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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant |X|
Filed by a Party other than the Registrant|_|
Check the appropriate box:
|X| Preliminary Proxy Statement |_| Confidential, For Use of Commission Only
(as permitted by Rule 14a-6(e)(2))
|_| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
COMMODORE APPLIED TECHNOLOGIES, INC.
(Name of Registrant as Specified in Its Charter)
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(Names of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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|_| Fee paid previously with preliminary materials:
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|_| Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, of
the form or schedule and the date of its filing.
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(1) Amount previously paid:
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(2) Form, Schedule or Registration Statement no.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
COMMODORE APPLIED TECHNOLOGIES, INC.
150 East 58th Street, Suite 3400
New York, New York 10155
May ___, 1997
Dear Stockholder:
You are cordially invited to attend the 1996 Annual Meeting of Stockholders
of Commodore Applied Technologies, Inc. (the "Company") to be held on Tuesday,
June 17, 1997, at 10:00 a.m., local time, at the American Stock Exchange, Inc.,
86 Trinity Place, New York, New York 10006.
Enclosed are the Notice of Annual Meeting, Proxy Statement and form of
proxy relating to the Annual Meeting which we urge you to read carefully for a
description of the specific business to be acted upon at the Annual Meeting.
Also enclosed for your review is the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1996.
To assure that your interests will be represented at the Annual Meeting,
regardless of whether you plan to attend the Annual Meeting in person, please
complete, sign, date and return the enclosed form of proxy as promptly as
possible to ensure that your shares will be voted. Because mail delays occur
frequently, it is important that the enclosed form of proxy be returned well in
advance of the Annual Meeting.
I look forward to seeing you at the Annual Meeting and hope to have the
opportunity to meet with you personally and introduce you to our management team
and the other members of the Board of Directors.
Sincerely,
PAUL E. HANNESSON
Chairman of the Board, President
and Chief Executive Officer
<PAGE>
COMMODORE APPLIED TECHNOLOGIES, INC.
150 East 58th Street, Suite 3400
New York, New York 10155
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held June 17, 1997
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NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the "Annual
Meeting") of Commodore Applied Technologies, Inc., a Delaware corporation (the
"Company"), will be held at 10:00 a.m., local time, on Tuesday, June 17, 1997,
at the American Stock Exchange, Inc., 86 Trinity Place, New York, New York
10006, for the following purposes:
1. To elect ten members to the Company's Board of Directors, each to hold
office until the next Annual Meeting of Stockholders or until his
successor is duly elected and qualified;
2. To consider and vote upon a proposal to approve and adopt an amendment
to the Company's Certificate of Incorporation to (a) increase the
number of authorized shares of common stock, par value $.001 per
share, of the Company (the "Common Stock") from 50,000,000 shares to
75,000,000 shares and (b) increase the number of authorized shares of
preferred stock, par value $.001 per share, of the Company (the
"Preferred Stock") from 5,000,000 shares to 10,000,000 shares;
3. To consider and vote upon a proposal to approve the issuance of a
warrant to purchase 7,500,000 shares of Common Stock to Commodore
Environmental Services, Inc., a Delaware corporation and the owner of
69.3% of the outstanding shares of Common Stock of the Company;
4. To ratify the appointment of Price Waterhouse LLP as the Company's
independent auditors for the fiscal year ending December 31, 1997; and
5. To consider and transact such other business as may properly be
brought before the Annual Meeting or any adjournment or postponement
thereof.
The Board of Directors has fixed May 15, 1997, as the record date for the
determination of stockholders entitled to notice of, and to vote at, the Annual
Meeting and any postponements or adjournments thereof, and only stockholders of
record at the close of business on that date are entitled to such notice and to
vote at the Annual Meeting. A list of stockholders entitled to vote at the
Annual Meeting will be open for examination, during ordinary business hours, at
the location of the Annual Meeting and at the offices of the Company for ten
days preceding the Annual Meeting.
By Order of the Board of Directors
MICHAEL D. FULLWOOD
Senior Vice President, Chief Financial and
Administrative Officer, Secretary and General Counsel
New York, New York
May ___, 1997
YOUR VOTE IS IMPORTANT
It is important that at least a majority of the outstanding shares of
Common Stock be represented at the Annual Meeting in person or by proxy.
Therefore, regardless of whether you plan to attend the Annual Meeting, please
complete, sign, date and return the enclosed form of proxy promptly in the
enclosed postage-paid envelope. Stockholders who attend the Annual Meeting may
revoke their proxies and vote in person if they desire.
<PAGE>
ANNUAL MEETING OF STOCKHOLDERS OF
COMMODORE APPLIED TECHNOLOGIES, INC.
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PROXY STATEMENT
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Date, Time and Place of Annual Meeting
This Proxy Statement is being furnished to the stockholders of Commodore
Applied Technologies, Inc., a Delaware corporation (the "Company"), in
connection with the solicitation of proxies by the Board of Directors of the
Company (the "Board of Directors" or the "Board") from holders of outstanding
shares of common stock, par value $.001 per share, of the Company (the "Common
Stock"), for use at the Annual Meeting of Stockholders to be held on Tuesday,
June 17, 1997, and at any adjournment or postponement thereof (the "Annual
Meeting"). This Proxy Statement, the attached Notice of Annual Meeting of
Stockholders and the enclosed form of proxy are first being mailed to
stockholders on or about May 19, 1997. The complete mailing address, including
zip code, of the principal executive offices of the Company is 150 East 58th
Street, Suite 3400, New York, New York 10155.
Information Concerning Solicitation of Proxies; Revocation of Proxies
The costs of preparing, assembling and mailing the proxy material will be
born by the Company. Solicitations will be made only by use of the mail except
that, if deemed desirable, officers and regular employees of the Company may
solicit proxies by telephone, facsimile and/or other means of communication.
Such persons will receive no compensation therefor in addition to their regular
salaries, but may be reimbursed for reasonable out-of-pocket expenses in
connection with such solicitation. Arrangements will be made with banks, brokers
and other custodians, nominees and fiduciaries to forward copies of the proxy
material to the beneficial owners of the stock held of record by such persons
and to request authority for the execution of proxies. The Company will
reimburse such persons for their reasonable expenses incurred in this
connection. The aggregate expenses anticipated to be incurred by the Company
relating to this solicitation are expected to be approximately $[_____________].
A Stockholder executing a proxy may revoke such proxy, at any time before
the shares subject to the proxy are voted, by (i) filing with the Secretary of
the Company at the Company's principal executive offices (a) a written notice of
revocation bearing a later date than the proxy or (b) a duly executed proxy
relating to the same shares bearing a later date than the original proxy, or
(ii) attending the Annual Meeting in person and expressing a desire in writing
to revoke the previously delivered proxy and to vote his or her shares in person
(attendance at the Annual Meeting will not in and of itself constitute
revocation of a proxy). No revocation of a previously delivered proxy shall be
deemed effective until it is received by the Secretary of the Company before the
shares subject to the proxy are voted at the Annual Meeting.
Purposes of the Annual Meeting
At the Annual Meeting, the Company's stockholders will be asked to consider
and vote upon the following matters:
1. To elect ten members to the Company's Board of Directors, each to hold
office until the next Annual Meeting of Stockholders or until his
successor is duly elected and qualified;
2. To consider and vote upon a proposal to approve and adopt an amendment
to the Company's Certificate of Incorporation to (a) increase the
number of authorized shares of Common Stock from 50,000,000 shares to
75,000,000 shares and (b) increase the number of authorized shares of
preferred stock, par value $.001 per share, of the Company (the
"Preferred Stock") from 5,000,000 shares to 10,000,000 shares;
3. To consider and vote upon a proposal to approve the issuance of a
warrant to purchase 7,500,000 shares of Common Stock to Commodore
Environmental Services, Inc., a Delaware corporation and the owner of
69.3% of the outstanding shares of Common Stock of the Company
("Environmental");
<PAGE>
4. To ratify the appointment of Price Waterhouse LLP as the Company's
independent auditors for the fiscal year ending December 31, 1997; and
5. To consider and transact such other business as may properly be
brought before the Annual Meeting or any adjournment or postponement
thereof.
As of the date of this Proxy Statement, the Board of Directors knows of no
other business which will be presented for consideration at the Annual Meeting.
Unless contrary instructions are indicated on the enclosed proxy, all shares
represented by valid proxies received pursuant to this solicitation (and which
have not been revoked in accordance with the procedures set forth above) will be
voted (i) FOR the election of the ten nominees for director named herein, (ii)
FOR the approval and adoption of an amendment to the Company's Certificate of
Incorporation increasing the number of authorized shares of Common Stock and
Preferred Stock, (iii) FOR the approval of the issuance of a warrant to purchase
7,500,000 shares of Common Stock to Environmental, (iv) FOR the ratification of
the appointment of Price Waterhouse LLP as the Company's independent auditors
for the fiscal year ending December 31, 1997 and (v) in favor of all other
proposals as may properly be brought before the Annual Meeting or any
adjournment or postponement thereof. If any other matters are properly presented
at the Annual Meeting for consideration, votes will be cast pursuant to said
proxies in respect of any such other business in accordance with the judgment
and in the discretion of the persons acting thereunder. In the event a
shareholder specifies a different choice by means of the enclosed form of proxy,
his shares will be voted in accordance with the specification so made.
Outstanding Shares and Voting Rights
The Board of Directors has set the close of business on May 15, 1997 as the
record date (the "Record Date") for determining stockholders of the Company
entitled to notice of, and to vote at, the Annual Meeting. As of the Record Date
there were [21,650,000] shares of Common Stock issued and outstanding, all of
which are entitled to be voted at the Annual Meeting. There was no beneficial
owner (as defined under the rules of the Securities and Exchange Commission) of
more than 5% of the Common Stock known to the Company at May 15, 1997, other
than as set forth under the caption "Security Ownership of Certain Beneficial
Owners and Management" herein. Holders of Common Stock are entitled to one vote
per share on each matter that is submitted to stockholders for approval.
The attendance, in person or by proxy, of the holders of shares of Common
Stock representing a majority of the outstanding shares of such stock will be
necessary to constitute a quorum at the Annual Meeting. For purposes of electing
directors at the Annual Meeting, the nominees receiving the affirmative vote of
the holders of a plurality of the shares of Common Stock present in person or
represented by proxy and entitled to vote at the Annual Meeting will be elected
as directors of the Company. The affirmative vote of the holders of a majority
of the shares of Common Stock present in person or represented by proxy and
entitled to vote at the Annual Meeting will be required for (i) the approval and
adoption of an amendment to the Company's Certificate of Incorporation
increasing the number of authorized shares of Common Stock and Preferred Stock,
(ii) the approval of the issuance of a warrant to purchase 7,500,000 shares of
Common Stock to Environmental, (iii) the ratification of the appointment of
Price Waterhouse LLP as the Company's independent auditors for the fiscal year
ending December 31, 1997 and (iv) the approval of any other matter that may
properly be submitted to a vote of the stockholders at the Annual Meeting.
Abstentions will be considered as shares present and entitled to vote for
purposes of determining the presence of a quorum and for purposes of determining
the outcome of any matter submitted to the stockholders for a vote, but will not
be counted as votes "for" or "against" any matter. The inspectors of election
will treat shares referred to as "broker or nominee non-votes" (shares held by
brokers or nominees as to which instructions have not been received from the
beneficial owners or persons entitled to vote and the broker or nominee does not
have discretionary voting power on a particular matter) as shares that are
present and entitled to vote for purposes of determining the presence of a
quorum. For purposes of determining the outcome of any matter as to which the
proxies reflect broker or nominee non-votes, shares represented by such proxies
will be treated as not present and not entitled to vote on that subject matter
and therefore will not be considered by the inspectors of election when counting
votes cast on the matter (even though such shares are considered entitled to
vote for quorum purposes and may be entitled to vote on other matters.) If less
than a majority of the outstanding shares of Common Stock are represented at the
Annual Meeting, a majority of the shares so represented may adjourn the Annual
Meeting from time to time without further notice.
2
<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of May 15, 1997 with
respect to (i) the beneficial ownership of the Common Stock of the Company by
each beneficial owner of more than 5% of the outstanding shares of Common Stock,
each director and executive officer who owns shares of Common Stock, and all
executive officers and directors of the Company as a group, and (ii) the number
of shares of Common Stock owned by each such person and group. Unless otherwise
indicated, the owners have sole voting and investment power with respect to
their respective shares.
<TABLE>
<CAPTION>
Number of Shares of Percentage of Outstanding
Name and Address Common Stock Beneficially Common Stock
of Beneficial Owner(1) Owned(2) Beneficially Owned
- ---------------------- -------- ------------------
<S> <C> <C>
Commodore Environmental
Services, Inc. ......................... 15,000,000 69.3%
Bentley J. Blum .......................... 15,000,000(3) 69.3%
Paul E. Hannesson ........................ [1,745,275](4) [8.0]%
Tom J. Fatjo, Jr ......................... 289,800(5) 1.3%
Albert E. Abel............................ [721,554](6) [3.2]%
Ed L. Romero ............................. 450,000 2.1%
Andrew P. Oddi ........................... 79,740(7) *
Kenneth L. Adelman ....................... [75,000](8) *
Michael D. Fullwood ...................... [25,000](9) *
Herbert A. Cohen ......................... 45,000(10) *
David L. Mitchell ........................ 45,000(10) *
C. Thomas McMillen ....................... 45,000(10) *
Edwin L. Harper .......................... [116,565](11) *
Carl O. Magnell .......................... [96,989](12) *
Neil L. Drobny ........................... [133,767](15) *
Thomas E. Noel ........................... [100,000](14) *
All executive officers
and directors as
a group (16 persons) ................... [15,739,800] [72.7]%
</TABLE>
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Percentage ownership is less than 1%.
(1) The address of each of Commodore Environmental Services, Inc., Bentley J.
Blum, Paul E. Hannesson, Tom J. Fatjo, Jr., Kenneth L. Adelman, Michael D.
Fullwood, Herbert A. Cohen, David L. Mitchell, C. Thomas McMillen and Edwin
L. Harper, Ph.D. is 150 East 58th Street, Suite 3400, New York, New York
10155. The address of Albert E. Abel, Carl O. Magnell and Neil L. Drobny is
1487 Delashmut Avenue, Columbus, Ohio 43212. The address of Andrew P. Oddi
is 40 Cutter Mill Road, Suite 509, Great Neck, New York 11021. The address
of Ed L. Romero is 2340 Menaul Boulevard, NE, Suite 400, Albuquerque, New
Mexico 87107. The address
3
<PAGE>
of Thomas E. Noel is 1420 N. Sam Houston Parkway E., Suite 190, Houston,
Texas 77032. Bentley J. Blum and Paul E. Hannesson are brothers-in-law.
(2) As used herein, the term beneficial ownership with respect to a security is
defined by Rule 13d-3 under the Securities Exchange Act of 1934, as
amended, as consisting of sole or shared voting power (including the power
to vote or direct the disposition of) with respect to the security through
any contract, arrangement, understanding, relationship or otherwise,
including a right to acquire such power(s) during the next 60 days. Unless
otherwise noted, beneficial ownership consists of sole ownership, voting
and investment rights.
(3) Represents all of the shares of Common Stock held by Environmental, based
upon Mr. Blum's beneficial ownership of 28,224,050 shares and his spouse's
ownership of 2,000,000 shares of common stock of Environmental,
representing together [52.2]% of the outstanding shares of Environmental
common stock at May 15, 1997. Does not include 440,000 shares of
Environmental common stock owned by Simone Blum, the mother of Mr. Blum,
and 395,000 shares of Environmental common stock owned by Samuel Blum, the
father of Mr. Blum. Mr. Blum disclaims any beneficial interest in the
shares of Environmental common stock owned by his spouse, mother and
father.
(4) Consists of (i) [160,000] shares of Common Stock underlying stock options,
representing [40]% of the [400,000] stock options granted to Mr. Hannesson,
which are currently exercisable, (ii) an aggregate of 2,650,000 shares of
Environmental common stock owned by Suzanne Hannesson, the spouse of Mr.
Hannesson, (iii) 2,650,000 shares of Environmental common stock owned by
the Hannesson Family Trust (Suzanne Hannesson and John D. Hannesson,
trustees) for the benefit of Mr. Hannesson's spouse and (iv) currently
exercisable options to purchase 500,000 and 950,000 shares of Environmental
common stock at $.53 per share and $1.12 per share, respectively,
representing collectively [11.4]% of the outstanding shares of
Environmental common stock at May 15, 1997. Does not include 1,000,000
shares of Environmental common stock owned by each of Jon Paul and Krista
Hannesson, the adult children of Mr. Hannesson, and additional stock
options to purchase 2,500,000 shares of Environmental common stock at $1.12
per share, which vest and become exercisable ratably on November 18 of each
of 1997 through 2001. Mr. Hannesson disclaims any beneficial interest in
the shares of Environmental common stock owned by or for the benefit of his
spouse and children.
(5) Consists of (i) 41,400 shares of Common Stock directly owned by Mr. Fatjo
and (ii) 248,400 shares of Common Stock owned by First Financial Alliance
Partnership, Inc., in which trusts controlled by Mr. Fatjo own 20% of the
capital stock. Does not include 124,200 shares of Common Stock owned by Tom
J. Fatjo III, the son of Mr. Fatjo. Mr. Fatjo disclaims any beneficial
interest in the shares of Common Stock owned by or for the benefit of his
son.
(6) Consist of (i) Mr. Abel's indirect beneficial interest in the shares of
Common Stock, based upon his ownership of 1,000,000 shares of Environmental
common stock, currently exercisable options to purchase an additional
1,000,000 shares of Environmental common stock, and a warrant to purchase
667,964 shares of Environmental common stock at $.05 per share, and (ii)
[50,000] shares of Common Stock, representing 40% of the [125,000] stock
options granted to Mr. Abel, which are currently exercisable.
(7) Consists of (i) Mr. Oddi's indirect beneficial interest in the shares of
Common Stock, based upon his ownership of 250,000 shares of Environmental
common stock, and (ii) [15,000] shares of Common Stock, representing stock
options granted to Mr. Oddi, which are currently exercisable.
(8) Consists of (i) Dr. Adelman's beneficial interest in the shares of Common
Stock, based upon his ownership of currently exercisable stock options to
purchase [140,000] shares of Environmental common stock, (ii) [45,000]
shares of Common Stock, representing [66-2/3]% of the [67,500] stock
options granted to Dr. Adelman in June 1996, which are currently
exercisable, and (iii) [30,000] shares of Common Stock, representing [20]%
of the [150,000] stock options granted to Dr. Adelman in May 1997, which
are currently exercisable.
(9) Consists of (i) Mr. Fullwood's beneficial interest in the shares of Common
Stock, based upon his ownership of currently exercisable stock options to
purchase [100,000] shares of Environmental common stock and (ii) [25,000]
shares of Common Stock, representing [20]% of the [125,000] stock options
granted to Mr. Fullwood in May 1997, which are currently exercisable.
4
<PAGE>
(10) Consists of [45,000] shares of Common Stock, representing [66-2/3]% of the
[67,500] stock options granted to each of Messrs. Cohen, Mitchell and
McMillen, which are currently exercisable.
(11) Consists of (i) Dr. Harper's beneficial interest in the shares of Common
Stock, based upon his ownership of currently exercisable stock options to
purchase [750,000] shares of Environmental common stock and (ii) [64,950]
shares of Common Stock, issuable upon exercise of currently exercisable
stock options granted to Dr. Harper by the Company.
(12) Consists of (i) Mr. Magnell's indirect beneficial interest in the shares of
Common Stock, based upon his ownership of [90,000] shares of Environmental
common stock, and currently exercisable options to purchase [150,000]
shares of Environmental common stock and (ii) [35,000] shares of Common
Stock, representing stock options granted to Mr. Magnell by the Company,
which are currently exercisable.
(13) Consists of (i) Dr. Drobny's indirect beneficial interest in the shares of
Common Stock, based upon his beneficial ownership of [7,266] shares of
Environmental common stock and options to purchase [240,000] shares of
Environmental common stock at $.50 per share, and (ii) [70,000] shares of
Common Stock underlying stock options, representing [40]% of the [175,000]
stock options granted to Dr. Drobny, which are currently exercisable.
(14) Consists of [100,000] shares of Common Stock underlying stock options,
representing 40% of the 250,000 stock options granted to Mr. Noel, which
are currently exercisable.
5
<PAGE>
PROPOSAL 1
ELECTION OF DIRECTORS
The Company's Certificate of Incorporation provides that the number of
directors constituting the Board of Directors shall be determined by the Board
of Directors, subject to the By-Laws of the Company. The Company's By-Laws
provide that the number of directors shall be determined from time to time by
the Board of Directors, provided that no decrease in the number of directors
shall have the effect of shortening the term of any incumbent director. The
Board of Directors has fixed at ten the number of directors that will constitute
the Board for the ensuing year. Each director elected at the Annual Meeting will
serve for a term expiring at the next Annual Meeting of Stockholders, which is
expected to be held in May 1998, or until his successor has been duly elected
and qualified. Each of the incumbent directors has been nominated as a director
to be elected at the Annual Meeting by the holders of Common Stock, and proxies
will be voted for such persons absent contrary instructions.
The Board of Directors has no reason to believe that any nominee will
refuse to act or be unable to accept election; however, in the event that a
nominee for a directorship is unable to accept election or if any other
unforeseen contingencies should arise, it is intended that proxies will be voted
for the remaining nominees and for such other person as may be designated by the
Board of Directors, unless it is directed by a proxy to do otherwise.
The ten nominees for election to the Board of Directors are as follows:
Paul E. Hannesson - 55
Mr. Hannesson has been a director of the Company since March 1996 and was
appointed Chairman of the Board in November 1996. Mr. Hannesson also served as
Chief Executive Officer of the Company from March to October 1996 and as
President of the Company from March to September 1996, and was reappointed Chief
Executive Officer of the Company on November 18, 1996 and President of the
Company on May 1, 1997. Mr. Hannesson has been a director of Environmental since
February 1993 and was appointed its Chairman of the Board and Chief Executive
Officer in November 1996. Mr. Hannesson also served as President of
Environmental from February 1993 to July 1996 and was reappointed President on
May 1, 1997. Mr. Hannesson also currently serves as the Chairman of the Board
and Chief Executive Officer of Commodore Separation Technologies, Inc., an 87%
owned subsidiary of the Company ("Separation"), Commodore Advanced Sciences,
Inc., a wholly owned subsidiary of the Company ("CAS"), and Commodore CFC
Technologies, Inc., a wholly owned subsidiary of the Company ("Refrigerant").
Mr. Hannesson was a private investor and business consultant from 1990 to 1993,
and was also an officer and director of Specialty Retail Services, Inc. from
1989 to August 1991. He currently serves as Chairman of the Board of Lanxide
Corporation, where he also serves on its Compensation Committee. Mr. Hannesson
is the brother-in-law of Bentley J. Blum, a director of the Company.
Bentley J. Blum - 55
Mr. Blum served as Chairman of the Board of the Company from March to
November 1996, and has served as a director of the Company since that date. Mr.
Blum served as the Chairman of the Board of Environmental from 1984 to November
1996, and has served as a director of Environmental since that date. Mr. Blum
also currently serves as a director of Separation, CAS and Refrigerant. For more
than 15 years, Mr. Blum has been actively engaged in real estate acquisitions
and currently is the sole stockholder and director of a number of corporations
which hold real estate interests, oil drilling interests and other corporate
interests. Mr. Blum is a director of Lanxide Corporation, a research and
development company developing metal and ceramic materials; Federal Resources
Corporation, a company formerly engaged in manufacturing, retail distribution
and natural resources development; Specialty Retail Services, Inc., a former
distributor of professional beauty products; and North Valley Development Corp.,
an inactive real estate development company. Mr. Blum is the controlling
6
<PAGE>
stockholder of Environmental. Mr. Blum is the brother-in-law of Paul E.
Hannesson, the Chairman of the Board, President and Chief Executive Officer of
the Company.
Edwin L. Harper, Ph.D. - 55
Dr. Harper served as a Co-Vice Chairman of the Company from November 1996
to April 1997, and has served as a director of the Company since that date. Dr.
Harper also served as President and Chief Operating Officer of both the Company
and Environmental, and as the Chairman of the Board and Chief Executive Officer
of Separation, CAS and Refrigerant, from November 1996 to April 1997, and has
served as a director of all of such companies since that date. Dr. Harper had
been the President and Chief Executive Officer of the Association of American
Railroads, a trade association for the major railroads in North America, since
January 1992. Prior to such appointment, Dr. Harper was the Co-Chief Executive
Officer of Campbell Soup Company from November 1989 through January 1990, and
its Executive Vice President and Chief Financial Officer from 1986 to 1991. Dr.
Harper has held several other senior executive officer positions in the past,
with Dallas Corporation (1983 to 1986), Emerson Electric Company (1978 to 1981)
and CertainTeed Corporation (1975 to 1978), and served in the White House as
Assistant to the President, Deputy Director of the Office of Management and
Budget and Chairman of the President's Council on Integrity and Efficiency in
Government from 1981 to 1983. Dr. Harper holds a Ph.D. degree from the
University of Virginia.
Thomas E. Noel - 58
Mr. Noel joined the Board of Directors in October 1996 and served as the
Company's President and Chief Executive Officer from October to November 17,
1996. Mr. Noel was appointed President and Chief Operating Officer of CAS
effective December 1, 1996. Mr. Noel has held numerous executive positions in
hazardous, nonhazardous and low-level nuclear waste industries. He previously
served as President of TransAmerican Waste Industries, Inc., a non-hazardous
waste disposal company, and two years as President of Ecova Corporation, an
Amoco subsidiary in the environmental services business. From 1984 to 1992, he
was at Chemical Waste Management, Inc., where he served as Senior Vice President
of operations, managing that company's core business with more than 6,000
employees and $1.5 billion in annual revenues. He also previously served as
President of Pakhoed, USA and DSI Terminals, Inc. After graduating from the
United States Military Academy at West Point, New York, he served 14 years in
the Army, including two years as an aide to General Creighton Abrams, Commander
of all U.S. Forces in Vietnam and Army Chief of Staff. Mr. Noel was presidential
appointee as Assistant Secretary of the Department of Energy, responsible for
the U.S. Strategic Petroleum Reserve, a $20 billion federal program created
following the Arab oil boycott in the early 1970's.
Kenneth L. Adelman, Ph.D. - 49
Dr. Adelman joined the Boards of Directors of the Company and Environmental
in July 1996 and was appointed Executive Vice President, Marketing and
International Development of the Company on May 5, 1997. Dr. Adelman also joined
the Board of Directors of Separation in April 1997. Since 1987, Dr. Adelman has
been an independent consultant on international issues to various corporations,
including Lockheed Martin Marietta Corporation and Loral Corporation.
Previously, Dr. Adelman held positions of responsibility in arms control during
most of the Reagan Administration. From 1983 to the end of 1987, he was Director
of the United States Arms Control and Disarmament Agency. Dr. Adelman was a
Professor at Georgetown University and writer for Washingtonian Magazine from
1987 to 1991. Dr. Adelman accompanied Ronald Reagan on summits with Mikhail
Gorbachev, and negotiated with Soviet diplomats on nuclear and chemical weapons
control issues, from 1985 to 1987. He also headed the United States team on
annual arms control discussions with top-level officials of the People's
Republic of China from 1983 through 1986. From 1981 to 1983, he served as Deputy
United States Representative to the United Nations with the rank of Ambassador
Extraordinary and Plenipotentiary. Dr. Adelman holds M.A. and Ph.D. degrees from
Georgetown University.
7
<PAGE>
Herbert A. Cohen - 62
Mr. Cohen joined the Boards of Directors of the Company and Environmental
in July 1996. Mr. Cohen has been a practicing negotiator for the past three
decades acting in an advisory capacity in hostage negotiations and crisis
management. He has been an advisor to Presidents Carter and Reagan in the
Iranian hostage crisis, the government's response to the skyjacking of TWA
Flight 847 and the seizure of Achille Lauro. Mr. Cohen's clients have included
large corporations and government agencies such as the Department of State, the
Federal Bureau of Investigation, the Conference of Mayors, the Bureau of Land
Management, Lands and Natural Resources Division in Conjunction with the EPA,
and the United States Department of Justice. In addition, Mr. Cohen was an
advisor and consultant to the Strategic Arms Reduction Talks negotiating team.
Mr. Cohen holds a law degree from New York University School of Law, and has
lectured at numerous academic institutions.
C. Thomas McMillen - 44
Mr. McMillen joined the Board of Directors of the Company in July 1996. Mr.
McMillen was elected to three consecutive terms (1987-1993) in the U.S. House of
Representatives from the Fourth Congressional District of Maryland, serving on
both the Energy and Commerce Committee and the Science, Space and Technology
Committee. Currently, Mr. McMillen serves as Chairman and Chief Executive
Officer of the Complete Wellness Centers, Inc., a privately held physician
practice management company. Previously, he served as Chief Administrative
Officer of Clinicorp, Inc., a publicly traded physician practice management
company. He is also a member of the Board of Directors of Chemring Group, PLC
and Integrated Communication Network, Inc. Mr. McMillen was also the first
selection by Buffalo in the 1974 National Basketball Association draft,
subsequently playing for eleven years in the NBA. Mr. McMillen received a B.S.
degree from the University of Maryland, where he was elected Phi Beta Kappa and
was an All-American basketball player. He received a M.A. degree in politics and
philosophy from Oxford University in 1978.
David L. Mitchell - 75
Mr. Mitchell joined the Boards of Directors of the Company and
Environmental in July 1996, and the Board of Directors of Separation in April
1997. For the past thirteen years, Mr. Mitchell has been President and
co-founder of Mitchell & Associates, Inc., a banking firm providing financial
advisory services in connection with corporate mergers, acquisitions and
diversities. Prior to forming Mitchell & Associates in 1982, Mr. Mitchell was a
Managing Director of Shearson/American Express. From 1979 to 1982, a Managing
Director of First Boston Corporation from 1976 to 1978, and a Managing Director
of the investment banking firm of S.G. Warburg & Company from 1965 to 1976. Mr.
Mitchell holds a bachelor's degree from Yale University.
Ed L. Romero - 62
Mr. Romero joined the Board of Directors of the Company in October 1996,
upon the Company's acquisition of Advanced Sciences, Inc. ("Advanced Sciences").
Mr. Romero founded Advanced Sciences (now a wholly owned subsidiary of CAS) in
1983 and currently serves as its Chairman and Chief Executive Officer. Mr Romero
is a prominent member of many veteran groups and Hispanic business
organizations. He is currently president of the Hispanic Culture Foundation and
also a member of the board of the Democratic National Committee's Finance
Committee.
Tom J. Fatjo, Jr. - 56
Mr. Fatjo served as a Co-Vice Chairman of the Company from November 1996 to
April 1997 and has served as a director of the Company since that date. Mr.
Fatjo also currently serves as Chairman of TransAmerican Waste Industries, Inc.,
a Houston based solid waste management company which he founded in 1991. Mr.
Fatjo is also the developer of The Houstonian, a 22-acre fitness and
preventative medicine complex and luxury
8
<PAGE>
condominium. Mr. Fatjo has served on the boards of several other public
companies including Western Waste, Inc., Rolm Corporation, Consolidated Fibers,
Inc., Health Resources Corporation of America, Criterion Capital Corporation,
Advanced Sciences, Inc. and American Title, Inc., among others. He holds a B.A.
degree from Rice University. He has also co-authored a book, With No Fear of
Failure (1981), a treatise on his personal business philosophy.
Messrs. Hannesson and Blum are brothers-in-law. No family relationship
exists among any other nominees for election as directors of the Company. No
arrangement or understanding exists between any nominee for election to the
Board of Directors and any other person, pursuant to which any nominee was
selected to be a director of the Company.
Vote Required and Recommendation
The Board of Directors has unanimously approved the nomination of each of
the individuals named above to serve as a director of the Company until the next
Annual Meeting of Stockholders, or until his successor is duly elected and
qualified. The nominees receiving the affirmative vote of the holders of a
plurality of the shares of Common Stock present in person or represented by
proxy and entitled to vote at the Annual Meeting shall be elected as directors
of the Company. Environmental intends to cause its shares of Common Stock to be
voted in favor of each of the persons nominated to serve as a director of the
Company at the Annual Meeting. Accordingly, election of such persons to the
Board of Directors is assured.
THE BOARD OF DIRECTORS RECOMMENDS AN AFFIRMATIVE VOTE FOR EACH OF THE
PERSONS NOMINATED TO SERVE AS A DIRECTOR OF THE COMPANY.
9
<PAGE>
INFORMATION REGARDING BOARD
MEETINGS, COMMITTEES AND MANAGEMENT
The Board of Directors held [3] meetings and took certain actions by
written consent during the fiscal year ended December 31, 1996. Each incumbent
director attended at least 75 percent of the aggregate of (i) the total number
of meetings of the Board of Directors and (ii) the total number of meetings held
by all committees of the Board on which he served, except Edwin L. Harper,
Ph.D., Thomas E. Noel, Ed L. Romero and Tom J. Fatjo, Jr.
Committees of the Board
Audit Committee - During the fiscal year ended December 31, 1996, the Audit
Committee of the Board of Directors consisted of Kenneth L. Adelman, Ph.D. and
C. Thomas McMillen. Dr. Adelman resigned as a member of the Audit Committee upon
his appointment as the Company's Executive Vice President, Marketing and
International Development as of May 1, 1997. [Edwin L. Harper, Ph.D. replaced
Dr. Adelman as a member of the Audit Committee effective as of May 1, 1997.] The
Audit Committee met once during the fiscal year ended December 31, 1996, at
which it approved the selection of Price Waterhouse LLP as the Company's
independent auditors for the fiscal year ending December 31, 1997 and reviewed
the financial results of the Company for the fiscal year ended December 31,
1996. The responsibilities of the Audit Committee include recommending to the
Board of Directors the firm of independent accountants to be retained by the
Company, reviewing with the Company's independent accountants the scope and
results of their audits, and reviewing with the independent accountants and
management the Company's accounting and reporting principles, policies and
practices, as well as the Company's accounting, financial and operating controls
and staff.
Compensation/Stock Option Committee - During the fiscal year ended December
31, 1996, the Compensation/Stock Option Committee of the Board of Directors
consisted of Herbert A. Cohen, Kenneth L. Adelman, Ph.D., Tom J. Fatjo, Jr. and
Edwin L. Harper, Ph.D. Dr. Adelman resigned as a member of the
Compensation/Stock Option Committee upon his appointment as the Company's
Executive Vice President, Marketing and International Development as of May 1,
1997, and was not replaced. The Compensation/Stock Option Committee did not meet
during the fiscal year ended December 31, 1996, as there were no material
compensation matters to be considered. The Compensation/Stock Option Committee
has responsibility for establishing and reviewing employee compensation,
administering and interpreting the Company's 1996 Stock Option Plan, and
determining the recipients, amounts and other terms (subject to the requirements
of the 1996 Stock Option Plan) of options which may be granted under the 1996
Stock Option Plan from time to time.
Finance Committee - During the fiscal year ended December 31, 1996, the
Audit Committee of the Board of Directors consisted of Bentley J. Blum, Paul E.
Hannesson and David L. Mitchell. The Finance Committee did not meet during the
fiscal year ended December 31, 1996, as there were no material financial matters
to be considered. The Finance Committee has responsibility for establishing the
Company's accounting and reporting principles, policies and practices, as well
as the Company's internal accounting, financial and operating controls.
Compensation of Directors
Non-management directors of the Company receive director's fees of $500 per
meeting for attendance at Board of Directors meetings, and are reimbursed for
actual expenses incurred in respect of such attendance. The Company does not
separately compensate employees for serving as directors.
10
<PAGE>
Management
The names and ages of the executive officers and key employees of the
Company, and their positions with the Company, are as follows:
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Paul E. Hannesson 56 Chairman of the Board, President and Chief Executive Officer
Kenneth L. Adelman, Ph.D. 49 Executive Vice President, Marketing and International
Development
Michael D. Fullwood 50 Senior Vice President, Chief Financial and Administrative
Officer, Secretary and General Counsel
Albert E. Abel 53 Vice President
Carl O. Magnell, P.E. 55 Vice President
Rayburn Hanzlik 58 Vice President
Neil L. Drobny, P.E., Ph.D. 56 Vice President
Andrew P. Oddi 35 Vice President and Treasurer
William E. Ingram 51 Vice President and Controller
</TABLE>
- ----------
The Company's officer's are appointed by, and serve at the pleasure of, the
Board of Directors, subject to the terms of any employment agreements.
See "Proposal 1 - Election of Directors" above for certain biographical
information concerning Paul E. Hannesson and Kenneth L. Adelman, Ph.D.
Michael D. Fullwood was appointed Senior Vice President, Chief Financial
and Administrative Officer, Secretary and General Counsel of the Company,
Environmental, CAS, Separation and Refrigerant effective May 1, 1997. From 1987
to 1996, Mr. Fullwood served in various executive positions, including Executive
Vice President and Chief Financial Officer of Witco Corporation, a worldwide
specialty chemicals company. From 1983 to 1987, Mr. Fullwood was Senior Attorney
at Scallop Corporation (Royal Dutch/Shell Group), where he specialized in
corporate matters and mass tort litigation and handled international law for
Royal Dutch/Shell Group. Mr. Fullwood also previously served as Senior Attorney
of Caltex Petroleum and Arabian American Oil Company, handling corporate,
contractual and transnational matters. Mr. Fullwood holds a law degree from
Harvard Law School.
Carl O. Magnell, P.E. served as a Vice President of Environmental from
September 1995 to June 1996 and has served as a Vice President of the Company
since that date. From 1992 to 1995, Mr. Magnell served as Director of Research
for Civil Engineering Research Foundation (an industry- sponsored engineering
research group), and from 1964 to 1992, Mr. Magnell served in various
engineering capacities with the U.S. Army Corps of Engineers. Mr. Magnell holds
a B.S. degree form the United States Military Academy, and a M.S. in Civil
Engineering and Political Science from the Massachusetts Institute of
Technology.
Albert E. Abel has served as a Vice President of the Company since March
1996. Mr. Abel founded Commodore Laboratories, Inc. (formerly A.L. Sandpiper
Corporation), an environmental technology company ("Commodore Labs"), in 1980
and was a Vice President and one of its principal stockholders until its sale to
Environmental in 1993. Mr. Abel had been the President of Commodore Labs since
December 1993.
Rayburn Hanzlik served as Vice President, General Counsel, Chief
Administrative Officer and Secretary of the Company from January 1997 to April
1997 and currently serves as a Vice President of the Company. Mr. Hanzlik also
served as Vice President, General Counsel and Secretary of Environmental, CAS,
Separation and Refrigerant from January 1997 to April 1997. During the previous
five years, he founded and was chairman of Lanxide Sports International, Inc.
and Stealth Propulsion International, Ltd., two San Diego-based technology
companies in the sporting goods and boating industries. Mr. Hanzlik has held
other senior executive positions in
11
<PAGE>
business and government, including partner and director of Heidrick & Struggles,
Inc. from 1985 through 1990; Administrator of the Department of Energy's
Economic Regulatory Administration from 1981 through 1985; and, White House
staff from 1970 through 1975. He has also been a member of several law firms in
Washington, D.C. and Los Angeles, California. Mr. Hanzlik holds J.D. and M.A.
degrees from the University of Virginia.
Neil L. Drobny, P.E., Ph.D. served as a Vice President of Environmental
from June 1995 to June 1996 and has served as a Vice President of the Company
since that date. From October 1994 to May 1995, Dr. Drobny served as a private
consultant for Environmental. From 1981 to October 1994, Dr. Drobny served as
President and a principal stockholder of ERM-Midwest, Inc., an environmental
consulting firm that is now part of ERM, Inc., an international environmental
consulting group. Dr. Drobny also founded and served as President of
ERM/EnviroClean-Midwest, Inc., an affiliated remediation company, from 1989 to
October 1993. From 1966 to 1981, Dr. Drobny held numerous positions ranging from
Project Engineer to Director of Business Development of Battelle Memorial
Institute, an international contract research organization. Dr. Drobny received
his Ph.D. in Civil Engineering from Ohio State University in 1971.
Andrew P. Oddi was appointed Vice President and Treasurer of the Company,
Environmental, Separation and Refrigerant effective May 1, 1997. Mr. Oddi served
as the Vice President of Finance, Chief Financial Officer and Secretary of the
Company from March to November 1996. Mr. Oddi also served as Vice President of
Finance & Administration and Chief Financial Officer of Environmental from 1987
to April 1997, and served as the Vice President-Finance of Separation from
September 1996 to April 1997. From 1982 to 1987, Mr. Oddi was employed by Ernst
& Young, independent accountants, and held the position of audit manager in 1986
and 1987. Mr. Oddi is a Certified Public Accountant.
William E. Ingram served as the Company's Vice President and Controller
from October 1996 to March 1997, as its Vice President, Finance from March to
April 1997, and was reappointed Vice President and Controller effective May 1,
1997. Prior to that Mr. Ingram was Chief Financial Officer of HydroChem
Industrial Services, Inc., a privately owned, $160 million company providing
high pressure water and chemical cleaning services primarily to the
petrochemical industry. Mr. Ingram was Vice President and Region Controller for
Chemical Waste Management, Inc. (CWM) for eleven years. CWM, a subsidiary of WMX
Technologies, provides hazardous waste treatment and disposal services to a wide
range of government and industrial customers. He also spent two years with the
solid waste operations of WMX Technologies. Mr. Ingram is a Certified Public
Accountant and has an MBA from the University of Florida and a B.S. in
Accounting from Florida Southern College.
12
<PAGE>
EXECUTIVE COMPENSATION AND RELATED MATTERS
The following table sets forth the amount of all compensation paid by the
Company and/or its affiliates and allocated to the Company's operations for
services rendered during each of 1996, 1995, and 1994 to the person serving as
the Company's current Chief Executive Officer and to each of the Company's most
highly compensated executive officers other than the Chief Executive Officer
whose total salary and bonus compensation exceeded $100,000 during any such year
(the "Named Executive Officers").
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation
----------------------------------------------------------------------------------------------
Other
Name Annual All Other
Principal Position Year Salary($) Bonus($) Compensation($) Compensation($)
- ------------------ ---- --------- -------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Paul E. Hannesson 1996 265,836 50,000 -0- -0-
Chief Executive Officer 1995 186,476 -0- 96,000(1) -0-
1994 186,476 -0- 24,000(1) -0-
Carl O. Magnell 1996 117,500 20,000 -0- -0-
Vice President 1995 37,500 -0- -0- 40,000(2)
1994 -0- -0- -0- -0-
Neil L. Drobny 1996 180,000 20,000 -0- -0-
Vice President 1995 75,000 -0- -0- 81,955(3)
1994 -0- -0- -0- -0-
Albert E. Abel 1996 140,583 -0- -0- -0-
Vice President 1995 114,577 12,500 -0- -0-
1994 104,666 12,500 -0- -0-
Vincent Valeri 1996 151,666 20,000 -0- -0-
Formerly, Senior Vice 1995 140,000 20,000 -0- -0-
President and Chief 1994 11,666 -0- -0- -0-
Engineer (4)
</TABLE>
(1) Represents amounts paid to Mr. Hannesson as an allowance for living
expenses in the New York Metropolitan area.
(2) Represents consulting fees paid to Mr. Magnell prior to his full-time
employment.
(3) Represents consulting fees paid to Dr. Drobny prior to his full-time
employment.
(4) Mr. Valeri served as Senior Vice President and Chief Engineer of the
Company until December 1996, at which time he became an executive
officer of CAS.
13
<PAGE>
Stock Options
The following table sets forth certain information concerning options
granted in fiscal 1996 to the Named Executive Officers under the Company's 1996
Stock Option Plan (the "1996 Plan"). The Company has no outstanding stock
appreciation rights and granted no stock appreciation rights during fiscal 1996.
Option Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Potential Realized Value at Assumed
Annual Rates of Stock Price
% of Total Appreciation
Options for Option Term
Granted to Exercise or -----------------------------------
Options Employees in Base Price Expiration 5% 10%
Name Granted (#) Fiscal Year(2) ($/sh) Date ($) ($)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Paul E. Hannesson 400,000(1) 29.1% 6.00 12/31/2000 $120,000 $240,000
Albert E. Abel 125,000(1) 9.1% 6.00 12/31/2000 $37,500 $75,000
Carl O. Magnell 35,000 2.6% 6.00 12/31/2000 $10,500 $21,000
Neil L. Drobny 175,000(1) 12.8% 6.00 12/21/2000 $52,500 $105,000
Vincent Valeri 125,000(1) 9.1% 6.00 12/31/2000 $37,500 $75,000
</TABLE>
(1) These options were granted on March 29, 1996 pursuant to the 1996 Plan, and
are exercisable at the rate of 20% of the number of options granted in each
of calendar 1996 through 2000, inclusive, beginning on March 31, 1996 and,
unless exercised, expire on December 31, 2000 (subject to prior termination
in accordance with the applicable stock option agreements). Upon
announcement of a Change in Control (pursuant to and as defined in the 1996
Plan), all options granted under the 1996 Plan will become immediately
exercisable. Upon consummation of a Change in Control, all unexercised
options will terminate.
(2) Percentages based on 1,372,375 stock options granted to employees in fiscal
year 1996.
The following table sets forth certain information concerning the exercise
of options and the value of unexercised options held under the 1996 Plan at
December 31, 1996 by the Named Executive Officers.
<TABLE>
<CAPTION>
Aggregated Option Exercises in the Last Fiscal Year and FY-End Option Values
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Options at FY-End (#) at FY-End ($)(1)
Shares Acquired Value Realized --------------------- ----------------
Name on Exercise (#) ($)(2) Exercisable/Unexercisable Exercisable/Unexercisable
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Paul E. Hannesson -0- -0- 80,000 320,000 -0- -0-
Albert E. Abel -0- -0- 25,000 100,000 -0- -0-
Carl O. Magnell -0- -0- 35,000 -0- -0- -0-
Neil L. Drobny -0- -0- 35,000 140,000 -0- -0-
Vincent Valeri -0- -0- 25,000 100,000 -0- -0-
</TABLE>
(1) Represents the difference between the last sale price of the Common Stock
on December 31, 1996, and the exercise price of the option multiplied by
the applicable number of options.
(2) Represents the difference between the exercise price and the closing price
on the date of exercise, multiplied by the number of shares acquired.
14
<PAGE>
Employment and Consulting Agreements
Paul E. Hannesson, the Company's Chairman of the Board, President and Chief
Executive Officer, entered into an employment agreement with Environmental as of
November 18, 1996 for a term expiring on December 31, 1999. Pursuant to such
employment agreement, Mr. Hannesson agreed to devote his business and
professional time and efforts to the business of Environmental as a senior
executive officer, and to serve in senior executive positions with one or more
of Environmental's subsidiaries, including the Company. The employment agreement
provides that Mr. Hannesson shall receive, among other things, a base salary at
an annual rate of $395,000 through December 31, 1997, and will receive not less
than $434,500 through December 31, 1998 and not less than $477,950 through
December 31, 1999, for services rendered to Environmental and its subsidiaries,
including the Company. Pursuant to the employment agreement, Mr. Hannesson
received, among other things: (i) a signing bonus of (a) $150,000 cash and (b)
stock options to purchase 950,000 shares of common stock of Environmental, which
options vested on the date of his employment agreement; and (ii) options to
purchase an aggregate of 2,500,000 shares of Environmental common stock,
exercisable in installments over a period of five years commencing on the date
of his employment agreement. Mr. Hannesson is also eligible to receive (x)
options to purchase common stock of each publicly-traded subsidiary of
Environmental in the amount of 1.0% of such subsidiary's total outstanding
shares of common stock on the date of grant, and (y) incentive compensation of
up to $225,000 per year for achieving certain goals.
Kenneth L. Adelman, Ph.D., the Company's Executive Vice President,
Marketing and International Development, entered into an employment agreement
with the Company on May 7, 1997 for a term expiring on April 30, 2000. Pursuant
to such employment agreement, Dr. Adelman agreed to devote his business and
professional time and efforts to the business of the Company as its Executive
Vice President, Marketing and International Development. The employment
agreement provides that Dr. Adelman shall receive, among other things, a fixed
base salary at an annual rate of $250,000 for services rendered to the Company.
Pursuant to the employment agreement, Dr. Adelman received options to purchase
an aggregate of 150,000 shares of Common Stock of the Company, exercisable in
installments over a period of five years commencing on the date of his
employment agreement. Dr. Adelman also received options to purchase 700,000
shares of common stock of Environmental, exercisable in installments over a
period of five years commencing on the date of his employment agreement. Dr.
Adelman will also be entitled to receive incentive compensation of up to
$150,000 per year for achieving certain goals, but in no event less than
$100,000 regardless of whether such goals are attained.
Michael D. Fullwood, the Company's Senior Vice President, Chief Financial
and Administrative Officer, Secretary and General Counsel, entered into an
employment agreement with Environmental on May 7, 1997 for an initial term
expiring on April 30, 1999. Pursuant to such employment agreement, Mr. Fullwood
agreed to devote his business and professional time and efforts to the business
of Environmental as its Executive Vice President, Chief Financial and
Administrative Officer, Secretary and General Counsel, and to serve as a senior
executive officer of certain of Environmental's subsidiaries, including the
Company. The employment agreement provides that Mr. Fullwood shall receive,
among other things, a base salary at an annual rate of $225,000 for services
rendered to Environmental and its subsidiaries, including the Company, which
base salary shall be increased by not less than 5% per year during the term of
his agreement. Pursuant to the employment agreement, Mr. Fullwood received
options to purchase an aggregate of 500,000 shares of Environmental common
stock, exercisable in installments over a period of five years commencing on the
date of his employment agreement. Mr. Fullwood also received options to purchase
125,000 shares of Common Stock of the Company and 67,500 shares of common stock
of Separation, exercisable in installments over a period of five years
commencing on the date of his employment agreement. Mr. Fullwood will also be
entitled to receive incentive compensation of up to $75,000 per year for
achieving certain goals, which incentive compensation shall be increased by 5%
per year during the term of his agreement.
Effective June 1996, the Company assumed and modified an employment
agreement entered into between Environmental and Albert E. Abel, effective
August 1993 and expiring August 1997, pursuant to which he received an annual
salary of $121,000 through August 1996, and will receive $133,100 through August
1997, and $146,410 through August 1998. Pursuant to the modification of Mr.
Abel's employment agreement, which became effective in June 1996, the employment
agreement was extended so as to terminate in June 2001, with the base salary of
$140,000 for the first twelve months of such modified agreement, subject to
minimum annual increases of not less than 5% each year thereafter based upon
changes in an applicable cost of living index. Pursuant to the employment
agreement, Mr. Abel also received options to purchase an aggregate of 125,000
shares of Common Stock, exercisable in installments over a period of five years
commencing on the date of his employment agreement.
Effective June 1996, the Company assumed and amended an employment
agreement entered into between Environmental and Carl O. Magnell, effective
September 1995 and expiring September 1997. Under such agreement, as amended,
Mr. Magnell received an annual base salary of $150,000 through June 1996 and
will receive $180,000 through September 1997. The Company has an option to
extend Mr. Magnell's agreement through September 1998 at an annual salary of
$180,000. Pursuant to the employment agreement, Mr. Magnell also
15
<PAGE>
received options to purchase an aggregate of 35,000 shares of Common Stock,
which options are currently exercisable.
Effective June 1996, the Company assumed and amended an employment
agreement entered into between Environmental and Neil L. Drobny, effective June
1995 and expiring May 31, 1997. Under such agreement as amended, Dr. Drobny
receives an annual salary of $180,000 through May 31, 1997. The Company has
decided not to exercise its option to extend Dr. Drobny's agreement through May
31, 1998. Pursuant to the employment agreement, Dr. Drobny also received options
to purchase an aggregate of 175,000 shares of Common Stock, exercisable in
installments over a period of five years commencing on the date of his
employment agreement.
Each of Messrs. Hannesson, Adelman, Fullwood, Abel, Magnell and Drobny are
entitled to participate in the Company's Executive Bonus Program.
All of the foregoing employment agreements require the full-time services
of the employees, subject to permitted service with professional-related service
organizations and other outside activities that do not materially interfere with
the individual's duties to the Company. The agreements also contain covenants
(a) restricting the employee from engaging in any activities competitive with
the business of the Company during the term of such employment agreements, (b)
prohibiting the employee from disclosure of confidential information regarding
the Company, and (c) confirming that all intellectual property developed by the
employee and relating to the business of the Company constitutes the sole
property of the Company.
Edwin L. Harper, Ph.D., a director of the Company, entered into a
consulting agreement with Environmental effective as of May 1, 1997 for a term
expiring on May 1, 2000. Pursuant to such consulting agreement, Dr. Harper
agreed to render financial consulting and business development services to
Environmental and certain of its subsidiaries, including the Company. The
consulting agreement provides that Dr. Harper shall receive, among other things,
a consulting fee at a monthly rate of $31,250 for the period commencing May 1,
1997 through and including November 30, 1997 for services rendered to
Environmental and its subsidiaries, including the Company. Dr. Harper shall also
receive a bonus equal to an aggregate of $145,833 for the period commencing
January 1, 1997 through and including October 31, 1997. From December 1, 1997
through May 1, 2000, Environmental and Dr. Harper will agree in advance on
consulting fees to be paid to Dr. Harper for specified projects for which
Environmental shall request, and for which Dr. Harper shall elect, to provide
services. Pursuant to the consulting agreement, Dr. Harper received options to
purchase an aggregate of 750,000 shares of Environmental common stock, all of
which options vested as of the date of the consulting agreement.
16
<PAGE>
Compensation Committee Interlocks and Insider Participation
The members of the Compensation/Stock Option Committee during the fiscal
year ended December 31, 1996 were Herbert A. Cohen, Kenneth L. Adelman, Ph.D.,
Tom J. Fatjo, Jr. and Edwin L. Harper, Ph.D. Dr. Adelman resigned as a member of
the Compensation/Stock Option Committee upon his appointment as the Company's
Executive Vice President, Marketing and International Development as of May 1,
1997, and was not replaced. Dr. Harper served as the President and Chief
Operating Officer of the Company and Environmental from November 1996 to April
1997, and served as the Chairman of the Board and Chief Executive Officer of
CAS, Separation and Refrigerant from January to April 1997. Dr. Harper resigned
as an executive officer of the Company, Environmental, CAS, Separation and
Refrigerant effective April 30, 1997. No other member of the Compensation/Stock
Option Committee had any interlocking relationship with any other corporation
that requires disclosure under this heading.
Report of the Compensation/Stock Option Committee on Executive Compensation
The Compensation/Stock Option Committee (the "Committee") of the Board of
Directors was established in November 1996 and did not hold any meetings during
the fiscal year ended December 31, 1996. The duties and responsibilities of the
Committee include the following:
(a) approval of annual salaries and other benefits provided for executive
officers of the Company;
(b) approval of the adoption of compensation plans in which the executive
officers of the Company may be participants and awarding of benefits under
such plans;
(c) administration and interpretation of the Company's 1996 Plan, and
determination of the recipients, amounts and other terms (subject to the
requirements of the 1996 Plan) of options which may be granted under the
1996 Plan from time to time; and
(d) undertaking studies and making recommendations with respect to the
Company's compensation structure and policies and the development of
management personnel.
The Committee's policies with respect to executive compensation are
intended to achieve the following goals. First, they are intended to create base
compensation levels sufficient to attract and retain talented and dedicated
executive officers. Second, the compensation policies are intended to provide a
direct link between performance during the year (both the performance of the
Company as a whole and the performance of the individual officer) as a part of
the officer's compensation. Third, the compensation policies are intended to
provide executive officers with the opportunity to acquire an entity stake in
the Company through the grant of options pursuant to the Company's 1996 Plan.
During the fiscal year ended December 31, 1996, the full Board of Directors
approved bonuses and granted options to certain of its executive officers and
certain employees. In each case, the Board of Directors' decision was based upon
the principles and procedures outlined above.
COMPENSATION/STOCK OPTION COMMITTEE
Herbert A. Cohen
Edwin L. Harper, Ph.D.
Tom J. Fatjo, Jr.
The Report of the Compensation/Stock Option Committee on Executive
Compensation shall not be deemed incorporated by reference by any general
statement incorporating by reference this Proxy Statement into any filing under
the Securities Act of 1933, as amended, or under the Securities Exchange Act of
1934, as amended, except to the extent that the Company specifically
incorporates this information by reference, and shall not otherwise be deemed
filed under such acts.
17
<PAGE>
Performance Graph
The following chart compares the value of $100 invested in the Company's
Common Stock from July 1996, the first full month during which the Company's
Common Stock was listed on the American Stock Exchange (the "AMEX"), through
December 31, 1996, with a similar investment in the AMEX Market Value Index and
the Dow Jones Pollution Control/Waste Management Index.
COMPARISON OF 5 MONTH CUMULATIVE TOTAL RETURN*
AMONG COMMODORE APPLIED TECHNOLOGIES, INC., THE AMEX MARKET VALUE INDEX
AND THE DOW JONES POLLUTION CONTROL/WASTE MANAGEMENT INDEX
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
<TABLE>
<CAPTION>
Cumulative Total Return
------------------------------------------------------------------
7/01/96 7/96 8/96 9/96 10/96 11/96 12/96
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Commodore Applied Techn Inc ....................... CXI 100 171 171 126 107 108 95
AMEX MARKET VALUE ................................. IAMX 100 94 97 99 99 103 101
DJ POLLUTION CONTROL/WASTE MGMT ................... IPOL 100 88 95 99 78 106 101
</TABLE>
* $100 INVESTED ON 07/01/96 IN STOCK OR ON
06/30/96 IN INDEX - INCLUDING REINVESTMENT OF
DIVIDENDS. FISCAL YEAR ENDING DECEMBER 31.
18
<PAGE>
Certain Relationships and Related Transactions
Organization and Capitalization of the Company
Since its acquisition of the capital stock of Commodore Laboratories, Inc.,
the Company's predecessor ("Commodore Labs"), in 1993, Environmental has
advanced an aggregate of $8,925,426 to the Company, which has been used to
finance the development of the Company's SET(TM) technology, including salaries
of personnel, equipment, facilities and patent prosecution. These cash advances
by Environmental were evidenced by successive unsecured promissory notes. Kraft
Capital Corporation ("Kraft"), a corporation wholly owned by Bentley J. Blum,
the principal stockholder of Environmental and a director of the Company and of
Environmental, provided approximately $656,000 of such financing to
Environmental. Environmental has provided additional advances to the Company of
$978,896 for the three months ended March 31, 1996, which were repaid by the
Company subsequent to its obtaining a line of credit provided by a commercial
bank in April 1996.
In March 1996, the Company was formed as a wholly-owned subsidiary of
Environmental. Prior to its June 1996 initial public offering, in exchange for
the issuance of 15,000,000 shares of Common Stock, Environmental contributed to
the Company (i) all of the assets and properties (including joint working
proposals, quotations and bids in respect to projects and contracts awarded for
feasibility studies), subject to all of the liabilities, of its operating
divisions relating to SET(TM) and the exploitation of the SET(TM) technology and
processes in all commercial and governmental applications; (ii) all of the
outstanding shares of the capital stock of each of Commodore Labs, Inc.,
Commodore Remediation Technologies, Inc., Commodore Government Environmental
Technologies, Inc., Commodore Technologies, Inc. and Sandpiper Properties, Inc.
(except for a 9.95% minority interest in Commodore Labs, which was held by
Albert E. Abel and acquired by Environmental (and thereafter contributed by
Environmental to the Company) upon completion of its June 1996 initial public
offering); and (iii) a portion of a promissory note in the amount of $3.0
million.
In April 1996, Bentley J. Blum personally guaranteed a $2.0 million line of
credit for the Company from a commercial bank. The initial borrowings under the
line of credit, in the approximate amount of $1.0 million, were utilized to
repay advances made by Environmental to the Company in 1996, and Environmental,
in turn, utilized such funds to repay Kraft the funds provided by Kraft to
Environmental for purposes of the advances to the Company. The Company applied
$2.0 million of the net proceeds of its June 1996 initial public offering to
repay the line of credit, and Mr. Blum's guarantee was released at such time.
In June 1996, Environmental acquired from Albert E. Abel, a Vice President
of the Company, the remaining 9.95% of the outstanding shares of common stock of
Commodore Labs which was not owned by the Company, and Environmental contributed
such shares to the Company, for no additional consideration. To acquire the
remaining shares of Commodore Labs, Environmental paid Mr. Abel the sum of
$750,000 in cash, and issued a ten-year, 8% promissory note to Mr. Abel in the
principal amount of $2,250,000, payable as to interest only until the maturity
of the note on the tenth anniversary of the date of issuance. Simultaneously,
the Company settled all outstanding obligations for accrued compensation payable
to Mr. Abel and for amount receivable by the Company from Mr. Abel, and that the
net payment to Mr. Abel arising therefrom approximated $120,000. The Company
paid such amount to Mr. Abel from the proceeds of its June 1996 initial public
offering.
Effective as of December 1, 1996, the Company transferred certain of its
operating assets related to its SET(TM) technology to CAS, subject to certain
liabilities related to such assets, in exchange for 100 shares of common stock,
par value $.01 per share, of CAS, representing all of the issued and outstanding
shares of capital stock of CAS. CAS agreed to assume all of the net assets of
the Company relating to its SET(TM) technology at December 1, 1996, which assets
had an aggregate value of approximately $4.0 million at such date, and all known
or unknown contingent or unliquidated liabilities of and claims against the
Company and its subsidiaries to the extent they relate to or arise out of the
transferred assets. The Company retained, among other things, (a) all temporary
cash investments of the Company at December 1, 1996, aggregating approximately
$14.1 million, and (b) the executive offices and related assets of the Company
located in Virginia.
19
<PAGE>
Effective as of December 2, 1996, as part of a corporate restructuring to
consolidate all of its current environmental technology businesses within the
Company, Environmental transferred to the Company 100% of the capital stock of
Separation and 100% of the capital stock of Refrigerant. In addition,
Environmental assigned to the Company notes aggregating $976,200 at December 2,
1996, representing advances previously made by Environmental to Separation. Such
advances have been capitalized by the Company as its capital contribution to
Separation. In consideration for such transfers, the Company paid Environmental
$3.0 million in cash and, subject to approval by the stockholders of the Company
at the Annual Meeting, shall issue to Environmental a warrant expiring December
2, 2003 to purchase 7,500,000 shares of the Company's Common Stock at an
exercise price of $15.00 per share, valued at $2.4 million. Bentley J. Blum, a
director and nominee for director of the Company, beneficially owns [52.2]% of
the outstanding shares of common stock of Environmental at May 15, 1997. See
"Proposal 2 -- Issuance of Warrant to Environmental."
At December 31, 1996, the Company and its subsidiaries had advanced an
aggregate of $1,500,000 to Lanxide Performance Materials, Inc. ("LPM"), a wholly
owned subsidiary of Lanxide Corporation, a Delaware corporation ("Lanxide")
which specializes in the manufacture of ceramic bonding and refractory
materials. Lanxide is related to the Company by significant common beneficial
ownership. The promissory notes become due on February 28, 1998. Interest
receivable on the note totaled $18,000 as of December 31, 1996. The notes are
collateralized by the assets of LPM and guaranteed by Lanxide on behalf of its
subsidiary.
Licenses of SET(TM) Technology
As a result of its acquisitions of the capital stock of Commodore Labs, the
Company acquired all patents, discoveries, technology and other intellectual
property in connection with the SET(TM) process system which it later
transferred to CAS effective December 1, 1996. Environmental licenses from CAS
the exclusive worldwide right with the right to sublicense, to make, use, sell
and exploit, itself or jointly with other third parties, for the life of all
patents now or hereafter owned by the CAS, the SET(TM) process and all related
technology underlying such patents and intellectual property in all domestic and
international commercial and industrial applications, in connection with the
destruction of CFCs and other ozone-depleting substances (the "CFC Business");
provided, that such license expressly limits the rights of the licensee(s) and
others who may be sub-licensees or users of the Company's patents and
technologies to the CFC Business.
The Company and its stockholders, other than Environmental, will not
receive any direct or indirect benefit from any revenues delivered from the CFC
Business, and any losses or other contingent liabilities incurred by CFC
Technologies and other entities operating businesses related to the CFC Business
may have a material adverse effect on Environmental, which, in turn, may
adversely affect the Company.
Technology and Technical Support Agreement
The Company has entered into five-year technology and technical support
agreement with Environmental and CFC Technologies, Inc., a wholly owned
subsidiary of the Company ("CFC Technologies"). Pursuant to such agreement, the
Company will provide certain research and development, equipment engineering and
technical support to enable Environmental and CFC Technologies to exploit the
CFC Business. Under such agreement, the Company will provide Environmental and
CFC Technologies the services of certain Company personnel and equipment. The
Company will charge CFC Technologies and Environmental a fee equal to the sum of
(a) the actual costs of all materials and equipment utilized in connection with
such services; and (b) an hourly rate allocable to the services rendered by all
Company personnel which shall be equal to 120% of the average hourly rate of
compensation then payable by the Company to such persons (based on a 35-hour
work week). Under the terms of the technology and technical services agreement,
in no event will the employees of the Company be required to expend in excess of
25% of their business and professional time in any 90-day period to rendering
services to Environmental or CFC Technologies, without the majority approval or
consent of Kenneth L. Adelman, Herbert A. Cohen and David L. Mitchell, or such
other members of the Board of Directors of the Company not otherwise affiliated
with or employed by Environmental, the Company or any of their respective
subsidiaries.
20
<PAGE>
Future Transactions
In connection with the Company's initial public offering in June 1996, the
Board of Directors has adopted a policy whereby any future transactions between
the Company and any of its subsidiaries, affiliates, officers, directors,
principal stockholders and any affiliates of the foregoing will be on terms no
less favorable to the Company than could reasonably be obtained in "arms length"
transactions with independent third parties, and that any such transactions also
be approved by a majority of the Company's disinterested outside directors,
including one of the designees of National Securities Corporation so long as
they are serving on the Board of Directors.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors and officers, and persons who
own more than 10% of the Company's Common Stock to file initial reports of
ownership and reports of changes in ownership of Common Stock with the
Securities and Exchange Commission (the "SEC") and the AMEX. Such persons are
required by SEC regulations to furnish the Company with copies of all Section
16(a) forms they file.
Based solely upon the Company's review of the copies of such reports
received by the Company, or upon written representations received by the Company
from certain reporting persons that no year-end Forms 5 were required for those
persons, the Company believes that no director, officer or holder of more than
ten percent of the Common Stock failed to file on a timely basis the reports
required by Section 16(a) of the Exchange Act during the fiscal year ended
December 31, 1996.
21
<PAGE>
PROPOSAL 2
AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION
TO INCREASE THE AUTHORIZED SHARES OF COMMON STOCK AND PREFERRED STOCK
The Company is currently authorized to issue 50,000,000 shares of Common
Stock and 5,000,000 shares of Preferred Stock. As at May 15, 1997, an aggregate
of [21,650,000] shares of Common Stock were outstanding and held of record by
[37] stockholders. An additional [16,310,000] shares of Common Stock were
reserved for future issuance in connection with outstanding options, warrants
and other convertible securities. No shares of Preferred Stock have been issued
or are outstanding.
The Board of Directors recommends the adoption of an amendment to the
Company's Certificate of Incorporation which will (a) increase the number of
authorized shares of Common Stock from 50,000,000 shares to 75,000,000 shares
and (b) increase the number of authorized shares of Preferred Stock from
5,000,000 shares to 10,000,000 shares. As a result of the proposed amendment,
article "Fourth" of the Company's Certificate of Incorporation would be amended
to read as follows:
"The aggregate number of shares of capital stock which
the Corporation shall have the authority to issue is
85,000,000 shares of capital stock consisting of:
(a) 75,000,000 shares of Common Stock, $.001 par value per
share (the "Common Stock"); and
(b) 10,000,000 shares of Preferred Stock, $.001 par value
per share (the "Preferred Stock")."
The authorization of additional shares of Common Stock would permit the
Company to have additional shares of Common Stock available for issuance at the
discretion of the Board of Directors for future acquisitions, stock splits,
stock dividends, equity financing, employee benefit plans and other corporate
purposes. The Board of Directors has no present intention to issue any
additional shares of Common Stock, other than in connection with the exercise of
stock options, warrants or other securities exercisable for, or convertible
into, Common Stock from time to time.
Although the increase in the number of shares of authorized Common Stock is
not intended as a means of preventing or dissuading a future change in control
or takeover of the Company, use of these shares for any such purpose is
possible. Shares of authorized but unissued or unreserved Common Stock, for
example, could be issued in an effort to dilute the stock ownership and voting
power of persons seeking to obtain control of the Company, or could be issued to
purchasers who would support the Board of Directors in opposing a takeover
proposal.
The authorization of additional shares of Preferred Stock would permit the
Company to have additional shares of Preferred Stock available for issuance at
the discretion of the Board of Directors for future acquisitions, equity
financing and other corporate purposes.
Under the laws of the State of Delaware, the unissued shares of Preferred
Stock will be available for issuance for any proper corporate purpose, as
authorized from time to time by the Board of Directors, without further approval
by the stockholders of the Company unless required by applicable law. The
Company's Certificate of Incorporation authorizes the Board of Directors to
issue one or more series of Preferred Stock, without the approval of the holders
of Common Stock, which could have voting or conversion rights that adversely
affect the voting power of the holders of Common Stock, or could result in one
or more classes of outstanding securities that would have dividend, liquidation
or other rights superior to those of the Common Stock. Such shares of Preferred
22
<PAGE>
Stock could be privately placed with purchasers sympathetic to management and
opposed to any takeover bid, or other circumstances that could make more
difficult, and thereby discourage, attempts to acquire control of the Company.
In addition, the issuance of such Preferred Stock could result in (i) a
reduction of the amount otherwise available for payments of dividends on the
Common Stock, if dividends are payable on the Preferred Stock, (ii) restrictions
on dividends on the Common Stock, if dividends on the Preferred Stock are in
arrears, and (iii) reduction in the prevailing market price of the Common Stock.
Such anti-takeover aspects of this proposal, and its potential adverse effect on
the value of the Common Stock should be carefully considered by stockholders in
determining how to vote on this proposal.
Vote Required and Recommendation
The affirmative vote of the holders of a majority of the outstanding shares
of Common Stock present in person or represented by proxy and entitled to vote
at the Annual Meeting is required to approve and adopt the amendment to the
Company's Certificate of Incorporation increasing the number of authorized
shares of Common Stock and Preferred Stock. Environmental intends to cause its
shares of Common Stock to be voted in favor of this proposal at the Annual
Meeting. Accordingly, approval and adoption of the amendment to the Company's
Certificate of Incorporation increasing the number of authorized shares of
Common Stock and Preferred Stock is assured.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS OF THE COMPANY VOTE
"FOR" APPROVAL AND ADOPTION OF THE AMENDMENT TO THE COMPANY'S CERTIFICATE OF
INCORPORATION INCREASING THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK AND
PREFERRED STOCK.
23
<PAGE>
PROPOSAL 3
ISSUANCE OF WARRANT TO ENVIRONMENTAL
Pursuant to a Stock Purchase Agreement dated as of December 2, 1996 between
the Company and Environmental (the "Stock Purchase Agreement"), the Company
acquired all of the outstanding capital stock of Separation and Refrigerant from
Environmental as part of a corporate restructuring of Environmental to
consolidate all of its current environmental technology businesses with the
Company. Separation has developed and intends to commercialize a separation
technology and recovery system, known as SLM(TM), for the purpose of separating
and recovering organic and inorganic targeted substances from liquid and gaseous
feedstreams. Refrigerant is applying certain environmental technologies to the
destruction, separation and recycling of CFCs and other ozone-depleting
substances. In addition, Environmental assigned to the Company outstanding
Separation notes aggregating $976,200 at December 2, 1996, representing advances
previously made by Environmental to Separation, which the Company has
contributed to the equity of Separation. In April 1997, Separation completed an
initial public offering of its equity securities, which resulted in net proceeds
to Separation of approximately $12.0 million. As a result, the Company now owns
87% of the outstanding capital stock of Separation.
In consideration for the transfer of all of the outstanding capital stock
of Separation and Refrigerant to the Company, the Company paid Environmental
$3.0 million in cash and, subject to approval of the stockholders of the Company
at the Annual Meeting, will issue to Environmental a warrant (the "Warrant")
expiring December 2, 2003 to purchase 7,500,000 shares of Common Stock of the
Company (the "Warrant Shares"), subject to adjustment upon the occurrence of
certain events, at an exercise price of $15.00 per share, which Warrant is
valued at $2.4 million. Pursuant to the terms of the Warrant, the Company
granted Environmental certain registration rights with respect to the Warrant
Shares.
The consideration for all of the outstanding capital stock of Separation
and Refrigerant was determined as a result of arm's-length negotiations between
representatives of both the Company and Environmental. Neither the Company nor
Environmental retained an independent financial advisor in connection with the
transactions contemplated by the Stock Purchase Agreement.
The foregoing information with respect to the Stock Purchase Agreement and
the Warrant is qualified in its entirety by reference to the Stock Purchase
Agreement and the Warrant, copies of which are attached hereto as Annex I, and
which are incorporated herein by reference.
The Board of Directors is submitting for stockholder approval the issuance
of the Warrant by the Company to Environmental. Stockholder approval of the
issuance of the Warrant is not required by Delaware law or the Company's
Certificate of Incorporation. The Company is seeking the approval of its
stockholders to satisfy the listing requirements of the AMEX. The rules of the
AMEX require stockholder approval as a prerequisite to listing securities to be
issued in connection with certain transactions where the present or potential
issuance of common stock or securities exercisable for or convertible into
common stock could result in an increase in outstanding common stock of 20% or
more.
Assuming issuance and exercise of the Warrant, the number of shares of
Common Stock outstanding would increase by approximately [26]% based on the
number of shares of Common Stock issued and outstanding on May 15, 1997. As a
result, stockholders of the Company would experience immediate and substantial
dilution in stock ownership and voting power. In addition, if the registration
rights with respect to the Warrant Shares are exercised, the Warrant Shares will
be freely tradeable without restriction under the Securities Act, unless the
Warrant Shares are restricted by contract or received by persons who are
"affiliates" of the Company. Sales or the potential for sales of substantial
amounts of such Warrant Shares in the public market could adversely affect the
market price of the Common Stock and the Company's ability to raise additional
capital in the capital markets at a time and price favorable to the Company.
24
<PAGE>
The issuance of the Warrant to Environmental would enable the Company to
complete the corporate restructuring of Environmental to consolidate all of its
current environmental technology businesses with the Company. The potential
benefits of such corporate restructuring include the following: (i) opportunity
for greater access to the capital markets which will enable the Company to
pursue a more ambitious commercialization strategy than would otherwise be
possible; (ii) diversification of the Company's technologies and services and
enhancement of the Company's market presence; and (iii) achievement of certain
efficiencies, cost savings and other corporate synergies.
Interests of Certain Persons
In considering the recommendation of the Board regarding approval of the
issuance of the Warrant, stockholders of the Company should be aware that
certain members of the Board of Directors of the Company have certain interests
in the issuance of the Warrant to Environmental that are different from the
interests of other stockholders of the Company.
Bentley J. Blum, a director and nominee for director of the Company and a
director of Environmental, beneficially owned [52.2]% of the outstanding common
stock of Environmental at May 15, 1997 and, through such beneficial ownership of
Environmental, beneficially owned [69.3]% of the outstanding Common Stock of the
Company at such date. Issuance of the Warrant to Environmental would increase
Environmental's beneficial ownership of the Company from [69.3]% to
approximately [77.2]% based on the number of shares of Common Stock outstanding
on May 15, 1997. As a result, Mr. Blum's beneficial ownership of the Company
would also increase from [69.3]% to [77.2]%.
Paul E. Hannesson, the Chairman of the Board, President and Chief Executive
Officer of the Company and Environmental and nominee for director of the
Company, beneficially owned [11.4]% of the outstanding common stock of
Environmental at May 15, 1997 and, through such beneficial ownership of
Environmental, beneficially owned [8.0]% of the outstanding Common Stock of the
Company at such date. As a result of the issuance of the Warrant to
Environmental, Mr. Hannesson's beneficial ownership of the Company would also
increase from [8.0]% to [8.8]% based on the number of shares of Common Stock
outstanding on May 15, 1997.
In addition to Messrs. Blum and Hannesson, Kenneth L. Adelman, Ph.D. and
Edwin L. Harper, Ph.D., each of whom is a director and a nominee for director of
the Company, also beneficially own stock in Environmental and would realize an
increase in beneficial ownership of Common Stock from the issuance of the
Warrant to Environmental.
The Board of Directors recognized all the interests described above and
concluded that these interests did not detract from the fairness to the
stockholders of the Company of the transactions contemplated by the Stock
Purchase Agreement, including, without limitation, the issuance of the Warrant
to Environmental.
Vote Required and Recommendation
The Board of Directors unanimously approved the transactions contemplated
by the Stock Purchase Agreement, including, without limitation, the issuance of
the Warrant to Environmental as partial consideration for all of the outstanding
capital stock of Separation and Refrigerant, and recommends that stockholders of
the Company vote to approve the issuance of the Warrant to Environmental.
To meet the requirements of the AMEX, the affirmative vote of the holders
of a majority of the shares of Common Stock of the Company present in person or
represented by proxy and entitled to vote at the Annual Meeting must approve the
issuance of the Warrant by the Company to Environmental. Environmental intends
to cause its shares of Common Stock to be voted in favor of this proposal at the
Annual Meeting. Accordingly, approval of the issuance of the Warrant to
Environmental is assured.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS OF THE COMPANY VOTE
"FOR" APPROVAL OF THE ISSUANCE OF THE WARRANT TO ENVIRONMENTAL.
25
<PAGE>
PROPOSAL 4
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Company and its former auditors, Tanner + Co. ("Tanner") mutually
agreed on December 11, 1996 to terminate their relationship. During the
Company's last two fiscal years, Tanner's reports on the Company's financial
statements neither contained any adverse opinions nor were qualified or modified
as to any uncertainty, except that Tanner's auditors reports on the Company's
consolidated financial statements for the years ended December 31, 1995 and 1994
contained additional paragraphs relating to the Company continuing as a going
concern, due to significant losses and a deficit in working capital.
During the last two fiscal years, there were no disagreements with Tanner
on any matter of accounting principles or practices, financial statement
disclosure or auditing scope or procedure, which disagreements, if not resolved
to the satisfaction of Tanner, would have caused it to make reference to the
subject matter of the disagreements in connection with its report.
The Board of Directors has retained Price Waterhouse LLP, as of December
19, 1996, to serve as the Company's independent auditors for the fiscal year
ending December 31, 1997. The Board of Directors is submitting its selection of
Price Waterhouse LLP as the Company's independent auditors for ratification at
the Annual Meeting in order to ascertain the views of stockholders of the
Company regarding such selection. If the appointment of Price Waterhouse LLP is
not ratified, the Board of Directors will reconsider its selection and, if
practicable, retain another firm to serve as the Company's independent auditors.
The Board of Directors reserves the right to select new independent auditors at
any time which it may deem advisable or necessary.
Representatives of Price Waterhouse LLP are expected to be present at the
Annual Meeting, will have the opportunity to make a statement if they so desire
and will be available to respond to appropriate questions.
Vote Required and Recommendation
The Audit Committee of the Board of Directors has approved the appointment
of Price Waterhouse LLP as the Company's independent auditors and is
recommending ratification of such appointment by the stockholders of the Company
because it believes that such appointment is in the Company's best interests.
The affirmative vote of the holders of a majority of the shares of Common Stock
of the Company present in person or represented by proxy and entitled to vote at
the Annual Meeting is required for ratification of the appointment of Price
Waterhouse LLP as the Company's independent auditors. Environmental intends to
cause its shares of Common Stock to be voted in favor of this proposal at the
Annual Meeting. Accordingly, ratification of the appointment of Price Waterhouse
LLP as the Company's independent auditors is assured.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS OF THE COMPANY VOTE
"FOR" RATIFICATION OF THE APPOINTMENT OF PRICE WATERHOUSE LLP AS THE COMPANY'S
INDEPENDENT AUDITORS.
26
<PAGE>
OTHER MATTERS WHICH MAY COME BEFORE THE ANNUAL MEETING
The Board of Directors knows of no other business to be presented at the
Annual Meeting, but if any other matters should properly come before the Annual
Meeting, it is intended that the persons named in the accompanying form of proxy
will vote the same in accordance with their own judgment and their discretion,
and authority to do so is included in the proxy.
INFORMATION CONCERNING PROPOSALS OF STOCKHOLDERS
Under certain circumstances, stockholders are entitled to present proposals
for consideration at stockholders meetings. Any such proposal to be included in
the proxy statement for the Company's 1997 Annual Meeting of Stockholders must
be submitted in writing to the Secretary of the Company at the Company's
principal executive offices on or before _______ __, 1997. It is suggested that
such proposal be sent by Certified Mail, Return Receipt Requested.
By Order of the Board of Directors
MICHAEL D. FULLWOOD
Senior Vice President, Chief Financial and
Administrative Officer, Secretary and General Counsel
New York, New York
May __, 1997
27
<PAGE>
FORM OF PROXY
COMMODORE APPLIED TECHNOLOGIES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS OF THE COMPANY
The undersigned, a stockholder of COMMODORE APPLIED TECHNOLOGIES, INC., a
Delaware corporation (the "Company"), hereby appoints Paul E. Hannesson and
Michael D. Fullwood, and each of them, as proxies for the undersigned, each with
full power of substitution, and hereby authorizes them to represent and to vote,
as designated below, all of the shares of Common Stock of the Company held of
record by the undersigned at the close of business on May 15, 1997 at the Annual
Meeting of Stockholders of the Company to be held at the American Stock
Exchange, Inc., 86 Trinity Place, New York, New York 10006, on June 17, 1997, at
10:00 a.m., local time, and at any adjournment or postponement thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS GIVEN, SUCH SHARES
WILL BE VOTED FOR ALL NOMINEES FOR DIRECTOR IDENTIFIED BELOW AND FOR ALL OTHER
PROPOSALS.
1. To elect the following nominees as directors of the Company to hold office
until the next Annual Meeting of Stockholders or until their successors
shall be duly elected and shall qualify: Paul E. Hannesson, Bentley J.
Blum, Edwin L. Harper, Ph.D., Thomas E. Noel, Kenneth L. Adelman, Ph.D.,
Herbert A. Cohen, C. Thomas McMillen, David L. Mitchell, Ed L. Romero and
Tom J. Fatjo, Jr.
FOR ALL NOMINEES (except as marked to the contrary) WITHHOLD ALL NOMINEES
( ) ( )
AUTHORITY TO WITHHOLD A VOTE FOR ANY OF THE ABOVE NAMED INDIVIDUALS SHOULD
BE INDICATED BY LINING THROUGH OR OTHERWISE STRIKING OUT THE NAME OF THE
NOMINEE.
2. To approve an amendment to the Company's Certificate of Incorporation to
(a) increase the number of authorized shares of the Company's Common Stock
from 50,000,000 shares to 75,000,000 shares and (b) increase the number of
authorized shares of the Company's Preferred Stock from 5,000,000 shares to
10,000,000 shares.
( ) FOR ( ) AGAINST ( ) ABSTAIN
3. To approve the issuance of the Warrant to purchase 7,500,000 shares of
Common Stock of the Company to Environmental.
( ) FOR ( ) AGAINST ( ) ABSTAIN
4. To ratify the appointment of Price Waterhouse LLP as the Company's
independent auditors for the fiscal year ending December 31, 1997.
( ) FOR ( ) AGAINST ( ) ABSTAIN
5. Upon such other matters as may properly come before such Annual Meeting or
any adjournments thereof. In their discretion, the proxies are authorized
to vote upon such other business as may properly come before the Annual
Meeting and any adjournment or postponement thereof.
(See reverse side)
<PAGE>
(Continued from other side)
The undersigned hereby acknowledges receipt of (1) the Notice of Annual
Meeting for the 1996 Annual Meeting, (2) the Proxy Statement and (3) the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1996.
Dated: ______________, 1997 _________________________________
Signature
_________________________________
Print Name
_________________________________
Signature, if Jointly Held
_________________________________
Print Name
PLEASE SIGN EXACTLY AS YOUR NAME APPEARS HEREIN,
if signing as attorney, executor, administrator,
trustee or guardian, indicate such capacity. All
joint tenants must sign. If a corporation, please
sign in full corporate name by president or other
authorized officer. If a partnership, please sign
in partnership name by authorized person.
The Board of Directors requests that you fill in
the date and sign the proxy and return it in the
enclosed envelope.
IF THE PROXY IS NOT DATED IN THE ABOVE SPACE, IT
IS DEEMED TO BE DATED ON THE DAY ON WHICH IT WAS
MAILED BY THE CORPORATION.
<PAGE>
ANNEX I
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<PAGE>
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated as of December 2, 1996 (the "Agreement"),
by and between Commodore Environmental Services, Inc., a Delaware corporation
("Commodore"), and Commodore Applied Technologies, Inc., a Delaware corporation
and 69.3%-owned subsidiary of Commodore ("Applied").
W I T N E S S E T H:
WHEREAS, Commodore is the owner of (i) 10,000,000 shares of common stock,
par value $.001 per share (the "Separation Stock"), of Commodore Separation
Technologies, Inc., a Delaware corporation ("Separation"), and (ii) 100 shares
of common stock, par value $.001 per share (the "Refrigerant Stock"), of
Commodore CFC Technologies, Inc., a Delaware corporation ("Refrigerant" and,
together with Separation, the "Subsidiaries");
WHEREAS, Commodore desires to implement a corporate restructuring to
consolidate all of its current environmental technology businesses within
Applied; and
WHEREAS, in order to accomplish said corporate restructuring, Commodore
desires to sell, and Applied desires to purchase, all of the Separation Stock
and the Refrigerant Stock on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants herein contained
and other good and valuable consideration, the receipt and sufficiency of which
is hereby mutually acknowledged, the parties agree as follows:
1. Purchased Shares and Note
Subject to the terms and conditions herein stated, Commodore hereby sells,
assigns, transfers and delivers to Applied, and Applied hereby purchases from
Commodore, all right, title and interest of Commodore in and to (a) the
Separation Stock and the Refrigerant Stock (together, the "Purchased Shares"),
and (b) the demand promissory note, dated as of September 30, 1996 (the "Note"),
issued by Separation to Commodore in the original principal amount of $408,000
and having a current principal balance of $______ and unpaid accrued interest
thereunder of $_________, for a total purchase price of (i) Three Million
Dollars ($3,000,000) and, (ii) subject to compliance with any applicable
stockholder approval or notice requirements, the issuance of a warrant to
purchase 7,500,000 shares of common stock, par value $.001 per share, of
Applied, at an exercise price of $15.00 per share and expiring on December 1,
2003 (the "Applied Warrant"), a copy of which is attached as Exhibit A hereto.
2. Payment of Consideration
In furtherance of the consummation of the transactions contemplated hereby,
simultaneously with the execution and delivery of this Agreement, Applied is (i)
paying the cash
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portion of the purchase price by delivering to Commodore Applied's check in the
amount of $3,000,000 payable to the order of Commodore, or by wire transferring
such amount in immediately available funds to Commodore's designated account
and, (ii) subject to compliance with any applicable stockholder approval or
notice requirements, delivering to Commodore the Applied Warrant, and (b)
Commodore is delivering to Applied (i) the certificates representing the
Separation Stock and the Refrigerant Stock, and (ii) the original executed Note,
in each case properly endorsed and/or accompanied by instruments of transfer
duly executed in blank.
3. Closing Date
The consummation of the transactions contemplated by this Agreement (the
"Closing") is taking place simultaneously with the execution and delivery of
this Agreement on December 2, 1996 (the "Closing Date") at the principal
executive offices of Commodore in New York, New York.
4. Representations and Warranties
4.1 By Commodore. Commodore represents and warrants as follows and
acknowledges that Applied is relying upon such representations and
warranties in connection with the purchase by Applied of the Purchased
Shares:
(a) The Subsidiaries are corporations duly incorporated, validly
existing and in good standing under the laws of State of
Delaware;
(b) The authorized capital stock of (i) Separation consists of
50,000,000 shares of common stock and 5,000,000 shares of
preferred stock, and (ii) Refrigerant consists of 1,000 shares of
common stock; and of such authorized capital, only the Purchased
Shares have been duly issued and are outstanding and are fully
paid and non-assessable;
(c) No person, corporation or other entity has any agreement, option
or warrant, or any right or privilege (whether by law,
pre-emptive or contractual, or whether by means of any exercise,
conversion or other right or action) which has the effect of or
is capable of becoming an agreement, option or warrant, for the
purchase from either of the Subsidiaries of any securities
(including convertible securities) of the Subsidiaries;
(d) All of the Purchased Shares and the Note are owned by Commodore
as the registered and beneficial owner of record, with good and
marketable title thereto, free and clear of all mortgages, liens,
charges, security interests, adverse claims, pledges,
encumbrances, restrictions and demands whatsoever (other than
restrictions imposed by federal or state securities laws);
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(e) No person, corporation or other entity (other than the Applied
pursuant to this Agreement) has any agreement, option or warrant,
or any right or privilege (whether by law, pre-emptive or
contractual, or whether by means of any exercise, conversion or
other right or action) which has the effect of or is capable of
becoming an agreement, option or warrant, for the purchase of any
of the Purchased Shares or the Note;
(f) Neither Commodore nor the Subsidiaries is party to, bound or
affected by or subject to any indenture, mortgage, lease,
agreement, instrument, charter or by-law provision, statute,
regulation, order, judgment, decree or law which would be
violated, contravened or breached by, or under which any default
would occur as a result of, the consummation of the transactions
provided for herein;
(g) Commodore has all requisite corporate power and authority to
execute, deliver and perform its obligations under this
Agreement; the execution, delivery and performance of this
Agreement by Commodore has been duly authorized by all necessary
corporate action on the part of Commodore; and this Agreement
constitutes the legal, valid and binding obligation of Commodore,
enforceable against Commodore in accordance with its terms; and
(h) The current principal balance of, and unpaid accrued interest
under, the Note are as set forth in Section 1 hereof.
4.2 By Applied. Applied represents and warrants as follows and
acknowledges that Commodore is relying upon such representations and
warranties in connection with the sale by Commodore of the Purchased
Shares:
(a) Applied is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Delaware;
(b) Applied has all requisite corporate power and authority to
execute, deliver and perform its obligations under this
Agreement; the execution, delivery and performance of this
Agreement by Applied (except the issuance and delivery of the
Applied Warrant hereunder, which is subject to compliance with
any applicable stockholder approval or notice requirements) has
been duly authorized by all necessary corporate action on the
part of Applied; and this Agreement and the Applied Warrant
constitute the legal, valid and binding obligations of Applied,
enforceable against Applied in accordance with their respective
terms;
(c) Applied is not a party to, bound or affected by or subject to any
indenture, mortgage, lease, agreement, instrument, charter or
by-law
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<PAGE>
provision, statute, regulation, order, judgment, decree or law
which would be violated, contravened or breached by, or under
which any default would occur as a result of, the consummation of
the transactions provided for herein; and
(d) Applied is purchasing the Purchased Shares and the Note for its
own account for investment purposes, and not with a view to the
distribution thereof in violation of any applicable securities
laws.
5. Survival of Representations and Warranties
5.1 Commodore. The representations and warranties of Commodore
contained in this Agreement, or any agreement, certificate or other
document delivered or given pursuant to this Agreement, shall survive the
consummation of the transactions contemplated by this Agreement and,
notwithstanding such completion or any investigation made by or on behalf
of Applied, shall continue in full force and effect for the benefit of
Applied and any claim in respect thereof shall be made in writing:
(a) with respect to representations and warranties of Commodore,
relating to matters other than tax matters, for a period of three
years after the Closing Date; and
(b) with respect to representations and warranties of Commodore,
relating to tax liability or other tax matters, within the period
commencing on the Closing Date and expiring on the date on which
the last applicable limitation period (without giving effect to
any voluntary extension(s) hereafter granted by or on behalf of
either of the Subsidiaries) under any applicable taxation
legislation expires with respect to any fiscal year of the
Subsidiaries which is relevant in determining any relevant tax
liability of the Subsidiaries.
5.2 Applied. The representations and warranties of Applied contained
in this Agreement, or any agreement, certificate or other document
delivered or given pursuant to this Agreement, shall survive the completion
of the transactions contemplated by this Agreement and, notwithstanding
such completion or any investigation made by or on behalf of Commodore,
shall continue in full force and effect for the benefit of Commodore and
any claim in respect thereof shall be made in writing for a period of three
years after the Closing Date.
5.3 General. The provisions of this Section 5 respecting the
expiration of claims periods is expressly subject to Section 8.3 hereof.
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<PAGE>
6. Transfer and Assumption
6.1 Transfer. This Agreement shall operate as an immediate and
effective transfer and assignment of the Purchased Shares and the Note by
Commodore to Applied as at the date hereof. The parties agree to do all
such other acts and things as may be necessary to give effect to the
provisions hereof, and without limiting the generality of the foregoing, to
validly and effectively transfer the Purchased Shares and the Note from
Commodore to Applied as at the Closing Date, and to validly and effectively
issue the Applied Warrant to Commodore as at the date hereof. Commodore
hereby irrevocably constitutes and appoints the Secretary of each of the
Subsidiaries as its attorney to transfer the Purchased Shares to Applied as
at the date hereof on the books of the Subsidiaries, with full power of
substitution in the premises.
6.2 Assumption. In addition to the transfer and assignment of the
Purchased Shares and the Note, this Agreement shall serve to constitute an
immediate assignment by Commodore to Applied, and an assumption by Applied,
of any and all further lending and/or funding obligations (whether written
or verbal) of Commodore in favor of the Subsidiaries; and from and after
the date hereof, Commodore shall have no further obligation to extend any
loans, advances or other financial accommodations to either of the
Subsidiaries (any and all of which obligations are hereby assumed by
Applied).
7. Additional Covenants
7.1 Each of Commodore and Applied shall take or cause to be taken all
necessary or desirable actions, steps and corporate proceedings to approve
or authorize the transactions contemplated by this Agreement and the
execution and delivery of this Agreement and other agreements and documents
contemplated hereby, and shall cause all necessary meetings of directors
and stockholders of the Subsidiaries to be held for such purpose.
7.2 In connection with the next annual meeting of Applied's
stockholders, Applied shall cause to be included in management's proxy
materials a proposal, with management's recommendation, for Applied's
stockholders to ratify the Applied Warrant and the issuance thereof to
Commodore pursuant to this Agreement.
8. Indemnification
8.1 Each party hereto agrees to indemnify and hold harmless the other
party from and in respect of any cost, claim, loss, damage, liability or
expense which such other party may suffer or incur, whether at law or in
equity, arising out, resulting from or in connection with the inaccuracy of
any representation or warranty contained herein, for the time periods
provided in Section 4.1 hereof.
8.2 No claim for indemnification will arise until written notice
thereof is given to the party from whom indemnification is sought or
claimed (the "Indemnitor"). Such notice shall be sent within a reasonable
time following the determination by the party seeking
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<PAGE>
indemnification (the "Indemnitee") that a claim for indemnity may exist. In
the event that any legal proceedings shall be instituted or any claim or
demand is asserted by any third person in respect of which either party may
seek any indemnification from the other party, the Indemnitee shall give or
cause to be given to the Indemnitor written notice thereof and the
Indemnitor shall have the right, at its option and expense, to be present
at the defense of such proceedings, claim or demand, but not to control the
defense, negotiation or settlement thereof, which control shall at all
times remain with the Indemnitee, unless the Indemnitor irrevocably
acknowledges full and complete responsibility for indemnification of the
Indemnitee in respect of the subject claim, in which case the Indemnitor
may assume such control through counsel of its choice, provided however,
that no settlement shall be entered into without the Indemnitee's prior
written consent (which shall not be unreasonably withheld). The parties
agree to cooperate fully with each other in connection with the defense,
negotiation or settlement of any such third party legal proceeding, claim
or demand.
8.3 Notwithstanding anything in this Agreement to the contrary, the
indemnity provided for in this Section 8 shall apply to any loss, claim,
cost, damage, expense or liability, whether or not the actual amount
thereof shall have been ascertained prior to the final day upon which a
claim for indemnity with respect thereto may be made hereunder in
accordance with Section 5 hereof, so long as written notice thereof shall
have been given to the party from whom indemnification is sought prior to
said date, setting forth specifically and in reasonable detail, so far as
is known, the matter as to which indemnification is being sought, but
nothing herein shall be construed to require payment of any claim for
indemnity until the actual amount payable shall have been finally
ascertained.
9. Tax Treatment
It is the intention of the parties for the transaction contemplated by this
Agreement to qualify as a tax-free reorganization pursuant to Section
368(a)(1)(B) of the Internal Revenue Code of 1986, as amended, thereby resulting
in no currently recognized gain or loss to either Commodore or Applied.
10. Governing Law
This Agreement shall be governed by and construed in accordance with the
laws of the State of New York.
11. Entire Agreement
This Agreement, together with the Applied Warrant, constitutes the entire
agreement between the parties relating to the subject matter hereof. There are
no verbal statements, representations, warranties, undertakings or agreements
between the parties. This agreement may be amended only by an instrument in
writing signed by both parties.
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<PAGE>
12. Time of the Essence
Time shall be of the essence of this Agreement.
13. Assignment
Neither this Agreement nor any rights or obligations hereunder may be
assigned by either party without the prior written consent of the other party,
which consent may be withheld in either party's sole and absolute discretion.
14. Binding Effect
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
COMMODORE ENVIRONMENTAL SERVICES, INC.
By: /s/ Paul E. Hannesson
-----------------------------------
Name: Paul E. Hannesson
Title: Chairman of the Board
COMMODORE APPLIED TECHNOLOGIES, INC.
By: /s/ Paul E. Hannesson
-----------------------------------
Name: Paul E. Hannesson
Title: Chairman of the Board
7
<PAGE>
EXHIBIT A
---------
NEITHER THE WARRANTS REPRESENTED BY THIS CERTIFICATE NOR THE
SHARES ISSUABLE UPON EXERCISE HEREOF HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED. NEITHER THE
WARRANTS NOR SUCH SHARES MAY BE OFFERED OR SOLD EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH
ACT, OR AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT.
COMMODORE APPLIED TECHNOLOGIES, INC.
WARRANT FOR THE PURCHASE OF SHARES OF COMMON STOCK
No. 1 7,500,000 Shares
THIS CERTIFIES that, for value received, Commodore Environmental Services,
Inc. (the "Holder"), is entitled to subscribe for and purchase from Commodore
Applied Technologies, Inc., a Delaware corporation (the "Company"), subject to
compliance with any applicable stockholder approval or notice requirements, and
upon the terms and conditions set forth herein, at any time or from time to time
after the date hereof, and before 5:00 P.M. on December 1, 2003, New York time
(the "Exercise Period"), Seven Million Five Hundred Thousand (7,500,000) shares,
par value $.001 per share, of the Company ("Common Stock"), at an exercise price
of $15.00 per share (the "Exercise Price"). This Warrant is issued in connection
with the sale of 100% of the capital stock of Commodore Separation Technologies,
Inc. and Commodore CFC Technologies, Inc. by the Holder to the Company pursuant
to a Stock Purchase Agreement, dated as of December 1, 1996, by and between the
Holder and the Company. As used herein the term "this Warrant" shall mean and
include this Warrant and any Warrant or Warrants hereafter issued as a
consequence of the exercise or transfer of this Warrant in whole or in part.
The number of shares of Common Stock issuable upon exercise of the Warrants
(the "Warrant Shares") and the Exercise Price may be adjusted from time to time
as hereinafter set forth.
1. This Warrant may be exercised during the Exercise Period, as to the
whole or any lesser number of the respective whole Warrant Shares, by the
surrender of this Warrant (with the election at the end hereof duly executed) to
the Company at its office as set forth in the form of election attached hereto,
or at such other place as is designated in writing by the Company, together with
a certified or bank cashier's check payable to the order of the Company in an
1
<PAGE>
amount equal to the Exercise Price multiplied by the number of respective
Warrant Shares for which this Warrant is being exercised.
2. Upon each exercise of the Holder's rights to purchase Warrant Shares and
payment of the Exercise Price, the Holder shall be deemed to be the holder of
record of the Warrant Shares issuable upon such exercise, notwithstanding that
the transfer books of the Company shall then be closed or certificates
representing such Warrant Shares shall not then have been actually delivered to
the Holder. As soon as practicable after each such exercise of this Warrant and
payment of the Holder a certificate or certificates for the Warrant Shares
issuable upon such exercise, registered in the name of the Holder or its
designee. If the Warrant should be exercised in part only, the Company shall,
upon surrender of this Warrant for cancellation, execute and deliver a new
Warrant evidencing the right of the Holder to purchase the balance of the
Warrant Shares (or portions thereof) subject to purchase hereunder.
3. Any Warrants issued upon the transfer or exercise in part of this
Warrant shall be numbered and shall be registered in a Warrant Register as they
are issued. The Company shall be entitled to treat the registered holder of any
Warrant on the Warrant Register as the Owner in fact thereof for all purposes
and shall not be bound to recognize any equitable or other claim to or interest
in such Warrant on the part of any other person, and shall not be liable for any
registration or transfer of Warrants which are registered or to be registered in
the name of a fiduciary or the nominee of a fiduciary unless made with the
actual knowledge that a fiduciary or nominee is committing a breach of trust in
requesting such registration or transfer, or with the knowledge of such facts
that its participation therein amounts to bad faith. This Warrant shall be
transferable only on the books of the Company upon delivery thereof duly
endorsed by the Holder or by his duly authorized attorney or representative, or
accompanied by proper evidence of succession, assignment, or authority to
transfer. In all cases or transfer by an attorney, executor, administrator,
guardian, or other legal representative, duly authenticated evidence of his or
its authority shall be produced. Upon any registration of transfer, the Company
shall deliver a new Warrant or Warrants to the person entitled thereto. This
Warrant may be exchanged, at the option of the Holder thereof, for another
Warrant, or other Warrants of different denominations, of like tenor and
representing in the aggregate the right to purchase a like number of Warrant
Shares (or portions thereof), upon surrender to the Company or its duly
authorized agent. Notwithstanding the foregoing, the Company shall have no
obligation to cause Warrants to be transferred on its books to any person if, in
the opinion of counsel to the Company, such transfer does not comply with the
provisions of the Securities Act of 1933, as amended (the "Act"), and the rules
and regulations thereunder.
4. The Company shall at all times reserve and keep available out of its
authorized and unissued Common Stock, solely for the purpose of providing for
the exercise of the rights to purchase all Warrant Shares granted pursuant to
the Warrants, such number of shares of Common Stock as shall, from time to time,
be sufficient therefor. The Company covenants that all shares of Common Stock
issuable upon exercise of this Warrant, upon receipt by the
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Company of the full Exercise Price therefor, shall be validly issued, fully
paid, nonassessable, and free of preemptive rights.
5. (a) In case the Company shall at any time after the date the Warrants
were first issued (i) declare a dividend on the outstanding Common Stock payable
in shares of its capital stock, (ii) subdivide the outstanding Common Stock,
(iii) combine the outstanding Common Stock into a smaller number of shares, or
(iv) issue any shares of its capital stock by reclassification of the Common
Stock (including any such reclassification in connection with a consolidation or
merger in which the Company is the continuing corporation), then, in each case,
the Exercise Price, and the number of Warrant Shares issuable upon exercise of
this Warrant, in effect at the time of the record date for such dividend or of
the effective date of such subdivision, combination, or reclassification, shall
be proportionately adjusted so that the Holder after such time shall be entitled
to receive the aggregate number and kind of shares which, if such Warrant had
been exercised immediately prior to such time, he would have owned upon such
exercise and been entitled to receive by virtue of such dividend, subdivision,
combination, or reclassification. Such adjustment shall be made successively
whenever any event listed above shall occur.
(b) In case the Company shall issue or fix a record date for the issuance
to all holders of Common Stock of rights, options, or warrants to subscribe for
or purchase Common Stock (or securities convertible into or exchangeable for
Common Stock) at a price per share (or having a conversion or exchange price per
share, if a security convertible into or exchangeable for Common Stock) less
than the Exercise Price per share of Common Stock on such record date, then, in
each case, the Exercise Price shall be adjusted by multiplying the Exercise
Price in effect immediately prior to such record date by a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding on
such record date plus the number of shares of Common Stock which the aggregate
offering price of the total number of shares of Common Stock so to be offered
(or the aggregate initial conversion or exchange price of the convertible or
exchangeable securities so to be offered) would purchase at such current
Exercise Price and the denominator of which shall be the number of shares of
Common Stock outstanding on such record date plus the number of additional
shares of Common Stock to be offered for subscription or purchase (or into which
the convertible or exchangeable securities so to be offered are initially
convertible or exchangeable). Such adjustment shall become effective at the
close of business on such record date; provided, however, that, to the extent
the shares of Common Stock (or securities convertible into or exchangeable for
shares of Common Stock) are not delivered, the Exercise Price shall be
readjusted after the expiration of such rights, options, or warrants (but only
with respect to Warrants exercised after such expiration), to the Exercise Price
which would then be in effect had the adjustments made upon the issuance of such
rights, options, or warrants been made upon the basis of delivery of only the
number of shares of Common Stock (or securities convertible into or exchangeable
for shares of Common Stock) actually issued. In case any subscription price may
be paid in a consideration part or all of which shall be in a form other than
cash, the value of such consideration shall be as determined in good faith by
the board of directors of the Company, whose determination shall be conclusive
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<PAGE>
absent manifest error. Shares of Common Stock owned by or held for the account
of the Company or any majority-owned subsidiary shall not be deemed outstanding
for the purpose of any such computation.
(c) In case the Company shall distribute to all holders of Common Stock
(including any such distribution made to the stockholders of the Company in
connection with a consolidation or merger in which the Company is the continuing
corporation) evidences of its indebtedness or assets (other than cash dividends
or distributions and dividends payable in shares of Common Stock), or rights,
options, or warrants to subscribe for or purchase Common Stock, or securities
convertible into or exchangeable for shares of Common Stock (excluding those
with respect to the issuance of which an adjustment of the Exercise Price is
provided pursuant to Section 5(b) hereof), then, in each case, the Exercise
Price shall be adjusted by multiplying the Exercise Price in effect immediately
prior to the record date for the determination of stockholders entitled to
receive such distribution by a fraction, the numerator of which shall be the
Exercise Price per share of Common Stock on such record date, less the fair
market value (as determined in good faith by the board of directors of the
Company, whose determination shall be conclusive absent manifest error) of the
portion of the evidences of indebtedness or assets so to be distributed, or of
such rights, options, or warrants or convertible or exchangeable securities,
applicable to one share, and the denominator of which shall be such current
Exercise Price per share of Common Stock. Such adjustment shall be made whenever
any such distribution is made, and shall become effective on the record date for
the determination of shareholders entitled to receive such distribution.
(d) In case the Company shall issue shares of Common Stock or rights,
options, or warrants to subscribe for or purchase Common Stock, or securities
convertible into or exchangeable for Common Stock (excluding shares, rights,
options, warrants, or convertible or exchangeable securities issued or issuable
(i) in any of the transactions with respect to which an adjustment of the
Exercise Price is provided pursuant to Sections 5(a), 5(b) or 5(c) above, (ii)
upon exercise of the Warrants or (iii) to management or employees of the Company
up to a maximum amount of shares of Common Stock), at a price per share
(determined, in the case of such rights, options, warrants, or convertible or
exchangeable securities, by dividing (x) the total amount received or receivable
by the Company in consideration of the sale and issuance of such rights,
options, warrants, or convertible or exchangeable securities, plus the minimum
aggregate consideration payable to the Company upon exercise, conversion, or
exchange thereof, by (y) the maximum number of shares covered by such rights,
options, warrants, or convertible or exchangeable securities) lower than the
Exercise Price per share of Common Stock in effect immediately prior to such
issuance, then the Exercise Price shall be reduced on the date of such issuance
to a price (calculated to the nearest cent) determined by multiplying the
Exercise Price in effect immediately prior to such issuance by a fraction, (iii)
the numerator of which shall be an amount equal to the sum of (A) the number of
shares of Common Stock outstanding immediately prior to such issuance plus (B)
the quotient obtained by dividing the consideration received by the Company upon
such issuance by such current Exercise Price, and (iv) the denominator of which
shall be the total number of shares of Common Stock outstanding
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<PAGE>
immediately after such issuance. For the purposes of such adjustments, the
maximum number of shares which the holders of any such rights, options,
warrants, or convertible or exchangeable securities shall be entitled to
initially subscribe for or purchase or convert or exchange such securities into
shall be deemed to be issued and outstanding as of the date of such issuance,
and the consideration received by the Company therefor shall be deemed to be the
consideration received by the Company for such rights, options, warrants, or
convertible or exchangeable securities, plus the minimum aggregate consideration
or premiums stated in such rights, options, warrants, or convertible or
exchangeable securities to be paid for the shares covered thereby. No further
adjustment of the Exercise Price shall be made as a result of the actual
issuance of shares of Common Stock on exercise of such rights, options, or
warrants or on conversion or exchange of such convertible or exchangeable
securities. On the expiration or the termination of such rights, options, or
warrants, or the termination of such right to convert or exchange, the Exercise
Price shall be readjusted (but only with respect to Warrants exercised after
such expiration or termination) to such Exercise Price as would have obtained
had the adjustments made upon the issuance of such rights, options, warrants, or
convertible or exchangeable securities been made upon the basis of the delivery
of only the number of shares of Common Stock actually delivered upon the
exercise of such rights, options, or warrants or upon the conversion or exchange
of any such securities; and on any change of the number of shares of Common
Stock deliverable upon the exercise of any such rights, options, or warrants or
conversion or exchange of such convertible or exchangeable securities or any
change in the consideration to be received by the Company upon such exercise,
conversion, or exchange, including, but not limited to, a change resulting from
the antidilution provisions thereof, the Exercise Price, as then in effect,
shall forthwith be readjusted (but only with respect to Warrants exercised after
such change) to such Exercise Price as would have been obtained had an
adjustment been made upon the issuance of such rights, options, or warrants not
exercised prior to such change, or securities not converted or exchanged prior
to such change, on the basis of such change. In case the Company shall issue
shares of Common Stock or any such rights, options, warrants, or convertible or
exchangeable securities for a consideration consisting, in whole or in part, of
property other than cash or its equivalent, then the "price per share" and the
"consideration received by the Company" for purposes of the first sentence of
this Section 5(d) shall be as determined in good faith by the board of directors
of the Company, whose determination shall be conclusive absent manifest error.
Shares of Common Stock owned by or held for the account of the Company or any
majority-owned subsidiary shall not be deemed outstanding for the purpose of any
such computation.
(e) No adjustment in the Exercise Price shall be required if such
adjustment is less than $.05; provided, however, that any adjustments which by
reason of this Section 5 are not required to be made shall be carried forward
and taken into account in any subsequent adjustment. All calculations under this
Section 5 shall be made to the nearest cent or to the nearest one-thousandth of
a share, as the case may be.
(f) In any case in which this Section 5 shall require that an adjustment in
the Exercise Price be made effective as of a record date for a specified event,
the Company may
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<PAGE>
elect to defer, until the occurrence of such event, issuing to the Holder, if
the Holder exercised this Warrant after such record date, the shares of Common
Stock, if any, issuable upon such exercise over and above the shares of Common
Stock, if any, issuable upon such exercise on the basis of the Exercise Price in
effect prior to such adjustment; provided, however, that the Company shall
deliver to the Holder a due bill or other appropriate instrument evidencing the
Holder's right to receive such additional shares upon the occurrence of the
event requiring such adjustment.
(g) Upon each adjustment of the Exercise Price as a result of the
calculations made in Sections 5(b), 5(c) or 5(d) hereof, this Warrant shall
thereafter evidence the right to purchase, at the adjusted Exercise Price, that
number of shares (calculated to the nearest thousandth) obtained by dividing (A)
the product obtained by multiplying the number of shares purchasable upon
exercise of this Warrant prior to adjustment of the number of shares by the
Exercise Price in effect prior to adjustment of the Exercise Price by (B) the
Exercise Price in effect after such adjustment of the Exercise Price.
(h) Whenever there shall be an adjustment as provided in this Section 5,
the Company shall promptly cause written notice thereof to be sent by registered
mail, postage prepaid, to the Holder, at its address as it shall appear in the
Warrant Register, which notice shall be accompanied by an officer's certificate
setting forth the number of Warrant Shares purchasable upon the exercise of this
Warrant and the Exercise Price after such adjustment and setting forth a brief
statement of the facts requiring such adjustment and the computation thereof,
which officer's certificate shall be conclusive evidence of the correctness of
any such adjustment absent manifest error.
6. (a) In case of any consolidation with or merger of the Company with or
into another corporation (other than a merger or consolidation in which the
Company is the surviving or continuing corporation), or in case of any sale,
lease, or conveyance to another corporation of the property and assets of any
nature of the Company as an entirety or substantially as an entirety, such
successor, leasing, or purchasing corporation, as the case may be, shall (i)
execute with the Holder an agreement providing that the Holder shall have the
right thereafter to receive upon exercise of this Warrant solely the kind and
amount of shares of stock and other securities, property, cash, or any
combination thereof receivable upon such consolidation, merger, sale, lease, or
conveyance by a holder of the number of shares of Common Stock for which this
Warrant;might have been exercised immediately prior to such consolidation,
merger, sale, lease, or conveyance and (ii) make effective provision in its
certificate of incorporation or otherwise, if necessary, to effect such
agreement. Such agreement shall provide for adjustments which shall be as nearly
equivalent as practicable to the adjustments in Section 5.
(b) In case of any reclassification or change of the shares of Common Stock
issuable upon exercise of this Warrant (other than a change in par value or from
no par value to a specified par value, or as a result of a subdivision or
combination, but including any change in the shares into two or more classes or
series of shares), or in case of any consolidation or
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<PAGE>
merger of another corporation into the Company in which the Company is the
continuing corporation and in which there is a reclassification or change
(including a change to the right to receive cash or other property) of the
shares of Common Stock (other than a change in par value, or from no par value
to a specified par value, or as a result of a subdivision or combination, but
including any change in the shares into two or more classes or series of
shares), the Holder shall have the right thereafter to receive upon exercise of
this Warrant solely the kind and amount of shares of stock and other securities,
property, cash, or any combination thereof receivable upon such
reclassification, change, consolidation, or merger by a holder of the number of
shares of Common Stock for which this Warrant might have been exercised
immediately prior to such reclassification, change, consolidation, or merger.
Thereafter, appropriate provision shall be made for adjustments which shall be
as nearly equivalent as practicable to the adjustments in Section 5.
(c) The above provisions of this Section 6 shall similarly apply to
successive reclassifications and changes of shares of Common Stock and to
successive consolidations, mergers, sales, leases, or conveyances.
7. In case at any time the Company shall propose
(a) to pay any dividend or make any distribution on shares of Common
Stock in shares of Common Stock or make any other distribution (other than
regularly scheduled cash dividends which are not in a greater amount per
share than the most recent such cash dividend) to all holders of Common
Stock; or
(b) to issue any rights, warrants, or other securities to all holders
of Common Stock entitling them to purchase any additional shares of Common
Stock or any other rights, warrants, or other securities; or
(c) to effect any reclassification or change of outstanding shares of
Common Stock, or any consolidation, merger, sale, lease, or conveyance of
property, described in Section 6; or
(d) to effect any liquidation, dissolution, or winding-up of the
Company; or
(e) to take any other action which would cause an adjustment to the
Exercise Price;
then, and in any one or more of such cases, the Company shall give written
notice thereof, by registered mail, postage prepaid, to the Holder at the
Holder's address as it shall appear in the Warrant Register, mailed at least 15
days prior to (i) the date as of which the holders of record of shares of Common
Stock to be entitled to receive any such dividend, distribution, rights,
warrants, or other securities are to be determined, (ii) the date on which any
such reclassification, change of outstanding shares of Common Stock,
consolidation, merger, sale,
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<PAGE>
lease, conveyance of property, liquidation, dissolution, or winding-up is
expected to become effective, and the date as of which it is expected that
holders of record of shares of Common Stock shall be entitled to exchange their
shares for securities or other property, if any, deliverable upon such
reclassification, change of outstanding shares, consolidation, merger, sale,
lease, conveyance of property, liquidation, dissolution, or winding-up, or (iii)
the date of such action which would require an adjustment to the Exercise Price.
8. (a) If at any time prior to the expiration of the Exercise Period, the
Company shall file a registration statement (other than a registration statement
on Form S-4, Form S-8, or any successor form) with the Securities and Exchange
Commission (the "Commission") while any Registrable Securities (as hereinafter
defined) are outstanding, the Company shall give all the then holders of any
Registrable Securities (the "Eligible Holders") at least 30 days prior written
notice of the filing of such registration statement. If requested by any
Eligible Holder in writing within 20 days after receipt of any such notice, the
Company shall, at the Company's sole expense (other than the fees and
disbursements of counsel for the Eligible Holders and the underwriting
discounts, if any, payable in respect of the Registrable Securities sold by any
Eligible Holder), register or qualify all or, at each Eligible Holder's option,
any portion of the Registrable Securities of any Eligible Holders who shall have
made such request, concurrently with the registration of such other securities,
all to the extent requisite to permit the public offering. and sale of the
Registrable Securities through the facilities of all appropriate securities
exchanges and the over-the-counter market, and will use its best efforts through
its officers, directors, auditors, and counsel to cause such registration
statement to become effective as promptly as practicable. Notwithstanding the
foregoing, if the managing underwriter of any such offering shall advise the
Company in writing that, in its opinion, the distribution of all or a portion of
the Registrable Securities requested to be included in the registration
concurrently with the securities being registered by the Company would
materially adversely affect the distribution of such securities by the Company
for its own account, then any Eligible Holder who shall have requested
registration of his or its Registrable Securities shall delay the offering and
sale of such Registrable Securities (or the portions thereof so designated by
such managing underwriter) for such period, not to exceed 90 days (the "Delay
Period"), as the managing underwriter shall request, provided that no such delay
shall be required as to any Registrable Securities if any securities of the
Company are included in such registration statement and eligible for sale during
the Delay Period for the account of any person other than the Company and any
Eligible Holder unless the securities included in such registration statement
and eligible for sale during the Delay Period for such other person shall have
been reduced pro rata to the reduction of the Registrable Securities which were
requested to be included and eligible for sale during the Delay Period in such
registration. As used herein' "Registrable Securities" shall mean the Warrants
and the Warrant Shares which, in each case, have not been previously sold
pursuant to a registration statement or Rule 144 promulgated under the Act.
(b) If, at any time prior to the expiration of the Exercise Period, the
Company shall receive a written request, from Eligible Holders who in the
aggregate own (or upon exercise of all Warrants then outstanding or issuable
would own) 50% of the total number of
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<PAGE>
shares of Common Stock then included (or upon such exercises would be included)
in the Registrable Securities (the "Majority Holders"), to register the sale of
all or part of such Registrable Securities, the Company shall, as promptly as
practicable, prepare and file with the Commission a registration statement
sufficient to permit the public offering and sale of the Registrable Securities
through the facilities of all appropriate securities exchanges and the
over-the-counter market, and will use its best efforts through its officers,
directors, auditors, and counsel to cause such registration statement to become
effective as promptly as practicable; provided, however, that the Company shall
only be obligated to file one such registration statement for which all expenses
incurred in connection with such registration (other than the fees and
disbursements of counsel for the Eligible Holders and underwriting discounts, if
any, payable in respect of the Registrable Securities sold by the Eligible
Holders) shall be borne by the Company. The Company shall not be obligated to
effect any registration of its securities pursuant to this Section 8(b) within
six months after the effective date of a previous registration statement
prepared and filed in accordance with Sections 8(a) or 8(b). Within three
business days after receiving any request contemplated by this Section 8(b), the
Company shall give written notice to all the other Eligible Holders, advising
each of them that the Company is proceeding with such registration and offering
to include therein all or any portion of any such other Eligible Holder's
Registrable Securities, provided that the Company receives a written request to
do so from such Eligible Holder within 30 days after receipt by him or it of the
Company's notice.
(c) In the event of a registration pursuant to the provisions of this
Section 8, the Company shall use its best efforts to cause the Registrable
Securities so registered to be registered or qualified for sale under the
securities or blue sky laws of such jurisdictions as the Eligible Holder or such
holders may reasonably request; provided, however, that the Company shall not be
required to qualify to do business in any state by reason of this Section 8(c)
in which it is not otherwise required to qualify to do business.
(d) The Company shall keep effective any registration or qualification
contemplated by this Section 8 and shall from time to time amend or supplement
each applicable registration statement, preliminary prospectus, final
prospectus, application, document, and communication for such period of time as
shall be required to permit the Eligible Holders to complete the offer and sale
of the Registrable Securities covered thereby. The Company shall in no event be
required to keep any such registration or qualification in effect for a period
in excess of nine months from the date on which the Eligible Holders are first
free to sell such Registrable Securities; provided, however, that, if the
Company is required to keep any such registration or qualification in effect
with respect to securities other than the Registrable Securities beyond such
period, the Company shall keep such registration or qualification in effect as
it relates to the Registrable Securities for so long as such registration or
qualification remains or is required to remain in effect in respect of such
other securities.
(e) In the event of a registration pursuant to the provisions of this
Section 8, the Company shall furnish to each Eligible Holder such number of
copies of the registration
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<PAGE>
statement and of each amendment and supplement thereto (in each case, including
all exhibits), such reasonable number of copies of each prospectus contained in
such registration statement and each supplement or amendment thereto (including
each preliminary prospectus), all of which shall conform to the requirements of
the Act and the rules and regulations thereunder, and such other documents, as
any Eligible Holder may reasonably request to facilitate the disposition of the
Registrable Securities included in such registration.
(f) In the event of a registration pursuant to the provisions of this
Section 8, the Company shall furnish each Eligible Holder of any Registrable
Securities so registered with an opinion of its counsel (reasonably acceptable
to the Eligible Holders) to the effect that (i) the registration statement has
become effective under the Act and no order suspending the effectiveness of the
registration statement, preventing or suspending the use of the registration
statement, any preliminary prospectus, any final prospectus, or any amendment or
supplement thereto has been issued, nor has the Commission or any securities or
blue sky authority of any jurisdiction instituted or threatened to institute any
proceedings with respect to such an order, (ii) the registration statement and
each prospectus forming a part thereof (including each preliminary prospectus),
and any amendment or supplement thereto, complies as to form with the Act and
the rules and regulations thereunder, and (iii) such counsel has no knowledge of
any material misstatement or omission in such registration statement or any
prospectus, as amended or supplemented. Such opinion shall also state the
jurisdictions in which the Registrable Securities have been registered or
qualified for sale pursuant to the provisions of Section 8(c).
(g) In the event of a registration pursuant to the provision of this
Section 8, the Company shall enter into a cross-indemnity agreement and a
contribution agreement, each in customary form, with each underwriter, if any,
and, if requested, enter into an underwriting agreement containing conventional
representations, warranties, allocation of expenses, and customary closing
conditions, including, but not limited to, opinions of counsel and accountants'
cold comfort letters, with any underwriter who acquires any Registrable
Securities.
(h) In the event of a registration pursuant to the provisions of this
Section 8:
(i) Each Eligible Holder shall furnish to the Company in writing such
appropriate information (relating to such Eligible Holder and the intention
of such Eligible Holder as to proposed methods of sale or other disposition
of their shares of Common Stock) and the identity of and compensation to be
paid to any proposed underwriters to be employed in connection therewith as
the Company, any underwriter, or the Commission or any other regulatory
authority may request;
(ii) the Eligible Holders shall enter into the usual and customary
form of underwriting agreement agreed to by the Company and any underwriter
with respect to any such offering, if required, and such underwriting
agreement shall contain the customary rights of indemnity between the
Company, the underwriters, and such Eligible Holders;
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<PAGE>
(iii) each Eligible Holder shall agree that he shall execute, deliver
and/or file with or supply the Company, any underwriters, the Commission
and/or any state or other regulatory authority such information, documents,
representations, undertakings and/or agreements necessary to carry out the
provisions of the registration covenants contained in this Section 8 and/or
to effect the registration or qualification of his or its Registrable
Securities under the Act and/or any of the laws and regulations of any
state of governmental instrumentality;
(iv) the Company's obligation to include any Registrable Securities in
a registration statement shall be subject to the written agreement of each
holder thereof to offer such securities in the same manner and on the same
terms and conditions as the other securities of the same class are being
offered pursuant to the registration statement, if such shares are being
underwritten;
(v) in the event that all the Registrable Securities have not been
sold on or prior to the expiration of the period specified in Section 8(d)
above, the Company may de-register by post-effective amendment any
Registrable Securities covered by the registration statement, but not sold
on or prior to such date. The Company agrees that it will notify each
holder of Registrable Securities of the filing and effective date of such
post-effective amendment; and
(vi) each Eligible Holder agrees that upon notification by the Company
that the prospectus in respect to any public offering covered by the
provisions hereof is in need of revision, such Eligible Holder shall
immediately upon receipt of such notification (x) cease to offer or sell
any securities of the Company which must be accompanied by such prospectus,
(y) return all such prospectuses in such Eligible Holder's hands to the
Company, and (z) not offer or sell any securities of the Company until such
Holder has been provided with a current prospectus and the Company has
given such Eligible Holder notification permitting such Eligible Holder to
resume offers and sales.
(i) The Company agrees that until all the Registrable Securities have been
sold under a registration statement or pursuant to Rule 144 under the Act, it
shall keep current in filing all reports, statements and other materials
required to be filed with the Commission to permit holders of the Registrable
Securities to sell such securities under Rule 144.
(j) Except for rights granted to holders of the Warrants, the Company will
not, without the written consent of the Majority Holders, grant to any persons
the right to request the Company to register any securities of the Company,
provided that the Company may grant such registration rights to other persons so
long as such rights are subordinate or pari passu to the rights of the Eligible
Holders.
9. (a) Subject to the conditions set forth below, the Company agrees to
indemnify and hold harmless each Eligible Holder, its officers, directors,
partners, employees, agents and
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<PAGE>
counsel, and each person, if any, who controls any such person within the
meaning of Section 15 of the Act or Section 20(a) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), from and against any and all loss,
liability, charge, claim, damage, and expense whatsoever (which shall include,
for all purposes of this Section 9, but not be limited to, attorneys' fees and
any and all reasonable expense whatsoever incurred in investigating, preparing,
or defending against any litigation, commenced or threatened, or any claim
whatsoever, and any and all amounts paid in settlement of any claim or
litigation), as and when incurred, arising out of, based upon, or in connection
with: (i) any untrue statement or alleged untrue statement of a material fact
contained (A) in any registration statement, preliminary prospectus, or final
prospectus (as from time to time amended and supplemented), or any amendment or
supplement thereto, relating to the sale of any of the Registrable Securities,
or (B) in any application or other document or communication (in this Section 9
collectively called an "application") executed by or on behalf of the Company or
based upon written information furnished by or on behalf of the Company filed in
any jurisdiction in order to register or qualify any of the Registrable
Securities under the securities or blue sky laws thereof or filed with the
Commission or any securities exchange; or (ii) any omission or alleged omission
to state a material fact required to be stated in any document referenced in
clause (A) or (B) above or necessary to make the statements therein not
misleading, unless such statement or omission was made in reliance upon and in
conformity with written information furnished to the Company with respect to
such Eligible Holder by or on behalf of such person expressly for inclusion in
any registration statement, preliminary prospectus, or final prospectus, or any
amendment or supplement thereto, or in any application, as the case may be; or
(iii) any breach of any representation, warranty, covenant, or agreement of the
Company contained in this Warrant. The foregoing agreement to indemnify shall be
in addition to any liability the Company may otherwise have, including
liabilities arising under this Warrant.
If any action is brought against any Eligible Holder or any of its
officers, directors, partners, employees, agents, or counsel, or any controlling
persons of such person (an "indemnified party") in respect of which indemnity
may be sought against the Company pursuant to the foregoing paragraph, such
indemnified party or parties shall promptly notify the Company in writing of the
institution of such action (but the failure so to notify shall not relieve the
Company from any liability other than pursuant to this Section 9(a), except to
the extent it may have been prejudiced in any material respect by such failure)
and the Company shall promptly assume the defense of such action, including the
employment of counsel (reasonably satisfactory to such indemnified party or
parties) and payment of expenses. Such indemnified party or parties shall have
the right to employ its or their own counsel in any such case, but the fees and
expenses of such counsel shall be at the expense of such indemnified party or
parties unless the employment of such counsel shall have been authorized in
writing by the Company in connection with the defense of such action or the
Company shall not have promptly employed counsel reasonably satisfactory to such
indemnified party or parties to have charge of the defense of such action or
such indemnified party or parties shall have reasonably concluded that there may
be one or more legal defenses available to it or them or to other indemnified
parties which are different from or additional to those available to the
Company, in any of which events such fees
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<PAGE>
and expenses shall be borne by the Company and the Company shall not have the
right to direct the defense of such action on behalf of the indemnified party or
parties. Anything in this Section 10 to the contrary notwithstanding, the
Company shall not be liable for any settlement of any such claim or action
effected without its written consent, which shall not be unreasonably withheld.
The Company shall not, without the prior written consent of each indemnified
party that is not released as described in this sentence, settle or compromise
any action, or permit a default or consent to the entry of judgment in or
otherwise seek to terminate any pending or threatened action, in respect of
which indemnity may be sought hereunder (whether or not any indemnified party is
a party thereto), unless such settlement, compromise, consent, or termination
includes an unconditional release of each indemnified party from all liability
in respect of such action. The Company agrees promptly to notify the Eligible
Holders of the commencement of any litigation or proceedings against the Company
or any of its officers or directors in connection with the sale of any
Registrable Securities or any preliminary prospectus, prospectus, registration
statement, or amendment or supplement thereto, or any application relating to
any sale of any Registrable Securities.
(b) The Holder agrees to indemnify and hold harmless the Company, each
director of the Company, each officer of the Company who shall have signed any
registration statement covering Registrable Securities held by the Holder, each
other person, if any, who controls the Company within the meaning of Section 15
of the Act or Section 20(a) of the Exchange Act, and its or their respective
counsel, to the same extent as the foregoing indemnity from the Company to the
Holder in Section 9(a), but only with respect to statements or omissions, if
any, made in any registration statement, preliminary prospectus, or final
prospectus (as from time to time amended and supplemented), or any amendment or
supplement thereto, or in any application, in reliance upon and in conformity
with written information furnished to the Company with respect to the Holder by
or on behalf of the Holder expressly for inclusion in any such registration
statement, preliminary prospectus, or final prospectus, or any amendment or
supplement thereto, or in any application, as the case may be. If any action
shall be brought against the Company or any other person so indemnified based on
any such registration statement, preliminary prospectus, or final prospectus, or
any amendment or supplement thereto, or in any application, and in respect of
which indemnity may be sought against the Holder pursuant to this Section 9(b),
the Holder shall have the rights and duties given to the Company, and the
Company and each other person so indemnified shall have the rights and duties
given to the indemnified parties, by the provisions of Section 9(a).
(c) To provide for just and equitable contribution, if (i) an indemnified
party makes a claim for indemnification pursuant to Section 9(a) or 9(b)
(subject to the limitations thereof) but it is found in a final judicial
determination, not subject to further appeal, that such indemnification may not
be enforced in such case, even though this Agreement expressly provides for
indemnification in such case, or (ii) any indemnified or indemnifying party
seeks contribution under the Act, the Exchange Act or otherwise, then the
Company (including for this purpose any contribution made by or on behalf of any
director of the Company, any officer of the Company who signed any such
registration statement, any controlling person of the
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Company, and its or their respective counsel), as one entity, and the Eligible
Holders of the Registrable Securities included in such registration in the
aggregate (including for this purpose any contribution by or on behalf of an
indemnified party), as a second entity, shall contribute to the losses,
liabilities, claims, damages, and expenses whatsoever to which any of them may
be subject, on the basis of relevant equitable considerations such as the
relative fault of the Company and such Eligible Holders in connection with the
facts which resulted in such losses, liabilities, claims, damages, and expenses.
The relative fault, in the case of an untrue statement, alleged untrue
statement, omission, or alleged omission, shall be determined by, among other
things, whether such statement, alleged statement, omission, or alleged omission
relates to information supplied by the Company or by such Eligible Holders, and
the parties' relative intent, knowledge, access to information, and opportunity
to correct or prevent such statement, alleged statement, omission, or alleged
omission. The Company and the Holder agree that it would be unjust and
inequitable if the respective obligations of the Company and the Eligible
Holders for contribution were determined by pro rata or per capita allocation of
the aggregate losses, liabilities, claims, damages, and expenses (even if the
Holder and the other indemnified parties were treated as one entity for such
purpose) or by any other method of allocation that does not reflect the
equitable considerations referred to in this Section 9(c). In no case shall any
Eligible Holder be responsible for a portion of the contribution obligation
imposed on all Eligible Holders in excess of its pro rata share based on the
number of shares of Common Stock owned (or which would be owned upon exercise of
the Registrable Securities) by it and included in such registration as compared
to the number of shares of Common Stock owned (or which would be owned upon
exercise of the Registrable Securities) by all Eligible Holders and included in
such registration. No person guilty of a fraudulent misrepresentation (within
the meaning of Section 11(f) of the Act) shall be entitled to contribution from
any person who is not guilty of such fraudulent misrepresentation. For purposes
of this Section 9(c), each person, if any, who controls any Eligible Holder
within the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act
and each officer, director, partner, employee, agent, and counsel of each such
Eligible Holder or control person shall have the same rights to contribution as
such Eligible Holder or control person and each person, if any, who controls the
Company within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act, each officer of the Company who shall have signed any such
registration statement, each director of the Company, and its or their
respective counsel shall have the same rights to contribution as the Company,
subject in each case to the provisions of this Section 9(c). Anything in this
Section 9(c) to the contrary notwithstanding, no party shall be liable for
contribution with respect to the settlement of any claim or action effected
without its written consent. This Section 9(c) is intended to supersede any
right to contribution under the Act, the Exchange Act or otherwise.
10. The issuance of any shares or other securities upon the exercise of
this Warrant, and the delivery of certificates or other instruments representing
such shares or other securities, shall be made without charge to the Holder for
any tax or other charge in respect of such issuance. The Company shall not,
however, be required to pay any tax which may be payable in respect of any
transfer involved in the issue and delivery of any certificate in a name other
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<PAGE>
than that of the Holder and the Company shall not be required to issue or
deliver any such certificate unless and until the person or persons requesting
the issue thereof shall have paid to the Company the amount of such tax or shall
have established to the satisfaction of the Company that such tax has been paid.
11. Certificates evidencing the Warrant Shares issued upon exercise of the
Warrants shall bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. SUCH
SHARES MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT, OR AN EXEMPTION FROM
REGISTRATION UNDER SUCH ACT."
12. Upon receipt of evidence satisfactory to the Company of the loss,
theft, destruction, or mutilation of any Warrant (and upon surrender of any
Warrant if mutilated), and upon reimbursement of the Company's reasonable
incidental expenses, the Company shall execute and deliver to the Holder thereof
a new Warrant of like date, tenor, and denomination.
13. The Holder of any Warrant shall not have, solely on account of such
status, any rights of a stockholder of the Company, either at law or in equity,
or to any notice of meetings of stockholders or of any other proceedings of the
Company, except as provided in this Warrant.
14. Any notice or other communication required or permitted to be given
hereunder shall be in writing and shall be mailed by certified mail, return
receipt requested or sent by Federal Express, Express Mail, or similar overnight
delivery or courier service or delivered (in person or by telecopy, telex, or
similar telecommunications equipment) against receipt to the party to whom it is
to be given, if sent to the Company, at: 150 East 58th Street, Suite 3400, New
York, New York 10155, Attention: The Chairman or the Chief Executive Officer; or
if sent to the Holder, at the Holder's address as it shall appear on the Warrant
Register; or to such other address as the party shall have furnished in writing
in accordance with the provisions of this Section 14. Any notice or other
communication given by certified mail shall be deemed given at the time of
certification thereof, except for a notice changing a party's address which will
be deemed given at the time of receipt thereof. Any notice given by other means
permitted by this Section 14 shall be deemed given at the time of receipt
thereof.
15. This Warrant shall be binding upon the Company and its successors and
assigns and shall inure to the benefit of the Holder and its successors and
assigns.
16. This Warrant shall be construed in accordance with the laws of the
State of New York applicable to contracts made and performed within such State,
without regard to principles of conflicts of law.
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17. The Company irrevocably consents to the jurisdiction of the courts of
the State of New York and of any federal court located in such State in
connection with any action or proceeding arising out of or relating to this
Warrant, any document or instrument delivered pursuant to, in connection with or
simultaneously with this Warrant, or a breach of this Warrant or any such
document or instrument. In any such action or proceeding, the Company waives
personal service of any summons, complaint or other process.
Dated: _________________, 1997
COMMODORE APPLIED TECHNOLOGIES, INC.
By: ______________________________________
Name:
Title:
[Seal]
______________________________
Secretary
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<PAGE>
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to transfer the
attached Warrant.)
FOR VALUE RECEIVED, ______________________________ hereby sells, assigns,
and transfers unto _____________________ a Warrant to purchase Shares, par value
$.001 per share, of Commodore Applied Technologies, Inc. (the "Company"),
together with all right, title, and interest therein, and does hereby
irrevocably constitute and appoint ___________________ attorney to transfer such
Warrant on the books of the Company, with full power of substitution.
Dated: ________________________
Signature______________________________
NOTICE
The signature on the foregoing Assignment must correspond to the name as
written upon the face of this Warrant in every particular, without alteration or
enlargement or any change whatsoever.
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<PAGE>
To: Commodore Applied Technologies, Inc.
150 East 58th Street, Suite 3400
New York, New York 10155
ELECTION TO EXERCISE
The undersigned hereby exercises its rights to purchase ______________
Warrant Shares covered by the within warrant and tenders payment herewith in the
amount of $ _____________ in accordance with the terms thereof, and requests
that certificates for such securities be issued in the name of, and delivered
to:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print Name, Address and Social Security
or Tax Identification Number)
and, if such number of Warrant Shares shall not be all the Warrant Shares
covered by the within Warrant, that a new Warrant for the balance of the Warrant
Shares covered by the within Warrant be registered in the name of, and delivered
to, the undersigned at the address stated below.
Dated:_________________________ Name_______________________________
(Print)
Address:________________________________________________________________________
_______________________________
(Signature)
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