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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): December 9, 1999
METRETEK TECHNOLOGIES, INC.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 0-19793 84-11698358
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(STATE OR OTHER JURISDICTION (COMMISSION FILE NUMBER) (I.R.S. EMPLOYER
OF INCORPORATION) IDENTIFICATION NO.)
1675 Broadway, Suite 2150, Denver, Colorado 80202
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (303) 592-5555
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Not Applicable
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(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
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ITEM 5. OTHER EVENTS.
THE PRIVATE PLACEMENT
GENERAL DESCRIPTION. On December 9, 1999, Metretek Technologies, Inc.,
a Delaware corporation (the "Company"), entered into a Securities Purchase
Agreement (as amended, the "Securities Purchase Agreement") and related
agreements with certain funds, and with an account established by an
institutional investor, for which DDJ Capital Management, LLC is the investment
manager or an investment advisor (the "DDJ Investors"). Pursuant to the
Securities Purchase Agreement, the DDJ Investors agreed to purchase in a private
placement, subject to certain conditions described below, 3,000 units ("Units"),
at a price of $2,000 per Unit, for an aggregate purchase price of $6,000,000 in
cash. Each Unit consists of 200 shares of the Company's Common Stock, par value
$.01 per share ("Common Stock"), one share of Series B Preferred Stock, par
value $.01 per share ("Preferred Stock"), and warrants ("Warrants") to purchase
100 shares of Common Stock. The Securities Purchase Agreement provides for the
issuance of the Units to the DDJ Investors in two closings ("Closings"). On
December 9, 1999, the Company issued and sold to the DDJ Investors 1,450 Units
for an aggregate purchase price of $2,900,000 (the "First Closing"). At the
"Second Closing", the Company will issue and sell to the DDJ Investors 1,550
additional Units for an aggregate purchase price of $3,100,000 in cash, subject
to reduction as set forth below. The Second Closing will occur promptly after
the date the stockholders approve the Private Placement (the "Private Placement
Proposal") at a special meeting of the stockholders (the "Special Meeting"), if
certain other conditions described herein, are met. The Special Meeting is
expected to be held in early February 2000.
Among other things, the Second Closing is conditioned upon additional
institutional investors or other "accredited investors" (as such term is defined
in Regulation D promulgated under the Securities Act of 1933, as amended (the
"Securities Act")) ("Additional Investors") purchasing no less than 3,000
additional Units and no more than 4,000 additional Units, at a price dependent
upon market conditions. The DDJ Investors and the Additional Investors are
collectively referred to in this Form 8-K as the "Purchasers." The Additional
Investors will enter into the Securities Purchase Agreement and the Registration
Rights Agreement (as defined below), will receive Warrants and will purchase
Units at the Second Closing. If the economic terms of the sale of Units to the
Additional Investors is more favorable than the economic terms of the sale of
the Units to the DDJ Investors, such as a lower per Unit purchase price, then,
DDJ Investors will be entitled to receive the same economic benefit with respect
to all Units they purchased in the First Closing or in the Second Closing,
whether through refund, redemption, exchange or otherwise, such as by a
reduction in the purchase price of the Units to be purchased by the DDJ
Investors in the Second Closing.
The offer, sale and issuance of the Units to the DDJ Investors and to
the Additional Investors is referred to in this Form 8-K as the "Private
Placement". As discussed below, the primary purpose of the Private Placement is
to raise capital to enable the Company to develop its Internet business, repay
certain outstanding indebtedness, and otherwise fund general working capital
requirements, as more fully described below. Consummation of the Second Closing
is conditioned upon, among other things, the approval of the Private Placement
Proposal by the stockholders of the Company.
TRANSFER RESTRICTIONS. The issuance of the shares of Common Stock, the
shares of Series B Preferred Stock and the Warrants in the Private Placement,
including the issuance of shares of Common Stock upon conversion of the Series B
Preferred Stock and upon exercise of the Warrants, has not been registered under
the Securities Act or any state securities laws. Such securities may not be
offered, sold or otherwise transferred by the holders thereof unless such offer,
sale or transfer is registered under the Securities Act and applicable state
securities laws, or made pursuant to valid
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exemption from such registration requirements. All securities issued in the
Private Placement bear or will bear a legend to that effect.
REGISTRATION RIGHTS. Concurrently with and pursuant to the Securities
Purchase Agreement, the Company entered into the Registration Rights Agreement,
dated as of December 9, 1999 (the "Registration Rights Agreement"), with the DDJ
Investors. The Additional Investors will also become parties to the Registration
Rights Agreement. Pursuant to the terms of the Registration Rights Agreement,
the Company is required to file, on or before February 7, 2000, a Form S-3
"shelf" registration statement (the "Shelf Registration Statement") with the
Securities and Exchange Commission covering the resale of (i) the shares of
Series B Preferred Stock issued in the Private Placement, and (ii) the shares of
Common Stock issued in the Private Placement, including the shares of Common
Stock issuable upon conversion of the Series B Preferred Stock and upon exercise
of the Warrants included in the Units (collectively, the "Registrable
Securities"). If the Shelf Registration Statement (i) is not filed with the SEC
on or prior to February 7, 2000, or has not become effective on or prior to May
9, 2000, or (ii) is filed and declared effective but its effectiveness is
suspended for any reason (without being succeeded immediately by a replacement
shelf registration statement filed and declared effective) for a period of time
(including any suspension period as discussed below) which shall exceed 30 days
in the aggregate, then the Company will be required to pay liquidated damages to
each holder of Registrable Securities. The amount of liquidated damages payable
during any period in which a registration default shall have occurred and be
continuing is that amount which is equal to $1.00 per 1,000 shares of
Registrable Securities per week and shall increase by an amount equal to $0.10
per 1,000 shares of Registrable Securities at the end of each subsequent two
week period up to a maximum of $3.20. In addition, pursuant to the Registration
Rights Agreement, the holders of Registrable Securities have certain "piggyback"
registration rights in connection with registration statements filed by the
Company, on its own behalf or on behalf of any of its stockholders, with respect
to the Registrable Securities. The Company will pay all expenses, other than
underwriting and brokerage discounts and commissions and other selling expenses,
of all such registrations.
BOARD REPRESENTATION. Pursuant to the terms of the Securities Purchase
Agreement and the Series B Preferred Stock, the holders of a majority of the
outstanding shares of Series B Preferred Stock, voting together as a separate
class, are entitled to elect one member of the Company's Board of Directors, so
long as an aggregate of at least 2,000 shares of Series B Preferred Stock remain
outstanding. In addition, pursuant to a letter agreement between the Company and
DDJ Capital Management, LLC, the Company agreed to recommend that its
stockholders approve an amendment to the terms of the Series B Preferred Stock
providing that, in the event the Company fails to redeem the Series B Preferred
Stock in accordance with its terms, the holders of the Series B Preferred Stock
will have the right to elect a majority of the Company's Board of Directors
until such time as all shares of Series B Preferred Stock have been redeemed by
the Company.
CONDITIONS TO SECOND CLOSING. The Second Closing of the sale of Units
in the Private Placement is subject to certain conditions. The conditions to the
obligation of the DDJ Investors to purchase Units at the Second Closing include
the following:
o the Company shall have sold no less than 3,000 Units and no
more than 4,000 Units to the Additional Investors;
o market conditions, at the time of the Second Closing, shall
not be such that, in the reasonable judgment of the Purchasers
in the Second Closing, the purchase and sale of the Units at
the Second Closing on the terms set forth in the Securities
Purchase Agreement do not reflect appropriate market terms;
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o the representations and warranties of the Company contained in
the Securities Purchase Agreement shall continue to be true
and correct at the time of the Second Closing;
o the Company shall have complied with all agreements and
covenants contained in the Securities Purchase Agreement
required to be performed by it prior to or at the Second
Closing; and
o the Company shall have obtained all requisite consents and
approvals.
The conditions to the obligation of the Company to issue and sell Units
at the Second Closing include the following:
o the stockholders of the Company shall have duly adopted the
Private Placement Proposal in accordance with Nasdaq
requirements; and
o the Company shall have received a fairness opinion from
Hanifen Imhoff, Inc., which states that the Private Placement
is fair, from a financial point of view, to the Company.
INDEMNIFICATION. The Company has agreed to indemnify and hold harmless
each Purchaser and its respective affiliates, and their employees, officers,
partners, members, directors and agents from and against any and all losses,
claims, damages, liabilities, costs and expenses in connection with or arising
out of any breach by the Company of any of its representations, warranties or
covenants in the Securities Purchase Agreement or in the related agreements or
any third party proceeding in connection therewith.
EXPENSES. The Company has agreed to pay all reasonable, documented,
out-of-pocket fees and expenses actually incurred by the Purchasers in
connection with the Private Placement.
MANAGEMENT RIGHTS. By separate letter agreement, the Company has
granted to the DDJ Investors the right to receive information and to submit
proposals to and consult with management regarding the Company's operations and
financial condition.
TERMS OF THE SERIES B PREFERRED STOCK
The holders of the Series B Preferred Stock are entitled to significant
rights, preferences and privileges as a result of their investment in the
Company. These rights, preferences and privileges are summarized below. The
terms of the Series B Preferred Stock are set forth in the Certificate of
Designation establishing the terms of the Series B Preferred Stock, which was
filed with the Secretary of State of the State of Delaware on December 9, 1999
and is included as an exhibit to this Form 8-K. The following summary of certain
key terms of the Series B Preferred Stock is not complete and is qualified in
its entirety by, and should be read in conjunction with, the Certificate of
Designation attached as an exhibit hereto.
AMOUNT. The Company has authorized a total of 1,000,000 shares of
Series B Preferred Stock, of which up to 7,000 shares will be issued in the
Private Placement.
DIVIDENDS. The holders of shares of Series B Preferred Stock are
entitled, in preference to the holders of any other class of capital stock of
the Company, to receive cash dividends on a quarterly basis, at the rate per
annum of 8%, when, as and if declared by the Company. The dividends on the
Series B Preferred Stock are cumulative and so long as at least 1,000 shares of
Series B Preferred Stock
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are outstanding and such dividends have not been paid in full, no dividends
shall be paid or declared on, and the Company cannot purchase, redeem or
acquire, any shares of Common Stock or any other class of capital stock of the
Company ranking junior to or on parity with the Series B Preferred Stock. In
addition, in the event that the Company declares or pays any cash or Common
Stock dividends on the Common Stock, the Company must also declare and pay to
the holders of the Series B Preferred Stock, the same dividends or distributions
based upon the number of shares of Common Stock into which the shares of Series
B Preferred Stock are then convertible.
LIQUIDATION PREFERENCE. Upon any voluntary or involuntary liquidation,
dissolution or winding-up of the Company, the holders of Series B Preferred
Stock will be entitled to receive, out of the assets of the Company available
for distribution to stockholders, before any payment or distribution will be
paid on any Common Stock or any other class of stock ranking on liquidation
junior to the Series B Preferred Stock, an amount in cash equal to $1,000 per
share of Series B Preferred Stock held by such holder, plus accrued but unpaid
dividends, if any (the "Liquidation Preference"). In the event the assets of the
Company available for distribution to the holders of Series B Preferred Stock
are insufficient to permit payment in full of the Liquidation Preference, then
all such assets will be distributed ratably among the holders of the Preferred
Stock. If the holders of Series B Preferred Stock would have received more than
the Liquidation Preference if they had converted their Series B Preferred Stock
into Common Stock immediately prior to the liquidation event, then they shall
receive such greater amount.
REDEMPTION. On December 9, 2004, the Company is required to redeem all
outstanding shares of Series B Preferred Stock at the amount of the Liquidation
Preference.
In addition, the holders of Series B Preferred Stock may, by majority
vote, elect either to participate in, or to have their shares of Series B
Preferred Stock redeemed upon the occurrence of, any of the following events:
o certain mergers or consolidations of the Company;
o the sale or transfer of all or substantially all of the
properties and assets of the Company;
o any purchase by any person or group of capital stock of the
Company causing such person or group to own a majority of the
voting power of the Company; or
o the redemption or repurchase of a majority of the voting power
of the capital stock of the Company.
The Company has agreed to provide an adequate remedy to the DDJ
Investors in the event it fails to redeem all of the Series B Preferred Stock
pursuant to the terms thereof. The amendment to the terms of the Series B
Preferred Stock relating to Board representation of the holders of Series B
Preferred Stock, as described below under "Special Class Voting Rights -- Board
Representation", will be the remedy, if a proposed amendment to Article Fourth
of the Company's Restated Certificate of Incorporation, as amended (the
"Restated Certificate"), relating to the Company's Preferred Stock which the
Board of Directors intends to submit to the stockholders at the Special Meeting
(the "Preferred Stock Proposal") is adopted by the stockholders at the Special
Meeting. If the Preferred Stock Proposal is not adopted, then the DDJ Investors
will not be obligated to purchase Units at the Second Closing and will be
entitled to contractual remedies, including, without limitation, the payment of
interest at an interest rate on the liquidation amount of the Series B Preferred
Stock that the Company fails to redeem.
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Furthermore, in the event that, at any time commencing after December
9, 2000, the market price of the Common Stock equals or exceeds 200% of the
Conversion Price (as defined below) then in effect for 20 out of a period of 30
consecutive trading days, then the Company shall have the right to redeem the
Series B Preferred Stock at a purchase price per share equal to the Liquidation
Preference.
CONVERSION RIGHTS. Commencing June 9, 2000, each share of Series B
Preferred Stock will be convertible, at the option of the holder thereof, into
the number of shares of Common Stock equal to the Liquidation Preference divided
by the "Conversion Price" per share then in effect. The initial "Conversion
Price" is $5.9334 (the "Initial Conversion Price"), which equals approximately
168 shares of Common Stock per share of Series B Preferred Stock, based upon a
Liquidation Preference of $1,000 per share of Series B Preferred Stock. On
December 9, 2000, the Conversion Price will be reset to the lower of (i) the
Initial Conversion Price, (ii) the Conversion Price then in effect, if it has
been adjusted pursuant to the anti-dilution provision of the Series B Preferred
Stock discussed below, or (iii) 110% of the sum of (a) the average closing bid
price of the Common Stock for the 30 trading days immediately preceding such
date, plus (b) the fair market value of any securities, cash or assets (other
than dividends paid exclusively in cash or Common Stock) distributed to the
holders of Series B Preferred Stock, but the Conversion Price will not, in any
event, be reduced by more than 50% of the Conversion Price then in effect.
Therefore, if the Series B Preferred Stock is not converted into Common Stock
prior to December 9, 2000, the Series B Preferred Stock may become convertible
into Common Stock at a rate which is below the prevailing market price of the
Common Stock on the Date. If the Conversion Price is so adjusted, then the
holders of Series B Preferred Stock will not, for a period of 90 days after the
adjustment, sell, pledge or transfer any capital stock of the Company, or, for a
period of 30 days after the adjustment, purchase (although they can convert
their Series B Preferred Stock or exercise their Warrants) any shares of Common
Stock to cover any "short" position.
The Conversion Price, and the number of shares of Common Stock of the
Company (or the number and kind of other securities or rights) into which each
share of Series B Preferred Stock is convertible, are also subject to adjustment
pursuant to the anti-dilution provisions of the Series B Preferred Stock as set
forth in the Certificate of Designation. These anti-dilution provisions include
the following:
o If the number of shares of Common Stock outstanding is
increased by a stock dividend or other distribution payable in
shares of Common Stock, or by a subdivision or split-up of the
outstanding shares of Common Stock into a greater number of
shares of Common Stock, then the Conversion Price will be
proportionally decreased so that the number of shares of
Common Stock issuable upon conversion of the Series B
Preferred Stock shall be increased in proportion to the
increase of outstanding shares of Common Stock.
o If the number of shares of Common Stock outstanding is
decreased by a combination or reverse split of the outstanding
shares of Common Stock, then the Conversion Price will be
proportionately increased so that the number of shares of
Common Stock issuable upon conversion of the Series B
Preferred Stock shall be decreased in proportion to such
decrease in outstanding shares of Common Stock.
o If the Company issues any Common Stock at a price, or any
options, rights, warrants or other securities convertible into
or exchangeable for shares of Common Stock (other than certain
shares and options to officers, director or employees under
the Company's employee plans, certain shares issuable upon the
exercise of outstanding warrants or other rights, or
securities issuable upon conversion of the Series B Preferred
Stock or
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upon exercise of the Warrants) at a purchase price, conversion
price or exercise price (as applicable) per share less than
the greater of the market price of the Common Stock or the
Conversion Price in effect immediately prior to such issuance,
then the Conversion Price will be reduced pursuant to a
"weighted price anti-dilution" formula, thereby entitling the
holders of the Series B Preferred Stock to receive additional
shares of Common Stock upon conversion.
o If the Company distributes to all holders of shares of Common
Stock evidences of its indebtedness, shares of any class or
series of capital stock, other securities, cash or assets
(excluding cash dividends or distributions of shares of its
Common Stock), then, if they so elect by majority vote, the
holders of outstanding shares of Series B Preferred Stock
shall be entitled to, either (i) receive such distribution
upon conversion, be entitled to covert each share of Series B
Preferred Stock into the consideration or if the holder has
converted its holdings of Series B Preferred Stock into Common
Stock as of the payment date, or (ii) have the Conversion
Price of the Series B Preferred Stock proportionately reduced.
GENERAL VOTING RIGHTS. The holders of the Series B Preferred Stock are
not entitled to vote on matters presented to the holders of Common Stock
generally, except as expressly provided by law or in the Certificate of
Designation.
SPECIAL CLASS VOTING RIGHTS - BOARD REPRESENTATION. The holders of the
Series B Preferred Stock, voting together as a separate class, have the right to
elect one member of the Company's Board of Directors, so long as at least 2,000
shares of Series B Preferred Stock remain outstanding. All other directors will
be elected by the holders of Common Stock and of any other class of capital
stock of the Company that has the right to vote in the election of directors.
The Company has agreed to recommend at the Special Meeting that its
stockholders approve an amendment to the terms of the Series B Preferred Stock
providing that, in the event the Company fails for any reason to redeem the
Series B Preferred Stock in full in accordance with its terms, then the size of
the Board of Directors will be increased to allow the holders of the Series B
Preferred Stock to elect a sufficient number of additional directors to
constitute a majority of the Board of Directors, to serve until the Company pays
in full the redemption price for the shares of Series B Preferred Stock to be
redeemed. Thereafter, the size of the Board of Directors will be reduced to its
size in effect prior to the redemption default.
SPECIAL CLASS VOTING RIGHTS -- RIGHT TO VETO CERTAIN TRANSACTIONS. So
long as at least 1,000 shares of Series B Preferred Stock remain outstanding,
the Company may not, without the consent of the holders of at least a majority
of the shares of Series B Preferred Stock then outstanding, voting as a single
class, take any of the following actions:
o enter into any merger, consolidation, recapitalization,
reorganizational or like transaction involving the Company or
any of its subsidiaries;
o liquidate or dissolve the Company;
o sell or transfer all or substantially all of the assets or
properties of the Company;
o dispose of assets in one or more transactions for
consideration in excess of $1,000,000 without approval of the
Board of Directors of the Company; or
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o incur indebtedness for money borrowed, except for borrowings
under the Company's primary credit agreement of up to
$3,000,000.
In addition, so long as any shares of Series B Preferred Stock remain
outstanding, the Company may not, without the consent of the holders of at least
a majority of the shares then outstanding, voting as a single class, take any of
the following actions:
o issue any equity security, or securities exchangeable or
convertible into equity securities or measured by the
Company's earnings or profit, other than Series C Preferred
Stock or securities of the Company, or its Internet
subsidiaries, that rank junior to the Series B Preferred Stock
as to liquidation, dividend and redemption rights;
o redeem, repurchase or otherwise acquire for value any equity
security of the Company (other than the Series B Preferred
Stock in accordance with its terms); or
o amend the Restated Certificate, By-Laws or other charter
documents of the Company or any of its subsidiaries.
WARRANTS
Each Warrant included in the Units being sold in the Private Placement
entitles the holder thereof to purchase one share of Common Stock at the then
current "Exercise Price". The Warrants are initially exercisable at an exercise
price equal to $6.7425 (the "Initial Exercise Price"). The Initial Exercise
Price will be reset on December 9, 2000 to the lower of (i) the Initial
Conversion Price, (ii) the Exercise Price then in effect, if it has been
adjusted pursuant to the anti-dilution provision of the Warrants, or (iii) 125%
of the average closing bid price of the Common Stock for the 30 trading days
immediately preceding such date. The Exercise Price is subject to further
adjustment pursuant to certain anti-dilution provisions, which are substantially
the same as the anti-dilution provisions of the Series B Preferred Stock
described in "Terms of the Series B Preferred Stock - Conversion Rights" above.
The Warrants are immediately detachable from the Units, can be exercised at any
time commencing March 9, 2000, and expire December 9, 2004. In lieu of paying
the Exercise Price in cash, holders of Warrants may exercise such Warrants by
delivering to the Company shares of Common Stock of the Company with a fair
market value equal to the Exercise Price. Alternatively, holders of Warrants may
make a "cashless" exercise of the Warrants and recover, upon exercise and
without making any payments (of cash, Common Stock or any other asset), a "net"
number of shares of Common Stock determined by a formula based on the amount the
trading price of the Common Stock exceeds the Exercise Price then in effect.
PRIVATE PLACEMENT AGENT
The Company has engaged First Albany Corporation to serve as its
exclusive placement agent in connection with the Private Placement. The Company
will pay to First Albany Corporation a fee equal to two percent (2%) of the
gross proceeds received by the Company in the Private Placement, plus customary
fees and expenses.
USE OF PROCEEDS
The gross proceeds from the Private Placement, if 6,000 Units (the
minimum required for the Second Closing) are sold at a purchase price of $2,000
per Unit and if the other conditions to the
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Second Closing are met, will be $12,000,000. Because the actual amount of gross
proceeds will depend upon (i) the consummation of the Second Closing, (ii) the
number of Units (between 3,000 and 4,000 Units) sold to the Additional
Investors, and (iii) the price of the Units sold to the Additional Investors
(which will depend on market conditions and, if less than $2,000 per Unit, will
also reduce the Company's proceeds from the First Closing), the Company cannot
provide any assurance of the actual amount of gross proceeds from the Private
Placement.
The gross proceeds of $2,900,000 from the First Closing will be used
primarily to finance, in part, the development of the Company's Internet
business. Any additional proceeds received by the Company in the Second Closing
will be used by the Company for development of its Internet business, repayment
of certain indebtedness, payment of its expenses associated with the Private
Placement, and for general corporate and working capital purposes.
REASONS FOR THE PRIVATE PLACEMENT
The Company is selling the Units in the Private Placement primarily to
raise funds it needs to satisfy short-term capital requirements to finance the
development of its Internet business. The Company expects that the initial
development of its eBusiness, which will allow the Company to define and develop
its eBusiness market, products and services and to launch a fully functional
website to conduct its eBusiness, will cost approximately $5,000,000, consisting
of consulting fees and technology costs.
The Company will also use a portion of the proceeds of the Private
Placement to fund certain long term capital requirements. These long-term
capital requirements include the potential repayment of a convertible promissory
note issued to American Meter Company in connection with the acquisition of a
business acquired from American Meter (an expected $600,000 principal balance
due May 2002), and the repayment of outstanding indebtedness (approximately
$2,100,000 as of September 30, 1999) under its credit facility with its
principal lender which expires May 2001. In addition, the Company will utilize
the proceeds of the Private Placement to finance its working capital needs and
the expansion of its business operations, including potentially providing the
funds to finance an acquisition opportunity, if one were to arise. The Company
has no present agreement or arrangement for any such acquisition opportunities.
The Company has recently focused a major part of its business strategy
upon the development of an Internet-based business, also referred to as an
eBusiness. The Company is currently developing and operating its eBusiness
through two wholly-owned subsidiaries, Metretek Internet Services, Inc.
("Metretek Internet") and TotalPlan, Inc. ("TotalPlan"). In furtherance of this
business strategy, the Company has entered into a strategic relationship with
Scient, a leading eBusiness consultant and advisor, to assist the Company in
designing, developing and creating its eBusiness. The goal of the eBusiness is
to enable the Company to take its measurement information products, services and
data management technologies to a broader market of end users of natural gas and
electricity by creating a comprehensive market place on the Internet for energy
consumers and suppliers to take advantage of deregulated energy markets. The
Company's initial focus, which is the principal reason for the Private
Placement, is to develop and launch an Internet-based transactional website.
The Company estimates that this initial development phase of its
eBusiness will require estimated expenditures of approximately $5,000,000,
consisting of consulting fees and expenses payable to Scient and costs of
acquiring the requisite technology, including hardware and software, as well as
research and development costs. The Company expects that after this initial
development stage is completed and its website is launched, the further
development and growth of its eBusiness,
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including staffing, organizational and start-up expenses, marketing costs and
additional capital expenditures, will require significant additional funds. In
order to so develop and expand its eBusiness, the Company will need to raise the
significant additional funds beyond the proceeds of the Private Placement, from
the proceeds of public or private equity financing, debt financing or from other
sources. Any such capital raising will be subject to the consent of the
Company's lender on its credit facility, if its credit facility is then in
effect. In addition, any such capital raising will be subject to any required
consents from the holders of Series B Preferred Stock, as described above. There
can be no assurance that such additional funds will be available to the Company
in the future or that, if available, such funds can be obtained on terms
favorable to the Company, and on terms acceptable to the Company's lender, if
its consent is required, and on terms acceptable to the holders of the Series B
Preferred Stock, if their consent is required. The inability of the Company to
raise sufficient additional funds, beyond the proceeds of the Private Placement,
to meet the capital requirements of its eBusiness could have a material adverse
effect on its business, financial condition and results of operations.
STOCKHOLDER APPROVAL
The Company's Common Stock is listed on the Nasdaq National Market. Due
to certain rules of the Nasdaq Stock Market, Inc. that may be applicable to the
Private Placement, the Company will submit the Private Placement to its
stockholders for their ratification and approval. Stockholder approval of the
Private Placement is not otherwise required as a matter of Delaware law or other
applicable laws or rules or by the Company's Restated Certificate or Amended and
Restated By-Laws.
As a result of the issuance of the Common Stock included in the Units
issued to the DDJ Investors in the First Closing, the DDJ Investors, in the
aggregate, own 290,000 shares of Common Stock, and have the right to acquire an
additional 389,379 shares of Common Stock upon the conversion of the Preferred
Stock (based upon the Initial Conversion Price) and upon the exercise of the
Warrants. The terms of the Securities Purchase Agreement prohibit the Company
from issuing to the DDJ Investors (including the 290,000 shares of Common Stock
issued at the First Closing plus all other shares of Common Stock issuable upon
conversion of the Series B Preferred Stock and exercise of the Warrants issued
at the First Closing, 696,809 or more shares of Common Stock, which constitutes
20% of the number of shares of Common Stock outstanding on the date preceding
the First Closing, without stockholder approval of this Private Placement
Proposal. In addition, the Second Closing is conditioned, among other things,
upon stockholder approval of this Private Placement Proposal. If stockholder
approval of the Private Placement Proposal is obtained, the Company will be able
to issue and sell up to an additional 5,550 Units, including 1,110,000 shares of
Common Stock included in such Units, and will be permitted to issue all shares
of Common Stock issuable upon conversion of the Series B Preferred Stock and
upon exercise of the Warrants included in the Units.
If stockholder approval of the Private Placement is not obtained, then
the shares of Common Stock, shares of Series B Preferred Stock and Warrants
which were issued to the DDJ Investors in the First Closing will remain
outstanding, but the Second Closing will not occur and the Company will not be
able to sell any additional Units in the Private Placement, and the Company will
not be permitted to issue more than 406,809 shares of Common Stock upon the
conversion of the Series B Preferred Stock or the exercise of the Warrants,
collectively, issued at the First Closing to the DDJ Investors, irrespective of
the Conversion Price or Exercise Price, respectively, from time to time in
effect. In addition, if the Conversion Price of the Series B Preferred Stock is
materially reduced due either to the reset provisions or the anti-dilution
provisions, then the Company will not be able to issue all the shares of Common
Stock issuable upon such conversion or exercise without violating the Nasdaq
Rules, and the Company could be subject to delisting from Nasdaq if such excess
shares of Common Stock are issued by the Company. In the Securities Purchase
Agreement, the Company has agreed to
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repurchase any Series B Preferred Stock or Warrants at a price based upon the
market value of the underlying Common Stock to the extent the conversion or
exercise thereof would violate the Nasdaq Rules.
LISTING AND REGISTRATION OF SECURITIES BEING ISSUED
Neither the Series B Preferred Stock nor the Warrants issued in the
Private Placement will be listed on the Nasdaq Stock Market, any national
securities exchange or any other stock market, stock exchange or stock trading
system. The Company has agreed to apply for the listing on the Nasdaq National
Market of the shares of Common Stock issued as part of the Units, as well as the
shares of Common Stock issuable upon conversion of the Series B Preferred Stock
or upon exercise of the Warrants.
The issuance of the Units in the First Closing was not, and the
issuance of Units in the Second Closing will not be, registered under the
Securities Act or any state securities laws. However, the Common Stock and the
Series B Preferred Stock issued as part of the Units, and the Common Stock
issuable upon conversion of the Series B Preferred Stock or upon exercise of the
Warrants, will be registered for public resale by the holders thereof pursuant
to a Form S-3 "shelf" registration statement filed by the Company with the SEC
in accordance with the registration rights of the Purchasers. See "The Private
Placement -- Registration Rights" above.
AMENDMENT TO STOCKHOLDER RIGHTS AGREEMENT
The Board of Directors also approved an amendment to the Company's
Rights Agreement at the same time that it approved the Private Placement. The
amendment to the Rights Agreement prevents the Private Placement, including the
Purchasers' acquisition of the Common Stock, Series B Preferred Stock and the
Warrants included in the Units, and the Purchasers' acquisition of Common Stock
upon conversion of the Series B Preferred Stock or upon exercise of the
Warrants, from triggering the protections contained in the Rights Agreement.
AMENDMENT TO CREDIT FACILITY
In connection with the Private Placement, the Company and National Bank
of Canada, the Company's lender under its credit facility (the "Lender"),
entered into the Third Amendment to Loan and Security Agreement and Loan
Documents (the "Loan Amendment"). Pursuant to the Loan Amendment, the Lender
waived all applicable restrictions and limitations in the credit facility
relating to the Private Placement, other than the right of the Company to redeem
the Series B Preferred Stock, and redefined certain covenants of the Company to
include the Series B Preferred Stock in the Company's tangible net worth.
FORWARD LOOKING STATEMENTS
This Form 8-K contains certain forward-looking statements within the
meaning of and made pursuant to the safe harbor provisions of Section 27A of the
Securities Act and Section 21E of the Securities Exchange Act of 1934, as
amended. From time to time, the Company may publish or otherwise make available
forward-looking statements of this nature. Forward-looking statements include
statements concerning plans, objectives, goals, strategies, future events or
performance, and underlying assumptions and other statements which are other
than statements or historical facts. The words "may", "could", "will",
"project", "intend", "continue", "believe", "anticipate", "estimate", "expect"
and similar predictive, future tense or forward-looking terminology, are
intended to identify forward-looking statements. Examples of forward-looking
statements include statements regarding,
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among other matters, the Company's plans, intentions, beliefs and expectations
with respect to its future prospects, including its eBusiness, and the Company's
ability to raise sufficient additional capital, from the sale of equity, debt,
assets or otherwise, to successfully develop and market its eBusiness. Such
forward-looking statements are based on the current plans, intentions, beliefs
and expectations of management as well as assumptions made by and information
currently available to management. Forward-looking statements are not guarantees
of future performance or events but are subject to, and are qualified by, risks
and uncertainties that could cause actual results to differ materially from
those expressed or implied by those statements. These risks and uncertainties
include, but are not limited to, (1) the Company's ability to successfully
develop and implement an Internet-based business; (2) the emergence and growth
of a market for online energy information and services; (3) the success of the
Company's strategic relationships; (4) changes in the energy industry in general
and the natural gas and electricity industry in particular; (5) the Company's
ability to successfully implement, and the market's acceptance of, its
"TotalPlan(TM)" offering; (6) the ability of the Company to raise sufficient
funds to finance the eBusiness; (7) the impact of current and future laws and
government regulations affecting the energy industry in general and the natural
gas industry in particular; and (8) other risks and uncertainties that are
discussed in this Form 8-K or that are discussed from time to time in the
Company's other reports and filings with the Securities and Exchange Commission.
The Company does not intend, and assumes no responsibility, to update any oral
or written forward-looking statements made by the Company.
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SUMMARY
The foregoing summary of the provisions of the Securities Purchase
Agreement, the Certificate of Designation, the Registration Rights Agreement,
and the Warrants is qualified in its entirety by reference to, and should be
read in conjunction with, such documents, which are fixed as exhibits to the
Form 8-K and incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) EXHIBITS
4.1 Securities Purchase Agreement, dated as of December
9, 1999, as amended, by and among Metretek
Technologies, Inc., State Street Bank & Trust,
(solely in its capacity as Trustee for General Motors
Employees Global Group Pension Trust as directed by
DDJ Capital Management, LLC, and not in its initial
capacity), DDJ Canadian High Yield Fund and B III-A
Capital Partners, L.P. (the "DDJ Investors")
4.2 Certificate of Designation of Series B Preferred
Stock, filed with the Secretary of State of the State
of Delaware on December 9, 1999
4.3 Form of Common Stock Purchase Warrant issued on
December 9, 1999 by Metretek Technologies, Inc. to
the DDJ Investors
4.4 Registration Rights Agreement, dated as of December
9, 1999, by and among Metretek Technologies, Inc. and
the DDJ Investors
4.5 Letter Agreement, dated as of December 20, 1999,
between Metretek Technologies, Inc. and DDJ Capital
Management, LLC
10.1 Third Amendment to Loan and Security Agreement and
Loan Documents, dated as of December 16, 1999 but
effective as of December 8, 1999, among National Bank
of Canada, Metretek Technologies, Inc., Southern Flow
Companies, Inc., Metretek, Incorporated and Sigma VI,
Inc.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
METRETEK TECHNOLOGIES, INC.
By: /s/ W. Phillip Marcum
-------------------------------------
W. Phillip Marcum
President and Chief Executive Officer
Dated: December 22, 1999
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METRETEK TECHNOLOGIES, INC.
FORM 8-K
DATED DECEMBER 9, 1999
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
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4.1 Securities Purchase Agreement, dated as of December
9, 1999, as amended, by and among Metretek
Technologies, Inc., State Street Bank & Trust,
(solely in its capacity as Trustee for General Motors
Employees Global Group Pension Trust as directed by
DDJ Capital Management, LLC, and not in its initial
capacity), DDJ Canadian High Yield Fund and B III-A
Capital Partners, L.P. (the "DDJ Investors")
4.2 Certificate of Designation of Series B Preferred
Stock, filed with the Secretary of State of the State
of Delaware on December 9, 1999
4.3 Form of Common Stock Purchase Warrant issued on
December 9, 1999 by Metretek Technologies, Inc. to
the DDJ Investors
4.4 Registration Rights Agreement, dated as of December
9, 1999, by and among Metretek Technologies, Inc. and
the DDJ Investors
4.5 Letter Agreement, dated as of December 20, 1999,
between Metretek Technologies, Inc. and DDJ Capital
Management, LLC
10.1 Third Amendment to Loan and Security Agreement and
Loan Documents, dated as of December 16, 1999 but
effective as of December 8, 1999, among National Bank
of Canada, Metretek Technologies, Inc., Southern Flow
Companies, Inc., Metretek, Incorporated and Sigma VI,
Inc.