STOCK SUBSCRIPTION AGREEMENT
THIS STOCK SUBSCRIPTION AGREEMENT (the "Agreement"), dated as of
October 28, 1997, is made and entered into by and between Onsite Energy
Corporation, a Delaware corporation (the "Company"), and Westar Capital, Inc., a
Kansas corporation (the "Investor").
W I T N E S S E T H
WHEREAS, the Company, in order to finance its operations, desires to
issue an aggregate of Two Million (2,000,000) shares of its Class A Common Stock
(the "Onsite Common Stock") and Two Hundred Thousand (200,000) shares of its
Series C Convertible Preferred Stock (the "Onsite Preferred Stock")
(collectively, the "Onsite Stock") to the Investor upon the terms and conditions
contained herein; and
WHEREAS, Investor desires to purchase Two Million (2,000,000) shares of
the Onsite Common Stock and Two Hundred Thousand (200,000) shares of the Onsite
Preferred Stock upon upon the terms and subject to the conditions set forth
herein.
NOW, THEREFORE, for and in consideration of the premises and of the
mutual representations, warranties, covenants, and agreements set forth in this
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
1. CONTEMPLATED TRANSACTIONS AND CLOSING.
1.1. Purchase of Common Stock. Upon the terms and subject to the
conditions set forth in this Agreement, on the Closing Date (as provided for in
Section 1.5), the Investor shall purchase from the Company, and the Company
shall issue and sell to the Investor, two million (2,000,000) shares of the
Company's Class A Common Stock, par value $0.001 per share (the "Onsite Common
Stock"). The purchase of the Onsite Common Stock shall occur at the Closing as
specified in Section 1.5.
1.2. Consideration for Onsite Common Stock. In consideration of the
purchase in Section 1.1, at the Closing specified in Section 1.5, the Investor
shall pay to the Company $0.50 per share in immediately available United States
Dollars, in an aggregate amount equal to One Million Dollars ($1,000,000) for
the Onsite Common Stock.
1.3. Purchase of Series C Convertible Preferred Stock. Upon the terms
and subject to the conditions set forth in this Agreement, on the Closing Date
(as provided for in Section 1.5), the Investor shall purchase from the Company,
and the Company shall issue and sell to the Investor, two hundred thousand
(200,000) shares of the Company's Series C Convertible
1055(3).nks 1 November 10, 1997
Preferred Stock, par value $0.001 per share (the "Onsite Preferred Stock"). The
purchase of the Onsite Preferred Stock shall occur at the Closing as specified
in Section 1.5.
1.4. Consideration for Onsite Preferred Stock. In consideration of the
purchase in Section 1.3, at the Closing specified in Section 1.5, the Investor
shall pay to the Company $5.00 per share in immediately available United States
Dollars, in an aggregate amount equal to One Million Dollars ($1,000,000) for
the Onsite Preferred Stock.
1.5. The Closing; Closing Date. The transactions contemplated hereby
shall be consummated at a closing (the "Closing"), which shall take place
simultaneously at 7:30 A.M. Pacific Standard Time on October 31, 1997, at the
offices of Xxxxxx Eng Xxxx & Xxxxxxxx, 000 Xxxxxxx Xxxx, Xxxxx 0000, Xxxxxxxxxx,
Xxxxxxxxxx 00000, the offices of the Company, 000 Xxxxxxx Xxxxxxx Xxxx, Xxxxx
000, Xxxxxxxx, Xxxxxxxxxx 00000, and the offices of the Investor, 000 Xxxxxx
Xxxxxx, Xxxxxx, Xxxxxx 00000. The Closing may also be held at such other time
and place as may be agreed upon by the parties. The date of the Closing is
referred to herein as the "Closing Date" and all transactions contemplated
herein to occur at the Closing shall be deemed to occur on the Closing Date and
all transfers and assignments of title shall vest and be deemed effective on the
Closing Date.
1.6. Deliveries at the Closing. Upon the terms and conditions set forth
in this Agreement, the Investor and the Company shall make the following
deliveries at the Closing on the Closing Date:
1.6.1. Deliveries by the Investor at the Closing. At or before
the Closing, the Investor shall deliver to the Company the following:
(a) Two Million Dollars ($2,000,000) in immediately
available United States funds in cash or by a wire
transfer in accordance with written instructions from
the Company; and
(b) a certificate, executed by the Investor and dated
as of the Closing Date, certifying that all of the
representations and warranties set forth in Section 3
hereof are true and correct in all material respects
and that all of the conditions set forth in Section 4
hereof have been satisfied.
1.6.2. Deliveries by the Company at the Closing. At the
Closing, the Company shall deliver to the Investor the following:
(a) Share certificates evidencing two million
(2,000,000) shares of the Onsite Common Stock issued
in the name of the Investor;
(b) share certificates evidencing two hundred
thousand (200,000) shares of the Onsite Preferred
Stock issued in the name of the Investor;
1055(3).nks 2 November 10, 1997
(c) a certificate, executed by the Company and dated
as of the Closing Date, certifying that all of the
representations and warranties set forth in Section 2
hereof are true and correct in all material respects
and that all of the conditions set forth in Section 5
hereof have been satisfied; and
(d) an opinion of counsel in the form attached
hereto as Exhibit A.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby represents and warrants to Investor that:
2.1. Due Organization: Good Standing and Corporate Power. The Company
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and has all requisite corporate power and
authority to carry on its business, and to own, lease and operate any properties
related to such business, except where the failure to have such power and
authority would not individually or in the aggregate have a Material Adverse
Effect (as defined below). The Company is duly qualified or licensed to do
business and in good standing in the State of California. For purposes of this
Agreement, a "Material Adverse Effect" shall mean an event that could reasonably
be expected to have a material adverse effect on the business of the Company, or
on its results of operations, properties or financial condition; for purposes of
this definition, any event which reasonably could be expected to result in a
potential liability to the Company either individually or in the aggregate in
excess of Fifty Thousand Dollars ($50,000) will be deemed to have a Material
Adverse Effect.
2.2. Capitalization. The Company's authorized capital stock consists of
(a) 24 million shares of Common Stock, $0.001 par value, of which 23,999,000 are
designated Class A Common Stock, of which 10,944,172 are currently outstanding
and held by approximately 217 shareholders of record, and (b) one million shares
of preferred stock, $0.001 par value, of which none are issued and currently
outstanding. Schedule 2.2 sets forth the names and share ownership of each
Company shareholder owning over 5% of Company's outstanding common stock as of
the date of this Agreement. Except as set forth in the notes to the financial
statements contained in the Company's Form 10-KSB for the year ended June 30,
1997, there are no equity securities or debt obligations of the Company
authorized, issued or outstanding and there are no outstanding options,
warrants, agreements, contracts, calls, commitments or demands of any character,
preemptive or otherwise, other than this Agreement, relating to any of the
Company's capital stock, there is no outstanding security of any kind
convertible into the Company's capital stock, and there is no outstanding
security with a claim on dividends prior or senior to the Onsite Preferred
Stock.
2.3. Authorization.
2.3.1. All corporate action on the part of the
Company, its officers, directors and stockholders necessary for the sale and
issuance of the Onsite Stock pursuant hereto and the
1055(3).nks 3 November 10, 1997
performance of the Company's obligations hereunder has been taken or will be
taken prior to the Closing.
2.3.2. The Onsite Stock, when issued, sold and delivered for
the consideration expressed and in compliance with the provisions of this
Agreement, will be duly authorized, validly issued, fully paid and
nonassessable, and will be free of restrictions on transfer other than
restrictions on transfer under this Agreement and under applicable federal and
state securities laws.
2.4. No Conflict; No Consents or Approvals Required. Neither the
execution and delivery of this Agreement by the Company, nor the consummation by
the Company of the transactions contemplated hereby will:
(a) conflict with or violate any provision of
the Certificate of Incorporation or Bylaws of the Company;
(b) conflict with or violate any law, rule,
regulation, ordinance, order, writ, injunction, judgment or decree applicable
to the Company or by which it or any of its properties or assets are bound or
affected; or
(c) conflict with or result in any breach of or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination or
cancellation of, or result in the creation of any lien, charge or encumbrance
on any of the respective properties or assets of it pursuant to any of
the terms, conditions or provisions of, any material note, bond, mortgage,
indenture, deed of trust, lease, permit, license, franchise, authorization,
agreement or other instrument or obligation to which the Company is a party or
by which the Company or any of its properties or assets is bound or affected.
2.5. Litigation. There is no action, suit, proceeding, or investigation
pending or, currently threatened against the Company which questions the
validity of this Agreement or the right of the Company to enter into it, or to
consummate the transactions contemplated hereby, or which might have, either
individually or in the aggregate, a Material Adverse Effect. The Company is not
a party or subject to the provisions of any order, writ, injunction, judgment or
decree of any court or government agency or instrumentality.
2.6. Title to Properties and Assets. Except for the security interests
granted to those persons specified in Schedule 2.6, and except for liens for
taxes not yet due and payable, the Company has good and marketable title to all
of its properties and assets used in and necessary to the conduct of its
business and has good and marketable title to its leasehold interests, in each
case subject to no material mortgage, pledge, lien or encumbrance.
2.7. Financial Statements. The Company has made available to the
Investor a true and complete copy of the audited financial statements of the
Company, for the fiscal years ended
1055(3).nks 4 November 10, 1997
June 30, 1995, June 30, 1996 and June 30, 1997, and related statements of income
and cash flows for the years ended June 30, 1995, June 30, 1996 and June 30,
1997 and changes in stockholders' equity for the period from July 1, 1994 to
June 30, 1997, as contained in the Company's Annual Reports on Form 10-KSB for
the fiscal years ended June 30, 1997 and June 30, 1996. All such financial
statements are complete and correct, are in accordance with the books and
records of the Company, present fairly the financial condition for the periods
indicated, and have been prepared in accordance with generally accepted
accounting principles ("GAAP") applied on a basis consistent with past practice.
2.8. No Material Adverse Change. Since the Company's report on Form
10-KSB for the fiscal year ended June 30, 1997, there has been no material
adverse change in the business, operations or financial condition or prospects
of the Company.
2.9. Reports and Other Information. All material reports, documents and
information required to be filed with the Securities and Exchange Commission
with respect to the Company have been filed. Since January 1, 1996, the Company
has made all filings required to be made in compliance with the Securities Act
of 1933, as amended (the "Securities Act"), and such did not omit to state any
material fact necessary in order to make the statements contained therein not
misleading in light of the circumstances under which such statements were made
as of their respective dates of filing.
2.10. Statements and Reports True and Correct. The financial statements
identified in Section 2.7 were and are true and correct as of the dates thereof.
The financial statements identified in Section 2.7 contain no untrue statements
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
3. REPRESENTATIONS AND WARRANTIES OF INVESTOR.
The Investor represents and warrants that:
3.1. Authorization. All action on the part of the Investor, including
any action by its officers, directors and stockholders, necessary for the
purchase of the Onsite Stock pursuant hereto and the performance of the
Investor's obligations hereunder has been taken or will be taken prior to the
Closing.
3.2. Purchase Entirely for Own Account. This Agreement is made with the
Investor in reliance upon such Investor's representation to the Company, which
by the Investor's execution of this Agreement the Investor hereby confirms, that
the Onsite Stock to be purchased by the Investor will be acquired for investment
purposes for the Investor's own account, not as a nominee or agent, and not with
a view to the resale or distribution of any part thereof in violation of
applicable federal and state securities laws. By executing this Agreement, the
Investor further represents that the Investor does not have any contract,
undertaking, agreement or arrangement with any person to sell, transfer or grant
participations to such person or to any
1055(3).nks 5 November 10, 1997
third person, with respect to any of the Onsite Stock. A transfer of the Onsite
Stock to an Affiliate by Investor shall not be deemed to be a violation of this
provision. As used herein, the term "Affiliate" shall mean, with respect to any
person, any other person that directly or indirectly through one or more
intermediaries controls or is controlled by or is under common control with such
person.
3.3. Reliance Upon Investor's Representations. Investor understands
that the Onsite Stock has not been registered under the Securities Act on the
grounds that the transactions contemplated by this Agreement and the issuance of
the Securities hereunder is exempt from registration under the Securities Act
pursuant to Section 4(2) thereof, and Regulation D promulgated thereunder, and
that the Company's reliance on such exemption is predicated on the Investor's
representations set forth herein.
3.4. Receipt of Information. The Investor has received information and
had the opportunity to ask questions of the Company's management and has
considered such information in evaluating the terms and conditions of the
offering of the Onsite Stock, and the business, properties, prospects and
financial condition of the Company, and in deciding to accept the Onsite Stock.
The foregoing, however, does not limit or modify the representations and
warranties of the Company in Section 2 hereof or the right of the Investor to
rely thereon.
3.5. Investment Experience. The Investor represents that it is
experienced in evaluating and investing in securities of companies and
acknowledges that it is able to fend for itself, can bear the economic risk of
the investment, and has such knowledge and experience in financial and business
matters that it is capable of evaluating the merits and risks of the investment
in the Onsite Stock. The Investor further represents that it has not been
organized solely for the purpose of acquiring the Onsite Stock.
3.6. Accredited Investor. The Investor represents that it is an
"accredited investor" as that term is defined in Regulation D,
17 C.F.R. 230.501(a).
3.7. Restricted Securities. The Investor understands that the Onsite
Stock issued, or to be issued, hereunder may not be sold, transferred, or
otherwise disposed of without registration under the Securities Act or an
exemption therefrom, and that in the absence of an effective registration
statement covering the Onsite Stock, or an available exemption from registration
under the Securities Act, the Onsite Stock must be held indefinitely. In
particular, the Investor is aware that the Onsite Stock may not be sold pursuant
to Rule 144, 17 C.F.R.
230.144, unless all of the conditions of that Rule are met.
4. CONDITIONS OF INVESTOR'S OBLIGATIONS AT CLOSING.
The obligations of the Investor under this Agreement are subject to the
fulfillment on or before the Closing Date of each of the following conditions,
the waiver of which shall not be effective against the Investor unless consented
to by Investor in writing:
1055(3).nks 6 November 10, 1997
4.1. Representations and Warranties. The representations and warranties
of the Company contained in Section 2 hereof shall be true and correct in all
material respects on and as of the Closing Date.
4.2. Performance. The Company shall have performed and complied with
all agreements, obligations, and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Closing Date.
4.3. Qualifications. All authorizations, approvals, or permits, if any,
of any governmental authority or regulatory body that are required in connection
with the lawful issuance and sale of the Onsite Stock pursuant to this Agreement
shall be duly obtained and effective as of the Closing Date.
4.4. Proceedings and Documents. All corporate and other proceedings in
connection with the transactions contemplated to occur on the Closing Date and
all documents incident thereto shall be reasonably satisfactory in form and
substance to the Investor, or Investor's counsel, as the case may be.
4.5. Execution of Related Agreements. The following agreements between
the parties shall have been executed and delivered between the parties to such
agreements:
(a) the Stockholders Agreement attached hereto as
Exhibit B between the Investor and Onsite Stockholders (as
defined in such agreement). All such action shall have been
taken as may be necessary to elect Investor's designee to the
Board of Directors of the Company, effective upon Closing, as
provided in the Stockholders Agreement;
(b) the Registration Rights Agreement attached hereto
as Exhibit C between Company and Investor; and
(c) the Plan and Agreement of Reorganization between
the Company, Westar Business Services, Inc., Westar Energy,
Inc., and Westar Capital, Inc.
5. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING.
The obligations of the Company to the Investor under this Agreement are
subject to the fulfillment on or before the Closing Date of each of the
following conditions by the Investor, the waiver of which shall not be effective
unless consented thereto in writing:
5.1. Representations and Warranties. The representations and warranties
of the Investor contained in Section 3 hereof shall be true and correct in all
material respects on and as of the Closing Date.
1055(3).nks 7 November 10, 1997
5.2. Qualifications. All authorizations, approvals, or permits, if any,
of any governmental authority or regulatory body that are required in connection
with the lawful issuance and sale of the Onsite Stock pursuant to this Agreement
shall be duly obtained and effective as of the Closing Date.
5.3. Performance. The Investor shall have performed and complied with
all agreements, obligations, and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Closing Date.
6. RESTRICTIONS ON TRANSFERABILITY OF SECURITIES; COMPLIANCE WITH
SECURITIES ACT.
6.1. Restrictions on Transferability. The Onsite Stock shall not be
transferable, except upon the conditions specified in this Section. The Investor
will cause any successor or proposed transferee of the Onsite Stock to agree to
take and hold the Onsite Stock subject to the conditions specified in this
Section. The Investor acknowledges the restrictions upon its right to transfer
the Onsite Stock set forth in this Section.
6.2. Restrictive Legend. Each certificate representing the Onsite Stock
shall (unless otherwise permitted or unless the securities evidenced by such
certificate shall have been registered under the Securities Act) be stamped or
otherwise imprinted with a legend in the following form (in addition to any
legend required under applicable state securities laws):
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR OFFERED FOR
SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE
SECURITIES UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAW OR AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION
IS NOT REQUIRED."
Upon request of the holder of such a certificate, the Company shall
remove the foregoing legend from the certificate or issue to such holder a new
certificate therefor free of any transfer legend, if, with such request, the
Company shall have received the opinion referred to in Section 6.3.1.
6.3. Notice of Proposed Transfer.
6.3.1. Notice. Prior to any proposed transfer of any of the
Onsite Stock, the Investor shall give written notice to the Company of its
intention to effect such transfer. Each such notice shall describe the manner
and circumstances of the proposed transfer in sufficient detail, and shall be
accompanied by a written opinion of legal counsel reasonably satisfactory to the
Company, addressed to the Company and reasonably satisfactory in form and
substance to the Company's counsel, to the effect that the proposed transfer of
the Onsite Stock may be
1055(3).nks 8 November 10, 1997
effected without registration under the Securities Act, whereupon the Investor
shall be entitled to transfer the Onsite Stock, subject to the restrictions
contained in this Agreement, in accordance with the terms of the notice
delivered by the Investor to the Company.
6.3.2. Certificate for Transferred Onsite Stock. Each
certificate evidencing the Onsite Stock transferred as above provided shall bear
the appropriate restrictive legend set forth in Section 6.2 above, except that
such certificate shall not bear such restrictive legend if the opinion of
counsel referred to above is to the further effect that such legend is not
required in order to establish compliance with any provisions of the Securities
Act. Each transferee of the Onsite Stock shall agree with respect to those
securities to be bound by the terms of this subsection.
6.4. Standstill Agreement.
6.4.1. Investor agrees that for a period of five (5) years
from the date of this Agreement (the "Standstill Period"), except as otherwise
permitted or contemplated by this Agreement, Investor will not, directly or
indirectly, nor will it permit any of its affiliates, as that term is defined in
Section 3.2 hereof, to, from or after the date such person becomes an affiliate,
without the prior approval of a majority vote of the directors of the Company's
board of directors (a "Requisite Board Vote") who are not the designated
directors of the Investor or otherwise affiliates of Investor (the
"Disinterested Directors") do any of the following:
(a) acquire, or offer to acquire, whether by
purchase, gift or by joining a partnership or other group (as
defined in Section 13(d)(3) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")), any shares of the
Company's common or preferred stock (collectively, the "Voting
Stock"), securities convertible into, exchangeable for, or
exercisable for Voting Stock which would result in the
Investor holding in excess of forty-five percent (45%) of the
Company's outstanding securities on a fully diluted basis at
the time of any such proposed acquisition, except as
contemplated by this Agreement; or
(b) (i) solicit, initiate or participate in any
"solicitation" of "proxies" or become a "participant" in any
"election contest" (as such terms are defined or used in
Regulation 14A under the Exchange Act, disregarding clause
(iv) of Rule 14a-1(1)(2) and including any exempt solicitation
pursuant to Rule 14a-2(b)(1)); call, or in any way participate
in a call, for any special meeting of stockholders of the
Company (or take any action with respect to acting by written
consent of the stockholders); request or take any action to
obtain or retain any list of holders of any securities of the
Company; initiate or propose any stockholder proposal or
participate in the making of, or solicit stockholders for the
approval of, one or more stockholder proposals relating to the
Company's Voting Stock; (ii) deposit any Voting Stock in a
voting trust or subject them to any voting agreement or
arrangements, except as provided for herein; (iii) form, join,
or in any way participate in a group with respect to any
shares of Voting Stock, or any
1055(3).nks 9 November 10, 1997
securities the ownership thereof would make the owner a
beneficial owner of Voting Stock; (iv) otherwise act to
control or influence the Company or the management, the
Disinterested Directors, policies or affairs of the Company;
(v) disclose any intent, purpose, plan or proposal with
respect to this Agreement or the Company, its affiliates or
the board of directors, management, policies, or affairs or
securities or assets of the Company or its affiliates that is
securities or assets of the Company or its Affiliates that is
not consistent with this Agreement or the Purchase Agreement,
including any intent, purpose, plan or proposal that is
conditioned upon, or that would require the Company or any of
its Affiliates to make public disclosure relating to any such
intent, purpose, plan, proposal or condition; or (vi) assist,
advise, encourage or act in concert with any person with
respect to, or seek to do, any of the foregoing.
6.4.2. If, at any time four or more quarterly dividends, whether or not
consecutive, on the Series C Convertible Preferred Stock shall be in default, in
whole or in part, if the Investor has exercised its rights to elect a majority
of the directors of the Company's board, all directors shall be entitled to vote
pursuant to Section 6.4.1 above. Such modification to the provisions of Section
6.4.1 shall continue until all dividends accrued on the Series C Convertible
Preferred Stock shall have been paid or set apart for payment, at which time
Section 6.4.1 shall again be in force as written.
6.4.3. Nothing in this Agreement shall preclude or prevent Investor
from making a counter-offer to acquire the Company in the event that a third
party makes an unsolicited bona fide publicly announced offer to acquire control
of the Company pursuant to a tender offer, merger, consolidation, share
exchange, purchase of a substantial portion of assets, business combination or
other similar transaction (a "Third Party Offer") and (B) the Company thereafter
(i) issues a statement recommending the Third Party Offer to its shareholders or
(ii) the Company either issues a statement not recommending the Third Party
Offer or takes no position with respect to such offer but is required by a court
to furnish the party making the Third Party Offer a list of shareholders of the
Company.
6.5. Investor's Preemptive Rights. The Company hereby grants to the
Investor the right, on the terms (including the limitations contained in Section
6.4) set forth below, to purchase the Investor's pro rata share of New
Securities (as defined below) which the Company may, from time to time, propose
to sell and issue for cash or other consideration. The pro rata share is the
ratio of (x) the underlying Common Stock and Preferred Stock on a fully diluted
basis held by the Investor at the time the New Securities are to be sold, or
otherwise transferred, to (y) the total number of shares of common stock then
issued and outstanding plus the number of shares of underlying common stock
represented by all then outstanding securities convertible at a price below the
then Average Closing Price, as that term is defined in Section 7.1, into or
exercisable at a price below the then Average Closing Price, as that term is
defined in Section 7.1, for shares of common stock held by any Person. The right
shall be subject to the following provisions:
1055(3).nks 10 November 10, 1997
In the case of securities to be issued pursuant to the acquisition of
another corporation or entity by the Company by merger, purchase of all or
substantially all of the assets or other reorganization whereby the Company
shall become the owner of more than 50% of the voting power of such corporation,
the price at which the Investor may exercise its pre-emption rights shall be the
Average Closing Price, as that term is defined in Section 7.1, for the twenty
day period ending the day before a public announcement of the merger or other
transaction is made; provided, however, that prior to December 31, 1998, such
price shall be at least $1.00, but not more than $2.00.
"New Securities" shall mean any authorized but unissued shares, and any
treasury shares, of capital stock of the Company and all rights, options or
warrants to purchase capital stock, and securities of any type whatsoever that
are, or may become, convertible into Common Stock; provided, however, that the
term "New Securities" does not include:
- securities issued under this Agreement;
- shares of Class A Common issued upon conversion of
options and warrants issued and outstanding as of the Closing Date;
- securities issued in connection with any stock split, stock
dividend or reclassification of Class A Common distributable on a pro
rata basis to all holders of Class A Common;
- shares of Class A Common issued pursuant to options
outstanding and/or granted after the date hereof to any senior
management personnel or directors or pursuant to any Employee Benefit
Plan as that term is defined in SEC Rule 405 entered into by the
Company and approved by the Company's Board of Directors.
In the event the Company proposes to undertake an issuance of New
Securities, it shall give the Investor reasonable written notice of its
intention, describing the type of New Securities, the consideration and the
general terms upon which the Company proposes to issue the same. The Investor
shall have a reasonable time under the circumstances to agree to purchase its
pro rata share of such New Securities for the cash or cash equivalent
consideration and upon the general terms specified in the notice by giving
written notice to the Company and stating therein the quantity of New Securities
to be purchased. The New Securities shall be purchased simultaneously with the
closing of the offering of the New Securities if practical, but in no event
later than 15 days after the closing at the Company's election.
The purchase rights granted under this Section shall be exercisable
only by the Investor and its successors but not its assigns, unless such assign
is an affiliate of the Investor. Upon request of the Investor or its successors,
the Company will promptly inform the requesting party in writing of (x) the
number of shares of common stock issued and outstanding and (y) the number of
shares of underlying common stock represented by then outstanding securities
convertible into or exercisable for shares of common stock held by any Person,
in each case as
1055(3).nks 11 November 10, 1997
of the date of such notice by the Company. The right of the Investor or
successor to the private preemptive right herein provided shall be determined on
the basis of the information contained in such notice, irrespective of any
exercise of options or conversion rights or like rights to acquire shares of
Common Stock of the Company after the date of such notice.
7. ADDITIONAL COVENANTS OF THE PARTIES.
7.1. Right to Purchase Additional Shares of Class A Common Stock.
Investor may, at its option and upon notice to the Company, between June 30,
1998 and December 31, 1998, purchase an additional two million shares of Class A
Common Stock at a per share price equal to the Average Closing Price of the
Class A Common Stock, but in no event less than $1.00 per share nor greater than
$2.00 per share. The purchase of the additional shares shall be completed within
5 business days.
"Average Closing Price" shall mean the average closing price for the
Company's Class A Common Stock for a period of 20 consecutive trading days as
quoted on a national securities exchange, or, if the Company's Class A Common
Stock is not traded on a national securities exchange, then on the NASDAQ Stock
Market, or, if the Company's Class A Common Stock is not traded on the NASDAQ
Stock Market, then on the OTC Bulletin Board or similar public market.
7.2. Call for Additional Shares of Series C Convertible Preferred
Stock. Provided that the Company is not in default with respect to the dividends
on the Series C Convertible Preferred Stock, the Company may, at its option and
upon 10 business days' written notice to the Investor, until December 31, 1998,
require Investor to purchase up to an additional four hundred thousand shares of
Series C Convertible Preferred Stock at $5.00 per share, using up to two
separate calls of at least 100,000 shares each, but limited to one such call per
quarter. The purchase of the additional shares shall be completed within 5
business days.
7.3. Securities Law Filings Undertaking. So long as the Investor is a
holder of the Company's common stock or preferred stock, the Company will use
its best efforts to maintain adequate public information as is necessary or
appropriate such that the Company qualifies to use a Form S-3 Registration
Statement and such that the Investor may transfer any of the Company's common
stock or preferred stock held by it pursuant to Rule 144 under the Securities
Act. All such filings shall be made at the Company's expense.
8. REGISTRATION RIGHTS.
8.1. Demand and Piggy-back Rights. The Company shall enter into a
Registration Rights Agreement in the form attached hereto as Exhibit C, pursuant
to which the Investor shall be granted demand registration rights and piggy-back
registration rights.
1055(3).nks 12 November 10, 1997
9. MISCELLANEOUS
9.1. Entire Agreement. This Agreement and the schedules and other
documents referred to herein constitute the entire agreement among the parties
and no party shall be liable or bound to any other party in any manner by any
warranties, representations, or covenants except as specifically set forth
herein or therein.
9.2. Survival of Warranties. The warranties, representations and
covenants of the Company and the Investor, jointly and severally, contained in
or made pursuant to this Agreement shall survive the execution and delivery of
this Agreement and the Closing Date.
9.3. Successors and Assigns. Except as otherwise provided herein, the
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties. Nothing in
this Agreement, express or implied, is intended to confer upon any party other
than the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
9.4. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of California.
9.5. Counterparts. This Agreement may be executed in one or more
counterparts, each of which may be deemed an original, but all of which together
shall constitute one and the same instrument. This Agreement may be executed by
a party and sent to the other parties via facsimile transmission and the
facsimile transmitted copy shall have the same integrity, force and effect as an
original document.
9.6. Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
9.7. Notices. All notices or other communications required hereunder
shall be in writing and shall be sufficient in all respects and shall be deemed
delivered after 5 days if sent via registered or certified mail, postage
prepaid; the next day if sent by overnight courier service; or one business day
after transmission, if sent by facsimile, to the following:
If to Company : Onsite Energy Corporation
000 Xxxxxxx Xxxxxxx Xx., #000
Xxxxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxxxx
Fax: (000) 000-0000
1055(3).nks 13 November 10, 1997
with copies to: Xxxxxx Eng Linn & Xxxxxxxx
000 Xxxxxxx Xxxx, Xxxxx 0000
Xxxxxxxxxx, XX 00000
Attn: Xxxxx X. Xxxxxx, Esq.
Fax: (000) 000-0000
If to Investor: Westar Capital, Inc.
XX Xxx 000
000 Xxxxxx Xxxxxx
Xxxxxx, XX 00000
Attn: Xxxx X. Xxxxxx
Fax: (000) 000-0000
with copies to: Westar Capital, Inc.
XX Xxx 000
000 Xxxxxx Xxxxxx
Xxxxxx, XX 00000
Attn: Xxxx X. Xxxxxxxxx
Fax: (000) 000-0000
Any party hereto may change its address for purposes hereof by notice to all
other parties hereto.
9.8. Dispute Resolution. No party to this Agreement shall be entitled
to take legal action with respect to any dispute relating hereto until it has
complied in good faith with the following alternative dispute resolution
procedures. This Section shall not apply to the extent it is deemed necessary to
take legal action immediately to preserve a party's adequate remedy.
9.8.1. Negotiation. The parties shall attempt promptly and in
good faith to resolve any dispute arising out of or relating to this Agreement,
through negotiations between representatives who have authority to settle the
controversy. Any party may give the other party written notice of any such
dispute not resolved in the normal course of business. Within 20 days after
delivery of the notice, representatives of both parties shall meet at a mutually
acceptable time and place, and thereafter as often as they reasonably deem
necessary, to exchange information and to attempt to resolve the dispute, until
the parties conclude that the dispute cannot be resolved through unassisted
negotiation. Negotiations extending sixty days after notice shall be deemed at
an impasse, unless otherwise agreed by the parties.
If a negotiator intends to be accompanied at a meeting by an attorney,
the other negotiator(s) shall be given at least three working days' notice of
such intention and may also be accompanied by an attorney. All negotiations
pursuant to this clause are confidential and shall be treated as compromise and
settlement negotiations for purposes of the Federal and state Rules of Evidence.
1055(3).nks 14 November 10, 1997
9.8.2. ADR Procedure. If a dispute with more than $20,000.00
at issue has not been resolved within 60 days of the disputing party's notice, a
party wishing resolution of the dispute ("Claimant") shall initiate assisted
Alternative Dispute Resolution ("ADR) proceedings as described in this Section.
Once the Claimant has notified the other ("Respondent") of a desire to initiate
ADR proceedings, the proceedings shall be governed as follows: By mutual
agreement, the parties shall select the ADR method they wish to use. That ADR
method may include arbitration, mediation, mini-trial, or any other method which
best suits the circumstances of the dispute. The parties shall agree in writing
to the chosen ADR method and the procedural rules to be followed within 30 days
after receipt of notice of intent to initiate ADR proceedings. To the extent the
parties are unable to agree on procedural rules in whole or in part, the current
Center for Public Resources ("CPR") Model Procedure for Mediation of Business
Disputes, CPR Model Mini-trial Procedure, or CPR Commercial Arbitration
Rules--whichever applies to the chosen ADR method--shall control, to the extent
such rules are consistent with the provisions of this Section. If the parties
are unable to agree on an ADR method, the method shall be arbitration.
The parties shall select a single Neutral third party to preside over
the ADR proceedings, by the following procedure: Within 15 days after an ADR
method is established, the Claimant shall submit a list of 5 acceptable Neutrals
to the Respondent. Each Neutral listed shall be sufficiently qualified,
including demonstrated neutrality, experience and competence regarding the
subject matter of the dispute. A Neutral who is an attorney or former judge
shall be deemed to have adequate experience. None of the Neutrals may be present
or former employees, attorneys, or agents of either party. The list shall supply
information about each Neutral, including address, and relevant background and
experience (including education, employment history and prior ADR assignments).
Within 15 days after receiving the Claimant's list of Neutrals, the Respondent
shall select one Neutral from the list, if at least one individual on the list
is acceptable to the Respondent. If none on the list are acceptable to the
Respondent, the Respondent shall submit a list of 5 Neutrals, together with the
above background information, to the Claimant. Each of the Neutrals shall meet
the conditions stated above regarding the Claimant's Neutrals. Within 15 days
after receiving the Respondent's list of Neutrals, the Claimant shall select one
Neutral, if at least one individual on the list is acceptable to the Respondent.
If none on the list are acceptable to the Claimant, then the parties shall
request assistance from the Center for Public Resources, Inc., to select a
Neutral.
The ADR proceeding shall take place within 30 days after the Neutral
has been selected. The Neutral shall issue a written decision within 30 days
after the ADR proceeding is complete. Each party shall be responsible for an
equal share of the costs of the ADR proceeding. The parties agree that any
applicable statute of limitations shall be tolled during the pendency of the ADR
proceedings, and no legal action may be brought in connection with this
Agreement during the pendency of an ADR proceeding.
The Neutral's written decision shall become final and binding on the
parties, unless a party objects in writing within 30 days of receipt of the
decision. The objecting party may then
1055(3).nks 15 November 10, 1997
file a lawsuit in any court allowed by this Agreement. The Neutral's written
decision shall be admissible in the objecting party's lawsuit.
9.9. Amendments and Waivers. Any term of this Agreement may be amended
and the observance of any term of this Agreement may be waived (either generally
or in a particular instance and either retroactively or prospectively), only
with the written consent of the parties. Any amendment or waiver effected in
accordance with this paragraph shall be binding upon the Investor, its
successors or assigns, and each future holder of such securities and the
Company. A waiver by any party hereto of a default in the performance of this
Agreement shall not operate as a waiver of any future or other default, whether
of a like or different kind.
9.10. Severability. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the parties shall use their efforts to substitute
provisions of substantially the same effect. The balance of the Agreement shall
be interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms.
9.11. Counterparts; Signatures. This Agreement may be executed in one
or more counterparts, each of which may be deemed an original, but all of which
together shall constitute one and the same instrument. This Agreement may be
executed by a party and sent to the other parties via facsimile transmission and
the facsimile transmitted copy shall have the same integrity, force and effect
as an original document.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
COMPANY:
Onsite Energy Corporation
By:
Xxxxxxx X. Xxxxxxxx, President
INVESTOR:
Westar Capital, Inc.
By:
Xxxx X. Xxxxxx, President
1055(3).nks 16 November 10, 1997
Stock Subscription Agreement
Schedule 2.2
Onsite Shareholders (Greater than 5% Ownership)
(as of 10/28/97)
Name Share Ownership
ProActive Partners, L.P. 1,599,172
Lagunitas Partners, L.P. 820,477
Xxxxxxx X. Xxxxxxxx 1,810,912
Xxxxxxx X. Xxxx 1,725,912
Stock Subscription Agreement
Schedule 2.6
Security Interest in Onsite Assets
Secured Party Assets Subject to Security Interest
EUA Cogenex Corp. Contracts and revenues associated with SCE
DSM contract and associated security deposits
Copelco Capital/Minolta Business Systems Copier
Ikon Capital/Xxxx-Xxxxx Telecopier
Xxxx Commercial Credit Computer equipment
ProActive Partners, L.P. General security in all Onsite assets
(securing Letter of Credit)
Xxxxxxx X. Xxxxxxxx General security in all Onsite assets
(securing indemnification agreement)
October 31, 1997
Westar Capital, Inc.
P. O. Box 889
000 Xxxxxx Xxxxxx
Xxxxxx, XX 00000
Re: Onsite Energy Corporation
Opinion Letter Pursuant to Stock Subscription Agreement
Ladies and Gentlemen:
We act as counsel for Onsite Energy Corporation, a Delaware corporation
(the "Company"), in connection with the Stock Subscription Agreement dated
October 28, 1997, between Westar Capital, Inc., a Kansas corporation ("Westar"),
and the Company ("Agreement"). This letter is delivered to Westar at the request
of the Company pursuant to Section 1.6.2.(d) of the Agreement. Except as
otherwise defined herein, the capitalized terms in this letter shall have the
meanings ascribed to them in the Agreement.
This Opinion Letter is governed by, and shall be interpreted in
accordance with, the Legal Opinion Accord (the "Accord") of the ABA Section of
Business Law (1991). As a consequence, it is subject to a number of
qualifications, exceptions, definitions, limitations on coverage and other
limitations, all as more particularly described in the Accord, and this Opinion
Letter should be read in conjunction therewith. In addition, this Opinion Letter
shall be governed by, and shall be interpreted in accordance with, the
"California Provisions" and the "California Generic Exception" as defined in the
Business Law Section of the California State Bar Report on the Third-Party Legal
Opinion Report of the ABA Section of Business Law (dated May 1992), and is
therefore subject to a number of additional qualifications, exceptions, and
understandings, all as more particularly described in the California Provisions
and California Generic Exception, and this Opinion Letter should also be read in
conjunction therewith. The law covered by the opinions expressed herein is
limited to the Federal Law of the United States and the Law of the States of
California and Delaware.
Westar Capital, Inc.
October 31, 1997
Page 2
Whenever our opinion herein with respect to the existence or absence of
facts or circumstances is qualified by the phrase "to the best of our
knowledge", it is intended to indicate that during the course of our
representation, no information has come to our attention that would give us
actual knowledge of the existence of such facts or circumstances. However, we
have not undertaken any special or independent investigation to determine the
existence or absence of such facts or circumstances, and no inference as to our
knowledge of the existence of such facts or circumstances should be drawn merely
from our representation herein.
Based upon and subject to the foregoing, as of the date hereof, we are
of the opinion that:
1. The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware, has all requisite
corporate power and authority to carry on its business as now conducted, and to
own, lease and operate any properties related to its business, except where the
failure to have such power and authority would not have a material adverse
effect. The Company is qualified to do business as a foreign corporation in the
State of California, and to our knowledge, in all other jurisdictions in which
such qualification is required other than those in which failure to qualify
would not have a material adverse effect on the Company's operations or
financial condition.
2. The Company has all requisite legal and corporate power to execute
and deliver the Agreement and to carry out and perform its obligations under the
Agreement.
3. The Agreement, when executed and delivered, constitutes a valid,
legally binding and enforceable obligation of the Company, except as the
enforceability may be subject to or limited by laws of general application
relating to bankruptcy, insolvency or the relief of debtors and other laws of
general application affecting enforcement of creditors' rights generally, or
rules of law and principles of equity governing specific performance, injunctive
relief or other equitable remedies, regardless of whether such enforceability is
considered in a proceeding in equity or at law.
4. The execution, delivery and performance of the Agreement
by the Company will not result in a violation of any provision of
Westar Capital, Inc.
October 31, 1997
Page 3
its Certificate of Incorporation or Bylaws as in effect on and as of the Closing
Date or, to our knowledge, of any provision of any material mortgage, indenture,
agreement, instrument or contract to which it is a party, of any provision of
any federal or state judgment, writ, decree, order, statute, rule or
governmental regulation applicable to the Company in any manner which would be
material to the Agreement, the conduct of the Company's business or its
financial condition.
5. The Common Stock and Preferred Stock, when sold, issued, and
delivered for the consideration expressed in, and in compliance with, the
provisions of the Agreement will be duly authorized, validly issued, fully paid
and nonassessable.
The phrase "Primary Lawyer Group," as used in the Accord, is hereby
modified and for purposes of applying the Accord to this Opinion Letter the
Primary Lawyer Group means Xxxxx X. Xxxxxx, Esq.
and Xxxxxx X. Eng, Esq. of our firm.
Our opinion is limited solely to matters set forth herein. This letter
is provided to you solely for your benefit and in connection with the
transactions provided for in or contemplated by the Agreement, and shall not be
relied upon by any other person or for any other purpose without our prior
written consent.
Very truly yours,
