisions,
such holder may be entitled to receive. Notwithstanding anything herein to the
contrary, in the event that any shareholders of the Company have an opportunity
to sell or exchange their shares of Common Stock pursuant to a consolidation,
merger, sale or reorganization or otherwise, each of the holders of the Warrant
may, if they so decide in their sole discretion, immediately exercise the
Warrant in whole or in part and, at their option sell or exchange any or all of
the Common Stock thereafter owned by such holders upon terms and conditions no
less favorable than those upon which the other shareholders are selling or
exchanging their shares of Common Stock.
ARTICLE IV
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FRACTIONAL SHARES
Anything contained herein to the contrary notwithstanding, the Company
shall not be required to issue any fraction of a share in connection with the
exercise of this Warrant, and in any case where the Warrant Holder would, except
for the provisions of this Article IV, be entitled under the terms of this
Warrant to receive a fraction of a share upon the exercise of this Warrant, the
Company shall upon the exercise of this Warrant and receipt of the Exercise
Price, issue the largest number of whole shares purchasable upon exercise of
this Warrant. The Company shall not be required to make any cash or other
adjustment in respect of such fraction of a share to which the Warrant Holder
would otherwise be entitled. The Warrant Holder, by the acceptance of this
Warrant, expressly waives his right to receive a certificate for any fraction of
a share upon exercise hereof.
ARTICLE V
FULLY PAID STOCK; TAXES
The Company covenants and agrees that the shares of stock represented by
each and every certificate representing Common Stock to be delivered on the
exercise of the purchase rights herein provided for shall, at the time of such
delivery, be validly issued and outstanding and be fully paid and nonassessable.
The Company further covenants and agrees that it will pay when due and payable
any and all Federal, State and local taxes which may be payable in connection
with the issuance of this Warrant or any Common Stock or certificates therefor
or the exercise of the rights provided for pursuant to the provisions hereof,
including without limitation any such taxes relating to the exercise of any
purchase, conversion, or other rights contained herein, but specifically
excluding any Federal, State or local income taxes owing by the holders of the
Warrant.
ARTICLE VI
CLOSING OF TRANSFER BOOKS
The right to exercise this Warrant shall not be suspended during any period
that the stock transfer books of the Company may be closed. The Company shall
not be required, however, to deliver certificates representing shares of its
Common Stock upon such exercise while such books are duly closed for any
purpose, but the Company may postpone the delivery of the certificates for such
Common Stock until the opening of such books, and they shall, in such case, be
delivered forthwith upon the opening thereof, or as soon as practicable
thereafter.
6
<PAGE>
ARTICLE VII
REPLACEMENT OF WARRANT
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
such loss, theft or destruction, upon delivery to the Company of indemnity or
security reasonably satisfactory to it and reimbursement to the Company of all
reasonable expenses incidental thereto, or, in the case of any such mutilation,
upon surrender and cancellation of this Warrant, the Company will make and
deliver a new Warrant of like tenor, in lieu of this Warrant.
ARTICLE VIII
RESERVATION OF SHARES
The Company shall at all times reserve and keep available out of its
authorized shares of Common Stock, solely for the purpose of issuance upon the
exercise of this Warrant, such number of shares of Common Stock as shall be
issuable upon the exercise of this Warrant. The Company covenants and agrees
that, upon exercise of this Warrant and payment of the Purchase Price therefor,
all shares of Common Stock issuable upon such exercise shall be duly and validly
issued, fully paid and non-assessable.
ARTICLE IX
RESTRICTIONS ON TRANSFERABILITY
OF WARRANTS AND SHARES; COMPLIANCE WITH LAWS
Section 9.1 In General. This Warrant and the Warrant Shares issued upon
the exercise hereof shall not be transferable except upon the conditions
hereinafter specified, which conditions are intended to insure compliance with
the provisions of the 1933 Act (or any similar Federal statute at the time in
effect) and any applicable State securities laws in respect of the transfer of
this Warrant or any such Warrant Shares.
Section 9.2 Restrictive Legends. Each Warrant shall bear on the face
thereof a legend substantially in the form of the notice endorsed on the first
page of this Warrant. Each certificate for shares of Common Stock initially
issued upon the exercise of any Warrant and each certificate for shares of
Common Stock issued to a subsequent transferee of such certificate shall, unless
otherwise permitted by the provisions of this Section 9.2, bear on the face
thereof a legend reading substantially as follows:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED SOLELY
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "1933 ACT"), OR ANY STATE SECURITIES LAW. SUCH
SHARES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF SUCH
7
<PAGE>
REGISTRATION OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH
SALE, OFFER, PLEDGE OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND
PROSPECTUS DELIVERY REQUIREMENTS OF THE 1933 ACT AND OF ANY APPLICABLE
STATE SECURITIES LAWS. THE SHARES REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO THE TERMS AND CONDITIONS OF THAT CERTAIN WARRANT AGREEMENT DATED
AUGUST 2, 1995, PURSUANT TO WHICH THEY WERE ISSUED.
In the event that a registration statement covering the Warrant Shares
shall become effective under the 1933 Act and under any applicable State
securities laws or in the event that the Company shall receive an opinion
of counsel satisfactory to it that, in the opinion of such counsel, such
legend is not, or is no longer, necessary or required (including, without
limitation, because of the availability of the exemption afforded by Rule
144 of the General Rules and Regulations of the Securities and Exchange
Commission), the Company shall, or shall instruct its transfer agents and
registrars to, remove such legend from the certificates evidencing the
Warrant Shares or issue new certificates without such legend in lieu
thereof. All fees and expenses of counsel in connection with the rendition
of the opinion provided for in this Section 9.2 shall be paid by the
holder.
Section 9.3 Notice of Proposed Transfer; Registration Not Required. The
holder of this Warrant or of any Warrant Shares, by acceptance thereof, agrees
to give prior written notice to the Company of such holder's intention to
transfer such Warrant or the Warrant Shares relating thereto (or any portion
thereof) describing briefly the manner and circumstances of the proposed
transfer. Promptly after receiving such written notice, the Company shall
present copies thereof to Company counsel and to counsel designated by such
holder, who may be an employee of such holder. If in the opinion of each such
counsel the proposed transfer may be affected without registration or
qualification of such Warrant or the Warrant Shares under any Federal or State
law, the Company, as promptly as practicable, shall notify such holder of such
opinion and of the terms and conditions, if any, to be observed, whereupon such
holder shall be entitled to transfer such Warrant or Warrant Shares, all in
accordance with the terms of the notice delivered to such holder by the Company.
If either of such counsel is unable to render such an opinion (in which case
said counsel shall set forth in writing the basis for the legal conclusions in
this regard), the Company shall promptly notify such holder that the proposed
transfer described in the written notice given pursuant to this subsection may
not be effected without such registration or qualification or without compliance
with the conditions of an exemptive regulation of the Commission and any
applicable State Securities regulatory authority. Such holder shall not be
entitled to effect such transfer until such registration, qualification,
exemption or other compliance has become effective. All fees and expenses of
counsel in connection with the rendition of the opinions provided for in this
subsection shall be paid by the holder requesting the transfer.
ARTICLE X
RIGHT OF FIRST REFUSAL
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<PAGE>
In the event any holder of Warrants or Warrant Shares ("Offeror") proposes
to sell all or any portion of the Warrants or Warrant Shares owned by the holder
to a person or entity other than an affiliate of the holder, the Offeror shall
first deliver to the Company a written notice ("Notice of Proposed Sale")
specifying the name and address of the proposed purchaser ("Proposed
Purchaser"), the number of Warrants or Warrant Shares proposed to be sold to the
Proposed Purchaser ("Offered Shares"), and all of the terms, including the
price, of the proposed sale and stating that the Company has the right to
purchase the Offered Shares in accordance with the following terms:
(i) During the 30-day period following receipt of the Notice of
Proposed Sale ("Exercise Period"), the Company shall have the right to
purchase all (but not less than all) of the Offered Shares, at the price
and on the terms specified in the Notice of Proposed Sale. The company
shall give written notice of its election to the Offeror during the
Exercise Period.
(ii) If the Offered Shares have not been purchased by the Company as
specified herein, the Offeror shall have the right, but only for a period
of six (6) months after the expiration of the Exercise Period, to sell the
Offered Shares to the Proposed Purchaser at the price specified in the
Notice of Proposed Sale.
(iii) Warrants or Warrant Shares sold to a Proposed Purchaser as
provided herein shall continue to be subject to the provisions of this
Warrant, and the Company shall not be obligated to issue a new Warrant
therefor in the name of such Proposed Purchaser unless that Proposed
Purchaser agrees in writing to become bound by the terms hereof.
(iv) For purposes of this Article X an affiliate shall mean each and
every corporation, partnership, person, or other entity controlling,
controlled by, or under common control with, the holder of any Warrant or
Warrant Shares.
ARTICLE XI
MISCELLANEOUS
Section 11.1 Warrant Holder As Owner. Prior to due presentment for
registration of transfer of this Warrant, the Company may deem and treat the
Warrant Holder as the absolute owner of this Warrant (notwithstanding any
notation of ownership or other writing hereon) for the purpose of any exercise
hereof and for all other purposes, and the Company shall not be affected by any
notice to the contrary.
Section 11.2 Warrant Holder Not Shareholder. This Warrant does not
confer upon the holder hereof any right to vote or to consent or to receive
notice as a shareholder of the Company, as such, in respect of any matters
whatsoever, or any other rights or liabilities as a shareholder, prior to the
exercise hereof as hereinbefore provided.
Section 11.3 Warrant Holder Representation. Notwithstanding anything to
the contrary herein, the Warrant Holder represents and warrants that (a) it
acknowledges that the Warrant and the
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<PAGE>
Warrant Shares have not been registered under the 1933 Act or any state
securities laws, (b) the Warrants and the Warrant Shares (unless such Warrants
and/or Warrant Shares, as the case may be, are registered under the 1933 Act and
applicable state securities laws) are being and will be issued pursuant to an
exemption from registration for nonpublic offerings or offerings to one or more
accredited investors, (c) that the Warrant Holder is acquiring the Warrant and
will acquire the Warrant Shares (unless such Warrants and/or Warrant Shares are
registered under the 1933 Act and applicable state securities laws) for his own
account and not with a view toward their distribution, (d) the Warrant Holder is
experienced in making investments of this nature and has the necessary
sophistication to be able to evaluate the merits of this investment and (e) the
Warrant Holder will not sell, offer for sale, pledge or otherwise hypothecate
the Warrant or the Warrant Shares (unless such shares are registered under the
1933 Act and applicable state securities laws) in the absence of an opinion of
counsel reasonably acceptable to the Company, that the sale, offer for sale,
pledge or hypothecation of the Warrant and Warrant Shares is exempt from the
registration and prospectus delivery requirements of the 1933 Act and applicable
state securities laws.
Section 11.4 Partial Exercise and Partial Assignment.
(a) If this Warrant is exercised in part only, the holder shall upon
surrender hereof be entitled to receive a new Warrant, registered in the
name of the holder or its nominee. This Warrant may be assigned either in
whole or in part by surrender of this Warrant at the principal office of
the Company in Denver, Colorado (with the assignment or, as the case may
be, partial assignment form at the end hereof duly executed). If this
Warrant is assigned, a new Warrant shall be issued to the holder hereof,
registered in the name of such holder or its nominee. The assignee shall
also be entitled to receive a new Warrant, registered in the name of such
assignee or its nominee.
(b) Subject to the provisions of paragraph (a) of this Section 11.4
this Warrant and the Warrant Shares may not be sold or otherwise disposed
of except as follows:
(i) to a person who, in the opinion of counsel reasonably
satisfactory to the Company, is a person to whom this Warrant or the
Warrant Shares may legally be transferred without registration and without
the delivery of a current prospectus under the 1933 Act with respect
thereto and then only against receipt of an agreement of such person to
comply with the provisions of this Warrant with respect to any resale or
other disposition of such securities; or
(ii) to any person upon delivery of a prospectus then meeting the
requirements of the 1933 Act relating to such securities (as to which a
registration statement under the 1933 Act shall then be in effect) and the
offering thereof for such sale or disposition.
Section 11.5 Successors. All the covenants, agreements, representations
and warranties contained in this Warrant shall bind the parties hereto and their
respective heirs, executors, administrators, distributees, successors and
assigns.
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<PAGE>
Section 11.6 Severability. Should any part of this Warrant for any
reason be declared invalid, such decision shall not affect the validity of any
remaining portion, which remaining portion shall remain in force and effect as
if this Warrant had been executed with the invalid portion thereof eliminated,
and it is hereby declared the intention of the parties hereto that they would
have executed and accepted the remaining portion of this Warrant without
including therein any such part, parts or portion which may, for any reason, be
hereafter declared invalid.
Section 11.7 Notices. Any notices required to be given pursuant to the
terms hereof shall be given (unless otherwise herein expressly provided) in
writing and either (i) personally delivered, (ii) sent by certified, return
receipt requested, (iii) sent by prepaid overnight courier, or (iv) transmitted
by telecopier or similar device, with confirmation of receipt. Notices shall be
addressed, if to holder of Warrants or Warrant Shares, to:
Peter G. Martin
48 Ogden Place
Dobbs Ferry, New York 10522
or to such other address of such holder appearing in the register maintained by
the Company, and if to the Company, to:
KFx Inc.
1999 Broadway, Suite 3200
Denver, CO 80202
Attn: Chief Financial Officer
For purposes of this Warrant, any notice sent by mail shall be demand given
on the date deposited in the mail.
Section 11.8 Headings. The Article headings in this Warrant are inserted
for purposes of convenience only and shall have no substantive effect.
Section 11.9 Law Governing. This Warrant is delivered in the State of
Colorado and shall be construed and enforced in accordance with, and governed
by, the laws of the State of Colorado.
Section 11.10 Amendments and Modifications. This Warrant may be amended or
modified only with the prior written consent of the holder hereof.
WITNESS the seal of the Company and the signatures of its duly authorized
officers.
KFx Inc.
(SEAL)
__________________________________________________
R. G. Swenson, Secretary & Chief Financial Officer
11
<PAGE>
[INTENTIONALLY LEFT BLANK]
12
<PAGE>
KFx INC.
SUBSCRIPTION FORM
(To be executed by the Registered Holder
in order to Exercise the Warrant)
The undersigned hereby irrevocably elects to exercise the right to purchase
__________ shares (the "Shares") of common stock, $.001 par value (the "Common
Stock") of KFx Inc. (the "Company") covered by the Common Stock Purchase Warrant
dated ____________, ____ (the "Warrant") and herewith makes payment of the
purchase price of such Shares in accordance with the terms of the Warrant. The
undersigned requests a certificate for such Shares to be registered in the name
of _____________________, whose address is ___________________________________.
If said number of Shares is less than all of the Shares issuable under the
Warrant, the undersigned further requests that a new warrant representing the
right to acquire the remaining balance of the Shares to be registered in the
name __________________________________, whose address is ___________________.
The undersigned hereby represents and warrants that:
(a) the Shares have not been registered under the Securities Act of
1933, as amended (the "Act") or any state securities laws,
(b) the Shares (unless such Shares are registered under the Act and
applicable state securities laws) are being and will be issued pursuant to
an exemption from registration for nonpublic offerings or offerings to one
or more accredited investors,
(c) he is acquiring the Shares (unless such Shares are registered
under the Act and applicable state securities laws) for his own account and
not with a view toward their distribution,
(d) he is experienced in making investments of this nature and has the
necessary sophistication to be able to evaluate the merits of this
investment, and
(e) he will not sell, offer for sale, pledge or otherwise hypothecate
the Shares (unless such Shares are registered under the Act and applicable
state securities laws) in the absence of an opinion of counsel reasonably
acceptable to the Company, that the sale, offer for sale, pledge or
hypothecation of the Shares is exempt from the registration and prospectus
delivery requirements of the Act and applicable state securities laws.
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<PAGE>
(f) the Shares are being acquired in accordance with and subject to
the terms, provisions and conditions of the Warrant, to all of which he
hereby expressly assent.
Very truly yours,
____________________________
Print Name: ____________________________
Address: ____________________________
____________________________
Receipt of the above is hereby acknowledged:
KFx Inc.
By: ________________________
Title: ________________________
Date: ________________________
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<PAGE>
ASSIGNMENT
----------
FOR VALUE RECEIVED ______________________________________ hereby sells,
assigns and transfers unto _______________________________________ the within
Warrant and all rights evidenced thereby and does irrevocably constitute and
appoint, __________________ _____________________ as attorney-in-fact, to
transfer the said Warrant on the books of the within named Company.
_____________________________
Dated: ___________________________
PARTIAL ASSIGNMENT
------------------
FOR VALUE RECEIVED ________________________________________ hereby sells,
assigns and transfers unto ________________________________________ that portion
of the within Warrant and the rights evidenced thereby which will on the date
hereof entitle the holder to purchase ____________ shares of Common Stock of
_______________________________, irrevocably constitute and appoint
_____________________________, attorney-in-fact, to transfer that part of the
said Warrant on the books of the within named Company.
_____________________________
Dated: ___________________________
<PAGE>
AMENDMENT NO. 1 TO COMMON STOCK PURCHASE WARRANT
This Amendment No. 1 to Common Stock Purchase Warrant (this
"Amendment"), is made by and between KFx Inc., a Delaware corporation (the
"Company") and Peter G. Martin, an individual ("Warrant Holder"), as of this 3rd
day of August 1998. The Company and Warrant Holder are sometimes collectively
referred to herein as the "Parties."
WHEREAS, the Parties entered into that certain Common Stock Purchase
Warrant dated August 2, 1995 in the amount of 25,000 shares (the "Warrant
Agreement");
WHEREAS, the Parties now desire to amend the Warrant Agreement pursuant
to the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth in the Warrant Agreement and as hereinafter set forth, and other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Parties agree as follows:
1. The introduction paragraph of the Warrant Agreement is hereby
amended in its entirety to read as follows:
THIS IS TO CERTIFY that, for value received and subject to the
provisions hereinafter set forth, Peter G. Martin, an individual
with his principal place of business at 48 Ogden Place, Dobbs
Ferry, New York 10522 (the "Warrant Holder") (or his assigns),
is entitled to purchase from KFx Inc., a Delaware corporation
("Company") 25,000 shares (the "Warrant Shares") of the
Company's $.001 par value common stock (the "Common Stock" or
"Shares"), for an aggregate purchase price equal to $4.00
multiplied by twenty-five thousand (25,000) shares ("Aggregate
Original Warrant Price"), all on and subject to the terms,
provisions and conditions hereinafter set forth. This Warrant
may be exercised as to all or part (comprising a whole number)
of the Shares represented hereby at any time or times before
August 2, 2001 ("Expiration Date"). This Warrant shall be void
and of no effect, and all rights, restrictions, and obligations
hereunder shall cease to the extent not exercised prior to the
Expiration Date.
2. Section 1.1 of the Warrant Agreement is hereby amended in their
entirety to read as follows:
Section 1.1 Duration. Subject to the provisions of Section 1.2
and 1.4 hereof, this Warrant may be exercised at any time on or
after 5:00 p.m., Denver, Colorado time, on August2, 1995 and at
or before 5:00 p.m., Denver Colorado time on August 2, 2001 (or,
if such day is not a business day, at or before 5:00 p.m.,
Denver, Colorado time, on the next following business day). If
this Warrant is not exercised on or before the Expiration Date,
it shall become void, and all rights hereunder shall thereupon
cease.
<PAGE>
2. All capitalized terms used and not otherwise defined herein
shall have the same meanings as set forth in the Warrant
Agreement.
3. As expressly modified by the terms hereof, the terms and
provisions of the Warrant Agreement shall remain in full force
and effect as originally written.
4. Signatures on this Amendment may be communicated by facsimile
transmission and shall be binding upon the Parties transmitting
the same by facsimile transmission. If executed in counterparts,
this Amendment will be as effective as if simultaneously
executed.
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<PAGE>
WITNESS, the seal of the Company and the signatures of its duly
authorized officers.
KFx Inc.
--------------------------------------------------
Seth L. Patterson
Executive Vice President & Chief Executive Officer
--------------------------------------------------
Rudolph G. Swenson, Secretary
The undersigned hereby consents to this Amendment as required by Section
11.10 of the Warrant Agreement.
-------------------------------------------------
Peter G. Martin, an individual
3
<PAGE>
EXHIBIT 4.7
THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFIED UNDER
ANY APPLICABLE STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED, HYPOTHECATED OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION AND
QUALIFICATION WITHOUT AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY STATING
THAT SUCH REGISTRATION AND QUALIFICATION IS NOT REQUIRED.
33,333 SHARES
COMMON STOCK PURCHASE WARRANT
OF KFx INC.
January 15, 1997
----------------
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
THIS IS TO CERTIFY that, for value received and subject to the provisions
hereinafter set forth, Dawson Mathis, as Assignee of Public Relations of
America, LTD., with his principal place of business at 410 First Street, SE,
Suite 300, Washington, D.C. 20003 (the "Warrant Holder") (or its assigns), is
entitled to purchase from KFx Inc, a Delaware corporation ("Company") thirty-
three thousand three hundred thirty-three shares (the "Warrant Shares") of the
Company's $.001 par value common stock (the "Common Stock" or "Shares"), for an
aggregate purchase price equal to $4.00 multiplied by thirty-three thousand
three hundred thirty-three (33,333) shares ("Aggregate Original Warrant Price"),
all on and subject to the terms, provisions and conditions hereinafter set
forth. This Warrant may be exercised as to all or part (comprising a whole
number) of the Shares represented hereby at any time or times on or before
November 5, 1999 ("Expiration Date"). This Warrant shall be void and of no
effect, and all rights, restrictions, and obligations hereunder shall cease to
the extent not exercised prior to the Expiration Date. This Warrant is issued
in partial exchange for a Warrant issued by the Company to Public Relations of
America, LTD., on November 6, 1996, in the amount of one hundred thousand
shares.
ARTICLE I
EXERCISE OF WARRANT
Section 1.1 Duration. Subject to the provisions of Sections 1.2 and 1.4
hereof, this Warrant may be exercised at any time on or after 9:00 a.m., Denver,
Colorado time, on January 15, 1997 and at or before 5:00 p.m., Denver, Colorado
time, on November 5, 1999 (or, if such day is not a business day, at or before
5:00 p.m., Denver, Colorado time, on the next following business day). If this
Warrant is not exercised on or before the Expiration Date, it shall become void,
and all rights hereunder shall thereupon cease.
<PAGE>
Section 1.2 Exercise of Warrant. Subject to the conditions contained
herein, this Warrant may be exercised in whole or in part at any time or times
before the Expiration Date by the surrender of this Warrant or any duly
authorized replacements hereto (with a duly executed subscription agreement in
the form attached hereto) at the principal office of the Company in Denver,
Colorado, and upon payment to the Company of the Aggregate Original Warrant
Price (or, if exercised in part, upon payment to the Company of the applicable
proportionate part of the Aggregate Original Warrant Price) for each Share so
purchased in lawful money of the United States, or by check, or postal or
express money order payable in United States dollars to the order of the Company
or by funds wired to an account as specified by the Company, and upon compliance
with and subject to the conditions set forth herein.
Upon receipt of this Warrant with the form of exercise duly executed and
accompanied by payment of the Aggregate Original Warrant Price for the shares of
Common Stock for which this Warrant is then being exercised, the Company will
cause to be issued certificates for the total number of whole Warrant Shares (as
provided in Article V hereof) for which this Warrant is being exercised in such
denominations as are required for delivery to the Warrant Holder, and the
Company shall thereupon deliver such certificates to the Warrant Holder or his
assignee.
In case the Warrant Holder shall exercise this Warrant with respect to less
than all of the shares of Common Stock that may be purchased under this Warrant,
the Company will execute a new Warrant substantially in the form of this Warrant
for the balance of the shares of Common Stock that may be purchased upon
exercise of this Warrant and deliver such new Warrant to the Warrant Holder.
The Company shall pay any and all transfer taxes payable in connection with
the issue of this Warrant or the issue of any Warrant Shares upon exercise of
this Warrant. The Company shall not, however, be required to pay any tax which
may be payable in respect of any transfer involved in the issuance or delivery
of this Warrant or the Warrant Shares in a name other than that of the Warrant
Holder at the time of surrender, and until the payment of such tax the Company
shall not be required to issue such Warrant Shares.
<PAGE>
Section 1.3 Warrant Holder Representation and Certificate Legend.
Unless the issuance of the Warrant Shares shall have been registered under the
Securities Act of 1933, as amended (the "1933 Act"), as a condition of its
delivery of certificates for the Warrant Shares or upon the split-up,
combination, exchange, transfer or loan of the Warrant, the Company may require
the Warrant Holder (including the transferee of the Warrant in whose name the
Warrant Shares are to be registered) to deliver to the Company, in writing,
representations regarding the Warrant Holder's sophistication, investment
intent, acquisition for his own account and such other matters as are reasonable
and customary for purchasers of securities in an unregistered private offering.
The Company may place conspicuously upon each new Warrant and upon each
certificate representing the Warrant Shares a legend substantially in the
following form, the terms of which are agreed to by the Warrant Holder
(including each transferee):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED SOLELY
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "1933 ACT"), OR ANY STATE SECURITIES LAW. SUCH
SHARES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF SUCH REGISTRATION OR AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY THAT SUCH SALE, OFFER, PLEDGE OR HYPOTHECATION IS EXEMPT FROM THE
REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF THE 1933 ACT AND OF
ANY APPLICABLE STATE SECURITIES LAWS.
The Company need not register a transfer of this Warrant or the Warrant
Shares unless the conditions specified in such legend are satisfied. Subject to
the transfer restrictions set forth in this Article I and in Articles IX and X
herein, this Warrant is transferable, in whole or in part, on the books of the
Company, upon surrender of this Warrant to the Company, together with a written
assignment duly executed by the Warrant Holder.
Section 1.4 Vesting. This Warrant shall vest and be exercisable
effective January 15, 1997.
Section 1.5 Exercise Price. The initial exercise price shall be $4.00
per share (the "Exercise Price").
ARTICLE II
ANTIDILUTION
Section 2.1 Subdivisions or Combinations. In case the Company shall at
any time after the date of this Warrant (i) subdivide the outstanding Shares or
(ii) combine the outstanding Shares into a smaller number of Shares, the
Exercise Price and the number and kind of Shares receivable upon exercise, in
effect at the time of the effective date of such subdivision or combination,
shall be proportionately adjusted so that the holder of the Warrant exercised
after such time shall be entitled
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<PAGE>
to receive the same percentage and kind of shares which, if the Warrant had been
exercised immediately prior to such date, the holder would have owned upon such
exercise and been entitled to receive by virtue of such subdivision or
combination. Such adjustment shall be made successively whenever any event
listed above shall occur and shall be retroactive to the record date, if any,
for such event. Any adjustment made pursuant to this Section 2.1 shall become
effective immediately upon the effective date of such event retroactive to the
record date, if any, for such event. All calculations made under this Section
2.1 shall be made to the nearest cent or to the nearest Share, as the case may
be.
Section 2.2 Reorganization, Reclassification or Consolidation. In case
of any capital reorganization of the Company, or of any reclassification of
Shares (other than a change in par value, or from par value to no par value, or
from no par value to par value, or as a result of subdivision or combination),
or in case of the consolidation of the Company with or the merger of the Company
into any other person (other than a consolidation or merger in which the Company
is the continuing corporation) or of the sale of the properties and assets of
the Company as, or substantially as, an entirety to any other corporation, the
Warrant shall after such reorganization, reclassification, consolidation, merger
or sale be exercisable, upon the terms and conditions specified in this
Agreement, for the number of shares of stock or other securities, cash or other
property to which a holder of the number of Shares purchasable (at the time of
such reorganization, reclassification, consolidation, merger or sale) upon
exercise of the Warrant would have been entitled upon such reorganization,
reclassification, consolidation, merger or sale; and in any such case, if
necessary, the provisions set forth in this Section 2.2 with respect to the
rights and interests thereafter of the holders of the Warrant shall be
appropriately adjusted so as to be applicable, as nearly as may reasonably be,
to any shares of stock or other securities, cash or other property thereafter
deliverable on the exercise of the Warrant. The subdivision or combination of
Shares at any time outstanding into a greater or lesser number of Shares shall
not be deemed to be a reclassification of the Common Stock for the purposes of
this Section 2.2. The Company shall not effect any such consolidation, merger
or sale unless prior to or simultaneously with the consummation thereof the
successor corporation (if other than the Company) resulting from such
consolidation or merger or the person purchasing such assets or other
appropriate corporation or entity shall assume, by written instrument executed
and delivered to the Company's and successor person's transfer agent, if any,
the obligation to deliver to the holders of the Warrant such shares of stock,
other securities, cash or other property as, in accordance with the foregoing
provisions, such holders may be entitled to purchase and the other obligations
of the Company under this Warrant.
Section 2.3 Notices to the Warrant Holder. Upon any adjustment of the
Exercise Price or of the number or kind of Shares for which the outstanding
Warrant may be exercised pursuant to Article II, the Company, within 20 calendar
days thereafter, shall cause to be given to all of the holders of the Warrant,
at such holders' addresses appearing on the register or other records maintained
for such purpose, an officer's certificate showing the adjusted Exercise Price
and setting forth in reasonable detail the method of calculation and the facts
upon which such calculations are based and setting forth the number of Shares
purchasable upon exercise of the Warrant after such
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<PAGE>
adjustment. Where appropriate, such notice may be given in advance and included
as a part of the notice required to be mailed under the other provisions of this
Article II.
In case:
(a) of any consolidation or merger to which the Company is a party and
for which approval of any stockholders of the Company is required, or of
the conveyance or transfer of the properties and assets of the Company as,
or substantially as, an entirety, or of any capital reorganization or any
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, or as a
result of a subdivision or combination); or
(b) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company;
then the Company shall cause to be mailed to the Warrant Holder at his address
appearing on the register or other records maintained by the Company for such
purpose, at least 20 calendar days (or 10 calendar days in any case specified in
clauses (a) or (b) above) prior to the applicable record or effective date
hereinafter specified a written notice stating the date on which any such
consolidation, merger, conveyance, transfer, reorganization, reclassification,
dissolution, liquidation or winding up is expected and that holders of record of
shares of Common Stock shall be entitled to exchange such shares for securities,
cash or other property, if any, deliverable upon such consolidation, merger,
conveyance, transfer, reorganization, reclassification, dissolution, liquidation
or winding up. The failure to give the notice required by this Section 2.3 or
any defect therein shall not affect the legality or validity of any
consolidation, merger, conveyance, transfer, reorganization, dissolution,
liquidation or winding up or the vote upon any action.
ARTICLE III
MERGERS, CONSOLIDATIONS, SALES AND
OTHER REORGANIZATIONS
5
<PAGE>
In the case of any consolidation or merger of the Company with another
entity, or the sale or all or substantially all or its assets to another entity,
or any reorganization or reclassification of the Common Stock or other equity
securities of the Company, then, as a condition of such consolidation, merger,
sale, reorganization or reclassification, lawful and adequate provision shall be
made whereby the holder of this Warrant shall thereafter have the right to
receive upon the basis and upon the terms and conditions specified herein and in
lieu of the shares of Common Stock immediately theretofore purchasable
hereunder, such shares of stock, securities or assets as may (by virtue of such
consolidation, merger, sale, reorganization or reclassification) be issued or
payable with respect to or in exchange for a number of outstanding shares of
Common Stock equal to the number of shares of Common Stock immediately
theretofore so purchasable hereunder had such consolidation, merger, sale,
reorganization or reclassification not taken place, and in any such case
appropriate provisions shall be made with respect to the rights and interests of
the holder of this Warrant to the end that the provisions hereof shall
thereafter be applicable, as nearly as may be, in relation to any shares of
stock, securities or assets thereafter deliverable upon exercise of this
Warrant. The Company shall not effect any such consolidation, merger, sale or
reorganization, unless prior to or simultaneously with the consummation thereof,
the successor entity (if other than the Company) resulting from such
consolidation, merger or reorganization or the entity purchasing such assets
shall assume by written instrument executed and mailed or delivered to the
holder of this Warrant, the obligations to deliver to such holder such shares of
stock, securities or assets as, in accordance with the foregoing provisions,
such holder may be entitled to receive. Notwithstanding anything herein to the
contrary, in the event that any shareholders of the Company have an opportunity
to sell or exchange their shares of Common Stock pursuant to a consolidation,
merger, sale or reorganization or otherwise, each of the holders of the Warrant
may, if they so decide in their sole discretion, immediately exercise the
Warrant in whole or in part and, at their option sell or exchange any or all of
the Common Stock thereafter owned by such holders upon terms and conditions no
less favorable than those upon which the other shareholders are selling or
exchanging their shares of Common Stock.
ARTICLE IV
FRACTIONAL SHARES
Anything contained herein to the contrary notwithstanding, the Company
shall not be required to issue any fraction of a share in connection with the
exercise of this Warrant, and in any case where the Warrant Holder would, except
for the provisions of this Article IV, be entitled under the terms of this
Warrant to receive a fraction of a share upon the exercise of this Warrant, the
Company shall upon the exercise of this Warrant and receipt of the Exercise
Price, issue the largest number of whole shares purchasable upon exercise of
this Warrant. The Company shall not be required to make any cash or other
adjustment in respect of such fraction of a share to which the Warrant Holder
would otherwise be entitled. The Warrant Holder, by the acceptance of this
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<PAGE>
Warrant, expressly waives his right to receive a certificate for any fraction of
a share upon exercise hereof.
ARTICLE V
FULLY PAID STOCK; TAXES
The Company covenants and agrees that the shares of stock represented by
each and every certificate representing Common Stock to be delivered on the
exercise of the purchase rights herein provided for shall, at the time of such
delivery, be validly issued and outstanding and be fully paid and nonassessable.
The Company further covenants and agrees that it will pay when due and payable
any and all Federal, State and local taxes which may be payable in connection
with the issuance of this Warrant or any Common Stock or certificates therefor
or the exercise of the rights provided for pursuant to the provisions hereof,
including without limitation any such taxes relating to the exercise of any
purchase, conversion, or other rights contained herein, but specifically
excluding any Federal, State or local income taxes owing by the holders of the
Warrant.
ARTICLE VI
CLOSING OF TRANSFER BOOKS
The right to exercise this Warrant shall not be suspended during any period
that the stock transfer books of the Company may be closed. The Company shall
not be required, however, to deliver certificates representing shares of its
Common Stock upon such exercise while such books are duly closed for any
purpose, but the Company may postpone the delivery of the certificates for such
Common Stock until the opening of such books, and they shall, in such case, be
delivered forthwith upon the opening thereof, or as soon as practicable
thereafter.
ARTICLE VII
REPLACEMENT OF WARRANT
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
such loss, theft or destruction, upon delivery to the Company of indemnity or
security reasonably satisfactory to it and reimbursement to the Company of all
reasonable expenses incidental thereto, or, in the case of any such mutilation,
upon surrender and cancellation of this Warrant, the Company will make and
deliver a new Warrant of like tenor, in lieu of this Warrant.
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<PAGE>
ARTICLE VIII
RESERVATION OF SHARES
The Company shall at all times reserve and keep available out of its
authorized shares of Common Stock, solely for the purpose of issuance upon the
exercise of this Warrant, such number of shares of Common Stock as shall be
issuable upon the exercise of this Warrant. The Company covenants and agrees
that, upon exercise of this Warrant and payment of the Purchase Price therefor,
all shares of Common Stock issuable upon such exercise shall be duly and validly
issued, fully paid and non-assessable.
ARTICLE IX
RESTRICTIONS ON TRANSFERABILITY
OF WARRANTS AND SHARES; COMPLIANCE WITH LAWS
Section 9.1 In General. This Warrant and the Warrant Shares issued upon
the exercise hereof shall not be transferable except upon the conditions
hereinafter specified, which conditions are intended to insure compliance with
the provisions of the 1933 Act (or any similar Federal statute at the time in
effect) and any applicable State securities laws in respect of the transfer of
this Warrant or any such Warrant Shares.
Section 9.2 Restrictive Legends. Each Warrant shall bear on the face
thereof a legend substantially in the form of the notice endorsed on the first
page of this Warrant. Each certificate for shares of Common Stock initially
issued upon the exercise of any Warrant and each certificate for shares of
Common Stock issued to a subsequent transferee of such certificate shall, unless
otherwise permitted by the provisions of this Section 9.2, bear on the face
thereof a legend reading substantially as follows:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED SOLELY
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "1933 ACT"), OR ANY STATE SECURITIES LAW. SUCH
SHARES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF SUCH REGISTRATION OR AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY THAT SUCH SALE, OFFER, PLEDGE OR HYPOTHECATION IS EXEMPT FROM THE
REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF THE 1933 ACT AND OF
ANY APPLICABLE STATE SECURITIES LAWS. THE SHARES REPRESENTED BY THIS
CERTIFICATE ARE SUBJECT TO THE TERMS AND CONDITIONS OF THAT CERTAIN WARRANT
AGREEMENT DATED JANUARY 15, 1997, PURSUANT TO WHICH THEY WERE ISSUED.
8
<PAGE>
In the event that a registration statement covering the Warrant Shares
shall become effective under the 1933 Act and under any applicable State
securities laws or in the event that the Company shall receive an opinion
of counsel satisfactory to it that, in the opinion of such counsel, such
legend is not, or is no longer, necessary or required (including, without
limitation, because of the availability of the exemption afforded by Rule
144 of the General Rules and Regulations of the Securities and Exchange
Commission), the Company shall, or shall instruct its transfer agents and
registrars to, remove such legend from the certificates evidencing the
Warrant Shares or issue new certificates without such legend in lieu
thereof. All fees and expenses of counsel in connection with the rendition
of the opinion provided for in this Section 9.2 shall be paid by the
holder.
Section 9.3 Notice of Proposed Transfer; Registration Not Required. The
holder of this Warrant or of any Warrant Shares, by acceptance thereof, agrees
to give prior written notice to the Company of such holder's intention to
transfer such Warrant or the Warrant Shares relating thereto (or any portion
thereof) describing briefly the manner and circumstances of the proposed
transfer. Promptly after receiving such written notice, the Company shall
present copies thereof to Company counsel and to counsel designated by such
holder, who may be an employee of such holder. If in the opinion of each such
counsel the proposed transfer may be affected without registration or
qualification of such Warrant or the Warrant Shares under any Federal or State
law, the Company, as promptly as practicable, shall notify such holder of such
opinion and of the terms and conditions, if any, to be observed, whereupon such
holder shall be entitled to transfer such Warrant or Warrant Shares, all in
accordance with the terms of the notice delivered to such holder by the Company.
If either of such counsel is unable to render such an opinion (in which case
said counsel shall set forth in writing the basis for the legal conclusions in
this regard), the Company shall promptly notify such holder that the proposed
transfer described in the written notice given pursuant to this subsection may
not be effected without such registration or qualification or without compliance
with the conditions of an exemptive regulation of the Commission and any
applicable State Securities regulatory authority. Such holder shall not be
entitled to effect such transfer until such registration, qualification,
exemption or other compliance has become effective. All fees and expenses of
counsel in connection with the rendition of the opinions provided for in this
subsection shall be paid by the holder requesting the transfer.
ARTICLE X
RIGHT OF FIRST REFUSAL
In the event any holder of Warrants or Warrant Shares ("Offeror") proposes
to sell all or any portion of the Warrants or Warrant Shares owned by the holder
to a person or entity other than an affiliate of the holder, the Offeror shall
first deliver to the Company a written notice ("Notice of Proposed Sale")
specifying the name and address of the proposed purchaser ("Proposed
Purchaser"), the number of Warrants or Warrant Shares proposed to be sold to the
Proposed Purchaser ("Offered
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<PAGE>
Shares"), and all of the terms, including the price, of the proposed sale and
stating that the Company has the right to purchase the Offered Shares in
accordance with the following terms:
(i) During the 30-day period following receipt of the Notice of
Proposed Sale ("Exercise Period"), the Company shall have the right to
purchase all (but not less than all) of the Offered Shares, at the price
and on the terms specified in the Notice of Proposed Sale. The company
shall give written notice of its election to the Offeror during the
Exercise Period.
(ii) If the Offered Shares have not been purchased by the Company as
specified herein, the Offeror shall have the right, but only for a period
of six (6) months after the expiration of the Exercise Period, to sell the
Offered Shares to the Proposed Purchaser at the price specified in the
Notice of Proposed Sale.
(iii) Warrants or Warrant Shares sold to a Proposed Purchaser as
provided herein shall continue to be subject to the provisions of this
Warrant, and the Company shall not be obligated to issue a new Warrant
therefor in the name of such Proposed Purchaser unless that Proposed
Purchaser agrees in writing to become bound by the terms hereof.
(iv) For purposes of this Article X an affiliate shall mean each and
every corporation, partnership, person, or other entity controlling,
controlled by, or under common control with, the holder of any Warrant or
Warrant Shares.
ARTICLE XI
MISCELLANEOUS
Section 11.1 Warrant Holder As Owner. Prior to due presentment for
registration of transfer of this Warrant, the Company may deem and treat the
Warrant Holder as the absolute owner of this Warrant (notwithstanding any
notation of ownership or other writing hereon) for the purpose of any exercise
hereof and for all other purposes, and the Company shall not be affected by any
notice to the contrary.
Section 11.2 Warrant Holder Not Shareholder. This Warrant does not
confer upon the holder hereof any right to vote or to consent or to receive
notice as a shareholder of the Company, as such, in respect of any matters
whatsoever, or any other rights or liabilities as a shareholder, prior to the
exercise hereof as hereinbefore provided.
Section 11.3 Warrant Holder Representation. Notwithstanding anything to
the contrary herein, the Warrant Holder represents and warrants that (a) it
acknowledges that the Warrant and the Warrant Shares have not been registered
under the 1933 Act or any state securities laws, (b) the Warrants and the
Warrant Shares (unless such Warrants and/or Warrant Shares, as the case may be,
are registered under the 1933 Act and applicable state securities laws) are
being and will be issued pursuant to an exemption from registration for
nonpublic offerings or offerings to one or more
10
<PAGE>
accredited investors, (c) that the Warrant Holder is acquiring the Warrant and
will acquire the Warrant Shares (unless such Warrants and/or Warrant Shares are
registered under the 1933 Act and applicable state securities laws) for his own
account and not with a view toward their distribution, (d) the Warrant Holder is
experienced in making investments of this nature and has the necessary
sophistication to be able to evaluate the merits of this investment and (e) the
Warrant Holder will not sell, offer for sale, pledge or otherwise hypothecate
the Warrant or the Warrant Shares (unless such shares are registered under the
1933 Act and applicable state securities laws) in the absence of an opinion of
counsel reasonably acceptable to the Company, that the sale, offer for sale,
pledge or hypothecation of the Warrant and Warrant Shares is exempt from the
registration and prospectus delivery requirements of the 1933 Act and applicable
state securities laws.
Section 11.4 Partial Exercise and Partial Assignment.
(a) If this Warrant is exercised in part only, the holder shall upon
surrender hereof be entitled to receive a new Warrant, registered in the
name of the holder or its nominee. This Warrant may be assigned either in
whole or in part by surrender of this Warrant at the principal office of
the Company in Denver, Colorado (with the assignment or, as the case may
be, partial assignment form at the end hereof duly executed). If this
Warrant is assigned, a new Warrant shall be issued to the holder hereof,
registered in the name of such holder or its nominee. The assignee shall
also be entitled to receive a new Warrant, registered in the name of such
assignee or its nominee.
(b) Subject to the provisions of paragraph (a) of this Section 11.4
this Warrant and the Warrant Shares may not be sold or otherwise disposed
of except as follows:
(i) to a person who, in the opinion of counsel reasonably
satisfactory to the Company, is a person to whom this Warrant or the
Warrant Shares may legally be transferred without registration and without
the delivery of a current prospectus under the 1933 Act with respect
thereto and then only against receipt of an agreement of such person to
comply with the provisions of this Warrant with respect to any resale or
other disposition of such securities; or
(ii) to any person upon delivery of a prospectus then meeting the
requirements of the 1933 Act relating to such securities (as to which a
registration statement under the 1933 Act shall then be in effect) and the
offering thereof for such sale or disposition.
Section 11.5 Successors. All the covenants, agreements, representations
and warranties contained in this Warrant shall bind the parties hereto and their
respective heirs, executors, administrators, distributees, successors and
assigns.
Section 11.6 Severability. Should any part of this Warrant for any
reason be declared invalid, such decision shall not affect the validity of any
remaining portion, which remaining portion
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shall remain in force and effect as if this Warrant had been executed with the
invalid portion thereof eliminated, and it is hereby declared the intention of
the parties hereto that they would have executed and accepted the remaining
portion of this Warrant without including therein any such part, parts or
portion which may, for any reason, be hereafter declared invalid.
Section 11.7 Notices. Any notices required to be given pursuant to the
terms hereof shall be given (unless otherwise herein expressly provided) in
writing and either (i) personally delivered, (ii) sent by certified, return
receipt requested, (iii) sent by prepaid overnight courier, or (iv) transmitted
by telecopier or similar device, with confirmation of receipt. Notices shall be
addressed, if to holder of Warrants or Warrant Shares, to:
Richard C. Whitner
1800 North Kent Street, Suite 1104
Arlington, Virginia 22209
or to such other address of such holder appearing in the register maintained by
the Company, and if to the Company, to:
KFx Inc.
1999 Broadway, Suite 3200
Denver, CO 80202
Attn: Chief Financial Officer
For purposes of this Warrant, any notice sent by mail shall be demand given
on the date deposited in the mail.
Section 11.8 Headings. The Article headings in this Warrant are inserted
for purposes of convenience only and shall have no substantive effect.
Section 11.9 Law Governing. This Warrant is delivered in the State of
Colorado and shall be construed and enforced in accordance with, and governed
by, the laws of the State of Colorado.
Section 11.10 Amendments and Modifications. This Warrant may be amended or
modified only with the prior written consent of the holder hereof.
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WITNESS the seal of the Company and the signatures of its duly authorized
officers.
KFx Inc.
_________________________________________
Theodore Venners, Chief Executive Officer
(SEAL)
_________________________________________
R. G. Swenson, Secretary
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[INTENTIONALLY LEFT BLANK]
<PAGE>
KFx INC.
SUBSCRIPTION FORM
(To be executed by the Registered Holder
in order to Exercise the Warrant)
The undersigned hereby irrevocably elects to exercise the right to purchase
__________ shares (the "Shares") of common stock, $.001 par value (the "Common
Stock") of KFx Inc. (the "Company") covered by the Common Stock Purchase Warrant
dated ____________, ____ (the "Warrant") and herewith makes payment of the
purchase price of such Shares in accordance with the terms of the Warrant. The
undersigned requests a certificate for such Shares to be registered in the name
of _____________________, whose address is ___________________________________.
If said number of Shares is less than all of the Shares issuable under the
Warrant, the undersigned further requests that a new warrant representing the
right to acquire the remaining balance of the Shares to be registered in the
name __________________________________, whose address is ____________________.
The undersigned hereby represents and warrants that:
(a) the Shares have not been registered under the Securities Act of
1933, as amended (the "Act") or any state securities laws,
(b) the Shares (unless such Shares are registered under the Act and
applicable state securities laws) are being and will be issued pursuant to
an exemption from registration for nonpublic offerings or offerings to one
or more accredited investors,
(c) he is acquiring the Shares (unless such Shares are registered
under the Act and applicable state securities laws) for his own account and
not with a view toward their distribution,
(d) he is experienced in making investments of this nature and has the
necessary sophistication to be able to evaluate the merits of this
investment, and
(e) he will not sell, offer for sale, pledge or otherwise hypothecate
the Shares (unless such Shares are registered under the Act and applicable
state securities laws) in the absence of an opinion of counsel reasonably
acceptable to the Company, that the sale, offer for sale, pledge or
hypothecation of the Shares is exempt from the registration and prospectus
delivery requirements of the Act and applicable state securities laws.
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<PAGE>
(f) the Shares are being acquired in accordance with and subject to
the terms, provisions and conditions of the Warrant, to all of which he
hereby expressly assent.
Very truly yours,
____________________________
Print Name: ____________________________
Address: ____________________________
____________________________
Receipt of the above is hereby acknowledged:
KFx Inc.
By: ________________________
Title: ________________________
Date: ________________________
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<PAGE>
ASSIGNMENT
----------
FOR VALUE RECEIVED ______________________________________ hereby sells,
assigns and transfers unto _______________________________________ the within
Warrant and all rights evidenced thereby and does irrevocably constitute and
appoint, __________________ _____________________ as attorney-in-fact, to
transfer the said Warrant on the books of the within named Company.
_______________________________
Dated: ____________________________
PARTIAL ASSIGNMENT
------------------
FOR VALUE RECEIVED ________________________________________ hereby sells,
assigns and transfers unto ________________________________________ that portion
of the within Warrant and the rights evidenced thereby which will on the date
hereof entitle the holder to purchase ____________ shares of Common Stock of
_______________________________, irrevocably constitute and appoint
_____________________________, attorney-in-fact, to transfer that part of the
said Warrant on the books of the within named Company.
_______________________________
Dated: ____________________________
<PAGE>
EXHIBIT 4.8
THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFIED UNDER
ANY APPLICABLE STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED, HYPOTHECATED OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION AND
QUALIFICATION WITHOUT AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY STATING
THAT SUCH REGISTRATION AND QUALIFICATION IS NOT REQUIRED.
55,000 SHARES
COMMON STOCK PURCHASE WARRANT
OF KFx INC.
November 15, 1996
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
THIS IS TO CERTIFY that, for value received and subject to the provisions
hereinafter set forth, Innovative Research Associates, Inc., a New York
corporation with its principal place of business at 950 Third Avenue, 26th
Floor, New York, New York 10022, (the "Warrant Holder") (or its assigns), is
entitled to purchase from KFx Inc, a Delaware corporation ("Company") Fifty-Five
Thousand (55,000) shares (the "Warrant Shares") of the Company's $.001 par value
common stock (the "Common Stock" or "Shares"), for an aggregate purchase price
equal to $4.00 multiplied by Fifty-Five Thousand (55,000) shares ("Aggregate
Original Warrant Price"), all on and subject to the terms, provisions and
conditions hereinafter set forth. This Warrant may be exercised as to all or
part (comprising a whole number) of the Shares represented hereby at any time or
times before August 3, 1998 ("Expiration Date"). This Warrant shall be void and
of no effect, and all rights, restrictions, and obligations hereunder shall
cease to the extent not exercised prior to the Expiration Date. This Warrant is
a reissue of a Warrant for 65,000 Shares dated October 29, 1996, which is hereby
canceled and superseded. A partial exercise of the October 29, 1996 Warrant has
been made this date for Ten Thousand (10,000) Shares.
ARTICLE I
EXERCISE OF WARRANT
Section 1.1 Duration. Subject to the provisions of Sections 1.2 and 1.4
hereof, this Warrant may be exercised at any time on or after 9:00 a.m., Denver,
Colorado time, on November 15, 1996, and at or before 5:00 p.m., Denver,
Colorado time, on August 3, 1998 (or, if such day is not a business day, at or
before 5:00 p.m., Denver, Colorado time, on the next following business day).
If this Warrant is not exercised on or before the Expiration Date, it shall
become void, and all rights hereunder shall thereupon cease.
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Section 1.2 Exercise of Warrant. Subject to the conditions contained
herein, this Warrant may be exercised in whole or in part at any time or times
before the Expiration Date by the surrender of this Warrant or any duly
authorized replacements hereto (with a duly executed subscription agreement in
the form attached hereto) at the principal office of the Company in Denver,
Colorado, and upon payment to the Company of the Aggregate Original Warrant
Price (or, if exercised in part, upon payment to the Company of the applicable
proportionate part of the Aggregate Original Warrant Price) for each Share so
purchased in lawful money of the United States, or by check, or postal or
express money order payable in United States dollars to the order of the Company
or by funds wired to an account as specified by the Company, and upon compliance
with and subject to the conditions set forth herein.
Upon receipt of this Warrant with the form of exercise duly executed and
accompanied by payment of the Aggregate Original Warrant Price for the shares of
Common Stock for which this Warrant is then being exercised, the Company will
cause to be issued certificates for the total number of whole Warrant Shares (as
provided in Article V hereof) for which this Warrant is being exercised in such
denominations as are required for delivery to the Warrant Holder, and the
Company shall thereupon deliver such certificates to the Warrant Holder or his
assignee.
In case the Warrant Holder shall exercise this Warrant with respect to less
than all of the shares of Common Stock that may be purchased under this Warrant,
the Company will execute a new Warrant substantially in the form of this Warrant
for the balance of the shares of Common Stock that may be purchased upon
exercise of this Warrant and deliver such new Warrant to the Warrant Holder.
The Company shall pay any and all transfer taxes payable in connection with
the issue of this Warrant or the issue of any Warrant Shares upon exercise of
this Warrant. The Company shall not, however, be required to pay any tax which
may be payable in respect of any transfer involved in the issuance or delivery
of this Warrant or the Warrant Shares in a name other than that of the Warrant
Holder at the time of surrender, and until the payment of such tax the Company
shall not be required to issue such Warrant Shares.
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Section 1.3 Warrant Holder Representation and Certificate Legend.
Unless the issuance of the Warrant Shares shall have been registered under the
Securities Act of 1933, as amended (the "1933 Act"), as a condition of its
delivery of certificates for the Warrant Shares or upon the split-up,
combination, exchange, transfer or loan of the Warrant, the Company may require
the Warrant Holder (including the transferee of the Warrant in whose name the
Warrant Shares are to be registered) to deliver to the Company, in writing,
representations regarding the Warrant Holder's sophistication, investment
intent, acquisition for his own account and such other matters as are reasonable
and customary for purchasers of securities in an unregistered private offering.
The Company may place conspicuously upon each new Warrant and upon each
certificate representing the Warrant Shares a legend substantially in the
following form, the terms of which are agreed to by the Warrant Holder
(including each transferee):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED SOLELY
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "1933 ACT"), OR ANY STATE SECURITIES LAW. SUCH
SHARES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF SUCH REGISTRATION OR AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY THAT SUCH SALE, OFFER, PLEDGE OR HYPOTHECATION IS EXEMPT FROM THE
REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF THE 1933 ACT AND OF
ANY APPLICABLE STATE SECURITIES LAWS.
The Company need not register a transfer of this Warrant or the Warrant
Shares unless the conditions specified in such legend are satisfied. Subject to
the transfer restrictions set forth in this Article I and in Articles IX and X
herein, this Warrant is transferable, in whole or in part, on the books of the
Company, upon surrender of this Warrant to the Company, together with a written
assignment duly executed by the Warrant Holder.
Section 1.4 Vesting. This Warrant shall vest and be exercisable
effective November 15, 1996.
Section 1.5 Exercise Price. The initial exercise price shall be $4.00
per share (the "Exercise Price").
ARTICLE II
ANTIDILUTION
Section 2.1 Subdivisions or Combinations. In case the Company shall at
any time after the date of this Warrant (i) subdivide the outstanding Shares or
(ii) combine the outstanding Shares into a smaller number of Shares, the
Exercise Price and the
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number and kind of Shares receivable upon exercise, in effect at the time of the
effective date of such subdivision or combination, shall be proportionately
adjusted so that the holder of the Warrant exercised after such time shall be
entitled to receive the same percentage and kind of shares which, if the Warrant
had been exercised immediately prior to such date, the holder would have owned
upon such exercise and been entitled to receive by virtue of such subdivision or
combination. Such adjustment shall be made successively whenever any event
listed above shall occur and shall be retroactive to the record date, if any,
for such event. Any adjustment made pursuant to this Section 2.1 shall become
effective immediately upon the effective date of such event retroactive to the
record date, if any, for such event. All calculations made under this Section
2.1 shall be made to the nearest cent or to the nearest Share, as the case may
be.
Section 2.2 Reorganization, Reclassification or Consolidation. In case
of any capital reorganization of the Company, or of any reclassification of
Shares (other than a change in par value, or from par value to no par value, or
from no par value to par value, or as a result of subdivision or combination),
or in case of the consolidation of the Company with or the merger of the Company
into any other person (other than a consolidation or merger in which the Company
is the continuing corporation) or of the sale of the properties and assets of
the Company as, or substantially as, an entirety to any other corporation, the
Warrant shall after such reorganization, reclassification, consolidation, merger
or sale be exercisable, upon the terms and conditions specified in this
Agreement, for the number of shares of stock or other securities, cash or other
property to which a holder of the number of Shares purchasable (at the time of
such reorganization, reclassification, consolidation, merger or sale) upon
exercise of the Warrant would have been entitled upon such reorganization,
reclassification, consolidation, merger or sale; and in any such case, if
necessary, the provisions set forth in this Section 2.2 with respect to the
rights and interests thereafter of the holders of the Warrant shall be
appropriately adjusted so as to be applicable, as nearly as may reasonably be,
to any shares of stock or other securities, cash or other property thereafter
deliverable on the exercise of the Warrant. The subdivision or combination of
Shares at any time outstanding into a greater or lesser number of Shares shall
not be deemed to be a reclassification of the Common
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Stock for the purposes of this Section 2.2. The Company shall not effect any
such consolidation, merger or sale unless prior to or simultaneously with the
consummation thereof the successor corporation (if other than the Company)
resulting from such consolidation or merger or the person purchasing such assets
or other appropriate corporation or entity shall assume, by written instrument
executed and delivered to the Company's and successor person's transfer agent,
if any, the obligation to deliver to the holders of the Warrant such shares of
stock, other securities, cash or other property as, in accordance with the
foregoing provisions, such holders may be entitled to purchase and the other
obligations of the Company under this Warrant .
Section 2.3 Notices to the Warrant Holder. Upon any adjustment of the
Exercise Price or of the number or kind of Shares for which the outstanding
Warrant may be exercised pursuant to Article II, the Company, within 20 calendar
days thereafter, shall cause to be given to all of the holders of the Warrant,
at such holders' addresses appearing on the register or other records maintained
for such purpose, an officer's certificate showing the adjusted Exercise Price
and setting forth in reasonable detail the method of calculation and the facts
upon which such calculations are based and setting forth the number of Shares
purchasable upon exercise of the Warrant after such adjustment. Where
appropriate, such notice may be given in advance and included as a part of the
notice required to be mailed under the other provisions of this Article II.
In case:
(a) of any consolidation or merger to which the Company is a party and
for which approval of any stockholders of the Company is required, or of
the conveyance or transfer of the properties and assets of the Company as,
or substantially as, an entirety, or of any capital reorganization or any
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, or as a
result of a subdivision or combination); or
(b) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company;
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then the Company shall cause to be mailed to the Warrant Holder at his address
appearing on the register or other records maintained by the Company for such
purpose, at least 20 calendar days (or 10 calendar days in any case specified in
clauses (a) or (b) above) prior to the applicable record or effective date
hereinafter specified a written notice stating the date on which any such
consolidation, merger, conveyance, transfer, reorganization, reclassification,
dissolution, liquidation or winding up is expected and that holders of record of
shares of Common Stock shall be entitled to exchange such shares for securities,
cash or other property, if any, deliverable upon such consolidation, merger,
conveyance, transfer, reorganization, reclassification, dissolution, liquidation
or winding up. The failure to give the notice required by this Section 2.3 or
any defect therein shall not affect the legality or validity of any
consolidation, merger, conveyance, transfer, reorganization, dissolution,
liquidation or winding up or the vote upon any action.
ARTICLE III
MERGERS, CONSOLIDATIONS, SALES AND
OTHER REORGANIZATIONS
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In the case of any consolidation or merger of the Company with another
entity, or the sale or all or substantially all or its assets to another entity,
or any reorganization or reclassification of the Common Stock or other equity
securities of the Company, then, as a condition of such consolidation, merger,
sale, reorganization or reclassification, lawful and adequate provision shall be
made whereby the holder of this Warrant shall thereafter have the right to
receive upon the basis and upon the terms and conditions specified herein and in
lieu of the shares of Common Stock immediately theretofore purchasable
hereunder, such shares of stock, securities or assets as may (by virtue of such
consolidation, merger, sale, reorganization or reclassification) be issued or
payable with respect to or in exchange for a number of outstanding shares of
Common Stock equal to the number of shares of Common Stock immediately
theretofore so purchasable hereunder had such consolidation, merger, sale,
reorganization or reclassification not taken place, and in any such case
appropriate provisions shall be made with respect to the rights and interests of
the holder of this Warrant to the end that the provisions hereof shall
thereafter be applicable, as nearly as may be, in relation to any shares of
stock, securities or assets thereafter deliverable upon exercise of this
Warrant. The Company shall not effect any such consolidation, merger, sale or
reorganization, unless prior to or simultaneously with the consummation thereof,
the successor entity (if other than the Company) resulting from such
consolidation, merger or reorganization or the entity purchasing such assets
shall assume by written instrument executed and mailed or delivered to the
holder of this Warrant, the obligations to deliver to such holder such shares of
stock, securities or assets as, in accordance with the foregoing provisions,
such holder may be entitled to receive. Notwithstanding anything herein to the
contrary, in the event that any shareholders of the Company have an opportunity
to sell or exchange their shares of Common Stock pursuant to a consolidation,
merger, sale or reorganization or otherwise, each of the holders of the Warrant
may, if they so decide in their sole discretion, immediately exercise the
Warrant in whole or in part and, at their option sell or exchange any or all of
the Common Stock thereafter owned by such holders upon terms and conditions no
less favorable than those upon which the other shareholders are selling or
exchanging their shares of Common Stock.
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ARTICLE IV
FRACTIONAL SHARES
Anything contained herein to the contrary notwithstanding, the Company
shall not be required to issue any fraction of a share in connection with the
exercise of this Warrant, and in any case where the Warrant Holder would, except
for the provisions of this Article IV, be entitled under the terms of this
Warrant to receive a fraction of a share upon the exercise of this Warrant, the
Company shall upon the exercise of this Warrant and receipt of the Exercise
Price, issue the largest number of whole shares purchasable upon exercise of
this Warrant. The Company shall not be required to make any cash or other
adjustment in respect of such fraction of a share to which the Warrant Holder
would otherwise be entitled. The Warrant Holder, by the acceptance of this
Warrant, expressly waives his right to receive a certificate for any fraction of
a share upon exercise hereof.
ARTICLE V
FULLY PAID STOCK; TAXES
The Company covenants and agrees that the shares of stock represented by
each and every certificate representing Common Stock to be delivered on the
exercise of the purchase rights herein provided for shall, at the time of such
delivery, be validly issued and outstanding and be fully paid and nonassessable.
The Company further covenants and agrees that it will pay when due and payable
any and all Federal, State and local taxes which may be payable in connection
with the issuance of this Warrant or any Common Stock or certificates therefor
or the exercise of the rights provided for pursuant to the provisions hereof,
including without limitation any such taxes relating to the exercise of any
purchase, conversion, or other rights contained herein, but specifically
excluding any Federal, State or local income taxes owing by the holders of the
Warrant.
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ARTICLE VI
CLOSING OF TRANSFER BOOKS
The right to exercise this Warrant shall not be suspended during any period
that the stock transfer books of the Company may be closed. The Company shall
not be required, however, to deliver certificates representing shares of its
Common Stock upon such exercise while such books are duly closed for any
purpose, but the Company may postpone the delivery of the certificates for such
Common Stock until the opening of such books, and they shall, in such case, be
delivered forthwith upon the opening thereof, or as soon as practicable
thereafter.
ARTICLE VII
REPLACEMENT OF WARRANT
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
such loss, theft or destruction, upon delivery to the Company of indemnity or
security reasonably satisfactory to it and reimbursement to the Company of all
reasonable expenses incidental thereto, or, in the case of any such mutilation,
upon surrender and cancellation of this Warrant, the Company will make and
deliver a new Warrant of like tenor, in lieu of this Warrant.
ARTICLE VIII
RESERVATION OF SHARES
The Company shall at all times reserve and keep available out of its
authorized shares of Common Stock, solely for the purpose of issuance upon the
exercise of this Warrant, such number of shares of Common Stock as shall be
issuable upon the exercise of this Warrant. The Company covenants and agrees
that, upon exercise of this Warrant and payment of the Purchase Price therefor,
all shares of Common Stock issuable upon such exercise shall be duly and validly
issued, fully paid and non-assessable.
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ARTICLE IX
RESTRICTIONS ON TRANSFERABILITY
OF WARRANTS AND SHARES; COMPLIANCE WITH LAWS
Section 9.1 In General. This Warrant and the Warrant Shares issued upon
the exercise hereof shall not be transferable except upon the conditions
hereinafter specified, which conditions are intended to insure compliance with
the provisions of the 1933 Act (or any similar Federal statute at the time in
effect) and any applicable State securities laws in respect of the transfer of
this Warrant or any such Warrant Shares.
Section 9.2 Restrictive Legends. Each Warrant shall bear on the face
thereof a legend substantially in the form of the notice endorsed on the first
page of this Warrant. Each certificate for shares of Common Stock initially
issued upon the exercise of any Warrant and each certificate for shares of
Common Stock issued to a subsequent transferee of such certificate shall, unless
otherwise permitted by the provisions of this Section 9.2, bear on the face
thereof a legend reading substantially as follows:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED SOLELY
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "1933 ACT"), OR ANY STATE SECURITIES LAW. SUCH
SHARES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF SUCH REGISTRATION OR AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY THAT SUCH SALE, OFFER, PLEDGE OR HYPOTHECATION IS EXEMPT FROM THE
REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF THE 1933 ACT AND OF
ANY APPLICABLE STATE SECURITIES LAWS. THE SHARES REPRESENTED BY THIS
CERTIFICATE ARE SUBJECT TO THE TERMS AND CONDITIONS OF THAT CERTAIN
WARRANT AGREEMENT DATED November 15, 1996, PURSUANT TO WHICH THEY WERE
ISSUED.
In the event that a registration statement covering the Warrant Shares
shall become effective under the 1933 Act and under any applicable State
securities laws or in the event that the Company shall receive an opinion
of counsel satisfactory to it that, in the opinion of such counsel, such
legend is not, or is no longer, necessary or required (including, without
limitation, because of the availability of
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the exemption afforded by Rule 144 of the General Rules and Regulations of
the Securities and Exchange Commission), the Company shall, or shall
instruct its transfer agents and registrars to, remove such legend from
the certificates evidencing the Warrant Shares or issue new certificates
without such legend in lieu thereof. All fees and expenses of counsel in
connection with the rendition of the opinion provided for in this Section
9.2 shall be paid by the holder.
Section 9.3 Notice of Proposed Transfer; Registration Not Required. The
holder of this Warrant or of any Warrant Shares, by acceptance thereof, agrees
to give prior written notice to the Company of such holder's intention to
transfer such Warrant or the Warrant Shares relating thereto (or any portion
thereof) describing briefly the manner and circumstances of the proposed
transfer. Promptly after receiving such written notice, the Company shall
present copies thereof to Company counsel and to counsel designated by such
holder, who may be an employee of such holder. If in the opinion of each such
counsel the proposed transfer may be affected without registration or
qualification of such Warrant or the Warrant Shares under any Federal or State
law, the Company, as promptly as practicable, shall notify such holder of such
opinion and of the terms and conditions, if any, to be observed, whereupon such
holder shall be entitled to transfer such Warrant or Warrant Shares, all in
accordance with the terms of the notice delivered to such holder by the Company.
If either of such counsel is unable to render such an opinion (in which case
said counsel shall set forth in writing the basis for the legal conclusions in
this regard), the Company shall promptly notify such holder that the proposed
transfer described in the written notice given pursuant to this subsection may
not be effected without such registration or qualification or without compliance
with the conditions of an exemptive regulation of the Commission and any
applicable State Securities regulatory authority. Such holder shall not be
entitled to effect such transfer until such registration, qualification,
exemption or other compliance has become effective. All fees and expenses of
counsel in connection with the rendition of the opinions provided for in this
subsection shall be paid by the holder requesting the transfer.
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ARTICLE X
RIGHT OF FIRST REFUSAL
In the event any holder of Warrants or Warrant Shares ("Offeror") proposes
to sell all or any portion of the Warrants or Warrant Shares owned by the holder
to a person or entity other than an affiliate of the holder, the Offeror shall
first deliver to the Company a written notice ("Notice of Proposed Sale")
specifying the name and address of the proposed purchaser ("Proposed
Purchaser"), the number of Warrants or Warrant Shares proposed to be sold to the
Proposed Purchaser ("Offered Shares"), and all of the terms, including the
price, of the proposed sale and stating that the Company has the right to
purchase the Offered Shares in accordance with the following terms:
(i) During the 30-day period following receipt of the Notice of
Proposed Sale ("Exercise Period"), the Company shall have the right to
purchase all (but not less than all) of the Offered Shares, at the price
and on the terms specified in the Notice of Proposed Sale. The company
shall give written notice of its election to the Offeror during the
Exercise Period.
(ii) If the Offered Shares have not been purchased by the Company as
specified herein, the Offeror shall have the right, but only for a period
of six (6) months after the expiration of the Exercise Period, to sell the
Offered Shares to the Proposed Purchaser at the price specified in the
Notice of Proposed Sale.
(iii) Warrants or Warrant Shares sold to a Proposed Purchaser as
provided herein shall continue to be subject to the provisions of this
Warrant, and the Company shall not be obligated to issue a new Warrant
therefor in the name of such Proposed Purchaser unless that Proposed
Purchaser agrees in writing to become bound by the terms hereof.
(iv) For purposes of this Article X an affiliate shall mean each and
every corporation, partnership, person, or other entity controlling,
controlled by, or under common control with, the holder of any Warrant or
Warrant Shares.
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ARTICLE XI
MISCELLANEOUS
Section 11.1 Warrant Holder As Owner. Prior to due presentment for
registration of transfer of this Warrant, the Company may deem and treat the
Warrant Holder as the absolute owner of this Warrant (notwithstanding any
notation of ownership or other writing hereon) for the purpose of any exercise
hereof and for all other purposes, and the Company shall not be affected by any
notice to the contrary.
Section 11.2 Warrant Holder Not Shareholder. This Warrant does not
confer upon the holder hereof any right to vote or to consent or to receive
notice as a shareholder of the Company, as such, in respect of any matters
whatsoever, or any other rights or liabilities as a shareholder, prior to the
exercise hereof as hereinbefore provided.
Section 11.3 Warrant Holder Representation. Notwithstanding anything to
the contrary herein, the Warrant Holder represents and warrants that (a) it
acknowledges that the Warrant and the Warrant Shares have not been registered
under the 1933 Act or any state securities laws, (b) the Warrants and the
Warrant Shares (unless such Warrants and/or Warrant Shares, as the case may be,
are registered under the 1933 Act and applicable state securities laws) are
being and will be issued pursuant to an exemption from registration for
nonpublic offerings or offerings to one or more accredited investors, (c) that
the Warrant Holder is acquiring the Warrant and will acquire the Warrant Shares
(unless such Warrants and/or Warrant Shares are registered under the 1933 Act
and applicable state securities laws) for his own account and not with a view
toward their distribution, (d) the Warrant Holder is experienced in making
investments of this nature and has the necessary sophistication to be able to
evaluate the merits of this investment and (e) the Warrant Holder will not sell,
offer for sale, pledge or otherwise hypothecate the Warrant or the Warrant
Shares (unless such shares are registered under the 1933 Act and applicable
state securities laws) in the absence of an opinion of counsel reasonably
acceptable to the Company, that the sale, offer for sale, pledge or
hypothecation of the Warrant and Warrant Shares
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is exempt from the registration and prospectus delivery requirements of the 1933
Act and applicable state securities laws.
Section 11.4 Partial Exercise and Partial Assignment.
(a) If this Warrant is exercised in part only, the holder shall upon
surrender hereof be entitled to receive a new Warrant, registered in the
name of the holder or its nominee. This Warrant may be assigned either in
whole or in part by surrender of this Warrant at the principal office of
the Company in Denver, Colorado (with the assignment or, as the case may
be, partial assignment form at the end hereof duly executed). If this
Warrant is assigned, a new Warrant shall be issued to the holder hereof,
registered in the name of such holder or its nominee. The assignee shall
also be entitled to receive a new Warrant, registered in the name of such
assignee or its nominee.
(b) Subject to the provisions of paragraph (a) of this Section 11.4
this Warrant and the Warrant Shares may not be sold or otherwise disposed
of except as follows:
(i) to a person who, in the opinion of counsel reasonably
satisfactory to the Company, is a person to whom this Warrant or the
Warrant Shares may legally be transferred without registration and without
the delivery of a current prospectus under the 1933 Act with respect
thereto and then only against receipt of an agreement of such person to
comply with the provisions of this Warrant with respect to any resale or
other disposition of such securities; or
(ii) to any person upon delivery of a prospectus then meeting the
requirements of the 1933 Act relating to such securities (as to which a
registration statement under the 1933 Act shall then be in effect) and the
offering thereof for such sale or disposition.
Section 11.5 Successors. All the covenants, agreements, representations
and warranties contained in this Warrant shall bind the parties hereto and their
respective heirs, executors, administrators, distributees, successors and
assigns.
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Section 11.6 Severability. Should any part of this Warrant for any
reason be declared invalid, such decision shall not affect the validity of any
remaining portion, which remaining portion shall remain in force and effect as
if this Warrant had been executed with the invalid portion thereof eliminated,
and it is hereby declared the intention of the parties hereto that they would
have executed and accepted the remaining portion of this Warrant without
including therein any such part, parts or portion which may, for any reason, be
hereafter declared invalid.
Section 11.7 Notices. Any notices required to be given pursuant to the
terms hereof shall be given (unless otherwise herein expressly provided) in
writing and either (i) personally delivered, (ii) sent by certified, return
receipt requested, (iii) sent by prepaid overnight courier, or (iv) transmitted
by telecopier or similar device, with confirmation of receipt. Notices shall be
addressed, if to holder of Warrants or Warrant Shares, to:
Luis J. Mejeia
Innovative Research Associates, Inc.
950 Madison Avenue
New York, New York 10022
or to such other address of such holder appearing in the register maintained by
the Company, and if to the Company, to:
KFx Inc.
1999 Broadway, Suite 3200
Denver, CO 80202
Attn: Chief Financial Officer
For purposes of this Warrant, any notice sent by mail shall be demand given
on the date deposited in the mail.
Section 11.8 Headings. The Article headings in this Warrant are inserted
for purposes of convenience only and shall have no substantive effect.
Section 11.9 Law Governing. This Warrant is delivered in the State of
Colorado and shall be construed and enforced in
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accordance with, and governed by, the laws of the State of Colorado.
Section 11.10 Amendments and Modifications. This Warrant may be amended or
modified only with the prior written consent of the holder hereof.
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WITNESS the seal of the Company and the signatures of its duly authorized
officers.
KFx Inc.
------------------------------------------
Theodore Venners, Chief Executive Officer
(SEAL)
------------------------------------------
R. G. Swenson, Secretary
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KFx INC.
SUBSCRIPTION FORM
(To be executed by the Registered Holder
in order to Exercise the Warrant)
The undersigned hereby irrevocably elects to exercise the right to purchase
________________ shares (the "Shares") of common stock, $.001 par value (the
"Common Stock") of KFx Inc. (the "Company") covered by the Common Stock Purchase
Warrant dated October 29, 1996 (the "Warrant") and herewith makes payment of the
purchase price of such Shares in accordance with the terms of the Warrant. The
undersigned requests a certificate for such Shares to be registered in the name
of _____________________, whose address is ___________________________________.
If said number of Shares is less than all of the Shares issuable under the
Warrant, the undersigned further requests that a new warrant representing the
right to acquire the remaining balance of the Shares to be registered in the
name __________________________________, whose address is ______________________
________________________________.
The undersigned hereby represents and warrants that:
(a) the Shares have not been registered under the Securities Act of
1933, as amended (the "Act") or any state securities laws,
(b) the Shares (unless such Shares are registered under the Act and
applicable state securities laws) are being and will be issued pursuant to
an exemption from registration for nonpublic offerings or offerings to one
or more accredited investors,
(c) he is acquiring the Shares (unless such Shares are registered
under the Act and applicable state securities laws) for his own account and
not with a view toward their distribution,
(d) he is experienced in making investments of this nature and has the
necessary sophistication to be able to evaluate the merits of this
investment, and
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(e) he will not sell, offer for sale, pledge or otherwise hypothecate
the Shares (unless such Shares are registered under the Act and applicable
state securities laws) in the absence of an opinion of counsel reasonably
acceptable to the Company, that the sale, offer for sale, pledge or
hypothecation of the Shares is exempt from the registration and prospectus
delivery requirements of the Act and applicable state securities laws.
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<PAGE>
(f) the Shares are being acquired in accordance with and subject to
the terms, provisions and conditions of the Warrant, to all of which he
hereby expressly assent.
Very truly yours,
____________________________
Print Name: ____________________________
Address: ____________________________
____________________________
Receipt of the above is hereby acknowledged:
KFx Inc.
By: ________________________
Title: ________________________
Date: ________________________
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<PAGE>
ASSIGNMENT
----------
FOR VALUE RECEIVED ______________________________________ hereby sells,
assigns and transfers unto _______________________________________ the within
Warrant and all rights evidenced thereby and does irrevocably constitute and
appoint, __________________ _____________________ as attorney-in-fact, to
transfer the said Warrant on the books of the within named Company.
-----------------------------------
Dated:
-----------------------
PARTIAL ASSIGNMENT
------------------
FOR VALUE RECEIVED ________________________________________ hereby sells,
assigns and transfers unto ________________________________________ that portion
of the within Warrant and the rights evidenced thereby which will on the date
hereof entitle the holder to purchase ____________ shares of Common Stock of
_______________________________, irrevocably constitute and appoint
_____________________________, attorney-in-fact, to transfer that part of the
said Warrant on the books of the within named Company.
-----------------------------------
Dated:
-----------------------
<PAGE>
AMENDMENT NO. 1 TO COMMON STOCK PURCHASE WARRANT
This Amendment No. 1 to Common Stock Purchase Warrant (this
"Amendment"), is made by and between KFx Inc., a Delaware corporation (the
"Company") and Innovative Research Associates, Inc., a New York corporation
("Warrant Holder"), as of this 3rd day of August 1998. The Company and Warrant
Holder are sometimes collectively referred to herein as the "Parties."
WHEREAS, the Parties entered into that certain Common Stock Purchase
Warrant dated October 29, 1996 in the amount of 65,000 shares (the "October
Warrant Agreement");
WHEREAS, on November 15, 1996 the Warrant Holder partially exercised the
October Warrant Agreement and purchased 10,000 shares of common stock of the
Company (the "Common Stock");
WHEREAS, in connection with the partial exercise the Company reissued
the October Warrant Agreement in the form of a Common Stock Purchase Warrant
dated November 15, 1996 in the amount of 55,000 shares (the "Warrant
Agreement");
WHEREAS, the Parties now desire to amend the Warrant Agreement pursuant
to the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth in the Warrant Agreement and as hereinafter set forth, and other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Parties agree as follows:
1. The introduction paragraph of the Warrant Agreement is hereby amended
in its entirety to read as follows:
THIS IS TO CERTIFY that, for value received and subject to the
provisions hereinafter set forth, Innovative Research Associates,
Inc., a New York corporation with its principal place of business at
950 Third Avenue, 26th Floor, New York, New York 10022 (the "Warrant
Holder") (or its assigns), is entitled to purchase from KFx Inc., a
Delaware corporation ("Company") Fifty-Five Thousand (55,000) shares
(the "Warrant Shares") of the Company's $.001 par value common stock
(the "Common Stock" or "Shares"), for an aggregate purchase price
equal to $3.75 multiplied by Fifty Five Thousand (55,000) shares
("Aggregate Original Warrant Price"), all on and subject to the terms,
provisions and conditions hereinafter set forth. This Warrant may be
exercised as to all or part (comprising a whole number) of the Shares
represented hereby at any time or times before August 3, 2001
("Expiration Date"). This Warrant shall be void and of no effect, and
all rights, restrictions, and obligations hereunder shall cease to the
extent not exercised prior to the Expiration Date.
<PAGE>
2. Section 1.1 of the Warrant Agreement is hereby amended in their entirety
to read as follows:
Section 1.1 Duration. Subject to the provisions of Section 1.2 and 1.4
hereof, this Warrant may be exercised at any time on or after 5:00 p.m.,
Denver, Colorado time, on November 15, 1996 and at or before 5:00 p.m.,
Denver Colorado time on August 3, 2001 (or, if such day is not a
business day, at or before 5:00 p.m., Denver, Colorado time, on the next
following business day). If this Warrant is not exercised on or before
the Expiration Date, it shall become void, and all rights hereunder
shall thereupon cease.
2. All capitalized terms used and not otherwise defined herein shall have
the same meanings as set forth in the Warrant Agreement.
3. As expressly modified by the terms hereof, the terms and provisions of
the Warrant Agreement shall remain in full force and effect as
originally written.
4. Signatures on this Amendment may be communicated by facsimile
transmission and shall be binding upon the Parties transmitting the same
by facsimile transmission. If executed in counterparts, this Amendment
will be as effective as if simultaneously executed.
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WITNESS, the seal of the Company and the signatures of its duly
authorized officers.
KFx Inc.
--------------------------------------------------
Seth L. Patterson
Executive Vice President & Chief Financial Officer
--------------------------------------------------
Rudolph G. Swenson, Secretary
The undersigned hereby consents to this Amendment as required by Section
11.10 of the Warrant Agreement.
Innovative Research Associates, Inc.
By:
--------------------------------------
Name:
--------------------------------------
Title:
--------------------------------------
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EXHIBIT 4.9
THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFIED UNDER
ANY APPLICABLE STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED, HYPOTHECATED OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION AND
QUALIFICATION WITHOUT AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY STATING
THAT SUCH REGISTRATION AND QUALIFICATION IS NOT REQUIRED.
33,334 SHARES
COMMON STOCK PURCHASE WARRANT
OF KFx INC.
January 15, 1997
----------------
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
THIS IS TO CERTIFY that, for value received and subject to the provisions
hereinafter set forth, John P. Venners, as Assignee of Public Relations of
America, LTD., with his principal place of business at 901 North Stuart Street,
Suite 750, Arlington, Virginia 22203 (the "Warrant Holder") (or its assigns), is
entitled to purchase from KFx Inc, a Delaware corporation ("Company") thirty-
three thousand three hundred thirty-four shares (the "Warrant Shares") of the
Company's $.001 par value common stock (the "Common Stock" or "Shares"), for an
aggregate purchase price equal to $4.00 multiplied by thirty-three thousand
three hundred thirty-four (33,334) shares ("Aggregate Original Warrant Price"),
all on and subject to the terms, provisions and conditions hereinafter set
forth. This Warrant may be exercised as to all or part (comprising a whole
number) of the Shares represented hereby at any time or times on or before
November 5, 1999 ("Expiration Date"). This Warrant shall be void and of no
effect, and all rights, restrictions, and obligations hereunder shall cease to
the extent not exercised prior to the Expiration Date. This Warrant is issued
in partial exchange for a Warrant issued by the Company to Public Relations of
America, LTD., on November 6, 1996, in the amount of one hundred thousand
shares.
ARTICLE I
EXERCISE OF WARRANT
Section 1.1 Duration. Subject to the provisions of Sections 1.2 and 1.4
hereof, this Warrant may be exercised at any time on or after 9:00 a.m., Denver,
Colorado time, on January 15, 1997 and at or before 5:00 p.m., Denver, Colorado
time, on November 5, 1999 (or, if such day is not a business day, at or before
5:00 p.m., Denver, Colorado time, on the next following business day). If this
Warrant is not exercised on or before the Expiration Date, it shall become void,
and all rights hereunder shall thereupon cease.
<PAGE>
Section 1.2 Exercise of Warrant. Subject to the conditions contained
herein, this Warrant may be exercised in whole or in part at any time or times
before the Expiration Date by the surrender of this Warrant or any duly
authorized replacements hereto (with a duly executed subscription agreement in
the form attached hereto) at the principal office of the Company in Denver,
Colorado, and upon payment to the Company of the Aggregate Original Warrant
Price (or, if exercised in part, upon payment to the Company of the applicable
proportionate part of the Aggregate Original Warrant Price) for each Share so
purchased in lawful money of the United States, or by check, or postal or
express money order payable in United States dollars to the order of the Company
or by funds wired to an account as specified by the Company, and upon compliance
with and subject to the conditions set forth herein.
Upon receipt of this Warrant with the form of exercise duly executed and
accompanied by payment of the Aggregate Original Warrant Price for the shares of
Common Stock for which this Warrant is then being exercised, the Company will
cause to be issued certificates for the total number of whole Warrant Shares (as
provided in Article V hereof) for which this Warrant is being exercised in such
denominations as are required for delivery to the Warrant Holder, and the
Company shall thereupon deliver such certificates to the Warrant Holder or his
assignee.
In case the Warrant Holder shall exercise this Warrant with respect to less
than all of the shares of Common Stock that may be purchased under this Warrant,
the Company will execute a new Warrant substantially in the form of this Warrant
for the balance of the shares of Common Stock that may be purchased upon
exercise of this Warrant and deliver such new Warrant to the Warrant Holder.
The Company shall pay any and all transfer taxes payable in connection with
the issue of this Warrant or the issue of any Warrant Shares upon exercise of
this Warrant. The Company shall not, however, be required to pay any tax which
may be payable in respect of any transfer involved in the issuance or delivery
of this Warrant or the Warrant Shares in a name other than that of the Warrant
Holder at the time of surrender, and until the payment of such tax the Company
shall not be required to issue such Warrant Shares.
<PAGE>
Section 1.3 Warrant Holder Representation and Certificate Legend.
Unless the issuance of the Warrant Shares shall have been registered under the
Securities Act of 1933, as amended (the "1933 Act"), as a condition of its
delivery of certificates for the Warrant Shares or upon the split-up,
combination, exchange, transfer or loan of the Warrant, the Company may require
the Warrant Holder (including the transferee of the Warrant in whose name the
Warrant Shares are to be registered) to deliver to the Company, in writing,
representations regarding the Warrant Holder's sophistication, investment
intent, acquisition for his own account and such other matters as are reasonable
and customary for purchasers of securities in an unregistered private offering.
The Company may place conspicuously upon each new Warrant and upon each
certificate representing the Warrant Shares a legend substantially in the
following form, the terms of which are agreed to by the Warrant Holder
(including each transferee):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED SOLELY
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "1933 ACT"), OR ANY STATE SECURITIES LAW. SUCH
SHARES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF SUCH REGISTRATION OR AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY THAT SUCH SALE, OFFER, PLEDGE OR HYPOTHECATION IS EXEMPT FROM THE
REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF THE 1933 ACT AND OF
ANY APPLICABLE STATE SECURITIES LAWS.
The Company need not register a transfer of this Warrant or the Warrant
Shares unless the conditions specified in such legend are satisfied. Subject to
the transfer restrictions set forth in this Article I and in Articles IX and X
herein, this Warrant is transferable, in whole or in part, on the books of the
Company, upon surrender of this Warrant to the Company, together with a written
assignment duly executed by the Warrant Holder.
Section 1.4 Vesting. This Warrant shall vest and be exercisable
effective January 15, 1997.
Section 1.5 Exercise Price. The initial exercise price shall be $4.00
per share (the "Exercise Price").
ARTICLE II
ANTIDILUTION
Section 2.1 Subdivisions or Combinations. In case the Company shall at
any time after the date of this Warrant (i) subdivide the outstanding Shares or
(ii) combine the outstanding Shares into a smaller number of Shares, the
Exercise Price and the number and kind of Shares receivable upon exercise, in
effect at the time of the effective date of such subdivision or combination,
shall be proportionately adjusted so that the holder of the Warrant exercised
after such time shall be entitled
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<PAGE>
to receive the same percentage and kind of shares which, if the Warrant had been
exercised immediately prior to such date, the holder would have owned upon such
exercise and been entitled to receive by virtue of such subdivision or
combination. Such adjustment shall be made successively whenever any event
listed above shall occur and shall be retroactive to the record date, if any,
for such event. Any adjustment made pursuant to this Section 2.1 shall become
effective immediately upon the effective date of such event retroactive to the
record date, if any, for such event. All calculations made under this Section
2.1 shall be made to the nearest cent or to the nearest Share, as the case may
be.
Section 2.2 Reorganization, Reclassification or Consolidation. In case
of any capital reorganization of the Company, or of any reclassification of
Shares (other than a change in par value, or from par value to no par value, or
from no par value to par value, or as a result of subdivision or combination),
or in case of the consolidation of the Company with or the merger of the Company
into any other person (other than a consolidation or merger in which the Company
is the continuing corporation) or of the sale of the properties and assets of
the Company as, or substantially as, an entirety to any other corporation, the
Warrant shall after such reorganization, reclassification, consolidation, merger
or sale be exercisable, upon the terms and conditions specified in this
Agreement, for the number of shares of stock or other securities, cash or other
property to which a holder of the number of Shares purchasable (at the time of
such reorganization, reclassification, consolidation, merger or sale) upon
exercise of the Warrant would have been entitled upon such reorganization,
reclassification, consolidation, merger or sale; and in any such case, if
necessary, the provisions set forth in this Section 2.2 with respect to the
rights and interests thereafter of the holders of the Warrant shall be
appropriately adjusted so as to be applicable, as nearly as may reasonably be,
to any shares of stock or other securities, cash or other property thereafter
deliverable on the exercise of the Warrant. The subdivision or combination of
Shares at any time outstanding into a greater or lesser number of Shares shall
not be deemed to be a reclassification of the Common Stock for the purposes of
this Section 2.2. The Company shall not effect any such consolidation, merger
or sale unless prior to or simultaneously with the consummation thereof the
successor corporation (if other than the Company) resulting from such
consolidation or merger or the person purchasing such assets or other
appropriate corporation or entity shall assume, by written instrument executed
and delivered to the Company's and successor person's transfer agent, if any,
the obligation to deliver to the holders of the Warrant such shares of stock,
other securities, cash or other property as, in accordance with the foregoing
provisions, such holders may be entitled to purchase and the other obligations
of the Company under this Warrant.
Section 2.3 Notices to the Warrant Holder. Upon any adjustment of the
Exercise Price or of the number or kind of Shares for which the outstanding
Warrant may be exercised pursuant to Article II, the Company, within 20 calendar
days thereafter, shall cause to be given to all of the holders of the Warrant,
at such holders' addresses appearing on the register or other records maintained
for such purpose, an officer's certificate showing the adjusted Exercise Price
and setting forth in reasonable detail the method of calculation and the facts
upon which such calculations are based and setting forth the number of Shares
purchasable upon exercise of the Warrant after such
4
<PAGE>
adjustment. Where appropriate, such notice may be given in advance and included
as a part of the notice required to be mailed under the other provisions of this
Article II.
In case:
(a) of any consolidation or merger to which the Company is a party and
for which approval of any stockholders of the Company is required, or of
the conveyance or transfer of the properties and assets of the Company as,
or substantially as, an entirety, or of any capital reorganization or any
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, or as a
result of a subdivision or combination); or
(b) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company;
then the Company shall cause to be mailed to the Warrant Holder at his address
appearing on the register or other records maintained by the Company for such
purpose, at least 20 calendar days (or 10 calendar days in any case specified in
clauses (a) or (b) above) prior to the applicable record or effective date
hereinafter specified a written notice stating the date on which any such
consolidation, merger, conveyance, transfer, reorganization, reclassification,
dissolution, liquidation or winding up is expected and that holders of record of
shares of Common Stock shall be entitled to exchange such shares for securities,
cash or other property, if any, deliverable upon such consolidation, merger,
conveyance, transfer, reorganization, reclassification, dissolution, liquidation
or winding up. The failure to give the notice required by this Section 2.3 or
any defect therein shall not affect the legality or validity of any
consolidation, merger, conveyance, transfer, reorganization, dissolution,
liquidation or winding up or the vote upon any action.
ARTICLE III
MERGERS, CONSOLIDATIONS, SALES AND
OTHER REORGANIZATIONS
5
<PAGE>
In the case of any consolidation or merger of the Company with another
entity, or the sale or all or substantially all or its assets to another entity,
or any reorganization or reclassification of the Common Stock or other equity
securities of the Company, then, as a condition of such consolidation, merger,
sale, reorganization or reclassification, lawful and adequate provision shall be
made whereby the holder of this Warrant shall thereafter have the right to
receive upon the basis and upon the terms and conditions specified herein and in
lieu of the shares of Common Stock immediately theretofore purchasable
hereunder, such shares of stock, securities or assets as may (by virtue of such
consolidation, merger, sale, reorganization or reclassification) be issued or
payable with respect to or in exchange for a number of outstanding shares of
Common Stock equal to the number of shares of Common Stock immediately
theretofore so purchasable hereunder had such consolidation, merger, sale,
reorganization or reclassification not taken place, and in any such case
appropriate provisions shall be made with respect to the rights and interests of
the holder of this Warrant to the end that the provisions hereof shall
thereafter be applicable, as nearly as may be, in relation to any shares of
stock, securities or assets thereafter deliverable upon exercise of this
Warrant. The Company shall not effect any such consolidation, merger, sale or
reorganization, unless prior to or simultaneously with the consummation thereof,
the successor entity (if other than the Company) resulting from such
consolidation, merger or reorganization or the entity purchasing such assets
shall assume by written instrument executed and mailed or delivered to the
holder of this Warrant, the obligations to deliver to such holder such shares of
stock, securities or assets as, in accordance with the foregoing provisions,
such holder may be entitled to receive. Notwithstanding anything herein to the
contrary, in the event that any shareholders of the Company have an opportunity
to sell or exchange their shares of Common Stock pursuant to a consolidation,
merger, sale or reorganization or otherwise, each of the holders of the Warrant
may, if they so decide in their sole discretion, immediately exercise the
Warrant in whole or in part and, at their option sell or exchange any or all of
the Common Stock thereafter owned by such holders upon terms and conditions no
less favorable than those upon which the other shareholders are selling or
exchanging their shares of Common Stock.
ARTICLE IV
FRACTIONAL SHARES
Anything contained herein to the contrary notwithstanding, the Company
shall not be required to issue any fraction of a share in connection with the
exercise of this Warrant, and in any case where the Warrant Holder would, except
for the provisions of this Article IV, be entitled under the terms of this
Warrant to receive a fraction of a share upon the exercise of this Warrant, the
Company shall upon the exercise of this Warrant and receipt of the Exercise
Price, issue the largest number of whole shares purchasable upon exercise of
this Warrant. The Company shall not be required to make any cash or other
adjustment in respect of such fraction of a share to which the Warrant Holder
would otherwise be entitled. The Warrant Holder, by the acceptance of this
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<PAGE>
Warrant, expressly waives his right to receive a certificate for any fraction of
a share upon exercise hereof.
ARTICLE V
FULLY PAID STOCK; TAXES
The Company covenants and agrees that the shares of stock represented by
each and every certificate representing Common Stock to be delivered on the
exercise of the purchase rights herein provided for shall, at the time of such
delivery, be validly issued and outstanding and be fully paid and nonassessable.
The Company further covenants and agrees that it will pay when due and payable
any and all Federal, State and local taxes which may be payable in connection
with the issuance of this Warrant or any Common Stock or certificates therefor
or the exercise of the rights provided for pursuant to the provisions hereof,
including without limitation any such taxes relating to the exercise of any
purchase, conversion, or other rights contained herein, but specifically
excluding any Federal, State or local income taxes owing by the holders of the
Warrant.
ARTICLE VI
CLOSING OF TRANSFER BOOKS
The right to exercise this Warrant shall not be suspended during any period
that the stock transfer books of the Company may be closed. The Company shall
not be required, however, to deliver certificates representing shares of its
Common Stock upon such exercise while such books are duly closed for any
purpose, but the Company may postpone the delivery of the certificates for such
Common Stock until the opening of such books, and they shall, in such case, be
delivered forthwith upon the opening thereof, or as soon as practicable
thereafter.
ARTICLE VII
REPLACEMENT OF WARRANT
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
such loss, theft or destruction, upon delivery to the Company of indemnity or
security reasonably satisfactory to it and reimbursement to the Company of all
reasonable expenses incidental thereto, or, in the case of any such mutilation,
upon surrender and cancellation of this Warrant, the Company will make and
deliver a new Warrant of like tenor, in lieu of this Warrant.
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<PAGE>
ARTICLE VIII
RESERVATION OF SHARES
The Company shall at all times reserve and keep available out of its
authorized shares of Common Stock, solely for the purpose of issuance upon the
exercise of this Warrant, such number of shares of Common Stock as shall be
issuable upon the exercise of this Warrant. The Company covenants and agrees
that, upon exercise of this Warrant and payment of the Purchase Price therefor,
all shares of Common Stock issuable upon such exercise shall be duly and validly
issued, fully paid and non-assessable.
ARTICLE IX
RESTRICTIONS ON TRANSFERABILITY
OF WARRANTS AND SHARES; COMPLIANCE WITH LAWS
Section 9.1 In General. This Warrant and the Warrant Shares issued upon
the exercise hereof shall not be transferable except upon the conditions
hereinafter specified, which conditions are intended to insure compliance with
the provisions of the 1933 Act (or any similar Federal statute at the time in
effect) and any applicable State securities laws in respect of the transfer of
this Warrant or any such Warrant Shares.
Section 9.2 Restrictive Legends. Each Warrant shall bear on the face
thereof a legend substantially in the form of the notice endorsed on the first
page of this Warrant. Each certificate for shares of Common Stock initially
issued upon the exercise of any Warrant and each certificate for shares of
Common Stock issued to a subsequent transferee of such certificate shall, unless
otherwise permitted by the provisions of this Section 9.2, bear on the face
thereof a legend reading substantially as follows:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED SOLELY
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "1933 ACT"), OR ANY STATE SECURITIES LAW. SUCH
SHARES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF SUCH REGISTRATION OR AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY THAT SUCH SALE, OFFER, PLEDGE OR HYPOTHECATION IS EXEMPT FROM THE
REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF THE 1933 ACT AND OF
ANY APPLICABLE STATE SECURITIES LAWS. THE SHARES REPRESENTED BY THIS
CERTIFICATE ARE SUBJECT TO THE TERMS AND CONDITIONS OF THAT CERTAIN WARRANT
AGREEMENT DATED JANUARY 15, 1997, PURSUANT TO WHICH THEY WERE ISSUED.
8
<PAGE>
In the event that a registration statement covering the Warrant Shares
shall become effective under the 1933 Act and under any applicable State
securities laws or in the event that the Company shall receive an opinion
of counsel satisfactory to it that, in the opinion of such counsel, such
legend is not, or is no longer, necessary or required (including, without
limitation, because of the availability of the exemption afforded by Rule
144 of the General Rules and Regulations of the Securities and Exchange
Commission), the Company shall, or shall instruct its transfer agents and
registrars to, remove such legend from the certificates evidencing the
Warrant Shares or issue new certificates without such legend in lieu
thereof. All fees and expenses of counsel in connection with the rendition
of the opinion provided for in this Section 9.2 shall be paid by the
holder.
Section 9.3 Notice of Proposed Transfer; Registration Not Required. The
holder of this Warrant or of any Warrant Shares, by acceptance thereof, agrees
to give prior written notice to the Company of such holder's intention to
transfer such Warrant or the Warrant Shares relating thereto (or any portion
thereof) describing briefly the manner and circumstances of the proposed
transfer. Promptly after receiving such written notice, the Company shall
present copies thereof to Company counsel and to counsel designated by such
holder, who may be an employee of such holder. If in the opinion of each such
counsel the proposed transfer may be affected without registration or
qualification of such Warrant or the Warrant Shares under any Federal or State
law, the Company, as promptly as practicable, shall notify such holder of such
opinion and of the terms and conditions, if any, to be observed, whereupon such
holder shall be entitled to transfer such Warrant or Warrant Shares, all in
accordance with the terms of the notice delivered to such holder by the Company.
If either of such counsel is unable to render such an opinion (in which case
said counsel shall set forth in writing the basis for the legal conclusions in
this regard), the Company shall promptly notify such holder that the proposed
transfer described in the written notice given pursuant to this subsection may
not be effected without such registration or qualification or without compliance
with the conditions of an exemptive regulation of the Commission and any
applicable State Securities regulatory authority. Such holder shall not be
entitled to effect such transfer until such registration, qualification,
exemption or other compliance has become effective. All fees and expenses of
counsel in connection with the rendition of the opinions provided for in this
subsection shall be paid by the holder requesting the transfer.
ARTICLE X
RIGHT OF FIRST REFUSAL
In the event any holder of Warrants or Warrant Shares ("Offeror") proposes
to sell all or any portion of the Warrants or Warrant Shares owned by the holder
to a person or entity other than an affiliate of the holder, the Offeror shall
first deliver to the Company a written notice ("Notice of Proposed Sale")
specifying the name and address of the proposed purchaser ("Proposed
Purchaser"), the number of Warrants or Warrant Shares proposed to be sold to the
Proposed Purchaser ("Offered
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<PAGE>
Shares"), and all of the terms, including the price, of the proposed sale and
stating that the Company has the right to purchase the Offered Shares in
accordance with the following terms:
(i) During the 30-day period following receipt of the Notice of
Proposed Sale ("Exercise Period"), the Company shall have the right to
purchase all (but not less than all) of the Offered Shares, at the price
and on the terms specified in the Notice of Proposed Sale. The company
shall give written notice of its election to the Offeror during the
Exercise Period.
(ii) If the Offered Shares have not been purchased by the Company as
specified herein, the Offeror shall have the right, but only for a period
of six (6) months after the expiration of the Exercise Period, to sell the
Offered Shares to the Proposed Purchaser at the price specified in the
Notice of Proposed Sale.
(iii) Warrants or Warrant Shares sold to a Proposed Purchaser as
provided herein shall continue to be subject to the provisions of this
Warrant, and the Company shall not be obligated to issue a new Warrant
therefor in the name of such Proposed Purchaser unless that Proposed
Purchaser agrees in writing to become bound by the terms hereof.
(iv) For purposes of this Article X an affiliate shall mean each and
every corporation, partnership, person, or other entity controlling,
controlled by, or under common control with, the holder of any Warrant or
Warrant Shares.
ARTICLE XI
MISCELLANEOUS
Section 11.1 Warrant Holder As Owner. Prior to due presentment for
registration of transfer of this Warrant, the Company may deem and treat the
Warrant Holder as the absolute owner of this Warrant (notwithstanding any
notation of ownership or other writing hereon) for the purpose of any exercise
hereof and for all other purposes, and the Company shall not be affected by any
notice to the contrary.
Section 11.2 Warrant Holder Not Shareholder. This Warrant does not
confer upon the holder hereof any right to vote or to consent or to receive
notice as a shareholder of the Company, as such, in respect of any matters
whatsoever, or any other rights or liabilities as a shareholder, prior to the
exercise hereof as hereinbefore provided.
Section 11.3 Warrant Holder Representation. Notwithstanding anything to
the contrary herein, the Warrant Holder represents and warrants that (a) it
acknowledges that the Warrant and the Warrant Shares have not been registered
under the 1933 Act or any state securities laws, (b) the Warrants and the
Warrant Shares (unless such Warrants and/or Warrant Shares, as the case may be,
are registered under the 1933 Act and applicable state securities laws) are
being and will be issued pursuant to an exemption from registration for
nonpublic offerings or offerings to one or more
10
<PAGE>
accredited investors, (c) that the Warrant Holder is acquiring the Warrant and
will acquire the Warrant Shares (unless such Warrants and/or Warrant Shares are
registered under the 1933 Act and applicable state securities laws) for his own
account and not with a view toward their distribution, (d) the Warrant Holder is
experienced in making investments of this nature and has the necessary
sophistication to be able to evaluate the merits of this investment and (e) the
Warrant Holder will not sell, offer for sale, pledge or otherwise hypothecate
the Warrant or the Warrant Shares (unless such shares are registered under the
1933 Act and applicable state securities laws) in the absence of an opinion of
counsel reasonably acceptable to the Company, that the sale, offer for sale,
pledge or hypothecation of the Warrant and Warrant Shares is exempt from the
registration and prospectus delivery requirements of the 1933 Act and applicable
state securities laws.
Section 11.4 Partial Exercise and Partial Assignment.
(a) If this Warrant is exercised in part only, the holder shall upon
surrender hereof be entitled to receive a new Warrant, registered in the
name of the holder or its nominee. This Warrant may be assigned either in
whole or in part by surrender of this Warrant at the principal office of
the Company in Denver, Colorado (with the assignment or, as the case may
be, partial assignment form at the end hereof duly executed). If this
Warrant is assigned, a new Warrant shall be issued to the holder hereof,
registered in the name of such holder or its nominee. The assignee shall
also be entitled to receive a new Warrant, registered in the name of such
assignee or its nominee.
(b) Subject to the provisions of paragraph (a) of this Section 11.4
this Warrant and the Warrant Shares may not be sold or otherwise disposed
of except as follows:
(i) to a person who, in the opinion of counsel reasonably
satisfactory to the Company, is a person to whom this Warrant or the
Warrant Shares may legally be transferred without registration and without
the delivery of a current prospectus under the 1933 Act with respect
thereto and then only against receipt of an agreement of such person to
comply with the provisions of this Warrant with respect to any resale or
other disposition of such securities; or
(ii) to any person upon delivery of a prospectus then meeting the
requirements of the 1933 Act relating to such securities (as to which a
registration statement under the 1933 Act shall then be in effect) and the
offering thereof for such sale or disposition.
Section 11.5 Successors. All the covenants, agreements, representations
and warranties contained in this Warrant shall bind the parties hereto and their
respective heirs, executors, administrators, distributees, successors and
assigns.
Section 11.6 Severability. Should any part of this Warrant for any
reason be declared invalid, such decision shall not affect the validity of any
remaining portion, which remaining portion
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shall remain in force and effect as if this Warrant had been executed with the
invalid portion thereof eliminated, and it is hereby declared the intention of
the parties hereto that they would have executed and accepted the remaining
portion of this Warrant without including therein any such part, parts or
portion which may, for any reason, be hereafter declared invalid.
Section 11.7 Notices. Any notices required to be given pursuant to the
terms hereof shall be given (unless otherwise herein expressly provided) in
writing and either (i) personally delivered, (ii) sent by certified, return
receipt requested, (iii) sent by prepaid overnight courier, or (iv) transmitted
by telecopier or similar device, with confirmation of receipt. Notices shall be
addressed, if to holder of Warrants or Warrant Shares, to:
John P. Venners.
901 North Stuart Street, Suite 750
Arlington, Virginia 22203
or to such other address of such holder appearing in the register maintained by
the Company, and if to the Company, to:
KFx Inc.
1999 Broadway, Suite 3200
Denver, CO 80202
Attn: Chief Financial Officer
For purposes of this Warrant, any notice sent by mail shall be demand given
on the date deposited in the mail.
Section 11.8 Headings. The Article headings in this Warrant are inserted
for purposes of convenience only and shall have no substantive effect.
Section 11.9 Law Governing. This Warrant is delivered in the State of
Colorado and shall be construed and enforced in accordance with, and governed
by, the laws of the State of Colorado.
Section 11.10 Amendments and Modifications. This Warrant may be amended or
modified only with the prior written consent of the holder hereof.
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WITNESS the seal of the Company and the signatures of its duly authorized
officers.
KFx Inc.
_________________________________________
Theodore Venners, Chief Executive Officer
(SEAL)
_________________________________________
R. G. Swenson, Secretary
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KFx INC.
SUBSCRIPTION FORM
(To be executed by the Registered Holder
in order to Exercise the Warrant)
The undersigned hereby irrevocably elects to exercise the right to purchase
__________ shares (the "Shares") of common stock, $.001 par value (the "Common
Stock") of KFx Inc. (the "Company") covered by the Common Stock Purchase Warrant
dated ____________, ____ (the "Warrant") and herewith makes payment of the
purchase price of such Shares in accordance with the terms of the Warrant. The
undersigned requests a certificate for such Shares to be registered in the name
of _____________________, whose address is __________________________________.
________________. If said number of Shares is less than all of the Shares
issuable under the Warrant, the undersigned further requests that a new warrant
representing the right to acquire the remaining balance of the Shares to be
registered in the name __________________________________, whose address is
______________________________________________________.
The undersigned hereby represents and warrants that:
(a) the Shares have not been registered under the Securities Act of
1933, as amended (the "Act") or any state securities laws,
(b) the Shares (unless such Shares are registered under the Act and
applicable state securities laws) are being and will be issued pursuant to
an exemption from registration for nonpublic offerings or offerings to one
or more accredited investors,
(c) he is acquiring the Shares (unless such Shares are registered
under the Act and applicable state securities laws) for his own account and
not with a view toward their distribution,
(d) he is experienced in making investments of this nature and has the
necessary sophistication to be able to evaluate the merits of this
investment, and
(e) he will not sell, offer for sale, pledge or otherwise hypothecate
the Shares (unless such Shares are registered under the Act and applicable
state securities laws) in the absence of an opinion of counsel reasonably
acceptable to the Company, that the sale, offer for sale, pledge or
hypothecation of the Shares is exempt from the registration and prospectus
delivery requirements of the Act and applicable state securities laws.
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<PAGE>
(f) the Shares are being acquired in accordance with and subject to
the terms, provisions and conditions of the Warrant, to all of which he
hereby expressly assent.
Very truly yours,
____________________________
Print Name: ____________________________
Address: ____________________________
____________________________
Receipt of the above is hereby acknowledged:
KFx Inc.
By: ________________________
Title: ________________________
Date: ________________________
2
<PAGE>
ASSIGNMENT
----------
FOR VALUE RECEIVED ______________________________________ hereby sells,
assigns and transfers unto _______________________________________ the within
Warrant and all rights evidenced thereby and does irrevocably constitute and
appoint, __________________ _____________________ as attorney-in-fact, to
transfer the said Warrant on the books of the within named Company.
_____________________________
Dated: _______________________
PARTIAL ASSIGNMENT
------------------
FOR VALUE RECEIVED ________________________________________ hereby sells,
assigns and transfers unto ________________________________________ that portion
of the within Warrant and the rights evidenced thereby which will on the date
hereof entitle the holder to purchase ____________ shares of Common Stock of
_______________________________, irrevocably constitute and appoint
_____________________________, attorney-in-fact, to transfer that part of the
said Warrant on the books of the within named Company.
_____________________________
Dated: _______________________
<PAGE>
EXHIBIT 10.1
STOCK PURCHASE AGREEMENT
I.
PARTIES
The parties to this Agreement are Theodore Venners (Venners) of Denver,
Colorado, and KFx Inc., a Delaware corporation (the Company), with its principal
offices at 1999 Broadway, Suite 3200, Denver, Colorado.
II.
PURPOSE
Venners is the Chairman, CEO and President of the Company and the owner of
a large number of the Company's shares of common stock. Venners wants to
provide liquidity to his estate for the payment of inheritance taxes at his
death, and the Company wants to provide liquidity to his estate for the payment
of inheritance taxes at his death, and the Company wants to avoid the dumping of
a large number of shares of stock on the market. It is contemplated that the
Company may, but is not obligated to, carry, from time to time, life insurance
on the life of Venners and that the proceeds of such life insurance will be used
to purchase shares of the Company's stock owned by Venners at the time of his
death.
III.
USE OF INSURANCE PROCEEDS
The Company agrees to use the proceeds of any life insurance policy or
policies which it maintains on the life of Venners at the time of his death to
purchase shares of the Company's stock owned by Venners at the time of his death
at the closing sales price of said shares on the last trading day prior to the
date of his death. Such payment shall be made to Venners' estate. In the event
the
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proceeds of such insurance exceed the value of the shares owned by Venners
upon his death, any excess shall be the property of the Company. It is
understood and agreed that the Company does not obligate itself to carry life
insurance on the life of Venners and that this Agreement is effective only in
the event that such life insurance is in force upon his death. Notwithstanding
the above, the Company may not redeem or purchase such shares when the capital
of the Company is impaired or when such purchase or redemption would cause any
impairment of the capital of the Company. Further, on or prior to any such
purchase the Company shall receive an opinion of counsel acceptable to the
Company to the effect that the Company may lawfully purchase or redeem such
shares.
IV.
VENNERS' OBLIGATION
Venners agrees to sell, or cause his estate to sell, to the Company upon
his death such number of the Company's shares of stock owned by him at his death
at the closing sales price on the last trading day prior to his death as are
required to entitle his estate, to receive the proceeds, if any, from the sale
of shares as provided for in Section III hereof.
V.
BINDING UPON HEIRS, ASSIGNS AND SUCCESSORS
This Agreement shall be binding upon the heirs, assigns, successors in
interest, of the parties and the estate of Venners.
Dated: March 26, 1997
-------------------------------
Theodore Venners
Dated: March 26, 1997 KFx Inc., a Delaware corporation
By:
----------------------------
Its: Chief Operating Officer
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EXHIBIT 10.2
Professional Installation Services Master Agreement
This Professional Installation Services Master Agreement (this
"Agreement"), effective March 5, 1999 (the "Effective Date"), between Net Power
Solutions, a Delaware limited liability company, with offices located at 1999
Broadway, Suite 3200, Denver, CO 80202, ("NPS"), and the Energy Systems Group of
Science Applications International Corporation, a corporation organized and
existing under the laws of the State of Delaware, with offices located at 20201
Century Boulevard, Germantown, MD 20874, (hereinafter called "SAIC").
I. RECITALS
A. On September 3, 1998 SAIC and NPS entered into an agreement under which
SAIC and NPS agreed that, among other things, SAIC would agree to train and
provide a sufficient number of employees with appropriate expertise to implement
and install the NeuSIGHT(TM) software at customer installations and NPS would
designate SAIC as its exclusive installation partner with respect thereto.
B. This Agreement is intended to set forth the terms and conditions under
which SAIC and NPS will provide such services with respect to the NeuSIGHT(TM)
software installations.
II. NPS AND SAIC ADMINISTRATIVE CONTACTS
Net Power Solutions, LLC SAIC
Attn: Jeffrey A. Hansen Attn: Michael Fink
Chief Financial Officer 20201 Century Boulevard
1999 Broadway, Suite 3200 Germantown, MD 20874
Denver, CO 80202 USA
Tel. No. (303) 293-2992 Tel. No. (301) 353-8238
Fax No. (303) 293-8430 Fax No. (301) 353-1887
In consideration of the mutual obligations assumed under this Agreement, SAIC
and NPS agree to the Terms and Conditions attached to this Agreement and
represent that this Agreement is executed by duly authorized representatives as
of the dates below. The parties acknowledge that the enclosed Terms and
Conditions are intended to set forth the general terms of SAIC's engagement and
that the specific terms and conditions with respect to the provision of services
shall be set forth in the Task Order, with any inconsistencies resolved in favor
of the terms and provisions of the Task Order.
<TABLE>
<CAPTION>
AGREED BY:
<S> <C>
Net Power Solutions, LLC Science Applications International
Corporation
By: By:
--------------------------------------------- ---------------------------------------------
Name: Jeffrey A. Hansen Name: Michael Fink
--------------------------------------------- ---------------------------------------------
Title: Chief Financial Officer Title: Group Contract Manger
--------------------------------------------- ---------------------------------------------
Date: Date:
--------------------------------------------- ---------------------------------------------
</TABLE>
<PAGE>
TERMS AND CONDITIONS
1. DEFINITIONS
1.1 "Business Day" means an eight-hour day during normal business hours.
1.2 "Confidential Information" means information of a party to this Agreement
which is provided or disclosed to the other and is marked as confidential or
proprietary and includes, without limitation, any financial information,
business information, trade secrets, or technical information (e.g., but not
exclusively, including; user documentation, system documentation, functional
overviews, screen layouts, processing flowcharts, algorithms), whether in oral,
written, computer media or other form of communication, supplied under this
Agreement and the NeuSIGHTTM Software. If the information is initially
disclosed orally then (1) it must be designated as confidential or proprietary
at the time of the initial disclosure and (2) within twenty (20) days after
disclosure, the information must be reduced to writing and marked as
confidential or proprietary. No information of the disclosing party will be
considered Confidential Information to the extent the information:
(a) is in the public domain through no fault of the recipient either before or
after disclosure; or
(b) is in the possession of the recipient prior to the disclosure, as evidenced
by written records maintained in the ordinary course of business, or thereafter
is independently developed by recipient's employees or consultants who have had
no prior access to the information; or
c) is rightfully received from a third party without breach of any obligation
of confidence.
1.3. Prime Installation Contract. Means the primary installation contract
entered into by NPS or its affiliates and its customers to provide Installation
Services.
1.4 "Deliverable" means any written summary of results or any other written
data, information or materials provided to NPS including data, comments and
conclusions pertaining to the Installation Services performed under this
Agreement.
1.5 Installation Services. Those services necessary to install the NeuSIGHT
software in accordance with the terms and provisions contained in a Prime
Installation Contract. The Installation Services provided under each Prime
Installation Contract shall be referred to as an "Installation."
1.6 "NeuSIGHTTM Software" means the proprietary process monitoring and
optimization software program for application in the utilities industry,
including all subsequent upgrades, modifications and enhancements and releases
thereof currently owned by NPS's affiliate, Pegasus Technologies, LLC
2. TERM OF AGREEMENT
This Agreement will become effective and binding upon execution of the Agreement
as of the Effective Date; and shall continue until the earlier of (i) SAIC has
been provided with and completed contracts for Installation Services on 30
Installations (providing that NPS is able to secure a like number of Prime
Installation Contracts); or (ii) 3 years (the "Term"), whichever occurs first,
unless earlier terminated by either party in accordance with Article 11 -
Termination.
3.1 Appointment of SAIC as NPS Exclusive Installation Partner.
In accordance with and subject to the terms and provisions contained in this
Agreement, NPS hereby designates SAIC as its exclusive third-party installation
partner to provide Installation Services for NeuSIGHTTM Software in North
America. SAIC's exclusivity to provide Installation Services during the term of
this Agreement is only with respect to fixed-price Installations in North
America and not performance-based Installations, which will be offered to SAIC
on a right of first refusal basis. This designation is valid for a period of 3
years from the effective date of this agreement or until award of 30
installations to SAIC, whichever occurs first. SAIC shall be a non-exclusive
installation partner for installations in all other countries as determined on a
case-by-case basis.
- ----------
[*] indicates redacted portions
2
<PAGE>
Exclusivity as noted above is further clarified as follows:
NPS has scheduled/anticipates a quantity of [*] installations in calendar year
1999. NPS staff shall provide Installation Services for the first [*] units or
the equivalent of [*] units per calendar quarter. Beyond calendar year 1999,
NPS will utilize its own installation staff to perform installations not offered
to or accepted by SAIC, while still recognizing its obligations to SAIC under
this Agreement.
The initial [*] installations in 1999, which shall be provided on training sites
as described in Item 2 of Exhibit A (Statement of Work) to this Agreement (the
"Training Installations"), shall be provided by SAIC on a [*]. The balance of
SAIC installations shall be performed on a [*] basis.
3.2 Training and Performance Requirements
Utilization of SAIC staff is contingent upon SAIC having available properly
trained installation personnel and providing acceptable Installation Services.
The determination as to SAIC's performance in supporting NPS sales/installations
schedules shall be determined by NPS. If NPS determines, in its reasonable
judgement, that SAIC is not meeting the Installation Services requirements as
specified in a Task Order, then NPS shall notify SAIC in writing of such
deficiencies. SAIC will then have 30 days to remedy the deficiencies. If NPS
determines, in its reasonable judgement, that the deficiencies have not been
resolved within the 30-day period, then NPS shall have the right to terminate
SAIC services under such Task Order, provided however, that unresolved issues
between the parties shall be determined pursuant to Item 16.5, Disputes. Any
Task Orders terminated as noted above shall be deemed an installation commenced
by SAIC under this Agreement.
Furthermore, should NPS be required to terminate SAIC installations for reasons
as described in this Section 3.2, [*], then NPS shall have the right to
immediately terminate the obligations of exclusivity and the 30-installation
minimum as defined under Section 3.1. Should NPS proceed to terminate the
exclusivity and 30 minimum installation obligations hereunder, NPS shall pay to
SAIC [*] NPS, at its sole discretion, may continue to utilize SAIC installation
resources under this Agreement and all other terms and conditions of the
Agreement shall remain unchanged.
Effective immediately, NPS shall provide NeuSIGHTTM installation training to
SAIC staff as defined in the Exhibit A, Statement of Work.
3.3 Provision of Installation Services Ordering Procedure.
(a) Subject to Section 3.1, upon execution of a Prime Installation Contract
with a customer, NPS will provide SAIC with a copy of the Prime Installation
Contract attached to a proposed task assignment ("Task Assignment Statement").
The Task Assignment Statement will set forth, among other things, (1) the work
to be performed under the Prime Installation Contract, (2) the schedule of
performance, and (3) specified Deliverables and required delivery dates, in
accordance with the terms and provisions of the Prime Installation Contract.
(b) The Task Assignment Statement will also specify those obligations
undertaken by NPS, which generally will include providing the NeuSIGHTTM
Software and related hardware necessary to complete the Prime Installation
Contract.
(c) SAIC shall respond to NPS within 5 days after receipt of the proposed Task
Assignment Statement by submitting a fully responsive task proposal (the "Task
Proposal"). SAIC's Task Proposal shall include the following, as appropriate,
which information shall be consistent with the terms and provisions contained in
the Prime Installation Contract:
(1) Date of commencement of work, and any necessary revision to the
schedule of performance.
(2) Labor, travel, material estimates and a task ceiling and/or a firm
fixed price.
(3) Other pertinent information.
(d) Within 5 days of receipt of the Task Proposal and upon mutual agreement, an
approved task order ("Task Order") will be issued in writing by NPS to perform
the full task. After a Task Order is issued, if any revision becomes necessary,
SAIC shall promptly submit to NPS a revised task proposal ("Revised Task
Proposal") with explanatory notes.
- ----------
[*] indicates redacted portions
3
<PAGE>
(e) Within 5 days of receipt of SAIC's Revised Task Proposal, and upon mutual
agreement, a revised Task Order ("Revised Task Order") will be issued in writing
by NPS to authorize additional work and associated funding. No Revised Task
Order will be binding until confirmation in writing and mutually agreed to by
NPS and SAIC. If NPS and SAIC cannot reach agreement on the Revised Task Order
in accordance with the procedures set forth in subsection 3.2(g) below, SAIC may
elect to cease to provide Installation Services under the Prime Installation
Contract and shall be entitled to the payment obligations described in Section
11.1; provided, however that SAIC forfeit its right to the 50/50 sharing of
Gross Profits for that installation set forth in Section 5.1; and provided
further that such installation shall count as an installation commenced by SAIC
under this Agreement.
(f) Task Orders will be numbered sequentially, beginning with Task Order No. 1.
Task Order revisions will be identified by alphabetic designation following the
existing Task Order number, e.g. Task Order No. 1a, indicating the first
modification of Task Order No. 1.
(g) In the event the parties cannot reach an agreement on the Task Assignment
Statement within 15 days after its original issuance, outstanding issues will be
escalated to respective company management for resolution. If resolution cannot
be obtained within 5 days, NPS may contract with another person or entity to
provide such Installation Services with no liability to SAIC.
(h) [*]
(i) For all other installations performed on a [*], amounts paid to SAIC shall
not be greater than the total price established in each Task Order subject
to any Revised Task Order pursuant to the clause 16.13 Changes below.
4. SAIC Responsibilities.
(a) SAIC shall incur and invoice for costs under this contract only in the
performance of approved Task Order(s) and revisions to Task Order(s) issued in
accordance with the above ordering procedure. No other costs are authorized.
(b) [*]
(c) SAIC shall complete at its own expense, documentation and packaging for the
version of NeuSIGHTTM software contemplated in (b) above.
(d) SAIC shall train the appropriate personnel to provide adequate support for
the installation and training for the NeuSIGHTTM software.
(e) SAIC shall endorse the NPS software and promote it to the industry at
large.
(f) SAIC shall participate with NPS in the appropriate industry forums to
promote the NeuSIGHTTM software.
(g) [*]
(h) SAIC shall insure against all losses and damages which are the result of
the fault or negligence of SAIC in the carrying out of the Installation
Services, including workers' compensation, public liability, property damages
and automobile liability. SAIC will, if requested, produce a certificate of
insurance showing that the necessary coverage is currently in force, and will
also give NPS thirty (30) days written notice before the required insurance can
be altered or canceled.
(i) SAIC shall provide sufficient staffing to enable the Systems to be
installed in accordance with the Task Proposal. NPS, or its affiliates, shall
have the right to require SAIC to replace any personnel, other than the project
manager, working on the project at a customers premises whom NPS deems, in its
reasonable sole discretion, to be unfit or otherwise unsatisfactory.
(j) In the event a performance or surety bond is required to provide
Installation Services, SAIC shall be responsible for obtaining and paying such
bond for those projects in which SAIC has primary responsibility for
Installation Services
5. FEES AND PAYMENTS
5.1 In consideration for SAIC's investment noted in Clause 4 above, NPS agrees
to a 50/50 sharing of Gross Profits and Losses (as defined in Exhibit C hereto)
only under the Prime Installation Contracts supported by SAIC. For any
installation contract supported by the SAIC installation team, NPS shall
distribute a 50% share of Gross Profits to SAIC upon
- ----------
[*] indicates redacted portions
4
<PAGE>
completion of the Prime Installation Contract and payment by the customer to
NPS in accordance with the payment terms set forth in the Prime Installation
Contract.
5.2 Labor Charges. [*]
For the [*] installations performed on a [*], billable charges shall be [*]
established for the respective Task Order.
5.3 Payment for Installation Services.
(a) Fees, Price Protection. NPS agrees to pay SAIC for the Installation
Services in accordance with the Fee Schedule or the [*] schedule set forth in
the Task Order. The fees specified in the Task Order are the total fees and
charges for the Installation Services [*] except as the parties may agree in
writing. SAIC represents that the price stated for the Installation Services
performed hereunder will be at least as favorable as that the Energy Systems
Group charges to any other customer for the same or similar services.
(b) Invoices. For the [*] Training Installations [*], SAIC shall invoice NPS
monthly for Installation Services rendered during the preceding monthly period.
The invoice will detail the work performed during such period. [*], SAIC shall
invoice pursuant to the payment schedule contained in each respective Task
Order. NPS will pay the invoices within thirty (30) days after receipt in
United States Dollars.
5.4 Billing. Payments to SAIC must be in United States dollars by wire
transfer to:
Science Applications International Corporation
[*]
ABA routing no.[*]
Account No. [*]
Reference: Project and Invoice Number(s)
5.5 Overdue Payments. NPS shall pay billed amounts within 30 days of the date
of the invoices in United States dollars, provided that NPS is able to bill and
collect from the end customer for such amounts in a similar time period. In no
event will payments be more than 60 days after the date of the invoices.
Overdue payments are subject to a late payment charge, calculated and compounded
monthly, and calculated at an annual rate of one percent (1%) over the lowest
prime rate available in New York City, as published in The Wall Street Journal
on the first Monday (or the next bank business day) following the payment due
date. If the amount of the late payment charge exceeds the maximum permitted by
law, the charge will be reduced to that maximum amount.
6. CONFIDENTIAL INFORMATION
6.1 Use of Confidential Information. Confidential Information disclosed by
each party to the other in connection with the Installation Services conducted
under this Agreement will be used by each party only for the performance of the
Installation Services described in the Task Order and the Statement of Work
6.2 Disclosure of Confidential Information. Confidential Information disclosed
under this Agreement by one party to the other will be protected by the
recipient from further disclosure, publication, and dissemination to the same
degree and using the same care and discretion as the recipient applies to
protect its own confidential or proprietary information from undesired
disclosure, publication and dissemination. Except as set forth in the following
paragraph, neither party will disclose the other's Confidential Information to
any affiliate or other third party, including another SAIC Group, without prior
written consent from the other party. If Confidential Information is required
by law, regulation, or court order to be disclosed, the recipient must first
notify the disclosing party and permit the disclosing party to seek an
appropriate protective order.
6.3 Disclosure to Employees and Consultants. Confidential Information
disclosed under this Agreement may be disclosed to a receiving party's employees
(including contract employees) or consultants who participate in the
Installation Services if the employees and consultants have been made aware of
their responsibilities under this Agreement and the employees (including
contract employees) and consultants have signed a statement agreeing to be bound
by the terms of this Agreement with respect to confidentiality. Each party to
this Agreement agrees that it is responsible for its employees (including
contract employees) and consultants complying with the confidentiality
- ----------
[*] indicates redacted portions
5
<PAGE>
provisions of this Agreement. Violations of any confidentiality provisions of
this Agreement by any of such employees or consultants will be deemed to be
violations by the party employing such employees or consultants. Confidential
Information shall be maintained in the Energy Systems Group of SAIC and shall
not be disclosed to any other SAIC Group without the prior written consent of
NPS.
6.4 Misuse of Confidential Information. Either party's failure to fulfill the
obligations and conditions with respect to any use, disclosure, publication,
release, or dissemination to any third person of the other party's Confidential
Information or breach of any restrictions or obligations of any licenses granted
by the other party, constitutes a material breach of this Agreement. In that
event the aggrieved party may, at its option and in addition to any other
remedies that it may have, terminate this Agreement immediately. In addition to
any other remedies it may have, the aggrieved party has the right to demand the
immediate return of all copies of Confidential Information provided to the other
party under this Agreement. The parties recognize that disclosure of
Confidential Information in violation of this Agreement may result in
irreparable harm. Each party shall have the right to injunctive relief in the
event of a disclosure in violation of this Agreement.
7. Recruitment. NPS and the Energy Systems Group of SAIC agree that, for the
term of this Agreement, and for a period of one year following termination of
this Agreement, neither party shall affirmatively recruit or make initial
contact with the employees of the other for the purpose of discussing or
offering employment with out written approval of the other party. This provision
does not, however, preclude either party from discussing employment with, or
offering employment to, an employee of the other party, when discussions or
negotiations leading to such an offer have been initiated by the employee
him/herself. Further this provision does not preclude either party from
advertising in publications of general circulation, posting vacancy
announcements, or conducting job fairs which may lead to contacts between that
party and employees of the other party.
8. [*]
9. OWNERSHIP OF
INTELLECTUAL PROPERTY
9.1 Ownership of Deliverables. Deliverables under the contract are SAIC
installation labor hours, interface software code prepared by SAIC at each
respective installation site, and training materials and related documentation.
NPS owns all right, title and interest in and to any copyright in any interface
NeuSIGHTTM software code, and any training materials and related documentation,
developed by SAIC and furnished to NPS hereunder. NPS grants to SAIC a
personal, nontransferable, nonexclusive license to use and copy the interface
software code for SAIC internal business purposes in performing the Installation
Services. SAIC shall include NPS' copyright notice on all copies of such
software.
9.2 Retention of Pre-existing Intellectual Property Rights. The parties agree
that each party retains all right, title or interest in any (a) patentable and
unpatentable discoveries, and ideas, including methods, techniques, know-how,
concepts, products ("Invention"), to all works fixed in any medium of
expression, including copyright and mask work rights ("Works of Authorship");
and (b) other materials where such Inventions and Works of Authorship, to the
extent that in each of (a) and (b) above, such Inventions, Works of Authorship
and/or other materials are created by or for each respective party outside this
Agreement. Provided, however, that SAIC shall have no right, title or interest
to the NeuSIGHTTM software, including any revisions or modifications made by
SAIC, prior to, during, or after the termination of this Agreement.
9.3 No Rights By Implication. No direct or indirect ownership interest or
license rights in Inventions or Works of Authorship are created by implication.
No direct or indirect ownership interest or license rights in any software or
patents are granted by either party in this Agreement, except as set forth in
Section 9.1 or 9.2. Any grant of an ownership interest or license rights in a
patent or software must be negotiated in a separate agreement.
9.4 Similar Work for Other Customers. SAIC may perform the same or similar
services for others, including providing the same or similar conclusions and
recommendations provided that SAIC does not breach any obligation with respect
to NPS' Confidential Information as provided herein.
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<PAGE>
10. NPS' RESPONSIBILITIES
10.1 NPS shall provide, maintain, and make available to SAIC, at its expense
and in a timely manner, the following resources as SAIC and NPS agree are
required by SAIC. These resources are for use by SAIC only in connection with
the Installation Services provided to NPS:
(i) Qualified personnel who will be designated to consult with SAIC on a
regular basis in connection with the services;
(ii) Appropriate work space for SAIC personnel at NPS' business locations when
necessary for SAIC personnel to be present.
(iii) All other materials needed in support of training and to support the
installation team(s).
10.2 NPS shall provide to SAIC a minimum of 30 installations under the
contract, providing that NPS secures a like number of customer installation
contracts.
10.3 NPS shall provide SAIC first right of refusal for installations priced on
a performance or value basis. Each project shall be considered on a case-by-
case basis.
11. TERMINATION
11.1 Either party may terminate this Agreement upon mutual agreement of the
parties upon 90 days written notice to the other party. Termination under this
paragraph will not affect payment obligations incurred under this Agreement and
the Task Orders for acceptable services performed prior to termination, and NPS
agrees to reimburse SAIC for any reasonable labor costs or costs incurred for
commitments to purchase products or services from third parties which were
entered into by SAIC in the course of its performance and were authorized under
the Task Order prior to termination. Such reimbursable costs may include, but
are not limited to, cancellation fees, minimum consulting fees, if any, and non-
refundable charges for third party products.
11.2 Upon termination of this Agreement, each party shall promptly return to
the other any and all personal property of the other held by such party,
including all Confidential Information; provided, that if upon termination of
this Contract, any fees required to be paid by NPS to SAIC pursuant to Article 5
of this Agreement, have not been paid, then SAIC shall not be required to return
to NPS any personal property of NPS held by SAIC, other than the source code and
object code for the NeuSIGHTTM Software, which shall be returned immediately,
and SAIC shall have a lien on such property, to the extent of the amounts unpaid
by NPS.
12. REPRESENTATIONS AND
WARRANTIES
12.1 Right to Provide Information. NPS represents and warrants to SAIC that it
has the right to provide the information, specifications and data that it has or
will provide to SAIC in order for SAIC to complete the Installation Services.
NPS further represents and warrants that possession and use of that information,
specifications and data by SAIC under the terms and conditions of this Agreement
will not constitute an infringement upon any patent, copyright, trade secret, or
other intellectual property right of any third party.
12.2 Employee and SAIC Agreements. Each party represents and warrants to the
other that it shall have obtained, prior to the commencement of the Installation
Services, appropriate agreements with its employees and consultants who may
participate in the Installation Services sufficient to enable it to comply with
the terms of this Agreement.
13. WARRANTY AND DISCLAIMER OF WARRANTIES
13.1 Installation Services Warranty.
13.1.1 SAIC warrants that the Installation Services provided under the Task
Orders will substantially conform to the Installation Services described in this
Agreement and the applicable Statement of Work and will be performed in a
professionally diligent manner by qualified personnel ("Satisfactory Work").
13.1.2 SAIC warrants that, in performing the Installation Services:
(a) it will strictly comply with the descriptions and representations of the
Installation Services (including performance capabilities, accuracy,
completeness, characteristics, specifications, configurations,
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7
<PAGE>
standards, function and requirements) which appear in the Task Orders;
(b) the Installation Services will not be in violation of any applicable law,
rule or regulation, and SAIC will have obtained all permits required to comply
with such laws and regulations;
(c) the Installation Services will not violate or in any way infringe upon the
rights of third parties reasonably known to SAIC, including property,
contractual, employment, trade secrets, proprietary information and
nondisclosure rights, or any trademark, copyright or patent rights.
13.2 Disclaimer of Implied Warranties.
EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS AGREEMENT, NEITHER PARTY TO THIS
AGREEMENT MAKES ANY EXPRESS OR IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE OR ANY OTHER WARRANTIES OR REPRESENTATIONS.
14. [*]
14.2 [*]
14.2.1 [*]
14.2.2 In no event shall either party be liable to the other for any special,
indirect, incidental, consequential, or economic (including, but not limited to
lost profits and lost business opportunity) damages, regardless of the legal
theory under which such damages are sought, and even if the parties have been
advised of the possibility of such damages. Notwithstanding anything contained
in the preceding sentence, a breach of the provisions contained in Article 6 and
Article 9 of this Agreement shall not be subject to the limitations contained in
the previous sentence.
15. SELLER'S RE-EXPORT OBLIGATIONS
15.1 Re-export of Technical Data. The parties acknowledge that commodities
and/or technical data provided under this Agreement may be subject to the Export
Administration Regulations ("the EAR") administered by the U.S. Commerce
Department. NPS shall be responsible for any required export administration.
16. GENERAL
16.1 Publicity. Nothing contained in this Agreement will be construed as
conferring upon either party, expressly or by implication, any right or license
to use in advertising, publicity, promotion, marketing, or other similar
activity, any name, trade name, trademark, or other designation including any
abbreviation, contraction, or simulation of the other. Each party to this
Agreement agrees to consult the other before using the other party's name in
publicity, with consent by either party not to be unreasonably withheld.
16.2 Assignment. Neither party shall assign, in whole or in part, this
Agreement, any Task Order or any license, rights or obligations granted, to any
other person or entity, without the prior written consent of the other party,
which consent may not be unreasonably withheld.
(a) Any subcontract made by SAIC in accordance with this Section 16.2 shall
incorporate by reference all the applicable terms of this Agreement and any
applicable Task Order. SAIC agrees to guarantee the performance of any
subcontractor used to perform Installation Services.
16.3 Waiver. The failure of either party at any time to enforce any of the
provisions of this Agreement or any right under this Agreement, or to exercise
any option provided, will in no way be construed to be a waiver of the
provisions, rights, or options, or in any way to affect the validity of this
Agreement. The failure of either party to exercise any rights or options under
the terms or conditions of this Agreement shall not preclude or prejudice the
exercising of the same or any other right under this Agreement.
16.4 Non-Compliance for Cause Beyond Control. Neither party shall be liable to
the other for non-compliance with any provision of this Agreement if the non-
compliance resulted directly from any cause beyond the reasonable control of the
party. However, this provision shall not apply to any payments due to SAIC
under this Agreement.
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<PAGE>
16.5 Applicable Laws and Disputes
16.5.1 This Agreement shall be interpreted, construed and governed by, and the
relationship between the parties determined in accordance with the laws of the
State of Colorado, United States of America.
16.5.2 Should any disputes or differences of any kind arise between NPS and
SAIC, in connection with/or arising out of this Agreement, or the performance
hereunder, the parties shall first engage in discussions at a management level
for resolution by mutual agreement which after having been written and signed by
both parties will become final and binding upon both Parties. Any difference
not resolved in this manner shall be considered a dispute and processed as noted
below.
16.5.3 If no binding agreement can be reached, the parties shall have the
right to proceed as a formal dispute. All disputes, controversies or claims
arising out of or relating to this Agreement, or the breach hereof, shall be
settled by arbitration in accordance with the Commercial Arbitration Rules of
the American Arbitration Association in Denver, Colorado. One arbitrator shall
be selected by the indemnifying party or parties, one arbitrator shall be
selected by the indemnified party, and the third arbitrator shall be chosen by
the first two arbitrators chosen. The cost and expense of arbitration shall be
shared equally by the parties to the arbitration, regardless of which party or
parties prevail. The arbitration shall be conducted in accordance with the
following time schedule unless otherwise mutually agreed to in writing by the
parties: (i) parties to the arbitration proceeding shall each appoint their
respective arbitrator within fifteen (15) business days after one party formally
notifies the other of its desire to proceed as a dispute; (ii) within five (5)
business days thereafter, such arbitrators shall appoint the third arbitrator;
(iii) the arbitrators shall schedule a hearing on the dispute within thirty (30)
days of the appointment of the third arbitrator; and (iv) within fifteen (15)
business days after the date of the hearing referenced in clause (iii), the
arbitrators shall render their decision. The decision or award of the
arbitrators shall be final and binding upon the parties hereto to the same
extent and to the same degree as if the matter had been adjudicated by a court
of competent jurisdiction and shall be enforceable under the Federal Arbitration
Act. Any damages awarded by the arbitrators shall be subject to the limitations
contained in this Agreement.
16.5.4 The judgment rendered by the Arbitrator upon the award may be entered
in any court having jurisdiction for the purposes of obtaining an order of
enforcement or judicial acceptance of the award, as the case may be. NPS and
SAIC hereby waives any immunity, sovereign or otherwise, that it would otherwise
have to such jurisdiction and agrees that its rights, obligations and
liabilities hereunder shall be determined in the same manner and to the same
extent as those of a private litigant under like circumstances.
16.6 Severability. If any provision or portion of a provision of this
Agreement is held invalid or unenforceable, the remainder of the Agreement shall
not be affected, and the remaining terms will continue in effect and be binding
on the parties, provided that such holding of invalidity or unenforceability
does not materially affect the essence of the Agreement.
16.7 Notice. Any notice or other written communication required or permitted
to be given by a party under this Agreement shall be in the English language and
will be considered delivered five business days after the notice has been mailed
by certified mail addressed to the attention of the other party's Administrative
Contact as identified in this Agreement.
16.8 Compliance with Laws. The parties agree to comply with all applicable
laws. If SAIC requires any government licenses or approvals to proceed with the
Installation Services, SAIC will provide NPS with prior notice of the
requirement and an estimate of any resulting increase in the price of the
Installation Services.
16.9 Survival. The terms and conditions of this Agreement regarding
confidentiality, payment, warranties, liability and all others that by their
sense and context are intended to survive the execution, delivery, performance,
termination or expiration of this Agreement survive and continue in effect for a
period of 1 year. Notwithstanding the foregoing sentence, the confidentiality
provisions contained in Article 6 and the Intellectual Property provisions
contained in Article 9 shall survive indefinitely [*].
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9
<PAGE>
16.10 Force Majeure.
16.10.1 Neither SAIC nor NPS shall be liable for delay or damages if prevented
from fulfilling its obligations by reason of Force Majeure causes, including but
not limited to acts of war, (whether declared or undeclared) insurrection,
terrorism, or acts of hostilities (such as invasion, bombing, etc.), lockouts,
strikes, riots, fires, governmental restrictions covering the import, export,
distribution, or transport of components, parts or raw materials necessary for
the completion of the equipment, priority given to U.S. Government work, export
restrictions imposed by any Government, mobilization of technical personnel in
general by reason of any cause beyond such party's control, provided that such
party gives notice to the other party within fifteen (15) days after occurrence
of such event.
16.10.2 The impact of Force Majeure on SAIC's subcontractors hereunder
shall be considered to be Force Majeure on SAIC, provided that SAIC gives notice
to NPS according to paragraph 16.10.1 above.
16.10.3 In case of Force Majeure, a party's performance shall be extended by a
reasonable period of time corresponding to the delay caused by the Force Majeure
and billing rates and the estimated cost price may be adjusted based on
agreement of the parties.
16.11 Relationship of Parties
16.11.1 Both SAIC and NPS are independent contractors in all respects with
regard to this Agreement. Nothing contained in the Agreement shall authorize,
empower, or constitute any party as partner or agent of any other party in any
manner; authorize or empower one party to assume or create any obligation or
responsibility whatsoever, express or implied, on behalf of or in the name of
any other party; or authorize or empower a party to bind any other party in any
manner or make any representation, warranty, covenant, contract, or commitment
on behalf of any other party.
16.11.2 Personnel provided by either party to perform the Installation Services
hereunder will at all times be considered employees or agents of the party
providing such personnel and will not for any purposes be considered employees
or agents of the other party. Each party shall assume full responsibility for
the actions or in-actions of the personnel it provides, and shall be solely
responsible for the supervision, direction and control, salaries, workers'
compensation coverage, disability and other insurance, benefits, as well as all
other legal obligations by law relating to its personnel.
16.12 Deliverables.
16.12.1 SAIC shall provide the Deliverables to NPS for the project in
accordance with scope of work. All deliverables shall be submitted in English.
16.13 Changes
16.13.1 Either party may, at any time, request a change or modification to the
work or services required under this Contract, including but not limited to
increases or decrease in quantities of deliverable items, or changes to the
method of shipment. Such requested changes shall not become binding until the
changes have been confirmed in writing and mutually agreed upon by both parties.
16.13.2 SAIC will advise NPS if the change requires a change in the delivery
schedule or change in the Agreement price. In that case, SAIC shall submit a
change proposal and an equitable adjustment shall be made to the Agreement
price, delivery schedule and other terms and conditions.
17. ENTIRE AGREEMENT
This is the entire Agreement between the parties about its subject. It
incorporates and supersedes all written and oral communications about its
subject. It may only be changed or supplemented by a written amendment signed
by the authorized representatives of the parties. Each Task Order executed
shall be considered part of this Agreement and the terms of each control in the
event of any inconsistency with the terms of this Agreement.
END OF TERMS AND CONDITIONS
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10
<PAGE>
Exhibit A
[*]
Exhibit B
[*]
Exhibit C
[*]
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-START> JAN-01-1999 JAN-01-1998
<PERIOD-END> MAR-31-1999 MAR-31-1998
<CASH> 3,897,670 5,649,992
<SECURITIES> 0 0
<RECEIVABLES> 581,850 1,146,819
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 4,845,497 7,004,806
<PP&E> 3,003,858 3,243,812
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 19,659,775 22,672,289
<CURRENT-LIABILITIES> 1,938,004 2,523,307
<BONDS> 17,000,000 17,000,000
0 0
0 0
<COMMON> 23,952 23,952
<OTHER-SE> (11,887) 2,234,237
<TOTAL-LIABILITY-AND-EQUITY> 19,659,775 22,672,289
<SALES> 556,157 244,695
<TOTAL-REVENUES> 556,157 244,695
<CGS> 240,335 0
<TOTAL-COSTS> 2,290,266 1,594,191
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 291,261 284,058
<INCOME-PRETAX> (2,246,124) (1,496,401)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (2,246,124) (1,496,401)
<EPS-PRIMARY> .09 .06
<EPS-DILUTED> .09 .06
</TABLE>
