WARRANT AGREEMENT
August 25, 1997
Xxx Xxxxxx & Company
Xxxxxxx Xxxxxx Xxxxx Inc.
c/o Xxx Xxxxxx & Company
00000 Xxxxxxxx Xxxx., Xxx. 0000
Xxx Xxxxxxx, XX 00000
Ladies and Gentlemen:
U S Liquids Inc., a Delaware corporation (the "Company"), hereby agrees, on
the terms and subject to the conditions of this Warrant Agreement (the
"Agreement"), to sell and deliver to Xxx Xxxxxx & Company ("VKCO") and Xxxxxxx
Xxxxxx Xxxxx Inc. ("SMM"), individually and not as Representatives of the
underwriters referred to in the "Underwriting Agreement" (defined below),
warrants to purchase a number of shares of the "Common Stock" (defined below)
equal to 7.5% (seven and one-half percent) of the aggregate number of shares
(not including "Option Shares" (defined in the Underwriting Agreement)) of the
Common Stock sold to the underwriters pursuant to the Underwriting Agreement.
VKCO and SMM agree, on the terms and subject to the conditions of this
Agreement, to purchase such warrants from the Company.
Each of the warrants will be exercisable by the "Holder" thereof (defined
below), as to all or any lesser number of shares of the Common Stock covered by
the Holder's warrants, at the "Exercise Price" per share (defined below), at any
time and from time to time beginning at 9:00 a.m., Los Angeles time, on the day
that begins one year after the Effective Date (defined below) and ending at 5:00
p.m., Los Angeles time, on the day that is five years after the Effective Date.
The warrants shall be evidenced by instruments in the form of Exhibit A hereto
(those instruments and all instruments issued after the date hereof in
replacement thereof are referred to below as the "Warrants").
The purchase price of the Warrants shall be $0.01 (one cent) for each share
of Common Stock purchasable as of the Closing Time on exercise of the Warrants.
The delivery of the Warrants and payment of the purchase price of the Warrants
are to be made on the "Closing Date" (defined in the Underwriting Agreement), at
the offices of VKCO at 00000 Xxxxxxxx Xxxxxxxxx, Xxxxx 0000, Xxx Xxxxxxx,
Xxxxxxxxxx, or such other time and place as may be agreed upon among the
Company, VKCO and SMM (the date(s) of such purchase of the Warrants is referred
to in this Agreement as the "Closing Time").
1. DEFINITIONS. As used in this Agreement, the following terms, unless the
context otherwise clearly requires, shall have for all purposes the following
respective
meanings, and capitalized terms used herein without definition shall have the
meanings ascribed to them in the Underwriting Agreement:
(a) The term "Common Stock" refers to the Common Stock, par value $.01 per
share, of the Company, and all other shares of any class or classes (however
designated) of the common equity of the Company, now or hereafter authorized,
the holders of which by operation of law shall have the right, without
limitation as to amount, either to all or to a part of the balance of current
dividends and liquidating dividends and distributions after the payment of
dividends and distributions on any shares entitled to preference and the holders
of which ordinarily, in the absence of contingency, shall be entitled to vote
for the election of the directors of the Company (even though the right so to
vote has been suspended by the occurrence of such a contingency), other than
those directors of the Company (constituting a portion of the Board of
Directors) who, pursuant to the Certificate of Incorporation or other charter
documents of the Company, are then to be elected by a designated class or series
of the capital stock of the Company.
(b) "Convertible Securities" shall mean any indebtedness, shares of stock
or other rights granted by the Company (other than Options) convertible into or
exchangeable for Common Stock.
(c) "Effective Date" shall mean the date on which the Securities and
Exchange Commission shall have declared the Registration Statement effective.
(d) The term "Exercise Price" refers to the per share purchase price of
the Warrant Shares subject to this Warrant Agreement. The Exercise Price shall
initially be $______ per share (120% of the initial per share price to the
public of the shares of Common Stock sold pursuant to the Underwriting
Agreement), subject to adjustment as provided in Section 6 below.
(e) The term "Holder", when used with respect to the Warrants or the
Warrant Shares, means the person registered on the books and records of the
Company as being the holder of record of the Warrants or the Warrant Shares, as
the case may be, and, so long as VKCO or SMM holds of record any Warrants or
Warrant Shares, it shall be included in the definition of "Holder," and any
action to be taken or approval to be given by the Holders shall, unless
otherwise provided in this Agreement, require the action by, or approval of, the
Holder or Holders of at least that number of Warrants and Warrant Shares which
in the aggregate shall constitute a majority of all Warrant Shares issued or
issuable under this Agreement.
(f) "Options" shall mean any warrants, options or, without limitation,
other rights granted by the Company to purchase Common Stock or Convertible
Securities.
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(g) The term "Other Securities" refers to any stock (other than Common
Stock) and other securities of the Company or any other person (corporate or
otherwise) which the Holders of the Warrants at any time shall be entitled to
receive, or shall have received, upon the exercise of the Warrants, in lieu of
or in addition to Common Stock, or which at any time shall be issuable or shall
have been issued in exchange for or in replacement of Common Stock or Other
Securities, whether pursuant to Section 6 below or otherwise.
(h) The term "Prospectus" refers to the prospectus which is part of the
Company's Registration Statement on Form S-1 in the form first filed with the
Securities and Exchange Commission (the "Commission") pursuant to Rule 424(b) of
the applicable rules and regulations (the "Rules and Regulations") of the
Commission under the Securities Act of 1933, as amended (the "Act").
(i) The term "Registration Statement" refers to the Company's Registration
Statement on Form S-1 (No. 333-30065), as amended, when it first became
effective under the Act.
(j) The term "Warrant Shares" refers to the shares of Common Stock (or
Other Securities) issued or issuable upon the exercise, in whole or in part, of
any of the Warrants.
2.1 REPRESENTATIONS AND WARRANTIES. The Company represents and warrants
to VKCO and SMM as follows:
(a) CORPORATE ACTION. The Company has all requisite power and authority,
and has taken all necessary action, to enter into and perform all of its
obligations under this Agreement, to issue and deliver the Warrants and to
authorize and reserve for issuance, and upon payment from time to time of the
Exercise Price in accordance with the terms of this Agreement, to issue and
deliver the Warrant Shares; and this Agreement has been duly authorized,
executed and delivered by the Company and constitutes the legal, valid and
binding agreement of the Company, enforceable against the Company in accordance
with its terms, except (i) as such enforceability may be subject to or limited
by bankruptcy, insolvency, reorganization, moratorium and other similar laws or
equitable principles now or hereafter in effect relating to or affecting
creditors' rights generally (collectively, the "Recognized Defenses") and (ii)
insofar as the indemnification and contribution provisions hereof may be limited
under federal and state securities laws and the public policies underlying such
laws.
(b) OUTSTANDING COMMON STOCK. The outstanding shares of Common Stock have
been duly and validly authorized and issued and are fully paid and
non-assessable and free of preemptive rights. The Warrant Shares (i) are duly
authorized by the Company's Certificate of Incorporation, (ii) have been duly
and validly authorized to be
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issued and adequately reserved by the Board of Directors of the Company, (iii)
will, when issued and delivered to the Holders pursuant to this Agreement, be
duly and validly issued, fully paid and non-assessable and free and clear of all
liens, charges, encumbrances or rights of others except for those which may be
created by the Holder, and (iv) and have been approved for listing, upon
official notice of issuance, on the American Stock Exchange. The holders of
outstanding shares of capital stock of the Company are not entitled to any
preemptive or similar rights to subscribe for or purchase Warrant Shares or
other shares of capital stock of the Company and, except as otherwise set forth
or incorporated by reference in the Prospectus, there are no outstanding rights,
warrants or options to acquire, or instruments convertible into or exchangeable
for, or agreements or understandings with respect to the sale or issuance of,
any shares of capital stock of the Company.
(c) NO VIOLATION. None of the execution or delivery of this Agreement,
the consummation of the transactions contemplated by this Agreement or
compliance with the terms and provisions of this Agreement will (i) conflict
with or constitute a breach of, or a default (or default with notice, the
passage of time or otherwise) under any bond, debenture, note or other evidence
of indebtedness or any indenture, mortgage, deed of trust or any other agreement
or instrument to which the Company or any of its subsidiaries is a party or by
which any of them is bound or to which any of their respective property or
assets is subject, (ii) result in the imposition of a lien on any properties of
the Company or any of its subsidiaries or an acceleration of indebtedness of the
Company or any of its subsidiaries or (iii) result in a violation of any law,
administrative regulation or order of any court or governmental agency or
authority applicable to the Company or any of its subsidiaries or to any of
their respective properties or assets. No consent, approval, authorization or
other order of any regulatory body, administrative agency or other governmental
body is required for the valid issuance and sale of the Warrant Shares to VKCO
and SMM or the other transactions contemplated by this Agreement, except for
registration under the federal securities laws and for permits and similar
authorizations required under state blue sky laws or similar laws.
(d) UNDERWRITING AGREEMENT. All representations and warranties made by
the Company in Section 1 of the Underwriting Agreement, dated August __, 1997,
by and among the Company and VKCO and SMM, as Representatives of the several
underwriters named therein (the "Underwriting Agreement"), are and will be at
and as of the Closing Time true and correct and are hereby incorporated by
reference into this Agreement as if such representations and warranties were set
forth in full herein.
2.2 REPRESENTATIONS AND WARRANTIES OF VKCO AND SMM. VKCO and SMM
severally represents and warrants to the Company that it has all requisite
corporate power and corporate authority, and has taken all necessary corporate
action, to enter into and perform all of its obligations under this Agreement
and that this Agreement has
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been duly authorized, executed and delivered by it and constitutes its legal,
valid and binding agreement, enforceable against it in accordance with its
terms, except (i) as such enforceability may be subject to or limited by the
Recognized Defenses and (ii) insofar as the indemnification and contribution
provisions hereof may be limited under federal and state securities laws and the
public policies underlying such laws.
3. COMPLIANCE WITH THE ACT.
(a) TRANSFERABILITY OF WARRANTS. Until August 24, 1998, each of VKCO and
SMM severally agrees that the Warrants may not be transferred, sold, assigned or
hypothecated except: (i) to its successors in a merger or consolidation or other
business combination; (ii) to purchasers of all or substantially all of its
assets; (iii) to any officers or partners of VKCO or SMM, as the case may be;
(iv) by operation of law; or (v) as permitted below in this Section 3. Each of
VKCO and SMM further severally agrees that the Company shall have no obligation
to effect any transfer of the Warrants during the time period referred to above,
unless the transferee, purchaser, assignee or pledgee, as the case may be, has
executed an agreement obligating the transferee to comply with all terms and
conditions of this Warrant Agreement applicable to the transferor.
(b) TRANSFERABILITY OF WARRANT SHARES.
(i) Except as otherwise provided in this Section 3(b), each
certificate for Warrant Shares initially issued upon the exercise of any
Warrants shall be stamped or otherwise imprinted with a legend in substantially
the following form:
"The Shares represented by this certificate are
subject to the conditions specified in a Warrant Agreement,
dated August __, 1997, among the Company, Xxx Xxxxxx &
Company, and Xxxxxxx Xxxxxx Xxxxx Inc. Except to the extent
permitted by the Warrant Agreement, no transfer, sale,
pledge, hypothecation, encumbrance or other disposition of
the shares represented by this certificate shall be valid or
effective until registered under the Securities Act of 1933,
as amended (or, if applicable, a successor law thereto) or
the Company has been presented with satisfactory evidence
that such shares will be transferred in a transaction exempt
from such registration and until any applicable conditions
contained in the Warrant Agreement have been fulfilled. A
copy of the Warrant Agreement is on file at the offices of
U S Liquids Inc. The holder of this certificate, by
acceptance of this certificate, agrees to be bound by the
provisions of the Warrant Agreement."
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(ii) Each certificate evidencing Warrant Shares issued upon any
transfer, sale, pledge, assignment, hypothecation or other disposition of any
Warrant Shares shall bear the restrictive legend set forth in Section 3(b)(i),
unless in the opinion of counsel to such Holder reasonably satisfactory to the
Company such legend is not required in order to ensure compliance with the Act.
(iii) Notwithstanding the foregoing provisions of this Section 3(b),
the restrictions imposed by subsections (i) and (ii) of this Section upon the
transferability of the Warrant Shares and the legend requirements of Section
3(b)(i) shall terminate as to any particular Warrant Shares (A) when and so long
as the transfer, sale, pledge, hypothecation, encumbrance or other disposition
thereof, shall have been registered under the Act or (B) when the Holder or
Holders of any Warrants or Warrant Shares has delivered to the Company the
written opinion of counsel to such Holder or Holders, which shall be reasonably
satisfactory to the Company, stating that such legend is not required in order
to ensure compliance with the Act. Whenever the restrictions imposed by this
Section shall terminate as to any Warrant Shares, as provided above, the Holder
thereof shall be entitled to receive from the Company, at the Company's expense,
a new certificate representing such Warrant Shares not bearing the restrictive
legend set forth in Section 3(b)(i).
(c) DEMAND REGISTRATION. At any time after the day that begins one year
after the Effective Date and on or before the end of the day that is five years
after the Effective Date, upon written, or telegraphic or telephonic notice
followed as soon as practicable by written confirmation thereof, from any Holder
or Holders (the "Requesting Holders") of that number of Warrants and/or Warrant
Shares which in the aggregate shall constitute a majority of all Warrant Shares
issued or issuable under this Agreement (excluding Warrant Shares which have
been previously sold, transferred or otherwise disposed of in a registered
public offering, pursuant to Rule 144 under the Act, as such rule may be amended
from time to time, or pursuant to Regulation S under the Act, as such Regulation
may be amended from time to time, or which in the opinion of both counsel to the
Company and counsel to the Requesting Holders may otherwise then be publicly
sold without registration under the Act), that such Holder or Holders request
the registration under the Act of any of the Warrant Shares, the Company shall
(i) immediately give notice to the other Holders and afford them the opportunity
to participate in the registration statement and (ii) as promptly as possible
after the receipt of such notice from the Requesting Holders, but in any event
within 60 days of the receipt of such notice, and solely at its cost and
expense, file a registration statement with respect to the offering and sale or
other disposition of the Warrant Shares with respect to which it shall have
received such notice. Such registration statement may, if the Company satisfies
the applicable requirements, be made on Form S-3. If a registration requested
pursuant to this Section 3(c) is an underwritten registration, the Company and
other holders of securities of the Company may include securities in such
registration without the written consent of the Holders of the Warrant Shares
for which
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registration has been requested pursuant to this Section 3(c) if, but only if,
the managing underwriters of such registration advise the participating Holders
of Warrant Shares in writing that in their opinion such inclusion will not
materially affect the successful marketing of the Warrant Shares. The Holders
shall not be deemed to have effected a demand registration pursuant to this
Section 3(c) unless and until the registration statement is declared effective.
The Company shall be obligated to file only one registration statement pursuant
to this Section 3(c) which becomes effective, whether or not the registration
statement at the time it becomes effective covers all or a portion of the
Warrant Shares.
(d) PIGGYBACK REGISTRATION. If, at any time during the period commencing
on the day that begins one year from the Effective Date and ending at the end of
the day that is six years after the Effective Date, the Company shall propose to
register any shares of Common Stock or Other Securities (but excluding any
shares or securities being registered pursuant to Form S-8 or Form S-4 or any
successor form to either of them), the Company shall (i) give each Holder
written notice, or telecopy and telephonic notice followed as soon as
practicable by written confirmation thereof, of such proposed registration at
least 20 business days prior to the filing of such registration statement and
(ii) upon written notice, or telecopy or telephonic notice followed as soon as
practicable by written confirmation thereof, given to the Company by any Holder
within 15 days after the giving of such written confirmation or written notice
by the Company, the Company shall include or cause to be included in any such
registration statement all or such portion of the Warrant Shares as such Holder
may request; provided, however, that the Company may at any time withdraw or
cease proceeding with any such registration if it shall at the same time
withdraw or cease proceeding with the registration of the Common Stock or Other
Securities originally proposed to be registered; and provided, further, that in
connection with any registered public offering involving an underwriting, the
managing underwriter may (if in its reasonable opinion marketing factors so
require) limit the number of securities (including any Warrants or Warrant
Shares) included in such offering (other than securities of the Company). In
the event of any such limitation, the total number of Warrant Shares to be
offered for the account of the Holders participating in the registration shall
be reduced pro rata in proportion to the respective number of shares requested
to be included therein to the extent necessary to reduce the total number of
shares proposed to be registered to the number of shares recommended by the
managing underwriter; provided, however, that if the amount or kind of
securities to be offered for the accounts of Holders shall be reduced in
accordance with this sentence, the Company shall not be permitted to include
securities of any persons (other than the Company) unless the Holders are
permitted to participate on a pro rata basis with other selling securityholders.
Notwithstanding the foregoing, the Company shall not be obligated to include
Warrant Shares in more than two registration statements pursuant to this
Agreement.
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(e) COMPANY'S OBLIGATIONS IN REGISTRATION. If any Holder timely elects to
participate in an offering by including Warrant Shares in a registration
statement pursuant to Section 3(c) or (d) above, the Company shall use its best
efforts to effect such registration to permit the sale of Warrant Shares in
accordance with the intended method or methods of disposition thereof and,
without limitation, pursuant thereto the Company shall:
(i) notify the Holders as to the filing of the registration
statement and of all amendments or supplements thereto filed prior to the
effective date thereof;
(ii) use its best efforts to cause any registration statement filed
under the Act pursuant to Section 3(c) or (d) above to become effective at the
earliest possible date after the filing thereof and to comply with all
applicable rules and regulations of the Commission in connection therewith;
provided, that before filing a registration statement or prospectus or any
amendments or supplements thereto, including documents which would be
incorporated or deemed to be incorporated by reference in the registration
statement after the initial filing of any registration statement, the Company
will furnish to the Holders, their respective counsel and the underwriters, if
any, to be engaged in connection with the offering and sale by the Company (for
purposes of this Section 3(e) and Section 3(f), the "Underwriters"), copies of
all such documents proposed to be filed, which documents will be subject to the
review of the Holders, their respective counsel and the Underwriters, and the
Company will not file any registration statement, or amendment thereto, or any
prospectus or any supplement thereto relating in whole or in part to the
Holders' Warrant Shares (including such documents incorporated or deemed to be
incorporated by reference) to which the Holders or the Underwriters, if any,
shall reasonably object;
(iii) notify the Holders immediately, and confirm the notice in
writing, (1) when the registration statement or any post-effective amendment
thereto becomes effective, (2) when a prospectus or prospectus supplement or
post-effective amendment has been filed, (3) of any request by the Commission
for amendments, supplements or additional information related to a registration
statement or prospectus or otherwise, (4) of the issuance by the Commission of
any stop order or of the initiation, or the threatening, of any proceedings for
that purpose known to the Company, (5) of the receipt by the Company of any
notification with respect to the suspension of qualification of the Warrant
Shares for sale in any jurisdiction or of the initiation, or the threatening, of
any proceedings for that purpose known to the Company, (6) of the receipt of any
comments from the Commission or any state regulatory authority, (7) of the
happening of any event which requires the making of any changes in a
registration statement or the related prospectus or any prospectus supplement so
that such documents will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading and (8) of the
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determination of the Company that a post-effective amendment to a registration
statement would be necessary or appropriate;
(iv) make every reasonable effort to obtain the withdrawal of any
order suspending the effectiveness of a registration statement, or the lifting
of any suspension of the qualification (or exemption from qualification) of any
of the Warrant Shares for sale in any jurisdiction, at the earliest possible
moment;
(v) if reasonably requested by the Underwriters, if any, or the
Holders, immediately incorporate in a prospectus supplement or post-effective
amendment such information as the Holders and the Underwriters, if any, agree
should be included therein relating to the sale and distribution of the Warrant
Shares, including, without limitation, information with respect to the number of
Warrant Shares being sold to such Underwriters, the purchase price being paid
therefor by such Underwriters and with respect to any other terms of the
underwritten offering of the Warrant Shares to be sold in such offering; make
all required filings of such prospectus supplement or post-effective amendment
as soon as notified of the matters to be incorporated in such prospectus
supplement or post-effective amendment; and supplement or amend any registration
statement if reasonably requested by the Holders or any Underwriter of Warrant
Shares covered by such Warrant Shares;
(vi) furnish to each of the Holders whose Warrant Shares have been
included therein, their respective counsel and each Underwriter, if any, without
charge, at least one manually executed copy of any registration statement
(including all amendments thereto) and any post-effective amendment thereto,
including financial statements and schedules, all documents incorporated therein
by reference and all exhibits (including those incorporated by reference);
(vii) during the time when a prospectus is required to be delivered
under the Act in connection with the distribution of the Warrant Shares, comply
so far as it is able with all requirements imposed upon it by the Act, as now
and hereafter amended, and by the Rules and Regulations promulgated by the
Commission thereunder, as from time to time in force, so far as necessary to
permit the continuance of sales of or dealings in the Warrant Shares. If at any
time when a prospectus relating to the Warrant Shares is required to be
delivered under the Act any event shall have occurred as a result of which, in
the opinion of counsel for the Company or counsel for the Holders, the
prospectus relating to the Warrant Shares as then amended or supplemented
includes an untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading, or if it is necessary at any time to amend such prospectus to
comply with the Act, the Company will use its best efforts promptly to prepare
and file with the Commission an appropriate amendment or supplement in form and
substance reasonably satisfactory to the Holders;
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(viii) make generally available to its security holders as soon as
practicable, but not later than 15 months following the effective date (and each
other deemed effective date) of such registration statement, an earnings
statement or statements of the Company and any subsidiaries it may then have
covering a period of at least 12 months beginning after the effective date of
the registration statement (but in no event commencing later than 90 days after
such date), which shall satisfy the provisions of Section 11(a) of the Act and
Rule 158 promulgated thereunder;
(ix) prepare and promptly file with the Commission such amendments
and post-effective amendments to each registration statement as may be necessary
to keep such registration statement continuously effective for a period of nine
months; cause the related prospectus to be supplemented by any required
prospectus supplement, and as so supplemented to be timely filed pursuant to
Rule 424 under the Act; and comply with the provisions of the Act with respect
to the disposition of all Warrant Shares covered by such registration statement
during the applicable period in accordance with the intended methods of
disposition as set forth in such registration statement or supplement to such
prospectus; and in these regards the Company shall not be deemed to have used
its best efforts to keep a registration statement effective during the
applicable period if it unreasonably takes any action that would result in any
Holder whose Warrant Shares have been included therein not being able to sell
such Warrant Shares at any time during such period or for more than 30 days,
whether or not consecutive, in such period;
(x) deliver to each of the Holders, their respective counsel and
the Underwriters, if any, without charge, as many copies of the prospectus or
prospectuses (including each preliminary prospectus) and any amendment or
supplement thereto as such persons may reasonably request; and the Company
consents to the use of any such prospectus or any amendment or supplement
thereto by the Holders and each of the Underwriters, if any, in connection with
the offering and sale of the Warrant Shares covered by such prospectus or any
amendment or supplement thereto;
(xi) prior to any public offering of Warrant Shares, register or
qualify or cooperate with the Holders, the Underwriters, if any, and their
respective counsel in connection with the registration or qualification (or
exemption from such registration or qualification) of such Warrant Shares for
offer and sale under the securities or blue sky laws of such jurisdictions as
the Holders or any Underwriter reasonably requests in writing; keep each such
registration or qualification (or exemption therefrom) effective during the
period the applicable registration statement is required to be kept effective
and do any and all other acts or things necessary or advisable to enable the
disposition in such jurisdictions of the Warrant Shares covered by the
applicable registration statement; provided, that the Company will not be
required to qualify generally to do business in any jurisdiction where it is not
then so qualified or to take any action which would
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subject it to general service of process in any such jurisdiction where it is
not then so subject;
(xii) cooperate with the Holders and the Underwriters, if any, to
facilitate the timely preparation and delivery of certificates representing
Warrant Shares to be sold, which certificates shall not bear any restrictive
legends; and enable such Warrant Shares to be in such denominations and
registered in such names as the Underwriters may request at least two business
days prior to any sale of Warrant Shares to the Underwriters;
(xiii) use its best efforts to cause the Warrant Shares covered by the
applicable registration statement to be registered with or approved by such
other governmental agencies or authorities as may be necessary to enable the
Holders and the Underwriters, if any, to consummate the disposition of such
Warrant Shares;
(xiv) enter into such agreements in form and substance reasonably
acceptable to the Company and its counsel (including an underwriting agreement)
and take all such other actions in connection therewith as may be necessary to
expedite or facilitate the disposition of such Warrant Shares and, in such
connection, whether or not an underwriting agreement is entered into and whether
or not the registration is an underwritten registration: (1) make such
representations and warranties to the Holders with respect to the business of
the Company and any subsidiaries it may then have, the registration statement,
the prospectus (and, if applicable, prospectus supplement) and documents, if
any, incorporated or deemed to be incorporated by reference in the registration
statement (and, if applicable, prospectus supplement), in each case in such
form, substance and scope as are reasonably requested by the Holders and confirm
the same if and when requested; (2) obtain opinions of counsel to the Company
and updates thereof addressed to the Holders with respect to the matters
referred to in the preceding clause (1) in such form, scope and substance as are
reasonably requested by the Holders; (3) in the case of an underwritten
offering, enter into an underwriting agreement in form, scope and substance as
is customary in underwritten offerings and obtain (a) opinions of counsel to the
Company and updates thereof (which counsel and opinions (in form, scope and
substance) shall be reasonably satisfactory to the Underwriters) addressed to
the Underwriters covering the matters customarily covered in opinions requested
by underwriters in underwritten offerings and such other matters as may be
reasonably requested by the Underwriters and (b) obtain opinions of counsel to
the Company and updates thereof (which counsel and opinions (in form, scope and
substance) shall be reasonably satisfactory to the Holders) addressed to the
Holders covering matters reasonably requested by the Holders (whether or not
such matters are different from, or in addition to, the matters described in
subclause (a) of this subsection (xiv)(3); (4) obtain "comfort" letters and
updates thereof from the independent certified public accountants of the Company
(and, if necessary, any other independent certified public accountants of any
subsidiary of the Company or of any business acquired by the
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Company for which financial statements and financial data is or is required to
be included in the registration statement), addressed to the Holders and each of
the Underwriters, if any, such letters to be in customary form and covering
matters of the type customarily covered in "comfort" letters to underwriters in
connection with underwritten offerings; (5) if an underwriting agreement is
entered into, the same shall set forth in full the indemnification and
contribution provisions and procedures of Section 3(f) hereof (or such other
indemnification and contribution provisions as shall be acceptable to the
Holders and the Underwriters of such underwritten offering) with respect to all
parties to be indemnified pursuant to said section; and (6) the Company shall
deliver such documents and certificates as may be requested by the Holders and
the Underwriters, if any, to evidence the continued validity of the
representations and warranties made pursuant to clause (1) above and to evidence
compliance with any customary conditions contained in the underwriting agreement
or other agreement entered into by the Company. Each of the above shall be done
at each closing under such underwriting or similar agreement or as and to the
extent required thereunder;
(xv) make available for inspection by a representative of the
Holders or any Underwriter participating in any disposition pursuant to such
registration statement and any attorney or accountant retained by the Holders or
such Underwriter, all financial and other records, pertinent corporate documents
and properties of the Company and its subsidiaries and cause the officers,
directors and employees of and independent accountants and attorneys for the
Company and its subsidiaries personally to meet with and to supply all
information reasonably requested by any such representative, Underwriter,
attorney or accountant in connection with any registration of Warrant Shares;
provided, that any records, information or documents that are designated by the
Company in writing as confidential shall be kept confidential by such persons
unless (i) disclosure of such records, information or documents is required by
court or administrative order, (ii) disclosure of such records, information or
document is, in the opinion of counsel to the Holders or to any Underwriter,
required pursuant to the requirements of the Act or (iii) such records,
information or documents are otherwise publicly available;
(xvi) pay all costs and expenses incident to the performance of the
Company's obligations under Sections 3(c) and (d) above and under this Section
3(e) (collectively "Registration Expenses"), including without limitation the
fees and disbursements of the Company's auditors, legal counsel, any special
legal counsel (including one legal counsel for the Holders) and legal counsel
(including, if applicable, legal counsel to the Underwriters) responsible for
qualifying the Warrant Shares under state securities or blue sky laws, all
filing fees and printing expenses, all expenses in connection with the transfer
and delivery of the Warrant Shares, all expenses in connection with the
qualification or registration of the Warrant Shares under applicable state
securities or blue sky laws of such states as are designated by the Holders (or
obtaining exemptions from such qualification or registration under state
securities or
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blue sky laws) and, if applicable, the fee of the National Association of
Securities Dealers, Inc. in connection with its review; provided, that in no
event shall Registration Expenses include any underwriting discounts,
commissions or fees or the fees of more than one counsel retained by the Holders
or the fees, except with respect to such state securities blue sky matters, of
legal counsel retained by the Underwriters in connection with the sale of
Warrant Shares pursuant to Section 3(c) or 3(d) above; and
(xvii) in connection with the filing of a registration statement
pursuant to Section 3(c) or (d) above, use its best efforts to obtain
indemnification of the Holders by the Underwriter to the same extent said
Underwriter provides indemnification to the Company.
As used in this Section 3(e), the term "Holders" refers only to those
Holders who have timely elected to sell Warrants Shares in an offering.
(f) INDEMNIFICATION.
(i) The Company shall indemnify and hold harmless VKCO, SMM, the
Holders and any underwriter (as defined in the Act) for VKCO, SMM and/or the
Holders, and each person, if any, who respectively controls (within the meaning
of Section 15 of the Act) VKCO, SMM, or any of the Holders or such underwriter
against any losses, claims, damages, liabilities (or actions in respect thereof)
and expenses whatsoever (including, but not limited to, any and all expense
whatsoever reasonably incurred in investigating, preparing or defending against
any litigation, commenced or threatened, or any claim whatsoever), joint or
several, to which VKCO, SMM, the Holders or such underwriter or such controlling
person becomes subject, under the Act, the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), or other federal or state statute, law or
regulation, at common law or otherwise, specifically including but not limited
to losses, claims, damages or liabilities (or actions in respect thereof) or
expenses related to negligence on the part of any such indemnified party,
insofar as any such loss, claim, damage, liability or expense (or actions in
respect thereof) (1) arises out of or is based upon any breach of any
representation, warranty or covenant of the Company in this Agreement or upon
any untrue statement or alleged untrue statement of any material fact contained
in (A) Section 2 of this Agreement, (B) any registration statement covering the
Warrant Shares as originally filed or in any amendment thereof, in the
prospectus contained therein or in an amendment or supplement thereto or (C) in
any application or other document, or any amendment or supplement thereto (in
this Section collectively called "application") executed by or on behalf of the
Company or based upon written information furnished by or on behalf of the
Company filed in any jurisdiction in order to qualify or register the Warrant
Shares under the securities or blue sky laws thereof (or to obtain exemptions
from such qualifications or registration requirements) or filed with the
Commission or any securities association or securities exchange, or (2) arises
out of or is based upon the omission or alleged omission to state
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in any of the documents described in subclauses (1)(A), (B) or (C) above, a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and agrees to reimburse each such indemnified person, as
incurred, for any legal or other expenses reasonably incurred by them in
connection with investigation or defending any such loss, claim, damage,
liability or action; provided, however, that the Company shall not be obligated
to indemnify in any such case to the extent that any such loss, claim, damage,
liability or expense arises out of or is based upon any untrue statement or
alleged untrue statement or omission or alleged omission made therein in
reliance upon, and in conformity with, written information furnished to the
Company by the indemnified person specifically for use therein. The Company
will not, without the prior written consent of VKCO and SMM, settle or
compromise or consent to the entry of any judgment in any pending or threatened
claim, action, suit or proceeding in respect of which indemnification may be
sought hereunder (whether or not VKCO or SMM is a party to such claim, action,
suit or proceeding), unless such settlement, compromise or consent includes,
without payment by VKCO or SMM, an unconditional release of all indemnified
parties from all liability arising out of such claim, action, suit or
proceeding, satisfactory in form and substance to VKCO and SMM.
(ii) Any Holder that includes all or a part of such Holder's Warrant
Shares in a registration statement pursuant to Sections 3(c) or (d) above agrees
to indemnify and hold harmless the Company and each of its directors and
officers who have signed any such registration statement, any other Holder of
Warrant Shares included in such registration statement and any underwriter (as
defined in the Act) for the Company or the Holders of Warrant Shares, and each
person, if any, who controls (within the meaning of Section 15 of the Act) the
Company or such underwriter to the same extent as the indemnity by the Company
in Section 3(f)(i), but only with respect to any untrue statement or alleged
untrue statement or omission or alleged omission, if any, made in such
registration statement, or any amendment or supplement thereto, or in any
application in reliance upon, and in conformity with, written information
furnished by the indemnifying Holder to the Company or such controlling person
expressly for use in the registration statement, or any amendment or supplement
thereto, or any such application, as the case may be. If any action shall be
brought in respect of which indemnity may be sought against any of the Holders,
such Holder(s) shall have the rights and duties given to the indemnifying party,
and the persons so indemnified shall have the rights and duties given to the
indemnified party, by the provisions of Section 3(f)(iii) below;
(iii) If any action is brought against a person in respect of which
indemnity may be sought hereunder against an indemnifying party, such person
shall promptly notify the indemnifying party in writing of the institution of
such action (but the failure to so notify shall not affect the indemnification
and other rights provided for herein except to the extent, if any, that the
indemnifying party is prejudiced by the failure to so give or timely give such
notice) and the indemnifying party shall assume the
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defense of the action, including the employment of counsel satisfactory to the
indemnified person and payment as incurred of all fees and expenses related
thereto. The indemnified person shall have the right to employ its own counsel
in any such case, but the fees and expenses of such counsel shall be at the
expense of such indemnified person unless (1) the employment of such counsel and
the payment of fees and expenses thereof shall have been authorized in writing
by the indemnifying party in connection with the defense of the action, (2) the
indemnifying party shall have failed promptly after notice by such indemnified
person to assume the defense of such action or proceeding and to employ counsel
satisfactory to the indemnified person in any such action or proceeding or (3)
the named parties to any such action or proceeding (including any impleaded
parties) include both such indemnified person and the indemnifying party, and
such indemnified person shall have been advised by counsel that there may be
legal defenses or rights available to such indemnified person which are
different from or additional to those available to the indemnifying party (in
which case, if such indemnified person notifies the indemnifying party in
writing that it elects to employ separate counsel at the expense of the
indemnifying party, the indemnifying party shall not have the right to assume
the defense of such action, it being understood, however, that the indemnifying
party shall not, in connection with any one such action or proceeding or
separate but substantially similar or related actions or proceedings in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the reasonable fees and expenses of more than one separate firm of
attorneys (together with appropriate local counsel) at any time for such
indemnified person. Anything in this paragraph to the contrary notwithstanding,
the indemnifying party shall not be liable for any settlement of any claim or
action effected without its written consent. The indemnity agreements contained
in this Section shall remain in full force and effect regardless of any
investigation made by or on behalf of any indemnified person and shall survive
any termination of this Agreement. The indemnifying party agrees promptly to
notify the indemnified party of the commencement of any litigation or
proceedings against the indemnifying party or any of its officers or directors
in connection with any registration statement referred to in Section 3(c) or (d)
above.
(iv) If the indemnification provided for in items (i), (ii) and
(iii) of this Section 3(f) from the indemnifying party is unavailable to an
indemnified party hereunder in respect of any losses, claims, damages,
liabilities or expenses referred to therein, then the indemnifying party, in
lieu of indemnifying such indemnified party, shall contribute to the amount paid
or payable by such indemnified party as a result of such losses, claims,
damages, liabilities or expenses in such proportion as is appropriate to reflect
not only the relative benefits received by the indemnified party and the
indemnifying party, but also the relative fault of the indemnifying party and
indemnified parties in connection with the actions which resulted in such
losses, claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative fault of the indemnifying party and
indemnified parties shall be determined by reference to, among other things,
whether any action in question, including any untrue or
-15-
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact, has been made by, or relates to information supplied by,
the indemnifying party or indemnified parties, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
action. The amount paid or payable by a party as a result of the losses,
claims, damages, liabilities and expenses referred to above shall be deemed to
include, subject to the limitations set forth in subparagraph (iii) of this
Section 3(f), any legal or other fees or expenses incurred by such party in
connection with any investigation or proceeding. The parties hereto agree that
it would not be just and equitable if contribution pursuant to this subparagraph
(iv) of this Section 3(f) were determined by pro rata allocation or by any other
method of allocation which does not take account of the equitable and other
considerations referred to in this paragraph. If the full amount of the
contribution specified in this subparagraph (iv) of this Section 3(f) is not
permitted by law, then such indemnified person shall be entitled to contribution
from the indemnifying party to the full extent permitted by law.
Notwithstanding the provisions of this Section 3(f)(iv), no Holder shall be
required to contribute any amount in excess of the amount by which the total
price at which the Warrant Shares of such Holder were sold to the public exceeds
the amount of any damages which such Holder has otherwise been required to pay
by reason of such untrue statement or omission. No party found guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any party who was not found guilty of
such fraudulent misrepresentation.
(v) Whenever any indemnifying or contributing party is requested by
the indemnified party or the party entitled to contribution to make a payment
pursuant to the forgoing provisions of this Section 3(f), such payment will be
made within five business days after the request and, if not so paid, the amount
due will thereafter bear interest at ten percent per annum, compounded annually
(but not in excess of the maximum amount permitted by law).
4. EXERCISE OF WARRANTS.
(a) EXERCISE OF WARRANTS. The Warrants may be exercised from time to time
and in full or in part by the Holder thereof by surrender of the Warrants, with
the Election to Purchase attached thereto duly executed by such Holder, to the
Company at its offices at 000 Xxxxx Xxx Xxxxxxx Xxxxxxx X., Xxx. 000, Xxxxxxx,
XX 00000-0000, or at such other office or agency as the Company may from time to
time designate in writing to each Holder, accompanied by payment, in cash or by
cashier's check payable to the order of the Company or as provided in Section
4(c), in the amount obtained by multiplying the number of Warrant Shares
designated by the Holder in the Election to Purchase by the Exercise Price per
share. Exercise of any Warrant shall constitute an acknowledgment by the
purchasing Holder that it will not dispose of the Warrant Shares acquired upon
such exercise except in compliance with Section 3(b) hereof and the Act. Upon
any partial exercise of the Warrants, the Company at its expense will forthwith
-16-
issue and deliver to the purchasing Holder a new Warrant, in the name of such
Holder and for the number of Warrant Shares equal to the number of shares called
for by the surrendered Warrant (after giving effect to any adjustment therein as
provided in Section 6 below) minus the number of such Warrant Shares (after
giving effect to such adjustment) purchased by the Holder pursuant to such
exercise.
(b) COMPANY TO REAFFIRM OBLIGATIONS. On the date of any exercise of any
Warrants (except that if, on that date, the stock transfer books of the Company
are closed, in which case on the next succeeding date on which such stock
transfer books are open) the Holder exercising the same shall be deemed to have
become, and thereafter shall be considered, a holder of record of the shares of
Common Stock purchased upon such exercise for all purposes. Holders of Warrants
shall have no rights of share ownership until they exercise their Warrants. The
Company will, at the time of any exercise of any Warrant, upon the request of
the Holder thereof, acknowledge in writing its continuing obligation to afford
to that Holder any rights (including without limitation any right to
registration of the Warrant Shares issued upon such exercise) to which the
Holder shall continue to be entitled after such exercise in accordance with the
provisions of this Agreement; provided, however, that if the Holder of a Warrant
shall fail to make any such request, such failure shall not affect the
continuing obligation of the Company to afford those rights to the Holder.
(c) NET EXERCISE OF WARRANTS. Notwithstanding anything to the contrary
contained in this Section 4, any Holder may elect to exercise any Warrant in
whole or in part by receiving shares of Common Stock equal to the value
(determined below) of the Warrant (or any part hereof), upon surrender of the
Warrant (or any part thereof) at the office or agency described in Section 4(a)
above, together with notice of such election, specifying the part of the Warrant
so surrendered, in which event the Company shall issue and deliver to the Holder
a number of shares of Common Stock determined using the following formula:
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X = (Y) (A-B)
---------
A
where
X = the number of shares of Common Stock to be issued to the
Holder;
Y = the number of shares of Common Stock purchasable under the
Warrant, or portion of the Warrant, surrendered;
A = the Current Market Price per share of the Common Stock,
determined pursuant to Section 6(d) of this Agreement; and
B = the then current Exercise Price per share of Common Stock.
5. DELIVERY OF STOCK CERTIFICATES, ETC., ON EXERCISE: NO FRACTIONAL
SHARES.
(a) STOCK CERTIFICATES, ETC. As soon as practicable after the exercise of
any Warrants and in any event within five business days thereafter, the Company,
at its expense (including the payment by it of any applicable issue taxes), will
cause to be issued in the name of and delivered to the purchasing Holder a
certificate or certificates for the number of fully paid and nonassessable
Warrant Shares to which such Holder shall be entitled upon such exercise,
together with any Other Securities and property (including cash, where
applicable) to which such Holder is entitled upon such exercise pursuant to
Section 6 of this Agreement or otherwise.
(b) NO FRACTIONAL SHARES. The Company will not issue a fractional share
of Common Stock upon exercise of a Warrant. Rather, if a fractional share would
otherwise be issued, the Company will instead issue a number of whole shares
equal to the next lowest number of whole shares and shall pay to the exercising
Holder an amount in cash equal to amount obtained by multiplying (x) the
fractional shares not issued by (y) the Current Market Price (as defined in
Section 6(d)) per share of the Common Stock on the last trading day prior to the
exercise date.
6. ANTI-DILUTION PROVISIONS. The Warrants are subject to the following
additional terms and conditions:
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(a) ADJUSTMENT FOR CHANGE IN CAPITAL STOCK. If, after the date of this
Agreement, the Company:
(1) pays a dividend or makes a distribution on its Common Stock in
shares of its capital stock (including Common Stock);
(2) subdivides its outstanding shares of Common Stock into a
greater number of shares;
(3) combines its outstanding shares of Common Stock into a smaller
number of shares; or
(4) issues by reclassification of its Common Stock any shares of
its capital stock or Other Securities (including without
limitation any such reclassification in connection with a
consolidation or merger in which the Company is the continuing
entity);
then the Exercise Price in effect at the time of the record date of such
dividend, distribution, subdivision, combination or reclassification shall be
adjusted so that the Exercise Price shall be equal to the price determined by
multiplying the Exercise Price in effect immediately prior to such event by a
fraction, the numerator of which shall be (x) the total number of outstanding
shares of Common Stock of the Company immediately prior to such event and the
denominator of which shall be (y) the total number of outstanding shares of
Common Stock of the Company immediately after such event and, as so adjusted or
readjusted, the Exercise Price shall remain in effect until a further adjustment
or readjustment is required by this Section 6(b).
Whenever the Exercise Price payable upon exercise of each Warrant is
adjusted pursuant to this Section 6(a), the Warrant Shares shall simultaneously
be adjusted by multiplying the number of Warrant Shares issuable upon exercise
of each Warrant immediately prior to such event by the Exercise Price in effect
on the date thereof and dividing the product so obtained by the Exercise Price
as adjusted.
These adjustments referred to in the preceding paragraph shall become
effective on (x) in the case of a dividend or distribution, the earlier of the
record date thereof or the distribution date thereof and (y) in the case of a
subdivision, combination or reclassification, the earlier of the record date
thereof or the effective date thereof.
(b) ADJUSTMENTS FOR OTHER DISTRIBUTIONS. If, after the date of this
Agreement, the holders of Common Stock generally shall have received or, on or
after the record date fixed for the determination of eligible stockholders,
shall have become entitled to receive (i) securities other than capital stock,
(ii) evidences of its indebtedness, (iii) assets (other than cash dividends or
distributions), (iv) rights, options, warrants or
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convertible or exchangeable securities (other than Convertible Securities or
Options) containing the right to subscribe for or purchase securities of the
Company, then and in each such case the Holder of each Warrant, upon the
exercise thereof as provided in Section 4 above, shall be entitled to receive,
in addition to the Warrant Shares otherwise receivable on such exercise, the
amount of securities, indebtedness, assets (other than cash in the case referred
to in subdivision (iii) of this Section 6(b)) and such rights, options, warrants
or convertible or exchangeable securities which such Holder would hold on the
date of such exercise if on the date of this Agreement such Holder had been the
holder of record of the number of shares of Common Stock called for by the
Warrants held by such Holder and had thereafter, during the period from the date
of this Agreement to and including the date of such exercise, retained such
shares, giving effect to all adjustments called for during such period by this
Section 6.
(c) ADJUSTMENTS FOR SALE OR OTHER ISSUANCE OF COMMON STOCK.
(i) If at any time prior to the exercise of the Warrants in full,
the Company shall issue or sell any Common Stock without consideration or for
consideration per share less than the Current Market Price per share (as defined
in Section 6(d)) on the date of such issuance or sale (which shall be deemed for
all purposes of this Section 6(c), in the case of Common Stock issued as all or
part of the consideration for an acquisition, to be the same as the date the
definitive agreement for such acquisition is entered into), the Exercise Price
shall be adjusted so that the Exercise Price shall equal the price determined by
multiplying the Exercise Price in effect immediately prior to the date of such
sale or issuance (which date in the event of distribution to shareholders shall
be deemed to be the record date set by the Company to determine shareholders
entitled to participate in such distribution) by a fraction, the numerator of
which shall be (i) the number of shares of Common Stock outstanding on the date
of such sale or issuance, plus (ii) the number of additional shares of Common
Stock which the aggregate consideration received by the Company upon such
issuance or sale would purchase at such Current Market Price per share of the
Common Stock and the denominator of which shall be (i) the number of shares of
Common Stock outstanding on the date of such issuance or sale, plus (ii) the
number of additional shares of Common Stock offered for purchase. Any
adjustments required by this Section 6(c) shall be made immediately after such
issuance or sale or record date, as the case may be. Such adjustments shall be
made successively whenever the event shall occur.
(ii) For the purpose of making any adjustment in the Exercise Price,
or number of shares of Common Stock purchasable upon exercise of the Warrants,
as provided above and in Section 6(c)(vii) below, the consideration received by
the Company for any issue or sale of securities shall:
(A) To the extent it consists of cash, be computed as the
gross amount of cash received by the Company before deduction of any
underwriting or
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similar commissions, compensation, discounts or concessions paid or allowed by
the Company in connection with such issue or sale and before deduction of any
other expenses payable in connection therewith.
(B) In case of the issuance (otherwise than upon conversion
or exchange of Convertible Securities) or sale of additional Common Stock,
Options or Convertible Securities for a consideration other than cash or a
consideration a part of which is other than cash, then for purposes of this
Section 6(c) the fair value of such consideration as determined by the Board of
Directors of the Company in the good faith exercise of its business judgment,
regardless of the accounting treatment thereof, shall be deemed to be the value
of the consideration other than cash received by the Company for such
securities.
(iii) OPTIONS AND CONVERTIBLE SECURITIES. If the Company in any
manner issues or grants any Options or any Convertible Securities -- but only to
the extent (i) such Options are exercisable at less than the Current Market
Price at the date of issue of such Options or (ii) the amount paid for such
Convertible Securities per share plus any additional amount payable per share
upon conversion thereof is less than the Current Market Price per share at the
date of issue of the Convertible Securities -- the total maximum number of
shares of Common Stock issuable upon the exercise of such Options or upon
conversion or exchange of the total maximum amount of such Convertible
Securities at the time such Convertible Securities first become convertible or
exchangeable shall (as of the date of issue or grant of such Options or, in the
case of the issue or sale of Convertible Securities other than where the same
are issuable upon the exercise of Options, as of the date of such issue or sale)
be deemed to be issued and to be outstanding for the purpose of this Section
6(c) and to have been issued for the sum of the amount (if any) paid for such
Options or Convertible Securities and the amount (if any) payable upon the
exercise of such Options or upon conversion or exchange of such Convertible
Securities at the time such Convertible Securities first become convertible or
exchangeable; provided that, subject to the other provisions of this Section
6(c), no further adjustment of the Exercise Price shall be made upon the actual
issuance of any such Common Stock or Convertible Securities or upon the
conversion or exchange of any such Convertible Securities.
(iv) CHANGE IN OPTION PRICE OR CONVERSION RATE. If the purchase
price provided for in any Option referred to in Section 6(c)(iii), or the rate
or price at which any Convertible Securities referred to in Section 6(c)(iii)
are convertible into or exchangeable for shares of Common Stock, shall change at
any time (other than under or by reason of conventional provisions designed to
protect against dilution), the Exercise Price in effect at the time of such
event shall forthwith be readjusted -- but only to the extent such change does
not result in either the per share Option exercise price or the amount per share
payable for such Convertible Securities plus the amount payable per share on the
conversion of such Convertible Securities to be greater than the lesser of
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the Current Market Price per share at the time such Options or Convertible
Securities were issued, as referred to in Section 6(c)(iii), or the Current
Market Price at the effective date of such change -- to the Exercise Price
that would have been in effect at such time had such Options or Convertible
Securities then still outstanding provided for such changed purchase price,
additional consideration or conversion rate, as the case may be, at the time
initially granted, issued or sold. If the purchase price provided for in any
such Option, or the additional consideration (if any) payable upon the
conversion or exchange of any such Convertible Securities, or the rate or
price at which any such Convertible Securities are convertible into or
exchangeable for shares of Common Stock shall be changed at any time under or
by reason of conventional provisions designed to protect against dilution,
then in case of, but only to the extent of, the delivery of shares of Common
Stock upon the exercise of any such Option or upon conversion or exchange of
any such Convertible Security, the Exercise Price then in effect hereunder
shall, upon issuance of such shares of Common Stock, be adjusted -- but only
to the extent such change does not result in either the per share Option
exercise price or the amount per share payable for such Convertible
Securities plus the amount payable per share on the conversion of such
Convertible Securities to be greater than the Current Market Price per share
at the time such Options or Convertible Securities were issued, as referred
to in Section 6(c)(iii) -- to such amount as would have obtained had such
Option or Convertible Security never been issued and had adjustments been
made based only upon the issuance of the shares of Common Stock for the
consideration actually received for such Option or Convertible Security and
such Common Stock.
(v) EXPIRATION OF OPTION OR CONVERSION RIGHTS. In the event of the
termination or expiration of any right to purchase Common Stock under any Option
or of any right to convert or exchange Convertible Securities, the Exercise
Price shall, upon such termination, be changed to the Exercise Price that would
have been in effect at the time of such expiration had such Option or
Convertible Security, to the extent outstanding immediately prior to such
expiration, never been issued. As used in this Section 6(c)(v), the word
"expiration" includes a termination, without payment of consideration by the
Company, of a right to purchase, convert or exchange.
(vi) EXCLUDED EVENTS. Notwithstanding anything in this Section 6 to
the contrary, the Exercise Price shall not be adjusted by virtue of (i) the
Warrants or the existence or exercise of any Options of the Company outstanding
on the date hereof and disclosed in the Prospectus or (ii) the issuance or sale
of, or the grant of Options to purchase, Common Stock to employees, directors,
or officers of the Company or its subsidiaries, or to other persons who do not
beneficially own more than one percent of the Common Stock (assuming for this
purpose that all Options then held by the person, including new options then
being granted, but no other Option or Convertible Securities, have then been
exercised in full) and are not the children of such a one percent or greater
shareholder or the spouses of such children, pursuant to stock option plans
currently existing or hereafter approved by the Board of Directors of the
Company,
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provided that the exercise price is no less than the lower of fair market value
at the time of grant (as determined in accordance with the applicable stock
option plan) or the Current Market Price at the time of grant (all as determined
in accordance with this Section 6(c)).
(vii) ADJUSTMENT IN NUMBER OF WARRANT SHARES. Whenever the Exercise
Price payable upon exercise of a Warrant is adjusted pursuant to this Section
6(c), the Warrant Shares issuable on exercise of the Warrant shall
simultaneously be adjusted by multiplying the number of the Warrant Shares
issuable upon exercise of the Warrant immediately prior to such event by the
Exercise Price in effect on the date thereof and dividing the product so
obtained by the Exercise Price, as adjusted.
(d) CURRENT MARKET PRICE. For the purpose of any computation under
Section 6, the "Current Market Price" per share of Common Stock at any date
shall be the average of the daily closing prices for the 15 consecutive trading
days commencing 20 trading days before such date. The closing price for each
day shall be the last reported sale price, regular way or, in case no such
reported sale takes place on such day, the average of the closing bid and asked
prices, regular way, for such day, in either case on the principal national
securities exchange on which the shares are listed or admitted to trading, or if
they are not listed or admitted to trading on any national securities exchange,
but are traded in the Nasdaq National Market ("NNM"), or if the shares are
otherwise securities for which transaction reports are required to be made on a
real-time basis pursuant to an effective transaction reporting plan under Rule
11a3-1 of the Rules of the Commission under the Exchange Act, the last reported
sales price or, if they are not listed or admitted to trade, and if last sale
data is not then available from NNM, but are traded in the over-the-counter
market, the average of the representative closing bid and asked quotations for
the Common Stock on NNM or any comparable system, or if the Common Stock is not
listed on NNM or a comparable system, the average of the closing bid and asked
prices as furnished by two members of the National Association of Securities
Dealers, Inc. selected from time to time by the independent members of the Board
of Directors of the Company for that purpose.
(e) MINIMUM ADJUSTMENT. No adjustment in the number of Warrant Shares
purchasable hereunder shall be required unless such adjustment would require an
increase or decrease of at least one percent in the number of Warrant Shares
purchasable upon the exercise of each Warrant. No adjustment in the Exercise
Price payable hereunder shall be required unless such adjustment would require
an increase or decrease in the Exercise Price of at least $.01 per share. Any
adjustments that by reason of this Section 6(e) are not required to be made
shall be carried forward and taken into account in any subsequent adjustment
and, notwithstanding the foregoing, all adjustments so carried forward shall be
made at the time of, and in connection with, each exercise of any of the
Warrants. All calculations shall be made to the nearest one-thousandth of a
share, or cent, as the case may be.
-23-
(f) OTHER SECURITIES. If at any time, as a result of an adjustment made
pursuant to this Section 6, the Holders shall become entitled to purchase any
shares of capital stock or Other Securities of the Company other than shares of
Common Stock, thereafter the number of such Other Securities so purchasable upon
exercise of each Warrant and the Exercise Price for such securities shall be
subject to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the Warrant Shares
contained in this Section 6; and the provisions of Sections 3, 4, 5 and 7,
inclusive, with respect to the Warrant Shares, shall apply on like terms to any
such Other Securities.
(g) CONSOLIDATIONS, MERGERS AND OTHER TRANSACTIONS. In case of any
consolidation of the Company with or merger of the Company into another
corporation or entity or in case of any sale or conveyance to another
corporation or entity of the property of the Company as an entirety or
substantially as an entirety, the Company or such successor or purchasing
corporation or entity, as the case may be, shall execute a binding agreement
agreeing that each Holder shall have the right thereafter upon payment of the
Exercise Price in effect immediately prior to such action to purchase upon
exercise of each Warrant the kind and amount of shares and other securities and
property which the Holder would have owned or have been entitled to receive
after the happening of such consolidation, merger, sale or conveyance had such
Warrant been exercised immediately prior to such action. The Company shall not
complete any such consolidation, merger, sale or conveyance unless the agreement
referred to in the foregoing sentence is executed and delivered, is binding and
the mailing thereof provided for in the next sentence is done at the time of
such completion. The Company shall mail by first class mail, postage prepaid,
to each Holder, notice of the execution of and a copy of such agreement. Such
agreement shall provide for adjustments, which shall be as nearly equivalent as
may be practicable to the adjustments provided for in this Section 6 and for
other protections and rights (including without limitation registration rights)
for the Holders as are as nearly equivalent as may be practical to those they
have under this Warrant Agreement. The provisions of this Section 6 shall
similarly apply to successive consolidations, mergers, sales or conveyances.
Each Holder of Warrants shall be under no duty or responsibility to determine
the correctness of any provisions contained in any such agreement relating
either to the kind or amount of shares of stock or Other Securities or property
receivable upon exercise of Warrants or with respect to the method employed and
provided therein for any adjustments.
(h) NOTICE OF ADJUSTMENTS. Whenever the Exercise Price or the kind or
amount of securities purchasable under the Warrants shall be adjusted pursuant
to any of the provisions of this Warrant Agreement, the Company shall forthwith
thereafter cause to be sent to VKCO and SMM and all other Holders a certificate
setting forth the adjustments in the Exercise Price and the number of shares
and, in addition, setting forth in detail the facts requiring such adjustments.
In addition, the Company at its expense shall within 90 days following the end
of each of its fiscal years during the term of this
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Agreement and promptly upon the reasonable request of the Holders of at least
ten percent of the Warrants in connection with the exercise from time to time of
all or any portion of any Warrants, cause independent public accountants of
nationally recognized standing selected by the Company to compute any such
adjustment in accordance with the terms of the Warrants and prepare and deliver
to the Holders a certificate setting forth such adjustment and showing in detail
the facts upon which the adjustment is based.
(i) NOTICE OF CERTAIN EVENTS. In the event of (i) any taking by the
Company of a record of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend or
other distribution, or any right to subscribe for, purchase or otherwise acquire
any shares of stock of any class or any Other Securities or property, or to
receive any other right or (ii) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the Company or any
transfer of all or substantially all of the assets of the Company to, or
consolidation or merger of the Company with or into, any other corporation or
other entity or (iii) any voluntary or involuntary dissolution or liquidation of
the Company, then and in each such event the Company will mail or cause to be
mailed to each Holder and, in addition, on the same date as the earliest such
mailing, telecopied and mailed to VKCO and SMM, a notice specifying the date
upon which any such record date is to be taken for the purpose of such dividend,
distribution or right, stating the amount and character of such dividend,
distribution or right and the date on which any such reorganization,
reclassification, recapitalization, transfer, consolidation, merger,
dissolution, liquidation or winding-up is to take place and the time, if any, as
of which the holders of record of Common Stock (or Other Securities) shall be
entitled to exchange their shares of Common Stock (or Other Securities) for
securities or other property deliverable upon such reorganization,
reclassification, recapitalization, transfer, consolidation, merger,
dissolution, liquidation or winding-up. Such notice shall be mailed at least 15
business days prior to the proposed record date therefor.
(j) OTHER EVENTS ALTERING EXERCISE PRICE. Upon the occurrence of any
event not specifically denominated in this Section 6 as altering the Exercise
Price and the amount of Common Stock purchasable upon the exercise of the
Warrants, if the reasonable exercise of the business judgment of the independent
members of the Board of Directors of the Company (or, if none, the Board of
Directors or the Company) requires, on equitable principles, the alteration of
the Exercise Price favorable to Holders and/or corresponding adjustment
favorable to Holders to the number of shares for which the Warrants are
exercisable, the Exercise Price and such number of shares shall be equitably
altered.
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7. FURTHER COVENANTS OF THE COMPANY. The Company hereby agrees as
follows:
(a) RESERVATION OF STOCK. The Company shall at all times reserve and keep
available, solely for issuance and delivery upon the exercise of the Warrants,
all Warrant Shares from time to time issuable upon the exercise of the Warrants.
(b) TITLE TO STOCK. All of the Warrant Shares delivered upon the exercise
of the Warrants and payment of the Exercise Price (including for the purpose by
a net exercise of Warrants as permitted by Section 4(c)) shall be validly
issued, fully paid and nonassessable; each Holder of a Warrant shall receive
good and marketable title to the Warrant Shares, free and clear of all voting
and other trust arrangements, liens, encumbrances, equities, preemptive rights
and, without limitation, claims of any type whatsoever; and the Company shall
have paid all taxes, if any, in respect of the issuance thereof.
(c) EXCHANGE OF WARRANTS. Subject to Section 3(a) hereof, upon surrender
for exchange of any Warrant to the Company, the Company at its expense will
promptly issue and deliver to the Holder thereof a new Warrant or Warrants of
like tenor, in the name of such Holder, calling in the aggregate for the number
of Warrant Shares called by the Warrants so surrendered.
(d) REPLACEMENT OF WARRANTS. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
Warrants and, in the case of any such loss, theft or destruction, upon delivery
of an indemnity agreement by the Warrant Holder reasonably satisfactory in form
and amount to the Company or, in the case of any such mutilation, upon surrender
by the Holder and cancellation of such Warrants, the Company at its expense will
execute and deliver, in lieu thereof, new Warrants of like tenor.
(e) REPORTING BY THE COMPANY. The Company agrees that, during the term of
the Warrants, it will use its best efforts to keep current in the filing of all
forms and other materials which it may be required to file with the appropriate
regulatory authority pursuant to the Exchange Act and all other forms and
reports required to be filed with any regulatory authority having jurisdiction
over the Company. The Company will take such further action as any Holder may
reasonably request, all to the extent required from time to time to enable such
Holder to sell Warrant Shares without registration under the Act within the
limitation of the exemptions provided by (a) Rule 144 under the Act, as such
Rule may be amended from time to time, or (b) any similar rule or regulation
hereafter adopted by the Commission.
8. OTHER HOLDERS. The Warrants are issued upon the following terms, to
all of which each Holder or owner thereof by the taking thereof consents and
agrees: (a)
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any person who shall become a transferee, within the limitations on transfer
imposed by Section 3(a) hereof, of a Warrant properly endorsed, shall take such
Warrant subject to the provisions of Sections 3(a) and 3(b) hereof and thereupon
shall be authorized to represent that such transferee is the absolute owner
thereof and, subject to the restrictions contained in this Warrant Agreement,
shall be empowered to transfer absolute title by endorsement and delivery
thereof to a permitted bona fide purchaser for value; and (b) each prior taker
or owner waives and renounces all equities or rights in such Warrant in favor of
each such permitted bona fide purchaser, and each such permitted bona fide
purchaser shall acquire absolute title thereto and to all rights presented
thereby; and (c) until such time as the respective Warrant is transferred on the
books of the Company, the Company may treat the registered Holder thereof as the
absolute owner thereof for all purposes, notwithstanding any notice to the
contrary.
9. GENERAL PROVISIONS. All notices, certificates and other
communications from or at the request of the Company to the Holder of any
Warrant or Warrant Share as such shall be mailed by first class, registered or
certified mail, postage prepaid to the Holder, with a copy to each of Xxx Xxxxxx
& Company, 00000 Xxxxxxxx Xxxxxxxxx, Xxxxx 0000, Xxx Xxxxxxx, Xxxxxxxxxx 00000,
Attn.: President, or to such other address for itself as VKCO shall have
furnished to the Company in writing. This Warrant Agreement and any of the
terms hereof may be changed, waived, discharged or terminated only by an
instrument in writing signed by the party against which enforcement of such
change, waiver, discharge or termination is sought. In addition and
notwithstanding the foregoing, the provisions of Section 3(c) and (d) and
Section 6 hereof cannot be changed, waived, discharged or terminated in a manner
adverse to the Holders without the written consent of one or more Holder or
Holders who collectively own, of record, that number of Warrants and/or Warrant
Shares which in the aggregate shall constitute two-thirds of all Warrant Shares
issued or issuable under this Agreement (excluding Warrant Shares which have
been previously sold, transferred or otherwise disposed of in a registered
public offering, pursuant to Rule 144 under the Act, as such Rule may be amended
from time to time, or pursuant to Regulation S, as such regulation may be
amended from time to time). The headings in this Warrant Agreement are for
purposes of reference only and shall not limit or otherwise affect any of the
terms hereof. This Warrant Agreement, together with the forms of instruments
annexed hereto, supersedes all prior negotiations and all prior written and
prior and contemporaneous oral agreements, representations, warranties and
inducements and constitutes the full and complete agreement of the parties
hereto with respect to the subject matter hereof.
-27-
10. GOVERNING LAW. THIS WARRANT AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS, AND NOT THE LAW PERTAINING TO
CHOICE OR CONFLICT OF LAWS, OF THE STATE OF CALIFORNIA.
U S LIQUIDS INC.
By:
----------------------------------------------
Name:
Title:
The foregoing Agreement is hereby confirmed and accepted as of the date first
above written.
XXX XXXXXX & COMPANY
By:
---------------------------
Name:
Title:
XXXXXXX XXXXXX XXXXX INC.
By:
---------------------------
Name:
Title:
-28-
Exhibit A
FORM OF WARRANT
THE WARRANTS REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE CONDITIONS
SPECIFIED IN A WARRANT AGREEMENT, DATED AUGUST_, 1997, AMONG THE COMPANY, XXX
XXXXXX & COMPANY AND XXXXXXX XXXXXX XXXXX INC. EXCEPT TO THE EXTENT PERMITTED
BY THE WARRANT AGREEMENT, NO TRANSFER, SALE, PLEDGE, HYPOTHECATION, ENCUMBRANCE
OR OTHER DISPOSITION OF THESE WARRANTS OR THE SHARES OF COMMON STOCK OF THE
COMPANY ACQUIRED ON EXERCISE OF THESE WARRANTS SHALL BE VALID OR EFFECTIVE UNTIL
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (OR, IF APPLICABLE, A
SUCCESSOR LAW THERETO) OR THE COMPANY HAS BEEN PRESENTED WITH SATISFACTORY
EVIDENCE THAT THESE WARRANTS OR SUCH SHARES OF COMMON STOCK WILL BE TRANSFERRED
IN A TRANSACTION EXEMPT FROM SUCH REGISTRATION AND UNTIL ANY APPLICABLE
CONDITIONS CONTAINED IN THE WARRANT AGREEMENT HAVE BEEN FULFILLED. A COPY OF
THE WARRANT AGREEMENT IS ON FILE AT THE OFFICES OF THE COMPANY. THE HOLDER OF
THIS CERTIFICATE, BY ACCEPTANCE OF THIS CERTIFICATE, AGREES TO BE BOUND BY THE
PROVISIONS OF THE WARRANT AGREEMENT.
No. ______________
Warrant to Purchase up to ______ Shares of Common Stock
EXERCISABLE COMMENCING 9:00 A.M., LOS ANGELES TIME, ON
AUGUST __, 1998 AND ENDING 5:00 P.M., LOS ANGELES TIME,
ON AUGUST __, 2002
U S LIQUIDS INC.
COMMON STOCK PURCHASE WARRANT
This certifies that ___________________________, or registered assigns, is
the holder (the "Holder") of this Warrant to purchase, subject to adjustment,
the number of fully paid and nonassessable shares set forth above (the "Warrant
Shares") of Common Stock, par value $.01 per share (the "Common Stock"), of
U S Liquids Inc., a Delaware corporation (the "Company"), at the per share
exercise price, subject to adjustment (the "Exercise Price"), set forth in the
Warrant Agreement, dated August __, 1997 (the "Warrant Agreement"), among the
Company, Xxx Xxxxxx & Company and Xxxxxxx Xxxxxx Xxxxx Inc., at any time prior
to the Expiration Date (defined below), by surrendering this Warrant, with the
form of subscription set forth hereon duly executed,
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to the Company at the Company's offices at 411 N. Xxx Houston Parkway East, Ste.
400, Houston, TX 77060-3545 or at such other office or agency as the Company may
designate and by paying in full, in the manner provided in Section 4 of the
Warrant Agreement, the Exercise Price for the Warrant Shares then purchased.
Payment of the Exercise Price may be made in cash or by cashier's check payable
to the order of the Company, or by surrender of a portion of this Warrant as
provided in Section 4(c) of the Warrant Agreement.
This Warrant may be exercised at any time and from time to time, in whole
or in part, at the option of the Holder, commencing 9:00 a.m., Los Angeles time,
on August __, 1998 until 5:00 p.m., Los Angeles time, on August __, 2002 (the
"Expiration Date"). Upon the purchase of fewer than all of the Warrant Shares,
there shall be issued to the Holder a new Warrant exercisable for the number of
Warrant Shares for which this Warrant has not been exercised or surrendered as
payment. Prior to the Expiration Date, the Holder shall be entitled to exchange
this Warrant, without charge, for another Warrant or Warrants exercisable for
the same aggregate number of Warrant Shares.
Prior to the Expiration Date, subject to any applicable laws restricting
transferability and to any restriction on transferability that may appear on
this Warrant or in the Warrant Agreement, the Holder shall be entitled to
transfer this Warrant upon delivery thereof, duly endorsed by the Holder or by
his, her or its duly authorized attorney or representative, or accompanied by
proper evidence of succession, assignment or authority to transfer, with the
form of assignment set forth hereon duly executed. Upon any such transfer, a
new Warrant or Warrants exercisable for the same aggregate number of Warrant
Shares will be issued by the Company, without charge, in accordance with
instructions in the form of assignment.
This Warrant is issued under and in accordance with the Warrant Agreement
and, except as otherwise provided in this Warrant, is subject to the terms and
provisions contained therein. Upon certain events provided for in the Warrant
Agreement, the Exercise Price and the number of shares of Common Stock issuable
upon the exercise of this Warrant are subject to adjustment. No fractional
shares will be issued upon the exercise of a Warrant. Instead, the Company
shall pay the value of such fractional share to the Holder in cash, as provided
in the Warrant Agreement.
THIS WARRANT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
INTERNAL LAWS AND NOT THE LAW PERTAINING TO CHOICE OR CONFLICT OF LAWS, OF THE
STATE OF CALIFORNIA.
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In witness whereof, the Company has caused this Warrant to be duly
executed.
U S LIQUIDS INC.
By:
----------------------------------------------
Name:
Title:
Attest:
-------------------------------------------------
Name:
Title:
-31-
ELECTION TO PURCHASE
The undersigned hereby irrevocably elects to exercise this Warrant to
purchase ______________ shares of Common Stock, acknowledges that it will not
dispose of such shares except in compliance with Section 3(b) of the Warrant
Agreement and the Securities Act of 1933, as amended, and requests that
Certificates for such shares be issued and delivered as follows:
Issue to: --------------------------------------------------------------
(Name)
--------------------------------------------------------------
(Address, including Zip Code)
--------------------------------------------------------------
(Social Security or Tax Identification Number)
Deliver to: --------------------------------------------------------------
(Name)
--------------------------------------------------------------
(Address, including Zip Code)
In full payment of the aggregate purchase price with respect to the number
of shares being purchased upon exercise of this Warrant, the undersigned hereby
(check applicable payment method): (i) / / tenders payment of $_________ by
cashier's check payable to the order of U S Liquids Inc. or (ii) / / hereby
surrenders to the Company, Warrants to purchase ________ shares of Common Stock.
If the Warrant is exercised hereby (and, if applicable, surrendered to purchase
shares of Common Stock) so as to purchase fewer than all the shares of Common
Stock that may be purchased pursuant to this Warrant, the undersigned requests
that a new Warrant representing the number of
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full shares for which the Warrant has not been exercised or surrendered be
issued and delivered as set forth below.
Name of Warrant holder or Assignee:
-------------------------------------------------
(Please Print)
Address:
-----------------------------------
-----------------------------------
Signature Dated:
(Signature must conform in all respects to name of holder as specified
on the face of the Warrant)
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ASSIGNMENT
For value received, the undersigned hereby sells, assigns and transfers
unto the Assignee named below all of the rights of the undersigned represented
by the within Warrant, with respect to the number of shares of Common Stock set
forth below:
Taxpayer
Number of Shares Identification
Name of Assignee Address of Common Stock Number
---------------- ------- ---------------- ------
and does hereby irrevocably authorize the Company to make such transfer on the
Warrant Register maintained at the principal office of the Company and, if
applicable, to issue to the undersigned a Warrant for the portion of such
Warrant not so sold, assigned or transferred.
Dated:
---------------------- -------------------------
Signature
(Signature must conform in all respects to name of holder as specified on the
face of the Warrant).
-34-
