AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 5, 1998
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------
FORM F-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-----------------
C.W. CHEMICAL WASTE TECHNOLOGIES LIMITED
(Exact Name of Registrant as Specified in Its Charter)
N/A
(Translation of Registrant's Name into English)
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<S> <C> <C>
CYPRUS 4953 52-2081158
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification Number)
</TABLE>
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20 EAST 63RD STREET, 1ST FLOOR, NEW YORK, NY 10021,
(212) 308-7420
(Address, including zip code, and telephone number, including area
code, of registrant's principal executive offices)
-----------------
IRA H. KANARICK
20 EAST 63RD STREET, 1ST FLOOR, NEW YORK, NEW YORK 10021,
(212) 308-7420
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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Copies to:
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<S> <C>
JACK LEVY, ESQ. JOSEPH L. CANNELLA, ESQ.
MORRISON COHEN SINGER & WEINSTEIN, LLP FISCHBEIN o BADILLO o WAGNER o HARDING
750 LEXINGTON AVENUE, NEW YORK, NEW YORK 10022 909 THIRD AVENUE, NEW YORK, NEW YORK 10022
(212) 735-8600 (TELEPHONE) (212) 453-3709 (TELEPHONE)
(212) 735-8708 (FACSIMILE) (212) 644-7485 (FACSIMILE)
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
-----------------
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 registration statement for the same
offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier 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. [X]
CALCULATION OF REGISTRATION FEE
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<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
TO BE REGISTERED REGISTERED UNIT (1) PRICE (1) REGISTRATION FEE
<S> <C> <C> <C> <C>
Units, each consisting of one Ordinary Share, $.10
par value and one Class A Warrant (2) (3) ......... 2,300,000 $ 5.00 $11,500,000 $ 3,392.50
Ordinary Shares, $.10 par value (4)(5).............. 2,300,000 $ 6.00 $13,800,000 $ 4,071.00
Class A Warrants (6) ............................... 250,000 $ .10 $ 2,500 $ 0.74
Ordinary Shares, $.10 par value (5)(7).............. 250,000 $ 6.00 $ 1,500,000 $ 442.50
Representative's Warrant (8) ....................... 200,000 $ .001 $ 200 --
Units, each consisting of one Ordinary Share,
$.10 par value and one Class A Warrant (9)......... 200,000 $ 6.00 $ 1,200,000 $ 354.00
Ordinary Shares, $.10 par value (5)(10)............. 200,000 $ 6.00 $ 1,200,000 $ 354.00
Total (11) ........................................................................... $29,202,700 $ 8,614.74
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<PAGE>
(1) Estimated solely for purposes of calculating the registration fee in
accordance with Rule 457 under the Securities Act of 1933, as amended.
(2) Each Unit offered hereby consists of one Ordinary Share, $.10 par value
and one redeemable Class A Warrant. Each Class A Warrant entitles the
holder thereof to purchase one Ordinary Share.
(3) Includes 300,000 Units issuable upon exercise of the Underwriters'
over-allotment option.
(4) Issuable upon exercise of the Class A Warrants.
(5) Pursuant to Rule 416, this Registration Statement also covers an
indeterminable number of additional Ordinary Shares issuable as a result
of any future anti-dilution adjustments in accordance with the terms of
the Class A Warrants.
(6) Represents the Class A Warrants registered for resale by the selling
securityholders.
(7) Issuable upon exercise of the Class A Warrants registered for resale by
the selling securityholders.
(8) To be issued to the Representative of the Underwriters and its designees.
(9) Issuable upon exercise of the Representative's Warrant.
(10) Issuable upon exercise of the Class A Warrants issuable under the
Representative's Warrant.
(11) Such registration fee is computed pursuant to Rule 457(i) under the
Securities Act of 1933, as amended.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE>
EXPLANATORY NOTE
This Registration Statement covers the registration of (i) up to 2,300,000
Units, including Units to cover over-allotments, if any, each Unit consisting of
one Ordinary Share, $.10 par value (the "Ordinary Shares") and one redeemable
Class A Warrant (the "Warrants") of C.W. Chemical Waste Technologies Limited, a
Cyprus corporation (the "Company"), for sale by the Company in an underwritten
public offering and (ii) an additional 250,000 Class A Warrants (the "Selling
Securityholder Warrants") and 250,000 Ordinary Shares (the "Selling
Securityholder Stock") issuable upon exercise of the Selling Securityholder
Warrants, for resale from time to time by the selling securityholders. The
Selling Securityholder Warrants and the Selling Securityholder Stock are
sometimes collectively referred to herein as the "Selling Securityholder
Securities."
The complete prospectus relating to the underwritten offering follows
immediately after this explanatory note. Following the prospectus for the
underwritten offering are pages of the prospectus relating solely to the Selling
Securityholder Securities, including alternative front and back cover pages and
sections entitled "Concurrent Public Offering," "Plan of Distribution" and
"Selling Securityholders" to be used in lieu of the sections entitled
"Concurrent Offering" and "Underwriting" in the prospectus relating to the
underwritten offering. Certain sections of the prospectus for the underwritten
offering will not be used in the prospectus relating to the Selling
Securityholder Securities, such as "Use of Proceeds" and "Dilution."
<PAGE>
SUBJECT TO COMPLETION, DATED MARCH 5, 1998
PROSPECTUS (LOGO) 2,000,000 UNITS
C.W. CHEMICAL WASTE TECHNOLOGIES LIMITED
All of the 2,000,000 units (collectively, the "Units" and each, a "Unit")
offered hereby (the "Offering") are being sold by C.W. Chemical Waste
Technologies Limited, a company organized and existing under the laws of Cyprus
(the "Company"). Each Unit offered by the Company consists of one Ordinary
Share, $.10 par value (the "Ordinary Shares") and one redeemable Class A Warrant
(collectively, the "Warrants" and each, a "Warrant"). The components of the
Units will be separately transferable immediately upon issuance. Each Warrant
entitles the holder to purchase one Ordinary Share at an exercise price of
$6.00, subject to adjustment, commencing one year after and ending on the fifth
anniversary of the date of this Prospectus. The Warrants are subject to
redemption by the Company at a redemption price of $.05 per Warrant, upon 30
days' written notice, commencing two years from the date hereof, provided that
the closing bid price of the Ordinary Shares as reported by the National
Association of Securities Dealers Automated Quotation System or on any National
Securities Exchange (if the Company's Ordinary Shares are listed thereon) for
any 20 consecutive business days ending ten days prior to the date of the notice
of redemption averages at least $8.25 per share (subject to adjustment). See
"Description of Securities."
Prior to the Offering, there has been no public market for the Units, the
Ordinary Shares or the Warrants and there can be no assurance that such a market
will develop. The Company has applied for listing of the Ordinary Shares and
Warrants on the Boston Stock Exchange under the symbols and , respectively, and
for quotation of the Ordinary Shares and the Warrants on the Nasdaq SmallCap
Market ("Nasdaq") under the symbols "CWTL," and "CWTLW," respectively. The Units
will not be listed on Nasdaq. It is anticipated that the initial public offering
price will be $5.00 per Unit. The initial public offering of the Units and the
exercise price and other terms of the Warrants were arbitrarily determined by
negotiation between the Company and RAS Securities Corp., the representative
(the "Representative") of the several underwriters (the "Underwriters"). See
"Underwriting" for a discussion of factors considered in determining the initial
public offering price.
--------------
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK AND IMMEDIATE
SUBSTANTIAL DILUTION. SEE "RISK FACTORS" BEGINNING ON PAGE 7 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.
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UNDERWRITING DISCOUNTS PROCEEDS TO
PRICE TO PUBLIC AND COMMISSIONS (1) COMPANY (2)
----------------- ------------------------ -----------------
<S> <C> <C> <C>
Per Unit .......... $ 5.00 $ 0.50 $ 4.50
Total (3) ......... $ 10,000,000.00 $ 1,000,000.00 $ 9,000,000.00
</TABLE>
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(1) Does not include additional compensation to be received by the
Representative in the form of (a) a non-accountable expense allowance equal
to 3% ($300,000) of the aggregate initial public offering price of the Units
($345,000 if the over-allotment option is exercised in full); and (b) a
warrant to the Representative to purchase up to 200,000 Units at a purchase
price equal to 120% of the initial public offering price during the four
years commencing one year from the date of this Prospectus (the
"Representative's Warrant"). The Company has also agreed to indemnify the
Underwriters and their respective control persons against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(2) Before deducting expenses of the Offering payable by the Company estimated
at $800,000 ($845,000 if the over-allotment option is exercised in full),
including the Representative's non-accountable expense allowance.
(3) The Company has granted the Underwriters a 45-day option (which may be
exercised by the Representative, individually) to purchase up to 300,000
additional Units on the same terms and conditions as set forth above, solely
to cover over-allotments, if any. If the over-allotment option is exercised
in full, the total Price to Public, Underwriting Discounts and Proceeds to
Company will be $11,500,000, $1,150,000 and $10,350,000, respectively. See
"Underwriting."
--------------
The registration statement of which this Prospectus is a part also covers
the offering for resale by certain security holders (the "Selling
Securityholders") of 250,000 Class A Warrants (the "Selling Securityholder
Warrants") and 250,000 Ordinary Shares (the "Selling Securityholder Stock")
issuable upon exercise of the Selling Securityholder Warrants, subject to
adjustment. The Selling Securityholder Warrants and the Selling Securityholder
Stock are sometimes collectively referred to herein as the "Selling
Securityholder Securities." The Selling Securityholder Warrants are issuable to
the Selling Securityholders upon the closing of the Offering upon the automatic
conversion of warrants (the "Bridge Warrants") acquired by them in the Company's
private placement completed in February 1998 (the "Bridge Financing"). See
"Description of Securities."
The Units are offered by the Underwriters on a "firm commitment" basis,
when, as and if delivered to and accepted by the Underwriters and subject to
their right to reject any offer in whole or in part and subject to certain other
conditions. It is expected that delivery of the certificates representing the
Ordinary Shares and Warrants will be made at the offices of RAS Securities
Corp., 50 Broadway, New York, New York 10004, on or about ____________, 1998.
RAS SECURITIES CORP.
THE DATE OF THIS PROSPECTUS IS __________, 1998.
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 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.
<PAGE>
[GRAPHIC OMITTED]
Flow charts of the Phosphogypsum Treatement Process and CLM (Trademark)
Production Production as described in "Business-The Processes."
The Company intends to furnish to its shareholders and holders of the
Warrants annual reports containing financial statements audited and reported on
by its independent public accountants and will make available such other
periodic reports as may be required by law.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE ORDINARY SHARES
AND THE WARRANTS. SUCH TRANSACTIONS MAY INCLUDE THE PURCHASE OF SECURITIES
FOLLOWING THE PRICING OF THE OFFERING TO COVER A SYNDICATE SHORT POSITION IN THE
ORDINARY SHARES OR THE WARRANTS OR FOR THE PURPOSE OF MAINTAINING THE PRICE OF
THE ORDINARY SHARES OR THE WARRANTS AND THE IMPOSITION OF PENALTY BIDS. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING" AND "PLAN OF DISTRIBUTION."
THE COMPANY IS A CYPRUS CORPORATION. ALL OR A SUBSTANTIAL PORTION OF THE
ASSETS OF THE COMPANY, AT ANY TIME, ARE OR MAY BE LOCATED IN JURISDICTIONS
OUTSIDE THE UNITED STATES. THEREFORE, IT ORDINARILY COULD BE DIFFICULT FOR
INVESTORS TO EFFECT SERVICE OF PROCESS WITHIN THE UNITED STATES ON THE COMPANY
OR TO RECOVER AGAINST JUDGMENTS OF UNITED STATES COURTS PREDICATED UPON CIVIL
LIABILITY UNDER THE UNITED STATES FEDERAL SECURITIES LAWS. NOTWITHSTANDING THE
FOREGOING, THE COMPANY HAS IRREVOCABLY AGREED THAT IT MAY BE SERVED WITH PROCESS
WITH RESPECT TO ACTIONS BASED ON OFFERS AND SALES OF ORDINARY SHARES MADE HEREBY
IN THE UNITED STATES BY SERVING THE COMPANY AT ITS ADDRESS IN THE UNITED STATES,
20 EAST 63RD STREET, NEW YORK, NEW YORK 10021.
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements (including the Notes thereto) appearing
elsewhere in this Prospectus. Unless otherwise indicated, the information in
this Prospectus (i) gives effect to the recapitalization effected in January
1998 (the "Recapitalization") described under "Capitalization," and (ii) assumes
no exercise of (a) the Underwriters' over-allotment option, (b) the Warrants, or
(c) the Representative's Warrant.
THE COMPANY
The Company is an early-stage technology licensing company. Its primary
purpose is to exploit globally a proprietary process that treats phosphogypsum,
an environmentally hazardous waste by-product containing toxic components, that
results from the production of phosphoric acid-based fertilizer, to render it
both non-toxic and a useful product in other industries. This process (the
"Phosphogypsum Treatment Process") converts the toxic phosphogypsum into an
environmentally friendly material ("Processed Phosphogypsum") which can be used
as basic construction material, road bed filler and filler for pigments and
plastics.
The Company also owns and intends to exploit a second process (the "CLM(TM)
Production Process" and, together with the Phosphogypsum Treatment Process, the
"Processes") which treats Processed Phosphogypsum to create a chemically
reconstructed form of the material which is then combined with particular
synthetic polymer resins and chemical hardeners to produce ceramic-like material
("CLM(TM)") which can be used in such compounds as floor coatings and chemical
and anticorrosive coatings. Since the CLM(TM) forms only after the hardener is
added, it is possible to mix the composite and store the mixture, potentially
for shipping to satellite finishing plants, for up to three months.
Phosphoric acid, a main ingredient in the production of fertilizers, is
derived from both apatite and phosphorite ores, minerals found in great
abundance in many areas of the world, including Russia, China, South Africa, the
Middle East, the Baltics and the United States. These areas accordingly produce
a substantial portion of the world's fertilizer. When phosphoric acid is
produced as the first step in the production of phosphoric acid-based
fertilizer, a waste by-product called phosphogypsum is created which is
considered toxic by virtue of the residual phosphoric, sulfuric and other acids
which are left in the phosphogypsum. Fertilizer production creates phosphogypsum
at the rate of five metric tons per every one metric ton of usable fertilizer.
The largest 150 phosphoric fertilizer manufacturers worldwide produce
approximately 35 million metric tons of phosphoric acid annually, which results
in approximately 175 million metric tons of phosphogypsum. Phosphogypsum cannot
be used without being treated to remove its toxic components. Some phosphorite
ore, especially that found in the United States, contains an elevated level of
radioactivity. At this time, regulations of the United States Environmental
Protection Agency (the "EPA") prohibit the use and treatment of phosphogypsum as
a result of dangers associated with the radioactive nature of phosphogypsum
produced from ores mined in the United States. Of the 150 largest phosphoric
fertilizer manufacturers, 126 are located outside the United States, and
approximately two-thirds of the world's production of such fertilizer takes
place outside the United States.
To date, the Company believes that no other economical method of treating
phosphogypsum on a large scale has been available. Fertilizer producers in most
countries, including the United States, store phosphogypsum by creating
artificial mountains in specially prepared landfills. These landfills not only
detract from the landscape, but cause great environmental concern to the local
authorities and population, and cost the fertilizer industry millions of dollars
to prepare and maintain. In certain countries, phosphogypsum is stacked in
mountains while in others phosphogypsum is dumped into the sea.
3
<PAGE>
The Company's objective is to become a worldwide licensor of its
technology, including the Processes and the design specifications for the
construction and operation of phosphogypsum treatment plants and CLM(TM)
production plants. The Company also intends to refine the production of, as well
as to develop further applications for, CLM(TM). The Company`s strategy is to
focus its initial efforts on marketing the Phosphogypsum Treatment Process as a
low-cost and environmentally sound alternative to both the storage and dumping
of phosphogypsum. The Company has commenced and will continue targeting
geographical areas where apatite-based phosphogypsum (essentially
non-radioactive) is most plentiful and its storage is a serious economic and
environmental concern. The Company intends to customize the engineering design
of phosphogypsum treatment plants for different capacities of phosphogypsum and
to provide technical support to each licensee throughout the construction and
operation of each plant. In consideration therefor, the Company will receive
licensing fees payable in specified increments. The Company believes that the
construction of a phosphogypsum treatment plant to operation will take
approximately 20 to 28 months depending on the size and location of the plant.
See "-- Licensing Arrangements."
Since its inception, the Company has focused its marketing efforts on the
Mediterranean, Central and Eastern Europe, North Africa and the Middle East,
developing engineering solutions for the application of the patents for building
phosphogypsum treatment and CLM(TM) plants, and developing value-added end uses
for the Processed Phosphogypsum. In October 1997, the Company entered into a
licensing agreement with a company that intends to exploit the phosphogypsum
treatment technology in Poland in cooperation with a local fertilizer plant,
with an option to purchase a license for the CLM(TM) production technology also
for use in Poland. The Company granted a further option to this licensee to
construct plants for the Processes in Greece. In November 1997, the Company
entered into an agreement to license the construction of both a phosphogypsum
treatment plant and CLM(TM) production plant in Israel. These initial agreements
provide for licensing fees of an aggregate of $8 million, payable over a
two-year period, of which $800,000 have already been received, in addition to
royalties on Processed Phosphogypsum and CLM(TM) disposed of by the licensees.
See "Business -- Sales and Marketing," "Business -- Licensing Arrangements" and
"Notes to Financial Statements."
The Company was incorporated in Cyprus in April 1995. The Company maintains
offices at 20 East 63rd Street, New York, New York 10021, and its telephone
number is (212) 308-7420. It also maintains offices at 31 Akti Moutsopoulou,
185-34 Piraeus, Greece.
4
<PAGE>
THE OFFERING
SECURITIES OFFERED BY THE
COMPANY................. 2,000,000 Units, each Unit consisting of one
Ordinary Share and one Warrant. Each Warrant is
exercisable at any time commencing one year after
and ending on the fifth anniversary of the date of
this Prospectus to purchase one Ordinary Share for
$6.00, subject to adjustment. Commencing two years
from the date hereof, the Warrants are subject to
redemption by the Company at a redemption price of
$.05 per Warrant, in certain circumstances, upon 30
days' written notice. See "Description of
Securities."
SECURITIES OFFERED
CONCURRENTLY BY SELLING
SECURITYHOLDERS......... 250,000 Selling Securityholder Warrants and 250,000
Ordinary Shares issuable upon the exercise of the
Selling Securityholder Warrants. See "Concurrent
Offering."
ORDINARY SHARES OUTSTANDING (1)
BEFORE THE OFFERING:.... 5,000,000 shares
AFTER THE OFFERING:..... 7,000,000 shares
USE OF PROCEEDS.......... To repay $500,000 principal amount of 12% promissory
notes (the "Bridge Notes") issued in the Bridge
Financing, together with accrued interest; for
marketing, research and development, working capital
and general corporate purposes. See "Use of
Proceeds."
PROPOSED NASDAQ SYMBOLS:
ORDINARY SHARES......... CWTL
CLASS A WARRANTS........ CWTLW
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(1) Excludes (i) 2,000,000 Ordinary Shares issuable upon exercise of the
Warrants included in the Units offered hereby, (ii) 600,000 shares issuable
upon the exercise of the Underwriters' over-allotment option and underlying
Warrants, (iii) 400,000 Ordinary Shares issuable upon exercise of the
Representative's Warrant and underlying Warrants, (iv) 250,000 Ordinary
Shares issuable upon exercise of the Selling Securityholder Warrants, and
(v) 500,000 Ordinary Shares reserved for issuance upon the exercise of
options issuable under the Company's 1998 Stock Option Plan (the "1998
Plan"), under which no options were granted as of the date hereof. See
"Capitalization" and "Management -- 1998 Stock Option Plan."
5
<PAGE>
SUMMARY FINANCIAL INFORMATION
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NOVEMBER 16, 1996
(COMMENCEMENT OF THREE MONTHS
OPERATIONS) ENDED DECEMBER 31,
THROUGH SEPTEMBER 30, --------------------------------
1997 1997 1996
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<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Sales ................................................... $ -- $ 800,000 $ --
Research and development expenses ....................... 2,133,695 505,000 240,847
Selling, General and administrative expense ............. 370,875 317,000 21,170
Net loss ................................................ (2,504,570) (22,000) (262,017)
Net loss per share (1) .................................. (0.57) (.005) (.06)
Shares used in computing net loss per share (1) ......... 4,410,000 4,410,000 4,410,000
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31, 1997
-------------------------------------
ACTUAL AS ADJUSTED (2)(3)
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<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents ............................ $ 31,500 $ 8,231,500
Total assets ......................................... 361,500 8,561,500
Total liabilities .................................... 190,000 190,000
Deficit accumulated during development stage ......... (2,533,070) (2,533,070)
Total stockholders' equity ........................... 171,500 8,371,500
</TABLE>
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(1) Gives effect to the Recapitalization effected in January 1998. See
"Capitalization -- Recapitalization."
(2) Adjusted to give effect to the sale of the 2,000,000 Units offered hereby at
an assumed offering price of $5.00 per Unit and the receipt of the net
proceeds therefrom. See "Capitalization," "Use of Proceeds," "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
and "Certain Transactions."
(3) Does not give effect to the 590,000 shares issued in January 1998 or to the
Bridge Financing.
6
<PAGE>
RISK FACTORS
An investment in the securities being offered hereby involves a high degree
of risk and should only be made by investors who can afford the loss of their
entire investment. This Prospectus contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. Such forward looking statements involve known
and unknown risks, uncertainties, and other factors which may cause the actual
results, performance, or achievements of the Company to be materially different
from any future results, performance or achievements, expressed or implied by
such forward looking statements. Accordingly, prospective investors should
consider carefully the following risk factors, as well as all other information
contained in this Prospectus, before purchasing the securities offered hereby.
HISTORY OF OPERATING LOSSES. The Company has experienced significant
operating losses since its commencement of operations in November 1996,
primarily as a result of investing in the research and development of the
technology that implements the Processes. As of December 31, 1997, the Company's
accumulated deficit was ($2,533,070). The Company believes that the net proceeds
of the Offering will be sufficient to fund its operations and the expansion of
its business during the next 12 months. There can be no assurance, however, that
the proceeds will be sufficient for such purposes. See Management's Discussion
and Analysis of Financial Condition and Results of Operations.
UNCERTAINTY OF TECHNOLOGY. The Company has not applied its Processes and
technology in full-scale plants. Although the Company believes that its
technology performs the principal functions for which it has been designed, the
Company has only conducted limited production of Processed Phosphogypsum and
CLM(TM)-based products. It has successfully produced five metric tons of
Processed Phosphogypsum per year in a pilot plant, whereas the average size of
the plants to be constructed from the Company's know-how and using the Processes
contemplates the production of 300,000 metric tons per year. In addition, the
Company's marketing and commercialization efforts are subject to all risks
inherent in the development of new technologies, including unanticipated delays,
expenses, technical problems or difficulties, as well as the possible
insufficiency of funds to complete development satisfactorily. Consequently,
there can be no assurance that such technology will perform all of the functions
for which it was designed in a large plant or prove to be sufficiently reliable
for widespread commercial production.
MARKET ACCEPTANCE OF TECHNOLOGY. Although the Company believes that the
Processes are a cost-effective solution to the global problem of phosphogypsum
disposal, the technology embodied in the Processes is relatively new. To date,
the Processes have been marketed in only a few select regions. Successful
development of a significant market for the Processes by the Company will
require education, training and broad acceptance of the Processes by phosphoric
acid-based fertilizer manufacturers and their governments. There can be no
assurance that such market acceptance of the Processes can be developed or, if
developed, that such acceptance can be sustained.
UNCERTAINTY OF PROTECTION OF PATENTS AND PROPRIETARY RIGHTS. The Company's
success will depend, in part, on its ability to obtain patent protection for its
products and technologies under foreign patent laws to preserve its trade
secrets and to operate without infringing the proprietary rights of third
parties. The Company filed a patent application covering the Phosphogypsum
Treatment Process in the Polish National Patent Office in June 1997. The three
patent applications covering the essential aspects of the CLM(TM) Production
Process were filed in the Polish National Patent Office prior to their
acquisition by the Company in September 1997. Two such patent applications were
filed in August 1993, and one was was filed in March 1995. Foreign counterpart
applications of the CLM(TM) Polish patent applications were filed in the
national patent offices of various other foreign countries, including the
countries in North America, most of Europe, South America, Asia and selected
African countries. Patents covering the CLM(TM) Production Process have issued
in certain countries, including Poland, Morocco, Tangiers, Taiwan and Pakistan.
The Company's strategy is to pursue patent protection for several of its CLM(TM)
technologies and for its Phosphogypsum Treatment Process in at least those
countries worldwide which subscribe to the provisions of the Paris Convention
Treaty. This treaty, to which the great majority of the industrialized and
develop-
7
<PAGE>
ing countries of the world subscribe (including the United States, most of
eastern Europe, Greece, Jordan and Israel), accords the benefit of the priority
date of the Polish patent application (the earliest filed application) to any
patent application filed within one year of such priority date in any
"convention" country. A patent search of published applications or issued
patents conducted by patent counsel to the Company has discovered no patents or
patent applications in conflict with those filed by the Company which could have
priority over the technology embodied in the Company's patents and patent
applications. There can be no assurance that any additional searches or review
of patents identified in prior searches will not reveal outstanding patents
which are in conflict with those filed by the Company, that the patent
applications relating to the Company's potential products or technologies,
including those that it may license in the future, will result in patents being
issued, that any issued patents will afford adequate protection or not be
challenged, opposed, held invalid or unenforceable, or that they will not be
infringed or circumvented, or that any rights granted thereunder will afford
competitive advantages to the Company, or that competing non-infringing methods
of processing phosphogypsum and producing commercially marketable products from
phosphogypsum will not be developed. Furthermore, there can be no assurance that
others have not independently developed, or will not independently develop,
similar products or technologies for which patent applications have claims that
may overlap or conflict with the claims pending in the Company's patent
applications. In such an event, there can be no assurance that the Company will
prevail in a dispute involving priority of the Company's invention or its
entitlement to the earliest priority date. See "Business -- Patents, Proprietary
Technology and Trade Secrets."
There can be no assurance, moreover, that the validity of any of the
patents currently held or to be secured by the Company would be upheld if
challenged by others in litigation or that the Company's activities would not
infringe patents owned by others. The Company could incur substantial costs in
defending itself in suits brought against it, or in suits in which the Company
may assert, against others, patent claims in which the Company has rights.
Should the Company's technologies be found to infringe patents issued to third
parties, there is a risk that the Company's technology could be enjoined and the
Company could be required to pay substantial damages. In addition, the Company
could be required to obtain licenses to patents or other proprietary rights of
third parties in connection with the development and use of its products and
technologies. No assurance can be given that any licenses required under any
such patents or proprietary rights would be made available on acceptable terms,
if at all.
The Company will also rely on trade secrets and proprietary know-how which
the Company seeks to protect, in part, by confidentiality agreements with
employees, consultants, advisors, customers and others. There can be no
assurance that such employees, consultants, advisors, customers or others, will
maintain the confidentiality of such trade secrets or proprietary information,
or that the trade secrets or proprietary know-how of the Company will not
otherwise become known or be independently developed by competitors in such a
manner that the Company will have no practical legal recourse.
COMPETITION AND TECHNOLOGICAL CHANGE. Management does not believe that
there is currently being marketed any technology for the treatment of
phosphogypsum competitive with the Company's processes and is unaware of any
such technology being developed. Because the Company intends to market its
technology rather than the products produced by its technology, such technology
may become obsolete if other companies develop superior technology for
phosphogypsum treatment or for the production of better CLM(TM) products. In
order for the Company to compete successfully in its targeted markets, its
technologies will have to be superior and will have to produce CLM(TM) products
that exhibit more favorable characteristics, at a lesser price than the prices
of other technologies that may be developed and of other products currently in
the market or that may be designed for the same purposes. There can be no
assurance that the technology or the CLM(TM) products will prove competitive
either on the basis of performance or price. Finally, there can be no assurance
that other companies will not succeed in developing technologies or products
that are more effective than those of the Company or that will render the
Company's products or technologies noncompetitive or obsolete. See "Business --
Competition."
RISKS APPLICABLE TO FOREIGN OPERATIONS. The Company's intention is to
market and license its processes in countries outside of the United States where
the storage and disposal of phosphogypsum has become a serious problem. Foreign
sales and licensing arrangements will expose the Company to certain risks,
includ-
8
<PAGE>
ing the difficulty and expense of establishing and maintaining foreign sales
channels, barriers to trade, political and economic instability, accounts
receivable collection and potential fluctuations in foreign currency exchange
rates. The Company may also find it difficult, if not impossible, to enforce its
rights under patents or contracts in certain jurisdictions in which it may
ultimately operate. Furthermore, since substantially all of the Company's assets
and a number of its officers and directors are located outside the United
States, any judgment obtained in the United States against the Company or its
officers or directors, including any judgment obtained by any investor or
prospective investor, may not be collectible in the United States. See "Business
- -- Sales and Marketing" and "Business -- Government Regulation."
NO UNITED STATES MARKETS. At this time, regulations of the United States
Environmental Protection Agency (the "EPA") prohibit the use and treatment of
phosphogypsum as a result of dangers associated with the radioactive nature of
phosphorite ore, which is much more prevalent in the United States than the
essentially non-radioactive apatite ore. Accordingly, the Company will not be
able, at this time, either directly or through licensees, to market the
Processes in the United States and must limit its marketing activities to those
countries that either employ apatite ore in their fertilizer production or do
not have such regulations relating to phosphorite-derived materials. Although
the Company believes that the abundance of phosphogypsum waste in the United
States is creating pressure on the EPA to create solutions to the problem, there
can be no assurance that the EPA will ever change its current regulations to
allow the processing of phosphorite ore-based phosphogypsum in the United
States. See "Risk Factors -- Government Regulation and Permits," "Business --
Background" and "-- Government Regulation."
GOVERNMENT REGULATION AND PERMITS. The construction, installation and
operation of the Phosphogypsum Treatment plants and CLM(TM) Production plants
may be subject to regulation by various governmental authorities in countries
where they are to be located, including agencies with powers equivalent to those
of the EPA. Delays in obtaining, or the failure to obtain, government approvals,
including appropriate permits and licenses, by the Company's customers may
substantially delay or prevent the construction and installation of such plants.
Such delays in obtaining, and complete failures to obtain, such approvals would
impair the Company's ability to license the Processes and related technology
and, accordingly, would have a material adverse effect on the business,
financial condition and results of operations of the Company. See "Business --
Government Regulation."
EFFECT OF CURRENCY EXCHANGE RATE FLUCTUATIONS. Although the fees under the
Company's standard licensing agreements are to be paid in a fixed amount of U.S.
Dollars, fluctuations in exchange rates may affect a licensee's ability to meet
its obligations under such agreements.
GOING CONCERN QUALIFICATION IN INDEPENDENT AUDITORS' REPORT. The Company
has received a report from its independent auditors that contains an explanatory
paragraph with respect to the uncertainty regarding the Company's ability to
continue as a going concern. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations," the "Report of Independent
Auditors" and "Note 1 to Notes to Financial Statements."
CONTROL BY INSIDERS, POTENTIAL ANTI-TAKEOVER EFFECT OF SHARES HAVING
DISPROPORTIONATE VOTING RIGHTS. Upon completion of the Offering, Drofan Trading
Ltd., a company owned 50% indirectly by Erwin Herling, Chairman of the Company's
Board of Directors, will beneficially own 63.0% of the outstanding Ordinary
Shares of the Company, and will be able to elect the Company's directors and
thereby direct the policies of the Company. See "Principal Shareholders" and
"Description of Securities."
POTENTIAL ADVERSE EFFECTS OF PREFERRED STOCK. The Company's Articles of
Association authorize the issuance of shares of "blank check" preferred stock,
which will have such designations, rights and preferences as may be determined
from time to time by the Board of Directors. Accordingly, the Board of Directors
will be empowered, without shareholder approval, to issue preferred stock with
dividend, liquidation, conversion, voting or other rights which could adversely
affect the voting power or other rights of the holders of the Ordinary Shares.
In the event of such issuance, the preferred stock could be utilized, under
certain circumstances, as a method of discouraging, delaying or preventing a
change in
9
<PAGE>
control of the Company. Although the Company has no present intention to issue
any shares of preferred stock, there can be no assurance that the Company will
not do so in the future. See "Description of Securities -- Preferred Stock."
NEED TO ATTRACT AND RETAIN KEY OFFICERS, EMPLOYEES AND CONSULTANTS. The
Company is highly dependent on the services of key officers, employees and
consultants as well as the other principal members of management and scientific
staff of the Company. The future success of the Company depends in large part
upon its ability to attract and retain highly qualified personnel. The Company
faces intense competition for such highly qualified personnel from other
technology companies, as well as universities and nonprofit research
organizations, and may have to pay higher salaries to attract and retain such
personnel. There can be no assurance that sufficient qualified personnel can be
hired on a timely basis or retained. The loss of such key personnel or failure
to recruit additional key personnel could have a material adverse effect on the
Company's business, financial condition and results of operations. See
"Management."
IMMEDIATE DILUTION. The purchasers of the Units in the Offering will incur
an immediate dilution of approximately $_________ or__________ % in the pro
forma per share net tangible book value of their Ordinary Shares ($_________
or_________% if the Underwriters' over-allotment option is exercised in full).
Additional dilution to public investors, if any, may result to the extent that
the Warrants or the Representative's Warrant is exercised at a time when the net
tangible book value per Ordinary Share exceeds the exercise price of any such
securities. See "Dilution."
PASSIVE FOREIGN INVESTMENT COMPANY. Under the Internal Revenue Code of
1986, as amended, a foreign corporation that in any taxable year derives 75% or
more of its gross income as passive income, or 50% or more of whose gross assets
on average produce passive income or are held for the production of passive
income, will be classified as a passive foreign investment company ("PFIC").
Based upon current law and an analysis of the Company's past and projected
future business activities, the Company believes it will not be treated as a
PFIC for U.S. federal income tax purposes, although there can be no assurance in
this regard. If the Company were to become a PFIC for U.S. federal income tax
purposes, unless such investor makes certain elections, any gain realized by an
investor on the disposition of Ordinary Shares or Warrants and the income
realized from certain distributions by the Company would be subject to a special
significantly adverse U.S. federal income tax regime. See "Certain United States
Tax Considerations -- Passive Foreign Investment Companies."
NO DIVIDENDS. The Company has not paid any dividends on its Ordinary Shares
and does not expect to declare or pay any cash or other dividends in the
foreseeable future. See "Dividend Policy."
NO PUBLIC MARKET FOR SECURITIES; POSSIBLE VOLATILITY OF MARKET PRICE;
ARBITRARY DETERMINATION OF OFFERING PRICE. Prior to the Offering, there has not
been any market for any of the Company's securities, and there can be no
assurance that an active trading market will develop or be sustained after the
Offering. The initial public offering price of the Units and the exercise prices
and other terms of the Warrants have been determined by negotiation between the
Company and the Representative and are not necessarily related to the Company's
asset value, net worth, results of operations or any other criteria of value and
may not be indicative of the prices that may prevail in the public market. The
market prices of the Ordinary Shares and Warrants could also be subject to
significant fluctuations in response to variations in the Company's development
efforts, priority of the Company's intellectual property rights, government
regulations, general trends in the industry and other factors, including extreme
price and volume fluctuations which have been experienced by the securities
markets from time to time. See "Underwriting" and "Shares Eligible for Future
Sale."
OUTSTANDING WARRANTS AND OPTIONS, EXERCISE OF REGISTRATION RIGHTS. Upon
completion of the Offering, the Company will have outstanding (i) 2,550,000
Warrants (including the Warrants subject to the Underwriters' over-allotment
option and the Warrants issuable upon the automatic conversion of the Bridge
Warrants) to purchase an aggregate of 2,550,000 Ordinary Shares; and (ii) the
Representative's Warrant to purchase an aggregate of 400,000 Ordinary Shares,
including shares issuable upon exercise of the underlying Warrants. The Company
also has 500,000 Ordinary Shares reserved for issuance upon
10
<PAGE>
exercise of options under the 1998 Plan, none of which have been granted.
Holders of such warrants and options are likely to exercise them when, in all
likelihood, the Company could obtain additional capital on terms more favorable
than those provided by the Warrants and options. Further, while the Warrants and
options are outstanding, the Company's ability to obtain additional financing on
favorable terms may be adversely affected. The holders of the Representative's
Warrant have certain demand and "piggy-back" registration rights with respect to
their securities. Exercise of such rights could involve substantial expense to
the Company. See "Management -- Stock Option Plan," "Description of Securities"
and "Underwriting."
POTENTIAL ADVERSE EFFECT OF REDEMPTION OF WARRANTS. Commencing two years
from the date of this Prospectus, the Warrants may be redeemed by the Company at
a redemption price of $.05 per Warrant upon not less than 30 days' prior written
notice if the closing bid price of the Ordinary Shares shall have averaged at
least $8.25 per share for 20 consecutive trading days ending within ten days of
the notice. Redemption of the Warrants could force the holders (i) to exercise
the Warrants and pay the exercise price therefor at a time when it may be
disadvantageous for the holders to do so, (ii) to sell the Warrants at the then
current market price when they might otherwise wish to hold the Warrants, or
(iii) to accept the nominal redemption price which, at the time the Warrants are
called for redemption, is likely to be substantially less than the market value
of the Warrants. See "Description of Securities -- Warrants."
CURRENT PROSPECTUS AND STATE REGISTRATION TO EXERCISE WARRANTS. Holders of
Warrants will be able to exercise the Warrants only if (i) a current prospectus
under the Securities Act relating to the securities underlying the Warrants is
then in effect and (ii) such securities are qualified for sale or exempt from
qualification under the applicable securities laws of the states in which the
various holders of Warrants reside. Although the Company has undertaken and
intends to use its best efforts to maintain a current prospectus covering the
securities underlying the Warrants following completion of the Offering to the
extent required by federal securities laws, there can be no assurance that the
Company will be able to do so. The value of the Warrants may be greatly reduced
if a prospectus covering the securities issuable upon the exercise of the
Warrants is not kept current or if the securities are not qualified or exempt
from qualification in the states in which the holders of Warrants reside.
Persons holding Warrants who reside in jurisdictions in which such securities
are not qualified and in which there is no exemption will be unable to exercise
their Warrants and would either have to sell their Warrants in the open market
or allow them to expire unexercised. If and when the Warrants become redeemable
by the terms thereof, the Company may exercise its redemption right even if it
is unable to qualify the underlying securities for sale under all applicable
state securities laws. See "Description of Securities -- Warrants."
POSSIBLE DELISTING OF SECURITIES FROM THE NASDAQ STOCK MARKET. While the
Company and the Ordinary Shares and Warrants should meet the current Nasdaq
listing requirements and the Ordinary Shares and Warrants are expected to be
initially included on Nasdaq, there can be no assurance that the Company will
meet the criteria for continued listing. Continued inclusion on Nasdaq will
require that (i) the Company maintain at least $2,000,000 in tangible assets, a
$35,000,000 market capitalization or realize net income of at least $500,000 in
two of the three prior years, (ii) there be at least 500,000 shares in the
public float valued at $1,000,000 or more, (iii) there be a minimum Ordinary
Share bid price of $1.00, (iv) there be at least two active market makers in the
Ordinary Shares, and (v) there be at least 300 holders thereof.
If the Company is unable to satisfy Nasdaq's requirements, its securities
may be delisted from Nasdaq. In such event, trading, if any, in the Ordinary
Shares and Warrants would thereafter be conducted in the over-the-counter market
in the so-called "pink sheets" or the NASD's "Electronic Bulletin Board."
Consequently, the liquidity of the Company's securities could be impaired, not
only in the number of securities which could be bought and sold, but also
through delays in the timing of transactions, reduction in security analysts'
and the news media's coverage of the Company, and lower prices for the Company's
securities than might otherwise be attained.
RISKS OF LOW-PRICED STOCK. If the Company's securities were delisted from
Nasdaq, they could become subject to Rule 15g-9 under the Exchange Act, which
imposes additional sales practice requirements on broker-dealers that sell such
securities except in transactions exempted by such Rule, including
11
<PAGE>
transactions meeting the requirements of Rule 505 or 506 of Regulation D under
the Securities Act and transactions in which the purchaser is an institutional
accredited investor (as defined) or an established customer (as defined) of the
broker-dealer. For transactions covered by this rule, a broker-dealer must make
a special suitability determination for the purchaser and have received the
purchaser's written consent to the transaction prior to sale. Consequently, such
rule may adversely affect the ability of broker-dealers to sell the Company's
securities and may adversely affect the ability of purchasers in the Offering to
sell in the secondary market any of the securities acquired hereby.
Commission regulations define a "penny stock" to be any non-Nasdaq equity
security that has a market price (as therein defined) of less than $5.00 per
share or with an exercise price of less than $5.00 per share, subject to certain
exceptions. For any transaction involving a penny stock, unless exempt, the
rules require delivery, prior to any transaction in a penny stock, of a
disclosure schedule prepared by the Commission relating to the penny stock
market. Disclosure is also required to be made about commissions payable to both
the broker-dealer and the registered representative and current quotations for
the securities. Finally, monthly statements are required to be sent disclosing
recent price information for the penny stock held in the account and information
on the limited market in penny stocks.
The foregoing required penny stock restrictions will not apply to the
Company's securities if such securities are listed on Nasdaq and have certain
price and volume information provided on a current and continuing basis or meet
certain minimum net tangible assets or average revenue criteria. There can be no
assurance that the Company's securities will qualify for exemption from these
restrictions. In any event, even if the Company's securities were exempt from
such restrictions, it would remain subject to Section 15(b)(6) of the Exchange
Act, which gives the Commission the authority to prohibit any person that is
engaged in unlawful conduct while participating in a distribution of a penny
stock from associating with a broker-dealer or participating in a distribution
of a penny stock, if the Commission finds that such a restriction would be in
the public interest. If the Company's securities were subject to the rules on
penny stocks, the market liquidity of the Company's securities could be severely
adversely affected.
SHARES ELIGIBLE FOR FUTURE SALE. Future sales of the Ordinary Shares by
existing shareholders pursuant to Regulation S or Rule 144 under the Securities
Act and pursuant to the offering by the Selling Securityholders (the "Concurrent
Offering") or otherwise could have an adverse effect on the price of the
Company's securities. Pursuant to the Concurrent Offering, 250,000 Selling
Securityholder Warrants and the underlying 250,000 Ordinary Shares have been
registered for resale concurrently with the Offering. Upon the sale of the
2,000,000 Units offered hereby, the Company will have outstanding 7,000,000
Ordinary Shares (7,300,000 if the Underwriters' over-allotment is exercised in
full) and 2,250,000 Warrants (2,550,000 Warrants if the Underwriters'
over-allotment option is exercised in full). The Ordinary Shares and Warrants
sold in the Offering will be freely tradeable without restriction under the
Securities Act, unless acquired by "affiliates" of the Company as that term is
defined in the Securities Act. Of the remaining 5,000,000 Ordinary Shares,
4,975,000 were issued to "non U.S. persons" as such term is defined in
Regulation S under the Securities Act in transactions that come within the
exemption from registration under the Securities Act provided by Regulation S.
Such shares are subject to sale in any U.S. market that may develop in
accordance with the provisions of Regulation S. The remaining 25,000 shares were
issued in a transaction exempt from the registration requirements of the
Securities Act pursuant to Rule 701 promulgated thereunder, and, accordingly,
will be freely tradeable in any U.S. market that may develop commencing 90 days
after the date hereof. However, persons holding the Ordinary Shares outstanding
prior to the Offering have agreed not to sell or otherwise dispose of any
securities of the Company for a period of 18 months from the date of this
Prospectus without the prior written consent of the Representative. In addition,
the holders of the Representative's Warrant have certain demand and "piggy-back"
registration rights with respect to their securities. The exercise of such
rights could involve significant expense to the Company. Sales of Ordinary
Shares, or the possibility of such sales, in the public market may adversely
affect the market price of the securities offered hereby. See "Concurrent
Offering," "Description of Securities," "Shares Eligible for Future Sale," and
"Underwriting."
12
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 2,000,000 Units
offered hereby, after deducting underwriting discounts and commissions and other
expenses of the Offering, are estimated to be approximately $8,200,000
($9,505,000 if the Underwriters' over-allotment option is exercised in full).
The Company expects the net proceeds to be utilized as follows:
<TABLE>
<CAPTION>
APPROXIMATE AMOUNT APPROXIMATE PERCENTAGE
APPLICATION OF NET PROCEEDS OF NET PROCEEDS
- ------------------------------------------------------ -------------------- -----------------------
<S> <C> <C>
Repayment of Bridge Notes (1) ..................... $ 512,000 6.1%
Additional Payments for the Processes (2) ......... 3,450,000 42.1%
Research and Development .......................... 1,000,000 12.2%
Marketing and Sales (3) ........................... 1,000,000 12.2%
Working Capital (4) ............................... 2,238,000 27.4%
---------- -----
Total .......................................... $8,200,000 100.0%
========== =====
</TABLE>
- ----------
(1) Represents the principal amount and accrued interest at the rate of 12% per
annum (estimated through April 15, 1998) of Bridge Notes issued in the
Bridge Financing completed in February 1998. The net proceeds of the Bridge
Financing were and are being used primarily for working capital purposes,
including the miscellaneous expenses of the Offering. See "Capitalization --
Bridge Financing," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Certain Transactions."
(2) Includes $1.4 million to be paid as partial payment for the acquisition of
the Phosphogypsum Treatment Process and $2.05 million to be paid to Herling
Applied Technologies, Ltd., a company owned by Erwin Herling, Chairman of
the Company's Board of Directors, as partial payment for the CLM(TM)
Production Process. See "Business -- The Processes -- Technology
Acquisition" and "Certain Transactions."
(3) Includes the costs associated with hiring personnel for and establishing the
sales and market facilities in the United States, Greece, and Poland.
(4) Includes general and administrative expenses, including approximately
$500,000 for salaries of the current executive officers during the next 12
months.
The foregoing represents the Company's best estimate of its allocation of
the net proceeds of the Offering during the next 12 months. This estimate is
based on certain assumptions, including that no events occur which would cause
the Company to abandon any particular efforts, that competitive conditions
remain stable, that the success of the research and development activities will
occur as projected, and that the Company will not enter into collaborations or
joint ventures. The amounts actually expended for each purpose may vary
significantly in the event any of these assumptions proves inaccurate. The
Company reserves the right to change its use of proceeds as unanticipated events
may cause the Company to redirect its priorities and reallocate the proceeds
accordingly.
Any additional proceeds received upon exercise of the Underwriters'
over-allotment option, Warrants or the Selling Securityholder Warrants will be
added to working capital. Pending utilization, the net proceeds of the Offering
will be invested in short-term, interest-bearing investments.
DIVIDEND POLICY
The Company has never paid cash or other dividends on its Ordinary Shares
and does not anticipate paying any such dividends in the foreseeable future. The
Company currently intends to retain all earnings, if any, for use in the
expansion of the Company's business. The declaration and payment of future
dividends, if any, will be at the sole discretion of the Board of Directors and
will depend upon the Company's profitability, financial condition, cash
requirements, future prospects and other factors deemed relevant by the Board of
Directors.
13
<PAGE>
CAPITALIZATION
The following table sets forth the Capitalization of the Company as of
December 31, 1997, giving retroactive effect to the Recapitalization effected in
January 1998; and as adjusted to reflect the sale of the Units offered hereby.
This table should be read in conjunction with the Financial Statements and the
Notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
DECEMBER 31, 1997
-------------------------------
ACTUAL AS ADJUSTED(2)
--------------- ---------------
<S> <C> <C>
Stockholders' equity:
Preferred Stock, $.10 par value; 5,000,000 shares authorized, no
shares issued and outstanding actual and as adjusted ............. -- --
Ordinary Shares, $.10 par value, 20,000,000 shares authorized;
4,410,000 shares issued and outstanding; 6,410,000 shares issued
and outstanding as adjusted (1) .................................. 441,000 641,000
Additional paid-in capital ....................................... 2,249,100 10,249,100
Shareholders' contribution ....................................... 14,470 14,470
Deficit accumulated during development stage ..................... (2,533,070) (2,533,070)
---------- ----------
Total shareholders' equity ....................................... 171,500 8,371,500
Total capitalization ............................................ $ 171,500 $ 8,371,500
============ ============
</TABLE>
- ----------
(1) Excludes (i) up to 600,000 shares issuable upon exercise of the
Underwriters' over-allotment option and the underlying Warrants; (ii)
2,000,000 shares issuable upon exercise of the Warrants included in the
Units offered hereby; (iii) 250,000 shares issuable upon exercise of the
Selling Securityholder Warrants; (iv) 400,000 shares issuable upon exercise
of the Representative's Warrant and the underlying warrants; and (v) 500,000
shares reserved for issuance under the 1998 Plan, pursuant to which there
are no options currently outstanding. See "Management -- Stock Option Plan,"
"Certain Transactions," "Description of Securities," "Underwriting" and
"Concurrent Offering."
(2) Does not give effect to the 590,000 shares issued in January 1998 or to the
Bridge Financing.
RECAPITALIZATION
Effective as at January 15, 1998, the Company amended its Articles of
Association to change its currency and increase its authorized capital from
1,000 Cyprus pounds to U.S. $2,500,000 and effected a recapitalization under
Cyprus law pursuant to which the 1,000 Ordinary Shares previously owned
beneficially by Drofan Trading Ltd. ("Drofan"), being all of the Ordinary Shares
of the Company then authorized and outstanding, were converted into 20,000 new
Ordinary Shares and an additional 4,390,000 Ordinary Shares were issued to
Drofan; resulting in Drofan's beneficial ownership of 4,410,000 Ordinary Shares,
which constituted all of the Ordinary Shares then outstanding. See "Note 4 to
Notes to Financial Statements."
Immediately following the Recapitalization, an additional 590,000 Ordinary
Shares were issued in the aggregate to eight individuals, bringing the total
number of Ordinary Shares then issued and outstanding to 5,000,000.
BRIDGE FINANCING
In February 1998, the Company completed the Bridge Financing of an
aggregate of $500,000 principal amount of Bridge Notes and 250,000 Bridge
Warrants. The Company paid the placement agent a fee of $50,000 and a
non-accountable expense allowance of $15,000 in connection with the Bridge
Financing. The Bridge Notes issued in the Bridge Financing are payable, together
with accrued interest at the rate of 12% per annum, on the earlier of February
27, 1999 or the closing of the Offering. See "Use of Proceeds."
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<PAGE>
In connection with the Bridge Financing, the Company issued an aggregate of
250,000 Bridge Warrants. The Bridge Warrants entitle the holders thereof to
purchase one Ordinary Share commencing in February 1999 but will be exchanged
automatically on the closing of the Offering for Class A Warrants, each of which
will be identical to the Class A Warrants included in the Units offered hereby.
The Selling Securityholder Securities have been registered for resale in the
Registration Statement of which this Prospectus is a part. See "Concurrent
Offering."
DILUTION
Dilution represents the difference between the initial public offering
price paid by the purchasers in the Offering and the net tangible book value per
share immediately after completion of the Offering. Net tangible book value per
share represents the amount of the Company's total assets minus the amount of
its intangible assets and liabilities, divided by the number of Ordinary Shares
outstanding. At December 31, 1997, the Company had a net tangible book value of
$( ) or $( ) per share and a pro forma net tangible book value of $( ) or $( )
per share. After giving retroactive effect to the sale of 2,000,000 Units
offered hereby, and the Company's receipt of the net proceeds therefrom, less
underwriting discounts, commissions and other estimated offering expenses
(anticipated to aggregate $1,800,000), and allocating $0.10 to the Warrants
contained in the Units, the net tangible book value of the Company, as adjusted
at December 31, 1997, would have been $ or $ per share. This would result in an
immediate dilution to the public investors of $ per share and an aggregate
increase in the pro forma net tangible book value to present shareholders of $
per share. The following table illustrates this pro forma per share dilution:
<TABLE>
<S> <C> <C>
Public offering price per Ordinary Share ............................. $
---
Pro forma net tangible book value per share before the Offering ...... $
---
Increase attributable to new investors ...............................
---
Adjusted pro forma net tangible book value per share after the Of-
fering .............................................................
---
Dilution to new investors (1) ........................................ $
===
</TABLE>
- ----------
(1) If the Underwriters' over-allotment option is exercised in full, the net
tangible book value after the Offering would be approximately $_______ per
share, resulting in dilution to new investors in the Offering of $________
per share.
The following table summarizes the differences between existing
shareholders and new investors with respect to the number of Ordinary Shares
purchased from the Company, the total consideration paid to the Company and the
average price per share paid by existing shareholders and by new investors:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
----------------------- ----------------------------
AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
----------- --------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
Existing shareholders ......... 5,000,000 71.4% $ % $
New investors ................. 2,000,000 28.6% $10,000,000 % $ 4.90
--------- ----- ----------- ------------ ------
Total ...................... 7,000,000 100.0% $ 100.0%
========= ===== =========== ============
</TABLE>
The foregoing table does not give effect to the exercise of the Warrants,
the Representative's Warrant or the Bridge Warrants, as they are not currently
exercisable. To the extent such warrants are exercised, or stock options are
granted and exercised under the Company's 1998 Stock Option Plan, there will be
further dilution to new investors. See "Capitalization -- Bridge Financing,"
"Management -- Stock Option Plan"and "Description of Securities."
15
<PAGE>
SELECTED FINANCIAL DATA
The selected financial data presented below for the period from November
16, 1996 (commencement of operations) through September 30, 1997, and the three
months ended December 31, 1997 and 1996, and the balance sheet data at September
30, 1997 and December 31, 1997 have been derived from the Financial Statements
of the Company. The Financial Statements of the Company, together with the notes
thereto, and the report of Coopers & Lybrand, independent auditors, are included
elsewhere in this Prospectus. The selected financial data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Company's Financial Statements and related
notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31,
-----------------------------
NOVEMBER 16, 1996
(COMMENCEMENT OF OPERATIONS)
THROUGH SEPTEMBER 30, 1997 1997 1996
----------------------------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Sales .............................................. $ -- $ 800,000 $ --
Research and development expenses .................. 2,133,695 505,000 240,847
Selling, General and administrative expenses ....... 370,875 317,000 21,170
Net loss ........................................... (2,504,570) (22,000) (262,017)
Net loss per share ................................. (0.57) (0.005) (0.06)
Shares used in computing net loss per share (1)..... 4,410,000 4,410,000 4,410,000
</TABLE>
<TABLE>
<CAPTION>
AT SEPTEMBER 30, 1997 AT DECEMBER 31, 1997
----------------------- ---------------------
(UNAUDITED)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents ............................ $ -- $ 31,500
Total assets ......................................... 300,000 361,500
Total liabilities .................................... 106,500 190,000
Deficit accumulated during development stage ......... (2,511,070) (2,533,070)
Total stockholders' equity ........................... 193,500 171,500
</TABLE>
(1) Gives effect to the Recapitalization effected in January 1998. See "Note 4
to Notes to Financial Statements."
16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the financial statements and notes thereto appearing elsewhere in this
Prospectus.
RESULTS OF OPERATIONS
Since the Company's inception in April 1995, it has had limited operations
and, accordingly, limited sales and expenses. The Company has spent
substantially all of its capital on research and development. The Company's only
sales have occurred in the three months ended December 31, 1997 during which the
Company received $800,000, constituting the initial payments made under two
sales contracts.
The Company's expenses, in addition to its organizational expenses, have
mainly consisted of research and development expenditures. During its first full
year of operations ending September 30, 1997, the Company spent $2,133,695 on
the research and development relating to the technology that implements the
Processes. The Company also spent an additional $505,000 for research and
development in the three months ended December 31, 1997, compared to $240,847
during the three months ended December 31, 1996. See also, "Business --
Strategy" and "Business -- Licensing Arrangements" for details concerning the
expected future operations of the Company.
LIQUIDITY AND CAPITAL RESOURCES
The Company has funded its activities to date primarily through loans and
capital contributions from principal shareholders. As of December 31, 1997, the
Company had a working capital deficit of $($2,533,070). In February 1998, the
Company completed the Bridge Financing which consisted of $500,000 principal
amount of Bridge Notes bearing interest at an annual rate of 12% and Bridge
Warrants to purchase an aggregate of 250,000 Ordinary Shares. The proceeds of
the Bridge Financing, which were approximately $435,000 (net of $50,000 in
commissions and a $15,000 expense allowance paid to the Representative for
acting as placement agent and other expenses of the Bridge Financing) have been
utilized by the Company for working capital purposes including general and
administrative expenses and expenses of the Offering. The Company intends to
repay the principal and accrued interest on the Bridge Notes issued in the
Bridge Financing with a portion of the proceeds of the Offering. See "Use of
Proceeds," "Capitalization -- Bridge Financing" and "Certain Transactions."
During the 12-month period following the Offering, the Company is committed
to pay approximately $500,000 in compensation to its current executive officers.
See "Management -- Employment Agreements" and "Certain Transactions."
The report of the independent auditors on the Company's financial
statements as of September 30, 1997 contains an explanatory paragraph regarding
an uncertainty with respect to the ability of the Company to continue as a going
concern. However, the Company believes that the proceeds of the Offering,
together with available cash, will provide the necessary liquidity and capital
resources to sustain its planned operations for approximately 12 to 18 months
following the Offering. In the event that the Company's internal estimates
relating to its planned expenditures prove materially inaccurate, the Company
may be required to reallocate funds among its planned activities and curtail
certain planned expenditures. In any event, the Company anticipates that it will
require substantial additional financing after such time. There can be no
assurance as to the availability or terms of any required additional financing,
when and if needed. In the event that the Company fails to raise any funds it
requires, it may be necessary for the Company to significantly curtail its
activities or cease operations. See "Use of Proceeds."
17
<PAGE>
BUSINESS
The Company is an early-stage technology licensing company. Its primary
purpose is to exploit globally two proprietary processes that treat
phosphogypsum, a toxic, environmentally hazardous waste by-product resulting
from the production of phosphoric acid-based fertilizer, to render it both
non-toxic and a useful product in other industries.
BACKGROUND
Phosphoric acid, a main ingredient in the production of fertilizers, is
derived from both apatite and phosphorite ores, minerals found in great
abundance in many areas of the world, including Russia, China, South Africa, the
Middle East, the Baltics and the United States. These areas produce a
substantial portion of the world's fertilizer. When phosphoric acid is produced
as the first step in the production of phosphoric acid-based fertilizer, a waste
by-product called phosphogypsum is created which is considered toxic by virtue
of the residual phosphoric, sulfuric and other acids which are left in the
phosphogypsum. Some of the phosphogypsum produced from phosphorite ore,
especially in the United States, contains an elevated level of radioactivity.
Because of its other toxic components, phosphogypsum cannot be used without
being treated to remove them. To date, the Company believes that no other
economical method of treating phosphogypsum on a large scale has been available.
Approximately five metric tons of phosphogypsum is produced per metric ton
of phosphoric acid-based fertilizer. Fertilizer producers in most countries,
including the United States and most of the countries that comprise the
Company's market, store phosphogypsum by creating artificial mountains in
specially prepared landfills. These landfills not only detract from the
landscape, but cause great environmental concern to the local authorities and
population, and cost the fertilizer industry millions of dollars to prepare and
maintain. The cost of preparing a site for phosphogypsum dumping is substantial,
estimated to be in excess of $45 million for a landfill accommodating ten
million metric tons of phosphogypsum. In certain other countries, phosphogypsum
is disposed of by dumping it into the sea. The cost of this method of disposal
is also expensive, as fertilizer manufacturers must provide transportation for
the phosphogypsum from their plants to the dump sites, including to railroads,
from railroads to seaports and from seaports to dumping sites. Whether
phosphogypsum is transported to landfill sites or to sea sites, the costs of
such transportation are significant and increases the cost of fertilizer
production by an amount estimated to be at least $15 per ton. The Company's
phosphogypsum treatment and CLM(TM) production technology, on the other hand, do
not involve transportation costs, as the technology is designed for use adjacent
to fertilizer manufacturing plants.
The largest 150 phosphoric fertilizer manufacturers produce an annual total
of approximately 35,000,000 metric tons of phosphoric acid, which results in
approximately 175,000,000 metric tons of phosphogypsum. For reference purposes,
if an average-sized Phosphogypsum Treatment plant of the Company treats 300,000
metric tons of such waste per year, 583 plants would be needed worldwide to
process the phosphogypsum of such manufacturers. Consequently, the Company
believes that the potential fees to the Company from the worldwide licensing of
the Phosphogypsum Treatment Process alone could be substantial.
To date, the Company uses its processes to treat waste phosphogypsum
derived only from apatite ore and expects to continue to do so for the
foreseeable future. Neither Processed Phosphogypsum nor CLM(TM) products derived
from apatite ore-based phosphoric acid contain any significant level of
radioactivity. However, the Company is aware that phosphogypsum derived from
phosphorite ore, a principal component of fertilizer production in a number of
countries, including the United States, contains levels of radium which exceed
the levels deemed permissible for usage by the U.S. Environmental Protection
Agency (the "EPA"). The Phosphogypsum Process does not remove or reduce the
level of radioactivity. Although the Company believes that it is possible to
produce Processed Phosphogypsum and CLM(TM) from phosphorite-based phosphogypsum
containing acceptable levels of radioactivity, the Company's research and
development activities in this area are currently ongoing. While some success
has been
18
<PAGE>
achieved to date, additional development and testing activities are needed to
determine whether products with acceptable levels of radioactivity can be
produced from phosphorite-based phosphogypsum. In view of the perceived dangers
from radioactivity, current regulations in the United States prohibit any use of
this waste product.
The markets for the Company's technology are limited primarily to those
countries that either use phosphoric acid derived from apatite ore in their
fertilizer production or do not have regulations relating to phosphorite-derived
materials. Such countries account for sixty-six percent (66%) of the world's
production of phosphoric acid-based fertilizer and are home to 126 of the 150
largest phosphoric fertilizer manufacturers worldwide. (Source: World Fertilizer
Plant List & Atlas -- Annex 3, 10th Edition, British Sulfur Publishing). See
"Government Regulation."
THE PROCESSES
Chemical Processes
The Company's primary purpose is to exploit two proprietary processes that
treat waste phosphogypsum to render it both non-toxic, by distilling off the
residual phosphoric, sulfuric and other acids, and a useful product in other
industries. The first such process (the "Phosphogypsum Treatment Process")
converts the toxic phosphogypsum into an environmentally friendly material
("Processed Phosphogypsum") which can be used as basic construction material,
road bed filler and filler for pigments and plastics. The raw phosphogypsum,
which is a wet, sludge-like material, is fed into a rotating kiln. Complex
chemical reactions take place in the kiln which neutralize the phosphogypsum and
distill off all acidic components (including fluorine compounds) which are
subsequently passed through a scrubber system that returns the acids to their
liquid state. These acids are then reused by the fertilizer production plant.
The Processed Phosphogypsum is discharged at the end of the process in a
water-free powder form and is collected in special air-cooled tanks. A diagram
of the Phosphogypsum Treatment Process appears on the inside front cover of this
Prospectus.
The second process (the "CLM(TM) Production Process" and, together with the
Phosphogypsum Treatment Process, the "Processes") is a proprietary process
discovered by Erwin Herling, Chairman of the Company's Board of Directors, and
two chemists through six years of scientific research conducted in Poland. The
CLM(TM) Production Process involves treating Processed Phosphogypsum to create a
chemically reconstructed form of the material which is then combined with
particular synthetic polymer resins. Chemical hardeners are then added to
initiate the polymerization to produce ceramic-like material ("CLM(TM)") which
can be used in such compounds as floor coatings and chemical and anticorrosive
coatings. Depending on the amount of hardener used and the product being
created, the CLM(TM) is fully cured in five to 48 hours. Since the CLM(TM) forms
only after the hardener is added, it is possible to mix the composite and store
the mixture, potentially for shipping to satellite finishing plants, for up to
three months. A diagram of the CLM(TM) Production Process appears on the inside
front cover of this Prospectus.
Technology Acquisition
In September 1997, the Company acquired the patents and rights to market
the Phosphogypsum Treatment Process from a group of Polish inventors. Pursuant
to the purchase agreement, the Company paid the inventors a down payment of
$100,000 and an aggregate of 500,000 Ordinary Shares (the "Inventor Shares").
The Company is obligated to pay the inventors a further payment of $1.4 million
upon completion of the Offering and intends to do so from the proceeds of the
Offering. If the Company does not complete the Offering or any other initial
public offering by June 30, 1998, the Company is obligated to pay the inventors
fifteen percent (15%) of the Company's pre-tax profits until such $1.4 million
has been paid.
In September 1997, the Company also acquired the patents to the CLM(TM)
Production Process from Herling Applied Technologies, Ltd. ("HAT"), a company
owned by Erwin Herling, the Chairman of the Board of the Company. Pursuant to
the terms of the acquisition agreement, the Company paid HAT a down payment of
$200,000 and is obligated to pay a further payment of $2.05 million upon the
comple-
19
<PAGE>
tion of the Offering. The Company intends to use a portion of the proceeds of
the Offering for such further payment. If the Company does not complete the
Offering or any other initial public offering by June 30, 1998, the Company is
obligated to pay HAT twenty percent (20%) of the Company's pre-tax profits until
such $2.05 million has been paid. Both CLM(TM) Production Process patents expire
on June 25, 2013. See "Certain Transactions."
STRATEGY
The Company's objective is to become a worldwide licensor of its
technology. The Company offers a complete package of its technology to its
prospective customers, including the Processes, basic design specifications for
the phosphogypsum treatment and CLM(TM) production plants, and the methodology
to adapt to local physical conditions. The Company also intends to refine the
production of, as well as to research and develop further applications for,
CLM(TM). The Company`s strategy is to focus its initial efforts on marketing the
Phosphogypsum Treatment Process as a low-cost and environmentally sound
alternative to the current methods used to deal with waste phosphogypsum,
including storing, stacking and dumping. The Company has commenced and will
continue targeting geographical areas where apatite-based (essentially
non-radioactive) phosphogypsum is most plentiful and its storage is a serious
economic and environmental concern.
LICENSING ARRANGEMENTS
The Company will customize the engineering and design of phosphogypsum
treatment plants for different capacities and locations and will provide
technical support to the licensee throughout the construction and operation of
each plant. In consideration therefor, the Company will receive a licensing fee
payable in specified increments. The Company believes that the construction of a
phosphogypsum treatment plant to operation will take 20 to 28 months depending
on the size and location of the plant.
The current terms of the Company's standard licensing arrangements with its
customers for its Phosphogypsum Treatment Process technology require the
customer to pay a licensing fee consisting of a ten percent (10%) down payment,
a further payment of forty percent (40%) one year after signing the agreement,
and a final payment of fifty percent (50%) upon completion of the plant. In
addition, the licensee is required to pay a running royalty of three percent
(3%) of the net sales price of any Processed Phosphogypsum sold or disposed of.
Royalties will be due and payable by the licensee for the life of any
Phosphogypsum Treatment Process patent in the applicable country where the plant
is located. Such fees may vary based on the size and location of the plant. The
term of the Company's standard licensing arrangement commences on the effective
date of such agreement and terminates upon the expiration of the last patent in
the applicable country covering any of the processes in the Phosphogypsum
Treatment Process.
Should a customer initially decide not to license the Company's CLM(TM)
Production Process technology, the Company will include in the Phosphogypsum
Treatment Process licensing agreement an option to acquire the CLM(TM)
technology license at the price prevailing at the time such agreement is signed.
Should both licenses be obtained at the same time, the licensee will receive a
thirty-three percent (33%) incentive reduction in the cost of the CLM(TM)
technology license.
The payment structure of the CLM(TM) licensing agreement is expected to
parallel that of the Phosphogypsum Treatment Process license agreement. In
addition, the Company's licensees will be required to make royalty payments
equal to three percent (3%) of the cost of the CLM(TM) products sold from each
operational plant. Royalties will be due and payable by the licensee for the
life of any CLM(TM) Production Process patent in the applicable country where
the plant is located. Under such license agreement, the Company will be
responsible for providing and custom designing the engineering plans for the
plants and for providing technical support. The Company believes that the
construction of a CLM(TM) production plant to operation will take an additional
6 to 9 months. The term of the Company's
20
<PAGE>
standard licensing arrangement commences on the effective date of such agreement
and terminates upon the expiration of the last patent in the appicable country
covering any of the processes in the CLM(TM) Production Process. See "--
Licensing Arrangements."
Under the current terms of the Company's standard licensing agreements for
both the Phosphogypsum Treatment Process and the CLM(TM) Production Process, the
licensees alone are obligated to comply with government regulations, including
environmental regulations.
The Company has entered into a license agreement with Hellenico Viomihania
Epexergasias Phosphoricou Gypsou E.P.E. ("Hellenico"), a company that intends to
exploit the Phosphogypsum Treatment Process and technology in Poland in
cooperation with a local fertilizer plant, with a 12-month option to purchase
the CLM(TM) Production Process technology also for use in Poland. The Company
granted a further option to Hellenico to construct plants for the implementation
of the Processes in Greece. The Company has also entered into a licensing
agreement with Snunit Levana Gimel ("Snunit"), an Israeli fertilizer
manufacturer, for the construction of a plant for both phosphogypsum treatment
and CLM(TM) production in Israel. These initial agreements provide for licensing
fees aggregating $8 million, payable over a two-year period, of which $800,000
have already been received, in addition to royalties on Processed Phosphogypsum
and CLM(TM) disposed of by the licensees. See "Business -- Sales and Marketing,"
"Business -- Licensing Arrangements" and "Note 3 to Notes to Financial
Statements."
CURRENT APPLICATIONS OF CLM(TM)
Altering the proportion of Processed Phosphogypsum and resins used enables
the licensee to vary the final mechanical, electrical and chemical properties of
the CLM(TM). Therefore, CLM(TM) can be produced in a hard solid form, in
elasticized rubber-like form and in pourable liquid form. CLM(TM)-based products
are characterized by highly desirable physical, chemical, mechanical and
strength-related properties that enable them to be used in a wide variety of
potential applications. The following products are among the numerous potential
applications identified to date for CLM(TM):
o Anticorrosive and Chemoresistant Floor, Wall and Ceiling Surfaces --
CLM(TM) can be made in almost any color enabling the production of
pre-fabricated, pre-colored wall, floor and ceiling tiles and other
surfaces. Since CLM(TM) has been shown to withstand UV rays, such tiles
would not be prone to color fading.
o Non-Corrosive Paint -- The Company can produce an anti-corrosive paint of
colored CLM(TM). Laboratory testing has shown such paint to be
anti-corrosive to acids and rust proof as a coating to metal surfaces.
o Molded "Rubber" -- The Company has a formula which reduces the hardening
agents, changes the resins and increases the phosphogypsum resulting in a
pliable, rubberlike compound at a fraction of the cost of rubber or
synthetic rubber. By utilizing prefabricated molds, this formulation of
CLM(TM) could be made into automobile bumpers, tires that are unlikely to
abrade or blow and engine hoses that are able to withstand heat and
pressure.
The Company has allocated some of the proceeds of the Offering for research
and development of new applications for CLM(TM).
SALES AND MARKETING
To date, the Company has conducted limited sales and marketing activities.
These efforts have targeted potential plant operators and investors in regions
where a large percentage of the world's fertilizer is produced including the
Mediterranean, Central and Eastern Europe, North Africa and the Middle East.
Although the Company has targeted potential manufacturers in the United States,
at this time, regulations of the EPA prohibit the use of phosphogypsum as a
result of dangers associated with the radioactive nature of phosphogypsum
produced from phosphorite ore which is much more prevalent in the United States
than apatite ore. See "Risk Factors -- No United States Market" and "-- Govern-
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<PAGE>
ment Regulation." Currently, the Company has a license agreement with Hellenico,
a company that intends to exploit the Phosphogypsum Treatment Process and
construct a plant in Poland in cooperation with a local fertilizer plant, with
an option to purchase the CLM(TM) Production Process technology for use in
Poland as well. The Company granted a further option to Hellenico to construct
plants for implementation of the Processes in Greece. The Company has also
entered into a licensing agreement with Snunit for the construction of a plant
for both phosphogypsum treatment and CLM(TM) production with a manufacturer in
Israel. See "-- Licensing Arrangements."
The Company will conduct its marketing and technology support from three
facilities including its United States headquarters and from regional centers
located in Greece and to be located in Poland. The Greek center will promote the
technology and perform sales and technical support to the Middle East, the
eastern part of North Africa and the Balkan States. The Polish center will
target Eastern and Central Europe and the former U.S.S.R. countries. In
addition, the Polish center will be responsible for small-scale research and
development work. In the near future, the Company also intends to have a
regional sales center in Singapore to cover Southeast Asia, China and the Indian
Sub-Continent and a regional sales center in South America to cover the South
American sub-continent.
The success of the Company's sales and marketing efforts will depend upon
the Company's ability to foster acceptance of the Processes as a low-cost
alternative to stacking, storing and dumping phosphogypsum. The Company intends
to educate customers as to the advantages and cost-effectiveness of the
Processes, including the availability in many countries of government subsidies
for participants in environmental protection projects. In Europe, there are
generally three types of such incentives: Technical Assistance Programs (TA),
which cover up to 100% of costs related to the pre-investment stage, including
feasibility studies; a subsidy for investment projects that covers between 20%
and 40% of the total investment costs depending on the country and the location
of the plant; and soft loans, which cover between 20% and 40% of the total
investment, with respect to which up to 50% of the interest is subsidized and
longer interest-free periods may be arranged. Under certain conditions,
manufacturers in many countries can take advantage of all three incentives.
Consequently, such incentives can dramatically reduce the cost of plant
construction and equipment installation.
RESEARCH AND DEVELOPMENT
Since its inception, the Company's research and development activities have
consisted of refining the Processes, developing the design and specifications of
phosphogypsum treatment plants based on the Company's proprietary technology and
developing new CLM(TM)-based products. The Company has successfully produced a
limited amount of Processed Phosphogypsum and CLM(TM) in a plant located in
Poland. The Company continues to use this plant for limited production of
Processed Phosphogypsum and CLM(TM) for its research and development activities
and sales efforts, for which the Company pays a nominal per diem fee.
During the year ended September 30, 1997 and the three months ended
December 31, 1997, expenditures for research and development aggregated
$2,133,695 and $505,000, respectively.
The Company's strategy is to conduct ongoing research and development
activities aimed at refining the Processes and identifying new applications for
CLM(TM)-based products, as well as to develop new products derived from
phosphogypsum. In addition, the Company intends to continue its research and
development of methods of producing Processed Phosphogypsum and CLM(TM)
containing acceptable levels of radioactivity for use in the United States, from
phosphorite ore-based phosphogypsum. The Company has allocated a substantial
portion of the proceeds of the Offering to continue its research and development
efforts. See "Use of Proceeds."
PATENTS, PROPRIETARY TECHNOLOGY AND TRADE SECRETS
The Company's success will depend, in part, on its ability to obtain patent
protection for its products and technologies under foreign patent laws to
preserve its trade secrets, and to operate without infringing the proprietary
rights of third parties. The Company filed a patent application covering the
22
<PAGE>
Phosphogypsum Treatment Process in the Polish National Patent Office in June
1997. The three patent applications covering the essential aspects of the
CLM(TM) Production Process were filed in the Polish National Patent Office prior
to their acquisition by the Company in September 1997. Two such patent
applications were filed in August 1993, and one was was filed in March 1995.
Foreign counterpart applications of the CLM(TM) Polish patent applications were
filed in the national patent offices of various other foreign countries,
including the countries in North America, most of Europe, South America, Asia
and selected African countries. Patents covering the CLM(TM) Production Process
have issued in certain countries, including Poland, Morocco, Tangiers, Taiwan
and Pakistan. The Company's strategy is to pursue patent protection for several
of its CLM(TM) technologies and for its Phosphogypsum Treatment Process
technology in at least those countries worldwide which subscribes to the
provisions of the Paris Convention Treaty. This treaty, to which the great
majority of the industrialized and developing countries of the world subscribe
(including the United States, most of eastern Europe, Greece, Jordan and
Israel), accords the benefit of the priority date of the Polish patent
application (the earliest filed application) to any patent application filed
within one year of such priority date in any "convention" country.
A patent search of published applications or issued patents conducted by
patent counsel to the Company has discovered no patents or patent applications
in conflict with those filed by the Company which could have priority over the
technology embodied in the Company's patents and patent applications. There can
be no assurance that any additional searches or review of patents identified in
prior searches will not reveal outstanding patents which are in conflict with
those filed by the Company, that the patent applications relating to the
Company's potential technologies, including those that it may license in the
future, will result in patents being issued, that any issued patents will afford
adequate protection or not be challenged, opposed, held invalid or
unenforceable, invalidated, infringed, or circumvented, or that any rights
granted thereunder will afford competitive advantages to the Company, or that
competing non-infringing methods of processing phosphogypsum and producing
commercially marketable products from phosphogypsum are not under development or
will not be developed. Furthermore, there can be no assurance that others have
not independently developed, or will not independently develop, similar products
and/or technologies, for which patent claims may overlap and/or conflict with
the claims pending in the Company's patent applications. In such an event, there
can be no assurance that the Company can prevail over a dispute involving
priority of invention or entitlement to the earliest priority date. See "Risk
Factors -- Risks Applicable to Foreign Operations."
There can be no assurance, moveover, that the validity of any of the
patents ultimately held by or licensed to the Company would be upheld if
challenged by others in litigation or that the Company's activities would not
infringe patents owned by others. The Company could incur substantial costs in
defending itself in suits brought against it, or in suits in which the Company
may assert, against others, patent claims in which the Company has rights.
Should the Company's technologies be found to infringe patents issued to third
parties, the use of the Company's technology could be enjoined and the Company
could be required to pay substantial damages. In addition, the Company could be
required to obtain licenses to patents or other proprietary rights of third
parties in connection with the development and use of its products and
technologies. No assurance can be given that any licenses required under any
such patents or proprietary rights would be made available on acceptable terms,
if at all.
The Company will also rely on trade secrets and proprietary know-how which
the Company seeks to protect, in part, by confidentiality agreements with
employees, consultants, advisors, and others. There can be no assurance that
such employees, consultants, advisors, or others, will maintain the
confidentiality of such trade secrets or proprietary information, or that the
trade secrets or proprietary know-how of the Company will not otherwise become
known or be independently developed by competitors in such a manner that the
Company will have no practical legal recourse.
The Company may also rely on trademarks or service marks covering its
products or services, respectively. The Company intends to select and seek the
registration of certain marks with which the Company hopes its products will be
identified. There can be no assurances that such applications for registration
will not be refused by the various trademark offices around the world, or if
allowed, will not
23
<PAGE>
be opposed by others. Further, there can be no assurance that a Company's
registered mark will not be canceled as a consequence of a cancellation
procedure initiated by others or that the use of any Company mark will not
infringe the trademark rights of others. The Company may need to defend itself
against third party claims or enforce its own rights against accused infringers
at substantial expense with no guarantee that the Company will prevail or retain
its right to use a given mark.
COMPETITION
Management does not believe that there is currently being marketed any
technology for the treatment of phosphogypsum competitive with the Processes and
is unaware of any such technology being developed. The Company may face
competition from companies that are developing or in the future may seek to
develop and market other types of phosphogypsum treatment technology. Some of
these entities may have significantly greater research and development
capabilities, and manufacturing, marketing, financial and managerial resources
than the Company. The Company believes that the cost-effectiveness of each of
the Processes, combined with the fact that both Processes have the potential to
turn what is otherwise a waste by-product into a revenue producing product, will
enable the Company to compete with these other companies. The Company estimates
that the market for basic construction and filler material for which Processed
Phosphogypsum can be substituted is in excess of $350 billion. The Company also
believes that the "environmentally friendly" basis of its technology will
encourage certain industrial concerns, including, but not limited to, those in
the fertilizer industry, to promote the use of CLM(TM)-based products. However,
there can be no assurance that the Company's technology will compete
successfully with technologies that may be developed.
The Company also competes with universities and other research institutions
in the development of phosphogypsum treatment and conversion processes. There
can be no assurance that others will not succeed in developing technologies that
are more desirable or useful than those of the Company or that will render the
Company's technologies non-competitive or obsolete.
GOVERNMENT REGULATION
The Company's ability to market its Processes in any country may be
influenced by government regulations regarding the handling and use of
phosphogypsum and the ability of its customers to obtain necessary construction
and other permits and approvals. Governmental regulation in any country in which
the Company may conduct business in the future could prevent or substantially
delay the marketing of the Company's Processes, cause it to undertake costly
procedures and furnish a competitive advantage to more substantially capitalized
companies with which it expects to compete. In addition, the extent of
potentially adverse government regulations, which might arise from future
administrative action or legislation, cannot be predicted.
Currently, regulations of the EPA prohibit the use of phosphogypsum as a
result of dangers associated with the radioactive nature of phosphogypsum
produced from ores mined in the United States. Such radioactive ores are much
more prevalent in the United States than apatite ore. Accordingly, the Company
will not be able, at this time, either directly or through licensees, to market
the Processes in the United States. The Company does not believe, however, that
such regulations prohibit the importation of CLM(TM)-based products manufactured
using either phosphorite or apatite ore into the United States. Although the
Company believes that the abundance of phosphogypsum waste in the United States
is creating pressure on the EPA to create solutions to the problem, there can be
no assurance that the EPA will ever change its current regulations to enable the
Company to conduct manufacturing operations in the United States.
The Company believes that neither the government of Greece nor Israel, the
geographical locations of the fertilizer manufacturers with which the Company
has existing agreements, has any laws or regulations that would prohibit or
hinder the construction or operation of a Phosphogypsum Treatment plant or
CLM(TM) Production plant in such country. Under the Company's standard licensing
agreement, the licensee alone is obligated to comply with governmental
regulations, including environmental regulations.
24
<PAGE>
EMPLOYEES
As of January 31, 1998, the Company had 12 full-time employees. One such
employee is located in London, six are located in New York and five are located
in Athens. The Company's future success depends, in significant part, upon the
continued service of its executive officers and key personnel and its ability to
attract and retain additional key personnel and a skilled sales force.
Competition for such personnel is intense, and there can be no assurance that
key employees can be retained or that other highly qualified sales and technical
personnel can be retained in the future.
None of the Company's employees is represented by a labor union. The
Company has not experienced any work stoppages and considers its relations with
its employees to be good.
FACILITIES
The Company's executive offices are located in a building owned indirectly
by Erwin Herling, Chairman of the Company's Board of Directors, at 20 East 63rd
Street, New York, New York. The Company leases 1,200 square feet of office space
in such building at a monthly rent of $5,000, which lease is on a month to month
basis. See "Management" and "Certain Transactions."
The Company also maintains an office at 31 Akti Moutsopoulou, 185-34
Piraeus, Greece, which consist of approximately 1400 square feet of office space
at a monthly rent of $4,500, which lease is on a month-to-month basis.
LEGAL PROCEEDINGS
The Company is not a party to any legal proceedings.
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth the names, ages and positions of the
executive officers and directors of the Company as of February 27, 1998:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------- ----- ----------------------------------------
<S> <C> <C>
Erwin Herling (1) 77 Chairman of the Board of Directors
Coy Eklund (1)(3) 82 Vice Chairman of the Board of Directors
Ira H. Kanarick 55 Director and Chief Executive Officer
Michael Kentas(3) 42 Director and Chief Financial Officer
Ioannis Papaioannou(3) 42 Director and Chief Operating Officer
Thirteenels Services Ltd. (2) N/A Secretary
Andreas Skentzos-Kalligeris 37 Director
Joseph Baretincic(3) 67 Director
</TABLE>
- ----------
(1) Member of the Audit Committee.
(2) Pursuant to the laws of the Republic of Cyprus, a corporation is permitted
to be the secretary of another corporation.
(3) Not currently a director. Expected to be elected a director prior to the
effective date of the registration statement of which this Prospectus is a
part.
25
<PAGE>
Erwin Herling has been a Chairman of the Board of Directors of the Company
since September 1, 1996. Dr. Herling has been Chairman of the Board and Chief
Executive Officer of the Herling Applied Technologies, Ltd. since he founded it
in June 1996. Dr. Herling is the founder and President of Getex, Inc., an
international importing and retail marketing firm. He was one of the founders
and a principal shareholder of Value Vision, Inc., a public company engaged in
the television home shopping industry. Dr. Herling holds a Doctorate in
Chemistry, as well as several other degrees in science and the arts from
educational institutions in Austria, Brazil and the United States.
Coy Eklund has been Vice Chairman of the board of Directors
since____________________ , 1998. He spent his entire active career, a period of
45 years, with Equitable Life Assurance Society of U.S. ("Equitable"). During
such time, Mr. Eklund received numerous promotions, ultimately rising to become
Equitable's President from 1973 to 1975 and then its Chairman of the Board and
Chief Executive Officer from 1975 until his retirement from Equitable in 1983.
Mr. Eklund continued to serve on Equitable's Board of Directors until 1987. He
has been a director of Life Medical Sciences, a public company engaged in the
research and development of specific types of medical and surgical
pharmaceutical products, since 1994, and was a director of Insight, Inc., a
public company that was engaged in the ownership and operation of television
stations, from 1995 to 1996. During Mr. Eklund's career, he also served on the
Board of Directors of The Bendix Companies, Burroughs and Chase Manhattan Bank.
Mr. Eklund received a B.A. degree in police administration from Michigan State
University.
Ira H. Kanarick has been a director since January 15, 1998 and Chief
Executive Officer since February 27, 1998. He has been employed by the Company
since September 1997. From June 1994 through September 1997, Mr. Kanarick worked
for various companies controlled by Erwin Herling, Chairman of the Company's
Board of Directors. These companies included Euroamerica Marketing Ltd., a
company which buys and supplies merchandise for the home shopping television
industry, and for which Mr. Kanarick served as the Head of Finance, and Herling
Applied Technologies, Ltd., a company involved in the development and production
of CLM(TM), for which Mr. Kanarick served as Vice President. Mr. Kanarick was a
partner for more than ten years in his own accounting firm, Kanarick &
Moscowitz, which he sold in 1994. Mr. Kanarick received his B.S. in accounting
from New York University and is a certified public accountant.
Mr. Kanarick was a defendant in a lawsuit brought in 1990 by his
brother-in-law in which allegations of, among other things, securities fraud
were asserted in connection with investments by the brother-in-law in four
private companies during the period 1975 to 1981 allegedly made at the
recommendation of Mr. Kanarick. In 1993, the case was ultimately settled by the
parties, while the jury verdict in favor of the brother-in-law was being
appealed by both parties, in which the allegations of securities fraud were
withdrawn and the judgment vacated.
Michael Kentas has been a director of the Company since , 1998.
Mr. Kentas has been a partner at FSPG, a U.K. firm of chartered accountants,
since August 1989. Mr. Kentas received an accounting degree from The University
of North London. Mr. Kentas was admitted as a Member of the Institute of
Chartered Accountants in England and Wales in May 1986 and received his
Practicing Certificate in May 1988.
Ioannis Papaioannou has been the Chief Operating Officer, Executive Vice
President and director of the Company since______________, 1998. Dr. Papaioannou
was the General Manager of Energo Group S.A., an energy and engineering
consulting firm, from 1994-1997. From 1991-1993, Dr. Papaioannou was an
independent consultant working in collaboration with Linnhoff March LTD (UK), an
engineering company, and from 1989-1990, he was the Chief Executive Officer of
General Mining and Metallurgical Company LARCO S.A., an iron mining company. Dr.
Papaioannou received a degree in engineering from the National Technical
University of Athens, and both an M.Sc. in advanced chemical engineering and a
Ph.D. in chemical engineering from The University of Manchester Institute of
Science and Technology.
Andreas Skentzos-Kalligeris has been a director of the Company since
September 1, 1996. Dr. Skentzos-Kalligeris has been a director of and the Head
of the Consultancy and Research Department of the Athens Technology Center S.A.,
a Greek company that designs and develops information systems
26
<PAGE>
technology for Greece and the European Community, since 1989. Dr.
Skentzos-Kalligeris has also been a private systems management consultant for
various companies since 1991. Dr. Skentzos-Kalligeris received a B.Sc. in
Systems Engineering, an M.Sc. in Systems Engineering, and a Ph.D. in Chemical/
Systems Engineering from the University of Manchester Institute of Science and
Technology.
Joseph Baretincic has been a director of the Company since_________, 1998.
He served as Director of Environmental Services for IMC-Agrico's Florida
chemical operations (formerly, IMC Fertilizer, Inc.) from 1978 until his
retirement in August 1996. Mr. Baretincic is a Certified Environmental Auditor &
Registered Environmental Manager, and, in August 1996, he testified before the
EPA on behalf of The Fertilizer Institute regarding easing restrictions on the
amount of phosphogypsum that may be used for research without approval from the
EPA. In October 1992, the EPA's Office of Pollution Prevention and Toxics
appointed Mr. Baretincic to a TSCA Dialogue Committee on Phosphoric Acid
Production Wastes. Mr. Baretincic received a B.S. degree in Chemistry from the
University of Pittsburgh and a Bachelor of Laws Degree from La Salle Extension
University.
Directors serve until the next annual meeting or until their successors are
elected and qualified. Officers serve at the discretion of the Board of
Directors, subject to rights, if any, under contracts of employment. See
"Management -- Employment Agreements."
BOARD COMMITTEES AND DESIGNATED DIRECTORS
The Board of Directors has an Audit Committee, the members of which are
Erwin Herling, Coy Eklund and Marshall Manley. The Audit Committee is
responsible for recommending to the Board of Directors the appointment of the
Company's independent auditors, examining the results of audits, reviewing
internal accounting controls and reviewing related party transactions.
The Representative has the right to nominate a director to the Company's
Board of Directors or to send a representative to board meetings at the
Company's expense for a period of three years from the date of this Prospectus.
See "Underwriting."
DIRECTOR COMPENSATION
After completion of the Offering, non-employee directors will receive
$1,000 for each Board meeting or committee meeting attended and will be
reimbursed for their expenses in attending such meetings. Directors are not
precluded from serving the Company in any other capacity and receiving
compensation therefor.
EXECUTIVE COMPENSATION
No executive officer of the Company received cash compensation in excess of
$100,000 during the fiscal year ended September 30, 1997.
STOCK OPTION PLAN
The 1998 Stock Option Plan
The Company expects to adopt its 1998 Stock Option Plan (the "1998 Plan")
prior to the date of this Prospectus. The maximum number of Ordinary Shares that
will be subject to options under the 1998 Plan is 500,000.
The 1998 Plan will be administered by the Board of Directors, which will
have the power and authority under the 1998 Plan to determine which of the
Company's employees, consultants and directors will receive awards, the time or
times at which awards will be made, the nature and amount of the awards, the
exercise or purchase price, if any, of such awards, and such other terms and
conditions applicable to awards as it determines to be appropriate or advisable.
27
<PAGE>
Options granted under the 1998 Plan will be either non-qualified stock
options or options intended to qualify as incentive stock options under Section
422 of the Code. The term of incentive stock options granted under the 1998 Plan
will not extend beyond ten years from the date of grant (or five years in the
case of a holder of more than 10% of the total combined voting power of all
classes of stock of the Company on the date of grant).
Under the 1998 Plan, the Board of Directors will be able to establish, with
respect to each option awarded, such vesting provisions as it determines to be
appropriate or advisable. Unvested options will automatically terminate within a
specified period of time following the termination of the holder's relationship
with the Company and in no event beyond the expiration of the term. All options
granted under the 1998 Plan to employees of the Company may, in the discretion
of the Board of Directors, become fully vested upon the occurrence of certain
corporate transactions if the holders thereof are terminated in connection
therewith.
The exercise price of options granted under the 1998 Plan will be
determined by the Board of Directors, but may not, (i) in the case of incentive
stock options, be less than the fair market value of the Ordinary Shares on the
date of grant (or, in the case of incentive stock options granted to a holder of
more than 10% of the total combined voting power of all classes of stock of the
Company on the date of grant, 110% of such fair market value), as determined by
the Board of Directors and (ii) in the case of non-qualified stock options, be
less than 75% of the fair market value of the Ordinary Shares on the date of
grant.
The Board of Directors will also be able to grant, in combination with
non-qualified stock options and incentive stock options, stock appreciation
rights ("Tandem SARs"), or will be able to grant Tandem SARs as an addition to
outstanding non-qualified stock options. A Tandem SAR will permit the
participant, in lieu of exercising the corresponding option, to elect to receive
any appreciation in the value of the shares subject to such option directly from
the Company in Ordinary Shares. The amount payable by the Company upon the
exercise of a Tandem SAR will be measured by the difference between the market
value of such shares at the time of exercise and the option exercise price.
Generally, Tandem SARs will be exercisable at any time after the underlying
option vests. Upon the exercise of a Tandem SAR, the corresponding portion of
the related option will have to be surrendered and will not thereafter be
exercised. Conversely, upon exercise of an option to which a Tandem SAR is
attached, the Tandem SAR will no longer be exercisable to the extent that the
corresponding option has been exercised. Nontandem stock appreciation rights
("Nontandem SARs") will also be awardable by the Board of Directors. A Nontandem
SAR will permit the participant to elect to receive from the Company that number
of Ordinary Shares having an aggregate market value equal to the excess of the
market value of the shares covered by the Nontandem SAR on the date of exercise
over the aggregate base price of such shares as determined by the Board of
Directors. With respect to both Tandem and Nontandem SARs, the Board of
Directors will be able to determine to cause the Company to settle its
obligations arising out of the exercise of such rights in cash or a combination
of cash and shares, in lieu of issuing shares only.
The number and class of shares available under the 1998 Plan will be
adjustable by the Board of Directors to prevent dilution or enlargement of
rights in the event of various changes in the capitalization of the Company. At
the time of grant of any award, the Board of Directors will be able to provide
that the number and class of shares issuable in connection with such award be
adjusted in certain circumstances to prevent dilution or enlargement of rights.
The Board of Directors will be able to suspend, amend, modify or terminate
the 1998 Plan. However, the Company's shareholders will be required to approve
any amendment that would (i) materially increase the aggregate number of shares
issuable under the 1998 Plan, (ii) materially increase the benefits accruing to
employees under the 1998 Plan or (iii) materially modify the requirements for
eligibility to participate in the 1998 Plan. Awards made prior to the
termination of the 1998 Plan shall continue in accordance with their terms
following such termination. No amendment, suspension or termination of the 1998
Plan shall adversely affect the rights of an employee or consultant in awards
previously granted without such employee's or consultant's consent.
28
<PAGE>
As of the date hereof, no stock options have been granted under the 1998
Plan.
OPTION GRANTS
During the fiscal year ended September 30, 1997, no options were granted to
any executive officer.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
The Company intends to enter into indemnification agreements with each of
its directors and officers after the Offering. Each such indemnification
agreement will provide that the Company will indemnify the indemnitee against
expenses, including reasonable attorneys' fees, judgments, penalties, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with any civil or criminal action or administrative proceeding arising out of
his performance of his duties as a director or officer, other than an action
instituted by the director or officer. Such indemnification will be available if
the indemnitee acted in good faith and in a manner he reasonably believed to be
in or not opposed to the best interests of the Company, and, with respect to any
criminal action, had no reasonable cause to believe his conduct was unlawful.
Each indemnification agreement will permit the director or officer that is party
thereto to bring suit to seek recovery or amounts due under the indemnification
agreement and to recover the expenses of such a suit if he is successful.
The Company's Articles of Association provide that every director, officer
and auditor of the Company shall be indemnified against all costs, charges,
expenses, losses and liabilities which he may incur or sustain in, about or in
relation to the execution of his office and, in particular without limiting the
foregoing, against any liability incurred by him in defending any proceedings in
relation to the affairs of the Company in which judgment is given in his favor
or in which he is acquitted or in connection with any application under the law
in which relief is granted to him by the court from liability in relation to the
affairs of the Company. The Company's Articles of Association also provide that
the Company may purchase and maintain for any director or officer of the Company
insurance against any liability which would otherwise attach to him in respect
of any negligence, default, breach of duty or breach of trust of which he may be
guilty in relation to the Company. The Company is applying to purchase directors
and officers liability insurance in the amount of $5,000,000.
KEY MAN LIFE INSURANCE
The Company is in the process of obtaining key man life insurance, of which
the Company will be the sole beneficiary, in the amount of $1,000,000 for each
of Ira Kanarick and Ioannis Papaioannou.
EMPLOYMENT AGREEMENTS
The Company expects to enter into two (2) year employment agreements with
each of Messrs. Ira Kanarick and Ioannis Papaioannou extending through the year
2000. Such agreements are expected to provide for base annual compensation equal
to $150,000 for Mr. Kanarick and $120,000 for Mr. Papaioannou. Each such
agreement is also expected to provide salary increases in the second year based
on increases in the United States consumer price index and for bonus
compensation based on a percentage of the Company's net income before taxes.
Each agreement will contain customary provisions regarding benefits and
restrictions on competition.
CERTAIN TRANSACTIONS
The Company maintains offices located in a building owned by an entity
controlled by Erwin Herling, Chairman of the Company's Board of Directors. The
Company pays rent of $5,000 per month to such entity. See "Business --
Properties."
In September 1997, the Company acquired the patents to the CLM(TM)
Production Process from HAT, a company of which Mr. Herling is a principal. Mr.
Kanarick was also an officer of HAT from June 1995 through September 1997.
Pursuant to the terms of acquisition agreement, the Company paid
29
<PAGE>
HAT a down payment of $200,000 and is obligated to pay a further payment of
$2.05 million upon the completion of the Offering. See "Use of Proceeds" and
"Business -- The Processes." The Company has been advised by HAT that the money
to be received from the Company out of the proceeds of the Offering will be used
to pay obligations of HAT, including obligations to repay amounts loaned to HAT
by various investors. The Company has been further advised that none of such
proceeds will be paid to Erwin Herling or any other affiliate of the Company.
The Company believes that all of the transactions set forth above were made
on terms no less favorable to the Company than could have been obtained from
unaffiliated third parties. The Company has adopted a policy that all future
transactions, including loans, between the Company and its officers, directors,
principal shareholders or any of their respective affiliates will be approved by
a majority of the Board of Directors, and a majority of the independent and
disinterested outside directors on the Board of Directors, and will continue to
be on terms no less favorable to the Company than could be obtained from
unaffiliated third parties.
30
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of Ordinary Shares as of February 27, 1998 and as adjusted to reflect
the sale of the Ordinary Shares offered hereby, with respect to (i) each person
known by the Company to be the beneficial owner of more than 5% of the Ordinary
Shares (ii) each of the Company's directors and nominees to become a director,
(iii) each of the Named Executive Officers and (iv) all directors and officers
as a group.
<TABLE>
<CAPTION>
PERCENTAGE OF TOTAL
-----------------------------------
NUMBER OF SHARES
NAME AND ADDRESS OF BENEFICIAL OWNER (1) BENEFICIALLY OWNED BEFORE OFFERING AFTER OFFERING
- ---------------------------------------------- ---------------------- ----------------- ---------------
<S> <C> <C> <C>
Erwin Herling ................................ 0 (2)(3) -- --
Coy Eklund** ................................. 0 -- --
Ira H. Kanarick .............................. 0 0 0
Michael Kentas** ............................. 0 0 0
Ioannis Papaioannou** ........................ 25,000 * *
Andreas Skentzos-Kalligeris .................. 25,000 (2)(3) * *
Joseph Baretincic** .......................... 0 -- --
Drofan Trading Ltd (3) ....................... 4,410,000 88.2% 63.0%
20, Clanwilliam Terrace
Dublin 2, Ireland
All executive officer and directors as a group
(7 persons) ................................. 50,000 (2) * *
</TABLE>
- ----------
* Less than one percent
** Director nominee
(1) Except as otherwise indicated above, the address of each shareholder
identified above is c/o the Company, 20 East 63rd Street, New York, NY
10021. Except as otherwise indicated in the footnotes to this table, the
persons named in this table have sole voting and investment power with
respect to all Ordinary Shares.
(2) Does not include the shares owned by Drofan Trading Ltd. ("Drofan"). See
Footnote (3).
(3) Five Star Financial Corp., a corporation owned 100% by Dr. Herling, is a 50%
shareholder of Drofan, and Eastern Capital (Holdings) Limited ("Eastern"), a
corporation 100% owned by George Samios, is a 50% shareholder of Drofan. Dr.
Herling and Mr. Skentzos-Kalligeris are directors and officers of Drofan and
control its affairs, including the voting and investing of the Ordinary
Shares of the Company owned by Drofan. Mr. Skentzos-Kalligeris is also a
director of Eastern. Mr. Skentzos-Kalligeris disclaims any beneficial
interest in the Ordinary Shares held by Drofan, and Dr. Herling disclaims
beneficial interest in 2,205,000 Ordinary Shares held by Drofan.
CONCURRENT OFFERING
The registration statement of which this Prospectus is a part also includes
a prospectus with respect to an offering by the Selling Securityholders. The
Selling Securityholders' Warrants are being issued to the Selling
Securityholders as of the effective date of the Offering upon the automatic
conversion of all of the Company's outstanding Bridge Warrants. These Class A
Warrants are identical to the Class A Warrants included in the Units offered
hereby. All of the Selling Securityholder Warrants issued upon conversion of the
Bridge Warrants and the Ordinary Shares issuable upon exercise of such Class A
Warrants will be registered, at the Company's expense, under the Securities Act
and are expected to become tradeable on or about the effective date of the
Offering. The Company will not receive any proceeds from the sale of the Selling
Securityholder Warrants. Sales of Selling Securityholder Warrants issued upon
conversion of the Bridge Warrants or the securities underlying such Class A
Warrants or even the potential of such sales could have an adverse effect on the
market prices of the Units, the Ordinary Shares and the Warrants.
31
<PAGE>
There are no material relationships between any of the Selling
Securityholders and the Company, nor have any such material relationships
existed within the past three years. The Company has been informed by the
Representative that there are no agreements between the Representative or the
Underwriters and any Selling Securityholder regarding the distribution of the
Selling Securityholder Warrants or the Selling Securityholder Shares.
The sale of the securities by the Selling Securityholders may be effected
from time to time in transactions (which may include block transactions by or
for the account of the Selling Securityholders) in the over-the-counter market
or in negotiated transactions, a combination of such methods of sale or
otherwise. Sales may be made at fixed prices which may be changed, at market
prices or in negotiated transactions, a combination of such methods of sale or
otherwise.
Selling Securityholders may effect such transactions by selling their
securities directly to purchasers, through broker-dealers acting as agents for
the Selling Securityholders or to broker-dealers who may purchase shares as
principals and thereafter sell the securities from time to time in the
over-the-counter market, in negotiated transactions or otherwise. Such
broker-dealers, if any, may receive compensation in the form of discounts,
concessions or commissions from the Selling Securityholders and/or the
purchasers for whom such broker-dealer may act as agents or to whom they may
sell as principals or otherwise (which compensation as to a particular
broker-dealer may exceed customary commissions).
Under applicable rules and regulations under the Exchange Act, any person
engaged in the distribution of the Selling Securityholder Warrants may not
simultaneously engage in market-making activities with respect to any securities
of the Company during the applicable "cooling-off " period (at least two and
possibly nine business days) prior to the commencement of such distribution.
Accordingly, in the event the Representative is engaged in a distribution of the
Selling Securityholder Warrants, it will not be able to make a market in the
Company's securities during the applicable restrictive period. However, the
Representative has not agreed to nor is it obligated to act as broker-dealer in
the sale of the Selling Securityholder Warrants, and the Selling Securityholders
may be required to sell such securities through another broker-dealer. In
addition, each Selling Securityholder desiring to sell Warrants will be subject
to the applicable provisions of the Exchange Act and the rules and regulations
thereunder, including, without limitation, Regulation M, which provisions may
limit the timing of the purchases and sales of the Company's securities by such
Selling Securityholder.
The Selling Securityholders and broker-dealers, if any, acting in
connection with such sales might be deemed to be "underwriters" within the
meaning of Section 2(l 1) of the Securities Act, and any commission received by
them and any profit on the resale of the securities might be deemed to be
underwriting discounts and commissions under the Securities Act.
DESCRIPTION OF SECURITIES
GENERAL
The authorized capital stock of the Company consists of 20,000,000 Ordinary
Shares, $.10 par value and 5,000,000 shares of "blank check" preferred stock,
$.10 par value (the "Preferred Stock").
ORDINARY SHARES
Holders of Ordinary Shares are entitled to dividends, pro rata based on the
number of shares held, when, as and if declared by the Board of Directors, from
funds legally available therefor subject to the rights of holders of Preferred
Stock when, and if, issued. In the case of dividends or other distributions
payable in stock of the Company, including distributions pursuant to stock
splits or division of stock of the Company, only Ordinary Shares will be
distributed with respect to Ordinary Shares. In the event of liquidation,
dissolution or winding up of the affairs of the Company, all assets and funds of
the Company remaining after the payment to creditors and to holders of preferred
stock shall be distributed, pro rata, among the holders of the Ordinary Shares.
Holders of Ordinary Shares are not entitled to preemptive,
32
<PAGE>
subscription, cumulative voting or conversion rights, and there are no
redemption or sinking fund provisions applicable to the Ordinary Shares. All
Ordinary Shares to be offered by the Company hereby, when issued, will be fully
paid and non-assessable and no personal liability will attach thereto.
There are no governmental laws, decrees or regulations in Cyprus that
restrict the export or import of capital, including, but not limited to, foreign
exchange controls, or that affect the remittance of dividends, interest or other
payments to non-resident holders of the Ordinary Shares.
There are no limitations on the right of non-resident or foreign owners to
hold or vote the Ordinary Shares imposed by law or by the charter or other
constituent documents of the Company.
WARRANTS
Each Warrant entitles the holder to purchase for $6.00 one Ordinary Share,
subject to adjustment, at any time commencing one year after and ending on the
fifth anniversary of the date of this Prospectus. The Warrants are subject to
redemption by the Company at a redemption price of $.05 per Warrant, upon 30
days' written notice, commencing two years from the date hereof, provided that
the closing bid price of the Ordinary Shares in the over-the-counter market as
reported by National Association of Securities Dealers Automated Quotation
System or the closing bid price on any National Stock Exchange (if the Company's
Ordinary Shares are listed thereon) for any 20 consecutive business days ending
10 days prior to the date of the notice of redemption averages at least $8.25
per share (subject to adjustment). All Warrants must be redeemed if any are
redeemed.
REPRESENTATIVE'S WARRANT
The Company has agreed to grant to the Representative and/or its designees
upon the closing of the Offering, the Representative's Warrant to purchase up to
200,000 Units. These Units will be identical to the Units offered hereby. The
Representative's Warrant is exercisable for a four (4) year period commencing
one year after the date of this Prospectus at an exercise price of $6.00 per
Unit (120% of the Offering price) subject to adjustment in certain events to
protect against dilution. The holders of the Representative's Warrant will have
certain demand and piggyback registration rights. See "Underwriting."
PREFERRED STOCK
The Company is authorized to issue up to 5,000,000 shares of preferred
stock (the "Preferred Stock"). The Board of Directors has the authority to issue
Preferred Stock in one or more series and to fix the number of shares and the
relative rights, conversion rights, voting rights and terms of redemption
(including sinking fund provisions) and liquidation preferences, without further
vote or action by the shareholders. If shares of Preferred Stock with voting
rights are issued, such issuance could affect the voting rights of the holders
of the Company's Ordinary Shares by increasing the number of outstanding shares
having voting rights, and by the creation of class or series voting rights. If
the Board of Directors authorizes the issuance of shares of Preferred Stock with
conversion rights, the number of Ordinary Shares outstanding could potentially
be increased by up to the authorized amount. Issuance of Preferred Stock could,
under certain circumstances, have the effect of delaying or preventing a change
in control of the Company and may adversely affect the rights of holders of
Ordinary Shares. Also, Preferred Stock could have preferences over the Ordinary
Shares (and other series of preferred stock) with respect to dividend and
liquidation rights. The Company currently has no plans to issue any Preferred
Stock.
TRANSFER AGENT AND REGISTRAR
Continental Stock Transfer & Trust Company, New York, NY, serves as
Transfer Agent for the Ordinary Shares and Warrant Agent for the Warrants.
CERTAIN CYPRUS TAX CONSIDERATIONS
Cyprus does not impose any taxation, including withholding taxes, on United
States holders of the Ordinary Shares or Warrants.
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<PAGE>
CERTAIN UNITED STATES TAX CONSIDERATIONS
The following is a summary of certain material United States federal tax
consequences of the acquisition and ownership of the Units, Ordinary Shares and
Warrants (collectively, the "Securities"). This summary is based on the opinion
of Morrison Cohen Singer & Weinstein, LLP with respect to U.S. federal taxes.
This summary does not address all of the material tax consequences of the
ownership of the Securities, and does not take into account the specific
circumstances of any particular category of investor (such as U.S. expatriates,
regulated investment companies, financial institutions, tax-exempt entities,
insurance companies, broker-dealers, investors subject to the alternative
minimum tax, investors that actually or constructively own 10% or more of the
voting stock of the Company, investors that hold Ordinary Shares as part of a
straddle or hedging or conversion transaction, or investors whose functional
currency is not the United States dollar), some of which may be subject to
special rules. This summary is based on the tax laws of the United States
(including the Internal Revenue Code of 1986, as amended (the "Code")), its
legislative history, final, temporary and proposed regulations thereunder,
published rulings and court decisions, all as in effect at the date hereof and
all of which are subject to change (or changes in interpretation), possibly with
retroactive effect.
For purposes of this discussion, a "U.S. Holder" is any beneficial owner of
Securities that is (i) a citizen or resident of the United States, (ii) a
corporation or partnership organized under the laws of the United States or of
any political subdivision thereof; or (iii) an estate the income of which is
subject to U.S. federal income taxation regardless of the source, or a trust
that meets the following two tests: (A) a U.S. court is able to exercise primary
supervision over the administration of the trust, and (B) one or more U.S.
fiduciaries have authority to control all substantial decisions of the trust. A
"non-U.S. Holder" is any beneficial owner of Securities that is not a U.S.
Holder. THIS DISCUSSION IS NOT EXHAUSTIVE OF ALL POSSIBLE TAX CONSIDERATIONS,
AND PROSPECTIVE INVESTORS ARE ADVISED TO CONSULT THEIR OWN TAX ADVISORS TO
SATISFY THEMSELVES AS TO THE OVERALL TAX CONSEQUENCES, INCLUDING, SPECIFICALLY,
THE CONSEQUENCES UNDER U.S. FEDERAL, STATE, LOCAL AND OTHER LAWS, OF THE
ACQUISITION, OWNERSHIP AND DISPOSITION OF THE SECURITIES.
TAXATION OF UNITS
A U.S. Holder of a Unit will not recognize gain or loss upon his separation
of the Units into Ordinary Shares and Warrants. The respective holding period of
each such constituent part of a Unit following such separation will include the
holding period for the Unit prior to such separation.
For purposes of determining the separate adjusted cost basis of the
Ordinary Shares and the Warrants comprising the Units, a holder who purchases a
Unit will be required to allocate the purchase price for the Unit between such
constituent parts based on their respective fair market values at the time of
purchase.
No gain or loss will be recognized for U.S. federal income tax purposes on
the exercise of a Warrant. A U.S. Holder's tax basis in the Ordinary Shares
received on exercise of a Warrant will include the amount paid on exercise of
such Warrant, but its holding period for such Ordinary Shares acquired by reason
of such exercise will not include its holding period for the Warrant. If a
Warrant expires unexercised, a U.S. Holder will recognize a capital loss equal
to such holder's tax basis in the Warrant.
Adjustment to the exercise price of a Warrant pursuant to the anti-dilution
provisions of the Warrant Agreement or the failure to make adjustments to the
exercise price upon the occurrence of certain events, may result in constructive
dividends to the holders of the Warrants under Section 305 of the Code,
regardless of whether there is a distribution of cash or property.
Gain recognized on the sale or other disposition of a Warrant will be
subject to the same rules that apply to a sale of Ordinary Shares, discussed
below.
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<PAGE>
TAXATION OF DIVIDENDS
Except as may be required under the rules discussed under the headings
"Passive Foreign Investment Companies," "Controlled Foreign Corporations," or
"Foreign Personal Holding Companies" below, under the U.S. federal income tax
laws, U.S. Holders will include in gross income the gross amount of any dividend
paid (before reduction for any foreign country withholding taxes) by the Company
out of its current or accumulated earnings and profits (as determined under U.S.
federal income tax principles) as ordinary income when the dividend is actually
or constructively received by the U.S. Holder. Distributions in excess of the
Company's earnings and profits will be treated, for U.S. federal income tax
purposes, first as a non-taxable return of capital to the extent of the U.S.
Holder's adjusted tax basis in the Ordinary Shares, and then as gain from the
sale or exchange of such Ordinary Shares. The dividend will not be eligible for
the dividends-received deduction generally allowed to United States corporations
in respect of dividends received from other United States corporations. The
amount of the dividend distribution includible in the income of a U.S. Holder
will be the U.S. dollar amount of the distribution, or the dollar value of the
Cyprus Pound payments made as determined at the spot Cyprus Pound/U.S. Dollar
rate on the date such dividend distribution is includible in the income of a
U.S. Holder, regardless of whether that payment is in fact converted into
dollars. Generally, any gain or loss resulting from currency exchange
fluctuations during the period from the date the dividend payment is includible
in income to the date such payment is converted into dollars will be treated as
ordinary income or loss. Such gain or loss will generally be income from sources
within the United States for foreign tax credit limitation purposes.
Dividends paid to a non-U.S. Holder in respect of Ordinary Shares will not
be subject to U.S. federal income tax unless such dividends are effectively
connected with the conduct of a trade or business within the United States by
such non-U.S. Holder (and are attributable to an office or other fixed place of
business in the United States or a permanent establishment maintained in the
United States by such non-U.S. Holder, if an applicable income tax treaty
between the United States and the country in which the non-U.S. Holder is
resident so requires as a condition for such non-U.S. Holder to be subject to
United States taxation on a net income basis in respect of income from Ordinary
Shares), in which case the non-U.S. Holder generally will be subject to tax in
respect of such dividends in the same manner as a U.S. Holder. Any such
effectively connected dividends received by a non-U.S. Holder which is a
corporation may also, under certain circumstances, be subject to an additional
"branch profits tax" at a 30% rate or such lower rate as may be specified by an
applicable income tax treaty.
TAXATION OF CAPITAL GAINS
Except as may be required under the Passive Foreign Investment Company and
Controlled Foreign Corporation rules discussed below, a U.S. Holder will, upon
the sale or exchange of any Securities, recognize a gain or loss for federal
income tax purposes in an amount equal to the difference between the amount
realized (or the U.S. dollar value thereof determined at the spot rate on the
date of disposition if the amount realized is denominated in a foreign currency)
and the U.S. Holder's adjusted tax basis in the Securities sold or exchanged.
Such gain or loss will generally be a capital gain or loss. In the case of an
individual U.S. Holder, any such capital gain will be subject to a maximum U.S.
federal income tax rate of (i) 20% if the U.S. Holder's holding period in such
Securities is more than 18 months, and (ii) 28% if the individual U.S. Holder's
holding period in such Securities is more than one year but no more than 18
months. Certain limitations exist on the deductibility of capital losses by both
corporate and individual taxpayers. Under most circumstances, gain or loss from
the sale or exchange of any Securities will be treated as U.S. source gain or
loss for foreign tax credit purposes. A non-U.S. Holder will not be subject to
U.S. federal income tax in respect of gain recognized on a disposition of
Securities unless (i) the gain is effectively connected with a trade or business
of the non-U.S. Holder in the United States, or (ii) in the case of a non-U.S.
Holder who is an individual, such holder is present in the United States for 183
or more days in the taxable year of the sale and certain other conditions apply.
Effectively connected gains realized by a corporate non-U.S. Holder may also,
under certain circumstances, be subject to an additional "branch profits tax" at
a 30% rate or lower rate as may be specified by an applicable income tax treaty.
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<PAGE>
PASSIVE FOREIGN INVESTMENT COMPANIES
Sections 1291 through 1298 of the Code contain special rules applicable to
foreign corporations that are "passive foreign investment companies" ("PFICs").
In general, a foreign corporation will be a PFIC for any taxable year in which
75% or more of its gross income constitutes "passive income," or 50% or more of
its assets produce "passive income." If the Company were to be characterized as
a PFIC, U.S. Holders of Securities would be subject to a penalty tax at the time
of sale of their Ordinary Shares or Warrants, or at the time of their receipt of
any "excess distribution" with respect to their Ordinary Shares. In general, a
U.S. Holder would be considered to have received an "excess distribution" if the
amount of the distribution were more than 125% of the average distribution with
respect to the Ordinary Shares during the three preceding taxable years (or
shorter period during which the U.S. Holder held the Ordinary Shares). In
general, the penalty tax would be equivalent to the taxes that would be deemed
due during the period of the U.S. shareholder's ownership of Ordinary Shares or
Warrants, computed by assuming that the excess distribution with respect to such
Ordinary Shares, or the gain on the disposition of the Ordinary Shares or
Warrants, had been taxed ratably throughout the U.S. Holder's period of
ownership at the maximum ordinary income tax rates prevailing during such
ownership period (whether or not the Company generated any earnings and profits
or was a PFIC throughout all of such ownership period), plus an interest charge
thereon. The interest charge is equal to the applicable rate imposed on
underpayment of U.S. federal income tax for such period. If the Company were a
PFIC, a U.S. Holder's pledge of appreciated Securities, or other use of
Securities to secure a direct or indirect obligation of such U.S. Holder, would
be taxed under the above rules as if such Securities had been disposed of for
their fair market values (or, if less than the amount of their fair market
values, the amount of the loan).
Income considered "passive income" for purposes of the PFIC rules generally
is income which constitutes "foreign personal holding company income" under Code
Section 954 and the Treasury Regulations thereunder applicable to "Controlled
Foreign Corporations" (described below). Although royalty income would generally
be considered passive income under such rules, royalty income can nevertheless
avoid characterization as "passive income" for these purposes if it is
considered to be derived in the "active conduct of a trade or business" and is
not received from a related party. Royalties will be considered to be derived in
the "active conduct of a trade or business" if either (i) the licensor has
developed, created or produced, or has acquired and added substantial value to,
the licensed property which produces the royalties, but only so long as the
licensor is regularly engaged in the development, creation or production of, or
in the acquisition of and addition of substantial value to, the licensed
property; or (ii) the licensed property is licensed as a result of the
performance of marketing functions by such licensor if the licensor, through its
own officers or staff of employees located in a foreign country, maintains and
operates an organization in such country that is regularly engaged in the
business of marketing, or of marketing and servicing, the licensed property, and
such business is "substantial" in relation to the amount of royalties derived
from the licensing of such property. Whether an organization's marketing and
servicing activities in a foreign country are "substantial" is determined based
on all of the facts and circumstances of a particular case. The Treasury
Regulations, however, provide a safe harbor based on certain mathematical tests
as to the relationship of the licensor's "active licensing expenses" to the
licensor's "adjusted licensing profits," as such terms are defined in such
Treasury Regulations, for such activities be considered "substantial," and the
royalties thus non-passive.
The Company believes that, based upon an analysis of current law and the
Company's past and prospective development activities and marketing operations,
including expectations as to its "active licensing expenses," that it is not,
and should in the foreseeable future not become, a PFIC for United States
federal income tax purposes, although no assurances can be given as to this. If
the Company were to be classified as a PFIC, a U.S. Holder would be subject to
an increased tax liability upon the sale or other disposition of its Securities,
or upon the receipt of "excess distributions" with respect to its Ordinary
Shares, as described above, unless either: (1) such U.S. Holder elected (a "QEF
Election") to be taxed currently on its pro rata portion of the Company's income
whether or not such income was distributed in the form of dividends or
otherwise; or (2) such U.S. Holder makes a "mark-to-market"
36
<PAGE>
election with respect to his Securities, under which it includes in its U.S.
income (as ordinary income) any annual appreciation in value of its Securities
(if publicly traded), and deducts as an ordinary loss any annual depreciation in
value of its Securities (or, if less, the "unreversed inclusions" with respect
to the Securities, which generally constitute the excess of the cumulative
mark-to-market gains previously so included by the holder, over the cumulative
mark-to-market losses previously so deducted).
The Company intends to monitor its status under the PFIC rules and, in the
event that the Company makes a determination that it is a PFIC for any taxable
year, it will promptly notify its U.S. Holders of such determination and will
provide its U.S. Holders with the information needed to make the QEF Election.
Prospective investors are urged to consult their tax advisors concerning
the application of the U.S. federal income tax rules governing PFICs in their
particular circumstances.
CONTROLLED FOREIGN CORPORATIONS
Under Subpart F of the Code, a "Controlled Foreign Corporation" (a "CFC")
is a foreign corporation that on any day of its taxable year is owned, directly,
indirectly or by attribution, more than 50%, by vote or value, by "U.S.
Shareholders." For this purpose, a "U.S. Shareholder" is a U.S. person (as
defined in Section 957(c) of the Code) who owns, directly, indirectly or by
attribution, at least 10% of the total combined voting power of all shares
entitled to vote of the foreign corporation.
If a foreign corporation has been a CFC for an uninterrupted period of at
least 30 days during a CFC's taxable year, the U.S. Shareholder who owns stock
in the CFC on the last day of such year must include in income for his taxable
year in which the taxable year of the CFC ends, the total of (i) his pro rata
share of the CFC's Subpart F income for such taxable year (which includes
"foreign personal holding company income", such as "passive" royalty income, as
discussed above in the context of PFICs), (ii) his pro rata share of the CFC's
previously excluded Subpart F income withdrawn from investment in less developed
countries for such year, (iii) his pro rata share of the CFC's previously
excluded Subpart F income from foreign base shipping company operations for such
year, and (iv) his pro rata share of the CFC's increase in earnings invested in
U.S. property for such year. Amounts distributed by a CFC to U.S. Shareholders
are tax free to the extent such amounts have been previously taken into income
by such U.S. Shareholders.
A U.S. person who owns less than 10% of the total combined voting power of
all classes of voting stock of the Company directly, indirectly or by
attribution would not be taxed on the undistributed income of the Company even
if the Company were a CFC. Distributions to shareholders that are not U.S.
Shareholders (but are U.S. Holders) will be taxed under the ordinary rules
relating to taxation of distributions discussed above.
Under Section 1248 of the Code, if a U.S. person sells or exchanges stock
in a foreign corporation, or receives a distribution from a foreign corporation
which for U.S. tax purposes is treated as an exchange of stock, and such person
owns, or is considered as owning by applying certain rules of constructive
ownership, 10% or more of the total combined voting power of all classes of
stock entitled to vote of such foreign corporation at any time during the
five-year period ending on the date of the sale or exchange when such foreign
corporation was a CFC, then the gain recognized on the sale or exchange of such
stock shall be included in the gross income of such person as a dividend, to the
extent of the earnings and profits of the foreign corporation accumulated during
the period in which the stock sold or exchanged was held by such person while
such foreign corporation was a CFC.
The Company expects that ownership of its Ordinary Shares will be such that
it will not meet the requirements for treatment as a CFC, although there can be
no assurance that the Company will not be, or in the future become, a CFC. The
Company's status as a CFC depends on the extent to which its U.S. Shareholders
(as defined under these rules) own, in the aggregate, more than 50% of the
Company (by vote or value) and, therefore, the Company's classification as a CFC
is not within the control of the Company.
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<PAGE>
The Company will attempt to monitor its status, particularly the identity
of its U.S. Shareholders, and will, promptly following the end of any taxable
year in which it has determined that it is a CFC, notify all of its U.S.
Shareholders that it is a CFC. If the Company becomes a CFC, it will comply with
all reporting requirements applicable to such classification.
FOREIGN PERSONAL HOLDING COMPANY
In general, the Company (and any non-U.S. subsidiaries) may be classified
as a "foreign personal holding company" ("FPHC") if, in any taxable year, five
or fewer U.S. Holders own directly or indirectly or by attribution more than 50%
(by vote or value) of the Company's stock (the "Ownership Test") and at least
60% (or, in certain circumstances, at least 50%) of the gross income of the
Company (or any non-U.S. subsidiaries of the Company) consists of certain
passive income for purposes of the FPHC provisions (the "Income Test").
If the Company becomes a FPHC, each U.S. Holder of Securities who held such
Securities on the last day of the taxable year of the Company or, if earlier, on
the last day of its taxable year in which the Ownership Test was met, would be
required to include in gross income as a deemed dividend such U.S. Holder's pro
rata share of the undistributed "passive" income of the Company, even if no cash
dividend were actually paid. In such case, a U.S. Holder would generally be
entitled to increase its tax basis in the Securities of the Company by the
amount of the deemed dividend. Although royalty income is generally considered
"passive" income for these purposes irrespective of the Company's development
activities or active licensing expenses, the Company nonetheless expects that,
following the completion of the Offering, it will not meet the Ownership Test.
Thus, the Company believes that its U.S. Holders will not be subject to the FPHC
rules, although no assurance can be given that the Company is not now nor will
become subject to the FPHC rules in the future. If the Company determines that
it is a FPHC, it will provide appropriate notification to the Company's U.S.
Holders. Prospective investors are urged to consult with their tax advisors
concerning the application of the U.S. federal income tax rules governing FPHCs
and their particular circumstances.
UNITED STATES FEDERAL GIFT AND ESTATE TAX
In general, an individual U.S. Holder will be subject to U.S. gift and
estate taxes with respect to his or her ownership of Securities in the same
manner and to the same extent as with respect to other types of personal
property. Holders that are not individual citizens or residents of the United
States will generally not be subject to U.S. federal gift and estate tax with
respect to their ownership of the Securities. Prospective individual investors
are urged to consult with their tax advisors concerning the application of U.S.
federal gift and estate taxation in their particular circumstances.
BACKUP WITHHOLDING AND INFORMATION REPORTING
In general, information reporting requirements will apply to dividend
payments (or other taxable distributions) in respect of the Securities made
within the United States to a non-corporate U.S. Holder, and "backup
withholding" at the rate of 31% will apply to such payments (i) if the U.S.
Holder or beneficial owner fails to provide an accurate taxpayer identification
number, (ii) if there has been notification from the Internal Revenue Service of
a failure by the U.S. Holder or beneficial owner to report all interest or
dividends required to be shown on its U.S. federal income tax returns, or (iii)
in certain circumstances, if the U.S. Holder or beneficial owner fails to comply
with applicable certification requirements. Certain corporations and persons
that are not U.S. persons may be required to establish their exemption from
information reporting or backup withholding by certifying their status on
Internal Revenue Service Forms W-8 or W-9.
In general, payment of the proceeds from the sale of Securities through any
U.S. office of a broker is subject to both backup withholding and information
reporting, unless the U.S. Holder or beneficial owner certifies its non-U.S.
status under penalties of perjury or otherwise establishes an exemption. U.S.
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<PAGE>
information reporting and backup withholding generally will not apply to a
payment made with respect to a transaction effected by a foreign office of a
foreign broker unless (i) the foreign broker is a CFC or (ii) 50% or more of the
gross income of the foreign broker for the three-year period ending with the
close of its taxable year preceding the payment was effectively connected with
the conduct of a trade or business in the United States, with certain
exceptions.
Recently, the Treasury Department has promulgated final regulations
regarding the withholding and information reporting rules discussed above. In
general, the final regulations do not significantly alter the substantive
withholding and information reporting requirements but unify current
certification procedures and forms and clarify reliance standards. Under the
final regulations, special rules apply which permit the shifting of primary
responsibility for withholding to certain financial intermediaries acting on
behalf of beneficial owners. The final regulations are generally effective for
payments made after December 31, 1998, subject to certain transition rules.
Non-U.S. Holders are urged to consult their tax advisors with respect to the
application of these final regulations.
Amounts withheld under the backup withholding rules may be credited against
a holder's tax liability, and a holder may obtain a refund of any excess amounts
withheld under the backup withholding rules by filing the appropriate claim for
refund with the Internal Revenue Service.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, the Company will have outstanding
7,000,000 Ordinary Shares. Of these shares, the 2,000,000 Ordinary Shares
offered hereby will be freely transferable without restriction or further
registration under the Securities Act, unless purchased by affiliates of the
Company as that term is defined in Rule 144 under the Securities Act ("Rule
144") described below. Of the remaining 5,000,000, 4,975,000 were issued to "non
U.S. persons," as such term is defined in Regulation S under the Securities Act
in transactions that come within the exemption from registration under the
Securities Act provided by Regulation S. Accordingly, such shares may be sold in
any U.S. market that may develop in accordance with the provisions of Regulation
S. The remaining 25,000 shares were issued in a transaction exempt from the
registration requirements of the Securities Act pursuant to Rule 701 promulgated
thereunder, and, accordingly, will be freely tradeable in any U.S. market that
may develop commencing 90 days after the date hereof. Holders of the remaining
4,975,000 outstanding Ordinary Shares have agreed not to sell or otherwise
dispose of any shares of Ordinary Shares without the Representative's prior
written consent for a period of 18 months after the date of this Prospectus.
In general, under Rule 144 a person (or persons whose shares are
aggregated), including persons who may be deemed to be "affiliates" of the
Company as that term is defined under the Securities Act, is entitled to sell
within any three-month period a number of restricted shares beneficially owned
for at least one year that does not exceed the greater of (i) 1% of the then
outstanding Ordinary Shares or (ii) an amount equal to the average weekly
trading volume in the Ordinary Shares during the four calendar weeks preceding
such sale. Sales under Rule 144 are also subject to certain requirements as to
the manner of sale, notice and the availability of current public information
about the Company. However, a person who is not deemed an affiliate and has
beneficially owned such shares for at least two years is entitled to sell such
shares without regard to the volume or other resale requirements.
Pursuant to registration rights acquired by investors in the Bridge
Financing, the Company has, concurrently with the Offering, registered for
resale on behalf of the Selling Securityholders, the Selling Securityholder
Securities.
The Representative has demand and "piggy-back" registration rights with
respect to the securities underlying the Representative's Warrant. See
"Underwriting."
Prior to the Offering, there has been no market for any securities of the
Company, and no predictions can be made of the effect, if any, that sales of
Ordinary Shares or the availability of the Ordinary Shares for sale will have on
the market price of such securities prevailing from time to time. Nevertheless,
sales of substantial amounts of Ordinary Shares in the public market could
adversely affect prevailing market prices.
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UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, each of
the Underwriters named below, for whom RAS Securities Corp. is acting as
representative (the "Representative"), has severally agreed to purchase from the
Company, and the Company has agreed to sell to such Underwriter, the respective
number of Units set forth opposite the name of such Underwriter:
<TABLE>
<CAPTION>
NAME NUMBER OF UNITS
- -------------------------------------- ----------------
<S> <C>
RAS Securities Corp. ..........
---------
..............................
---------
..............................
---------
..............................
---------
..............................
---------
Total ........................ 2,000,000
=========
</TABLE>
It is expected that the Representative, as a syndicate member, will distribute a
substantial portion (not to exceed %, including the over-allotment option) of
the Units offered hereby.
The nature of the Underwriters' obligations is such that they are committed
to purchase and pay for all of the Units in the Offering if any are purchased.
The Underwriters have advised the Company that they propose to offer the
Units to the public at the public offering price set forth on the cover page of
this Prospectus and to certain dealers who are members of the NASD, at such
price less a concession of not in excess of $__________ per Unit, of which a sum
not in excess of $_________ per Unit, may in turn be re-allowed to other dealers
who are members of the NASD. After the initial public offering of Units, the
public offering price, the concession and the re-allowance may be changed by the
Representative. No change in any such terms shall change the amount of proceeds
to be received by the Company as set forth on the cover page to this Prospectus
or by the Selling Securityholders as set forth on the cover page the Selling
Securityholders' Prospectus.
The Company has granted to the Underwriters an option, exercisable during
the 45-day period commencing on the effective date of this Prospectus, to
purchase from the Company at the public offering price, less underwriting
discounts, up to 300,000 additional Units for the purpose of covering
over-allotments, if any, subject to the right of the Representative to elect, in
its sole discretion, to exercise such option individually, and not as
Representative of the several Underwriters.
The Company has agreed to indemnify the Underwriters and their controlling
persons 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
Units offered hereby, including any Units purchased pursuant to the
Underwriters' over-allotment option, $_______ of which has been paid to date. To
the extent that the expenses of the Representative are less than the
non-accountable expense allowance, the excess may be deemed to be compensation
to the Representative.
All of the Company's current shareholders, officers and directors have
agreed not to sell, assign, transfer or otherwise dispose of any of their Common
Stock, and the Company has agreed not to offer any securities or rights to
purchase any securities, in each case, for a period of 18 months from the
effective date of this Prospectus, without the prior written consent of the
Representative, which may not be unreasonably withheld.
The Representative has the right to designate an individual for nomination
to the Company's Board of Directors or to attend its meetings for a period of
three years commencing on the effective date of this Prospectus, although the
Representative has not yet selected any such designee. Such designee may be a
director, officer, partner, employee or affiliate of the Representative, and
will receive compensation
40
<PAGE>
customary for outside directors if nominated and elected to serve on the
Company's Board of Directors, or reimbursement of expenses of attending
meetings, if designated to attend meetings. See "Management -- Board Committees
and Designated Directors."
The Company has agreed to entered into a consulting agreement with the
Representative pursuant to which the Representative will provide certain
financial advisory services to the Company for a period of 24 months commencing
on the closing of the offering for monthly consideration of $5,000. The Company
has also agreed to enter into an exclusive financial consulting agreement with
the Representative if, at any time through the end of the first 12 months of the
consultancy, the Company or any subsidiary thereof embarks upon any financing,
merger, sale, acquisition or joint venture to which the Company or any
subsidiary is a party or involving any substantial asset of the Company or any
subsidiary (a "Covered Transaction"), the Representative will be entitled to
receive a fee, upon closing of such transaction, equal to a percentage of the
consideration paid in the transaction ranging from 10% of the first $2,000,000
to 2% of any consideration in excess of $8,000,000.
The Company has also granted the Representative a right of first refusal to
act as placement agent or underwriter with respect to any offerings of
securities by the Company or any of its subsidiaries during the three-year
period commencing on the effective date of this Prospectus.
The Company has agreed not to solicit Warrant exercises, (and Selling
Securityholder Warrants exercises) other than through the Representative, unless
the Representative declines to make such solicitation. Upon any exercise of the
warrants after the first anniversary of the effective date of this Prospectus,
the Company will pay the Representative a fee of 5% of the aggregate exercise
price of the Warrants, if (i) the market price of the Company's Common Stock on
the date the Warrants are exercised is greater than the then exercise price of
the Warrants; (ii) the exercise of the Warrants was solicited by a member of the
NASD; (iii) the warrantholder designates that the exercise of the Warrants was
solicited by a member of the NASD and the broker-dealer to receive compensation
for such exercise; (iv) the Warrants are not held in a discretionary account;
(v) disclosure of compensation arrangements was made both at the time of the
Offering and at the time of exercise of the Warrants; and (vi) the solicitation
of exercise of the Warrants was not in violation of Regulation M, which was
recently adopted to replace Rule 10b-6, and certain other rules promulgated
under the Exchange Act.
Regulation M may prohibit the Representative or any other soliciting
broker-dealer from engaging in any market making activities with regard to the
Company's securities for the period from five business days (or such other
applicable period as Regulation M may provide) prior to any solicitation by the
Representative of the exercise of the Warrants until the later of the
termination of such solicitation activity or the termination (by waiver or
otherwise) of any right that the Representative may have to receive a fee for
the exercise of Warrants following such solicitation. As a result, the
Representative may be unable to provide a market for the Company's securities
during certain periods while the Warrants are exercisable.
The Company has agreed to sell to the Representative and its designees, for
nominal consideration, a warrant to purchase up to 200,000 units (the
"Representative's Warrant"), which will be substantially identical to the Units
offered hereby, except that the warrants included in the Representative's
Warrant are not subject to redemption until the Representative's Warrant has
been exercised and the underlying warrants are outstanding. The Representative's
Warrant is exercisable for a period of four years commencing one year from the
effective date of this Prospectus at an exercise price per Unit of $6.00 (120%
of the Offering price), subject to adjustment in certain events to protect
against dilution. The holders of the Representative's Warrant will have no
voting, dividend or other rights of shareholders until the Representative's
Warrant is exercised. The holders of a majority of the securities underlying the
Representative's Warrant will have the right to demand registration thereof, at
the Company's expense, and the holder(s) of any such securities have the right
to demand such registration, at such holder or holders' expense, in each case,
on one occasion for a period of five years from the closing of the Offering. The
five-year period will be extended for the period of time of any delay in
registration by the Company. The Company has also granted certain "piggy-back"
registration rights to holders of the securities underlying the Representative's
Warrant.
41
<PAGE>
Prior to the Offering, there has been no public market for any of the
securities offered hereby. Accordingly, the public offering price of the Units
offered hereby and the terms of the Warrants have been determined by negotiation
between the Company and the Representative and are not necessarily related to
the Company's asset value, net worth or other established criteria of value.
Factors considered in determining such prices and terms, in addition to
prevailing market and economic conditions, include the history of and the
prospects for the industry in which the Company competes, the present state of
the Company's development and operations, estimates of the business potential
and prospects of the Company, an assessment of the Company's management, the
Company's capital structure, consideration of these factors in relation to the
market valuation of comparable companies and such other factors as were deemed
relevant.
The Representative acted as the placement agent for the Bridge Financing in
January and February 1998 for which the Representative received a fee of $50,000
and a non-accountable expense allowance of $15,000.
The Underwriters have informed the Company that they do not expect to make
sales of the Units offered hereby to discretionary accounts.
In connection with the Offering, the Underwriters and certain selling group
members may engage in certain transactions that stabilize, maintain or otherwise
affect the market price of the Ordinary Shares and the Warrants. Such
transactions may include stabilization transactions affected in accordance with
Rule 104 of Regulation M, pursuant to which such persons may bid for or purchase
the Ordinary Shares and the Warrants for the purpose of pegging, fixing or
maintaining the market price of such securities. The Underwriters may also
create a short position in the Units by selling more Units in connection with
the Offering than the Underwriters are committed to purchase from the Company,
and in such case the Underwriters may reduce all or a portion of that short
position by purchasing the Ordinary Shares and the Warrants in the open market.
The Representative also may elect to reduce any short position by exercising all
or any portion of the over-allotment option described herein. In addition, the
Representative may impose "penalty bids" on certain Underwriters and selling
group members, whereby, if the Representative purchases Ordinary Shares or
Warrants in the open market to reduce the Underwriters' short position or to
stabilize the price of the of the Ordinary Shares or the Warrants, the
Representative may reclaim the amount of the selling concession from the
Underwriters who sold those Ordinary Shares or Warrants as part of the Offering.
Any of the transactions described in this paragraph may stabilize or maintain
the market price of the Ordinary Shares or the Warrants at a level above that
which might otherwise prevail in the open market.
Neither the Company nor the Underwriters make any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the Units, the Ordinary Shares or the
Warrants. In addition, neither the Company nor the Underwriters make any
representation that the Underwriters will engage in such transactions or that
such transactions, once commenced, will not be discontinued without notice.
42
<PAGE>
LEGAL MATTERS
Certain legal matters have been passed upon for the Company by Morrison
Cohen Singer & Weinstein, LLP, New York, New York. The validity of the
securities offered hereby has been passed upon for the Company by Pelaghias,
Christodoulou & Vrachas, Cyprus counsel for the Company. The statements relating
to patent matters have been passed upon by Pepper Hamilton LLP, Washington, D.C.
Certain legal matters have been passed upon for the Underwriters by
Fischbein * Badillo * Wagner * Harding, New York, New York.
EXPERTS
The financial statements of the Company at September 30, 1997 and for the
period from April 5, 1995 (date of inception) to September 30, 1997, appearing
in this Prospectus and Registration Statement have been audited by Coopers &
Lybrand, independent auditors, as set forth in their report thereon (which
contains an explanatory paragraph with respect to the uncertainty regarding the
Company's ability to continue as a going concern) appearing elsewhere herein and
in the Registration Statement, and are included in reliance upon such report
given upon the authority of said firm as experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company is subject to the informational reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and in
accordance therewith files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Judiciary Plaza, Washington, D.C. 20549, and at the Commission's
following Regional Office: Chicago Regional Office, Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511; and New York Regional
Office, 7 World Trade Center, Suite 1300, New York, New York 10048. Copies of
such material can be obtained at prescribed rates from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Judiciary Plaza,
Washington, D.C. 20549. Such reports and other information can also be reviewed
through the Commission's Web site (http://www.sec.gov).
Additional information regarding the Company and the securities offered
hereby is contained in the Registration Statement on Form F-1 and the exhibits
thereto filed with the Commission under the Securities Act. This Prospectus does
not contain all of the information contained in such Registration Statement and
the exhibits and schedules thereto. Statements contained in this Prospectus
regarding the contents of any documents or contract are qualified in their
entirety by reference to the copy of such contract or document filed as an
exhibit to the Registration Statement. For further information pertaining to the
Company and the securities, reference is made to the Registration Statement and
the exhibits thereto, which may be inspected without charge at, and copies
thereof may be obtained at prescribed rates from, the office of the Commission
at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549.
43
<PAGE>
C.W. CHEMICAL WASTE TECHNOLOGIES LIMITED
(A DEVELOPMENTAL STAGE ENTERPRISE)
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGES
------
<S> <C>
Report of Independent Accountants ........................................... F-2
Balance Sheets as of September 30, 1997 and December 31, 1997 (unaudited) ... F-3
Income Statements for the Fiscal Year ended September 30, 1997, and the
Three Months ended December 31, 1997 (unaudited) and 1996 (unaudited) .... F-4
Statements of Cash Flow for the Fiscal Year ended September 30, 1997, and
the Three Months ended December 31, 1997 (unaudited) and 1996 (unaudited) .. F-5
Notes to the Financial Statements ........................................... F-6
</TABLE>
F-1
<PAGE>
C.W. CHEMICAL WASTE TECHNOLOGIES LIMITED
(A DEVELOPMENTAL STAGE ENTERPRISE)
INDEPENDENT AUDITOR'S REPORT
Report of the Independent Accountants to the directors and the members of
C.W. CHEMICAL WASTE TECHNOLOGIES LIMITED
(a development stage enterprise)
We have audited the accompanying balance sheet of C.W. Chemical Waste
Technologies Limited (a development stage enterprise) as of September 30, 1997,
and the related income statements, shareholders' equity and cash flows for the
period from April 6, 1995 (inception) to September 30, 1996 and for the year
ended September 30, 1997. 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 in the United Kingdom which are substantially the same as auditing
standards in the United States. 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 C.W. Chemical Waste
Technologies Limited, as of September 30, 1997, and the results of its
operations and its cash flows for the period from April 6, 1995 (inception) to
September 30, 1996 and for the year ended September 30, 1997, in conformity with
generally accepted accounting principles in the United States.
As discussed in Note 1 to the financial statements, the Company experienced
a net loss in the year ended September 30, 1997 and is dependent upon the
finance to be raised under the proposed Initial Public Offering. Until such
finance is obtained, there is doubt about the Company's ability to continue as a
going concern. The accompanying financial statements do not include any
adjustments relating to the recoverability and classification of recorded asset
amounts or the amounts and classification of liabilities that might be necessary
should the Company be unable to continue as a going concern.
COOPERS & LYBRAND
Chartered Accountants
London
England
February 25, 1998
F-2
<PAGE>
C.W. CHEMICAL WASTE TECHNOLOGIES LIMITED
(A DEVELOPMENTAL STAGE ENTERPRISE)
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, 1997
SEPTEMBER 30, 1997 (UNAUDITED)
-------------------- ------------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents ..................................... $ -- $ 31,500
Prepaid expenses and other assets ............................. -- 27,000
------------ ------------
TOTAL CURRENT ASSETS .......................................... -- 58,500
FIXED ASSETS
Intellectual property and technology patents .................. 300,000 300,000
Computer equipment ............................................ -- 3,000
------------ ------------
TOTAL ASSETS .................................................. 300,000 361,500
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Accrued expenses .............................................. 106,500 190,000
------------ ------------
TOTAL LIABILITIES ............................................. 106,500 190,000
------------ ------------
SHAREHOLDERS' EQUITY:
Preferred shares, $0.10 par value, 5,000,000 shares authorized,
no shares issued and outstanding ............................. -- --
Ordinary shares, $0.10 par value, 20,000,000 shares authorized;
4,410,000 shares issued and outstanding ...................... 441,000 441,000
Additional paid-in capital .................................... 2,249,100 2,249,100
Shareholder's contributions ................................... 14,470 14,470
Deficit accumulated during development stage .................. (2,511,070) (2,533,070)
------------ ------------
TOTAL SHAREHOLDERS' EQUITY .................................... 193,500 171,500
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY .................... 300,000 361,500
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-3
<PAGE>
C.W. CHEMICAL WASTE TECHNOLOGIES LIMITED
(A DEVELOPMENTAL STAGE ENTERPRISE)
INCOME STATEMENTS
<TABLE>
<CAPTION>
NOVEMBER 16, 1996
(COMMENCEMENT OF THREE MONTHS TO THREE MONTHS TO
OPERATIONS) THROUGH DECEMBER 31, 1997 DECEMBER 31, 1996
SEPTEMBER 30, 1997 (UNAUDITED) (UNAUDITED)
--------------------- ------------------- ------------------
<S> <C> <C> <C>
Sales ............................................ $ -- $ 800,000 $ --
Research and development costs ................... (2,133,695) (505,000) (240,847)
Selling, general and administrative expenses ..... (370,875) (317,000) (21,170)
------------ ---------- ----------
NET LOSS ......................................... (2,504,570) (22,000) (262,017)
============ ========== ==========
</TABLE>
- ----------
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE>
C.W. CHEMICAL WASTE TECHNOLOGIES LIMITED
(A DEVELOPMENTAL STAGE ENTERPRISE)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS TO THREE MONTHS TO
YEAR TO SEPTEMBER DECEMBER 31, 1997 DECEMBER 31, 1996
30, 1997 (UNAUDITED) (UNAUDITED)
------------------- ------------------- ------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss ............................................. $ (2,504,570) $ (22,000) $ (262,017)
Prepaid expenses ..................................... -- (27,000) --
Intellectual property and technology patents ......... (300,000) -- --
Accrued expenses ..................................... 100,000 83,500 --
------------ --------- ----------
Net cash (used)/ provided by operating activities. (2,704,570) 34,500 (262,017)
------------ --------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets ............................. -- (3,000) --
------------ --------- ----------
Net cash used by investing activities ................ -- (3,000) --
------------ --------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in shareholder's contributions .............. 14,470 -- 262,017
Shareholder's contributions .......................... 2,690,100 -- --
------------ --------- ----------
Net cash provided by financing activities ............ 2,704,570 -- 262,017
------------ --------- ----------
Net increase in cash and cash equivalents ............ -- 31,500 --
Cash and cash equivalents at beginning of the
period .............................................. --- -- --
------------ --------- ----------
Cash and cash equivalents at end of period ........... 2,704,570 31,500 262,017
============ ========= ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE>
C.W. CHEMICAL WASTE TECHNOLOGIES LIMITED
(A DEVELOPMENTAL STAGE ENTERPRISE)
NOTES TO THE FINANCIAL STATEMENTS FOR THE PERIOD ENDED DECEMBER 31, 1997
1 ORGANIZATION AND BUSINESS OF THE COMPANY
C.W. Chemical Waste Technologies Limited (the "Company"), formerly known as
Kadoma Trading Limited, was incorporated in Cyprus on April 6, 1995 and
commenced operations on November 16, 1996. Prior to that date, the company
incurred a total of $6,500 in legal and formation expenses between inception on
April 6, 1995 and September 30, 1996. The Company is a development stage
enterprise and has experienced significant operating losses since its inception,
primarily as a result of investing in the research and development of the
technology implementing the processes described below. The Company is dependent
on the proceeds of the proposed Initial Public Offering ("IPO"). Until such
financing is obtained, there is doubt about the Company's ability to continue as
a going concern.
The Company's primary purpose is to globally exploit two proprietary processes
that treat phosphogypsum, a toxic, environmentally hazardous waste product
resulting from the production of phosphoric acid-based fertilizer and phosphoric
acid, to render it both non-toxic and a useful product in other industries.
2 BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The financial statements have been prepared in accordance with accounting
principles generally accepted in the United States. 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 operating
revenues and expenses during the reporting periods. Accounting estimates have
been employed in the financial statements with respect to accrued expenses.
Actual results could differ from those estimates.
INTELLECTUAL PROPERTY AND TECHNOLOGY PATENTS
Acquired intellectual property and technology patents are capitalized.
Amortization of these assets will commence with the start of the licensing of
the Company's technology over a period not longer than the life of the patent,
such amortization being a maximum of eight years. All costs associated with
research and development are expensed as incurred.
FIXED ASSETS
The cost of acquired fixed assets includes the purchase cost, together with any
incidental expenses of acquisition. Depreciation rates have been established to
expense the cost of fixed assets, less their estimated residual values, over
their expected useful lives. Depreciation is calculated at the following annual
rates:
Computer equipment 33%
REVENUE RECOGNITION
Revenue from license fees is recognized to the extent that the Company has met
the related obligations and the amount is considered as non-refundable. Royalty
revenue is recognized in the period that it is earned.
F-6
<PAGE>
C.W. CHEMICAL WASTE TECHNOLOGIES LIMITED
(A DEVELOPMENTAL STAGE ENTERPRISE)-(CONTINUED)
3 INCOME
On October 27, 1997, the Company signed a Process Technology License Agreement
with Hellenico Viomihania Epexergasias Phosphoricou Gypsou E.P.E. (Hellenico
Industry of Phosphogypsum Treatment Ltd) ("Hellenico") whereby Hellenico
obtained a license to use the know-how for the treatment of waste phosphogypsum
and for its conversion. Hellenico is contracted to pay the Company $3,000,000
over a maximum period of 24 months. Additionally, Hellenico agrees to pay the
Company a running royalty of 3% of the net sales price of any waste
phosphogypsum that is sold or otherwise disposed of. On November 5, 1997, the
Company received $300,000 being the first installment due under this contract.
On November 14, 1997, the Company signed a Process Technology License Agreement
with Snunit Levana Gimel ("Snunit"), a company incorporated in Israel, whereby
Snunit obtained a license to use the know-how to plan, construct, operate,
repair and maintain the necessary installations for the treatment of waste
phosphogypsum to produce a non-toxic product and for the production of Ceramic
Like Material ("CLM"). Snunit is contracted to pay the Company $5,000,000 over a
maximum period of 24 months. Snunit is further contracted to pay the Company a
running royalty of 3% of the net sales price of any waste phosphogypsum or CLM
sold or otherwise disposed of. On November 20, 1997, the Company received
$500,000 being the first installment under this agreement.
4 SHAREHOLDERS' EQUITY
On January 15, 1998, the currency of the authorized share capital of the Company
of 1,000 ordinary shares of CY\P1 each was changed to US dollars at a rate of
CY\P1:$2. Consequently, the authorized share capital of the Company was 2,000
ordinary shares of $1 each. On the same date, the authorized share capital of
2,000 ordinary shares of $1 each was converted into 20,000 ordinary shares of
$0.10 each.
On January 15, 1998, the authorized share capital of the Company was increased
from 20,000 ordinary shares of $0.10 each to 20,000,000 ordinary shares of $0.10
each and 5,000,000 preferred shares of $0.10 each. On the same date 4,390,000
ordinary shares of $0.10 each were issued to the sole shareholder who had
contributed to the expenses and assets of the company in the period up to
December 31, 1997. These shares were valued at $0.61 per share for accounting
purposes. This share issuance has been reflected in the balance sheet at
September 30, 1997 as the Company had always intended to issue shares to the
sole shareholder in consideration for the funding made available by the
shareholder during the Company's initial period of trading.
On January 15, 1998, a further 500,000 ordinary shares were issued in accordance
with the Technology Assignment Agreement with three Polish scientists (See Note
5 to these financial statements, Commitments and Contingencies). These shares
were valued at $0.61 each for accounting purposes.
On the same date, 90,000 ordinary shares were issued in lieu of past and future
services of certain directors and employees of the Company. These shares were
valued at $1.50 per share for accounting purposes.
5 COMMITMENTS AND CONTINGENCIES
COMMITMENTS UNDER DEVELOPMENT CONTRACTS
The Company has signed three contracts with Energo Group SA, a company of
process engineering consultants based in Greece, for a total of $1,450,000 to:
1. Undertake a preliminary study of the phosphogypsum waste treatment project
covering technological evaluation, preliminary engineering design and
technological deployment. $450,000 has been paid to December 31, 1997 under this
contract.
F-7
<PAGE>
C.W. CHEMICAL WASTE TECHNOLOGIES LIMITED
(A DEVELOPMENTAL STAGE ENTERPRISE)-(CONTINUED)
2. Prepare the basic engineering for a reference waste phosphogypsum treatment
plant at a sufficient level for the detailed engineering to follow. $600,000 has
been paid to the date of these financial statements.
3. Customize the engineering design for two different plant capacities and for a
plant expansion to cover production of higher added-value phosphogypsum-based
products. Under this contract, $400,000 has been paid to December 31, 1997.
COMMITMENTS UNDER THE TECHNOLOGY ASSIGNMENT AGREEMENTS
The Company has signed two Technology Assignment Agreements:
1. $ 100,000 was paid to three Polish scientists as a deposit for all rights,
title and interest in the methods and improvements relating to processing waste
phosphogypsum (the "Invention"), the Patent Application, all Intellectual
Property therein and the Assignors' entire right to work the Invention for the
purpose of gain or in the course of trade in Poland and throughout the world.
Under this agreement the Company was committed to the following:
(a) the issue and allotment of 500,000 ordinary shares as further
consideration (See Note 4);
(b) a final payment of $1,400,000 upon successful completion of an
initial public offering.
If the Company does not complete the IPO or any other initial public offering by
June 30, 1998, the Company is obligated to pay the Assignors fifteen percent
(15%) of the Company's pre-tax profits until such $1,400,000 has been paid.
2. $200,000 was paid to Herling Applied Technologies Inc. as a deposit for the
purchase of intellectual property and technology patents. Under this agreement,
the Company is further committed to make a final payment of $2,050,000 upon
successful completion of an initial public offering. If the Company does not
complete the IPO or any other initial public offering by June 30, 1998, the
Company is obligated to pay HAT twenty percent (20%) of the Company's pre-tax
profits until such $2,050,000 has been paid.
6 RELATED PARTY TRANSACTIONS
The Company paid $200,000 in the year ended September 30, 1997 to Herling
Applied Technologies Inc., a company in which one of the directors has an
interest, as a deposit for the purchase of intellectual property and technology
patents. The Company also paid $27,000 in the year ended September 30, 1997 to
Eastern Capital (Holdings) Limited, a company of which A.S. Kalligeris is a
director, for telecommunications expenses.
The Company maintains offices located in a building owned by an entity
controlled by Erwin Herling, Chairman of the Company's Board of Directors. The
Company pays rent of $5,000 per month to this entity.
7 SUBSEQUENT EVENTS
ORDINARY SHARES
See Note 4, Shareholders' Equity, for the increase and issue of ordinary shares
subsequent to the year end.
INCOME
Subsequent to the year ended September 30, 1997, the Company signed two process
technology license agreements which are detailed in Note 3 to these Financial
Statements.
F-8
<PAGE>
C.W. CHEMICAL WASTE TECHNOLOGIES LIMITED
(A DEVELOPMENTAL STAGE ENTERPRISE)-(CONTINUED)
LETTER OF INTENT
The Company has signed a letter of intent with RAS Securities Corp. ("RAS"),
dated December 10, 1997. This letter confirms RAS's intent to act as
representative of the underwriters in connection with the proposed IPO by the
Company. It is contemplated that the underwriters will underwrite the securities
on a firm commitment basis. The offering is intended to consist of 2,000,000
ordinary shares at an initial public offering price of $4.90 per share, and
2,000,000 warrants at an initial public offering price of $0.10 per warrant.
BRIDGE FINANCING
In February 1998, RAS completed a private placement of $500,000 principal amount
of 12% notes and 250,000 warrants for the Company as a bridge financing to be
repaid from the proceeds of the IPO. The Company paid RAS a placement agent fee
of $50,000 and a non-accountable expense allowance of $15,000. Interest is
payable at a rate of 12% per annum on the bridge notes.
.
F-9
<PAGE>
================================================================================
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS, 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 BY THE
REPRESENTATIVE. 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
ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER, OR SOLICITATION. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION HEREIN CONTAINED IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF THIS PROSPECTUS.
----------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Prospectus Summary ......................... 3
Risk Factors ............................... 7
Use of Proceeds ............................ 13
Dividend Policy ............................ 13
Capitalization ............................. 14
Dilution ................................... 15
Selected Financial Data .................... 16
Management's Discussion and Analysis of
Financial Condition and Results of
Operations .............................. 17
Business ................................... 18
Management ................................. 25
Certain Transactions ....................... 29
Principal Shareholders ..................... 31
Concurrent Offering ........................ 31
Description of Securities .................. 32
Certain Cyprus Tax Considerations .......... 33
Certain United States Federal Income
Tax Considerations ...................... 34
Shares Eligible for Future Sale ............ 39
Underwriting ............................... 40
Legal Matters .............................. 43
Experts .................................... 43
Additional Information ..................... 43
Index to Financial Statements .............. F-1
</TABLE>
----------------------------------------
UNTIL ______________ 1998, ALL DEALERS EFFECTING TRANSACTIONS IN THE
REGISTERED SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE
REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF
DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO
THEIR UNSOLD ALLOTMENTS ORSUBSCRIPTIONS.
================================================================================
<PAGE>
================================================================================
2,000,000 UNITS
C.W. CHEMICAL WASTE
TECHNOLOGIES LIMITED
CONSISTING OF 2,000,000 ORDINARY SHARES
AND
2,000,000 REDEEMABLE CLASS A WARRANTS
-----------------------------------------------------
PROSPECTUS
-----------------------------------------------------
RAS SECURITIES CORP.
, 1998
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the various expenses to be incurred by the
Registrant in connection with the sale and distribution of the securities being
registered hereby, other than underwriting discounts and commissions. All
amounts are estimated, except the Securities and Exchange Commission
registration fee and the National Association of Securities Dealers, Inc.
filing fee:
<TABLE>
<S> <C>
SEC registration fee ........................... $ 8,614.74
National Association of Securities Dealers, Inc.
filing fee .................................... $ 3,420.27
Blue Sky fees and expenses ..................... $ 25,000.00
Boston Stock Exchange listing fee .............. $ 15,000.00
Nasdaq listing fee ............................. $ 10,000.00
Accounting fees and expenses ................... $ 100,000.00
Legal fees and expenses ........................ $ 250,000.00
Printing and engraving expenses ................ $ 75,000.00
Registrar and Transfer Agent's fees ............ $ 5,000.00
Miscellaneous .................................. $ 7,964.99
------------
Total ....................................... $ 500,000.00
============
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Cyprus law and the Company's Articles of Association both provide that
every director, officer and auditor of the Company shall be indemnified against
all costs, charges, expenses, losses and liabilities which he may incur or
sustain in, about or in relation to the execution of his office and, in
particular without limiting the foregoing, against any liability incurred by him
in defending any proceedings in relation to the affairs of the Company in which
judgment is given in his favor or in which he is acquitted or in connection with
any application under the law in which relief is granted to him by the court
from liability in relation to the affairs of the Company. The Company's Articles
of Association also provide that the Company may purchase and maintain for any
director or officer of the Company insurance against any liability which would
otherwise attach to him in respect of any negligence, default, breach of duty or
breach of trust of which he may be guilty in relation to the Company.
The Underwriting Agreement provides for indemnification by the Underwriters
of the Registrant and its directors and officers for certain liabilities,
including liabilities arising under the Act.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Within the past three years, the Company has issued and sold the following
securities that were not registered under the Securities Act of 1933, as amended
(the "Act"), in each case in reliance on an exemption from required registration
pursuant to Section 4(2) or Rule 701 of the Act or Regulation S promulgated
under the Act:
The Company has issued 4,410,000 Ordinary Shares to Drofan Trading, Ltd,
Including nominees holding shares for the benefit of Drofan Trading, Ltd.), of
which 1,000 Ordinary Shares were issued in [September] 1996, and the balance
were issued in January 1998 pursuant to the Recapitalization referred to under
"Capitalization" -- "Recapitalization" and "Notes to Financial Statements." This
issuance was exempt from the registration requirements of the Act pursuant to
Regulation S.
II-1
<PAGE>
The Company issued an aggregate of 500,000 Ordinary Shares to three Polish
scientists in January 1998. These shares were issued pursuant to a Technology
Assignment Agreement between the Company and the aforementioned persons, dated
September 30, 1997. The issuance of these shares was exempt from the
registration requirements of the Act pursuant to Regulation S.
The Company issued an aggregate of 50,000 Ordinary Shares to Ioannis
Papaioannou (25,000 Ordinary Shares), and Andreas Skentzos-Kalligeris (25,000
Ordinary Shares), which shares were issued on January 15, 1998 in consideration
for services rendered and to be rendered. The issuance of these shares was
exempt from the registration requirements of the Act pursuant to Regulation S.
The Company issued an aggregate of 40,000 Ordinary Shares to three
employees of the Company on January 15, 1998 in consideration for employment
services rendered and to be rendered. The issuance of these shares was exempt
from the registration requirements of the Act pursuant to Rule 701.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF DOCUMENT
- ------------- ----------------------------------------------------------------------------------------
<S> <C>
1.1 Form of Underwriting Agreement between the Company and the Representative.
3.1, 3.2 Memorandum and Articles of Association of the Company, as amended.
4.1 Form of Common Stock Purchase Warrant Agreement relating to Warrants issued by the
Company in a private placement, concluded February 27, 1998 (the "Bridge Financing").
4.2 Form of Representative's Warrant.
4.3 Form of Class A Warrant Agreement.
4.4* Form of Lock-up Agreement between the Company's Affiliates and the Representative.
4.5* Specimen Ordinary Share Certificate.
4.6* Specimen Class A Warrant Certificate.
5.1 Opinion of Pelaghias, Christodoulou & Vrachas.
8.1 Tax Opinion of Morrison Cohen Singer & Weinstein, LLP.
10.1 Technology Assignment Agreement between the Company and Herling Applied Technolo-
gies, Inc., dated September 27, 1997.
10.2 Technology Assignment Agreement between the Company and Zielinski, Kosicka and
Ksiazek, dated September 30, 1997.
10.3 Form of 12% Promissory Note issued in the Company's Bridge Financing.
10.4 Form of Process Technology License Agreement for the Company's Phosphogypsum Treat-
ment Technology with option to license the CLM Production Technology.
10.5 Form of Process Technology License Agreement for the Company's Phosphogypsum Treat-
ment Technology and the CLM Production Technology.
10.6 Form of 1998 Stock Option Plan of the Company.
23.1 Consent of Pelaghias, Christodoulou & Vrachas (included in Exhibit 5.1).
23.2 Consent of Morrison Cohen Singer & Weinstein, LLP (included in Exhibit 8.1).
23.3 Consent of Coopers & Lybrand, independent auditors.
23.4 Consent of Pepper Hamilton LLP.
24 Power of Attorney (filed as part of the signature page to this Registration Statement).
27 Financial Data Schedule.
</TABLE>
- ----------
* To be filed upon amendment.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
II-2
<PAGE>
(1) To file, during any period in which offers of sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(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 the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high and of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in
the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(4) If the registrant is a foreign private issuer, to file a post-effective
amendment to the registration statement to include any financial statements
required by Rule 3-19 of this chapter at the start of any delayed offering or
throughout a continuous offering. Financial statements and information otherwise
required by Section 10(a)(3) of the Act need not be furnished, provided, that
the registrant includes in the prospectus, by means of a post-effective
amendment, financial statements required pursuant to this paragraph (a)(4) and
other information necessary to ensure that all other information in the
prospectus is a least as current as the date of those financial statements.
Notwithstanding the foregoing, with respect to registration statements on Form
F-3, a post-effective amendment need not be filed to include financial
statements and information required by Section 10(a)(3) of the Act or Rule 3-19
of this chapter if such financial statements and information are contained in
periodic reports filed with or furnished to the Commission by the registrant
pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934
that are incorporated by reference in the Form F-3.
(5) To provide to the underwriter at the closing specified in the
underwriting agreements, certificates in such denominations and registered in
such names as required by the underwriter to permit prompt delivery to each
purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions or otherwise, the registrant has
been advised that in the opinion of the 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 registrants
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 registrants will, unless in the opinion of their counsel the
matter has been settled by the controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by them is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on March 5, 1998.
C.W. CHEMICAL WASTE TECHNOLOGIES LIMITED
By: /s/ Ira H. Kanarick
------------------------------------------
Ira H. Kanarick
Chief Executive Officer
Each person whose signature appears below constitutes and appoints Ira H.
Kanarick and Erwin Herling, or either of them, each with the power of
substitution, his or her true and lawful attorney-in-fact to sign any amendments
to this registration statement and to file the same, with exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that each said attorney-in-fact,
or his or her substitute, may do or choose 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 on behalf of the
Company and in the capacities and on the dates indicated below.
<TABLE>
<CAPTION>
NAME TITLE DATE
- -------------------------------- ------------------------------------- ---------------
<S> <C> <C>
/s/ Ira H. Kanarick Director, Chief Executive Officer and March 5, 1998
- -------------------------------- Chief Financial Officer (Principal
Ira H. Kanarick Executive Officer and Principal
Financial Officer)
/s/ Erwin Herling Chairman of the Board of Directors March 5, 1998
- --------------------------------
Erwin Herling
/s/ Andreas Skentzos-Kalligeris Director March 5 , 1998
- --------------------------------
Andreas Skentzos-Kalligeris
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF DOCUMENT PAGE
- ------------- ---------------------------------------------------------------------------- -----
<S> <C> <C>
1.1 Form of Underwriting Agreement between the Company and the Rep-
resentative.
3.1, 3.2 Memorandum and Articles of Association of the Company, as amended.
4.1 Form of Common Stock Purchase Warrant Agreement relating to War-
rants issued by the Company in a private placement, concluded
February 27, 1998 (the "Bridge Financing").
4.2 Form of Representative's Warrant.
4.3 Form of Class A Warrant Agreement.
4.4* Form of Lock-up Agreement between the Company's Affiliates and the
Representative.
4.5* Specimen Ordinary Share Certificate.
4.6* Specimen Class A Warrant Certificate.
5.1 Opinion of Pelaghias, Christodoulou & Vrachas.
8.1 Tax Opinion of Morrison Cohen Singer & Weinstein, LLP.
10.1 Technology Assignment Agreement between the Company and Herling
Applied Technologies, Inc., dated September 27, 1997.
10.2 Technology Assignment Agreement between the Company and Zielinski,
Kosicka and Ksiazek, dated September 30, 1997.
10.3 Form of 12% Promissory Note issued in the Company's Bridge Financing.
10.4 Form of Process Technology License Agreement for the Company's
Phosphogypsum Treatment Technology with option to license the
CLM Production Technology.
10.5 Form of Process Technology License Agreement for the Company's
Phosphogypsum Treatment Technology and the CLM Production
Technology.
10.6 Form of 1998 Stock Option Plan of the Company.
23.1 Consent of Pelaghias, Christodoulou & Vrachas (included in Exhibit 5.1).
23.2 Consent of Morrison Cohen Singer & Weinstein, LLP (included in Exhibit
8.1).
23.3 Consent of Coopers & Lybrand, independent auditors.
23.4 Consent of Pepper Hamilton LLP.
24 Power of Attorney (filed as part of the signature page to this Registration
Statement).
27 Financial Data Schedule.
</TABLE>
- ----------
* To be filed upon amendment.
<PAGE>
ADDITIONAL PAGE FOR ALTERNATE PROSPECTUS
SELLING SECURITYHOLDERS
An aggregate of up to 250,000 Class A Warrants may be offered for resale by
investors who received their Class A Warrants in exchange for warrants received
in the Bridge Financing.
The following table sets forth certain information with respect to each
Selling Securityholder for whom the Company is registering the Selling
Securityholder Securities for resale to the public. The Company will not receive
any of the proceeds from the sale of such securities. To the Company's
knowledge, there are no material relationships between any of the Selling
Securityholders and the Company, nor have any such material relationships
existed within the past three years.
================================================================================
<TABLE>
<CAPTION>
NUMBER OF ORDINARY NUMBER OF WARRANTS AND ORDINARY NUMBER OF SHARES/
SHARES OWNED SHARES UNDERLYING WARRANTS OFFERED PERCENTAGE OF SHARES
SELLING SECURITYHOLDER PRIOR TO OFFERING FOR ACCOUNT OF SELLING STOCKHOLDER OWNED AFTER OFFERING
<S> <C> <C> <C>
100,000 Warrants
Marc R. Wein .............. 0 100,000 Shares 0 / 0%
150,000 Warrants
Grigoris Charisis ......... 0 150,000 Shares 0 / 0%
</TABLE>
================================================================================
PLAN OF DISTRIBUTION
The sale of the securities by the Selling Securityholders may be effected
from time to time in transactions (which may include block transactions by or
for the amount of the Selling Securityholders) in the over-the-counter market or
in negotiated transactions, through the writing of options on the securities, a
combination of such methods of sale or otherwise. Sales may be made at fixed
prices which may be changed, at market prices prevailing at the time of sale or
at negotiated prices.
The Selling Securityholders may effect such transactions by selling their
securities directly to purchasers, through broker-dealers acting as agents for
the Selling Securityholders or to broker-dealers who may purchase shares as
principals and thereafter sell the securities from time to time in the over
the-counter market in negotiated transactions or otherwise. Such broker-dealers,
if any, may receive compensation in the form of discounts, concessions or
commissions from the Selling Securityholders or the purchasers for whom such
broker-dealers may act as agents or to whom they may sell as principals or
otherwise (which compensation as to a particular broker-dealer may exceed
customary commissions).
Under applicable rules and regulations under the Securities Exchange Act of
1934 ("Exchange Act"), any person engaged in the distribution of the Selling
Securityholder Warrants may not simultaneously engage in market making
activities with respect to any securities of the Company during the applicable
"cooling-off' period (at least two, and possibly nine, business days) prior to
the commencement of such distribution. Accordingly, in the event that any of the
Underwriters or selling group member with respect to the Concurrent Public
Offering that is engaged in a distribution of the Selling Securityholder
Warrants, it will not be able to make a market in the Company's securities
during the applicable restrictive period. However, the Representative has not
agreed to nor is it obliged to act as a broker-dealer in the sale of the Selling
Securityholder Warrants, and the Selling Securityholders may be required to sell
such securities through another broker-dealer. In addition, each Selling
Securityholder desiring to sell Warrants will be subject to the applicable
provisions of the Exchange Act and the rules and regulations thereunder,
including, without limitation, Regulation M, which provisions may limit the
timing of the purchases and sales of shares of the Company's securities by such
Selling Securityholders.
The Selling Securityholders and broker-dealers, if any, acting in
connection with such sale might be deemed to be underwriters within the meaning
of Section 2(11) of the Securities Act, and any commission received by them and
any profit on the resale of the securities might be deemed to be underwriting
discounts and commissions under the Securities Act.
The Company has agreed not to solicit exercises of the Selling
Securityholder Warrants other than through the Representative, unless the
Representative declines to make such solicitation. Upon any exercise of the
Selling Securityholder Warrants after the first anniversary of the effective
date of this Prospectus, the Company will pay the Representative a fee of 5% of
the aggregate exercise price of the Selling Securityholder Warrants, if (i) the
market price of the company's Common Stock on the date such Warrants are
exercised is greater than the exercise price of such Warrants; (ii) the exercise
of the Selling Securityholder Warrants was solicited by a member of the NASD;
(iii) the warrantholder desig-
<PAGE>
ADDITIONAL PAGE FOR ALTERNATE PROSPECTUS
nates the NASD member that solicited such exercise and the broker-dealer to
receive compensation for such exercise; (iv) the Selling Securityholder Warrants
are not held in a discretionary account; (v) disclosure of compensation
arrangements was made both at the time of the offering and at the time of
exercise of the Selling Securityholder Warrants; and (vi) the solicitation of
exercise of the Selling Securityholder Warrants was not in violation of
Regulation M and certain other rules promulgated under the Exchange Act. If the
Representative elects to solicit exercises of the Selling Securityholder
Warrants and the soliciting broker-dealer is not the Representative, the
Representative will be obligated to pay the compensation due to the soliciting
broker-dealer.
Regulation M may prohibit the Representative or any other soliciting
broker-dealer from engaging in any market making activities with regard to the
Company's securities for the period from five business days (or such other
applicable period as Regulation M may provide) prior to any solicitation by the
Representative or such other soliciting broker-dealer of the exercise of the
Selling Securityholder Warrants until the later of the termination of such
solicitation activity or the termination (by waiver or otherwise) of any right
that the Representative or such other soliciting broker-dealer may have to
receive a fee for soliciting the exercise of the Selling Securityholder Warrants
following such solicitation. As a result, the Representative and other
broker-dealers may be unable to provide a market for the Company's securities
during certain periods while the Warrants are exercisable.
CONCURRENT PUBLIC OFFERING
On the date of this Prospectus, a Registration Statement was declared
effective under the Securities Act with respect to an underwritten offering by
the Company of 2,000,000 Units by the Company and up to 300,000 additional Units
to cover over-allotments, if any.
<PAGE>
ALTERNATE PROSPECTUS COVER PAGE
SUBJECT TO COMPLETION, DATED MARCH ___, 1998
250,000 REDEEMABLE CLASS A WARRANTS
AND
250,000 ORDINARY SHARES
ISSUABLE UPON EXERCISE OF THE
250,000 REDEEMABLE CLASS A WARRANTS
PROSPECTUS
C.W. CHEMICAL WASTE TECHNOLOGIES LIMITED
This Prospectus relates to 250,000 Redeemable Class A Warrants (the
"Selling Securityholder Warrants" or the "Warrants") of C.W. Chemical Waste
Technologies Limited, a Cyprus corporation (the "Company"), held by holders (the
"Selling Securityholders") and the 250,000 Ordinary Shares, $.10 par value
("Ordinary Shares") issuable upon the exercise of the Selling Securityholder
Warrants. The Selling Securityholder Warrants, together with the Ordinary
Shares, are sometimes collectively referred to herein as the "Selling
Securityholder Securities." The Selling Securityholder Warrants were issued to
the Selling Securityholders upon automatic conversion of warrants they received
in a private placement by the Company completed in February 1998 (the "Bridge
Financing") and are identical to the Warrants included in the Units being sold
in the Company's initial public offering pursuant to a prospectus of even date
herewith. See "Selling Securityholders" and "Plan of Distribution." Each Selling
Securityholder Warrant entitles the holder to purchase, at an exercise price of
$6.00, subject to adjustment, one Ordinary Share at any time after the first
anniversary through the fifth anniversary of the date of this Prospectus. See
"Plan of Distribution." Commencing two years from the date hereof, the Warrants
are subject to redemption by the Company for $.05 per Warrant, upon 30 days'
written notice, if the average closing bid price of the Ordinary Shares averages
at least $8.25 per share (subject to adjustment) for 20 consecutive business
days ending ten days prior to the date of the notice of redemption. See
"Description of Securities."
The securities offered by this Prospectus may be sold from time to time by
the Selling Securityholders or by their transferees. The distribution by the
Selling Securityholders of the Class A Warrants and the Ordinary Shares offered
hereby by the Selling Securityholders may be effected in one or more
transactions that may take place on the over-the-counter market, including
ordinary brokers' transactions, privately negotiated transactions or through
sales to one or more dealers for resale of such securities as principals, at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices. Usual and customary or
specifically negotiated brokerage fees or commissions may be paid by the Selling
Securityholders.
The Selling Securityholders, and intermediaries through whom such
securities are sold, may be deemed underwriters within the meaning of the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
securities offered, and any profits realized or commissions received may be
deemed underwriting compensation. The Company has agreed to indemnify the
Selling Securityholders against certain liabilities, including liabilities under
the Securities Act.
The Company will not receive any of the proceeds from the sale of the
Selling Securityholders Securities by the Selling Securityholders. In the event
the Selling Securityholder Warrants are exercised, the Company will receive
gross proceeds of $1,500,000. See "Selling Securityholders" and "Plan of
Distribution."
On the date of this Prospectus, a registration statement under the
Securities Act with respect to an underwritten public offering by the Company
(the "Concurrent Public Offering") of 2,000,000 Units, each Unit consisting of
one Ordinary Share and one Class A Warrant, was declared effective by the
Securities and Exchange Commission (the "Commission"). The Company will receive
approximately $8,200,000 in net proceeds from the Concurrent Public Offering
(assuming no exercise of the Underwriters' over-allotment option) after payment
of underwriting discounts and commissions and estimated expenses of the
Concurrent Public Offering.
AN INVESTMENT IN THESE SECURITIES INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" COMMENCING ON PAGE 7.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is ___________________, 1998
<PAGE>
ADDITIONAL PAGE FOR ALTERNATE PROSPECTUS
================================================================================
----------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----------
<S> <C>
Prospectus Summary ......................... 3
Risk Factors ............................... 7
Use of Proceeds ............................ 13
Dividend Policy ............................ 13
Capitalization ............................. 14
Dilution ................................... 15
Selected Financial Data .................... 16
Management's Discussion and Analysis
of Financial Condition and Results of
Operations .............................. 17
Business ................................... 18
Management ................................. 25
Certain Transactions ....................... 29
Principal Shareholders ..................... 31
Concurrent Offering ........................ 31
Description of Securities .................. 32
Certain Cyprus Tax Considerations .......... 33
Certain United States Federal Income
Tax Considerations ...................... 34
Shares Eligible for Future Sale ............ 39
Underwriting ............................... 40
Legal Matters .............................. 43
Experts .................................... 43
Additional Information ..................... 43
Index to Financial Statements .............. F-1
</TABLE>
----------------------------------------
UNTIL 1998, ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED
SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED
TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
================================================================================
<PAGE>
================================================================================
250,000 CLASS A WARRANTS
AND
250,000 ORDINARY SHARES
C.W. CHEMICAL WASTE
TECHNOLOGIES LIMITED
-----------------------------------------------------
PROSPECTUS
-----------------------------------------------------
, 1998
================================================================================
2,000,000 Units
Each Unit consisting of one ordinary share, par value $0.10 per
share, and one redeemable Class A Warrant
C. W. CHEMICAL WASTE TECHNOLOGIES LIMITED
UNDERWRITING AGREEMENT
New York, New York
, 1998
RAS Securities Corp.
As Representative of the Several
Underwriters listed on Schedule A hereto
50 Broadway
New York, New York 10004
Ladies and Gentlemen:
C.W. Chemical Waste Technologies Limited, a company organized under the
laws of Cyprus (the "Company"), confirms its agreement with RAS Securities Corp.
("RAS") and each of the other underwriters named in Schedule A hereto and any
underwriter substituted as hereinafter provided (collectively, the
"Underwriters"), for whom RAS is acting as representative (RAS, acting in such
capacity, the "Representative"), with respect to the sale by the Company and the
purchase by the Underwriters, acting severally and not jointly, of the
respective numbers of units set forth in said Schedule A, or 2,000,000 units in
the aggregate, each unit (a "Unit") consisting of one ordinary share of the
Company, par value $0.10 per share (each, a "Share" and collectively, the
"Shares"), and a warrant to acquire one additional Share (each, a "Warrant" and
collectively, the "Warrants"). The Shares and Warrants comprising the Units
shall be immediately separable and tradeable upon issuance and shall not trade
as Units. Each Warrant is exercisable from the effective date of the
Registration Statement (as defined below) (the "Effective Date") until the fifth
anniversary of the Effective Date, at an initial exercise price of $6.00,
subject to adjustment. The Warrants are redeemable by the Company under certain
circumstances commencing on the second anniversary of the Effective Date, as
more fully described in the Registration Statement and the Prospectus (as
defined below). The 2,000,000 Units are hereinafter referred to as the "Firm
Units." Upon request of RAS as provided in Section 2(b) of this Agreement, the
Company shall also issue and sell to RAS and/or certain Underwriters, up to
300,000 additional Units for the purpose of covering over-allotments, if any, in
the sale of the Firm Units (the "Over-Allotment Units"). The Firm Units and the
Over-Allotment Units are hereinafter collectively referred to as the "Units."
The Company also proposes to issue and sell to the Representative a warrant (the
"Representative's Warrant") pursuant
<PAGE>
to the Representative's Warrant Agreement dated ______, 1998 between the
Representative and the Company (the "Representative's Warrant Agreement") for
the purchase by the Representative of an additional 200,000 units, each
consisting of one Share and one Warrant (collectively, the "Representative's
Securities"). The Shares issuable upon exercise of the Warrants (including the
Warrants issuable upon exercise of the right to acquire any of the
Over-Allotment Units (the "Over-Allotment Option") and the Warrants underlying
the Representative's Warrant) are hereinafter sometimes referred to as the
"Warrant Shares." The Units, the Shares, the Warrants, the Representative's
Warrant, the Representative's Securities and the Warrant Shares are more fully
described in the Registration Statement and the Prospectus (as hereinafter
defined).
1. Representations and Warranties.
(a) The Company represents and warrants to, and agrees with, each of the
Underwriters as of the date hereof and as of the Closing Date (as hereinafter
defined) and each Over-Allotment Closing Date (each, as hereinafter defined), if
any, as follows:
(i) The Company has prepared and filed with the Securities and
Exchange Commission (the "Commission") the registration statement of the
Company on Form F-1 (No. ________), and an amendment or amendments
thereto, including any related preliminary or final prospectus
(respectively, the "Preliminary Prospectus" and the "Prospectus"), for the
registration of the Units, the Shares, the Warrants, the Representative's
Warrant, Representative's Securities and the Warrant Shares, under the
Securities Act of 1933, as amended (the "Act"), which registration
statement (as amended) has been prepared by the Company in conformity with
the requirements of the Act and the rules and regulations of the
Commission promulgated under the Act. The Company shall promptly file a
further amendment to the registration statement in the form heretofore
delivered to the Underwriters and will not file any other amendment
thereto to which the Underwriters shall have objected in writing after
having been provided a copy thereof. Except as the context may otherwise
require, the registration statement on file with the Commission (including
the Prospectus, financial statements, schedules, exhibits and all other
documents or information incorporated by reference therein) and all
information deemed to be a part thereof as of such time pursuant to
paragraph (b) of Rule 430(A) of the rules and regulations of the
Commission), is referred to herein as the "Registration Statement," and
the form of prospectus in the form first filed with the Commission
pursuant to Rule 424(b) of the rules and regulations of the Commission is
hereinafter called the "Prospectus." For purposes hereof, the term "Rules
and Regulations" means the rules and regulations adopted by the Commission
either under the Act or the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), as applicable.
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(ii) Neither the Commission nor any state regulatory authority has
issued any order preventing or suspending the use of any Preliminary
Prospectus, the Registration Statement or the Prospectus or any part of
any thereof, and no proceeding for a stop order suspending the
effectiveness of the Registration Statement or any of the Company's
securities has been instituted or is pending or threatened. Each of the
Preliminary Prospectus, the Registration Statement and the Prospectus at
the time of filing thereof conformed or will conform with the requirements
of the Act and the Rules and Regulations, and neither the Preliminary
Prospectus, the Registration Statement nor the Prospectus at the time of
filing thereof contained or will contain any untrue statement of a
material fact or omitted or will omit to state any material fact required
to be stated therein or necessary to make the statements therein, in light
of the circumstances under which they were or will be made, not
misleading; provided, however, that this representation and warranty shall
not apply to statements made in reliance upon and in conformity with
written information furnished to the Company with respect to the
Underwriters by or on behalf of the Underwriters expressly for use in such
Preliminary Prospectus, Registration Statement or the Prospectus or any
amendment or supplement thereto.
(iii) When the Registration Statement becomes effective and at all
times subsequent thereto up to the Closing Date (as hereinafter defined)
and each Over-Allotment Closing Date (as hereinafter defined), if any, and
during such longer period as the Prospectus may be required to be
delivered in connection with sales by the Underwriters or any dealer, the
Registration Statement and the Prospectus will contain all statements
which are required to be stated therein in accordance with the Act and the
Rules and Regulations, and will conform to the requirements of the Act and
the Rules and Regulations; neither the Registration Statement nor the
Prospectus, nor any amendment or supplement thereto, contains or will
contain any untrue statement of any material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading; provided, however, that this representation and
warranty shall not apply to statements made or statements omitted in
reliance upon and in conformity with information furnished to the Company
in writing by or on behalf of any Underwriter (as set forth in paragraph
l(a)(ii) hereof) expressly for use in the Preliminary Prospectus, the
Registration Statement or Prospectus or any amendment thereof or
supplement thereto.
(iv) The Company is a company duly organized, validly existing and
in good standing under the laws of Cyprus. The Company does not own an
equity interest in any corporation, company, partnership, trust, joint
venture or other business
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entity. The Company is duly qualified and licensed and in good standing as
a foreign corporation in each jurisdiction in which the ownership or
leasing of any properties or the character of its operations require such
qualification or licensing, except where the failure to be so qualified,
licensed or in good standing, individually or in the aggregate, would not
materially and adversely affect the condition, financial or otherwise, or
the earnings, business affairs, position, prospects, value, operation,
properties, business or results of operations of the Company. The Company
has all requisite power and authority (corporate and other), and has
obtained any and all authorizations, approvals, orders, licenses,
certificates, franchises and permits of and from all governmental or
regulatory officials and bodies (including, without limitation, those
having jurisdiction over environmental or similar matters), necessary to
own or lease its properties and to conduct its business as described in
the Prospectus; the Company is and has been doing business in compliance
with all such authorizations, approvals, orders, licenses, certificates,
franchises and permits and all federal, state, local and foreign laws,
rules and regulations and the Company has not received any notice of
proceedings relating to the revocation or modification of any such
authorization, approval, order, license, certificate, franchise, or permit
which, singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would materially and adversely affect the
condition, financial or otherwise, or the earnings, business affairs,
position, prospects, value, operations, properties, business, or results
of operations of the Company. The disclosures in the Registration
Statement and the Prospectus concerning the effects of federal, state,
local, and foreign laws, rules and regulations on the Company's business
as currently conducted and as contemplated are correct in all material
respects and do not omit to state a material fact necessary to make the
statements contained therein not misleading in light of the circumstances
in which they were made.
(v) The Company has a duly authorized, issued and outstanding
capitalization as set forth in the Prospectus, and will have the adjusted
capitalization set forth therein on the Closing Date (as hereinafter
defined) and each Over-Allotment Closing Date (as hereinafter defined), if
any, based upon the assumptions set forth therein; the Company is not a
party to, nor is it bound by, any instrument, agreement or other
arrangement providing for it to issue any shares of capital stock, or any
rights, warrants, options or other securities, except this Agreement and
as described in the Prospectus. The Units, the underlying Shares, the
Warrants, the Warrant Shares, the Representative's Warrant and the
Representative's Securities (hereinafter sometimes collectively referred
to as the "Securities") and all other securities issued or issuable by the
Company conform or, when issued and paid for, will
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<PAGE>
conform, in all respects to all statements relating thereto contained in
the Registration Statement and the Prospectus. All issued and outstanding
securities of the Company have been duly authorized and validly issued and
are fully paid and non-assessable and the holders thereof have no rights
of rescission with respect thereto and are not subject to personal
liability by reason of being such holders; and no such securities were
issued in violation of the preemptive rights of any holder of any
security of the Company or similar contractual rights granted by the
Company. The Securities are not and will not be subject to any preemptive
or other similar rights of any shareholder, have been duly authorized and,
when issued, paid for and delivered in accordance with the terms hereof,
will be validly issued, fully paid and non-assessable and will conform to
the description thereof contained in the Prospectus; the holders thereof
will not be subject to any liability solely as such holders; all corporate
action required to be taken with respect to the authorization, issuance
and sale of any Securities has been duly and validly taken; and the
certificates representing the Securities are in due and proper form. Upon
the issuance and delivery, pursuant to the terms hereof, of the Securities
to be sold by the Company hereunder, the Underwriters or the
Representative, as the case may be, will acquire good and marketable title
to such Securities free and clear of any lien, charge, claim, encumbrance,
pledge, security interest, defect or other restriction or equity of any
kind whatsoever.
(vi) The financial statements of the Company together with the
related notes and schedules thereto included in the Registration
Statement, the Preliminary Prospectus and the Prospectus fairly present
the financial position, income, changes in cash flow, changes in
shareholders' equity and the results of operations of the Company at the
respective dates and for the respective periods to which they apply, and
the pro forma financial information included in the Registration
Statement, the Preliminary Prospectus and the Prospectus presents fairly,
and on a basis consistent with that of the audited financial statements
included therein, the Company's pro forma net income or loss per share, as
the case may be, pro forma net tangible book value and the pro forma
capitalization, and such financial statements have been prepared in
conformity with generally accepted accounting principles in the United
States, consistently applied throughout the periods involved, and the
Rules and Regulations. There has been no material adverse change or
development involving any material change in the condition, financial or
otherwise, or in the earnings, business affairs, position, prospects,
value, operation, properties, business or results of operation of the
Company, whether or not arising in the ordinary course of business, since
the date of the financial statements included in the Registration
Statement and the Prospectus, and
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<PAGE>
the outstanding debt, the property, both tangible and intangible, and the
business of the Company conforms in all material respects to the
descriptions thereof contained in the Registration Statement and the
Prospectus.
(vii) The Company (A) has paid all federal, state, local, and
foreign taxes for which it is liable, including, but not limited to,
withholding taxes and amounts payable under Chapters 21 through 24 of the
Internal Revenue Code of 1986, as amended (the "Code"), and has furnished
all information returns it is required to furnish pursuant to the Code,
(B) has established adequate reserves for such taxes which are not yet due
and payable, and (C) does not have any tax deficiency or claims
outstanding, proposed or assessed against it.
(viii) No transfer tax, stamp duty or other similar tax is payable
by or on behalf of the Underwriters or the Representative in connection
with (A) the issuance by the Company of any Securities, (B) the purchase
by the Underwriters of the Units, and the underlying Shares, Warrants and
Warrant Shares or the purchase by the Representative and/or certain of the
Underwriters of the Representative's Warrant or the Representative's
Securities from the Company, (C) the consummation by the Company of any of
its obligations under this Agreement, or (D) resales of the Securities in
connection with the distribution contemplated hereby.
(ix) The Company maintains insurance policies, including, but not
limited to, general liability, [product liability] and property insurance,
which insure the Company, its employees and properties, against such
losses and risks as are generally insured against by comparable companies
in the exercise of prudent business judgement. The Company (A) has not
failed to give notice or present any insurance claim with respect to any
matter, including, but not limited to, the Company's business, property or
employees, under any insurance policy or surety bond in a due and timely
manner, (B) does not have any disputes or claims against any underwriter
of any such insurance policy or surety bond and has not failed to pay any
premiums due and payable thereunder, and (C) has not failed to comply with
all conditions contained in each such insurance policy and surety bond.
There are no facts or circumstances applicable under any such insurance
policy or surety bond which would relieve any insurer of its obligation to
satisfy in full any valid claim of the Company.
(x) There is no action, suit, proceeding, inquiry, arbitration,
investigation, litigation, or governmental or administrative proceeding,
including, without limitation, any such action, suit, proceeding, inquiry,
arbitration, investigation, litigation or proceeding by any person having
jurisdiction over environmental or similar matters, domestic
6
<PAGE>
or foreign, pending or threatened against (or circumstances that may give
rise to the same), or involving the properties or business of the Company
which (A) questions the validity of the capital stock of the Company or
this Agreement, the Representative's Warrant, the Warrant Agreement or of
any action taken or to be taken by the Company pursuant to or in
connection with this Agreement, the Representative's Warrant or the
Warrant Agreement, (B) is required to be disclosed in the Registration
Statement which is not so disclosed, and such proceedings as are
summarized in the Registration Statement are accurately summarized in all
material respects, or (C) if adversely determined, might materially and
adversely affect the condition, financial or otherwise, or the business
affairs or business prospects, earnings, liabilities, prospects,
shareholders' equity, value, properties, business or assets of the
Company.
(xi) The Company has full legal right, power and authority to
authorize, issue, deliver and sell the Securities, enter into this
Agreement, the Representative's Warrant and the Warrant Agreement and to
consummate the transactions contemplated hereby and thereby; and each of
this Agreement, the Representative's Warrant and the Warrant Agreement has
been duly and properly authorized, executed and delivered by the Company.
This Agreement, the Representative's Warrant and the Warrant Agreement
each constitutes the legal, valid and binding agreement of the Company
enforceable against the Company in accordance with its terms, except as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application relating
to or affecting enforcement of creditors' rights and the application of
equitable principles in any action, legal or equitable, and except as
rights to indemnification or contribution may be limited by applicable
law), and neither the Company's issuance and sale of any Securities or its
execution or delivery of this Agreement, the Representative's Warrant or
the Warrant Agreement or its performance hereunder and thereunder, its
consummation of the transactions contemplated hereby and thereby, or the
conduct of its business as described in the Registration Statement, the
Prospectus, and any amendments or supplements thereto, conflicts with or
will conflict with or results or will result in any breach or violation of
any of the terms or provisions of, or constitutes or will constitute a
default under or results or will result in the creation or imposition of
any lien, charge, claim, encumbrance, pledge, security interest, defect or
other restriction or equity of any kind whatsoever upon any property or
assets (tangible or intangible, including, without limitation, any rights
with respect to intellectual property) of the Company pursuant to the
terms of, (A) the Memorandum of Association or the Articles of
Association, each as the same may have been amended from time to time
(respectively, the
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<PAGE>
"Memorandum" and the "Articles"), (B) any license, patent or patent
application, contract, indenture, mortgage, deed of trust, voting trust
agreement, shareholders' agreement, note, loan or credit agreement or any
other agreement or instrument to which the Company is a party or by which
it is or may be bound or to which any of its properties or assets
(tangible or intangible) is or may be subject, or any indebtedness, or (C)
any statute, judgment, decree, order, rule or regulation applicable to the
Company of any arbitrator, court, regulatory body or administrative agency
or other governmental agency or body (including, without limitation, those
having jurisdiction over environmental or similar matters), domestic or
foreign, having jurisdiction over the Company or any of its activities or
properties, in each case except for conflicts, breaches, violations,
defaults, or impositions which do not and would not, individually or in
the aggregate, have a material adverse effect on the condition, financial
or otherwise, or the earnings, business affairs, position, shareholders'
equity, value, operation, properties, business or results of operations of
the Company.
(xii) No consent, approval, authorization or order of, and no filing
with, any court, regulatory body, government or administrative agency or
other body, domestic or foreign, is required for the issuance of any
securities pursuant to the Prospectus or the Registration Statement, this
Agreement, the Representative's Warrant or the Warrant Agreement, the
execution, delivery or performance of this Agreement, the Representative's
Warrant or the Warrant Agreement, or the transactions contemplated hereby
or thereby, including, without limitation, any waiver of any preemptive
right, right of first refusal or other right that any entity or individual
may have with respect to the issuance and/or sale of any Securities,
except such as have been or may be obtained under the Act or may be
required under state securities or Blue Sky laws in connection with the
Underwriters' purchase and distribution of the Securities and the purchase
by the Representative (and/or any of the Underwriters) of the
Representative's Warrant and the underlying Shares and Warrants to be
issued and sold by the Company hereunder and thereunder.
(xiii) All executed agreements, contracts or other documents or
copies of executed agreements, contracts or other documents filed as
exhibits to the Registration Statement to which the Company is a party or
by which it may be bound or to which its assets, properties or business
may be subject have been duly and validly authorized, executed and
delivered by the Company and constitute the legal, valid and binding
obligations and agreements of the Company, enforceable against the Company
in accordance with their respective terms. The descriptions in the
Registration Statement of agreements, contracts, licenses, patents and
patent applications, other
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<PAGE>
documents, statutes and regulations are accurate and fairly present the
information required to be shown with respect thereto by Form F-1; there
are no contracts, other documents or arrangements which are required by
the Act to be described and/or filed as exhibits to the Registration
Statement which are not described or filed as required; and the exhibits
which have been filed are complete and correct copies of the documents of
which they purport to be copies.
(xiv) Subsequent to the respective dates as of which information is
set forth in the Registration Statement and Prospectus, and except as may
otherwise be indicated or contemplated herein or therein, the Company has
not (A) issued any securities or incurred any liability or obligation,
direct or contingent, for borrowed money, (B) entered into any transaction
other than in the ordinary course of business, or (C) declared or paid any
dividend or made any other distribution of or in respect of its capital
stock of any class, and there has not been any change in the capital
stock, or any change in the debt (long or short term) or liabilities of
the Company or any material change in or affecting the business affairs or
prospects, management, shareholders' equity, properties, business,
financial operations or assets (tangible or intangible) of the Company.
(xv) No default exists in the due performance and observance of any
term, covenant or condition of any license, contract, indenture, mortgage,
installment sale agreement, lease, deed of trust, voting trust agreement,
shareholders agreement, partnership agreement, note, loan or credit
agreement, purchase order, or any other material agreement or instrument
evidencing an obligation for borrowed money, or any other material
agreement or instrument to which the Company is a party or by which the
Company or any of its assets is or may be bound or to which the property
or assets (tangible or intangible) of the Company is subject or affected,
which default would have a material adverse effect on the condition,
financial or otherwise, earnings, business affairs, position,
shareholders' equity, value, operation, properties (tangible or
intangible), business or results of operations of the Company.
(xvi) The Company has generally enjoyed a satisfactory
employer-employee relationship with its employees and is in compliance in
all material respects with all federal, state, local and foreign laws and
regulations respecting employment and employment practices, terms and
conditions of employment and wages and hours. There are no pending
investigations involving the Company by the U.S. Department of Labor or
any other governmental or administrative agency responsible for the
enforcement of such federal, state, local, or foreign laws and
regulations. There is no unfair labor practice charge or complaint against
the Company pending before the National Labor Relations Board or any
strike, picketing, boycott,
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dispute, slowdown or stoppage pending or threatened against or involving
the Company or any predecessor entity, and none has ever occurred. No
question exists as to representation with respect to the employees of the
Company and no bargaining agreement or modification thereof is currently
being negotiated by the Company. No grievance or arbitration proceeding is
pending under any expired or existing bargaining agreement of the Company.
No labor dispute exists with any employee of the Company, or, to the
knowledge of the Company, is imminent.
(xvii) Except as described in the Prospectus, the Company does not
maintain, sponsor or contribute to any program or arrangement that
constitutes an "employee pension benefit plan," an "employee welfare
benefit plan," or a "multiemployer plan" as such terms are defined in
Sections 3(2), 3(1) and 3(37), respectively, of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA") (collectively, "ERISA
Plans"). The Company does not now maintain or contribute to, nor has it at
any time maintained or contributed to, any "defined benefit plan," as
defined in Section 3(35) of ERISA. No ERISA Plan (or any trust created
thereunder) has engaged in a "prohibited transaction" within the meaning
of Section 406 of ERISA or Section 4975 of the Code which could subject
the Company to any tax penalty on prohibited transactions and which has
not adequately been corrected. Each ERISA Plan is in compliance with all
material reporting, disclosure and other requirements of the Code and
ERISA as they relate to such ERISA Plan. Determination letters have been
received from the Internal Revenue Service with respect to each ERISA Plan
which is intended to comply with Code Section 401(a) stating that such
ERISA Plan and the attendant trust are qualified thereunder. The Company
has never completely or partially withdrawn from a "multiemployer plan."
(xviii) Neither the Company nor any of its employees, directors,
shareholders, nor any affiliate (as defined in the Rules and Regulations)
of any of the foregoing has taken or will take, directly or indirectly,
any action designed to or which has constituted or will constitute or
which might be expected to cause or result in, under the Exchange Act or
otherwise, stabilization or manipulation of the price of any security of
the Company to facilitate the sale or resale of any of the Securities or
otherwise.
(xix) None of the patents, patent applications, service marks,
trademarks, trade names, copyrights, licenses, technology, know-how and
any other rights with respect to any of the foregoing or any other
intellectual property rights currently owned, licensed or held by the
Company is in dispute or is in any conflict with the rights of any other
person or entity. The Company (A) owns or has the license or other right
to use,
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free and clear of all liens, charges, claims, encumbrances, pledges,
security interests, defects or other restrictions or equities of any kind
whatsoever, all patents, trademarks, service marks, trade names,
copyrights, technology, know-how, any licenses and all other rights with
respect to the foregoing, used in the conduct of its business as now
conducted or proposed to be conducted without infringing upon or otherwise
adversely affecting any right or claimed right of any individual or entity
under or with respect to any of the foregoing, and (B) except as set forth
in the Prospectus, is not obligated nor does it have any liability
whatsoever to make any payments by way of royalties, fees or otherwise to
any owner or licensee of, or other claimant to, any patent, trademark,
service mark, trade name, copyright, know-how, technology or other
intellectual property right or intangible asset with respect to the use
thereof or in connection with the conduct of the Company's business or
otherwise.
(xx) The Company has not received any notice of infringement of or
conflict with asserted right(s) of others with respect to any patent,
patent application, technology, know-how, trademark, service mark, trade
name, copyright, application or license for any of the foregoing or other
intellectual property right or intangible asset used or held for use by
the Company in connection with the conduct of its business which, singly
or in the aggregate, if the subject of an unfavorable decision, ruling or
finding, might have a material adverse effect on the condition, financial
or otherwise, or the earnings, business affairs, position, prospects,
value, operations, properties, business or results of operations,
shareholders' equity, financial operations, properties or assets (tangible
or intangible) of the Company.
(xxi) The Company has good and marketable title to, or valid and
enforceable leasehold estates in, all items of real and personal property
stated in the Prospectus to be owned or leased by it, free and clear of
all liens, charges, claims, encumbrances, pledges, security interests,
defects or other restrictions or equities of any kind whatsoever, except
those referred to in the Prospectus and liens for taxes not yet due and
payable.
(xxii) Coopers & Lybrand, Certified Public Accountants, whose report
is filed with the Commission as a part of the Registration Statement, are
independent certified public accountants as required by the Act and the
Rules and Regulations.
(xxiii) The Company has caused to be duly executed legally binding
and enforceable agreements pursuant to which each of its officers,
directors, any person or entity deemed to be an affiliate of the Company
and any shareholders of the Company has each agreed not to, directly or
indirectly, offer to sell, sell, grant any option for the sale of, assign,
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transfer, pledge, hypothecate or otherwise encumber or dispose of any
Shares or other securities of the Company (either pursuant to Rule 144 or
Regulation S of the Rules and Regulations or otherwise) or dispose of any
beneficial interest therein for a period of not less than 18 months
following the Effective Date of the Registration Statement without the
prior written consent of the Representative, and any Share or other
security of the Company which has been issued and is outstanding on the
Effective Date and is to be sold or otherwise disposed of pursuant to Rule
144, Regulation S or otherwise with the consent of the Representative
shall only be sold or otherwise disposed of through the Representative.
The Company shall cause the Transfer Agent, as defined below, to affix an
appropriate legend on the face of stock certificates representing all such
Shares and other securities and to issue "stop transfer" orders with
respect to all such Shares and other securities to the Transfer Agent.
(xxiv) There are no claims, payments, issuances, arrangements or
understandings, whether oral or written, for services in the nature of a
finder's or origination fee with respect to the sale of the Securities
hereunder or any other arrangements, agreements, understandings, payments
or issuance with respect to the Company, or any of its officers,
directors, shareholders, partners, employees or affiliates that may affect
the Underwriters' compensation, as determined by the National Association
of Securities Dealers, Inc. ("NASD") except the obligation to pay the sum
of $20,000 to D.H. Blair Investment Banking Corp. and/or any of its
affiliates. The Company acknowledges that the Representative and each of
the Underwriters will compensate any of their respective personnel who may
have acted in such capacities as the Representative and the Underwriters
shall determine in their sole discretion.
(xxv) The Shares, the Warrants, the Warrant Shares and the
Representative's Securities have been approved for quotation on the Nasdaq
SmallCap Market and, upon notice of issuance, listing on the Boston Stock
Exchange (the "BSE").
(xxvi) Neither the Company, nor any of its officers, employees,
agents or any other person acting on behalf of the Company has, directly
or indirectly, given or agreed to give any money, gift or similar benefit
(other than legal price concessions to customers in the ordinary course of
business) to any customer, supplier, employee or agent of a customer or
supplier, or official or employee of any governmental agency (domestic or
foreign) or instrumentality of any government (domestic or foreign) or any
political party or candidate for office (domestic or foreign) or other
person who was, is, or may be in a position to help or hinder the business
of the Company (or assist the Company in connection with any actual or
proposed transaction) which (A) might subject the Company, or any other
person to any damage or penalty in any civil,
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criminal or governmental litigation or proceeding (domestic or foreign),
(B) if not given in the past, might have had a materially adverse effect
on the assets (tangible or intangible), business, operations or prospects
of the Company, or (C) if not continued in the future, might adversely
affect the assets (tangible or intangible), business, operations or
prospects of the Company. The Company's internal accounting controls are
sufficient to cause the Company to comply with the Foreign Corrupt
Practices Act of 1977, as amended.
(xxvii) Except as set forth in the Prospectus, no officer, director,
or shareholder of the Company, or any "affiliate" or "associate" (as such
terms are defined in Rule 405 promulgated under the Rules and Regulations)
of any of the foregoing persons or entities has or has had, either
directly or indirectly, (A) any interest in any person or entity which (1)
furnishes or sells services or products which are furnished or sold or are
proposed to be furnished or sold by the Company, or (2) purchases from or
sells or furnishes to the Company any goods or services, or (B) any
interest as a beneficiary of any contract or agreement to which the
Company is a party or by which it may be bound or affected. Except as set
forth in the Prospectus under the heading "Certain Transactions," there
are no existing agreements, arrangements, understandings or transactions,
or proposed agreements, arrangements, understandings or transactions,
between or among the Company, and any officer, director, Principal
Shareholder (as such term is defined in the Prospectus) of the Company, or
any partner, affiliate or associate of any of the foregoing.
(xxviii) Any certificate signed by any officer of the Company and
delivered to the Representative, the Underwriters or to Fischbein
Badillo Wagner Harding ("Underwriters' Counsel") shall be deemed a
representation and warranty by the Company to the Representative and the
Underwriters as to the matters covered thereby.
(xxix) The minute books of the Company have been made available to
the Representatives, the Underwriters and Underwriters' Counsel,
contain a complete summary of all meetings and actions of the directors
and shareholders of the Company since the time of its formation, and
reflect all transactions referred to in such minutes accurately in all
material respects.
(xxx) Except and to the extent described in the Prospectus, (A) no
holders of any securities of the Company or of any options, warrants or
other convertible or exchangeable securities of the Company have the right
to include any securities issued by the Company in the Registration
Statement or any registration statement under the Act, and (B) no
individual or entity holds any anti-dilution rights with respect to any
securities of the Company.
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(xxxi) As of the Effective Date, the Company has: (A) entered into
an employment agreement with each of Messrs. Kanarick and ____________ on
terms and conditions satisfactory to the Representative; (B) purchased
"Key-Man" life insurance on the lives of each Messrs. Kanarick and
______________ pursuant to insurance policies, in an amount not less than
$1 million each, which name the Company as the sole beneficiary thereof on
terms and conditions satisfactory to the Representative; and (C) purchased
director and officer liability insurance and general liability insurance
on terms and in amounts acceptable to the Underwriters; as of the date of
the initial filing of the Registration Statement with the Commission,
engaged the services of a financial public relations firm on terms
approved by the Representative.
(xxxii) The Company has entered into the Warrant Agreement with
Continental Stock Transfer and Trust Company with respect to the Warrants,
which Agreement is substantially in the form filed as Exhibit 4.3 to
the Registration Statement.
(xxxiii) Immediately prior to the Effective Date, there shall be no
more than an aggregate of 5,000,000 Shares issued and outstanding, (A)
including any and all (i) securities with rights equivalent to those of
the Shares, (ii) Shares or such equivalent securities issuable upon the
exercise of options, warrants and other contract rights and (iii)
securities convertible directly or indirectly into Shares or such
equivalent securities, but (B) excluding Shares issuable pursuant to (i)
the Representative's Warrant, (ii) the Company's 1998 Stock Option Plan
and (iii) the private placement of notes and warrants of the Company
completed in February 1998.
2. Purchase, Sale and Delivery of Securities.
(a) On the basis of the representations, warranties, covenants and
agreements herein contained, but subject to the terms and conditions herein set
forth, the Company agrees to sell to each Underwriter, and each Underwriter,
severally and not jointly, agrees to purchase from the Company at a price of
$4.50 per Unit (the "Purchase Price"), such number of Firm Units as is set forth
in Schedule A opposite such Underwriter's name, subject to such adjustments as
the Representative in its sole discretion shall make to eliminate any sales or
purchases of fractional shares, plus any additional number of Firm Units which
such Underwriter may become obligated to purchase pursuant to the terms of
Section 11 hereof.
(b) On the basis of the representations, warranties, covenants and
agreements herein contained, but subject to the terms and conditions herein set
forth, the Company hereby grants an
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option to the Underwriters, severally and not jointly, to purchase all or any
part of an additional 300,000 Units at the Purchase Price (the "Over-Allotment
Option"). The Over-Allotment Option granted hereby shall expire 45 days
following the Effective Date and may be exercised in whole or in part from time
to time upon notice by the Representative to the Company setting forth the
number of Over-Allotment Units as to which the several Underwriters are then
exercising the Over-Allotment Option and the time and date of payment and
delivery for any such Over-Allotment Units. Any such time and date of delivery
(an "Over-Allotment Closing Date") shall be determined by the Representative,
but shall not be later than seven full business days following exercise of the
Over-Allotment Option nor in any event prior to the Closing Date (as
hereinafter defined), unless otherwise agreed by the Representative and the
Company. Nothing herein contained shall obligate the Underwriters or the
Representative to make any over-allotments. No Over-Allotment Units shall be
delivered unless the Firm Units shall have been theretofore or are
simultaneously delivered as herein provided.
(c) Payment of the Purchase Price of, and delivery of certificates
evidencing, the Firm Units shall be made at the offices of RAS Securities Corp.
at 50 Broadway, New York, New York 10004 (the "RAS Offices"), or at such other
place designated by the Representative. Such delivery and payment shall be made
at 10:00 a.m. (New York City time) on ____________, 199__ or at such other time
and date agreed upon by the Representative and the Company, but no less than
three (3) nor more than ten (10) full business days following the Effective Date
(such time and date of payment and delivery of the Firm Units, the "Closing
Date"). In the event that any or all of the Over-Allotment Units are purchased
by the Representative and/or the Underwriters, payment of the Purchase Price of
and delivery of certificates for such Over-Allotment Units shall be made at each
Over-Allotment Closing Date at the RAS Offices or at such other place designated
by the Representative by notice to the Company. Delivery of the certificates for
the Firm Units and the Over-Allotment Units, if any, shall be made to the
Underwriters against payment by the Underwriters, severally and not jointly, of
the Purchase Price of the Firm Units and the Over-Allotment Units, if any, to
the order of the Company in New York Clearing House Funds. In the event that the
Over-Allotment Option is exercised, each of the Underwriters, acting severally
and not jointly, shall purchase that portion of the total number of
Over-Allotment Units then being purchased which the number of Firm Units set
forth in Schedule A hereto opposite the name of such Underwriter bears to the
total number of Firm Units, subject in each case to such adjustments as the
Representative shall make in its sole discretion to eliminate any sales or
purchases of fractional shares or otherwise. Certificates representing the Firm
Units and the Over-Allotment Units, if any, shall be in definitive, fully
registered form, shall bear no restrictive legends and shall be in such
denominations and registered in such names as the Representative and the
Underwriters may request in writing
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<PAGE>
at least two (2) business days prior to Closing Date or the relevant
Over-Allotment Closing Date, as the case may be. The certificates representing
the Firm Units and the Over-Allotment Units, if any, shall be made available to
the Representative at such office or such other place as the Representative may
designate for inspection and delivery no later than 9:30 a.m. on the last
business day prior to Closing Date or the relevant Over-Allotment Closing Date,
as the case may be.
(d) On the Closing Date, the Company shall issue and sell to the
Representative the Representative's Warrant, entitling the holders thereof to
purchase 200,000 units, at a purchase price of $.001 per unit. Each unit shall
be identical to the Units and shall be exercisable for $6.00 per unit (or 120%
of the offering price per Unit) for a period of four years commencing one year
from the Closing Date. The Representative's Warrant shall be substantially in
the form filed as Exhibit 4.2 to the Registration Statement. The holder(s) of
the Representative's Warrant and the Representative's Securities shall have
"piggy-back" and demand registration rights for periods of seven and five years,
respectively, from the Closing Date (as herein defined) as set forth in the
Representative's Warrant. Payment for the Representative's Warrant shall be made
on the Closing Date.
3. Public Offering of the Units. As soon after the Effective Date as the
Representative deems advisable, the Underwriters shall make a public offering of
the Firm Units and such number of Over-Allotment Units as they may determine
(other than to residents of, or in any jurisdiction in which, qualification of
the Units is required and has not become effective) at the price and upon the
other terms set forth in the Prospectus. The Representative may from time to
time increase or decrease the public offering price after distribution of the
Units has been completed to such extent as the Representative deems advisable in
the exercise of its sole discretion. The Underwriters may enter into one or more
agreements as the Underwriters in their sole discretion deem advisable, with one
or more broker-dealers who shall act as dealers in connection with such public
offering. Investors in the public offering shall be required to purchase one
Unit or multiples thereof. The Securities comprising each Unit shall, however,
be immediately separable and tradeable upon issuance and shall not be registered
or listed for trading on any exchange as units.
4. Covenants and Agreements of the Company. The Company covenants and
agrees with the Representative and each of the Underwriters as follows:
(a) The Company shall use its best efforts to cause the Registration
Statement and any amendments thereto to become effective as promptly as
practicable (such Registration Statement to be in form and substance
satisfactory to the Representative and
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<PAGE>
Underwriters' Counsel); the Company shall not, at any time, whether before or
after the Effective Date, file any amendment to the Registration Statement or
supplement to the Prospectus or file any document under the Act or the Exchange
Act before termination of the offering of the Units by the Underwriters (i)
unless the Company shall have previously advised the Representative and
Underwriters' Counsel and furnished the Representative and Underwriters' Counsel
with copies thereof or (ii) to which the Representative shall have objected or
(iii) which is not in compliance with the Act, the Rules and Regulations, or the
Exchange Act.
(b) As soon as the Company is advised or has knowledge thereof, the
Company shall advise the Representative and confirm by notice in writing, the
following: (i) the date on which the Registration Statement, as amended, becomes
effective, if the provisions of Rule 430A promulgated under the Act are to be
relied upon; (ii) the date on which the Prospectus is filed in accordance with
said Rule 430A; (iii) the date on which any post-effective amendment to the
Registration Statement becomes effective; (iv) the issuance by the Commission of
any stop order or of the initiation or threat of any proceeding suspending the
effectiveness of the Registration Statement or any order preventing or
suspending the use of the Preliminary Prospectus or the Prospectus, or any
amendment or supplement thereto, or the institution of proceedings for that
purpose; (v) the issuance by the Commission or by any state securities
commission of any proceedings for the suspension of the qualification of any of
the Securities for offering or sale in any jurisdiction or the initiation or
threat of any proceeding for that purpose; (vi) the receipt of any comments from
the Commission; and (vii) any request by the Commission for any amendment to the
Registration Statement or any amendment or supplement to the Prospectus or for
additional information. If the Commission or any state securities commission or
authority enters a stop order or suspends such qualification at any time, the
Company shall make every effort to secure promptly the lifting of such order or
suspension.
(c) The Company shall file the Prospectus (in form and substance
satisfactory to the Representative and Underwriters' Counsel) or transmit the
Prospectus by a means reasonably calculated to result in filing with the
Commission pursuant to Rule 424(b)(1) (or, if applicable and if consented to by
the Representative, pursuant to Rule 424(b)(47)) not later than the Commission's
close of business on the earlier of (i) the second business day following the
execution and delivery of this Agreement and (ii) the fifth business day after
the Effective Date.
(d) The Company shall: (i) give notice to the Representative of the
Company's intent to file or prepare any amendment to the Registration Statement
(including any post-effective amendment) or any amendment or supplement to the
Prospectus (including any revised prospectus which the Company proposes for use
by the
17
<PAGE>
Underwriters in connection with the offering of any Securities which differs
from the corresponding prospectus on file with the Commission at the time the
Registration Statement becomes effective, whether or not such revised prospectus
is required to be filed pursuant to Rule 424(b) of the Rules and Regulations);
(ii) shall furnish the Representative with copies of any such amendment or
supplement within a reasonable amount of time prior to such proposed filing or
use, as the case may be; and (iii) shall not file any such prospectus to which
the Representative or Underwriters' Counsel shall reasonably object.
(e) The Company shall take all action, in cooperation with the
Representative, at or prior to the Effective Date, to qualify the Units for
offering and sale under the securities laws of such jurisdictions as the
Representative may designate to permit the continuance of sales and dealings
therein for as long as may be necessary to complete the distribution thereof and
shall make such applications, file such documents and furnish such information
as may be required for such purpose; provided, however, that the Company shall
not be required to qualify as a foreign corporation in any such jurisdiction. In
each jurisdiction where such qualification will be effected, the Company shall,
unless the Representative agrees that such action is not necessary or advisable
at the time, use all reasonable efforts to file and make such statements or
reports at such times as are or may reasonably be required by the laws of such
jurisdiction to continue such qualification. It is agreed that Underwriters'
Counsel (or its designees) shall perform all such required Blue Sky legal
services.
(f) During the time when a prospectus is required to be delivered under
the Act, the Company shall use all reasonable efforts to comply with all
requirements imposed upon it by the Act and the Exchange Act, as now and
hereafter amended, or by the Rules and Regulations, as from time to time in
force, so far as necessary to permit the continuance of sales of or dealings in
the Securities in accordance with the provisions hereof and the Preliminary
Prospectus or the Prospectus, or any amendments or supplements thereto. If at
any time when a prospectus relating to any Securities is required to be
delivered under the Act, any event shall have occurred, as a result of which, in
the reasonable opinion of counsel to the Company or Underwriters' Counsel, the
Prospectus, as then amended or supplemented, includes any untrue statement of a
material fact or omits to state any material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, or if it is necessary at any time to
amend the Prospectus to comply with the Act or any of the Rules and Regulations,
the Company shall notify the Representative promptly and prepare and file with
the Commission an appropriate amendment or supplement in accordance with Section
10 of the Act, each such amendment or supplement to be satisfactory to
Underwriters' Counsel, and the Company shall furnish to the Underwriters copies
18
<PAGE>
of such amendment or supplement as soon as available and in such quantities as
the Underwriters may request.
(g) As soon as practicable, but in any event not later than 45 days
following the 12-month period which begins on the first day immediately
following the last day of the fiscal quarter of the Company during which the
Effective Date falls (or 90 days in the event that the last day of such fiscal
quarter is also the last day of the Company's fiscal year), the Company shall
make generally available to its security holders, in the manner specified in
Rule 158(b) of the Rules and Regulations, and to the Representative, an earnings
statement which shall be in the detail required by, and shall otherwise comply
with, the provisions of Section 11(a) of the Act and Rule 158(a) of the Rules
and Regulations, which statement need not be audited unless required by the Act,
covering a period of at least 12 consecutive months following the Effective
Date.
(h) During a period of seven years after the date hereof, the Company
shall furnish to its shareholders, as soon as practicable, annual reports
(including financial statements audited by independent public accountants) and
unaudited quarterly reports of earnings, and shall deliver to the
Representative:
(i) concurrently with furnishing such quarterly reports to its
shareholders, statements of income of the Company for each quarter in the
form furnished to the Company's shareholders and certified by the
Company's principal financial or accounting officer;
(ii) concurrently with furnishing such annual reports to its
shareholders, a balance sheet of the Company as at the end of the
preceding fiscal year, together with statements of operations,
shareholders' equity, and cash flows of the Company for such fiscal year,
accompanied by a copy of the certificate thereon of independent certified
public accountants;
(iii) as soon as they are available, copies of all reports
(financial or other) mailed to shareholders;
(iv) as soon as they are available, copies of all reports and
financial statements furnished to or filed with the Commission, the NASD
or any securities exchange;
(v) every press release and every material news item or article of
interest to the financial community in respect of the Company or its
affairs which was released or prepared by or on behalf of the Company; and
(vi) any additional information of a public nature concerning the
Company (and any future subsidiaries of the Company) or its or their
business(es) which the Representative may reasonably request. During such
seven-year period, if the
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<PAGE>
Company has active subsidiaries, the foregoing financial statements shall
be on a consolidated basis to the extent that the accounts of the Company
and its subsidiaries are consolidated and shall be accompanied by similar
financial statements for any significant subsidiary which is not so
consolidated.
(i) The Company shall maintain a Transfer Agent, counsel, accounting firm,
financial printer, a public relations firm and a registrar (which may be the
Transfer Agent) for its Units, Shares, Warrants, Warrant Shares and other
Securities, all of whom shall be reasonably acceptable to the Representative.
Such Transfer Agent shall, for a period of five years following the Closing
Date, deliver to the Representative the monthly securities position of the
Company's shareholders of record.
(j) The Company shall furnish to the Representative or on the
Representative's order, without charge, at such place as the Representative may
designate, copies of each Preliminary Prospectus, the Registration Statement,
any pre-effective or post-effective amendments thereto (two of each shall be
signed and include all financial statements and exhibits), the Prospectus and
all amendments and supplements thereto, including any Prospectus or prospectus
prepared after the effective date of the Registration Statement, in each case as
soon as available and in such quantities as the Representative may reasonably
request.
(k) On or before the Effective Date, the Company shall provide the
Representative with true and correct copies of duly executed, legally binding
and enforceable agreements pursuant to which, for a period of not less than 18
months following the Effective Date, each holder of securities issued by the
Company and outstanding at the Effective Date of the Registration Statement
(excluding the Selling Securityholders' Securities (as defined in the
Prospectus, but including all other securities convertible into or exercisable
for Shares) agrees that such holder shall not, directly or indirectly, issue,
offer to sell, sell, grant an option for the sale of, assign, transfer, pledge,
hypothecate or otherwise encumber or dispose of any of such securities (pursuant
to Rule 144 or Regulation S of the Rules and Regulations or otherwise) or
dispose of any beneficial interest therein without the prior written consent of
the Representative (collectively, the "Lock-up Agreements"). The Lock-Up
Agreements shall also provide that any Securities that may be sold pursuant to
Rule 144 or Regulation S with the Representative's consent shall be executed
through the Representative. During the two-year period commencing with the
Effective Date, the Company shall not issue any securities under Regulation S
and shall not, without the prior written consent of the Representative, sell,
contract or offer to sell, issue, transfer, assign, pledge, distribute, or
otherwise dispose of, directly or indirectly, any debt security of the Company
or any Shares, issue any preferred Stock of the Company or any options, rights
or warrants with respect to any shares of preferred stock of
20
<PAGE>
the Company or any Shares (other than any Warrant Shares with respect to the
Warrants and the Representative's Warrant). On or before the Closing Date, the
Company shall deliver instructions to the Transfer Agent authorizing it to place
appropriate legends on the certificates representing the securities subject to
the Lock-up Agreement and to place appropriate stop transfer orders on the
Company's ledgers.
(l) Neither the Company, nor any of its officers, directors, shareholders
or affiliates (within the meaning of the Rules and Regulations) shall, directly
or indirectly, take any action designed to or which might in the future
reasonably be expected to cause or result in stabilization or manipulation of
the price of any securities of the Company.
(m) The Company shall apply the net proceeds from the sale of the
Securities in the manner, and subject to the conditions, set forth under "Use of
Proceeds" in the Prospectus. No portion of the net proceeds shall be used,
directly or indirectly, to acquire any securities issued by the Company.
(n) The Company shall timely file all such reports, forms or other
documents as may be required (including, but not limited to, a Form SR as may be
required pursuant to Rule 463 under the Act) from time to time, under the Act,
the Exchange Act or the Rules and Regulations, and all such reports, forms and
documents filed shall comply as to form and substance with the applicable
requirements under the Act, the Exchange Act and/or the Rules and Regulations.
(o) The Company shall furnish to the Representative as early as
practicable prior to each of the date hereof, the Closing Date and each
Over-Allotment Closing Date, if any, but no later than two (2) full business
days prior thereto, a copy of the latest available unaudited interim financial
statements of the Company (which in no event shall be as of a date more than
thirty (30) days prior to the date of the Registration Statement) which have
been read by the Company's independent public accountants, as stated in their
letters to be furnished pursuant to Section 6(j) hereof.
(p) The Company shall cause the Shares, the Shares, the Warrants, the
Warrant Shares and the Securities included in the Over-Allotment Units to be
listed on the Nasdaq SmallCap Market and the BSE. For a period of seven (7)
years from the date hereof, the Company shall use its best efforts to maintain
such listings of Securities to the extent any of the same is outstanding.
(q) For a period of five (5) years from the Closing Date, the Company
shall furnish to the Representative at the Representative's request and at the
Company's sole expense, (i) a list of holders of all of the Company's securities
and (ii) a Blue Sky "Trading Survey" for secondary sales of the Company's
securities prepared by counsel to the Company.
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<PAGE>
(r) The Company shall, as soon as practicable, but (i) in no event more
than five business days prior to the Effective Date, file a Form 8-A with the
Commission providing for the registration under the Exchange Act of the
Securities and (ii) in no event more than 30 days after the Effective Date, take
all necessary and appropriate actions to be included in Standard and Poor's
Corporation Descriptions and Moody's Manual in order to satisfy the requirements
for a "manual exemption" in those states where available and to maintain such
inclusion for as long as any of the Securities is outstanding.
(s) Until the completion of the distribution of the Securities, the
Company shall not, without the prior written consent of the Representative and
Underwriters' Counsel, issue, directly or indirectly any press release or other
communication or hold any press conference with respect to the Company or its
activities or the offering contemplated hereby, other than trade releases with
respect to the Company's operations issued in the ordinary course of the
Company's business consistent with past practices.
(t) For a period of three (3) years after the Effective Date, the
Representative shall have the right to designate, one (1) individual for
election to the Company's Board of Directors ("Board"), and the Company shall
cause such individual to be elected to the Board. In the event the
Representative shall not have designated such individual at the time of any
meeting of the Board or such person is unavailable to serve, the Company shall
notify the Representative of each meeting of the Board and an individual
designated by the Representative shall be permitted to attend all meetings of
the Board and to receive all notices and other correspondence and communications
sent by the Company to members of the Board. Such individual or the
Representative's designee for election to the Board shall be reimbursed for all
out-of-pocket expenses incurred in connection with his or her service on, or
attendance at meetings of, the Board. The Company shall provide its outside
directors with compensation in the form of cash and/or options with respect to
its Shares as deemed appropriate and customary for similar companies. Such
individual or designee shall receive all notices and other correspondence and
communications sent by the Company to Board members.
(u) The Company hereby grants to the Representative a right of first
refusal, on the terms and subject to the conditions set forth in this paragraph,
for a period of three years from the Effective Date, to purchase for its account
or to sell for the account of either the Company or any of its current or future
subsidiaries, any securities of either the Company or any of its present or
future subsidiaries, with respect to which the Company or any of its present or
future subsidiaries may seek a public or private or offering or sale. For a
period of three years from the Effective Date, the Company shall consult and
shall cause such present or future subsidiaries to consult with the
Representative
22
<PAGE>
with regard to any such offering or placement and shall offer or cause any of
its current or future subsidiaries to offer to the Representative the
opportunity, on terms not more favorable to the Company or such current or
future subsidiary than they can secure elsewhere, to purchase, offer for sale
and/or sell any such securities. If the Representative fails to accept in
writing such proposal made by the Company or any of its current or future
subsidiaries within fifteen business days after receipt of written notice
containing such offer, then the Representative shall have no further claim or
right with respect to the proposal contained in such notice. If, thereafter,
such proposal is materially modified, the Company shall again consult and cause
each current or future subsidiary to consult with the Representative in
connection with such modification and shall in all respects have the same
obligations and adopt the same procedures with respect to such proposal as are
provided hereinabove with respect to the original proposal.
(v) For a period equal to the lesser of (i) seven (7) years from the date
hereof and (ii) the date of the sale to the public of the securities issuable
upon exercise of the Representative's Securities, the Company shall not take any
action or actions which may prevent or disqualify the Company's use of any form
otherwise available for the registration under the Act of the securities
issuable upon exercise of the Representative's Securities.
(w) Commencing one year from the date hereof, the Company shall pay the
Representative a commission equal to five percent (5%) of the exercise price of
the Warrants, payable on the date of the exercise thereof on terms provided in
the Warrant Agreement. The Company shall neither solicit the exercise of the
Warrants other than through the Representative nor authorize any other dealer or
engage in such solicitation without the Representative's prior written consent.
The Representative shall not receive any fee for Warrants voluntarily exercised
without solicitation by the Representative.
(x) On or before the Effective Date, the Company shall have retained a
financial public relations firm reasonably satisfactory to the Representative,
which shall be continuously engaged from such engagement date to a date twelve
(12) months from the Closing Date.
5. Payment of Expenses.
(a) The Company hereby agrees to pay on each of the Closing Date and each
Over-Allotment Closing Date (to the extent not paid at the Closing Date) all
expenses and fees (other than fees of Underwriters' Counsel, except as provided
below in clause (iv) of this paragraph) incident to the performance of the
obligations of the Company under this Agreement, the Representative's Warrant
and the Warrant Agreement including, without limitation,
23
<PAGE>
(i) the fees and expenses of accountants and counsel for the Company, (ii) all
costs and expenses incurred in connection with the preparation, duplication,
printing (including mailing and handling charges), filing, delivery and mailing
(including the payment of postage with respect thereto) of the Registration
Statement, the Preliminary Prospectus and the Prospectus and any amendments and
supplements thereto and the printing, mailing (including the payment of postage
with respect thereto) and delivery of this Agreement, the Representative's
Warrant, the Warrant Agreement, and related documents, including the cost of all
copies thereof and of the Preliminary Prospectuses, the Prospectus and any
amendments or supplements thereto supplied to the Underwriters and such dealers
as the Underwriters may request, in quantities as hereinabove stated, (iii) the
printing, engraving, issuance and delivery of the Securities, including, but not
limited to, (A) the purchase of the Securities by the Underwriters and the
purchase of the Representative's Warrant by the Representative from the Company,
(B) the performance by the Company of any of its obligations under this
Agreement, the Representative's Warrant and the Warrant Agreement, and (C)
resale of the Securities by the Underwriters in connection with the distribution
contemplated hereby, (iv) the qualification of the Securities under state or
foreign securities or "Blue Sky" laws and determination of the status of such
securities under legal investment laws, including the costs of printing and
mailing the "Preliminary Blue Sky Memorandum", the "Supplemental Blue Sky
Memorandum" and the "Legal Investment Survey," if any, and disbursements and
fees of counsel in connection therewith, provided, however, that the Company's
obligation with respect to such "Blue Sky" fees and disbursements of
Underwriters' Counsel shall not exceed $25,000, (v) advertising costs and
expenses, including, but not limited to, costs and expenses in connection with
the "road show," information meetings and presentations, bound volumes and
prospectus memorabilia and a "tombstone," in the Wall Street Journal and other
appropriate publications, (vi) costs, fees and expenses in connection with due
diligence investigations, including, but not limited to, the costs of background
checks on key management and/or personnel of the Company and the fees of any
independent counsel or consultant retained, (vii) fees and expenses of the
transfer agent, warrant agent, escrow agent, if any, and registrar, (viii)
applications for assignments of a rating of the Securities by qualified rating
agencies, (ix) the fees payable to the Commission, Nasdaq and the NASD, and (x)
the fees and expenses incurred in connection with the listing of the Securities
on the Nasdaq SmallCap Market, the BSE and any other exchange.
(b) If this Agreement is terminated by the Underwriters in accordance with
the provisions of Section 6, Section 10(a) or Section 12, the Company shall
reimburse and indemnify the Representative for all of its actual out-of-pocket
expenses, including the fees and disbursements of Underwriters' Counsel (and in
addition to fees and expenses of Underwriter's Counsel incurred pursuant to
Section 5(a)(iv) above for which the Company shall
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<PAGE>
remain liable), provided, however, that in the event of a termination pursuant
to Section 10(a) hereof, such obligation of the Company shall not exceed
$50,000.
(c) The Company further agrees that, in addition to the expenses payable
pursuant to subsections (a) of this Section 5, it shall pay to the
Representative on the Closing Date, by certified or bank cashier's check, or, at
the election of the Representative, by deduction from the proceeds of the
offering contemplated herein, a non-accountable expense allowance equal to three
percent (3%) of the gross proceeds received by the Company from the sale of the
Firm Units, of which $50,000 [has been paid]. In the event the Representative
elects to exercise the Over-Allotment Option, the Company further agrees to pay
to the Representative, on each Over-Allotment Closing Date (by certified or bank
cashier's check or, at the Representative's election, by deduction from the
proceeds of the offering), a non-accountable expense allowance equal to three
percent (3%) of the gross proceeds received by the Company from the sale of the
relevant Over-Allotment Units.
(d) Neither the Underwriters nor the Representative shall not be
responsible for any expense of the Company or others or for any charge or claim
related to the offering contemplated herein the event that the sale of the
Securities as herein contemplated is not consummated.
6. Conditions of the Underwriters' Obligations. The obligations of the
Underwriters hereunder shall be subject to the continuing accuracy of the
representations and warranties of the Company contained herein as of the date
hereof and as of the Closing Date and each Over-Allotment Closing Date, if any,
as if they had been made on and as of the date hereof, the Closing Date and each
Over-Allotment Closing Date, as the case may be; the accuracy on and as of the
Closing Date or Over-Allotment Closing Date, if any, of the statements of the
officers of the Company made pursuant to the provisions hereof; and the
performance by the Company on and as of the Closing Date and each Over-Allotment
Closing Date, if any, of its covenants and obligations hereunder and to the
following further conditions:
(a) The Registration Statement, which shall be in form and substance
satisfactory to the Representative and Underwriters' Counsel, shall have become
effective no later than 12:00 p.m., New York time, on the date of this Agreement
or such later date and time as shall be consented to in writing by the
Representative, and, at the Closing Date and each Over-Allotment Closing Date,
if any, no stop order suspending the effectiveness of the Registration Statement
shall have been issued and no proceeding for such purpose shall have been
instituted or shall be pending or contemplated by the Commission and any request
on the part of the Commission for additional information shall have been
complied with to the reasonable satisfaction of Underwriters' Counsel. If the
Company
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has elected to rely upon Rule 430A of the Rules and Regulations, the price of
the Units and any price-related information previously omitted from the
effective Registration Statement pursuant to such Rule 430A shall have been
transmitted to the Commission for filing pursuant to Rule 424(b) of the Rules
and Regulations within the prescribed time period, and the Company shall have
provided evidence satisfactory to the Representative prior to the Closing Date,
of such timely filing or a post-effective amendment providing such information
shall have been promptly filed and declared effective in accordance with the
requirements of Rule 430A of the Rules and Regulations.
(b) The Representative shall not have advised the Company that the
Registration Statement or any amendment thereto contains any untrue statement
of fact which, in the opinion of the Representative or Underwriters' Counsel, is
material, or omits to state a fact which, in the opinion of the Representative
or Underwriters' Counsel, is material and is required to be stated therein or is
necessary to make the statements therein not misleading, or that the Prospectus
or any supplement thereto contains any untrue statement of fact which, in the
opinion of the Representative or Underwriter's Counsel opinion, is material and
is required to be stated therein or is necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
(c) On or prior to the Closing Date, the Representative shall have
received from the Company's counsel such opinion or opinions with respect to the
organization of the Company, the validity of the Securities, and the
Representative's Warrants and the Representative's Securities, the Registration
Statement, the Prospectus and other related matters as the Representative may
request, and Underwriters' Counsel shall have received such papers and
information as they request to enable them to pass upon such matters.
(d) On the Closing Date, the Underwriters shall have received the
favorable opinion of Morrison Cohen Singer & Weinstein, LLP, counsel to the
Company, dated the Closing Date, addressed to the Underwriters and in form and
substance satisfactory to Underwriters' Counsel, to the effect that:
(i) the Company (A) has been duly organized and is validly existing
as a corporation in good standing under the laws of its jurisdiction of
incorporation, has all requisite corporate power and authority, and has obtained
any and all authorizations, approvals, orders, licenses, certificates,
franchises and permits of and from all governmental or regulatory officials and
bodies (including, without limitation, those having jurisdiction over
environmental or similar matters), relating to the ownership or leasing of its
properties and the conduct of its business as described in the Prospectus; the
Company is duly qualified and licensed and in good standing as a foreign
corporation in each jurisdiction in which its ownership or
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leasing of any properties or the character of its operations requires such
qualification or licensing; to such counsel's knowledge, the Company has
not received any notice of proceedings relating to the revocation or
modification of any such authorization, approval, order, license,
certificate, franchise, or permit which, singly or in the aggregate, if
the subject of an unfavorable decision, ruling or finding, would
materially and adversely affect the business, operations, condition,
financial or otherwise, or the earnings, business affairs or prospects,
properties, business, any intellectual property rights or other assets or
results of operations of the Company. The disclosures in the Registration
Statement concerning the effects of federal, state, local and foreign
laws, rules and regulations on the Company's business as currently
conducted and as contemplated are true and correct in all material
respects and do not omit to state a fact necessary to make the statements
contained therein not misleading in light of the circumstances in which
they are made.
(ii) to such counsel's knowledge, the Company does not own an equity
interest in any other corporation, partnership, joint venture, trust or
other business entity;
(iii) the Company has a duly authorized, issued and outstanding
capitalization as set forth in the Prospectus and any amendment or supplement
there to under the heading, "Capitalization," and to such counsel's knowledge,
after due inquiry, the Company is not a party to nor is it bound by any
instrument, agreement or other arrangement providing for it to issue any capital
stock, rights, warrants, options or other securities, except for this Agreement,
the Representative's Warrant, the Warrant Agreement and as described in the
Prospectus. The Securities and all other securities issued or issuable by the
Company conform in all material respects to all statements with respect thereto
contained in the Registration Statement and the Prospectus. All issued and
outstanding securities of the Company have been duly authorized and validly
issued and are fully paid and non-assessable, and the holders thereof have no
rights of rescission with respect thereto and are not subject to personal
liability under the laws of Cyprus as currently in effect by reason of being
such holders, and no securities have been issued by the Company in violation of
the preemptive rights of any holder of any security of the Company. The
Securities to be sold by the Company hereunder and under the Representative's
Warrant and the Warrant Agreement are not and will not be subject to any
preemptive or other similar rights of any shareholder, have been duly authorized
and, when issued, paid for and delivered in accordance with the terms hereof,
will be validly issued, fully paid and non-assessable and will conform to the
description thereof contained in the Prospectus, the holders thereof will not be
subject to any liability solely as
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such holders, all corporate action required to be taken for the
authorization, issuance and sale of the Securities has been duly and
validly taken, and the certificates representing the Securities are in due
and proper form. The Warrants and the Representative's Warrants constitute
the valid and binding obligations of the Company to issue and sell, upon
exercise thereof and payment therefor, the number and type of securities
of the Company called for thereby. Upon the issuance and delivery of the
Securities to be sold by the Company pursuant to this Agreement, the
Underwriters and the Representative will acquire good and marketable title
to the Securities free and clear of any pledge, lien, charge, claim,
encumbrance, pledge, security interest or other restriction or equity of
any kind whatsoever. No transfer tax is payable by or on behalf of the
Underwriters or the Representative in connection with (A) the issuance by
the Company of the Securities, (B) the purchase by the Underwriters and
the Representative of the Securities from the Company, (C) the
consummation by the Company of any of its obligations under this
Agreement, or (D) resales of the Securities in connection with the
distribution contemplated hereby.
(iv) the Registration Statement is effective under the Act, and, if
applicable, the filing of any unfavorable decision, ruling or finding,
would materially adversely affect the business, operations, condition,
financial or otherwise, or the earnings, business affairs or prospects,
properties, business, assets (tangible or intangible) or results of
operations of the Company. The disclosures in the Registration Statement
concerning the effects of federal, state and local laws, rules and
regulations on the Company's business as currently conducted and as
contemplated are true and correct in all material respects and do not omit
to state any fact necessary to make the statements contained therein not
misleading in light of the circumstances in which they were made.
(v) each of the Preliminary Prospectus, the Registration Statement
and the Prospectus and any amendments or supplements thereto (other than
the financial statements and other financial and statistical data included
therein, as to which no opinion need be rendered) comply as to form in all
material respects with the requirements of the Act and the Rules and
Regulations.
(vi) to the best of such counsel's knowledge: (A) there are no
agreements, contracts or other documents required by the Act to be
described in the Registration Statement or the Prospectus and filed as
exhibits to the Registration Statement other than those described in the
Registration Statement (or required to be filed under the Exchange Act if
upon such filing they would be incorporated, in whole or in part, by
reference therein), or the Prospectus, respectively, and filed as exhibits
thereto, and the exhibits which have been filed
28
<PAGE>
are correct copies of the documents of which they purport to be copies;
(B) the descriptions in the Registration Statement and the Prospectus and
any supplement or amendment thereto of contracts and other documents to
which the Company is a party or by which it is bound, [including any
document to which the Company is a party or by which it is bound,]
incorporated by reference into the Prospectus and any supplement or
amendment thereto, are accurate in all material respects and fairly
represent the information required to be shown under the Act and the Rules
and Regulations thereunder; (C) there is not pending or threatened against
the Company any action, arbitration, suit, proceeding, inquiry,
investigation, litigation, governmental, administrative or other
proceeding (including, without limitation, by any person or body having
jurisdiction over environmental or similar matters), domestic or foreign,
pending or threatened against (or circumstances that may give rise to the
same), or involving the properties or business of the Company which (1) is
required to be disclosed in the Registration Statement which is not so
disclosed (and such proceedings as are summarized in the Registration
Statement are accurately summarized in all respects), (2) questions the
validity of the capital stock or any other Securities of the Company or
this Agreement or of any action taken or to be taken by the Company
pursuant to or in connection with any of the foregoing; (D) no statute or
regulation or legal, governmental or administrative proceeding required to
be described in the Prospectus is not described as required; and (E)
except as disclosed in the Prospectus, there is no action, suit or
proceeding pending or threatened against or affecting the Company before
any court or arbitrator or governmental body, agency or official (or any
basis thereof known to such counsel) in which an adverse decision, which
may result in a material adverse change in the condition, financial or
otherwise or the earnings, position, prospects, shareholders' equity,
value, operation, properties, business or results of operations of the
Company, could adversely affect the present or prospective ability of the
Company to perform its obligations under this Agreement, the
Representative's Warrant or the Warrant Agreement or which in
any manner draws into question the validity or enforceability of this
Agreement, the Representative's Warrant or the Warrant
Agreement;
(vii) the Company has full legal right, power and authority to enter
into this Agreement, the Representative's Warrant and the Warrant
Agreement and to consummate the transactions provided for herein and
therein; and this Agreement, the Representative's Warrant and the Warrant
Agreement have been duly authorized, executed and delivered by the
Company. This Agreement, the Representative's Warrant and the Warrant
Agreement, assuming due authorization, execution and delivery by each
party hereto and thereto, constitutes the legal, valid and binding
agreement of
29
<PAGE>
the Company enforceable against the Company in accordance with its terms
(except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general
application relating to or affecting enforcement of creditors' rights and
the application of equitable principles in any action, legal or equitable,
and except as rights to indemnity or contribution may be limited by
applicable law), and neither the Company's execution or delivery of this
Agreement, the Representative's Warrant or the Warrant Agreement, the
Company's performance of its obligations hereunder or thereunder, its
consummation of the transactions contemplated herein or therein or the
conduct of its business as described in the Registration Statement, the
Prospectus and any amendments or supplements thereto, conflicts with or
will conflict with or results or will result in any breach or violation of
any of the terms or provisions of, or constitutes or will constitute a
default under, or results or will result in the creation or imposition of
any lien, charge, claim, encumbrance, pledge, security interest, defect or
other restriction or equity of any kind whatsoever upon, any property or
assets (tangible or intangible) of the Company pursuant to the terms of
(A) the Memorandum or the Articles, (B) any license, contract, indenture,
mortgage, deed of trust, license, patent, patent application, voting trust
agreement, shareholders' agreement, note, loan or credit agreement or any
other agreement or instrument to which the Company is a party or by which
it is or may be bound or to which any of its properties or assets
(tangible or intangible) is or may be subject, or any indebtedness, or (C)
any statute, judgment, decree, order, rule or regulation applicable to the
Company of any arbitrator, court, regulatory body or administrative agency
or other governmental agency or body (including, without limitation, any
such agency or body having jurisdiction over environmental or similar
matters), domestic or foreign, having jurisdiction over the Company or any
of its activities or properties, except for conflicts, breaches,
violations, defaults or impositions which do not and would not
have a material adverse effect on the condition, financial or otherwise,
or the earnings, business affairs, position, shareholders' equity, value,
operations, assets (tangible or intangible), properties, business or
results of operations of the Company.
(viii) except as described in the Prospectus, no consent, approval,
authorization or order and no filing with any court, regulatory body,
government or administrative agency or other body (other than such as may
be required under Blue Sky laws, as to which no opinion need be rendered)
is required in connection with the issuance of any Securities pursuant to
the Prospectus and the Registration Statement, the issuance of the
Representative's Warrant and the Representative's Securities, or the
performance of this Agreement, the
30
<PAGE>
Representative's Warrant and the Warrant Agreement and the
transactions contemplated hereby and thereby;
(ix) the properties and business of the Company conform to the
description thereof contained in each of the Registration Statement and
the Prospectus;
(x) the Company is not in breach of, nor is it in default under, any
term or provision of any license, contract, indenture, mortgage,
installment sale agreement, deed of trust, lease, license, patent, patent
application, voting trust agreement, shareholders' agreement, partnership
agreement, note, loan or credit agreement or any other agreement or
instrument evidencing an obligation for borrowed money, or any other
agreement or instrument to which the Company is a party or by which the
Company is or any of its properties or assets (tangible or intangible) is
subject or affected which could materially and adversely affect the
Company; and the Company is not in violation of any term or provision of
the Memorandum or the Articles or in violation of any franchise, license,
patent, permit, judgment, decree, order, statute, rule or regulation, the
result of which would materially and adversely affect the condition,
financial or otherwise, or the earnings, business affairs, position,
shareholders' equity, operations, properties, business or results of
operations of the Company.
(xi) the Company owns or possesses, free and clear of all liens,
encumbrances, any rights thereto or therein by any third party, the
requisite licenses or other rights to use all trademarks, service marks,
copyrights, service names, trade names, patents, patent applications and
licenses necessary to conduct its business (including, without limitation,
any such licenses or rights described in the Prospectus as being owned or
possessed by the Company), and to the best of such counsel's knowledge
after reasonable investigation, there is no claim or action by any person
pertaining to or proceeding pending, or threatened, which challenges the
exclusive rights of the Company with respect to any trademark, service
mark, copyright, service name, trade name, patent, patent application or
license used in the conduct of the Company's business (including, without
limitation, any such license or right described in the Prospectus as being
owned or possessed by the Company).
(xii) except as described in the Prospectus, the Company does not
(A) maintain, sponsor, or contribute to any ERISA Plan, (B) maintain or
contribute now or at any time previously, to any defined benefit plan, as
defined in Section 3(35) of ERISA, and (C) has never completely or
partially withdrawn from a "multiemployer plan;" and
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<PAGE>
(xiii) the Securities have been approved for listing on the Nasdaq
SmallCap Market and the BSE, and the Company's Registration Statement on
Form 8-A under the Exchange Act has become effective.
(xiv) to such counsel's knowledge, the persons listed under the
caption "PRINCIPAL SHAREHOLDERS" in the Prospectus are the respective
"beneficial owners" (as such phrase is defined in regulation 13d-3 under
the Exchange Act) of the securities set forth thereunder opposite their
respective names as and to the extent set forth therein;
(xv) to such counsel's knowledge, except as described in the
Prospectus, no person, corporation, trust, partnership, association or
other entity has the right to include and/or register any securities of
the Company in the Registration Statement, require the Company to file any
registration statement or, if filed, to include any security in such
registration statement;
(xvi) to such counsel's knowledge, except as described in the
Prospectus, there are no claims, payments, issuances, arrangements or
understandings for services in the nature of a finder's or origination fee
with respect to the sale of the Units hereunder and the financial
consulting arrangement between the Representative and the Company, or any
other arrangement, agreement, understanding, payment or issuance that may
affect the Underwriters' compensation, as determined by the NASD;
(xvii) each of the Lock-up Agreements constitutes the legal, valid
and binding obligations of the parties thereto, enforceable against each
such party and any subsequent holder of the securities subject thereto in
accordance with its terms (except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other
laws of general application relating to or affecting enforcement of
creditors' rights and the application of equitable principles in any
action, legal or equitable);
(xviii) all action required to be taken under the Act to conduct the
public offering and consummate the sale of the Securities as provided in
this Agreement has been taken by the Company. The provisions of the
Memorandum and the Articles comply as to form in all material respects
with the Act and the Rules and Regulations, and;
(xix) indemnification of officers and directors of the Company to
the fullest extent permitted by applicable Cyprus law is as stated in the
Prospectus and the Registration Statement and is no broader.
32
<PAGE>
Such counsel shall state that it has participated in conferences
with officers and other representatives of the Company and representatives of
the independent public accountants for the Company, in which conferences such
counsel made inquiries of such officers, representatives and accountants and
discussed the contents of the Preliminary Prospectus, the Registration Statement
and the Prospectus, and related matters were discussed, and although such
counsel is not passing upon and does not assume any responsibility for the
accuracy, completeness or fairness of the statements contained in the
Preliminary Prospectus, the Registration Statement or the Prospectus, on the
basis of the foregoing, no fact or facts have come to the attention of such
counsel which lead such counsel to believe that either the Registration
Statement or any amendment thereto, at the time such Registration Statement or
amendment became effective or the Preliminary Prospectus, the Prospectus or any
amendment or supplement thereto as of the date of such opinion contained any
untrue statement of any material fact or omitted to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading (it being understood that such counsel need express no opinion with
respect to the financial statements and schedules and other financial and
statistical data included in the Preliminary Prospectus, the Registration
Statement or the Prospectus).
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws other than the laws of the United States
and jurisdictions in which they are admitted, to the extent such counsel
deems proper and to the extent specified in such opinion, if at all, upon
an opinion or opinions (in form and substance satisfactory to
Underwriters' Counsel) of other counsel acceptable to Underwriters'
Counsel, familiar with the applicable laws; (B) as to matters of fact, to
the extent they deem proper, on certificates and written statements of
responsible officers of the Company and certificates or other written
statements of officers of departments of various jurisdictions having
custody of documents respecting the corporate existence or good standing
of the Company, provided that copies of any such statements or
certificates shall be delivered to Underwriters' Counsel if requested. The
opinion of such counsel for the Company shall state that the opinion of
any such other counsel is in form satisfactory to such counsel and that
they, the Representative and the Underwriters, are justified in relying
thereon.
On each Over-Allotment Closing Date, if any, the Underwriters shall
have received the favorable opinion of Morrison Cohen Singer & Weinstein,
LLP, counsel to the Company, dated such Over-Allotment Closing Date and
addressed to the Underwriters and in form and substance satisfactory to
Underwriters' Counsel confirming as of such Over-Allotment
33
<PAGE>
Closing Date the statements made in the opinion of delivered on the
Closing Date.
(e) On or prior to each of the Closing Date and each Over-Allotment
Closing Date, if any, Underwriters' Counsel shall have been furnished such
documents, certificates and opinions as they may reasonably require for the
purpose of enabling them to review or pass upon the matters referred to in
subsection (c) of this Section 6, or in order to evidence the accuracy,
completeness or satisfaction of any of the representations, warranties or
covenants of the Company herein contained.
(f) Prior to each of Closing Date and each Over-Allotment Closing Date, if
any: i) there shall have been no adverse change nor development involving any
prospective change in the condition, financial or otherwise, prospects, assets
(tangible or intangible), shareholders' equity or the business of the Company,
whether or not in the ordinary course of business, from the latest dates as of
which such condition is described in the Registration Statement and/or the
Prospectus; (ii) there shall have been no transaction, outside the ordinary
course of business entered into by the Company; (iii) the Company shall not be
in default under any provision of any instrument relating to any outstanding
indebtedness; (iv) the Company shall not have issued any securities (other than
the Securities) or declared or paid any dividend or made any distribution in
respect of its capital, stock of any class and there shall not have been any
change in either the capital, long or short term, liabilities or obligations
of the Company whether contingent or otherwise; (v) no material amount of the
assets (tangible or intangible) of the Company shall have been pledged or
mortgaged, except as set forth in the Registration Statement and Prospectus;
(vi) no action, suit or proceeding, at law or in equity, shall have been pending
or threatened, against the Company, nor shall there have been any
circumstances giving rise to same, or affecting any of its properties or
business before or by any court or federal, state or foreign commission, board
or other administrative agency wherein an unfavorable decision, ruling or
finding may adversely affect the business, operations, management, prospects or
financial condition or assets (tangible or intangible) of the Company, except as
set forth in the Registration Statement and the Prospectus: and (vii) no stop
order shall have been issued under the Act and no proceedings therefor shall
have been initiated, threatened or contemplated by the Commission.
(g) On each of the Closing Date and each Over-Allotment Closing Date, if
any, the Underwriters shall have received a certificate of the principal
executive officer and the chief financial or chief accounting officer of the
Company, dated the Closing Date or Over-Allotment Closing Date, as the case may
be, to the effect that each such person has carefully examined the Registration
Statement, the Prospectus and this Agreement, and that:
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<PAGE>
(i) The representations and warranties of the Company contained in
this Agreement are true and correct as if made on and as of the Closing
Date or the Over-Allotment Closing Date, as the case may be, and the
Company has complied with all agreements and covenants and satisfied all
conditions contained in this Agreement on its part to be performed or
satisfied at or prior to such Closing Date or Over-Allotment Closing Date,
as the case my be;
(ii) No stop order suspending the effectiveness of the Registration
Statement or any part thereof has been issued and no proceedings for that
purpose have been instituted or are pending, contemplated or threatened
under the Act;
(iii) The Registration Statement, the Prospectus and each amendment
and supplement thereto contain all statements and information required to
be included therein, and none of the Registration Statement, the
Prospectus nor any amendment or supplement thereto includes any untrue
statement of any material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein
not misleading, and neither the Preliminary Prospectus nor any supplement
thereto included any untrue statement of any material fact or omitted to
state any material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they
were made, not misleading; and
(iv) Since the dates as of which information is given in the
Registration Statement and the Prospectus: (A) there has not been any
material change in the number of Shares or other capital stock authorized
or outstanding or in liabilities of the Company except as set forth in or
contemplated by the Prospectus; (B) there has not been any material
adverse change in the general affairs, management, business, financial
condition or results of operations of the Company whether or not arising
from transactions in the ordinary course of business, as set forth in or
contemplated by the Prospectus; (C) the Company has not sustained any
material loss in or interference with its business from any court or from
legislative or other governmental action, order or decree, whether foreign
or domestic, or from any other occurrence, not described in the
Registration Statement and Prospectus; (D) there has not occurred any
event that makes untrue or incorrect in any material respect any statement
or information contained in the Registration Statement or the Prospectus
or that is not reflected in the Registration Statement or the Prospectus
which should be reflected therein in order to make any statement or
information therein, in light of the circumstances in which they were made
or presented, not misleading in any material respect; (E) the Company has
not incurred up to and including the Closing Date or the Over-Allotment
Closing Date, as the case may be, other than in the
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<PAGE>
ordinary course of its business, any material liabilities or obligations,
direct or contingent; (F) the Company has not paid or declared any
dividends or other distributions on any of its capital stock; (G) the
Company has not entered into any transactions not in the ordinary course
of business; (H) there has not been any change in the capital stock or
long-term debt or any increase in the short-term borrowings (other than
any increase in the short-term borrowings in the ordinary course of
business) of the Company; (I) the Company has not sustained any material
loss or damage to its property or assets (tangible or intangible) whether
or not insured; and (J) there has occurred no event required to be set
forth in an amended or supplemented Prospectus which has not been set
forth. References to the Registration Statement and the Prospectus in this
subsection (g) are to such documents as the same may be amended and
supplemented through the date of such certificate.
(h) By the Closing Date, the Underwriters shall have received clearance
from the NASD as to the amount of compensation allowable or payable to the
Underwriters, as described in the Registration Statement.
(i) At the time this Agreement is executed, the Underwriters shall
have received from Coopers & Lybrand a letter, dated such date, addressed
to the Representative and the Underwriters in form and substance
(including the non-material nature of the changes or decreases, if any,
referred to in clause (iii) below) satisfactory in all respects to the
Representative, the Underwriters and Underwriters' Counsel;
(i) confirming that they are independent accountants with respect to
the Company within the meaning of the Act and the applicable Rules and
Regulations;
(ii) stating that it is their opinion that the financial statements
of the Company included in the Registration Statement comply as to form in
all material respects with the applicable accounting requirements of the
Act and the Rules and Regulations thereunder and that the Representative
and the Underwriter may rely upon the opinion of Coopers & Lybrand with
respect to the financial statements and supporting schedules included in
the Registration Statement;
(iii) stating that, on the basis of a limited review which included
a reading of the latest available unaudited interim financial statements
of the Company (with an indication of the date of the latest available
unaudited interim financial statements), a reading of the latest available
minutes of the shareholders and the Board and the various committees of
the Board, consultations with officers and other employees of the Company
responsible for financial and accounting matters and other specified
procedures and inquiries, nothing has come to their attention which would
lead them to believe that (A) the unaudited financial
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<PAGE>
statements, if any, of the Company included in the Registration Statement
do not comply as to form in any material respect with the applicable
accounting requirements of the Act and the Rules and Regulations or are
not presented fairly and in conformity with generally accepted accounting
principles applied on a basis substantially consistent with that of the
audited financial statements of the Company included in the Registration
Statement or (B) at a specified date not more than five (5) days prior to
the Effective Date, there has been any change in the authorized or
outstanding capital stock, long-term debt of the Company, or any decrease
in the shareholders' equity or net current assets or net assets of the
Company as compared with amounts shown in the balance sheet dated
________, 1998 included in the Registration Statement, other than as set
forth in or contemplated by the Registration Statement, or, if there was
any such change or decrease, setting forth the amount of such change or
decrease;
(iv) setting forth, at a date not later than five (5) days prior to
the date of the Registration Statement, the amount of the Company's
liabilities (including a breakdown of commercial paper and notes payable
to banks);
(v) stating that they have compared specific dollar amounts, numbers
of Securities, percentages of revenues and earnings, statements and other
financial information pertaining to the Company set forth in the
Prospectus in each case to the extent that such amounts, numbers,
percentages, statements and information may be derived from the general
accounting records, including work sheets, of the Company and excluding
any questions requiring an interpretation by legal counsel, with the
results obtained from the application of specified readings, inquiries and
other appropriate procedures (which procedures do not constitute an
examination in accordance with generally accepted auditing standards) set
forth in the letter referred to in Section __ hereof and found by them to
be in agreement;
(vi) stating that they have, in addition, carried out certain
specified procedures, not constituting an audit, with respect to certain
pro forma financial information which is included in the Registration
Statement and the Prospectus and that nothing has come to their attention
as a result of such procedures that caused them to believe that such
unaudited pro forma financial information does not comply in form in all
respects with the applicable accounting requirements of Rule 11-02 of
Regulation S-X or that the pro forma adjustments have not been properly
applied to the historical amounts in the compilation of such information;
(vii) stating that they have not, during the immediately preceding
five (5)-year period, brought to the attention of any of the Company's
management any "weakness," as defined in
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the Statement of Auditing Standard No. 60 entitled "Communication of
Internal Control Structure Related Matters Noted in an Audit," in any of
the Company's internal controls; and
(viii) statements as to such other matters incident to the
transaction contemplated hereby as the Representative may request.
(j) On or prior to the Closing Date and each Over-Allotment Closing Date,
if any, the Underwriters shall have received from Coopers & Lybrand, a letter,
dated as of the Closing Date or the Over-Allotment Closing Date, as the case may
be, to the effect that they reaffirm the statements made in the letter furnished
pursuant to paragraph (i) of this Section 6; except that the specified date
referred to in the letter shall be a date not more than five days prior to the
Closing Date or the Over-Allotment Closing Date, as the case may be, and, if the
Company has elected to rely on Rule 430A of the Rules and Regulations, to the
further effect that they have carried out procedures as specified in clause (v)
of paragraph (i) of this Section with respect to certain amounts, percentages
and financial information as specified by the Representative and deemed to be a
part of the Registration Statement pursuant to Rule 430A(b) and have found such
amounts, percentages and financial information to be in agreement with the
records specified in such clause (v).
(k) On each of Closing Date and Over-Allotment Closing Date, if any, there
shall have been duly tendered to the Representative for the several
Underwriters' accounts the appropriate number of Securities.
(l) No order suspending the sale of the Securities in any jurisdiction
designated by the Representative pursuant to paragraph (e) of Section 4 hereof
shall have been issued on either the Closing Date or the Over-Allotment Closing
Date, if any, and no proceedings for such purpose shall have been instituted or
shall be contemplated.
(m) On or before each Closing Date, the Shares, the Warrant Shares and the
Warrants shall have been approved for quotation on the Nasdaq SmallCap Market
and shall have been authorized upon official notice of issuance for trading on
the BSE.
(n) On or before Closing Date, the Lock-up Agreements, in form and
substance satisfactory to the Representative and Underwriters' Counsel, shall
have been delivered to the Representative.
(o) On or before the Closing Date, the Company shall have executed (i) a
financial consulting agreement with the Representative for a period of 24 months
and (ii) an agreement to engage the Representative on an exclusive basis to
advise the Company with respect to mergers and acquisition and certain other
38
<PAGE>
types of transactions for a term continuing through the first anniversary of the
Effective Date, each such agreement in form and substance satisfactory to the
Representative and its counsel.
(p) On or before the Closing Date, the Company shall have executed the
Representative's Warrant and the Warrant Agreement together with the
applicable warrant certificates, each in form and substance satisfactory to the
Representative and Underwriters' Counsel.
(q) On or before the Closing Date, the Company shall have entered into
employment agreements with Messrs. Kanarick and ______, engaged the services of
a financial public relations firm, and secured the key man life insurance,
directors and officers liability and general liability insurance, all as
provided above, and delivered copies of the executed employment agreements, the
agreement engaging the financial public relations firm and all such insurance
policies.
If any condition to the obligations of the Underwriters or the
Representative hereunder to be fulfilled prior to or at the Closing Date or the
relevant Over-Allotment Closing Date, as the case may be, is not so fulfilled,
the Representative may terminate this Agreement or, if the Representative so
elects, it may waive any such conditions which have not been fulfilled or extend
the time for their fulfillment.
7. Indemnification.
(a) The Company agrees to indemnify and hold harmless each of the
Representative and the Underwriters (for purposes of this Section 7, each of the
terms "Representative," "Underwriter" and/or "Underwriters" shall include the
officers, directors, partners, employees, agents and counsel of the Underwriter,
each of the Underwriters, or the Representative, as the case may be, and
including specifically each person that may be substituted for an Underwriter as
provided in Section 11 hereof), and each person, if any, that controls each such
Underwriter or the Representative (each a "controlling person") within the
meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, from and
against any and all losses, claims, damages, expenses or liabilities, joint or
several and actions in respect thereof, whatsoever (including, but not limited
to, any and all expenses whatsoever reasonably incurred in investigating,
preparing or defending against any litigation, commenced or threatened, or any
claim whatsoever), as the same are incurred, to which the Representative, any
Underwriter or any such controlling person may become subject under the Act, the
Exchange Act or any other statute or at common law or otherwise or under the
laws of any foreign country, arising out of or based upon any untrue statement
or alleged untrue statement of any material fact contained in (i) the
Preliminary Prospectus, the Registration Statement or the Prospectus (as any of
the same may be amended and supplemented from time to time); (ii) any post-
39
<PAGE>
effective amendment or amendments or any new registration statement or
prospectus in which is included any securities of the Company issued or issuable
upon exercise of the Securities; or (iii) any application or other document or
written communication (referred to in this Section 7 collectively, as
"application") executed by the Company or based upon written information
furnished by the Company in any jurisdiction in order to qualify the Securities
under the securities laws thereof or (B) filed with the NASD, the Commission,
any state or other securities commission or agency, NASDAQ, the BSE or any other
securities exchange; or the omission or alleged omission therefrom of any
material fact required to be stated therein or necessary to make the statements
therein not misleading (in the case of the Prospectus, in the light of the
circumstances under which they were made), unless such statement or omission was
made in reliance upon and in conformity with written information furnished to
the Company with respect to any Underwriter by or on behalf of such Underwriter
expressly for use in any Preliminary Prospectus, the Registration Statement or
the Prospectus, or any amendment thereof or supplement thereto, or in any
Application, as the case may be.
The obligations of the Company to indemnify the Underwriters, the
Representative and their respective controlling persons contained in this
paragraph (a) of this Section 7 shall be in addition to any obligation or
liability which the Company may have at common law or otherwise.
(b) Each of the Underwriters agrees severally, but not jointly, to
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the Registration Statement, and each other person, if
any, who controls the Company within the meaning of Section 15 of the Act, to
the same extent as the foregoing indemnity from the Company to the Underwriters,
but only with respect to statements or omissions, if any, made in any
Preliminary Prospectus, the Registration Statement or the Prospectus or any
amendment or supplement thereto or in any application made in reliance upon and
in strict conformity with written information furnished to the Company with
respect to any Underwriter by such Underwriter expressly for use in such
Preliminary Prospectus, the Registration Statement or the Prospectus or any
amendment thereof or supplement thereto or in any such application, solely to
the extent that any such written information or omission pertains to disclosures
in the Preliminary Prospectus, the Registration Statement or the Prospectus
directly relating to the transactions effected by the Underwriters in connection
with the offering contemplated hereby. The Company acknowledges that the
statements with respect to the public offering of the Securities set forth under
the heading "Underwriting" and the stabilization legend in the Prospectus have
been furnished by the Underwriters expressly for use therein and constitute the
only information furnished in writing by or on behalf of the Underwriters for
inclusion in the Prospectus.
40
<PAGE>
(c) Promptly after receipt by a party indemnified under this Section 7 of
notice of the commencement of any action, suit or proceeding, such indemnified
party shall, if a claim in respect thereof is to be made against one or more
indemnifying parties under this Section 7, notify in writing each party against
whom indemnification is to be sought of the commencement of such action, suit or
proceeding (but the failure so to notify an indemnifying party shall not relieve
it from (x) any liability which it may have under this Section 7 except to the
extent that it has been prejudiced in any material respect by such failure or
(y) from any liability which it may have otherwise). In case any such action,
suit or proceeding is brought against any indemnified party, and such party
notifies an indemnifying party or parties of the commencement thereof, the
indemnifying party or parties shall be entitled to participate therein, and to
the extent that such party or parties may elect by written notice delivered to
any indemnified party promptly after receiving the aforesaid notice from such
indemnified party, to assume the defense thereof with counsel reasonably
satisfactory to such indemnified party. Notwithstanding the foregoing, the
indemnified party or parties shall have the right to employ its or their own
counsel in any such suit or proceeding, but the fees and expenses of such
counsel shall be at the expense of such indemnified party or parties unless (i)
the employment of such counsel shall have been authorized in writing by such
indemnifying party in connection with the defense of such action, suit or
proceeding at the expense of such indemnifying party or parties, (ii) such
indemnifying parties shall not have employed counsel reasonably satisfactory to
such indemnified party or parties to have charge of the defense of such action,
suit or proceeding within a reasonable time after notice of commencement of the
action, or (iii) such indemnified party or parties shall have reasonably
concluded that there may be defenses available to it or them which are different
from or in addition to those available to one or all of the indemnifying parties
(in which case such indemnifying party or parties shall not have the right to
direct the defense of such action on behalf of the indemnified party or
parties), in any of which events, such fees and expenses of one additional
counsel shall be borne by the indemnifying parties. In no event shall any
indemnifying party be liable for fees and expenses of more than one counsel (in
addition to any local counsel) separate from such indemnifying party's own
counsel for all indemnified parties in connection with any one action or
separate but similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances. Anything in this Section 7 to the
contrary notwithstanding, an indemnifying party shall not be liable for any
settlement of any claim or action effected without its written consent;
provided, however, that such consent was not unreasonably withheld.
(d) In order to provide for just and equitable contribution in any case in
which (i) any indemnified party makes claim for indemnification pursuant to this
Section 7 but it is judicially determined (by the entry of a final judgment or
decree by a court
41
<PAGE>
of competent jurisdiction and the expiration of time to appeal or the denial of
the last right of appeal) that such indemnification may not be enforced in such
case notwithstanding the fact that the express provisions of this Section 7
provide for indemnification in such case, or (ii) contribution under the Act may
be required on the part of any indemnified party, then each indemnifying party
shall contribute to the amount paid as a result of any such loss, claim, damage,
expense or liability (or action in respect thereof) (A) in such proportion as is
appropriate to reflect the relative benefits received by each of the
contributing parties, on the one hand, and the party to be indemnified on the
other hand, from the offering of Securities contemplated hereby or (B) if the
allocation provided by clause (A) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of each of the
contributing parties, on the one hand, and the party to be indemnified on the
other hand in connection with any statement or omission which resulted in any
such loss, claim, damage, expense or liability, as well as any other relevant
equitable considerations. In any case where the Company is a contributing party
and the Underwriter(s) are the indemnified party, the relative benefits received
by the Company, on the one hand, and such Underwriter(s), on the other, shall be
deemed to be in the same proportion as the total net proceeds from the offering
of the Units (before deducting expenses) bear to the total underwriting
discounts received by the Underwriters hereunder in connection with such
offering, in each case as set forth in the table appearing on the cover page of
the Prospectus. Relative fault shall be determined by reference to, among other
things, whether any untrue or alleged untrue statement of any material fact or
the omission or alleged omission to state any material fact relates to
information supplied by the Company or by the Underwriters, and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such untrue statement or omission. The amount paid or payable by an
indemnified party as a result of any loss, claim, damage, expense or liability
(or action in respect thereof) referred to above in this paragraph (d) shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
suit, proceeding or claim. Notwithstanding the provisions of this paragraph (d),
the Underwriters shall not be required to contribute any amount in excess of the
underwriting discount applicable to the Securities purchased by the Underwriters
hereunder. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11 (f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. For purposes of this
Section 7, each person, if any, that controls the Company within the meaning of
the Act, each officer of the Company that has signed the Registration Statement,
and each director of the Company shall have the same rights as the Company to
contribution, subject in each case to the terms of this paragraph (d). Any party
entitled to contribution shall, promptly after receipt of notice of commencement
of any
42
<PAGE>
action, suit or proceeding against such party in respect to which a claim for
contribution may be made against another party or parties under this paragraph
(d) notify each such party from whom contribution may be sought, but the
omission so to notify each such party or parties shall not relieve such party or
parties from any obligation it or they may have hereunder or otherwise, or to
the extent that such party or parties were not adversely affected by such
omission. The obligations of contribution set forth in this Section 7
shall be in addition to any liabilities which any indemnifying party may have at
common law or otherwise.
8. Representations and Agreements to Survive Delivery. All representations,
warranties and agreements contained in this Agreement or contained in
certificates of officers of the Company submitted pursuant hereto, shall be
deemed to be representations, warranties and agreements at the Closing Date and
each Over-Allotment Closing Date, as the case may be, and such representations,
warranties and agreements of the Company and the respective indemnity agreements
contained in Section 7 hereof shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of any Underwriter,
the Representative, the Company or any controlling person of any Underwriter,
the Representative or the Company, and shall survive termination of this
Agreement or the issuance and delivery of the Securities to the Underwriters and
the Representative, as the case may be.
9. Effective Date of Agreement. This Agreement shall become effective at 10:00
a.m., New York City time, on the next full business day following the date
hereof, or at such earlier time after the Registration Statement becomes
effective as the Representative, in its discretion, shall release the Securities
for the sale to the public; provided, however, that the provisions of Sections
5, 7 and 10 of this Agreement shall be effective at all times. For purposes of
this Section 9, the Securities to be purchased hereunder shall be deemed to have
been so released upon the earlier of dispatch by the Representative of telegrams
to securities dealers releasing such securities for offering or the release by
the Representative for publication of the first newspaper advertisement which is
subsequently published relating to the Securities.
10. Termination.
(a) Subject to the terms of subsection (b) of this Section 10, the
Representative shall have the right to terminate this Agreement if: (i) any
domestic or international event or act or occurrence has disrupted, or, in the
Representative's opinion will in the immediate future disrupt, the financial
markets; (ii) any material adverse change in the financial markets shall have
occurred; (iii) if trading on the New York Stock Exchange, the
43
<PAGE>
American Stock Exchange, or in the over-the-counter market shall have been
suspended, or minimum or maximum prices for trading shall have been fixed, or
maximum ranges for prices for securities shall have been required on the
over-the-counter market by the NASD or by order of the Commission or any other
government authority having jurisdiction; (iv) the United States shall have
become involved in a war or major hostilities, or if there shall have been an
escalation in an existing war or major hostilities or a national emergency shall
have been declared in the United States; (v) a banking moratorium shall have
been declared by a state or federal authority; (vi) a moratorium in foreign
exchange trading shall have been declared; or (vii) the Company shall have
sustained a loss which is material or substantial to the Company by fire, flood,
accident, hurricane, earthquake, theft, sabotage or other calamity or malicious
act which, whether or not such loss shall have been insured, will, in the
Representative's opinion, make it inadvisable to proceed with the delivery of
the Securities; or (vii) there shall have occurred a material adverse change in
the condition (financial or otherwise), business affairs or prospects of the
Company, whether or not arising in the ordinary course of business, which would
render, in the Representative's judgment, either of such parties unable to
perform satisfactorily its respective obligations as contemplated by this
Agreement or the Registration Statement, or a material adverse change in the
general market, political or economic conditions in the United States or
elsewhere as in the Representative's judgment would make it inadvisable to
proceed with the offering, sale and/or delivery of the Securities.
(b) If this Agreement is terminated by the Representative in accordance
with the provisions of Section 10(a) hereof, the Company shall promptly
reimburse and indemnify the Representative for all of its actual out-of-pocket
expenses, including the fees and disbursements of Underwriters' Counsel in an
amount not to exceed $50,000. Anything contained in this Agreement to the
contrary notwithstanding, if this Agreement is not carried out within the time
specified herein (as the same may be any extended by the Representative), by
reason of any failure on the part of the Company to perform any undertaking or
satisfy any condition of this Agreement to be performed or satisfied by the
Company (including, without limitation, pursuant to Section 6 or Section 12
hereof) or because of any action by the Company or any failure of the Company to
take any action reasonably requested by the Representative, then the Company
shall promptly reimburse and indemnify the Representative for all of its actual
out-of-pocket expenses, including without limitation, the fees and disbursements
of counsel for the Underwriters (less amounts previously paid pursuant to
Section 5 (c) above). In addition, the Company shall remain liable for all
counsel fees and expenses relating to Blue Sky matters and Blue Sky filing fees.
Anything contained in this Agreement to the contrary notwithstanding, any
election hereunder or any termination of this Agreement (including, without
limitation, pursuant to Section 6, 10, 11 and 12 hereof), and whether or not
this Agreement is otherwise carried out, the provisions of Sections 5 and 7
shall not in any
44
<PAGE>
way be affected by such election or termination or failure to carry out the
terms of this Agreement or any part hereof.
11. Substitution of Underwriter. If one or more of the Underwriters fails
(otherwise than for a reason sufficient to justify the termination of this
Agreement under the provisions of Section 6, 10 or 12 hereof) to purchase the
Securities which it or they are obligated to purchase on date specified in this
Agreement (the "Defaulted Securities"), the Representative shall have the right,
within 24 hours thereafter, to make arrangements for one or more of the
non-defaulting Underwriters, or any other underwriters, singly or in the
aggregate, to purchase all, but not less than all, of the Defaulted Securities
in such amounts as may be agreed upon and upon the terms herein set forth; if,
however, the Representative shall not have completed such arrangements within
such 24-hour period, then:
(a) if the number of Defaulted Securities does not exceed 10% of the total
number of Firm Units to be purchased on such date, the non-defaulting
Underwriters shall be obligated to purchase the full amount thereof in the
proportions that their respective underwriting obligations hereunder bear to the
underwriting obligations of all non-defaulting Underwriters, or
(b) if the number of Defaulted Securities exceeds 10% of the total number
of Firm Units, this Agreement shall terminate without liability on the part of
any non-defaulting Underwriters.
No action taken pursuant to this Section shall relieve any defaulting
Underwriter from liability in respect of any default by such Underwriter under
this Agreement.
In the event of any such default which does not result in a termination of
this Agreement, the Representative shall have the right to postpone the Closing
Date, for a period not to exceed seven days, in order to effect any required
changes in the Registration Statement or the Prospectus or in any other
documents.
12. Default by the Company. If the Company fails at the Closing Date or
any Over-Allotment Closing Date, as applicable, to sell and deliver the number
of Units which it is obligated to sell hereunder on such date, then this
Agreement shall terminate (or, if such default shall occur with respect to any
Over-Allotment Units to be purchased on any Over-Allotment Closing Date, the
Representative may, at its option, by written notice to the Company, terminate
the obligation of the Representative and/or the Underwriters to purchase
Over-Allotment Units from the Company on such date) without any liability on the
part of any non-defaulting party other than pursuant to Sections 5, 7 and 10
hereof. No action taken pursuant to this Section shall relieve the Company from
liability, if any, in respect of such default.
45
<PAGE>
13. Notices. All notices and communications hereunder, except as herein
otherwise specifically provided, shall be in writing and shall be deemed to have
been duly given if mailed or transmitted by any standard form of
telecommunication. Notices to the Representative or the Underwriters shall be
directed to the Representative at 50 Broadway, New York, New York 10004,
Attention: Mr. Robert A. Schneider, Chairman of the Board, with a copy to
Fischbein Badillo Wagner Harding, 909 Third Avenue, New York, New York 10022,
Attention: Joseph L. Cannella, Esq. Notices to the Company shall be directed to
the Company at 20 East 63rd Street, 1st Floor, New York, New York 10021,
Attention: Ira Kanarick, with a copy to Morrison Cohen Singer & Weinstein, LLP,
750 Lexington Avenue, New York, New York 10022, Attention: Jack Levy, Esq.
14. Parties. This Agreement shall inure solely to the benefit of, and
shall be binding upon, the Underwriters, the Representative, the Company and
the controlling persons, directors and officers referred to in Section 7 hereof,
and their respective successors, legal representatives and assigns, and no other
person shall have or be construed to have any legal or equitable right, remedy
or claim under, in respect of or by virtue of this Agreement or any of the
provisions contained herein. No purchaser of Securities from the Representative
or any Underwriter shall be deemed to be a successor by reason merely of such
purchase.
15. Construction. This Agreement has been prepared, negotiated and
delivered in the State of New York and shall be governed by and construed and
enforced in accordance with the laws of such State, without giving effect to the
principles thereof relating to the conflict of laws.
16. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original and all of which,
taken together, shall constitute one and the same document.
17. Entire Agreement; Amendments. This Agreement, the Representative's
Warrant and the Warrant Agreement constitute the entire agreement of
the parties hereto with respect to the subject matter hereof and thereof and
supersede all prior written or oral agreements, understandings and negotiations
with respect to such subject matter. This Agreement may not be modified or
amended in any way except by a writing signed by the Representative and the
Company.
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<PAGE>
If the foregoing correctly sets forth the understanding among the
Representative, the Underwriters and the Company, please so indicate in the
appropriate space provided below for that purpose, whereupon this letter shall
constitute a binding agreement among us.
Very truly yours,
C. W. CHEMICAL WASTE TECHNOLOGIES LIMITED
By:/s/Ira H. Kanarick
--------------------------------------
Ira H. Kanarick
Chief Executive Officer
Confirmed and accepted as of the
date first above written by: RAS
SECURITIES CORP. for itself and as
Representatives of the several
Underwriters named in Schedule A
attached hereto:
By: RAS SECURITIES CORP.
By:
-----------------------------------
Name: Robert A. Schneider
Chairman
47
<PAGE>
SCHEDULE A
Name of Underwriters
Number of Firm
Securities to
be purchased
===============
RAS Securities Corp.
First London
TOTAL................................................... 2,000,000
48
Exhibit 3.1, 3.2
THE COMPANIES LAW CAP. 113
(PRIVATE COMPANY LIMITED BY SHARES)
MEMORANDUM
AND
ARTICLES OF ASSOCIATION
OF THE COMPANY
C.W. CHEMICAL WASTE TECHNOLOGIES LIMITED
It is hereby certified that this is a true and
accurate translation of the original text of
the Memorandum and Articles of Association of
the company C.W. CHEMICAL WASTE TECHNOLOGIES LIMITED which is
on file with the Registrar of Cyprus Companies.
/s/ ALEXANDRA CHRISTODOULOU
- -------------------------------
Alexandra Christodoulou
Advocate.
<PAGE>
THE COMPANIES LAW, CAP. 113
PRIVATE COMPANY LIMITED BY SHARES
MEMORANDUM OF ASSOCIATION
OF THE COMPANY
C.W. CHEMICAL WASTE TECHNOLOGIES LIMITED
- --------------------------------------------------------------------------------
1. The name of the Company is:
C.W. CHEMICAL WASTE TECHNOLOGIES LIMITED
2. The registered office of the Company is in Cyprus.
3. The objects for which the Company is incorporated are:
(1) To carry on works for the processing of chemical technology
products and all kinds of works for chemical wastes, in
connection therewith keeping for this purpose the necessary
installations all over the world for the conversion,
transformation and processing of chemical wastes and products
of chemical technology and to carry on to trading in and
exploitation of such products.
(2) To carry on business as Traders, Importers, Exporters,
Mercantile Agents and Retailers of Goods of any kind,
manufactured or not.
(3) To carry on business as industrialists and artisans of all
kinds.
(4) To purchase, sell, construct, repair, adapt, alter and
otherwise deal with machinery, tools, materials, goods,
objects, cars, factories and things capable of use for the
above enterprises or any of them or which may be requested by
clients or persons dealing with the Company.
(5) To carry on all kinds of estate business, that is, the
acquisition in Cyprus or abroad of immovable property of all
kinds and description by purchase, rent, exchange, donation,
or any other way and the development, construction on same of
all kinds of buildings, lease, cash sale or credit sale, the
exploitation and disposal of same in any way and including by
donation.
2
<PAGE>
(6) To effect bareboat Charters of any kind and to proceed with
the registration of ships in any ship register and in
accordance with any relevant law, also to buy, exchange, Ere,
administer~ charter, construct or otherwise acquire, possess
or equip ships or sailing vessels of any kind together with or
without their equipment, machinery, their furniture and
chattels, or shares or interests over such ships or sailing
vessels, possess such ships or sailing vessels and to utilize
same for the transportation of passengers, soldiers, goods and
products of every kind including animals petroleum or other
liquids, armaments, and generally any kind of chattels between
any harbours or places in Cyprus or elsewhere and to acquire
postal subsidies and to maintain, repair, improve, modify, let
out, mortgage or otherwise deal with, sell, alienate, such
ships, sailing vessels, shares or other documents.
(7) To provide help, aid, or assistance in any possible way,
commercially, financially or otherwise to any ship owning,
ship-managing or other shipping company belonging to the same
group of companies as the Company, or is managed and
controlled by the same person or persons, or has in its
ownership a vessel under common management or common
exploitation with a vessel of the Company including (without
limitation) holding, parent, associated, sister, dependent or
subsidiary company or companies of the Company.
(8) In all fields of shipping, commercial and/or financial
activity to provide cooperation, mutual assistance,
collaboration and/or joint venture with any other company or
companies belonging to the same group as the Company and/or
are controlled by the same person or persons for the purpose
of increasing, renewing, replacing and/or improving the
group's fleet and/or expansion in whole of its activities.
(9) To carry on the business of shipowners, carriers by land or
sea, administrators, brokers and agents of ships and shipping
companies, shipchandlers, storers, contractors, owners of
small boats, loading boats, motorboats and other small
vessels, forwarding agents, shipping representatives of any
kind, loaders, unloaders, shipping agents, chartering agents,
shipowners, wharfingers, manufacturers and merchants of ice,
owners and storers of ice boxes, freezing spaces and to insure
with any insurance company or person, against any loss,
damage, danger or responsibility of any kind which could
adversely affect the Company, its property, its products or
any persons or chattels transported through its own
transporting means, also to carry on the business of
representative of Insurance Companies for every kind of
insurance business including marine insurance.
3
<PAGE>
(10) In all fields of commercial and/or financial activity to
provide co-operation, mutual assistance, collaboration and/or
joint venture with any other company or companies belonging to
the same group as the Company and/or are controlled by the
same person or persons for the purpose of increasing,
renewing, replacing and/or improving the whole group and/or
expansion in whole of its activities.
(11) To purchase, take upon lease or in exchange, rent or otherwise
obtain, use and possess or to mortgage, sell, donate or
otherwise alienate any property or any interests, any lands,
buildings, easements, fights, privileges, concessions,
machinery, patents, installations, goods or other movable or
immovable property of any kind.
(12) To carry on business as hoteliers and to construct or in any
way acquire of hotels, restaurants and recreating centers and
to exploit of same.
(13) To undertake and carry on tourist business and projects of
tourist development in any way.
(14) To carry on business as traders of electronic, electrical and
mechanical equipment of all kinds.
(15) To proceed in amalgamation with any other company or
enterprise which company or enterprise will have objects in
whole of in part similar to those of the Company.
(16) To acquire in whole or in part the property and debts of any
person or persons legal or natura of whatsoever description as
long as the Company will consider them capable of promoting
its business and contributes to its progress.
(17) To enter into partnerships or other arrangements for the
participation in profits or interests, cooperation, common
enterprises, provision of mutual facilities, or otherwise,
with any legal or natural person or persons, or with any
enterprise which has undertaken or is involved in a business
or commercial transaction which may prove directly or
indirectly beneficial for the Company.
(18) To invest and administer the funds and the monies of the
Company in such shares or other investments, mortgages or
fixed securities as may be considered suitable or in such
manner as
4
<PAGE>
the Board of Directors would from time to time decide, also to
subscribe in order to receive, buy, or otherwise acquire and
hold shares or other interests in other companies, deeds or
other securities in such companies.
(19) To appoint and employ employees, servants, workers personnel,
representatives or other persons in connection with the
activities of the Company.
(20) To lend or pay in advance monies to such persons and under
such terms as it would seem appropriate and especially to its
members, to its customers and to persons doing business with
the Company.
(21) To borrow as well as to provide on its own or jointly or
severally with any other or facilities with or without any
security in such others loans and/or any other credit f way as
the Company may deem fit and to mortgage, pledge, or encumber
the entire business or any part thereof and the entire assets
and moveable and immovable property of the Company present or
future wherever this may be situated or any part thereof
including the uncalled capital of the Company or any part
thereof to secure the whole or pan of any such loan or loans
or credit facilities as well as to issue promissory notes,
with or without floating charges and debentures payable at the
time and in the manner as the Company may deem fit and the
whole or any part of the proceeds of any such loan or loans or
credit facilities may be disposed in whole or in part for the
benefit or use either of the Company itself or other company
or companies or person or persons or the Company jointly or
severally with an other company or companies or person or
persons or in part in the one manner and in part in the other
manner.
(22) To advertise either directly or through specialists,
government or private organizations the business of the
Company or any one of them, in any way the Company should
think fit, including advertisement through the press or radio,
by signs, by films, circulars exhibitions, by publishing
competitions, by the granting or prizes or rewards and any
other legal means.
(23) To establish and preserve or to cause the establishment and
preservation of any pension fund with or without contributions
in favor of the following persons or superannuation funds or
provident fund and to grant or to cause the granting of
donations, bonuses, pensions, subsidies or remuneration to any
persons who are or were at any time in the service of the
Company or were employed by it, or any subsidiary company or
company associated or cooperating with the
5
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Company or with any subsidiary company or person who are or
were at any time Directors or officers of the Company or any
other such company as above and to their spouses, widows,
widowers, families and descendants of any such persons and
also to establish and maintain register in any institutions,
unions, associations or funds which may be considered by the
Company beneficial to, or capable of promoting the interest
and welfare of the Company or any other such company as above
or any such persons as above and to effect payments for or on
account of the security of any such person as above and to
proceed with any of the above acts either alone or in
conjunction with any other such company as above.
(24) To execute payment of any monies or fulfill or execute any
obligation of any Government, Administrative body, Legal
entity, Commercial house, company or partnership, to provide
and receive collateral guaranties and to provide guarantees
and indemnities generally to any person or company.
(25) To grant, assist in the granting or in the securing of the
granting of any loan secured by promissory notes, debentures
or otherwise or the share capital of any company or other
business.
(26) To participate in the management, supervision and control of
the activities or the business of any company or enterprise
and for this purpose to appoint and pay any Board Members or
Directors, accountants, experts, agents or other
representatives.
(27) To enter into contracts, agreements or arrangements with other
companies~ legal or natural person or persons of any
description, for lawful consideration, and to carry out in the
name of said persons any activity which is related to the
objects of the Company.
(28) To reimburse or provide guarantees to third parties including
the mortgaging and charging of the assets of the Company in
the form of a security for a loan to third parties and/or
grant guarantees to such parties. The payment of said
compensation or security constitutes conclusive and
irrefutable evidence that such payment was made in the
interest and in furtherance of the objects of the Company.
(29) To purchase or in any other way, acquire, construct, maintain,
improve, adapt and maintain any offices, laboratories,
installations, factories, machinery, buildings~ works and
other things which may be considered necessary or useful for
the purposes of the Company in Cyprus or abroad.
6
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(30) To carry on any other trade or business whatever which can in
the opinion of the Board of Directors be advantageously
carried on in connection with or ancillary to any of the
businesses of the Company.
(31) To purchase or by any other means to acquire, to possess,
register, protect and renew in any part of the world any
patents, patent rights, brevets d'invention, licences, secret
processes, trade marks, designs, protections and concessions,
chemical formulas, and other similar things and to sell,
exchange, grant licences or alter, modify or improve the same
as the Company may from time to time decide.
(32) To carry on or undertake the whole or any part of the
business, goodwill and assets of any person, firm or company
carrying on or proposing to carry on any of the business which
the Company is authorized to carry on and as part of the
consideration for such acquisition to undertake all or any of
the liabilities of such person, firm or company or to acquire
an interest in, amalgamate with or enter into partnership or
into any arrangement for sharing profits or for co-operation
or for mutual assistance with any such person, firm or company
or for subsidizing or otherwise assisting any such person,
firm or company and to give or accept by way of consideration
for any of the acts or things aforesaid or property acquired,
any shares, debentures, debenture stock or securities that may
be agreed upon and to hold and retain or sell, mortgage and
deal with any shares, debentures, stock, or securities so
received.
(33) To improve, manage, construct, repair, develop. exchange, let
on lease or otherwise, mortgage, charge, sell, dispose or turn
to account, grant licences, options, rights and privileges in
respect of or otherwise deal with all or any part of the
property and rights of the Company.
(34) To invest or deal with the moneys of the Company not
immediately required in such manner as may from time to time
be determined and to hold or otherwise deal with any
investments made.
(35) To borrow and raise money in any manner and without any
restriction and to secure the repayment of any money borrowed,
raised or owing by mortgage, charge or any other security upon
the whole or any part of the company's property or assets
(whether present or future) including its uncalled capital and
also by a similar mortgage, charge or security to secure and
7
<PAGE>
guarantee the performance by the Company of any obligation or
liability it may under-take or which may become binding on it.
(36) To draw, make, accept, endorse, discount, negotiate, execute
and issue cheques, bills of exchange, promissory notes, bills
of lading, warrants, debentures and other negotiable or
transferable instruments.
(37) To apply for, promote and obtain any law, order or licence of
any appropriate Authority for enabling the Company to carry
any of its objects into effect or for effecting any
modification of the Company's constitution or for any other
purpose which might directly or indirectly promote the
Company's interests, and to oppose any proceeding or
application which might directly or indirectly prejudice the
Company's interests.
(38) To enter into any arrangements with any government or
authority, supreme, municipal, local or otherwise that may
seem conducive to the attainment of the Company's objects or
any of them and to obtain from any such government or
authority any charters, decrees, rights or privileges which
the Company may think desirable and to carry out, exercise and
comply with any such charters, decrees, rights, and
privileges.
(39) To subscribe for, take, purchase or otherwise acquire, hold,
sell, deal with and dispose, place and underwrite shares,
stocks, debentures, debenture stocks, bonds, obligations or
securities issued or guaranteed by any other company
constituted or carrying on business in any part of the World
and debentures, stocks, bonds, obligations or securities
issued or guaranteed by any government or authority,
municipal, local or otherwise in any part of the World.
(40) To control, manage, finance, subsidize, co-ordinate or
otherwise assist any company or companies in which the Company
has a direct or indirect financial interest, to provide
secretarial, administrative, technical, commercial and other
services and facilities of all kinds for any such company or
companies and to make payments by way of subvention or
otherwise and any other arrangements which may seem desirable
with respect to any business or operations of or generally
with respect to any such company or companies.
(41) To promote any other company for the purpose of acquiring the
whole or any part of the business or property or undertaking
or any of the liabilities of the Company or of undertaking any
business
8
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or operations which may appear likely to assist or benefit the
Company or to enhance the value of any property or business of
the Company and to place or guarantee the placing of,
underwrite, subscribe for or otherwise acquire all or any part
of the shares or securities of any such company as aforesaid.
(42) To sell or otherwise dispose of the whole or any part of the
business or property of the Company, either together or in
portions, for such consideration as the Company may think fit,
and in particular for shares, debentures, or securities of any
company purchasing the same.
(43) To act as agents or brokers and as trustees for any person,
firm. or company, and to undertake and perform sub-contracts.
(44) To remunerate any person, firm or company rendering services
to the Company either by cash payment or by the allotment to
him or them of shares or other securities of the Company
credited as paid up in full or in part or otherwise as may be
thought expedient.
(45) To pay all or any expenses incurred in connection with the
promotion, formation and incorporation of the Company, or to
contract with any person, firm or company to pay the same, and
to pay commissions to brokers and others for underwriting,
placing, selling, or guaranteeing the subscription of any
shares or other securities of the Company.
(46) To distribute among the members of the Company in kind any
property or business of the Company of whatsoever nature at
any time as well as in the event of its liquidation.
(47) To procure the Company to be registered or recognized in any
part of the world and to comply with any necessary or useful
conditions for the purpose of securing the operation of the
Company in such country or place and to establish local agents
or office in it for the carrying out of its business.
(48) To do all or any of the things or matters aforesaid in any
part of the world either as principals, agents, contractors,
trustees, assignors, assignees and with various legal
capacities or otherwise, and by or through agents, brokers,
sub-contractors or otherwise and either alone or in
conjunction with others and under any other capacity provided
by law, as well as generally and for any other reason or
purpose to act under any aforementioned capacity.
9
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(49) To do all such other things as may be deemed incidental or
conducive or necessary for, or which will contribute to the
attainment of the Company's objects or any of them.
It is understood that notwithstanding anything above contained all the business
of the Company shall be carried on outside Cyprus.
Nothing of the above set forth shall prevent the directors and the place of
carrying on the offshore business of the Company to be situated in Cyprus.
The objects set forth in each sub-clause shall not be restrictively construed
but the widest interpretation shall be given thereto and they shall not except
when the context expressly so requires be in any way limited or restricted by
reference to or inference from any other object or objects set forth in such
sub-clause or from the terms of any other sub-clause or from the name of the
Company, None of such sub-clause or the object or objects therein specified or
the powers thereby conferred shall be deemed subsidiary or ancillary to the
objects or powers mentioned in any other sub-clause but shall be considered as
separate and distinct objects.
The word "company" in this clause save where it is used in connection with this
Company shall be deemed to include any partnership or other body of persons
either registered as a Company or not and either having its registered Office in
Cyprus or not.
4. The liability of the Members is limited.
5. The share capital of the Company is CY Pounds 1.000,00 divided into one
thousand shares of CY Pounds I,- each.
The shares of the initial or any additional capital may be divided into various
classes which may be given any rights privileges, conditions or limitations as
to preference or specifically as regards the dividends, capital, voting rights
or otherwise.
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WE, the several persons whose names and addresses are subscribed, are desirous
of being formed into a Company, in pursuance of this Memorandum of Association,
and we respectively agree to take the number of shares in the capital of the
Company set opposite our respective names.
- --------------------------------------------------------------------------------
Names, Addresses and Descriptions Number of Shares taken
of Subscribers by each Subscriber
- --------------------------------------------------------------------------------
THIRTEENELS SERVICES LIMITED 999 SHARES
41, THEM, DERVIS STREET
OFFICE 80
NICOSIA
THRTEENELS NOMDMES LIMITED 1 SHARE
41, THEM. DERVIS STREET
OFFICE 807
NICOSIA
- --------------------------------------------------------------------------------
Dated on this 5 day of April 1995.
Witness of the above signatures:
/s/ MARIA ANTONIOU
- ----------------------
Maria Antoniou
Private Employee
41 Them. Dervis Street
Nicosia
11
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THE COMPANIES LAW, CAP. 113
COMPANY LIMITED BY SHARES
ARTICLES OF ASSOCIATION
-of-
C.W. CHEMICAL WASTE TECHNOLOGIES LIMITED
PRELIMINARY
1. The regulations in Part I of Table A in the First Schedule of the
Companies Law. CAP. 113 shall not apply to the Company.
2. In the Articles:
(A) if not inconsistent with the subject or context (1) words importing
the singular number include the plural, and vice versa; (2) words
importing one gender include any gender; (3) references to statutory
provisions shall be construed as referring to those provisions as
amended or re-enacted and from time to time in force; and (4) save
for the words standing in the first column of the table below which
shall bear the meanings set opposite to them respectively in the
second column thereof, any words or expressions defined in the Law
shall bear the same meanings as therein given to them but excluding
any column thereof, any words or expressions defined in the Law
shall bear the same meanings as therein given to them but excluding
any column thereof, any words or expressions defined in the Law
shall bear the same meanings as therein given to them but excluding
any statutory modification thereof not in force at the date of
adoption by the Company of these Articles;
WORDS MEANINGS
these Articles these Articles of Association as therein contained or as from
time to time altered
equity security a relevant share in the Company, or a right to subscribe for,
or to convert securities into, relevant shares in the Company
the holder in relation to shares, means a holder whose name is entered in
the register of holders as the holder of the shares
the Law the Companies Law, CAP. 113 and every statutory modification
or reenactment thereof in force from time to time
<PAGE>
Office the registered office of the Company
Paid up paid up or credited as paid up
relevant share a share in the Company other than a share which, as respects
dividends and capital, carries a right to participate only up
to a specified amount in a distribution
(B) subject to the provisions of Article 47 below, where. for any
purpose an ordinary resolution of the Company is required, a special
resolution shall also be effective; and
(C) headings are for ease of reference only and shall not affect the
construction of these Articles.
CAPITAL
3. The share capital of the Company at the date of the adoption of these
Articles is US$2.500.000 divided into Twenty Million (20.000-000) Ordinary
Shares of US$O, 10 each and Five Million (5,000,000) Preference Shares of
US$O, 10 each.
Upon issuance of the preference shares, the Directors will define the terms of
issue at their discretion.
VARIATION OF RIGHTS
4. Subject to the provisions of the Law, if at any time the capital of the
Company is divided into different shares, the rights attached to any class
may be varied or abrogated, whether or not the Company is being wound up,
either (a) in such manner (if any) as may be provided by such rights or
(b) in the absence of any such provision (i) with the consent in writing
of the holders of 75% in nominal value of the issued shares of that class,
or (ii) with the sanction of an extraordinary resolution passed at a
separate general meeting of the holders of the shares of the class, but
not otherwise. To every such separate meeting (iii) all the provisions of
these Articles relating to general meetings of the Company or to the
proceedings thereat shall, so far as applicable and with the necessary
modification, apply other special rights and shall not (unless otherwise
expressly provided by these Articles or by the conditions of issue of such
shares) be deemed to be varied by the creation or issue of further shares
ranking in some or all respects pari passu therewith or subsequent
thereto.
SHARES
5. (A) The directors shall have general and unconditional authority to
allot any relevant securities up to the maximum amount of the
authorized but unissued share capital at the date of the adoption of
these Articles or such other amount as my be laid down
2
<PAGE>
from time to time by the Company in a general meeting, subject to
the following provisions of this Article 6.
(B) The Company shall be permitted to give financial assistance for the
purpose of or in connection with the acquisition of shares in the
Company only to the extent permitted by the Law.
6. (A) Save as otherwise provided in these Articles or otherwise directed
by the Company in a general meeting, all unissued shares (whether
forming part of the original or any increased capital) which the
directors are authorized (by these Articles or otherwise) to allot
shall be at the disposal of the directors who may allot, grant
options over, offer or otherwise deal with or dispose of them to
such persons, at such times and generally on such terms and
conditions as they may determine.
(B) The Company may issue shares which are to be redeemed or are liable
to the redeemed at the option of the Company or the shareholders.
(C) Subject to the provisions of the Law, the Company shall have power
to purchase its own shares, including any redeemable shares, out of
capital or otherwise.
7. In addition to all the powers of paying commissions, the Company may
exercise the powers conferred by the Law in paying commissions to persons
subscribing or procuring subscriptions for shares in the Company, or
agreeing so to do, whether absolutely or conditionally; provided that the
rate per cent or the amount of the commission paid or agreed to be paid
shall be disclosed in the manner required by the Law. Subject to the
provisions of the Law, any such commission may be satisfied by the payment
of cash or by the allotment of fully or partly shares or partly in one way
and partly in the other. The Company may also, on any issue of shares, pay
such brokerage as may be lawful.
8. Except as required by law, no person shall be recognised by the Company as
holding any share upon any trust, and the Company shall not be bound by or
compelled in any way to recognise any equitable, contingent, future or
partial interest in any share, or (except only as by these Articles
otherwise provided or as by law required) any interest in any fractional
part of a share or any other right in respect of any share, except an
absolute tight to the entirety thereof in the registered holder.
9. Every holder shall be entitled without payment to one certificate for all
his shares of each class, or, upon request, to several certificates, each
for one or more of his shares. Every certificate shall be issued within
two months after allotment or the lodgement with the Company of the
transfer of the shares, not being a transfer which the Company is for any
reason entitled to refuse to register and does not register, unless the
conditions of issue of such shares otherwise provide, and shall be under
the Seal and shall specify the number and class and distinguishing numbers
(if any) of the shares to which it relates, and the amount
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<PAGE>
paid up thereon. In the case of a share held jointly by several persons,
the Company shall not be bound to issue more than one certificate
therefor, and delivery of a certificate for share to one of several joint
holders shall be sufficient delivery to all. Where a holder transfers part
of the shares comprised in his holding he shall be entitled to a
certificate for the balance of his holding without charge.
10. If a share certificate be defaced, worn out, lost or destroyed, it may be
renewed on such terms (if any) as to evidence and indemnity and the
payment of any exceptional out-of-pocket expenses incurred by the Company
investigating evidence as the directors think fit but otherwise free of
charge, and (in case of defacement or wearing out) on delivery up of the
old certificate.
CALLS ON SHARES
11. The directors may, subject to the provisions of these Articles and to any
conditions of allotment, from time to time make calls upon the holders in
respect of any moneys unpaid on their shares (whether on account of the
nominal amount of the shares or by way of premium) and each holder shall
(subject to being given at least fourteen days' notice specifying the time
or times and place of payment) pay to the Company at the time or times mid
place so specified the amount called on his shares.
12. A call may be made payable by installments, A call may be postponed and a
call may be wholly or in part revoked as the directors may determine, A
call shall be deemed to have been made at the time when the resolution of
the directors authorising the call was passed. The joint holders of a
share shall be jointly and severally liable to pay all calls in respect
thereof A person upon whom a call is made shall remain liable for calls
made upon him notwithstanding the subsequent transfer of the shares in
respect whereof the call was made.
13. If a sum called in respect of a share is not paid before or on the day
appointed for payment thereof, the person from whom the sum is due shall
pay interest on the sum form the day appointed for payment thereof to the
time of actual payment at the rate fixed by the terms of allotment of the
share or in the notice of the call or, if no rate is so fixed, at such
rate as the directions may determine, but the directors shall be at
liberty to waive payment of such interest wholly or in part.
14. Any sum which by the terms of issue of a share becomes payable upon
allotment or at any fixed date, whether on account of the nominal amount
of the share or by way of premium or as an installment of a call, shall
for the purposes of these Articles be deemed to be a call duly made and
payable on the date on which by the terms of issue the same becomes
payable, and, in case of non-payment, all the relevant provisions of these
Articles as to payment of interest, forfeiture or otherwise shall apply as
if such sum had become payable by virtue of a call duly made and notified.
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<PAGE>
15. Subject to the terms of allotment, the directors may make arrangements on
the issue of shares for a difference between the holders in the amount of
calls to be paid and in the times of payment.
16. The directors may, if they think fit, receive from any holder willing to
advance the same all or any part of the money unpaid upon the shares held
by him beyond the sums actually called up thereon as a payment in advance
of calls, and any such payment in advance of calls shall extinguish, so
far as the same shall extend but subject as in these Articles provided,
the liability upon the shares in respect of which it is advanced; and upon
the money so received, or so much thereof as from hi time to time exceeds
the amount of the calls then made upon the shares in respect of which it
has been received the Company may pay interest at such rate not exceeding
5% per annum as the holder paying such sum and the directors agree. Any
such payment in advance of calls on any share shall not entitle the holder
of such shares to participate in respect of such amount in any dividend.
FORFEITURE, SURRENDER AND LIEN
17. If a holder fails to pay any call or installment of a call on the day
appointed for payment thereof, the directors may at any time thereafter,
during such time as any part of such call or installment remains unpaid,
serve a notice on him requiring payment of so much of the call or
installment as is unpaid, together with any interest which may have
accrued. The notice shall name a further day (not earlier than fourteen
days from the date of service thereof) on or before which and the place
where the payment required by the notice is to be made, and shall state
that in the event of non-payment at or before the time and at the place
appointed the shares on which the call was made will be liable to be
forfeited.
18. If the requirements of any such notice as aforesaid are not complied with,
any share in respect of which such notice has been given may at any time
thereafter, before payment of all calls and interest due in respect
thereof has been made, be forfeited by a resolution of the directors to
that effect, and such forfeiture shall include all dividends which shall
have been declared on the forfeited shares and not actually paid before
the forfeiture, The directors may accept a surrender of any shares liable
to be forfeited hereunder.
19. Subject to the provisions of the Law, a share so forfeited or surrendered
may be sold, reallotted or otherwise disposed of, either to the person who
was before such forfeiture or surrender the holder thereof of or entitled
thereto, or to any other person upon such terms and in such manner as the
directors shall think fit. At any time before a sale, re-allotment or
disposal, the forfeiture or surrender may be canceled on such terms as the
directors think fit. The directors may, if they think fit, authorise some
person to execute an instrument of transfer of a forfeited or surrendered
share to any other person as aforesaid.
20. A holder whose shares have been forfeited or surrendered shall cease to be
a holder in respect of the forfeited or surrendered shares and shall
surrender to the Company for cancellation the
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<PAGE>
certificate for the shares forfeited, but shall notwithstanding such
forfeiture or surrender remain liable to pay to the Company all moneys
which at the date of forfeiture or surrender were presently payable by him
to the Company in respect of the shares, with interest thereon, unless and
to the extent that the directors resolve to waive interest, at the rate of
5% per annum or at such lower rate as the directors may agree to accept
from the date of forfeiture or surrender until payment, and the directors
may enforce payment without any allowance for the value of the shares at
the time of forfeiture or surrender or for any consideration received on
their disposal.
21. The Company shall have a first and paramount lien on every share (not
being a fully paid share) for all moneys, whether presently payable or
not, called or payable at a fixed time in respect of such share. The
Company's lien (if any) on a share shall extend to all dividends or other
moneys payable thereon or in respect thereof.
22. The Company may sell in such manner as the director think fit, any shares
on which the Company has a lien, but no sale shall be made unless some sum
in respect of which the lien exists is presently payable, nor until the
expiration of fourteen days after a notice in writing, stating and
demanding payment of the sum presently payable, and giving notice of
intention to sell in default, shall have been served on the holder for the
time being of the shares or the person entitled by reason of his death or
bankruptcy to the shares.
23. The net proceeds of such sale, after payment of the costs thereof, shall
be applied in or towards payment or satisfaction of the debt or liability
in respect whereof the lien exists, so far as the same is presently
payable, and any residue shall (upon surrender to the Company for
cancellation of the certificate for the shares sold and subject to a like
lien for debts or liabilities not presently payable as existed upon the
shares prior to the sale) be paid to the person entitled to the shares at
the time of the sale. For giving effect to any such sale, the directors
may authorise some person to execute an instrument of transfer of the
shares sold to, or in accordance with the directions of, the purchaser
thereof.
24. The Company shall be entitled to sell at the best price reasonably
obtainable any share held by a holder, or any share to which a person is
entitled by transmissions, if for a period of 12 years or any shorter
period that the directors should decide no cheque or warrant sent by the
Company through the post in a prepaid letter addressed to the holder or to
the person entitled by transmission to the share, at his registered
address or at the last known address given by the holder or the person
entitled by transmission as the address given by the holder or the person
entitled by transmission as the address to which the cheques and warrants
are to be sent, has been cashed and no communication has been received by
the Company from the holder or person concerned and for the purpose of
giving effect to any such sale the Company may appoint any person to
execute as transferor an instrument of transfer of such share, and such
instrument shall be as effective as if it had been executed by the holder
of, or person entitled by transmission to, such share.
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The Company shall be liable to account without interest to the holder or other
person entitled to such share for the net proceeds of such sale and shall be
deemed to be his debtor and not a trustee for him in respect of the same.
25. A statutory declaration in writing that the declarant is a director or the
Secretary of the Company and that a share has been duly forfeited or
surrendered or sold whether to satisfy a lien of the Company or otherwise
on a date stated in the declaration shall be conclusive evidence of the
facts therein stated as against all persons claiming to be entitled to the
share, Such declaration and the receipt of the Company for the
consideration (if any) given for the share on the sale, re-allotment or
disposal thereof together with the share certificate delivered to a
purchaser or allottee thereof shall (subject of the execution of an
instrument of transfer if the same be required) constitute a good title to
the share and the person to whom the share is sold, re-allotted or
disposed of shall be registered as the holder of the share and shall not
be bound to see to the application of the consideration (if any) nor shall
his title to the share be affected by any irregularity or invalidity in
the proceedings in reference to the forfeiture, surrender, sale,
re-allotment or disposal of the share.
TRANSFER OF SHARES
26. The shares of the Company shall be transferred by the use of the Mowing
form, signed by the transferor and the transferee, or in such usual or
common form which the directors may approve:
If/We,[ ] of [ ], in consideration of the sum of
[ ] paid to me by [ ] of [ ] ("the transferee")
hereby transfer to the transferee shares of [ ] each in the capital of
[ ] so that the transferee, his/its executors, administrators and
assigns shall
hold the same subject to the same terms as I/We held the same at the time of
execution of this transfer.
I/We, being the transferee, hereby agree to accept the said shares subject to
the aforesaid terms".
27. The instrument of transfer shall be signed by or on behalf of the
transferor and (except in the case of fully paid shares) by or on behalf
of the transferee. Except as provided by subparagraph (4) of paragraph 2
of the Seventh Schedule of the Law, the transferor shall be deemed to
remain the holder of the share until the name of the transferee is entered
on the register of holders in respect thereof.
28. The directors may decline to recognise any instrument of transfer:
(A) unless the instrument of transfer is deposited at the Office or such
other place as the directors may appoint, accompanied by the
certificate for the shares to which it
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relates and such other evidence as the directors may reasonably
require to show the right of the transferor to make the transfer;
(B) unless the instrument of transfer is in respect of only one class of
share; and
(C) unless the instrument of transfer is in respect of share in respect
of which all sums presently payable to the Company have been paid;
and
29. If the directors refuse to register a transfer of any shares, they shall,
within two months after the date on which the transfer was lodged with the
Company, send to the transferor and the transferee notice of the refusal.
30. The registration of transfers of shares or of any class of shares may be
suspended at such time and for such periods as the directors may from time
to time determine, provided always that the register of holders shall not
be closed for more than thirty days in any year.
31. No fee will be charged by the Company in respect of the registration of
any instrument of transfer, probate, letters of administration,
certificate of marriage or death, stop notice or power of attorney or
other document relating to or affecting the title to any shares or
otherwise for making any entry in the register of members relating to or
affecting the title to any shares.
32. All instruments of transfer which shall be registered may be retained by
the Company, but any instrument of transfer which the directors refuse to
register shall (except in any case of fraud) be returned to the person
depositing the same.
33. Nothing in these Articles shall preclude the directors from recognising a
renunciation of the allotment of any share by the allottee in favour of
some other person.
TRANSMISSION OF SHARE
34. In the case of the death of a holder the survivors or survivor where the
deceased was a joint holder, and the legal personal representatives of the
deceased (or, in the absence of such legal personal representatives, the
heirs) where he was a sole or only surviving holder, shall be the only
persons recognised by the Company as having any title to his interest in
the shares, but nothing in this Article shall release the estate of a
deceased holder (whether sole or joint) from any liability in respect of
any share held by him.
35. Any person becoming entitled to a share in consequence of the death or
bankruptcy of a holder may, upon such evidence as to his title being
produced as may from time to time be required by the directors and subject
as hereinafter provided, elect either to be registered himself as holder
of the share or to have some person nominated by him registered as the
transferee thereof.
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36. If the person so becoming entitled shall elect to be registered himself,
he shall deliver or send to the Company a notice in writing signed by him
stating that he so elects. If he shall elect to have another person
registered, he shall testify his election by executing a transfer of the
share in favour of that person. AH the limitations, restrictions and
provisions of these Articles relating to the right to transfer and the
registration of transfers of shares shall be applicable to any such notice
or transfer as aforesaid as if the death or bankruptcy of the holder had
not occurred and the notice or transfer were a transfer signed by such
holder.
37. Save as otherwise provided by or in accordance with these Articles, a
person becoming entitled to a share in consequence of the death or
bankruptcy of a holder shall (upon supplying to the Company such evidence
as the directors may reasonable require as to his title to the share) be
entitled to receive and may give a discharge for all benefits arising or
accruing from or in respect of the share, but he shall not be entitled in
respect of that share to receive notices of or to attend or vote at
general meetings of the Company or at any separate meeting of the holders
of any class of shares in the Company nor, save as aforesaid, to any of
the rights or privileges of a holder, until he shall have become a holder
in respect of the share; provided always that the directors may at any
time give notice requiring any such person to elect either to be
registered himself or to transfer the share, and if, within sixty days the
notice is not complied with, such person shall (but only in the case of a
share which is fully paid up) be deemed to have elected to be registered
as a holder in respect thereof and may be registered accordingly.
INCREASE OF CAPITAL
38. The Company may from time to time by ordinary resolution increase its
capital by such sum to be divided into shares of such amounts and carrying
such rights as the resolution may prescribe.
39. All new shares shall (unless the Company shall in a general meeting
otherwise determine) be subject to the provisions of these Articles with
reference to payment of calls, forfeiture, surrender, hen, transfer,
transmission and otherwise, and unless otherwise provided by or pursuant
to these Articles or by the conditions of issue the new shares shall upon
issue be Ordinary Shares.
ALTERATION OF CAPITAL
40. (A) The Company may by ordinary resolution:
(i) consolidate and divide all or any of its share capital into shares
of larger amount than its existing shares;
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(ii) cancel any shares which, at the date of the passing of the
resolution, have not been taken, or agreed to be taken, by any
person and diminish the amount of share capital by the amount of the
shares so cancelled;
(iii) sub-divide its shares, or any of them, into shares of smaller amount
than is fixed by the Memorandum of Association (subject nevertheless
to the provisions of the Law).
(B) The Company may by special resolution reduce its share capital and
any capital redemption reserve and any share premium account in any
manner subject to the provisions of the Law.
GENERAL MEETINGS
41. The Company shall in each year hold a general meeting as its annual
general meeting in addition to any other meetings in that year and not
more than fifteen Months shall elapse between the date of one annual
general meeting of the Company and that of the next, save that the Company
shall not be required to hold an annual general meeting in the year of its
incorporation. Subject as aforesaid and to the provisions of the Law, the
annual general meeting shall be held at such time and place as the
directors may determine, All general meetings other than annual general
meetings shall be called extraordinary general meetings.
42. The directors may whenever they think fit, and shall on requisition in
accordance with the law, proceed to convene any extraordinary general
meeting for a date not later than eight weeks after receipt of the
requisition. if at any time there are not sufficient directors capable of
acting to form a quorum, any director or any two holders of the Company
may convene an extraordinary general meeting in the same manner as nearly
as possible as that in which meetings may be convened by the directors.
NOTICE OF GENERAL MEETINGS
43. Subject to the provisions of the Law, an annual general meeting for the
passing of a special resolution shall be called by twenty-one days' notice
at the least, and all other general meetings shall be called by fourteen
days' notice at the least. Every notice shall be in writing and shall
specify the place, the day and the time of meeting, and in the case of
special meeting shall specify the meeting as such. Notice shall be given
in the manner hereinafter mentioned to all the holders, other than those
who under the provisions of these Articles are not entitled to receive the
notice.
44. A general meeting of the Company shall, notwithstanding that it is called
by shorter notice than that specified in these Articles, be deemed to have
been duly called if it is so agreed:
(A) in the case of a meeting called as an annual general meeting, by all
the holders entitled to attend and vote thereat; and
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(B) in the case of any other general meeting, by a majority in number of
the holders having a right to attend and vote at the meeting, being
a majority together holding not less than 95% in nominal value of
the shares giving such right.
45. The accidental omission to give notice of a meeting to, or the non-receipt
of notice by, any person entitled to receive notice shall not invalidate
the proceedings at the meeting.
PROCEEDINGS AT GENERAL MEETINGS
46. All business shall be deemed special that is transacted at an
extraordinary general meeting, and also all business that is transacted at
an annual general meeting, with the exception of the declaration of
dividends, the consideration of accounts and of the reports of the
directors and of the auditors and other documents annexed to accounts, the
appointment of directors in the place of those retiring, the appointment
of the auditors and the fixing of the remuneration of the auditors or of
the manner in which such remuneration is to be fixed.
47. No business shall be transacted at any general meeting unless a quorum is
present when the meeting proceeds to business. Save as in these Articles
otherwise provided, holders owning a majority in interest of votes
entitled to be cast present in person or by proxy and entitled to vote at
the meeting shall be a quorum for all purposes.
48. If within half an hour from the time appointed for the meeting a quorum is
not present, the meeting, if convened on the requisition of or by holders,
shall be dissolved. In any other case, it shall stand adjourned to the
same day in the next week at the same time and place or to such other day,
and at such time and place, as the directors may determine, and if at such
adjourned meeting a quorum is not present within fifteen minutes from the
time appointed for holding the meeting, the holders present shall be a
quorum
49. The chairman (if any) of the board of directors shall preside as chairman
at every general meeting of the Company, but if at any meeting such
chairman shall not be present within five minutes after the time appointed
for holding the meeting, or if lie is not willing to act as chairman, or
if there is no such chairman, the directors present shall choose some
director present to be chairman, or if no director be present, or if all
the directors present decline to take the chair, the holders present shall
choose some holder present to be chairman.
50. The chairman of any meeting at which a quorum is present may, with the
consent of such meeting (and shall if so directed by the meeting) adjourn
the meeting from time to time and from place to place, but no business
shall be transacted at any adjourned meeting except business which might
lawfully have been transacted at the meeting from which the adjournment
took place. When a meeting is adjourned for thirty days or more, seven
days' notice at least, specifying the place, the day and the time of the
adjourned meeting shall be given as in the case of an original meeting.
but it shall not be necessary to specify in such
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notice the nature of the business to be transacted at the adjourned
meeting. Save as aforesaid it shall not be necessary to give any notice of
an adjournment.
51. If an amendment shall be proposed to any resolution under consideration
but shall in good faith be ruled out of order by the chairman of the
meeting the proceedings on any substantive resolution shall not be
invalidated by any error in such ruling.
52. At any general meeting, a resolution put to the vote of the meeting shall
be decided on a show of hands, unless before, a poll is demanded:
(A) by the chairman of the meeting; or
(B) by not less than three holders having the right to vote at the
meeting; or
(C) by a holder or holders representing not less than one tenth of the
total voting rights of all the holders having the right to vote at
the meeting; or
(D) by a holder or holders holding shares in the Company conferring a
right to vote at the meeting, being shares on which an aggregate sum
has been paid up equal to not less than one tenth of the total sum
paid up on all the shares conferring that right.
Unless a poll be so demanded, a declaration by the chairman of the meeting
that a resolution has been carried, or carried unanimously, or by a
particular majority, or lost, or riot carried by a particular majority,
and an entry to that effect in the book containing the minutes of the
proceedings of general meetings of the Company, shall be conclusive
evidence of the fact without proof of the number or proportion of the
votes recorded in favour of or against such resolution. The demand for a
poll may be withdrawn.
53. The instrument appointing a proxy to vote at a meeting shall be deemed
also to confer authority to demand or join in demanding a poll, and for
the purposes of the last preceding Article, a demand by a person as proxy
for a holder shall be the same as a demand by the holder.
54. If a poll is duly demanded, it shall be taken in such manner as the
chairman of the meeting may direct (including the use of ballot or voting
papers or forms), and the result of a poll shall be deemed to be the
resolution of the meeting at which the poll was demanded.
55. A poll demanded on the election of a chairman or on a question of
adjournment shall be taken forthwith. A poll demanded on any other
question shall be taken at such time and place as the chairman of the
meeting shall direct not being more than thirty days from the date of the
meeting or the adjourned meeting at which the poll was demanded. No notice
need be given of a poll not taken forthwith if the time and place at which
it is to be taken are
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announced at the meeting at which it is demanded. In any other case at
least seven days' notice shall be given specifying the time and place at
which the poll is to be taken.
56. In the case of an equality of votes, whether on a show of hands or on a
poll, then the issue or question shall be deemed to be voted down. The
chairman shall not be entitled to a casting vote.
57. Subject to the provisions of the Law, a resolution in writing signed by
all the holders for the time being entitled to receive notice of and
attend and vote at general meetings (or, being corporations, by their
authorized representations) shall be as valid and effective as if the same
had been approved and passed at a general meeting duly convened and held.
VOTES OF HOLDERS
58. Subject to any special rights or restrictions as to voting attached to any
shares by or in accordance with these Articles, on a show of hands every
holder who is present in person or by proxy not being himself a holder
shall have one vote per share and on a poll every holder who is present or
by proxy shall have one vote for every share of which he is the holder.
59. In the case of joint holders of a share, the joint holders are allowed to
decide amongst themselves who will vote.
60. A holder suffering from mental disorder in respect of whom an order has
been made or a direction or authority given by a court of competent
jurisdiction may vote, whether on a show of hands or on a poll, by his
committee, receiver, curator bonis or other person authorized in that
behalf appointed by such court and such committee, receiver, curator bonis
or other person may on a poll vote by proxy, provided that such evidence
as the directors may require of the authority of the person claiming to
vote shall have been deposited at the place at which proxies for the
meeting in question are to be deposited under Article 67 below not less
than forty eight hours before the time for holding the meeting or
adjourned meeting at on claims to vote and in default the right to vote
shall not be which such pers exercisable.
61. No holder shall, unless the directors otherwise determine, be entitled to
vote at any general meeting or at any separate meeting of the holders of
any class of shares in the Company either personally or by proxy, or to
exercise any privilege as a holder, unless as calls or other sums
presently payable by him in respect of shares in the Company have been
paid.
62. No objection shall be raised to the qualification of any voter except at
the meeting or adjourned meeting at which the vote objected to is given or
tendered, and every vote not disallowed at such meeting shall be valid for
all purposes, Any such objection made in due time shall be referred to the
chairman of the meeting whose decision shall be final and conclusive.
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63. On a poll, votes may be given either personally or by proxy. On a poll, a
holder entitled to more than one vote need not, if he votes, use all his
votes or cast all the votes he uses in the same way.
64. Any person (whether a holder or not) may be appointed to act as a proxy.
65. The instrument appointing a proxy shall be in writing in the usual common
form, or such other form as may be approved by the directors, and shall be
signed by the appointor or his attorney duly authorized in writing, or if
the appointor is a corporation shall be either under its common seal or
under the hand of a duly authorized officer or attorney of the
corporation. The directors may, but shall not be bound to, require
evidence of authority of such officer or attorney. An instrument of proxy
need not be witnessed.
66. The instrument appointing a proxy together with (unless the directors
waive such requirement) the power of attorney or other authority (if any)
under which it is signed, or a notarially certified or office copy of such
power or authority, shall be deposited at the Office, or at such other
place, as is specified for that purpose in the notice calling the meeting,
or in any instrument of proxy sent out by the Company in relation to the
meeting, before the time appointed for holding the meeting or adjourned
meeting at which the person named in the instrument proposes to vote, and
if in default the instrument of proxy shall not be treated as valid. An
instrument appointing a proxy to vote at any meeting and deposited as
aforesaid shall be valid to empower the proxy so appointed to vote on any
poll taken or demanded at such meeting or at any adjournment of such
meeting.
67. A vote given in accordance with the terms of an instrument of proxy or by
the duly authorized representative of a corporate holder or a poll
demanded by proxy or by the duly authorized representative of a corporate
holder shall be valid notwithstanding (in the case of a proxy) the
previous death or mental disorder of the principal or the revocation of
the instrument of proxy or of the authority under which the instrument of
proxy was executed or (in the case of a duly authorized representative of
a corporate holder) the revocation of his appointment, provided that no
evidence in writing of such death, mental disorder or revocation shall
have been received by the Company at the Office or (in the case of an
instrument of such other place at which it was required to be deposited
under Article 67 proxy) above three hours at least before the commencement
of the meeting or adjourned meeting at which the vote is given or the poll
demanded or (in the case of a poll taken otherwise than on the same day as
the meeting or adjourned meeting) the time appointed for taking the poll.
68. An instrument appointing a proxy shall be in the following form or a form
as near thereto as circumstances shall admit or otherwise in accordance
with the securities laws of any country where the company's securities are
registered for Public Trading:
"[ ] Limited"
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I/We, [ ] of [ ], being a holder/holders of the above-
named company, hereby appoint [ ] of [ ], or failing him
[ ] of [ ] as my/our proxy to vote for me/us on my/our behalf at
the [annual/extraordinary] general meeting of the company, to be held on
[ ] and at any adjournment thereof My proxy shall vote [in favour
of/against the resolution [s]] [as he thinks fit, unless otherwise instructed by
me].
[Date and signature]"
69. The instrument appointing a proxy shall be deemed to confer authority to
demand or join in demanding a poll.
CORPORATIONS ACTING BY REPRESENTATIVES
70. Any corporation which is a holder of the Company may, by resolution of its
directors or other governing body, authorise such person as it thinks fit
to act as its representative at any meeting of the Company, or at any
meeting of any class of holders of the Company, and the person so
authorized shall be entitled to exercise the same powers on behalf of the
corporation which he represents and that corporation shall, for the
purpose of these Articles, be deemed to be present in person at such
meeting if a person so authorized is present thereat.
DIRECTORS
71. Subject as hereinafter provided, the directors shall be not less than two
and not more than nine but the Company may by ordinary resolution from
time to time vary the minimum number and may also fix and from time to
time vary the maximum number of directors. The exact number of Directors,
within the above minimum and maximum at any given time, shall be decided
by the Directors.
72. A director shall not require a share qualification but nevertheless shall
be entitled to attend and speak at any general meeting of the Company and
at any separate meeting of the holders of any class of shares in the
Company.
73. The remuneration of the directors shall from time to time be determined by
the Company in a general meeting. Unless so determined, the directors
shall be paid US$1000 for each meeting or committee meeting, The directors
shall also be entitled to be paid all traveling, hotel and other expenses
properly incurred by them in connection with the business of the Company,
or in attending and returning from meetings of the directors or of
committees of the directors or general meetings or separate meetings of
the holders of any class of shares or of debentures of the Company or
otherwise in connection with the discharge of their duties.
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74. In addition to any payments authorized under or pursuant to Article 74,
any director who serves on any committee or who devotes special attention
to the business of the Company, or who otherwise performs services which,
in the opinion of the directors, are outside the scope of the ordinary
duties of a director, may be paid such extra remuneration by way of
salary, lump sum, percentage of profits, consultancy fees or otherwise as
the directors may determine.
75. A director, may hold any other office or place of profit under the Company
(other than the office of auditor) in conjunction with his office of
director, on such terms as to tenure of office, remuneration and otherwise
as the directors may determine. Any director may act by himself or his
firm in a professional capacity (other than that of auditor) for the
Company and he or his firm shall be entitled to remuneration for such
professional services.
76. No director or intending director, shall be disqualified from his office
by contracting with the Company either with regard to his tenure of any
other office or place of profit, or as vendor, purchaser or otherwise, nor
shall any such contract, or any contract or arrangement entered into by or
on behalf of the Company in which any director is in any way, whether
directly or indirectly, interested be liable to account to the Company for
any profit realised by any such contract or arrangement, by reason of such
director holding that office or of the fiduciary relationship thereby
established.
77. Any director, may continue to be or become a director or other officer or
holder of or otherwise interested in any other company promoted by the
Company or any subsidiary thereof or in which the Company or any
subsidiary thereof may be interested, as a holder or otherwise, or in
which the Company or any subsidiary thereof has decided not to take any
shareholding or other interest whatsoever, and no such director shall be
accountable for any remuneration or other benefits whatsoever received by
him as a director or other officer or holder of or from his interest in
any such other company. The directors may exercise the voting power
conferred by the shares in any other company held or owned by the Company,
or exercisable by them as directors of such other company, in such manner
in all respects as they think.
78. A director who is in any way, whether directly or indirectly, interested
in a contract, transaction or arrangement or a proposed contract,
transaction or arrangement with the Company shall declare the nature of
his interest at a meeting of the directors in accordance with Section 191
of the Law, and, provided that, he shall be entitled to vote at a meeting
of directors, or of a committee of directors on any resolution concerning
any such matter and he shall be counted in any quorum at any meeting at
which he or his alternate is present.
79. The directors may exercise all the powers of the Company to borrow money
and to mortgage or charge its undertaking, property, assets and uncalled
capital, and to issue debentures and other securities, whether outright or
as collateral security for any debt, liability or obligation of the
Company or any third party and whether at a discount, premium or otherwise
and with
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such powers as to redemption, surrender, drawings, issuing of shares as
the directors shall think fit.
GENERAL POWERS QF DIRECTOR
80. The business of the Company shall be managed by the directors, who may
exercise all such powers of the Company as are not by the Law or by these
Articles required to be exercised by the Company in a general meeting,
subject nevertheless to any regulations of these Articles, to the
provisions of the Law, and to such regulations or provisions as may be
prescribed by the Company by special resolution, but no regulation made by
the Company by special resolution shall invalidate any prior act of the
directors which would have been valid if such regulation had not been
made.
81. The directors may from time to time, and at any time, by power of
attorney, appoint any corporation, firm or person, or any fluctuating body
of persons, whether nominated directly or indirectly by the directors, to
be the attorney of the Company for such purposes, with such powers,
authorities an discretions (not exceeding those vested in or exercisable
by the directors under these Articles), for such period and subject to
such conditions as they may think fit, and any such power of attorney may
contain such provisions for the protection and convenience of persons
dealing with any such attorney as the directors may think fit, and may
such attorney to sub-delegate all or any of the powers, also authorise any
authorities and discretions vested in him.
82. The Company may exercise the powers conferred on it by Sections 114 to 117
(both inclusive) of the Law with regard to the keeping of a dominion
register, and the directors may (subject to the provisions of those
Sections) make and vary such regulations as they may think fit respecting
the keeping of such register.
83. All cheques, promissory notes, drafts, bills of exchange, and other
negotiable or transferable instruments, and all respects for moneys paid
to the Company, shall be signed, drawn, accepted, endorsed or otherwise
executed, as the case may be, in such manner as the directors shall from
time to time by resolution determine.
DIRECTORS HOLDING EXECUTIVE OFFICE
84. The directors may from time to time appoint any one or more of their body
to any executive office for such period and on such terms and with or
without such title or titles (including but not limited to chairman,
managing director, chief executive and joint, deputy or assistant managing
director or chief executive) as they think fit. A director holding any
such office (whether appointed as aforesaid or otherwise) shall (subject
to the terms of any contract between him and the Company) be subject to
The same provisions of resignation and removal as the other directors or
as the directors resolve that his term of office as holder of such
executive office be determined, his appointment as such shall ipso facto
determine.
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85. A director appointed to any such office shall receive such remuneration
(whether by way of salary, commission, participation in profits, provision
for retirement or insurance benefit, or partly in one way and partly in
another, or otherwise) as the directors may determine.
86. The directors may entrust to and confer upon any director appointed to any
such office any of the powers exercisable by them as directors, other than
the power to make calls or forfeit shares, upon such terms and conditions
and with such restrictions as they think fit, and either collaterally with
or to the exclusion of their own powers, and may from time to time revoke,
withdraw, alter or vary all or any Of such powers.
RETIREMENT AND APPOINTMENT QF DIRECTORS
87. The office of a director shall be vacated in any of the following events,
namely:
(A) if (but in the case of a director holding any executive office
subject to the terms of any contract between him and his Company) he
resigns his office by instrument in writing signed by the resigning
director and authenticated in such manner as the other directors or
director may accept (provided that the resigning director shall
deposit the original signed instrument at the Office as soon as
reasonably practicable but failure or delay in his doing so shall
not prejudice the validity of the resignation;)
(B) if he becomes bankrupt or makes any arrangement or composition with
his creditors generally;
(C) if, in the opinion of the majority of directors other than the
directors vacating office and in the written opinion of a suitably
qualified medical expert he becomes of unsound mind;
(D) if he ceases to be a director by virtue of any provision of the Law
or becomes prohibited by law from being a director.
88. No person shall, unless recommended by the directors for appointment, be
eligible for appointment to the office of director at any general meeting
unless, not less than seven nor more than forty eight days before the day
appointed for the meeting, there shall have been given to the Company
notice in writing by some holder duly qualified to attend and vote at the
meeting for which such notice is given of his intention to propose such
person for appointment stating the particulars which would, if he were so
appointed, be required to be included in the Company's register of
directors, and also notice in writing signed by the person to be proposed
of his willingness to be appointed.
89. At a general meeting a motion for the appointment of two or more persons
as directors by a single resolution shall not be made unless a resolution
that it shall be so made has been first agreed to by the meeting without
any vote being given against it, and for the purposes of this
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Article a motion for approving a person's appointment or for nominating a
person for appointment shall be treated as a motion for his appointment.
90. The Company may from time to time by ordinary resolution increase or
reduce the number of directors.
91. The directors shall have the power at any time, and from time to time, to
appoint any person who is willing to act to be a director, either to fill
a vacancy or as an additional director, but so that the total number of
directors shall not at any time exceed the maximum number (if any) fixed
by or in accordance with these Articles. Subject to the provisions of the
Law and of these Articles, any director so appointed shall hold office
only until the conclusion of the next following annual general meeting,
and shall be eligible for re-appointment at that meeting and if not
re-appointed at such annual general meeting, he shall vacate office at the
conclusion thereof.
92. Subject to the provisions of Article 94, the Company may at any time, and
from time to time, by ordinary resolution, appoint any person who is
willing to act as a director either to fill a vacancy or as an additional
director and, without prejudice to the provisions of the Act, may by
ordinary resolution remove a director (including a director holding
executive office) before the expiration of his period of office (but such
removal shall be without prejudice to any claim such director may have for
breach of any contract of service between him and the Company).
PROCEEDINGS OF DIRECTORS
93. Subject to the provisions of these Articles, the directors may meet
together for the dispatch of business, adjourn and otherwise regulate
their meetings as they think fit. Questions arising at any meeting shall
be determined by a majority of votes. In case of an equality of votes the
chairman of the meeting shall have a second or casting vote. A director
shall be entitled in the absence of his appointor to a separate vote on
behalf of the director he is representing in addition to his own vote. Any
two directors may, and the Secretary on the requisition of two any
directors shall, at any time summon a meeting of the directors, It shall
not be necessary to give notice of a meeting of directors to any director
for the time being absent from the Cyprus, unless such director is
ordinarily resident outside Cyprus, in which case such notice shall be
sent to his address as it appears in the register of directors, A meeting
of the directors or a committee of the directors may consist of a
conference between directors who are not all in one place, but of whom
each is able (directly or by telephonic communication) to speak to each of
the others, and to be heard by each of the others simultaneously; and the
word "meeting" in these Articles shall be construed accordingly.
94. A director who is unable to attend any meeting of the directors may
authorise any other director to vote for him at the meeting, and in that
event the director so authorized shall have a vote for each director by
whom he is so authorized in addition to his own vote. Any such
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authority must be by instrument signed by the authorising director and
authenticated in such manner as the other directors may accept. The
authorising director shall deposit the original signed instrument at the
office as soon as reasonably practicable, but failure or delay in his
doing so shall not prejudice the validity of the authorisation.
95. The quorum necessary for the transaction of the business of the directors
may be fixed by the directors, and unless so fixed at any other number
shall be two, For the purposes of this Article, a person who holds office
only as an alternate director shall, if his appointor is not present, be
counted in a quorum, but so that not less than two individuals shall
constitute the quorum, Any director or alternate director who attends a
meeting of directors by telephone or other conference facility shall be
deemed to be personally present at such meeting for all purposes of these
Articles and shall be counted in the quorum accordingly, A meeting of the
directors for the time being at which a quorum is present shall be
competent to exercise all powers and discretions for the time being
exercisable by the directors.
96. The continuing directors or a sole continuing director may act
notwithstanding any vacancies in their body, but if and so long as the
number of directors is reduced below the number fixed by or in accordance
with these Articles as the quorum of directors, the continuing directors
or director may act for the purpose of filling up vacancies in their body
or of summoning general meetings of the Company, but not for any other
purpose. If there be no directors or director able or willing to act~ then
any two holders may summon a general meeting for the purpose of appointing
directors.
97. The directors may, from their number, from time to time elect and remove a
chairman and determine the period for which he is to hold office, The
chairman shall preside at all meetings of the directors, but if no such
chairman be elected, or if at any meeting the chairman is not willing to
preside or is not present within five minutes after the time appointed for
holding the same, the directors present may choose one of their number to
be chairman of the meeting.
98. A resolution in writing, signed or approved by telefax by all the
directors for the time being entitled to receive notice of a meeting of
directors or of a committee of directors, shall be as effective as a
resolution passed at a meeting of the directors or ( as the case may be) a
committee of directors duly convened and held, and may consist of several
documents in the like form each signed by one or more of the directors;
99. The directors may delegate any of their powers to committees consisting of
at least one holder of their body as they think fit, provided that at
least one half of the holders of any such committee shall be directors of
the Company. Any committee so formed shall in the exercise of the powers
so delegated conform to any regulations that may be imposed on it by the
directors. The meetings and proceedings of any such committee consisting
of two or more directors shall be governed by the provisions of these
Articles regulating the meetings and
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proceedings of the directors, so far as the same are applicable and are
not superseded by any regulations imposed by the directors under this
Article.
100. All acts done by any meeting of directors, or of a committee of directors,
or by any person acting as a director, notwithstanding it be afterwards
discovered that there was some defect in the appointment of any such
director, or person acting as aforesaid, or that they or any of them were
disqualified from holding office, or had vacated office, or were not
entitled to vote, be as valid as if every such person had been duly
appointed, and was qualified and had continued to be a director and had
been entitled to vote.
EXECUTIVE AND OTHER DIRECTOR
101. Subject to the provision of the Law, the directors may from time to time,
and at any time, pursuant to this Article appoint any other persons to any
post with such descriptive title including that of director (whether as
executive, group, divisional, department, deputy, assistant, local,
advisory director or otherwise) as the directors may determine and may
define, Emit, vary and restrict the powers, authorities and discretions of
persons so appointed and may fix and determine their remuneration and
duties, and, subject to any contract between him and the Company, may
remove from such post any person so appointed. A person so appointed shall
not be a director of the Company for any of the purposes of these Articles
or of the Act, and accordingly shall not be a holder of the board of
directors or of any committee thereof, nor shall he be entitled to be
present at any meeting of the board of directors or of any such committee,
except at the request of the board of directors or of such committee, and
if present at such request he shall not be entitled to vote thereat.
MINUTES AND BOOKS
102. The directors shall cause minutes to be made:
(A) of all appointments of officers made by the directors;
(B) of the names of the directors present at each meeting of directors
and of any committee of directors;
(C) of all resolutions and proceedings at all meetings of the Company of
any class of holders of the Company and of the directors and of
committees of directors.
Any such minutes, if purporting to be signed by the chairman of the meeting at
which the proceedings took place, or by the chairman of the next following
meeting, shall be evidence of the proceedings.
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SECRETARY
103. Subject to the Law, the secretary of the Company shall be appointed by the
directors on such terms and for each period as they may think fit. Any
secretary so appointed may at any time be removed from office by the
directors, but without prejudice to any claim for damages for breach of
any contract of service between him and the Company.
104. Anything by the Act required or authorized to be done by or to the
secretary of the Company may, if the office is vacant or such secretary is
absent or there is for any other reason no such secretary capable of
acting, be done by or to any officer of the Company authorized generally
or specialty in that behalf by the directors; provided that any provision
of the Law or of these Articles requiring or authorising a thing to be
done by or to a director and the secretary shall not be satisfied by its
being done or to the same person acting both as director and as, or in
place of, the Secretary.
THE SEAL
105. The directors shall provide for the safe custody of the Seal and it shall
not be used except by the authority of a resolution of the directors or of
a committee of the directors authorized in that behalf by the directors.
The directors may from time to time make such regulations as they see fit
(subject to the provisions of these Articles in relation to share
certificates and debenture certificates) determining the persons and the
number of such persons who shall sign every instrument to which the Seal
is affixed, and until otherwise so determined (and subject as aforesaid)
every such instrument shall be signed by one director and shall be
countersigned by the Secretary or by a second director.
DIVIDENDS
106. The profits of the Company available for dividend and res shall be applied
in the payment of dividends to the holders in accordance with their
respective rights and priorities. The Company in a general meeting may
declare dividends accordingly.
107. No dividends shall be payable otherwise than in accordance with the Law
and out of the profits of the Company available for that purpose, and no
dividend shall exceed the amount recommended by the directors.
108. Subject to the rights of persons, if any, entitled to shares with special
rights as to dividends, all dividends shall be declared and paid according
to the amounts paid up on the shares in respect whereof the dividend is
paid, but no amount paid up on a share in advance of calls shall be
treated for the purposes of this Article as paid up on the share.
109. The directors may, if they think fit from time to time, pay to the holders
such interim dividends as appear to the directors to be justified by the
profits of the Company and are
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permitted by the Law. If at any time the share capital of the Company is
divided into different classes, the directors may (subject to the
provisions of the Law) pay such interim dividends in respect of those
shares in the capital of the Company which confer or the holders thereof
deferred or non-preferred rights as well as in respect of those shares
which confer on the holders thereof preferential rights with regard to
dividends but no interim dividend shall be paid on shares carrying
deferred or non-preferred rights if, at the time of payment, any
preferential dividend is in arrears. The directors may also pay
half-yearly, or at other suitable intervals to be settled by them, any
dividend which may be payable at a fixed rate if they are of the opinion
that the profits justify the payment and if and to the extent that such
payment is permitted by the Act. Provided the directors act bona fide,
they shall not incur any responsibility to the holders of shares
conferring a preference for any damages that they may suffer by reason of
the payment of an interim dividend on any shares having deferred or
non-preferred rights.
110. The directors may deduct from any dividend or other moneys payable to any
holder or in respect of a share of, all sums of money (if any) presently
payable by him to the Company on account of calls or otherwise in relation
to shares of the Company. The Company may cease to send any cheque or
warrant through the post for any dividend payable on any shares in the
Company which is normally paid in that manner on those shares if in
respect of at least two consecutive dividends payable on those shares the
cheques or warrants have been returned undelivered or remain uncashed but,
subject to the provisions of these Articles, shall recommence sending
cheques or warrants in respect of dividends payable on those shares if the
holder or person entitled by transmission claims the arrears of any
dividend and does not instruct the Company to pay future dividends in some
other way.
111. Any dividend or other moneys payable on or in respect of a share may be
paid by cheque or warrant sent through the post to the registered address
of the holder or person entitled thereto and in the case of joint holders
to any one of such joint holders, or to such person or such address as the
holder or joint holders may in writing direct. Every such cheque or
warrant shall be made payable to the order of the person to whom it is
sent or to such other person as the holder or joint holders may in writing
direct, and payment of the cheque or warrant or dispatch shall be a good
discharge of the Company. Every such cheque or warrant shall be sent at
the risk of the person entitled to the money represented thereby.
112. If several persons are registered as joint holders of any share, any one
of them may give effectual receipts for any dividend or other moneys
payable on or in respect of the share-
RESERVES
113. The directors may before recommending any dividend, whether preferential
or otherwise, carry to reserve out of the profits of the Company
(including any premiums received upon the issue of debentures or other
securities or rights of the Company) such sums as they think proper as a
reserve or reserves which shall, at the discretion of the directors, be
applicable
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for any purpose to which the profits of the Company may properly be
applied and pending such application may, at the like discretion either,
be employed in the business of the Company or be invested in such
investments (including, but subject to the provisions of the law, the
shares of the Company or its holding company, if any) as the directors may
from time to time think fit. The directors may also without placing the
same to reserve carry forward any profits which they may think it prudent
not to divide.
CAPITALISATION
114. (A) The Company in a general meeting may upon the recommendation of the
directors resolve that it is desirable to capitalise any undivided
profits of the Company standing to the credit of the profit and loss
account or otherwise and available for distribution (not being
required for the payment of fixed dividends on any shares entitled
to fixed preferential dividends with or without further
participation in profits) and, accordingly, that the directors be
authorized and directed to appropriate the profits resolved to be
capitalised to the holders who would have been entitled to them if
distributed by way of a dividend and in the same proportions on
condition that the same be not paid in cash but be applied either in
or towards paying up any amounts for the time being unpaid on any
shares held by such holders, respectively, or paying up in full
unissued shares or debentures of the Company to be allotted and
distributed credited as fully paid up and amongst such holders in
the proportions aforesaid, and partly in the one way and panty in
the other, and the directors shall give effect to such resolution.
(B) The Company in a general meeting may upon the recommendation of the
directors resolve that it is desirable to capitalise any part of the
amount for the time being standing to the credit of any reserve
account of the Company (including its share premium account and
capital redemption reserve) or its profit and loss account and,
whether or not available for distribution, by applying such sum in
paying up in Rill unissued shares to be allotted as fully paid
shares to those holders of the Company who would have been entitled
to that sum if it were distributed by way of dividend (and in the
same proportions), and the directors shall give effect to such
resolution.
115. Whenever such a resolution as aforesaid shall have been passed, the
directors shall make 4 appropriations and applications of the profits or
sum resolved to be capitalised thereby, and (subject to the provisions of
the Law) all allotments and issues of fully paid shares or debentures, if
any, and generally shall do all acts and things required to give effect
thereto with full power to fractional certificates or by payment in cash
or otherwise as they think fit for the case of shares or debentures
becoming distributable in fractions, or to make provisions whereby the
benefit of fractional entitlements accrues to the Company rather than to
the holders concerned, and also to authorise any person to enter into on
behalf of all the holders entitled to the benefit of such appropriations
and applications and agreement with the Company providing for the
allotment to them, respectively, credited as fully paid up, or
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any further shares to which they may be entitled upon such capitalisation,
and any agreement made under such authority shall be effective and binding
on all such holders.
ACCOUNTS
116. The directors shall cause accounting records to be kept and preserved in
accordance with the Law. The accounting records shall be kept at the
Office, and (subject to the provisions of the Law) at such other place as
the directors think fit, and shall always be open to inspection by the
officers of the Company. No holder (other than an officer of the Company)
shall have any right of inspecting any account or book or document of the
Company except as conferred by statute or authorized by the directors of
by the Company in a general meeting.
117. The directors shall from time to time, in accordance with the provisions
of the Law, cause to be prepared and to be laid before the Company in a
general meeting such profit and loss accounts, balance sheets, group
accounts (if any) and reports as are specified in the Law.
118. The auditors' report shall be read before the Company in a general meeting
and shall be open to inspection as required by the Law.
119. A copy of every balance sheet and profit and loss account (including every
document required by law to be annexed thereto) which is to be laid before
the Company in a general meeting and of the directors' and auditors'
reports shall not less than twenty-one days before the date of the meeting
be sent to every holder and to every holder of debentures of the Company,
provided that:
(A) this Article shall not require copies of such documents to be sent
to any person to whom, by virtue of the Law, the Company is not
required to send the same, nor to any person of whose address the
Company is not aware nor to more than one of the joint holders of
any shares or debentures; and
(B) instead of these documents there may be sent a copy of such summary
financial statement as may be permitted, in such form as may be
specified and subject to such conditions as may be required by law
to be sent to the holders of, and holders of debentures of, the
Company.
AUDITORS
120. Auditors shall be appointed and their duties, powers, rights and
remuneration regulated in accordance with the provisions of the Law.
Subject to the provisions of the Law, all acts done by any person acting
as an auditor shall, as regards all persons dealing in good faith with the
Company, be valid, notwithstanding that there was some defect in his
appointment or that he was at the time of his appointment not qualified
for appointment.
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121. In respect of each financial year of the Company, the accounts of the
Company shall be examined and the correctness of the balance sheet, profit
and loss account and group accounts (if any) ascertained by an auditor or
auditors.
122. (A) The auditor or auditors shall be entitled to attend any general
meeting and to receive notices of and other communications relating
to any general meeting which any holder is entitled to receive, and
to be heard at any general meeting on any part of the business of
the meeting which concerns him or them as auditor or auditors.
(B) The Company shall comply with the provisions of the Law relating to
the sending of copies of special notices of certain resolutions
concerning changes of auditors and to the giving notice of, and
circulating to holders, representations made by auditors retiring or
proposed to be removed.
123. Any notice or document may be given by the Company to or served by the
Company on any holder either personally or by sending it through the post
in a prepaid letter addressed to such holder at his address as appearing
in the register of holders or by transmitting it by telefax to the telefax
number of the holder last known to the Company. A notice to be given by
advertisement shall be deemed to have been served on the day on which the
advertisement appears. In the case of joint holders of a share, all
notices shall be given to that one of the joint holders whose name stands
first in the register of holders in respect of the joint holding, and
notice so given shall be sufficient notice to all joint holders.
124. Any holder present, either in person or by proxy, at any meeting of tile
Company shall for the purposes thereof be deemed to have received due
notice of such meeting and, where requisite, of the purposes for which
such meeting was convened.
125. Every person who by operation of law, transfer or other means whatsoever
shall become entitled to any share shall be bound by any notice in respect
of such share which previously to his name and address being entered on
the register of holders shall have been duly given to a person from whom
he derives his title to such shares.
126. Save as otherwise provided by the Law or by these Articles, any notice
shall be exclusive of the day on which it is served, or deemed to be
served, and of the day for which it is given. Any notice or other
document, if served by post, shall be deemed to have been served on the
second day following the day on which the letter, envelope, card or cover
containing the same is posted and any notice or document served by telefax
shall be deemed served at the time when the telefax is transmitted, and in
proving such service it shall be sufficient to prove that the letter,
envelope, card or cover containing the notice or documents was properly
addressed, postage prepaid, and duly posted or that the telefax was
correctly transmitted. A notice to be given by advertisement shall be
deemed to have been served on the day on which the advertisement appears.
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127. Any notice or document delivered or sent by post to or left at the
registered address of any holder in pursuant of these Articles shall,
notwithstanding that such holder be then dead or bankrupt and whether or
not the Company shall have notice of his death or bankruptcy, be deemed to
have been duly served in respect of any share registered in the name of
such holder as sole or joint holder, unless his name shall, at the time of
service of the notice or document, have been removed from the register of
holders as the holder of the share, and such service shall for all
purposes be deemed a sufficient service of such notice or document on all
persons interested (whether jointly with or as claiming through or under
him) in the share.
128. If the Company shall be wound up (whether the liquidation is altogether
voluntary, under supervision or by the court) the liquidator may, with the
authority of a special resolution and any other sanction required by the
Law, divide among the holders in specie the whole or any part of the
assets of the Company, and whether or not the assets shall consist of
property of one kind or shall consist of properties of different kinds,
and may for such purposes set such value as he deems fair upon any one or
more class or classes of property, and may determine how such division
shall be carried out as between the holders or different classes of
holders. The liquidator may, with the like authority, vest any part of the
assets in trustees upon such trusts for the benefit of holders as the
liquidator, with the like authority, shall think fit, and the liquidation
of the Company may be closed and the Company dissolved, but so that no
holder shall be compelled to accept any shares in respect of which there
is a liability.
INDEMNITY
129. To the extent not avoided by the provisions of the Law, every director or
other officer and auditor of the Company shall be indemnified out of the
assets of the Company against all costs, charges, expenses, losses and
liabilities which he may sustain or incur in or about the execution of his
office or otherwise in relation thereto and, in particular but without
prejudice to the generality of the foregoing, shall be indemnified out of
the assets of the Company against any liability incurred by him in
defending any proceedings, whether civil or criminal, in relation to the
affairs of the Company in which judgment is given in his favour or in
which he is acquitted or in connection with any application under the Law
in which relief is granted to Win by the court from liability in relation
to the affairs of the Company. The Company may purchase and maintain for
any director, Secretary or other officer of the Company insurance against
any liability which by virtue of any rule of law would otherwise attach to
him in respect of any negligence, default, breach of duty or breach of
trust of which he may be guilty in relation to the Company.
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NAMES, ADDRESSES AND DESCRIPTION SIGNATURES
OF SUBSCRIBERS
- ------------------------------------------------------------------------------
Dated this day of 199 .
WITNESS to the above signatures:
41, Them. Dervis Street,
8th floor, Off. 906 & 807,
Nicosia,
Cyprus.
I hereby confirm that the above Memorandum and Articles of Association were
drawn up by me.
(Sgn.)
---------------------------------------
Advocate
Office Address: 41, Them. Dervis Street,
8th floor, Off. 806 & 807,
Nicosia,
CYPRUS.
28
WARRANT AGREEMENT
WARRANT AGREEMENT, dated as of this ______ day of _____________, 1998, by
and among C.W. Chemical Waste Technologies Limited, a corporation organized
under the laws of Cyprus (the "Company"), Continental Stock Transfer & Trust
Company, as warrant agent (the "Warrant Agent"), and Ras Securities Corp., a New
York corporation ("RAS").
W I T N E S S E T H
WHEREAS, in connection with a private placement (the "Private Placement")
of units ("Units"), more particularly, a minimum of eight Units (the "Minimum
Units") and a maximum of 20 Units (the "Maximum Units"), each Unit consisting of
$25,000 principal amount of 12% Promissory Notes ("Notes"), and 12,500 common
stock purchase warrants ("Warrants");
WHEREAS, each Warrant is exercisable to purchase one ordinary share of the
Company, par value ___ Cyprus pounds per share under certain conditions set
forth below, and the Company will issue up to 250,000 Warrants;
WHEREAS, the Company desires the Warrant Agent to act on behalf of the
Company, and the Warrant Agent is willing to so act, in connection with the
issuance, registration, transfer, exchange and redemption of the Warrants, the
issuance of certificates representing the Warrants, the exercise of the
Warrants, and the rights of the holders thereof;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
set forth herein, and for the purpose of defining the terms and provisions of
the Warrants and the certificates representing the Warrants and the respective
rights and obligations thereunder of the Company, the holders of certificates
representing the Warrants, the Warrant Agent and RAS, the parties hereto agree
as follows:
SECTION 1. Definitions. As used herein, the following terms shall have the
following meanings, unless the context shall otherwise require:
(a) "Common Stock" shall mean ordinary shares of the Company of any
class, whether now or hereafter authorized, which have the right to
participate in the distributions of earnings and assets of the Company
without limit as to amount or percentage, which at the date hereof
consists of authorized shares, par value ___ Cyprus pounds per share.
(b) "Conversion Warrants" shall mean common stock purchase warrants,
substantially in the form of the Public Warrants, except that the
Conversion Warrants shall be subject to the Lock-Up, if any.
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(c) "Corporate Office" shall mean the office of the Warrant Agent
(or its successor) at which at any particular time its principal business
shall be administered, which office is located at the date hereof at 2
Broadway, New York, New York.
(d) "Exercise Date" shall mean, as to any Warrant, the date on which
the Warrant Agent Shall have received both (a) the Warrant Certificate
representing such Warrant, with the exercise form thereon duly executed by
the Registered Holder thereof or his attorney duly authorized in writing,
and (b) payment in cash, or by official bank or certified check made
payable to the Company, of an amount in lawful money of the United States
of America equal to the applicable Purchase Price.
(e) "Initial Warrant Exercise Date" shall mean , 2000.
(f) "Lock-Up" shall mean the restriction on registration, exercise
or transferability of the Conversion Warrants that may be imposed pursuant
to any requirements of the National Association of Securities Dealers or
the National Association of Securities Dealers Automated Quotation System
in connection with, respectively, the review of the terms of the
anticipated public offering and approval for listing of the securities
sold in such offering.
(g) "Public Warrants" shall have the meaning given in Section 9(a)
hereof.
(h) "Purchase Price" shall mean the purchase price to be paid upon
exercise of each Warrant in accordance with the terms hereof, which price
shall be $3.00 per share subject to (i) adjustment from time to time
pursuant to the provisions of Section 8 hereof, (ii) conversion of the
Warrants pursuant to the provisions of Section 9 hereof, and (iii) the
Company's right to reduce the Purchase Price upon notice to all warrant
holders.
(i) "Registrable Securities" shall mean the Conversion Warrants and
the shares of Common Stock for which the Conversion Warrants are
exercisable.
(j) "Registered Holder" shall mean the person in whose name any
certificate representing Warrants shall be registered on the books
maintained by the Warrant Agent pursuant to Section 6.
(k) "Transfer Agent" shall mean Continental Stock Transfer and Trust
Company, as the Company's transfer agent, or its authorized successor, as
such.
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(l) "Warrant Expiration Date" shall mean 5:00 P.M. (New York time)
on , 2004; provided that if such date shall be a holiday or a day on
which banks are authorized to close in the State of New York, then 5:00
P.M. (New York time) on the next following day which in the State of New
York is not a holiday or a day on which banks are authorized to close.
Upon notice to all warrant holders, the Company shall have the right to
extend the Warrant Expiration Date.
SECTION 2. Warrants and Issuance of Warrant Certificates.
(a) A Warrant shall initially entitle the Registered Holder of the
Warrant Certificate representing such Warrant to purchase one share of
Common Stock upon the exercise thereof, in accordance with the terms
hereof, subject to modification and adjustment as provided in Section 8.
(b) From time to time, up to the Warrant Expiration Date, the
Transfer Agent shall execute and deliver stock certificates in required
whole number denominations representing up to an aggregate of 250,000
shares of Common Stock, subject to adjustment as described herein, upon
the exercise of Warrants in accordance with this Agreement.
(c) From time to time, up to the Warrant Expiration Date, the
Warrant Agent shall execute and deliver Warrant Certificates in required
whole number denominations to the persons entitled thereto in connection
with any transfer or exchange permitted under this Agreement; provided
that no Warrant Certificates shall be issued except (i) those initially
issued hereunder, (ii) those issued on or after the Initial Warrant
Exercise Date, upon the exercise of fewer than all Warrants represented by
any Warrant Certificate, to evidence any unexercised Warrants held by the
exercising Registered Holder, (iii) those issued upon any transfer or
exchange pursuant to Section 6; (iv) those issued in replacement of lost,
stolen, destroyed or mutilated Warrant Certificates pursuant to Section 7;
and (v) at the option of the Company, in such form as may be approved by
the its Board of Directors, to reflect (A) any adjustment or change in the
Purchase Price or the number of shares of Common Stock, purchasable upon
exercise of the Warrants, made pursuant to Section 8 hereof and (B) other
modifications approved by Warrantholders in accordance with Section 16
hereof.
(d) The provisions of Section 9 hereof shall govern the terms of
conversion of the Warrants and registration thereof or of the Registrable
Securities under certain circumstances described therein.
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SECTION 3. Form and Execution of Warrant Certificates.
(a) The Warrant Certificates shall be substantially in the form
annexed hereto as Exhibit A (the provisions of which are hereby
incorporated herein) and may have such letters, numbers or other marks of
identification or designation and such legends, summaries or endorsements
printed, lithographed, engraved or typed thereon as the Company may deem
appropriate and as are not inconsistent with the provisions of this
Agreement, or as may be required to comply with any law or with any rule
or regulation made pursuant thereto or with any rule or regulation of any
stock exchange on which the Warrants may be listed, or to conform to
usage. The Warrant Certificates shall be dated the date of issuance
thereof (whether upon initial issuance, transfer, exchange or in lieu of
mutilated, lost, stolen, or destroyed Warrant Certificates) and issued in
registered form. Warrants shall be numbered serially with the letter W.
(b) Warrant Certificates shall be executed on behalf of the Company
by two officers of the Company duly authorized to do so under applicable
Cyprus law, by manual signatures or by facsimile signatures printed
thereon, and shall have imprinted thereon a facsimile of the Company's
seal. In case any officer of the Company who shall have signed any of the
Warrant Certificates shall cease to be such officer of the Company before
the date of issuance of the Warrant Certificates and issue and delivery
thereof, such Warrant Certificates may nevertheless be issued and
delivered with the same force and effect as though the person who signed
such Warrant Certificates had not ceased to be such officer of the
Company. After execution by the Company, Warrant Certificates shall be
delivered by the Warrant Agent to the Registered Holder.
SECTION 4. Exercise.
(a) Each Warrant may be exercised by the Registered Holder thereof
at any time on or after the Initial Exercise Date, but not later than the
Warrant Expiration Date, upon the terms and subject to the conditions set
forth herein and in the applicable Warrant Certificate. A Warrant shall be
deemed to have been exercised immediately prior to the close of business
on the Exercise Date, and the person entitled to receive the securities
deliverable upon such exercise shall be treated for all purposes as the
holder upon exercise thereof as of the close of business on the Exercise
Date. As soon as practicable on or after the Exercise Date, the Warrant
Agent shall deposit the proceeds received from the exercise of a Warrant,
and promptly after clearance of checks received in payment of the Purchase
Price pursuant to such Warrants, cause to be issued and delivered by the
Transfer Agent, to the person or persons entitled to receive the same, a
certificate or certificates for the securities deliverable upon such
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<PAGE>
exercise (plus a certificate for any remaining unexercised Warrants of the
Registered Holder). Notwithstanding the foregoing, in the case of payment
made in the form of a check drawn on an account of RAS or such other
investment banks and brokerage houses as the Company shall approve,
certificates shall immediately be issued without any delay. Upon the
exercise of any Warrant and clearance of the funds received, the Warrant
Agent shall promptly remit the payment received for the Warrant to the
Company or as the Company may direct in writing.
(b) If on the Exercise Date in respect of the exercise of any
Warrant, (i) the current market value (determined as provided in Section
10 hereof) of the Company's Common Stock is greater than the then Purchase
Price of the Warrant, (ii) the exercise of the Warrant was solicited by a
member of the NASD, (iii) the Warrant was not held in a discretionary
account, (iv) disclosure of compensation arrangements was made both at the
time of the original offering and at the time of exercise; and (v) the
solicitation of the exercise of the Warrant was not in violation of
Regulation M promulgated under the Securities Exchange Act of 1934, as
amended (as such regulation or any successor regulation or rule may be in
effect as of such time of exercise), then the Warrant Agent,
simultaneously with the receipt of the proceeds of the exercise of the
Warrant(s) so exercised shall pay from such proceeds, a fee of 5% of the
Purchase Price to RAS (of which up to 1% may be re-allowed to the dealer
who solicited the exercise). Within five days after exercise of a Warrant,
the Warrant Agent shall send RAS a copy of the reverse side of each
Warrant exercised. RAS shall reimburse the Warrant Agent, upon request,
for its reasonable expenses relating to compliance with this Section 4(b).
In addition, RAS may at any time during business hours, examine the
records of the Warrant Agent, including its ledger of original Warrant
Certificates returned to the Warrant Agent upon exercise of Warrants. The
provisions of this paragraph may not be modified, amended or deleted
without the prior written consent of RAS. Market price shall be determined
in accordance with the provisions of Section 10.
SECTION 5. Reservation of Shares; Listing; Payment of Taxes; etc..
(a) The Company covenants that it shall at all times reserve and
keep available out of its authorized Common Stock, solely for the purpose
of issue upon exercise of Warrants, such number of shares of Common Stock
as shall then be issuable upon the exercise of all outstanding Warrants.
The Company covenants that all shares of Common Stock which shall be
issuable upon exercise of the Warrants and payment of the Purchase Price
shall, at the time of delivery, be duly and validly issued, fully paid,
non-assessable and free from all
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taxes, liens and charges with respect to the issue thereof (other than
those which the Company shall promptly pay or discharge).
(b) The Company shall use reasonable efforts to obtain appropriate
approvals or registrations under state "blue sky" or securities laws with
respect to the exercise of the Warrants; provided, however, that the
Company shall not be obligated to qualify as a foreign corporation in any
jurisdiction. With respect to any such securities laws, however, Warrants
may not be exercised by, or shares of Common Stock issued to, any
Registered Holder in any state in which such exercise would be unlawful.
(c) The Company shall pay all documentary, stamp or similar taxes
and other governmental charges that may be imposed with respect to the
issuance of Warrants, or the issuance, or delivery of any shares upon
exercise of the Warrants; provided, however, that if the shares of Common
Stock are to be delivered in a name other than the name of the Registered
Holder of the Warrant Certificate representing any Warrant being
exercised, then no such delivery shall be made unless the person
requesting the same has paid to the Warrant Agent the amount of transfer
taxes or charges incident thereto, if any.
(d) The Warrant Agent is hereby irrevocably authorized to
requisition the Transfer Agent from time to time for certificates
representing shares of Common Stock required upon exercise of the
Warrants, and the Company shall authorize the Transfer Agent to comply
with all such proper requisitions.
SECTION 6. Exchange and Registration of Transfer. Subject to the
restrictions on transfer contained in the Warrant Certificates and the
Subscription Agreements between the Company and the purchasers of Units:
(a) Warrant Certificates may be exchanged for other Warrant
Certificates representing an equal aggregate number of Warrants of the
same class or may be transferred in whole or in part; provided that no
transfers may be made to the extent prohibited by the terms of the
Lock-Up. Warrant Certificates to be exchanged shall be surrendered to the
Warrant Agent at its Corporate Office, and upon satisfaction of the terms
and provisions hereof, the Company shall execute, and the Warrant Agent
shall countersign, issue and deliver in exchange therefor the Warrant
Certificate or Certificates which the Registered Holder making the
exchange shall be entitled to receive.
(b) The Warrant Agent shall keep at its office books in which,
subject to such reasonable regulations as it may prescribe, it shall
register Warrant Certificates and the
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transfer thereof in accordance with its regular practice. Upon due
presentment for registration of transfer of any Warrant Certificate at its
office, the Company shall execute and the Warrant Agent shall issue and
deliver to the transferee or transferees a new Warrant Certificate or
Certificates representing an equal aggregate number of Warrants.
(c) With respect to all Warrant Certificates presented for
registration of transfer, or for exchange or exercise, the subscription
form on the reverse thereof shall be duly endorsed, or be accompanied by a
written instrument or instruments of transfer and subscription, in form
satisfactory to the Company, duly executed by the Registered Holder or his
attorney-in-fact duly authorized to do so in writing.
(d) The Company may require payment by such holder of a sum
sufficient to cover any tax or other governmental charge that may be
imposed in connection therewith.
(e) All Warrant Certificates surrendered for exercise or for
exchange in case of mutilated Warrant Certificates shall be promptly
cancelled by the Warrant Agent and thereafter disposed of or destroyed,
upon notice to RAS at the direction of the Company.
(f) Prior to due presentment for registration of transfer thereof,
the Company and the Warrant Agent may deem and treat the Registered Holder
of any Warrant Certificate as the absolute owner thereof and of each
Warrant represented thereby (notwithstanding any notations of ownership or
writing thereon made by anyone other than a duly authorized officer of the
Company or the Warrant Agent) for all purposes and shall not be affected
by any notice to the contrary.
SECTION 7. Loss or Mutilation. Upon receipt by the Company and the Warrant
Agent of evidence satisfactory to them of the ownership of and loss, theft,
destruction or mutilation of any Warrant Certificate and (in case of loss, theft
or destruction) of indemnity satisfactory to them, and (in the case of
mutilation) upon surrender and cancellation thereof, the Company shall execute
and the Warrant Agent shall (in the absence of notice to the Company and/or
Warrant Agent that the Warrant Certificate has been acquired by a bona fide
purchaser) countersign and deliver to the Registered Holder in lieu thereof a
new Warrant Certificate of like tenor representing an equal aggregate number of
Warrants. Any warrant holder requesting a substitute Warrant Certificate shall
comply with such other reasonable regulations and pay such other reasonable
charges as the Warrant Agent may prescribe.
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SECTION 8. Adjustment of Exercise Price and Number of Shares of Common
Stock or Warrants.
(a) Subject to the exceptions referred to in Section 8(g) below, in
the event the Company shall, at any time or from time to time after the
date hereof, sell any shares of Common Stock for a consideration per share
less than the current market value per share, determined as provided in
Section 10 hereof, on the date of the sale or issue any shares of Common
Stock as a stock dividend to the holders of Common Stock, or subdivide or
combine the outstanding shares of Common Stock into a greater or lesser
number of shares (any such sale, issuance, subdivision or combination
being herein called a "Change of Shares"), then, and thereafter upon each
further Change of Shares, the Purchase Price in effect immediately prior
to such Change of Shares shall be changed to a price (including any
applicable fraction of a cent) determined by multiplying the Purchase
Price in effect immediately prior thereto by a fraction, the numerator of
which shall be the sum of the number of shares of Common Stock outstanding
immediately prior to the issuance of such additional shares and the number
of shares of Common Stock which the aggregate consideration received
(determined as provided in subsection 8(f)(vi) below), if any, for the
issuance of such additional shares would purchase at such current market
price per share of Common Stock, and the denominator of which shall be the
sum of the number of shares of Common Stock outstanding immediately after
the issuance of such additional shares. Such adjustment shall be made
successively whenever such an issuance is made.
Upon each adjustment of the Purchase Price pursuant to this Section
8, the total number of shares of Common Stock purchasable upon the
exercise of each Warrant shall, subject to the provisions contained in
Section 8(b) hereof, be such number of shares (calculated to the nearest
tenth) purchasable at the Purchase Price immediately prior to such
adjustment multiplied by a fraction, the numerator of which shall be the
Purchase Price in effect immediately prior to such adjustment and the
denominator of which shall be the Purchase Price in effect immediately
after such adjustment.
(b) The Company may elect, upon any adjustment of the Purchase Price
hereunder, to adjust the number of Warrants outstanding, in lieu of the
adjustment in the number of shares of Common Stock purchasable upon the
exercise of each Warrant as hereinabove provided, so that each Warrant
outstanding after such adjustment shall represent the right to purchase
one share of Common Stock. Each Warrant held of record prior to such
adjustment of the number of Warrants shall become that number of Warrants
(calculated to the nearest tenth) determined by multiplying the number one
by a fraction, the numerator of which shall be the Purchase Price in
effect
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immediately prior to such adjustment and the denominator of which shall be
the Purchase Price in effect immediately after such adjustment. Upon each
adjustment of the number of Warrants pursuant to this Section 8, the
Company shall, as promptly as practicable, cause to be distributed to each
Registered Holder of Warrant Certificates on the date of such adjustment
Warrant Certificates evidencing, subject to Section 10 hereof, the number
of additional Warrants to which such Holder shall be entitled as a result
of such adjustment or, at the option of the Company, cause to be
distributed to such Holder in substitution and replacement for the Warrant
Certificates held by him prior to the date of adjustment (and upon
surrender thereof, if required by the Company) new Warrant Certificates
evidencing the number of Warrants to which such Holder shall be entitled
after such adjustment.
(c) In case of any reclassification, capital reorganization or other
change of outstanding shares of Common Stock, or, in case of any
consolidation or merger of the Company with or into another corporation
(other than a consolidation or merger in which the Company is the
continuing corporation and which does not result in any reclassification,
capital reorganization or other change of outstanding shares of Common
Stock), or in case of any sale or conveyance to another corporation of the
property of the Company as, or substantially as, an entirety (other than a
sale/leaseback, mortgage or other financing transaction), the Company
shall cause effective provision to be made so that each holder of a
Warrant then outstanding shall have the right thereafter, by exercising
such Warrant, to purchase the kind and number of shares of stock or other
securities or property (including cash) receivable upon such
reclassification, capital reorganization or other change, consolidation,
merger, sale or conveyance by a holder of the number of shares of Common
Stock that might have been purchased upon exercise of such Warrant
immediately prior to such reclassification, capital reorganization or
other change, consolidation, merger, sale or conveyance. Any such
provision shall include provision for adjustments that shall be as nearly
equivalent as may be practicable to the adjustments provided for in this
Section 8. The foregoing provisions shall similarly apply to successive
reclassifications, capital reorganizations and other changes of
outstanding shares of Common Stock and to successive consolidations,
mergers, sales or conveyances.
(d) Irrespective of any adjustments or changes in the Purchase Price
or the number of shares of Common Stock purchasable upon exercise of the
Warrants, the Warrant Certificates theretofore and thereafter issued
shall, unless the Company shall exercise its option to issue new Warrant
Certificates pursuant to Section 2(c) hereof, continue to express the
Purchase Price per share and the number of shares purchasable thereunder
as the Purchase Price per share, and
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<PAGE>
the number of shares purchasable were expressed in the Warrant
Certificates when the same were originally issued.
(e) After each adjustment of the Purchase Price pursuant to this
Section 8, the Company shall promptly prepare a certificate signed by two
officers of the Company duly authorized to do so under Cyprus law, setting
forth: (i) the Purchase Price as so adjusted, (ii) the number of shares of
Common Stock purchasable upon exercise of each Warrant after such
adjustment, and, if the Company shall have elected to adjust the number of
Warrants, the number of Warrants to which the registered holder of each
Warrant shall then be entitled, and the proportionate adjustment in
Redemption Price resulting therefrom, and (iii) a brief statement of the
facts accounting for such adjustment. The Company shall promptly file such
certificate with the Warrant Agent and cause a copy thereof to be sent by
ordinary first class mail to RAS and to each registered holder of Warrants
at such holder's last address appearing on the registry books of the
Warrant Agent. No failure to mail such notice nor any defect therein or in
the mailing thereof shall affect the validity thereof except as to the
holder to whom the Company failed to mail such notice, or except as to the
holder whose notice was defective. The affidavit of an officer of the
Warrant Agent or the Secretary or other duly authorized officer of the
Company that such notice has been mailed shall, in the absence of fraud,
be prima facie evidence of the facts stated therein.
(f) For purposes of Section 8(a) and 8(b) hereof, the following
provisions (i) to (vi) shall also be applicable:
(i) The number of shares of Common Stock outstanding at any
given time shall include shares of Common Stock owned or held by or
for the account of the Company and the sale or issuance of such
treasury shares or the distribution of any such treasury shares
shall not be considered a Change of Shares for purposes of said
sections.
(ii) No adjustment of the Purchase Price shall be made unless
such adjustment would require an increase or decrease of at least
$.10 in such price; provided that any adjustments which by reason of
this clause (ii) are not required to be made shall be carried
forward and shall be made at the time of and together with the next
subsequent adjustment which, together with any adjustment(s) so
carried forward, shall require an increase or decrease of at least
$.10 in the Purchase Price then in effect hereunder.
(iii) In case of (A) the sale by the Company for cash of any
rights or warrants to subscribe for or purchase, or any options for
the purchase of, Common
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Stock or any securities convertible into or exchangeable for Common
Stock without the payment of any further consideration other than
cash, if any (such convertible or exchangeable securities being
herein called "Convertible Securities"), or (B) the issuance by the
Company, without the receipt by the Company of any consideration
therefor, of any rights or warrants to subscribe for or purchase, or
any options for the purchase of, Common Stock or Convertible
Securities, in each case, if (and only if) the consideration payable
to the Company upon the exercise of such rights, warrants or options
shall consist of cash, whether or not such rights, warrants or
options, or the right to convert or exchange such Convertible
Securities, are immediately exercisable, and the price per share for
which Common Stock is issuable upon the exercise of such rights,
warrants or options or upon the conversion or exchange of such
Convertible Securities (determined by dividing (1) the minimum
aggregate consideration payable to the Company upon the exercise of
such rights, warrants or options, plus the consideration received by
the Company for the issuance or sale of such rights, warrants or
options, plus, in the case of such Convertible Securities, the
minimum aggregate amount of additional consideration, if any, other
than such Convertible Securities, payable upon the conversion or
exchange thereof, by (2) the total maximum number of shares of
Common Stock issuable upon the exercise of such rights, warrants or
options or upon the conversion or exchange of such Convertible
Securities issuable upon the exercise of such rights, warrants or
options) is less than the fair market value of the Common Stock on
the date of the issuance or sale of such rights, warrants or
options, then the total maximum number of shares of Common Stock
issuable upon the exercise of such rights, warrants or options or
upon the conversion or exchange of such Convertible Securities (as
of the date of the issuance or sale of such rights, warrants or
options) shall be deemed to be outstanding shares of Common Stock
for purposes of Sections 8(a) and 8(b) hereof and shall be deemed to
have been sold for cash in an amount equal to such price per share.
(iv) In case of the sale by the Company for cash of any
Convertible Securities, whether or not the right of conversion or
exchange thereunder is immediately exercisable, and the price per
share for which Common Stock is issuable upon the conversion or
exchange of such Convertible Securities (determined by dividing (A)
the total amount of consideration received by the Company for the
sale of such Convertible Securities, plus the minimum aggregate
amount of additional consideration, if any, other than such
Convertible Securities, payable upon the
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<PAGE>
conversion or exchange thereof, by (B) the total maximum number of
shares of Common Stock issuable upon the conversion or exchange of
such Convertible Securities) is less than the fair market value or
the Common Stock on the date of the sale of such Convertible
Securities, then the total maximum number of shares of Common Stock
issuable upon the conversion or exchange of such Convertible
Securities (as of the date of the sale of such Convertible
Securities) shall be deemed to be outstanding shares of Common Stock
for purposes of Sections 8(a) and 8(b) hereof and shall be deemed to
have been sold for cash in an amount equal to such price per share.
(v) If the exercise or purchase price provided for in any
right, warrant or option referred to in (iii) above, or the rate at
which any Convertible Securities referred to in (iii) or (iv) above
are convertible into or exchangeable for Common Stock, shall change
at any time (other than under or by reason of provisions designed to
protect against dilution), the Purchase Price then in effect
hereunder shall forthwith be readjusted to such Purchase Price as
would have obtained (A) had the adjustments made upon the issuance
or sale of such rights, warrants, options or Convertible Securities
been made upon the basis of the issuance of only the number of
shares of Common Stock theretofore actually delivered (and the total
consideration received therefor) upon the exercise of such rights,
warrants or options or upon the conversion or exchange of such
Convertible Securities, (B) had adjustments been made on the basis
of the Purchase Price as adjusted under clause (A) for all
transactions (which would have affected such adjusted Purchase
Price) made after the issuance or sale of such rights, warrants,
options or Convertible Securities, and (C) had any such rights,
warrants, options or Convertible Securities then still outstanding
been originally issued or sold at the time of such change. On the
expiration of any such right, warrant or option or the termination
of any such right to convert or exchange any such Convertible
Securities, the Purchase Price then in effect hereunder shall
forthwith be readjusted to such Purchase Price as would have
obtained (1) had the adjustments made upon the issuance or sale of
such rights, warrants, options or Convertible Securities been made
upon the basis of the issuance of only the number of shares of
Common Stock theretofore actually delivered (and the total
consideration received therefor) upon the exercise of such rights,
warrants or options or upon the conversion or exchange of such
Convertible Securities and (2) had adjustments been made on the
basis of the Purchase Price as adjusted under clause (1) for all
transactions (which would have affected such adjusted
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<PAGE>
Purchase Price) made after the issuance or sale of such rights,
warrants, options or Convertible Securities.
(vi) In case of the sale for cash of any shares of Common
Stock, any Convertible Securities, any rights or warrants to
subscribe for or purchase, or any options for the purchase of,
Common Stock or Convertible Securities, the consideration received
by the Company therefore shall be deemed to be the gross sales price
therefor without deducting therefrom any expense paid or incurred by
the Company or any underwriting discounts or commissions or
concessions paid or allowed by the Company in connection therewith.
(g) No adjustment to the Purchase Price of the Warrants or to the
number of shares of Common Stock purchasable upon the exercise of each
Warrant shall be made, however,
(i) any recapitalization effected by the Company and approved
by RAS with respect to the Common Stock pursuant to which no more
than 4,000,000 shares of Common Stock are then issued and
outstanding, or
(ii) upon the grant or exercise of options which may hereafter
be granted or exercised under the Company's Stock Option Plan or
under any other employee benefit plan of the Company; or
(iii) upon the sale or exercise of the Warrants or any other
Warrants issued by the Company; or
(iv) upon the issuance of any shares of Common Stock or
warrants sold in the Company's initial public offering, or upon
exercise of warrants comprising or underlying any Units sold in the
Company's initial public offering; or
(v) upon the issuance or sale of Common Stock or Convertible
Securities upon the exercise of any rights or warrants to subscribe
for or purchase, or any options for the purchase of, Common Stock or
Convertible Securities, whether or not such rights, warrants or
options were outstanding on the date of the original sale of the
Warrants or were thereafter issued or sold; or
(vi) upon the issuance or sale of Common Stock upon conversion
or exchange of any Convertible Securities, whether or not any
adjustment in the Purchase Price was made or required to be made
upon the issuance or sale of such Convertible Securities and whether
or not such Convertible Securities were outstanding on the date of
the original sale of the Warrants or were thereafter issued or sold;
or
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<PAGE>
(vii) upon any amendment to or change in the terms of any
rights or warrants to subscribe for or purchase, or options for the
purchase of, Common Stock or Convertible Securities or in the terms
of any Convertible Securities, including, but not limited to, any
extension of any expiration date of any such right, warrant or
option, any change in any exercise or purchase price provided for in
any such right, warrant or option, any extension of any date through
which any Convertible Securities are convertible into or
exchangeable for Common Stock or any change in the rate at which any
Convertible Securities are convertible into or exchangeable for
Common Stock (other than rights, warrants, options or Convertible
Securities issued or sold after the close of business on the date of
the original issuance of the Warrants (A) for which an adjustment in
the Purchase Price then in effect was theretofore made or required
to be made, upon the issuance or sale thereof, or (B) for which such
an adjustment would have been required had the exercise or purchase
price of such rights, warrants or options at the time of the
issuance or sale thereof or the rate of conversion or exchange of
such Convertible Securities, at the time of the sale of such
Convertible Securities, or the issuance or sale of rights or
warrants to subscribe for or purchase, or options for the purchase
of, such Convertible Securities, been the price or rate as changed,
in which case the provisions of Section 8(f)(v) hereof shall be
applicable if, but only if, the exercise or purchase price thereof,
as changed, or the rate of conversion or exchange thereof, as
changed, consists of cash or requires the payment of additional
consideration, if any, consisting of cash and the Company did not
receive any consideration other than cash, if any, in connection
with such change).
(h) As used in this Section 8, the term "Common Stock" shall mean
and include the Company's Common Stock authorized on the date of the
original issue of the Units and shall also include any capital stock of
any class of the Company thereafter authorized which shall not be limited
to a fixed sum or percentage in respect of the rights of the holders
thereof to participate in dividends and in the distribution of assets upon
the voluntary liquidation, dissolution or winding up of the Company;
provided, however, that the shares issuable upon exercise of the Warrants
shall include only shares of such class designated in the Company's
Articles of Association as Common Stock on the date of the original issue
of the Units or (i), in the case of any reclassification, change,
consolidation, merger, sale or conveyance of the character referred to in
Section 8(c) hereof, the stock, securities or property provided for in
such section or (ii), in the case of any reclassification or change in the
outstanding shares of
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Common Stock issuable upon exercise of the Warrants as a result of a
subdivision or combination or consisting or a change in par value, or from
par value to no par value, or from no par value to par value, such shares
of Common Stock as so reclassified or changed.
(i) Any determination as to whether an adjustment in the Purchase
Price in effect hereunder is required pursuant to Section 8, or as to the
amount of any such adjustment, if required, shall be binding upon the
holders of the Warrants and the Company if made in good faith by the Board
of Directors of the Company.
(j) If and whenever the Company shall declare any dividends or
distributions or grant to the holders of Common Stock, as such, rights or
warrants to subscribe for or to purchase, or any options for the purchase
of, Common Stock or securities convertible into or exchangeable for or
carrying a right, warrant or option to purchase Common Stock, the Company
shall notify each of the then Registered Holders of the Warrants of such
event prior to its occurrence to enable such Registered Holders to
exercise their Warrants and participate as holders of Common Stock in such
event.
SECTION 9. Conversion of Warrants; Registration Under The Securities Act.
(a) In the event that (i) the Company consummates an initial public
offering of its securities ("IPO") and (ii) such securities include common
stock purchase warrants having a term of at least four years and an
exercise price of not more than $6.00 ("Public Warrants"), the Warrants
shall be automatically converted on the closing date of the IPO, with no
action required on the part of the Registered Holder, into an equal number
of Conversion Warrants, which shall have the identical terms as the Public
Warrants, except that the Conversion Warrants shall be subject to the
Lock-Up, if any. Each Registered Holder is required to return his or her
Warrant Certificates to the Warrant Agent for the issuance of new
Conversion Warrants at such time. On the date on which the Warrants are
automatically converted into Conversion Warrants as provided in this
Section 9(a), this Warrant Agreement shall terminate and the rights,
obligations and commitments of the Company, the Registered Holder and the
Warrant Agent with respect to the Conversion Warrants into which the
Warrants convert shall be set forth in the warrant agreement included in
the IPO, as the same may be modified or amended to provide for the
Lock-Up, if applicable.
(b) In the event that the IPO is consummated but does not include
Public Warrants, the Company shall use its best efforts to register the
Warrants and the Common Stock issuable
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upon exercise of the Warrants as soon as practicable following the IPO.
(c) In the event that IPO is not consummated, the warrantholders
shall have the right, for a period of five years from the termination date
of the offering of the warrants subject to this Warrant Agreement, and
commencing six months after the closing of an initial public offering of
securities of the Company, to participate, on two occasions, on a
piggy-back basis, in a registration by the Company under the Securities
Act, subject to certain restrictions, including underwriter hold-backs. In
such event, the Company shall give written notice of such registrations to
the Registered Holder. Upon the written request of the then registered
holders of more than 50% of the Warrants, within twenty (20) days after
receipt of any such notice from the Company, the Company shall, except as
herein provided, cause the Warrants and the shares of Common Stock
issuable upon conversion of the Warrants (the "Warrant Shares") to be
included in such registration statement, all to the extent required to
permit the sale or other disposition by the prospective seller or sellers
of the Warrant Shares; provided, further, that nothing herein shall
prevent the Company from abandoning or delaying any registration at any
time. If any registration pursuant to this Section ___ shall be
underwritten in whole or in part, the Company may require that the
Warrants and the Warrant Shares requested for inclusion pursuant to this
Section ___ be included in the underwriting on the same terms and
conditions as the securities otherwise being sold through the
underwriters. In the event that the Warrants or the Warrant Shares
requested for inclusion pursuant to this Section ___ together with any
other shares which have similar piggy-back registration rights (such
shares, the Warrants and the Warrant Shares being collectively referred to
as the "Requested Securities"), would constitute more than 15% of the
total number of securities of such type to be included in a proposed
underwritten public offering, and if in the good faith judgment of the
managing underwriter of such public offering the inclusion of all such
Requested Securities originally covered by a request for registration
would reduce the number of shares to be offered by the Company or
interfere with the successful marketing of the shares of stock or warrants
offered by the Company, the number of such Requested Securities otherwise
to be included in the underwritten public offering may be reduced pro rata
(by number of securities of the same type) among the holders thereof
requesting such registration or excluded in their entirety if so required
by the underwriter. To the extent that only a portion of any Requested
Securities is included in the underwritten public offering, those shares
of Requested Securities which are thus excluded from the underwritten
public offering shall be withheld from the market by the holders thereof
for a period, not to exceed 120 days, which the managing underwriter
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reasonably determines is necessary in order to effect the underwritten
public offering.
The obligation of the Company under this Section ___ shall be
limited to two registration statements.
SECTION 10. Fractional Warrants and Fractional Shares.
(a) If the number of shares of Common Stock purchasable upon the
exercise of each Warrant is adjusted pursuant to Section 8 hereof, the
Company shall nevertheless not be required to issue fractions of shares,
upon exercise of the Warrants or otherwise, or to distribute certificates
that evidence fractional shares. With respect to any fraction of a share
called for upon any exercise hereof, the Company shall pay to the Holder
an amount in cash equal to such fraction multiplied by the current market
value of such fractional share on the date of the exercise of this
Warrant, determined as follows:
(i) If the Common Stock is listed on a national securities
exchange or admitted to unlisted trading privileges on such exchange
or listed for trading on the National Market System of NASDAQ
("NMS"), the current market value shall be the last reported sale
price of the Common Stock on such exchange on the last business day
prior to the date for which the determination is being made or if no
such sale is made on such day or no closing sale price is quoted,
the average of the closing bid and asked prices for such day on such
exchange or system; or
(ii) If the Common Stock is listed in the over-the-counter
market (other than on NMS) or admitted to unlisted trading
privileges, the current market value shall be the mean of the last
reported bid and asked prices reported by the National Quotation
Bureau, Inc. on the last business day prior to the date for which
the determination is being made; or
(iii) If the Common Stock is not so listed or admitted to
unlisted trading privileges and bid and asked prices are not so
reported, the current market value shall be an amount determined in
such reasonable manner as may be prescribed by the Board of
Directors of the Company.
SECTION 11. Warrant Holders Not Deemed Stockholders. No holder of Warrants
shall, as such, be entitled to vote or to receive dividends or be deemed the
holder of Common Stock that may at any time be issuable upon exercise of such
Warrants for any purpose whatsoever, nor shall anything contained herein be
construed to confer upon the holder of Warrants, as such, any of the rights of a
stockholder of the Company or any right To vote for
B-17
<PAGE>
the election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action (whether
upon any recapitalization, issue or reclassification of stock, change of par
value or change of stock to no par value, consolidation, merger or conveyance or
otherwise), or to receive notice of meetings, or to receive dividends or
subscription rights, until such Holder shall have exercised such Warrants and
been issued shares of Common Stock in accordance with the provisions hereof.
SECTION 12. Rights of Action. All rights of action with respect to this
Agreement are vested in the respective Registered Holders of the Warrants, and
any Registered Holder of a Warrant, without consent of the Warrant Agent or of
the holder of any other Warrant, may, on his own behalf and for his own benefit,
enforce against the Company his right to exercise his Warrants for the purchase
of shares of Common Stock in the manner provided in the Warrant Certificate and
this Agreement.
SECTION 13. Agreement of WarrantHolders. Every holder of a Warrant, by his
acceptance thereof, consents and agrees with the Company, the Warrant Agent and
every other holder of a Warrant that:
(a) The Warrants are transferable only on the registry books of the
Warrant Agent by the Registered Holder thereof in person or by his
attorney duly authorized to do so in writing and only if the Warrant
Certificates representing such Warrants are surrendered at the office of
the Warrant Agent, duly endorsed or accompanied by a proper instrument of
transfer satisfactory to the Warrant Agent and the Company in their sole
discretion, together with payment of any applicable transfer taxes; and
(b) The Company may deem and treat the person in whose name the
Warrant Certificate is registered as the holder and as the absolute, true
and lawful owner of the Warrants represented thereby for all purposes, and
the Company shall not be affected by any notice or knowledge to the
contrary, except as otherwise expressly provided in Section 7 hereof.
SECTION 14. Cancellation of Warrant Certificates. If the Company shall
purchase or acquire any Warrant or Warrants, the Warrant Certificate or Warrant
Certificates evidencing the same shall thereupon be cancelled by it and retired.
The Warrant Agent shall also cancel Warrant Certificates following exercise of
any or all of the Warrants represented thereby or delivered to it for transfer,
split-up, combination or exchange.
SECTION 15. Concerning the Warrant Agent. The Warrant Agent acts hereunder
as agent and in a ministerial capacity for the Company, and its duties shall be
determined solely by the provisions hereof. The Warrant Agent shall not, by
issuing and
B-18
<PAGE>
delivering Warrant Certificates or by any other act hereunder be deemed to make
any representations as to the validity, value or authorization of the Warrant
Certificates or the Warrants represented thereby or of any securities or other
property delivered upon exercise of any Warrant or whether any stock issued upon
exercise of any Warrant is fully paid and nonassessable.
The Warrant Agent shall account promptly to the Company with respect to
Warrants exercised and concurrently pay the Company, as provided in Section 4,
all moneys received by the Warrant Agent upon the exercise of such Warrants. The
Warrant Agent shall, upon request of the Company from time to time, deliver to
the Company such complete reports of registered ownership of the Warrants and
such complete records of transactions with respect to the Warrants and the
shares of Common Stock as the Company may request. The Warrant Agent shall also
make available to the Company and RAS for inspection by their agents or
employees, from time to time as either of them may request, such original books
of accounts and record (including original Warrant Certificates surrendered to
the Warrant Agent upon exercise of Warrants) as may be maintained by the Warrant
Agent in connection with the issuance and exercise of Warrants hereunder, such
inspections to occur at the Warrant Agent's office as specified in Section 17,
during normal business hours.
The Warrant Agent shall not at any time be under any duty or
responsibility to any holder of Warrant Certificates to make or cause to be made
any adjustment of the Purchase Price provided in this Agreement, or to determine
whether any fact exists which may require any such adjustments, or with respect
to the nature or extent of any such adjustment, when made, or with respect to
the method employed in making the same. It shall not (a) be liable for any
recital or statement of facts contained herein or for any action taken, suffered
or omitted by it in reliance on any Warrant Certificate or other document or
instrument believed by it in good faith to be genuine and to have been signed or
presented by the proper party or parties, (b) be responsible for any failure on
the part of the Company to comply with any of its covenants and obligations
contained in this Agreement or in any Warrant Certificate, or (c) be liable for
any act or omission in connection with this Agreement except for its own
negligence or wilful misconduct.
The Warrant Agent may at any time consult with counsel satisfactory to it
(who may be counsel for the Company) and shall incur no liability or
responsibility for any action taken, suffered or omitted by it in good faith in
accordance with the opinion or advice of such counsel.
Any notice, statement, instruction, request, direction, order or demand of
the Company shall be sufficiently evidenced by an instrument signed by the
Chairman of the Board, President, any Vice President, its Secretary, or
Assistant Secretary, (unless other
B-19
<PAGE>
evidence in respect thereof is herein specifically prescribed). The Warrant
Agent shall not be liable for any action taken, suffered or omitted by it in
accordance with such notice, statement, instruction, request, direction, order
or demand believed by it to be genuine.
The Company agrees to pay the Warrant Agent reasonable compensation for
its services hereunder and to reimburse it for its reasonable expenses
hereunder; it further agrees to indemnify the Warrant Agent and save it harmless
against any and all losses, expenses and liabilities, including judgments, costs
and counsel fees, for anything done or omitted by the Warrant Agent in the
execution of its duties and powers hereunder except losses, expenses and
liabilities arising as a result of the Warrant Agent's negligence or wilful
misconduct.
The Warrant Agent may resign its duties and be discharged from all further
duties and liabilities hereunder (except liabilities arising as a result of the
Warrant Agent's own negligence or wilful misconduct), after giving 30 days'
prior written notice to the Company. At least 15 days prior to the date such
resignation is to become effective, the Warrant Agent shall cause a copy of such
notice of resignation to be mailed to the Registered Holder of each Warrant
Certificate at the Company's expense. Upon such resignation, or any inability of
the Warrant Agent to act as such hereunder, the Company shall appoint a new
warrant agent in writing. If the Company shall fail to make such appointment
within a period of 15 days after it has been notified in writing of such
resignation by the resigning Warrant Agent, then the Registered Holder of any
Warrant Certificate may apply to any court of competent jurisdiction for the
appointment of a new warrant agent. Any new warrant agent, whether appointed by
the Company or by such a court, shall be a bank or trust company having a
capital and surplus, as shown by its last published report to its stockholders,
of not less than $10,000,000 or a stock transfer company. After acceptance in
writing of such appointment by the new warrant agent is received by the Company,
such new warrant agent shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named herein as the Warrant Agent,
without any further assurance, conveyance, act or deed; but if for any reason it
shall be necessary or expedient to execute and deliver any further assurance,
conveyance, act or deed, the same shall be done at the expense of the Company
and shall be legally and validly executed and delivered by the resigning Warrant
Agent. Not later than the effective date of any such appointment the Company
shall file notice thereof with the resigning Warrant Agent and shall forthwith
cause a copy of such notice to be mailed to the Registered Holder of each
Warrant Certificate.
Any corporation into which the Warrant Agent or any new warrant agent may
be converted or merged or any corporation resulting from any consolidation to
which the Warrant Agent or any new warrant agent shall be a party or any
corporation succeeding to
B-20
<PAGE>
the trust business of the Warrant Agent shall be a successor warrant agent under
this Agreement without any further act, provided that such corporation is
eligible for appointment as successor to the Warrant Agent under the provisions
of the preceding paragraph. Any such successor warrant agent shall promptly
cause notice of its succession as warrant agent to be mailed to the Company and
to the Registered Holder of each Warrant Certificate.
The Warrant Agent, its subsidiaries and affiliates, and any of its or
their officers or directors, may buy and hold or sell Warrants or other
securities of the Company and otherwise deal with the Company in the same manner
and to the same extent and with like effects as though it were not Warrant
Agent. Nothing herein shall preclude the Warrant Agent from acting in any other
capacity for the Company or for any other legal entity.
SECTION 16. Modification of Agreement. Subject to the provisions of
Section 4(b), the parties hereto may by supplemental agreement make any changes
or corrections in this Agreement (a) that it shall deem appropriate to cure any
ambiguity or to correct any defective or inconsistent provision or manifest
mistake or error herein contained; (b) to reflect an increase in the number of
Warrants which are to be governed by this Agreement resulting from an increase
in the size of the Private Placement; or (c) that it may deem necessary or
desirable and which shall not adversely affect the interests of the holders of
Warrant Certificates; provided, however, that this Agreement shall not otherwise
be modified, supplemented or altered in any respect except with the consent in
writing of the Registered Holders of Warrant Certificates representing not less
than 50% of the Warrants then outstanding; and provided, further, that no change
in the number or nature of the securities purchasable upon the exercise of any
Warrant, or the Purchase Price therefor, or the acceleration of the Warrant
Expiration Date, shall be made without the consent in writing of the Registered
Holder of the Warrant Certificate representing such Warrant, other than such
changes as are specifically prescribed by this Agreement as originally executed.
SECTION 17. Notices. All notices, requests, consents and other
communications hereunder shall be in writing and shall be deemed to have been
made when delivered or mailed first class registered or certified mail, postage
prepaid as follows: if to the Registered Holder, at the address of such holder
as shown on the registry books maintained by the Warrant Agent; if to the
Company, at C.W. Chemical Waste Technologies Limited, 20 East 63rd Street, 1st
Floor, New York, New York 10021, Attention: President, with a copy to Jack Levy,
Esq., Morrison Cohen Singer & Weinstein LLP, _____ Lexington Avenue, New York,
New York 10022; if to the Warrant Agent, at its Corporate Office, and if to RAS,
at RAS Securities Corp., 50 Broadway, New York, New York 10004-1607, Attention:
B-21
<PAGE>
Fredrick Schulman, with a copy to Joseph L. Cannella, Fischbein o Badillo o
Wagner o Harding, 909 Third Avenue, New York, New York 10022.
SECTION 18. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without
reference to principles of conflict of laws.
SECTION 19. Binding Effect. This Agreement shall be binding upon and inure
to the benefit of the Company and the Warrant Agent (and their respective
successors and assigns) and the holders from time to time of Warrant
Certificates. Nothing in this Agreement is intended or shall be construed to
confer upon any other person any right, remedy or claim, in equity or at law, or
to impose upon any other person any duty, liability or obligation.
SECTION 20. Termination. This Agreement shall terminate on the earlier to
occur of (i) the close of business on the Expiration Date of all the Warrants;
(ii) the closing date of an IPO which results in the conversion of the Warrants;
or (iii) the date upon which all Warrants have been exercised.
SECTION 21. Counterparts. This Agreement may be executed in several
counterparts, which taken together shall constitute a single document.
B-22
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
C.W. CHEMICAL WASTE
TECHNOLOGIES LIMITED
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
RAS SECURITIES CORP.
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
[WARRANT AGENT]
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
B-23
<PAGE>
THIS WARRANT AND ANY SHARES OF COMMON STOCK ISSUABLE UPON ITS EXERCISE (THE
"SHARES") HAVE NOT BEEN REGISTERED UNDER THE [SECURITIES ACT OF 1933 OR ANY
STATE SECURITIES LAWS AND MAY NOT BE TRANSFERRED UNTIL (1) A REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933 (THE "ACT") SHALL HAVE BECOME
EFFECTIVE WITH RESPECT THERETO AND THE WARRANT AND SUCH SHARES ARE REGISTERED
UNDER APPLICABLE STATE SECURITIES LAWS, OR (2) RECEIPT BY THE ISSUER OF AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUER TO THE EFFECT THAT
REGISTRATION UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED
IN CONNECTION WITH SUCH PROPOSED TRANSFER NOR IS IN VIOLATION OF ANY APPLICABLE
STATE SECURITIES LAWS.
NO. PPWW Warrants
VOID AFTER ______________ __, 2004
WARRANT CERTIFICATE FOR PURCHASE OF COMMON STOCK
C.W. CHEMICAL WASTE TECHNOLOGIES LIMITED
This certifies that, FOR VALUE RECEIVED, _____________________ or
registered assigns (the "Registered Holder") is the owner of the number of
Warrants ("Warrants") specified above. Each Warrant initially entitles the
Registered Holder to purchase, subject to the terms and conditions set forth in
this Certificate and the Warrant Agreement (as hereinafter defined), one fully
paid and non-assessable share of Common Stock, $.001 par value ("Common Stock")
of C.W. Chemical Waste Technologies Limited, a corporation organized under the
laws of Cyprus (the "Company") at any time commencing _____________ __, 2000 and
prior to the Expiration Date (as hereinafter defined), upon the presentation and
surrender of this Warrant Certificate with the Subscription Form on the reverse
hereof duly executed, at the corporate office of _______________________________
____________________________ as Warrant Agent, or its successor (the " Warrant
Agent"), accompanied by payment of an amount equal to $3.00 for each Warrant
(the A-1 "Purchase Price") in lawful money of the United States of America in
cash or by official bank or certified check made payable to the Company. The
Company may, at its election, reduce the Purchase Price.
This Warrant Certificate and each Warrant represented hereby are issued
pursuant to and are subject in all respects to the terms and conditions set
forth in the Warrant Agreement, dated ____________ ___, 199__, by and among the
Company, the Warrant Agent and RAS Securities Corp. (the "Agreement").
In the event of certain contingencies provided for in the Agreement, the
Purchase Price or the number of shares of Common Stock subject to purchase upon
the exercise of each Warrant represented hereby are subject to modification or
adjustment.
Each Warrant represented hereby is exercisable at the option of the
Registered Holder, but no fractional shares of Common Stock shall be issued. In
the case of the exercise of less than all the
W-1
<PAGE>
Warrants represented hereby, the Company shall cancel this Warrant Certificate
upon the surrender hereof and shall execute and deliver a new Warrant
Certificate or arrant Certificates of like tenor, which the Warrant Agent shall
countersign, for the balance of such Warrants.
This Warrant Certificate and each Warrant represented hereby are issued
pursuant to and are subject in all respects to the terms and conditions set
forth in the Warrant Agreement (the "Agreement"), dated ____________ __, 1998,
by and among the Company, the Warrant Agent and RAS Securities Corp.
In the event of certain contingencies provided for in the Agreement, the
Purchase Price or the number of shares of Common Stock subject to purchase upon
the exercise of each Warrant represented hereby are subject to modification or
adjustment.
Each Warrant represented hereby is exercisable at the option of the
Registered Holder, but no fractional shares of Common Stock shall be issued. In
the case of the exercise of less than all of the Warrants represented hereby,
the Company shall cancel this Warrant Certificate upon the surrender hereof and
shall execute and deliver a new Warrant Certificate or Warrant Certificates of
like tenor, which the Warrant Agent shall countersign, for the balance of such
Warrants.
The term "Expiration Date" shall mean 5:00 P.M. (New York time) on
____________ __, 2004. If such date shall be a holiday or a day on which the
banks are authorized to close in the State of New York, then the Expiration Date
shall mean 5:00 P.M. (New York time) the next following day which is not a
holiday or a day on which banks are authorized to close in such State. The
Company may, at its election, extend the Expiration Date.
This Warrant Certificate is exchangeable, upon the surrender hereof by the
Registered Holder at the corporate office of the Warrant Agent, for a new
Warrant Certificate or Warrant Certificates of like tenor representing an equal
aggregate number of Warrants, each of such new Warrant Certificates to represent
such number of Warrants as shall be designated by such Registered Holder at the
time of such surrender. Upon due presentment with any tax or other governmental
charge imposed in connection therewith, for registration of transfer of this
Warrant Certificate at such office, a new Warrant Certificate or Warrant
Certificates representing an equal aggregate number of Warrants shall be issued
to the transferee in exchange therefor, subject to the limitations provided in
the Agreement.
Prior to the exercise of any Warrant represented hereby, the Registered
Holder shall not be entitled to any rights of a stockholder of the Company,
including, without limitation, the right to vote or to receive dividends or
other distributions, and
W-2
<PAGE>
shall not be entitled to receive any notice of any proceedings of the Company,
except as provided in the Agreement.
Prior to due presentment for registration of transfer hereof, the Company
may deem and treat the Registered Holder as the absolute owner hereof and of
each Warrant represented hereby (notwithstanding any notations of ownership or
writing hereon made by anyone other than a duly authorized officer of the
Company) for all purposes and shall not be affected by any notice to the
contrary.
The Company has agreed to pay a fee of ____% of the Purchase Price upon
certain conditions as specified in the Agreement upon the exercise of this
Warrant.
This Warrant shall automatically convert into a like number of new
warrants under certain circumstances in the event the Company completes an
initial public offering of its securities or otherwise registers the Conversion
Warrants, and such new warrants shall have the terms and conditions specified in
the Agreement and the Subscription Agreement between the Company and the first
purchaser of this Warrant.
This Warrant Certificate shall be governed by and construed in accordance
with the laws of the State of New York, without giving effect to the principles
thereof related to the conflict of laws.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
duly executed, manually or in facsimile by two of
W-3
<PAGE>
its officers thereunto duly authorized and a facsimile of its corporate seal to
be imprinted hereon.
Dated: ________________, 1998
C.W. CHEMICAL WASTE
TECHNOLOGIES LIMITED
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
[seal]
CONTINENTAL STOCK TRANSFER
AND TRUST COMPANY
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
W-4
<PAGE>
SUBSCRIPTION FORM
To Be Executed by the Registered Holder
in Order to Exercise Warrants
The undersigned Registered Holder hereby irrevocably elects to exercise
Warrants represented by this Warrant Certificate, and to purchase the securities
issuable upon the exercise of such Warrants, and requests that certificates for
such securities shall be issued in the name of:
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER
__________________________________________________
__________________________________________________
__________________________________________________
__________________________________________________
[please print or type name and address]
and be delivered to:
__________________________________________________
__________________________________________________
__________________________________________________
__________________________________________________
[please print or type name and address]
and if such number of Warrants shall not be all of the Warrants evidenced by
this Warrant Certificate, that a new Warrant Certificate for the balance of such
Warrants be registered in the name of, and delivered to, the Registered Holder
at the address stated below.
W-5
<PAGE>
The undersigned represents that the exercise of the within Warrant
was solicited by a member of the National Association of Securities Dealers,
Inc. (("NASD"). If not solicited by an NASD member, please write "unsolicited"
in the space below. Unless otherwise indicated by listing the name of another
NASD member firm, it will be assumed that the exercise was solicited by RAS
Securities Corp.
--------------------------------------
(Name of NASD Member if other than RAS
Securities Corp.)
Dated: X
--------------------- -------------------------------------
--------------------------------------
--------------------------------------
Address
--------------------------------------
Taxpayer Identification Number
--------------------------------------
Signature Guaranteed
W-6
<PAGE>
ASSIGNMENT
To Be Executed by the Registered Holder
in Order to Assign Warrants
FOR VALUE RECEIVED, _________________________________ hereby sells, assigns and
transfers unto
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER
__________________________________________________
__________________________________________________
__________________________________________________
[please print or type name and address]
_____________________ of the Warrants represented by this Warrant Certificate,
and hereby irrevocably constitutes and appoints _____________________
_____________________ _____________________ ___________________ Attorney to
transfer this Warrant Certificate on the books of the Company, with full power
of substitution in the premises.
Dated: X
---------------------- -------------------------------------
Signature Guaranteed
----------------------------------------
THE SIGNATURE TO THE ASSIGNMENT OR THE SUBSCRIPTION FORM MUST CORRESPOND TO THE
NAME AS WRITTEN UPON THE FACE OF THIS WARRANT CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER, AND MUST BE
GUARANTEED BY A COMMERCIAL BANK OR TRUST COMPANY OR A MEMBER FIRM OF THE
AMERICAN STOCK EXCHANGE, NEW YORK STOCK EXCHANGE, PACIFIC STOCK EXCHANGE OR
MIDWEST STOCK EXCHANGE.
W-7
Dated: ____________, 1998
C. W. CHEMICAL WASTE TECHNOLOGIES LIMITED
REPRESENTATIVE'S WARRANT
TO PURCHASE UP TO 200,000 UNITS
THIS REPRESENTATIVE'S WARRANT (this "Warrant" or "Representative's
Warrant") CERTIFIES THAT RAS Securities Corp. (and/or any of its permitted
transferees herein sometimes called the "Holder") is entitled to purchase from
C. W. Chemical Waste Technologies Limited (the "Company"), at the price and
during the period as hereinafter specified, up to 200,000 units ("Units"), each
consisting of one ordinary share of the Company, par value $.10 per share, as
now constituted (each, a "Share" and collectively, the "Shares"), and one
warrant to purchase one Share (each, an "Underlying Warrant" and collectively,
the "Underlying Warrants"). The Shares included in the Units, the Underlying
Warrants and the Shares issuable upon exercise thereof (the "Warrant Shares")
are sometimes referred to herein collectively, as the "Warrant Securities." The
components of the Units shall be separately transferable immediately upon
issuance. Each Underlying Warrant is exercisable for a period of four (4) years
from the one year anniversary of the Effective Date (as hereinafter defined)
through the fifth anniversary thereof, at an exercise price of $6.00, subject
to adjustment, to purchase one Share.
This Representative's Warrant and the Warrant Securities have been
registered pursuant to a Registration Statement on Form F-1 (File No.
33-_________) (the "Registration Statement") declared effective by the
Securities and Exchange Commission (the "Commission") on _________, 1998 (the
"Effective Date"). This Representative's Warrant, constituting in the aggregate
warrants to purchase 200,000 Units, or 200,000 Shares and Underlying Warrants to
purchase 200,000 Shares, subject to adjustment pursuant to the terms of Section
8 hereof, was originally issued in consideration of $200 paid by the
Representative to the Company pursuant to an underwriting agreement between the
Company and RAS Securities Corp., as representative (the "Representative") of
the several underwriters (the "Underwriters"), the Representative in connection
with a public offering through the Underwriters (the "Public Offering") of
2,000,000 units, or 2,300,000 units if the Underwriters' over-allotment option
is exercised in full, each such unit (each, a "Public Unit" and collectively,
the "Public Units") consisting of one Share and one redeemable Class A Warrant
of the Company (the "Public Warrants").
<PAGE>
Except as otherwise specifically provided herein, the Shares issued
pursuant to this Representative's Warrant shall have the same terms and
conditions as described under the caption "DESCRIPTION OF SECURITIES - Ordinary
Shares" in the Registration Statement, and the Underlying Warrants shall be
governed by the terms of the warrant agreement dated as of _________, 1998,
governing the Public Warrants and executed in connection with the Public
Offering (the "Public Warrant Agreement"), except that (i) the Underlying
Warrants included in the Units may be redeemed by the Company pursuant to the
Public Warrant Agreement after this Representative's Warrant has been exercised
and to the extent that the Underlying Warrants are then outstanding, have not
been exercised and are called for redemption, and (ii) the holder(s) of (a) this
Representative's Warrant or any warrant issued in exchange herefor as provided
below and the holder(s) of any Warrant Securities shall have certain
registration rights under the Securities Act of 1933, as amended (the "Act").
The Company shall list this Representative's Warrant and the Warrant Securities
on the Nasdaq SmallCap Market and such other exchange or market on which the
Shares sold in the Public Offering are listed or quoted. In the event of any
extension of the expiration date or reduction of the exercise price of the
Public Warrants (the "Public Warrant Exercise Price"), the same changes shall be
simultaneously effected in Underlying Warrants.
1. Exercise Periods. The rights represented by this Representative's
Warrant shall be exercised at the prices, subject to adjustment in accordance
with Section 8 of this Representative's Warrant, and during the periods as
follows:
(a) During the period prior to the one-year anniversary of the
Effective Date, the Holder shall have no right to purchase any Units
hereunder, except that in the event of any merger, consolidation or sale
of all or substantially all the capital stock or assets of the Company or
in the case of any statutory exchange of securities with another
corporation or company (including any exchange effected in connection with
a merger of another corporation into the Company) subsequent to the
Effective Date, the Holder shall have the right to exercise this
Representative's Warrant and the Underlying Warrants included herein at
such time and receive the kind and number of shares of stock and other
securities and property (including cash) which a holder of the number of
Shares included in the Units and the Warrant Shares would have owned or
been entitled to receive had this Representative's Warrant and the
Underlying Warrants been exercised immediately prior thereto.
(b) During the four-year period commencing on the first
2
<PAGE>
anniversary of the Effective Date and ending at 5:00 p.m. New York time on
the fifth anniversary of the Effective Date, inclusive (the "Exercise
Period"), each Holder shall have the right to purchase Units hereunder at
$6.00 per Unit, as adjusted (the "Exercise Price"). For purposes of the
adjustments to be made pursuant to Section 8 hereof, the per Unit Exercise
Price shall be deemed to be $6.00, subject to further adjustment as
provided in said Section 8.
(c) Following the Exercise Period, this Warrant shall expire and the
Holder shall have no right to purchase any Units hereunder.
2. Certificates.
(a) The warrant certificates evidencing the Underlying Warrants
shall be in the form of the warrant certificate representing the Public
Warrants (the "Underlying Warrant Certificates"), with such appropriate
insertions, omissions, substitutions, and other variations as required or
permitted by the terms of this Warrant or the Public Warrant.
(b) Upon the exercise of this Representative's Warrant, the issuance of
certificates for Shares and Underlying Warrant Certificates and/or
certificates for any other securities, properties or rights issuable upon
such exercise, shall be made forthwith (and in any event within seven (7)
business days thereafter) without charge to the Holder thereof including,
without limitation, any tax which may be payable in respect of the
issuance thereof, and such certificates shall (subject to the provisions
of Sections 4 and __ hereof) be issued in the name of, or in such names as
may be directed by, the Holder thereof; provided, however, that the
Company shall not be required to pay any tax which may be payable in
respect of any transfer involved in the issuance and delivery of any such
certificates in a name other than that of the Holder, and the Company
shall not be required to issue or deliver such certificates unless or
until the person or persons requesting the issuance thereof shall have
paid to the Company the amount of such transfer tax or shall have
established to the satisfaction of the Company that such tax has been
paid.
(c) Upon receipt by the Company of evidence reasonably satisfactory
to it of the loss, theft, destruction or mutilation of any
Representative's Warrant, and, in the case of loss, theft or destruction,
of indemnity or security reasonably satisfactory to the Company, and
reimbursement to the Company of all reasonable expenses incidental
thereto, and upon surrender and cancellation of the Representative's
Warrant,
3
<PAGE>
if mutilated, the Company shall make and deliver a new Representative's
Warrant of like tenor, in lieu thereof.
3. Exercise of Representative's Warrant.
3.1. Method of Exercise. The rights represented by this Warrant may be
exercised, in whole or in part, at any time during the Exercise Period, by
(a) surrender of this Warrant, and the purchase form attached hereto as
Exhibit A properly completed and executed (the "Purchase Form") at the
offices of the Company at 20 East 63rd Street, 1st Floor, New York, NY
10021 (the "Company Offices") and (b) payment to the Company of the
Exercise Price for the number of Units for which this Warrant is then
being exercised, as specified in the Purchase Form, by certified or
official bank check in New York Clearing House funds, subject to
adjustment as provided in Section 8 hereof. This Warrant shall be deemed
to have been exercised, in whole or in part to the extent specified,
immediately prior to the close of business on the date on which this
Warrant is surrendered and payment is made as provided in this Section 3.1
(such date, the "Exercise Date"), and the person or persons in whose name
or names the certificates for Shares and Underlying Warrant Certificates
are issued upon such exercise shall become the holder(s) of record of such
Shares and Underlying Warrants at such time on such Exercise Date. In the
event that this Representative's Warrant is exercised for less than all of
the Units for which it is then exercisable, upon such exercise and
surrender of this Warrant, together with payment of the Exercise Price as
provided above, the Company shall cancel this Warrant and execute and
deliver to the Holder a new Representative's Warrant of like tenor for a
number of Units equal to the number of the Units for which this Warrant
has not yet been exercised, as adjusted (i) as provided in Section 8
hereof and (ii) upon election of the Holder, as provided in Section 3.4
hereof, together with certificates representing the Shares and Underlying
Warrant Certificates for which the Warrant then being surrendered is
exercised, no later than seven (7) days following the Company's receipt of
this Representative's Warrant and the Purchase Form.
3.2 Exchange of Representative's Warrant. A Holder may, at any time
during the Exercise Period, elect to exchange this Warrant, in whole or in
part (a "Warrant Exchange"), whether or not the same is being exercised,
into the number of Units determined pursuant to the terms of Section 3.4
hereof, by surrender of this Warrant accompanied by notice of intent to
exchange the same indicating the number of Units for which such Holder
elects to exchange this Warrant and the date of
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such exchange (the "Exchange Date"), which notice shall be in the form of
Exhibit C attached hereto (the "Exchange Notice"), which Exchange Notice
may be in addition to any Purchase Form submitted in connection with the
simultaneous exercise, if any, of the Warrant, in whole or in part. If
this Warrant is being exercised and a Purchase Form and Exchange Notice
are submitted simultaneously, the Warrant Exchange shall apply only to all
or any number of those Units as to which this Warrant is not then being
exercised. Such new Representative's Warrant shall be issued as of the
Exchange Date and delivered to the Holder requesting the Warrant Exchange
within seven (7) days after the Exchange Date.
3.3 Exercise of Underlying Warrants; Issuance of Shares Upon
Exercise of Representative's Warrant. In addition to the method of payment
set forth in Section 3.1 and in lieu of any cash payment required
thereunder, the Holder(s) of the Underlying Warrants shall have the right
at any time and from time to time to exercise such Underlying Warrants by
surrendering the Underlying Warrant Certificates therefor in the manner
specified in Section 3.1 and/or 3.2 and complying with the terms of the
Underlying Warrants. The number of Underlying Warrants to be issued upon
exercise of the Representative's Warrant with respect to any Unit shall be
as adjusted pursuant to Section 8 hereof. The number of Shares to be
issued upon exercise of this Representative's Warrant with respect to any
Units shall be as adjusted pursuant to Section 8 hereof.
3.4 Adjustments Pursuant to Exchange Notice; Definition of Market
Price. In connection with any Warrant Exchange and the Units subject
thereto, the number of Units represented by the new Representative's
Warrant to be issued shall represent a warrant to purchase the number of
Units (rounded to the next highest integer) equal to the difference
between (a) the number of Units specified in the Exchange Notice (which
shall in no event be greater than the number of Units as to which the
Representative's Warrant then being exchanged has theretofore not been
exercised) and (b) a fraction, (i) the numerator of which shall be the
number of such Units multiplied by the Exercise Price and (ii) the
denominator of which shall be the Market Price, defined as follows:
(a) As used herein, the term "Market Price" shall mean, on any
date, if the Units are then listed on a national securities exchange
or listed or admitted to unlisted trading privileges on such
exchange or listed for trading on the Nasdaq National Market or the
Nasdaq SmallCap Market, the average of the last reported sale prices
or the average of the means of the last reported
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bid and asked prices of the Units on such exchange or market for the
three (3) business days ending on the last business day prior to the
Exchange Date.
(b) As used herein, the term "Market Price" shall mean, on any
date, if the provisions of paragraph (a) of this Section 3.4 are not
applicable, as follows:
(i) If the Shares are then listed on a national
securities exchange or listed or admitted to unlisted trading
privileges on such exchange or listed for trading on the
Nasdaq National Market or the Nasdaq SmallCap Market, "Market
Price" shall mean the average of the last reported sale prices
or the average of the means of the last reported bid and asked
prices of the Shares on such exchange or market for the three
(3) business days ending on the last business day prior to the
Exchange Date;
(ii) If the [Public] Warrants are then listed on a
national securities exchange or listed or admitted to unlisted
trading privileges on such exchange or listed for trading on
the Nasdaq National Market or the Nasdaq SmallCap Market,
"Market Price" shall mean the average of the last reported
sale prices or the average of the means of the last reported
bid and asked prices of the [Public] Warrants on such exchange
or market for the three (3) business days ending on the last
business day prior to the Exchange Date;
(iii) If neither the Shares nor the [Public] Warrants
are so listed or admitted to unlisted trading privileges,
"Market Price" shall mean the average of the means of the last
reported bid and asked prices of the Shares for the three (3)
business days ending on the last business day prior to the
Exchange Date;
(iv) If neither the Shares nor the [Public] Warrants are
so listed or admitted to unlisted trading privileges, "Market
Price" shall mean the average of the means of the last
reported bid and asked prices of the Warrants for the three
(3) business days ending on the last business day prior to the
Exchange Date;
(v) If neither the Shares nor the [Public] Warrants are
so listed or admitted to unlisted
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trading privileges and bid and asked prices are not so
reported with respect to the Shares or the [Public] Warrants,
"Market Price" shall mean the amount, not less than the book
value of the Shares, as at the end of the most recent fiscal
year of the Company ending prior to the Exchange Date,
determined in such reasonable manner as may be prescribed by
the Company's Board of Directors.
4. Restriction On Transfer of Warrants. The Holder of this
Representative's Warrant, by its acceptance hereof, covenants and agrees that
such Representative's Warrant is being acquired as an investment and not with a
view to the distribution thereof; that such Representative's Warrant may not be
sold, transferred, assigned, hypothecated or otherwise disposed of, in whole or
in part, for a period of one (1) year from the date hereof, except to any of the
Underwriters, any dealer that participates in the Public Offering or any of
their respective officer(s) or director(s). The assignment, in whole or in part,
of any rights represented by this Representative's Warrant shall be made
pursuant to the Form of Assignment attached hereto as Exhibit B.
5. Exercise Price. Except as otherwise provided in Section 8 hereof, the
Exercise Price of a Unit shall be $6.00, as adjusted from time to time in
accordance with the provisions of Section 8 hereof and as adjusted to reflect
any reduction of the exercise price of the Public Warrants.
6. Reservation and Listing of Securities. The Company shall at all times
reserve and keep available out of its authorized Shares, solely for the purpose
of issuance upon the exercise of the Representative Warrant(s) and the
Underlying Warrants, such number of Shares or other securities, properties or
rights as shall be issuable upon the exercise thereof. The Company covenants and
agrees that, upon exercise of the Representative Warrant(s) and payment of the
Exercise Price therefor, all Shares and other securities issuable upon such
exercise shall be duly and validly issued, fully paid, non-assessable and not
subject to the preemptive rights of any shareholder. The Company further
covenants and agrees that upon exercise of the Underlying Warrants and payment
of the respective Underlying Warrant exercise price therefor, all Warrant Shares
and other securities issuable upon such exercises shall be duly and validly
issued, fully paid, non-assessable and not subject to the preemptive rights of
any shareholder. As long as any Representative Warrant and/or Underlying Warrant
is outstanding, the Company shall use its best efforts to cause all Shares
issuable upon the exercise of the
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Representative's Warrant(s) and the Underlying Warrants to be listed (subject to
official notice of issuance) on all securities exchanges on which the Shares or
Underlying Warrants issued to the public herewith may then be listed and/or
quoted.
7. Registration Rights.
7.1 Current Registration Under the Securities Act of 1933. This
Representative's Warrant, the underlying Shares, Underlying Warrants and
Warrant Shares, the Public Units and the Shares included in the Public
Units, the Public Warrants and the Shares issuable upon exercise of the
Public Warrants have been registered under the Securities Act of 1933, as
amended (the "Act"), pursuant to the Company's Registration Statement. The
Company covenants and agrees to use its best efforts to maintain the
effectiveness of the Registration Statement for a period of seven (7)
years from the Closing of the Public Offering.
7.2 Contingent Registration Rights. In the event that, for any
reason whatsoever, the Company fails to maintain the effectiveness of the
Registration Statement for a period of seven (7) years from the Effective
Date, and, in any event, from and after the first anniversary of the
Effective Date, the Representative shall have, commencing on the date of
any such occasion, contingent registration rights ("Registration Rights")
as set forth in Section 7.3 hereof.
7.3 Piggyback Registration. (a) If, at any time commencing on the
date of closing of the Public Offering (the "Closing Date") and expiring
on the seventh (7th) anniversary of thereof, the Company proposes to
register any of its securities under the Act, either for its own account
or the account of any other security holder or holders of the Company
possessing registration rights ("Other Shareholders") (other than pursuant
to Form S-4, Form S-8 or comparable registration statement), it shall give
written notice, at least thirty (30) days prior to the filing of each such
registration statement, to the Representative and to all other Holders of
any Representative's Warrant, or of any Units, and/or Warrant Securities
included therein or issued or issuable upon exercise of such
Representative's Warrant or the Underlying Warrants (collectively,
"Registrable Securities") of its intention to do so. If the Representative
or other holders of Registrable Securities notify the Company within
twenty-one (21) days after the receipt of any such notice of its or their
desire to include any such securities in such proposed registration
statement, the Company shall afford the
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<PAGE>
Representative and such other holders of such Securities the opportunity
to have any such Securities registered under such registration statement.
(b) If the registration of which the Company gives notice is for a
registered public offering involving an underwriting, the Company shall so
advise the Representative and such other Holders as part of the written
notice given pursuant to Section 7.3(a) hereof. The right of the
Representative or any such other Holder to registration pursuant to this
Section 7.3 shall be conditioned upon participation by the Representative
or such Holder in such underwriting and the inclusion of the Registrable
Securities of the Representative or such Holder in the underwriting to the
extent hereinafter provided. The Representative and all other Holders
proposing to distribute their securities through such underwriting shall
(together with the Company and any officer, directors or Other
Shareholders distributing their securities through such underwriting)
enter into an underwriting agreement in customary form with the
representative of the underwriter or underwriters therefor selected by the
Company. Notwithstanding any other provision of this Section 7.3, if the
representative of the underwriter or underwriters advises the Company in
writing that marketing factors require a limitation or elimination of the
number of Shares or other securities to be underwritten, the
representative may limit the number of Shares or other securities to be
included in the registration and underwriting. The Company shall so advise
the Representative and all other holders of Registrable Securities
requesting registration, and the number of Shares or other securities that
are entitled to be included in the registration and underwriting shall be
allocated among the Representative and other holders requesting
registration, in each case, in proportion, as nearly as practicable, to
the respective amounts of the securities which they had requested to be
included in such registration at the time of filing the registration
statement.
(c) Notwithstanding the provisions of this Section 7.3, the Company
shall have the right, at any time after it shall have given written notice
pursuant to Section 7.3(a) hereof (irrespective of whether a written
request for inclusion of any such securities shall have been made), to
elect not to file any such proposed registration statement or to withdraw
the same after the filing, but prior to the effective date thereof.
7.4 Demand Registration.
(a) At any time commencing after the Closing Date and ending on the
fifth (5th) anniversary of thereof, the holders
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<PAGE>
of Registrable Securities representing a "Majority" (as hereinafter
defined) of such Securities, assuming the exercise of the Representative's
Warrant as to all of the Units (the "Initiating Holders"), shall have
the right (which right is in addition to the registration rights under
Section 7.3 hereof), exercisable by written notice to the Company, to have
the Company prepare and file with the Commission, on one occasion, a
registration statement and such other documents, including a prospectus,
as may be necessary in the opinion of both counsel for the Company and
counsel for the Holders, in order to comply with the provisions of the
Act, so as to permit a public offering and sale of their respective
Registrable Securities for up to two hundred and seventy (270) days by
such Holders and any other holders of Registrable Securities, as well as
any other security holders possessing similar registration rights, who
notify the Company within twenty-one (21) days after receiving notice from
the Company of such request. All expenses of such registration and
underwriting shall be borne by the Company.
(b) The Company covenants and agrees to give written notice of any
registration request under this Section 7.4 by any Holder or Holders to
all other registered holders of Registrable Securities, as well as any
other security holders possessing similar registration rights, within ten
(10) days after the date of the receipt of any such registration request.
(c) If the Initiating Holders intend to distribute the Registrable
Securities covered by their request by means of an underwriting, they
shall so advise the Company as a part of their request made pursuant to
Section 7.4(a) hereof. The right of any holder to registration pursuant to
this Section 7.4 shall be conditioned upon such holder's participation in
such underwriting and the inclusion of such Holder's Registrable
Securities in the underwriting to the extent and subject to the
limitations provided herein. A holder may elect to include in such
underwriting all or a part of the Registrable Securities it holds.
(d) The Company shall (together with all Holders, officers,
directors and Other Shareholders proposing to distribute their securities
through such underwriting) enter into an underwriting agreement in
customary form with the underwriter or the representative of the
underwriters selected for such underwriting by the Initiating Holders,
which underwriter(s) shall be reasonably acceptable to the Representative.
Notwithstanding any other provision of this Section 7.4, if the
underwriter or the representative of the underwriters advises the
Initiating Holders in writing that
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<PAGE>
marketing factors require a limitation or elimination of the number of
Shares or other securities to be underwritten, such representative may
limit the number of Shares or other securities to be included in the
registration and underwriting. The Company shall so advise the
Representative and all holders of Registrable Securities requesting
registration, and the number of Shares or other securities that are
entitled to be included in the registration and underwriting shall be
allocated among the Representative and other holders requesting
registration, in each case, in proportion, as nearly as practicable, to
the respective numbers of securities which they had requested to be
included in such registration at the time of filing the registration
statement. If the Company or any holder of Registrable Securities that has
requested inclusion in such registration as provided above disapproves of
the terms of any such underwriting, such person may elect to withdraw its
securities therefrom by written notice to the Company, the underwriter and
the Initiating Holders. Any securities so excluded shall be withdrawn from
such registration. No securities excluded from such registration by reason
of such underwriters' marketing limitations shall be included in such
registration. To facilitate the allocation of shares in accordance with
this Section 7.4(d), the Company or underwriter or underwriters selected
as provided above may round the number of securities of any holder which
may be included in such registration to the nearest 100 Shares.
(e) In the event that the Initiating Holders are unable to sell all
of the Registrable Securities for which they have requested registration
due to the provisions of Section 7.4(d) hereof and if, at that time, the
Initiating Holders are not permitted to sell Registrable Securities under
Rule 144(k), the Initiating Holders shall be entitled to require the
Company to afford the Initiating Holders an opportunity to effect one
additional demand registration under this Section 7.4.
(f) In addition to the registration rights under Section 7.3 and
subsection (a) of Section 7.4 hereof, at any time commencing on the
Closing Date and expiring on the seventh (7th) anniversary of the Closing
Date, any holder of Registrable Securities shall have the right,
exercisable by written request to the Company, to have the Company prepare
and file, on one occasion, with the Commission a registration statement so
as to permit a public offering and sale for 270 days by any such holder of
its Registrable Securities, provided, however, that the provisions of
Section 7.5(b) hereof, shall not apply to any such registration request
and the registration and all costs incident thereto shall be at the
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<PAGE>
expense of the Holder or Holder's making such request.
(g) Notwithstanding anything to the contrary contained herein, if
the Company shall not have filed a registration statement for the
Registrable Securities of the Initiating holders or the holder(s) referred
to in Section 7.5(f) above (the "Paying Holders"), within the time period
specified in Section 7.5(a) below, the Company shall, upon the written
notice of election of the Initiating Holders or the Paying Holders, as the
case may be, repurchase (i) any and all Shares and Warrant Shares at the
higher of the Market Price per Share on (x) the date of the notice sent to
the Company under Section 7.4(a) or 7.5(a), as the case may be, or (y) the
expiration of the 21 day period specified in Section 7.5(a) and (ii) any
and all Underlying Warrants at such Market Price less the Exercise Price
of such Warrants. Such repurchase shall be in immediately available funds
and shall close within five (5) business days after the expiration of the
period specified in Section 7.5(a).
7.5 Covenants of the Company With Respect to Registration. In
connection with each registration under Section 7.3 or 7.4 hereof, the
Company covenants and agrees as follows:
(a) The Company shall use its best efforts to file a registration
statement within thirty (30) days of receipt of any demand therefor, shall
use its best efforts to have any registration statements declared
effective at the earliest possible time, and shall furnish each holder
desiring to sell Registrable Securities such number of prospectuses as
shall reasonably be requested.
(b) The Company shall pay all costs (excluding fees and expenses of
Holder(s)' counsel and any underwriting or selling commissions), fees and
expenses in connection with all registration statements flied pursuant to
Sections 7.3 and 7.4 hereof including, without limitation, the Company's
legal and accounting fees, printing expenses, and blue sky fees and
expenses. If the Company fails to comply with the provisions of Section
7.5(a), the Company shall, in addition to any other equitable or other
relief available to the Holder(s), extend the exercise period of each
Representative's Warrant and Underlying Warrant by such number of days as
shall equal the delay caused by the Company's failure.
(c) The Company shall take all action which may be required in
qualifying or registering the Registrable Securities included in a
registration statement for offering and sale under the securities or blue
sky laws of such states
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as reasonably are requested by the Holder(s); provided, however, that the
Company shall not be obligated to qualify as a foreign corporation to do
business under the laws of any such jurisdiction.
(d) The Company shall indemnify the Holder(s) of the Registrable
Securities to be sold pursuant to any registration statement and each
person, if any, who controls such Holders within the meaning of Section 15
of the Act or Section 20(a) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), against any and all losses, damages, suits,
actions, claims, liabilities and expenses (including all expenses
reasonably incurred in investigating, preparing or defending against any
claim whatsoever) to which they or any of them may become subject under
the Act, the Exchange Act or otherwise, arising from such registration
statement, but only to the same extent and with the same effect as the
indemnification provided by the Company in Section 7 of the Underwriting
Agreement.
(e) The Holder(s) of the Registrable Securities to be sold pursuant
to a registration statement, and their successors and assigns, shall
severally, and not jointly, indemnify the Company, its officers and
directors and each person, if any, who controls the Company within the
meaning of Section 15 of the Act or Section 20(a) of the Exchange Act,
against any and all losses, damages, liabilities, suits, actions, claims,
liabilities and expenses (including all expenses reasonably incurred in
investigating, preparing or defending against any claim whatsoever) to
which they may become subject under the Act, the Exchange Act or
otherwise, arising from information furnished by or on behalf of such
Holders or their successors or assigns, for specific inclusion in such
registration statement to the same extent and with the same effect as the
indemnification provided by the Underwriters to the Company in Section 7
of the Underwriting Agreement.
(f) For a period of one hundred eighty (180) days after the
effectiveness of any registration statement filed pursuant to Section 7.4
hereof, the Company shall not permit any other registration statement
(other than (i) a registration statement relating to the securities for
which the Company has granted demand registration rights, as described in
the Prospectus included in the Registration Statement, (ii) a registration
statement relating to the Shares and the shares issuable upon exercise of
the Public Warrants, (iii) a registration statement relating to the
securities for which the Company has granted piggyback registration
rights, as described in the Prospectus included in the Registration
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Statement and (iv) a registration statement filed on Forms S-4 or S-8) to
be or remain effective during the effectiveness of a registration
statement filed pursuant to Section 7.4 hereof, without the prior written
consent of the holders of the Registrable Securities representing a
Majority of such Securities.
(g) The Company shall furnish to each holder participating in a
registration and to each underwriter, if any, a signed counterpart,
addressed to such Holder or underwriters, of (i) an opinion of counsel to
the Company, dated the effective date of such registration statement (and,
if such registration includes an underwritten public offering, an opinion
dated the date of the closing under the underwriting agreement), and (ii)
a "cold comfort" letter dated the effective date of such registration
statement (and, if such registration includes an underwritten public
offering, a cold comfort letter dated the date of the closing under the
underwriting agreement) signed by the independent public accountants who
have issued a report on the Company's financial statements included in
such registration statement, in each case covering substantially the same
matters with respect to such registration statement (and the prospectus
include therein) and, in the case of such accountants' letter, with
respect to events subsequent to the date of such financial statements, as
are customarily covered in opinions of issuer's counsel and in
accountants' letters delivered to underwriters in underwritten public
offerings of securities.
(h) The Company shall as soon as practicable after the effective
date of any registration statement filed pursuant to Section 7.3 or 7.4
hereof, and in any event within 15 months thereafter, make "generally
available to its security holders" (within the meaning of Rule 158 under
the Act) an earnings statement (which need not be audited) complying the
Section 11(a) of the Act and covering a period of at least 12 consecutive
months beginning after the effective date of the registration statement.
(i) The Company shall deliver promptly to each holder participating
in the offering requesting the correspondence and memoranda described
below and to the managing underwriters, copies of all written
correspondence between the Commission and the company, its counsel or
auditors and all memoranda relating to discussions with the Commission or
its staff with respect to the registration statement and permit each
Holder and underwriters to do such investigation, upon reasonable advance
notice, with respect to information contained in or omitted from the
registration statement as it deems reasonably necessary to comply with
applicable
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<PAGE>
securities laws or rules of the NASD. Such investigation shall include
access to books, records and properties and opportunities to discuss the
business of the Company with its officers and independent auditors, all to
such reasonable extent and at such reasonable times and as often as any
such holder or underwriter shall reasonably request.
(j) With respect to any registration under Section 7.4 hereof, the
Company shall enter into an underwriting agreement with the managing
underwriter or representative of the underwriters selected for such
underwriting by the Initiating Holders or the Paying Holders, as the case
may be, which may be the Representative. Such agreement shall be
satisfactory in form and substance to the Company, each Holder and the
Representative or such managing underwriters, as the case may be, and
shall contain such representations, warranties and covenants by the
Company and such other terms as are customarily contained in agreements of
that type used by the managing underwriter or the representative, as the
case may be. The holders shall be parties to any underwriting agreement
relating to an underwritten sale of their Registrable Securities and may,
at their option, require that any or all the representations, warranties
and covenants of the Company to or for the benefit of such underwriters
shall also be made to and for the benefit of such Holders. Such Holders
shall not be required to make any representations or warranties to or
agreements with the Company, the underwriters or their representative,
except to the extent that such representations or warranties relate to
such Holders and their intended methods of distribution.
(k) For purposes of this Agreement, the term "Majority" in reference
to the holders of Registrable Securities, shall mean in excess of fifty
percent (50%) of the then outstanding Shares and Underlying Warrants
included in the Units and/or Warrant Shares that (i) are not held by the
Company, an affiliate, officer, creditor, employee or agent thereof or any
of their respective affiliates or family members, persons acting as
nominees or in conjunction with any of the foregoing and (ii) have not
been resold to the public pursuant to a registration statement filed with
the Commission under the Act.
(l) Nothing contained in this Agreement shall be construed as
requiring any Holder to exercise any Representative's Warrants or
Underlying Warrants prior to the initial filing of any registration
statement or the effectiveness thereof.
(m) In addition to the Registrable Securities, upon the written
request therefor by any holder(s), the Company shall
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<PAGE>
include in the registration statement any other securities of the Company
held by such holder(s) as of the date of filing of such registration
statement, including, without limitation, restricted Shares, options,
warrants or any other securities convertible into Shares.
7.6 Restrictive Legends. In the event that the Company fails to
maintain the effectiveness of the Registration Statement such that the
exercise, in part or in whole, of any Representative's Warrants and/or the
Underlying Warrants are not, at the time of such exercise, registered
under the Act, any certificates representing the Underlying Warrants or
the Shares included in the Units or the Warrant Shares, and any other
securities issuable upon exercise of any Representative's Warrant or the
Underlying Warrants, shall bear the following restrictive legend:
The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended ("Act"), and
may not be offered or sold except pursuant to (i) an effective
registration statement under the Act, (ii) to the extent applicable,
Rule 144 under the Act (or any similar rule under the Act relating
to the disposition of securities), or (iii) another applicable
exemption from registration under the Act is available.
8. Adjustments to Exercise Price and Number of Securities.
8.1 Computation of Adjusted Exercise Price.
(a) Except as hereinafter provided, in the event the Company shall
at any time after the date hereof issue or sell any Shares (other than the
issuances or sales referred to in Section 8.7 hereof), including Shares
held in the Company's treasury and Shares issued upon the exercise of any
options, rights or warrants to subscribe for Shares or Shares issued upon
the direct or indirect conversion or exchange of securities for Shares,
for a consideration per Share less than the Market Price in effect
immediately prior to the issuance or sale thereof, or without
consideration, then forthwith upon such issuance or sale, the Exercise
Price shall (until another such issuance or sale) be reduced to the price
(calculated to the nearest full cent) equal to the quotient derived by
dividing (i) an amount equal to the sum of (A) the total number of Shares
outstanding immediately prior to the issuance or sale of such Shares,
multiplied by the Exercise Price in effect immediately prior to such
issuance or sale and (B) the aggregate of the amount of all consideration,
if any, received
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by the Company upon such issuance or sale, by (ii) the total number of
Shares outstanding immediately after such issuance or sale; provided,
however, that in no event shall the Exercise Price be adjusted pursuant to
this computation to an amount in excess of the Exercise Price in effect
immediately prior to such computation, except in the case of a combination
of outstanding Shares, as provided by Section 8.3 hereof.
(b) For the purposes of this Section 8, the term Exercise Price
shall mean the Exercise Price per Unit set forth in Section 1(b) hereof,
as adjusted from time to time pursuant to the provisions of this Section
8 or otherwise provided in this Agreement.
(c) Whenever the Exercise Price is adjusted pursuant to this Section
8, (i) the number of Shares included in any Units shall be simultaneously
adjusted by multiplying the number of Shares included in such Units
immediately prior to such adjustment by the Exercise Price in effect
immediately prior to such adjustment and dividing the product so obtained
by the Exercise Price as adjusted, and (ii) the number of Shares or other
securities issuable upon exercise of the Underlying Warrants and the
exercise price of such Underlying Warrants shall be adjusted in accordance
with the applicable terms of the Public Warrant Agreement.
8.2 Computation Rules Pursuant to Section 8.1. For the purposes of
any computation to be made in accordance with Section 8.1 hereof, the
following provisions shall be applicable:
(a) In the event of the issuance or sale of Shares for a
consideration, part or all of which is cash, the amount of the cash
consideration therefor shall be deemed to be the amount of cash received
by the Company for such Shares (or, if Shares are offered by the Company
for subscription, the subscription price, or, if either of such securities
is sold to underwriters or dealers for public offering without a
subscription offering, the initial public offering price) before deducting
therefrom any compensation paid or discount allowed in the sale,
underwriting or purchase thereof by underwriters or dealers or others
performing similar services, or any expenses incurred in connection
therewith.
(b) In the event of the issuance or sale (other than as a dividend
or other distribution on any stock of the Company) of Shares for a
consideration, part or all of which shall be other than cash, the amount
of the consideration therefor other than cash shall be deemed to be the
value of such consideration as determined in good faith by the Board of
Directors of the Company and shall include any amounts payable
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<PAGE>
to security holders or any affiliates thereof, including, without
limitation, pursuant to any employment agreement, royalty, consulting
agreement, covenant not to compete, earn-out or contingent payment right
or similar arrangement, agreement or understanding, whether oral or
written; all such amounts being valued for the purposes hereof at the
aggregate amount payable thereunder, whether such payments are absolute or
contingent and irrespective of the period or uncertainty of payment, the
rate of interest, if any, or the contingent nature thereof; provided,
however, that if any Holder(s) does not agree with such evaluation, a
mutually acceptable independent appraiser shall make such evaluation, the
cost of which shall be borne by the Company.
(c) Shares issuable by way of dividend or other distribution on any
stock of the Company shall be deemed to have been issued immediately after
the opening of business on the day following the record date for the
determination of shareholders entitled to receive such dividend or other
distribution and shall be deemed to have been issued without
consideration.
(d) The reclassification of securities of the Company other than
Shares into securities, including Shares, shall be deemed to involve the
issuance of such Shares for a consideration other than cash immediately
prior to the close of business on the date fixed for the determination of
security holders entitled to receive such Shares, and the value of the
consideration allocable to such Shares shall be determined as provided in
subsection (a) of Section 8.1.
(e) The number of Shares at any one time outstanding shall include
the aggregate number of Shares issued or issuable (subject to readjustment
upon the actual issuance thereof) upon the exercise of options, rights,
warrants and upon the conversion or exchange of convertible or
exchangeable securities.
8.3 Options, Rights, Warrants and Convertible and Exchangeable
Securities. In the event that the Company issues, at any time after the
date hereof, options, rights or warrants to subscribe for Shares, or
issues any securities convertible into or exchangeable for Shares, for a
consideration per Share less than the Market Price in effect immediately
prior to the issuance of such options, rights or warrants or such
convertible or exchangeable securities, or without consideration, the
Exercise Price in effect immediately prior to the issuance of such
options, rights or warrants or such convertible or exchangeable
securities, as the case may be, shall be reduced to a price determined by
making a computation in accordance with the provisions of
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Sections 8.1 and 8.2 hereof, provided that:
(a) The aggregate maximum number of Shares, as the case may be,
issuable under such options, rights or warrants shall be deemed to be
issued and outstanding at the time such options, rights or warrants were
issued and for a consideration equal to the minimum purchase price per
Share provided for in such options, rights or warrants at the time of
issuance, plus the consideration (determined in the same manner as
consideration received on the issue or sale of shares in accordance with
the terms of the Warrants), if any, received by the Company for such
options, rights or warrants.
(b) The aggregate maximum number of Shares issuable upon conversion
or exchange of any convertible or exchangeable securities shall be deemed
to be issued and outstanding at the time of issuance of such securities
and for a consideration equal to the consideration (determined in the same
manner as consideration received on the issue or sale of Shares in
accordance with the terms of the Underlying Warrants) received by the
Company for such securities, plus the minimum consideration, if any,
receivable by the Company upon the conversion or exchange thereof.
(c) If any change occurs in the price per Share provided for in any
of the options, rights or warrants referred to in subsection (a) of this
Section 8.3, or in the price per Share at which the securities referred to
in subsection (b) of this Section 8.3 are convertible or exchangeable,
such options, rights or warrants or conversion or exchange rights, as the
case may be, shall be deemed to have expired or terminated on the date
when such price change became effective in respect of Shares not
theretofore issued pursuant to the exercise or conversion or exchange
thereof, and the Company shall be deemed to have issued upon such date new
options, rights or warrants or convertible or exchangeable securities at
the new price in respect of the number of Shares issuable upon the
exercise of such options, rights or warrants or the conversion or exchange
of such convertible or exchangeable securities.
8.4 Subdivision and Combination. In the event that, at any time, the
Company subdivides or combines the outstanding Shares, the Exercise Price
shall forthwith be proportionately decreased in the case of subdivision or
increased in the case of combination.
8.5 Definition of Shares. As used in this Section 8, the term
"Shares" shall mean (i) the class of stock designated as ordinary shares
in the Company's Memorandum of Association and Articles of Association,
each as amended to and as of the
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date hereof and/or (ii) any other class of stock resulting from successive
changes or reclassifications of such ordinary shares consisting solely of
changes in par value, or from par value to no par value, or from no par
value to par value. The Company covenants that so long as any
Representative's Warrant or Warrant Securities are outstanding, the
Company shall not, without the prior written consent of the
Representative, issue any securities whatsoever other than Shares. In the
event that, upon the consent of the Representative given after the date
hereof, the Company issues securities with greater or superior voting
rights than the Shares outstanding as of the date hereof, the Holder, at
its option, may receive, upon exercise of any Representative's Warrants
either Shares or a like number of such securities with greater or superior
voting rights.
8.6 Merger or Consolidation. In the event of any consolidation or
merger of the Company with, or merger of the Company into, another
corporation or company (other than a consolidation or merger which does
not result in any reclassification or change of the outstanding Shares)
during the Exercise Period, the corporation or company formed by such
consolidation or merger shall execute and deliver to each Holder of a
Representative's Warrant or the holder of any rights to purchase Units, a
supplemental Representative's Warrant, providing that each such holder
shall have the right to receive thereafter (until the expiration of such
Representative's Warrant), upon exercise thereof, the kind and number of
shares of stock and other securities and property receivable upon such
consolidation or merger, by a holder of the number of Shares of the
Company for which such Representative's Warrant and/or Units might have
been exercised immediately prior to such consolidation, merger, sale or
transfer. Such supplemental Representative's Warrant shall provide for
adjustments identical to the adjustments provided in this Section 8. The
above provision of this Section 8.6 shall similarly apply to successive
consolidations or mergers.
8.7 No Adjustment of Exercise Price in Certain Cases. No adjustment
of the Exercise Price shall be made:
(a) Upon the issuance or sale of any Representative Warrants,
Warrant Securities or Shares issuable upon the exercise of (i) the
Representative Warrants, (ii) the Underlying Warrants, or (iii) the Public
Warrants; or
(b) If the amount of said adjustment would be less than two cents
(2) per Unit, provided, however, that in such case, any adjustment that
would otherwise then be required to be
20
<PAGE>
made shall be carried forward and shall be made at the time of and
together with the next subsequent adjustment which, together with any
adjustment so carried forward, shall equal at least two cents (2) per
Unit.
8.8 Dividends and Other Distributions. In the event that, at any time
prior to the exercise of by Holders of all Representative Warrants for Units,
the Company declares a dividend (other than a dividend consisting solely of
Shares) or otherwise distribute to its shareholders any assets, property,
rights, evidences of indebtedness, securities (other than Shares), whether
issued by the Company or by another, or any other thing of value, the Holders of
the unexercised Representative Warrants shall thereafter be entitled, in
addition to the Units, the Shares and the Underlying Warrants or other
securities and property receivable upon the exercise thereof, to receive, upon
such exercise, the same property, assets, rights, evidences of indebtedness,
securities or any other thing of value that they would have been entitled to
receive at the time of such dividend or distribution as if such Representative
Warrants had been exercised immediately prior to such dividend or distribution.
At the time of any such dividend or distribution, the Company shall make
appropriate reserves to ensure the timely performance of the provisions of this
Section 8.8.
9. Notices to Holders. Nothing contained in this Representative's
Warrant shall be construed as conferring upon any Holder the right to vote or to
consent or to receive notice as a shareholder in respect of any meetings of
shareholders for the election of directors or any other matter, or as having any
rights whatsoever as a shareholder of the Company. If, however, at any time
prior to the expiration of the Exercise Period, any of the following events
occurs:
(a) the Company takes a record of the holders of its Shares for the
purpose of entitling them to receive a dividend or distribution payable
other than in cash, or a cash dividend or distribution payable other than
out of current or retained earnings, as indicated by the accounting
treatment of such dividend or distribution on the books of the Company; or
(b) the Company offers to all holders of Shares any additional
shares of capital stock of the Company or securities convertible into or
exchangeable for shares of capital stock of the Company, or any option,
right or warrant to subscribe therefor; or
(c) a dissolution, liquidation or winding up of the Company (other
than in connection with a consolidation or merger) or a sale of all or
substantially all of its property,
21
<PAGE>
assets and business as an entirety shall be proposed;
then, in any one or more of said events, the Company shall give written notice
of such event at least fifteen (15) days prior to the date fixed as a record
date or the date of closing the transfer books for the determination of the
shareholders entitled to such dividend, distribution, convertible or
exchangeable securities or subscription rights, or entitled to vote on such
proposed dissolution, liquidation, winding up or sale. Such notice shall specify
such record date or the date of closing the transfer book, as the case may be.
Failure to give such notice or any defect therein shall not affect the validity
of any action taken in connection with the declaration or payment of any such
dividend, or the issuance of any convertible or exchangeable securities, or
subscription rights, options or warrants, or any proposed dissolution,
liquidation, winding up or sale.
10. Notices. All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed to have been duly made and
sent when delivered, mailed by registered or certified mail, return receipt
requested, or sent by receipted overnight courier for next day delivery:
(a) If to the registered Holders of any Representative's Warrant or
any permitted assignee(s) thereof, to the address of such Holders and
assignees as shown on the books of the Company; or
(b) If to the Company, to the Company Offices set forth in Section 3
hereof or to such other address as the Company may designate by notice to
the Holders and/or permitted assignees thereof.
11. Supplements and Amendments. The Company and the Representative may
from time to time supplement or amend this Agreement without the approval of any
Holder or permitted assignee in order to cure any ambiguity, to correct or
supplement any provision contained herein which may be defective or inconsistent
with any provisions herein, or to make any other provisions in regard to matters
or questions arising hereunder which the Company and the Representative may deem
(a) necessary or desirable and (b) without adverse effect on the interests of
any Holder.
12. Successors. All of the covenants and provisions of this
Representative's Warrant shall be binding upon and inure to the benefit of the
Company, the Holders and their respective successors and permitted assigns.
22
<PAGE>
13. Termination. This Representative's Warrant shall terminate on the last
day on which any registration rights granted hereunder may be exercised.
Notwithstanding the foregoing, the indemnification provisions of Section 7 shall
survive such termination until the close of business on the _________
anniversary of the Effective Date.
14. Governing Law; Submission to Jurisdiction. This Representative's
Warrant has been prepared, negotiated and delivered in the State of New York and
shall, in all respects, be governed by and construed in accordance with the laws
of such State, without giving effect to the principles thereof relating to the
conflict of laws.
The Company, the Representative and any other Holders or any assignees
thereof hereby agree that any action, proceeding or claim against such person in
any way arising out of or relating to this Agreement shall be brought and
enforced in the courts of the State of New York or of the United States of
America located in the County of New York, and irrevocably submits to such
jurisdiction, which jurisdiction shall be exclusive. The Company, the
Representative and any Holders and/or assignees thereof hereby irrevocably waive
any objection to such exclusive jurisdiction or inconvenient forum. Any such
process or summons to be served upon any of the Company, the Representative, any
Holders or any assignee thereof (at the option of the party bringing such
action, proceeding or claim) may be served by transmitting a copy thereof, by
registered or certified mail, return receipt requested, postage prepaid,
addressed to such person at the address set forth in Section 10 hereof. Such
mailing shall be deemed personal service and shall be legal and binding upon the
party so served in any action, proceeding or claim. The Company, the
Representative and any Holders and their respective assignee(s) agree that the
prevailing party(ies) in any such action or proceeding shall be entitled to
recover from the other party(ies) all of its/their reasonable legal costs and
expenses relating to such action or proceeding and/or incurred in connection
with the preparation therefor.
15. Entire Warrant; Modification. This Representative's Warrant (including
the Underwriting Agreement and the Public Warrant Agreement to the extent that
portions thereof are referred to herein) contains the entire understanding among
the parties hereto with respect to the subject matter hereof and may not be
modified or amended except by a writing duly signed by the party against whom
enforcement of the modification or amendment is sought.
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<PAGE>
16. Severability. If any provision of this Representative's Warrant is
held to be invalid or unenforceable, such invalidity or unenforceability shall
not affect any other provision hereof.
17. Headings. The headings to the Sections and subsections of this
Representative's Warrant are for convenience of reference only and are not
intended, nor should they be construed as, a part of this Warrant and shall be
given no substantive effect.
18. Benefits. Nothing contained herein shall be construed to give to any
individual or entity other than the Company and the Representative and any other
registered Holder(s) of this Warrant, any Units or Warrant Securities any legal
or equitable right, remedy or claim hereunder, and this Representative's Warrant
shall be for the sole benefit of the Company and the Representative and any
other registered Holders or permitted assignees hereof.
21. Counterparts. This Representative's Warrant may be executed in any
number of counterparts, each such counterpart shall for all purposes be
deemed to be an original, and such counterparts shall together constitute one
and the same document.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the day and year first above written.
C. W. CHEMICAL WASTE TECHNOLOGIES LIMITED
By:
--------------------------------------
Name:
Title:
Attest:
- -----------------------------
Name:
Title:
RAS SECURITIES CORP.
By:
--------------------------------------
Name:
Title:
24
<PAGE>
EXHIBIT A
FORM OF ELECTION TO PURCHASE
The undersigned hereby irrevocably elects to exercise the right, represented by
the Representative's Warrant, to purchase:
___________________________ Units
and herewith tenders in payment for such Units a certified or official bank
check payable in New York Clearing House Funds to the order of C.W. Chemical
Waste Technologies Limited (the "Company") in the amount of $__________, all in
accordance with the terms of Section 3.1 of the Representative's Warrant dated
as of _____________, 1998 between the Company and RAS Securities Corp. The
undersigned requests that certificates for the Warrant Securities included in
the Units as to which the Representative's Warrant is hereby being exercised be
registered in the name of _____________, whose address is ____________ and that
such certificates be delivered to _____________, whose address
is___________________.
Signature
--------------------------------
(Signature must conform in all respects to
name of holder as specified on the face of
the Warrant Certificate.)
------------------------------------------
(Insert Social Security or Other
Identifying Number of Holder)
25
<PAGE>
EXHIBIT B
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder
desires to transfer the Representative's Warrant,
in whole or in part.)
FOR VALUE RECEIVED ___________________________________ hereby sells,
assigns and transfers unto _______________________________________________
________________________________________________________________________________
_______, having an address at: _________________________________________________
________________________________________________________________________________
(Please print name and address of transferee)
_____ all rights in the Representative's Warrant held by me
or
_____ all rights in the Representative's Warrant held by me with respect to
___________ if the Units represented thereby, which constitute some but not all
such Units,
together with all right, title and interest therein, and does hereby reasonably
constitute and appoint _________________________, as attorney, to transfer the
within Warrant (or the rights therein with respect to said Units) on the books
of the within-named Company, with full power of substitution.
Date:___________________ Signature
--------------------------------
(Signature must conform in all respects to
name of holder as specified on the face of
the Warrant Certificate.)
------------------------------------------
(Insert Social Security or Other
Identifying Number of Holder)
26
<PAGE>
EXHIBIT C
FORM OF EXCHANGE NOTICE
The undersigned, pursuant to the provisions of the Representative's
Warrant between C. W. Chemical Waste Technologies Limited (the "Company") and
RAS Securities Corp. dated _______________, 1998, hereby elects to exchange this
Representative's Warrant, representing the right to purchase up to ____ Units
(as defined in said Warrant), as follows:
__________ with respect to all Units represented thereby
or
__________ with respect to _______ Units represented thereby
This Exchange Notice
__________ is
__________ is not accompanied by (check one)
__________ an Election to Purchase
__________ an Assignment
Dated: ___________________
-------------------------------
SIGNATURE OF HOLDER
-------------------------------
PRINT NAME OF HOLDER
27
Exhibit 4.3
WARRANT AGREEMENT
WARRANT AGREEMENT, dated as of this ______ day of _____________, 1998,
by and among C.W. Chemical Waste Technologies Limited, a corporation organized
under the laws of Cyprus (the "Company"), and Continental Stock Transfer & Trust
Company, as warrant agent (the "Warrant Agent").
W I T N E S S E T H
WHEREAS, the Company proposes to issue Class A Warrants as hereinafter
described (the "Warrants"), to purchase up to an aggregate of 2,300,000 shares
of Common Stock of the Company, par value $.10 per share, in connection with the
public offering (the "IPO") by the Company under Registration Statement No. 333-
of up to 2,300,000 Units (the Units"), each Unit consisting of one ordinary
share and one Warrant, including Units to be issued upon exercise of the
Underwriters' overallotment option;
WHEREAS, RAS Securities Corp., a New York corporation, has acted as the
representative of the underwriters int he IPO;
WHEREAS, the Company proposes to issue up to an additional 200,000
Warrants upon exercise of the Representative's Warrant being issued to the
Representative in the IPO;
WHEREAS, the Company proposes to issue up to an additional 250,000
Warrants upon the automatic conversion of the warrants issued pursuant to that
certain Warrant Agreement dated January 27, 1998 by and among the company, the
Warrant Agent and the Representative;
WHEREAS, the Company desires the Warrant Agent to act on behalf of the
Company, and the Warrant Agent is willing to so act, in connection with the
issuance, registration, transfer, exchange and redemption of the Warrants, the
issuance of certificates representing the Warrants, the exercise of the
Warrants, and the rights of the holders thereof;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements set forth herein, and for the purpose of defining the terms and
provisions of the Warrants and the certificates representing the Warrants and
the respective rights and obligations thereunder of the Company, the holders of
certificates representing the Warrants and the Warrant Agent, the parties hereto
agree as follows:
SECTION 1. Definitions. As used herein, the following terms shall have
the following meanings, unless the context shall otherwise require:
(a) "Common Stock" shall mean ordinary shares of the Company
of any class, whether now or hereafter authorized, which have the right
to participate in the distributions of earnings and assets of the
Company without limit as to amount or percentage, which at the date
hereof consists of 20,000,000 authorized shares, par value $.10 per
share.
<PAGE>
(b) "Corporate Office" shall mean the office of the Warrant
Agent (or its successor) at which at any particular time its principal
business shall be administered, which office is located at the date
hereof at 2 Broadway, New York, New York.
(c) "Exercise Date" shall mean, as to any Warrant, the date on
which the Warrant Agent Shall have received both (a) the Warrant
Certificate representing such Warrant, with the exercise form thereon
duly executed by the Registered Holder thereof or his attorney duly
authorized in writing, and (b) payment in cash, or by official bank or
certified check made payable to the Company, of an amount in lawful
money of the United States of America equal to the applicable Purchase
Price.
(d) "Initial Warrant Exercise Date" shall mean ______, 1999.
(e) "Purchase Price" shall mean the purchase price to be paid
upon exercise of each Warrant in accordance with the terms hereof,
which price shall be $___ per share subject to (i) adjustment from time
to time pursuant to the provisions of Section 8 hereof, (ii) conversion
of the Warrants pursuant to the provisions of Section 9 hereof, and
(iii) the Company's right to reduce the Purchase Price upon notice to
all warrant holders.
(f) "Registrable Securities" shall mean the Conversion
Warrants and the shares of Common Stock for which the Conversion
Warrants are exercisable.
(g) "Registered Holder" shall mean the person in whose name
any certificate representing Warrants shall be registered on the books
maintained by the Warrant Agent pursuant to Section 6.
(h) "Transfer Agent" shall mean Continental Stock Transfer and
Trust Company, as the Company's transfer agent, or its authorized
successor, as such.
(i) "Warrant Expiration Date" shall mean 5:00 P.M. (New York
time) on , 2003; provided that if such date shall be a holiday or a day
on which banks are authorized to close in the State of New York, then
5:00 P.M. (New York time) on the next following day which in the State
of New York is not a holiday or a day on which banks are authorized to
close. Upon notice to all warrant holders, the Company shall have the
right to extend the Warrant Expiration Date.
SECTION 2. Warrants and Issuance of Warrant Certificates.
(a) A Warrant shall initially entitle the Registered Holder of
the Warrant Certificate representing such Warrant to purchase one share
of Common Stock upon the exercise thereof, in accordance with the terms
hereof, subject to modification and adjustment as provided in Section
8.
2
<PAGE>
(b) From time to time, up to the Warrant Expiration Date, the
Transfer Agent shall execute and deliver stock certificates in required
whole number denominations representing up to an aggregate of 2,750,000
shares of Common Stock, subject to adjustment as described herein, upon
the exercise of Warrants in accordance with this Agreement.
(c) From time to time, up to the Warrant Expiration Date, the
Warrant Agent shall execute and deliver Warrant Certificates in
required whole number denominations to the persons entitled thereto in
connection with any transfer or exchange permitted under this
Agreement; provided that no Warrant Certificates shall be issued except
(i) those initially issued hereunder, (ii) those issued on or after the
Initial Warrant Exercise Date, upon the exercise of fewer than all
Warrants represented by any Warrant Certificate, to evidence any
unexercised Warrants held by the exercising Registered Holder, (iii)
those issued upon any transfer or exchange pursuant to Section 6; (iv)
those issued in replacement of lost, stolen, destroyed or mutilated
Warrant Certificates pursuant to Section 7; and (v) at the option of
the Company, in such form as may be approved by the its Board of
Directors, to reflect (A) any adjustment or change in the Purchase
Price or the number of shares of Common Stock, purchasable upon
exercise of the Warrants, made pursuant to Section 8 hereof and (B)
other modifications approved by Warrantholders in accordance with
Section 16 hereof.
(d) The provisions of Section 9 hereof shall govern the terms
of conversion of the Warrants and registration thereof or of the
Registrable Securities under certain circumstances described therein.
SECTION 3. Form and Execution of Warrant Certificates.
(a) The Warrant Certificates shall be substantially in the
form annexed hereto as Exhibit A (the provisions of which are hereby
incorporated herein) and may have such letters, numbers or other marks
of identification or designation and such legends, summaries or
endorsements printed, lithographed, engraved or typed thereon as the
Company may deem appropriate and as are not inconsistent with the
provisions of this Agreement, or as may be required to comply with any
law or with any rule or regulation made pursuant thereto or with any
rule or regulation of any stock exchange on which the Warrants may be
listed, or to conform to usage. The Warrant Certificates shall be dated
the date of issuance thereof (whether upon initial issuance, transfer,
exchange or in lieu of mutilated, lost, stolen, or destroyed Warrant
Certificates) and issued in registered form. Warrants shall be numbered
serially with the letter W.
(b) Warrant Certificates shall be executed on behalf of the
Company by two officers of the Company duly authorized to do so under
applicable Cyprus law, by manual signatures or by facsimile signatures
printed thereon, and shall have imprinted thereon a facsimile of the
Company's seal. In case any officer of the Company who shall have
signed any of the Warrant Certificates shall cease to be such officer
of the Company before the date of issuance of the Warrant Certificates
and issue and delivery thereof, such Warrant Certificates may
3
<PAGE>
nevertheless be issued and delivered with the same force and effect as
though the person who signed such Warrant Certificates had not ceased
to be such officer of the Company. After execution by the Company,
Warrant Certificates shall be delivered by the Warrant Agent to the
Registered Holder.
SECTION 4. Exercise.
(a) Each Warrant may be exercised by the Registered Holder
thereof at any time on or after the Initial Exercise Date, but not
later than the Warrant Expiration Date, upon the terms and subject to
the conditions set forth herein and in the applicable Warrant
Certificate. A Warrant shall be deemed to have been exercised
immediately prior to the close of business on the Exercise Date, and
the person entitled to receive the securities deliverable upon such
exercise shall be treated for all purposes as the holder upon exercise
thereof as of the close of business on the Exercise Date. As soon as
practicable on or after the Exercise Date, the Warrant Agent shall
deposit the proceeds received from the exercise of a Warrant, and
promptly after clearance of checks received in payment of the Purchase
Price pursuant to such Warrants, cause to be issued and delivered by
the Transfer Agent, to the person or persons entitled to receive the
same, a certificate or certificates for the securities deliverable upon
such exercise (plus a certificate for any remaining unexercised
Warrants of the Registered Holder). Notwithstanding the foregoing, in
the case of payment made in the form of a check drawn on an account of
RAS or such other investment banks and brokerage houses as the Company
shall approve, certificates shall immediately be issued without any
delay. Upon the exercise of any Warrant and clearance of the funds
received, the Warrant Agent shall promptly remit the payment received
for the Warrant to the Company or as the Company may direct in writing.
(b) If on the Exercise Date in respect of the exercise of any
Warrant, (i) the current market value (determined as provided in
Section 10 hereof) of the Company's Common Stock is greater than the
then Purchase Price of the Warrant, (ii) the exercise of the Warrant
was solicited by a member of the NASD, (iii) the Warrant was not held
in a discretionary account, (iv) disclosure of compensation
arrangements was made both at the time of the original offering and at
the time of exercise; and (v) the solicitation of the exercise of the
Warrant was not in violation of Regulation M promulgated under the
Securities Exchange Act of 1934, as amended (as such regulation or any
successor regulation or rule may be in effect as of such time of
exercise), then the Warrant Agent, simultaneously with the receipt of
the proceeds of the exercise of the Warrant(s) so exercised shall pay
from such proceeds, a fee of 5% of the Purchase Price to RAS (of which
up to 1% may be re-allowed to the dealer who solicited the exercise).
Within five days after exercise of a Warrant, the Warrant Agent shall
send RAS a copy of the reverse side of each Warrant exercised. RAS
shall reimburse the Warrant Agent, upon request, for its reasonable
expenses relating to compliance with this Section 4(b). Market price
shall be determined in accordance with the provisions of Section 10.
4
<PAGE>
SECTION 5. Reservation of Shares; Listing; Payment of Taxes; etc..
(a) The Company covenants that it shall at all times reserve
and keep available out of its authorized Common Stock, solely for the
purpose of issue upon exercise of Warrants, such number of shares of
Common Stock as shall then be issuable upon the exercise of all
outstanding Warrants. The Company covenants that all shares of Common
Stock which shall be issuable upon exercise of the Warrants and payment
of the Purchase Price shall, at the time of delivery, be duly and
validly issued, fully paid, non-assessable and free from all taxes,
liens and charges with respect to the issue thereof (other than those
which the Company shall promptly pay or discharge).
(b) The Company shall use reasonable efforts to obtain
appropriate approvals or registrations under state "blue sky" or
securities laws with respect to the exercise of the Warrants; provided,
however, that the Company shall not be obligated to qualify as a
foreign corporation in any jurisdiction. With respect to any such
securities laws, however, Warrants may not be exercised by, or shares
of Common Stock issued to, any Registered Holder in any state in which
such exercise would be unlawful.
(c) The Company shall pay all documentary, stamp or similar
taxes and other governmental charges that may be imposed with respect
to the issuance of Warrants, or the issuance, or delivery of any shares
upon exercise of the Warrants; provided, however, that if the shares of
Common Stock are to be delivered in a name other than the name of the
Registered Holder of the Warrant Certificate representing any Warrant
being exercised, then no such delivery shall be made unless the person
requesting the same has paid to the Warrant Agent the amount of
transfer taxes or charges incident thereto, if any.
(d) The Warrant Agent is hereby irrevocably authorized to
requisition the Transfer Agent from time to time for certificates
representing shares of Common Stock required upon exercise of the
Warrants, and the Company shall authorize the Transfer Agent to comply
with all such proper requisitions.
SECTION 6. Exchange and Registration of Transfer. Subject to the
restrictions on transfer contained in the Warrant Certificates and the
Subscription Agreements between the Company and the purchasers of Units:
(a) Warrant Certificates may be exchanged for other Warrant
Certificates representing an equal aggregate number of Warrants of the
same class or may be transferred in whole or in part; provided that no
transfers may be made to the extent prohibited by the terms of the
Lock-Up. Warrant Certificates to be exchanged shall be surrendered to
the Warrant Agent at its Corporate Office, and upon satisfaction of the
terms and provisions hereof, the Company shall execute, and the Warrant
Agent shall countersign, issue and deliver in exchange therefor the
Warrant Certificate or Certificates which the Registered Holder making
the exchange shall be entitled to receive.
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(b) The Warrant Agent shall keep at its office books in which,
subject to such reasonable regulations as it may prescribe, it shall
register Warrant Certificates and the transfer thereof in accordance
with its regular practice. Upon due presentment for registration of
transfer of any Warrant Certificate at its office, the Company shall
execute and the Warrant Agent shall issue and deliver to the transferee
or transferees a new Warrant Certificate or Certificates representing
an equal aggregate number of Warrants.
(c) With respect to all Warrant Certificates presented for
registration of transfer, or for exchange or exercise, the subscription
form on the reverse thereof shall be duly endorsed, or be accompanied
by a written instrument or instruments of transfer and subscription, in
form satisfactory to the Company, duly executed by the Registered
Holder or his attorney-in-fact duly authorized to do so in writing.
(d) The Company may require payment by such holder of a sum
sufficient to cover any tax or other governmental charge that may be
imposed in connection therewith.
(e) All Warrant Certificates surrendered for exercise or for
exchange in case of mutilated Warrant Certificates shall be promptly
cancelled by the Warrant Agent and thereafter disposed of or destroyed,
upon notice to RAS at the direction of the Company.
(f) Prior to due presentment for registration of transfer
thereof, the Company and the Warrant Agent may deem and treat the
Registered Holder of any Warrant Certificate as the absolute owner
thereof and of each Warrant represented thereby (notwithstanding any
notations of ownership or writing thereon made by anyone other than a
duly authorized officer of the Company or the Warrant Agent) for all
purposes and shall not be affected by any notice to the contrary.
SECTION 7. Loss or Mutilation. Upon receipt by the Company and the
Warrant Agent of evidence satisfactory to them of the ownership of and loss,
theft, destruction or mutilation of any Warrant Certificate and (in case of
loss, theft or destruction) of indemnity satisfactory to them, and (in the case
of mutilation) upon surrender and cancellation thereof, the Company shall
execute and the Warrant Agent shall (in the absence of notice to the Company
and/or Warrant Agent that the Warrant Certificate has been acquired by a bona
fide purchaser) countersign and deliver to the Registered Holder in lieu thereof
a new Warrant Certificate of like tenor representing an equal aggregate number
of Warrants. Any warrant holder requesting a substitute Warrant Certificate
shall comply with such other reasonable regulations and pay such other
reasonable charges as the Warrant Agent may prescribe.
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SECTION 8. Adjustment of Exercise Price and Number of Shares of Common
Stock or Warrants.
(a) Subject to the exceptions referred to in Section 8(g)
below, in the event the Company shall, at any time or from time to time
after the date hereof, sell any shares of Common Stock for a
consideration per share less than the current market value per share,
determined as provided in Section 10 hereof, on the date of the sale or
issue any shares of Common Stock as a stock dividend to the holders of
Common Stock, or subdivide or combine the outstanding shares of Common
Stock into a greater or lesser number of shares (any such sale,
issuance, subdivision or combination being herein called a "Change of
Shares"), then, and thereafter upon each further Change of Shares, the
Purchase Price in effect immediately prior to such Change of Shares
shall be changed to a price (including any applicable fraction of a
cent) determined by multiplying the Purchase Price in effect
immediately prior thereto by a fraction, the numerator of which shall
be the sum of the number of shares of Common Stock outstanding
immediately prior to the issuance of such additional shares and the
number of shares of Common Stock which the aggregate consideration
received (determined as provided in subsection 8(f)(vi) below), if any,
for the issuance of such additional shares would purchase at such
current market price per share of Common Stock, and the denominator of
which shall be the sum of the number of shares of Common Stock
outstanding immediately after the issuance of such additional shares.
Such adjustment shall be made successively whenever such an issuance is
made.
Upon each adjustment of the Purchase Price pursuant to this
Section 8, the total number of shares of Common Stock purchasable upon
the exercise of each Warrant shall, subject to the provisions contained
in Section 8(b) hereof, be such number of shares (calculated to the
nearest tenth) purchasable at the Purchase Price immediately prior to
such adjustment multiplied by a fraction, the numerator of which shall
be the Purchase Price in effect immediately prior to such adjustment
and the denominator of which shall be the Purchase Price in effect
immediately after such adjustment.
(b) The Company may elect, upon any adjustment of the Purchase
Price hereunder, to adjust the number of Warrants outstanding, in lieu
of the adjustment in the number of shares of Common Stock purchasable
upon the exercise of each Warrant as hereinabove provided, so that each
Warrant outstanding after such adjustment shall represent the right to
purchase one share of Common Stock. Each Warrant held of record prior
to such adjustment of the number of Warrants shall become that number
of Warrants (calculated to the nearest tenth) determined by multiplying
the number one by a fraction, the numerator of which shall be the
Purchase Price in effect immediately prior to such adjustment and the
denominator of which shall be the Purchase Price in effect immediately
after such adjustment. Upon each adjustment of the number of Warrants
pursuant to this Section 8, the Company shall, as promptly as
practicable, cause to be distributed to each Registered Holder of
Warrant Certificates on the date of such adjustment Warrant
Certificates evidencing, subject to Section 10 hereof, the number of
additional Warrants to which such Holder shall be entitled
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as a result of such adjustment or, at the option of the Company, cause
to be distributed to such Holder in substitution and replacement for
the Warrant Certificates held by him prior to the date of adjustment
(and upon surrender thereof, if required by the Company) new Warrant
Certificates evidencing the number of Warrants to which such Holder
shall be entitled after such adjustment.
(c) In case of any reclassification, capital reorganization or
other change of outstanding shares of Common Stock, or, in case of any
consolidation or merger of the Company with or into another corporation
(other than a consolidation or merger in which the Company is the
continuing corporation and which does not result in any
reclassification, capital reorganization or other change of outstanding
shares of Common Stock), or in case of any sale or conveyance to
another corporation of the property of the Company as, or substantially
as, an entirety (other than a sale/leaseback, mortgage or other
financing transaction), the Company shall cause effective provision to
be made so that each holder of a Warrant then outstanding shall have
the right thereafter, by exercising such Warrant, to purchase the kind
and number of shares of stock or other securities or property
(including cash) receivable upon such reclassification, capital
reorganization or other change, consolidation, merger, sale or
conveyance by a holder of the number of shares of Common Stock that
might have been purchased upon exercise of such Warrant immediately
prior to such reclassification, capital reorganization or other change,
consolidation, merger, sale or conveyance. Any such provision shall
include provision for adjustments that shall be as nearly equivalent as
may be practicable to the adjustments provided for in this Section 8.
The foregoing provisions shall similarly apply to successive
reclassifications, capital reorganizations and other changes of
outstanding shares of Common Stock and to successive consolidations,
mergers, sales or conveyances.
(d) Irrespective of any adjustments or changes in the Purchase
Price or the number of shares of Common Stock purchasable upon exercise
of the Warrants, the Warrant Certificates theretofore and thereafter
issued shall, unless the Company shall exercise its option to issue new
Warrant Certificates pursuant to Section 2(c) hereof, continue to
express the Purchase Price per share and the number of shares
purchasable thereunder as the Purchase Price per share, and the number
of shares purchasable were expressed in the Warrant Certificates when
the same were originally issued.
(e) After each adjustment of the Purchase Price pursuant to
this Section 8, the Company shall promptly prepare a certificate signed
by two officers of the Company duly authorized to do so under Cyprus
law, setting forth: (i) the Purchase Price as so adjusted, (ii) the
number of shares of Common Stock purchasable upon exercise of each
Warrant after such adjustment, and, if the Company shall have elected
to adjust the number of Warrants, the number of Warrants to which the
registered holder of each Warrant shall then be entitled, and the
proportionate adjustment in Redemption Price resulting therefrom, and
(iii) a brief statement of the facts accounting for such adjustment.
The Company shall promptly file such certificate with the Warrant Agent
and cause a copy thereof to be sent by ordinary first class
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mail to each registered holder of Warrants at such holder's last
address appearing on the registry books of the Warrant Agent. No
failure to mail such notice nor any defect therein or in the mailing
thereof shall affect the validity thereof except as to the holder to
whom the Company failed to mail such notice, or except as to the holder
whose notice was defective. The affidavit of an officer of the Warrant
Agent or the Secretary or other duly authorized officer of the Company
that such notice has been mailed shall, in the absence of fraud, be
prima facie evidence of the facts stated therein.
(f) For purposes of Section 8(a) and 8(b) hereof, the
following provisions (i) to (vi) shall also be applicable:
(i) The number of shares of Common Stock outstanding
at any given time shall include shares of Common Stock owned
or held by or for the account of the Company and the sale or
issuance of such treasury shares or the distribution of any
such treasury shares shall not be considered a Change of
Shares for purposes of said sections.
(ii) No adjustment of the Purchase Price shall be
made unless such adjustment would require an increase or
decrease of at least $.10 in such price; provided that any
adjustments which by reason of this clause (ii) are not
required to be made shall be carried forward and shall be made
at the time of and together with the next subsequent
adjustment which, together with any adjustment(s) so carried
forward, shall require an increase or decrease of at least
$.10 in the Purchase Price then in effect hereunder.
(iii) In case of (A) the sale by the Company for cash
of any rights or warrants to subscribe for or purchase, or any
options for the purchase of, Common Stock or any securities
convertible into or exchangeable for Common Stock without the
payment of any further consideration other than cash, if any
(such convertible or exchangeable securities being herein
called "Convertible Securities"), or (B) the issuance by the
Company, without the receipt by the Company of any
consideration therefor, of any rights or warrants to subscribe
for or purchase, or any options for the purchase of, Common
Stock or Convertible Securities, in each case, if (and only
if) the consideration payable to the Company upon the exercise
of such rights, warrants or options shall consist of cash,
whether or not such rights, warrants or options, or the right
to convert or exchange such Convertible Securities, are
immediately exercisable, and the price per share for which
Common Stock is issuable upon the exercise of such rights,
warrants or options or upon the conversion or exchange of such
Convertible Securities (determined by dividing (1) the minimum
aggregate consideration payable to the Company upon the
exercise of such rights, warrants or options, plus the
consideration received by the Company for the issuance or sale
of such rights, warrants or options, plus, in the case of such
Convertible Securities, the minimum aggregate amount of
additional consideration, if any, other than such
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Convertible Securities, payable upon the conversion or
exchange thereof, by (2) the total maximum number of shares of
Common Stock issuable upon the exercise of such rights,
warrants or options or upon the conversion or exchange of such
Convertible Securities issuable upon the exercise of such
rights, warrants or options) is less than the fair market
value of the Common Stock on the date of the issuance or sale
of such rights, warrants or options, then the total maximum
number of shares of Common Stock issuable upon the exercise of
such rights, warrants or options or upon the conversion or
exchange of such Convertible Securities (as of the date of the
issuance or sale of such rights, warrants or options) shall be
deemed to be outstanding shares of Common Stock for purposes
of Sections 8(a) and 8(b) hereof and shall be deemed to have
been sold for cash in an amount equal to such price per share.
(iv) In case of the sale by the Company for cash of
any Convertible Securities, whether or not the right of
conversion or exchange thereunder is immediately exercisable,
and the price per share for which Common Stock is issuable
upon the conversion or exchange of such Convertible Securities
(determined by dividing (A) the total amount of consideration
received by the Company for the sale of such Convertible
Securities, plus the minimum aggregate amount of additional
consideration, if any, other than such Convertible Securities,
payable upon the conversion or exchange thereof, by (B) the
total maximum number of shares of Common Stock issuable upon
the conversion or exchange of such Convertible Securities) is
less than the fair market value or the Common Stock on the
date of the sale of such Convertible Securities, then the
total maximum number of shares of Common Stock issuable upon
the conversion or exchange of such Convertible Securities (as
of the date of the sale of such Convertible Securities) shall
be deemed to be outstanding shares of Common Stock for
purposes of Sections 8(a) and 8(b) hereof and shall be deemed
to have been sold for cash in an amount equal to such price
per share.
(v) If the exercise or purchase price provided for in
any right, warrant or option referred to in (iii) above, or
the rate at which any Convertible Securities referred to in
(iii) or (iv) above are convertible into or exchangeable for
Common Stock, shall change at any time (other than under or by
reason of provisions designed to protect against dilution),
the Purchase Price then in effect hereunder shall forthwith be
readjusted to such Purchase Price as would have obtained (A)
had the adjustments made upon the issuance or sale of such
rights, warrants, options or Convertible Securities been made
upon the basis of the issuance of only the number of shares of
Common Stock theretofore actually delivered (and the total
consideration received therefor) upon the exercise of such
rights, warrants or options or upon the conversion or exchange
of such Convertible Securities, (B) had adjustments been made
on the basis of the Purchase Price as adjusted under clause
(A) for all transactions (which would have affected such
adjusted Purchase Price) made after the
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issuance or sale of such rights, warrants, options or
Convertible Securities, and (C) had any such rights, warrants,
options or Convertible Securities then still outstanding been
originally issued or sold at the time of such change. On the
expiration of any such right, warrant or option or the
termination of any such right to convert or exchange any such
Convertible Securities, the Purchase Price then in effect
hereunder shall forthwith be readjusted to such Purchase Price
as would have obtained (1) had the adjustments made upon the
issuance or sale of such rights, warrants, options or
Convertible Securities been made upon the basis of the
issuance of only the number of shares of Common Stock
theretofore actually delivered (and the total consideration
received therefor) upon the exercise of such rights, warrants
or options or upon the conversion or exchange of such
Convertible Securities and (2) had adjustments been made on
the basis of the Purchase Price as adjusted under clause (1)
for all transactions (which would have affected such adjusted
Purchase Price) made after the issuance or sale of such
rights, warrants, options or Convertible Securities.
(vi) In case of the sale for cash of any shares of
Common Stock, any Convertible Securities, any rights or
warrants to subscribe for or purchase, or any options for the
purchase of, Common Stock or Convertible Securities, the
consideration received by the Company therefore shall be
deemed to be the gross sales price therefor without deducting
therefrom any expense paid or incurred by the Company or any
underwriting discounts or commissions or concessions paid or
allowed by the Company in connection therewith.
(g) No adjustment to the Purchase Price of the Warrants or to
the number of shares of Common Stock purchasable upon the exercise of
each Warrant shall be made, however,
(i) upon the grant or exercise of options which may
hereafter be granted or exercised under the Company's Stock
Option Plan or under any other employee benefit plan of the
Company; or
(ii) upon the issuance or sale of Common Stock or
Convertible Securities upon the exercise of any rights or
warrants to subscribe for or purchase, or any options for the
purchase of, Common Stock or Convertible Securities, whether
or not such rights, warrants or options were outstanding on
the date of the original sale of the Warrants or were
thereafter issued or sold; or
(iii) upon the issuance or sale of Common Stock upon
conversion or exchange of any Convertible Securities, whether
or not any adjustment in the Purchase Price was made or
required to be made upon the issuance or sale of such
Convertible Securities and whether or not such Convertible
Securities were outstanding on the date of the original sale
of the Warrants or were thereafter issued or sold; or
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(iv) upon any amendment to or change in the terms of
any rights or warrants to subscribe for or purchase, or
options for the purchase of, Common Stock or Convertible
Securities or in the terms of any Convertible Securities,
including, but not limited to, any extension of any expiration
date of any such right, warrant or option, any change in any
exercise or purchase price provided for in any such right,
warrant or option, any extension of any date through which any
Convertible Securities are convertible into or exchangeable
for Common Stock or any change in the rate at which any
Convertible Securities are convertible into or exchangeable
for Common Stock (other than rights, warrants, options or
Convertible Securities issued or sold after the close of
business on the date of the original issuance of the Warrants
(A) for which an adjustment in the Purchase Price then in
effect was theretofore made or required to be made, upon the
issuance or sale thereof, or (B) for which such an adjustment
would have been required had the exercise or purchase price of
such rights, warrants or options at the time of the issuance
or sale thereof or the rate of conversion or exchange of such
Convertible Securities, at the time of the sale of such
Convertible Securities, or the issuance or sale of rights or
warrants to subscribe for or purchase, or options for the
purchase of, such Convertible Securities, been the price or
rate as changed, in which case the provisions of Section
8(f)(v) hereof shall be applicable if, but only if, the
exercise or purchase price thereof, as changed, or the rate of
conversion or exchange thereof, as changed, consists of cash
or requires the payment of additional consideration, if any,
consisting of cash and the Company did not receive any
consideration other than cash, if any, in connection with such
change).
(h) As used in this Section 8, the term "Common Stock" shall
mean and include the Company's Common Stock authorized on the date of
the original issue of the Units and shall also include any capital
stock of any class of the Company thereafter authorized which shall not
be limited to a fixed sum or percentage in respect of the rights of the
holders thereof to participate in dividends and in the distribution of
assets upon the voluntary liquidation, dissolution or winding up of the
Company; provided, however, that the shares issuable upon exercise of
the Warrants shall include only shares of such class designated in the
Company's Articles of Association as Common Stock on the date of the
original issue of the Units or (i), in the case of any
reclassification, change, consolidation, merger, sale or conveyance of
the character referred to in Section 8(c) hereof, the stock, securities
or property provided for in such section or (ii), in the case of any
reclassification or change in the outstanding shares of Common Stock
issuable upon exercise of the Warrants as a result of a subdivision or
combination or consisting or a change in par value, or from par value
to no par value, or from no par value to par value, such shares of
Common Stock as so reclassified or changed.
(i) Any determination as to whether an adjustment in the
Purchase Price in effect hereunder is required pursuant to Section 8,
or as to the amount of any such adjustment, if required, shall be
binding upon the holders of the Warrants and the Company if made in
good faith by the Board of Directors of the Company.
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(j) If and whenever the Company shall declare any dividends or
distributions or grant to the holders of Common Stock, as such, rights
or warrants to subscribe for or to purchase, or any options for the
purchase of, Common Stock or securities convertible into or
exchangeable for or carrying a right, warrant or option to purchase
Common Stock, the Company shall notify each of the then Registered
Holders of the Warrants of such event prior to its occurrence to enable
such Registered Holders to exercise their Warrants and participate as
holders of Common Stock in such event.
SECTION 9. Purchase of the Warrants by the Company.
(a) The Company shall have the right, except as limited by
law, other agreements or herein, to redeem all, but not less than all,
of the Warrants then issued and outstanding, upon written notice to the
holders thereof given at least 30 days in advance, for a redemption
price per Warrant equal to $.05: provided that such right of redemption
shall not commence until , 2000; and provided further, that the
Company shall not have the right to redeem any Warrants unless the
average closing bid price for the shares of Common Stock (or the
closing price if such shares are traded on a national securities
exchange) for the 20 consecutive business days ending 10 days prior to
the date of the notice of redemption, averages at least $8.25 per share
(subject to adjustment to the same extent as the Purchase Price is
adjusted in accordance with the provisions of Section 8 hereof.
(b) In the event the Company shall redeem, purchase or
otherwise acquire Warrants, the same shall thereupon be delivered to
the Warrant Agent and be canceled by it and retired. The Warrant Agent
shall cancel any Warrant surrendered for exchange, substitution,
transfer or exercise in whole or in part.
SECTION 10. Fractional Warrants and Fractional Shares.
(a) If the number of shares of Common Stock purchasable upon
the exercise of each Warrant is adjusted pursuant to Section 8 hereof,
the Company shall nevertheless not be required to issue fractions of
shares, upon exercise of the Warrants or otherwise, or to distribute
certificates that evidence fractional shares. With respect to any
fraction of a share called for upon any exercise hereof, the Company
shall pay to the Holder an amount in cash equal to such fraction
multiplied by the current market value of such fractional share on the
date of the exercise of this Warrant, determined as follows:
(i) If the Common Stock is listed on a national
securities exchange or admitted to unlisted trading privileges
on such exchange or listed for trading on the National Market
System of NASDAQ ("NMS"), the current market value shall be
the last reported sale price of the Common Stock on such
exchange on the last business day prior to the date for which
the determination is being made or if no such sale is made on
such day or no closing sale price is quoted, the average of
the closing bid and asked prices for such day on such exchange
or system; or
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(ii) If the Common Stock is listed in the
over-the-counter market (other than on NMS) or admitted to
unlisted trading privileges, the current market value shall be
the mean of the last reported bid and asked prices reported by
the National Quotation Bureau, Inc. on the last business day
prior to the date for which the determination is being made;
or
(iii) If the Common Stock is not so listed or
admitted to unlisted trading privileges and bid and asked
prices are not so reported, the current market value shall be
an amount determined in such reasonable manner as may be
prescribed by the Board of Directors of the Company.
SECTION 11. Warrant Holders Not Deemed Stockholders. No holder of
Warrants shall, as such, be entitled to vote or to receive dividends or be
deemed the holder of Common Stock that may at any time be issuable upon exercise
of such Warrants for any purpose whatsoever, nor shall anything contained herein
be construed to confer upon the holder of Warrants, as such, any of the rights
of a stockholder of the Company or any right To vote for the election of
directors or upon any matter submitted to stockholders at any meeting thereof,
or to give or withhold consent to any corporate action (whether upon any
recapitalization, issue or reclassification of stock, change of par value or
change of stock to no par value, consolidation, merger or conveyance or
otherwise), or to receive notice of meetings, or to receive dividends or
subscription rights, until such Holder shall have exercised such Warrants and
been issued shares of Common Stock in accordance with the provisions hereof.
SECTION 12. Rights of Action. All rights of action with respect to this
Agreement are vested in the respective Registered Holders of the Warrants, and
any Registered Holder of a Warrant, without consent of the Warrant Agent or of
the holder of any other Warrant, may, on his own behalf and for his own benefit,
enforce against the Company his right to exercise his Warrants for the purchase
of shares of Common Stock in the manner provided in the Warrant Certificate and
this Agreement.
SECTION 13. Agreement of Warrant Holders. Every holder of a Warrant, by
his acceptance thereof, consents and agrees with the Company, the Warrant Agent
and every other holder of a Warrant that:
(a) The Warrants are transferable only on the registry books
of the Warrant Agent by the Registered Holder thereof in person or by
his attorney duly authorized to do so in writing and only if the
Warrant Certificates representing such Warrants are surrendered at the
office of the Warrant Agent, duly endorsed or accompanied by a proper
instrument of transfer satisfactory to the Warrant Agent and the
Company in their sole discretion, together with payment of any
applicable transfer taxes; and
(b) The Company may deem and treat the person in whose name
the Warrant Certificate is registered as the holder and as the
absolute, true and lawful owner of the
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Warrants represented thereby for all purposes, and the Company shall
not be affected by any notice or knowledge to the contrary, except as
otherwise expressly provided in Section 7 hereof.
SECTION 14. Cancellation of Warrant Certificates. If the Company shall
purchase or acquire any Warrant or Warrants, the Warrant Certificate or Warrant
Certificates evidencing the same shall thereupon be cancelled by it and retired.
The Warrant Agent shall also cancel Warrant Certificates following exercise of
any or all of the Warrants represented thereby or delivered to it for transfer,
split-up, combination or exchange.
SECTION 15. Concerning the Warrant Agent. The Warrant Agent acts
hereunder as agent and in a ministerial capacity for the Company, and its duties
shall be determined solely by the provisions hereof. The Warrant Agent shall
not, by issuing and delivering Warrant Certificates or by any other act
hereunder be deemed to make any representations as to the validity, value or
authorization of the Warrant Certificates or the Warrants represented thereby or
of any securities or other property delivered upon exercise of any Warrant or
whether any stock issued upon exercise of any Warrant is fully paid and
nonassessable.
The Warrant Agent shall account promptly to the Company with respect to
Warrants exercised and concurrently pay the Company, as provided in Section 4,
all moneys received by the Warrant Agent upon the exercise of such Warrants. The
Warrant Agent shall, upon request of the Company from time to time, deliver to
the Company such complete reports of registered ownership of the Warrants and
such complete records of transactions with respect to the Warrants and the
shares of Common Stock as the Company may request. The Warrant Agent shall also
make available to the Company and RAS for inspection by their agents or
employees, from time to time as either of them may request, such original books
of accounts and record (including original Warrant Certificates surrendered to
the Warrant Agent upon exercise of Warrants) as may be maintained by the Warrant
Agent in connection with the issuance and exercise of Warrants hereunder, such
inspections to occur at the Warrant Agent's office as specified in Section 17,
during normal business hours.
The Warrant Agent shall not at any time be under any duty or
responsibility to any holder of Warrant Certificates to make or cause to be made
any adjustment of the Purchase Price provided in this Agreement, or to determine
whether any fact exists which may require any such adjustments, or with respect
to the nature or extent of any such adjustment, when made, or with respect to
the method employed in making the same. It shall not (a) be liable for any
recital or statement of facts contained herein or for any action taken, suffered
or omitted by it in reliance on any Warrant Certificate or other document or
instrument believed by it in good faith to be genuine and to have been signed or
presented by the proper party or parties, (b) be responsible for any failure on
the part of the Company to comply with any of its covenants and obligations
contained in this Agreement or in any Warrant Certificate, or (c) be liable for
any act or omission in connection with this Agreement except for its own
negligence or wilful misconduct.
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The Warrant Agent may at any time consult with counsel satisfactory to
it (who may be counsel for the Company) and shall incur no liability or
responsibility for any action taken, suffered or omitted by it in good faith in
accordance with the opinion or advice of such counsel.
Any notice, statement, instruction, request, direction, order or demand
of the Company shall be sufficiently evidenced by an instrument signed by the
Chairman of the Board, President, any Vice President, its Secretary, or
Assistant Secretary, (unless other evidence in respect thereof is herein
specifically prescribed). The Warrant Agent shall not be liable for any action
taken, suffered or omitted by it in accordance with such notice, statement,
instruction, request, direction, order or demand believed by it to be genuine.
The Company agrees to pay the Warrant Agent reasonable compensation for
its services hereunder and to reimburse it for its reasonable expenses
hereunder; it further agrees to indemnify the Warrant Agent and save it harmless
against any and all losses, expenses and liabilities, including judgments, costs
and counsel fees, for anything done or omitted by the Warrant Agent in the
execution of its duties and powers hereunder except losses, expenses and
liabilities arising as a result of the Warrant Agent's negligence or wilful
misconduct.
The Warrant Agent may resign its duties and be discharged from all
further duties and liabilities hereunder (except liabilities arising as a result
of the Warrant Agent's own negligence or wilful misconduct), after giving 30
days' prior written notice to the Company. At least 15 days prior to the date
such resignation is to become effective, the Warrant Agent shall cause a copy of
such notice of resignation to be mailed to the Registered Holder of each Warrant
Certificate at the Company's expense. Upon such resignation, or any inability of
the Warrant Agent to act as such hereunder, the Company shall appoint a new
warrant agent in writing. If the Company shall fail to make such appointment
within a period of 15 days after it has been notified in writing of such
resignation by the resigning Warrant Agent, then the Registered Holder of any
Warrant Certificate may apply to any court of competent jurisdiction for the
appointment of a new warrant agent. Any new warrant agent, whether appointed by
the Company or by such a court, shall be a bank or trust company having a
capital and surplus, as shown by its last published report to its stockholders,
of not less than $10,000,000 or a stock transfer company. After acceptance in
writing of such appointment by the new warrant agent is received by the Company,
such new warrant agent shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named herein as the Warrant Agent,
without any further assurance, conveyance, act or deed; but if for any reason it
shall be necessary or expedient to execute and deliver any further assurance,
conveyance, act or deed, the same shall be done at the expense of the Company
and shall be legally and validly executed and delivered by the resigning Warrant
Agent. Not later than the effective date of any such appointment the Company
shall file notice thereof with the resigning Warrant Agent and shall forthwith
cause a copy of such notice to be mailed to the Registered Holder of each
Warrant Certificate.
Any corporation into which the Warrant Agent or any new warrant agent
may be converted or merged or any corporation resulting from any consolidation
to which the Warrant Agent or any
16
<PAGE>
new warrant agent shall be a party or any corporation succeeding to the trust
business of the Warrant Agent shall be a successor warrant agent under this
Agreement without any further act, provided that such corporation is eligible
for appointment as successor to the Warrant Agent under the provisions of the
preceding paragraph. Any such successor warrant agent shall promptly cause
notice of its succession as warrant agent to be mailed to the Company and to the
Registered Holder of each Warrant Certificate.
The Warrant Agent, its subsidiaries and affiliates, and any of its or
their officers or directors, may buy and hold or sell Warrants or other
securities of the Company and otherwise deal with the Company in the same manner
and to the same extent and with like effects as though it were not Warrant
Agent. Nothing herein shall preclude the Warrant Agent from acting in any other
capacity for the Company or for any other legal entity.
SECTION 16. Modification of Agreement. Subject to the provisions of
Section 4(b), the parties hereto may by supplemental agreement make any changes
or corrections in this Agreement (a) that it shall deem appropriate to cure any
ambiguity or to correct any defective or inconsistent provision or manifest
mistake or error herein contained; (b) to reflect an increase in the number of
Warrants which are to be governed by this Agreement resulting from any
adjustment pursuant to Section 8; or (c) that it may deem necessary or desirable
and which shall not adversely affect the interests of the holders of Warrant
Certificates; provided, however, that this Agreement shall not otherwise be
modified, supplemented or altered in any respect except with the consent in
writing of the Registered Holders of Warrant Certificates representing not less
than 50% of the Warrants then outstanding; and provided, further, that no change
in the number or nature of the securities purchasable upon the exercise of any
Warrant, or the Purchase Price therefor, or the acceleration of the Warrant
Expiration Date, shall be made without the consent in writing of the Registered
Holder of the Warrant Certificate representing such Warrant, other than such
changes as are specifically prescribed by this Agreement as originally executed.
SECTION 17. Notices. All notices, requests, consents and other
communications hereunder shall be in writing and shall be deemed to have been
made when delivered or mailed first class registered or certified mail, postage
prepaid as follows: if to the Registered Holder, at the address of such holder
as shown on the registry books maintained by the Warrant Agent; if to the
Company, at C.W. Chemical Waste Technologies Limited, 20 East 63rd Street, 1st
Floor, New York, New York 10021, Attention: President, with a copy to Jack Levy,
Esq., Morrison Cohen Singer & Weinstein LLP, _____ Lexington Avenue, New York,
New York 10022; if to the Warrant Agent, at its Corporate Office, with a copy of
all notices to RAS, at RAS Securities Corp., 50 Broadway, New York, New York
10004-1607, Attention: Fredrick Schulman, with a copy to Joseph L. Cannella,
Fischbein*Badillo*Wagner*Harding, 909 Third Avenue, New York, New York 10022.
SECTION 18. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without
reference to principles of conflict of laws.
17
<PAGE>
SECTION 19. Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the Company and the Warrant Agent (and their respective
successors and assigns) and the holders from time to time of Warrant
Certificates. Nothing in this Agreement is intended or shall be construed to
confer upon any other person any right, remedy or claim, in equity or at law, or
to impose upon any other person any duty, liability or obligation.
SECTION 20. Termination. This Agreement shall terminate on the earlier
to occur of (i) the close of business on the Expiration Date of all the
Warrants; or (ii) the date upon which all Warrants have been exercised.
SECTION 21. Counterparts. This Agreement may be executed in several
counterparts, which taken together shall constitute a single document.
18
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
C.W. CHEMICAL WASTE
TECHNOLOGIES LIMITED
By: ___________________________
Name: ___________________________
Title:___________________________
CONTINENTAL STOCK TRANSFER &
TRUST COMPANY
By: ___________________________
Name: ___________________________
Title:___________________________
19
<PAGE>
THIS WARRANT AND ANY SHARES OF COMMON STOCK ISSUABLE UPON ITS EXERCISE (THE
"SHARES") HAVE NOT BEEN REGISTERED UNDER THE [SECURITIES ACT OF 1933 OR ANY
STATE SECURITIES LAWS AND MAY NOT BE TRANSFERRED UNTIL (1) A REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933 (THE "ACT") SHALL HAVE BECOME
EFFECTIVE WITH RESPECT THERETO AND THE WARRANT AND SUCH SHARES ARE REGISTERED
UNDER APPLICABLE STATE SECURITIES LAWS, OR (2) RECEIPT BY THE ISSUER OF AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUER TO THE EFFECT THAT
REGISTRATION UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED
IN CONNECTION WITH SUCH PROPOSED TRANSFER NOR IS IN VIOLATION OF ANY APPLICABLE
STATE SECURITIES LAWS.
NO. AW- Warrants
VOID AFTER ______________ __, 2003
WARRANT CERTIFICATE FOR PURCHASE OF COMMON STOCK
C.W. CHEMICAL WASTE TECHNOLOGIES LIMITED
This certifies that, FOR VALUE RECEIVED, _____________________ or
registered assigns (the "Registered Holder") is the owner of the number of
Warrants ("Warrants") specified above. Each Warrant initially entitles the
Registered Holder to purchase, subject to the terms and conditions set forth in
this Certificate and the Warrant Agreement (as hereinafter defined), one fully
paid and non-assessable share of Common Stock, $.10 par value ("Common Stock")
of C.W. Chemical Waste Technologies Limited, a corporation organized under the
laws of Cyprus (the "Company") at any time commencing _____________ __, 1999 and
prior to the Expiration Date (as hereinafter defined), upon the presentation and
surrender of this Warrant Certificate with the Subscription Form on the reverse
hereof duly executed, at the corporate office of ________________
____________________________ as Warrant Agent, or its successor (the "Warrant
Agent"), accompanied by payment of an amount equal to $6.00 for each Warrant
(the "Purchase Price") in lawful money of the United States of America in cash
or by official bank or certified check made payable to the Company. The Company
may, at its election, reduce the Purchase Price.
This Warrant Certificate and each Warrant represented hereby are issued
pursuant to and are subject in all respects to the terms and conditions set
forth in the Warrant Agreement, dated ____________ ___, 1998, by and among the
Company and the Warrant Agent (the "Agreement").
In the event of certain contingencies provided for in the Agreement,
the Purchase Price or the number of shares of Common Stock subject to purchase
upon the exercise of each Warrant represented hereby are subject to modification
or adjustment.
Each Warrant represented hereby is exercisable at the option of the
Registered Holder, but no fractional shares of Common Stock shall be issued. In
the case of the exercise of less than all the Warrants represented hereby, the
Company shall cancel this Warrant Certificate upon the surrender
W-1
<PAGE>
hereof and shall execute and deliver a new Warrant Certificate or arrant
Certificates of like tenor, which the Warrant Agent shall countersign, for the
balance of such Warrants.
The term "Expiration Date" shall mean 5:00 P.M. (New York time) on
____________ __, 2003. If such date shall be a holiday or a day on which the
banks are authorized to close in the State of New York, then the Expiration Date
shall mean 5:00 P.M. (New York time) the next following day which is not a
holiday or a day on which banks are authorized to close in such State. The
Company may, at its election, extend the Expiration Date.
This Warrant Certificate is exchangeable, upon the surrender hereof by
the Registered Holder at the corporate office of the Warrant Agent, for a new
Warrant Certificate or Warrant Certificates of like tenor representing an equal
aggregate number of Warrants, each of such new Warrant Certificates to represent
such number of Warrants as shall be designated by such Registered Holder at the
time of such surrender. Upon due presentment with any tax or other governmental
charge imposed in connection therewith, for registration of transfer of this
Warrant Certificate at such office, a new Warrant Certificate or Warrant
Certificates representing an equal aggregate number of Warrants shall be issued
to the transferee in exchange therefor, subject to the limitations provided in
the Agreement.
Prior to the exercise of any Warrant represented hereby, the Registered
Holder shall not be entitled to any rights of a stockholder of the Company,
including, without limitation, the right to vote or to receive dividends or
other distributions, and shall not be entitled to receive any notice of any
proceedings of the Company, except as provided in the Agreement.
Prior to due presentment for registration of transfer hereof, the
Company may deem and treat the Registered Holder as the absolute owner hereof
and of each Warrant represented hereby (notwithstanding any notations of
ownership or writing hereon made by anyone other than a duly authorized officer
of the Company) for all purposes and shall not be affected by any notice to the
contrary.
This Warrant Certificate shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to the
principles thereof related to the conflict of laws.
W-2
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed, manually or in facsimile by two of its officers thereunto duly
authorized and a facsimile of its corporate seal to be imprinted hereon.
Dated: ________________, 199__
C.W. CHEMICAL WASTE
TECHNOLOGIES LIMITED
By: ___________________________
Name: ___________________________
Title:___________________________
By: ___________________________
Name: ___________________________
Title:___________________________
[seal]
CONTINENTAL STOCK TRANSFER
AND TRUST COMPANY
By: ___________________________
Name: ___________________________
Title:___________________________
W-3
<PAGE>
SUBSCRIPTION FORM
To Be Executed by the Registered Holder
in Order to Exercise Warrants
The undersigned Registered Holder hereby irrevocably elects to exercise
Warrants represented by this Warrant Certificate, and to purchase the securities
issuable upon the exercise of such Warrants, and requests that certificates for
such securities shall be issued in the name of:
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER
__________________________________________
__________________________________________
__________________________________________
__________________________________________
[please print or type name and address]
and be delivered to:
__________________________________________
__________________________________________
__________________________________________
__________________________________________
[please print or type name and address]
W-4
<PAGE>
and if such number of Warrants shall not be all of the Warrants evidenced by
this Warrant Certificate, that a new Warrant Certificate for the balance of such
Warrants be registered in the name of, and delivered to, the Registered Holder
at the address stated below.
The undersigned represents that the exercise of the within
Warrant was solicited by a member of the National Association of Securities
Dealers, Inc. (("NASD"). If not solicited by an NASD member, please write
"unsolicited" in the space below. Unless otherwise indicated by listing the name
of another NASD member firm, it will be assumed that the exercise was solicited
by RAS Securities Corp.
__________________________________
(Name of NASD Member if other
than RAS Securities Corp.)
Dated: X
_____________________ __________________________________
__________________________________
__________________________________
Address
__________________________________
Taxpayer Identification Number
__________________________________
Signature Guaranteed
W-5
<PAGE>
ASSIGNMENT
To Be Executed by the Registered Holder
in Order to Assign Warrants
FOR VALUE RECEIVED, _________________________________ hereby sells,
assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER
__________________________________________
__________________________________________
__________________________________________
__________________________________________
[please print or type name and address]
_____________________ of the Warrants represented by this Warrant Certificate,
and hereby irrevocably constitutes and appoints _____________________
_____________________ _____________________ ___________________ Attorney to
transfer this Warrant Certificate on the books of the Company, with full power
of substitution in the premises.
Dated: _____________________ X_____________________
Signature Guaranteed
_____________________
THE SIGNATURE TO THE ASSIGNMENT OR THE SUBSCRIPTION FORM MUST CORRESPOND TO THE
NAME AS WRITTEN UPON THE FACE OF THIS WARRANT CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER, AND MUST BE
GUARANTEED BY A COMMERCIAL BANK OR TRUST COMPANY OR A MEMBER FIRM OF THE
AMERICAN STOCK EXCHANGE, NEW YORK STOCK EXCHANGE, PACIFIC STOCK EXCHANGE OR
MIDWEST STOCK EXCHANGE.
W-6
Exhibit 5.1
5 March, 1998
To
C.W. CHEMICAL WASTE TECHNOLOGIES LIMITED
New York
U.S.A.
Dear Sirs,
Following an examination perusal and investigation we are of opinion that the
Ordinary Shares and Warrants to be issued by the Company have been duly
authorised by all corporate action and the shares and the shares to be issued
upon exercise of the Warrants in accordance with their terms will be fully paid
and no personal liability will attach thereto.
We hereby consent to the reference to our firm under the caption "Legal
Matters" in the registration statement on Form F-1 of C.W. CHEMICAL WASTE
TECHNOLOGIES LIMITED and to the filing of our opinion as an exhibit thereto.
Yours faithfully,
/s/Alexandra Christodoulou
- --------------------------
Alexandra Christodoulou
Exhibit 8.1
[MCS&W Letterhead]
March 4, 1998
C.W. Chemical Waste Technologies Limited
20 East 63rd Street, 1st Floor
New York, New York 10021
Re: Registration Statement on Form F-1
Ladies and Gentlemen:
We have acted as tax counsel to C.W. Chemical Waste Technologies
Limited, a company organized and existing under the laws of Cyprus (the
"Company"), in connection with the preparation of the discussion under the
heading "Certain United States Tax Considerations" contained in the
above-referenced Registration Statement on Form F-1 ("Registration Statement")
relating to the registration and offering by the Company of 2,000,000 Units.
Capitalized terms used in this letter shall have the same meanings as terms used
in the Registration Statement.
We have relied upon certain representations of management of the Company
and assumptions as to the occurrence of future events, and upon the facts set
forth in the Registration Statement, and have examined the documents referred to
therein and the exhibits thereto. We have assumed the genuineness of all
signatures, the authenticity of all documents submitted to us as originals and
the accuracy of all photocopies.
Our opinion is based upon the Internal Revenue Code of 1986, as
currently in effect, Treasury Regulations proposed or promulgated thereunder and
judicial decisions, all of which are subject to change either prospectively or
retroactively. Any change in applicable law or in any of
<PAGE>
the facts or circumstances described in the Registration Statement, or
inaccuracies in any of the statements or assumptions on which we have relied,
may affect the conclusions expressed herein.
We also note that the tax matters relating to the transactions
described in the Registration Statement are complex and are subject to varying
interpretations. Thus, there can be no assurance that the Internal Revenue
Service will not take a position in conflict with the opinion we express herein,
which position might ultimately be sustained by the courts.
Based upon and subject to the foregoing, in our view, the discussion in
the Registration Statement under the heading "Certain United Stated Tax
Considerations" fairly and accurately reflects our opinion as to the federal
income tax matters discussed therein.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name under the captions "Certain
United Stated Tax Considerations" and "Legal Matters" in the Registration
Statement.
Very truly yours,
/s/ Morrison Cohen Singer & Weinstein, LLP
------------------------------------------
Morrison Cohen Singer & Weinstein, LLP
2
Exhibit 10.1
TECHNOLOGY ASSIGNMENT AGREEMENT
BETWEEN KADOMA TRADING, LIMITED AND HERLING APPLIED
TECHNOLOGIES, INC.
This Technology Assignment Agreement ("Agreement") is made effective as of
the last date set forth below ("Effective Date"), by and between KADOMA TRADING,
LIMITED, a Cyprus company, having a principal office located at 20 East 63rd
Street, New York, New York 10021 (the "Company"), on the one hand, and HERLING
APPLIED TECHNOLOGIES, INC., a corporation of Delaware having a principal office
located at 20 East 63rd Street, New York, New York 10021 (the "Assignor"), on
the other hand.
W I T N E S S E T H:
WHEREAS, the Assignor owns certain rights, title, and interest in, to and
under certain methods and improvements relating to certain ceramic-like
materials, polymeric materials, and processes for preparing such materials (the
"Invention"), which are disclosed and claimed in certain Patents and Patent
Applications as defined herein:
WHEREAS, the Assignor owns certain rights, title and interest in certain
Intellectual Property, as defined herein, including certain Patents and Patent
Applications; and
WHEREAS, the Assignor desires to irrevocably sell and transfer to the
Company, and the Company desires to receive, all right, title and interest in,
to and under the Invention, Intellectual Property, Patents and Patent
Applications, including any Patents that may issue therefrom worldwide upon the
terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing and the mutual promises
herein contained, and intending to be legally bound hereby, the Company and the
Assignor hereby agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.01. Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings:
"Actions" means any claim, action, lawsuit, arbitration, inquiry,
proceeding or investigation by or before any Governmental Authority.
"Agreement" or "this Agreement" means this Technology Assignment
Agreement, dated as of the Effective Date, among the Company and the Assignor,
including all Exhibits and Schedules hereto, and all amendments hereto made in
accordance with the provisions of Section 9.09.
- 1 -
<PAGE>
"Applicants" means Marceli Cyrkiewicz, Erwin Herling, and Jacek
Kleszczewski.
"Assignor" has the meaning specified in the Recitals to this Agreement.
"Claims" has the meaning specified in Section 5.02 of this Agreement.
"Company" has the meaning specified in the Recitals to this Agreement and
any successors to the Company.
"Governmental Authority" means any national, state, or local government,
governmental, regulatory, or administrative authority, agency or commission or
any court, tribunal or judicial body or other institution for deciding disputes.
"Initial Public Offering" means a first offering to the public of shares
of stock in the Company, or a Person that controls, is controlled by, or is
under common control with Company, through a stock exchange, underwriters, and
investment bankers registered in the United States of America.
"Intellectual Property" means all of the following: issued patents and
patent applications, including patents of invention, provisional patents,
dependent patents, patents of additions, and applications therefor; invention
disclosures; and any and all divisions, continuations, continuations-in-part,
reissues, reexamined patents, or extensions thereof; any counterparts claiming
priority therefrom; utility models, certificates of invention and like statutory
rights, issued in or subsisting under the laws of Poland, the United States, and
any other nation or multinational patent granting authority of the world (the
"Patents") all rights to work, advertise, promote, practice, make, use, and sell
the Invention and the subject matter of the Patent Application anywhere in the
world, to the exclusion of all others including the Assignor; all rights to
lease, license, sell, authorize use of, and otherwise exploit the Invention and
the subject matter of the Patent to any Person anywhere in the world; all
categories of trade secrets as defined in the Uniform Trade Secrets Act
including, but not limited to, business information know-how, and technology
relating to the Invention; all Invention Records; all licenses and agreements
pursuant to which the Assignor has acquired rights in or to any Patents, and
agreements pursuant to which the Assignor has licensed or transferred the right
to use any of the foregoing; and all rights to enforce any of the foregoing
rights against anyone anywhere in the world.
"Invention" has the meaning specified in the Recitals to this Agreement,
and additionally shall mean the entire subject matter disclosed and claimed in
the Patent Applications.
"Invention Records" means all laboratory records, notes, test results, and
other writings of the true and original inventors of the Invention pertaining to
the conception, reduction to practice, development, and testing of the
Invention.
"Liabilities" means any and all debts, liabilities, obligations, whether
accrued or fixed, absolute or contingent, matured or un-matured or determined or
determinable,
- 2 -
<PAGE>
including, without limitation, those arising under any Law, Action or
Governmental Order and those arising under any contract, agreement, arrangement,
commitment or undertaking.
"Patent Applications" means certain patent applications filed by
Applicants under the Patent Cooperation Treaty, namely International Application
No. PCT/PL93/00013, filed August 12, 1993, entitled "Process For Preparing
Ceramic-Like Materials And The Ceramic-Like Materials" and published as
International Publication No. WO 95/00589; International Application No.
PCT/PL/00005, filed March 15, 1995, entitled "A Process For The Manufacture of
Polymeric Materials With A High Chemical And Mechanical Resistance And Polymeric
Materials With A High Chemical And Mechanical Resistance" and published as
International Publication No. WO 95/28440; and International Application No.
PCT/PL93/00012, filed August 12, 1993, entitled "Process For Preparing Ceramic-
Like Materials And The Ceramic-Like Materials" and published as International
Publication No. WO 95/00583, copies of which International Publications are
attached hereto as Exhibit 1.
"Person" means any individual, partnership, firm, corporation,
association, syndicate, group, trust, unincorporated organization or other
entity, including Applicants.
"Successful Completion" of the Initial Public Offering shall mean that
time if and when the investing public shall have invested the sum of Ten Million
Dollars (US$10,000,000.00) in the stock of the Company that is offered in the
Initial Public Offering.
"Taxes" means any and all taxes, levies, duties, tariffs, imposts, and
other similar fees or charges of any kind, foreign or domestic, together with
any and all interest, penalties, additions to tax and additional amounts imposed
with respect thereto, imposed by any Governmental Authority or taxing authority,
including, without limitation: taxes on or with respect to income, franchises,
windfall or other profits, gross receipts, property, sales, use, capital stock,
payroll, employment, social security, workers' compensation, unemployment
compensation, or net work; takes or other charges in the nature of excise,
withholding, ad valorem, stamp, transfer, value added, or gains taxes; license,
registration and documentation fees; and customs duties and tariffs.
ARTICLE 2
ASSIGNMENT OF THE TECHNOLOGY
Section 2.01. Assignment. In consideration for the Assignment Fees paid or
payable to Assignor hereunder, and in consideration for the promises of Company
made hereunder, Assignor agrees to assign and do hereby assign to the Company,
all right, title, and interest in, to and under the Invention, the Patent
Applications, all Intellectual Property therein, and the Assignor's entire right
to work the Invention for the purpose of gain or in the course of trade in
Poland and throughout the world.
Section 2.02. Execution of Assignments. Concurrently with the execution of
this Agreement, Assignor shall execute the short form Assignment attached hereto
as Exhibit 2.
- 3 -
<PAGE>
The Company may record the executed short form Assignment at any time after
execution with the Patent Office of Poland, the U.S. Patent & Trademark Office,
and with the patent office or comparable registry of any nation of the world.
Section 2.03. Additional Documents. Company's obligations under this
Agreement are expressly conditioned upon Company's approval of the chain of
title to the Invention, the Patent Applications, and the Intellectual Property.
The Assignor further agrees to assist the Company in every reasonable way in
perfecting the rights acquired by Company hereunder. Upon request by Company,
Assignor shall duly execute, acknowledge and deliver to Company, cause to be
executed, acknowledged, and delivered to Company, or use its best efforts to
cause Applicants to do the same, any and all powers of attorney, legalizations,
further assignments or instruments that Company may reasonably deem necessary,
expedient or proper to carry out and effectuate the purposes and intent of this
Agreement. Company shall have the right to place the same on record in the
Patent Office of Poland, the U.S. Patent & Trademark Office, and elsewhere as
Company may determine. In the event that Company or Assignor fail to execute
and/or deliver such additional documents, upon execution of this Agreement, all
rights agreed to be transferred to Company under this Agreement shall be deemed
irrevocably vested in Company effective upon the Effective Date.
Section 2.04 Secondary Assignments Prohibited. Assignor shall not assign
to, license to, dispose of or exploit for the benefit of any third party or
Person anything assigned hereunder by Assignor to Company. Moreover, the
Assignor agrees not to engage in any activity, including entering into any
arrangements and/or agreements with third parties, which would diminish the
commercial value of the Invention, Patent Application and Intellectual Property,
or inhibit, encumber, or impair the commercial exploitation of same by the
Company or its successors in interest.
ARTICLE 3
FEES AND PAYMENTS
Section 3.01. Payment upon Execution. Upon execution of this Agreement by
the parties and upon execution of the short form Assignment set forth in Exhibit
2 by Assignor, and in consideration for the rights granted to Company hereunder,
Company shall cause to be paid to Assignor Assignment Fees in the sum of Two
Hundred Thousand Dollars (US$200,000.00)
Section 3.02. Further Payment. Upon Successful Completion of the Initial
Public Offering, Company shall cause to be paid to Assignor further Assignment
Fees in the sum of Two Million Fifty Thousand Dollars (US$2,050,000.00).
Section 3.03. Payment Terms. All payments that are payable to Assignor
under this Agreement shall be payable in U.S. dollars and may be paid by Company
check, wire transfer, or cash, at the election of Company.
- 4 -
<PAGE>
Section 3.04. Taxes. Assignor shall have sole responsibility to pay or
reimburse Company for all Taxes, if any, including penalties and interest,
levied by any Governmental Authority as a result of the payments made to
Assignor under this Agreement as well as any costs associated with the
collection or withholding such taxes or duties. Company shall withhold Taxes
from such payments only if required to do so by Governmental Authority.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
Section 4.01. Representations and Warranties of Assignor. As an inducement
to the Company to enter into this Agreement, Assignor represents and warrant:
(a) That to the best of its knowledge, its interest in the Patent
Applications was transferred to it by all the true and original inventors
of the Invention and of the entire subject matter disclosed and claimed in
the Patent Applications including all aspects of the Invention disclosed
and claimed therein;
(b) That to the best of their knowledge, the Invention and the
subject matter claimed in the Patent Applications have not been taken or
copied from or based upon any other source (including without limitation
any other invention or inventor), and are not based upon, derived or
adapted from any Intellectual Property of any other Person in violation of
any statute, legal obligation, or agreement to which Assignor, the
inventor(s), or the Applicants are bound;
(c) That this Agreement, each provision thereof, and entry into this
Agreement by Assignor, shall not conflict with, violate, or result in the
breach of any provision of any agreement or understanding by or between
Assignor and any other Person;
(d) That jointly it owns all right, title, and interest in, to and
under the Patent Applications; that it holds the unqualified right to
assign, transfer, and sell the Invention, the Patent Applications, and all
Intellectual Property therein, free and clear of any claims, demands,
liens or other encumbrances of title, ownership or the like of any third
party or Person; that there are no past or outstanding options, licenses,
or assignments regarding all or a portion of the rights assigned
hereunder; that other assignment or other transfer of the rights assigned
hereunder has been granted or made to any other Person; that it has not
done or permitted to be done any act or thing whereby any of the rights
referred to in this Agreement have in any way been encumbered or impaired;
(e) That it will cooperate with the Company and provide all
reasonable assistance to the Company, both during prosecution of the
Patent Applications (including any opposition, appeal, or related
proceedings) and during the entire period of enforceability of the
Invention, the Patent Applications, any patent issued thereon.
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<PAGE>
and the Intellectual Property therein, necessary or requested by Company
to facilitate or advance the prosecution, enforcement, or defense of the
Invention, the Patent Applications, the Intellectual Property therein, and
any enforcement action, lawsuit, litigation, or claim relating thereto;
(f) That to the best of the Assignor's knowledge, the Invention, the
subject matter claimed in the Patent Applications, the Intellectual
Property therein, and products produced according to them do not and will
not infringe any Intellectual Property rights or any other proprietary
right of any Person or give rise to any obligations to any Person as a
result of co-authorship, co-inventorship, or an express or implied
contract for any user or transfer;
(g) That there are no Actions now pending or threatened to be
brought before any Governmental Authority that could in any way impair,
limit or diminish the Invention, the Patent Applications, or any rights
granted to the Company hereunder, or that challenge the legality,
validity, enforceability, or title of Assignor in the Invention, the
Patent Applications, or the Intellectual Property therein;
(h) That this Agreement has been duly executed and delivered by the
Assignor, and this Agreement constitutes a legal, valid and binding
obligation of the Assignor enforceable against Assignor in accordance with
its terms except as such enforceability may be limited by principles of
public policy and subject to applicable laws;
(i) That this Agreement, any provision thereof and the acts of
Assignor in entering into this Agreement, shall not violate, conflict
with, result in any breach of constitute a default under, require any
consent under, or give others any right of termination, amendment,
acceleration, suspension, revocation, or cancellation of or result in the
creation of any encumbrance on the Invention or the Patent Applications
under any agreement, understanding, or provision thereof entered into
among Assignor and any other Person;
(j) That the execution, delivery and performance of this Agreement
by Assignor do not and will not require any consent, approval,
authorization or other order of, action by, filing with or notification to
any governmental authority;
(k) That Assignor is not under any obligation to pay any royalty or
other compensation to any third party or Person or to obtain any approval
or consent for the use of the Invention, the Patent Applications, or any
Intellectual Property therein;
(l) That neither the Invention, the Patent Applications, or any
Intellectual Property therein is subject to any presently effective
judgment, order, decree, stipulation, injunction, or charge;
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<PAGE>
(m) That Assignor has not agreed to indemnify any Person for or
against any interference, infringement, misappropriation, or other
conflict with respect to the Invention, the Patent Applications, or the
Intellectual Property;
(n) That they have no notice or knowledge of any allegations or
threats that the Invention, the Patent Applications, Intellectual Property
therein, or any practice thereof or product produced therefrom infringes
upon or is in conflict with any Intellectual Property of any third party,
and to the best of their knowledge, no basis exists for any such
allegations or threats;
(o) That Assignor never has sent or otherwise communicated to any
Person any notice, charge, claim, or assertion of any present, impending,
or threatened infringement by any other Person of any Intellectual
Property of Assignor or any Intellectual Property that Assignor has the
right to use.
(p) That no broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made
by or on behalf of Assignor.
ARTICLE 5
INDEMNIFICATION AND REMEDIES
Section 5.01. Indemnification by Assignor. Assignor agrees to defend,
indemnify, and hold harmless the Company, its successors, assigns, licensees,
officers and employees from and against any and all liability, losses, damages,
costs, claims, expenses (including but not limited to reasonable attorneys
fees), judgments and penalties arising of, resulting from, based upon or
incurred because of the actual breach of any warranty made by Assignor
hereunder.
Section 5.02. Infringement Indemnification by Assignor. Assignor agrees to
indemnify and hold harmless the Company, its successors, assigns, licensees,
officers and employees from and against any and all actions, liability, losses,
damages, settlements, costs, claims, royalties, expenses (including but not
limited to reasonable attorneys fees), judgments and penalties (collective
referred to as "Claims") arising of, resulting from, based upon or incurred
because of infringement by the Invention, the Patent Applications or the
Intellectual Property therein of any Intellectual Property of any third party or
other Person. The Company shall notify Assignor of any such Claims. The Company
in its sole discretion may elect to defend any such Claims or may elect to allow
Assignor to defend such Claims, and if Company elects the latter, Assignor
agrees to vigorously and diligently defend such Claims provided that Company
shall cooperate with Assignor in such defense. In any case, Assignor shall allow
Company to direct and control all related settlement negotiations. If it is, or
in the reasonable opinion of Assignor there is a high probability that it will
be, determined by a court of competent jurisdiction that the Invention, Patent
Applications, Intellectual Property therein or the sale or use thereof or any
product thereof infringes any patent, copyright, trade
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<PAGE>
secret or trademark of another Person or third party or is enjoined from
practicing any right granted to Company hereunder, then Assignor may, at its
sole expense, procure for Company under any applicable Intellectual Property the
same rights and to the same extent as those granted under this Agreement.
Section 5.04 Remedies of Assignor. Assignor agrees that its sole remedy
for any default by the Company hereunder, including the failure by the Company
to pay any consideration payable to Assignor hereunder, shall be an action
against Company for such consideration and/or for damages. Specifically,
Assignor agrees that it shall have no right to enjoin the making, using, or
selling of the Invention, Patent Applications, Intellectual Property, or any
method or product thereof, or to terminate or rescind any rights in the
Invention, Patent Applications, or Intellectual Property granted to Company
hereunder, or to obtain any other form of equitable relief.
Section 5.04. Remedies of Company. The Company shall have at all times,
all rights and remedies that it has at law and in equity hereunder or otherwise.
Section 5.05. Right of Company to Injunctive Relief. The rights that are
the subject matter of this Agreement are of a special, unique, extraordinary and
intellectual character that gives them a peculiar value, the loss of which
cannot be reasonably or adequately compensated for in damages in an action at
law and which would cause Company great irreparable injury and harm.
Accordingly, Company shall be entitled to injunctive relief specific performance
and other equitable relief to preserve its rights and interest in, to and under
such rights as set forth in this Agreement. This provision shall not be
construed as a waiver of any rights Company may have for damages or otherwise
arising from any breach of this Agreement.
Section 5.06. Limitation on Remedies. IN NO EVENT SHALL "COMPANY," ITS
EMPLOYEES, OFFICERS, DIRECTORS, OR AGENTS BE LIABLE TO "ASSIGNOR" FOR ANY
INCIDENTAL, CONSEQUENTIAL, SPECIAL OR INDIRECT DAMAGES OF ANY KIND, INCLUDING,
WITHOUT LIMITATION, LOST PROFITS OR REVENUES OR ANTICIPATED SAVINGS, ARISING
FROM ANY "ACTION" AS DEFINED HEREIN ARISING UNDER THIS AGREEMENT, EVEN IF
"COMPANY" OR SUCH OTHER PARTY IS AWARE OF THE POSSIBILITY OF SUCH DAMAGES OR
LOSS. In no event shall the aggregate liability for damages of Company, its
employees or agents, exceed the total amount actually paid to Assignor by
Company under this Agreement.
Section 5.07. Allocation of Risk. The provisions in this Agreement
concerning limitation of liability, representations and warranties and damages
allocate the risk of failure between Company on the one hand and Assignor on the
other hand. Such allocation is reflected in the consideration paid for the
rights granted hereunder and is an essential element of the basis of the bargain
between Company on the one hand and Assignor on the other hand.
ARTICLE 6
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<PAGE>
OTHER OBLIGATIONS OF ASSIGNOR
Section 6.01. Delivery of Invention Records. Promptly after execution of
this Agreement, the Assignor shall deliver or cause to be delivered to the
Company or its designated agent, all original Invention Records of the true and
original inventor(s) pertaining to the Invention and the Patent Applications
that are possessed by Assignor or within its custody or control. Applicants and
such true inventor(s) may retain a copy of such Invention Records.
Section 6.02. Confidentiality. Assignor acknowledge and agree that it has
or may receive hereunder information which is marked confidential or is verbally
designated confidential and constitutes the proprietary confidential information
of the Company, and that Assignor's protection thereof is essential to this
Agreement. Assignor shall retain in strict confidence and not disclose to any
third party (except as authorized by this Agreement) without Company's express
written consent any and all such information.
Section 6.03. Exceptions. Assignor shall be relieved of this obligation of
confidentiality to the extent any such information:
(i) was in the public domain at the time it was disclosed or
has become in the public domain through no fault of Assignor;
(ii) Assignor can prove was known to Assignor, without
restriction, at the time of disclosure as shown by the files of Assignor
in existence at the time of disclosure;
(iii) is disclosed by Assignor with the prior written approval
of Company;
(iv) Assignor can prove was independently developed by
Assignor without any use of Company's confidential information and by
employees or other agents of Assignor who have not had access to any of
Company's confidential information; or
(v) becomes known to Assignor, without restriction, from a
source other than Company without breach of this Agreement by Assignor and
otherwise not in violation of Company rights.
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<PAGE>
ARTICLE 7
ASSIGNMENT OF THE AGREEMENT
Section 7.01. By Company. The Company may transfer and assign this
Agreement or all or any of its rights hereunder to any Person, and in such
event, Company shall be released and discharged from all executory obligations
hereunder, and Assignor shall look solely to such Person for performance
thereof.
Section 7.02. By Assignor. Assignor may not assign this Agreement or its
rights hereunder, in whole or in part, without Company's prior written approval.
Any such purported assignment without Company's prior written approval shall be
deemed void. This Agreement shall inure to the benefit of the parties' permitted
successors, licensees and assigns.
ARTICLE 8
TERM, RENEWAL AND TERMINATION
Section 8.01. Termination. This Agreement may be terminated at any time:
(a) by the Company immediately upon written notice to Assignor if (i.)
Assignor breaches or is found to be in breach of any representation or warranty
made by Assignor herein, or (ii.) Assignor breaches or is found to be in breach
of its obligations under Section 6.02 ("Confidentiality") hereof; or
(b) by the Company immediately upon written notice to Assignor if any
Governmental Authority shall have issued a final, non-appealable order, decree
or ruling or taken any other action (i.) permanently enjoining or otherwise
prohibiting the enforcement of any of the rights assigned by Assignor to Company
hereunder, (ii.) declaring any patent that shall have issued from the Patent
Applications to be invalid, not valid, void, or unenforceable, or (iii)
declaring the Patent Applications invalid or not patentable in any opposition
proceeding; or
(c) by the mutual written consent of the Company and the Assignor.
Section 8.02. Effect of Termination. In the event of termination of this
Agreement, this Agreement shall forthwith become void and there shall be no
liability on the part of either party hereto except that nothing herein shall
relieve either party from liability for any breach of this Agreement or for
breach of any representation or warranty made hereunder.
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<PAGE>
ARTICLE 9
GENERAL PROVISIONS
Section 9.01. Controlling Law. This Agreement shall be construed and
enforced under the laws of the State of New York applicable to agreements
entered into and performed wholly within New York. In any action to enforce or
construe this Agreement, the parties hereto agree to submit to the jurisdiction
of the United States District Court for the Southern District of New York or the
Supreme Court of the State of New York which the parties acknowledge and agree
are convenient forums in which to litigate any such action. The parties waive
any right to transfer such action to any other court and expressly consent to
the permanent jurisdiction of such courts regarding the resolution of any
disputes hereunder and agree to be bound by the judgment rendered by such
courts.
Section 9.02. Independent Contractor. Neither party has any authority to
make any statement, representation, warranty or other commitment on behalf of
the other. This Agreement does not create any agency, employment, partnership,
joint venture or similar relationship between Company or Assignor.
Section 9.03. Force Majeure. Neither party shall be liable for any delay
or failure to meet its obligations under this Agreement due to circumstances
beyond its reasonable control, including but not limited to war, riot,
insurrection, civil commotion, labor strikes or lockouts, shortages, factory or
other labor conditions, fire, flood, earthquake or storm.
Section 9.04. Severability. If any provision of this Agreement should be
held unenforceable or invalid for any reason, such holding shall not affect the
enforceability or validity of the remaining provisions, and the parties will
substitute for such provisions an enforceable and valid provision which most
closely approximates the intent and economic effect of the unenforceable or
invalid provision.
Section 9.05. Waiver. No waiver of any obligation under this Agreement
shall be valid unless set forth in a writing signed by the party to be bound
thereby. Any waiver of a term or condition shall not be construed as a waiver of
any subsequent breach or a subsequent waiver of the same term or condition, or a
waiver of any other term or condition, of this Agreement. The failure of any
party to assert any of its rights hereunder shall not constitute a waiver of any
such rights.
Section 9.06. Expenses. Each party shall bear its own costs and expenses
incurred in connection with this Agreement.
Section 9.07. Notices. All notices, requests, claims, demands and other
communications hereunder shall be deemed given upon receipt, and shall be given
in writing and shall be given or made by delivery in person, by courier service,
by telecopy, or by registered or certified mail (postage prepaid, return receipt
requested) to the respective parties at the following addresses:
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<PAGE>
(a) If to the Company:
Kadoma Trading, Ltd.
20 East 63rd Street
New York, New York 10021
(b) If to the Assignor:
Herling Applied Technologies, Inc.
20 East 63rd Street
New York, New York 10021
Section 9.08. Public Announcements. No party to this Agreement shall make,
or cause to be made, any press release or public announcement relating to this
Agreement without prior consent of the other party, subject to the Company's
obligations to comply with applicable securities laws, and the parties shall
cooperate as to the timing and contents of any such release or announcement.
Section 9.09. Entire Agreement. This Agreement, including the attached
Exhibits, constitutes the entire agreement between Company and Assignor with
respect to its subject matter, and supersedes any prior or contemporaneous
written or oral understandings, agreements, or arrangements between Customer and
Assignor on the subject matter hereof. No amendment of this Agreement will be
enforceable unless set forth in writing signed by the party against which
enforcement is sought. This Agreement may be executed in duplicate counterparts,
which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their duly authorized representatives.
HERLING APPLIED
KADOMA TRADING, LTD. TECHNOLOGIES, INC.
("Company") ("Assignor")
By /s/ Andreas Skentlos Kalligeris By /s/ Ira Kanarick
-------------------------------- --------------------------------
Name: ANDREAS SKENTLOS KALLIGERIS Name: IRA KANARICK
Title: DIRECTOR Title: VICE PRESIDENT
Date: 27/9/97 Date:
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<PAGE>
A S S I G N M E N T
WHEREAS, Herling Applied Technologies, Inc. is the sole and exclusive
owner of the PCT Patent Applications PCT/PL93/00012 filed August 12, 1993;
PCT/PL93/00013 filed August 12, 1993; and PCT/PL95/00005 filed March 15, 1995
and their respective Polish Priority Patent Applications P 299472 filed June 25,
1993; P 299473 filed June 25, 1993; and P 303058 filed April 19, 1994 by virtue
of an Agreement Priority And Patent Rights Transfer executed by Inventors
Marceli Cyrkiewicz, Jacek Kleszczewski, Erwin Herling on May 10, 1996, assigning
their respective rights of ownership of the above-referenced Patent Applications
to Herling Applied Technologies, Inc.,
WHEREAS, Kadoma Trading, Ltd., a company organized and existing under the
laws of the Country of Cyprus, and having a place of business at 20 East 63rd
Street, New York, NY 10021, is desirous of acquiring the entire right, title and
interest, including the right to bring a patent infringement lawsuit for past
infringement, in and to the aforesaid Patent Applications, and in, to and under
any and all Letters Patent that may be granted as a result thereof in any and
all countries;
NOW, THEREFORE, for and in consideration of the sum of One Dollar ($1.00)
and other good and valuable consideration, the receipt of which is hereby
acknowledged, the said Herling Applied Technologies, Inc. has sold, assigned,
transferred and set over to said Kadoma Trading, Ltd., the entire right, title
and interest, including the right to bring a patent infringement lawsuit for
past infringement, in and to the aforesaid Patent Applications, and in, to and
under any and all Letters Patent that may be granted as a result thereof in any
and all countries, and any and all extensions, divisions, reissues, substitutes,
renewals or continuations thereof, and the right to all benefits under the
International Convention for the Protection of Industrial Property, the same to
be held and enjoyed by said Kadoma Trading, Ltd., its successors, assigns and
legal representatives, to the full end of the term or terms for which said
Letters Patent may be granted, reissued or extended as fully as the same would
have been held and enjoyed in full by Herling Applied Technologies, Inc. had
this assignment, sale or transfer not been made; and said Herling Applied
Technologies, Inc. hereby authorizes and requests the Commissioner of Patents of
the United States and any official of any country or countries foreign to the
United States whose duty it is to issue patents to issue to said Kadoma Trading,
Ltd., as assignee of the entire right, title and interest therein, including the
right to bring a patent infringement lawsuit for past infringement, any and all
Letters Patent of the United States or of said foreign country or countries,
which may be issued or granted as a result of the Patent Applications
hereinbefore identified, in accordance with the terms of this agreement, and
hereby covenants that it has the full right to convey the entire interest herein
assigned and that it has not executed and will not execute any agreement in
conflict herewith.
<PAGE>
HERLING APPLIED TECHNOLOGIES, LTD.
September 27th, 1997
Kadoma Trading Ltd.
20 East 63rd Street
New York, New York 10021
Dear Sirs:
We hereby confirm that we have received the amount of $200,000.00 (U.S. Dollars
two hundred thousand) representing payment against purchasing of the patent, as
per our agreement.
Very truly yours
/s/Ira Kanarick
---------------
HERLING APPLIED TECHNOLOGIES, LTD.
Ira Kanarick - Vice President
<PAGE>
HERLING APPLIED TECHNOLOGIES, LTD.
AGREEMENT
PRIORITY AND PATENT RIGHTS
TRANSFER
Whereas on this date, May 10, 1996, it has been agreed that a binding
Agreement has been reached and so will be exercised by this document, and
Whereas the parties hereto undersigned namely: Marceli Cyrkiewicz, Jacek
Kleszczewski and Erwin Herling individually are duly authorized, free and clear
of any incumberances or restrictions to sign individually.
Whereas Erwin Herling is recognized as the duly authorized representative
and officer of Herling Applied Technologies, Ltd. and is free and clear of any
incumberances to act as its representative, then
Now and Henceforth, it is agreed that the Priority and Patent Rights as
well as Priority Rights to Inventions (applications) filed according to Polish
priorities Nos. 299472 and 29473 from June 25, 1993, and No. 303058 from April
19, 1994, to all processes, materials, products and formulas both real and
intangible that are currently held individually by Marceli Cyrkiewicz, Jacek
Kleszczewki and Erwin Herling are transferred wholly to Herling Applied
Technologies, Ltd., in all countries, except Poland, where applications were
filed until the date of this agreement. This transfer of rights includes Poland
in the respect necessary under Polish law whereby Herling Applied Technologies,
Ltd. is now the sole owner of the patent rights and priorities as well.
Further, it is agreed that specifically all formulas, pieces product and
material priority and patent rights that relate to CLM are included in this
transfer agreement. This transfer gives Herling Applied Technologies. Ltd. all
rights as described above from now in perpetuity for the sum of $10.00 (Ten U.S.
Dollars) and is so binding upon payment being received and signature of the
parties affixed below.
Agreed to and in force as of the above date, so signed by:
Marceli Cyrkiewicz /s/ Marceli Cyrkiewicz Date: 10-05-96
--------------------- -----------
(individually)
Jacek Kleszczewski /s/ Jacek Kleszczewski Date: 10 MAY 1996
--------------------- -----------
(individually)
Erwin Herling /s/ Erwin Herling Date: 10 MAY 1996
--------------------- -----------
(individually)
Erwin Herling /s/ Erwin Herling Date: 10 MAY 1996
--------------------- -----------
(Herling Applied
Technologies, Ltd.)
<PAGE>
IN TESTIMONY WHEREOF, has caused these presents to be signed by an officer
thereunto duly authorized, an its seal to be affixed and attested this _____ day
of ____________, 1997.
HERLING APPLIED TECHNOLOGIES, INC.
/s/ Ira Kanarick
---------------------------------
Name:
Vice President
---------------------------------
Title:
---------------------------------
Date:
SEAL OF NOTARY PUBLIC
ATTEST: Mary McElhone
Public, State of New York
No. 01MC5062105
Qualified in Queens County
Commission Expires 6-14-98
/s/ Mary McElhone
- ---------------------------------
Mary McElhone
Exhibit 10.2
TECHNOLOGY ASSIGNMENT AGREEMENT
BETWEEN KADOMA TRADING, LTD.
AND ZIELINSKI, KOSICKA AND KSIAZEK
This Technology Assignment Agreement ("Agreement") is made effective as of
the last date set forth below ("Effective Date"), by and between KADOMA TRADING,
LIMITED, a Cyprus company, having a principal office located at 20 East 63rd
Street, New York, New York 10021 (the "Company"), on the one hand, and MAREK
ZIELINSKI, an individual residing at 93-355 Lodz, Bialostocka 11/22, Poland
("Inventor"), DOBROSLAVA KOSICKA, an individual residing at 91-037 Lodz,
Szamotulska 17/8, Poland ("Kosicka") (Kosicka and Inventor are referred to
collectively, as the "Assignors") and ANDRZEI MAREK KSIAZEK, an individual
residing at __________________________, Poland ("Ksiazek"), on the other hand.
W I T N E S S E T H:
WHEREAS, the Inventor has invented certain methods and improvements
relating to processing waste phosphogypsum, which are disclosed and claimed in a
Polish patent application (the "Invention") prepared and filed by Kosicka on
behalf of Inventor;
WHEREAS, said Polish patent application is entitled "A Method For
Processing Phosphogypsum Wastes," was duly filed June 23, 1997 with the Patent
Office of Poland and assigned Serial Number P320762 (the "Patent Application," a
copy of which, along with the certified English language translation thereof, is
attached hereto as Exhibit 1); and
WHEREAS, the Assignors desire to irrevocably sell and transfer to the
Company, and the Company desires to receive, all right, title and interest in,
to and under the Invention, the Patent Application and all Intellectual
Property, including any Patents that may issue therefrom worldwide, upon the
terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing and the mutual promises
herein contained, and intending to be legally bound hereby, the Company, the
Assignors and Ksiazek hereby agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.01. Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings:
"Actions" means any claim, action, lawsuit, arbitration, inquiry,
proceeding or investigation by or before any Governmental Authority.
- 1 -
<PAGE>
"Agreement" or "this Agreement" means this Technology Assignment
Agreement, dated as of the Effective Date, among the Company, the Assignors and
Ksiazek, including all Exhibits and Schedules hereto, and all amendments hereto
made in accordance with the provisions of Section 9.09.
"Assignors" has the meaning specified in the Recitals to this Agreement.
"Company" has the meaning specified in the Recitals to this Agreement and
any successors to the Company.
"Encumbrance" means any security interest, mortgage, lien, charge, cloud
on title, adverse claim or restriction of any kind, including but not limited
to, any restriction on the use, voting, transfer, receipt of income, or other
exercise of any attributes of ownership.
"Governmental Authority" means any national, state, or local government,
governmental, regulatory, or administrative authority, agency or commission or
any court, tribunal or judicial body or other institution for deciding disputes.
"Initial Public Offering" means a first offering to the public of shares
of stock in the Company, or a Person (as defined below) that controls, is
controlled by, or is under common control with Company, through a stock
exchange, underwriters, and investment bankers registered in the United States
of America.
"Intellectual Property" means all of the following: issued patents and
patent applications, including patents of invention, provisional patents,
dependent patents, patents of additions, and applications therefor; invention
disclosures; and any and all divisions, continuations, continuations-in-part,
reissues, reexamined patents, or extensions thereof; any counterparts claiming
priority therefrom; utility models, certificates of invention and like statutory
rights, issued in or subsisting under the laws of Poland, the United States, and
any other nation or multinational patent granting authority of the world (the
"Patents"); all rights to work, advertise, promote, practice, make, use, and
sell the Invention and the subject matter of the Patent Application anywhere in
the world, to the exclusion of all others including the Assignors; all rights to
lease, license, sell, authorize use of, and otherwise exploit the Invention and
the subject matter of the Patent to any Person anywhere in the world; all
categories of trade secrets as defined in the Uniform Trade Secrets Act
including, but not limited to, business information, know-how, and technology
relating to the Invention; all Invention Records; all licenses and agreements
pursuant to which the Assignors have acquired rights in or to any Patents, and
agreements pursuant to which the Assignors have licensed or transferred the
right to use any of the foregoing; and all rights to enforce any of the
foregoing rights against anyone anywhere in the world.
"Invention" has the meaning specified in the Recitals to this Agreement,
and additionally shall mean the entire subject matter disclosed and claimed in
the Patent Application.
- 2 -
<PAGE>
"Invention Records" means all laboratory records, notes, test results, and
other writings of the Inventor pertaining to the conception, reduction to
practice, development, and testing of the Invention.
"Inventor" has the meaning specified in the Recitals to this Agreement.
"Liabilities" means any and all debts, liabilities, obligations, whether
accrued or fixed, absolute or contingent, matured or un-matured or determined or
determinable, including, without limitation, those arising under any Law, Action
or Governmental Order and those arising under any contract, agreement,
arrangement, commitment or undertaking.
"Patent Application" has the meaning specified in the Recitals to this
Agreement.
"Person" means any individual, partnership, firm, corporation,
association, syndicate, group, trust, unincorporated organization or other
entity.
"Successful Completion" of the Initial Public Offering shall mean that
time if and when the investing public shall have invested the sum of Ten Million
Dollars (US$10,000,000.00) in the stock of the Company that is offered in the
Initial Public Offering.
"Taxes" means any and all taxes, levies, duties, tariffs, imposts, and
other similar fees or charges of any kind, foreign or domestic, together with
any and all interest, penalties, additions to tax and additional amounts imposed
with respect thereto, imposed by any Governmental Authority or taxing authority,
including, without limitation: taxes on or with respect to income, franchises,
windfall or other profits, gross receipts, property, sales, use, capital stock,
payroll, employment, social security, workers' compensation, unemployment
compensation, or net work; takes or other charges in the nature of excise,
withholding, ad valorem, stamp, transfer, value added, or gains taxes; license,
registration and documentation fees; and customs duties and tariffs.
"University" means the University of Lodz (Uniwersytet Lodzki), located at
90-136 Lodz, Poland and any Person or legal entity that controls it, is
controlled by it, or is under common control with it.
ARTICLE 2
ASSIGNMENT OF THE TECHNOLOGY
Section 2.01. Assignment. In consideration for the Assignment Fees paid or
payable to Assignors hereunder, and in consideration for the promises of Company
made hereunder, Assignors agree to assign and do hereby assign to the Company,
all right, title, and interest in, to and under the Invention, the Patent
Application, all Intellectual Property therein, and the Assignors' entire right
to work the Invention for the purpose of gain or in the course of trade in
Poland and throughout the world.
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<PAGE>
Section 2.02. Execution of Assignments. Concurrently with the execution of
this Agreement, Assignors shall execute the short form Assignment attached
hereto as Exhibit 2. The Company may record the executed short form Assignment
at any time after execution with the Patent Office of Poland, the U.S. Patent &
Trademark Office, and with the patent office or comparable registry of any
nation of the world.
Section 2.03. Additional Documents. Company's obligations under this
Agreement are expressly conditioned upon Company's approval of the chain of
title to the Invention, the Patent Application, and the Intellectual Property.
The Assignors further agree to assist the Company in every reasonable way in
perfecting the rights acquired by Company hereunder. Upon request by Company,
Inventor and Assignors shall duly execute, acknowledge and deliver to Company,
cause to be executed, acknowledged, and delivered to Company, any and all powers
of attorney, legalizations, further assignments or instruments that Company may
reasonably deem necessary, expedient or proper to carry out and effectuate the
purposes and intent of this Agreement. Company shall have the right to place the
same on record in the Patent Office of Poland, the U.S. Patent & Trademark
Office, and elsewhere as Company may determine. In the event that Company,
Inventor or Assignors fail to execute and/or deliver such additional documents,
upon execution of this Agreement, all rights agreed to be transferred to Company
under this Agreement shall be deemed irrevocably vested in Company effective
upon the Effective Date.
Section 2.04 Secondary Assignments Prohibited. Assignors shall not assign
to, license to, dispose of or exploit for the benefit of any third party or
Person anything assigned hereunder by Assignors to Company. Moreover, the
Assignors agree not to engage in any activity, including entering into any
arrangements and/or agreements with third parties, which would diminish the
commercial value of the Invention, Patent Application and Intellectual Property,
or inhibit, encumber, or impair the commercial exploitation of same by the
Company or its successors in interest.
ARTICLE 3
FEES AND PAYMENTS
Section 3.01. Payment upon Execution. Issuance of Shares of Stock and
Buyback Option. Upon execution of this Agreement by the parties and upon
execution of the short form Assignment set forth in Exhibit 2 by Assignors, and
in consideration for the rights granted to Company hereunder, Company shall
cause to be paid to Assignors an Assignment Fee in the sum of One Hundred
Thousand Dollars (US$100,000.00). In addition, Company shall cause to be issued
to the following individuals the indicated allotment of shares of Company Stock:
Andrzei Marek Ksiazek, 100,000 shares; Marek Zielinksi, 200,000 shares; and
Dobroslawa Kosicka, 200,000 shares, provided that the Company retains an option
to buy back said shares from each individual at a maximum price of US$7.50 per
share within a period of twenty-four months from the date of issuance of said
shares ("Option Period"). Accordingly, Ksiazek, Zielinksi and Kosicka each
hereby agrees not to sell or transfer his or
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her allotment of said shares and to maintain said shares free and clear of all
Encumbrances for the duration of the Option Period.
Section 3.02. Further Payment. Upon Successful Completion of the Initial
Public Offering, Company shall cause to be paid to Assignors a further
Assignment Fee in the sum of One Million Four Hundred Thousand Dollars
(US$1,400,000.00).
Section 3.03. Payment Terms. All payments that are payable to Inventor or
Assignors under this Agreement shall be payable in U.S. dollars and may be paid
by Company check, wire transfer, or cash, at the election of Company.
Section 3.04. Taxes. Inventor and Assignors shall have sole responsibility
to pay or reimburse Company for all Taxes, if any, including penalties and
interest, levied by any Governmental Authority as a result of the payments made
to Inventor or Assignor under this Agreement as well as any costs associated
with the collection or withholding such taxes or duties. Company shall withhold
Taxes from such payments only if required to do so by Governmental Authority.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
Section 4.01. Representations and Warranties of the Inventor. As an
inducement to the Company to enter into this Agreement, the Inventor represents
and warrants:
(a) That he is the sole and original inventor of the Invention, and
the entire subject matter disclosed and claimed in the Patent Application
including all aspects of the Invention disclosed and claimed therein;
(b) That the Invention and the subject matter claimed in the Patent
Application have not been taken or copied from or based upon any other
source (including without limitation any other invention or inventor), and
are not based upon, derived or adapted from any Intellectual Property of
any other Person in violation of any statute, legal obligation, or
agreement to which Inventor is bound;
(b) That this Agreement, each provision thereof, and entry into this
Agreement by Inventor, shall not conflict with, violate, or result in the
breach of any provision of any agreement or understanding by or between
Inventor and any other Person, including University and any past or
present employer of Inventor;
Section 4.02. Representations and Warranties of Assignors. As an
inducement to the Company to enter into this Agreement, the Assignors,
individually and collectively, represent and warrant:
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<PAGE>
(a) That jointly they own all right, title, and interest in, to and
under the Patent Application; that they hold the unqualified right to
assign, transfer, and sell the Invention, the Patent Application, and all
Intellectual Property therein, free and clear of any claims, demands,
liens or other encumbrances of title, ownership or the like of any third
party or Person; that there are no past or outstanding options, licenses,
or assignments regarding all or a portion of the rights assigned
hereunder; that other assignment or other transfer of the rights assigned
hereunder has been granted or made to any other Person; that they have not
done or permitted to be done any act or thing whereby any of the rights
referred to in this Agreement have in any way been encumbered or impaired;
(b) That each of them will cooperate with the Company and provide
all reasonable assistance to the Company, both during prosecution of the
Patent Application, including any opposition, appeal, or related
proceedings, and during the entire period of enforceability of the
Invention, the Patent Application, any patent issued thereon, and the
Intellectual Property, necessary or requested by Company to facilitate or
advance the prosecution, enforcement, or defense of the Invention, the
Patent Application, the Intellectual Property, and any enforcement action,
lawsuit, litigation, or claim relating thereto;
(c) That to the best of the Assignors' knowledge, the Invention, the
subject matter claimed in the Patent Application, Intellectual Property
therein, and products produced according to them do not and will not
infringe any Intellectual Property rights or any other proprietary right
of any Person or give rise to any obligations to any Person as a result of
co-authorship, co-inventorship, or an express or implied contract for any
user or transfer;
(d) That there are no Actions now pending or threatened to be
brought before any Governmental Authority that could in any way impair,
limit or diminish the Invention, the Patent Application, or any rights
granted to the Company hereunder, or that challenge the legality,
validity, enforceability, or title of Assignors in the Invention, the
Patent Application, or the Intellectual Property therein;
(e) That this Agreement has been duly executed and delivered by the
Assignors and Ksiazek, and this Agreement constitutes a legal, valid and
binding obligation of the Assignors and Ksiazek enforceable against
Assignors and Ksiazek in accordance with its terms except as such
enforceability may be limited by principles of public policy and subject
to applicable laws;
(f) That this Agreement, any provision thereof, and the acts of
Assignors and Ksiazek in entering into this Agreement, shall not violate,
conflict with, result in any breach of, constitute a default under,
require any consent under, or give others any right of termination,
amendment, acceleration, suspension, revocation, or cancellation of, or
result in the creation of any encumbrance on the Invention or the Patent
Application under any agreement, understanding, or provision thereof
entered into among Assignors, Ksiazek and any other Person;
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<PAGE>
(g) That the execution, delivery and performance of this Agreement
by Assignors and Ksiazek do not and will not require any consent,
approval, authorization or other order of, action by, filing with or
notification to any governmental authority;
(h) That neither of the Assignors nor Ksiazek is under any
obligation to pay any royalty or other compensation to any third party or
Person or to obtain any approval or consent for the use of the Invention,
the Patent Application, or any Intellectual Property therein;
(i) That neither the Invention, the Patent Application, or any
Intellectual Property therein is subject to any presently effective
judgment, order, decree, stipulation, injunction, or charge;
(j) That neither Assignor nor Ksiazek has agreed to indemnify any
Person for or against any interference, infringement, misappropriation, or
other conflict with respect to the Invention, the Patent Application, or
the Intellectual Property;
(k) That they have no notice or knowledge of any allegations or
threats that the Invention, the Patent Application, Intellectual Property
therein, or any practice thereof or product produced therefrom infringes
upon or is in conflict with any Intellectual Property of any third party,
and to the best of their knowledge, no basis exists for any such
allegations or threats;
(l) That neither Assignor has sent or otherwise communicated to any
Person any notice, charge, claim, or assertion of any present, impending,
or threatened infringement by any other Person of any Intellectual
Property of Assignors or any Intellectual Property that Assignors have the
right to use.
(m) That no broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made
by or on behalf of either Assignor or Ksiazek.
ARTICLE 5
INDEMNIFICATION AND REMEDIES
Section 5.01. Indemnification by Inventor. The Inventor agrees to defend,
indemnify, and hold harmless the Company, its successors, assigns, licensees,
officers and employees from and against any and all liability, losses, damages,
costs, claims, expenses (including but not limited to reasonable attorneys
fees), judgments and penalties arising of, resulting from, based upon or
incurred because of the actual breach of any warranty made by Inventor
hereunder.
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<PAGE>
Section 5.02. Indemnification by Assignors and Ksiazek. Assignors and
Ksiazek agree, individually and collectively, to defend, indemnify, and hold
harmless the Company, its successors, assigns, licensees, officers and employees
from and against any and all liability, losses, damages, costs, claims, expenses
(including but not limited to reasonable attorneys fees), judgments and
penalties arising of, resulting from, based upon or incurred because of the
actual breach of any warranty made by Assignors and Ksiazek hereunder.
Section 5.03. Infringement Indemnification by Assignors and Ksiazek.
Assignors and Ksiazek agree, individually and collectively, to indemnify and
hold harmless the Company, its successors, assigns, licensees, officers and
employees from and against any and all actions, liability, losses, damages,
settlements, costs, claims, royalties, expenses (including but not limited to
reasonable attorneys fees), judgments and penalties (collective referred to as
"Claims") arising of, resulting from, based upon or incurred because of
infringement by the Invention, the Patent Application or the Intellectual
Property therein of any Intellectual Property of any third party or other
Person. The Company shall notify Assignors and Ksiazek of any such Claims. The
Company in its sole discretion may elect to defend any such Claims or may elect
to allow Assignors and Ksiazek to defend such Claims, and if Company elects the
latter, Assignors and Ksiazek agree to vigorously and diligently defend such
Claims provided that Company shall cooperate with Assignors and Ksiazek in such
defense. In any case, Assignors and Ksiazek shall allow Company to direct and
control all related settlement negotiations. If it is, or in the reasonable
opinion of Assignors and Ksiazek there is a high probability that it will be,
determined by a court of competent jurisdiction that the Invention, Patent
Application, Intellectual Property therein or the sale or use thereof or any
product thereof infringes any patent, copyright, trade secret or trademark of a
third party or is enjoined from practicing any right granted to Company
hereunder, then Assignors and Ksiazek may, at their sole expense, procure for
Company under any applicable Intellectual Property the same rights and to the
same extent as those granted under this Agreement.
Section 5.04 Remedies of Inventor, Assignors and Ksiazek. Inventor,
Assignors and Ksiazek agree that their sole remedy, individually or
collectively, for any default by the Company hereunder, including the failure by
the Company to pay any consideration payable to Inventor, Assignors, or Ksiazek
hereunder, shall be an action against Company for such consideration and/or for
damages. Specifically, Inventor, Assignors and Ksiazek agree that they, and each
of them, shall have no right to enjoin the making, using, or selling of the
Invention, Patent Application, Intellectual Property, or any method or product
thereof, or to terminate or rescind any rights in the Invention, Patent
Application, or Intellectual Property granted to Company hereunder, or to obtain
any other form of equitable relief.
Section 5.04. Remedies of Company. The Company shall have at all times,
all rights and remedies that it has at law and in equity hereunder or otherwise.
Section 5.05. Right of Company to Injunctive Relief. The rights that are
the subject matter of this Agreement are of a special, unique, extraordinary and
intellectual character that gives them a peculiar value, the loss of which
cannot be reasonably or adequately
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<PAGE>
compensated for in damages in an action at law and which would cause Company
great irreparable injury and harm. Accordingly, Company shall be entitled to
injunctive relief, specific performance and other equitable relief to preserve
its rights and interest in and to such rights as set forth in this Agreement.
This provision shall not be construed as a waiver of any rights Company may have
for damages or otherwise arising from any breach of this Agreement.
Section 5.06. Limitation on Remedies. IN NO EVENT SHALL "COMPANY," ITS
EMPLOYEES, OFFICERS, DIRECTORS, OR AGENTS BE LIABLE TO "INVENTOR" OR "ASSIGNORS"
OR "KSIAZEK" FOR ANY INCIDENTAL, CONSEQUENTIAL, SPECIAL OR INDIRECT DAMAGES OF
ANY KIND, INCLUDING, WITHOUT LIMITATION, LOST PROFITS OR REVENUES OR ANTICIPATED
SAVINGS, ARISING FROM ANY "ACTION" AS DEFINED HEREIN ARISING UNDER THIS
AGREEMENT, EVEN IF "COMPANY" OR SUCH OTHER PARTY IS AWARE OF THE POSSIBILITY OF
SUCH DAMAGES OR LOSS. In no event shall the aggregate liability for damages of
Company, its employees or agents, exceed the total amount actually paid to
Inventor or Assignors or Ksiazek by Company under this Agreement.
Section 5.07. Allocation of Risk. The provisions in this Agreement
concerning limitation of liability, representations and warranties and damages
allocate the risk of failure between Company on the one hand and Inventor,
Assignors and Ksiazek on the other hand. Such allocation is reflected in the
consideration paid for the rights granted hereunder and is an essential element
of the basis of the bargain between Company on the one hand and Inventor,
Assignors and Ksiazek on the other hand.
ARTICLE 6
OTHER OBLIGATIONS OF INVENTOR, ASSIGNORS AND KSIAZEK
Section 6.01. Delivery of Invention Records. Promptly after execution of
this Agreement, the Inventor shall deliver or cause to be delivered to the
Company or its designated agent, all original Invention Records of the Inventor
pertaining to the Invention and the Patent Application. The Inventor may retain
a copy of such Invention Records.
Section 6.02. Confidentiality. Assignors and Ksiazek acknowledge and agree
that they or each of them has or may receive hereunder information which is
marked confidential or is verbally designated confidential and constitutes the
proprietary confidential information of the Company, and that Assignors' and
Ksiazek's protection thereof is essential to this Agreement. Assignors and
Ksiazek shall retain in strict confidence and not disclose to any third party
(except as authorized by this Agreement) without Company's express written
consent any and all such information.
Section 6.03. Exceptions. Assignors and Ksiazek shall be relieved of this
obligation of confidentiality to the extent any such information:
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<PAGE>
(i) was in the public domain at the time it was disclosed or
has become in the public domain through no fault of Assignors and Ksiazek;
(ii) Assignors can prove was known to Assignors and Ksiazek,
without restriction, at the time of disclosure as shown by the files of
Assignors and Ksiazek in existence at the time of disclosure;
(iii) is disclosed by Assignors and Ksiazek with the prior
written approval of Company;
(iv) Assignor and Ksiazek can prove was independently
developed by Assignor and Ksiazek without any use of Company's
confidential information and by employees or other agents of Assignors and
Ksiazek who have not had access to any of Company's confidential
information; or
(v) becomes known to Assignors and Ksiazek, without
restriction, from a source other than Company without breach of this
Agreement by Assignors and Ksiazek and otherwise not in violation of
Company rights.
Section 6.04. Technical Consultation. For a period of five (5) year(s)
after the Effective Date, the Inventor shall provide technical assistance and
consultation to the Company in its efforts to commercialize and/or license the
Invention and the subject matter claimed in the Patent Application throughout
the world. In the course of providing such assistance and consultation to
Company, Inventor may provide Company with information that Company uses, relies
upon, or incorporates as part of its implementation and commercial use of the
Invention and the subject matter claimed in the Patent Application. Company will
own all of Inventor's right, title, interest and Intellectual Property in such
information, and no such information shall be deemed Intellectual Property owned
by Inventor.
ARTICLE 7
ASSIGNMENT OF THE AGREEMENT
Section 7.01. By Company. The Company may transfer and assign this
Agreement or all or any of its rights hereunder to any Person, and in such
event, Company shall be released and discharged from all executory obligations
hereunder, and Inventor, Assignors and Ksiazek shall look solely to such Person
for performance thereof.
Section 7.02. By Inventor, Assignors and Ksiazek. Inventor, Assignors and
Ksiazek, individually or collectively, may not assign this Agreement or their
rights hereunder, in whole or in part, without Company's prior written approval.
Any such purported assignment without Company's prior written approval shall be
deemed void. This Agreement shall inure to the benefit of the parties' permitted
successors, licensees and assigns.
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<PAGE>
ARTICLE 8
TERM, RENEWAL AND TERMINATION
Section 8.01. Termination. This Agreement may be terminated at any time:
(a) by the Company immediately upon written notice to Inventor or
Assignors or Ksiazek if (i.) Inventor breaches or is found to be in breach of
any representation or warranty made by Inventor herein, or (ii.) either Assignor
or Ksiazek breaches or is found to be in breach of any representation or
warranty made by Assignors or Ksiazek herein, or (iii.) either Assignor or
Ksiazek breaches or is found to be in breach of its obligations under Section
6.02 ("Confidentiality") hereof; or
(b) by the Company immediately upon written notice to Inventor or
Assignors if any Governmental Authority shall have issued a final,
non-appealable order, decree or ruling or taken any other action (i.)
permanently enjoining or otherwise prohibiting the enforcement of any of the
rights assigned by Assignors to Company hereunder, (ii.) declaring any patent
that shall have issued from the Patent Application to be invalid, not valid,
void, or unenforceable, or (iii) declaring the Patent Application invalid or not
patentable in any opposition proceeding; or
(c) by the mutual written consent of the Company and the Inventor, or by
the Company and both Assignors, or by the Company, both Assignors and Ksiazek.
Section 8.02. Effect of Termination. In the event of termination of this
Agreement, this Agreement shall forthwith become void and there shall be no
liability on the part of either party hereto except that nothing herein shall
relieve either party from liability for any breach of this Agreement or for
breach of any representation or warranty made hereunder.
ARTICLE 9
GENERAL PROVISIONS
Section 9.01. Controlling Law. This Agreement shall be construed and
enforced under the laws of the State of New York applicable to agreements
entered into and performed wholly within New York. In any action to enforce or
construe this Agreement, the parties hereto agree to submit to the jurisdiction
of the United States District Court for the Southern District of New York or the
Supreme Court of the State of New York which the parties acknowledge and agree
are convenient forums in which to litigate any such action. The parties waive
any right to transfer such action to any other court and expressly consent to
the permanent jurisdiction of such courts regarding the resolution of any
disputes hereunder and agree to be bound by the judgment rendered by such
courts.
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<PAGE>
Section 9.02. Independent Contractor. Neither party has any authority to
make any statement, representation, warranty or other commitment on behalf of
the other. This Agreement does not create any agency, employment, partnership,
joint venture or similar relationship between Company, Inventor, Assignors, or
Ksiazek.
Section 9.03. Force Majeure. Neither party shall be liable for any delay
or failure to meet its obligations under this Agreement due to circumstances
beyond its reasonable control, including but not limited to war, riot,
insurrection, civil commotion, labor strikes or lockouts, shortages, factory or
other labor conditions, fire, flood, earthquake or storm.
Section 9.04. Severability. If any provision of this Agreement should be
held unenforceable or invalid for any reason, such holding shall not affect the
enforceability or validity of the remaining provisions, and the parties will
substitute for such provisions an enforceable and valid provision which most
closely approximates the intent and economic effect of the unenforceable or
invalid provision.
Section 9.05. Waiver. No waiver of any obligation under this Agreement
shall be valid unless set forth in a writing signed by the party to be bound
thereby. Any waiver of a term or condition shall not be construed as a waiver of
any subsequent breach or a subsequent waiver of the same term or condition, or a
waiver of any other term or condition, of this Agreement. The failure of any
party to assert any of its rights hereunder shall not constitute a waiver of any
such rights.
Section 9.06. Expenses. Each party shall bear its own costs and expenses
incurred in connection with this Agreement.
Section 9.07. Notices. All notices, requests, claims, demands and other
communications hereunder shall be deemed given upon receipt, and shall be given
in writing and shall be given or made by delivery in person, by courier service,
by telecopy, or by registered or certified mail (postage prepaid, return receipt
requested) to the respective parties at the following addresses:
(a) If to the Company:
Kadoma Trading, Ltd.
20 East 63rd Street
New York, New York 10021
(b) If to the Inventor:
Marek Zielinski
93-355 Lodz,
Bialostocka 11/22, Poland
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<PAGE>
(c) If to the Assignors:
Marek Zielinski and Dobroslava Kosicka
93-355 Lodz, 91-037 Lodz,
Bialostocka 11/22, Poland Szamotulska 17/8, Poland
(d) If to the Ksiazek:
Andrzei Marek Ksiazek
_____________________,
_____________________, Poland
Section 9.08. Public Announcements. No party to this Agreement, including
Ksiazek, shall make, or cause to be made, any press release or public
announcement relating to this Agreement without prior consent of the other
party, subject to the Company's obligations to comply with applicable securities
laws, and the parties shall cooperate as to the timing and contents of any such
release or announcement.
Section 9.09. Entire Agreement. This Agreement, including the attached
Exhibits, constitutes the entire agreement between Company, Inventor, Assignors
and Ksiazek with respect to its subject matter, and supersedes any prior or
contemporaneous written or oral understandings, agreements, or arrangements
between Customer, Inventor, Assignors and Ksiazek on the subject matter hereof.
No amendment of this Agreement will be enforceable unless set forth in writing
signed by the party against which enforcement is sought. This Agreement may be
executed in duplicate counterparts, which together shall constitute one and the
same instrument.
IN WITNESS WHEREOF, the parties, including Ksiazek, hereto have caused
this Agreement to be executed by their duly authorized representatives.
KADOMA TRADING, LTD. MAREK ZIELINSKI
("Company") ("Inventor" and an "Assignor")
By /s/ Andreas Skentzos Kalligeris By /s/ Marek Zielinski
-------------------------------- --------------------------------
Name: ANDREAS SKENTZOS KALLIGERIS Name: MAREK ZIELINSKI
Title: DIRECTOR Date: 30/9/97
Date: 30/9/97
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<PAGE>
DOBROSLAWA KOSICKA ANDRZEI MAREK KSIAZEK
(an "Assignor")
By /s/ Dobroslawa Kosicka By /s/ Andrzei Marek Ksiazek
-------------------------------- --------------------------------
Name: DOBROSLAWA KOSICKA Name: ANDRZEI MAREK KSIAZEK
Date: 30/09/97 Date: 30/9/97
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<PAGE>
A S S I G N M E N T
WHEREAS, Marek Zielinski, an individual residing at 93-355 Lodz,
Bialostocka 11/22 Poland ("Inventor"), and Dobroslava Kosicka, an individual
residing at 91-037 Lodz, Szamotulska 17/8 Poland ("Kosicka") (Kosicka and
Inventor are referred to collectively, as the "Assignors"), Assignors Polish
Priority Patent Application P 320762, filed June 23, 1997 for "A Method For
Processing Phosphogypsum Wastes", Kosicka having an interested in the
aforementioned Patent Application by virtue of an agreement between Inventor and
Kosicka dated September 30, 1997.
WHEREAS, Kadoma Trading, Ltd., a company organized and existing under the
laws of the Country of Cyprus, and having a place of business at 20 East 63rd
Street, New York, NY 10021, is desirous of acquiring the entire right, title and
interest, including the right to bring a patent infringement lawsuit for past
infringement, in and to the aforesaid Patent Application, and in, to and under
any and all Letters Patent that may be granted as a result thereof in any and
all countries;
NOW, THEREFORE, for and in consideration of the sum of One Dollar ($1.00)
and other good and valuable consideration, the receipt of which is hereby
acknowledged, the said Assignors have sold, assigned, transferred and set over
to said Kadoma Trading, Ltd., the entire right, title and interest including the
right to bring a patent infringement lawsuit for past infringement, in and to
the aforesaid Patent Application, and in, to and under any and all Letters
Patent that may be granted as a result thereof in any and all countries, and
any and all extensions, divisions, reissues, substitutes, renewals, or
continuations thereof, and the right to all benefits under the International
Convention for the Protection of Industrial Property, the same to be held and
enjoyed by said Kadoma Trading, Ltd., its successors, assigns and legal
representatives, to the full end of the term or terms for which said Letters
Patent may be granted, reissued or extended as fully as the same would have been
held and enjoyed in full by the Assignors had this assignment, sale or
transfer not been made; and said Assignors hereby authorize and request the
Commissioner of Patents of the United States and any official of any country or
countries foreign to the United States whose duty it is to issue patents to
issue to said Kadoma Trading, Ltd., assignee of the entire right, title and
interest therein, including the right to bring a patent infringement lawsuit for
past infringement, any and all Letters Patent of the United States or of said
foreign country or countries, which may be issued or granted as a result of the
Patent Application hereinbefore identified, in accordance with the terms of this
agreement, and hereby covenant that Assignors have the full right to convey the
entire interest herein assigned and that Assignors have not executed and will
not execute any agreement in conflict herewith.
<PAGE>
IN TESTIMONY WHEREOF, has caused these presents to be signed by an officer
thereunto duly authorized, and its seal to be affixed and attested this 30th day
of September, 1997.
/s/ Marek Zielinski
---------------------------------
Name: Marek Zielinski
30-9-97
---------------------------------
Date:
SEAL OF NOTARY PUBLIC
ATTEST:
KONSTANTIA KAZA
ATTORNEY AT LAW
A.M. 3070
47, OMIROU STREET
ATHENS - GREECE
/s/ Dobroslava Kosicka
---------------------------------
Name: Dobroslava Kosicka
30-9-97
---------------------------------
Date:
SEAL OF NOTARY PUBLIC
ATTEST:
KONSTANTIA KAZA
ATTORNEY AT LAW
A.M. 3070
47, OMIROU STREET
ATHENS - GREECE
<PAGE>
RECEIPT OF U.S.$100,000.00
I, the undersigned, Marek Zielinski, of 58-305 Walbrzych, Krasickiego 23/5,
Poland, hereby confirm that I have received the amount of US$100,000.- as
deposit for selling to KADOMA TRADING LIMITED of 20, East 63rd Street, New York,
N.Y. 10021, U.S.A., the patent Number P 320762 declared in Poland under number
P-320762 as per relevant contract.
30th September 1997
/s/Marek Zielinski
- ---------------------------
Marek Zielinski
THIS NOTE HAS BEEN ACQUIRED FOR INVESTMENT PURPOSES ONLY AND MAY NOT BE
TRANSFERRED UNTIL (i) A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"), SHALL HAVE BECOME EFFECTIVE WITH RESPECT THERETO OR (ii)
RECEIPT BY THE ISSUER OF AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
ISSUER TO THE EFFECT THAT REGISTRATION UNDER THE ACT IS NOT REQUIRED IN
CONNECTION WITH SUCH PROPOSED TRANSFER NOR IS IT IN VIOLATION OF ANY APPLICABLE
STATE SECURITIES LAWS. THIS LEGEND SHALL BE ENDORSED UPON ANY NOTE ISSUED IN
EXCHANGE FOR THIS NOTE.
- --------------------------------------------------------------------------------
C.W. CHEMICAL WASTE TECHNOLOGIES LIMITED
No. _________ $_____________
PROMISSORY NOTE
C.W. CHEMICAL WASTE TECHNOLOGIES LIMITED, a corporation organized under
the laws of Cyprus (the "Company"), for value received, hereby promises to pay
to _________________________________________ or registered assigns (the "Payee")
on the earlier of the closing date of the public offering of securities by the
Company contemplated in the Confidential Term Sheet dated January 16, 1998 (as
the same amended or supplemented from time to time) or ________, 1999 (the
"Maturity Date") at the offices of the Company, 20 E. 63rd Street, 1st Floor,
New York, New York 10021, the principal amount of __________________ and No/100
Dollars ($_____), plus interest at the rate of twelve percent (12%) per annum
accrued on the unpaid principal balance hereof through the date of repayment and
payable monthly in arrears on the first day of each full calendar month
following the date hereof commencing March 1, 1998 until such repayment, in such
coin or currency of the United States of America as at the time of payment shall
be legal tender for the payment of public and private debts.
This Note is issued pursuant to a Subscription Agreement dated as of
___________, 1998, between the Company and the Payee (the "Subscription
Agreement") a copy of which agreement is available for inspection at the address
for the Company set forth above. Notwithstanding any provision to the contrary
contained herein, this Note is subject and entitled to certain terms,
conditions, covenants and agreements contained in the Subscription Agreement.
Any transferee or transferees of the Note, by their acceptance hereof, assume
the obligations of the Payee in the Subscription Agreement with respect to the
conditions and procedures for transfer of the Note. Reference to the
Subscription Agreement shall in no way impair the absolute and unconditional
obligation of the Company to pay both principal and interest hereon as provided
herein.
This Note is one of a series of notes issued or to be issued by the
Company in connection with a private placement of Units, consisting of 12% notes
in the aggregate principal amount of between $200,000 and $500,000 (the "Notes")
and an aggregate of between 100,000 and 250,000 common stock purchase warrants.
<PAGE>
1. Prepayment. The principal amount of this Note may be prepaid by the
Company, in whole or in part, without penalty, at any time.
2. Covenants of Company. The Company covenants and agrees that, for as
long as this Note shall be outstanding, the Company shall:
A. Promptly pay and discharge all lawful taxes, assessments, and
governmental charges or levies imposed upon the Company or upon its income and
profits, or upon any of its properties, before the same shall become in default,
as well as all lawful claims for labor, materials and supplies which, if unpaid,
might become a lien or charge upon such properties or any part thereof;
provided, however, that the Company shall not be required to pay or discharge
any such tax, assessment, charge, levy or claim so long as the validity thereof
shall be contested in good faith by appropriate proceedings and the Company
shall set aside on its books adequate reserves with respect to any such tax,
assessment, charge, levy or claim so contested;
B. Do or cause to be done all things reasonably necessary to
preserve and keep in full force and effect its corporate existence, licenses,
patents, rights and franchises and comply with all laws applicable to the
Company, except where the failure to comply would not have a material adverse
effect on the Company;
C. At all times reasonably maintain, preserve, protect and keep its
property used or useful in the conduct of its business in good repair, working
order and condition, and from time to time make all needful and proper repairs,
renewals, replacements, betterments and improvements thereto as shall be
reasonably required in the conduct of its business;
D. To the extent necessary for the operation of its business,
maintain adequate insurance, provided by financially sound and reputable
insurers, including all property, casualty, and products liability insurance of
a character usually maintained by companies in a business of the same or similar
type to that of the Company, and carry such other insurance as is usually
carried by similar corporations; and
E. At all times keep true and correct books, records and accounts.
F. Except for assumption of any indebtedness (including, without
limitation, the granting of any guarantee or the making of any contingent
payment obligation with respect thereto) secured by a lien, mortgage or
guarantee on any property (whether real or personal, tangible or intangible) and
any refinancings or replacements thereof or trade debt incurred in the ordinary
course of business, not incur any indebtedness whatsoever which indebtedness
does not expressly provide that it is wholly subordinated in right of payment to
the indebtedness evidenced by this Note and the other Notes.
3. Events of Default.
A. This Note shall become and be due and payable upon written demand
made by the holder hereof if one or more of the following events, herein called
events of default, shall occur and be continuing:
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<PAGE>
(i) Default in the payment of the principal and accrued
interest on any of the Notes when and as the same shall become due and
payable, whether by acceleration or otherwise;
(ii) Default in the due observance or performance of any
material covenant, condition or agreement on the part of the Company to be
observed or performed pursuant to the terms hereof, which default
continues uncured for thirty (30) days after written notice thereof,
specifying such default, shall have been given to the Company by the
holder of the Note;
(iii) Default in the payment of any outstanding indebtedness
in excess of $25,000 of the principal amount thereof or in the due
observance or performance of any material covenant, condition or agreement
on the part of the Company with respect to any outstanding indebtedness
with the result that such outstanding indebtedness becomes due and payable
prior to the due date otherwise specified therefor and such default
continues uncured or such acceleration is not rescinded or annulled within
thirty (30) days after written notice thereof shall have been given to the
Company by the holder of this Note;
(iv) Application for, or consent to, the appointment of a
receiver, trustee or liquidator of the Company or of its property;
(v) Admission in writing of the Company's inability to pay its
debts as they become due;
(vi) General assignment by the Company for the benefit of
creditors;
(vii) Filing by the Company of a voluntary petition in
bankruptcy or a petition or an answer seeking reorganization or an
arrangement with creditors;
(viii) The entry of a court order approving a petition filed
against the Company under the Federal bankruptcy laws, which order shall
not have been vacated or set aside or otherwise terminated within sixty
(60) days;
(ix) The sale by the Company of substantially all of its
assets; or
(x) The merger by the Company with or into another
corporation, other than for purposes of changing domicile, where the
Company is not the surviving corporation; or
(xi) A material breach of any of the representations of the
Company contained in the Subscription Agreement.
B. The Company agrees that notice of the occurrence of any event of
default shall be promptly given to the holder at his or her registered address
by certified or registered mail, between receipt requested.
C. Subject to the provisions of Section 4(B) hereof, if any one or
more of the events of default specified above shall occur and be continuing, the
holder of this Note may proceed to protect and enforce any of such holder's
rights hereunder by action to compel specific
-3-
<PAGE>
performance of any covenant or agreement contained in this Note, or in aid of
the exercise of any power granted in this Note or may proceed to enforce the
payment of this Note or to enforce any other legal or equitable rights as such
holder.
4. Amendments and Waivers
A. Subject to the provisions of Sections 4(C) and 4(D) hereof, the
covenants set forth in Section 2 hereof may be waived by the written consent of
the holders of a majority in outstanding principal amount of the Notes.
B. Subject to the provisions of Sections 4(C) and 4(D) hereof, the
events of default set forth in clauses (i), (ii), (iii), (ix), (x) and (xi) of
Section 3(A) hereof may be waived by the written consent of the holders of a
majority in outstanding principal amount of the Notes.
C. The Company may amend or supplement this Note with the written
consent of the holders of a majority in outstanding principal amount of the
Notes; provided, however, that without the consent of each Note holder, no
amendment, supplement or waiver may:
(i) reduce the principal amount of Notes whose holders must
consent to any amendment, supplement or waiver;
(ii) reduce the rate of interest or principal amount of each
Note; or
(iii) extend the maturity date of the Notes or the time for
payment of interest thereunder by more than one year from the date
set forth herein.
D. After any waiver, amendment or supplement under this Section
becomes effective, the Company shall mail to the holders of the Notes a notice
briefly describing such waiver, amendment or supplement.
5. Miscellaneous
A. This Note has been issued by the Company pursuant to due
authorization, including, without limitation, authorization of its Board of
Directors, which authorization provides for the issuance of the remaining Notes.
B. The Company may consider and treat the person in whose name this
Note is registered as the absolute owner hereof for all purposes whatsoever
(whether or not this Note is overdue), and the Company shall not be affected by
any notice to the contrary. The registered owner hereof shall have the right to
transfer this Note by assignment (subject to the limitations on transfer
contained in the Subscription Agreement), and the transferee thereof shall, upon
registration of such transferee as owner of this Note, become vested with all of
the powers and rights of the transferor. Registration of any new owner shall
take place upon presentation of this Note to the Company at its offices at 20
East 63rd Street, 1st Floor, New York, NY 10021, together with a duly
authenticated assignment. In case this Note is transferred by operation of law,
the transferee agrees to notify the Company of such transfer and of such
transferee's address, and to submit appropriate evidence regarding the transfer
so that this Note may be registered in the name of the transferee. This Note is
transferable only on the books of the Company by the holder hereof, in person or
by attorney, on the surrender hereof, duly endorsed. Communications sent to any
registered owner shall be effective
-4-
<PAGE>
as against all holders or transferees of the Note not registered at the time of
sending the communication.
C. Payments of interest shall be made as specified above to the
registered owner of this Note. Payment of principal and interest shall be made
to the registered owner of this Note upon presentation of this Note upon or
after maturity.
D. All notices required or permitted to be given hereunder shall be
sufficient if in writing and shall be deemed given, (i) upon delivery in person
or by overnight courier, (ii) on the third business day following the mailing
thereof by certified or registered mail, return receipt requested, (i) on the
first business day following the sending thereof by facsimile transmission with
confirmation of transmission, if addressed as follows: If to the holder hereof,
addressed to the registered holder of this Note at its last address or facsimile
number, if any, as the case may be, provided to the Company either pursuant to
the Subscription Agreement or by notice given in compliance with the terms of
this Section 4(D), and if to the Company, to the Company at its address set
forth above, with a copy to:
Morrison Cohen Singer & Weinstein LLP
750 Lexington Avenue
New York, New York 10022
Fax No.: (212) 735-8708
Attention: Jack Levy, Esq.
provided, however, that notices of change of address shall be deemed given when
received.
E. This Note shall be construed and enforced in accordance with the laws
of the State of New York, without giving effect to the principles thereof
relating to the conflict of laws.
IN WITNESS WHEREOF, the Company has caused this Note to be signed in its
name by its duly authorized officer.
C.W. CHEMICAL WASTE TECHNOLOGIES LIMITED
By:
-------------------------------------
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PROCESS TECHNOLOGY LICENSE AGREEMENT
THIS AGREEMENT is made, entered into by and between:
A. C.W. CHEMICAL WASTE TECHNOLOGIES LTD (hereafter called the " Licensor"), a
corporation organized and existing under the laws of Cyprus, having a
principle office at 20 East 63rd Street, New York, N.Y. 10021, U.S.A., and
B. (hereafter called the "Licensee") having its principle office at
__________________________.
WITNESSETH:
WHEREAS Licensor is the owner of proprietary technology regarding:
1. a First Process for the treatment of waste phosphogypsum that can
produce a substantially non-toxic First Product with numerous useful
end uses and which in many cases can be used as a substitute for
other materials currently in use with superior results, and
2. a Second Process for the production of Ceramic Like Material (CLM)
Second products, which are composite materials containing
appropriately conditioned treated phosphogypsum, synthetic resins
and other materials.
WHEREAS for both above mentioned Processes Licensor owns or controls a
pending patent application in Poland, as set forth in Appendix I, and certain
PCT applications as set forth in Appendix II hereof, and Licensor is in
possession of and owns or controls Know-How related to these Processes.
WHEREAS, Licensee desires to obtain a license to use the Know-How for the
treatment of waste phosphogypsum and for its conversion into an environmentally
friendly material by the First Process and a license under the Patents covering
such treatment and conversion that are owned or controlled by Licensor, as
exemplified in Appendix I hereof, as well as to obtain the relevant Know-How and
design and engineering assistance from Licensor in connection with such
treatment and conversion First Process, and sale of the licensed First Product,
on the terms
<PAGE>
and conditions referred to herein.
WHEREAS, Licensee desires to obtain, an option to license to use the
technology and Know-How related to the production of a Second Product, sometimes
referred to as CLM, by the Second Process, and as referred to in Patents that
are exemplified by those that are set forth in Appendix II hereof.
NOW, THEREOF, in consideration of the mutual covenants herein contained,
the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
In this Agreement, the following expressions shall have the following
meanings assigned to them in this article.
1.1 "Agreement" shall mean this Licensing Agreement together with Appendixes
hereto, as entered into between the Licensor and the Licensee whereby
granting to the Licensee a License to use the First Process, together with
all of the documents to which reference has been made in this Agreement,
including any amendments made to those documents by mutual agreement
between the parties.
1.2 "Licensor" shall mean the party named as such in this Agreement or his
successor or permitted assigns.
1.3 "Licensee" shall mean the party named as such in this Agreement or his
successor or permitted assigns.
1.4 "Patent(s)" shall mean the patent(s) and patent application(s) relevant to
the First or Second Processes Owned or controlled by the Licensor, as
exemplified by the Patents set forth in Appendix I and Appendix II, as the
case may be.
2
<PAGE>
1.5 "Effective Date" shall mean the last date on which any party executes this
Agreement, whereupon this Agreement comes into effect.
1.6 "Improvements" shall mean any modification or refinement of either of the
Processes and/or Know-How related thereto, whether patented or not, which
has been developed or acquired during the period covered by this
Agreement, and which is capable of improving the technical and/or economic
characteristics of the First or Second Products and/or the First or Second
Processes.
1.7 "Know-How" shall mean all the technical data, information, drawings and
designs and instructions relevant to the First or Second Processes,
respectively and/or the First or Second Products, respectively, that is in
the possession of the Licensor, and is applicable to commercial use of the
respective Processes by the Licensee, and which are sufficient to enable
the Licensee to construct the Plant, and to enable the Licensee's
personnel to operate the Plant so as to carry out at least the First
Process and manufacture at least the First Product.
1.8 "Plant" shall mean the manufacturing facilities to be built by the
Licensee, at its own expense, at a site in Greece, using the First Process
for the manufacturing of the First Product at nameplate capacity of one
hundred fifty thousand (150,000) metric tons of treated phosphogypsum per
annum based on 300 operating days per annum.
1.9 "Process" shall mean the latest commercially proven process, with respect
to the First Process, developed or acquired, and owned or controlled by
the Licensor at the Effective Date.
1.10 "First Product" shall mean the waste phosphogypsum treated by the First
Process.
3
<PAGE>
ARTICLE 2
LICENSE
2.1 The Licensor expressly and unreservedly guarantees that it is the
proprietary licensee of, and/or that it owns or controls and has lawful
and full access to, the relevant Know-How and that it possesses the lawful
and unlimited right and authority to grant rights to the Licensee to use
the Know-How and, subject to the payment of the sums in the amounts and at
the time referred into Article 4 hereof, hereby grants to the Licensee a
license with the full right and authority to use said Know-How, to plan,
construct, operate, repair and maintain the necessary installations for
the earning out the First Process and thereby manufacturing the First
Product; to purchase, acquire make or have made any equipment apparatus,
materials or other items necessary for the construction and operation of
the relevant installations; to use, sell, export or otherwise dispose of
the First Product, and/or to improve, modify or up-date the First Process
and/or the First Product.
2.2 Said license shall be non-exclusive for the manufacture and production of
the First Product, and shall also include the right for the Licensor to
grant one or more sub- license(s), under the relevant Patents and to use
the Know-How, to others for the same purposes and with the same
limitations as expressed herein. Said license and above rights granted
hereunder to Licensee shall be limited to the specific Plant referred to
above for the manufacturing of up to one hundred fifty thousand (150,000)
metric tons of First Product yearly, which shall be the maximum designed
capacity of the Plant.
2.3 Said Processes are covered by certain patents that include those set forth
in Appendix I and Appendix II, as they may apply to each process and/or
product, (including, inter alia, patent and/or patent application
identification and description of the respective Patent rights, the name
of the Patentee and/or Licensee, dates of issuance, country(ies) and dates
of their filing, and their expiration date(s), if applicable). The
Licensor hereby expressly declares that by the expiration of ninety (90)
days from the Effective Date of this Agreement, it shall have caused
corresponding applications for patent to be filed in , _________ expressly
agrees to use its best efforts to obtain the issuance of patents on said
4
<PAGE>
application(s), and to use its best efforts to maintain such patent
application(s) and patent(s) in force for their respective entire term(s)
or the entire term of this Agreement, whichever is shorter. Licensor shall
inform Licensee in writing, immediately after the filing of said patent
application(s), that said patent application(s) have been duly filed; of
the progress of the prosecution of said patent application(s); of the
granting of said patent application; and of the time and requirements for
maintaining such patent and/or patent application(s) in force, as well as
provide Licensee with copies of all related patent applications and issued
patents, and any other relevant documents.
2.4 All formalities, procedures, costs and expenses (including, legal costs,
Government fees, renewal fees, and any other reasonably associated costs)
relating to the, filing, prosecution, issuance and maintenance in force of
the Patents throughout their respective life (including any patented
improvements thereof), shall be the responsibility of and at the cost and
expense of the Licensor. Should Licensor decide that it will not pursue or
maintain any patent, it shall immediately (at least thirty (30) days
before a terminating event is to take place) inform Licensee of such
decision and permit Licensee to take over the patent property in question.
Under these circumstances, Licensee shall have no obligation to pay any
running royalty with respect to such patent property.
ARTICLE 3
IMPROVEMENTS
The Licensor undertakes, to make available to the Licensee all
improvements in the Know-How developed or acquired by the Licensor and of which
he is entitled to dispose, and specifically to make available, free of charge,
all developments and improvements in operating techniques, preventive
maintenance and safety measures, and process developments applicable to the
First Process and/or the First Product and the relevant installations, as well
as all other relevant data and proprietary information which is made available,
free of charge, by the Licensor to other licensed users of the Know-How.
5
<PAGE>
ARTICLE 4
LUMP-SUM PAYMENT AND ROYALTIES
4.1 In consideration of the license under the Patents referred into Appendix I
hereof and for the license to use the respective Know-How, the Licensee
shall pay the Licensor (a) a lump sum of US$________ ( ) million according
to the following schedule:
- Within a period of fifteen (15) working days after the signing of
this Agreement, the Licensee shall pay US$________ to the following
bank account of the Licensor:
EUROPEAN POPULAR BANK
63, Eroon Polytechniou and Skouze Str.,
Piraeus - Greece
A/C No: 004-030086
In favour of: C.W. CHEMICAL WASTE TECHNOLOGIES LTD
- Twelve months after the Effective Date this Agreement, the Licensee
shall pay US$________ - to the above Licensor's Bank account;
- Upon completion of the Plant, but in any case no later than twenty
four (24) months after the Effective Date of this Agreement, the
Licensee shall pay US$________ - to the above Licensor's Bank
account.
Additionally, in further consideration for the rights and licensed granted
by this Agreement, Licensee agrees to pay Licensor a running royalty of three
percent (3%) of the net sales price of any First Product that is sold or
otherwise disposed of. In the event that First Product is disposed of without
compensation to the Licensee, the net sales price of that First Product shall be
assumed to be the average of the net sales prices of the last preceding ten (10)
tons of First Product that were actually sold by Licensor.
Said sale price shall be calculated without any deduction. All expenses
incurred for the manufacture, marketing, promotion, advertising, hand outs,
brochures, financing, etc., of the First Product, will be exclusively born by
Licensee and will not be deducted from the net sales price
6
<PAGE>
used to calculate the running royalties that are due to Licensor. Those
royalties are net, and not to be diminished for any tax in (country). Licensee
will pay every tax that could diminish the above mentioned royalties.
Running Royalties shall be due and payable for the entire life of any
patent in the applicable country that contains at least one claim that is
infringed by said Product and/or said Process.
If the First Product is further processed/converted by Licensee, or is
assembled in combination with other materials by the Licensee, the net sale
price on which royalties shall be calculated, shall be the net sales price of
whatever product the Licensee finally sells to a third party.
Licensee will provide Licensor with a monthly report, submitted by not
later than the tenth (10th) of the following month, detailing the quantity sold
of each First Product, the total dollar value of the net sales price of each
First Product, and the running royalty to be paid to Licensor for the preceding
month. Licensee shall pay the royalties to Licensor along with the monthly
report. At Licensor's option the running royalty may be paid by crediting the
corresponding amount to one or more accounts designated by Licensor and that
Licensor communicates in writing to Licensee on or before the tenth day prior to
the closing of the Licensee's monthly accounting period for which running
royalties are being paid. Licensee shall notify Licensor of its closing date.
The provisions of this Section 4.1, relating to the calculation and payment of
royalties shall apply hereto mutatis-mutandis.
4.2 In addition to all of the above payments, and in the event that Licensee
exercises the option referred to in Article 8 hereof, the Licensee shall
immediately pay to the Licensor a lump sum of United States Dollars
___________ million (US$______________) for the license to use the
Know-How and technology covered by the Patents referred into Appendix II
hereof, related to the production of CLM Second Products. Additionally and
as part of the total price for the relevant License under these Appendix
II Patents and the relevant technology, the Licensee shall pay to the
Licensor a running royalty of three percent (3%)
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<PAGE>
of the net sales price of the produced CLM Second Products. The running
royalties calculated according to this section shall be calculated in the
same manner as the running royalties were calculated above.
ARTICLE 5
OTHER OBLIGATIONS OF THE LICENSOR
5.1 Upon signing of this Agreement, payment by the Licensee of 10% of the
agreed lump sum referred into paragraph 4.1, and execution and delivery to
the Licensor of the guarantee agreement referred into Article 6.4 hereof,
the Licensor shall make available to the Licensee all of the Know-How
specified under this Agreement, except for the Process Specification Book
referred to below.
5.2 Within three months from the date the Licensee notifies the Licensor as to
the location of the Plant pursuant to Article 6.2 hereof, the Licensor
shall provide the Licensee with the "Process Specification Book", which
consists of:
(a) Process Flow sheets with material and energy balances,
(b) Technical Description of the Process,
(c) Basic Equipment Specification (at a level sufficient for detailed
engineering to be completed),
(d) Preliminary Process Instrumentation and Control Diagram,
(e) Proposed Plan Layout.
5.3 Within one month from the date the Licensee provides the Licensor with the
Detailed Engineering as referred below in Article 6.2, the Licensor must
have reviewed the Detailed Engineering and advice the Licensee of any
alterations required for the appropriate construction of the Plant.
5.4 Licensee shall use its best efforts to cause the Plant to be constructed
in an expeditious manner. Upon completion of the Plant, the Licensor shall
provide the Licensee, at the Licensee's expense, the technical assistance
of three (3) qualified personnel trained in the
8
<PAGE>
Process techniques to train up to ten (10) members of the Licensee's
personnel for a period of thirty (30) days, in order to ensure proper and
adequate use of the transferred Know-How. Licensee shall reimburse
Licensor for its entire cost for such training personnel including, but
not limited to: US$________ - per day per person provided, any
accommodation, traveling, food and other local expenses. Licensor shall
consider any reasonable request for additional training personnel and/or
technical assistance and support. For any additional training personnel,
technical assistance and support that may be supplied by the Licensor, all
expense, including those enumerated above, shall be borne exclusively by
the Licensee.
ARTICLE 6
OTHER OBLIGATIONS OF THE LICENSEE
6.1 As to the Processes and/or the Products licensed under this Agreement, the
Licensee shall exercise its best efforts and diligence in undertaking, at
its own expense, all investigating, as far as those are required, to
obtain and maintain required governmental approvals to manufacture, market
and sell the Product(s) in ________, and shall diligently proceed to
secure and maintain, as may be required from time to time, government
registration and any kind of approvals, authorizations and permits
necessary in ________.
In no case may the Licensor be held responsible for any claims or disputes
arising from, or for any damages caused by, the non compliance of the
Licensee with any Governmental requirements regarding environmental
protection or any other matter.
6.2 The Licensee shall notify the Licensor of the exact, specific location of
the Plant within 30 days from the Effective Date of this Agreement. For
the construction of the Plant, the Licensee may hire any competent
international Engineering Contractor with experience in similar plant
design and construction. This Engineering Contractor will perform the
detailed engineering based on the "Process Specification Book" referred to
above in Article 5.2. The Licensee must provide the detailed engineering
to the Licensor for review and comments as mentioned above in Article 5.3
as soon as it is completed and especially the following:
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<PAGE>
(a) Detailed Specification Sheets of all Equipment
(b) Detail Engineering Drawings of all Equipment
(c) Detail Construction and Erection Plans of all required Process and
Auxiliary Equipment.
6.3 Throughout the term of this Agreement the Licensor and any personnel,
assistants, consultants thereof shall have free access to the Plant during
normal business hours and upon ten (10) days written notice. Licensor
shall have the obligation to maintain the confidentiality of any
information obtained as a result of these visits that is so designated in
writing as confidential by Licensee.
6.4 As a condition precedent to the Licensor's undertaking to satisfy its
obligations hereunder, the Licensee shall procure and provide the Licensor
with a guarantee agreement by the holders of all the shares in the
Licensee. Such guarantee agreement shall have to be in form and substance
satisfaction, to and supplied by the Licensor in all respects at the
Licensor's sole and absolute discretion.
ARTICLE 7
SECRECY AND CONFIDENTIALITY
The Licensee shall treat all Processes and technical information,
proprietary Know-How, patented processes, product specifications, patent
applications, documents and drawings supplied by the Licensor as "Confidential
Information" and shall not disclose such confidential information to a third
party except if required by law, and only then if the Licensee informs the
Licensor at least thirty (30) days in advance of the required date of
disclosure. These obligations shall begin with the first supply or disclosure of
the confidential information. The Licensee shall not utilize the confidential
information for any purpose other than for completing, operating, maintaining or
modifying the Plant, and/or formulating and/or selling the Product(s).
10
<PAGE>
The Licensee shall cause all of its employees to be bound by the same
obligations of confidentiality as the Licensee. The same applies for the
Engineering company(ies) that will take care of the detailed engineering and the
erection and construction of the plant.
Information received from the Licensor shall not be deemed Confidential
Information when:
(a) it enters the public domain by publication or otherwise from a
source having the legal right to publish such information: or
(b) it was documented to have been in the possession of the Licensee at
the Effective Date of the Agreement; or
(c) it is made available to the Licensee independently by a third party,
who has the legal right to do so.
ARTICLE 8
OPTION
Within a period of 24 months commencing with the Effective Date of this
Agreement, the Licensee shall have the option to request and obtain from the
Licensor a license to use the additional patents owned or controlled by the
Licensor and relevant Know-How owned or controlled by the Licensor, with regard
to the manufacturing and/or sale of Ceramic Like Material (CLM) end Second
Products, as referred to in the Patents set forth in Appendix II hereof.
Should the Licensee exercise the above option, and upon payment by the
Licensee of the agreed lump sum referred into Article 4.2 hereof, the Licensor
shall make available to the Licensee all the Know-How and other technical
information related to the subject matter of the Patents referred into Appendix
II hereof.
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ARTICLE 9
TERM
The term of this Agreement is agreed to be from the Effective Date hereof
until the last patent containing at least one claim that covers the First or
Second Process, respectively, or any portion thereof, expires.
ARTICLE 10
TERMINATION
10.1 In the event either party fails to perform its obligations or conditions
herein required to be performed or fulfilled and if any default shall
continue for thirty (30) days after receipt of written notice thereof from
the non-defaulting party, the non-defaulting party shall have the right to
terminate this Agreement by written notice of such termination at any
time. Any right to terminate this Agreement, pursuant to this paragraph,
shall be in addition to, and shall not be exclusive of, or prejudicial to,
any other rights or remedies the non- defaulting party may have on account
of the default of the other party. No waiver by either party of any breach
of any of the provisions herein contained to be performed by the other
party shall be construed as a waiver of any succeeding breach of the same
or any other provision hereof.
10.2 In the event that either party shall be adjudicated as bankrupt; go into
liquidation, receivership, or trusteeship; make a compromise with its
creditors or enter into any similar proceedings or the same nature; or
that governmental regulations, policies, or laws are promulgated, or
proceedings initiated by the government in the domiciliary country of
either party which preclude performance hereunder of the obligations of
either party of a prolonged period of time, the other party shall be
entitled without liability therefor to terminate this Agreement effective
immediately before such action by notice in writing thereof to the other
party. In the event that this Agreement becomes the property of a trustee
or custodian or receiver in bankruptcy or similar situation for the
Licensee, said trustee, custodian or receiver shall be disabled from
granting any sub-license hereunder and shall be obliged to transfer the
Know-How and Patent licenses back to Licensor.
12
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ARTICLE 11
APPLICABLE LAW
This Agreement shall governed by and construed in accordance with the laws
of the State New York, U.S.A.
ARTICLE 12
ARBITRATION
12.1 In the event of any dispute in the interpretation or meaning of any of the
articles to this Agreement, both parties shall promptly endeavor to
resolve the dispute by mutual discussions and agreement. Should the
dispute continue to remain unresolved, both parties to this Agreement
shall resort to Arbitration as provided for herein.
Either the Licensee or the Licensor may demand Arbitration with respect to
any claim, dispute or other matter that has arisen between the parties.
However, no demand for Arbitration for any such claim, disputes or other
matter shall be made until the latter of:
(a) the date on which either of the parties has indicated his final
position on such claim, dispute or matter, or
(b) the twentieth (20th) day after one party has notified the other of
his complaint in written form and no written reply has been received
within twenty (20) days after such notification.
12.2 No demand for Arbitration shall be made after the thirtieth (30th) day
following the date on which either of the parties has rendered its written
final decision, in respect of the claim, dispute or other matter as to
which Arbitration is sought. The Licensee or the Licensor, as the case may
be, shall be obliged to specify that the written decision is in fact their
final position within the meaning of this Sub-Article. Failure to demand
Arbitration
13
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within said 30 day period, shall result in the expressed position becoming
the final decision and therefore being binding upon the other party.
12.3 All claims, disputes and other matters arising out of, or relating to,
this Agreement or the breach thereof, which cannot be resolved by the
parties, shall be decided by Arbitration in accordance with the rules of
the American Arbitration Association and, where applicable, the laws of
the State of New York, U.S.A. The Arbitrator shall be chosen by Agreement
between the parties. Should the parties be unable to agree on the naming
of the Arbitration within ten (10) days, the selection of the Arbitrator
shall be made by the American Arbitration Association. The Arbitration
proceedings shall be conducted in English and shall be held in a place at
the discretion of the party against whom a decision is sought, but not
more than 25 miles from an international airport. The party seeking the
Arbitration shall bear the cost, if any, of the location of the
Arbitration and of the travel expenses of not more than two (2) people
representing the other party and not more than two (2) of its counsel, in
coming to the Arbitration, but each party shall bear its entire cost of
counsel, excluding such travel expenses. The award rendered by the
Arbitrator shall be final, and judgments may be entered upon it in any
court having jurisdiction thereof. The party losing the arbitration shall
bear the cost of the Arbitrator.
12.4 The Licensor and the Licensee shall continue to carry out their
obligations under the Agreement and maintain the agreed progress and
running royalty payment schedule during any Arbitration proceedings,
unless otherwise agreed by the parties in writing. In the event that the
Arbitration concerns the amount or running royalties that are due,
interest shall be owed by the Licensee at the rate of 1.5% per month on
the amount of the arbitration award, if any, from the first day of the
month that the running royalties were due until payment thereof.
12.5 In the event of Arbitration, the Licensor and the Licensee agree that the
Arbitrator(s) shall have unrestricted access to the Plant, and to all of
the books and records thereof, for the purpose of the said Arbitration.
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ARTICLE 13
MISCELLANEOUS
13.1 In the event any term or provision of this Agreement shall for any reason
be held to be invalid, illegal or unenforceable in any respect, then,
unless otherwise agreed, this Agreement shall continue to be in full force
and effect except that the said term or provision shall be deemed to be
excised therefrom, so that the Agreement shall be interpreted and
construed as if such term or provision, to the extent the same shall have
been held to be invalid, illegal or unenforceable, had never been
contained herein.
13.2 This agreement supersedes all communications, negotiations, and
agreements, either written or oral, made prior to the Effective Date.
13.3 Licensor makes no representation that the practice of either or both
Processes, or the making using and/or selling of either Product does not
infringe any claim of any patent in any country of the world. Should a
third party make claim against Licensee that there is such an
infringement, Licensor agrees to assist Licensee, as requested and at
Licensee's expense, in the defense against such a claim.
13.4 Licensee hereby agrees to indemnify and hold Licensor harmless against any
claim against Licensor and/or Licensee by any third party in connection
with the Licensee's using the instant licensed technology, carrying out
either or both of the instant licensed Processes, and/or making, using
and/or selling either or both of the instant licensed Products. Licensee
further agrees to indemnify and hold Licensor harmless against any claim
brought by a government or a governmental agency in connection with the
practice of the technology licensed hereunder, and/or the making, using
and/or selling of the Product(s) produced thereby.
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In witness whereof the parties have read, accepted and signed this
Agreement.
C.W. CHEMICAL WASTE _______________________
TECHNOLOGIES LTD.
(LICENSOR) (LICENSEE)
- ----------------------------------- ----------------------------------
Dated this day of , 199 Dated this day of , 199
-- ------- - -- ------- _
[CORPORATE SEAL] [CORPORATE SEAL]
16
PROCESS TECHNOLOGY LICENSE AGREEMENT
THIS AGREEMENT is made, entered into by and between:
A. C.W. CHEMICAL WASTE TECHNOLOGIES LTD (hereafter called "Licensor"), a
corporation organized and existing under the laws of Cyprus, having a
principal office at 20 East 63rd Street, New York, New York 10021, U.S.A.;
and
B. _______________________________ (hereafter called the Licensee) a
corporation organized and existing under the laws of ________ and having
its principal office at ____________________.
WITNESSETH:
WHEREAS, Licensor is the owner of proprietary technology regarding the
following two Process Technologies:
1. a First Process for the treatment of waste phosphogypsum that can
produce a substantially non-toxic First Product with numerous useful end
uses and which in many cases can be used with superior results as a
substitute for other materials currently in use; and
2. a Second Process for the production of Ceramic Like Material (CLM)
Second products, which are composite materials containing appropriately
conditioned treated phosphogypsum, synthetic resins and other materials.
WHEREAS, for both above mentioned Processes Licensor owns or controls a
pending patent application in Poland, as set forth in Appendix I, and certain
PCT applications as set forth in Appendix II hereof, and Licensor is in
possession of and owns or controls Know-How related to these Processes.
WHEREAS, License desires to obtain a license to use the Know-How for both
above mentioned processes i.e. for 1) the treatment of waste phosphogypsum and
for its conversion into an environmentally friendly material by the First
Process and a license under the Patents covering
<PAGE>
such treatment and conversion that are owned or controlled by Licensor, as
exemplified in Appendix I hereof, as well as to obtain the relevant Know-How and
design and engineering assistance from Licensor in connection with such
treatment and conversion First Process, and sale of the licensed First Product,
on the terms and conditions referred to herein and 2) the license to use the
technology and Know-How related to the production of a Second Product, sometime
referred to as CLM, by the Second Process, and as referred to in Patents that
are exemplified by those that are set forth in APPENDIX II hereof.
WHEREAS, Licensee desires to obtain, an option to license to use the
technology and Know-How related to the production of a Second Product, sometimes
referred to as CLM, by the Second Process, and as referred to in Patents that
are exemplified by those that are set forth in Appendix II hereof.
NOW, THEREOF, in consideration of the mutual covenants herein contained,
the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
In this Agreement, the following expressions shall have the following
meanings assigned to them in this article.
1.1 "Agreement" shall mean this Licensing Agreement together with Appendixes
hereto, as entered into between the Licensor and the Licensee whereby
granting to the Licensee a License to use the First Process, together with
all of the documents to which reference had been made in this Agreement,
including any amendments made to those documents by mutual agreement
between the parties.
2
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1.2 "Licensor" shall mean the party named as such in this Agreement or its
successor or permitted assigns.
1.3 "Licensee" shall mean the party named as such in this Agreement or its
successor or permitted assigns.
1.4 "Patent(s)" shall mean the patent(s) application(s) relevant to the First
or Second Processes owned or controlled by the Licensor, as exemplified by
the Patents set forth in Appendix I and Appendix II, as the case may be.
1.5 "Effective Date" shall mean the last date on which any party executes this
Agreement, whereupon this Agreement comes into effect.
1.6 "Improvements" shall mean any modification or refinement of either of the
Processes and/or Know-How related thereto, whether patented or not, which
has been developed or acquired during the period covered by this
Agreement, and which is capable of improving the technical and/or economic
characteristics of the First or Second and/or the First or Second
Processes.
1.7 "Know-How" shall mean all the technical data, information, drawings and
designs and instructions relevant to the First or Second Processes,
respectively and/or the First or Second Products, respectively, that is in
the possession of the Licensor, and is applicable to commercial use of the
respective Processes by the Licensee, and which are sufficient to enable
the Licensee to construct the Plant, and to enable the Licensee's
personnel to operate the Plant so as to carry out at least the First
Process and manufacture at least the First Product.
1.8 "Plant" shall mean the manufacturing facilities to be built by the
Licensee, at its own expense, at a site in Israel, using the First Process
for the manufacturing of the First
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Product at nameplate capacity of one hundred fifty thousand (150,000)
metric tons of treated phosphogypsum per annum based on 300 operating days
per annum.
1.9 "Process" shall mean the latest commercially proven process, with respect
to the First and Second Process, developed or acquired, and owned or
controlled by the Licensor at the Effective Date.
1.10 "First Product" shall mean the waste phosphogypsum treated by the First
Process and "Second Product" shall mean the CLM material produced by the
Second Process.
ARTICLE 2
LICENSE
2.1 The Licensor expressly and unreservedly guarantees that it is the
proprietary licensee of, and/or that it owns or controls and has lawful
and full access to, the relevant Know-How and that it possesses the
exclusive lawful and unlimited right and authority to grant rights to the
Licensee to use the Know-How and, subject to the payment of the sums in
the amounts and at the time referred into Article 4 hereof, hereby grants
to the Licensee a license with the full right and authority to use said
Know-How to plan, construct, operate, repair and maintain the necessary
installations for the carrying out the First and Second Process and
thereby manufacturing the First and Second Product; to purchase acquire
make or have made any equipment apparatus, materials or other items
necessary for the construction and operation of the relevant
installations; to use, sell, export or otherwise dispose of the First and
Second Product; and/or to improve, modify or up-date the First and Second
Process and/or the First and Second Product.
2.2 Said license shall be non-exclusive for the manufacture and production of
the First and Second Product, and shall also include the right for the
Licensor to grant one or more sub-license(s), under the relevant Patents
and to use the Know-How, to others for the same
4
<PAGE>
purposes and with the same limitations as expressed herein. Said license
and above rights granted hereunder to Licensee shall be limited to the
specific Plant referred to above for the manufacturing of up to one
hundred and fifty thousand (150,000) metric tons of First Product yearly
and up to five thousand (5,000) metric tons of Second Product yearly,
which shall be the maximum designed capacity of the Plant.
2.3 Said Processes are covered by certain patents that include those set forth
in Appendix I and Appendix II, as they may apply to each process and/or
product, (including, inter alia, patent and/or patent application
identification and description of the respective Patent rights, the name
of the Patentee and/or Licensee, dates of issuance, country(ies) and dates
of their filing, and their expiration date(s), if applicable). The
Licensor hereby expressly declares that by the expiration of ninety (90)
days from the Effective Date of this Agreement, it shall have caused
corresponding applications for patent to be filed in _________, expressly
agrees to use its best efforts to maintain such patent application(s) and
patent(s) in force for their respective entire term(s) or the entire term
of this Agreement, whichever is shorter. Licensor shall inform Licensee in
writing, immediately after the filing of said patent application(s), that
said patent application(s) have been duly filed; of the progress of the
prosecution of said patent application(s); of the granting of said patent
application; and of the time and requirements for maintaining such patent
and/or patent application(s) in force, as well as provide Licensee with
copies of all related patent applications and issued patents, and any
other relevant documents.
2.4 All formalities, procedures, costs and expenses (including, legal costs,
Government fees, renewal fees, and any other reasonably associated costs)
relating to the, filing, prosecution, issuance and maintenance in force of
the Patents throughout their respective life (including any patented
improvements thereof), shall be the responsibility of and at the cost and
expense of the Licensor. Should Licensor decide that it will not pursue or
maintain any patent, it shall immediately (at least thirty (30) days
before a terminating event is to take place) inform Licensee of such
decision and permit Licensee to take over
5
<PAGE>
the patent property in question. Under these circumstances, Licensee shall
have no obligation to pay any running royalty with respect to such patent
property.
ARTICLE 3
IMPROVEMENTS
The Licensor undertakes, to make available to the Licensee all
improvements in the Know-How developed or acquired by the Licensor and of which
it is entitled to dispose, and specifically to make available, free of charge,
all developments and improvements in operating techniques, preventive
maintenance and safety measures, and process developments applicable to the
First Process and/or the First Product and the relevant installations, as well
as all other relevant data and proprietary information which is made available,
free of charge, by the Licensor to other licensed users of the Know-How.
ARTICLE 4
LUMP-SUM PAYMENT AND ROYALTIES
4.1 In consideration of the license under the Patents referred into Appendix I
hereof and for the license to use the respective Know-How, the Licensee
shall pay the Licensor (a) a lump sum of US$ _________ ( ) million
according to the following schedule:
- Upon signing of this Agreement and not later than three (3) working
days, the Licensee shall pay US$ ________ to the following bank
account of the Licensor:
EUROPEAN POPULAR BANK
63, Eroon Polytechniou and Skouze Str,
Piraeus - Greece
A/C No.: 004-030086
In favour of : C.W. CHEMICAL WASTE TECHNOLOGIES LTD.
6
<PAGE>
- Twelve months after the Effective Date this Agreement, the Licensee
shall pay US$________ - to the above Licensor's Bank account or as
otherwise directed by Licensor;
- Upon completion of the Plant, but in any case no later than twenty
four (24) months after the Effective Date of this Agreement, the
Licensee shall pay US$________ - to the above Licensor's Bank
account or as otherwise directed by Licensor.
Additionally, in further consideration for the rights and licensed granted
by this Agreement, Licensee agrees to pay Licensor a running royalty of three
percent (3%) of the net sales price of any First and Second Product that is sold
or otherwise disposed of. In the event that First and Second Product is disposed
of without compensation to the Licensee, the net sales price of that First and
Second Product shall be assumed to be the average of the net sales prices of the
last preceding ten (10) tons of First and Second Product that were actually sold
by Licensor.
Said sale price shall be calculated without any deduction. All expenses
incurred for the manufacture, marketing, promotion, advertising, hand outs,
brochures, financing, etc., of the First and Second Product, will be exclusively
born by Licensee and will not be deducted from the net sales price used to
calculate the running royalties that are due to Licensor. Those royalties are
net, and not to be diminished for tax in (country). Licensee will pay every tax
that could diminish the above mentioned royalties.
Running Royalties shall be due and payable for the entire life of any
patent in the applicable country that contains at least one claim that is
infringed by said Products and/or said Processes.
If the First and Second Product is further processed/converted by
Licensee, or is assembled in combination with other materials by the Licensee,
the net sale price on which
7
<PAGE>
royalties shall be calculated, shall be the net sales price of whatever product
the Licensee finally sells to a third party.
Licensee will provide Licensor with a monthly report, submitted by not
later than the tenth (10th) of the following month, detailing the quantity sold
of each First and Second Product, the total dollar value of the net sales price
of each First and Second Product, and the running royalty to be paid to Licensor
for the preceding month. Licensee shall pay the royalties to Licensor along with
the monthly report. At Licensor's option the running royalty may be paid by
crediting the corresponding amount to one or more accounts designated by
Licensor and that Licensor communicates in writing to Licensee on or before the
tenth day prior to the closing of the Licensee's monthly accounting period for
which running royalties are being paid. Licensee shall notify Licensor of its
closing date. The provisions of this Section 4.1, relating to the calculation
and payment of royalties shall apply hereto mutatis-mutandis.
4.2 In addition to all of the above payments, and in the event that Licensee
exercises the option referred to in Article 8 hereof, the Licensee shall
immediately pay to the Licensor a lump sum of United States Dollars
_____________ million (US$________) for the license to use the Know-How
and technology covered by the Patents referred into Appendix II hereof,
related to the production of CLM Second Products. Additionally and as part
of the total price for the relevant License under these Appendix II
Patents and the relevant technology, the Licensee shall pay to the
Licensor a running royalty of three percent (3%) of the net sales price of
the produced CLM Second Products. The running royalties calculated
according to this section shall be calculated in the same manner as the
running royalties were calculated above.
8
<PAGE>
ARTICLE 5
OTHER OBLIGATIONS OF THE LICENSOR
5.1 Upon signing of this Agreement, payment by the Licensee of 10% of the
agreed lump sum referred into paragraph 4.1, and execution and delivery to
the Licensor of the guarantee agreement referred into Article 6.4 hereof,
the Licensor shall make available to the Licensee all of the Know-How
specified under this Agreement,. except for the Process Specification Book
referred to below.
5.2 Within three months from the date the Licensee notifies the Licensor as to
the location of the Plant pursuant to Article 6.2 hereof, the Licensor
shall provide the Licensee with the "Process Specification Book", which
consists of:
(a) Process Flow sheets with material and energy balances,
(b) Technical Description of the Process,
(c) Basic Equipment Specification (at a level sufficient for detailed
engineering to be completed),
(d) Preliminary Process Instrumentation and Control Diagram,
(e) Proposed Plan Layout.
5.3 One month from the date the Licensee provides the Licensor with the
Detailed Engineering as referred below in Article 6.2, the Licensor must
have reviewed the detailed Engineering and advise the Licensee of any
alterations required for the appropriate construction of the Plant.
5.4 Licensee shall use its best efforts to cause the Plant to be constructed
in an expeditious manner. Upon completion of the Plant, the Licensor shall
provide the Licensee, at the Licensee's expense, the technical assistance
of three (3) qualified personnel trained in the
9
<PAGE>
Process techniques to train up to ten (10) members of the Licensee's
personnel for a period of thirty (30) days, in order to ensure proper and
adequate use of the transferred Know-How. Licensee shall reimburse
Licensor for its entire cost for such training personnel including, but
not limited to: US$________ per day per person provided, any
accommodation, traveling, food and other local expenses. Licensor shall
consider any reasonable request for additional training personnel and/or
technical assistance and support. For any additional training personnel,
technical assistance and support that may be supplied by the Licensor, all
expense, including those enumerated above, shall be borne exclusively by
the Licensee.
ARTICLE 6
OTHER OBLIGATIONS OF THE LICENSEE
6.1 As to the Processes and/or the Products licensed under this Agreement, the
Licensee shall exercise its best efforts and diligence in undertaking, at
its own expense, all investigating, as far as those are required, to
obtain and maintain required governmental approvals to manufacture, market
and sell the Product(s) in ________, and shall diligently proceed to
secure and maintain, as may be required from time to time, government
registration and any kind of approvals, authorizations and permits
necessary in________. In no case may the Licensor be held respo0sible for
any claims or disputes arising from, or for any damages caused by, the non
compliance of the Licensee with any Governmental requirements regarding
environmental protection or any other matter.
6.2 The Licensee shall notify the Licensor of the exact, specific location of
the Plant within 30 days from the Effective Date of this Agreement. For
the construction of the Plant, the Licensee may hire any competent
international Engineering Contractor with experience in similar plant
design and construction. This Engineering Contractor will perform the
details engineering based on the "Process Specification Book" referred to
above in Article 5.2. The Licensee must provide the detailed engineering
to the Licensor for review and
10
<PAGE>
comments as mentioned above in Article 5.3 as soon as it is completed and
especially the following:
(a) Detailed Specification Sheets of all Equipment
(b) Detail Engineering Drawings of all Equipment
(c) Detail Construction and Erection Plans of all required Process and
Auxiliary Equipment.
6.3 Throughout the term of this Agreement the Licensor and any personnel,
assistants, consultants thereof shall have free access to the Plant during
normal business hours and upon ten (10) days written notice. Licensor
shall have the obligation to maintain the confidentiality of any
information obtained as a result of these visits that is so designated in
writing as confidential by Licensee.
6.4 As a condition precedent to the Licensor's undertaking to satisfy its
obligations hereunder, the Licensee shall procure and provide the Licensor
with a guarantee agreement by the holders of all the shares in the
Licensee. Such guarantee agreement shall have to be in form and substance
satisfactory to an supplied by the Licensor in all respects at the
Licensor's sole and absolute discretion.
ARTICLE 7
SECRECY AND CONFIDENTIALITY
7.1 The Licensee shall treat all Processes and technical information,
proprietary Know- How, patented processes, product specifications, patent
applications, documents and drawings supplied by the Licensor as
"Confidential Information" and shall not disclose such confidential
information to a third party except if required date of disclosure. These
obligations shall begin with the first supply or disclose of the
confidential information. The Licensee shall not utilize the confidential
information
11
<PAGE>
for any purpose other than for completing, operating, maintaining or
modifying the Plant, and/or formulating and/or selling the Product(s). The
Licensee shall cause all of its employees to be bound by the same
obligations of confidentiality as the Licensee, the same applies for the
Engineering company(ies) that will take care of the detailed engineering
and the erection and construction of the Plant.
Information received from the Licensor shall not be deemed Confidential
Information when:
(a) it enters the public domain by publication or otherwise from a
source having the legal right to publish such information; or
(b) it was documented to have been in the possession of the Licensee at
the Effective Date of the Agreement; or
(c) it is made available to the Licensee independently by a third party,
who has the legal right to do so.
ARTICLE 8
TERM
The term of this Agreement is agreed to be from the Effective Date
hereof until the last patent containing at least one claim that covers the First
or Second Process, respectively, or any portion thereof, expires.
ARTICLE 9
TERMINATION
9.1 In the event either party fails to perform its obligations or conditions
herein required to be performed or fulfilled and if any default shall
continue for thirty (30) days after receipt of written notice thereof from
the non-defaulting party, the non-defaulting
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<PAGE>
party shall have the right to terminate this Agreement by written notice
of such termination at any time. Any right to terminate this Agreement,
pursuant to this paragraph, shall be in addition to, and shall not be
exclusive of, or prejudicial to, any other rights or remedies the
non-defaulting party may have on account of the default of the other
party. No waiver by either party of any breach of any of the provisions
herein contained to be performed by the other party shall be construed as
a waiver of any succeeding breach of the same or any other provision
hereof.
9.2 In the event that either party shall be adjudicated as bankrupt; go into
liquidation, receivership, or trusteeship; make a compromise with its
creditors or enter into any similar proceedings of the same nature; or
that governmental regulations, policies, or laws are promulgated, or
proceedings initiated by the government in the domiciliary country of
either party which preclude performance hereunder of the obligations of
either party of a prolonged period of time, the other party shall be
entitled without liability therefor to terminate this Agreement effective
immediately before such action by notice in writing thereof to the other
party. In the event that this Agreement becomes the property of a trustee
or custodian or receiver in bankruptcy or similar situation for the
Licensee, said trustee, custodian or receiver shall be disabled from
granting any sub-license hereunder and shall be obliged to transfer the
Know-How and Patent licenses back to Licensor.
ARTICLE 10
APPLICABLE LAW
This Agreement shall governed by and construed in accordance with
the laws of the State of New York, U.S.A. without regard to principles of
conflict of Laws.
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ARTICLE 11
ARBITRATION
11.1 In the event of any dispute in the interpretation or meaning of any of the
articles to this Agreement, both parties shall promptly endeavor to
resolve the dispute by mutual discussions and agreement. Should the
dispute continue to remain unresolved, both parties to this Agreement
shall resort to Arbitration as provided for herein.
Either the Licensee or the Licensor may demand Arbitration with respect to
any claim, dispute or other matter that has arisen between the parties.
However, no demand for Arbitration for any such claim, disputes or other
matter shall be made until the latter of.:
(a) the date on which either of the parties has indicated its final
position on such claim, dispute or matter, or
(b) the twentieth (20th) day after one party has notified the other of
its complaint in written form and no written reply has been received
within twenty (20) days after such notification.
11.2 No demand for Arbitration shall be made after the thirtieth (30th) day
following the date on which either of the parties has rendered its written
final decision, in respect of the claim, dispute or other matter as to
which Arbitration is sought. The Licensee or the Licensor, as the case may
be, shall be obligated to specify that the written decision is in fact
position within the meaning of this Sub-Article. Failure to demand
Arbitration within said 30 day period, shall result in the expressed
position becoming the final decision and therefore being binding upon the
other party.
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<PAGE>
11.3 All claims, disputes and other matters arising out of, or relating to,
this Agreement or the breach thereof, which cannot be resolved by the
parties, shall be decided by Arbitration in accordance with the rules of
the American Arbitration Association and, where applicable, the laws of
the State of New York U.S.A. The Arbitrator shall be chosen by Agreement
between the parties. Should the parties be unable to agree on the naming
of the Arbitration within ten (10) days, the selection of the Arbitrator
shall be made by the American Arbitration Association. The Arbitration
proceedings shall be conducted in English and shall be held in a place at
the discretion of the party against whom a decision is sought, but not
more than 25 miles from an international airport. The party seeking the
Arbitration shall bear the cost, if any, of the location of the
Arbitration and of the travel expenses of not more than two (2) people
representing the other party and not more than ( 2 ) of its counsel, in
coming to the Arbitration, but each party shall bear its entire cost of
counsel, excluding such travel expenses. The award rendered by the
Arbitrator shall be final, and judgments may be entered upon it in any
court having jurisdiction thereof. The party losing the arbitration shall
bear cost of the Arbitrator.
11.4 The Licensor and the Licensee shall continue to carry out their
obligations under the Agreement and maintain the agreed progress and
running royalty payment schedule during any Arbitration proceedings,
unless otherwise agreed by the parties in writing. In the event that the
Arbitration concerns the amount or running royalties that are due,
interest shall be owed by the Licensee at the rate of 1.5% per month on
the amount of the arbitration award, if any, from the first day of the
month that the running royalties were due until payment thereof.
11.5 In the event of Arbitration, the Licensor and the Licensee agree that the
Arbitrator(s) shall have unrestricted access to the Plant, and to all of
the books and records thereof, for the purpose of the said Arbitration.
The parties shall comply with the U.S. Rules of Civil Practice and the
Rules of Evidence.
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ARTICLE 12
MISCELLANEOUS
12.1 In the event any term or provision of this Agreement shall for any reason
be held to be invalid, illegal or unenforceable in any respect, then,
unless otherwise agreed, this Agreement shall continue to be in full force
and effect except that the said term or provision shall be deemed to be
excised therefrom, so that the Agreement shall be interpreted and
construed as if such term or provision, to the extent the same shall have
been held to be invalid, illegal or unenforceable, had never been
contained herein.
12.2 This Agreement supersedes all communications, negotiations, and
agreements, either written or oral, made prior to the Effective Date.
12.3 Licensor makes no representation that the practice of either or both
Processes, or the making using and/or selling of either Product does not
infringe any claim of any patent in any country of the world. Should a
third party make claim against Licensee that there is such an
infringement, Licensor agrees to assistance, as requested and at License's
expense, in the defense against such a claim.
12.4 Licensee hereby agrees to indemnify and hold Licensor harmless against any
claim against Licensor and/or Licensee by any third party in connection
with the Licensee's using the instant licensed technology, carrying out
either or both of the instant Licensed Processes, and/or making, using
and/or selling either or both of the instant Licensed Products. Licensee
further agrees to indemnify and hold Licensor harmless against any claim
brought by a governmental or a governmental agency in connection with the
practice of the technology licensed hereunder, and/or the making, using
and/or selling of the Product(s) produced thereby.
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In witness whereof the parties have read, accepted and signed this
Agreement.
C.W. CHEMICAL WASTE _______________________
TECHNOLOGIES LTD.
- ----------------------------------- ----------------------------------
Dated this day of , 199 Dated this day of , 199
-- ------- - -- ------- _
[CORPORATE SEAL] [CORPORATE SEAL]
17
Exhibit 10.6
C.W. CHEMICAL WASTE TECHNOLOGIES LIMITED
1998 STOCK OPTION PLAN
<PAGE>
<TABLE>
<CAPTION>
C.W. CHEMICAL WASTE TECHNOLOGIES LIMITED
1998 STOCK OPTION PLAN
Article Page
<S> <C> <C>
1. Establishment and Purpose............................................................................1
1.1 Establishment and Effective Date............................................................1
1.2 Purpose.....................................................................................1
2. Awards...............................................................................................1
2.1 Form of Awards..............................................................................1
2.2 Maximum Shares Available....................................................................2
2.3 Return of Prior Awards......................................................................2
3. Administration.......................................................................................2
3.1 Committee...................................................................................3
3.2 Powers of the Committee.....................................................................3
3.3 Delegation..................................................................................3
3.4 Interpretations.............................................................................4
3.5 Liability; Indemnification..................................................................4
4. Eligibility..........................................................................................4
5. Stock Options........................................................................................5
5.1 Grant of Options............................................................................5
5.2 Designation as Non-Qualified
Stock Option or Incentive Stock Option......................................................5
5.3 Option Price................................................................................5
5.4 Limitation on Amount of
Incentive Stock Options ....................................................................6
5.5 Limitation on Time of Grant.................................................................6
5.6 Exercise and Payment........................................................................6
5.7 Term........................................................................................7
5.8 Rights as a Stockholder.....................................................................7
5.9 General Restrictions........................................................................7
5.10 Cancellation of Stock Appreciation Rights...................................................8
6. Stock Appreciation Rights............................................................................8
6.1 Grants of Stock Appreciation Rights.........................................................8
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
6.2 Limitations on Exercise.....................................................................8
6.3 Surrender or Exchange of Tandem Stock
Appreciation Rights.........................................................................9
6.4 Exercise of Nontandem Stock Appreciation Rights.............................................9
6.5 Settlement of Stock Appreciation Rights.....................................................9
6.6 Cash Settlement............................................................................10
7. NonTransferability of Options and
Stock Appreciation Rights...........................................................................10
8. Effect of Termination of Employment,
Disability, Retirement, or Death....................................................................11
8.1 General Rule...............................................................................11
8.2 Disability or Retirement ..................................................................12
8.3 Death......................................................................................12
8.4 Termination of Unvested Options ...........................................................13
9. Adjustment Upon Changes in Capitalization ..........................................................11
10. Amendment and Termination ..........................................................................11
11. Written Agreement ..................................................................................11
12. Miscellaneous Provisions ...........................................................................12
12.1 Tax Withholding ...........................................................................12
12.2 Compliance with Section 16(b) .............................................................12
12.3 Successors ................................................................................12
12.4 General Creditor Status ...................................................................12
12.5 Non Right to Employment ...................................................................13
12.6 Other Plans ...............................................................................13
12.7 Notices ...................................................................................13
12.8 Severability ..............................................................................13
12.9 Governing Law .............................................................................13
</TABLE>
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C.W. CHEMICAL WASTE TECHNOLOGIES LIMITED
1998 STOCK OPTION PLAN
ARTICLE 1
ESTABLISHMENT AND PURPOSE
1.1 ESTABLISHMENT AND EFFECTIVE DATE. C.W. Chemical Waste
Technologies Limited, a Cyprus corporation (the "Corporation"), hereby
establishes an incentive stock option plan to be known as the "C.W. Chemical
Waste Technologies Limited 1998 Stock Option Plan" (the "Plan"). The Plan became
effective as of February_____, 1998, upon its adoption by the Corporation's
Board of Directors (the "Board") and its approval by the Corporation's
shareholders.
1.2 PURPOSE. The purpose of the Plan is to encourage and enable
directors, key employees and consultants (subject to such requirements as may be
prescribed by the Board or the Committee) of the Corporation and its
subsidiaries to acquire a proprietary interest in the Corporation through the
ownership of the Corporation's ordinary shares, par value $.10 per share (the
"Ordinary Shares"), and other rights with respect to the Ordinary Shares. Such
ownership will provide the employees and consultants with a more direct stake in
the future welfare of the Corporation and encourage them to remain with the
Corporation and its subsidiaries. It is also expected that the Plan will
encourage qualified persons to seek and accept employment with the Corporation
and its subsidiaries.
ARTICLE 2
AWARDS
2.1 FORM OF AWARDS. Awards under the Plan may be granted in any one
or all of the following forms: (i) incentive stock options ("Incentive Stock
Options") meeting the requirements of Section 422 of the Internal Revenue Code
of 1986, as amended (the "Code"); (ii) non-qualified stock options
("Non-qualified Stock Options") (unless otherwise indicated, references in the
Plan to "Options" shall include both Incentive Stock Options and Non-qualified
Stock Options); and (iii) stock appreciation rights ("Stock Appreciation
Rights"), as described in Article 6 hereof, which may be awarded either in
tandem with Options ("Tandem Stock Appreciation Rights") or on a stand-alone
basis ("Nontandem Stock Appreciation Rights").
2.2 MAXIMUM SHARES AVAILABLE. The maximum aggregate number of
Ordinary Shares available for award under the Plan is 500,000, subject to
adjustment pursuant to Article 9 hereof. The maximum aggregate number Ordinary
Shares covered by Options or Stock
<PAGE>
Appreciation Rights that may be awarded under the Plan to any individual during
any calendar year is 100,000. In the event that prior to the end of the period
during which Options may be granted under the Plan, any Option or any Nontandem
Stock Appreciation Rights under the Plan expires unexercised or is terminated,
surrendered or canceled (other than in connection with the exercise of Stock
Appreciation Rights) without being exercised in whole or in part for any reason,
or if such awards are settled in cash in lieu of Ordinary Shares, then such
shares shall be available for subsequent awards under the Plan upon such terms
and conditions as the Board may determine.
2.3 RETURN OF PRIOR AWARDS. As a condition to any subsequent award,
the Board shall have the right, in its sole discretion, to require employees to
return to the Corporation awards previously granted under the Plan. Subject to
the provisions of the Plan, such new award shall be upon such terms and
conditions as are specified by the Board at the time the new award is granted.
ARTICLE 3
ADMINISTRATION
3.1 COMMITTEE. Awards shall be determined, and the Plan shall be
administered, by the Board or by a committee as appointed from time to time by
the Board (the "Committee"). Whenever the Plan grants power and authority to the
Board, it shall also be deemed to have granted the same power and authority to
the Committee, which Committee shall consist of not less than two (2) members of
the Board; PROVIDED, HOWEVER, that in order to permit transactions pursuant to
the Plan by employees of the Corporation to be exempt from the provisions of
Section 16(b) of the Securities Exchange Act of 1934, as amended (the "1934
Act"), each member of the Committee shall be a "Non-Employee Director," as that
term is defined in subparagraph (b)(3)(i) of Rule 16b-3 promulgated under the
1934 Act, as in effect from time to time ("Rule 16b-3"); and PROVIDED FURTHER,
HOWEVER, that each member of the Committee shall also be an "outside director"
as that term is defined in Treasury Regulation Section 1.162- 27(e)(3).
3.2 POWERS OF THE BOARD. Subject to the express provisions of the
Plan, the Board shall have the power and authority (i) to grant Options and to
determine the purchase price of the Ordinary Shares covered by each Option, the
term of each Option, the number of Ordinary Shares to be covered by each Option,
the time or times at which each Option shall become exercisable and the duration
of the exercise period applicable to each Option; (ii) to designate Options as
Incentive Stock Options or Non-qualified Stock Options and to determine which
Options, if any, shall be accompanied by Tandem Stock Appreciation Rights, (iii)
to grant Tandem Stock Appreciation Rights and Nontandem Stock Appreciation
Rights and to determine the terms and conditions of such rights; (iv) to
determine the directors, employees and consultants to whom, and the time or
times at which, Options and Stock Appreciation Rights shall be granted or made
and (v) to take all other actions contemplated to be taken by the Board
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under the Plan, including, but not limited to, authorizing the amendment of any
written agreement relating to any award made hereunder. Without limiting the
foregoing, in the event of a merger, consolidation, combination, exchange of
shares, separation, spin-off, reorganization, liquidation or other similar
transaction, the Board may, in its sole discretion, accelerate the lapse of any
vesting periods and waiting periods and extend the exercise periods applicable
to any award made under the Plan.
3.3 DELEGATION. The Board may delegate to one or more of its members
or to any other person or persons such ministerial duties as it may deem
advisable; PROVIDED, HOWEVER, that the Board may not delegate any of its
responsibilities hereunder to any director who is not a "Non-Employee Director,"
as that term is defined in subparagraph (b)(3)(i) of Rule 16b-3 and an "outside
director" for purposes of Treasury Regulation Section 1.162-27(e)(3). The Board
may also employ attorneys, consultants, accountants or other professional
advisors and shall be entitled to rely upon the advice opinions or valuations of
any such advisors.
3.4 INTERPRETATIONS. The Board shall have sole discretionary
authority to interpret the terms of the Plan, to adopt and revise rules,
regulations and policies to administer the Plan and to make any other factual
determinations which it believes to be necessary or advisable for the
administration of the Plan. All actions taken and interpretations and
determinations made by the Board in good faith shall be final and binding upon
the Corporation, all directors, employees and consultants who have received
awards under the Plan and all other interested persons.
3.5 LIABILITY; INDEMNIFICATION. No member of the Board, nor any
person to whom ministerial duties have been delegated, shall be personally
liable for any action, interpretation or determination made with respect to the
Plan or awards made thereunder, and each member of the Board shall be fully
indemnified and protected by the Corporation with respect to any liability he or
she may incur with respect to any such action, interpretation or determination,
to the extent permitted by applicable law and to the extent provided in the
Corporation's memorandum and articles of association, as amended from time to
time, or under any agreement between any such member and the Corporation.
ARTICLE 4
ELIGIBILITY
Awards may be made to all directors, employees and consultants of the
Corporation or any of its subsidiaries (subject to such requirements as may be
prescribed by the Board or the Committee). In determining the directors,
employees and consultants to whom awards may be made and the number of shares to
be covered by each award, the Board or the Committee shall take into account the
nature of the services rendered by such directors, employees and consultants,
their present and potential contributions to the success of the Corporation and
its
3
<PAGE>
subsidiaries and such other factors as the Board or the Committee in its sole
discretion shall deem relevant.
Notwithstanding the foregoing, only employees of the Corporation and
any present or future corporation which is or may be a "subsidiary corporation"
of the Corporation (as such term is defined in Section 424(f) of the Code) shall
be eligible to receive Incentive Stock Options.
ARTICLE 5
STOCK OPTIONS
5.1 GRANT OF OPTIONS. Options may be granted under the Plan for the
purchase of Ordinary Shares. Options shall be granted in such form and upon such
terms and conditions, including the satisfaction of corporate or individual
performance objectives and other vesting standards, as the Board shall from time
to time determine.
5.2 DESIGNATION AS NON-QUALIFIED STOCK OPTION OR INCENTIVE STOCK
OPTION. In connection with any grant of Options, the Board shall designate in
the written agreement required pursuant to Article 11 hereof whether the Options
granted shall be Incentive Stock Options or Non-Qualified Stock Options, or in
the case both are granted, the number of shares of each.
5.3 OPTION PRICE. The purchase price per share under each Incentive
Stock Option shall be not less than the Market Price (as hereinafter defined) of
the Ordinary Shares on the date the Incentive Stock Option is granted. The
purchase price per share under each Non-Qualified Stock Option shall be
determined by the Board. In no case, however, shall the purchase price per share
of (i) an Incentive Stock Option be less than the par value of the Ordinary
Shares ($0.10) and (ii) a Non-Qualified Stock Option be less than 75% of the
Market Price of the Ordinary Shares on the date of the grant. In the case of an
Incentive Stock Option granted to an employee owning (actually or constructively
under Section 424(d) of the Code), more than 10% of the total combined voting
power of all classes of stock of the Corporation or of a subsidiary (a "10%
Stockholder"), the option price shall not be less than 110% of the Market Price
of the Ordinary Shares on the date of grant.
The "Market Price" of the Ordinary Shares on any day shall
be determined as follows: (i) if the Ordinary Shares are listed on a national
securities exchange or quoted through the NASDAQ National Market System, the
Market Price on any day shall be, in the sole discretion of the Board, either
(x) the average of the high and low reported Consolidated Trading sales prices,
or if no such sale is made on such day, the average of the closing bid and asked
prices reported on the Consolidated Trading listing for such day or (y) the
closing price reported on the Consolidated Trading listing for such day; (ii) if
the Ordinary Shares are quoted on the NASDAQ interdealer quotation system, the
Market Price on any day shall be the average of the
4
<PAGE>
representative bid and asked prices at the close of business for such day; (iii)
if the Ordinary Shares are not listed on a national stock exchange or quoted on
NASDAQ, the Market Price on any day shall be the average of the high bid and low
asked prices reported by the National Quotation Bureau, Inc. for such day; or
(iv) if the Ordinary Shares are not listed on a national stock exchange, quoted
on NASDAQ or reported on by the National Quotation Bureau, Inc., the Market
Price on any day shall mean the fair market value of one Ordinary Share on such
day as determined in good faith by the Board. In no event shall the Market Price
of an Ordinary Share subject to an Incentive Stock Option be less than the fair
market value as determined for purposes of Section 422(b)(4) of the Code.
The Option price so determined shall also be applicable in connection
with the exercise of any Tandem Stock Appreciation Rights granted with respect
to such Option.
5.4 LIMITATION ON AMOUNT OF INCENTIVE STOCK OPTIONS. In the case of
Incentive Stock Options, the aggregate Market Price (determined at the time the
Incentive Stock Option is granted) of the Ordinary Shares with respect to which
Incentive Stock Options are exercisable for the first time by an optionee during
any calendar year (under all plans of the Corporation and any subsidiary) shall
not exceed $100,000.
5.5 LIMITATION ON TIME OF GRANT. No grant of an Incentive Stock
Option shall be made under the Plan more than ten (10) years after the date the
Plan is approved by the stockholders of the Corporation.
5.6 EXERCISE AND PAYMENT. Options may be exercised in whole or in
part. Ordinary Shares purchased upon the exercise of Options shall be paid for
at the time of purchase. Such payment shall be made in cash or, in the sole
discretion of the Board, through delivery of Ordinary Shares, installment
payments under the optionee's promissory note or combination of cash, Ordinary
Shares and/or installment payments, in accordance with procedures to be
established by the Committee. Any shares so delivered shall be valued at their
Market Price on the date of exercise. Upon receipt of a notice of exercise and
payment in accordance with procedures to be established by the Board, the
Corporation or its agent shall deliver to the persons exercising the Option (or
his or her designee) a certificate for such shares.
The Board in its sole discretion may, on an individual basis or
pursuant to a general program established by the Board in connection with the
Plan, lend money to an optionee to exercise all or a portion of an Option
granted hereunder. If the exercise price is paid in whole or part with an
optionee's promissory note, such note shall (i) provide for full recourse to the
maker, (ii) be collateralized by the pledge of the Ordinary Shares that the
optionee purchases upon exercise of such Option, (iii) bear interest at a rate
no less than the applicable Federal rate (within the meaning of Section 1274 of
the Code), and (iv) contain such other terms as the Board in its sole discretion
shall require. In the event that payment for exercised Options is made through
the delivery of Ordinary Shares, the Board, in accordance with procedures
established by the Board, may grant Non-Qualified Stock Options ("Restoration
Options") to the person exercising the
5
<PAGE>
Option for the purchase of a number of shares equal to the number of Ordinary
Shares delivered to the Corporation in connection with the payment of the
exercise price of the Option and the payment of or surrender of shares for any
withholding taxes due upon such exercise. The purchase price per share under
each Restoration Option shall be the Market Price of the Ordinary Shares on the
date the Restoration Option is granted.
5.7 TERM. The term of each Option granted hereunder shall be
determined by the Board; PROVIDED, HOWEVER, that, notwithstanding any other
provision of the Plan, in no event shall an Incentive Stock Option be
exercisable after ten (10) years from the date it is granted, or in the case of
an Incentive Stock Option granted to a 10% Stockholder, five (5) years from the
date it is granted.
5.8 RIGHTS AS A STOCKHOLDER. A recipient of Options shall have no
rights as a stockholder with respect to any shares issuable or transferable upon
exercise thereof until the date a stock certificate representing such shares is
issued to such recipient. Except as otherwise expressly provided in the Plan or
by the Board, no adjustment shall be made for cash dividends or other rights for
which the record date is prior to the date such stock certificate is issued.
5.9 GENERAL RESTRICTIONS. Each Option granted under the Plan shall be
subject to the requirement that, if at any time the Board shall determine, in
its sole discretion, that the listing, registration or qualification of the
shares issuable or transferable upon exercise thereof upon any securities
exchange or under any state or United States Federal law, or the consent or
approval of any governmental regulatory body, is necessary or desirable as a
condition of, or in connection with, the granting of such Option or the issue,
transfer, or purchase of shares thereunder, such Option may not be exercised in
whole or in part unless such listing, registration, qualification, consent, or
approval shall have been effected or obtained free of any conditions not
acceptable to the Board.
The Board or the Committee may, in connection with the granting of
any Option, require the individual to whom the Option is to be granted to enter
into an agreement with the Corporation stating that as a condition precedent to
each exercise of the Option, in whole or in part, such individual shall if then
required by the Corporation represent to the Corporation in writing that such
exercise is for investment only and not with a view to distribution, and also
setting forth such other terms and conditions as the Board or the Committee may
prescribe.
5.10 CANCELLATION OF STOCK APPRECIATION RIGHTS. Upon exercise of all
or a portion of an Option, the related Tandem Stock Appreciation Rights shall be
cancelled with respect to an equal number of Ordinary Shares.
ARTICLE 6
STOCK APPRECIATION RIGHTS
6
<PAGE>
6.1 GRANTS OF STOCK APPRECIATION RIGHTS. Tandem Stock Appreciation
Rights may be awarded by the Board in connection with any Option granted under
the Plan, either at the time the Option is granted or thereafter at any time
prior to the exercise, termination or expiration of the Option. Nontandem Stock
Appreciation Rights may also be granted by the Board at any time. At the time of
grant of Nontandem Stock Appreciation Rights, the Board shall specify the number
of Ordinary Shares covered by such right and the base price for the Ordinary
Shares to be used in connection with the calculation described in Section 6.4
below. The base price of any Nontandem Stock Appreciation Rights shall be not
less than 100% of the Market Price of an Ordinary Share on the date of grant.
Stock Appreciation Rights shall be subject to such terms and conditions not
inconsistent with the other provisions of the Plan as the Board shall determine.
6.2 LIMITATIONS ON EXERCISE. Tandem Stock Appreciation Rights shall
be exercisable only when and to the extent that, the related Option is
exercisable and shall be exercisable only for such period as the Board may
determine (which period must, in the case of a Tandem Stock Appreciation Right
related to an Incentive Stock Option, expire not later than the expiration date
of the related Option). A Tandem Stock Appreciation Right related to an
Incentive Stock Option may only be exercised when the Market Price of an
Ordinary Share exceeds the exercise price per share of the related Option. Upon
the exercise of all or a portion of Tandem Stock Appreciation Rights, the
related Option shall be cancelled with respect to an equal number of Ordinary
Shares. Ordinary Shares subject to Options, or portions thereof, surrendered
upon exercise of Tandem Stock Appreciation Rights shall not be available for
subsequent awards under the Plan. Nontandem Stock Appreciation Rights shall be
exercisable during such period as the Board shall determine.
6.3 SURRENDER OR EXCHANGE OF TANDEM STOCK APPRECIATION RIGHTS. Tandem
Stock Appreciation Rights shall entitle the recipient to surrender to the
Corporation unexercised the related Option, or any portion thereof, and to
receive from the Corporation in exchange therefor that number of Ordinary Shares
having an aggregate Market Price equal to (A) the excess of (i) the Market Price
of one (1) Ordinary Share as of the date the Tandem Stock Appreciation Rights
are exercised over (ii) the option price per share specified in such Option,
multiplied by (B) the number of Ordinary Shares subject to the Option, or
portion thereof, which is surrendered. Cash shall be delivered in lieu of any
fractional shares.
6.4 EXERCISE OF NONTANDEM STOCK APPRECIATION RIGHTS. The exercise of
Nontandem Stock Appreciation Rights shall entitle the recipient to receive from
the Corporation that number of Ordinary Shares having an aggregate Market Price
equal to (A) the excess of (i) the Market Price of one (1) Ordinary Share as of
the date on which the Nontandem Stock Appreciation Rights are exercised over
(ii) the base price of the shares covered by the Nontandem Stock Appreciation
Rights, multiplied by (B) the number of Ordinary Shares covered by the Nontandem
Stock Appreciation Rights, or the portion thereof being exercised. Cash shall be
delivered in lieu of any fractional shares.
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6.5 SETTLEMENT OF STOCK APPRECIATION RIGHTS. As soon as is reasonably
practicable after the exercise of any Stock Appreciation Rights, the Corporation
shall (i) issue, in the name of the recipient, stock certificates representing
the total number of full Ordinary Shares to which the recipient is entitled
pursuant to Section 6.3 or 6.4 hereof and cash in an amount equal to the Market
Price, as of the date of exercise, of any resulting fractional shares, and (ii)
if the Board causes the Corporation to elect to settle all or part of its
obligations arising out of the exercise of the Stock Appreciation Rights in cash
pursuant to Section 6.6 hereof, deliver to the recipient an amount in cash equal
to the Market Price, as of the date of exercise, of the Ordinary Shares it would
otherwise be obligated to deliver.
6.6 CASH SETTLEMENT. The Board, in its sole discretion, may cause the
Corporation to settle all or any part of its obligation arising out of the
exercise of Stock Appreciation Rights by the payment of cash in lieu of all or
part of the Ordinary Shares it would otherwise be obligated to deliver in an
amount equal to the Market Price of such shares on the date of exercise.
ARTICLE 7
NONTRANSFERABILITY OF OPTIONS AND STOCK APPRECIATION RIGHTS
No Option or Stock Appreciation Rights may be transferred, assigned,
pledged or hypothecated (whether by operation of law or otherwise), except as
provided by will or the applicable laws of descent and distribution, and no
Option or Stock Appreciation Rights shall be subject to execution, attachment or
similar process. Any attempted assignment, transfer, pledge, hypothecation or
other disposition of an Option or Stock Appreciation Rights not specifically
permitted herein shall be null and void and without effect. An Option or Stock
Appreciation Rights may be exercised by the recipient only during his or her
lifetime, or following his or her death pursuant to Section 8.3 hereof.
Notwithstanding anything to the contrary in the preceding paragraph,
the Board may, in its sole discretion, cause the written agreement relating to
any Non-qualified Stock Options or Stock Appreciation Rights granted hereunder
to provide that the recipient of such Non-qualified Stock Options or Stock
Appreciation Rights may transfer any of such Non-qualified Stock Options or
Stock Appreciation Rights other than by will or the laws of descent and
distribution in any manner authorized under applicable law; PROVIDED, HOWEVER,
that in no event may the Board permit any transfers which would cause the Plan
to fail to satisfy the applicable requirements of Rule 16b-3 under the 1934 Act
or which would cause any recipient of awards hereunder to fail to be entitled to
the benefits Rule 16b-3 or other exemptive rules under Section 16 of the 1934
Act or be subject to liability thereunder.
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ARTICLE 8
EFFECT OF TERMINATION OF EMPLOYMENT,
DISABILITY, RETIREMENT, OR DEATH
8.1 GENERAL RULE. Except as expressly provided in the written
agreement relating to any Option or Stock Appreciation Rights or as otherwise
expressly determined by the Board in its sole discretion, in the event that a
recipient of Options or Stock Appreciation Rights ceases to be a director,
employee or consultant of the Corporation and its subsidiaries (a "Terminated
Person") for any reason other than Disability or Retirement (as hereinafter
defined) or death, any Options or Stock Appreciations Rights which were held by
such Person on the date on which he or she ceased to be a director, employee or
consultant (the "Termination Date") and which were otherwise exercisable on such
Date shall expire unless exercised within the period of 30 days following the
Termination Date, but in no event after the expiration of the exercise period of
such Options or Stock Appreciation Rights.
Except as expressly provided in the written agreement relating to the
Options or Stock Appreciation Rights or as otherwise expressly determined by the
Board in its sole discretion, the Board may, in its sole discretion, cause any
Option or Stock Appreciation Rights to be forfeited upon a director's cessation
from service on the Board, an employee's termination of employment or the
termination of a consultant's consulting arrangement if the director, employee
or consultant was terminated for one (or more) of the following reasons: (i) the
director's, employee's or consultant's commission of any fraud, misappropriation
or misconduct which causes demonstrable injury to the Corporation or a
subsidiary, or (ii) an act of dishonesty by the director, employee or consultant
resulting or intended to result, directly or indirectly, in gain or personal
enrichment at the expense of the Corporation or a subsidiary; PROVIDED, HOWEVER,
that "cause," in the case of an employee or consultant who has an employment or
consulting agreement with the Corporation or a subsidiary thereof, shall have
the meaning, if any, set forth in such employment or consulting agreement. It
shall be within the sole discretion of the Board to determine whether a
director's, employee's or consultant's termination was for one of the foregoing
reasons, and the decision of the Board shall be final and conclusive.
8.2 DISABILITY OR RETIREMENT. Except as expressly provided otherwise
in the written agreement relating to any Option or Stock Appreciation Rights
granted under the Plan or as otherwise determined by the Board in its sole
discretion, in the event of a termination of directorship, employment or
consulting arrangement of a Terminated Person due to the Disability or
Retirement of such Person, any Options or Stock Appreciation Rights which were
held by such Person on the Termination Date and which were otherwise exercisable
on such Date shall expire unless exercised within the period of 180 days
following such Date, but in no event after the expiration date of the exercise
period of such Options or Stock Appreciation Rights; PROVIDED, HOWEVER, that any
Incentive Stock Option of such Terminated Person shall no longer be treated as
an Incentive Stock Option unless exercised within three (3) months of the
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Termination Date (or within one (1) year in the case of an employee who is
"disabled" within the meaning of Section 22(e)(3) of the Code).
"Disability" shall mean any termination of directorship, employment
or consulting arrangement with the Corporation or a subsidiary because of a
long-term or total disability, as determined by the Committee in its sole
discretion. "Retirement" shall mean a termination of directorship, employment or
consulting arrangement with the Corporation or a subsidiary with the written
consent of the Board in its sole discretion. The decision of the Board shall be
final and conclusive.
8.3 DEATH. Except as expressly provided in the written agreement
relating to the Options or Stock Appreciation Rights or as otherwise expressly
determined by the Board in its sole discretion, in the event of the death of a
recipient of Options or Stock Appreciation Rights while a director, employee or
consultant of the Corporation or any subsidiary, any Options or Stock
Appreciation Rights which were held by such Person at the date of death and
which were otherwise exercisable on such date shall be exercisable by the
beneficiary designated by the director, employee or consultant for such purpose
(the "Designated Beneficiary") or if no Designated Beneficiary shall be
appointed or if the Designated Beneficiary shall predecease the director,
consultant or employee, as the case may be, by such person's personal
representatives, heirs or legatees for a period of one (1) year from the date of
death, but in no event later than the expiration date of the exercise period of
such Options of Stock Appreciation Rights, at which time such Options or Stock
Appreciation Rights shall expire.
In the event of the death of a Terminated Person following a
termination of employment due to Disability or Retirement, any Options or Stock
Appreciation Rights which were held by such Person on the Termination Date and
which were exercisable on such Date shall be exercisable by such recipient's
Designated Beneficiary, or if no Designated Beneficiary shall be appointed or if
the Designated Beneficiary shall predecease such recipient, by such recipient's
personal representatives, heirs or legatees for a period of one (1) year from
the date of death but in no event later than the expiration date of the exercise
period of such Options or Stock Appreciation Rights, at which time such Options
or Stock Appreciation Rights shall expire; PROVIDED, HOWEVER, that any Incentive
Stock Option of such Terminated Person shall no longer be treated as an
Incentive Stock Option unless exercised within three (3) months of the date of
such Termination Date (or within one (1) year in the case of an employee whose
termination of employment occurs by reason of "disability" within the meaning of
Section 22(e)(3) of the Code) or death.
8.4 TERMINATION OF UNVESTED OPTIONS. All Options and Stock
Appreciation Rights which were not exercisable by a Terminated Person as of the
Termination Date of such Terminated Person shall terminate as of such Date,
except as expressly provided in the written agreement relating to the Options or
Stock Appreciation Rights or as otherwise expressly determined by the Board in
its sole discretion. Options and Stock Appreciation Rights shall not
10
<PAGE>
be affected by any change of employment so long as the recipient continues to be
employed by either the Corporation or a subsidiary.
ARTICLE 9
ADJUSTMENT UPON CHANGES IN CAPITALIZATION
Notwithstanding any other provision of the Plan, the Board may: (i)
at any time, make or provide for such adjustments to the Plan or to the number
and class of shares available thereunder or (ii) at the time of grant of any
Options or Stock Appreciation Rights, provide for such adjustments to such
Options or Stock Appreciation Rights, in each case as the Board shall deem
appropriate to prevent dilution or enlargement of rights, including, without
limitation, adjustments in the event of stock dividends, stock splits,
recapitalizations, mergers, consolidations, combinations or exchanges of shares,
separations, spin-offs, reorganizations, liquidations and the like.
ARTICLE 10
AMENDMENT AND TERMINATION
The Board may suspend, terminate, modify or amend the Plan, provided
that any amendment that would (i) materially increase the aggregate number of
shares which may be issued under the Plan, (ii) materially increase the benefits
accruing to employees under the Plan, or (iii) materially modify the
requirements as to eligibility for participation in the Plan, shall be subject
to the approval of the Corporation's stockholders, except that any such increase
or modification that may result from adjustments authorized by Article 9 hereof
shall not require such stockholder approval. If the Plan is terminated, the
terms of the Plan shall, notwithstanding such termination, continue to apply to
awards granted prior to such termination. No suspension, termination,
modification or amendment of the Plan may, without the consent of the employee
or consultant to whom an award shall theretofore have been granted, adversely
affect the rights of such employee or consultant under such award.
ARTICLE 11
WRITTEN AGREEMENT
Each award of Options and Stock Appreciation Rights shall be
evidenced by a written agreement containing such restrictions, terms and
conditions, if any, as the Board may require. In the event of any conflict
between a written agreement and the Plan, the terms of the Plan shall govern.
11
<PAGE>
ARTICLE 12
MISCELLANEOUS PROVISIONS
12.1 TAX WITHHOLDING. The Corporation shall have the right to require
employees or their beneficiaries or legal representatives to remit to the
Corporation an amount sufficient to satisfy Federal, state and local withholding
tax requirements, or to deduct from all payments under the Plan, amounts
sufficient to satisfy all withholding tax requirements. Whenever payments under
the Plan are to be made to an employee in cash, such payments shall be net of
any amounts sufficient to satisfy all Federal, state and local withholding tax
requirements. The Board may, in its sole discretion, permit an employee to
satisfy his or her tax withholding obligations either by (i) surrendering shares
owned by the employee or (ii) having the Corporation withhold from shares
otherwise deliverable to the employee. Shares surrendered or withheld shall be
valued at their Market Price as of the date on which income is required to be
recognized for income tax purposes.
12.2 COMPLIANCE WITH SECTION 16(B). In the case of employees who are
or may be subject to Section 16 of the 1934 Act, it is the intent of the
Corporation that the Plan and any award granted hereunder satisfy and be
interpreted in a manner that satisfies the applicable requirements of Rule 16b-3
so that such persons will be entitled to the benefits of Rule 16b-3 or other
exemptive rules under Section 16 of the 1934 Act and will not be subjected to
liability thereunder. If any provision of the Plan or any award would otherwise
conflict with the intent expressed herein, that provision, to the extent
possible, shall be interpreted and deemed amended so as to avoid such conflict.
To the extent of any remaining irreconcilable conflict with such intent, such
provision shall be deemed void as applicable to employees who are or may be
subject to Section 16 of the 1934 Act.
12.3 SUCCESSORS. The obligations of the Corporation under the Plan
shall be binding upon any successor corporation or organization resulting from
the merger, consolidation or other reorganization of the Corporation, or upon
any successor corporation or organization succeeding to all or substantially all
of the assets and business of the Corporation. In the event of any of the
foregoing, the Committee may, in its discretion prior to the consummation of the
transaction and subject to Article 10 hereof, cancel, offer to purchase,
exchange, adjust or modify any outstanding awards, at such time and in such
manner as the Board deems appropriate and in accordance with applicable law.
12.4 GENERAL CREDITOR STATUS. Directors, employees and consultants
shall have no right, title, or interest whatsoever in or to any investments
which the Corporation may make to aid it in meeting its obligations under the
Plan. Nothing contained in the Plan, and no action taken pursuant to its
provisions, shall create or be construed to create a trust of any kind, or a
fiduciary relationship between the Corporation and any employee, consultant,
beneficiary or legal representative of such employee or consultant. To the
extent that any person acquires a right to receive payments from the Corporation
under the Plan, such right shall be no greater than
12
<PAGE>
the right of an unsecured general creditor of the Corporation. All payments to
be made hereunder shall be paid from the general funds of the Corporation and no
special or separate fund shall be established and no segregation of assets shall
be made to assure payment of such amounts except as expressly set forth in the
Plan.
12.5 NO RIGHT TO EMPLOYMENT. Nothing in the Plan or in any written
agreement entered into pursuant to Article 11 hereof, nor the grant of any
award, shall confer upon any employee any right to continue in the employ of the
Corporation or a subsidiary or to be entitled to any remuneration or benefits
not set forth in the Plan or such written agreement or interfere with or limit
the right of the Corporation or a subsidiary to modify the terms of or terminate
such employee's employment at any time. The preceding sentence shall be equally
applicable with respect to directors and consultants of the Corporation or a
subsidiary.
12.6 NOTICES. Notices required or permitted to be given under the
Plan shall be sufficiently given if in writing and personally delivered to the
employee or consultant or sent by regular mail addressed (a) to the director,
employee or consultant at the director's, employee's or consultant's address as
set forth in the books and records of the Corporation or its subsidiaries, or
(b) to the Corporation or the Board at the principal office of the Corporation
clearly marked "Attention: Board of Directors" or "Attention: Compensation
Committee," as the case may be.
12.7 SEVERABILITY. In the event that any provision of the Plan shall
be held illegal or invalid for any reason, such illegality or invalidity shall
not affect the remaining parts of the Plan, and the Plan shall be construed and
enforced as if the illegal or invalid provision had not been included.
12.8 GOVERNING LAW. To the extent not preempted by United States
Federal law, the Plan, and all agreements hereunder, shall be construed in
accordance with and governed by the laws of the State of New York.
13
Exhibit 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form F-1 of our
report dated February 25, 1998 on our audit of the financial statements of C.W.
Chemical Waste Technologies Limited. We also consent to the references to our
firm under the captions "Experts" and "Selected Financial Data."
/s/ Coopers & Lybrand
- ---------------------
COOPERS & LYBRAND
London
England
March 5, 1998
Exhibit 23.4
CONSENT OF PATENT COUNSEL
We hereby consent to the reference to our firm, in connection with passing upon
patent matters,under the caption "Legal Matters" in this registration statement
on Form F-1 of C.W. Chemical Waste Technologies Limited.
/s/ Pepper Hamilton LLP
-----------------------
PEPPER HAMILTON LLP
Washington, D.C.
March 4, 1998
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