EXHIBIT 10.39
METRETEK TECHNOLOGIES, INC.
STIPULATION OF SETTLEMENT
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DISTRICT COURT, CITY AND COUNTY OF DENVER,
COLORADO
1437 Bannock Street
Denver, Colorado 80202
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PLAINTIFF: Douglas W. Heins, on behalf of himself Case No.: 01CV26
and all others similarly situated
Courtroom 2
DEFENDANTS: Metretek Technologies, Inc., et al.
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STIPULATION OF SETTLEMENT
This Stipulation of Settlement (the "Stipulation"), dated as of March
2, 2004, is made and entered into by and among the following parties (as defined
further in Section V (1) hereof) to the above-entitled Litigation: (i) the
Plaintiff (in his representative capacity on behalf of himself and the Class) by
and through his counsel of record in the Litigation; and (ii) the "Settling
Defendants" by and through their counsel of record in the Litigation. The
Stipulation is intended by the Settling Parties to fully, finally and forever
resolve, discharge and settle the Released Claims (as defined herein), upon and
subject to the terms and conditions set out in this joint Stipulation of
Settlement. This settlement is contingent upon resolution of an Interpleader
Action (as defined herein) filed Gulf Insurance Company and the payment of
$2,375,000 on behalf of the Settling Defendants and Jeff Farstad in his capacity
as trustee of the Trust, from the insurance proceeds into the Escrow Account as
provided herein.
I. THE LITIGATION
This lawsuit (referred to in this Stipulation as "the Class Action" or
"the Litigation") was filed in the District Court for the City and County of
Denver, Colorado on January 3, 2001. The Class Action generally alleges that the
Settling Defendants and others engaged in violations of the Colorado Securities
Act in connection with the selling of units in Marcum Midstream 1997-1 Business
Trust (hereinafter "Trust").
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II. PRETRIAL PROCEEDINGS AND DISCOVERY IN THE LITIGATION
Class Counsel has conducted extensive research and investigation during
the prosecution of the Litigation. This discovery and investigation has
included, inter alia, (i) inspection of hundreds of pages of documents produced
by the Settling Defendants, available public records, and documents voluntarily
provided by numerous cooperating class members; (ii) review of hundreds of pages
of the PPM and its supplements; (iii) review of a previously filed federal
lawsuit and arbitration relating to the Amoco Contract that is also at issue in
this case, (iv) exhaustive pre-filing investigation of the claims and counts set
out in the original complaint and proposed amended complaint, (v) retention of a
private investigator to search for assets to satisfy a judgment or evaluate the
settlement offer, (vi) an investigation of the tariffs and regulations governing
the transmission of natural gas liquids, and (vii) extensive research of the
applicable law with respect to the claims asserted in the Complaint and the
potential defenses thereto.
Class Counsel also filed and prevailed on a motion for class
certification, filed a motion for partial summary judgment that is currently
pending, opposed the Defendants' various motions to dismiss, and opposed the
Settling Defendants motion for partial summary judgment regarding collateral
estoppel. Class Counsel also defended the deposition of the class representative
and participated in the deposition of the primary broker-dealer. Class Counsel
have also served detailed discovery on the Defendants including interrogatories,
request for production of documents and request for admissions. Class Counsel
also drafted a proposed Second Amendment to their Complaint that has been
provided to the Metretek Defendants in order to demonstrate the "road ahead" in
the event there was not a settlement.
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III. SETTLING DEFENDANTS' STATEMENT
The Settling Defendants have denied and continue to deny each and all
of the claims and contentions alleged by the Representative Plaintiff on behalf
of the Class. The Settling Defendants also have denied and continue to deny,
inter alia, the allegations that the Representative Plaintiff or the Class has
suffered damage. The Settling Defendants have concluded that the further conduct
of the Litigation concerning the Released Claims would be protracted and
expensive, and they also have taken into account the uncertainty and risks
inherent in any litigation, especially in complex cases like this Litigation.
Therefore, the Settling Defendants have determined that it is desirable and
beneficial to them that the Litigation concerning the Released Claims be fully
and finally settled as to them in the manner and upon the terms and conditions
set forth in this Stipulation.
The Settling Defendants have asserted cross claims or third party
claims in the Litigation for fraud, negligent misrepresentation, breach of
contract, breach of fiduciary duty, civil conspiracy, contribution and
contractual indemnification against Jeff Farstad and his companies, Farstad Oil,
Inc. and Farstad Gas and Oil, LLC. The Settling Defendants intend to continue to
pursue their claims against these Farstad defendants.
IV. CLAIMS OF THE REPRESENTATIVE PLAINTIFF AND BENEFITS OF SETTLEMENT
The Representative Plaintiff believes that the claims asserted in the
Litigation have merit and that the evidence developed to date in the Litigation
supports the claims asserted. However, Class Counsel and the Representative
Plaintiff recognize and acknowledge the expense and length of continued
proceedings necessary to prosecute the Litigation against the Settling
Defendants through trial and through appeals. Counsel for the Representative
Plaintiff also have taken into account the uncertainty and risks inherent in any
litigation, especially in complex cases like this Litigation, and they believe
that the settlement set forth in the Stipulation confers substantial benefits
upon the Class and each of the Class Members. Based on their evaluation, Class
Counsel and the Representative Plaintiff have determined that the settlement set
forth in the Stipulation is in the best interests of the Class and each of the
Class Members.
V. TERMS OF STIPULATION AND AGREEMENT OF SETTLEMENT
NOW, THEREFORE, IT IS HEREBY STIPULATED AND AGREED by and among the
Representative Plaintiff (for himself and the Class), and the Settling
Defendants, by and through their respective attorneys of record, that, subject
to the approval of the Court and the satisfaction of the conditions set forth
herein, the Litigation and the
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Released Claims (defined below) shall be finally and fully compromised and
settled, as to the Released Persons (defined below), upon and subject to the
terms and conditions of the Stipulation, as follows:
1. DEFINITIONS
As used in the Stipulation, the following terms have the meanings
specified below. Any defined term in this Stipulation that is not otherwise
defined herein shall have the meaning set forth in the Complaint.
"Brokerage Firms" means IFG Network Securities, Inc., Intrust Financial
Services, Investment Tax Strategies, Professional Planning, Issac Financial
Service, Capital Strategies, Ltd., Sentra Securities, GBS Financial, Strategic
Assets, Inc., and Smith Moore & Co. Brokerage Firms does not mean or include
Marcum Capital Resources, Inc. or Daniel J. Packard.
"Class" means all persons or entities who are members of that certain
class certified by the Court on September 28, 2001, in connection with the Class
Action and who did not voluntarily opt out of the class.
"Class Action" means the lawsuit filed in the District Court for the
City and County of Denver, Colorado as Case No. 01 CV 26, captioned Douglas W.
Heins, on behalf of himself and all others similarly situated v. Metretek
Technologies, Inc., et al. The Class Action is also referred to in this
Stipulation as the Litigation.
"Class Counsel" means the following counsel for Representative
Plaintiff in the Litigation: The Law Office of Vincent T. Gresham, Hawkins &
Parnell, and Von Gunten Law, LLC.
"Class Member" or "Member of the Class" means a Person who falls within
the definition of the Class as set forth in herein, including his, her, its or
their respective past, present and future employees, agents, officers,
directors, principals, members, partners, predecessors, successors, heirs,
executors, administrators, trustees, assigns, representatives, attorneys,
consultants, advisors, parents, insurers, subsidiaries, and related or
affiliated entities. Excluded from the class are the Defendants, their
affiliates, officers, directors, trustees, family members, employees and any
individual that opted out of the class.
"Claims Against Farstad" means those claims against any of the Farstad
Defendants that are being asserted by either the Class or any of the Metretek
Defendants, excluding any and all claims asserted against Jeff Farstad in his
capacity as trustee of the Trust.
"Contribution Claims" has the meaning set forth in Section 2.3.3.
"Effective Date" means the first date by which all of the events and
conditions specified in Sections 6 and 8 of the Stipulation have been met and
have occurred.
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"Escrow Account" means that certain escrow account #78480900 at US
Bank.
"Escrow Agent" means US Bank.
"Escrow Agreement" shall mean that certain agreement attached as
EXHIBIT C.
"Escrow Funds" means any funds deposited into the Escrow Account, and
shall include any interest or earnings thereon.
"Failure Date" means the date (should it occur) that the Court's Final
Judgment and Order approving this Settlement as required in Section 6 is
overturned, in whole or in material part, by final, non-appealable order or
ruling of this Court or another court of competent jurisdiction with authority
to do so, or when any one or more of the conditions in Section 8 are not
satisfied; provided that the Failure Date shall mean December 31, 2006 or such
later date as may be agreed to by the Settling Parties if neither the Failure
Date nor the Effective Date shall have occurred on or before such date.
"Farstad Defendants" means Jeff Farstad (in his individual capacity and
not as a trustee of the Trust as set forth herein), Farstad Gas & Oil, LLC, and
Farstad Oil, Inc., and any of their affiliates including without limitation, SPF
Energy, Inc.
"Final" means (i) the date of final affirmance on an appeal from a
judgment, the expiration of the time for a petition for a writ of certiorari to
review a judgment and, if certiorari be granted, the date of final affirmance of
a judgment following review pursuant to that grant; or (ii) the date of final
dismissal of any appeal from a judgment or the final dismissal of any proceeding
on certiorari to review a judgment; or (iii) if no appeal is filed, the
expiration date of the time for the filing or noticing of any appeal from a
judgment, i.e., thirty (30) days after entry of the judgment or such longer time
as allowed by extension.
"Judgment" means the judgment to be rendered by the Court, finally
approving the terms of this settlement as set forth in this Stipulation.
"Lead Class Counsel" means Vincent T. Gresham of The Law Office of
Vincent T. Gresham.
"Litigation" means that certain lawsuit filed in the District Court for
the City and County of Denver, Colorado as Case No. 01CV26, captioned Douglas W.
Heins, on behalf of himself and all others similarly situated v. Metretek
Technologies, Inc., et al. The Litigation is also referred to in this
Stipulation as the Class Action.
"Metretek" means Metretek Technologies, Inc.
"Metretek Claims" has the meaning set forth in Section 2.3.
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"Metretek Counterclaims" has the meaning set forth in Section 2.3.3.
"Metretek Defendants" shall mean Marcum Midstream 1997-1 Business Trust
("Trust"), Marcum Midstream-Farstad, LLC, Metretek Technologies, Inc., Marcum
Gas Transmission, Inc., Marcum Capital Resources, Inc., W. Phillip Marcum
("Marcum"), Richard M. Wanger ("Wanger"), and Daniel J. Packard ("Packard").
Marcum, Wanger and Packard may be referred to together as the "Individual
Metretek Defendants." The Metretek Defendants are also referred to in this
Stipulation as the Settling Defendants.
"Metretek Note" means a $3 Million note from Metretek Technologies,
Inc. in the form attached hereto as EXHIBIT A, that is guaranteed by the Trust
and all subsidiaries of Metretek pursuant to guarantees in the form attached
hereto as EXHIBIT B.
"Metretek Persons" means Metretek, all subsidiaries of Metretek
including, without limitation, Southern Flow Companies, Inc., and all Individual
Metretek Defendants.
"Net Recovery" has the meaning set forth in Section 2.3.4.
"Notice" means the Notice of Proposed Settlement Of Class Claims
referred to in Section 5.1.
"Payment Date" means that date which is 46 days after the Court enters
the Final Judgment and Order as required in Section 6, or such later date as may
be agreed to by the Settling Parties.
"Person" means an individual, corporation, partnership, limited
partnership, association, joint stock company, estate, legal representative,
trust, unincorporated association, government or any political subdivision or
agency thereof, and any business or legal entity and their spouses, heirs,
predecessors, successors, representatives, or assignees.
"Prepayment Amount" has the meaning set forth in Section 2.3.5.
"Released Claims" shall mean and include any and all claims, causes of
action, demands, rights, liabilities, costs and expenses (including without
limitation attorneys' fees and interest) of any kind or nature whatsoever,
whether based on statutory, tort, contractual or any other theory of recovery or
liability, whether at law or in equity, whether asserted or unasserted, whether
known or unknown (including Unknown Claims as defined below), that have been or
that could have been asserted in this or any other forum or proceeding by or on
behalf of the Representative Plaintiff, the Class, or any Member of the Class
(together, "Releasors") directly or indirectly based upon, arising out of, or
related to (a) the Trust, (b) any purchases or sales of securities in the Trust
or investment in the Trust, (c) the subject matter of the Litigation, (d) any
action, omission, duty or obligation of any Released Person
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related thereto, (e) the institution, prosecution, assertion, defense or
resolution of the Litigation (except with respect to the obligations in this
Stipulation), (f) any communications to or with any Person, or (g) otherwise
arising out of or relating to any facts, circumstances, allegations, claims,
causes of action, representations, statements, reports, disclosures,
transactions, events, occurrences, acts, omissions or failures to act in
connection with the Trust or by any Settling Defendant or any Released Person of
whatever kind or character whatsoever, irrespective of the state of mind of the
actor performing or omitting to perform the same that have been or could have
been alleged in any pleading, amended pleading, argument, complaint, amended
complaint, brief, motion, report or filing in the Litigation, or any other forum
or other proceeding. "Released Claims" also include all claims asserted against
Jeff Farstad in his capacity as a trustee of the Trust.
"Released Persons" means each and all of the Settling Defendants, and
his, its or their respective past, present and future employees, agents,
officers, directors, principals, members, partners, predecessors, successors,
heirs, executors, administrators, trustees, assigns, representatives, attorneys,
accountants, consultants, advisors, parents, insurers (including, but not
limited to Gulf Insurance Company), subsidiaries, and related or affiliated
entities including, without limitation, Southern Flow Companies, Inc., Kendor
Jones, Welborn, Sullivan, Meck & Tooley, P.C., Thomas A. Wentz, Jr., Pringle &
Herigstad, P.C., Patrick R. Sughroue, Patrick R. Sughroue, P.C., Purvin & Gertz,
Jeff Farstad, in his capacity as trustee of the Trust, the Brokerage Firms
(except as limited by Section 3.3 below), Jacobs Chase Frick Kleinkopf & Kelley,
LLC, Kegler, Brown, Hill & Ritter Co., L.P.A., Waldbaum Corn Koff & Berger,
P.C., and Chapin Shea McNitt & Carter, and his, its, or their respective past,
present and future employees, agents, officers, directors, principals, members,
partners, predecessors, successors, heirs, executors, administrators, trustees,
assigns, representatives, attorneys, consultants, advisors, parents, insurers
(including, but not limited to Gulf Insurance Company),, subsidiaries, and
related or affiliated entities, but specifically excluding the Farstad
Defendants (as previously defined).
"Remaining Defendants" shall mean the Farstad Defendants (as previously
defined) and any other party named as a defendant in the Metretek Claims.
"Representative Plaintiff" means Douglas Heins.
"Settlement" means the settlement contemplated by this Stipulation as
approved by the Court.
"Settlement Fund" is the sum of (a), (b), (c) and (d) below: (a) an
initial payment of $2.75 Million which includes $2.375 million of insurance
proceeds to be paid on behalf of the Settling Defendants and Jeff Farstad in his
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capacity as trustee of the Trust, which are currently the subject of the
Interpleader Action as defined herein, (b) all regularly scheduled payments made
under the $3 Million Metretek Note, (c) any Net Recovery from the Farstad
Defendants or any other person on account of either Claims Against Farstad or
Metretek Claims whether such Net Recovery is additional consideration or
Prepayment Amounts, and (d) all accrued interest or earnings on (a) through (c).
"Settling Defendants" means the Metretek Defendants. The Settling
Defendants are also referred to in this Stipulation as the Metretek Defendants.
"Settling Parties" means, collectively, each of the Settling Defendants
and the Representative Plaintiff on behalf of himself and the Class.
"Settling Party" means any of the Settling Defendants or the
Representative Plaintiff on behalf of himself and the Class.
"Stipulation" means this Stipulation of Settlement, together with all
Exhibits hereto.
"Stock Sale Prepayment" has the meaning set forth in Section 2.4.
"Unknown Claims" means any Released Claims which the Representative
Plaintiff or Class Members do not know or suspect to exist in his, her or its
favor against the Released Persons at the time of the release of the Released
Persons which, if known by him, her, or it, might have affected his, her, or its
settlement with and release of the Released Persons, or might have affected his,
her, or its decision not to object to this settlement. The Representative
Plaintiff and Class Members may hereafter discover facts in addition to or
different from those which he or she now knows or believes to be true with
respect to the subject matter of the Released Claims, but hereby stipulate and
agree that the Representative Plaintiff and Class Members shall be deemed to,
upon the Effective Date, fully, finally, and forever settle and release any and
all Released Claims, as against the Released Persons, known or unknown,
suspected or unsuspected, contingent or non-contingent, whether or not concealed
or hidden, which now exist, or heretofore have existed upon any theory of law or
equity, including, but not limited to, conduct which is negligent, intentional,
with or without malice, or a breach of any duty, law or rule including, but not
limited to state and federal securities and racketeering laws, without regard to
the subsequent discovery or existence of such different or additional facts. The
Representative Plaintiff and Class Members acknowledge that the foregoing waiver
was separately bargained for and is a key element of the Settlement of which
this release is a part.
"WF Subsidiaries" means Southern Flow Companies, Inc., Metretek,
Incorporated and PowerSecure, Inc.
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2. CLASS CONSIDERATION FOR SETTLEMENT
The Representative Plaintiff and Class Counsel agreed to settle this
Litigation only after determining that (a) the Representative Plaintiff and
members of the Class will receive substantial monetary and/or other additional
benefits as a result of the Settlement, (b) there were substantial risks
attendant to the continuation of the Litigation, (c) the Settlement provides for
a prompt and efficient resolution of all claims against the Settling Defendants,
and (d) the Settlement is in the best interests of the Representative Plaintiff
and members of the Class and constitutes a fair, reasonable and adequate
resolution of the Litigation as to the Settling Defendants.
2.1 THE $2.75 MILLION PAYMENT
Meteretek agrees to exert its best efforts to settle the Interpleader
Action (as defined herein) in sufficient time to cause to be paid into the
Escrow Account, directly and through its insurers, $2,750,000 to be held by the
Escrow Agent pursuant to the Escrow Agreement on or before March 15, 2004. It is
understood and agreed that currently $2,375,000 of these funds are the subject
of that certain interpleader action filed by Gulf Insurance Company in DISTRICT
COURT, CITY AND COUNTY OF DENVER, COLORADO as Case Number: 03 CV 2067 (the
"Interpleader Action"). The execution of this Stipulation of Settlement and the
taking of actions pursuant to such Stipulation of Settlement shall not impact
upon the rights of any party in the Interpleader Action.
Except as provided in the subsequent paragraph and pursuant to the
Escrow Agreement, no Person, other than the Escrow Agent, Metretek or the
Settlement Fund, shall have any rights or interest in the Escrow Account or the
Escrow Funds, and under no circumstances shall the Escrow Agent be permitted, to
disburse any Escrow Funds to any Person other than Metretek, the Escrow Agent,
or the Settlement Fund, or in the event the Failure Date occurs, as provided
below, and then only as provided and permitted in this Stipulation and in the
Escrow Agreement.
In the event the Failure Date occurs, then all Escrow Funds shall be
immediately returned (with any interest or earnings thereon, but less any fees
or expenses of the Escrow Account) to the Person depositing such funds, and both
Lead Class Counsel and Metretek agree to sign an authorization to that effect
and deliver the same to the Escrow Agent. In the event the Failure Date occurs,
specifically, with respect to the $2.375 million of insurance proceeds, the
Escrow Agent shall return the funds to an "Interpleader Escrow Account" to be
established pursuant to the terms of the Settlement Agreement reached in the
Interpleader Action. In the event the Effective Date occurs, then all such
Escrow Funds shall be immediately paid into the Settlement Fund (with any
interest or earnings thereon, but less any fees or expenses of the Escrow
Account), and both Lead Class Counsel and Metretek agree to
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sign an authorization to that effect and deliver the same to the Escrow Agent.
Prior to the Preliminary Approval Hearing (as defined below) the
Metretek Defendants will submit affidavits to the effect that no other insurance
policies apply to the issues raised in the Litigation.
2.2 THE $3 MILLION METRETEK NOTE
On the earlier of June 30, 2004 or 5 business days after the Payment
Date, Metretek shall execute a note payable to the Settlement Fund for the
benefit of the Class in the amount of $3,000,000 (the "Metretek Note"). The
Metretek Note shall be in the form attached hereto as EXHIBIT A and shall bear
interest at the Wall Street Journal prime rate plus 3% and will be payable in 16
quarterly installments of $187,500 plus accrued interest, commencing on June 30,
2004.
In the event that neither the Effective Date nor Failure Date has
occurred by the time the Metretek Note is payable, then Metretek shall pay all
installments as due under the Metretek Note as Escrow Funds into the Escrow
Account referenced in Section 2.1 above. These installments shall be retained as
Escrow Funds in the Escrow Account until either the Effective Date or Failure
Date occurs. In the event the Failure Date occurs, then all such payments under
the Metretek Note (along with any interest or earnings thereon) shall be
immediately returned to Metretek, and both Lead Class Counsel and Metretek agree
to sign an authorization to that effect and deliver the same to the Escrow
Agent. In the event the Effective Date occurs, then all such payments under the
Metretek Note (with any interest or earnings thereon) shall be immediately paid
into the Settlement Fund, and both Lead Class Counsel and Metretek agree to sign
an authorization to that effect and deliver the same to the Escrow Agent. The
Metretek Note shall be guaranteed by the Trust and all subsidiaries of Metretek
pursuant to guarantees in the form attached hereto as EXHIBIT B. Notwithstanding
the foregoing, no individual (including Wanger, Packard, and Marcum) shall be
required to guarantee the Metretek Note. In the event that the Failure Date
occurs, then the Metretek Note along with any guarantees shall be returned to
Metretek.
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2.3 THE METRETEK CLAIMS
2.3.1 The Metretek Defendants believe they may have valid causes of
action against Jeff Farstad, Farstad Gas & Oil, LLC, Farstad Oil, Inc., Welborn,
Sullivan, Meck & Tooley, P.C., Pringle & Herigstad, P.C., IFG Network
Securities, Inc., Patrick R. Sughroue, and Purvin & Gertz relating to the Trust,
sale of Trust units, the Farstad Product, the Farstad Facility, Amoco Contract
and the other facts and circumstances giving rise to Plaintiff's claims set
forth in his complaint. The Metretek Defendants have either asserted claims
against these parties in the Litigation or have obtained tolling agreements with
these third parties.
2.3.2 The Metretek Defendants shall either (a) vigorously prosecute the
"Metretek Claims" referenced in the immediately preceding Paragraph, or, in the
alternative, (b) such Metretek Defendants may satisfy this obligation by
requesting that Class Counsel prosecute such Metretek Claims, and defend any
resulting "Contribution Claims" (as defined below), in the manner set forth in
the next paragraph. In the event some Metretek Defendants agree to request Class
Counsel but others do not, all Metretek Defendants agree to be bound by a
majority vote of Metretek Defendants.
2.3.3 In the event the Metretek Defendants make this request of Class
Counsel, then Class Counsel will prosecute those Metretek Claims that Class
Counsel in their sole discretion shall determine to prosecute, and defend any
resulting Contribution Claims (as defined below). The Metretek Defendants shall
retain separate counsel to defend any "Metretek Counterclaims" (as defined
below). Class Counsel shall have no duty to defend against any Metretek
Counterclaims. In the event that Class Counsel elects not to prosecute any of
the disclosed Metretek Claims by expressly advising Metretek in writing of the
same within thirty (30) days from the request by the Metretek Defendants, then
the Metretek Defendants, or any of them, may, but shall not be required to,
prosecute such Metretek Claims by other counsel of its own selection. All
Metretek Defendants agree that Class Counsel shall have the right to prosecute
(or not prosecute) such claims, as Class Counsel shall in their sole discretion
determine. However, if Class Counsel prosecutes any Metretek Claims, they must
also defend any resulting Contribution Claims.
To the extent that any Person recovers from any Metretek Person on any
claim, cross claim, counterclaim or third party claim by such Person that is
based in whole or in part on such Person's liability, directly or indirectly, to
the Representative Plaintiff, the Class or any Class Member including, without
limitation, any claim for contribution or indemnification (collectively,
"Contribution Claims"), then the amount of such Contribution Claims
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including, without limitation, any damages, interest, costs, expenses, fees or
attorneys' fees, shall be paid from any amounts recovered by either the Metretek
Person or the Class, as applicable, from the prosecution of any Metretek Claims,
and shall be deducted from any computations of "Net Recovery" (as defined
below). "Metretek Counterclaims" are all claims brought against any Metretek
Person other than the "Contribution Claims."
2.3.4 Any Metretek Defendant requesting Class Counsel to prosecute such
Metretek Claims agrees that Class Counsel shall work on a 100% contingent basis
and shall advance all costs incurred in prosecuting such Metretek Claims and
defending any resulting Contribution Claims by those Persons against whom Class
Counsel is prosecuting Metretek Claims or by any other Person as a result of
those Metretek Claims. Any such Metretek Defendant also agrees that from any
recovery Class Counsel shall be entitled to deduct the first 1/3 of the "Net
Recovery" (as defined in the first sentence of the next paragraph) of any
amounts received as contingent attorneys' fees and shall also be entitled to the
reimbursement of all expenses incurred in the prosecution of the Metretek Claims
and defense of any resulting Contribution Claims from the remaining balance of
the Net Recovery. If the Metretek Defendants do not request that Class Counsel
prosecute any Metretek Claims, or if Class Counsel elects not to prosecute any
Metretek Claims, then counsel selected by the Metretek Defendants shall be
entitled to deduct the first 1/3 of the "Net Recovery" (as defined in the
following sentence) of any amounts received as contingent attorneys' fees and
shall also be entitled to the reimbursement of all expenses incurred in the
prosecution of the Metretek Claims and defense of any resulting Contribution
Claims from the remaining balance of the Net Recovery.
As used herein, the term "Net Recovery" shall mean the amount of any
damages, interest, fees, expenses or other amounts paid on any Metretek Claims
or any Claim Against Farstad prosecuted on behalf of the Class, pursuant to a
Final judgment, or pursuant to a settlement of such claims, after payment on
account of any resulting Contribution Claims made against and payable by any
Metretek Person in connection with such prosecuted claims. No Metretek Claim or
Claim Against Farstad shall be settled without a full, complete and final
release of all Metretek Persons.
2.3.5 100% of any Net Recovery, after application of any proceeds as
provided in Section 2.3.4, shall be paid into the Settlement Fund for the
benefit of the Class. Of this amount: (a) 50% of such Net Recovery shall be
treated as additional consideration for this settlement, and (b) 50% of any Net
Recovery shall be treated as a "Prepayment Amount" as set forth in Paragraphs
2.3.6 and 2.3.7 below.
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2.3.6 All Prepayment Amounts shall be paid into the Settlement Fund for
the benefit of the Class. The Prepayment Amount shall be treated as a prepayment
of the Metretek Note and shall be applied against the last quarterly
installments due under the Metretek Note so as to reduce the term of the
Metretek Note. In the event the Prepayment Amount exceeds the aggregate amount
still then due on the Metretek Note, then Metretek shall be directly paid such
excess Prepayment Amount up to the total amount actually paid under the Metretek
Note. Such direct payments of any excess Prepayment Amount shall be made at the
same time Class Members are sent their checks of the Net Recovery referred to in
the first sentence of this Section 2.3.6.
2.3.7 The Prepayment Amount shall be capped at the sum of the total
amount actually paid under the Metretek Note plus the aggregate amount still due
on or before the maturity date under the Metretek Note. Any part of the
Prepayment Amount exceeding the sum of the total amount actually paid under the
Metretek Note plus the aggregate amount still due on or before the maturity date
under the Metretek Note shall not be paid to Metretek but rather shall be paid
into the Settlement Fund as additional consideration for the benefit of the
Class.
2.3.8 Notwithstanding anything to the contrary set forth in this
Section 2.3, in the event that neither the Effective Date nor Failure Date has
occurred by the time that there is a Net Recovery on the Metretek Claims, then
the Net Recovery shall be paid into the Escrow Account referenced in Section 2.1
above. All such payments shall be retained in the Escrow Account until either
the Effective Date or the Failure Date occurs. If the Failure Date occurs, then
the Net Recovery from the Metretek Claims shall be immediately returned (along
with any interest or earnings thereon, but less any fees or expenses of the
Escrow Account) to Metretek, and both Lead Class Counsel and Metretek agree to
sign an authorization to that effect and deliver the same to the Escrow Agent.
In the event the Failure Date occurs, Class Counsel shall be entitled to keep
any fees earned or expenses reimbursed in connection with prosecution of the
Metretek Claims. In the event the Effective Date occurs, then any Net Recovery
shall be immediately applied (along with any interest or earnings thereon, but
less any fees or expenses of the Escrow Account) as set forth in Sections 2.3.5,
2.3.6 and 2.3.7.
2.4 STOCK SALE PREPAYMENTS
2.4.1 Currently, Metretek owns 100% of the common stock of Southern
Flow Companies, Inc., and Metretek, Incorporated and 85% of the common stock of
PowerSecure, Inc. (collectively the "WF Subsidiaries"). Currently, the common
stock is the only one class of stock in the WF Subsidiaries.
13
2.4.2 Metretek agrees that none of the WF Subsidiaries will create any
other class of stock. Metretek agrees that none of the WF Subsidiaries will sell
any of its common stock, without the written consent of Lead Class Counsel,
which may be given or withheld at his sole discretion for any reason, or no
reason at all.
2.4.3 In the event that Metretek desires to sell any of the common
stock of any WF Subsidiary without obtaining Lead Class Counsel's consent, it
may do so provided that (i) each of the WF Subsidiaries who desires to sell such
stock makes a prepayment on the Metretek Note in the amount of the lesser of at
least $1 Million or the then outstanding balance (principal and interest) of the
Metretek Note, or (ii) if more than one of the WF Subsidiaries desires to sell
any of their common stock, then each WF Subsidiary selling stock shall make a
prepayment on the Metretek Note of at least $1 Million or their prorata share of
the then outstanding balance (principal and interest) of the Metretek Note. For
example, if all three of the WF Subsidiaries desired to sell common stock, then
the aggregate prepayment amount would be the lesser of $3 Million or the then
outstanding balance (principal and interest) of the Metretek Note.
2.4.4 All of such prepayments of the Metretek Note (the "Stock Sale
Prepayments") shall be paid into the Settlement Fund for the benefit of the
Class and shall be applied against the last quarterly installments due under the
Metretek Note so as to reduce the term of the Metretek Note. In the event that
any of the Stock Sale Prepayments would exceed the aggregate amount still then
due on the Metretek Note, then the obligation to make Stock Sale Prepayments
would be limited to the amount then still due on the Metretek Note. For example,
if two of the WF Subsidiaries desired to sell common stock at a time in which
the amount due under the Metretek Note was $1.6 Million, then each of the WF
Subsidiaries would make a Stock Sale Prepayment of $800,000.
2.4.5 Notwithstanding anything to the contrary set forth in this
Section 2.4, in the event that neither the Effective Date nor Failure Date has
occurred by the time that there is a Stock Sale Prepayment, then the Stock Sale
Prepayment shall be paid into the Escrow Account referenced in Section 2.1
above. All such Stock Sale Prepayments shall be retained in the Escrow Account
until either the Effective Date or the Failure Date occurs. If the Failure Date
occurs, then the Stock Sale Prepayments shall be immediately returned (along
with any interest or earnings thereon, but less any fees or expenses of the
Escrow Account) to Metretek, and both Lead Class Counsel and Metretek agree to
sign an authorization to that effect and deliver the same to the Escrow Agent.
In the event the Effective Date occurs, then any Stock Sale Prepayments in the
Escrow Account shall be immediately applied (along with any interest or earnings
thereon, but less any fees or expenses of the Escrow Account) as set forth in
Section
14
2.4.4.
3. SETTLING DEFENDANTS' CONSIDERATION FOR SETTLEMENT
3.1 RELEASES FOR SETTLING DEFENDANTS
Upon the Effective Date, the Representative Plaintiff and Class
Members, individually and collectively, shall be deemed to have, and by
operation of the Judgment shall have, irrevocably, fully, finally, and forever
released, relinquished and discharged each and all of the Settling Defendants
and Released Persons from all Released Claims (including Unknown Claims), except
claims to enforce this Stipulation.
The Representative Plaintiff and Class Members, individually and
collectively, expressly and intentionally waive all rights and benefits which
it, he, she or they now have, or in the future may have, under the terms of
section 1542 of the Civil Code of the State of California, which section
provides:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR
DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF
EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE
MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.
Upon the Effective Date, each of the Settling Defendants shall be
deemed to have, and by operation of the Judgment shall have, irrevocably, fully,
finally, and forever released, relinquished and discharged each and all of the
Representative Plaintiff, the Class Members, and Class Counsel from all Released
Claims (including Unknown Claims), except claims to enforce this Stipulation.
3.2 OMITTED
3.3 LIMITATION ON RELEASE OF BROKERAGE FIRMS
With respect to release of the Brokerage Firms only, the Released
Claims are not intended to include any claims against the Brokerage Firms that
are unique to a particular Class Member. For example, claims that Class Members
may have against the Brokerage Firms with respect to suitability of an
investment in the Trust, or with respect to any other investments or general
investment advice (unrelated to the Trust), services etc. These examples are
illustrative, not exhaustive. This Section 3.3 is not intended to affect, alter
or limit in any way, the release of Released Claims by the Representative
Plaintiff and Class Members against the Metretek Persons.
3.4 CLAIMS AGAINST FARSTAD
The Settling Parties recognize that both the Class and various Metretek
Defendants are asserting or may attempt to assert claims against the Farstad
Defendants. Claims Against Farstad prosecuted on behalf of the
15
Metretek Defendants shall be considered to be Metretek Claims and shall be
treated as set forth in Section 2.3. Except for those claims released against
the Released Persons, Class Counsel may, on behalf of the Class, prosecute any
and all other claims including Claims Against Farstad. The Class may prosecute
such claims (or not prosecute such claims) as determined by the Representative
Plaintiff and Class Counsel in their sole discretion for any reason, or no
reason at all. Neither the Class, Representative Plaintiff or Class Counsel
shall have any duty or obligation to the Settling Defendants, or any of them, to
prosecute any claims. However, if Class Counsel prosecutes any Claims Against
Farstad, they must also defend any resulting Contribution Claims. No Claims
Against Farstad shall be settled without a full, complete and final release of
all Metretek Persons.
Regardless of whether or not the Effective Date or Failure Date has
occurred, the Net Recovery from any Claims Against Farstad prosecuted on behalf
of the Class shall not be paid into the Escrow Account, but shall be paid into
the Settlement Fund. In the event the Effective Date occurs, then a portion of
the Net Recovery from any Claims Against Farstad prosecuted on behalf of the
Class shall be treated as a Prepayment Amount against Metretek's obligations
under the Metretek Note in the same manner as the Net Recovery from Metretek
Claims is treated under Sections 2.3.4, 2.3.5, 2.3.6 and 2.3.7 above.
3.5 PROPORTIONATE CREDIT AND DISCHARGE IN FAVOR OF REMAINING DEFENDANTS
AND SETTLEMENT CONTRIBUTION BAR
The Settling Parties agree and acknowledge that this is a good faith,
non-collusive settlement. With respect to the claims that the Representative
Plaintiff and each of the Class Members have asserted or may attempt to assert
against any other Person including, but not limited to, the Farstad Defendants,
related to the Trust, sale of Trust units, the Farstad Product, the Farstad
Facility, Amoco Contract or arising out of the other facts and circumstances
giving rise to Plaintiff's claims set forth in this Litigation, the
Representative Plaintiff and each of the Class Members discharge, credit and
fully satisfy against the total recovery from such Persons, that fraction or
percentage of the total claim or damages which may be determined to have been
attributable to the fault or negligence of the Settling Defendants, pursuant to
the provisions of C.R.S. Section 13-50.5-105(a). The purpose of this credit and
discharge is to enable the Settling Defendants to obtain a dismissal of any
claims brought by other persons or entities for contribution, indemnification or
similar claims where the damages sought by the claiming party are based in whole
or in part on the claiming party's liability, directly or indirectly, to the
Representative Plaintiff, the Class or any Class Member.
16
The Settling Parties also agree to ask the Court for entry of a
settlement contribution bar order in favor of the Settling Defendants, which bar
will be consistent with the terms of C.R.S. Section 13-50.5-105 and C.R.S.
Section 11-51-604(13), and which will extinguish any rights, claims or causes of
action by any Remaining Defendants against any of the Settling Defendants and
any of their past, present or future employees, agents, officers, directors,
principals, members, partners, predecessors, successors, heirs, executors,
administrators, trustees, assigns, representatives, attorneys, accountants,
consultants, advisors, parents, insurers, subsidiaries, and related or
affiliated entities, for contribution, indemnification or similar claims where
the damages sought by the claiming party are based in whole or in part on the
claiming party's liability, directly or indirectly, to the Representative
Plaintiff, the Class or any Class Member.
The hearing with respect to the settlement contribution bar order in
favor of the Settling Defendants (the "Bar Order Hearing") may be held before,
on or after the date of the Final Approval Hearing. The parties agree to use
their best efforts to cause the Bar Order Hearing to be heard independently of
the Final Approval Hearing. Delays affecting the Bar Order Hearing shall not be
cause to delay the Final Approval Hearing. The parties shall use best efforts to
cause the grant or denial of such settlement contribution bar order to be issued
in a separate order (the "Bar Order"). The parties agree to use reasonable
efforts to attempt to schedule the Bar Order Hearing prior to the Final Approval
Hearing.
In the event that the Bar Order is not issued by June 1, 2004, Metretek
shall have the right to terminate this Settlement upon notice to Class Counsel
coupled with the immediate payment to the Court of $200,000 which notice and
payment shall be made prior to June 1, 2004. In the event that Metretek does not
exercise its right to terminate the Settlement prior to June 1, 2004 as set
forth above, then Metretek shall be deemed to have waived this termination right
regardless of whether or not the Bar Order is or isn't issued. In the event that
the Bar Order is issued prior to June 1, 2004, then Metretek shall have no right
to terminate, even if the Bar Order is subsequently reversed on appeal.
The procedure for, and issuance or not by the Court of the Bar Order is
not a part of the Settlement set forth in this Stipulation and is to be
considered by the Court separately from the Court's consideration of the
fairness, justness, reasonableness, adequacy, good faith and non-collusiveness
of the Settlement, and any order or proceeding relating to any Bar Order, or any
appeal from any order relating thereto or reversal or modification thereof,
shall not operate to terminate or cancel this Stipulation or affect or delay the
finality of the Final Judgment and Order
17
approving this Stipulation and the Settlement. Nor shall, any appeal by any
party relating to the Bar Order affect or delay the Settlement of this
litigation nor shall it operate to extend Metretek's right to terminate the
Settlement beyond June 1, 2004.
4. ADMINISTRATION OF THE SETTLEMENT AND SETTLEMENT FUND
4.1 Class Counsel, or their authorized agents, acting on behalf of the
Class, and subject to the supervision, direction and approval of the Court,
shall monitor the calculation of distributions of that portion of the Settlement
Fund that is finally awarded by the Court to the Class Members. Metretek shall
at least twenty (20) days prior to making any distribution of any money in the
Settlement Fund provide to Class Counsel a schedule of proposed distributions.
4.2 The Settlement Fund shall be held in a segregated account for the
benefit of the beneficiaries of the Settlement Fund maintained at a National
Bank authorized to do business in the State of Colorado with capital and surplus
of at least $500,000,000. The funds in this account will be held in an interest
bearing account at the bank at a commercially reasonable rate or invested in
United States government securities. Metretek shall act as trustee of the
account, but this account must be separate and apart from the accounts of the
Settling Defendants and will be the property of the beneficiaries of the
Settlement Fund and not the Settling Defendants and will not be subject to the
claims of creditors of the Settling Defendants.
Metretek's responsibilities as trustee shall be limited to those
responsibilities articulated in this Stipulation. Metretek shall not be liable
for any error of judgment or for any actions taken or omitted by Metretek or any
other Person in connection with the performance of its duties and obligations
with respect to the Settlement Fund, except in the case of its own willful
misconduct, bad faith or fraud. Metretek's duties and responsibilities in
connection with the administration of the Settlement Fund shall be purely
ministerial and shall be limited to those expressly set forth herein. Metretek
shall not in such capacity be deemed to be acting as a principal, participant or
beneficiary of and shall have no liability or responsibility for any actions or
omissions of the National Bank holding such funds.
4.3 The Settlement Fund shall be used to pay the entire amount of any
fees and costs awarded by the Court to Class Counsel and the remainder shall be
divided among Class Members so that each Class Member receives the percentage of
the Settlement Fund equal to the amount invested in Trust Units by such
individual Class Member divided by the total amount invested in Trust Units by
all Class Members. Unless otherwise agreed to by Class Counsel, the Settlement
Fund shall make distributions to beneficiaries within 5 business days of the
receipt of the
18
$2.75 Million Payment, any installment paid under the Metretek
Note or the receipt of any proceeds from prosecution of the Metretek Claims or
Claims Against Farstad, provided that in the event the amount of the Net
Proceeds from claims is less than $200,000 then such amount may be paid with the
next installment under the Metretek Note.
4.4 The Parties agree to treat the Settlement Fund as being at all
times a "qualified settlement fund" within the meaning of Treasury Regulation
Section 1.468B-1. For the purpose of Section 468B of the Internal Revenue Code
of 1986, as amended, and the regulations promulgated thereunder including
Treasury Regulation Section 1.468B-2(k)(3), the "administrator" shall be
Metretek. Metretek shall timely and properly file all informational and other
tax returns necessary or advisable with respect to the Settlement Fund
(including without limitation the returns described in Treasury Regulation
Section l.468B-2(k)). Metretek shall also timely make such elections as
necessary or advisable to carry out the provisions of this Stipulation. Such
elections shall be made in compliance with the procedures and requirements
contained in such regulations. It shall be the responsibility of Metretek to
timely and properly prepare and deliver the necessary documentation for
signature by all necessary parties, and thereafter to cause the appropriate
filing to occur.
4.5 Metretek agrees that it will pay the costs of printing and mailing
of the Notice. All costs associated with administration of the Settlement Fund,
including, but not limited to, taxes, preparation of tax returns, payment of
bank fees, and audit fees, shall be borne exclusively by the Settlement Fund.
Class Counsel shall be notified of any costs in excess of $1,000 and shall the
right to veto any such costs if in their sole opinion they deem such costs to be
excessive or unreasonable.
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5. NOTICE ORDER AND SETTLEMENT HEARING
5.1 The Settling Parties shall submit the Stipulation together with its
Exhibits to the Court and shall jointly request the scheduling of the
preliminary approval hearing to be set as soon as practicable (the "Preliminary
Approval Hearing"). The parties shall use best efforts to cause the Preliminary
Hearing to be heard no later than February 21, 2004 at which the Settling
Parties shall jointly apply for entry of an order (the "Preliminary Approval
Order"), requesting the preliminary approval of the settlement set forth in the
Stipulation, and approval for the mailing of a settlement notice to be drafted
by Class Counsel which shall include the general terms of the settlement set
forth in the Stipulation, the general terms of the Fee and Expense Application
and the date of the Settlement Hearing. The Settling Parties shall submit a
proposed Notice and Preliminary Approval Order prior to the Preliminary Approval
Hearing.
5.2 Omitted.
5.3 The Settling Parties shall request that, after notice is given, the
Court hold the Settlement Hearing and finally approve this settlement as set
forth herein. At the Settlement Hearing, the Class Counsel also will request
that the Court approve the fee and expense application.
5.4 The Preliminary Approval Order shall specifically include
provisions that, among other things, will:
(a) Preliminarily approve the Stipulation and the settlement set forth
herein as meeting the standards for preliminary approval;
(b) Approve the form of Notice of Settlement of Class Action ("Notice")
reflecting the agreement set forth in this Stipulation for mailing to members of
the Class;
(c) Schedule a hearing (the "Settlement Hearing") to be held by the
Court as soon as practicable from the date of the Preliminary Approval Order to
consider and determine whether (i) the proposed settlement of the Litigation
against the Settling Defendants as contained in the Stipulation should be
approved as fair, adequate, and reasonable, and in good faith and non-collusive;
and (ii) the Judgment approving the settlement should be entered;
(d) Provide that at the Settlement Hearing, the Court shall determine
and enter an order regarding whether and in what amount attorneys' fees and
reimbursement of expenses should be awarded to the Class Counsel;
(e) Provide that pending final determination of whether the settlement
contained in the Stipulation should be approved as required in Section 6,
neither the Representative Plaintiff, nor any Class Member, either directly,
20
representatively, derivatively or in any other capacity shall commence or
prosecute any action or proceeding in any court or tribunal asserting any of the
Released Claims against the Released Persons;
(f) Provide that any objections to (i) the proposed settlement
contained in the Stipulation; (ii) entry of the Judgment approving the
Settlement; or (iii) the Class Counsels' Fee and Expense Application, shall be
heard and any papers submitted in support of said objections shall be received
and considered by the Court at the Settlement Hearing only if, on or before a
date to be specified in the Notice Order, Persons making objections shall file
and serve on all parties notice of their intention to appear (which shall set
forth each objection and the basis therefore) and copies of any papers in
support of their position as set forth in the Notice Order;
(g) Provide that, upon the occurrence of the Effective Date, all Class
Members shall be permanently enjoined and barred from asserting any Released
Claims against any of the Released Persons and any such Class Member shall
conclusively be deemed to have released any and all such Released Claims as
against all of the Released Persons; and
(h) Provide that the Settlement Hearing may, from time to time and
without further notice to the Class, be continued or adjourned by Order of the
Court.
5.5 Promptly upon entry of the Preliminary Approval Order, and as
provided for therein, Class Counsel will send copies of the Notice by
first-class mail, postage prepaid, to the members of the Class at their last
known addresses as provided to Class Counsel by Metretek as such addresses
appear in the records maintained by the Trust. Class Counsel will undertake
reasonable efforts to update where possible any address where a Notice is
returned as undeliverable. Class Counsel shall file an affidavit of mailing with
the Court prior to the Settlement Hearing stating that the Notice was duly made
upon all members of the Settlement Class in accordance with the Preliminary
Approval Order.
6. ENTRY OF FINAL JUDGMENT AND ORDER
At or prior to the Settlement Hearing, counsel for the Parties to this
Stipulation shall jointly submit to the Court a proposed Final Judgment and
Order providing as follows:
- Finding that the Stipulation and the transactions contemplated thereby
are fair, adequate, and reasonable, and are in good faith and
non-collusive; directing consummation of the Settlement in accordance
with the terms and conditions of the Stipulation;
- Dismissing each and every cause of action and claim set forth in the
Complaint on the merits as to all Settling Defendants and Jeff Farstad
in his capacity as trustee of the Trust and with prejudice as to all
Class
21
Members, extinguishing all claims, rights, demands and causes of action
that have been or might have been asserted therein and discharging the
Settling Defendants and Jeff Farstad in his capacity as trustee of the
Trust therefrom;
- Provide that pending the occurrence of the Effective Date, neither the
Representative Plaintiff, nor any Class Member, either directly,
representatively, derivatively or in any other capacity shall commence
or prosecute any action or proceeding in any court or tribunal
asserting any of the Released Claims against the Released Persons;
- Permanently barring the Representative Plaintiff and Class Members, as
well as their predecessors, successors and assigns, upon the occurrence
of the Effective Date, from asserting the Released Claims against the
Released Persons, and releasing the Released Persons from the Released
Claims;
- Reserving jurisdiction in the Court over all matters relating to the
administration and consummation of this Stipulation and the Settlement
provided for herein;
- Designating and approving Metretek as the "administrator" of the
Settlement Fund as such term is used in Treasury Regulation
Section 1.468B-2(k)(3); and
- Ordering and approving the establishment and funding of the Settlement
Fund as provided in Treasury Regulation Section 1.468B-1(c)(1).
7. ATTORNEYS' FEES AND REIMBURSEMENT OF EXPENSES
7.1 No fees or reimbursements shall be sought by the Settling Parties
against each other. Each side agrees to bear its own attorneys' fees, costs and
expenses.
7.2 Class Counsel may submit an application or applications for: (i) an
award of attorneys' fees; plus (ii) reimbursement of all expenses and costs, to
be paid from the Settlement Fund, as may be awarded by the Court.
7.3 The attorneys' fees, expenses and costs, including the fees of
experts and consultants, as awarded by the Court, shall be paid as set forth by
the Court in the award and such funds shall be transferred to Lead Counsel from
the Settlement Fund, within the later of (a) three (3) business days after the
Court executes an order awarding such fees and expenses and (b) the
establishment of the Settlement Fund.
7.4 The Settling Defendants agree to take no position on the issue of
attorneys' fees and reimbursement of expenses by Class Members out of the
Settlement Fund.
7.5 The procedure for, and the allowance or disallowance by the Court
of, any application(s) by Class Counsel for an award of attorneys' fees and/or
reimbursement of reasonable expenses are not a part of the Settlement set forth
in this Stipulation and are to be considered by the Court separately from the
Court's consideration of the
22
fairness, justness, reasonableness, adequacy, good faith and non-collusiveness
of the Settlement, and any order or proceeding relating to any such fee and/or
expense application or procedure, or any appeal from any order relating thereto
or reversal or modification thereof, shall not operate to terminate or cancel
this Stipulation or affect or delay the finality of the Final Judgment and Order
approving this Stipulation and the Settlement.
8. CONDITIONS OF SETTLEMENT, EFFECT OF DISAPPROVAL, CANCELLATION OR TERMINATION
8.1 The Effective Date of the Stipulation shall be conditioned on the
occurrence of all of the following events:
(a) Omitted;
(b) Metretek, on behalf of the Settling Defendants and Jeff Farstad in
his capacity as trustee of the Trust, has caused $2,375,000 in insurance
proceeds through settlement of the Interpleader Action to be deposited into the
Escrow Account, and has also deposited additional funds into the Escrow Account
so that the total amount deposited into the Escrow Account is the sum of at
least $2,750,000;
(c) The Court has entered the Preliminary Approval Order, as required
above;
(d) The Court has entered the Final Judgment and Order, as required
above; and
(e) The Final Judgment and Order has become Final.
8.2 If all of the conditions specified herein are not met, then the
Stipulation shall be canceled and terminated unless Class Counsel and counsel
for Settling Defendants mutually agree in writing to proceed with the
Stipulation.
8.3 In the event that this Stipulation is terminated pursuant to the
terms herein, the following shall occur:
- all parties shall stand in the same position, without prejudice, as if
this Stipulation had not been made and submitted to the Court for its
consideration and approval;
- neither this Stipulation, nor the Preliminary Approval Order, nor the
Final Judgment and Order, nor any documents or oral representations
relating to any of the foregoing, shall be offered as evidence relating
to the merits or legal sufficiency of the allegations in the Class
Action; and
- no right, claim, obligation, liability, or defense of any person
affected by the termination shall arise from or be affected by the
negotiation or execution of this Stipulation.
Provided however that if termination is due the failure of the Court to issue
the Bar Order prior to June 1, 2004, the $200,000 payment by Metretek pursuant
to Section 3.5 shall also occur.
23
9. MISCELLANEOUS PROVISIONS
9.1 The Settling Parties (a) acknowledge that it is their intent to
consummate the terms and conditions, and the transactions and actions
contemplated by the Stipulation; and (b) agree to cooperate to the extent
necessary to effectuate and implement all terms and conditions of the
Stipulation and to exercise their best efforts to accomplish the foregoing terms
and conditions of the Stipulation.
9.2 Settling Parties agree that the terms of the Settlement reflect a
good faith Settlement of Representative Plaintiff's and the Class' claims,
reached voluntarily after consultation with experienced legal counsel. The
Stipulation and Settlement may be used in such proceedings as may be necessary
to consummate or enforce the Stipulation, the Settlement or the Judgment, and
Settling Defendants may file the Stipulation and/or the Judgment in any action
that may be brought against them in order to support a defense or counterclaim
based on principles of res judicata, collateral estoppel, release, good faith
settlement, judgment bar or reduction or any other theory of claim preclusion or
issue preclusion or similar defense or counterclaim.
9.3 All of the Exhibits to the Stipulation are material and integral
parts hereof and are fully incorporated herein by this reference.
9.4 The Stipulation may be amended or modified only by a written
instrument signed by or on behalf of all Settling Parties or their
successors-in-interest.
9.5 The Stipulation and the Exhibits attached hereto constitute the
entire agreement among the parties hereto and no representations, warranties or
inducements have been made to any party concerning the Stipulation or its
Exhibits other than the representations, warranties and covenants contained and
memorialized in such documents. Except as otherwise provided herein, each party
shall bear its own costs.
9.6 Each counsel or other Person executing the Stipulation or any of
its Exhibits on behalf of any party hereto hereby warrants that such person has
the full authority to do so.
9.7 The Stipulation may be executed in one or more counterparts. All
executed counterparts and each of them shall be deemed to be one and the same
instrument. Counsel for the parties to the Stipulation shall exchange among
themselves original signed counterparts and a complete set of original executed
counterparts shall be filed with the Court.
9.8 The Stipulation shall be binding upon, and inure to the benefit of,
the successors and assigns of the parties hereto.
24
9.9 The Court shall retain jurisdiction with respect to implementation
and enforcement of the terms of the Stipulation, and all parties hereto submit
to the jurisdiction of the Court for purposes of implementing and enforcing the
settlement embodied in the Stipulation.
9.10 The undersigned agree that no single Party shall be deemed to have
drafted this Stipulation or any portion thereof. This Stipulation is the product
of the collaborative effort of the undersigned counsel.
9.11 The Stipulation and the Exhibits hereto shall be considered to
have been negotiated, executed and delivered, and to be wholly performed, in the
State of Colorado, and the rights and obligations of the parties to the
Stipulation shall be construed and enforced in accordance with, and governed by,
the internal, substantive laws of the State of Colorado without giving effect to
that State's choice of law principles.
9.12 The captions contained in this Stipulation are inserted only as a
matter of convenience and in no way define, limit, extend, or describe the scope
of this Stipulation or the intent of its provisions.
9.13 This Stipulation of Settlement is a compromise disposition of
controverted claims. No consideration for this Stipulation, and nothing
contained in this Stipulation shall be construed as an admission of any
liability or any lack of merit to the claims asserted by or on behalf of any of
the Settling Parties or their attorneys.
9.14 This Stipulation of Settlement, the Preliminary Approval Order and
Final Approval Order shall not affect the rights of any person other than the
Settling Parties, except as expressly provided herein. This Settlement is
contingent upon the payment of funds currently the subject of the Interpleader
Action and payment of such funds is a condition precedent to this Settlement.
Whether or not such funds are or are not paid will be determined in the
Interpleader Action. This Settlement is also contingent upon the entry of the
Bar Order. However, this Stipulation of Settlement does not effect a Bar Order.
Whether or not such Bar Order is entered will be determined at a Bar Order
Hearing. At the Preliminary Approval Hearing, the issues to be addressed relate
solely to the mechanics of settlement and sending out the class notice pursuant
to Section 5. At the Preliminary Approval Hearing, none of the Settling Parties
shall argue or seek any orders relating to the Bar Orders or Interpleader
Action.
25
IN WITNESS WHEREOF, the parties hereto have caused the Stipulation to
be executed, by their duly authorized attorneys, as of March 2, 2004.
ATTORNEYS FOR CLASS ATTORNEYS FOR METRETEK
DEFENDANTS
/s/ Vincent T. Gresham /s/ Jeffrey A. Chase
- -------------------------------------- ---------------------------------------
Vincent T. Gresham Jeffrey A. Chase
Georgia Bar No. 005920 Reg. No. 5203
Robert R. Elarbee Barbara A. Grandjean
Georgia Bar No. 242825 Reg. No. 23202
Law Offices of Vincent T. Gresham Jacobs Chase Frick Kleinkopf & Kelley,
3312 Piedmont Road, Suite 317 LLC
Atlanta, Georgia 30305 1050 17th Street, Suite 1500
(404) 467-1388 Denver, Colorado 80265
(404) 467-4328 fax (303) 685-4800
(303) 685-4869 fax
bgrandjean@jcfkk.com
Albert H. Parnell
Georgia Bar No. 564400
Hawkins & Parnell, LLP
303 Peachtree Street, N.E., Suite 4000
Atlanta, Georgia 30308-3242
(404) 614-7400
David von Gunten
Reg. No. 17096
Von Gunten Law LLC
2303 E. Dartmouth Ave.
Englewood, Colorado 80110
(303) 504-0055
(303) 504-0044 (fax)
26
EXHIBIT A
NON-NEGOTIABLE PROMISSORY NOTE
$3,000,000 Denver, Colorado
_________, 2004
For value received, the undersigned, METRETEK TECHNOLOGIES, INC., a
Delaware corporation (the "Maker"), hereby promises to [THE HEINS SETTLEMENT
FUND] (the "Fund"), at __________________, or at any other place designated at
any time by the holder hereof, in lawful money of the United States of America
and in immediately available funds, the principal sum of Three Million Dollars
($3,000,000), together with interest on the principal amount hereunder remaining
unpaid from time to time, computed on the basis of the actual number of days
elapsed and a 360-day year, from the date hereof until this Note is fully paid
at the initial rate of ______ percent (__%) which is the current rate set forth
in the Wall Street Journal as the "prime rate" of interest, plus three percent
(3%). Commencing on January 1, 2005 the interest rate under this Note shall be
adjusted and shall be adjusted annually thereafter to the rate set forth in the
Wall Street Journal at that time as the "prime rate" of interest, plus three
percent (3%). The principal hereof and interest accruing thereon shall be due
and payable as provided below.
This Note is issued pursuant to, and in connection with the settlement
of certain litigation (the "Litigation") as provided in, a Stipulation of
Settlement (the "Stipulation"), dated as of March __, 2004, by and among Douglas
W. Heins, on behalf of himself and all others similarly situated, and the Maker,
et al. This Note is the "Metretek Note" referred to in the Stipulation. This
Note is an obligation of the Maker, senior to Maker's obligations on the
Subordinated Indebtedness (as defined below), but subordinate to the Guarantor's
obligations on the Senior Lender Indebtedness (as defined in the Guaranty). The
obligations of the Maker under this Note have been guaranteed by the
subsidiaries of the Maker.
The principal sum of this Note shall be due and payable in sixteen (16)
quarterly payments, each consisting of $187,500 repayment of principal plus
accrued and unpaid interest on this Note through the due date of such payment,
commencing on June 30, 2004, and continuing on the first day of each third month
thereafter until paid in full; provided that the Maker shall have a grace period
of fifteen (15) business days from the due date for making a payment required
hereunder. The Maker's obligations arising under this Note (the "Obligations")
shall be absolute, unconditional and irrevocable, and shall be paid strictly in
accordance with the terms of this Note, under all circumstances whatsoever.
The Maker shall have the right to prepay the outstanding principal sum
of this Note, in whole at any time or in part from time to time, without premium
or penalty, and without prior notice. In addition, this Note will be deemed to
have been prepaid, in whole or in part, by certain "Prepayment Amounts" as
provided in the Stipulation.
The obligations of the Maker under that certain Credit and Security
Agreement, dated as of September 24, 2001, as supplemented and amended, by and
between Wells Fargo Business Credit, Inc., a Minnesota corporation (the
"Lender") and Southern Flow Companies, Inc., a wholly-owned subsidiary of the
Maker, and the loan documents and instruments related thereto executed by Maker,
and under that certain Credit and Security Agreement, dated as of September 6,
2002, as supplemented and amended, by and between the Lender and Metretek,
Incorporated, a wholly-owned subsidiary of the Maker, and the loan documents and
instruments related thereto executed by Maker, as well each and every debt,
liability and obligation of every type and description which the Maker may now
or at any time hereafter owe to the Lender, whether such debt, liability or
obligation now exists or is hereafter created or incurred, and whether it is or
may be direct or indirect, due or to become due, absolute or contingent, primary
or secondary, liquidated or unliquidated, or joint, several or joint and
several, all interest thereon, and all fees, costs and other charges related
thereto (including all interest, fees, costs and other charges accruing after
the commencement of any case, proceeding or other action relating to the
bankruptcy insolvency or reorganization of the Maker, whether or not allowed in
such proceeding or other action), all renewals, extensions and modifications
thereof and any notes issued in whole or partial substitution therefore (the
"Subordinated Indebtedness") are hereby expressly subordinated to the payment in
full by the Maker to the Fund of all indebtedness represented by this Note,
including all interest hereon, and all fees, costs and other charges related
hereto (including all interest, fees, costs and other charges accruing after the
commencement of any case, proceeding or other action relating to the bankruptcy
insolvency or reorganization of the Maker, whether or not allowed in such
proceeding or other action) (the "Senior Indebtedness"). In addition, the
security interest and lien of the Lender in the "Metretek Claims" or in the
"Prepayment Amounts" (as such terms are defined in the Stipulation), including
all proceeds thereof, is hereby expressly subordinated to the payment in full to
the Fund of the Senior Indebtedness.
Each of the following occurrences shall constitute an event of default
under this Note (herein called "Event of Default"): (a) the Maker shall fail to
pay any or all of the Obligations under this Note within 10 business days of the
due date; (b) the Maker shall fail to observe or perform any material covenant
or agreement herein binding on it, which failure continues for 10 business days
after notice thereof is received by the Maker; (c) the Maker or any "WF
Guarantor" (as such term is defined below) shall be or become insolvent, or
admit in writing its or his inability to pay its or his debts as they mature, or
make an assignment for the benefit of creditors; or the Maker or any WF
Guarantor shall apply for or consent to the appointment of any receiver,
trustee, or similar officer for it or him or for all or any substantial part of
its or his property; or such receiver, trustee or similar officer shall be
appointed without the application or consent of the Maker or such WF Guarantor,
as the case may be; or the Maker or any WF Guarantor shall institute (by
petition, application, answer, consent or otherwise) any bankruptcy, insolvency,
reorganization, arrangement, readjustment of debt, dissolution, liquidation or
similar proceeding relating to it or him under the laws of any jurisdiction; or
any such proceeding shall be instituted (by petition, application or otherwise)
against the Maker or any such WF Guarantor, and such proceeding remains
undismissed and unstayed for a period of 60 days after the commencement thereof;
or any judgment, writ, warrant of attachment or execution or similar process
shall be issued or levied against a substantial part of the property of the
Maker or any WF Guarantor which remains unsatisfied or undischarged and in
effect for a period of 60 days after such issuance or levy without a stay of
enforcement or execution; (d) any default under any bond, debenture, note or
other evidence of material indebtedness of the Maker or a WF Guarantor owed to
any Person (including but not limited to the Lender) other than the Fund, or
under any indenture or other instrument under which any such evidence of
indebtedness has been issued or by which it is governed, or under any material
lease or other contract, and the expiration of the applicable period of grace,
if any, specified in, or otherwise agreed by all parties to, such evidence of
indebtedness, indenture, other instrument, lease or contract; provided that to
the extent Maker or any Guarantor is contesting any amount owed to Scient
Corporation in respect of any note payable to Scient Corporation, non-payment of
such contested amount shall not be an Event of Default hereunder so long as such
contest continues in good faith or to the extent that such contest is
adjudicated in favor of Maker or such Guarantor; (e) a petition shall be filed
by or against the Maker or any WF Guarantor under the United States Bankruptcy
Code naming the Maker or such WF Guarantor as debtor if such petition has not
been dismissed within 60 days of the filing of such petition against Maker or
such WF Guarantor; or (f) any representation or warranty made by the Maker in
this Note, by any WF Guarantor in any guaranty delivered to the Fund, or by any
of the "Settling Defendants" (as described in the Stipulation) in the
Stipulation shall prove to have been incorrect in any material respect as of the
date of the Stipulation. As used in this Note, the term "WF Guarantor" means
only the following subsidiaries of the Maker: Southern Flow Companies, Inc.,
Metretek, Incorporated and PowerSecure, Inc.
Upon the occurrence of an Event of Default and at any time thereafter
so long as the Event of Default is continuing, the interest rate payable under
the Note shall be automatically increased by 6%. The then existing interest rate
plus 6% shall be the "Default Interest Rate." Notwithstanding the foregoing, no
rate change shall be put into effect which would result in a rate greater than
the highest rate permitted by law. If any payments in the nature of interest,
default interest and other charges made are held to be in excess of the limits
imposed by any applicable usury laws, it is agreed that any such amount held to
be in excess shall be considered payment of principal hereunder, and the
indebtedness evidenced hereby shall be reduced by such amount so that the total
liability for payments in the nature of interest, default interest and other
charges shall not exceed the applicable limits imposed by any applicable usury
laws, in compliance with the desires of the Maker and the Fund. This provision
shall never be superseded or waived and shall control every other provision of
all agreements between the Maker and the Fund.
Upon the occurrence of an Event of Default and at any time thereafter
so long as the Event of Default is continuing, in addition to the automatic
increase in the interest rate to the Default Interest Rate, the Fund may
exercise any one or more of the following rights and remedies: (i) declare all
unmatured Obligations to be immediately due and payable, and the same shall
thereupon be immediately due and payable, without presentment or other notice or
demand; and (ii) exercise or enforce any or all other rights or remedies
available to the Fund by law or agreement against the Maker, the Guarantors or
against any other person or property, provided however, the Fund will not
commence any action or proceeding against any WF Guarantor with respect to the
Obligation, or join with any creditor (unless the Lender shall so join) in
bringing any proceeding against any WF Guarantor under any
bankruptcy, reorganization, readjustment of debt, arrangement of debt
receivership, liquidation or insolvency law or statute of the federal or any
state government, or exercise or enforce any right or remedy available to the
Fund with respect to the Obligation, unless and until the Subordinated
Indebtedness has been paid in full and the Lender has released its lien in the
collateral securing the Subordinated Indebtedness.
Until all of the Subordinated Indebtedness has been paid in full and
the Lender has released its lien in the collateral securing the Subordinated
Indebtedness, the Fund shall not, except after giving the Lender ten (10)
business days prior written notice thereof (but shall have the right after
giving such notice without the need for the Lender's consent to), demand,
receive or accept any payment (whether of principal, interest or otherwise) from
the Maker in respect of this Note, or exercise any right of or permit any setoff
in respect of this Note, except that the Fund may accept from the Maker
scheduled payments of principal and interest required to be paid under this Note
and prepayments of Prepayment Amounts, so long as no default under the
Subordinated Indebtedness has occurred and is continuing or will occur as a
result of or immediately following any such payment.
If the Fund receives any payment on this Note that the Fund is not
entitled to receive under the provisions of this Note or any Guaranty, the Fund
will hold the amount so received in trust for the Lender and will forthwith turn
over such payment to the Lender in the form received (except for the endorsement
of the Fund where necessary) for application to then-existing Subordinated
Indebtedness (whether or not due), in such manner of application as the Lender
may deem appropriate. If the Fund exercises any right of setoff which the Fund
is not permitted to exercise under the provisions of this Note, the Fund will
promptly pay over to the Lender, in immediately available funds, an amount equal
to the amount of the claims or obligations offset. If the Fund fails to make any
endorsement required under this Note, the Lender, or any of its officers or
employees or agents on behalf of the Lender, is hereby irrevocably appointed as
the attorney-in-fact (which appointment is coupled with an interest) for the
Fund to make such endorsement in the Fund's name.
Presentment or other demand for payment, notice of dishonor and protest
are expressly waived. The Maker shall pay all costs of collection, including
reasonable attorneys' fees and legal expenses if this Note or any installment
due under this Note is not paid when due, whether or not legal proceedings are
commenced.
No failure or delay by the Fund in exercising any right, power or
remedy under the Note or Guarantees shall operate as a waiver thereof; nor shall
any single or partial exercise of any such right, power or remedy preclude any
other or further exercise thereof or the exercise of any other right, power or
remedy under the such documents. The remedies provided in the Note and
Guarantees are cumulative and not exclusive of any remedies provided by law.
The Maker hereby (i) consents to the personal jurisdiction of the state
and federal courts located in the State of Colorado in connection with any
controversy related to this Agreement; (ii) waives any argument that venue in
any such forum is not convenient, (iii) agrees that any litigation initiated by
the Fund or Maker in connection with this Note or the Guarantees may be venued
in either the state or federal courts located in the City and County of Denver,
Colorado; and (iv) agrees that a final judgment in any such suit, action or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law.
This Note shall be binding upon Maker and inure to the benefit of the
Fund and their respective successors and permitted assigns. Neither this Note
nor any rights or obligations herein may be assigned or transferred by the Maker
or the Fund without the prior written consent of the other.
THE MAKER WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING
BASED ON OR PERTAINING TO THIS NOTE.
METRETEK TECHNOLOGIES, INC.
By: __________________________________
Its: _________________________________
B-1
EXHIBIT B
FORM OF GUARANTY BY SUBSIDIARY
This Guaranty, dated as of _______, 2004, is made by ____________, a
Delaware corporation (the "Guarantor"), for the benefit of [the Heins Settlement
Fund] (the "Fund").
Metretek Technologies, Inc. ("Maker"), a Delaware corporation and the
corporate parent of Guarantor, has executed and delivered to the Fund an
unsecured Non-Negotiable Promissory Note (the "Note"), of even date herewith, in
the principal amount of Three Million Dollars ($3,000,000), in connection with
and pursuant to the settlement of certain litigation (the "Litigation") as
provided in a Stipulation of Settlement (the "Stipulation"), dated as of March
__, 2004, by and among Douglas W. Heins, on behalf of himself and all others
similarly situated, and the Maker, et al.
As a condition to entering into such Stipulation of Settlement,
pursuant to which a portion of the settlement payment is represented by the
Note, the Fund has required the execution and delivery of this Guaranty.
ACCORDINGLY, the Guarantor, in consideration of the premises and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, hereby agrees as follows:
1. Definitions. All terms defined in the Stipulation that are not
otherwise defined herein shall have the meanings given them in the Stipulation.
2. Indebtedness Guaranteed. The Guarantor hereby absolutely and
unconditionally guarantees to the Fund the full and prompt payment when due,
whether at maturity or earlier by reason of acceleration or otherwise, of the
indebtedness of the Maker under the Note (the "Indebtedness").
3. Guarantor's Representations and Warranties. The Guarantor
represents and warrants to the Fund that (i) the Guarantor is a corporation,
duly organized and existing in good standing and has full power and authority to
make and deliver this Guaranty; (ii) the execution, delivery and performance of
this Guaranty by the Guarantor have been duly authorized by all necessary action
of its directors and stockholders and do not and will not violate the provisions
of, or constitute a default under, any presently applicable law or its
constituent documents or any agreement presently binding on it; (iii) this
Guaranty has been duly executed and delivered by the authorized officers of the
Guarantor and constitutes its lawful, binding and legally enforceable
obligation; and (iv) the authorization, execution, delivery and performance of
this Guaranty do not require notification to, registration with, or consent or
approval by, any federal, state or local regulatory body or administrative
agency. The Guarantor represents and warrants to the Fund that the Guarantor has
a direct and substantial economic interest in the Maker and expects to derive
substantial benefits therefrom and from the settlement of the Litigation against
Maker pursuant to the terms of the Stipulation which settlement resulted in the
creation of the Indebtedness guarantied hereby, and that this Guaranty is given
for a corporate purpose. The Guarantor agrees to rely exclusively on the right
to revoke this Guaranty prospectively as to future transactions, in accordance
with paragraph 4, if at any time, in the opinion of the directors or officers,
the benefits then being received by the Guarantor in connection with this
Guaranty are not sufficient to warrant the continuance of this Guaranty as to
the future Indebtedness of the Maker. Accordingly, so long as this Guaranty is
not revoked prospectively in accordance with paragraph 4, the Fund may rely
conclusively on a continuing warranty, hereby made, that the Guarantor continues
to be benefited by this Guaranty and the Fund shall have no duty to inquire into
or confirm the receipt of any such benefits, and this Guaranty shall be
effective and enforceable by the Fund without regard to the receipt, nature or
value of any such benefits.
4. Unconditional Nature. No act or thing need occur to establish
the Guarantor's liability hereunder, and no act or thing, except full payment
and discharge of all of the Indebtedness, shall in any way exonerate the
Guarantor hereunder or modify, reduce, limit or release the Guarantor's
liability hereunder. This is an absolute, unconditional and continuing guaranty
of payment of the Indebtedness and shall continue to be in force and be binding
upon the Guarantor, whether or not all of the Indebtedness is paid in full.
Notwithstanding the foregoing, this Guaranty shall terminate upon the
satisfaction in full of the Indebtedness.
5. Dissolution or Insolvency of Guarantor. The dissolution or
adjudication of bankruptcy of the Guarantor shall not revoke this Guaranty,
except upon actual receipt of written notice thereof by the Fund and only
prospectively, as to future transactions, as herein set forth. [If the Guarantor
shall be dissolved or shall be or become
insolvent (however defined), then the Fund shall have the right to declare
immediately due and payable, and the Guarantor will forthwith pay to the Fund,
subject to the provisions of paragraph 14 below, the full amount of all of the
Indebtedness whether due and payable or unmatured. If the Guarantor voluntarily
commences or there is commenced involuntarily against the Guarantor a case under
the United States Bankruptcy Code, the full amount of all Indebtedness, whether
due and payable or unmatured, shall be immediately due and payable without
demand or notice thereof.][THE BRACKETED LANGUAGE SHALL ONLY BE INCLUDED IN
GUARANTEES BY "WF GUARANTORS" (AS DEFINED IN THE NOTE)]
6. Enforcement Expenses. The Guarantor will pay or reimburse the
Fund for all reasonable costs, expenses and attorneys' fees paid or incurred by
the Fund in endeavoring to collect and enforce the Indebtedness and enforcing
this Guaranty after an "Event of Default" shall have occurred under the Note
(the "Enforcement Expenses"), subject to the provisions of Section 13 below.
7. Fund's Rights. The Fund shall not be obligated by reason of
its acceptance of this Guaranty to engage in any transactions with or for the
Maker. Whether or not any existing relationship between the Guarantor and the
Maker has been changed or ended and whether or not this Guaranty has been
revoked, the Fund may enter into transactions resulting in the creation or
continuance of the Indebtedness and may otherwise agree, consent to or suffer
the creation or continuance of any of the Indebtedness, without any consent or
approval by the Guarantor and without any prior or subsequent notice to the
Guarantor. The Guarantor's liability shall not be affected or impaired by any of
the following acts or things (which the Fund is expressly authorized to do, omit
or suffer from time to time, both before and after revocation of this Guaranty,
without consent or approval by or notice to the Guarantor): (i) any acceptance
of collateral security, guarantors, accommodation parties or sureties for any or
all of the Indebtedness; (ii) one or more extensions or renewals of the
Indebtedness (whether or not for longer than the original period) or any
modification of the interest rates, maturities, if any, or other contractual
terms applicable to any of the Indebtedness or any amendment or modification of
any of the terms or provisions of any loan agreement or other agreement under
which the Indebtedness or any part thereof arose; (iii) any waiver or indulgence
granted to the Maker, any delay or lack of diligence in the enforcement of the
Indebtedness or any failure to institute proceedings, file a claim, give any
required notices or otherwise protect any of the Indebtedness; (iv) any full or
partial release of, compromise or settlement with, or agreement not to sue, the
Maker or any guarantor or other person liable in respect of any of the
Indebtedness; (v) any release, surrender, cancellation or other discharge of any
evidence of the Indebtedness or the acceptance of any instrument in renewal or
substitution therefor; (vi) any failure to obtain collateral security (including
rights of setoff) for the Indebtedness, or to see to the proper or sufficient
creation and perfection thereof, or to establish the priority thereof, or to
preserve, protect, insure, care for, exercise or enforce any collateral
security; or any modification, alteration, substitution, exchange, surrender,
cancellation, termination, release or other change, impairment, limitation, loss
or discharge of any collateral security; (vii) any collection, sale, lease or
disposition of, or any other foreclosure or enforcement of or realization on,
any collateral security; (viii) any assignment, pledge or other transfer of any
of the Indebtedness or any evidence thereof; (ix) any manner, order or method of
application of any payments or credits upon the Indebtedness; and (x) any
election by the Fund under Section 1111(b) of the United States Bankruptcy Code.
The Guarantor waives any and all defenses and discharges available to a surety,
guarantor or accommodation co-obligor.
8. Waivers by Guarantor. The Guarantor waives any and all
defenses, claims, setoffs and discharges of the Maker, or any other obligor,
pertaining to the Indebtedness, except the defense of discharge by payment in
full. Without limiting the generality of the foregoing, the Guarantor will not
assert, plead or enforce against the Fund any defense of waiver, release,
discharge or disallowance in bankruptcy, statute of limitations, res judicata,
statute of frauds, anti-deficiency statute, fraud, incapacity, minority, usury,
illegality or unenforceability which may be available to the Maker or any other
person liable in respect of any of the Indebtedness, or any setoff available
against the Fund to the Maker or any other such person, whether or not on
account of a related transaction. The Guarantor expressly agrees that the
Guarantor shall be and remain liable for any deficiency remaining after
foreclosure of any mortgage or security interest securing the Indebtedness,
whether or not the liability of the Maker or any other obligor for such
deficiency is discharged pursuant to statute or judicial decision. The liability
of the Guarantor shall not be affected or impaired by any voluntary or
involuntary liquidation, dissolution, sale or other disposition of all or
substantially all of the assets, marshalling of assets and liabilities,
receivership, insolvency, bankruptcy, assignment for the benefit of creditors,
reorganization, arrangement, composition or readjustment of, or other similar
event or proceeding affecting, the Maker or any of its assets. The Guarantor
will not assert, plead or enforce against the Fund any claim, defense or setoff
available to the Guarantor against the Maker. The Guarantor waives presentment,
demand for payment, notice of dishonor or nonpayment and protest of any
instrument evidencing the Indebtedness. The Fund shall not be required first to
resort for payment of the Indebtedness to the Maker or other persons, or their
properties, or first to enforce, realize upon or exhaust any collateral security
for the Indebtedness, before enforcing this Guaranty.
9. If Payments Set Aside, etc. If any payment applied by the Fund
to the Indebtedness is thereafter set aside, recovered, rescinded or required to
be returned for any reason (including, without limitation, the bankruptcy,
insolvency or reorganization of the Maker or any other obligor), the
Indebtedness to which such payment was applied shall for the purpose of this
Guaranty be deemed to have continued in existence, notwithstanding such
application, and this Guaranty shall be enforceable as to such Indebtedness as
fully as if such application had never been made.
10. Additional Obligation of Guarantor. The Guarantor's liability
under this Guaranty is in addition to and shall be cumulative with all other
liabilities of the Guarantor to the Fund as guarantor, surety, endorser,
accommodation co-obligor or otherwise of any of the Indebtedness or obligation
of the Maker, without any limitation as to amount, unless the instrument or
agreement evidencing or creating such other liability specifically provides to
the contrary.
11. No Duties Owed by Fund. The Guarantor acknowledges and agrees
that the Fund (i) has not made any representations or warranties with respect
to, (ii) does not assume any responsibility to the Guarantor for, and (iii) has
no duty to provide information to the Guarantor regarding, the enforceability of
any of the Indebtedness or the financial condition of the Maker or any
guarantor. The Guarantor has independently determined the creditworthiness of
the Maker and the enforceability of the Indebtedness and until the Indebtedness
is paid in full will independently and without reliance on the Fund continue to
make such determinations.
12. Miscellaneous. This Guaranty shall be effective upon delivery
to the Fund, without further act, condition or acceptance by the Fund, shall be
binding upon the Guarantor and the successors and assigns of the Guarantor and
shall inure to the benefit of the Fund and its participants, successors and
assigns. Any invalidity or unenforceability of any provision or application of
this Guaranty shall not affect other lawful provisions and application thereof,
and to this end the provisions of this Guaranty are declared to be severable.
This Guaranty may not be waived, modified, amended, terminated, released or
otherwise changed except by a writing signed by the Guarantor and the Fund. This
Guaranty shall be governed by and construed in accordance with the substantive
laws (other than conflict laws) of the State of Colorado. The Guarantor hereby
(i) consents to the personal jurisdiction of the state and federal courts
located in the State of Colorado in connection with any controversy related to
this Guaranty; (ii) waives any argument that venue in any such forum is not
convenient, (iii) agrees that any litigation initiated by the Fund or the
Guarantor in connection with this Guaranty may be venued in either the state or
federal courts located in the City and County of Denver, Colorado; and (iv)
agrees that a final judgment in any such suit, action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law.
13. Subordination. The obligations of the Guarantor with respect
to the payment of all indebtedness represented by the Note and this Guaranty
(the "Subordinated Indebtedness") is hereby expressly subordinated to the
payment in full to Wells Fargo Business Credit, Inc., a Minnesota corporation
(the "Senior Lender"), of the obligations of the Guarantor under that certain
Credit and Security Agreement, dated as of September 24, 2001, as supplemented
and amended, by and between the Senior Lender and Southern Flow Companies, Inc.,
and the loan
documents and instruments related thereto executed by the Guarantor, and under
that certain Credit and Security Agreement, dated as of September 6, 2002, as
supplemented and amended, by and between the Senior Lender and Metretek,
Incorporated, and the loan documents and instruments related thereto executed by
the Guarantor, as well each and every debt, liability and obligation of every
type and description which the Guarantor may now or at any time hereafter owe to
the Senior Lender, whether such debt, liability or obligation now exists or is
hereafter created or incurred, and whether it is or may be direct or indirect,
due or to become due, absolute or contingent, primary or secondary, liquidated
or unliquidated, or joint, several or joint and several, all interest thereon,
and all fees, costs and other charges related thereto (including all interest,
fees, costs and other charges accruing after the commencement of any case,
proceeding or other action relating to the bankruptcy insolvency or
reorganization of the Guarantor, whether or not allowed in such proceeding or
other action), all renewals, extensions and modifications thereof and any notes
issued in whole or partial substitution therefore (the "Senior Lender
Indebtedness"), provided that the amount of Senior Lender Indebtedness shall not
exceed $3,260,000 in the aggregate. In addition, the Senior Lender shall hold a
first priority security interest and lien in all collateral now or hereafter
securing payment of the Senior Lender Indebtedness, including all proceeds
thereof (the "Collateral"), and any lien claimed therein by the Fund shall be
and remain fully subordinate for all purposes to the lien of the Senior Lender
for all purposes whatsoever. The Subordinated Indebtedness shall continue to be
subordinated to the Senior Lender Indebtedness even if the Senior Lender
Indebtedness is subordinated, avoided or disallowed under the United States
Bankruptcy Code or other applicable law.
14. Payments. Until all of the Senior Lender Indebtedness has been
paid in full and the Senior Lender has released its lien in the Collateral, the
Fund shall not, without the Senior Lender's prior written consent, demand,
receive or accept any payment (whether of principal, interest or otherwise) from
the Guarantor in respect of this Guaranty, or exercise any right of or permit
any setoff in respect of the Guaranty. [THE FOREGOING PROVISION ONLY APPLIES IN
THE GUARANTEES BY THE WF GUARANTORS. THE FOLLOWING PROVISION SHALL BE INCLUDED
IN ALL OTHER GUARANTEES: Until all of the Senior Lender Indebtedness has been
paid in full and the Senior Lender has released its lien in the Collateral, the
Fund shall not, except after giving ten (10) business days prior written notice
to the Senior Lender, (but shall have the right after giving such notice without
the need for the Senior Lender's consent to), demand, receive or accept any
payment (whether of principal, interest or otherwise) from the Guarantor in
respect of this Guaranty, or exercise any right of or permit any setoff in
respect of the Guaranty.]
15. Receipt of Prohibited Payments. If the Fund receives any
payment on the Note that the Fund is not entitled to receive under the
provisions of this Guaranty, the Fund will hold the amount so received in trust
for the Senior Lender and will forthwith turn over such payment to the Senior
Lender in the form received (except for the endorsement of the Fund where
necessary) for application to then-existing Senior Lender Indebtedness (whether
or not due), in such manner of application as the Senior Lender may deem
appropriate. If the Fund exercises any right of setoff which the Fund is not
permitted to exercise under the provisions of this Guaranty, the Fund will
promptly pay over to the Senior Lender, in immediately available funds, an
amount equal to the amount of the claims or obligations offset. If the Fund
fails to make any endorsement required under this Guaranty, the Senior Lender,
or any of its officers or employees or agents on behalf of the Senior Lender, is
hereby irrevocably appointed as the attorney-in-fact (which appointment is
coupled with an interest) for the Fund to make such endorsement in the Fund's
name.
THE GUARANTOR HEREBY IRREVOCABLY WAIVES ALL RIGHTS TO TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF, BASED ON OR PERTAINING TO
THIS GUARANTY.
IN WITNESS WHEREOF, this Guaranty has been duly executed by the
Guarantor the date first written above.
[NAME OF GUARANTOR SUBSIDIARY]
By: ___________________________________
Its: __________________________________
STATE OF COLORADO )
) ss.
CITY AND COUNTY OF DENVER )
The foregoing instrument was acknowledged before me this ___
day of ______________, 2004, by [name of individual], the [title] of
[Guarantor], a Delaware corporation, on behalf of the corporation.
_______________________________________
Notary Public
EXHIBIT C
ESCROW AGREEMENT
Escrow Account No _____________________
Effective Date ________________________
The parties to this Agreement are U. S. Bank National Association as Escrow
Agent and the persons identified below as Customers and Class Counsel
(collectively, "Customers") by their signatures. The parties shall be referred
to in this Agreement respectively as Escrow Agent and Customers.
The Customers wish to place in escrow funds, securities, and/or documents as
identified on Schedule A (the "Escrow Property"). The Escrow Agent is willing to
hold and distribute such funds, securities and/or documents in accordance with
the instructions of the Customers, subject to the terms identified in this
Agreement and the Special Instructions in Schedule B which is incorporated by
reference herein.
The Escrow Agent and the Customers agree as follows:
1. This Agreement may be altered, amended, modified or revoked only in
writing, signed by all of the Customers and approved by the Escrow
Agent, upon payment of all additional fees and expenses of the Escrow
Agent.
2. No assignment, transfer or conveyance or hypothecation of any right,
title or interest in the subject matter of this Escrow shall be binding
upon the Escrow Agent unless notice is served by both Customers upon
the Escrow Agent and all additional fees and expenses of the Escrow
Agent incident to the transfer of the interest have been paid.
3. Any notice will be given by mailing, via first class mail, postage
prepaid; by overnight mail; or by facsimile promptly followed by
mailing such notice via first class mail, postage prepaid, to the
addresses and/or facsimile numbers provided in this Agreement. Notice
shall be effective when it is actually received by Customers or the
Escrow Agent at the addresses set forth herein unless a different
address is designated in writing to the other parties for notices
hereunder. All such notices to the Escrow Agent must contain the
account number, as set out above.
4. The Escrow Agent shall not be liable for any act it may do or omit to
do as agent, while acting in good faith and in the exercise of its own
best judgment. Any act done or omitted by the Escrow Agent on the
advice of its own attorneys shall be deemed conclusively to have been
done or omitted in good faith. The Escrow Agent shall have the right at
any time to consult with counsel on any question arising under this
Agreement. The Escrow Agent shall incur no liability for any delay
reasonably required to obtain the advice of counsel.
5. The Escrow Agent is authorized to rely on the apparent authority and
identity of the Customers executing or delivering these instructions or
any notices, documents or papers given, deposited or called for under
this Agreement.
6. The Escrow Agent shall not be a party to and shall not be bound by any
agreements related hereto other than this Agreement. Furthermore, the
Escrow Agent shall have no duty to know or determine the performance or
nonperformance of any provision of any agreement that exists between
the Customers and/or any other third parties. The Escrow Agent assumes
no responsibility for the validity, accuracy, or sufficiency of any
documents, papers, securities or payments deposited or called for under
this Agreement except as may be expressly and specifically set forth in
Schedule B.
7. The Escrow Agent shall invest funds in the triple "A" rated First
American Treasury Reserve Obligations Money Fund (Class A). Customers
hereby confirm receipt of the First American Funds prospectus.
Customers further acknowledge that the fund investment advisor,
custodian, distributor and other service providers as described in the
prospectus are affiliates of U.S. Bank National Association, and
investment in the fund includes approval of the fund's fees and
expenses as detailed in the prospectus, including advisory
and custodial fees and shareholder service expenses (which may be so
called 12b-1 shareholder service fees), which fees and expenses are
paid to U.S. Bank National Association, or subsidiaries of U.S.
Bancorp. The shares of the funds are not deposits or obligations of, or
guaranteed by, any bank including U.S. Bank National Association, or
any of its affiliates, nor are they insured by the Federal Deposit
Insurance Corporation, the Federal Reserve Board or any other agency.
The investment in the fund involves investment risk, including possible
loss of principal. All accrued interest shall become part of the Escrow
Fund. All entities entitled to receive interest from the escrow account
will provide Escrow Agent with a W-9 or W-8 IRS tax form prior to the
disbursement of interest. A statement of citizenship will be provided
if requested by Escrow Agent. The Escrow Agent shall not be liable for
losses, penalties or charges incurred upon any sale or purchase of any
such investment.
8. In order to comply with IRS reporting requirements, the Escrow Agent is
hereby directed to allocate interest earned on deposits to the entity
to which they are actually paid as set out in Schedule B.
9. The Escrow Agent is expressly authorized to disregard any and all
notices or warnings given by any of the Customers or by any other
person or entity, except orders or process of a court, with or without
jurisdiction. The Escrow Agent is expressly authorized to comply with
and obey any and all court orders, judgments or decrees. The Escrow
Agent shall not be liable to any of the Customers or to any other
person or entity by reason of compliance with any court order,
notwithstanding that such order, judgment or decree may be subsequently
reversed, modified, annulled, set aside or vacated, or found to have
such been entered without jurisdiction.
10. In the event of any dispute arising under this Agreement, Colorado law
will govern. With respect to the disposition of the Escrow Property,
the Escrow Agent may deposit the property held in escrow with the
Clerk, or acting Clerk, of the District Court of the City and County of
Denver, State of Colorado. The Escrow Agent may interplead the funds
into the District Court of the City and County of Denver, State of
Colorado. Upon deposit of the Escrow Property and filing a complaint in
interpleader, the Escrow Agent shall be relieved of all liabilities
under the terms of this Agreement. The Customers, their heirs, legal
representatives, executors of, administrators, successors and assigns
shall submit themselves to the jurisdiction of the District Court of
the City and County of Denver, State of Colorado and shall appoint the
Clerk, or acting Clerk, of the District Court, as their agent for the
service of all process in connection with such proceedings. The
institution of an interpleader action shall not impair the rights and
remedies of the Escrow Agent under Section 13.
11. The Escrow Agent may resign at any time by giving written notice to all
Customers pursuant to Section 3 hereof. Resignation shall be effective
30 days after such notice has been received by both Customers. If a
successor agent has not been appointed within such 30 day period, the
Escrow Agent may petition the District Court of the City and County of
Denver, State of Colorado, or may interplead the Customers in a
proceeding for the appointment of a successor Escrow Agent, and all
fees, including but not limited to extraordinary fees associated with
the filing of interpleader, and expenses associated therewith shall be
payable by the Settlement Fund.
12. Any company into which the Escrow Agent may be merged or with which it
may be consolidated, or any company to whom the Escrow Agent may
transfer a substantial amount of its Corporate Trust business, shall be
the Successor to the Escrow Agent without the execution or filing of
any paper of the Customers, anything herein to the contrary
notwithstanding.
13. In consideration of the acceptance of this Escrow by the Escrow Agent,
the undersigned agree, jointly and severally, to bind themselves, their
heirs, legal representatives, executors, administrators, successors and
assigns, to allow Escrow Agent to charge against the Escrowed Property
deposited all expenses and fees, including but not limited to,
extraordinary fees associated with the performance of other than
ordinary duties. Customers further agree that the Escrowed Property may
be used to indemnify and hold harmless the Escrow Agent for any
liability incurred to any other person or entity by reason of having
accepted the Escrow and to reimburse all expenses, including, among
other things, attorney fees and court costs. The Escrow Agent shall
have a first and prior lien on all the Escrow Property to secure its
indemnification and payment of fees and expenses. Thirty (30) days
prior to deducting any expenses and fees from the Escrowed Property,
the Escrow Agent shall send notice of the amount, type and reasons for
such expenses and fees after which Escrow Agent is authorized to deduct
fees and expenses without any additional prior notice from any
deposited funds.
14. This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be one and the same instrument. The exchange
of copies of this Agreement and of signature pages by facsimile
transmission shall constitute effective execution and delivery of this
Agreement as to the parties and may be used in lieu of the original
Agreement for all purposes. Signatures of the parties transmitted by
facsimile shall be deemed to be their original signatures for all
purposes.
15. If the deposits are not withdrawn on or before December 31, 2006 or
such later date as may be agreed by the Customers, the Escrow Agent is
instructed to release and then distribute the Escrow Property held
hereunder, less any fees and expenses of the Escrow Agent, to the
entity who originally deposited such funds, as set forth in a written
authorization to be signed by both Customers.
UPON RELEASE OF THE ESCROW PROPERTY, THE ESCROW AGENT SHALL BE RELIEVED
OF ALL LIABILITY ARISING UNDER THIS AGREEMENT.
16. Escrow fees for the performance of ordinary duties shall be initially
billed to 1/2 to METRETEK and 1/2 to ClASS Counsel but any payments
made by them may be reimbursed from any interest or earnings on
escrowed funds and shall be:
(a) Setting up Fees: (b) Annual Fee (payable in (c) Miscellaneous
ONE TIME ONLY advance, per year or any
portion thereof billed
semi-annually)
$ 500 $ 1,000 $ None
-------- ----------- ---------
17. The parties hereto hereby agree not to use the name of U.S. BANK
NATIONAL ASSOCIATION to imply an association with the transaction other
than that of a legal escrow agent.
18. The parties acknowledge that to the extent regulations of the
Comptroller of Currency or other applicable regulatory entity grant a
right to receive brokerage confirmations of security transactions of
the escrow, the parties waive receipt of such confirmations, to the
extent permitted by law. The Escrow Agent shall furnish a statement of
security transactions on its regular monthly reports.
IN WITNESS WHEREOF, the undersigned have affixed their signatures and
hereby adopt as part of this instrument Schedule A and B which are incorporated
by reference.
CUSTOMER: CUSTOMER:
Metretek Technologies, Inc. Class Counsel - Law Offices of Vincent
T. Gresham, LLC
By: __________________________ By: ______________________________________
A. Bradley Gabbard Vincent T. Gresham
Its: Executive Vice President Its: Lead Counsel
303 E. 17th Avenue, Suite 660 3312 Piedmont Road, Suite 317
(Address) (Address)
Denver, CO 80203 Atlanta, GA 30305
(City, State and Zip Code) (City, State and Zip Code)
303-785-8079 404-467-8290
(Telephone) (Telephone)
303-785-8085 404-467-4328
(Telecopy Number) (Telecopy Number)
Tax I.D. _______________________ Tax I.D. _________________________________
U. S. BANK NATIONAL ASSOCIATION as
Escrow Agent
By: ______________________________________
Its: _____________________________________
NOTICES TO ESCROW AGENT SHALL BE SENT TO:
U.S. Bank Corporate Trust Services
60 Livingston Avenue
EP-MN-WS3T
St. Paul, MN 55107-2292
Attn: Olaleye Fadahunsi
(651) 495-3726 With Fax Copy to:
(651) 495-8087 (fax) Dawnita Ehl
(206) 344-4630 (fax)
(206) 344-4685 (phone)
"SCHEDULE A"
(Deposits)
$2,750,000
"SCHEDULE B"
(SPECIAL INSTRUCTIONS)
Escrow Agent shall disburse funds only to Metretek Technologies, Inc.
("Metretek") or the Settlement Fund, or to Interpleader Escrow Account No.
_________, or to the Escrow Agent. Any disbursement to the Escrow Agent shall be
made in accordance with the procedure set forth in paragraph 13 of this Escrow
Agreement. Any disbursements to Metretek or the Settlement Fund or to
Interpleader Escrow Account No. ___________ must be approved by a written notice
delivered to Escrow Agent in writing signed by both a Metretek representative
and a representative for Class Counsel, with 5 business days prior written
notice to Birge & Minckley P.C., Attn Thomas D. Birge or Carla B. Minckley, 1700
Broadway #1501, Denver, Co 80290, telecopy 303-860-7338 to be provided by
Metretek and/or Class Counsel. The notice to Escrow Agent shall also contain the
date written notice was received by Birge & Minckley. . The necessary writing,
notices, and signatures may be transmitted by facsimile (the original writing
and signatures are not necessary). The approved representative who may sign on
behalf of Metretek is A. Bradley Gabbard, whose signature appears below. The
approved representatives on behalf of Class Counsel are Vincent T. Gresham or
Robert R. Elarbee, whose signatures appear below. Interest earnings shall be
reported to the entity they are actually paid to subject to the provisions of
paragraph 7 of this Escrow Agreement.
The "Settlement Fund" shall be an interest bearing money market account
to be established at a financial institution acceptable to both Metretek and
Class Counsel and established with Metretek acting as Trustee.
___________________________________
Vincent T. Gresham
___________________________________
Robert R. Elarbee
___________________________________
A. Bradley Gabbard