EXHIBIT 10.31
CREDIT AGREEMENT
Dated as of February 6, 2001
Among
MOUNTAIN COMPRESSED AIR, INC., as Borrower
And
XXXXX FARGO ENERGY CAPITAL, INC., as Lender
TABLE OF CONTENTS
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ARTICLE I. CREDIT TERMS.......................................................1
SECTION 1.1 TERM LOAN......................................................1
SECTION 1.2 INTEREST/FEES..................................................1
SECTION 1.03 COLLECTION OF PAYMENTS.........................................1
SECTION 1.04 COLLATERAL.....................................................2
SECTION 1.05 SUBORDINATION OF DEBT..........................................2
ARTICLE II. REPRESENTATIONS AND WARRANTIES....................................2
SECTION 2.01 LEGAL STATUS...................................................2
SECTION 2.02 AUTHORIZATION AND VALIDITY.....................................2
SECTION 2.03 NO VIOLATION...................................................2
SECTION 2.04 LITIGATION.....................................................3
SECTION 2.05 CORRECTNESS OF FINANCIAL STATEMENT.............................3
SECTION 2.06 INCOME TAX RETURNS.............................................3
SECTION 2.07 NO SUBORDINATION...............................................3
SECTION 2.08 PERMITS, FRANCHISES............................................3
SECTION 2.09 ERISA..........................................................3
SECTION 2.10 OTHER OBLIGATIONS..............................................3
SECTION 2.11 ENVIRONMENTAL MATTERS..........................................4
SECTION 2.12 REAL PROPERTY..................................................4
SECTION 2.13 NO CONSENT.....................................................4
SECTION 2.14 QUALIFIED COMMERCIAL LOAN......................................4
ARTICLE III. CONDITIONS.......................................................4
SECTION 3.01................................................................4
ARTICLE IV. AFFIRMATIVE COVENANTS.............................................5
SECTION 4.01 PUNCTUAL PAYMENTS..............................................5
SECTION 4.02 ACCOUNTING RECORDS.............................................5
SECTION 4.03 FINANCIAL STATEMENTS...........................................5
SECTION 4.04 COMPLIANCE.....................................................6
SECTION 4.05 INSURANCE......................................................6
SECTION 4.06 FACILITIES.....................................................6
SECTION 4.07 TAXES AND OTHER LIABILITIES....................................6
SECTION 4.08 LITIGATION.....................................................6
SECTION 4.09 FINANCIAL CONDITION............................................6
SECTION 4.10 NOTICE TO LENDER...............................................7
ARTICLE V. NEGATIVE COVENANTS.................................................7
SECTION 5.01 USE OF FUNDS...................................................7
SECTION 5.02 CAPITAL EXPENDITURES...........................................7
SECTION 5.03 LEASE EXPENDITURES.............................................7
SECTION 5.04 OTHER INDEBTEDNESS.............................................8
SECTION 5.05 MERGER, CONSOLIDATION, TRANSFER OF ASSETS......................8
SECTION 5.06 GUARANTIES.....................................................8
SECTION 5.07 LOANS, ADVANCES, INVESTMENTS...................................8
SECTION 5.08 DIVIDENDS, DISTRIBUTIONS.......................................8
SECTION 5.09 PLEDGE OF ASSETS...............................................8
SECTION 5.10 SALES AND LEASEBACKS...........................................8
SECTION 5.11 NATURE OF BUSINESS.............................................8
SECTION 5.12 LIMITATION ON REAL PROPERTY LEASES.............................8
SECTION 5.13 TRANSACTIONS WITH AFFILIATES...................................9
ARTICLE VI. EVENTS OF DEFAULT.................................................9
SECTION 6.01 EVENTS OF DEFAULT.............................................9
SECTION 6.02 REMEDIES......................................................10
ARTICLE VII. MISCELLANEOUS...................................................10
SECTION 7.01 NO WAIVER.....................................................10
SECTION 7.02 NOTICES.......................................................10
SECTION 7.03 COSTS, EXPENSES AND ATTORNEYS' FEES...........................11
SECTION 7.04 SUCCESSORS, ASSIGNMENT........................................11
SECTION 7.05 AMENDMENT.....................................................11
SECTION 7.06 NO THIRD PARTY BENEFICIARIES..................................11
SECTION 7.07 TIME..........................................................12
SECTION 7.08 SEVERABILITY OF PROVISIONS....................................12
SECTION 7.09 COUNTERPARTS..................................................12
SECTION 7.10 GOVERNING LAW.................................................12
SECTION 7.11 SAVINGS CLAUSE................................................12
SECTION 7.12 RIGHT OF SETOFF; DEPOSIT ACCOUNTS.............................13
SECTION 7.13 BUSINESS PURPOSE..............................................13
SECTION 7.14 ARBITRATION...................................................13
SECTION 7.15 INDEMNIFICATION...............................................15
SECTION 7.16 WAIVER OF JURY TRIAL..........................................15
CREDIT AGREEMENT
THIS AGREEMENT is entered into as of February 6, 2001, by and between
MOUNTAIN COMPRESSED AIR, INC., a Texas corporation ("BORROWER"), and XXXXX FARGO
ENERGY CAPITAL, INC. ("LENDER").
RECITALS
Borrower has requested that Lender extend or continue credit to
Borrower as described below, and Lender has agreed to provide such credit to
Borrower on the terms and conditions contained herein.
NOW, THEREFORE, for valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, Lender and Borrower hereby agree as follows:
ARTICLE I.
CREDIT TERMS
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SECTION 1.1 TERM LOAN.
(a) TERM LOAN. Subject to the terms and conditions of this Agreement,
Lender hereby agrees to make a loan to Borrower in the principal amount of Two
Million Dollars ($2,000,000) ("TERM LOAN"), the proceeds of which shall be used
to finance a portion of the fixed assets of Mountain Air Drilling Service Co.,
Inc., a Colorado corporation (the "SELLER"). Borrower's obligation to repay the
Term Loan shall be evidenced by a promissory note substantially in the form of
EXHIBIT A attached hereto ("TERM NOTE"), all terms of which are incorporated
herein by this reference.
(b) REPAYMENT. Principal and interest on the Term Loan shall be repaid
in accordance with the provisions of the Term Note with a final maturity date of
January 31, 2004 ("MATURITY DATE").
SECTION 1.2 INTEREST/FEES.
(a) INTEREST. The outstanding principal balance of the Term Loan shall
bear interest at the rate of interest set forth in the Term Note.
(b) COMMITMENT FEE. Borrower shall pay to Lender a non-refundable
commitment fee equal to $20,000, which fee shall be due and payable in full
contemporaneously herewith.
(c) WARRANT. Borrower shall sell and issue to Lender a warrant to
purchase 1,350,000 shares of Borrower's common stock as more particularly set
forth in Warrant Purchase Agreement of even date herewith between Borrower and
Lender, attached hereto as EXHIBIT B.
SECTION 1.03 COLLECTION OF PAYMENTS. Borrower authorizes Lender to collect all
principal, interest, and fees due under each credit subject hereto by charging
Borrower's deposit account number [4496857319 with Xxxxx Fargo Bank Texas,
National Association ("WF BANK")], or any other deposit account maintained by
Borrower with WF Bank, for the full amount thereof. Should there be insufficient
funds in any such deposit account to pay all such sums when due, the full amount
of such deficiency shall be immediately due and payable by Borrower.
SECTION 1.04 COLLATERAL. As security for all indebtedness of Borrower to Lender
subject hereto and all of Borrower's obligations hereunder and all other Loan
Documents executed herewith, as same may be amended, modified or restated from
time to time (collectively "INDEBTEDNESS"), Borrower hereby grants to Lender
security interests in all of Borrower's assets, subject only to prior liens in
favor of WF Bank, evidenced by and subject to the terms of such security
agreements, financing statements, and other documents described on SCHEDULE I
hereto as Lender shall require, all in form and substance satisfactory to
Lender. Borrower shall reimburse Lender immediately upon demand for all
reasonable costs and expenses incurred by Lender in connection with any of the
foregoing security, including without limitation, filing and recording fees and
costs of appraisals, audits, title insurance, and attorneys' fees.
SECTION 1.05 SUBORDINATION OF DEBT. In connection with the Term Note, Borrower
is borrowing money from and incurring obligations to WF Bank (the "WF BANK
INDEBTEDNESS"), from Xxxxx Fargo Equipment Finance, Inc. (the "WF FINANCE
INDEBTEDNESS"), and from Seller (the "SELLER INDEBTEDNESS"). The obligation of
Borrower to repay the Term Note and other Indebtedness hereunder and the
priority of liens created under the Security Agreements are subject to the terms
of the [Intercreditor Agreement] by and among Lender, WF Bank and WF Finance
attached as EXHIBIT C hereto and Subordination Agreement by and among Lender, WF
Bank, WF Finance and Seller attached as EXHIBIT D hereto.
ARTICLE II.
REPRESENTATIONS AND WARRANTIES
------------------------------
Borrower makes the following representations and warranties to Lender,
which representations and warranties shall survive the execution of this
Agreement and shall continue in full force and effect until the full and final
payment, and satisfaction and discharge, of all obligations of Borrower to
Lender subject to this Agreement.
SECTION 2.01 LEGAL STATUS. Borrower is a corporation, duly organized and
existing and in good standing under the laws of the State of Texas, and is
qualified or licensed to do business (and is in good standing as a foreign
corporation, if applicable) in New Mexico, Utah, Colorado, and all other
jurisdictions in which such qualification or licensing is required or in which
the failure to so qualify or to be so licensed could have a material adverse
effect on Borrower.
SECTION 2.02 AUTHORIZATION AND VALIDITY. This Agreement, the Term Note, the
Warrant Purchase Agreement and each promissory note, contract, instrument and
other document required hereby or at any time hereafter delivered to Lender in
connection herewith (collectively, the "LOAN DOCUMENTS") have been duly
authorized, and upon their execution and delivery in accordance with the
provisions hereof will constitute legal, valid and binding agreements and
obligations of Borrower, enforceable in accordance with their respective terms.
SECTION 2.03 NO VIOLATION. The execution, delivery and performance by Borrower
of each of the Loan Documents do not violate any provision of any law or
regulation, or contravene any provision of the Articles of Incorporation or
By-Laws of Borrower, or result in any breach of or default under any contract,
obligation, indenture or other instrument to which Borrower is a party or by
which Borrower may be bound.
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SECTION 2.04 LITIGATION. There are no pending, or to the best of Borrower's
knowledge threatened, actions, claims, investigations, suits or proceedings by
or before any governmental authority, arbitrator, court or administrative agency
which could have a material adverse effect on the financial condition or
operation of Borrower other than those disclosed by Borrower to Lender in
writing prior to the date hereof.
SECTION 2.05 CORRECTNESS OF FINANCIAL STATEMENT. The pro forma financial
statement of Borrower has been prepared by the chief financial officer of
Borrower after doing the required due diligence for Borrower to represent and
warrant herein that such statement is complete and correct and presents fairly
the financial condition and projections of Borrower for the period therein
stated. The balance sheet of Borrower dated February 6, 2001, a true copy of
which has been delivered by Borrower to Lender prior to the date hereof, (a) is
complete and correct and presents fairly the financial condition of Borrower,
(b) discloses all liabilities of Borrower that are required to be reflected or
reserved against under generally accepted accounting principles, whether
liquidated or unliquidated, fixed or contingent, and (c) has been prepared in
accordance with generally accepted accounting principles consistently applied.
Since the date of such balance sheet there has been no material adverse change
in the financial condition of Borrower, nor has Borrower mortgaged, pledged,
granted a security interest in or otherwise encumbered any of its assets or
properties except in favor of Lender or as otherwise permitted by Lender in
writing.
SECTION 2.06 INCOME TAX RETURNS. Borrower has no knowledge of any pending
assessments or adjustments of its income tax payable with respect to any year.
SECTION 2.07 NO SUBORDINATION. There is no agreement, indenture, contract or
instrument to which Borrower is a party or by which Borrower may be bound that
requires the subordination in right of payment of any of Borrower's obligations
subject to this Agreement to any other obligation of Borrower except as provided
in the Subordination Agreement and Intercreditor Agreement.
SECTION 2.08 PERMITS, FRANCHISES. Borrower possesses, and will hereafter
possess, all permits, consents, approvals, franchises and licenses required and
rights to all trademarks, trade names, patents, and fictitious names, if any,
necessary to enable it to conduct the business in which it is now engaged in
compliance with applicable law.
SECTION 2.09 ERISA. Borrower is in compliance in all material respects with all
applicable provisions of the Employee Retirement Income Security Act of 1974, as
amended or recodified from time to time ("ERISA"); Borrower has not violated any
provision of any defined employee pension benefit plan (as defined in ERISA)
maintained or contributed to by Borrower (each, a "PLAN"); no Reportable Event
as defined in ERISA has occurred and is continuing with respect to any Plan
initiated by Borrower; Borrower has met its minimum funding requirements under
ERISA with respect to each Plan; and each Plan will be able to fulfill its
benefit obligations as they come due in accordance with the Plan documents and
under generally accepted accounting principles.
SECTION 2.10 OTHER OBLIGATIONS. Borrower is not in default on any obligation for
borrowed money, any purchase money obligation or any other material lease,
commitment, contract, instrument or obligation.
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SECTION 2.11 ENVIRONMENTAL MATTERS. Except as disclosed by Borrower to Lender in
writing prior to the date hereof, Borrower is in compliance, which compliance
could not reasonably be expected to have a material adverse effect (as such term
is used in SECTION 3.1(C) hereof) with all applicable federal or state
environmental, hazardous waste, health and safety statutes, and any rules or
regulations adopted pursuant thereto, which govern or affect any of Borrower's
operations and/or properties, including without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the Superfund
Amendments and Reauthorization Act of 1986, the Federal Resource Conservation
and Recovery Act of 1976, and the Federal Toxic Substances Control Act, as any
of the same may be amended, modified or supplemented from time to time. None of
the operations of Borrower is the subject of any federal or state investigation
evaluating whether any remedial action involving a material expenditure is
needed to respond to a release of any toxic or hazardous waste or substance into
the environment. Borrower has no material contingent liability in connection
with any release of any toxic or hazardous waste or substance into the
environment.
SECTION 2.12 REAL PROPERTY. The Borrower has no real property.
SECTION 2.13 NO CONSENT. The Borrower's execution, delivery and performance of
each of the Loan Documents, including this Agreement, to which the Borrower is a
party do not require the consent or approval of any other person or entity which
has not been obtained, including, without limitation, any regulatory authority
or governmental body of the United States of America or any state thereof or any
political subdivision of the United States of America or any state thereof.
SECTION 2.14 QUALIFIED COMMERCIAL LOAN. This loan is a Qualified Commercial Loan
as defined in Chapter 306 of the Texas Finance Code. This loan is not secured by
real property and is not a loan for the purpose of financing a business licensed
by the Motor Vehicle Board of the Texas Department of Transportation under
Section 4.01(a), Texas Motor Vehicle Commission (Article 4413(36), Vernon's
Texas Civil Statutes). Borrower has been advised by Lender to seek advice of an
attorney and an accountant in connection with this Qualified Commercial Loan and
Borrower has had the opportunity to seek the advice of an attorney and
accountant of Borrower's choice in connection with this Qualified Commercial
Loan.
ARTICLE III.
CONDITIONS
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SECTION 3.01 The obligation of Lender to extend any credit contemplated by this
Agreement is subject to the fulfillment to Lender's satisfaction of all of the
following conditions:
(a) APPROVAL OF LENDER COUNSEL. All legal matters incidental to the
extension of credit by Lender shall be satisfactory to Lender's counsel.
(b) DOCUMENTATION. Lender shall have received, in form and substance
satisfactory to Lender, such documents as Lender may require including, without
limitation, each of the documents described on SCHEDULE I attached hereto.
(c) FINANCIAL CONDITION. There shall have been no material adverse
change, as determined by Lender, in the financial condition or business of
Borrower or any guarantor hereunder, nor any material decline, as determined by
Lender, in the market value of any collateral required hereunder or a
substantial or material portion of the assets of Borrower or any such guarantor.
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(d) INSURANCE. Borrower shall have delivered to Lender evidence of
insurance coverage on all Borrower's property, in form, substance, amounts,
covering risks and issued by companies satisfactory to Lender, and where
required by Lender, with loss payable endorsements in favor of Lender, including
without limitation, policies of fire and extended coverage insurance covering
all real property collateral required hereby, with replacement cost and
mortgagee loss payable endorsements, and such policies of insurance against
specific hazards affecting any such real property as may be required by
governmental regulation or Lender, and all containing provisions that such
policies cannot be cancelled without thirty (30) days' prior written notice to
Lender.
(e) APPRAISALS. Lender shall have obtained, at Borrower's cost, an
appraisal of all collateral required hereby, and all improvements thereon,
issued by an appraiser acceptable to Lender and in form, substance and
reflecting values satisfactory to Lender, in its discretion.
ARTICLE IV.
AFFIRMATIVE COVENANTS
---------------------
Borrower covenants that so long as any liabilities (whether direct or
contingent, liquidated or unliquidated) of Borrower to Lender under any of the
Loan Documents remain outstanding, and until payment in full of all obligations
of Borrower subject hereto, Borrower shall, unless Lender otherwise consents in
writing:
SECTION 4.01 PUNCTUAL PAYMENTS. Punctually pay all principal, interest, fees or
other liabilities due under any of the Loan Documents at the times and place and
in the manner specified therein, and immediately upon demand by Lender, the
amount by which the outstanding principal balance of any credit subject hereto
at any time exceeds any limitation on borrowings applicable thereto.
SECTION 4.02 ACCOUNTING RECORDS. Maintain adequate books and records in
accordance with generally accepted accounting principles consistently applied,
and permit any representative of Lender, at any reasonable time, to inspect,
audit and examine such books and records, to make copies of the same, and to
inspect the properties of Borrower.
SECTION 4.03 FINANCIAL STATEMENTS. Provide or cause to be provided to Lender all
of the following, in form and detail satisfactory to Lender:
(a) not later than 90 days after and as of the end of each fiscal year,
an audited financial statement of Borrower, prepared by a recognized independent
accounting firm acceptable to Lender, to include consolidated balance sheets and
consolidated statements of income, retained earnings and cash flow, in
accordance with generally accepted accounting principles, together with an
unqualified opinion and such firm's covenant compliance calculations, certified
by a senior financial officer;
(b) not later than 45 days after and as of the end of each calendar
quarter, a financial statement of Borrower, prepared by Borrower, to include
consolidated balance sheets and consolidated statements of income, retained
earnings and cash flow, in accordance with generally accepted accounting
principles, together with covenant compliance calculations, certified by a
senior financial officer;
(c) not later than 25 days after and as of the end of each calendar
month, an aged listing of accounts receivable and accounts payable, and a
reconciliation of accounts, and not later than 25 days after and as of each
calendar month, a list of the names and addresses of all Borrower's account
debtors, all of which Borrower shall deliver to Xxxxx Fargo Wholesale Services,
0000 Xxxxxxxx Xx., 0xx Xxxxx, XXX X0000-000, Xxxxxx, Xxxxxxxx 00000;
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(d) contemporaneously with each annual and quarterly financial
statement of Borrower required hereby, a certificate of a senior financial
officer of Borrower that said financial statements are accurate, showing the
calculations confirming Borrower's compliance with all financial covenants and
that there exists no Event of Default nor any condition, act or event which with
the giving of notice or the passage of time or both would constitute an Event of
Default; and
(e) from time to time such other information as Lender may reasonably
request.
SECTION 4.04 COMPLIANCE. Preserve and maintain all licenses, permits,
governmental approvals, rights, privileges and franchises necessary for the
conduct of its business; and comply with the provisions of all documents
pursuant to which Borrower is organized and/or which govern Borrower's continued
existence and with the requirements of all laws, rules, regulations and orders
of any governmental authority applicable to Borrower and/or its business.
SECTION 4.05 INSURANCE. Maintain and keep in force insurance of the types and in
amounts customarily carried in lines of business similar to that of Borrower,
including but not limited to fire, extended coverage, public liability, flood,
property damage and workers' compensation, with all such insurance carried with
companies and in amounts satisfactory to Lender, and deliver to Lender from time
to time at Lender's request Schedules setting forth all insurance then in
effect.
SECTION 4.06 FACILITIES. Keep all properties useful or necessary to Borrower's
business in good repair and condition, and from time to time make necessary
repairs, renewals and replacements thereto so that such properties shall be
fully and efficiently preserved and maintained.
SECTION 4.07 TAXES AND OTHER LIABILITIES. Pay and discharge when due any and all
indebtedness, obligations, assessments and taxes, both real or personal,
including without limitation federal and state income taxes and state and local
property taxes and assessments, except such (a) as Borrower may in good faith
contest or as to which a bona fide dispute may arise, and (b) for which Borrower
has made provision, to Lender's satisfaction, for eventual payment thereof in
the event Borrower is obligated to make such payment.
SECTION 4.08 LITIGATION. Promptly give notice in writing to Lender of all
litigation pending or threatened against Borrower with claims in excess of
$25,000.00 in the aggregate.
SECTION 4.09 FINANCIAL CONDITION. Maintain Borrower's financial condition as
follows using generally accepted accounting principles consistently applied and
used consistently with prior practices (except to the extent modified by the
definitions herein):
(a) Tangible Net Worth not at any time less than eighty-five percent
(85%) of Tangible Net Worth as of the date hereof (plus seventy-five percent
(75%) of cumulative net income after the date hereof, excluding any fiscal
quarters in which net income is negative), plus one hundred percent (100%) of
equity offerings after the date hereof, with "TANGIBLE NET WORTH" defined herein
as the aggregate of total stockholders' equity plus any debt subordinated to the
Indebtedness hereunder less any intangible assets.
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(b) Fixed Charge Coverage Ratio not less than 1.1 to 1.0 for the twelve
(12) month period ending on the last day of each fiscal quarter, beginning with
the fiscal quarter ending March 31, 2001, with "EBITDA" defined herein as net
income plus interest charges, plus taxes, plus depreciation, amortization and
non-cash charges on a trailing twelve (12) month basis and with "FIXED CHARGE
COVERAGE RATIO" defined herein as (i) EBITDA plus applicable operating lease
payments less unfinanced capital expenditures divided by (ii) the aggregate of
total interest charges (excluding any applicable paid-in-kind ("PIK") charges),
scheduled principal payments, operating lease payments, cash dividends paid, and
paid taxes for the same period. Through September 30, 2001, EBITDA and these
charges, excluding unfinanced capital expenditures, will be annualized.
(c) Total Funded Debt to EBITDA Ratio not more than 3.25 to 1.0 through
December 31, 2001; 2.50 to 1.0 through December 31, 2002; and 2.0 to 1.0
thereafter, with "TOTAL FUNDED DEBT TO EBITDA RATIO" defined as Total Funded
Debt divided by the twelve (12) trailing months EBITDA. "TOTAL FUNDED DEBT" is
defined herein as all interest-bearing obligations of Borrower, whether secured
or unsecured, senior or subordinated, excluding the Seller Note. Through
September 30, 2001, EBITDA will be annualized to calculate the Total Funded Debt
to EBITDA Ratio.
SECTION 4.10 NOTICE TO LENDER. Promptly (but in no event more than five (5) days
after the occurrence of each such event or matter) give written notice to Lender
in reasonable detail of: (a) the occurrence of any Event of Default, or any
condition, event or act which with the giving of notice or the passage of time
or both would constitute an Event of Default; (b) any change in the name or the
organizational structure of Borrower; (c) the occurrence and nature of any
Reportable Event or Prohibited Transaction, each as defined in ERISA, or any
funding deficiency with respect to any Plan; or (d) any termination or
cancellation of any insurance policy which Borrower is required to maintain, or
any uninsured or partially uninsured loss through liability or property damage,
or through fire, theft or any other cause affecting Borrower's property in
excess of an aggregate of $250,000.00.
ARTICLE V.
NEGATIVE COVENANTS
------------------
Borrower further covenants that so long as Lender remains committed to
extend credit to Borrower pursuant hereto, or any liabilities (whether direct or
contingent, liquidated or unliquidated) of Borrower to Lender under any of the
Loan Documents remain outstanding, and until payment in full of all obligations
of Borrower subject hereto, Borrower will not without Lender's prior written
consent:
SECTION 5.01 USE OF FUNDS. The proceeds of credit extended hereunder shall be
used to finance the acquisition of a portion of the fixed assets of Seller and
for no other purposes.
SECTION 5.02 CAPITAL EXPENDITURES. Make any additional investment in fixed
assets in any fiscal year in excess of an aggregate of $500,000.00.
SECTION 5.03 LEASE EXPENDITURES. Incur with respect to any personal property
operating lease expense in any fiscal year in excess of an aggregate of
$750,000, including operating lease payments related to that certain
sale/leaseback transaction of even date herewith between Borrower and Xxxxx
Fargo Equipment Finance, Inc. ("WF FINANCE").
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SECTION 5.04 OTHER INDEBTEDNESS. Create, incur, assume or permit to exist any
indebtedness or liabilities resulting from borrowings, loans or advances,
whether secured or unsecured, matured or unmatured, liquidated or unliquidated,
joint or several, except (a) the liabilities of Borrower to Lender, and (b) any
other liabilities of Borrower existing as of, and described in the Subordination
Agreement and the Intercreditor Agreement.
SECTION 5.05 MERGER, CONSOLIDATION, TRANSFER OF ASSETS. Merge into or
consolidate with any other entity; make any substantial change in the nature of
Borrower's business as conducted as of the date hereof; acquire all or
substantially all of the assets of any other entity; nor sell, lease, transfer
or otherwise dispose of all or a substantial or material portion of Borrower's
assets except in the ordinary course of its business.
SECTION 5.06 GUARANTIES. Guarantee or become liable in any way as surety,
endorser (other than as endorser of negotiable instruments for deposit or
collection in the ordinary course of business), accommodation endorser or
otherwise for, nor pledge or hypothecate any assets of Borrower as security for,
any liabilities or obligations of any other person or entity, except any of the
foregoing in favor of Lender.
SECTION 5.07 LOANS, ADVANCES, INVESTMENTS. Make any loans or advances to or
investments in any person or entity, except any of the foregoing existing as of,
and disclosed to Lender prior to, the date hereof.
SECTION 5.08 DIVIDENDS, DISTRIBUTIONS. Declare or pay any dividend or
distribution either in cash, stock or any other property on Borrower's stock now
or hereafter outstanding, nor redeem, retire, repurchase or otherwise acquire
any shares of any class of Borrower's stock now or hereafter outstanding except
as provided in the Warrant Purchase Agreement.
SECTION 5.09 PLEDGE OF ASSETS. Mortgage, pledge, grant or permit to exist a
security interest in, or lien upon, all or any portion of Borrower's assets now
owned or hereafter acquired, except any of the foregoing in favor of Lender or
which is existing as of, and described under the Intercreditor Agreement.
SECTION 5.10 SALES AND LEASEBACKS. Enter into any arrangement, directly or
indirectly, with any person whereby Borrower shall sell or transfer any of its
property, whether now owned or hereafter acquired, and whereby Borrower shall
then or thereafter rent or lease as lessee such property or any part thereof or
other property which Borrower intends to use for substantially the same purpose
or purposes as the property is sold or transferred (except for that certain
sale/leaseback transaction of even date herewith between Borrower and WF
Finance).
SECTION 5.11 NATURE OF BUSINESS. Allow any material change to be made in the
character of Borrower's business as an oilfield service provider.
SECTION 5.12 LIMITATION ON REAL PROPERTY LEASES. Create, incur, assume or permit
to exist any obligation for the payment of rent or hire of real property of any
kind whatsoever under leases or lease agreements which would cause the aggregate
amount of all payments made by Borrower pursuant to all such leases or lease
agreements to exceed $50,000.00 in any twelve (12) month period.
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SECTION 5.13 TRANSACTIONS WITH AFFILIATES. Enter into any transaction, including
without limitation, any purchase, sale, lease or exchange of property or the
rendering of any service, with any affiliate of Borrower unless such
transactions are in the ordinary course of its business and are upon fair and
reasonable terms no less favorable to it to Borrower than Borrower would obtain
in a comparable arm's-length transaction with a person not an affiliate.
ARTICLE VI.
EVENTS OF DEFAULT
-----------------
SECTION 6.01 EVENTS OF DEFAULT. The occurrence of any of the following
shall constitute an "EVENT OF DEFAULT" under this Agreement:
(a) Borrower shall fail to pay when due any principal, interest, fees
or other amounts payable under any of the Loan Documents.
(b) Any financial statement or certificate furnished to Lender in
connection with, or any representation or warranty made by Borrower or any other
party under this Agreement or any other Loan Document shall prove to be
incorrect, false or misleading in any material respect when furnished or made.
(c) Any default in the performance of or compliance with any
obligation, agreement or other provision contained herein or in any other Loan
Document (other than those referred to in SUBSECTIONS 6.1(A) and (B) and notice
required under SECTION 4.10 above), and with respect to any such default which
by its nature can be cured, such default shall continue for a period of twenty
(20) days from its occurrence.
(d) Any default in the payment or performance of any obligation, or any
defined event of default, under the terms of any contract or instrument (other
than any of the Loan Documents) pursuant to which Borrower or any guarantor
hereunder has incurred any debt or other liability to any person or entity,
including Lender.
(e) The filing of a notice of judgment lien against Borrower or any
guarantor hereunder; or the recording of any abstract of judgment against
Borrower or any guarantor hereunder in any county in which Borrower or such
guarantor has an interest in real property; or the service of a notice of levy
and/or of a writ of attachment or execution, or other like process, against the
assets of Borrower or any guarantor hereunder; or the entry of a judgment
against Borrower or any guarantor hereunder. Notwithstanding the foregoing,
there shall not be an Event of Default upon the filing of notices of judgment
lien, the recording of abstracts of judgment, or the entries of judgment against
Borrower or any guarantor hereunder if the aggregate amount of all such
judgments is less than $50,000 and such judgments are released within sixty (60)
days of the filing, recording or entry of such judgment.
(f) Borrower or any guarantor hereunder shall become insolvent, or
shall suffer or consent to or apply for the appointment of a receiver, trustee,
custodian or liquidator of itself or any of its property, or shall generally
fail to pay its debts as they become due, or shall make a general assignment for
the benefit of creditors; Borrower or any guarantor hereunder shall file a
voluntary petition in bankruptcy, or seeking reorganization, in order to effect
a plan or other arrangement with creditors or any other relief under the
Bankruptcy Reform Act, Title 11 of the United States Code, as amended or
recodified from time to time ("BANKRUPTCY CODE"), or under any state or federal
law granting relief to debtors, whether now or hereafter in effect; or any
involuntary petition or proceeding pursuant to the Bankruptcy Code or any other
-9-
applicable state or federal law relating to bankruptcy, reorganization or other
relief for debtors is filed or commenced against Borrower or any guarantor
hereunder, or Borrower or any such guarantor shall file an answer admitting the
jurisdiction of the court and the material allegations of any involuntary
petition; or Borrower or any such guarantor shall be adjudicated a bankrupt, or
an order for relief shall be entered against Borrower or any such guarantor by
any court of competent jurisdiction under the Bankruptcy Code or any other
applicable state or federal law relating to bankruptcy, reorganization or other
relief for debtors.
(g) There shall exist or occur any event or condition which Lender in
good faith believes impairs, or is substantially likely to impair, the prospect
of payment or performance by Borrower of its obligations under any of the Loan
Documents.
(h) The dissolution or liquidation of Borrower; or Borrower, or any of
its directors or stockholders, shall take action seeking to effect the
dissolution or liquidation of Borrower.
(i) Any change in ownership during the term of this Agreement of an
aggregate of twenty-five percent (25%) or more of the common stock of
stockholders' equity in Borrower.
(j) Any "EVENT OF DEFAULT" as defined under the WF Bank Loan Documents,
the WF Finance Loan Documents or Seller's Note or any amendments, modifications
or restatements thereof.
SECTION 6.02 REMEDIES. Upon (a) the occurrence of any Event of Default under
SUBSECTION 6.1(F) above, all Indebtedness including principal and accrued and
unpaid interest outstanding under each of the Loan Documents shall become
automatically due and payable and (b) upon the occurrence of any other Event of
Default, all Indebtedness including all principal and accrued and unpaid
interest outstanding under each of the Loan Documents, any term thereof to the
contrary notwithstanding, shall at Lender's option and without notice become
immediately due and payable; in each case without presentment, demand, or any
notices of any kind, including without limitation notice of nonperformance,
notice of protest, protest, notice of dishonor, notice of intention to
accelerate or notice of acceleration, all of which are hereby expressly waived
by each Borrower. Upon acceleration of the Indebtedness, Lender shall have all
rights, powers and remedies available under each of the Loan Documents, or
accorded by law, including without limitation the right to resort to any or all
security for any credit subject hereto and to exercise any or all of the rights
of a beneficiary or secured party pursuant to applicable law. All rights, powers
and remedies of Lender may be exercised at any time by Lender and from time to
time after the occurrence of an Event of Default, are cumulative and not
exclusive, and shall be in addition to any other rights, powers or remedies
provided by law or equity.
ARTICLE VII.
MISCELLANEOUS
-------------
SECTION 7.01 NO WAIVER. No delay, failure or discontinuance of Lender in
exercising any right, power or remedy under any of the Loan Documents shall
affect or operate as a waiver of such right, power or remedy; nor shall any
single or partial exercise of any such right, power or remedy preclude, waive or
otherwise affect any other or further exercise thereof or the exercise of any
other right, power or remedy. Any waiver, permit, consent or approval of any
kind by Lender of any breach of or default under any of the Loan Documents must
be in writing and shall be effective only to the extent set forth in such
writing.
SECTION 7.02 NOTICES. All notices, requests and demands which any party is
required or may desire to give to any other party under any provision of this
Agreement must be in writing delivered to each party at the following address:
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BORROWER: MOUNTAIN COMPRESSED AIR, INC.
0000 Xxxxxxxx Xxxx.
Xxxxx Xxxxxxxx, XX 00000
LENDER: XXXXX FARGO ENERGY CAPITAL, INC.
0000 Xxxxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
or to such other address as any party may designate by written notice to all
other parties. Each such notice, request and demand shall be deemed given or
made as follows: (a) if sent by hand delivery, upon delivery; (b) if sent by
mail, upon the earlier of the date of receipt or three (3) days after deposit in
the U.S. mail, first class and postage prepaid; and (c) if sent by telecopy,
upon receipt.
SECTION 7.03 COSTS, EXPENSES AND ATTORNEYS' FEES. Borrower shall pay to Lender
immediately upon demand the full amount of all payments, advances, charges,
costs and expenses, including reasonable attorneys' fees (to include outside
counsel fees), expended or incurred by Lender in connection with (a) the
negotiation and preparation of this Agreement and the other Loan Documents,
Lender's continued administration hereof and thereof, and the preparation of any
amendments and waivers hereto and thereto, (b) the enforcement of Lender's
rights and/or the collection of any amounts which become due to Lender under any
of the Loan Documents, (c) the prosecution or defense of any action in any way
related to any of the Loan Documents, including without limitation, any action
for declaratory relief, whether incurred at the trial or appellate level, in an
arbitration proceeding or otherwise, and including any of the foregoing incurred
in connection with any bankruptcy proceeding (including without limitation, any
adversary proceeding, contested matter or motion brought by Lender or any other
person) relating to any Borrower or any other person or entity, (d) the
performance, prior to the date hereof and after any Event of Default, of an
asset appraisal by an independent qualified appraiser approved by Lender; and
(e) up to two (2) collateral audits performed by Lender per fiscal year with
respect to the collateral or any other matters relating to the loans provided
for in this Agreement and/or Borrower's compliance with the terms and provisions
of this Agreement; provided, however, Lender shall coordinate with WF Bank on
performing such collateral audits and Borrower's out-of-pocket cost and expense
under this SUBSECTION (E) shall be limited to $3,500 per collateral audit.
SECTION 7.04 SUCCESSORS, ASSIGNMENT. This Agreement shall be binding upon and
inure to the benefit of the heirs, executors, administrators, legal
representatives, successors and assigns of the parties; provided however, that
Borrower may not assign or transfer its interest hereunder without Lender's
prior written consent. Lender reserves the right to sell, assign, transfer,
negotiate or grant participations in all or any part of, or any interest in,
Lender's rights and benefits under each of the Loan Documents. In connection
therewith, Lender may disclose all documents and information which Lender now
has or may hereafter acquire relating to any credit subject hereto, Borrower or
its business, any guarantor hereunder or the business of such guarantor, or any
collateral required hereunder.
SECTION 7.05 AMENDMENT. This Agreement may be amended or modified only in
writing signed by each party hereto.
SECTION 7.06 NO THIRD PARTY BENEFICIARIES. This Agreement is made and entered
into for the sole protection and benefit of the parties hereto and their
respective permitted successors and assigns, and no other person or entity shall
be a third party beneficiary of, or have any direct or indirect cause of action
or claim in connection with, this Agreement or any other of the Loan Documents
to which it is not a party.
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SECTION 7.07 TIME. Time is of the essence of each and every provision of this
Agreement and each other of the Loan Documents.
SECTION 7.08 SEVERABILITY OF PROVISIONS. If any provision of this Agreement
shall be prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity without
invalidating the remainder of such provision or any remaining provisions of this
Agreement.
SECTION 7.09 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which when executed and delivered shall be deemed to be an
original, and all of which when taken together shall constitute one and the same
Agreement.
SECTION 7.10 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas.
SECTION 7.11 SAVINGS CLAUSE. It is the intention of the parties to comply
strictly with applicable usury laws. Accordingly, notwithstanding any provision
to the contrary in the Loan Documents, in no event shall any Loan Documents
require the payment or permit the payment, taking, reserving, receiving,
collection or charging of any sums constituting interest under applicable laws
that exceed the maximum amount permitted by such laws, as the same may be
amended or modified from time to time (the "MAXIMUM RATE"). If any such excess
interest is called for, contracted for, charged, taken, reserved or received in
connection with any Loan Documents, or in any communication by or any other
person to Borrower or any other person, or in the event that all or part of the
principal or interest hereof or thereof shall be prepaid or accelerated, so that
under any of such circumstances or under any other circumstance whatsoever the
amount of interest contracted for, charged, taken, reserved or received on the
amount of principal actually outstanding from time to time under the Loan
Documents shall exceed the Maximum Rate, then in such event it is agreed that:
(i) the provisions of this Paragraph shall govern and control; (ii) neither
Borrower nor any other person or entity now or hereafter liable for the payment
of any Loan Documents shall be obligated to pay the amount of such interest to
the extent it is in excess of the Maximum Rate; (iii) any such excess interest
which is or has been received by Lender, notwithstanding this paragraph, shall
be credited against the then unpaid principal balance hereof or thereof, or if
any of the Loan Documents has been or would be paid in full by such credit,
refunded to Borrower; and (iv) the provisions of each of the Loan Documents, and
any other communication to Borrower, shall immediately be deemed reformed and
such excess interest reduced, without the necessity of executing any other
document, to the Maximum Rate. The right to accelerate the maturity of the Loan
Documents does not include the right to accelerate, collect or charge unearned
interest, but only such interest that has otherwise accrued as of the date of
acceleration. Without limiting the foregoing, all calculations of the rate of
interest contracted for, charged, taken, reserved or received in connection with
any of the Loan Documents which are made for the purpose of determining whether
such rate exceeds the Maximum Rate shall be made to the extent permitted by
applicable laws by amortizing, prorating, allocating and spreading during the
period of the full term of such Loan Documents, including all prior and
subsequent renewals and extensions hereof or thereof, all interest at any time
contracted for, charged, taken, reserved or received by Lender. The terms of
this Paragraph shall be deemed to be incorporated into each of the other Loan
Documents.
To the extent that either Chapter 303 or 306, or both, of the Texas
Finance Code apply in determining the Maximum Rate, Lender hereby elects to
determine the applicable rate ceiling by using the weekly ceiling from time to
time in effect, subject to Lender's right subsequently to change such method in
accordance with applicable law, as the same may be amended or modified from time
to time.
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SECTION 7.12 RIGHT OF SETOFF; DEPOSIT ACCOUNTS. Upon and after the occurrence of
an Event of Default, (a) Borrower hereby authorizes Lender and WF Bank, acting
on Lender's behalf, at any time and from time to time, without notice, which is
hereby expressly waived by each Borrower, and whether or not Lender shall have
declared any credit subject hereto to be due and payable in accordance with the
terms hereof, to set off against, and to appropriate and apply to the payment
of, Borrower's obligations and liabilities under the Loan Documents (whether
matured or unmatured, fixed or contingent, liquidated or unliquidated), any and
all amounts owing by Lender to Borrower (whether payable in U.S. dollars or any
other currency, whether matured or unmatured, and in the case of deposits,
whether general or special (except trust and escrow accounts), time or demand
and however evidenced), and (b) pending any such action, to the extent
necessary, to hold such amounts as collateral to secure such obligations and
liabilities and to return as unpaid for insufficient funds any and all checks
and other items drawn against any deposits so held as Lender, in its sole
discretion, may elect. Borrower hereby grants to Lender a security interest in
all deposits and accounts maintained with Lender and with any other financial
institution to secure the payment of all obligations and liabilities of Borrower
to Lender under the Loan Documents subject only to prior liens and security
interests in favor of WF Bank.
SECTION 7.13 BUSINESS PURPOSE. Borrower represents and warrants that each credit
subject hereto is for a business, commercial, investment, agricultural or other
similar purpose and not primarily for a personal, family or household use.
SECTION 7.14 ARBITRATION.
(a) ARBITRATION. The parties hereto agree, upon demand by any party, to
submit to binding arbitration all claims, disputes and controversies between or
among them (and their respective employees, officers, directors, attorneys, and
other agents), whether in tort, contract or otherwise arising out of or relating
to in any way (i) the loan and related Loan Documents which are the subject of
this Agreement and its negotiation, execution, collateralization,
administration, repayment, modification, extension, substitution, formation,
inducement, enforcement, default or termination; or (ii) requests for additional
credit.
(b) GOVERNING RULES. Any arbitration proceeding will (i) proceed in a
location in Texas selected by the American Arbitration Association ("AAA"); (ii)
be governed by the Federal Arbitration Act (Title 9 of the United States Code),
notwithstanding any conflicting choice of law provision in any of the documents
between the parties; and (iii) be conducted by the AAA, or such other
administrator as the parties shall mutually agree upon, in accordance with the
AAA's commercial dispute resolution procedures, unless the claim or counterclaim
is at least $1,000,000.00 exclusive of claimed interest, arbitration fees and
costs in which case the arbitration shall be conducted in accordance with the
AAA's optional procedures for large, complex commercial disputes (the commercial
dispute resolution procedures or the optional procedures for large, complex
commercial disputes to be referred to, as applicable, as the "RULES"). If there
is any inconsistency between the terms hereof and the Rules, the terms and
procedures set forth herein shall control. Any party who fails or refuses to
submit to arbitration following a demand by any other party shall bear all costs
and expenses incurred by such other party in compelling arbitration of any
dispute. Nothing contained herein shall be deemed to be a waiver by any party
that is a Lender of the protections afforded to it under 12 U.S.C. ss.91 or any
similar applicable state law.
-13-
(c) NO WAIVER OF PROVISIONAL REMEDIES, SELF-HELP AND FORECLOSURE. The
arbitration requirement does not limit the right of any party to (i) foreclose
against real or personal property collateral; (ii) exercise self-help remedies
relating to collateral or proceeds of collateral such as setoff or repossession;
or (iii) obtain provisional or ancillary remedies such as replevin, injunctive
relief, attachment or the appointment of a receiver, before during or after the
pendency of any arbitration proceeding. This exclusion does not constitute a
waiver of the right or obligation of any party to submit any dispute to
arbitration or reference hereunder, including those arising from the exercise of
the actions detailed in Sections (i), (ii) and (iii) of this paragraph.
(d) ARBITRATOR QUALIFICATIONS AND POWERS. Any arbitration proceeding in
which the amount in controversy is $5,000,000.00 or less will be decided by a
single arbitrator selected according to the Rules, and who shall not render an
award of greater than $5,000,000.00. Any dispute in which the amount in
controversy exceeds $5,000,000.00 shall be decided by majority vote of a panel
of three arbitrators; provided however, that all three arbitrators must actively
participate in all hearings and deliberations. The arbitrator will be a neutral
attorney licensed in the State of Texas with a minimum of ten years experience
in the substantive law applicable to the subject matter of the dispute to be
arbitrated. The arbitrator will determine whether or not an issue is
arbitratable and will give effect to the statutes of limitation in determining
any claim. In any arbitration proceeding the arbitrator will decide (by
documents only or with a hearing at the arbitrator's discretion) any pre-hearing
motions which are similar to motions to dismiss for failure to state a claim or
motions for summary adjudication. The arbitrator shall resolve all disputes in
accordance with the substantive law of Texas and may grant any remedy or relief
that a court of such state could order or grant within the scope hereof and such
ancillary relief as is necessary to make effective any award. The arbitrator
shall also have the power to award recovery of all costs and fees, to impose
sanctions and to take such other action as the arbitrator deems necessary to the
same extent a judge could pursuant to the Federal Rules of Civil Procedure, the
Texas Rules of Civil Procedure or other applicable law. Judgment upon the award
rendered by the arbitrator may be entered in any court having jurisdiction. The
institution and maintenance of an action for judicial relief or pursuit of a
provisional or ancillary remedy shall not constitute a waiver of the right of
any party, including the plaintiff, to submit the controversy or claim to
arbitration if any other party contests such action for judicial relief.
(e) DISCOVERY. In any arbitration proceeding discovery will be
permitted in accordance with the Rules. All discovery shall be expressly limited
to matters directly relevant to the dispute being arbitrated and must be
completed no later than 20 days before the hearing date and within 180 days of
the filing of the dispute with the AAA. Any requests for an extension of the
discovery periods, or any discovery disputes, will be subject to final
determination by the arbitrator upon a showing that the request for discovery is
essential for the party's presentation and that no alternative means for
obtaining information is available.
(f) CLASS PROCEEDINGS AND CONSOLIDATIONS. The resolution of any dispute
arising pursuant to the terms of this Agreement shall be determined by a
separate arbitration proceeding and such dispute shall not be consolidated with
other disputes or included in any class proceeding.
(g) PAYMENT OF ARBITRATION COSTS AND FEES. The arbitrator shall award
all costs and expenses of the arbitration proceeding.
(h) MISCELLANEOUS. To the maximum extent practicable, the AAA, the
arbitrators and the parties shall take all action required to conclude any
arbitration proceeding within 180 days of the filing of the dispute with the
AAA. No arbitrator or other party to an arbitration proceeding may disclose the
existence, content or results thereof, except for disclosures of information by
a party required in the ordinary course of its business or by applicable law or
regulation. If more than one agreement for arbitration by or between the parties
potentially applies to a dispute, the arbitration provision most directly
related to the Loan Documents or the subject matter of the dispute shall
control. This arbitration provision shall survive termination, amendment or
expiration of any of the Loan Documents or any relationship between the parties.
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SECTION 7.15 INDEMNIFICATION. Borrower agrees to indemnify Lender, each assignee
or participant hereunder, each of their Affiliates and each of their officers,
directors, employees, representatives, agents, attorneys, accountants and
experts ("INDEMNIFIED PARTIES") from, hold each of them harmless against and
promptly upon demand pay or reimburse each of them for, the Indemnity Matters
(hereafter defined) which may be incurred by or asserted against or involve any
of them (whether or not any of them is designated a party thereto) as a result
of, arising out of or in any way related to (i) any actual or proposed use by
Borrower of the proceeds of any of the Loans, (ii) the execution, delivery and
performance of the Loan Documents, (iii) the operations of the business of
Borrower, (iv) the failure of Borrower to comply with the terms of any Loan
Document or this Agreement, or with any applicable law, (v) any inaccuracy of
any representation or any breach of any warranty of Borrower set forth in any of
the Loan Documents, (vi) any assertion that any Indemnified Party was not
entitled to receive the proceeds received pursuant to the Loan Documents or
(vii) any other aspect of the Loan Documents, including, without limitation, the
reasonable fees and disbursements of counsel and all other expenses incurred in
connection with investigating, defending or preparing to defend any such action,
suit, proceeding (including any investigations, litigation or inquiries) or
claim and including all Indemnity Matters arising by reason of the ordinary
negligence of any Indemnified Party, but excluding all Indemnity Matters arising
solely by reason of claims between the Lender or any assignee or participant, or
any such party's shareholders against Lender or any assignee or participant or
by reason of the gross negligence or willful misconduct on the part of the
Indemnified Party. "INDEMNITY MATTERS" shall mean any and all actions, suits,
proceedings (including any investigations, litigation or inquiries), claims,
demands and causes of action made or threatened against a person and, in
connection therewith, all losses, liabilities, damages (including, without
limitation, consequential damages) or reasonable costs and expenses of any kind
or nature whatsoever incurred by such person whether caused by the sole or
concurrent negligence of such person seeking indemnification.
SECTION 7.16 WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW, BORROWER HEREBY IRREVOCABLY AND EXPRESSLY WAIVES ALL RIGHT TO A TRIAL BY
JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM (WHETHER BASED UPON CONTRACT,
TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE
LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY OR THE ACTIONS OF LENDER
IN THE NEGOTIATION, ADMINISTRATION OR ENFORCEMENT THEREOF.
NOTICE: THIS DOCUMENT AND ALL OTHER DOCUMENTS RELATING TO THE INDEBTEDNESS
CONSTITUTE A WRITTEN LOAN AGREEMENT WHICH REPRESENTS THE FINAL AGREEMENT BETWEEN
THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES RELATING TO THE INDEBTEDNESS.
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[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.
SIGNATURE PAGES TO FOLLOW.]
-16-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first written above.
XXXXX FARGO ENERGY CAPITAL, INC.
By:/s/ XXXX XXXXXXX
--------------------------------------
Xxxx Xxxxxxx
Senior Vice President
MOUNTAIN COMPRESSED AIR, INC.
By: /s/ XXXXXXX X. XXXXXXXXXXXX
--------------------------------------
Xxxxxxx X. Xxxxxxxxxxxx
Chairman and Chief Executive Officer
-17-
EXHIBITS
--------
A. Term Note
B. Warrant Purchase Agreement
C. Subordination Agreement
D. Intercreditor Agreement
EXHIBIT A
TERM NOTE
---------
2,000,000.00 Houston, Texas
February 6, 2001
FOR VALUE RECEIVED, the undersigned MOUNTAIN COMPRESSED AIR, INC., a
Texas corporation ("BORROWER"), promises to pay to the order of XXXXX FARGO
ENERGY CAPITAL, INC., Texas corporation ("LENDER") at its office at 0000
Xxxxxxxxx, Xxxxx 000, Xxxxxxx, Xxxxx 00000, or at such other place as the holder
hereof may designate, in lawful money of the United States of America and in
immediately available funds, the principal sum of Two Million Dollars
($2,000,000.00), with interest thereon as set forth herein. This Note is issued
in connection with that certain Credit Agreement between Lender and Borrower of
even date herewith (the "CREDIT AGREEMENT"), and is secured as provided therein
by the Security Documents. All capitalized terms not otherwise defined herein
are defined in the Credit Agreement.
INTEREST:
(a) INTEREST. Borrower agrees to pay interest at Lender's address
listed above on the unpaid principal note hereof and, to the extent permitted by
law, the accrued interest in respect hereof from time to time from the date
hereof until payment in full of the principal amount hereof and accrued interest
hereon, at a rate equal to twelve percent (12%) per annum. Interest shall be
computed on the basis of a 360-day year, actual days elapsed, unless such
calculation would result in a usurious rate, in which case interest shall be
computed on the basis of a 365/366-day year, as the case may be, actual days
elapsed. Interest shall be payable quarterly commencing on April 1, 2001, and
continuing on the first day of each succeeding third month thereof until
"MATURITY" as hereinbelow defined.
(b) DEFAULT INTEREST. From and after the maturity date of this Note, or
such earlier date as all principal owing hereunder becomes due and payable by
acceleration or otherwise, the outstanding principal balance of this Note shall
bear interest until paid in full at an increased rate per annum (computed on the
basis of a 360-day year, actual days elapsed, unless such calculation would
result in a usurious rate, in which case interest shall be computed on the basis
of a 365/366-day year, as the case may be, actual days elapsed) equal to
fourteen percent (14%) per annum, but in no event at a rate greater than the
Maximum Rate.
REPAYMENT AND PREPAYMENT:
(a) REPAYMENT. Principal shall be payable upon maturity hereof, January
31, 2004 ("MATURITY") or such sooner date if principal under this Note is
accelerated as provided herein.
(b) APPLICATION OF PAYMENTS. Each payment made on this Note shall be
credited first, to any interest then due and second, to the outstanding
principal balance hereof.
(c) PREPAYMENT. Borrower may prepay this Note provided that all terms
in the Credit Agreement and herein are complied with (including the payment of
any prepayment penalties required in the Credit Agreement), at any time upon one
day prior notice and in the minimum amount of One Hundred Thousand Dollars
($100,000); PROVIDED, HOWEVER, that if the outstanding principal balance of such
portion of this Note is less than said amount, the minimum prepayment amount
shall be the entire outstanding principal hereof.
EVENTS OF DEFAULT:
(a) EVENTS OF DEFAULT. The occurrence of an Event of Default under the
Credit Agreement shall constitute an "Event of Default" under this Note.
(b) REMEDIES. Upon (i) the occurrence of any Event of Default under
SUBSECTION 6.1 (F), all sums of principal and accrued and unpaid interest
outstanding hereunder shall become automatically due and payable and (ii) upon
the occurrence of any other Event of Default, the holder of this Note, at the
holder's option, may declare all sums of principal and accrued and unpaid
interest outstanding hereunder to be immediately due and payable; in each case
without presentment, demand, or any notices of any kind, including without
limitation notice of nonperformance, notice of protest, protest, notice of
dishonor, notice of intention to accelerate or notice of acceleration, all of
which are expressly waived by Borrower, and the obligation, if any, of the
holder to extend any further credit hereunder shall immediately cease and
terminate. Borrower shall pay to the holder immediately upon demand the full
amount of all payments, advances, charges, costs and expenses, including
reasonable attorneys' fees (to include outside counsel fees and all allocated
costs of the holder's in-house counsel to the extent permissible), expended or
incurred by the holder in connection with the enforcement of the holder's rights
and/or the collection of any amounts which become due to the holder under this
Note, and the prosecution or defense of any action in any way related to this
Note, including without limitation, any action for declaratory relief, whether
incurred at the trial or appellate level, in an arbitration proceeding or
otherwise, and including any of the foregoing incurred in connection with any
bankruptcy proceeding (including without limitation, any adversary proceeding,
contested matter or motion brought by Lender or any other person) relating to
any Borrower or any other person or entity.
MISCELLANEOUS:
(a) GOVERNING LAW. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS. THIS NOTE IS PERFORMABLE IN
XXXXXX COUNTY, TEXAS. ANY ACTION OR PROCEEDING UNDER OR IN CONNECTION WITH THIS
NOTE AGAINST BORROWER OR ANY THIRD PARTY OBLIGOR MAY BE BROUGHT IN ANY STATE OR
FEDERAL COURT IN XXXXXX COUNTY, TEXAS. BORROWER AND EACH THIRD PARTY OBLIGOR
HEREBY IRREVOCABLY (I) SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF SUCH COURTS,
AND (II) WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF
ANY SUCH ACTION OR PROCEEDING BROUGHT IN SUCH COURT OR THAT SUCH COURT IS AN
INCONVENIENT FORUM. NOTHING HEREIN SHALL AFFECT THE RIGHT OF LENDER TO BRING ANY
ACTION OR PROCEEDING AGAINST BORROWER OR ANY THIRD PARTY OBLIGOR OR WITH RESPECT
TO ANY COLLATERAL IN ANY STATE OR FEDERAL COURT IN ANY OTHER JURISDICTION. ANY
ACTION OR PROCEEDING BY BORROWER OR ANY THIRD PARTY OBLIGOR AGAINST LENDER SHALL
BE BROUGHT ONLY IN A COURT LOCATED IN XXXXXX COUNTY, TEXAS.
A-2
(b) SAVINGS CLAUSE. It is the intention of the parties to comply
strictly with applicable usury laws. Accordingly, notwithstanding any provision
to the contrary in this Note, the Credit Agreement, or in any contract,
instrument or document evidencing or securing the payment hereof or otherwise
relating hereto (each, a "RELATED DOCUMENT"), in no event shall this Note or any
Related Document require the payment or permit the payment, taking, reserving,
receiving, collection or charging of any sums constituting interest under
applicable laws that exceed the maximum amount permitted by such laws, as the
same may be amended or modified from time to time (the "MAXIMUM RATE"). If any
such excess interest is called for, contracted for, charged, taken, reserved or
received in connection with this Note or any Related Document, or in any
communication by Lender or any other person to Borrower or any other person, or
in the event that all or part of the principal or interest hereof or thereof
shall be prepaid or accelerated, so that under any of such circumstances or
under any other circumstance whatsoever the amount of interest contracted for,
charged, taken, reserved or received on the amount of principal actually
outstanding from time to time under this Note shall exceed the Maximum Rate,
then in such event it is agreed that: (i) the provisions of this paragraph shall
govern and control; (ii) neither Borrower nor any other person or entity now or
hereafter liable for the payment of this Note or any Related Document shall be
obligated to pay the amount of such interest to the extent it is in excess of
the Maximum Rate; (iii) any such excess interest which is or has been received
by Lender, notwithstanding this paragraph, shall be credited against the then
unpaid principal balance hereof or thereof, or if this Note or any Related
Document has been or would be paid in full by such credit, refunded to Borrower;
and (iv) the provisions of this Note and each Related Document, and any other
communication to Borrower, shall immediately be deemed reformed and such excess
interest reduced, without the necessity of executing any other document, to the
Maximum Rate. The right to accelerate the maturity of this Note or any Related
Document does not include the right to accelerate, collect or charge unearned
interest, but only such interest that has otherwise accrued as of the date of
acceleration. Without limiting the foregoing, all calculations of the rate of
interest contracted for, charged, taken, reserved or received in connection with
this Note and any Related Document which are made for the purpose of determining
whether such rate exceeds the Maximum Rate shall be made to the extent permitted
by applicable laws by amortizing, prorating, allocating and spreading during the
period of the full term of this Note or such Related Document, including all
prior and subsequent renewals and extensions hereof or thereof, all interest at
any time contracted for, charged, taken, reserved or received by Lender. The
terms of this paragraph shall be deemed to be incorporated into each Related
Document.
To the extent that either Chapter 303 or 306, or both, of the Texas
Finance Code apply in determining the Maximum Rate, Lender hereby elects to
determine the applicable rate ceiling by using the weekly ceiling from time to
time in effect, subject to Lender's right subsequently to change such method in
accordance with applicable law, as the same may be amended or modified from time
to time.
(c) RIGHT OF SETOFF; DEPOSIT ACCOUNTS. Upon and after the occurrence of
an Event of Default, (i) Borrower hereby authorizes Lender, at any time and from
time to time, without notice, which is hereby expressly waived by Borrower, and
whether or not Lender shall have declared this Note to be due and payable in
accordance with the terms hereof, to set off against, and to appropriate and
apply to the payment of, Borrower's obligations and liabilities under this Note
(whether matured or unmatured, fixed or contingent, liquidated or unliquidated),
any and all amounts owing by Lender to Borrower (whether payable in U.S. dollars
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or any other currency, whether matured or unmatured, and in the case of
deposits, whether general or special (except trust and escrow accounts), time or
demand and however evidenced), and (ii) pending any such action, to the extent
necessary, to hold such amounts as collateral to secure such obligations and
liabilities and to return as unpaid for insufficient funds any and all checks
and other items drawn against any deposits so held as Lender, in its sole
discretion, may elect. Borrower hereby grants to Lender a security interest in
all deposits and accounts maintained with Lender and with any other financial
institution to secure the payment of all obligations and liabilities of Borrower
to Lender under this Note.
(d) SUBORDINATION. Payment of this Note is subject to the terms of the
Subordination and Intercreditor Agreement of even date herewith between WF Bank,
Lender, WF Finance and Borrower.
NOTICE: THIS NOTE AND ALL OTHER DOCUMENTS RELATING TO THE INDEBTEDNESS EVIDENCED
HEREBY CONSTITUTE A WRITTEN LOAN AGREEMENT WHICH REPRESENTS THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES RELATING TO THIS NOTE AND THE
INDEBTEDNESS EVIDENCED HEREBY.
IN WITNESS WHEREOF, the undersigned has executed this Note as of the
date first written above.
MOUNTAIN COMPRESSED AIR, INC.
By: /S/ XXXXXXX X. XXXXXXXXXXXX
-------------------------------
Xxxxxxx X. Xxxxxxxxxxxx
Chairman and CEO
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EXHIBIT B
WARRANT PURCHASE AGREEMENT
--------------------------
WARRANT PURCHASE AGREEMENT
by and between
Mountain Compressed Air, Inc.
a Colorado Corporation
(the "Company")
and
Xxxxx Fargo Energy Capital, Inc.
a ________ corporation
("Purchaser")
Concerning the
Purchase of Warrants to Purchase 1,350,000
Shares of the Company's Common Stock
February 6, 2001
TABLE OF CONTENTS
PAGE
----
ARTICLE I. PURCHASE AND SALE OF WARRANTS......................................1
Section 1.1. Sale and Issuance............................................1
Section 1.2. Purchase; Purchase Price.....................................1
ARTICLE II. CLOSING DATE; DELIVERY............................................1
Section 2.1. Closing Date.................................................1
Section 2.2. Payment; Delivery............................................1
ARTICLE III. REPRESENTATIONS AND WARRANTIES...................................2
Section 3.1. Representations and Warranties of the Company................2
(a) Organization and Standing; Certificate and By-Laws...........2
(b) Corporate Power..............................................2
(c) Authorization................................................2
(d) Capitalization...............................................2
(e) Governmental Consent, etc....................................3
(f) Offering.....................................................3
(g) Brokers or Finders...........................................3
Section 3.2. Representations and Warranties of Purchaser..................3
(a) Investment Intent............................................3
ARTICLE IV. CONDITIONS TO CLOSING.............................................3
Section 4.1. Purchaser's Conditions.......................................3
(a) Representations and Warranties Correct.......................3
(b) Covenants....................................................4
(c) Compliance Certificate.......................................4
(d) Consents.....................................................4
(e) Consummation of Loan Agreement...............................4
Section 4.2. Company's Conditions.........................................4
(a) Representations..............................................4
(b) Closing of Loan Agreement....................................4
ARTICLE V. AFFIRMATIVE COVENANTS OF THE COMPANY...............................4
Section 5.1. Financial Information........................................4
(a) SEC Reports..................................................4
(b) Other Reports................................................4
Section 5.2. Transactions with Affiliates.................................5
Section 5.3. Restrictions on Dividend Payments............................5
(a) Restriction..................................................5
(b) Permitted Dividends..........................................5
Section 5.4. Access.......................................................6
Section 5.5. Rule 144 Reporting...........................................6
ARTICLE VI. THE COMPANY'S INDEMNIFICATION.....................................6
Section 6.1. Indemnification..............................................6
ARTICLE VII. PUT AND CALL OPTIONS.............................................6
Section 7.1. Purchaser's Option to Cause Purchase.........................6
i
(a) Exercise Notice..............................................6
(b) Purchase Price...............................................7
(c) Closing......................................................7
(d) Purchaser's Representations and Warranties...................7
(e) Company's Representations and Warranties.....................7
Section 7.2. Restrictions on Company's Ability to Purchase................8
(a) Dividend Restriction.........................................8
(b) Restrictions on Certain Capital Transactions.................8
(c) Continuing Obligation........................................8
Section 7.3. Purchase of Warrant............................................8
Section 7.4. Company's Option to Purchase.................................8
(a) Purchase Notice..............................................9
(b) Purchase Price...............................................9
(c) Closing......................................................9
(d) Representations and Warranties...............................9
(e) Legend.......................................................9
(f) Restrictions on Purchases....................................9
(g) No Restriction on Transfer...................................9
(h) Breach of Loan Agreement or Other Documents..................9
ARTICLE VIII. MISCELLANEOUS...................................................9
Section 8.1. Governing Law...............................................10
Section 8.2. Survival....................................................10
Section 8.3. Successors and Assigns......................................10
Section 8.4. Entire Agreement, Amendment.................................10
Section 8.5. Notices, etc................................................10
Section 8.6. Delays or Omissions.........................................10
Section 8.7. Counterparts................................................10
Section 8.8. Severability................................................10
Section 8.9. Titles and Subtitles........................................11
Section 8.10...............................................................11
Form of Warrant Exhibit A
ii
WARRANT PURCHASE AGREEMENT
This Warrant Purchase Agreement (the "Agreement") is made and entered
into as of February 6, 2001 by and between Mountain Compressed Air, Inc., a
Colorado corporation (the "Company"), and Xxxxx Fargo Energy Capital, Inc., a
__________ corporation ("Purchaser").
W I T N E S S E T H:
--------------------
WHEREAS, Purchaser and the Company have entered into a term loan
agreement (the "Loan Agreement") of even date herewith pursuant to which
Purchaser is lending (the "Loan") $2,000,000 to the Company in exchange for a
note in such amount (the "Note"); and
WHEREAS, as a condition to making the Loan, Purchaser has required the
Company to enter into this Agreement;
NOW, THEREFORE, for and in consideration of the mutual covenants and
promises herein contained, as well as for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties,
intending to be legally bound, contract and agree as follows:
ARTICLE I. PURCHASE AND SALE OF WARRANTS
Section 1.1. SALE AND ISSUANCE. The Company shall sell and issue to
Purchaser at the Closing (as hereinafter defined) a warrant ("Warrant") to
purchase 1,350,000 shares of its Common Stock, $.___ par value ("Common Stock"),
subject to adjustment as provided in the Warrant. The Warrant shall be in the
form of Exhibit A attached hereto and incorporated herein. The shares of Common
Stock or Other Securities into which the Warrant will be exercisable upon
payment of the purchase price as set forth in the Warrant are referred to herein
as the "Shares."
Section 1.2. PURCHASE; PURCHASE PRICE. Subject to the terms and
conditions set forth herein, for and in consideration of the sale and issuance
of the Warrant, Purchaser hereby agrees to enter into the Loan Agreement and
consummate the transactions contemplated thereby concurrently with the Closing.
ARTICLE II. CLOSING DATE; DELIVERY
Section 2.1. CLOSING DATE. The closing ("Closing") of the purchase and
sale of the Warrant hereunder shall be held simultaneously with the closing of
the transactions contemplated by the Loan Agreement (the "Closing Date") or at
such other time and place upon which the Company and Purchaser shall agree.
Section 2.2. PAYMENT; DELIVERY. At the Closing, the Company will
deliver to Purchaser the duly executed Warrant registered in the name of
Purchaser, against receipt of the Loan, together with delivery by the Company of
such other documents, certificates and opinions of counsel as may be required to
be delivered by the Company to Purchaser as a condition to Purchaser's
consummation of this Agreement.
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ARTICLE III. REPRESENTATIONS AND WARRANTIES
Section 3.1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. In order to
induce Purchaser to enter into this Agreement and to extend the Loan
contemplated by the Loan Agreement, the Company hereby represents and warrants
to Purchaser and each subsequent holder of Warrants, as follows:
(a) ORGANIZATION AND STANDING; CERTIFICATE AND BY-LAWS. The
Company is a corporation legally incorporated, duly organized, validly
existing, and in good standing under the laws of the State of
________. The Company has all requisite corporate power and authority
to own and operate its properties and assets, and to carry on its
business as presently conducted and as proposed to be conducted. The
Company is qualified to do business as a foreign corporation and is in
good standing in all jurisdictions in which the Company owns or leases
property or in which the failure to be so qualified would have a
material adverse affect on the Company's business as currently
conducted.
(b) CORPORATE POWER. The Company has, and will have at the
Closing and at all times during which the Warrant is exercisable, all
requisite corporate power and authority to execute and deliver this
Agreement, to sell and issue the Warrant hereunder, to issue the
Shares upon exercise of the Warrant and to carry out and perform its
obligations under the terms of this Agreement and the Warrant.
(c) AUTHORIZATION. All corporate action necessary for the
authorization, execution, delivery and performance of this Agreement
by the Company, the authorization, sale, issuance and delivery of the
Warrant and (upon exercise of the Warrant) the Shares and the
performance of all of the Company's obligations hereunder and under
the Warrant have been taken. This Agreement and the Warrant each
constitutes a valid and binding obligation of the Company, enforceable
in accordance with its terms, except as may be limited by insolvency,
bankruptcy, moratorium or other laws affecting the rights of creditors
in general. The Shares have been duly and validly reserved and, when
issued in compliance with the provisions of this Agreement and the
Warrant, will be validly issued, fully paid and nonassessable. Upon
issuance upon exercise of the Warrant, the Shares will be free of any
liens, claims or encumbrances. The Shares are not subject to any
preemptive rights or rights of first refusal.
(d) CAPITALIZATION. The authorized capital stock of the
Company consists of __________ shares of Common Stock, of which
_________ shares are issued and outstanding as of the date hereof. The
outstanding shares have been duly authorized and validly issued, and
are fully paid and nonassessable. All outstanding securities of the
Company were issued in compliance with applicable federal and state
securities laws. The Company has reserved 1,350,000 shares of Common
Stock for issuance upon exercise of the Warrant. Other than the
Warrant and except as specifically described above, the Company does
not have any outstanding capital stock or securities convertible into
or exchangeable for any shares of its capital stock, or any
outstanding rights (either preemptive or other) to subscribe for or to
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purchase, or any outstanding rights or options for the purchase of, or
any agreements providing for the issuance (contingent or otherwise)
of, or any outstanding calls, commitments or claims of any character
relating to, any capital stock or any stock or securities convertible
into or exchangeable for any capital stock of the Company. Except as
provided in the Warrant, the Company is not subject to any obligation
(contingent or otherwise) to repurchase or otherwise acquire or retire
any shares of its capital stock or any convertible securities, rights
or options of the type described in the preceding sentence. The
Company is not a party to any agreement (except as set forth in this
Agreement) restricting the transfer of any shares of the Company's
capital stock.
(e) GOVERNMENTAL CONSENT, ETC. No consent, approval or
authorization of (or designation, declaration or filing with) any
governmental authority or the National Association of Securities
Dealers, Inc., on the part of the Company is required in connection
with the valid execution, delivery or performance of this Agreement,
or the offer, sale or issuance of the Warrants and the Shares pursuant
hereto, or the consummation of any other transaction contemplated
hereby.
(f) OFFERING. The offer, sale and issuance of the Warrants,
and the issuance of the Shares upon exercise of the Warrants,
constitute transactions exempt from the registration and prospectus
delivery requirements of the Securities Act of 1933 (the "Securities
Act") and any applicable state securities laws.
(g) BROKERS OR FINDERS. The Company has not incurred, and will
not incur, directly or indirectly, as a result of any action taken by
the Company, any liability for brokerage or finders' fees or agents'
commissions or any similar charges in connection with this Agreement.
Section 3.2. REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser
hereby represents and warrants to the Company as follows:
(a) INVESTMENT INTENT. Purchaser is acquiring the Warrant for
investment for its own account, not as a nominee or agent, and not
with the view to, or for resale in connection with, any distribution
thereof. Purchaser understands and agrees that the Warrant and (upon
exercise of the Warrant) the Shares have not been registered under the
Securities Act.
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ARTICLE IV. CONDITIONS TO CLOSING
Section 4.1. PURCHASER'S CONDITIONS. Purchaser's obligations to
purchase the Warrant at the Closing are subject to the fulfillment of the
following conditions, the waiver of which shall not be effective against
Purchaser unless specifically consented to in writing:
(a) REPRESENTATIONS AND WARRANTIES CORRECT. The
representations and warranties made by the Company in Section 3.1
hereof (including any representations of the Company incorporated by
reference) shall be true and correct when made, and shall be true and
correct on the Closing Date.
(b) COVENANTS. All covenants, agreements and conditions
contained in this Agreement to be performed by the Company on or prior
to the Closing Date shall have been performed or complied with in all
respects.
(c) COMPLIANCE CERTIFICATE. The Company shall have delivered
to Purchaser a certificate of the Company, executed by the President
and Secretary of the Company, dated the Closing Date, and certifying,
that all representations and warranties of the Company contained in
the Agreement are true and correct on the Closing Date as if made on
such date, that all conditions to the obligations of Purchaser to
close the transactions contemplated by this Agreement have been
satisfied or waived in writing by Purchaser and that the Company has
complied with all covenants or obligations set forth in this
Agreement.
(d) CONSENTS. Any consent, approval, authorization or order of
any court or governmental agency or administrative body required for
the consummation of the transactions contemplated by this Agreement,
shall have been obtained and shall be in effect on the Closing Date.
(e) CONSUMMATION OF LOAN AGREEMENT. The Company shall have
satisfied all conditions precedent to the obligation of the Purchaser
to advance funds under the Loan Agreement in compliance with all
applicable laws.
Section 4.2. COMPANY'S CONDITIONS. The Company's obligation to sell and
issue the Warrants at the Closing is, at the option of the Company, subject to
the fulfillment as of the Closing Date of the following conditions:
(a) REPRESENTATIONS. The representations made by Purchaser in
Section 3.2 hereof shall be true and correct when made, and shall be
true and correct on the Closing Date.
(b) CLOSING OF LOAN AGREEMENT. The Loan contemplated by the
Loan Agreement shall have been consummated in accordance with the
terms of such commitment.
ARTICLE V. AFFIRMATIVE COVENANTS OF THE COMPANY
Section 5.1. FINANCIAL INFORMATION. The Company will mail to each
holder of any of the Warrants or Shares:
(a) SEC REPORTS. The Company shall promptly mail copies of all
quarterly and annual reports and of the information, documents and
other reports which the Company is required to file with the
Securities and Exchange Commission (the "Commission"), exclusive of
any exhibits to such reports and exclusive or registration statements
on Form S-8.
(b) OTHER REPORTS. If the Company is not subject to the
requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934 (the "Exchange Act"), the Company shall mail within five days
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after it would have been required to file with the Commission,
financial statements, including notes thereto (and with respect to
annual reports, an auditor's report by a firm of established national
reputation), and a "Management's Discussion and Analysis of Financial
Condition and Results of Operations" both comparable to that which the
Company would have been required to include in such annual or
quarterly reports, information, documents or other reports if the
Company were subject to the requirements of Section 13 or 15(d) of the
Exchange Act.
Section 5.2. TRANSACTIONS WITH AFFILIATES. The Company will not, and
will not permit any of its Subsidiaries to, (i) enter into any transaction or
series of related transactions with any Affiliate or Affiliates (other than a
wholly-owned subsidiary) including shareholders, directors and officers and
their respective Affiliates, if the aggregate amount paid or payable to such
persons with respect to such transaction or series of transactions is in excess
of $100,000 unless such transaction (a) is fair to the Company, (b) is not
materially adverse to the rights of the holders of Warrants, and (c) is on terms
equivalent to those available on an arm's length basis, or (ii) issue, or agree
to issue, any shares of capital stock (including rights or warrants with respect
thereto) or stock appreciation rights, stock benefit plans, phantom stock rights
or plans or any similar plans or rights or other rights measured by earnings,
profits, or revenues of the Company or its Subsidiaries to any Affiliate
including shareholders, directors and officers and their respective Affiliates,
unless such transaction (a) is fair to the Company, (b) is not materially
adverse to the rights to the holders of Warrants, and (c) is on terms equivalent
to those available on an arm's length basis. If a transaction referred to in
subsection (i) or (ii) hereof is approved by a majority of Independent
Directors, such approval shall be presumptive evidence that such transaction
complies wit the provisions of this Section. As used herein, an Independent
Director shall mean any director who is not an officer or employee of the
Company and who does not beneficially own more than 5% of any outstanding class
or series of capital stock of the Company and who is not related by blood or
marriage to any of the foregoing. As used herein, "Affiliate" has the meaning
set forth in Article VII of the Warrant, except that as long as any of the
Shareholders are stockholders of the Company, such Shareholders and each of
their respective Affiliates shall be deemed Affiliates of the Company and
Purchaser and its direct and indirect wholly-owned subsidiaries and the Persons
that directly or indirectly own Purchaser shall not be deemed Affiliates of the
Company.
Section 5.3. RESTRICTIONS ON DIVIDEND PAYMENTS.
(a) RESTRICTION. For so long as the Warrant is outstanding and
except as provided in 5.3(b), the Company shall not pay any dividends with
respect to its Common Stock (other than dividends payable in shares of its
Common Stock) out of its surplus or otherwise or return any capital to its
stockholders as such or authorize or make any other distribution, payment or
delivery of property or cash to its holders of Common Stock as such, or redeem,
retire, purchase or otherwise acquire, directly or indirectly, for a
consideration (otherwise than in exchange for, or from the proceeds of the
substantially concurrent sale of, other shares of capital stock of the Company),
any shares of any class of its Common Stock now or hereafter outstanding.
(b) PERMITTED DIVIDENDS. The Company may pay dividends to the
holders of its Common Stock, provided that (i) contemporaneously with the
declaration of any such dividend, the Company will set aside for payment to the
holders of Warrants an amount equal to the total Dividend Amount (as hereinafter
defined) payable to all holders of Warrants and (ii) on the date of payment of
such dividend, will pay to each holder of Warrants the Dividend Amount
multiplied times the number of Warrants owned by such holder as reflected on the
Warrantholders' List. Such payment shall be made by Company check to such holder
of Warrants at the address of such Holder as reflected on the Warrantholders'
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List. As used herein, the Dividend Amount shall equal the dividend declared or
paid (as the case may be) with respect to one share of Common Stock multiplied
times the Dilution Factor on the date of declaration or payment.
Section 5.4. ACCESS. The Company will allow, and will cause its
subsidiaries to allow, any holder of Warrants or proposed assignee of Warrants
designated by such holder, and their respective representatives, upon two
Business Days prior telephonic notice, to visit and inspect any of its property,
to examine its books of record and account, and to discuss its affairs, finances
and accounts with its officers, provided, (i) the holder of Warrants, proposed
assignee or representative signs a customary confidentiality agreement if
requested by the Company and (ii) the examination will not unreasonably disrupt,
in any material manner, the operations of the Company.
Section 5.5. RULE 144 REPORTING. The Company agrees that from and after
the date it registers any class of its securities under Section 12(b) or 12(g)
of the Exchange Act, it shall:
(a) Make and keep "adequate public information" available, as
those terms are understood and defined in Rule 144 under the
Securities Act, at all times from and after the date hereof;
(b) File with the Commission in a timely manner all reports
and other documents required of the Company under the Securities Act
and the Exchange Act; and
(c) So long as Purchaser owns any Shares, furnish to Purchaser
promptly upon request a written statement by the Company as to its
compliance with the reporting requirements (i) necessary to cause
"adequate public information" to be available under Rule 144, and (ii)
of the Securities Act and Exchange Act.
ARTICLE VI. THE COMPANY'S INDEMNIFICATION
Section 6.1. INDEMNIFICATION. The Company will indemnify and hold
harmless Purchaser, and its respective officers, directors, employees, agents,
representatives and affiliates (collectively "Indemnitees") from and against any
and all expenses, claims, charges, losses, damages, fines or penalties,
including without limitation reasonable attorneys' fees incurred in defending or
resisting any claims, actions or proceedings or in enforcing this indemnity
(hereinafter "Damages"), that an Indemnitee may suffer, sustain, incur or become
subject to, whether directly or indirectly, arising out of, based upon,
resulting from any violation or inaccuracy of any representations, warranties,
obligations or covenants of the Company contained, disclosed or set forth in
this Agreement or the Warrant.
ARTICLE VII. PUT AND CALL OPTIONS
Section 7.1. PURCHASER'S OPTION TO CAUSE PURCHASE. From and after the
earlier to occur of the three-year anniversary of the Closing Date and the date
the Note is paid in full ("Commencement Date") but before the fifth anniversary
of the Closing, Purchaser shall have the right and option to cause the Company
to purchase all (and not any portion) of the Shares, in the following manner:
(a) EXERCISE NOTICE. In order to exercise its right and option
to cause the Company to purchase Shares, a holder desiring to cause
the Company to purchase Shares (a "Selling Holder"), shall notify
("Exercise Notice") the Company of its intent to sell Shares to the
Company. The Exercise Notice shall specify: (i) the proposed closing
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date of such purchase which shall be a Business Day at least ten and
no more than thirty Business Days from the date of such notice; and
(ii) the purchase price.
(b) PURCHASE PRICE. The purchase price (the "Put Purchase
Price") for the aggregate number of Shares shall be $600,000 less (a)
the interest paid to the Commencement Date on the Note and (b) the
$20,000 facility fee paid pursuant to the Loan Agreement.
(c) CLOSING. The closing shall be held at the principal
executive offices of the Company at 10:00 a.m., local time on the date
specified in the Exercise Notice, or such other time and place as the
Selling Holder and the Company shall agree in writing. At the closing,
the Company shall pay the Selling Holder the purchase price by
cashier's check or wire transfer of immediately available funds. The
Selling Holder shall deliver certificates representing the securities
transferred, duly endorsed for transfer to the Company.
(d) PURCHASER'S REPRESENTATIONS AND WARRANTIES. At the
closing, the Selling Holder shall make customary representations and
warranties as to the following, and shall not be required to make any
additional representations or warranties:
(i) That Selling Holder has the power and
authority to transfer the Shares to the Company ;
(ii) That the transfer of the Shares has
been duly authorized by the Selling Holder; and
(iii) That the Shares will be transferred to
the Company free and clear of any liens, claims, pledges, and
encumbrances created by the Selling Holder.
(e) COMPANY'S REPRESENTATIONS AND WARRANTIES. At the closing,
the Company shall make customary representations and warranties as to
the following, and shall not be required to make any additional
representations or warranties:
(i) That the Company has the power and
authority to purchase the Shares from the Selling Holder;
(ii) That the purchase of the Shares has
been duly authorized by the Company;
(iii) That the purchase of the Shares is in
compliance with applicable state corporate laws governing the
Company's repurchase of its securities;
(iv) That the Shares are not being purchased
with a view toward distribution in violation of applicable
securities laws; and
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(v) That purchase of the Shares does not
render the Company insolvent.
Section 7.2. RESTRICTIONS ON COMPANY'S ABILITY TO PURCHASE.
(a) DIVIDEND RESTRICTION. Whenever any Shares are required to be
purchased by the Company pursuant to this Agreement, if the Company shall not be
able lawfully to purchase all of such shares on the closing date under the
provisions of applicable state corporate law dealing with impairment of surplus,
the Company shall purchase on the closing date so many of such shares as it may
lawfully purchase. In the event the Company purchases less than all of such
Shares on the closing date, then the Company shall not, without the written
consent of the Selling Holder, pay dividends, distributions or other payments to
any stockholder or make any loans to stockholders, other than reasonable salary
and benefits payments, until the remainder of such Shares are purchased in
accordance with the terms of this Agreement.
(b) RESTRICTIONS ON CERTAIN CAPITAL TRANSACTIONS. The Company will not,
without the written consent of all holders of Warrants and Shares, increase the
par value of any Shares or effect a transfer from the retained earnings account
of the Company to the capital or additional paid in capital accounts of the
Company if, at the time of such transfer and after giving effect thereto and to
any concurrent or then contemplated transactions, the ability of the Company to
lawfully discharge its obligations to purchase shares of Shares pursuant to this
Agreement would be materially or adversely impaired.
(c) CONTINUING OBLIGATION. If the Company is unable on the closing date
lawfully to purchase all of the Shares that it is obligated to purchase, the
obligation of the Company to purchase such Shares that the Company could not
lawfully purchase shall continue until such time as the Company may lawfully
discharge such obligation; provided, however, that the purchase price shall be
increased by an amount equal to interest on the purchase price at the rate of
__% per annum.
Section 7.3. PURCHASE OF WARRANT. Prior to the exercise of the Warrant,
a holder of a Warrant (who shall be deemed a Selling Holder as used in Sections
7.1 and 7.2) without first exercising the Warrant, may deliver an Exercise
Notice in accordance with Section 7.1(a) as if the Warrant had been exercised
and the Shares covered by the Exercise Notice had been issued. The Selling
Holder may exercise the Warrant immediately prior to the closing date and
transfer the Shares to the Company. In lieu of exercising the Warrant, at the
closing, the Selling Holder may sell all or a portion of the Warrant to the
Company for a purchase price equal to the purchase price (computed as provided
in Section 7.1) of the Shares that could be acquired by the Selling Holder by
exercising the Warrant to be sold to the Company minus the price the Selling
Holder would be required to pay to acquire such Shares under the Warrant.
Appropriate revisions will be made to the representations and warranties to be
made by the Company and the Selling Holder as provided by Section 7.1(d) and (e)
in the event the Warrant is purchased.
Section 7.4. COMPANY'S OPTION TO PURCHASE. From and after the
Commencement Date but on or before the fifth anniversary of the Closing, the
Company shall have the right and option to purchase all, but not less than all,
of the outstanding Shares and Warrant, in the following manner:
B-8
(a) PURCHASE NOTICE. In order to exercise its right and option
to cause the holders of Warrants and Shares to sell all of their
Shares and Warrants to the Company, the Company shall notify
("Purchase Notice") such holders ("Redeemed Holders") of its intent to
purchase all Shares and Warrants owned by the Redeemed Holders. The
Purchase Notice shall state: (i) the proposed closing date of such
purchase which shall be a Business Day at least ten and no more than
thirty Business Days from the date of such notice and (ii) the
purchase price.
(b) PURCHASE PRICE. The purchase price for the aggregate
number of Shares shall be the Put Purchase Price. The purchase price
for the Warrant shall equal the Put Purchase Price as computed above
minus the price for which the Shares could be acquired pursuant to
exercise of the Warrant.
(c) CLOSING. The closing of any purchase pursuant to this
Section 7.4 shall be held at the principal executive offices of the
Company at 10:00 a.m., local time, on the date specified in the
Purchase Notice, or such other time and place as the Company and
Purchaser shall agree in writing. At the closing, the Company shall
pay the Redeemed Holders the Purchase Price by cashier's check or wire
transfer of immediately available funds. Each Redeemed Holder shall
deliver certificates representing the securities transferred, duly
endorsed for transfer to the Company.
(d) REPRESENTATIONS AND WARRANTIES. At the Closing, the
Redeemed Holders shall make the representations and warranties
specified in Section 7.1(d) and the Company shall make the
representations and warranties specified in 7.1(e); provided, that
appropriate revisions shall be made to such representations and
warranties if Warrants are purchased by the Company.
(e) LEGEND. Purchaser agrees to maintain a legend on all
Shares owned by it and on the Warrant referring to the right and
option set forth in this Section.
(f) RESTRICTIONS ON PURCHASES. The Company shall not have the
right and option to purchase Shares or Warrants as provided in this
Section unless the Company is legally able to purchase all Shares and
Warrants outstanding under applicable corporate law.
(g) NO RESTRICTION ON TRANSFER. Nothing in this Article VII
shall restrict or limit a holder of Shares or Warrants the ability to
sell the Warrant or Shares, except that from and after receipt of the
Purchase Notice until the purchase of the shares as provided in this
Section, a holder of Shares or Warrants shall not sell, assign,
transfer or pledge the Shares.
(h) BREACH OF LOAN AGREEMENT OR OTHER DOCUMENTS.
Notwithstanding any other provision herein, the Company shall not have
the right or option to cause a holder of Shares or Warrants to sell
Shares or Warrants to the Company if the Company has breached, is in
default or an event of default has occurred under the Loan Agreement,
this Agreement, the Warrant, which default has not been cured.
ARTICLE VIII. MISCELLANEOUS
B-9
Section 8.1. GOVERNING LAW. This Agreement shall be governed in all
respects by the internal laws of the state of Texas.
Section 8.2. SURVIVAL. The representations, warranties, covenants and
agreements made herein shall survive any investigation made by Purchaser and the
closing of the transactions contemplated hereby.
Section 8.3. SUCCESSORS AND ASSIGNS. Except as otherwise provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto.
Section 8.4. ENTIRE AGREEMENT, AMENDMENT. This Agreement and the other
documents delivered pursuant hereto at the Closing constitute the full and
entire understanding and agreement between the parties with regard to the
subjects hereof and thereof, 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. Except as expressly provided herein,
neither this Agreement nor any term hereof may be amended, waived, discharged or
terminated other than by a written instrument signed by the party against whom
enforcement of any such amendment, waiver, discharge or termination is sought.
Section 8.5. NOTICES, ETC. All notices and other communications
required or permitted hereunder shall be in writing and shall be mailed by
registered or certified mail, postage prepaid, or otherwise delivered by hand or
by messenger, addressed (a) if to Purchaser, at: Xxxxx Fargo Energy Capital,
Inc., 0000 Xxxxxxxxx, Xxxxx Xxxxx, Xxxxxxx, Xxxxx 00000, Attention: Xxxx
Xxxxxxx, Senior Vice President, or at such other address as Purchaser shall have
furnished to the Company in writing, or (b) if to any other holder of any
Warrants or Shares, at such address as such holder shall have furnished the
Company in writing, or, until any such holder so furnishes an address to the
Company, then to and at the address of the last holder of such Warrants or
Shares who has so furnished an address to the Company, or (c) if to the Company,
to its address set forth on the signature page of this Agreement and addressed
to the attention of the Corporate Secretary, or at such other address as the
Company shall have furnished to Purchaser, _____________________, Attention:
_______________________.
Section 8.6. DELAYS OR OMISSIONS. Except as expressly provided herein,
no delay or omission to exercise any right, power or remedy accruing to any
holder of any Shares, upon any breach or default of the Company under this
Agreement, shall impair any such right, power or remedy of such holder nor shall
it be construed to be a waiver of any such breach or default, or an acquiescence
therein, or of or in any similar breach or default thereafter occurring; nor
shall any waiver of any single breach or default be deemed a waiver of any other
breach or default theretofore or thereafter occurring. Any waiver, permit,
consent or approval of any kind or character on the part of any holder of any
breach or default under this Agreement, or any waiver on the part of any holder
of any provisions or conditions of this agreement, must be in writing and shall
be effective only to the extent specifically set forth in such writing. All
remedies, either under this Agreement or by law or otherwise afforded to any
holder, shall be cumulative and not alternative.
Section 8.7. COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be an original, and all of which together
shall constitute one agreement.
Section 8.8. SEVERABILITY. In the event that any provision of this
Agreement becomes or is declared by a court of competent jurisdiction to be
illegal, unenforceable or void, this Agreement shall continue in full force and
effect without said provision; provided that no such severability shall be
effective if it materially changes the economic benefit of this Agreement to any
party.
B-10
Section 8.9. TITLES AND SUBTITLES. The titles and subtitles used in
this Agreement are used for convenience only and are not considered in
construing or interpreting this Agreement.
Section 8.10 SPECIFIC PERFORMANCE. The Company acknowledges that any
breaches of the agreements and covenants contained in of this Agreement would
cause irreparable injury to Purchaser for which Purchaser would have no adequate
remedy at law. In addition to any other remedy that Purchaser may be entitled
to, the parties agree that Purchaser shall be entitled to the remedy of specific
performance.
B-11
The foregoing Agreement is hereby executed as of the date first above
written.
Address:__________________ Mountain Compressed Air, Inc.
By: /S/XXXXXXX X. XXXXXXXXXXXX
-------------------------
Munaware X. Xxxxxxxxxxxx
Address: 1000 Louisiana,
Sixth Floor Xxxxx Fargo Energy Capital, Inc.
Xxxxxxx, Xxxxx 00000
By: /S/ XXXX XXXXXXX
----------------
Xxxx Xxxxxxx
Senior Vice President
B-12
EXHIBIT A TO
WARRANT PURCHASE AGREEMENT
=========================================
WARRANT
Mountain Compressed Air, Inc.
a Colorado Corporation
(the "Company")
To Purchase 1,350,000
Shares of the Company's Common Stock
issued to
Xxxxx Fargo Energy Capital, Inc.
a ________ Corporation
("Warrantholder")
February 6, 2001
This Warrant and the Shares issued upon exercise thereof are
subject to repurchase by the Company as provided in the Warrant
Purchase Agreement dated February 6, 2001.
This Warrant and any Shares acquired upon the exercise of this
Warrant have not been registered under the Securities Act of 1933, as
amended, and may not be transferred, sold or otherwise disposed of in
the absence of such registration or an exemption therefrom under such
Act. This Warrant and such Shares may be transferred only in compliance
with the conditions specified in this Warrant and the Warrant Purchase
Agreement, a copy of which is available from the Company to holders of
this Warrant.
=========================================
Mountain Compressed Air, Inc.
Warrant
No. W-1 February 6, 2001
Mountain Compressed Air, Inc. (the "Company"), a Colorado corporation,
for value received, hereby certifies that Xxxxx Fargo Energy Capital, Inc., a
________ Corporation, or registered assigns, is entitled to purchase from the
Company 1,350,000 duly authorized, validly issued, fully paid and nonassessable
shares of Common Stock, $___ par value (the "Common Stock") at any time or from
time to time prior to 5:00 p.m., Houston, Texas time, on the Expiration Date (as
herein defined), all subject to terms, conditions and adjustments set forth in
this Warrant.
This is the Warrant (the "Warrant") (such term to include any warrants
issued in substitution therefor) originally issued pursuant to the Warrant
Purchase Agreement. Certain capitalized terms used in this Warrant are defined
in Article VII; unless otherwise specified, references to an "Exhibit" mean one
of the exhibits attached to this Warrant, references to an "Article" mean one of
the articles in this Warrant and references to a "Section" mean one of the
sections of this Warrant.
ARTICLE I. EXERCISE OF WARRANT
Section 1.1. MANNER OF EXERCISE. This Warrant may be exercised by the
holder hereof, in whole or in part, during normal business hours on any Business
Day, by surrender of this Warrant to the Company at its office maintained
pursuant to subdivision (a) of Section 6.2, accompanied by a subscription in
substantially the form attached to this Warrant (or a reasonable facsimile
thereof) duly executed by such holder and accompanied by payment, in cash or by
certified or official bank check payable to the order of the Company in the
amount obtained by multiplying (a) the number of shares of Common Stock (without
giving effect to any adjustment thereof) designated in such subscription by (b)
the Initial Price, and such holder shall thereupon be entitled to receive the
number of duly authorized, validly issued, fully paid and nonassessable shares
of Common Stock (or Other Securities) determined as provided in Articles II
through IV.
Section 1.2. WHEN EXERCISE EFFECTIVE. Each exercise of this Warrant
shall be deemed to have been effected immediately prior to the close of business
on the Business Day on which this Warrant shall have been surrendered to the
Company as provided in Section 1.1, and at such time the Person or Persons in
whose name or names any certificate or certificates for shares of Common Stock
(or Other Securities) shall be issuable upon such exercise as provided in
Section 1.3 shall be deemed to have become the holder or holders of record
thereof.
1
Section 1.3. DELIVERY OF STOCK CERTIFICATES, ETC. As soon as
practicable after each exercise of this Warrant, in whole or in part, 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 holder hereof, subject to Article V,
as such holder (upon payment by such holder of any applicable transfer taxes)
may direct, the following:
(a) CERTIFICATES. A certificate or certificates for the number
of duly authorized, validly issued, fully paid and nonassessable shares
of Common Stock (or Other Securities) to which such holder shall be
entitled upon such exercise plus, in lieu of any fractional share to
which such holder would otherwise be entitled, cash in an amount equal
to the same fraction of the Market Price per share on the Business Day
next preceding the date of such exercise.
(b) WARRANT. In case such exercise is in part only, a new
Warrant or Warrants of like tenor dated the date hereof, calling in the
aggregate on the face or faces thereof for the number of shares of
Common Stock equal (without giving effect to any adjustment thereof) to
the number of such shares called for on the face of this Warrant minus
the number of such shares designated by the holder upon such exercise
as provided in Section 1.1.
ARTICLE II. ADJUSTMENT OF COMMON STOCK ISSUABLE UPON EXERCISE
Section 2.1. GENERAL; WARRANT PRICE. The number of shares of Common
Stock which the holder of this Warrant shall be entitled to receive upon each
exercise hereof shall be determined by multiplying the number of shares of
Common Stock which would otherwise (but for the provisions of this Article II)
be issuable upon such exercise, as designated by the holder hereof pursuant to
Section 1.1, by a fraction (the "Dilution Factor") (a) the numerator of which is
the Initial Price and (b) the denominator of which is the Warrant Price in
effect at the effective time of such exercise (as provided in Section 1.2). The
"Warrant Price" shall initially be the Initial Price, shall be adjusted and
readjusted from time to time as provided in this Article II and, as so adjusted
or readjusted, shall remain in effect until a further adjustment or readjustment
thereof is required by this Article II.
Section 2.2. ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK. In case the
Company at any time or from time to time after the date hereof shall issue or
sell Additional Shares of Common Stock (including Additional Shares of Common
Stock deemed to be issued pursuant to section 2.4 or 2.5) without consideration
or for a consideration per share less than the Dilutive Basis, then, and in each
such case, such Warrant Price shall be reduced, concurrently with such issue or
sale, to the lower of the prices (calculated to the nearest cent) determined as
follows:
(a) by multiplying the Warrant Price then in existence by a
fraction, the numerator of which shall be (i) the number of shares of
Common Stock outstanding immediately prior to such issue or sale plus
(ii) the number of shares of Common Stock which the aggregate
consideration received by the Company for the total number of such
Additional Shares of Common Stock so issued or sold would purchase at
the Current Market Price, and the denominator of which shall be the
number of shares of Common Stock outstanding immediately after such
issue or sale, provided that, for the purposes of this Section 2.2, (i)
immediately after any Additional Shares of Common Stock are deemed to
have been issued pursuant to Section 2.4 or 2.5, such Additional Shares
of Common Stock shall be deemed to be outstanding, and (ii) treasury
shares shall not be deemed to be outstanding; and
2
(b) by dividing (i) an amount equal to the sum of (1) the
number of shares of Common Stock outstanding immediately prior to such
issuance or sale multiplied times the then effective Warrant Price plus
(2) the total consideration, if any, received and deemed received by
the Company upon such issue or sale, by (ii) the total number of shares
of Common Stock outstanding and deemed outstanding immediately after
such issue or sale.
Section 2.3. EXTRAORDINARY DIVIDENDS AND DISTRIBUTIONS. If the Company
at any time or from time to time after the date hereof shall declare, order, pay
or make a dividend or other distribution (including, without limitation, any
distribution of other or additional stock or Other Securities or property or
Options by way of dividend or spin-off, reclassification, recapitalization or
similar corporate rearrangement) on the Common Stock, other than (a) a dividend
payable in Additional Shares of Common Stock or (b) a dividend payable in cash
or other property and declared out of the earned surplus of the Company as at
the date thereof as increased by any credits (other than credits resulting from
a revaluation of property) and decreased by any debits made thereto, then, and
in each such case, the Warrant Price in effect immediately prior to the close of
business on the record date fixed for the determination of holders of any class
of securities entitled to receive such dividend or distribution shall be
reduced, effective as of the close of business on such record date, to a price
(calculated to the nearest cent) determined by multiplying such Warrant Price by
a fraction:
(a) the numerator of which shall be the Current Market Price
in effect on such record date or, if the Common Stock trades on an
ex-dividend basis, on the date prior to the commencement of ex-dividend
trading, less the amount of such dividend or distribution (as
determined in good faith by the Board of Directors of the Company)
applicable to one share of Common Stock, and
(b) the denominator of which shall be the Current Market Price
on such record date, or if the Common Stock trades on an ex-dividend
basis, on the date prior to the commencement of ex-dividend trading.
Section 2.4. TREATMENT OF OPTIONS AND CONVERTIBLE SECURITIES. In case
the Company at any time or from time to time after the date hereof shall issue,
sell, grant or assume, or shall fix a record date for the determination of
holders of any class of securities entitled to receive, any Options or
Convertible Securities, then, and in each such case, the maximum number of
Additional Shares of Common Stock (as set forth in the instrument relating
thereto, without regard to any provisions contained therein for a subsequent
adjustment of such number) issuable upon the exercise of such Options or, in the
case of Convertible Securities and Options therefor, the conversion or exchange
of such Convertible Securities, or, in the case of Appreciation Rights, the
number computed in Section 2.9, shall be deemed to be the number of Additional
Shares of Common Stock issued as of the time of such issue, sale, grant or
assumption or, in case such a record date shall have been fixed, as of the close
of business on such record date (or, if the Common Stock trades on an
ex-dividend basis, on the date prior to the commencement of ex-dividend
trading); provided that such Additional Shares of Common Stock shall not be
deemed to have been issued unless the consideration per share (determined
3
pursuant to Section 2.6) of such shares would be less than the Dilutive Basis in
effect on the date of and immediately prior to such issue, sale, grant or
assumption or immediately prior to the close of business on such record date
(or, if the Common Stock trades on an ex-dividend basis, on the date prior to
the commencement of ex-dividend trading), as the case may be; and provided,
further, that in any such case in which Additional Shares of Common Stock are
deemed to be issued no further adjustment of the Warrant Price shall be made
upon the subsequent issue or sale of Convertible Securities or Additional Shares
of Common Stock upon the exercise of such Options or the conversion or exchange
of such Convertible Securities.
Section 2.5. TREATMENT OF STOCK DIVIDENDS, STOCK SPLITS, ETC. In case
the Company at any time or from time to time after the date hereof shall declare
or pay any dividend on the Common Stock payable in Common Stock, or shall effect
a subdivision of the outstanding shares of Common Stock into a greater number of
shares of Common Stock (by reclassification or otherwise than by payment of a
dividend in Common Stock), then, and in each such case, Additional Shares of
Common Stock shall be deemed to have been issued (a) in the case of any such
dividend, immediately after the close of business on the record date for the
determination of holders of any class of securities entitled to receive such
dividend, or (b) in the case of any such subdivision, at the close of business
on the day immediately prior to the day upon which such corporate action becomes
effective.
Section 2.6. COMPUTATION OF CONSIDERATION. For the purpose of Article
II, the following shall be used to determine the consideration received or
deemed received by the Company:
(a) SHARES ACTUALLY ISSUED. The consideration for the issue or
sale of any Additional Shares of Common Stock shall, irrespective of
the accounting treatment of such consideration,
(i) insofar as it consists of cash, be computed at
the net amount of cash received by the Company, without
deducting any expenses paid or incurred by the Company or any
commissions or compensations paid or concessions or discounts
allowed to underwriters, dealers or others performing similar
services in connection with such issue or sale,
(ii) insofar as it consists of property (including
securities) other than cash, be computed at the fair value
thereof at the time of such issue or sale, as determined in
good faith by the Board of Directors of the Company, and
(iii) in case Additional Shares of Common Stock are
issued or sold together with other stock or securities or
other assets of the Company for a consideration which covers
both, be the portion of such consideration so received,
computed as provided in clauses (i) and (ii) above, applicable
to such Additional Shares of Common Stock, all as determined
in good faith by the Board of Directors of the Company.
(b) SHARES DEEMED ISSUED. Additional Shares of Common Stock
deemed to have been issued pursuant to Section 2.4, relating to Options
and Convertible Securities, shall be deemed to have been issued for a
consideration per share determined by dividing,
(i) the present value (using a discount factor equal
to the average interest rate on the Company's outstanding
indebtedness to financial institutions and assuming any
consideration receivable by the Company shall be received at
the latest date possible under the terms of such Options or
Convertible Securities) of the total amount, if any, received
and receivable by the Company as consideration for the issue,
sale, grant or assumption of the Options or Convertible
Securities in question, plus the present value (using a
discount factor equal to the average interest rate on the
Company's outstanding indebtedness to financial institutions
4
and assuming any consideration receivable by the Company shall
be received at the latest date possible under the terms of the
Options and Convertible Securities) of the minimum aggregate
amount of additional consideration (as set forth in the
instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such
consideration to protect against dilution) payable to the
Company upon the exercise in full of such Options or the
conversion or exchange of such Convertible Securities or, in
the case of Options for Convertible Securities, the exercise
of such Options for Convertible Securities and the conversion
or exchange of such Convertible Securities, in each case
computing such consideration as provided in the foregoing
subdivision (a), by
(ii) the maximum number of Additional Shares of
Common Stock (as set forth in the instruments relating
thereto, without regard to any provision contained therein for
a subsequent adjustment of such number to protect against
dilution) issuable upon the exercise of such Options or the
conversion or exchange of such Convertible Securities.
(c) STOCK DIVIDENDS, ETC. Additional Shares of Common Stock
issued or deemed to have been issued pursuant to Section 2.5, relating
to stock dividends, stock splits, etc., shall be deemed to have been
issued for no consideration.
(d) SERVICES. Additional Shares of Common Stock issued or sold
or deemed issued or sold in exchange for services or the promise of
future services shall be deemed to have been issued for no
consideration.
Section 2.7. ADJUSTMENTS FOR COMBINATIONS, ETC. In case the outstanding
shares of Common Stock shall be combined or consolidated, by reclassification or
otherwise, into a lesser number of shares of Common Stock, the Warrant Price in
effect immediately prior to such combination or consolidation shall,
concurrently with the effectiveness of such combination or consolidation, be
proportionately increased.
Section 2.8. DILUTION IN CASE OF OTHER SECURITIES. In case any Other
Securities shall be issued or sold or shall become subject to issue or sale upon
the conversion or exchange of any stock (or Other Securities) of the Company (or
any issuer of Other Securities or any other Person referred to in Article II) or
to subscription, purchase or other acquisition pursuant to any Options issued or
granted by the Company (or any such other issuer or Person) for a consideration
such as to dilute, on a basis consistent with the standards established in the
other provisions of this Article II, the purchase rights granted by this
Warrant, then, and in each such case, the computations, adjustments and
readjustments provided for in this Article II with respect to the Warrant Price
shall be made as nearly as possible in the manner so provided and applied to
determine the amount of Other Securities from time to time receivable upon the
exercise of the Warrant, so as to protect the holder of the Warrant against the
effect of such dilution.
Section 2.9. APPRECIATION RIGHTS. If the Company issues or sells
Appreciation Rights, a number of Additional Shares of Common Stock shall be
deemed issued for purposes of this Article II and shall be computed as follows:
(a) VALUE BASED ON DIVIDENDS. If the Appreciation Rights
entitle the holder thereof to distributions or payments based on or
determined with reference to dividends paid or payable on Common Stock,
the number of Additional Shares of Common Stock deemed issued will be
the number of shares of Common Stock that would be required to be
issued such that the holder thereof would receive distribution payments
equal to those paid or payable with respect to such Appreciation
Rights.
5
(b) VALUE BASED ON LIQUIDATING DISTRIBUTIONS. If the
Appreciation Rights entitle the holder thereof to distributions or
payments based on or determined with reference to liquidation
distributions paid or payable on, or consideration received, in
connection with the sale, exchange or transfer of Common Stock, the
number of Additional Shares of Common Stock deemed issued will be the
number of shares of Common Stock that would be required to be issued
such that the holder thereof would receive distributions or payments
equal to those paid or payable with respect to such Appreciation
rights.
(c) VALUE BASED ON DIVIDENDS AND LIQUIDATING DISTRIBUTIONS. If
the Appreciation Rights entitle the holder thereof to distributions
based on or determined with reference to either dividends paid or
payable on Common Stock and liquidating distributions paid or payable
or on consolidation received in connection with the sale, exchange or
transfer of Common Stock, the number of Additional Shares of Common
Stock deemed issued will be the greater of the amount computed under
(a) or (b) above.
(d) OTHER PROFITS. If the Appreciation Rights entitle the
holder thereof to distributions based on or determined with reference
to any other measure of profit of the Company, the number of Additional
Shares of Common Stock deemed issued will be the value of the
Appreciation Right, as determined in the good faith judgment of the
Board of Directors, divided by the Current Market Price of the Common
Stock on the date of issuance of the Appreciation Right.
ARTICLE III. CONSOLIDATION, MERGER, ETC.
Section 3.1. CONSOLIDATION, MERGER, SALE OF ASSETS, REORGANIZATION,
ETC. From and after the date hereof, without the prior consent of the holder of
this Warrant, the Company shall not (a) consolidate with or merge into any other
Person if the Company is not the continuing or surviving corporation of such
consolidation or merger, or (b) permit any other Person to consolidate with or
merge into the Company even though the Company shall be the continuing or
surviving Person if, in connection with such consolidation or merger, the Common
Stock or Other Securities shall be changed into or exchanged for stock or other
securities of any other Person or cash or any other property, or (c) transfer
all or substantially all of its properties or assets to any other Person, or (d)
effect a capital reorganization or reclassification of the Common Stock or Other
Securities (other than a capital reorganization or reclassification resulting in
the issue of Additional Shares of Common Stock for which adjustment in the
Warrant Price is provided in Section 2.2 or 2.3).
Section 3.2. ASSUMPTION OF OBLIGATIONS. Notwithstanding anything
contained in this Warrant to the contrary, the Company will not effect any of
the transactions described in clauses (a) through (d) of Section 3.1 unless,
prior to the consummation thereof, each Person (other than the Company) which
may be required to deliver any stock, securities, cash or property upon the
exercise of this Warrant as provided herein shall assume, by written instrument
delivered to, and reasonably satisfactory to, the holder of this Warrant, (a)
the obligations of the Company under this Warrant (and if the Company shall
survive the consummation of such transaction, such assumption shall be in
addition to, and shall not release the Company from, any continuing obligations
of the Company under this Warrant) and (b) the obligation to deliver to such
holder such shares of stock, securities, cash or property as such holder may be
entitled to receive. Nothing in this Article III shall be deemed to authorize
the Company to enter into any transaction not otherwise permitted by the Loan
Agreement.
6
ARTICLE IV. OTHER PROVISIONS CONCERNING DILUTION
Section 4.1. OTHER DILUTIVE EVENTS. In case any event shall occur as to
which the provisions of Article II or III are not strictly applicable but the
failure to make any adjustment would not fairly protect the purchase rights
represented by this Warrant in accordance with the essential intent and
principles of such sections, then, in each such case, the Company shall appoint
a firm of independent certified public accountants of recognized national
standing (which may be the regular auditors of the Company), which shall give
their opinion upon the adjustment, if any, on a basis consistent with the
essential intent and principles established in Articles II and III, necessary to
preserve, without dilution, the purchase rights represented by this Warrant.
Upon receipt of such opinion, the Company will promptly mail a copy thereof to
the holder of this Warrant and shall make the adjustments described therein.
Section 4.2. NO DILUTION OR IMPAIRMENT. The Company will not, by
amendment of its certificate of incorporation or through any consolidation,
merger, reorganization, transfer of assets, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms of this Warrant, but will at all times in
good faith assist in the carrying out of all such terms and in the taking of all
such action as may be necessary or appropriate in order to protect the rights of
the holder of this Warrant against dilution or other impairment. Without
limiting the generality of the foregoing, the Company (a) will not permit the
par value of any shares of stock receivable upon the exercise of this Warrant to
exceed the amount payable therefor upon such exercise, (b) will take all such
action as may be necessary or appropriate in order that the Company may validly
and legally issue fully paid and nonassessable shares of Common Stock on the
exercise of the Warrant from time to time outstanding, and (c) will not take any
action which results in any adjustment of the Warrant Price if the total number
of shares of Common Stock (or Other Securities) issuable after the action upon
the exercise of the Warrant would exceed the total number of shares of Common
Stock (or Other Securities) then authorized by the Company's certificate of
incorporation and available for the purpose of issuance upon such exercise.
Section 4.3. ACCOUNTANT'S AND COMPANY'S REPORT AS TO ADJUSTMENTS. In
each case of any adjustment or readjustment in the shares of Common Stock (or
Other Securities) issuable upon the exercise of this Warrant, the Company at its
expense will promptly compute such adjustment or readjustment in accordance with
the terms of this Warrant and cause independent certified public accountants of
recognized national standing (which may be the regular auditors of the Company)
selected by the Company to verify such computation (other than any computation
of the fair value of property as determined in good faith by the Board of
Directors of the Company) and prepare a report setting forth such adjustment or
readjustment and showing in reasonable detail the method of calculation thereof
and the facts upon which such adjustment or readjustment is based, including a
statement of (a) the consideration received or to be received by the Company for
any Additional Shares of Common Stock issued or sold or deemed to have been
issued, (b) the number of shares of Common Stock outstanding or deemed to be
outstanding, and (c) the Warrant Price in effect immediately prior to such issue
or sale and as adjusted and readjusted (if required by Article II) on account
thereof. The Company shall also prepare and certify a report stating that any
computation of the fair value of property by the Board of Directors was done in
good faith by the Board of Directors as required herein. The Company will
forthwith mail a copy of each such report to each holder of a Warrant and will,
upon the written request at any time of any holder of a Warrant, furnish to such
holder a like report setting forth the Warrant Price at the time in effect and
showing in reasonable detail the manner in which it was calculated. The Company
will also keep copies of all such reports at its office maintained pursuant to
subdivision (a) of Section 6.2 and will cause the same to be available for
inspection at such office during normal business hours by any holder of a
Warrant or any prospective purchaser of a Warrant designated by the holder
thereof.
7
Section 4.4. NOTICES OF CORPORATE ACTION. In the event that any of the
following occurs,
(a) 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 (other than a regular
periodic dividend payable in cash out of earned surplus in an amount
not exceeding the amount of the immediately preceding cash dividend for
such period) 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
(b) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the
Company or any consolidation or merger involving the Company and any
other Person or any transfer of all or substantially all the assets of
the company to any other Person, or
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
the Company will mail to each holder of a Warrant a notice specifying (i) the
date or expected date as of which any such record is to be taken for the purpose
of such dividend, distribution or right, and the amount and character of such
dividend, distribution or right, and (ii) the date or expected date on which any
such reorganization, reclassification, recapitalization, consolidation, merger,
transfer, dissolution, liquidation or winding-up is to take place and the time,
if any such time is to be fixed, 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 the securities or other property deliverable
upon such reorganization, reclassification, recapitalization, consolidation,
merger, transfer, dissolution, liquidation or winding-up. Such notice shall be
mailed at least 20 days prior to the date therein specified.
Section 4.5. REGISTRATION OF COMMON STOCK. If any shares of Common
Stock required to be reserved for purposes of exercise of this Warrant require
registration with or approval of any governmental authority under any federal or
state law (other than the Securities Act) before such shares may be issued upon
exercise, the Company will, at its expense and as expeditiously as possible, use
its best efforts to cause such shares to be duly registered or approved, as the
case may be. At any such time as Common Stock is listed on any national
securities exchange, the Company will, at its expense, obtain the a notice of
issuance, of the shares of Common Stock issuable upon exercise of the Warrant
and maintain the listing of such shares after their issuance; and the Company
will also list on such national securities exchange, will register under the
Exchange Act and will maintain such listing of, any Other Securities that at any
time are issuable upon exercise of the Warrant, if and at the time that any
securities of the same class shall be listed on such national securities
exchange by the Company.
Section 4.6. AVAILABILITY OF INFORMATION. The Company will cooperate
with each holder of any Warrant or Restricted Security in supplying such
information as may be reasonably requested by such holder to complete and file
any information reporting forms presently or hereafter required by the
Commission to report such holder's beneficial ownership of Common Stock or Other
Securities or as a condition to the availability of an exemption from the
provisions of the Securities Act for the sale of any Restricted Securities.
8
Section 4.7. RESERVATION OF STOCK, ETC. The Company will at all times
reserve and keep available, solely for issuance and delivery upon exercise of
the Warrant, the number of shares of Common Stock (or Other Securities) from
time to time issuable upon exercise of the Warrant. All shares of Common Stock
(or Other Securities) issuable upon exercise of the Warrant shall be duly
authorized and, when issued upon such exercise, shall be validly issued and, in
the case of shares, fully paid and non-assessable with no liability on the part
of the holders thereof.
ARTICLE V. RESTRICTIONS ON TRANSFER
Section 5.1. RESTRICTIVE LEGENDS. Except as otherwise permitted by this
Article V, each Warrant (including each Warrant issued upon the transfer of any
Warrant) shall be stamped or otherwise imprinted with a legend in substantially
the following form:
"This Warrant and any shares acquired upon the exercise of
this Warrant have not been registered under the Securities Act of 1933,
as amended, and may not be transferred, sold or otherwise disposed of
in the absence of such registration or an exemption therefrom under
such Act. This Warrant and such Shares may be transferred only in
compliance with the conditions specified in this Warrant."
Except as otherwise permitted by this Article V, each certificate for Common
Stock (or Other Securities) issued upon the exercise of any Warrant, and each
certificate issued upon the transfer of any such Common Stock (or Other
Securities), shall be stamped or otherwise imprinted with a legend in
substantially the following form:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933 and may not be transferred
in the absence of such registration or an exemption therefrom under
such Act."
Section 5.2. NOTICE OF PROPOSED TRANSFER; OPINIONS OF COUNSEL. Prior to
any transfer of any Restricted Securities which are not registered under an
effective registration statement under the Securities Act, the holder thereof,
will give written notice to the Company of such holder's intention to effect
such transfer and to comply in all other respects with this Section 5.2. Each
such notice (a) shall describe the manner and circumstances of the proposed
transfer and (b) shall include an opinion of legal counsel addressed to the
Company, in form and substance reasonably satisfactory to the Company, to the
effect that such transfer does not violate the Securities Act of 1933 and
applicable state securities laws.
Section 5.3. TERMINATION OF RESTRICTIONS. The restrictions imposed by
this Article V upon the transferability of Restricted Securities shall cease and
terminate as to any particular Restricted Securities when such securities shall
have been sold pursuant to an effective registration statement under the
Securities Act or otherwise become freely transferable by the holder thereof.
Whenever such restrictions shall cease and terminate as to any Restricted
Securities, the holder thereof shall be entitled to receive from the Company,
without expense (other than applicable transfer taxes, if any), new certificates
representing the securities not bearing the applicable legends required by
Section 5.1.
ARTICLE VI. OWNERSHIP, TRANSFER AND SUBSTITUTION OF WARRANT
Section 6.1. OWNERSHIP OF WARRANT. The Company may treat the person in
whose name any Warrant is registered on the register kept at the office of the
Company maintained pursuant to subdivision (a) of Section 6.2 as the owner and
holder thereof for all purposes, notwithstanding any notice to the contrary,
9
except that, if and when any Warrant is properly assigned in blank, the Company
may (but shall not be obligated to) treat the bearer thereof as the owner of
such Warrant for all purposes, notwithstanding any notice to the contrary.
Subject to Article V, a Warrant, if properly assigned, may be exercised by a new
holder without a new Warrant first having been issued.
Section 6.2. OFFICE, TRANSFER AND EXCHANGE OF WARRANT.
(a) OFFICE. The Company will maintain an office in where
notices, presentations and demands in respect of this Warrant may be
made upon it. Such office shall be maintained at
__________________________________until such time as the Company shall
notify each holder of the Warrant of any change of location of such
office.
(b) NEW WARRANT. Upon the surrender of any Warrant, properly
endorsed, for registration of transfer or for exchange at the office of
the Company maintained pursuant to subdivision (a) of this Section 6.2,
the Company at its expense will (subject to compliance with Article V,
if applicable) execute and deliver to or upon the order of the holder
thereof a new Warrant or Warrants of like tenor, in the name of such
holder or as such holder (upon payment by such holder of any applicable
transfer taxes) may direct, calling in the aggregate on the face or
faces thereof for the number of shares of Common Stock called for on
the face or faces of the Warrant or Warrants so surrendered.
Section 6.3. REPLACEMENT OF WARRANT. Upon receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of any Warrant and, in the case of any such loss, theft or
destruction of any Warrant held by a Person other than Purchaser or any
institutional investor, upon delivery of indemnity reasonably satisfactory to
the Company in form and amount or, in the case of any such mutilation, upon
surrender of such Warrant for cancellation at the office of the Company
maintained pursuant to subdivision (a) of Section 6.2, the Company at its
expense will execute and deliver, in lieu thereof, a new Warrant of like tenor.
ARTICLE VII. DEFINITIONS
As used herein, unless the context otherwise requires, the following
terms have the following respective meanings:
ADDITIONAL SHARES OF COMMON STOCK: All shares (including treasury
shares) of Common Stock issued or sold (or pursuant to Section 2.4, 2.5 or 2.9,
deemed to be issued) by the Company after the date hereof, whether or not
subsequently reacquired or retired by the Company, other than
(a) shares issued upon the exercise of the Warrant,
(b) such additional number of shares as may become issuable
upon the exercise of any of the securities referred to in the foregoing
clause (a) by reason of adjustments required pursuant to anti-dilution
provisions applicable to such securities as in effect on the date
hereof, but only if and to the extent that such adjustments are
required as the result of the original issuance of the Warrant, and
10
(c) such additional number of shares as may become issuable
upon the exercise of any of the securities referred to in the foregoing
clause (a) by reason of adjustments required pursuant to anti-dilution
provisions applicable to such securities as in effect on the date
hereof, in order to reflect any subdivision or combination of Common
Stock, by reclassification or otherwise, or any dividend on Common
Stock payable in Common Stock.
APPRECIATION RIGHTS: All stock appreciation rights, net profits
interests or other rights entitling the holder or owner thereof to receive
payments based upon or determined with reference to the distributions to holders
of Common Stock or the profits of the Company.
BUSINESS DAY: Any day other than a Saturday or a Sunday or a day on
which commercial banking institutions in the States of Texas or New York are
authorized by law to be closed. Any reference to "days" (unless Business Days
are specified) shall mean calendar days.
COMMISSION: The Securities and Exchange Commission or any other federal
agency at the time administering the Securities Act.
COMMON STOCK: As defined in the introduction to this Warrant, such term
to include (i) any stock into which such Common Stock shall have been changed or
any stock resulting from any reclassification of such Common Stock, (ii) all
other stock of any class or classes (however designated) of the Company the
holders of which have the right, without limitation as to amount, either to all
or to a share of the balance of current dividends and liquidating dividends
after the payment of dividends and distributions on any shares entitled to
preference and (iii) all stock appreciation rights, phantom stock and similar
contract rights the holders of which are entitled to payments based on or
determined by reference to the value of the Common Stock, dividends payable with
respect to Common Stock, or liquidating distributions payable with respect to
Common Stock.
COMPANY: As defined in the introduction to this Warrant, such term to
include any Person which shall succeed to or assume the obligations of the
Company hereunder in compliance with Article III.
CONVERTIBLE SECURITIES: Any evidences of indebtedness, shares of stock
(other than Common Stock) or other securities directly or indirectly convertible
into or exchangeable for Additional Shares of Common Stock.
CURRENT MARKET PRICE: On any date specified herein, the average daily
Market Price during the period of the most recent 20 days, ending on such date,
on which the national securities exchanges were open for trading, except that if
no Common Stock is then listed or admitted to trading on any national securities
exchange or quoted in the over-the-counter market, the Current Market Price
shall be the Market Price on such date.
DILUTION FACTOR: As defined in Section 2.1.
DILUTIVE BASIS: With respect to any issuance or sale or any deemed
issuance or sale of Additional Shares of Common Stock from and after the date
hereof, the greater of (i) the Current Market Price on the day immediately
before issuance or deemed issuance and (ii) the Warrant Price on the day before
issuance or deemed issuance.
EXCHANGE ACT: The Securities Exchange Act of 1934, or any similar
federal statute, and the rules and regulations of the Commission thereunder, all
as the same shall be in effect at the time.
EXPIRATION DATE: February 6, 2011, unless extended as provided in
Section 8.5.
11
GAAP: Generally accepted accounting principles set forth in the
Opinions of the Accounting Principles Board of the American Institute of
Certified Public Accountants and in statements by the Financial Accounting
Standards Board or in such other statement by such other entity as may be
approved by a significant segment of the accounting profession; and the
requirement that such principles be applied on a consistent basis shall mean
that the accounting principles observed in a current period are comparable in
all material respects to those applied in a preceding period.
INITIAL PRICE: $0.01.
MARKET PRICE: On any date specified herein, the amount per share of the
Common Stock, equal to (a) the last sale price of such Common Stock, regular
way, on such date or, if no such sale takes place on such date, the average of
the closing bid and asked prices thereof on such date, in each case as
officially reported on the principal national securities exchange on which such
Common Stock is then listed or admitted to trading, or (b) if such Common Stock
is not then listed or admitted to trading on any national securities exchange
but is designated as a national market system security by the NASD, the last
trading price of the Common Stock on such date, or (c) if there shall have been
no trading on such date or if the Common Stock is not so designated, the average
of the closing bid and asked prices of the Common Stock on such date as shown by
the NASD automated quotation system, or (d) if such Common Stock is not then
listed or admitted to trading on any national exchange or quoted in the
over-the-counter market, the fair value thereof determined in good faith by the
Board of Directors of the Company as of a date which is within 20 days of the
date as of which the determination is to be made.
NASD: The National Association of Securities Dealers, Inc.
OPTIONS: Rights, options or warrants to subscribe for, purchase or
otherwise acquire either Additional Shares of Common Stock or Convertible
Securities.
OTHER SECURITIES: Any stock (other than Common Stock) and other
securities of the Company or any other Person (corporate or otherwise) which the
holder of the Warrant at any time shall be entitled to receive, or shall have
received upon the exercise of the Warrant, in lieu of or in addition to Common
Stock, or which at any time shall be issuable or shall have been issued in
exchange for or in replacement of Common Stock or Other Securities pursuant to
Article III or otherwise.
PERSON: Any corporation, association, partnership, joint venture,
trust, estate, limited liability company, organization, business, individual,
government or political subdivision thereof or governmental agency.
RESTRICTED SECURITIES: All of the following: (a) any Warrant bearing
the applicable legend or legends referred to in Section 5.1, (b) any shares of
Common Stock (or Other Securities) which have been issued upon the exercise of
the Warrant and which are evidenced by a certificate or certificates bearing the
applicable legend or legends referred to in such section and (c) unless the
context otherwise requires, any shares of Common Stock (or Other Securities)
which are at the time issuable upon the exercise of the Warrant and which, when
so issued, will be evidenced by a certificate or certificates bearing the
applicable legend or legends referred to in such section.
SECURITIES ACT: The Securities Act of 1933, or any similar federal
statute, and the rules and regulations of the Commission thereunder, all as the
same shall be in effect at the time.
SUBSIDIARY: With respect to any Person, any corporation with respect to
which more than 50% of the outstanding shares of stock of each class having
ordinary voting power (other than stock having such power only by reason of the
happening of a contingency) is at the time owned, directly or indirectly, by
such Person or by one or more Subsidiaries of such Person.
12
TRANSFER: Any sale, assignment, pledge or other disposition of any
security, or of any interest therein, which could constitute a "sale" as that
term is defined in section 2(3) of the Securities Act.
PURCHASER: Xxxxx Fargo Energy Capital, Inc..
WARRANT PRICE: As defined in Section 2.1 of this Warrant.
WARRANT PURCHASE AGREEMENT: That certain Warrant Purchase Agreement by
and between the Company and Purchaser, of even date.
ARTICLE VIII. MISCELLANEOUS
Section 8.1. REMEDIES. The Company stipulates that the remedies at law
of the holder of this Warrant in the event of any default or threatened default
by the Company in the performance of or compliance with any of the terms of this
Warrant are not and will not be adequate and that, to the fullest extent
permitted by law, such terms may be specifically enforced by a decree for the
specific performance of any agreement contained herein or by an injunction
against a violation of any of the terms hereof or otherwise.
Section 8.2. NO RIGHTS OR LIABILITIES AS STOCKHOLDER. The holder of
this Warrant and all subsequent holders thereof hereby agree that except to the
extent set forth herein, no provision of this Warrant shall be construed as
conferring upon the holder hereof any rights as a stockholder of the Company or
as imposing any obligation on such holder to purchase any securities or as
imposing any liabilities on such holder as a stockholder of the Company, whether
such obligation or liabilities are asserted by the Company or by creditors of
the Company.
Section 8.3. NOTICES. All notices and other communications under this
Warrant shall be in writing and shall be mailed by registered or certified mail,
return receipt requested, addressed (a) if to any holder of any Warrant, to the
registered address of such holder as set forth in the register kept at the
principal office of the Company, or (b) if the Company, to the attention of its
President at its office maintained pursuant to subdivision (a) of Section 6.2,
provided that the exercise of any Warrant shall be effective in the manner
provided in Article I.
Section 8.4. MISCELLANEOUS.
(a) This Warrant may be amended, waived, discharged or
terminated and the Company may take any action herein required to be
performed by it, only if the Company shall have obtained the written
consent to such amendment, action or omission to act, of the holder of
the Warrant.
(b) THIS WARRANT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE
WITH THE GOVERNED BY THE LAWS OF THE STATE OF TEXAS.
(c) The section headings in this Warrant are for purposes of
convenience only and shall not constitute a part hereof.
Section 8.5. EXPIRATION. The Company will give the holder of this
Warrant not less than six weeks nor more than five months prior notice of the
expiration of the right to exercise this Warrant. The right to exercise this
13
Warrant shall expire at 5:00 p.m., Houston, Texas time, on the Expiration Date.
If the Company shall fail to give such notice as aforesaid, the Expiration Date
shall be automatically extended until the date six weeks after the date on which
the Company shall give the holder hereof notice of the expiration of the right
to exercise this Warrant.
Mountain Compressed Air, Inc.
By: /S/ XXXXXXX X. XXXXXXXXXXXX
----------------------------
Xxxxxxx X. Xxxxxxxxxxxx
Chairman and Chief Executive Officer
14
FORM OF SUBSCRIPTION
To ___________________________:
The undersigned registered holder of the within Warrant hereby
irrevocably exercises such Warrant for, and purchases _________* shares of
Common Stock of _________________, and herewith makes payment of $___________
therefor, and requests that the certificates for such shares be issued in the
name of, and delivered to ___________________________, whose address is
______________________________ ___________.
Dated: (Signature must conform in all
respects to name of holder as
specified on the face or
Warrant)
----------------------------
(Street Address)
----------------------------
(City) (State) (Zip Code)
---------------------------
*Insert the number of shares called for on the face of this
Warrant (or, in the case of a partial exercise, the portion thereof as
to which this Warrant is being exercised), in either case without
making any adjustment for Additional Shares of Common Stock or any
other stock or other securities or property or cash which, pursuant to
the adjustment provisions of this Warrant, may be delivered upon
exercise. In the case of a partial exercise, a new Warrant or Warrants
will be issued and delivered, representing the unexercised portion of
the Warrant, to the holder surrendering the Warrant.
FORM OF ASSIGNMENT
[To be executed only upon transfer of Warrant]
For value received, the undersigned registered holder of the within
Warrant hereby sells, assigns and transfers unto _________________ the right
represented by such Warrant to purchase shares of Common Stock of to which such
Warrant relates, and appoints Attorney to make such transfer on the books of
maintained for such purpose, with full power of substitution in the premises.
Dated: (Signature must conform in all
respects to name of holder as
specified on the face or
Warrant)
----------------------------
(Street Address)
----------------------------
(City) (State) (Zip Code)
Signed in the presence of:
--------------------------
EXHIBIT C
SUBORDINATION AGREEMENT
-----------------------
EXHIBIT D
INTERCREDITOR AGREEMENT
-----------------------
