As filed with the Securities and Exchange Commission on March 31, 2000.
Registration No. 333-95445
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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PRE-EFFECTIVE AMENDMENT NO. 2 TO
FORM S-3
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
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COMMODORE APPLIED TECHNOLOGIES, INC.
(Exact name of Registrant as specified in its charter)
Delaware 11-3312952
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
PAUL E. HANNESSON
Chairman of the Board, President and Chief Executive Officer
Commodore Applied Technologies, Inc.
150 East 58th Street, Suite 3400 150 East 58th Street, Suite 3400
New York, NY 10155 (212) 308-5800 New York, NY 10155 (212) 308-5800
(Address, including zip code, and (Name and address, including
telephone number, including area zip code, and telephone number,
code, of registrant's principal including area code, of agent
executive offices) for service)
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Copies of Communications to:
Stephen A. Weiss, Esq.
Anthony J. Marsico, Esq.
Greenberg Traurig, LLP
200 Park Avenue, 15th Floor
New York, New York 10166
(212) 801-9200
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From Time to time as described in the Prospectus after the effective date
of this Registration Statement.
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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 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. [_]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF AMOUNT OFFERING AGGREGATE AMOUNT OF
SECURITIES TO BE BEING PRICE OFFERING REGISTRATION
REGISTERED REGISTERED(1) PER SHARE PRICE FEE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $0.001 per share 13,863,475 shares $1.66 $5,998,368.50(2) $1,583.57(2)(3)
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</TABLE>
(1) Pursuant to rule 416 under the Securities Act of 1933, as amended (the
"Securities Act"), the number of shares of common stock, par value $0.001
per share (the "Common Stock"), of Commodore Applied Technologies, Inc.
being registered shall be adjusted to include any additional shares which
may become issuable as a result of stock splits, stock dividends, or
similar transactions.
(2) Computed on the basis of 3,613,475 shares of Common Stock in accordance
with Rule 457(a) under the Securities Act. A registration fee of $3,379.20
with respect to 10,000,000 shares of Common Stock was computed in
accordance with Rule 457(c) under the Securities Act and paid upon the
initial filing of the Registration Statement on January 26, 2000. A
registration fee of $107.58 with respect to an additional 250,000 shares of
Common Stock was computed in accordance with Rules 457(a) and (c) under the
Securities Act and paid upon the filing of Pre-effective Amendment No. 1 to
the Registration Statement on February 10, 2000. This Pre-effective
Amendment No. 2 to the Registration Statement increases the number of
shares of Common Stock being registered hereby by 3,613,475 shares, and the
registration fee of $1,583.57 being paid herewith relates to such 3,613,475
additional shares.
(3) Computed in accordance with Rule 457(c) under the Securities Act solely for
the purpose of calculating the total registration fee. Based on the average
of the high and low prices (rounded to the nearest cent) of the Common
Stock as reported on the American Stock Exchange on March 27, 2000.
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>
The information in this Prospectus is not complete and may be changed. These
securities may not be sold until the Registration Statement filed with the
Securities and Exchange Commission is effective. This Prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any State where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED MARCH 31, 2000
PROSPECTUS
13,863,475 Shares
COMMODORE APPLIED TECHNOLOGIES, INC.
Common Stock
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The selling stockholders listed on page 11 of this prospectus are selling
these shares for their own accounts.
Our common stock is traded on the American Stock Exchange under the symbol
CXI.
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INVESTING IN THE COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 2.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES, OR
DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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The date of this prospectus is ________________ __, 2000
<PAGE>
No one (including any salesman or broker) is authorized to provide oral or
written information about this offering that is not included in this prospectus.
TABLE OF CONTENTS
Page
----
Risk Factors .................................................... 2
Forward-Looking Statements ...................................... 8
About Commodore Applied Technologies ............................ 8
Recent Developments ............................................. 9
Use Of Proceeds ................................................. 10
Selling Stockholders ............................................ 11
Plan Of Distribution ............................................ 13
Legal Matters ................................................... 14
Experts ......................................................... 14
Where You Can Find More Information ............................. 14
SET is a trademark of Commodore Applied Technologies, Inc.
<PAGE>
RISK FACTORS
You should carefully consider the risks described below before deciding to
invest in our common stock. The risks and uncertainties we describe below are
the material risks that we face. If any of the possible events described below
actually occurred, our business, financial condition or results of operations
could be materially adversely affected. If that happened, the trading price of
our common stock could decline, and you could lose all or part of your
investment.
WE HAVE A HISTORY OF LOSSES FROM OPERATIONS AND WE MAY CONTINUE TO INCUR LOSSES
IN THE FUTURE WHICH COULD ADVERSELY AFFECT THE VALUE OF YOUR INVESTMENT.
We have experienced significant operating losses since our inception. We
had net losses of $5,643,000 during 1996, $15,694,000 during 1997, $5,535,000
during 1998 and $2,350,000 during the nine months ended September 30, 1999. Our
losses have resulted from a combination of:
o significant investments in our research and development activities;
o large expenditures for infrastructure to support our anticipated
future growth;
o significant costs associated with our commercialization activities;
o lack of sufficient revenues due to significant delays in our obtaining
material project contracts from potential governmental and
private-sector customers; and
o general and administrative expenses.
Until we are able to begin additional large projects for our SET technology, the
timing of which is uncertain, we may continue to experience losses. We may incur
operating losses in the future due primarily to:
o continuing expenditures for our product development and
commercialization activities;
o investments in complementary products and technologies; and
o costs associated with expansion of our environmental management
services business.
As a result of these losses, as of September 30, 1999, we had an
accumulated deficit of approximately $37,795,000. In an attempt to control our
losses we undertook certain actions in 1998 and 1999 resulting in the reduction
of our workforce, the closing of ancillary office locations and the elimination
of all non-core business activities. Even though we have taken such steps, we
still may not be able to operate profitably in the year 2000, or in the future.
OUR SET TECHNOLOGY HAS PROVEN TO BE EFFECTIVE ON A LIMITED-SCALE COMMERCIAL
BASIS, BUT HAS NOT BEEN PROVEN TO BE EFFECTIVE ON A LARGE-SCALE COMMERCIAL
BASIS. THEREFORE, IT MAY NEVER BE PROFITABLE TO US.
Our SET technology has limited experience on a large-scale basis and may
never perform successfully on a scale necessary for it to be profitable. As a
result, we cannot predict all of the difficulties that may arise in the
application of SET on a large-scale basis. In addition, not all of the results
of the tests we conducted on SET have been verified by an independent testing
laboratory. Thus, it is possible that this technology may require further
research, development, design and testing, as well as regulatory clearances,
before it can be further commercialized on a large scale. If we encounter
difficulties in testing SET on a large-scale basis, we may not be able to
successfully demonstrate SET to regulatory authorities from whom we may need to
obtain additional permits in order to operate our business successfully.
Additionally, our ability to operate our business successfully will depend on a
variety of factors, many of which are beyond our control, including:
o competition from companies with greater financial and other resources
than we have;
o cost and availability of supplies that we use;
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o changes in governmental initiatives and requirements that affect our
technologies and services;
o changes in regulatory requirements that apply to our business; and
o costs associated with equipment repair and maintenance.
WE MAY NOT BE ABLE TO OBTAIN ANY FURTHER COLLABORATIVE AGREEMENTS, LICENSES OR
PROJECT CONTRACTS OR MAINTAIN THOSE WE DO HAVE, WHICH MAY REQUIRE US TO LICENSE
OUR TECHNOLOGIES TO THIRD PARTIES THAT ARE NOT AFFILIATED WITH US.
Our business is largely dependent on entering into collaborative joint
working arrangements with established engineering and environmental companies,
or entering into joint venture agreements involving the application of our
technologies. To date, only one of our operating subsidiaries and its
collaborative joint working partners have been awarded material project
contracts. We may not be able to enter into any other definitive joint project
arrangements or joint venture collaborative agreements. Even if we are able to
enter into such arrangements or agreements, they may not be on terms and
conditions that are sufficiently beneficial to us, or may not enable us to
generate profits. If we are not able to enter into commercially attractive
collaborative working arrangements in the future, we may have to license our
technologies to third parties that are not affiliated with us. We may not be
able to enter into such license arrangements. Even if we do, such arrangements
may not produce any income to us. In addition, our existing project contracts,
and any project contract that may be awarded to us and/or any of our joint
working partners in the future, may be curtailed, delayed, redirected or
terminated at any time. Problems or delays that we experience on any specific
project could materially adversely affect our business and financial condition.
WE MAY NOT BE ABLE TO COMPETE SUCCESSFULLY IN THE ENVIRONMENTAL SERVICES
INDUSTRY WHICH COULD RESULT IN A LOSS OF MARKET SHARE AND DIMINISH OUR BRAND
RECOGNITION.
Many potential users of our SET technology have already invested
substantial funds in other forms of environmental remediation technology,
including (i) incineration, (ii) plasma arc, (iii) vitrification, (iv) molten
metal, (v) molten salt, (vi) chemical neutralization, (vii) catalytic
electrochemical oxidation and (viii) supercritical wet oxidation. Our growth and
future financial performance will depend on our ability to demonstrate to
prospective partners and customers the advantages of our environmental
technology over other technologies. We may not be successful in this effort.
Furthermore, it is possible that competing technologies may be perceived to
have, or may actually have, certain advantages over our technology for certain
industries or applications.
Competition in the environmental services industry is intense. The industry
is dominated by large companies such as Bechtel, Westinghouse, Foster Wheeler
and ICF Kaiser, among others. These companies are called upon to serve as
primary contractors and consultants on a large portion of the Superfund, federal
and state government, Department of Energy and Department of Defense projects.
Additionally, many smaller engineering firms, construction firms, consulting
firms and other specialty firms have entered the environmental services industry
in recent years, and additional firms can be expected to enter the industry in
the future. Many of our competitors in the environmental services industry have
significantly greater financial resources and more established market positions
than we do. We may not be able to compete with these companies. In addition,
other firms may expand into or develop expertise in the areas in which we
specialize.
WE MAY BE ADVERSELY AFFECTED BY EXTENSIVE ENVIRONMENTAL REGULATIONS, AND WE
COULD BE SUBJECT TO FINES OR OTHER PENALTIES FOR FAILURE TO COMPLY WITH SUCH
REGULATIONS.
The scope and nature of environmental regulation, at the federal, state and
local levels, has expanded dramatically in recent years. Such regulations impose
stringent guidelines on companies that generate and handle hazardous materials,
as well as other companies involved in various aspects of the environmental
services industry. Any future increases or changes in regulation may result in
our incurring additional costs for equipment, retraining, development of new
remediation plans, handling of hazardous materials and other costs.
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<PAGE>
In addition, we could be liable for substantial costs and damages (including
penalties and fines) associated with environmental remediation, including
investigation, cleanup and natural resource damages.
As our environmental technology is commercialized, we may be required to
obtain environmental liability insurance in the future in amounts greater than
those we currently maintain. Such insurance may not provide coverage against all
claims made against us. In addition, as the cost of cleaning or correcting
environmental hazards can be extremely high, even if we are determined to be
liable for costs that are covered by our insurance, such coverage may not be
adequate to pay the entire cost. If that occurs, we may be responsible for
paying costs in excess of our insurance coverage, which may significantly reduce
working capital necessary to fund our operations.
OUR FUTURE SUCCESS MAY DEPEND ON CONTINUED ENVIRONMENTAL REGULATION IN CERTAIN
AREAS, THE RELAXATION OF WHICH MAY RESULT IN REDUCED DEMAND FOR OUR STREAM OF
REVENUE.
Any relaxation of environmental regulation may result in a decline in
demand for environmental services and thereby adversely affect our financial
condition. The growth of the environmental services industry has been largely
attributable to, and tracks, the increase in environmental regulation since the
1970s. The demand for environmental services has been largely the result of
facility owners attempting to comply with, or avoid liability under, existing or
newly imposed environmental regulations at the federal, state and local levels.
Because of the burden imposed on the industry in complying with such
regulations, efforts have been made by various groups to seek the relaxation or
repeal of certain forms of environmental regulation. While such efforts to relax
environmental regulation have been largely unsuccessful to date, the scope or
growth of environmental regulation may be curtailed in the future.
WE ARE DEPENDENT UPON THE SPENDING LEVELS OF GOVERNMENTAL AND INDUSTRIAL
ENTITIES, THE REDUCTION OF WHICH COULD ADVERSELY AFFECT OUR STREAM OF REVENUE.
Any curtailment or delays in spending for environmental services by
governmental agencies or industrial entities can be expected to have a material
adverse effect on the environmental services industry and on our operations and
prospects. Because of the nature of sites requiring environmental services, the
growing public emphasis on environmental matters and the cost of environmental
services, a significant portion of all funds budgeted for such services has
already been spent by governmental agencies and large industrial entities. While
third-party reimbursement may be sought in various cleanups, most Superfund
cleanups, as well as weapons and other nuclear facility cleanups, involve
significant spending by governmental agencies. As budget constraints and
emphasis on employment, international competition and other considerations grow,
certain governmental agencies and industrial entities may choose to delay or
curtail expenditures for environmental services.
OUR BUSINESS IS HEAVILY DEPENDENT UPON CONTRACTS TO PROVIDE SERVICES FOR THE
DEPARTMENT OF ENERGY. THE FAILURE TO RENEW THOSE CONTRACTS OR TO REPLACE THEM
WILL RESULT IN A MATERIAL REDUCTION OF OUR REVENUES.
A significant portion of our revenues during the past two years have come
from contracts that we have to provide services for one client, the Department
of Energy. Revenues from our contract to provide technical management support
services to the Department of Energy for the opening and operation of the Waste
Isolation Pilot Plant near Carlsbad, New Mexico constituted approximately 62% of
our total revenues in 1999. Revenues from our contract to provide technical,
engineering and scientific support for the closedown and cleanup of the
Department of Energy's facility at Rocky Flats, Colorado accounted for
approximately 22% of our total revenues in 1999. The Waste Isolation Pilot Plant
contract will expire on September 30, 2000, and the Rocky Flats contract will
expire on June 30, 2000. In order for us to replace the revenues attributable to
such large projects, we must secure one or more large projects or a large number
of smaller projects. We may not be able to adequately replace such projects with
other projects that will produce as much revenue. If we fail to do so, our
revenues will be materially reduced and your investment will be materially
adversely affected. Furthermore, we may continue to be dependent on a small
number of major customers for a significant portion of our revenues.
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<PAGE>
OUR CASH NEEDS ARE SIGNIFICANT AND WE WILL LIKELY NEED ADDITIONAL FUNDING IN THE
FUTURE. IF ADEQUATE FUNDS ARE NOT AVAILABLE, WE MAY HAVE TO DELAY, SCALE BACK OR
ELIMINATE ONE OR MORE OF OUR DEVELOPMENT PROGRAMS.
We have required and will require substantial working capital to support
our ongoing operations. If adequate funds are not available, we may be required
to delay, scale back or eliminate one or more of our development programs or
certain aspects of our operations (in addition to those we have already
curtailed), or to obtain funds by entering into arrangements with collaborative
partners or others that may require us to relinquish rights to our technology
that we would not otherwise relinquish, or to license third parties to
commercialize our technology that we would otherwise seek to develop ourselves.
Prior to our initial public offering, financing for all of our activities
had been provided in the form of direct equity investments and loans by
Commodore Environmental Services, Inc. ("COES"), the owner of approximately 49%
of our outstanding common stock. Since the consummation of our initial public
offering in July 1996, we have experienced periodic working capital shortages
because of expenditures relating to research and development and other
infrastructure expenditures. As a result of such working capital shortages, we
were required to raise additional capital through private placements of our
preferred stock and common stock.
Notwithstanding such financing, we expect that we will require significant
additional capital either in the form of debt or equity in the near future to
support our operations. We may not be able to obtain any additional financing on
acceptable terms, or at all.
THE PATENT AND OTHER INTELLECTUAL PROPERTY PROTECTION WE CURRENTLY HAVE MAY NOT
BE ADEQUATE TO PROTECT US FROM INFRINGEMENT BY OTHERS AND WE CANNOT BE SURE THAT
OUR BUSINESS DOES NOT INFRINGE ON THE PROPRIETARY RIGHTS OF OTHERS.
We are highly dependent upon proprietary technology and seek to protect
such technology through a combination of patents, licenses and trade secrets. We
have applied for and obtained patents for certain proprietary aspects of our
technology and processes in the United States and other countries. Our success
depends, in large part, on our ability to obtain additional patents, protect the
patents that we currently own, maintain trade secrecy protection and operate
without infringing on the proprietary rights of third parties. The patents that
we currently own 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. Our pending patent applications may not be
approved; we may not develop any additional proprietary technology that is
patentable; any patents issued to us may not provide us with competitive
advantages and may be challenged by third parties; and the patents of others may
have an adverse effect on our ability to conduct our business. Furthermore,
others may independently develop similar or superior technologies, duplicate
elements of our technologies, or design around our technology.
In the future, we may need to acquire licenses to, or to contest the
validity of, issued or pending patents of third parties. Any license acquired
under such patents may not be made available to us on acceptable terms, or at
all. In addition, we could incur substantial costs in defending ourselves in
suits brought against us for alleged infringement of another party's patents or
in defending the validity or enforceability of our patents. In addition to
patent protection, we also rely on trade secrets, proprietary know-how and
technology, which we seek to protect, in part, by entering into confidentiality
agreements with our prospective working partners and collaborators, employees
and consultants. These agreements may be breached, and we may not have adequate
remedies for any breach. In addition, our trade secrets and proprietary know-how
may otherwise become known or be independently discovered by others.
OUR ACQUISITION PROGRAM POSES SPECIAL RISKS AND FINANCIAL CONSEQUENCES TO US
THAT COULD ULTIMATELY HURT OUR BUSINESS AND ADVERSELY AFFECT YOUR INVESTMENT.
As part of our growth strategy, we may seek to acquire or invest in
complementary (including competitive) businesses, products or technologies.
Acquisitions involve numerous risks, including:
o difficulties in the assimilation of the acquired operations,
technologies and products;
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o diversion of management's attention from other business concerns; and
o potential departures of key employees of the acquired company.
If we successfully identify acquisitions in the future, completing such
acquisitions may result in:
o new issuances of our stock that may be dilutive to current owners;
o increases in our debt and contingent liabilities; and
o additional amortization expenses related to goodwill and other
intangible assets.
Any of these risks could materially adversely affect our business,
financial condition and results of operations, thereby adversely affecting the
value of your investment.
We continue to explore potential acquisitions. We may not be able to
identify, successfully complete or integrate potential acquisitions in the
future. However, even if we can, we cannot be sure that such acquisitions will
have a positive impact on our business or operating results.
THE LOSS OF OUR SENIOR MANAGEMENT OR OTHER KEY PERSONNEL OR OUR FAILURE TO
ATTRACT ADDITIONAL PERSONNEL COULD NEGATIVELY AFFECT OUR BUSINESS AND DECREASE
THE VALUE OF YOUR INVESTMENT.
Our success depends to a significant extent upon the performance of senior
management and other key employees and on our ability to continue to attract and
retain highly qualified personnel. Each of the employment agreements with our
senior executive officers has, as of the date of this prospectus, either expired
by its terms and has not been renewed by us or, in the case of the employment
agreement of Kenneth L. Adelman, our former Executive Vice President--Marketing
and International Development, has been mutually cancelled and has no further
force and effect. Thus, such individuals could leave the company at any time.
Should any of the members of our senior management be unable or unwilling to
continue in their present roles, or should such persons determine to enter into
competition with us, our operations and prospects could be adversely affected.
Competition for highly skilled employees with technical, management, marketing,
sales, product development and other specialized training is intense. We may not
be successful in attracting and retaining such personnel in the future. We
presently do not carry any key-man life insurance.
WE HAVE VERY LIMITED MANUFACTURING OPERATIONS AND RELY ON OUTSIDE SOURCES OF
SUPPLY FOR MOST OF THE STRATEGIC COMPONENTS USED IN OUR SET TECHNOLOGY. OUR
INABILITY TO OBTAIN A SUFFICIENT SUPPLY OF SUCH COMPONENTS COULD SIGNIFICANTLY
IMPAIR OUR ABILITY TO SERVE OUR CLIENTS.
We currently have very limited manufacturing capabilities and experience in
manufacturing the components used in our SET process. We intend to continue to
rely on outside sources of supply for most of the strategic components utilized
in the SET technology. If we were unable to obtain a sufficient supply of
required components, we could experience significant delays in the manufacture
of SET equipment, which could result in the loss of orders and customers and
could have a material adverse affect on our business and market goodwill, which
will materially reduce the value of your investment. In addition, if the cost of
raw materials or finished components were to increase, there can be no assurance
that we would be able to pass such increase to our customers. The use of outside
suppliers also entails risks of quality control and disclosure of proprietary
information.
OUR BOARD OF DIRECTORS HAS A POTENTIAL CONFLICT OF INTERESTS WHICH MAY ADVERSELY
AFFECT OUR BUSINESS.
Paul E. Hannesson, our Chairman of the Board, President and Chief Executive
Officer, also serves as the Chairman of the Board and Chief Executive Officer of
our affiliate, Commodore Separation Technologies, Inc. ("Separation"), and
devotes a limited portion of his business and professional time and efforts to
Separation's business. In addition, six out of seven members of our board of
directors also serve as directors of Separation. Mr. Hannesson and those other
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. Moreover,
while Mr. Hannesson has agreed to devote the
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majority of his business and professional time and efforts to the Company,
potential conflicts of interest also include the amount of time and effort
devoted by him to Separation. We may be materially adversely affected if Mr.
Hannesson and/or the other directors choose to place the interests of Separation
before those of the company and we fail to resolve such conflicts in our favor.
FUTURE SALES OF OUR COMMON STOCK MAY HAVE A DEPRESSIVE EFFECT ON THE MARKET
PRICE OF OUR STOCK.
On a fully-diluted basis (not including the shares of our common stock
underlying any of our outstanding convertible preferred stock), approximately
63,741,149 shares of our common stock would be outstanding on the date of this
prospectus. Of such shares, 33,828,682 shares would be freely tradable without
restriction or further registration under the Securities Act, except to the
extent such shares are held by our "affiliates." The remaining 29,912,467 shares
are "restricted securities" as defined in Rule 144 promulgated under the
Securities Act, and may only be sold in the public market if such shares are
registered under the Securities Act of 1933, as amended, or sold in accordance
with Rule 144 or another exemption from registration. Sales of substantial
amounts of our common stock, or the perception that such sales could occur,
could adversely affect prevailing market prices for our common stock.
THE MARKET PRICE OF OUR COMMON STOCK HAS FLUCTUATED CONSIDERABLY AND WILL
PROBABLY CONTINUE TO DO SO.
The stock markets have experienced extreme price and volume fluctuations.
The market prices for our common stock and publicly traded warrants have been
historically volatile. The market prices of our securities could be subject to
wide fluctuations in the future as well in response to a variety of events or
factors, some of which may be beyond our control. These could include, without
limitation:
o future announcements of new competing technologies;
o changing policies and regulations of the federal government and state
governments;
o the status of our patent protection and other intellectual property
rights;
o quarterly fluctuations in our financial results;
o liquidity of the market for our securities;
o public perception of our company and our entry into new markets; and
o general conditions in our company's industry and the economy.
OUR CHARTER CONTAINS AUTHORIZED, UNISSUED PREFERRED STOCK THAT MAY INHIBIT A
TAKEOVER.
Our certificate of incorporation and by-laws contain provisions that could
make it more difficult for a third party to acquire the company. Our certificate
of incorporation authorizes our board of directors to issue preferred stock
without stockholder approval and upon such terms as it may determine. The rights
of holders of our common stock are subject to, and may be adversely affected by,
the rights of future holders of preferred stock. In addition, our by-laws
require stockholders to provide advance notice to nominate candidates for
election as directors and to submit proposals for consideration at stockholder
meetings. Section 203 of the Delaware General Corporation Law makes it more
difficult for an "interested stockholder" (generally a 15% stockholder) to
effect various business combinations with a corporation for a three-year period
after the stockholder becomes an "interested stockholder." In general, these
provisions may discourage a third party from attempting to acquire our company
and, therefore, may inhibit a change of control of our company under
circumstances that could give stockholders an opportunity to realize a premium
over then-prevailing market prices.
OUR BUSINESS COULD STILL BE DISRUPTED BY RESIDUAL CONSEQUENCES OF THE YEAR 2000
PROBLEM.
Prior to January 1, 2000, there was a great deal of concern regarding the
ability of computers to adequately recognize 21st century dates from 20th
century dates due to the two-digit date fields used by many systems. Most
reports to date, however, are that computer systems are functioning normally and
the
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compliance and remediation work accomplished during the years leading up to 2000
was effective to prevent any problems. As of the date of this prospectus, we
have not experienced any such computer difficulty; however, computer experts
have warned that there may still be residual consequences of the change in
centuries and any such difficulties may, depending upon their pervasiveness and
severity, have a material adverse effect on our business, financial condition
and results of operations. Any of the following could have a material adverse
effect on our business operations:
o a failure to fully identify all year 2000 dependencies in our systems;
o a failure to fully identify all year 2000 dependencies in the systems
of third parties with whom we do business;
o a failure of any third party with whom we do business to adequately
address their year 2000 issues;
o the failure of any contingency plans developed to protect our business
and operations from year 2000-related interruptions; and
o delays in the implementation of new systems resulting from year 2000
problems.
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 based on
our current expectations and projections about future events. These
forward-looking statements are subject to a number of risks and uncertainties
which could cause our actual results to differ materially from historical
results or those anticipated. Certain of those risks and uncertainties are
beyond our control. The words "believe," "expect," "anticipate" and similar
expressions identify forward-looking statements. We undertake no obligation to
publicly update or revise any forward-looking statements, whether as a result of
new information, future events or otherwise. New risk factors emerge from time
to time and it is not possible for us to predict all such risk factors, nor can
we assess the impact of all such risk factors on our business or the extent to
which any factor, or combination of factors, may cause actual results to differ
materially from those forecast in any forward-looking statements. Given these
risks and uncertainties, investors should not place undue reliance on
forward-looking statements as a prediction of actual results. Please see "Risk
Factors" for a discussion of certain risks that are relevant to us.
ABOUT COMMODORE APPLIED TECHNOLOGIES
We are an environmental treatment and services company that provides a
range of services related to remediating contamination in soils, liquids and
other materials and disposing of or reusing certain waste by-products. Our
environmental services business, which accounts for substantially all of our
current revenues, offers a full range of services related to environmental
management for on-site and off-site identification, investigation, remediation
and management of hazardous, mixed and radioactive wastes, as well as waste
remediation services through the use of our proprietary technology, known as SET
(solvated electron technology). We believe that SET is the only patented,
non-thermal, portable and scalable process that is currently available for
treating and decontaminating soils, liquids and other materials containing PCBs,
pesticides, dioxins, chemical weapons and warfare agents and other toxic
contaminants.
Demand for our environmental technology and services is anticipated to
arise principally from two sources:
o the need for alternative environmental treatment and disposal methods
for toxic substances (such as the SET technology), which involve
limited safety risks with respect to air pollution and transportation
of hazardous materials and do not result in large volumes of residual
waste that require further treatment prior to disposal; and
o stricter legislation and regulations mandating new or increased levels
of air and water pollution control and solid waste management.
8
<PAGE>
Our business strategy is to expand our environmental services business and
commercialize our SET technology. We plan to execute this strategy by:
o strengthening our relationships with our present industrial and
government-sector customers, particularly the Department of Energy and
Department of Defense, by continuing to provide high-quality
environmental management and consulting services;
o focusing our marketing efforts with respect to the SET technology on
selected niche markets within certain strategic environmental market
segments, such as government mixed waste remediation and chemical
weapons demilitarization, where we believe SET offers the greatest
value and meets pressing customer needs; and
o establishing additional collaborative joint working and marketing
arrangements with established engineering and environmental service
organizations to pursue commercial opportunities in the public and
private sector.
We are incorporated under the laws of the State of Delaware. Our principal
executive offices are located at 150 East 58th Street, Suite 3400, New York, New
York 10155, and our telephone number at that address is (212) 308-5800.
RECENT DEVELOPMENTS
$2.5 MILLION PRIVATE PLACEMENT
On November 4, 1999, we completed a $2.5 million private placement
financing with The Shaar Fund Ltd. We received net proceeds of approximately
$2.1 million, after payment of expenses and fees in connection with the private
placement. We have been and intend to continue using these net proceeds for
working capital and general corporate purposes.
In the private placement, we issued to The Shaar Fund 335,000 shares of a
new Series E convertible preferred stock, convertible into our common stock at
any time after April 30, 2000, up to April 30, 2003. We also issued to The Shaar
Fund a warrant to purchase up to 312,500 shares of our common stock (subject to
adjustment) at a purchase price of $1.1963 per share. The warrant expires on
November 4, 2004.
The conversion price of the Series E convertible preferred stock will be
equal to the arithmetic mean of the closing prices of our common stock as
reported on the American Stock Exchange for the ten trading days immediately
preceding the date The Shaar Fund elects to convert its shares, as long as our
common stock continues to trade on the American Stock Exchange. In May 2003, the
Series E convertible preferred stock will automatically convert into our common
stock at a conversion price calculated in accordance with the above conversion
formula, plus accrued and unpaid dividends. If conversion of the Series E
convertible preferred stock would require us to issue to The Shaar Fund a number
of shares of our common stock equal to or greater than 20% of the outstanding
shares of our common stock as of November 4, 1999, we will be required to obtain
stockholder approval before we may issue those shares.
The Series E convertible preferred stock has a variable rate dividend
averaging 8.14% over the term of the securities. We reserved the right to redeem
all of the Series E convertible preferred stock on or before April 30, 2000 by
payment of $2.8 million, plus any accrued and unpaid dividends. We do not
currently have any intention to redeem the Series E convertible preferred stock.
We issued to Avalon Research Group Inc., as finder in this transaction, a
five-year warrant to purchase up to 250,000 shares of our common stock (subject
to adjustment) at a purchase price of $1.1963 per share. We also paid Avalon a
fee of $250,000.
$2.0 MILLION PRIVATE PLACEMENT
On March 15, 2000, we completed a $2.0 million private placement financing
with The Shaar Fund Ltd. We received net proceeds of approximately $1.8 million,
after payment of expenses and fees in connection
9
<PAGE>
with the private placement. We have been and intend to continue using these net
proceeds for working capital and general corporate purposes.
In the private placement, we issued to The Shaar Fund 266,700 shares of a
new Series F convertible preferred stock, convertible into our common stock at
any time on or after September 30, 2000, up to September 30, 2003. We also
issued to The Shaar Fund a warrant to purchase up to 250,000 shares of our
common stock (subject to adjustment) at a purchase price of $1.93875 per share.
The warrant expires on March 15, 2005.
The conversion price of the Series F convertible preferred stock will be
equal to the lesser of (i) $2.50 (subject to adjustment for any stock-split or
stock combination) or (ii) the arithmetic mean of the closing prices of our
common stock as reported on the American Stock Exchange for the ten trading days
immediately preceding the date The Shaar Fund elects to convert its shares, as
long as our common stock continues to trade on the American Stock Exchange. In
October 2003, the Series F convertible preferred stock will automatically
convert into our common stock at a conversion price calculated in accordance
with the above conversion formula, plus accrued and unpaid dividends. If
conversion of the Series F convertible preferred stock would require us to issue
to The Shaar Fund a number of shares of our common stock equal to or greater
than 20% of the outstanding shares of our common stock as of March 15, 2000, we
will be required to obtain stockholder approval before we may issue those
shares.
The Series F convertible preferred stock has a variable rate dividend
averaging 8.23% over the term of the securities. We reserved the right to redeem
all of the Series F convertible preferred stock on or before September 30, 2000
by payment of $2,250,000, plus any accrued and unpaid dividends. We do not
currently have any intention to redeem the Series F convertible preferred stock.
We issued to Avalon Research Group Inc., as finder in this transaction, a
five-year warrant to purchase up to 113,475 shares of our common stock (subject
to adjustment) at a purchase price of $1.93875 per share. We also paid Avalon a
fee of $200,000.
U.S. ARMY FUNDS $7.9 MILLION FOR DEMONSTRATION OF SET TECHNOLOGY
On February 25, 2000, the U.S. Army awarded our Teledyne-Commodore, LLC
joint venture $7.9 million to demonstrate our SET technology for the destruction
of chemical weapons. The demonstration, administered under the Assembled
Chemical Weapons Assessment program has already begun and will continue until
January 2001. On March 27, 2000 we released details of the planned tests for the
Phase II demonstration under this program. The Army will test
Teledyne-Commodore's SET technology and its Ammonia Fluid-Jet Process technology
in the destruction of chemical weapons. In two separate sets of tests,
Teledyne-Commodore will test seven major unit operations. These tests will be
conducted at the Dugway Proving Ground, Utah and the Chemical Agent Munition
Disposal System near Tooele, Utah.
GENERAL SERVICES ADMINISTRATION, FEDERAL SUPPLY SERVICE AWARDS $15 MILLION
CONTRACT TO OUR SUBSIDIARY COMMODORE ADVANCED SCIENCES, INC.
On March 1, 2000, the General Services Administration, Federal Supply
Service, awarded our subsidiary Commodore Advanced Sciences, Inc. a five-year,
$15 million contract to provide environmental services. This contract for
environmental advisory services includes providing expertise in the areas of
environmental planning services and documentation, environmental compliance
services, environmental/occupational training services and waste management
services.
USE OF PROCEEDS
All of the common stock offered hereby is being sold by or for the selling
stockholders. We will not receive any proceeds from the sale of the common stock
offered hereby. We will, however, receive the exercise price upon the exercise
of warrants held by The Shaar Fund Ltd. and Avalon Research Group Inc. We plan
to use all such proceeds for working capital and general corporate purposes.
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<PAGE>
SELLING STOCKHOLDERS
The following table sets forth:
o the name of each selling stockholder;
o the number of shares of common stock, and the percentage (if 1% or
more) of the outstanding shares of such class, owned as of March 30,
2000;
o the number of shares which may be sold pursuant to this prospectus for
the account of the selling stockholder; and
o the number of such shares, and the percentage (if 1% or more) of the
outstanding shares of such class, that will be owned by the Selling
Stockholder, assuming the sale of all the shares offered pursuant to
this prospectus.
The information included below is based upon information provided to us by the
selling stockholders. The selling stockholders purchased or otherwise acquired
the securities to be resold in the ordinary course of business. Because each
selling stockholder may offer all, some or none of the shares of common stock it
holds, the following table has been prepared on the assumption that all of the
shares offered under this prospectus will be sold to parties unaffiliated with
the selling stockholders. At the time of purchase there were, and as of the date
of this prospectus there are, no agreements, arrangements or understandings,
directly or indirectly, with any person to distribute any of the securities to
be resold. Except as indicated, none of the selling stockholders has had a
material relationship with us within the past three years, other than as a
result of ownership of shares of our common stock or other securities. Unless
otherwise indicated, the selling stockholders have sole voting and investment
power with respect to their respective shares.
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF COMMON STOCK SHARES SHARES OF COMMON STOCK
OWNED PRIOR TO THE SALE WHICH MAY BE OWNED AFTER THE SALE
------------------------- SOLD THROUGH -------------------------
NAME AND POSITION/RELATIONSHIP NUMBER PERCENT THIS PROSPECTUS NUMBER PERCENT
- ------------------------------ ---------- ------- --------------- ---------- --------
<S> <C> <C> <C> <C> <C>
The Shaar Fund Ltd. .......... 0(1) * 11,000,000(2) 0 *
Commodore Environmental
Services, Inc. (3) ......... 15,456,677(4) 49.9% 2,500,000(5) 12,956,677(3) 41.8%
Avalon Research Group Inc. (6) 0(7) * 363,475(8) 0 *
</TABLE>
- ----------
* Represents less than 1% of the outstanding shares of our common stock as of
March 30, 2000.
(1) Does not include shares of our common stock The Shaar Fund may receive in
lieu of cash dividend payments on, and upon conversion of, the Series E
convertible preferred stock and the Series F convertible preferred stock,
and upon exercise of its warrants to purchase up to an aggregate of 562,500
shares (subject to adjustment) of our common stock.
(2) Pursuant to a Registration Rights Agreement, dated as of November 4, 1999,
and a Registration Rights Agreement, dated as of March 15, 2000, by and
between our company and The Shaar Fund, we agreed to register an aggregate
of 11,000,000 shares of our common stock for sale by The Shaar Fund. The
Shaar Fund may receive shares of our common stock in lieu of cash dividend
payments on, and upon conversion of, the Series E convertible preferred
stock and the Series F convertible preferred stock, and upon exercise of
its warrants to purchase up to an aggregate of 562,500 shares (subject to
adjustment) of our common stock. The 11,000,000 shares being registered
hereby for sale by The Shaar Fund is not intended to be a representation of
the number of shares of our common stock which may actually be issued to
The Shaar Fund, which may be materially more or less than 11,000,000. The
conversion price of the Series E convertible preferred stock will be equal
to the arithmetic mean of the closing prices of our common stock as
reported on the American Stock Exchange for the ten trading days
immediately preceding the date of conversion, as long as our common stock
continues to trade on the American Stock Exchange. The conversion price of
the Series F convertible preferred stock will be equal to the lesser of (i)
$2.50 (subject to adjustment for any stock-split or stock combination) or
(ii) the arithmetic mean of the
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<PAGE>
closing prices of our common stock as reported on the American Stock
Exchange for the ten trading days immediately preceding the date of
conversion, as long as our common stock continues to trade on the American
Stock Exchange. Please see "Recent Developments--$2.5 Million Private
Placement" for a more detailed discussion regarding the conversion terms of
the Series E convertible preferred stock, and "Recent Developments - $2.0
Million Private Placement" for a more detailed discussion regarding the
conversion terms of the Series F convertible preferred stock.
(3) Commodore Environmental Services, Inc. is our principal stockholder. Please
see "Item 13. Certain Relationships and Related Transactions" in our Annual
Report on Form 10-K for the year ended December 31, 1999, which is
incorporated in this prospectus by reference, for a more detailed
discussion of the relationship between Commodore Environmental Services,
Inc. and us.
(4) Does not include shares underlying currently exercisable warrants to
purchase an aggregate of 14,410,540 shares (subject to adjustment) of our
common stock at prices ranging from $1.28 per share to $7.03 per share.
(5) Pursuant to a letter agreement between our company and Commodore
Environmental Services, Inc., dated November 4, 1999, Commodore
Environmental agreed, among other things, that it will not sell or
distribute any or all of these shares at a price less than $2.00 per share
for so long as The Shaar Fund has not converted 75% or more of its Series E
convertible preferred stock.
(6) Avalon Research Group Inc. acted as a finder in connection with our sale of
the Series E convertible preferred stock and the Series F convertible
preferred stock to The Shaar Fund, and has acted as a finder in connection
with certain other private placement transactions we have completed in the
past. In connection with our sale of the Series E convertible preferred
stock to The Shaar Fund, we paid Avalon a fee of $250,000 and issued Avalon
a warrant to purchase up to 250,000 shares (subject to adjustment) of our
common stock at a price of $1.1963 per share. In connection with our sale
of the Series F convertible preferred stock to The Shaar Fund, we paid
Avalon a fee of $200,000 and issued Avalon a warrant to purchase up to
113,475 shares (subject to adjustment) of our common stock at a price of
$1.93875 per share. Avalon is a registered broker-dealer.
(7) Does not include shares of our common stock Avalon Research Group Inc. may
receive upon exercise of its warrants to purchase up to an aggregate of
363,475 shares (subject to adjustment) of our common stock.
(8) Pursuant to a Finder's Agreement, dated August 17, 1999, by and between our
company and Avalon Research Group Inc., we agreed to register for resale
the 363,475 shares (subject to adjustment) of our common stock underlying
the warrants that were issued to Avalon in connection with our sale of the
Series E convertible preferred stock and the Series F convertible preferred
stock to The Shaar Fund.
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<PAGE>
PLAN OF DISTRIBUTION
All or a portion of the shares offered hereby may be sold, from time to
time, by or for the selling stockholders in one or more transactions on the
American Stock Exchange, in the public market off the American Stock Exchange,
in privately negotiated transactions, or in a combination of such transactions.
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. Pursuant to a letter agreement between our
company and Commodore Environmental Services, Inc., dated November 4, 1999,
Commodore Environmental agreed, among other things, that it will not sell or
distribute any or all of its shares offered hereby at a price less than $2.00
per share for so long as The Shaar Fund Ltd. has not converted 75% or more of
its Series E convertible preferred stock. The shares may be sold by or for the
selling stockholders by one or more of the following methods, without
limitation:
o 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;
o purchases by a broker or dealer as principal and resale by such broker
or dealer for its account pursuant to this prospectus;
o an exchange distribution in accordance with the rules of such
exchange; o ordinary brokerage transactions and transactions in which
a broker may solicit purchasers;
o privately negotiated transactions;
o short sales; and
o 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. 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.
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 our common stock 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
promulgated under the Exchange Act, including, without limitation, Regulation M,
which provisions may limit the timing of purchases and sales of our common stock
by the selling stockholders. All of these things may limit the marketability of
the shares.
To our knowledge, no underwriting arrangements have been entered into by
the selling stockholders with respect to the shares as of the date of this
prospectus. If we are 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, we will file a supplement to this prospectus, 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 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.
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<PAGE>
We will maintain the effectiveness of the registration statement of which
this prospectus is a part until the earlier of (i) five years after the
effective date of the registration statement or (ii) such time as all the shares
registered under the registration statement have been sold or are no longer
subject to volume or manner of sale restrictions under the Securities Act.
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.
We will pay all expenses incurred to register the shares, which are
estimated to be approximately $58,000, but all brokerage commissions and other
expenses incurred by individual selling stockholders will be paid by them. There
is no assurance that any of the selling stockholders will sell any or all of the
shares offered by this prospectus.
LEGAL MATTERS
The validity of the shares offered by this prospectus has been passed upon
by our counsel, Greenberg Traurig, LLP, New York, New York. A shareholder of
Greenberg Traurig, LLP holds options to purchase 275,000 shares of common stock
of Commodore Environmental Services, Inc.
EXPERTS
The consolidated financial statements of Commodore Applied Technologies,
Inc. and Subsidiaries as of December 31, 1999 and for the year ended December
31, 1999, incorporated in this prospectus by reference to our Annual Report on
Form 10-K for the year ended December 31, 1999, have been so incorporated in
reliance on the report of Tanner & Co., independent accountants, given on the
authority of said firm as experts in auditing and accounting.
The financial statements of Commodore Applied Technologies, Inc. and
Subsidiaries as of December 31, 1998 and for each of the two years in the period
ended December 31, 1998, incorporated in this prospectus by reference to our
Annual Report on Form 10-K for the year ended December 31, 1999, have been so
incorporated in reliance on the report (which contains an explanatory paragraph
relating to our ability to continue as a going concern as described in Note 2 to
the financial statements) of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the informational requirements of the Securities Exchange
Act of 1934, as amended, and file annual, quarterly and current reports, proxy
statements and other information with the Securities and Exchange Commission
that are required to be filed under the Securities Exchange Act of 1934, as
amended. You may read and copy such reports, proxy statements and other
information at the SEC's public reference rooms located at 450 Fifth Street,
N.W., Washington, D.C. 20549, at Seven World Trade Center, Suite 1300, New York,
New York 10048, and at Northwest Atrium Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661-2511. Please call the SEC at 1-800-SEC-0330 for
further information on the public reference rooms. Our SEC filings are also
available to the public from the SEC's internet site on the World Wide Web at
http://www.sec.gov. Copies of these reports, proxy statements and other
information also can be inspected at the offices of the American Stock Exchange,
86 Trinity Place, New York, New York 10006.
We have filed a registration statement on Form S-3 with the SEC with
respect to the shares. This prospectus constitutes a part of that registration
statement, as amended. As allowed by SEC rules, this prospectus does not contain
all of the information you can find in the registration statement and its
exhibits. In addition, there may have been changes in the facts set forth in
this prospectus since the date it was filed. For further information about us
and our common stock, you should consult the registration statement and its
exhibits. Statements in this prospectus regarding the contents of any documents
are summaries of those documents, and each statement is qualified in its
entirety by reference to the copy of the document on file with the SEC. You may
inspect and obtain copies of the registration statement and any of its
amendments, including exhibits filed as a part of the registration statement or
an amendment to the registration statement, through the entities listed above.
The SEC allows us to "incorporate by reference" certain information we file
with the SEC, which means that we can disclose important information to you by
referring you to another document filed separately with the SEC. Information
contained in a previously filed document that we incorporate by reference is
considered to be a part of this prospectus, except for any information
superseded by information in this prospectus.
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<PAGE>
Information that we file with the SEC after the date of this prospectus will
automatically update and supersede the information contained or incorporated by
reference in this prospectus.
The following documents we filed with the SEC pursuant to the Exchange Act
(File No. 1-11871), as well as any future filings under Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act made prior to the termination of the offering,
are incorporated by reference:
(a) our Annual Report on Form 10-K for the year ended December 31,
1999, including the exhibits thereto; and
(b) the description of our common stock contained in our registration
statement on Form 8-A, dated June 24, 1996, as amended by our registration
statement on Form 8-A/A, dated June 26, 1996, filed under Section 12(b) of
the Exchange Act, including any amendment or report filed for the purpose
of updating such information.
We will provide without charge to each person, including any beneficial
owner, to whom a copy of this prospectus is delivered a copy of any or all
documents incorporated by reference into this prospectus except the exhibits to
such documents (unless such exhibits are specifically incorporated by reference
in such documents). Requests for copies can be made by writing or telephoning us
at our principal executive office at 150 East 58th Street, Suite 3400, New York,
New York 10155, Attention: General Counsel; telephone number (212) 308-5800.
15
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================================================================================
13,863,475 SHARES
COMMODORE APPLIED TECHNOLOGIES, INC.
COMMON STOCK
-------------------
P R O S P E C T U S
-------------------
-------------------
__________ __, 2000
-------------------
WE HAVE NOT AUTHORIZED ANY DEALER, SALESPERSON OR OTHER PERSON TO GIVE ANY
INFORMATION OR REPRESENT ANYTHING NOT CONTAINED OR INCORPORATED BY REFERENCE IN
THIS PROSPECTUS. YOU MUST NOT RELY ON ANY UNAUTHORIZED INFORMATION. THIS
PROSPECTUS DOES NOT OFFER TO SELL ANY SHARES IN ANY JURISDICTION WHERE IT IS
UNLAWFUL. THE INFORMATION IN THIS PROSPECTUS IS CURRENT ONLY AS OF ITS DATE.
================================================================================
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the costs and expenses in connection with
the sale and distribution of the securities being registered, other than
underwriting discounts and commissions. The selling stockholders will not pay
any of the listed expenses. All of the amounts shown are estimates, except the
Securities and Exchange Commission registration fee and American Stock Exchange
additional listing fee.
TO BE PAID
BY THE
REGISTRANT
----------
SEC registration fee .................................. $ 5,070.35
Accounting fees and expenses .......................... 10,000.00
Legal fees and expenses ............................... 10,000.00
American Stock Exchange additional listing fee ........ 17,500.00
Printing and engraving costs .......................... 10,000.00
Miscellaneous expenses ................................ 5,000.00
----------
Total ............................................. $57,570.35
==========
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 further 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
II-1
<PAGE>
loyalty, failing to act in good faith, engaging in intentional misconduct or
knowingly violating a law, 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 $10 million
per occurrence and $10 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.
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.
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
* 4.1 Warrant to purchase 312,500 shares of Common stock of Commodore Applied
Technologies, Inc. issued to The Shaar Fund Ltd.
* 4.2 Certificate of Designation of Series E convertible preferred stock.
* 4.3 Specimen Form of Common Stock Certificate. (1)
* 4.4 Warrant to purchase 250,000 shares of Common stock of Commodore Applied
Technologies, Inc. issued to Avalon Research Group Inc.
** 4.5 Warrant to purchase 250,000 shares of Common Stock of Commodore Applied
Technologies, Inc. issued to The Shaar Fund Ltd.
** 4.6 Certificate of Designation of Series F convertible preferred stock.
** 4.7 Warrant to purchase 113,475 shares of Common Stock of Commodore Applied
Technologies, Inc. issued to Avalon Research Group, Inc.
** 5.1 Opinion of Greenberg Traurig, LLP.
*10.1 Securities Purchase Agreement, dated as of November 4, 1999, between
Commodore Applied Technologies, Inc. and The Shaar Fund Ltd.
*10.2 Registration Rights Agreement, dated as of November 4, 1999, between
Commodore Applied Technologies, Inc. and The Shaar Fund Ltd.
*10.3 Finder's Agreement, dated August 17, 1999, between Commodore Applied
Technologies, Inc. and Avalon Research Group Inc.
**10.4 Securities Purchase Agreement, dated as of March 15, 2000, between
Commodore Applied Technologies, Inc. and The Shaar Fund Ltd.
**10.5 Registration Rights Agreement, dated as of March 15, 2000, between
Commodore Applied Technologies, Inc. and The Shaar Fund Ltd.
**10.6 Award Contract, dated October 6, 1997, between the U.S. Army CBDCOM and
Teledyne-Commodore, LLC.
**10.7 Award Contract, dated January 18, 2000, between General Services
Administration and Commodore Advanced Sciences, Inc.
**23.1 Consent of PricewaterhouseCoopers LLP.
**23.2 Consent of Greenberg Traurig, LLP (contained in Exhibit 5.1).
**23.3 Consent of Tanner & Co.
II-2
<PAGE>
*25.1 Power of Attorney.
- ----------
* Previously filed electronically.
** Filed herewith electronically.
(1) Incorporated herein by reference. Filed as an exhibit to the Company's
Registration Statement on Form S-1 (Registration No. 333-4396) filed
with the Commission on May 2, 1996.
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
20 percent change in the maximum aggregate offering price set forth in
the "Calculation of Registration Fee" table in the effective
Registration Statement; and
(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 paragraphs (a)(1)(i) and (a)(1)(ii) do not
apply if the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed
by the Company pursuant to Section 13 or Section 15(d) of the Exchange
Act that are incorporated by reference in the 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.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant'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 the 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
registrant pursuant to the foregoing provisions, or otherwise, the registrant
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 registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant 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-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, 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
Pre-effective Amendment No. 2 to the 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 30th day of March, 2000.
COMMODORE APPLIED TECHNOLOGIES, INC.
By: /s/ PAUL E. HANNESSON
----------------------------------
Paul E. Hannesson
Chairman of the Board, President
and Chief Executive Officer
----------
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Pre-effective Amendment No. 2 to the Registration Statement has been signed
by the following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Capacity Date
--------- -------- ----
<S> <C> <C>
/s/ PAUL E. HANNESSON Chairman of the Board, President March 30, 2000
- ----------------------------------------- and Chief Executive Officer
Paul E. Hannesson (principal executive officer)
/s/ JAMES M. DEANGELIS* Senior Vice President and Chief March 30, 2000
- ----------------------------------------- Financial Officer (principal
James M. DeAngelis financial and accounting officer)
/s/ WILLIAM R. TOLLER* Director March 30, 2000
- -----------------------------------------
William R. Toller
/s/ BENTLEY J. BLUM* Director March 30, 2000
- -----------------------------------------
Bentley J. Blum
/s/ KENNETH L. ADELMAN* Director March 30, 2000
- -----------------------------------------
Kenneth L. Adelman
/s/ HERBERT A. COHEN* Director March 30, 2000
- -----------------------------------------
Herbert A. Cohen
/s/ DAVID L. MITCHELL* Director March 30, 2000
- -----------------------------------------
David L. Mitchell
*By: /s/ Paul E. Hannesson
- -----------------------------------------
Paul E. Hannesson
Attorney-in-Fact
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
* 4.1 Warrant to purchase 312,500 shares of Common stock of Commodore Applied
Technologies, Inc. issued to The Shaar Fund Ltd.
* 4.2 Certificate of Designation of Series E convertible preferred stock. *
4.3 Specimen Form of Common Stock Certificate. (1)
* 4.4 Warrant to purchase 250,000 shares of Common stock of Commodore Applied
Technologies, Inc. issued to Avalon Research Group Inc.
** 4.5 Warrant to purchase 250,000 shares of Common Stock of Commodore Applied
Technologies, Inc. issued to The Shaar Fund Ltd.
** 4.6 Certificate of Designation of Series F convertible preferred stock.
** 4.7 Warrant to purchase 113,475 shares of Common Stock of Commodore Applied
Technologies, Inc. issued to Avalon Research Group, Inc.
** 5.1 Opinion of Greenberg Traurig, LLP.
*10.1 Securities Purchase Agreement, dated as of November 4, 1999, between
Commodore Applied Technologies, Inc. and The Shaar Fund Ltd.
*10.2 Registration Rights Agreement, dated as of November 4, 1999, between
Commodore Applied Technologies, Inc. and The Shaar Fund Ltd.
*10.3 Finder's Agreement, dated August 17, 1999, between Commodore Applied
Technologies, Inc. and Avalon Research Group Inc.
**10.4 Securities Purchase Agreement, dated as of March 15, 2000, between
Commodore Applied Technologies, Inc. and The Shaar Fund Ltd.
**10.5 Registration Rights Agreement, dated as of March 15, 2000, between
Commodore Applied Technologies, Inc. and The Shaar Fund Ltd.
**10.6 Award Contract, dated October 6, 1997, between the U.S. Army CBDCOM and
Teledyne-Commodore, LLC.
**10.7 Award Contract, dated January 18, 2000, between General Services
Administration and Commodore Advanced Sciences, Inc.
**23.1 Consent of PricewaterhouseCoopers LLP.
**23.2 Consent of Greenberg Traurig, LLP (contained in Exhibit 5.1).
**23.3 Consent of Tanner & Co.
*25.1 Power of Attorney.
- ----------
* Previously filed electronically.
** Filed herewith electronically.
(1) Incorporated herein by reference. Filed as an exhibit to the Company's
Registration Statement on Form S-1 (Registration No. 333-4396) filed
with the Commission on May 2, 1996.
THIS COMMON STOCK PURCHASE WARRANT AND THE SECURITIES REPRESENTED HEREBY HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
TRANSFERRED IN VIOLATION OF SUCH ACT, THE RULES AND REGULATIONS THEREUNDER OR
THE PROVISIONS OF THIS COMMON STOCK PURCHASE WARRANT.
Number of Shares of Common Stock: 250,000
Warrant No. 2
COMMON STOCK PURCHASE WARRANT
To Purchase Common Stock of
Commodore Applied Technologies, Inc.
THIS IS TO CERTIFY THAT The Shaar Fund Ltd., or registered assigns, is
entitled, at any time from the Closing Date (as hereinafter defined) to the
Expiration Date (as hereinafter defined), to purchase from Commodore Applied
Technologies, Inc., a Delaware corporation (the "Company"), 250,000 shares of
Common Stock (as hereinafter defined and subject to adjustment as provided
herein), ("Warrant Amount") in whole or in part, including fractional parts, at
a purchase price per share equal to 110% of the Market Price, subject to
adjustment as provided herein, all on the terms and conditions and pursuant to
the provisions hereinafter set forth.
1. Definitions
As used in this Common Stock Purchase Warrant (this "Warrant"), the
following terms shall have the respective meanings set forth below:
"Additional Shares of Common Stock" shall mean all shares of Common Stock
issued by the Company after the Closing Date, other than Warrant Stock.
"Amex" shall mean the American Stock Exchange.
"Book Value" shall mean, in respect of any share of Common Stock on
any date herein specified, the consolidated book value of the Company as of the
last day of any month immediately preceding such date, divided by the number of
Fully Diluted Outstanding shares of Common Stock as determined in accordance
with GAAP (assuming the payment of the exercise prices for such shares) by
PricewaterhouseCoopers LLC or any other firm of independent
<PAGE>
certified public accountants of recognized national standing selected by the
Company and reasonably acceptable to the Holder.
"Business Day" shall mean any day that is not a Saturday or Sunday or a day
on which banks are required or permitted to be closed in the State of New York.
"Closing Date" shall have the meaning set forth in the Securities Purchase
Agreement.
"Commission" shall mean the Securities and Exchange Commission or any other
federal agency then administering the Securities Act and other federal
securities laws.
"Common Stock" shall mean (except where the context otherwise indicates)
the Common Stock, par value $0.001 per share, of the Company as constituted on
the Closing Date, and any capital stock into which such Common Stock may
thereafter be changed, and shall also include (i) capital stock of the Company
of any other class (regardless of how denominated) issued to the holders of
shares of Common Stock upon any reclassification thereof which is also not
preferred as to dividends or assets over any other class of stock of the Company
and which is not subject to redemption and (ii) shares of common stock of any
successor or acquiring corporation received by or distributed to the holders of
Common Stock of the Company in the circumstances contemplated by Section 4.4.
"Convertible Securities" shall mean evidences of indebtedness, shares of
stock or other securities which are convertible into or exchangeable, with or
without payment of additional consideration in cash or property, for shares of
Common Stock, either immediately or upon the occurrence of a specified date or a
specified event.
"Current Market Price" shall mean on any date of determination the closing
price of a Common Share on such day as reported on the Amex; provided, if such
security is not listed or admitted to trading on the Amex, as reported on the
principal national security exchange or quotation system on which such security
is quoted or listed or admitted to trading, or, if not quoted or listed or
admitted to trading on any national securities exchange or quotation system, the
closing price of such security on the over-the-counter market on the day in
question as reported by Bloomberg LP, or a similar generally accepted reporting
service, as the case may be.
"Current Warrant Price" shall mean, in respect of a share of Common Stock
at any date herein specified, the price at which a share of Common Stock may be
purchased pursuant to this Warrant on such date, as set forth in the first
paragraph hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
or any successor federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect from time to time.
"Exercise Period" shall mean the period during which this Warrant is
exercisable pursuant to Section 2.1.
"Expiration Date" shall mean March 15, 2005.
-2-
<PAGE>
"Fully Diluted Outstanding" shall mean, when used with reference to Common
Stock, at any date as of which the number of shares thereof is to be determined,
all shares of Common Stock Outstanding at such date and all shares of Common
Stock issuable in respect of this Warrant, outstanding on such date, and other
options or warrants to purchase, or securities convertible into, shares of
Common Stock outstanding on such date which would be deemed outstanding in
accordance with GAAP for purposes of determining Book Value or net income per
share.
"Fundamental Corporate Change" shall have the meaning set forth in Section
4.4.
"GAAP" shall mean generally accepted accounting principles in the United
States of America as from time to time in effect.
"Holder" shall mean the Person in whose name the Warrant or Warrant Stock
set forth herein is registered on the books of the Company maintained for such
purpose.
"Market Price" per Common Share means the average of the closing prices of
the Common Shares as reported on the Amex for the five trading days immediately
preceding the Closing Date.
"Other Property" shall have the meaning set forth in Section 4.4.
"Outstanding" shall mean, when used with reference to Common Stock, at any
date as of which the number of shares thereof is to be determined, all issued
shares of Common Stock, except shares then owned or held by or for the account
of the Company or any subsidiary thereof, and shall include all shares issuable
in respect of outstanding scrip or any certificates representing fractional
interests in shares of Common Stock.
"Person" shall mean any individual, sole proprietorship, partnership, joint
venture, trust, incorporated organization, association, corporation,
institution, public benefit corporation, entity or government (whether federal,
state, county, city, municipal or otherwise, including, without limitation, any
instrumentality, division, agency, body or department thereof).
"Registration Rights Agreement" shall mean the Registration Rights
Agreement dated as of a date even herewith between the Company and The Shaar
Fund Ltd., as it may be amended from time to time.
"Restricted Common Stock" shall mean shares of Common Stock which are, or
which upon their issuance on their exercise of this Warrant would be, evidenced
by a certificate bearing the restrictive legend set forth in Section 9.1(a).
"Securities Act" shall mean the Securities Act of 1933, as amended, or any
successor federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
-3-
<PAGE>
"Securities Purchase Agreement" shall mean the Securities Purchase
Agreement dated as of a date even herewith between the Company and The Shaar
Fund Ltd., as it may be amended from time to time.
"Transfer" shall mean any disposition of any Warrant or Warrant Stock or of
any interest in either thereof, which would constitute a sale thereof within the
meaning of the Securities Act.
"Transfer Notice" shall have the meaning set forth in Section 9.2.
"Warrant Price" shall mean an amount equal to (i) the number of shares of
Common Stock being purchased upon exercise of this Warrant pursuant to Section
2.1, multiplied by (ii) the Current Warrant Price as of the date of such
exercise.
"Warrant Stock" shall mean the shares of Common Stock purchased by the
holders of the Warrants upon the exercise thereof.
"Warrants" shall mean this Warrant and all warrants issued upon transfer,
division or combination of, or in substitution for, any thereof. All Warrants
shall at all times be identical as to terms and conditions and date, except as
to the number of shares of Common Stock for which they may be exercised.
2. Exercise of Warrant
2.1 Manner of Exercise
From and after September 30, 2000 and until 5:00 p.m., New York time, on
the Expiration Date, Holder may exercise this Warrant, on any Business Day, for
all or any part of the number of shares of Common Stock purchasable hereunder.
In order to exercise this Warrant, in whole or in part, Holder shall
deliver to the Company at its principal office at 150 East 58th Street, Suite
3400, New York, New York 10155, or at the office or agency designated by the
Company pursuant to Section 12, (i) a written notice of Holder's election to
exercise this Warrant, which notice shall specify the number of shares of Common
Stock to be purchased, (ii) to the extent such exercise is not being effected
through a Cashless Exercise, payment of the Warrant Price in cash or wire
transfer or cashier's check drawn on a United States bank and (iii) this
Warrant. Such notice shall be substantially in the form of the subscription form
appearing at the end of this Warrant as Exhibit A, duly executed by Holder or
its agent or attorney. Upon receipt of the items referred to in clauses (i),
(ii) and (iii) above, the Company shall, as promptly as practicable, and in any
event within five Business Days thereafter, execute or cause to be executed and
deliver or cause to be delivered to Holder a certificate or certificates
representing the aggregate number of full shares of Common Stock issuable upon
such exercise, together with cash in lieu of any fraction of a share, as
hereinafter provided. The stock certificate or certificates so delivered shall
be, to the extent possible, in such denomination or denominations as Holder
shall request in the notice and shall be registered in the name of Holder or,
subject to Section 9, such other name as shall be designated in the notice.
-4-
<PAGE>
This Warrant shall be deemed to have been exercised and such certificate or
certificates shall be deemed to have been issued, and Holder or any other Person
so designated to be named therein shall be deemed to have become a holder of
record of such shares for all purposes, as of the date the notice, together with
the cash or check or checks and this Warrant, is received by the Company as
described above and all taxes required to be paid by Holder, if any, pursuant to
Section 2.2 prior to the issuance of such shares have been paid. If this Warrant
shall have been exercised in part, the Company shall, at the time of delivery of
the certificate or certificates representing Warrant Stock, deliver to Holder a
new Warrant evidencing the rights of Holder to purchase the unpurchased shares
of Common Stock called for by this Warrant, which new Warrant shall in all other
respects be identical with this Warrant, or, at the request of Holder,
appropriate notation may be made on this Warrant and the same returned to
Holder. Notwithstanding any provision herein to the contrary, the Company shall
not be required to register shares in the name of any Person who acquired this
Warrant (or part hereof) or any Warrant Stock otherwise than in accordance with
this Warrant.
Simultaneously with the exercise of this Warrant, payment in full of the
Warrant Price shall be made, at the option of the Holder, (i) by payment of the
Warrant Price in cash or by wire transfer or cashier's check drawn on a United
States bank, (ii) through a net exercise without payment of the Warrant Price in
cash by providing notice to the Company of the Holder's election to receive a
number of shares of Common Stock in a Cashless Exercise equal to the product of
(1) the number of shares for which such Warrant is exercisable with payment in
cash of the Warrant Price as of the date of exercise and (2) the Cashless
Exercise Ratio or (iii) by any combination of clauses (i) and (ii). For purposes
of this Agreement, the "Cashless Exercise Ratio" shall equal a fraction, the
numerator of which is the excess of the Current Market Price per share of the
Common Stock on the date of exercise over the Current Warrant Price as of the
date of exercise, and the denominator of which is the Current Market Price per
share of the Common Stock on the date of exercise. An exercise of a Warrant in
accordance with clause (ii) above is herein called a "Cashless Exercise."
Following a Cashless Exercise, this Warrant shall be canceled in all respects
with regard to (a) the number of shares of Common Stock issued in accordance
with the Cashless Exercise plus (b) the number of shares used as consideration
for the Cashless Exercise.
2.2 Payment of Taxes and Charges
All shares of Common Stock issuable upon the exercise of this Warrant
pursuant to the terms hereof shall be validly issued, fully paid and
nonassessable, freely tradable and without any preemptive rights. The Company
shall pay all expenses in connection with, and all taxes and other governmental
charges that may be imposed with respect to, the issuance or delivery thereof,
unless such tax or charge is imposed by law upon Holder, in which case such
taxes or charges shall be paid by Holder. The Company shall not be required,
however, to pay any tax or other charge imposed in connection with any transfer
involved in the issuance of any certificate for shares of Common Stock issuable
upon exercise of this Warrant in any name other than that of Holder, and in such
case the Company shall not be required to issue or deliver any stock certificate
until such tax or other charge has been paid or it has been established to the
satisfaction of the Company that no such tax or other charge is due.
-5-
<PAGE>
2.3 Fractional Shares
The Company shall not be required to issue a fractional share of Common
Stock upon exercise of any Warrant. As to any fraction of a share which Holder
would otherwise be entitled to purchase upon such exercise, the Company shall
pay a cash adjustment in respect of such final fraction in an amount equal to
the same fraction of the Market Price per share of Common Stock as of the
Closing Date.
2.4 Continued Validity
A holder of shares of Common Stock issued upon the exercise of this
Warrant, in whole or in part (other than a holder who acquires such shares after
the same have been publicly sold pursuant to a Registration Statement under the
Securities Act or sold pursuant to Rule 144 thereunder) shall continue to be
entitled with respect to such shares to all rights to which it would have been
entitled as Holder under Sections 9, 10 and 14 of this Warrant. The Company
will, at the time of exercise of this Warrant, in whole or in part, upon the
request of Holder, acknowledge in writing, in form reasonably satisfactory to
Holder, its continuing obligation to afford Holder all such rights; provided,
however, that if Holder shall fail to make any such request, such failure shall
not affect the continuing obligation of the Company to afford to Holder all such
rights.
3. Transfer, Division and Combination
3.1 Transfer
Subject to compliance with Section 9, transfer of this Warrant and all
rights hereunder, in whole or in part, shall be registered on the books of the
Company to be maintained for such purpose, upon surrender of this Warrant at the
principal office of the Company referred to in Section 2.1 or the office or
agency designated by the Company pursuant to Section 12, together with a written
assignment of this Warrant substantially in the form of Exhibit B hereto duly
executed by Holder or its agent or attorney and funds sufficient to pay any
transfer taxes payable upon the making of such transfer. Upon such surrender
and, if required, such payment, the Company shall, subject to Section 9, execute
and deliver a new Warrant or Warrants in the name of the assignee or assignees
and in the denomination specified in such instrument of assignment, and shall
issue to the assignor a new Warrant evidencing the portion of this Warrant not
so assigned, and this Warrant shall promptly be canceled. A Warrant, if properly
assigned in compliance with Section 9, may be exercised by a new Holder for the
purchase of shares of Common Stock without having a new warrant issued.
3.2 Division and Combination
Subject to Section 9, this Warrant may be divided or combined with other
Warrants upon presentation hereof at the aforesaid office or agency of the
Company, together with a written notice specifying the names and denominations
in which new Warrants are to be issued, signed by Holder or its agent or
attorney. Subject to compliance with Sections 3.1 and 9, as to any transfer
which may be involved in such division or combination, the Company shall
-6-
<PAGE>
execute and deliver a new Warrant or Warrants in exchange for the Warrant or
Warrants to be divided or combined in accordance with such notice.
3.3 Expenses
The Company shall prepare, issue and deliver at its own expense (other than
transfer taxes) the new Warrants or Warrants under this Section 3.
3.4 Maintenance of Books
The Company agrees to maintain, at its aforesaid office or agency, books
for the registration and the registration of transfer of the Warrants.
4. Adjustments
The number of shares of Common Stock for which this Warrant is exercisable,
or the price at which such shares may be purchased upon exercise of this
Warrant, shall be subject to adjustment from time to time as set forth in this
Section 4. The Company shall give Holder notice of any event described below
which requires an adjustment pursuant to this Section 4 at the time of such
event.
4.1 Stock Dividends, Subdivisions and Combinations
If at any time the Company shall:
(a) take a record of the holders of its Common Stock for the purpose of
entitling them to receive a dividend payable in, or other distribution of,
Additional Shares of Common Stock;
(b) subdivide its outstanding shares of Common Stock into a larger number
of shares of Common Stock; or
(c) combine its outstanding shares of Common Stock into a smaller number of
shares of Common Stock;
then (i) the number of shares of Common Stock for which this Warrant is
exercisable immediately after the occurrence of any such event shall be adjusted
to equal the number of shares of Common Stock which a record holder of the same
number of shares of Common Stock for which this Warrant is exercisable
immediately prior to the occurrence of such event would own or be entitled to
receive after the happening of such event, and (ii) the Current Warrant Price
shall be adjusted to equal (A) the Current Warrant Price multiplied by the
number of shares of Common Stock for which this Warrant is exercisable
immediately prior to the adjustment divided by (B) the number of shares for
which this Warrant is exercisable immediately after such adjustment.
-7-
<PAGE>
4.2 Certain Other Distributions
If at any time the Company shall take a record of the holders of its Common
Stock for the purpose of entitling them to receive any dividend or other
distribution of:
(a) cash;
(b) any evidences of its indebtedness, any shares of its stock or any other
securities or property of any nature whatsoever (other than cash, Convertible
Securities or Additional Shares of Common Stock); or
(c) any warrants or other rights to subscribe for or purchase any evidences
of its indebtedness, any shares of its stock or any other securities or property
of any nature whatsoever (other than cash, Convertible Securities or Additional
Shares of Common Stock);
then Holder shall be entitled to receive such dividend or distribution as if
Holder had exercised the Warrant. A reclassification of the Common Stock (other
than a change in par value, or from par value to no par value or from no par
value to par value) into shares of Common Stock and shares of any other class of
stock shall be deemed a distribution by the Company to the holders of its Common
Stock of such shares of such other class of stock within the meaning of this
Section 4.2 and, if the outstanding shares of Common Stock shall be changed into
a larger or smaller number of shares of Common Stock as a part of such
reclassification, such change shall be deemed a subdivision or combination, as
the case may be, of the outstanding shares of Common Stock within the meaning of
Section 4.1.
4.3 Other Provisions Applicable to Adjustments under this Section
The following provisions shall be applicable to the making of adjustments
of the number of shares of Common Stock for which this Warrant is exercisable
and the Current Warrant Price provided for in this Section 4:
(a) When Adjustments to be Made. The adjustments required by this Section 4
shall be made whenever and as often as any specified event requiring an
adjustment shall occur. For the purpose of any adjustment, any specified event
shall be deemed to have occurred at the close of business on the date of its
occurrence.
(b) Fractional Interests. In computing adjustments under this Section 4,
fractional interests in Common Stock shall be taken into account to the nearest
1/10th of a share.
(c) When Adjustment not Required. If the Company shall take a record of the
holders of its Common Stock for the purpose of entitling them to receive a
dividend or distribution or subscription or purchase rights and shall,
thereafter and before the distribution to stockholders thereof, legally abandon
its plan to pay or deliver such dividend, distribution, subscription or purchase
rights, then thereafter no adjustment shall be required by reason of the taking
of such record and any such adjustment previously made in respect thereof shall
be rescinded and annulled.
-8-
<PAGE>
(d) Challenge to Good Faith Determination. Whenever the Board of Directors
of the Company shall be required to make a determination in good faith of the
fair value of any item under this Section 4, such determination may be
challenged in good faith by the Holder, and any dispute shall be resolved by an
investment banking firm of recognized national standing selected by the Company
and acceptable to Holder.
4.4 Reorganization, Reclassification, Merger, Consolidation or Disposition
of Assets
In case the Company shall reorganize its capital, reclassify its capital
stock, consolidate or merge with or into another Person (where the Company is
not the survivor or where there is a change in or distribution with respect to
the Common Stock of the Company), or sell, convey, transfer or otherwise dispose
of all or substantially all its property, assets or business to another Person,
or effectuate a transaction or series of related transactions in which more than
50% of the voting power of the Company is disposed of (each, a "Fundamental
Corporate Change") and, pursuant to the terms of such Fundamental Corporate
Change, shares of common stock of the successor or acquiring corporation, or any
cash, shares of stock or other securities or property of any nature whatsoever
(including warrants or other subscription or purchase rights) in addition to or
in lieu of common stock of the successor or acquiring corporation ("Other
Property"), are to be received by or distributed to the holders of Common Stock
of the Company, then Holder shall have the right thereafter to receive, upon
exercise of the Warrant, such number of shares of common stock of the successor
or acquiring corporation or of the Company, if it is the surviving corporation,
and Other Property as is receivable upon or as a result of such Fundamental
Corporate Change by a holder of the number of shares of Common Stock for which
this Warrant is exercisable immediately prior to such Fundamental Corporate
Change. In case of any such Fundamental Corporate Change, the successor or
acquiring corporation (if other than the Company) shall expressly assume the due
and punctual observance and performance of each and every covenant and condition
of this Warrant to be performed and observed by the Company and all the
obligations and liabilities hereunder, subject to such modifications as may be
deemed appropriate (as determined by resolution of the Board of Directors of the
Company) in order to provide for adjustments of shares of Common Stock for which
this Warrant is exercisable which shall be as nearly equivalent as practicable
to the adjustments provided for in this Section 4. For purposes of this Section
4.4, "common stock of the successor or acquiring corporation" shall include
stock of such corporation of any class which is not preferred as to dividends or
assets over any other class of stock of such corporation and which is not
subject to redemption and shall also include any evidences of indebtedness,
shares of stock or other securities which are convertible into or exchangeable
for any such stock, either immediately or upon the arrival of a specified date
or the happening of a specified event and any warrants or other rights to
subscribe for or purchase any such stock. The foregoing provisions of this
Section 4.4 shall similarly apply to successive Fundamental Corporate Change.
4.5 Other Action Affecting Common Stock
In case at any time or from time to time the Company shall take any action
in respect of its Common Stock, other than any action described in this Section
4, which would have a materially adverse effect upon the rights of Holder, the
number of shares of Common
-9-
<PAGE>
Stock and/or the purchase price thereof shall be adjusted in such manner as may
be equitable in the circumstances, as determined in good faith by the Board of
Directors of the Company.
4.6 Certain Limitations
Notwithstanding anything herein to the contrary, the Company agrees not to
enter into any transaction which, by reason of any adjustment hereunder, would
cause the Current Warrant Price to be less than the par value per share of
Common Stock.
5. Notices to Holder
5.1 Notice of Adjustments
Whenever the number of shares of Common Stock for which this Warrant is
exercisable, or whenever the price at which a share of such Common Stock may be
purchased upon exercise of the Warrants, shall be adjusted pursuant to Section
4, the Company shall forthwith prepare a certificate to be executed by the chief
financial officer of the Company setting forth, in reasonable detail, the event
requiring the adjustment and the method by which such adjustment was calculated
(including a description of the basis on which the Board of Directors of the
Company determined the fair value of any evidences of indebtedness, shares of
stock, other securities or property or warrants or other subscription or
purchase rights referred to in Section 4.2), specifying the number of shares of
Common Stock for which this Warrant is exercisable and (if such adjustment was
made pursuant to Section 4.4 or 4.5) describing the number and kind of any other
shares of stock or Other Property for which this Warrant is exercisable, and any
change in the purchase price or prices thereof, after giving effect to such
adjustment or change. The Company shall promptly cause a signed copy of such
certificate to be delivered to the Holder in accordance with Section 14.2. The
Company shall keep at its office or agency designated pursuant to Section 12
copies of all such certificates and cause the same to be available for
inspection at said office during normal business hours by the Holder or any
prospective purchaser of a Warrant designated by Holder.
5.2 Notice of Corporate Action
If at any time:
(a) the Company shall take a record of the holders of its Common Stock for
the purpose of entitling them to receive a dividend or other distribution, or
any right to subscribe for or purchase any evidences of its indebtedness, any
shares of stock of any class or any other securities or property, or to receive
any other right; or
(b) there shall be any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the Company or any
consolidation or merger of the Company with, or any sale, transfer or other
disposition of all or substantially all the property, assets or business of the
Company to, another corporation; or
-10-
<PAGE>
(c) there shall be a voluntary or involuntary dissolution, liquidation or
winding up of the Company;
then, in any one or more of such cases, the Company shall give to Holder (i) at
least 30 days' prior written notice of the date on which a record date shall be
selected for such dividend, distribution or right or for determining rights to
vote in respect of any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or winding
up, and (ii) in the case of any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or winding
up, at least 30 days' prior written notice of the date when the same shall take
place. Such notice in accordance with the foregoing clause also shall specify
(i) the date on which any such record is to be taken for the purpose of such
dividend, distribution or right, the date on which the holders of Common Stock
shall be entitled to any such dividend, distribution or right, and the amount
and character thereof, and (ii) the date on which any such reorganization,
reclassification, merger, consolidation, sale, transfer, disposition,
dissolution, liquidation or winding up is to take place and the time, if any
such time is to be fixed, as of which the holders of Common Stock shall be
entitled to exchange their shares of Common Stock for securities or other
property deliverable upon such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or winding
up. Each such written notice shall be sufficiently given if addressed to Holder
at the last address of Holder appearing on the books of the Company and
delivered in accordance with Section 14.2.
6. No Impairment
The Company shall not by any action, including, without limitation,
amending its certificate of incorporation or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issuance or sale of
securities or other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of all such
actions as may be necessary or appropriate to protect the rights of Holder
against impairment. Without limiting the generality of the foregoing, the
Company will (a) not increase the par value of any shares of Common Stock
receivable upon the exercise of this Warrant above the amount payable therefor
upon such exercise immediately prior to such increase in par value, (b) take all
such action as may be necessary or appropriate in order that the Company may
validly and legally issue fully paid and nonassessable shares of Common Stock
upon the exercise of this Warrant, and (c) use its best efforts to obtain all
such authorizations, exemptions or consents from any public regulatory body
having jurisdiction thereof as may be necessary to enable the Company to perform
its obligations under this Warrant.
Upon the request of Holder, the Company will at any time during the period
this Warrant is outstanding acknowledge in writing, in form satisfactory to
Holder, the continuing validity of this Warrant and the obligations of the
Company hereunder.
-11-
<PAGE>
7. Reservation and Authorization of Common Stock
From and after the Closing Date, the Company shall at all times reserve and
keep available for issuance upon the exercise of Warrants such number of its
authorized but unissued shares of Common Stock as will be sufficient to permit
the exercise in full of all outstanding Warrants. All shares of Common Stock
which shall be so issuable, when issued upon exercise of any Warrant and payment
therefor in accordance with the terms of such Warrant, shall be duly and validly
issued and fully paid and nonassessable and not subject to preemptive rights.
Before taking any action which would cause an adjustment reducing the
Current Warrant Price below the then par value, if any, of the shares of Common
Stock issuable upon exercise of the Warrants, the Company shall take any
corporate action which may be necessary in order that the Company may validly
and legally issue fully paid and nonassessable shares of such Common Stock at
such adjusted Current Warrant Price.
Before taking any action which would result in an adjustment in the number
of shares of Common Stock for which this Warrant is exercisable or in the
Current Warrant Price, the Company shall obtain all such authorizations or
exemptions thereof, or consents thereto, as may be necessary from any public
regulatory body or bodies having jurisdiction thereof.
8. Taking of Record; Stock and Warrant Transfer Books
In the case of all dividends or other distributions by the Company to the
holders of its Common Stock with respect to which any provision of Section 4
refers to the taking of record of such holders, the Company will in each case
take such a record and will take such record as of the close of business on a
Business Day. The Company will not at any time, except upon dissolution,
liquidation or winding up of the Company, close its stock transfer books or
Warrant transfer books so as to result in preventing or delaying the exercise or
transfer of any Warrant.
9. Restrictions on Transferability
The Warrants and the Warrant Stock shall not be transferred, hypothecated
or assigned before satisfaction of the conditions specified in this Section 9,
which conditions are intended to ensure compliance with the provisions of the
Securities Act with respect to the Transfer of any Warrant or any Warrant Stock.
Holder, by acceptance of this Warrant, agrees to be bound by the provisions of
this Section 9.
9.1 Restrictive Legend
(a) Holder, by accepting this Warrant and any Warrant Stock agrees that
this Warrant and the Warrant Stock issuable upon exercise hereof may not be
assigned or otherwise transferred unless and until (i) the Company has received
an opinion of counsel for Holder that such securities may be sold pursuant to an
exemption from registration under the Securities Act or (ii) a registration
statement relating to such securities has been filed by the Company and declared
effective by the Commission.
-12-
<PAGE>
Each certificate for Warrant Stock issuable hereunder shall bear a legend
as follows until such securities have been sold pursuant to an effective
registration statement under the Securities Act:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY
STATE, AND ARE BEING OFFERED AND SOLD PURSUANT TO AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH LAWS. THESE
SECURITIES MAY NOT BE SOLD OR TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OR SUCH
OTHER LAWS."
(b) Except as otherwise provided in this Section 9, the Warrant shall be
stamped or otherwise imprinted with a legend in substantially the following
form:
"THIS COMMON STOCK PURCHASE WARRANT AND THE SECURITIES REPRESENTED HEREBY
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
MAY NOT BE TRANSFERRED IN VIOLATION OF SUCH ACT, THE RULES AND REGULATIONS
THEREUNDER OR THE PROVISIONS OF THIS COMMON STOCK PURCHASE WARRANT."
9.2 Notice of Proposed Transfers
Prior to any Transfer or attempted Transfer of any Warrants or any shares
of Restricted Common Stock, the Holder shall give ten days' prior written notice
(a "Transfer Notice") to the Company of Holder's intention to effect such
Transfer, describing the manner and circumstances of the proposed Transfer, and
obtain from counsel to Holder who shall be reasonably satisfactory to the
Company, an opinion that the proposed Transfer of such Warrants or such
Restricted Common Stock may be effected without registration under the
Securities Act. After receipt of the Transfer Notice and opinion, the Company
shall, within five days thereof, notify the Holder as to whether such opinion is
reasonably satisfactory and, if so, such holder shall thereupon be entitled to
Transfer such Warrants or such Restricted Common Stock, in accordance with the
terms of the Transfer Notice. Each certificate, if any, evidencing such shares
of Restricted Common Stock issued upon such Transfer shall bear the restrictive
legend set forth in Section 9.1(a), and the Warrant issued upon such Transfer
shall bear the restrictive legend set forth in Section 9.1(b), unless in the
opinion of such counsel such legend is not required in order to ensure
compliance with the Securities Act. Holder shall not be entitled to Transfer
such Warrants or such Restricted Common Stock until receipt of notice from the
Company under this Section 9.2 that such opinion is reasonably satisfactory.
-13-
<PAGE>
9.3 Required Registration
Pursuant to the terms and conditions set forth in Registration Rights
Agreement, the Company shall prepare and file with the Commission not later than
the 60th day after the Closing Date, a Registration Statement relating to the
offer and sale of the Common Stock issuable upon exercise of the Warrants and
shall use its best efforts to cause the Commission to declare such Registration
Statement effective under the Securities Act as promptly as practicable but no
later than September 30, 2000.
9.4 Termination of Restrictions
Notwithstanding the foregoing provisions of Section 9, the restrictions
imposed by this Section upon the transferability of the Warrants, the Warrant
Stock and the Restricted Common Stock (or Common Stock issuable upon the
exercise of the Warrants) and the legend requirements of Section 9.1 shall
terminate as to any particular Warrant or share of Warrant Stock or Restricted
Common Stock (or Common Stock issuable upon the exercise of the Warrants) (i)
when and so long as such security shall have been effectively registered under
the Securities Act and disposed of pursuant thereto or (ii) when the Company
shall have received an opinion of counsel reasonably satisfactory to it that
such shares may be transferred without registration thereof under the Securities
Act. Whenever the restrictions imposed by Section 9 shall terminate as to this
Warrant, as hereinabove provided, the Holder hereof shall be entitled to receive
from the Company upon written request of the Holder, at the expense of the
Company, a new Warrant bearing the following legend in place of the restrictive
legend set forth hereon:
"THE RESTRICTIONS ON TRANSFERABILITY OF THE WITHIN WARRANT CONTAINED IN
SECTION 9 HEREOF TERMINATED ON __________, _____, AND ARE OF NO FURTHER
FORCE AND EFFECT."
All Warrants issued upon registration of transfer, division or combination of,
or in substitution for, any Warrant or Warrants entitled to bear such legend
shall have a similar legend endorsed thereon. Whenever the restrictions imposed
by this Section shall terminate as to any share of Restricted Common Stock, as
hereinabove provided, the holder thereof shall be entitled to receive from the
Company, at the Company's expense, a new certificate representing such Common
Stock not bearing the restrictive legend set forth in Section 9.1(a).
9.5 Listing on Securities Exchange
If the Company shall list any shares of Common Stock on any securities
exchange or quotation system, it will, at its expense, list thereon, maintain
and, when necessary, increase such listing of, all shares of Common Stock issued
or, to the extent permissible under the applicable securities exchange rules,
issuable upon the exercise of this Warrant so long as any shares of Common Stock
shall be so listed during any such Exercise Period.
-14-
<PAGE>
10. Supplying Information
The Company shall cooperate with Holder in supplying such information as
may be reasonably necessary for Holder to complete and file any information
reporting forms presently or hereafter required by the Commission as a condition
to the availability of an exemption from the Securities Act for the sale of any
Warrant or Restricted Common Stock.
11. Loss or Mutilation
Upon receipt by the Company from Holder of evidence reasonably satisfactory
to it of the ownership of and the loss, theft, destruction or mutilation of this
Warrant and indemnity reasonably satisfactory to it (it being understood that
the written agreement of the Holder shall be sufficient indemnity), and in case
of mutilation upon surrender and cancellation hereof, the Company will execute
and deliver in lieu hereof a new Warrant of like tenor to Holder; provided, in
the case of mutilation no indemnity shall be required if this Warrant in
identifiable form is surrendered to the Company for cancellation.
12. Office of the Company
As long as any of the Warrants remain outstanding, the Company shall
maintain an office or agency (which may be the principal executive offices of
the Company) where the Warrants may be presented for exercise, registration of
transfer, division or combination as provided in this Warrant.
13. Limitation of Liability
No provision hereof, in the absence of affirmative action by Holder to
purchase shares of Common Stock, and no enumeration herein of the rights or
privileges of Holder hereof, shall give rise to any liability of Holder for the
purchase price of any Common Stock or as a stockholder of the Company, whether
such liability is asserted by the Company or by creditors of the Company.
14. Miscellaneous
14.1 Nonwaiver and Expenses
No course of dealing or any delay or failure to exercise any right
hereunder on the part of Holder shall operate as a waiver of such right or
otherwise prejudice Holder's rights, powers or remedies. If the Company fails to
make, when due, any payments provided for hereunder, or fails to comply with any
other provision of this Warrant, the Company shall pay to Holder such amounts as
shall be sufficient to cover any costs and expenses including, without
limitation, reasonable attorneys' fees, including those of appellate
proceedings, incurred by Holder in collecting any amounts due pursuant hereto or
in otherwise enforcing any of its rights, powers or remedies hereunder.
-15-
<PAGE>
14.2 Notice Generally
Except as may be otherwise provided herein, any notice or other
communication or delivery required or permitted hereunder shall be in writing
and shall be delivered personally or sent by certified mail, postage prepaid, or
by a nationally recognized overnight courier service, and shall be deemed given
when so delivered personally or by overnight courier service, or, if mailed,
three days after the date of deposit in the United States mails, as follows:
(a) if to the Company, to:
Commodore Applied Technologies, Inc.
150 East 58th Street, Suite 3400
New York, NY 10155
Attention: Paul E. Hannesson
(212) 308-5800
(212) 752-0731 (Fax)
with a copy to:
Greenberg Traurig, LLP
200 Park Avenue
New York, NY 10166
Attention: Stephen A. Weiss, Esq.
(212) 801-9253
(212) 801-6400 (Fax)
(b) if to the Holder, to:
The Shaar Fund Ltd.,
c/o Levinson Capital Management
2 World Trade Center, Suite 1820
New York, NY 10048
Attention: Samuel Levinson
(212) 432-7711
(212) 432-7771 (Fax)
with a copy to:
Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, NY 10038
Attention: Dennis J. Block, Esq.
(212) 504-5555
(212) 504-5557 (Fax)
The Company or the Holder may change the foregoing address by notice given
pursuant to this Section 14.2.
-16-
<PAGE>
14.3 Indemnification
The Company agrees to indemnify and hold harmless Holder from and against
any liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, claims, costs, attorneys' fees, expenses and disbursements of any kind
which may be imposed upon, incurred by or asserted against Holder in any manner
relating to or arising out of any failure by the Company to perform or observe
in any material respect any of its covenants, agreements, undertakings or
obligations set forth in this Warrant; provided, however, that the Company will
not be liable hereunder to the extent that any liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, claims, costs, attorneys' fees,
expenses or disbursements are found in a final nonappealable judgment by a court
to have resulted from Holder's gross negligence, bad faith or willful misconduct
in its capacity as a stockholder or warrantholder of the Company.
14.4 Remedies
Holder in addition to being entitled to exercise all rights granted by law,
including recovery of damages, will be entitled to specific performance of its
rights under Section 9 of this Warrant. The Company agrees that monetary damages
would not be adequate compensation for any loss incurred by reason of a breach
by it of the provisions of Section 9 of this Warrant and hereby agrees to waive
the defense in any action for specific performance that a remedy at law would be
adequate.
14.5 Successors and Assigns
Subject to the provisions of Sections 3.1 and 9, this Warrant and the
rights evidenced hereby shall inure to the benefit of and be binding upon the
successors of the Company and the successors and assigns of Holder. The
provisions of this Warrant are intended to be for the benefit of all Holders
from time to time of this Warrant and, with respect to Section 9 hereof, holders
of Warrant Stock, and shall be enforceable by any such Holder or holder of
Warrant Stock.
14.6 Amendment
This Warrant and all other Warrants may be modified or amended or the
provisions hereof waived with the written consent of the Company and Holder.
14.7 Severability
Wherever possible, each provision of this Warrant shall be interpreted in
such manner as to be effective and valid under applicable law, but if any
provision of this Warrant shall be prohibited by or invalid under applicable
law, such provision shall only be ineffective to the extent of such prohibition
or invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Warrant.
-17-
<PAGE>
14.8 Headings
The headings used in this Warrant are for the convenience of reference only
and shall not, for any purpose, be deemed a part of this Warrant.
14.9 Governing Law
This Warrant shall be governed by the laws of the State of New York,
without regard to the provisions thereof relating to conflicts of law.
[SIGNATURE PAGE FOLLOWS.]
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed
and its corporate seal to be impressed hereon and attested by its Secretary or
an Assistant Secretary.
Dated: March 15, 2000
Commodore Applied Technologies,
Inc.
By: /s/ PAUL HANNESSON
-------------------------------------
Name: Paul Hannesson
Title: President
Attest:
By:___________________________________
Name:
Title:
<PAGE>
EXHIBIT A
SUBSCRIPTION FORM
[To be executed only upon exercise of Warrant]
The undersigned registered owner of this Warrant irrevocably exercises this
Warrant for the purchase of __________ shares of Common Stock of Commodore
Applied Technologies, Inc. and herewith makes payment therefor, all at the price
and on the terms and conditions specified in this Warrant and requests that
certificates for the shares of Common Stock hereby purchased (and any securities
or other property issuable upon such exercise) be issued in the name of and
delivered to
- --------------------------------------------------------------------------------
whose address is
- --------------------------------------------------------------------------------
and, if such shares of Common Stock shall not include all of the shares of
Common Stock issuable as provided in this Warrant, that a new Warrant of like
tenor and date for the balance of the shares of Common Stock issuable hereunder
be delivered to the undersigned.
------------------------------------
(Name of Registered Owner)
------------------------------------
(Signature of Registered Owner)
------------------------------------
(Street Address)
------------------------------------
(City) (State) (Zip Code)
A-1
<PAGE>
Notice: The signature on this subscription
must correspond with the name as written
upon the face of the within Warrant in
every particular, without alteration or
enlargement or any change whatsoever.
A-2
<PAGE>
EXHIBIT B
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of this Warrant hereby
sells, assigns and transfers unto the Assignee named below all of the rights of
the undersigned under this Warrant, with respect to the number of shares of
Common Stock set forth below:
No. of Shares of
Name and Address of Assignee Common Stock
---------------------------- ------------
and does hereby irrevocably constitute and appoint
- --------------------------------------------------------------------------------
attorney-in-fact to register such transfer on the books of Commodore
Applied Technologies, Inc. maintained for the purpose, with full power
of substitution in the premises.
Dated:_________________________________
-----------------------------------
(Print Name)
------------------------------------
(Signature)
------------------------------------
(Print Name of Witness)
------------------------------------
(Witness's Signature)
B-1
<PAGE>
Notice: The signature on this assignment
must correspond with the name as written
upon the face of the within Warrant in
every particular, without alteration or
enlargement or any change whatsoever.
B-2
CERTIFICATE OF DESIGNATION
OF
SERIES F CONVERTIBLE PREFERRED STOCK
OF
COMMODORE APPLIED TECHNOLOGIES, INC.
------------------------------------
Pursuant to Section 151 of the
General Corporation Law of the
State of Delaware
------------------------------------
Commodore Applied Technologies, Inc., a corporation organized and existing
under the General Corporation Law of the State of Delaware (the "Corporation"),
hereby certifies that the following resolutions were adopted by the Board of
Directors of the Corporation on March 15, 2000 pursuant to authority of the
Board of Directors as required by Section 151 of the General Corporation Law of
the State of Delaware:
RESOLVED, that pursuant to the authority granted to and vested in the Board
of Directors of this Corporation (the "Board of Directors" or the "Board") in
accordance with the provisions of its Certificate of Incorporation, the Board of
Directors hereby authorizes a series of the Corporation's previously authorized
Preferred Stock, par value $0.001 per share (the "Preferred Stock"), and hereby
states the designation and number of shares, and fixes the relative rights,
preferences, privileges, powers and restrictions thereof as follows:
Series F Convertible Preferred Stock:
ARTICLE 1
DEFINITIONS
The terms defined in this Article whenever used in this Certificate of
Designation have the following respective meanings:
(a) "Additional Capital Shares" has the meaning set forth in Section
6.1(c).
(b) "Affiliate" has the meaning ascribed to such term in Rule 12b-2 under
the Securities Exchange Act of 1934, as amended.
(c) "Amex" means the American Stock Exchange.
(d) "Business Day" means a day other than Saturday, Sunday or any day on
which banks located in the State of New York are authorized or obligated to
close.
(e) "Capital Shares" means the Common Shares and any other shares of any
other class or series of capital stock, whether now or hereafter authorized and
however
<PAGE>
designated, which have the right to participate in the distribution of earnings
and assets (upon dissolution, liquidation or winding-up) of the Corporation.
(f) "Closing Date" shall have the meaning set forth in the Securities
Purchase Agreement.
(g) "Common Shares" or "Common Stock" means shares of common stock, par
value $ 0.001 per share, of the Corporation.
(h) "Common Stock Issued at Conversion", when used with reference to the
securities issuable upon conversion of the Series F Preferred Stock, means all
Common Shares now or hereafter Outstanding and securities of any other class or
series into which the Series F Preferred Stock hereafter shall have been changed
or substituted, whether now or hereafter created and however designated.
(i) "Conversion Date" means any day on which all or any portion of shares
of the Series F Preferred Stock is converted in accordance with the provisions
hereof.
(j) "Conversion Notice" means a written notice of conversion substantially
in the form annexed hereto as Annex I.
(k) "Conversion Price" has the meaning set forth in Section 6.1.
(l) "Corporation" means Commodore Applied Technologies, Inc., a Delaware
corporation, and any successor or resulting corporation by way of merger,
consolidation, sale or exchange of all or substantially all of the Corporation's
assets, or otherwise.
(m) "Current Market Price" means on any date of determination the closing
price of a Common Share on such day as reported on the Amex; provided, if such
security is not listed or admitted to trading on the Amex, as reported on the
principal national security exchange or quotation system on which such security
is quoted or listed or admitted to trading, or, if not quoted or listed or
admitted to trading on any national securities exchange or quotation system, the
closing price of such security on the over-the-counter market on the day in
question as reported by Bloomberg LP, or a similar generally accepted reporting
service, as the case may be.
(n) "Default Dividend Rate" is equal to the Dividend Rate plus an
additional 4% per annum.
(o) "Dividend Period" means the quarterly period commencing on and
including the Issue Date or, if a dividend has previously been paid, the day
after the immediately preceding Dividend Payment Due Date and ending on and
including the immediately subsequent Dividend Payment Due Date.
(p) "Dividend Payment Due Date" means March 31, June 30, September 30 and
December 31 of each year.
-2-
<PAGE>
(q) "Dividend Rate" means 12% per annum, computed on the basis of a 360-day
year up to and including September 30, 2000 and thereafter 5% per annum,
computed on the basis of a 360-day period.
(r) "Holder" means The Shaar Fund Ltd., any successor thereto, or any
Person or Persons to whom the Series F Preferred Stock is subsequently
transferred in accordance with the provisions hereof.
(s) "Issue Date" means, as to any share of Series F Preferred Stock, the
date of issuance of such share.
(t) "Junior Securities" means all capital stock of the Corporation except
for the Series F Preferred Stock.
(u) "Liquidation Preference" means, with respect to a share of the Series F
Preferred Stock, an amount equal to the sum of (i) the Stated Value thereof,
plus (ii) an amount equal to 30% of such Stated Value, plus (iii) the aggregate
of all accrued and unpaid dividends (whether or not declared, whether or not
there were funds legally available for the payment of dividends and whether or
not a Dividend Payment Due Date has occurred since the last dividend payment) on
such share of Series F Preferred Stock until the most recent Dividend Payment
Due Date; provided that, in the event of an actual liquidation, dissolution or
winding up of the Corporation, the amount referred to in clause (iii) above
shall be calculated by including accrued and unpaid dividends to the actual date
of such liquidation, dissolution or winding up, rather than the Dividend Payment
Due Date referred to above.
(v) "Mandatory Conversion Date" has the meaning set forth in Section 6.8.
(w) "Market Price" per Common Share means the arithmetic mean of the
closing prices of the Common Shares as reported on the Amex for the ten Trading
Days during any Valuation Period; provided, if such security is not listed or
admitted to trading on the Amex, as reported on the principal national security
exchange or quotation system on which such security is quoted or listed or
admitted to trading, or, if not quoted or listed or admitted to trading on any
national securities exchange or quotation system, the closing price of such
security on the over-the-counter market on the day in question as reported by
Bloomberg LP, or a similar generally accepted reporting service, for the ten
Trading Days during any Valuation Period.
(x) "Optional Redemption Price" has the meaning set forth in Section 6.5.
(y) "Outstanding", when used with reference to Common Shares or Capital
Shares (collectively, "Shares"), means, on any date of determination, all issued
and outstanding Shares, and includes all such Shares issuable in respect of
outstanding scrip or any certificates representing fractional interests in such
Shares; provided, however, that any such Shares directly or indirectly owned or
held by or for the account of the Corporation or any Subsidiary of the
Corporation shall not be deemed "Outstanding" for purposes hereof.
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(z) "Person" means an individual, a corporation, a partnership, an
association, a limited liability company, an unincorporated business
organization, a trust or other entity or organization, and any government or
political subdivision or any agency or instrumentality thereof.
(aa) "Redemption Date" has the meaning set forth in Section 6.5.
(bb) "Registration Rights Agreement" means that certain Registration Rights
Agreement to be dated as of March 15, 2000 between the Corporation and The Shaar
Fund Ltd.
(cc) "SEC" means the United States Securities and Exchange Commission.
(dd) "Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC thereunder, all as in effect at the time.
(ee) "Securities Purchase Agreement" means that certain Securities Purchase
Agreement to be dated as of March 15, 2000 between the Corporation and The Shaar
Fund Ltd.
(ff) "Series E Certificate" means the Certificate of Designation of the
Corporation's Series E Convertible Preferred Stock dated November 4, 1999.
(gg) "Series F Preferred Shares" or "Series F Preferred Stock" means the
shares of Series F Convertible Preferred Stock of the Corporation or such other
convertible preferred stock of the Corporation as may be exchanged therefor.
(hh) "Stated Value" has the meaning set forth in Article 2.
(ii) "Subsidiary" means any entity of which securities or other ownership
interests having ordinary voting power to elect a majority of the board of
directors or other persons performing similar functions are owned directly or
indirectly by the Corporation.
(jj) "Trading Day" means any day on which (a) purchases and sales of
securities authorized for quotation on the Amex are reported thereon, (b) no
event which results in a material suspension or limitation of trading of the
Common Shares on the Amex has occurred and (c) at least one bid for the trading
of Common Shares is reported on the Amex.
(kk) "Valuation Event" has the meaning set forth in Section 6.1.
(ll) "Valuation Period" means the period of ten Trading Days immediately
preceding the Conversion Date or in the case of a Valuation Period utilized for
the purpose of Section 4(a)(iii) hereof, Valuation Period shall mean the date of
payment of a dividend in Common Stock; provided, however, that if a Valuation
Event occurs during a Valuation Period on a date less than five Trading Days
before the Conversion Date, the Valuation Period shall be extended until the
date five Trading Days after the occurrence of the Valuation Event.
All references to "cash" or "$" herein mean currency of the United States
of America.
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ARTICLE 2
DESIGNATION AND AMOUNT
The designation of this series, which consists of 266,700 shares of
Preferred Stock, shall be Series F Convertible Preferred Stock (the "Series F
Preferred Stock") and the stated value shall be $10 per share (the "Stated
Value").
ARTICLE 3
RANK
The Series F Preferred Stock shall rank prior to any other capital stock of
the Corporation.
ARTICLE 4
DIVIDENDS
(a) (i) The Holder shall be entitled to receive, out of funds legally
available for the payment of dividends, (x) dividends at the Dividend Rate
on the Stated Value of each share of Series F Preferred Stock on and as of
each Dividend Payment Due Date with respect to each Dividend Period and, in
addition, (y) a special dividend (the "Special Dividend") at the rate of
7.5% per annum (computed on the basis of a 360-day year) on the Stated
Value of each share of Series F Preferred Stock which shall accrue
commencing on September 30, 2000 until and including the date of payment
thereof and shall be due and payable on September 30, 2001; provided,
however, that no Special Dividend shall be paid in respect of any share of
Series F Preferred Stock which is converted into Common Stock pursuant to
Article 6 on or before September 30, 2001; and provided, further, that if
(X) any dividend which is not a Special Dividend is not paid in full on any
Dividend Payment Due Date or (Y) the Special Dividend is not paid in full
on September 30, 2001, dividends shall thereafter accrue and be payable at
the Default Dividend Rate on the Stated Value of each share of Series F
Preferred Stock until all accrued dividends are paid in full. Dividends on
the Series F Preferred Stock shall be cumulative from the date of issue,
whether or not declared for any reason, including if such declaration is
prohibited under any outstanding indebtedness or borrowings of the
Corporation or any of its Subsidiaries, or any other contractual provision
binding on the Corporation or any of its Subsidiaries, and whether or not
there shall be funds legally available for the payment thereof.
(i) Each dividend shall be payable in equal quarterly amounts on each
Dividend Payment Due Date, commencing June 30, 2000, to the Holders of
record of shares of the Series F Preferred Stock, as they appear on the
stock records of the Corporation at the close of business on such record
date, not more than 60 days or less than 10 days preceding the payment
dates thereof, as shall be fixed by the Board of Directors. Accrued and
unpaid dividends for any past Dividend Period may be declared and paid at
any time, without reference to any Dividend Payment Due Date, to Holders of
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record, not more than 15 days preceding the payment date thereof, as may be
fixed by the Board of Directors.
(ii) Dividends due hereunder shall be payable in cash; provided,
however, that at the option of the Corporation, such dividends shall be
paid either (x) in cash or (y) through the issuance of duly and validly
authorized and issued, fully paid and nonassessable, freely tradable shares
of the Common Stock valued at the Market Price and registered for resale in
the open market transactions on the Registration Statement (as defined in
the Registration Rights Agreement), which Registration Statement shall then
be effective under the Securities Act; provided, further, that if no funds
are legally available for the payment of cash dividends on the Series F
Preferred Stock, dividends shall be paid as provided in clause (y) above.
Notwithstanding the foregoing, until such Registration Statement has been
declared effective under the Securities Act by the SEC, payment of
dividends on the Series F Preferred Stock shall be in cash.
(b) Except as provided in Section 4(d) hereof, the Holder shall not be
entitled to any dividends in excess of the cumulative dividends, as herein
provided, on the Series F Preferred Stock.
(c) So long as any shares of the Series F Preferred Stock are outstanding,
no dividends shall be declared or paid or set apart for payment or other
distribution declared or made upon any Junior Securities, nor shall any Junior
Securities be redeemed, purchased or otherwise acquired (other than a
redemption, purchase or other acquisition of shares of Common Stock made for
purposes of an employee incentive or benefit plan (including a stock option
plan) of the Corporation or any Subsidiary) for any consideration by the
Corporation, directly or indirectly, nor shall any moneys be paid to or made
available for a sinking fund for the redemption of any shares of any Junior
Securities, unless in each case (i) the full cumulative dividends required to be
paid in cash on all outstanding shares of the Series F Preferred Stock shall
have been paid or set apart for payment for all past Dividend Periods with
respect to the Series F Preferred Stock and (ii) sufficient funds shall have
been paid or set apart for the payment of the dividend for the current Dividend
Period with respect to the Series F Preferred Stock.
(d) If the Corporation shall at any time or from time to time after the
Issue Date declare, order, pay or make a dividend or other distribution
(including, without limitation, any distribution of stock or other securities or
property or rights or warrants to subscribe for securities of the Corporation or
any of its Subsidiaries by way of dividend or spin-off) on shares of its Common
Stock, then, and in each such case, in addition to the dividend obligation of
the Corporation specified in Section 4(a) hereof, the Corporation shall declare,
order, pay and make the same dividend or distribution to each Holder of Series F
Preferred Stock as would have been made with respect to the number of Common
Shares the Holder would have received had it converted all of its Series F
Preferred Shares, and exercised the Warrant held by it in full for all the
Common Shares then underlying the Warrant, immediately prior to such dividend or
distribution.
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ARTICLE 5
LIQUIDATION PREFERENCE; MERGERS, CONSOLIDATIONS, ETC.
(a) If the Corporation shall commence a voluntary case under the Federal
bankruptcy laws or any other applicable Federal or state bankruptcy, insolvency
or similar law, or consent to the entry of an order for relief in an involuntary
case under any law or to the appointment of a receiver, liquidator, assignee,
custodian, trustee or sequestrator (or other similar official) of the
Corporation or of any substantial part of its property, or make an assignment
for the benefit of its creditors, or admit in writing its inability to pay its
debts generally as they become due, or if a decree or order for relief in
respect of the Corporation shall be entered by a court having jurisdiction in
the premises in an involuntary case under the Federal bankruptcy laws or any
other applicable Federal or state bankruptcy, insolvency or similar law
resulting in the appointment of a receiver, liquidator, assignee, custodian,
trustee or sequestrator (or other similar official) of the Corporation or of any
substantial part of its property, or ordering the winding up or liquidation of
its affairs, and any such decree or order shall be unstayed and in effect for a
period of 30 consecutive days and, on account of any such event, the Corporation
shall liquidate, dissolve or wind up, or if the Corporation shall otherwise
liquidate, dissolve or wind up, no distribution shall be made to the holders of
any shares of capital stock of the Corporation upon liquidation, dissolution or
winding-up unless prior thereto, the Holders of shares of Series F Preferred
Stock, subject to this Article 5, shall have received the Liquidation Preference
with respect to each share.
(b) In case the Corporation shall reorganize its capital, reclassify its
capital stock, consolidate or merge with or into another Person (where the
Corporation is not the survivor or where there is a change in or distribution
with respect to the Common Stock of the Corporation), sell, convey, transfer or
otherwise dispose of all or substantially all its property, assets or business
to another Person, or effectuate a transaction or series of related transactions
in which more than 50% of the voting power of the Corporation is disposed of
(each, a "Fundamental Corporate Change") and, pursuant to the terms of such
Fundamental Corporate Change, shares of common stock of the successor or
acquiring corporation, or any cash, shares of stock or other securities or
property of any nature whatsoever (including warrants or other subscription or
purchase rights) in addition to or in lieu of common stock of the successor or
acquiring corporation ("Other Property"), are to be received by or distributed
to the holders of Common Stock of the Corporation, then each Holder of Series F
Preferred Stock shall have the right thereafter, at its sole option, either (x)
to require the Corporation to deem such Fundamental Corporate Change to be a
liquidation, dissolution or winding up of the Corporation pursuant to which the
Corporation shall be required to distribute, upon consummation of and as a
condition to, such Fundamental Corporate Change an amount equal to 105% of the
Liquidation Preference with respect to each outstanding share of Series F
Preferred Stock, (y) to receive the number of shares of common stock of the
successor or acquiring corporation or of the Corporation, if it is the surviving
corporation, and Other Property as is receivable upon or as a result of such
Fundamental Corporate Change by a holder of the number of shares of Common Stock
into which such Series F Preferred Stock may be converted at the Conversion
Price applicable immediately prior to such Fundamental Corporate Change or (z)
require the Corporation, or such successor, resulting or purchasing corporation,
as the case may be, to, without benefit of any additional consideration
therefor, to execute and deliver to the Holder shares of its Preferred
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Stock with substantial identical rights, preferences, privileges, powers,
restrictions and other terms as the Series F Preferred Stock equal to the number
of shares of Series F Preferred Stock held by such Holder immediately prior to
such Fundamental Corporate Change; provided, that all Holders of Series F
Preferred Stock shall be deemed to elect the option set forth in clause (x)
above if at least a majority in interest of such Holders elect such option. For
purposes of this Section 5(b), "common stock of the successor or acquiring
corporation" shall include stock of such corporation of any class which is not
preferred as to dividends or assets over any other class of stock of such
corporation and which is not subject to redemption and shall also include any
evidences of indebtedness, shares of stock or other securities which are
convertible into or exchangeable for any such stock, either immediately or upon
the arrival of a specified date or the happening of a specified event and any
warrants or other rights to subscribe for or purchase any such stock. The
foregoing provisions of this Section 5(b) shall similarly apply to successive
Fundamental Corporate Changes.
ARTICLE 6
CONVERSION OF PREFERRED STOCK
Section 6.1 Conversion; Conversion Price
At the option of the Holder, the shares of Series F Preferred Stock may be
converted, either in whole or in part, into Common Shares (calculated as to each
such conversion to the nearest 1/100th of a share) at any time and from time to
time on or after September 30, 2000 (or such earlier date as the Holder and the
Corporation shall agree) at a Conversion Price per share of Common Stock equal
to the lesser of (i) $2.50 (subject to adjustment for any stock-split or stock
combination to occur after the date hereof) or (ii) the Market Price (the
"Conversion Price"); provided, that if the Corporation's Common Stock is
delisted off the Amex for any reason, then any remaining unconverted Series F
Preferred Stock may be converted, at the sole option of the Holder, at a
Conversion Price per share of Common Stock equal to 50% of the Market Price. At
the Corporation's option, the amount of accrued and unpaid dividends as of the
Conversion Date shall not be subject to conversion but instead may be paid in
cash as of the Conversion Date; if the Corporation elects to convert the amount
of accrued and unpaid dividends at the Conversion Date into Common Stock, the
Common Stock issued to the Holder shall be valued at the applicable Conversion
Price.
The number of shares of Common Stock due upon conversion of Series F
Preferred Stock shall be (i) the number of shares of Series F Preferred Stock to
be converted, multiplied by (ii) the Stated Value plus accrued and unpaid
dividends (whether or not declared, whether or not there were funds legally
available for the payment of dividends and whether or not a Dividend Payment Due
Date has occurred since the last dividend payment), to the extent the
Corporation does not elect to pay, and pay, accrued and unpaid dividends in
cash, and divided by (iii) the applicable Conversion Price.
Within two Business Days of the occurrence of a Valuation Event, the
Corporation shall send notice thereof to each Holder. Notwithstanding anything
to the contrary contained herein, if a Valuation Event occurs during any
Valuation Period, the Holder may
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convert some or all of its Series F Preferred Stock, at its sole option, at a
Conversion Price equal to the Current Market Price on any Trading Day during the
Valuation Period.
For purposes of this Section 6.1, a "Valuation Event" shall mean an event
in which the Corporation takes any of the following actions:
(a) subdivides or combines its Capital Shares;
(b) makes any distribution on its Capital Shares;
(c) issues any additional Capital Shares (the "Additional Capital Shares"),
otherwise than as provided in the foregoing Sections 6.1(a) and 6.1(b) above, at
a price per share less, or for other consideration lower, than the Current
Market Price in effect immediately prior to such issuances, or without
consideration, except for issuances under (A) employee benefit plans consistent
with those presently in effect, (B) presently outstanding warrants, options or
convertible securities and (C) in connection with an acquisition or merger where
the Board of Directors of the Corporation determines in good faith that such
Additional Capital Shares are not being issued for consideration lower than the
Current Market Price in effect immediately prior to such issuances;
(d) issues any warrants, options or other rights to subscribe for or
purchase any Additional Capital Shares if the price per share for which
Additional Capital Shares may at any time thereafter be issuable pursuant to
such warrants, options or other rights shall be less than the Current Market
Price in effect immediately prior to such issuance;
(e) issues any securities convertible into or exchangeable or exercisable
for Additional Capital Shares if the consideration per share for which
Additional Capital Shares may at any time thereafter be issuable pursuant to the
terms of such convertible, exchangeable or exercisable securities shall be less
than the Current Market Price in effect immediately prior to such issuance;
(f) announces or effects a Fundamental Corporate Change;
(g) makes any distribution of its assets or evidences of indebtedness to
the holders of its Capital Shares as a dividend in liquidation or by way of
return of capital or other than as a dividend payable out of earnings or surplus
legally available for the payment of dividends under applicable law or any
distribution to such holders made in respect of the sale of all or substantially
all of the Corporation's assets (other than under the circumstances provided for
in the foregoing Sections 6.1(a) through 6.1(e)); or
(h) takes any action affecting the number of Outstanding Capital Shares,
other than an action described in any of the foregoing Sections 6.1(a) through
6.1(g) hereof, inclusive, which in the opinion of the Holder, determined in good
faith, would have a material adverse effect upon the rights of the Holder at the
time of a conversion of the Preferred Stock or is reasonably likely to result in
a decrease in the Market Price.
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Section 6.2 Exercise of Conversion Privilege
(a) Conversion of the Series F Preferred Stock may be exercised, in whole
or in part, by the Holder by telecopying an executed and completed Conversion
Notice to the Corporation. Each date on which a Conversion Notice is telecopied
to the Corporation in accordance with the provisions of this Section 6.2 shall
constitute a Conversion Date. The Corporation shall convert the Preferred Stock
and issue the Common Stock Issued at Conversion, and all voting and other rights
associated with the beneficial ownership of the Common Stock Issued at
Conversion shall vest with the Holder, effective as of the Conversion Date at
the time specified in the Conversion Notice. The Conversion Notice also shall
state the name or names (with addresses) of the Persons who are to become the
holders of the Common Stock Issued at Conversion in connection with such
conversion. The Holder shall deliver the shares of Series F Preferred Stock to
the Corporation by express courier within 30 days following the Conversion Date.
Upon surrender for conversion, the Preferred Stock shall be accompanied by a
proper assignment thereof to the Corporation or be endorsed in blank. As
promptly as practicable after the receipt of the Conversion Notice as aforesaid,
but in any event not more than five Business Days after the Corporation's
receipt of such Conversion Notice, the Corporation shall (i) issue the Common
Stock issued at Conversion in accordance with the provisions of this Article 6,
and (ii) cause to be mailed for delivery by overnight courier to the Holder (x)
a certificate or certificate(s) representing the number of Common Shares to
which the Holder is entitled by virtue of such conversion, (y) cash, as provided
in Section 6.3, in respect of any fraction of a Common Share issuable upon such
conversion and (z) if the Corporation chooses to pay accrued and unpaid
dividends in cash, cash in the amount of accrued and unpaid dividends as of the
Conversion Date. Such conversion shall be deemed to have been effected at the
time at which the Conversion Notice indicates so long as the Series F Preferred
Stock shall have been surrendered as aforesaid at such time, and at such time
the rights of the Holder of the Series F Preferred Stock, as such, shall cease
and the Person or Persons in whose name or names the Common Stock Issued at
Conversion shall be issuable shall be deemed to have become the holder or
holders of record of the Common Shares represented thereby and all voting and
other rights associated with the beneficial ownership of such Common Shares
shall at such time vest with such Person or Persons. The Conversion Notice shall
constitute a contract between the Holder and the Corporation, whereby the Holder
shall be deemed to subscribe for the number of Common Shares which it will be
entitled to receive upon such conversion and, in payment and satisfaction of
such subscription (and for any cash adjustment to which it is entitled pursuant
to Section 6.3), to surrender the Series F Preferred Stock and to release the
Corporation from all liability thereon. No cash payment aggregating less than
$1.00 shall be required to be given unless specifically requested by the Holder.
(b) If, at any time (i) the Corporation challenges, disputes or denies the
right of the Holder hereof to effect the conversion of the Series F Preferred
Stock into Common Shares or otherwise dishonors or rejects any Conversion Notice
delivered in accordance with this Section 6.2 or (ii) any third party commences
any lawsuit or proceeding or otherwise asserts any claim before any court or
public or governmental authority which seeks to challenge, deny, enjoin, limit,
modify, delay or dispute the right of the Holder hereof to effect the conversion
of the Series F Preferred Stock into Common Shares (a "Blockage Claim"), and
such Blockage Claim shall remain in effect and not be resolved for a period of
more than 90 days, then the Holder shall have
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the right, by written notice to the Corporation, to require the Corporation
promptly to redeem the Series F Preferred Stock for cash at a redemption price
equal to 105% of the Stated Value thereof together with all accrued and unpaid
dividends (whether or not declared, whether or not there were funds legally
available for the payment of dividends and whether or not a Dividend Payment Due
Date has occurred since the last dividend payment) thereon (the "Mandatory
Purchase Amount"). Under any of the circumstances set forth above, the
Corporation shall be responsible for the payment of all costs and expenses of
the Holder, including reasonable legal fees and expenses, as and when incurred
in disputing any such action or pursuing its rights hereunder (in addition to
any other rights of the Holder).
(c) The Holder shall be entitled to exercise its conversion privilege
notwithstanding the commencement of any case under 11 U.S.C. ss. 101 et seq.
(the "Bankruptcy Code"). In the event the Corporation is a debtor under the
Bankruptcy Code, the Corporation hereby waives to the fullest extent permitted
any rights to relief it may have under 11 U.S.C. ss. 362 in respect of the
Holder's conversion privilege. The Corporation hereby waives to the fullest
extent permitted any rights to relief it may have under 11 U.S.C. ss. 362 in
respect of the conversion of the Series F Preferred Stock. The Corporation
agrees, without cost or expense to the Holder, to take or consent to any and all
action necessary to effectuate relief under 11 U.S.C. ss. 362.
Section 6.3 Fractional Shares
No fractional Common Shares or scrip representing fractional Common Shares
shall be issued upon conversion of the Series F Preferred Stock. Instead of any
fractional Common Shares which otherwise would be issuable upon conversion of
the Series F Preferred Stock, the Corporation shall pay a cash adjustment in
respect of such fraction in an amount equal to the same fraction.
Section 6.4 Adjustments to Conversion Price
Except with respect to issuances of Capital Shares in connection with an
acquisition or merger where the Board of Directors of the Corporation determines
in good faith that such Capital Shares are not being issued for consideration
lower than the Current Market Price in effect immediately prior to such
issuances, for so long as any shares of the Series F Preferred Stock are
outstanding, if the Corporation issues and sells pursuant to an exemption from
registration under the Securities Act (A) Common Shares at a purchase price on
the date of issuance thereof that is lower than the Conversion Price, (B)
warrants or options with an exercise price on the date of issuance thereof that
is lower than the Conversion Price for the Holder on such date, except for
warrants or options issued pursuant to employee benefit plans consistent with
those presently in effect, employee stock option agreements or stock incentive
agreements of the Corporation, or (C) convertible, exchangeable or exercisable
securities with a right to exchange at lower than the Current Market Price on
the date of issuance or conversion, as applicable, of such convertible,
exchangeable or exercisable securities, except for stock option agreements or
stock incentive agreements, then on any date on which the Conversion Price shall
be determined, the Conversion Price shall be reduced by an amount equal to the
amount by which the purchase price, exercise price or exchange price, as
applicable, is lower than the
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Conversion Price or Current Market Price, as applicable, multiplied by a
fraction the denominator of which is $2,000,000 and the numerator of which is
the sum of (A) the aggregate number of (i) Common Shares, in the case of (A)
above, (ii) Common Shares into which the warrants or options are exchangeable
into, in the case of (B) above, or (iii) equity securities into which the
convertible or exchangeable securities are exercisable into, in the case of (C)
above, multiplied by (B) the Conversion Price, in each case, with a maximum
adjustment equal to the applicable discount triggering such adjustment pursuant
to this Section 6.4.
Notwithstanding the foregoing, the application of the provisions of this
Section 6.4 shall not, in and of itself, constitute an adjustment to the terms
of the Series E Preferred Stock pursuant to Section 6.4 of the Series E
Certificate.
Section 6.5 Optional Redemption
(a) At any time on or before September 30, 2000 (the "September 30, 2000
Redemption Date") the Corporation, upon notice delivered to the Holder as
provided in Section 6.6, may redeem the Series F Preferred Stock for a
redemption price of $2,250,000, together with all accrued and unpaid dividends
on the Series F Preferred Stock through September 30, 2000, in each case in cash
(the "Section 6.5(a) Optional Redemption Price").
(b) At any time after the September 30, 2000 Redemption Date until the
Mandatory Conversion Date (as defined below), the Corporation, upon notice
delivered to the Holder as provided in Section 6.6, may redeem, in cash, the
Series F Preferred Stock (but only with respect to such shares as to which the
Holder has not theretofore furnished a Conversion Notice in compliance with
Section 6.2), at the Stated Value thereof (the "Section 6.5(b) Optional
Redemption Price"), together with all accrued and unpaid dividends (whether or
not declared, whether or not there were funds legally available for the payment
of dividends and whether or not a Dividend Payment Due Date has occurred since
the last dividend payment) thereon to the date of redemption (the "Section
6.5(b) Redemption Date" and, together with the September 30, 2000 Redemption
Date, the "Redemption Date").
(c) The Section 6.5(a) Redemption Price and the Section 6.5(b) Redemption
Price, as applicable, is referred to herein as the "Optional Redemption Price."
Except as set forth in this Section 6.5, the Corporation shall not have the
right to redeem the Series F Preferred Stock.
Section 6.6 Notice of Redemption
Notice of redemption pursuant to Section 6.5 shall be provided by the
Corporation to the Holder in writing (by registered mail or overnight courier at
the Holder's last address appearing in the Corporation's security registry) not
less than 10 nor more than 15 days prior to the Redemption Date, which notice
shall specify the Redemption Date and refer to Section 6.5 (including a
statement of the Current Market Price per Common Share) and this Section 6.6.
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Section 6.7 Surrender of Preferred Stock
Upon any redemption of the Series F Preferred Stock pursuant to Sections
6.5 and 6.6, the Holder shall either deliver the Series F Preferred Stock by
hand to the Corporation at its principal executive offices or surrender the same
to the Corporation at such address by express courier within 14 days after the
date that the Buyer receives payment therefore. Payment of the Optional
Redemption Price shall be made by the Corporation to the Holder by wire transfer
of immediately available funds to such account(s) as the Holder shall specify to
the Corporation. If payment of such Optional Redemption Price is not made in
full by the Redemption Date, the Holder shall again have the right to convert
the Series F Preferred Stock as provided in Article 6 hereof.
Section 6.8 Mandatory Conversion
On the 42nd (forty-second) calendar month anniversary of the Issue Date of
this Certificate of Designation (the "Mandatory Conversion Date"), the
Corporation shall convert all Series F Preferred Stock outstanding, at the
Conversion Price utilizing the Stated Value (plus accrued and unpaid dividends)
(whether or not declared, whether or not there were funds legally available for
the payment of dividends and whether or not a Dividend Payment Due Date has
occurred since the last dividend payment)) as the value of each share of Series
F Preferred Stock, into shares of Common Stock registered for resale in open
market transactions on the Registration Statement (as defined in the
Registration Rights Agreement), which Registration Statement shall then be
effective under the Securities Act.
Section 6.9 Certain Conversion Limitations
(a) Notwithstanding anything herein to the contrary, the Holder shall not
have the right, and the Corporation shall not have the obligation, to convert
all or any portion of the Series F Preferred Stock (and the Corporation shall
not have the right to pay dividends on the Series F Preferred Stock in shares of
Common Stock) if and to the extent that the issuance to the Holder of shares of
Common Stock upon such conversion (or payment of dividends) would result in the
Holder being deemed the "beneficial owner" of more than 5% of the then
Outstanding shares of Common Stock within the meaning of Section 13(d) of the
Securities Exchange Act of 1934, as amended, and the rules promulgated
thereunder. If any court of competent jurisdiction shall determine that the
foregoing limitation is ineffective to prevent a Holder from being deemed the
beneficial owner of more than 5% of the then Outstanding shares of Common Stock,
then the Corporation shall redeem so many of such Holder's shares (the
"Redemption Shares") of Series F Preferred Stock as are necessary to cause such
Holder to be deemed the beneficial owner of not more than 5% of the then
Outstanding shares of Common Stock. Upon such determination by a court of
competent jurisdiction, the Redemption Shares shall immediately and without
further action be deemed returned to the status of authorized but unissued
shares of Series F Preferred Stock, and the Holder shall have no interest in or
rights under such Redemption Shares. Any and all dividends paid on or prior to
the date of such determination shall be deemed dividends paid on the remaining
shares of Series F Preferred Stock held by the Holder. Such redemption shall be
for cash at a redemption price equal to the sum of (i) 105% of the Stated Value
of the Redemption Shares and (ii) any accrued and unpaid dividends (whether
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or not declared, whether or not there were funds legally available for the
payment of dividends and whether or not a Dividend Payment Due Date has occurred
since the last dividend payment) to the date of such redemption.
(b) Notwithstanding anything herein to the contrary, if and to the extent
that, on any date (the "Section 16 Determination Date"), the holding by the
Holder of shares of the Series F Preferred Stock would result in the Holder's
becoming subject to the provisions of Section 16(b) of the Exchange Act in
virtue of being deemed the "beneficial owner" of more than 10% of the then
Outstanding shares of Common Stock, then the Holder shall not have the right,
and the Corporation shall not have the obligation, to convert so many of such
Holder's shares of Series F Preferred Stock (the "Section 16 Redemption Shares")
as shall cause such Holder to be deemed the beneficial owner of more than 10% of
the then Outstanding shares of Common Stock during the period ending 60 days
after the Section 16 Determination Date. If any court of competent jurisdiction
shall determine that the foregoing limitation is ineffective to prevent a Holder
from being deemed the beneficial owner of more than 10% of the then Outstanding
shares of Common Stock for the purposes of such Section 16(b), then the
Corporation shall redeem the Section 16 Redemption Shares. Upon such
determination by a court of competent jurisdiction, the Section 16 Redemption
Shares shall immediately and without further action be deemed returned to the
status of authorized but unissued shares of Series F Preferred Stock, and the
Holder shall have no interest in or rights under such Section 16 Redemption
Shares. Any and all dividends paid on or prior to the date of such determination
shall be deemed dividends paid on the remaining shares of Series F Preferred
Stock held by the Holder. Such redemption shall be for cash at a redemption
price equal to the sum of (i) 105% of the Stated Value of the Section 16
Redemption Shares and (ii) any declared and unpaid dividends to the date of such
redemption.
(c) Unless the Corporation shall have obtained the approval of its voting
stockholders to such issuance in accordance with the rules of the Amex or any
other stock market rules with which the Corporation shall be required to comply,
but only to the extent required thereby, the Corporation shall not issue shares
of Common Stock (i) upon conversion of any shares of Series F Preferred Stock or
(ii) as a dividend on the Series F Preferred Stock, if such issuance of Common
Stock, when added to the number of shares of Common Stock previously issued by
the Corporation (x) upon conversion of shares of the Series F Preferred Stock,
(y) upon exercise of the Warrants issued pursuant to the terms of the Securities
Purchase Agreement and (z) in payment of dividends on the Series F Preferred
Stock, would equal or exceed 20% of the number of shares of the Corporation's
Common Stock which were issued and Outstanding on the Issue Date (the "Maximum
Issuance Amount"). In the event that a properly executed Conversion Notice is
received by the Corporation which would require the Corporation to issue shares
of Common Stock equal to or in excess of the Maximum Issuance Amount, the
Corporation shall honor such conversion request by (a) converting the number of
shares of Series F Preferred Stock stated in the Conversion Notice which is not
in excess of the Maximum Issuance Amount and (b) redeeming the remaining number
of shares of Series F Preferred Stock stated in the Conversion Notice in cash at
a price equal to 105% of the Stated Value thereof, together with all accrued and
unpaid dividends (whether or not declared, whether or not there were funds
legally available for the payment of dividends and whether or not a Dividend
Payment Due Date has occurred since the last dividend payment) on the total
number of shares stated in the Conversion Notice. In the event that the
Corporation shall elect to pay a dividend in
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shares of Common Stock which would require the Corporation to issue shares of
Common Stock equal to or in excess of the Maximum Issuance Amount, the
Corporation shall pay (1) a dividend in a number of shares of Common Stock equal
to one less than the Maximum Issuance Amount and (2) the balance of the dividend
in cash.
ARTICLE 7
VOTING RIGHTS
The Holders of the Series F Preferred Stock have no voting power, except as
otherwise provided by the General Corporation Law of the State of Delaware (the
"DGCL"), in this Article 7, and in Article 8 below.
Notwithstanding the above, the Corporation shall provide each Holder of
Series F Preferred Stock with prior notification of any meeting of the
shareholders (and copies of all proxy materials and other information sent to
shareholders). In the event of any taking by the Corporation of a record of its
shareholders for the purpose of determining shareholders who are entitled to
receive payment of any dividend or other distribution, any right to subscribe
for, purchase or otherwise acquire (including by way of merger, consolidation or
recapitalization) any share of any class or any other securities or property, or
to receive any other right, or for the purpose of determining shareholders who
are entitled to vote in connection with any proposed liquidation, dissolution or
winding up of the Corporation, the Corporation shall mail a notice thereof to
each Holder at least 30 days prior to the date on which any such record is to be
taken for the purpose of such dividend, distribution, right or other event,
together with a brief statement regarding the amount and character of such
dividend, distribution, right or other event to the extent known at such time.
To the extent that under the DGCL the vote of the Holders of the Series F
Preferred Stock, voting separately as a class or series as applicable, is
required to authorize a given action of the Corporation, the affirmative vote or
consent of the Holders of at least a majority of the outstanding shares of
Series F Preferred Stock represented at a duly held meeting at which a quorum is
present or by written consent of a majority of the outstanding shares of Series
F Preferred Stock (except as otherwise may be required under the DGCL) shall
constitute the approval of such action by the class. To the extent that under
the DGCL Holders of the Series F Preferred Stock are entitled to vote on a
matter with holders of Common Stock, voting together as one class, each share of
Series F Preferred Stock shall be entitled to a number of votes equal to the
number of shares of Common Stock into which it is then convertible using the
record date for the taking of such vote of shareholders as the date as of which
the Conversion Price is calculated. Holders of the Series F Preferred Stock
shall be entitled to notice of all shareholder meetings or written consents (and
copies of all proxy materials and other information sent to shareholders) with
respect to which they would be entitled to vote, which notice would be provided
pursuant to the Corporation's bylaws and the DGCL.
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ARTICLE 8
PROTECTIVE PROVISIONS
So long as shares of Series F Preferred Stock are outstanding, the
Corporation shall not, without first obtaining the approval (by vote or written
consent, as provided in the DGCL) of the Holders of at least a majority of the
then outstanding shares of Series F Preferred Stock:
(a) alter or change the rights, preferences or privileges of the Series F
Preferred Stock;
(b) create any new class or series of capital stock having a preference
over the Series F Preferred Stock as to distribution of assets upon liquidation,
dissolution or winding up of the Corporation ("Senior Securities") or alter or
change the rights, preferences or privileges of any Senior Securities so as to
affect adversely the Series F Preferred Stock;
(c) increase the authorized number of shares of Series F Preferred Stock;
or
(d) do any act or thing not authorized or contemplated by this Certificate
of Designation which would result in taxation of the Holders of shares of the
Series F Preferred Stock under Section 305 of the Internal Revenue Code of 1986,
as amended (or any comparable provision of the Internal Revenue Code of 1986, as
hereafter from time to time amended).
In the event Holders of least a majority of the then outstanding shares of
Series F Preferred Stock agree to allow the Corporation to alter or change the
rights, preferences or privileges of the shares of Series Preferred Stock,
pursuant to subsection (a) above, so as to affect the Series F Preferred Stock,
then the Corporation will deliver notice of such approved change to the Holders
of the Series Preferred Stock that did not agree to such alteration or change
(the "Dissenting Holders") and Dissenting Holders shall have the right for a
period of 30 days to convert pursuant to the terms of this Certificate of
Designation as in effect prior to such alteration or change or to continue to
hold their shares of Series F Preferred Stock.
Notwithstanding anything to the contrary herein, if at any time the
Corporation shall "spin-off" certain of its assets or businesses by
transferring, directly or indirectly, such assets or businesses to a Subsidiary
of the Corporation ("Spinco") and making a dividend (the "Spin-off Dividend") to
the Corporation's stockholders of the shares of capital stock of Spinco, then
prior to making the Spin-off Dividend, the Corporation shall cause Spinco to
issue to each Holder that number of shares of preferred stock of Spinco with
substantially identical rights, preferences, privileges, powers, restrictions
and other terms as the Series F Preferred Stock equal to the number of shares of
Series F Preferred Shares held by such Holder immediately prior to the Spin-off
Dividend.
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ARTICLE 9
MISCELLANEOUS
Section 9.1 Loss, Theft, Destruction of Preferred Stock
Upon receipt of evidence satisfactory to the Corporation of the loss,
theft, destruction or mutilation of shares of Series F Preferred Stock and, in
the case of any such loss, theft or destruction, upon receipt of indemnity or
security reasonably satisfactory to the Corporation, or, in the case of any such
mutilation, upon surrender and cancellation of the Series F Preferred Stock, the
Corporation shall make, issue and deliver, in lieu of such lost, stolen,
destroyed or mutilated shares of Series F Preferred Stock, new shares of Series
F Preferred Stock of like tenor. The Series F Preferred Stock shall be held and
owned upon the express condition that the provisions of this Section 9.1 are
exclusive with respect to the replacement of mutilated, destroyed, lost or
stolen shares of Series F Preferred Stock and shall preclude any and all other
rights and remedies notwithstanding any law or statute existing or hereafter
enacted to the contrary with respect to the replacement of negotiable
instruments or other securities without the surrender thereof.
Section 9.2 Who Deemed Absolute Owner
The Corporation may deem the Person in whose name the Series F Preferred
Stock shall be registered upon the registry books of the Corporation to be, and
may treat it as, the absolute owner of the Series F Preferred Stock for the
purpose of receiving payment of dividends on the Series F Preferred Stock, for
the conversion of the Series F Preferred Stock and for all other purposes, and
the Corporation shall not be affected by any notice to the contrary. All such
payments and such conversion shall be valid and effectual to satisfy and
discharge the liability upon the Series F Preferred Stock to the extent of the
sum or sums so paid or the conversion so made.
Section 9.3 Fundamental Corporate Change
In the case of the occurrence of any Fundamental Corporate Change described
in Section 5(b), the Corporation shall cause to be mailed to the Holder of the
Series F Preferred Stock at its last address as it appears in the Corporation's
security registry, at least 20 days prior to the applicable record, effective or
expiration date specified in connection therewith (or, if such 20 days notice is
not possible, at the earliest possible date prior to any such record, effective
or expiration date), a notice stating (x) the date on which a record is to be
taken for the purpose of such corporate action, or if a record is not to be
taken, the date as of which the Holders of record of Series F Preferred Stock to
be entitled to any dividend, distribution, issuance or granting of rights,
options or warrants are to be determined or the date on which such Fundamental
Corporate Change is expected to become effective, and (y) the date as of which
it is expected that Holders of record of Series F Preferred Stock will be
entitled to exchange their shares for securities, cash or other property
deliverable upon such Fundamental Corporate Change.
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Section 9.4 Register
The Corporation shall keep at its principal office a register in which the
Corporation shall provide for the registration of the Series F Preferred Stock.
Upon any transfer of the Series F Preferred Stock in accordance with the
provisions hereof, the Corporation shall register such transfer on the register
of Series F Preferred Stock.
Section 9.5 Withholding
To the extent required by applicable law, the Corporation may withhold
amounts for or on account of any taxes imposed or levied by or on behalf of any
taxing authority in the United States having jurisdiction over the Corporation
from any payments made pursuant to the Series F Preferred Stock.
Section 9.6 Headings
The headings of the Articles and Sections of this Certificate of
Designation are inserted for convenience only and do not constitute a part of
this Certificate of Designation.
Section 9.7 Severability
If any provision of this Certificate of Designation, or the application
thereof to any person or entity or any circumstance, is invalid or
unenforceable, (i) a suitable and equitable provision shall be substituted
therefor in order to carry out, so far as may be valid and enforceable, the
intent and purpose of such invalid or unenforceable provision, and (ii) the
remainder of this Certificate of Designation and the application of such
provision to other persons, entities or circumstances shall not be affected by
such invalidity or unenforceability, nor shall such invalidity or
unenforceability affect the validity or enforceability of such provision, or the
application thereof, in any other jurisdiction.
[SIGNATURE PAGE FOLLOWS.]
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IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Designation to be signed by its duly authorized officers on March ___, 2000.
COMMODORE APPLIED TECHNOLOGIES,
INC.
By: /s/ PAUL HANNESSON
--------------------------------------
Name: Paul Hannesson
Title: President
By: /s/ JAMES M. DEANGELEIS
--------------------------------------
Name: James M. DeAngeleis
Title: Senior V.P.,
Chief Financial Officer
<PAGE>
ANNEX I
FORM OF CONVERSION NOTICE
TO: Commodore Applied Technologies, Inc.
150 East 58th Street
Suite 3400
New York, NY 10155
The undersigned owner of this Series F Convertible Preferred Stock (the
"Series F Preferred Stock") issued by Commodore Applied Technologies, Inc. (the
"Corporation") hereby irrevocably exercises its option to convert __________
shares of the Series F Preferred Stock into shares of the common stock, par
value $0.001 per share ("Common Stock"), of the Corporation in accordance with
the terms of the Certificate of Designation. The undersigned hereby instructs
the Corporation to convert the number of shares of the Series F Preferred Stock
specified above into Shares of Common Stock Issued at Conversion in accordance
with the provisions of Article 6 of the Certificate of Designation. The
undersigned directs that the Common Stock issuable and certificates therefor
deliverable upon conversion and the recertificated Series F Preferred Stock, if
any, not being surrendered for conversion hereby, together with any check in
payment for fractional Common Stock, be issued in the name of and delivered to
the undersigned unless a different name has been indicated below. All
capitalized terms used and not defined herein have the respective meanings
assigned to them in the Certificate of Designation. So long as the Series F
Preferred Stock shall have been surrendered for conversion hereby, the
conversion pursuant hereto shall be deemed to have been effected at the date and
time specified below, and at such time the rights of the undersigned as a Holder
of the Series F Preferred Stock shall cease and the Person or Persons in whose
name or names the Common Stock Issued at Conversion shall be issuable shall be
deemed to have become the holder or holders of record of the Common Shares
represented thereby and all voting and other rights associated with the
beneficial ownership of such Common Shares shall at such time vest with such
Person or Persons.
Date and time:_________________________
---------------------------------
Signature
Fill in for registration of Series F Preferred Stock:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
Please print name and address (including zip code number)
NEITHER THE WARRANTS REPRESENTED BY THIS CERTIFICATE NOR THE
SHARES ISSUABLE UPON EXERCISE HEREOF HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED. NEITHER THE
WARRANTS NOR SUCH SHARES MAY BE OFFERED OR SOLD EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH
ACT, OR AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT.
COMMODORE APPLIED TECHNOLOGIES, INC.
WARRANT FOR THE PURCHASE OF SHARES OF COMMON STOCK
No. 00-1 113,475 Shares
THIS CERTIFIES that, for value received, AVALON RESEARCH GROUP INC. (the
"Holder"), is entitled to subscribe for and purchase from COMMODORE APPLIED
TECHNOLOGIES, INC., a Delaware corporation (the "Company"), upon the terms and
conditions set forth herein, at any time from and after September 30, 2000, and
before 5:00 P.M. on March 15, 2005, New York City time (the "Exercise Period"),
One Hundred Thirteen Thousand Four Hundred Seventy Five (113,475) shares, par
value $.001 per share, of the Company ("Common Stock"), at an exercise price of
$1.93875 per share (the "Exercise Price"). As used herein the term "this
Warrant" shall mean and include this Warrant and any Warrant or Warrants
hereafter issued as a consequence of the exercise or transfer of this Warrant in
whole or in part.
The number of shares of Common Stock issuable upon exercise of the Warrant
(the "Warrant Shares") and the Exercise Price may be adjusted from time to time
as hereinafter set forth.
1. This Warrant may be exercised during the Exercise Period by the
surrender of this Warrant (with the form of election at the end hereof duly
executed) to the Company at its office as set forth in the form of election
attached hereto, or at such other place as is designated in writing by the
Company, together with a certified or bank cashier's check payable to the order
of the Company in an amount equal to the Exercise Price multiplied by the number
of respective Warrant Shares for which this Warrant is being exercised.
2. Upon the exercise of the Holder's rights to purchase Warrant Shares,
the Holder shall be deemed to be the holder of record of the Warrant Shares
issuable upon such exercise, notwithstanding that the transfer books of the
Company shall then be closed or certificates
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representing such Warrant Shares shall not then have been actually delivered to
the Holder. As soon as practicable after the exercise of this Warrant and
payment of the Exercise Price by the Holder, a certificate or certificates for
the Warrant Shares issuable upon such exercise, registered in the name of the
Holder or its designee, shall be issued by the Company to the Holder. If the
Warrant should be exercised in part only, the Company shall, upon surrender of
this Warrant for cancellation, execute and deliver a new Warrant evidencing the
right of the Holder to purchase the balance of the Warrant Shares (or portions
thereof) subject to purchase hereunder.
3. The Company shall be entitled to treat the registered holder of any
Warrant on the Warrant Register as the Owner in fact thereof for all purposes
and shall not be bound to recognize any equitable or other claim to or interest
in such Warrant on the part of any other person, and shall not be liable for any
registration or transfer of Warrants which are registered or to be registered in
the name of a fiduciary or the nominee of a fiduciary unless made with the
actual knowledge that a fiduciary or nominee is committing a breach of trust in
requesting such registration or transfer, or with the knowledge of such facts
that its participation therein amounts to bad faith. This Warrant shall be
transferable only on the books of the Company upon delivery thereof duly
endorsed by the Holder or by his duly authorized attorney or representative, or
accompanied by proper evidence of succession, assignment, or authority to
transfer. In all cases or transfer by an attorney, executor, administrator,
guardian, or other legal representative, duly authenticated evidence of his or
its authority shall be produced. Upon any registration of transfer, the Company
shall deliver a new Warrant or Warrants to the person entitled thereto. The
Company shall have no obligation to cause Warrants to be transferred on its
books to any person if, in the opinion of counsel to the Company, such transfer
does not comply with the provisions of the Securities Act of 1933, as amended
(the "Act"), and the rules and regulations promulgated thereunder.
4. The Company shall at all times reserve and keep available out of its
authorized and unissued Common Stock, solely for the purpose of providing for
the exercise of the rights to purchase all Warrant Shares granted pursuant to
the Warrants, such number of shares of Common Stock as shall, from time to time,
be sufficient therefor. The Company covenants that all shares of Common Stock
issuable upon exercise of this Warrant, upon receipt by the Company of the full
Exercise Price therefor, shall be validly issued, fully paid, nonassessable, and
free of preemptive rights.
5. (a) In case the Company shall at any time after the date the Warrants
were first issued (i) declare a dividend on the outstanding Common Stock payable
in shares of its capital stock, (ii) subdivide the outstanding Common Stock,
(iii) combine the outstanding Common Stock into a smaller number of shares, or
(iv) issue any shares of its capital stock by reclassification of the Common
Stock (including any such reclassification in connection with a consolidation or
merger in which the Company is the continuing corporation), then, in each case,
the Exercise Price, and the number of Warrant Shares issuable upon exercise of
this Warrant, in effect at the time of the record date for such dividend or of
the effective date of such subdivision, combination, or reclassification, shall
be proportionately adjusted so that the Holder after such
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<PAGE>
time shall be entitled to receive the aggregate number and kind of shares which,
if such Warrant had been exercised immediately prior to such time, he would have
owned upon such exercise and been entitled to receive by virtue of such
dividend, subdivision, combination, or reclassification. Such adjustment shall
be made successively whenever any event listed above shall occur.
(b) No adjustment in the Exercise Price shall be required if such
adjustment is less than $.05; provided, however, that any adjustments which by
reason of this Section 5 are not required to be made shall be carried forward
and taken into account in any subsequent adjustment. All calculations under this
Section 5 shall be made to the nearest cent or to the nearest one-thousandth of
a share, as the case may be.
(c) In any case in which this Section 5 shall require that an adjustment in
the Exercise Price be made effective as of a record date for a specified event,
the Company may elect to defer, until the occurrence of such event, issuing to
the Holder, if the Holder exercised this Warrant after such record date, the
shares of Common Stock, if any, issuable upon such exercise over and above the
shares of Common Stock, if any, issuable upon such exercise on the basis of the
Exercise Price in effect prior to such adjustment; provided, however, that the
Company shall deliver to the Holder a due bill or other appropriate instrument
evidencing the Holder's right to receive such additional shares upon the
occurrence of the event requiring such adjustment
(d) Whenever there shall be an adjustment as provided in this Section 5,
the Company shall promptly cause written notice thereof to be sent by registered
mail, postage prepaid, to the Holder, at its address as it shall appear in the
Warrant Register, which notice shall be accompanied by an officer's certificate
setting forth the number of Warrant Shares purchasable upon the exercise of this
Warrant and the Exercise Price after such adjustment and setting forth a brief
statement of the facts requiring such adjustment and the computation thereof,
which officer's certificate shall be conclusive evidence of the correctness of
any such adjustment absent manifest error.
6. (a) In case of any consolidation with or merger of the Company with or
into another corporation (other than a merger or consolidation in which the
Company is the surviving or continuing corporation), or in case of any sale,
lease, or conveyance to another corporation of the property and assets of any
nature of the Company as an entirety or substantially as an entirety, such
successor, leasing, or purchasing corporation, as the case may be, shall (i)
execute with the Holder an agreement providing that the Holder shall have the
right thereafter to receive upon exercise of this Warrant solely the kind and
amount of shares of stock and other securities, property, cash, or any
combination thereof receivable upon such consolidation, merger, sale, lease, or
conveyance by a holder of the number of shares of Common Stock for which this
Warrant might have been exercised immediately prior to such consolidation,
merger, sale, lease, or conveyance and (ii) make effective provision in its
certificate of incorporation or otherwise, if necessary, to effect such
agreement. Such agreement shall provide for adjustments which shall be as nearly
equivalent as practicable to the adjustments in Section 5.
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(b) In case of any reclassification or change of the shares of Common Stock
issuable upon exercise of this Warrant (other than a change in par value or from
no par value to a specified par value, or as a result of a subdivision or
combination, but including any change in the shares into two or more classes or
series of shares), or in case of any consolidation or merger of another
corporation into the Company in which the Company is the continuing corporation
and in which there is a reclassification or change (including a change to the
right to receive cash or other property) of the shares of Common Stock (other
than a change in par value, or from no par value to a specified par value, or as
a result of a subdivision or combination, but including any change in the shares
into two or more classes or series of shares), the Holder shall have the right
thereafter to receive upon exercise of this Warrant solely the kind and amount
of shares of stock and other securities, property, cash, or any combination
thereof receivable upon such reclassification, change, consolidation, or merger
by a holder of the number of shares of Common Stock for which this Warrant might
have been exercised immediately prior to such reclassification, change,
consolidation, or merger. Thereafter, appropriate provision shall be made for
adjustments which shall be as nearly equivalent as practicable to the
adjustments in Section 5.
(c) The above provisions of this Section 6 shall similarly apply to
successive reclassifications and changes of shares of Common Stock and to
successive consolidations, mergers, sales, leases, or conveyances.
7. In case at any time the Company shall propose:
(a) to pay any dividend or make any distribution on shares of Common
Stock in shares of Common Stock or make any other distribution (other than
regularly scheduled cash dividends which are not in a greater amount per
share than the most recent such cash dividend) to all holders of Common
Stock; or
(b) to issue any rights, warrants, or other securities to all holders
of Common Stock entitling them to purchase any additional shares of Common
Stock or any other rights, warrants, or other securities; or
(c) to effect any reclassification or change of outstanding shares of
Common Stock, or any consolidation, merger, sale, lease, or conveyance of
property, described in Section 6; or
(d) to effect any liquidation, dissolution, or winding-up of the
Company; or
(e) to take any other action which would cause an adjustment to the
Exercise Price;
then, and in any one or more of such cases, the Company shall give written
notice thereof, by registered mail, postage prepaid, to the Holder at the
Holder's address as it shall appear in the
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Warrant Register, mailed at least 15 days prior to (i) the date as of which the
holders of record of shares of Common Stock to be entitled to receive any such
dividend, distribution, rights, warrants, or other securities are to be
determined, (ii) the date on which any such reclassification, change of
outstanding shares of Common Stock, consolidation, merger, sale, lease,
conveyance of property, liquidation, dissolution, or winding-up is expected to
become effective, and the date as of which it is expected that holders of record
of shares of Common Stock shall be entitled to exchange their shares for
securities or other property, if any, deliverable upon such reclassification,
change of outstanding shares, consolidation, merger, sale, lease, conveyance of
property, liquidation, dissolution, or winding-up, or (iii) the date of such
action which would require an adjustment to the Exercise Price.
8. (a) If, at any time prior to the expiration of the Exercise Period, the
Company proposes to file with the Securities and Exchange Commission (the
"Commission") a registration statement under the Act on any form (other than a
registration statement on Form S-4, Form S-8, or any successor form) for the
general registration of securities to be sold for cash (a "Registration
Statement") with respect to any shares of Common Stock, either for its own
account or for the account of any stockholder of the Company, it will give
written notice (a "Piggyback Notice") to the Holder at least 30 days before the
initial filing of such Registration Statement, which Piggyback Notice shall set
forth the intended method of disposition of the securities proposed to be
registered. The Piggyback Notice shall offer to include in such filing such
aggregate number of Warrant Shares held by the Holder as the Holder may request.
The Holder shall advise the Company in writing within 10 days after the date of
receipt of the Piggyback Notice from the Company whether the Holder intends to
have any Warrant Shares registered under the Registration Statement, setting
forth the number of such Warrant Shares for which registration is requested. The
Company shall thereupon include in such Registration Statement the aggregate
number of Warrant Shares held by the Holder for which registration is so
requested, subject to the next sentence. If a Registration Statement involves an
underwritten offering and the managing underwriter advises the Company in
writing that, in its opinion, the number of securities requested to be included
in such Registration Statement exceeds the number which can be sold in such
offering without adversely affecting the offering, the Company will include in
such Registration Statement the number of such securities which the Company is
so advised can be sold in such offering without adversely affecting the
offering, determined as follows: (i) first, the securities proposed by the
Company to be sold for it own account; and (ii) second, any Warrant Shares
requested to be included in such registration by the Holder and any other
securities of the Company pro rata among the holders thereof requesting such
registration on the basis of the number of shares of such securities requested
to be included by such holders. As used herein, "Registrable Securities" shall
mean the Warrant Shares that have not been previously sold pursuant to a
registration statement or Rule 144 promulgated under the Act.
(b) In the event of a registration pursuant to the provisions of this
Section 8, the Company shall use its best efforts to cause the Registrable
Securities so registered to be registered or qualified for sale under the
securities or blue sky laws of such jurisdictions as the Holder may reasonably
request; provided, however, that the Company shall not be required to
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<PAGE>
qualify to do business in any state by reason of this Section 8(b) in which it
is not otherwise required to qualify to do business.
(c) The Company shall keep effective any registration or qualification
contemplated by this Section 8 and shall from time to time amend or supplement
each applicable registration statement, preliminary prospectus, final
prospectus, application, document, and communication for such period of time as
shall be required to permit the Holder to complete the offer and sale of the
Registrable Securities covered thereby. The Company shall in no event be
required to keep any such registration or qualification in effect for a period
in excess of nine months from the date on which the Holder is first free to sell
such Registrable Securities; provided, however, that, if the Company is required
to keep any such registration or qualification in effect with respect to
securities other than the Registrable Securities beyond such period, the Company
shall keep such registration or qualification in effect as it relates to the
Registrable Securities for so long as such registration or qualification remains
or is required to remain in effect in respect of such other securities.
(d) In the event of a registration pursuant to the provisions of this
Section 8, the Company shall furnish to the Holder such number of copies of the
Registration Statement and of each amendment and supplement thereto (in each
case, including all exhibits), such reasonable number of copies of each
prospectus contained in such registration statement and each supplement or
amendment thereto (including each preliminary prospectus), all of which shall
conform to the requirements of the Act and the rules and regulations thereunder,
and such other documents, as the Holder may reasonably request to facilitate the
disposition of the Registrable Securities included in such registration.
(e) In the event of a registration pursuant to the provisions of this
Section 8, the Company shall furnish the Holder of any Registrable Securities so
registered with an opinion of its counsel (reasonably acceptable to the Holder)
to the effect that (i) the registration statement has become effective under the
Act and no order suspending the effectiveness of the registration statement,
preventing or suspending the use of the registration statement, any preliminary
prospectus, any final prospectus, or any amendment or supplement thereto has
been issued, nor has the Commission or any securities or blue sky authority of
any jurisdiction instituted or threatened to institute any proceedings with
respect to such an order, (ii) the registration statement and each prospectus
forming a part thereof (including each preliminary prospectus), and any
amendment or supplement thereto, complies as to form with the Act and the rules
and regulations thereunder, and (iii) such counsel has no knowledge of any
material misstatement or omission in such registration statement or any
prospectus, as amended or supplemented. Such opinion shall also state the
jurisdictions in which the Registrable Securities have been registered or
qualified for sale pursuant to the provisions of Section 8(b).
(f) In the event of a registration pursuant to the provision of this
Section 8, the Company shall enter into a cross-indemnity agreement and a
contribution agreement, each in customary form, with each underwriter, if any,
and, if requested, enter into an underwriting
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<PAGE>
agreement containing conventional representations, warranties, allocation of
expenses, and customary closing conditions, including, but not limited to,
opinions of counsel and accountants' cold comfort letters, with any underwriter
who acquires any Registrable Securities.
(g) In the event of a registration pursuant to the provisions of this
Section 8:
(i) The Holder shall furnish to the Company in writing such
appropriate information (relating to the Holder and the intention of such
Holder as to proposed methods of sale or other disposition of its shares of
Common Stock) and the identity of and compensation to be paid to any
proposed underwriters to be employed in connection therewith as the
Company, any underwriter, or the Commission or any other regulatory
authority may request;
(ii) The Holder shall enter into the usual and customary form of
underwriting agreement agreed to by the Company and any underwriter with
respect to any such offering, if required, and such underwriting agreement
shall contain the customary rights of indemnity between the Company, the
underwriters, and the Holder;
(iii) The Holder shall agree that he shall execute, deliver and/or
file with or supply the Company, any underwriters, the Commission and/or
any state or other regulatory authority such information, documents,
representations, undertakings and/or agreements necessary to carry out the
provisions of the registration covenants contained in this Section 8 and/or
to effect the registration or qualification of his or its Registrable
Securities under the Act and/or any of the laws and regulations of any
state of governmental instrumentality;
(iv) the Company's obligation to include any Registrable Securities in
a registration statement shall be subject to the written agreement of the
Holder thereof to offer such securities in the same manner and on the same
terms and conditions as the other securities of the same class are being
offered pursuant to the registration statement, if such shares are being
underwritten;
(v) In the event that all the Registrable Securities have not been
sold on or prior to the expiration of the period specified in Section 8(c)
above, the Company may de-register by post-effective amendment any
Registrable Securities covered by the registration statement, but not sold
on or prior to such date. The Company agrees that it will notify the Holder
of Registrable Securities of the filing and effective date of such
post-effective amendment; and
(vi) The Holder agrees that upon notification by the Company that the
prospectus in respect to any public offering covered by the provisions
hereof is in need of revision, such Holder shall immediately upon receipt
of such notification (x) cease to offer or sell any securities of the
Company which must be accompanied by such prospectus, (y) return all such
prospectuses in such Holder's hands to the Company, and (z) not offer or
sell any securities
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<PAGE>
of the Company until such Holder has been provided with a current
prospectus and the Company has given such Holder notification permitting
such Holder to resume offers and sales.
(h) The Company agrees that until all the Registrable Securities have been
sold under a registration statement or pursuant to Rule 144 under the Act, it
shall keep current in filing all reports, statements and other materials
required to be filed with the Commission to permit holders of the Registrable
Securities to sell such securities under Rule 144.
9. (a) Subject to the conditions set forth below, the Company agrees to
indemnify and hold harmless the Holder, its officers, directors, partners,
employees, agents and counsel, and each person, if any, who controls any such
person within the meaning of Section 15 of the Act or Section 20(a) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), from and
against any and all loss, liability, charge, claim, damage, and expense
whatsoever (which shall include, for all purposes of this Section 9, but not be
limited to, attorneys' fees and any and all reasonable expense whatsoever
incurred in investigating, preparing, or defending against any litigation,
commenced or threatened, or any claim whatsoever, and any and all amounts paid
in settlement of any claim or litigation), as and when incurred, arising out of,
based upon, or in connection with: (i) any untrue statement or alleged untrue
statement of a material fact contained (A) in any registration statement,
preliminary prospectus, or final prospectus (as from time to time amended and
supplemented), or any amendment or supplement thereto, relating to the sale of
any of the Registrable Securities, or (B) in any application or other document
or communication (in this Section 9 collectively called an "application")
executed by or on behalf of the Company or based upon written information
furnished by or on behalf of the Company filed in any jurisdiction in order to
register or qualify any of the Registrable Securities under the securities or
blue sky laws thereof or filed with the Commission or any securities exchange;
or (ii) any omission or alleged omission to state a material fact required to be
stated in any document referenced in clause (A) or (B) above or necessary to
make the statements therein not misleading, unless such statement or omission
was made in reliance upon and in conformity with written information furnished
to the Company with respect to such Holder by or on behalf of such person
expressly for inclusion in any registration statement, preliminary prospectus,
or final prospectus, or any amendment or supplement thereto, or in any
application, as the case may be; or (iii) any breach of any representation,
warranty, covenant, or agreement of the Company contained in this Warrant. The
foregoing agreement to indemnify shall be in addition to any liability the
Company may otherwise have, including liabilities arising under this Warrant.
If any action is brought against the Holder or any of its officers,
directors, partners, employees, agents, or counsel, or any controlling persons
of such person (an "indemnified party") in respect of which indemnity may be
sought against the Company pursuant to the foregoing paragraph, such indemnified
party or parties shall promptly notify the Company in writing of the institution
of such action (but the failure so to notify shall not relieve the Company from
any liability other than pursuant to this Section 9(a), except to the extent it
may have been prejudiced in any material respect by such failure) and the
Company shall promptly
8
<PAGE>
assume the defense of such action, including the employment of counsel
(reasonably satisfactory to such indemnified party or parties) and payment of
expenses. Such indemnified party or parties shall have the right to employ its
or their own counsel in any such case, but the fees and expenses of such counsel
shall be at the expense of such indemnified party or parties unless the
employment of such counsel shall have been authorized in writing by the Company
in connection with the defense of such action or the Company shall not have
promptly employed counsel reasonably satisfactory to such indemnified party or
parties to have charge of the defense of such action or such indemnified party
or parties shall have reasonably concluded that there may be one or more legal
defenses available to it or them or to other indemnified parties which are
different from or additional to those available to the Company, in any of which
events such fees and expenses shall be borne by the Company and the Company
shall not have the right to direct the defense of such action on behalf of the
indemnified party or parties. Anything in this Section 9(a) to the contrary
notwithstanding, the Company shall not be liable for any settlement of any such
claim or action effected without its written consent, which shall not be
unreasonably withheld. The Company shall not, without the prior written consent
of each indemnified party that is not released as described in this sentence,
settle or compromise any action, or permit a default or consent to the entry of
judgment in or otherwise seek to terminate any pending or threatened action, in
respect of which indemnity may be sought hereunder (whether or not any
indemnified party is a party thereto), unless such settlement, compromise,
consent, or termination includes an unconditional release of each indemnified
party from all liability in respect of such action. The Company agrees promptly
to notify the Holder of the commencement of any litigation or proceedings
against the Company or any of its officers or directors in connection with the
sale of any Registrable Securities or any preliminary prospectus, prospectus,
registration statement, or amendment or supplement thereto, or any application
relating to any sale of any Registrable Securities.
(b) The Holder agrees to indemnify and hold harmless the Company, each
director of the Company, each officer of the Company who shall have signed any
registration statement covering Registrable Securities held by the Holder, each
other person, if any, who controls the Company within the meaning of Section 15
of the Act or Section 20(a) of the Exchange Act, and its or their respective
counsel, to the same extent as the foregoing indemnity from the Company to the
Holder in Section 9(a), but only with respect to statements or omissions, if
any, made in any registration statement, preliminary prospectus, or final
prospectus (as from time to time amended and supplemented), or any amendment or
supplement thereto, or in any application, in reliance upon and in conformity
with written information furnished to the Company with respect to the Holder by
or on behalf of the Holder expressly for inclusion in any such registration
statement, preliminary prospectus, or final prospectus, or any amendment or
supplement thereto, or in any application, as the case may be. If any action
shall be brought against the Company or any other person so indemnified based on
any such registration statement, preliminary prospectus, or final prospectus, or
any amendment or supplement thereto, or in any application, and in respect of
which indemnity may be sought against the Holder pursuant to this Section 9(b),
the Holder shall have the rights and duties given to the Company,
9
<PAGE>
and the Company and each other person so indemnified shall have the rights and
duties given to the indemnified parties, by the provisions of Section 9(a).
(c) To provide for just and equitable contribution, if (i) an indemnified
party makes a claim for indemnification pursuant to Section 9(a) or 9(b)
(subject to the limitations thereof) but it is found in a final judicial
determination, not subject to further appeal, that such indemnification may not
be enforced in such case, even though this Agreement expressly provides for
indemnification in such case, or (ii) any indemnified or indemnifying party
seeks contribution under the Act, the Exchange Act or otherwise, then the
Company (including for this purpose any contribution made by or on behalf of any
director of the Company, any officer of the Company who signed any such
registration statement, any controlling person of the Company, and its or their
respective counsel), as one entity, and the Holder of the Registrable Securities
included in such registration in the aggregate (including for this purpose any
contribution by or on behalf of an indemnified party), as a second entity, shall
contribute to the losses, liabilities, claims, damages, and expenses whatsoever
to which any of them may be subject, on the basis of relevant equitable
considerations such as the relative fault of the Company and such Holder in
connection with the facts which resulted in such losses, liabilities, claims,
damages, and expenses. The relative fault, in the case of an untrue statement,
alleged untrue statement, omission, or alleged omission, shall be determined by,
among other things, whether such statement, alleged statement, omission, or
alleged omission relates to information supplied by the Company or by such
Holder, and the parties' relative intent, knowledge, access to information, and
opportunity to correct or prevent such statement, alleged statement, omission,
or alleged omission. The Company and the Holder agree that it would be unjust
and inequitable if the respective obligations of the Company and the Holder for
contribution were determined by pro rata or per capita allocation of the
aggregate losses, liabilities, claims, damages, and expenses (even if the Holder
and the other indemnified parties were treated as one entity for such purpose)
or by any other method of allocation that does not reflect the equitable
considerations referred to in this Section 9(c). No person guilty of a
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who is not guilty of such
fraudulent misrepresentation. Anything in this Section 9(c) to the contrary
notwithstanding, no party shall be liable for contribution with respect to the
settlement of any claim or action effected without its written consent. This
Section 9(c) is intended to supersede any right to contribution under the Act,
the Exchange Act or otherwise.
10. The issuance of any Warrant Shares or other securities upon the
exercise of this Warrant, and the delivery of certificates or other instruments
representing such shares or other securities, shall be made without charge to
the Holder for any tax or other charge in respect of such issuance. The Company
shall not, however, be required to pay any tax which may be payable in respect
of any transfer involved in the issue and delivery of any certificate in a name
other than that of the Holder and the Company shall not be required to issue or
deliver any such certificate unless and until the person or persons requesting
the issue thereof shall have paid to the Company the amount of such tax or shall
have established to the satisfaction of the Company that such tax has been paid.
10
<PAGE>
11. Prior to the registration of the Warrant Shares under Section 8 hereof,
certificates evidencing the Warrant Shares issued upon exercise of the Warrant
shall bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED. SUCH SHARES MAY NOT BE OFFERED
OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT, OR AN
EXEMPTION FROM REGISTRATION UNDER SUCH ACT."
12. Upon receipt of evidence satisfactory to the Company of the loss,
theft, destruction, or mutilation of any Warrant (and upon surrender of any
Warrant if mutilated), and upon reimbursement of the Company's reasonable
incidental expenses, the Company shall execute and deliver to the Holder thereof
a new Warrant of like date, tenor, and denomination.
13. The Holder of any Warrant shall not have, solely on account of such
status, any rights of a stockholder of the Company, either at law or in equity,
or to any notice of meetings of stockholders or of any other proceedings of the
Company, except as provided in this Warrant.
14. Any notice or other communication required or permitted to be given
hereunder shall be in writing and shall be mailed by certified mail, return
receipt requested or sent by Federal Express, Express Mail, or similar overnight
delivery or courier service or delivered (in person or by telecopy, telex, or
similar telecommunications equipment) against receipt to the party to whom it is
to be given, if sent to the Company, at: 150 East 58th Street, Suite 3400, New
York, New York 10155, Attention: Assistant Secretary and General Counsel; or if
sent to the Holder, at the Holder's address as it shall appear on the Warrant
Register; or to such other address as the party shall have furnished in writing
in accordance with the provisions of this Section 14. Any notice or other
communication given by certified mail shall be deemed given at the time of
certification thereof, except for a notice changing a party's address which will
be deemed given at the time of receipt thereof. Any notice given by other means
permitted by this Section 14 shall be deemed given at the time of receipt
thereof.
15. This Warrant shall be binding upon the Company and its successors and
assigns and shall inure to the benefit of the Holder and its successors and
assigns.
16. This Warrant shall be construed in accordance with the laws of the
State of New York applicable to contracts made and performed within such State,
without regard to principles of conflicts of law.
11
<PAGE>
17. The Company irrevocably consents to the jurisdiction of the courts of
the State of New York and of any federal court located in such State in
connection with any action or proceeding arising out of or relating to this
Warrant, any document or instrument delivered pursuant to, in connection with or
simultaneously with this Warrant, or a breach of this Warrant or any such
document or instrument. In any such action or proceeding, the Company waives
personal service of any summons, complaint or other process.
Dated: As of March 15, 2000 COMMODORE APPLIED TECHNOLOGIES, INC.
By: /s/ PAUL E. HANNESSON
------------------------
Name: Paul E. Hannesson
Title: President and Chief Executive Officer
12
<PAGE>
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to transfer the
attached Warrant.)
FOR VALUE RECEIVED, ______________________________ hereby sells, assigns,
and transfers unto _____________________ a Warrant to purchase Shares, par value
$.001 per share, of Commodore Applied Technologies, Inc. (the "Company"),
together with all right, title, and interest therein, and does hereby
irrevocably constitute and appoint ___________________ attorney to transfer such
Warrant on the books of the Company, with full power of substitution.
Dated: ________________________
Signature_________________________________
NOTICE
The signature on the foregoing Assignment must correspond to the name as
written upon the face of this Warrant in every particular, without alteration or
enlargement or any change whatsoever.
13
<PAGE>
To: Commodore Applied Technologies, Inc.
150 East 58th Street, Suite 3400
New York, New York 10155
ELECTION TO EXERCISE
The undersigned hereby exercises its rights to purchase ______________
Warrant Shares covered by the within warrant and tenders payment herewith in the
amount of $ _____________ in accordance with the terms thereof, and requests
that certificates for such securities be issued in the name of, and delivered
to:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print Name, Address and Social Security
or Tax Identification Number)
and, if such number of Warrant Shares shall not be all the Warrant Shares
covered by the within Warrant, that a new Warrant for the balance of the Warrant
Shares covered by the within Warrant be registered in the name of, and delivered
to, the undersigned at the address stated below.
Dated:_________________________ Name________________________________
(Print)
Address:_______________________
_________________________________
(Signature)
14
[GREENBERG TRAURIG, LLP LETTERHEAD]
March 31, 2000
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"), for the
registration of an aggregate of 13,863,475 shares (the "Shares") of the
Company's common stock, par value $.001 per share (the "Common Stock"). The
Shares consist of: (i) an aggregate of 11,000,000 shares (the "Conversion
Shares") of Common Stock that may be issuable (x) upon conversion of the
Company's Series E convertible preferred stock, par value $0.001 per share (the
"Series E Preferred Stock"), issued to the Shaar Fund Ltd. (the "Shaar Fund")
(y) upon conversion of the Company's Series F convertible preferred stock, par
value $0.001 per share (the "Series F Preferred Stock"), issued to the Shaar
Fund, and (z) upon exercise of the warrants (the "Warrants") issued by the
Company to the Shaar Fund to purchase up to an aggregate of 562,500 shares
(subject to adjustment) of the Company's Common Stock; (ii) 2,500,000 shares
(the "Environmental Shares") of Common Stock owned by Commodore Environmental
Services, Inc., an affiliate of the Company; and (iii) 363,475 shares (the
"Avalon Shares") of Common Stock which may be issued to Avalon Research Group
Inc. upon exercise of warrants (the "Avalon Warrants") to purchase up to an
aggregate of 363,475 shares of Common Stock.
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.
With respect to the issuance of the Conversion Shares and the Avalon
Shares by the Company, we have assumed that the Conversion Shares and the Avalon
Shares will be issued, and the certificates evidencing the same will be duly
delivered, in accordance with the respective terms of the Series E Preferred
Stock, the Series F Preferred Stock, the Warrants or the Avalon Warrants, as the
case may be, and against receipt of the consideration stipulated therefor, which
will not be less than the par value of the Conversion Shares or the Avalon
Shares, as the case may be.
With respect to the Environmental Shares, we have assumed that such shares
have been issued and the certificate evidencing the same have been duly
delivered, against receipt of the consideration stipulated therefor, which was
not less than the par value of the Environmental Shares.
Based on the foregoing, we are of the opinion that the Shares have been
duly authorized and, when issued and paid for in accordance with the foregoing
assumptions, have been and will be validly issued, fully paid and
non-assessable.
The opinion set forth above is limited to the Delaware General Corporation
Law, as amended.
We hereby consent to the filing of this opinion as an exhibit to 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, LLP
-------------------------------------------
Greenberg Traurig, LLP
SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT, dated as of March 15, 2000 (this
"Agreement"), by and between Commodore Applied Technologies, Inc., a Delaware
corporation, with principal executive offices located at 150 East 58th Street,
Suite 3400, New York, New York 10155 (the "Company"), and The Shaar Fund Ltd.
("Buyer").
WHEREAS, Buyer desires to purchase from the Company, and the Company
desires to issue and sell to Buyer, upon the terms and subject to the conditions
of this Agreement, (i) 266,700 shares of the Company's Series F Convertible
Preferred Stock, par value $0.001 per share (collectively, the "Preferred
Shares"), and (ii) Common Stock Purchase Warrants in the form attached hereto as
Exhibit A to purchase 250,000 shares of Common Stock (as defined below)
(collectively, the "Warrants");
WHEREAS, upon the terms and subject to the designations, preferences and
rights set forth in the Company's Certificate of Designation of Series F
Convertible Preferred Stock in the form attached hereto as Exhibit B (the
"Certificate of Designation"), the Preferred Shares are convertible into shares
of the Company's common stock, par value $0.001 per share (the "Common Stock");
and
WHEREAS, the Warrants, upon the terms and subject to the conditions
specified in the Warrants, will be exercisable for a period of five years;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, the parties hereto, intending to be legally bound, hereby
agree as follows:
I. PURCHASE AND SALE OF PREFERRED SHARES AND WARRANTS
A. Transaction. Buyer hereby agrees to purchase from the Company, and the
Company has offered and hereby agrees to issue and sell to Buyer in a
transaction exempt from the registration and prospectus delivery requirements of
the Securities Act of 1933, as amended (the "Securities Act"), the Preferred
Shares and the Warrants to purchase 250,000 shares of Common Stock .
B. Purchase Price; Form of Payment. The purchase price for the Preferred
Shares and the Warrants to be purchased by Buyer hereunder shall be $2,000,000
(the "Purchase Price"). Simultaneously with the execution of this Agreement,
Buyer shall pay the Purchase Price by wire transfer of immediately available
funds to the escrow agent (the "Escrow Agent") identified in those certain
Escrow Instructions of even date herewith, a copy of which is attached hereto as
Exhibit C (the "Escrow Instructions"). Simultaneously with the execution of this
Agreement, the Company shall deliver one or more duly authorized, issued and
executed
<PAGE>
certificates (I/N/O Buyer or, if the Company otherwise has been notified, I/N/O
Buyer's nominee) evidencing the Preferred Shares and the Warrants which Buyer is
purchasing, to the Escrow Agent or its designated depository. By executing and
delivering this Agreement, Buyer and the Company each hereby agree to observe
the terms and conditions of the Escrow Instructions, all of which are
incorporated herein by reference as if fully set forth herein.
C. Method of Payment. Payment into escrow of the Purchase Price shall be
made as set forth in the Escrow Instructions.
II. BUYER'S REPRESENTATIONS AND WARRANTIES; ACCESS TO INFORMATION;
INDEPENDENT INVESTIGATION
Buyer represents and warrants to and covenants and agrees with the Company
as follows:
A. Buyer is purchasing the Preferred Shares, the Warrants, the Common Stock
issuable upon exercise of the Warrants (the "Warrant Shares"), the Common Stock,
if any, issuable in payment of dividends on the Preferred Shares (the "Dividend
Shares"), and the Common Stock issuable upon conversion or redemption of the
Preferred Shares (the "Conversion Shares" and, collectively with the Preferred
Shares, the Warrants, the Warrant Shares and the Dividend Shares, the
"Securities") for its own account, for investment purposes only and not with a
view towards or in connection with the public sale or distribution thereof in
violation of the Securities Act.
B. Buyer is (i) an "accredited investor" within the meaning of Rule 501 of
Regulation D under the Securities Act, (ii) experienced in making investments of
the kind contemplated by this Agreement, (iii) capable, by reason of its
business and financial experience, of evaluating the relative merits and risks
of an investment in the Securities, and (iv) able to afford the loss of its
investment in the Securities.
C. Buyer understands that the Securities are being offered and sold by the
Company in reliance on an exemption from the registration requirements of the
Securities Act and equivalent state securities and "blue sky" laws, and that the
Company is relying upon the accuracy of, and Buyer's compliance with, Buyer's
representations, warranties and covenants set forth in this Agreement to
determine the availability of such exemption and the eligibility of Buyer to
purchase the Securities;
D. Buyer understands that the Securities have not been approved or
disapproved by the Securities and Exchange Commission (the "Commission") or any
state securities commission.
E. This Agreement has been duly and validly authorized, executed and
delivered by Buyer and is a valid and binding agreement of Buyer enforceable
against it in accordance with its terms, subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and similar laws
affecting creditors' rights and remedies generally and except as
-2-
<PAGE>
rights to indemnity and contribution may be limited by federal or state
securities laws or the public policy underlying such laws.
F. Neither Buyer nor its affiliates nor any person acting on its or their
behalf has the intention of entering, or will enter into, prior to the closing,
any put option, short position or other similar instrument or position with
respect to the Common Stock, and neither Buyer nor any of its affiliates nor any
person acting on its or their behalf will use at any time shares of Common Stock
acquired pursuant to this Agreement to settle any put option, short position or
other similar instrument or position that may have been entered into prior to
the execution of this Agreement.
G. Buyer has been given the opportunity for a reasonable time prior to the
date hereof to ask questions of, and receive answers from, the Company or its
representatives concerning the Company and the Securities, and has been given
the opportunity for a reasonable time prior to the date hereof to obtain such
additional information necessary to verify the accuracy of the information which
was provided to the extent the Company possesses such information or can acquire
it without unreasonable effort or expense.
H. Buyer is not relying on the Company or its affiliates with respect to
economic considerations involved in an investment in the Securities.
I. Buyer represents, warrants and agrees that it will not sell or otherwise
transfer the Securities without registration under the Securities Act or an
exemption therefrom and fully understands and agrees that it must bear the
economic risk of an investment in the Securities because, among other reasons,
the Securities have not been registered under the Securities Act or under the
securities laws of any state and, therefore, cannot be resold, pledged, assigned
or otherwise disposed of unless they are registered under the Securities Act and
under the applicable securities laws of such states prior to such resale,
pledge, assignment or other disposition, or an exemption from such registration
is available. In particular, Buyer is aware that the Securities, when issued,
will be "restricted securities," as such term is defined in Rule 144 promulgated
under the Securities Act ("Rule 144"), and they may not be sold pursuant to Rule
144 unless all of the conditions of Rule 144 are met. Buyer also understands
that, except as otherwise provided herein or in the Registration Rights
Agreement (as defined below), the Company is under no obligation to register the
Securities on its behalf or to assist it in complying with any exemption from
registration under the Securities Act or applicable state securities laws. Buyer
further understands that sales or transfers of the Securities are further
restricted by applicable state securities laws and the provisions of this
Agreement.
J. No representations or warranties have been made to Buyer by the Company,
or any officer, employee, agent, affiliate or subsidiary of the Company, other
than the representations of the Company contained herein, and in subscribing for
the Securities Buyer is not relying upon any representations other than those
contained herein.
K. Buyer is not purchasing the Securities as a result of or subsequent to
any advertisement, article, notice or other communication published in any
newspaper, magazine, or similar media or broadcast over television or radio, any
seminar or meeting or any solicitation of
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a subscription by a person or entity not previously known to Buyer in connection
with investments in securities generally.
L. Neither the execution, delivery nor performance of this Agreement or any
other required documents by Buyer violates or conflicts with or creates (with or
without the giving of notice or the lapse of time, or both) a default under, or
a lien or encumbrance upon, any of Buyer's assets or properties pursuant to or
requires the consent, approval, or order of any government or governmental
agency or other person or entity under (x) any note, indenture, lease, license
or other material agreement to which Buyer is a party or by which it or any of
its assets or properties is bound, (y) any statute, law, rule, regulation or
court decree binding upon or applicable to Buyer or its assets or properties, or
(z) the charter or by-laws or other equivalent governing documents of Buyer.
III. THE COMPANY'S REPRESENTATIONS
The Company represents and warrants to Buyer that:
A. Capitalization.
1. The authorized capital stock of the Company consists solely of: (i)
100,000,000 shares of Common Stock, of which 31,016,338 shares are issued
and outstanding on the date hereof; and (ii) 10,000,000 shares of "blank
check" preferred stock, of which (a) 80,000 shares have been designated as
Series A Preferred Stock, of which 18,000 were issued and have been
retired, (b) 25,000 shares have been designated as Series B 6% Convertible
Preferred Stock, of which 20,909 have been issued, all of which have been
converted into Common Stock, (c) 15,000 shares have been designated as
Series C 6% Convertible Preferred Stock, of which 10,189 have been issued,
all of which have been converted into Common Stock, (d) 25,000 shares have
been designated as Series D 6% Convertible Preferred Stock, of which 20,391
have been issued, all of which have been converted into Common Stock, (e)
335,000 shares have been designated as Series E Convertible Preferred
Stock, of which 335,000 have been issued and are outstanding on the date
hereof, and (f) 266,700 shares have been designated as Series F Convertible
Preferred Stock. As of the date hereof, the Company has outstanding stock
options to purchase 7,536,397 shares of Common Stock and warrants
outstanding to purchase 24,423,669 shares of Common Stock. The exercise
price for each of such outstanding options and warrants is accurately set
forth on Schedule III.A.1. hereto.
2. The Conversion Shares, the Dividend Shares and the Warrant Shares
have been duly and validly authorized and reserved for issuance by the
Company, and when issued by the Company upon conversion of, or in lieu of
cash dividends on, the Preferred Shares and on exercise of the Warrants
will be duly and validly issued, fully paid and nonassessable and will not
subject the holder thereof to personal liability by reason of being such
holder.
3. Except as disclosed on Schedule III.A.3. hereto, there are no
preemptive, subscription, "call," right of first refusal or other similar
rights to acquire any
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capital stock of the Company or any of its Subsidiaries or other voting
securities of the Company that have been issued or granted to any person
and no other obligations of the Company or any of its Subsidiaries to
issue, grant, extend or enter into any security, option, warrant, "call,"
right, commitment, agreement, arrangement or undertaking with respect to
any of their respective capital stock.
4. Schedule III.A.4. hereto lists all the subsidiaries of the Company
(the "Subsidiaries"). Except as disclosed on Schedule III.A.4. hereto, the
Company does not own or control, directly or indirectly, any interest in
any other corporation, partnership, limited liability company,
unincorporated business organization, association, trust or other business
entity.
5. The Company has delivered to Buyer complete and correct copies of
the Certificate of Incorporation and the By-Laws of each of the Company and
the Subsidiaries, in each case as amended to the date of this Agreement.
Except as set forth on Schedule III.A.5., the Company has delivered to
Buyer true and complete copies of all minutes of the Board of Directors of
the Company (the "Board of Directors") since March 1, 1997.
B. Organization; Reporting Company Status.
1. Each of the Company and the Subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of the
state or jurisdiction in which it is incorporated and is duly qualified as
a foreign corporation in all jurisdictions in which the failure so to
qualify would reasonably be expected to have a material adverse effect on
the business, properties, prospects, condition (financial or otherwise) or
results of operations of the Company and the Subsidiaries taken as a whole
or on the consummation of any of the transactions contemplated by this
Agreement (a "Material Adverse Effect").
2. The Company has registered the Common Stock pursuant to Section 12
of the Securities Exchange Act of 1934, as amended (the "Exchange Act").
The Common Stock is listed and traded on the American Stock Exchange (the
"Amex") and the Company has not received any notice regarding, and to its
knowledge there is no threat of, the termination or discontinuance of the
eligibility of the Common Stock for such listing.
C. Authorization. The Company (i) has duly and validly authorized and
reserved for issuance (1) any remaining shares of Common Stock which were
reserved pursuant to the Securities Purchase Agreement dated as of November 4,
1999 between the Company and the Buyer (the "Prior Transaction"); and (2) an
additional 3,500,000 shares of Common Stock, which, together with the remaining
shares referred to in clause (1), is a number sufficient for the conversion of
and the payment of dividends (in lieu of cash payments) on the 266,700 Preferred
Shares and the exercise of the Warrants in full, and (ii) at all times from and
after the date hereof shall have a sufficient number of shares of Common Stock
duly and validly authorized and reserved for issuance to satisfy the conversion
of Preferred Shares, the payment of dividends (in
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lieu of cash payments) on the Preferred Shares and the exercise of the Warrants
in full. The Company understands and acknowledges the potentially dilutive
effect on the Common Stock of the issuance of the Preferred Shares and of the
Conversion Shares, the Dividend Shares and the Warrant Shares upon the
conversion of, and payment of dividends on, the Preferred Shares and the
exercise of the Warrants, respectively. The Company further acknowledges that
its obligation to issue Conversion Shares upon conversion of the Preferred
Shares and Warrant Shares upon exercise of the Warrants in accordance with this
Agreement, the Certificate of Designation and the Warrants is absolute and
unconditional regardless of the dilutive effect that such issuance may have on
the ownership interests of other stockholders of the Company and notwithstanding
the commencement of any case under 11 U.S.C. ss. 101 et seq. (the "Bankruptcy
Code"). In the event the Company is a debtor under the Bankruptcy Code, the
Company hereby waives to the fullest extent permitted any rights to relief it
may have under 11 U.S.C. ss. 362 in respect of the conversion of the Preferred
Shares and the exercise of the Warrants. The Company agrees, without cost or
expense to Buyer, to take or consent to any and all action necessary to
effectuate relief under 11 U.S.C. ss. 362. Schedule III.C. hereto sets forth (i)
all issuances and sales by the Company since December 31, 1998 of its capital
stock, and other securities convertible into or exercisable or exchangeable for
capital stock of the Company, (ii) the amount of such securities sold, including
the amount of any underlying shares of capital stock, (iii) the purchaser
thereof, (iv) the amount paid therefor, and (v) the material terms of all
outstanding capital stock of the Company (other than the Common Stock).
D. Authority; Validity and Enforceability. The Company has the requisite
corporate power and authority to file, and perform its obligations under, the
Certificate of Designation and to enter into the Documents (as hereinafter
defined) and to perform all of its obligations hereunder and thereunder
(including the issuance, sale and delivery to Buyer of the Securities). The
execution, delivery and performance by the Company of the Documents and the
consummation by the Company of the transactions contemplated hereby and thereby
(including, without limitation, the filing of the Certificate of Designation
with the Delaware Secretary of State's office, the issuance of the Preferred
Shares and the Warrants and the issuance and reservation for issuance of the
Conversion Shares, the Dividend Shares and the Warrant Shares) have been duly
and validly authorized by all necessary corporate action on the part of the
Company. Each of the Documents has been duly and validly executed and delivered
by the Company and the Certificate of Designation has been duly filed with the
Delaware Secretary of State's office by the Company, and each Document
constitutes a valid and binding obligation of the Company enforceable against it
in accordance with its terms, subject to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and similar laws affecting
creditors' rights and remedies generally and except as rights to indemnity and
contribution may be limited by federal or state securities laws or the public
policy underlying such laws. The Securities have been duly and validly
authorized for issuance by the Company and, when executed and delivered by the
Company, will be valid and binding obligations of the Company enforceable
against it in accordance with their terms, subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and similar laws
affecting creditors' rights and remedies generally. For purposes of this
Agreement, the term "Documents" means (i) this Agreement; (ii) the Registration
Rights Agreement of even date herewith between the Company and Buyer, a copy of
which is annexed hereto as Exhibit D (the "Registration
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Rights Agreement"); (iii) the Certificate of Designation; (iv) the Warrants; and
(v) the Escrow Instructions.
E. Validity of Issuance of the Securities. The Preferred Shares and the
Warrants as of the Closing Date, and the Conversion Shares, the Dividend Shares
and the Warrant Shares upon their issuance in accordance with the Certificate of
Designation and the Warrants, respectively, will be validly issued and
outstanding, fully paid and nonassessable, and not subject to any preemptive
rights, rights of first refusal, tag-along rights, drag-along rights or other
similar rights.
F. Non-contravention. Except as set forth on Schedule III.F., the execution
and delivery by the Company of the Documents, the issuance of the Securities,
and the consummation by the Company of the other transactions contemplated
hereby and thereby, including, without limitation, the filing of the Certificate
of Designation with the Delaware Secretary of State's office, do not, and
compliance with the provisions of this Agreement and other Documents will not,
conflict with, or result in any violation of, or default (with or without notice
or lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or loss of a material benefit
under, or result in the creation of any Lien (as defined in Section III.V.) upon
any of the properties or assets of the Company or any of its Subsidiaries under,
or result in the termination of, or require that any consent be obtained or any
notice be given with respect to, (i) the Certificate of Incorporation or By-Laws
of the Company or the comparable charter or organizational documents of any of
its Subsidiaries, (ii) any loan or credit agreement, note, bond, mortgage,
indenture, lease, contract or other agreement, instrument or permit applicable
to the Company or any of its Subsidiaries or their respective properties or
assets, or (iii) any Law (as defined in Section III.N.) applicable to, or any
judgment, decree or order of any court or government body having jurisdiction
over, the Company or any of its Subsidiaries or any of their respective
properties or assets.
G. Approvals. No authorization, approval or consent of any court or public
or governmental authority is required to be obtained by the Company for the
issuance and sale of the Preferred Shares or the Warrants (or the Conversion
Shares, the Dividend Shares or Warrant Shares) to Buyer as contemplated by this
Agreement, except such authorizations, approvals and consents as have been
obtained by the Company prior to the date hereof.
H. Commission Filings. The Company has properly and timely filed with the
Commission all reports, proxy statements, forms and other documents required to
be filed with the Commission under the Securities Act and the Exchange Act since
March 1, 1997 (the "Commission Filings"). As of their respective dates, (i) the
Commission Filings complied in all material respects with the requirements of
the Securities Act or the Exchange Act, as the case may be, and the rules and
regulations of the Commission promulgated thereunder applicable to such
Commission Filings, and (ii) none of the Commission Filings contained at the
time of its filing any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The financial statements of the Company included in the
Commission Filings, as of the dates of such documents, were true and complete in
all material respects and complied with applicable accounting requirements and
the published rules
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and regulations of the Commission with respect thereto, were prepared in
accordance with generally accepted accounting principles in the United States
("GAAP") (except in the case of unaudited statements permitted by Form 10-Q
under the Exchange Act) applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto) and fairly presented
the consolidated financial position of the Company and its Subsidiaries as of
the dates thereof and the consolidated results of their operations and cash
flows for the periods then ended (subject, in the case of unaudited statements,
to normal year-end audit adjustments that in the aggregate are not material and
to any other adjustment described therein).
I. Absence of Certain Changes. Since the Balance Sheet Date (as defined in
Section III.M.), there has not occurred any change, event or development in the
business, financial condition, prospects or results of operations of the Company
and the Subsidiaries, there has not existed any condition having or reasonably
likely to have a Material Adverse Effect, and the Company and the Subsidiaries
have conducted their respective businesses only in the ordinary course.
J. Full Disclosure. There is no fact known to the Company (other than
general economic or industry conditions known to the public generally) that has
not been fully disclosed in writing to Buyer that (i) reasonably could be
expected to have a Material Adverse Effect or (ii) reasonably could be expected
to materially and adversely affect the ability of the Company to perform its
obligations pursuant to the Documents.
K. Absence of Litigation. Except as set forth on Schedule III.K., there are
(i) no suits, actions or proceedings pending or, to the knowledge of the
Company, threatened against the Company or any of its Subsidiaries, (ii) no
complaints, lawsuits, charges or other proceedings pending or, to the knowledge
of the Company, threatened in any forum by or on behalf of any present or former
employee of the Company or any of its Subsidiaries, any applicant for employment
or classes of the foregoing alleging breach of any express or implied contract
of employment, any applicable law governing employment or the termination
thereof or other discriminatory, wrongful or tortious conduct in connection with
the employment relationship, and (iii) no judgments, decrees, injunctions or
orders of any court or other governmental entity or arbitrator outstanding
against the Company or any Subsidiary.
L. Absence of Events of Default. Except as set forth in Schedule III.L., no
"Event of Default" (as defined in any agreement or instrument to which the
Company is a party) and no event which, with notice, lapse of time or both,
would constitute an Event of Default (as so defined), has occurred and is
continuing.
M. Financial Statements; No Undisclosed Liabilities. The Company has
delivered to Buyer true and complete copies of the (i) audited balance sheet of
the Company and the Subsidiaries as at December 31, 1998, 1997 and 1996,
respectively, and the related audited statements of income, changes in
stockholders' equity and cash flows for the three fiscal years ended December
31, 1998, 1997 and 1996 including the related notes and schedules thereto and
(ii) unaudited balance sheets of the Company and the Subsidiaries and the
statements of income, changes in stockholders' equity and cash flows as at the
end of and for each fiscal quarter ended since December 31, 1998 including the
related notes and schedules thereto, all certified by the
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chief financial officer of the Company (collectively, the "Financial
Statements"), and all management letters, if any, from the Company's independent
auditors relating to the dates and periods covered by the Financial Statements.
Each of the Financial Statements is complete and correct in all material
respects, has been prepared in accordance with GAAP (subject, in the case of the
interim Financial Statements, to normal year end adjustments and the absence of
footnotes), and fairly presents the financial position, results of operations
and cash flows of the Company as at the dates and for the periods indicated. For
purposes hereof, the audited balance sheet of the Company as at December 31,
1998 is hereinafter referred to as the "Balance Sheet" and December 31, 1998 is
hereinafter referred to as the "Balance Sheet Date". Except as set forth on
Schedule III.M. hereto, the Company has no indebtedness, obligations or
liabilities of any kind (whether accrued, absolute, contingent or otherwise, and
whether due or to become due), which was not fully reflected in, reserved
against or otherwise described in the Balance Sheet or the notes thereto or
incurred in the ordinary course of business consistent with the Company's past
practices since the Balance Sheet Date.
N. Compliance with Laws; Permits. Each of the Company and its Subsidiaries
is in compliance with all laws, rules, regulations, codes, ordinances and
statutes (collectively, "Laws") applicable to it or to the conduct of its
business. The Company possesses all material permits, approvals, authorizations,
licenses, certificates and consents from all public and governmental authorities
which are necessary to conduct its business.
O. Related Party Transactions. Except as set forth on Schedule III.O.
hereto, neither the Company nor any of its officers, directors or "Affiliates"
(as such term is defined in Rule 12b-2 under the Exchange Act) nor any family
member of any officer, director or Affiliate of the Company has borrowed any
moneys from or has outstanding any indebtedness or other similar obligations to
the Company or any of the Subsidiaries. Except as set forth on Schedule III.O.
hereto, neither the Company nor any of its officers, directors or Affiliates nor
any family member of any officer, director or Affiliate of the Company (i) owns
any direct or indirect interest constituting more than a 1% equity (or similar
profit participation) interest in, or controls or is a director, officer,
partner, member or employee of, or consultant or lender to or borrower from, or
has the right to participate in the profits of, any person or entity which is
(x) a competitor, supplier, customer, landlord, tenant, creditor or debtor of
the Company or any Subsidiary, (y) engaged in a business related to the business
of the Company or any Subsidiary, or (z) a participant in any transaction to
which the Company or any Subsidiary is a party or (ii) is a party to any
contract, agreement, commitment or other arrangement with the Company or any
Subsidiary.
P. Insurance. Each of the Company and the Subsidiaries maintains property
and casualty, general liability, workers' compensation, environmental hazard,
personal injury and other similar types of insurance with financially sound and
reputable insurers that is adequate and consistent with industry standards and
the Company's historical claims experience. None of the Company or the
Subsidiaries has received notice from, and none of them has knowledge of any
threat by, any insurer (that has issued any insurance policy to the Company or
any Subsidiary) that such insurer intends to deny coverage under or cancel,
discontinue or not renew any insurance policy presently in force.
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Q. Securities Law Matters. Assuming the accuracy of the representations and
warranties of Buyer set forth in Article II hereof, the offer and sale by the
Company of the Securities is exempt from (i) the registration and prospectus
delivery requirements of the Securities Act and the rules and regulations of the
Commission thereunder and (ii) the registration and/or qualification provisions
of all applicable state securities and "blue sky" laws. Other than pursuant to
an effective registration statement under the Securities Act, the Company has
not issued, offered or sold the Preferred Shares or any shares of Common Stock
(including for this purpose any securities of the same or a similar class as the
Preferred Shares or Common Stock, or any securities convertible into or
exchangeable or exercisable for the Preferred Shares or Common Stock or any such
other securities) within the one-year period next preceding the date hereof,
except as disclosed on Schedule III.Q. hereto, and the Company shall not
directly or indirectly take, and shall not permit any of its directors, officers
or Affiliates directly or indirectly to take, any action (including, without
limitation, any offering or sale to any person or entity of the Preferred Shares
or shares of Common Stock) which will make unavailable the exemption from
Securities Act registration being relied upon by the Company for the offer and
sale to Buyer of the Preferred Shares and the Warrants (and the Conversion
Shares, the Dividend Shares and the Warrant Shares) as contemplated by this
Agreement. No form of general solicitation or advertising has been used or
authorized by the Company or any of its officers, directors or Affiliates in
connection with the offer or sale of the Preferred Shares and the Warrants (and
the Conversion Shares, the Dividend Shares and the Warrant Shares) as
contemplated by this Agreement or any other agreement to which the Company is a
party.
R. Environmental Matters.
Except as set forth on Schedule III.R. hereto:
1. The Company, the Subsidiaries and their respective operations are
in compliance with all applicable Environmental Laws and all permits
(including terms, conditions, and limitations therein) issued pursuant to
Environmental Laws or otherwise;
2. Each of the Company and the Subsidiaries has all permits, licenses,
waivers, exceptions, and exemptions required under all applicable
Environmental Laws necessary to operate its business;
3. None of the Company or the Subsidiaries is the subject of any
outstanding written order of or agreement with any governmental authority
or person respecting (i) Environmental Laws or permits, (ii) Remedial
Action or (iii) any Release or threatened Release of Hazardous Materials;
4. None of the Company or the Subsidiaries has received any written
communication alleging that it may be in violation of any Environmental Law
or any permit issued pursuant to any Environmental Law, or may have any
liability under any Environmental Law;
5. None of the Company or the Subsidiaries has any liability,
contingent or otherwise, in connection with any presence, treatment,
storage, disposal or Release of
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any Hazardous Materials whether on property owned or operated by the
Company or any Subsidiary or property of third parties, and none of the
Company or the Subsidiaries has transported, or arranged for transportation
of, any Hazardous Materials for treatment or disposal on any property;
6. There are no investigations of the business, operations, or
currently or previously owned, operated or leased property of the Company
or any Subsidiary pending or threatened which could lead to the imposition
of any case or liability pursuant to any Environmental Law;
7. There is not located at any of the properties owned or operated by
the Company or any Subsidiary any (A) underground storage tanks, (B)
asbestos-containing material or (C) equipment containing polychlorinated
biphenyls;
8. Each of the Company and the Subsidiaries has provided to Buyer all
environmentally related assessments, audits, studies, reports, analyses,
and results of investigations that have been performed with respect to the
currently or previously owned, leased or operated properties or activities
of the Company and such Subsidiaries;
9. There are no liens arising under or pursuant to any Environmental
Law on any real property owned, operated, or leased by the Company or any
Subsidiary, and no action of any governmental authority has been taken or,
to the knowledge of the Company, is in process of being taken which could
subject any of such properties to such liens, and none of the Company or
the Subsidiaries has been or is expected to be required to place any notice
or restriction relating to the presence of Hazardous Material at any real
property owned, operated, or leased by it in any deed to such property;
10. Neither the Company nor any of the Subsidiaries owns, operates, or
leases any hazardous waste generation, treatment, storage, or disposal
facility, as such terms are used pursuant to the RCRA and related or
analogous state, local, or foreign law. None of the properties owned,
operated, or leased by the Company, any of the Subsidiaries or any
predecessor thereof are now, or were in the past, used in any part as a
dump, landfill, or disposal site, and neither the Company, any of the
Subsidiaries nor any predecessor of any of them has filled any wetlands;
11. The purchase that is the subject of this Agreement will not
require any governmental approvals under Environmental Laws, including
those that are triggered by sales or transfers of businesses or real
property, including, as examples and without limitation, the New Jersey
Industrial Site Recovery Act, N.J. Stat. 13:1K-7 et seq., and the
Connecticut Transfer of Establishments Act, Conn. Gen. Stat. ss. 22a-134 et
seq.;
12. There is no currently existing requirement or requirement to be
imposed in the future by any Environmental Law or Environmental Permit
which could result in the incurrence of a cost that could be reasonably
expected to have a Material Adverse Effect; and
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13. Each of the Company and each of the Subsidiaries has disclosed to
Buyer all other acts or conditions that could result in any costs or
liabilities under Environmental Laws.
For purposes of this Section III.R.:
"Environmental Law" means any foreign, federal, state or local statute,
regulation, ordinance, or common law as now or hereafter in effect in any way
relating to the protection of human health, safety or welfare or the environment
including, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act, the Hazardous Materials Transportation Act, the
Resource Conservation and Recovery Act ("RCRA"), the Clean Water Act, the Clean
Air Act, the Toxic Substances Control Act, the Federal Insecticide, Fungicide,
and Rodenticide Act and the Occupational Safety and Health Act, and the
regulations promulgated pursuant to any of them;
"Hazardous Material" means any substance that is listed, classified or
regulated pursuant to any Environmental Law, including petroleum, gasoline, and
any other petroleum product, by-product, fraction or derivative, asbestos or
asbestos-containing material, lead-containing paint, water, or plumbing,
polychlorinated biphenyls, radioactive materials and radon;
"Release" means any placement, release, spill, filtration, emission,
leaking, pumping, injection, deposit, disposal, discharge, dispersal, migration,
or leaching to, through, or under the indoor or outdoor environment, or into,
through, under, or out of any property; and
"Remedial Action" means any action to (x) clean up, remove, remediate,
treat or in any other way address any Hazardous Material; (y) prevent or contain
the Release of any Hazardous Material; or (z) perform studies and investigations
or post-remedial monitoring and care in relation to (x) or (y) above.
S. Labor Matters. Neither the Company nor any of the Subsidiaries is party
to any labor or collective bargaining agreement, and there are no labor or
collective bargaining agreements which pertain to any employees of the Company
or any Subsidiary. No employees of the Company or any of the Subsidiaries are
represented by any labor organization and none of such employees has made a
pending demand for recognition, and there are no representation proceedings or
petitions seeking a representation proceeding presently pending or, to the
Company's knowledge, threatened to be brought or filed, with the National Labor
Relations Board or other labor relations tribunal. There is no organizing
activity involving the Company or any Subsidiary pending or to the Company's
knowledge, threatened by any labor organization or group of employees of the
Company or any of the Subsidiaries. There are no (i) strikes, work stoppages,
slowdowns, lockouts or arbitrations or (ii) material grievances or other labor
disputes pending or, to the knowledge of the Company, threatened against or
involving the Company or any of the Subsidiaries. There are no unfair labor
practice charges, grievances or complaints pending or, to the knowledge of the
Company, threatened by or on behalf of any employee or group of employees of the
Company or any of the Subsidiaries.
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T. ERISA Matters. All Plans maintained by the Company or any of its
Subsidiaries and ERISA Affiliates are listed in Schedule III.T. and copies of
all documentation relating to such Plans (including, but not limited to, copies
of written Plans, written descriptions of oral Plans, summary plan descriptions,
trust agreements, the three most recent annual returns, employee communications
and IRS determination letters) have been delivered to or made available for
review by the Buyer. Except as set forth in Schedule III.T.A., each Plan has at
all times been maintained and administered in all material respects in
accordance with its terms and the requirements of applicable law, including
ERISA and the Code, and each Plan intended to qualify under section 401(a) of
the Code has at all times since its adoption been so qualified, and each trust
which forms a part of any such plan has at all times since its adoption been
tax-exempt under section 501(a) of the Code. Except as set forth in Schedule
III.T.A., the Company and each of its Subsidiaries and ERISA Affiliates are in
compliance in all material respects with all provisions of ERISA applicable to
it. No Reportable Event has occurred, been waived or exists as to which the
Company or any of its Subsidiaries and ERISA Affiliates was required to file a
report with the PBGC, and the present value of all liabilities under each
Pension Plan (based on those assumptions used to fund such Plans) listed in
Schedule III.T. did not, as of the most recent annual valuation date applicable
thereto, exceed the value of the assets of such Pension Plan. None of the
Company, its Subsidiaries and ERISA Affiliates has incurred, or reasonably
expects to incur, any Withdrawal Liability with respect to any Multi-employer
Plan that could result in a Material Adverse Effect. None of the Company, its
Subsidiaries and ERISA Affiliates has received any notification that any
Multi-employer Plan is in reorganization or has been terminated within the
meaning of Title IV of ERISA, and no Multi-employer Plan is reasonably expected
to be in reorganization or termination where such reorganization or termination
has resulted or could reasonably be expected to result in increases to the
contributions required to be made to such Plan or otherwise. No direct,
contingent or secondary liability has been incurred or is expected to be
incurred by the Company or any of its Subsidiaries under Title IV of ERISA to
any party with respect to any Plan, or with respect to any other Plan presently
or heretofore maintained or contributed to by any ERISA Affiliate. Neither the
Company nor any of its Subsidiaries and ERISA Affiliates has incurred any
liability for any tax imposed under sections 4971 through 4980B of the Code or
civil liability under section 502(i) or (l) of ERISA. No suit, action or other
litigation or any other claim which could reasonably be expected to result in a
material liability or expense to the Company or any of its Subsidiaries or ERISA
Affiliates (excluding claims for benefits incurred in the ordinary course of
plan activities) has been brought or, to the knowledge of the Company,
threatened against or with respect to any Plan and there are no facts or
circumstances known to the Company or any of its Subsidiaries or ERISA
Affiliates that could reasonably be expected to give rise to any such suit,
action or other litigation. All contributions to Plans that were required to be
made under such Plans have been made, and all benefits accrued under any
unfunded Plan have been paid, accrued or otherwise adequately reserved in
accordance with GAAP, all of which accruals under unfunded Plans are as
disclosed in Schedule III.T., and, except as set forth in Schedule III.T.A., the
Company, its Subsidiaries and ERISA Affiliates have each performed all material
obligations required to be performed under all Plans. The execution, delivery
and performance of this Agreement and the other Documents and the consummation
of the transactions contemplated hereby and thereby (including, without
limitation, the offer, issue and sale by the Company, and the purchase by the
Buyer, of the Preferred Shares, the Conversion Shares, the Warrants, the Warrant
Shares and Dividend Shares)
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will not involve any "prohibited transaction" within the meaning of ERISA or the
Code with respect to any Plan.
As used in this Agreement:
"Code" means the Internal Revenue Code of 1986, as amended.
"ERISA" means the Employee Retirement Income Security Act of 1974, or any
successor statute, together with the regulations thereunder, as the same may be
amended from time to time.
"ERISA Affiliate" means any trade or business (whether or not incorporated)
that was, is or hereafter may become, a member of a group of which the Company
is a member and which is treated as a single employer under section 414 of the
Code.
"Multi-employer Plan" means a multi-employer plan as defined in section
4001(a)(3) of ERISA to which the Company or any ERISA Affiliate (other than one
considered an ERISA Affiliate only pursuant to subsection (m) or (o) of section
414 of the Code) is making or accruing an obligation to make contributions, or
has within any of the preceding six plan years made or accrued an obligation to
make contributions.
"PBGC" means the Pension Benefit Guaranty Corporation referred to and
defined in ERISA or any successor thereto.
"Pension Plan" means any pension plan (other than a Multi-employer Plan)
subject to the provision of Title IV of ERISA or section 412 of the Code that is
maintained for employees of the Company or any of its Subsidiaries, or any ERISA
Affiliate.
"Plan" means any bonus, incentive compensation, deferred compensation,
pension, profit sharing, retirement, stock purchase, stock option, stock
ownership, stock appreciation rights, phantom stock, leave of absence, layoff,
vacation, day or dependent care, legal services, cafeteria, life, health,
accident, disability, workmen's compensation or other insurance, severance,
separation or other employee benefit plan, practice, policy or arrangement of
any kind, whether written or oral, or whether for the benefit of a single
individual or more than one individual including, but not limited to, any
"employee benefit plan" within the meaning of section 3(3) of ERISA, including
any Pension Plan.
"Reportable Event" means any reportable event as defined in section 4043(b)
of ERISA or the regulations issued thereunder with respect to a Plan.
"Withdrawal Liability" means liability to a Multi-employer Plan as a result
of a complete or partial withdrawal from such Multi-employer Plan, as such terms
are defined in Part I of Subtitle E of Title IV of ERISA.
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U. Tax Matters.
1. The Company has filed all material Tax Returns which it is required
to file under applicable Laws; all such Tax Returns are true and accurate
in all material respects and have been prepared in compliance with all
applicable Laws; the Company has paid all Taxes due and owing by it
(whether or not such Taxes are required to be shown on a Tax Return) and
has withheld and paid over to the appropriate taxing authorities all Taxes
which it is required to withhold from amounts paid or owing to any
employee, stockholder, creditor or other third parties; and since the
Balance Sheet Date, the charges, accruals and reserves for Taxes with
respect to the Company (including any provisions for deferred income taxes)
reflected on the books of the Company are adequate to cover any Tax
liabilities of the Company if its current tax year were treated as ending
on the date hereof.
2. No claim has been made by a taxing authority in a jurisdiction
where the Company does not file tax returns that the Company is or may be
subject to taxation by such jurisdiction. There are no foreign, federal,
state or local tax audits or administrative or judicial proceedings pending
or being conducted with respect to the Company; no information related to
Tax matters has been requested by any foreign, federal, state or local
taxing authority; and, except as disclosed above, no written notice
indicating an intent to open an audit or other review has been received by
the Company from any foreign, federal, state or local taxing authority.
There are no material unresolved questions or claims concerning the
Company's Tax liability. The Company (A) has not executed or entered into a
closing agreement pursuant to section 7121 of the Code or any predecessor
provision thereof or any similar provision of state, local or foreign law;
or (B) has not agreed to or is required to make any adjustments pursuant to
section 481(a) of the Code or any similar provision of state, local or
foreign law by reason of a change in accounting method initiated by the
Company or any of its subsidiaries or has any knowledge that the IRS has
proposed any such adjustment or change in accounting method, or has any
application pending with any taxing authority requesting permission for any
changes in accounting methods that relate to the business or operations of
the Company. The Company has not been a United States real property holding
corporation within the meaning of section 897(c)(2) of the Code during the
applicable period specified in section 897(c)(1)(A)(ii) of the Code.
3. The Company has not made an election under section 341(f) of the
Code. The Company is not liable for the Taxes of another person that is not
a subsidiary of the Company under (A) Treas. Reg. Section 1.1502-6 (or
comparable provisions of state, local or foreign law), (B) as a transferee
or successor, (C) by contract or indemnity or (D) otherwise. The Company is
not a party to any tax sharing agreement. The Company has not made any
payments, is not obligated to make payments and is not a party to an
agreement that could obligate it to make any payments that would not be
deductible under section 280G of the Code.
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<PAGE>
As used in this Agreement:
"IRS" means the United States Internal Revenue Service.
"Tax" or "Taxes" means federal, state, county, local, foreign, or other
income, gross receipts, ad valorem, franchise, profits, sales or use, transfer,
registration, excise, utility, environmental, communications, real or personal
property, capital stock, license, payroll, wage or other withholding,
employment, social security, severance, stamp, occupation, alternative or add-on
minimum, estimated and other taxes of any kind whatsoever (including, without
limitation, deficiencies, penalties, additions to tax, and interest attributable
thereto) whether disputed or not.
"Tax Return" means any return, information report or filing with respect to
Taxes, including any schedules attached thereto and including any amendment
thereof.
V. Property. Except as set forth on Schedule III.V., each of the Company
and the Subsidiaries has good and marketable title to all of its assets and
properties material to the conduct of its business, free and clear of any liens,
pledges, security interests, claims, encumbrances or other restrictions of any
kind (collectively, "Liens"). With respect to any assets or properties it
leases, each of the Company and its Subsidiaries holds a valid and subsisting
leasehold interest therein, free and clear of any Liens, is in compliance, in
all material respects, with the terms of the applicable lease, and enjoys
peaceful and undisturbed possession under such lease. All of the assets and
properties of the Company and its Subsidiaries that are material to the conduct
of business as presently conducted or as proposed to be conducted by it are in
good operating condition and repair. The inventory of each of the Company and
its Subsidiaries is in good and marketable condition, does not include any
material quantity of items which are obsolete, damaged or slow moving, and is
salable (or may be leased) in the normal course of business as currently
conducted by it.
W. Intellectual Property. The Company owns or possesses adequate and
enforceable rights to use all patents, patent applications, trademarks,
trademark applications, trade names, service marks, copyrights, copyright
applications, licenses, know-how (including trade secrets and other unpatented
and/or unpatentable proprietary or confidential information, systems or
procedures) and other similar rights and proprietary knowledge (collectively,
"Intangibles") necessary for the conduct of its business as now being conducted
including, but not limited to, those described on Schedule III.W. hereto. Except
as set forth on Schedule III.W, the Company has all right, title and interest in
all of the Intangibles, free and clear of any and all Liens. The Company is not
infringing upon or in conflict with any right of any other person with respect
to any Intangibles. Except as disclosed on Schedule III.W. hereto, (i) no claims
have been asserted by any individual, partnership, corporation, unincorporated
organization or association, limited liability company, trust or other entity
(collectively, a "Person") contesting the validity, enforceability, use or
ownership of any Intangibles, and the Company has no knowledge of any basis for
such claim, and (ii) neither the Company nor the Subsidiaries has any knowledge
of infringement or misappropriation of the Intangibles by any third party.
X. Contracts. All contracts, agreements, notes, instruments, franchises,
leases, licenses, commitments, arrangements or understandings, written or oral
(collectively,
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"Contracts") which are material to the business and operations of the Company
and the Subsidiaries are in full force and effect and constitute legal, valid
and binding obligations of the Company and the Subsidiaries and, to the best
knowledge of the Company, the other parties thereto; the Company and the
Subsidiaries and, to the best knowledge of the Company, each other party
thereto, have performed in all material respects all obligations required to be
performed by them under the Contracts, and no material violation or default
exists in respect thereof, nor any event that with notice or lapse of time, or
both, would constitute a default thereof, on the part of the Company and the
Subsidiaries or, to the best knowledge of the Company, any other party thereto;
none of the Contracts is currently being renegotiated; and the validity,
effectiveness and continuation of all Contracts will not be materially adversely
affected by the transactions contemplated by this Agreement.
Y. Registration Rights. Except as set forth on Schedule III.Y., no Person
has, and as of the Closing (as defined in Article VII), no Person shall have,
any demand, "piggy-back" or other rights to cause the Company to file any
registration statement under the Securities Act, relating to any of its
securities or to participate in any such registration statement.
Z. Dividends. The timely payment of dividends on the Preferred Shares as
specified in the Certificate of Designation is not prohibited by the Certificate
of Incorporation or By-Laws of the Company or any agreement, Contract, document
or other undertaking to which the Company or any of the Subsidiaries is a party.
AA. Investment Company Act. Neither the Company nor any of the Subsidiaries
is an "investment company" within the meaning of the Investment Company Act of
1940, as amended (the "Investment Company Act"), nor is the Company nor any of
the Subsidiaries directly or indirectly controlled by or acting on behalf of any
Person which is an "investment company" within the meaning of the Investment
Company Act.
BB. Business Plan. Any business information of the Company previously
submitted to Buyer in any form, including the projections contained therein, was
prepared by the senior management of the Company in good faith and is based on
assumptions that the Company believes are reasonable. The Company is not aware
of any fact or condition that could reasonably be expected to result in the
Company not achieving the results described in such business plan.
CC. Year 2000 Compliance. The Company has reviewed its products, business
and operations that could be adversely affected by the risk that computer
applications used by the Company and the Subsidiaries may be unable to
recognize, and properly perform date-sensitive functions involving, dates prior
to and after December 31, 1999 (the "Year 2000 Problem"). The Company believes
its internal information and business systems will be able to perform properly
date-sensitive functions for all dates before and after January 1, 2000. In
addition, the Company has surveyed those vendors, suppliers and other third
parties (collectively, the "Outside Parties") with which the Company or any of
the Subsidiaries do business and whose failure to adequately address the Year
2000 Problem could reasonably be expected to adversely affect the business and
operations of the Company or any of the Subsidiaries. Based upon the
aforementioned internal review and surveys of the Outside Parties as of the date
of this
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Agreement, the Year 2000 Problem has not resulted in, and is not reasonably
expected to have, a Material Adverse Effect.
DD. Internal Controls and Procedures. The Company maintains accurate books
and records and internal accounting controls that provide reasonable assurance
that (i) all transactions to which the Company or each of the Subsidiaries is a
party or by which its properties are bound are executed with management's
authorization; (ii) the reported accountability of the Company's and the
Subsidiaries' assets is compared with existing assets at regular intervals;
(iii) access to the Company's and the Subsidiaries' assets is permitted only in
accordance with management's authorization; and (iv) all transactions to which
any of the Company and the Subsidiaries is a party or by which its properties
are bound are recorded as necessary to permit preparation of the financial
statements of the Company in accordance with GAAP.
EE. Payments and Contributions. Neither the Company nor any of its
Subsidiaries nor any of their respective directors, officers or, to their
respective knowledge, other employees has (i) used any company funds for any
unlawful contribution, endorsement, gift, entertainment or other unlawful
expense relating to political activity; (ii) made any direct or indirect
unlawful payment of company funds to any foreign or domestic government official
or employee, (iii) violated or is in violation of any provision of the Foreign
Corrupt Practices Act of 1977, as amended; or (iv) made any bribe, rebate,
payoff, influence payment, kickback or other similar payment to any person with
respect to Company matters.
FF. No Misrepresentation. No representation or warranty of the Company
contained in this Agreement or any of the other Documents, any schedule, annex
or exhibit hereto or thereto or any agreement, instrument or certificate
furnished by the Company to Buyer pursuant to this Agreement contains any untrue
statement of a material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein not misleading.
GG. Finder's Fee. There is no finder's fee, brokerage commission or like
payment in connection with the transactions contemplated by this Agreement for
which Buyer is liable or responsible. The Company will be solely responsible for
the payment of a finder's fee and brokerage commission to Avalon Research, Inc.
IV. CERTAIN COVENANTS AND ACKNOWLEDGMENTS
A. Restrictive Legend. Buyer acknowledges and agrees that, upon issuance
pursuant to this Agreement, the Securities (including any Dividends Shares,
Conversion Shares or the Warrant Shares) shall have endorsed thereon a legend in
substantially the following form (and a stop-transfer order may be placed
against transfer of the Preferred Shares, the Warrant Shares and the Conversion
Shares until such legend has been removed):
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY
STATE, AND ARE BEING OFFERED
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AND SOLD PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND SUCH LAWS. THESE SECURITIES MAY NOT BE SOLD OR
TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OR SUCH OTHER LAWS."
B. Filings. The Company shall make all necessary Commission Filings and
"blue sky" filings required to be made by the Company in connection with the
sale of the Securities to Buyer as required by all applicable Laws, and shall
provide a copy thereof to Buyer promptly after such filing.
C. Reporting Status. So long as Buyer beneficially owns any of the
Securities, the Company shall timely file all reports required to be filed by it
with the Commission pursuant to Section 13 or 15(d) of the Exchange Act.
D. Use of Proceeds. The Company shall use the proceeds from the sale of the
Securities (net of amounts paid by the Company for Buyer's out-of-pocket costs
and expenses, whether or not accounted for or incurred in connection with the
transactions contemplated by this Agreement (including the fees and
disbursements of Buyer's legal counsel), and finder's fees in connection with
such sale) solely for general corporate and working capital purposes.
E. Listing. Except to the extent the Company lists its Common Stock on The
New York Stock Exchange, the Company shall use its best efforts to maintain its
listing of the Common Stock on Amex. If the Common Stock is delisted from Amex,
the Company will use its best efforts to list the Common Stock on the most
liquid national securities exchange or quotation system that the Common Stock is
qualified to be listed on.
F. Reserved Conversion Shares. The Company at all times from and after the
date hereof shall have such number of shares of Common Stock duly and validly
authorized and reserved for issuance as shall be sufficient for the conversion
in full of, and the payment of dividends on, the Preferred Shares and the
exercise in full of the Warrants.
G. Right of First Refusal. The Company will use its best efforts to provide
Buyer with the opportunity to provide the financing in connection with any
financing contemplated by the Company that includes either the issuance of
equity securities or securities convertible into equity securities at a price
less than the Current Market Price (as defined in the Certificate of
Designation) on the date of issuance or the issuance of debt securities at a
price less than par value or having an effective annual interest rate in excess
of 9.9%.
H. Information. Each of the parties hereto acknowledges and agrees that
Buyer shall not be provided with, nor be given access to, any material
non-public information relating to the Company or any of the Subsidiaries.
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I. Exemption from Investment Company Act. The Company shall conduct its
business, and shall cause the Subsidiaries to conduct their businesses, in such
a manner that neither the Company nor any Subsidiary shall become an "investment
company" within the meaning of the Investment Company Act.
J. Accounting and Reserves. The Company shall maintain a standard and
uniform system of accounting and shall keep proper books and records and
accounts in which full, true and correct entries shall be made of its
transactions, all in accordance with GAAP applied on a consistent basis through
all periods, and shall set aside on such books for each fiscal year all such
reserves for depreciation, obsolescence, amortization, bad debts and other
purposes in connection with its operations as are required by such principles so
applied.
K. Transactions with Affiliates. Neither the Company nor any of its
Subsidiaries shall, directly or indirectly, enter into any transaction or
agreement with any stockholder, officer, director or Affiliate of the Company or
family member of any officer, director or Affiliate of the Company, unless the
transaction or agreement is (i) reviewed and approved by a majority of
Disinterested Directors (as defined below) and (ii) on terms no less favorable
to the Company or the applicable Subsidiary than those obtainable from a
non-affiliated person. A "Disinterested Director" shall mean a director of the
Company who is not and has not been an officer or employee of the Company and
who is not a member of the family of, controlled by or under common control
with, any such officer or employee.
L. Issuances of Additional Convertible Preferred Shares or Convertible
Debentures. The Company shall not file with the Commission a registration
statement relating to the offer and sale of any additional warrants, convertible
preferred stock or convertible debt securities or Common Stock into which any
such convertible securities or warrants are convertible into, unless, with
respect to the registration of convertible securities or warrants the terms of
the convertible securities or warrants so registered provide that under no
circumstances will the securities be convertible into Common Stock at a
conversion price below $0.50 and, with respect to the registration of Common
Stock into which such convertible securities or warrants are exchangeable into,
the exchange of such convertible securities or warrants into Common Stock will
not occur at a price below $.50, in each case, until the Registration Statement
(as defined in the Registration Rights Agreement) shall have been declared
effective by the Commission and the Registration Statement shall continuously be
effective and in compliance with the provisions of the Securities Act applicable
thereto for a period of six months.
M. Certain Restriction. So long as any Preferred Shares are outstanding:
(i) if any interest or dividends which shall have accrued on any Preferred
Shares shall not have been fully paid, when due or if the Company is in default
on any of the terms of any of the Documents, no dividends shall be declared or
paid or set apart for payment or other distribution declared or made upon Junior
Securities (as defined in the Certificate of Designation), which is issued and
outstanding as of the Closing Date, (ii) no dividends shall be declared or paid
or set apart for payment or other distribution declared or made upon Junior
Securities which shall be authorized or issued following the Closing Date, and
(iii) nor shall any Junior Securities be redeemed, purchased or otherwise
acquired (other than a redemption, purchase or other acquisition of shares of
Common Stock made for purposes of an employee incentive or benefit plan
(including a stock
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option plan) of the Company or any Subsidiary, for any consideration (or any
moneys be paid to or made available for a sinking fund for the redemption of any
shares of any such stock) by the Company, directly or indirectly.
N. Transfer Agent. If requested by Buyer, the Company shall replace the
then Transfer Agent for the Common Stock with a Transfer Agent designated by
Buyer.
O. Certain Restrictions. Neither Buyer nor its affiliates nor any person
acting on its or their behalf shall enter into any put option, short position or
other similar instrument or position with respect to the Common Stock and
neither Buyer nor any of its affiliates nor any person acting on its or their
behalf will use at any time shares of Common Stock acquired pursuant to this
Agreement to settle any put option, short position or other similar instrument
or position that may have been entered into prior to the execution of this
Agreement; provided, however, that nothing in this Section IV.O. shall operate
to forbid Buyer or any of its affiliates or any person acting on its or their
behalf from selling, or entering into any other transaction with respect to, the
Common Stock contemporaneously with or following such date and time as the
person or persons in whose name or names the Common Stock delivered at
conversion of Preferred Shares, as provided in the Certificate of Designation,
shall be issuable shall be deemed to have become the holder or holders of record
of the Common Shares represented thereby and all voting and other rights
associated with the beneficial ownership of such Common Shares shall have vested
with such person or persons.
P. Adjustment to Series E Preferred. Buyer agrees that the issuance of the
Series F Preferred Stock and the underlying Common Stock will not trigger an
adjustment to the Series E Preferred Stock pursuant to Section 6.4 of the
Certificate of Designation of Series E Preferred Stock of the Company dated
November 4, 1999.
V. TRANSFER AGENT INSTRUCTIONS
A. The Company undertakes and agrees that no instruction other than the
instructions referred to in this Article V and customary stop transfer
instructions prior to the registration and sale of the Common Stock pursuant to
an effective Securities Act registration statement shall be given to its
transfer agent for the Common Stock and that the Conversion Shares, the Dividend
Shares and the Warrant Shares shall otherwise be freely transferable on the
books and records of the Company as and to the extent provided in this
Agreement, the Registration Rights Agreement and applicable law. Nothing
contained in this Section V.A. shall affect in any way Buyer's obligations and
agreement to comply with all applicable securities laws upon resale of such
Common Stock. If, at any time, Buyer provides the Company with an opinion of
counsel reasonably satisfactory to the Company that registration of the resale
by Buyer of such Common Stock is not required under the Securities Act and that
the removal of restrictive legends is permitted under applicable law, the
Company shall permit the transfer of such Common Stock and promptly instruct the
Company's transfer agent to issue one or more certificates for Common Stock
without any restrictive legends endorsed thereon.
B. Buyer shall have the right to convert the Preferred Shares by
telecopying an executed and completed Notice of Conversion (as defined in the
Certificate of Designation) to
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the Company. Each date on which a Notice of Conversion is telecopied to and
received by the Company in accordance with the provisions hereof shall be deemed
a Conversion Date (as defined in the Certificate of Designation). The Company
shall transmit the certificates evidencing the shares of Common Stock issuable
upon conversion of any Preferred Shares (together with certificates evidencing
any Preferred Shares not being so converted) to Buyer via express courier, by
electronic transfer or otherwise, within five business days after receipt by the
Company of the Notice of Conversion (the "Delivery Date"). Within 30 days after
Buyer delivers the Notice of Conversion to the Company, Buyer shall deliver to
the Company a certificate or certificates evidencing the Preferred Shares being
converted.
C. Buyer shall have the right to purchase shares of Common Stock pursuant
to exercise of the Warrants in accordance with its applicable terms of the
Warrants. The last date that the Company may deliver shares of Common Stock
issuable upon any exercise of Warrants is referred to herein as the "Warrant
Delivery Date."
D. The Company understands that a delay in the issuance of the shares of
Common Stock issuable in lieu of cash dividends on the Preferred Shares or upon
the conversion of the Preferred Shares or exercise of the Warrants beyond the
applicable Dividend Payment Due Date (as defined in the Certificate of
Designation), Delivery Date or Warrant Delivery Date could result in economic
loss to Buyer. As compensation to Buyer for such loss (and not as a penalty),
the Company agrees to pay to Buyer for late issuance of Common Stock issuable in
lieu of cash dividends on the Preferred Shares or upon conversion of the
Preferred Shares or exercise of the Warrants in accordance with the following
schedule (where "No. Business Days" is defined as the number of business days
beyond five days from the Dividend Payment Due Date, the Delivery Date or the
Warrant Delivery Date, as applicable):
No. Business Days Compensation For Each 10 Shares
----------------- of Preferred Shares Not Converted
Timely or 500 Shares of Common
Stock Issuable In Payment of
Dividends or Upon Exercise of
Warrants Not Issued Timely
---------------------------------
1 $ 25
2 50
3 75
4 100
5 125
6 150
7 175
8 200
9 225
10 250
more than 10 $250 + $100 for each Business
Day Late beyond 10 days
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The Company shall pay to Buyer the compensation described above by the transfer
of immediately available funds upon Buyer's demand. Nothing herein shall limit
Buyer's right to pursue actual damages for the Company's failure to issue and
deliver Common Stock to Buyer. In addition to any other remedies which may be
available to Buyer, in the event the Company fails for any reason to deliver
such shares of Common Stock within five business days after the relevant
Dividend Payment Due Date, Delivery Date or Warrant Delivery Date, as
applicable, Buyer shall be entitled to rescind the relevant Notice of Conversion
or exercise of Warrants by delivering a notice to such effect to the Company
whereupon the Company and Buyer shall each be restored to their respective
original positions immediately prior to delivery of such Notice of Conversion on
delivery.
VI. DELIVERY INSTRUCTIONS
The Securities shall be delivered by the Company to the Escrow Agent
pursuant to Section I.B. hereof on a "delivery-against-payment basis" at the
Closing.
VII. CLOSING DATE
The date and time (the "Closing Date") of the issuance and sale of the
Preferred Shares and the Warrants (the "Closing") shall be the date hereof or
such other date as shall be mutually agreed upon in writing. The issuance and
sale of the Securities shall occur on the Closing Date at the offices of the
Escrow Agent. Notwithstanding anything to the contrary contained herein, the
Escrow Agent shall not be authorized to release to the Company the Purchase
Price or to Buyer the certificate(s) (I/N/O Buyer or I/N/O Buyer's nominee)
evidencing the Securities being purchased by Buyer unless the conditions set
forth in Sections VIII.C. and IX.H. hereof have been satisfied.
VIII. CONDITIONS TO THE COMPANY'S OBLIGATIONS
Buyer understands that the Company's obligation to sell the Securities on
the Closing Date to Buyer pursuant to this Agreement is conditioned upon:
A. Delivery by Buyer to the Escrow Agent of the Purchase Price;
B. The accuracy on the Closing Date of the representations and warranties
of Buyer contained in this Agreement as if made on the Closing Date (except for
representations and warranties which, by their express terms, speak as of and
relate to a specified date, in which case such accuracy shall be measured as of
such specified date) and the performance by Buyer in all material respects on or
before the Closing Date of all covenants and agreements of Buyer required to be
performed by it pursuant to this Agreement on or before the Closing Date; and
C. There shall not be in effect any Law or order, ruling, judgment or writ
of any court or public or governmental authority restraining, enjoining or
otherwise prohibiting any of the transactions contemplated by this Agreement.
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IX. CONDITIONS TO BUYER'S OBLIGATIONS
The Company understands that Buyer's obligation to purchase the Securities
on the Closing Date pursuant to this Agreement is conditioned upon:
A. Delivery by the Company to Buyer of evidence that the Certificate of
Designation has been filed and is effective;
B. Delivery by the Company to the Escrow Agent of one or more certificates
(I/N/O Buyer or I/N/O Buyer's nominee) evidencing the Securities to be purchased
by Buyer pursuant to this Agreement;
C. The accuracy on the Closing Date of the representations and warranties
of the Company contained in this Agreement as if made on the Closing Date
(except for representations and warranties which, by their express terms, speak
as of and relate to a specified date, in which case such accuracy shall be
measured as of such specified date) and the performance by the Company in all
respects on or before the Closing Date of all covenants and agreements of the
Company required to be performed by it pursuant to this Agreement on or before
the Closing Date, all of which shall be confirmed to Buyer by delivery of the
certificate of the chief executive officer of the Company to that effect;
D. Buyer having received an opinion of counsel for the Company, dated the
Closing Date, in form, scope and substance reasonably satisfactory to Buyer as
to the matters set forth in Annex A;
E. There not having occurred (i) any general suspension of trading in, or
limitation on prices listed for, the Common Stock on Amex, (ii) the declaration
of a banking moratorium or any suspension of payments in respect of banks in the
United States, (iii) the commencement of a war, armed hostilities or other
international or national calamity directly or indirectly involving the United
States or any of its territories, protectorates or possessions, or (iv) in the
case of the foregoing existing at the date of this Agreement, a material
acceleration or worsening thereof;
F. There not having occurred any event or development, and there being in
existence no condition, having or which reasonably and foreseeably could have a
Material Adverse Effect;
G. The Company shall have delivered to Buyer (as provided in the Escrow
Instructions) reimbursement of Buyer's out-of-pocket costs and expenses, whether
or not accounted for or incurred in connection with the transactions
contemplated by this Agreement (including the fees and disbursements of Buyer's
legal counsel), of $30,000;
H. There shall not be in effect any Law, order, ruling, judgment or writ of
any court or public or governmental authority restraining, enjoining or
otherwise prohibiting any of the transactions contemplated by this Agreement;
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I. Delivery by the Company of irrevocable instructions to the Company's
transfer agent to reserve (1) any remaining shares of Common Stock which were
reserved in the Prior Transaction for issuance of Common Stock of the Conversion
Shares and Warrant Shares and (2) an additional 3,500,000 shares of Common Stock
for issuance of the Conversion Shares and the Warrant Shares;
J. The Company shall have obtained all consents, approvals or waivers from
governmental authorities and third persons necessary for the execution, delivery
and performance of the Documents and the transactions contemplated thereby, all
without material cost to the Company; and
K. Buyer shall have received such additional documents, certificates,
payment, assignments, transfers and other delivers, as it or its legal counsel
may reasonably request and as are customary to effect a closing of the matters
herein contemplated.
X. TERMINATION
A. Termination by Mutual Written Consent. This Agreement may be terminated
and the transactions contemplated hereby may be abandoned, for any reason and at
any time prior to the Closing Date, by the mutual written consent of the Company
and Buyer.
B. Termination by the Company or Buyer. This Agreement may be terminated
and the transactions contemplated hereby may be abandoned by action of the
Company or Buyer if (i) the Closing shall not have occurred at or prior to 5:00
p.m., New York City time, on March 31, 2000 (the "Latest Closing Date");
provided, however, that the right to terminate this Agreement pursuant to this
Section X.B. shall not be available to any party whose failure to fulfill any of
its obligations under this Agreement has been the cause of or has resulted in
the failure of the Closing to occur at or before such time and date; provided,
further, however, that if the Closing shall not have occurred on or prior to the
Latest Closing Date, the Closing may only occur after the Latest Closing Date
with the written consent of Buyer.
C. Termination by Buyer. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned by Buyer at any time prior to
the Closing Date, if (i) the Company shall have failed to comply with any of its
covenants or agreements contained in this Agreement, (ii) there shall have been
a breach by the Company of any representation or warranty made by it in this
Agreement, (iii) there shall have occurred any event or development, or there
shall be in existence any condition, having or reasonably likely to have a
Material Adverse Effect or (iv) the Company shall have failed to satisfy the
conditions provided in Article IX hereof.
D. Termination by the Company. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned by the Company at any time
prior to the Closing Date, if (i) Buyer shall have failed to comply with any of
its covenants or agreements contained in this Agreement or (ii) there shall have
been a breach by Buyer of any representation or warranty made by it in this
Agreement.
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E. Effect of Termination. In the event of the termination of this Agreement
pursuant to this Article X, this Agreement shall thereafter become void and have
no effect, and no party hereto shall have any liability or obligation to any
other party hereto in respect of this Agreement, except that the provisions of
Article XI, this Section X.E and Section X.F shall survive any such termination;
provided, however, that no party shall be released from any liability hereunder
if this Agreement is terminated and the transactions contemplated hereby
abandoned by reason of (i) willful failure of such party to perform its
obligations hereunder or (ii) any misrepresentation made by such party of any
matter set forth herein.
XI. SURVIVAL; INDEMNIFICATION
A. The representations, warranties and covenants made by each of the
Company and Buyer in this Agreement, the annexes, schedules and exhibits hereto
and in each instrument, agreement and certificate entered into and delivered by
them pursuant to this Agreement shall survive the Closing and the consummation
of the transactions contemplated hereby. In the event of a breach or violation
of any of such representations, warranties or covenants, the party to whom such
representations, warranties or covenants have been made shall have all rights
and remedies for such breach or violation available to it under the provisions
of this Agreement or otherwise, whether at law or in equity, irrespective of any
investigation made by or on behalf of such party on or prior to the Closing
Date.
B. The Company hereby agrees to indemnify and hold harmless Buyer, its
Affiliates and their respective officers, directors, partners and members
(collectively, the "Buyer Indemnitees") from and against any and all losses,
claims, damages, judgments, penalties, liabilities and deficiencies
(collectively, "Losses") and agrees to reimburse Buyer Indemnitees for all out
of-pocket expenses (including the reasonable fees and expenses of legal
counsel), in each case promptly as incurred by Buyer Indemnitees and to the
extent arising out of or in connection with:
1. any misrepresentation, omission of fact or breach of any of the
Company's representations or warranties contained in this Agreement or the
other Documents, or the annexes, schedules or exhibits hereto or thereto or
any instrument, agreement or certificate entered into or delivered by the
Company pursuant to this Agreement or the other Documents;
2. any failure by the Company to perform in any material respect any
of its covenants, agreements, undertakings or obligations set forth in this
Agreement or the other Documents or any instrument, certificate or
agreement entered into or delivered by the Company pursuant to this
Agreement or the other Documents;
3. the purchase of the Preferred Shares and the Warrants, the
conversion of the Preferred Shares and the exercise of the Warrants and the
consummation of the transactions contemplated by this Agreement and the
other Documents, the use of any of the proceeds of the Purchase Price by
the Company, the purchase or ownership of any or all of the Securities, the
performance by the parties hereto of their respective obligations hereunder
and under the Documents or any claim, litigation, investigation,
proceedings or
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governmental action relating to any of the foregoing, whether or not Buyer
is a party thereto; or
4. resales of the Common Shares by Buyer in the manner and as
contemplated by this Agreement and the Registration Rights Agreement.
C. Buyer hereby agrees to indemnify and hold harmless the Company, its
Affiliates and their respective officers, directors, partners and members
(collectively, the "Company Indemnitees") from and against any and all Losses,
and agrees to reimburse the Company Indemnitees for all out-of-pocket expenses
(including the reasonable fees and expenses of legal counsel) in each case
promptly as incurred by the Company Indemnitees and to the extent arising out of
or in connection with:
1. any misrepresentation, omission of fact or breach of any of Buyer's
representations or warranties contained in this Agreement or the other
Documents, or the annexes, schedules or exhibits hereto or thereto or any
instrument, agreement or certificate entered into or delivered by Buyer
pursuant to this Agreement or the other Documents; or
2. any failure by Buyer to perform in any material respect any of its
covenants, agreements, undertakings or obligations set forth in this
Agreement or the other Documents or any instrument, certificate or
agreement entered into or delivered by Buyer pursuant to this Agreement or
the other Documents.
D. Promptly after receipt by either party hereto seeking indemnification
pursuant to this Article XI (an "Indemnified Party") of written notice of any
investigation, claim, proceeding or other action in respect of which
indemnification is being sought (each, a "Claim"), the Indemnified Party
promptly shall notify the party against whom indemnification pursuant to this
Article XI is being sought (the "Indemnifying Party") of the commencement
thereof; but the omission so to notify the Indemnifying Party shall not relieve
it from any liability that it otherwise may have to the Indemnified Party except
to the extent that the Indemnifying Party is materially prejudiced and forfeits
substantive rights or defenses by reason of such failure. In connection with any
Claim as to which both the Indemnifying Party and the Indemnified Party are
parties, the Indemnifying Party shall be entitled to assume the defense thereof.
Notwithstanding the assumption of the defense of any Claim by the Indemnifying
Party, the Indemnified Party shall have the right to employ separate legal
counsel and to participate in the defense of such Claim, and the Indemnifying
Party shall bear the reasonable fees, out-of-pocket costs and expenses of such
separate legal counsel to the Indemnified Party if (and only if): (x) the
Indemnifying Party shall have agreed to pay such fees, out-of-pocket costs and
expenses, (y) the Indemnified Party and the Indemnifying Party reasonably shall
have concluded that representation of the Indemnified Party and the Indemnifying
Party by the same legal counsel would not be appropriate due to actual or, as
reasonably determined by legal counsel to the Indemnified Party, potentially
differing interests between such parties in the conduct of the defense of such
Claim, or if there may be legal defenses available to the Indemnified Party that
are in addition to or disparate from those available to the Indemnifying Party,
or (z) the Indemnifying Party shall have failed to employ legal counsel
reasonably satisfactory to the
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Indemnified Party within a reasonable period of time after notice of the
commencement of such Claim. If the Indemnified Party employs separate legal
counsel in circumstances other than as described in clauses (x), (y) or (z)
above, the fees, costs and expenses of such legal counsel shall be borne
exclusively by the Indemnified Party. Except as provided above, the Indemnifying
Party shall not, in connection with any Claim in the same jurisdiction, be
liable for the fees and expenses of more than one firm of legal counsel for the
Indemnified Party (together with appropriate local counsel). The Indemnifying
Party shall not, without the prior written consent of the Indemnified Party
(which consent shall not unreasonably be withheld), settle or compromise any
Claim or consent to the entry of any judgment that does not include an
unconditional release of the Indemnified Party from all liabilities with respect
to such Claim or judgment.
E. In the event one party hereunder should have a claim for indemnification
that does not involve a claim or demand being asserted by a third party, the
Indemnified Party promptly shall deliver notice of such claim to the
Indemnifying Party. If the Indemnified Party disputes the claim, such dispute
shall be resolved by mutual agreement of the Indemnified Party and the
Indemnifying Party or by binding arbitration conducted in accordance with the
procedures and rules of the American Arbitration Association. Judgment upon any
award rendered by any arbitrators may be entered in any court having competent
jurisdiction thereof.
XII. GOVERNING LAW
This Agreement shall be governed by and interpreted in accordance with the
laws of the State of New York, without regard to the conflicts of law principles
of such state.
XIII. SUBMISSION TO JURISDICTION
Each of the parties hereto consents to the exclusive jurisdiction of the
federal courts whose districts encompass any part of the City of New York or the
state courts of the State of New York sitting in the City of New York in
connection with any dispute arising under this Agreement and the other
Documents. Each party hereto hereby irrevocably and unconditionally waives, to
the fullest extent it may effectively do so, any defense of an inconvenient
forum or improper venue to the maintenance of such action or proceeding in any
such court and any right of jurisdiction on account of its place of residence or
domicile. Each party hereto irrevocably and unconditionally consents to the
service of any and all process in any such action or proceeding in such courts
by the mailing of copies of such process by certified or registered airmail at
its address specified in Article XIX. Each party hereto agrees that a final
judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law.
XIV. WAIVER OF JURY TRIAL
TO THE FULLEST EXTENT PERMITTED BY LAW, EACH OF THE PARTIES HERETO HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ITS RESPECTIVE RIGHTS TO A JURY
TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS
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AGREEMENT OR ANY OTHER DOCUMENT OR ANY DEALINGS BETWEEN THEM RELATING TO THE
SUBJECT MATTER OF THIS AGREEMENT AND OTHER DOCUMENTS. EACH PARTY HERETO (i)
CERTIFIES THAT NEITHER OF THEIR RESPECTIVE REPRESENTATIVES, AGENTS OR ATTORNEYS
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH PARTY WOULD NOT, IN THE EVENT
OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS AND (ii) ACKNOWLEDGES THAT
IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE
MUTUAL WAIVERS AND CERTIFICATIONS HEREIN.
XV. COUNTERPARTS; EXECUTION
This Agreement may be executed in any number of counterparts and by the
different parties hereto on separate counterparts, each of which when so
executed and delivered shall be an original, but all the counterparts shall
together constitute one and the same instrument. A facsimile transmission of
this signed Agreement shall be legal and binding on all parties hereto.
XVI. HEADINGS
The headings of this Agreement are for convenience of reference and shall
not form part of, or affect the interpretation of, this Agreement.
XVII. SEVERABILITY
In the event any one or more of the provisions contained in this Agreement
or in the other Documents should be held invalid, illegal or unenforceable in
any respect, the validity, legality and enforceability of the remaining
provisions contained herein or therein shall not in any way be affected or
impaired thereby. The parties shall endeavor in good-faith negotiations to
replace the invalid, illegal or unenforceable provisions with valid provisions
the economic effect of which comes as close as possible to that of the invalid,
illegal or unenforceable provisions.
XVIII. ENTIRE AGREEMENT; REMEDIES, AMENDMENTS AND WAIVERS
This Agreement and the Documents constitute the entire agreement among the
parties pertaining to the subject matter hereof and supersede all prior
agreements, understandings, negotiations and discussions, whether oral or
written, of the parties. No supplement, modification or waiver of this Agreement
shall be binding unless executed in writing by all parties. No waiver of any of
the provisions of this Agreement shall be deemed or shall constitute a waiver of
any other provision hereof (whether or not similar), nor shall such waiver
constitute a continuing waiver unless otherwise expressly provided.
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<PAGE>
XIX. NOTICES
Except as may be otherwise provided herein, any notice or other
communication or delivery required or permitted hereunder shall be in writing
and shall be delivered personally or sent by certified mail, postage prepaid, or
by a nationally recognized overnight courier service, and shall be deemed given
when so delivered personally or by overnight courier service, or, if mailed,
three (3) days after the date of deposit in the United States mails, as follows:
A. if to the Company, to:
Commodore Applied Technologies, Inc.
150 East 58th Street, Suite 3400
New York, NY 10155
Attention: Paul E. Hannesson
(212) 308-5800
(212) 752-0731 (Fax)
with a copy to:
Greenberg Traurig, LLP
200 Park Avenue
New York, NY 10166
Attention: Stephen A. Weiss, Esq.
(212) 801-9253
(212) 801-6400 (Fax)
B. if to Buyer, to:
The Shaar Fund Ltd.
c/o Levinson Capital Management
2 World Trade Center, Suite 1820
New York, NY 10048
Attention: Samuel Levinson
(212) 432-7711
(212) 432-7771 (Fax)
with a copy to:
Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, NY 10038
Attention: Dennis J. Block, Esq.
(212) 504-5555
(212) 504-5557 (Fax)
C. if to the Escrow Agent, to:
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<PAGE>
Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, NY 10038
Attention: Dennis J. Block, Esq.
(212) 504-5555
(212) 504-5557 (Fax)
The Company, Buyer or the Escrow Agent may change the foregoing address by
notice given pursuant to this Article XIX.
XX. CONFIDENTIALITY
Each of the Company and Buyer agrees to keep confidential and not to
disclose to or use for the benefit of any third party the terms of this
Agreement or any other information which at any time is communicated by the
other party as being confidential without the prior written approval of the
other party; provided, however, that this provision shall not apply to
information which, at the time of disclosure, is already part of the public
domain (except by breach of this Agreement) and information which is required to
be disclosed by law (including, without limitation, pursuant to Item 601(b)(10)
of Regulation S-K under the Securities Act and the Exchange Act).
XXI. ASSIGNMENT
This Agreement shall not be assignable by either of the parties hereto
prior to the Closing without the prior written consent of the other party, and
any attempted assignment contrary to the provisions hereby shall be null and
void; provided, however, that Buyer may assign its rights and obligations
hereunder, in whole or in part, to any Affiliate of Buyer.
[SIGNATURE PAGE FOLLOWS.]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement on the date first above written.
COMMODORE APPLIED TECHNOLOGIES, INC.
By: /s/ PAUL HANNESSON
------------------------------------
Name: Paul Hannesson
Title: President
THE SHAAR FUND LTD.
By: /s/ SAMUEL LEVINSON
------------------------------------
Name: Samuel Levinson
Title:
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT, dated as of March 15, 2000 (this
"Agreement"), by and between Commodore Applied Technologies, Inc., a Delaware
corporation, with principal executive offices located at 150 East 58th Street,
Suite 3400, New York, New York 10155 (the "Company"), and The Shaar Fund Ltd.
(the "Initial Investor").
WHEREAS, upon the terms and subject to the conditions of the Securities
Purchase Agreement dated as of March 15, 2000, by and between the Initial
Investor and the Company (the "Securities Purchase Agreement"), the Company has
agreed to issue and sell to the Initial Investor (i) 266,700 shares of Series F
Convertible Preferred Stock, par value $0.001 per share (the "Preferred Shares")
which, upon the terms of and subject to the conditions of the Company's
Certificate of Designation of Series F Convertible Preferred Stock (the
"Certificate of Designation"), are convertible into shares of the Company's
common stock, par value $0.001 per share (the "Common Stock") and (ii) Common
Stock Purchase Warrants (the "Warrants") to purchase 250,000 shares of Common
Stock; and
WHEREAS, to induce the Initial Investor to execute and deliver the
Securities Purchase Agreement, the Company has agreed to provide with respect to
the Common Stock issued or issuable in lieu of cash dividend payments on the
Preferred Shares, upon conversion of the Preferred Shares and exercise of the
Warrants certain registration rights under the Securities Act;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. Definitions
(a) As used in this Agreement, the following terms shall have the meanings:
(i) "Affiliate," of any specified Person means any other Person who
directly, or indirectly through one or more intermediaries, is in control
of, is controlled by, or is under common control with, such specified
Person. For purposes of this definition, control of a Person means the
power, directly or indirectly, to direct or cause the direction of the
management and policies of such Person whether by contract, securities,
ownership or otherwise; and the terms "controlling" and "controlled" have
the respective meanings correlative to the foregoing.
(ii) "Closing Date" means the date and time of the issuance and sale
of the Preferred Shares and the Warrants.
(iii) "Commission" means the Securities and Exchange Commission.
<PAGE>
(iv) "Current Market Price" on any date of determination means the
closing price of a share of the Common Stock on such day as reported on the
American Stock Exchange ("Amex")]; provided, if such security is not listed
or admitted to trading on the Amex, as reported on the principal national
security exchange or quotation system on which such security is quoted or
listed or admitted to trading, or, if not quoted or listed or admitted to
trading on any national securities exchange or quotation system, the
closing price of such security on the over-the-counter market on the day in
question as reported by Bloomberg LP, or a similar generally accepted
reporting service, as the case may be.
(v) "Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission thereunder, or any
similar successor statute.
(vi) "Investor" means each of the Initial Investor and any transferee
or assignee of Registrable Securities which agrees to become bound by all
of the terms and provisions of this Agreement in accordance with Section 8
hereof.
(vii) "Person" means any individual, partnership, corporation, limited
liability company, joint stock company, association, trust, unincorporated
organization, or a government or agency or political subdivision thereof.
(viii) "Prospectus" means the prospectus (including, without
limitation, any preliminary prospectus and any final prospectus filed
pursuant to Rule 424(b) under the Securities Act, including any prospectus
that discloses information previously omitted from a prospectus filed as
part of an effective registration statement in reliance on Rule 430A under
the Securities Act) included in the Registration Statement, as amended or
supplemented by any prospectus supplement with respect to the terms of the
offering of any portion of the Registrable Securities covered by the
Registration Statement and by all other amendments and supplements to such
prospectus, including all material incorporated by reference in such
prospectus and all documents filed after the date of such prospectus by the
Company under the Exchange Act and incorporated by reference therein.
(ix) "Public Offering" means an offer registered with the Commission
and the appropriate state securities commissions by the Company of its
Common Stock and made pursuant to the Securities Act.
(x) "Registrable Securities" means the Common Stock issued or issuable
(i) in lieu of cash dividend payments on the Preferred Shares, (ii) upon
conversion or redemption of the Preferred Shares or (iii) upon exercise of
the Warrants; provided, however, a share of Common Stock shall cease to be
a Registrable Security for purposes of this Agreement when it no longer is
a Restricted Security.
(xi) "Registration Statement" means the amended registration statement
of the Company which is provided for in Section 2(a) and which is to be
filed
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<PAGE>
on an appropriate form under the Securities Act providing for the
registration of, and the sale on a continuous or delayed basis by the
holders of, all of the Registrable Securities pursuant to Rule 415 under
the Securities Act, including the Prospectus contained therein and forming
a part thereof, any amendments to such registration statement and
supplements to such Prospectus, and all exhibits to and other material
incorporated by reference in such registration statement and Prospectus.
(xii) "Restricted Security" means any share of Common Stock issued or
issuable in lieu of cash dividend payments on the Preferred Shares, upon
conversion or redemption of the Preferred Shares or exercise of the
Warrants except any such share that (i) has been registered pursuant to an
effective registration statement under the Securities Act and sold in a
manner contemplated by the prospectus included in such registration
statement, (ii) has been transferred in compliance with the resale
provisions of Rule 144 under the Securities Act (or any successor provision
thereto) or is transferable pursuant to paragraph (k) of Rule 144 under the
Securities Act (or any successor provision thereto), or (iii) otherwise has
been transferred and a new share of Common Stock not subject to transfer
restrictions under the Securities Act has been delivered by or on behalf of
the Company.
(xiii) "Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations of the Commission thereunder, or any similar
successor statute.
(b) All capitalized terms used and not defined herein have the
respective meaning assigned to them in the Securities Purchase Agreement.
2. Registration
(a) Filing and Effectiveness of Registration Statement. Within 75 days
after the Closing Date, the Company shall prepare and file an amendment to the
registration statement it filed pursuant to the Registration Rights Agreement
dated November 4, 1999 between the Company and the Buyer to (1) provide that any
remaining shares which were registered under the registration statement can be
used for the offer and sale of the Registrable Securities; and (2) register an
additional 3,500,000 shares of Common Stock for the offer and sale of the
Registrable Securities, (such amended registration statement is referred to
herein as the "Registration Statement") and the Company shall use its best
efforts to cause the Commission to declare such Registration Statement effective
under the Securities Act as promptly as practicable but in no event later than
September 30, 2000. The Company shall promptly (and, in any event, no more than
24 hours after it receives comments from the Commission), notify the Buyer when
and if it receives any comments from the Commission on the Registration
Statement and promptly forward a copy of such comments, if they are in writing,
to the Buyer. At such time after the filing of the Registration Statement
pursuant to this Section 2(a) as the Commission indicates, either orally or in
writing, that it has no further comments with respect to such Registration
Statement or that it is willing to entertain appropriate requests for
acceleration of effectiveness of such Registration Statement, the Company shall
promptly, and in no event later than two business days after receipt of such
indication from the Commission, request that the effectiveness
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<PAGE>
of such Registration Statement be accelerated within 48 hours of the
Commission's receipt of such request. Except as set forth on Schedule 2(a)
annexed hereto, the Company shall not include any other securities in the
Registration Statement relating to the offer and sale of the Registrable
Securities. The Company shall notify the Initial Investor by written notice that
such Registration Statement has been declared effective by the Commission within
24 hours of such declaration by the Commission.
(b) Registration Default. If the Registration Statement covering the
Registrable Securities required to be filed by the Company pursuant to Section
2(a), is not (i) filed with the Commission within 75 days after the Closing Date
or (ii) declared effective by the Commission on or before September 30, 2000
(either of which, without duplication, an "Initial Date"), then the Company
shall make the payments to the Initial Investor as provided in the next sentence
as liquidated damages and not as a penalty. The amount to be paid by the Company
to the Initial Investor shall be determined as of each Computation Date (as
defined below), and such amount shall be equal to 2% (the "Liquidated Damage
Rate") of the Purchase Price (as defined in the Securities Purchase Agreement)
from the Initial Date to the first Computation Date and for each Computation
Date thereafter, calculated on a pro rata basis to the date on which the
Registration Statement is filed with (in the event of an Initial Date pursuant
to clause (i) above) or declared effective by (in the event of an Initial Date
pursuant to clause (ii) above) the Commission (the "Periodic Amount") provided,
however, that in no event shall the liquidated damages be less than $25,000;
provided, further, however, that if the Registration Statement is not declared
effective by the Commission within 210 days after the Initial Date set forth in
clause (ii) above, then the Liquidated Damage Rate shall increase to 4%;
provided, further, however, that the Liquidated Damage Rate shall increase by 1%
for each 30 day period after the 210th day after the Initial Date set forth in
clause (ii) above that the Registration Statement is not declared effective by
the Commission. The full Periodic Amount shall be paid by the Company to the
Initial Investor by wire transfer of immediately available funds within three
days after each Computation Date.
As used in this Section 2(b), "Computation Date" means the date which is 30
days after the Initial Date and, if the Registration Statement required to be
filed by the Company pursuant to Section 2(a) has not theretofore been declared
effective by the Commission, each date which is 30 days after the previous
Computation Date until such Registration Statement is so declared effective.
(c) Eligibility for Use of Form S-3. The Company agrees that at such time
as it meets all the requirements for the use of Securities Act Registration
Statement on Form S-3 it shall file all reports and information required to be
filed by it with the Commission in a timely manner and take all such other
action so as to maintain such eligibility for the use of such form.
(d) Additional Registration Statement. In the event the Current Market
Price declines to $.75 per share or less and each time thereafter that the
Current Market Price declines by 20% (each such date, a "Decline Date"), the
Company shall, to the extent required by the Securities Act (because the
additional shares were not covered by the Registration Statement filed pursuant
to Section 2(a)), as reasonably determined by the Initial Investor, file an
additional Registration Statement (an "Additional Registration Statement") or
pre-effective amendment
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to the original Registration Statement with the Commission for such additional
number of Registrable Securities as would be issuable upon conversion of the
Preferred Shares and exercise of the Warrants (the "Additional Registrable
Securities") in addition to those previously registered, assuming (x) with
respect to the first Additional Registration Statement, a Conversion Price of
$.75 per share and (y) with respect to each succeeding Additional Registration
Statement, a Conversion Price of 20% less than the Conversion Price assumed with
respect to the immediately preceding Additional Registration Statement. The
Company shall, to the extent required by the Securities Act, as reasonably
determined by the Initial Investor, prepare and file with the Commission not
later than the 30th day thereafter, a Registration Statement relating to the
offer and sale of such Additional Registrable Securities and shall use its best
efforts to cause the Commission to declare such Registration Statement effective
under the Securities Act as promptly as practicable but not later than 60 days
thereafter. The Company shall not include any other securities in the
Registration Statement relating to the offer and sale of such Additional
Registrable Securities.
If the Additional Registration Statement is not (i) filed with the
Commission within 30 days after the Decline Date or (ii) declared effective by
the Commission within 90 days after the Decline Date (either of which, without
duplication, an "Additional Registration Date"), then the Company shall make the
payments to the Initial Investor at the Liquidated Damage Rate from the
Additional Registration Date to the first Additional Computation Date and for
each Additional Computation Date thereafter, calculated on a pro rata basis to
the date on which the Additional Registration Statement is filed with (in the
event of an Additional Registration Date pursuant to clause (i) above) or
declared effective by (in the event of an Additional Registration Date pursuant
to clause (ii) above) the Commission (the "Additional Periodic Amount")
provided, however, that in no event shall the liquidated damages be less than
$25,000; provided, further, however, that if the Additional Registration
Statement is not declared effective by the Commission within 120 days after the
Additional Registration Date set forth in clause (ii) above, then the Liquidated
Damage Rate shall increase to 4%; provided, further, however, that the
Liquidated Damage Rate shall increase by 1% for each 30 day period after the
120th day after the Additional Registration Date set forth in clause (ii) above
that the Additional Registration Statement is not declared effective by the
Commission. The full Additional Periodic Amount shall be paid by the Company to
the Initial Investor by wire transfer of immediately available funds within
three days after each Additional Computation Date.
As used in this Section 2(d), "Additional Computation Date" means the date
which is 30 days after the Additional Registration Date and, if the Additional
Registration Statement required to be filed by the Company pursuant to this
Section 2(d) has not theretofore been declared effective by the Commission, each
date which is 30 days after the previous Additional Computation Date until such
Additional Registration Statement is so declared effective.
Notwithstanding anything to the contrary, express or implied, contained in
this Section 2(d), the obligations of the Company to file any Additional
Registration Statement(s) pursuant to the provisions hereof shall be subject at
all times to the limitations set forth in Section 6.9 of the Certificate of
Designation applicable to the Preferred Shares.
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(e) If the Company proposes to register any of its warrants, Common Stock
or any other shares of common stock of the Company under the Securities Act
(other than a registration (A) on Form S-8 or S-4 or any successor or similar
forms, (B) relating to Common Stock or any other shares of common stock of the
Company issuable upon exercise of employee share options or in connection with
any employee benefit or similar plan of the Company or (C) in connection with a
direct or indirect acquisition by the Company of another Person or any
transaction with respect to which Rule 145 (or any successor provision) under
the Securities Act applies), whether or not for sale for its own account, it
will each such time, give prompt written notice at least 20 days prior to the
anticipated filing date of the registration statement relating to such
registration to each Investor, which notice shall set forth such Investor's
rights under this Section 2(e) and shall offer such Investor the opportunity to
include in such registration statement such number of Registrable Securities as
such Investor may request. Upon the written request of any Investor made within
10 days after the receipt of notice from the Company (which request shall
specify the number of Registrable Securities intended to be disposed of by such
Investor), the Company will use its best efforts to effect the registration
under the Securities Act of all Registrable Securities that the Company has been
so requested to register by each Investor, to the extent requisite to permit the
disposition of the Registrable Securities so to be registered; provided,
however, that (A) if such registration involves a Public Offering, each Investor
must sell its Registrable Securities to any underwriters selected by the Company
with the consent of such Investor on the same terms and conditions as apply to
the Company and (B) if, at any time after giving written notice of its intention
to register any Registrable Securities pursuant to this Section 2 and prior to
the effective date of the registration statement filed in connection with such
registration, the Company shall determine for any reason not to register such
Registrable Securities, the Company shall give written notice to each Investor
and, thereupon, shall be relieved of its obligation to register any Registrable
Securities in connection with such registration. The Company's obligations under
this Section 2(e) shall terminate on the date that the registration statement to
be filed in accordance with Section 2(a) is declared effective by the
Commission.
(i) If a registration pursuant to this Section 2(e) involves a Public
Offering and the managing underwriter thereof advises the Company that, in
its view, the number of shares of Common Stock, Warrants or other shares of
Common Stock that the Company and the Investors intend to include in such
registration exceeds the largest number of shares of Common Stock or
Warrants (including any other shares of Common Stock or Warrants of the
Company) that can be sold without having an adverse effect on such Public
Offering (the "Maximum Offering Size"), the Company will include in such
registration only such number of shares of Common Stock or Warrants, as
applicable, as does not exceed the Maximum Offering Size, and the number of
shares in the Maximum Offering Size shall be allocated among the Company,
the Investors and any other sellers of Common Stock or Warrants in such
Public Offering ("Third-Party Sellers"), first, pro rata among the
Investors until all the shares of Common Stock or Warrants originally
proposed to be offered for sale by the Investors have been allocated, and
second, pro rata among the Company and any Third-Party
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Sellers, in each case on the basis of the relative number of shares of
Common Stock or Warrants originally proposed to be offered for sale under
such registration by each of the Investors, the Company and the Third-Party
Sellers, as the case may be. If as a result of the proration provisions of
this Section 2(e)(ii), any Investor is not entitled to include all such
Registrable Securities in such registration, such Investor may elect to
withdraw its request to include any Registrable Securities in such
registration. With respect to registrations pursuant to this Section 2(e),
the number of securities required to satisfy any underwriters'
over-allotment option shall be allocated among the Company, the Investors
and any Third Party Seller pro rata on the basis of the relative number of
securities offered for sale under such registration by each of the
Investors, the Company and any such Third Party Sellers before the exercise
of such over-allotment option.
3. Obligations of the Company
In connection with the registration of the Registrable Securities, the
Company shall:
(a) Promptly (i) prepare and file with the Commission such amendments
(including post-effective amendments) to the Registration Statement and
supplements to the Prospectus as may be necessary to keep the Registration
Statement continuously effective and in compliance with the provisions of the
Securities Act applicable thereto so as to permit the Prospectus forming part
thereof to be current and useable by Investors for resales of the Registrable
Securities for a period of five years from the date on which the Registration
Statement is first declared effective by the Commission (the "Effective Time")
or such shorter period that will terminate when all the Registrable Securities
covered by the Registration Statement have been sold pursuant thereto in
accordance with the plan of distribution provided in the Prospectus, transferred
pursuant to Rule 144 under the Securities Act or otherwise transferred in a
manner that results in the delivery of new securities not subject to transfer
restrictions under the Securities Act (the "Registration Period") and (ii) take
all lawful action such that each of (A) the Registration Statement and any
amendment thereto does not, when it becomes effective, contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, not misleading and
(B) the Prospectus forming part of the Registration Statement, and any amendment
or supplement thereto, does not at any time during the Registration Period
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
(b) During the Registration Period, comply with the provisions of the
Securities Act with respect to the Registrable Securities of the Company covered
by the Registration Statement until such time as all of such Registrable
Securities have been disposed of in accordance with the intended methods of
disposition by the Investors as set forth in the Prospectus forming part of the
Registration Statement;
(c) (i) Prior to the filing with the Commission of any Registration
Statement (including any amendments thereto) and the distribution or delivery of
any Prospectus (including any supplements thereto), provide (A) draft copies
thereof to the Investors and reflect in such documents all such comments as the
Investors (and their counsel) reasonably may propose and (B) to the Investors a
copy of the accountant's consent letter to be included in the filing and (ii)
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furnish to each Investor whose Registrable Securities are included in the
Registration Statement and its legal counsel identified to the Company, (A)
promptly after the same is prepared and publicly distributed, filed with the
Commission, or received by the Company, one copy of the Registration Statement,
each Prospectus, and each amendment or supplement thereto, and (B) such number
of copies of the Prospectus and all amendments and supplements thereto and such
other documents, as such Investor may reasonably request in order to facilitate
the disposition of the Registrable Securities owned by such Investor;
(d) (i) Register or qualify the Registrable Securities covered by the
Registration Statement under such securities or "blue sky" laws of such
jurisdictions as the Investors who hold a majority-in-interest of the
Registrable Securities being offered reasonably request, (ii) prepare and file
in such jurisdictions such amendments (including post-effective amendments) and
supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof at all times during the Registration Period,
(iii) take all such other lawful actions as may be necessary to maintain such
registrations and qualifications in effect at all times during the Registration
Period, and (iv) take all such other lawful actions reasonably necessary or
advisable to qualify the Registrable Securities for sale in such jurisdictions;
provided, however, that the Company shall not be required in connection
therewith or as a condition thereto to (A) qualify to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
Section 3(d), (B) subject itself to general taxation in any such jurisdiction or
(C) file a general consent to service of process in any such jurisdiction;
(e) As promptly as practicable after becoming aware of such event, notify
each Investor of the occurrence of any event, as a result of which the
Prospectus included in the Registration Statement, as then in effect, includes
an untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, and
promptly prepare an amendment to the Registration Statement and supplement to
the Prospectus to correct such untrue statement or omission, and deliver a
number of copies of such supplement and amendment to each Investor as such
Investor may reasonably request;
(f) As promptly as practicable after becoming aware of such event, notify
each Investor who holds Registrable Securities being sold (or, in the event of
an underwritten offering, the managing underwriters) of the issuance by the
Commission of any stop order or other suspension of the effectiveness of the
Registration Statement at the earliest possible time and take all lawful action
to effect the withdrawal, recession or removal of such stop order or other
suspension;
(g) Cause all the Registrable Securities covered by the Registration
Statement to be listed on the principal national securities exchange, and
included in an inter-dealer quotation system of a registered national securities
association, on or in which securities of the same class or series issued by the
Company are then listed or included;
(h) Maintain a transfer agent and registrar, which may be a single entity,
for the Registrable Securities not later than the effective date of the
Registration Statement;
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(i) Cooperate with the Investors who hold Registrable Securities being
offered to facilitate the timely preparation and delivery of certificates for
the Registrable Securities to be offered pursuant to the registration statement
and enable such certificates for the Registrable Securities to be in such
denominations or amounts, as the case may be, as the Investors reasonably may
request and registered in such names as the Investor may request; and, within
three business days after a registration statement which includes Registrable
Securities is declared effective by the Commission, deliver and cause legal
counsel selected by the Company to deliver to the transfer agent for the
Registrable Securities (with copies to the Investors whose Registrable
Securities are included in such registration statement) an appropriate
instruction and, to the extent necessary, an opinion of such counsel;
(j) Take all such other lawful actions reasonably necessary to expedite and
facilitate the disposition by the Investors of their Registrable Securities in
accordance with the intended methods therefor provided in the Prospectus which
are customary under the circumstances;
(k) Make generally available to its security holders as soon as
practicable, but in any event not later than three (3) months after (i) the
effective date (as defined in Rule 158(c) under the Securities Act) of the
Registration Statement, and (ii) the effective date of each post-effective
amendment to the Registration Statement, as the case may be, an earnings
statement of the Company and its subsidiaries complying with Section 11(a) of
the Securities Act and the rules and regulations of the Commission thereunder
(including, at the option of the Company, Rule 158);
(l) In the event of an underwritten offering, promptly include or
incorporate in a Prospectus supplement or post-effective amendment to the
Registration Statement such information as the managers reasonably agree should
be included therein and to which the Company does not reasonably object and make
all required filings of such Prospectus supplement or post-effective amendment
as soon as practicable after it is notified of the matters to be included or
incorporated in such Prospectus supplement or post-effective amendment;
(m) (i) Make reasonably available for inspection by Investors, any
underwriter participating in any disposition pursuant to the Registration
Statement, and any attorney, accountant or other agent retained by such
Investors or any such underwriter all relevant financial and other records,
pertinent corporate documents and properties of the Company and its
subsidiaries, and (ii) cause the Company's officers, directors and employees to
supply all information reasonably requested by such Investors or any such
underwriter, attorney, accountant or agent in connection with the Registration
Statement, in each case, as is customary for similar due diligence examinations;
provided, however, that all records, information and documents that are
designated in writing by the Company, in good faith, as confidential,
proprietary or containing any material nonpublic information shall be kept
confidential by such Investors and any such underwriter, attorney, accountant or
agent (pursuant to an appropriate confidentiality agreement in the case of any
such holder or agent), unless such disclosure is made pursuant to judicial
process in a court proceeding (after first giving the Company an opportunity
promptly to seek a protective order or otherwise limit the scope of the
information sought to be disclosed) or is required by law, or such records,
information or documents become available to the public
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generally or through a third party not in violation of an accompanying
obligation of confidentiality; and provided, further, that, if the foregoing
inspection and information gathering would otherwise disrupt the Company's
conduct of its business, such inspection and information gathering shall, to the
maximum extent possible, be coordinated on behalf of the Investors and the other
parties entitled thereto by one firm of counsel designed by and on behalf of the
majority in interest of Investors and other parties;
(n) In connection with any underwritten offering, make such representations
and warranties to the Investors participating in such underwritten offering and
to the managers, in form, substance and scope as are customarily made by the
Company to underwriters in secondary underwritten offerings;
(o) In connection with any underwritten offering, obtain opinions of
counsel to the Company (which counsel and opinions (in form, scope and
substance) shall be reasonably satisfactory to the managers) addressed to the
underwriters, covering such matters as are customarily covered in opinions
requested in secondary underwritten offerings (it being agreed that the matters
to be covered by such opinions shall include, without limitation, as of the date
of the opinion and as of the Effective Time of the Registration Statement or
most recent post-effective amendment thereto, as the case may be, the absence
from the Registration Statement and the Prospectus, including any documents
incorporated by reference therein, of an untrue statement of a material fact or
the omission of a material fact required to be stated therein or necessary to
make the statements therein (in the case of the Prospectus, in light of the
circumstances under which they were made) not misleading, subject to customary
limitations);
(p) In connection with any underwritten offering, obtain "cold comfort"
letters and updates thereof from the independent public accountants of the
Company (and, if necessary, from the independent public accountants of any
subsidiary of the Company or of any business acquired by the Company, in each
case for which financial statements and financial data are, or are required to
be, included in the Registration Statement), addressed to each underwriter
participating in such underwritten offering (if such underwriter has provided
such letter, representations or documentation, if any, required for such cold
comfort letter to be so addressed), in customary form and covering matters of
the type customarily covered in "cold comfort" letters in connection with
secondary underwritten offerings;
(q) In connection with any underwritten offering, deliver such documents
and certificates as may be reasonably required by the managers, if any; and
(r) In the event that any broker-dealer registered under the Exchange Act
shall be an "Affiliate" (as defined in Rule 2729(b)(1) of the rules and
regulations of the National Association of Securities Dealers, Inc. (the "NASD
Rules") (or any successor provision thereto)) of the Company or has a "conflict
of interest" (as defined in Rule 2720(b)(7) of the NASD Rules (or any successor
provision thereto)) and such broker-dealer shall underwrite, participate as a
member of an underwriting syndicate or selling group or assist in the
distribution of any Registrable Securities covered by the Registration
Statement, whether as a holder of such Registrable Securities or as an
underwriter, a placement or sales agent or a broker or dealer in respect
thereof, or otherwise, the Company shall assist such broker-dealer in complying
with the
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requirements of the NASD Rules, including, without limitation, by (A) engaging a
"qualified independent underwriter" (as defined in Rule 2720(b)(15) of the NASD
Rules (or any successor provision thereto)) to participate in the preparation of
the Registration Statement relating to such Registrable Securities, to exercise
usual standards of due diligence in respect thereof and to recommend the public
offering price of such Registrable Securities, (B) indemnifying such qualified
independent underwriter to the extent of the indemnification of underwriters
provided in Section 6 hereof, and (C) providing such information to such
broker-dealer as may be required in order for such broker-dealer to comply with
the requirements of the NASD Rules.
4. Obligations of the Investors
In connection with the registration of the Registrable Securities, the
Investors shall have the following obligations:
(a) It shall be a condition precedent to the obligations of the Company to
complete the registration pursuant to this Agreement with respect to the
Registrable Securities of a particular Investor that such Investor shall furnish
to the Company such information regarding itself, the Registrable Securities
held by it and the intended method of disposition of the Registrable Securities
held by it as shall be reasonably required to effect the registration of such
Registrable Securities and shall execute such documents in connection with such
registration as the Company may reasonably request. As least seven days prior to
the first anticipated filing date of the Registration Statement, the Company
shall notify each Investor of the information the Company requires from each
such Investor (the "Requested Information") if such Investor elects to have any
of its Registrable Securities included in the Registration Statement. If at
least two business days prior to the anticipated filing date the Company has not
received the Requested Information from an Investor (a "Non-Responsive
Investor"), then the Company may file the Registration Statement without
including Registrable Securities of such Non-Responsive Investor and have no
further obligations to the Non-Responsive Investor;
(b) Each Investor by its acceptance of the Registrable Securities agrees to
cooperate with the Company in connection with the preparation and filing of the
Registration Statement hereunder, unless such Investor has notified the Company
in writing of its election to exclude all of its Registrable Securities from the
Registration Statement; and
(c) Each Investor agrees that, upon receipt of any notice from the Company
of the occurrence of any event of the kind described in Section 3(e) or 3(f), it
shall immediately discontinue its disposition of Registrable Securities pursuant
to the Registration Statement covering such Registrable Securities until such
Investor's receipt of the copies of the supplemented or amended Prospectus
contemplated by Section 3(e) and, if so directed by the Company, such Investor
shall deliver to the Company (at the expense of the Company) or destroy (and
deliver to the Company a certificate of destruction) all copies in such
Investor's possession, of the Prospectus covering such Registrable Securities
current at the time of receipt of such notice.
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5. Expenses of Registration
All expenses, other than underwriting discounts and commissions, incurred
in connection with registrations, filings or qualifications pursuant to Section
3, but including, without limitation, all registration, listing, and
qualifications fees, printing and engraving fees, accounting fees, and the fees
and disbursements of counsel for the Company, and the reasonable fees of one
firm of counsel to the holders of a majority in interest of the Registrable
Securities shall be borne by the Company.
6. Indemnification and Contribution
(a) The Company shall indemnify and hold harmless each Investor and each
underwriter, if any, which facilitates the disposition of Registrable
Securities, and each of their respective officers and directors and each person
who controls such Investor or underwriter within the meaning of Section 15 of
the Securities Act or Section 20 of the Exchange Act (each such person being
sometimes hereinafter referred to as an "Indemnified Person") from and against
any losses, claims, damages or liabilities, joint or several, to which such
Indemnified Person may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon an untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement or an
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, not misleading, or
arise out of or are based upon an untrue statement or alleged untrue statement
of a material fact contained in any Prospectus or an omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; and the Company hereby agrees to
reimburse such Indemnified Person for all reasonable legal and other expenses
incurred by them in connection with investigating or defending any such action
or claim as and when such expenses are incurred; provided, however, that the
Company shall not be liable to any such Indemnified Person in any such case to
the extent that any such loss, claim, damage or liability arises out of or is
based upon (i) an untrue statement or alleged untrue statement made in, or an
omission or alleged omission from, such Registration Statement or Prospectus in
reliance upon and in conformity with written information furnished to the
Company by such Indemnified Person expressly for use therein or (ii) in the case
of the occurrence of an event of the type specified in Section 3(e), the use by
the Indemnified Person of an outdated or defective Prospectus after the Company
has provided to such Indemnified Person an updated Prospectus correcting the
untrue statement or alleged untrue statement or omission or alleged omission
giving rise to such loss, claim, damage or liability.
(b) Indemnification by the Investors and Underwriters. Each Investor
agrees, as a consequence of the inclusion of any of its Registrable Securities
in a Registration Statement, and each underwriter, if any, which facilitates the
disposition of Registrable Securities shall agree, as a consequence of
facilitating such disposition of Registrable Securities, severally and not
jointly, to (i) indemnify and hold harmless the Company, its directors
(including any person who, with his or her consent, is named in the Registration
Statement as a director nominee of the Company), its officers who sign any
Registration Statement and each person, if any, who controls the Company within
the meaning of either Section 15 of the Securities Act or Section 20 of the
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Exchange Act, against any losses, claims, damages or liabilities to which the
Company or such other persons may become subject, under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in such Registration Statement or
Prospectus or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein (in light of the circumstances under which they were
made, in the case of the Prospectus), not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Company by such holder or
underwriter expressly for use therein; provided, however, that no Investor or
underwriter shall be liable under this Section 6(b) for any amount in excess of
the net proceeds paid to such Investor or underwriter in respect of shares sold
by it, and (ii) reimburse the Company for any legal or other expenses incurred
by the Company in connection with investigating or defending any such action or
claim as such expenses are incurred.
(c) Notice of Claims, etc. Promptly after receipt by a party seeking
indemnification pursuant to this Section 6 (an "Indemnified Party") of written
notice of any investigation, claim, proceeding or other action in respect of
which indemnification is being sought (each, a "Claim"), the Indemnified Party
promptly shall notify the party against whom indemnification pursuant to this
Section 6 is being sought (the "Indemnifying Party") of the commencement
thereof; but the omission to so notify the Indemnifying Party shall not relieve
it from any liability that it otherwise may have to the Indemnified Party,
except to the extent that the Indemnifying Party is materially prejudiced and
forfeits substantive rights and defenses by reason of such failure. In
connection with any Claim as to which both the Indemnifying Party and the
Indemnified Party are parties, the Indemnifying Party shall be entitled to
assume the defense thereof. Notwithstanding the assumption of the defense of any
Claim by the Indemnifying Party, the Indemnified Party shall have the right to
employ separate legal counsel and to participate in the defense of such Claim,
and the Indemnifying Party shall bear the reasonable fees, out-of-pocket costs
and expenses of such separate legal counsel to the Indemnified Party if (and
only if): (x) the Indemnifying Party shall have agreed to pay such fees, costs
and expenses, (y) the Indemnified Party and the Indemnifying Party shall
reasonably have concluded that representation of the Indemnified Party by the
Indemnifying Party by the same legal counsel would not be appropriate due to
actual or, as reasonably determined by legal counsel to the Indemnified Party,
potentially differing interests between such parties in the conduct of the
defense of such Claim, or if there may be legal defenses available to the
Indemnified Party that are in addition to or disparate from those available to
the Indemnifying Party, or (z) the Indemnifying Party shall have failed to
employ legal counsel reasonably satisfactory to the Indemnified Party within a
reasonable period of time after notice of the commencement of such Claim. If the
Indemnified Party employs separate legal counsel in circumstances other than as
described in clauses (x), (y) or (z) above, the fees, costs and expenses of such
legal counsel shall be borne exclusively by the Indemnified Party. Except as
provided above, the Indemnifying Party shall not, in connection with any Claim
in the same jurisdiction, be liable for the fees and expenses of more than one
firm of counsel for the Indemnified Party (together with appropriate local
counsel). The Indemnified Party shall not, without the prior
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written consent of the Indemnifying Party (which consent shall not unreasonably
be withheld), settle or compromise any Claim or consent to the entry of any
judgment that does not include an unconditional release of the Indemnifying
Party from all liabilities with respect to such Claim or judgment.
(d) Contribution. If the indemnification provided for in this Section 6 is
unavailable to or insufficient to hold harmless an Indemnified Person under
subsection (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
Indemnifying Party shall contribute to the amount paid or payable by such
Indemnified Party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect the
relative fault of the Indemnifying Party and the Indemnified Party in connection
with the statements or omissions which resulted in such losses, claims, damages
or liabilities (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative fault of such Indemnifying Party and
Indemnified Party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact relates to information supplied by
such Indemnifying Party or by such Indemnified Party, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The parties hereto agree that it would not be just
and equitable if contribution pursuant to this Section 6(d) were determined by
pro rata allocation (even if the Investors or any underwriters were treated as
one entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to in this Section 6(d).
The amount paid or payable by an Indemnified Party as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) referred to above
shall be deemed to include any legal or other fees or expenses reasonably
incurred by such Indemnified Party in connection with investigating or defending
any such action or claim. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The obligations of the Investors and any underwriters in this
Section 6(d) to contribute shall be several in proportion to the percentage of
Registrable Securities registered or underwritten, as the case may be, by them
and not joint.
(e) Notwithstanding any other provision of this Section 6, in no event
shall any (i) Investor be required to undertake liability to any person under
this Section 6 for any amounts in excess of the dollar amount of the proceeds to
be received by such Investor from the sale of such Investor's Registrable
Securities (after deducting any fees, discounts and commissions applicable
thereto) pursuant to any Registration Statement under which such Registrable
Securities are to be registered under the Securities Act and (ii) underwriter be
required to undertake liability to any Person hereunder for any amounts in
excess of the aggregate discount, commission or other compensation payable to
such underwriter with respect to the Registrable Securities underwritten by it
and distributed pursuant to the Registration Statement.
(f) The obligations of the Company under this Section 6 shall be in
addition to any liability which the Company may otherwise have to any
Indemnified Person and the obligations of any Indemnified Person under this
Section 6 shall be in addition to any liability which such Indemnified Person
may otherwise have to the Company. The remedies provided in
-14-
<PAGE>
this Section 6 are not exclusive and shall not limit any rights or remedies
which may otherwise be available to an indemnified party at law or in equity.
7. Rule 144
With a view to making available to the Investors the benefits of Rule 144
under the Securities Act or any other similar rule or regulation of the
Commission that may at any time permit the Investors to sell securities of the
Company to the public without registration ("Rule 144"), the Company agrees to
use its best efforts to:
(a) comply with the provisions of paragraph (c) (1) of Rule 144; and
(b) file with the Commission in a timely manner all reports and other
documents required to be filed by the Company pursuant to Section 13 or 15(d)
under the Exchange Act; and, if at any time it is not required to file such
reports but in the past had been required to or did file such reports, it will,
upon the request of any Investor, make available other information as required
by, and so long as necessary to permit sales of, its Registrable Securities
pursuant to Rule 144.
8. Assignment
The rights to have the Company register Registrable Securities pursuant to
this Agreement shall be automatically assigned by the Investors to any permitted
transferee of all or any portion of such Registrable Securities (or all or any
portion of any Preferred Shares or Warrant of the Company which is convertible
into such securities) only if: (a) the Investor agrees in writing with the
transferee or assignee to assign such rights, and a copy of such agreement is
furnished to the Company within a reasonable time after such assignment, (b) the
Company is, within a reasonable time after such transfer or assignment,
furnished with written notice of (i) the name and address of such transferee or
assignee and (ii) the securities with respect to which such registration rights
are being transferred or assigned, (c) immediately following such transfer or
assignment, the securities so transferred or assigned to the transferee or
assignee constitute Restricted Securities, and (d) at or before the time the
Company received the written notice contemplated by clause (b) of this sentence
the transferee or assignee agrees in writing with the Company to be bound by all
of the provisions contained herein.
9. Amendment and Waiver
Any provision of this Agreement may be amended and the observance thereof
may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company
and Investors who hold a majority-in-interest of the Registrable Securities. Any
amendment or waiver effected in accordance with this Section 9 shall be binding
upon each Investor and the Company.
10. Changes in Common Stock
If, and as often as, there are any changes in the Common Stock by way of
stock split, stock dividend, reverse split, combination or reclassification, or
through merger,
-15-
<PAGE>
consolidation, reorganization or recapitalization, or by any other means,
appropriate adjustment shall be made in the provisions hereof, as may be
required, so that the rights and privileges granted hereby shall continue with
respect to the Common Stock as so changed.
11. Miscellaneous
(a) A person or entity shall be deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
(b) If, after the date hereof and prior to the Commission declaring the
Registration Statement to be filed pursuant to Section 2(a) effective under the
Securities Act, the Company grants to any Person any registration rights with
respect to any Company securities which are more favorable to such other Person
than those provided in this Agreement, then the Company forthwith shall grant
(by means of an amendment to this Agreement or otherwise) identical registration
rights to all Investors hereunder.
(c) Except as may be otherwise provided herein, any notice or other
communication or delivery required or permitted hereunder shall be in writing
and shall be delivered personally or sent by certified mail, postage prepaid, or
by a nationally recognized overnight courier service, and shall be deemed given
when so delivered personally or by overnight courier service, or, if mailed,
three days after the date of deposit in the United States mails, as follows:
(i) if to the Company, to:
Commodore Applied Technologies, Inc.
150 East 58th Street, Suite 3400
New York, NY 10155
Attention: Paul E. Hannesson
(212) 308-5800
(212) 752-0731 (Fax)
with a copy to:
Greenberg Traurig, LLP
200 Park Avenue
New York, NY 10166
Attention: Stephen A. Weiss, Esq.
(212) 801-9253
(212) 801-6400 (Fax)
-16-
<PAGE>
(ii) if to the Initial Investor, to:
The Shaar Fund Ltd.,
c/o Levinson Capital Management
2 World Trade Center, Suite 1820
New York, NY 10048
Attention: Samuel Levinson
(212) 432-7711
(212) 432-7771 (Fax)
with a copy to:
Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, NY 10038
Attention: Dennis J. Block, Esq.
(212) 504-5555
(212) 504-5557 (Fax)
(iii) if to any other Investor, at such address as such Investor shall
have provided in writing to the Company.
The Company, the Initial Investor or any Investor may change the foregoing
address by notice given pursuant to this Section 11(c).
(d) Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
(e) This Agreement shall be governed by and interpreted in accordance with
the laws of the State of New York. Each of the parties consents to the
jurisdiction of the federal courts whose districts encompass any part of the
City of New York or the state courts of the State of New York sitting in the
City of New York in connection with any dispute arising under this Agreement and
hereby waives, to the maximum extent permitted by law, any objection including
any objection based on forum non conveniens, to the bringing of any such
proceeding in such jurisdictions.
(f) The remedies provided in this Agreement are cumulative and not
exclusive of any remedies provided by law. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their best efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would
-17-
<PAGE>
have executed the remaining terms, provisions, covenants and restrictions
without including any of such that may be hereafter declared invalid, illegal,
void or unenforceable.
(g) The Company shall not enter into any agreement with respect to its
securities that is inconsistent with the rights granted to the holders of
Registrable Securities in this Agreement or otherwise conflicts with the
provisions hereof. The Company is not currently a party to any agreement
granting any registration rights with respect to any of its securities to any
person which conflicts with the Company's obligations hereunder or gives any
other party the right to include any securities in any Registration Statement
filed pursuant hereto, except for such rights and conflicts as have been
irrevocably waived. Without limiting the generality of the foregoing, without
the written consent of the holders of a majority in interest of the Registrable
Securities, the Company shall not grant to any person the right to request it to
register any of its securities under the Securities Act unless the rights so
granted are subject in all respect to the prior rights of the holders of
Registrable Securities set forth herein, and are not otherwise in conflict or
inconsistent with the provisions of this Agreement. The restrictions on the
Company's rights to grant registration rights under this paragraph shall
terminate on the date the Registration Statement to be filed pursuant to Section
2(a) is declared effective by the Commission.
(h) This Agreement, the Securities Purchase Agreement, the Escrow
Instructions, dated as of a date even herewith (the "Escrow Instructions"),
between the Company, the Initial Investor and Cadwalader, Wickersham & Taft, the
Preferred Shares and the Warrants constitute the entire agreement among the
parties hereto with respect to the subject matter hereof. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein. This Agreement, the Securities Purchase Agreement, the
Escrow Instructions, the Certificate of Designation and the Warrants supersede
all prior agreements and undertakings among the parties hereto with respect to
the subject matter hereof.
(i) Subject to the requirements of Section 8 hereof, this Agreement shall
inure to the benefit of and be binding upon the successors and assigns of each
of the parties hereto.
(j) All pronouns and any variations thereof refer to the masculine,
feminine or neuter, singular or plural, as the context may require.
(k) The headings in this Agreement are for convenience of reference only
and shall not limit or otherwise affect the meaning thereof.
(l) The Company acknowledges that any failure by the Company to perform its
obligations under Section 3, or any delay in such performance could result in
direct damages to the Investors and the Company agrees that, in addition to any
other liability the Company may have by reason of any such failure or delay, the
Company shall be liable for all direct damages caused by such failure or delay.
(m) This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original but all of which shall constitute one and the
same agreement. A facsimile transmission of this signed Agreement shall be legal
and binding on all parties hereto.
-18-
<PAGE>
[SIGNATURE PAGE FOLLOWS.]
-19-
<PAGE>
In Witness Whereof, the parties have caused this Agreement to be duly
executed and delivered as of the date first above written.
Commodore Applied Technologies,
Inc.
By: /s/ PAUL HANNESSON
--------------------------------------
Name: Paul Hannesson
Title: President
The Shaar Fund Ltd.
By: /s/ SAMUEL LEVINSON
--------------------------------------
Name: Samuel Levinson
Title: Managing Director
Exhibit 10.6
================================================================================
ORDER FOR SUPPLIES OR SERVICES Form Approved PAGE 1 OF
(Contractor must submit four copies of invoice.) OMB No. 0704-0187 2
Expires Jun 30, 1997
================================================================================
Public reporting burden for this collection of information is estimated to
average 1 hour per response, including the time for reviewing instructions,
searching existing date sources, gathering and maintaining the data needed, and
completing and reviewing the collection of information. Send comments regarding
this burden estimate or any other aspect of this collection of information
including suggestions for reducing this burden, to Department of Defense,
Washington Headquarters Services, Directorate for Information Operations and
Reports, 1215 Jefferson Davis Highway, Suite 1204, Arlington, VA 22202-4302, and
to the Office of Management and Budget, Paperwork Reduction Project (0704-0187),
Washington, DC 20503.
PLEASE DO NOT RETURN YOUR FORM TO EITHER OF THESE ADDRESSES.
SEND YOUR COMPLETED FORM TO THE PROCUREMENT OFFICIAL IDENTIFIED IN ITEM 6.
<TABLE>
<CAPTION>
====================================================================================================================================
<S> <C> <C> <C> <C>
1. CONTRACT / PURCH ORDER NO 2. DELIVERY ORDER NO. 3. DATE OF ORDER 4. REQUISITION / PURCH REQUEST NO. 5. PRIORITY
DAAM01-98-D-0004 0003 99NOV03 W90B3W-2000-0038
- ----------------------------------------------------------------------------------------------------------------
6. ISSUED BY CODE DAAD13 7. ADMINISTERED BY (If other than 6) CODE S0101A DOC9*
------ ------------------------------
AMC ACQUISITION CENTER DCASMA BIRMINGHAM 8. DELIVERY FOB
EDGEWOOD BRANCH ATTN AMSSB-ACC-E 2121 6TH AVE., NORTH, RM 104 |X| DEST
5183 BLACKHAWK ROAD BIRMINGHAM AL 35203-2376 |_| OTHER
ABERDEEN PROVING GROUND MD 21010-5423 (See Schedule if other)
Eric W. Braerman ACC (410) 436-4469
- ------------------------------------------------------------------------------------------------------------------------------------
9. CONTRACTOR Vendor Id: 00002221 IOJS9 FACILITY CODE 10. DELIVER TO FOB POINT BY (Date) 11. MARK IF
CODE ----- -------------------------------------------- BUSINESS IS
TELEDYNE COMMODORE |X| SMALL
NAME AND CUMMINGS RESEARCH 12. DISCOUNT TERMS |_| SMALL DISAD-
ADDRESS P O BOX 070007 0% 000 Days Net 030 VANTAGED
HUNTSVILLE AL 35807-7007 |_| WOMEN-OWNED
-------------------------------------------------------
13. MAIL INVOICES TO
See Block 15
- ------------------------------------------------------------------------------------------------------------------------------------
14. SHIP TO CODE ERDEC 15. PAYMENT WILL BE MADE BY CODE SC1020
----- ------ MARK ALL
ERDEC DFAS-COLUMBUS CENTER PACKAGES AND
SOUTH ENTITLEMENT OPERATIONS PAPERS WITH
ATTN: SCBRD DAAM0198D0004 P.O. BOX 182264 CONTRACT OR
APC EA COLUMBUS OH 43218-2264 ORDER NUMBER
EFT. T
====================================================================================================================================
16.
T O DELIVERY This delivery order is issued on another Government agency or in accordance with and subject to terms and
Y R conditions of above numbered contract.
P D X
E D -------------------------------------------------------------------------------------------------------------------------------
R Reference your furnish the following on terms specified herein.
O PURCHASE ---------------------------------------------------------------------------------------------------------------
F ACCEPTANCE. THE CONTRACTOR HEREBY ACCEPTS THE OFFER REPRESENTED BY THE NUMBERED PURCHASE ORDER AS IT MAY
PREVIOUSLY HAVE BEEN OR IS NOW MODIFIED, SUBJECT TO ALL OF THE TERMS AND CONDITIONS SET FORTH, AND AGREES TO
- ------------------- PERFORM THE SAME.
- --------------------------------------- -------------------------- ----------------------------- --------------------
NAME OF CONTRACTOR SIGNATURE TYPED NAME AND TITLE DATE SIGNED
(YYMMDD)
|X| If this is marked, supplier must sign Acceptance and return the following number of copies:
====================================================================================================================================
17. ACCOUNTING AND APPROPRIATION DATA / LOCAL USE
21 Award Oblig Amt OSS
====================================================================================================================================
18. 19. 20. QUANTITY 21. 22. UNIT PRICE 23. AMOUNT
ITEM NO. SCHEDULE OF SUPPLIES/SERVICE ORDERED/ UNIT
ACCEPTED*
- ------------------------------------------------------------------------------------------------------------------------------------
0001 Plans, Reports and Meetings as described 1.00 LT 100000.000000 100000.00
in the attached statement of work. This
CLIN is awarded on a firm-fixed price
basis.
MIPRORDERNF003
212390 0102 6N6N66 770117 2514 9899T6
CC: 9CJD10 S11071 MDEF: VCKM
AMS: 770117.00000 JONO: 9E99T6
====================================================================================================================================
*If quantity accepted by the Government is same as 24. UNITED STATES OF AMERICA 25. TOTAL $100000.00
quantity ordered, indicate by X. If different, enter ----------------------
actual quantity accepted below quantity ordered and BY: Charles A. Comaty aka /s/ Charles A. Comaty 29.
encircle. CONTRACTING/ORDERING OFFICER DIFFERENCES ----------
- ------------------------------------------------------------------------------------------------------------------------------------
26. QUANTITY IN COLUMN 20 HAS BEEN 27. SHIP NO. 28. D.O. VOUCHER NO. 30.
INITIALS ----------
|_| INSPECTED |_| RECEIVED |_| ACCEPTED, AND CONFORMS TO THE
CONTRACT EXCEPT AS NOTED ------------- ---------------------------------------------
|_| PARTIAL 32. PAID BY 33.
- -------------- ------------------------------------------------ |_| FINAL AMOUNT VERIFIED
DATE SIGNATURE OF AUTHORIZED GOVERNMENT CORRECT FOR
REPRESENTATIVE
- ------------------------------------------------------------------------------------ ----------------------
36. I certify this account is correct and proper for payment. 31. PAYMENT 34. CHECK NUMBER
|_| COMPLETE
- -------------- ------------------------------------------------ |_| PARTIAL ----------------------
DATE SIGNATURE AND TITLE OF CERTIFYING OFFICER |_| FINAL 35. BILL OF LADING NO.
- ------------------------------------------------------------------------------------------------------------------------------------
37. RECEIVED AT 38. RECEIVED BY (Print) 39. DATE RECEIVED 40. TOT. CONTAINERS 41. S/R ACCOUNT 42. S/R VOUCHER NO.
(YYMMDD) NUMBER
====================================================================================================================================
DD Form 1155, JUN 94 PREVIOUS EDITIONS MAY BE USED
</TABLE>
<PAGE>
[DEPARTMENT OF DEFENSE
SEAL]
[LETTERHEAD OF DEPARTMENT OF THE ARMY]
May 4, 1998
Richard Smith
Teledyne-Commodore
Cummings Research
300 Sparkman Drive
Huntsville, AL 35807-7007
Dear Mr. Smith,
Reference the Assembled Chemical Weapons Assessment (ACWA) program and the long
lead time item list you identified for demonstration testing.
Teledyne-Commodore is hereby authorized pre-contract costs under CLIN 0003 for
demonstration testing. You are authorized to incur costs not to exceed
$1,578,150, at this time. This authorization is limited to the
equipment/material and associated engineering costs as identified in your list
(attached) as adjusted.
The Government shall not be liable for any costs incurred which exceed the total
amount indicated above, nor shall it be liable for any equipment/material or
labor costs incurred for work outside that which is identified in your list
without the approval of the undersigned. This authorization does not guarantee
you will be issued a delivery order under CLIN 0003 for demonstration testing.
Sincerely,
/s/ Charles A. Comaty
Charles A. Comaty
Contracting Officer
OPTIONAL FORM 99 ([ILLEGIBLE])
FAX TRANSMITTAL
--------------------------------------------------------
To Dick Smith From Eric Braerman
--------------------------------------------------------
Dept./Agency Phone # 410-671-4469
--------------------------------------------------------
[ILLEGIBLE] Fax #
205-726-3330 410-671-4549
--------------------------------------------------------
[ILLEGIBLE] [ILLEGIBLE] [ILLEGIBLE]
Printed on [RECYCLE LOGO] Recycled Paper
<PAGE>
Feb 09 00 09:31a AMCRC Edgewood 410-435-4280 p.2
original DUPLICATE ORIGINAL
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
1. CONTRACT ID CODE PAGE OF PAGES
AMENDMENT OF SOLICITATION/MODIFICATION OF CONTRACT 1
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
2. AMENDMENT/APPLICATION NO. 3. EFFECTIVE DATE 4. REQUISITION/PURCHASE ORD NO. 5. PROJECT NO. (If applicable)
000203 02/07/00
- ------------------------------------------------------------------------------------------------------------------------------------
6. ISSUED BY CODE DAAD13 7. ADMINISTERED BY (if other than item 6) CODE S0101A
------ ----------------
AMC ACQUISITION CENTER DCASMA BIRMINGHAM
EDGEWOOD BRANCH ATTN: AMSSB-ACC-E 2121 8TH AVE. NORTH RM 104
5183 BLACKHAWK ROAD BIRMINGHAM, AL 35203-2376
ABERDEEN PROVING GROUND, MD 21010-5423
- ------------------------------------------------------------------------------------------------------------------------------------
8. NAME AND ADDRESS OF CONTRACTOR (No., street, city, State and ZIP Code) |X| 94. AMENDMENT OR SOLICITATION NO.
-----
TELEDYNE COMMODORE ------------------------------------
CUMMINGS RESEARCH PARK 98. DATED (SEE ITEM 11)
P.O. BOX 070007
HUNTSVILLE, AL 35807-7007 ------------------------------------
104. MODIFICATION OF CONTRACTS
ORDER NO
|X| DAAM01-98-D-0004 0002
------------------------------------
- ------------------------------------------------------------------------------------------ 108. DATED (SEE ITEM 13)
CODE IC159 FACILITY CODE 04/23/98
- ------------------------------------------------------------------------------------------------------------------------------------
11. THIS ITEM ONLY APPLIES TO AMENDMENTS OF SOLICITATIONS
- ------------------------------------------------------------------------------------------------------------------------------------
|_| The above numbered solicitation is amended as set forth in Item 14. The hour and date |_| [ILLEGIBLE] |_| [ILLEGIBLE]
specified [ILLEGIBLE]
[ILLEGIBLE] must acknowledge receipt of this amendment [ILLEGIBLE].
[ILLEGIBLE]
- ------------------------------------------------------------------------------------------------------------------------------------
12. ACCOUNTING AND APPROPRIATION DATA (If required)
- ------------------------------------------------------------------------------------------------------------------------------------
13. THIS ITEM APPLIES ONLY TO MODIFICATIONS OF CONTRACTS/ORDERS.
IT MODIFIES THE CONTRACT/ORDER NO. AS DESCRIBED IN ITEM 14.
- ------------------------------------------------------------------------------------------------------------------------------------
|X| 6. THIS CHANGE ORDER IS ISSUED PURSUANT TO (Specify authority). THE CHANGES SET FORTH IN ITEM 16 ARE MADE IN THE CONTRACT
ORDER NO. IN ITEM 108.
- ------------------------------------------------------------------------------------------------------------------------------------
7. THE ABOVE AMENDED CONTRACT/ORDER IS MODIFIED TO REFLECT THE ADMINISTRATIVE CHANGES ([ILLEGIBLE] as changes in [ILLEGIBLE]
appropriation date, etc.) SET FORTH IN ITEM 14, PURSUANT TO THE AUTHORITY OF [ILLEGIBLE]
- ------------------------------------------------------------------------------------------------------------------------------------
|X| 8. THIS SUPPLEMENTAL AGREEMENT IS ENTERED INTO PURSUANT TO AUTHORITY OF: Mutual Agreement of the Parties
- ------------------------------------------------------------------------------------------------------------------------------------
9. OTHER (Specify type of modification and authority)
- ------------------------------------------------------------------------------------------------------------------------------------
E. IMPORTANT: Contractor |_| is not |X| is required to sign this document and return 2 copies to the issuing office.
- ------------------------------------------------------------------------------------------------------------------------------------
14. DESCRIPTION OF AMENDMENT/MODIFICATION (Organized by UCF version headings, including solicitation/contract subject matter where
feasible.)
The delivery order price is hereby increased by $1,623,539. from $1,728,150. to $3,351,689. The parties agree that this increase is
the full and final equitable adjustment for any and all costs incurred in preparing for ACWA demonstration testing through November
1, 1999. Funding in the amount of $1,623,539. is provided.
MIPROHDERNF037 2102390 0102 06N6N66 77811700000 2514 VCHM00 MIPROHDERNF037 OE99ID S11071
AMOUNT: $1,623,539. ACRN: AC
Except as provided herein, all terms and conditions of the [ILLEGIBLE] referenced in Items [ILLEGIBLE] or [ILLEGIBLE], as heretofore
changed, remains unchanged and in full force.
- ------------------------------------------------------------------------------------------------------------------------------------
15A. NAME AND TITLE OF SIGNER (Type or print) 16A. NAME AND TITLE OF CONTRACTING OFFICER (Type or print)
CHARLES A. COMATY
William C. Burns, President, Teledyne-Commodore, LLC
- ------------------------------------------------------------------------------------------------------------------------------------
15B. CONTRACTOR/[ILLEGIBLE] 15C. DATE SIGNED 16B. UNITED STATES OF AMERICA 16C. DATE SIGNED
/s/ William C. Burns 02/09/00 BY /s/ Charles A. Comaty
- ---------------------------------------- -------------------------------- 12 FEB 2000
(Signature of person authorized to sign) (Signature of Contracting Officer)
- ------------------------------------------------------------------------------------------------------------------------------------
[ILLEGIBLE] [ILLEGIBLE] [ILLEGIBLE] [ILLEGIBLE]
[ILLEGIBLE]
</TABLE>
<PAGE>
FEB 24 '00 (THU) 14 57 TELEDYNE COMMODORE 2567261696 PAGE 2
Feb 24 00 09:15a AMCRC Edgewood 410-436-4290 p.1
original DUPLICATE ORIGINAL
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
1. CONTRACT ID CODE PAGE OF PAGES
AMENDMENT OF SOLICITATION/MODIFICATION OF CONTRACT 1
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
2. [ILLEGIBLE] APPLICATION NO. 3. EFFECTIVE DATE 4. REQUISITION/PURCHASE ORD NO. 5. PROJECT NO. (If applicable)
000302 11/08/99
- ------------------------------------------------------------------------------------------------------------------------------------
6. ISSUED BY CODE DAAD13 7. ADMINISTERED BY (if other than item 6) CODE 01A
------ ----------------
AMC ACQUISITION CENTER DCASMA BIRMINGHAM
EDGEWOOD BRANCH ATTN: AMSSB-ACC-E 2121 8TH AVE. NORTH RM 104
5183 BLACKHAWK ROAD BIRMINGHAM, AL 35203-2376
ABERDEEN PROVING GROUND, MD 21010-5423
- ------------------------------------------------------------------------------------------------------------------------------------
8. NAME AND ADDRESS OF CONTRACTOR (No., street, city, State and ZIP Code) |X| 94. AMENDMENT OR SOLICITATION NO.
-----
TELEDYNE COMMODORE ------------------------------------
CUMMINGS RESEARCH PARK 98. DATED (SEE ITEM 11)
P.O. BOX 070007
HUNTSVILLE, AL 35807-7007 ------------------------------------
104. MODIFICATION OF CONTRACTS
ORDER NO
|X| DAAM01-98-D-0004 0[ILLEGIBLE]
------------------------------------
- ------------------------------------------------------------------------------------------ 108. DATED (SEE ITEM 13)
CODE IC1S9 FACILITY CODE 11/03/99
- ------------------------------------------------------------------------------------------------------------------------------------
11. THIS ITEM ONLY APPLIES TO AMENDMENTS OF SOLICITATIONS
- ------------------------------------------------------------------------------------------------------------------------------------
|_| The above numbered solicitation is amended as set forth in Item 14. The hour and date |_| [ILLEGIBLE] |_| [ILLEGIBLE]
specified [ILLEGIBLE]
[ILLEGIBLE] must acknowledge receipt of this amendment [ILLEGIBLE].
[ILLEGIBLE]
- ------------------------------------------------------------------------------------------------------------------------------------
12. ACCOUNTING AND APPROPRIATION DATA (If required)
- ------------------------------------------------------------------------------------------------------------------------------------
13. THIS ITEM APPLIES ONLY TO MODIFICATIONS OF CONTRACTS/ORDERS.
IT MODIFIES THE CONTRACT/ORDER NO. AS DESCRIBED IN ITEM 14.
- ------------------------------------------------------------------------------------------------------------------------------------
|X| A. THIS CHANGE ORDER IS ISSUED PURSUANT TO (Specify authority). THE CHANGES SET FORTH IN ITEM 16 ARE MADE IN THE CONTRACT
ORDER NO. IN ITEM 108.
- ------------------------------------------------------------------------------------------------------------------------------------
B. THE ABOVE AMENDED CONTRACT/ORDER IS MODIFIED TO REFLECT THE ADMINISTRATIVE CHANGES ([ILLEGIBLE] as changes in [ILLEGIBLE]
appropriation date, etc.) SET FORTH IN ITEM 14, PURSUANT TO THE AUTHORITY OF [ILLEGIBLE]
- ------------------------------------------------------------------------------------------------------------------------------------
C. THIS SUPPLEMENTAL AGREEMENT IS ENTERED INTO PURSUANT TO AUTHORITY OF:
- ------------------------------------------------------------------------------------------------------------------------------------
D. OTHER (Specify type of modification and authority) Pursuant to the provisions of Delivery Order 0003
|X|
- ------------------------------------------------------------------------------------------------------------------------------------
E. IMPORTANT: Contractor |_| is not |X| is required to sign this document and return 2 copies to the issuing office.
- ------------------------------------------------------------------------------------------------------------------------------------
14. DESCRIPTION OF AMENDMENT/MODIFICATION (Organized by UCF version headings, including solicitation/contract subject matter where
feasible.)
See continuation sheet
Except as provided herein, all terms and conditions of the [ILLEGIBLE] referenced in Items [ILLEGIBLE] or [ILLEGIBLE], as heretofore
changed, remains unchanged and in full force
- ------------------------------------------------------------------------------------------------------------------------------------
15A. NAME AND TITLE OF SIGNER (Type or print) 16A. NAME AND TITLE OF CONTRACTING OFFICER (Type or print)
CHARLES A. COMATY
Richard W. Smith, Dir. of Operations
- ------------------------------------------------------------------------------------------------------------------------------------
15B. CONTRACTOR/[ILLEGIBLE] 15C. DATE SIGNED 16B. UNITED STATES OF AMERICA 16C. DATE SIGNED
/s/ Richard W. Smith 24 Feb 00 BY /s/ Charles A. Comaty
- ---------------------------------------- -------------------------------- 28 FEB 2000
(Signature of person authorized to sign) (Signature of Contracting Officer)
- ------------------------------------------------------------------------------------------------------------------------------------
[ILLEGIBLE] [ILLEGIBLE] [ILLEGIBLE] [ILLEGIBLE]
[ILLEGIBLE]
</TABLE>
<PAGE>
SF 30 CONTINUATION SHEET
CLIN 0003 for demonstration testing is hereby authorized. The contractor shall
conduct the demonstration effort in accordance with the attached statement of
work which incorporates by reference the final Government approved demonstration
study plan and matrix.
The total estimated amount for performance of CLIN 0003 is set forth below:
Estimated Cost 4,343,598.
Fixed Fee 325,770.
Total CPFF 4,669,368.
Funding in the amount of $4,669,368. is provided for performance of CLIN 0003.
The total funding available for payment under CLIN 0003 is $4,669,368. of which
$4,343,598. is for reimbursement of costs and $325,770. is for payment of fixed
fee. CLIN 0003 is fully funded.
Accounting Data:
MIPROHDERNF041
2102390 0102 06N6N66 77811700000 2514 VCHM00 MIPROHDERNF041
0E99TD S11071
AMOUNT: $4,669,368. ACRN: AC
DAAM01-98-D-0004 MOD 000302
Exhibit 10.7
- --------------------------------------------------------------------------------
AWARD/CONTRACT 1. THIS CONTRACT IS A RATED ORDER RATING PAGE
UNDER DPAS (15 CFR 350) > 1 of 4
- --------------------------------------------------------------------------------
2. CONTRACT (PRO. INST. IDENT.) NO. 3. EFFECTIVE DATE
GS-10F-0092K Janaury 18, 2000
- --------------------------------------------------------------------------------
4. REQUISITION/PURCHASE REQUEST/PROJECT NO.
8999
- --------------------------------------------------------------------------------
5. ISSUED BY CODE ____
General Services Administration
Acquisition Division (10FTP)
400 15th St SW
Auburn, WA 98001-6599
- --------------------------------------------------------------------------------
6. ADMINISTERED BY (If other than Item 5) CODE _____
- --------------------------------------------------------------------------------
7. NAME AND ADDRESS OF CONTRACTOR 8. DELIVERY
(No., street, city, county, State,
and ZIP Code) |_| FOB ORIGIN |X| FOB DESTINATION
--------------------------------------------
Commodore Advanced Sciences, Inc. 9. DISCOUNT FOR PROMPT PAYMENT
2340 MENAUL BOULEVARD NE NET 30 DAYS
Suite 400 --------------------------------------------
Albuquerque, NM 87107 10. SUBMIT INVOICES TO BE SHOWN ON
(4 copies unless otherwise DELIVERY ORDER
- ---------------------------------- specified) TO THE
CODE | FACILITY CODE ADDRESS SHOWN IN >
- --------------------------------------------------------------------------------
11. SHIP TO/MARK FOR CODE 12. PAYMENT WILL BE MADE BY
AS SPECIFIED ON EACH DELIVERY ORDER AS SPECIFIED ON EACH DELIVERY ORDER
- --------------------------------------------------------------------------------
13. AUTHORITY FOR USING OTHER FULL 14. ACCOUNTING AND APPROPRIATION DATA
AND OPEN COMPETITION
|_| 10 U.S.C. 2304(C)( )
|_| 41 U.S.C. 253 (C)( )
- --------------------------------------------------------------------------------
15a ITEM NO 15B. SUPPLIES/SERVICES 15C. QUANTITY 15D UNIT
MULTIPLE AWARD FEDERAL SUPPLY
SCHEDULE CONTRACT FOR: FSC 8999 - Environmental Advisory Services
CONTRACT PERIOD: January 18, 2000 through January 17, 2005
SINS AWARDED: 899-1, 899-2, 899-3 AND 899-4
- --------------------------------------------------------------------------------
15E. UNIT PRICE 15F. AMOUNT
15G. TOTAL AMOUNT OF CONTRACT > $INDEFINITE
- --------------------------------------------------------------------------------
16. TABLE OF CONTENTS
- --------------------------------------------------------------------------------
(X) SEC DESCRIPTION PAGES
- --------------------------------------------------------------------------------
PART I - THE SCHEDULE
- --------------------------------------------------------------------------------
A. SOLICITATION/CONTRACT FORM
- --------------------------------------------------------------------------------
B. SUPPLIES OR SERVICES AND PRICES/COST
- --------------------------------------------------------------------------------
C. DESCRIPTION/SPECS./WORK STATEMENT
- --------------------------------------------------------------------------------
D. PACKAGING AND MARKING
- --------------------------------------------------------------------------------
E. INSPECTION AND ACCEPTANCE
- --------------------------------------------------------------------------------
F. DELIVERIES OR PERFORMANCE
- --------------------------------------------------------------------------------
G. CONTRACT ADMINISTRATION DATA
- --------------------------------------------------------------------------------
H. SPECIAL CONTRACT REQUIREMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(X) SEC DESCRIPTION PAGES
- --------------------------------------------------------------------------------
PART II-CONTRACT CLAUSES
- --------------------------------------------------------------------------------
I. CONTRACT CLAUSES AND OTGHER ATTACH
- --------------------------------------------------------------------------------
PART III-LIST OF DOCUMENTS, EXHIBITS
- --------------------------------------------------------------------------------
J. LIST OF ATTACHMENTS
- --------------------------------------------------------------------------------
PART IV-REPRESENTATIONS AND INSTRUCTIONS
- --------------------------------------------------------------------------------
K. REPRESENTATION,CERTIFICATIONS AND
OTHER STATEMENTS OF OFFERORS
- --------------------------------------------------------------------------------
L. INSTRS., CONDS., AND NOTICES TO OFFERORS
- --------------------------------------------------------------------------------
M. EVALUATION FACTORS FOR AWARD
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CONTRACTING OFFICER WILL COMPLETE ITEM 17 OR 18 AS APPLICABLE
- --------------------------------------------------------------------------------
17. |_| CONTRACTOR'S NEGOTIATED AGREEMENT (Contractor is required to sign this
document and return _____copies to issuing office.) Contractor agrees to furnish
and deliver all items or perform all the services set forth or otherwise
identified above and on any continuation sheets for the consideration stated
herein. The rights and obligations of the parties to this contract shall be
subject to and governed by the following documents: (a) this award/contract, (b)
the solicitation, if any, and (c) such provision, representations,
certifications and specifications, as were attached or incorporated by reference
herein. (Attachments are list herein).
- --------------------------------------------------------------------------------
18. |X| AWARD (Contractor is not required to sign this document.) Your offer on
Solicitation Number TFTP-SW-988999-B including the additions or changes made by
you which additions or changes are set forth in full above, is hereby accepted
as to the items listed above and on any continuation sheets. This award
consummates the contract which consists of the following documents: (a) the
Government's solicitation and your offer, and (b) this award/contract. No
further contractual document is necessary.
- --------------------------------------------------------------------------------
19A. NAME AND TITLE OF SIGNER (Type or print)
- --------------------------------------------------------------------------------
19B. NAME OF CONTRACTOR
BY ____________________________________________________
(Signature of person authorized to sign)
- --------------------------------------------------------------------------------
20A. NAME OF CONTRACTING OFFICER
Patricia L. Austin
- --------------------------------------------------------------------------------
20B. UNITED STATES OF AMERICA
BY /s/ Patricia L. Austin
-----------------------------------------------
(Signature of Contracting Officer)
- --------------------------------------------------------------------------------
20C. DATE SIGNED
1/13/00
- --------------------------------------------------------------------------------
<PAGE>
GS-10F-0092K
SF-26
Page 2
1. Multiple Award Federal Supply Schedule Contract For: Environmental Advisory
Services
2. Contract Period: January 18, 2000 through January 17, 2005.
3. SINs Awarded: Commodore Advanced Sciences, Inc is awarded the following SINs:
899-1 Environmental Planning Services & Documentation
899-2 Environmental Compliance Services
899-3 Environmental/Occupational Training Services
899-4 Waste Management Services
4. Delivery/Performance Area: Worldwide.
5. F.O.B. Point: Destination
6. Order Limitations: Minimum Order: $ 300.00
Maximum Order: $2,000,000.00
7. Award is predicated on other than commercial pricing.
8. Prompt Payment Discount Terms: Net 30
9. Offer accepted as negotiated. The following documents are incorporated into
this contract which are attached hereto and made a part hereof:
Amendment 01, dated November 25, 1998
Amendment 02, dated December 7, 1998
Commodore letter, dated November 9, 1999
Email from W. Sanchez to D. Ginther, dated December 23, 1999
Compliance with Veterans Employment Reporting Requirements, dated November
9, 1999 Subcontracting Plan dated October 7, 1999
10. Contractor shall pay the Industrial Funding Fee of 1% of sales, in
accordance with clause 552.238-77.
11. In accordance with clause 552.238-72, contractor must report the quarterly
dollar value of sales under the contract by calendar quarter on electronic GSA
Form 72A.
12. Yearly escalations will be effective January 18, 2001 and each January 18
through January 18, 2004 (for the year January 18, 2004 through January 17,
2005). If this contract is extended for the option period the same principle
will apply.
13. Commodore Advanced Sciences, Inc has an approved accounting system to track
labor hour task orders. The name of this accounting system is Del-Tek
Accounting.
14. Other Direct Costs (ODCs) will be listed as separate line items and
identified as 'open market charges'. These Other Direct Costs will be negotiated
by the task ordering official when the task order is issued.
15. READ CONTRACT CAREFULLY: This award covers indefinite quantities or
services. No performance or delivery is required until order(s) are received.
<PAGE>
SF-26
Page 3
16. The Government Hourly Rates (Billable Rates) for the following labor
categories are listed as follows for Commodore Advanced Sciences On-Site labor
for the base 5-year contract period for SINs 899-1, 899-2, 899-3, and 899-4:
<TABLE>
<CAPTION>
Year 1 Year 2 Year 3 Year 4 Year 5
Labor Category Hrly Rate Hrly Rate Hrly Rate Hrly Rate Hrly Rate
-------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Program Manager $ 119.33 $ 122.85 $ 126.48 $ 130.21 $ 134.05
Project/Task Order Manager I $ 93.64 $ 96.39 $ 99.22 $ 102.14 $ 105.14
Project/Task Order Manager II $ 81.49 $ 83.87 $ 86.33 $ 88.86 $ 91.46
Scientist I $ 81.49 $ 83.87 $ 86.33 $ 88.86 $ 91.46
Scientist II $ 70.44 $ 72.50 $ 74.61 $ 76.79 $ 79.03
Scientist III $ 64.41 $ 66.28 $ 68.21 $ 70.20 $ 72.27
Engineer I $ 81.49 $ 83.87 $ 86.33 $ 88.86 $ 91.46
Engineer II $ 70.44 $ 72.50 $ 74.61 $ 76.79 $ 79.03
Engineer III $ 64.41 $ 66.28 $ 68.21 $ 70.20 $ 72.24
Technician I $ 61.45 $ 63.24 $ 65.07 $ 66.96 $ 68.91
Technician II $ 52.93 $ 54.46 $ 56.03 $ 57.65 $ 59.32
Technician III $ 51.43 $ 52.92 $ 54.44 $ 56.02 $ 57.64
Technician IV $ 37.17 $ 38.22 $ 39.31 $ 40.43 $ 41.58
Principal Executive $ 203.10 $ 209.14 $ 215.35 $ 221.75 $ 228.34
Principal/Sr Expert $ 175.95 $ 181.17 $ 186.54 $ 192.08 $ 197.78
Principal/Expert $ 148.07 $ 152.45 $ 156.96 $ 161.61 $ 166.40
Sr Project Administrator $ 71.73 $ 73.82 $ 75.98 $ 78.20 $ 80.48
Jr Project Administrator $ 46.63 $ 47.97 $ 49.35 $ 50.77 $ 52.23
Word Processing/Clerical $ 38.78 $ 39.88 $ 41.02 $ 42.19 $ 43.39
Clerical I $ 34.09 $ 35.06 $ 36.05 $ 37.07 $ 38.12
Clerical II $ 27.77 $ 28.54 $ 29.34 $ 30.16 $ 31.00
Technical Writer/Editor $ 61.60 $ 63.39 $ 65.23 $ 67.12 $ 69.08
</TABLE>
The following labor category hourly rates have been agreed to for SINs 899-1,
899-2, 899-3 and 899-4 for Commodore Advanced Sciences Client (off-site) labor
for the 5-year base contract period:
<TABLE>
<CAPTION>
Year 1 Year 2 Year 3 Year 4 Year 5
Labor Category Hrly Rate Hrly Rate Hrly Rate Hrly Rate Hrly Rate
-------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Program Manager $ 92.61 $ 95.33 $ 98.13 $101.01 $103.98
Project/Task Order Manager I $ 72.77 $ 74.90 $ 77.08 $ 79.33 $ 81.65
Project/Task Order Manager II $ 63.39 $ 65.23 $ 67.12 $ 69.08 $ 71.09
Scientist I $ 63.39 $ 65.23 $ 67.12 $ 69.08 $ 71.09
Scientist II $ 54.86 $ 56.44 $ 58.08 $ 59.76 $ 61.49
Scientist III $ 50.20 $ 51.64 $ 53.13 $ 54.67 $ 56.25
Engineer I $ 63.39 $ 65.23 $ 67.12 $ 69.08 $ 71.09
Engineer II $ 54.86 $ 56.44 $ 58.08 $ 59.76 $ 61.49
Engineer III $ 50.20 $ 51.64 $ 53.13 $ 54.67 $ 56.25
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Year 1 Year 2 Year 3 Year 4 Year 5
Labor Category Hrly Rate Hrly Rate Hrly Rate Hrly Rate Hrly Rate
-------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Technician I $ 47.92 $ 49.29 $ 50.71 $ 52.17 $ 53.68
Technician II $ 41.33 $ 42.51 $ 43.73 $ 44.98 $ 46.27
Technician III $ 40.18 $ 41.32 $ 42.50 $ 43.72 $ 44.97
Technician IV $ 29.16 $ 29.98 $ 30.82 $ 31.68 $ 32.57
Principal Executive $157.30 $161.96 $166.76 $171.70 $176.79
Principal/Sr Expert $136.33 $140.36 $144.51 $148.79 $153 19
Principal/Expert $114.80 $118.18 $121.67 $125.26 $128.95
Sr Project Administrator $ 55.85 $ 57.47 $ 59.13 $ 60.85 $ 62.61
Jr Project Administrator $ 36.47 $ 37.50 $ 38.57 $ 39.66 $ 40.79
Word Processing/Clerical $ 30.41 $ 31.26 $ 32.14 $ 33.04 $ 33.97
Clerical I $ 26.79 $ 27.53 $ 28.30 $ 29.09 $ 29.90
Clerical II $ 21.90 $ 22.50 $ 23.11 $ 23.75 $ 24.40
Technical Writer/Editor $ 48.03 $ 49.41 $ 50.83 $ 52.29 $ 53.80
</TABLE>
<PAGE>
Commodore Advanced Sciences, Inc Commodore Advanced Sciences, Inc
102 North Main 800 Oak Ridge Turnpike Suite C-260
Carlsbad NM 88221 Oak Ridge TN 37830
Eddy County Anderson County
Commodore Advanced Sciences, Inc Commodore Advanced Sciences, Inc
4500 Township Road 161 1310 Wakarusa Drive Suite A
Marengo OH 43334 Lawrence KS 66049
Morrow County Douglas County
Commodore Advanced Sciences, Inc
4760 Highway 377 South
Ft Worth TX 76116
Tarrant County
6. Discount From List Price: Prices shown herein are net prices.
7. Prompt Payment Terms: .05% 10 days, else Net 30 days
8a. Government Credit Card is accepted for orders below the micropurchase
threshold
b. Contact Contractor's Representative for credit card acceptance of orders
above the micropurchase threshold
9. Foreign Items: N/A
10a-d. Time of Delivery: To be negotiated with ordering agency on each task
order
11. F.O.B. Point(s): Destination
12. Ordering Address(es): Same as contractor's address
13. Payment Address(es): Commodore Advanced Sciences, Inc.
P0 Box 25848
Albuquerque NM 87125-5848
14. Warranty Provisions: N/A
15. Export Packing Charges: N/A
16. Terms and Conditions of Government Credit Card Acceptance: See #8 above
17. Terms and Conditions of Rental, Maintenance, and Repair: N/A
18. Terms and Conditions of Installation: N/A
19. Terms and Conditions of Repair Parts: N/A
19a. Terms and Conditions of any other services: N/A
20. List of Service and Distribution Points: N/A
21. List of Participating Dealers: N/A
22. Preventative Maintenance: N/A
23. Year 2000 (Y2K) Compliant: Yes
24. Environmental Attributes: N/A
25. Data Universal Numbering System (DUNS) number: 08-941-6994
26. Contractor is registered in Central Contractor Registration (CCR)
database: NA
<PAGE>
The Government Hourly Rates (Billable Rates) for the following labor categories
are listed as follows for Commodore Advanced Sciences On-Site labor for the base
5-year contract period for SINs 899-1, 899-2, 899-3, and 899-4:
<TABLE>
<CAPTION>
Year 1 Year 2 Year 3 Year 4 Year 5
Labor Category Hrly Rate Hrly Rate Hrly Rate Hrly Rate Hrly Rate
-------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Program Manager $119.33 $122.85 $126.48 $130.21 $134.05
Project/Task Order Manager I $ 93.64 $ 96.39 $ 99.22 $102.14 $105.14
Project/Task Order Manager II $ 81.49 $ 83.87 $ 86.33 $ 88.86 $ 91.46
Scientist I $ 81.49 $ 83.87 $ 86.33 $ 88.86 $ 91.46
Scientist II $ 70.44 $ 72.50 $ 74.61 $ 76.79 $ 79.03
Scientist III $ 64.41 $ 66.28 $ 68.21 $ 70.20 $ 72.27
Engineer I $ 81.49 $ 83.87 $ 86.33 $ 88.86 $ 91.46
Engineer II $ 70.44 $ 72.50 $ 74.61 $ 76.79 $ 79.03
Engineer III $ 64.41 $ 66.28 $ 68.21 $ 70.20 $ 72.24
Technician I $ 61.45 $ 63.24 $ 65.07 $ 66.96 $ 68.91
Technician II $ 52.93 $ 54.46 $ 56.03 $ 57.65 $ 59.32
Technician III $ 51.43 $ 52.92 $ 54.44 $ 56.02 $ 57.64
Technician IV $ 37.17 $ 38.22 $ 39.31 $ 40.43 $ 41.58
Principal Executive $203.10 $209.14 $215.35 $221.75 $228.34
Principal/Sr Expert $175.95 $181.17 $186.54 $192.08 $197.78
Principal/Expert $148.07 $152.45 $156.96 $161.61 $166.40
Sr Project Administrator $ 71.73 $ 73.82 $ 75.98 $ 78.20 $ 80.48
Jr Project Administrator $ 46.63 $ 47.97 $ 49.35 $ 50.77 $ 52.23
Word Processing/Clerical $ 38.78 $ 39.88 $ 41.02 $ 42.19 $ 43.39
Clerical I $ 34.09 $ 35.06 $ 36.05 $ 37.07 $ 38.12
Clerical II $ 27.77 $ 28.54 $ 29.34 $ 30.16 $ 31.00
Technical Writer/Editor $ 61.60 $ 63.39 $ 65.23 $ 67.12 $ 69.08
</TABLE>
The following labor category hourly rates have been agreed to for SINs 899-1,
899-2, 899-3 and 899-4 for Commodore Advanced Sciences Client (off-site) labor
for the 5-year base contract period:
<TABLE>
<CAPTION>
Year 1 Year 2 Year 3 Year 4 Year 5
Labor Category Hrly Rate Hrly Rate Hrly Rate Hrly Rate Hrly Rate
-------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Program Manager $ 92.61 $ 95.33 $ 98.13 $101.01 $103.98
Project/Task Order Manager I $ 72.77 $ 74.90 $ 77.08 $ 79.33 $ 81.65
Project/Task Order Manager II $ 63.39 $ 65.23 $ 67.12 $ 69.08 $ 71.09
Scientist I $ 63.39 $ 65.23 $ 67.12 $ 69.08 $ 71.09
Scientist II $ 54.86 $ 56.44 $ 58.08 $ 59.76 $ 61.49
Scientist III $ 50.20 $ 51.64 $ 53.13 $ 54.67 $ 56.25
Engineer I $ 63.39 $ 65.23 $ 67.12 $ 69.08 $ 71.09
Engineer II $ 54.86 $ 56.44 $ 58.08 $ 59.76 $ 61.49
Engineer III $ 50.20 $ 51.64 $ 53.13 $ 54.67 $ 56.25
Technician I $ 47.92 $ 49.29 $ 50.71 $ 52.17 $ 53.68
Technician II $ 41.33 $ 42.51 $ 43.73 $ 44.98 $ 46.27
Technician III $ 40.18 $ 41.32 $ 42.50 $ 43.72 $ 44.97
Technician IV $ 29.16 $ 29.98 $ 30.82 $ 31.68 $ 32.57
Principal Executive $157.30 $161.96 $166.76 $171 70 $176.79
Principal/Sr Expert $136.33 $140.36 $144.51 $148.79 $153.19
Principal/Expert $114.80 $118.18 $121.67 $125.26 $128.95
Sr Project Administrator $ 55.85 $ 57.47 $ 59.13 $ 60.85 $ 62.61
Jr Project Administrator $ 36.47 $ 37.50 $ 38.57 $ 39 66 $ 40.79
Word Processing/Clerical $ 30.41 $ 31.26 $ 32.14 $ 33.04 $ 33.97
Clerical I $ 26.79 $ 27.53 $ 28.30 $ 29.09 $ 29.90
Clerical II $ 21.90 $ 22.50 $ 23.11 $ 23.75 $ 24.40
Technical Writer/Editor $ 48.03 $ 49.41 $ 50.83 $ 52.29 $ 53.80
</TABLE>
<PAGE>
GENERAL SERVICES ADMINISTRATION
FEDERAL SUPPLY SERVICE
Authorized Federal Supply Schedule Pricelist
On-line access to contract ordering information, terms and conditions,
up-to-date pricing, and the option to create an electronic delivery is available
through GSA Advantage!, a menu-driven database system The INTERNET address for
GSA Advantage! is http://www.gsa.gov.
ENVIRONMENTAL ADVISORY SERVICES
Federal Supply Schedule Industrial Group 899
Industrial Class 8999
Contract No. GS-10F-0092K
For more information on ordering from Federal Supply Schedules click on the FSS
Schedules button at http:www.fss.gsa.gov.
Contract Period: January 18, 2000 through January 17, 2005.
Contractor: Commodore Advanced Sciences, Inc
2340 Menaul Blvd NE Suite 400
Albuquerque NM 87107
Phone: (505) 872-6876
FAX: (505) 872-6828
Contract Administration:
For Domestic Orders - Mr. Will Sanchez
For Overseas Orders - Mr. Will Sanchez
Address/Telephone: Same as Above
Business Size: Large
CUSTOMER INFORMATION
la. Table of Awarded Special Item Numbers (SINs):
899-1 Environmental Planning Services & Documentation
899-2 Environmental Compliance Services
899-3 Environmental/Occupational Training Services
899-4 Waste Management Services
lb. N/A
2. Maximum Order: $2,000,000.00
3. Minimum Order $300
4. Geographic Coverage: Worldwide
5. Production Points:
Commodore Advanced Sciences, Inc Commodore Advanced Sciences, Inc
2340 Menaul Blvd NE Suite 400 143 Union Blvd Suite 660
Albuquerque NM 87107 Lakewood CO 80228
Bernalillo County Jefferson County
<PAGE>
Identification Data
Contractor: Commodore Advanced Sciences, Inc.
--------------------------------------
Address: 2340 Menaul Blvd NE, Suite 400
Albuquerque, NM 87107
--------------------------------------
Solicitation or Contract Number: TFTP-98-5W-8999-B
-----------------
Item/Service: Worldwide FSS for Environmental Advisory Services
-------------------------------------------------------
Total Amount of Contract (Including Options) $TBD - desire $30,000,000
--------------------------
Period of Contract Performance (Day, Mo. & Yr.): 5 years and one 5 year option
-------------------------------
* Federal Acquisition Regulation (FAR), paragraph 19.708(b) prescribes the use
of the clause at FAR 52.219-9 entitled "Small, Small Disadvantaged, and
Women-Owned Small Business Subcontracting Plan." The following is a suggested
model for use when formulating such a subcontracting plan. While this model plan
has been designed to be consistent with FAR 52.219-9, other formats of a
subcontracting plan may be acceptable. However, failure to include essential
information as exemplified in this model may be cause for either a delay in
acceptance or the rejection of a bid or offer where the clause is applicable.
Further, the use of this model is not intended to waive other requirements that
may be applicable under FAR 52.219-9. "SUBCONTRACT," as used in this clause,
means any agreement (other than one involving an employer-employee relationship)
entered into by a Federal Government prime contractor or subcontractor calling
for supplies or services required for performance of the contract or subcontract
<PAGE>
1. Type of plan (check one):
|X| Individual Plan (All elements developed specifically for this contract and
applicable for the full term of this contract).
____ Master Plan (Goals developed for this contract; all other elements
standard; must be renewed every year).
____ Commercial Products Plan (Contractor sells large quantities of the
off-the-shelf commodities to many Government agencies. Plans/goals
negotiated by a lead agency on a company-wide basis rather than for
individual contracts. Plan effective only during the year for which it is
approved. The contractor must provide a copy of the lead agency approval).
2. Goals:
State separate dollar and percentage goals for small business, small
disadvantaged business, and women-owned small business in the following format.
(For a contract with option, provide a separate statement for the basic contract
and individual statements for each option year).
Commodore ASI's plan numbers shown below are based on the assumption that we
will be awarded $3,000,000 in task orders per year and the nature of the work
will afford opportunities to subcontract about 10% of the effort to small and
small disadvantaged and women owned firms ands 3% to large businesses like
analytical laboratories.
A. Total estimated dollar value and percent of planned subcontracting
with small businesses (include small disadvantaged and women-owned
small businesses): (77% of "C")
$1,500,000 basic contract and $1,500,000 for option years 1
through 5
B. Total estimated dollar value and percent of planned subcontracting
with large businesses (all business concerns classified as "other
than small"): (23% of "C")
$450,000 basic contract and $50,000 for option years 1 through 5
C. Total estimated dollar value of all planned subcontracting, i.e.,
the sum of A and B above:
$1,950,000 (100%) basic contract $1,950,000 (100%) option years 1
through 5
D. Total estimated dollar value and percent of planned subcontracting
with small
disadvantaged businesses: (38.5% of "C")
$750,000 basic contract, $750,000 for option years 1 through 5
E. Total estimated dollar value and percent of planned subcontracting
with women-owned small businesses: (25.6% of "C")
$500,000 basic contract and $500,000 for option years 1 through 5
<PAGE>
F. Provide a description of all the products and/or services to be
subcontracted under this contract, and indicate the types of
businesses supplying them: i.e., OTHER THAN SMALL BUSINESS (OTHER),
SMALL BUSINESS (SB), SMALL DISADVANTAGED BUSINESS (SDB), and
WOMEN-OWNED SMALL BUSINESS (WOSB):
(Check all that apply)
Subcontracted Product/Service Other SB |X| SDB |X| WOSB |X|
CAS plans on subcontracting with specialty firms for the following services:
drilling, analytical laboratories, geophysical surveys, land surveys, asbestos
surveys, systems (transportation planning), training, major investment studies,
traffic noise analysis, and specific expert studies in disciplines or locations
that it would be more cost effective to subcontract out these types of services.
CAS identified a woman owned firm, Environmental Management Resources of
Lawrence KS and an 8a firm, LS Gallegos & Associates of Englewood CO as two
example small disadvantaged firms whom we could access to meet our goals.
(Attach additional sheets if necessary).
G. A description of the method used to develop the subcontracting goals
for small, small disadvantaged, and women-owned small business
concerns: i.e., explain the method and state the quantitative basis
(in dollars) used to establish the percentage goals; how the areas
to be subcontracted to small, small disadvantaged, and women-owned
small business concerns were determined; and how the capabilities of
small, small disadvantaged, and women-owned small business concerns
were determined. Include any source list used in the determination
process.
The areas of this procurement to be subcontracted will be identified by the
program and scientific staff to determine the requisite skill required to
satisfy subcontract requirements. CAS reviewed the GSA website for available
SDB/WO subcontractors. Our program staff will identify other specialty areas of
needs and candidate subcontractors based on their familiarity with our in-house
capabilities and location of work. It is recognized that this contract could
offer opportunities for qualified small and small disadvantaged business firms
that support environmental investigation and field services using specialized
equipment or facilities..
H. Indirect costs have |X| have not _____ been included in the dollar
and percentage subcontracting goals stated above. (Check one).
I. If indirect costs have been included, explain the method used to
determine the proportionate share of such costs to be allocated as
subcontracts to small, small disadvantaged, and women-owned small
business concerns.
CAS adds a three (3)% subcontract handling expense to subcontract costs. Profit
or fee is not included.
- --------------------------------------------------------------------------------
<PAGE>
================================================================================
3. Program Administrator:
- --------------------------------------------------------------------------------
Name, title, position within the corporate structure, and duties and
responsibilities of the employee who will administer the contractor's
subcontracting program.
Name: Dorothy A. Lucero
Title: Subcontract Administrator
Address: 2340 Menaul Blvd., NE, Suite 400
Albuquerque, NM 87107
Telephone: (505) 872-3508
Facsimile: (505) 872-6828
Duties: Has general overall responsibility for the contractor's subcontracting
program, i.e., developing, preparing, and executing individual subcontracting
plans and monitoring performance relative to the requirements of this particular
plan. These duties include, but are not limited to, the following activities:
A. Developing and promoting company-wide policy initiatives that
demonstrate the company's support for awarding contracts and subcontracts
to small, small disadvantaged, and women-owned small business concerns;
and assure that small, small disadvantaged, and women-owned small
businesses are included on the source lists for solicitations for products
and services they are capable of providing;
B. Developing an maintaining bidder's lists of small, small disadvantaged,
and women-owned small business concerns from all possible sources;
C. Ensuring periodic rotation of potential subcontractors on bidders'
lists.
D. Ensuring that procurement "packages" are designed to permit the maximum
possible participation of small, small disadvantaged, and women-owned
small businesses.
E. Make arrangements for the utilization of various sources for the
identification of small, small disadvantaged, and women-owned small
businesses such as the SBA's Procurement Automated Source System (PASS),
the National Minority Purchasing Council Vendor Information Service, the
Office of Minority Business Data Center in the Department of Commerce, and
the facilities of local small business and minority associations, and
contact with Federal agencies' Small and Small Disadvantaged Business
Utilization Specialists (SADBUS);
F. Overseeing the establishment and maintenance of contract and
subcontract award records;
G. Attending or arranging for the attendance of company counselors at
Business Opportunity Workshops, Minority Business Enterprise Seminars,
Trade Fairs, Procurement Conferences, etc.;
H. Ensure small, small disadvantaged, and women-owned small business
concerns are made aware of subcontracting opportunities and how to prepare
responsive bids to the company;
<PAGE>
I. Conducting or arranging for the conduct of training for purchasing
personnel regarding the intent and impact of Section 8(a) of the Small
Business Act on purchasing procedures;
J. Monitoring the company's performance and making any adjustments
necessary to achieve the subcontract plan goals;
K. Preparing and submitting timely, required subcontract reports;
L. Coordinating the company's activities during the conduct of compliance
reviews by Federal agencies;
M. Providing technical assistance; e.g., engineering, quality control, and
managerial assistance to small, small disadvantaged, and women-owned small
business;
N. For contractors of the Department of Defense, NASA, and the U.S. Coast
Guard: Ensuring that Historically Black Colleges and Universities (HBCUs)
and Minority Institutions (MIS) shall be afforded maximum practicable
opportunity.
0. Other Duties:
Ms. Lucero will also be responsible for procurements of specialty
equipment in support of other commercial corporate projects.
__________________________________________________________________________
__________________________________________________________________________
4. Equitable Opportunity:
Describe efforts the offeror will make to ensure that small, small
disadvantaged, and women-owned small business concerns will have an equitable
opportunity to compete for subcontracts. These efforts include, but are not
limited to, the following activities:
A. Outreach efforts to obtain sources:
1. Contacting minority and small business trade associations;
2. Contacting business development organizations;
3. Attending small and minority business procurement conferences
and trade fairs;
4. Requesting sources from the Small Business Administration's
PASS; and
5. Utilizing newspaper and magazine ads to encourage new sources.
B. Internal efforts to guide and encourage purchasing personnel:
1. Presenting workshops, seminars, and training programs;
2. Establishing maintaining and using small, small disadvantaged,
and women-owned small business source lists, guides, and other data
for soliciting subcontracts; and
<PAGE>
3. Monitoring activities to evaluate compliance with the
subcontracting plan.
C. Additional Efforts:
Contacting chapters of NAPM and NCMA nearest the location where
subcontracted services may be required to request assistance in
identifying qualified and reputable SDB/WO firms.
5. Flow-Down Clause.
The contractor agrees to include the provisions under FAR 52.219-8, "Utilization
of Small, Small Disadvantaged, and Women-Owned Small Business Concerns," in all
subcontracts that offer further subcontracting opportunities. All
subcontractors, except small business concerns, that receive subcontracts in
excess of $500,000 ($1,000,000 for construction) must adopt and comply with a
plan required by FAR 52.219-9, "of Small, Small Disadvantaged, and Women-Owned
Small Business Subcontracting Plan" (FAR 19.704 (a)(4)).
6. Reporting and Cooperation:
The contractor gives assurance of (1) cooperation in any studies or surveys that
may be required; (2) submission of periodic reports which show compliance with
the subcontracting plan; (3) submission of Standard Form (SF) 294,
"Subcontracting Report for Individual Contracts," and SF-295, "Summary
Subcontract Report;" in accordance with the instructions on the forms; and (4)
ensuring that large business subcontractors with subcontracting plans agree to
submit Standard Forms 294 and 295.
Reporting Period Report Due Due Date
---------------- ---------- --------
Oct 1 - March 31 SF-294 04/30
Apr 1 - Sept 30 SF-294 10/30
Oct 1 - Sept 30 SF-295* 10/30
* Beginning in fiscal year 1996, contractors of the Department of Defense will
be required to submit the SF 295 semiannually, except that contractors with
Commercial Plans and contractors in the DOD Test Program for Negotiation of
Comprehensive Subcontracting Plans may continue to submit the SF-295 annually.
All contractors of civilian agencies will be required to submit the SF 295
annually as shown in this chart.
ADDRESSES
(a) SF-294 to be submitted to the cognizant contracting officer or as otherwise
specified in the contract; and
(b) SF-295 to be submitted to the Office of Small and Disadvantaged Business
Utilization of the procuring agency, or as otherwise specified in the contract,
and to the cognizant SBA Commercial Market Representative.
7. Recordkeeping:
The following is a recitation of the types of records the contractor will
maintain to demonstrate the procedures adopted to comply with the requirements
and goals in the subcontracting plan. These records will include, but not
limited to, the following:
<PAGE>
A. If the prime contractor is not using PASS as its source for small,
small disadvantaged, and women-owned small business concerns, list the
names of guides and other data identifying such vendors;
B. Organizations contacted in an attempt to locate small, small
disadvantaged, and women-owned small business concerns;
C. On a contract-by-contract basis, records on each subcontract
solicitation resulting in an award of more than $100,000 indicating (1)
whether small business concerns were solicited, and if not, why not; (2)
whether small disadvantaged business concerns were solicited, and if not,
why not; (3) whether women-owned small business concerns were solicited,
and if not, why not; and (4) if applicable, the reason that the award was
not made to a small business concern;
D. Records to support other outreach efforts, e.g., contacts with minority
and small business trade associations, attendance at small and minority
business procurement conferences and trade fairs;
E. Records to support internal guidance and encouragement provided to
buyers through (1) workshops, seminars, training program, incentive
awards; and (2) monitoring of activities to evaluate compliance; and
F. On a contract-by-contract basis, records to support subcontract award
data including the name, address, and business size of each subcontractor.
(This item is not required on a contract-by-contract basis for company or
division-wide commercial plans.)
G. Additional Records:
NA
--------------------------------------------------------------------------
--------------------------------------------------------------------------
--------------------------------------------------------------------------
--------------------------------------------------------------------------
8. Timely Payments to Subcontractor:
FAR 19.702 requires your company to establish and use procedures to ensure the
timely payment of amounts due pursuant to the terms of your subcontracts with
small, small disadvantages, and women-owned small business concerns.
State whether you company has established and uses such procedures.
CAS's standard payment terms for such size firms is Net 30 after approval of the
invoice.
9. Description of Good Faith Effort:
Maximum practicable utilization of small, small disadvantage, and women-owned
small business concerns as subcontractors in Government contracts is a matter of
national interest with both social and economic benefits. When a contractor
fails to make a good faith effort to comply with a subcontracting plan, these
objectives are not achieved, and 15 U.S.C. 637(d)(4)(F) directs that liquidated
damages shall be paid by the contractor. In order to demonstrate your compliance
with a good faith effort to achieve the small, small disadvantaged, and
women-owned small business subcontracting goals, outline the steps your company
plans to take. These steps will be negotiated with the Contracting Officer prior
to approval of the plan.:
<PAGE>
CAS was a successful 8a contractor and is committed to helping similar firms and
will implement the plan and meet the goals. Normally our SDB/WO goals are based
on 10% of the actual awarded contract value. CAS is willing to put some portion
of our profits or fee at risk to assure the GSA that we will meet the goals.
This subcontracting plan was submitted by:
Typed Name: Wilfred G. Sanchez, Jr.
----------------------------------------------------------
Signature: /s/ Wilfred G. Sanchez, Jr.
----------------------------------------------------------
Title: Director of Contracts and Controls
----------------------------------------------------------
Date Prepared: October 7, 1999
--------------------------------------------------------------------------
Phone No.: (505) 872-6876
----------------------------------------------------------
Fax No.: (505) 872-6828
----------------------------------------------------------
E-Mail: [email protected]
----------------------------------------------------------
Approval:
Agency: __________________________________________________________________
Typed Name: ______________________________________________________________
Signature:
__________________________________________________________________________
Title: ___________________________________________________________________
Date Approved: ___________________________________________________________
Phone No.: _______________________________________________________________
Fax No.: _________________________________________________________________
<PAGE>
[LOGO] U.S. GENERAL SERVICES ADMINISTRATION
Northwest/Arctic Region
------------------------------------------------------------------------
JAN 18 2000
Re: Subcontracting Plan Reports -- Contract No. GS-10F-0092K
Commodore Advanced Sciences, Inc.
2340 Menaul Boulevard NE
Suite 400
Albuquerque, NM 87107
Your individual contract plan submitted in connection with the contact has been
approved. You are required to submit subcontracting reports on Standard Form
(SF) 294, Subcontracting Report for Individual Contracts, and Standard Form (SF)
295, Summary Subcontract Report.
The SF 294 report is used to report subcontracting activity under this contract.
The report is due semiannually and must be submitted by April 30 for the
reporting period October 1 - March 31 and October 30 for the reporting period
April 1 - September 30. A separate report is required at contract completion.
The SF 295 is used to report total subcontracting activity under all of your GSA
contracts. The report must be submitted annually and cover the period October 1
- - September 30 (the Government fiscal year). The report is due on or before
October 30th of each year. A new reporting cycle begins October 1st of each
year.
Please note the requirement on the SF 295 to report your subcontracting with
women-owned small business concerns.
The SF 294 report must be submitted to: General Services Administration
Acquisition Division (10FTP-E)
400 15th St., SW
Auburn, WA 98001-6599
with a copy to: General Services Administration
Office of Enterprise Development (10AB)
400 15th Street SW
Auburn, WA 98001-6599
The SF 295 report must be submitted to: General Services Administration
Office of Enterprise Development (E)
18th and F Street, NW
Washington, DC 20405
Sincerely,
/s/ Patricia L. Austin
Patricia L. Austin
Contracting Officer
Acquisition Division (10FTP-E)
Management Services Center
Enclosures (SF 294 and SF 295)
400 15th Street SW, Auburn, WA 98001-6599
Federal Recycling Program [LOGO] Printed on Recycled Paper
<PAGE>
FAC 97-05 AUGUST 21, 1998
PART 53-FORMS 53.301-294
- --------------------------------------------------------------------------------
================================================================================
SUBCONTRACTING REPORT FOR INDIVIDUAL CONTRACTS
(See instructions on reverse)
- --------------------------------------------------------------------------------
OMB No.: 9000-0006
Expires: 04/30/2001
- --------------------------------------------------------------------------------
Public reporting burden for this collection of information is estimated to
average 3 hours per response, including the time for reviewing instructions,
searching existing data sources, gathering and maintaining the data needed, and
completing and reviewing the collection of information. Send comments regarding
this burden estimate or any other aspect of this collection of information,
including suggestions for reducing this burden, to the FAR Secretariat (MVR),
Federal Acquisition Policy Division, GSA, Washington, DC 20405.
- --------------------------------------------------------------------------------
1. CORPORATION, COMPANY OR SUBDIVISION COVERED
- --------------------------------------------------------------------------------
a. COMPANY NAME
- --------------------------------------------------------------------------------
b. STREET ADDRESS
- --------------------------------------------------------------------------------
c. CITY d. STATE e. ZIP CODE
- --------------------------------------------------------------------------------
2. CONTRACTOR IDENTIFICATION NUMBER
- --------------------------------------------------------------------------------
3. DATE SUBMITTED
- --------------------------------------------------------------------------------
4. REPORTING PERIOD FROM INCEPTION OF CONTRACT THRU:
- --------------------------------------------------------------------------------
|_| MAR 31 |_| SEPT 30 YEAR
- --------------------------------------------------------------------------------
5. TYPE OF REPORT
- --------------------------------------------------------------------------------
|_| REGULAR |_|FINAL |_| REVISED
- --------------------------------------------------------------------------------
6. ADMINISTERING ACTIVITY (Please check applicable box)
- --------------------------------------------------------------------------------
|_| ARMY |_| GSA |_| NASA
|_| NAVY |_| DOE |_| OTHER FEDERAL AGENCY (Specify)
|_| AIR FORCE |_| DEFENSE LOGISTICS AGENCY
- --------------------------------------------------------------------------------
7. REPORT SUBMITTED AS (Check one and provide appropriate number)
- --------------------------------------------------------------------------------
|_| PRIME CONTRACTOR PRIME CONTRACT NUMBER
--------------------------------------------------
|_| SUBCONTRACTOR SUBCONTRACT NUMBER
- --------------------------------------------------------------------------------
8. AGENCY OR CONTRACTOR AWARDING CONTRACT
- --------------------------------------------------------------------------------
a. AGENCY'S OR CONTRACTOR'S NAME
- --------------------------------------------------------------------------------
b. STREET ADDRESS
- --------------------------------------------------------------------------------
C. CITY d. STATE e. ZIP CODE
- --------------------------------------------------------------------------------
9. DOLLARS AND PERCENTAGES IN THE FOLLOWING BLOCKS:
|_| DO INCLUDE INDIRECT COSTS |_| DO NOT INCLUDE INDIRECT COSTS
- --------------------------------------------------------------------------------
SUBCONTRACT AWARDS
- --------------------------------------------------------------------------------
TYPE CURRENT GOAL ACTUAL CUMULATIVE
--------------------------------------------
WHOLE WHOLE
DOLLARS PERCENT DOLLARS PERCENT
- --------------------------------------------------------------------------------
10A. SMALL BUSINESS CONCERNS
(Include SDB, WOSB, HBCU/MI)
(Dollar Amount and Percent of 10c.)
- --------------------------------------------------------------------------------
10b. LARGE BUSINESS CONCERNS
(Dollar Amount and Percent of 10c.)
- --------------------------------------------------------------------------------
10c. TOTAL (Sum of 10a and 10b.) 100.0% 100.0%
- --------------------------------------------------------------------------------
11. SMALL DISADVANTAGE (SDB)
CONCERNS (INCLUDE HBCU/MI)
(Dollar Amount and Percent of 10c.)
- --------------------------------------------------------------------------------
12. WOMEN-OWNED SMALL BUSINESS
(WOSB) CONCERNS (Dollar Amount and Percent of 10c.)
- --------------------------------------------------------------------------------
13. REMARKS
- --------------------------------------------------------------------------------
14A. NAME OF INDIVIDUAL ADMINISTERING SUBCONTRACTING PLAN
- --------------------------------------------------------------------------------
14b. TELEPHONE NUMBER
- --------------------------------------------------------------------------------
AREA CODE NUMBER
================================================================================
AUTHORIZED FOR LOCAL REPRODUCTION STANDARD FORM 294 (REV. 8-98)
Previous edition is not usable Presribed by GSA-FAR (48 CFR) 53.219(a)
53-83
<PAGE>
FAC 97-05 AUGUST 21, 1998
PART 53-FORMS 53.301-295
- --------------------------------------------------------------------------------
================================================================================
SUMMARY SUBCONTRACT REPORT OMB NO.: 9000-0007
(See instructions on reverse) Expires: 06/30/2000
- --------------------------------------------------------------------------------
Public reporting burden for this collection of information is estimated to
average 13 hours per response, including the time for reviewing instructions,
searching existing data sources, gathering and maintaining the data needed, and
completing and reviewing the collection of information. Send comments regarding
this burden estimate or any other aspect of this collection of information,
including suggestions for reducing this burden, to the FAR Secretariat (MVR),
Federal Acquisition Policy Division, GSA, Washington, DC 20405.
- --------------------------------------------------------------------------------
1. CORPORATION, COMPANY OR SUBDIVISION COVERED
- --------------------------------------------------------------------------------
a. COMPANY NAME
- --------------------------------------------------------------------------------
b. STREET ADDRESS
- --------------------------------------------------------------------------------
c. CITY d. STATE e. ZIP CODE
- --------------------------------------------------------------------------------
3. DATE SUBMITTED
- --------------------------------------------------------------------------------
4. REPORTING PERIOD:
- --------------------------------------------------------------------------------
|_| OCT 1 - MAR 31 |_| OCT 1 - SEPT 30 YEAR
- --------------------------------------------------------------------------------
5. TYPE OF REPORT
- --------------------------------------------------------------------------------
|_| REGULAR |_| FINAL |_| REVISED
- --------------------------------------------------------------------------------
6. ADMINISTERING ACTIVITY (Please check applicable box)
- --------------------------------------------------------------------------------
|_| ARMY |_| DEFENSE LOGISTICS AGENCY |_| DOE
|_| NAVY |_| NASA |_| OTHER FEDERAL AGENCY (Specify)
|_| AIR FORCE |_| GSA
- --------------------------------------------------------------------------------
7. REPORT SUBMITTED AS (Check one)
- --------------------------------------------------------------------------------
|_| PRIME CONTRACTOR |_| BOTH
|_| SUBCONTRACTOR
- --------------------------------------------------------------------------------
8. TYPE OF PLAN
- --------------------------------------------------------------------------------
|_| INDIVIDUAL |_| COMMERCIAL
- --------------------------------------------------------------------------------
IF PLAN IS A COMMERCIAL PLAN, SPECIFY THE PERCENTAGE OF THE DOLLARS
ON THIS REPORT ATTRIBUTABLE TO THIS AGENCY
- --------------------------------------------------------------------------------
9. CONTRACTOR'S MAJOR PRODUCTS OR SERVICE LINES
- --------------------------------------------------------------------------------
a c
- --------------------------------------------------------------------------------
b d
- --------------------------------------------------------------------------------
CUMULATIVE FISCAL YEAR SUBCONTRACT AWARDS (Report
cumulative figures for reporting period in Block 4)
- --------------------------------------------------------------------------------
PERCENT
TYPE WHOLE (To nearest tenth
DOLLARS of a %)
- --------------------------------------------------------------------------------
10a.SMALL BUSINESS CONCERNS (include SDB,
WOSB, HBCU/MI)
(Dollar Amount and Percent of 10c.)
- --------------------------------------------------------------------------------
10b. LARGE BUSINESS CONCERNS
(Dollar Amount and Percent of 10c.)
- --------------------------------------------------------------------------------
10c. TOTAL (Sum of 10a and 10b.) 100.0%
- --------------------------------------------------------------------------------
11. SMALL DISADVANTAGED (SDB) CONCERNS
(Dollar Amount and Percent of 10c.)
- --------------------------------------------------------------------------------
12. WOMEN-OWNED SMALL BUSINESS (WOSB) CONCERNS
(Dollar Amount and Percent of 10c.)
- --------------------------------------------------------------------------------
13. HISTORICALLY BLACK COLLEGES AND UNIVERISITES
(HBCU) AND MINORITY INSTITUTIONS (MI) (if
applicable)
(Dollar Amount and Percent of 10c.)
- --------------------------------------------------------------------------------
14. REMARKS
- --------------------------------------------------------------------------------
15. CONTRACTOR'S OFFICIAL WHO ADMINISTERS SUBCONTRACTING PROGRAM
- --------------------------------------------------------------------------------
a. NAME b. TITLE c. TELEPHONE NUMBER
AREA CODE | NUMBER
- --------------------------------------------------------------------------------
16. CHIEF EXECUTIVE OFFICER
- --------------------------------------------------------------------------------
a. NAME c. SIGNATURE
- --------------------------------------------------------------------------------
b. TITLE d. DATE
================================================================================
AUTHORIZED FOR LOCAL REPRODUCTION STANDARD FORM 295(REV. 8-98)
Previous edition is not usable Prescribed by GSA-FAR(48 CFR) 53.219(a)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-3 of our report (which contains an explanatory paragraph
relating to Commodore Applied Technologies, Inc.'s ability to continue as a
going concern) dated April 8, 1999 relating to the financial statements of
Commodore Applied Technologies, Inc. and Subsidiaries as of December 31, 1998
and for each of the two years in the period ended December 31, 1998, which
appears in the 1999 Annual Report to Shareholders of Commodore Applied
Technologies, Inc., which is incorporated by reference in Commodore Applied
Technologies, Inc.'s Annual Report on Form 10-K for the year ended December 31,
1999. We also consent to the reference to us under the heading "Experts" in such
Registration Statement.
PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
March 31, 2000
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Amendment 2 of Form S-3 of our report dated February 18, 2000
except for Note 18 which is dated March 17, 2000 relating to the financial
statements of Commodore Applied Technologies, Inc. and Subsidiaries as of
December 31, 1999 and for the year ended December 31, 1999, which appears in the
1999 Annual Report to Shareholders of Commodore Applied Technologies, Inc.,
which is incorporated by reference in Commodore Applied Technologies, Inc.'s
Annual Report on Form 10-K for the year ended December 31, 1999. We also consent
to the reference to us under the heading "Experts" in such Registration
Statement.
Tanner + Co.
Salt Lake City, Utah
March 31, 2000
