WARRANT AGREEMENT
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% (seven percent) of the aggregate number of shares (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 Closing Time (defined below) and ending at 5:00
p.m., Los Angeles time, on the day that is five years after the Closing Time.
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) or,
to the extent applicable, on the date the Option Shares are purchased pursuant
to 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) 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.
(d) The term "Holder", when used with respect to the Warrants or the
Warrant Shares, means the person registered on the books and records of the
Company as being the holder of record of the Warrants or the Warrant Shares, as
the case may be, and, so long as 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.
(e) "Options" shall mean any warrants, options or, without limitation,
other rights granted by the Company to purchase Common Stock or Convertible
Securities.
(f) The term "Other Securities" refers to any stock (other than Common
Stock) and other securities of the Company or any other person (corporate or
otherwise) which the Holders of the Warrants at any time shall be entitled to
receive, or shall have received, upon the exercise of the Warrants, in lieu of
or in addition to Common Stock, or which at any time shall be issuable or shall
have been issued in exchange for or in replacement of Common Stock or Other
Securities, whether pursuant to Section 6 below or otherwise.
(g) The term "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
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(the "Rules and Regulations") of the Commission under the Securities Act of
1933, as amended (the "Act").
(h) The term "Registration Statement" refers to the Company's Registration
Statement on Form S-1 (No. 333-______), as amended, when it first became
effective under the Act.
(i) 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 issued and adequately reserved by the Board of
Directors of the Company, (iii) will, when issued and delivered to the Holders
pursuant to this Agreement, be duly and validly issued, fully paid and
non-assessable and free and clear of all liens, charges, encumbrances or rights
of others except for those which may be created by the Holder, and (iv) and have
been approved for inclusion, when issued, in the Nasdaq National Market ("NNM").
The holders of outstanding shares of capital stock of the Company are not
entitled to any preemptive or similar rights to subscribe for or purchase
Warrant Shares or other shares of capital stock of the Company and, except as
otherwise 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
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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 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. 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.
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(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."
(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).
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(c) DEMAND REGISTRATION. At any time after the day that begins one year
after the Closing Time and on or before the end of the day that is six years
after the Closing Time, upon written, or telegraphic or telephonic notice
followed as soon as practicable by written confirmation thereof, from any
Holder or Holders (the "Requesting Holders") of that number of Warrants
and/or Warrant Shares which in the aggregate shall constitute a majority of
all Warrant Shares issued or issuable under this Agreement (excluding Warrant
Shares which have been previously sold, transferred or otherwise disposed of
in a registered public offering, pursuant to Rule 144 under the Act, as such
rule may be amended from time to time, or pursuant to Regulation S under the
Act, as such Regulation may be amended from time to time, or which in the
opinion of both counsel to the Company and counsel to the Requesting Holders
may otherwise then be publicly sold without registration under the Act), that
such Holder or Holders request the registration under the Act of any of the
Warrant Shares, the Company shall (i) immediately give notice to the other
Holders and afford them the opportunity to participate in the registration
statement and (ii) as promptly as possible after the receipt of such notice
from the Requesting Holders, but in any event within 60 days of the receipt
of such notice, and solely at its cost and expense, file a registration
statement with respect to the offering and sale or other disposition of the
Warrant Shares with respect to which it shall have received such notice.
Such registration statement may, if the Company satisfies the applicable
requirements, be made on Form S-3. If a registration requested pursuant to
this Section 3(c) is an underwritten registration, the Company and other
holders of securities of the Company may include securities in such
registration without the written consent of the Holders of the Warrant Shares
for which registration has been requested pursuant to this Section 3(c) if,
but only if, the managing underwriters of such registration advise the
participating Holders of Warrant Shares in writing that in their opinion such
inclusion will not materially affect the successful marketing of the Warrant
Shares. The Holders shall not be deemed to have effected a demand
registration pursuant to this Section 3(c) unless and until the registration
statement is declared effective. The Company shall be obligated to file only
one registration statement pursuant to this Section 3(c) which becomes
effective, whether or not the registration statement at the time it becomes
effective covers all or a portion of the Warrant Shares.
(d) PIGGYBACK REGISTRATION. If, at any time during the period
commencing on the day that begins one year from the Closing Time and ending at
the end of the day that is six years after the Closing Time, the Company shall
propose to register any shares of Common Stock or Other Securities (but
excluding any shares or securities being registered pursuant to Form S-8 or
Form S-4 or any successor form to either of them), the Company shall (i) give
each Holder written notice, or telecopy and telephonic notice followed as soon
as practicable by written confirmation thereof, of such proposed registration
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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.
(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
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amendments or supplements thereto, including documents which would be
incorporated or deemed to be incorporated by reference in the registration
statement after the initial filing of any registration statement, the Company
will furnish to the Holders, their respective counsel and the underwriters, if
any, to be engaged in connection with the offering and sale by the Company (for
purposes of this Section 3(e) and Section 3(f), the "Underwriters"), copies of
all such documents proposed to be filed, which documents will be subject to the
review of the Holders, their respective counsel and the Underwriters, and the
Company will not file any registration statement, or amendment thereto, or any
prospectus or any supplement thereto relating in whole or in part to the
Holders' Warrant Shares (including such documents incorporated or deemed to be
incorporated by reference) to which the Holders or the Underwriters, if any,
shall reasonably object;
(iii) notify the Holders immediately, and confirm the notice in
writing, (1) when the registration statement or any post-effective amendment
thereto becomes effective, (2) when a prospectus or prospectus supplement or
post-effective amendment has been filed, (3) of any request by the Commission
for amendments, supplements or additional information related to a registration
statement or prospectus or otherwise, (4) of the issuance by the Commission of
any stop order or of the initiation, or the threatening, of any proceedings for
that purpose known to the Company, (5) of the receipt by the Company of any
notification with respect to the suspension of qualification of the Warrant
Shares for sale in any jurisdiction or of the initiation, or the threatening, of
any proceedings for that purpose known to the Company, (6) of the receipt of any
comments from the Commission or any state regulatory authority, (7) of the
happening of any event which requires the making of any changes in a
registration statement or the related prospectus or any prospectus supplement so
that such documents will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading and (8) of the determination of the
Company that a post-effective amendment to a registration statement would be
necessary or appropriate;
(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
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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;
(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
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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 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
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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 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
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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 blue sky laws) and,
if applicable, the
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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.
-13-
(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 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
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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 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
-15-
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 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
-16-
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 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
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the surrendered Warrant (after giving effect to any adjustment therein as
provided in Section 6 below) minus the number of such Warrant Shares (after
giving effect to such adjustment) purchased by the Holder pursuant to such
exercise.
(b) COMPANY TO REAFFIRM OBLIGATIONS. On the date of any exercise of any
Warrants (except that if, on that date, the stock transfer books of the Company
are closed, in which case on the next succeeding date on which such stock
transfer books are open) the Holder exercising the same shall be deemed to have
become, and thereafter shall be considered, a holder of record of the shares of
Common Stock purchased upon such exercise for all purposes. Holders of Warrants
shall have no rights of share ownership until they exercise their Warrants. The
Company will, at the time of any exercise of any Warrant, upon the request of
the Holder thereof, acknowledge in writing its continuing obligation to afford
to that Holder any rights (including without limitation any right to
registration of the Warrant Shares issued upon such exercise) to which the
Holder shall continue to be entitled after such exercise in accordance with the
provisions of this Agreement; provided, however, that if the Holder of a Warrant
shall fail to make any such request, such failure shall not affect the
continuing obligation of the Company to afford those rights to the Holder.
(c) NET EXERCISE OF WARRANTS. Notwithstanding anything to the contrary
contained in this Section 4, any Holder may elect to exercise any Warrant in
whole or in part by receiving shares of Common Stock equal to the value
(determined below) of the Warrant (or any part hereof), upon surrender of the
Warrant (or any part thereof) at the office or agency described in Section 4(a)
above, together with notice of such election, specifying the part of the Warrant
so surrendered, in which event the Company shall issue and deliver to the Holder
a number of shares of Common Stock determined using the following formula:
X = (Y) (A-B)
---------
A
where
X = the number of shares of Common Stock to be issued to the
Holder;
Y = the number of shares of Common Stock purchasable under the
Warrant, or portion of the Warrant, surrendered;
A = the Current Market Price per share of the Common Stock,
determined pursuant to Section 6(d) of this Agreement; and
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B = the then current Exercise Price per share of Common Stock.
5. DELIVERY OF STOCK CERTIFICATES, ETC., ON EXERCISE: NO FRACTIONAL
SHARES.
(a) STOCK CERTIFICATES, ETC. As soon as practicable after the exercise
of any Warrants and in any event within five business days thereafter, the
Company, at its expense (including the payment by it of any applicable issue
taxes), will cause to be issued in the name of and delivered to the purchasing
Holder a certificate or certificates for the number of fully paid and
nonassessable Warrant Shares to which such Holder shall be entitled upon such
exercise, together with any Other Securities and property (including cash, where
applicable) to which such Holder is entitled upon such exercise pursuant to
Section 6 of this Agreement or otherwise.
(b) NO FRACTIONAL SHARES. The Company will not issue a fractional share
of Common Stock upon exercise of a Warrant. Rather, if a fractional share would
otherwise be issued, the Company will instead issue a number of whole shares
equal to the next lowest number of whole shares and shall pay to the exercising
Holder an amount in cash equal to amount obtained by multiplying (x) the
fractional shares not issued by (y) the Current Market Price (as defined in
Section 6(d)) per share of the Common Stock on the last trading day prior to the
exercise date.
6. ANTI-DILUTION PROVISIONS. The Warrants are subject to the following
additional terms and conditions:
(a) ADJUSTMENT FOR CHANGE IN CAPITAL STOCK. If, after the date of this
Agreement, the Company:
(1) pays a dividend or makes a distribution on its Common Stock
in shares of its capital stock (including Common Stock);
(2) subdivides its outstanding shares of Common Stock into a
greater number of shares;
-19-
(3) combines its outstanding shares of Common Stock into smaller
number of shares; or
(4) issues by reclassification of its Common Stock any shares of
its capital stock or Other Securities (including without
limitation any such reclassification in connection with a
consolidation or merger in which the Company is the continuing
entity);
then the Exercise Price in effect at the time of the record date of such
dividend, distribution, subdivision, combination or reclassification shall be
adjusted so that the Exercise Price shall be equal to the price determined by
multiplying the Exercise Price in effect immediately prior to such event by a
fraction, the numerator of which shall be (x) the total number of outstanding
shares of Common Stock of the Company immediately prior to such event and the
denominator of which shall be (y) the total number of outstanding shares of
Common Stock of the Company immediately after such event and, as so adjusted or
readjusted, the Exercise Price shall remain in effect until a further
adjustment or readjustment is required by this Section 6(b).
Whenever the Exercise Price payable upon exercise of each Warrant is
adjusted pursuant to this Section 6(a), the Warrant Shares shall simultaneously
be adjusted by multiplying the number of Warrant Shares issuable upon exercise
of each Warrant immediately prior to such event by the Exercise Price in effect
on the date thereof and dividing the product so obtained by the Exercise Price
as adjusted.
These adjustments referred to in the preceding paragraph shall become
effective on (x) in the case of a dividend or distribution, the earlier of the
record date thereof or the distribution date thereof and (y) in the case of a
subdivision, combination or reclassification, the earlier of the record date
thereof or the effective date thereof.
(b) ADJUSTMENTS FOR OTHER DISTRIBUTIONS. If, after the date of this
Agreement, the holders of Common Stock generally shall have received or, on or
after the record date fixed for the determination of eligible stockholders,
shall have become entitled to receive (i) securities other than capital stock,
(ii) evidences of its indebtedness, (iii) assets (including cash dividends or
distributions), (iv) rights, options, warrants or convertible or exchangeable
securities (other than Convertible Securities or Options) containing the right
to subscribe for or purchase securities of the Company, then and in each such
case the Holder of each Warrant, upon the exercise thereof as provided in
Section 4 above, shall be entitled to receive, in addition to the Warrant Shares
-20-
otherwise receivable on such exercise, the amount of securities, indebtedness,
assets (including cash in the case referred to in subdivision (iii) of this
Section 6(b)) and such rights, options, warrants or convertible or exchangeable
securities which such Holder would hold on the date of such exercise if on the
date of this Agreement such Holder had been the holder of record of the number
of shares of Common Stock called for by the Warrants held by such Holder and had
thereafter, during the period from the date of this Agreement to and including
the date of such exercise, retained such shares, giving effect to all
adjustments called for during such period by this Section 6.
(c) ADJUSTMENTS FOR SALE OR OTHER ISSUANCE OF COMMON STOCK.
(i) If at any time prior to the exercise of the Warrants in full,
the Company shall issue or sell any Common Stock without consideration or for
consideration per share less than the Current Market Price per share (as
defined in Section 6(d)) on the date of such issuance or sale (which shall be
deemed for all purposes of this Section 6(c), in the case of Common Stock
issued as all or part of the consideration for an acquisition, to be the same
as the date the definitive agreement for such acquisition is entered into),
the Exercise Price shall be adjusted so that the Exercise Price shall equal
the price determined by multiplying the Exercise Price in effect immediately
prior to the date of such sale or issuance (which date in the event of
distribution to shareholders shall be deemed to be the record date set by the
Company to determine shareholders entitled to participate in such
distribution) by a fraction, the numerator of which shall be (i) the number
of shares of Common Stock outstanding on the date of such sale or issuance,
plus (ii) the number of additional shares of Common Stock which the aggregate
consideration received by the Company upon such issuance or sale would
purchase at such Current Market Price per share of the Common Stock and the
denominator of which shall be (i) the number of shares of Common Stock
outstanding on the date of such issuance or sale, plus (ii) the number of
additional shares of Common Stock offered for purchase. Any adjustments
required by this Section 6(c) shall be made immediately after such issuance
or sale or record date, as the case may be. Such adjustments shall be made
successively whenever the event shall occur.
(ii) For the purpose of making any adjustment in the Exercise
Price, or number of shares of Common Stock purchasable upon exercise of the
Warrants, as provided above and in Section 6(c)(vii) below, the consideration
received by the Company for any issue or sale of securities shall:
(A) To the extent it consists of cash, be computed as the
gross amount of cash received by the Company before deduction of any
underwriting or similar commissions, compensation, discounts or concessions paid
-21-
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
-22-
change does not result in either the per share Option exercise price or the
amount per share payable for such Convertible Securities plus the amount
payable per share on the conversion of such Convertible Securities to be
greater than the lesser of the Current Market Price per share at the time
such Options or Convertible Securities were issued, as referred to in Section
6(c)(iii), or the Current Market Price at the effective date of such change
-- to the Exercise Price that would have been in effect at such time had such
Options or Convertible Securities then still outstanding provided for such
changed purchase price, additional consideration or conversion rate, as the
case may be, at the time initially granted, issued or sold. If the purchase
price provided for in any such Option, or the additional consideration (if
any) payable upon the conversion or exchange of any such Convertible
Securities, or the rate or price at which any such Convertible Securities are
convertible into or exchangeable for shares of Common Stock shall be changed
at any time under or by reason of conventional provisions designed to protect
against dilution, then in case of, but only to the extent of, the delivery of
shares of Common Stock upon the exercise of any such Option or upon
conversion or exchange of any such Convertible Security, the Exercise Price
then in effect hereunder shall, upon issuance of such shares of Common Stock,
be adjusted -- but only to the extent such change does not result in either
the per share Option exercise price or the amount per share payable for such
Convertible Securities plus the amount payable per share on the conversion of
such Convertible Securities to be greater than the Current Market Price per
share at the time such Options or Convertible Securities were issued, as
referred to in Section 6(c)(iii) -- to such amount as would have obtained had
such Option or Convertible Security never been issued and had adjustments
been made based only upon the issuance of the shares 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
-23-
of, or the grant of Options to purchase, Common Stock to employees,
directors, or officers of the Company or its subsidiaries, or to other
persons who do not beneficially own more than one percent of the Common Stock
(assuming for this purpose that all Options then held by the person,
including new options then being granted, but no other Option or Convertible
Securities, have then been exercised in full) and are not the children of
such a one percent or greater shareholder or the spouses of such children,
pursuant to stock option plans currently existing or hereafter approved by
the Board of Directors of the Company, provided that the exercise price is no
less than the lower of fair market value at the time of grant (as determined
in accordance with the applicable stock option plan) or the Current Market
Price at the time of grant (all as determined in accordance with this Section
6(c)).
(vii) ADJUSTMENT IN NUMBER OF WARRANT SHARES. Whenever the
Exercise Price payable upon exercise of a Warrant is adjusted pursuant to
this Section 6(c), the Warrant Shares issuable on exercise of the Warrant
shall simultaneously be adjusted by multiplying the number of the Warrant
Shares issuable upon exercise of the Warrant immediately prior to such event
by the Exercise Price in effect on the date thereof and dividing the product
so obtained by the Exercise Price, as adjusted.
(d) CURRENT MARKET PRICE. For the purpose of any computation under
Section 6, the "Current Market Price" per share of Common Stock at any date
shall be the average of the daily closing prices for the 15 consecutive trading
days commencing 20 trading days before such date. The closing price for each
day shall be the last reported sale price, regular way or, in case no such
reported sale takes place on such day, the average of the closing bid and asked
prices, regular way, for such day, in either case on the principal national
securities exchange on which the shares are listed or admitted to trading, or if
they are not listed or admitted to trading on any national securities exchange,
but are traded in the NNM, or if the shares are otherwise securities for
which transaction reports are required to be made on a real-time basis pursuant
to an effective transaction reporting plan under Rule 11a3-1 of the Rules of the
Commission under the Exchange Act, the last reported sales price or, if they are
not listed or admitted to trade, and if last sale data is not then available
from NNM, but are traded in the over-the-counter market, the average of the
representative closing bid and asked quotations for the Common Stock on NNM
or any comparable system, or if the Common Stock is not listed on NNM or a
comparable system, the average of the closing bid and asked prices as furnished
by two members of the National Association of Securities Dealers, Inc. selected
from time to time by the independent members of the Board of Directors of the
Company for that purpose.
-24-
(e) MINIMUM ADJUSTMENT. No adjustment in the number of Warrant Shares
purchasable hereunder shall be required unless such adjustment would require an
increase or decrease of at least one percent in the number of Warrant Shares
purchasable upon the exercise of each Warrant. No adjustment in the Exercise
Price payable hereunder shall be required unless such adjustment would require
an increase or decrease in the Exercise Price of at least $.01 per share. Any
adjustments that by reason of this Section 6(e) are not required to be made
shall be carried forward and taken into account in any subsequent adjustment
and, notwithstanding the foregoing, all adjustments so carried forward shall be
made at the time of, and in connection with, each exercise of any of the
Warrants. All calculations shall be made to the nearest one-thousandth of a
share, or cent, as the case may be.
(f) OTHER SECURITIES. If at any time, as a result of an adjustment made
pursuant to this Section 6, the Holders shall become entitled to purchase any
shares of capital stock or Other Securities of the Company other than shares of
Common Stock, thereafter the number of such Other Securities so purchasable upon
exercise of each Warrant and the Exercise Price for such securities shall be
subject to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the Warrant Shares
contained in this Section 6; and the provisions of Sections 3, 4, 5 and 7,
inclusive, with respect to the Warrant Shares, shall apply on like terms to any
such Other Securities.
(g) CONSOLIDATIONS, MERGERS AND OTHER TRANSACTIONS. In case of any
consolidation of the Company with or merger of the Company into another
corporation or entity or in case of any sale or conveyance to another
corporation or entity of the property of the Company as an entirety or
substantially as an entirety, the Company or such successor or purchasing
corporation or entity, as the case may be, shall execute a binding agreement
agreeing that each Holder shall have the right thereafter upon payment of the
Exercise Price in effect immediately prior to such action to purchase upon
exercise of each Warrant the kind and amount of shares and other securities and
property which the Holder would have owned or have been entitled to receive
after the happening of such consolidation, merger, sale or conveyance had such
Warrant been exercised immediately prior to such action. The Company shall not
complete any such consolidation, merger, sale or conveyance unless the agreement
referred to in the 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)
-25-
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 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.
-26-
(j) OTHER EVENTS ALTERING EXERCISE PRICE. Upon the occurrence of any
event not specifically denominated in this Section 6 as altering the Exercise
Price and the amount of Common Stock purchasable upon the exercise of the
Warrants, if the reasonable exercise of the business judgment of the independent
members of the Board of Directors of the Company (or, if none, the Board of
Directors or the Company) requires, on equitable principles, the alteration of
the Exercise Price favorable to Holders and/or corresponding adjustment
favorable to Holders to the number of shares for which the Warrants are
exercisable, the Exercise Price and such number of shares shall be equitably
altered.
7. FURTHER COVENANTS OF THE COMPANY. The Company hereby agrees as
follows:
(a) RESERVATION OF STOCK. The Company shall at all times reserve and
keep available, solely for issuance and delivery upon the exercise of the
Warrants, all Warrant Shares from time to time issuable upon the exercise of the
Warrants.
(b) TITLE TO STOCK. All of the Warrant Shares delivered upon the
exercise of the Warrants and payment of the Exercise Price (including for the
purpose by a net exercise of Warrants as permitted by Section 4(c)) shall be
validly issued, fully paid and nonassessable; each Holder of a Warrant shall
receive good and marketable title to the Warrant Shares, free and clear of all
voting and other trust arrangements, liens, encumbrances, equities, preemptive
rights and, without limitation, claims of any type whatsoever; and the Company
shall have paid all taxes, if any, in respect of the issuance thereof.
(c) EXCHANGE OF WARRANTS. Subject to Section 3(a) hereof, upon
surrender for exchange of any Warrant to the Company, the Company at its expense
will promptly issue and deliver to the Holder thereof a new Warrant or Warrants
of like tenor, in the name of such Holder, calling in the aggregate for the
number of Warrant Shares called by the Warrants so surrendered.
(d) REPLACEMENT OF WARRANTS. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
Warrants and, in the case of any such loss, theft or destruction, upon delivery
of an indemnity agreement by the Warrant Holder reasonably satisfactory in form
and amount to the Company or, in the case of any such mutilation, upon surrender
by the Holder and cancellation of such Warrants, the Company at its expense will
execute and deliver, in lieu thereof, new Warrants of like tenor.
(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
-27-
appropriate regulatory authority pursuant to the Exchange Act and all other
forms and reports required to be filed with any regulatory authority having
jurisdiction over the Company. The Company will take such further action as any
Holder may reasonably request, all to the extent required from time to time to
enable such Holder to sell Warrant Shares without registration under the Act
within the limitation of the exemptions provided by (a) Rule 144 under the Act,
as such Rule may be amended from time to time, or (b) any similar rule or
regulation hereafter adopted by the Commission.
8. OTHER HOLDERS. The Warrants are issued upon the following terms,
to all of which each Holder or owner thereof by the taking thereof consents
and agrees: (a) any person who shall become a transferee, within the
limitations on transfer imposed by Section 3(a) hereof, of a Warrant properly
endorsed, shall take such Warrant subject to the provisions of Sections 3(a)
and 3(b) hereof and thereupon shall be authorized to represent that such
transferee is the absolute owner thereof and, subject to the restrictions
contained in this Warrant Agreement, shall be empowered to transfer absolute
title by endorsement and delivery thereof to a permitted bona fide purchaser
for value; and (b) each prior taker or owner waives and renounces all
equities or rights in such Warrant in favor of each such permitted bona fide
purchaser, and each such permitted bona fide purchaser shall acquire absolute
title thereto and to all rights presented thereby; and (c) until such time as
the respective Warrant is transferred on the books of the Company, the
Company may treat the registered Holder thereof as the absolute owner thereof
for all purposes, notwithstanding any notice to the contrary.
9. GENERAL PROVISIONS. All notices, certificates and other
communications from or at the request of the Company to the Holder of any
Warrant or Warrant Share as such shall be mailed by first class, registered or
certified mail, postage prepaid to the Holder, with a copy to 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
-28-
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.
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:
-29-
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, to
the Company at the Company's offices at
-30-
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.
In witness whereof, the Company has caused this Warrant to be duly
executed.
-31-
U S LIQUIDS INC.
By:
------------------------------------
Name:
Title:
Attest:
---------------------------------------
Name:
Title:
-32-
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
-33-
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)
-34-
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).
-35-
