WARRANT AGREEMENT
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
U S Liquids Inc., a Delaware corporation (the "Company"), hereby agrees, on
the terms and subject to the conditions of this Warrant Agreement (the
"Agreement"), to sell and deliver to ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ Inc. ("SMM") warrants
to purchase 200,000 shares of the "Common Stock" (defined below) of the
Company. SMM agrees, on the terms and subject to the conditions of this
Agreement, to purchase such warrants from the Company.
Each of the warrants will be exercisable by the "Holder" thereof (defined
below), as to all or any lesser number of shares of the Common Stock covered by
the Holder's warrants, at the "Exercise Price" per share (defined below), at any
time and from time to time beginning at 9:00 a.m., Los Angeles time, on May 15,
1997 and ending at 5:00 p.m., Los Angeles time, on the day that is five years
after such date. The warrants shall be evidenced by instruments in the form of
Exhibit A hereto (those instruments and all instruments issued after the date
hereof in replacement thereof are referred to below as the "Warrants").
The purchase price of the Warrants shall be $0.01 (one cent) for each share
of Common Stock purchasable as of the Closing Time on exercise of the Warrants.
The delivery of the Warrants and payment of the purchase price of the Warrants
are to be made on or about May 15, 1997 to you at the address shown hereinabove,
or such other time and place as may be agreed upon among the Company and SMM
(the date(s) of such purchase of the Warrants is referred to in this Agreement
as the "Closing Time").
1. DEFINITIONS. As used in this Agreement, the following terms, unless
the context otherwise clearly requires, shall have for all purposes the
following respective meanings:
(a) The term "Common Stock" refers to the Common Stock, par value $.01 per
share, of the Company, and all other shares of any class or classes (however
designated) of the common equity of the Company, now or hereafter authorized,
the holders of which by operation of law shall have the right, without
limitation as to amount, either to all or to a part of the balance of current
dividends and liquidating dividends and distributions after the payment of
dividends and distributions on any shares entitled to preference and the holders
of which ordinarily, in the absence of contingency, shall be entitled to vote
for the election of the directors of the Company (even though the right so to
vote has been suspended by the occurrence of such a contingency), other than
those directors of the Company (constituting a
portion of the Board of Directors) who, pursuant to the Certificate of
Incorporation or other charter documents of the Company, are then to be
elected by a designated class or series of the capital stock of the Company.
(b) "Convertible Securities" shall mean any indebtedness, shares of stock
or other rights granted by the Company (other than Options) convertible into or
exchangeable for Common Stock.
(c) The term "Exercise Price" refers to the per share purchase price of
the Warrant Shares subject to this Warrant Agreement. The Exercise Price shall
initially be $10.50 per share, and, upon the completion of an initial public
offering of the Common Stock, shall be equal to the initial per share price to
the public of the shares of Common Stock sold pursuant to such initial public
offering, subject to adjustment as provided in Section 6 below.
(d) The term "Holder", when used with respect to the Warrants or the
Warrant Shares, means the person registered on the books and records of the
Company as being the holder of record of the Warrants or the Warrant Shares, as
the case may be, and, so long as SMM holds of record any Warrants or Warrant
Shares, it shall be included in the definition of "Holder," and any action to be
taken or approval to be given by the Holders shall, unless otherwise provided in
this Agreement, require the action by, or approval of, the Holder or Holders of
at least that number of Warrants and Warrant Shares which in the aggregate shall
constitute a majority of all Warrant Shares issued or issuable under this
Agreement.
(e) "Options" shall mean any warrants, options or, without limitation,
other rights granted by the Company to purchase Common Stock or Convertible
Securities.
(f) The term "Other Securities" refers to any stock (other than Common
Stock) and other securities of the Company or any other person (corporate or
otherwise) which the Holders of the Warrants at any time shall be entitled to
receive, or shall have received, upon the exercise of the Warrants, in lieu of
or in addition to Common Stock, or which at any time shall be issuable or shall
have been issued in exchange for or in replacement of Common Stock or Other
Securities, whether pursuant to Section 6 below or otherwise.
(g) The term "Warrant Shares" refers to the shares of Common Stock (or
Other Securities) issued or issuable upon the exercise, in whole or in part, of
any of the Warrants.
2.1 REPRESENTATIONS AND WARRANTIES. The Company represents and warrants
to SMM as follows:
(a) CORPORATE ACTION. The Company has all requisite power and authority,
and has taken all necessary action, to enter into and perform all of its
obligations under this Agreement, to issue and deliver the Warrants and to
authorize and reserve for issuance, and
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upon payment from time to time of the Exercise Price in accordance with the
terms of this Agreement, to issue and deliver the Warrant Shares; and this
Agreement has been duly authorized, executed and delivered by the Company and
constitutes the legal, valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms, except (i) as
such enforceability may be subject to or limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws or equitable principles now
or hereafter in effect relating to or affecting creditors' rights generally
(collectively, the "Recognized Defenses") and (ii) insofar as the
indemnification and contribution provisions hereof may be limited under
federal and state securities laws and the public policies underlying such
laws.
(b) OUTSTANDING COMMON STOCK. The outstanding shares of Common Stock have
been duly and validly authorized and issued and are fully paid and
non-assessable and free of preemptive rights. The Warrant Shares (i) are duly
authorized by the Company's Certificate of Incorporation, (ii) have been duly
and validly authorized to be issued and adequately reserved by the Board of
Directors of the Company, (iii) will, when issued and delivered to the Holders
pursuant to this Agreement, be duly and validly issued, fully paid and
non-assessable and free and clear of all liens, charges, encumbrances or rights
of others except for those which may be created by the Holder, and (iv) and have
been approved for inclusion, when issued, in the Nasdaq National Market ("NNM").
The holders of outstanding shares of capital stock of the Company are not
entitled to any preemptive or similar rights to subscribe for or purchase
Warrant Shares or other shares of capital stock of the Company and, except as
otherwise disclosed to SMM, there are no outstanding rights, warrants or options
to acquire, or instruments convertible into or exchangeable for, or agreements
or understandings with respect to the sale or issuance of, any shares of capital
stock of the Company.
(c) NO VIOLATION. None of the execution or delivery of this Agreement,
the consummation of the transactions contemplated by this Agreement or
compliance with the terms and provisions of this Agreement will (i) conflict
with or constitute a breach of, or a default (or default with notice, the
passage of time or otherwise) under any bond, debenture, note or other evidence
of indebtedness or any indenture, mortgage, deed of trust or any other agreement
or instrument to which the Company or any of its subsidiaries is a party or by
which any of them is bound or to which any of their respective property or
assets is subject, (ii) result in the imposition of a lien on any properties of
the Company or any of its subsidiaries or an acceleration of indebtedness of the
Company or any of its subsidiaries or (iii) result in a violation of any law,
administrative regulation or order of any court or governmental agency or
authority applicable to the Company or any of its subsidiaries or to any of
their respective properties or assets. No consent, approval, authorization or
other order of any regulatory body, administrative agency or other governmental
body is required for the valid issuance and sale of the Warrant Shares to SMM or
the other transactions contemplated by this Agreement, except for registration
under the federal securities laws and for permits and similar authorizations
required under state blue sky laws or similar laws.
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2.2 REPRESENTATIONS AND WARRANTIES OF SMM. SMM represents and warrants
to the Company that it has all requisite corporate power and corporate
authority, and has taken all necessary corporate action, to enter into and
perform all of its obligations under this Agreement and that this Agreement has
been duly authorized, executed and delivered by it and constitutes its legal,
valid and binding agreement, enforceable against it in accordance with its
terms, except (i) as such enforceability may be subject to or limited by
the Recognized Defenses and (ii) insofar as the indemnification and contribution
provisions hereof may be limited under federal and state securities laws and the
public policies underlying such laws.
3. COMPLIANCE WITH THE ACT.
(a) TRANSFERABILITY OF WARRANTS. SMM agrees that the Warrants may not be
transferred, sold, assigned or hypothecated except: (i) to its successors in a
merger or consolidation or other business combination; (ii) to purchasers of all
or substantially all of its assets; (iii) to any officers or partners of SMM, as
the case may be; (iv) by operation of law; or (v) as permitted below in this
Section 3. SMM further agrees that the Company shall have no obligation to
effect any transfer of the Warrants during the time period referred to above,
unless the transferee, purchaser, assignee or pledgee, as the case may be, has
executed an agreement obligating the transferee to comply with all terms and
conditions of this Warrant Agreement applicable to the transferor.
(b) TRANSFERABILITY OF WARRANT SHARES.
(i) Except as otherwise provided in this Section 3(b), each
certificate for Warrant Shares initially issued upon the exercise of any
Warrants shall be stamped or otherwise imprinted with a legend in
substantially the following form:
"The Shares represented by this certificate are subject
to the conditions specified in a Warrant Agreement, dated
May 15, 1997, among the Company and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Inc. Except to the extent permitted by the Warrant
Agreement, no transfer, sale, pledge, hypothecation,
encumbrance or other disposition of the shares represented
by this certificate shall be valid or effective until
registered under the Securities Act of 1933, as amended (or,
if applicable, a successor law thereto) or the Company has
been presented with satisfactory evidence that such shares
will be transferred in a transaction exempt from such
registration and until any applicable conditions contained
in the Warrant Agreement have been fulfilled. A copy of the
Warrant
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Agreement is on file at the offices of U S Liquids Inc.
The holder of this certificate, by acceptance of this
certificate, agrees to be bound by the provisions of the
Warrant Agreement."
(ii) Each certificate evidencing Warrant Shares issued upon any
transfer, sale, pledge, assignment, hypothecation or other disposition of
any Warrant Shares shall bear the restrictive legend set forth in Section
3(b)(i), unless in the opinion of counsel to such Holder reasonably
satisfactory to the Company such legend is not required in order to ensure
compliance with the Act.
(iii) Notwithstanding the foregoing provisions of this Section 3(b),
the restrictions imposed by subsections (i) and (ii) of this Section upon
the transferability of the Warrant Shares and the legend requirements of
Section 3(b)(i) shall terminate as to any particular Warrant Shares (A)
when and so long as the transfer, sale, pledge, hypothecation, encumbrance
or other disposition thereof, shall have been registered under the Act or
(B) when the Holder or Holders of any Warrants or Warrant Shares has
delivered to the Company the written opinion of counsel to such Holder or
Holders, which shall be reasonably satisfactory to the Company, stating
that such legend is not required in order to ensure compliance with the
Act. Whenever the restrictions imposed by this Section shall terminate as
to any Warrant Shares, as provided above, the Holder thereof shall be
entitled to receive from the Company, at the Company's expense, a new
certificate representing such Warrant Shares not bearing the restrictive
legend set forth in Section 3(b)(i).
(c) DEMAND REGISTRATION. At any time after the day that begins one year
after the Closing Time and on or before the end of the day that is six years
after the Closing Time, upon written, or telegraphic or telephonic notice
followed as soon as practicable by written confirmation thereof, from any Holder
or Holders (the "Requesting Holders") of that number of Warrants and/or Warrant
Shares which in the aggregate shall constitute a majority of all Warrant Shares
issued or issuable under this Agreement (excluding Warrant Shares which have
been previously sold, transferred or otherwise disposed of in a registered
public offering, pursuant to Rule 144 under the Act, as such rule may be amended
from time to time, or pursuant to Regulation S under the Act, as such Regulation
may be amended from time to time, or which in the opinion of both counsel to the
Company and counsel to the Requesting Holders may otherwise then be publicly
sold without registration under the Act), that such Holder or Holders request
the registration under the Act of any of the Warrant Shares, the Company shall
(i) immediately give notice to the other Holders and afford them the opportunity
to participate in the registration statement and (ii) as promptly as possible
after the receipt of such notice from the Requesting Holders, but in any event
within 60 days of the receipt of such notice, and solely at its cost and
expense, file a registration statement with respect to the offering and sale or
other disposition of the Warrant Shares with respect to which it shall have
received such notice. Such registration statement may, if the Company
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satisfies the applicable requirements, be made on Form S-3. If a registration
requested pursuant to this Section 3(c) is an underwritten registration, the
Company and other holders of securities of the Company may include securities
in such registration without the written consent of the Holders of the
Warrant Shares for which registration has been requested pursuant to this
Section 3(c) if, but only if, the managing underwriters of such registration
advise the participating Holders of Warrant Shares in writing that in their
opinion such inclusion will not materially affect the successful marketing of
the Warrant Shares. The Holders shall not be deemed to have effected a
demand registration pursuant to this Section 3(c) unless and until the
registration statement is declared effective. The Company shall be obligated
to file only one registration statement pursuant to this Section 3(c) which
becomes effective, whether or not the registration statement at the time it
becomes effective covers all or a portion of the Warrant Shares.
(d) PIGGYBACK REGISTRATION. If, at any time during the period commencing
on the day that begins one year from the Closing Time and ending at the end of
the day that is six years after the Closing Time, the Company shall propose to
register any shares of Common Stock or Other Securities (but excluding any
shares or securities being registered pursuant to Form S-8 or Form S-4 or any
successor form to either of them), the Company shall (i) give each Holder
written notice, or telecopy and telephonic notice followed as soon as
practicable by written confirmation thereof, of such proposed registration at
least 20 business days prior to the filing of such registration statement and
(ii) upon written notice, or telecopy or telephonic notice followed as soon as
practicable by written confirmation thereof, given to the Company by any Holder
within 15 days after the giving of such written confirmation or written notice
by the Company, the Company shall include or cause to be included in any such
registration statement all or such portion of the Warrant Shares as such Holder
may request; provided, however, that the Company may at any time withdraw or
cease proceeding with any such registration if it shall at the same time
withdraw or cease proceeding with the registration of the Common Stock or Other
Securities originally proposed to be registered; and provided, further, that in
connection with any registered public offering involving an underwriting, the
managing underwriter may (if in its reasonable opinion marketing factors so
require) limit the number of securities (including any Warrants or Warrant
Shares) included in such offering (other than securities of the Company). In
the event of any such limitation, the total number of Warrant Shares to be
offered for the account of the Holders participating in the registration shall
be reduced pro rata in proportion to the respective number of shares requested
to be included therein to the extent necessary to reduce the total number of
shares proposed to be registered to the number of shares recommended by the
managing underwriter; provided, however, that if the amount or kind of
securities to be offered for the accounts of Holders shall be reduced in
accordance with this sentence, the Company shall not be permitted to include
securities of any persons (other than the Company) unless the Holders are
permitted to participate on a pro rata basis with other selling securityholders.
Notwithstanding the foregoing, the Company shall not be obligated to include
Warrant Shares in more than two registration statements pursuant to this
Agreement.
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(e) COMPANY'S OBLIGATIONS IN REGISTRATION. If any Holder timely elects to
participate in an offering by including Warrant Shares in a registration
statement pursuant to Section 3(c) or (d) above, the Company shall use its best
efforts to effect such registration to permit the sale of Warrant Shares in
accordance with the intended method or methods of disposition thereof and,
without limitation, pursuant thereto the Company shall:
(i) notify the Holders as to the filing of the registration statement
and of all amendments or supplements thereto filed prior to the effective
date thereof;
(ii) use its best efforts to cause any registration statement filed
under the Act pursuant to Section 3(c) or (d) above to become effective at
the earliest possible date after the filing thereof and to comply with all
applicable rules and regulations of the Commission in connection therewith;
provided, that before filing a registration statement or prospectus or any
amendments or supplements thereto, including documents which would be
incorporated or deemed to be incorporated by reference in the registration
statement after the initial filing of any registration statement, the
Company will furnish to the Holders, their respective counsel and the
underwriters, if any, to be engaged in connection with the offering and
sale by the Company (for purposes of this Section 3(e) and Section 3(f),
the "Underwriters"), copies of all such documents proposed to be filed,
which documents will be subject to the review of the Holders, their
respective counsel and the Underwriters, and the Company will not file any
registration statement, or amendment thereto, or any prospectus or any
supplement thereto relating in whole or in part to the Holders' Warrant
Shares (including such documents incorporated or deemed to be incorporated
by reference) to which the Holders or the Underwriters, if any, shall
reasonably object;
(iii) notify the Holders immediately, and confirm the notice in
writing, (1) when the registration statement or any post-effective
amendment thereto becomes effective, (2) when a prospectus or prospectus
supplement or post-effective amendment has been filed, (3) of any request
by the Commission for amendments, supplements or additional information
related to a registration statement or prospectus or otherwise, (4) of the
issuance by the Commission of any stop order or of the initiation, or the
threatening, of any proceedings for that purpose known to the Company, (5)
of the receipt by the Company of any notification with respect to the
suspension of qualification of the Warrant Shares for sale in any
jurisdiction or of the initiation, or the threatening, of any proceedings
for that purpose known to the Company, (6) of the receipt of any comments
from the Commission or any state regulatory authority, (7) of the happening
of any event which requires the making of any changes in a registration
statement or the related prospectus or any prospectus supplement so that
such documents will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary
to make the statements therein not misleading and (8) of the determination
of the Company that a post-effective amendment to a registration statement
would be necessary or appropriate;
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(iv) make every reasonable effort to obtain the withdrawal of any
order suspending the effectiveness of a registration statement, or the
lifting of any suspension of the qualification (or exemption from
qualification) of any of the Warrant Shares for sale in any jurisdiction,
at the earliest possible moment;
(v) if reasonably requested by the Underwriters, if any, or the
Holders, immediately incorporate in a prospectus supplement or
post-effective amendment such information as the Holders and the
Underwriters, if any, agree should be included therein relating to the sale
and distribution of the Warrant Shares, including, without limitation,
information with respect to the number of Warrant Shares being sold to such
Underwriters, the purchase price being paid therefor by such Underwriters
and with respect to any other terms of the underwritten offering of the
Warrant Shares to be sold in such offering; make all required filings of
such prospectus supplement or post-effective amendment as soon as notified
of the matters to be incorporated in such prospectus supplement or
post-effective amendment; and supplement or amend any registration
statement if reasonably requested by the Holders or any Underwriter of
Warrant Shares covered by such Warrant Shares;
(vi) furnish to each of the Holders whose Warrant Shares have been
included therein, their respective counsel and each Underwriter, if any,
without charge, at least one manually executed copy of any registration
statement (including all amendments thereto) and any post-effective
amendment thereto, including financial statements and schedules, all
documents incorporated therein by reference and all exhibits (including
those incorporated by reference);
(vii) during the time when a prospectus is required to be delivered
under the Act in connection with the distribution of the Warrant Shares,
comply so far as it is able with all requirements imposed upon it by the
Act, as now and hereafter amended, and by the Rules and Regulations
promulgated by the Commission thereunder, as from time to time in force, so
far as necessary to permit the continuance of sales of or dealings in the
Warrant Shares. If at any time when a prospectus relating to the Warrant
Shares is required to be delivered under the Act any event shall have
occurred as a result of which, in the opinion of counsel for the Company or
counsel for the Holders, the prospectus relating to the Warrant Shares as
then amended or supplemented includes an untrue statement of a material
fact or omits to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, or if it is
necessary at any time to amend such prospectus to comply with the Act, the
Company will use its best efforts promptly to prepare and file with the
Commission an appropriate amendment or supplement in form and substance
reasonably satisfactory to the Holders;
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(viii) make generally available to its security holders as soon as
practicable, but not later than 15 months following the effective date (and
each other deemed effective date) of such registration statement, an
earnings statement or statements of the Company and any subsidiaries it may
then have covering a period of at least 12 months beginning after the
effective date of the registration statement (but in no event commencing
later than 90 days after such date), which shall satisfy the provisions of
Section 11(a) of the Act and Rule 158 promulgated thereunder;
(ix) prepare and promptly file with the Commission such amendments
and post-effective amendments to each registration statement as may be
necessary to keep such registration statement continuously effective for a
period of nine months; cause the related prospectus to be supplemented by
any required prospectus supplement, and as so supplemented to be timely
filed pursuant to Rule 424 under the Act; and comply with the provisions of
the Act with respect to the disposition of all Warrant Shares covered by
such registration statement during the applicable period in accordance with
the intended methods of disposition as set forth in such registration
statement or supplement to such prospectus; and in these regards the
Company shall not be deemed to have used its best efforts to keep a
registration statement effective during the applicable period if it
unreasonably takes any action that would result in any Holder whose Warrant
Shares have been included therein not being able to sell such Warrant
Shares at any time during such period or for more than 30 days, whether or
not consecutive, in such period;
(x) deliver to each of the Holders, their respective counsel and the
Underwriters, if any, without charge, as many copies of the prospectus or
prospectuses (including each preliminary prospectus) and any amendment or
supplement thereto as such persons may reasonably request; and the Company
consents to the use of any such prospectus or any amendment or supplement
thereto by the Holders and each of the Underwriters, if any, in connection
with the offering and sale of the Warrant Shares covered by such prospectus
or any amendment or supplement thereto;
(xi) prior to any public offering of Warrant Shares, register or
qualify or cooperate with the Holders, the Underwriters, if any, and their
respective counsel in connection with the registration or qualification (or
exemption from such registration or qualification) of such Warrant Shares
for offer and sale under the securities or blue sky laws of such
jurisdictions as the Holders or any Underwriter reasonably requests in
writing; keep each such registration or qualification (or exemption
therefrom) effective during the period the applicable registration
statement is required to be kept effective and do any and all other acts or
things necessary or advisable to enable the disposition in such
jurisdictions of the Warrant Shares covered by the applicable registration
statement; provided, that the Company will not be required to qualify
generally to do business in any jurisdiction where it is not then so
qualified or to take any action which
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would subject it to general service of process in any such jurisdiction
where it is not then so subject;
(xii) cooperate with the Holders and the Underwriters, if any, to
facilitate the timely preparation and delivery of certificates representing
Warrant Shares to be sold, which certificates shall not bear any
restrictive legends; and enable such Warrant Shares to be in such
denominations and registered in such names as the Underwriters may request
at least two business days prior to any sale of Warrant Shares to the
Underwriters;
(xiii) use its best efforts to cause the Warrant Shares covered by
the applicable registration statement to be registered with or approved by
such other governmental agencies or authorities as may be necessary to
enable the Holders and the Underwriters, if any, to consummate the
disposition of such Warrant Shares;
(xiv) enter into such agreements in form and substance reasonably
acceptable to the Company and its counsel (including an underwriting
agreement) and take all such other actions in connection therewith as may
be necessary to expedite or facilitate the disposition of such Warrant
Shares and, in such connection, whether or not an underwriting agreement is
entered into and whether or not the registration is an underwritten
registration: (1) make such representations and warranties to the Holders
with respect to the business of the Company and any subsidiaries it may
then have, the registration statement, the prospectus (and, if applicable,
prospectus supplement) and documents, if any, incorporated or deemed to be
incorporated by reference in the registration statement (and, if
applicable, prospectus supplement), in each case in such form, substance
and scope as are reasonably requested by the Holders and confirm the same
if and when requested; (2) obtain opinions of counsel to the Company and
updates thereof addressed to the Holders with respect to the matters
referred to in the preceding clause (1) in such form, scope and substance
as are reasonably requested by the Holders; (3) in the case of an
underwritten offering, enter into an underwriting agreement in form, scope
and substance as is customary in underwritten offerings and obtain (a)
opinions of counsel to the Company and updates thereof (which counsel and
opinions (in form, scope and substance) shall be reasonably satisfactory to
the Underwriters) addressed to the Underwriters covering the matters
customarily covered in opinions requested by underwriters in underwritten
offerings and such other matters as may be reasonably requested by the
Underwriters and (b) obtain opinions of counsel to the Company and updates
thereof (which counsel and opinions (in form, scope and substance) shall be
reasonably satisfactory to the Holders) addressed to the Holders covering
matters reasonably requested by the Holders (whether or not such matters
are different from, or in addition to, the matters described in subclause
(a) of this subsection (xiv)(3); (4) obtain "comfort" letters and updates
thereof from the independent certified public accountants of the Company
(and, if necessary, any other
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independent certified public accountants of any subsidiary of the Company
or of any business acquired by the Company for which financial statements
and financial data is or is required to be included in the registration
statement), addressed to the Holders and each of the Underwriters, if any,
such letters to be in customary form and covering matters of the type
customarily covered in "comfort" letters to underwriters in connection
with underwritten offerings; (5) if an underwriting agreement is entered
into, the same shall set forth in full the indemnification and contribution
provisions and procedures of Section 3(f) hereof (or such other
indemnification and contribution provisions as shall be acceptable to the
Holders and the Underwriters of such underwritten offering) with respect
to all parties to be indemnified pursuant to said section; and (6) the
Company shall deliver such documents and certificates as may be requested
by the Holders and the Underwriters, if any, to evidence the continued
validity of the representations and warranties made pursuant to clause (1)
above and to evidence compliance with any customary conditions contained
in the underwriting agreement or other agreement entered into by the
Company. Each of the above shall be done at each closing under such
underwriting or similar agreement or as and to the extent required
thereunder;
(xv) make available for inspection by a representative of the Holders
or any Underwriter participating in any disposition pursuant to such
registration statement and any attorney or accountant retained by the
Holders or such Underwriter, all financial and other records, pertinent
corporate documents and properties of the Company and its subsidiaries and
cause the officers, directors and employees of and independent accountants
and attorneys for the Company and its subsidiaries personally to meet with
and to supply all information reasonably requested by any such
representative, Underwriter, attorney or accountant in connection with any
registration of Warrant Shares; provided, that any records, information or
documents that are designated by the Company in writing as confidential
shall be kept confidential by such persons unless (i) disclosure of such
records, information or documents is required by court or administrative
order, (ii) disclosure of such records, information or document is, in the
opinion of counsel to the Holders or to any Underwriter, required pursuant
to the requirements of the Act or (iii) such records, information or
documents are otherwise publicly available;
(xvi) pay all costs and expenses incident to the performance of the
Company's obligations under Sections 3(c) and (d) above and under this
Section 3(e) (collectively "Registration Expenses"), including without
limitation the fees and disbursements of the Company's auditors, legal
counsel, any special legal counsel (including one legal counsel for the
Holders) and legal counsel (including, if applicable, legal counsel to the
Underwriters) responsible for qualifying the Warrant Shares under state
securities or blue sky laws, all filing fees and printing expenses, all
expenses in connection with the transfer and delivery of the Warrant
Shares, all expenses in connection with the
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qualification or registration of the Warrant Shares under applicable state
securities or blue sky laws of such states as are designated by the Holders
(or obtaining exemptions from such qualification or registration under
state securities or blue sky laws) and, if applicable, the fee of the
National Association of Securities Dealers, Inc. in connection with its
review; provided, that in no event shall Registration Expenses include any
underwriting discounts, commissions or fees or the fees of more than one
counsel retained by the Holders or the fees, except with respect to such
state securities blue sky matters, of legal counsel retained by the
Underwriters in connection with the sale of Warrant Shares pursuant to
Section 3(c) or 3(d) above; and
(xvii) in connection with the filing of a registration statement
pursuant to Section 3(c) or (d) above, use its best efforts to obtain
indemnification of the Holders by the Underwriter to the same extent said
Underwriter provides indemnification to the Company. As used in this
Section 3(e), the term "Holders" refers only to those Holders who have
timely elected to sell Warrants Shares in an offering.
(f) INDEMNIFICATION.
(i) The Company shall indemnify and hold harmless SMM, the Holders
and any underwriter (as defined in the Act) for SMM and/or the Holders, and
each person, if any, who respectively controls (within the meaning of
Section 15 of the Act) SMM, or any of the Holders or such underwriter
against any losses, claims, damages, liabilities (or actions in respect
thereof) and expenses whatsoever (including, but not limited to, any and
all expense whatsoever reasonably incurred in investigating, preparing or
defending against any litigation, commenced or threatened, or any claim
whatsoever), joint or several, to which SMM, the Holders or such
underwriter or such controlling person becomes subject, under the Act, the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), or other
federal or state statute, law or regulation, at common law or otherwise,
specifically including but not limited to losses, claims, damages or
liabilities (or actions in respect thereof) or expenses related to
negligence on the part of any such indemnified party, insofar as any such
loss, claim, damage, liability or expense (or actions in respect thereof)
(1) arises out of or is based upon any breach of any representation,
warranty or covenant of the Company in this Agreement or upon any untrue
statement or alleged untrue statement of any material fact contained in (A)
Section 2 of this Agreement, (B) any registration statement covering the
Warrant Shares as originally filed or in any amendment thereof, in the
prospectus contained therein or in an amendment or supplement thereto or
(C) in any application or other document, or any amendment or supplement
thereto (in this Section collectively called "application") executed by or
on behalf of the Company or based upon written information furnished by or
on behalf of the Company filed in any jurisdiction in order to qualify or
register the Warrant Shares under the securities or blue sky laws thereof
(or to obtain exemptions from such qualifications or registration
requirements) or filed with the Commission or any securities association or
securities
-12-
exchange, or (2) arises out of or is based upon the omission or alleged
omission to state in any of the documents described in subclauses (1)(A),
(B) or (C) above, a material fact required to be stated therein or
necessary to make the statements therein not misleading, and agrees to
reimburse each such indemnified person, as incurred, for any legal or other
expenses reasonably incurred by them in connection with investigation or
defending any such loss, claim, damage, liability or action; provided,
however, that the Company shall not be obligated to indemnify in any such
case to the extent that any such loss, claim, damage, liability or expense
arises out of or is based upon any untrue statement or alleged untrue
statement or omission or alleged omission made therein in reliance upon,
and in conformity with, written information furnished to the Company by the
indemnified person specifically for use therein. The Company will not,
without the prior written consent of SMM, settle or compromise or consent
to the entry of any judgment in any pending or threatened claim, action,
suit or proceeding in respect of which indemnification may be sought
hereunder (whether or not SMM is a party to such claim, action, suit or
proceeding), unless such settlement, compromise or consent includes,
without payment by SMM, an unconditional release of all indemnified
parties from all liability arising out of such claim, action, suit or
proceeding, satisfactory in form and substance to SMM.
(ii) Any Holder that includes all or a part of such Holder's Warrant
Shares in a registration statement pursuant to Sections 3(c) or (d) above
agrees to indemnify and hold harmless the Company and each of its directors
and officers who have signed any such registration statement, any other
Holder of Warrant Shares included in such registration statement and any
underwriter (as defined in the Act) for the Company or the Holders of
Warrant Shares, and each person, if any, who controls (within the meaning
of Section 15 of the Act) the Company or such underwriter to the same
extent as the indemnity by the Company in Section 3(f)(i), but only with
respect to any untrue statement or alleged untrue statement or omission or
alleged omission, if any, made in such registration statement, or any
amendment or supplement thereto, or in any application in reliance upon,
and in conformity with, written information furnished by the indemnifying
Holder to the Company or such controlling person expressly for use in the
registration statement, or any amendment or supplement thereto, or any such
application, as the case may be. If any action shall be brought in respect
of which indemnity may be sought against any of the Holders, such Holder(s)
shall have the rights and duties given to the indemnifying party, and the
persons so indemnified shall have the rights and duties given to the
indemnified party, by the provisions of Section 3(f)(iii) below;
(iii) If any action is brought against a person in respect of which
indemnity may be sought hereunder against an indemnifying party, such
person shall promptly notify the indemnifying party in writing of the
institution of such action (but the failure to so notify shall not affect
the indemnification and other rights provided for herein except to
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the extent, if any, that the indemnifying party is prejudiced by the
failure to so give or timely give such notice) and the indemnifying
party shall assume the defense of the action, including the employment
of counsel satisfactory to the indemnified person and payment as
incurred of all fees and expenses related thereto. The indemnified
person shall have the right to employ its own counsel in any such case,
but the fees and expenses of such counsel shall be at the expense of
such indemnified person unless (1) the employment of such counsel and
the payment of fees and expenses thereof shall have been authorized in
writing by the indemnifying party in connection with the defense of the
action, (2) the indemnifying party shall have failed promptly after
notice by such indemnified person to assume the defense of such action
or proceeding and to employ counsel satisfactory to the indemnified
person in any such action or proceeding or (3) the named parties to any
such action or proceeding (including any impleaded parties) include both
such indemnified person and the indemnifying party, and such indemnified
person shall have been advised by counsel that there may be legal
defenses or rights available to such indemnified person which are
different from or additional to those available to the indemnifying party
(in which case, if such indemnified person notifies the indemnifying party
in writing that it elects to employ separate counsel at the expense of the
indemnifying party, the indemnifying party shall not have the right to
assume the defense of such action, it being understood, however, that the
indemnifying party shall not, in connection with any one such action or
proceeding or separate but substantially similar or related actions or
proceedings in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the reasonable fees and
expenses of more than one separate firm of attorneys (together with
appropriate local counsel) at any time for such indemnified person.
Anything in this paragraph to the contrary notwithstanding, the
indemnifying party shall not be liable for any settlement of any claim or
action effected without its written consent. The indemnity agreements
contained in this Section shall remain in full force and effect regardless
of any investigation made by or on behalf of any indemnified person and
shall survive any termination of this Agreement. The indemnifying party
agrees promptly to notify the indemnified party of the commencement of any
litigation or proceedings against the indemnifying party or any of its
officers or directors in connection with any registration statement
referred to in Section 3(c) or (d) above.
(iv) If the indemnification provided for in items (i), (ii) and (iii)
of this Section 3(f) from the indemnifying party is unavailable to an
indemnified party hereunder in respect of any losses, claims, damages,
liabilities or expenses referred to therein, then the indemnifying party,
in lieu of indemnifying such indemnified party, shall contribute to the
amount paid or payable by such indemnified party as a result of such
losses, claims, damages, liabilities or expenses in such proportion as is
appropriate to reflect not only the relative benefits received by the
indemnified party and the indemnifying party, but also the relative fault
of the indemnifying party and indemnified parties in connection with the
actions which resulted in such losses, claims, damages, liabilities
-14-
or expenses, as well as any other relevant equitable considerations. The
relative fault of the indemnifying party and indemnified parties shall be
determined by reference to, among other things, whether any action in
question, including any untrue or alleged untrue statement of a material
fact or omission or alleged omission to state a material fact, has been
made by, or relates to information supplied by, the indemnifying party or
indemnified parties, and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such action. The
amount paid or payable by a party as a result of the losses, claims,
damages, liabilities and expenses referred to above shall be deemed to
include, subject to the limitations set forth in subparagraph (iii) of
this Section 3(f), any legal or other fees or expenses incurred by such
party in connection with any investigation or proceeding. The parties
hereto agree that it would not be just and equitable if contribution
pursuant to this subparagraph (iv) of this Section 3(f) were determined
by pro rata allocation or by any other method of allocation which does
not take account of the equitable and other considerations referred to
in this paragraph. If the full amount of the contribution specified in
this subparagraph (iv) of this Section 3(f) is not permitted by law, then
such indemnified person shall be entitled to contribution from the
indemnifying party to the full extent permitted by law. Notwithstanding
the provisions of this Section 3(f)(iv), no Holder shall be required to
contribute any amount in excess of the amount by which the total price at
which the Warrant Shares of such Holder were sold to the public exceeds
the amount of any damages which such Holder has otherwise been required
to pay by reason of such untrue statement or omission. No party found
guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any party who
was not found guilty of such fraudulent misrepresentation.
(v) Whenever any indemnifying or contributing party is requested by
the indemnified party or the party entitled to contribution to make a
payment pursuant to the forgoing provisions of this Section 3(f), such
payment will be made within five business days after the request and, if
not so paid, the amount due will thereafter bear interest at ten percent
per annum, compounded annually (but not in excess of the maximum amount
permitted by law).
4. EXERCISE OF WARRANTS.
(a) EXERCISE OF WARRANTS. The Warrants may be exercised from time to time
and in full or in part by the Holder thereof by surrender of the Warrants, with
the Election to Purchase attached thereto duly executed by such Holder, to the
Company at its offices at ▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇., ▇▇▇. ▇▇▇, ▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇-▇▇▇▇, or at such other office or agency as the Company may from time to
time designate in writing to each Holder, accompanied by payment, in cash or by
cashier's check payable to the order of the Company or as provided in Section
4(c), in the amount obtained by multiplying the number of Warrant
-15-
Shares designated by the Holder in the Election to Purchase by the Exercise
Price per share. Exercise of any Warrant shall constitute an acknowledgment
by the purchasing Holder that it will not dispose of the Warrant Shares
acquired upon such exercise except in compliance with Section 3(b) hereof and
the Act. Upon any partial exercise of the Warrants, the Company at its
expense will forthwith issue and deliver to the purchasing Holder a new
Warrant, in the name of such Holder and for the number of Warrant Shares
equal to the number of shares called for by the surrendered Warrant (after
giving effect to any adjustment therein as provided in Section 6 below) minus
the number of such Warrant Shares (after giving effect to such adjustment)
purchased by the Holder pursuant to such exercise.
(b) COMPANY TO REAFFIRM OBLIGATIONS. On the date of any exercise of any
Warrants (except that if, on that date, the stock transfer books of the Company
are closed, in which case on the next succeeding date on which such stock
transfer books are open) the Holder exercising the same shall be deemed to have
become, and thereafter shall be considered, a holder of record of the shares of
Common Stock purchased upon such exercise for all purposes. Holders of Warrants
shall have no rights of share ownership until they exercise their Warrants. The
Company will, at the time of any exercise of any Warrant, upon the request of
the Holder thereof, acknowledge in writing its continuing obligation to afford
to that Holder any rights (including without limitation any right to
registration of the Warrant Shares issued upon such exercise) to which the
Holder shall continue to be entitled after such exercise in accordance with the
provisions of this Agreement; provided, however, that if the Holder of a Warrant
shall fail to make any such request, such failure shall not affect the
continuing obligation of the Company to afford those rights to the Holder.
(c) NET EXERCISE OF WARRANTS. Notwithstanding anything to the contrary
contained in this Section 4, any Holder may elect to exercise any Warrant in
whole or in part by receiving shares of Common Stock equal to the value
(determined below) of the Warrant (or any part hereof), upon surrender of the
Warrant (or any part thereof) at the office or agency described in Section 4(a)
above, together with notice of such election, specifying the part of the Warrant
so surrendered, in which event the Company shall issue and deliver to the Holder
a number of shares of Common Stock determined using the following formula:
X = (Y) (A-B)
---------
A
where
X = the number of shares of Common Stock to be issued to the
Holder;
Y = the number of shares of Common Stock purchasable under the
Warrant, or portion of the Warrant, surrendered;
-16-
A = the Current Market Price per share of the Common Stock,
determined pursuant to Section 6(d) of this Agreement; and
B = the then current Exercise Price per share of Common Stock.
5. DELIVERY OF STOCK CERTIFICATES, ETC., ON EXERCISE: NO FRACTIONAL
SHARES.
(a) STOCK CERTIFICATES, ETC. As soon as practicable after the exercise of
any Warrants and in any event within five business days thereafter, the Company,
at its expense (including the payment by it of any applicable issue taxes), will
cause to be issued in the name of and delivered to the purchasing Holder a
certificate or certificates for the number of fully paid and nonassessable
Warrant Shares to which such Holder shall be entitled upon such exercise,
together with any Other Securities and property (including cash, where
applicable) to which such Holder is entitled upon such exercise pursuant to
Section 6 of this Agreement or otherwise.
(b) NO FRACTIONAL SHARES. The Company will not issue a fractional share of
Common Stock upon exercise of a Warrant. Rather, if a fractional share would
otherwise be issued, the Company will instead issue a number of whole shares
equal to the next lowest number of whole shares and shall pay to the exercising
Holder an amount in cash equal to amount obtained by multiplying (x) the
fractional shares not issued by (y) the Current Market Price (as defined in
Section 6(d)) per share of the Common Stock on the last trading day prior to the
exercise date.
6. ANTI-DILUTION PROVISIONS. The Warrants are subject to the following
additional terms and conditions:
(a) ADJUSTMENT FOR CHANGE IN CAPITAL STOCK. If, after the date of this
Agreement, the Company:
(1) pays a dividend or makes a distribution on its Common Stock in
shares of its capital stock (including Common Stock);
(2) subdivides its outstanding shares of Common Stock into a greater
number of shares;
(3) combines its outstanding shares of Common Stock into smaller
number of shares; or
(4) issues by reclassification of its Common Stock any shares of its
capital stock or Other Securities (including without limitation
any such
-17-
reclassification in connection with a consolidation or
merger in which the Company is the continuing entity);
then the Exercise Price in effect at the time of the record date of such
dividend, distribution, subdivision, combination or reclassification shall be
adjusted so that the Exercise Price shall be equal to the price determined by
multiplying the Exercise Price in effect immediately prior to such event by a
fraction, the numerator of which shall be (x) the total number of outstanding
shares of Common Stock of the Company immediately prior to such event and the
denominator of which shall be (y) the total number of outstanding shares of
Common Stock of the Company immediately after such event and, as so adjusted or
readjusted, the Exercise Price shall remain in effect until a further adjustment
or readjustment is required by this Section 6(b). Whenever the Exercise Price
payable upon exercise of each Warrant is adjusted pursuant to this Section 6(a),
the Warrant Shares shall simultaneously be adjusted by multiplying the number
of Warrant Shares issuable upon exercise of each Warrant immediately prior to
such event by the Exercise Price in effect on the date thereof and dividing the
product so obtained by the Exercise Price as adjusted. These adjustments
referred to in the preceding paragraph shall become effective on (x) in the case
of a dividend or distribution, the earlier of the record date thereof or the
distribution date thereof and (y) in the case of a subdivision, combination or
reclassification, the earlier of the record date thereof or the effective date
thereof.
(b) ADJUSTMENTS FOR OTHER DISTRIBUTIONS. If, after the date of this
Agreement, the holders of Common Stock generally shall have received or, on or
after the record date fixed for the determination of eligible stockholders,
shall have become entitled to receive (i) securities other than capital stock,
(ii) evidences of its indebtedness, (iii) assets (including cash dividends or
distributions), (iv) rights, options, warrants or convertible or exchangeable
securities (other than Convertible Securities or Options) containing the right
to subscribe for or purchase securities of the Company, then and in each such
case the Holder of each Warrant, upon the exercise thereof as provided in
Section 4 above, shall be entitled to receive, in addition to the Warrant Shares
otherwise receivable on such exercise, the amount of securities, indebtedness,
assets (including cash in the case referred to in subdivision (iii) of this
Section 6(b)) and such rights, options, warrants or convertible or exchangeable
securities which such Holder would hold on the date of such exercise if on the
date of this Agreement such Holder had been the holder of record of the number
of shares of Common Stock called for by the Warrants held by such Holder and had
thereafter, during the period from the date of this Agreement to and including
the date of such exercise, retained such shares, giving effect to all
adjustments called for during such period by this Section 6.
(c) ADJUSTMENTS FOR SALE OR OTHER ISSUANCE OF COMMON STOCK.
(i) If at any time prior to the exercise of the Warrants in full, the
Company shall issue or sell any Common Stock without consideration or for
consideration per share less than the Current Market Price per share (as
defined in Section 6(d)) on the date of such issuance or sale (which shall
be deemed for all purposes of this Section
-18-
6(c), in the case of Common Stock issued as all or part of the
consideration for an acquisition, to be the same as the date the
definitive agreement for such acquisition is entered into), the
Exercise Price shall be adjusted so that the Exercise Price shall
equal the price determined by multiplying the Exercise Price in
effect immediately prior to the date of such sale or issuance (which date
in the event of distribution to shareholders shall be deemed to be the
record date set by the Company to determine shareholders entitled to
participate in such distribution) by a fraction, the numerator of which
shall be (i) the number of shares of Common Stock outstanding on the date
of such sale or issuance, plus (ii) the number of additional shares of
Common Stock which the aggregate consideration received by the Company upon
such issuance or sale would purchase at such Current Market Price per share
of the Common Stock and the denominator of which shall be (i) the number of
shares of Common Stock outstanding on the date of such issuance or sale,
plus (ii) the number of additional shares of Common Stock offered for
purchase. Any adjustments required by this Section 6(c) shall be made
immediately after such issuance or sale or record date, as the case may be.
Such adjustments shall be made successively whenever the event shall occur.
(ii) For the purpose of making any adjustment in the Exercise Price,
or number of shares of Common Stock purchasable upon exercise of the
Warrants, as provided above and in Section 6(c)(vii) below, the
consideration received by the Company for any issue or sale of securities
shall: (A) To the extent it consists of cash, be computed as the gross
amount of cash received by the Company before deduction of any underwriting
or similar commissions, compensation, discounts or concessions paid or
allowed by the Company in connection with such issue or sale and before
deduction of any other expenses payable in connection therewith. (B) In
case of the issuance (otherwise than upon conversion or exchange of
Convertible Securities) or sale of additional Common Stock, Options or
Convertible Securities for a consideration other than cash or a
consideration a part of which is other than cash, then for purposes of this
Section 6(c) the fair value of such consideration as determined by the
Board of Directors of the Company in the good faith exercise of its
business judgment, regardless of the accounting treatment thereof, shall be
deemed to be the value of the consideration other than cash received by the
Company for such securities.
(iii) OPTIONS AND CONVERTIBLE SECURITIES. If the Company in any
manner issues or grants any Options or any Convertible Securities -- but
only to the extent (i) such Options are exercisable at less than the
Current Market Price at the date of issue of such Options or (ii) the
amount paid for such Convertible Securities per share plus any additional
amount payable per share upon conversion thereof is less than the Current
Market Price per share at the date of issue of the Convertible Securities
-- the total maximum number of shares of Common Stock issuable upon the
exercise of such Options or upon conversion or exchange of the total
maximum amount of such Convertible Securities at the time such Convertible
Securities first become convertible
-19-
or exchangeable shall (as of the date of issue or grant of such Options
or, in the case of the issue or sale of Convertible Securities other than
where the same are issuable upon the exercise of Options, as of the date
of such issue or sale) be deemed to be issued and to be outstanding for
the purpose of this Section 6(c) and to have been issued for the sum of
the amount (if any) paid for such Options or Convertible Securities and
the amount (if any) payable upon the exercise of such Options or upon
conversion or exchange of such Convertible Securities at the time such
Convertible Securities first become convertible or exchangeable; provided
that, subject to the other provisions of this Section 6(c), no further
adjustment of the Exercise Price shall be made upon the actual issuance
of any such Common Stock or Convertible Securities or upon the conversion
or exchange of any such Convertible Securities.
(iv) CHANGE IN OPTION PRICE OR CONVERSION RATE. If the purchase
price provided for in any Option referred to in Section 6(c)(iii), or the
rate or price at which any Convertible Securities referred to in Section
6(c)(iii) are convertible into or exchangeable for shares of Common Stock,
shall change at any time (other than under or by reason of conventional
provisions designed to protect against dilution), the Exercise Price in
effect at the time of such event shall forthwith be readjusted -- but only
to the extent such change does not result in either the per share Option
exercise price or the amount per share payable for such Convertible
Securities plus the amount payable per share on the conversion of such
Convertible Securities to be greater than the lesser of the Current Market
Price per share at the time such Options or Convertible Securities were
issued, as referred to in Section 6(c)(iii), or the Current Market Price at
the effective date of such change -- to the Exercise Price that would have
been in effect at such time had such Options or Convertible Securities then
still outstanding provided for such changed purchase price, additional
consideration or conversion rate, as the case may be, at the time initially
granted, issued or sold. If the purchase price provided for in any such
Option, or the additional consideration (if any) payable upon the
conversion or exchange of any such Convertible Securities, or the rate or
price at which any such Convertible Securities are convertible into or
exchangeable for shares of Common Stock shall be changed at any time under
or by reason of conventional provisions designed to protect against
dilution, then in case of, but only to the extent of, the delivery of
shares of Common Stock upon the exercise of any such Option or upon
conversion or exchange of any such Convertible Security, the Exercise Price
then in effect hereunder shall, upon issuance of such shares of Common
Stock, be adjusted -- but only to the extent such change does not result in
either the per share Option exercise price or the amount per share payable
for such Convertible Securities plus the amount payable per share on the
conversion of such Convertible Securities to be greater than the Current
Market Price per share at the time such Options or Convertible Securities
were issued, as referred to in Section 6(c)(iii) -- to such amount as would
have obtained had such Option or Convertible Security never been issued and
had adjustments been made based only upon the issuance of the shares
-20-
of Common Stock for the consideration actually received for such Option or
Convertible Security and such Common Stock.
(v) EXPIRATION OF OPTION OR CONVERSION RIGHTS. In the event of the
termination or expiration of any right to purchase Common Stock under any
Option or of any right to convert or exchange Convertible Securities, the
Exercise Price shall, upon such termination, be changed to the Exercise
Price that would have been in effect at the time of such expiration had
such Option or Convertible Security, to the extent outstanding immediately
prior to such expiration, never been issued. As used in this Section
6(c)(v), the word "expiration" includes a termination, without payment of
consideration by the Company, of a right to purchase, convert or exchange.
(vi) EXCLUDED EVENTS. Notwithstanding anything in this Section 6 to
the contrary, the Exercise Price shall not be adjusted by virtue of (i) the
Warrants or the existence or exercise of any Options of the Company
outstanding on the date hereof and disclosed in the Prospectus or (ii) the
issuance or sale of, or the grant of Options to purchase, Common Stock to
employees, directors, or officers of the Company or its subsidiaries, or to
other persons who do not beneficially own more than one percent of the
Common Stock (assuming for this purpose that all Options then held by the
person, including new options then being granted, but no other Option or
Convertible Securities, have then been exercised in full) and are not the
children of such a one percent or greater shareholder or the spouses of
such children, pursuant to stock option plans currently existing or
hereafter approved by the Board of Directors of the Company, provided that
the exercise price is no less than the lower of fair market value at the
time of grant (as determined in accordance with the applicable stock option
plan) or the Current Market Price at the time of grant (all as determined
in accordance with this Section 6(c)).
(vii) ADJUSTMENT IN NUMBER OF WARRANT SHARES. Whenever the Exercise
Price payable upon exercise of a Warrant is adjusted pursuant to this
Section 6(c), the Warrant Shares issuable on exercise of the Warrant shall
simultaneously be adjusted by multiplying the number of the Warrant Shares
issuable upon exercise of the Warrant immediately prior to such event by
the Exercise Price in effect on the date thereof and dividing the product
so obtained by the Exercise Price, as adjusted.
(d) CURRENT MARKET PRICE. For the purpose of any computation under Section
6, the "Current Market Price" per share of Common Stock at any date shall be the
average of the daily closing prices for the 15 consecutive trading days
commencing 20 trading days before such date. The closing price for each day
shall be the last reported sale price, regular way or, in case no such reported
sale takes place on such day, the average of the closing bid and asked prices,
regular way, for such day, in either case on the principal national securities
exchange on which the shares are listed or admitted to trading, or if they are
not listed or admitted to
-21-
trading on any national securities exchange, but are traded in the NNM, or if
the shares are otherwise securities for which transaction reports are
required to be made on a real-time basis pursuant to an effective transaction
reporting plan under Rule 11a3-1 of the Rules of the Commission under the
Exchange Act, the last reported sales price or, if they are not listed or
admitted to trade, and if last sale data is not then available from NNM, but
are traded in the over-the-counter market, the average of the representative
closing bid and asked quotations for the Common Stock on NNM or any
comparable system, or if the Common Stock is not listed on NNM or a
comparable system, the average of the closing bid and asked prices as
furnished by two members of the National Association of Securities Dealers,
Inc. selected from time to time by the independent members of the Board of
Directors of the Company for that purpose.
(e) MINIMUM ADJUSTMENT. No adjustment in the number of Warrant Shares
purchasable hereunder shall be required unless such adjustment would require an
increase or decrease of at least one percent in the number of Warrant Shares
purchasable upon the exercise of each Warrant. No adjustment in the Exercise
Price payable hereunder shall be required unless such adjustment would require
an increase or decrease in the Exercise Price of at least $.01 per share. Any
adjustments that by reason of this Section 6(e) are not required to be made
shall be carried forward and taken into account in any subsequent adjustment
and, notwithstanding the foregoing, all adjustments so carried forward shall be
made at the time of, and in connection with, each exercise of any of the
Warrants. All calculations shall be made to the nearest one-thousandth of a
share, or cent, as the case may be.
(f) OTHER SECURITIES. If at any time, as a result of an adjustment made
pursuant to this Section 6, the Holders shall become entitled to purchase any
shares of capital stock or Other Securities of the Company other than shares of
Common Stock, thereafter the number of such Other Securities so purchasable upon
exercise of each Warrant and the Exercise Price for such securities shall be
subject to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the Warrant Shares
contained in this Section 6; and the provisions of Sections 3, 4, 5 and 7,
inclusive, with respect to the Warrant Shares, shall apply on like terms to any
such Other Securities.
(g) CONSOLIDATIONS, MERGERS AND OTHER TRANSACTIONS. In case of any
consolidation of the Company with or merger of the Company into another
corporation or entity or in case of any sale or conveyance to another
corporation or entity of the property of the Company as an entirety or
substantially as an entirety, the Company or such successor or purchasing
corporation or entity, as the case may be, shall execute a binding agreement
agreeing that each Holder shall have the right thereafter upon payment of the
Exercise Price in effect immediately prior to such action to purchase upon
exercise of each Warrant the kind and amount of shares and other securities and
property which the Holder would have owned or have been entitled to receive
after the happening of such consolidation, merger, sale or conveyance had such
Warrant been exercised immediately prior to such action. The Company shall not
complete any such consolidation, merger, sale or conveyance unless the agreement
referred to in the
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foregoing sentence is executed and delivered, is binding and the mailing
thereof provided for in the next sentence is done at the time of such
completion. The Company shall mail by first class mail, postage prepaid, to
each Holder, notice of the execution of and a copy of such agreement. Such
agreement shall provide for adjustments, which shall be as nearly equivalent
as may be practicable to the adjustments provided for in this Section 6 and
for other protections and rights (including without limitation registration
rights) for the Holders as are as nearly equivalent as may be practical to
those they have under this Warrant Agreement. The provisions of this Section
6 shall similarly apply to successive consolidations, mergers, sales or
conveyances. Each Holder of Warrants shall be under no duty or responsibility
to determine the correctness of any provisions contained in any such
agreement relating either to the kind or amount of shares of stock or Other
Securities or property receivable upon exercise of Warrants or with respect
to the method employed and provided therein for any adjustments.
(h) NOTICE OF ADJUSTMENTS. Whenever the Exercise Price or the kind or
amount of securities purchasable under the Warrants shall be adjusted pursuant
to any of the provisions of this Warrant Agreement, the Company shall forthwith
thereafter cause to be sent to SMM and all other Holders a certificate setting
forth the adjustments in the Exercise Price and the number of shares and, in
addition, setting forth in detail the facts requiring such adjustments. In
addition, the Company at its expense shall within 90 days following the end of
each of its fiscal years during the term of this Agreement and promptly upon the
reasonable request of the Holders of at least ten percent of the Warrants in
connection with the exercise from time to time of all or any portion of any
Warrants, cause independent public accountants of nationally recognized standing
selected by the Company to compute any such adjustment in accordance with the
terms of the Warrants and prepare and deliver to the Holders a certificate
setting forth such adjustment and showing in detail the facts upon which the
adjustment is based.
(i) NOTICE OF CERTAIN EVENTS. In the event of (i) any taking by the
Company of a record of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend or
other distribution, or any right to subscribe for, purchase or otherwise acquire
any shares of stock of any class or any Other Securities or property, or to
receive any other right or (ii) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the Company or any
transfer of all or substantially all of the assets of the Company to, or
consolidation or merger of the Company with or into, any other corporation or
other entity or (iii) any voluntary or involuntary dissolution or liquidation of
the Company, then and in each such event the Company will mail or cause to be
mailed to each Holder and, in addition, on the same date as the earliest such
mailing, telecopied and mailed to SMM, a notice specifying the date upon which
any such record date is to be taken for the purpose of such dividend,
distribution or right, stating the amount and character of such dividend,
distribution or right and the date on which any such reorganization,
reclassification, recapitalization, transfer, consolidation, merger,
dissolution, liquidation or winding-up is to take place and the time, if any, as
of which the holders of record of Common Stock (or Other Securities) shall be
entitled to exchange their shares of
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Common Stock (or Other Securities) for securities or other property
deliverable upon such reorganization, reclassification, recapitalization,
transfer, consolidation, merger, dissolution, liquidation or winding-up.
Such notice shall be mailed at least 15 business days prior to the proposed
record date therefor.
(j) OTHER EVENTS ALTERING EXERCISE PRICE. Upon the occurrence of any
event not specifically denominated in this Section 6 as altering the Exercise
Price and the amount of Common Stock purchasable upon the exercise of the
Warrants, if the reasonable exercise of the business judgment of the independent
members of the Board of Directors of the Company (or, if none, the Board of
Directors or the Company) requires, on equitable principles, the alteration of
the Exercise Price favorable to Holders and/or corresponding adjustment
favorable to Holders to the number of shares for which the Warrants are
exercisable, the Exercise Price and such number of shares shall be equitably
altered.
7. FURTHER COVENANTS OF THE COMPANY. The Company hereby agrees as
follows:
(a) RESERVATION OF STOCK. The Company shall at all times reserve and keep
available, solely for issuance and delivery upon the exercise of the Warrants,
all Warrant Shares from time to time issuable upon the exercise of the Warrants.
(b) TITLE TO STOCK. All of the Warrant Shares delivered upon the exercise
of the Warrants and payment of the Exercise Price (including for the purpose by
a net exercise of Warrants as permitted by Section 4(c)) shall be validly
issued, fully paid and nonassessable; each Holder of a Warrant shall receive
good and marketable title to the Warrant Shares, free and clear of all voting
and other trust arrangements, liens, encumbrances, equities, preemptive rights
and, without limitation, claims of any type whatsoever; and the Company shall
have paid all taxes, if any, in respect of the issuance thereof.
(c) EXCHANGE OF WARRANTS. Subject to Section 3(a) hereof, upon surrender
for exchange of any Warrant to the Company, the Company at its expense will
promptly issue and deliver to the Holder thereof a new Warrant or Warrants of
like tenor, in the name of such Holder, calling in the aggregate for the number
of Warrant Shares called by the Warrants so surrendered.
(d) REPLACEMENT OF WARRANTS. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
Warrants and, in the case of any such loss, theft or destruction, upon delivery
of an indemnity agreement by the Warrant Holder reasonably satisfactory in form
and amount to the Company or, in the case of any such mutilation, upon surrender
by the Holder and cancellation of such Warrants, the Company at its expense will
execute and deliver, in lieu thereof, new Warrants of like tenor.
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(e) REPORTING BY THE COMPANY. The Company agrees that, during the term of
the Warrants, it will use its best efforts to keep current in the filing of all
forms and other materials which it may be required to file with the appropriate
regulatory authority pursuant to the Exchange Act and all other forms and
reports required to be filed with any regulatory authority having jurisdiction
over the Company. The Company will take such further action as any Holder may
reasonably request, all to the extent required from time to time to enable such
Holder to sell Warrant Shares without registration under the Act within the
limitation of the exemptions provided by (a) Rule 144 under the Act, as such
Rule may be amended from time to time, or (b) any similar rule or regulation
hereafter adopted by the Commission.
8. OTHER HOLDERS. The Warrants are issued upon the following terms, to
all of which each Holder or owner thereof by the taking thereof consents and
agrees: (a) any person who shall become a transferee, within the limitations on
transfer imposed by Section 3(a) hereof, of a Warrant properly endorsed, shall
take such Warrant subject to the provisions of Sections 3(a) and 3(b) hereof and
thereupon shall be authorized to represent that such transferee is the absolute
owner thereof and, subject to the restrictions contained in this Warrant
Agreement, shall be empowered to transfer absolute title by endorsement and
delivery thereof to a permitted bona fide purchaser for value; and (b) each
prior taker or owner waives and renounces all equities or rights in such Warrant
in favor of each such permitted bona fide purchaser, and each such permitted
bona fide purchaser shall acquire absolute title thereto and to all rights
presented thereby; and (c) until such time as the respective Warrant is
transferred on the books of the Company, the Company may treat the registered
Holder thereof as the absolute owner thereof for all purposes, notwithstanding
any notice to the contrary.
9. GENERAL PROVISIONS. All notices, certificates and other communications
from or at the request of the Company to the Holder of any Warrant or Warrant
Share as such shall be mailed by first class, registered or certified mail,
postage prepaid to the Holder, with a copy to ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ INc., ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, Attn.: President, or to such other
address for itself as shall have furnished to the Company in writing. This
Warrant Agreement and any of the terms hereof may be changed, waived, discharged
or terminated only by an instrument in writing signed by the party against which
enforcement of such change, waiver, discharge or termination is sought. In
addition and notwithstanding the foregoing, the provisions of Section 3(c) and
(d) and Section 6 hereof cannot be changed, waived, discharged or terminated in
a manner adverse to the Holders without the written consent of one or more
Holder or Holders who collectively own, of record, that number of Warrants
and/or Warrant Shares which in the aggregate shall constitute two-thirds of all
Warrant Shares issued or issuable under this Agreement (excluding Warrant Shares
which have been previously sold, transferred or otherwise disposed of in a
registered public offering, pursuant to Rule 144 under the Act, as such Rule may
be amended from time to time, or pursuant to Regulation S, as such regulation
may be amended from time to time). The headings in this Warrant Agreement are
for purposes of reference only and shall not limit or otherwise affect any of
the terms hereof. This Warrant Agreement, together with the forms of
instruments annexed hereto, supersedes all prior negotiations and all prior
written and prior
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and contemporaneous oral agreements, representations, warranties and
inducements and constitutes the full and complete agreement of the parties
hereto with respect to the subject matter hereof.
10. GOVERNING LAW. THIS WARRANT AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS, AND NOT THE LAW PERTAINING TO
CHOICE OR CONFLICT OF LAWS, OF THE STATE OF TEXAS.
U S LIQUIDS INC.
By: /s/ W. ▇▇▇▇▇▇▇ ▇▇▇
------------------------------
Name: W. ▇▇▇▇▇▇▇ ▇▇▇
Title: President
The foregoing Agreement is hereby confirmed and accepted as of the date first
above written.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice President
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FORM OF WARRANT
THE WARRANTS REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE CONDITIONS
SPECIFIED IN A WARRANT AGREEMENT, DATED MAY 15, 1997, AMONG THE COMPANY, AND
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ INC. EXCEPT TO THE EXTENT PERMITTED BY THE WARRANT
AGREEMENT, NO TRANSFER, SALE, PLEDGE, HYPOTHECATION, ENCUMBRANCE OR OTHER
DISPOSITION OF THESE WARRANTS OR THE SHARES OF COMMON STOCK OF THE COMPANY
ACQUIRED ON EXERCISE OF THESE WARRANTS SHALL BE VALID OR EFFECTIVE UNTIL
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (OR, IF APPLICABLE, A
SUCCESSOR LAW THERETO) OR THE COMPANY HAS BEEN PRESENTED WITH SATISFACTORY
EVIDENCE THAT THESE WARRANTS OR SUCH SHARES OF COMMON STOCK WILL BE TRANSFERRED
IN A TRANSACTION EXEMPT FROM SUCH REGISTRATION AND UNTIL ANY APPLICABLE
CONDITIONS CONTAINED IN THE WARRANT AGREEMENT HAVE BEEN FULFILLED. A COPY OF
THE WARRANT AGREEMENT IS ON FILE AT THE OFFICES OF THE COMPANY. THE HOLDER OF
THIS CERTIFICATE, BY ACCEPTANCE OF THIS CERTIFICATE, AGREES TO BE BOUND BY THE
PROVISIONS OF THE WARRANT AGREEMENT.
No. ______________
Warrant to Purchase up to ______ Shares of Common Stock
EXERCISABLE COMMENCING 9:00 A.M., LOS ANGELES TIME, ON MAY 15,
1997 AND ENDING 5:00 P.M., LOS ANGELES TIME,
ON MAY 15, 2002
U S LIQUIDS INC.
COMMON STOCK PURCHASE WARRANT
This certifies that ___________________________, or registered assigns,
is the holder (the "Holder") of this Warrant to purchase, subject to adjustment,
the number of fully paid and nonassessable shares set forth above (the "Warrant
Shares") of Common Stock, par value $.01 per share (the "Common Stock"), of
U S Liquids Inc., a Delaware corporation (the "Company"), at the
per share exercise price, subject to adjustment (the "Exercise Price"), set
forth in the Warrant Agreement, dated August __, 1997 (the "Warrant Agreement"),
among the Companyand ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ Inc., at any time prior to the
Expiration Date (defined below), by surrendering this Warrant, with the form of
subscription set forth hereon duly executed, to the Company at the Company's
offices at 411 N. ▇▇▇ Houston Parkway East, Ste. 400, Houston, TX 77060-3545 or
at such other office or agency as the Company may designate and by paying in
full, in the manner provided in Section 4 of the Warrant Agreement, the Exercise
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Price for the Warrant Shares then purchased. Payment of the Exercise Price may
be made in cash or by cashier's check payable to the order of the Company, or by
surrender of a portion of this Warrant as provided in Section 4(c) of the
Warrant Agreement.
This Warrant may be exercised at any time and from time to time, in
whole or in part, at the option of the Holder, commencing 9:00 a.m., Los Angeles
time, on May 15, 1997 until 5:00 p.m., Los Angeles time, on May 15, 2002 (the
"Expiration Date"). Upon the purchase of fewer than all of the Warrant Shares,
there shall be issued to the Holder a new Warrant exercisable for the number of
Warrant Shares for which this Warrant has not been exercised or surrendered as
payment. Prior to the Expiration Date, the Holder shall be entitled to exchange
this Warrant, without charge, for another Warrant or Warrants exercisable for
the same aggregate number of Warrant Shares.
Prior to the Expiration Date, subject to any applicable laws restricting
transferability and to any restriction on transferability that may appear on
this Warrant or in the Warrant Agreement, the Holder shall be entitled to
transfer this Warrant upon delivery thereof, duly endorsed by the Holder or by
his, her or its duly authorized attorney or representative, or accompanied by
proper evidence of succession, assignment or authority to transfer, with the
form of assignment set forth hereon duly executed. Upon any such transfer, a
new Warrant or Warrants exercisable for the same aggregate number of Warrant
Shares will be issued by the Company, without charge, in accordance with
instructions in the form of assignment.
This Warrant is issued under and in accordance with the Warrant
Agreement and, except as otherwise provided in this Warrant, is subject to the
terms and provisions contained therein. Upon certain events provided for in the
Warrant Agreement, the Exercise Price and the number of shares of Common Stock
issuable upon the exercise of this Warrant are subject to adjustment. No
fractional shares will be issued upon the exercise of a Warrant. Instead, the
Company shall pay the value of such fractional share to the Holder in cash, as
provided in the Warrant Agreement.
THIS WARRANT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
INTERNAL LAWS AND NOT THE LAW PERTAINING TO CHOICE OR CONFLICT OF LAWS, OF THE
STATE OF TEXAS.
In witness whereof, the Company has caused this Warrant to be duly
executed.
U S LIQUIDS INC.
By:
-----------------------------
Name:
Title:
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Attest:
---------------------------------
Name:
Title:
-29-
ELECTION TO PURCHASE
The undersigned hereby irrevocably elects to exercise this Warrant to
purchase ______________ shares of Common Stock, acknowledges that it will not
dispose of such shares except in compliance with Section 3(b) of the Warrant
Agreement and the Securities Act of 1933, as amended, and requests that
Certificates for such shares be issued and delivered as follows:
Issue to:
------------------------------------------------------------------
(Name)
------------------------------------------------------------------
(Address, including Zip Code)
------------------------------------------------------------------
(Social Security or Tax Identification Number)
Deliver to:
------------------------------------------------------------------
(Name)
------------------------------------------------------------------
(Address, including Zip Code)
In full payment of the aggregate purchase price with respect to the number
of shares being purchased upon exercise of this Warrant, the undersigned hereby
(check applicable payment method): (i) / / tenders payment of $_________ by
cashier's check payable to the order of U S Liquids Inc. or (ii) / / hereby
surrenders to the Company, Warrants to purchase ________ shares of Common Stock.
If the Warrant is exercised hereby (and, if applicable, surrendered to purchase
shares of Common Stock) so as to purchase fewer than all the shares of Common
Stock that may be purchased pursuant to this Warrant, the undersigned requests
that a new Warrant representing the number of full shares for which the Warrant
has not been exercised or surrendered be issued and delivered as set forth
below.
Name of Warrant holder or Assignee:
------------------------------------------------------
(Please Print)
-30-
Address:
------------------------------
------------------------------
Signature Dated:
(Signature must conform in all respects to name of holder as specified
on the face of the Warrant)
-31-
ASSIGNMENT
For value received, the undersigned hereby sells, assigns and transfers
unto the Assignee named below all of the rights of the undersigned represented
by the within Warrant, with respect to the number of shares of Common Stock set
forth below:
No. of Shares of Taxpayer I.D.
Name of Assignee Address Common Stock Number
---------------- ------- ---------------- -------------
and does hereby irrevocably authorize the Company to make such transfer on the
Warrant Register maintained at the principal office of the Company and, if
applicable, to issue to the undersigned a Warrant for the portion of such
Warrant not so sold, assigned or transferred.
Dated:
---------------------- --------------------------------------
Signature
(Signature must conform in all respects to name of holder as specified on the
face of the Warrant).
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