As filed with the Securities and Exchange Commission on January 26, 2000
Registration No. 333-___
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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 (I.R.S. Employer
of 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 NEW YORK, NY 10155
(212) 308-5800 (212) 308-5800
(Address, including zip code, and (Name, address, including zip code, and
telephone number, including telephone number, including area code,
area code, of registrant's of agent for service)
principal executive offices)
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COPIES OF COMMUNICATIONS TO:
STEPHEN A. WEISS, ESQ.
ANTHONY J. MARSICO, ESQ.
GREENBERG TRAURIG, LLP.
METLIFE BUILDING
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. |_|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
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(Continued on the following page)
<PAGE>
CALCULATION OF REGISTRATION FEE
================================================================================
PROPOSED
MAXIMUM PROPOSED
TITLE OF AMOUNT OFFERING MAXIMUM AMOUNT OF
SECURITIES TO BE TO BE PRICE AGGREGATE REGISTRATION
REGISTERED REGISTERED(1) PER SHARE OFFERING PRICE FEE
- --------------------------------------------------------------------------------
Common Stock, par 10,000,000 $1.28 $12,800,000 $3,379.20
value $0.001 per shares
share
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(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 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 January 24,
2000.
<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 JANUARY 26, 2000
PROSPECTUS
10,000,000 SHARES
COMMODORE APPLIED TECHNOLOGIES, INC.
COMMON STOCK
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The selling stockholders listed on page 12 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 3.
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
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About Commodore Applied Technologies.........................................2
Recent Development...........................................................2
Risk Factors.................................................................3
Forward-Looking Statements..................................................10
Use Of Proceeds.............................................................11
Selling Stockholders........................................................11
Plan Of Distribution........................................................12
Legal Matters...............................................................13
Experts.....................................................................13
Where You Can Find More Information.........................................13
SET is a trademark of Commodore Applied Technologies, Inc.
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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.
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 DEVELOPMENT
On November 4, 1999, we completed a $2,500,000 private placement financing
with The Shaar Fund Ltd. We issued to The Shaar Fund 335,000 shares of a new
Series E convertible preferred stock, convertible into our common stock at the
market price on the date of conversion at any time after April 30, 2000 and up
through April 30, 2003, at which time it automatically converts into our common
stock. The Series E convertible preferred stock has a variable rate dividend
averaging 8.15% over the term of the securities. We reserved the right to redeem
all of the Series E preferred stock on or before April 30, 2000 by payment of
$2,800,000 plus any accrued dividends. Depending upon the share price at the
time of conversion, the issuance of the common shares relating to the conversion
may be subject to shareholder approval. In addition, we 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 equal to 110% of the market price on the date of
exercise. The warrant expires on November 4, 2004.
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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
not the only ones that we face. Additional risks and uncertainties that we do
not presently know about or that we currently believe are immaterial may also
impair our business operations. 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 EXPECT TO INCUR LOSSES IN THE
FUTURE
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 meaningful 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 one or more large projects for our SET technology,
which we have been unable to obtain to date, or until such time as other
projects are begun, if ever, we will continue to experience losses. We expect to
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, there
can be no assurance that we will be able to operate profitably in the year 2000,
or in the future.
OUR SET TECHNOLOGY HAS NOT BEEN PROVEN TO BE EFFECTIVE ON A LARGE-SCALE
COMMERCIAL BASIS
Our SET technology has never been utilized on a large-scale basis. There
can be no assurance that this technology will perform successfully in tests or
on a large-scale commercial basis or that it will be profitable. We have never
tested SET under the conditions and in the volumes that will be required to be
profitable, and we cannot predict all of the difficulties that may arise. 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 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
must obtain 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 COLLABORATIVE AGREEMENTS, LICENSES OR PROJECT
CONTRACTS
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. There can be no assurance that we will 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,
there can be no assurance that they will be on terms and conditions that are
sufficiently beneficial to us, or that they will 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. There also can be no assurance that we
will be able to enter into such license arrangements or, if we do, that such
arrangements will 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.
MARKET ACCEPTANCE OF OUR TECHNOLOGY AND SERVICES STILL REMAINS UNCERTAIN
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. There can be no assurance that we will 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.
WE MAY NOT BE ABLE TO COMPETE SUCCESSFULLY IN THE ENVIRONMENTAL SERVICES
INDUSTRY
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. There can be no assurance that we will
be able to compete with these companies, or that other firms will not expand
into or develop expertise in the areas in which we specialize.
WE MAY BE SIGNIFICANTLY AFFECTED BY EXTENSIVE ENVIRONMENTAL 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.
In addition to the burdens imposed on our operations by various
environmental regulations, federal law imposes strict joint and several
liability on (i) present and former owners and operators of facilities that
release hazardous substances into the environment, (ii) generators and
transporters of such substances and (iii) persons
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arranging for the disposal of such substances. All such persons may be liable
for the costs and damages (including penalties and fines) associated with
environmental remediation, including investigation, cleanup and natural resource
damages. These costs can be very substantial. In light of the growing trend to
impose and expand the responsibility and scope of liability for environmental
cleanup costs, there can be no assurance that we will not be liable for such
costs and damages or exposed to other liabilities for our business activities.
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. There can be no assurance, however, that such
insurance will 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, there can be no assurance that such coverage will be adequate to pay
the entire cost. If that occurs, we may be responsible for paying costs in
excess of our insurance coverage, which could have a material adverse effect on
our business, financial condition and results of operations.
OUR FUTURE SUCCESS MAY DEPEND ON CONTINUED ENVIRONMENTAL REGULATION IN CERTAIN
AREAS
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, there can be no
assurance that the scope or growth of environmental regulation will not be
curtailed in the future. Any relaxation of environmental regulation may result
in a decline in demand for environmental services and may adversely affect our
operations.
WE ARE DEPENDENT UPON THE SPENDING LEVELS OF GOVERNMENTAL AND INDUSTRIAL
ENTITIES
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. 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.
OUR BUSINESS IS HEAVILY DEPENDENT UPON CONTRACTS TO PROVIDE SERVICES FOR THE
DEPARTMENT OF ENERGY
A significant portion of our revenues during the past two years have come
from contracts that we have to provide services for 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. There is no assurance that we can adequately replace such projects
with other projects that will produce as much revenue. If we fail to do so, our
business, financial condition and results of operations will be materially
adversely affected. Furthermore, there is no assurance that we will not continue
to be dependent on a small number of major customers for a significant portion
of our revenues.
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OUR CASH NEEDS ARE SIGNIFICANT AND WE WILL NEED ADDITIONAL FUNDING IN THE FUTURE
We have required and will require substantial working capital to support
our ongoing operations. As is common in the environmental services industry,
payments for services rendered by us are generally received pursuant to specific
draw schedules after services are rendered. Thus, pending the receipt of
payments for services rendered, we must typically fund substantial project
costs, including significant labor and other costs, from internal and outside
financing sources.
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 financed our operations internally without
utilizing any substantial bank lines of credit. Because of expenditures relating
to research and development and other infrastructure expenditures, we have
experienced periodic working capital shortages. As a result of such working
capital shortages, we were required to raise additional capital in 1997 through
private placements of our preferred stock and common stock, from which we
received aggregate net proceeds of approximately $4.0 million. In addition, we
received an aggregate of approximately $9,450,000 from unsecured loans from COES
in 1997 and 1998, which loans were retired in March and September 1998.
Currently, Advanced Sciences has begun repayment of an intercompany loan from
our company of approximately $6.3 million and, to date, have paid us back
approximately $210,000. We also closed an equipment financing loan providing
approximately $1,000,000 in working capital in July 1999.
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 the following activities:
o development and commercialization activities;
o investments in complementary products and technologies;
o expansion of our environmental management services business; and
o general and administrative functions.
Our future capital requirements and the adequacy of our available funds depend
on numerous factors, including:
o successful commercialization of our technology;
o acquisition of complementary products and technologies;
o magnitude, scope and results of our development efforts;
o progress of regulatory affairs activities;
o our ability to maintain and obtain new collaborative working
arrangements and agreements;
o competing technological and market developments; and
o the nature and timing of remediation and cleanup projects and
permits required.
There can be no assurance we will be able to obtain additional financing
on acceptable terms, if at all. We may seek to raise additional capital through
public or private offerings of equity or debt or through collaborative
agreements, strategic alliances with corporate partners and others, or through
other contractual arrangements with third parties. 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
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parties to commercialize our technology that we would otherwise seek to develop
ourselves. If adequate funds are not available, our business, financial
condition and results of operations will be materially adversely affected.
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. There can be no assurance that any of our
pending patent applications will be approved, that we will develop additional
proprietary technology that is patentable, that any patents issued to us will
provide us with competitive advantages or will not be challenged by third
parties or that the patents of others will not have an adverse effect on our
ability to conduct our business. Furthermore, there can be no assurance that
others will not 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. There can be no
assurance that any license acquired under such patents would be made available
to us on acceptable terms, if at all, or that we would prevail in any such
contest. 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. There can be no assurance that these agreements will not be
breached, that we would have adequate remedies for any breach, or that our trade
secrets and proprietary know-how will not otherwise become known or be
independently discovered by others.
OUR ACQUISITION PROGRAM POSES SPECIAL RISKS AND FINANCIAL CONSEQUENCES TO US
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;
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.
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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.
WE ARE HEAVILY DEPENDENT ON OUR KEY MANAGEMENT AND OUR ABILITY TO HIRE OTHER
QUALIFIED PERSONNEL
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. We do not have employment agreements with any
of our key employees. 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, and we
cannot assure you that we will 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
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, financial
condition and results of operations. 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
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 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 a significant portion
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.
Mr. Hannesson and the other directors have agreed that, to the extent such
opportunities arise, they will carefully consider a number of factors,
including:
o whether such opportunities are within our line of business;
o whether such opportunities are consistent with our strategic
objectives; and
o whether we will be able to undertake or benefit from such
opportunities.
In addition, our board has adopted a policy whereby any future transactions
between the Company and any of its subsidiaries, affiliates, officers,
directors, or principal stockholders will be on terms no less favorable to us
than could reasonably be obtained in "arm's length" transactions with
independent third parties. Mr. Hannesson and the other directors also owe
fiduciary duties of care and loyalty to us under Delaware law. However, our
failure to resolve any conflicts of interest in our favor could materially
adversely affect our business, financial condition and results of operations.
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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 the Series E preferred stock), approximately 60,849,570 shares of our
common stock would be outstanding on the date of this prospectus. Of such
shares, 27,787,013 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 33,062,557 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. We cannot predict the effect, if any, that
future sales of shares, or the availability of shares for future sale, will have
on the prevailing market price of our common stock. 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.
WE DO NOT ANTICIPATE PAYING ANY DIVIDENDS ON OUR COMMON STOCK
We have never paid any dividends on our common stock. We do not anticipate
paying any cash dividends on our common stock in the foreseeable future. The
current policy of our board of directors is to retain earnings to finance the
operations and expansion of our business. Any future determination to pay
dividends will depend on our results of operations, financial condition, capital
requirements, contractual restrictions and other factors deemed relevant by our
board of directors.
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.
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<PAGE>
OUR FAILURE AND THE FAILURE OF OUR CUSTOMERS AND PARTNERS TO BE YEAR 2000
COMPLIANT COULD NEGATIVELY IMPACT OUR BUSINESS
The year 2000 date issue arises from the fact that many computer systems
and applications currently use only two digits to identify the year in date
fields. As a result, date-sensitive systems may recognize the year 2000 as 1900,
or may not recognize the year 2000 at all. This could result in either
miscalculations or system failures. As of the date of this prospectus, however,
we have not experienced any material interruptions in or adverse impact on our
business operations nor have we experienced any negative impact on our financial
condition as a result of year 2000 issues. We could, however, experience certain
problems related to the year 2000 in the future.
We rely on information technology systems and non-information technology
systems (e.g., equipment with embedded microprocessors) in connection with our
business operations. In addition, we rely upon the proper functioning of the
computer and non-information technology systems of our collaborative partners,
suppliers and customers.
We prepared our internal computer and embedded systems for the year 2000
and implemented changes to ease potential year 2000 problems. To accomplish
this, we purchased and implemented software programs that have been
independently developed by third parties which test year 2000 compliance for the
majority of our systems. We completed year 2000 compliance testing on all of our
critical systems and the total cost of our year 2000 compliance plan was
approximately $61,500. Such total cost does not include potential costs related
to any systems used by our customers, any third party claims, or the costs of
the replacement of internal software and hardware which occurs in the normal
course of our business. The overall cost of our year 2000 compliance plan was a
minor portion of our total information technology budget and has not to date
materially delayed the implementation of any other unrelated projects that we
have planned to undertake. Any of the following could have a material adverse
effect on our business, financial condition and results of 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 our collaborative partners, suppliers and customers;
o a failure of our collaborative partners, suppliers and customers 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.
The above-mentioned year 2000 issues have not to date had a material
negative impact on our financial condition or results of operations. However,
the specific extent to which we may be affected by such matters in the future is
not certain.
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.
10
<PAGE>
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. We plan to use all such proceeds for
working capital and general corporate purposes.
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 January 26, 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.
Since we have not been informed whether or not any selling stockholders intend
to sell any shares, the following table has been prepared assuming that all
shares offered under this prospectus will be sold to parties unaffiliated with
the selling stockholders. The inclusion of shares in the table below does not
constitute a commitment to sell any shares. Unless otherwise indicated, the
selling stockholders have sole voting and investment power with respect to their
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 ----------------------
NAME AND POSITION/RELATIONSHIP NUMBER PERCENT HEREBY NUMBER PERCENT
- ------------------------------ ------ ------- ------ ------ -------
<S> <C> <C> <C> <C> <C>
The Shaar Fund Ltd. 0 * 7,500,000(1) 0 *
Commodore Environmental 15,456,677(2) 49.9% 2,500,000(3) 12,956,677(2) 41.8%
Services, Inc.
</TABLE>
- ----------
* Represents less than 1% of the outstanding shares of our common stock.
(1) Pursuant to a Registration Rights Agreement, dated as of November 4, 1999,
by and between our company and The Shaar Fund Ltd., we agreed to register
7,500,000 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 the Series E preferred stock, upon conversion of the Series E
preferred stock, and upon exercise of its warrant to purchase up to
312,500 shares of our common stock. The 7,500,000 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 7,500,000.
The conversion price of the Series E preferred stock is the market price
of our common stock at the time of conversion; therefore, the number of
shares of our common stock we may actually issue to The Shaar Fund upon
conversion of the Series E preferred stock will depend upon the market
price of our common stock at the time of conversion and may be subject to
stockholder approval.
(2) Does not include shares underlying currently exercisable warrants to
purchase an aggregate of 14,410,540 shares of our common stock at prices
ranging from $1.28 per share to $7.03 per share.
(3) 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 Ltd. has not converted 75% or more of its
Series E convertible preferred stock.
11
<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
thereunder, 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 the foregoing 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
12
<PAGE>
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.
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 hereby 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 $18,380, 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 hereby.
LEGAL MATTERS
The validity of the shares offered hereby has been passed upon by our
counsel, Greenberg Traurig, New York, New York. A shareholder of Greenberg
Traurig holds options to purchase 275,000 shares of COES common stock.
EXPERTS
The financial statements of Commodore Applied Technologies, Inc. and
Subsidiaries as of December 31, 1998 and 1997 and for each of the three 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,
1998, 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 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 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 not
necessarily complete, 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. Information that
13
<PAGE>
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, 1998,
including the exhibits thereto;
(b) our Quarterly Reports on Form 10-Q for the fiscal quarters ended March
31, June 30 and September 30, 1999;
(c) our Current Report on Form 8-K dated December 25, 1998, and Amendment
No. 1 on Form 8-K/A thereto filed with the SEC on March 9, 1999;
(d) our Current Report on Form 8-K dated August 17, 1999, and Amendment
No. 1 on Form 8-K/A thereto filed with the SEC on September 1, 1999;
(e) our Current Reports on Form 8-K dated April 21, 1999, October 1,
1999 and October 31, 1999; and
(f) 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.
14
<PAGE>
================================================================================
10,000,000 Shares
COMMODORE APPLIED TECHNOLOGIES, INC.
COMMON STOCK
--------------------------
PROSPECTUS
--------------------------
-----------------
_______ __, 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. All of the amounts shown are estimates
except the Securities and Exchange Commission registration fee.
To be Paid
by the
Registrant
----------
SEC registration fee ............................ $ 3,379.20
Accounting fees and expenses .................... 5,000.00
Legal fees and expenses ......................... 5,000.00
Miscellaneous expenses .......................... 5,000.00
----------
Total ................................. $18,379.20
==========
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.
II-1
<PAGE>
However, no such provision may eliminate or limit the liability of a director
for breaching his or her duty of loyalty, failing to act in good faith, engaging
in intentional misconduct or knowingly violating a law, 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 shares of Common stock of Commodore Applied
Technologies, Inc.
*4.2 Certificate of Designation of Series E preferred stock.
4.3 Specimen Form of Common Stock Certificate. (1)
*5.1 Opinion of Greenberg Traurig, LLP.
*10.1 Securities Purchase Agreement, dated November 4, 1999, between
Commodore Applied Technologies, Inc. and The Shaar Fund Ltd.
*10.2 Registration Rights Agreement, dated November 4, 1999, between
Commodore Applied Technologies, Inc. and The Shaar Fund Ltd.
*23.1 Consent of PricewaterhouseCoopers LLP.
*23.2 Consent of Greenberg Traurig, LLP. (contained in Exhibit 5.1).
*25.1 Power of Attorney (included as part of the signature page to this
Registration Statement and incorporated herein by reference).
- ----------
* 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.
II-2
<PAGE>
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
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 25th day of
January, 2000.
COMMODORE APPLIED TECHNOLOGIES, INC.
By: /s/ Paul E. Hannesson
--------------------------------
Paul E. Hannesson
Chairman of the Board, President
and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Paul E. Hannesson and James M. DeAngelis, and
each of them, his true and lawful attorneys-in-fact and agents, with full power
of substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, and any other regulatory authority, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their substitutes, may lawfully
do or cause to be done by virtue hereof.
--------------------
Pursuant to the requirements of the Securities Act of 1933, as amended,
this 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 January 25, 2000
- --------------------------------- and Chief Executive Officer
Paul E. Hannesson (principal executive officer)
/s/ James M. DeAngelis Vice President--Finance and Treasurer January 25, 2000
- --------------------------------- (principal financial and accounting officer)
James M. DeAngelis
/s/ William R. Toller Director January 25, 2000
- ---------------------------------
William R. Toller
/s/ Bentley J. Blum Director January 25, 2000
- ---------------------------------
Bentley J. Blum
/s/ Kenneth L. Adelman Director January 25, 2000
- ---------------------------------
Kenneth L. Adelman
/s/ Herbert A. Cohen Director January 25, 2000
- ---------------------------------
Herbert A. Cohen
/s/ David L. Mitchell Director January 25, 2000
- ---------------------------------
David L. Mitchell
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
------ -----------
*4.1 Warrant to purchase shares of Common stock of Commodore Applied
Technologies, Inc.
*4.2 Certificate of Designation of Series E Preferred Stock.
4.3 Specimen Form of Common Stock Certificate. (1)
*5.1 Opinion of Greenberg Traurig, LLP.
*10.1 Securities Purchase Agreement, dated November 4, 1999, between
Commodore Applied Technologies, Inc. and The Shaar Fund Ltd.
*10.2 Registration Rights Agreement, dated November 4, 1999, between
Commodore Applied Technologies, Inc. and The Shaar Fund Ltd.
*23.1 Consent of PricewaterhouseCoopers LLP.
*23.2 Consent of Greenberg Traurig, LLP. (contained in Exhibit 5.1).
*25.1 Power of Attorney (included as part of the signature page to this
Registration Statement and incorporated herein by reference).
- ----------
* 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: 312,500
Warrant No. 1
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"), 312,500 shares of
Common Stock (as hereinafter defined and subject to adjustment as provided
herein), in whole or in part, including fractional parts, at a purchase price
per share equal to 110% of the Market Price( as hereinafter defined and 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 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" 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 listed and admitted to trading on the NASDAQ, the closing
bid price of a Common Share on such day as reported on the NASDAQ, or, if not
quoted or listed or admitted to trading on any national securities exchange or
quotation system, the closing bid 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 the fifth anniversary of the Closing
Date.
-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.
"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 bid
prices of the Common Shares as reported on the Amex for the five trading days
immediately preceding the Closing Date.
"NASDAQ" means the Nasdaq National Market or the Nasdaq SmallCap
Market, as the case may be.
"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 April 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. This
Warrant shall be deemed to have been exercised and such certificate or
certificates shall be
-4-
<PAGE>
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 may 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) without payment of the Warrant Price by surrender of
certificate(s) evidencing the Warrants (the "WARRANT CERTIFICATE") in exchange
for a number of shares equal to the product of (l) the number of shares for
which such Warrant is exercisable with payment of the Warrant Price as of the
date of exercise and (2) the Cashless Exercise Ratio or (iii) by any combination
of (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 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 on the
date of exercise. An exercise of a Warrant in accordance with the clause (ii) in
the first sentence of this paragraph is herein called a "CASHLESS EXERCISE."
Upon surrender of a Warrant Certificate representing more than one Warrant in
connection with the Holder's option to elect a Cashless Exercise, the number of
shares deliverable upon a Cashless Exercise shall be equal to the Cashless
Exercise Ratio multiplied by the product of (a) the number of Warrants that the
Holder specifies is to be exercised pursuant to a Cashless Exercise and (b) the
number of shares for which such Warrant is then exercisable (without giving
effect to the Cashless Exercise option). All provisions of this Agreement shall
be applicable with respect to an exercise of a Warrant Certificate pursuant to a
Cashless Exercise for less than the full number of Warrants represented thereby.
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 issue 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 issue 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
-5-
<PAGE>
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.
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 finds 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
-6-
<PAGE>
issued, signed by Holder or its agent or attorney. Subject to compliance with
Section 3.1 and with Section 9, as to any transfer which may be involved in such
division or combination, the Company shall 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.
4.2 Certain Other Distributions
-7-
<PAGE>
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.
(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
-8-
<PAGE>
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 corporation (where the
Company is not the surviving corporation or where there is a change in or
distribution with respect to the Common Stock of the Company), or sell, transfer
or otherwise dispose of all or substantially all its property, assets or
business to another corporation and, pursuant to the terms of such
reorganization, reclassification, merger, consolidation or disposition of
assets, 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, the 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 receivable upon or as a result of such reorganization,
reclassification, consolidation or disposition of assets by a holder of the
number of shares of Common Stock for which this Warrant is exercisable
immediately prior to such event. In case of any such reorganization,
reclassification, merger, consolidation or disposition of assets, 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 still similarly apply to successive reorganizations,
reclassifications, mergers, consolidations or disposition of assets.
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 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
-9-
<PAGE>
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
(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
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<PAGE>
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, issue 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.
7. RESERVATION AND AUTHORIZATION OF COMMON STOCK
From and after the Closing Date, the Company shall at all times
reserve and keep available for issue 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.
-11-
<PAGE>
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.
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
-12-
<PAGE>
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 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 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(a) that such opinion is reasonably satisfactory.
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 75th 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 April 30, 2000.
-13-
<PAGE>
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.
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
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<PAGE>
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.
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:
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<PAGE>
(a) if to the Company, to:
Commodore Applied Technologies, Inc.
150 East 58th Street, Suite 3400
New York, NY 10155
Attention:
(212) 308-5800
(212) 752-0731 (Fax)
with a copy to:
Greenberg Traurig
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.
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
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<PAGE>
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.
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.
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<PAGE>
[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: October __, 1999
Commodore Applied Technologies, Inc.
By: /s/ Paul Hannesson
---------------------------------
Name: Paul Hannesson
Title: CEO
Attest:
By: /s/ James M. DeAngelis
---------------------------------
Name: James M. DeAngelis
Title: Vice President, Treasurer
<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)
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-l
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 06:00 PM 11/03/1999
991468356 -- 2607851
AMENDED
CERTIFICATE OF DESIGNATION
OF
SERIES E 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 November 3, 1999 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 amends the Certificate of Designation of Series E
Convertible Preferred Stock of the Corporation authorizing a series of the
Corporation's previously authorized Preferred Stock, par value $0.001 per share
(the "PREFERRED STOCK"), and hereby amends the designation and the number of
shares, and fixes the relative rights, preferences, privileges, powers and
restrictions thereof as follows:
Series E 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 common stock, whether now or hereafter authorized
and however designated, which have the right to participate in the distribution
of earnings and assets (upon dissolution, liquidation or winding-up) of the
Corporation.
<PAGE>
(f) "COMMON SHARES" or "COMMON STOCK" means shares of common stock,
par value $0.001 per share, of the Corporation.
(g) "COMMON STOCK ISSUED AT CONVERSION", when used with reference to
the securities issuable upon conversion of the Series E Preferred Stock, means
all Common Shares now or hereafter Outstanding and securities of any other class
or series into which the Series E Preferred Stock hereafter shall have been
changed or substituted, whether now or hereafter created and however designated.
(h) "CONVERSION DATE" means any day on which all or any portion of
shares of the Series E Preferred Stock is converted in accordance with the
provisions hereof.
(i) "CONVERSION NOTICE" means a written notice of conversion
substantially in the form annexed hereto as Annex I.
(j) "CONVERSION PRICE" means any date of determination the
applicable price for the conversion of shares of Series E Preferred Stock into
Common Shares on such day as set forth in Section 6.1.
(k) "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.
(l) "CURRENT MARKET PRICE" means any date of determination the
closing price of a Common Share on such day as reported on the Amex; provided,
if such security is listed and admitted to trading on the NASDAQ, the closing
bid price of a Common Share on such day as reported on the NASDAQ, or, if not
quoted or listed or admitted to trading on any national securities exchange or
quotation system, the closing bid 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.
(m) "DEFAULT DIVIDEND RATE" is equal to the Dividend Rate plus an
additional 4% per annum.
(n) "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.
(o) "DIVIDEND PAYMENT DUE DATE" means March 31, June 30, September
30 and December 31 of each year.
(p) "DIVIDEND RATE" means 12% per annum, computed on the basis of a
360-day year up to and including April 30, 2000 and thereafter 5% per annum,
computed on the basis of a 360-day period.
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<PAGE>
(q) "HOLDER" means The Share Fund Ltd., any successor thereto, or
any Person or Persons to whom the Series E Preferred Stock is subsequently
transferred in accordance with the provisions hereof.
(r) "ISSUE DATE" means, as to any share of Series E Preferred Stock,
the date of issuance of such share.
(s) "JUNIOR SECURITIES" means all capital stock of the Corporation
except for the Series E Preferred Stock.
(t) "LIQUIDATION PREFERENCE" means, with respect to a share of the
Series E 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 on such share of Series E
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.
(u) "MANDATORY CONVERSION DATE" has the meaning set forth in Section
6.8.
(v) "MARKET PRICE" per Common Share means the arithmetic mean of the
closing prices of Common Shares as reported on the Amex for the ten Trading Days
during any Valuation Period; provided, if such security is listed and admitted
to trading on the NASDAQ, the closing bid price of a Common Share on such day as
reported on the NASDAQ, or, if not quoted or listed or admitted to trading on
any national securities exchange or quotation system, the closing bid price of
such security on the over-the-counter market on the day in question reported by
Bloomberg LP, or a similar generally accepted reporting service, as the case may
be.
(w) "NASDAQ" means Nasdaq National Market or the Nasdaq SmallCap
Market, as the case may be.
(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 the purposes
hereof.
(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 therof.
(aa) "REDEMPTION DATE" has the meaning set forth in Section 6.5.
-3-
<PAGE>
(bb) "REGISTRATION RIGHTS AGREEMENT" means that certain Registration
Rights Agreement dated a date even herewith 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 dated as of a date even herewith between the Corporation and
The Shaar Fund Ltd.
(ff) "SERIES E PREFERRED SHARES" or "SERIES E PREFERRED STOCK" means
the shares of Series E Convertible Preferred Stock of the Corporation or such
other convertible Preferred Stock exchanged therefor.
(gg) "STATED VALUE" has the meaning set forth in Article 2.
(hh) "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.
(ii) "TRADING DAY" means any day on which purchases and sales of
securities authorized for quotation on the Amex are reported thereon and on
which no event which results in a material suspension or limitation of trading
of the Common Shares on the Amex has occurred.
(jj) "VALUATION EVENT" has the meaning set forth in Section 6.1.
(kk) "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 means the currency of the
United States of America.
ARTICLE 2
DESIGNATION AND AMOUNT
The designation of this series, which consists of 335,000 shares of
Preferred Stock, shall be Series E Convertible Preferred Stock (the "SERIES E
PREFERRED STOCK") and the stated value shall be $10 per share (the "STATED
VALUE").
-4-
<PAGE>
ARTICLE 3
RANK
The Series E 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 E 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 E Preferred
Stock which shall accrue commencing on May 1, 2000 until and including the
date of payment thereof and shall be due and payable on May 1, 2001;
provided, however, that no Special Dividend shall be paid in respect of
any share of Series E Preferred Stock which is converted into Common Stock
pursuant to Article 6 on or before April 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 May 1, 2001, dividends shall thereafter accrue and be
payable at the Default Dividend Rate on the Stated Value of each share of
Series E Preferred Stock until all accrued dividends are paid in full.
Dividends on the Series E 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.
(ii) Each dividend shall be payable in equal quarterly amounts
on each Dividend Payment Due Date, commencing December 31, 1999, to the
Holders of record of shares of the Series E 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 record, not more than 15 days preceding the payment date
thereof, as may be fixed by the Board of Directors.
(iii) Dividends due hereunder shall be payable in cash;
provided, however, that with respect to dividends due after May 1, 2000,
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
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Securities Act; provided, further, that if no funds are legally available
for the payment of cash dividends on the Series E 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 E 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 E Preferred Stock.
(c) So long as any shares of the Series E 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 E Preferred Stock shall
have been paid or set apart for payment for all past Dividend Periods with
respect to the Series E 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 E 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 paragraph (a) of this Article 4, the Corporation
shall declare, order, pay and make the same dividend or distribution to each
Holder of Series E 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 E 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.
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, 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
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laws or any other applicable Federal or state bankruptcy, insolvency or similar
law resulting in the appointment of a receiver, liquidator, assignee, custodian,
trustee, 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 E 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 E
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 E
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 shares of Common Stock
into which such Series E 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 Stock
with substantial identical rights, preferences, privileges, powers, restrictions
and other terms as the Series E Preferred Stock equal to the number of shares of
Series E Preferred Stock held by such Holder immediately prior to such
Fundamental Corporate Change; provided, that all Holders of Series E Preferred
Stock shall be deemed to elect the option set forth in clause (i) above if at
least a majority in interest of such Holders elect such option. The foregoing
provisions of this Section 5(b) shall similarly apply to successive Fundamental
Corporate Changes.
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ARTICLE 6
CONVERSION OF PREFERRED STOCK
SECTION 6.1 CONVERSION; CONVERSION PRICE
At the option of the Holder, the shares of Series E 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 following April 30, 2000 at a conversion price per share of Common
Stock equal to 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 E 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 secured 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 E
Preferred Stock shall be (i) the number of shares of Series E Preferred Stock to
be converted, multiplied by (ii) the Stated Value plus accrued and unpaid
dividends, 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 convert some or all of its Series E 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;
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(d) issues any warrants, options or other rights to subscribe for or
purchase any Additional Capital Shares and 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 and 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 a 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 Section 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 any conversion of Preferred Stock or its reasonably likely
to result in a decrease in the Market Price.
SECTION 6.2 EXERCISE OF CONVERSION PRIVILEGE
(a) Conversion of the Series E 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 E Preferred Stock to
the Corporation by express courier with 30 days following the date on which the
telecopied Conversion Notice has been transmitted to the Corporation. 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
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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 E Preferred Stock shall have been surrendered as aforesaid at such
time, and at such time the rights of the Holder of the Series E 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 E 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 rights of the Holder thereof to effect the conversion of the Series E
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 E 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 the
right, by written notice to the Corporation, to require the Corporation to
promptly redeem the Series E Preferred Stock for cash at a redemption price
equal to 105% of the Stated Value thereof together with all accrued and unpaid
dividends 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. Section
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. Section 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.
Section 362 in respect of the conversion of the Series E 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. Section 362.
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SECTION 6.3 FRACTIONAL SHARES
No fractional Common Shares or scrip representing fractional Common
Shares shall be issued upon conversion of the Series E Preferred Stock. Instead
of any fractional Common Shares which otherwise would be issuable upon
conversion of the Series E 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 E 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 Conversion Price or Current Market Price, as
applicable, multiplied by a fraction the denominator of which is $2,500,000 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.
SECTION 6.5 OPTIONAL REDEMPTION
(a) At any time on or before April 30, 2000 (the "APRIL 30, 2000
REDEMPTION DATE") the Corporation, upon notice delivered to the Holder as
provided in Section 6.6, may redeem the Series E Preferred Stock for a
redemption price of $2,800,000, together with all unpaid dividends thereon
through April 30, 2000, whether or not accrued, in each case in cash (the
"SECTION 6.5(A) OPTIONAL REDEMPTION PRICE").
(b) At any time after the April 30, 2000 Redemption Date until the
Mandatory Conversion Date, the Corporation, upon notice delivered to the Holder
as provided in Section 6.6, may redeem, in cash, the Series E 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
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with all accrued an unpaid dividends thereon to the date of redemption (the
SECTION 6.5(B) REDEMPTION DATE" and, together with the April 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, as 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 E 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 ten 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.
SECTION 6.7 SURRENDER OF PREFERRED STOCK.
Upon any redemption of the Series E Preferred Stock pursuant to
Sections 6.5 and 6.6, the Holder shall either deliver the Series E 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 E 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 (the "MANDATORY CONVERSION DATE"), the Corporation shall convert all Series
E Preferred Stock outstanding at the Conversion Price utilizing the Stated Value
(plus accrued and unpaid dividends) as the value of each share of Series E
Preferred Stock, into Common Stock which is registered for sale 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 E Preferred Stock (and the Corporation
shall not have the right to pay dividends on the Series E 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
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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
E 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 E 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 E 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 to the date of such redemption.
(b) Unless the Corporation shall have obtained the approval of its
voting stockholders to such issuance in accordance with the rules of the Amex or
such other stock market 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 E Preferred Stock or
(ii) as a dividend on the Series E Preferred Stock, if such issuance of Common
Stock, when added to the number of shares of Common Stock previously issued by
the Corporation (i) upon conversion of shares of the Series E Preferred Stock,
(ii) upon exercise of the Warrants issued pursuant to the terms of the
Securities Purchase Agreement and (iii) in payment of dividends on the Series E
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 (i)
converting the number of shares of Series E Preferred Stock stated in the
Conversion Notice not in excess of the Maximum Issuance Amount and (ii)
redeeming the number of shares of Series E Preferred Stock stated in the
Conversion Notice equal to or in excess of the Maximum Issuance Amount in cash
at a price equal to 105% of the Stated Value of the shares of Series E Preferred
Stock to be so redeemed, together with all accrued and unpaid dividends thereon.
In the event that the Corporation shall elect to pay a dividend in 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
(i) a dividend in shares of Common Stock equal to one less than an amount which
would result in the Corporation issuing shares equal to the Maximum Issuance
Amount and (ii) the balance of the dividend in cash.
ARTICLE 7
VOTING RIGHTS
The Holders of the Series E Preferred Stock have no voting power,
except as otherwise provided by the General Corporation Law of the State of
Delaware ("DGCL"), in this Article 7, and in Article 8 below.
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Notwithstanding the above, the Corporation shall provide each Holder
of Series E Preferred Stock with prior notification of any meeting of the
shareholders (and copies of 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 to each
Holder, at least 30 days prior to the consummation of the transaction or event,
whichever is earlier), of the date on which any such action is to be taken for
the purpose of such dividend, distribution, right or other event, and 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
Section E 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 E 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
E 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 E Preferred Stock are entitled to vote on a
matter with holders of Common Stock, voting together as one class, each share of
Series E 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 E Preferred Stock
shall be entitled to notice of all shareholder meetings or written consents (and
copies of 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.
ARTICLE 8
PROTECTIVE PROVISIONS
So long as shares of Series E Preferred Stock are outstanding, the
Corporation shall not, without first obtaining the approval (by vote or written
consent, as provided by the DGCL) of the Holders of at least a majority of the
then outstanding shares of Series E Preferred Stock:
(a) alter or change the rights, preferences or privileges of the
Series E Preferred Stock;
(b) create any new class or series of capital stock having a
preference over the Series E 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 E Preferred Stock;
(c) increase the authorized number of shares of Series E Preferred
Stock; or
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(d) do any act or thing not authorized or contemplated by this
Certificate of Designation which would result in taxation of the Holders of the
Series E Preferred Stock under Section 305 of the Internal Revenue Code of 1986,
as amended (or any comparable provision of the Internal Revenue Code as
hereafter from time to time amended).
In the event Holders of least a majority of the then outstanding
shares of Series E 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 E 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 continue to hold
their shares of Series E 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 E Preferred Stock equal to the number of shares of
Series E Preferred Shares held by such Holder immediately prior to the Spin-Off
Dividend.
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 E 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 such mutilitation, upon surrender and cancellation of the Series E
Preferred Stock, the Corporation shall make, issue and deliver, in lieu of such
lost, stolen, destroyed or mutilated shares of Series E Preferred Stock, new
shares of Series E Preferred Stock of like tenor. The Series E 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 E 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 E
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 E Preferred Stock
for the purpose of receiving payment of dividends
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<PAGE>
on the Series E Preferred Stock, for the conversion of the Series E 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 E Preferred
Stock to the extent of the sum or sums so paid or the conversion so made.
SECTION 9.3 NOTICE OF CERTAIN EVENTS
In the case of the occurrence of any event described in Sections 5(b), 6.5
or 6.6 of this Certificate of Designation, the Corporation shall cause to be
mailed to the Holder of the Series E 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 hereinafter specified (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
E Preferred Stock to be entitled to such dividend, distribution, issuance or
granting of rights, options or warrants are to be determination or the date on
which such reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding-up is expected to become effective, and (y) the date as
of which it is expected that Holders of record of Series E Preferred Stock will
be entitled to exchange their shares for securities, cash or other property
deliverable upon such reclassification, consolidation, merger, sale transfer,
dissolution, liquidation or winding-up.
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 E Preferred Stock.
Upon any transfer of the Series E Preferred Stock in accordance with the
provisions hereof, the Corporation shall register such transfer on the Series E
Preferred Stock register.
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 E 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 SEVERABLILITY
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
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<PAGE>
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 unenforceability of such provision, or
the application thereof, in any other jurisdiction.
[SIGNATURE PAGE FOLLOWS]
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<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Amended
Certificate of Designation to be signed by its duly authorized officers on
November 4, 1999.
COMMODORE APPLIED TECHNOLOGIES, INC.
By: /s/ Paul Hannesson
-------------------------------------
Name: Paul Hannesson
Title: CEO
By: /s/ James M. DeAngelis
-------------------------------------
Name: James M. DeAngelis
Title: Vice President and Treasurer
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<PAGE>
ANNEX I
FORM OF CONVERSION NOTICE
To:Commodore Applied Technologies, Inc.
150 East 58th Street
New York, New York 10155
The undersigned owner of this Series E Convertible Preferred Stock (the
"SERIES E PREFERRED STOCK") issued by Commodore Applied Technologies, Inc. (the
"CORPORATION") hereby irrevocably exercises its option to convert _________
shares of Series E 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 E 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, the Series E Preferred Stock recertificated, 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 E
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 E 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 Stock shall at such time vest with such
Person or Persons.
Date and time:_____________________
----------------------------------------
Signature
Fill in for registration of Series E Preferred Stock:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Please print name and address (including zip code number)
[GREENBERG TRAURIG, LLP. LETTERHEAD]
January 26, 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 10,000,000 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 7,500,000 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")
and (y) upon exercise of the Warrant (the "Warrant"), dated November 4, 1999,
issued by the Company to the Shaar Fund to purchase shares of the Company's
Common Stock; and (ii) 2,500,000 shares (the "Environmental Shares") of Common
Stock owned by Commodore Environment Services, Inc., an affiliate of the
Company.
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 by the Company, we
have assumed that the Conversion 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 and the Warrant, 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.
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 November 4, 1999
(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) 335,000 shares of the Company's Series E Convertible
Preferred Stock, par value $0.001 per share and liquidation preference of $10.00
per share (collectively, the "PREFERRED SHARES") and (ii) Common Stock Purchase
Warrants in the form attached hereto as Exhibit A to purchase 312,500 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 E
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 from
the date of issuance;
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.
B. PURCHASE PRICE; FORM OF PAYMENT. The purchase price for the
Preferred Shares and the Warrants to be purchased by Buyer hereunder shall be
$2,500,000 (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 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 agrees to observe the terms and conditions of the Escrow
Instructions, all of which are incorporated herein by reference as if fully set
forth herein.
<PAGE>
C. METHOD OF PAYMENT. Payment into escrow of the Purchase Price
shall be made by wire transfer of immediately available funds to:
The Bank of New York
48 Wall Street
New York, NY 10038
ABA No.: 021000018
For the Account of: Cadwalader, Wickersham & Taft
Trust Account IOLA Fund
Account No.: 0902061070
II. BUYER'S REPRESENTATIONS, 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
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<PAGE>
and except as 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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<PAGE>
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) 75,000,000 shares of Common Stock, of which 23,702,263
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 and are outstanding, (c) 15,000 shares
have been designated as Series C 6% Convertible Preferred Stock, of
which 10,189 have been issued and are outstanding, (d) 25,000 shares
have been designated as Series D 6% Convertible Preferred Stock, of
which 20,391 have been issued and are outstanding, in each case on
the date hereof and (e) 335,000 shares have been designated as
Series E Convertible Preferred Stock. All of the issued and
outstanding shares of Common Stock and preferred stock, if any, have
been duly authorized and validly issued and are fully paid and
nonassessable. As of the date hereof, the Company has outstanding
stock options and warrants to purchase 21,214,819 shares of Common
Stock. Schedule III.A.1. hereto lists the exercise prices for each
such stock option and warrant.
2. The Preferred Shares have been duly and validly authorized
and reserved for issuance by the Company, and, when issued by the
Company, will be duly and validly issued, fully paid and
nonassessable and will not subject the holder thereof to personal
liability solely by reason of being such holder. 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
accrued dividends on, the Preferred Shares and on exercise of the
Warrants will be duly and validly issued, filly paid and
nonassessable and will not subject the holder thereof to personal
liability solely by reason of being such holder.
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<PAGE>
3. Except as disclosed on Schedule III.A.3 there are no
preemptive, subscription, "call," right of first refusal or other
similar rights to acquire any capital stock of the Company or any of
the subsidiaries of the Company (the "SUBSIDIARIES") or other voting
securities of the Company that have been issued or granted to any
person or any 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. 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 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 made available to Buyer true and complete copies of all minutes
of the Board of Directors of the Company (the "BOARD OF DIRECTORS")
since October 1, 1996.
B. ORGANIZATION; REPORTING COMPANY STATUS.
1. Each of the Company and each of the Subsidiaries is a
corporation duly organized, validly existing and in good standing
under the laws of the state of jurisdiction in which it is
incorporated and is duly qualified as a foreign corporation in all
jurisdictions in which the failure to so 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
consolidated 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 10,000,000 shares of Common Stock, sufficient in
number for the conversion of and the payment of dividends (in lieu of cash
payments) on the Preferred Shares and the exercise of the Warrants, 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 lieu of
cash
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<PAGE>
payments) on the Preferred Shares and the exercise of the Warrants. The Company
understands and acknowledges the potentially dilutive effect to the Common Stock
of the issuance of the Preferred Shares, 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, except as otherwise provided in Section 6.9
of the Certificate of Designation, 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, exercisable or
exchangeable for capital stock of the Company, (ii) the amount of such
securities sold, including 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 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
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<PAGE>
"REGISTRATION 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 as
of the Closing Date, the Conversion Shares and the Dividend Shares upon their
issuance in accordance with the Certificate of Designation, and the Warrant
Shares upon exercise of the Warrants, respectively, are or 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. The Warrants as of the Closing Date are or will be
validly issued.
F. NON-CONTRAVENTION. Except as set forth on Schedule III.F. hereto,
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 below)
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 below) applicable to the
Company or any of its Subsidiaries or 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 (and the
Conversion Shares, the Dividend Shares and Warrant Shares) to Buyer as
contemplated by this Agreement, except such authorizations, approvals and
consents that 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 October 1, 1996 (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 their 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 and regulations of the Commission with
respect thereto, have been prepared in accordance with generally accepted
accounting principles in the United States ("GAAP") (except in the case of
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the unaudited statements, as permitted by Form l0-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 there 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 tortuous conduct in connection with
the employment relationship, or (iii) no judgments, decrees, injunctions or
orders of any 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 and 1997, respectively,
and the related audited statements of income, changes in stockholders' equity
and cash flows for the three fiscal years ended December 31, 1998, 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 for each fiscal quarter ended since December
31, 1998, including the related notes and schedules, all certified by the 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
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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 was
not 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 each of
its Subsidiaries has complied and 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.0. 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.0. 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 to 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 each of 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, consistent with
industry standards and the Company's historical claims experience. Each of the
Company and each of the Subsidiaries has not received notice from, and has no
knowledge of any threat by, any insurer (that has issued any insurance policy to
the Company or the Subsidiaries) that such insurer intends to deny coverage
under or cancel, discontinue or not renew any insurance policy presently in
force.
Q. SECURITIES LAW MATTERS. Assuming the accuracy of the
representations and warranties of Buyer set forth in Section II hereof, the
offer and sale by the Company of the Securities is exempt from (i) the
registration and prospectus delivery requirements of the
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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 next preceding the date hereof, except as disclosed on Schedule III.Q.
hereto or otherwise previously disclosed in writing to Buyer, 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), so as to 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 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 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 is or 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 any Hazardous Materials whether on
property owned or operated by the Company and the Subsidiaries or
property of third parties, and none of the Company or the
Subsidiaries has transported, or arranged for
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transportation of, any Hazardous Materials for treatment or disposal
of 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 of the Subsidiaries 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 of the Subsidiaries any (A)
underground storage tank, (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 the
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 of the Subsidiaries, 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 is or has been 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, the
Subsidiaries or any predecessor of any of them is now, or was in the
past, used in any part as a dump, landfill, or disposal site, and
neither Company, the Subsidiaries nor any predecessor 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.
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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 thereto.
"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.
"REMEDIAL ACTION" means all actions 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) and (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 employees of the Company. No
employees of the Company or 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. To the knowledge of the Company, there is no
organizing activity involving the Company or the Subsidiaries pending or to the
Company's knowledge, threatened by any labor organization or group of employees
of the Company or 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 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 the Subsidiaries.
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T. ERISA MATTERS. All Plans maintained by the Company, its
Subsidiaries and ERISA Affiliates are listed in Schedule III.T. and copies of
all material documentation or general distributions 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 or will have been made available for review by the Buyer. 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. The Company, its Subsidiaries and
its 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, its Subsidiaries or any ERISA
Affiliate 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 or 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 or 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 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, its Subsidiaries, or ERISA Affiliate has incurred any
liability for any tax imposed under section 4971 through 4980B of the Code or
civil liability under section 502(i) or (1) of ERISA. No suit, action or other
litigation (excluding claims for benefits incurred in the ordinary course of
plan activities and any other claim which could reasonably be expected to result
in a material liability or expense to the Company, its Subsidiaries or ERISA
Affiliates) 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, 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 to the extent required in accordance with
generally accepted accounting principles, all of which accruals under unfunded
Plans are as disclosed in Schedule III.T., and 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, the Preferred Shares, the Warrants and the Registration Rights
Agreement and the consummation of the transactions contemplated hereby and
thereby (including, without limitation, the offer, issue and sale by the Company
and its Subsidiaries, and the purchase by the Buyer, of the Preferred Shares,
the Conversion Shares, the Warrants, the Warrant Shares and
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Dividend Shares) will not involve any "prohibited transaction" within the
meaning of ERISA or the Code with respect to any Plan.
For purposes of this Section III.T.:
"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 Internal Revenue Code of 1986, as amended (the "INTERNAL REVENUE
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 subsections (m) or (o)
of Section 414 of the Internal Revenue 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.
"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,
severance, layoff, vacation, day or dependent care, legal services, cafeteria,
life, health, accident, disability, workmen's compensation or other insurance,
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.
"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
Internal Revenue Code that is maintained for employees of the Company, its
Subsidiaries, or any ERISA Affiliate.
"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.
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
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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 such
corporation is or may be subject to taxation by that 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 Internal Revenue 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 Internal Revenue 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 Internal Revenue Code during the applicable period
specified in Section 897(c)(1)(A)(ii) of the Internal Revenue Code.
3. The Company has not made an election under Section 341(f)
of the Internal Revenue 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 obligated to make payments or is a party to an
agreement that could obligate it to make any payments that would not
be deductible under Section 280G of the Internal Revenue Code.
For purposes of this Section III.U.:
"IRS" means the United States Internal Revenue Service.
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"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 each of 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 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.
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 understanding,
written or oral (collectively, "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
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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 below), no Person shall have,
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, documents 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 is currently reviewing 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 is currently surveying those vendors,
suppliers and other third parties (collectively, the "OUTSIDE PARTIES") with
which the Company and 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 and the
Subsidiaries. Based upon the aforementioned internal review and surveys of the
Outside Parties as of the date of this 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
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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 each 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 the company matters.
FF. NO MISREPRESENTATION. No representation or warranty of the
Company contained in this Agreement, any schedule, annex or exhibit hereto 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 are 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 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."
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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 net proceeds from the
sale of the Securities (excluding amounts paid by the Company for Buyer's
out-of-pocket costs and expenses whether or 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 the Amex. If the Common Stock is
delisted from the Amex, the Company will use its best efforts to list the Common
Stock as promptly as possible 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 and the Subsidiaries.
I. EXEMPTION FROM INVESTMENT COMPANY ACT. The Company shall conduct
its business, and shall cause the Subsidiaries to conduct their businesses, in a
manner so 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
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year all such proper 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 an individual who
is not and who 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 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.
0. 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
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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.
V. TRANSFER AGENT INSTRUCTIONS
A. The Company undertakes and agrees that no instruction other than
the instructions referred to in this Section V and customary stop transfer
instructions prior to the registration and sale of the Common Stock pursuant to
an effective Securities Act registration statement will be given to its transfer
agent for the Common Stock and that the Conversion Shares, the Dividend Shares
and the Warrants Shares otherwise shall 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 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 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."
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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, 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, 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
business days from the Dividend Payment Due Date, the Delivery Date or the
Warrant Delivery Date, as applicable):
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
NO. BUSINESS DAYS 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
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, and in addition to any other remedies which may
be available to Buyer, in the event the Company fails for any reason to effect
delivery of such shares of Common Stock within five business days after the
relevant Dividend Payment Due Date, the Delivery Date or the 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.
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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 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 and
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
Section 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.
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
material respects on or before the Closing Date of all covenants and agreements
of the Company required to be performed by it pursuant to this
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Agreement on or before the Closing Date, all of which shall be confirmed to
Buyer by the chief executive officer of the Company by delivery of the
certificate 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 the 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 foreseeable
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 $60,000;
H. 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;
I. Delivery by the Company of irrevocable instructions to the
Company's transfer agent to reserve 10,000,000 shares of Common Stock for
issuance of the Conversion Shares, the Dividend 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.
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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 October [__], 1999 (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
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 with respect to 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 Section 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 with respect to any representation or warranty made by it
in this Agreement, or (iii) Buyer shall have failed to satisfy the conditions
provided in Section VIII hereof.
E. EFFECT OF TERMINATION. In the event of the termination of this
Agreement pursuant to this Section 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.
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<PAGE>
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 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. the purchase of the Preferred Shares and the Warrants, the
conversion of the Preferred Shares, the exercise of the Warrants,
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 governmental
action relating to any of the foregoing, whether or not Buyer is a
party thereto; and
3. 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; and
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 Section 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
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pursuant to this Section XI 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,
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 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.
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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 Section 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
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.
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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 supersedes 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.
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:
(212) 308-5800
(212) 752-0731 (Fax)
with a copy to:
Greenberg Traurig
200 Park Avenue
New York, NY 10166
Attention: Stephen A. Weiss, Esq.
(212) 801-9253
(212) 801-6400 (Fax)
B. if to Buyer, to:
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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:
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 Section XIII.
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.
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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: CEO
THE SHAAR FUND LTD.
By:
-----------------------------------------
Name: Samuel Levinson
Title: Managing Director
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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:
-----------------------------------------
Name:
Title:
THE SHAAR FUND LTD.
By: /s/ Samuel Levinson
-----------------------------------------
Name: Samuel Levinson
Title: Managing Director
-31-
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of November 4, 1999
(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 November 4, 1999, 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) 335,000 shares
of Series E 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 E 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 312,500 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 pursuant to the
Securities Purchase Agreement.
(iii) "COMMISSION" means the Securities and Exchange
Commission.
<PAGE>
(iv) "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 listed and admitted to trading on the
NASDAQ, the closing bid price of a Common Share on such day as reported on
the NASDAQ, or, if not quoted or listed or admitted to trading on any
national securities exchange or quotation system, the closing bid 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) "NASDAQ" means the Nasdaq National Market or the Nasdaq
SmallCap Market, as the case may be.
(viii) "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.
(ix) "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.
(x) "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.
(xi) "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.
(xii) "REGISTRATION STATEMENT" means a registration statement
of the Company filed on an appropriate form under the Securities Act
providing for the
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<PAGE>
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.
(xiii) "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.
(xiv) "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. The Company
shall prepare and file with the Commission not later than 60 days after the
Closing Date, a Registration Statement relating to the offer and sale of the
Registrable Securities in the amount of 7,500,000 shares of Common Stock 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 in
no event later than April 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 of such
Registration Statement be accelerated within 48 hours of the Commission's
receipt of such request. Except as set forth on Schedule 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.
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<PAGE>
(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 April 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, in the case of clause (ii) above, 1%
of the Purchase Price (as defined in the Securities Purchase Agreement) from the
Initial Date to the first Computation Date and, in the case of clause (i) above,
from the Initial Date to the first Computation Date and for each Computation
Date thereafter and in the case of clause (ii) above from the first Computation
Date to the next Computation Date and for each Computation Date thereafter, 2%
of the Purchase Price, calculated, in each case, 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 $.50 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 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 $.50 per share and (y) with respect to each
succeeding Additional
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<PAGE>
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.
(e) (i) 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
5
<PAGE>
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 3(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 3 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.
(ii) 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
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
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<PAGE>
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)
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
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<PAGE>
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;
(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
8
<PAGE>
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 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;
9
<PAGE>
(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 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 5 hereof, and (C) providing
such information to such broker-
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<PAGE>
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.
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.
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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
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
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<PAGE>
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 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
13
<PAGE>
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 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
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<PAGE>
(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, 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.
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<PAGE>
(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:
(212) 308-5800
(212) 752-0731 (Fax)
with a copy to:
Greenberg Traurig
200 Park Avenue
New York, NY 10166
Attention: Stephen A. Weiss, Esq.
(212) 801-9253
(212) 801-6400 (Fax)
(ii) if to the Initial Investor, to:
The Shaar Fund Ltd.,
do Levinson Capital Management
2 World Trade Center, Suite 1820
New York, NY 10048
Attention: Samuel Levinson
(212) 432-7711
(212) 432-7771 (Fax)
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<PAGE>
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 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
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<PAGE>
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.
(1) 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.
[SIGNATURE PAGE FOLLOWS.]
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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: CEO
THE SHAAR FUND LTD.
By:
-------------------------------------
Name: Samuel Levinson
Title: Managing Director
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<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:
-------------------------------------
Name:
Title:
THE SHAAR FUND LTD.
By: /s/ Samuel Levinson
-------------------------------------
Name: Samuel Levinson
Title: Managing Director
19
EXHIBIT 23.1
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 1997 and for each of the three years in the period ended December 31, 1998,
which appears in the 1998 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,
1998. We also consent to the reference to us under the heading "Experts" in such
Registration Statement.
/s/ PRICEWATERHOUSECOOPERS LLP
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PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
January 26, 2000
