<PAGE>
As filed with the Securities and Exchange Commission on April 15, 1998
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
COMMODORE APPLIED TECHNOLOGIES, INC.
(Exact Name of Registrant as Specified in Its Charter)
<TABLE>
<CAPTION>
150 East 58th Street, Suite 3400
New York, New York 10155
Delaware (212) 308-5800 11-3312952
<S> <C> <C>
(State or Other Jurisdiction of (Address, Including Zip Code, and Telephone Number, (I.R.S. Employer
Incorporation or Organization) Including Area Code, of Registrant's Principal Executive Offices) Identification No.)
</TABLE>
PAUL E. HANNESSON
Chairman of the Board, President and Chief Executive Officer
Commodore Applied Technologies, Inc.
150 East 58th Street, Suite 3400
New York, New York 10155
(212) 308-5800
(Name, Address, Including Zip Code, and Telephone Number, Including
Area Code, of Agent For Service)
Copies of communications to:
STEPHEN A. WEISS, ESQ.
ANTHONY J. MARSICO, ESQ.
Greenberg Traurig Hoffman
Lipoff Rosen & Quentel
200 Park Avenue
New York, New York 10166
Tel: (212) 801-9200
Fax: (212) 801-6400
---------------------
Approximate date of commencement of proposed sale to the public: From time
to time after the effective date of this Registration Statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. /X/
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
(continued on following page)
================================================================================
<PAGE>
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Proposed Proposed
maximum maximum Amount of
Title of Amount offering price aggregate registration
securities to be registered to be registered(1) per share offering price fee
<S> <C> <C> <C> <C>
Common Stock, par value
$0.001 per share ........... 3,000,000 shares $ 3.78(2) $ 11,340,000.00 $ 3,345.30
Common Stock, par value
$0.001 per share ........... 210,000 shares $ 5.71(3) $ 1,199,100.00 $ 353.73
Total: .................... 3,210,000 shares $ 12,539,100.00 $ 3,699.03
</TABLE>
- --------------------------------------------------------------------------------
(1) In the event of a stock split, stock dividend, or similar transaction
involving the common stock, par value $0.001 per share (the "Common Stock"),
of the Registrant, in order to prevent dilution, the number of shares of
Common Stock registered hereby shall be automatically increased to cover the
additional shares of Common Stock in accordance with Rule 416 under the
Securities Act of 1933, as amended (the "Securities Act").
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) under the Securities Act. Represents the average of
the high and low prices (rounded to the nearest cent) reported for the
Common Stock on the American Stock Exchange on April 13, 1998.
(3) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(g) under the Securities Act. Represents the weighted
average exercise price per share (rounded to the nearest cent) at which the
shares of Common Stock will be issued.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
Information contained herein is subject to completion or amendment. A
Registration Statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the Registration Statement becomes
effective. This Prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any state in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such state.
Subject to Completion, dated April 15, 1998
PROSPECTUS
3,210,000 Shares
Commodore Applied Technologies, Inc.
Common Stock
---------------------
This Prospectus relates to an aggregate of 3,210,000 shares (each, a
"Share" and collectively, the "Shares") of common stock, par value $0.001 per
share (the "Common Stock"), of Commodore Applied Technologies, Inc., a Delaware
corporation (the "Company"), which may be offered from time to time by or for
the accounts of the holders thereof (hereinafter referred to as the "Selling
Stockholders"). The number of Shares includes: (i) an aggregate of 1,381,692
Shares (the "First Tranche Shares") acquired by certain of the Selling
Stockholders on February 10, 1998 (the "First Tranche Sale") in a private
placement (the "Private Placement") by Commodore Environmental Services, Inc., a
Delaware corporation ("Environmental"); (ii) up to 150,000 Shares (subject to
adjustment) (the "First Tranche Warrant Shares"), which may be acquired by
certain of the Selling Stockholders upon exercise of three-year warrants (the
"First Tranche Warrants") issued by Environmental in the First Tranche Sale;
(iii) an aggregate of 1,618,308 Shares (the "Maximum Additional First Tranche
Shares"), which may be acquired by certain of the Selling Stockholders in the
future pursuant to certain purchase price adjustment terms of the Private
Placement; and (iv) up to 60,000 Shares (subject to adjustment) (the "Consultant
Warrant Shares"), which may be acquired by a Selling Stockholder upon exercise
of a four-year warrant, as amended (the "Consultant Warrant"), issued by the
Company to a financial consultant in November 1996. The First Tranche Shares,
First Tranche Warrant Shares and Maximum Additional First Tranche Shares are
hereinafter collectively referred to as the "Aggregate First Tranche Shares."
The Aggregate First Tranche Shares have been and may be sold to certain Selling
Stockholders from the account of Environmental, which currently owns 9,823,702
shares of Common Stock (representing 42.5% of the Company's outstanding shares
of Common Stock as of the date hereof) and warrants to purchase up to 10,514,000
additional shares of Common Stock. See "Prospectus Summary," "Recent
Developments" and "Selling Stockholders."
The number of Shares offered hereby includes such presently indeterminable
number of shares of Common Stock as may be acquired by certain of the Selling
Stockholders in the future pursuant to certain purchase price adjustment terms
of the Private Placement. The 1,618,308 Maximum Additional First Tranche Shares
being registered hereby represent the maximum number of additional shares of
Common Stock that Environmental may be required to transfer to certain of the
Selling Stockholders pursuant to such purchase price adjustment terms. The
actual number of Shares that may be acquired by the Selling Stockholders and
resold hereby could differ materially depending upon factors that cannot be
predicted at this time. See "Recent Developments" and "Selling Stockholders."
The Shares have been and may be acquired by the Selling Stockholders
pursuant to an exemption from the registration requirements of the Securities
Act of 1933, as amended (the "Securities Act"), provided by Section 4(2)
thereof. The Aggregate First Tranche Shares are being registered pursuant to the
terms of a registration rights agreement, dated as of February 9, 1998 (the
"Registration Rights Agreement"), among the Company, Environmental and certain
of the Selling Stockholders. The Consultant Warrant Shares are being registered
pursuant to the terms of a financial advisory and consulting agreement dated as
of November 8, 1996, as amended (the "Consulting Agreement"), by and between the
Company and a Selling Stockholder. See "Recent Developments," "Selling
Stockholders" and "Plan of Distribution."
<PAGE>
The Shares may be sold from time to time by the Selling Stockholders or
their transferees. To the knowledge of the Company, no underwriting arrangements
have been entered into by the Selling Stockholders as of the date hereof. The
distribution of the Shares by the Selling Stockholders may be effected in one or
more transactions that may take place on the American Stock Exchange ("Amex"),
including ordinary broker's transactions, privately negotiated transactions, or
through sales to one or more dealers for resale of such Shares as principals, at
prevailing market prices, or negotiated prices. Underwriting discounts and usual
and customary or specifically negotiated brokerage fees or commissions will be
paid by the Selling Stockholders in connection with the sale of the Shares. The
Selling Stockholders, and any broker-dealers, agents, or underwriters through
whom the Shares are sold, may be deemed "underwriters" within the meaning of the
Securities Act with respect to securities offered by them, and any profits
realized or commissions received by them may be deemed underwriting
compensation. See "Plan of Distribution."
The Company will not receive any proceeds from the sale of the Shares by
the Selling Stockholders. The Company may, however, receive proceeds from the
exercise of the Consultant Warrant. By agreement with the Selling Stockholders,
the Company will pay all of the expenses incurred in connection with the
registration of the Shares hereby, estimated to be approximately $31,000, other
than underwriting commissions, discounts and counsel fees and expenses. See "Use
of Proceeds" and "Plan of Distribution."
The Common Stock is traded on the Amex under the symbol "CXI." On April 13,
1998, the closing sale price of the Common Stock, as reported on the Amex, was
$3.6875 per share. Prospective investors are urged to obtain a current price
quotation.
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 7.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
The date of this Prospectus is ________, 1998.
<PAGE>
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS, AND ANY INFORMATION OR REPRESENTATION NOT
CONTAINED OR INCORPORATED HEREIN BY REFERENCE MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY, THE SELLING STOCKHOLDERS OR ANY OTHER PERSON.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY BY ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL FOR SUCH
PERSON TO MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS AT ANY TIME NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCE
IMPLY THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE
DATE HEREOF.
---------------------
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Reports, proxy statements
and other information filed by the Company may be inspected and copied at the
public reference facilities maintained by the Commission at Judiciary Plaza, 450
Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at the Commission's
Regional Offices located at 7 World Trade Center, Suite 1300, New York, New York
10048, and at the Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such material can also be obtained at prescribed rates
from the Public Reference Section of the Commission at Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549. The Commission maintains a Web site
at http://www.sec.gov that contains reports, proxy statements and other
information regarding registrants that file electronically with the Commission
via the EDGAR system, including the Company.
The Common Stock is traded on the Amex under the symbol "CXI." Reports,
proxy statements and other information concerning the Company can also be
inspected at the offices of the Amex located at 86 Trinity Place, New York, New
York 10006.
The Company has filed with the Commission a registration statement on Form
S-3 (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act with respect to the Common
Stock offered hereby. This Prospectus does not contain all of the information
set forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. For further
information regarding the Company and the Common Stock offered hereby, reference
is hereby made to the Registration Statement and to the exhibits and schedules
filed therewith. The Registration Statement, including the exhibits and
schedules thereto, may be inspected at the public reference facilities
maintained by the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Room
1024, Washington, D.C. 20549, and copies of all or any part thereof may be
obtained from such office upon payment of the prescribed fees.
2
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed by the Company with the Commission
(File No. 1-11871) under the Exchange Act are hereby incorporated in this
Prospectus by reference:
(a) The Company's Annual Report on Form 10-K for the year ended December
31, 1997;
(b) The Company's Current Report on Form 8-K, dated February 10, 1998;
(c) The description of the Company's Common Stock contained in its
Registration Statement on Form 8-A, dated June 24, 1996, as amended by
the Company's Registration Statement on Form 8-A/A, dated June 26,
1996, including any other amendment or report filed for the purpose of
updating such description.
In addition, all documents filed by the Company pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus
and prior to the termination of the offering of Common Stock hereby shall be
deemed to be incorporated by reference into this Prospectus and to be a part
hereof from the respective dates of filing of such documents.
Any statement contained herein or in a document all or part of which is
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any subsequently filed document which also is
or is deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
All information appearing in this Prospectus is qualified in its entirety by the
information and financial statements (including the notes thereto) appearing in
the documents incorporated herein by reference, except to the extent set forth
in the immediately preceding sentence.
The Company will provide without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, upon the written or oral
request of such person, a copy of any or all of the documents incorporated
herein by reference (other than exhibits to such documents unless such exhibits
are specifically incorporated by reference into the documents that this
Prospectus incorporates). Requests for copies of such documents should be
directed to:
Michael D. Fullwood, Esq.
Commodore Applied Technologies, Inc.
150 East 58th Street, Suite 3400
New York, New York 10155
Phone: (212) 308-5800
Fax: (212) 753-0731
3
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to, and
should be read in conjunction with, the more detailed information appearing
elsewhere in this Prospectus or incorporated herein by reference. Investors
should also carefully consider the information set forth under the heading "Risk
Factors."
The Company
The Company is an environmental treatment and services company which,
through its operating subsidiaries, provides a range of technologies and
services directed principally at remediating contamination in soils and other
materials, protecting the integrity of our nation's water and air and disposing
or reusing certain waste by-products through development of inert and
environmentally sound technologies. The Company believes it provides, through
its wholly-owned subsidiary Commodore Solution Technologies, Inc. ("Solution"),
the only patented, non-thermal, portable and scalable process, known as SETTM
(solvated electron technology), for treating and decontaminating soils and other
materials containing PCBs, pesticides, dioxins and other toxic contaminants. The
Company, through its publicly-traded subsidiary Commodore Separation
Technologies, Inc. ("Separation"), also provides a system, known as SLiMTM
(supported liquid membrane), that has been proven in limited-scale tests to
separate and recover chromium, cadmium, silver, nickel, zinc, copper and other
targeted substances from aqueous and possibly gaseous waste streams. The
Company, through Commodore Advanced Sciences, Inc. ("Advanced Sciences"), also
provides a full range of services related to providing on-site waste
containment, management of on-site and off-site remediation and waste removal
using environmentally safe methods and through the use of the Company's
technologies. The operations of Advanced Sciences, which account for
substantially all of the Company's current revenues, also include engineering
and technical services in connection with designing production processes to
minimize or eliminate the generation of hazardous wastes. Additionally, the
Company, through its wholly-owned subsidiary Commodore CFC Technologies, Inc.
("CFC Technologies"), is engaged in separating mixed refrigerants,
chlorofluorocarbons and hydrochlorofluorocarbons so that they may be returned to
productive use at purity levels meeting industry standards.
The Company's SET technology is directed principally at treating and
decontaminating soils, as well as other materials and surfaces, by destroying
PCBs, pesticides, dioxins and other toxic contaminants to an extent sufficient
to satisfy current federal environmental guidelines for non-contamination. The
Company also believes that SET is capable of neutralizing chemical weapons and
warfare agents and concentrating certain radioactive wastes for more effective
disposal. In March 1997, Advanced Sciences entered into a teaming agreement with
ICF Kaiser Engineers, Inc. ("ICF Kaiser"), pursuant to which the Company's SET
technology will be used in connection with the remediation of mixed waste at Los
Alamos National Laboratory in New Mexico under ICF Kaiser's U.S. Department of
Energy ("DOE") contract. In December 1997, Advanced Sciences also entered into a
memorandum of understanding with Lockheed Martin Advanced Environmental Systems,
Inc. to jointly pursue environmental remediation projects, and in August 1996,
the Company formed a 50/50 joint venture with a subsidiary of Allegheny
Teledyne, Inc., known as Teledyne-Commodore, LLC, to jointly pursue the chemical
weapons destruction and demilitarization market on a worldwide basis, in both
cases utilizing the SET technology. The Company operates under a Nationwide
Permit for PCB disposal (the "Nationwide Permit") issued by the U.S.
Environmental Protection Agency ("EPA"), which allows the Company to use SET
on-site to treat PCB-contaminated soils and metallic surfaces anywhere in the
United States. Based on currently published lists of EPA national operating
permits, the Company believes that it possesses the only non-thermal PCB
treatment technology for multiple applications licensed by the EPA. The
Company's business strategy is to use SET on a select number of industrial and
governmental clean-up and related projects through collaborative working
arrangements with well-recognized companies in the environmental industry.
Separation's SLiM technology is directed at selectively extracting and
recovering solubilized metals, radionuclides, biochemicals and other targeted
elements from aqueous and possibly gaseous waste streams
4
<PAGE>
in degrees of concentration and purity which permit both the reuse of such
elements and the ability for the waste water or gas to be disposed of as
non-toxic effluent without any further treatment. In December 1997 and February
1998, Separation was awarded its first two commercial projects by the State of
Maryland and entered into two multi-year, sole-source contracts with Maryland
Environmental Service to use its SLiM technology in connection with the removal
of chromium in water leaching from waste sites at the Baltimore Harbor and
potentially polluting the Chesapeake Bay. Prior to these awards, Separation
had performed a series of on-site demonstrations of SLiM, in which a SLiM unit,
in a single feedstream passthrough, reduced the contamination level of chromium
from more than 630 parts per million (ppm) to less than one ppm. Under a license
agreement with Lockheed Martin Energy Research Corporation, Separation also
received the exclusive worldwide license (subject to a government use license)
to use and develop its SLiM technology for separating the radionuclides,
technetium and rhenium, from mixed wastes containing radioactive materials.
Separation's business strategy is to pursue these and other opportunities for
SLiM and to seek marketing arrangements with established engineering and
environmental services firms to use SLiM.
The Company acquired Advanced Sciences in October 1996 for the purpose of
coordinating the Company's existing technologies and services, as well as
developing, acquiring and utilizing new technologies, for the treatment, reuse
and ultimate disposal of by-products generated as a result of industrial and
governmental activities. Advanced Sciences, to the extent possible, has sought
to utilize the Company's technologies in connection with its environmental,
remediation and technical services performed for industrial and governmental
customers (particularly the DOE and U.S. Department of Defense ("DOD")), with a
view to increasing the quality and scope of services offered and providing the
Company with a broader customer base for its technologies. Advanced Sciences was
founded in 1977 and its services include the identification, investigation,
remediation and management of hazardous, mixed and radioactive waste sites.
Advanced Sciences has been awarded environmental management contracts by the DOE
and DOD, as well as Bechtel, Westinghouse, ICF Kaiser, Lockheed Martin and Rust
Waste Management.
Demand for the Company's environmental technologies and services arises
principally from three sources:
o need for alternative environmental treatment and disposal methods for
toxic substances, such as the SET technology, which do not involve safety
risks with respect to air pollution and transportation of hazardous
materials, or result in large volumes of residual waste that require
further treatment prior to disposal;
o need for a low cost, on-site extraction/removal system, such as the SLiM
technology, which is capable of treating a wide variety of elements and
compounds in multiple industrial settings at great speed and with a high
degree of effectiveness, at various contaminant concentrations and
volumes; and
o stricter legislation and regulations mandating new or increased levels of
air and water pollution control and solid waste management.
The Company's overall strategy is to provide a broad range of
"state-of-the-art" environmental technologies and services to solve its
customers' increasingly complex pollution and waste disposal problems. The
Company believes that its technological capabilities are significant marketing
advantages to the Company and enable the Company to provide its customers
greater "value-added" services through the integration of its various
disciplines.
To finance the significant growth experienced by the Company, to
recapitalize its borrowings and to provide resources to invest in its
environmental markets, the Company raised a net amount equal to approximately
$30,500,000 from an initial public offering of its Common Stock and warrants in
July 1996 (the "IPO"), approximately $4,000,000 from private placements of
preferred stock and Common Stock in August and October 1997, and approximately
$11,100,000 from the public sale of Separation preferred
5
<PAGE>
stock, common stock and warrants in April and May 1997. The Company currently
holds 87% of the outstanding shares of common stock of Separation. As of April
15, 1998, approximately 42.5% of the outstanding shares of Common Stock, in
turn, was owned by Environmental.
The Company was incorporated in Delaware in March 1996. As used in this
Prospectus, and except as the context otherwise requires, the term "Company"
refers to Commodore Applied Technologies, Inc. and its subsidiaries, including
Solution, Separation, CFC Technologies and Advanced Sciences. The Company's
principal executive offices are located at 150 East 58th Street, Suite 3400, New
York, New York 10155, and its telephone number at that address is (212)
308-5800.
The Offering
Shares Offered by Selling
Stockholders............ Up to 3,210,000 shares of Common Stock.(1)
Common Stock Outstanding:
Before the Offering.... 23,103,200 shares.
After the Offering..... Up to 23,163,200 shares, assuming the full
exercise of the Consultant Warrant.(2)
Use of Proceeds.......... If the Consultant Warrant is exercised in full by
payment of its stated exercise price in cash (as
opposed to a "cashless" exercise), the Company will
receive gross proceeds of approximately $300,000.
Such proceeds, if any, will be utilized for working
capital and general corporate purposes. The Company
will not receive any proceeds from the sale of the
Shares by the Selling Stockholders. See "Use of
Proceeds."
Amex Trading Symbol...... CXI
- -------------
(1) Includes up to 1,618,308 shares of Common Stock (representing the Maximum
Additional First Tranche Shares being registered hereby), which may be
acquired by certain of the Selling Stockholders in the future pursuant to
certain purchase price adjustment terms of the Private Placement.
(2) The Shares being offered hereby include 3,150,000 Aggregate First Tranche
Shares that have been and may be sold to certain of the Selling Stockholders
from the account of Environmental, which owned approximately 42.5% of the
outstanding shares of Common Stock as of the date hereof. Therefore, the
resale of such Shares by certain of the Selling Stockholders will not result
in an increase in the number of outstanding shares of Common Stock.
Risk Factors
An investment in the Shares offered hereby involves a high degree of risk,
including, without limitation, the Company's limited operating history, history
of losses and anticipation of future losses; the lack of assurance of
collaborative agreements, licenses or project contracts; the uncertainty of
market acceptance; the risk of environmental liability; the potential need for
additional financing; the existence of competition and technological
alternatives; the unpredictability of patent protection and proprietary
technology; environmental regulation; unspecified acquisition-related risks; and
potential conflicts of interest. An investment in the Shares offered hereby
should be considered only by investors who can afford the loss of their entire
investment. See "Risk Factors."
6
<PAGE>
RISK FACTORS
The Shares offered hereby are highly speculative in nature and involve a
high degree of risk. Prior to making an investment decision, prospective
investors in the Shares offered hereby should give careful consideration to the
information set forth in this Prospectus or incorporated herein by reference
and, in particular, should evaluate the risk factors set forth below.
Limited Operating History; History of Losses; Future Losses and Uncertainty of
Financial Results;
Initial Commercialization Stage
Prior to the acquisition of Advanced Sciences, the Company's operating
history was limited and consisted primarily of the development of SET and
remediation equipment, conducting laboratory tests, and planning on-site tests
and demonstrations. The Company is still subject to all of the business risks
associated with a new enterprise, including, but not limited to, risks of
unforeseen capital requirements, failure of market acceptance, failure to
establish business relationships and competitive disadvantages as against larger
and more established companies. For the year ended December 31, 1997, the
Company had total revenues of $19,493,000 and a net loss of $15,694,000,
compared to total revenues of $5,123,000 and a net loss of $5,643,000 for the
year ended December 31, 1996. Such losses primarily reflect the Company's
investments in product development related to the SET technology and SET
equipment and commercialization activities. At December 31, 1997, the Company
had stockholders' equity of $11,654,000 and working capital of $11,170,000,
compared to stockholders' equity of $20,076,000 and working capital of
$8,838,000 at December 31, 1996.
The Company anticipates that it will continue to incur significant
operating losses through 1998 and may incur additional losses thereafter,
depending upon its ability to consummate collaborative working arrangements or
licenses with third parties and the operation and financial success of any
environmental projects that the Company and its potential working partners may
be awarded. Other than revenues generated by Advanced Sciences, which the
Company acquired in October 1996, the Company has generated nominal revenues to
date, and there can be no assurance as to whether or when it will generate
material revenues or achieve profitable operations.
SET and SLiM Unproven on Large-Scale Commercial Basis
SET and SLiM have never been utilized on a large-scale basis, and there can
be no assurance that such technologies will perform successfully on a
large-scale commercial basis or that they will be profitable to the Company. The
Company has never utilized SET and SLiM under the conditions and in the volumes
that will be required to be profitable and cannot predict all of the
difficulties that may arise. In addition, most of the results of the tests
conducted by the Company on SET and SLiM have not been verified by an
independent testing laboratory. Thus, it is possible that the Company's SET and
SLiM technologies may require further research, development, design and testing,
as well as regulatory clearances, prior to larger-scale commercialization.
Additionally, the Company's ability to operate its business successfully will
depend on a variety of factors, many of which are outside the Company's control,
including competition, cost and availability of supplies, changes in
governmental initiatives and requirements, changes in EPA and other regulatory
requirements, and the costs associated with equipment repair and maintenance.
No Assurance of Collaborative Agreements, Licenses or Project Contracts
The Company's business strategy is based upon entering into collaborative
joint working arrangements with established engineering and environmental
companies, or entering into joint venture agreements relative to the application
of SET and SLiM as enabling technologies for specified industries or markets. To
date, only Advanced Sciences and its collaborative joint working partners have
been awarded material project contracts. There can be no assurance that the
Company will enter into any definitive joint project arrangements or joint
venture collaborative agreements with its prospective working partners or
others, or that such agreements, if entered into, will be on terms and
conditions that are sufficiently attractive to the Company to enable it to
generate profits. In the event the Company is unable to enter into commercially
attractive collaborative working arrangements for one or more commercial or
industrial remediation projects, in order to produce revenues for
7
<PAGE>
the Company, it may be necessary to license SET and/or SLiM to unaffiliated
third parties. There is no assurance that the Company will be able to enter into
such license arrangements or that such licenses will produce any income to the
Company. Even if the Company is able to complete additional joint working
arrangements, there is no assurance that the Company and its working partners
will be awarded contracts to perform decontamination or remediation projects.
Even if such contracts are awarded, there is no assurance that these contracts
will be profitable to the Company. In addition, any project contract which may
be awarded to the Company and/or any of its joint working partners may be
curtailed, delayed, redirected or eliminated at any time. Problems experienced
on any specific project or delays in the implementation and funding of projects
could materially adversely affect the Company's business and financial
condition.
Uncertainty of Market Acceptance
Many prospective users of SET have already committed substantial resources
to other forms of environmental remediation technology, including incineration,
plasma arc, vitrification, molten metal, molten salt, chemical neutralization,
catalytic electrochemical oxidation and supercritical wet oxidation. In
addition, many prospective users of SLiM have committed substantial resources to
other forms of process stream treatments or technologies. The Company's growth
and future financial performance will depend on demonstrating to prospective
collaborative partners and users the advantages of SET, SLiM and the Company's
other environmental technologies over alternative technologies. There can be no
assurance that the Company and its prospective collaborative partners will be
successful in this effort. Furthermore, it is possible that competing
alternatives may be perceived to have, or may actually have, certain advantages
over SET, SLiM and/or the Company's other environmental technologies for certain
industries or applications.
Risk of Environmental Liability
The Company's operations, as well as the use of the specialized technical
equipment by its customers, are subject to numerous federal, state and local
regulations relating to the storage, handling, emission and transportation of
certain regulated materials. There is always the risk that such materials might
be mishandled, or that there might be equipment or technology failures, which
could result in significant claims against the Company. Any such claims against
the Company could materially adversely affect the Company's business, financial
condition and results of operations.
As SET, SLiM and the Company's other environmental technologies are
commercialized, the Company may be required to obtain environmental liability
insurance in the future in amounts greater than those it currently maintains.
There can be no assurance that such insurance will provide coverage against all
claims, and claims may be made against the Company (even if covered by an
insurance policy) for amounts substantially in excess of applicable policy
limits. Any such event could have a material adverse effect on the Company's
business, financial condition and results of operations.
Potential Need for Additional Financing
In July 1996, the Company completed the IPO, from which it received net
proceeds of approximately $30.5 million. In April 1997, Separation completed an
initial public offering of its equity securities, from which it received net
proceeds of approximately $11.1 million. In August and October 1997, the Company
completed the private placement of 18,000 shares of its Series A Preferred Stock
and 700,000 shares of Common Stock, respectively, from which the Company
received aggregate net proceeds of approximately $4.0 million. In addition, in
September 1997 and February 1998, the Company received a $4.0 million unsecured
loan and a $5.45 million unsecured loan, respectively, from Environmental. Prior
to such financings, financing for all of the Company's activities had been
provided in the form of direct equity investments and loans by Environmental.
While the Company believes that it has sufficient cash reserves to meet expenses
incurred in the ordinary course of business through the first fiscal quarter of
1999, the Company's future capital requirements will depend on certain factors,
many of which are not within the Company's control. These include the ongoing
development and testing of SET, SLiM and the Company's other environmental
technologies, the nature and timing of remediation and clean-up projects and
permits required, and the availability of financing.
8
<PAGE>
In the environmental remediation market, the Company may not be able to
enter into favorable business collaborations and might thus be required to bid
upon projects for its own account. If such bids were successful, the Company
would be required to make significant expenditures on personnel and capital
equipment which would require significant financing in amounts substantially in
excess of the net proceeds of the above financings. In addition, the Company's
lack of operational experience and limited capital resources could make it
difficult, if not highly unlikely, to successfully bid on major reclamation or
clean-up projects. In such event, the Company's business development could be
limited to remediation of smaller commercial and industrial sites with
significantly lower potential for profit. In addition, the expansion of the
Company's business will require the commitment of significant capital resources
toward the hiring of technical and operational support personnel, the
development of a manufacturing and testing facility for SET and SLiM equipment,
and the building of equipment to be used both for on-site test demonstrations
and the remediation of contaminated elements. In the event the Company is
presented with one or more significant reclamation or clean-up projects,
individually or in conjunction with collaborative working partners, it may
require additional capital to take advantage of such opportunities. There can be
no assurance that such financing will be available or, if available, that it
will be on favorable terms. If adequate financing is not available, the Company
may be required to delay, scale back or eliminate certain of its research and
development programs, to relinquish rights to certain of its technologies, or to
license third parties to commercialize technologies that the Company would
otherwise seek to develop itself.
Competition and Technological Alternatives
The Company anticipates that the primary markets for its technologies will
be for hazardous and toxic waste and industrial by-products treatment and
disposal, the destruction or neutralization of chemical weapons materials and
warfare agents, and the concentration of radioactive wastes. The Company has had
limited experience in marketing its technologies and has a small sales and
marketing organization, whereas other participants in both the private and
public sectors include several large domestic and international companies and
numerous small companies, many of whom have substantially greater financial and
other resources and more manufacturing, marketing and sales experience than the
Company. Any one or more of the Company's competitors or other enterprises not
presently known to the Company may develop technologies which are superior to
SET, SLiM or other technologies utilized by the Company. To the extent that the
Company's competitors are able to offer more cost-effective remediation
alternatives, the Company's ability to compete could be materially and adversely
affected.
Unpredictability of Patent Protection and Proprietary Technology
Solution has fifteen United States patents which were issued between 1987
and 1998, and which relate to SET, electrochemistry of halogenated organic
compounds, separation and destruction of CFCs and decontamination of soils
containing mercury and radioactive metals. Solution also has one Canadian and
one Japanese patent relating to its SET technology. The Company has filed
additional United States patent applications relating to SET and removal of
heavy metals from soil. In 1997, the Company filed a patent application relating
to the destruction of chemical warfare agents and explosives. In September 1997,
Separation filed two United States continuation-in-part ("CIP") provisional
patent applications and one international patent application covering the
principal features of its SLiM technology. One of the CIP provisional patent
applications covers the joint inventions of Dr. Srinivas Kilambi, Separation's
former Senior Vice President--Technology, and Lockheed Martin. The other CIP
provisional patent application and the international patent application cover
the sole inventions of Dr. Kilambi. CFC Technologies has one patent and one
patent filing, and CFC Technologies is licensed to utilize SET for CFC
applications. The Company is pursuing foreign patent protection where it deems
appropriate.
The Company's success depends, in part, on its ability to obtain additional
patents, protect the patents which it owns, maintain trade secrecy protection
and operate without infringing on the proprietary rights of third parties. The
patents currently owned by the Company are improvement patents which are more
difficult to monitor for infringement than those that would be contained in a
patent covering a pioneering invention or technology. There can be no assurance
that any of the Company's pending patent applications will be approved, that the
Company will develop additional proprietary technology that is patentable, that
any patents issued to the Company will provide the Company with competitive
advantages or will not be challenged by third parties or that
9
<PAGE>
the patents of others will not have an adverse effect on the Company's ability
to conduct its business. Furthermore, there can be no assurance that others will
not independently develop similar or superior technologies, duplicate any
elements of SET, SLiM or the Company's other technologies, or design around such
technologies. It is possible that the Company may need to acquire licenses to,
or to contest the validity of, issued or pending patents of third parties. There
can be no assurance that any license acquired under such patents would be made
available to the Company on acceptable terms, if at all, or that the Company
would prevail in any such contest. In addition, the Company could incur
substantial costs in defending itself in suits brought against the Company for
alleged infringement of another party's patents or in defending the validity or
enforceability of the Company's patents, or in bringing patent infringement
suits against other parties based on the Company's patents. In addition to
patent protection, the Company also relies on trade secrets, proprietary
know-how and technology which it seeks to protect, in part, by confidentiality
agreements with its prospective working partners and collaborators, employees
and consultants. There can be no assurance that these agreements will not be
breached, that the Company would have adequate remedies for any breach, or that
the Company's trade secrets and proprietary know-how will not otherwise become
known or be independently discovered by others.
Environmental Regulation
The Company and its customers are required to comply with a number of
federal, state and local laws and regulations in the areas of safety, health and
environmental controls, including, without limitation, the Resource Conservation
and Recovery Act, as amended ("RCRA"), and the Occupational Safety and Health
Act of 1970 ("OSHA"), which may require the Company, its prospective working
partners or its customers to obtain permits or approvals to utilize SET and/or
SLiM, or the Company's other environmental technologies and related equipment on
certain job sites. In addition, if the Company begins to market SET and SLiM
internationally, the Company will be required to comply with laws and
regulations and, when applicable, obtain permits or approvals in those other
countries. There is no assurance that such required permits and approvals will
be obtained. Furthermore, particularly in the environmental remediation market,
the Company may be required to conduct performance and operating studies to
assure government agencies that SET and/or SLiM, and their by-products, do not
pose environmental risks. There is no assurance that such studies, if
successful, will not be more costly or time-consuming than anticipated.
In addition, the Company's Nationwide Permit issued by the EPA contains
numerous conditions for maintaining the Nationwide Permit, including
notification of all job sites, periodic reporting to the EPA as to activities at
the job sites, prior notification to and approval by the EPA with respect to any
single-site centralized remediation facility that the Company may seek to
establish and certain restrictions on the disposal of byproducts from the use of
SET, and there can be no assurance that the Company will be able to comply with
such conditions in order to maintain and/or obtain renewal of the Nationwide
Permit. Further, if new environmental legislation or regulations are enacted or
existing legislation or regulations are amended, or are interpreted or enforced
differently, the Company, its prospective working partners and/or its customers
may be required to meet stricter standards of operation and/or obtain additional
operating permits or approvals. There can be no assurance that the Company will
meet all of the applicable regulatory requirements.
Unspecified Acquisition-Related Risks
As part of its growth strategy, the Company may seek to acquire or invest
in complementary (including competitive) businesses, products or technologies.
The Company may allocate a significant portion of its available working capital
to finance a portion of the purchase price relating to possible acquisitions of,
or investments in, complementary (including competitive) businesses, products or
technologies. In the event any such acquisition or investment opportunity arises
in the future, it is probable that the Company will also be required to obtain
additional financing to complete such transaction. The process of integrating
such acquired assets into the Company's operations may result in unforeseen
operating difficulties and expenditures and may absorb significant management
attention that would otherwise be available for the ongoing development of the
Company's business. There can be no assurance that the anticipated benefits of
any acquisitions will be realized. In addition, future acquisitions by the
Company could result in potentially dilutive issuances of equity securities, the
incurrence of debt and contingent liabilities and amortization expenses related
to goodwill and other intangible assets,
10
<PAGE>
any of which could materially adversely affect the Company's operating results
and financial position. Acquisitions also involve other risks, including
entering markets in which the Company has no or limited prior experience. The
Company currently has no binding commitments or agreements with respect to any
possible acquisitions or investments.
Dependence on Key Management and Other Personnel
The Company is dependent on the efforts of its senior management and
scientific staff, including, among others, Paul E. Hannesson, Chairman of the
Board, President and Chief Executive Officer, Michael D. Fullwood, Senior Vice
President, Chief Financial and Administrative Officer, Secretary and General
Counsel, and Kenneth L. Adelman, Ph.D., Vice Chairman and Executive Vice
President--Marketing and International Development. The Company is also
dependent on the efforts of Kenneth J. Houle, President and Chief Operating
Officer of Separation, Ed L. Romero, Chief Executive Officer of Advanced
Sciences, and Peter E. Harrod, President of Advanced Sciences and President and
Chief Operating Officer of Solution. The proceeds of key-man life insurance
policies on the lives of certain of such individuals may not be adequate to
compensate the Company for the loss of any of such individuals. The loss of the
services of any one or more of such persons may have a material adverse effect
on the Company. The Company's future success will depend in large part upon its
ability to attract and retain skilled scientific, management, operational and
marketing personnel. The Company faces competition for hiring such personnel
from other companies, government entities and other organizations. There can be
no assurance that the Company will continue to be successful in attracting and
retaining such personnel.
Potential Conflicts of Interest
Paul E. Hannesson and Michael D. Fullwood, the Chairman of the Board,
President and Chief Executive Officer and the Senior Vice President, Chief
Financial and Administrative Officer, Secretary and General Counsel of the
Company, respectively, also serve in the same capacities with, and devote a
significant portion of their business and professional time and efforts to the
businesses of, Environmental and Separation. In addition, Bentley J. Blum,
Kenneth L. Adelman, Ph.D., Herbert A. Cohen and David L. Mitchell (the
"Environmental Directors"), all of whom are directors of the Company, also serve
as directors of Environmental and Separation. While the Company believes that
its business and technologies are distinguishable from those of Environmental,
and that it does not compete in the markets in which Environmental competes,
Messrs. Hannesson and Fullwood and the Environmental Directors may have
potential conflicts of interest with respect to, among other things, potential
corporate opportunities, business combinations, joint ventures and/or other
business opportunities that may become available to them, the Company and/or
Environmental. Moreover, while Messrs. Hannesson and Fullwood have agreed to
devote a portion of their business and professional time and efforts to the
Company, potential conflicts of interest also include the amount of time and
effort devoted by them to the affairs of Environmental and Separation. The
Company may be materially adversely affected if Messrs. Hannesson and Fullwood
and/or the Environmental Directors choose to place the interests of
Environmental or Separation before those of the Company. Each of Messrs.
Hannesson and Fullwood and the Environmental Directors has agreed that, to the
extent such opportunities arise, he will carefully consider a number of factors,
including whether such opportunities are within the Company's line of business
or consistent with its strategic objectives and whether the Company will be able
to undertake or benefit from such opportunities. In addition, the Company's
Board of Directors has adopted a policy whereby any future transactions between
the Company and any of its subsidiaries, affiliates, officers, directors,
principal stockholders or any affiliates of the foregoing will be on terms no
less favorable to the Company than could reasonably be obtained in "arm's
length" transactions with independent third parties, and any such transactions
will also be approved by a majority of the Company's disinterested outside
directors. Messrs. Hannesson and Fullwood and the Environmental Directors also
owe fiduciary duties of care and loyalty to the Company under Delaware law.
However, the failure of the Company's management to resolve any conflicts of
interest in favor of the Company could materially adversely affect the Company's
business, financial condition and results of operations.
Absence of Dividends on Common Stock
To date, the Company has not declared or paid any cash dividends on its
Common Stock. The payment of cash dividends, if any, in the future is within the
discretion of the Board of Directors and will depend upon the Company's
earnings, if any, its capital requirements and financial condition and other
relevant factors. The Company does not expect to declare or pay any dividends on
its Common Stock in the foreseeable future.
11
<PAGE>
Potential Adverse Effect on Market Price of Securities from Future Sales of
Common Stock
No assurance can be given as to the effect, if any, that future sales of
Common Stock, or the availability of shares of Common Stock for future sales,
will have on the market price of the Common Stock from time to time. Sales of
substantial amounts of Common Stock (including shares issued upon the exercise
of warrants or stock options), or the possibility that such sales could occur,
could adversely affect the market price of the Common Stock and could also
impair the Company's ability to raise capital through an offering of its equity
securities in the future. Assuming the full exercise of the Consultant Warrant,
upon completion of this offering the Company will have approximately 23,163,200
shares of Common Stock outstanding, of which approximately 11,897,806 currently
publicly traded shares of Common Stock, 60,000 Shares (subject to adjustment)
issuable upon exercise of the Consultant Warrant, and 3,150,000 Shares that have
been and may be transferred to the Selling Stockholders by Environmental in
connection with the First Tranche Sale will be transferable without restriction
under the Securities Act of 1933, as amended (the "Securities Act"). The
remaining 8,055,394 shares of Common Stock to be outstanding upon completion of
this offering are "restricted securities" (as that term is defined in Rule 144
promulgated under the Securities Act) which may be publicly sold only if
registered under the Securities Act, or if sold in accordance with an applicable
exemption from registration such as Rule 144. In general, under Rule 144 as
currently in effect, subject to the satisfaction of certain other conditions, a
person, including an affiliate of the Company, who has beneficially owned
restricted securities for at least one year, is entitled to sell (together with
any person with whom such individual is required to aggregate sales), within any
three-month period, a number of shares that does not exceed the greater of 1% of
the total number of outstanding shares of the same class, or, if the stock is
quoted on the Nasdaq Stock Market or a national securities exchange, the average
weekly trading volume during the four calendar weeks preceding the sale. A
person who has not been an affiliate of the Company for at least the immediately
preceding three months, and who has beneficially owned restricted securities for
at least two years, is entitled to sell such restricted shares under Rule 144
without regard to any of the limitations described above.
Volatility of Market Prices of Common Stock
The market price for the Company's Common Stock has been historically
volatile. Future announcements of new technologies and changing policies and
regulations of the federal government and state governments and other external
factors, as well as potential fluctuations in the Company's financial results,
may have a significant impact on the price of the Common Stock in the future.
Certain Anti-Takeover Provisions and Potential Adverse Effect on Market Price
of Securities from Issuance of Preferred Stock
The Company's Certificate of Incorporation and By-laws contain certain
provisions that could have the effect of delaying or preventing a change of
control of the Company, which could limit the ability of security holders to
dispose of their shares of Common Stock in such transactions. The Certificate of
Incorporation authorizes the Board of Directors to issue one or more series of
preferred stock without stockholder approval. Such preferred stock could have
voting and 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. Issuance of such preferred stock may have an adverse
effect on the then prevailing market price of the Common Stock. Additionally,
the Company is subject to the anti-takeover provisions of Section 203 of the
Delaware General Corporation Law, which prohibits the Company from engaging in a
"business combination" with an "interested stockholder" for a period of three
years after the date of the transaction in which the person became an interested
stockholder, unless the business combination is approved in a prescribed manner.
Section 203 could have the effect of delaying or preventing a change of control
of the Company.
Limitations on Liability of Directors and Officers
The Company's Certificate of Incorporation includes provisions to
eliminate, to the full extent permitted by the Delaware General Corporation Law
as in effect from time to time, the personal liability of directors of the
Company for monetary damages arising from a breach of their fiduciary duties as
directors. The Certificate of
12
<PAGE>
Incorporation also includes provisions to the effect that (subject to certain
exceptions) the Company shall, to the maximum extent permitted from time to time
under the laws of the State of Delaware, indemnify, and upon request shall
advance expenses to, any director or officer to the extent that such
indemnification and advancement of expenses is permitted under such law, as it
may from time to time be in effect. In addition, the Company's By-laws require
the Company to indemnify, to the full extent permitted by law, any director,
officer, employee or agent of the Company for acts which such person reasonably
believes are not in violation of the Company's corporate purposes as set forth
in the Certificate of Incorporation. As a result of such provisions in the
Certificate of Incorporation and By-laws, stockholders may be unable to recover
damages against the directors and officers of the Company for actions taken by
them which constitute negligence, gross negligence or a violation of their
fiduciary duties, which may discourage or deter stockholders from suing
directors, officers, employees and agents of the Company for breaches of their
duty of care, even though such action, if successful, might otherwise benefit
the Company and its stockholders.
FORWARD-LOOKING STATEMENTS
This Prospectus includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act. All
statements, other than statements of historical facts, included or incorporated
by reference in this Prospectus which address activities, events or developments
which the Company expects or anticipates will or may occur in the future,
including such things as future capital expenditures (including the amount and
nature thereof), anticipated improvements in financial performance and
management's long-term performance goals, the Company's growth strategy,
including anticipated internal growth and plans to pursue acquisitions of
complementary (including competitive) businesses, products or technologies,
expansion and growth of the Company's business operations, including development
and maintenance of collaborative joint working arrangements, and other such
matters are forward-looking statements. These statements are based on certain
assumptions and analyses made by the Company in light of its experience and its
perception of historical trends, current conditions and expected future
developments, as well as other factors it believes are appropriate in the
circumstances. However, whether actual results and developments will conform
with the Company's expectations and predictions is subject to a number of risks
and uncertainties, including, without limitation, the risk factors discussed in
this Prospectus; general economic, market or business conditions; the business
opportunities (or lack thereof) that may be presented to and pursued by the
Company; changes in laws or regulations; and other factors, most of which are
beyond the control of the Company. Consequently, all of the forward-looking
statements made in this Prospectus are qualified by these cautionary statements
and there can be no assurance that the actual results or developments
anticipated by the Company will be realized or, even if substantially realized,
that they will have the expected consequences to or effects on the Company or
its business or operations. The Company assumes no obligation to update any such
forward-looking statements.
RECENT DEVELOPMENTS
Sale of Company Common Stock by Environmental
On February 10, 1998, Environmental completed the First Tranche Sale of (i)
1,381,692 shares of Company Common Stock held in its account (representing the
First Tranche Shares being registered hereby), and (ii) the First Tranche
Warrants to purchase an aggregate of 150,000 shares of Company Common Stock
(subject to adjustment) held in its account (representing the First Tranche
Warrant Shares being registered hereby) at an exercise price equal to $6.00 per
share, to certain of the Selling Stockholders. After deduction of fees and
transaction costs associated with the First Tranche Sale totaling approximately
$550,000, Environmental received aggregate net proceeds of approximately
$5,450,000 from the First Tranche Sale. Immediately prior to the First Tranche
Sale, Environmental owned approximately 52% of the outstanding shares of Common
Stock. As of the date hereof, Environmental owned approximately 42.5% of the
outstanding shares of Common Stock.
Pursuant to the terms of the Private Placement, in the event that 90% of
the average closing bid price per share of Common Stock for the First Tranche
Measuring Period (as defined below) (the "First Tranche Adjustment Price") is
less than the $4.3425 per share purchase price of the First Tranche Shares,
Environmental will be required to transfer to certain of the Selling
Stockholders, for no additional consideration, an aggregate amount of additional
shares of Common Stock equal to the difference between (a) the amount equal to
13
<PAGE>
$6,000,000 (representing the aggregate purchase price of the First Tranche
Shares) divided by the First Tranche Adjustment Price and (b) 1,381,692
(representing the number of First Tranche Shares), provided that in no event
will the First Tranche Adjustment Price be less than $2.00. The "First Tranche
Measuring Period" is defined as the 75-trading day period commencing immediately
following the effective date of the Registration Statement of which this
Prospectus is a part, provided that if the Registration Statement is not
declared effective within 12 months following February 10, 1998, the First
Tranche Measuring Period will commence on the date which is 12 months following
February 10, 1998, and provided further that if the Registration Statement is
declared effective prior to April 15, 1998, the First Tranche Measuring Period
will mean the 75-trading day period commencing April 15, 1998.
The maximum number of additional shares of Common Stock that Environmental
may be required to transfer to certain of the Selling Stockholders pursuant to
the foregoing purchase price adjustment terms is 1,618,308 shares (representing
the Maximum Additional First Tranche Shares being registered hereby), assuming
the lowest possible First Tranche Adjustment Price of $2.00.
Pursuant to the terms of the Private Placement, Environmental will, no
earlier than the last day of the First Tranche Measuring Period and no later
than 45 trading days following the end of the First Tranche Measuring Period,
have the right and option (but not the obligation) to require certain of the
Selling Stockholders to purchase (i) an aggregate amount of additional shares of
Common Stock equal to $4,000,000 divided by 90% of the average closing price per
share of Common Stock for the five trading days immediately prior to the closing
date of such sale (the "Second Tranche Shares") and (ii) warrants to purchase an
aggregate of 100,000 shares of Common Stock at an exercise price per share equal
to the greater of $6.00 or 125% of the per share purchase price of the Second
Tranche Shares, for an aggregate purchase price of $4.0 million (the "Second
Tranche Sale").
As in the case of the First Tranche Sale, in the event that 90% of the
average closing bid price per share of Common Stock for the Second Tranche
Measuring Period (as defined below) (the "Second Tranche Adjustment Price") is
less than the per share purchase price of the Second Tranche Shares,
Environmental will transfer to certain of the Selling Stockholders, for no
additional consideration, an aggregate amount of additional shares of Common
Stock equal to the difference between (a) the amount equal to $4,000,000
(representing the aggregate purchase price of the Second Tranche Shares) divided
by the Second Tranche Adjustment Price and (b) the number of Second Tranche
Shares, provided that in no event will the Second Tranche Adjustment Price be
less than $2.00. The "Second Tranche Measuring Period" means the 75-trading day
period commencing immediately following the effective date of a registration
statement covering the Second Tranche Shares, provided that if such registration
statement is not declared effective within 12 months after the closing date of
the Second Tranche Sale, the Second Tranche Measuring Period will commence on
the date which is 12 months following the closing date of the Second Tranche
Sale.
If during the 90-day period after the end of the First Tranche Measuring
Period Environmental sells, or the Company issues, any shares of Common Stock
("First Future Shares") at a price per share that is less than the per share
purchase price of the First Tranche Shares or during the 90-day period after the
end of the Second Tranche Measuring Period Environmental sells, or the Company
issues, any shares of Common Stock ("Second Future Shares") at a price per share
that is less than the per share purchase price of the Second Tranche Shares,
Environmental will transfer to certain of the Selling Stockholders, for no
additional consideration, a number of additional shares of Common Stock equal to
(a) with respect to First Future Shares, an amount equal to the difference
between (i) $6,000,000 (representing the aggregate purchase price of the First
Tranche Shares) divided by the price at which the First Future Shares were sold
or issued and (ii) 1,381,692 (representing the number of First Tranche Shares),
and (b) with respect to Second Future Shares, an amount equal to the difference
between (i) $4,000,000 (representing the aggregate purchase price of the Second
Tranche Shares) divided by the price at which the Second Future Shares were sold
or issued and (ii) the amount equal to the number of Second Tranche Shares.
Notwithstanding the foregoing, the terms "First Future Shares" and "Second
Future Shares" do not include any shares of Common Stock which may be issued in
the future upon conversion or exercise of, or pursuant to the terms of any
agreement entered into by the Company or Environmental in respect of, securities
of the Company and/or Environmental which have been issued prior to February 9,
1998.
Pursuant to the terms of the Registration Rights Agreement, the Company has
agreed to file registration statements on Form S-3, including the Registration
Statement of which this Prospectus is a part, under the Securities Act covering
all of the shares of Common Stock that have been and may be issued to certain of
the
14
<PAGE>
Selling Stockholders in the Private Placement and to keep such registration
statements continuously effective under the Securities Act for a period of two
years after their respective effective dates or such earlier date when all
shares covered by the registration statements have been sold or may be sold
without volume restrictions under the Securities Act (the "Effective Period").
Avalon Group, Inc. was retained by Environmental as a finder in connection
with the Private Placement and has to date received fees of approximately
$510,000 in connection therewith.
The Private Placement was deemed exempt from the registration requirements
of the Securities Act in reliance on Section 4(2) thereof as a transaction by an
issuer not involving any public offering. The recipients of securities in the
First Tranche Sale represented their intentions to acquire the securities for
investment only and not with a view to or for sale in connection with any
distribution thereof, and appropriate restrictive legends were affixed to the
First Tranche Warrants and the certificates representing the First Tranche
Shares issued in such transaction. The Company and Environmental made available
to all recipients of securities written information about the Company and
Environmental in accordance with Rule 502 of the Securities Act and advised such
recipients of the limitations on resale of such securities. In addition, all
recipients were offered the opportunity, prior to purchasing any securities, to
ask questions of, and receive answers from, the Company and Environmental
concerning the terms and conditions of the transactions and to obtain additional
relevant information about the Company and Environmental.
Intercompany Note
Upon receipt of the net proceeds of the First Tranche Sale, Environmental
provided a $5,450,000 unsecured loan to the Company, evidenced by the Company's
8% non-convertible note (the "Intercompany Note"). Pursuant to the terms of the
Intercompany Note, interest on the unpaid principal balance of the Intercompany
Note is payable at the rate of 8% per annum semiannually in cash. The unpaid
principal amount of the Intercompany Note is due and payable, together with
accrued and unpaid interest, on the earlier to occur of (a) December 31, 1999,
or (b) consummation of any public offering or private placement (other than the
Private Placement) of securities of the Company with net proceeds aggregating in
excess of $6.0 million, other than in respect of working capital financing or
secured financing of assets received by the Company in the ordinary course of
business from any bank or other lending institution, provided that if such funds
are raised in a private placement during the period commencing on February 9,
1998 and ending on the last day of the Effective Period, then the Intercompany
Note will not be payable unless a registration statement covering the shares of
Common Stock sold in the Private Placement has been effective for 75 consecutive
days and is effective on the date of such repayment. The Company will use the
net proceeds of the loan solely for working capital and general corporate
purposes and not for the satisfaction of any portion of Company debt or to
redeem any Company equity or equity-equivalent securities.
In connection with the loan, the Company amended and restated in its
entirety a five-year warrant to purchase 7,500,000 shares of Common Stock issued
to Environmental on December 2, 1996 to, among other things, reduce the exercise
price of the warrant from $15.00 per share to $10.00 per share. In addition, the
Company issued to Environmental an additional five-year warrant to purchase
1,500,000 shares of Common Stock at an exercise price of $10.00 per share.
Intercompany Convertible Note
In September 1997, Environmental provided a $4.0 million unsecured loan to
the Company, evidenced by the Company's 8% convertible subordinated note (the
"Convertible Note"). Pursuant to the terms of the Convertible Note, the Company
is obligated to pay Environmental interest only at the rate of 8% per annum,
payable quarterly. Unless converted into Common Stock at any time, the unpaid
principal amount of the Convertible Note is due and payable, together with
accrued and unpaid interest, on August 31, 2002. Payment of principal and
accrued interest under the Convertible Note is subordinated to all other
indebtedness for money borrowed of the Company. Environmental has the right to
convert the Convertible Note into shares of Common Stock at a conversion price
of $3.89 per share. Such conversion price was fixed at approximately 85% of the
five-day average closing bid price of Common Stock ($4.575 per share) prior to
August 22, 1997, the date that
15
<PAGE>
the Executive and Finance Committees of the respective Boards of Directors of
the Company and Environmental authorized such loan. In connection with the $4.0
million loan, the Company issued Environmental a five-year warrant to purchase
1,000,000 shares of Common Stock at an exercise price of $5.0325 per share
(approximately 110% of the $4.575 five-day average closing bid price of Common
Stock prior to August 22, 1997).
In March 1998, the Company prepaid $2.0 million of the Convertible Note by
(i) paying Environmental the sum of $500,000 in cash and (ii) transferring to
Environmental a promissory note, dated August 30, 1996, in the principal amount
of $1.5 million from Lanxide Performance Materials, Inc., a wholly-owned
subsidiary of Lanxide Corporation, a Delaware corporation ("Lanxide"). Lanxide,
which specializes in the manufacture of ceramic bonding and refractory
materials, is related to the Company by significant common beneficial ownership.
To induce Environmental to accept the Company's prepayment of $2.0 million of
the Convertible Note (and thereby give up the right to convert $2.0 million of
the Convertible Note into Common Stock), the Company issued to Environmental an
additional warrant to purchase up to 514,000 shares of Common Stock at an
exercise price of $4.50 per share. Such exercise price was fixed at
approximately 110% of the closing sale price of the Common Stock on February 20,
1998, the trading day immediately prior to the date the Board of Directors of
the Company approved such prepayment. The estimated fair value of such warrant
is approximately $340,000.
USE OF PROCEEDS
An aggregate of up to 210,000 shares of Common Stock (subject to
adjustment) covered by this Prospectus are issuable upon the exercise of the
First Tranche Warrants and the Consultant Warrant. If all such warrants are
exercised in full by payment of their stated exercise prices in cash,
Environmental will receive gross proceeds of approximately $900,000 from the
exercise of the First Tranche Warrants, and the Company will receive gross
proceeds of approximately $300,000 from the exercise of the Consultant Warrant.
The First Tranche Warrants and the Consultant Warrant provide for "cashless"
exercises thereof and, to the extent such warrants are exercised by "cashless"
exercises, neither Environmental nor the Company will receive any proceeds
therefrom. The Company will not receive any proceeds from any exercise of the
First Tranche Warrants.
Expenses expected to be incurred by the Company in connection with this
registration are estimated at approximately $31,000. The Selling Stockholders
will pay all of their underwriting commissions and discounts and counsel fees
and expenses in connection with the sale of the Shares. See "Plan of
Distribution." Net proceeds to the Company from the exercise of the Consultant
Warrant, if any, will be utilized for working capital and general corporate
purposes. No assurance can be given, however, as to when, if ever, the
Consultant Warrant will be exercised, or as to whether the Company will realize
any proceeds therefrom.
The Company will not receive any proceeds from the sale of the Shares by
the Selling Stockholders.
16
<PAGE>
SELLING STOCKHOLDERS
The following table sets forth the name of each Selling Stockholder, the
number of Shares owned by the Selling Stockholders (where indicated by footnote,
as if all the First Tranche Warrants and the Consultant Warrant had been
exercised in full as of the date hereof), and the number of Shares which may be
offered for resale pursuant to this Prospectus. The information included below
is based upon information provided by the Selling Stockholders. The actual
number of Shares owned or offered could be materially less or more than such
estimated amount depending upon factors which cannot be predicted at this time
and, if required, will be reflected in a supplement to this Prospectus. Because
each Selling Stockholder may offer all, some or none of the Shares it holds, and
because there are currently no agreements, arrangements or understandings with
respect to the sale of any of the Shares, no definitive estimate as to the
number of Shares that will be held by each such Selling Stockholder after such
offering can be provided, and the following table has been prepared on the
assumption that all Shares offered under this Prospectus will be sold to parties
unaffiliated with the Selling Stockholders. Except as indicated, none of the
Selling Stockholders has had a material relationship with the Company within the
past three years, other than as a result of the ownership of the Shares or other
securities of the Company. Unless otherwise indicated, the Selling Stockholders
have sole voting and investment power with respect to their respective Shares.
<TABLE>
<CAPTION>
Shares Number of Shares
Owned Prior to Shares Which Owned After
the Offering the Offering
------------------------------- May be Sold -------------------
Name Number Percent(1) in this Offering Number Percent
- ----------------------------------- ---------------- ------------ ------------------ -------- --------
<S> <C> <C> <C> <C> <C>
Southbrook International Invest-
ments, Ltd. ...................... 765,846(2) 3.3% 1,575,000(3) * *
Westover Investments L.P. ......... 268,046(2) 1.2% 551,250(3) * *
Montrose Investments, Ltd ......... 497,800(2) 2.2% 1,023,750(3) * *
VistaQuest, Inc. .................. 60,000(4) * 60,000 * *
</TABLE>
- ------------
* Represents less than 1% of the outstanding Common Stock.
(1) Percentages based on 23,103,200 shares of Common Stock outstanding as of
April 15, 1998.
(2) Includes: (i) the number of First Tranche Shares acquired by the Selling
Stockholder; and (ii) the number of First Tranche Warrant Shares that would
be owned by the Selling Stockholder if it had exercised all of its First
Tranche Warrants in full as of the date hereof.
(3) Includes: (i) the number of First Tranche Shares acquired by the Selling
Stockholder; (ii) the number of First Tranche Warrant Shares that may be
acquired by the Selling Stockholder upon exercise of all of its First
Tranche Warrants in full; and (iii) the Selling Stockholder's pro rata
portion of the Maximum Additional First Tranche Shares.
(4) Represents the number of Shares that would be owned by the Selling
Stockholder if it had exercised its Consultant Warrant in full as of the
date hereof. Pursuant to the Consulting Agreement, since November 1996 the
Selling Stockholder has rendered certain financial and other advice to the
Company in connection with the Company's public relations, for a total
aggregate consulting fee of $64,000.
The actual number of Shares that may be received by the Selling
Stockholders and resold hereby could differ materially from the foregoing
estimated amounts depending upon factors which cannot be predicted at this time.
If required, the actual number of Shares to be received by such Selling
Stockholders will be reflected in a supplement to this Prospectus.
The Company, Environmental and the Selling Stockholders have agreed to
indemnify each other and their respective officers and directors and certain
other persons against liabilities in connection with any offering of the Shares,
including liabilities arising under the Securities Act.
17
<PAGE>
PLAN OF DISTRIBUTION
All or a portion of the Shares offered hereby may be sold, from time to
time, by the Selling Stockholders in or more transactions on the Amex, in the
over-the-counter market, in transactions independent of the Amex or the
over-the-counter market, in separately negotiated transactions, or otherwise.
Such sales may be made either at fixed prices which may be changed, at market
prices prevailing at the time of sale, at prices related to prevailing market
prices or at negotiated prices. The Shares may be sold by the Selling
Stockholders by one or more of the following methods, without limitation: (i)
block trades in which a broker or dealer will attempt to sell the Shares as
agent, but may position and resell a portion of the block as principal to
facilitate the transaction; (ii) purchases by a broker or dealer as principal
and resale by such broker or dealer for its account pursuant to this Prospectus;
(iii) an exchange distribution in accordance with the rules of such exchange;
(iv) ordinary brokerage transactions and transactions in which a broker may
solicit purchasers; (v) privately negotiated transactions; (vi) short sales; and
(vii) a combination of any such methods of sale. In effecting sales, brokers and
dealers engaged by the Selling Stockholders may arrange for other brokers or
dealers to participate. Brokers or dealers may receive compensation in the form
of discounts, concessions or commissions from the Selling Stockholders (or, if
any such broker-dealer acts as agent for the purchaser of such Shares, from such
purchaser) in amounts to be negotiated which may be less than, or in excess of,
those customary in the types of transactions involved. Broker-dealers may agree
with the Selling Stockholders to sell a specified number of such Shares at a
stipulated price per Share, and, to the extent such broker-dealer is unable to
do so acting as agent for a Selling Stockholder, to purchase as principal any
unsold Shares at the price required to fulfill the broker-dealer commitment to
the Selling Stockholder. Broker-dealers who acquire the Shares as principal may
thereafter resell such Shares from time to time in transactions (which may
involve block transactions and sales to and through other broker-dealers,
including transactions of the nature described above) on the Amex, in the
over-the-counter market, in transactions independent of the Amex or the
over-the-counter market, in separately negotiated transactions, or otherwise, at
fixed prices which may be changed, at market prices prevailing at the time of
sale, at prices related to prevailing market prices or at negotiated prices. In
connection with such resales, such broker-dealers may pay to or receive from the
purchasers of such Shares compensation as described above.
Any or all of the sales or other transactions involving the Common Stock
described above, whether effected by a Selling Stockholder, any broker-dealer or
others, may be made pursuant to this Prospectus. In addition, any shares of
Common Stock that qualify for sale pursuant to Rule 144 under the Securities Act
may be sold under Rule 144 rather than pursuant to this Prospectus.
In order to comply with the securities laws of certain states, if
applicable, the Shares will be sold in such jurisdictions only through
registered or licensed brokers or dealers.
The Selling Stockholders and any broker-dealers or agents that participate
with the Selling Stockholders in the distribution of the Shares may be deemed to
be "underwriters" within the meaning of the Securities Act, and any commissions
received by them and any profit received by them may be deemed to be
underwriting commissions or discounts under the Securities Act.
Under applicable rules and regulations under the Exchange Act, any person
engaged in the distribution of the Shares may not simultaneously engage in
market-making activities with respect to the Common Stock of the Company for a
period of one business day prior to the commencement of such distribution. In
addition and without limiting the foregoing, each Selling Stockholder will be
subject to applicable provisions of the Exchange Act and the rules and
regulations thereunder, including, without limitation, Regulation M, which
provisions may limit the timing of purchases and sales of shares of Common Stock
by the Selling Stockholders. All of the foregoing may limit the marketability of
the Shares.
To the knowledge of the Company, no underwriting arrangements have been
entered into by the Selling Stockholders with respect to the Shares as of the
date hereof. Upon the Company being notified by a Selling Stockholder that any
material arrangement has been entered into with a broker or dealer for the sale
of Shares through a block trade, special offering or secondary distribution, or
a purchase by a broker or dealer, a supplement to this Prospectus will be filed,
if required, pursuant to Rule 424(b) under the Securities Act, disclosing (a)
the name of each such Selling Stockholder and of the participating broker or
dealer, (b) the number of Shares
18
<PAGE>
involved, (c) the price at which such Shares were sold, (d) the commissions paid
or the discounts or concessions allowed to such broker or dealer, where
applicable, (e) that such broker or dealer did not conduct any investigation to
verify the information set out or incorporated by reference in this Prospectus,
and (f ) other facts material to the transaction.
The Company will maintain the effectiveness of the Registration Statement
of which this Prospectus is a part until the earlier of (i) two years after the
effective date of the Registration Statement, or (ii) such time as all the
Shares registered hereby have been sold or are no longer subject to volume or
manner of sale restrictions under the Securities Act.
The Company, Environmental and the Selling Stockholders have agreed to
indemnify each other and their respective officers and directors and certain
other persons against liabilities in connection with any offering of the Shares,
including liabilities arising under the Securities Act.
By agreement with the Selling Stockholders, the Company will pay all of the
expenses incurred in connection with the registration of the Shares, estimated
to be approximately $31,000, other than underwriting commissions, discounts and
counsel fees and expenses.
LEGAL MATTERS
The validity of the securities offered hereby will be passed upon for the
Company by Greenberg Traurig Hoffman Lipoff Rosen & Quentel, New York, New York
("Greenberg Traurig"). Stephen A. Weiss, a shareholder of Greenberg Traurig,
holds options to purchase 275,000 shares of Environmental common stock.
EXPERTS
The consolidated financial statements incorporated in this Prospectus by
reference have been audited by various independent accountants. The periods
covered by these audits are indicated in the individual accountants' reports.
Such financial statements have been so incorporated in reliance on the reports
of the various independent accountants given on the authority of such firms as
experts in auditing and accounting.
19
<PAGE>
================================================================================
No dealer, salesperson or other person is authorized to give any
information or to make any representation not contained in this Prospectus in
connection with this offering, and any information or representation not
contained herein must not be relied upon as having been authorized by the
Company or any other person. This Prospectus does not constitute an offer to
sell or a solicitation of an offer to buy any securities other than the
registered securities to which it relates or an offer to or solicitation of any
person in any jurisdiction where such an offer or solicitation would be
unlawful. Neither the delivery of this Prospectus at any time nor any sale made
hereunder shall, under any circumstances, create any implication that the
information herein contained is correct as of any time subsequent to the date of
this Prospectus.
TABLE OF CONTENTS
Page
-----
Available Information ............... 2
Incorporation of Certain Documents by
Reference ........................ 3
Prospectus Summary .................. 4
Risk Factors ........................ 7
Forward-Looking Statements .......... 13
Recent Developments ................. 13
Use of Proceeds ..................... 16
Selling Stockholders ................ 17
Plan of Distribution ................ 18
Legal Matters ....................... 19
Experts ............................. 19
================================================================================
<PAGE>
================================================================================
3,210,000 Shares
COMMODORE
APPLIED
TECHNOLOGIES, INC.
Common Stock
-----------------------------------
PROSPECTUS
-----------------------------------
-------------------------- , 1998
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth the costs and expenses (subject to future
contingencies) incurred or expected to be incurred by the Company in connection
with the issuance and distribution of the securities being registered pursuant
to this Registration Statement (items marked with an asterisk (*) represent
estimated expenses). The Company has agreed to pay all the costs and expenses of
this offering.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee ......... $ 3,699.03
Legal fees and expenses ..................................... 15,000.00*
Accounting fees and expenses ................................ 2,500.00*
Miscellaneous ............................................... 10,000.00*
-----------
Total ..................................................... $ 31,199.03
===========
</TABLE>
Item 15. Indemnification of Directors and Officers.
Section 145(a) of the General Corporation Law of the State of Delaware (the
"General Corporation Law") provides that a Delaware corporation may indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the corporation) by reason of the fact that he or she is or was a
director, officer, employee or agent of the corporation or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation or enterprise, against expenses, judgments, fines and
amounts paid in settlement actually and reasonably incurred by him or her in
connection with such action, suit or proceeding if he or she acted in good faith
and in a manner he or she reasonably believed to be in or not opposed to the
best interests of the corporation, and, with respect to any criminal action, or
proceeding, had no cause to believe his or her conduct was unlawful.
Section 145(b) of the General Corporation Law provides that a Delaware
corporation may indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action or suit by or in
the right of the corporation to procure a judgment in its favor by reason of the
fact that such person acted in any of the capacities set forth above, against
expenses actually and reasonably incurred by him or her in connection with the
defense or settlement of such action or suit if he or she acted under similar
standards as set forth above, except that no indemnification may be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the corporation unless and only to the extent that the
court in which such action or suit was brought shall determine that despite the
adjudication of liability, but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to be indemnified for such
expenses which the court shall deem proper.
Section 145 of the General Corporation Law provides that to the extent a
director or officer of a corporation has been successful on the merits or
otherwise in the defense of any action, suit or proceeding referred to in
subsections (a) and (b) or in the defense of any claim, issue or matter therein,
he or she shall be indemnified against expenses actually and reasonably incurred
by him or her in connection therewith; that indemnification provided for by
Section 145 shall not be deemed exclusive of any other rights to which the
indemnified party may be entitled; and that the corporation may purchase and
maintain insurance on behalf of such person against any liability asserted
against him or her or incurred by him or her in any such capacity or arising out
of his or her status as such, whether or not the corporation would have the
power to indemnify him or her against such liabilities under such Section 145.
Section 102(b)(7) of the General Corporation Law provides that a
corporation in its original certificate of incorporation or an amendment thereto
validly approved by stockholders may eliminate or limit personal liability of
members of its board of directors or governing body for monetary damages for
breach of a director's fiduciary duty. However, no such provision may eliminate
or limit the liability of a director for breaching his or her duty of loyalty,
failing to act in good faith, engaging in intentional misconduct or knowingly
violating a law,
II-1
<PAGE>
paying a dividend or approving a stock repurchase or redemption which was
illegal, or obtaining an improper personal benefit. A provision of this type has
no effect on the availability of equitable remedies, such as injunction or
rescission, for breach of fiduciary duty. The Company's Certificate of
Incorporation contains such a provision.
Article Thirteenth of the Company's Certificate of Incorporation eliminates
the personal liability of directors and/or officers to the Company or its
stockholders for monetary damages for breach of fiduciary duty as a director;
provided that such elimination of the personal liability of a director and/or
officer of the Company does not apply to (i) any breach of such person's duty of
loyalty to the Company or its stockholders, (ii) acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) actions prohibited under Section 174 of the General Corporation Law (i.e.,
liabilities imposed upon directors who vote for or assent to the unlawful
payment of dividends, unlawful repurchases or redemption of stock, unlawful
distribution of assets of the Company to the stockholders without the prior
payment or discharge of the Company's debts or obligations, or unlawful making
or guaranteeing of loans to directors and/or officers), or (iv) any transaction
from which the director derived an improper personal benefit. In addition,
Article Fourteenth of the Company's Certificate of Incorporation and Article VI
of the Company's By-laws provide that the Company shall indemnify its corporate
personnel, directors and officers to the fullest extent permitted by the General
Corporation Law, as amended from time to time.
The Company has in force a combined insurance policy with its affiliates
under which its directors and officers are insured, with limits of $20 million
per occurrence and $20 million in the aggregate, against certain expenses in
connection with the defense of such actions, suits or proceedings to which they
are parties by reason of being or having been directors or officers of the
Company.
The Company and its officers, directors and other persons are entitled to
be indemnified under certain circumstances for certain securities law violations
in accordance with the provisions of an underwriting agreement dated June 28,
1996, by and among the Company, Bentley J. Blum and National Securities
Corporation, as representative of the several underwriters.
The Company, Environmental and the Selling Stockholders have agreed to
indemnify each other and their respective officers and directors and certain
other persons against liabilities in connection with any offering of the Shares,
including liabilities arising under the Securities Act.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling the Company as
disclosed above, the Company has been informed that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act and is therefore unenforceable.
Item 16. Exhibits
<TABLE>
<CAPTION>
Exhibit
No. Description
- -------- -----------
<S> <C>
3.1 Certificate of Incorporation of the Company. (1)
3.2 By-laws of the Company. (1)
4.1 Specimen Common Stock Certificate. (2)
4.2 Warrant to purchase 75,000 shares of Applied Common Stock issued to
Southbrook International Investments, Ltd. (3)
4.3 Warrant to purchase 48,750 shares of Applied Common Stock issued to Montrose Investments,
Ltd. (3)
4.4 Warrant to purchase 26,250 shares of Applied Common Stock issued to Westover Investments,
L.P. (3)
*4.5 Warrant to Purchase 60,000 shares of Applied Common Stock issued to
VistaQuest, Inc., as amended.
*5.1 Opinion of Greenberg Traurig Hoffman Lipoff Rosen & Quentel.
10.1 Common Stock Purchase Agreement, dated as of February 9, 1998, among Commodore
Environmental Services, Inc., Commodore Applied Technologies, Inc., Southbrook International
Investments, Ltd., Westover Investments, L.P., and Montrose Investments, Ltd. (3)
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Description
- ---------- -----------
<S> <C>
10.2 Registration Rights Agreement, dated as of February 9, 1998, among
Commodore Environmental Services, Inc., Commodore Applied
Technologies, Inc., Southbrook International Investments, Ltd.,
Westover Investments, L.P., and Montrose Investments, Ltd. (3)
10.3 Escrow Agreement, dated as of February 9, 1998, among Commodore
Environmental Services, Inc., Commodore Applied Technologies, Inc.,
Southbrook International Investments, Ltd., Westover Investments,
L.P., and Montrose Investments, Ltd. (3)
*10.4 Financial Advisory and Consulting Agreement dated November 8, 1996, as amended.
*23.1 Consent of Tanner + Co.
*23.2 Consent of Price Waterhouse LLP.
*23.3 Consent of Greenberg Traurig Hoffman Lipoff Rosen & Quentel (included in Exhibit 5.1).
*24.1 Power of Attorney. (4)
</TABLE>
- ------------
* Filed herewith.
(1) Incorporated by reference. Filed as an exhibit to the Company's Registration
Statement on Form S-1 (the "Form S-1") filed with the Commission on May 2,
1996 (Commission File No. 333-04396).
(2) Incorporated by reference. Filed as an exhibit to Amendment No. 2 to the
Form S-1 filed with the Commission on June 25, 1996.
(3) Incorporated by reference. Filed as an exhibit to Environmental's Current
Report on Form 8-K, dated February 10, 1998 and filed with the Commission on
February 23, 1998 (Commission File No. 0-10054).
(4) Contained on the signature page hereof.
Item 17. Undertakings.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of this Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in this
Registration Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high and of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
Pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in
the effective Registration Statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in this Registration Statement or
any material change to such information in this Registration Statement;
provided, however, that the undertakings set forth in paragraphs (a)(1)(i)
and (a)(l)(ii) shall not apply if the information required to be included
in a post-effective amendment by those paragraphs is contained in periodic
response filed with or furnished to the Commission by the Company pursuant
to Section 13 or Section 15(d) of the Exchange Act that are incorporated
by reference in this Registration Statement.
(2) That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
II-3
<PAGE>
(b) The Company hereby undertakes that, for purposes of determining any
liability under the Securities Act, each filing of the Company's annual report
pursuant to Section 13(a) or Section 15(d) of the Exchange Act (and, where
applicable, each filing of the annual report of the employee benefit plans
pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference
in this Registration Statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Company pursuant to the foregoing provisions, or otherwise, the Company has been
advised that in the opinion of the Commission such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Company of expenses incurred or paid
by a director, officer or controlling person of the Company in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person connection with the securities being registered, the
Company will, unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York, State of New York on this 15th day of
April, 1998.
COMMODORE APPLIED TECHNOLOGIES, INC.
By: /s/ Paul E. Hannesson
-------------------------------------
Paul E. Hannesson
Chairman of the Board, President and
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Paul E. Hannesson and Michael D. Fullwood, and
each of them, his true and lawful attorneys-in-fact and agents, with full power
of substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, and any other regulatory authority, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their substitutes, may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------------------------- ------------------------------------------ ---------------
<S> <C> <C>
/s/ Paul E. Hannesson
- ------------------------ Chairman of the Board, President and April 15, 1998
Paul E. Hannesson Chief Executive Officer (principal
executive officer)
/s/ Michael D. Fullwood
- ------------------------ Senior Vice President, Chief Financial April 15, 1998
Michael D. Fullwood and Administrative Officer, Secretary and
General Counsel (principal financial and
accounting officer)
/s/ Paul E. Hannesson
- ---------------------- Chairman of the Board April 15, 1998
Paul E. Hannesson
/s/ Bentley J. Blum
- ---------------------- Director April 15, 1998
Bentley J. Blum
/s/ Kenneth L. Adelman
- ---------------------- Director April 15, 1998
Kenneth L. Adelman, Ph.D.
/s/ Herbert A. Cohen
- ---------------------- Director April 15, 1998
Herbert A. Cohen
</TABLE>
II-5
<PAGE>
Signature Title Date
- ------------ ------ ---------------
/s/ David L. Mitchell
- ---------------------- Director April 15, 1998
David L. Mitchell
/s/ Tom J. Fatjo, Jr.
- ---------------------- Director April 15, 1998
Tom J. Fatjo, Jr.
/s/ Thomas E. Noel
- ---------------------- Director April 15, 1998
Thomas E. Noel
/s/ Ed L. Romero
- ---------------------- Director April 15, 1998
Ed L. Romero
/s/ William R. Toller
- ---------------------- Director April 15, 1998
William R. Toller
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
- ------------- ------------------------------------------------------------------------------------------
<S> <C>
3.1 Certificate of Incorporation of the Company. (1)
3.2 By-laws of the Company. (1)
4.1 Specimen Common Stock Certificate. (2)
4.2 Warrant to purchase 75,000 shares of Applied Common Stock issued to Southbrook Interna-
tional Investments, Ltd. (3)
4.3 Warrant to purchase 48,750 shares of Applied Common Stock issued to Montrose Investments,
Ltd. (3)
4.4 Warrant to purchase 26,250 shares of Applied Common Stock issued to Westover Investments,
L.P. (3)
*4.5 Warrant to Purchase 60,000 shares of Applied Common Stock issued to VistaQuest, Inc., as
amended.
*5.1 Opinion of Greenberg Traurig Hoffman Lipoff Rosen & Quentel.
10.1 Common Stock Purchase Agreement, dated as of February 9, 1998,
among Commodore Environmental Services, Inc., Commodore Applied
Technologies, Inc., Southbrook International Investments, Ltd.,
Westover Investments, L.P., and Montrose Investments, Ltd. (3)
10.2 Registration Rights Agreement, dated as of February 9, 1998,
among Commodore Environmental Services, Inc., Commodore Applied
Technologies, Inc., Southbrook International Investments, Ltd.,
Westover Investments, L.P., and Montrose Investments, Ltd. (3)
10.3 Escrow Agreement, dated as of February 9, 1998, among Commodore
Environmental Services, Inc., Commodore Applied Technologies,
Inc., Southbrook International Investments, Ltd., Westover
Investments, L.P., and Montrose Investments, Ltd. (3)
*10.4 Financial Advisory and Consulting Agreement dated November 8, 1996, as amended.
*23.1 Consent of Tanner + Co.
*23.2 Consent of Price Waterhouse LLP.
*23.3 Consent of Greenberg Traurig Hoffman Lipoff Rosen & Quentel (included in Exhibit 5.1).
*24.1 Power of Attorney. (4)
</TABLE>
- ------------
* Filed herewith.
(1) Incorporated by reference. Filed as an exhibit to the Company's Registration
Statement on Form S-1 (the "Form S-1") filed with the Commission on May 2,
1996 (Commission File No. 333-04396).
(2) Incorporated by reference. Filed as an exhibit to Amendment No. 2 to the
Form S-1 filed with the Commission on June 25, 1996.
(3) Incorporated by reference. Filed as an exhibit to Environmental's Current
Report on Form 8-K, dated February 10, 1998 and filed with the Commission on
February 23, 1998 (Commission File No. 0-10054).
(4) Contained on the signature page hereof.
<PAGE>
THIS SECURITY (AND THE UNDERLYING SECURITY, IF ANY) HAS NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (AND IS A "RESTRICTED SECURITY" AS DEFINED
UNDER SAID ACT) OR UNDER THE SECURITIES LAWS OF ANY STATE OF JURISDICTION.
ACCORDINGLY, NEITHER THIS SECURITY NOR ANY INTEREST THEREIN MAY BE SOLD, OFFERED
FOR SALE, ASSIGNED, TRANSFERRED, PLEDGED OR HYPOTHECATED, EXCEPT BY BONA FIDE
GIFT OR INHERITANCE, IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO
SECURITY UNDER SAID ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY
THAT SUCH REGISTRATION IS NOT REQUIRED.
COMMODORE APPLIED TECHNOLOGIES, INC.
Common Stock Cashless Warrant
No. CSW ___ Date: 8 November 1996
This certifies that on or before 5:00 p.m. Eastern time, exactly four
(4) years from the date hereof, but not thereafter, VistaQuest, Inc.
("VistaQuest") or registered assigns, is entitled hereby to acquire through the
exercise of this Cashless Warrant (the "Warrant") Common Stock, $.001 par value
per share, of Commodore Applied Technologies, Inc., a Delaware corporation (the
"Company"), and its successors, upon the terms and subject to the conditions set
forth hereinafter.
Number of Shares. The number of shares of common stock which may be
acquired under this Warrant shall be 100,000, (subject to adjustment for stock
splits recapitalization).
Exercise Price. The exercise price of each share of common stock
subject to this Warrant, shall be $5.00, adjusted with respect to any
adjustments made in the number of shares for stock splits, recapitalization.
Subscription and Payment of Purchase Price. The Company will issue and
deliver to VistaQuest, this Warrant for the purchase of up to 100,000 shares
(the "Warrant Shares") of the Company's common stock with full piggy back
registration rights thereon. This Warrant provides that in lieu of paying the
exercise price in cash, VistaQuest may surrender the Warrant for the
cancellation of up to that number of Warrant Shares (the "Cancelled Warrant
Shares") having an aggregate Premium (as defined below) as nearly as possible
equal to without exceeding the aggregate exercise price of the Warrant Shares
not being cancelled (the "Exercised Warrant Shares"). The purchase price for the
Exercised Warrant Shares shall thus be paid with the Cancelled Warrant Shares
and, to the extent that the aggregate exercise price of the Exercised Warrant
Shares exceeds the aggregate Premium of the Cancelled Warrant Shares, such
difference shall be paid in cash. The Premium of a Warrant Share is the amount
by which the market price of the Warrant Share exceeds its exercise price.
<PAGE>
Investment Purpose. The registered holder exercising this Warrant shall
make such investment representation as may be required by counsel to the Company
to satisfy the requirements of an exemption from registration under the
Securities Act of 1933.
Registration. The registered holder agrees that the common stock
acquired upon exercise of this Warrant shall be subject to any reasonable
contractual restrictions on resales imposed by the Company's underwriter in a
public offering on other unregistered stock of the Company. The Company agrees
to include this Warrant and all Warrant shares (whether issued or issuable) at
the election of the registered holder of such shares, in any registration
statement filed under the Securities Act of 1933 for a public offering of common
stock subsequent to the Company's initial public offering, subject nevertheless
to the approval of the underwriter of such subsequent offering. This paragraph
shall not be deemed to be a representation that the Company will undertake a
public offering of his securities.
Certificates and Registration. The registered holder shall be entitled
to receive a certificate(s) for the common stock, fully paid and nonassessable,
purchased by exercise of this Warrant, upon surrender of this Warrant. The
Company or its transfer agent shall register this Warrant on the stock transfer
records of the Company in the name of holder or assigns and shall issue
replacement certificate(s) in the name(s) of assigns upon presentment of the
Warrant certificate properly endorsed for transfer. This Warrant may be
transferred in whole but not in part subject to compliance with federal
securities laws.
Reports. The Company shall provide to the registered holder copies of
all reports and information provided by the Company to its stockholders at the
same times such reports are provided to its stockholders.
This Warrant shall be void from and after 5:00 p.m. Eastern time,
November 8, 2000.
COMMODORE APPLIED TECHNOLOGIES, INC.
By: /s/ Paul E. Hannesson
-----------------------
<PAGE>
EXHIBIT 5.1
April 15, 1998
Commodore Applied Technologies, Inc.
150 East 58th Street, Suite 3400
New York, New York 10155
Re: Registration Statement on Form S-3
----------------------------------
Ladies and Gentlemen:
We have acted as counsel to Commodore Applied Technologies, Inc., a
Delaware corporation (the "Company"), in connection with the preparation of a
Registration Statement on Form S-3 (the "Registration Statement") to be filed
under the Securities Act of 1933, as amended (the "Securities Act"), covering up
to 3,210,000 shares of the Company's common stock, par value $0.001 per share
(the "Shares"), which are being registered in connection with the proposed sale
of the Shares by the entities listed as selling stockholders therein.
In connection with this opinion, we have examined the Registration
Statement, the Company's Certificate of Incorporation, By-laws and minutes, and
such other documents and records as we have deemed relevant. In our
examinations, we have assumed the genuineness of all signatures, the
authenticity of all documents submitted to us as originals, and the conformity
with the originals of all documents submitted to us as copies. In addition, we
have made such other examinations of law and of fact as we have deemed
appropriate in order to form a basis for the opinion hereinafter expressed.
We have been informed by the Company that the Shares have been and will
be transferred or issued, and the certificates evidencing the same have been and
will be duly delivered, against receipt of the consideration stipulated
therefor, which has not been and will not be less than the par value of the
Shares.
Based on the foregoing, we are of the opinion that the Shares have been
duly authorized and have been, or when transferred or issued, delivered and paid
for in accordance with the foregoing assumptions will be, validly issued, fully
paid and non-assessable.
The opinion set forth above is limited to the Delaware General
Corporation Law, as amended.
<PAGE>
Commodore Applied Technologies, Inc.
Registration Statement on Form S-3
April 15, 1998
Page 2
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to this firm under the caption
"Legal Matters" in the Prospectus forming a part of the Registration Statement.
In giving this opinion and consent, we do not thereby admit that we are acting
within the category of persons whose consent is required under Section 7 of the
Securities Act, or the rules and regulations of the Securities and Exchange
Commission promulgated thereunder.
Very truly yours,
/s/ GREENBERG TRAURIG HOFFMAN
LIPOFF ROSEN & QUENTEL
<PAGE>
FINANCIAL ADVISORY AND CONSULTING AGREEMENT
This Agreement is made and entered into as of this 8 day of November,
1996 by Commodore Applied Technologies, Inc. ("Commodore" or the "Company") and
VistaQuest Inc. (the "Consultant").
In consideration of and for the matual promises and covenants contained
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
1. Purpose. The Company hereby retains Consultant during the term
specified in Section 2 hereof to render consulting advice to the Company as an
investment banker relating to financial and similar matters, upon the terms and
conditions set forth for this Agreement.
2. Term. The term of this Agreement (the "Term") shall be the period
beginning the date of this Agreement and ending four (4) months thereafter.
3. Services of Consultant. During the Term the Consultant will provide
the Company with such regular and customary consulting advice as is reasonably
requested by the Company, provided that the Consultant shall not be required to
undertake duties not reasonably within the scope of the consulting advisory
services contemplated by this Agreement. In the performance of these duties the
Consultant shall provide the Company with the benefits of its best judgment
and efforts. It is understood and acknowledged by the parties that the value of
the Consultant's advice is not measurable in any quantitative manner, and that
the Consultants shall be obligated to render advice, upon the request of the
Company, in good faith, but shall not be obligated to spend any specific amount
of time in doing so. The Consultant's duties may include, but will not
necessarily be limited to:
(a) rendering advice and assistance and providing expertise in
connection with the dissemination of corporate information regarding the Company
to the investment community;
(b) rendering advice and assistance in connection with the
preparation of annual and interim reports and press releases;
(c) arranging, on behalf of the Company, at appropriate times,
meetings with securities analysts and others in the securities business;
(d) assisting in the Company's financial public relations, including
discussions between the Company and the financial community:
(e) rendering service with regard to internal operations, including
advice regarding:
(i) the formation of corporate goals and their implementation;
(ii) the financial structure of the Company or any programs and
projects in connection therewith;
<PAGE>
(iii) the securing, when necessary and if possible, of
additional financing through banks, insurance companies and/or other
institutions; and
(iv) corporate organizations and personnel;
(f) rendering advice with respect to any acquisition program of the
Company; and
(g) rendering advice regarding a future public or private offering
of securities of the Company.
4. Relationships with Others. The Company acknowledges that the
Consultant and its affiliates are in the business of providing financial
services and consulting advice (of all types contemplated by this Agreement) to
others. Nothing herein contained shall be construed to limit, restrict, or
preclude the Consultant or its affiliates from rendering such services or advice
to others.
5. Consultant Liability. In the absence of gross negligence or willful
misconduct on the part of the Consultant, the Consultant shall not be liable to
the Company, or to any officer, director, employee, stockholder or creditor of
the Company, for any or omission in the course of or in connection with the
rendering or providing of advice or services hereunder. Except in those cases
whence the gross negligence or willful misconduct of the Consultant is alleged
and proven in a judicial proceeding, the Company agrees to defend, indemnify and
hold the Consultant harmless from and against any and all costs and expenses,
and any liability (including, but not limited to, attorneys' fees paid in the
defense of the Consultant) which may in any way result from services rendered by
the Consultant pursuant to or in any connection with this Agreement.
6. Expenses. Except as otherwise explicitly provided below in this
Section 6, the Company, upon receipt of appropriate supporting documentation,
shall reimburse the Consultant for any and all reasonable out-of-pocket expenses
incurred by the Consultant in connection with services rendered by the
Consultant to the Company pursuant to this Agreement, including, but not limited
to, hotel, food and associated expenses, all charges for travel and
long-distance telephone calls carried out in connection with the performance of
its duties hereunder, and all other expenses incurred by the Consultant in
connection with services rendered by the Consultant to the Company pursuant to
the Agreement; provided, however, that any expense of two hundred and fifty
dollars ($250) or more must be either approved in writing by the Company prior
to being incurred or ratified thereafter. Expense payable under this Section 6
shall not include (i) allocable overhead expenses of the Consultant including,
but not limited to, attorneys' fees, secretarial charges and rent, and (ii) long
distance telephone calls incurred at any time other than while on approved
Company travel.
7. Compensation
7.1 As compensation for the services to be rendered by the
Consultant to the Company pursuant to Section 3 of this Agreement, the Company
shall pay the Consultant a financial consulting fee of forty thousand dollars
($40,000). Such fee shall be paid according to the following schedule:
$10,000 To VistaQuest Inc. shall be paid concurrently with the
execution of this Agreement.
$10,000 To VistaQuest Inc. shall be due on December __, 1996.
$10,000 To VistaQuest Inc. shall be due on January __, 1997.
$10,000 To VistaQuest Inc. shall be due on February __, 1997.
-2-
<PAGE>
7.2 As promptly as possible after the execution of this
Agreement, the Company will issue and deliver to the Consultant a warrant for
the purchase of up to 100,000 shares (the "Warrant Shares") of the Company's
common stock with full piggy back registration rights thereon (the "Warrant").
The Warrant shall provide for a cashless exercise, i.e., the Warrant shall
provide that in lieu of paying the exercise price in cash, the Consultant may
surrender the Warrant for the cancellation of that number of Warrant Shares (the
"Cancelled Warrant Shares") having an aggregate Premium (as defined below) as
nearly as possible equal to without exceeding the aggregate exercise price of up
to the Warrant Shares not being cancelled (the "Exercised Warrant Shares"). The
premium prices for the Exercised Warrant Shares shall thus be paid with the
Cancelled Warrant Shares and, to the extent that the aggregate exercise price of
the Exercised Warrant Shares exceeds the aggregate Premium of the Cancelled
Warrant Shares, such difference shall be paid in cash. For purposes of this
Section 7.2, the "Premium" of a Warrant Share in the amount by which the market
price of the Warrant Share exceeds the exercise price. The Warrant may be
exercised in which or in part at any time, and from time to time, commencing on
or after the date hereof until 5:00 p.m. New York time November, 2000,
(whereupon the Warrants shall expire and be of no further force or effect). The
Warrant shall be exercised at a price of $5.00.
The exercise price shall be subject to adjustment, to
protect the Consultant against dilution, as set forth in appropriate
antidilution provisions in the Warrant. The Warrant shall also provide that
stock certificates for any shares purchased by the Consultant under the Warrant
shall be delivered to the Consultant no later than 10 days after the receipt of
payment of the exercise price by the Company.
7.3 (a) If any time during the period commencing on the date
hereof, the Company proposes to file a registration statement to register shares
of the common stock under the Act for sale to the public in an underwritten
offering, it will at each such time promptly give written notice to the
Consultant of its intention to do so and, upon the written request of the
Consultant made within 15 calendar days after the receipt of any such notice
(which request must specify the number of shares of registration stock which the
Consultant intents to dispose of, and must state the intended method of
disposition thereto), the Company will effect the registration under the Act of
the shares as and when requested by the Consultant. The registration rights of
the Consultant shall be subject to reduction or elimination if so required by
the Company's managing underwriter, provided, that if such offering also
registers shares for other selling shareholders, all of the Consultant's Warrant
Shares shall be included in the registration.
(b) The costs and expenses (other than underwriting
discounts and commissions) of all registrations and qualifications under the Act
and of all other actions the Company is required to take or effect in connection
with the registration rights described herein, shall be paid by the Company
(including, without limitation, all registration and filing fees, printing
expenses, fees and expenses of complying with the Blue Sky laws of the State of
New York, and fees and disbursements of counsel for the Company and of the
Company's independent public accountants).
8. Limitation Upon the Use of Advice and Services.
8.1 No person or entity, other than the Company, shall be entitled
to make use of or rely upon the advice of the Consultant to be given hereunder,
and the Company shall not transmit such advice no others, or encourage or
facilitate the use or reliance upon such advice by others, without the prior
written consent of the Consultant.
-3-
<PAGE>
8.2 It is clearly understood that the Consultant, for services
rendered under this Agreement, makes no commitment whatsoever to recommend or
advise its clients to purchase the securities of the Company. Research reports
that may be prepared by the Consultant will, when, and if prepared, be based
solely on the independent judgment of analysts of the Consultant or senior
corporate finance personnel of the Consultant.
8.3 The use of the Consultant's names in any annual report or other
report of the Company, or any reference of similar document prepared by or on
behalf of the Company, must have the prior written approval of the Consultant
unless the Company is required by law to include the Consultant's name in such
annual report, other reports or release, in which event the Consultant will be
furnished with a copy of such annual report, other report or release using the
Consultant's name in advance of publication by or on behalf of the Company.
Any such written materials produced by the Consultant and shared with or relied
upon by the Company are the sole property of the Consultant, and must be
returned, along with all copies thereof, to the Consultant, within five days of
the completion of the Consultant's duties or the termination of the Consultant's
services under this Agreement.
8.4 The Consultant shall not disclose confidential information which
it learns about the Company as a result of its engagement hereunder, except for
such disclosures as may be required for Consultant to perform its duties
hereunder, as is agreed to in writing by the parties, or is ordered by a Court
having jurisdiction with respect to this Agreement.
9. Severability. Every provision of this Agreement is intended to be
enforceable. If any part or provision hereof is deemed unlawful for any reason
whatsoever, such unlawfulness or invalidity shall not affect the validity of
the remainder of this Agreement.
10. Miscellaneous.
10.1 Any notice or other communication between the parties hereto
shall be sent by certified or registered mail, postage prepaid, (i) if to the
Consultant, at VistaQuest Inc., 380 Lexington Avenue, Suite 700, New York, New
York 10168-0002, Attention: Mark Kabbash, President, with a copy to Kramer,
Levin, Naftalis & Frankel, at 919 Third Avenue, New York, NY 10022. Attention:
Bruce Rabb or (ii) if to the Company, 150 East 58th Street, Suite 3400, New
York, 10155, Attention: Paul E. Hannesson, President and Chairman of the Board
of Directors, with a copy to Greenberg Traurig Hoffman, Lipoff Rosen & Quentel,
153 East 53rd Street, New York, New York 10022. Atten: Stephen A. Weiss, Esq.,
or to such address as may hereafter be designated in writing by any such parties
to the others. Such notice or other communication shall be deemed to be given on
the date of receipt.
10.2 At the end of the Term, the provisions of this Agreement
relating to the duties of the Consultant and compensation by the Company as it
applies to such Consultant shall cease to be in effect, except for those rights
and obligations that by their nature are intended to survive the termination of
this Agreement, including but not intended to the Company's obligations of
payment for services rendered prior thereto and the provisions set forth in
Section 7 above. The Agreement shall survive any merger of the Company or sale
of substantially all of its assets and this Agreement shall be binding on the
surviving company after any such merger or acquisition, and upon both the
Company and the acquiring company after any such date.
-4-
<PAGE>
10.3 This Agreement embodies the entire agreement and understanding
between the Company and the Consultant and supercedes any and all negotiations,
prior discussions and preliminary and prior agreements and understandings
related to the subject matter hereo.
10.4 This Agreement has been duly authorized, executed and
delivered by and on behalf of the Company and the Consultant.
10.5 This Agreement shall be construed and interpreted in
accordance with the laws of the State of New York, without giving effect to
conflicts of laws. Each party hereby consents to the jurisdiction of the State
and Federal courts sitting in New York City in any action arising out of this
Agreement, and each party further agrees that the service of process or of any
papers upon it by registered mail at their respective addressess set forth
herein shall be declared good, proper and effective service upon it, and each
party waives, to the fullest extent permitted by law, any objection that it may
now or hereafter have to the establishment of personal jurisdiction or venue in
any such court, suit, action, or proceeding.
10.6 This Agreement and the rights hereunder may not be assigned by
either party (except by operation of law or in the case of a merger or
acquisition in accordance with Section 10.2) and shall be binding upon and inure
to the benefit of the parties and their respective successors and assigns.
10.7 The headings in this Section of this Agreement are included
for convenience of reference only and shall not affect or be deemed to affect
the meaning of any provision of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above written.
COMMODORE APPLIED TECHNOLOGIES, INC.
By: /s/ Paul E. Hannesson
----------------------
Name: Paul E. Hannesson
Title: Chairman of the Board
Directors
VISTAQUEST INC.
By: /s/ Mark Kabbash
--------------------
Name: Mark Kabbash
Title: President
-5-
<PAGE>
AMENDMENT TO
FINANCIAL ADVISORY AND CONSULTING AGREEMENT
-------------------------------------------
THIS AMENDMENT, dated as of February 5, 1997 (the "Amendment"), between
COMMODORE APPLIED TECHNOLOGIES, INC., a Delaware corporation (the "Company"),
and VISTAQUEST INC. (the "Consultant").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the parties hereto have heretofore entered into a Financial
Advisory and Consulting Agreement, dated as of November 8, 1996 (the
"Agreement"), and a Common Stock Cashless Warrant, dated November 8, 1996 (the
"Warrant");
WHEREAS, the Company and the Consultant wish to amend (a) Sections 2
and 7.1 of the Agreement to extend the term of the Agreement by three months
and to adjust the compensation accordingly, and (b) Section 7.2 of the Agreement
and the number of shares of common stock which may be acquired under the Warrant
to 60,000 from 100,000.
NOW, THEREFORE, the parties hereto hereby agree that the Agreement be
amended as follows:
1. Definitions; references; continuation of Agreement. Unless otherwise
specified herein, each term used herein that is defined in the Agreement shall
have the meaning assigned to such term in the Agreement. Each reference to
"hereof," "hereunder," "herein," and "hereby" and each other similar reference,
and each reference to "this Agreement" and each other similar reference,
contained in the Agreement shall from and after the date hereof refer to the
Agreement as amended hereby. Except as amended hereby, all terms and provisions
of the Agreement shall continue and remain in full force and effect.
2. Term. Section 2 of the Agreement shall be replaced with the
following:
"The term of this Agreement (the "Term") shall be the period beginning
the date of this Agreement and ending seven (7) months thereafter."
3. Compensation. Section 7.1 of the Agreement shall be revised to
increase the aggregate financial consulting fee payable to the Consultant to
sixty-four thousand dollars ($64,000) and insert at the end of such subsection
the following:
"$8,000 To VistaQuest Inc. shall be due on March 8, 1997.
$8,000 To VistaQuest Inc. shall be due on April 8, 1997.
$8,000 To VistaQuest Inc. shall be due on May 8, 1997."
4. Warrant Shares. Section 7.2 of the Agreement and the sections titled
"Number of Shares" and "Subscription and Payment of Purchase Price" in the
Warrants shall be
<PAGE>
revised to indicate that the number of shares of common stock which may be
acquired under the Warrant shall be 60,000 (subject to adjustment for stock
splits and recapitalizations), rather than 100,000. As promptly as possible
after the execution of this Amendment, the Company shall issue and deliver to
the Consultant a new warrant for the purchase of up to 60,000 shares, and the
original warrant, dated November 8, 1996, shall be surrendered to the Company
and cancelled.
5. Counterparts. This Amendment may be executed in counterparts.
6. Governing Law. This Amendment shall be governed by and construed in
accordance with the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed as of the date first above written.
COMMODORE APPLIED TECHNOLOGIES, INC.
By: /s/ Paul Hannesson
------------------
Name: Paul Hannesson
Title: Chairman
VISTAQUEST INC.
By: /s/ Mark Kabbash
-------------------
Name: Mark Kabbash
Title: President
<PAGE>
EXHIBIT 23.1
------------
TANNER + CO.
Certified Public Accountants
675 East 500 South, Suite 640
Salt Lake City, Utah 84102
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
---------------------------------------------------
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-3 of our report dated January 19, 1996, relating to the
consolidated financial statements of Commodore Applied Technologies, Inc. (the
"Company") for the year ended December 31, 1995, which appears on page F-1A of
the Company's Annual Report on Form 10-K for the year ended December 31, 1997,
and to the reference of our firm under the caption "Experts" in the Prospectus.
/s/ Tanner + Co.
----------------
Tanner + Co.
Salt Lake City, Utah
April 15, 1998
<PAGE>
EXHIBIT 23.2
------------
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-3 of our report
dated March 27, 1998 appearing on page F-1 of Commodore Applied Technologies,
Inc.'s Annual Report on Form 10-K for the year ended December 31, 1997. We also
consent to the reference to us under the heading "Experts" in such Prospectus.
Price Waterhouse LLP
Philadelphia, Pennsylvania
April 15, 1998
