WARRANT AGREEMENT
August 25, 1997
Xxx Xxxxxx & Company
Xxxxxxx Xxxxxx Xxxxx Inc.
c/o Xxx Xxxxxx & Company
00000 Xxxxxxxx Xxxx., Xxx. 0000
Xxx Xxxxxxx, XX 00000
Ladies and Gentlemen:
U S Liquids Inc., a Delaware corporation (the "Company"), hereby agrees,
on the terms and subject to the conditions of this Warrant Agreement (the
"Agreement"), to sell and deliver to Xxx Xxxxxx & Company ("VKCO") and
Xxxxxxx Xxxxxx Xxxxx Inc. ("SMM"), individually and not as Representatives of
the underwriters referred to in the "Underwriting Agreement" (defined below),
warrants to purchase a number of shares of the "Common Stock" (defined below)
equal to 7.5% (seven and one-half percent) of the aggregate number of shares
(not including "Option Shares" (defined in the Underwriting Agreement)) of
the Common Stock sold to the underwriters pursuant to the Underwriting
Agreement. VKCO and SMM agree, on the terms and subject to the conditions of
this Agreement, to purchase such warrants from the Company.
Each of the warrants will be exercisable by the "Holder" thereof
(defined below), as to all or any lesser number of shares of the Common Stock
covered by the Holder's warrants, at the "Exercise Price" per share (defined
below), at any time and from time to time beginning at 9:00 a.m., Los Angeles
time, on the day that begins one year after the Effective Date (defined
below) and ending at 5:00 p.m., Los Angeles time, on the day that is five
years after the Effective Date. The warrants shall be evidenced by
instruments in the form of Exhibit A hereto (those instruments and all
instruments issued after the date hereof in replacement thereof are referred
to below as the "Warrants").
The purchase price of the Warrants shall be $0.01 (one cent) for each
share of Common Stock purchasable as of the Closing Time on exercise of the
Warrants. The delivery of the Warrants and payment of the purchase price of
the Warrants are to be made on the "Closing Date" (defined in the
Underwriting Agreement), at the offices of VKCO at 00000 Xxxxxxxx Xxxxxxxxx,
Xxxxx 0000, Xxx Xxxxxxx, Xxxxxxxxxx, or such other time and place as may be
agreed upon among the Company, VKCO and SMM (the date(s) of such purchase of
the Warrants is referred to in this Agreement as the "Closing Time").
1. DEFINITIONS. As used in this Agreement, the following terms,
unless the context otherwise clearly requires, shall have for all purposes
the following respective meanings, and capitalized terms used herein without
definition shall have the meanings ascribed to them in the Underwriting
Agreement:
(a) The term "Common Stock" refers to the Common Stock, par value $.01
per share, of the Company, and all other shares of any class or classes
(however designated) of the common equity of the Company, now or hereafter
authorized, the holders of which by operation of law shall have the right,
without limitation as to amount, either to all or to a part of the balance of
current dividends and liquidating dividends and distributions after the
payment of dividends and distributions on any shares entitled to preference
and the holders of which ordinarily, in the absence of contingency, shall be
entitled to vote for the election of the directors of the Company (even
though the right so to vote has been suspended by the occurrence of such a
contingency), other than those directors of the Company (constituting a
portion of the Board of Directors) who, pursuant to the Certificate of
Incorporation or other charter documents of the Company, are then to be
elected by a designated class or series of the capital stock of the Company.
(b) "Convertible Securities" shall mean any indebtedness, shares of
stock or other rights granted by the Company (other than Options) convertible
into or exchangeable for Common Stock.
(c) "Effective Date" shall mean the date on which the Securities and
Exchange Commission shall have declared the Registration Statement effective.
(d) The term "Exercise Price" refers to the per share purchase price
of the Warrant Shares subject to this Warrant Agreement. The Exercise Price
shall initially be $11.40 per share (120% of the initial per share price to
the public of the shares of Common Stock sold pursuant to the Underwriting
Agreement), subject to adjustment as provided in Section 6 below.
(e) The term "Holder", when used with respect to the Warrants or the
Warrant Shares, means the person registered on the books and records of the
Company as being the holder of record of the Warrants or the Warrant Shares,
as the case may be, and, so long as VKCO or SMM holds of record any Warrants
or Warrant Shares, it shall be included in the definition of "Holder," and
any action to be taken or approval to be given by the Holders shall, unless
otherwise provided in this Agreement, require the action by, or approval of,
the Holder or Holders of at least that number of Warrants and Warrant Shares
which in the aggregate shall constitute a majority of all Warrant Shares
issued or issuable under this Agreement.
(f) "Options" shall mean any warrants, options or, without limitation,
other rights granted by the Company to purchase Common Stock or Convertible
Securities.
(g) The term "Other Securities" refers to any stock (other than Common
Stock) and other securities of the Company or any other person (corporate or
otherwise) which the Holders of the Warrants at any time shall be entitled to
receive, or shall have received, upon the exercise of the Warrants, in lieu
of or in addition to Common Stock, or which at any time
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shall be issuable or shall have been issued in exchange for or in replacement
of Common Stock or Other Securities, whether pursuant to Section 6 below or
otherwise.
(h) The term "Prospectus" refers to the prospectus which is part of
the Company's Registration Statement on Form S-1 in the form first filed with
the Securities and Exchange Commission (the "Commission") pursuant to Rule
424(b) of the applicable rules and regulations (the "Rules and Regulations")
of the Commission under the Securities Act of 1933, as amended (the "Act").
(i) The term "Registration Statement" refers to the Company's
Registration Statement on Form S-1 (No. 333-30065), as amended, when it first
became effective under the Act.
(j) The term "Warrant Shares" refers to the shares of Common Stock (or
Other Securities) issued or issuable upon the exercise, in whole or in part,
of any of the Warrants.
2.1 REPRESENTATIONS AND WARRANTIES. The Company represents and
warrants to VKCO and SMM as follows:
(a) CORPORATE ACTION. The Company has all requisite power and
authority, and has taken all necessary action, to enter into and perform all
of its obligations under this Agreement, to issue and deliver the Warrants
and to authorize and reserve for issuance, and upon payment from time to time
of the Exercise Price in accordance with the terms of this Agreement, to
issue and deliver the Warrant Shares; and this Agreement has been duly
authorized, executed and delivered by the Company and constitutes the legal,
valid and binding agreement of the Company, enforceable against the Company
in accordance with its terms, except (i) as such enforceability may be
subject to or limited by bankruptcy, insolvency, reorganization, moratorium
and other similar laws or equitable principles now or hereafter in effect
relating to or affecting creditors' rights generally (collectively, the
"Recognized Defenses") and (ii) insofar as the indemnification and
contribution provisions hereof may be limited under federal and state
securities laws and the public policies underlying such laws.
(b) OUTSTANDING COMMON STOCK. The outstanding shares of Common Stock
have been duly and validly authorized and issued and are fully paid and
non-assessable and free of preemptive rights. The Warrant Shares (i) are
duly authorized by the Company's Certificate of Incorporation, (ii) have been
duly and validly authorized to be issued and adequately reserved by the Board
of Directors of the Company, (iii) will, when issued and delivered to the
Holders pursuant to this Agreement, be duly and validly issued, fully paid
and non-assessable and free and clear of all liens, charges, encumbrances or
rights of others except for those which may be created by the Holder, and
(iv) and have been approved for listing, upon official notice of issuance, on
the American Stock Exchange. The holders of outstanding shares of capital
stock of the Company are not entitled to any preemptive or
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similar rights to subscribe for or purchase Warrant Shares or other shares of
capital stock of the Company and, except as otherwise set forth or
incorporated by reference in the Prospectus, there are no outstanding rights,
warrants or options to acquire, or instruments convertible into or
exchangeable for, or agreements or understandings with respect to the sale or
issuance of, any shares of capital stock of the Company.
(c) NO VIOLATION. None of the execution or delivery of this
Agreement, the consummation of the transactions contemplated by this
Agreement or compliance with the terms and provisions of this Agreement will
(i) conflict with or constitute a breach of, or a default (or default with
notice, the passage of time or otherwise) under any bond, debenture, note or
other evidence of indebtedness or any indenture, mortgage, deed of trust or
any other agreement or instrument to which the Company or any of its
subsidiaries is a party or by which any of them is bound or to which any of
their respective property or assets is subject, (ii) result in the imposition
of a lien on any properties of the Company or any of its subsidiaries or an
acceleration of indebtedness of the Company or any of its subsidiaries or
(iii) result in a violation of any law, administrative regulation or order of
any court or governmental agency or authority applicable to the Company or
any of its subsidiaries or to any of their respective properties or assets.
No consent, approval, authorization or other order of any regulatory body,
administrative agency or other governmental body is required for the valid
issuance and sale of the Warrant Shares to VKCO and SMM or the other
transactions contemplated by this Agreement, except for registration under
the federal securities laws and for permits and similar authorizations
required under state blue sky laws or similar laws.
(d) UNDERWRITING AGREEMENT. All representations and warranties made
by the Company in Section 1 of the Underwriting Agreement, dated August 19,
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.
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(a) TRANSFERABILITY OF WARRANTS. Until August 24, 1998, each of VKCO
and SMM severally agrees that the Warrants may not be transferred, sold,
assigned or hypothecated except: (i) to its successors in a merger or
consolidation or other business combination; (ii) to purchasers of all or
substantially all of its assets; (iii) to any officers or partners of VKCO or
SMM, as the case may be; (iv) by operation of law; or (v) as permitted below
in this Section 3. Each of VKCO and SMM further severally agrees that the
Company shall have no obligation to effect any transfer of the Warrants
during the time period referred to above, unless the transferee, purchaser,
assignee or pledgee, as the case may be, has executed an agreement obligating
the transferee to comply with all terms and conditions of this Warrant
Agreement applicable to the transferor.
(b) TRANSFERABILITY OF WARRANT SHARES.
(i) Except as otherwise provided in this Section 3(b), each
certificate for Warrant Shares initially issued upon the exercise of any
Warrants shall be stamped or otherwise imprinted with a legend in
substantially the following form:
"The Shares represented by this certificate are
subject to the conditions specified in a Warrant Agreement,
dated August 25, 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
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particular Warrant Shares (A) when and so long as the transfer, sale, pledge,
hypothecation, encumbrance or other disposition thereof, shall have been
registered under the Act or (B) when the Holder or Holders of any Warrants or
Warrant Shares has delivered to the Company the written opinion of counsel to
such Holder or Holders, which shall be reasonably satisfactory to the
Company, stating that such legend is not required in order to ensure
compliance with the Act. Whenever the restrictions imposed by this Section
shall terminate as to any Warrant Shares, as provided above, the Holder
thereof shall be entitled to receive from the Company, at the Company's
expense, a new certificate representing such Warrant Shares not bearing the
restrictive legend set forth in Section 3(b)(i).
(c) DEMAND REGISTRATION. At any time after the day that begins one
year after the Effective Date and on or before the end of the day that is
five years after the Effective Date, upon written, or telegraphic or
telephonic notice followed as soon as practicable by written confirmation
thereof, from any Holder or Holders (the "Requesting Holders") of that number
of Warrants and/or Warrant Shares which in the aggregate shall constitute a
majority of all Warrant Shares issued or issuable under this Agreement
(excluding Warrant Shares which have been previously sold, transferred or
otherwise disposed of in a registered public offering, pursuant to Rule 144
under the Act, as such rule may be amended from time to time, or pursuant to
Regulation S under the Act, as such Regulation may be amended from time to
time, or which in the opinion of both counsel to the Company and counsel to
the Requesting Holders may otherwise then be publicly sold without
registration under the Act), that such Holder or Holders request the
registration under the Act of any of the Warrant Shares, the Company shall
(i) immediately give notice to the other Holders and afford them the
opportunity to participate in the registration statement and (ii) as promptly
as possible after the receipt of such notice from the Requesting Holders, but
in any event within 60 days of the receipt of such notice, and solely at its
cost and expense, file a registration statement with respect to the offering
and sale or other disposition of the Warrant Shares with respect to which it
shall have received such notice. Such registration statement may, if the
Company satisfies the applicable requirements, be made on Form S-3. If a
registration requested pursuant to this Section 3(c) is an underwritten
registration, the Company and other holders of securities of the Company may
include securities in such registration without the written consent of the
Holders of the Warrant Shares for which registration has been requested
pursuant to this Section 3(c) if, but only if, the managing underwriters of
such registration advise the participating Holders of Warrant Shares in
writing that in their opinion such inclusion will not materially affect the
successful marketing of the Warrant Shares. The Holders shall not be deemed
to have effected a demand registration pursuant to this Section 3(c) unless
and until the registration statement is declared effective. The Company
shall be obligated to file only one registration statement pursuant to this
Section 3(c) which becomes effective, whether or not the registration
statement at the time it becomes effective covers all or a portion of the
Warrant Shares.
(d) PIGGYBACK REGISTRATION. If, at any time during the period
commencing on the day that begins one year from the Effective Date and ending
at the end of the day that is six
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years after the Effective Date, the Company shall propose to register any
shares of Common Stock or Other Securities (but excluding any shares or
securities being registered pursuant to Form S-8 or Form S-4 or any successor
form to either of them), the Company shall (i) give each Holder written
notice, or telecopy and telephonic notice followed as soon as practicable by
written confirmation thereof, of such proposed registration at least 20
business days prior to the filing of such registration statement and (ii)
upon written notice, or telecopy or telephonic notice followed as soon as
practicable by written confirmation thereof, given to the Company by any
Holder within 15 days after the giving of such written confirmation or
written notice by the Company, the Company shall include or cause to be
included in any such registration statement all or such portion of the
Warrant Shares as such Holder may request; provided, however, that the
Company may at any time withdraw or cease proceeding with any such
registration if it shall at the same time withdraw or cease proceeding with
the registration of the Common Stock or Other Securities originally proposed
to be registered; and provided, further, that in connection with any
registered public offering involving an underwriting, the managing
underwriter may (if in its reasonable opinion marketing factors so require)
limit the number of securities (including any Warrants or Warrant Shares)
included in such offering (other than securities of the Company). In the
event of any such limitation, the total number of Warrant Shares to be
offered for the account of the Holders participating in the registration
shall be reduced pro rata in proportion to the respective number of shares
requested to be included therein to the extent necessary to reduce the total
number of shares proposed to be registered to the number of shares
recommended by the managing underwriter; provided, however, that if the
amount or kind of securities to be offered for the accounts of Holders shall
be reduced in accordance with this sentence, the Company shall not be
permitted to include securities of any persons (other than the Company)
unless the Holders are permitted to participate on a pro rata basis with
other selling securityholders. Notwithstanding the foregoing, the Company
shall not be obligated to include Warrant Shares in more than two
registration statements pursuant to this Agreement.
(e) COMPANY'S OBLIGATIONS IN REGISTRATION. If any Holder timely
elects to participate in an offering by including Warrant Shares in a
registration statement pursuant to Section 3(c) or (d) above, the Company
shall use its best efforts to effect such registration to permit the sale of
Warrant Shares in accordance with the intended method or methods of
disposition thereof and, without limitation, pursuant thereto the Company
shall:
(i) notify the Holders as to the filing of the registration
statement and of all amendments or supplements thereto filed prior to the
effective date thereof;
(ii) use its best efforts to cause any registration statement
filed under the Act pursuant to Section 3(c) or (d) above to become effective
at the earliest possible date after the filing thereof and to comply with all
applicable rules and regulations of the Commission in connection therewith;
provided, that before filing a registration statement or prospectus or any
amendments or supplements thereto, including documents which would be
incorporated or deemed to be incorporated by reference in the registration
statement after the initial filing of
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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 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
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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 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
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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 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,
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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 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
-11-
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 fee of the National Association of Securities Dealers,
Inc. in connection with its review; provided, that in no event shall
Registration Expenses include any underwriting discounts, commissions or fees
or the fees of more than one counsel retained by the Holders or the fees,
except with respect to such state securities blue sky matters, of legal
counsel retained by the Underwriters in connection with the sale of Warrant
Shares pursuant to Section 3(c) or 3(d) above; and
(xvii) in connection with the filing of a registration
statement pursuant to Section 3(c) or (d) above, use its best efforts to
obtain indemnification of the Holders by the Underwriter to the same extent
said Underwriter provides indemnification to the Company.
As used in this Section 3(e), the term "Holders" refers only to those
Holders who have timely elected to sell Warrants Shares in an offering.
(f) INDEMNIFICATION.
(i) The Company shall indemnify and hold harmless VKCO, SMM,
the Holders and any underwriter (as defined in the Act) for VKCO, SMM and/or
the Holders, and each person, if any, who respectively controls (within the
meaning of Section 15 of the Act) VKCO, SMM, or any of the Holders or such
underwriter against any losses, claims, damages, liabilities (or actions in
respect thereof) and expenses whatsoever (including, but not limited to, any
and all expense whatsoever reasonably incurred in investigating, preparing or
defending against any litigation, commenced or threatened, or any claim
whatsoever), joint or several, to which VKCO, SMM, the Holders or such
underwriter or such controlling person becomes subject, under the Act, the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), or other
federal or state statute, law or regulation, at common law or otherwise,
specifically including but not limited to losses, claims, damages or
liabilities (or
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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 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
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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 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
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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 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
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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 the
surrendered Warrant (after giving effect to any adjustment therein as
provided in Section 6 below) minus the number of such Warrant Shares (after
giving effect to such adjustment) purchased by the Holder pursuant to such
exercise.
(b) COMPANY TO REAFFIRM OBLIGATIONS. On the date of any exercise of
any Warrants (except that if, on that date, the stock transfer books of the
Company are closed, in which case on the next succeeding date on which such
stock transfer books are open) the Holder exercising the same shall be deemed
to have become, and thereafter shall be considered, a holder of record of the
shares of Common Stock purchased upon such exercise for all purposes.
Holders of Warrants shall have no rights of share ownership until they
exercise their Warrants. The Company will, at the time of any exercise of
any Warrant, upon the request of the Holder thereof, acknowledge in writing
its continuing obligation to afford to that Holder any rights (including
without limitation any right to registration of the Warrant Shares issued
upon such exercise) to which the Holder shall continue to be entitled after
such exercise in accordance with the provisions of this Agreement; provided,
however, that if the Holder of a Warrant shall fail to make any such request,
such failure shall not affect the continuing obligation of the Company to
afford those rights to the Holder.
(c) NET EXERCISE OF WARRANTS. Notwithstanding anything to the
contrary contained in this Section 4, any Holder may elect to exercise any
Warrant in whole or in part by receiving shares of Common Stock equal to the
value (determined below) of the Warrant (or any part hereof), upon surrender
of the Warrant (or any part thereof) at the office or agency described in
Section 4(a) above, together with notice of such election, specifying the
part of the Warrant so surrendered, in which event the Company shall issue
and deliver to the Holder a number of shares of Common Stock determined using
the following formula:
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X = (Y) (A-B)
---------
A
where
X = the number of shares of Common Stock to be issued to the
Holder;
Y = the number of shares of Common Stock purchasable under
the Warrant, or portion of the Warrant, surrendered;
A = the Current Market Price per share of the Common Stock,
determined pursuant to Section 6(d) of this Agreement;
and
B = the then current Exercise Price per share of Common
Stock.
5. DELIVERY OF STOCK CERTIFICATES, ETC., ON EXERCISE: NO FRACTIONAL
SHARES.
(a) STOCK CERTIFICATES, ETC. As soon as practicable after the
exercise of any Warrants and in any event within five business days
thereafter, the Company, at its expense (including the payment by it of any
applicable issue taxes), will cause to be issued in the name of and delivered
to the purchasing Holder a certificate or certificates for the number of
fully paid and nonassessable Warrant Shares to which such Holder shall be
entitled upon such exercise, together with any Other Securities and property
(including cash, where applicable) to which such Holder is entitled upon such
exercise pursuant to Section 6 of this Agreement or otherwise.
(b) NO FRACTIONAL SHARES. The Company will not issue a fractional
share of Common Stock upon exercise of a Warrant. Rather, if a fractional
share would otherwise be issued, the Company will instead issue a number of
whole shares equal to the next lowest number of whole shares and shall pay to
the exercising Holder an amount in cash equal to amount obtained by
multiplying (x) the fractional shares not issued by (y) the Current Market
Price (as defined in Section 6(d)) per share of the Common Stock on the last
trading day prior to the exercise date.
6. ANTI-DILUTION PROVISIONS. The Warrants are subject to the
following additional terms and conditions:
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(a) ADJUSTMENT FOR CHANGE IN CAPITAL STOCK. If, after the date of
this Agreement, the Company:
(1) pays a dividend or makes a distribution on its Common Stock
in shares of its capital stock (including Common Stock);
(2) subdivides its outstanding shares of Common Stock into a
greater number of shares;
(3) combines its outstanding shares of Common Stock into a
smaller number of shares; or
(4) issues by reclassification of its Common Stock any shares of
its capital stock or Other Securities (including without
limitation any such reclassification in connection with a
consolidation or merger in which the Company is the
continuing entity);
then the Exercise Price in effect at the time of the record date of such
dividend, distribution, subdivision, combination or reclassification shall be
adjusted so that the Exercise Price shall be equal to the price determined by
multiplying the Exercise Price in effect immediately prior to such event by a
fraction, the numerator of which shall be (x) the total number of outstanding
shares of Common Stock of the Company immediately prior to such event and the
denominator of which shall be (y) the total number of outstanding shares of
Common Stock of the Company immediately after such event and, as so adjusted
or readjusted, the Exercise Price shall remain in effect until a further
adjustment or readjustment is required by this Section 6(b).
Whenever the Exercise Price payable upon exercise of each Warrant is
adjusted pursuant to this Section 6(a), the Warrant Shares shall
simultaneously be adjusted by multiplying the number of Warrant Shares
issuable upon exercise of each Warrant immediately prior to such event by the
Exercise Price in effect on the date thereof and dividing the product so
obtained by the Exercise Price as adjusted.
These adjustments referred to in the preceding paragraph shall become
effective on (x) in the case of a dividend or distribution, the earlier of
the record date thereof or the distribution date thereof and (y) in the case
of a subdivision, combination or reclassification, the earlier of the record
date thereof or the effective date thereof.
(b) ADJUSTMENTS FOR OTHER DISTRIBUTIONS. If, after the date of this
Agreement, the holders of Common Stock generally shall have received or, on
or after the record date fixed for the determination of eligible
stockholders, shall have become entitled to receive (i) securities other than
capital stock, (ii) evidences of its indebtedness, (iii) assets (other than
cash dividends or distributions), (iv) rights, options, warrants or
convertible or exchangeable
-18-
securities (other than Convertible Securities or Options) containing the
right to subscribe for or purchase securities of the Company, then and in
each such case the Holder of each Warrant, upon the exercise thereof as
provided in Section 4 above, shall be entitled to receive, in addition to the
Warrant Shares otherwise receivable on such exercise, the amount of
securities, indebtedness, assets (other than cash in the case referred to in
subdivision (iii) of this Section 6(b)) and such rights, options, warrants or
convertible or exchangeable securities which such Holder would hold on the
date of such exercise if on the date of this Agreement such Holder had been
the holder of record of the number of shares of Common Stock called for by
the Warrants held by such Holder and had thereafter, during the period from
the date of this Agreement to and including the date of such exercise,
retained such shares, giving effect to all adjustments called for during such
period by this Section 6.
(c) ADJUSTMENTS FOR SALE OR OTHER ISSUANCE OF COMMON STOCK.
(i) If at any time prior to the exercise of the Warrants in
full, the Company shall issue or sell any Common Stock without consideration
or for consideration per share less than the Current Market Price per share
(as defined in Section 6(d)) on the date of such issuance or sale (which
shall be deemed for all purposes of this Section 6(c), in the case of Common
Stock issued as all or part of the consideration for an acquisition, to be
the same as the date the definitive agreement for such acquisition is entered
into), the Exercise Price shall be adjusted so that the Exercise Price shall
equal the price determined by multiplying the Exercise Price in effect
immediately prior to the date of such sale or issuance (which date in the
event of distribution to shareholders shall be deemed to be the record date
set by the Company to determine shareholders entitled to participate in such
distribution) by a fraction, the numerator of which shall be (i) the number
of shares of Common Stock outstanding on the date of such sale or issuance,
plus (ii) the number of additional shares of Common Stock which the aggregate
consideration received by the Company upon such issuance or sale would
purchase at such Current Market Price per share of the Common Stock and the
denominator of which shall be (i) the number of shares of Common Stock
outstanding on the date of such issuance or sale, plus (ii) the number of
additional shares of Common Stock offered for purchase. Any adjustments
required by this Section 6(c) shall be made immediately after such issuance
or sale or record date, as the case may be. Such adjustments shall be made
successively whenever the event shall occur.
(ii) For the purpose of making any adjustment in the Exercise
Price, or number of shares of Common Stock purchasable upon exercise of the
Warrants, as provided above and in Section 6(c)(vii) below, the consideration
received by the Company for any issue or sale of securities shall:
(A) To the extent it consists of cash, be computed as
the gross amount of cash received by the Company before deduction of any
underwriting or similar commissions, compensation, discounts or concessions
paid or allowed by the Company in
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connection with such issue or sale and before deduction of any other expenses
payable in connection therewith.
(B) In case of the issuance (otherwise than upon
conversion or exchange of Convertible Securities) or sale of additional
Common Stock, Options or Convertible Securities for a consideration other
than cash or a consideration a part of which is other than cash, then for
purposes of this Section 6(c) the fair value of such consideration as
determined by the Board of Directors of the Company in the good faith
exercise of its business judgment, regardless of the accounting treatment
thereof, shall be deemed to be the value of the consideration other than cash
received by the Company for such securities.
(iii) OPTIONS AND CONVERTIBLE SECURITIES. If the Company in any
manner issues or grants any Options or any Convertible Securities -- but only
to the extent (i) such Options are exercisable at less than the Current
Market Price at the date of issue of such Options or (ii) the amount paid for
such Convertible Securities per share plus any additional amount payable per
share upon conversion thereof is less than the Current Market Price per share
at the date of issue of the Convertible Securities -- the total maximum
number of shares of Common Stock issuable upon the exercise of such Options
or upon conversion or exchange of the total maximum amount of such
Convertible Securities at the time such Convertible Securities first become
convertible or exchangeable shall (as of the date of issue or grant of such
Options or, in the case of the issue or sale of Convertible Securities other
than where the same are issuable upon the exercise of Options, as of the date
of such issue or sale) be deemed to be issued and to be outstanding for the
purpose of this Section 6(c) and to have been issued for the sum of the
amount (if any) paid for such Options or Convertible Securities and the
amount (if any) payable upon the exercise of such Options or upon conversion
or exchange of such Convertible Securities at the time such Convertible
Securities first become convertible or exchangeable; provided that, subject
to the other provisions of this Section 6(c), no further adjustment of the
Exercise Price shall be made upon the actual issuance of any such Common
Stock or Convertible Securities or upon the conversion or exchange of any
such Convertible Securities.
(iv) CHANGE IN OPTION PRICE OR CONVERSION RATE. If the
purchase price provided for in any Option referred to in Section 6(c)(iii),
or the rate or price at which any Convertible Securities referred to in
Section 6(c)(iii) are convertible into or exchangeable for shares of Common
Stock, shall change at any time (other than under or by reason of
conventional provisions designed to protect against dilution), the Exercise
Price in effect at the time of such event shall forthwith be readjusted --
but only to the extent such change does not result in either the per share
Option exercise price or the amount per share payable for such Convertible
Securities plus the amount payable per share on the conversion of such
Convertible Securities to be greater than the lesser of 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
-20-
outstanding provided for such changed purchase price, additional
consideration or conversion rate, as the case may be, at the time initially
granted, issued or sold. If the purchase price provided for in any such
Option, or the additional consideration (if any) payable upon the conversion
or exchange of any such Convertible Securities, or the rate or price at which
any such Convertible Securities are convertible into or exchangeable for
shares of Common Stock shall be changed at any time under or by reason of
conventional provisions designed to protect against dilution, then in case
of, but only to the extent of, the delivery of shares of Common Stock upon
the exercise of any such Option or upon conversion or exchange of any such
Convertible Security, the Exercise Price then in effect hereunder shall, upon
issuance of such shares of Common Stock, be adjusted -- but only to the
extent such change does not result in either the per share Option exercise
price or the amount per share payable for such Convertible Securities plus
the amount payable per share on the conversion of such Convertible Securities
to be greater than the Current Market Price per share at the time such
Options or Convertible Securities were issued, as referred to in Section
6(c)(iii) -- to such amount as would have obtained had such Option or
Convertible Security never been issued and had adjustments been made based
only upon the issuance of the shares of Common Stock for the consideration
actually received for such Option or Convertible Security and such Common
Stock.
(v) EXPIRATION OF OPTION OR CONVERSION RIGHTS. In the event
of the termination or expiration of any right to purchase Common Stock under
any Option or of any right to convert or exchange Convertible Securities, the
Exercise Price shall, upon such termination, be changed to the Exercise Price
that would have been in effect at the time of such expiration had such Option
or Convertible Security, to the extent outstanding immediately prior to such
expiration, never been issued. As used in this Section 6(c)(v), the word
"expiration" includes a termination, without payment of consideration by the
Company, of a right to purchase, convert or exchange.
(vi) EXCLUDED EVENTS. Notwithstanding anything in this Section
6 to the contrary, the Exercise Price shall not be adjusted by virtue of (i)
the Warrants or the existence or exercise of any Options of the Company
outstanding on the date hereof and disclosed in the Prospectus or (ii) the
issuance or sale of, or the grant of Options to purchase, Common Stock to
employees, directors, or officers of the Company or its subsidiaries, or to
other persons who do not beneficially own more than one percent of the Common
Stock (assuming for this purpose that all Options then held by the person,
including new options then being granted, but no other Option or Convertible
Securities, have then been exercised in full) and are not the children of
such a one percent or greater shareholder or the spouses of such children,
pursuant to stock option plans currently existing or hereafter approved by
the Board of Directors of the Company, 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)).
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(vii) ADJUSTMENT IN NUMBER OF WARRANT SHARES. Whenever the
Exercise Price payable upon exercise of a Warrant is adjusted pursuant to
this Section 6(c), the Warrant Shares issuable on exercise of the Warrant
shall simultaneously be adjusted by multiplying the number of the Warrant
Shares issuable upon exercise of the Warrant immediately prior to such event
by the Exercise Price in effect on the date thereof and dividing the product
so obtained by the Exercise Price, as adjusted.
(d) CURRENT MARKET PRICE. For the purpose of any computation under
Section 6, the "Current Market Price" per share of Common Stock at any date
shall be the average of the daily closing prices for the 15 consecutive
trading days commencing 20 trading days before such date. The closing price
for each day shall be the last reported sale price, regular way or, in case
no such reported sale takes place on such day, the average of the closing bid
and asked prices, regular way, for such day, in either case on the principal
national securities exchange on which the shares are listed or admitted to
trading, or if they are not listed or admitted to trading on any national
securities exchange, but are traded in the Nasdaq National Market ("NNM"), or
if the shares are otherwise securities for which transaction reports are
required to be made on a real-time basis pursuant to an effective transaction
reporting plan under Rule 11a3-1 of the Rules of the Commission under the
Exchange Act, the last reported sales price or, if they are not listed or
admitted to trade, and if last sale data is not then available from NNM, but
are traded in the over-the-counter market, the average of the representative
closing bid and asked quotations for the Common Stock on NNM or any
comparable system, or if the Common Stock is not listed on NNM or a
comparable system, the average of the closing bid and asked prices as
furnished by two members of the National Association of Securities Dealers,
Inc. selected from time to time by the independent members of the Board of
Directors of the Company for that purpose.
(e) MINIMUM ADJUSTMENT. No adjustment in the number of Warrant Shares
purchasable hereunder shall be required unless such adjustment would require
an increase or decrease of at least one percent in the number of Warrant
Shares purchasable upon the exercise of each Warrant. No adjustment in the
Exercise Price payable hereunder shall be required unless such adjustment
would require an increase or decrease in the Exercise Price of at least $.01
per share. Any adjustments that by reason of this Section 6(e) are not
required to be made shall be carried forward and taken into account in any
subsequent adjustment and, notwithstanding the foregoing, all adjustments so
carried forward shall be made at the time of, and in connection with, each
exercise of any of the Warrants. All calculations shall be made to the
nearest one-thousandth of a share, or cent, as the case may be.
(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
-22-
contained in this Section 6; and the provisions of Sections 3, 4, 5 and 7,
inclusive, with respect to the Warrant Shares, shall apply on like terms to
any such Other Securities.
(g) CONSOLIDATIONS, MERGERS AND OTHER TRANSACTIONS. In case of any
consolidation of the Company with or merger of the Company into another
corporation or entity or in case of any sale or conveyance to another
corporation or entity of the property of the Company as an entirety or
substantially as an entirety, the Company or such successor or purchasing
corporation or entity, as the case may be, shall execute a binding agreement
agreeing that each Holder shall have the right thereafter upon payment of the
Exercise Price in effect immediately prior to such action to purchase upon
exercise of each Warrant the kind and amount of shares and other securities
and property which the Holder would have owned or have been entitled to
receive after the happening of such consolidation, merger, sale or conveyance
had such Warrant been exercised immediately prior to such action. The
Company shall not complete any such consolidation, merger, sale or conveyance
unless the agreement referred to in the foregoing sentence is executed and
delivered, is binding and the mailing thereof provided for in the next
sentence is done at the time of such completion. The Company shall mail by
first class mail, postage prepaid, to each Holder, notice of the execution of
and a copy of such agreement. Such agreement shall provide for adjustments,
which shall be as nearly equivalent as may be practicable to the adjustments
provided for in this Section 6 and for other protections and rights
(including without limitation registration rights) for the Holders as are as
nearly equivalent as may be practical to those they have under this Warrant
Agreement. The provisions of this Section 6 shall similarly apply to
successive consolidations, mergers, sales or conveyances. Each Holder of
Warrants shall be under no duty or responsibility to determine the
correctness of any provisions contained in any such agreement relating either
to the kind or amount of shares of stock or Other Securities or property
receivable upon exercise of Warrants or with respect to the method employed
and provided therein for any adjustments.
(h) NOTICE OF ADJUSTMENTS. Whenever the Exercise Price or the kind or
amount of securities purchasable under the Warrants shall be adjusted
pursuant to any of the provisions of this Warrant Agreement, the Company
shall forthwith thereafter cause to be sent to VKCO and SMM and all other
Holders a certificate setting forth the adjustments in the Exercise Price and
the number of shares and, in addition, setting forth in detail the facts
requiring such adjustments. In addition, the Company at its expense shall
within 90 days following the end of each of its fiscal years during the term
of this 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.
-23-
(i) NOTICE OF CERTAIN EVENTS. In the event of (i) any taking by the
Company of a record of the holders of any class of securities for the purpose
of determining the holders thereof who are entitled to receive any dividend
or other distribution, or any right to subscribe for, purchase or otherwise
acquire any shares of stock of any class or any Other Securities or property,
or to receive any other right or (ii) any capital reorganization of the
Company, any reclassification or recapitalization of the capital stock of the
Company or any transfer of all or substantially all of the assets of the
Company to, or consolidation or merger of the Company with or into, any other
corporation or other entity or (iii) any voluntary or involuntary dissolution
or liquidation of the Company, then and in each such event the Company will
mail or cause to be mailed to each Holder and, in addition, on the same date
as the earliest such mailing, telecopied and mailed to VKCO and SMM, a notice
specifying the date upon which any such record date is to be taken for the
purpose of such dividend, distribution or right, stating the amount and
character of such dividend, distribution or right and the date on which any
such reorganization, reclassification, recapitalization, transfer,
consolidation, merger, dissolution, liquidation or winding-up is to take
place and the time, if any, as of which the holders of record of Common Stock
(or Other Securities) shall be entitled to exchange their shares of Common
Stock (or Other Securities) for securities or other property deliverable upon
such reorganization, reclassification, recapitalization, transfer,
consolidation, merger, dissolution, liquidation or winding-up. Such notice
shall be mailed at least 15 business days prior to the proposed record date
therefor.
(j) OTHER EVENTS ALTERING EXERCISE PRICE. Upon the occurrence of any
event not specifically denominated in this Section 6 as altering the Exercise
Price and the amount of Common Stock purchasable upon the exercise of the
Warrants, if the reasonable exercise of the business judgment of the
independent members of the Board of Directors of the Company (or, if none,
the Board of Directors or the Company) requires, on equitable principles, the
alteration of the Exercise Price favorable to Holders and/or corresponding
adjustment favorable to Holders to the number of shares for which the
Warrants are exercisable, the Exercise Price and such number of shares shall
be equitably altered.
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.
-24-
(c) EXCHANGE OF WARRANTS. Subject to Section 3(a) hereof, upon
surrender for exchange of any Warrant to the Company, the Company at its
expense will promptly issue and deliver to the Holder thereof a new Warrant
or Warrants of like tenor, in the name of such Holder, calling in the
aggregate for the number of Warrant Shares called by the Warrants so
surrendered.
(d) REPLACEMENT OF WARRANTS. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
Warrants and, in the case of any such loss, theft or destruction, upon
delivery of an indemnity agreement by the Warrant Holder reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, upon surrender by the Holder and cancellation of such Warrants,
the Company at its expense will execute and deliver, in lieu thereof, new
Warrants of like tenor.
(e) REPORTING BY THE COMPANY. The Company agrees that, during the
term of the Warrants, it will use its best efforts to keep current in the
filing of all forms and other materials which it may be required to file with
the appropriate regulatory authority pursuant to the Exchange Act and all
other forms and reports required to be filed with any regulatory authority
having jurisdiction over the Company. The Company will take such further
action as any Holder may reasonably request, all to the extent required from
time to time to enable such Holder to sell Warrant Shares without
registration under the Act within the limitation of the exemptions provided
by (a) Rule 144 under the Act, as such Rule may be amended from time to time,
or (b) any similar rule or regulation hereafter adopted by the Commission.
8. OTHER HOLDERS. The Warrants are issued upon the following terms,
to all of which each Holder or owner thereof by the taking thereof consents
and agrees: (a) 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
-25-
furnished to the Company in writing. This Warrant Agreement and any of the
terms hereof may be changed, waived, discharged or terminated only by an
instrument in writing signed by the party against which enforcement of such
change, waiver, discharge or termination is sought. In addition and
notwithstanding the foregoing, the provisions of Section 3(c) and (d) and
Section 6 hereof cannot be changed, waived, discharged or terminated in a
manner adverse to the Holders without the written consent of one or more
Holder or Holders who collectively own, of record, that number of Warrants
and/or Warrant Shares which in the aggregate shall constitute two-thirds of
all Warrant Shares issued or issuable under this Agreement (excluding Warrant
Shares which have been previously sold, transferred or otherwise disposed of
in a registered public offering, pursuant to Rule 144 under the Act, as such
Rule may be amended from time to time, or pursuant to Regulation S, as such
regulation may be amended from time to time). The headings in this Warrant
Agreement are for purposes of reference only and shall not limit or otherwise
affect any of the terms hereof. This Warrant Agreement, together with the
forms of instruments annexed hereto, supersedes all prior negotiations and
all prior written and prior and contemporaneous oral agreements,
representations, warranties and inducements and constitutes the full and
complete agreement of the parties hereto with respect to the subject matter
hereof.
-26-
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: /s/ W. Xxxxxxx Xxx
-----------------------------------------------
Name: W. Xxxxxxx Xxx
Title: President and Chief Operating Officer
The foregoing Agreement is hereby confirmed and accepted as of the date first
above written.
XXX XXXXXX & COMPANY
By: /s/ Xxxxx X. Xxxxxxx
--------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Senior Vice President
XXXXXXX XXXXXX XXXXX INC.
By: /s/ Xxxxx X. XxXxxxx
--------------------------------
Name: Xxxxx X. XxXxxxx
Title: Vice President
-27-
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 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
-28-
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.
-29-
In witness whereof, the Company has caused this Warrant to be duly
executed.
U S LIQUIDS INC.
By:
-----------------------------------------
Name:
Title:
Attest:
--------------------------------------------
Name:
Title:
-30-
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
-31-
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)
-32-
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).
-33-
