EXHIBIT 11
EXECUTION COPY
1996 FINANCING LETTER
WES ACQUISITION CORP.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
August 28, 1996
Wahlco Environmental Systems, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Gentlemen:
Reference is made to that certain Term Loan Agreement dated as of July
28, 1995 (the "Loan Agreement") between WES Acquisition Corp. and Wahlco
Environmental Systems, Inc., as amended. Capitalized terms used herein,
unless separately defined, shall have the meanings assigned to such terms in
the Loan Agreement.
1. 1996 FINANCING FACILITIES. ▇▇▇▇▇▇▇▇ has requested that Lender
provide Borrower with additional loans, and ▇▇▇▇▇▇ has agreed to provide such
loans on the terms and conditions set forth herein. The loans to be provided
hereunder shall consist of the Series A Facility, which shall have the terms
and conditions set forth in Section 2 of this Agreement. This Agreement may
be referred to from time to time as the "1996 Financing Agreement."
2. SERIES A FACILITY
(a) AMOUNT AND AVAILABILITY. ▇▇▇▇▇▇ hereby agrees to loan to
Borrower the principal amount of up to $1,600,000, subject to compliance with
the further terms and conditions of this 1996 Financing Agreement. The
minimum size of any borrowing hereunder (each, a "Series A Advance") shall be
$200,000 and the maximum shall be $400,000. Each Series A Advance shall be
made on three Business Days' notice to Lender. Borrower may borrow $400,000
upon execution of this Agreement. Borrower may borrow an additional Series A
Advance of $400,000 in September 1996, an additional Series A Advance of
$200,000 in October 1996, an additional Series A Advance of $300,000 in
November 1996, and an additional Series A Advance of $300,000 in December
1996, PROVIDED, that, for each month shown in column 2 of Schedule I attached
hereto, ▇▇▇▇▇▇▇▇'s cumulative consolidated earnings before interest,
taxes, depreciation and amortization ("EBITDA") for the period shown in
column 1 of Schedule I, are equal to or greater than the applicable amount
set forth in column 4 on Schedule I; PROVIDED, FURTHER, that the fees and
expenses incurred by Borrower in connection with (i)
the consummation of the transactions contemplated by the 1996 Financing
Agreement, and (ii) the refinancing and/or restructuring of the Silicon
Obligation shall be added back to Borrower's earnings in determining EBITDA.
If, for any month listed on column 2 of Schedule I Borrower has failed to
satisfy the applicable EBITDA test, Lender's obligation to make Series A
Advances shall terminate, unless Lender waives Borrower's failure. If Lender
waives Borrower's failure to achieve the EBITDA amounts set forth in column 4
of Schedule I and makes a Series A Advance, such waiver shall not be
effective as to any future Series A Advance, and Lender shall have no
commitment to fund any future Series A Advances. If Borrower does not borrow
the full amount of Series A Advances in any month, the unborrowed portion may
be borrowed in a subsequent month, provided there is no Event of Default at
the time of such request for a Series A Advance. Series A Advances shall be
used by Borrower for working capital and general corporate purposes. Each
Series A Advance shall be evidenced by a Series A Secured Note, payable to
the order of Lender, dated the date of the funding of the applicable loan to
Borrower, in the form attached hereto as Exhibit A. Absent manifest error,
▇▇▇▇▇▇'s books and records shall be conclusive evidence as to the amount of
outstanding principal amount of and accrued interest on the Series A Advances.
(b) INTEREST. Each Series A Advance shall bear interest from the
date funds are made available to Borrower until repaid at the rate of 13% per
annum. Interest on each Series A Advance shall be paid in kind and
capitalized and added to the outstanding principal amount of each Series A
Note quarterly on each March 31, June 30, September 30 and December 31.
Interest on each Series A Advance shall be computed on the basis of a 365-day
year for the actual number of days elapsed.
(c) MATURITY. Each Series A Note shall mature, unless prepaid or
accelerated, on January 1, 1997 (the "Maturity Date"). The Maturity Date may
be accelerated upon the occurrence of an Event of Default under any Series A
Note, the Loan Agreement, or any Collateral Document.
(d) OPTIONAL PREPAYMENT. Borrower may prepay any Series A Note at
any time or from time to time on one Business Day's notice to Lender. Any
Series A advances that are optionally prepaid may not be reborrowed.
(e) COLLATERAL. Each Series A Advance and each Series A Note shall
be secured by a perfected lien on all of the Collateral securing the
Obligations outstanding under the Loan Agreement. ▇▇▇▇▇▇▇▇ hereby agrees
that, notwithstanding the time of perfection, priority or attachment of liens
or security interests, (1) the Series A Advances shall be secured by all
liens and security interests outstanding under the Loan Agreement and the
Collateral Documents as if the Series A Advances were Term Loan Advances
under the Loan Agreement, and (2) the liens and security interests securing
each Series A Advance shall rank senior to all
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liens and security interests securing Term Loan Advances under the Loan
Agreement.
(f) RANKING. Each Series A Note shall rank senior in right of
repayment to Term Loan Advances and other Obligations outstanding under the
Loan Agreement, but shall be subordinated in right of payment to obligations
owed by Borrower or Wahlco to Silicon (the "Silicon Obligations"); PROVIDED,
HOWEVER, that such subordination to the Silicon Obligations shall terminate
upon the repayment in full of the Silicon Obligations; and, PROVIDED,
FURTHER, that if and to the extent that WESAC becomes subrogated to the
rights of Silicon in respect of the Silicon Obligations, the Series A
Advances shall rank senior in right of payment to such subrogation rights.
▇▇▇▇▇▇▇▇ agrees that Lender may apply any payments received by ▇▇▇▇▇▇ from
any source to the payment of ▇▇▇▇▇▇▇▇'s obligations hereunder prior to (i)
the payment of any Obligations arising under the Loan Agreement or (ii)
making any payments in respect of subrogation rights in respect of the
Silicon Obligations.
(g) CLOSING CONDITIONS. Concurrently with the making of the initial
Series A Advance hereunder, ▇▇▇▇▇▇▇▇ shall deliver to Lender:
(1) Resolutions of the Board of Directors of Borrower
authorizing the execution and delivery of the 1996 Financing Letter and the
transactions contemplated hereby;
(2) An officers' certificate of Borrower (A) specifying that,
except as set forth in such certificate, there is no Event of Default under
the Loan Agreement or the 1996 Financing Agreement, and (B) certifying the
incumbency and specimen signatures of the officers of Borrower executing the
1996 Financing Agreement and Series A Note to be executed and delivered
concurrently therewith;
(3) An executed copy of the Warrant Agreement;
(4) An executed copy of the waiver letter of even date herewith
between ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇;
(5) An opinion of counsel to ▇▇▇▇▇▇▇▇, as to such legal matters
as ▇▇▇▇▇▇'s counsel shall reasonably request;
(6) The reasonable fees and expenses of counsel to ▇▇▇▇▇▇; and
(7) Such other documents, certificates and opinions as ▇▇▇▇▇▇
and its counsel may reasonably request.
(h) CONDITIONS TO EACH SERIES A ADVANCE. It shall be a condition to
the making of each Series A Advance that (i) Borrower shall have delivered to
Lender a copy of the monthly reporting package for the relevant month, and
(ii) in the sole
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discretion of Lender, there shall not have occurred a material adverse change
in the business, financial condition, results of operations or prospects of
Borrower.
3. ADDITIONAL CONSIDERATION. As additional consideration to Lender
for making the commitment to fund Series A Advances, Borrower shall (a) pay
Lender a fee of $32,000, which amount shall be added to the principal balance
of the initial Series A Advance hereunder, and (b) issue to Lender's
designees (the "Holders") warrants concurrently with the making of each
Series A Advance pursuant to the form of Warrant Agreement (the "Warrant
Agreement") attached hereto as Exhibit B. The number of warrants to be issued
to the Holders when any Series A Advance is made shall be computed by
dividing the principal amount of such Series A Advance by $.47.
4. REPRESENTATIONS. By its acceptance of this agreement,
Borrower hereby represents that (a) this letter agreement has been duly
authorized by all necessary corporate action of Borrower, (b) this Agreement
and the initial Series A Note to be issued hereunder are, and each subsequent
Series A Note upon issuance will be, the valid, legal and binding obligations
of Borrower, enforceable in accordance with their respective terms, and (c)
no Event of Default, or other event which, with the passing of time or the
giving of notice or both, would constitute an Event of Default, has occurred
under the Loan Agreement.
5. COVENANTS. The affirmative and negative covenants contained in
Articles 6 and 7 of the Loan Agreement are hereby incorporated by reference,
and ▇▇▇▇▇▇▇▇ agrees to comply with such covenants as the same may be from
time to time amended, as if set forth herein in full. ▇▇▇▇▇▇▇▇ also agrees to
perform and satisfy its covenants contained in any other agreement for
borrowed money as if set forth herein in full.
6. EVENTS OF DEFAULT. The provisions contained in Article 9 of the
Loan Agreement are hereby incorporated by reference, and ▇▇▇▇▇▇▇▇ agrees to
be bound by provisions as if set forth herein in full.
7. ENTIRE AGREEMENT. This Agreement, the Loan Agreement, as
modified to date, and the Collateral Documents constitute the entire
agreement between the parties with respect to the subject matter hereof.
Except as set forth herein, the Loan Agreement and the Collateral Documents
remain in full force and effect.
8. MODIFICATIONS AND WAIVERS. This Agreement may not be amended,
modified or waived except by a written agreement signed by ▇▇▇▇▇▇ and
▇▇▇▇▇▇▇▇. This agreement shall be governed by the laws of the State of New
York. This Agreement may be executed in counterparts, all of which, when
taken together, shall constitute one agreement.
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9. NOTICES. Any notices required to be sent hereunder shall be sent
in accordance with the provisions of Section 10.11 of the Loan Agreement.
10. EXPENSES. ▇▇▇▇▇▇▇▇ agrees to pay the reasonably fees and
expenses of ▇▇▇▇▇▇ and its counsel for the negotiation and documentation of
this Agreement and the transactions contemplated hereby, any amendment
modification or restructuring of this Agreement and the transactions
contemplated hereby, and upon the occurrence of an Event of Default, any
enforcement of the Series A Notes.
If the foregoing correctly sets forth our agreement with respect to
the subject matter hereof, kindly sign in the space indicated below and
return two executed copies of this letter to Lender at its address set forth
above.
WES ACQUISITION CORP.
By: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
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Its: President
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▇▇▇▇▇▇ to and accepted as of
this 31st day of August, 1996
WAHLCO ENVIRONMENTAL SYSTEMS, INC.
By: ▇▇▇▇▇ ▇.▇. ▇▇▇▇▇▇▇▇
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Its: Chairman
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EXECUTION COPY
WARRANT AGREEMENT AND FORM OF WARRANT
WARRANT AGREEMENT (the "Agreement"), dated as of August 28, 1996,
between Wahlco Environmental Services, Inc., a Delaware corporation (the
"Company"), and WES Acquisition Corp. ("WESAC").
WHEREAS, in consideration for certain funds advanced and to be advanced
by WESAC to the Company pursuant to that certain agreement (the "1996
Financing Agreement"), dated as of the date hereof, between the Company and
WESAC, the Company agrees to issue to WESAC's designees (each, a "Holder") a
warrant (the "Warrant") entitling each Holder to purchase, upon the terms and
subject to the conditions contained in this Agreement and the Warrant
Certificates (as defined below), one share of the common stock of the
Company, $.01 par value (the "Common Stock") for each warrant, subject to
adjustment as provided in Section 11 hereof; and
WHEREAS, the Company will issue certificates evidencing the Warrants
(the "Warrant Certificates") and other matters as provided herein.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereto agree as follows:
SECTION 1. WARRANT CERTIFICATES. The Warrant Certificate (and the
Forms of Exercise, Assignment and Partial Assignment) shall be substantially
in the forms set forth in Exhibits A through D, respectively, attached
hereto, and may have such letters, numbers or other marks of identification
and such legends printed, lithographed or engraved thereon as the Company may
deem appropriate and as are not inconsistent with the provisions of this
Agreement.
SECTION 2. EXECUTION AND COUNTERSIGNATURE OF WARRANT CERTIFICATES. The
Warrant Certificates shall be executed on behalf of the Company by its Chief
Executive Officer, President, Chief Financial Officer or Treasurer (each, a
"Company Officer") under its corporate seal reproduced thereon attested by
its Secretary or Assistant Secretary. The signature of any of these Company
Officers on any Warrant Certificate may be manual or facsimile. The name,
incumbency and specimen signature of each Company Officer authorized to act
and give instructions and notices under this Agreement shall be certified by
the Secretary or Assistant Secretary of the Company. Warrant Certificates
bearing the manual or facsimile signatures of individuals who were at any
time Company Officers shall bind the Company even if any such individual
ceased to be a Company Officer prior to the execution and delivery of such
Warrant Certificate or was not a Company Officer at the date of this
Agreement.
Each Warrant Certificate shall be countersigned by the manual signature
of each Holder and shall not be valid for any purpose unless so countersigned.
Each Warrant Certificate shall be dated the data of issuance.
SECTION 3. DISTRIBUTION OF WARRANT CERTIFICATES. Each time that WESAC
makes a Series A Advance pursuant to the 1996 Financing Agreement (as such
term is defined therein), Holder shall receive a number of warrants (the
"Warrant Amount"), computed as follows: the principal amount of the Series A
Advance shall be divided by $.47. The number of Warrants to be issued, the
Exercise Price (as hereinafter defined) therefore, and the calculation of the
Warrant Amount shall be certified (the "Calculation Certificate") to WESAC by
a Company Officer each time a Calculation Certificate is delivered to WESAC
pursuant to this Agreement. Promptly following each calculation of a Warrant
Amount, the Company shall execute and authenticate Warrant Certificates
representing the number of Warrants equal to the Warrant Amount. The Company
shall promptly thereupon deliver by first-class mail, postage prepaid to
WESAC, for distribution to such Holders as WESAC may designate, Warrant
Certificates representing warrants to purchase such number of shares of
Common Stock of the Company as are set forth in the Calculation. Except for
the Expiration Date of such warrant, as set forth in Section 5 hereof, the
terms and conditions of each Warrant described in the preceding sentence
shall be identical. The Company shall effect the foregoing as expeditiously
as possible and execute, authenticate and deliver, from time to time, such
other Warrant Certificates as are required by the terms of this Agreement.
SECTION 4. TRANSFERS; EXCHANGES AND PURCHASES BY THE COMPANY. Subject
to Section 14, each Warrant shall be transferable, in whole or in part, upon
surrender of the Warrant Certificate to the Company together with a written
assignment of the Warrant Certificate, on the Form of Assignment or Partial
Assignment, as the case may be, set forth on the reverse thereof or in other
form satisfactory to the Company, duly executed by ▇▇▇▇▇▇, and together with
funds to pay any transfer taxes payable in connection with such transfer.
Upon such surrender and payment, a new Warrant Certificate, in the name of
the assignee and in the denomination or denominations specified in such
instrument of assignment, shall be issued and delivered. If less than all of
a Warrant Certificate is being transferred, a new Warrant Certificate or
Certificates shall be issued for the portion of the Warrant not being
transferred. The Warrant Certificate surrendered shall be canceled by the
Company.
A Warrant Certificate may be divided or combined with other Warrant
Certificates upon surrender thereof to the Company,
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together with a written notice specifying the names and denominations in
which new Warrant Certificates are to be issued, signed by ▇▇▇▇▇▇, and
together with the funds to pay any transfer taxes payable in connection with
such transfer. Upon such surrender and payment, a new Warrant Certificate or
certificates shall be issued and delivered in accordance with such notice.
The Warrant Certificate surrendered shall be canceled by the Company.
The Company shall make no service or other charge in connection with any
such transfer or exchange of Warrant Certificates, except for any transfer
taxes or other governmental charges payable in connection therewith.
Warrant Certificates canceled pursuant to any provisions of this
Agreement shall not be reissued, and shall be returned to the Company.
SECTION 5. DURATION AND EXERCISE OF WARRANTS. The Warrants shall
expire at 5:00 p.m. New York City time on the fifth anniversary of the
Exercise Date (as defined below), PROVIDED, that if such date falls on a day
other than a Business Day, then the Warrants shall expire at 5:00 p.m. New
York City time on the next succeeding Business Day (such date of expiration
being herein referred to as the "Expiration Date"). A "Business Day" shall
mean a day other than a Saturday, Sunday or a public or national bank holiday
or the equivalent for banks generally under the laws of the State of New York.
For any Warrant or Warrant Certificate, the "Expiration Date" shall be
the fifth anniversary of the date of issuance thereof. The Warrants
represented by each Warrant Certificate shall only be exercisable for Common
Stock from the Exercise Date with respect to such Warrants through and
including the Expiration Date with respect to such Warrants. Each Warrant may
be exercised on any Business Day on or prior to 5:00 p.m. New York City time
on the Expiration Date. After 5:00 p.m. New York City time on the Expiration
Date, unexercised Warrants will become wholly void and of no value.
Subject to the provisions of this Agreement, each Holder shall have the
right to purchase from the Company (and the Company shall issue and sell to
such Holder) one fully paid and nonassessable share of Common Stock at the
exercise price (the "Exercise Price") at the time in effect hereunder, upon
surrender the Company of the Warrant Certificate evidencing such Warrant,
with the Form of Exercise duly completed and signed, and upon payment of the
Exercise Price in lawful money of the United States of America by certified
or official bank check payable to the order of the Company; PROVIDED,
HOWEVER, that a Holder who is also a creditor of the Company may exercise
Warrants by payment as herein provided, cancellation of indebtedness or a
combination thereof. The Exercise Price shall be as provided in Section 6.
The Exercise Price and the number of shares of Common Stock
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purchasable upon exercise of a Warrant shall be subject to adjustment as
provided in Section 11. Except as provided in Section 11, no adjustment shall
be made for any cash dividends or other distributions on or in respect of the
Common Stock or other securities purchasable upon the exercise of a Warrant.
Subject to Section 7, upon surrender of a Warrant Certificate and
payment of the Exercise Price at the time in effect hereunder and an amount
equal to any applicable transfer tax in cash or by certified check or bank
draft payable to the order of the Company, the Company shall thereupon
promptly cause to be issued and shall deliver to or upon such Holder, within
a reasonable time, not exceeding fifteen days after each Warrant represented
by the Warrant Certificate shall have been exercised, a certificate for the
Common Stock issuable upon the exercise of each Warrant evidenced by such
Warrant Certificate. Such certificate shall be deemed to have been issued and
such Holder shall be deemed to have become a holder of record of such shares
of Common Stock (a "Shareholder") as of the date of the surrender of such
Warrant Certificate and payment of the Exercise Price.
The Warrants evidenced by a Warrant Certificate shall be exercisable, at
the election of any Holder, either as an entirety or from time to time for
part only of the number of Warrants evidenced by the Warrant Certificate. In
the event that less than all of the Warrants evidenced by a Warrant
Certificate surrendered upon the exercise of Warrants are exercised, a new
Warrant Certificate or Certificates shall be issued for the remaining number
of Warrants evidenced by the Warrant Certificate so surrendered. All Warrant
Certificates surrendered upon exercise of Warrants shall be canceled by the
Company.
The Company shall deposit to the account of the Company all monies
received in payment of the Exercise Price of any Warrant and any applicable
transfer taxes.
SECTION 6. EXERCISE PRICE. The Exercise Price for Warrants to be
issued hereunder shall $.47 per share of Common Stock.
SECTION 7. PAYMENT OF TAXES. The Company shall pay all documentary
stamp taxes, if any, attributable to the issuance of Warrants and the
issuance of Common Stock upon the exercise of any Warrant, PROVIDED, HOWEVER,
that the Company shall not be required to pay any tax or taxes which may be
payable in respect of any transfer involved in the issuance of any
certificates for Common Stock in a name other than that of a Holder of a
Warrant Certificate surrendered upon the exercise of a Warrant and the
Company shall not be required to issue or deliver such certificates unless or
until the persons requesting the issuance thereof shall have paid to the
Company the amount of such tax or shall have established to the satisfaction
of the Company that such tax has been paid.
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SECTION 8. MUTILATED OR MISSING WARRANT CERTIFICATES. In case any of
the Warrant Certificates shall be mutilated, lost, stolen or destroyed, the
Company shall issue, in exchange and substitution for and upon cancellation
of the mutilated Warrant Certificate, or in lieu of and in substitution for
the Warrant Certificate lost, stolen or destroyed, a new Warrant Certificate
of like tenor and representing an equivalent number of Warrants, but only
upon receipt of evidence satisfactory to the Company of such loss, theft or
destruction of such Warrant Certificate and indemnity, if requested, also
satisfactory to the Company. Applicants for such substitute Warrant
Certificates shall also comply with such other reasonable requirements and
pay such other reasonable charges as the Company may prescribe.
SECTION 9. RESERVATION OF COMMON STOCK. The Company will at all times
reserve and keep available, free from preemptive rights, out of the aggregate
of its authorized but unissued Common Stock and Common Stock held in its
treasury, for the purpose of enabling it to satisfy any obligation to issue
Common Stock upon the exercise of Warrants, the maximum number of shares of
Common Stock which are required to be delivered upon the exercise of all
outstanding Warrants.
The Company covenants that all Common Stock which may be issued upon the
exercise of Warrants will, upon issuance, be duly issued and outstanding,
fully paid and nonassessable and free from all taxes, liens, charges and
security interests with respect to the issuance thereof.
The Company is authorized to requisition from time to time from a
transfer agent for the Common Stock stock certificates required to honor the
exercise of outstanding Warrants. The Company hereby authorizes its present
and any future such transfer agent to comply with all such requests. The
Company will supply such transfer agent with duly executed Common Stock
certificates for such purposes and will itself provide or otherwise make
available any cash which may be payable as provided in Section 12.
SECTION 10. OBTAINING OF GOVERNMENTAL APPROVALS AND STOCK EXCHANGE
LISTINGS. The Company will in good faith and as expeditiously as possible
take all action which may be necessary to obtain and keep effective any and
all permits, consents and approvals of governmental agencies and authorities,
and will make any and all filings under federal and state securities laws
necessary in connection with the issuance, distribution and transfer of
Warrant Certificates, the exercise of the Warrants and the issuance, sale,
transfer and delivery of Common Stock upon the exercise of Warrants,
provided, that the foregoing provisions of this sentence shall not be deemed
to require the registration under the Securities Act of 1933, as amended (the
"Securities Act"), or similar state securities laws of the Warrants or the
Common Stock issuable upon the exercise of the Warrants.
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SECTION 11. ADJUSTMENT OF EXERCISE PRICE AND NUMBER AND KIND OF
SECURITIES PURCHASABLE UPON EXERCISE OF WARRANTS.
(a) ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANTS. The
applicable Exercise Price for any Warrants shall be subject to adjustment
from time to time as hereinafter provided for in this Section 11. No
adjustment of the Exercise Price for any Warrants, however, shall be made in
an amount less than $.0l per share, but any such lesser adjustment shall be
carried forward and shall be made at the time and together with the next
subsequent adjustment, which together with any subsequent adjustments so
carried forward shall amount to $.01 per share or more. Upon each adjustment
of the Exercise Price for any Warrants, except pursuant to subsection (f) of
this Section 11, each Holder shall thereafter, at or prior to the Expiration
Date, be entitled to purchase, at the Exercise Price for the applicable
Warrants resulting from such adjustment, the number of shares issuable upon
exercise of such Warrants (calculated to the nearest whole share) obtained by
multiplying the applicable Exercise Price in effect immediately prior to such
adjustment by the number of shares issuable upon exercise of the Warrants
immediately prior to such adjustment and dividing the product so obtained by
the applicable Exercise Price resulting from such adjustment.
(b) ADJUSTMENT OF EXERCISE PRICE UPON CERTAIN ISSUANCES OF COMMON
STOCK. If and whenever after the date hereof, the "current market price" (as
hereinafter defined in subsection (vi) of this Section 11) of the Common
Stock shall be equal to or less than $1.00 per share, and thereafter the
Company shall issue or sell any shares of Common Stock for a consideration
per share less than the current market price in effect immediately prior to
the time of such issue or sale, then, forthwith upon such issue or sale, the
applicable Exercise Price for all Warrants shall be reduced to the price
(calculated to the nearest cent) determined by multiplying the applicable
Exercise Price in effect immediately prior to the time of such issue or sale
by a fraction, the numerator of which shall be the sum of (i) the number of
shares of Common Stock outstanding immediately prior to such issue or sale
multiplied by the current market price immediately prior to such issue or
sale, plus (ii) the consideration received by the Company upon such issue or
sale, and the denominator of which shall be the product of (i) the total
number of shares of Common Stock outstanding immediately after such issue or
sale, multiplied by (ii) the current market price immediately prior to such
issue or sale.
(c) CONSTRUCTIVE ISSUANCES OF STOCK, CONVERTIBLE SECURITIES, RIGHTS AND
OPTIONS. For purposes of subsection (b) of this Section 11, the following
clauses shall also be applicable:
(i) ISSUANCE OF RIGHTS OR OPTIONS. In case at any time the
Company shall in any manner grant any rights or
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options to subscribe for or to purchase, or any options for the purchase of,
Common Stock or stock or securities convertible into or exchangeable for
Common Stock (such convertible or exchangeable stock or securities being
hereinafter called "Convertible Securities"), whether or not such rights or
options or the right to convert or exchange any such Convertible Securities
are immediately exercisable, and the price per share for which Common Stock
is issuable upon the exercise of such rights or options or upon conversion or
exchange of such Convertible Securities (determined as provided below) shall
be less than the current market price determined as of the date of granting
such rights or options, then the total maximum number of shares of Common
Stock issuable upon the exercise of such rights or options or upon conversion
or exchange of the total maximum amount of such Convertible Securities
issuable upon the exercise of such rights or options shall (as of the date of
granting of such rights or options) be deemed to be outstanding and to have
been issued for such price per share. For the purposes of calculations under
this clause (i), the price per share for which Common Stock is issuable upon
the exercise of any such rights or options or upon conversion or exchange of
any such Convertible Securities shall be determined by dividing (a) the total
amount, if any, received or receivable by the Company as consideration for
the granting of such rights or options, plus the minimum aggregate amount of
additional consideration payable to the Company upon the exercise of all such
rights or options, plus, in the case of such rights or options which relate
to Convertible Securities, the minimum aggregate amount of additional
consideration, if any, payable upon the issue or sale of such Convertible
Securities and upon the conversion or exchange thereof, by the maximum
number of shares of Common Stock issuable upon the exercise of such rights or
options or upon the conversion or exchange of all such Convertible Securities
issuable upon the exercise of such rights or options. Except as provided in
clause (iii) of this subsection (c), no further adjustments of any Exercise
Price shall be made upon the actual issue of such Common Stock or of such
Convertible Securities upon exercise of such rights or options or upon the
actual issue of such Common Stock upon conversion or exchange of such
Convertible Securities.
(ii) ISSUANCE OF CONVERTIBLE SECURITIES. In case at any time the
Company shall in any manner issue or sell any Convertible Securities, whether
or not the rights to exchange or convert thereunder are immediately
exercisable, and the price per share for which Common Stock is issuable upon
conversion or exchange of such Convertible Securities (determined as provided
below) shall be less than the current ▇▇▇▇.▇▇ price determined as of the date
of such issue or sale of such Convertible Securities, then the total maximum
number of shares of Common Stock issuable upon conversion or exchange of all
such Convertible Securities shall (as of the date of the issue or sale of
such Convertible Securities) be deemed to be outstanding and to have been
issued for such price per share, provided that if any such issue or sale
-7-
of such Convertible Securities is made upon exercise of any rights to
subscribe for or to purchase or any option to purchase any such Convertible
Securities for which adjustments of any Exercise Price have been or are to be
made pursuant to other provisions of this subsection (c), no further
adjustment of any Exercise Price shall be made by reason of such issue or
sale. For the purposes of calculations under this clause (ii), the price per
share for which Common Stock is issuable upon conversion or exchange of
Convertible Securities shall be determined by dividing (a) the total amount
received or receivable by the Company as consideration for the issue or sale
of such Convertible Securities, plus the minimum aggregate amount of
additional consideration, if any, payable to the Company upon the conversion
or exchange thereof, by (b) the total maximum number of shares of Common
Stock issuable upon the conversion or exchange of all such Convertible
Securities. Except as provided in clause (iii) of this subsection, no further
adjustments of any Exercise Price shall be made upon the actual issue of such
Common Stock upon conversion or exchange of such Convertible Securities.
(iii) CHANGE IN OPTION PRICE OR CONVERSION RATE; EXPIRATION OR
TERMINATION OF RIGHTS OR CONVERTIBLE SECURITIES. If the purchase price
provided for in any rights or options referred to in clause (i) above, or the
additional consideration, if any, payable upon the conversion or exchange of
Convertible Securities referred to in clause (i) or (ii) above, or the rate
at which any Convertible Securities referred to in clause (i) or (ii) above
are convertible into or exchangeable for Common Stock, shall change (other
than under or by reason of provisions designed to protect against dilution),
then the Exercise Price for all Warrants then in effect shall forthwith be
readjusted to the Exercise Price which would have then been in effect had
such then outstanding rights, options or Convertible Securities 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 right or option referred to in clause
(i) above or the rate at which any Convertible Securities referred to in
clause (i) or (ii) above are convertible into or exchangeable for Common
Stock, shall decrease at any time under or by reason of provisions with
respect thereto designed to protect against dilution, then in case of the
delivery of Common Stock upon the exercise of any such right or option or
upon conversion or exchange of any such Convertible Security, the Exercise
Price for all Warrants then in effect hereunder shall forthwith be decreased
to such Exercise Price as would have been obtained had the adjustments made
upon issuance of such right or option or such Convertible Securities been
made upon the basis of the actual issuance of (and the total consideration
received for) the shares of Common Stock delivered upon such exercise,
conversion or exchange. Upon the expiration of any rights, options or
Convertible Securities, if any thereof shall not have been exercised,
converted or exchanged, as the case may be, each applicable Exercise Price
and the number of shares issuable upon
-8-
exercise of the Warrants shall, upon such expiration, be readjusted and shall
thereafter be such as it would have been had it been originally adjusted (or
had the original adjustment not- been required, as the case may be) as if the
only shares of Common Stock so issued were the shares of Common Stock, if
any, actually issued or sold upon the exercise, conversion or exchange, as
the case may be, of such rights, options or Convertible Securities and (b)
such shares of Common Stock, if any, were issued or sold for the
consideration actually received by the Company upon such exercise, conversion
or exchange, as the case may be, plus the aggregate consideration, if any,
actually received by the Company for the issuance, sale or grant of all of
such rights, options or Convertible Securities, whether or not exercised,
converted or exchanged.
(iv) STOCK DIVIDENDS. In case at any time the Company shall
declare a dividend or make any other distribution upon any stock of the
Company which is payable in Common Stock or Convertible Securities, any
Common Stock or Convertible Securities, as the case may be, issuable in
payment of such dividend or distribution shall be deemed to have been issued
or sold without consideration.
(v) CONSIDERATION FOR STOCK. In case any shares of Common Stock
or Convertible Securities or any rights or options to purchase any such
Common Stock or Convertible Securities shall be issued or sold for cash, the
consideration received therefor shall be deemed to be the issuance or sales
price therefor, without deducting therefrom any expenses incurred or any
underwriting commissions or concessions or discounts paid or allowed by the
Company in connection therewith. In case any shares of Common Stock or
Convertible Securities or any rights or options to purchase any such Common
Stock or Convertible Securities shall be issued or sold for a consideration
other than cash, the amount of the consideration other than cash received by
the Company shall be deemed to be the fair value of such consideration as
determined reasonably and in good faith by the Board of Directors of the
Company, without deducting any expenses incurred or any underwriting
commissions or concessions or discounts paid or allowed by the Company in
connection therewith. In case any Common Stock or Convertible Securities or
any rights or options to purchase any shares of Common Stock or Convertible
Securities shall be issued in connection with any merger of another
corporation with and into the Company, the amount of consideration therefor
shall be deemed to be the fair value as determined reasonably and in good
faith by the Board of Directors of the Company of such portion of the assets
of such merged corporation as the Board shall determine to be attributable to
such Common Stock, Convertible Securities, rights or options, as the case may
be.
(vi) DEFINITION OF "CURRENT MARKET PRICE". For the purpose of any
computation hereunder, the "current market price" shall mean (1) if the
Common Stock is listed on one or
-9-
more stock exchanges or is quoted on the NASDAQ National Market (the
"National Market"), the average of the closing sales prices of a share of
Common Stock on the primary national or regional stock exchange on which such
shares are listed or on the National Market if quoted thereon or (2) if the
Common Stock is not so listed or quoted but is traded in the over-the-counter
market (other than the National Market), the average of the closing bid and
asked prices of a share of Common Stock, in the case of clauses (1) and (2),
for the 30 trading days (or such lesser number of trading days as the Common
Stock shall have been so listed, quoted or traded) next preceding the date of
measurement; PROVIDED, HOWEVER, that if no such sale prices or bid and asked
prices have been quoted during the preceding 30-day period, "current market
price" means the value as determined reasonably and in good faith by the
Board of Directors of the Company; and PROVIDED, FURTHER, however, that in
the event the current market price of a share of Common Stock is determined
during a period following the announcement by the Company of (i) a dividend
or distribution on the Common Stock payable in shares of Common Stock or
Convertible Securities, (ii) a dividend of the type referred to in subsection
(d) of this Section 11, or (iii) any subdivision, combination or
reclassification of the Common Stock, and prior to the expiration of 30
trading days after the ex-dividend date for such dividend or distribution, or
the record date for such subdivision, combination or reclassification, then,
and in each such case, the "current market price" shall be appropriately
adjusted to take into account ex-dividend trading.
(d) ADJUSTMENT FOR CERTAIN SPECIAL DIVIDENDS. In case the Company
shall declare a dividend upon the Common Stock payable otherwise than out of
earnings or earned surplus, determined in accordance with generally accepted
accounting principles, and otherwise than in Common Stock or Convertible
Securities, each Exercise Price in effect immediately subsequent to the
declaration of such dividend shall be determined by multiplying such Exercise
Price in effect immediately prior to such declaration by a fraction, the
numerator of which shall be the current market price immediately prior to
such distribution less the amount of cash (or, if the distribution is for
property other than cash, the fair market value of such property determined
reasonably and in good faith by the Board of Directors of the Company)
distributed in respect of one share of Common Stock, and the denominator of
which shall be the current market price immediately prior to such
distribution. For the purposes of the foregoing, a dividend other than in
cash shall be considered payable out of earnings or earned surplus (Other
than revaluation of paid-in-surplus) only to the extent that such earnings or
earned surplus are charged an amount equal to the fair value of such dividend
as determined, reasonably and in good faith, by the Board of Directors of the
Company. Such reductions shall take effect as of the date on which a record
is taken for the purpose of such dividend, or, if a record is not taken, the
date as of which the holders of Common Stock of record entitled to such
dividend are determined.
-10-
(e) SUBDIVISION OR COMBINATION OF STOCK. In case the Company shall at
any time subdivide the outstanding shares of Common Stock into a greater
number of shares, each Exercise price in effect immediately prior to such
subdivision shall be proportionately reduced and the number of shares
issuable upon exercise of the Warrants immediately prior to such subdivision
shall be proportionately increased, and conversely, in case the outstanding
shares of Common Stock shall be combined at any time into a smaller number of
shares, each Exercise Price in effect immediately prior to such combination
shall be proportionately increased and the number of shares issuable upon
exercise of the Warrants immediately prior to such combination shall be
proportionately reduced.
(f) ADJUSTMENTS FOR CONSOLIDATION, MERGER, SALE OF ASSETS,
REORGANIZATION, ETC. In case the Company (i) consolidates with or merges into
any other corporation and is not the continuing or surviving corporation of
such consolidation or merger, or (ii) permits any other corporation to
consolidate with or merge into the Company and the Company is the continuing
or surviving corporation but, in connection with such consolidation or
merger, the Common Stock is changed into or exchanged for stock or other
securities of any other corporation or cash or any other assets, or (iii)
transfers all or substantially all of its properties and assets to any other
corporation, or (iv) effects a capital reorganization or reclassification of
the capital stock of the Company in such a way that holders of Common Stock
shall be entitled to receive stock, securities, cash or assets with respect
to or in exchange for Common Stock, then, and in each such case, proper
provision shall be made so that, upon the basis and upon the terms and in the
manner provided in this subsection (f), upon the exercise of the Warrants at
any time after the consummation of such consolidation, merger, transfer,
reorganization or reclassification, Holder shall be entitled to receive (at
the aggregate Exercise Price in effect for shares issuable upon such exercise
of the Warrants immediately prior to such consummation), in lieu of shares
issuable upon such exercise of the Warrants prior to such consummation, the
stock and other securities, cash and assets to which Holder would have been
entitled upon such consummation if Holder had so exercised such Warrants
immediately prior thereto (subject to adjustments subsequent to such
corporate action as nearly equivalent as possible to the adjustments provided
for in this Section 11). Notwithstanding the foregoing, in the event that a
definitive agreement (a "Sale Agreement") is executed with respect to an all
cash transaction involving (i) either a merger or consolidation of the
Company with and into another corporation or (ii) the sale of all or
substantially all of the outstanding Common Stock of the Company, the Company
shall have the right, on three (3) days prior written notice to Holder, to
pay or cause to be paid to Holder on or immediately prior to the closing date
of the transactions under the Sale Agreement in full and complete
satisfaction and cancellation of the Warrants, an amount in cash equal to (A)
the product of (x) the price per share of Common
-11-
Stock payable to the holders of Common Stock under the Sale Agreement and (y)
the number of shares of Common Stock issuable upon exercise of the Warrants
on such date minus (B) the product of (x) the applicable Exercise Price(s) in
effect at such date(s) and (y) the number of shares of Common Stock issuable
upon exercise of the Warrants on such date(s).
(g) NOTICE OF ADJUSTMENT. Whenever the number of shares issuable upon
the exercise of the Warrants or any Exercise Price is adjusted, as provided
in this Section 11, the Company shall prepare and mail to each Holder a
certificate setting forth (i) the Exercise Price and the number of shares
issuable upon the exercise of the Warrants after such adjustment, (ii) a
brief statement of the facts requiring such adjustment and (iii) the
computation by which such adjustment was made.
(h) NO CHANGE OF WARRANT NECESSARY. Irrespective of any adjustment in
any Exercise Price or in the number or kind of shares issuable upon exercise
of the Warrants, unless the Holders of a majority of Warrants otherwise
request, the Warrants may continue to express the same price and number and
kind of shares as are stated in the Warrants as initially issued.
(i) TREASURY SHARES. The number of shares of Common Stock outstanding
at any given time shall not include shares of Common Stock owned or held by
or for the account of the Company. The disposition of any shares of Common
Stock owned or held by or for the account of the Company shall be considered
an issue of Common Stock for the purposes of this Section 11.
(j) CERTAIN ADJUSTMENT RULES.
(i) The provisions of this Section 11 shall similarly apply to
successive transactions.
(ii) If the Company shall declare any dividend referred to in
paragraph (iv) of subsection (c) of this Section 11 or subsection (d) of this
Section 11 and if any Holder exercises all or any part of the Warrants after
such declaration but before the payment of such dividend, the Company may
elect to defer, until the payment of such dividend, issuing to such Holder
the shares issuable upon such exercise of the Warrants over and above the
shares issuable upon such exercise of the Warrants on the basis of the
Exercise Price in effect prior to such adjustment; PROVIDED, HOWEVER, that
the Company shall deliver to each such Holder a due bill or other appropriate
instrument evidencing such Holder's right to receive such additional shares
upon the payment of such dividend.
(iii) If the Company shall declare any dividend referred to in
paragraph (iv) of subsection (c) of this Section 11 or subsection (d) of this
Section 11 and shall legally abandon such dividend prior to payment, then no
adjustment shall be made pursuant to this Section 11 in respect of such
declaration.
-12-
(k) EXCEPTIONS TO ADJUSTMENT TO PURCHASE PRICE. Notwithstanding
anything herein to the contrary, no adjustment to any Exercise Price or the
number of shares issuable upon exercise of the Warrants shall be made in the
case of the following:
(i) the issuance of any Warrant or the issuance of any shares upon
any exercise of any Warrant or any adjustment of the Exercise Price with
respect thereto;
(ii) the grant of options to purchase Common Stock to employees,
officers or directors of the Company, or the adjustment of the exercise price
thereof pursuant to any initiative stock option or similar plan;
(iii) the issuance of shares of Common Stock to any employees,
officers or directors of the Company upon the exercise of any options to
purchase Common Stock referred to in (ii) above; and
(iv) any change in the par value of the Common Stock.
(1) OTHER EXERCISE PRICE REDUCTIONS. Anything in this Section 11 to
the contrary notwithstanding, the Company shall be entitled to reduce any
Exercise Price, in addition to those adjustments required by this Section 11,
to the extent necessary so that any consolidation or subdivision of the
Common Stock, issuance wholly for cash of any Common Stock at less than the
current market price, issuance wholly for cash of Common Stock or Convertible
Securities or dividends on Common Stock payable in Common Stock or other
assets, hereafter made by the Company to the holders of its Common Stock
shall not be taxable to them.
SECTION 12. FRACTIONAL SHARES OF COMMON STOCK. The Company may, but
will not be required to, issue fractions of shares of Common Stock or to
distribute Common Stock certificates which evidence fractions of shares upon
the exercise of the Warrants, provided, however, that in lieu of fractional
shares of Common Stock the Company shall make a cash payment therefor equal
in amount to the product of the applicable fraction multiplied by the
"current market price" then in effect.
SECTION 13. NOTICES OF CERTAIN EVENTS. In the event that the Company
shall propose (a) to pay any dividend payable in stock of any class to the
holders of shares of Common Stock or to make any other distribution to the
holders of shares of Common Stock (other than a regular quarterly cash
dividend out of earnings or retained earnings of the Company), (b) to offer
to the holders of shares of Common Stock rights or warrants to subscribe for
or to purchase any additional shares of Common Stock or shares of stock of
any class or any other securities, rights or options, (c) to effect any
reclassification of its Common Stock, (d) to effect any consolidation or
merger into or with, or to effect any sale or other transfer (or to permit one
-13-
or more of its subsidiaries to effect any sale or other transfer) in one or
more transactions, of more than fifty percent (50%) of the assets or earning
power of the Company and its subsidiaries (taken as a whole) to, any other
person or entity, or (e) to effect the liquidation, dissolution or winding up
of the Company, then, in each such case, the Company shall give to each
Holder, in accordance with this Section 13, a notice of such proposed action,
which shall specify the record date for the purposes of such stock dividend,
distribution of rights or warrants, or the date on which such
reclassification, consolidation, merger, sale, transfer, liquidation,
dissolution, or winding up is to place and the date of participation therein
by the holders of the Common Stock, if any such date is to be fixed, and such
notice shall be so given in the case of any action covered by clause (a) or
(b) above at least twenty (20) days prior to the record date for determining
holders of the shares of Common Stock for purposes of such action, and in the
case of any such other action, at least twenty (20) days prior to the date of
the taking of such proposed action or the date of participation therein by
the holders of the shares of Common Stock whichever shall be the earlier.
Notices authorized or required by this Agreement to be given by the Company
to each Holder shall be sufficiently given if sent by first-class mail,
postage prepaid, addressed to WESAC. Failure to mail or receive such notice
or any defect therein or in the mailing thereof shall not affect the validity
of any action taken in connection with such dividend, distribution or
subscription rights, or such proposed dissolution, liquidation or winding up.
SECTION 14. RESTRICTIONS ON TRANSFERABILITY.
The Warrant Certificates and the shares of capital stock issuable upon
exercise of the Warrants shall not be transferable except upon the conditions
specified in this Section 14, which conditions are intended to insure
compliance with the provisions of the Securities Act in respect of the
transfer of any Warrant Certificate or any shares of capital stock issuable
upon exercise of the Warrants.
(a) RESTRICTIVE LEGEND: ▇▇▇▇▇▇'S REPRESENTATION. Unless and until
otherwise permitted by this Section 14, each certificate representing shares
of capital stock issuable upon exercise of the Warrants, and any certificate
issued at any time upon transfer of, or in exchange for or replacement of,
any certificate bearing the legend set forth below shall be stamped or
otherwise imprinted with a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OR ANY STATE SECURITIES LAWS AND,
ACCORDINGLY, THE TRANSFER, RESALE OR OTHER DISPOSITION OF SUCH SECURITIES MAY
ONLY BE MADE PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR A VALID EXEMPTION THEREFROM AND IN COMPLIANCE WITH ALL
APPLICABLE
-14-
STATE SECURITIES LAWS, AND BY" DELIVERY OF AN OPINION OF COUNSEL SATISFACTORY
TO COUNSEL FOR THE COMPANY THAT THERE IS SUCH AN EXEMPTION. THE SECURITIES
REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS AND CONDITIONS OF
THAT CERTAIN WARRANT AGREEMENT DATED AS OF AUGUST 28, 1996, BY AND BETWEEN
HOLDER AND THE COMPANY. COPIES OF SUCH AGREEMENT MAY BE OBTAINED UPON WRITTEN
REQUEST TO THE SECRETARY OF THE COMPANY."
Each Holder represents to the Company that he or it is acquiring
the Warrants and will acquire the shares of capital stock issuable upon
exercise of the Warrants (if at all) for its own account and not with a view
to any public distribution thereof, subject to any requirement of law that
the disposition of such securities shall at all times be within the control
of the owner thereof. The acquisition of any Warrants or shares of capital
stock issuable upon exercise of the Warrants by any Holder shall constitute
such Holder's reaffirmation of such representation. Each Holder further
represents to the Company that he or it is an "accredited investor" as
defined in Regulation D of the Securities Act. Holder understands that the
Warrants and the shares of capital stock issuable upon exercise of the
Warrants have not been registered under the Securities Act and may only be
sold or otherwise disposed of in compliance with the Securities Act. Holder
by its acceptance of such security further understands that such security may
bear a legend as contemplated by this Section 14.
(b) TERMINATION OF RESTRICTIONS. Notwithstanding the foregoing
provisions of this Section 14, the restrictions imposed by this Section 14
upon the transferability of the Warrant Certificates and the shares of
capital stock issuable upon exercise of the Warrants shall cease and
terminate as to any particular Warrant Certificate or shares of capital stock
when, (i) such Warrant Certificate or shares of capital stock shall have been
effectively registered under the Securities Act and sold by any Holder in
accordance with such registration or (ii) in the opinion of counsel for such
▇▇▇▇▇▇, if such opinion is satisfactory in form and substance to the Company,
such restrictions are no longer required in order to insure compliance with
the Securities Act. If and whenever the restrictions imposed' by this
Section 14 shall terminate as to a Warrant Certificate (or to any shares of
capital stock) as hereinabove provided, such Holder may and the Company
shall, as promptly as practicable upon the request of such Holder and at the
Company's expense, cause to be stamped or otherwise imprinted upon such
Warrant Certificate or such shares of capital stock a legend in substantially
the following form:
"The restrictions on transferability of this [these] [Warrant
Certificate/securities] terminated on , and are of no
further force or effect."
All Warrant Certificates issued upon transfer, division or combination
of, or in substitution for, any Warrant
-15-
Certificate or Warrant Certificates entitled to bear such legend shall have
a similar legend endorsed thereon. Whenever restrictions imposed by this
Section 14 shall terminate as to any Warrant Certificate or as to any shares
of capital stock, as hereinabove provided, each Holder shall be entitled to
receive from the Company without expense, a new Warrant Certificate or new
shares of capital stock not bearing the restrictive legend set forth in
subsection (a) of this Section 14.
SECTION 15. REPRESENTATIONS AND WARRANTIES. The Company represents and
warrants that:
(a) ORGANIZATION, STANDING AND QUALIFICATION. The Company is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware; and has all requisite power and authority to
own or lease and operate properties and to carry on its business as now
conducted.
(b) AUTHORITY. The Company has all requisite power and authority to
enter into and perform all of its obligations under this Agreement, to issue
the Warrants and to carry out the transactions contemplated hereby. The
Company has taken all corporate or stockholder actions necessary to authorize
enter into and perform all of its obligations under this Agreement and to
consummate the transactions contemplated hereby.
(c) VALIDITY. This Agreement and the Warrants are the legal, valid and
binding obligations of the Company, enforceable in accordance with their
respective terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium and other similar laws
affecting the rights of creditors generally.
(d) CAPITALIZATION. As of the date hereof, the equity capitalization
of the Company consists of (i) 50,000,000 shares of Common Stock, par value
$.01 per share, of which 17,649,000 shares are outstanding; (ii) 10,000,000
shares of preferred stock, $1.00 per share, of which 0 shares are
outstanding; and (iii) warrants and options (including the Warrants) to
purchase up to 5,823,539 shares of Common Stock. All of the shares comprising
the Common Stock will, when issued, be validly issued, fully paid and
non-assessable. Except as set forth in the first sentence of this Section
15(d), as of the date hereof, there will not be any outstanding securities
convertible into, exchangeable for, or carrying the right to acquire, equity
securities of the Company, or subscriptions, warrants, options, rights or
other arrangements or commitments obligating the Company to issue or dispose
of any of its equity securities or any ownership interest therein.
SECTION 16. NOTICE. Any notice, demand, request, instruction or other
communication which any party hereto may be required or may desire to give
shall be deemed to have been properly given (a) if by hand delivery,
telecopy, telex or other
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facsimile transmission, upon delivery to such party at the address,
telecopier or telex number specified below; (b) if by registered or certified
mail, on the third Business Day after the day deposited with the United
States Postal Service, postage prepaid, return receipt requested, addressed
to such party at the address specified below; or (c) if by Federal Express or
other reputable express mail service, on the next Business Day after delivery
to such express mail service, addressed to such party at the following
address:
To the Company, at:
Wahlco Environmental Systems, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
To WESAC or any Holder, at:
WES Acquisition Corp.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇)▇▇▇-▇▇▇▇
such other address, telex, telecopier, or other facsimile transmission number
as the party to be served with notice may have furnished in writing to the
party seeking or desiring to serve notice as a place or number for the
service of notice.
SECTION 17. IDENTITY OF TRANSFER AGENT. Forthwith upon the appointment
of any subsequent transfer agent for the Common Stock, or any other shares of
the Company's capital stock issuable upon the exercise of the Warrants, the
Company will provide to each Holder a statement setting forth the name and
address of such subsequent transfer agent.
SECTION 18. SUPPLEMENTS AND AMENDMENTS.
(a) The Company may from time to time supplement or amend this Agreement
without the approval of any Holder in order to cure any ambiguity, to correct
or supplement any provision contained herein which may be defective or
inconsistent with any provisions herein, or to make any other provisions with
regard to matters or questions arising hereunder which the Company may deem
necessary or desirable and which shall not adversely affect the interests of
any Holder.
(b) Any term, covenant, agreement or condition contained in this
Agreement may be amended, or compliance therewith may be waived (either
generally or in a particular instance and either retroactively or
prospectively), by a written instrument signed by the Company and each Holder.
-17-
SECTION 19. NO RIGHTS AS SHAREHOLDERS. Nothing contained in this
Agreement or in any of the Warrant Certificates shall be construed as
conferring upon any Holder any rights of a Shareholder, including without
limitation, the right to vote, to receive dividends or to consent to, or
receive notice as a Shareholder in respect of, any meeting of Shareholders
for the election of directors of the Company or for any other matter.
SECTION 20. SUCCESSORS. All the covenants and provisions of this
Agreement by or for the benefit of the Company and each Holder shall bind and
inure to the benefit of their respective successors and assigns hereunder.
SECTION 21. TERMINATION. This Agreement shall terminate and be of no
further force and effect at, and no Warrant may be exercised after, 5:00 p.m.
New York City time on the last of the Expiration Dates provided for in
Section 5 of this Agreement. Notwithstanding the foregoing, this Agreement
will terminate on any earlier date when all Warrants have been exercised and
no Warrants remain outstanding.
SECTION 22. GOVERNING LAW. This Agreement and each Warrant issued
hereunder shall be deemed to be a contract made under the laws of the State
of New York, without regard to the conflict of law principles thereof, and
for all purposes shall be governed by and construed in accordance with the
laws of such state applicable to contracts to be made and performed entirely
within such state.
SECTION 23. BENEFITS OF THIS AGREEMENT: RIGHTS OF ACTION. Nothing in
this Agreement shall be construed to give to any person or corporation other
than the Company and each Holder any legal or equitable right, remedy or
claim under this Agreement; and this Agreement shall be for the sole and
exclusive benefit of the Company and each Holder.
SECTION 24. DAMAGES. The Company recognizes and agrees that each
Holder will not have an adequate remedy if the Company fails to comply with
the terms of this Agreement and the Warrant Certificates and that damages
will not readily be ascertainable, and the Company expressly agrees that, in
the event of such failure, it shall not oppose an application by any Holder
requiring specific performance of any and all provisions of the Warrant or
this Agreement or enjoining the Company from continuing to commit any such
breach of the terms of the Warrant or this Agreement.
SECTION 25. COUNTERPARTS. This Agreement may be executed in any number
of counterparts and each of such counterparts shall for all purposes be
deemed to be an original, and all such counterparts shall together constitute
but one and the same instrument.
-18-
SECTION 26. HEADINGS. The headings used in this Agreement are
inserted for convenience only and neither constitute a portion of this
Agreement nor in any manner affect the construction of the provisions of this
Agreement.
SECTION 27. SEVERABILITY. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain
in full force and effect and shall in no way be affected, impaired or
invalidated.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the day and year first above written.
Attest: WAHLCO ENVIRONMENTAL SYSTEMS, INC.
By: ▇▇▇▇▇ ▇.▇. ▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇.▇. ▇▇▇▇▇▇▇▇
Title: Chairman
WES ACQUISITION CORP.
By: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: President
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