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EXHIBIT 4.1
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METRETEK TECHNOLOGIES, INC.
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SECURITIES PURCHASE AGREEMENT
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UP TO 6,000 UNITS
EACH CONSISTING OF ONE SHARE OF
SERIES B PREFERRED STOCK,
200 SHARES OF COMMON STOCK
AND
ONE WARRANT TO PURCHASE 100 SHARES OF COMMON STOCK
OF
METRETEK TECHNOLOGIES, INC.
Dated as of December 9, 1999
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TABLE OF CONTENTS
Page
1. PURCHASE AND SALE OF THE SHARES..........................................................................1
1.1. Description of Securities.......................................................................1
1.2. Initial Purchase and Sale.......................................................................2
1.3. Second Purchase and Sale........................................................................2
1.4. Closing Expenses................................................................................2
1.5. Use of Proceeds.................................................................................2
2. INITIAL CLOSING AND SECOND CLOSING.......................................................................3
2.1. Initial Closing.................................................................................3
2.2. Second Closing..................................................................................4
3. CONDITIONS OF OBLIGATIONS OF THE PURCHASERS AT THE CLOSING...............................................4
3.1. Representations and Warranties..................................................................4
3.2. Authorization...................................................................................5
3.3. Certificate of Designations.....................................................................5
3.4. Registration Rights Agreement...................................................................5
3.5. Opinion of Counsel..............................................................................5
3.6. Special Stockholders Meeting; Nasdaq Approval...................................................5
3.7. All Proceedings Satisfactory....................................................................5
3.8. No Violation or Injunction......................................................................5
3.9. Delivery of Documents...........................................................................6
3.10. Absence of Certain Changes or Events............................................................6
3.11. Compliance With Securities Laws.................................................................6
3.12. Government and Third Party Permits, Consents, Etc...............................................7
3.13. Stockholder Rights Agreement....................................................................7
3.14. Payment of Out-of-Pocket Expenses...............................................................7
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY............................................................8
4.1. Organization and Existence......................................................................8
4.2. Power and Authority.............................................................................8
4.3. No Violation....................................................................................8
4.4. Licenses, etc...................................................................................9
4.5. Litigation......................................................................................9
4.6. Commission Filings.............................................................................10
4.7. Material Adverse Change........................................................................11
4.8. Limitation on Subsidiary Payment Restrictions..................................................11
4.9. Tax Returns and Payments.......................................................................11
4.10. Investment Company Act; Public Utility Holding Company Act; Divesture
Commerce Act...................................................................................12
4.11. Corporate Structure; Capitalization............................................................12
(i)
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Page
4.12. Environmental Matters..........................................................................13
4.13. Properties and Assets..........................................................................13
4.14. No Default.....................................................................................14
4.15. Compliance With Law............................................................................14
4.16. Brokers' Fees..................................................................................14
4.17. Books and Records..............................................................................14
4.18. Outstanding Debt...............................................................................14
4.19. Other Relationships............................................................................14
4.20. Employee Programs..............................................................................15
4.21. Private Offerings..............................................................................17
4.22. Insurance......................................................................................17
4.23. Employment Practices...........................................................................17
4.24. Material Contracts and Obligations.............................................................18
4.25. Intellectual Property..........................................................................18
4.26. Accounts Receivable............................................................................20
5. CONDITIONS OF OBLIGATIONS OF THE COMPANY AT THE CLOSING.................................................20
5.1. Representations and Warranties.................................................................20
5.2. Government and Third Party Permits, Consents, Etc..............................................20
5.3. Certificate of Designations....................................................................20
5.4. Special Stockholders Meeting; Nasdaq Approval..................................................20
5.5. No Violation or Injunction.....................................................................21
6. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.........................................................21
6.1. Status.........................................................................................21
6.2. Power and Authority; Enforceability............................................................21
6.3. Securities Representations.....................................................................22
6.4. Margin Compliance..............................................................................22
6.5. Source of Funds................................................................................23
6.6. Brokers' Fees..................................................................................23
6.7. Post-Reset Standstill..........................................................................23
7. COVENANTS OF THE COMPANY................................................................................23
7.1. Special Stockholders Meeting...................................................................23
7.2. General Covenants of the Company...............................................................24
7.3. Compliance Certificate.........................................................................26
7.4. Restrictions on Action by the Company..........................................................27
7.5. Board of Directors.............................................................................28
7.6. Exchange at Second Closing.....................................................................28
8. RESTRICTIONS ON TRANSFER................................................................................28
8.1. Restrictive Legends............................................................................28
8.2. Removal of Legends.............................................................................29
(ii)
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Page
8.3. Transfer Information...........................................................................29
9. DEFINITIONS.............................................................................................29
10. INDEMNIFICATION.........................................................................................33
10.1. Indemnification; Expenses, Etc.................................................................33
10.2. Survival of Representations and Warranties.....................................................35
11. MISCELLANEOUS...........................................................................................35
11.1. Notices, Etc...................................................................................35
11.2. Severability...................................................................................36
11.3. Amendment and Waiver...........................................................................37
11.4. Successors and Assigns.........................................................................37
11.5. Descriptive Headings...........................................................................37
11.6. Governing Law..................................................................................37
11.7. Service of Process.............................................................................37
11.8. Counterparts...................................................................................38
11.9. Disclosure to Other Persons....................................................................38
11.10. Waiver of Jury Trial...........................................................................38
(iii)
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SCHEDULES
Schedule 1.2 Initial Purchase
Schedule 1.3 Second Purchase
Schedule 1.5 Use of Proceeds
Schedule 3.10 Absence of Certain Changes
Schedule 4.1 Subsidiaries; Qualifications
Schedule 4.6 Commission Reports
Schedule 4.7 Material Adverse Change
Schedule 4.8 Subsidiary Payment Restrictions
Schedule 4.9 Tax Matters
Schedule 4.11 Capitalization
Schedule 4.12 Environmental Matters
Schedule 4.13 Properties and Assets
Schedule 4.16 Finder's Fees
Schedule 4.18 Outstanding Debt
Schedule 4.19 Other Relationships
Schedule 4.20 Employee Programs
Schedule 4.22 Insurance
Schedule 4.24 Material Contracts
Schedule 4.25 Intellectual Property
Schedule 4.26 Accounts Receivable
Schedule 7.1(b) Stockholders Meeting Matters
Schedule 7.4 Subsidiary Security Issuances
Schedule L Liens
(iv)
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EXHIBITS
EXHIBIT A Certificate of Designations
EXHIBIT B Registration Rights Agreement
EXHIBIT C Opinion of Kegler, Brown, Hill & ▇▇▇▇▇▇ Co., LPA.
EXHIBIT D Indemnification Agreement
EXHIBIT E Amendment to Rights Agreement
EXHIBIT F Joinder Agreement
(v)
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SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (the "AGREEMENT") dated as of December 9,
1999 by and among METRETEK TECHNOLOGIES, INC., a Delaware corporation (the
"COMPANY"), and each of the purchasers listed on the signature pages hereto
(each, a "PURCHASER," and collectively, the "PURCHASERS"). Unless otherwise
defined, capitalized terms used in this Agreement are defined in Section 9
hereof; references to a "SCHEDULE" or an "EXHIBIT" are, unless otherwise
specified, to a Schedule or an Exhibit attached to this Agreement; references to
a "section," a "subsection," a "paragraph" or a "clause" are, unless otherwise
specified, to a section, a subsection, a paragraph or a clause, respectively, of
this Agreement.
WITNESSETH
WHEREAS, the Company wishes to sell up to 6,000 investment units ("UNITS")
each consisting of (i) one share of its "Series B Preferred Stock" par value
$.01 per share (the "CONVERTIBLE PREFERRED STOCK"), (ii) 200 shares of its
common stock, par value $.01 per share ("COMMON STOCK"), and (iii) warrants to
purchase 100 shares of Common Stock ("WARRANTS"), in each case, in the amounts
and on the terms and conditions set forth herein;
WHEREAS, the Company has duly authorized the issuance of up to 6,000 shares
of Convertible Preferred Stock, the issuance of up to 1,200,000 shares of Common
Stock, the issuance of Warrants to purchase up to 600,000 shares of Common
Stock, and the execution and delivery of this Agreement, upon the terms and
subject to the conditions set forth herein; and
WHEREAS, the Purchasers are willing to purchase and the Company is willing
to sell the aggregate number of shares of Convertible Preferred Stock and Common
Stock and Warrants set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. PURCHASE AND SALE OF THE SHARES.
1.1. DESCRIPTION OF SECURITIES. For purposes of this Agreement, the shares
of Convertible Preferred Stock to be acquired by the Purchasers from the Company
hereunder are referred to as the "CONVERTIBLE PREFERRED SHARES," the shares of
Common Stock to be acquired by the Purchasers from the Company hereunder are
referred to as the "INITIAL COMMON SHARES," the shares of Common Stock issuable
upon conversion of the Convertible Preferred Shares and exercise of the Warrants
are referred to as the "CONVERSION SHARES," and the Convertible Preferred
Shares, the Initial Common Shares, the Warrants and the Conversion Shares are
sometimes referred to herein as the "SECURITIES."
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1.2. INITIAL PURCHASE AND SALE. Upon the terms and subject to the
conditions set forth herein, and in reliance on the representations and
warranties set forth in Section 4 hereof, each Purchaser shall severally
purchase from the Company, and the Company shall issue and sell to each of the
Purchasers, at the Initial Closing (as defined in Section 2.1), the number of
Units set forth opposite the name of such Purchaser in SCHEDULE 1.2 at a
purchase price of $2,000 per Investment Unit for an aggregate purchase price in
the amount set forth opposite the name of such Purchaser in SCHEDULE 1.2, and
the Company shall without further action grant the Purchasers the rights set
forth herein. All Units sold hereunder shall be immediately detachable into
their component Securities. All payments under this Agreement shall be made by
wire transfer of immediately available funds to an account designated by the
Company.
1.3. SECOND PURCHASE AND SALE. Upon the terms and subject to the conditions
contained herein, and in reliance on the representations and warranties set
forth in Sections 4 and 5, on the fifth business day after the Special
Stockholders' Meeting (as defined on Section 7.1(b)) or such other place and on
such date as agreed upon by the parties hereto, each Purchaser shall severally
purchase from the Company, and the Company shall issue and sell to each of the
Purchasers, at the Second Closing (as defined in Section 2.2), the number of
Units set forth opposite the name of such Purchaser in SCHEDULE 1.3 (which
Schedule will be completed after the date of this Agreement pursuant to the
joinder agreement attached hereto as EXHIBIT F) at a purchase price of $2,000
per Unit for an aggregate purchase price in the amount set forth opposite the
name of such Purchaser in SCHEDULE 1.3. Such Units are referred to herein as the
"Additional Units."
1.4. CLOSING EXPENSES. The Company agrees to pay, prior to or on the
Initial Closing and Second Closing, as applicable, to the Purchasers an amount
equal to all reasonable documented fees, expenses and disbursements of the
Purchasers and the Purchasers' Special Counsel reflected in statements of the
Purchasers and such counsel rendered prior to or on the date of such Closing;
PROVIDED, HOWEVER, that such statements provided prior to or on the such date
may be a good faith estimate of such expenses and the Purchasers and Purchasers'
Special Counsel reserve the right to balance such statements within thirty (30)
days following such date.
1.5. USE OF PROCEEDS. The proceeds from the issuance of the Units at the
Initial Closing and Second Closing shall be used by the Company in accordance
with SCHEDULE 1.5.
1.6. NASDAQ LIMITATION.
(a) Notwithstanding any provision to the contrary in this Agreement,
the Certificate of Designations for the Convertible Preferred Stock or in the
Warrants, in no event shall (i) Purchasers be entitled to convert any shares of
Convertible Preferred Stock into shares of Common Stock, or to purchase any
shares of Common Stock upon the exercise of any Warrants, to the extent that,
after such conversion or exercise, the sum of (A) the number of shares of Common
Stock issued by the Company in connection with the transactions contemplated by
this Agreement, and (B) the number of shares of Common Stock issuable upon the
conversion of the shares of Convertible Preferred Stock or upon the exercise of
the
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Warrants with respect to which the determination of this provision is being
made, would equal or exceed 696,809 shares of Common Stock, such amount being
equal to 20.0% of the shares of Common Stock of the Company outstanding on the
date prior to the date of this Agreement, unless and until the stockholders of
the Company authorize and approve the Stockholder Meeting Matter at the Special
Stockholders' Meeting.
(b) If at any time the Purchasers are prohibited from converting
Convertible Preferred Stock or exercising Warrants by the provisions of Section
1.6(a), then (i) the Company shall use its best efforts to obtain all approvals
(including without limitation stockholder approvals) that may be necessary to
remove such prohibition and (ii) the Purchasers shall have the right, but not
the obligation, at any time and from time to time as long as the prohibition of
Section 1.6(a) is in effect, to sell to the Company, and the Company shall be
obligated to purchase upon receiving written notice thereof from the Purchasers
(the "Put Notice"), the Purchasers' pro rata share of any or all shares of
Convertible Preferred Stock and Warrants that the Purchasers may not then
convert or exercise by reason of Section 1.6(a) (a "Put").
The closing of a Put shall take place by mail within five (5) business
days after receipt by the Company of the related Put Notice. At the closing of a
Put, the Purchasers shall deliver (1) a certificate or certificates representing
at least that number of shares of Convertible Preferred Stock to be purchased by
the Company and (2) certificates representing at least that number of Warrants
to be purchased by the Company, and the Company shall deliver to the Purchasers
(i) by wire transfer of immediately available funds to an account or accounts
designated in writing by the Purchasers, the Put Purchase Price and (ii)
certificates and Warrants representing the balance of the shares of Convertible
Preferred Stock and Warrants not purchased hereunder but delivered pursuant to
subclause (1) immediately above.
The "Put Purchase Price" shall be equal to the sum of (1) the number
of shares of Convertible Preferred Stock being purchased by the Company
multiplied by the Convertible Preferred Stock Put Price, plus (2) the number of
Warrants being purchased by the Company multiplied by the Warrant Put Price. The
"Convertible Preferred Stock Put Price" shall be equal to the greater of (A) the
Convertible Liquidation Preference Amount (as defined in Section A.4(a) of the
Certificate of Designations) and (B) the product of (x) the number of shares
into which one share of Convertible Preferred Stock may be converted (assuming
the prohibition of Section 1.6(a) is not in effect) times (y) the Current Market
Price (as defined in the Warrants). The "Warrant Put Price" shall be equal to
the Current Market Price (as defined in the Warrants) minus the Exercise Price
(as defined in the Warrants) then in effect.
(c) If at any time the Company is prohibited by the terms of any
agreement with its senior lender from purchasing shares of Convertible Preferred
Stock or Warrant under Section 1.6(b), then from and after the date of the
applicable Put Notice, the Company shall pay to the Purchasers exercising the
Put Notice, compounding on a quarterly basis (pro-rated for the first quarter)
on each March 31, June 30, September 30 and December 31, an amount equal to the
Rate (as defined below) times the applicable Put Purchase Price (calculated as
if the purchase
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were not prohibited). The "Rate" shall initially be one percent (1%) and shall
increase at the beginning of each quarter by a further one percent (1%) up to
the maximum amount permitted by law until the securities covered in the Put
Notice have been duly redeemed, converted or exercised.
2. INITIAL CLOSING AND SECOND CLOSING.
2.1. INITIAL CLOSING. The closing of the purchase and sale of the Units
pursuant to Section 1.2 hereof and the other transactions contemplated hereby
(the "INITIAL CLOSING") shall take place at the offices of ▇▇▇▇▇▇▇, Procter &
▇▇▇▇ LLP, Exchange Place, Boston, Massachusetts on the date hereof, or such
other place and on such date as agreed upon by the parties hereto (such date on
which the Closing shall have actually occurred, the "INITIAL CLOSING DATE"). At
or before the Initial Closing, the Company will take all steps necessary to have
the Certificate of Designations attached hereto as EXHIBIT A (the "CERTIFICATE
OF DESIGNATIONS") duly approved by its Board of Directors and, if necessary, its
stockholders, and duly filed with the Secretary of State of the State of
Delaware. At the Initial Closing, the Company will deliver or cause to be
delivered to each of the Purchasers, a single share certificate representing
that number of shares of Convertible Preferred Stock specified opposite such
Purchaser's name on SCHEDULE 1.2, a single share certificate representing that
number of shares of Common Stock specified opposite such Purchaser's name on
SCHEDULE 1.2, and a warrant certificate or certificates exercisable for the
aggregate number of shares of Common Stock specified opposite such Purchaser's
name on SCHEDULE 1.2 in such denominations as such Purchaser may specify, each
dated the Initial Closing Date and registered in such Purchaser's name or its
nominee as directed by the Purchaser, against payment in full of the purchase
price therefor in the amount specified in Section 1.2 hereof.
2.2. SECOND CLOSING. The closing of the purchase and sale of the Additional
Units pursuant to Section 1.3 hereof (the "SECOND CLOSING") shall take place at
the offices of ▇▇▇▇▇▇▇, Procter & ▇▇▇▇ LLP, Exchange Place, Boston,
Massachusetts on the fifth business day after the Special Stockholders' Meeting
(as defined in Section 7.1(b), or such other place and on such date as agreed
upon by the parties hereto (the "SECOND CLOSING DATE"). At the Second Closing,
the Company will deliver or cause to be delivered to each of the Purchasers, a
single share certificate representing that number of shares of Convertible
Preferred Stock specified opposite such Purchaser's name on SCHEDULE 1.3, a
single share certificate representing that number of shares of Common Stock
specified opposite such Purchaser's name on SCHEDULE 1.3, and a warrant
certificate or certificates exercisable for the aggregate number of shares of
Common Stock specified opposite such Purchaser's name on SCHEDULE 1.3 in such
denominations as such Purchaser may specify, each dated the Second Closing Date
and registered in such Purchaser's name or its nominee as directed by such
Purchaser, against payment of the purchase price therefor in the amount
specified in Section 1.3 hereof.
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3. CONDITIONS OF OBLIGATIONS OF THE PURCHASERS AT THE CLOSING.
The Purchasers' obligation to purchase and pay for the Units at the Initial
Closing and the Second Closing, as applicable (in either case, referred to
hereinafter as the "Closing") shall be subject to compliance by the Company with
its agreements and covenants herein contained required to be performed prior to
or concurrent with the applicable Closing and to the fulfillment, to the
Purchasers' satisfaction, on or before and at the Initial Closing Date or the
Second Closing Date, as applicable (in either case, referred to hereinafter as
the "Closing Date") of the following conditions, provided that any or all of the
following conditions may be waived with respect to a particular Closing, in
whole or in part, by the Purchasers in their sole and absolute discretion:
3.1. REPRESENTATIONS AND WARRANTIES. The representations and warranties of
the Company made in Section 4 hereof shall have been true and correct when made
and on and as of the Closing Date (except to the extent any of the
representations and warranties specifically apply or relate to a prior date, in
which case such representations and warranties shall have been true and correct
as of such prior date).
3.2. AUTHORIZATION. The Board of Directors and, to the extent required by
law, the rules of the Nasdaq Stock Market Inc.'s National Market ("NASDAQ") or
the terms of the Company's Charter Documents, the stockholders of the Company
shall have duly adopted resolutions in form reasonably satisfactory to the
Purchasers authorizing, and shall have taken all action necessary for the
purpose of, consummating the transactions contemplated hereby and in the Other
Transaction Documents in accordance with the terms hereof and thereof,
respectively.
3.3. CERTIFICATE OF DESIGNATIONS. The Board of Directors and, if necessary,
the stockholders of the Company shall have duly adopted the Certificate of
Designations and the Certificate of Designations shall have been duly filed with
the Secretary of State of the State of Delaware.
3.4. REGISTRATION RIGHTS AGREEMENT. The Company and the Purchasers shall
have duly entered into the Registration Rights Agreement substantially in the
form of Exhibit B, the Purchasers shall have received fully-executed
counterparts of the Registration Rights Agreement, and such agreement shall be
in full force and effect.
3.5. OPINION OF COUNSEL. The Purchasers shall have received from counsel
for the Company, Kegler, Brown, Hill & ▇▇▇▇▇▇ Co., L.P.A., dated the Closing
Date, an opinion in the form attached hereto as EXHIBIT C.
3.6. SPECIAL STOCKHOLDERS MEETING; NASDAQ APPROVAL. On or prior to the
Second Closing Date, the Company's stockholders shall have duly approved by the
requisite vote under applicable Nasdaq rules the Stockholder Meeting Matter (as
defined in Section 7.1(b)) at the Special Stockholders Meeting.
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3.7. ALL PROCEEDINGS SATISFACTORY. All corporate, organizational and other
proceedings taken prior to or at the Closing in connection with the transactions
contemplated by this Agreement and the Other Transaction Documents, and all
documents and evidences incident hereto and thereto, shall be reasonably
satisfactory in form and substance to the Purchasers, and the Purchasers shall
have received copies thereof and other materials as they may reasonably request
in connection therewith.
3.8. NO VIOLATION OR INJUNCTION. The consummation of the transactions
contemplated by this Agreement and the Other Transaction Documents shall not be
in violation of any law or regulation and shall not be subject to any
injunction, stay or restraining order that has not been reversed or overturned.
3.9. DELIVERY OF DOCUMENTS. The Company shall have executed and delivered
to the Purchasers (or shall have caused to be executed and delivered to the
Purchasers by the appropriate Persons) the following:
(a) Certificate(s) for the Convertible Preferred Shares;
(b) Certificate(s) for the Initial Common Shares;
(c) Warrants executed by the Company;
(d) a certificate of the Secretary of the Company setting forth (i)
copies of the resolutions referred to in Section 3.2 hereof and confirming
that such resolutions have not been modified, rescinded or amended and are
in full force and effect as of the Closing Date, (ii) a copy of the
Company's Certificate of Incorporation (certified by the Secretary of State
of the State of Delaware as of a recent date) and By-laws, each as in
effect on and immediately following the Closing Date, and (iii) such other
matters as the Purchasers may reasonably request;
(e) a certificate as to the matters described in Section 3.1 hereof
executed by the President, the Chief Financial Officer or any Vice
President of the Company;
(f) a copy of a certificate issued by the Secretary of State of the
State of Delaware certifying that the Company is in good standing as of a
date reasonably close to the Closing Date; and
(g) a copy of a certificate issued by the appropriate Secretary of
State of the state of organization of each Subsidiary certifying that, to
the extent applicable, each such Subsidiary is in good standing in such
state.
3.10. ABSENCE OF CERTAIN CHANGES OR EVENTS. Since September 30, 1999,
except as set forth on SCHEDULE 3.10, the Company shall have conducted its
business only in the ordinary course and there shall not have been any event,
act or condition which has had, or can
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reasonably be expected to have, a Material Adverse Effect. As a condition to the
Second Closing, (i) market conditions at the time of the Second Closing shall
not be such that, in the reasonable judgment of the Purchasers, the purchase and
sale of the Additional Units on the terms set forth in this Agreement does not
reflect appropriate market terms and (ii) the Company shall have sold at the
Second Closing a number of Units equal to 6,000 minus the number of Units sold
at the Initial Closing.
3.11. COMPLIANCE WITH SECURITIES LAWS. The offering, issuance and sale of
the Convertible Preferred Shares, the Initial Common Shares and the Warrants
under this Agreement shall have complied with (or be exempt from) all applicable
requirements of the U.S. Federal securities laws and any applicable state
securities or Blue Sky laws.
3.12. GOVERNMENT AND THIRD PARTY PERMITS, CONSENTS, ETC. The Company shall
have duly applied for and obtained all material approvals from each Government
Authority, or pursuant to any material agreement to which the Company is a party
or to which it or any of its material assets is subject, which are required to
be applied for and obtained by the Company in connection with this Agreement,
the Other Transaction Documents or any other agreements and documents
contemplated hereby or thereby and in connection herewith or therewith; and such
approvals shall remain in effect upon consummation of the transactions
contemplated by this Agreement and the Other Transaction Documents, and all
applicable waiting periods, including, without limitation, the waiting period
under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), if required, with respect to such contemplated transactions, shall
have expired without any action being taken by any competent Government
Authority and no law or regulation shall be applicable which restrains or
prevents, or imposes adverse conditions upon, such contemplated transactions.
3.13. STOCKHOLDER RIGHTS AGREEMENT. The Rights Agreement dated December 2,
1991 (the "Rights Agreement"), between ▇▇▇▇▇▇ Natural Gas Services, Inc. and
American Securities Transfer, Inc. (the "Rights Agent") is in full force and
effect and shall not be modified, amended or supplemented without the consent of
the Purchasers, except as provided below. The Board of Directors of the Company
has taken all necessary action under the Rights Agreement such that neither the
Purchasers nor any of their respective Affiliates or Associates (as such terms
are defined in the Rights Agreement) will become an "Acquiring Person" under the
Rights Agreement, no "Shares Acquisition Date" or "Distribution Date" (as such
terms are defined in the Rights Agreement) will occur under the Rights
Agreement, and no holder of any Rights (as such term is defined in the Rights
Agreement) issued pursuant to the Rights Agreement will be entitled to receive
any benefits under the Rights Agreement, in each case as a result of the
approval, execution or delivery of, or performance by the parties under, this
Agreement or the consummation of the transactions contemplated by this
Agreement, including without limitation, the issuance of the Securities or
conversion or exercise of any Securities. From and after the date of this
Agreement, the Company shall not take any action that would cause anything in
the preceding sentence to no longer be true. At the Closing, the Company and the
Rights Agent shall enter into an amendment to the Rights Agreement in the form
set forth in Exhibit E attached hereto, which provides, among other things, that
the Purchasers' ownership of the Securities will not cause either of the
Purchasers or any of their respective Affiliates or Associates to become an
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"Acquiring Person" under the Rights Agreement, and that no "Shares Acquisition
Date" or "Distribution Date" will occur under the Rights Agreement as a result
of the Purchasers' ownership of the Securities.
3.14. PAYMENT OF OUT-OF-POCKET EXPENSES. The Company shall have paid
contemporaneously with the Closing, the reasonable, documented, out-of-pocket
fees and expenses actually incurred by the Purchasers in connection with the
transactions and other matters contemplated by this Agreement and the Other
Transaction Documents (including without limitation the reasonable, documented
fees, expenses and disbursements of Purchasers' Special Counsel, accountants and
other advisors and professional consultants and all costs relating to any
required filings under the HSR Act).
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
In order to induce the Purchasers to enter into this Agreement and the
Other Transaction Documents and to purchase the Units, the Company represents
and warrants to the Purchasers, as of the date hereof and as of the Closing Date
(except to the extent any of the following representations or warranties
specifically apply or relate to a prior date, in which event the Company
represents and warrants as of such prior date), as follows:
4.1. ORGANIZATION AND EXISTENCE. Each of the Company and its Subsidiaries
(i) is a duly organized and validly existing corporation in good standing under
the laws of the jurisdiction of its incorporation, (ii) has the requisite
corporate power and authority to own its material properties and assets and to
transact the business in which it is engaged or presently proposes to engage and
(iii) has duly qualified, registered, is licensed and authorized to do business
and is in good standing as a foreign corporation in every jurisdiction in which
it owns or leases real property or in which the nature of its business requires
it to be so qualified, registered, licensed and/or authorized, except where the
failure to be so qualified, registered, licensed or authorized would not have a
Material Adverse Effect. The Company has heretofore delivered to the Purchasers
complete and correct copies of the Certificate of Incorporation and By-Laws of
the Company and all Subsidiaries, each as amended to date and as presently in
effect (collectively, with respect to any such Person, "CHARTER DOCUMENTS"). A
list of all Subsidiaries of the Company and all jurisdictions in which the
Company or any Subsidiary is qualified, registered or licensed to do business is
disclosed in SCHEDULE 4.1.
4.2. POWER AND AUTHORITY; ENFORCEABILITY. The execution, delivery and
performance by the Company of its obligations under the Transaction Documents
and the issuance and sale to the Purchasers of the Convertible Preferred Shares,
the Initial Common Shares and the Warrants pursuant to this Agreement and the
authorization, issuance and delivery by the Company of the Conversion Shares are
within the Company's corporate power and have been duly authorized by all
necessary corporate action on the part of the Company. The Company has, or on
the Closing Date will have, duly executed and delivered each Transaction
Document and each Transaction Document constitutes, or will constitute, the
legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms
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except to the extent that its enforceability may be subject to applicable
bankruptcy, insolvency, reorganization, moratorium, or similar laws now or
hereafter in effect affecting creditor's rights generally and to general
equitable principles.
4.3. NO VIOLATION. Neither the execution, delivery or performance by the
Company of its obligations under the Transaction Documents nor compliance by it
with the terms and provisions thereof nor the consummation of the transactions
contemplated thereunder, (i) contravene or violate the Charter Documents of the
Company or any Subsidiary, (ii) require any authorization, approval,
qualification or formal exemption from, or other action by or in respect of, or
filing of a declaration or registration with, any court, Government Authority,
agency or official or other Person (except for (A) such as have been obtained or
will be obtained at the Special Stockholders Meeting prior to consummation of
any sale or issuance requiring such authorization, (B) such as may be required
under the Securities Act or state securities or Blue Sky laws, (C) such as may
be required for the redemption of the Convertible Preferred Shares under the
Loan and Security Agreement, dated as of April 14, 1998, as amended, among
National Bank of Canada, the Company and certain of its subsidiaries or (D) such
as would not have a Material Adverse Effect); (iii) will contravene any
applicable provision of any law, statute, rule, regulation, order, writ,
injunction or decree of any court or Government Authority or (iv) will conflict
or be inconsistent with or result in any breach of, or require the consent of
any Person under, any of the terms, covenants, conditions or provisions of, or
constitute a default under, or result in the creation or imposition of (or the
obligation to create or impose) any Lien upon any of the property or assets of
the Company or any Subsidiary pursuant to the terms of any indenture, mortgage,
deed of trust, agreement or other instrument to which the Company or any
Subsidiary is a party or by which it or any of its material property or assets
is bound or to which it may be subject, except in the case of clause (iv) for
such conflicts, inconsistencies, breaches, defaults, events of default or Liens
which would not have a Material Adverse Effect.
4.4. LICENSES, ETC. Each of the Company and its Subsidiaries have obtained
and hold in full force and effect, all franchises, licenses, permits,
certificates, authorizations, qualifications, accreditations, easements, rights
of way and other rights, consents and approvals, and made all filings, which are
necessary for the operation of their respective businesses as presently
conducted (individually, a "LICENSE" and collectively, "LICENSES"), except where
such failure to do so would not have a Material Adverse Effect. Except as would
not have a Material Adverse Effect, each License is valid and current and the
Company and its Subsidiaries are in compliance with the terms thereof, with to
the Company's knowledge, no conflict with the valid rights of others. Except as
would not have a Material Adverse Effect, (i) no event has occurred which
permits, or after notice or lapse of time or both would permit, the revocation
or termination of any License and (ii) the Company and its Subsidiaries have
filed all applications currently necessary for renewal or extension of the
Licenses and all such applications have been granted without conditions. To the
Company's knowledge, there exists no fact that would result in the denial of an
application or renewal, or the revocation, modification, nonrenewal or
suspension of any of the Licenses.
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4.5. LITIGATION. Except as set forth in SCHEDULE 4.5, there is no action,
suit, proceeding or investigation pending or, to the Company's knowledge after
due inquiry, threatened against or affecting the Company or any Subsidiary, any
of their Properties, or any director or executive officer of the Company or any
Subsidiary in their capacity as such, before or by any court or arbitrator or
any Government Authority within the United States which (individually or in the
aggregate) (i) will result in an impairment or loss of the Company's or any
Subsidiary title to any material Property or diminish the value thereof or
impede the operation of any such material Property, (ii) has resulted in or has
impaired or will impair the ability of the Company or any Subsidiary's to
perform in all material respects any obligation which the Company or any
Subsidiary has or will have under any Transaction Document to which the Company
or any Subsidiary is a party, or (iii) otherwise could have a Material Adverse
Effect. Neither the Company nor any Subsidiary has violated or is in default
under (except as set forth in SCHEDULE 4.5) and there does not exist any event
or condition which, after notice or lapse of time or both, would constitute such
a default under), any term of its Charter Documents, or, except as would not
have a Material Adverse Effect, of any term of any agreement, instrument,
judgment, decree, order, statute, exemption, injunction, law or other Government
regulation, rule or ordinance applicable to the Company or any Subsidiary or to
which the Company or any Subsidiary is bound, or to any Properties of the
Company or any Subsidiary.
4.6. COMMISSION FILINGS.
(a) The Company has heretofore delivered to the Purchasers true and
complete copies of its (i) Annual Report on Form 10-KSB for the fiscal year
ended December 31, 1998, (ii) Quarterly Report on Form 10-QSB for each of the
fiscal quarters ended March 31, and June 30, 1999 and September 30, 1999, (iii)
Proxy Statement for the annual meeting of stockholders held on June 7, 1999, and
(iv) all other reports or registration statements filed by the Company with the
Securities and Exchange Commission (the "COMMISSION") since January 1, 1999, in
each case as filed with the Commission.
(b) Except as set forth in SCHEDULE 4.6, the Company has filed all
required forms, reports and documents with the Commission since February 13,
1992 (collectively, the "COMMISSION REPORTS"), all of which were prepared in
accordance with the applicable requirements of the Securities Act of 1933, as
amended, and the Securities Exchange Act of 1934, as amended, in all material
respects. Except to the extent, if any, as may have been appropriately disclosed
in a Commission Report filed subsequent thereto and prior to the date hereof as
of their respective dates, the Commission Reports did not, at the time they were
filed, contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, and complied as to form and substance in all material respects with
all applicable requirements of law.
(c) Each of the consolidated financial statements (including, in each
case, any related notes thereto) contained in the Commission Reports has been
prepared in
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accordance with GAAP applied on a consistent basis throughout the periods
involved, and each fairly presents in accordance with the consolidated financial
position of the Company and its Subsidiaries as at the date thereof and the
consolidated results of their operations and changes in cash flow for the
periods indicated [in all material respects,] except as may be indicated in the
consolidated financial statements contained in a Commission Report filed
subsequent thereto and prior to the date hereof, and except that the unaudited
interim financial statements were or are subject to normal and recurring
year-end adjustments which were not or are not expected to be material in
amount.
(d) Except as set forth in the Commission Reports, neither the
Company nor any of its Subsidiaries has any liabilities or obligations of any
nature (whether accrued, absolute, contingent or otherwise) which would be
required to be reflected on a consolidated balance sheet of the Company and its
subsidiaries, or in the notes thereto, prepared in accordance with GAAP, except
for liabilities or obligations (a) incurred in the ordinary course of business
since September 30, 1999, or (b) any liability or obligation existing at
September 30, 1999 which, individually or in the aggregate, is not material to
the Company and its Subsidiaries taken as a whole as of such date.
4.7. MATERIAL ADVERSE CHANGE. Except as set forth in the Commission Reports
or in SCHEDULE 4.7, since September 30, 1999, there has been (a) to the best
knowledge of the Company, no event, act or condition which has had, or could
reasonably be expected to have, a Material Adverse Effect, (b) no obligation or
liability (contingent or other) incurred by the Company or any of its
Subsidiaries, other than obligations and liabilities incurred in the ordinary
course of business, and no Lien placed on any of the properties of the Company
which remains in existence on the date hereof, other than Permitted Liens, (c)
no acquisition or disposition of any material assets by the Company or any
Subsidiary (or any contract or arrangement therefor), or any other material
transaction, otherwise than for fair value in the ordinary course of business
and (d) no declaration or payment of any dividends or other distributions upon
the Capital Stock of the Company or redemption, retirement, repurchase or other
acquisition by the Company or any Subsidiary of any of the Company's Capital
Stock.
4.8. LIMITATION ON SUBSIDIARY PAYMENT RESTRICTIONS. Except as set forth on
SCHEDULE 4.8, neither the Company nor any of its Subsidiaries is subject to any
consensual restriction on the ability of any Subsidiary (a) to pay dividends or
make any other distributions on such Subsidiary's Capital Stock to, or pay any
indebtedness owing to, or repurchase or redeem any of such Subsidiary's Capital
Stock from, the Company or any other Subsidiary of the Company, (b) to make any
loans or advances to the Company or any other Subsidiary of the Company, or (c)
to transfer any of its Property or assets to the Company or any other
Subsidiary.
4.9. TAX RETURNS AND PAYMENTS. The Company, its Subsidiaries, and any
predecessors to the Company or any Subsidiary, have filed or obtained extensions
of all Tax Returns heretofore required by law to be filed by any of them and all
such Tax Returns were correct and complete in all material respects. All Taxes
for which the Company or any
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Subsidiary is liable have been paid in full or are adequately provided for in
accordance with GAAP on the financial statements of the applicable Person,
except to the extent such failure would not have a Material Adverse Effect. All
amounts required by law to be withheld, collected or provided for by the Company
or any Subsidiary, including deposits with respect to Taxes constituting
employees' income withholding taxes, have been duly withheld, collected or
provided for and have been paid over to the proper federal, provincial, state,
municipal or local authority, to the extent due and payable, or are held by the
applicable Person for such payment. No Liens arising from or in connection with
Taxes have been filed and are currently in effect against the Company or any
Subsidiary, except for Liens for Taxes which are not yet due or which are being
contested in good faith and as to which reserves have been set aside on the
books of the Company or such Subsidiary, as applicable, to the extent required
by GAAP. The Company and its Subsidiaries, including any predecessors thereto,
have not executed or filed with any taxing authority any agreement or document
extending, or having the effect of extending, the period for assessment or
collection of any Taxes. The federal income Tax Returns of the Company and its
Subsidiaries, and any predecessors thereto, have been examined by the IRS, or
the statute of limitations with respect to federal income Taxes has expired, for
all tax years to and including the fiscal year ended December 31, 1998 and any
deficiencies have been paid in full or appropriate action or appropriate
reserves therefor in accordance with GAAP have been established on the Company's
or such Subsidiary's books. Except as set forth in SCHEDULE 4.9, neither the
Company nor any Subsidiary is a party to any tax sharing agreement or
arrangement. Except as set forth in SCHEDULE 4.9, no audits or investigations
are pending or, to the Company's knowledge, threatened with respect to any Tax
Returns or Taxes of the Company or any Subsidiary, or any predecessor thereto.
4.10. INVESTMENT COMPANY ACT; PUBLIC UTILITY HOLDING COMPANY ACT; DIVESTURE
COMMERCE ACT. Neither the Company nor any of its Subsidiaries is, or will be (i)
an "investment company" or a company "controlled" by an "investment company,"
within the meaning of the Investment Company Act, (ii) a "holding company" or a
"subsidiary company" of a "holding company" or an "affiliate" of either a
"holding company" or a "subsidiary company" within the meaning of the Public
Utility Holding Company Act of 1935, as amended, or (iii) a "rail carrier," or a
Person controlled by or affiliated with a "rail carrier," within the meaning of
Title 49, U.S.C. Neither the Company nor any of its Subsidiaries is a "carrier"
or other Person to which 49 U.S.C. Section 11301(b)(1) is applicable.
4.11. CORPORATE STRUCTURE; CAPITALIZATION. As of the date hereof and as of
the Closing Date, SCHEDULE 4.11 sets forth, both before and after giving effect
to the transactions contemplated under the Transaction Documents, the number of
authorized and issued shares of Capital Stock of each of the Company and its
Subsidiaries, the par value thereof, and the registered owner(s) of the shares
of Capital Stock of each subsidiary thereof. All of such Capital Stock has been
duly and validly issued and is fully paid and non-assessable and, in the case of
Capital Stock of the Subsidiaries, is owned of record and beneficially by the
Company. The Convertible Preferred Shares and the Initial Common Shares are,
and, upon conversion of the Convertible Preferred Shares and exercise of the
Warrants, the Conversion Shares will be, duly and validly issued, fully-paid and
non-assessable. As of the date hereof and as of the
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Closing Date, except as set forth in SCHEDULE 4.11, neither the Company nor any
Subsidiary has outstanding any securities convertible into or exchangeable for
its Capital Stock or any other equity interest nor does the Company or any
Subsidiary have outstanding any rights to subscribe for or to purchase, or any
options for the purchase of, or any agreements providing for the issuance
(contingent or otherwise) of, or any calls, commitments or claims of any
character relating to, its Capital Stock or other obligations or commitments of
any kind whatsoever to issue, sell or otherwise dispose of, any shares of or
other equity interests in the Company or any of its Subsidiaries. Except as
contemplated by the Transaction Documents, neither the Company or any of its
Subsidiaries are subject to any obligation (contingent or otherwise) to
repurchase or otherwise acquire or retire any of their Capital Stock. There are
no voting trusts or other agreements or understandings to which the Company or
any of its Subsidiaries is a party with respect to the voting of its Capital
Stock.
4.12. ENVIRONMENTAL MATTERS.
(a) Neither the Company nor any Subsidiary (i) has any liability
under any Environmental Law which could have a Material Adverse Effect, or has
not violated any Environmental Law which violation could have a Material Adverse
Effect; (ii) has entered into or been subject to any judgment, consent decree,
compliance order, or administrative order with respect to any environmental or
health and safety matter which could have a Material Adverse Effect and (iii)
has received any request for information, notice, demand letter, administrative
inquiry, or formal or informal complaint or claim from any Person with respect
to any environmental or health and safety matter or the enforcement of any
Environmental Law which could have a Material Adverse Effect.
(b) (i) All properties owned, operated, leased, or used by the
Company and its Subsidiaries and any facilities and operations thereon comply
with applicable Environmental Laws except for such non-compliance as would not
have a Material Adverse Effect; (ii) the Company and its Subsidiaries have not
generated, transported, used, stored, treated, manufactured, refined,
transferred, produced, processed, disposed of, or managed any Hazardous
Materials, except in accordance with applicable Environmental Laws [or except as
would not have a Material Adverse Effect]; (iii) the Company and its
Subsidiaries have not effected, and have no knowledge of, any release of a
Hazardous Material at, on, in or under any property presently or formerly owned,
operated, leased, or used by the Company or any Subsidiary and (iv) no Lien has
been imposed by any Government Authority on any property, facility, machinery,
or equipment owned, operated, leased, or used by the Company or any Subsidiary
in connection with the presence of any Hazardous Material.
(c) Except as set forth in SCHEDULE 4.12, the Company and its
Subsidiaries (i) do not presently own, operate, lease or use any property on
which underground storage tanks are or, to the Company's knowledge, were
located; (ii) have never placed underground storage tanks on any property owned,
operated, leased or used by the Company or any Subsidiary; (iii) have never
removed underground storage tanks from any property presently or
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formerly owned, operated, leased or used by the Company, except in compliance
with all Environmental Laws or except as would not have a Material Adverse
Effect.
4.13. PROPERTIES AND ASSETS. The Company and each Subsidiary has good
record and marketable title to all material real Property which it owns in fee
and has good record and defensible title to all of its other material Properties
and assets (tangible or intangible) which it owns, in each case free and clear
of all Liens, other than Permitted Liens. All of the material leases for the
operation of their respective properties and assets under which the Company and
its Subsidiaries hold any material Property or assets, real or personal, are
valid, subsisting and enforceable and afford peaceful and undisturbed possession
of the subject matter of the lease, and no material default by the Company or
any Subsidiary exists under any of the provisions thereof. All buildings,
machinery and equipment of the Company and its Subsidiaries are in good repair
and working order, except for ordinary wear and tear, and except as could have a
Material Adverse Effect. All material current and proposed uses of such property
or assets of the Company and its Subsidiaries are permitted as of right and no
regulation or ordinance interferes with such current or proposed uses. To the
knowledge of the Company, there is no pending or formally proposed change in any
such laws, regulations or ordinances which could have a Material Adverse Effect.
No condemnation, appropriation or similar proceeding is pending or, to the
Company's knowledge, threatened against any material real Property owned by the
Company or any Subsidiary. Except as disclosed in SCHEDULE 4.13 or as would not
have a Material Adverse Effect, the Property of the Company and its Subsidiaries
is not subject to any agreements containing preferential purchase rights or
consent to assignment provisions that must be complied with prior to the
consummation of this Agreement and the other Transaction Documents and the
transactions contemplated hereby and thereby.
4.14. NO DEFAULT. Neither the Company nor any Subsidiary is in default
under or with respect to any material agreement, instrument or undertaking to
which it is a party or by which it or any of its property is bound, except
where, in the aggregate, all such defaults would not have a Material Adverse
Effect.
4.15. COMPLIANCE WITH LAW. Each of the Company and its Subsidiaries is in
full compliance with all laws, rules, regulations, orders, judgments, writs and
decrees, except where the failure to be in compliance would not have a Material
Adverse Effect.
4.16. BROKERS' FEES. Except as set forth on Schedule 4.16, neither the
Company nor any Subsidiary has any obligation to any Person in respect of any
finder's, brokers', investment banking or other similar fees in connection with
any of the Transaction Documents.
4.17. BOOKS AND RECORDS. The minute books of the Company contain complete
and accurate records of all meetings and other corporate actions of the
Company's Board of Directors and committees thereof and accurately reflect in
all material respects all transactions referred to therein.
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4.18. OUTSTANDING DEBT. Except as set forth on SCHEDULE 4.18, at and as of
the date hereof and as of the Closing Date, neither the Company nor any of its
Subsidiaries will have outstanding any debt for borrowed money, or obligations
or liabilities evidenced by bonds, debentures, notes or other similar
instruments or under capital leases. SCHEDULE 4.18 contains a complete and
accurate list of all material guaranties, assumptions, purchase agreements and
similar agreements and arrangements whereby the Company or any of its
Subsidiaries is or may become directly or indirectly liable or responsible for
the indebtedness or other obligations of another Person, except for negotiable
instruments endorsed for collection or deposit in the ordinary course of its
business.
4.19. OTHER RELATIONSHIPS. Except as set forth in SCHEDULE 4.19:
(a) None of the Company or any of its Subsidiaries nor any officer of
any of the foregoing has any interest (other than as non-controlling holders of
securities of a publicly-traded company), either directly or indirectly, in any
Person (whether as an employee, officer, director, more than five percent (5%)
shareholder, agent, independent contractor, security holder, creditor,
consultant or otherwise) that presently (i) provides any services or engages in
any activity which is the same or competitive with any activity or business in
which the Company or any of its Subsidiaries is now engaged, (ii) is a supplier
of, customer of, creditor of, or has an existing contractual relationship with,
the Company or any of its Subsidiaries, or (iii) has any direct or indirect
interest in any asset or property used by the Company or any of its Subsidiaries
or any property, real or personal, tangible or intangible, that is necessary for
the conduct of the business of the Company or any of its Subsidiaries; and
(b) No stockholder, director, officer or employee of the Company or
any of its Subsidiaries of any such Person is a party to any transaction (other
than as a stockholder, director, officer or employee) with the Company or any of
its Subsidiaries providing for the furnishing of services by, or rental of real
or personal property from, or otherwise requiring cash payments to any such
Person.
4.20. EMPLOYEE PROGRAMS. SCHEDULE 4.20 sets forth a list of every
Employee Program (as defined below) maintained by the Company or any of its
Subsidiaries at any time during the six-year period ending on the Closing Date
or with respect to which a liability of the Company or any of its Subsidiaries
exists. Except as set forth on SCHEDULE 4.20, each Employee Program (other than
a Multiemployer Plan (as defined below)) which has been maintained by the
Company during the six-year period ending on the Closing Date and which has been
intended to qualify under Section 401(a) or Section 501(c)(9) of the Code has
received a favorable determination or approval letter from the IRS regarding its
qualification under such Section or the remedial amendment period under Section
401(b) of the Code has not yet expired with respect to such Employee Program
and, to the Company's knowledge, nothing has occurred that would adversely
affect such qualification since the date of such letter or application for a
determination or approval letter has been timely made and, to the Company's
knowledge, no reason exists why a favorable determination or approval shall not
be granted. Except as set forth on SCHEDULE 4.20, the Company and its
Subsidiaries do not know of any
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failure of any party to comply with any laws applicable with respect to the
Employee Programs that have been maintained by the Company or any of its
Subsidiaries, and no such failure will result from completion of the
transactions contemplated hereby. Except as set forth on SCHEDULE 4.20 with
respect to any Employee Program ever maintained by the Company or any of its
Subsidiaries, there has been no "prohibited transaction," as defined in Section
406 of ERISA or Code Section 4975, or breach of any duty under ERISA or other
applicable law or any agreement which in any such case could subject the Company
or any of its Subsidiaries to material liability either directly or indirectly
(including, without limitation, through any obligation of indemnification or
contribution) for any damages, penalties, or taxes, or any other loss or
expense. No litigation or Government administrative proceeding (or
investigation) or other proceeding (other than those relating to routine claims
for benefits) is pending or threatened with respect to any such Employee Program
(other than a Multiemployer Plan). No event or omission has occurred which would
cause any Employee Program to lose its qualification or otherwise fail to
satisfy the relevant requirements to provide tax-favored benefits under the
applicable Code Section (including without limitation Code Sections 105, 125,
401(a) and 501(c)(9)). Each asset held under any such Employee Program may be
liquidated or terminated without the imposition of any redemption fee, surrender
charge or comparable liability.
None of the Company or its Subsidiaries have incurred any liability under
Title IV of ERISA which has not been paid in full prior to the Closing. None of
the Company or any of its Subsidiaries participates currently or has ever
participated in or is required currently or has ever been required to contribute
to or otherwise participate in any plan, program or arrangement subject to Title
IV of ERISA or Code Section 412. None of the Company or its Subsidiaries
participates currently or has ever participated in or is required currently or
has ever been required to contribute to or otherwise participate in any
Multiemployer Plan (as defined below). Except as disclosed on SCHEDULE 4.20,
none of the Employee Programs which is a welfare plan maintained by the Company
or any of its Subsidiaries provides health care or any other non-pension
benefits to any employees after their employment is terminated (other than as
required by Part 6 of Subtitle B of Title I of ERISA or comparable statutes or
regulations) or has ever promised to provide such post-termination benefits.
Each Employee Program required to be listed on SCHEDULE 4.20 may be amended,
terminated, or otherwise modified by the Company or its Subsidiaries to the
greatest extent permitted by applicable law, including the elimination of any
and all future benefit accruals under any Employee Program and no employee
communications or provision of any Employee Program document has failed to
effectively reserve the right of the Company or its Subsidiaries to so amend,
terminate or otherwise modify such Employee Program.
For purposes of this Section 4.20:
(a) "EMPLOYEE PROGRAM" means (A) any employee benefit plan within the
meaning of Section 3(3) of ERISA and employee benefit plans (such as foreign or
excess benefit plans) which are not subject to ERISA, and (B) if for employees
generally or any subgroup of employees generally, any stock option plans, bonus
or incentive award plans,
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severance pay policies or agreements, deferred compensation arrangements,
supplemental income arrangements, vacation plans, and all other employee benefit
plans, agreements, and arrangements not described in (A) above, and (C) any
trust used to fund benefits under the foregoing maintained by the Company or any
of its Subsidiaries.
(b) An entity "MAINTAINS" an Employee Program if such entity
sponsors, contributes to, or provides benefits under such Employee Program, or
has any obligation (by agreement or under applicable law) to contribute to or
provide benefits under such Employee Program, or if such Employee Program
provides benefits to or otherwise covers employees of such entity (or, in
respect of such employees, their spouses, dependents, or beneficiaries).
(c) "MULTIEMPLOYER PLAN" means a (pension or non-pension) employee
benefit plan to which more than one employer contributes and which is maintained
pursuant to one or more collective bargaining agreements.
(d) Each reference to the "Company" or any "Subsidiary" includes any
entity which has ever been considered a single employer with such entity under
ERISA Section 4001(b) or part of the same "controlled group" as such entity for
purposes of ERISA Section 302(d)(8)(C).
4.21. PRIVATE OFFERINGS. No form of general solicitation or general
advertising, including, but not limited to, advertisements, articles, notices or
other communications, published in any newspaper, magazine or similar medium or
broadcast over television or radio, or any seminar or meeting whose attendees
have been invited by any general solicitation or general advertising, was used
by the Company or any of its Subsidiaries or any of their respective
representatives, or, to the Company's knowledge, any other Person acting on
behalf of the Company or any of its Subsidiaries in connection with the offering
of the Securities. Neither the Company nor any of its Subsidiaries nor any
Person acting on the Company's or any such Subsidiaries' behalf, has directly or
indirectly offered Securities for sale to, or sold or solicited any offer to buy
any of the same from, or otherwise approached or negotiated in respect thereof
with any Person or Persons other than the Purchasers and other investors who the
Company reasonably believed had such knowledge and experience in financial and
business matters that they were capable of evaluating the merits and risks of
purchasing the Securities. The Company further represents to the Purchasers
that, assuming the accuracy of the representations of the Purchasers as set
forth in Section 6 hereof, neither the Company nor any of its Subsidiaries, nor
any Person acting on the Company's or any such Subsidiary's behalf, as
applicable, has taken or will take any action which would subject the issue and
sale of the Securities to the provisions of Section 5 of the Securities Act,
except as contemplated by the Transaction Documents. The Company and its
Subsidiaries have not sold the Securities to anyone other than the Purchasers
designated in this Agreement. No shares of Convertible Preferred Stock and no
securities containing the same terms as the Warrants have been issued and sold
by the Company or any of its Subsidiaries prior to the date hereof.
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4.22. INSURANCE. Except as set forth on SCHEDULE 4.22 attached hereto, the
Company maintains in full force and effect policies of insurance and bonds of
the type and in amounts customarily carried by Persons conducting business
similar to that currently conducted by the Company and its Subsidiaries. There
is no claim in excess of $15,000 by the Company or any of its Subsidiaries
pending under any of such policies or bonds as to which coverage has been
questioned, reserved, denied or disputed by the underwriters of such policies or
bonds or their agents. The Company has no knowledge of any threatened
termination of any such policies or bonds.
4.23. EMPLOYMENT PRACTICES. Neither the Company nor any Subsidiary is a
party to or in the process of negotiating any collective bargaining or labor
agreement or union contract. As of the date of this Agreement, except as would
not have a Material Adverse Effect, there is no (a) charge, complaint or suit
pending or, to the Company's knowledge, threatened against the Company or any
Subsidiary respecting employment, hiring for employment, terminating from
employment, employment practices, employment discrimination, terms and
conditions of employment, safety, wrongful termination, or wages and hours, (b)
unfair labor practice charge or complaint pending or, to the Company's
knowledge, threatened against, or decision or order in effect and binding on,
the Company or any Subsidiary before or of the National Labor Relations Board,
(c) grievance or arbitration proceeding arising out of or under collective
bargaining agreements pending or, to the Company's knowledge, threatened against
the Company or any Subsidiary (d) strike, labor dispute, slow-down, work
stoppage or other interference with work pending or, to the Company's knowledge,
threatened against the Company or any Subsidiary, or (e) to the Company's
knowledge, union organizing activities or union representation question
threatened or existing with respect to any groups of employees of the Company or
any Subsidiary. All payments due from the Company or any Subsidiary on account
of employee health and welfare insurance and vacation pay have been paid or
accrued as a liability on the books of the Company or any Subsidiary. There are
no complaints or charges against the Company or any Subsidiary pending or, to
the best of the Company's knowledge after due inquiry, threatened to be filed
with any Government Authority based on, arising out of, in connection with, or
otherwise relating to the employment or termination of employment by the Company
or any Subsidiary which could have a Material Adverse Effect.
4.24. MATERIAL CONTRACTS AND OBLIGATIONS. Set out on SCHEDULE 4.24 hereto
is a list of all material agreements of any nature to which the Company or any
of its Subsidiaries are a party or by which they are bound, including without
limitation (a) each agreement which requires future expenditures by the Company
or any of its Subsidiaries in any one year in excess of $250,000 and (b) all
employment and consulting agreements, employee benefit, bonus, pension,
profit-sharing, stock option and stock purchase and similar plans and
arrangements. The Company, each Subsidiary and, to the Company's knowledge, each
other party thereto have in all material respects performed all the obligations
required to be performed by them to date, have received no notice of default and
are not in default (with due notice or lapse of time or both) under any lease,
agreement or contract described in subsections (a) or (b) above that could have
a Material Adverse Effect. All of the agreements and contracts described above
are valid, binding and in full force and effect with respect to the Company or
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the respective Subsidiary, except as would not have a Material Adverse Effect.
Neither the Company nor any of its Subsidiaries has any present expectation or
intention of not fully performing all its obligations under each such lease,
contract or other agreement, and the Company has no knowledge of any breach or
anticipated breach by the other party to any contract or commitment to which the
Company or any Subsidiary is a party.
4.25. INTELLECTUAL PROPERTY.
(a) Except as described in SCHEDULE 4.25 and except as would not have
a Material Adverse Effect, the Company has exclusive ownership of, or exclusive
license to use, all patent, copyright, trade secret, trademark, or other
proprietary rights used in the business of the Company and its Subsidiaries
(collectively, "INTELLECTUAL PROPERTY"). There are no claims or demands of any
other Person pertaining to any of such Intellectual Property and no proceedings
have been instituted, or are pending or, to the Company's knowledge, threatened,
which challenge the rights of the Company in respect thereof. Except as would
not have a Material Adverse Effect the Company has the right to use, free and
clear of claims or rights of other Persons, all customer lists, billing systems
or other processes, computer software systems, data compilations, and other
information required for or incident to their business as presently conducted or
contemplated.
(b) All trademarks, trademark applications and registrations and
registered copyrights which are owned by or licensed to the Company or its
Subsidiaries or used or to be used by the Company or its Subsidiaries in their
business as presently conducted, and which are material to the Company, are
listed in SCHEDULE 4.25. All of such trademarks and trade names, trademark
applications and registrations and registered copyrights have been duly
registered in, filed in or issued by the United States Patent and Trademark
Office, the United States Register of Copyrights, or the corresponding offices
of other jurisdictions as identified in SCHEDULE 4.25, and have been properly
maintained and renewed in accordance with all applicable provisions of law and
administrative regulations in the United States and each such jurisdiction,
except when the failure to do so would not have a Material Adverse Effect.
(c) All material licenses or other agreements under which the Company
or any of its Subsidiaries is granted rights in Intellectual Property are listed
in SCHEDULE 4.25. All such licenses or other agreements are in full force and
effect and there is no default by any party thereto.
(d) Except as would not have a Material Adverse Effect, the Company
has taken all steps required in accordance with sound business practice and
business judgment to establish and preserve its ownership of all material
copyright, trade secret and other proprietary rights with respect to their
products and technology. To the Company's knowledge, the Company has not made
any such information available to any Person other than employees of the Company
or its Subsidiaries except pursuant to written agreements requiring the
recipients to maintain the confidentiality of such information and appropriately
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restricting the use thereof. To the Company's knowledge, there are no material
infringements by others of any of its Intellectual Property rights.
(e) Except as set forth on Schedule 4.25, to the Company's knowledge,
the present business, activities and products of the Company and its
Subsidiaries does not infringe any intellectual property of any other Person,
except as would not have a Material Adverse Effect. Except as set forth on
SCHEDULE 4.25, no proceeding charging the Company or any of its Subsidiaries
with infringement of any adversely held Intellectual Property has been filed or
is, to the Company's knowledge, threatened to be filed, except as would not have
a Material Adverse Effect. To the Company's knowledge, the Company and its
Subsidiaries are not making any unauthorized use of any confidential information
or trade secrets of any Person, including without limitation any former employer
of any past or present employee of the Company and its Subsidiaries. Neither the
Company nor, to the Company's knowledge, any of its employees have any
agreements or arrangements with any Persons other than the Company related to
confidential information or trade secrets of such Persons or restricting any
such employee's engagement in business activities of any nature.
4.26. ACCOUNTS RECEIVABLE. Except as set forth on SCHEDULE 4.26, all
accounts receivable of the Company that are reflected in the Commission Reports
represent, and as of the Closing Date (except to the extent collected in cash
before such date) will represent, valid obligations to the Company of third
parties (who are unrelated to the Company, or any Affiliate thereof) arising
from sales actually made or services actually performed by the Company and its
Subsidiaries in the ordinary course of business. To the best of the Company's
knowledge, each such account receivable is a valid obligation of the account
debtor enforceable in accordance with its terms, free and clear of all
encumbrances, set-offs, adverse claims, assessments, defaults, prepayment,
defenses and conditions precedent. The Company is the true and lawful owner of
each such account receivable and has good and clear title to each such
receivable, free and clear of all Liens other than Permitted Liens.
5. CONDITIONS OF OBLIGATIONS OF THE COMPANY AT THE CLOSING.
The Company's obligation to issue and sell the Units and to enter this
Agreement and the Other Transaction Documents at the Closing shall be subject to
compliance by each Purchaser with its agreements and covenants herein contained
and to the fulfillment, to the Company's satisfaction, on or before and at the
Closing Date of the following conditions, provided that any or all of the
following conditions may be waived, in whole or in part, by the Company in its
sole and absolute discretion:
5.1. REPRESENTATIONS AND WARRANTIES. The representations and warranties of
each Purchaser made in Section 6 hereof shall have been true and correct when
made and on and as of the Closing Date.
5.2. GOVERNMENT AND THIRD PARTY PERMITS, CONSENTS, ETC. The Company shall
have duly applied for and obtained all material approvals from each Government
Authority, or
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pursuant to any material agreement to which the Company is a party or to which
it or any of its material assets is subject, which are required in connection
with this Agreement or the Other Transaction Documents and such approvals shall
remain in effect upon consummation of the transactions contemplated by this
Agreement and the Other Transaction Documents, and all applicable waiting
periods, including, without limitation, the waiting period required under the
HSR Act with respect to such contemplated transactions, shall have expired
without any action being taken by any competent Government Authority and no law
or regulation shall be applicable which restrains or prevents, or imposes
adverse conditions upon, such contemplated transactions.
5.3. CERTIFICATE OF DESIGNATIONS. The Board of Directors and, if necessary,
the stockholders of the Company shall have duly adopted the Certificate of
Designations and the Certificate of Designations shall have been duly filed with
the Secretary of State of the State of Delaware.
5.4. SPECIAL STOCKHOLDERS MEETING; NASDAQ APPROVAL. On or prior to the
Second Closing Date, the Company's stockholders shall have duly approved by the
requisite vote under applicable Nasdaq rules the Stockholder Meeting Matter (as
defined in Section 7.1(b)) at the Special Stockholders Meeting.
5.5. NO VIOLATION OR INJUNCTION. The consummation of the transactions
contemplated by this Agreement and the Other Transaction Documents shall not be
in violation of any law or regulation and shall not be subject to any
injunction, stay or restraining order that has not been reversed or overturned.
5.6. PURCHASE PRICE. The Purchasers shall have paid the applicable purchase
price to the Company in accordance with Section 1 hereof.
5.7. FAIRNESS OPINION. The Company shall have received an opinion, prior to
the Second Closing Date, from Hanifen, Imhoff, Inc., Investment Bankers, in form
and substance reasonably satisfactory to the Company, substantially to the
effect that the consideration to be received by the Company at the Second
Closing under the terms of this Agreement is fair, from a financial point of
view, to the Company.
6. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.
In order to induce the Company to enter into this Agreement and the Other
Transaction Documents and to issue and sell the Units, each Purchaser severally
represents and warrants to the Company, as of the date hereof and as of the
Closing Date (except to the extent that any of the following representations or
warranties specifically apply or relate to a prior date, in which event such
Purchaser represents and warrants as of such prior date), as to itself only, as
follows:
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6.1. STATUS. Such Purchaser (i) is a duly organized and validly existing
limited liability company, partnership or trust fund in good standing under the
laws of the jurisdiction of its incorporation or formation and (ii) has the
requisite power and authority to acquire and own the Securities.
6.2. POWER AND AUTHORITY; ENFORCEABILITY. The execution, delivery and
performance by such Purchaser of its obligations under the Transaction Documents
to which such Purchaser is a party and the purchase by such Purchaser of the
Units Securities pursuant to this Agreement are within such Purchaser's
corporate, limited liability company or partnership power and have been duly
authorized by all necessary corporate, limited liability or partnership action
on the part of such Purchaser. Such Purchaser has, or on the Closing Date will
have, duly executed and delivered each Transaction Document to which it is a
party and each such Transaction Document constitutes or will constitute such
Purchaser's legal, valid and binding obligation, enforceable in accordance with
its terms except to the extent that its enforceability may be subject to
applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws
affecting creditor's rights generally and to general equitable principles.
6.3. SECURITIES REPRESENTATIONS.
(a) Such Purchaser is (i) an "accredited investor" as that term is
defined in Rule 501 promulgated under the Securities Act, (ii) knowledgeable,
sophisticated and experienced in financial and business matters as to be capable
of evaluating the merits and risks of its investment in the Securities, (iii)
capable of bearing the economic risk of such investments, including a complete
loss of its investment in the Securities, and (iv) able, by reason of the
business and financial experience of its officers, partners, and, employees and
agents and professional advisors (who are not affiliated with or compensated in
any way by the Company or any of its affiliates or selling agents) to protect
its own interests in connection with the transactions described in this
agreement and the related documents.
(b) Such Purchaser is acquiring the Securities for its own account
and not with a view towards the public sale or distribution of such Securities,
unless such public sale or distribution is properly registered under the
Securities Act or exempt from the registration requirements thereof.
(c) Such Purchaser understands that the Securities are being offered
and sold to it pursuant to and a reliance upon certain exemptions from the
registration requirements of the Securities Act and applicable state securities
laws and that the Company is relying upon the truth and accuracy of, and the
Purchaser's compliance with, the representation, warranties, agreements,
acknowledgments and understandings of such Purchaser set forth herein in order
to determine the availability of such exemptions and the eligibility of such
Purchaser to acquire the Securities.
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(d) Such Purchaser understands that any subsequent offer or sale of
the securities by the Purchaser must be registered under the Securities Act and
applicable state, securities laws or exempt from the registration requirements
thereof.
(e) The Company has furnished or otherwise made available to such
Purchaser or its agents, all documents, information and materials relating to
the business, affairs, operations or condition of the Company and to this
transaction which have been requested by or on behalf of such Purchaser. In
addition, such Purchaser and its agents have been given the opportunity to ask
questions of, and to receive the answers from, the Company concerning its
business, affairs, operations and conditions, as well as the terms and
conditions of the Securities and other related matters, and has received
complete and satisfactory answers to all such inquiries. In evaluating the
suitability of an investment in the Securities, the Purchaser has not relied
upon any representations or other information (whether oral or written) made by
or on behalf of the Company other than as expressly set forth in this Agreement.
6.4. MARGIN COMPLIANCE. Such Purchaser is not relying, directly or
indirectly, on any "margin stock" (as defined in Regulation U of the Federal
Reserve Board) as collateral for the Securities. Such Purchaser is not a
broker-dealer subject to Regulation T of the Federal Reserve Board.
6.5. SOURCE OF FUNDS. If any part of the funds to be used to purchase the
Securities constitutes assets of any employee benefit plan within the meaning of
Section 3 of ERISA, either (i) such Securities are being purchased pursuant to
an available exemption from the provisions of 406 of ERISA and Section 4975 of
the Code or (ii) the assets do not constitute "plan assets" as defined in ERISA.
6.6. BROKERS' FEES. No Purchaser has any obligation to any Person in
respect of any finder's, brokers', investment banking or other similar fees in
connection with any of the Transaction Documents.
6.7. POST-RESET STANDSTILL. If the Exercise Price (as defined in the
Warrants) or the Conversion Price (as defined in the Certificate of
Designations) is adjusted pursuant to Section 2.2 of the Warrants or Section
A.7(a) of the Certificate of Designations, respectively, then the Purchasers and
their assigns shall not, for a period of ninety (90) days after such adjustment,
sell, pledge or otherwise transfer any Capital Stock of the Company (other than
to their respective Affiliates) and shall not, for a period of thirty (30) days
after such adjustment, purchase any Capital Stock of the Company (except that
they may exercise Warrants or convert Convertible Preferred Shares) for the
purpose of covering a "short" position; provided, however, that the restrictions
of this Section 6.7 shall terminate prior to the end of the foregoing periods
upon written notice of redemption of the Convertible Preferred Stock given by
the Company pursuant to Section A.5(a)(iii) of the Certificate of Designations.
Notwithstanding the foregoing, State Street Bank & Trust, in its capacity as
Trustee for General
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Motors Employees Global Group Pension Trust, shall only be subject to the
limitations of this Section 6.7 with respect to accounts managed or advised by
DDJ Capital Management, LLC.
7. COVENANTS OF THE COMPANY.
7.1. SPECIAL STOCKHOLDERS MEETING.
(a) PROXY STATEMENT; OTHER FILINGS. As promptly as practicable, the
Company shall (i) prepare and file with the Commission under the Exchange Act a
Proxy Statement with respect to the Special Stockholders Meeting containing the
information required to be included therein, (ii) after consultation with the
Purchasers, use its best efforts to promptly respond to any comments by the
Commission with respect to the Proxy Statement and any preliminary version
thereof and (iii) promptly after clearance by the Commission, mail the Proxy
Statement to its stockholders. The term "PROXY STATEMENT" shall mean such proxy
statement, as the case may be, and all related proxy materials at the time such
documents initially are mailed to the Company's stockholders, and all amendments
or supplements thereto, if any, similarly filed and mailed. The Company shall
give the Purchasers and the Purchasers' Special Counsel a reasonable opportunity
to review and comment upon the Proxy Statement prior to its being filed with the
Commission and shall give the Purchasers and the Purchasers' Special Counsel a
reasonable opportunity to review all amendments and supplements to the Proxy
Statement and all responses to requests for additional information and replies
to comments prior to their being filed with, or sent to, the Commission and, in
the case of the Proxy Statement and any amendments or supplements thereto, prior
to its being disseminated to the Company's stockholders. The Company shall
promptly notify the Purchasers of the receipt of any comments on, or any request
for amendments or supplements to, the Proxy Statement by the Commission or any
other governmental entity or official, and the Company shall supply the
Purchasers with copies of all correspondence between it and each of its
Subsidiaries and representatives, on the one hand, and the Commission or the
members of its staff or any other appropriate governmental official, on the
other hand, with respect to the Proxy Statement. The information provided and to
be provided by the Purchasers and the Company, respectively, for use in the
Proxy Statement shall, on both the date the Proxy Statement is first mailed to
the Company's stockholders as referred to in Section 7.1(b) hereof and the date
the Special Stockholders Meeting is held, not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they are made, not misleading, or necessary to correct any statement in
any earlier communication with respect to the solicitation of proxies for the
stockholders' meeting which shall have become false or misleading, and shall
comply in all material respects as to form and substance with all applicable
requirements of law. The Purchasers and the Company agree to correct promptly
any such information provided by them for use in the Proxy Statement which, to
their respective knowledge, shall have become false or misleading.
(b) SPECIAL STOCKHOLDERS MEETING. In order to consummate the issuance
of the Additional Units and the transactions contemplated hereby in connection
therewith (the
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"STOCKHOLDERS MEETING MATTER"), the Company, acting through the Board of
Directors, shall take all action necessary in accordance with applicable law and
the Company's Charter Documents to duly call, give notice of, convene and hold a
special meeting of its stockholders as promptly as practicable (but in no event
later than 90 days after the Initial Closing Date) to consider and vote upon the
approval of the Stockholders Meeting Matter and to take such other action as is
necessary or desirable to consummate the transactions contemplated hereby (the
"SPECIAL STOCKHOLDERS MEETING"). Except to the extent required by law or the
Company's Charter Documents or as set forth in SCHEDULE 7.1(b), the Company
shall not present any other matter at the Special Stockholders Meeting except
for the matters contemplated by this Agreement. The Proxy Statement shall
contain the determination and the recommendation of the Board of Directors that
the stockholders of the Company approve the Stockholders Meeting Matter and the
transactions contemplated hereby and the Company, acting through the Board of
Directors, shall use its best efforts to obtain such approval. The Purchasers
and the Company shall coordinate and cooperate with respect to the foregoing
matters at the Company's expense.
7.2. GENERAL COVENANTS OF THE COMPANY.
(a) The Company covenants and agrees that so long as at least 1,000
shares of Convertible Preferred Stock are outstanding, the Company shall file
with the Commission the annual reports and quarterly reports and the
information, documents and other reports that are required to be filed with the
Commission pursuant to Sections 13 and 15 of the Exchange Act, whether or not
the Company has or is required to have a class of securities registered under
the Exchange Act and whether or not the Company is then subject to the reporting
requirements of the Exchange Act, at the time the Company is or would be
required to file the same with the Commission and, promptly after the Company is
or would be required to file such reports, information or documents with the
Commission, to mail copies of such reports, information and documents to the
holders of the Convertible Preferred Stock and the Conversion Shares.
(b) USE OF PROCEEDS. The Company shall use all of the proceeds from
the Closing in the manner set forth in SCHEDULE 1.5 hereto.
(c) COMPLIANCE WITH LAW. The Company shall, and shall cause each of
its Subsidiaries to, comply with all applicable laws, rules, statutes,
regulations, decrees and orders of, and all applicable restrictions imposed by,
all Government bodies, domestic or foreign, in respect of the conduct of their
business and the ownership of their properties, except where the failure to
comply could not reasonably be expected to have a Material Adverse Effect.
(d) CORPORATE EXISTENCE AND OTHER INTANGIBLES. The Company shall do
or cause to be done all things necessary to preserve and keep in full force and
effect its corporate existence and the corporate, partnership or other existence
of each of its material Subsidiaries in accordance with the respective
organizational documents of such Subsidiary and the rights (charter and
statutory), licenses and franchises of the Company and each of its Subsidiaries;
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PROVIDED, HOWEVER, that the Company shall not be required to preserve any such
right, license or franchise, or the corporate, partnership or other existence of
any Subsidiary, if the Board of Directors of the Company shall determine, in the
exercise of business judgment, that the preservation thereof is no longer
desirable in the conduct of the business of the Company and its Subsidiaries
taken as a whole.
The Company shall, and shall cause each of its Subsidiaries to, do or cause
to be done, all things necessary to preserve and keep in full force and effect
its patents, trademarks, service marks, trade names, copyrights, franchises,
licenses, permits, certificates, authorizations, qualifications, accreditations,
easements, rights of way and other rights, consents and approvals, except where
the failure to so preserve any of the foregoing could not reasonably be expected
to, individually or in the aggregate, result in a Material Adverse Effect.
(e) ACCOUNTING METHODS. Unless consistent with GAAP, the Company will
not, and it will not permit any Subsidiary to, change or introduce any new
method of accounting which differs in any substantive respect from the
accounting as reflected in the Commission Reports.
(f) INDEMNIFICATION OF DIRECTORS; PAYMENT OF DIRECTORS' EXPENSES. The
Company shall (i) at all times maintain provisions in its By-laws (as they may
be amended from time to time) indemnifying any member of the Board of Directors
of the Company chosen by the Purchasers pursuant to Section 7.5 against
liability and limiting such liability, both to the maximum extent permitted
under the laws of the State of Delaware, (ii) enter into an Indemnification
Agreement in the form attached hereto as EXHIBIT D with any such member of the
Board of Directors, and (iii) promptly reimburse any such member of the Board of
Directors of the Company for his or her reasonable out-of-pocket expenses in
accordance with the regular policies of the Company's Board of Directors
incurred in attending each meeting of the Board of Directors of the Company or
any committee thereof of which he or she is a member.
(g) DIRECTORS AND OFFICERS LIABILITY INSURANCE. The Company shall
obtain and maintain standard directors and officers liability insurance coverage
with a financially sound and reputable insurance company to the extent such
coverage is available on commercially reasonable terms.
(h) CONFLICTING AGREEMENTS. The Company shall not, and shall not
permit any of its Subsidiaries to, enter into any agreement or instrument (or
amend any existing agreement or instrument) that prohibits the Company from
repurchasing or redeeming the Convertible Preferred Stock in accordance with the
terms of the Certificate of Incorporation or issuing Common Stock upon
conversion of the Convertible Preferred Stock or exercise of the Warrants.
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(i) INVESTMENT COMPANY ACT. The Company shall not become an
"investment company" subject to registration under the Investment Company Act of
1940, as amended.
(j) FURTHER INSTRUMENTS AND ACTS. The Company shall, and shall cause
each of its Subsidiaries to, execute and deliver such further instruments and do
such further acts as any holder of Securities acquired directly or indirectly
pursuant to this Agreement may deem reasonably necessary or proper to carry out
more effectively the purposes of this Agreement and the Other Transaction
Documents.
7.3. COMPLIANCE CERTIFICATE. So long as at least 1,000 shares of
Convertible Preferred Stock shall remain outstanding, the Company shall deliver
to the Purchasers (or their assignees), within forty-five (45) days after the
end of each fiscal year of the Company, and within forty-five (45) days after
the end of each of the first three quarters of each fiscal year of the Company,
an Officers' Certificate stating that (i) a review of the activities of the
Company and its Subsidiaries during the preceding fiscal year or quarter, as the
case may be, has been made to determine whether the Company has kept, observed,
performed and fulfilled all of its obligations under this Agreement and the
Securities, (ii) such review was supervised by the Officers of the Company
signing such certificate, and (iii) to the best knowledge of each Officer
signing such certificate, the Company has in all material respects kept,
observed, performed and fulfilled the covenants contained in this Agreement and
is not in default in any material respect in the performance or observance of
any of the terms, provisions and conditions of this Agreement.
7.4. RESTRICTIONS ON ACTION BY THE COMPANY. As long as (i) at least 1,000
shares of Convertible Preferred Stock are held by the Purchasers, or (ii)
Warrants or shares representing at least 1,000 shares of Common Stock are held
by the Purchasers and there is not a registration statement in effect covering
all such shares of Common Stock, without the prior written consent of Purchasers
holding at least a majority of the Common Stock represented by the Securities
held by the Purchasers (which consent shall not be unreasonably withheld), the
Company shall not, and the Company shall cause the Company's Subsidiaries not
to, directly or indirectly, enter into an agreement with respect to, or effect,
or permit, any:
(i) merger or consolidation of the Company or any Subsidiary
with any other Person, recapitalization, reorganization or other like
transaction involving the Company or any Subsidiary, or liquidation or
dissolution of the Company or any Subsidiary;
(ii) sale or transfer of all or substantially all of the
Company's consolidated properties or assets;
(iii) disposition of assets in one or more transactions for
consideration in excess of $1,000,000 without the approval of the
Board of Directors of the Company;
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(iv) issuance of any equity securities or any securities
exchangeable or convertible into equity securities or measured by
earnings or profit of the Company or any Subsidiary, provided that the
Company (and the Subsidiaries set forth on Schedule 7.4) may issue
securities that rank junior to the Convertible Preferred Stock as to
liquidation, dividend and redemption rights;
(v) redemption, repurchase or other acquisition for value of any
equity security of the Company;
(vi) amendment of the Company's or any Subsidiary's Charter
Documents; or
(vii) incurrence of indebtedness for money borrowed, except for
borrowings under the Company's primary credit agreement of up to
$3,000,000.
The restriction on repurchases contained in Section 7.4(v) shall not apply to
the repurchase by the Company of up to 250,000 shares of Common Stock pursuant
to the terms of restrictive agreements under which the Corporation has the
option to repurchase such shares from employees, officers, directors,
consultants, or other persons performing services for the Company or any
Subsidiary upon the occurrence of certain events.
7.5. BOARD OF DIRECTORS. So long as any at least 2,000 shares of
Convertible Preferred Stock are outstanding, Purchasers (or their transferees)
holding a majority of the outstanding Convertible Preferred Stock shall have the
right to designate one person as a Director of the Company in accordance with
the Certificate of Designations. The Company shall use its best efforts to cause
any such designee to be nominated, elected and continued as a Director of the
Company and not to be removed for any reason other than in connection with the
designation and election of a successor in accordance with the Certificate of
Designations.
7.6. EXCHANGE AT SECOND CLOSING. If for any reason the economic terms of
the transactions to be consummated at the Second Closing are more favorable to
the Purchasers than the economic terms of the Initial Closing (other than the
fact that, solely because the Second Closing will occur after the First Closing,
the Convertible Preferred Stock issued at the Second Closing will become
convertible, and the Warrants issued at the Second Closing will become
exercisable, sooner than the Convertible Preferred Stock and Warrants issued at
the First Closing), then the Purchasers who purchased Securities at the Initial
Closing shall be entitled to receive the economic benefit of the Second Closing
with respect to such initially purchased securities, whether through refund,
redemption, exchange or otherwise.
8. RESTRICTIONS ON TRANSFER.
8.1. RESTRICTIVE LEGENDS. Except as otherwise permitted by this Section
8.1, each Convertible Preferred Share, Initial Common Share, Warrant and
Conversion Share issued
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pursuant to this Agreement shall be stamped or otherwise imprinted with a legend
in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, NOR PURSUANT
TO THE SECURITIES OR "BLUE SKY" LAWS OF ANY STATE. SUCH SECURITIES MAY
NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE
ASSIGNED, EXCEPT IN ACCORDANCE WITH APPLICABLE "BLUE SKY" LAWS AND
PURSUANT TO A REGISTRATION STATEMENT WITH RESPECT TO SUCH SECURITIES
WHICH IS EFFECTIVE UNDER SUCH ACT OR AN EXEMPTION FROM REGISTRATION
UNDER SUCH ACT.
The Company shall maintain a copy of this Agreement and any amendments
thereto on file in its principal office, and will make such copy available
during normal business hours for inspection to any party thereto or will provide
such copy to any holder of Convertible Preferred Shares, Initial Common Shares,
Warrants or Conversion Shares upon such holder's request. The legend requirement
of this Section 8.1 shall terminate when the applicable securities are
transferred pursuant to an effective registration statement under the Securities
Act or may be sold pursuant to Rule 144(k) under the Securities Act without
regard to the volume or manner of sale limitations set forth therein.
8.2. REMOVAL OF LEGENDS. Whenever the legend requirement imposed by Section
8.1 shall terminate, the respective holders of Convertible Preferred Shares,
Initial Common Shares, Warrants or Conversion Shares for which such legend
requirements have terminated shall be entitled to receive from the Company, at
the Company's expense, new certificates representing such Convertible Preferred
Shares, Initial Common Shares, Warrants or Conversion Shares, as applicable,
without such legend.
8.3. TRANSFER INFORMATION. The holder of each Convertible Preferred Share,
Initial Common Share, Warrants or Conversion Share bearing the restrictive
legend set forth in Section 8.1 above agrees with respect to any transfer of
such security, upon reasonable request from the Company to such holder, to give
to the Company written information describing the transferee and the
circumstances of such transfer necessary to establish the availability of an
exemption from the registration requirements of the Securities Act.
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9. DEFINITIONS.
As used herein the following terms have the following respective meanings:
"AFFILIATE" means with respect to any Person, any "person" or "group"
(as such terms are used in Sections 13(d) and 14(d) of the Exchange Act)
directly or indirectly controlling or controlled by or under common control with
such Person, provided that, for purposes of this definition, "control"
(including, with correlative meanings, the terms "controlled by" and "under
common control with"), as used with respect to any Person, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities or by contract or otherwise.
"AGREEMENT" means this Agreement, as amended, modified or supplemented
from time to time, together with any exhibits, schedules or other attachments
thereto.
"BOARD OF DIRECTORS" means the Board of Directors of the Company or
any committee thereof duly authorized to act on behalf of such Board.
"BUSINESS DAY" means any day other than a day on which banks are
authorized or required to be closed in the State of New York.
"CAPITAL STOCK" means any and all shares, interests, participations,
rights in or other equivalents (however designated) of capital stock of a
corporation, and any rights, warrants or options exchangeable for or convertible
into such capital stock and any and all equivalent ownership interests in a
Person (other than a Corporation).
"CODE" means the Internal Revenue Code of 1986, and the rules and
regulations thereunder, as amended from time to time.
"COMMISSION" means the United States Securities and Exchange
Commission or any other Federal agency at the time administering the Securities
Act, the Exchange Act and other securities laws.
"COMPANY" has the meaning ascribed thereto in the introduction hereof,
and shall include all successors and assigns of the Company.
"ENVIRONMENTAL LAWS" means all federal, state, local and foreign laws
and regulations relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water, ground
water, land surface or subsurface strata), including without limitation, laws
and regulations relating to emissions, discharges, releases or threatened
releases of Materials of Environmental Concern, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Materials of Environmental Concern.
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"ERISA" means the Employee Retirement Income Security Act of 1974, and
the rules and regulations thereunder, as amended from time to time.
"EXCHANGE ACT" means the Securities Exchange Act of 1934 and the rules
and regulations of the Commission promulgated thereunder, as amended.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, which are applicable as of the date of
determination.
"GOVERNMENT AUTHORITY" means any nation or government, any state,
provincial or political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"HAZARDOUS MATERIAL" means and includes any hazardous waste as defined
or regulated under any Environmental Law.
"INVESTMENT ADVISERS ACT" shall mean the Investment Advisors Act of
1940, and the rules and regulations promulgated thereunder, as such may be
amended or supplemented from time to time.
"IRS" means the Internal Revenue Service or any successor agency.
"LIEN" means any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), or preference, priority or
other security agreement of any kind or nature whatsoever, including, without
limitation, any conditional sale or other title retention agreement, any
financing lease having substantially the same effect as any of the foregoing.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on the
financial condition, revenues, properties, assets, business or operations of the
Company and its Subsidiaries taken as a whole.
"MATERIALS OF ENVIRONMENTAL CONCERN" means and includes chemicals,
pollutants, contaminants, wastes, toxic substances, petroleum and petroleum
products.
"OTHER TRANSACTION DOCUMENTS" means, collectively, the Securities and
any and all agreements, certificates, instruments and other documents
contemplated thereby or executed and delivered in connection therewith or with
this Agreement.
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"PERMITTED LIENS" means (i) any minor imperfection of title with
respect to such asset which does materially adversely affect the value of such
asset or materially interfere with the present use and continuation of such
present use of such asset in the business of the Company; (ii) Liens that are
not related to mortgages or other financial encumbrances, and any other stated
effects, which do not, individually or in the aggregate, materially detract from
the value, or, as presently used or occupied, materially interfere with the
present occupancy or use of such asset; (iii) Liens in favor of the Company or
any of its Subsidiaries; (iv) Liens on property of a Person existing at the time
such Person is merged into or consolidated with, or acquired by, the Company or
any of its Subsidiaries, provided that such Liens were in existence prior to the
contemplation of such merger, consolidation or acquisition and do not extend to
any assets other than those of the Person merged into, consolidated with or
acquired by the Company or any such Subsidiary; (v) Liens on property existing
at the time of acquisition thereof by the Company or any of its Subsidiaries,
provided that such Liens were in existence prior to the contemplation of such
acquisition; (vi) Liens to secure the performance of statutory obligations,
surety or appeal bonds, performance bonds, reimbursement obligations in respect
of letters of credit and self-insurance programs or other obligations of a like
nature incurred in the ordinary course of business; (vii) Liens existing on the
date of this Agreement and set forth on SCHEDULE L hereto; (viii) (A) Liens for
taxes, assessments or Government charges or claims and (B) mechanics',
materialmen's and similar Liens, in each case that are not yet delinquent or
that are being contested in good faith by appropriate proceedings promptly
instituted and diligently concluded, provided that any reserve or other
appropriate provision as shall be required in conformity with GAAP shall have
been made therefor; and (ix) Liens in respect of extensions, renewals,
refundings or refinancings of any Indebtedness secured by the Liens referred to
in clauses (iii), (iv), (v) and (vii) above; provided that the Liens in
connection with such renewal, extensions, renewals, refundings or refinancings
shall be limited to all or part of the specific property which was subject to
the original Lien and shall not secure an aggregate principal amount of
indebtedness which is greater than the aggregate principal amount of
indebtedness previously secured (together with any interest capitalized in
connection with such refinancing).
"PERSON" means any natural person, sole proprietorship, partnership,
joint venture, trust, incorporated organization, limited liability company,
association, corporation, institution, public benefit corporation, entity or
government body (whether federal, state, county, city, municipal or otherwise,
including, without limitation, any instrumentality, division, agency, commission
or department thereof).
"PROPERTY" or "PROPERTY" means any assets or property of any kind or
nature whatsoever, real, personal, or mixed (including fixtures), whether
tangible or intangible.
"PURCHASERS" has the meaning ascribed thereto in the introduction
hereof, and shall include all successors and permitted assigns of the
Purchasers.
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"PURCHASERS' SPECIAL COUNSEL" means ▇▇▇▇▇▇▇, Procter & ▇▇▇▇ LLP, a
limited liability partnership including professional corporations, acting as
counsel to the Purchasers in connection with the transactions contemplated
hereunder.
"SECURITIES ACT" means the Securities Act of 1933, and the rules and
regulations of the Commission promulgated thereunder, as amended.
"SUBSIDIARY" means with respect to any Person, any corporation,
association or other business entity of which securities representing more than
fifty percent (50%) of the combined voting power of the total Voting Stock (or
in the case of an association or other business entity which is not a
corporation, more than fifty percent (50%) of the equity interest) is at the
time owned or controlled, directly or indirectly, by that Person or one or more
Subsidiaries of that Person or a combination thereof. When used herein without
reference to any Person, Subsidiary means a Subsidiary of the Company.
"TAX RETURN" means any return, declaration, report, claim for refund
or information, return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"TAX" and "TAXES" means all present and future taxes, surtaxes,
duties, levies, imposts, rates, fees, assessments, withholdings and other
charges of any nature (including income, corporate, capital (including large
corporations), net worth, sales, consumption, use, transfer, goods and services,
value-added, stamp, registration, franchise, withholding, payroll, employment,
excise, business, and property) imposed by any Government Entity, including
without limitation any ad valorem, property, production, excise, severance,
windfall profit and similar taxes, together with any fines, interest, penalties
or other additions on, to, in lieu, for non-collection of or in respect of those
taxes, surtaxes, duties, levies, imposts, rates, fees, assessments, withholdings
and other charges.
"TRANSACTION DOCUMENTS" means, collectively, this Agreement and the
Other Transaction Documents.
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In addition to the foregoing, the following terms are defined in the
following Sections of this Agreement:
Term Defined in Section
---- ------------------
"Charter Documents"....................................................4.1
"Closing"..............................................................3
"Closing Date".........................................................3
"Commission"...........................................................4.6(a)
"Commission Reports"...................................................4.6(b)
"Common Stock".........................................................1.1
"Conversion Shares"....................................................1.1
"Convertible Preferred Stock"..........................................1.1
"Convertible Preferred Stock"..........................Introductory Statement
"Employee Program".....................................................4.30(a)
"HSR Act"..............................................................3.12
"Indemnified Party" and "Indemnified Parties".........................10.1(a)
"Initial Closing"......................................................2.1
"Initial Closing Date".................................................2.1
"Initial Common Shares"................................................1.1
"Intellectual Property"................................................4.25
"License"..............................................................4.4
"Losses"..............................................................10.1(a)
"Multiemployer Plan"...................................................4.20(c)
"Proxy Statement"......................................................7.1(a)
"Purchasers"...........................................Introductory Statement
"Securities"...........................................................1.1
"Second Closing".......................................................2.2
"Second Closing Date"..................................................2.2
"Special Stockholders Meeting".........................................7.1(b)
"Stockholders Meeting Matter"..........................................7.1(b)
"Units"...............................................Introductory Statement
10. INDEMNIFICATION
10.1. INDEMNIFICATION; EXPENSES, ETC.
(a) The Company agrees to indemnify and hold harmless the Purchasers,
their respective Affiliates, and the employees, officers, partners, members,
directors, and agents of the Purchasers and their respective Affiliates
(individually, an "INDEMNIFIED PARTY" and, collectively the "INDEMNIFIED
PARTIES") from and against any and all losses, claims, damages, liabilities,
costs (including the costs of preparation and reasonable attorneys' fees) and
expenses (including expenses of investigation) (collectively, "LOSSES") incurred
or suffered by an Indemnified Party (i) in connection with or arising out of any
breach of any warranty, or
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41
the inaccuracy of any representation, as the case may be, made by the Company,
or the failure of the Company to fulfill any agreement or covenant contained in
this Agreement or (ii) in connection with any proceeding against the Company or
any Indemnified Party brought by any third party arising out of or in connection
with the Transaction Documents or the transactions contemplated hereby or
thereby, as the case may be, or any action taken in connection herewith or
therewith (or any other document or instrument executed herewith or pursuant
hereto or thereto), whether or not the transactions contemplated by this
Agreement are consummated or whether or not any Indemnified Party is a formal
party to any proceeding; PROVIDED, HOWEVER, that the Company shall not be liable
for any losses resulting from action on the part of any Indemnified Party which
is finally determined in such proceeding to be an act of gross negligence or
willful misconduct by such Indemnified Party. The Company agrees promptly to
reimburse any Indemnified Party for all such Losses as they are incurred or
suffered by such Indemnified Party which are demonstrated to the reasonable
satisfaction of the Company.
Except as otherwise provided herein, the Company agrees (for the benefit of
the Purchasers) to pay, and to hold each of the Purchasers harmless from and
against, all costs and expenses (including, without limitation, reasonable
attorneys' fees, expenses and disbursements), if any, incurred in connection
with the enforcement against the Company of this Agreement or any Other
Transaction Document to which the Company is a party or in connection herewith
or therewith in any action in which a Purchaser shall prevail or in any action
in which a Purchaser shall in good faith assert any provision of any of the
foregoing as a defense.
(b) If any Indemnified Party is entitled to indemnification
hereunder, such Indemnified Party shall give prompt notice to the Company of any
claim or of the commencement of any proceeding against the Company or any
Indemnified Party brought by any third party with respect to which such
Indemnified Party seeks indemnification pursuant hereto; PROVIDED, HOWEVER, that
the failure so to notify the Company shall not relieve the Company from any
obligation or liability except to the extent the Company is prejudiced by such
failure. The Company shall have the right, exercisable by giving written notice
to an Indemnified Party promptly after the receipt of written notice from such
Indemnified Party of such claim or proceeding, to assume, at the expense of the
Company, the defense of any such claim or proceeding with counsel reasonably
satisfactory to such Indemnified Party. The Indemnified Party or Parties will
not be subject to any liability for any settlement made without its or their
consent (but such consent will not be unreasonably withheld). The Company shall
not consent to entry of any judgment or enter into any settlement that does not
include as an unconditional term thereof the giving by claimant or plaintiff to
such Indemnified Party or Parties of a release, in form and substance
satisfactory to the Indemnified Party or Parties, from all liability in respect
of such claim, litigation or proceeding.
(c) In addition to any other obligations of the Company to indemnify
the Purchasers pursuant to any of the Transaction Documents, the Company will
pay, and will save the Purchasers and each other holder of any of the Securities
harmless from liability for
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the payment of, all expenses arising in connection with the transactions
contemplated by the Transaction Documents, including, without limitation: (a)
all document production and duplication charges and the reasonable fees, charges
and expenses of Purchaser's Special Counsel (whether arising before or after the
Closing Date), the transactions contemplated hereby and any subsequent proposed
modification of, or proposed consent under, this Agreement, whether or not such
proposed modification shall be effected or such proposed consent granted; (b)
the costs of obtaining a private placement CUSIP number from Standard & Poor's
Corporation for the Securities; (c) the costs and expenses, including attorneys'
fees, incurred by the Purchasers in enforcing any rights under this Agreement or
in responding to any subpoena or other legal process issued in connection with
this Agreement or the transactions contemplated hereby or thereby or by reason
of the Purchasers' having acquired any of the Securities, including, without
limitation, costs and expenses incurred by the Purchasers in any bankruptcy
case; (d) the cost of delivering to the Purchasers' principal office, insured to
its satisfaction, the Units delivered to the Purchasers hereunder and any
Securities delivered to the Purchasers upon any substitution of Securities
pursuant to this Agreement or any of the Transaction Documents and of the
Purchasers' delivering any Securities, insured to their satisfaction, upon any
such substitution; and (e) the reasonable out-of-pocket expenses incurred by the
Purchasers in connection with such transactions and any such amendments or
waivers.
10.2. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties contained in this Agreement or the Other Transaction Documents or
made in writing by or on behalf of the Company in connection with the
transactions contemplated by this Agreement or the Other Transaction Documents
shall survive for the duration of any statutes of limitation applicable thereto,
the execution and delivery of this Agreement, any investigation at any time made
by the Purchasers or on the Purchasers' behalf, the purchase of the Securities
by the Purchasers under this Agreement and any disposition of or payment on the
Securities.
11. MISCELLANEOUS
11.1. NOTICES, ETC. Any notice or communication under this Agreement shall
be duly given if in writing and delivered in person, mailed by registered or
certified mail, postage prepaid, return receipt requested or delivered by
telecopier or overnight air courier guaranteeing next day delivery to the
other's address:
If to the Company: Metretek Technologies, Inc.
World Trade Center
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: W. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Chairman
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With a copy to: Kegler, Brown, Hill & ▇▇▇▇▇▇ Co, L.P.A.
Capitol Square
Suite 1800
▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇, Esq.
If to the Purchasers: c/o DDJ Capital Management, LLC
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇-▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: General Counsel
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇▇▇, Procter & ▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, P.C.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
The Company or the Purchaser by notice to the other may designate
additional or different addresses for subsequent notices or communications.
All notices and communications shall be deemed to have been duly given: at
the time delivered by hand, if personally delivered; the date receipt is
acknowledged, if mailed by registered or certified mail; when answered back, if
telecopied; and the next Business Day after timely delivery to the courier, if
sent by overnight air courier guaranteeing next day delivery.
11.2. SEVERABILITY. Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof or affecting the validity or enforceability of such
provisions in any other jurisdiction.
11.3. AMENDMENT AND WAIVER. This Agreement may be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may be given, provided that the same are in writing and signed by the Company
and Purchasers (or their assignees) holding at least a majority of the Common
Stock issued or issuable pursuant to this Agreement (including upon exercise of
the Warrants and conversion of the Convertible Preferred Stock).
11.4. SUCCESSORS AND ASSIGNS. Whenever in this Agreement any of the parties
hereto are referred to, such reference shall be deemed to include the successors
and assigns of such
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party; and all covenants, promises and agreements by or on behalf of the
respective parties which are contained in this Agreement shall bind and inure to
the benefit of the successors and assigns of all other parties. The terms and
provisions of this Agreement and the Other Transaction Documents shall inure to
the benefit of and shall be binding upon any assignee or transferee of a
Purchaser, and in the event of such transfer or assignment, the rights and
privileges herein conferred upon a Purchaser shall automatically extend to and
be vested in, and become an obligation of, such transferee or assignee, all
subject to the terms and conditions hereof. In connection therewith, such
transferee or assignee may disclose all documents and information which such
transferee or assignee now or hereafter may have relating to the Transaction
Documents, the Company, any other Persons referred to herein or any of the
business of any of the foregoing entities, subject to full compliance with
Section 11.9 hereof.
11.5. DESCRIPTIVE HEADINGS. The headings in this Agreement are for purposes
of reference only and shall not limit or otherwise affect the meaning hereof.
11.6. GOVERNING LAW. THIS AGREEMENT AND THE SECURITIES SHALL BE CONSTRUED
AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED
BY, THE INTERNAL LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD TO PRINCIPLES OF
CONFLICT OF LAW.
11.7. SERVICE OF PROCESS. The Company (a) hereby irrevocably submits itself
to the jurisdiction of the state courts of the Commonwealth of Massachusetts and
to the jurisdiction of the United States District Court for the District of
Massachusetts for the purpose of any suit, action or other proceeding arising
out of or based upon this Agreement, the Other Transaction Documents or the
subject matter hereof or thereof brought by the Purchaser or its successors or
assigns and (b) hereby waives, and agrees not to assert, by way of motion, as a
defense, or otherwise, in any such suit, action or proceeding, any claim that it
is not subject personally to the jurisdiction of the above-named courts, that
its property is exempt or immune from attachment or execution, that the suit,
action or proceeding is brought in an inconvenient forum, that the venue of the
suit, action or proceeding is improper or that this Agreement or the subject
matter hereof may not be enforced in or by such court. The Company hereby
consents to service of process by registered mail at the address to which
notices are to be given. The Company agrees that its submission to jurisdiction
and its consent to service of process by mail is made for the express benefit of
the Purchasers. Final judgment against the Company in any such action, suit or
proceeding shall be conclusive and may be enforced in other jurisdictions (a) by
suit, action or proceeding on the judgment, a certified or true copy of which
shall be conclusive evidence of the fact and of the amount of any indebtedness
or liability of the Company therein described or (b) in any other manner
provided by or pursuant to the laws of such other jurisdiction; PROVIDED,
HOWEVER, that the Purchasers may at their option bring suit or institute other
judicial proceedings against the Company or any of the Company's assets in any
state or federal court of the United States or in any country or place where the
Company or such assets may be found.
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11.8. COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, and it shall not
be necessary in making proof of this Agreement to produce or account for more
than one such counterpart.
11.9. DISCLOSURE TO OTHER PERSONS. The Purchasers agree to keep
confidential any financial information delivered by the Company pursuant to this
Agreement (other than information that is publicly available) and such other
non-public proprietary information delivered by the Company that is clearly
designated in writing to be or otherwise known by the Purchasers to be
confidential; PROVIDED, HOWEVER, that nothing herein shall prevent the
Purchasers from disclosing such information: (a) to any prospective purchaser
who agrees in writing to be bound by this Section 11.9, (b) to any Affiliate,
director, officer, employee, agent and professional consultant of any
prospective purchasers, in its capacity as such or any actual purchaser,
participant, assignee, or transferee of the Purchasers' or prospective
purchaser's rights under any Securities that agrees in writing to be bound by
this Section 11.9, (c) upon order of any court or administrative agency having
jurisdiction over such party, (d) upon the request or demand of any regulatory
agency or authority having jurisdiction over such party, (e) which has been
publicly disclosed through no breach of the Purchasers, (f) which has been
obtained from any Person that is not a party hereto or an Affiliate of any such
party, (g) in connection with the exercise of any remedy hereunder, (h) to the
certified public accountants for the Purchasers or as required in summary
financial or descriptive business information disclosed by the Purchasers as
part of their regular reports to investors or partners, or (i) as otherwise
expressly contemplated by this Agreement. In order to permit the Company to
remove or limit any order, request or demand or to obtain confidential treatment
for any disclosure pursuant to (c) or (d) above, the Purchasers will use
reasonable efforts to inform the Company of any such request for disclosure
prior to disclosure. Nothing in this Section 11.9 shall be construed to create
or give rise to any fiduciary duty on the part of the Purchasers to the Company.
11.10. WAIVER OF JURY TRIAL. THE PARTIES HERETO HEREBY WAIVE TRIAL BY JURY
IN ANY LITIGATION, SUIT OR PROCEEDING, IN ANY COURT WITH RESPECT TO, IN
CONNECTION WITH, OR ARISING OUT OF THIS AGREEMENT, ANY OTHER TRANSACTION
DOCUMENTS, OR ANY INSTRUMENT OR DOCUMENT DELIVERED PURSUANT TO THIS AGREEMENT OR
ANY OTHER TRANSACTION DOCUMENTS, OR THE VALIDITY, PROTECTION, INTERPRETATION,
COLLECTION OR ENFORCEMENT THEREOF, PROVIDED, HOWEVER, THAT WITH RESPECT TO ANY
COMPULSORY COUNTERCLAIM (I.E., A CLAIM BY ONE PARTY AGAINST ANOTHER PARTY WHICH
IF NOT BROUGHT IN SUCH ACTION WOULD RESULT IN THE PARTY BRINGING SUCH CLAIM
BEING FOREVER BARRED FROM BRINGING SUCH CLAIM), THE PARTY BRING SUCH CLAIM SHALL
HAVE THE RIGHT TO RAISE SUCH COMPULSORY COUNTERCLAIM IN ANY SUCH LITIGATION.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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SECURITIES PURCHASE AGREEMENT
COMPANY SIGNATURE PAGE
IN WITNESS WHEREOF, the undersigned, being duly authorized, has executed
this Agreement on behalf of the Company as of the date first above written.
METRETEK TECHNOLOGIES, INC., a
Delaware corporation
By: /s/ A. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
----------------------------------
Name: A. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Executive Vice President
S-1
47
SECURITIES PURCHASE AGREEMENT
PURCHASER SIGNATURE PAGE
State Street Bank & Trust, solely
in its capacity as Trustee for
General Motors Employees Global
Group Pension Trust as directed by
DDJ Capital Management, LLC, and
not in its individual capacity
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Assistant Vice President
▇-▇
▇▇
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ Fund
By: DDJ Capital Management, LLC,
its attorney-in-fact
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Member
▇-▇
▇▇
▇ ▇▇▇-▇ Capital Partners, L.P.
By: GP III-A, LLC, its General
Partner
By: DDJ Capital management, LLC,
Manager
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Member
S-4
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AMENDMENT NO. 1 TO SECURITIES PURCHASE AGREEMENT
Reference is hereby made to the Securities Purchase Agreement dated
December 9, 1999 (the "Purchase Agreement") by and between Metretek
Technologies, Inc. (the "Company") and the undersigned Purchasers (capitalized
terms not defined herein shall have the meanings given them in the Purchase
Agreement).
For good and valuable consideration, the parties agree as follows:
The parties agree that notwithstanding anything to the contrary in the
Purchase Agreement, the Company shall have the right to sell and issue up to
5,550 Units at the Second Closing. It shall remain a condition to the obligation
of the Purchasers to purchase Units at the Second Closing that the Company shall
have sold at the Second Closing at least 4,550 Units. In all other respects the
Purchase Agreement shall remain in full force and effect without modification or
waiver.
[END OF TEXT]
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In witness whereof, the parties hereto have caused this Amendment No. 1
to be executed as of December 21, 1999.
Metretek Technologies, Inc., a
Delaware corporation
By: /s/ A. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
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Name: A. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Executive Vice President
State Street Bank & Trust, solely in its
Capacity as Trustee for General Motors Employee
Global Group Pension Trust as directed by DDJ
Capital Management, LLC, and not in its
individual capacity
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Assistant Vice President
DDJ Canadian High Yield Fund
By: DDJ Capital Management, LLC
its attorney-in-fact
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Member
B III-A Capital Partners, L.P.
By: GP III-A, LLC, its General Partner
By: DDJ Capital Management, LLC, Manager
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Member