<PAGE>
As filed with the Securities and Exchange Commission on September 12, 1996
Registration No. 333-_____
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
-----------
COMMODORE SEPARATION TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
3559
(Primary Standard Industrial Classification Code Number)
11-3299195
(I.R.S. Employer Identification No.)
150 East 58th Street, Suite 3400
New York, New York 10155
telephone: (212) 308-5800; facsimile: (212) 753-0731
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
ALAN R. BURKART
President and Chief Executive Officer
Commodore Separation Technologies, Inc.
150 East 58th Street, Suite 3400
New York, New York 10155
telephone: (212) 308-5800; facsimile: (212) 753-0731
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
STEPHEN A. WEISS, ESQ. LAWRENCE B. FISHER, ESQ.
SPENCER G. FELDMAN, ESQ. Orrick, Herrington & Sutcliffe LLP
Greenberg, Traurig, Hoffman, 666 Fifth Avenue
Lipoff, Rosen & Quentel New York, New York 10103
153 East 53rd Street telephone: (212) 506-5000
New York, New York 10022 facsimile: (212) 506-5151
telephone: (212) 801-9200
facsimile: (212) 223-7161
Approximate date of commencement of proposed sale to the public:
As soon as practicable after this Registration Statement becomes effective.
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, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. / /
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
================================================================================================================================
Amount to Proposed maximum Proposed maximum Amount of
Title of each class of be offering price aggregate offering registration
securities to be registered registered(1) per security(2) price fee
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.001 par
value......................... 5,750,000(3) $8.00 $46,000,000 $15,862.07
- --------------------------------------------------------------------------------------------------------------------------------
Redeemable Common Stock
Purchase Warrants............. 5,750,000(4) $.10 $575,000 $198.28
- --------------------------------------------------------------------------------------------------------------------------------
Common Stock, $.001 par
value, issuable upon
exercise of Redeemable
Common Stock Purchase
Warrants...................... 5,750,000(5) $11.20 $64,400,000 $22,206.90
- --------------------------------------------------------------------------------------------------------------------------------
Representative's Warrants to
purchase Common Stock
and Redeemable Common
Stock Purchase Warrants....... 500,000 $.0001 $50 $.02
- --------------------------------------------------------------------------------------------------------------------------------
Common Stock, $.001 par
value, issuable upon
exercise of Representative's
Warrants...................... 500,000(6) $9.60 $4,800,000 $1,655.17
- --------------------------------------------------------------------------------------------------------------------------------
Redeemable Common Stock
Purchase Warrants issuable
upon exercise of
Representative's Warrants..... 500,000(7) $.12 $60,000 $20.69
- --------------------------------------------------------------------------------------------------------------------------------
Common Stock, $.001
par value, issuable
upon exercise of
Redeemable Common Stock
Purchase Warrants
issuable upon exercise
of Representative's
Warrants...................... 500,000(8) $11.20 $5,600,000 $1,931.03
- --------------------------------------------------------------------------------------------------------------------------------
Total................ $121,435,050 $41,874.16
================================================================================================================================
</TABLE>
(1) Pursuant to Rule 416, there are also being registered such additional
securities as may become issuable pursuant to the anti-dilution
provisions of the Warrants and the Representative's Warrants.
(2) Estimated solely for the purpose of calculating the registration fee
in accordance with Rule 457 under the Securities Act of 1933, as
amended.
(3) Includes 750,000 shares of Common Stock which may be purchased by the
Underwriters from the existing stockholder of the Registrant to cover
over-allotments, if any.
(4) Includes 750,000 Redeemable Common Stock Purchase Warrants which may
be purchased by the Underwriters from the Registrant
to cover over-allotments, if any.
(5) Includes 750,000 shares of Common Stock underlying 750,000 Redeemable
Common Stock Purchase Warrants which may be purchased by the
Underwriters from the Registrant to cover over-allotments, if any.
(6) Consists of shares of Common Stock issuable upon exercise of
Representative's Warrants issued to the Representative of the several
Underwriters (the "Representative").
(7) Consists of Redeemable Common Stock Purchase Warrants issuable upon
exercise of Representative's Warrants issued to the Representative.
(8) Consists of shares of Common Stock underlying the Redeemable Common
Stock Purchase Warrants issuable upon exercise of the Representative's
Warrants issued to the Representative.
------------
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, as amended, or until the Registration Statement shall
become effective on such date as the Commission, acting pursuant to said Section
8(a), may determine.
==============================================================================
-ii-
<PAGE>
COMMODORE SEPARATION TECHNOLOGIES, INC.
CROSS REFERENCE SHEET
Pursuant to Item 501(b) of Regulation S-K
<TABLE>
<CAPTION>
Item
Number Item Caption in Form S-1 Location in Prospectus
------- ------------------------- -----------------------
<S> <C> <C>
1. Forepart of the Registration Statement Outside Front Cover Page of Prospectus
and Outside Front Cover Page of
Prospectus
2. Inside Front and Outside Back Cover Inside Front Cover Page of Prospectus;
Pages of Prospectus Additional Information; Back Cover Page
of Prospectus
3. Summary Information, Risk Factors and Prospectus Summary; Risk Factors
Ratio of Earnings to Fixed Charges
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price Outside Front Cover Page of Prospectus;
Risk Factors; Underwriting
6. Dilution Dilution
7. Selling Security Holders Not applicable
8. Plan of Distribution Outside Front Cover Page of Prospectus;
Underwriting
9. Description of Securities to Be Registered Prospectus Summary; Capitalization;
Description of Securities
10. Interests of Named Experts and Counsel Legal Matters; Experts
11. Information with Respect to the Outside Front Cover Page of Prospectus;
Registrant Prospectus Summary; Risk Factors; Use
of Proceeds; Capitalization; Dividend
Policy; Dilution; Selected Financial
Data; Management's Discussion and
Analysis of Financial Condition and
Results of Operations; Business;
Management; Executive Compensation;
Principal Stockholders; Certain
Relationships and Related Transactions;
Description of Securities; Shares
Eligible for Future Sale; Financial
Statements; Outside Back Cover Page of
Prospectus
12. Disclosure of Commission Position on Not applicable
Indemnification for Securities Act
Liabilities
</TABLE>
-iii-
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION, DATED SEPTEMBER 12, 1996
PROSPECTUS 5,000,000 Shares of Common Stock and
5,000,000 Redeemable Common Stock Purchase Warrants
COMMODORE SEPARATION TECHNOLOGIES, INC.
-------------
Commodore Separation Technologies, Inc., a Delaware corporation (the
"Company"), hereby offers (the "Offering") 5,000,000 shares of common stock, par
value $.001 per share (the "Common Stock"), and 5,000,000 Redeemable Common
Stock Purchase Warrants (the "Warrants"). The shares of Common Stock and the
Warrants are sometimes hereinafter together referred to as the "Securities."
Until the completion of this Offering, the shares of Common Stock and the
Warrants offered hereby may only be purchased together on the basis of one share
of Common Stock and one Warrant, but will trade separately immediately after the
Offering. Each Warrant entitles the registered holder thereof to purchase one
share of Common Stock at an initial exercise price of $____ per share [140% of
the initial public offering price per share of Common Stock], subject to
adjustment, at any time commencing one year after the date of this Prospectus
until five years after the date of this Prospectus. Commencing 18 months after
the date of this Prospectus, the Warrants are subject to redemption by the
Company, in whole but not in part, at $.10 per Warrant on 30 days' prior written
notice provided that the average closing sale price of the Common Stock as
reported on the American Stock Exchange (the "AMEX") equals or exceeds $_____
per share [300% of the initial public offering price of the Common Stock]
(subject to adjustment under certain circumstances) for any 20 trading days
within a period of 30 consecutive trading days ending on the fifth trading day
prior to the date of the notice of redemption. See "Description of Securities."
Prior to this Offering, there has been no public market for the
Securities and there can be no assurance that such a market will develop after
the completion of this Offering or, if developed, that it will be sustained. It
is currently anticipated that the initial public offering prices of the Common
Stock and the Warrants will be between $6.00 and $8.00 per share and $.10 per
Warrant, respectively. For information regarding the factors considered in
determining the initial public offering prices of the Securities and the terms
of the Warrants, see "Risk Factors" and "Underwriting." Application has been
made to include the Common Stock and the Warrants on the AMEX under the symbols
"CXO" and "CXO.WS," respectively.
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK AND IMMEDIATE
SUBSTANTIAL DILUTION. SEE "RISK FACTORS" BEGINNING ON PAGE 8 AND "DILUTION."
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
================================================================================================================================
Price to Public Underwriting Discount (1) Proceeds to Company (2)
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<S> <C> <C> <C>
Per Share............... $ $ $
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Per Warrant............. $ $ $
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Total (3)............... $ $ $
================================================================================================================================
</TABLE>
(see footnotes on following page)
The Securities are being offered by the Underwriters, subject to prior
sale, when, as and if delivered to and accepted by the Underwriters and subject
to approval of certain legal matters by their counsel and subject to certain
other conditions. The Underwriters reserve the right to withdraw, cancel or
modify this Offering and to reject any order in whole or in part. It is expected
that delivery of the Securities will be made against payment at the offices of
National Securities Corporation, Seattle, Washington, on or about _________,
1996.
NATIONAL SECURITIES CORPORATION
The date of this Prospectus is ____________, 1996
<PAGE>
- ------------
(1) Does not include additional compensation payable to National Securities
Corporation, the representative of the several Underwriters (the
"Representative"), in the form of a non-accountable expense allowance.
In addition, see "Underwriting" for information concerning
indemnification and contribution arrangements with the Underwriters and
other compensation payable to the Representative.
(2) Before deducting estimated expenses of $375,000 payable by the
Company, excluding the non-accountable expense allowance payable to
the Representative.
(3) The Company's sole stockholder has granted to the Underwriters an
option exercisable within 45 days after the date of this Prospectus to
purchase up to 750,000 additional shares of Common Stock from such
stockholder, and the Company has granted to the Underwriters an option
exercisable within 45 days after the date of this Prospectus to
purchase up to 750,000 additional Warrants, all upon the same terms and
conditions as set forth above, solely to cover over-allotments, if any
(the "Over-allotment Option"). If such Over-allotment Option is
exercised in full, the total Price to Public, Underwriting Discount and
Proceeds to Company will be $____________, $_________ and $__________,
respectively, and the total proceeds to the Company's sole stockholder
will be $_____. The Company will not receive any of the proceeds from
the sale of up to 750,000 shares of Common Stock by its sole
stockholder. See "Underwriting."
---------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE
SECURITIES OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN
THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE AMERICAN STOCK
EXCHANGE, IN THE OVER-THE-COUNTER MARKET, OR OTHERWISE. SUCH STABILIZING, IF
COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
The Company intends to furnish its stockholders with annual reports
containing financial statements audited and reported upon by its independent
certified public accountants after the end of each fiscal year, and make
available such other periodic reports as the Company may deem to be appropriate
or as may be required by law.
CST is the name used by the Company to describe its proprietary
separation and recovery technology.
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified by, and must be read in conjunction
with, the more detailed information and financial statements and notes thereto
appearing elsewhere in this Prospectus. Unless otherwise indicated, all share
and per share information in this Prospectus reflects a 150,000-for-one stock
split effected on September 5, 1996, and does not give effect to (i) any
exercise of the Underwriters' Over-allotment Option, (ii) the issuance of up to
5,000,000 shares of Common Stock upon exercise of the Warrants, (iii) the
issuance of up to 500,000 shares of Common Stock and 500,000 Warrants upon
exercise of the Representative's Warrants, (iv) the issuance of up to 500,000
shares of Common Stock upon exercise of Warrants underlying the Representative's
Warrants, (v) the issuance of up to 1,235,000 shares of Common Stock upon
exercise of stock options outstanding as of the date of this Prospectus, and
(vi) the issuance of up to 765,000 additional shares of Common Stock reserved
for issuance upon exercise of additional stock options that may be granted under
the Company's 1996 Stock Option Plan. As used herein, the term "Company" refers
to Commodore Separation Technologies, Inc. See "Executive Compensation - Stock
Options" and "Underwriting."
This Prospectus contains forward-looking statements which involve risks and
uncertainties. The Company's actual results may differ significantly from the
results discussed in the forward-looking statements. Factors that might cause
such a difference include, but are not limited to, those discussed in "Risk
Factors" and in "Management's Discussion and Analysis of Financial Condition and
Results of Operations-Liquidity and Capital Resources."
The Company
Commodore Separation Technologies, Inc. (the "Company") is a process
technology company which has developed and intends to commercialize its
separation technology and recovery system, known as CST. Based on the results
of more than 100 laboratory tests and one significant field test to date, the
Company believes that CST is capable of effectively separating and extracting
various solubilized materials, including metals, organic chemicals,
biochemicals, radionuclides and other targeted substances, from liquid and
gaseous process streams.
Industrial companies create liquid and gaseous mixed process streams in
the course of their manufacturing and product development activities which
frequently require costly treatment and disposal to comply with regulatory
requirements. These process streams often contain valuable materials which can
be reused if they can be extracted in a sufficient concentration and degree of
purity. The Company believes that application of CST in these industries can
substantially reduce disposal costs for certain of these manufacturing process
streams, and can enable the recovery and reuse of metals and other valuable
materials. The Company also believes that CST can be utilized for environmental
remediation and restoration in the clean-up of harbors and groundwater, and in
the decontamination of nuclear sites.
CST is an advanced form of membrane separation technology, in which a
contaminated liquid or gaseous feedstream is injected into a Company-designed
fibrous membrane unit or module. This module is continuously fed with a recycled
stream of proprietary chemical solution whose composition will vary depending on
the types and concentrations of compounds in the feedstream. As the feedstream
enters the membrane unit, the metal or other substance to be extracted reacts
with the proprietary chemical solution in the membrane, and the metallic or
other ions are extracted through the membrane into a strip solution which is
concentrated and gathered in a separate storage container. The balance of the
feedstream is either recycled or simply discharged as normal effluent. In some
instances, additional treatment may be required prior to disposal, or disposal
may need to be made in a regulated manner. The Company believes that CST can
be utilized for the separation and recovery of chrome, chromium, cadmium,
silver, mercury, platinum, lead, zinc, nickel, trichlorethylene, polychlorinated
biphenyls, methylene chloride, amino acids, antibiotics, radionuclides, and
other organic and inorganic substances.
-3-
<PAGE>
CST possesses operational characteristics distinguishable from other
existing forms of membrane filtration technology in that it:
o requires low initial capital costs, as well as low operating
costs;
o is environmentally safe, in most instances producing no
sludges or other harmful by-products which would require
additional post-treatment prior to ultimate disposal;
o can selectively extract specific target substances, while
extracting substantially fewer unwanted substances;
o can typically operate in less than 40 square feet of space for
the entire system;
o has the capability of treating a wide variety of elements and
compounds in a wide variety of industrial settings, and doing
so at great speed and with a high degree of effectiveness
regardless of particle size, volume requirements and other
variables;
o can extract metals, organic chemicals and other elements and
compounds in a sufficient concentration and degree of purity
to permit their ready reuse; and
o has the capability, in a single process application, of
selectively extracting multiple elements or compounds from a
mixed process stream.
The Company has conducted more than 100 tests of CST in the
laboratory and one significant test in the field. In laboratory testing,
CST has been shown to substantially reduce contamination levels in a variety
of process streams, including process streams containing nickel, chromium,
phenols, phenylalanine, cesium and nitrates, in most instances yielding a
reacted process stream capable of disposal with little or no further treatment
required, and reusable materials of sufficient quantity and purity as to
economically permit their reuse. In August 1996, the Company completed an
on-site demonstration of CST for the decontamination of chromium-contaminated
groundwater in the Port of Baltimore, Maryland. During this demonstration, a
single CST unit, in a single pass-through of feedstream, reduced the
contamination level from more than 600 parts per million (ppm) to less than one
ppm. The Company believes that CST is the only technology capable of on-site
chromium removal that enables effluent discharge without post-treatment.
The Company will market CST directly to a variety of domestic and
international industries, particularly those engaged in metallurgical processing
and metal plating, which generate a substantial volume of mixed metal process
streams, and to gas separation, organic chemicals and biochemical companies,
which produce or utilize substantial volumes of liquid or gaseous mixed process
streams. Federal, state and local government entities are also a potential
market for the Company, with penetration into this area having already begun
with test projects for the Port of Baltimore and on Cape Cod, Massachusetts.
-4-
<PAGE>
The Company may also develop collaborative joint working and marketing
arrangements with companies that have a significant presence in well-established
industries or markets. Such arrangements, for example, may be expected to focus
on obtaining environmental remediation projects, including clean-up of harbors,
groundwater and nuclear sites. Although the Company has entered into memorandums
of understanding for potential working arrangements with Teledyne Brown
Engineering, a division of Teledyne Industries, Inc., and Sverdrup
Environmental, Inc., and is bidding on certain projects, there can be no
assurance that any of these activities will result in definitive collaborative
agreements or project awards. Even if contracts are awarded to the Company,
CST has never been utilized on a large-scale basis, and there is no assurance
that this technology will perform successfully on a large-scale commercial
basis, or that it will be profitable to the Company. There can also be no
assurance that this technology will not be superseded by other competing
technologies.
The Company was incorporated in the State of Delaware in November 1995,
and is a wholly-owned subsidiary of Commodore Environmental Services, Inc.
("Commodore"). To date, Commodore has financed the development efforts of the
Company's technologies through direct equity investments and loans to the
Company. The principal executive offices of the Company are located at 150 East
58th Street, Suite 3400, New York, New York 10155, and its telephone number is
(212) 308-5800.
The Offering
<TABLE>
<CAPTION>
<S> <C>
Securities Offered.......................................... 5,000,000 shares of Common Stock and
5,000,000 Warrants.
</TABLE>
-5-
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Terms of Warrants........................................... Each Warrant entitles the holder thereof to
purchase, at any time commencing one year after
the date of this Prospectus until five years after
the date of this Prospectus, one share of Common
Stock at a price of $____ per share [140% of the
initial public offering price per share of Common
Stock], subject to adjustment. Commencing 18
months after the date of this Prospectus, the
Warrants are subject to redemption by the
Company, in whole but not in part, at $.10 per
Warrant on 30 days' prior written notice
provided that the average closing sale price of the
Common Stock as reported on the AMEX equals
or exceeds $______ per share [300% of the
initial public offering price of the Common
Stock], subject to adjustment, for any 20 trading
days within a period of 30 consecutive trading
days ending on the fifth trading day prior to the
date of the notice of redemption. See
"Description of Securities."
Common Stock outstanding prior to the Offering.............. 15,000,000 shares of Common Stock.
Securities to be outstanding after the Offering............. 20,000,000 shares of Common Stock and
5,000,000 Warrants.
Use of Proceeds ............................................ The Company intends to apply the net proceeds
of this Offering to purchase its initial CST
inventory; conduct ongoing development; acquire
manufacturing equipment; establish its Atlanta
facility; fund proposed collaborative
arrangements; and for working capital and
general corporate purposes. See "Use of
Proceeds."
Proposed AMEX Symbols:(1)
Common Stock.......................................... CXO
Warrants.............................................. CXO.WS
Risk Factors ............................................... An investment in the Securities offered hereby
involves a high degree of risk and immediate and
substantial dilution, and should be made only by
investors who can afford the loss of their entire
investment. See "Risk Factors" and "Dilution."
</TABLE>
- ----------
(1) There can be no assurance that the Securities will be accepted for
listing on the AMEX.
-6-
<PAGE>
Summary Financial Data
The following summary financial data have been derived from the
audited financial statements of the Company. The statement of operations data
set forth below with respect to the period from November 15, 1995 (date of
inception) to June 30, 1996 and the balance sheet data at June 30, 1996 are
derived from, and are qualified by reference to, the audited Financial
Statements included elsewhere in this Prospectus and should be read in
conjunction with those financial statements and notes thereto.
<TABLE>
<CAPTION>
November 15, 1995
(date of inception)
Statement of Operations Data:(1) to June 30, 1996
--------------------
<S> <C>
Revenue................................................. $ 0
Costs and expenses:
Research and development.............................. 50,080
General and administrative............................ 9,720
Amortization.......................................... 101
-------
Loss before interest and taxes.......................... (59,901)
Interest expense........................................ 1,035
-------
Net loss................................................ (60,936)
=======
Net loss per share(2)................................... -- (3)
</TABLE>
<TABLE>
<CAPTION>
June 30, 1996
-----------------------------------------------
Balance Sheet Data: Pro Pro Forma,
Actual Forma(4) as Adjusted(5)
------ -------- --------------
<S> <C> <C> <C>
Working capital (deficit).............................. $(81,630) $333,270 $31,553,270
Total assets........................................... 23,327 385,627 31,605,627
Total current liabilities.............................. 84,163 31,563 31,563
Deficit accumulated during development stage........... (60,936) (60,936) (60,936)
Stockholders' equity (deficit)......................... (60,836) 354,064 31,574,064
</TABLE>
- ----------
(1) The Company is in the development stage, and has not had any significant
financial or operating transactions. See Note 1 of Notes to Financial
Statements.
(2) Net loss per share is calculated on the basis of 15,000,000 shares of
Common Stock being outstanding for the period presented. See Note 1 of
Notes to Financial Statements.
(3) Less than $.01 per share of Common Stock.
(4) Gives effect on a pro forma basis to the contribution by Commodore to the
equity of the Company of a total of $415,000, representing $362,400 of
additional cash advances made by Commodore to the Company and the
conversion of short-term debt to equity of $52,600 prior to the
completion of this Offering (the "Commodore Contribution").
See "Capitalization."
(5) Gives effect on a pro forma, as adjusted basis to (i) the Commodore
Contribution and (ii) the sale by the Company of the Securities offered
hereby at an assumed initial public offering price of $7.00 per share and
$.10 per Warrant and the initial application of the estimated net proceeds
therefrom. See "Use of Proceeds" and "Certain Relationships and Related
Transactions."
-7-
<PAGE>
RISK FACTORS
An investment in the Securities offered hereby involves a high degree
of risk and should be made only by investors who can afford the loss of their
entire investment. Prospective investors should carefully review and consider
the risk factors described below and the other information in this Prospectus
before purchasing the Securities.
No Operating History; Accumulated and Working Capital Deficits;
Initial Commercialization Stage; Going Concern Disclosure in Independent
Auditors' Report
The Company was organized in November 1995 and has had no commercial
operations to date. Since its inception, the Company has been engaged
principally in organizational activities, including developing a strategic
operating plan, entering into contracts, hiring personnel, developing test
modules and installing and operating modules on a limited basis for
demonstration or test purposes. Accordingly, the Company has no relevant
operating history upon which an evaluation of its performance and prospects can
be made. The Company is subject to all of the business risks associated with a
new enterprise, including, but not limited to, risks of unforeseen capital
requirements, failure of market acceptance, failure to establish business
relationships, and competitive disadvantages as against larger and more
established companies. The report of the independent auditors with respect to
the Company's financial statements included in this Prospectus includes a "going
concern" qualification, indicating that the Company's significant operating
losses and deficits in working capital and stockholders' equity raise
substantial doubt about its ability to continue as a going concern.
The Company has generated no revenues to date, and will not generate
any meaningful revenues until after the Company successfully completes the
installation of modules in a significant number of industrial companies, of
which no assurance can be given. As of June 30, 1996, the Company had a working
capital deficit of $(81,630) and a stockholders' deficit of $(60,836). From June
30, 1996 to August 31, 1996, the Company has incurred additional operating
losses of $(143,163), and anticipates that it may continue to incur significant
operating losses for the foreseeable future. There can be no assurance as to
whether or when the Company will generate meaningful revenues or achieve
profitable operations.
CST has never been utilized on a large-scale basis, and there can be
no assurance that CST will perform successfully on a large-scale commercial
basis or that it will be profitable to the Company. The Company's ability to
operate its business successfully will depend on a variety of factors, many of
which are outside the Company's control, including competition, cost and
availability of strategic components, changes in governmental initiatives and
requirements, changes in regulatory requirements, and the costs associated with
equipment repair and maintenance. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations," "Business" and Financial
Statements.
Dependence on Strategic Components
The Company currently has a limited number of outside sources of supply
for some strategic components used in CST, including chemicals, fibers and
membrane casings. Business disruptions or financial difficulties of such
suppliers, or raw material shortages or other causes beyond the Company's
control, could adversely affect the Company by increasing the cost of goods sold
or reducing the availability of such components. In its development stage to
date, the Company has been able to obtain adequate supplies of these strategic
components. However, as it commences commercial activities, the Company expects
to experience a rapid and substantial increase in its requirements for these
components. If the Company were unable to obtain a sufficient supply of required
components, the Company could experience significant delays in the manufacture
-8-
<PAGE>
of CST equipment, which could result in the loss of orders and customers, and
could have a material adverse effect on the Company's business, financial
condition and results of operations. Although the Company plans to use a portion
of the net proceeds of this Offering to build its own manufacturing plant for
these strategic components, there can be no assurance as to whether or when such
plant will be completed, that it will be able to manufacture components more
inexpensively than the cost of current sources of supply or that, prior to the
completion of such plant, the Company will not require alternative sources of
such components or experience delays in obtaining adequate supplies thereof. The
occurrence of any of such events would have a material adverse effect on the
Company's 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 the Company would be able to pass through any of such
increases to its customers. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Dependence on Suppliers" and
"Business - Proposed Manufacturing Operations."
Uncertainty of Market Acceptance
Many prospective users of CST have already committed substantial
resources to other forms of process stream treatments or technologies. The
Company's growth and future financial performance will depend on its ability to
demonstrate to prospective users the technical and economic advantages of CST
over these alternatives. There can be no assurance that the Company will be
successful in this effort. Furthermore, it is possible that competing
alternatives may be perceived to have, or may actually have, certain advantages
over CST for certain industries or applications. See "Business."
Risk of International Operations
The Company intends to market CST in international markets, including
both industrialized and developing countries. International operations entail
various risks, including political instability, economic instability and
recessions, exposure to currency fluctuations, difficulties of administering
foreign operations generally, and obligations to comply with a wide variety of
foreign import and United States export laws, tariffs and other regulatory
requirements. The Company's competitiveness in overseas markets may be
negatively impacted when there is a significant increase in the value of the
dollar against the currencies of the other countries in which the Company does
business. In addition, the laws of certain foreign countries may not protect the
Company's proprietary rights to the same extent as the laws of the United
States. See "Business - Environmental Matters," "- Intellectual Property" and "-
Competition."
Unpredictability of Patent Protection and Proprietary Technology
The Company currently has one United States utility patent application
pending and one United States provisional patent application pending and may in
the future file foreign patent applications. The Company's success depends, in
part, on its ability to obtain patents, maintain trade secrecy, and operate
without infringing on the proprietary rights of third parties. There can be no
assurance that the patents of others will not have an adverse effect on the
Company's ability to conduct its business, that any of the Company's pending
patent applications will be approved, that the Company will develop additional
proprietary technology which is patentable or that any patents issued to the
Company will provide the Company with competitive advantages or will not be
challenged by third parties. Furthermore, there can be no assurance that others
will not independently develop similar or superior technologies, duplicate
elements of CST, or design around CST. The Company's liquid membrane technology
patent applications are based on the selective combination of different known
solvents, supports, diluents, carriers and other components to separate a
variety of metals, chemicals and other targeted substances. While the Company
believes that its technology covers all separation applications, third parties
may have developed, or may subsequently assert claims to, certain of these
solvents, supports, diluents, carriers or other components for one or more
specific applications. In such event, the Company may need to acquire licenses
to, or to contest the validity of, issued or pending patents or claims of third
parties. There can be no assurance that any license acquired under such patents
would be made available to the Company on acceptable terms, if at all, or that
the Company would prevail in any such contest. In addition, the Company could
incur
-9-
<PAGE>
substantial costs in defending itself in suits brought against the Company for
alleged infringement of another party's patents or in defending the validity or
enforceability of the Company's patents, or in bringing patent infringement
suits against other parties based on the Company's patents.
In addition to patent protection, the Company also relies on trade
secrets, proprietary know-how and technology which it seeks to protect, in part,
by confidentiality agreements with its prospective working partners and
collaborators, employees and consultants. There can be no assurance that these
agreements will not be breached, that the Company would have adequate remedies
for any breach, or that the Company's trade secrets and proprietary know-how
will not otherwise become known or be independently discovered by others.
See "Business - Intellectual Property."
Royalty Obligation
Pursuant to an assignment of technology agreement between the Company
and Srinivas Kilambi, Ph.D., the Company's Vice President-Technology, the
Company agreed to pay Dr. Kilambi a royalty through December 3, 2002 equal to 2%
of the Company's revenues actually received and attributed to the commercial
application of the technology acquired from Dr. Kilambi. Payment of such royalty
to Dr. Kilambi is based on Company revenues and is not related to or contingent
upon the Company attaining profitability or positive cash flow. As a result,
such payment will adversely affect operating results and divert cash resources
from use in the Company's business, and possibly at times when the Company's
liquidity and access to funding may be limited. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Liquidity and
Capital Resources," "Business - Intellectual Property" and "Certain
Relationships and Related Transactions - Organization and Capitalization of the
Company."
Risk of Environmental Liability
The Company's operations, as well as the use of the specialized
technical equipment by its customers, are subject to numerous federal, state and
local regulations relating to the storage, handling and transportation of
certain regulated materials. Although the Company's role is generally limited to
the leasing of its specialized technical equipment for use by its customers,
there is always the risk of the mishandling of such materials or technological
or equipment failures, which could result in significant claims against the
Company. Any such claims against the Company could have a material adverse
effect.
As CST is commercialized, the Company may be required to obtain
environmental liability insurance in the future in amounts greater than it
currently maintains. There can be no assurance that such insurance will provide
coverage against all claims, and claims may be made against the Company (even if
covered by the Company's insurance policy) for amounts substantially in excess
of applicable policy limits. Any such event could have a material adverse effect
on the Company's business, financial condition and results of operations. See
"Business - Environmental Matters."
Potential Need for Additional Financing
Prior to this Offering, financing for all of the Company's activities
has been provided in the form of direct equity investments and loans by
Commodore, and the Company has been entirely dependent on Commodore for such
funding. Although the Company anticipates that the net proceeds of this Offering
will be sufficient to sustain its operations for approximately 18 months
following the date of this Prospectus, the Company's future capital requirements
could vary significantly and will depend on certain factors, many of which are
not within the Company's control. These include the ongoing development and
testing of CST as a remediation and industrial waste management technology;
the nature and timing of remediation and clean-up projects and permits required;
and the availability of financing. In the environmental remediation market, the
Company may not be able to enter into favorable business collaborations and
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<PAGE>
might thus be required to bid upon projects for its own account. If such bids
were successful, the Company would be required to make significant expenditures
on personnel and capital equipment which would require significant financing in
amounts substantially in excess of the net proceeds of this Offering. In
addition, the Company's lack of operational experience and limited capital
resources could make it difficult, if not highly unlikely, to successfully bid
on major reclamation or clean-up projects. In such event, the Company's business
development could be limited to remediation of smaller commercial and industrial
sites with significantly lower potential for profit.
In addition, the expansion of the Company's business will require the
commitment of significant capital resources toward the hiring of technical and
operational support personnel, the development of a manufacturing and testing
facility for CST equipment, and the building of equipment to be used both for
on-site test demonstrations and the remediation of contaminated elements. In the
event the Company is presented with one or more significant reclamation or
clean-up projects, individually or in conjunction with collaborative working
partners, it may require additional capital to take advantage of such
opportunities. There can be no assurance that such financing will be available
or, if available, that it will be on favorable terms. If adequate financing is
not available, the Company may be required to delay, scale back or eliminate
certain of its development programs, to relinquish rights to certain of its
technologies, or to license third parties to commercialize technologies that the
Company would otherwise seek to develop itself. To the extent the Company raises
additional capital by issuing equity securities, investors in this Offering will
be diluted. See "Use of Proceeds" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Liquidity and Capital
Resources."
Competition and Technical Alternatives
The Company anticipates that CST's primary market will be for
industrial by-products treatment and disposal. The Company has had limited
experience in marketing CST and has not previously had any employees or
personnel whose primary responsibilities for the Company consisted of sales or
marketing functions. Other participants in both the private and public sectors
include several large domestic and international companies and numerous small
companies, many of whom have substantially greater financial and other resources
and more manufacturing, marketing and sales experience than the Company. In
addition, as membrane separation technology evolves, there exists the
possibility that CST may be rendered obsolete by one or more competing
technologies. Any one or more of the Company's competitors, or one or more other
enterprises not presently known to the Company, may develop technologies which
are superior to CST or other technologies utilized by the Company. To the
extent that the Company's competitors are able to offer more cost-effective
separation technology alternatives, the Company's ability to compete could be
materially and adversely affected. See "Business."
No Assurance of Collaborative Agreements or Project Awards
In addition to its direct marketing efforts, the Company proposes to
pursue opportunities in the environmental remediation market through
collaborative joint working arrangements with companies that have a significant
presence in well-established industries or markets, and that can introduce CST
as an enabling technology to industry participants. However, neither the Company
nor any of its prospective collaborative joint working partners have been
awarded any project contracts. There can be no assurance that the Company will
enter into any definitive joint project arrangements with its prospective
working partners or others, or that any such definitive arrangements will be on
terms and conditions that will enable the Company to generate profits.
Furthermore, even if the Company is successful in obtaining one or more project
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<PAGE>
awards, such projects may be curtailed or eliminated, or other problems may
arise, which could materially adversely affect the Company's business,
financial condition and results of operations.
Dependence on Key Management and Other Personnel
The Company is dependent on the efforts of its senior management and
scientific staff, including Alan R. Burkart, President and Chief Executive
Officer, Carl O. Magnell, Executive Vice President, James M. DeAngelis, Senior
Vice President, Srinivas Kilambi, Ph.D., Vice President-Technology, and Michael
D. Kiehnau, Chief Financial Officer. The proceeds of key man life insurance
policies on the lives of such individuals may not be adequate to compensate the
Company for the loss of any of such individuals. The loss of the services of any
one or more of such persons may have a material adverse effect on the Company.
See "Executive Compensation - Employment Agreements."
The Company's future success will depend in large part upon its ability
to attract and retain skilled scientific, management, operational and marketing
personnel. Prior to this Offering, the Company has not had any employees or
personnel whose responsibilities for the Company were focused primarily on sales
or marketing. The Company faces competition for hiring such personnel from other
companies, government entities and other organizations. There can be no
assurance that the Company will continue to be successful in attracting and
retaining such personnel. See "Use of Proceeds," "Management" and "Executive
Compensation."
Government Regulation
The Company and its customers may be required to comply with a number
of federal, state and local laws and regulations in the areas of safety, health
and environmental controls, including without limitation, the Resource
Conservation and Recovery Act, as amended ("RCRA"), and the Occupational Safety
and Health Act of 1970 ("OSHA"), which may require the Company, its prospective
working partners or its customers to obtain permits or approvals to utilize
CST and related equipment on certain job sites. In addition, if, as and when
the Company begins to market CST internationally, the Company may be required
to comply with laws and regulations and obtain permits or approvals in those
other countries. There is no assurance that such required permits and approvals
will be obtained. Furthermore, particularly in the environmental remediation
market, the Company may be required to conduct performance and operating studies
to assure government agencies that CST and its by-products do not pose
environmental risks. There is no assurance that such studies, if successful,
will not be more costly or time-consuming than anticipated. Further, if new
environmental legislation or regulations are enacted or existing legislation or
regulations are amended, or are interpreted or enforced differently, the
Company, its prospective working partners and/or its customers may be required
to meet stricter standards of operation and/or obtain additional operating
permits or approvals. There can be no assurance that the Company will meet all
of the applicable regulatory requirements. Failure to obtain such permits, or
otherwise to comply with such regulatory requirements, could have a material
adverse effect on the Company's business, financial condition and results of
operations. See "Business - Government Regulation."
Control by Principal Stockholder
Commodore is currently the sole stockholder of the Company and, after
completion of this Offering, will own 75% of the outstanding Common Stock of the
Company (71.3% if the Underwriters' Over-allotment Option is exercised in full).
In addition, a significant asset of Commodore is its 72.3% common stock
ownership of Commodore Applied Technologies, Inc. ("Applied"), which is traded
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<PAGE>
on the AMEX. Accordingly, events or circumstances having an adverse effect on
Commodore or Applied could have an adverse effect on the market prices of the
Securities.
Bentley J. Blum, a Director of the Company, beneficially owns, directly
and through entities controlled by him, approximately 52.6% of the outstanding
common stock of Commodore. Paul E. Hannesson, the Chairman of the Board of the
Company, beneficially owns approximately 9.5% of the outstanding Commodore
common stock. Accordingly, through his beneficial ownership of a controlling
stock interest in Commodore, Mr. Blum will be able to control the voting of
Commodore's shares at all meetings of stockholders of the Company and, because
the Common Stock does not have cumulative voting rights, will be able to
determine the outcome of the election of all of the Company's directors and
determine corporate and stockholder action on other matters. See "Management,"
"Principal Stockholders" and "Certain Relationships and Related Transactions."
Risk of Product Liability
The Company proposes initially to distribute CST equipment and, upon
completion of its proposed Atlanta facility, to manufacture all or a substantial
portion of that equipment. The equipment will be utilized in a variety of
industrial and other settings, and will be used to handle materials through
pressurized and chemical processes. Accordingly, the equipment will be subject
to risks of breakdowns and malfunctions, and there exists the possibility of
claims for personal injury and business losses arising out of such breakdowns
and malfunctions. There can be no assurance that the Company's product liability
insurance will provide coverage against all claims, and claims may be made
against the Company (even if covered by the Company's insurance policy) for
amounts substantially in excess of applicable policy limits. Any such event
could have a material adverse effect on the Company's business, financial
condition and results of operations.
Broad Discretion in Application of Proceeds
Approximately 32.8% of the net proceeds of this Offering has been
allocated for working capital and general corporate purposes. In addition,
approximately 4.8% of the net proceeds of this Offering has been allocated for
proposed collaborative ventures for which the Company has no binding agreements
as of the date of this Prospectus. Accordingly, the Company will have broad
discretion as to the application of a significant portion of the net proceeds of
this Offering. See "Use of Proceeds."
Benefit to Related Parties
In the event that the Over-allotment Option is exercised (in whole or
in part) with respect to shares of Common Stock, such additional shares will be
sold to the Underwriters by Commodore, which will be entitled to retain all net
proceeds from any such sale. Accordingly, the Company's existing stockholder may
directly benefit from the sale of the Securities offered hereby. See "Use of
Proceeds," "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Liquidity and Capital Resources" and "Certain
Relationships and Related Transactions."
Dilution
Purchasers of shares of Common Stock in this Offering will experience
an immediate and substantial dilution of $5.42 per share (based on an assumed
initial public offering price of $7.00 per share in this Offering), or
approximately 77.4%, in the net tangible book value of the shares of Common
Stock purchased by them in this Offering. Additional dilution to future net
tangible book value per share may occur upon exercise of outstanding stock
options and warrants (including the Warrants and the Representative's Warrants)
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<PAGE>
and may occur, in addition, if the Company issues additional equity securities
in the future. Commodore acquired its shares of Common Stock for cash
consideration which was substantially less than the initial public offering
price of the shares of Common Stock offered hereby. As a result, new investors
will bear substantially all of the risks inherent in an investment in the
Company. See "Dilution" and "Certain Relationships and Related Transactions."
No Dividends
The Company has never paid any dividends on its Common Stock, and has
no plans to pay dividends on its Common Stock in the foreseeable future. See
"Dividend Policy."
Potential Adverse Effect on Market Price of Securities from Future Sales of
Common Stock
Future sales of Common Stock by Commodore or other stockholders
(including option holders) under Rule 144 of the Securities Act of 1933, as
amended (the "Securities Act"), or through the exercise of the Warrants or
outstanding registration rights granted to the holders of the Representative's
Warrants, could have an adverse effect on the market prices of the Securities.
The Company and Commodore, as well as all holders of outstanding securities
exercisable for or convertible into Common Stock, have agreed not to, directly
or indirectly, issue, agree or offer to sell, sell, transfer, assign,
distribute, grant an option for purchase or sale of, pledge, hypothecate or
otherwise encumber or dispose of any beneficial interest in such securities for
a period of 13 months following the date of this Prospectus without the prior
written consent of the Representative. Sales of substantial amounts of Common
Stock or the perception that such sales could occur could adversely affect
prevailing market prices for the Common Stock and/or the Warrants. See "Shares
Eligible For Future Sale."
Potential Adverse Effect on Market Price of Securities as a Result of Commodore
Common Stock Price
As of the date of this Prospectus, there are an aggregate of
approximately 57,489,000 shares of common stock of Commodore issued and
outstanding, of which approximately 16,000,000 shares are publicly held.
Commodore's common stock trades in the over-the-counter market and is quoted on
the OTC Bulletin Board of the National Association of Securities Dealers, Inc.
On August 30, 1996, the closing bid price of Commodore common stock was $1.25
per share. The prevailing per share trading price of Commodore common stock may
have a direct impact on the future trading price of the Common Stock, especially
since the approximately $72,000,000 market capitalization of Commodore at August
30, 1996 is significantly less than the approximately $105,000,000 market
capitalization of Commodore's interest in the Company (based on an assumed
initial public offering price of $7.00 per share in this Offering). In addition,
potential negative developments affecting Commodore, which may be unrelated to
the Company's business, may adversely affect the market value of the Securities.
No Assurance of Public Trading Market; Arbitrary Determination of Public
Offering Price; Possible Volatility of Common Stock and Warrant Prices
Prior to this Offering, there has been no public market for the Common
Stock or the Warrants, and there can be no assurance that an active trading
market for any of the Securities will develop or, if developed, be sustained
after the Offering. The initial public offering prices of the Securities offered
hereby and the terms of the Warrants have been arbitrarily determined by
negotiations between the Company and the Representative, and do not necessarily
bear any relationship to the Company's assets, book value, results of operations
or any other generally accepted criteria of value. See "Underwriting."
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<PAGE>
The stock market has from time to time experienced significant price
and volume fluctuations that may be unrelated to the operating performances of
specific companies. Announcements of new technologies and changing policies and
regulations of the federal government and state governments and other external
factors, as well as potential fluctuations in the Company's financial results,
may have a significant impact on the prices of the Securities.
Certain Anti-Takeover Provisions and Potential Adverse Effect on Market Price
of Securities from Issuance of Preferred Stock
The Company's Certificate of Incorporation and By-laws contain certain
provisions that could have the effect of delaying or preventing a change of
control of the Company, which could limit the ability of security holders to
dispose of their Common Stock and/or Warrants in such transactions. The
Certificate of Incorporation authorizes the Board of Directors to issue one or
more series of preferred stock without stockholder approval. Such preferred
stock could have voting and conversion rights that adversely affect the voting
power of the holders of Common Stock, or could result in one or more classes of
outstanding securities that would have dividend, liquidation or other rights
superior to those of the Common Stock. Issuance of such preferred stock may have
an adverse effect on the then prevailing market price of the Common Stock and
Warrants. Additionally, the Company is subject to the anti-takeover provisions
of Section 203 of the Delaware General Corporation Law, which prohibits the
Company from engaging in a "business combination" with an "interested
stockholder" for a period of three years after the date of the transaction in
which the person became an interested stockholder, unless the business
combination is approved in a prescribed manner. Section 203 could have the
effect of delaying or preventing a change of control of the Company. See
"Description of Securities - Preferred Stock" and "- Section 203 of the Delaware
Law."
Speculative Nature of the Warrants; Possible Redemption of Warrants
The Warrants do not confer any rights of Common Stock ownership on
their holders, such as voting rights or the right to receive dividends, but
merely represent the right to acquire shares of Common Stock at a fixed price
for a limited period of time. Specifically, commencing one year after the date
of this Prospectus, holders of the Warrants may exercise their right to acquire
Common Stock and pay an exercise price of $______ per share [140% of the initial
offering price per share of Common Stock], subject to adjustment upon the
occurrence of certain dilutive events, until five years after the date of this
Prospectus, after which date any unexercised Warrants will expire and have no
further value. Moreover, following the completion of this Offering, the market
value of the Warrants is uncertain and there can be no assurance that the market
value of the Warrants will equal or exceed their initial public offering price.
There can be no assurance that the market price of the Common Stock will ever
equal or exceed the exercise price of the Warrants, and consequently, whether it
will ever be profitable for holders of the Warrants to exercise the Warrants.
Commencing 18 months after the date of this Prospectus, the Warrants
are subject to redemption at $.10 per Warrant on 30 days' prior written notice
provided that the average closing sale price of the Common Stock as reported on
the AMEX equals or exceeds $____ per share [300% of the initial public offering
price of the Common Stock] for any 20 trading days within a period of 30
consecutive trading days ending on the fifth trading day prior to the date of
the notice of redemption. If the Warrants are redeemed, holders of the Warrants
will lose their right to exercise the Warrants after the expiration of the
30-day notice period. Upon receipt of a notice of redemption, holders would be
required to: (i) exercise the Warrants and pay the exercise price at a time when
it may be disadvantageous for them to do so, (ii) sell the Warrants at the
then-prevailing market price, if any, when they might otherwise wish to hold the
Warrants, or (iii) accept the redemption price which is likely to be
substantially less than the market value of the Warrants at the time of
redemption. In the event that holders of the Warrants elect not to exercise
their Warrants upon notice of redemption, the
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<PAGE>
unexercised Warrants will be redeemed prior to exercise, and the holders thereof
will lose the benefit of the appreciated market price of the Warrants, if any,
and/or the difference between the market price of the underlying Common Stock as
of such date and the exercise price of such Warrants, as well as any possible
future price appreciation in the Common Stock. See "Description of Securities -
Warrants."
Current Prospectus and State Blue Sky Registration Required to Exercise Warrants
The Warrants are not exercisable unless, at the time of exercise, the
Company has a current prospectus covering the shares of Common Stock issuable
upon exercise of the Warrants and such shares have been registered, qualified or
deemed to be exempt under the securities or "blue sky" laws of the state of
residence of the exercising holder of the Warrants. There can be no assurance
that the Company will be able to have all of the shares of Common Stock issuable
upon exercise of the Warrants registered or qualified on or before the exercise
date and to maintain a current prospectus relating thereto until the expiration
of the Warrants. The value of the Warrants may be greatly reduced if a current
prospectus covering the Common Stock issuable upon the exercise of the Warrants
is not kept effective or if such Common Stock is not qualified or exempt from
qualification in the states in which the holders of the Warrants reside. Until
completion of this Offering, the Common Stock and the Warrants may only be
purchased together on the basis of one share of Common Stock and one Warrant,
but the Warrants will be separately tradeable immediately after this Offering.
In the event investors purchase the Warrants in the secondary market or move to
a jurisdiction in which the shares underlying the Warrants are not registered or
qualified during the period that the Warrants are exercisable, the Company will
be unable to issue shares to those persons desiring to exercise their Warrants
unless and until the shares are qualified for sale in jurisdictions in which
such purchasers reside, or an exemption from such qualification exists in such
jurisdictions, and holders of the Warrants would have no choice but to attempt
to sell the Warrants in a jurisdiction where such sale is permissible or allow
them to expire unexercised. See "Description of Securities - Warrants."
Limited Underwriting History
The Representative has participated in only ten public offerings as an
underwriter in the last five years. In evaluating an investment in the Company,
prospective investors in the Securities offered hereby should consider the
Representative's limited experience. See "Underwriting."
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<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Securities offered
hereby (assuming an initial public offering price of $7.00 per share and $.10
per Warrant), after deduction of underwriting discounts and other estimated
offering expenses, are estimated to be approximately $31,220,000 (approximately
$31,286,750 if the Over-allotment Option is exercised in full). The Company
intends to utilize such net proceeds as follows:
<TABLE>
<CAPTION>
Approximate
Approximate Percentage of
Dollar Amount Net Proceeds
<S> <C> <C>
Purchase of initial CST inventory (1)................... $6,000,000 19.2%
Ongoing development costs (2)............................. 5,500,000 17.6
Acquisition of manufacturing equipment (3)................ 5,000,000 16.0
Establishment of Atlanta facility (4)..................... 3,000,000 9.6
Funding of proposed collaborative
arrangements (5).......................................... 1,500,000 4.8
Working capital and general corporate purposes (6)........ 10,220,000 32.8
----------- -----
Total............................................ $31,220,000 100.0%
=========== =====
</TABLE>
- -----------
(1) Consists of costs anticipated to be incurred in connection with purchasing
up to 100 initial CST modules to be available for installation at
customer sites.
(2) Includes the hiring of additional personnel (including marketing personnel)
and the costs associated with conducting ongoing tests, demonstrations and
enhancements of CST.
(3) Consists of costs anticipated to be incurred in connection with purchasing
the equipment necessary to manufacture the modules and produce the
proprietary chemicals used in CST.
(4) Consists of costs anticipated to be incurred in connection with locating,
leasing and equipping a new facility of approximately 35,000 square feet in
or around Atlanta, Georgia, which would comprise the Company's executive
and administrative offices, research and testing laboratories, and CST
manufacturing plant. The Company is currently in the process of selecting a
suitable site for such facility. See "Business - Proposed Manufacturing
Operations" and "- Properties."
(5) Expenditures in respect of collaborative arrangements will include salaries
and benefits of personnel, equipment design and procurement costs, costs of
leasing or otherwise obtaining additional operating facilities, analytical
and other testing costs, professional fees, insurance and other
administrative expenses. In each arrangement, personnel expenses may be
expected to account for at least 50% of the costs of each collaborative
arrangement, and equipment costs are likely to constitute the next largest
component of expenditures. As of the date of this Prospectus, the Company
has not determined the amount of net proceeds of this Offering to be
applied to any of the proposed collaborative arrangements because the
Company is currently in negotiations with such companies involving, among
other issues, the level of its proposed funding commitment. See "Risk
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Factors - No Assurance of Collaborative Agreements or Project Awards" and
"Business - Collaborative Working Arrangements."
(6) Working capital and general corporate purposes include amounts required to
pay officers' salaries, professional fees, ongoing public reporting costs,
office-related expenses and other corporate expenses, including interest
and overhead. Any additional net proceeds received from the exercise of the
Over-allotment Option with respect to the Warrants, if any, will be used
for working capital and general corporate purposes. Any additional net
proceeds received from the exercise of the Over-allotment Option with
respect to shares of Common Stock sold by Commodore, if any, will be
retained by Commodore.
The Company believes that the net proceeds of this Offering will be
sufficient to meet its cash, operational and liquidity requirements for a
minimum of 18 months after the date of this Prospectus. While the initial
allocation of the net proceeds of this Offering represents the Company's best
estimates of their use, the amounts actually expended for these purposes may
vary significantly from the specific allocation of the net proceeds set forth
above, depending on numerous factors, including changes in the general economic
and/or regulatory climate, and the progress and market acceptance of the
Company's technology. See "Risk Factors - Broad Discretion in Application of
Proceeds." However, there can be no assurance that the net proceeds of the
Offering will satisfy the Company's requirements for any particular period of
time. The Company anticipates that, after 18 months from the receipt of the net
proceeds of this Offering, additional funding may be needed. No assurance can be
given that such additional financing will be available on terms acceptable to
the Company, if at all. See "Risk Factors - Potential Need for Additional
Financing." Pending specific allocation of the net proceeds of this Offering,
the net proceeds will be invested in short-term, investment grade,
interest-bearing obligations.
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CAPITALIZATION
The following table sets forth the capitalization of the Company (a) as
of June 30, 1996, (b) pro forma giving effect to the Commodore Contribution, and
(c) pro forma, as adjusted giving effect to the Commodore Contribution and the
sale by the Company of the Securities offered hereby (at an assumed initial
public offering price of $7.00 per share and $.10 per Warrant) and the initial
application of the estimated net proceeds therefrom. See "Use of Proceeds,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources" and "Description of Securities."
This table should be read in conjunction with the Company's Financial Statements
and the notes thereto which are included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
June 30, 1996
------------------------------------------------------
Pro Forma,
Actual Pro Forma as Adjusted
-------------- ----------------- ---------------
<S> <C> <C> <C>
Short-term debt to principal stockholder................. $52,600 $ 0 $ 0
======== ======== ===========
Stockholders' equity:
Preferred Stock, $.001 per value; authorized
5,000,000 shares; no shares issued and outstanding;
no shares issued and outstanding, as adjusted....... -- -- --
Common Stock, $.001 par value; authorized
50,000,000 shares; 15,000,000 shares issued
and outstanding; 20,000,000 shares issued and
outstanding, as adjusted............................ $ 15,000 $ 15,000 $ 20,000
Subscription receivable............................. (14,900) -- --
Additional paid-in capital.......................... 0 400,000 31,615,000
Accumulated deficit................................. (60,936) (60,936) (60,936)
-------- -------- -----------
Total stockholders' equity (deficit)..................... $(60,836) $354,064 $31,574,064
-------- -------- -----------
Total capitalization............................ $(60,836) $354,064 $31,574,064
======== ======== ===========
</TABLE>
-19-
<PAGE>
DIVIDEND POLICY
The Company has never declared or paid cash dividends, and does not
intend to pay any dividends in the foreseeable future on its shares of Common
Stock. Earnings of the Company, if any, are expected to be retained for use in
expanding the Company's business. The payment of dividends is within the
discretion of the Board of Directors of the Company and will depend upon the
Company's earnings, if any, capital requirements, financial condition and such
other factors as are considered to be relevant by the Board of Directors from
time to time.
DILUTION
At June 30, 1996, the Company's negative net tangible book value was
$(71,042), or less than $(.01) per share of Common Stock. The net tangible book
value of the Company is the tangible assets less total liabilities. After giving
effect to the contribution by Commodore to the equity of the Company of a total
of $400,000 (representing cash advances made by Commodore to the Company) prior
to the completion of this Offering, the sale by the Company of the Securities
offered hereby (assuming an initial public offering price of $7.00 per share and
$.10 per Warrant) and the initial application of the estimated net proceeds
therefrom, the pro forma net tangible book value of the Company as of June 30,
1996 would have been approximately $31,548,958, or $1.58 per share. This
represents an increase in net tangible book value per share of $1.58 to the
Company's existing stockholders and an immediate dilution of $5.42 per share to
new stockholders purchasing Common Stock in this Offering. The following table
illustrates this dilution on a per share basis:
<TABLE>
<CAPTION>
<S> <C> <C>
Assumed initial public offering price per share............................................. $7.00
Negative net tangible book value per share before the
Offering..................................................... $0.00
Increase per share attributable to payments by new
stockholders................................................. $1.58
-----
Pro forma net tangible book value per share after the Offering.............................. $1.58
-----
Dilution per share to new stockholders...................................................... $5.42
=====
</TABLE>
In the event the Over-allotment Option is exercised in full, the net
tangible book value at June 30, 1996 would have been approximately $31,615,708
and the dilution of net tangible book value per share to new stockholders would
have remained approximately $5.42.
The following table sets forth on a pro forma basis the number of
shares of Common Stock purchased from the Company by its existing stockholder,
the number of shares of Common Stock to be purchased by investors in this
Offering at an assumed initial public offering price of $7.00 per share, the
total consideration paid and to be paid to the Company, and the average price
paid per share.
<TABLE>
<CAPTION>
Average Price
Shares Purchased Total Consideration per Share
------------------------------ ------------------------------- ----------------
Number Percent Amount Percent
------- -------- ------ -------
<S> <C> <C> <C> <C> <C>
New investors................. 5,000,000 25.0% $35,000,000(1) 98.9% $7.00
Existing stockholder.......... 15,000,000 75.0% 415,000(2) 1.1% $ .03
---------- ----- ----------- -----
Total................ 20,000,000 100.0% $35,415,000 100.0%
========== ===== =========== =====
</TABLE>
- -----
(1) Attributes no value to the Warrants.
(2) See "Certain Relationships and Related Transactions - Organization and
Capitalization of the Company" and Note 1 of Notes to Financial
Statements. For these purposes, no value is attributed to the shares of
common stock of Commodore issued by Commodore to enable the Company to
acquire certain intellectual property rights relating to CST from
Srinivas Kilambi, Ph.D., the Company's Vice President - Technology. See
"Business -Intellectual Property."
-20-
<PAGE>
SELECTED FINANCIAL DATA
The following selected financial data have been derived from the
audited financial statements of the Company. The consolidated statement of
operations data set forth below with respect to the period from November 15,
1995 (date of inception) to June 30, 1996 and the balance sheet data at June 30,
1996 are derived from, and are qualified by reference to, the audited Financial
Statements included elsewhere in this Prospectus and should be read in
conjunction with those financial statements and notes thereto.
<TABLE>
<CAPTION>
November 15, 1995
(date of inception)
Statement of Operations Data:(1) to June 30, 1996
---------------------
<S> <C>
Revenue................................................. $ 0
Costs and expenses:
Research and development.............................. 50,080
General and administrative............................ 9,720
Amortization.......................................... 101
-------
Loss before interest and taxes.......................... (59,901)
Interest expense........................................ 1,035
-------
Net loss................................................ (60,936)
=======
Net loss per share(2)................................... --(3)
</TABLE>
<TABLE>
<CAPTION>
June 30, 1996
-------------------------------------------------
Balance Sheet Data: Pro Pro Forma,
Actual Forma(4) as Adjusted(5)
-------- -------- ---------------
<S> <C> <C> <C>
Working capital (deficit).............................. $(81,630) $333,270 $31,553,370
Total assets........................................... 23,327 385,627 31,605,627
Total current liabilities.............................. 84,163 31,563 31,563
Deficit accumulated during development stage........... (60,936) (60,936) (60,936)
Stockholders' equity (deficit)......................... (60,836) 354,064 31,574,064
</TABLE>
- --------
(1) The Company is in the development stage, and has not had any significant
financial or operating transactions. See Note 1 of Notes to Financial
Statements.
(2) Net loss per share is calculated on the basis of 15,000,000 shares of
Common Stock being outstanding for the period presented. See Note 1 of
Notes to Financial Statements.
(3) Less than $.01 per share of Common Stock.
(4) Gives effect on a pro forma basis to the Commodore Contribution. See
"Capitalization."
(5) Gives effect on a pro forma, as adjusted basis to (i) the Commodore
Contribution and (ii) the sale by the Company of the Securities offered
hereby at an assumed initial public offering price of $7.00 per share and
$.10 per Warrant and the initial application of the estimated net proceeds
therefrom. See "Use of Proceeds" and "Certain Relationships and Related
Transactions."
-21-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Prospectus contains forward-looking statements which involve risks and
uncertainties. The Company's actual results may differ significantly from the
results discussed in the forward-looking statements. Factors that might cause
such a difference include, but are not limited to, those discussed in "Risk
Factors" and in "Management's Discussion and Analysis of Financial Condition and
Results of Operations-Liquidity and Capital Resources" below.
General
The Company was organized in November 1995 and has had no commercial
operations to date. Since its inception, the Company has been engaged
principally in organizational activities, including developing a strategic
operating plan, entering into contracts, hiring personnel, developing test
modules and installing and operating modules on a limited basis for
demonstration or test purposes. Accordingly, the Company has no relevant
operating history upon which an evaluation of its performance and prospects can
be made. The Company is subject to all of the business risks associated with a
new enterprise, including, but not limited to, risks of unforeseen capital
requirements, failure of market acceptance, failure to establish business
relationships, and competitive disadvantages as against larger and more
established companies. The report of the independent auditors with respect to
the Company's financial statements included in this Prospectus includes a "going
concern" qualification, indicating that the Company's significant losses and
deficits in working capital and stockholders' equity raise substantial doubt
about the Company's ability to continue as a going concern.
The Company has generated no revenues to date, and will not generate
any meaningful revenues until after the Company successfully completes the
installation of modules in a significant number of industrial companies, of
which no assurance can be given. During the period from November 15, 1995 (date
of inception) to June 30, 1996, the Company incurred a net loss of $(60,936).
From June 30, 1996 to August 31, 1996, the Company incurred additional operating
losses of $(143,163), and anticipates that it may continue to incur significant
operating losses for the foreseeable future. There can be no assurance as to
whether or when the Company will generate meaningful revenues or achieve
profitable operations. See "Business" and Financial Statements.
Dependence on Suppliers
The Company has not to date conducted any manufacturing operations, but
has relied on unaffiliated suppliers to provide chemicals, fibers, membrane
casings and other materials and components utilized in CST. The Company has
not previously experienced any delays or difficulties in obtaining any of these
items, although there can be no assurance that such difficulties may not be
encountered in the future. The Company has allocated a portion of the net
proceeds of this Offering to the establishment of a facility in Atlanta, part of
which will be dedicated to operations related to the manufacturing of chemicals,
fibers, membrance casings and other materials and components utilized in CST.
See "Risk Factors - Dependence on Strategic Components" and "Use of Proceeds."
Liquidity and Capital Resources
The Company has to date financed its development efforts through direct
equity investments and loans from Commodore. From November 15, 1995 (date of
inception) to June 30, 1996, the Company has purchased or constructed equipment
totalling $7,498, has incurred patent filing and maintenance costs of $10,307,
-22-
<PAGE>
and has paid approximately $33,000 in compensation to one of its officers. The
Company had indebtedness of $52,600 to Commodore outstanding as of June 30,
1996. As of August 31, 1996, the Company's aggregate indebtedness to Commodore
was approximately $200,000. Commodore has agreed to provide up to an additional
$200,000 to the Company prior to the completion of this Offering, and to
contribute the entire amount of intercompany debt (totalling up to $400,000 by
the time of the completion of this Offering) to the Company's equity. In the
event that the Over-allotment Option is exercised (in whole or in part) with
respect to shares of Common Stock, such additional shares will be sold to the
Underwriters by Commodore, which will be entitled to retain the entire net
proceeds from any such sale. See "Underwriting."
The Company has sustained losses for the period from November 15, 1995
(date of inception) to June 30, 1996 of $(60,936). The Company had no revenues
during this period, and substantially all of such losses are attributable to the
expenses detailed above. At June 30, 1996, the Company had a working capital
deficit of $(81,630) and a stockholders' deficit of $(60,836). The Company has
received significant advances in working capital from Commodore which has
allowed it to continue its operations. There can be no assurance that it will
continue to receive such financial assistance.
The Company believes that the net proceeds of the Offering will be
sufficient to meet its cash, operational and liquidity requirements for a
minimum of 18 months after the date of this Prospectus.
The Company has allocated $1,500,000 of the net proceeds of this
Offering for the funding of proposed collaborative arrangements. These costs
include, but are not limited to, salaries and benefits of personnel, equipment
design and procurement costs, cost of leasing or otherwise obtaining additional
operating facilities, analytical and other testing costs, professional fees,
insurance and other administrative expenses. As of the date of this Prospectus,
the Company has not determined the amount of net proceeds of this Offering to be
applied to any of the proposed collaborative arrangements because the Company is
currently in negotiations with such companies involving, among other issues, the
level of its proposed funding commitment. See "Use of Proceeds" and "Business -
Collaborative Working Arrangements."
After this Offering, the Company intends to lease a new facility of
approximately 35,000 square feet in or around Atlanta, Georgia, which would
comprise the Company's executive and administrative offices, research and
testing laboratories and CST manufacturing plant. The Company is currently in
the process of selecting a suitable site for such facility. It is anticipated
that $3,000,000 of the net proceeds of this Offering will be required with
respect to leasing such facility and related leasehold improvements.
Additionally, it is anticipated that $5,000,000 of the net proceeds of this
Offering will be required to purchase the equipment necessary to manufacture the
modules and produce the proprietary chemicals used in CST. Prior to the
Company's facility becoming operational for manufacturing, the Company
anticipates spending approximately $6,000,000 of the net proceeds of this
Offering to purchase CST inventory (or assembled components therefor) for use
in connection with initial demonstrations and/or installations of CST at
customer sites. The Company is continuing to further the development of CST
through additional testing, demonstrations and enhancements which will require
the hiring of additional personnel and additional research and development
costs. See "Use of Proceeds" and "Business - Proposed Manufacturing Operations"
and "Properties."
Pursuant to an assignment of technology agreement between the Company
and Srinivas Kilambi, Ph.D., the Company's Vice President-Technology, the
Company agreed to pay Dr. Kilambi a royalty through December 3, 2002 equal to 2%
of the Company's revenues actually received and attributed to the commercial
application of the technology acquired from Dr. Kilambi. Payment of such royalty
to Dr. Kilambi is based on Company revenues and is not related to or contingent
upon the Company attaining profitability or positive cash flow. As a result,
such payment will adversely affect operating results and divert cash resources
from use in the Company's business, and possibly at times when the Company's
liquidity and access to funding may be limited. See "Business - Intellectual
-23-
<PAGE>
Property" and "Certain Relationships and Related Transactions - Organization and
Capitalization of the Company."
Recent Pronouncements of the Financial Accounting Standards Board
The Financial Accounting Standards Board has issued Statements of
Financial Accounting Standard Statement No. 121, "Accounting for Long Lived
Assets" and No. 123 "Accounting and Disclosure of Stock-Based Compensation."
Statement No. 121 is effective for years beginning after December 15, 1995. The
effect of adoption of Statement No. 121 will not have a material effect on the
Company's financial statements. Statement No 123 is effective for years
beginning after December 15, 1995. The effect of adoption of Statement No. 123
is not expected to have a material effect on the Company's financial statements
as the Company has adopted only the disclosure requirements of Statement No.
123.
Net Operating Loss Carryforwards
The Company has net operating loss carryforwards of approximately
$21,000, which expire in the year 2011. The amount of net operating loss
carryforward that can be used in any one year will be limited by the applicable
tax laws which are in effect at the time such carryforward can be utilized. A
valuation allowance of $21,000 has been established to offset any benefit from
the net operating loss carryforward as it cannot be determined when or if the
Company will be able to utilize the net operating losses.
-24-
<PAGE>
BUSINESS
General
The Company is a process technology company which has developed and
intends to commercialize its separation technology and recovery system, known as
CST. Based on the results of more than 100 laboratory tests and one significant
field test to date, the Company believes that CST is capable of effectively
separating and extracting various solubilized materials, including metals,
organic chemicals, biochemicals, radionuclides and other targeted substances,
from liquid and gaseous process streams.
Industrial companies create liquid and gaseous mixed process streams in
the course of their manufacturing and product development activities which
frequently require costly treatment and disposal to comply with regulatory
requirements. These process streams often contain valuable materials which can
be reused if they can be extracted in a sufficient concentration and degree of
purity. The Company believes that application of CST in these industries can
substantially reduce disposal costs for certain of these manufacturing process
streams, and can enable the recovery and reuse of metals and other valuable
materials. The Company also believes that CST can be utilized for environmental
remediation and restoration in the clean-up of harbors and groundwater, and in
the decontamination of nuclear sites.
CST is an advanced form of membrane separation technology, in which a
contaminated liquid or gaseous feedstream is injected into a Company-designed
fibrous membrane unit or module. This module is continuously fed with a recycled
stream of proprietary chemical solution whose composition will vary depending on
the types and concentrations of compounds in the feedstream. As the feedstream
enters the membrane unit, the metal or other substance to be extracted reacts
with the proprietary chemical solution in the membrane, and the metallic or
other ions are extracted through the membrane into a strip solution which is
concentrated and gathered in a separate storage container. The balance of the
feedstream is either recycled or simply discharged as normal effluent. In some
instances, additional treatment may be required prior to disposal, or disposal
may need to be made in a regulated manner. The Company believes that CST can
be utilized for the separation and recovery of chrome, chromium, cadmium,
silver, mercury, platinum, lead, zinc, nickel, trichlorethylene, polychlorinated
biphenyls, methylene chloride, amino acids, antibiotics, radionuclides, and
other organic and inorganic substances.
CST possesses operational characteristics distinguishable from other
existing forms of membrane filtration technology in that it:
o requires low initial capital costs, as well as low operating
costs;
o is environmentally safe, in most instances producing no
sludges or other harmful by-products which would require
additional post-treatment prior to ultimate disposal;
o can selectively extract specific target substances, while
extracting substantially fewer unwanted substances;
o can typically operate in less than 40 square feet of space for
the entire system;
o has the capability of treating a wide variety of elements and
compounds in a wide variety of industrial settings, and doing
so at great speed and with a high degree of effectiveness
regardless of particle size, volume requirements and other
variables;
-25-
<PAGE>
o can extract metals, organic chemicals and other elements and
compounds in a sufficient concentration and degree of purity
to permit their ready reuse; and
o has the capability, in a single process application, of
selectively extracting multiple elements or compounds from a
mixed process stream.
The Company has conducted more than 100 tests of CST in the laboratory
and one significant test in the field. In laboratory testing, CST has been shown
to substantially reduce contamination levels in a variety of process streams,
including process streams containing nickel, chromium, phenols, phenylalanine,
cesium and nitrates, in most instances yielding a reacted process stream capable
of disposal with little or no further treatment required, and reusable materials
of sufficient quantity and purity as to economically permit their reuse. In
August 1996, the Company completed an on-site demonstration of CST for the
decontamination of chromium-contaminated groundwater in the Port of Baltimore,
Maryland. During this demonstration, a single CST unit, in a single pass-through
of feedstream, reduced the contamination level from more than 600 parts per
million ("ppm") to less than one ppm. The Company believes that CST is the only
technology capable of on-site chromium removal that enables effluent discharge
without post-treatment.
The Company will market CST directly to a variety of domestic and
international industries, particularly those engaged in metallurgical processing
and metal plating, which generate a substantial volume of mixed metal process
streams, and to gas separation, organic chemicals and biochemical companies,
which produce or utilize substantial volumes of liquid or gaseous mixed process
streams. Federal, state and local government entities are also a potential
market for the Company, with penetration into this area having already begun
with test projects for the Port of Baltimore and on Cape Cod, Massachusetts.
The Company may also develop collaborative joint working and marketing
arrangements with companies that have a significant presence in well-established
industries or markets. Such arrangements, for example, may be expected to focus
on obtaining environmental remediation projects, including clean-up of harbors,
groundwater and nuclear sites. Although the Company has entered into memorandums
of understanding for potential working arrangements with Teledyne Brown
Engineering ("Teledyne Brown"), a division of Teledyne Industries, Inc., and
Sverdrup Environmental, Inc. ("Sverdrup"), and is bidding on certain projects,
there can be no assurance that any of these activities will result in definitive
collaborative agreements or project awards. Even if contracts are awarded to the
Company, CST has never been utilized on a large-scale basis, and there is no
assurance that this technology will perform successfully on a large-scale
commercial basis, or that it will be profitable to the Company. There can also
be no assurance that this technology will not be superseded by other competing
technologies.
-26-
<PAGE>
Market Overview
Based on market data compiled by the Company, the Company estimates
that, as of August 1, 1996, there were approximately 7,500 companies operating
metal plating and metal finishing facilities in the United States, and an
additional 1,500 such facilities in Canada. Based on estimated sales by these
facilities, the Company believes that on average each of these facilities could
utilize four to ten CST membrane units. The Company estimates that, as of such
date, there were approximately 50 companies in the United States involved in
industrial gas separation, and based on these companies' estimated sales, the
Company believes that on average each of these companies could utilize two to
four membrance units operating at significant volumes. Further, as of August 1,
1996, based on market data compiled by the Company, the potential market from
organic chemical companies is in excess of 10,000 companies in the United
States. Based on these companies' estimated sales, the Company believes that on
average each of these companies could utilize two to four membrane units
operating at significant volumes. Additionally, as of such date, there were more
than 5,000 biochemical, bulk drug manufacturing and pharmaceutical companies
operating in the United States and Canada, and based on these companies'
estimated sales, the Company believes that on average the typical such company
could utilize two to four membrane units operating at substantial volumes. The
Company believes that the potential international market for each of the above
applications could be twice the size of the North American market. Federal,
state and local government entities are also a potential market for the Company,
particularly in the area of environmental remediation and clean-up.
As with any new technology or process, or a significant advancement of
an existing technology or process, there may be initial resistance to the use of
CST on a large scale, and certain prospective projects for the Company may
have already been committed to other forms of technology. In each case, the
Company expects to introduce its process on a test basis through the
introduction of sample membrane units to demonstrate the efficacy of the
technology, with the aim of full installation and/or project awards based on the
performance of the sample units.
Alternative Separation Technologies
Membrane separation and extraction technologies have been utilized
commercially for several decades. Prior to the development of CST, membrane
separation and extraction capabilities were broken into four subranges,
consisting of microfiltration, ultrafiltration, nanofiltration and reverse
osmosis (hyperfiltration), each distinguished and defined by the relative
particle size which the particular process was capable of separating from the
feedstream, and by whether the compounds were suspended or dissolved in the
feedstream. Existing technologies currently in use for the treatment of
solubilized feedstreams (in which the containment is dissolved, rather than
suspended, in the feedstream) include: (i) ion exchange (wherein electrically
charged ions that are electrochemically held by ion exchange resin beads are
exchanged for ions of similar charge in a solution in which the beads are
immersed), (ii) reverse osmosis (wherein solutions are desalted or concentrated
by driving them through membranes using relatively high hydraulic pressure,
resulting in contaminants being excluded or rejected by the membranes), (iii)
precipitation (wherein chemicals are used to precipitate out the contaminants
for eventual off-site disposal), (iv) ultrafiltration (wherein moderate
hydraulic pressure is used to transfer water and low molecular weight species
through a membrane while blocking relatively large-sized contaminants such as
suspended solids, colloids and large organic molecules) and (v) chromatography
(wherein mixtures are separated into their constituents by preferential
adsorption on solids).
-27-
<PAGE>
CST
Although CST uses the same basic principles as other membrane
separation technologies, the Company believes that CST represents a
significant advance in membrane separation technology in the treatment of
solubilized feedstreams. In contrast to the five alternative separation
technologies described above, CST acts by separating and extracting the
targeted material(s) from the feedstream, rather than extracting the feedstream
from the targeted material(s). As a result, for the first time, a single process
is capable of treating a wide variety of elements and compounds in a wide
variety of industrial settings, and doing so at great speed and with a high
degree of effectiveness regardless of particle size, volume requirements and
other variables. The Company also believes that CST is the first membrane
separation technology which is capable, in a single process application, of
selectively extracting multiple elements or compounds from a mixed process
stream. The CST membrane modules can also be configured in various sizes and
numbers and for varying capacities, and operate on the manufacturing site at
ambient temperatures and pressures.
CST involves injecting a contaminated liquid or gaseous feedstream
into the Company-designed fibrous membrane unit or module. This module is
continuously fed with a recycled stream of proprietary chemical solution whose
composition will vary depending on the types of compounds in the feedstream. As
the feedstream enters the membrane unit, the metal or other substance to be
extracted reacts with the proprietary chemical solution in the fibrous membrane,
and the metallic or other ions are extracted through the membrane into a strip
solution which is concentrated and gathered in a separate storage container. The
balance of the feedstream is either recycled or simply discharged as normal
effluent. In some instances, additional treatment may be required prior to
disposal, or disposal may need to be made in a regulated manner. The Company
believes that CST can be utilized for the separation and recovery of chrome,
chromium, cadmium, silver, mercury, platinum, lead, zinc, nickel,
trichlorethylene, polychlorinated biphenyls, methylene chloride, amino acids,
antibiotics, radionuclides, and other organic and inorganic substances.
The typical CST module is cylindrical in shape and can be situated on
a surface or in an area the size of a desktop. The module casing is constructed
of either steel or plastic (depending on the required durability for the
particular process application), and contains the microporous fiber membrane
through which the target element or compound is separated from the contaminated
feedstream. At one end of the module, there is attached a set of pumps and
tubing that feeds the contaminated feedstock from its point of origin (such as a
metal plating tank or bath) into the module. Additional pumps and tubing are
attached to feed and recycle the chemical solution which is the active element
in the membrane, and discharge tubing or piping is attached at the other end of
the module, to carry away the separated concentrated metal solution or other
compound, and the wastewater and other non-reusable by-product. The Company
plans to produce a range of modules that will precisely conform to the
customer's requirements for volume and capacity, and thus accommodate the
available space in the customer's facility. The Company also formulates the
active chemical compound for the process in each customer application, and
performs the initial installation of the equipment at the customer site. The
customer will operate the equipment and, by computer hook-up, the Company will
monitor the equipment and process while in operation.
-28-
<PAGE>
The following diagram illustrates how the CST module works:
[Picture of Module] ________________Feed Solution
(Source Material)
1 |
| 3
|
2 |
|
Strip Solution
(Extracted Material)
|
|
|
|
|
CST Module___________________________|
|
|
|
| 4
|
|
Effluent
(Clean Material)
1. Feedstream containing varied materials (e.g., metals, organics,
biochemicals and gases) to be separated and extracted.
2. Direction of feedstream flow through module.
3. Continuous strip solution into which selected materials are extracted and
separated.
4. Original feedstream without separated materials.
-29-
<PAGE>
Laboratory and Field Test Results
In more than 100 laboratory tests on a small-scale basis and one field
test to date, CST has demonstrated the ability to successfully separate a
variety of metals and other substances from liquid and gaseous process streams.
In each instance, the process stream was decontaminated to levels approaching
federal guidelines for the disposal of the reacted process stream as normal
wastewater effluent, and the recovered materials were of sufficient quantity and
purity as to economically permit the reuse thereof in most commercial
applications.
Test results included the following:
<TABLE>
<CAPTION>
Material Before Treatment After Treatment
- -------- ---------------- ---------------
<S> <C> <C>
Metals:
Zinc 300 ppm/1,200 ppm Less than 20 ppm (after 30
minutes)
Nickel 1200 ppm Less than 20 ppm (after 30
minutes)
Chromium 637 ppm 0.074 (field test)
Aluminum 195 ppm 100 ppm (after 15 minutes)
Organics:
Phenol 10,000 ppm Less than 10 ppm
Nitrophenol 10,000 ppm Less than 10 ppm
Biochemicals:
Phenylalanine 5,000 ppm Less than 10 ppm
Radionuclides:
Cesium 10 ppm Less than 5 parts per billion (ppb)
Rhenium 5 ppm Less than 5 ppb
Anions:
Nitrates 62,000 ppm Less than 100 ppm
</TABLE>
All of these tests were performed on limited quantities of process
streams, and there can be no assurance that the same or similar results would or
could be obtained on a large-scale commercial basis or on any specific project.
See "Risk Factors - No Operating History; Accumulated and Working Capital
Deficits; Initial Commercialization Stage; Going Concern Disclosure in
Independent Auditors' Report."
-30-
<PAGE>
Competitive and Operational Aspects of CST
The following chart highlights certain of the salient differences which
the Company believes distinguishes CST from other membrane separation
technologies. As shown below, the Company believes that CST has substantially
broader applications than most of the other technologies, and is generally
capable of superior results in less time.
<TABLE>
<CAPTION>
REVERSE
OSMOSIS/
ULTRA-
CST ION EXCHANGE PRECIPITATION CHROMATOGRAPHY FILTRATION
----- ------------ ------------- -------------- ----------
Process Description Reaction-diffusion Ionic exchange Precipitation as Adsorption High pressure
membrane transport metal hydroxides transport of
water across a
membrane
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Process Ambient-80(0)C Ambient-80(0)C Ambient Ambient Ambient-80(0)C
Temperatures
- ----------------------------------------------------------------------------------------------------------------------------------
Process Pressure 15-20 pounds per 20-30 psi 15-25 psi 25 psi 100-1,000 psi
square inch (psi)
- ----------------------------------------------------------------------------------------------------------------------------------
Target Compounds Metals, Organics, Metals, Anions Heavy Metals Biochemicals Water
Volatile organic
compounds, Gases,
Biochemicals,
Radionuclides, Anions
- ----------------------------------------------------------------------------------------------------------------------------------
Target Metals Electroplating, Metal Electroplating, Electrochemicals, Biotechnology Electroplating,
Finishing, Petroleum, Metal Finishing Metal Finishing Metal Finishing,
Petrochemical, Paper, Petroleum,
Organics, Food Petrochemical,
Process, Biotechnology, Paper, Organics,
Textile Food Process,
Biotechnology,
Textile
- ----------------------------------------------------------------------------------------------------------------------------------
Reaction Time Instantaneous 1-2 seconds 2-10 seconds Several minutes Not applicable
- ----------------------------------------------------------------------------------------------------------------------------------
Process Selectivity Greater than 1,000:1 Less than 70:1 0:1 2-5:1 0:1
(Desired:
Undesired)
- ----------------------------------------------------------------------------------------------------------------------------------
Product Recovery Greater than 99.9% Greater than 99.9% None Greater than 90% Greater than 90%
- ----------------------------------------------------------------------------------------------------------------------------------
Loading Limitations None Operates only at None Operates only at Cannot produce
low feed velocities very low flow rates large throughput
without clogging
- ----------------------------------------------------------------------------------------------------------------------------------
Process Speed Very high Low to medium High Very low Medium
- ----------------------------------------------------------------------------------------------------------------------------------
Post-Treatment No Yes Yes Yes Yes
Required
- ----------------------------------------------------------------------------------------------------------------------------------
Comments; Readily integrated into Readily integrated Non-selective; most Limited to low feed Energy intensive;
Limitations other processes; may into other processes labor intensive; no concentration; non- non-selective;
need prefiltration to product recovery selective; slow needs
remove suspended or process prefiltration;
heavier particles relatively
expensive
</TABLE>
-31-
<PAGE>
Commercialization and Marketing Strategy
During the initial commercialization phase, the Company expects to
lease the CST modules to customers, with the lease payments being due and
payable after installation and successful start-up of the equipment. When
replacement modules are required, the Company expects to supply these modules at
a reasonable mark-up over their cost. As new patents are filed and issued, the
Company may, for certain applications, determine to make a direct sale of the
equipment with additional long-term royalty payment provisions. The Company also
expects to obtain revenues through servicing the CST equipment, including
periodic replacement of the membrane component. In addition to leasing and
selling its equipment, the Company intends to charge its customers based on a
percentage of the customer's actual cost savings derived from reduced disposal
costs and recovered reusable materials. In applications in which reusable
materials are not recovered, the Company's ongoing charges may be based on the
volume of materials processed. Although the Company plans to focus its initial
marketing efforts on domestic businesses, the Company will also be prepared to
pursue international opportunities, which may arise from successful
presentations to multinational corporations or from overseas referrals by
domestic entities.
In specific industries and for specific applications, the Company
intends to emphasize and exploit the following attributes of CST.
Metals Separation and Recovery
The Company's initial marketing efforts will be in the industrial
sector, in which the separation and recovery of metal-bearing liquid solutions
present a substantial market. Primary among the potential customers in this area
are metal plating and metal finishing operations, which generate substantial
volumes of mixed metals process streams for which no previous technology was
available to effect proper separation. The Company intends to introduce CST on
a test basis to demonstrate its effectiveness in reducing disposal costs and
creating reusable metals (thereby reducing ongoing materials costs).
The major competitive technology in this area is precipitation, which
generates a metallic sludge by-product requiring further treatment prior to
landfill disposal. By contrast, CST does not generate harmful metallic
sludges, and instead enables close to 100% process water recycling, while also
enabling recovery of valuable raw materials. As costs of environmental
compliance continue to mount, the Company expects CST to become a preferred
alternative to existing metals separation methods.
Gas Separation
The CST equipment and technology can also be utilized to separate and
recover valuable gases (such as nitrogen) from mixed gaseous and liquid
compounds. For example, nitrogen is used for a wide variety of process
applications, including oil recovery, food processing, metal heat treatment, and
pharmaceutical testing and development.
Nitrogen is typically obtained by separating it from oxygen, using
processes such as cryogenic distillation, adsorption, catalytic removal, and
permselective polymeric membrane separation. However, each of these processes
has drawbacks, which can include high energy usage, high pressure and
temperature requirements, and/or relatively low purity of the recovered gas. The
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CST process overcomes these drawbacks by yielding relatively pure nitrogen in a
low-energy, low capital cost process conducted at ambient temperature and
pressure. The Company has prepared a proposal for a prototype unit for the
production of high-purity nitrogen for use in food processing, but has not
otherwise developed a strategy or targeted a market for commercialization of the
gas separation application.
Organics Separation and Recovery
As of August 1, 1996, based on market data compiled by the Company,
there are more than 10,000 organic chemical industry companies operating in the
United States, and more than 560 operating internationally. These companies
generate significant volumes of waste process streams, including mixed
organic/non-organic streams which no current technology has proved capable of
separating. Through the use of CST, these companies may be able to separate
and/or recover a variety of contaminants, including volatile organic compounds,
petrochemicals, phenyl and phenylic derivatives, olefin alkanes and acid gases.
Currently, the primary technology utilized in this area is activated
carbon treatment. Like the other slow biological treatment processes utilized in
this area, the by-products are often more toxic than the original compound. The
Company intends to demonstrate to chemical manufacturers that CST is effective
in dealing with the wide variety of contaminants generated by these businesses,
and that use of CST will substantially reduce the environmental risks and
costs associated with traditional separation methods.
Biochemicals Separation and Recovery
CST has been demonstrated to have significant capabilities in the
separation and recovery of biochemicals, including proteins, amino acids,
antibiotics, glycerides, fatty acids, drug delivery vehicles and other
pharmaceuticals. Mixed wastes containing these materials are generated in both
research and development functions and in manufacturing functions. These
materials have substantial value, and the Company intends to emphasize both the
value of the recovered materials and the enhanced and speedier environmental
compliance attributes of CST.
Currently, the primary competing technology in this area is
chromatography, which requires substantially greater time to treat significant
volumes of material, and is substantially less selective in the types of
materials that can be separated from the liquid feedstream. For example,
chromatography has not proven effective in separating certain amino acids from
one another, or in separating component fractions of specific amino acids.
Environmental Remediation and Restoration
The Company believes that CST has significant potential for
application to environmental remediation and restoration. The Company is
currently involved in pilot projects for the decontamination of water in the
Port of Baltimore, and for clean-up of trichlorethylene-contaminated groundwater
on Cape Cod, Massachusetts. In the case of a project such as the Port of
Baltimore project, it is expected that the remediating technology will be
applied continuously over a period of many years, until the subject
contamination (in the case of Baltimore, chromium leaching from underlying soil
into the aquifer) has been demonstrated to have been abated for a significant
period of time.
In contrast to other remediation technologies, the Company believes
that CST has the attributes of low initial capital costs, low operating costs
and the ability to recover heavy metals, organic chemicals and varied volatile
organic compounds for reuse.
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<PAGE>
In August 1996, the Company completed an on-site demonstration of CST
for the decontamination of water in the Port of Baltimore. During seven hours of
operation, a single CST unit, in a single pass-through of feedstream,
processed 90 gallons of water containing more than 600 ppm of chromium, and
reduced the contamination level to 0.074 ppm. This reduced level of
contamination is close to the federal guideline (0.05 ppm) for the unregulated
discharge of water. The Company believes that compliance with such guideline can
be achieved either by refinement of chemical formulation or process procedure,
by dilution of the processed water with a small amount of uncontaminated water,
or by passing the processed water through a larger or supplemental CST unit.
The Company believes that the same process is capable of achieving comparable
results in the same time period on substantially greater volumes of contaminated
water, either by increasing the flow of feedstream into the membrane, by
configuring and utilizing a larger module, or by installing and operating
additional modules. As indicated above, this demonstration was performed on
limited quantities of process streams, and there can be no assurance that the
same or similar results would or could be obtained on a larger scale.
To speed its entry in this market, the Company intends to enter into
collaborative joint working and marketing arrangements with established
engineering and environmental service organizations which are expected to
provide technical and professional expertise, market presence and credibility.
Although the Company has entered into memorandums of understanding with several
such companies, the Company has not to date entered into any definitive
agreements or received any firm contract awards. See "- Collaborative Working
Arrangements."
Radionuclide/Mixed Waste Separation
In the United States, there are numerous sites operated or maintained
by the Department of Energy and/or the Department of Defense at which there are
present "mixed wastes" containing radionuclides intermingled with other
hazardous wastes. These sites are also contaminated with other compounds
associated with nuclear weapons, testing and energy. The Company believes that
CST is capable of separating most of these compounds. The United States
government estimates that potential government expenditures in this market could
exceed $250 billion over the next 40 years.
This element of the market is a significant subcategory of the general
environmental remediation that can be undertaken with CST. In addition to low
initial capital costs and low operational costs, CST has the advantage of
cost-effectively separating both dissolved mixed waste and radionuclides, and
allowing separate handling and disposal of both hazardous waste types. The
Company anticipates pursuing this market area in collaboration with established
engineering and environmental service organizations, who can provide technical
and professional expertise, market presence and credibility. Neither the Company
nor any of its collaborative partners have been awarded any contracts to use
CST, and there can be no assurance as to whether or when any such contracts
may be obtained.
Proposed Manufacturing Operations
The Company currently has a limited number of outside sources of supply
for some strategic components used in CST, including chemicals, fibers and
membrane casings. Business disruptions or financial difficulties of such
suppliers, or raw material shortages or other causes beyond the Company's
control, could adversely affect the Company by increasing their cost of goods
sold or reducing the availability of such components. The use of outside
suppliers also entails risks of quality control and disclosure of proprietary
information.
The Company intends to utilize a portion of the net proceeds of this
Offering to establish a manufacturing facility in which the Company will be able
to manufacture CST chemicals and equipment, including the microporous fiber
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<PAGE>
membranes which constitute the key component of all configurations of CST
equipment. The Company expects that such plant will be operational approximately
six months following the completion of this Offering, although the Company may
encounter unforeseen delays in locating, modifying and/or equipping the plant
location. Once the plant is fully operational, the Company expects to benefit
from greater quality control, increased assurance of product availability, and
greater protection of proprietary information and technology. See "Risk Factors
- - Dependence on Strategic Components," "Unpredictability of Patent Protection
and Proprietary Technology" and "Use of Proceeds."
Collaborative Working Arrangements
As of the date of this Prospectus, the Company has entered into
memorandums of understanding with Teledyne Brown and Sverdrup for various uses
and applications of CST, principally in connection with large-scale clean-ups
of governmental facilities.
Pursuant to separate memorandums of understanding with each of Teledyne
Brown and Sverdrup, the Company and each of Teledyne Brown and Sverdrup,
respectively, have agreed to negotiate, on a non-exclusive basis, the formation
of one or more mutually agreeable business arrangements concerning the
marketing, application and commercialization of CST. In addition to conducting
due diligence with respect to each company's technology in accordance with the
confidentiality provisions contained in the memorandums of understanding, the
Company and each of Teledyne Brown and Sverdrup, respectively, are currently
negotiating the scope, covered applications and geographical territory
encompassed by the proposed joint marketing and commercialization activities. It
is expected that the Company's relationship with Teledyne Brown will focus on
Department of Energy sites such as Hanford, Washington and Mound, Ohio, and that
the Company's initial opportunities with Sverdrup will focus on Department of
Defense sites such as Cape Cod, Massachusetts. In the event a definitive
agreement is not entered into by the Company and Teledyne Brown or Sverdrup,
respectively, on or before the end of February 1997, such memorandum of
understanding may be terminated by either company upon written notice and,
except for the survival of the confidentiality provisions, without any further
liability to the other company. As of the date of the Prospectus, the Company
has not determined the amount of net proceeds of this Offering to be applied to
these or other potential collaborative working arrangements. See "Use of
Proceeds." Although the Company believes that it will enter into definitive
joint working agreements with Teledyne Brown, Sverdrup and other potential
collaborative partners, there can be no assurance that these memorandums of
understanding or other future discussions will result in any definitive joint
ventures or related agreements, or, even if such agreements are executed, that
the Company and its prospective collaborators will be awarded any projects that
will ultimately result in revenues and earnings for the Company.
CFC Services Agreement
Upon completion of this Offering, the Company will enter into a
services agreement (the "Services Agreement") with Commodore CFC Technologies,
Inc., a wholly-owned subsidiary of Commodore ("CFC Technologies"), which has
developed and patented a process which, based on test applications of limited
quantities of chlorofluorocarbons ("CFCs"), may be able to separate mixtures of
refrigerants so that they can be returned to productive use at purity levels
meeting industry standards. Pursuant to the Services Agreement, the Company will
provide advice, assistance and guidance, and, where necessary, personnel to
implement the same, in connection with, among others, administrative, financial
and related matters, product design, development and promotion, and marketing,
sales and related operations to CFC Technologies in connection with its business
and operations in exchange for which the Company will be paid an annual fee
equal to 75% of the net income of CFC Technologies, if any, and reimbursement of
expenses incurred in furnishing such services. The Services Agreement may be
-35-
<PAGE>
terminated by either party at any time upon not less than 90 days' prior notice.
Government Regulation
The Company and its customers may be required to comply with a number
of federal, state and local laws and regulations in the areas of safety, health
and environmental controls including, without limitation, RCRA and OSHA, which
may require the Company, its prospective working partners or its customers to
obtain permits or approvals to utilize CST and related equipment on certain
job sites. In addition, if, as and when the Company begins to market CST
internationally, the Company may be required to comply with laws and regulations
and obtain permits or approvals in those other countries. There is no assurance
that such required permits and approvals will be obtained. Furthermore,
particularly in the environmental remediation market, the Company may be
required to conduct performance and operating studies to assure government
agencies that CST and its by-products do not pose environmental risks. There
is no assurance that such studies, if successful, will not be more costly or
time-consuming than anticipated. Further, if new environmental legislation or
regulations are enacted or existing legislation or regulations are amended, or
are interpreted or enforced differently, the Company, its prospective working
partners and/or its customers may be required to meet stricter standards of
operation and/or obtain additional operating permits or approvals.
Environmental Matters
The Company's operations, as well as the use of specialized technical
equipment by its customers, are subject to numerous federal, state and local
regulations relating to the storage, handling and transportation of certain
regulated materials. Although the Company's role is generally limited to the
leasing of its specialized technical equipment for use by its customers, there
is always the risk of the mishandling of such materials or technological or
equipment failures, which could result in significant claims against the
Company. Any such claims against the Company could have a material adverse
effect.
The Company maintains environmental liability insurance with limits of
$1,000,000 per occurrence and $1,000,000 in the aggregate. The Company may be
required to obtain environmental liability insurance in greater amounts in the
future as CST is commercialized. There can be no assurance that such insurance
will provide coverage against all claims, and claims may be made against the
Company (even if covered by the Company's insurance policy) for amounts
substantially in excess of applicable policy limits. Any such event could have a
material adverse effect on the Company's business, financial condition and
results of operations.
Intellectual Property
The basic principles underlying the CST technology were developed by
Srinivas Kilambi, Ph.D., the Company's Vice President - Technology. Effective
February 29, 1996, pursuant to an assignment of technology agreement between the
Company and Dr. Kilambi, the Company acquired rights to the CST technology
from Dr. Kilambi, together with associated patent rights, confidential know-how
and other property rights created or obtained by Dr. Kilambi, whether then
existing or thereafter created, relating to the construction, design,
development and exploitation of the processes, equipment and technology related
to CST and any other product or development resulting from the acquired patent
rights. Such assignment excluded applications involving the separation of
technicium, a radionuclide. The Company is currently negotiating a technology
license with Oak Ridge National Laboratory, a Department of Energy national
laboratory, relating to the separation of technicium.
In consideration for his assignment of the CST technology, the Company
transferred to Dr. Kilambi 200,000 shares of common stock of Commodore, which
had been contributed to the Company by Commodore to effect the transaction, and
the Company agreed
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<PAGE>
to pay Dr. Kilambi a royalty through December 3, 2002 equal to 2% of its
revenues actually received and attributed to the commercial application of the
acquired technology. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Liquidity and Capital Resources" and
"Certain Relationships and Related Transactions - Organization and
Capitalization of the Company."
The Company has filed one United States utility patent application and
one United States provisional patent application covering the principal features
of its CST technology. The Company may also pursue foreign patent protection
where it deems appropriate.
The Company's liquid membrane technology patent applications are based
on the selective combination of different known solvents, supports, diluents,
carriers and other components to separate a variety of metals, chemicals and
other targeted substances. While the Company believes that its technology covers
all separation applications, third parties may have developed, or may
subsequently assert claims to, certain of these solvents, supports, diluents,
carriers or other components for one or more specific applications. In such
event, the Company may need to acquire licenses to, or to contest the validity
of, issued or pending patents or claims of third parties.
To protect its trade secrets and the unpatented proprietary information
in its development activities, the Company requires its employees, consultants
and contractors to enter into agreements providing for the confidentiality and
the Company's ownership of such trade secrets and other unpatented proprietary
information originated by such persons while in the employ of the Company. The
Company also requires potential collaborative partners to enter into
confidentiality and non-disclosure agreements.
There can be no assurance that any patents which may hereafter be
obtained, or any of the Company's confidentiality and non-disclosure agreements,
will provide meaningful protection of the Company's confidential or proprietary
information in the case of unauthorized use or disclosure. In addition, there
can be no assurance that the Company will not incur significant costs and
expenses, including the costs of any future litigation, to defend its rights in
respect of any such intellectual property.
Competition
The most common alternative methods for metals separation from
solubilized process streams presently include ion exchange, reverse osmosis,
precipitation, ultrafiltration and chromatography. The Company believes that
most of these methods have certain drawbacks, including lack of selectivity in
the separation process, inability to handle certain metals in the process
streams, and the creation of sludges and other harmful by-products which require
further post-treatment prior to disposal. For example, reverse osmosis and
ultrafiltration are incapable of separating chrome and chromium materials from
wastewater streams, and precipitation results in the production of sludge which
requires dewatering, drying and disposal in a landfill. Certain of these other
technologies also entail long process times, and are relatively expensive.
By contrast, CST is capable of handling a broad range of compounds in
a faster and relatively inexpensive manner. Furthermore, the by-products of the
CST process consist primarily of wastewater, which can be discharged as normal
wastewater effluent, and to a substantially lesser extent and in only rare
circumstances, materials requiring landfill disposal.
Separation technologies are currently utilized by a wide variety of
domestic and international companies, including several large companies having
substantially greater financial and other resources than the Company. Although
the Company believes that CST has substantial advantages over all other known
separation technologies, any one or more of the Company's competitors, or other
enterprises not presently known, may develop technologies which are superior to
CST. To the extent the Company's competitors are able to offer comparable
services at lower prices or of higher quality, or more cost-effective
alternatives, the Company's ability to compete effectively could be materially
adversely affected. The Company believes that its ability to compete in both the
commercial and governmental sectors is dependent upon CST being a superior,
more cost-effective method to achieve separation and/or recovery of a variety of
materials in varying amounts and configurations. In the event that the Company
is unable to demonstrate that CST is a technical and cost-effective
alternative to other separation technologies on a commercial scale, the Company
may not be able to successfully compete.
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<PAGE>
Research and Development
The Company continues to perform research and development activities
with respect to CST, utilizing its internal technical staff as well as
independent consultants. Such activities, which are expected to increase
significantly following this Offering, have to date been entirely
Company-sponsored. Research and development expenditures were $50,080 for the
period from November 15, 1995 (date of inception) to June 30, 1996.
Employees
As of August 31, 1996, the Company had seven full-time employees,
including four with advanced scientific degrees. The Company believes that it
has been successful in attracting experienced and capable personnel. All of the
Company's employees have entered into agreements with the Company requiring them
not to disclose the Company's proprietary information, assigning to the Company
all rights to inventions made during their employment, and prohibiting them from
competing with the Company. The Company's employees are not represented by any
labor union. The Company believes that relations with its employees are
satisfactory.
Properties
The Company leases approximately 7,000 square feet of space in
Columbus, Ohio from an unaffiliated third party under a lease expiring on
November 30, 1996, which the Company uses as its laboratory and administrative
offices. The Company shares such space with Commodore and certain of its other
subsidiaries. As of July 1, 1996, the Company pays an allocable share of the
rent equal to $750 per month for such space.
The Company's principal executive offices are located in approximately
2,000 square feet of office space in New York, New York, which also serves as
the principal executive offices of Commodore, certain of its affiliates, and
Bentley J. Blum and Paul E. Hannesson, directors of each of the Company and
Commodore. The Company does not pay any rent with respect to such offices. See
"Certain Relationships and Related Transactions - Offices."
After this Offering, the Company intends to lease a new facility of
approximately 35,000 square feet in or around Atlanta, Georgia, which would
comprise the Company's executive and administrative offices, research and
testing laboratories and CST manufacturing plant. The Company is currently in
the process of selecting a suitable site for such facility. See "Use of
Proceeds." Upon commencement of its occupancy at such facility, the Company,
together with Commodore, may elect to terminate the existing lease in Columbus,
Ohio.
Legal Proceedings
There are no pending material legal proceedings to which the Company or
its properties is subject.
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<PAGE>
MANAGEMENT
Executive Officers, Key Employees and Directors
The names and ages of the executive officers, key employees and
directors of the Company, and their positions with the Company, are as follows:
Name Age Position
- ---- --- --------
Alan R. Burkart 66 President, Chief Executive Officer
and Director
Carl O. Magnell, P.E. 55 Executive Vice President
James M. DeAngelis 36 Senior Vice President
Srinivas Kilambi, Ph.D. 32 Vice President - Technology
Michael D. Kiehnau, P.E. 35 Chief Financial Officer
Paul E. Hannesson 56 Chairman of the Board of Directors
Bentley J. Blum 55 Director
John A. Cenerazzo 72 Director (1)
Jon Lee Prather 57 Director (1)
- ----------
(1) Positions will be assumed upon completion of this Offering.
ALAN R. BURKART was appointed President and Chief Executive Officer,
and elected a Director, of the Company effective August 1, 1996. From March 1986
through September 1995, Mr. Burkart served as President and Chief Operating
Officer of Columbian Chemicals Company, the second largest producer of
industrial and rubber carbon blacks in the world, which is wholly owned by
Phelps Dodge Corporation ("Columbian Chemicals"). Mr. Burkart had been retired
from September 1995 until his appointment with the Company. Mr. Burkart is a
member of the American Institute of Mechanical Engineers and the American
Society of Testing and Materials. Mr. Burkart holds a B.S. degree in
Metallurgical Engineering from Case Institute of Technology.
CARL O. MAGNELL, P.E. was appointed Executive Vice President of the
Company effective September 1, 1996. He served prior to such time as Executive
Vice President, Governmental Operations of Commodore Applied Technologies, Inc.,
a 72%-owned, publicly-traded subsidiary of Commodore engaged in the
environmental technology business ("Applied"), since July 1996. From September
1995 to July 1996, Mr. Magnell served as Vice President for Business Development
of Commodore. From 1992 to August 1995, Mr. Magnell served as Director of
Research for Civil Engineering Research Foundation (an industry-sponsored
engineering research group), and from 1964 to 1992, Mr. Magnell served in
various engineering capacities with the U.S. Army Corps of Engineers, including
brigade commander in Europe and as Engineer for U.S. Forces in Korea, retiring
as a colonel. Mr. Magnell holds a B.S. degree from the United States Military
Academy, and M.S. degrees in Civil Engineering and Political Science from the
Massachusetts Institute of Technology. He is a licensed professional engineer.
JAMES M. DeANGELIS was appointed Senior Vice President of the Company
effective September 1, 1996. He served prior to such time as Vice President -
Marketing of Commodore and President of CFC Technologies since January 1993.
Prior to January 1993, Mr. DeAngelis was a full-time student, and completed
M.B.A. and Masters in International Management degrees from the American
Graduate School of International Management. Mr. DeAngelis holds B.S. degrees in
Biology and Physiology from the University of Connecticut.
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<PAGE>
SRINIVAS KILAMBI, Ph.D. has served as Vice President - Technology of
the Company since February 1996, and was a part-time consultant to the Company
from December 1995 to the time he became an officer of the Company. Prior to
joining the Company, Dr. Kilambi was a graduate student at the University of
Tennessee, where he received a Ph.D. in Chemical Engineering in January 1996.
During the course of his graduate studies, Dr. Kilambi also performed research
at Clarkson University, Potsdam, New York (from August 1991 to June 1993) and
Oak Ridge National Laboratories, Oak Ridge, Tennessee (from September 1993 to
June 1996), and briefly served as an environmental consultant to Jacobs
Engineering Group, Inc. from December 1993 to May 1994. Prior to his graduate
studies in the United States, Dr. Kilambi served as the President and Managing
Director of Chemopol Complex India, Pvt. Ltd., a developer of chemical and
biochemical products, from 1987 to August 1991.
MICHAEL D. KIEHNAU, P.E. joined the Company as Chief Financial Officer
in September 1996. From 1992 to August 1996, Mr. Kiehnau served as a manager for
Brown & Root, Inc. (an engineering and construction firm), and from 1983 to
1990, Mr. Kiehnau served in various engineering capacities with the U.S. Army
Corps of Engineers in the United States, Europe and Central America. From 1990
to 1992, Mr. Kiehnau was a full-time student. Mr. Kiehnau holds a B.S. degree
from the United States Military Academy, an M.A. in International Relations from
Boston University, and an M.B.A. from the Harvard Graduate School of Business
Administration. He is a licensed professional engineer.
PAUL E. HANNESSON has been the Chairman of the Board of the Company
since its inception. Mr. Hannesson has also been a Director of Commodore since
February 1993, and served until July 1996 as its President and Chief Executive
Officer. In July 1996, Mr. Hannesson became the President and Chief Executive
Officer of Applied. Mr. Hannesson was a private investor and business consultant
from 1990 to 1993. He currently serves as Chairman of the Board of Lanxide
Corporation, a research and development company developing metal and ceramic
materials ("Lanxide"), where he also serves on its Compensation Committee. Mr.
Hannesson is the brother-in-law of Bentley J. Blum, a Director of the Company.
BENTLEY J. BLUM has been a Director of the Company since August 1996.
Mr. Blum has been Chairman of the Board of Directors of Commodore since 1984.
Mr. Blum has also served as the Chairman of the Board of Applied since July
1996. For more than 15 years, Mr. Blum has been actively engaged in real estate
acquisitions and currently is the sole stockholder and director of a number of
corporations which hold real estate interests, oil drilling interests and other
corporate interests. Mr. Blum is a director of Lanxide; Federal Resources
Corporation, a company formerly engaged in manufacturing, retail distribution
and natural resources development; Specialty Retail Services, Inc., a former
distributor of professional beauty products; and North Valley Development Corp.,
an inactive real estate development company. Mr. Blum is the controlling
stockholder of Commodore, and is the brother-in-law of Paul E. Hannesson, the
Chairman of the Board of the Company.
JOHN A. CENERAZZO has agreed to join the Board of Directors of the
Company upon the completion of this Offering. Mr. Cenerazzo currently serves as
the Chairman of the Board of Infocore, Inc., a voice and data communications
company, and as a director of U.S. Axle Inc., a manufacturer of industrial axles
and shafts, and Igene Biotechnology, Inc., a development stage biotechnology
company. For more than 30 years prior to his retirement in 1986, Mr. Cenerazzo,
a chemical engineer, directed the operations, most recently as its Executive
Vice President, of Kawecki Berylco Industries, Inc., a division of Cabot Corp.
which produces chemicals and rare metals. Mr. Cenerazzo had also served as a
director of National Penn Bank, a national bank located in Boyertown,
Pennsylvania, from 1961 to April 1996, and was recently appointed director
emeritus of such company.
JON LEE PRATHER has agreed to join the Board of Directors of the
Company upon the completion of this Offering. Since January 1996, Mr. Prather
has been a Senior Vice President of American Central Gas Companies, Inc., a
privately-held company that gathers, treats and processes natural gas, and also
serves on its advisory board. From 1979 through 1995, Mr. Prather held several
executive positions with Columbian Chemicals, the most recent of which being
Senior Vice President-Administration and General Counsel. Mr. Prather has been a
licensed attorney for more than 30 years.
-40-
<PAGE>
Board Committees
The Company's Board of Directors has an Audit Committee, a Compensation
Committee and a Stock Option Committee. The responsibilities of the Audit
Committee (which, upon completion of this Offering, will consist of Messrs.
Cenerazzo (Chairman) and Prather) include recommending to the Board of
Directors the firm of independent accountants to be retained by the Company,
reviewing with the Company's independent accountants the scope and results of
their audits, and reviewing with the independent accountants and management the
Company's accounting and reporting principles, policies and practices, as well
as the Company's accounting, financial and operating controls and staff. The
Compensation Committee (which, upon completion of this Offering, will consist of
Messrs. Prather (Chairman) and Blum) has responsibility for establishing and
reviewing employee compensation. The Stock Option Committee (which, upon
completion of this Offering, will consist of Messrs. Hannesson (Chairman) and
Burkart) has responsibility for administering and interpreting the Company's
1996 Stock Option Plan (the "Plan"), and determining the recipients, amounts,
and other terms (subject to the requirements of the Plan) of options which may
be granted under the Plan from time to time.
Compensation of Directors
Non-management directors of the Company will receive directors' fees of
$500 per meeting for attendance at Board of Directors meetings, and are
reimbursed for actual expenses incurred in respect of such attendance. The
Company does not intend to separately compensate employees for serving as
directors.
EXECUTIVE COMPENSATION
The Company was organized in November 1995. No salaries were paid by
the Company at any time through June 30, 1996, except for approximately $33,000
paid to Dr. Kilambi in the six months ended June 30, 1996. The Company has
entered into employment agreements with its executive officers, as more fully
described below.
Employment Agreements
Each of Alan R. Burkart, Carl O. Magnell, James M. DeAngelis, Srinivas
Kilambi, Ph.D. and Michael D. Kiehnau has entered into an employment agreement
with the Company for a term expiring on December 31, 1999. Pursuant to these
employment agreements, Messrs. Burkart, Magnell, DeAngelis, Kilambi and Kiehnau
have agreed to devote substantially all of their business and professional time
and efforts to the business of the Company as its President and Chief Executive
Officer, Executive Vice President, Senior Vice President, Vice President -
Technology and Chief Financial Officer, respectively. The employment agreements
provide that Messrs. Burkart, Magnell, DeAngelis, Kilambi and Kiehnau shall
receive a fixed base salary at an annual rate of $200,000, $180,000, $145,000,
$110,000 and $88,000, respectively, for services rendered in such positions, and
each may be entitled to receive, at the sole discretion of the Board of
Directors of the Company or a committee thereof, bonuses and/or stock options
based on the achievement (in whole or in part) by the Company of its business
plan and by the employee of fixed personal performance objectives. Each of
Messrs. Burkart, Magnell, DeAngelis, Kilambi and Kiehnau are entitled to
participate in the Company's Stock Option Plan and Executive Bonus Plan. See "-
Stock Options" and "- Executive Bonus Plan" below. In addition, Mr. Burkart will
receive a signing bonus of up to a maximum of approximately $117,500.
The employment agreements also provide for termination by the Company
upon death or disability (defined as three aggregate months of incapacity during
any 365-consecutive day period) or upon conviction of a felony crime of moral
turpitude or a material breach of their obligations to the Company. In the event
any of the employment agreements are terminated by the Company without cause,
such executive will be entitled to compensation for the balance of the term. The
Company has obtained commitments for $1,000,000 key-man life insurance policies
in respect of each of Messrs. Burkart, Magnell, DeAngelis and Kilambi.
The employment agreements also contain covenants (a) restricting the
executive from engaging in any activities competitive with the business of the
Company during the terms of such employment agreements and one year thereafter,
(b) prohibiting the executive from disclosure of confidential information
-41-
<PAGE>
regarding the Company at any time, and (c) confirming that all intellectual
property developed by the executive and relating to the business of the Company
constitutes the sole and exclusive property of the Company.
Pursuant to an assignment of technology agreement between the Company
and Dr. Kilambi, effective February 29, 1996, the Company agreed to pay to Dr.
Kilambi a royalty through December 3, 2002 equal to 2% of the Company's revenues
actually received and attributed to the commercial application of the acquired
technology. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations - Liquidity and Capital Resources," "Business -
Intellectual Property" and "Certain Relationships and Related Transactions -
Organization and Capitalization of the Company."
Stock Options
On September 5, 1996, Commodore (as sole stockholder of the Company)
approved the Company's 1996 Stock Option Plan, as previously adopted by the
Company's Board of Directors (the "Plan"), pursuant to which officers,
directors, and/or key employees and/or consultants of the Company can receive
incentive stock options and non-qualified stock options to purchase up to an
aggregate of 2,000,000 shares of the Company's Common Stock (of which no more
than 1,500,000 shares may be issued pursuant to non-qualified stock options). On
September 5, 1996, the Company's Board of Directors awarded, effective upon
completion of this Offering, non-qualified stock options under the Plan to
certain key executive officers entitling them to purchase an aggregate of
1,100,000 shares of Common Stock, all of which provide for an exercise price
equal to the initial public offering price of the Common Stock, are exercisable
at the rate of 20% of the number of options granted in each of calendar 1996
through 2000, inclusive, beginning on the closing date of this Offering and,
unless exercised, expire on December 31, 2001 (subject to prior termination in
accordance with the applicable stock option agreements). In addition,
non-qualified options to purchase an aggregate of 135,000 shares of Common Stock
were awarded, effective upon completion of this Offering, to members of the
Board of Directors who are not employed or otherwise affiliated with the
Company, all of which are exercisable at an exercise price equal to the initial
public offering price of the Common Stock, are exercisable at the rate of
33-1/3% of the number of options granted in each of calendar 1996 through 1998,
inclusive, beginning on the closing date of this Offering, and, unless
exercised, expire on December 31, 2001 (subject to prior termination in
accordance with the applicable stock option agreements). The exercise price
applicable to all outstanding stock options represents not less than 100% of the
fair market value of the underlying Common Stock as of the date that such
options were granted, as determined by the Board of Directors of the Company on
the date that such options were granted.
With respect to incentive stock options, the Plan provides that the
exercise price of each such option must be at least equal to 100% of the fair
market value of the Common Stock on the date that such option is granted (and
110% of fair market value in the case of stockholders who, at the time the
option is granted, own more than 10% of the total outstanding Common Stock), and
requires that all such options have an expiration date not later than that date
which is one day before the tenth anniversary of the date of the grant of such
options (or the fifth anniversary of the date of grant in the case of 10%
stockholders). However, with certain limited exceptions, in the event that the
option holder ceases to be associated with the Company, or engages in or is
involved with any business similar to that of the Company, such option holder's
incentive options immediately terminate. Pursuant to the provisions of the Plan,
the aggregate fair market value, determined as of the date(s) of grant, for
which incentive stock options are first exercisable by an option holder during
any one calendar year cannot exceed $100,000.
With respect to non-qualified stock options, the Plan requires that the
exercise price of all such options be at least equal to 100% of the fair market
value of the Common Stock on the date such option is granted, provided that
non-qualified options may be issued at a lower exercise price (but in no event
less than 85% of fair market value) if the net pre-tax income of the Company in
the full fiscal year immediately preceding the date of the grant of such option
(the "Prior Year") exceeded 125% of the mean annual average net pre-tax income
of the Company for the three fiscal years immediately preceding such Prior Year.
Non-qualified options must have an expiration date not later than that date
which is the day before the eighth anniversary of the date of the grant of the
subject option. However, with certain limited exceptions, in the event that the
option holder ceases to be associated with the Company, or engages in or becomes
involved with any business similar to that of the Company, such option holder's
non-qualified options immediately terminate.
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<PAGE>
The following table lists information on stock options granted to each
of the Company's executive officers and directors and to all executive officers
and directors as a group. All of such stock options were granted on September 5,
1996, and (i) with respect to all stock options other than those in favor of
Messrs. Cenerazzo and Prather, are exercisable at the rate of 20% per calendar
year in each of 1996 through 2000, inclusive (subject to prior termination under
the terms of the applicable option agreements), or (ii) with respect to the
stock options granted to Messrs. Cenerazzo and Prather, are exercisable at the
rate of 33-1/3% per calendar year in each of 1996 through 1998, inclusive
(subject to prior termination under the terms of the applicable option
agreements), and, to the extent not exercised, expire on December 31, 2001. As
of the date of this Prospectus, none of such options have been exercised.
<TABLE>
<CAPTION>
Number of Percentage of
Shares Total
Underlying Type of Options Exercise
Name of Options Option Granted Price per
Officer or Director Granted Granted Under Plan Share
------------------- ------------ ------------- -------------- ---------
<S> <C> <C> <C> <C>
Alan R. Burkart 400,000 Non-Qualified 32.3% *
Carl O. Magnell 175,000 Non-Qualified 14.2% *
James M. DeAngelis 150,000 Non-Qualified 12.1% *
Srinivas Kilambi, Ph.D. 100,000 Non-Qualified 8.1% *
Michael D. Kiehnau 75,000 Non-Qualified 6.1% *
Paul E. Hannesson 200,000 Non-Qualified 16.2% *
John A. Cenerazzo 67,500 Non-Qualified 5.5% *
Jon Lee Prather 67,500 Non-Qualified 5.5% *
--------- -----
All executive officers
and directors as a group
(nine persons) 1,235,000 100.0%
========= =====
</TABLE>
- ---------------
* To be equal to the initial public offering price per share of the Common
Stock in this Offering.
Executive Bonus Plan
On September 5, 1996, the Company's Board of Directors established a
five-year Executive Bonus Plan (the "Bonus Plan") to reward executive officers
and other key employees based upon the Company achieving certain performance
levels. Under the Bonus Plan, commencing with the Company's 1997 fiscal year and
for each of the four fiscal years thereafter, the Company will have discretion
to award bonuses in an aggregate amount in each fiscal year equal to 1% of the
Company's consolidated net sales revenues for such fiscal year, provided and on
condition that the Company achieves a consolidated net profit before taxes of
not less than 5% of consolidated net sales in each year, and provided that the
aggregate bonuses in each year (out of the maximum amount of 1% of annual net
sales) shall not be in excess of the proportion by which the Company's
consolidated net profit before taxes is greater than 5% of consolidated net
sales but less than 15% of consolidated net sales. The Compensation Committee of
the Board of Directors of the Company will determine the allocable amounts or
percentages of the bonus pool which may be paid annually to participants;
provided that for fiscal 1997, the following persons shall (subject to their
continued full-time employment with the Company) be entitled to receive the
following percentages of the bonus payments, if any, payable in respect of
fiscal 1997:
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<PAGE>
Percentage of
Name of Participant Available Bonus Pool
------------------- --------------------
Alan R. Burkart 15%
Carl O. Magnell 15%
James M. DeAngelis 15%
Srinivas Kilambi, Ph.D. 15%
Michael D. Kiehnau 15%
Other employees 25%
Bonuses under the Bonus Plan are not exclusive of other bonuses that
may be awarded by the Board of Directors or the Compensation Committee from time
to time.
Limitation of Directors' and Officers' Liability and Indemnification
The Company has included in its Certificate of Incorporation and
By-laws provisions to (i) eliminate the personal liability of its directors and
officers for monetary damages resulting from breaches of their fiduciary duty
(provided that such provisions do not eliminate liability for breaches of the
duty of loyalty, acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, violations under Section
174 of the Delaware General Corporation Law (the "Delaware Law"), or for any
transaction from which the director and/or officer derived an improper personal
benefit), and (ii) indemnify its directors and officers to the fullest extent
permitted by the Delaware Law, including circumstances in which indemnification
is otherwise discretionary. The Company believes that these provisions are
necessary to attract and retain qualified persons as directors and officers.
-44-
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information as of the date of
this Prospectus with respect to (i) the beneficial ownership of the Common Stock
of the Company by each beneficial owner of more than 5% of the outstanding
shares of Common Stock of the Company, each director, each executive officer and
all executive officers and directors of the Company as a group, and (ii) the
number of shares of Common Stock owned by each such person and group. Unless
otherwise indicated, the owners have sole voting and investment power with
respect to their respective shares.
<TABLE>
<CAPTION>
Percentage of Outstanding
Number of Shares Common Stock
of Common Stock Beneficially Owned
Name and Address of Beneficially ---------------------------------
Beneficial Owner(1) Owned (2) Before Offering After Offering
------------------- ---------------- --------------- --------------
<S> <C> <C> <C>
Commodore Environmental
Services, Inc................... 15,000,000 100.0% 75.0%(3)
Bentley J. Blum(4)................. 15,000,000 100.0% 75.0%
Paul E. Hannesson(5)............... 1,422,874 9.5% 7.1%
Alan R. Burkart(6)................. 82,609 * *
Carl O. Magnell(7)................. 61,074 * *
James M. DeAngelis(8).............. 181,071 1.2% *
Srinivas Kilambi, Ph.D.(9)......... 72,184 * *
Michael D. Kiehnau(10)............. 15,000 * *
John A. Cenerazzo(11)............. 22,500 * *
Jon Lee Prather(12)................ 22,500 * *
All executive officers and
directors as a group (nine
persons)........................... 15,000,000 100.0% 75.0%
</TABLE>
- ----------
* Percentage ownership is less than 1%.
(1) The addresses of each of Commodore Environmental Services, Inc., Bentley
J. Blum, Paul E. Hannesson, Carl O. Magnell, James M. DeAngelis and Dr.
Srinivas Kilambi is 150 East 58th Street, Suite 3400, New York, New York
10155. The address of Alan R. Burkart is 430 Cherry Hill Drive, Marietta,
Georgia 30067. The address of Michael D. Kiehnau is 215 Prairie Street,
Concord, Massachusetts 01742. The address of John A. Cenerazzo is P.O.
Box 4067, Reading, Pennsylvania 19606. The address of Jon Lee Prather is
3414 South Zunis Place, Tulsa, Oklahoma 74105. Bentley J. Blum and Paul E.
Hannesson are brothers-in-law.
(2) As used herein, the term beneficial ownership with respect to a security
is defined by Rule 13d-3 under the Securities Exchange Act of 1934, as
amended, as consisting of sole or shared voting power (including the power
to vote or direct the vote) and/or sole or shared investment power
(including the power to dispose or direct the disposition of) with respect
to the security through any contract, arrangement, understanding,
relationship or otherwise, including a right to acquire such power(s)
during the next 60 days. Unless otherwise noted, beneficial ownership
consists of sole ownership, voting and investment rights.
(3) In the event the Over-allotment Option is exercised in full, Commodore
will sell 750,000 shares of Common Stock and will own 14,250,000 shares of
Common Stock (71.3% of such outstanding shares) following the Offering.
See "Certain Relationships and Related Transactions" and "Underwriting."
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<PAGE>
(4) Represents all of the shares of Common Stock held by Commodore, based upon
Mr. Blum's beneficial ownership of 28,224,050 shares and his spouse's
ownership of 2,000,000 shares of common stock of Commodore, representing
together 52.6% of the outstanding shares of Commodore common stock. As of
August 31, 1996, there were 57,488,953 outstanding shares of Commodore
common stock. Does not include 440,000 shares of Commodore common stock
owned by Simone Blum, the mother of Mr. Blum, and 395,000 shares of
Commodore common stock owned by Samuel Blum, the father of Mr. Blum. Mr.
Blum disclaims any beneficial interest in the shares of Commodore common
stock owned by his spouse, mother and father.
(5) Consists of (a) 40,000 shares of Common Stock, representing 20% of the
200,000 stock options granted to Mr. Hannesson under the Plan, which are
currently exercisable, and (b) Mr. Hannesson's indirect beneficial
interest in the shares of Common Stock, based upon an aggregate of
2,650,000 shares of Commodore common stock owned by Suzanne Hannesson, the
spouse of Mr. Hannesson, and 2,650,000 shares of Commodore common stock
owned by the Hannesson Family Trust (Suzanne Hannesson and John D.
Hannesson, trustees) for the benefit of Mr. Hannesson's spouse,
representing together 9.2% of the outstanding shares of Commodore common
stock. Does not include 1,000,000 shares of Commodore common stock owned
by each of Jon Paul and Krista Hannesson, the adult children of Mr.
Hannesson. Mr. Hannesson disclaims any beneficial interest in the shares
of Commodore common stock owned by or for the benefit of his spouse and
children.
(6) Consists of (a) Mr. Burkart's indirect beneficial interest in the shares
of Common Stock, based upon his ownership of 10,000 shares of Commodore
common stock, and (b) 80,000 shares of Common Stock, representing 20% of
the 400,000 stock options granted to Mr Burkart under the Plan, which are
currently exercisable. Does not include 10,000 shares of Common Stock and
10,000 Warrants, which Mr. Burkart intends to purchase in the Offering.
See "Underwriting."
(7) Consists of (a) Mr. Magnell's indirect beneficial interest in the shares
of Common Stock, based upon his ownership of 60,000 shares of Commodore
common stock, and currently exercisable options to purchase 40,000 shares
of Commodore common stock at $.50 per share, and (b) 35,000 shares of
Common Stock, representing 20% of the 175,000 stock options granted to
Mr. Magnell under the Plan, which are currently exercisable.
(8) Consists of (a) Mr. DeAngelis' indirect beneficial interest in the shares
of Common Stock, based upon his ownership of 480,000 shares of Commodore
common stock, and currently exercisable options to purchase 100,000 shares
of Commodore common stock at $.03 per share, and (b) 30,000 shares of
Common Stock, representing 20% of the 150,000 stock options granted to Mr.
DeAngelis under the Plan, which are currently exercisable.
(9) Consists of (a) Dr. Kilambi's indirect beneficial interest in the shares
of Common Stock, based upon his ownership of 200,000 shares of Commodore
common stock, and (b) 20,000 shares of Common Stock, representing 20% of
the 100,000 stock options granted to Dr. Kilambi under the Plan, which are
currently exercisable.
(10) Consists of 15,000 shares of Common Stock, representing 20% of the
75,000 stock options granted to Mr. Kiehnau under the Plan, which are
currently exercisable.
(11) Consists of 22,500 shares of Common Stock, representing 33-1/3% of the
67,500 stock options granted to Mr. Cenerazzo under the Plan, which are
currently exercisable.
(12) Consists of 22,500 shares of Common Stock, representing 33-1/3% of the
67,500 stock options granted to Mr. Prather under the Plan, which are
currently exercisable.
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<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Organization and Capitalization of the Company
The Company was organized in November 1995 as a wholly-owned subsidiary
of Commodore. Effective February 29, 1996, pursuant to an assignment of
technology agreement between the Company and Srinivas Kilambi, Ph.D., the
Company's Vice President-Technology, the Company acquired rights to the CST
technology from Dr. Kilambi. In consideration for such technology, the Company
transferred to Dr. Kilambi 200,000 shares of common stock of Commodore, which
had been contributed to the Company by Commodore to effect the transaction, and
the Company agreed to pay Dr. Kilambi a royalty through December 3, 2002 equal
to 2% of the Company's revenues actually received and attributed to the
commercial application of the acquired technology. In exchange for Commodore's
issuance of such shares to the Company, as well as Commodore's funding and
support of the Company, the Company issued to Commodore 15,000,000 shares of
Common Stock. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations - Liquidity and Capital Resources" and "Business -
Intellectual Property."
Since the Company's inception, Commodore has financed the research and
development activities of the Company through direct equity investments and
loans to the Company. As of August 31, 1996, the Company's aggregate
indebtedness to Commodore was approximately $200,000. Commodore has agreed to
provide up to an additional $200,000 to the Company prior to the completion of
this Offering, and to contribute the entire amount of such intercompany debt
(totalling up to $400,000 by the time of the completion of this Offering) to the
Company's equity, without requirement of the issuance of any additional shares
of capital stock.
In the event that the Over-allotment Option is exercised (in whole or
in part) with respect to shares of Common Stock, such additional shares will be
sold to the Underwriters by Commodore, which will be entitled to retain the
entire net proceeds from any such sale. See "Underwriting."
Offices
The Company's principal executive offices are located in approximately
2,000 square feet of office space in New York, New York, which also serves as
the principal executive offices of Commodore, certain of its affiliates, and
Messrs. Bentley J. Blum and Paul E. Hannesson, directors of each of the Company
and Commodore. The Company does not pay any rent with respect to such offices.
In addition, the Company currently shares facilities in Columbus, Ohio with
Commodore and certain of its other subsidiaries. The Company pays an allocable
share of rent equal to $750 per month for such space. See "Business -
Properties."
After this Offering, the Company intends to lease a new facility of
approximately 35,000 square feet in or around Atlanta, Georgia, which would
comprise the Company's executive and administrative offices, research and
testing laboratories and CST manufacturing plant. The Company is currently in
the process of selecting a suitable site for such facility. See "Use of
Proceeds." Upon commencement of its occupancy at such facility, the Company,
together with Commodore, may elect to terminate the existing lease in Columbus,
Ohio.
Future Transactions
In connection with the Offering, the Company's Board of Directors has
adopted a policy whereby any future transactions between the Company and any of
its subsidiaries, affiliates, officers, directors, principal stockholders or any
affiliates of the foregoing will be on terms no less favorable to the Company
than could reasonably be obtained in "arm's length" transactions with
independent third parties, and any such transactions will also be approved by a
majority of the Company's disinterested outside directors.
-47
<PAGE>
DESCRIPTION OF SECURITIES
General
The Company is authorized by its Certificate of Incorporation to issue
an aggregate of 50,000,000 shares of Common Stock, par value $.001 per share,
and 5,000,000 shares of preferred stock, par value $.001 per share (the
"Preferred Stock"), which Preferred Stock may be issued with such rights,
designations and privileges (including redemption and voting rights) as the
Board of Directors may, from time to time, determine.
Common Stock
Holders of the Common Stock are entitled to one vote per share and,
subject to the rights of the holders of the Preferred Stock (discussed below),
to receive dividends when and as declared by the Board of Directors, and to
share ratably in the assets of the Company legally available for distribution in
the event of the liquidation, dissolution or winding up of the Company. Holders
of the Common Stock do not have subscription, redemption or conversion rights,
nor do they have any preemptive rights. In the event the Company were to elect
to sell additional shares of its Common Stock following this Offering, investors
in this Offering would have no right to purchase such additional shares. As a
result, their percentage equity interest in the Company would be diluted. The
shares of Common Stock offered hereby will be, when issued and paid for,
fully-paid and not liable for further call or assessment. Holders of the Common
Stock do not have cumulative voting rights, which means that the holders of more
than half of the outstanding shares of Common Stock (subject to the rights of
the holders of the Preferred Stock) can elect all of the Company's directors, if
they choose to do so. In such event, the holders of the remaining shares would
not be able to elect any directors. The Board is empowered to fill any vacancies
on the Board. Except as otherwise required by the Delaware Law, all stockholder
action is taken by vote of a majority of the outstanding shares of Common Stock
voting as a single class present at a meeting of stockholders at which a quorum
(consisting of a majority of the outstanding shares of the Company's Common
Stock) is present in person or by proxy.
Preferred Stock
The Company is authorized by its Certificate of Incorporation to issue
a maximum of 5,000,000 shares of Preferred Stock, in one or more series and
containing such rights, privileges and limitations, including voting rights,
conversion privileges and/or redemption rights, as may, from time to time, be
determined by the Board of Directors of the Company. Preferred Stock may be
issued in the future in connection with acquisitions, financings or such other
matters as the Board of Directors deems to be appropriate. In the event that any
such shares of Preferred Stock shall be issued, a Certificate of Designation,
setting forth the series of such Preferred Stock and the relative rights,
privileges and limitations with respect thereto, shall be filed with the
Secretary of State of the State of Delaware. The effect of such Preferred Stock
is that the Company's Board of Directors alone, within the bounds and subject to
the federal securities laws and the Delaware Law, may be able to authorize the
issuance of Preferred Stock which could have the effect of delaying, deferring
or preventing a change in control of the Company without further action by the
stockholders and may adversely affect the voting and other rights of holders of
Common Stock. The issuance of Preferred Stock with voting and conversion rights
may also adversely affect the voting power of the holders of Common Stock,
including the loss of voting control to others.
Warrants
The following is a brief summary of certain provisions of the Warrants.
Reference is made to the actual text of the Warrant Agreement between the
Company, the Representative and The Bank of New York (the "Warrant Agent"), a
copy of which has been filed as an exhibit to the Registration Statement of
which this Prospectus is a part, for a more complete description of the
Warrants. See "Additional Information."
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<PAGE>
Exercise Price and Terms. Each Warrant entitles the registered holder
thereof to purchase, at any time during the four year period commencing one year
after the date of this Prospectus, one share of Common Stock at a price of
$________ per share [140% of the initial public offering price per share of
Common Stock], subject to adjustment in accordance with the anti-dilution and
other provisions referred to below. The holder of any Warrant may exercise such
Warrant by surrendering the certificate representing the Warrant to the Warrant
Agent, with the subscription form thereon properly completed and executed,
together with payment of the exercise price. No fractional shares will be issued
upon the exercise of the Warrants.
Adjustments. The exercise price and the number of shares of Common
Stock purchasable upon the exercise of the Warrants are subject to adjustment
upon the occurrence of certain events, including stock dividends, stock splits,
combinations or reclassifications of the Common Stock, or sale by the Company of
shares of its Common Stock or other securities convertible into Common Stock
(exclusive of options and shares under the Plan, and other limited exceptions)
at a price below the then-applicable exercise price of the Warrants.
Additionally, an adjustment would be made in the case of a reclassification or
exchange of Common Stock, consolidation or merger of the Company with or into
another corporation (other than a consolidation or merger in which the Company
is the surviving corporation) or sale of all or substantially all of the assets
of the Company, in order to enable warrantholders to acquire the kind and number
of shares of stock or other securities or property receivable in such event by a
holder of the number of shares of Common Stock that might have been purchased
upon the exercise of the Warrant.
Redemption Provisions. Commencing 18 months after the date of this
Prospectus, the Warrants are subject to redemption at $.10 per Warrant on 30
days' prior written notice provided that the average closing sale price of the
Common Stock as reported on the AMEX equals or exceeds $______ per share [300%
of the initial public offering price of the Common Stock] (subject to adjustment
for stock dividends, stock splits, combinations or reclassifications of the
Common Stock), for any 20 trading days within a period of 30 consecutive trading
days ending on the fifth trading day prior to the date of the notice of
redemption. In the event the Company exercises the right to redeem the Warrants,
such Warrants will be exercisable until the close of business on the business
day immediately preceding the date for redemption fixed in such notice. If any
Warrant called for redemption is not exercised by such time, it will cease to be
exercisable and the holder will be entitled only to the redemption price.
Transfer, Exchange and Exercise. The Warrants are in registered form
and may be presented to the Warrant Agent for transfer, exchange or exercise at
any time on or prior to their expiration date five years from the date of this
Prospectus, at which time the Warrants become wholly void and of no value. If a
market for the Warrants develops, the holder may sell the Warrants instead of
exercising them. There can be no assurance, however, that a market for the
Warrants will develop or continue.
Modification of Warrants. The Company and the Warrant Agent may make
such modifications to the Warrants as they deem necessary and desirable that do
not adversely affect the interests of the warrantholders. The Company may, in
its sole discretion, lower the exercise price of the Warrants for a period of
not less than 30 days on not less than thirty (30) days' prior written notice to
the warrantholders and the Representative. Modification of the number of
securities purchasable upon the exercise of any Warrant, the exercise price and
the expiration date with respect to any Warrant requires the consent of
two-thirds of the warrantholders. No other modifications may be made to the
Warrants, without the consent of two-thirds of the warrantholders.
The Warrants are not exercisable unless, at the time of the exercise,
the Company has a current prospectus covering the shares of Common Stock
issuable upon exercise of the Warrants, and such shares have been registered,
qualified or deemed to be exempt under the securities laws of the state of
residence of the exercising holder of the Warrants. Although the Company will
use its best efforts to have all of the shares of Common Stock issuable upon
exercise of the Warrants registered or qualified on or before the exercise date
and to maintain a current prospectus relating thereto until the expiration of
the Warrants, there can be no assurance that it will be able to do so.
-49-
<PAGE>
The Warrants are separately transferable immediately upon issuance.
Although the Securities will not knowingly be sold to purchasers in
jurisdictions in which the Securities are not registered or otherwise qualified
for sale, purchasers may buy Warrants in the aftermarket or may move to
jurisdictions in which the shares underlying the Warrants are not so registered
or qualified during the period that the Warrants are exercisable. In this event,
the Company would be unable to issue shares to those persons desiring to
exercise their Warrants, and holders of Warrants would have no choice but to
attempt to sell the Warrants in a jurisdiction where such sale is permissible or
allow them to expire unexercised.
Section 203 of the Delaware Law
Section 203 of the Delaware Law prohibits a publicly-held Delaware
corporation from engaging in a "business combination" with an "interested
stockholder" for a period of three years after the date of the transaction in
which the person became an interested stockholder, unless (i) prior to the date
of the business combination, the transaction is approved by the board of
directors of the corporation; (ii) upon consummation of the transaction which
resulted in the stockholder becoming an interested stockholder, the interested
stockholder owns at least 85% of the outstanding voting stock, or (iii) on or
after such date, the business combination is approved by the board of directors
and by the affirmative vote of at least 66-2/3% of the outstanding voting stock
that is not owned by the interested stockholder. A "business combination"
includes mergers, asset sales and other transactions resulting in a financial
benefit to the stockholder. An "interested stockholder" is a person, who,
together with affiliates and associates, owns (or within three years, did own)
15% or more of the corporation's voting stock.
Transfer Agent and Registrar and Warrant Agent
The Transfer Agent and Registrar for the Common Stock and the Warrant
Agent for the Warrants is The Bank of New York, 101 Barclay Street, New York,
New York 10286.
-50-
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this Offering, the Company will have 20,000,000
shares of Common Stock outstanding, of which only the 5,000,000 shares offered
hereby (and the 5,000,000 Warrants) will be transferable without restriction
under the Securities Act. The other 15,000,000 outstanding shares of Common
Stock, all of which are owned by Commodore, are "restricted securities" (as that
term is defined in Rule 144 promulgated under the Securities Act) which may be
publicly sold only if registered under the Securities Act or if sold in
accordance with an applicable exemption from registration, such as Rule 144. In
general, under Rule 144 as currently in effect, subject to the satisfaction of
certain other conditions, a person, including an affiliate of the Company, who
has beneficially owned restricted securities for at least two years, is entitled
to sell (together with any person with whom such individual is required to
aggregate sales), within any three-month period, a number of shares that does
not exceed the greater of 1% of the total number of outstanding shares of the
same class, or, if the Common Stock is quoted on the AMEX or another national
securities exchange, the average weekly trading volume during the four calendar
weeks preceding the sale. Sales under Rule 144 are also subject to certain
manner of sale provisions, notice requirements, and the availability of current
public information regarding the Company. A person who has not been an affiliate
of the Company for at least three months, and who has beneficially owned
restricted securities for at least three years, is entitled to sell such
restricted shares under Rule 144 without regard to any of the limitations
described above.
Subject to certain limitations on the aggregate offering price of a
transaction and other conditions, Rule 701 generally may be relied upon with
respect to the sale of shares purchased from the Company by its employees,
directors, officers or consultants prior to the date of this Prospectus pursuant
to written compensatory benefit plans such as the Plan and written contracts
such as option agreements. Rule 701 is also available for sales of shares
acquired by persons pursuant to the exercise of options granted prior to the
effective date of this Prospectus, regardless of whether the option exercise
occurs before or after the effective date of this Prospectus. Securities issued
in reliance on Rule 701 are "restricted securities" within the meaning of Rule
144 and, beginning 90 days after the date of this Prospectus, may be sold by
persons other than affiliates of the Company subject only to the manner of sale
provisions of Rule 144 and by affiliates under Rule 144 without compliance with
its two-year minimum holding period requirement.
Options granted under the Plan to purchase a total of 1,235,000 shares
of Common Stock are currently outstanding, and options to purchase an additional
765,000 shares of Common Stock are reserved for future issuance under the Plan.
Of the options granted under the Plan, 265,000 of such options are currently
exercisable, with the remaining outstanding options to become exercisable at the
rate of 265,000 options in each of December 1997 and 1998, and 220,000 options
in each of December 1999 and 2000. Shares of Common Stock issued upon the
exercise of outstanding options will be "restricted securities" and may not be
sold in the absence of registration under the Securities Act unless an exemption
from registration is available. Potential exemptions include those available
under Rule 144 and Rule 701.
No prediction can be made as to the effect that future sales of Common
Stock, or the availability of shares of Common Stock for future sale, will have
on the market prices of the Common Stock and the Warrants prevailing from time
to time. The Company and Commodore, as well as all officers and directors of the
Company and all holders of outstanding securities exercisable for or convertible
into Common Stock (other than the Representative's Warrants), have agreed not
to, directly or indirectly, issue, agree or offer to sell, sell, transfer,
assign, distribute, grant an option for purchase or sale of, pledge, hypothecate
or otherwise encumber or dispose of any beneficial interest in such securities
for a period of 13 months following the date of this Prospectus without the
prior written consent of the Representative. The sale or issuance, or the
potential for sale or issuance, of Common Stock after such 13-month period could
have an adverse impact on the market prices of the Common Stock and/or the
Warrants. Sales of substantial amounts of Common Stock or the perception that
such sales could occur could adversely affect prevailing market prices for the
Common Stock and/or the Warrants. See "Underwriting."
-51-
<PAGE>
UNDERWRITING
The Underwriters named below (the "Underwriters"), for whom National
Securities Corporation is acting as representative (in such capacity, the
"Representative"), have severally agreed, subject to the terms and conditions of
the Underwriting Agreement (the "Underwriting Agreement"), to purchase from the
Company and the Company has agreed to sell to the Underwriters on a firm
commitment basis, the respective number of shares of Common Stock and Warrants
set forth opposite their names:
<TABLE>
<CAPTION>
Number of Number of
Underwriters Shares Warrants
------------ --------- ---------
<S> <C> <C>
National Securities Corporation.................
--------- ---------
Total........................................... 5,000,000 5,000,000
========= =========
</TABLE>
The Underwriters are committed to purchase all the shares of Common
Stock and Warrants offered hereby, if any of such Securities are purchased. The
Underwriting Agreement provides that the obligations of the several Underwriters
are subject to conditions precedent specified therein.
The Company has been advised by the Representative that the
Underwriters propose initially to offer the Securities to the public at the
initial public offering prices set forth on the cover page of this Prospectus
and to certain dealers at such prices less concessions not in excess of $_____
per share of Common Stock and $______ per Warrant. Such dealers may reallow a
concession not in excess of $_____ per share of Common Stock and $______ per
Warrant to certain other dealers. After the commencement of the Offering, the
public offering price, concession and reallowance may be changed by the
Representative.
The Representative has informed the Company that it does not expect
sales to discretionary accounts by the Underwriters to exceed five percent of
the Securities offered hereby.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act. The Company has
also agreed to pay to the Representative a non-accountable expense allowance
equal to 3% of the gross proceeds derived from the sale of the Securities
underwritten, of which $50,000 has been paid to date.
Commodore and the Company have granted to the Underwriters an
over-allotment option, exercisable during the 45-day period from the date of
this Prospectus, to purchase from Commodore up to an additional 750,000 shares
of Common Stock and/or to purchase from the Company up to an additional 750,000
Warrants at the initial public offering prices per share and per Warrant,
respectively, offered hereby, less underwriting discounts and the
non-accountable expense allowance. Such option may be exercised only for the
purpose of covering over-allotments, if any, incurred in the sale of the
Securities offered hereby. To the extent such option is exercised in whole or in
part, each Underwriter will have a firm commitment, subject to certain
conditions, to purchase the number of the additional Securities proportionate to
its initial commitment. The Company will not receive any of the proceeds from
the sale of shares of Common Stock by Commodore.
All officers, directors and stockholders of the Company and all holders
of any options, warrants or other securities convertible, exercisable or
exchangeable for Common Stock have agreed not to, directly or indirectly, offer,
agree or offer to sell, sell, transfer, assign, encumber, grant an option for
the purchase or sale of, pledge or otherwise dispose of any beneficial interest
-52-
<PAGE>
in such securities for a period of 13 months following the date of this
Prospectus without the prior written consent of the Representative. An
appropriate legend shall be marked on the face of certificates representing all
such securities.
The Company has agreed not to, without the prior written consent of the
Representative, issue, sell, agree or offer to sell, grant an option for the
purchase or sale of, or otherwise transfer or dispose of any of its securities
for a period of 13 months following the effective date of the Registration
Statement of which this Prospectus is a part, except pursuant to the Warrants
and those options existing on the date of this Prospectus.
In connection with this Offering, the Company has agreed to sell to the
Representative, for $.0001 per warrant, warrants to purchase from the Company up
to 500,000 shares of Common Stock and/or up to 500,000 Warrants (the
"Representative's Warrants"). The Representative's Warrants are initially
exercisable at a price of $________ per share [120% of the initial public
offering price per share of Common Stock] and $_____ per Warrant [120% of the
initial public offering price per Warrant] for a period of four years,
commencing one year after the date of this Prospectus and are restricted from
sale, transfer, assignment or hypothecation for a period of 12 months from the
date of this Prospectus, except to officers of the Representative. The
Representative's Warrants provide for adjustment in the number of securities
issuable upon the exercise thereof as a result of certain subdivisions and
combinations of the Common Stock. The Representative's Warrants grant to the
holders thereof certain rights of registration for the securities issuable upon
exercise thereof.
Alan R. Burkart, the Company's President and Chief Executive Officer,
intends to purchase 10,000 shares of Common Stock and 10,000 Warrants offered
hereby at their respective initial public offering prices.
Although the Representative has been in business for over 40 years, the
Representative has participated in only ten public offerings as an underwriter
during the last five years. In evaluating an investment in the Company,
prospective purchasers of the Securities offered hereby should consider the
Representative's limited experience.
Prior to this Offering, there has been no public market for the
Securities. Consequently, the initial public offering prices of the Securities
and the terms of the Warrants have been determined by negotiation between the
Company and the Representative and do not necessarily bear any relationship to
the Company's asset value, net worth, or other established criteria of value.
The factors considered in such negotiations were prevailing market conditions,
the history of and prospects for the industry in which the Company competes, an
assessment of the Company's management and technology, the prospects of the
Company, its capital structure, the market for initial public offerings and
market prices of similar securities of comparable publicly-traded companies.
Upon the exercise of any Warrants more than one year after the date of
this Prospectus, which exercise was solicited by the Representative, and to the
extent not inconsistent with the guidelines of the National Association of
Securities Dealers, Inc. and the Rules and Regulations of the Securities and
Exchange Commission (the "Commission"), the Company has agreed to pay the
Representative a commission of 5% of the aggregate exercise price of such
Warrants. However, no compensation will be paid to the Representative in
connection with the exercise of the Warrants if (a) the market price of the
Common Stock is lower than the exercise price, (b) the Warrants are held in a
discretionary account, or (c) the Warrants are exercised in an unsolicited
transaction where the holder of the Warrant has not stated in writing that the
transaction was solicited and has not designated in writing the Representative
as soliciting agent. Unless granted an exemption by the Commission from Rule
10b-6 under the Exchange Act, the Representative and any soliciting
broker-dealers will be prohibited from engaging in any market-making activities
or solicited brokerage activities with regard to the Company's securities for
the periods prescribed by exemption (xi) to Rule 10b-6 before the solicitation
activity or the termination (by waiver or otherwise) of any right that the
Representative and any soliciting broker-dealers may have to receive a fee for
the exercise of the Warrants following such solicitation. As a result, the
-53-
<PAGE>
Representative and any soliciting broker-dealers may be unable to continue to
provide a market for the Common Stock or Warrants during certain periods while
the Warrants are exercisable. If the Representative has engaged in any of the
activities prohibited by Rule 10b-6 during the periods described above, the
Representative has undertaken to waive unconditionally its rights to receive a
commission on the exercise of such Warrants.
The foregoing is a summary of the principal terms of the agreements
described above. Reference is made to a copy of each such agreement which are
filed as exhibits to the Registration Statement of which this Prospectus is a
part for a more complete description thereof. See "Additional Information."
LEGAL MATTERS
The validity of the issuance of the Securities offered hereby will be
passed upon for the Company by the law firm of Greenberg, Traurig, Hoffman,
Lipoff, Rosen & Quentel, New York, New York, as counsel to the Company in
connection with this Offering. Orrick, Herrington & Sutcliffe LLP, New York, New
York, has acted as counsel to the Underwriters in connection with this Offering.
A shareholder of Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel is the
holder of stock options to purchase an aggregate of 400,000 shares of Commodore
common stock, representing less than 1% of Commodore's outstanding common stock.
EXPERTS
The financial statements included in this Prospectus and in the
Registration Statement of which this Prospectus is a part have been audited by
Tanner + Co., independent certified public accountants, to the extent and for
the period set forth in the report of such firm contained herein and in the
Registration Statement of which this Prospectus is a part. All such financial
statements have been included in reliance upon such report given upon the
authority of such firm as experts in auditing and accounting.
ADDITIONAL INFORMATION
The Company has filed with the Commission in Washington D.C., a
Registration Statement under the Securities Act with respect to the Securities
offered hereby. This Prospectus, filed as a part of the Registration Statement,
does not contain certain information set forth in or annexed as exhibits to the
Registration Statement. For further information regarding the Company and the
Securities offered hereby, reference is made to the Registration Statement and
to the exhibits filed as a part thereof, which may be inspected at the office of
the Commission without charge or copies of which may be obtained therefrom upon
request to the Commission and payment of the prescribed fee. With respect to
each contract, agreement or other document referred to in this Prospectus and
filed as an exhibit to the Registration Statement, reference is made to such
exhibit for a more complete description of the matter involved.
The Registration Statement and such exhibits and schedules may be
inspected without charge at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
following Regional Offices of the Commission: New York Regional Office, 7 World
Trade Center, 13th Floor, New York, New York 10048, and Chicago Regional Office,
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511. Copies of such material may be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. The Registration Statement may also be accessed on the World
Wide Web through the Commission's Internet address at "http://www.sec.gov."
-54-
<PAGE>
COMMODORE SEPARATION TECHNOLOGIES, INC.
(A Development Stage Company)
INDEX TO FINANCIAL STATEMENTS
Page
Independent Auditors' Report.................................. F-2
Balance Sheet as of June 30, 1996............................. F-3
Statements of Operations for the period from
November 15, 1995 (date of inception) to June 30,
1996.......................................................... F-4
Statement of Stockholders' Deficit for the period
from November 15, 1995 (date of inception)
to June 30, 1996.............................................. F-5
Statement of Cash Flows for the period from November 15, 1995
(date of inception) to June 30, 1996.......................... F-6
Notes to Financial Statements................................. F-7
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Commodore Separation Technologies, Inc.
We have audited the accompanying balance sheet of Commodore Separation
Technologies, Inc. (a development stage company) as of June 30, 1996, and the
related statements of operations, stockholders' deficit, and cash flows for the
period from November 15, 1995 (date of inception) to June 30, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Commodore Separation
Technologies, Inc. (a development stage company) as of June 30, 1996, and the
results of its operations and its cash flows for the period from November 15,
1995 (date of inception) to June 30, 1996, in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in note 4, the
Company's significant operating losses and deficits in working capital and
stockholders' equity raise substantial doubt about its ability to continue as a
going concern. Management's plans in regard to these matters are also described
in note 4. The accompanying financial statements do not include any adjustment
that might result from the outcome of this uncertainty.
TANNER + CO.
Salt Lake City, Utah
August 1, 1996 except note 7,
which is dated September 6, 1996
F-2
<PAGE>
COMMODORE SEPARATION TECHNOLOGIES, INC.
(A Development Stage Company)
Balance Sheet
June 30, 1996
ASSETS
Current assets - cash $ 2,533
--------
Property and equipment:
Technical equipment 7,498
Office equipment 3,142
--------
10,640
Less accumulated depreciation 52
--------
Net property and equipment 10,588
--------
Intangible assets, net of accumulated amortization
of $101 10,206
--------
$ 23,327
========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable $ 18,254
Accrued liabilities 12,276
Due to related party 1,033
Note payable to stockholder 52,600
--------
Total current liabilities 84,163
--------
Commitments and contingencies: --
Stockholders' deficit;
Preferred stock, $.001 par value,
5,000,000 shares authorized, and
no shares issued --
Common stock, $.001 par value,
50,000,000 shares authorized,
15,000,000 shares issued and
outstanding 15,000
Subscription receivable (14,900)
Deficit accumulated during the development stage (60,936)
--------
Total stockholders' deficit (60,836)
--------
$ 23,327
========
See accompanying notes to financial statements
F-3
<PAGE>
COMMODORE SEPARATION TECHNOLOGIES, INC.
(A Development Stage Company)
Statements of Operations
Period from November 15, 1995 (Date of
Inception) to June 30, 1996
Revenue $ --
Costs and expenses:
Research and development 50,080
Amortization 101
General and administrative 9,720
--------
Total costs and expenses 59,901
--------
Loss from operations (59,901)
Interest expense (1,035)
--------
Net loss before income taxes (60,936)
Provision for income taxes --
--------
Net loss $(60,936)
--------
Loss per share $ (.00)
========
See accompanying notes to financial statements.
F-4
<PAGE>
COMMODORE SEPARATION TECHNOLOGIES, INC.
(A Development Stage Company)
Statement of Stockholders' Deficit
Period from November 15, 1995 (Date of
Inception) Through June 30, 1996
<TABLE>
<CAPTION>
Deficit
Accumulated
Common Stock During the Total
----------------------- Subscription Development Stockholders'
Shares Amount Receivable Stage Deficit
------ ------ ---------- ----- -------
<S> <C> <C> <C> <C> <C>
Balance, November 15, 1995 - $ - $ - $ - $ -
Common stock issued for
cash at $1 per share 100 100 - - 100
Forward stock split
150,000 shares for one share 14,999,900 14,900 (14,900) - -
Net loss - - - (60,936) (60,936)
---------- ------- ------- ------- -------
Balance, June 30, 1996 15,000,000 $15,000 $(14,900) $(60,936) $(60,836)
========== ======= ======= ======= =======
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE>
COMMODORE SEPARATION TECHNOLOGIES, INC.
(A Development Stage Company)
Statement of Cash Flows
Period from November 15, 1995 (Date of Inception) to June 30, 1996
Cash flows from operating activities:
Net loss $(60,936)
Adjustments to reconcile net loss to
net cash (used in) operating
activities:
Depreciation and amortization 153
Increase (decrease) in:
Accounts payable 18,254
Accrued liabilities 12,276
Due to related party 1,033
--------
Net cash used in
operating activities (29,220)
--------
Cash flows from investing activities:
Acquisition of intangible assets (10,307)
Purchase of property and equipment (3,142)
Construction technical equipment (7,498)
--------
Net cash used in
investing activities (20,947)
--------
Cash flows from financing activities:
Proceeds from sale of common stock 100
Note payable to stockholder 52,600
--------
Net cash provided by
financing activities 52,700
--------
Increase in cash 2,533
Cash, beginning of period --
--------
Cash, end of period $ 2,533
========
Supplemental disclosure of cash flow information
Cash paid during the period for:
Interest $ -
======
Income taxes $ -
======
See accompanying notes to financial statements.
F-6
<PAGE>
COMMODORE SEPARATION TECHNOLOGIES, INC.
(A Development Stage Company)
Notes to Financial Statements
June 30, 1996
(1) Summary of Significant Accounting Policies
Organization and Development Stage Company
Commodore Separation Technologies, Inc. (a development stage
company) (the "Company") was incorporated on November 15, 1995, under
the laws of the state of Delaware. As part of the capitalization,
Commodore Environmental Services, Inc. ("Commodore") contributed its
rights to the separation technology and assigned a royalty payable of
2% from future technology revenue that the Company may realize.
The Company is a process technology company which has
developed and intends to commercialize its separation technology and
recovery system, known as CST. Based on the results of more than 100
laboratory tests and one significant field test to date, the Company
believes that CST is capable of effectively separating and extracting
various solubilized materials, including metals, organic chemicals,
biochemicals, radionuclides and other targeted substances, from liquid
and gaseous process streams. The Company has not commenced planned
principal operations. As such, the Company is considered a development
stage company as defined in SFAS No.7.
Fair Value of Financial Instruments
The fair value of financial instruments is determined by
reference to various market data and other valuation techniques as
appropriate. Financial instruments subject to possible material market
variations from the recorded book value are a note payable to a
stockholder and a note due to a related party. There are no material
differences in instruments from the recorded book value as of June 30,
1996.
Use of Accounting Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could
differ from those estimates.
Loss Per Share
Loss per share is computed based on the average number of
shares outstanding of 15,000,000 shares as of June 30, 1996 and for the
period then ended.
Cash Equivalents
For purposes of the statement of cash flows, the Company
considers all highly liquid debt instruments purchased with an original
maturity of three months or less to be cash equivalents.
F-7
<PAGE>
COMMODORE SEPARATION TECHNOLOGIES, INC.
(A Development Stage Company)
Notes to Financial Statements - Continued
(1) Summary of Significant Accounting Policies - Continued
Property and Equipment
Property and equipment are stated at cost. Major additions and
improvements are capitalized while minor replacements, maintenance and
repairs which do not increase the useful lives of the assets are
expensed as incurred. Depreciation and amortization have been provided
using a straight-line method over estimated useful lives of the assets.
Research equipment has been constructed by the Company and management
anticipates it will be placed in service in 1996. In connection with
the construction, the Company has not capitalized interest as part of
the asset cost as it is not material.
Intangible Assets
The Company has incurred costs associated with applying for
certain patents. These costs are amortized over 17 years. Accumulated
amortization was $101 at June 30, 1996.
Research and Development Expenditures
Research and development expenditures are charged to
operations as incurred except for those costs relating to the design or
construction of an asset having an economic useful life which are then
capitalized and depreciated over the estimated life.
Income Taxes
Deferred income taxes are provided, when material, in amounts
sufficient to give effect to timing differences between financial and
tax reporting.
(2) Related Party Transactions
The Company owes unsecured advances of $52,600 as of June 30,
1996 to its sole stockholder, Commodore. The Company owes interest on
the advances at the rate of 8 percent per annum. Accrued interest
payable at June 30, 1996 is $1,035.
The Company has unsecured non-interest bearing advances from a
related entity that has the same principal stockholder as the Company.
The amount owed to the related party at June 30, 1996 is $1,033.
Through June 30, 1996, the Company had an unwritten agreement
in which its sole stockholder provided space for the Company's New York
offices at no cost, and another company under common control provided
the Ohio facility space to the Company at no cost. Subsequent to June
30, 1996, the Company is paying a monthly rent of $750 for the Ohio
space.
F-8
<PAGE>
COMMODORE SEPARATION TECHNOLOGIES, INC.
(A Development Stage Company)
Notes to Financial Statements - Continued
(3) Income Taxes
The difference between the income tax benefit at statutory
rates for the period ended June 30, 1996, and the amount presented in
the financial statements is as follows:
Tax benefit at statutory rates $(21,000)
Valuation allowance 21,000
---------
$ -
=========
Deferred tax asset at June 30, 1996 is as follows:
Net operating loss carryforward $(21,000)
Valuation allowance 21,000
---------
Net deferred tax asset $ -
=========
At June 30, 1996, the Company has tax loss carryforwards of
approximately $21,000. The amount of and ultimate realization of
benefit from the net operating loss for income tax purposes is
dependent, in part, upon the tax laws in effect, future earnings of the
Company, and other future events, the effects of which cannot be
determined. A change in ownership of the Company may reduce the amount
of loss allowable. These net operating carryforwards begin to expire in
2011.
A valuation allowance has been established to reduce any
potential tax benefit as it is not known when or if the Company will
realize the benefit of net operating losses.
(4) Going Concern
The Company has sustained significant operating losses. In
addition, the Company has significant deficits in working capital and
stockholders' equity. These factors create an uncertainty about the
Company's ability to continue as a going concern. The Company has
received advances in working capital from its parent company to fund
operations to date. There can be no assurance that it will continue to
receive such assistance.
F-9
<PAGE>
COMMODORE SEPARATION TECHNOLOGIES, INC.
(A Development Stage Company)
Notes to Financial Statements - Continued
(4) Going Concern - Continued
The Company has commenced drafting and preparing a Securities
and Exchange Commission registration statement for a public offering of
five million shares of its common stock and five million warrants. If
the proposed public offering is consummated it will provide funds for
continuing operations. There is no assurance that the Company will be
successful in raising the needed working capital and equity through the
proposed public offering. The ability of the Company to continue as a
going concern is dependent on the Company obtaining external funding
and attaining future profitable operations. The financial statements do
not include any adjustment that might be necessary if the Company is
unable to continue as a going concern.
(5) Royalty Agreement
The Company has an agreement with an officer of the Company
where the officer is to receive a royalty of 2% of collected revenues
from the Company's membrane separation technology through
December 3, 2002.
(6) Recent Accounting Pronouncements
The Financial Accounting Standards Board has issued Statements
of Financial Accounting Standard Statement No. 121, "Accounting for
Long Lived Assets" and No. 123 "Accounting and Disclosure of
Stock-Based Compensation." Statement No. 121 is effective for years
beginning after December 15, 1995. The effect of adoption of Statement
No. 121 will not have a material effect on the Company's financial
statements. Statement No. 123 is effective for awards granted after
December 31, 1994, and has required financial presentation for years
beginning after December 15, 1995. The effect of adoption of Statement
123 is not expected to have a material effect on the Company's
financial statements.
(7) Subsequent Events
Public Stock Offering
Subsequent to June 30, 1996, the Company commenced drafting
and preparing a Securities and Exchange Commission registration
statement for a public offering of five million shares of common stock
and five million warrants.
F-10
<PAGE>
COMMODORE SEPARATION TECHNOLOGIES, INC.
(A Development Stage Company)
Notes to Financial Statements - Continued
(7) Subsequent Events - Continued
Employment Agreements
On August 1 and September 1, 1996, the Company entered into
employment agreements with certain officers of the Company. Commitments
under the employment agreements are as follows:
Annual
Year Compensation
---- ------------
1997 $ 619,000
1998 723,000
1999 723,000
2000 361,000
----------
$2,426,000
==========
Stock Option Plan
In September 1996, Commodore (as sole stockholder of the
Company) approved the Company's 1996 Stock Option Plan, as previously
adopted by the company's Board of Directors (the Plan), pursuant to
which officers, directors, key employees and/or consultants of the
Company can receive incentive stock options and non-qualified stock
options to purchase up to an aggregate of 2,000,000 shares of the
Company's Common Stock (of which no more than 1,500,000 shares may be
issued pursuant to non-qualified stock options). In September 1996, the
Company's Board of Directors awarded, under the Plan, based upon
completion of the public offering, non-qualified stock options to
certain key executive officers and directors entitling them to purchase
an aggregate of 1,100,000 shares of Common Stock, all of which provide
for an exercise price equal to the initial public offering price of the
Common Stock, are exercisable at the rate of 20% of the number of
options granted in each of calendar years 1996 through 2000, inclusive,
beginning on the consummation of the Offering and, unless exercised,
expire on December 31, 2001 (subject to prior termination in accordance
with the applicable stock option agreements). In addition,
non-qualified options to purchase an aggregate of 135,000 shares of
Common Stock were awarded, based upon completion of the public
offering, to members of the Board of Directors who are not employed or
otherwise affiliated with the Company, all of which are exercisable at
an exercise price equal to the initial public offering price of the
Common Stock, are exercisable at the rate of 33 1/3% of the number of
options granted in each of calendar years 1996 through 1998, inclusive,
beginning on the consummation of the Offering, and, unless exercised,
expire on December 31, 2001 (subject to prior termination in accordance
with the applicable stock option agreements). The exercise price
applicable to all outstanding stock options represent no less than 100%
of the fair market value of the underlying Common Stock as of the date
that such options were granted, as determined by the Board of Directors
of the Company on the date that such options were granted.
F-11
<PAGE>
COMMODORE SEPARATION TECHNOLOGIES, INC.
(A Development Stage Company)
Notes to Financial Statements - Continued
(7) Subsequent Events - Continued
Basis of Presentation
On September 5, 1996, the Company amended its Articles of
Incorporation which changed the preferred and common stock to the
following:
Preferred Stock
The Company is authorized to issue up to 5,000,000
shares of $.001 par value preferred stock.
Common Stock
The Company is authorized to issue up to 50,000,000
shares of $.001 par value common stock.
The Company also effected a forward stock split of 150,000
shares for one share. This increased the total number of shares of
Common Stock issued and outstanding to 15,000,000 shares, which are all
held by Commodore.
The financial statements have been prepared as though the
above changes in stockholders' equity had occurred at November 15,
1995.
Capital Contribution
The Company, under an agreement with Commodore, will receive a
capital contribution of $400,000. Commodore will not receive any
additional common stock for this contribution. As of September 6, 1996,
the Company had received $274,900 of the additional contribution.
F-12
<PAGE>
==========================================================================
No dealer, salesperson or any other person has been authorized
to give any information or to make any representation other than
those contained in this Prospectus, and, if given or made, such
information or representations must not be relied upon as having
been authorized by the Company or any Underwriter. Neither
the delivery of this Prospectus nor any sale made hereunder shall,
under any circumstances, create any implication that there has
been no change in the affairs of the Company since the date
hereof or that the information contained herein is correct as of
any date subsequent to the date hereof. This Prospectus does not
constitute an offer to sell or a solicitation of an offer to buy any
securities offered hereby by anyone in any jurisdiction in which
such offer or solicitation is not authorized or in which the person
making such offer or solicitation is not qualified to do so or to
any person to whom it is unlawful to make such offer or
solicitation.
---------------
TABLE OF CONTENTS
Page
----
Prospectus Summary .................................................. 3
Risk Factors......................................................... 8
Use of Proceeds...................................................... 17
Capitalization....................................................... 19
Dividend Policy...................................................... 20
Dilution............................................................. 20
Selected Financial Data ............................................. 21
Management's Discussion and Analysis of Financial
Condition and Results of Operations.............................. 22
Business............................................................. 25
Management........................................................... 39
Executive Compensation............................................... 41
Principal Stockholders .............................................. 45
Certain Relationships and Related Transactions....................... 47
Description of Securities............................................ 48
Shares Eligible for Future Sale...................................... 51
Underwriting......................................................... 52
Legal Matters........................................................ 54
Experts.............................................................. 54
Additional Information............................................... 54
Index to Financial Statements........................................ F-1
Until _________, 1996 (25 days after the date of this Prospectus), all
dealers effecting transactions in the registered securities, whether or not
participating in this distribution, may be required to deliver a Prospectus.
This delivery requirement is in addition to the obligations of dealers to
deliver a Prospectus when acting as Underwriters and with respect to their
unsold allotments or subscriptions.
=============================================================================
<PAGE>
=============================================================================
COMMODORE
SEPARATION
TECHNOLOGIES, INC.
5,000,000 Shares of
Common Stock
and
5,000,000 Redeemable
Common Stock Purchase
Warrants
---------------
Prospectus
---------------
NATIONAL SECURITIES
CORPORATION
__________________, 1996
=============================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the Company in connection
with the sale of the Securities being registered. All amounts are estimates
except the SEC registration fee, the NASD filing fee and the AMEX listing fee.
SEC registration fee........................................ $ 41,874
NASD filing fee............................................. 12,644
AMEX listing fee............................................ 50,000
Registrar and Transfer Agent's fees......................... 10,000
Printing and engraving expenses............................. 50,000
Blue Sky fees and expenses.................................. 25,000
Legal fees and expenses..................................... 150,000
Accountant's fees and expenses.............................. 25,000
Miscellaneous............................................... 10,482
---------
Total.............................................. $ 375,000
=========
Item 14. Indemnification of Directors and Officers.
The Certificate of Incorporation and By-laws of the registrant provide
that the Company shall indemnify officers and directors to the fullest extent
allowed by the Delaware General Corporation Law, as it now exists and as may be
amended.
The Underwriting Agreement between the Company and National Securities
Corporation, as representative of the several Underwriters (the
"Representative"), provides for indemnification of the officers and directors of
the registrant under certain circumstances.
Item 15. Recent Sales of Unregistered Securities.
(a) In November and December 1995, the registrant issued an aggregate
of 15,000,000 shares of its Common Stock to its corporate parent, Commodore
Environmental Services, Inc.
In September 1996, the registrant issued to officers and directors,
effective upon completion of this Offering, pursuant to the registrant's 1996
Stock Option Plan, options to purchase an aggregate of 1,235,000 shares of the
registrant's Common Stock.
II-1
<PAGE>
(b) There were no underwriters, brokers or finders employed in
connection with any of the transactions set forth in Item 15(a).
(c) The issuances described in Item 15(a) were deemed exempt from
registration under the Securities Act in reliance on Section 4(2) of the
Securities Act as transactions by an issuer not involving any public offering.
In addition, certain of the issuances described in Item 15(a) were deemed exempt
from registration under the Securities Act in reliance upon Rule 701 promulgated
under the Securities Act. The recipients of securities in each such transaction
represented their intentions to acquire the securities for investment only and
not with a view to or for sale in connection with any distribution thereof and
appropriate legends were affixed to the share certificates issued in such
transactions. All recipients had adequate access, through their relationships
with the registrant, to information about the registrant.
The registrant has not otherwise issued any securities exempt from the
registration requirements of the Securities Act pursuant to Section 4(2) thereof
Item 16. Exhibits and Financial Statement Schedules.
(a) Exhibits.
<TABLE>
<CAPTION>
Exhibit No. Description
- ---------- ------------
<S> <C>
*1.1 Form of Underwriting Agreement between the Company and the Representative.
3.1 Restated Certificate of Incorporation of the Company.
3.2 By-Laws of the Company.
*4.1 Specimen Common Stock Certificate.
*4.2 Form of Warrant Agreement between the Company, the Representative and The Bank of New
York.
*4.3 Specimen Warrant Certificate.
*4.4 Form of Representative's Warrant Agreement between the Company and the Representative,
including form of Representative's Warrant therein.
*5.1 Opinion of Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel as to the legality of the
Securities being offered.
10.1 Employment Agreement, dated as of August 1, 1996, between the Company and Alan
R. Burkart.
10.2 Employment Agreement, dated as of September 1, 1996, between the Company and Carl O.
Magnell.
10.3 Employment Agreement, dated as of September 1, 1996, between the Company and James
M. DeAngelis.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description
- ---------- ------------
<S> <C>
10.4 Employment Agreement, dated as of September 1, 1996, between the Company and Srinivas
Kilambi, Ph.D.
10.5 Employment Agreement, dated as of September 1, 1996, between the Company and Michael
D. Kiehnau.
10.6 1996 Stock Option Plan of the Company.
10.7 Executive Bonus Plan of the Company.
10.8 Memorandum of Understanding, dated August 30, 1996, between the Company and Teledyne
Brown Engineering, a Division of Teledyne Industries, Inc.
10.9 Memorandum of Understanding, dated August 29, 1996, between the Company and Sverdrup
Environmental, Inc.
10.10 Services Agreement, dated August 31, 1996, between the Company and Commodore CFC
Technologies, Inc.
10.11 Assignment of Technology Agreement, dated as of December 4, 1995, by and between the
Company (formerly Commodore Membrane Technologies, Inc.) and Srinivas Kilambi, Ph.D.
22.1 Subsidiaries of the Company.
23.1 Consent of Tanner + Co.
23.2 Consent of Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel (included in the opinion
filed as Exhibit 5.1).
23.3 Consent of John A. Cenerazzo.
23.4 Consent of Jon Lee Prather.
25.1 Power of Attorney (set forth on signature page of the Registration Statement).
27.1 Financial Data Schedule.
</TABLE>
- ------------
* To be filed by amendment.
(b) Financial Statement Schedules.
None required.
Item 17. Undertakings.
The undersigned registrant hereby undertakes as follows:
II-3
<PAGE>
(a) To file, during any period in which offers or sales are being made,
a post-effective amendment(s) 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 the 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
end of the estimated maximum offering range may be reflected
in the form of prospectus filed with the Commission pursuant
to Rule 424(b) under the Securities Act if, in the
aggregate, the changes in volume and price represent no more
than a 20% change in the maximum aggregate offering price
set forth in the "Calculation of Registration Fee" table in
the effective registration statement;
(iii) to include any material information with respect to the plan
of distribution not previously disclosed in the Registration
Statement or any material change in such information in the
Registration Statement.
(b) 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.
(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 provisions described in Item 14, or otherwise,
the registrant has been advised 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. 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.
(d) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(e) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus 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.
II-4
<PAGE>
(f) To provide to the underwriter at the closing specified in the
underwriting agreement certificates in such denominations and registered in such
names as required by the underwriter to permit prompt delivery to each
purchaser.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in New York, New York on
September 9, 1996.
COMMODORE SEPARATION TECHNOLOGIES, INC.
By: /s/ Alan R. Burkart
------------------------------------------------------
Alan R. Burkart, President and Chief Executive Officer
POWER OF ATTORNEY
We, the undersigned officers and directors of Commodore Separation
Technologies, Inc., hereby severally constitute and appoint Paul E. Hannesson,
Alan R. Burkart and Bentley J. Blum and each of them (with full power to each of
them to act alone), our true and lawful attorneys-in-fact and agents, with full
power of substitution, for us and in our stead, in any and all capacities, to
sign any and all amendments (including pre-effective and post-effective
amendments) to this Registration Statement and all documents relating thereto,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting to
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing necessary or advisable to be done in
and about the premises, as full to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all the said attorneys-in-fact and
agents, or any of them, or their substitute or substitutes may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Paul E. Hannesson Chairman of the Board September 9, 1996
- ------------------------
Paul E. Hannesson
/s/ Alan R. Burkart President, Chief Executive September 9, 1996
- ------------------------ Officer and Director (principal
Alan R. Burkart executive officer)
/s/ Michael D. Kiehnau Chief Financial Officer September 9, 1996
- ------------------------ (principal financial and
Michael D. Kiehnau accounting officer)
/s/ Bentley J. Blum Director September 9, 1996
- ------------------------
Bentley J. Blum
</TABLE>
II-6
<PAGE>
Exhibit 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF
COMMODORE MEMBRANE TECHNOLOGIES, INC.
Commodore Membrane Technologies, Inc., a corporation organized and
existing under the laws of the State of Delaware, hereby certifies as follows:
1. The name of the Corporation is Commodore Membrane Technologies, Inc.
The date of filing of its original Certificate of Incorporation with the
Secretary of State of the State of Delaware was November 15, 1995.
2. This Restated Certificate of Incorporation restates and integrates
and further amends the Certificate of Incorporation of this Corporation by (a)
changing the name of the Corporation, (b) increasing the number and changing the
par value of the authorized common stock and establishing a class of preferred
stock of the Corporation, (c) electing to be subject to the provisions of
Section 203 of the General Corporation Law of the State of Delaware, (d)
limiting the liability of directors of the Corporation, and (e) providing for
indemnification of directors and officers of the Corporation.
3. The text of the Certificate of Incorporation, as amended or
supplemented heretofore is further amended hereby to read as herein set forth in
full:
ARTICLE 1. NAME
The name of the Corporation is Commodore Separation Technologies, Inc.
ARTICLE 2. REGISTERED OFFICE AND AGENT
The address of its registered office in the State of Delaware is
Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County
of New Castle. The name of its registered agent at such address is The
Corporation Trust Company.
ARTICLE 3. PURPOSES
The nature of the business or purposes to be conducted or promoted is
to engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of the State of Delaware.
<PAGE>
ARTICLE 4. SHARES
The aggregate number of shares of capital stock which the Corporation
shall have authority to issue is 55,000,000 shares of capital stock consisting
of:
(a) 50,000,000 shares of Common Stock, par value $.001 per
share (the "Common Stock"); and
(b) 5,000,000 shares of Preferred Stock, par value $.001 per
share (the "Preferred Stock").
Part A: Common Stock
(a) Each share of Common Stock issued and outstanding shall be
identical in all respects one with the other, and no dividends shall be paid on
any shares of Common Stock unless the same dividend is paid on all shares of
Common Stock outstanding at the time of such payment.
(b) Except for and subject to those rights expressly granted
to the holders of the Preferred Stock, or except as may be provided by the
General Corporation Law of the State of Delaware, the holders of Common Stock
shall have exclusively all other rights of stockholders including, but not by
way of limitation, (i) the right to receive dividends, when, as and if declared
by the Board of Directors out of assets lawfully available therefor, and (ii) in
the event of any distribution of assets upon liquidation, dissolution or winding
up of the Corporation or otherwise, the right to receive ratably and equally all
the assets and funds of the Corporation remaining after payment to the holders
of the Preferred Stock of the Corporation of the specific amounts which they are
entitled to receive upon such liquidation, dissolution or winding up of the
Corporation as herein provided.
(c) In the event that the holder of any share of Common Stock
shall receive any payment of any dividend on, liquidation of, or other amounts
payable with respect to, any shares of Common Stock, which he is not then
entitled to receive, he will forthwith deliver the same in the form received to
the holders of shares of the Preferred Stock as their respective interests may
appear, or the Corporation if no shares of Preferred Stock are then outstanding,
and until so delivered will hold the same in trust for such holders or the
Corporation.
(d) Each holder of shares of Common Stock shall be entitled to
one vote for each share of such Common Stock held by him, and voting power with
respect to all classes of securities of the Corporation shall be vested solely
in the Common Stock, other than as specifically provided in the Corporation's
Certificate of Incorporation, as it may be amended, with respect to the
Preferred Stock.
2
<PAGE>
(e) No stockholder shall be entitled to any preemptive right
to purchase or subscribe for any unissued stock of any class or any additional
shares of any class to be issued by reason of any increase in the authorized
capital stock of the Corporation.
Part B: Preferred Stock
Authority is hereby vested in the Board of Directors of the Corporation
to provide for the issuance of Preferred Stock and in connection therewith to
fix by resolution providing for the issue of such series, the number of shares
to be included and such of the preferences and relative participating, optional
or other special rights and limitations of such series, including, without
limitation, rights of redemption or conversion into Common Stock, to the fullest
extent now or hereafter permitted by the General Corporation Law of the State of
Delaware.
ARTICLE 5. BY-LAWS
The Board of Directors is expressly authorized to adopt, amend or
repeal the by-laws of the Corporation.
ARTICLE 6. EXISTENCE
The Corporation is to have perpetual existence.
ARTICLE 7. BUSINESS COMBINATIONS WITH INTERESTED STOCKHOLDERS
The Corporation expressly elects to be subject to the provisions of
Section 203 of the General Corporation Law of the State of Delaware.
ARTICLE 8. ELECTION OF DIRECTORS
Elections of directors need not be by written ballot unless the by-laws
of the Corporation shall otherwise provide.
ARTICLE 9. SPECIAL MEETINGS OF STOCKHOLDERS
Special meetings of the stockholders of the Corporation may only be
called by the Board of Directors of the Corporation upon the request of any two
directors, by the holders of one-third or more of the outstanding Common Stock,
or by the duly elected officers of the Corporation.
ARTICLE 10. AMENDMENTS TO CERTIFICATE OF INCORPORATION
The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by
3
<PAGE>
statute or by this Certificate of Incorporation, and all rights conferred upon
stockholders herein are granted subject to this reservation.
ARTICLE 11. LIMITATION OF DIRECTOR LIABILITY
No director of the Corporation shall be liable to the Corporation or
its stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability (i) for any breach of the director's duty of
loyalty to the Corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the General Corporation Law of the State of
Delaware, or (iv) for any transaction from which the director derived an
improper personal benefit.
ARTICLE 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Except as may otherwise be specifically provided in this Certificate of
Incorporation, no provision of this Certificate of Incorporation is intended by
the Corporation to be construed as limiting, prohibiting, denying or abrogating
any of the general or specific powers or rights conferred under the General
Corporation Law of the State of Delaware upon the Corporation, upon its
stockholders, bondholders and security holders, and upon its directors, officers
and other corporate personnel, including, in particular, the power of the
Corporation to furnish indemnification to directors and officers in the
capacities defined and prescribed by the General Corporation Law of the State of
Delaware and the defined and prescribed rights of said persons to
indemnification as the same are conferred under the General Corporation Law of
the State of Delaware. The Corporation shall, to the fullest extent permitted by
the laws of the State of Delaware, including, but not limited to Section 145 of
the General Corporation Law of the State of Delaware, as the same may be amended
and supplemented, indemnify any and all directors and officers of the
Corporation and may, in the discretion of the board of directors, indemnify any
and all other persons whom it shall have power to indemnify under said Section
or otherwise under Delaware law, from and against any and all of the expenses,
liabilities or other matters referred to or covered by said Section. The
indemnification provisions contained in the General Corporation Law of the State
of Delaware shall not be deemed exclusive of any other rights to which those
indemnified may be entitled under any By-Law, agreement, resolution of
stockholders or disinterested directors, or otherwise, and shall continue as to
a person who has ceased to be a director, officer, employee or agent, both as to
action in his official capacity and as to action in another capacity while
holding such office, and shall inure to the benefit of the heirs, executors and
administrators of such person.
ARTICLE 13. BOARD OF DIRECTORS
The number of directors constituting the Board of Directors shall be
determined by the Board of Directors, subject to the by-laws of the Corporation.
Any vacancy in the Board of Directors, whether arising from death, resignation,
removal (with or without cause), an
4
<PAGE>
increase in the number of directors or any other cause, may be filled by the
vote of either a majority of the directors then in office, though less than a
quorum, or by the stockholders at the next annual meeting thereof or at a
special meeting called for such purpose. Stockholders may not apply to request
that the Delaware Court of Chancery summarily order an election to be held to
fill any vacancies in the Board of Directors whether or not, at the time of
filling any vacancy or any newly created directorship, the directors then in
office shall constitute less than a majority of the whole Board of Directors as
constituted immediately prior to any such vacancy or increase. Each director so
elected shall hold office until the next meeting of the stockholders in which
the election of directors is in the regular order of business and until his
successor shall have been elected and qualified.
4. This Restated Certificate of Incorporation was duly proposed by the
Corporation's Board of Directors and duly adopted by written consent of the sole
stockholder of the Corporation in accordance with the applicable provisions of
Sections 228, 242 and 245 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, Commodore Membrane Technologies, Inc. has caused
this Restated Certificate of Incorporation to be signed by Alan R. Burkart, its
President and Chief Executive Officer, this 4th day of September 1996.
/s/ Alan R. Burkart
------------------------------------
Alan R. Burkart
President and Chief Executive Officer
5
<PAGE>
Exhibit 3.2
BY-LAWS
OF
COMMODORE SEPARATION TECHNOLOGIES, INC.
(A Delaware Corporation)
ARTICLE I
Offices
SECTION 1. Principal Office. The principal office of the Corporation
shall be located in New York, New York.
SECTION 2. Registered Office and Agent. The registered office of the
Corporation in the State of Delaware is Corporation Trust Center, 1209 Orange
Street, Wilmington, Delaware 19801. The name of the Corporation's registered
agent at such address is The Corporation Trust Company.
SECTION 3. Other Offices. The Corporation may also have an office or
offices other than said principal office at such place or places, either within
or without the State of Delaware, as the Board of Directors shall from time to
time determine or the business of the Corporation may require.
ARTICLE II
Meetings of Stockholders
SECTION 1. Place of Meetings. All meetings of the stockholders for the
election of directors or for any other purpose shall be held at such place as
may be fixed from time to time by the Board of Directors, or at such other
place, either within or without the State of Delaware, as shall be designated
from time to time by the Board of Directors.
SECTION 2. Annual Meeting. The annual meeting of the stockholders of
the Corporation for the election of directors and for the transaction of such
other business as may properly come before the meeting, shall be designated from
time to time by the Board of Directors.
SECTION 3. Special Meetings. Special meetings of the stockholders,
unless otherwise prescribed by statute, may be called at any time by the Board
of Directors or the Chairman of the Board, if one shall have been elected, or
the Vice Chairman of the Board, if one shall have been elected, or the
President, by the holders of 33-1/3% or more of the outstanding Common Stock, or
upon the request of any two members of the Board of Directors of the
Corporation.
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SECTION 4. Notice of Meetings. Notice of the place, date and hour of
holding of each annual and special meeting of the stockholders and, unless it is
the annual meeting, the purpose or purposes thereof, shall be given personally
or by mail in a postage prepaid envelope, not less than ten nor more than sixty
days before the date of such meeting, to each stockholder entitled to vote at
such meeting, and, if mailed, it shall be directed to such stockholder at his
address as it appears on the record of stockholders, unless he shall have filed
with the Secretary of the Corporation a written request that notices to him be
mailed at some other address, in which case it shall be directed to him at such
other address. Any such notice for any meeting other than the annual meeting
shall indicate that it is being issued at the direction of the Board of
Directors, the Chairman of the Board, the Vice-Chairman of the Board, the
President or the Secretary, whichever shall have called the meeting. Notice of
any meeting of stockholders shall not be required to be given to any stockholder
who shall attend such meeting in person or by proxy and shall not, prior to the
conclusion of such meeting, protest the lack of notice thereof, or who shall,
either before or after the meeting, submit a signed waiver of notice, in person
or by proxy. Unless the Board of Directors shall fix a new record date for an
adjourned meeting, notice of such adjourned meeting need not be given if the
time and place to which the meeting shall be adjourned were announced at the
meeting at which the adjournment is taken.
SECTION 5. Quorum. At all meetings of the stockholders, the holders of
a majority of the shares of the Corporation issued and outstanding and entitled
to vote thereat shall be present in person or by proxy to constitute a quorum
for the transaction of business, except as otherwise provided by statute. In the
absence of a quorum, the holders of a majority of the shares present in person
or by proxy and entitled to vote may adjourn the meeting from time to time. At
any such adjourned meeting at which a quorum may be present, any business may be
transacted which might have been transacted at the meeting as originally called.
SECTION 6. Organization. At each meeting of the stockholders, the
Chairman of the Board, if one shall have been elected, shall act as chairman of
the meeting. In the absence of the Chairman of the Board or if one shall not
have been elected, the Vice Chairman of the Board, or in his absence or if one
shall not have been elected, the President shall act as chairman of the meeting.
The Secretary, or in his absence or inability to act, the person whom the
chairman of the meeting shall appoint secretary of the meeting, shall act as
secretary of the meeting and keep the minutes thereof.
SECTION 7. Order of Business. The order of business at all meetings of
the stockholders shall be determined by the chairman of the meeting.
SECTION 8. Voting. Except as otherwise provided by statute or the
Certificate of Incorporation, each holder of record of shares of the Corporation
having voting power shall be entitled at each meeting of the stockholders to one
vote for each share standing in his name on the record of stockholders of the
Corporation:
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(a) on the date fixed pursuant to the provisions of Section 6
of Article V of these By-Laws as the record date for the determination
of the stockholders who shall be entitled to notice of and to vote at
such meeting; or
(b) if no such record date shall have been so fixed, then at
the close of business on the day next preceding the day on which notice
thereof shall be given.
Each stockholder entitled to vote at any meeting of the stockholders may
authorize another person or persons to act for him by a proxy signed by such
stockholder or his attorney-in-fact. Any such proxy shall be delivered to the
secretary of such meeting at or prior to the time designated in the order of
business for so delivering such proxies. Except as otherwise provided by statute
or the Certificate of Incorporation or these By-Laws, any corporate action to be
taken by vote of the stockholders shall be authorized by a majority of the votes
cast at a meeting of stockholders by the holders of shares present in person or
represented by proxy and entitled to vote on such action. Unless required by
statute, or determined by the chairman of the meeting to be advisable, the vote
on any question need not be by ballot. On a vote by ballot, each ballot shall be
signed by the stockholder acting, or by his proxy, if there be such proxy, and
shall state the number of shares voted.
SECTION 9. List of Stockholders. A list of stockholders as of the
record date, certified by the Secretary of the Corporation or by the transfer
agent for the Corporation, shall be produced at any meeting of the stockholders
upon the request of any stockholder made at or prior to such meeting.
SECTION 10. Inspectors. The Board of Directors may, in advance of any
meeting of stockholders, appoint one or more inspectors to act at such meeting
or any adjournment thereof. If any of the inspectors so appointed shall fail to
appear or act or on the request of any stockholder entitled to vote at such
meeting, the chairman of the meeting shall, or if inspectors shall not have been
appointed, the chairman of the meeting may, appoint one or more inspectors. Each
inspector, before entering upon the discharge of his duties, shall take and sign
an oath faithfully to execute the duties of inspector at such meeting with
strict impartiality and according to the best of his ability. The inspectors
shall determine the number of shares outstanding and the voting power of each,
the number of shares represented at the meeting, the existence of a quorum, the
validity and effect of proxies, and shall receive votes, ballots or consents,
hear and determine all challenges and questions arising in connection with the
right to vote, count and tabulate all votes, ballots or consents, determine the
results, and do such acts as are proper to conduct the election or vote with
fairness to all stockholders. On request of the chairman of the meeting or any
stockholder entitled to vote thereat, the inspector shall make a report in
writing of any challenge, request or matter determined by them and shall execute
a certificate of any fact found by him. No director or candidate for the office
of director shall act as an inspector of an election of directors. Inspectors
need not be stockholders.
SECTION 11. Action by Consent. Whenever stockholders are required or
permitted to take any action by vote, such action may be taken without a meeting
on written consent,
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setting forth the action so taken signed by the holders of a majority of the
outstanding shares of the Corporation entitled to vote thereon.
ARTICLE III
Board of Directors
SECTION 1. General Powers. The business and affairs of the Corporation
shall be managed under the direction of the Board of Directors. The Board of
Directors may exercise all such authority and powers of the Corporation and do
all such lawful acts and things as are not by statute or the Certificate of
Incorporation directed or required to be exercised or done by the stockholders.
SECTION 2. Number, Qualifications, Election and Term of Office. The
number of directors constituting the Board of Directors shall be determined from
time to time by the Board of Directors, provided that no decrease in the number
of directors shall have the effect of shortening the term of any incumbent
director. Any decrease in the number of directors shall be effective at the time
of the next succeeding annual meeting of the stockholders unless there shall be
vacancies in the Board of Directors, in which case such decrease may become
effective at any time prior to the next succeeding annual meeting to the extent
of the number of such vacancies. All the directors shall be at least eighteen
years of age. Directors need not be stockholders. Except as otherwise provided
by statute or these By-Laws, the directors shall be elected at the annual
meeting of the stockholders. At each meeting of the stockholders for the
election of directors at which a quorum is present, the persons receiving a
plurality of the votes cast at such election shall be elected. Each director
shall hold office until the next annual meeting of the stockholders and until
his successor shall have been elected and qualified, or until his death, or
until he shall have resigned, or have been removed, as hereinafter provided in
these By-Laws.
SECTION 3. Place of Meetings. Meetings of the Board of Directors shall
be held at the principal office of the Corporation in the State of Delaware or
at such other place, within or without such State, as the Board of Directors may
from time to time determine or as shall be specified in the notice of any such
meeting.
SECTION 4. Regular Meetings. Regular meetings of the Board of Directors
shall be held at such time and place as the Board of Directors may fix. If any
day fixed for a regular meeting shall be a legal holiday at the place where the
meeting is to be held, then the meeting which would otherwise be held on that
day shall be held at the same hour on the next succeeding business day. Notice
of regular meetings of the Board of Directors need not be given except as
otherwise required by statute or these By-Laws.
SECTION 5. Special Meetings. Special meetings of the Board of Directors
may be called by the Chairman or by a majority of the directors.
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SECTION 6. Notice of Meeting. Notice of each special meeting of the
Board of Directors (and of each regular meeting for which notice shall be
required) shall be given by the Secretary as hereinafter provided in this
Section 6, in which notice shall be stated the time and place of the meeting.
Except as otherwise required by these By-Laws, such notice need not state the
purposes of such meeting. Notice of each such meeting shall be mailed, postage
prepaid, to each director, addressed to him at his residence or usual place of
business, by first-class mail, at least five days before the day on which such
meeting is to be held, or shall be sent addressed to him at such place by
telegraph, cable, telex, telecopier or other similar means, or be delivered to
him personally or be given to him by telephone, or other similar means, at least
forty-eight hours before the time at which such meeting is to be held. Notice of
any such meeting need not be given to any director who shall, either before or
after the meeting, submit a signed waiver of notice or who shall attend such
meeting without protesting, prior to or at its commencement, the lack of notice
to him.
SECTION 7. Quorum and Manner of Acting. A majority of the entire Board
of Directors shall constitute a quorum for the transaction of business at any
meeting of the Board of Directors, and, except as otherwise expressly required
by statute or the Certificate of Incorporation or these By-Laws, the act of a
majority of the directors present at any meeting at which a quorum is present
shall be the act of the Board of Directors. Each director shall have one vote on
each matter for which directors are entitled to vote. In the absence of a quorum
at any meeting of the Board of Directors, a majority of the directors present
thereat may adjourn such meeting to another time and place. Notice of the time
and place of any such adjourned meeting shall be given to the directors unless
such time and place were announced at the meeting at which the adjournment was
taken. At any adjourned meeting at which a quorum is present, any business may
be transacted which might have been transacted at the meeting as originally
called. The directors shall act only as a Board and the individual directors
shall have no power as such.
SECTION 8. Organization. At each meeting of the Board of Directors, the
Chairman of the Board, if one shall have been elected, shall act as the Chairman
of the meeting, or if one shall not have been elected, the Vice Chairman of the
Board, or in his absence, or if one shall not have been elected, the President,
if he or she is a director (or, in his absence, another director chosen by a
majority of the directors present) shall act as chairman of the meeting and
preside thereat. The Secretary (or, in his absence, any person -- who shall be
an Assistant Secretary, if any of them shall be present at such meeting --
appointed by the chairman) shall act as secretary of the meeting and keep the
minutes thereof.
SECTION 9. Resignations. Any director of the Corporation may resign at
any time by giving written notice of his resignation to the Board of Directors
or the Chairman of the Board or the Vice Chairman of the Board or the President
or the Secretary. Any such resignation shall take effect at the time specified
therein or, if the time when it shall become effective shall not be specified
therein, immediately upon its receipt. Unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
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SECTION 10. Vacancies. Subject to any express provision of the
Certificate of Incorporation, any vacancy in the Board of Directors, whether
arising from death, resignation, removal (with or without cause), an increase in
the number of directors or any other cause, may be filled by the vote of a
majority of the directors then in office, though less than a quorum, or by the
stockholders at the next annual meeting thereof or at a special meeting thereof.
Stockholders of the Company may not apply to request that the Delaware Court of
Chancery summarily order an election to be held to fill vacancies in the Board
of Directors. Each director so elected shall hold office until the next meeting
of the stockholders in which the election of directors is in the regular order
of business and until his successor shall have been elected and qualified.
SECTION 11. Removal of Directors. Except as otherwise provided by
statute, any director may be removed, either with or without cause, at any time,
by the stockholders at a special meeting thereof. Except as otherwise provided
by statute, any director may be removed for cause by the Board of Directors at a
special meeting thereof.
SECTION 12. Compensation. The Board of Directors shall have authority
to fix the compensation, including fees and reimbursement of expenses, of
directors for services to the Corporation in any capacity.
SECTION 13. Committees. The Board of Directors may, by resolution
passed by a majority of the entire Board of Directors, designate one or more
committees, including an executive committee, each committee to consist of two
or more of the directors of the Corporation. The Board of Directors may
designate one or more directors as alternate members of any committee, who may
replace any absent member at any meeting of the committee. Except to the extent
restricted by statute or the Certificate of Incorporation, each such committee,
to the extent provided in the resolution creating it, shall have and may
exercise all the authority of the Board of Directors. Each such committee shall
serve at the pleasure of the Board of Directors and have such name as may be
determined from time to time by resolution adopted by the Board of Directors.
Each committee shall keep regular minutes of its meetings and report the same to
the Board of Directors.
SECTION 14. Action by Consent. Unless restricted by the Certificate of
Incorporation, any action required or permitted to be taken by the Board of
Directors or any committee thereof may be taken without a meeting if all members
of the Board of Directors or such committee consent in writing to the adoption
of a resolution authorizing the action. The resolution and the written consents
thereto by the members of the Board of Directors or such committee shall be
filed with the minutes of the proceedings of the Board of Directors or such
committee.
SECTION 15. Telephonic Meeting. Unless restricted by the Certificate of
Incorporation or by statute, any one or more members of the Board of Directors
or any committee thereof may participate in a meeting of the Board of Directors
or such committee by means of a conference telephone or similar communications
equipment allowing all persons
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participating in the meeting to hear each other at the same time. Participation
by such means shall constitute presence in person at a meeting.
ARTICLE IV
Officers
SECTION 1. Number and Qualifications. The officers of the Corporation
shall be elected by the Board of Directors and shall include the Chairman of the
Board, President, one or more Vice Presidents, the Secretary, and, if determined
by the Board of Directors, the Treasurer. If the Board of Directors wishes, it
may also elect as officers of the Corporation a Vice Chairman of the Board and
may elect other officers (including one or more Assistant Treasurers and one or
more Assistant Secretaries), as may be necessary or desirable for the business
of the Corporation. Any two or more offices may be held by the same person. Each
officer shall hold office until the first meeting of the Board of Directors
following the next annual meeting of the stockholders, and until his successor
shall have been elected and shall have qualified, or until his death, or until
he shall have resigned or have been removed, as hereinafter provided in these
By-Laws.
SECTION 2. Resignations. Any officer of the Corporation may resign at
any time by giving written notice of his resignation to the Board of Directors
or the Chairman of the Board or the Vice Chairman of the Board, if one shall be
elected, or the President or the Secretary. Any such resignation shall take
effect at the time specified therein or, if the time when it shall become
effective shall not be specified therein, immediately upon its receipt. Unless
otherwise specified therein, the acceptance of any such resignation shall not be
necessary to make it effective.
SECTION 3. Removal. Any officer of the Corporation may be removed,
either with or without cause, at any time, by the Board of Directors at any
meeting thereof.
SECTION 4. Chairman of the Board. The Chairman of the Board shall be a
member of the Board, an officer of the Corporation and, if present, shall
preside at each meeting of the Board of Directors or the stockholders. He shall
perform all duties incident to the office of Chairman, and shall perform such
other duties as may from time to time be assigned to him by the Board of
Directors.
SECTION 5. Vice Chairman of the Board. The Vice Chairman of the Board,
if one shall have been elected, shall be a member of the Board, an officer of
the Corporation, and, if present, shall preside at each meeting of the Board of
Directors if no Chairman of the Board has been elected or if the Chairman of the
Board is absent, or is unable or refuses to act. He shall advise and counsel the
Chairman of the Board and the President, and, in the President's absence, other
executives of the Corporation, and shall perform such other duties as may from
time to time be assigned to him by the Board of Directors.
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SECTION 6. President. The President shall be the chief operating
officer of the Corporation. He shall, in the absence of the Chairman of the
Board and the Vice Chairman of the Board or if either shall not have been
elected, preside at each meeting of the Board of Directors (if he is a director)
or the stockholders. He shall perform all duties incident to the office of
President and chief operating officer and such other duties as may from time to
time be assigned to him by the Board of Directors.
SECTION 7. Vice President. Each Vice President shall perform all such
duties as from time to time may be assigned to him by the Board of Directors or
the President. At the request of the President or in his absence or in the event
of his inability or refusal to act, the Vice President, or if there shall be
more than one, the Vice Presidents in the order determined by the Board of
Directors (or if there be no such determination, then the Vice Presidents in the
order of their election), shall perform the duties of the President, and, when
so called, shall have the power of and be subject to the restrictions placed
upon the President in respect of the performance of such duties.
SECTION 8. Treasurer. The Treasurer, if one shall then be elected,
shall
(a) have charge and custody of, and be responsible for, all
the funds and securities of the Corporation;
(b) keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation;
(c) deposit all moneys and other valuables to the credit of
the Corporation in such depositaries as may be designated by the Board
of Directors or pursuant to its direction;
(d) receive, and give receipts for, moneys due and payable to
the Corporation from any source whatsoever;
(e) disburse the funds of the Corporation and supervise the
investments of its funds, taking proper vouchers therefor;
(f) render to the Board of Directors, whenever the Board of
Directors may require, an account of the financial condition of the
Corporation; and
(g) in general, perform all duties incident to the office of
the Treasurer and such other duties as from time to time may be
assigned to him by the Board of Directors.
SECTION 9. Secretary. The Secretary shall
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(a) keep or cause to be kept in one or more books provided for
the purpose, the minutes of all meetings of the Board of Directors, the
committees of the Board of Directors and the stockholders;
(b) see that all notices are duly given in accordance with the
provisions of these By-Laws and as required by law;
(c) be custodian of the records and the seal of the
Corporation and affix and attest the seal to all certificates for
shares of the Corporation (unless the seal of the Corporation on such
certificates shall be a facsimile, as hereinafter provided) and affix
and attest the seal to all other documents to be executed on behalf of
the Corporation under its seal;
(d) see that the books, reports, statements, certificates and
other documents and records required by law to be kept and filed are
properly kept and filed; and
(e) in general, perform all duties incident to the office of
the Secretary and such other duties as from time to time may be
assigned to him by the Board of Directors.
SECTION 10. Assistant Treasurer. The Assistant Treasurer, or if there
shall be more than one, the Assistant Treasurers in the order determined by the
Board of Directors (or if there be no such determination, then in the order of
their election), shall, in the absence of the Treasurer or in the event of his
inability or refusal to act, perform the duties and exercise the powers of the
Treasurer and shall perform such other duties as from time to time may be
assigned by the Board of Directors.
SECTION 11. Assistant Secretary. The Assistant Secretary, or if there
be more than one, the Assistant Secretaries in the order determined by the Board
of Directors (or if there be no such determination, then in the order of their
election), shall, in the absence of the Secretary or in the event of his
inability or refusal to act, perform the duties and exercise the powers of the
Secretary and shall perform such other duties as from time to time may be
assigned by the Board of Directors.
SECTION 12. Officers' Bonds or Other Security. If required by the Board
of Directors, any officer of the Corporation shall give a bond or other security
for the faithful performance of his duties, in such amount and with such surety
or sureties as the Board of Directors may require.
SECTION 13. Compensation. The compensation of the officers of the
Corporation for their services as such officers shall be fixed from time to time
by the Board of Directors. An officer of the Corporation shall not be prevented
from receiving compensation by reason of the fact that he is also a director of
the Corporation.
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ARTICLE V
Shares, etc.
SECTION 1. Share Certificates. Each owner of shares of the Corporation
shall be entitled to have a certificate, in such form as shall be approved by
the Board of Directors, certifying the number of shares of the Corporation owned
by him. The certificates representing shares shall be signed in the name of the
Corporation by the Chairman of the Board or the Vice Chairman of the Board or
the President or a Vice President and by the Secretary, an Assistant Secretary,
the Treasurer or an Assistant Treasurer, and sealed with the seal of the
Corporation (which seal may be a facsimile, engraved or printed); provided,
however, that where any such certificate is countersigned by a transfer agent,
or is registered by a registrar (other than the Corporation or one of its
employees), the signatures of the Chairman of the Board, Vice Chairman of the
Board, President, Vice President, Secretary, Assistant Secretary, Treasurer or
Assistant Treasurer upon such certificates may be facsimiles, engraved or
printed. In case any officer who shall have signed any such certificate shall
have ceased to be such officer before such certificate shall be issued, it may
nevertheless be issued by the Corporation with the same effect as if such
officer were still in office at the date of their issue. When the Corporation is
authorized to issue shares of more than one class, there shall be set forth upon
the face or back of the certificate, (or the certificate shall have a statement
that the Corporation will furnish to any shareholder upon request and without
charge) a full statement of the designation, relative rights, preferences, and
limitations of the shares of each separate class, or of the different shares
within each class, authorized to be issued and, if the Corporation is authorized
to issue any class of preferred shares in series, the designation, relative
rights, preferences and limitations of each such series so far as the same have
been fixed and the authority of the Board of Directors to designate and fix the
relative rights, preferences and limitations of other series.
SECTION 2. Books of Account and Record of Stockholders. There shall be
kept correct and complete books and records of account of all the business and
transactions of the Corporation. There shall also be kept, at the office of the
Corporation, or at the office of its transfer agent, a record containing the
names and addresses of all stockholders of the Corporation, the number of shares
held by each, and the dates when they became the holders of record thereof.
SECTION 3. Transfer of Shares. Transfers of shares of the Corporation
shall be made on the records of the Corporation only upon authorization by the
registered holder thereof, or by his attorney thereunto authorized by power of
attorney duly executed and filed with the Secretary or with a transfer agent,
and on surrender of the certificate or certificates for such shares properly
endorsed or accompanied by a duly executed stock transfer power and the payment
of all taxes thereon. The person in whose name shares shall stand on the record
of stockholders of the Corporation shall be deemed the owner thereof for all
purposes as regards the Corporation. Whenever any transfer of shares shall be
made for collateral security and not absolutely and written notice thereof shall
be given to the Secretary or to a transfer agent, such fact shall be noted on
the records of the Corporation.
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SECTION 4. Transfer Agents and Registrars. The Board of Directors may
appoint, or authorize any officer or officers to appoint, one or more transfer
agents and one or more registrars and may require all certificates for shares of
stock to bear the signature of any of them.
SECTION 5. Regulations. The Board of Directors may make such additional
rules and regulations, not inconsistent with these By-Laws, as it may deem
expedient concerning the issue, transfer and registration of certificates for
shares of the Corporation.
SECTION 6. Fixing of Record Date. The Board of Directors may fix, in
advance, a date not more than fifty nor less than ten days before the date when
fixed for the holding of any meeting of the stockholders or before the last day
on which the consent or dissent of the stockholders may be effectively expressed
for any purpose without a meeting, as the time as of which the stockholders
entitled to notice of and to vote at such meeting or whose consent or dissent is
required or may be expressed for any purpose, as the case may be, shall be
determined, and all persons who were stockholders of record of voting shares at
such time, and no others, shall be entitled to notice of and to vote at such
meeting or to express their consent or dissent, as the case may be. The Board of
Directors may fix, in advance, a date not more than fifty nor less than ten days
preceding the date fixed for the payment of any dividend or the making of any
distribution or the allotment of rights to subscribe for securities of the
Corporation, or for the delivery of evidences of rights or evidences of
interests arising out of any change, conversion or exchange of shares or other
securities, as the record date for the determination of the stockholders
entitled to receive any such dividend, distribution, allotment, rights or
interests, and in such case only the stockholders of record at the time so fixed
shall be entitled to receive such dividend, distribution, allotment, rights or
interests.
SECTION 7. Lost, Destroyed or Mutilated Certificates. The holder of any
certificate representing shares of the Corporation shall immediately notify the
Corporation of any loss, destruction or mutilation of such certificate, and the
Corporation may issue a new certificate in the place of any certificate
theretofore issued by it which the owner thereof shall allege to have been lost
or destroyed or which shall have been mutilated. The Board of Directors may, in
its discretion, require such owner or his legal representatives to give to the
Corporation a bond in such sum, limited or unlimited, and in such form and with
such surety or sureties as the Board of Directors in its absolute discretion
shall determine, to indemnify the Corporation against any claim that may be made
against it on account of the alleged loss or destruction of any such
certificate, or the issuance of such new certificate.
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ARTICLE VI
Indemnification
Except as may otherwise be specifically provided in the Certificate of
Incorporation, no provision of the Certificate of Incorporation is intended by
the Corporation to be construed as limiting, prohibiting, denying or abrogating
any of the general or specific powers or rights conferred under the General
Corporation Law of the State of Delaware (the "GCL") upon the Corporation, upon
its stockholders, bondholders and security holders, and upon its directors,
officers and other corporate personnel, including, in particular, the power of
the Corporation to furnish indemnification to directors and officers in the
capacities defined and prescribed by the General Corporation Law, as the same
are conferred under the General Corporation Law. The Corporation shall, to the
fullest extent permitted by the laws of the State of Delaware, including but not
limited to Section 145 of the GCL, as the same may be amended and supplemented,
indemnify any and all persons whom it shall have power to indemnify under said
Section or otherwise under Delaware law from and against any and all of the
expenses, liabilities or other matters referred to or covered by said Section.
The indemnification provisions contained in the GCL shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
any By-Law, agreement, resolution of stockholders or disinterested directors, or
otherwise, and shall continue as to a person who has ceased to be a director,
officer, employee or agent, both as to action in his official capacity and as to
action in another capacity while holding such office, and shall inure to the
benefit of the heirs, executors and administrators of such person.
ARTICLE VII
General Provisions
SECTION 1. Dividends. Subject to statute and the Certificate of
Incorporation, dividends upon the shares of the Corporation may be declared by
the Board of Directors at any regular or special meeting. Dividends may be paid
in cash, in property or in shares of the Corporation, unless otherwise provided
by statute or the Certificate of Incorporation.
SECTION 2. Reserves. Before payment of any dividend, there may be set
aside out of any funds of the Corporation available for dividends such sum or
sums as the Board of Directors may, from time to time, in its absolute
discretion, think proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
Corporation or for such other purpose as the Board of Directors may think
conducive to the interests of the Corporation. The Board of Directors may modify
or abolish any such reserves in the manner in which it was created.
SECTION 3. Fiscal Year. The fiscal year of the Corporation shall be
fixed, and once fixed, may thereafter be changed, by resolution of the
Directors.
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SECTION 4. Checks, Notes, Drafts Etc. All checks, notes, drafts or
other orders for the payment of money of the Corporation shall be signed,
endorsed or accepted in the name of the Corporation by such officer, officers,
person or persons as from time to time may be designated by the Board of
Directors or by an officer or officers authorized by the Board of Directors to
make such designation.
SECTION 5. Execution of Contracts, Deeds, Etc. The Board of Directors
may authorize any officer or officers, agent or agents, in the name and on
behalf of the Corporation to enter into or execute and deliver any and all
deeds, bonds, mortgages, contracts and other obligations or instruments, and
such authority may be general or confined to specific instances.
SECTION 6. Voting of Stocks in Other Corporations. Unless otherwise
provided by resolution of the Board of Directors, the Chairman of the Board, the
Vice Chairman of the Board, the President or any Vice President, from time to
time, may (or may appoint one or more attorneys or agents to) cast the votes
which the Corporation may be entitled to cast as a stockholder or otherwise in
any other corporation, any of whose shares or securities may be held by the
Corporation, at meetings of the holders of the shares or other securities of
such other corporations, or to consent in writing to any action by any such
other corporation. In the event one or more attorneys or agents are appointed,
the Chairman of the Board, the Vice Chairman of the Board, the President or any
Vice President may instruct the person or persons so appointed as to the manner
of casting such votes or giving such consent. The Chairman of the Board, the
Vice Chairman of the Board, the President or any Vice President may, or may
instruct the attorneys or agents appointed to, execute or cause to be executed
in the name and on behalf of the Corporation and under its seal or otherwise,
such written proxies, consents, waivers or other instruments as may be necessary
or proper in the premises.
SECTION 7. Related Party Transactions. The Corporation shall not engage
in any transaction with any of its directors, officers or shareholders owning,
directly or indirectly, 5% of the shares of Common Stock of the Corporation,
unless such transaction has been approved by both a majority of the entire Board
of Directors, as well as by a majority of the independent outside directors or
by a majority of the Corporation's Disinterested Stockholders. As used herein,
the term "Disinterested Stockholder" shall mean any record holder of Common
Stock of the Corporation who is not: (i) an officer, director or employee, or
former officer, director or employee, of the Corporation or any subsidiary or
affiliate (as that term is defined in the Securities Act of 1933, as amended,
and the regulations promulgated thereunder) of the Corporation; (ii) an
affiliate of any such present or former officer, director or employee of the
Corporation; or (iii) a holder, directly or indirectly, of five (5%) percent or
more of any class or series of voting securities of the Corporation or any
affiliate thereof.
13
<PAGE>
ARTICLE VIII
Force and Effect of By-Laws
These By-Laws are subject to the provisions of the GCL and the
Corporation's Certificate of Incorporation, as it may be amended from time to
time. If any provision in these By-Laws is inconsistent with a provision in the
GCL or the Certificate of Incorporation, the provision of the GCL or the
Certificate of Incorporation shall govern. Wherever in these By-Laws references
are made to more than one incorporator, director or stockholder, they shall, if
this is a sole incorporator, director or stockholder corporation, be construed
to mean the solitary person; and all provisions dealing with the quantum of
majorities or quorums shall be deemed to mean the action by the one person
constituting the Corporation.
ARTICLE IX
Amendments
These By-Laws may be amended or repealed or new By-Laws may be adopted
at an annual or special meeting of stockholders at which a quorum is present or
represented, by the vote of the holders of shares entitled to vote thereon
provided that notice of the proposed amendment or repeal or adoption of new
By-Laws is contained in the notice of such meeting. These By-Laws may also be
amended or repealed or new By-Laws may be adopted by the Board of Directors at
any regular or special meeting of the Board of Directors; provided that Article
VII, Section 7 of these By-Laws may only be amended or repealed, or new By-Laws
adopted which have the effect of amending or repealing Article VII, Section 7 of
these By-Laws, by the vote or written consent of the holders of a majority of
the outstanding shares of capital stock entitled to vote thereon which is held
by Disinterested Stockholders. If any By-Law regulating an impending election of
directors is adopted, amended or repealed by the Board of Directors, there shall
be set forth in the notice of the next meeting of the stockholders for the
election of directors the By-Law so adopted, amended or repealed, together with
a concise statement of the changes made. By-Laws adopted by the Board of
Directors may be amended or repealed by the stockholders.
14
<PAGE>
Exhibit 10.1
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this "Agreement"), made and entered into
as of the 1st day of August 1996, by and between COMMODORE SEPARATION
TECHNOLOGIES, INC., a Delaware corporation having offices at 150 East 58th
Street, Suite 3400, New York, New York 10155 (the "Company"), and ALAN R.
BURKART, an individual residing at 430 Cherry Hill Drive, Marietta, Georgia
30067 (the "Employee").
W I T N E S S E T H:
WHEREAS, the Employee has substantial knowledge and experience
relating to the management and operation of technology-driven developmental
businesses, and the Company desires to obtain the full-time services of the
Employee to serve in an executive capacity with the Company; and
WHEREAS, the Employee is ready, willing and able to serve as
an executive officer of the Company, all upon the terms and subject to the
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing premises and
the mutual covenants herein contained, the parties hereto hereby agree as
follows:
Part A. Employment.
1. Duties. Subject to the terms and conditions of this
Agreement, the Company shall employ the Employee and the Employee shall render
services to the Company in the capacity and with the titles of President and
Chief Executive Officer of the Company. In addition, the Employee shall serve in
such capacities and have such titles with such of the
<PAGE>
Company's subsidiaries as may be requested from time to time by the Company,
without requirement of any additional compensation to the Employee.
2. Full-Time Employment. Throughout the period of his
employment hereunder, the Employee shall devote his full and entire professional
and business time, attention, knowledge and skills to faithfully, diligently and
to the best of his abilities perform his duties hereunder. It is expected that
the Employee will render his services primarily from the Company's Atlanta,
Georgia office (as and when located), provided that the Employee will engage in
such travelling as may be reasonably required in connection with the performance
of his duties hereunder.
Part B. Term of Employment; Termination of Agreement.
1. Term. Subject to prior termination in accordance with the
provisions hereof, the term of this Agreement shall commence on the date hereof
and shall continue through and including December 31, 1999 (the "Term").
2. Termination For Cause. Anything contained in Section 1 of
this Part B to the contrary notwithstanding, this Agreement may be terminated at
the option of the Board of Directors of the Company (the "Board") for "Cause"
(as hereinafter defined), effective upon the giving of written notice of
termination to the Employee. As used herein, the term "Cause" shall mean and be
limited to:
(a) any act committed by the Employee against the
Company, or any of its subsidiaries or divisions, constituting: (i) fraud, (ii)
misappropriation of corporate opportunity, breach of fiduciary duty or
non-disclosure of conflict of interest, (iii) self-dealing, (iv) embezzlement of
funds, (v) felony conviction for conduct involving moral turpitude or other
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<PAGE>
criminal conduct, or (vi) the disregard by the Employee of the reasonable
directions of the Board; or
(b) the breach or default by the Employee in the
performance of any material provision of this Agreement (including but not
limited to Part D below); or
(c) alcoholism or any other form of addiction which
impairs the Employee's ability to perform his duties hereunder.
3. Death or Disability. Anything contained in Section 1 of
this Part B to the contrary notwithstanding, this Agreement may be terminated by
the Company: (i) upon the death of the Employee, or (ii) on thirty (30) days'
prior written notice to the Employee, in the event that the Employee shall be
physically or mentally disabled or impaired so as to prevent him from continuing
the normal and proper performance of his duties and responsibilities hereunder
for a period of three (3) consecutive months. The initial determination as to
whether the Employee is disabled or impaired shall be made by the physician
regularly treating the condition causing the disability. The Company shall have
the right to require the Employee to be examined by a physician duly licensed to
practice medicine in the State in which the Employee has his primary residence
to determine such physician's opinion as to the Employee's disability. If such
physician's opinion differs from that of the physician treating the Employee, or
a physician thereafter retained by the Employee, they shall forthwith select a
third physician so licensed whose opinion, after examination and review of
available information, shall be conclusive and binding upon all parties hereto.
All costs of the physician regularly treating or thereafter retained by the
Employee shall be paid by the Employee. All costs of the physician
- 3 -
<PAGE>
retained by the Company shall be paid by the Company. If a third physician is
required, then the costs of that physician shall be paid by the Company.
4. No Further Obligations. Upon any termination of this
Agreement by the Company for "Cause" pursuant to Section 2 of this Part B, or by
reason of the Employee's death or disability pursuant to Section 3 of this Part
B, neither the Company nor any subsidiary or division thereof shall be liable
for or be required to pay to the Employee any further remuneration, compensation
or other benefits hereunder.
Part C. Compensation; Expenses.
1. Base Salary. As compensation for his services during the
Term, the Company shall pay or cause to be paid to the Employee a fixed base
salary at the annual rate of Two Hundred Thousand ($200,000) Dollars.
2. Bonuses and Options. The Employee may from time to time be
awarded bonuses and/or stock options to purchase securities of the Company based
on the achievement (in whole or in part) by the Company of its business plan and
by the Employee of fixed personal performance objectives. Any and all such
bonuses and/or stock options (together, the "Bonuses") shall be in the sole and
absolute discretion of the Board or a committee thereof.
3. Benefits. In addition to the foregoing Base Salary and
Bonuses, the Employee shall, throughout the period of his employment hereunder,
be eligible to participate in any and all group health, group life and/or other
benefit plans generally made available by the Company to its employees, provided
that nothing herein contained shall be deemed to require the Company to maintain
or continue any particular plan or policy.
- 4 -
<PAGE>
4. Vacation. The Employee shall be entitled to up to five (5)
weeks of vacation per year, to be taken at such times as shall be mutually
agreeable to the Company and the Employee, and so as not to unduly interfere
with the business of the Company. The Employee may carry over, to the next
annual period hereunder, up to two (2) weeks of unused vacation time as at the
end of each year of the term of this Agreement.
5. Expenses. In addition to the remuneration set forth above,
throughout the period of the Employee's employment hereunder, the Company shall
also reimburse the Employee or cause the Employee to be reimbursed, upon
presentment by the Employee to the Company of appropriate receipts and vouchers
therefor, for any reasonable business expenses incurred by the Employee in
connection with the performance of his duties and responsibilities hereunder;
provided, however, that in order to be reimbursable hereunder, any such expense
must be deductible (in whole or in part) by the Company for federal income tax
purposes.
Part D. Confidentiality; Non-Competition. As a material inducement to
cause the Company to enter into this Agreement, the Employee hereby covenants
and agrees that:
1. Confidential Information; Personal Relationships. The
Employee shall, at all times during and subsequent to the Term, keep secret and
retain in strictest confidence all confidential matters of the Company, and the
"know-how", trade secrets, technical processes, inventions, equipment
specifications, equipment designs, plans, drawings, research projects,
confidential client lists, details of client, subcontractor or consultant
contracts, pricing policies, operational methods, marketing plans and
strategies, project development, acquisition and bidding techniques and plans,
business acquisition plans, and new personnel acquisition plans of the Company
and its subsidiaries and divisions (whether now known or hereafter learned by
- 5 -
<PAGE>
the Employee), except to the extent that (i) such information is generally
available to the public without restriction, (ii) the Employee obtains
confidentiality agreements with respect to such confidential information, (iii)
the Employee is requested by the Board of Directors of the Company or a
Committee thereof, or by the Chairman of the Company, to disclose such
confidential information, (iv) such information is provided to a customer of the
Company pursuant to a request received from such customer in the ordinary course
of business, or (v) the Employee is under compulsion of either a court order or
a governmental agency's or authority's inquiry, order or request to so disclose
such information.
2. Property of the Company.
(a) Except as otherwise provided herein, all lists,
records and other non-personal documents or papers (and all copies thereof)
relating to the Company and/or any of its subsidiaries or divisions, including
such items stored in computer memories, on microfiche or by any other means,
made or compiled by or on behalf of the Employee, or made available to the
Employee, are and shall be the property of the Company, and shall be delivered
to the Company on the date of termination of the Employee's employment with the
Company, or sooner upon request of the Company at any time or from time to time.
(b) All inventions, including any procedures,
formulas, methods, processes, uses, apparatuses, patterns, designs, plans,
drawings, devices or configurations of any kind, any and all improvements to
them which are developed, discovered, made or produced, and all trade secrets
and information used by the Company and/or its subsidiaries and divisions
(including, without limitation, any such matters created or developed by the
Employee during the term of this Agreement), shall be the exclusive property of
the Company or the subject
- 6 -
<PAGE>
subsidiary, and shall be delivered to the Company or the subject subsidiary
(without the Employee retaining any copies, components or records thereof) on
the date of termination of the Employee's employment with the Company; provided,
however, that nothing herein contained shall be deemed to grant to the Company
any property rights in any inventions or other intellectual property which may
at any time be developed by the Employee which is wholly unrelated to any
business then engaged in or under development by the Company.
3. Employees of the Company. The Employee shall not, at any
time (whether during the term of this Agreement or at any time thereafter),
directly or indirectly, for or on behalf of any business enterprise other than
the Company and/or its subsidiaries and affiliates, solicit any employee of the
Company or any of its subsidiaries to leave his or her employment with the
Company or such subsidiary, or encourage any such employee to leave such
employment, without the prior written approval of the Company in each instance.
4. Non-Competition. For so long as the Employee shall be
receiving any compensation or remuneration under this Agreement, and for a
further period of one (1) year thereafter, the Employee shall not, directly or
indirectly, whether individually or as an employee, stockholder (other than the
passive ownership of up to 5% of the capital stock of a publicly traded
corporation), partner, joint venturer, agent or other representative of any
other person, firm or corporation, engage or have any interest in any business
(other than the Company or any of its subsidiaries or affiliates) which, in any
country in which the Company or any of its subsidiaries or divisions does or
solicits business during the Term, is engaged in or derives any revenues from
performing any functionally equivalent services or marketing any
- 7 -
<PAGE>
functionally equivalent products as those services provided and products
marketed by the Company or any of its subsidiaries or divisions during the Term.
5. Severability of Covenants. The Employee acknowledges and
agrees that the provisions of this Part D are (a) made in consideration of the
premises and undertakings of the Company set forth herein, (b) made for good,
valuable and adequate consideration received and to be received by the Employee,
and (c) reasonable and necessary, in terms of the time, geographic scope and
nature of the restrictions, for the protection of the Company and the business
and good will thereof. It is intended that the provisions of this Part D be
fully severable, and in the event that any of the foregoing restrictions, or any
portion of the foregoing restrictions, shall be deemed contrary to law, invalid
or unenforceable in any respect by any court or tribunal of competent
jurisdiction, then such restrictions shall be deemed to be amended, modified and
reduced in scope and effect, as to duration and/or geographic area, only to that
extent necessary to render same valid and enforceable (and in such reduced form,
such provisions shall then be enforceable), and any other of the foregoing
restrictions shall be unaffected and shall remain in full force and effect.
6. Equitable Remedies. The parties hereby acknowledge that, in
the event of any breach or threatened breach by the Employee of the provisions
of this Part D, the Company will suffer irreparable harm and will not have an
adequate remedy at law. Accordingly, in the event of any such breach or
threatened breach, the Company may seek and obtain appropriate equitable relief
to restrain or enjoin such breach or threatened breach and/or to compel
compliance herewith.
- 8 -
<PAGE>
Part E. Miscellaneous.
1. Binding Effect. All of the terms and conditions of this
Agreement shall be binding upon and inure to the benefit of the Employee, the
Company and their respective heirs, executors, administrators, personal
representatives, successors and permitted assigns.
2. Notices. Except as may otherwise be provided herein, any
notice, request, demand or other communication required or permitted under this
Agreement shall be in writing and shall be deemed to have been given when
delivered personally or when mailed by certified mail, return receipt requested,
addressed to a party at the address of such party first set forth above, or at
such other address as such party may hereafter have designated by notice. Copies
of all notices hereunder shall simultaneously be sent by first class post-paid
mail to Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel, Citicorp Center,
153 East 53rd Street, New York, New York 10022, Attn: Stephen A. Weiss, Esq.
3. Waivers. Neither this Agreement nor any of the terms or
conditions hereof may be waived, amended or modified except by means of a
written instrument duly executed by the party to be charged therewith.
4. Captions. The captions and paragraph headings used in this
Agreement are for convenience of reference only, and shall not affect the
construction or interpretation of this Agreement or any of the provisions
hereof.
5. Governing Law. This Agreement, and all matters or disputes
relating to the validity, construction, performance or enforcement hereof, shall
be governed by, and construed under, the laws of the State of New York.
- 9 -
<PAGE>
6. Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original hereof, but all
of which together shall constitute one and the same instrument.
7. Arbitration. Except for any court action or proceeding to
obtain equitable relief in respect of the provisions of Part D above, any
dispute involving the interpretation or application of this Agreement shall be
resolved by final and binding arbitration before an arbitrator designated by,
and mutually acceptable to, the Company and the Employee. In the event that the
parties cannot agree to the appointment of a mutually acceptable arbitrator, the
subject dispute shall be resolved by final and binding arbitration before one or
more arbitrators designated by the American Arbitration Association in New York,
New York, unless mutually agreed to otherwise. The award of any of such
arbitrator(s) may be enforced in any court of competent jurisdiction.
8. Assignment.
(a) This Agreement is intended for the sole and
exclusive benefit of the parties hereto and their respective heirs, executors,
administrators, personal representatives, successors and permitted assigns, and
no other person or entity shall have any right to rely on this Agreement or to
claim or derive any benefit herefrom absent the express written consent of the
party to be charged with such reliance or benefit.
(b) The Employee may not assign or otherwise transfer
any of his obligations or duties hereunder to any other person, firm or
corporation, it being understood and agreed that this Agreement is intended to
be for the personal services of the Employee only and of no other person.
- 10 -
<PAGE>
(c) The Company shall have the right, at any time and
from time to time, to cause any payments required hereunder to be made by any
subsidiary of the Company. Furthermore, the Company may assign this Agreement to
any successor-in-interest who may acquire, whether by direct purchase, sale of
securities, merger or consolidation, the assets, business or properties of the
Company; provided, that no such assignment shall relieve the Company of its
duties and obligations to the Employee hereunder, without the prior written
consent of the Employee.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on and as of the date first set forth above.
COMMODORE SEPARATION TECHNOLOGIES, INC.
By: /s/ Paul E. Hannesson
-------------------------
Paul E. Hannesson
Chairman of the Board
/s/ Alan R. Burkart
-------------------------
Alan R. Burkart
- 11 -
<PAGE>
Exhibit 10.2
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this "Agreement"), made and entered into
as of the 1st day of September 1996, by and between COMMODORE SEPARATION
TECHNOLOGIES, INC., a Delaware corporation having offices at 150 East 58th
Street, Suite 3400, New York, New York 10155 (the "Company"), and CARL O.
MAGNELL, P.E., an individual residing at 3709 Beaver Ford Road, Lake Ridge,
Virginia 22192-4919 (the "Employee").
W I T N E S S E T H:
WHEREAS, the Employee has substantial knowledge and experience
relating to the management and operation of technology-driven developmental
businesses, and the Company desires to obtain the full-time services of the
Employee to serve in an executive capacity with the Company; and
WHEREAS, the Employee is ready, willing and able to serve as
an executive officer of the Company, all upon the terms and subject to the
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing premises and
the mutual covenants herein contained, the parties hereto hereby agree as
follows:
Part A. Employment.
1. Duties. Subject to the terms and conditions of this
Agreement, the Company shall employ the Employee and the Employee shall render
services to the Company in the capacity and with the title of Executive Vice
President of the Company. In addition, the Employee shall serve in such capacity
and have such title with such of the Company's
1
<PAGE>
subsidiaries as may be requested from time to time by the Company, without
requirement of any additional compensation to the Employee.
2. Full-Time Employment. Throughout the period of his
employment hereunder, the Employee shall devote his full and entire professional
and business time, attention, knowledge and skills to faithfully, diligently and
to the best of his abilities perform his duties hereunder. It is expected that
the Employee will render his services primarily from the Company's Atlanta,
Georgia office (as and when located), provided that the Employee will engage in
such travelling as may be reasonably required in connection with the performance
of his duties hereunder.
Part B. Term of Employment; Termination of Agreement.
1. Term. Subject to prior termination in accordance with the
provisions hereof, the term of this Agreement shall commence on the date hereof
and shall continue through and including December 31, 1999 (the "Term").
2. Termination For Cause. Anything contained in Section 1 of
this Part B to the contrary notwithstanding, this Agreement may be terminated at
the option of the Board of Directors of the Company (the "Board") for "Cause"
(as hereinafter defined), effective upon the giving of written notice of
termination to the Employee. As used herein, the term "Cause" shall mean and be
limited to:
(a) any act committed by the Employee against the
Company, or any of its subsidiaries or divisions, constituting: (i) fraud, (ii)
misappropriation of corporate opportunity, breach of fiduciary duty or
non-disclosure of a conflict of interest, (iii) self-dealing, (iv) embezzlement
of funds, (v) felony conviction for conduct involving moral turpitude or other
2
<PAGE>
criminal conduct, or (vi) the disregard by the Employee of the reasonable
directions of the Board; or
(b) the breach or default by the Employee in the
performance of any material provision of this Agreement (including but not
limited to Part D below); or
(c) alcoholism or any other form of addiction which
impairs the Employee's ability to perform his duties hereunder.
3. Death or Disability. Anything contained in Section 1 of
this Part B to the contrary notwithstanding, this Agreement may be terminated by
the Company: (i) upon the death of the Employee, or (ii) on thirty (30) days'
prior written notice to the Employee, in the event that the Employee shall be
physically or mentally disabled or impaired so as to prevent him from continuing
the normal and proper performance of his duties and responsibilities hereunder
for a period of three (3) consecutive months. The initial determination as to
whether the Employee is disabled or impaired shall be made by the physician
regularly treating the condition causing the disability. The Company shall have
the right to require the Employee to be examined by a physician duly licensed to
practice medicine in the State in which the Employee has his primary residence
to determine such physician's opinion as to the Employee's disability. If such
physician's opinion differs from that of the physician treating the Employee, or
a physician thereafter retained by the Employee, they shall forthwith select a
third physician so licensed whose opinion, after examination and review of
available information, shall be conclusive and binding upon all parties hereto.
All costs of the physician regularly treating or thereafter retained by the
Employee shall be paid by the Employee. All costs of the physician retained by
the Company shall be paid by the Company. If a third physician is required, then
3
<PAGE>
the costs of that physician shall be paid by the Company.
4. No Further Obligations. Upon any termination of this
Agreement by the Company for "Cause" pursuant to Section 2 of this Part B, or by
reason of the Employee's death or disability pursuant to Section 3 of this Part
B, neither the Company nor any subsidiary or division thereof shall be liable
for or be required to pay to the Employee any further remuneration, compensation
or other benefits hereunder.
Part C. Compensation; Expenses.
1. Base Salary. As compensation for his services during the
Term, the Company shall pay or cause to be paid to the Employee a fixed base
salary at the annual rate of One Hundred Eighty Thousand ($180,000) Dollars.
2. Bonuses and Options. The Employee may from time to time be
awarded bonuses and/or stock options to purchase securities of the Company based
on the achievement (in whole or in part) by the Company of its business plan and
by the Employee of fixed personal performance objectives. Any and all such
bonuses and/or stock options (together, the "Bonuses") shall be in the sole and
absolute discretion of the Board or a committee thereof.
3. Benefits. In addition to the foregoing Base Salary and
Bonuses, the Employee shall, throughout the period of his employment hereunder,
be eligible to participate in any and all group health, group life and/or other
benefit plans generally made available by the Company to its employees, provided
that nothing herein contained shall be deemed to require the Company to maintain
or continue any particular plan or policy.
4. Vacation. The Employee shall be entitled to up to four (4)
weeks of vacation per year, to be taken at such times as shall be mutually
agreeable to the Company and
4
<PAGE>
the Employee, and so as not to unduly interfere with the business of the
Company. The Employee may carry over, to the next annual period hereunder, up to
two (2) weeks of unused vacation time as at the end of each year of the term of
this Agreement.
5. Expenses. In addition to the remuneration set forth above,
throughout the period of the Employee's employment hereunder, the Company shall
also reimburse the Employee or cause the Employee to be reimbursed, upon
presentment by the Employee to the Company of appropriate receipts and vouchers
therefor, for any reasonable business expenses incurred by the Employee in
connection with the performance of his duties and responsibilities hereunder;
provided, however, that in order to be reimbursable hereunder, any such expense
must be deductible (in whole or in part) by the Company for federal income tax
purposes.
Part D. Confidentiality; Non-Competition. As a material inducement to
cause the Company to enter into this Agreement, the Employee hereby covenants
and agrees that:
1. Confidential Information; Personal Relationships. The
Employee shall, at all times during and subsequent to the Term, keep secret and
retain in strictest confidence all confidential matters of the Company, and the
"know-how", trade secrets, technical processes, inventions, equipment
specifications, equipment designs, plans, drawings, research projects,
confidential client lists, details of client, subcontractor or consultant
contracts, pricing policies, operational methods, marketing plans and
strategies, project development, acquisition and bidding techniques and plans,
business acquisition plans, and new personnel acquisition plans of the Company
and its subsidiaries and divisions (whether now known or hereafter learned by
the Employee), except to the extent that (i) such information is generally
available to the public without restriction, (ii) the Employee obtains
confidentiality agreements with respect to such
5
<PAGE>
confidential information, (iii) the Employee is requested by the Board of
Directors of the Company or a Committee thereof, or by the Chairman of the
Company, to disclose such confidential information, (iv) such information is
provided to a customer of the Company pursuant to a request received from such
customer in the ordinary course of business, or (v) the Employee is under
compulsion of either a court order or a governmental agency's or authority's
inquiry, order or request to so disclose such information.
2. Property of the Company.
(a) Except as otherwise provided herein, all lists,
records and other non-personal documents or papers (and all copies thereof)
relating to the Company and/or any of its subsidiaries or divisions, including
such items stored in computer memories, on microfiche or by any other means,
made or compiled by or on behalf of the Employee, or made available to the
Employee, are and shall be the property of the Company, and shall be delivered
to the Company on the date of termination of the Employee's employment with the
Company, or sooner upon request of the Company at any time or from time to time.
(b) All inventions, including any procedures,
formulas, methods, processes, uses, apparatuses, patterns, designs, plans,
drawings, devices or configurations of any kind, any and all improvements to
them which are developed, discovered, made or produced, and all trade secrets
and information used by the Company and/or its subsidiaries and divisions
(including, without limitation, any such matters created or developed by the
Employee during the term of this Agreement), shall be the exclusive property of
the Company or the subject subsidiary, and shall be delivered to the Company or
the subject subsidiary (without the Employee retaining any copies, components or
records thereof) on the date of termination of the
6
<PAGE>
Employee's employment with the Company; provided, however, that nothing herein
contained shall be deemed to grant to the Company any property rights in any
inventions or other intellectual property which may at any time be developed by
the Employee which is wholly unrelated to any business then engaged in or under
development by the Company.
3. Employees of the Company. The Employee shall not, at any
time (whether during the term of this Agreement or at any time thereafter),
directly or indirectly, for or on behalf of any business enterprise other than
the Company and/or its subsidiaries and affiliates, solicit any employee of the
Company or any of its subsidiaries to leave his or her employment with the
Company or such subsidiary, or encourage any such employee to leave such
employment, without the prior written approval of the Company in each instance.
4. Non-Competition. For so long as the Employee shall be
receiving any compensation or remuneration under this Agreement, and for a
further period of one (1) year thereafter, the Employee shall not, directly or
indirectly, whether individually or as an employee, stockholder (other than the
passive ownership of up to 5% of the capital stock of a publicly traded
corporation), partner, joint venturer, agent or other representative of any
other person, firm or corporation, engage or have any interest in any business
(other than the Company or any of its subsidiaries or affiliates) which, in any
country in which the Company or any of its subsidiaries or divisions does or
solicits business during the Term, is engaged in or derives any revenues from
performing any functionally equivalent services or marketing any functionally
equivalent products as those services provided and products marketed by the
Company or any of its subsidiaries or divisions during the Term.
7
<PAGE>
5. Severability of Covenants. The Employee acknowledges and
agrees that the provisions of this Part D are (a) made in consideration of the
premises and undertakings of the Company set forth herein, (b) made for good,
valuable and adequate consideration received and to be received by the Employee,
and (c) reasonable and necessary, in terms of the time, geographic scope and
nature of the restrictions, for the protection of the Company and the business
and good will thereof. It is intended that the provisions of this Part D be
fully severable, and in the event that any of the foregoing restrictions, or any
portion of the foregoing restrictions, shall be deemed contrary to law, invalid
or unenforceable in any respect by any court or tribunal of competent
jurisdiction, then such restrictions shall be deemed to be amended, modified and
reduced in scope and effect, as to duration and/or geographic area, only to that
extent necessary to render same valid and enforceable (and in such reduced form,
such provisions shall then be enforceable), and any other of the foregoing
restrictions shall be unaffected and shall remain in full force and effect.
6. Equitable Remedies. The parties hereby acknowledge that, in
the event of any breach or threatened breach by the Employee of the provisions
of this Part D, the Company will suffer irreparable harm and will not have an
adequate remedy at law. Accordingly, in the event of any such breach or
threatened breach, the Company may seek and obtain appropriate equitable relief
to restrain or enjoin such breach or threatened breach and/or to compel
compliance herewith.
8
<PAGE>
Part E. Miscellaneous.
1. Binding Effect. All of the terms and conditions of this
Agreement shall be binding upon and inure to the benefit of the Employee, the
Company and their respective heirs, executors, administrators, personal
representatives, successors and permitted assigns.
2. Notices. Except as may otherwise be provided herein, any
notice, request, demand or other communication required or permitted under this
Agreement shall be in writing and shall be deemed to have been given when
delivered personally or when mailed by certified mail, return receipt requested,
addressed to a party at the address of such party first set forth above, or at
such other address as such party may hereafter have designated by notice. Copies
of all notices hereunder shall simultaneously be sent by first class post-paid
mail to Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel, Citicorp Center,
153 East 53rd Street, New York, New York 10022, Attn: Stephen A. Weiss, Esq.
3. Waivers. Neither this Agreement nor any of the terms or
conditions hereof may be waived, amended or modified except by means of a
written instrument duly executed by the party to be charged therewith.
4. Captions. The captions and paragraph headings used in this
Agreement are for convenience of reference only, and shall not affect the
construction or interpretation of this Agreement or any of the provisions
hereof.
5. Governing Law. This Agreement, and all matters or disputes
relating to the validity, construction, performance or enforcement hereof, shall
be governed by, and construed under, the laws of the State of New York, without
giving effect to principles of conflicts of laws thereof.
9
<PAGE>
6. Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original hereof, but all
of which together shall constitute one and the same instrument.
7. Arbitration. Except for any court action or proceeding to
obtain equitable relief in respect of the provisions of Part D above, any
dispute involving the interpretation or application of this Agreement shall be
resolved by final and binding arbitration before an arbitrator designated by,
and mutually acceptable to, the Company and the Employee. In the event that the
parties cannot agree to the appointment of a mutually acceptable arbitrator, the
subject dispute shall be resolved by final and binding arbitration before one or
more arbitrators designated by the American Arbitration Association in New York,
New York, unless mutually agreed to otherwise. The award of any of such
arbitrator(s) may be enforced in any court of competent jurisdiction.
8. Assignment.
(a) This Agreement is intended for the sole and
exclusive benefit of the parties hereto and their respective heirs, executors,
administrators, personal representatives, successors and permitted assigns, and
no other person or entity shall have any right to rely on this Agreement or to
claim or derive any benefit herefrom absent the express written consent of the
party to be charged with such reliance or benefit.
(b) The Employee may not assign or otherwise transfer
any of his obligations or duties hereunder to any other person, firm or
corporation, it being understood and agreed that this Agreement is intended to
be for the personal services of the Employee only and of no other person.
10
<PAGE>
(c) The Company shall have the right, at any time and
from time to time, to cause any payments required hereunder to be made by any
subsidiary of the Company. Furthermore, the Company may assign this Agreement to
any successor-in-interest who may acquire, whether by direct purchase, sale of
securities, merger or consolidation, the assets, business or properties of the
Company; provided that no such assignment shall relieve the Company of its
duties and obligations to the Employee hereunder, without the prior written
consent of the Employee.
9. Superseding Effect. This Agreement supersedes and replaces
any previous employment agreement entered into by the Employee with the Company
or any affiliate thereof.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on and as of the date first set forth above.
COMMODORE SEPARATION TECHNOLOGIES, INC.
By: /s/ Alan R. Burkart
------------------------------------
Alan R. Burkart
President and Chief Executive Officer
/s/ Carl O. Magnell, P.E.
------------------------------------
Carl O. Magnell, P.E.
11
<PAGE>
Exhibit 10.3
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this "Agreement"), made and entered into
as of the 1st day of September 1996, by and between COMMODORE SEPARATION
TECHNOLOGIES, INC., a Delaware corporation having offices at 150 East 58th
Street, Suite 3400, New York, New York 10155 (the "Company"), and JAMES M.
DeANGELIS, an individual residing at 2361 Glof Brook Drive, West Palm Beach,
Florida 33414 (the "Employee").
W I T N E S S E T H:
WHEREAS, the Employee has substantial knowledge and experience
relating to the management and operation of technology-driven developmental
businesses, and the Company desires to obtain the full-time services of the
Employee to serve in an executive capacity with the Company; and
WHEREAS, the Employee is ready, willing and able to serve as
an executive officer of the Company, all upon the terms and subject to the
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing premises and
the mutual covenants herein contained, the parties hereto hereby agree as
follows:
Part A. Employment.
1. Duties. Subject to the terms and conditions of this
Agreement, the Company shall employ the Employee and the Employee shall render
services to the Company in the capacity and with the title of Senior Vice
President of the Company. In addition, the Employee shall serve in such capacity
and have such title with such of the Company's
<PAGE>
subsidiaries as may be requested from time to time by the Company, without
requirement of any additional compensation to the Employee.
2. Full-Time Employment. Throughout the period of his
employment hereunder, the Employee shall devote his full and entire professional
and business time, attention, knowledge and skills to faithfully, diligently and
to the best of his abilities perform his duties hereunder. It is expected that
the Employee will render his services primarily from the Company's Atlanta,
Georgia office (as and when located), provided that the Employee will engage in
such travelling as may be reasonably required in connection with the performance
of his duties hereunder.
Part B. Term of Employment; Termination of Agreement.
1. Term. Subject to prior termination in accordance with the
provisions hereof, the term of this Agreement shall commence on the date hereof
and shall continue through and including December 31, 1999 (the "Term").
2. Termination For Cause. Anything contained in Section 1 of
this Part B to the contrary notwithstanding, this Agreement may be terminated at
the option of the Board of Directors of the Company (the "Board") for "Cause"
(as hereinafter defined), effective upon the giving of written notice of
termination to the Employee. As used herein, the term "Cause" shall mean and be
limited to:
(a) any act committed by the Employee against the Company,
or any of its subsidiaries or divisions, constituting: (i) fraud, (ii)
misappropriation of corporate opportunity, breach of fiduciary duty or
non-disclosure of a conflict of interest, (iii) self-dealing, (iv) embezzlement
of funds, (v) felony conviction for conduct involving moral turpitude or other
2
<PAGE>
criminal conduct, or (vi) the disregard by the Employee of the reasonable
directions of the Board; or
(b) the breach or default by the Employee in the
performance of any material provision of this Agreement (including but not
limited to Part D below); or
(c) alcoholism or any other form of addiction which impairs
the Employee's ability to perform his duties hereunder.
3. Death or Disability. Anything contained in Section 1 of
this Part B to the contrary notwithstanding, this Agreement may be terminated by
the Company: (i) upon the death of the Employee, or (ii) on thirty (30) days'
prior written notice to the Employee, in the event that the Employee shall be
physically or mentally disabled or impaired so as to prevent him from continuing
the normal and proper performance of his duties and responsibilities hereunder
for a period of three (3) consecutive months. The initial determination as to
whether the Employee is disabled or impaired shall be made by the physician
regularly treating the condition causing the disability. The Company shall have
the right to require the Employee to be examined by a physician duly licensed to
practice medicine in the State in which the Employee has his primary residence
to determine such physician's opinion as to the Employee's disability. If such
physician's opinion differs from that of the physician treating the Employee, or
a physician thereafter retained by the Employee, they shall forthwith select a
third physician so licensed whose opinion, after examination and review of
available information, shall be conclusive and binding upon all parties hereto.
All costs of the physician regularly treating or thereafter retained by the
Employee shall be paid by the Employee. All costs of the physician retained by
the Company shall be paid by the Company. If a third physician is required, then
3
<PAGE>
the costs of that physician shall be paid by the Company.
4. No Further Obligations. Upon any termination of this
Agreement by the Company for "Cause" pursuant to Section 2 of this Part B, or by
reason of the Employee's death or disability pursuant to Section 3 of this Part
B, neither the Company nor any subsidiary or division thereof shall be liable
for or be required to pay to the Employee any further remuneration, compensation
or other benefits hereunder.
Part C. Compensation; Expenses.
1. Base Salary. As compensation for his services during the
Term, the Company shall pay or cause to be paid to the Employee a fixed base
salary at the annual rate of One Hundred Forty-Five Thousand ($145,000) Dollars.
2. Bonuses and Options. The Employee may from time to time be
awarded bonuses and/or stock options to purchase securities of the Company based
on the achievement (in whole or in part) by the Company of its business plan and
by the Employee of fixed personal performance objectives. Any and all such
bonuses and/or stock options (together, the "Bonuses") shall be in the sole and
absolute discretion of the Board or a committee thereof.
3. Benefits. In addition to the foregoing Base Salary and
Bonuses, the Employee shall, throughout the period of his employment hereunder,
be eligible to participate in any and all group health, group life and/or other
benefit plans generally made available by the Company to its employees, provided
that nothing herein contained shall be deemed to require the Company to maintain
or continue any particular plan or policy.
4. Vacation. The Employee shall be entitled to up to four (4)
weeks of vacation per year, to be taken at such times as shall be mutually
agreeable to the Company and
4
<PAGE>
the Employee, and so as not to unduly interfere with the business of the
Company. The Employee may carry over, to the next annual period hereunder, up to
two (2) weeks of unused vacation time as at the end of each year of the term of
this Agreement.
5. Expenses. In addition to the remuneration set forth above,
throughout the period of the Employee's employment hereunder, the Company shall
also reimburse the Employee or cause the Employee to be reimbursed, upon
presentment by the Employee to the Company of appropriate receipts and vouchers
therefor, for any reasonable business expenses incurred by the Employee in
connection with the performance of his duties and responsibilities hereunder;
provided, however, that in order to be reimbursable hereunder, any such expense
must be deductible (in whole or in part) by the Company for federal income tax
purposes.
Part D. Confidentiality; Non-Competition. As a material inducement to
cause the Company to enter into this Agreement, the Employee hereby covenants
and agrees that:
1. Confidential Information; Personal Relationships. The
Employee shall, at all times during and subsequent to the Term, keep secret and
retain in strictest confidence all confidential matters of the Company, and the
"know-how", trade secrets, technical processes, inventions, equipment
specifications, equipment designs, plans, drawings, research projects,
confidential client lists, details of client, subcontractor or consultant
contracts, pricing policies, operational methods, marketing plans and
strategies, project development, acquisition and bidding techniques and plans,
business acquisition plans, and new personnel acquisition plans of the Company
and its subsidiaries and divisions (whether now known or hereafter learned by
the Employee), except to the extent that (i) such information is generally
available to the public without restriction, (ii) the Employee obtains
confidentiality agreements with respect to such
5
<PAGE>
confidential information, (iii) the Employee is requested by the Board of
Directors of the Company or a Committee thereof, or by the Chairman of the
Company, to disclose such confidential information, (iv) such information is
provided to a customer of the Company pursuant to a request received from such
customer in the ordinary course of business, or (v) the Employee is under
compulsion of either a court order or a governmental agency's or authority's
inquiry, order or request to so disclose such information.
2. Property of the Company.
(a) Except as otherwise provided herein, all lists, records
and other non-personal documents or papers (and all copies thereof) relating to
the Company and/or any of its subsidiaries or divisions, including such items
stored in computer memories, on microfiche or by any other means, made or
compiled by or on behalf of the Employee, or made available to the Employee, are
and shall be the property of the Company, and shall be delivered to the Company
on the date of termination of the Employee's employment with the Company, or
sooner upon request of the Company at any time or from time to time.
(b) All inventions, including any procedures, formulas,
methods, processes, uses, apparatuses, patterns, designs, plans, drawings,
devices or configurations of any kind, any and all improvements to them which
are developed, discovered, made or produced, and all trade secrets and
information used by the Company and/or its subsidiaries and divisions
(including, without limitation, any such matters created or developed by the
Employee during the term of this Agreement), shall be the exclusive property of
the Company or the subject subsidiary, and shall be delivered to the Company or
the subject subsidiary (without the Employee retaining any copies, components or
records thereof) on the date of termination of the
6
<PAGE>
Employee's employment with the Company; provided, however, that nothing herein
contained shall be deemed to grant to the Company any property rights in any
inventions or other intellectual property which may at any time be developed by
the Employee which is wholly unrelated to any business then engaged in or under
development by the Company.
3. Employees of the Company. The Employee shall not, at any
time (whether during the term of this Agreement or at any time thereafter),
directly or indirectly, for or on behalf of any business enterprise other than
the Company and/or its subsidiaries and affiliates, solicit any employee of the
Company or any of its subsidiaries to leave his or her employment with the
Company or such subsidiary, or encourage any such employee to leave such
employment, without the prior written approval of the Company in each instance.
4. Non-Competition. For so long as the Employee shall be
receiving any compensation or remuneration under this Agreement, and for a
further period of one (1) year thereafter, the Employee shall not, directly or
indirectly, whether individually or as an employee, stockholder (other than the
passive ownership of up to 5% of the capital stock of a publicly traded
corporation), partner, joint venturer, agent or other representative of any
other person, firm or corporation, engage or have any interest in any business
(other than the Company or any of its subsidiaries or affiliates) which, in any
country in which the Company or any of its subsidiaries or divisions does or
solicits business during the Term, is engaged in or derives any revenues from
performing any functionally equivalent services or marketing any functionally
equivalent products as those services provided and products marketed by the
Company or any of its subsidiaries or divisions during the Term.
7
<PAGE>
5. Severability of Covenants. The Employee acknowledges and
agrees that the provisions of this Part D are (a) made in consideration of the
premises and undertakings of the Company set forth herein, (b) made for good,
valuable and adequate consideration received and to be received by the Employee,
and (c) reasonable and necessary, in terms of the time, geographic scope and
nature of the restrictions, for the protection of the Company and the business
and good will thereof. It is intended that the provisions of this Part D be
fully severable, and in the event that any of the foregoing restrictions, or any
portion of the foregoing restrictions, shall be deemed contrary to law, invalid
or unenforceable in any respect by any court or tribunal of competent
jurisdiction, then such restrictions shall be deemed to be amended, modified and
reduced in scope and effect, as to duration and/or geographic area, only to that
extent necessary to render same valid and enforceable (and in such reduced form,
such provisions shall then be enforceable), and any other of the foregoing
restrictions shall be unaffected and shall remain in full force and effect.
6. Equitable Remedies. The parties hereby acknowledge that, in
the event of any breach or threatened breach by the Employee of the provisions
of this Part D, the Company will suffer irreparable harm and will not have an
adequate remedy at law. Accordingly, in the event of any such breach or
threatened breach, the Company may seek and obtain appropriate equitable relief
to restrain or enjoin such breach or threatened breach and/or to compel
compliance herewith.
8
<PAGE>
Part E. Miscellaneous.
1. Binding Effect. All of the terms and conditions of this
Agreement shall be binding upon and inure to the benefit of the Employee, the
Company and their respective heirs, executors, administrators, personal
representatives, successors and permitted assigns.
2. Notices. Except as may otherwise be provided herein, any
notice, request, demand or other communication required or permitted under this
Agreement shall be in writing and shall be deemed to have been given when
delivered personally or when mailed by certified mail, return receipt requested,
addressed to a party at the address of such party first set forth above, or at
such other address as such party may hereafter have designated by notice. Copies
of all notices hereunder shall simultaneously be sent by first class post-paid
mail to Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel, Citicorp Center,
153 East 53rd Street, New York, New York 10022, Attn: Stephen A. Weiss, Esq.
3. Waivers. Neither this Agreement nor any of the terms or
conditions hereof may be waived, amended or modified except by means of a
written instrument duly executed by the party to be charged therewith.
4. Captions. The captions and paragraph headings used in this
Agreement are for convenience of reference only, and shall not affect the
construction or interpretation of this Agreement or any of the provisions
hereof.
5. Governing Law. This Agreement, and all matters or disputes
relating to the validity, construction, performance or enforcement hereof, shall
be governed by, and construed under, the laws of the State of New York, without
giving effect to principles of conflicts of laws thereof.
9
<PAGE>
6. Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original hereof, but all
of which together shall constitute one and the same instrument.
7. Arbitration. Except for any court action or proceeding to
obtain equitable relief in respect of the provisions of Part D above, any
dispute involving the interpretation or application of this Agreement shall be
resolved by final and binding arbitration before an arbitrator designated by,
and mutually acceptable to, the Company and the Employee. In the event that the
parties cannot agree to the appointment of a mutually acceptable arbitrator, the
subject dispute shall be resolved by final and binding arbitration before one or
more arbitrators designated by the American Arbitration Association in New York,
New York, unless mutually agreed to otherwise. The award of any of such
arbitrator(s) may be enforced in any court of competent jurisdiction.
8. Assignment.
(a) This Agreement is intended for the sole and exclusive
benefit of the parties hereto and their respective heirs, executors,
administrators, personal representatives, successors and permitted assigns, and
no other person or entity shall have any right to rely on this Agreement or to
claim or derive any benefit herefrom absent the express written consent of the
party to be charged with such reliance or benefit.
(b) The Employee may not assign or otherwise transfer any
of his obligations or duties hereunder to any other person, firm or corporation,
it being understood and agreed that this Agreement is intended to be for the
personal services of the Employee only and of no other person.
10
<PAGE>
(c) The Company shall have the right, at any time and from
time to time, to cause any payments required hereunder to be made by any
subsidiary of the Company. Furthermore, the Company may assign this Agreement to
any successor-in-interest who may acquire, whether by direct purchase, sale of
securities, merger or consolidation, the assets, business or properties of the
Company; provided that no such assignment shall relieve the Company of its
duties and obligations to the Employee hereunder, without the prior written
consent of the Employee.
9. Superseding Effect. This Agreement supersedes and replaces
any previous employment agreement entered into by the Employee with the Company
or any affiliate thereof.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on and as of the date first set forth above.
COMMODORE SEPARATION TECHNOLOGIES, INC.
By: /s/ Alan R. Burkart
--------------------------------------------
Alan R. Burkart
President and Chief Executive Officer
/s/ James M. DeAngelis
--------------------------------------------
James M. DeAngelis
11
<PAGE>
Exhibit 10.4
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this "Agreement"), made and entered into
as of the 1st day of September 1996, by and between COMMODORE SEPARATION
TECHNOLOGIES, INC., a Delaware corporation having offices at 150 East 58th
Street, Suite 3400, New York, New York 10155 (the "Company"), and SRINIVAS
KILAMBI, Ph.D., an individual residing at 1579 Worthington Club Drive,
Westerville, Ohio 43081 (the "Employee").
W I T N E S S E T H:
WHEREAS, the Employee has substantial knowledge and experience
relating to the management and operation of technology-driven developmental
businesses, and the Company desires to obtain the full-time services of the
Employee to serve in an executive capacity with the Company; and
WHEREAS, the Employee is ready, willing and able to serve as
an executive officer of the Company, all upon the terms and subject to the
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing premises and
the mutual covenants herein contained, the parties hereto hereby agree as
follows:
Part A. Employment.
1. Duties. Subject to the terms and conditions of this
Agreement, the Company shall employ the Employee and the Employee shall render
services to the Company in the capacity and with the title of Vice President -
Technology of the Company. In addition, the Employee shall serve in such
capacity and have such title with such of the Company's subsidiaries as may be
requested from time to time by the Company, without requirement of any
<PAGE>
additional compensation to the Employee.
2. Full-Time Employment. Throughout the period of his
employment hereunder, the Employee shall devote his full and entire professional
and business time, attention, knowledge and skills to faithfully, diligently and
to the best of his abilities perform his duties hereunder. It is expected that
the Employee will render his services primarily from the Company's Atlanta,
Georgia office (as and when located), provided that the Employee will engage in
such travelling as may be reasonably required in connection with the performance
of his duties hereunder.
Part B. Term of Employment; Termination of Agreement.
1. Term. Subject to prior termination in accordance with the
provisions hereof, the term of this Agreement shall commence on the date hereof
and shall continue through and including December 31, 1999 (the "Term").
2. Termination For Cause. Anything contained in Section 1 of
this Part B to the contrary notwithstanding, this Agreement may be terminated at
the option of the Board of Directors of the Company (the "Board") for "Cause"
(as hereinafter defined), effective upon the giving of written notice of
termination to the Employee. As used herein, the term "Cause" shall mean and be
limited to:
(a) any act committed by the Employee against the Company,
or any of its subsidiaries or divisions, constituting: (i) fraud, (ii)
misappropriation of corporate opportunity, breach of fiduciary duty or
non-disclosure of a conflict of interest, (iii) self-dealing, (iv) embezzlement
of funds, (v) felony conviction for conduct involving moral turpitude or other
criminal conduct, or (vi) the disregard by the Employee of the reasonable
directions of the
2
<PAGE>
Board; or
(b) the breach or default by the Employee in the
performance of any material provision of this Agreement (including but not
limited to Part D below); or
(c) alcoholism or any other form of addiction which impairs
the Employee's ability to perform his duties hereunder.
3. Death or Disability. Anything contained in Section 1 of
this Part B to the contrary notwithstanding, this Agreement may be terminated by
the Company: (i) upon the death of the Employee, or (ii) on thirty (30) days'
prior written notice to the Employee, in the event that the Employee shall be
physically or mentally disabled or impaired so as to prevent him from continuing
the normal and proper performance of his duties and responsibilities hereunder
for a period of three (3) consecutive months. The initial determination as to
whether the Employee is disabled or impaired shall be made by the physician
regularly treating the condition causing the disability. The Company shall have
the right to require the Employee to be examined by a physician duly licensed to
practice medicine in the State in which the Employee has his primary residence
to determine such physician's opinion as to the Employee's disability. If such
physician's opinion differs from that of the physician treating the Employee, or
a physician thereafter retained by the Employee, they shall forthwith select a
third physician so licensed whose opinion, after examination and review of
available information, shall be conclusive and binding upon all parties hereto.
All costs of the physician regularly treating or thereafter retained by the
Employee shall be paid by the Employee. All costs of the physician retained by
the Company shall be paid by the Company. If a third physician is required, then
the costs of that physician shall be paid by the Company.
3
<PAGE>
4. No Further Obligations. Upon any termination of this
Agreement by the Company for "Cause" pursuant to Section 2 of this Part B, or by
reason of the Employee's death or disability pursuant to Section 3 of this Part
B, neither the Company nor any subsidiary or division thereof shall be liable
for or be required to pay to the Employee any further remuneration, compensation
or other benefits hereunder.
Part C. Compensation; Expenses.
1. Base Salary. As compensation for his services during the
Term, the Company shall pay or cause to be paid to the Employee a fixed base
salary at the annual rate of One Hundred Ten Thousand ($110,000) Dollars.
2. Bonuses and Options. The Employee may from time to time be
awarded bonuses and/or stock options to purchase securities of the Company based
on the achievement (in whole or in part) by the Company of its business plan and
by the Employee of fixed personal performance objectives. Any and all such
bonuses and/or stock options (together, the "Bonuses") shall be in the sole and
absolute discretion of the Board or a committee thereof.
3. Benefits. In addition to the foregoing Base Salary and
Bonuses, the Employee shall, throughout the period of his employment hereunder,
be eligible to participate in any and all group health, group life and/or other
benefit plans generally made available by the Company to its employees, provided
that nothing herein contained shall be deemed to require the Company to maintain
or continue any particular plan or policy.
4. Vacation. The Employee shall be entitled to up to three (3)
weeks of vacation per year, to be taken at such times as shall be mutually
agreeable to the Company and the Employee, and so as not to unduly interfere
with the business of the Company. The
4
<PAGE>
Employee may carry over, to the next annual period hereunder, up to two (2)
weeks of unused vacation time as at the end of each year of the term of this
Agreement.
5. Expenses. In addition to the remuneration set forth above,
throughout the period of the Employee's employment hereunder, the Company shall
also reimburse the Employee or cause the Employee to be reimbursed, upon
presentment by the Employee to the Company of appropriate receipts and vouchers
therefor, for any reasonable business expenses incurred by the Employee in
connection with the performance of his duties and responsibilities hereunder;
provided, however, that in order to be reimbursable hereunder, any such expense
must be deductible (in whole or in part) by the Company for federal income tax
purposes.
Part D. Confidentiality; Non-Competition. As a material inducement to
cause the Company to enter into this Agreement, the Employee hereby covenants
and agrees that:
1. Confidential Information; Personal Relationships. The
Employee shall, at all times during and subsequent to the Term, keep secret and
retain in strictest confidence all confidential matters of the Company, and the
"know-how", trade secrets, technical processes, inventions, equipment
specifications, equipment designs, plans, drawings, research projects,
confidential client lists, details of client, subcontractor or consultant
contracts, pricing policies, operational methods, marketing plans and
strategies, project development, acquisition and bidding techniques and plans,
business acquisition plans, and new personnel acquisition plans of the Company
and its subsidiaries and divisions (whether now known or hereafter learned by
the Employee), except to the extent that (i) such information is generally
available to the public without restriction, (ii) the Employee obtains
confidentiality agreements with respect to such confidential information, (iii)
the Employee is requested by the Board of Directors of the
5
<PAGE>
Company or a Committee thereof, or by the Chairman of the Company, to disclose
such confidential information, (iv) such information is provided to a customer
of the Company pursuant to a request received from such customer in the ordinary
course of business, or (v) the Employee is under compulsion of either a court
order or a governmental agency's or authority's inquiry, order or request to so
disclose such information.
2. Property of the Company.
(a) Except as otherwise provided herein, all lists, records
and other non-personal documents or papers (and all copies thereof) relating to
the Company and/or any of its subsidiaries or divisions, including such items
stored in computer memories, on microfiche or by any other means, made or
compiled by or on behalf of the Employee, or made available to the Employee, are
and shall be the property of the Company, and shall be delivered to the Company
on the date of termination of the Employee's employment with the Company, or
sooner upon request of the Company at any time or from time to time.
(b) All inventions, including any procedures, formulas,
methods, processes, uses, apparatuses, patterns, designs, plans, drawings,
devices or configurations of any kind, any and all improvements to them which
are developed, discovered, made or produced, and all trade secrets and
information used by the Company and/or its subsidiaries and divisions
(including, without limitation, any such matters created or developed by the
Employee during the term of this Agreement), shall be the exclusive property of
the Company or the subject subsidiary, and shall be delivered to the Company or
the subject subsidiary (without the Employee retaining any copies, components or
records thereof) on the date of termination of the Employee's employment with
the Company; provided, however, that nothing herein contained
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<PAGE>
shall be deemed to grant to the Company any property rights in any inventions or
other intellectual property which may at any time be developed by the Employee
which is wholly unrelated to any business then engaged in or under development
by the Company.
3. Employees of the Company. The Employee shall not, at any
time (whether during the term of this Agreement or at any time thereafter),
directly or indirectly, for or on behalf of any business enterprise other than
the Company and/or its subsidiaries and affiliates, solicit any employee of the
Company or any of its subsidiaries to leave his or her employment with the
Company or such subsidiary, or encourage any such employee to leave such
employment, without the prior written approval of the Company in each instance.
4. Non-Competition. For so long as the Employee shall be
receiving any compensation or remuneration under this Agreement, and for a
further period of one (1) year thereafter, the Employee shall not, directly or
indirectly, whether individually or as an employee, stockholder (other than the
passive ownership of up to 5% of the capital stock of a publicly traded
corporation), partner, joint venturer, agent or other representative of any
other person, firm or corporation, engage or have any interest in any business
(other than the Company or any of its subsidiaries or affiliates) which, in any
country in which the Company or any of its subsidiaries or divisions does or
solicits business during the Term, is engaged in or derives any revenues from
performing any functionally equivalent services or marketing any functionally
equivalent products as those services provided and products marketed by the
Company or any of its subsidiaries or divisions during the Term.
5. Severability of Covenants. The Employee acknowledges and
agrees that the provisions of this Part D are (a) made in consideration of the
premises and undertakings of
7
<PAGE>
the Company set forth herein, (b) made for good, valuable and adequate
consideration received and to be received by the Employee, and (c) reasonable
and necessary, in terms of the time, geographic scope and nature of the
restrictions, for the protection of the Company and the business and good will
thereof. It is intended that the provisions of this Part D be fully severable,
and in the event that any of the foregoing restrictions, or any portion of the
foregoing restrictions, shall be deemed contrary to law, invalid or
unenforceable in any respect by any court or tribunal of competent jurisdiction,
then such restrictions shall be deemed to be amended, modified and reduced in
scope and effect, as to duration and/or geographic area, only to that extent
necessary to render same valid and enforceable (and in such reduced form, such
provisions shall then be enforceable), and any other of the foregoing
restrictions shall be unaffected and shall remain in full force and effect.
6. Equitable Remedies. The parties hereby acknowledge that, in
the event of any breach or threatened breach by the Employee of the provisions
of this Part D, the Company will suffer irreparable harm and will not have an
adequate remedy at law. Accordingly, in the event of any such breach or
threatened breach, the Company may seek and obtain appropriate equitable relief
to restrain or enjoin such breach or threatened breach and/or to compel
compliance herewith.
Part E. Miscellaneous.
1. Binding Effect. All of the terms and conditions of this
Agreement shall be binding upon and inure to the benefit of the Employee, the
Company and their respective heirs, executors, administrators, personal
representatives, successors and permitted assigns.
2. Notices. Except as may otherwise be provided herein, any
notice,
8
<PAGE>
request, demand or other communication required or permitted under this
Agreement shall be in writing and shall be deemed to have been given when
delivered personally or when mailed by certified mail, return receipt requested,
addressed to a party at the address of such party first set forth above, or at
such other address as such party may hereafter have designated by notice. Copies
of all notices hereunder shall simultaneously be sent by first class post-paid
mail to Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel, Citicorp Center,
153 East 53rd Street, New York, New York 10022, Attn: Stephen A. Weiss, Esq.
3. Waivers. Neither this Agreement nor any of the terms or
conditions hereof may be waived, amended or modified except by means of a
written instrument duly executed by the party to be charged therewith.
4. Captions. The captions and paragraph headings used in this
Agreement are for convenience of reference only, and shall not affect the
construction or interpretation of this Agreement or any of the provisions
hereof.
5. Governing Law. This Agreement, and all matters or disputes
relating to the validity, construction, performance or enforcement hereof, shall
be governed by, and construed under, the laws of the State of New York, without
giving effect to principles of conflicts of laws thereof.
6. Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original hereof, but all
of which together shall constitute one and the same instrument.
7. Arbitration. Except for any court action or proceeding to
obtain equitable relief in respect of the provisions of Part D above, any
dispute involving the interpretation or
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<PAGE>
application of this Agreement shall be resolved by final and binding arbitration
before an arbitrator designated by, and mutually acceptable to, the Company and
the Employee. In the event that the parties cannot agree to the appointment of a
mutually acceptable arbitrator, the subject dispute shall be resolved by final
and binding arbitration before one or more arbitrators designated by the
American Arbitration Association in New York, New York, unless mutually agreed
to otherwise. The award of any of such arbitrator(s) may be enforced in any
court of competent jurisdiction.
8. Assignment.
(a) This Agreement is intended for the sole and exclusive
benefit of the parties hereto and their respective heirs, executors,
administrators, personal representatives, successors and permitted assigns, and
no other person or entity shall have any right to rely on this Agreement or to
claim or derive any benefit herefrom absent the express written consent of the
party to be charged with such reliance or benefit.
(b) The Employee may not assign or otherwise transfer any
of his obligations or duties hereunder to any other person, firm or corporation,
it being understood and agreed that this Agreement is intended to be for the
personal services of the Employee only and of no other person.
(c) The Company shall have the right, at any time and from
time to time, to cause any payments required hereunder to be made by any
subsidiary of the Company. Furthermore, the Company may assign this Agreement to
any successor-in-interest who may acquire, whether by direct purchase, sale of
securities, merger or consolidation, the assets, business or properties of the
Company; provided that no such assignment shall relieve the
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<PAGE>
Company of its duties and obligations to the Employee hereunder, without the
prior written consent of the Employee.
9. Superseding Effect. This Agreement supersedes and replaces
any previous employment agreement entered into by the Employee with the Company
or any affiliate thereof.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on and as of the date first set forth above.
COMMODORE SEPARATION TECHNOLOGIES, INC.
By: /s/ Alan R. Burkart
--------------------------------------------
Alan R. Burkart
President and Chief Executive Officer
/s/ Srinivas Kilambi, Ph.D.
-------------------------------------------
Srinivas Kilambi, Ph.D.
11
<PAGE>
Exhibit 10.5
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this "Agreement"), made and entered into
as of the 3rd day of September, 1996, by and between COMMODORE SEPARATION
TECHNOLOGIES, INC., a Delaware corporation having offices at 150 East 58th
Street, Suite 3400, New York, New York 10155 (the "Company"), and MICHAEL D.
KIEHNAU, an individual residing at 312 Colony Court, Norton, Virginia 24273 (the
"Employee").
W I T N E S S E T H:
WHEREAS, the Employee has substantial knowledge and experience
relating to the financial management and accounting of publicly traded companies
and technology-related businesses, and the Company desires to obtain the
full-time services of the Employee to serve as the Chief Financial Officer and
Chief Accounting Officer of the Company; and
WHEREAS, the Employee is ready, willing and able to serve as
the Chief Financial Officer and Chief Accounting Officer of the Company, all
upon the terms and subject to the conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing premises and
the mutual covenants herein contained, the parties hereto hereby agree as
follows:
Part A. Employment.
1. Duties. Subject to the terms and conditions of this
Agreement, the Company shall employ the Employee and the Employee shall render
services to the Company in the capacity and with the title of Chief Financial
Officer and Chief Accounting Officer of the Company, with primary responsibility
for all accounting functions and financial management
<PAGE>
relating to the Company and its business. In addition, the Employee shall serve
in such capacity and have such title with such of the Company's subsidiaries as
may be requested from time to time by the Company, without requirement of any
additional compensation to the Employee.
2. Full-Time Employment. Throughout the period of his
employment hereunder, the Employee shall devote his full and entire professional
and business time, attention, knowledge and skills to faithfully, diligently and
to the best of his abilities perform his duties hereunder. It is expected that
the Employee will render his services primarily from the Company's Atlanta,
Georgia office (as and when located), provided that the Employee will engage in
such travelling as may be reasonably required in connection with the performance
of his duties hereunder.
Part B. Term of Employment; Termination of Agreement.
1. Term. Subject to prior termination in accordance with the
provisions hereof, the term of this Agreement shall commence on September __,
1996 and shall continue through and including December 31, 1999 (the "Term").
2. Termination For Cause. Anything contained in Section 1 of
this Part B to the contrary notwithstanding, this Agreement may be terminated at
the option of the Board of Directors of the Company (the "Board") for "Cause"
(as hereinafter defined), effective upon the giving of written notice of
termination to the Employee. As used herein, the term "Cause" shall mean and be
limited to:
(a) any act committed by the Employee against the Company,
or any of its subsidiaries or divisions, constituting: (i) fraud, (ii)
misappropriation of corporate opportunity, breach of fiduciary duty or
non-disclosure of a conflict of interest, (iii) self-dealing, (iv) embezzlement
of funds, (v) felony conviction for conduct involving moral turpitude or other
2
<PAGE>
criminal conduct, or (vi) the disregard by the Employee of the reasonable
directions of the Board; or
(b) the breach or default by the Employee in the
performance of any material provision of this Agreement (including but not
limited to Part D below); or
(c) alcoholism or any other form of addiction which impairs
the Employee's ability to perform his duties hereunder.
3. Death or Disability. Anything contained in Section 1 of
this Part B to the contrary notwithstanding, this Agreement may be terminated by
the Company: (i) upon the death of the Employee, or (ii) on thirty (30) days'
prior written notice to the Employee, in the event that the Employee shall be
physically or mentally disabled or impaired so as to prevent him from continuing
the normal and proper performance of his duties and responsibilities hereunder
for a period of three (3) consecutive months. The initial determination as to
whether the Employee is disabled or impaired shall be made by the physician
regularly treating the condition causing the disability. The Company shall have
the right to require the Employee to be examined by a physician duly licensed to
practice medicine in the State in which the Employee has his primary residence
to determine such physician's opinion as to the Employee's disability. If such
physician's opinion differs from that of the physician treating the Employee, or
a physician thereafter retained by the Employee, they shall forthwith select a
third physician so licensed whose opinion, after examination and review of
available information, shall be conclusive and binding upon all parties hereto.
All costs of the physician regularly treating or thereafter retained by the
Employee shall be paid by the Employee. All costs of the physician retained by
the Company shall be paid by the Company. If a third physician is required, then
3
<PAGE>
the costs of that physician shall be paid by the Company.
4. No Further Obligations. Upon any termination of this
Agreement by the Company for "Cause" pursuant to Section 2 of this Part B, or by
reason of the Employee's death or disability pursuant to Section 3 of this Part
B, neither the Company nor any subsidiary or division thereof shall be liable
for or be required to pay to the Employee any further remuneration, compensation
or other benefits hereunder.
Part C. Compensation; Expenses.
1. Base Salary. As compensation for his services during the
Term, the Company shall pay or cause to be paid to the Employee a fixed base
salary at the annual rate of Eighty-Eight Thousand ($88,000) Dollars.
2. Bonuses and Options. The Employee may from time to time be
awarded bonuses and/or stock options to purchase securities of the Company based
on the achievement (in whole or in part) by the Company of its business plan and
by the Employee of fixed personal performance objectives. Any and all such
bonuses and/or stock options (together, the "Bonuses") shall be in the sole and
absolute discretion of the Board or a committee thereof.
3. Benefits. In addition to the foregoing Base Salary and
Bonuses, the Employee shall, throughout the period of his employment hereunder,
be eligible to participate in any and all group health, group life and/or other
benefit plans generally made available by the Company to its employees, provided
that nothing herein contained shall be deemed to require the Company to maintain
or continue any particular plan or policy.
4. Vacation. The Employee shall be entitled to up to four (4)
weeks of vacation per year, to be taken at such times as shall be mutually
agreeable to the Company and
4
<PAGE>
the Employee, and so as not to unduly interfere with the business of the
Company. The Employee may carry over, to the next annual period hereunder, up to
two (2) weeks of unused vacation time as at the end of each year of the term of
this Agreement.
5. Expenses. In addition to the remuneration set forth above,
throughout the period of the Employee's employment hereunder, the Company shall
also reimburse the Employee or cause the Employee to be reimbursed, upon
presentment by the Employee to the Company of appropriate receipts and vouchers
therefor, for any reasonable business expenses incurred by the Employee in
connection with the performance of his duties and responsibilities hereunder;
provided, however, that in order to be reimbursable hereunder, any such expense
must be deductible (in whole or in part) by the Company for federal income tax
purposes.
Part D. Confidentiality; Non-Competition. As a material inducement to
cause the Company to enter into this Agreement, the Employee hereby covenants
and agrees that:
1. Confidential Information; Personal Relationships. The
Employee shall, at all times during and subsequent to the Term, keep secret and
retain in strictest confidence all confidential matters of the Company, and the
"know-how", trade secrets, technical processes, inventions, equipment
specifications, equipment designs, plans, drawings, research projects,
confidential client lists, details of client, subcontractor or consultant
contracts, pricing policies, operational methods, marketing plans and
strategies, project development, acquisition and bidding techniques and plans,
business acquisition plans, and new personnel acquisition plans of the Company
and its subsidiaries and divisions (whether now known or hereafter learned by
the Employee), except to the extent that (i) such information is generally
available to the public without restriction, (ii) the Employee obtains
confidentiality agreements with respect to such
5
<PAGE>
confidential information, (iii) the Employee is requested by the Board or a
Committee thereof, or by the Chairman of the Company, to disclose such
confidential information, (iv) such information is provided to a customer of the
Company pursuant to a request received from such customer in the ordinary course
of business, or (v) the Employee is under compulsion of either a court order or
a governmental agency's or authority's inquiry, order or request to so disclose
such information.
2. Property of the Company.
(a) Except as otherwise provided herein, all lists, records
and other non-personal documents or papers (and all copies thereof) relating to
the Company and/or any of its subsidiaries or divisions, including such items
stored in computer memories, on microfiche or by any other means, made or
compiled by or on behalf of the Employee, or made available to the Employee, are
and shall be the property of the Company, and shall be delivered to the Company
on the date of termination of the Employee's employment with the Company, or
sooner upon request of the Company at any time or from time to time.
(b) All inventions, including any procedures, formulas,
methods, processes, uses, apparatuses, patterns, designs, plans, drawings,
devices or configurations of any kind, any and all improvements to them which
are developed, discovered, made or produced, and all trade secrets and
information used by the Company and/or its subsidiaries and divisions
(including, without limitation, any such matters created or developed by the
Employee during the term of this Agreement), shall be the exclusive property of
the Company or the subject subsidiary, and shall be delivered to the Company or
the subject subsidiary (without the Employee retaining any copies, components or
records thereof) on the date of termination of the
6
<PAGE>
Employee's employment with the Company; provided, however, that nothing herein
contained shall be deemed to grant to the Company any property rights in any
inventions or other intellectual property which may at any time be developed by
the Employee which is wholly unrelated to any business then engaged in or under
development by the Company.
3. Employees of the Company. The Employee shall not, at any
time (whether during the term of this Agreement or at any time thereafter),
directly or indirectly, for or on behalf of any business enterprise other than
the Company and/or its subsidiaries and affiliates, solicit any employee of the
Company or any of its subsidiaries to leave his or her employment with the
Company or such subsidiary, or encourage any such employee to leave such
employment, without the prior written approval of the Company in each instance.
4. Non-Competition. For so long as the Employee shall be
receiving any compensation or remuneration under this Agreement, and for a
further period of one (1) year thereafter, the Employee shall not, directly or
indirectly, whether individually or as an employee, stockholder (other than the
passive ownership of up to 5% of the capital stock of a publicly traded
corporation), partner, joint venturer, agent or other representative of any
other person, firm or corporation, engage or have any interest in any business
(other than the Company or any of its subsidiaries or affiliates) which, in any
country in which the Company or any of its subsidiaries or divisions does or
solicits business during the Term, is engaged in or derives any revenues from
performing any functionally equivalent services or marketing any functionally
equivalent products as those services provided and products marketed by the
Company or any of its subsidiaries or divisions during the Term; and in this
regard, the Employee acknowledges that his background, skills and experience are
not uniquely suited to
7
<PAGE>
a business such as that conducted by the Company, but can be readily adapted to
and utilized in a wide variety of other businesses.
5. Severability of Covenants. The Employee acknowledges and
agrees that the provisions of this Part D are (a) made in consideration of the
premises and undertakings of the Company set forth herein, (b) made for good,
valuable and adequate consideration received and to be received by the Employee,
and (c) reasonable and necessary, in terms of the time, geographic scope and
nature of the restrictions, for the protection of the Company and the business
and good will thereof. It is intended that the provisions of this Part D be
fully severable, and in the event that any of the foregoing restrictions, or any
portion of the foregoing restrictions, shall be deemed contrary to law, invalid
or unenforceable in any respect by any court or tribunal of competent
jurisdiction, then such restrictions shall be deemed to be amended, modified and
reduced in scope and effect, as to duration and/or geographic area, only to that
extent necessary to render same valid and enforceable (and in such reduced form,
such provisions shall then be enforceable), and any other of the foregoing
restrictions shall be unaffected and shall remain in full force and effect.
6. Equitable Remedies. The parties hereby acknowledge that, in
the event of any breach or threatened breach by the Employee of the provisions
of this Part D, the Company will suffer irreparable harm and will not have an
adequate remedy at law. Accordingly, in the event of any such breach or
threatened breach, the Company may seek and obtain appropriate equitable relief
to restrain or enjoin such breach or threatened breach and/or to compel
compliance herewith.
8
<PAGE>
Part E. Miscellaneous.
1. Binding Effect. All of the terms and conditions of this
Agreement shall be binding upon and inure to the benefit of the Employee, the
Company and their respective heirs, executors, administrators, personal
representatives, successors and permitted assigns.
2. Notices. Except as may otherwise be provided herein, any
notice, request, demand or other communication required or permitted under this
Agreement shall be in writing and shall be deemed to have been given when
delivered personally or when mailed by certified mail, return receipt requested,
addressed to a party at the address of such party first set forth above, or at
such other address as such party may hereafter have designated by notice. Copies
of all notices hereunder shall simultaneously be sent by first class post-paid
mail to Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel, Citicorp Center,
153 East 53rd Street, New York, New York 10022, Attn: Stephen A. Weiss, Esq.
3. Waivers. Neither this Agreement nor any of the terms or
conditions hereof may be waived, amended or modified except by means of a
written instrument duly executed by the party to be charged therewith.
4. Captions. The captions and paragraph headings used in this
Agreement are for convenience of reference only, and shall not affect the
construction or interpretation of this Agreement or any of the provisions
hereof.
5. Governing Law. This Agreement, and all matters or disputes
relating to the validity, construction, performance or enforcement hereof, shall
be governed by, and construed under, the laws of the State of New York, without
giving effect to principles of conflicts of laws thereof.
9
<PAGE>
6. Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original hereof, but all
of which together shall constitute one and the same instrument.
7. Arbitration. Except for any court action or proceeding to
obtain equitable relief in respect of the provisions of Part D above, any
dispute involving the interpretation or application of this Agreement shall be
resolved by final and binding arbitration before an arbitrator designated by,
and mutually acceptable to, the Company and the Employee. In the event that the
parties cannot agree to the appointment of a mutually acceptable arbitrator, the
subject dispute shall be resolved by final and binding arbitration before one or
more arbitrators designated by the American Arbitration Association in New York,
New York, unless mutually agreed to otherwise. The award of any of such
arbitrator(s) may be enforced in any court of competent jurisdiction.
8. Assignment.
(a) This Agreement is intended for the sole and exclusive
benefit of the parties hereto and their respective heirs, executors,
administrators, personal representatives, successors and permitted assigns, and
no other person or entity shall have any right to rely on this Agreement or to
claim or derive any benefit herefrom absent the express written consent of the
party to be charged with such reliance or benefit.
(b) The Employee may not assign or otherwise transfer any
of his obligations or duties hereunder to any other person, firm or corporation,
it being understood and agreed that this Agreement is intended to be for the
personal services of the Employee only and of no other person.
10
<PAGE>
(c) The Company shall have the right, at any time and from
time to time, to cause any payments required hereunder to be made by any
subsidiary of the Company. Furthermore, the Company may assign this Agreement to
any successor-in-interest who may acquire, whether by direct purchase, sale of
securities, merger or consolidation, the assets, business or properties of the
Company; provided that no such assignment shall relieve the Company of its
duties and obligations to the Employee hereunder, without the prior written
consent of the Employee.
9. Entire Agreement. This Agreement constitutes the sole and
entire agreement between the parties as to the subject matter hereof and
supersedes any and all prior agreements or understandings with respect to such
subject matter.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on and as of the date first set forth above.
COMMODORE SEPARATION TECHNOLOGIES, INC.
By: /s/ Alan R. Burkart
--------------------------------------------
Alan R. Burkart
President and Chief Executive Officer
/s/ Michael D. Kiehnau
--------------------------------------------
Michael D. Kiehnau
11
<PAGE>
Exhibit 10.6
COMMODORE SEPARATION TECHNOLOGIES, INC.
1996 STOCK OPTION PLAN
A. Purposes.
The purposes of the Commodore Separation Technologies, Inc.
1996 Stock Option Plan (this "Plan") are to aid Commodore Separation
Technologies, Inc. (the "Company") and its subsidiaries in attracting and
retaining capable management and employees and to enable officers, directors and
selected key employees and/or consultants of the Company and its subsidiaries to
acquire or increase ownership interest in the Company on a basis that will
encourage them to perform at increasing levels of effectiveness and use their
best efforts to promote the growth and profitability of the Company and its
subsidiaries. Consistent with these objectives, this Plan authorizes the
granting to officers, directors and selected key employees and/or consultants of
options (collectively, "Options") to acquire shares of the Company's common
stock, par value $.001 per share ("Common Stock"), pursuant to the terms and
conditions hereinafter set forth. As used herein, the term "subsidiary" has the
same meaning as is ascribed to the term "subsidiary corporation" under Section
425 of the Internal Revenue Code of 1986, as amended (the "Code").
Options granted hereunder may be (i) "Incentive Options"
(which term, as used herein, shall mean Options that are intended to be
"incentive stock options" within the meaning of Section 422 of the Code) granted
to selected key employees of the Company, or (ii) "Nonqualified Options" (which
term, as used herein, shall mean Options that are not intended to be Incentive
Options) granted to officers, directors and/or selected key employees and/or
consultants of the Company.
B. Effective Date.
This Plan shall be effective as of September 5, 1996, which is
the date of adoption of this Plan by the Board of Directors of the Company (the
"Board")) and approval hereof by the sole stockholder of the Company.
C. Administration.
1. This Plan shall be administered by a committee (the
"Committee") consisting of two members of the Board, who are selected by the
Board. (In the event that, and for so long as, the entire Board shall consist of
only two members, then the Board shall constitute the Committee hereunder.) If,
at any time, there are less than two members of the Committee eligible to serve
in such capacity, the Board shall appoint one or more other eligible members of
the Board to serve on the Committee. All Committee members shall serve, and may
be removed, at the pleasure of the Board.
<PAGE>
2. A majority of the members of the Committee (but not less
than two) shall constitute a quorum, and any action taken by a majority of such
members present at any meeting at which a quorum is present, or acts approved in
writing by all such members, shall be the acts of the Committee.
3. Subject to the other provisions of this Plan, the Committee
shall have full authority to decide the date or dates on which Options will be
granted under this Plan (in each instance, the "Date of Grant"), to determine
whether the Options to be granted shall be Incentive Options or Nonqualified
Options, or a combination of both, to select the officers, directors and/or key
employees and/or consultants to whom Options will be granted, to determine the
number of shares of Common Stock to be covered by each Option, the price at
which such shares may be purchased upon the exercise of such Option (the
"Exercise Price") and other terms and conditions of such purchase, any vesting
requirements to be applicable to any Options, and any other terms and conditions
not inconsistent with the requirements of this Plan. In making such
determinations, the Committee shall solicit the recommendations of the Chairman
and President of the Company and may take into account each proposed optionee's
present and potential contributions to the Company's business and any other
factors which the Committee may deem relevant. Subject to the other provisions
of this Plan, the Committee shall also have full authority to (i) interpret this
Plan and any stock option agreements evidencing Options granted hereunder
("Option Agreements"), (ii) issue rules for administering this Plan, (ii)
change, alter, amend or rescind such rules, and (iv) make all other
determinations necessary or appropriate for the administration of this Plan. All
determinations, interpretations and constructions made by the Committee pursuant
to this Part C shall be final and conclusive. No member of the Board or the
Committee shall be liable for any action, determination or omission taken or
made in good faith with respect to this Plan or any Option granted hereunder.
D. Eligibility.
1. Subject to the provisions of Part G below, key employees of
the Company and its subsidiaries (including officers and directors who are
employees) shall be eligible to receive Incentive Options under this Plan, as
determined by the Committee.
2. All officers, directors and other senior management of
and/or key employees or consultants to the Company (as determined by the
Committee) shall be eligible to receive Nonqualified Options under this Plan.
E. Option Shares.
1. The shares subject to Options granted under this Plan shall
be shares of Common Stock and, except as otherwise required or permitted by Part
E, Section 3 below, (i) the aggregate number of shares with respect to which
Incentive Options may be granted hereunder shall not exceed 500,000 shares, and
(ii) the aggregate number of shares with respect to which Nonqualified Options
may be granted hereunder shall not exceed 1,500,000 shares. If an Option
expires, terminates or is otherwise surrendered, in whole or in part, the shares
2
<PAGE>
allocable to the unexercised portion of such Option shall again become available
for grants of Options hereunder. As determined from time to time by the Board,
the shares available under this Plan for grants of Options may consist either in
whole or in part of authorized but unissued shares of Common Stock or shares of
Common Stock which have been reacquired by the Company following original
issuance.
2. The aggregate number of shares of Common Stock as to which
Incentive Options and Nonqualified Options may be granted hereunder (as provided
in Part E, Section 1 above), the number of shares covered by each outstanding
Option, and the Exercise Price applicable to each outstanding Option shall be
proportionately adjusted for any increase or decrease in the number of issued or
outstanding shares of Common Stock resulting from a stock split, combination of
shares, recapitalization or other subdivision or consolidation of shares or
other adjustment, or the payment of a stock dividend in respect of the Common
Stock; provided, however, that any fractional shares resulting from any such
adjustment shall be eliminated.
3. The aggregate fair market value, determined on the Date of
Grant, of the shares of stock with respect to which Incentive Options are
exercisable for the first time by an Optionee (as such term is defined in Part F
below) during any calendar year (under all incentive stock option plans of the
Company and its subsidiaries) may not exceed $100,000.
F. Terms and Conditions of Options.
The Committee may, in its discretion, subject to Part D above,
grant to prospective optionees only Incentive Options, only Nonqualified
Options, or a combination of both, and each Option granted shall be clearly
identified as to its status. Each Option granted pursuant to this Plan shall be
evidenced by an Option Agreement between the Company and the officer, director,
key employee and/or consultant to whom the Option is granted (the "Optionee") in
such form or forms as the Committee, from time to time, shall prescribe, which
agreements may but need not be identical to each other, but shall comply with
and be subject to the following terms and conditions:
1. Exercise Price. The Exercise Price at which each share of
Common Stock may be purchased pursuant to an Option shall be determined by the
Committee, except that (i) subject to Part G below, the Exercise Price at which
each share of Common Stock may be purchased pursuant to an Incentive Option
shall be not less than 100% of the fair market value for each such share on the
Date of Grant of such Incentive Option, as determined by the Committee in good
faith in accordance with Section 422 of the Code and applicable regulations
thereunder, and (ii) the Exercise Price at which each share of Common Stock may
be purchased pursuant to a Nonqualified Option shall be not less than 100% of
the fair market value for each such share on the Date of Grant of such
Nonqualified Option, determined by the Committee as aforesaid; provided,
however, that if the consolidated net pre-tax income of the Company and its
subsidiaries in the full fiscal year immediately preceding the Date of Grant of
such Nonqualified Option (the "Prior Year") exceeded 125% of the mean average
annual consolidated net pre-tax income of the Company and its subsidiaries for
the three fiscal years immediately
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preceding the Prior Year, then the Exercise Price per share under such
Nonqualified Option may be an amount not less than 85% of the fair market value
per share on the Date of Grant of such Nonqualified Option, determined by the
Committee as aforesaid. For purposes hereof, the consolidated net pre-tax income
of the Company and its subsidiaries for any fiscal year shall be the
consolidated net pre-tax income of the Company and its subsidiaries as reflected
in the Company's consolidated audited financial statements for such fiscal year,
prepared in accordance with generally accepted accounting principles applied on
a consistent basis throughout all periods in question. Anything contained in
this Part F, Section 1 to the contrary notwithstanding, in the event that the
number of shares of Common Stock subject to any Option is adjusted pursuant to
Part E, Section 2 above, a corresponding adjustment shall be made in the
Exercise Price per share.
2. Duration of Options. The duration of each Option granted
hereunder shall be determined by the Committee, except that (i) subject to Part
G below, each Incentive Option granted hereunder shall expire and all rights to
purchase shares of Common Stock pursuant thereto shall cease no later than that
date which is the day before the tenth anniversary of the Date of Grant of such
Incentive Option, and (ii) each Nonqualified Option granted hereunder shall
expire and all rights to purchase shares of Common Stock pursuant thereto shall
cease no later than that date which is the day before the eighth anniversary of
the Date of Grant of such Nonqualified Option, subject to extension by mutual
written agreement of the Company and the subject Optionee (in each instance, the
"Expiration Date").
3. Vesting of Options. The vesting of each Option granted
hereunder shall be determined by the Committee. Only the vested portion(s) of
any Option may be exercised. Anything contained in this Part F or in any Option
Agreement to the contrary notwithstanding, an Optionee shall become fully (100%)
vested in each of his or her Incentive Options upon his or her termination of
employment with the Company or any of its subsidiaries by reason of death,
disability or retirement at age 65 or older in accordance with the Company's
standard retirement procedures then in effect (with such retirement being
hereinafter referred to as "retirement"). The Committee shall, in its sole
discretion, determine whether or not disability or retirement has occurred.
4. Merger, Consolidation, etc. In the event that the Company
shall, pursuant to action by the Board, at any time propose to merge into,
consolidate with, or sell or otherwise transfer all or substantially all of its
assets to, another corporation and provision is not made pursuant to the terms
of such transaction for (i) the assumption by the surviving, resulting or
acquiring corporation of all outstanding Options granted pursuant to this Plan,
(ii) the substitution of new options therefor, or (iii) the payment of cash or
other consideration in respect thereof, then the Committee shall cause written
notice of the proposed transaction to be given to each Optionee not less than
thirty (30) days prior to the anticipated effective date of the proposed
transaction. On a date which the Committee shall specify in such notice, which
date shall be not less than ten (10) days prior to the anticipated effective
date of the proposed transaction, each Optionee's Options shall become fully
(100%) vested and each Optionee shall have the right to exercise his or her
Options to purchase any or all shares then subject to such
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Options; and if the proposed transaction is consummated, each Option, to the
extent not previously exercised prior to the effective date of the transaction,
shall terminate on such effective date. If the proposed transaction is abandoned
or otherwise not consummated, then to the extent that any Option not exercised
prior to such abandonment shall have vested solely by operation of this Part F,
Section 4, such vesting shall be annulled and be of no further force or effect
and the vesting period otherwise established for or applicable to such Option
pursuant to Part F, Section 3 above shall be reinstituted as of the date of such
abandonment; provided, however, that nothing herein contained shall be deemed to
retroactively affect or impair any exercise of any such vested Option prior to
the date of such abandonment.
5. Exercise of Options. A person entitled to exercise an
Option, or any portion thereof, may exercise it (or such vested portion thereof)
in whole at any time, or in part from time to time, by delivering to the Company
at its principal office, directed to the attention of the President of the
Company or such other duly elected officer as shall be designated in writing by
the Committee to the Optionee, written notice specifying the number of shares of
Common Stock with respect to which the Option is being exercised, together with
payment in full of the aggregate Exercise Price for such shares. Such payment
shall be made in cash or by certified check or bank draft payable to the order
of the Company; provided, however, that the Committee may, in its sole
discretion, authorize such payment, in whole or in part, in any other form,
including payment by personal check or by the exchange of shares of Common Stock
owned of record by the person entitled to exercise the Option and having a fair
market value on the date of exercise equal to the price for which the shares of
Common Stock may be purchased pursuant to the Option.
6. Non-Transferability. No Incentive Option granted hereunder
shall be transferable other than by will or the laws of descent and
distribution, and during the subject Optionee's lifetime, no Incentive Option
granted hereunder may be exercised by anyone other than such Optionee; provided,
however, that if the Optionee dies or becomes incapacitated, the Incentive
Option may be exercised by his or her estate, legal representative or
beneficiary, as the case may be, subject to all other terms and conditions
contained in this Plan and the applicable Option Agreement. Any Nonqualified
Option granted hereunder may, if so provided in the subject Option Agreement, be
transferable to members of the Optionee's immediate family or by will or by the
laws of decent and distribution, and may, if so provided in the subject Option
Agreement, be pledged as collateral security in favor of another permitted
holder of a Nonqualified Option hereunder, solely as collateral for a loan made
by such other holder to the person making such pledge.
7. Termination of Employment; Competition. The following
provisions shall apply in the event of an Optionee's engaging in competition
with the Company or any of its subsidiaries, or in the event of the termination
of an Optionee's employment with the Company or any of its subsidiaries:
a. In the event that an Optionee shall engage or
participate in, or become involved with, in any manner or capacity
(whether as employee, agent,
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consultant, advisor, officer, director, manager, partner, joint
venturer, investor, shareholder (other than passive investments in less
than 5% of the outstanding securities of any company) or otherwise),
any business enterprise which is engaged in or derives any material
revenues from or is developing any form of membrane separation
technology, or is engaged in any other business conducted or operated
by the Company or any of its subsidiaries on the date on which such
Optionee first became involved with such other business enterprise, or
in the event that an Optionee's employment with the Company or any of
its subsidiaries shall be terminated either (A) by the Company or any
of its subsidiaries for "Cause" (as defined in any applicable
employment agreement to which such Optionee is a party), or (in the
absence of a definition contained in any applicable employment
agreement) for fraud, dishonesty, habitual drunkenness or drug use, for
willful disregard of assigned duties or instructions by such Optionee,
or for concrete actions causing substantial harm to the Company or any
of its subsidiaries, or for other material breach by the Optionee of
any applicable employment agreement to which the Optionee is a party,
or (B) by the Optionee voluntarily and without the written consent of
the Company, then all outstanding Options granted hereunder to such
Optionee shall automatically and immediately terminate at the time that
notice of termination of employment is given, and shall not then or
thereafter be exercisable in whole or in part; provided, however, that
nothing herein contained shall be deemed to modify or amend the terms
and conditions of any applicable employment agreement, including but
not limited to the grounds upon which any Optionee's employment may be
terminated.
b. In the event that an Optionee's employment with
the Company or any of its subsidiaries shall terminate (A) by reason of
retirement, or (B) under circumstances other than those specified in
Part F, Section 7(a) above and for other than death or disability, then
all outstanding Options granted hereunder to such Optionee shall
terminate three (3) months after the date of such termination of
employment or on the Expiration Date, whichever shall first occur;
provided, however, that if such Optionee dies within such three (3)
month period, then all outstanding Options granted hereunder to such
Optionee shall terminate on the first anniversary of such Optionee's
death or on the Expiration Date, whichever shall first occur.
c. In the event of the death or disability of an
Optionee while such Optionee is employed by the Company or any of its
subsidiaries, all outstanding Options granted hereunder to such
Optionee shall terminate on the first anniversary of such death or
disability, as the case may be, or on the Expiration Date, whichever
shall first occur.
d. Anything contained in this Part F to the contrary
notwithstanding, an Option granted pursuant to this Plan may only be
exercised following the subject Optionee's termination of employment
with the Company or any of its subsidiaries for reasons other than
death, disability or retirement if, and to the extent that, such Option
was exercisable immediately prior to such termination of employment.
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e. An Optionee's transfer of employment between the
Company and any of its subsidiaries or between subsidiaries shall not
constitute a termination of employment, and the Committee shall
determine in each case whether an authorized leave of absence for
professional education, military service or otherwise shall constitute
a termination of employment.
f. Nothing contained in this Part F, Section 7 shall
be deemed to modify or affect any vesting schedule provided in any
Option Agreement, which vesting schedule shall continue in effect and
be applied and enforced notwithstanding any modification of the
exercise period arising by reason of the application of this Part F,
Section 7.
8. No Rights as a Stockholder or to Continued Employment. No
Optionee shall have any rights as a stockholder of the Company with respect to
any shares covered by an Option prior to the date of issuance to such Optionee
of the certificate or certificates for such shares. Neither this Plan nor any
Option granted hereunder shall confer upon an Optionee any right to continued
employment by the Company or any of its subsidiaries or interfere in any way
with the right of the Company or its subsidiaries to terminate the employment of
such Optionee (subject to the terms and conditions of any applicable employment
agreement between the Company or any of its subsidiaries and the subject
Optionee).
9. Designation. Each Option Agreement entered into pursuant to
this Plan shall specify whether the Options evidenced thereby are Incentive
Options, Nonqualified Options, or a combination of both.
10. Other Terms and Conditions. Any Option Agreement entered
into pursuant to this Plan may contain such further terms and conditions
(including, at any time when the Common Stock is not traded on any national or
regional securities exchange or listed on any recognized automated quotation
system such as NASDAQ, a right of first refusal in favor of the Company in the
event that the Optionee shall seek to transfer any shares acquired upon exercise
of the subject Option) as the Committee may determine, provided that such other
terms and conditions are not in violation of, in conflict with or otherwise
inconsistent with the requirements of this Plan.
G. Ten Percent Stockholders.
The Committee shall not grant an Incentive Option to an
individual who, at the time such Incentive Option is to be granted, owns
(directly or by attribution pursuant to Section 425(d) of the Code) shares of
capital stock of the Company possessing more than 10% of the voting power of all
classes of capital stock of the Company unless (a) the Exercise Price at which
each share of Common Stock may be purchased pursuant to such Incentive Option is
at least 110% of the fair market value of each such share on the Date of Grant
(determined as provided in Section 6(a)(i) above), and (b) such Incentive
Option, by its terms, is not exercisable after the expiration of five years from
the Date of Grant thereof.
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H. Issuance of Shares; Restrictions.
1. Subject to the conditions, restrictions and other
qualifications provided in this Part H, the Company shall, within thirty (30)
business days after an Option has been duly exercised in whole or in part,
deliver to the person who exercised the Option one or more certificates,
registered in the name of such person, for the number of shares of Common Stock
with respect to which the Option has been exercised. The Company may legend any
stock certificate issued hereunder to reflect any restrictions provided for in
this Part H, including but not limited to a "stop transfer" legend pursuant to
Section 2 below of this Part H.
2. Unless the shares subject to Options granted under the Plan
have been registered under the Securities Act of 1933, as amended (the "Act")
(and, if the person exercising the Option may be deemed an "affiliate" of the
Company as such term is defined in Rule 405 under the Act, such shares have been
registered under the Act for resale by such person), or the Company has
determined that an exemption from registration under the Act is available, the
Company may require, prior to and as a condition of the issuance of any shares
of Common Stock upon exercise of any Option, that the person exercising such
Option hereunder furnish the Company with a written representation in a form
prescribed by the Committee to the effect that such person is acquiring such
shares solely with a view to investment for his or her own account and not with
a view to the resale or distribution of all or any part thereof, and that such
person will not dispose of any of such shares otherwise than in accordance with
the provisions of Rule 144 under the Act unless and until either the sale or
distribution of such shares is registered under the Act or the Company is
satisfied that an exemption from such registration is available.
3. Anything herein contained to the contrary notwithstanding,
the Company shall not be obligated to sell or issue any shares of Common Stock
pursuant to the exercise of an Option granted hereunder unless and until the
Company is satisfied that such sale or issuance complies with all applicable
provisions of the Act and all other laws and/or regulations by which the Company
is bound or to which the Company or such shares may be subject; and the Company
reserves the right to delay the issuance and/or delivery of shares of Common
Stock for such period of time as may be required in order to effect compliance
with the applicable provisions of the Act and all other applicable laws and/or
regulations as aforesaid.
I. Substitute Options.
Anything herein contained to the contrary notwithstanding,
Options may, at the discretion of the Board, be granted under this Plan in
substitution for options to purchase shares of capital stock of another
corporation which is merged into, consolidated with or all or a substantial
portion of the property or stock of which is acquired by, the Company or a
subsidiary. The terms, provisions and benefits to each Optionee under such
substitute Options shall in all respects be identical to the terms, provisions
and benefits to such Optionee of his or her options of the other corporation on
the date of substitution, except that such substitute Options shall provide for
the purchase of shares of Common Stock of the Company instead of
shares of such other corporation.
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J. Term of this Plan.
Unless this Plan has been sooner terminated pursuant to
Section K below, this Plan shall terminate on, and no Options hereunder shall be
granted after, the tenth (10th) anniversary of the date of Board adoption of
this Plan. Notwithstanding any such Plan termination, the provisions of this
Plan shall nonetheless continue thereafter to govern all Options theretofore
granted (including but not limited to any Nonqualified Options the Expiration
Date of which is extended to any date subsequent to the termination of this
Plan) until the exercise, expiration or cancellation of such Options.
K. Amendment and Termination of Plan.
The Board may at any time terminate this Plan, or amend this
Plan from time to time in such respects as the Board deems desirable; provided,
however, that, without the further approval of the stockholders of the Company
in the manner required under Part B above, no amendment shall (i) increase the
maximum aggregate number of shares of Common Stock with respect to which Options
may be granted under this Plan, or (ii) change the eligibility provisions of
Part D above; and further provided, that, subject to the provisions of Parts F
and H above, no termination hereof or amendment hereto shall adversely affect
the rights of an Optionee or other person holding an Option theretofore granted
hereunder without the consent of such Optionee or other person, as the case may
be.
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Exhibit 10.7
COMMODORE SEPARATION TECHNOLOGIES, INC.
EXECUTIVE BONUS PLAN
In order to provide its executive and management employees
with additional incentives for enhanced performance, Commodore Separation
Technologies, Inc. hereby adopts the following Executive Bonus Plan for the
benefit of the Company's selected executive and management employees from time
to time.
1. Definitions. Wherever used in this Plan, the following
terms shall have the following meanings:
(a) "Allocable Share(s)" shall mean, with respect to
each Participant in each Plan Year, the amount of the Annual Aggregate Bonus (if
any) for such Plan Year allocated to such Participant by the Committee or by the
Board.
(b) "Annual Aggregate Bonus" shall mean the amount of
bonus for each Plan Year payable to all Participants in the aggregate in respect
of such Plan Year, as calculated in accordance with paragraph 4(a) below. In no
event and under no circumstances shall the Annual Aggregate Bonus in any Plan
Year exceed the Maximum Annual Payout in respect of such Plan Year.
(c) "Board" shall mean the Board of Directors of the
Company, as such Board of Directors is constituted from time to time.
(d) "Committee" shall mean the Compensation Committee
of the Board, as such Compensation Committee is constituted from time to time.
(e) "Company" shall mean Commodore Separation
Technologies, Inc., a Delaware corporation, and its successors and assigns.
(f) "Maximum Annual Payout" shall mean, with respect
to each Plan Year, an amount equal to one (1%) percent of the Net Sales in the
subject Plan Year, as set forth in the Company's audited consolidated financial
statements for such Plan Year, prepared in accordance with generally accepted
accounting principals consistently applied.
(g) "Maximum Creditable Profits" shall mean, with
respect to each Plan Year, an amount equal to 15% of the Pre-Tax Profits for
such Plan Year.
(h) "Net Sales" shall mean, with respect to each Plan
Year, the gross revenues of the Company and its consolidated subsidiaries from
the sale of products or rendition of services during such Plan Year, less all
credits, allowances, bad debt reserves and other such deductions taken against
such gross revenues in a manner consistent with past practice.
<PAGE>
(i) "Participants" shall mean, in respect of each
Plan Year, those executive and management employees of the Company and its
subsidiaries who are designated by the Committee or by the Board to participate
in the Annual Aggregate Bonus (if any) payable in respect of such Plan Year.
(j) "Plan" shall mean this Executive Bonus Plan as
same may be amended, modified and/or restated from time to time in accordance
herewith.
(k) "Plan Year" shall mean each fiscal year of the
Company commencing with the fiscal year ending December 31, 1997 and continuing
through and including the fiscal year ending December 31, 2001, and each fiscal
year of the Company thereafter if this Plan is extended by affirmative action of
the Board to include such fiscal year.
(l) "Pre-Tax Profits" shall mean, for each Plan Year,
the consolidated net income (if any) of the Company and its consolidated
subsidiaries for such Plan Year, after giving effect to deduction of or
provision for all operating expenses, interest expense, depreciation,
amortization and all other deductions from income other than taxes based on the
consolidated income of the Company and its consolidated subsidiaries, all
determined in accordance with generally accepted accounting principles
consistently applied; provided, however, that for purposes of such calculation,
there shall be excluded and no effect shall be given to (i) any restoration of
any contingency reserve, except to the extent that provision for such reserve
was made out of income during such Plan Year, (b) any net gains or losses on the
sale or other disposition, not in the ordinary course of business, of
investments or other capital assets, and (iii) any net gain arising from the
collection of the proceeds of any insurance policy or policies.
(m) "Threshold Profit Level" shall mean, with respect
to each Plan Year, an amount equal to 5% of the Pre-Tax Profits (if any) for
such Plan Year.
2. Administration. This Plan shall be administered by the
Committee. Except to the extent that any Participants are assured by the Board
of Allocable Shares in respect of particular Plan Years, the Committee shall
have full and final authority to make all calculations of bonuses hereunder, to
determine which executive and management employees shall be Participants
entitled to receive Allocable Shares of any Annual Aggregate Bonuses earned
hereunder, to allocate Allocable Shares, and to determine all other matters
relating to the administration of this Plan, and the calculation and payment of
any and all bonuses hereunder.
3. Eligible Employees. All executive and management employees
of the Company and its subsidiaries during the subject Plan Year shall be
eligible to be Participants in and receive bonuses under this Plan. The
foregoing notwithstanding, no otherwise eligible employee shall be guaranteed to
receive any bonus hereunder except to the extent that the Board or the Committee
shall specifically allocate to such employee an Allocable Share of the Annual
Aggregate Bonus (if any) hereunder for the subject Plan Year. In determining
which eligible employees shall be Participants and receive Allocable Shares
hereunder in any Plan Year, the
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Committee shall take into account its evaluation of the duties and
responsibilities of each eligible employee, the tenure and performance of each
eligible employee during the subject Plan Year, the eligible employee's actual
or anticipated contributions to the achievement of any Annual Aggregate Bonus
for such Plan Year, and such other matters as the Committee may deem relevant
under the circumstances.
4. Calculation and Payment of Bonuses.
(a) In the event that, in any Plan Year, the Pre-Tax
Profits exceed the Threshold Profit Level, the Participants shall be entitled to
receive, in the aggregate, an Annual Aggregate Bonus in respect of such Plan
Year in an amount equal to the lesser of (i) the Maximum Annual Payout, or (ii)
an amount equal to the product of (A) the Maximum Annual Payout, multiplied by
(B) a percentage equal to the quotient of (y) the Pre-Tax Profits minus the
Threshold Profit Level, divided by (z) the Maximum Creditable Profits minus the
Threshold Profit Level.
(b) Within thirty (30) days after the delivery to the
Company of its annual audited consolidated financial statements for each Plan
Year, (i) the Committee shall calculate the Annual Aggregate Bonus (if any)
payable in respect of such Plan Year (in accordance with paragraph 4(a) above as
applied to the results of operations reflected in such audited financial
statements) and the Allocable Shares of the Participants in any such Annual
Aggregate Bonus, and (ii) the Company shall deliver a written summary such
calculation to each of the Participants (regardless of whether any Annual
Aggregate Bonus is determined to be payable). To the extent that any bonuses are
payable in accordance with such calculation, such written summary shall be
accompanied by payment to each Participant of his or her respective Allocable
Share of the Annual Aggregate Bonus so calculated.
(c) Bonuses hereunder shall be calculated separately
for each Plan Year, and there shall be no carryforward or carryback of any Net
Sales or Pre-Tax Profits from any Plan Year to any other Plan Year.
5. Amendment of Plan. In addition to its rights of
interpretation and administration with respect to this Plan, the Committee,
subject to approval by the full Board, shall have the right to make such
amendments to this Plan as it may deem necessary, appropriate, advisable and/or
in the best interests of the Company, provided that no such amendment shall have
the effect of (a) terminating this Plan prior to the expiration of the Plan Year
ending December 31, 2001, (b) adversely affecting the rights of any Participant
with respect to any bonus previously earned and vested, or (c) effecting any
material modification in the manner of the calculation or payment of bonuses
hereunder with respect to any Plan Year through and including the Plan Year
ending December 31, 2001.
6. Governing Law. This Plan shall be governed by and construed
in accordance with the laws of the State of New York, without giving effect to
principles of conflicts of laws.
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Exhibit 10.8
August 7, 1996
MEMORANDUM OF UNDERSTANDING
THIS MEMORANDUM OF UNDERSTANDING ("MOU") is made and entered into on
this the 7th day of August, 1996, by and between Teledyne Brown Engineering, a
Division of Teledyne Industries, Inc., a California Corporation, with offices
located at Huntsville, Alabama, (hereinafter TBE), and Commodore Membrane
Technologies Inc., a Delaware Corporation, with offices located in New York, New
York ("Commodore Membrane").
1. 1. Commodore Membrane has developed a proprietary technology based
upon supported liquid membranes, supported gas membranes and pervaporation for
varied separations and recoveries including, but not limited to, metals,
organics, gases, bio-chemicals and radio- nuclides. The aforementioned
proprietary technology is hereinafter referred to as "separation technology".
2. The parties have determined that there may be a benefit in the
formation of an agreement between Commodore Membrane and TBE to market, apply
and commercialize Commodore Membrane's separation technology.
3. Commodore Membrane and TBE agree that they will negotiate, on a
non-exclusive basis, for the development of one or more mutually agreeable
business arrangements concerning the marketing, application and
commercialization of Commodore Membrane's separation technology. The scope,
covered applications and geographical territory encompassed by such marketing
and commercialization will also be the subject of non-exclusive negotiations
between the parties hereto.
4. The final written form of such mutually agreeable business
arrangements, if any, will be negotiated between the parties as provided in this
MOU. Any business arrangement between TBE and Commodore is subject to execution
and delivery of a definitive agreement.
5. During the term of this MOU, the parties agree that they will
cooperate with any due diligence that either party desires to perform with
respect to the other or the other's technology including Commodore Membrane's
separation technology and will provide reasonable information requested by the
other party.
6. The parties agree that during the term of this MOU Commodore
Membrane may negotiate and/or enter into agreements with third parties
concerning the marketing, application and commercialization of Commodore
Membrane's separation technology including agreements which encompass the
subject, scope, covered applications and geographical territories which are
subject to the negotiations hereunder.
<PAGE>
7. The term of this MOU will commence on the day and year above written
and continue for a period of at least ninety (90) days from the date hereof
during which the parties will negotiate on a non-exclusive basis to enter into
mutually agreeable business arrangements concerning the development, marketing
and commercialization of the separation technology. If within ninety (90) days
from the date hereof, the parties have not reduced their mutually agreeable
business arrangements to one or more definitive agreements which have been
executed and delivered by each party to the other, then either party may
terminate this MOU by giving notice to the other party in writing, whereupon,
except for the survival of the confidentiality provisions in paragraphs 8
through 12 hereof, this MOU shall become null, void and of no force or effect
whatsoever and neither party shall have any further liability to the other.
8. This MOU and any future business arrangements will require an
exchange of proprietary, technical and business information (collectively
"Proprietary Information") as part of the due diligence and the establishment of
terms and conditions for negotiation. Proprietary Information is further defined
as any information, either written or oral, originated by or peculiarly within
the knowledge of the disclosing party, or its suppliers, which is not generally
available to others and may include, without limitation, patent applications,
test results, equipment design, ideas, business plans, financial data, technical
data, computer software and other items pertaining to the above subject matter
as may be necessary or desirable for evaluation. The party transmitting such
Proprietary Information and the party receiving same shall hereinafter be
referred to as "Discloser" and "Recipient," respectively.
9. The Discloser shall make a good faith effort to disclose and clearly
mark (by stamp, typewriting, or other method) each document, drawing, or article
constituting confidential information "Proprietary" or "Confidential" and as
being subject to this Article. The Discloser shall also make a good faith effort
to declare as Proprietary or Confidential, at the outset, any oral disclosures
or other unwritten or confidential information discernible to the Recipient as a
result of plant tours, demonstrations, etc., for which protection is sought. The
Discloser will make a good faith effort to submit in written or graphic form to
the Recipient within fifteen (15) business days thereafter a description of such
discernible information. However, the failure to clearly make any document
"Proprietary" or "Confidential", the failure to declare as confidential or
proprietary information to be such as the outset of any oral or visual
disclosure, or the failure to follow-up in writing, a description of orally or
visually discernible confidential information shall in no way be construed as a
waiver of the Discloser's proprietary rights nor shall such omission in any way
release the Recipient from its responsibility to hold such material in
confidence as set forth in this agreement except to the extent the Discloser's
omission has prejudiced the Recipient.
10. Either party may maintain a log of Proprietary Information
disclosed to the other and received from the other to facilitate tracking
Proprietary Information and preserving the confidentiality thereof. Any such log
shall reflect: (i) a description of Proprietary Information
2
<PAGE>
disclosed or received; (ii) the date disclosed or received; (iii) the individual
to whom or by whom the information was disclosed, as the case may be. The
parties may periodically exchange copies of their log for comparison purposes.
11. Recipient agrees to receive and hold all such Proprietary
Information acquired from Discloser in strict confidence and to disclose same
within its own organization only to its employees or authorized contractors who
are (i) directly assigned to projects within the scope of this MOU, (ii) have a
bona fide need to know and use such Proprietary Information and (iii) have
executed an agreement with Recipient prohibiting the unauthorized use,
duplication and disclosure of Proprietary Information in accordance with this
Agreement. Recipient will exercise no less care to safeguard the Proprietary
Information acquired from Discloser than Recipient exercises in safeguarding its
own competition sensitive or proprietary information.
12. Recipient agrees that it will not disclose, duplicate or use the
Proprietary Information acquired from Discloser, in whole or in part, for any
purposes other than those expressly permitted herein. Recipient agrees that it
will not disclose any such Proprietary Information to any third party,
commercially exploit in any manner whatsoever, or use same for its exclusive
benefit of any third party without the express written consent of Discloser.
Recipient shall not perform or permit others to perform decompilation or
disassembly of any items of software or hardware provided hereunder. Violation
of the terms of this Agreement shall be cause for appropriate injunctive relief
to stop such unauthorized disclosure, in addition to any other available legal
or equitable remedy.
The foregoing restrictions on Recipient's disclosure and use of Proprietary
Information acquired from Discloser shall not apply to information;
(i) Known to Recipient prior to receipt from Discloser;
(ii) which is in public knowledge, or becomes so, without breach of
Recipient's obligations hereunder;
(iii) rightfully acquired by Recipient prior to the time of disclosure
hereunder from a third party without restriction on disclosure or
use;
(iv) disclosed by Discloser to a third party without restriction on
disclosure or use,
(v) independently developed by Recipient without resort to
Proprietary Information provided by Discloser, or;
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<PAGE>
(vi) as to which Recipient has received express written consent from
an authorized officer of Discloser to disclose or use.
In the case of any of events (i), (ii), (iii), (iv), (v), or (vi)
above, the removal of restrictions shall be effective only from and after the
date of occurrence of the applicable event and shall only apply to the portion
of Proprietary Information which falls within the scope of such events.
13. The provisions contained in paragraphs 8 through 12 hereof shall
survive expiration or termination of this MOU by any means or for any reason.
14. This MOU shall be deemed to have been executed in, governed by, and
interpreted in accordance with the internal laws of the State of Delaware
without regard to its laws relating to conflicts of law.
15. Neither party may assign their respective rights or duties under
this MOU to a third party without the prior written consent of the other party.
16. This MOU and the corresponding Proprietary Information Agreement
contains the entire understanding between the parties relative to the matters
contained herein and supersedes any prior and collateral communications, reports
and understandings, if any, whether oral or written, between the parties. No
changes, modifications, alterations or additions to any provision hereof shall
be binding unless contained in writing signed by both parties hereto.
17. Each party acknowledges its acceptance of this MOU by the signature
below of its authorized officer on duplicate originals of the MOU, one of which
fully executed original is to be retained by each party.
COMMODORE MEMBRANE
TECHNOLOGIES, INC.
By: /s/ Carl O. Magnell
-----------------------------
Carl O. Magnell
TELEDYNE BROWN
ENGINEERING, a
Division of
Teledyne, Inc.
By: /s/ C.H. Fox
-----------------------------
C.H. Fox
4
<PAGE>
Exhibit 10.9
August 29, 1996
MEMORANDUM OF UNDERSTANDING
THIS MEMORANDUM OF UNDERSTANDING ("MOU") is made and entered into on
this the 29th day of August, 1996, by and between Sverdrup Environmental, Inc.,
a corporation organized and existing under the laws of the State of Missouri
with offices located at Maryland Heights, Missouri ("Sverdrup") and Commodore
Membrane Technologies Inc., a Delaware Corporation, with offices located in New
York, New York ("Commodore Membrane").
1. Commodore Membrane has developed a proprietary technology based upon
supported liquid membranes, supported gas membranes and pervaporation for varied
separations and recoveries including, but not limited to, metals, organics,
gases, bio-chemicals and radio-nuclides. The aforementioned proprietary
technology is hereinafter referred to as "separation technology".
2. The parties have determined that there may be a benefit in the
formation of an agreement between Commodore Membrane and Sverdrup to market,
apply and commercialize Commodore Membrane's separation technology.
3. Commodore Membrane and Sverdrup agree that they will negotiate, on a
non-exclusive basis, for the development of one or more mutually agreeable
business arrangements concerning the marketing, application and
commercialization of Commodore Membrane's separation technology. The scope,
covered applications and geographical territory encompassed by such marketing
and commercialization will also be the subject of non-exclusive negotiations
between the parties hereto.
4. The final written form of such mutually agreeable business
arrangements, if any, will be negotiated between the parties as provided in this
MOU. Any business arrangement between Sverdrup and Commodore is subject to
execution and delivery of a definitive agreement.
5. During the term of this MOU, the parties agree that they will
cooperate with any due diligence that either party desires to perform with
respect to the other or the other's technology including Commodore Membrane's
separation technology and will provide reasonable information requested by the
other party.
6. The parties agree that during the term of this MOU Commodore
Membrane may negotiate and/or enter into agreements with third parties
concerning the marketing, application and commercialization of Commodore
Membrane's separation technology including agreements which encompass the
subject, scope, covered applications and geographical territories which are
subject to the negotiations hereunder.
<PAGE>
7. The term of this MOU will commence on the day and year above written
and continue for a period of at least ninety (90) days from the date hereof
during which the parties will negotiate on a non-exclusive basis to enter into
mutually agreeable business arrangements concerning the development, marketing
and commercialization of the separation technology. If within ninety (90) days
from the date hereof, the parties have not reduced their mutually agreeable
business arrangements to one or more definitive agreements which have been
executed and delivered by each party to the other, then either party may
terminate this MOU by giving notice to the other party in writing, whereupon,
except for the survival of the confidentiality provisions in paragraphs 8
through 12 hereof, this MOU shall become null, void and of no force or effect
whatsoever and neither party shall have any further liability to the other.
8. This MOU and any future business arrangements will require an
exchange of proprietary, technical and business information (collectively
"Proprietary Information") as part of the due diligence and the establishment of
terms and conditions for negotiation. Proprietary Information is further defined
as any information, either written or oral, originated by or peculiarly within
the knowledge of the disclosing party, or its suppliers, which is not generally
available to others and may include, without limitation, patent applications,
test results, equipment design, ideas, business plans, financial data, technical
data, computer software and other items pertaining to the above subject matter
as may be necessary or desirable for evaluation. The party transmitting such
Proprietary Information and the party receiving same shall hereinafter be
referred to as "Discloser" and "Recipient," respectively.
9. The Discloser shall make a good faith effort to disclose and clearly
mark (by stamp, typewriting, or other method) each document, drawing, or article
constituting confidential information "Proprietary" or "Confidential" and as
being subject to this Article. The Discloser shall also make a good faith effort
to declare as Proprietary or Confidential, at the outset, any oral disclosures
or other unwritten or confidential information discernible to the Recipient as a
result of plant tours, demonstrations, etc., for which protection is sought. The
Discloser will make a good faith effort to submit in written or graphic form to
the Recipient within fifteen (15) business days thereafter a description of such
discernible information. However, the failure to clearly make any document
"Proprietary" or "Confidential", the failure to declare as confidential or
proprietary information to be such as the outset of any oral or visual
disclosure, or the failure to follow-up in writing, a description of orally or
visually discernible confidential information shall in no way be construed as a
waiver of the Discloser's proprietary rights nor shall such omission in any way
release the Recipient from its responsibility to hold such material in
confidence as set forth in this agreement except to the extent the Discloser's
omission has prejudiced the Recipient.
10. Either party may maintain a log of Proprietary Information
disclosed to the other and received from the other to facilitate tracking
Proprietary Information and preserving the confidentiality thereof. Any such log
shall reflect: (i) a description of Proprietary Information
2
<PAGE>
disclosed or received; (ii) the date disclosed or received; (iii) the individual
to whom or by whom the information was disclosed, as the case may be. The
parties may periodically exchange copies of their log for comparison purposes.
11. Recipient agrees to receive and hold all such Proprietary
Information acquired from Discloser in strict confidence and to disclose same
within its own organization only to its employees or authorized contractors who
are (i) directly assigned to projects within the scope of this MOU, (ii) have a
bona fide need to know and use such Proprietary Information and (iii) have
executed an agreement with Recipient prohibiting the unauthorized use,
duplication and disclosure of Proprietary Information in accordance with this
Agreement. Recipient will exercise no less care to safeguard the Proprietary
Information acquired from Discloser than Recipient exercises in safeguarding its
own competition sensitive or proprietary information.
12. Recipient agrees that it will not disclose, duplicate or use the
Proprietary Information acquired from Discloser, in whole or in part, for any
purposes other than those expressly permitted herein. Recipient agrees that it
will not disclose any such Proprietary Information to any third party,
commercially exploit in any manner whatsoever, or use same for its exclusive
benefit of any third party without the express written consent of Discloser.
Recipient shall not perform or permit others to perform decompilation or
disassembly of any items of software or hardware provided hereunder. Violation
of the terms of this Agreement shall be cause for appropriate injunctive relief
to stop such unauthorized disclosure, in addition to any other available legal
or equitable remedy.
The foregoing restrictions on Recipient's disclosure and use of Proprietary
Information acquired from Discloser shall not apply to information;
(i) Known to Recipient prior to receipt from Discloser;
(ii) which is in public knowledge, or becomes so, without
breach of Recipient's obligations hereunder;
(iii) rightfully acquired by Recipient prior to the time of
disclosure hereunder from a third party without
restriction on disclosure or use;
(iv) disclosed by Discloser to a third party without
restriction on disclosure or use,
(v) independently developed by Recipient without resort to
Proprietary Information provided by Discloser, or;
(vi) as to which Recipient has received express written
consent from an
3
<PAGE>
authorized officer of Discloser to disclose or use.
In the case of any of events (i), (ii), (iii), (iv), (v), or (vi)
above, the removal of restrictions shall be effective only from and after the
date of occurrence of the applicable event and shall only apply to the portion
of Proprietary Information which falls within the scope of such events.
13. The provisions contained in paragraphs 8 through 12 hereof shall
survive expiration or termination of this MOU by any means or for any reason.
14. This MOU shall be deemed to have been executed in, governed by, and
interpreted in accordance with the internal laws of the State of Delaware
without regard to its laws relating to conflicts of law.
15. Neither party may assign their respective rights or duties under
this MOU to a third party without the prior written consent of the other party.
16. This MOU and the corresponding Proprietary Information Agreement
contains the entire understanding between the parties relative to the matters
contained herein and supersedes any prior and collateral communications, reports
and understandings, if any, whether oral or written, between the parties. No
changes, modifications, alterations or additions to any provision hereof shall
be binding unless contained in writing signed by both parties hereto.
17. Each party acknowledges its acceptance of this MOU by the signature
below of its authorized officer on duplicate originals of the MOU, one of which
fully executed original is to be retained by each party.
COMMODORE MEMBRANE
TECHNOLOGIES, INC.
By: /s/ Carl O. Magnell
-------------------------------------
Carl O. Magnell
SVERDRUP ENVIRONMENTAL, INC.
By: /s/ Dr. Charles Riggs
-------------------------------------
Dr. Charles Riggs
4
<PAGE>
Exhibit 10.10
SERVICES AGREEMENT
SERVICES AGREEMENT (this "Agreement") is made and entered into
as of this 31st day of August 1996, by and between COMMODORE SEPARATION
TECHNOLOGIES INC., a Delaware corporation (the "Company"), and COMMODORE CFC
TECHNOLOGIES, INC., a Delaware corporation ("CFC Technologies").
W I T N E S S E T H:
WHEREAS, CFC Technologies has requested the Company to
provide, and the Company has agreed to provide, certain research and
development, equipment engineering and technical services to CFC Technologies
pursuant to the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants contained herein, the parties hereto, intending to be legally
bound, hereby agree as follows:
1. Engagement of the Company. During the term of this
Agreement, the Company shall provide to CFC Technologies certain research and
development, equipment engineering and technical services ("Services"), as more
fully described and defined below, as may be necessary or desirable, or as CFC
Technologies may reasonably request or require, in connection with CFC
Technologies' business and operations. "Services" means and includes, without
limitation, the furnishing of advice, assistance and guidance, and, where
necessary, certain personnel and equipment to implement the same, in connection
with, among other things, scientific, engineering, technical and related
functions, product design, development and maintenance, chemical formulations
and applications, and other technical aspects of CFC Technologies' business and
operations.
2. Term; Termination. This Agreement shall commence upon
completion of the Company's proposed initial public offering and continue
thereafter for a 3-year term, unless terminated by either party at any time for
any reason (or without any reason) upon not less than ninety (90) days' prior
notice to the other.
3. Payments to the Company.
(a) In consideration of the Services provided by the
Company hereunder, CFC Technologies shall pay to the Company, within forty-five
(45) days after the close of each fiscal quarter of CFC Technologies prior to
the effective date of termination of this Agreement, a fee in an amount equal to
seventy-five (75%) percent of the Net Income (as hereinafter defined) of CFC
Technologies, if any, in the fiscal quarter of CFC Technologies then ended
(provided, that, such fees shall be prorated, based on number of days, for any
partial fiscal quarter at the beginning and at the end of the term of this
Agreement). As used herein, the term "Net Income" means the net income of CFC
Technologies for the fiscal quarter in question, after giving effect to
deduction of or provision for all operating expenses, taxes and reserves, and
all other proper deductions (including, without limitation, expense
reimbursements under paragraph 3(b) below), all determined in accordance with
generally accepted accounting principles consistently applied; provided, that,
for purposes of calculating Net Income hereunder, there shall be excluded and no
effect shall be given to (i) any restoration of any contingency
<PAGE>
reserve, except to the extent that provision for such reserve was made out of
income during such period, (ii) any net gains or losses on the sale or other
disposition, outside of the ordinary course of business, of any capital assets
or other investments (provided, that, there shall also be excluded any related
charges for taxes thereon), (iii) any net gain arising from the collection of
the proceeds of any insurance policy or policies, (iv) any amounts deducted for
amortization of depreciation to the extent resulting from the write-up of any
asset, and (v) any deduction on account of any fees under this paragraph 3(a).
Regardless of whether there is positive Net Income in any fiscal quarter, CFC
Technologies shall provide to the Company a written calculation of Net Income
within forty-five (45) days after the close of each fiscal quarter of CFC
Technologies, and if such calculation shall indicate positive Net Income for
such fiscal quarter, such calculation shall be accompanied by payment to the
Company of the fees payable hereunder in respect of such fiscal quarter. CFC
Technologies shall permit the Company and its representatives to inspect and
make copies of and extracts from CFC Technologies' books and records at any time
during normal business hours, so as to permit the Company to verify any and all
calculations of Net Income rendered hereunder.
(b) In addition to the foregoing fees, CFC Technologies
shall pay or reimburse the Company for all documented out-of-pocket expenses
incurred by the Company in the performance of the Services required or
authorized hereby to be performed by the Company. To the extent not advanced to
the Company in any instance, such expenses shall be reimbursed by CFC
Technologies to the Company on a monthly basis, within thirty (30) days after
receipt of an appropriate statement from the Company with respect thereto.
4. Indemnification.
(a) CFC Technologies agrees to indemnify and hold harmless
the Company against and in respect of any and all claims, suits, actions,
proceedings (formal or informal), investigations, judgments, deficiencies,
damages, settlements, liabilities, and legal and other expenses (collectively,
"Losses") as and when incurred, arising out of, in connection with or based upon
any act or omission, or alleged act or alleged omission, by the Company in
connection with the acceptance of, or the performance or non-performance by, the
Company of any of its Services under this Agreement.
(b) The Company shall give CFC Technologies prompt notice
of any claim asserted or threatened against the Company on the basis of which
the Company intends to seek indemnification from CFC Technologies as herein
permitted; however, the obligations of CFC Technologies under this Section 4
shall not be conditioned upon receipt of such notice.
(c) Notwithstanding anything to the contrary contained in
this Section 4, CFC Technologies shall not be liable to indemnify the Company in
connection with any claim to the extent that the Company's actions or omissions
relating thereto (i) were not taken in good faith or in a manner reasonably
believed to be in, or not opposed to, the best interests of CFC Technologies,
(ii) exceeded the scope of its authority as set forth herein, or (iii)
constituted gross negligence or willful misconduct on the part of the Company.
(d) The Company shall indemnify and hold harmless CFC
Technologies against and in respect any and all Losses, as and when incurred,
arising out of or in connection with any act or omission of the Company which
(i) was not taken in good faith or in a manner
2
<PAGE>
reasonably believed to be in, or not opposed to, the best interests of CFC
Technologies, (ii) exceeded the scope of the Company's authority as set forth
herein, or (iii) constituted gross negligence or willful misconduct in the
performance or non-performance of Services.
5. Miscellaneous.
(a) All notices, requests, demands and other communications
required or permitted under this Agreement shall be in writing and shall be
deemed to have been duly given if personally delivered or mailed by regular
first-class mail, in each case, however, only against receipt, or if mailed by
first class registered or certified mail, return receipt requested, addressed to
the parties, in each case, to 150 East 58th Street, Suite 3400, New York, New
York 10155, Attention: President, or to such other person or address as may be
designated by like notice hereunder. Any such notice, etc. shall be deemed to
have been given on the date actually received, if personally delivered or mailed
by regular first-class mail, or on the second day after the date of mailing, if
mailed by registered or certified mail.
(b) Neither this Agreement nor any rights or obligations
hereunder may be transferred, assigned or delegated, in whole or in part, by
either party without the other party's prior written consent. Subject to the
foregoing, this Agreement shall be binding upon and inure to the benefit of and
be enforceable by the parties hereto and their respective successors and
permitted assigns, but no other person or entity shall acquire or have any
rights under this Agreement.
(c) This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without reference to conflict
or choice of laws principles.
IN WITNESS WHEREOF, the parties have duly executed this
Agreement as of the date first above written.
COMMODORE SEPARATION TECHNOLOGIES, INC.
By: /s/ Alan R. Burkart
--------------------------------------------
Name: Alan R. Burkart
Title: President and Chief Executive Officer
COMMODORE CFC TECHNOLOGIES, INC.
By: /s/ James M. DeAngelis
--------------------------------------------
Name: James M. DeAngelis
Title: President
3
<PAGE>
ASSIGNMENT OF TECHNOLOGY AGREEMENT
THIS ASSIGNMENT OF TECHNOLOGY AGREEMENT (this "Agreement"),
dated as of December , 1995, is made by and between COMMODORE MEMBRANE
TECHNOLOGIES, INC. (the "Company"), a Delaware corporation having an office at
1487 Delashmut Avenue, Columbus, Ohio 43212, and SRI KILAMBI, an individual
residing at 3700 Sutherland Avenue, Apartment O-11, Knoxville, Tennessee 37919
(the "Employee").
W I T N E S S E T H:
WHEREAS, simultaneously herewith the Company and the Employee
have entered into a certain Employment Agreement dated of even date herewith
relating to the employment by the Company of the Employee as Program Director in
charge of membrane separation technology (the "Employment Agreement"); and
WHEREAS, in connection with the execution of the Employment
Agreement, the Employee has agreed to assign to the Company all of the
Employee's rights in certain technology which is proprietary to the Employee and
which is more particularly hereinafter described and in connection therewith and
in consideration therefor, the Company has agreed to cause there to be awarded
to the Employee shares of common stock in the Company's parent corporation,
Commodore Environmental Services, Inc. ("CESI"), and the Company has agreed to
pay certain royalties to the Employee.
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<PAGE>
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained and for other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, the Company and the
Employee hereby agrees as follows:
1. Certain Definitions . As used in this Agreement, the
following terms shall have the respective meanings set forth below:
(a) The term "Confidential Know-How" shall mean
information relating to the conception, design, development and exploitation of
certain processes, equipment and technologies known as Universal Membrane
Separation Technology and any other product or development resulting from the
Patent Rights, whether now existing or hereafter created.
(b) The term "Patent Rights" shall mean (a) the
unexpired term of all patent rights, including patent applications,
continuations, continuations in part, divisions, reissue applications and
revision applications, in the United States of America or in any other country
in the world owned by the Employee as of the date hereof and at any time during
the term of this Agreement, including, without limitation, all registered
patents and pending applications set forth on Exhibit A (as same may be
supplemented from time to time during the term of this Agreement), and (b) the
unexpired term of all patent rights, including patent applications,
continuations, continuations in part, divisions, reissue applications and
revision applications, in the United
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<PAGE>
States of America or in any other country in the world hereafter acquired by the
Employee.
(c) The term "Membrane Technology" shall mean all
technologies, letters patent, patent applications, trade secrets, formula,
inventions, drawings, schematics, plans, technology descriptions, mathematical
models, supporting data, and other intellectual property, including without
limitation, the Patent Rights, Confidential Know-How or other property rights
created or obtained by the Employee, whether now existing or hereafter created
relating to the conception, design, development and exploitation of certain
processes, equipment and technologies known as Universal Membrane Separation
Technology and any other product or development resulting from the Patent
Rights, whether now existing or hereafter created.
2. Assignment of Technology.
(a) The Employee hereby assigns, transfers, conveys
and delivers to the Company all right, title and interest of the Employee in the
Membrane Technology, the Confidential Know-How and the Patent Rights, excluding,
however, applications involving the separation of technicium. The Company shall
have the absolute right to use the Membrane Technology, the Patent Rights and
the Confidential Know-How for any purpose, including, the further transfer
thereof to third parties. The effective date of the within assignment shall be
the date on which the Employee begins employment under the Employment Agreement.
At the option of the Company, it shall have the right to accelerate such
effective date
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<PAGE>
to the date of payment by the Company to the Employee of a fee of
$10,000.
(b) The Employee covenants and agrees not to enter
into any other agreement for the Membrane Technology, the Patent Rights or the
Confidential Know-How with any person or entity other than the Company.
(c) The Employee covenants and agrees that he will,
commencing immediately upon his execution and delivery of this Agreement,
cooperate with the Company in the preparation and filing of all relevant patent
applications relating to the Membrane Technology. The Company covenants and
agrees that the Employee's name will appear on any patents authored or
co-authored by the Employee.
3. Grant of Stock Options. In consideration for the transfer
hereunder by the Employee of the Membrane Technology, the Patent Rights and the
Confidential Know-How, the Company hereby agrees to cause CESI to award to the
Employee 200,000 shares of its common stock (the "CESI Stock").
4. Conditions to the Release of Stock. Intentionally deleted.
5. Tax Liability. In addition to release of the CESI Stock to
the Employee, the Company shall pay to the Employee in cash an amount equal to
the Employee's liability for federal and state income taxes incurred in
connection with the award of the CESI Stock, when and if such tax liabilities
are actually incurred. Payment of such taxes shall be made by reimbursement to
the
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<PAGE>
Employee upon presentation of signed income tax returns prepared by a certified
public accountant indicating that such tax liability is due and payable by the
Employee.
6. Royalties. (a) For the period commencing on the date hereof
through the seventh anniversary of the date hereof (the "Term"), the Company
shall pay to the Employee annually during the Term a royalty equal to two
percent (2~) of revenues actually received and attributable to the commercial
application of the Membrane Technology (the "Revenue"), such amount to be
payable within 30 days of the end of each calendar quarter during the Term.
(b) Within sixty (60) days after the end of each 12
month period during the Term, the Company shall furnish to the Employee a
complete, detailed and accurate statement, certified as accurate by the chief
financial officer of the Company, setting forth the Revenue and the basis on
which the Revenue is calculated. The provisions of this Paragraph 6 shall
survive the termination of this Agreement and shall continue for the entire Term
whether or not the Employee is then still employed by the Company.
7. Representations and Warranties. The Employee represents and
warrants to the Company as follows, the continuing veracity of each of which
representation and warranty shall be deemed a condition precedent to the
obligations of the Company hereunder:
(a) The Employee has the full and unrestricted right,
power and authority to enter into and perform the terms, covenants and
conditions of this Agreement and to be bound thereby.
-5-
<PAGE>
This Agreement constitutes a legal, valid and binding obligation of the Employee
enforceable against the Employee in accordance with its terms.
(b) No consent, approval or authorization of or
filing or registration with, any governmental entity or other party is required
in connection with the execution, delivery and performance of this Agreement by
the Employee.
(c) No representations or warranties of the Employee
contained in this Agreement,and no other information provided by the Employee to
the Company contains an untrue statement of material fact, or omits to state a
material fact, necessary to make the statements herein or therein not
misleading.
(d) Except for applications involving the separation
of technicium which is not being assigned, the Employee is the sole and
exclusive owner of the Membrane Technology, all Confidential Know-How and all
Patent Rights relating thereto and no other individual or entity has any right
to or interest to or in the Membrane Technology, the Confidential Know-How, the
Patent Rights and any work derivative therefrom, or any profits therefrom and
the Employee has not heretofore assigned, pledged or otherwise encumbered the
Membrane Technology, the Confidential Know-How or the Patent Rights.
(e) The Membrane Technology, Confidential Know-How
and Patent Rights were created entirely by the Employee and neither the Membrane
Technology, the Confidential Know-How nor the Patent Rights infringe upon any
patent, trademark, copyright or other
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<PAGE>
intellectual property or any common law right, proprietary right or other right
of any other person or entity. To the best of the Employee's knowledge, no other
party has ownership or rights of any kind in and to the Membrane Technology. In
furtherance of the foregoing, the Employee covenants and agrees that if and when
he learns of any infringing technical claim relating to the Membrane Technology,
he will promptly notify the Company of same.
(f) None of the Employee, the Membrane Technology,
Confidential Know-How or the Patent Rights is subject to any contract or any
other agreement (written or oral) which restricts or limits the ability of the
Employee to assign and transfer the Membrane Technology, Confidential Know-How
or Patent Rights pursuant to this Agreement.
(g) Exhibit A annexed hereto is a true and complete
list of all Patent Rights registered and patent applications pending with the
United States Patent and Trademark Office and the patent registration office of
any other country owned by the Employee with respect to the Membrane Technology.
Exhibit A will be supplemented from time to time to reflect any and all Patent
Rights created or arising during the term of this Agreement.
8. Binding Effect. All of the terms and conditions of this
Agreement shall be binding upon and inure to the benefit of the Employee, the
Company and their respective heirs, executors, administrators, personal
representatives, successors and permitted assigns.
-7-
<PAGE>
9. Notices. Except as herein provided, any notice, request,
demand or other communication required or permitted under this Agreement shall
be in writing and shall be deemed to have been given when delivered personally
or when mailed by certified mail, return receipt requested, addressed to a party
at the address of such party first set forth above, or at such other address as
such party may hereafter have designated by notice. Copies of all notices
hereunder shall simultaneously be sent by first class post-paid mail to Solomon,
Fornari, Weiss & Moskowitz, P.C., 650 Fifth Avenue, New York, New York 10019,
Attn: Stephen A. Weiss, Esq.
10. Waivers. Neither this Agreement nor any of the terms or
conditions hereof may be waived, amended or modified except by means of a
written instrument duly executed by the party to be charged therewith.
11. Captions. The captions and paragraph headings used in this
Agreement are for convenience of reference only, and shall not affect the
construction or interpretation of this Agreement or any of the provisions
hereof.
12. Governing Law. This Agreement, and all matters or disputes
relating to the validity, construction, performance or enforcement hereof, shall
be governed by and construed under the laws of the State of New York.
13. Arbitration. Any dispute involving the interpretation or
application of this Agreement shall be resolved by final and binding arbitration
before an arbitrator designated by and mutually acceptable to the Company and
the Employee. In the
-8-
<PAGE>
event that the parties cannot agree to the appointment of a mutually acceptable
arbitrator, the subject dispute shall be resolved by final and binding
arbitration before one or more arbitrators designated by the American
Arbitration Association in New York, New York, unless mutually agreed to
otherwise. The award of any of such arbitrator(s) may be enforced in any court
of competent jurisdiction.
14. Assignment. This Agreement is intended for the sole and
exclusive benefit of the parties hereto and their respective heirs, executors,
administrators, personal representatives, successors and permitted assigns, and
no other person or entity shall have any right to rely on this Agreement or to
claim or derive any benefit herefrom absent the express written consent of the
party to be charged with such reliance or benefit.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first set forth above.
COMMODORE MEMBRANE TECHNOLOGIES, INC.
By: /s/ Carl O. Magnell
------------------------------------
Carl 0. Magnell, President
/s/ Sri Kilambi
------------------------------------
Sri Kilambi
-9-
<PAGE>
Exhibit A
None as of the date of this Agreement.
-10-
<PAGE>
EXHIBIT 22.1
Subsidiaries of the Company
None.
<PAGE>
EXHIBIT 23.1
CONSENT AND REPORT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANT
We hereby consent to the use in this Registration Statement of our
report dated August 1, 1996, except for note 7, which is dated September 6, 1996
relating to the financial statements of Commodore Separation Technologies, Inc.
(a development stage company), and to the reference to our Firm under the
caption "Experts" in the prospectus.
Tanner+Co.
-------------------------------
TANNER + CO.
CERTIFIED PUBLIC ACCOUNTANTS
-------------------------------
675 East 500 South, Suite 640
Salt Lake City, Utah 84102
Telephone (801) 532-7444
Fax (801) 532-4911
A PROFESSIONAL CORPORATION
Salt Lake City, Utah
September 9, 1996
<PAGE>
EXHIBIT 23.3
CONSENT
Pursuant to Rule 438 under the Securities Act of 1933, as amended, the
undersigned hereby consents to being named in the Registration Statement on Form
S-1 of Commodore Applied Technologies, Inc. (the "Company") as a person about to
become a director of the Company.
Dated: September 6, 1996
/s/ John A. Cenerazzo
----------------------------
John A. Cenerazzo
<PAGE>
EXHIBIT 23.4
CONSENT
Pursuant to Rule 438 under the Securities Act of 1933, as amended, the
undersigned hereby consents to being named in the Registration Statement on Form
S-1 of Commodore Applied Technologies, Inc. (the "Company") as a person about to
become a director of the Company.
Dated: September 6, 1996
/s/ Jon L. Prather
----------------------------
Jon L. Prather
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