As filed with the Securities and Exchange Commission on February 10, 2000.
Registration No. 333-95445
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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PRE-EFFECTIVE AMENDMENT NO. 1 TO
FORM S-3
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
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COMMODORE APPLIED TECHNOLOGIES, INC.
(Exact name of Registrant as specified in its charter)
Delaware 11-3312952
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Paul E. Hannesson
Chairman of the Board, President and Chief Executive Officer
Commodore Applied Technologies, Inc.
150 East 58th Street, Suite 3400 150 East 58th Street, Suite 3400
New York, NY 10155 (212) 308-5800 New York, NY 10155 (212) 308-5800
(Address, including zip code, and (Name and address, including
telephone number, including area zip code, and telephone number,
code, of registrant's principal including area code, of agent
executive offices) for service)
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Copies of Communications to:
Stephen A. Weiss, Esq.
Anthony J. Marsico, Esq.
Greenberg Traurig, LLP
200 Park Avenue, 15th Floor
New York, New York 10166
(212) 801-9200
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.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
================================================================================================================
Proposed Proposed
Maximum Maximum
Title of Amount Offering Aggregate Amount of
Securities to be Being Price Offering Registration
Registered Registered(1) per share Price Fee
- - ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $0.001 per share 10,250,000 shares $1.63 $407,500(2) $107.58(2)(3)
================================================================================================================
</TABLE>
(1) Pursuant to rule 416 under the Securities Act of 1933, as amended (the
"Securities Act"), the number of shares of common stock, par value $0.001
per share (the "Common Stock"), of Commodore Applied Technologies, Inc.
being registered shall be adjusted to include any additional shares which
may become issuable as a result of stock splits, stock dividends, orsimilar
transactions.
(2) Computed on the basis of 250,000 shares of Common Stock in accordance with
Rule 457(a) under the Securities Act. A registration fee of $3,379.20 with
respect to 10,000,000 shares of Common Stock was computed in accordance
with Rule 457(c) under the Securities Act and paid upon the initial filing
of the Registration Statement on January 26, 2000. This Pre-effective
Amendment No. 1 to the Registration Statement increases the number of
shares of Common Stock being registered hereby by 250,000 shares, and the
registration fee of $107.58 being paid herewith relates to such 250,000
additional shares.
(3) Computed in accordance with Rule 457(c) under the Securities Act solely for
the purpose of calculating the total registration fee. Based on the average
of the high and low prices (rounded to the nearest cent) of the Common
Stock as reported on the American Stock Exchange on February 7, 2000.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
================================================================================
<PAGE>
The information in this Prospectus is not complete and may be changed. These
securities may not be sold until the Registration Statement filed with the
Securities and Exchange Commission is effective. This Prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any State where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED FEBRUARY 10, 2000
PROSPECTUS
10,250,000 Shares
COMMODORE APPLIED TECHNOLOGIES, INC.
Common Stock
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The selling stockholders listed on page 11 of this prospectus are selling
these shares for their own accounts.
Our common stock is traded on the American Stock Exchange under the symbol
CXI.
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INVESTING IN THE COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 3.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES, OR
DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------
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
----
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 ............................................ 13
Legal Matters ................................................... 14
Experts ......................................................... 14
Where You Can Find More Information ............................. 14
SET is a trademark of Commodore Applied Technologies, Inc.
<PAGE>
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 any
time after April 30, 2000 and up to April 30, 2003, at a conversion price equal
to the arithmetic mean of the closing prices of our common stock as reported on
the American Stock Exchange for the ten trading days immediately preceding the
date of conversion, as long as our common stock continues to trade on the
American Stock Exchange. In May 2003, the Series E convertible preferred stock
will automatically convert into our common stock at a conversion price
calculated in accordance with the above conversion formula plus any accrued and
unpaid dividends. 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 convertible preferred stock on or before April 30,
2000 by payment of $2,800,000 plus any accrued and unpaid dividends. Depending
upon the market price of our common stock at the time of conversion, the
issuance of the common stock upon conversion of the Series E convertible
preferred stock 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 of $1.1963 per share. The warrant
expires on November 4, 2004. We also issued to Avalon Research Group Inc., as
finder in this transaction, a five-year warrant to purchase up to 250,000 shares
of our common stock (subject to adjustment) at a purchase price of $1.1963 per
share. We also paid Avalon a fee of $250,000.
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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 arranging for the
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<PAGE>
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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<PAGE>
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 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.
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<PAGE>
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.
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
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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.
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
8
<PAGE>
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.
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.
9
<PAGE>
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. and Avalon Research Group Inc. 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 February 8,
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(1) * 7,500,000(2) 0 *
Commodore Environmental
Services, Inc. 15,456,677(3) 49.9% 2,500,000(4) 12,956,677(3) 41.8%
Avalon, Research Group Inc. (5) 0(6) * 250,000(7) 0 *
</TABLE>
- - ----------
* Represents less than 1% of the outstanding shares of our common stock.
(1) Does not include shares of our common stock The Shaar Fund may receive in
lieu of cash dividend payments on the Series E convertible preferred stock,
upon conversion of the Series E convertible preferred stock, and upon
exercise of its warrants to purchase up to 312,500 shares (subject to
adjustment) of our common stock.
(2) Pursuant to a Registration Rights Agreement, dated as of November 4, 1999,
by and between our company and The Shaar Fund, 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 convertible preferred stock, upon conversion of
the Series E convertible preferred stock, and upon exercise of its warrant
to purchase up to 312,500 shares (subject to adjustment) 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 convertible preferred stock will be equal to the arithmetic mean of the
closing prices of our common stock as reported on the American Stock
Exchange for the ten trading days immediately preceding the date of
conversion, as long as our common stock continues to trade on the American
Stock Exchange; therefore, the number of shares of our common stock we may
actually issue to The Shaar Fund upon conversion of the Series E
convertible preferred stock will depend upon such closing prices and may be
subject to stockholder approval.
11
<PAGE>
(3) Does not include shares underlying currently exercisable warrants to
purchase an aggregate of 14,410,540 shares (subject to adjustment) of our
common stock at prices ranging from $1.28 per share to $7.03 per share.
(4) Pursuant to a letter agreement between our company and Commodore
Environmental Services, Inc., dated November 4, 1999, Commodore
Environmental agreed, among other things, that it will not sell or
distribute any or all of these shares at a price less than $2.00 per share
for so long as The Shaar Fund has not converted 75% or more of its Series E
convertible preferred stock.
(5) Avalon Research Group Inc. acted as a finder in connection with our sale of
the Series E convertible preferred stock to The Shaar Fund and has acted as
a finder in connection with certain other private placement transactions we
have completed in the past. In connection with our sale of the Series E
convertible preferred stock to The Shaar Fund, we paid Avalon a fee of
$250,000 and issued Avalon a warrant to purchase up to 250,000 shares
(subject to adjustment) of our common stock at a price of $1.1963 per
share.
(6) Does not include shares of our common stock Avalon Research Group Inc. may
receive upon exercise of its warrants to purchase up to 250,000 shares
(subject to adjustment) of our common stock.
(7) Pursuant to a Finder's Agreement, dated August 17, 1999, by and between our
company and Avalon Research Group Inc., we agreed to register for resale
the 250,000 shares of our common stock underlying the warrants that were
issued to Avalon in connection with our sale of the Series E convertible
preferred stock to The Shaar Fund.
12
<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 shares were sold,
(d) the commissions paid or the discounts or concessions allowed to such broker
or dealer, where applicable, (e) that such broker or dealer did not conduct any
investigation to verify the information set out or incorporated by reference in
this prospectus, and (f) other facts material to the transaction.
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<PAGE>
We will maintain the effectiveness of the registration statement of which
this prospectus is a part until the earlier of (i) five years after the
effective date of the registration statement or (ii) such time as all the shares
registered 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 $43,000, but all brokerage commissions and other
expenses incurred by individual selling stockholders will be paid by them. There
is no assurance that any of the selling stockholders will sell any or all of the
shares offered hereby.
LEGAL MATTERS
The validity of the shares offered hereby has been passed upon by our
counsel, Greenberg Traurig, LLP, New York, New York. A shareholder of Greenberg
Traurig, LLP holds options to purchase 275,000 shares of common stock of
Commodore Environmental Services, Inc.
EXPERTS
The 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 amended. As allowed by SEC rules, this prospectus does not contain
all of the information you can find in the registration statement and its
exhibits. In addition, there may have been changes in the facts set forth in
this prospectus since the date it was filed. For further information about us
and our common stock, you should consult the registration statement and its
exhibits. Statements in this prospectus regarding the contents of any documents
are 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 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.
14
<PAGE>
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.
15
<PAGE>
================================================================================
10,250,000 Shares
COMMODORE APPLIED TECHNOLOGIES, INC.
Common Stock
-------------------
P R O S P E C T U S
-------------------
-------------------
__________ __, 2000
-------------------
We have not authorized any dealer, salesperson or other person to give any
information or represent anything not contained or incorporated by reference in
this prospectus. You must not rely on any unauthorized information. This
prospectus does not offer to sell any shares in any jurisdiction where it is
unlawful. The information in this prospectus is current only as of its date.
================================================================================
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 14. Other expenses of issuance and distribution.
The following table sets forth the costs and expenses in connection with
the sale and distribution of the securities being registered, other than
underwriting discounts and commissions. All of the amounts shown are estimates
except the Securities and Exchange Commission registration fee.
To be Paid
by the
Registrant
----------
SEC registration fee ............................. $ 3,486.78
Accounting fees and expenses ..................... 5,000.00
Legal fees and expenses .......................... 5,000.00
Miscellaneous expenses ........................... 30,000.00
----------
Total ........................................ $43,486.78
==========
Item 15. Indemnification of Directors and Officers.
Section 145(a) of the General Corporation Law of the State of Delaware (the
"General Corporation Law") provides that a Delaware corporation may indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the corporation) by reason of the fact that he or she is or was a
director, officer, employee or agent of the corporation or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation or enterprise, against expenses, judgments, fines and
amounts paid in settlement actually and reasonably incurred by him or her in
connection with such action, suit or proceeding if he or she acted in good faith
and in a manner he or she reasonably believed to be in or not opposed to the
best interests of the corporation, and, with respect to any criminal action or
proceeding, had no cause to believe his or her conduct was unlawful.
Section 145(b) of the General Corporation Law provides that a Delaware
corporation may indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action or suit by or in
the right of the corporation to procure a judgment in its favor by reason of the
fact that such person acted in any of the capacities set forth above, against
expenses actually and reasonably incurred by him or her in connection with the
defense or settlement of such action or suit if he or she acted under similar
standards as set forth above, except that no indemnification may be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the corporation unless and only to the extent that the
court in which such action or suit was brought shall determine that despite the
adjudication of liability, but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to be indemnified for such
expenses which the court shall deem proper.
Section 145 of the General Corporation Law further provides that to the
extent a director or officer of a corporation has been successful on the merits
or otherwise in the defense of any action, suit or proceeding referred to in
subsections (a) and (b) or in the defense of any claim, issue or matter therein,
he or she shall be indemnified against expenses actually and reasonably incurred
by him or her in connection therewith; that indemnification provided for by
Section 145 shall not be deemed exclusive of any other rights to which the
indemnified party may be entitled; and that the corporation may purchase and
maintain insurance on behalf of such person against any liability asserted
against him or her or incurred by him or her in any such capacity or arising out
of his or her status as such, whether or not the corporation would have the
power to indemnify him or her against such liabilities under such Section 145.
Section 102(b)(7) of the General Corporation Law provides that a
corporation in its original certificate of incorporation or an amendment thereto
validly approved by stockholders may eliminate or limit personal liability of
members of its board of directors or governing body for monetary damages for
breach of a director's fiduciary duty. However, no such provision may eliminate
or limit the liability of a director for breaching his or her duty of 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
II-1
<PAGE>
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. issued to The Shaar Fund Ltd.
* 4.2 Certificate of Designation of Series E preferred stock.
4.3 Specimen Form of Common Stock Certificate. (1)
** 4.4 Warrant to purchase shares of Common stock of Commodore Applied
Technologies, Inc. issued to Avalon Research Group Inc.
* 5.1 Opinion of Greenberg Traurig, LLP.
*10.1 Securities Purchase Agreement, dated 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.
**10.3 Finder's Agreement, dated August 17, 1999, between Commodore Applied
Technologies, Inc. and Avalon Research Group Inc.
**23.1 Consent of PricewaterhouseCoopers LLP.
*23.2 Consent of Greenberg Traurig, LLP.
*25.1 Power of Attorney.
- - ----------
* Previously filed electronically.
** Filed herewith electronically.
(1) Incorporated herein by reference. Filed as an exhibit to the Company's
Registration Statement on Form S-1 (Registration No. 333-4396) filed with
the Commission on May 2, 1996.
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
Pre-effective Amendment No. 1 to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
State of New York, on this 8th day of February, 2000.
COMMODORE APPLIED TECHNOLOGIES, INC.
By: /s/ PAUL E. HANNESSON
----------------------------------
Paul E. Hannesson
Chairman of the Board, President
and Chief Executive Officer
----------
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Pre-effective Amendment No. 1 to the Registration Statement has been signed
by the following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Capacity Date
--------- -------- ----
<S> <C> <C>
/s/ PAUL E. HANNESSON Chairman of the Board, President February 8, 2000
- - ----------------------------------------- and Chief Executive Officer
Paul E. Hannesson (principal executive officer)
/s/ JAMES M. DEANGELIS* Senior Vice President and Chief February 8, 2000
- - ----------------------------------------- Financial Officer (principal
James M. DeAngelis financial and accounting officer)
/s/ WILLIAM R. TOLLER* Director February 8, 2000
- - -----------------------------------------
William R. Toller
/s/ BENTLEY J. BLUM* Director February 8, 2000
- - -----------------------------------------
Bentley J. Blum
/s/ KENNETH L. ADELMAN* Director February 8, 2000
- - -----------------------------------------
Kenneth L. Adelman
/s/ HERBERT A. COHEN* Director February 8, 2000
- - -----------------------------------------
Herbert A. Cohen
/s/ DAVID L. MITCHELL* Director February 8, 2000
- - -----------------------------------------
David L. Mitchell
*By: /s/ Paul E. Hannesson
- - -----------------------------------------
Paul E. Hannesson
Attorney-in-Fact
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
* 4.1 Warrant to purchase shares of Common stock of Commodore Applied
Technologies, Inc. issued to The Shaar Fund Ltd.
* 4.2 Certificate of Designation of Series E preferred stock.
4.3 Specimen Form of Common Stock Certificate. (1)
** 4.4 Warrant to purchase shares of Common stock of Commodore Applied
Technologies, Inc. issued to Avalon Research Group Inc.
* 5.1 Opinion of Greenberg Traurig, LLP.
*10.1 Securities Purchase Agreement, dated 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.
**10.3 Finder's Agreement, dated August 17, 1999, between Commodore Applied
Technologies, Inc. and Avalon Research Group Inc.
**23.1 Consent of PricewaterhouseCoopers LLP.
*23.2 Consent of Greenberg Traurig, LLP.
*25.1 Power of Attorney.
- - ----------
* Previously filed electronically.
** Filed herewith electronically.
(1) Incorporated herein by reference. Filed as an exhibit to the Company's
Registration Statement on Form S-1 (Registration No. 333-4396) filed with
the Commission on May 2, 1996.
NEITHER THE WARRANTS REPRESENTED BY THIS CERTIFICATE NOR THE
SHARES ISSUABLE UPON EXERCISE HEREOF HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED. NEITHER THE WARRANTS NOR
SUCH SHARES MAY BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT, OR AN EXEMPTION
FROM REGISTRATION UNDER SUCH ACT.
COMMODORE APPLIED TECHNOLOGIES, INC.
WARRANT FOR THE PURCHASE OF SHARES OF COMMON STOCK
No. 99-1 250,000 Shares
THIS CERTIFIES that, for value received, AVALON RESEARCH GROUP INC. (the
"Holder"), is entitled to subscribe for and purchase from COMMODORE APPLIED
TECHNOLOGIES, INC., a Delaware corporation (the "Company"), upon the terms and
conditions set forth herein, at any time after the date hereof, and before 5:00
P.M. on November 30, 2004, New York City time (the "Exercise Period"), Two
Hundred Fifty Thousand (250,000) shares, par value $.001 per share, of the
Company ("Common Stock"), at an exercise price of $1.1963 per share (the
"Exercise Price"). As used herein the term "this Warrant" shall mean and include
this Warrant and any Warrant or Warrants hereafter issued as a consequence of
the exercise or transfer of this Warrant in whole or in part.
The number of shares of Common Stock issuable upon exercise of the Warrant
(the "Warrant Shares") and the Exercise Price may be adjusted from time to time
as hereinafter set forth.
1. This Warrant may be exercised during the Exercise Period by the
surrender of this Warrant (with the form of election at the end hereof duly
executed) to the Company at its office as set forth in the form of election
attached hereto, or at such other place as is designated in writing by the
Company, together with a certified or bank cashier's check payable to the order
of the Company in an amount equal to the Exercise Price multiplied by the number
of respective Warrant Shares for which this Warrant is being exercised.
2. Upon the exercise of the Holder's rights to purchase Warrant Shares, the
Holder shall be deemed to be the holder of record of the Warrant Shares issuable
upon such exercise, notwithstanding that the transfer books of the Company shall
then be closed or certificates representing such Warrant Shares shall not then
have been actually delivered to the Holder. As soon as practicable after the
exercise of this Warrant and payment of the Exercise Price by the
1
<PAGE>
Holder, a certificate or certificates for the Warrant Shares issuable upon such
exercise, registered in the name of the Holder or its designee, shall be issued
by the Company to the Holder. If the Warrant should be exercised in part only,
the Company shall, upon surrender of this Warrant for cancellation, execute and
deliver a new Warrant evidencing the right of the Holder to purchase the balance
of the Warrant Shares (or portions thereof) subject to purchase hereunder.
3. The Company shall be entitled to treat the registered holder of any
Warrant on the Warrant Register as the Owner in fact thereof for all purposes
and shall not be bound to recognize any equitable or other claim to or interest
in such Warrant on the part of any other person, and shall not be liable for any
registration or transfer of Warrants which are registered or to be registered in
the name of a fiduciary or the nominee of a fiduciary unless made with the
actual knowledge that a fiduciary or nominee is committing a breach of trust in
requesting such registration or transfer, or with the knowledge of such facts
that its participation therein amounts to bad faith. This Warrant shall be
transferable only on the books of the Company upon delivery thereof duly
endorsed by the Holder or by his duly authorized attorney or representative, or
accompanied by proper evidence of succession, assignment, or authority to
transfer. In all cases or transfer by an attorney, executor, administrator,
guardian, or other legal representative, duly authenticated evidence of his or
its authority shall be produced. Upon any registration of transfer, the Company
shall deliver a new Warrant or Warrants to the person entitled thereto. The
Company shall have no obligation to cause Warrants to be transferred on its
books to any person if, in the opinion of counsel to the Company, such transfer
does not comply with the provisions of the Securities Act of 1933, as amended
(the "Act"), and the rules and regulations promulgated thereunder.
4. The Company shall at all times reserve and keep available out of its
authorized and unissued Common Stock, solely for the purpose of providing for
the exercise of the rights to purchase all Warrant Shares granted pursuant to
the Warrants, such number of shares of Common Stock as shall, from time to time,
be sufficient therefor. The Company covenants that all shares of Common Stock
issuable upon exercise of this Warrant, upon receipt by the Company of the full
Exercise Price therefor, shall be validly issued, fully paid, nonassessable, and
free of preemptive rights.
5. (a) In case the Company shall at any time after the date the Warrants
were first issued (i) declare a dividend on the outstanding Common Stock payable
in shares of its capital stock, (ii) subdivide the outstanding Common Stock,
(iii) combine the outstanding Common Stock into a smaller number of shares, or
(iv) issue any shares of its capital stock by reclassification of the Common
Stock (including any such reclassification in connection with a consolidation or
merger in which the Company is the continuing corporation), then, in each case,
the Exercise Price, and the number of Warrant Shares issuable upon exercise of
this Warrant, in effect at the time of the record date for such dividend or of
the effective date of such subdivision, combination, or reclassification, shall
be proportionately adjusted so that the Holder after such time shall be entitled
to receive the aggregate number and kind of shares which, if such Warrant had
been exercised immediately prior to such time, he would have owned upon such
exercise and
2
<PAGE>
been entitled to receive by virtue of such dividend, subdivision, combination,
or reclassification. Such adjustment shall be made successively whenever any
event listed above shall occur.
(b) No adjustment in the Exercise Price shall be required if such
adjustment is less than $.05; provided, however, that any adjustments which by
reason of this Section 5 are not required to be made shall be carried forward
and taken into account in any subsequent adjustment. All calculations under this
Section 5 shall be made to the nearest cent or to the nearest one-thousandth of
a share, as the case may be.
(c) In any case in which this Section 5 shall require that an adjustment in
the Exercise Price be made effective as of a record date for a specified event,
the Company may elect to defer, until the occurrence of such event, issuing to
the Holder, if the Holder exercised this Warrant after such record date, the
shares of Common Stock, if any, issuable upon such exercise over and above the
shares of Common Stock, if any, issuable upon such exercise on the basis of the
Exercise Price in effect prior to such adjustment; provided, however, that the
Company shall deliver to the Holder a due bill or other appropriate instrument
evidencing the Holder's right to receive such additional shares upon the
occurrence of the event requiring such adjustment
(d) Whenever there shall be an adjustment as provided in this Section 5,
the Company shall promptly cause written notice thereof to be sent by registered
mail, postage prepaid, to the Holder, at its address as it shall appear in the
Warrant Register, which notice shall be accompanied by an officer's certificate
setting forth the number of Warrant Shares purchasable upon the exercise of this
Warrant and the Exercise Price after such adjustment and setting forth a brief
statement of the facts requiring such adjustment and the computation thereof,
which officer's certificate shall be conclusive evidence of the correctness of
any such adjustment absent manifest error.
6. (a) In case of any consolidation with or merger of the Company with or
into another corporation (other than a merger or consolidation in which the
Company is the surviving or continuing corporation), or in case of any sale,
lease, or conveyance to another corporation of the property and assets of any
nature of the Company as an entirety or substantially as an entirety, such
successor, leasing, or purchasing corporation, as the case may be, shall (i)
execute with the Holder an agreement providing that the Holder shall have the
right thereafter to receive upon exercise of this Warrant solely the kind and
amount of shares of stock and other securities, property, cash, or any
combination thereof receivable upon such consolidation, merger, sale, lease, or
conveyance by a holder of the number of shares of Common Stock for which this
Warrant might have been exercised immediately prior to such consolidation,
merger, sale, lease, or conveyance and (ii) make effective provision in its
certificate of incorporation or otherwise, if necessary, to effect such
agreement. Such agreement shall provide for adjustments which shall be as nearly
equivalent as practicable to the adjustments in Section 5.
(b) In case of any reclassification or change of the shares of Common Stock
issuable upon exercise of this Warrant (other than a change in par value or from
no par value to a specified par value, or as a result of a subdivision or
combination, but including any change in
3
<PAGE>
the shares into two or more classes or series of shares), or in case of any
consolidation or merger of another corporation into the Company in which the
Company is the continuing corporation and in which there is a reclassification
or change (including a change to the right to receive cash or other property) of
the shares of Common Stock (other than a change in par value, or from no par
value to a specified par value, or as a result of a subdivision or combination,
but including any change in the shares into two or more classes or series of
shares), the Holder shall have the right thereafter to receive upon exercise of
this Warrant solely the kind and amount of shares of stock and other securities,
property, cash, or any combination thereof receivable upon such
reclassification, change, consolidation, or merger by a holder of the number of
shares of Common Stock for which this Warrant might have been exercised
immediately prior to such reclassification, change, consolidation, or merger.
Thereafter, appropriate provision shall be made for adjustments which shall be
as nearly equivalent as practicable to the adjustments in Section 5.
(c) The above provisions of this Section 6 shall similarly apply to
successive reclassifications and changes of shares of Common Stock and to
successive consolidations, mergers, sales, leases, or conveyances.
7. In case at any time the Company shall propose:
(a) to pay any dividend or make any distribution on shares of Common
Stock in shares of Common Stock or make any other distribution (other than
regularly scheduled cash dividends which are not in a greater amount per
share than the most recent such cash dividend) to all holders of Common
Stock; or
(b) to issue any rights, warrants, or other securities to all holders
of Common Stock entitling them to purchase any additional shares of Common
Stock or any other rights, warrants, or other securities; or
(c) to effect any reclassification or change of outstanding shares of
Common Stock, or any consolidation, merger, sale, lease, or conveyance of
property, described in Section 6; or
(d) to effect any liquidation, dissolution, or winding-up of the
Company; or
(e) to take any other action which would cause an adjustment to the
Exercise Price;
then, and in any one or more of such cases, the Company shall give written
notice thereof, by registered mail, postage prepaid, to the Holder at the
Holder's address as it shall appear in the Warrant Register, mailed at least 15
days prior to (i) the date as of which the holders of record of shares of Common
Stock to be entitled to receive any such dividend, distribution, rights,
warrants, or other securities are to be determined, (ii) the date on which any
such reclassification, change of outstanding shares of Common Stock,
consolidation, merger, sale, lease, conveyance
4
<PAGE>
of property, liquidation, dissolution, or winding-up is expected to become
effective, and the date as of which it is expected that holders of record of
shares of Common Stock shall be entitled to exchange their shares for securities
or other property, if any, deliverable upon such reclassification, change of
outstanding shares, consolidation, merger, sale, lease, conveyance of property,
liquidation, dissolution, or winding-up, or (iii) the date of such action which
would require an adjustment to the Exercise Price.
8. (a) If, at any time prior to the expiration of the Exercise Period, the
Company proposes to file with the Securities and Exchange Commission (the
"Commission") a registration statement under the Act on any form (other than a
registration statement on Form S-4, Form S-8, or any successor form) for the
general registration of securities to be sold for cash (a "Registration
Statement") with respect to any shares of Common Stock, either for its own
account or for the account of any stockholder of the Company, it will give
written notice (a "Piggyback Notice") to the Holder at least 30 days before the
initial filing of such Registration Statement, which Piggyback Notice shall set
forth the intended method of disposition of the securities proposed to be
registered. The Piggyback Notice shall offer to include in such filing such
aggregate number of Warrant Shares held by the Holder as the Holder may request.
The Holder shall advise the Company in writing within 10 days after the date of
receipt of the Piggyback Notice from the Company whether the Holder intends to
have any Warrant Shares registered under the Registration Statement, setting
forth the number of such Warrant Shares for which registration is requested. The
Company shall thereupon include in such Registration Statement the aggregate
number of Warrant Shares held by the Holder for which registration is so
requested, subject to the next sentence. If a Registration Statement involves an
underwritten offering and the managing underwriter advises the Company in
writing that, in its opinion, the number of securities requested to be included
in such Registration Statement exceeds the number which can be sold in such
offering without adversely affecting the offering, the Company will include in
such Registration Statement the number of such securities which the Company is
so advised can be sold in such offering without adversely affecting the
offering, determined as follows: (i) first, the securities proposed by the
Company to be sold for it own account; and (ii) second, any Warrant Shares
requested to be included in such registration by the Holder and any other
securities of the Company pro rata among the holders thereof requesting such
registration on the basis of the number of shares of such securities requested
to be included by such holders. As used herein, "Registrable Securities" shall
mean the Warrant Shares that have not been previously sold pursuant to a
registration statement or Rule 144 promulgated under the Act.
(b) In the event of a registration pursuant to the provisions of this
Section 8, the Company shall use its best efforts to cause the Registrable
Securities so registered to be registered or qualified for sale under the
securities or blue sky laws of such jurisdictions as the Holder may reasonably
request; provided, however, that the Company shall not be required to qualify to
do business in any state by reason of this Section 8(b) in which it is not
otherwise required to qualify to do business.
(c) The Company shall keep effective any registration or qualification
contemplated by this Section 8 and shall from time to time amend or supplement
each applicable
5
<PAGE>
registration statement, preliminary prospectus, final prospectus, application,
document, and communication for such period of time as shall be required to
permit the Holder to complete the offer and sale of the Registrable Securities
covered thereby. The Company shall in no event be required to keep any such
registration or qualification in effect for a period in excess of nine months
from the date on which the Holder is first free to sell such Registrable
Securities; provided, however, that, if the Company is required to keep any such
registration or qualification in effect with respect to securities other than
the Registrable Securities beyond such period, the Company shall keep such
registration or qualification in effect as it relates to the Registrable
Securities for so long as such registration or qualification remains or is
required to remain in effect in respect of such other securities.
(d) In the event of a registration pursuant to the provisions of this
Section 8, the Company shall furnish to the Holder such number of copies of the
Registration Statement and of each amendment and supplement thereto (in each
case, including all exhibits), such reasonable number of copies of each
prospectus contained in such registration statement and each supplement or
amendment thereto (including each preliminary prospectus), all of which shall
conform to the requirements of the Act and the rules and regulations thereunder,
and such other documents, as the Holder may reasonably request to facilitate the
disposition of the Registrable Securities included in such registration.
(e) In the event of a registration pursuant to the provisions of this
Section 8, the Company shall furnish the Holder of any Registrable Securities so
registered with an opinion of its counsel (reasonably acceptable to the Holder)
to the effect that (i) the registration statement has become effective under the
Act and no order suspending the effectiveness of the registration statement,
preventing or suspending the use of the registration statement, any preliminary
prospectus, any final prospectus, or any amendment or supplement thereto has
been issued, nor has the Commission or any securities or blue sky authority of
any jurisdiction instituted or threatened to institute any proceedings with
respect to such an order, (ii) the registration statement and each prospectus
forming a part thereof (including each preliminary prospectus), and any
amendment or supplement thereto, complies as to form with the Act and the rules
and regulations thereunder, and (iii) such counsel has no knowledge of any
material misstatement or omission in such registration statement or any
prospectus, as amended or supplemented. Such opinion shall also state the
jurisdictions in which the Registrable Securities have been registered or
qualified for sale pursuant to the provisions of Section 8(b).
(f) In the event of a registration pursuant to the provision of this
Section 8, the Company shall enter into a cross-indemnity agreement and a
contribution agreement, each in customary form, with each underwriter, if any,
and, if requested, enter into an underwriting agreement containing conventional
representations, warranties, allocation of expenses, and customary closing
conditions, including, but not limited to, opinions of counsel and accountants'
cold comfort letters, with any underwriter who acquires any Registrable
Securities.
(g) In the event of a registration pursuant to the provisions of this
Section 8:
6
<PAGE>
(i) The Holder shall furnish to the Company in writing such
appropriate information (relating to the Holder and the intention of such
Holder as to proposed methods of sale or other disposition of its shares of
Common Stock) and the identity of and compensation to be paid to any
proposed underwriters to be employed in connection therewith as the
Company, any underwriter, or the Commission or any other regulatory
authority may request;
(ii) The Holder shall enter into the usual and customary form of
underwriting agreement agreed to by the Company and any underwriter with
respect to any such offering, if required, and such underwriting agreement
shall contain the customary rights of indemnity between the Company, the
underwriters, and the Holder;
(iii) The Holder shall agree that he shall execute, deliver and/or
file with or supply the Company, any underwriters, the Commission and/or
any state or other regulatory authority such information, documents,
representations, undertakings and/or agreements necessary to carry out the
provisions of the registration covenants contained in this Section 8 and/or
to effect the registration or qualification of his or its Registrable
Securities under the Act and/or any of the laws and regulations of any
state of governmental instrumentality;
(iv) the Company's obligation to include any Registrable Securities in
a registration statement shall be subject to the written agreement of the
Holder thereof to offer such securities in the same manner and on the same
terms and conditions as the other securities of the same class are being
offered pursuant to the registration statement, if such shares are being
underwritten;
(v) In the event that all the Registrable Securities have not been
sold on or prior to the expiration of the period specified in Section 8(c)
above, the Company may de-register by post-effective amendment any
Registrable Securities covered by the registration statement, but not sold
on or prior to such date. The Company agrees that it will notify the Holder
of Registrable Securities of the filing and effective date of such
post-effective amendment; and
(vi) The Holder agrees that upon notification by the Company that the
prospectus in respect to any public offering covered by the provisions
hereof is in need of revision, such Holder shall immediately upon receipt
of such notification (x) cease to offer or sell any securities of the
Company which must be accompanied by such prospectus, (y) return all such
prospectuses in such Holder's hands to the Company, and (z) not offer or
sell any securities of the Company until such Holder has been provided with
a current prospectus and the Company has given such Holder notification
permitting such Holder to resume offers and sales.
(h) The Company agrees that until all the Registrable Securities have been
sold under a registration statement or pursuant to Rule 144 under the Act, it
shall keep current in filing all reports, statements and other materials
required to be filed with the Commission to permit holders of the Registrable
Securities to sell such securities under Rule 144.
7
<PAGE>
9. (a) Subject to the conditions set forth below, the Company agrees to
indemnify and hold harmless the Holder, its officers, directors, partners,
employees, agents and counsel, and each person, if any, who controls any such
person within the meaning of Section 15 of the Act or Section 20(a) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), from and
against any and all loss, liability, charge, claim, damage, and expense
whatsoever (which shall include, for all purposes of this Section 9, but not be
limited to, attorneys' fees and any and all reasonable expense whatsoever
incurred in investigating, preparing, or defending against any litigation,
commenced or threatened, or any claim whatsoever, and any and all amounts paid
in settlement of any claim or litigation), as and when incurred, arising out of,
based upon, or in connection with: (i) any untrue statement or alleged untrue
statement of a material fact contained (A) in any registration statement,
preliminary prospectus, or final prospectus (as from time to time amended and
supplemented), or any amendment or supplement thereto, relating to the sale of
any of the Registrable Securities, or (B) in any application or other document
or communication (in this Section 9 collectively called an "application")
executed by or on behalf of the Company or based upon written information
furnished by or on behalf of the Company filed in any jurisdiction in order to
register or qualify any of the Registrable Securities under the securities or
blue sky laws thereof or filed with the Commission or any securities exchange;
or (ii) any omission or alleged omission to state a material fact required to be
stated in any document referenced in clause (A) or (B) above or necessary to
make the statements therein not misleading, unless such statement or omission
was made in reliance upon and in conformity with written information furnished
to the Company with respect to such Holder by or on behalf of such person
expressly for inclusion in any registration statement, preliminary prospectus,
or final prospectus, or any amendment or supplement thereto, or in any
application, as the case may be; or (iii) any breach of any representation,
warranty, covenant, or agreement of the Company contained in this Warrant. The
foregoing agreement to indemnify shall be in addition to any liability the
Company may otherwise have, including liabilities arising under this Warrant.
If any action is brought against the Holder or any of its officers,
directors, partners, employees, agents, or counsel, or any controlling persons
of such person (an "indemnified party") in respect of which indemnity may be
sought against the Company pursuant to the foregoing paragraph, such indemnified
party or parties shall promptly notify the Company in writing of the institution
of such action (but the failure so to notify shall not relieve the Company from
any liability other than pursuant to this Section 9(a), except to the extent it
may have been prejudiced in any material respect by such failure) and the
Company shall promptly assume the defense of such action, including the
employment of counsel (reasonably satisfactory to such indemnified party or
parties) and payment of expenses. Such indemnified party or parties shall have
the right to employ its or their own counsel in any such case, but the fees and
expenses of such counsel shall be at the expense of such indemnified party or
parties unless the employment of such counsel shall have been authorized in
writing by the Company in connection with the defense of such action or the
Company shall not have promptly employed counsel reasonably satisfactory to such
indemnified party or parties to have charge of the defense of such action or
such indemnified party or parties shall have reasonably concluded that there may
be one
8
<PAGE>
or more legal defenses available to it or them or to other indemnified parties
which are different from or additional to those available to the Company, in any
of which events such fees and expenses shall be borne by the Company and the
Company shall not have the right to direct the defense of such action on behalf
of the indemnified party or parties. Anything in this Section 9(a) to the
contrary notwithstanding, the Company shall not be liable for any settlement of
any such claim or action effected without its written consent, which shall not
be unreasonably withheld. The Company shall not, without the prior written
consent of each indemnified party that is not released as described in this
sentence, settle or compromise any action, or permit a default or consent to the
entry of judgment in or otherwise seek to terminate any pending or threatened
action, in respect of which indemnity may be sought hereunder (whether or not
any indemnified party is a party thereto), unless such settlement, compromise,
consent, or termination includes an unconditional release of each indemnified
party from all liability in respect of such action. The Company agrees promptly
to notify the Holder of the commencement of any litigation or proceedings
against the Company or any of its officers or directors in connection with the
sale of any Registrable Securities or any preliminary prospectus, prospectus,
registration statement, or amendment or supplement thereto, or any application
relating to any sale of any Registrable Securities.
(b) The Holder agrees to indemnify and hold harmless the Company, each
director of the Company, each officer of the Company who shall have signed any
registration statement covering Registrable Securities held by the Holder, each
other person, if any, who controls the Company within the meaning of Section 15
of the Act or Section 20(a) of the Exchange Act, and its or their respective
counsel, to the same extent as the foregoing indemnity from the Company to the
Holder in Section 9(a), but only with respect to statements or omissions, if
any, made in any registration statement, preliminary prospectus, or final
prospectus (as from time to time amended and supplemented), or any amendment or
supplement thereto, or in any application, in reliance upon and in conformity
with written information furnished to the Company with respect to the Holder by
or on behalf of the Holder expressly for inclusion in any such registration
statement, preliminary prospectus, or final prospectus, or any amendment or
supplement thereto, or in any application, as the case may be. If any action
shall be brought against the Company or any other person so indemnified based on
any such registration statement, preliminary prospectus, or final prospectus, or
any amendment or supplement thereto, or in any application, and in respect of
which indemnity may be sought against the Holder pursuant to this Section 9(b),
the Holder shall have the rights and duties given to the Company, and the
Company and each other person so indemnified shall have the rights and duties
given to the indemnified parties, by the provisions of Section 9(a).
(c) To provide for just and equitable contribution, if (i) an indemnified
party makes a claim for indemnification pursuant to Section 9(a) or 9(b)
(subject to the limitations thereof) but it is found in a final judicial
determination, not subject to further appeal, that such indemnification may not
be enforced in such case, even though this Agreement expressly provides for
indemnification in such case, or (ii) any indemnified or indemnifying party
seeks contribution under the Act, the Exchange Act or otherwise, then the
Company (including for this purpose any contribution made by or on behalf of any
director of the Company, any officer of the
9
<PAGE>
Company who signed any such registration statement, any controlling person of
the Company, and its or their respective counsel), as one entity, and the Holder
of the Registrable Securities included in such registration in the aggregate
(including for this purpose any contribution by or on behalf of an indemnified
party), as a second entity, shall contribute to the losses, liabilities, claims,
damages, and expenses whatsoever to which any of them may be subject, on the
basis of relevant equitable considerations such as the relative fault of the
Company and such Holder in connection with the facts which resulted in such
losses, liabilities, claims, damages, and expenses. The relative fault, in the
case of an untrue statement, alleged untrue statement, omission, or alleged
omission, shall be determined by, among other things, whether such statement,
alleged statement, omission, or alleged omission relates to information supplied
by the Company or by such Holder, and the parties' relative intent, knowledge,
access to information, and opportunity to correct or prevent such statement,
alleged statement, omission, or alleged omission. The Company and the Holder
agree that it would be unjust and inequitable if the respective obligations of
the Company and the Holder for contribution were determined by pro rata or per
capita allocation of the aggregate losses, liabilities, claims, damages, and
expenses (even if the Holder and the other indemnified parties were treated as
one entity for such purpose) or by any other method of allocation that does not
reflect the equitable considerations referred to in this Section 9(c). No person
guilty of a fraudulent misrepresentation (within the meaning of Section 11(f) of
the Act) shall be entitled to contribution from any person who is not guilty of
such fraudulent misrepresentation. Anything in this Section 9(c) to the contrary
notwithstanding, no party shall be liable for contribution with respect to the
settlement of any claim or action effected without its written consent. This
Section 9(c) is intended to supersede any right to contribution under the Act,
the Exchange Act or otherwise.
10. The issuance of any Warrant Shares or other securities upon the
exercise of this Warrant, and the delivery of certificates or other instruments
representing such shares or other securities, shall be made without charge to
the Holder for any tax or other charge in respect of such issuance. The Company
shall not, however, be required to pay any tax which may be payable in respect
of any transfer involved in the issue and delivery of any certificate in a name
other than that of the Holder and the Company shall not be required to issue or
deliver any such certificate unless and until the person or persons requesting
the issue thereof shall have paid to the Company the amount of such tax or shall
have established to the satisfaction of the Company that such tax has been paid.
11. Prior to the registration of the Warrant Shares under Section 8 hereof,
certificates evidencing the Warrant Shares issued upon exercise of the Warrant
shall bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. SUCH
SHARES MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT, OR AN EXEMPTION FROM
REGISTRATION UNDER SUCH ACT."
10
<PAGE>
12. Upon receipt of evidence satisfactory to the Company of the loss,
theft, destruction, or mutilation of any Warrant (and upon surrender of any
Warrant if mutilated), and upon reimbursement of the Company's reasonable
incidental expenses, the Company shall execute and deliver to the Holder thereof
a new Warrant of like date, tenor, and denomination.
13. The Holder of any Warrant shall not have, solely on account of such
status, any rights of a stockholder of the Company, either at law or in equity,
or to any notice of meetings of stockholders or of any other proceedings of the
Company, except as provided in this Warrant.
14. Any notice or other communication required or permitted to be given
hereunder shall be in writing and shall be mailed by certified mail, return
receipt requested or sent by Federal Express, Express Mail, or similar overnight
delivery or courier service or delivered (in person or by telecopy, telex, or
similar telecommunications equipment) against receipt to the party to whom it is
to be given, if sent to the Company, at: 150 East 58th Street, Suite 3400, New
York, New York 10155, Attention: Assistant Secretary and General Counsel; or if
sent to the Holder, at the Holder's address as it shall appear on the Warrant
Register; or to such other address as the party shall have furnished in writing
in accordance with the provisions of this Section 14. Any notice or other
communication given by certified mail shall be deemed given at the time of
certification thereof, except for a notice changing a party's address which will
be deemed given at the time of receipt thereof. Any notice given by other means
permitted by this Section 14 shall be deemed given at the time of receipt
thereof.
15. This Warrant shall be binding upon the Company and its successors and
assigns and shall inure to the benefit of the Holder and its successors and
assigns.
16. This Warrant shall be construed in accordance with the laws of the
State of New York applicable to contracts made and performed within such State,
without regard to principles of conflicts of law.
11
<PAGE>
17. The Company irrevocably consents to the jurisdiction of the courts of
the State of New York and of any federal court located in such State in
connection with any action or proceeding arising out of or relating to this
Warrant, any document or instrument delivered pursuant to, in connection with or
simultaneously with this Warrant, or a breach of this Warrant or any such
document or instrument. In any such action or proceeding, the Company waives
personal service of any summons, complaint or other process.
Dated: November 29, 1999 Commodore Applied Technologies, Inc.
By: /s/ Paul E. Hannesson
-------------------------------------
Name: Paul E. Hannesson
Title: President and Chief Executive Officer
12
<PAGE>
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to transfer
the attached Warrant.)
FOR VALUE RECEIVED, ______________________________ hereby sells, assigns,
and transfers unto _____________________ a Warrant to purchase Shares, par value
$.001 per share, of Commodore Applied Technologies, Inc. (the "Company"),
together with all right, title, and interest therein, and does hereby
irrevocably constitute and appoint ___________________ attorney to transfer such
Warrant on the books of the Company, with full power of substitution.
Dated: ____________________
Signature _____________________________
NOTICE
The signature on the foregoing Assignment must correspond to the name as
written upon the face of this Warrant in every particular, without alteration or
enlargement or any change whatsoever.
13
<PAGE>
To: Commodore Applied Technologies, Inc.
150 East 58th Street, Suite 3400
New York, New York 10155
ELECTION TO EXERCISE
The undersigned hereby exercises its rights to purchase ______________
Warrant Shares covered by the within warrant and tenders payment herewith in the
amount of $_____________ in accordance with the terms thereof, and requests that
certificates for such securities be issued in the name of, and delivered to:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print Name, Address and Social Security
or Tax Identification Number)
and, if such number of Warrant Shares shall not be all the Warrant Shares
covered by the within Warrant, that a new Warrant for the balance of the Warrant
Shares covered by the within Warrant be registered in the name of, and delivered
to, the undersigned at the address stated below.
Dated:_____________________ Name __________________________________
(Print)
Address: ______________________________________________________________________
_______________________________________
(Signature)
14
FINDER'S AGREEMENT
THIS AGREEMENT made on 17th day of August, 1999, by and between AVALON RESEARCH
GROUP INC. ("AVALON") and COMMODORE APPLIED TECHNOLOGIES, INC. ("CXI"),
1. THE PARTIES
1.1 CXI, a corporation, with its principal office at 150 East 58th Street,
Suite 3400, New York, Now York 10155 (tel.: 212-308-5800; fax
212-753-0731).
1.2 AVALON, a corporation, with its principal office at 1900 Glades Road,
Suite 201, Boca Raton, Florida 88481 (tel.: 561-447-4044; fax:
561-447-4042; email; [email protected].
1.3 The persons executing this Agreement represent that they have full and
complete authority to enter into this Agreement on behalf of their
respective companies.
2. THE AGREEMENT
2.1 CXI seeks a purchaser of all or part of a private placement offering
(`Offering"). The offering shall be for any combination of equity
and/or debt on terms and conditions satisfactory to CXI. As a result
of the introduction made through AVALON to a buyer of the Offering
(referred to herein as "INVESTORS") or any related entity under
INVESTORS' control, should the Offering be closed with INVESTORS
within one year, hereof, CXI shall owe AVALON the fees described
herein. Should CXI close on any introduced transactions under this
Agreement, that in itself shall serve as proof that the Offering met
the terms and conditions that were satisfactory to CXI.
2.2 It is acknowledged by CXI that: AVALON has acted solely as a finder
and not in any other capacity; AVALON has not advised CXI in any
manner regarding the merits of this or any other transaction; CXI has
consulted its own counsel on all aspects of this Offering and has done
its own due diligence to its satisfaction; AVALON has not made any
representations to CXI.
<PAGE>
2.3 AVALON is a NASD broker/dealer and NASDAQ Market Maker. INVESTORS may
be clients of AVALON. AVALON may make a market in CXI. AVALON, or its
clients, may have positions or trade in CXI at any time.
2.4 CXI shall be under no obligation to pay any fee or other monies
whatsoever to AVALON on account of this Agreement unless (a) the
purchase of the Offering contemplated by this Agreement has closed
with INVESTORS and (b) the purchase of the Offering has resulted from
the introduction by AVALON to CXI of INVESTORS.
2.5 Prior to introduction to any particular investor, AVALON will first
disclose the identity of that proposed investor to CXI. CXI, at its
sole discretion, can approve or decline whether such introduction can
be made to that investor. If CXI does not approve or decline whether
such introduction can be made to that investor within 24 hours of the
disclosure of the identity of that investor by AVALON to CXI, then
such inaction shall be deemed an approval.
2.6 This Agreement will expire sixty days from the date first above at
which time neither party will have any obligations towards the other
party unless introduced INVESTORS are actively negotiating with CXI at
expiration time, then this Agreement will survive until such time as
the active dealings either terminate or an Offering is dosed.
3. TEE FEE
3.1 In consideration of its services, AVALON shall be paid by CXI a sum
equal to Ten Percent (10%) of all funds raised upon the closing of the
transaction, The term "funds raised" shall include all funds due to
CXI under the Agreement between CXI and INVESTORS regardless of when
those funds may be payable to CXI.
3.2 In addition to the cash fee in paragraph 3.1, AVALON shell be granted
100,000 common stock purchase warrants ("Warrants") per $1 million
raised, or such part thereof as pro-rated. The
2
<PAGE>
Warrants shall have an exercise price of 110% of the average dosing
price of the common stock over the 5-day trading period ending on the
day prior to the closing of this Offering (as reported by Bloomberg).
Such Warrants shall expire five years from the closing date of the
Offering end shall piggyback on the next registration statement made
after issue of the Warrants.
3.3 The fee due to AVALON shall be payable to AVALON through an escrow
account at closing at the same time as the funds are released to CXI
and the stock certificates are released to INVESTORS. The Warrants due
to AVALON shall be payable to AVALON not later than sixty days from
the date of closing. If CXI fails to issue the Warrants as per this
paragraph, AVALON shall be entitled to a penalty of an additional 10%
of the amount of the Warrants due per calendar quarter until such
Warrants are issued. The additional Warrants to be granted under the
penalty provision herein shall not be prorated.
4. OTHER
41. In the event of any dispute between CXI and AVALON arising under or
pursuant to the terms of this Agreement, the same shall be settled
only by arbitration in the County of Palm Beach, State of Florida, in
accordance with the rules and regulations of the American Arbitration
Association. The determination of the arbitrators shall be final and
binding upon CXI and AVALON and may be enforced in any court of
appropriate jurisdiction.
4.2 This Agreement shall be construed by and governed under the laws of
the State of Florida.
4.3 This Agreement contains the entire agreement between AVALON and CXI
concerning the introduction of INVESTORS to CXI and correctly sets
forth the rights and duties of each of the parties to each other. Any
agreement or representation concerning the subject matter of this
Agreement or the duties of AVALON to CXI in relation thereto, not set
forth in this Agreement, is null and void.
3
<PAGE>
IN WITNESS WHEREOF, the parties have signed this Agreement on the date first
written above.
COMMDODORE APPLIED TECHNOLOGIES. INC.
By: /s/ Paul E. Hannesson
----------------------------------
Paul E. Hannesson, Chairman
AVALON RESEARCH GROUP, INC.
By: /s/ Adam B. Cohen
----------------------------------
Adam B. Cohen, General Counsel
4
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
- - ----------------------------------
PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
February 10, 2000
