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\viewkind4\uc1\pard\qc\lang1033\f0\fs20 SECURITIES AND EXCHANGE COMMISSION\par
Washington, D.C. 20549\par
\par
\par
FORM 8-K\par
\par
\par
CURRENT REPORT\par
\par
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934\par
Date of Report (Date of earliest event reported) December 10, 2001\par
\par
\par
METALCLAD CORPORATION \par
(Exact name of registrant as specified in its charter)\par
\pard\par
\par
\par
Delaware 0-2000\par
(State or other jurisdiction) (Commission File Number)\par
\par
95-2368719\par
(I.R.S. Employer Identification No.)\par
\par
2 Corporate Plaza, Suite 125\par
Newport Beach, CA 92660\par
(Address of Principal Executive Office) (Zip Code)\par
\par
\par
Registrant's telephone number, including area code (949) 719-1234\par
\par
\par
Item 5. Other Events.\par
\par
On December 10, 2001, the Company entered into a Non-Recourse Security \par
And Pledge Agreement ("Pledge Agreement") with Blake Capital Partners LLC \par
("Blake") and Mr. Wayne Mills ("Mills") and Bruce H. Haglund, Esq., whereby \par
Mills and Blake pledged 500,000 shares (the "Pledged Shares") of Metalclad \par
stock to guarantee a loan in the amount of $1,250,000 from the Company to \par
Blake. A copy of the Pledge Agreement is attached hereto as Exhibit A. The \par
note is memorialized in the Non-Recourse Secured Note, dated December 10, \par
2001, between and among Metalclad, Blake, and Mr. Mills (the "Note"), a \par
copy of which is attached hereto as Exhibit B. Under the terms of the \par
Pledge Agreement, Mills shall retain all voting power with respect to the \par
Pledged Shares unless and until (1) Metalclad cancels such shares as a \par
result of Blake defaulting on the Note, or as a result of Blake and/or Mr. \par
Mills defaulting under the Pledge Agreement and failing to cure the default \par
pursuant to the terms of the Pledge Agreement and/or the Note, or as a \par
result of Blake requesting cancellation of such shares to satisfy its \par
obligations under the Note, or (2) Blake requests the sale of such shares \par
to satisfy its obligations under the Note. As of the date of this filing, \par
the Company's shares traded at approximately $2.05, valuing the \par
collateral at $1.025 million.\par
\par
On December 14, 2001, Mr. Mills and Blake Capital filed an amended \par
Schedule 13D reflecting this loan agreement. In this filing, it is \par
indicated that Mr. Mills owns 1,005,000 shares. Blake Capital Partners, \par
LLC, a Minnesota limited liability corporation ("Blake"), owns 400,000 \par
shares. Mr. Mills is the sole officer, director and controlling person of \par
Blake. Ms. Mills, Mr. Mills' wife, owns 275,000 shares. Mr. and \par
Ms. Mills each disclaim beneficial ownership over their spouse's \par
shares and Ms. Mills disclaims beneficial ownership over the shares \par
owned by Blake. As of this date, the Company has 7,448,015 shares \par
outstanding. Accordingly, Mr. Mills owns 18.9% of the outstanding \par
shares and Ms. Mills owns 3.7% of the outstanding shares.\par
\par
Additionally, on November 20, 2001, the Company has participated to \par
the extent of $1 million in a private placement of securities in a company \par
known as Catalytic Solutions, Inc. ("CSI"), a private company based in \par
Oxnard, California. The offering was handled by JP Morgan and Hambrecht & \par
Quist and consists of a preferred stock offering that is convertible into \par
common stock of CSI. Exhibits C and D more fully detail the terms and \par
convertibility features of this investment.\par
\par
Catalytic Solutions, Inc. is a materials science technology company \par
focused on applying industry-leading technology to improve the performance \par
and reduce the cost of automotive catalytic converters. They have \par
developed unique and proprietary Mixed Phase Catalyst "("MPC") technology \par
that enables them to produce catalyst formulations that provide superior \par
catalytic activity and durability at substantial cost saving versus \par
competitive technologies. Using MPC technology, they can manufacture \par
coated substrates, the active core of a catalytic converter, that use up to \par
10 times lower platinum group metal ("PGM") loadings than competing \par
offerings, which can result in a cost savings to auto manufacturers of up \par
to $400 per vehicle. They sell their coated substrates directly to major \par
auto manufacturers and to aftermarket manufacturers of catalytic \par
converters. \par
\par
Item 7. Exhibits.\par
\par
Exhibit A: Non-Recourse Security and Pledge Agreement dated \par
December 10, 2001.\par
\par
Exhibit B: Non-Recourse Secured Note dated December 10, 2001.\par
\par
Exhibit C: Catalytic Solutions Shareholders Agreement dated \par
November 15, 2001.\par
\par
Exhibit D: Amended and Restated Articles of Incorporation of \par
Catalytic Solutions, Inc. a California Corporation.\par
\par
Exhibit E: Metalclad Corporation Press Release dated December 14,\par
2001.\par
\par
\par
SIGNATURES\par
\par
Pursuant to the requirements of the Securities Exchange Act of 1934, \par
the Registrant has duly caused this report to be signed on its behalf by \par
the undersigned hereunto duly authorized.\par
\par
METALCLAD CORPORATION\par
\par
\par
\par
December 21, 2001 By: /s/Anthony C. Dabbene\par
-----------------------\par
Anthony C. Dabbene\par
Chief Financial Officer\par
\par
\par
\par
\par
\par
\pard\qc EXHIBIT A\par
NON-RECOURSE SECURITY AND PLEDGE AGREEMENT\par
\pard\par
THIS SECURITY AND PLEDGE AGREEMENT is entered into as of this 10th day of \par
December, 2001, by and between BLAKE CAPITAL PARTNERS, LLC, a Minnesota \par
limited liability company ("BLAKE"), with offices at 5020 Blake Road South, \par
Edina, Minnesota 55436, WAYNE W. MILLS, an individual residing at 5020 \par
Blake Road South, Edina, Minnesota 55436 ("MILLS") (collectively referred \par
to herein as "PLEDGORS"), METALCLAD CORPORATION, a Delaware corporation \par
with offices at 2 Corporate Plaza, Suite 125, Newport Beach, California \par
92660 ("METALCLAD"), and BRUCE H. HAGLUND, ESQ., the attorney for and \par
member of the Board of Directors of METALCLAD, whose office is located at 2 \par
Park Plaza, Suite 450, Irvine, California 92614 (the "AGENT").\par
\par
\pard\qc W I T N E S S E T H:\par
\pard\par
WHEREAS, pursuant to a Non-Recourse Secured Note dated December 10, 2001, \par
METALCLAD is simultaneously herewith lending $1,250,000.00 aggregate \par
principal amount due June 10, 2001 (the "Note") to BLAKE, a copy of which \par
Note is attached hereto as Exhibit A; and \par
\par
WHEREAS, as a condition precedent and as an inducement to METALCLAD to make \par
the loan to BLAKE evidenced by the Note, PLEDGORS have agreed to grant to \par
the AGENT for the benefit of METALCLAD a security interest in the \par
Collateral (as defined below), as more fully set forth herein; \par
\par
NOW, THEREFORE, in consideration of the foregoing and other good and \par
valuable consideration, receipt of which is hereby acknowledged, the \par
parties hereto hereby agree as follows: \par
\par
1. DEFINITIONS. For the purposes hereof unless the context otherwise \par
requires, the following terms shall have the meanings indicated: \par
\par
1.1 "Collateral" shall mean (i) the Pledged Securities, (ii) all other \par
monies, securities or other property at any time and from time to time \par
received in exchange for any of the Pledged Securities; (iii) all right, \par
title, and interest of BLAKE in and to the Pledged Securities. \par
\par
1.2 "Event of Default" shall mean the occurrence of any one of the \par
following events: \par
\par
(a) BLAKE shall fail to pay any principal and/or interest on the Note when \par
due in accordance with the terms of the Note; or\par
\par
(b) Any material representation or warranty made by BLAKE and/or MILLS, \par
respectively, as applicable and as more fully set forth in Section 5 below, \par
at any time prior to payment in full of the Note with respect to ownership \par
of the Collateral shall prove to have been incorrect in any material \par
respect on or as of the date made or deemed made; or \par
\par
(c) BLAKE and/or MILLS shall default in the observance or performance of \par
any covenant contained in this Agreement or the Note as the same may be \par
applicable to itself or himself respectively; or \par
\par
(d) PLEDGORS shall commence any case, proceeding or other action (A) under \par
any existing or future law of any jurisdiction, domestic or foreign, \par
relating to bankruptcy, insolvency, reorganization or relief of debtors, \par
seeking to have any order for relief entered with respect to it, or seeking \par
to adjudicate it a bankrupt or insolvent, or seeking reorganization, \par
arrangement, adjustment, winding-up, liquidation, dissolution, composition \par
or other relief with respect to it or its debts, or (B) seeking appointment \par
of a receiver, trustee, custodian, conservator or other similar official \par
for it or for all or any substantial part of its assets, or PLEDGORS shall \par
make a general assignment for the benefit of its creditors; or \par
\par
(e) There shall be commenced against PLEDGORS any case, proceeding or other \par
action of a nature referred to in clause (d) above which (A) results in the \par
entry of an order for relief or any such adjudication or appointment or (B) \par
remains undismissed, undischarged or unbonded for a period of 30 days; or \par
\par
(f) There shall be commenced against PLEDGORS any case, proceeding or other \par
action seeking issuance of a warrant of attachment, execution, distraint or \par
similar process against the Collateral which results in the entry of an \par
order for any such relief which shall not have been vacated, discharged, or \par
stayed or bonded pending appeal within 30 days from the entry thereof; or\par
\par
(g) PLEDGORS shall take any action in furtherance of, or indicating its \par
consent to, approval of, or acquiescence in, any of the acts set forth in \par
clause (d), (e), or (f) above; or \par
\par
(h) PLEDGORS shall generally not, or shall be unable to, or shall admit in \par
writing its inability to, pay its debts as they become due. \par
\par
1.3 "Obligations" shall mean the obligations of BLAKE and/or MILLS under \par
the Note and this Agreement that are specifically applicable to it or him, \par
respectively. \par
\par
1.4 "Pledged Securities" shall mean 500,000 shares of the common stock of \par
METALCLAD owned beneficially and of record by PLEDGORS as evidenced by \par
certificates numbered 815, 817, and 818 (the "Certificates"), copies of \par
which are attached hereto as Exhibit B. \par
\par
\par
2. PLEDGE. As security for the payment and performance in full of all of \par
the Obligations, PLEDGORS hereby grant and pledge to the AGENT, for the \par
benefit of METALCLAD, and hereby grant to the AGENT, a security interest in \par
the Collateral to the extent of their respective interests in the \par
Collateral. \par
\par
\par
3. DELIVERY OF COLLATERAL TO THE AGENT. The AGENT hereby acknowledges the \par
delivery of the Certificates to him, accompanied by stock powers or \par
instruments of transfer with medallion signature guarantees, as the case \par
may be, duly executed in blank by PLEDGORS (the "Stock Powers"). \par
\par
\par
4. CHANGE OF DENOMINATION. The AGENT shall have the right (in his sole and \par
absolute discretion) upon the occurrence and during the continuation of an \par
Event of Default, following the expiration of the applicable extension or \par
Cure Period as defined in Section 7.1 or 7.3 hereof, respectively, to \par
exchange the Certificates or other instruments or documents representing \par
the Collateral for certificates of smaller or larger denominations for any \par
purpose consistent with this Agreement and in accordance with the Uniform \par
Commercial Code. \par
\par
\par
5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF BLAKE. BLAKE and/or MILLS \par
hereby represent and warrant to, and/or covenant and agree with, METALCLAD \par
and the AGENT as follows: \par
\par
5.1 BLAKE and/or MILLS are respectively the record and beneficial owners of \par
the Pledged Securities and have the absolute right to pledge to the AGENT \par
and to grant to METALCLAD a security interest in the Collateral. \par
\par
5.2 To the best of PLEDGORS' knowledge, the execution, delivery and \par
performance of this Agreement and the Note, the pledge to the AGENT, and \par
the grant to METALCLAD of a security interest in the Collateral (i) will \par
not violate, or involve the AGENT or METALCLAD in a violation of, any \par
provision of any law or regulation or any order of any governmental \par
authority or any judgment of any court applicable to BLAKE or his \par
properties and assets, (ii) will not violate any agreement for borrowed \par
money, any bond, note or other similar instrument or any other material \par
agreement to which PLEDGORS are a party or by which PLEDGORS or any of \par
their property is bound or affected, (iii) will not be in conflict with, \par
result in a breach of or constitute (with due notice or lapse of time or \par
both) a default under any indenture, agreement for borrowed money, bond, \par
note, instrument or other agreement, and (iv) will not result in the \par
creation, or imposition of any lien, charge or encumbrance of any nature \par
whatsoever upon any property or assets of PLEDGORS other than pursuant to \par
this Agreement. \par
\par
5.3 This Agreement constitutes the legal, valid and binding obligation of \par
BLAKE and/or MILLS with respect to their respective securities pledged \par
hereunder, and is enforceable in accordance with its terms, subject (i) to \par
the enforcement of remedies, to applicable bankruptcy, reorganization, \par
insolvency and other laws affecting creditors rights generally and to \par
moratorium laws from time to time in effect, and (ii) to general equitable \par
principles. \par
\par
5.4 BLAKE and/or MILLS have good title to their respective securities \par
pledged hereunder. \par
\par
5.5 The Collateral is not subject to any other financial liens, security \par
interests or encumbrances. \par
\par
5.6 There is no material pending legal or governmental proceeding to which \par
PLEDGORS are a party or to which any of their properties is subject, which \par
proceeding will materially affect (i) PLEDGORS ability to perform their \par
obligations hereunder, or (ii) the Collateral. \par
\par
5.7 This Agreement creates in favor of METALCLAD a valid, binding and \par
enforceable security interest in, and lien upon, all right, title and \par
interest of BLAKE and/or MILLS, respectively, in the Collateral and, upon \par
delivery of the Collateral to the AGENT, METALCLAD will have a fully \par
perfected first and prior security interest in and lien upon all right, \par
title and interest of BLAKE and MILLS in the Collateral. \par
\par
5.8 BLAKE will not create or permit to exist any financial lien, security \par
interest or encumbrance on the Collateral except as permitted by this \par
Agreement. \par
\par
\par
6. VOTING RIGHTS; DIVIDENDS; ETC. \par
\par
6.1 PLEDGORS shall be entitled to exercise any and all voting and/or \par
consensual rights and powers accruing to owners of the Pledged Securities \par
or any part thereof for any purpose not inconsistent with the terms hereof, \par
at all times, except, provided, however, such rights shall cease with \par
respect to any Pledged Securities which are cancelled as expressly provided \par
in Section 7 below. \par
\par
6.2 Any dividends or distributions of any kind whatsoever (in cash or \par
otherwise) received by PLEDGORS, including any dividends resulting from a \par
subdivision, combination, or reclassification of the outstanding capital \par
stock of the issuer, which are received in exchange for the Pledged \par
Securities, or other Collateral or any part thereof or as a result of any \par
merger, consolidation, acquisition, or other exchange of assets to which \par
METALCLAD may be a party, or otherwise, shall be and become part of the \par
Collateral pledged hereunder. \par
\par
\par
7. MATURITY DATE; EXTENSION PERIOD; CURE PERIOD; LIMITED RECOURSE UPON \par
DEFAULT. \par
\par
7.1 At the Maturity of the Note (as defined therein), BLAKE shall have the \par
option of (i) paying the Obligations in cash; (ii) paying the principal \par
portion of the Obligations by requesting cancellation of all or part of the \par
Pledged Securities as provided in the Note; (iii) paying the Obligations in \par
part in cash, and in part by requesting cancellation of the Pledged \par
Securities as provided in the Note for the principal portion of the \par
Obligations; or (iv) giving METALCLAD notice that BLAKE is extending the \par
Maturity Date by 90 days (until September 8, 2002) (the "Extended Maturity \par
Date"), during which period simple interest shall accrue on the principal \par
obligation at the rate of 12% per annum.\par
\par
7.2 If, following the end of the Extended Maturity Date effected by BLAKE \par
pursuant to Subsection 7.1 above, an Event of Default shall have occurred \par
and be continuing, the AGENT, upon complying with Section 8 below, shall \par
have the right to deliver that number of Pledged Securities to METALCLAD's \par
stock transfer agent for cancellation as is necessary to pay the principal \par
balance then due under the Note. The number of shares of the Pledged \par
Securities subject to cancellation (those necessary to pay the principal \par
balance remaining under the Note) shall be derived by dividing the amount \par
of the principal balance due under the Note by $2.50 per share. If after \par
payment and/or cancellation of Pledged Securities to satisfy the principal \par
portion of the Obligations, Pledged Securities remain in escrow with the \par
AGENT, the remaining Pledged Securities may be used to satisfy the interest \par
portion of the Obligations at the rate of $2.50 per share. All Pledged \par
Securities remaining, if any, after satisfying the principal and interest \par
portions of the Obligations under the Note shall immediately be returned by \par
the AGENT and/or METALCLAD to BLAKE. \par
\par
7.3 In the Event of Default, METALCLAD shall provide PLEDGORS Notice of the \par
Event of Default pursuant to paragraph 12 hereof and of its intention, if \par
any, to seek its remedies pursuant to paragraph 8 hereof. Upon receipt of \par
Notice of an Event of Default, Pledgors shall have 90 days within which to \par
cure said default (the "Cure Period"), provided, however, that in no event \par
shall such Cure Period extend beyond the last date of the Extended Maturity \par
Date. \par
\par
7.4 With respect to the principal owing under the Note, the sole and \par
exclusive remedy for any Event of Default shall be to foreclose on the \par
Collateral as provided in this Agreement. Neither BLAKE nor MILLS shall be \par
personally obligated to repay any of such principal. However, BLAKE remains \par
personally obligated to pay any interest owing under the Note to the extent \par
the obligation to pay such interest has not been satisfied by the \par
cancellation of Pledged Securities pursuant to the terms of this Agreement \par
or the application of the proceeds of the sale of such Pledged Securities \par
to the Obligations. Such obligation of BLAKE to pay interest owing under \par
the Note shall be guaranteed by MILLS. \par
\par
\par
8. CANCELLATION NOTICE. The AGENT shall give 10 calendar days written \par
notice (the "Cancellation Notice") to BLAKE and MILLS of the AGENT's \par
intention to deliver any or all of the Pledged Securities to METALCLAD's \par
stock transfer agent for cancellation. The Cancellation Notice shall set \par
forth the number of shares of the Pledged Securities subject to \par
cancellation, the number of Pledged Securities that shall be returned to \par
BLAKE and/or MILLS pursuant to Section 7.2 above, the date on which the \par
Pledged Securities will be sent to METALCLAD's stock transfer agent, and \par
the calculation described in Section 7.2 above. \par
\par
\par
9. THE AGENT APPOINTED ATTORNEY-IN-FACT. Upon the occurrence and during the \par
continuance of an Event of Default, and following any applicable cure \par
period, PLEDGORS hereby appoint the AGENT as their attorney-in-fact for the \par
purpose of carrying out the provisions of this Agreement and the pledge of, \par
and the grant of a security interest in, the Collateral hereunder and the \par
taking of any action and the execution of any instrument which the AGENT \par
may deem necessary or advisable to accomplish the purposes hereof, which \par
appointment is irrevocable and coupled with an interest. Without limiting \par
the generality of the foregoing, the AGENT shall have the right and power \par
to deliver shares of the Pledged Securities to METALCLAD's stock transfer \par
agent and complete the Stock Power by inserting the date on which the \par
Pledged Securities are being cancelled in accordance with the terms of this \par
Agreement. \par
\par
\par
10. FURTHER ASSURANCES. Upon the request of the AGENT, PLEDGORS hereby \par
agrees duly to execute and deliver, or cause to be duly executed and \par
received, from time to time, at no cost or expense of PLEDGORS, such \par
further instruments as may be necessary or proper, in the reasonable \par
judgment of the AGENT, to carry out the provisions and purposes of this \par
Agreement and to do all things necessary or advisable, in the judgment of \par
the AGENT, to perfect and preserve the pledge and the security interests of \par
the AGENT hereunder and in the Collateral or any portion thereof. \par
\par
\par
11. RELEASE OF COLLATERAL. \par
\par
11.1 The pledge and grant of the security interest in all of the Collateral \par
hereunder shall terminate upon payment in full of the principal balance of \par
the Note together with any interest owing thereon. AGENT hereby \par
acknowledges that his authority is limited to disposition and cancellation \par
of the Collateral only to the extent of the Obligations. \par
\par
11.2 At such time as the pledge and security interest hereunder shall \par
terminate, the AGENT shall, if requested by BLAKE or MILLS, execute such \par
documents as BLAKE or MILLS may reasonably request, and assign and deliver \par
to BLAKE or MILLS, or to such person or persons as BLAKE or MILLS shall \par
designate, such of the Collateral (if any) as shall not have been cancelled \par
pursuant to the terms hereof, together with appropriate instruments of \par
reassignment and release and share certificates representing the Collateral \par
and any Stock Powers then remaining in the possession or under the control \par
of the AGENT. Any such reassignment shall be without recourse upon or \par
warranty by the AGENT (other than as to such Collateral being free of any \par
lien or encumbrance created by the AGENT). \par
\par
\par
12. NOTICES. Notices and other communications provided for herein shall be \par
in writing and shall be delivered by hand or shall be sent by facsimile \par
(and if sent by facsimile, shall be confirmed by registered mail, return \par
receipt requested, or by overnight mail or courier, postage and delivery \par
charges prepaid), to the addresses set forth in the introductory paragraph \par
to this Agreement. Whenever any notice is required to be given hereunder, \par
such notice shall be deemed given and such requirement satisfied only when \par
such notice is delivered or, if sent by telecopy, when received. Addresses \par
may be changed upon notice of such change given as provided in this Section \par
12. \par
\par
\par
13. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All covenants, agreements, \par
representations and warranties made herein and in any certificates \par
delivered pursuant hereto shall survive the loan by METALCLAD, and the \par
execution and delivery, of the Note pursuant to the Loan Agreement, and \par
shall continue in full force and effect until the payment in full of the \par
Obligations or the, conversion, redemption or prepayment of all of the \par
Note, regardless of the release of part or all of the Collateral pursuant \par
to the provisions of Section 11 hereof. \par
\par
\par
14. SUCCESSORS. Whenever in this Agreement any of the parties hereto is \par
referred to such reference shall be deemed to include the successors and \par
assigns of such party, and all covenants, promises and agreements by or on \par
behalf of the parties which are contained in this Agreement shall bind and \par
inure to the benefit of the successors and assigns of all other parties. \par
\par
\par
15. THE AGENT'S FEES. METALCLAD agrees to pay to the fees to the AGENT in \par
connection with this Agreement and the Note. \par
\par
\par
16. INDEMNIFICATION BY METALCLAD. METALCLAD hereby indemnifies and holds \par
harmless the AGENT from and against all claims, demands, losses, judgments, \par
liabilities, penalties and expenses (including, without limitation, \par
reasonable attorneys' fees and disbursements) of any nature whatsoever, \par
arising out of or related to this Agreement. This indemnity shall survive \par
the termination of this Agreement. \par
\par
\par
17. GOVERNING LAW. This Agreement shall be governed by, and construed in \par
accordance with, the laws of the State of Delaware. \par
\par
\par
18. FAILURE TO ACT NOT A WAIVER. Neither any failure to exercise, nor any \par
delay on the part of the AGENT, BLAKE or MILLS in exercising, any right, \par
power or privilege hereunder shall operate as a waiver thereof, nor shall a \par
single or partial exercise thereof preclude any other or further exercise \par
of any right, power or privilege. \par
\par
\par
19. MODIFICATION. No modification, amendment or waiver of any provision of \par
this Agreement, and no consent to any departure from the terms hereof, \par
shall in any event be effective unless the same shall be in writing and \par
signed by the parties hereto, and then such waiver or consent shall be \par
effective only in the specific instance and for the purpose for which \par
given. \par
\par
\par
20. SEVERABILITY. In case any one or more of the provisions contained in \par
this Agreement should be invalid, illegal or unenforceable in any respect, \par
the validity, legality and enforceability of the remaining provisions \par
contained herein shall not in any way be affected or impaired thereby. To \par
the extent permitted by applicable law, the parties hereby waive any \par
provision of law that may render any provision hereof invalid, illegal or \par
unenforceable in any respect. \par
\par
\par
21. COUNTERPARTS. This Agreement may be executed by the parties hereto in \par
separate counterparts, each of which, when so executed and delivered, shall \par
be an original, but all such counterparts shall together constitute one and \par
the same instrument, and all signatures need not appear on any one \par
counterpart. \par
\par
\par
22. HEADINGS. The headings and captions of this Agreement are for \par
convenience of reference only and shall not define, limit or otherwise \par
affect any of the terms or provisions hereof. \par
\par
\par
23. ARBITRATION. Any dispute relating to this Agreement shall be resolved \par
by final and binding arbitration conducted in accordance with the \par
commercial arbitration rules of the American Arbitration Association (the \par
"AAA"). A copy of any demand for arbitration shall be filed with the Los \par
Angeles, California office of the AAA; and such arbitration shall be \par
conducted in Orange County, California, unless all parties expressly agree \par
in writing otherwise. Any award or decision issued by the arbitrator shall \par
be a final and binding determination of the dispute without appeal or \par
review except as permitted by the laws of the State of California. In \par
addition to any damages awarded in any such arbitration, the prevailing \par
party therein shall be entitled to receive its reasonable attorneys' fees \par
and costs incurred in prosecuting such arbitration and enforcing any \par
judgment thereon. \par
\par
\par
24. WAIVER OF POTENTIAL CONFLICT OF INTEREST. The parties hereto \par
acknowledge that the AGENT is general counsel to METALCLAD. The parties \par
agree to waive any potential conflict of interest that may exist as a \par
result of such representation and acknowledge that they have consulted with \par
independent counsel with respect to such potential conflict of interest or \par
have waived such right. In the event of a dispute between PLEDGORS and \par
METALCLAD in connection with this Agreement, the AGENT agrees that neither \par
he nor any member of his firm will act as counsel to METALCLAD in \par
connection with the resolution of such dispute. \par
IN WITNESS WHEREOF, BLAKE, MILLS, METALCLAD, and the AGENT have caused this \par
Pledge Agreement to be executed by their respective duly authorized \par
officers, all as of day and year first above written. \par
\par
BLAKE: MILLS:\par
\par
BLAKE CAPITAL PARTNERS, LLC WAYNE W. MILLS\par
\par
\par
/s/ Wayne W. Mills /s/ Wayne W. Mills\par
------------------------ ------------------------\par
WAYNE W. MILLS, Manager WAYNE W. MILLS, Individually\par
\par
\par
METALCLAD: \par
METALCLAD CORPORATION \par
\par
By: /s/ Grant S. Kesler\par
--------------------------\par
Grant S. Kesler, President\par
\par
\par
AGENT: \par
\par
/s/ Bruce H. Haglund\par
------------------------------\par
BRUCE H. HAGLUND\par
\par
\par
\par
\par
\pard\qc EXHIBIT B\par
\par
NON-RECOURSE SECURED NOTE\par
\pard\par
\par
$1,250,000.00 December 10, 2001\par
\par
FOR VALUE RECEIVED, the undersigned, BLAKE CAPITAL PARTNERS, LLC, a \par
Minnesota limited liability company ("BLAKE"), hereby promises to pay to \par
METALCLAD CORPORATION, a Delaware corporation located at 2 Corporate Plaza, \par
Suite 125, Newport Beach, California 92660 or its registered assigns \par
("METALCLAD"), the principal sum of $1,250,000.00 on June 10, 2002 \par
("Maturity") with simple interest at the rate of 6% per annum, principal \par
and interest payable on Maturity. Wayne W. Mills ("MILLS"), an individual \par
residing at the 5020 Blake Road South, Edina, Minnesota, is a party hereto \par
solely for the purpose of guaranteeing payment by BLAKE of any interest \par
obligations due hereunder. \par
\par
BLAKE shall have the right to extend the Maturity date of this Note for a \par
period of 90 days pursuant to Section 7 of the Non-Recourse Security and \par
Pledge Agreement dated December 10, 2001, a copy of which is attached \par
hereto and incorporated herein by this reference as Exhibit "A" (the \par
"Security Agreement"). In the event BLAKE elects to extend the Maturity \par
date, during the pendency of the 90-day extension period, simple interest \par
shall be payable at 12% per annum. \par
\par
The principal amount hereof, together with accrued, unpaid interest hereon, \par
may be prepaid at anytime without penalty. In this regard BLAKE may direct \par
Bruce H. Haglund, as agent in accordance with terms of the Security \par
Agreement (the "Agent"), to sell all or any part of the Pledged Securities \par
(hereinafter defined) held in escrow and to use the proceeds therefrom to \par
reduce the principal balance of this Note or have the same held in escrow \par
pending further instructions from BLAKE. BLAKE may also instruct METALCLAD \par
through the Agent, to cancel any of the shares held in escrow at $2.50 per \par
share, or at a higher price at METALCLAD's discretion, and to have that \par
amount applied to the then remaining principal balance of the Note. \par
METALCLAD and the Agent shall immediately perform any of the foregoing \par
requests. The principal balance then due and owing under this Note shall \par
thereupon be reduced by an amount equal to the number of Pledged Securities \par
cancelled multiplied by $2.50 per share, or by such higher price, as \par
applicable. If, after applying this amount to the principal balance of the \par
Note and in the event the Note has otherwise been paid in full, there \par
remain any uncancelled Pledged Securities, the same shall be returned to \par
BLAKE or MILLS as required by the Security Agreement. \par
\par
Payment of principal and interest shall be made in lawful money of the \par
United States of America or pursuant to cancellation of the Pledged \par
Securities as provided for herein, at the principal office of METALCLAD at \par
Newport Beach, California, or at such other place as METALCLAD shall have \par
designated for such purpose in writing, or to the address or account \par
designated by METALCLAD for such purpose. \par
\par
The sole security for this Note is 500,000 shares of common stock of \par
METALCLAD pledged by BLAKE and MILLS as set forth in the Security Agreement \par
(the "Pledged Securities"). BLAKE shall have the right at any time to \par
request the Agent to sell any or all of the Pledged Securities, in the open \par
market or by private transaction, and to apply the proceeds of such sale, \par
less brokerage commissions and fees incurred in such sale ("Selling \par
Expenses"), to pay all or any portion of any amount due hereunder, and said \par
Agent shall immediately perform such request; provided, however, that none \par
of the Pledged Securities shall be sold for a price of less than $2.50 per \par
share net of Selling Expenses. \par
\par
This Note is delivered in and shall be construed and enforced in accordance \par
with and governed by the laws of the State of California. If any term, \par
provision, covenant, or condition of this Note is held to be invalid, void, \par
or unenforceable, the rest of the Note shall remain in full force and \par
effect and shall in no way be affected, impaired, or invalidated. BLAKE \par
hereby waives presentment, demand, dishonor or notice of dishonor, protest \par
or notice of protest, or other formality at maturity, at which time this \par
Note will be unconditionally due and payable in the manner and with the \par
effect provided in the Security Agreement and this Note. METALCLAD shall be \par
entitled to collect reasonable attorneys' fee from BLAKE, as well as other \par
costs and expenses reasonably incurred, in connection with any dispute \par
related to the payment due on this Note.\par
\par
This is a non-recourse note and the recourse of METALCLAD, with respect to \par
the principal amount owing under this Note, shall be limited to the \par
Collateral as provided in the Security Agreement. Neither BLAKE, nor MILLS, \par
shall be personally obligated to pay the principal amount owing under this \par
Note. However, BLAKE and MILLS shall be personally obligated to pay any \par
interest owing under the Note to the extent the obligation to pay such \par
interest has not been satisfied by the cancellation of Pledged Securities \par
pursuant to the terms of this Note or the Security Agreement or by the \par
application of the proceeds of the sale of such Pledged Securities to \par
BLAKE's obligations hereunder.\par
\par
IN WITNESS WHEREOF, BLAKE has executed and delivered this Note to METALCLAD \par
on December 10, 2001. \par
\par
\par
BLAKE: \par
\par
BLAKE CAPITAL PARTNERS, LLC \par
\par
/s/ Wayne W. Mills\par
---------------------------------\par
WAYNE W. MILLS, Manager\par
\par
\par
MILLS:\par
\par
Wayne W. Mills\par
\par
/s/ Wayne W. Mills\par
---------------------------------\par
Individually\par
\par
\par
\par
\par
\par
\par
\pard\qc EXHIBIT C\par
\par
\par
\par
\par
\par
\par
SHAREHOLDERS' AGREEMENT\par
\par
\par
dated as of November 15, 2001\par
\par
\par
\par
among\par
\par
\par
CATALYTIC SOLUTIONS, INC. \par
\par
\par
and\par
\par
\par
THE SHAREHOLDERS NAMED HEREIN\par
\par
\par
\par
\par
\par
\par
\par
\par
\par
Morgan, Lewis & Bockius LLP\par
New York, New York\par
\pard\par
\par
\par
\pard\qc TABLE OF CONTENTS\par
\pard\par
PAGE\par
ARTICLE I CERTAIN DEFINITIONS 1\par
1.1 Defined Terms 1\par
\par
ARTICLE II TRANSFERS OF RESTRICTED SECURITIES 4\par
2.1 Restrictions Generally; Securities Act 4\par
2.2 Legends 5\par
2.3 Transfers by Management Group Members 6\par
2.4 Management Group First Refusal Rights 6\par
2.4 Series C First Refusal Rights 7\par
\par
ARTICLE III TAG-ALONG RIGHTS; PREEMPTIVE RIGHTS 9\par
3.1 Tag-Along Rights 9\par
3.2 Pre-Emptive Right 10\par
\par
ARTICLE IV MISCELLANEOUS 12\par
4.1 Election of Directors 12\par
4.2 Series C Protective Provisions\tab 13\par
4.3 Governing Law 14\par
4.4 Waiver of Jury Trial 14\par
4.5 Entire Agreement; Amendments 15\par
4.6 Term 15\par
4.7 Inspection 15\par
4.8 Recapitalization, Exchanges, Etc., Affecting \par
Restricted Securities 15\par
4.9 Compliance with Regulations 15\par
4.10 Waiver 15\par
4.11 Successors and Assigns 15\par
4.12 Remedies 15\par
4.13 Invalid Provisions 16\par
4.14 Headings 16\par
4.15 Further Assurances 16\par
4.16 Gender 16\par
4.17 Counterparts 16\par
4.18 Notices 16\par
4.19 Joinder Agreement 17\par
4.20 Investors Rights Agreement 17\par
\par
\par
SHAREHOLDERS' AGREEMENT, dated as of November 15, 2001 (the "Effective \par
Date"), by and among Catalytic Solutions, Inc., a California corporation \par
(the "Company"), Stephen J. Golden ("Golden"), William R. Anderson \par
("Anderson"), Daniel P. McGuire ("McGuire") and the holders of the \par
Company's Series C Preferred Stock (the "Series C Shareholders").\par
RECITALS\par
\par
WHEREAS, each of the Management Group Members, as defined below, Series C \par
Shareholders and the Company desires to enter into this Agreement to \par
regulate certain aspects of their relationship and to provide for, among \par
other things, restrictions on the transfer or other disposition of \par
securities of the Company and matters relating to the corporate governance \par
of the Company.\par
\par
NOW, THEREFORE, for good and valuable consideration, the receipt and \par
sufficiency of which are hereby acknowledged, the parties hereto agree as \par
follows:\par
\par
\pard\qc ARTICLE I\par
CERTAIN DEFINITIONS\par
\pard\par
1.1\tab Defined Terms.\par
\par
(a) The following capitalized terms, when used in this Agreement, \par
have the respective meanings set forth below:\par
\par
"Affiliate" means, as applied to any Person, (a) any other \par
Person directly or indirectly controlling, controlled by or under common \par
control with, that Person, (b) any other Person that owns or controls (i) \par
10% or more of any class of equity securities of that Person or any of its \par
Affiliates or (ii) 10% or more of any class of equity securities (including \par
any equity securities issuable upon the exercise of any option or \par
convertible security) of that Person or any of its Affiliates, or (c) any \par
director, partner, officer, manager, agent, employee or relative of such \par
Person. For the purposes of this definition, "control" (including with \par
correlative meanings, the terms "controlling", "controlled by", and "under \par
common control with"), as applied to any Person, means the possession, \par
directly or indirectly, of the power to direct or cause the direction of \par
the management and policies of that Person, whether through ownership of \par
voting securities or by contract or otherwise.\par
\par
"Agreement" means this Shareholders' Agreement and the exhibits \par
hereto, as the same may be amended, modified, supplemented or restated from \par
time to time in accordance with the terms hereof.\par
\par
"Associate" means, with respect to any Person, (i) any \par
corporation or organization of which such Person is an officer or partner \par
or is, directly or indirectly, the beneficial owner of 10 percent or more \par
of any class of equity securities, (ii) any trust or other estate in which \par
such Person has a substantial beneficial interest or as to which such \par
Person serves as trustee or in a similar fiduciary capacity and (iii) any \par
relative or spouse of such Person, or any relative of such spouse, who has \par
the same home as such Person or who is a director or officer of such Person \par
or any of its parents or subsidiaries.\par
\par
"Board" means the Board of Directors of the Company.\par
\par
"Commission" means the Securities and Exchange Commission.\par
\par
"Common Stock" means the Company's common stock, no par value \par
per share, and any stock and other securities into which such Common Stock \par
may thereafter be changed or exchanged.\par
\par
"Diluted Basis" means, with respect to the calculation of the \par
number of shares of Common Stock, all shares of Common Stock outstanding at \par
the time of determination and all shares issuable upon the exercise of \par
outstanding Options, outstanding Warrants or other convertible or \par
exchangeable securities; provided, however, that with respect to any \par
Options, shares of Common Stock shall only be included in the determination \par
of Diluted Basis to the extent such Options are vested.\par
\par
"Exchange Act" means the Securities Exchange Act of 1934, as \par
amended, and the rules and regulations of the Commission thereunder.\par
\par
"Joinder Agreement" means a Joinder Agreement substantially in \par
the form attached hereto as Attachment 1.\par
\par
"Lien" means any lien, claim, option, charge, encumbrance, \par
security interest or other adverse claim of any kind.\par
\par
"Management Group Members" means Golden, Anderson and McGuire \par
and their respective Permitted Transferees, so long as any such Person \par
shall hold Restricted Securities.\par
\par
"Options" means options to purchase shares of Common Stock \par
issued pursuant to the Company's stock option plan or otherwise granted by \par
the Company (subject in each case to appropriate adjustment for stock \par
splits, stock dividends, recapitalizations and similar events).\par
\par
"Permitted Transferee" means:\par
\par
(i) as to any Management Group Member, the child, stepchild, \par
grandchild, parent, step-parent, grandparent, spouse, sibling, mother-in-\par
law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-\par
in-law (including by adoption) of such Management Group Member, or any \par
trust of which such Management Group Member is the trustee and which is \par
established solely for the benefit of any of the foregoing individuals and \par
whose terms are not inconsistent with the terms of this Agreement or any \par
partnership, the general partner(s) and limited partner(s) (if any) of \par
which are one or more Persons identified in this clause (i) or any \par
charitable foundation;\par
\par
(ii) as to any Management Group Member, any other Management \par
Group Member; any trust, a majority in interest of the beneficiaries of \par
which, or corporation or partnership or limited liability company, a \par
majority in interest of the shareholders, limited partners or members of \par
which, or partnership, the managing general partner of which, are (or is) \par
one (1) or more of the Persons identified in this clause (ii), the spouse \par
of any such Person and/or such Person's lineal descendants (including by \par
adoption); and\par
\par
(iii) as to any Person that becomes a Management Group Member \par
and that is not a natural Person, any Affiliate of such Management Group \par
Member.\par
\par
"Person" means an individual, partnership, corporation, limited \par
liability company or partnership, trust, unincorporated organization, joint \par
venture, government (or agency or political subdivision thereof) or any \par
other entity of any kind.\par
\par
"Preferred Stock" means the Company's outstanding Preferred \par
Stock as such class of security exists on the Effective Date and any other \par
stock and securities into which such Preferred Stock may thereafter be \par
changed or exchanged. As of the Effective Date, the Preferred Stock \par
includes the Series A Preferred, the Series B Preferred and the Series C \par
Preferred.\par
\par
"Pro Rata" means, with respect to one or more Series C \par
Shareholders, in proportion to the number of shares of Common Stock on a \par
Diluted Basis owned by such Series C Shareholder or Shareholders.\par
\par
"Qualified Public Offering" means an underwritten public \par
offering of the shares of Common Stock with an aggregate offering size of \par
$25 million at a public offering price per share that is not less than \par
$44.375.\par
\par
"Registration Rights Agreement" means the Registration Rights \par
Agreement, dated as of the date hereof, by and among the signatories \par
thereto, as the same may be amended, modified or supplemented from time to \par
time.\par
\par
"Restricted Securities" means the Common Stock, the Series A \par
Preferred, the Series B Preferred, Series C Preferred, the Options, the \par
Warrants and any other securities exercisable, exchangeable or convertible \par
for or into Common Stock and any securities issued with respect to any of \par
the foregoing as a result of any stock dividend, stock split, \par
reclassification, recapitalization, reorganization, merger, consolidation \par
or similar event or upon the conversion, exchange or exercise thereof.\par
\par
"Sale of the Company" means the sale of the Company (whether by \par
merger, consolidation, recapitalization, reorganization, sale of \par
securities, sale of assets or otherwise) in one transaction or series of \par
related transactions to a Person or Persons not an Affiliate, directly or \par
indirectly, of any Management Group Member pursuant to which such Person or \par
Persons (together with its Affiliates) acquires (i) securities representing \par
at least a majority of the voting power of all securities of the Company, \par
assuming the conversion, exchange or exercise of all securities \par
convertible, exchangeable or exercisable for or into voting securities, or \par
(ii) all or substantially all of the Company's assets on a consolidated \par
basis.\par
\par
"Securities Act" means the Securities Act of 1933, as amended, \par
and the rules and regulations of the Commission thereunder.\par
\par
"Series A Preferred" means the Series A Preferred Stock, no par \par
value per share, of the Company.\par
\par
"Series B Preferred" means the Series B Preferred Stock, no par \par
value per share, of the Company.\par
\par
"Series C Preferred" means the Series C Preferred Stock, no par \par
value per share, of the Company.\par
\par
"Shareholder" means each of the Series C Shareholders and the \par
Management Group Members for so long as any such Person shall hold \par
Restricted Securities.\par
\par
"Transfer" means, directly or indirectly, any sale, transfer, \par
assignment, hypothecation, pledge or other disposition of any Restricted \par
Securities or any interest therein.\par
\par
"Warrants" means warrants to purchase up to 18,055 shares of \par
Common Stock issued by the Company and warrants to purchase 70,143 shares \par
of Series C Preferred issuable upon the consummation of the transactions \par
contemplated by that Investment Agreement dated the date hereof between the \par
Company and the Investors named therein (the "Investment Agreement"). \par
\par
(b) Unless otherwise provided herein, all accounting terms used in \par
this Agreement shall be interpreted in accordance with United States of \par
America generally accepted accounting principles as in effect from time to \par
time, applied on a consistent basis.\par
\par
\pard\qc ARTICLE II\par
TRANSFERS OF RESTRICTED SECURITIES\par
\pard\par
2.1 Restrictions Generally; Securities Act. Each of the Series C \par
Shareholders and each Management Group Member agrees that, in addition to \par
the other requirements imposed herein relating to transfer, it will not \par
transfer any Restricted Securities except pursuant to (i) an effective \par
registration statement under the Securities Act; (ii) an exemption from the \par
registration requirements of the Securities Act and, if required by the \par
Company, receipt by the Company of an opinion of counsel to the Company; or \par
(iii) a no-action letter from the Commission addressed to the Company, to \par
the effect that no registration under the Securities Act is required \par
because of the availability of an exemption from registration under the \par
Securities Act. \par
\par
2.2 Legends. (a) Each certificate representing Restricted \par
Securities shall be endorsed with the following legend and such other \par
legends as may be required by applicable state securities laws:\par
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT \par
TO A STOCKHOLDERS' AGREEMENT, DATED AS OF NOVEMBER 15, 2001, \par
AS SUCH AGREEMENT MAY BE AMENDED, RESTATED OR MODIFIED FROM \par
TIME TO TIME, AND MAY NOT BE TRANSFERRED, SOLD, ASSIGNED, \par
PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT IN \par
ACCORDANCE WITH THE PROVISIONS THEREOF, AND ANY TRANSFEREE OF \par
THESE SECURITIES SHALL BE SUBJECT TO THE TERMS OF SUCH \par
AGREEMENT. COPIES OF THE FOREGOING AGREEMENT ARE MAINTAINED \par
WITH THE CORPORATE RECORDS OF THE ISSUER AND ARE AVAILABLE \par
FOR INSPECTION AT THE PRINCIPAL OFFICES OF THE ISSUER."\par
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN \par
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR \par
ANY STATE SECURITIES LAWS, AND MAY NOT BE OFFERED, SOLD OR \par
TRANSFERRED EXCEPT PURSUANT TO (I) AN EFFECTIVE REGISTRATION \par
STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND \par
IN COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS OR (II) \par
AN APPLICABLE EXEMPTION FROM REGISTRATION THEREUNDER AND \par
UNDER APPLICABLE STATE SECURITIES LAWS."\par
\par
(b) Any certificate issued at any time in exchange or substitution \par
for any certificate bearing such legends (except a new certificate issued \par
upon the completion of a Transfer pursuant to a registered public offering \par
under the Securities Act and made in accordance with the Securities Act) \par
shall also bear such legends, unless in the opinion of counsel for the \par
Company, the Restricted Securities represented thereby are no longer \par
subject to the provisions of this Agreement or the restrictions imposed \par
under the Securities Act or state securities laws, in which case the \par
applicable legend (or legends) may be removed. \par
\par
2.3 Transfers by Management Group Members. Each Management Group \par
Member severally agrees that it will not transfer any Restricted \par
Securities, except (i) to a Permitted Transferee or (ii) pursuant to the \par
terms relating to transfer as set forth in this Agreement. \par
\par
2.4 Management Group First Refusal Rights. \par
\par
(a) Except for Transfers \par
permitted pursuant to Section 2.3, if any Management Group Member (the \par
"Selling Management Group Member") proposes to transfer any Restricted \par
Securities of the Company (the "Offered Securities"), prior to any Transfer \par
such Management Group Member shall obtain a bona fide arm's-length written \par
offer (a "Bona Fide Offer") from an independent party unrelated to such \par
Management Group Member (the "Third Party") for the purchase of such \par
Offered Securities and shall give written notice of the proposed Transfer \par
(the "Notice of Intention") to the Company and to each of the Series C \par
Shareholders (the "Prospective Buyers"), accompanied by a copy of the Bona \par
Fide Offer and evidence demonstrating to the reasonable satisfaction of the \par
Company the Third Party's ability to consummate the purchase of the Offered \par
Securities in accordance with the terms of the Bona Fide Offer. The Bona \par
Fide Offer shall identify such Third Party, the price per share (which \par
shall be in cash or notes) being offered by the Third Party for the Offered \par
Securities (the "Offer Price") and all other material terms of the Bona \par
Fide Offer.\par
\par
(b) For a period of thirty (30) days following its receipt of the \par
Notice of Intention, the Company shall have an irrevocable right to \par
purchase all or any portion of the Offered Securities at the Offer Price, \par
exercisable by delivery of notice (the "Company Notice") to the Selling \par
Management Group Member, with a copy to each of the Prospective Buyers, \par
specifying the number of Offered Securities with respect to which the \par
Company is exercising its option. \par
\par
(c) For a period of thirty (30) days following its receipt of the \par
Company Notice or, if no Company Notice is so received, for a period of \par
sixty (60) days following its receipt of the Notice of Intention, each of \par
the Prospective Buyers shall have the irrevocable right to purchase, upon \par
such terms and conditions as may be individually negotiated with the Third \par
Party, any or all of the Offered Securities which the Company has elected \par
not to purchase, Pro Rata among the Prospective Buyers; provided, however, \par
that in the event any Prospective Buyer does not purchase any or all of its \par
Pro Rata portion of the Offered Securities, the other Prospective Buyers \par
shall have the right to purchase such portion, Pro Rata, until all of such \par
Offered Securities are purchased or until such other Prospective Buyers do \par
not desire to purchase any more Offered Securities. The right of the \par
Prospective Buyers pursuant to this Section 2.4(c) shall be exercisable by \par
delivery of a notice (the "Prospective Buyer Notice") setting forth the \par
maximum number of Offered Securities that such Prospective Buyer wishes to \par
purchase, including any number which would be allocated to such Prospective \par
Buyer in the event any other Prospective Buyer does not purchase all or any \par
portion of its Pro Rata portion, to the Selling Management Group Member and \par
the Company and shall expire if unexercised within such 30-day or 60-day \par
period, as applicable. \par
\par
(d) Notwithstanding the foregoing provisions of this Section 2.4, \par
unless the Selling Management Group Member shall have consented to the \par
purchase of less than all of the Offered Securities, neither the Company \par
nor any Prospective Buyer may purchase any Offered Securities unless all of \par
the Offered Securities are to be purchased (whether by the Company or the \par
Prospective Buyers, or any combination thereof).\par
\par
(e) If all notices required to be given pursuant to this Section 2.4 \par
have been duly given, and the Company and the Prospective Buyers determine \par
not to exercise their respective options to purchase the Offered Securities \par
or determine, with the consent of the Selling Management Group Member, to \par
exercise their options to purchase less than all of the Offered Securities, \par
then the Selling Management Group Member shall have the right, for a period \par
of sixty (60) days from the earlier of (i) the expiration of the last \par
applicable option period pursuant to this Section 2.4 or (ii) the date on \par
which such Selling Management Group Member receives notice from the Company \par
and the Prospective Buyers that they will not exercise in whole or in part \par
the options granted pursuant to this Section 2.4, to sell to the Third \par
Party the Offered Securities remaining unsold under this Section 2.4 at a \par
price not less than the Offer Price and on terms no more favorable to the \par
Third Party than the other terms set forth in the Bona Fide Offer; \par
provided, that prior to any such Transfer to the Third Party, the Third \par
Party executes and delivers to the Company, for the benefit of the Company, \par
the Management Group Members and all Series C Shareholders, a Joinder \par
Agreement and thereby becomes a party to this Agreement.\par
\par
(f) The closing of any purchase and sale pursuant to this Section 2.4 \par
(other than to the Third Party) shall take place on such date, not later \par
than fifteen (15) business days after the later of delivery to the Selling \par
Management Group Member of (i) the Company Notice and (ii) the Prospective \par
Buyer Notice, as the Company and the Selling Management Group Member shall \par
select. At the closing of such purchase and sale, the Selling Management \par
Group Member shall deliver certificates evidencing the Offered Securities \par
being sold duly endorsed, or accompanied by written instruments of transfer \par
in form satisfactory to the purchasers thereof, duly executed by the \par
Selling Management Group Member, free and clear of any Liens, against \par
delivery of the Offer Price therefor.\par
\par
(g) In the event that the Prospective Buyers and the Company do not \par
exercise their options to purchase any or all of the Offered Securities, \par
and the Selling Management Group Member shall not have sold the remaining \par
Offered Securities to the Third Party for any reason before the expiration \par
of the 60-day period described in Section 2.4(e), then such Selling \par
Management Group Member shall not give another Notice of Intention pursuant \par
to this Section 2.4 for the period of 90 calendar days from the last day of \par
such 60-day period.\par
\par
2.5 Series C First Refusal Rights. \par
\par
(a) If a holder of Series C Preferred (the "Selling Series C Member") \par
proposes to transfer any Restricted Securities of the Company to (i) a \par
customer of the Company, (ii) to any entity which is engaged in the \par
business of selling, promoting, manufacturing and/or developing catalytic \par
coatings (a "Competitor") or (iii) to any Affiliate of a Competitor or \par
customer of the Company (the "Series C Offered Securities"), prior to any \par
Transfer such Selling Series C Member shall obtain a bona fide arm's-length \par
written offer (a "Series C Bona Fide Offer") from an independent party \par
unrelated to such Series C Member (the "Series C Third Party") for the \par
purchase of such Series C Offered Securities and shall give written notice \par
of the proposed Transfer (the "Series C Notice of Intention") to the \par
Company and to each of the Series C Shareholders (the "Series C Prospective \par
Buyers"), accompanied by a copy of the Series C Bona Fide Offer and \par
evidence demonstrating to the reasonable satisfaction of the Company the \par
Series C Third Party's ability to consummate the purchase of the Series C \par
Offered Securities in accordance with the terms of the Series C Bona Fide \par
Offer. The Series C Bona Fide Offer shall identify such Series C Third \par
Party, the price per share (which shall be in cash or notes) being offered \par
by the Series C Third Party for the Series C Offered Securities (the \par
"Series C Offer Price") and all other material terms of the Series C Bona \par
Fide Offer. For purposes of this Section 2.5(a) only, the Series C Offered \par
Securities shall not include any proposed transfer of Restricted Securities \par
by an original holder of Series C Preferred Stock to an Affiliate of such \par
original holder of Series C Preferred Stock.\par
\par
(b) For a period of thirty (30) days following its receipt of the \par
Series C Notice of Intention, the Company shall have an irrevocable right \par
to purchase all or any portion of the Offered Securities at the Offer \par
Price, exercisable by delivery of notice (the "Series C Company Notice") to \par
the Selling Series C Member, with a copy to each of the Series C \par
Prospective Buyers, specifying the number of Series C Offered Securities \par
with respect to which the Company is exercising its option.\par
\par
(c) For a period of thirty (30) days following its receipt of the \par
Series C Company Notice or, if no Series C Company Notice is so received, \par
for a period of sixty (60) days following its receipt of the Series C \par
Notice of Intention, each of the Series C Prospective Buyers shall have the \par
irrevocable right to purchase, upon such terms and conditions as may be \par
individually negotiated with the Series C Third Party, any or all of the \par
Series C Offered Securities which the Company has elected not to purchase, \par
Pro Rata among the Series C Prospective Buyers; provided, however, that in \par
the event any Series C Prospective Buyer does not purchase any or all of \par
its Pro Rata portion of the Series C Offered Securities, the other Series C \par
Prospective Buyers shall have the right to purchase such portion, Pro Rata, \par
until all of such Series C Offered Securities are purchased or until such \par
other Series C Prospective Buyers do not desire to purchase any more Series \par
C Offered Securities. The right of the Series C Prospective Buyers \par
pursuant to this Section 2.5(c) shall be exercisable by delivery of a \par
notice (the "Series C Prospective Buyer Notice") setting forth the maximum \par
number of Series C Offered Securities that such Series C Prospective Buyer \par
wishes to purchase, including any number which would be allocated to such \par
Series C Prospective Buyer in the event any other Series C Prospective \par
Buyer does not purchase all or any portion of its Pro Rata portion, to the \par
Selling Series C Member and the Company and shall expire if unexercised \par
within such 30-day or 60-day period, as applicable. \par
\par
(d) Notwithstanding the foregoing provisions of this Section 2.5, \par
unless the Selling Series C Member shall have consented to the purchase of \par
less than all of the Series C Offered Securities, no Series C Prospective \par
Buyer may purchase any Series C Offered Securities unless all of the Series \par
C Offered Securities are to be purchased (whether by the Company or the \par
Series C Prospective Buyer, or any combination thereof).\par
\par
(e) If all notices required to be given pursuant to this Section 2.5 \par
have been duly given, and the Company and the Series C Prospective Buyers \par
determine not to exercise their options to purchase the Series C Offered \par
Securities or determine, with the consent of the Selling Series C Member, \par
to exercise their options to purchase less than all of the Series C Offered \par
Securities, then the Selling Series C Member shall have the right, for a \par
period of sixty (60) days from the earlier of (i) the expiration of the \par
last applicable option period pursuant to this Section 2.5 or (ii) the date \par
on which such Selling Series C Member receives notice from the Company and \par
the Series C Prospective Buyers that they will not exercise in whole or in \par
part the options granted pursuant to this Section 2.5, to sell to the \par
Series C Third Party the Series C Offered Securities remaining unsold under \par
this Section 2.5 at a price not less than the Series C Offer Price and on \par
terms no more favorable to the Series C Third Party than the other terms \par
set forth in the Series C Bona Fide Offer; provided, that prior to any such \par
Transfer to the Series C Third Party, the Series C Third Party executes and \par
delivers to the Company, for the benefit of the Company, the Selling Series \par
C Member and all Series C Shareholders, a Joinder Agreement and thereby \par
becomes a party to this Agreement.\par
\par
(f) The closing of any purchase and sale pursuant to this Section 2.5 \par
(other than to the Series C Third Party) shall take place on such date, not \par
later than fifteen (15) business days after the later of delivery to the \par
Selling Series C Member of the (i) the Series C Company Notice and (ii) the \par
Series C Prospective Buyer Notice, as the Company and the Selling Series C \par
Member shall select. At the closing of such purchase and sale, the Selling \par
Series C Member shall deliver certificates evidencing the Series C Offered \par
Securities being sold duly endorsed, or accompanied by written instruments \par
of transfer in form satisfactory to the purchasers thereof, duly executed \par
by the Selling Series C Member, free and clear of any Liens, against \par
delivery of the Series C Offer Price therefor.\par
\par
(g) In the event that the Series C Prospective Buyers and the Company \par
do not exercise their options to purchase any or all of the Series C \par
Offered Securities, and the Selling Series C Member shall not have sold the \par
remaining Series C Offered Securities to the Series C Third Party for any \par
reason before the expiration of the 30-day period described in Section \par
2.5(e), then such Selling Series C Member shall not give another Series C \par
Notice of Intention pursuant to this Section 2.5 for a period of 90 \par
calendar days from the last day of such 60-day period.\par
\par
\pard\qc ARTICLE III\par
TAG-ALONG RIGHTS; PREEMPTIVE RIGHTS\par
\par
\pard 3.1 Management Tag-Along Rights. \par
\par
(a) If any Management Group Member (the "Transferor") proposes to \par
Transfer, other than to a Permitted Transferee, an amount of Restricted \par
Securities of the Company ("Transferor Shares") that would result in \par
proceeds to the Transferor of at least $100,000, to one or more Third \par
Parties (each such Person, a "Buyer"), then, as a condition to such\par
Transfer, the Transferor shall cause the Buyer to include an offer (the \par
"Article III Offer") to each Series C Shareholder (collectively, the \par
"Offerees"), to purchase from each Offeree, at the option of each Offeree, \par
that number of shares of Restricted Securities determined in accordance \par
with Section 3.1(b), on the same terms and conditions as are applicable \par
to the Transferor Shares (which shall include, without limitation, any
consideration to be received by the Transferor in the form of bonuses, \par
consulting fees, non-competition payments and other payments which are, \par
in the reasonable belief of the majority of the Series C Shareholders, \par
designed as additional consideration for the shares). The Transferor \par
shall provide a written notice (the "Inclusion Notice") of the \par
Article III Offer to each Offeree, which may accept the Article III Offer \par
by providing a written notice of acceptance of the Article III Offer to the \par
Transferor within forty (40) days of delivery of the Inclusion Notice.\par
\par
(b) Each Offeree shall have the right (an "Inclusion Right") to sell \par
pursuant to the Article III Offer up to that percentage of its Restricted \par
Securities, on a Diluted Basis, as equals the percentage of Restricted \par
Securities, on a Diluted Basis, proposed to be sold by the Transferor (the \par
shares elected to be sold, being the "Inclusion Shares"); provided that if \par
the Buyer does not agree to purchase all of the Transferor Shares and the \par
Inclusion Shares, then (i) the number of Transferor Shares shall be reduced \par
by the amount of Restricted Securities sought to be sold by the Offerees \par
pursuant to their exercise of the Inclusion Right; and (ii) if necessary, \par
the Inclusion Shares shall be included on a Pro Rata basis among the \par
Offerees in accordance with the number of Inclusion Shares held by each \par
Offeree. \par
\par
(c) The Buyer shall have 70 days, commencing on the 20th day after \par
delivery of the Inclusion Notice, in which to purchase from the Transferor \par
and the Offerees, the number of Restricted Securities with respect to which \par
the Inclusion Right is exercised and the number of Transferor Shares. The \par
material terms of such sale, including, without limitation, price and form \par
of consideration, shall be as set forth in the Inclusion Notice. If at the \par
end of such 70-day period the Buyer has not completed the purchase of the \par
Transferor Shares and the Offerees' Restricted Securities (if any) proposed \par
to be sold, the provisions of this Section 3.1 shall continue to be in \par
effect.\par
\par
(d) Upon the consummation of the sale or other disposition of the \par
Transferor Shares and Restricted Securities of the Offerees to the Buyer \par
pursuant to the Article III Offer, the Buyer shall pay to the Transferor \par
and each of the Offerees their respective portions of the sales price of \par
the Restricted Securities sold or otherwise disposed of pursuant thereto, \par
and shall furnish such other evidence of the completion of such sale or \par
other disposition and the terms thereof as may be reasonably requested by \par
the Offerees.\par
\par
3.2 Pre-Emptive Right. \par
\par
(a) Grant. The Company hereby grants to each holder of shares \par
of Series C Preferred the preemptive right to purchase, on the same terms \par
and conditions and for the same price as the New Securities (as defined \par
below) are issued to other persons by the Company, that Pro Rata portion of \par
any New Securities which shall be equal to that number of New Securities as \par
is equal to the product obtained by multiplying (a) the total number of New \par
Securities to be issued by (b) the quotient obtained by dividing (i) total \par
number of shares of Common Stock on a Diluted Basis held of record by the \par
shareholder by (ii) the total number of shares of Common Stock on a Diluted \par
Basis of the Company then outstanding.\par
\par
(b) Notice. The Company shall give to each holder of Series C \par
Preferred Stock written notice of the proposed offer to sell and issue any \par
New Securities, which written notice shall contain the terms of such \par
proposed sale and issuance in reasonable detail. The Company shall deliver \par
such notice to the Series C Shareholder at least 60 days prior to the first \par
date which such New Securities are proposed to be sold and issued to any \par
third party. The Series C Shareholders shall have the right to exercise \par
the right granted pursuant to paragraph 3.2(a) above by giving written \par
notice thereof to the Company within 60 days after the Company's delivery \par
of the notice, specifying the amount of New Securities which the Series C \par
Shareholder desires to purchase. In the event the Series C Shareholder \par
does not give notice of exercise within such 60 day period, the Company may \par
sell and issue New Securities without regard to the Series C Shareholder's \par
rights under this section 3.2(b); provided that the failure of the Series C \par
Shareholder to exercise the right to purchase with respect to any \par
particular sale and issuance of New Securities shall not affect the Series \par
C Shareholder's right to purchase New Securities in any subsequent sale and \par
issuance by the Company.\par
\par
(c) New Securities. The term "New Securities" as used in this \par
Section 3.2 means shares of Common Stock or any rights, options, warrants \par
or other securities (including debt securities) exercisable or exchangeable \par
for or convertible into shares of Common Stock which the Company intends to \par
sell or issue after the Effective Date, except for such securities which \par
are issued or issuable:\par
\par
1. in connection with an underwritten public offering;\par
2. upon conversion of shares of Preferred Stock or other \par
securities convertible into or exchangeable for Common Stock;\par
3. as dividends or distributions on Preferred Stock or Common \par
Stock;\par
4. to banks, equipment financing companies or equipment \par
lessors (not to exceed in the aggregate more than 169,000 shares of Common \par
Stock); \par
5. in connection with strategic alliances, business contracts \par
or similar transactions approved by no less than six-sevenths of the \par
Company's Board to induce such business partner to use, promote or assist \par
the Company in the development of its products; \par
6. in connection with any stock split, stock dividend, \par
reclassification, recapitalization or similar event;\par
7. in connection with a business acquisition by the Company, \par
whether by merger, consolidation, purchase of assets, sale or exchange of \par
stock or otherwise (not to exceed in the aggregate 5% of the then \par
outstanding equity of the Company without the prior consent of the holders \par
of at least 66 2/3% of the Series C Preferred); or\par
8. to current or prospective officers, directors or employees \par
of or consultants to the Company or its affiliates, including the issuance \par
or granting of options or rights to purchase Common Stock to such officers, \par
directors, employees or consultants (not to exceed in the aggregate 7% of \par
the then outstanding equity of the Company without the prior consent of the \par
holders of at least 66 2/3% of the Series C Preferred).\par
\par
Notwithstanding any of the exceptions stated above, the Series C \par
Shareholders shall have a preemptive right pursuant to this Section 3.2(a) \par
in any situation in which the holders of the Series A Preferred Stock have \par
preemptive rights under the Company's Amended and Restated Articles of \par
Incorporation.\par
\par
The Company may impose any conditions on any sale and issuance of \par
New Securities to which the right granted by Section 3.2(a) above applies \par
which the Company reasonably believes are necessary to assure compliance \par
with the applicable federal and state securities laws, including, without \par
limitation, requiring that all purchasers and offerees of the New \par
Securities be "accredited investors" (as defined in Regulation D \par
promulgated under the Securities Act).\par
\par
(d) Limitation. Notwithstanding anything in this Agreement to the \par
contrary, the Series C Shareholder shall not have a pre-emptive right under \par
this Section 3.2 to participate in any sale and issuance of any New \par
Securities by the Company if (i) the Company's sale and issuance of the New \par
Securities to the Series C Shareholder would not comply with all applicable \par
federal and state securities laws, other than as a result of a voluntary \par
act by the Company which can be brought into compliance without undue \par
expense to the Company; or (ii) the Series C Shareholder fails to comply \par
with any terms and conditions of its participation which are reasonably \par
imposed by the Company and which apply generally to all persons \par
participating in the sale and issuance of such New Securities.\par
\par
\pard\qc ARTICLE IV\par
MISCELLANEOUS\par
\par
4.1 Election of Directors. For so long as Cinergy Ventures II, LLC \par
owns 281,690 shares of Series C Preferred, subject to equitable adjustment \par
for stock splits, stock dividends or the like, each of the Series C \par
Shareholders hereby agrees that one of the two members of the Company's \par
Board of Directors to be elected by holders of the Series C Preferred, as \par
provided by the Company's Articles of Incorporation, shall be designated by \par
Cinergy Ventures II, LLC. The Series C Shareholders further agree that the \par
second member of the Company's Board of Directors to be elected by holders \par
of the Series C Preferred, as provided by the Company's Articles of \par
Incorporation, shall be designated by Cinergy Ventures II, LLC until the \par
Company's annual meeting of shareholders in 2003. Thereafter, the second \par
member of the Company's Board of Directors to be elected by holders of the \par
Series C Preferred, as provided by the Company's Articles of Incorporation, \par
shall be elected by a majority of the holders of Series C Preferred, voting \par
together as a class. In addition, a vacancy in the directorship designated \par
by Cinergy Ventures II, LLC shall be filled only by the designee of Cinergy \par
Ventures II, LLC. \par
\par
4.2 Series C Protective Provisions. Except as otherwise required by \par
law, so long as 680,000 shares of Series C Preferred are outstanding, \par
subject to equitable adjustment for any stock splits, stock dividends or \par
the like, the Company shall not, without first obtaining the approval (by \par
vote or written consent, as provided by law) of the holders of at least a \par
majority of the outstanding shares of Series C Preferred, do any of the \par
following: \par
\par
(a) redeem or repurchase any outstanding shares of Common Stock \par
or Preferred Stock, or securities convertible or exchangeable into, or \par
exercisable for, Common Stock or Preferred Stock, other than (i) pursuant \par
to agreements between the Company and any of its employees providing the \par
Company with the right of such repurchase at original cost upon any \par
termination of employment or (ii) the redemption of the Series C Preferred \par
pursuant to Section 7 of Article IV of the Company's Amended and Restated \par
Articles of Incorporation.\par
\par
(b) authorize, create or issue any new or existing shares of any \par
class or classes or series of capital stock having any preference or \par
priority as to dividends or amounts distributable upon dissolution, \par
liquidation or winding up of the Company superior to or on a parity with \par
any such preference or priority of the Series C Preferred, or authorize or \par
issue any shares of stock of any class or any bonds, debentures, notes or \par
other obligations convertible into or exercisable or exchangeable for, or \par
having option rights to purchase, any shares of stock of the Company having \par
any preference or priority as to dividends or amounts distributable upon \par
dissolution, liquidation or winding up of the Company superior to or on a \par
parity with any such preference or priority of the Series C Preferred;\par
\par
(c) reclassify any Common Stock into shares having any \par
preference or priority as to dividends or amounts distributable upon \par
dissolution, liquidation or winding up of the Company superior to or on a \par
parity with any such preference or priority of the Preferred Stock; \par
\par
(d) amend or repeal any provision of, or add any provision to, \par
the Company's Amended and Restated Articles of Incorporation or Bylaws; \par
\par
(e) effect (i) any voluntary or involuntary liquidation, \par
dissolution or winding up of the Company, (ii) a merger, consolidation or \par
other reorganization of the Company into or with another corporation which \par
results in the Company's shareholders immediately prior to such transaction \par
not holding (by virtue of such shares or securities issued solely with \par
respect thereto) at least 50% of the voting power of the surviving or \par
continuing entity following such transaction or (iii) a sale of all or \par
substantially all of the assets of the Company;\par
\par
(f) dissolve or liquidate the Company pursuant to Section 7 of \par
the Bankruptcy Code; \par
\par
(g) increase or decrease the authorized number of directors \par
constituting the Board or changing the requirements for a director; or\par
\par
(h) declare a dividend or extraordinary dividend with regard to \par
any security.\par
\par
4.3 Governing Law; Venue; Disputes. This Agreement shall be governed \par
by and construed in accordance with the domestic laws of the State of New \par
York, notwithstanding any conflict of law provision to the contrary; \par
provided, however, that any matters herein within the purview of the \par
California Corporations Code shall be governed by the California \par
Corporations Code. With respect to any disputes arising out of or related \par
to this Agreement, the parties consent to the exclusive jurisdiction of, \par
and venue in, the federal courts within the State of New York, County of \par
New York. In the event of any dispute between the Company and/or any of the \par
other parties hereto arising under this Agreement, the Registration Rights \par
Agreement, the Investment Agreement or the Company's Articles of \par
Incorporation, as amended, the prevailing party in any litigation shall be \par
entitled to payment of its attorneys' fees and other costs and expenses \par
incurred in connection with such dispute.\par
\par
4.4 Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY WAIVES \par
ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED \par
UPON OR ARISING OUT OF THIS AGREEMENT. EACH OF THE PARTIES HERETO ALSO \par
WAIVES ANY BOND OR SURETY OR SECURITY UPON SUCH BOND WHICH MIGHT, BUT FOR \par
THIS WAIVER, BE REQUIRED OF SUCH PARTY. THE SCOPE OF THIS WAIVER IS \par
INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED \par
IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS AGREEMENT, \par
INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL \par
OTHER COMMON LAW AND STATUTORY CLAIMS. EACH OF THE PARTIES HERETO FURTHER \par
WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL \par
COUNSEL, AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS \par
FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, \par
MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THIS \par
WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR \par
MODIFICATIONS TO THIS AGREEMENT. IN THE EVENT OF LITIGATION, THIS \par
AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.\par
\par
4.5 Entire Agreement; Amendments. This Agreement constitutes the \par
entire agreement of the parties with respect to the subject matter hereof \par
and may be amended, modified or supplemented only by a written instrument \par
duly executed by the parties hereto.\par
\par
4.6 Term. This Agreement shall terminate upon the earliest to occur \par
of (i) the initial public offering of Common Stock of the Company; (ii) a \par
Sale of the Company and (iii) twenty-five years from the date hereof.\par
\par
4.7 Inspection. For so long as this Agreement shall remain in \par
effect, this Agreement shall be made available for inspection by any holder \par
of Restricted Securities at the principal executive offices of the Company.\par
\par
4.8 Recapitalization, Exchanges, Etc., Affecting Restricted \par
Securities. The provisions of this Agreement shall apply, to the full \par
extent set forth herein with respect to the Restricted Securities, to any \par
and all shares of the capital stock of the Company or any successor or \par
assign of the Company (whether by merger, consolidation, sale of assets, or \par
otherwise, including shares issued by a parent corporation in connection \par
with a triangular merger) which may be issued in respect of, in exchange \par
for, or in substitution of, Restricted Securities and shall be \par
appropriately adjusted for any stock dividends, splits, reverse splits, \par
combinations, reclassifications and the like occurring after the date \par
hereof.\par
\par
4.9 Compliance with Regulations. Whenever a party is entitled to \par
purchase Restricted Securities pursuant to the provisions of this \par
Agreement, any closing time period specified in such provision shall be \par
tolled until any necessary governmental approval is received including, \par
without limitation, approval under the Hart-Scott-Rodino Antitrust \par
Improvements Act of 1976.\par
\par
4.10 Waiver. No waiver by any party of any term or condition of this \par
Agreement, in one or more instances, shall be valid unless in writing, and \par
no such waiver shall be deemed to be construed as a waiver of any \par
subsequent breach or default of the same or similar nature.\par
\par
4.11 Successors and Assigns. Except as otherwise expressly provided \par
herein, this Agreement shall be binding upon and inure to the benefit of \par
the parties hereto and their respective heirs, personal representatives, \par
successors and permitted assigns (including, without limitation, \par
transferees of Restricted Securities); provided, however, that (i) nothing \par
contained herein shall be construed as granting any Shareholder the right \par
to transfer any Restricted Securities except in accordance with this \par
Agreement, (ii) any Third Party that acquires Restricted Securities in \par
accordance with this Agreement shall be bound by the provisions of this \par
Agreement and (iii) only the provisions of this Agreement that are \par
expressly applicable to such type of Shareholder shall be applicable to \par
such Shareholder and to the Restricted Securities in the hands of such \par
Shareholder.\par
\par
4.12 Remedies. In the event of a breach by any party to this \par
Agreement of its obligations under this Agreement, any party injured by \par
such breach, in addition to being entitled to exercise all rights granted \par
by law, including recovery of damages and costs (including reasonable \par
attorneys' fees), will be entitled to specific performance of its rights \par
under this Agreement. The parties agree that the provisions of this \par
Agreement shall be specifically enforceable, it being agreed by the parties \par
that the remedy at law, including monetary damages, for breach of any such \par
provision will be inadequate compensation for any loss and that any defense \par
in any action for specific performance that a remedy at law would be \par
adequate is waived.\par
\par
4.13 Invalid Provisions. If any provision of this Agreement is held \par
to be illegal, invalid or unenforceable under any present or future law, \par
and if the rights or obligations of any party hereto under this Agreement \par
will not be materially and adversely affected thereby, (i) such provision \par
will be fully severable, (ii) this Agreement will be construed and enforced \par
as if such illegal, invalid or unenforceable provision had never comprised \par
a part hereof, (iii) the remaining provisions of this Agreement will remain \par
in full force and effect and will not be affected by the illegal, invalid \par
or unenforceable provision or by its severance herefrom and (iv) in lieu of \par
such illegal, invalid or unenforceable provision, there will be added \par
automatically as a part of this Agreement a legal, valid and enforceable \par
provision as similar in terms to such illegal, invalid or unenforceable \par
provision as may be possible.\par
\par
4.14 Headings. The headings used in this Agreement have been inserted \par
for convenience of reference only and do not define or limit the provisions \par
hereof.\par
\par
4.15 Further Assurances. Each party hereto shall cooperate and shall \par
take such further action and shall execute and deliver such further \par
documents as may be reasonably requested by any other party in order to \par
carry out the provisions and purposes of this Agreement.\par
\par
4.16 Gender. Whenever the pronouns "he" or "his" are used herein they \par
shall also be deemed to mean "she" or "hers" or "it" or "its" whenever \par
applicable. Words in the singular shall be read and construed as though in \par
the plural and words in the plural shall be construed as though in the \par
singular in all cases where they would so apply.\par
\par
4.17 Counterparts. This Agreement may be executed in any number of \par
counterparts, each of which will be deemed an original, but all of which \par
together will constitute one and the same instrument.\par
\par
4.18 Notices. All notices, requests and other communications \par
hereunder must be in writing and will be deemed to have been duly given \par
only if delivered personally against written receipt or by facsimile \par
transmission or mailed by prepaid first class mail, return receipt \par
requested, or mailed by overnight courier prepaid to the parties at the \par
following addresses or facsimile numbers:\par
\par
(i) If to any Series C Investor: Such Investor's address set \par
forth on the Schedule of Investors to the Investment Agreement.\par
\par
(ii) If to the Company, to:\par
\par
Catalytic Solutions, Inc.\par
1640 Fiske Place\par
Oxnard, CA 93033\par
Facsimile No.: (805) 486-0511\par
Attn.: Chief Executive Officer\par
\par
with a copy to:\par
\par
Morgan, Lewis & Bockius LLP\par
101 Park Avenue\par
New York, New York 10178\par
Facsimile No.: 212-309-627\par
Attn.: Christopher T. Jensen, Esq.\par
\par
All such notices, requests and other communications will (w) if \par
delivered personally to the address as provided in this Section 4.18, be \par
deemed given upon delivery, (x) if delivered by facsimile transmission to \par
the facsimile number as provided in this Section 4.16, be deemed given upon \par
facsimile confirmation, and (y) if delivered by mail in the manner \par
described above to the address as provided in this Section 4.18, upon the \par
earlier of the third business day following mailing or upon receipt and (z) \par
if delivered by overnight courier to the address as provided in this \par
Section 4.18, be deemed given on the earlier of the first business day \par
following the date sent by such overnight courier or upon receipt (in each \par
case regardless of whether such notice, request or other communication is \par
received by any other Person to whom a copy of such notice is to be \par
delivered pursuant to this Section 4.18). Any party from time to time may \par
change its address, facsimile number or other information for the purpose \par
of notices to that party by giving notice specifying such change to the \par
other parties hereto.\par
\par
4.19 Joinder Agreement. Each of the Shareholders severally agrees \par
that it will not transfer any of its Restricted Securities to any third \par
party (including any Permitted Transferee) unless such transferee has \par
executed a Joinder Agreement by which such transferee becomes a party to \par
this Agreement.\par
\par
4.20 Investors Rights Agreement. This Agreement shall supersede the \par
Investors Rights Agreement dated April 16, 2001 between the Company and the \par
parties thereto. Such Investors Rights Agreement to which any Series C \par
Investor is a party thereto shall be considered null and void.\par
\par
\par
\pard\qc Attachment 1\par
Form of Joinder Agreement\par
\pard\par
\par
\par
Catalytic Solutions, Inc.\par
1640 Fiske Place\par
Oxnard, CA 93033\par
Attn.: Chief Executive Officer\par
\par
Ladies and Gentlemen:\par
\par
In consideration of the [transfer][issuance] to the undersigned of _____ \par
shares of [Series C Preferred Stock, no par value per share,] [Common \par
Stock, no par value per share,] [Describe any other security being \par
transferred or issued] of Catalytic Solutions, Inc., a California \par
corporation (the "Company"), the undersigned represents that [it is a \par
Permitted Transferee of [Insert name of transferor] and]* agrees that, as \par
of the date written below, [he] [she] [it] shall become a party to that \par
certain Shareholders Agreement, dated as of November __, 2001, as such \par
agreement may have been or may be amended from time to time (the \par
"Agreement"), among the Company and the persons named therein, and [as a \par
Permitted Transferee shall be fully bound by, and subject to, all of the \par
covenants, terms and conditions of the Agreement that were applicable to \par
the undersigned's transferor,]* [shall be fully bound by, and subject to, \par
the provisions of the Agreement that are applicable to the Management Group \par
Members]** [shall be fully bound by, and subject to, the provisions of the \par
Agreement that are applicable to the Series C Shareholders]*** as though an \par
original party thereto and shall be deemed a [Management Group Member] \par
[Series C Shareholder] for purposes thereof.\par
\par
Executed as of the day of , .\par
TRANSFEREE: \par
\par
Address: \par
\par
\par
* Include if transferee is a Permitted Transferee\par
** Include if transferee is a Third Party or Management Group Member\par
***Include if transferor is a Series C Shareholder\par
\par
\par
\par
\pard\qc EXHIBIT D\par
\par
AMENDED AND RESTATED\par
ARTICLES OF INCORPORATION\par
OF\par
CATALYTIC SOLUTIONS, INC.\par
a California Corporation\par
\pard\par
The undersigned certify that:\par
\par
1. They are the President and the Secretary, respectively, of Catalytic \par
Solutions, Inc., a California corporation.\par
\par
2. This corporation has determined to authorize additional shares of \par
Common Stock and Preferred Stock and to create a new series of Preferred \par
Stock of this corporation to be designated as Series C Preferred Stock to \par
replace the existing Series C Preferred Stock of this corporation and, in \par
connection therewith, the Articles of Incorporation of this corporation are \par
amended and restated to read as follows:\par
\par
\pard\qc I\par
\pard \par
The name of this corporation is Catalytic Solutions, Inc. \par
\par
\pard\qc II\par
\pard\par
The purpose of this corporation is to engage in any lawful act or \par
activity for which a corporation may be organized under the General \par
Corporation Law of California other than the banking business, the trust \par
company business or the practice of a profession permitted to be \par
incorporated by the California Corporations Code.\par
\par
\pard\qc III\par
\pard\par
This corporation is authorized to issue two classes of stock to be \par
designated, respectively, "Common Stock" and "Preferred Stock." The total \par
number of shares which this corporation is authorized to issue is Ten \par
Million (10,000,000) shares, Seven Million Five Hundred Thousand \par
(7,500,000) shares of which shall be Common Stock (the "Common Stock") and \par
Two Million Five Hundred Thousand (2,500,000) shares of which shall be \par
Preferred Stock (the "Preferred Stock"), each having no par value. The \par
first series of Preferred Stock shall be designated Series A Preferred \par
Stock and shall consist of One Hundred Thousand (100,000) shares (such \par
series of Preferred Stock being sometimes referred to herein as "Series A \par
Preferred"). The second series of Preferred Stock shall be designated \par
Series B Preferred Stock and shall consist of One Hundred Thirty-Nine \par
Thousand (139,000) shares (such series of Preferred Stock being sometimes \par
referred to herein as "Series B Preferred"). The third series of Preferred \par
Stock shall be designated Series C Preferred Stock and shall consist of One \par
Million, Nine Hundred and Thirty Five Thousand (1,935,000) shares (such \par
series of Preferred Stock being sometimes referred to herein as "Series C \par
Preferred"). The relative rights, preferences, privileges and restrictions \par
granted to or imposed upon the Series A Preferred, Series B Preferred and \par
Series C Preferred are as follows (any reference herein below to "Preferred \par
Stock" shall include Series A Preferred, Series B Preferred, Series C \par
Preferred and all additional series of Preferred Stock which may be \par
designated in the future):\par
\par
1. Dividend Rights of Preferred Stock.\par
\par
1.1 Series C Preferred. The holders of the outstanding Series C \par
Preferred shall be entitled to receive, when, as and if declared by the \par
Board of Directors, out of any assets at the time legally available \par
therefor, dividends for each share, payable in cash at a rate per annum \par
equal to 8% of $17.75 per share of Series C Preferred ("Accruing \par
Dividends"). To the extent declared, such dividends shall be payable on a \par
monthly basis, to the holders of record as they appear on the register of \par
this corporation for the shares of Series C Preferred five (5) business \par
days prior to such dividend payment date. Accruing Dividends shall be \par
cumulative and shall accrue monthly from the date of issue, without \par
interest, whether or not such dividends have been declared. Accruing \par
Dividends shall be paid upon (a) any Liquidating Event, (b) any conversion \par
of the Series C Preferred into shares of Common Stock in accordance with \par
Section 3 of these Articles, and (c) any redemption of the Series C \par
Preferred in accordance with Section 7 of these Articles.\par
\par
1.2 Series A Preferred and Series B Preferred. So long as any shares \par
of Series C Preferred are outstanding, no dividend shall be paid on the \par
Series A Preferred, the Series B Preferred or the Common Stock, without the \par
prior consent of the holders of a majority of the Series C Preferred.\par
\par
2. Liquidation Preference.\par
\par
2.1 In the event of any voluntary or involuntary liquidation, \par
dissolution or winding up of this corporation or a Change of Control as \par
defined in Section 2.6 hereof (together, a "Liquidating Event"), the \par
holders of shares of Series C Preferred then outstanding shall be entitled \par
to be paid out of the assets of this corporation available for distribution \par
to its shareholders, prior to and in preference over holders of Series A \par
Preferred, Series B Preferred, Common Stock or any other class or series of \par
stock ranking junior to the Series C Preferred Stock, by reason of their \par
ownership thereof, in respect of each share of Series C Preferred \par
outstanding, an amount equal to $35.50 per share, plus all accrued but \par
unpaid dividends and all other declared but unpaid dividends thereon (the \par
"Series C Liquidation Preference"), subject to equitable adjustment for any \par
stock splits, stock dividends or the like. If, upon any such Liquidating \par
Event, the remaining assets of this corporation available for distribution \par
to its holders of Series C Preferred shall be insufficient to pay the \par
holders of shares of Series C Preferred the full amount to which they shall \par
be entitled, the holders of shares of Series C Preferred shall share \par
ratably in any distribution of the remaining assets and funds of this \par
corporation in proportion to the respective amounts which would otherwise \par
be payable in respect of such shares held by them upon such distribution if \par
all amounts payable on or with respect to such shares were paid in full. \par
\par
2.2 After payment of the Series C Liquidation Preference, the holders \par
of Series A Preferred and the Series B Preferred then outstanding shall be \par
entitled to be paid out of the assets of this corporation available for \par
distribution to its shareholders, prior to and in preference over holders \par
of Common Stock or any other class or series of stock ranking junior to the \par
Series A Preferred and Series B Preferred, by reason of their ownership \par
thereof, the following: (a) to the holders of Series A Preferred, in \par
respect of each share of Series A Preferred outstanding, an amount equal to \par
$15.00 per share, plus all declared but unpaid dividends thereon (the \par
"Series A Liquidation Preference") and (b) to the holders of Series B \par
Preferred, in respect of each share of Series B Preferred outstanding, an \par
amount equal to $20.00 per share, plus all declared but unpaid dividends \par
thereon (the "Series B Liquidation Preference"), in each case subject to \par
equitable adjustment for any stock splits, stock dividends or the like. \par
If, upon any such Liquidation Event, the remaining assets of this \par
corporation available for distribution to its holders of Series A Preferred \par
and Series B Preferred shall be insufficient to pay the holders of shares \par
of Series A Preferred and Series B Preferred the full amount to which they \par
shall be entitled, the holders of shares of Series A Preferred and Series B \par
Preferred shall share ratably in any distribution of the remaining assets \par
and funds of this corporation in proportion to the respective amounts which \par
would otherwise be payable in respect of such shares held by them upon such \par
distribution if all amounts payable on or with respect to such shares were \par
paid in full.\par
\par
2.3 After payment of the Series A Liquidation Preference and the \par
Series B Liquidation Preference, the holders of the Common Stock and the \par
holders of the Series C Preferred participating on an as-if-converted basis \par
shall be entitled to share ratably in the remaining assets of the \par
Corporation until the holders of the Series C Preferred have received an \par
aggregate amount (including what was received pursuant to Section 2.1) \par
equal to $44.375 per share in respect of all outstanding shares of Series C \par
Preferred Stock (the "Series C and Common Liquidation Preference").\par
\par
2.4 After payment of all preferential amounts required to be paid \par
pursuant to Sections 2.1, 2.2 and 2.3 above, upon a Liquidating Event, all \par
of the remaining assets and funds of this corporation available for \par
distribution to its shareholders shall be distributed to the holders of the \par
Common Stock pro rata based on the number of shares of Common Stock held by \par
each.\par
\par
2.5 This corporation shall give each holder of Series A Preferred, \par
Series B Preferred and Series C Preferred written notice of an impending \par
Liquidating Event not later than ten (10) days prior to the date set for \par
the closing of such transaction, and shall also notify such holders in \par
writing of the final approval of such transaction. The first of such \par
notices shall describe the material terms and conditions of the impending \par
transaction and the provisions of this Section 2 and this corporation shall \par
thereafter give such holders prompt notice of any material changes in the \par
terms of the transaction or the information supplied in the first notice. \par
The transaction shall in no event take place sooner than ten (10) days \par
after the corporation has given notice of any material changes provided for \par
herein; provided, however, that such periods may be shortened upon the \par
written consent of the holders of 66 2/3% of the shares of each class of \par
Series A Preferred, Series B Preferred and Series C Preferred then \par
outstanding.\par
\par
2.6 For purposes of this Section, a liquidation, dissolution or \par
winding up of this corporation shall be deemed to include (unless the \par
holders of 66 2/3% of the shares of each class of Series A Preferred, \par
Series B Preferred and Series C Preferred then outstanding, vote \par
otherwise), (a) the merger, consolidation, recapitalization or other \par
reorganization of this corporation into or with another corporation which \par
results in this corporation's shareholders immediately prior to such \par
transaction not holding (by virtue of such shares or securities issued \par
solely with respect thereto) at least 50% of the voting power of the \par
surviving or continuing entity following such transaction and (b) the sale \par
of all or substantially all of the assets of this corporation (each a \par
"Change of Control").\par
\par
3. Conversion. The holders of the Series A Preferred, Series B \par
Preferred and Series C Preferred shall have conversion rights as follows \par
(the "Conversion Rights"):\par
\par
3.1 Right to Convert and Automatic Conversion.\par
\par
3.1.1 (a) Each share of Series A Preferred shall be convertible, at \par
the option of the holder thereof, at any time and from time to time, into \par
one (1) fully paid and nonassessable share of Common Stock (the "Series A \par
Conversion Ratio"). Such initial Series A Conversion Ratio shall be subject \par
to adjustment as provided below.\par
\par
(b) Each share of Series B Preferred shall be convertible, at \par
the option of the holder thereof, at any time and from time to time, into \par
one (1) fully paid and nonassessable share of Common Stock (the "Series B \par
Conversion Ratio"). Such initial Series B Conversion Ratio shall be subject \par
to adjustment as provided below.\par
\par
(c) Each share of Series C Preferred shall be convertible, at \par
the option of the holder thereof, at any time and from time to time, into \par
one fully paid and nonassessable share of Common Stock (the "Series C \par
Conversion Factor"). Such initial Series C Conversion Factor shall be \par
subject to adjustment as provided below. Upon any conversion of the Series \par
C Preferred into shares of Common Stock pursuant to this Section 3, this \par
corporation shall pay in cash an amount equal to all accrued but unpaid \par
dividends and all other dividends declared but unpaid on the Series C \par
Preferred.\par
\par
(i) If this corporation fails to enter into the agreement \par
referred to in Section 8.12 of the Investment Agreement dated as of \par
November 15, 2001, among this corporation and the Investors named therein \par
(the "Investment Agreement") by January 31, 2002, the Series C Conversion \par
Factor then in effect, including any adjustment made pursuant to Section \par
3.4, 3.5 or 3.6 of these Articles, shall be adjusted such that the number \par
of shares of Common Stock that shall be issued in exchange for each share \par
of Series C Preferred shall be multiplied by 1.3.\par
\par
(ii) If this corporation fails to book revenues and \par
generate a gross margin for the year ended December 31, 2002 in the amounts \par
set forth in Section 8.13 of the Investment Agreement, the Series C \par
Conversion Factor as in effect, including any adjustments made pursuant to \par
subsection (i) above or Section 3.4, 3.5 or 3.6 of these Articles, shall be \par
adjusted such that the number of shares of Common Stock that shall be \par
issued in exchange for each share of Series C Preferred shall be multiplied \par
by 1.25. For purposes of this subsection (ii), revenues shall be \par
determined by using Generally Accepted Accounting Principles.\par
\par
(iii) If this corporation enters into (a) the agreement \par
referred to in Section 8.12 of the Investment Agreement by December 31, \par
2002 and (b) the agreements set forth in Section 8.14 of the Investment \par
Agreement by December 31, 2002, the Series C Conversion Factor as in \par
effect, including any adjustments made pursuant to subsections (i) and/or \par
(ii) above or Section 3.4, 3.5 or 3.6 of these Articles, shall be adjusted \par
such that the number of shares of Common Stock that shall be issued in \par
exchange for each share of Series C Preferred shall be multiplied by .909.\par
\par
As used herein, "Conversion Ratio" shall mean the Series \par
A Conversion Ratio, the Series B Conversion Ratio or the Series C \par
Conversion Factor, as applicable in context.\par
\par
3.1.2 Each share of Series A Preferred, Series B Preferred and Series \par
C Preferred shall automatically be converted into shares of Common Stock at \par
the then effective Conversion Ratio, immediately upon the closing of the \par
offering pursuant to the corporation's registration statement on Form S-1 \par
(or any other form equivalent thereto) pursuant to which Common Stock is \par
sold to the public by this corporation (or selling shareholders, if any) in \par
an underwritten initial public offering registered under the Securities Act \par
of 1933, as amended, and realizes, aggregate proceeds of not less than \par
$25,000,000 and a per share offering price of not less than $44.375 \par
(subject to equitable adjustment for any stock splits, combinations, \par
consolidations, recapitalizations, reorganizations, reclassifications, \par
stock distributions, stock dividends, or other similar events with respect \par
to such shares) (a "Public Offering").\par
\par
3.2 Fractional Shares. No fractional shares of Common Stock shall \par
be issued upon conversion of the Preferred Stock and the number of shares \par
of Common Stock to be issued shall be rounded to the nearest whole share. \par
Any conversion of shares of Preferred Stock by any holder shall be done on \par
an aggregate basis taking into account all shares of Preferred Stock held \par
by such holder. \par
\par
3.3 Mechanics of Conversion. In order to convert shares of Preferred
Stock into shares of Common Stock, the holder shall surrender the \par
certificate or certificates for shares of Series A Preferred, Series B \par
Preferred or Series C Preferred at the office of the transfer agent (or at
the principal office of this corporation if this corporation serves as its
own transfer agent), together with written notice that such holder \par
elects to convert all or any number of the shares represented by such
certificate or certificates. Such notice shall state such holder's name \par
or the names of the nominees inwhich such holder wishes the \par
certificate or certificates for shares of Common Stock to be issued.
If required by this corporation, certificates surrendered for conversion
shall be endorsed or accompanied by a written instrument or \par
instruments of transfer, in form reasonably satisfactory to this
corporation, duly executed by the registered holder or his, her or its
attorney duly authorized in writing. The date of a holder's conversion \par
notice to this corporation pursuant to Section 3.1.1 of this Article III, \par
or the closing of the Public Offering causing automatic conversion pursuant \par
to Section 3.1.2 of this Article III, shall be the conversion date (the
"Conversion Date"). This corporation shall, as soon as practicable \par
after the Conversion Date, issue and deliver at such office to such \par
holder, or to its nominees, a certificate or certificates for the number \par
of shares of Common Stock to which such holder shall be entitled.\par
\par
3.3.2 This corporation shall at all times during which the Series A \par
Preferred, Series B Preferred or Series C Preferred shall be outstanding, \par
reserve and keep available out of its authorized but unissued stock, for \par
the purpose of effecting the conversion of the Series A Preferred, Series B \par
Preferred and Series C Preferred, such number of its duly authorized shares \par
of Common Stock as shall from time to time be sufficient to effect the \par
conversion of all outstanding shares of Series A Preferred, Series B \par
Preferred and Series C Preferred. \par
\par
3.3.3 Any share of Series A Preferred, Series B Preferred or Series C \par
Preferred which shall have been surrendered for conversion as herein \par
provided shall no longer be deemed to be outstanding and all rights with \par
respect to any such share, including the rights, if any, to receive \par
dividends and notices and to vote, shall immediately cease and terminate on \par
the Conversion Date, except only the right of the holder thereof to receive \par
shares of Common Stock in exchange therefor. Any shares of Series A \par
Preferred, Series B Preferred or Series C Preferred so converted shall be \par
retired and canceled and shall not be reissued, and this corporation may \par
from time to time take such appropriate action as may be necessary to \par
reduce the number of shares of authorized Series A Preferred, Series B \par
Preferred and Series C Preferred accordingly.\par
\par
3.3.4 If the conversion is pursuant to Subsection 3.1.2 in connection \par
with a Public Offering, the conversion may at the option of any holder \par
tendering Series A Preferred, Series B Preferred or Series C Preferred for \par
conversion be conditioned upon the closing of the sale of securities \par
pursuant to such offering, in which event the person(s) entitled to receive \par
the Common Stock issuable upon such conversion shall not be deemed to have \par
converted such Series A Preferred, Series B Preferred or Series C Preferred \par
until immediately prior to the closing of the sale of securities.\par
\par
3.4 Adjustments to Series C Conversion Factor for Diluting Issues.\par
\par
3.4.1 Special Definitions. For purposes of this Section 3.4, the \par
following definitions shall apply:\par
\par
(a) "Original Issue Date" shall mean the date on which the first \par
share of Series C Preferred is first issued.\par
\par
(b) "Series C Conversion Price" shall mean $17.75 per share of \par
Common Stock, as such price may be adjusted from time to time pursuant to \par
this Section 3.\par
\par
(c) "Permitted Issuance" shall mean all shares of Common Stock \par
issued by this corporation after the Original Issue Date issued or \par
issuable:\par
\par
(1) in connection with a Public Offering; \par
\par
(2) upon conversion of shares of Preferred Stock or other \par
Convertible Securities (as defined below);\par
\par
(3) as dividends or distributions on Preferred Stock or \par
Common Stock; \par
\par
(4) to banks, equipment financing companies or equipment \par
lessors (not to exceed in the aggregate more than 169,000 shares of Common \par
Stock);\par
\par
(5) in connection with strategic alliances, business \par
contracts or similar transactions approved by no less than six-sevenths of \par
this corporation's Board of Directors to induce such business partner to \par
use, promote or assist this corporation in the development of its products;\par
\par
(6) in connection with a business acquisition by this \par
corporation, whether by merger, consolidation, purchase of assets, sale or \par
exchange of stock or otherwise (not to exceed in the aggregate 5% of the \par
then outstanding equity of this corporation without the prior consent of \par
the holders of at least 66 2/3% of the Series C Preferred); or\par
\par
(7) to current or prospective officers, directors or \par
employees of or consultants to this corporation or its affiliates, \par
including the issuance or granting of options or rights to purchase Common \par
Stock to such officers, directors, employees or consultants (not to exceed \par
in the aggregate 7% of the then outstanding equity of this corporation \par
without the prior consent of the holders of at least 66 2/3% of the Series \par
C Preferred). \par
\par
3.4.2 Adjustment of Series C Conversion Factor and Series C \par
Conversion Price. If and whenever, on or after the Original Issue Date, \par
this corporation issues or sells, or in accordance with Section 3.5 is \par
deemed to have issued or sold, other than pursuant to a Permitted Issuance \par
and other than pursuant to an event for which adjustment is made pursuant \par
to Section 3.6, any shares of Common Stock for a consideration per share \par
less than the Series C Conversion Price in effect immediately prior to such \par
issuance or sale, then immediately upon such issuance or sale (i) the \par
Series C Conversion Price shall be reduced to a price equal to the \par
consideration per share of Common Stock in such issuance or sale and (ii) \par
the Series C Conversion Factor shall be increased to equal the amount \par
determined by multiplying the Series C Conversion Factor in effect \par
immediately prior to such issuance or sale by a fraction, the numerator of \par
which is the Series C Conversion Price in effect immediately prior to such \par
issuance or sale and the denominator is the Series C Conversion Price in \par
effect immediately after such issuance or sale (as calculated pursuant to \par
clause (i) above). \par
\par
3.5 Effect on Series C Conversion Factor and Series C Conversion \par
Price of Certain Events. For purposes of determining the adjusted Series C \par
Conversion Factor and Series C Conversion Price under Section 3.4.2, the \par
following shall be applicable:\par
\par
(a) Issuance of Rights or Options. If this corporation in any \par
manner grants any rights or options (other than pursuant to a Permitted \par
Issuance and other than pursuant to an event for which adjustment is made \par
pursuant to Section 3.6) to subscribe for or to purchase Common Stock or \par
any stock or other securities convertible into or exchangeable for Common \par
Stock (including without limitation convertible common stock) (such rights \par
or options being herein called "Options" and such convertible or \par
exchangeable stock or securities being herein called "Convertible \par
Securities") and the price per share for which Common Stock is issuable \par
upon the exercise of such Options or upon conversion or exchange of such \par
Convertible Securities is less than the Series C Conversion Price in effect \par
immediately prior to the time of the granting or sale of such Options, then \par
the total maximum number of shares of Common Stock issuable upon the \par
exercise of such Options or upon conversion or exchange of the total \par
maximum amount of such Convertible Securities issuable upon the exercise of \par
such Options shall be deemed to be outstanding and to have been issued and \par
sold by this corporation for such price per share. For purposes of this \par
paragraph, the "price per share for which Common Stock is issuable upon \par
exercise of such Options or upon conversion or exchange of such Convertible \par
Securities" is determined by dividing (x) the total amount, if any, \par
received or receivable by this corporation as consideration for the \par
granting of all such Options, plus the minimum aggregate amount of \par
additional consideration payable to this corporation upon the exercise of \par
all such Options, plus in the case of such Options that relate to \par
Convertible Securities, the minimum aggregate amount of additional \par
consideration, if any, payable to this corporation upon the issuance or \par
sale of all such Convertible Securities and the conversion or exchange \par
thereof, by (y) the total maximum number of shares of Common Stock issuable \par
upon exercise of all such Options or upon the conversion or exchange of all \par
such Convertible Securities issuable upon the exercise of such Options. No \par
further adjustment of the Series C Conversion Factor and Series C \par
Conversion Price shall be made upon the actual issuance of such Common \par
Stock or of such Convertible Securities upon the exercise of such Options \par
or upon the actual issuance of such Common Stock upon conversion or \par
exchange of such Convertible Securities.\par
\par
(b) Issuance of Convertible Securities. If this corporation in \par
any manner issues or sells any Convertible Securities (other than pursuant \par
to a Permitted Issuance and other than pursuant to an event for which \par
adjustment is made pursuant to Section 3.6) and the price per share for \par
which Common Stock is issuable upon such conversion or exchange is less \par
than the Series C Conversion Price in effect immediately prior to the \par
issuance or sale of such Convertible Securities, then the maximum number of \par
shares of Common Stock issuable upon conversion or exchange of such \par
Convertible Securities shall be deemed to be outstanding and to have been \par
issued and sold by this corporation for such price per share. For the \par
purposes of this paragraph, the "price per share for which Common Stock is \par
issuable upon such conversion or exchange" is determined by dividing (x) \par
the total amount received or receivable by this corporation as \par
consideration for the issuance or sale of all such Convertible Securities, \par
plus the minimum aggregate amount of additional consideration, if any, \par
payable to this corporation upon the conversion or exchange thereof, by (y) \par
the total maximum number of shares of Common Stock issuable upon the \par
conversion or exchange of all such Convertible Securities. No further \par
adjustment of the Series C Conversion Factor and Series C Conversion Price \par
shall be made upon the actual issuance of such Common Stock upon conversion \par
or exchange of such Convertible Securities, and, if any such issuance or \par
sale of such Convertible Securities is made upon exercise of any Options \par
for which adjustments of the Series C Conversion Factor and Series C \par
Conversion Price have been or are to be made pursuant to other provisions \par
of Section 3.5(a), no further adjustment of the Series C Conversion Factor \par
and Series C Conversion Price shall be made by reason of such issuance or \par
sale.\par
\par
(c) Change in Option Price or Series C Conversion Factor. If \par
the purchase price provided for in any Options, the additional \par
consideration, if any, payable upon the issue, conversion or exchange of \par
any Convertible Securities or the rate at which any Convertible Securities \par
are convertible into or exchangeable for Common Stock changes at any time, \par
the Series C Conversion Factor in effect at the time of such change shall \par
be readjusted to the Series C Conversion Factor which would have been in \par
effect at such time had such Options or Convertible Securities still \par
outstanding provided for such changed purchase price, additional \par
consideration or changed conversion rate, as the case may be, at the time \par
initially granted, issued or sold and the Series C Conversion Price shall \par
be correspondingly readjusted.\par
\par
(d) Treatment of Expired Options and Unexercised Convertible \par
Securities. Upon the expiration of any Option or the termination of any \par
right to convert or exchange any Convertible Securities, in either case, \par
without the exercise of such Option or right, the Series C Conversion \par
Factor and Series C Conversion Price then in effect shall be adjusted to \par
the Series C Conversion Factor and Series C Conversion Price which would \par
have been in effect at the time of such expiration or termination had such \par
Option or Convertible Securities, to the extent not exercised in full and \par
outstanding immediately prior to such expiration or termination, never been \par
issued.\par
\par
(e) Calculation of Consideration Received. If any Common \par
Stock, Options or Convertible Securities are issued or sold or deemed to \par
have been issued or sold for cash, the consideration received therefor \par
shall be deemed to be the amount paid therefor. In case any Common Stock, \par
Options or Convertible Securities are issued or sold for a consideration \par
other than cash, the amount of the consideration other than cash received \par
by this corporation shall be the fair value of such consideration, except \par
where such consideration consists of securities, in which case the amount \par
of consideration received by this corporation shall be the fair market \par
value thereof as of the date of receipt. In case any Common Stock, Options \par
or Convertible Securities are issued to the owners of the non-surviving \par
entity in connection with any merger in which this corporation is the \par
surviving entity, the amount of consideration therefor shall be deemed to \par
be the fair value of such portion of the net assets and business of the \par
non-surviving entity as is attributable to such Common Stock, Options or \par
Convertible Securities, as the case may be. The fair value of any \par
consideration other than cash or marketable securities shall be determined \par
in good faith by this corporation and approved by either (i) the directors \par
nominated by the holders of Series C Preferred Stock pursuant to Section \par
4.2 below or (ii) the holders of a majority of the Series C Preferred Stock \par
then outstanding. If such parties are unable to reach agreement within a \par
reasonable period of time, such fair value shall be determined in good \par
faith by an appraiser selected by this corporation and approved by either \par
(i) the directors nominated by the holders of Series C Preferred Stock \par
pursuant to Section 4.2 below or (ii) the holders of a majority of the \par
Series C Preferred Stock then outstanding whose determination shall be \par
final and binding on this corporation and all holders of the Series C \par
Preferred Stock. The fees and expenses of such appraiser shall be paid by \par
this corporation.\par
\par
(f) Record Date. If this corporation takes a record of the \par
holders of Common Stock for the purpose of entitling them (i) to receive a \par
dividend or other distribution payable in Common Stock, Options or \par
Convertible Securities or (ii) to subscribe for or purchase Common Stock, \par
Options or Convertible Securities, then such record date shall be deemed to \par
be the date of the issue or sale of the shares of Common Stock deemed to \par
have been issued or sold upon the declaration of such dividend or the \par
making of such other distribution or the date of the granting of such right \par
of subscription or purchase, as the case may be.\par
\par
3.6 Adjustment for Stock Splits, Dividends and Combinations. If \par
this corporation shall at any time or from time to time after the Original \par
Issue Date effect a subdivision of the outstanding Common Stock or shall \par
issue a dividend in Common Stock on its outstanding Common Stock, the \par
Conversion Ratio then in effect immediately before that subdivision shall \par
be proportionately increased. If this corporation shall at any time or \par
from time to time after the Original Issue Date combine the outstanding \par
shares of Common Stock into a lesser number of shares of Common Stock, the \par
Conversion Ratio then in effect immediately before the combination shall be \par
proportionately decreased. Any adjustment under this paragraph shall \par
become effective at the close of business on the date the subdivision or \par
combination becomes effective.\par
\par
3.7 Adjustments for Other Dividends and Distributions. In the event \par
this corporation at any time or from time to time after the Original Issue \par
Date shall make or issue a dividend or other distribution payable in \par
securities of this corporation other than shares of Common Stock, then and \par
in each such event provision shall be made so that the holders of shares of \par
the Series A Preferred, Series B Preferred and Series C Preferred shall \par
receive upon conversion thereof, in addition to the number of shares of \par
Common Stock receivable thereupon, the amount of securities of this \par
corporation that they would have received had their Series A Preferred, \par
Series B Preferred and Series C Preferred been converted into Common Stock \par
on the date of such event and had thereafter, during the period from the \par
date of such event to and including the conversion date, retained such \par
securities receivable by them as aforesaid during such period giving \par
application to all adjustments called for during such period, under this \par
paragraph with respect to the rights of the holders of the Series A \par
Preferred, Series B Preferred and Series C Preferred.\par
\par
3.8 No Impairment. This corporation will not, by amendment of its \par
Amended and Restated Articles of Incorporation or through any \par
reorganization, transfer of assets, consolidation, merger, dissolution, \par
issue or sale of securities or any other voluntary action, avoid or seek to \par
avoid the observance or performance of any of the terms to be observed or \par
performed hereunder by this corporation, but will at all times in good \par
faith assist in the carrying out of all the provisions of this Section 3 \par
and in the taking of all such action as may be necessary or appropriate in \par
order to protect the Conversion Rights of the holders of the Series A \par
Preferred, Series B Preferred and Series C Preferred against impairment.\par
\par
3.9 Certificate as to Adjustments. Upon the occurrence of each \par
adjustment or readjustment of the Conversion Ratio pursuant to this Section \par
3, this corporation at its expense shall promptly compute such adjustment \par
or readjustment in accordance with the terms hereof and furnish to each \par
holder, if any, of Series A Preferred, Series B Preferred and Series C \par
Preferred a certificate setting forth such adjustment or readjustment and \par
showing in detail the facts upon which such adjustment or readjustment is \par
based and shall file a copy of such certificate with its corporate records.\par
This corporation shall, upon the written request at any time of any holder \par
of Series A Preferred, Series B Preferred or Series C Preferred, furnish or \par
cause to be furnished to such holder a similar certificate setting forth \par
(1) such adjustments and readjustments, (2) the Conversion Ratio then in \par
effect and (3) the number of shares of Common Stock and the amount, if any, \par
of other property which then would be received upon the conversion of such \par
Preferred Stock. Despite such adjustment or readjustment, the form of each \par
certification or all certificates for Series A Preferred, Series B \par
Preferred and Series C Preferred, if the same shall reflect the initial or \par
any subsequent Conversion Ratio, need not be changed in order for the \par
adjustments or readjustments to be valued in accordance with the provisions \par
of these Amended and Restated Articles of Incorporation, which shall \par
control.\par
\par
3.10 Notice of Record Date. In the event:\par
\par
(i) that this corporation declares a dividend (or any other \par
distribution) on its Common Stock payable in Common Stock or other \par
securities of this corporation;\par
\par
(ii) that this corporation subdivides or combines its \par
outstanding shares of Common Stock;\par
\par
(iii) of any reclassification of the Common Stock of this \par
corporation (other than a subdivision or combination of its outstanding \par
shares of Common Stock or a stock dividend or stock distribution thereon), \par
or of any consolidation or merger of this corporation into or with another \par
corporation, or of the sale of all or substantially all of the assets of \par
this corporation; or\par
\par
(iv) of the involuntary or voluntary dissolution, liquidation or \par
winding up of this corporation;\par
\par
then this corporation shall cause to be filed at its principal office or at \par
the office of the transfer agent for the Series A Preferred, Series B \par
Preferred and Series C Preferred, and shall cause to be mailed to the \par
holders of the Series A Preferred, Series B Preferred and Series C \par
Preferred at their last addresses as shown on the records of this \par
corporation or such transfer agent, at least 10 days prior to the record \par
date specified in (A) below or 20 days before the date specified in (B) \par
below, a notice stating: (A) the record date of such dividend, \par
distribution, subdivision or combination, or, if a record is not to be \par
taken, the date as of which the holders of Common Stock of record to be \par
entitled to such dividend, distribution, subdivision or combination are to \par
be determined, or (B) the date on which such reclassification, \par
consolidation, merger, sale, dissolution, liquidation or winding up is \par
expected to become effective, and the date as of which it is expected that \par
holders of Common Stock of record shall be entitled to exchange their \par
shares of Common Stock for securities or other property deliverable upon \par
such reclassification, consolidation, merger, sale, dissolution, \par
liquidation or winding up.\par
\par
3.11 Payment of Taxes. The corporation shall pay any and all issue \par
and other taxes that may be payable in respect of any issue or delivery of \par
Common Stock on conversion of the Series A Preferred, Series B Preferred or \par
Series C Preferred pursuant hereto. This corporation shall not, however, \par
be required to pay any tax which may be payable in respect of any transfer \par
involved in the issue and delivery of Common Stock in a name other than \par
that in which the Series A Preferred, Series B Preferred or Series C \par
Preferred so converted was registered, and no such issue or delivery shall \par
be made unless and until the person requesting such issue has paid to this \par
corporation the amount of any such tax payable by this corporation.\par
\par
4. Voting Rights.\par
\par
4.1 Voting Rights Generally. Except as otherwise provided herein or \par
required by law, each holder of shares of Preferred Stock shall be entitled \par
to the number of votes equal to the whole number of shares of Common Stock \par
into which such holder's shares of Preferred Stock could be converted on \par
the record date for the vote or consent of shareholders, voting together as \par
a single class. Such holders of Preferred Stock shall have voting rights \par
and powers equal to the voting rights and powers of the Common Stock, and \par
shall be entitled to notice of any shareholders' meeting in accordance with \par
the Bylaws of this corporation and shall vote with holders of the Common \par
Stock upon any matters submitted to a vote of shareholders, except those \par
matters required by law to be submitted to a class vote and except as \par
otherwise provided in Section 7.\par
\par
4.2 Election of Directors. The number of directors of this \par
corporation shall be set in accordance with this corporation's Bylaws. For \par
so long as 680,000 shares of Series C Preferred are outstanding, the \par
holders of the Series C Preferred shall be entitled, voting separately as a \par
class, to elect two directors of this corporation at each annual election \par
of directors. All remaining directors of this corporation shall be elected \par
by the holders of Common Stock and the Preferred Stock, voting together as \par
a class. In the case of any vacancy (other than a vacancy caused by \par
removal by vote of the shareholders in accordance with applicable law) in \par
the office of a director occurring among the directors elected by the \par
holders of a class of stock (if any) pursuant to this Section 4.2, the \par
remaining directors so elected by that class may, by affirmative vote of a \par
majority thereof (or the remaining director so elected if there be but one, \par
or if there are no such directors remaining, by the affirmative vote of the \par
holders of a majority of the shares of that class), elect a successor or \par
successors to hold office for the unexpired term of the director or \par
directors whose place or places shall be vacant. Any director who shall \par
have been elected by the holders of a class of stock (if any) or by any \par
directors so elected as provided in the immediately preceding sentence \par
hereof may be removed during the aforesaid term of office, either with or \par
without cause, by, and only by, the affirmative vote of the holders of the \par
shares of the class of stock entitled to elect such director or directors, \par
given either at a special meeting of such shareholders duly called for that \par
purpose or pursuant to a written consent of shareholders, and any vacancy \par
thereby created may be filled by the holders of that class of stock \par
represented at a meeting or pursuant to written consent.\par
\par
5. Series A Pre-Emptive Right.\par
\par
5.1 Grant. This corporation hereby grants to each holder of shares \par
of Series A Preferred Stock the preemptive right to purchase, on the same \par
terms and conditions and for the same price as the New Securities (as \par
defined below) are issued to other persons by this corporation, that \par
portion of any New Securities which is equal to the product obtained by \par
multiplying (i) the total number of New Securities to be issued by (ii) the \par
quotient obtained by dividing (x) the total number of shares of Series A \par
Preferred Stock held of record by the shareholder by (y) the total number \par
of shares of Common Stock and Preferred Stock of this corporation then \par
outstanding. For purposes of calculating the portion of the New Securities \par
which may be purchased by the holders of shares of Series A Preferred Stock \par
under this Section 5, it shall be assumed that all outstanding shares of \par
Preferred Stock have been converted into Common Stock of this corporation. \par
However, no actual conversion of Series A Preferred Stock to Common Stock \par
shall occur except in accordance with Section 3.\par
\par
5.2 Notice. This corporation shall give to each holder of shares of \par
Series A Preferred Stock written notice of the proposed sale and issuance \par
of any New Securities, which written notice shall contain the terms of such \par
proposed sale and issuance in reasonable detail. This corporation may \par
deliver such notice to the shareholder either (a) at least 60 days prior to \par
the first date on which such New Securities are proposed to be sold and \par
issued to any third party or (b) not more than thirty (30) days after the \par
date on which this corporation closes the last sale of the New Securities \par
to any third party. If this corporation elects to deliver the notice after \par
its sale of the New Securities to any third party, this corporation shall \par
insure that the agreements with such third parties confirm this \par
corporation's right to sell the New Securities to the holders of shares of \par
Series A Preferred Stock under this Section 5 and to sell such New \par
Securities to such holders free of any preemptive rights of such parties. \par
Each shareholder shall have the right to exercise the right granted under \par
this Section 5 by giving written notice thereof to this corporation within \par
20 days after this corporation's delivery of the notice, specifying the \par
amount of New Securities which the shareholder desires to purchase. In the \par
event the shareholder does not give notice of exercise within such 20-day \par
period, this corporation may sell and issue the New Securities without \par
regard to the shareholder's rights under this Section 5; provided that the \par
failure of the shareholder to exercise the right to purchase with respect \par
to any particular sale and issuance of New Securities shall not affect the \par
shareholder's right to purchase New Securities in any subsequent sale and \par
issuance by this corporation.\par
\par
5.3 New Securities. The term "New Securities" as used in this \par
Section 5 means any shares of Common Stock or any rights, options, warrants \par
or other securities exercisable or exchangeable for or convertible into \par
shares of Common Stock which this corporation intends to offer, sell or \par
issue after the date of first issuance of any shares of Series A Preferred \par
Stock, except for such securities which are:\par
\par
(a) exchanged for the securities of another corporation or \par
other business entity as a result of a merger or consolidation whereby this \par
corporation or any wholly-owned subsidiary of this corporation is the \par
surviving corporation; \par
\par
(b) issued to another corporation or other business entity in \par
exchange for all or substantially all of the assets of such corporation or \par
entity;\par
\par
(c) issued to the shareholders of another corporation or the \par
equity participants in another business entity in exchange for eighty \par
percent (80%) or more of the outstanding equity securities of such \par
corporation or entity;\par
\par
(d) securities representing or convertible into or exercisable \par
for shares of Common Stock issued to fulfill any obligation of this \par
corporation under any existing or future stock option, warrant or bonus or \par
other incentive arrangement or plan for the benefit of the employees, \par
consultants or directors of this corporation implemented for the purpose of \par
inducing them to join, remain with or assist this corporation or its Board \par
of Directors or any securities issued in satisfaction of such obligations; \par
\par
(e) shares subject to the Corporation's sale and issuance of \par
any shares of capital stock or other securities in an underwritten initial \par
public offering registered under the Securities Act of 1933, as amended, \par
and realizes aggregate proceeds of not less than $25,000,000;\par
\par
(f) warrants and options to purchase shares of Common Stock of \par
this corporation issued in connection with any transaction the principal \par
purposes of which is (i) the borrowing of funds in exchange for its \par
issuance of non-convertible promissory notes or similar instruments, (ii) \par
the leasing of equipment or acquisition of equipment, goods or services, or \par
(iii) any other financing transaction in which this corporation does not \par
issue any securities, other than such warrants and options, which are \par
exchangeable for or convertible into equity securities; or\par
\par
(g) issued upon the exercise of any conversion, warrant or \par
option rights whether presently or hereafter outstanding.\par
\par
This corporation may impose any conditions on any sale and issuance of \par
New Securities to which the right granted by Section 5.1 above applies \par
which this corporation reasonably believes are necessary to assure \par
compliance with applicable federal and state securities laws, including, \par
without limitation, requiring that all purchasers and offerees of the New \par
Securities be "accredited investors" (as defined in Regulation D \par
promulgated under the Securities Act).\par
\par
5.4 Limitation. Notwithstanding anything in these Articles of \par
Incorporation to the contrary, no holder of shares of Series A Preferred \par
Stock shall have a preemptive right to participate in any sale and issuance \par
of any New Securities by this corporation if: (a) this corporation's sale \par
and issuance of the New Securities to the shareholder would not comply with \par
all applicable federal and state securities laws, other than as a result of \par
a voluntary act by this corporation which can be brought into compliance \par
without undue expense to this corporation; or (b) the shareholder fails to \par
comply with any terms and conditions of its participation which are \par
reasonably imposed by this corporation and which apply generally to all \par
persons participating in the sale and issuance of such New Securities.\par
\par
5.5 Termination. The pre-emptive right granted under this Section 5 \par
shall terminate on the effective date of the first to occur of the \par
following:\par
\par
(a) the effective date of any offering by this corporation of \par
its equity securities to the public pursuant to an effective registration \par
statement under the Securities Act in which the aggregate price paid by the \par
public for the shares shall be at least Twenty-Five Million Dollars \par
($25,000,000); provided that such an offering shall not include an offering \par
of this corporation's equity securities made in connection with a business \par
acquisition or combination or an employee benefit plan;\par
\par
(b) the closing of the sale of all or substantially all of the \par
assets and business of this corporation in substantially a single \par
transaction; provided that the transfer of all or any part of the assets of \par
this corporation to another corporation in which this corporation owns, \par
immediately after such transfer, eighty percent (80%) or more of the \par
outstanding voting securities of such other corporation shall not be \par
considered a transaction described in this clause (b);\par
\par
(c) the consummation of the merger or consolidation of this \par
corporation with and into another corporation or another reorganization \par
transaction as a result of which this corporation is not the surviving \par
corporation; provided that the merger or consolidation of this corporation \par
with or into another corporation primarily for purposes of the re-\par
domiciling of this corporation in another state and immediately after which \par
the shareholders of this corporation own eighty percent (80%) or more of \par
the outstanding voting securities of the surviving corporation shall not be \par
considered a transaction described in this clause (c); and\par
\par
(d) the acquisition of any voting securities of this \par
corporation by any person (as that term is used for purposes of Section \par
13(d) or Section 14(d) of the Exchange Act), immediately after which such \par
person has beneficial ownership (within the meaning of Rule 13d-3 \par
promulgated under the Exchange Act) of more than fifty percent (50%) of the \par
combined voting power of this corporation's then outstanding voting \par
securities.\par
\par
6. Protective Provisions.\par
\par
6.1 Except as otherwise required by law, this corporation shall not, \par
without the vote or written consent by the holders of at least a majority \par
of the outstanding shares of any series of Preferred Stock, take any action \par
that alters or changes the rights, preferences or privileges of such series \par
of Preferred Stock or increases the authorized number of shares of such \par
series of Preferred Stock.\par
\par
6.2 Except as otherwise required by law, so long as 680,000 shares of \par
Series C Preferred are outstanding, subject to equitable adjustment for any \par
stock splits, stock dividends or the like, this corporation shall not, \par
without first obtaining the approval (by vote or written consent, as \par
provided by law) of the holders of at least a majority of the outstanding \par
shares of Series C Preferred, do any of the following:\par
\par
(a) redeem or repurchase any outstanding shares of Common Stock \par
or Preferred Stock, or securities convertible or exchangeable into, or \par
exercisable for, Common Stock or Preferred Stock, other than (i) pursuant \par
to agreements between this corporation and any of its employees providing \par
this corporation with the right of such repurchase at original cost upon \par
any termination of employment or (ii) the redemption of the Series C \par
Preferred pursuant to Section 7 of this Article III.\par
\par
(b) authorize, create or issue any new or existing shares of \par
any class or classes or series of capital stock having any preference or \par
priority as to dividends or amounts distributable upon dissolution, \par
liquidation or winding up of this corporation superior to or on a parity \par
with any such preference or priority of the Series C Preferred, or \par
authorize or issue any shares of stock of any class or any bonds, \par
debentures, notes or other obligations convertible into or exercisable or \par
exchangeable for, or having option rights to purchase, any shares of stock \par
of this corporation having any preference or priority as to dividends or \par
amounts distributable upon dissolution, liquidation or winding up of this \par
corporation superior to or on a parity with any such preference or priority \par
of the Series C Preferred;\par
\par
(c) reclassify any Common Stock into shares having any \par
preference or priority as to dividends or amounts distributable upon \par
dissolution, liquidation or winding up of this corporation superior to or \par
on a parity with any such preference or priority of the Preferred Stock; \par
\par
(d) amend or repeal any provision of, or add any provision to, \par
this corporation's Amended and Restated Articles of Incorporation or \par
Bylaws; \par
\par
(e) effect any Liquidating Event or Change of Control;\par
\par
(f)dissolve or liquidate this corporation pursuant to Section 7 \par
of the Bankruptcy Code; \par
\par
(g) increase or decrease the authorized number of directors \par
constituting the Board of Directors or changing the requirements for a \par
director; or\par
\par
(h) declare a dividend or extraordinary dividend with regard to \par
any security.\par
\par
7. Redemption.\par
\par
7.1 Redemption Rights Generally. On July 31, 2005 (the "First \par
Redemption Date"), upon the consent of the holders of 66 2/3% of the then \par
outstanding Series C Preferred (the "Requesting Investors"), this \par
corporation shall redeem, in the manner and with the effect provided in \par
Sections 7.2 through 7.4, (i) 33 1/3% of the shares of the Series C \par
Preferred which shall then be outstanding; (ii) on July 31, 2006 (the \par
"Second Redemption Date"), 50% of the shares of the Series C Preferred \par
which shall then be outstanding; and (iii) on July 31, 2007 (the "Third \par
Redemption Date"), 100% of the shares of the Series C Preferred which \par
shall then be outstanding. Each of the First Redemption Date, the Second \par
Redemption Date and the Third Redemption Date is hereinafter referred to as \par
the "Redemption Date".\par
\par
7.2 Redemption Price. The Series C Preferred to be redeemed on the \par
Redemption Date shall be redeemed by paying for each share (the "Redemption \par
Price") the sum of (a) $17.75 and (b) an amount equal to all dividends \par
accrued but unpaid thereon up to the Redemption Date and all other \par
dividends declared but unpaid thereon. \par
\par
7.3 Redemption Procedures. Not less than 60 days before the First \par
Redemption Date, the Requesting Investors shall give written notice to this \par
corporation of their desire for this corporation to redeem the Series C \par
Preferred. Not less than 30 days before the Redemption Date, written \par
notice shall be made to the holders of record of the Series C Preferred \par
Stock to be redeemed, specifying the number of shares to be redeemed, the \par
Redemption Price and the place and date of such redemption, which date \par
shall not be a day on which banks in California are required or authorized \par
to close. If such notice of redemption shall have been duly given and if \par
on or before such Redemption Date the funds necessary for redemption shall \par
have been set aside so as to be and continue to be available therefor, then \par
notwithstanding that any certificate for shares of Series C Preferred to be \par
redeemed shall not have been surrendered for cancellation, after the close \par
of business on such Redemption Date, the shares so called for redemption \par
shall no longer be deemed outstanding, the dividends thereon shall cease to \par
accrue, and all rights with respect to such shares shall forthwith after \par
the close of business on the Redemption Date, cease, except only the right \par
of the holders thereof to receive, upon presentation of the certificate \par
representing shares so called for redemption, the Redemption Price \par
therefor, without interest thereon.\par
\par
7.4 Redeemed Shares to be Retired. Any shares of Series C Preferred \par
redeemed pursuant to this Section 6 shall be permanently retired and shall \par
not under any circumstances be reissued; and this corporation may from time \par
to time take such appropriate corporate action as may be necessary to \par
reduce the number of authorized shares of Series C Preferred accordingly. \par
\par
8. Notices. Any notice required by the provisions of these Amended \par
and Restated Articles of Incorporation, except as otherwise specifically \par
provided herein, to be given to the holders of shares of Series A \par
Preferred, Series B Preferred or Series C Preferred shall be in writing and \par
may be delivered by personal service or sent by telecopier, e-mail, \par
telegraph or cable or sent by first class mail, return receipt requested, \par
with postage thereon fully prepaid. All such communications shall be \par
addressed to each holder of record at its address appearing on the books of \par
this corporation. If sent by telecopier, e-mail, telegraph or cable, a \par
confirming copy of such notice shall be contemporaneously sent by mail (in \par
the manner provided above) to the holders. Service of any such \par
communication made only by mail shall be deemed complete on the date of \par
actual delivery as shown by the addressee's delivery receipt or at the \par
expiration of the third (3rd) business day after the date of mailing, \par
whichever is earlier in time.\par
\par
\pard\qc IV\par
\pard\par
1. The liability of the directors of this corporation for monetary \par
damages shall be eliminated to the fullest extent permissible under \par
California law.\par
\par
\pard\qc V\par
\pard\par
2. This corporation is authorized to provide indemnification of \par
agents (as defined in Section 317 of the California Corporations Code) \par
through bylaw provisions, agreements with agents, vote of shareholders or \par
disinterested directors or otherwise, in excess of the indemnification \par
otherwise permitted by Section 317 of the California Corporations Code, \par
subject only to the applicable limits set forth in Section 204 of the \par
California Corporations Code with respect to actions for breach of duty to \par
the corporation and its shareholders.\par
\par
3. The foregoing amendment and restatement of these Articles of \par
Incorporation has been duly approved by the Board of Directors.\par
\par
4. The foregoing amendment and restatement of these Articles of \par
Incorporation has been duly approved by the required vote of shareholders \par
in accordance with Section 902 of the California Corporations Code. The \par
total number of outstanding shares of this corporation is 1,162,487 shares \par
of Common Stock, 100,000 shares of Series A Preferred Stock, 139,000 shares \par
of Series B Preferred Stock and zero shares of Series C Preferred Stock. \par
The number of shares voting in favor of the amendment equaled or exceeded \par
the vote required. The percentage vote required was (a) more than 50% of \par
the outstanding shares of Common Stock, Series A Preferred Stock and Series \par
B Preferred Stock voting together, (b) more than 50% of the outstanding \par
shares of Common Stock voting as a class and (c) more than 50% of the \par
outstanding shares of Series A Preferred Stock and Series B Preferred Stock \par
voting together as a class. \par
\par
We further declare under penalty of perjury under the laws of the \par
State of California that the matters set forth in this certificate are true \par
and correct of our own knowledge.\par
\par
DATE: November 15, 2001\par
\par
/s/Daniel P. McGuire\par
---------------------------------\par
Daniel P. McGuire, President\par
\par
\par
/s/Stephen J. Golden\par
---------------------------------\par
Stephen J. Golden, Secretary\par
\par
\par
\pard\qc METALCLAD CORPORATION\par
\par
PRESS RELEASE\par
December 14, 2001\par
\par
FOR IMMEDIATE RELEASE\par
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METALCLAD ANNOUNCES PLANS FOR THE FUTURE AND STRATEGIC INVESTMENTS\par
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Newport Beach, California, Metalclad Corporation (NASDAQ: MTLC), announced \par
today its plan for moving forward. \par
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Since receiving a $16 million cash payment from Mexico in settlement of the \par
Nafta litigation, the Company has explored several strategic directions and \par
concluded the most promising avenue for creating value is to merge with a \par
fast growing company in need of capital and a publicly traded stock.\par
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Metalclad finds itself in the enviable position of having an established, \par
profitable subsidiary; significant cash reserves; and an institutional \par
investor base that would be very supportive of a merger with a company \par
poised for significant growth and profitability. Moreover, the Company has \par
involved major individual shareholders in the decision-making process and \par
has won their support for a proper and well-conceived merger.\par
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Many opportunities for a merger were explored in anticipation of payment \par
from Mexico, and there are several being looked at currently. No \par
definitive time frame for concluding a merger can be made. The Company is \par
in a position to move quickly provided the appropriate candidate is \par
identified.\par
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In order to enhance cash returns prior to selecting the most ideal merger \par
candidate available, the Company has made two small placements of capital.\par
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The Company has made a loan in the amount of $1,250,000 to Blake Capital \par
Partners, an affiliate of Wayne M. Mills, the largest single shareholder of \par
the Company, of Edina, Minnesota. The loan bears interest at 6% per annum \par
for a period of six months with a default rate of 12% thereafter. The loan \par
is secured by a pledge of 500,000 shares of stock in Metalclad Corporation \par
owned by Mills and Blake. \par
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The Company has participated to the extent of $1 million in a private \par
placement of securities in a company known as Catalytic Solutions, Inc. \par
("CSI"), a private company based in Oxnard, California (www.catsolns.com). \par
The offering was handled by JP Morgan and Hambrecht & Quist and consists of \par
a preferred stock offering convertible into common stock of CSI. CSI is a \par
rapidly growing private company that has developed a less expensive \par
catalytic converter for automobiles.\par
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The Company will be filing a report with the SEC on Form 8-K in the next \par
few days more fully detailing the transactions with CSI and Blake. Both of \par
these opportunities came through substantial shareholder affiliates of the \par
Company.\par
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Because of the prominent role played by Anthony C. Dabbene these past six \par
years and because of the importance of the role he is expected to play in \par
the Company's merger plans he has been promoted and will hereafter hold the \par
titles and perform the duties of Executive Vice President, in addition to \par
his current role as Chief Financial Officer.\par
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For additional information contact: Grant S. Kesler, President\par
Anthony C. Dabbene, CFO\par
Metalclad Corporation \par
(949) 719-1234\par
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Statements in this release that are not strictly historical are "forward-\par
looking" statements which should be considered subject to the many \par
uncertainties that exist in the Company's operations and business \par
environment. These uncertainties, which include economic and currency \par
conditions, market demand and pricing, competitive and cost factors, and \par
the like, are included in this release.\par