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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K/A-1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 20, 1997
Commodore Environmental Services, Inc.
(Exact name of registrant as specified in its charter)
Delaware 0-10054 87-0275043
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
150 East 58th Street
New York, New York 10155
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 308-5800
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(Former Name or Former Address, if Changed Since Last Report)
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AMENDMENT NO. 1 ON FORM 8-K/A-1
TO
CURRENT REPORT ON FORM 8-K
COMMODORE ENVIRONMENTAL SERVICES, INC.
May 20, 1997
Item 5. Other Events.
SALE OF SERIES D PREFERRED STOCK BY ENVIRONMENTAL
On May 20, 1997, pursuant to 7% Preferred Stock Purchase Agreements
(the "Series D Purchase Agreements"), the Company completed the sale to three
investors, for an aggregate purchase price of $6,000,000, of (i) 60,000 shares
of newly-created Series D Preferred Stock, par value $.01 per share (the "Series
D Preferred Stock"), and (ii) five-year common stock purchase warrants (the
"Warrants:) entitling the holders to purchase from the Company an aggregate of
600,000 shares of common stock, par value $.001 per share (the "Applied Common
Stock"), of the Company's 67.2%-owned subsidiary Commodore Applied Technologies,
Inc. ("Applied"). In connection with an August 18, 1997 amendment to the May 20,
1997 Series D Purchase Agreements, Warrants entitling the holders to purchase
from the Company an additional 150,000 shares of Applied Common Stock were
issued to the investors.
On August 14, 1997, the Company completed the sale to three additional
investors, for an aggregate purchase price of $2,800,000, of (i) 28,000
additional shares of Series D Preferred Stock, and (ii) Warrants entitling the
holders to purchase from the Company an additional 425,000 shares of Applied
Common Stock.
The Series D Preferred Stock has a liquidation preference of $100 per
share (plus accumulated and unpaid dividends) and pays a 7% per-annum cumulative
dividend, payable, at the Company's option, at the time of conversion in cash or
shares of Applied Common Stock which is owned by the Company, at the Conversion
Price (as defined). The Company currently owns 14,958,401 shares of Applied
Common Stock and will reserve from such holdings a sufficient number of shares
of Applied Common Stock to permit the conversion in full of the outstanding
Series D Preferred Stock. The Series D Preferred Stock ranks: (i) prior to the
Company's common stock, par value $.01 per share; (ii) pari passu with the
Company's Series B and Series C Preferred Stock; (iii) junior to the Company's
Series AA Preferred Stock; and (iv) prior to any other class or series of
capital stock of the Company created after May 16, 1997 (unless it specifically,
by its terms, ranks on parity with the Series D Preferred Stock), in each case
as to distributions of assets upon liquidation, dissolution or winding up of the
Company, whether voluntary or involuntary.
The holders of Series D Preferred Stock have no voting rights, except
with respect to any amendment to the Company's certificate of incorporation
that would have an adverse effect on the Series D Preferred Stock or as
otherwise provided by the General Corporation Law of the State of Delaware.
The Series D Preferred Stock may be converted by the holders at any
time or from time to time at the Conversion Price (as defined). However, each
holder of Series D Preferred Stock may not convert more than 20% of its shares
of Series D Preferred Stock in any one month, subject to the right to accumulate
conversions so that any shares of Series D Preferred Stock not converted in any
one calendar month may be accumulated with the number of convertible shares of
Series D Preferred Stock in the next calendar month.
The Series D Preferred Stock is convertible by the holders into that
number of shares of Applied Common Stock equal to the Liquidation Preference
divided by the Conversion Price. The Conversion Price is defined to
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mean an amount equal to a 15% discount from the lower of (i) the average of the
low prices, or (ii) the average of the closing bid prices of Applied Common
Stock as reported by Bloomberg, L.P. ("Bloomberg") for the previous five
business days ending on the day before the Conversion Date (as defined) (the
"Average Closing Bid Price"). The Conversion Price will be equal to certain
amounts set forth in the Certificate of Designation for the Series D Preferred
Stock if the Average Closing Bid Price of Applied Common Stock, as reported by
Bloomberg, for any consecutive 30 days is equal to or less than $2.00; provided,
however, that in no event will the Conversion Price be less than $1.50. In the
event that Applied Common Stock is not traded on the American Stock Exchange
("AMEX") the Average Closing Bid Price will be based on the average closing bid
price (or, if not available, the mean of the high and low price) of such Applied
Common Stock on the over-the-counter market or the principal national securities
exchange or the Nasdaq National Market or Nasdaq SmallCap Market system on which
such Applied Common Stock then trades.
The Warrants entitle the registered holders thereof to purchase an
aggregate of 1,175,000 shares of Applied Common Stock owned by the Company. The
Warrants to purchase an aggregate of 750,000 shares of Applied Common Stock
issued to the investors in connection with the May 20, 1997 sale, as amended,
are exercisable at an initial exercise price equal to $7.14 per share. The
Warrants to purchase 425,000 shares of Applied Common Stock issued to investors
in connection with the August 14, 1997 sale transaction are exercisable at an
initial exercise price of $5.15 per share. Such exercise prices are (in addition
to customary anti-dilution adjustments) subject to reset on August 18, 1998 to
an exercise price equal to the lesser of (i) the exercise price in effect
immediately prior to August 18, 1998, or (ii) 110% of the closing bid price of
Applied Common Stock on August 17, 1998. In addition, if Applied Common Stock
trades at less than 50% of the August 17, 1998 closing bid price for any 10
consecutive trading days, the exercise price is subject to further reset (on one
occasion only) to 50% of such August 17, 1998 closing bid price. The above reset
provisions terminate in the event that Applied Common Stock trades at $10.00 or
more at any time after 90 days from the date a registration statement
registering such Applied Common Stock under the Securities Act of 1933, as
amended (the "Securities Act"), becomes effective.
The Company has agreed to pay certain penalties to the holders of the
Series D Preferred Stock and the Warrants in the event that Applied shall fail
by certain specified dates to cause to become effective under the Securities Act
a registration statement on Form S-3, or other applicable form of registration
statement, covering all shares of Applied Common Stock issuable upon conversion
of the Series D Preferred Stock and exercise of the Warrants. Upon the
effectiveness of such registration statement, no such penalties are payable by
the Company.
The transactions described above were deemed exempt from registration
under the Securities Act, as transactions by an issuer not involving any public
offering. The recipients of the Series D Preferred Stock and the Warrants in
connection with the foregoing transactions represented their intentions to
acquire such securities for investment only and not with a view to or for sale
in connection with any distribution thereof and appropriate legends were
contained in the Warrants and affixed to the share certificates representing the
Series D Preferred Stock. The Company engaged Avalon Research Group, Inc. as a
finder in connection with the sale of the Series D Preferred Stock and the
Warrants. Such firm received fees aggregating $792,000 and together with other
transaction costs of approximately $176,000, the Company received net proceeds
of approximately $7.8 million from the sale of the Series D Preferred Stock and
Warrants. In addition to its commissions, affiliates of Avalon Research Group,
Inc. received five-year Company warrants entitling the holders to purchase an
aggregate of 75,000 shares of Applied Common Stock at exercise prices of $7.14
as to 60,000 warrants and $5.15 as to 15,000 warrants.
On September 29, 1997, two investors elected to convert 20% of their
Series D Preferred Stock into Applied Common Stock. Such conversion resulted
in the transfer by Enviornmental of 41,599 shares of its Applied Common Stock
to such investors.
If conversion of all of the remaining shares of Series D Preferred
Stock were to occur at the lowest possible Conversion Price, the 86,400 shares
of Series D Preferred Stock would represent approximately 5,760,000 of the
14,958,401 shares of Applied Common Stock currently owned by the Company, but
would not represent any increase in the number of outstanding shares of Applied
Common Stock.
LOAN TO COMMODORE APPLIED TECHNOLOGIES, INC.
On August 22, 1997, the Company agreed to provide Applied with a
$4,000,000 loan. The loan was funded to Applied on September 23, 1997. The loan
was evidenced by Applied's 8% note due August 31, 2002. The Company has the
right at any time to convert the note into shares of Applied Common Stock at a
conversion price of $3.89 per share (one full share of Applied Common Stock for
each $3.89 principal amount of the note so converted). Such conversion price was
fixed at approximately 85% of the five day average closing bid price of Applied
Common Stock ($4.575 per share) as traded on AMEX for the five
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trading days prior to August 22, 1997; the date that the executive committees of
the respective boards of directors of each of the Company and Applied authorized
such loan. The conversion price is also subject to adjustment to protect the
holder of the note against dilution.
In consideration of the $4,000,000 loan, Applied issued to the Company
a warrant expiring August 31, 2002 entitling the Company to purchase 1,000,000
shares of additional Applied Common Stock at an exercise price of $5.0325 per
share (approximately 110% of the five day average closing bid price of Applied
Common Stock ($4.575 per share) as traded on the AMEX for the five trading days
prior to August 22, 1997).
The information set forth above is qualified in its entirety by
reference to: (a) Form of 7% Preferred Stock Securities Purchase Agreement,
dated May 20, 1997, among the Company, Applied and Okemo Partners Limited,
incorporated herein by reference as Exhibit 4.1; (b) Form of 7% Preferred Stock
Securities Purchase Agreement, dated May 20, 1997, among the Company, Applied
and American Investment Group of New York, L.P., incorporated herein by
reference as Exhibit 4.2; (c ) Form of 7% Preferred Stock Securities Purchase
Agreement, dated May 20, 1997, among the Company, Applied and Milton Partners,
incorporated herein by reference as Exhibit 4.3; (d) Form of Common Stock
Purchase Warrant to purchase 200,000 shares of Applied Common Stock issued to
Milton Partners, incorporated herein by reference as Exhibit 4.4; (e) Form of
Common Stock Purchase Warrant to purchase 100,000 shares of Applied Common Stock
issued to Okemo Partners Limited, incorporated herein by reference as Exhibit
4.5; (f) Form of Common Stock Purchase Warrant to purchase 300,000 shares of
Applied Common Stock issued to American Investment Group of New York, L.P.,
incorporated herein by reference as Exhibit 4.6; (g) Certificate of Designations
of Series D Preferred Stock, incorporated herein by reference as Exhibit 4.7;
(h) Amendment No. 1, dated August 18, 1997, to 7% Preferred Stock Securities
Purchase Agreement, dated May 20, 1997, a copy of which is attached hereto as
Exhibit 4.8; (i) 7% Preferred Stock Securities Purchase Agreement, dated August
14, 1997, among the Company, Applied and Elara Ltd., a copy of which is attached
hereto as Exhibit 4.9; (j) Amendment No. 1, dated August 20, 1997, to 7%
Preferred Stock Securities Purchase Agreement, dated August 14, 1997, among the
Company, Applied and Elara Ltd., a copy of which is attached hereto as Exhibit
4.10; (k) 7% Preferred Stock Securities Purchase Agreement, dated August 14,
1997, among the Company, Applied and Porter Partners, L.P., a copy of which is
attached hereto as Exhibit 4.11; (l) Amendment No. 1, dated August 20, 1997, to
7% Preferred Stock Securities Purchase Agreement, dated August 14, 1997, among
the Company, Applied and Porter Partners, L.P., a copy of which is attached
hereto as Exhibit 4.12; (m) 7% Preferred Stock Securities Purchase Agreement,
dated August 14, 1997, among the Company, Applied and EDJ Limited, a copy of
which is attached hereto as Exhibit 4.13; (n) Amendment No. 1, dated August 20,
1997, to 7% Preferred Stock Securities Purchase Agreement, dated August 14,
1997, among the Company, Applied and EDJ Limited, a copy of which is attached
hereto as Exhibit 4.14; (o) Common Stock Purchase Warrant to purchase 325,000
shares of Applied Common Stock issued to Elara Ltd., a copy of which is attached
hereto as Exhibit 4.15; (p) Common Stock Purchase Warrant to purchase 50,000
shares of Applied Common Stock issued to Porter Partners Ltd., a copy of which
is attached hereto as Exhibit 4.16; (q) Common Stock Purchase Warrant to
purchase 12,500 shares of Applied Common Stock issued to EDJ Limited, a copy of
which is attached hereto as Exhibit 4.17; (r ) Amendment to the Company's
Certificate of Incorporation and Amended and Restated Certificate of
Designations for Series D Preferred Stock, a copy of which is attached hereto as
Exhibit 4.18; (s) Common Stock Purchase Warrant to purchase 50,000 shares of
Applied Common Stock issued to Milton Partners, a copy of which is attached
hereto as Exhibit 4.19; (t) Common Stock Purchase Warrant to purchase 25,000
shares of Applied Common Stock issued to Okemo Partners Limited, a copy of which
is attached hereto as Exhibit 4.20; (u) Common Stock Purchase Warrant to
purchase 75,000 shares of Applied Common Stock issued to American Investment
Group of New York, L.P., a copy of which is attached hereto as Exhibit 4.21; (v)
$4,000,000 convertible note of Applied payable to the Company, a copy of which
is attached hereto as Exhibit 4.22; (w) Common Stock Purchase Warrant to
purchase 1,000,000 shares of Applied Common Stock issued to the Company, a copy
of which is attached hereto as Exhibit 4.23; (x) 7% Preferred Stock Purchase
Agreement, dated August 14, 1997, among the Company, Applied and Porter
Partners, L.P., a copy of which is attached hereto as Exhibit 4.24; and (y)
Common Stock Purchase Warrant to purchase 37,500 shares of Applied Common Stock
issued to Porter Partners, L.P., a copy of which is attached hereto as Exhibit
4.25.
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Item 7. Financial Statements, Pro Forma Financial Statements and Exhibits.
(a) Financial Statements of Business Acquired.
Not Applicable.
(b) Pro Forma Financial Information.
Not Applicable.
(c) Exhibits.
Exhibit
No. Description
4.1 Form of 7% Preferred Stock Securities Purchase Agreement, dated May 20,
1997, among the Company, Applied and Okemo Partners Limited. (1)
4.2 Form of 7% Preferred Stock Securities Purchase Agreement, dated May 20,
1997, among the Company, Applied and American Investment Group of New
York, L.P. (1)
4.3 Form of 7% Preferred Stock Securities Purchase Agreement, dated May 20,
1997, among the Company, Applied and Milton Partners. (1)
4.4 Form of Common Stock Purchase Warrant to purchase 200,000 shares of
Applied Common Stock issued to Milton Partners. (1)
4.5 Form of Common Stock Purchase Warrant to purchase 100,000 shares of
Applied Common Stock issued to Okemo Partners Limited. (1)
4.6 Form of Common Stock Purchase Warrant to purchase 300,000 shares of
Applied Common Stock issued to American Investment Group of New York,
L.P. (1)
4.7 Certificate of Designations of Series D Preferred Stock. (1)
*4.8 Amendment No. 1, dated August 18, 1997, to 7% Preferred Stock
Securities Purchase Agreement, dated May 20, 1997.
*4.9 7% Preferred Stock Securities Purchase Agreement, dated August 14,
1997, among the Company, Applied and Elara Ltd.
*4.10 Amendment No. 1, dated August 20, 1997, to 7% Preferred Stock
Securities Purchase Agreement, dated August 14, 1997, among the
Company, Applied and Elara Ltd.
*4.11 7% Preferred Stock Securities Purchase Agreement, dated August 14,
1997, among the Company, Applied and Porter Partners, L.P.
*4.12 Amendment No. 1, dated August 20, 1997, to 7% Preferred Stock
Securities Purchase Agreement, dated August 14, 1997, among the
Company, Applied and Porter Partners, L.P.
*4.13 7% Preferred Stock Securities Purchase Agreement, dated August 14,
1997, among the Company, Applied and EDJ Limited.
*4.14 Amendment No. 1, dated August 20, 1997, to 7% Preferred Stock
Securities Purchase Agreement, dated August 14, 1997, among the
Company, Applied and EDJ Limited.
*4.15 Common Stock Purchase Warrant to purchase 325,000 shares of Applied
Common Stock issued to Elara Ltd.
*4.16 Common Stock Purchase Warrant to purchase 50,000 shares of Applied
Common Stock issued to Porter Partners Ltd.
*4.17 Common Stock Purchase Warrant to purchase 12,500 shares of Applied
Common Stock issued to EDJ Limited.
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*4.18 Amendment to Certificate of Incorporation of Environmental and Amended
and Restated Certificate of Designations for Environmental Series D
Preferred Stock.
*4.19 Common Stock Purchase Warrant to purchase 50,000 shares of Applied
Common Stock issued to Milton Partners.
*4.20 Common Stock Purchase Warrant to purchase 25,000 shares of Applied
Common Stock issued to Okemo Partners Limited.
*4.21 Common Stock Purchase Warrant to purchase 75,000 shares of Applied
Common Stock issued to American Investment Group of New York, L.P.
*4.22 8% $4.0 million note due 2002 from Commodore Applied Technologies, Inc.
to the Company.
*4.23 Common Stock Purchase Warrant to purchase 1,000,000 shares of Common
Stock of Commodore Applied Technologies, Inc. to the Company.
*4.24 7% Preferred Stock Securities Purchase Agreement, dated August 14,
1997, among the Company, Applied and Porter Partners, L.P.
*4.25 Common Stock Purchase Warrant to purchase 37,500 shares of Applied
Common Stock issued to Porter Partners, L.P.
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* Filed herewith electronically.
(1) Incorporated herein by reference. Filed as an exhibit to the Company's
Current Report on Form 8-K, dated May 20, 1997 and filed with the Commission on
July 1, 1997.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Current Report to be signed on its behalf by
the undersigned thereunto duly authorized.
COMMODORE ENVIRONMENTAL SERVICES, INC.
Date: October 3, 1997 By: /s/ Michael D. Fullwood
-----------------------------------------
Michael D. Fullwood, Senior Vice President, Chief
Financial and Administrative Officer, Secretary
and General Counsel
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EXHIBIT INDEX
Exhibit
No. Description
4.1 Form of 7% Preferred Stock Securities Purchase Agreement, dated May 20,
1997, among the Company, Applied and Okemo Partners Limited. (1)
4.2 Form of 7% Preferred Stock Securities Purchase Agreement, dated May 20,
1997, among the Company, Applied and American Investment Group of New
York, L.P. (1)
4.3 Form of 7% Preferred Stock Securities Purchase Agreement, dated May 20,
1997, among the Company, Applied and Milton Partners. (1)
4.4 Form of Common Stock Purchase Warrant to purchase 200,000 shares of
Applied Common Stock issued to Milton Partners. (1)
4.5 Form of Common Stock Purchase Warrant to purchase 100,000 shares of
Applied Common Stock issued to Okemo Partners Limited. (1)
4.6 Form of Common Stock Purchase Warrant to purchase 300,000 shares of
Applied Common Stock issued to American Investment Group of New York,
L.P. (1)
4.7 Certificate of Designations of Series D Preferred Stock. (1)
*4.8 Amendment No. 1, dated August 18, 1997, to 7% Preferred Stock
Securities Purchase Agreement, dated May 20, 1997.
*4.9 7% Preferred Stock Securities Purchase Agreement, dated August 14,
1997, among the Company, Applied and Elara Ltd.
*4.10 Amendment No. 1, dated August 20, 1997, to 7% Preferred Stock
Securities Purchase Agreement, dated August 14, 1997, among the
Company, Applied and Elara Ltd.
*4.11 7% Preferred Stock Securities Purchase Agreement, dated August 14,
1997, among the Company, Applied and Porter Partners, L.P.
*4.12 Amendment No. 1, dated August 20, 1997, to 7% Preferred Stock
Securities Purchase Agreement, dated August 14, 1997, among the
Company, Applied and Porter Partners, L.P.
*4.13 7% Preferred Stock Securities Purchase Agreement, dated August 14,
1997, among the Company, Applied and EDJ Limited.
*4.14 Amendment No. 1, dated August 20, 1997, to 7% Preferred Stock
Securities Purchase Agreement, dated August 14, 1997, among the
Company, Applied and EDJ Limited.
*4.15 Common Stock Purchase Warrant to purchase 325,000 shares of Applied
Common Stock issued to Elara Ltd.
*4.16 Common Stock Purchase Warrant to purchase 50,000 shares of Applied
Common Stock issued to Porter Partners Ltd.
*4.17 Common Stock Purchase Warrant to purchase 12,500 shares of Applied
Common Stock issued to EDJ Limited.
*4.18 Amendment to Certificate of Incorporation of Environmental and Amended
and Restated Certificate of Designations for Environmental Series D
Preferred Stock.
*4.19 Common Stock Purchase Warrant to purchase 50,000 shares of Applied
Common Stock issued to Milton Partners.
*4.20 Common Stock Purchase Warrant to purchase 25,000 shares of Applied
Common Stock issued to Okemo Partners Limited.
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*4.21 Common Stock Purchase Warrant to purchase 75,000 shares of Applied
Common Stock issued to American Investment Group of New York, L.P.
*4.22 8% $4.0 million note due 2002 from Commodore Applied Technologies, Inc.
to the Company.
*4.23 Common Stock Purchase Warrant to purchase 1,000,000 shares of Common
Stock of Commodore Applied Technologies, Inc. to the Company.
*4.24 7% Preferred Stock Securities Purchase Agreement, dated August 14,
1997, among the Company, Applied and Porter Partners, L.P.
*4.25 Common Stock Purchase Warrant to purchase 37,500 shares of Applied
Common Stock issued to Porter Partners, L.P.
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* Filed herewith electronically.
(1) Incorporated herein by reference. Filed as an exhibit to the Company's
Current Report on Form 8-K, dated May 20, 1997 and filed with the Commission on
July 1, 1997.
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SECURITIES HAVE NOT REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN EXEMPTION
FROM REGISTRATION UNDER REGULATION D PROMULGATED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"). THIS AGREEMENT SHALL NOT CONSTITUTE AN
OFFER TO SELL NOR A SOLICITATION OF AN OFFER TO BUY THE SECURITIES IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL. THE
SECURITIES ARE "RESTRICTED" AND MAY NOT BE RESOLD OR TRANSFERRED EXCEPT AS
PERMITTED UNDER THE ACT PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.
AMENDMENT NO. 1 TO
7% PREFERRED STOCK
SECURITIES PURCHASE AGREEMENT
AND RELATED STOCK PURCHASE WARRANT
COMMODORE ENVIRONMENTAL SERVICES, INC.
AND
COMMODORE APPLIED TECHNOLOGIES, INC.
THIS AMENDMENT NO. 1 is made as of the 18th day of August, 1997, by and
between COMMODORE ENVIRONMENTAL SERVICES, INC. traded on the "Pinksheets" under
the "COES" (the "Parent Company"), a corporation, with its principal office at
150 East 58th Street, New York, NY 10155, COMMODORE APPLIED TECHNOLOGIES INC.,
AMEX symbol "CXI" (the "Subsidiary Company"), a corporation, with its principal
office at 150 East 58th Street, New York, NY 10155 and the undersigned (the
"Purchaser"), with its principal office at the address set forth below the
signature of the Purchaser on the signature page hereof.
Reference is made to the 7% Preferred Stock Securities Purchase
Agreement made as of the 20th day of May, 1997 (the "7% Preferred Stock
Securities Purchase Agreement") by and among the parties hereto. All
capitalized terms herein are defined as set forth in the 7% Preferred Stock
Securities Purchase Agreement or by reference therein.
Reference is also made to the Stock Purchase Warrant to Purchase
200,000 shares of Common Stock of the Subsidiary Company from COES identified
on the signature page of this Amendment No. 1 beneath the signature of the
Purchaser (the "Stock Purchase Warrant").
IN CONSIDERATION of the mutual covenants contained in this Amendment,
the Parent Company, Subsidiary Company and the Purchaser agree as follows:
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Section 1. Limitation on Conversions. The 7% Preferred Stock Securities
Purchase Agreement is amended by the addition of the following as a new
Section 14:
"Section 14. Limitation on Conversions. Notwithstanding anything
contained in this Agreement, the Stock Purchase Warrant, or the Certificate
of Designation, Number, Powers, Preferences and Relative, Participating,
Optional, and Other Special Rights and the Qualifications, Limitations,
Restrictions, and Other Distinguishing Characteristics of Series "D"
Preferred Stock of COES to be filed contemporaneously with the execution
and d (as amended and restated, the "Series D Certificate of
Designations"), neither the Purchaser nor any subsequent Holder of the COES
Preferred Shares may elect to convert into CXI Common Stock more then
twenty (20%) percent of the aggregate number (the "Initial Number") of
shares of COES Preferred Shares owned by the Purchaser upon the
consummation of the acquisition by the Purchaser of the COES Preferred
Shares pursuant to this Agreement during any one calendar month, calculated
from the first month during which a conversion may occur; provided, that,
such limitation on conversion shall be on a cumulative basis so that if,
for example, no shares of COES Preferred Shares are converted into CXI
Common Stock in any one month, then in the next month 40% of the Initial
Number of shares of COES Preferred Shares may be converted into CXI Common
Stock. In any event, the rights of conversion set forth in this Section 14
shall be cumulative, so that any shares not converted in any one calendar
month may be accumulated with the number of convertible shares in the next
calendar month. No transfer or other disposition of COES Preferred Shares
by the Purchaser or any subsequent transferee shall be effective unless
prior thereto the transferee agrees in writing satisfactory to COES and
received by COES to be bound by the terms and conditions of this Section."
Section 2. Amendment of the Definition of the Term "Conversion Price".
Section 1 of the Agreement is hereby amended by deleting therefrom in its
entirety the definition of the term "Conversion Price" and substituting
therefor the following:
"Conversion Price" means an amount equal to a fifteen (15%) percent
discount from either the lower of (i) the average of the low prices, or
(ii) the average of the closing bid prices of the CXI Common Stock as
reported by Bloomberg, L.P. ("Bloomberg") for the previous five (5)
business days ending on the day before the Conversion Date (the "Average
Closing Bid Price"); provided, however, if the Average Closing Bid Price of
the CXI Common Stock, as reported by Bloomberg, for any consecutive thirty
(30) days (such thirtieth day shall be the "First Trigger Date") is equal
to or less than $2.00 (the "Floor Average"), the conversion price shall
equal $2.00; if the Floor Average for any consecutive thirty (30) days
beginning any day after the First Trigger Date is less than $2.00 ("Second
Trigger Date"), the conversion price shall equal $1.90; if the Floor
Average for any thirty (30) days beginning any day after the Second Trigger
Date is less than $1.90 (the
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"Third Trigger Date"), the conversion price shall equal $1.80; if the
Floor Average for any consecutive thirty (30) days beginning any day
after the Third Trigger Date is less than $1.80 (the "Fourth Trigger
Date"), the conversion price shall equal $1.70; if the Floor Average
for any consecutive thirty (30) days beginning any day after the Fourth
Trigger Date is less than $1.70 (the "Fifth Trigger Date"), the
conversion price shall equal $1.60; if the Floor Average for any
consecutive thirty (30) days beginning any day after the Fifth Trigger
Date is less than $1.60, the conversion price shall equal $1.50.
Subject to Section 11.5 herein, in no event shall the Conversion Price
be lower than $1.50 per share of CXI Common Stock. If the CXI Common
Stock is not traded on the American Stock Exchange, the Average Closing
Bid Price shall be the average closing bid price (and if not available,
the mean of the high and low prices) of the Common Stock on the
over-the-counter-market or the principal national securities exchange
or the Nasdaq National Market System or Nasdaq SmallCap Market System
on which the CXI Common Stock is traded for the previous five (5)
business days ending on the day before the Conversion Date.
The Conversion Price shall be equitably adjusted accordingly on a pro
rata basis in the event of the happening of certain events that would
affect the CXI Common Stock or COES Convertible Preferred Stock's value
including, but not limited to, forward and reverse stock splits,
issuance of stock dividends, subdivision of shares, combinations,
reclassifications, or the like (collectively "Reclassifications"). An
adjustment made pursuant to this section shall become effective
immediately after the effective date of such event retroactive to the
record date, if any, for such an event."
Section 3. Best Efforts Commitment Regarding Shelf
Registration Statement. Section 8.2(a) of the Agreement is hereby deleted in
its entirety and the following is substituted therefor as the new Section
8.2(a):
"use its best efforts to file with the SEC not later than September 15,
1997 a shelf registration statement under the Securities Act on Form
S-3, if the Subsidiary Company is eligible to file a registration
statement under such form (and if the Subsidiary Company is not
eligible to file a registration statement under Form S-3, to file with
the SEC a registration statement under the Securities Act on Form S-1
or any other form which is appropriate), to register the Conversion
Shares and Warrant Shares, and to use its best efforts to cause such
registration statement to be declared effective by the SEC by not later
than December 15, 1997. Such registration statement will also cover
shares issuable upon conversion of Series A Preferred Stock of CXI sold
by CXI pursuant to a certain Stock Purchase Agreement dated as of
August 15, 1997;
Section 4. Monthly Penalty for Failure to Cause Registration
Statement to Become Effective Within Required Time Period. Section 8.2(g) of the
Agreement is
3
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hereby deleted in its entirety and the following is substituted therefor as a
new Section 8.2(g):
"in the event of the failure of Company to procure registration, in
accordance with Section 8.2(a) of this Agreement, of the Conversion
Shares and the Warrant Shares prior to any of the dates set forth below
in this Section 8.2(g), the Parent Company will pay Purchaser by wire
transfer, as liquidated damages for such failure and not as a penalty,
for each month or part thereof for which such failure continues or in
the event of a Suspension (as defined in Section 8.7) after such date,
an amount equal to the following percentages of the Liquidation
Preference of all COES Preferred Shares acquired by the Purchaser
pursuant to this Agreement which are still owned by such Purchaser and
have not been converted:
Required Effective Date Percentage
----------------------- ----------
On or before November 19, 1997 1%
Between November 20 and
December 19, 1997 2%
After December 20, 1997 3%
If the Parent Company does not remit the damages to the Purchaser as
set forth above, the Parent Company will pay the Purchaser reasonable
costs of collection, including attorneys fees, in addition to the
liquidated damages. Such payment shall be made to the Purchaser if
due, monthly in arrears. The payment of such liquidated damages shall
not relieve the Subsidiary Company from its obligations to register the
Conversion Shares and Warrant Shares pursuant to this provision and
shall not affect or limit Purchaser's other rights or remedies as set
forth in this Agreement. The "Liquidation Preference" for a Share shall
equal $100 (subject to adjustments for Reclassifications), plus all
accrued and unpaid dividends (which shall accrue through the Conversion
Date, Redemption Date or the date liquidated damages are paid, as
applicable) and any then unpaid liquidated damages (interest on which
shall accrue at a rate of 2% per month) arising under Sections 8.2(g),
10.2 or 10.6. Notwithstanding the foregoing, the liquidated damages
shall be limited to 1% per month or any portion thereof if the delay in
effectiveness of the registration statement beyond November 19, 1997 or
the Suspension thereafter shall be for reasons outside the control of
the COES or CXI."
Section 5. Amendment of Series D Certificate of Designations.
COES covenants and agrees to cause the Series D Certificate of Designations to
be amended promptly following the execution and delivery of this Amendment by
deleting Section 7 thereof in its entirety and inserting the following as a new
Section 7 in place thereof:
"Voting Rights.
4
<PAGE> 5
(a) Class Voting Rights. The Series D Preferred Stock shall
have the following class voting rights (in addition to the voting
rights set forth in Section 7(b) hereof). So long as any shares of the
Series D Preferred Stock remain outstanding, the Company shall not,
without the affirmative vote or consent of the holders of at least a
majority of the shares of the Series D Preferred Stock outstanding at
the time, given in person or by proxy, either in writing or at a
meeting, in which the holders of the Series D Preferred Stock vote
separately as a class: (i) authorize, create, issue or increase the
authorized or issued amount of any class or series of stock ranking
prior to or on a parity with the Series D Preferred Stock, with respect
to payment of dividends or the distribution of assets on liquidation,
dissolution or winding up; (ii) amend, alter or repeal the provisions
of the Series D Preferred Stock, whether by merger, consolidation or
otherwise, so as to affect materially and adversely any right,
preference, privilege or voting power of the Series D Preferred Stock;
provided, however, that any creation and issuance of other series of
Junior Stock shall not be deemed to materially and adversely affect
such rights, preferences, privileges or voting powers; (iii)
repurchase, or pay cash dividends on, shares of the Company's Junior
Stock; or (iv) amend the Certificate of Incorporation or By-Laws of the
Company so as to affect materially and adversely any right, preference,
privilege or voting power of the Series D Preferred Stock; provided,
however, that any creation and issuance of other series of Junior Stock
shall not be deemed to materially and adversely affect such rights,
preferences privileges or voting powers.
(b) General Voting Rights. Except with respect to transactions
upon which the Series D Preferred Stock shall be entitled to vote
separately as a class pursuant to Section 7(a) above and except as
otherwise required by Delaware law, the Series D Preferred Stock shall
vote together with the Common Stock and not as a separate class on any
transaction with respect to which the Common Stock is entitled to vote
pursuant to applicable Delaware law or the Certificate of
Incorporation. Each share of Series D Preferred Stock shall be entitled
to a number of votes per share equal to (i) one (1) multiplied by (ii)
the number of shares of Common Stock into which each share of Series D
Preferred Stock is convertible on the record date used to determine
share eligible to vote on such transaction."
The amendment of the Series D Certificate of Designations will also designate
the number of shares constituting the Series D Preferred Stock to be 100,000,
rather than 60,000. Upon amendment as aforesaid, the Series D Certificate of
Designations will be restated in the form of Exhibit A hereto. By executing and
delivering this Amendment, the Purchaser hereby approves and consents to the
foregoing amendment and restatement of the Series D Certificate of Designations.
Section 6. Grant of Voting Rights to Holders of COES Warrants.
Section 7 of the COES Warrants issued and delivered to the Purchaser pursuant to
the Agreement is hereby deleted in its entirety and the following is substituted
therefor as a new Section 7:
5
<PAGE> 6
"Voting Rights. This Warrant does not entitle the holder
hereof to any rights as a shareholder of the Subsidiary Company prior
to the exercise hereof except for the voting rights set forth in this
paragraph. If, however, at the time of the surrender of this Warrant
and purchase the holder hereof shall be entitled to exercise this
Warrant, the shares so purchased shall be and shall be deemed to be
transferred and reissued to such holder as the record owner of such
shares as of the close of business on the date on which this Warrant
shall have been exercised. Prior to the date of such exercise and
except as otherwise required by applicable Delaware law, the holder of
this Warrant shall vote together with the Common Stock and not as a
separate class on any transaction with respect to which the Common
Stock is entitled to vote pursuant to applicable Delaware law or the
Certificate of Incorporation. Each Warrant shall be entitled to a
number of votes per share equal to (i) one (1) multiplied by (ii) the
number of shares of Common Stock which may be acquired upon exercise of
this Warrant if the same were exercisable and were so exercised on the
record date used to determine shares eligible to vote on such
transaction."
Section 7. Additional COES Warrants. Effective as of the
execution and delivery of this Amendment, the Purchaser shall receive 5
additional COES Warrants (the "Additional COES Warrants") for each 2 shares of
COES Preferred Shares acquired by the Purchaser on the closing date pursuant to
the Agreement. Promptly after the execution and delivery of this Amendment, COES
and the Subsidiary Company shall cause certificates evidencing such Additional
COES Warrants to be issued and delivered to the Purchaser. The Additional COES
Warrants shall be on terms identical to those of the already outstanding COES
Warrants except that the Additional COES Warrants shall be subject to Section 8
of this Amendment. The shares of CXI Common Stock underlying the Additional COES
Warrants shall be included in the registration statement to be filed pursuant to
Section 8.2(a) of the Agreement.
Section 8. Reset of Exercise Price of COES Warrants and
Additional COES Warrants. Notwithstanding anything to the contrary in the COES
Warrants or the Additional COES Warrants, the exercise price of the COES
Warrants and the Additional COES Warrants shall be reset on the first
anniversary date of issuance of the Additional COES to an exercise price which
shall be equal to the lesser of (i) the exercise price in effect immediately
prior to such anniversary date, or (ii) 110% of the closing bid price of the CXI
Common Stock on the day immediately prior to such first anniversary date of
issuance, as reported by Bloomberg. Furthermore, if at any time after the first
anniversary of the date of issuance of the Additional COES Warrants, the closing
price of the CXI Common Stock for any period of ten (10) consecutive trading
days or more shall be less than fifty percent (50%) of the closing price of the
CXI Common Stock on the day immediately preceding the first anniversary of the
date of issuance of the Additional COES Warrants, the exercise price of the COES
Warrants and the Additional COES
6
<PAGE> 7
Warrants shall be further reset to 50% of the closing price of the CXI Common
Stock on the day immediately prior to the first anniversary of the date of
issuance of the Additional COES Warrants. The aforesaid 50% reset provision
shall be applicable, if at all, on only one occasion. The foregoing reset
provisions expire if the CXI Common Stock trades at a price of $10.00 or more at
any time, commencing ninety (90) days after the effective date of the
registration statement filed pursuant to Section 8.2(a) of the Agreement. In the
event that, at any time and from time to time from and after the date hereof,
there shall occur any stock dividend, stock split, combination of shares,
recapitalization or other such event relating to the then outstanding CXI Common
Stock, then all of the foregoing price calculations and amounts will be
appropriately arithmetically adjusted. The COES Warrants are hereby amended to
incorporate the provisions of this Section 8.
Section 9. Further Issuance of Warrants. If, but only if, COES
consummates during 1997 the purchase of 50% or more of the voting capital stock
of Lanxide Corporation, COES shall promptly issue to the holders of the then
outstanding shares of COES Series D Preferred Stock, in proportion to their
interests therein, three (3) year warrants for such holders, in the aggregate,
to purchase, in the aggregate, three percent (3%) of the total number of shares
of Lanxide Corporation common stock and common stock equivalents so acquired by
COES at the same price per share paid by COES (which is presently estimated to
be approximately $7.41 per share but which may change in negotiations). The form
of warrant shall contain customary terms and provisions. In addition to the
foregoing, COES hereby covenants and agrees that
(a) the holders of the warrants to purchase Lanxide common stock and
common stock equivalents shall be entitled to the benefits of Rule 144, as
promulgated under the Securities Act of 1933, as amended, and,
(b) if for any reason, Rule 144 shall not be available to such holders
on a date which shall be not later than one year from the date of issuance of
such warrants, COES shall cause Lanxide to file and use its best efforts to
cause to be declared effective by the Commission, a registration statement
registering the Lanxide common stock or other common stock equivalents for sale
under the Securities Act.
Section 10. Instruments Remain in Full Force and Effect. The
Agreement and the COES Warrants remain in full force and effect, without
amendment except as expressly set forth in this Amendment. Without in any way
limiting the foregoing, the interpretation and enforcement of this Amendment
shall be governed by the applicable enforcement and interpretation (including
governing law) provisions of the Agreement. Furthermore, the Purchaser is
specifically and expressly deemed to have restated the Purchaser's
representations and warranties concerning investor suitability, adequate access
to information, due diligence by the Purchaser, and investment intent. The
Purchaser expressly reaffirms the Purchaser's agreement that the securities
issued
<PAGE> 8
pursuant to the Agreement, as amended hereby, shall be legended and restricted
as set forth in the Agreement, as amended hereby.
Section 11. Miscellaneous.
11.1 Headings. The headings of the various sections of this Amendment
have been inserted for convenience of reference only and shall not be deemed to
be part of this Amendment.
11.2 Governing Law/Jurisdiction. This Amendment will be construed and
enforced in accordance with and governed by the laws of the State of New York,
except for matters arising under the Securities Act, without reference to
principles of conflicts of law. Each of the parties consents to the jurisdiction
of the courts of or located in the State of New York, specifically the Southern
District of New York and/or the Supreme Court of the state of New York in
connection with any dispute arising under this Amendment and hereby waives, to
the maximum extent permitted by law, any objection, including any objection
based on forum non conveniens, to the bringing of any such proceeding in such
jurisdictions. Each party hereby agrees that if another party to this Amendment
obtains a judgment against it in such a proceeding, the party which obtained
such judgment may enforce same by summary judgment in the courts of any country
having jurisdiction over the party against whom such judgment was obtained, and
each party hereby waives any defenses available to it under local law and agrees
to the enforcement of such a judgment. In addition, the parties agree that the
party against whom such judgment was obtained will pay the legal fees of the
party obtaining such judgment. Each party to this Amendment irrevocably consents
to the service of process in any such proceeding by the mailing of copies
thereof by registered or certified mail, postage prepaid, to such party at its
address set forth in the Agreement. Nothing herein shall affect the right of any
party to serve process in any other manner permitted by law.
11.3 Counterparts/Facsimile. This Amendment may be executed in two or
more counterparts, each of which shall constitute an original, but all of which,
when taken together, shall constitute but one instrument, and shall become
effective when one or more counterparts have been signed by each party hereto
and delivered to the other party. In lieu of the original, a facsimile
transmission copy of the original shall be as effective and enforceable as the
original.
<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their duly authorized representatives the day and year first above
written.
COMMODORE ENVIRONMENTAL SERVICES, INC.
By /s/ Paul E. Hannesson
------------------------------------
COMMODORE APPLIED TECHNOLOGIES, INC.
By /s/ Michael D. Fullwood
------------------------------------
Purchaser: OKEMO PARTNERS LIMITED
By /s/
------------------------------------
Name:
Title:
Purchaser's Address: 85 Old Long Ridge Road
Suite A7
Stamford, CT 06903
Warrant No. 97-D2
<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their duly authorized representatives the day and year first above
written.
COMMODORE ENVIRONMENTAL SERVICES, INC.
By /s/ Paul E. Hannesson
------------------------------------
COMMODORE APPLIED TECHNOLOGIES, INC.
By /s/ Michael D. Fullwood
------------------------------------
Purchaser: AMERICAN INVESTMENT GROUP
OF NEW YORK, L.P.
By /s/
------------------------------------
Name:
Title:
Purchaser's Address: 85 Old Long Ridge Road
Suite A7
Stamford, CT 06903
Warrant No. 97-D3
<PAGE> 11
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their duly authorized representatives the day and year first above
written.
COMMODORE ENVIRONMENTAL SERVICES, INC.
By /s/ Paul E. Hannesson
------------------------------------
COMMODORE APPLIED TECHNOLOGIES, INC.
By /s/ Michael D. Fullwood
------------------------------------
Purchaser: MILTON PARTNERS
By /s/
------------------------------------
Name:
Title:
Purchaser's Address: 165 Mason Street
Greenwich, CT 06830
Warrant No. 97-D1
<PAGE> 1
SECURITIES HAVE NOT REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN EXEMPTION
FROM REGISTRATION UNDER REGULATION D PROMULGATED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"). THIS SUBSCRIPTION AGREEMENT SHALL NOT
CONSTITUTE AN OFFER TO SELL NOR A SOLICITATION OF AN OFFER TO BUY THE SECURITIES
IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL. THE
SECURITIES ARE "RESTRICTED" AND MAY NOT BE RESOLD OR TRANSFERRED EXCEPT AS
PERMITTED UNDER THE ACT PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.
7% PREFERRED STOCK
SECURITIES PURCHASE AGREEMENT
COMMODORE ENVIRONMENTAL SERVICES, INC.
AND
COMMODORE APPLIED TECHNOLOGIES, INC.
THIS AGREEMENT is made as of the 14th day of August, 1997, by
and between COMMODORE ENVIRONMENTAL SERVICES, INC., traded on the "Pinksheets"
under the "COES" (the "Parent Company"), a corporation, with its principal
office at 150 East 58th Street, New York, NY 10155, COMMODORE APPLIED
TECHNOLOGIES INC., AMEX symbol "CXI" (the "Subsidiary Company"), a corporation,
with its principal office at 150 East 58th Street, New York, NY 10155 and ELARA
LTD. (the "Purchaser"), with its principal office at P.O. Box 438, Tropic Isle
Building, Wickhams Cay, Road Town, Tortolla, British Virgin Islands.
IN CONSIDERATION of the mutual covenants contained in this
Agreement, the Parent Company, Subsidiary Company and the Purchaser agree as
follows:
Section 1. Certain Definitions. For purposes of this
Agreement:
"Change in Control Transaction" means the date the Parent
Company or the Subsidiary Company (i) sells or otherwise conveys all or
substantially all of its assets or (ii) effects a transaction (by merger or
otherwise) in which more than 50% of the voting power of the Parent Company or
the Subsidiary Company is disposed of, directly or indirectly, or if within any
12 month period there is a change of more than 50% of the members of the Parent
Company's or the Subsidiary Company's Board of Directors, or if any other
person, entity or group (as defined in Section 13(d) of the Exchange Act) and/or
any of their affiliates or associates acquires in excess of 50% of the Common
Stock.
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<PAGE> 2
"Closing Date" means the date agreed to by the parties for the
delivery of the stock certificate against a wire transfer of the funds to the
Parent Company.
"Closing" means the completion of the purchase and sale of the
COES Preferred Shares on the Closing Date.
"COES Convertible Preferred Stock" means the 100,000 shares of
Series D Preferred Stock of the Parent Company, $.01 par value, convertible into
CXI Common Stock as hereinafter provided and which has the rights, preferences
and privileges set forth in the Certificate of Designation, Number, Powers,
Preferences and Relative, Participating, Optional, and Other Special Rights and
the Qualifications, Limitations, Restrictions, and Other Distinguishing
Characteristics of Series "D" Preferred Stock of COES (as amended and restated,
the "Series D Certificate of Designations"), a copy of which Certificate of
Designations is attached hereto as Exhibit A (the "Certificate of Designation").
"COES Preferred Shares" means the shares of COES Convertible
Preferred Stock purchased hereunder.
"Conversion Date" means the date on which the Purchaser has
telecopied the Notice of Conversion to counsel for the Parent Company.
"Conversion Price" means an amount equal to the lesser of (a)
$5.15, being one hundred and ten percent (110%) of the average closing price of
the CXI Common Stock for the five (5) business days immediately prior to the
date of this Agreement, or (b) a fifteen (15%) percent discount from the average
of either the low bid price or the closing price (such average to be selected at
the option of the holder of the COES Preferred Shares) of the CXI Common Stock
as reported by Bloomberg, L.P. ("Bloomberg") for the previous five (5) business
days ending on the day before the Conversion Date (the "Average Closing Bid
Price"); provided, however, if the average of the low bid price or the closing
price (whichever is applicable)of the CXI Common Stock, as reported by Bloomberg
("Floor Average"), for any consecutive thirty (30) days is equal or less than
$2.00 (such thirtieth day shall be the "First Trigger Date"), the conversion
price shall equal $2.00; if the Floor Average for any consecutive thirty (30)
days beginning any day after the First Trigger Date is less than $2.00 ("Second
Trigger Date"), the conversion price shall equal $1.90; if the Floor Average for
any thirty (30) days beginning any day after the Second Trigger Date is less
than $1.90 (the "Third Trigger Date"), the conversion price shall equal $1.80;
if the Floor Average for any consecutive thirty (30) days beginning any day
after the Third Trigger Date is less than $1.80 (the "Fourth Trigger Date"), the
conversion price shall equal $1.70; if the Floor Average for any consecutive
thirty (30) days beginning any day after the Fourth Trigger Date is less than
$1.70 (the "Fifth Trigger Date"), the conversion price shall equal $1.60; if the
Floor Average for any consecutive thirty (30) days beginning any day after the
Fifth Trigger Date is less than $1.60, the conversion price shall equal $1.50.
Subject to Section 11.5 herein, in no event shall the Conversion Price be lower
than $1.50 per share of CXI
2
<PAGE> 3
Common Stock. If the CXI Common Stock is not traded on the American Stock
Exchange, the Average Closing Bid Price shall be the average closing bid price
(and if not available, the mean of the high and low prices) of the Common Stock
on the over-the-counter-market or the principal national securities exchange or
the Nasdaq National Market System or Nasdaq SmallCap Market System on which the
CXI Common Stock is traded for the previous five (5) business days ending on the
day before the Conversion Date.
The Conversion Price shall be equitably adjusted accordingly
on a pro rata basis in the event of the happening of certain events that would
affect the CXI Common Stock or COES Convertible Preferred Stock's value
including, but not limited to, forward and reverse stock splits, issuance of
stock dividends, subdivision of shares, combinations, reclassifications, or the
like (collectively "Reclassifications"). An adjustment made pursuant to this
section shall become effective immediately after the effective date of such
event retroactive to the record date, if any, for such an event.
"Convertible Date" means the date on which the COES Preferred
Shares will become convertible, which is the day following the date that the
Registration Statement for the shares of CXI Common Stock underlying the COES
Preferred Stock and COES Warrants has been declared effective by the Securities
and Exchange Commission ("SEC").
"Cumulative Suspension" means the date a Suspension (as
defined in Section 8.7) has occurred and is continuing or the date that is the
15th day in the aggregate that more than one Suspension has occurred since the
effective date of the Registration Statement.
"CXI Common Stock" means the underlying Common Stock of the
Subsidiary Company, $.001 par value.
"Delisting" means the date the CXI Common Stock is delisted
from AMEX and is not otherwise listed on the Nasdaq Stock Market or other
national securities exchange.
"Holder" means a holder of COES Preferred Shares.
"Insufficient CXI Common Stock" means the date the number of
shares of CXI Common Stock held by the Parent Company is not sufficient to
effect the conversion of all outstanding COES Preferred Shares then eligible for
conversion (whether or not the Holders have duly delivered Notices of
Conversion).
"Purchase Price" means the aggregate purchase price of the
COES Preferred Shares purchased.
3
<PAGE> 4
Section 2. Authorization and Sale of Shares.
2.1 Authorization. Subject to the terms and conditions of this
Agreement, the Parent Company has authorized the sale and issuance of the COES
Preferred Shares.
2.2 Agreement to Sell and Purchase the Shares. The Parent
Company will sell and the Purchaser will buy, in reliance upon the
representations and warranties of the Parent Company Subsidiary Company and
Purchaser contained in this Agreement, upon the terms and conditions hereinafter
set forth, Twenty Thousand (20,000) COES Preferred Shares of COES Convertible
Preferred Stock for an aggregate purchase price of Two Million Dollars
($2,000,000) for all such COES Preferred Shares based on U.S. $100 per share.
The COES Preferred Shares shall pay a 7% cumulative dividend, payable in cash or
CXI Common Stock at the Conversion Price, at the discretion of the Parent
Company, at the time of each conversion. Such purchase and sale shall occur on
the Closing Date. In addition, Parent Company will transfer to Purchaser for no
additional consideration, five-year warrants ("COES Warrants") to purchase
twelve and one-half (12 1/2) shares of CXI Common Stock for each COES Preferred
Share purchased, initially exercisable on the Convertible Date and for a period
of five years thereafter, at an initial exercise price equal to $7.14 per share
of the CXI Common Stock, subject to adjustment and resetting as set forth in the
form of COES Warrant attached hereto as Exhibit B.
2.3 Subsidiary Company. Whereas the Purchaser is purchasing
COES Preferred Shares from the Parent Company, and the Parent Company is
transferring CXI Common Stock to the Purchaser upon conversion of COES Preferred
Shares and exercise of COES Warrants, the Parent Company hereby agrees to
immediately remit 2.5% of the Purchase Price ($2.50 per COES Preferred Shares
which has a subscription price of $100 per COES Preferred Share) at the Closing
to the Subsidiary Company, constituting the sum of $50,000 of aggregate
consideration for the Subsidiary Company's agreement to perform its obligations
as set forth in this Agreement and the Warrant Agreement, a form of which is
included in Exhibit B.
2.4 Time and Place of Closing. The Closing shall be held at
the offices of Greenberg Traurig, 153 East 53rd Street, 35th Floor, New York,
New York 10022 as promptly as practicable as agreed to by the parties to this
Agreement, but no later than August 15, 1997 at which time either party may
terminate this Agreement.
2.5 Payment and Delivery. At or prior to the Closing, the
following shall occur:
(a) Provided that Purchaser has been notified by
counsel to COES that the Parent Company has delivered to such counsel for
immediate delivery to Purchaser against wire transfer of funds as hereinafter
set forth certificates representing the COES Preferred Shares and COES Warrants
as provided in Section 2.5(b) below, Purchaser shall remit by wire transfer the
Purchase Price as payment in full for the COES
4
<PAGE> 5
Preferred Shares as follows: 89% of the Purchase Price ($1,780,000) directly to
the Parent Company, 9% of the Purchase Price $180,000) directly to Avalon
Research Group, Inc. (the "Finder"), and 2% of the Purchase Price ($40,000)
directly to Stephen A. Weiss.
(b) The Parent Company shall deliver or cause to be
delivered to counsel to Seller for immediate delivery to Purchaser against wire
transfer of funds as aforesaid certificates representing the COES Preferred
Shares and the COES Warrants, registered in the name of Purchaser (or any
nominee designated by Purchaser at or prior to the Closing Date), free and clear
of all liens, claims, charges and encumbrances. Purchaser will receive such
certificates from counsel to COES, as applicable, after the Parent Company,
Finder and Stephen A. Weiss have received the Purchase Price directly from
Purchaser.
(c) Wire instructions for the Parent Company have
been separately provided to the Purchaser's counsel.
Section 3. General Representations and Warranties of the
Parent Company. The Parent Company hereby represents and warrants to, and
covenants with, the Purchaser that the following are true and correct as of the
date hereof and as of the Closing Date.
3.1 Organization; Qualification. The Parent Company is a
corporation duly organized and validly existing under the laws of the State of
Delaware and is in good standing under such laws. The Parent Company has all
requisite corporate power and authority to own, lease and operate its properties
and assets, and to carry on its business as presently conducted. The Parent
Company is qualified to do business as a foreign corporation in each
jurisdiction in which the ownership of its property or the nature of its
business requires such qualification, except where failure to so qualify would
not have a material adverse effect on the Parent Company.
3.2 Capitalization. The authorized capital stock of the Parent
Company is as set forth in footnote 12 of the audited consolidated financial
statements of the Parent Company set forth in its Form 10-K for the fiscal year
ended December 31, 1996, a true copy of which has been supplied to Purchaser,
provided that in addition 60,000 shares of the COES Preferred Shares and COES
Warrants for 600,000 shares of CXI Common Stock were issued in May 1997, and
40,000 additional COES Preferred Shares and 462,500 additional COES Warrants
have been authorized for issuance. The Series D Preferred Stock, when issued,
shall be duly authorized and validly issued and are fully paid and
nonassessable.
3.3 CXI Common Stock Transferable Upon Conversion of COES
Preferred Shares or Exercise of COES Warrants. The Parent Company currently owns
Fifteen Million (15,000,000) shares of CXI Common Stock, all of which have been
duly
5
<PAGE> 6
authorized and validly issued and are fully paid and nonassessable. The Parent
Company will reserve from its holdings of CXI Common Stock a sufficient number
of shares of CXI Common Stock to permit the conversion in full of the
outstanding COES Preferred Shares and the exercise in full of the COES Warrants.
As of the Closing Date, the Parent Company had reserved sufficient shares of CXI
Common Stock for transfer to Purchaser upon exercise of the COES Preferred
Shares which are convertible, at Purchaser's option, at the Conversion Price, as
per Section 10 of this Agreement, and upon exercise of the COES Warrants. If the
Parent Company does not own sufficient shares of CXI Common Stock for transfer
to the Purchaser upon conversion of COES Preferred Shares and/or exercise of
COES Warrants, the Parent Company hereby agrees to promptly purchase or
otherwise acquire the sufficient amount of shares of CXI Common Stock and
transfer such shares to the Purchaser upon conversion of COES Preferred Shares
and/or exercise of COES Warrants.
Except for the consent of National Securities Corporation,
which has been obtained, the Parent Company has all requisite corporate right,
power and authority to transfer the shares of CXI Common Stock in its holdings
to Purchaser upon conversion of the COES Preferred Shares and exercise of the
COES Warrants.
3.4 Authorization. The Parent Company has all requisite
corporate right, power and authority to execute and deliver this Agreement and
to consummate the transactions contemplated hereby. All corporate action on the
part of the Parent Company, its directors and stockholders necessary for the
authorization, execution, delivery and performance of this Agreement by the
Parent Company, the authorization, sale, issuance and delivery of the COES
Preferred Shares and the performance of the Parent Company's obligations
hereunder has been taken. This Agreement has been duly executed and delivered by
the Parent Company and constitutes a legal, valid and binding obligation of the
Parent Company enforceable in accordance with its terms, subject to laws of
general application relating to bankruptcy, insolvency and the relief of debtors
and rules of law governing specific performance, injunctive relief or other
equitable remedies, and to limitations of public policy as they apply to the
indemnification provisions set forth in Section 8.4 or this Agreement. Upon
their issuance, transfer and delivery pursuant to this Agreement, the COES
Preferred Shares, COES Warrants and shares of CXI Common Stock transferable upon
conversion of the COES Preferred Shares (the "Conversion Shares") and exercise
of the COES Warrants (the "Warrant Shares") (collectively, the "Securities")
will be validly issued, fully paid and nonassessable and will be free of any
liens or encumbrances; provided, however, that the COES Preferred Shares and
COES Warrants are subject to restrictions on transfer under state and/or federal
securities laws. The issuance and sale of the COES Preferred Shares and COES
Warrants will not give rise to any preemptive right or right of first refusal or
right of participation on behalf of any person. Upon registration of the
Conversion Shares and the Warrant Shares pursuant to Section 8 of this
Agreement, there shall be no restriction on the transferability thereof other
than applicable prospectus delivery requirements.
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3.5 No Conflict. The execution and delivery of this Agreement
do not, and the consummation of the transactions contemplated hereby will not,
conflict with, or result in any violation of, or default (with or without notice
or lapse of time, or both), or give rise to a right termination, cancellation or
acceleration of any obligation or to a loss of a material benefit, under, any
provision of the Articles of Incorporation, and any amendments thereto, Bylaws,
stockholders agreements and any amendments thereto of the Parent Company or any
material mortgage, indenture, lease or other agreement or instrument, permit,
concession, franchise, license, judgment, order, decree statute, law, ordinance,
rule or regulation applicable to the Parent Company, its properties or assets.
3.6 Accuracy of Reports and Information. The Parent Company is
in full compliance, to the extent applicable, with all reporting obligations
under Section 12(b), 12(g) or 15(d), as applicable, of the Securities Exchange
Act of 1934, as amended (the "Exchange Act").
The Parent Company has filed all material required to be filed
pursuant to all reporting obligations, under either Section 13(a) or 15(d) of
the Exchange Act for a period of at least twelve (12) months immediately
preceding the offer or sale of the COES Preferred Shares (or for such shorter
period that the Parent Company has been required to file such material).
3.7 SEC Filings/Full Disclosure. None of the Parent Company's
filings with the SEC since January 1, 1997 contain any untrue statement of a
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. The Parent Company has, since January 1,
1997, timely filed all requisite forms, reports and exhibits thereto with the
SEC. The Parent Company's Annual Report on Form 10-K for the year ended December
31, 1996, its Quarterly Reports for the periods ended March 31, 1997 and all
Current Reports on Form 8-K filed by the Parent Company from January 1, 1996 to
date are referred to as the "COES SEC Reports."
There is no fact known to the Parent Company (other than
general economic conditions known to the public generally) that has not been
disclosed in writing to the Purchaser which could reasonably be expected to have
a material adverse effect on the condition (financial or otherwise) or in the
earnings, business affairs, business prospects, properties or assets of the
Parent Company, or (ii) could reasonably be expected to materially and adversely
affect the ability of the Parent Company to perform its obligations pursuant to
this Agreement.
3.8 Absence of Undisclosed Liabilities. The Parent Company has
no material liabilities or obligations, absolute or contingent (individually or
in the aggregate), except as set forth in the financial statements included in
the COES SEC (the "COES Financial Statements") or as incurred in the ordinary
course of business after the date of the COES Financial Statements.
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3.9 Governmental Consent, etc. No consent, approval or
authorization of or designation, declaration or filing with any governmental
authority on the part of the Parent Company is required in connection with the
valid execution and delivery of this Agreement, or the offer, sale or issuance
of the COES Preferred Shares, or the consummation of any other transaction
contemplated hereby, except the filing with the SEC of a registration statement
on Form S-3 or Form S-1 for the purpose of registering the CXI Common Stock
underlying the COES Preferred Shares and the COES Warrants.
3.10 Intellectual Property Rights. Except as disclosed in the
COES SEC Reports, the Parent Company has sufficient trademarks, trade names,
patent rights, copyrights and licenses to conduct its business as contemplated
therein. To the Parent Company's knowledge, neither the Parent Company nor its
products is infringing or will infringe any trademark, trade name, patent right,
copyright, license, trade secret or other similar right of others currently in
existence; and there is no claim being made against the Parent Company regarding
any trademark, trade name, patent, copyright, license, trade secret or other
intellectual property right which could have a material adverse effect on the
condition (financial or otherwise), business, results of operations or prospects
of the Parent Company.
3.11 Material Contracts. Except as set forth in the COES SEC
Reports, the agreements to which the Parent Company is a party described therein
are valid agreements, in full force and effect, the Parent Company is not in
material breach or material default (with or without notice or lapse of time, or
both) under any of such agreements, and, to the Parent Company's knowledge, the
other contracting party or parties thereto are not in material breach or
material default (with or without notice or lapse of time, or both) under any of
such agreements.
3.12 Litigation. There is no action, proceeding or
investigation pending, or to the Parent Company's knowledge threatened, against
the Parent Company which might result, either individually or in the aggregate,
in any material adverse change in the business, prospects, conditions, affairs
or operations of the Parent Company. The Parent Company is not a party to or
subject to the provisions of any order, writ, injunction, judgment or decree of
any court or government agency or instrumentality. There is no action, suit,
proceeding or investigation by the Parent Company currently pending or which the
Parent Company currently intends to initiate.
3.13 Title to Assets. Except as set forth in COES SEC Reports,
the Parent Company has good and marketable title to all properties and material
assets described therein as owned by it, free and clear of any pledge, lien,
security interest, encumbrance, claim or equitable interest other than such as
are not material to the business of the Parent Company.
3.14 Subsidiaries. The Parent Company does not presently own
or control, directly or indirectly, any interest in any other corporation,
partnership, association or other business entity, except as stated in the COES
SEC Reports.
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3.15 Required Governmental Permits. The Parent Company is in
possession of and operating in compliance with all authorizations, licenses,
certificates, consents, orders and permits from state, federal and other
regulatory authorities which are material to the conduct of its business, all of
which are valid and in full force and effect.
3.16 Listing. The Parent Company will maintain the listing of
its Common Stock on the "Pinksheets" or other organized, comparable United
States market or quotation system; provided, however, that the sole remedy for
Purchaser for breach of this representation shall be liquidated damages as
provided in Section 10.6.
3.17 Other Outstanding Securities/Financing Restrictions.
Except as set forth on the CXI SEC Reports (as defined herein) or as
contemplated hereby, there are no other outstanding debt or equity securities
presently convertible into shares of CXI Common Stock. COES contemplates selling
an aggregate of approximately 25,000 shares of COES Preferred Shares (including
the shares being offered and sold hereby) contemporaneously herewith, and
issuing an aggregate of approximately 462,500 additional COES Warrants
contemporaneously herewith, of which 150,000 such warrants will be issued to
entities which acquired COES Preferred Shares in May 1997 and the balance are
anticipated to be issued contemporaneously herewith to acquirors of additional
COES Preferred Shares (including the Purchaser).
The Parent Company cannot, without the prior approval in
writing from the Purchaser, obtain convertible debt or equity financing which is
convertible into securities of the Subsidiary Company for a period of ninety
(90) days following the effective date of the Registration Statement (as defined
herein); however, the Parent Company will not require prior approval if (a) at
least 80% of the net proceeds of the financing is part of an acquisition by the
Parent Company of control of another company or entity, (b) at least 80% of the
net proceeds of the financing is a refinancing of the Parent Company's debt, or
(c) the financing is part of a public offering of the Parent Company's
securities.
3.18 Right of Participation. In the event the parent Company
wishes to complete a financing similar in structure to the securities issued
hereby within one hundred and eighty (180) days from the Closing Date, the
Purchaser shall have the right to participate in such offering and shall have
three (3) business days to reply in writing after receipt of written notice of
such proposed financing from the Parent Company. In the event a writing is not
received by the Parent Company from the Purchaser specifying the extent of the
Purchaser's interest in so participating, this will be deemed a refusal by the
Purchaser of such right to participate.
3.19 Legal Opinion. Purchaser shall, upon purchase of the COES
Preferred Shares, receive an opinion letter from counsel to the Parent Company,
and the Parent Company represents that it will immediately obtain such an
opinion from counsel to the satisfaction of the Purchaser, to the effect that:
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<PAGE> 10
(a) The Parent Company is duly incorporated, validly existing
and in good standing in the jurisdiction of its incorporation.
(b) There is no action, proceeding or investigation pending,
or to such counsel's knowledge, threatened against the Parent Company which
might result, either individually or in the aggregate, in any material adverse
change in the business, prospects, conditions, affairs or operations of the
Parent Company.
(c) The Parent Company is not a party to or subject to the
provisions of any order, writ, injunction, judgment or decree of any court or
government agency or instrumentality.
(d) There is no action, suit, proceeding or investigation by
the parent Company currently pending or, to such counsel's knowledge, which the
Parent Company currently intends to initiate.
(e) All issued and outstanding shares of CXI Common Stock have
been duly authorized and validly issued and are fully paid and nonassessable.
(f) This Securities Purchase Agreement and the Stock Purchase
Warrant, the issuance of the COES Preferred Shares and COES Warrants and the
transfer of the Conversion Shares and Warrant Shares have been duly approved by
all required corporate action, the requisite consent of National Securities
Corporation for the Parent Company to transfer the shares of CXI Common Stock in
its holdings to the Purchaser upon conversion of the COES Preferred Shares and
exercise of the COES Warrants has been duly obtained, and that all such
Securities, upon delivery, shall be validly issued and outstanding, fully paid
and nonassessable.
(g) The execution, delivery and performance of this Securities
Purchase Agreement and the Stock Purchase Warrant by the Parent Company, and the
consummation of the transactions contemplated thereby, will not, with or without
the giving of notice or the passage of time or both:
(i) Violate the provisions of any law, rule or
regulation which is material to the assets,
properties or business of the Parent Company;
(ii) Violate the provisions of the charter or bylaws
of the Parent Company; or
(iii) To the best of counsel's knowledge, violate any
judgment, decree, order or award of any court,
governmental body or arbitrator.
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(iv) To the best of counsel's knowledge, conflict
with, or result in the breach or termination of any
term or provision of, or constitute a default under,
or cause any acceleration under, or cause the
creation of any lien, charge or encumbrance upon the
properties or assets of the Parent Company pursuant
to, any note, bond, indenture, mortgage, lease, deed
of trust or other instrument, obligation, or
agreement to which the Parent Company is a party and
which is material to Parent Company, or by which the
Parent Company, or any of its material properties is
or may be bound.
(h) This Securities Purchase Agreement and the Stock Purchase
Warrant constitute the valid and legally binding obligations of the Parent
Company and are enforceable against the Parent Company in accordance with their
respective terms, subject to laws of general application relating to bankruptcy,
insolvency and the relief of debtors and rules of law governing specific
performance, injunctive relief or other equitable remedies, and, with respect to
the Securities Purchase Agreement, to limitations of public policy as they may
apply to the indemnification provisions set forth in Section 8.4 thereof.
3.20 Use of Proceeds. Except for payments aggregating $50,000
to the Subsidiary Company as provided herein, the Parent Company represents that
the net proceeds from this offering will be used for general corporate purposes.
3.21 No Poison Pill. The Parent Company represents that it
does not have, and has no current intention to adopt, a stockholder rights plan
("poison pill").
Section 4. General Representations and Warranties of the
Subsidiary Company. The Subsidiary Company hereby represents and warrants to,
and covenants with, the Purchaser that the following are true and correct as of
the date hereof and as of the Closing Date.
4.1 Organization; Qualification. The Subsidiary Company is a
corporation duly organized and validly existing under the laws of the State of
Delaware and is in good standing under such laws. The Subsidiary Company has all
requisite corporate power and authority to own, lease and operate its properties
and assets, and to carry on its business as presently conducted. The Subsidiary
Company is qualified to do business as a foreign corporation in each
jurisdiction in which the ownership of its property or the nature of its
business requires such qualification, except where failure to so qualify would
not have a material adverse effect on the Subsidiary Company.
4.2 Capitalization. The authorized capital stock of the
Subsidiary Company is as set forth in the CXI SEC Reports. All issued and
outstanding shares of Common Stock have been duly authorized and validly issued
and are fully paid and nonassessable.
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4.3 CXI Common Stock Transferable Upon Conversion of COES
Preferred Shares or Exercise of COES Warrants. Except for the consent of
National Securities Corporation, which has been obtained, the Subsidiary Company
has all requisite corporate right, power and authority to transfer shares of CXI
Common Stock owned by the Parent Company to the Purchaser upon conversion of the
COES Preferred Shares and exercise of the COES Warrants.
4.4 Authorization. The Subsidiary Company has all requisite
corporate right, power and authority to execute and deliver this Agreement and
to consummate the transactions contemplated hereby. All corporate action on the
part of the Subsidiary Company, its directors and stockholders necessary for the
authorization, execution, delivery and performance of this Agreement by the
Subsidiary Company, and the performance of the Subsidiary Company's obligations
hereunder has been taken. This Agreement has been duly executed and delivered by
the Subsidiary Company and constitutes a legal, valid and binding obligation of
the Subsidiary Company enforceable in accordance with its terms, subject to laws
of general application relating to bankruptcy, insolvency and the relief of
debtors and rules of law governing specific performance, injunctive relief or
other equitable remedies, and to limitations of public policy as they may apply
to the indemnification provisions set fourth in Section 8.4 of this Agreement.
Upon their issuance, transfer and delivery pursuant to this Agreement, the
Securities will have been validly issued, fully paid and nonassessable and will
be free of any liens or encumbrances; provided, however, that the COES Preferred
Shares and COES Warrants are subject to restrictions on transfer under state
and/or federal securities laws. Upon registration of the Conversion Shares and
the Warrant Shares pursuant to Section 8 of this Agreement, there shall be no
restriction on the transferability thereof other than applicable prospectus
delivery requirements.
4.5 No Conflict. The execution and delivery of this Agreement
do not, and the consummation of the transactions contemplated hereby will not,
conflict with, or result in any violation of, or default (with or without notice
or lapse of time, or both), or give rise to a right of termination, cancellation
or acceleration of any obligation or to a loss of a material benefit, under, any
provision of the Certificate of Incorporation, and any amendments thereto,
Bylaws, stockholders agreements and any amendments thereto of the Subsidiary
Company or any material mortgage, indenture, lease or other agreement or
instrument, permit, concession, franchise, license, judgment, order, decree
statute, law, ordinance, rule or regulation applicable to the Subsidiary
Company, its properties or assets.
4.6 Accuracy of Reports and Information. The Subsidiary
Company is in full compliance, to the extent applicable, with all reporting
obligations under Section 12(b), 12(g) or 15(d), as applicable, of the Exchange
Act. The Subsidiary Company has registered its Common Stock pursuant to Section
12 of the Exchange Act and the Common Stock is listed and trades on AMEX.
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The Subsidiary Company has filed all material required to be
filed pursuant to all reporting obligations, under either Section 13(a) or 15(d)
of the Exchange Act for a period of at least twelve (12) months immediately
proceeding the offer or sale of the COES Preferred Shares (or for such shorter
period that the Subsidiary Company has been required to file such material).
4.7 SEC Filings/Full Disclosure. None of the Subsidiary
Company's filings with the SEC since January 1, 1997 contain any untrue
statement of a 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. The Subsidiary Company
has, since January 1, 1997, timely filed all requisite forms reports and
exhibits thereto with the SEC. The Subsidiary Company's Prospectus declared
effective by the SEC on June 28, 1996, the Annual Report on Form 10-K for the
year ended December 31, 1996, its Quarterly Reports for the periods ended March
31, 1997 and all Current Reports on Form 8-K filed by the Subsidiary Company
from January 1, 1996 to date are referred to as the "CXI SEC Reports."
There is no fact known to the Subsidiary Company (other than
general economic conditions known to the public generally) that has not been
disclosed in writing to the Purchaser which could reasonably be expected to have
a material adverse effect on the condition (financial or otherwise) or in the
earnings, business affairs, business prospects, properties or assets of the
Subsidiary Company, or (ii) could reasonably be expected to materially and
adversely affect the ability of the Subsidiary Company to perform its
obligations pursuant to this Agreement.
4.8 Absence of Undisclosed Liabilities. The Subsidiary Company
has no material liabilities or obligations, absolute or contingent (individually
or in the aggregate), except as set forth in the financial statements included
in the CXI SEC Reports (the "CXI Financial Statements") or as incurred in the
ordinary course of business after the date of the CXI Financial Statements.
4.9 Governmental Consent, etc. No consent, approval or
authorization of or designation, declaration or filing with any governmental
authority on the part of the Subsidiary Company is required in connection with
the valid execution and delivery of this Agreement, or the offer, sale or
issuance of the COES Preferred Shares, or the consummation of any other
transaction contemplated hereby, except the filing with the SEC of a
registration statement on Form S-3 or S-1 for the purpose of registering the CXI
Common Stock underlying the COES Preferred Shares and the COES Warrants.
4.10 Intellectual Property Rights. Except as disclosed in the
CXI SEC Reports, the Subsidiary Company has sufficient trademarks, trade names,
patent rights, copyrights and licenses to conduct its business as contemplated
therein. To the Subsidiary Company's knowledge, neither the Subsidiary Company
nor its products is infringing or will infringe any trademark, trade name,
patent right, copyright, license, trade secret or other similar right of others
currently in existence; and there is no claim
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being made against the Subsidiary Company regarding any trademark, trade name,
patent, copyright, license, trade secret or other intellectual property right
which could have a material advisers effect on the condition (financial or
otherwise), business, results of operations or prospects of the Subsidiary
Company.
4.11 Material Contracts. Except as set forth in the CXI SEC
Reports, the agreements to which the Subsidiary Company is a party described
therein are valid agreements, in full force and effect, the Subsidiary Company
is not in material breach or material default (with or without notice or lapse
of time, or both) under any of such agreements, and, to the Subsidiary Company's
knowledge, the other contracting party or parties thereto are not in material
breach or material default (with or without notice or lapse of time, or both)
under any such agreements.
4.12 Litigation. There is no action, proceeding or
investigation pending, or to the Subsidiary Company's knowledge threatened,
against the Subsidiary Company which might result, either individually or in the
aggregate, in any material adverse change in the business, prospects,
conditions, affairs or operations of the Subsidiary Company. The Subsidiary
Company is not a party to or subject to the provisions of any order, writ,
injunction, judgment or decree of any court or government agency or
instrumentality. There is no action, suit, proceeding or investigation by the
Subsidiary Company currently pending or which the Subsidiary Company currently
intends to initiate.
4.13 Title to Assets. Except as set forth the CXI SEC Reports,
the Subsidiary Company has good and marketable title to all properties, and
material assets described therein as owned by it, free and clear of any pledge,
lien, security interest, encumbrance, claim or equitable interest other than
such as are not material to the business of the Subsidiary Company.
4.14 Subsidiaries. The Subsidiary Company does not presently
own or control, directly or indirectly, any interest in any other corporation,
partnership, association or other business entity, except as stated in the CXI
SEC Reports.
4.15 Required Governmental Permits. The Subsidiary Company is
in possession of and operating in compliance with all authorizations, licenses,
certificates, consents, orders and permits from state, federal and other
regulatory authorities which are material to the conduct of its business, all of
which are valid and in full force and effect.
4.16 Listing. The Subsidiary Company will maintain the listing
of its Common Stock on AMEX or other organized, comparable United States market
or quotation system; provided, however, that the sole remedy for Purchaser for
breach of this representation shall be liquidated damages as provided in Section
10.6.
4.17 Other Outstanding Securities/Financing Restrictions.
Except as set forth in the CXI SEC Reports or as contemplated hereby, there are
no other outstanding
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debt or equity securities presently convertible into shares of CXI Common Stock.
Except as set forth in the CXI SEC Reports, the Subsidiary Company has no
outstanding restricted shares of Common Stock, or shares of Common Stock sold
under Regulation S or Regulation D under the Securities Act of 1933, as amended
(the "Securities Act") or outstanding under any other exemption from
registration, which are available for sale as unrestricted ("free trading")
stock.
The Subsidiary Company cannot, without the prior approval in
writing from the Purchaser, obtain convertible debt or equity financing for a
period of ninety (90) days following the effective date of the Registration
Statement (as defined herein); however, the Subsidiary Company will not require
prior approval if (a) at least 80% of the net proceeds of the financing is part
of any acquisition by the Subsidiary Company of control of another company or
entity, (b) at least 80% of the net proceeds of the financing is a refinancing
of the Subsidiary Company's debt, or (c) the financing is part of a public
offering of the Subsidiary Company's securities.
4.18 Right of Participation. In the event the Subsidiary
Company wishes to complete a financing similar in structure to the securities
issued hereby within one hundred and eighty (180) days from the Closing Date,
the Purchaser shall have the right to participate in such offering and shall
have three (3) business days to reply in writing after receipt of written notice
of such proposed financing from the Subsidiary Company. In the event a writing
is not received by the Subsidiary Company from the Purchaser specifying the
extent of the Purchaser's interest in so participating, this will be deemed a
refusal by the Purchaser of such right to participate.
4.19 Legal Opinion. Purchaser shall, upon purchase of the COES
Preferred Shares, receive an opinion letter from counsel to the Subsidiary
Company, and the Subsidiary Company represents that it will immediately obtain
such an opinion from counsel to the satisfaction of the Purchaser, to the effect
that:
(a) The Subsidiary Company is duly incorporated, validly
existing and in good standing in the jurisdiction of its incorporation.
(b) There is no action, proceeding or investigation pending,
or to such counsel's knowledge, threatened against the Subsidiary
Company which might result, either individually or in the aggregate, in
any material adverse change in the business, prospects, conditions,
affairs or operations of the Subsidiary Company.
(c) The Subsidiary Company is not a party to or subject to the
provisions of any order, writ, injunction, judgment or decree of any
court or government agency or instrumentality.
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(d) There is no action, suit, proceeding or investigation by
the Company currently pending, to such counsel's knowledge, or which
the Subsidiary Company currently intends to initiate.
(e) All issued and outstanding shares of CXI Common Stock have
been duly authorized and validly issued and are fully paid and
nonassessable.
(f) This Securities Purchase Agreement and the Stock Purchase
Warrant, the issuance of the COES Preferred Shares and COES Warrants
and the transfer of the Conversion Shares and Warrant Shares have been
duly approved by all required corporate action, the requisite consent
of National Securities Corporation for the Parent Company to transfer
the shares of CXI Common Stock in its holdings to the Purchaser upon
conversion of the COES Preferred Shares and exercise of the COES
Warrants has been duly obtained, and that all such Securities, upon
delivery, shall be validly issued and outstanding, fully paid and
nonassessable.
(g) The execution, delivery and performance of this Securities
Purchase Agreement and the Stock Purchase Warrant by the Subsidiary
Company, and the consummation of the transactions contemplated thereby,
will not, with or without the giving of notice or the passage of time
or both:
(i) Violate the provisions of any law, rule or
regulation which is material to the assets, properties or
business of the Subsidiary Company;
(ii) Violate the provisions of the charter or bylaws
of the Subsidiary Company; or
(iii) To the best of counsel's knowledge, violate any
judgment, decree, order or award of any court, governmental
body or arbitrator.
(iv) To the best of counsel's knowledge, conflict
with, or result in the breach or termination of any term or
provision of, or constitute a default under, or cause any
acceleration under, or cause the creation of any lien, charge
or encumbrance upon the properties or assets of the Subsidiary
Company pursuant to, any note, bond, indenture, mortgage,
lease, deed of trust or other instrument, obligation, or
agreement to which the Subsidiary Company is a party and which
is material to the Subsidiary Company or by which the
Subsidiary Company, or any of its material properties is or
may be bound.
(h) This Securities Purchase Agreement and the Stock Purchase
Warrant constitute the valid and legally binding obligations of the
Subsidiary Company and are enforceable against the Subsidiary Company
in accordance with their respective terms, subject to laws of general
application relating to
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bankruptcy, insolvency and the relief of debtors and rules of law
governing specific performance, injunctive relief or other equitable
remedies, and, with respect to the Securities Purchase Agreement, to
limitations of public policy as they may apply to the indemnification
provisions set forth in Section 8.4 thereof.
4.20 No Poison Pill. The Subsidiary Company represents that it
does not have, and has no current intention to adopt, a stockholder rights plan
("poison pill").
Section 5. Representations, Warranties and Covenants of the
Purchaser. The Purchaser represents and warrants to, and covenants with, the
Parent Company and the Subsidiary Company that the following are true and
correct as of the date hereof and as of the Closing Date.
5.1 Authority. The Purchaser's signatory has all right, power,
authority and capacity to execute and deliver this Agreement and to consummate
the transactions contemplated hereby. This Agreement has been duly executed and
delivered by the Purchaser and will constitute the legal, valid and binding
obligations of the Purchaser, enforceable in accordance with its terms, subject
to laws or general application relating to bankruptcy, insolvency and the relief
of debtors and rules of laws governing specific performance, injunctive relief
or other equitable remedies, and to limitations of public policy as they may
apply to the indemnification provisions set forth in Section 8.4 of this
Agreement.
5.2 Investment Experience. Purchaser is an "accredited
investor" as defined in Rule 501(a) under the Securities Act. Purchaser is aware
of the Parent Company's and Subsidiary Company's business affairs and financial
conditions and has had access to and has acquired sufficient information about
the Parent Company and the Subsidiary Company, including the COES and CXI SEC
Reports, to reach an informed and knowledgeable decision to acquire the COES
Preferred Shares. Purchaser has such business and financial experience as to
require to give it the capacity to protect its own interests in connection with
the purchase of the COES Preferred Shares and the acquisition of the COES
Warrants.
5.3 Investment Intent. Without limiting its ability to resell
the COES Preferred Shares and the COES Warrants and underlying CXI Common Stock
pursuant to an effective registration statement, Purchaser represents that it is
purchasing the COES Preferred Shares of reinvestment purposes. Purchaser
understands that its acquisition of the COES Preferred Shares and the COES
Warrants has not been registered under the Securities Act or registered or
qualified under any state securities law in reliance on specific exemptions
therefrom, which exemptions may depend upon, among other things, the bona fide
nature of Purchaser's investment intent as expressed herein. Purchaser will not,
directly or indirectly, offer, sell, pledge, transfer or otherwise dispose of
(or solicit any offers to buy, purchase or otherwise acquire or take a pledge
of) any of the COES Preferred Shares or the COES Warrants except in compliance
with the Securities Act and
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any applicable state securities laws, and the rules and regulations promulgated
thereunder.
5.4 Registration or Exemption Requirements. Purchaser further
acknowledges and understands that the COES Preferred Shares and the COES
Warrants may not be resold or otherwise transferred except in a transaction
registered under the Securities Act and any applicable state securities laws or
unless an exemption from such registration is available. Purchaser understands
that the certificate(s) evidencing the COES Preferred Shares and the COES
Warrants will be imprinted with a legend, subject to Section 5.7 below, that
prohibits the transfer thereof unless (I) they are registered or such
registration is not required, and (ii) if the transfer is pursuant to an
exemption from registration other than Rule 144 under the Securities Act and, if
the Parent Company shall so request in writing, an opinion of counsel reasonably
satisfactory to the Parent Company is obtained to the effect that the
transaction is so exempt.
5.5 No Legal, Tax or Investment Advice. Purchaser understands
that nothing in this Agreement or any other materials presented to Purchaser in
connection with the purchase and sale of the COES Preferred Shares and the
acquisition and issuance of the COES Warrants constitutes legal, tax or
investment advice. Purchaser has consulted such legal, tax and investment
advisors as it, in its sole discretion, has deemed necessary or appropriate in
connection with its purchase of the COES Preferred Shares and acquisition of the
COES Warrants.
5.6 Purchaser Review. Purchaser hereby represents and warrants
that the Purchaser has carefully examined the COES SEC Reports and CXI SEC
Reports and the COES and CXI Financial Statements contained therein. The
Purchaser acknowledges that the Parent Company and Subsidiary Company has made
available to the Purchaser all documents and information that it has requested
relating to the Parent Company and the Subsidiary Company and has provided
answers to all of its questions concerning the Parent Company and the Subsidiary
Company, the COES Preferred Shares and the COES Warrants. Nothing stated in the
previous two sentences, however, shall be deemed to affect the representations
and warranties of the Parent Company the Subsidiary Company contained in this
Agreement.
5.7 Legend. The certificate or certificates representing the
Securities shall be subject to a legend restricting transfer under the
Securities Act, such legend to be substantially as follows:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. SUCH SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT WHICH, EXCEPT IN
THE CASE OF AN EXEMPTION PURSUANT TO
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<PAGE> 19
RULE 144 UNDER SAID ACT, IS CONFIRMED IN A LEGAL OPINION SATISFACTORY
TO THE COMPANY."
The certificates shall also include any legends required by any applicable state
securities laws.
The legend(s) endorsed on a stock certificate pursuant to this
Section 5.7 or on any certificate representing any of the Securities shall be
removed and the Parent Company or the Subsidiary Company shall issue a
replacement certificate without such legend to the holder of such certificate if
the Securities represented by such certificate are registered under the
Securities Act or if such holder provides to the Parent Company or the
Subsidiary Company an opinion of counsel to the effect that a public sale,
transfer or assignment of such Securities may be made without registration.
5.8 Restrictions on Conversion of Shares. Notwithstanding
anything to the contrary contained herein, no COES Preferred Shares may be
converted by a Holder to the extent that, after giving effect to the Conversion
Shares issued pursuant to a Notice of Conversion, the total number of shares of
CXI Common Stock deemed beneficially owned by such Holder (other than by virtue
of the ownership of COES Preferred Shares or COES Warrants or ownership of other
securities that have limitations on a Holder's rights to convert or exercise
similar to those limitations set forth herein), together with all shares of CXI
Common Stock deemed beneficially owned by Holder's "affiliates" (as defined in
Rule 144 under the Securities Act) that would be aggregate for purposes of
determining whether a group under Section 13(d) of the Exchange Act exists,
would exceed 4.99% of the total issued and outstanding shares of CXI Common
Stock, provided that each Holder shall have the right to waive this restriction,
in whole or in part, immediately in case of a pending Change in Control
Transaction and in any other case upon 61 days prior notice to the Parent
Company and the Subsidiary Company. The delivery of a Notice of Conversion by
any Holder shall be deemed a presentation by such Holder it is in compliance
with this Section 5.8. A transferee of COES Preferred Shares shall not be bound
by this provision unless it expressly agrees to be so bound. The term "deemed
beneficially owned" as used in this Section 5.8 shall exclude shares that might
otherwise be deemed beneficially owned by reason of the convertibility of the
COES Preferred Shares.
Section 6. Conditions to the Purchaser's Obligation to
Purchase. The Parent Company and the Subsidiary Company understand that the
Purchaser's obligation to purchase the COES Preferred Shares is conditioned
upon:
(a) Acceptance by Purchaser of this Agreement for the sale of
the COES Preferred Shares, as evidence by the execution of this Agreement by its
authorized officers;
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<PAGE> 20
(b) Delivery of the COES Preferred Shares and COES Warrants to
counsel to COES for immediate delivery to the Purchaser against wire transfer of
funds as aforesaid;
(c)(i) The delivery at the Closing of a certificate from an
authorized officer of the Parent Company certifying that all representations and
warranties of the Parent Company are true and correct as of the Closing Date (in
the form annexed hereto as Exhibit C1);
(c)(ii) The delivery at the Closing of a certificate from an
authorized officer of the Subsidiary Company certifying that all representations
and warranties of the Subsidiary Company are true and correct as of the Closing
Date (in the form annexed hereto as Exhibit C2); and
(d) A filed Certificate of Designation.
Section 7. Conditions to Parent Company's Obligation to Sell.
Purchaser understands that the Parent Company's obligation to sell the COES
Preferred Shares is conditioned upon:
(a) The receipt and acceptance by the Parent Company of this
Agreement to issue the COES Preferred Shares as evidenced by execution of this
Agreement by the President or any Vice President of the Parent Company.
(b) Delivery to the Company, the Finder and Counsel for Parent
by Purchaser of good funds as payment in full for the purchase of the COES
Preferred Shares; and
(c) The delivery at the Closing of a certificate from an
authorized officer or representative of Purchaser certifying that all
representations and warranties of the Purchaser are true and correct as of the
Closing Date (in the form annexed hereto as Exhibit C3).
Section 8. Registration of the Shares; Compliance with the
Securities Act.
8.1 Definitions. For the purpose of this Section 8:
(a) the term "Registration Statement" shall mean any
registration statement required to be filed by Section 8.2 below, and shall
include any preliminary prospectus, final prospectus, exhibit or amendment
included in or relating to such registration statement; and
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<PAGE> 21
(b) the term "untrue statement" shall include any untrue
statement or alleged untrue statement, or any omission or alleged omission to
state in the Registration Statement a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
8.2 Registration Procedures and Expenses. The Parent Company
shall cause the Subsidiary Company to, and the Subsidiary Company shall:
(a) use its best efforts to file with the SEC not later than
September 15, 1997 a shelf registration statement under the Securities Act on
Form S-3, if the Subsidiary Company is eligible to file a registration statement
under such form (and if the Subsidiary Company is not eligible to file a
registration statement under Form S-3, to file with the SEC a registration
statement under the Securities Act on Form S-1 or any other form which is
appropriate), to register the Conversion Shares and Warrant Shares, and to use
its best efforts to cause such registration statement to be declared effective
by the SEC by not later than December 15, 1997. Such registration statement will
also cover shares issuable upon conversion of Series A Preferred Stock of CXI
sold by CXI pursuant to a certain Stock Purchase Agreement dated as of August
15, 1997;
(b) use its best efforts, subject to receipt of necessary
information from the Purchaser, to cause such Registration Statement to become
effective as promptly after filing as practicable;
(c) prepare and file with the SEC such amendments and
supplements to such Registration Statement and the prospectus used in connection
therewith as may be necessary to keep such Registration Statement effective
until termination of such obligation as provided in Section 8.9 below;
(d) furnish to the Purchaser with respect to the CXI Common
Stock registered on the Registration Statement (and to each underwriter, if any,
of such CXI Common Stock) such number of copies of prospectuses in conformity
with the requirements of the Securities Act and such other documents as the
Purchaser may reasonably request, in order to facilitate the public sale or
other disposition of all or any of the CXI Common Stock by the Purchaser;
provided, however, that the obligation of the Subsidiary Company to deliver
copies of prospectuses to the Purchaser shall be subject to the receipt by the
Subsidiary Company of reasonable assurances from the Purchaser that the
Purchaser will comply with the applicable provisions of the Securities Act and
of such other securities laws as may be applicable in connection with any use of
such prospectuses;
(e) file such documents as may be required of the Subsidiary
Company for normal securities law clearance for the resale of the Common Stock
in which states of the United States as may be reasonably requested by the
Purchaser; provided, however, that the Subsidiary Company shall not be required
in connection with
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<PAGE> 22
this paragraph (e) to qualify as a foreign corporation or execute a general
consent to service of process in any jurisdiction;
(f) bear all expenses in connection with the procedures in
paragraphs (a) through (e) of this Section 8.2 and the registration of the CXI
Common Stock on such Registration Statement and the satisfaction of the blue sky
laws of such states, including the reasonable fees and expenses of legal counsel
to the Purchaser in connection with the procedures in paragraph (a) through (e)
of this Section 8.2, other than underwriting discounts and selling commissions
or expenses required by law to be borne by Purchaser; and
(g) in the event of the failure of Company to procure
registration, in accordance with Section 8.2(a) of this Agreement, of the
Conversion Shares and the Warrant Shares prior to any of the dates set forth
below in this Section 8.2(g), the Parent Company will pay Purchaser by wire
transfer, as liquidated damages for such failure and not as a penalty, for each
month or part thereof for which such failure continues or in the event of a
Suspension (as defined in Section 8.7) after such date, an amount equal to the
following percentages of the Liquidation Preference of all COES Preferred Shares
acquired by the Purchaser pursuant to this Agreement which are still owned by
such Purchaser and have not been converted:
<TABLE>
<CAPTION>
Required Effective Date Percentage
----------------------- ----------
<S> <C>
On or before November 19, 1997 1%
Between November 20 and
December 19, 1997 2%
After December 20, 1997 3%
</TABLE>
If the Parent Company does not remit the damages to the Purchaser as set forth
above, the Parent Company will pay the Purchaser reasonable costs of collection,
including attorneys fees, in addition to the liquidated damages. Such payment
shall be made to the Purchaser if due, monthly in arrears. The payment of such
liquidated damages shall not relieve the Subsidiary Company from its obligations
to register the Conversion Shares and Warrant Shares pursuant to this provision
and shall not affect or limit Purchaser's other rights or remedies as set forth
in this Agreement. The "Liquidation Preference" for a Share shall equal $100
(subject to adjustments for Reclassifications), plus all accrued and unpaid
dividends (which shall accrue through the Conversion Date, Redemption Date or
the date liquidated damages are paid, as applicable) and any then unpaid
liquidated damages (interest on which shall accrue at a rate of 2% per month)
arising under Sections 8.2(g), 10.2 or 10.6. Notwithstanding the foregoing, the
liquidated damages shall be limited to 1% per month or any portion thereof if
the delay in effectiveness of the registration statement beyond November 19,
1997 or the Suspension thereafter shall be for reasons outside the control of
the Parent Company or the Subsidiary Company.
8.3 Underwriter. The Parent Company and the Subsidiary Company
understand that the Purchaser disclaims being an "underwriter" (as such term is
defined
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<PAGE> 23
under the Securities Act and the rules and regulations promulgated thereunder
(an "Underwriter")), but Purchaser being deemed an Underwriter shall not relieve
the Parent Company and the Subsidiary Company of any obligation it has
hereunder.
8.4 Indemnification.
(a) General Indemnification. The Parent Company and the
Subsidiary Company together and the Purchaser agree to indemnify the other and
to hold the other harmless from and against any and all losses, damages,
liabilities, costs and expenses (including reasonable attorneys' fees) which the
other may sustain or incur in connection with the breach by the indemnifying
party of any representation, warranty or covenant made by it in this Agreement.
(b) Indemnification for Registration Statement.
(i) By Parent Company and Subsidiary Company. To the
extent permitted by law, the Parent Company and Subsidiary Company together will
indemnify and hold harmless each Holder, the directors, if any, of such Holder,
the officers, if any, of such Holder who sign the Registration Statement, each
person, if any, who controls such Holder, any underwriter (as defined in the
Securities Act) for the Holders and each person, if any, who controls any such
underwriter within the meaning of the Securities Act or the Exchange Act,
against any losses, claims, damages, expenses or liabilities (joint or several)
to which any of them may become subject under the Securities Act, the Exchange
Act or otherwise, insofar as such losses, claims, damages, expenses or
liabilities (or actions or proceedings, whether commenced or threatened, in
respect thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively, a "Violation"): (i) any untrue statement
or alleged untrue statement of a material fact contained in the Registration
Statement including any preliminary prospectus or final prospectus contained
therein or any amendments or supplements thereof, (ii) the omission or alleged
omission to state therein a material fact required to be stated therein, or
necessary to make the statements therein, in light of the circumstance in which
they are made, not misleading or (iii) any violation or alleged violation by the
Company of the Securities Act, the Exchange Act, any state securities law or any
rule or regulation promulgated under the Securities Act, the Exchange Act or any
state securities law; and the Company will reimburse the Holders and each such
underwriter or controlling person, promptly as such expenses are incurred, for
any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability action or
proceeding; provided, however, that the indemnity agreement contained in this
Section 8.4(b) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or action if such settlement is effected without the
consent of the Parent Company and the Subsidiary Company, which consents shall
not be unreasonably withheld, nor shall the Parent Company and Subsidiary
Company be liable in any such case for any such loss, claim, damage, liability
or action to the extent that it arises out of or is based upon a Violation which
occurs in reliance upon and in conformity with written information furnished
23
<PAGE> 24
expressly for use in connection with such registration by the Holders or any
such underwriter or controlling person, as the case may be. Such indemnity shall
remain in full force and effect regardless of any investigation made by or on
behalf of the Holders or any such underwriter or controlling person and shall
survive the transfer of the Securities by Holders.
(ii) By Holders. To the extent permitted by law, each
Holder, severally and not jointly, will indemnify and hold harmless the
Subsidiary Company, each of its directors, each of its officers who have signed
the Registration Statement, each person, if any, who controls the Subsidiary
Company within the meaning of the Securities Act or the Exchange Act, any
underwriter and any other stockholder selling securities pursuant to the
Registration Statement or any of its directors or officers or any person who
controls such holder or underwriter, against any losses, claims, damages or
liabilities (joint or several) to which any of them may become subject, under
the Securities Act, the Exchange Act or other federal state law, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any Violation, in each case to the extent (and only to the
extent) that such Violation occurs in reliance upon and in conformity with
written information furnished by such Holder expressly for use in connection
with such registration, and such Holder will reimburse any legal or other
expenses reasonably incurred by any of them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that the indemnity agreement contained in this subsection 8.4(b) shall not apply
to amounts paid in settlement of such loss, claim, damage, liability or action
if such settlement is effected without the consent of such Holder, which consent
shall not be unreasonably withheld; and provided further, that the Holder shall
be liable under this paragraph for only that amount of losses, claims, damages
and liabilities as does not exceed the net proceeds to such Holder as a result
of the sale of the Securities pursuant to such registration.
(c) Procedure for Indemnification. Promptly after receipt by
an indemnified party under this Section 8.4 of notice of the commencement of any
action (including any governmental action), such indemnified party will, if a
claim in respect thereof is to be made against any indemnifying party under this
Section 8.4, deliver to the indemnifying party a written notice of commencement
thereof and the indemnifying party shall have the right to participate in, and,
to the extent the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume control of the defense thereof
with counsel mutually satisfactory to the parties; provided, however, that an
indemnified party shall have the right to retain its own counsel, with the fees
and expenses to be paid by the indemnifying party, if, in the reasonable opinion
of counsel for the indemnifying party, representation of such indemnified party
by the counsel retained by the indemnifying party would be inappropriate due to
actual or potential differing interests between such indemnified party and any
other party represented by such counsel in such proceeding. The failure to
deliver written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall relieve such indemnifying party of any
liability to the indemnified party under this Section 8.4 only the extent
prejudicial to its ability to defend such action, but the omission so to deliver
24
<PAGE> 25
written notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party other than under this Section 8.4. The
indemnification required by this Section 8.4 shall be made by periodic payments
of the amount thereof during the course of the investigation or defense,
promptly as such expense, loss, damage or liability is incurred.
(d) Contribution. To the extent any indemnification by an
indemnifying party is prohibited or limited by law, the indemnifying party
agrees to make the maximum contribution with respect to any amounts for which it
otherwise would be liable under this Section 8.4 to the extent permitted by law,
provided that (i) no contribution shall be made under the circumstances where
the maker would not have been liable for indemnification under the fault
standards set fourth in this Section 8.4, (ii) no seller of the Securities
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any seller of the
Securities who was not guilty of such fraudulent misrepresentation and (iii)
contribution by any seller of the Securities shall be limited in amount to the
net amount of proceeds received by such seller from the sale of such Securities.
8.5 Information Available. So long as any registration
statement is effective covering the resale of the Conversion Shares of Warrant
Shares, the Parent Company and the Subsidiary Company will each furnish to
Purchaser:
(a) as soon as possible after available, one copy of (i) each
of its Annual Report to Stockholders (which Annual Report shall contain
financial statements audited in accordance with generally accepted accounting
principles in the United States of American by a national firm of certified
public accountants); (ii) if not included in substance in the Annual Report to
Stockholders, each of its annual report on Form 10-K within 100 days after the
end of each fiscal year of each Company, (iii) each of its Quarterly Reports to
Stockholders, and its quarterly report on Form 10-Q within sixty (60) days, and
(iv) a full copy of the registration statement covering the Conversion Shares
and Warrant Shares (the foregoing, in each case, excluding exhibits); and
(b) upon the reasonable request of Purchaser, such other
information that is generally available to the public.
8.6 Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the SEC which may at any time
permit the sale of the Conversion Shares and the Warrant Shares to the public
without registration, the Parent Company and the Subsidiary Company agrees to
use its best efforts to:
(a) make and keep public information available, as those terms
are understood and defined in Rule 144 under the Securities Act, at all times
after the effective date on which the Company becomes subject to the reporting
requirements of the Securities Act or the Exchange Act;
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<PAGE> 26
(b) use its best efforts to file with the SEC in a timely
manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act;
(c) furnish to Purchaser forthwith upon request a written
statement by the Parent Company or the Subsidiary Company as to its compliance
with the reporting requirements of said Rule 144, and of the Securities Act and
the Exchange Act, a copy of the most recent annual or quarterly report of the
Company, and such other reports and comments of the Parent Company or the
Subsidiary Company and other information in the possession of or reasonably
obtainable by the Parent Company or the Subsidiary Company as Purchaser may
reasonably request in availing itself of any rule or regulation of the SEC
allowing Purchaser to sell any such Conversion Shares or Warrant Shares without
registration.
8.7 Temporary Cessation of Offers and Sales by Purchaser. The
Purchaser acknowledges that there may occasionally be times when the Subsidiary
Company may be required to suspend the use of the prospectus forming part of the
Registration Statement (a "Suspension") until such time as an amendment to the
Registration Statement has been filed by the Company and declared effective by
the Commission, until the prospectus is supplemented or amended to comply with
the Securities Act, or until such time as the Subsidiary Company has filed an
appropriate report with the Commission pursuant to the Exchange Act. The
Subsidiary Company agrees to file any necessary amendments, supplements and
reports as soon as practicable under the circumstances. The Subsidiary Company
agrees to use its best efforts to cause a Suspension to be lifted within 10
business days during which time Purchaser agrees that it will not sell any
shares of Common Stock pursuant to such prospectus.
8.8 Transfer of Conversion Shares or Warrant Shares Stock
After Registration. Purchaser hereby covenants with the Parent Company and the
Subsidiary Company not to make any sale of the conversion Shares or Warrant
Shares except either (i) in accordance with the Registration Statement, in which
case Purchaser covenants to comply with the requirement of delivering a current
prospectus, (ii) in accordance with Rule 144, in which case Purchaser covenants
to comply with Rule 144, or (iii) as otherwise permitted by applicable law.
8.9 Termination of Obligations. The obligations of the Parent
Company and Subsidiary Company pursuant to Sections 8.2, 8.3 and 8.6 hereof
shall cease and terminate upon the earlier to occur of (i) such time as all of
the Conversion Shares of Warrant Shares have been re-sold, or (ii) such time as
all of the Common Stock may be resold pursuant to Rule 144(k) under the
Securities Act.
Section 9. Legal Fees and Expenses. Each of the parties shall
pay its own fees and expenses (including the fees of any attorneys, accountants,
appraisers or others
26
<PAGE> 27
engaged by such party) in connection with this Agreement and the transactions
contemplated hereby.
Section 10. Conversion; Liquidated Damages.
10.1 Restrictions on Conversion. Conversion of all the COES
Preferred Shares may be made at the Conversion Price, the day following the date
that the Registration Statement for the CXI Common Stock underlying the COES
Preferred Stock and COES Warrants was declared effective by the SEC.
10.2 Notice of Conversion. Conversion of the COES Preferred
Shares to CXI Common Stock may be exercised in whole or in part by Purchaser
telecopying an executed and completed Notice of Conversion (in the form annexed
hereto as Exhibit D) to counsel for the Parent Company, with a copy to the
Parent Company and Subsidiary Company, and delivering the original Notice of
Conversion and the certificate representing the COES Preferred Shares to counsel
by hand or by express courier within three (3) business days of exercise. Each
date on which a Notice of Conversion is telecopied to and received by the Parent
Company in accordance with the provisions hereof shall be deemed a Conversion
Date. The Subsidiary Company will reissue and transmit the certificates in the
name of the Purchaser, or any other name as instructed by the Purchaser,
representing the CXI Common Stock transferable upon conversion of all or any
part of the COES Preferred Shares and COES Warrant Shares (and the Parent
Company will transmit any certificates for replacement COES Preferred Shares not
previously converted but included in the original certificate presented for
conversion) to the Purchaser via express courier within three (3) business days
after counsel for the Parent Company has received the original Notice of
Conversion and the certificate representing the COES Preferred Shares being so
converted. The Notice of Conversion and certificate representing the portion of
the COES Preferred Shares converted shall be delivered as follows:
To counsel of Parent Company:
Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel
153 East 53rd Street
New York, NY 10022
Attention: Stephen A. Weiss, Esq.
Telephone: 212-801-9200
Facsimile: 212-223-7161
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<PAGE> 28
To the Parent Company:
Commodore Environmental Services, Inc.
150 East 58th Street
New York, NY 10155
Attention: Bentley J. Blum
Telephone: 212-935-5400
Facsimile: 212-753-0731
To the Subsidiary Company:
Commodore Applied Technologies, Inc.
150 East 58th Street
New York, NY 10155
Attention: Bentley J. Blum
Telephone: 212-935-5400
Facsimile: 212-753-0731
or to such other person at such other place as the Parent Company shall
designate to the Purchaser in writing.
In the event that the COES Preferred Shares are not converted
within three (3) business days of the Conversion Date, the Parent Company shall
be liable to Purchaser for actual damages incurred from the fourth business day
following the Conversion Date for such failure (provided that Purchaser has
delivered the original valid Notice of Conversion and the original
certificate(s) representing the COES Preferred Shares to be converted, or an
affidavit and indemnity agreement as to lost certificates reasonably
satisfactory to the Company). In the event the COES Preferred Shares are not
converted by the tenth (10th) business day following the Conversion Date, the
Parent Company shall pay to the Purchaser, by wire transfer, as liquidated
damages for such failure and not as a penalty, an amount in cash equal to one
(1%) percent per day of the Liquidation Preference for the COES Preferred Shares
to be converted which shall run from the tenth (10th) business day following the
Conversion Date; provided, however, that actual damages and liquidated damages
for a failure to deliver certificates of CXI Common Stock shall be determined in
accordance with Section 10.6, if both of the following conditions are satisfied
by the Parent Company: (i) the failure to deliver certificates of CXI Common
Stock is the result of a lack of available shares of CXI Common Stock and (ii)
the Parent Company commences, with ten (10) business days after the initial
Conversion Date to purchase or otherwise acquire the number of shares of CXI
Common Stock which is sufficient to permit conversion of all COES Preferred
Shares then outstanding at the Hypothetical Conversion Price (as hereinafter
defined) then in effect.
10.3 Mandatory Conversion. The COES Preferred Shares are
subject to mandatory conversion after five (5) years from the Closing Date, at
which time all COES
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<PAGE> 29
Preferred Shares will automatically be converted at the Conversion Price, upon
the terms set forth in this section. Such five year period will be extended by
the number of days during such period that (i) the Subsidiary Company's Common
Stock has been Delisted and/or (ii) a Suspension has been in effect and by the
number of days after the 90th day or the 120th day, whichever date is applicable
as provided in Section 8.2(g) herein, that Registration Statement was not
declared effective. Any particular day in which more than one of the foregoing
condition events shall have been in effect shall only be counted once in
determining the number of days by which to extend the five year period prior to
mandatory conversion. In addition, mandatory conversion shall not occur for so
long as certain default events specified in Section 5(e) of the Certificate of
Designation are continuing.
10.4 Reservation of CXI Common Stock Transferable Upon
Conversion. The Parent Company shall at all times reserve and keep available out
of its holdings of shares of CXI Common Stock, such number of shares of CXI
Common Stock as shall from time to time be sufficient to effect the conversion
of all then outstanding COES Preferred Shares and COES Warrants, the sufficiency
of which shall be determined (in the case of the COES Preferred Shares) by using
a Conversion Price (the "Hypothetical Conversion Price") derived from a
hypothetical closing market price that is 75% of either (i) the actual Average
Closing Bid Price on the Closing Date or (ii) the actual Average Closing Bid
Price from time to time, whichever is lower, and in the case of the COES
Warrants, by the exercise price thereof. The Parent Company hereby covenants and
agrees that if at any time the Hypothetical Conversion Price falls to a level
that would not enable all outstanding COES Preferred Shares to be fully
converted and the outstanding COES Warrants to be fully exercised, the Parent
Company will promptly purchase or otherwise acquire the number of shares of CXI
Common Stock sufficient to permit the conversion of all COES Preferred Shares
then outstanding at the Hypothetical Conversion Price then in effect and the
exercise of all outstanding COES Warrants.
10.5 Liquidated Damages. In the event of a Delisting, a
Cumulative Suspension or Insufficient CXI Common Stock (each a "Damage Event"),
the Parent Company will pay to Purchaser (and to all other holders of the
Shares), by wire transfer, as liquidated damages for such non-availability and
not as a penalty, an amount in cash equal to 2% per month of the Liquidation
Preference of only those COES Preferred Shares then eligible for conversion,
without regard to Section 5.8, for the first two months after the occurrence of
a Damage Event, and 3% per month for each month thereafter. Similar liquidated
damages shall be paid with respect to any COES Preferred Shares not initially
eligible for conversion when the Damage Event first occurred but which
subsequently become eligible for conversion, without regard to Section 5.8,
commending in the first month that such COES Preferred Shares become eligible
for such conversion. Such liquidated damages shall continue to accrue and shall
be payable until the Damage Event has been cured, and, if not paid, interest
thereon shall accrue at a rate of 2% per month. At the Purchaser's election,
such liquidated damages may be paid in cash or may be added to the principal of
the COES Preferred Shares for subsequent conversion purposes. Notwithstanding
the foregoing, in the case of a Delisting, after six months
29
<PAGE> 30
from the date of such Delisting, the Parent Company shall have the option to
force Purchaser to as promptly as possible convert (in increments of no less
than $50,000) all or part of its COES Preferred Shares, subject to Purchaser
being able to sell the underlying Conversion Shares, and simultaneously sell
such Conversion Shares (where the conversion price therefor shall not be the
Conversion Price but instead shall equal 85% of the Purchaser's sale price of
the Conversion Shares, all as determined by Purchaser's actual trading records
(to be provided to the Company). In no event may the Company force Purchaser to
convert less than $50,000 of COES Preferred Shares at any one time.
Section 11. Redemption By Parent Company.
11.1 Parent Company's Right to Redeem. The Parent Company
shall have the right, at any time and from time to time, in its sole discretion,
to redeem in whole or in part the COES Preferred Shares then outstanding, except
that if the Purchaser or any Holder of the COES Preferred Shares has submitted a
Notice of Conversion, the Parent Company shall not have the right to redeem the
COES Preferred Shares which were submitted for conversion and the certificates
representing Conversion Shares should be delivered promptly according to Section
10.2 herein. If the Parent Company elects to redeem some, but not all, of the
COES Preferred Shares, the Parent Company shall redeem the COES Preferred Shares
pro rata among the Holders of all the COES Preferred Shares then outstanding.
The date of the Parent Company's redemption of COES Preferred Shares shall be
referred to as the "Redemption Date."
11.2 Redemption Price. The redemption price per COES Preferred
Share shall equal $125.
11.3 Mechanics of Redemption; Purchaser's Conversion Rights.
The Parent Company shall effect each such redemption by giving notice of its
election to redeem ("Redemption Notice"), by facsimile, by 5 P.M. New York City
time on the Redemption Date and shall provide a copy of such redemption notice
by overnight or 2-day courier, to Purchaser, all other Holders of COES Preferred
Shares and the Parent Company will redeem all or part of the COES Preferred
Shares. Upon the giving of any such Redemption Notice, and until the earlier of
either payment of the applicable redemption price or fifteen (15) business days
after the Redemption Date (or later as provided in Section 6(d) below), the
conversion rights in respect of the COES Preferred Shares and any other
outstanding shares of COES Convertible Preferred Stock called for redemptions
shall be suspended. Subject to the Parent Company's payment of the applicable
redemption price, the accrual of dividends in connection with the shares of COES
Convertible Preferred Stock called for redemption will suspend on the Redemption
Date.
11.4 Payment of Redemption Price. Upon receipt of a Redemption
Notice, Purchaser shall send its COES Preferred Shares being redeemed to the
Parent
30
<PAGE> 31
Company or its Transfer Agent within three (3) business days of the receipt of
such Redemption Notice, and the Parent Company shall pay the applicable
redemption price within fifteen (15) business days of the Redemption Date (such
fifteen (15) business day period shall be extended for each day the COES
Preferred Shares being redeemed have not been delivered to the Parent or its
Transfer Agent beyond the third (3rd) business day after receipt of the
Redemption Notice). The Parent Company shall not be obligated to deliver the
redemption price unless the COES Preferred Shares so redeemed are delivered to
the Parent Company or its Transfer Agent, or, in the event one or more
certificates have been lost, stolen, mutilated or destroyed, Purchaser delivers
to the Parent Company a lost certificate affidavit reasonably satisfactory to
Parent Company and its Transfer Agent.
11.5 Default of Parent Company's Redemption. If the Parent
Company fails to pay the applicable redemption price to the Purchaser and/or
other Holders of the COES Preferred Shares being redeemed by the Parent Company
within fifteen (15) business days of the Redemption Date (such fifteen (15)
business day period shall be extended for each day the COES Preferred Shares
being redeemed have not been delivered to the Parent or its Transfer Agent
beyond the third (3rd) business day after receipt of the Redemption Notice), the
Parent Company shall be deemed to have defaulted on their right to redeem such
COES Preferred Shares. Such COES Preferred Shares shall thereafter become
immediately convertible and the Conversion Price for such COES Preferred Shares
shall be equal to 75% of the Average Closing Bid Price. The Conversion Price for
such COES Preferred Shares shall not be subject to a floor.
11.6 Blackout Period. Notwithstanding the foregoing, the
Parent Company may not either send out a redemption notice or effect a
redemption during a Blackout Period (defined as a period during which the Parent
Company's or the Subsidiary Company's officers or directors would not be
entitled to buy or sell stock because of their holding of material non-public
information). In the event the Parent Company initiates a redemption during a
Blackout Period without having first made public material non-public
information, the Parent Company or the Subsidiary Company shall disclose the
non-public information that resulted in the Blackout Period, and no redemption
shall be effected until at least 10 days after the Company or the Subsidiary
Company shall have given the Holder written notice that the Blackout Period has
been lifted.
Section 12. Notices. All notices, requests, consents and other
communications hereunder shall be in writing, shall be mailed by first class
registered or certified airmail, postage prepaid, or shall be sent by overnight
courier or by facsimile, and shall be deemed given when received:
31
<PAGE> 32
(a) if to the Parent Company, to
Commodore Environmental Services, Inc.
150 East 58th Street
New York, NY 10155
Attention: Bentley J. Blum
Telephone: 212-935-5400
Facsimile: 212-753-0731
copy to:
Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel
153 East 53rd Street
New York, NY 10022
Attention: Stephen A. Weiss, Esq.
Telephone: 212-801-9200
Facsimile: 212-223-7161
or to such other person at such other place as the Parent Company shall
designate to the Purchaser in writing;
(b) if to the Subsidiary Company:
Commodore Applied Technologies, Inc.
150 East 58th Street
New York, NY 10155
Attention: Bentley J. Blum
Telephone: 212-935-5400
Facsimile: 212-753-0731
copy to:
Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel
153 East 53rd Street
New York, NY 10022
Attention: Stephen A. Weiss, Esq.
Telephone: 212-801-9200
Facsimile: 212-223-7161
or to such other person at such other place as the Subsidiary Company shall
designate to the Purchaser in writing;
32
<PAGE> 33
(c) if to the Purchaser, to:
Elara Ltd.
c/o Talisman Capital
16101 LaGrande Drive, #100
Little Rock, Arkansas 72211
Attn: Mr. Geoff Tirman
copy to: such person or entity as may be identified from time
to time by written notice from the Purchaser.
or to such other address or addresses as may have been furnished to the Parent
Company and the Subsidiary Company in writing; or
(d) if to any transferee or transferees of a Purchaser, at
such address or addresses as shall have been furnished to the Parent Company and
the Subsidiary Company at the time of the transfer or transfers, or at such
other address or addresses as may have been furnished by such transferee or
transferees to the Parent Company and the Subsidiary Company in writing.
Section 13. Miscellaneous.
13.1 Entire Agreement. This Agreement and the Exhibits hereto
embodies the entire agreement and understanding between the parties thereto with
respect to the subject matter hereof and supersedes all prior oral or written
agreements and understandings relating to the subject matter hereof. No
statement, representation, warranty, covenant or agreement or any kind not
expressly set forth in this Agreement or the Exhibits hereto shall affect or be
used to interpret, change or restrict, the express terms and provisions of this
Agreement.
13.2 Amendments. This Agreement may not be modified or amended
except pursuant to an instrument in writing singed by the Parent Company, the
Subsidiary Company and by Purchaser.
13.3 Headings. The headings of the various sections of this
Agreement have been inserted for convenience of reference only and shall not be
deemed to be part of this Agreement.
13.4 Severability. In case any provision contained in this
Agreement should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.
33
<PAGE> 34
13.5 Governing Law/Jurisdiction. This Agreement will be
construed and enforced in accordance with and governed by the laws of the State
of New York, except for matters arising under the Securities Act, without
reference to principles of conflicts of law. Each of the parties consents to the
jurisdiction of the courts of or located in the State of New York, specifically
the Southern District of New York and/or the Supreme Court of the state of New
York in connection with any dispute arising under this Agreement and hereby
waives, to the maximum extent permitted by law, any objection, including any
objection based on forum non conveniens, to the bringing of any such proceeding
in such jurisdictions. Each party hereby agrees that if another party to this
Agreement obtains a judgment against it in such a proceeding, the party which
obtained such judgment may enforce same by summary judgment in the courts of any
country having jurisdiction over the party against whom such judgment was
obtained, and each party hereby waives any defenses available to it under local
law and agrees to the enforcement of such a judgment. In addition, the parties
agree that the party against whom such judgment was obtained will pay the legal
fees of the party obtaining such judgment. Each party to this Agreement
irrevocably consents to the service of process in any such proceeding by the
mailing of copies thereof by registered or certified mail, postage prepaid, to
such party at its address set forth herein. Nothing herein shall affect the
right of any party to serve process in any other manner permitted by law.
13.6 Recovery of Attorney's Fees. Should any party bring an
action to enforce the terms of this Agreement then, if Purchaser prevails in
such action it should be entitled to recovery of its attorney's fees from the
Parent Company or the Subsidiary Company, and if the Parent Company or the
Subsidiary Company prevails in such action it shall be entitled to recovery of
its attorney's fees from the Purchaser.
13.7 Fees. Notwithstanding Section 13.6, the Parent Company
and the Subsidiary Company acknowledge that Purchaser shall have no
responsibility for the payment of any of its fees in connection with this
offering.
13.8 Counterparts/Facsimile. This Agreement may be executed in
two or more counterparts, each of which shall constitute an original, but all of
which, when taken together, shall constitute but one instrument, and shall
become effective when one or more counterparts have been signed by each party
hereto and delivered to the other party. In lieu of the original, a facsimile
transmission copy of the original shall be as effective and enforceable as the
original.
13.9 Publicity. The Purchaser shall not issue any press
releases or otherwise make any public statement with respect to the transactions
contemplated by this Agreement without the prior written consent of the Parent
Company and the Subsidiary Company, except as may be required by applicable law
or regulation.
13.10 Survival. The representations and warranties in this
Agreement shall survive Closing.
34
<PAGE> 35
Section 14. Limitation on Conversions. Notwithstanding
anything contained in this Agreement, the Stock Purchase Warrant, or the
Certificate of Designations, neither the Purchaser nor any subsequent Holder of
the COES Preferred Shares may elect to convert into CXI Common Stock more than
twenty (20%) percent of the aggregate number (the "Initial Number") of shares of
COES Preferred Shares owned by the Purchaser upon the consummation of the
acquisition by the Purchaser of the COES Preferred Shares pursuant to this
Agreement during any one calendar month, calculated from the first month during
which a conversion may occur; provided, that, such limitation on conversion
shall be on a cumulative basis so that if, for example, no shares of COES
Preferred Shares are converted into CXI Common Stock in any one month, then in
the next month 40% of the Initial Number of shares of COES Preferred Shares may
be converted into CXI Common Stock. In any event, the rights of conversion set
forth in this Section 14 shall be cumulative, so that any shares not converted
in any one calendar month may be accumulated with the number of convertible
shares in the next calendar month. No transfer or other disposition of COES
Preferred Shares by the Purchaser or any subsequent transferee shall be
effective unless prior thereto the transferee agrees in writing satisfactory to
COES and received by COES to be bound by the terms and conditions of this
Section.
Section 15. If, but only if, COES consummates during 1997 the
purchase of 50% or more of the voting capital stock of Lanxide Corporation, COES
shall promptly issue to the holders of the then outstanding shares of COES
Series D Preferred Stock, in proportion to their interests therein, three (3)
year warrants for such holders, in the aggregate, to purchase, in the aggregate,
three percent (3%) of the total number of shares of Lanxide Corporation common
stock and common stock equivalents so acquired by COES at the same price per
share paid by COES (which is presently estimated to be approximately $7.41 per
share but which may change in negotiations). The form of warrant shall contain
customary terms and provisions.
35
<PAGE> 36
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be signed by their duly authorized representatives the day and year
first above written.
COMMODORE ENVIRONMENTAL SERVICES, INC.
By /s/ Paul E. Hannesson
------------------------------------
COMMODORE APPLIED TECHNOLOGIES, INC.
By /s/ Michael D. Fullwood
------------------------------------
Purchaser: ELARA LTD
By /s/
------------------------------------
Name:
Title:
36
<PAGE> 1
SECURITIES HAVE NOT REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN EXEMPTION
FROM REGISTRATION UNDER REGULATION D PROMULGATED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"). THIS AGREEMENT SHALL NOT CONSTITUTE
AN OFFER TO SELL NOR A SOLICITATION OF AN OFFER TO BUY THE SECURITIES IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL. THE
SECURITIES ARE "RESTRICTED" AND MAY NOT BE RESOLD OR TRANSFERRED EXCEPT AS
PERMITTED UNDER THE ACT PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.
AMENDMENT NO. 1 TO
7% PREFERRED STOCK
SECURITIES PURCHASE AGREEMENT
AND RELATED STOCK PURCHASE WARRANT
COMMODORE ENVIRONMENTAL SERVICES, INC.
AND
COMMODORE APPLIED TECHNOLOGIES, INC.
THIS AMENDMENT NO. 1 is made as of the 20th day of August,
1997, by and between COMMODORE ENVIRONMENTAL SERVICES, INC., traded on
the "Pinksheets" under the "COES' (the "Parent Company"), a
corporation, with its principal office at 150 East 58th Street, New
York, NY 10155, COMMODORE APPLIED TECHNOLOGIES INC., AMEX symbol "CXI"
(the "Subsidiary Company"), a corporation, with its principal office at
150 East 58th Street, New York, NY 10155 and the undersigned (the
"Purchaser"), with its principal office at the address set forth below
the signature of the Purchaser on the signature page hereof.
Reference is made to the 7% Preferred Stock Securities
Purchase Agreement made as of the 14th day of August, 1997 (the "7%
Preferred Stock Securities Purchase Agreement") by and among the
parties hereto. All capitalized terms herein are defined as set forth
in the 7% Preferred Stock Securities Purchase Agreement or by reference
therein.
IN CONSIDERATION of the mutual covenants contained in this
Amendment, the Parent Company, Subsidiary Company and the Purchaser
agree as follows:
Section 1. Amendment of the Definition of the Term "Conversion
Price". Section 1 of the Agreement is hereby amended by deleting
therefrom in its entirety the definition of the term "Conversion Price"
and substituting therefor the following:
<PAGE> 2
"Conversion Price" means an amount equal to a fifteen (15%) percent
discount from either the lower of (i) the average of the low prices, or
(ii) the average of the closing bid prices of the CXI Common Stock as
reported by Bloomberg, L.P. ("Bloomberg") for the previous five (5)
business days ending on the day before the Conversion Date (the
"Average Closing Bid Price"); provided, however, if the Average Closing
Bid Price of the CXI Common Stock, as reported by Bloomberg , for any
consecutive thirty (30) days (such thirtieth day shall be the "First
Trigger Date") is equal to or less than $2.00 (the "Floor Average"),
the conversion price shall equal $2.00; if the Floor Average for any
consecutive thirty (30) days beginning any day after the First Trigger
Date is less than $2.00 ("Second Trigger Date"), the conversion price
shall equal $1.90; if the Floor Average for any thirty (30) days
beginning any day after the Second Trigger Date is less than $1.90 (the
"Third Trigger Date"), the conversion price shall equal $1.80; if the
Floor Average for any consecutive thirty (30) days beginning any day
after the Third Trigger Date is less than $1.80 (the "Fourth Trigger
Date"), the conversion price shall equal $1.70; if the Floor Average
for any consecutive thirty (30) days beginning any day after the Fourth
Trigger Date is less than $1.70 (the "Fifth Trigger Date"), the
conversion price shall equal $1.60; if the Floor Average for any
consecutive thirty (30) days beginning any day after the Fifth Trigger
Date is less than $1.60, the conversion price shall equal $1.50.
Subject to Section 11.5 herein, in no event shall the Conversion Price
be lower than $1.50 per share of CXI Common Stock. If the CXI Common
Stock is not traded on the American Stock Exchange, the Average Closing
Bid Price shall be the average closing bid price (and if not available,
the mean of the high and low prices) of the Common Stock on the
over-the-counter-market or the principal national securities exchange
or the Nasdaq National Market System or Nasdaq SmallCap Market System
on which the CXI Common Stock is traded for the previous five (5)
business days ending on the day before the Conversion Date.
The Conversion Price shall be equitably adjusted accordingly on a pro
rata basis in the event of the happening of certain events that would
affect the CXI Common Stock or COES Convertible Preferred Stock's value
including, but not limited to, forward and reverse stock splits,
issuance of stock dividends, subdivision of shares, combinations,
reclassifications, or the like (collectively "Reclassifications"). An
adjustment made pursuant to this section shall become effective
immediately after the effective date of such event retroactive to the
record date, if any, for such an event."
Section 2. Miscellaneous.
2.1 Headings. The headings of the various sections of this
Amendment have been inserted for convenience of reference only and shall not be
deemed to be part of this Amendment.
<PAGE> 3
2.2 Counterparts/Facsimile. This Amendment may be executed in
two or more counterparts, each of which shall constitute an original, but all of
which, when taken together, shall constitute but one instrument, and shall
become effective when one or more counterparts have been signed by each party
hereto and delivered to the other party. In lieu of the original, a facsimile
transmission copy of the original shall be as effective and enforceable as the
original.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be signed by their duly authorized representatives the day and year
first above written.
COMMODORE ENVIRONMENTAL SERVICES, INC.
By /s/ Paul E. Hannesson
--------------------------------------------------
COMMODORE APPLIED TECHNOLOGIES, INC.
By /s/ Michael D. Fullwood
-------------------------------------------------
Purchaser: EDJ LIMITED
By /s/
--------------------------------------------------
Name:
Title:
Purchaser's Address: Deltec Panamerica Trust Company
Deltec House
Lyman Cay
Box N-3229
Nassau, Bahamas
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be signed by their duly authorized representatives the day and year
first above written.
COMMODORE ENVIRONMENTAL SERVICES, INC.
By
--------------------------------------------------
COMMODORE APPLIED TECHNOLOGIES, INC.
By
--------------------------------------------------
Purchaser: PORTER PARTNERS, L.P.
By /s/
--------------------------------------------------
Name:
Title:
Purchaser's Address: c/o Porter Capital Management
100 Shoreline
Suite 211B
Mill Valley, California 94941
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be signed by their duly authorized representatives the day and year
first above written.
COMMODORE ENVIRONMENTAL SERVICES, INC.
By
--------------------------------------------------
COMMODORE APPLIED TECHNOLOGIES, INC.
By
--------------------------------------------------
Purchaser: ELARA LTD.
By /s/
--------------------------------------------------
Name:
Title:
Purchaser's Address: P.O. Box 438
Tropic Isle Building
Wickhams Cay
Road Town, Tortolla
British Virgin Islands
<PAGE> 1
SECURITIES HAVE NOT REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN EXEMPTION
FROM REGISTRATION UNDER REGULATION D PROMULGATED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"). THIS SUBSCRIPTION AGREEMENT SHALL NOT
CONSTITUTE AN OFFER TO SELL NOR A SOLICITATION OF AN OFFER TO BUY THE SECURITIES
IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL. THE
SECURITIES ARE "RESTRICTED" AND MAY NOT BE RESOLD OR TRANSFERRED EXCEPT AS
PERMITTED UNDER THE ACT PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.
7% PREFERRED STOCK
SECURITIES PURCHASE AGREEMENT
COMMODORE ENVIRONMENTAL SERVICES, INC.
AND
COMMODORE APPLIED TECHNOLOGIES, INC.
THIS AGREEMENT is made as of the 14th day of August, 1997, by
and between COMMODORE ENVIRONMENTAL SERVICES, INC., traded on the "Pinksheets"
under the "COES" (the "Parent Company"), a corporation, with its principal
office at 150 East 58th Street, New York, NY 10155, COMMODORE APPLIED
TECHNOLOGIES INC., AMEX symbol "CXI" (the "Subsidiary Company"), a corporation,
with its principal office at 150 East 58th Street, New York, NY 10155 and PORTER
PARTNERS, L.P. (the "Purchaser"), with its principal office at c/o Porter
Capital Management, 100 Shoreline, Suite 211B, Mill Valley, California 94941.
IN CONSIDERATION of the mutual covenants contained in this
Agreement, the Parent Company, Subsidiary Company and the Purchaser agree as
follows:
Section 1. Certain Definitions. For purposes of this
Agreement:
"Change in Control Transaction" means the date the Parent
Company or the Subsidiary Company (i) sells or otherwise conveys all or
substantially all of its assets or (ii) effects a transaction (by merger or
otherwise) in which more than 50% of the voting power of the Parent Company or
the Subsidiary Company is disposed of, directly or indirectly, or if within any
12 month period there is a change of more than 50% of the members of the Parent
Company's or the Subsidiary Company's Board of Directors, or if any other
person, entity or group (as defined in Section 13(d) of the Exchange Act) and/or
any of their affiliates or associates acquires in excess of 50% of the Common
Stock.
1
<PAGE> 2
"Closing Date" means the date agreed to by the parties for the
delivery of the stock certificate against a wire transfer of the funds to the
Parent Company.
"Closing" means the completion of the purchase and sale of the
COES Preferred Shares on the Closing Date.
"COES Convertible Preferred Stock" means the 100,000 shares of
Series D Preferred Stock of the Parent Company, $.01 par value, convertible into
CXI Common Stock as hereinafter provided and which has the rights, preferences
and privileges set forth in the Certificate of Designation, Number, Powers,
Preferences and Relative, Participating, Optional, and Other Special Rights and
the Qualifications, Limitations, Restrictions, and Other Distinguishing
Characteristics of Series "D" Preferred Stock of COES (as amended and restated,
the "Series D Certificate of Designations"), a copy of which Certificate of
Designations is attached hereto as Exhibit A (the "Certificate of Designation").
"COES Preferred Shares" means the shares of COES Convertible
Preferred Stock purchased hereunder.
"Conversion Date" means the date on which the Purchaser has
telecopied the Notice of Conversion to counsel for the Parent Company.
"Conversion Price" means an amount equal to the lesser of (a)
$5.15, being one hundred and ten percent (110%) of the average closing price of
the CXI Common Stock for the five (5) business days immediately prior to the
date of this Agreement, or (b) a fifteen (15%) percent discount from the average
of either the low bid price or the closing price (such average to be selected at
the option of the holder of the COES Preferred Shares) of the CXI Common Stock
as reported by Bloomberg, L.P. ("Bloomberg") for the previous five (5) business
days ending on the day before the Conversion Date (the "Average Closing Bid
Price"); provided, however, if the average of the low bid price or the closing
price (whichever is applicable)of the CXI Common Stock, as reported by Bloomberg
("Floor Average"), for any consecutive thirty (30) days is equal or less than
$2.00 (such thirtieth day shall be the "First Trigger Date"), the conversion
price shall equal $2.00; if the Floor Average for any consecutive thirty (30)
days beginning any day after the First Trigger Date is less than $2.00 ("Second
Trigger Date"), the conversion price shall equal $1.90; if the Floor Average for
any thirty (30) days beginning any day after the Second Trigger Date is less
than $1.90 (the "Third Trigger Date"), the conversion price shall equal $1.80;
if the Floor Average for any consecutive thirty (30) days beginning any day
after the Third Trigger Date is less than $1.80 (the "Fourth Trigger Date"), the
conversion price shall equal $1.70; if the Floor Average for any consecutive
thirty (30) days beginning any day after the Fourth Trigger Date is less than
$1.70 (the "Fifth Trigger Date"), the conversion price shall equal $1.60; if the
Floor Average for any consecutive thirty (30) days beginning any day after the
Fifth Trigger Date is less than $1.60, the conversion price shall equal $1.50.
Subject to Section 11.5 herein, in no event shall the Conversion Price be lower
than $1.50 per share of CXI
2
<PAGE> 3
Common Stock. If the CXI Common Stock is not traded on the American Stock
Exchange, the Average Closing Bid Price shall be the average closing bid price
(and if not available, the mean of the high and low prices) of the Common Stock
on the over-the-counter-market or the principal national securities exchange or
the Nasdaq National Market System or Nasdaq SmallCap Market System on which the
CXI Common Stock is traded for the previous five (5) business days ending on the
day before the Conversion Date.
The Conversion Price shall be equitably adjusted accordingly
on a pro rata basis in the event of the happening of certain events that would
affect the CXI Common Stock or COES Convertible Preferred Stock's value
including, but not limited to, forward and reverse stock splits, issuance of
stock dividends, subdivision of shares, combinations, reclassifications, or the
like (collectively "Reclassifications"). An adjustment made pursuant to this
section shall become effective immediately after the effective date of such
event retroactive to the record date, if any, for such an event.
"Convertible Date" means the date on which the COES Preferred
Shares will become convertible, which is the day following the date that the
Registration Statement for the shares of CXI Common Stock underlying the COES
Preferred Stock and COES Warrants has been declared effective by the Securities
and Exchange Commission ("SEC").
"Cumulative Suspension" means the date a Suspension (as
defined in Section 8.7) has occurred and is continuing or the date that is the
15th day in the aggregate that more than one Suspension has occurred since the
effective date of the Registration Statement.
"CXI Common Stock" means the underlying Common Stock of the
Subsidiary Company, $.001 par value.
"Delisting" means the date the CXI Common Stock is delisted
from AMEX and is not otherwise listed on the Nasdaq Stock Market or other
national securities exchange.
"Holder" means a holder of COES Preferred Shares.
"Insufficient CXI Common Stock" means the date the number of
shares of CXI Common Stock held by the Parent Company is not sufficient to
effect the conversion of all outstanding COES Preferred Shares then eligible for
conversion (whether or not the Holders have duly delivered Notices of
Conversion).
"Purchase Price" means the aggregate purchase price of the
COES Preferred Shares purchased.
3
<PAGE> 4
Section 2. Authorization and Sale of Shares.
2.1 Authorization. Subject to the terms and conditions of this
Agreement, the Parent Company has authorized the sale and issuance of the COES
Preferred Shares.
2.2 Agreement to Sell and Purchase the Shares. The Parent
Company will sell and the Purchaser will buy, in reliance upon the
representations and warranties of the Parent Company Subsidiary Company and
Purchaser contained in this Agreement, upon the terms and conditions hereinafter
set forth, Four Thousand (4,000) COES Preferred Shares of COES Convertible
Preferred Stock for an aggregate purchase price of Four Hundred Thousand Dollars
($400,000) for all such COES Preferred Shares based on U.S. $100 per share. The
COES Preferred Shares shall pay a 7% cumulative dividend, payable in cash or CXI
Common Stock at the Conversion Price, at the discretion of the Parent Company,
at the time of each conversion. Such purchase and sale shall occur on the
Closing Date. In addition, Parent Company will transfer to Purchaser for no
additional consideration, five-year warrants ("COES Warrants") to purchase
twelve and one-half (12 1/2) shares of CXI Common Stock for each COES Preferred
Share purchased, initially exercisable on the Convertible Date and for a period
of five years thereafter, at an initial exercise price equal to $7.14 per share
of the CXI Common Stock, subject to adjustment and resetting as set forth in the
form of COES Warrant attached hereto as Exhibit B.
2.3 Subsidiary Company. Whereas the Purchaser is purchasing
COES Preferred Shares from the Parent Company, and the Parent Company is
transferring CXI Common Stock to the Purchaser upon conversion of COES Preferred
Shares and exercise of COES Warrants, the Parent Company hereby agrees to
immediately remit 2.5% of the Purchase Price ($2.50 per COES Preferred Shares
which has a subscription price of $100 per COES Preferred Share) at the Closing
to the Subsidiary Company, constituting the sum of $10,000 of aggregate
consideration for the Subsidiary Company's agreement to perform its obligations
as set forth in this Agreement and the Warrant Agreement, a form of which is
included in Exhibit B.
2.4 Time and Place of Closing. The Closing shall be held at
the offices of Greenberg Traurig, 153 East 53rd Street, 35th Floor, New York,
New York 10022 as promptly as practicable as agreed to by the parties to this
Agreement, but no later than August 15, 1997 at which time either party may
terminate this Agreement.
2.5 Payment and Delivery. At or prior to the Closing, the
following shall occur:
(a) Provided that Purchaser has been notified by
counsel to COES that the Parent Company has delivered to such counsel for
immediate delivery to Purchaser against wire transfer of funds as hereinafter
set forth certificates representing the COES Preferred Shares and COES Warrants
as provided in Section 2.5(b) below,
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Purchaser shall remit by wire transfer the Purchase Price as payment in full for
the COES Preferred Shares as follows: 89% of the Purchase Price ($356,000)
directly to the Parent Company, 9% of the Purchase Price $36,000) directly to
Avalon Research Group, Inc. (the "Finder"), and 2% of the Purchase Price
($8,000) directly to Stephen A. Weiss.
(b) The Parent Company shall deliver or cause to be
delivered to counsel to Seller for immediate delivery to Purchaser against wire
transfer of funds as aforesaid certificates representing the COES Preferred
Shares and the COES Warrants, registered in the name of Purchaser (or any
nominee designated by Purchaser at or prior to the Closing Date), free and clear
of all liens, claims, charges and encumbrances. Purchaser will receive such
certificates from counsel to COES, as applicable, after the Parent Company,
Finder and Stephen A. Weiss have received the Purchase Price directly from
Purchaser.
(c) Wire instructions for the Parent Company have
been separately provided to the Purchaser's counsel.
Section 3. General Representations and Warranties of the
Parent Company. The Parent Company hereby represents and warrants to, and
covenants with, the Purchaser that the following are true and correct as of the
date hereof and as of the Closing Date.
3.1 Organization; Qualification. The Parent Company is a
corporation duly organized and validly existing under the laws of the State of
Delaware and is in good standing under such laws. The Parent Company has all
requisite corporate power and authority to own, lease and operate its properties
and assets, and to carry on its business as presently conducted. The Parent
Company is qualified to do business as a foreign corporation in each
jurisdiction in which the ownership of its property or the nature of its
business requires such qualification, except where failure to so qualify would
not have a material adverse effect on the Parent Company.
3.2 Capitalization. The authorized capital stock of the Parent
Company is as set forth in footnote 12 of the audited consolidated financial
statements of the Parent Company set forth in its Form 10-K for the fiscal year
ended December 31, 1996, a true copy of which has been supplied to Purchaser,
provided that in addition 60,000 shares of the COES Preferred Shares and COES
Warrants for 600,000 shares of CXI Common Stock were issued in May 1997, and
40,000 additional COES Preferred Shares and 462,500 additional COES Warrants
have been authorized for issuance. The Series D Preferred Stock, when issued,
shall be duly authorized and validly issued and are fully paid and
nonassessable.
3.3 CXI Common Stock Transferable Upon Conversion of COES
Preferred Shares or Exercise of COES Warrants. The Parent Company currently owns
Fifteen Million (15,000,000) shares of CXI Common Stock, all of which have been
duly
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authorized and validly issued and are fully paid and nonassessable. The Parent
Company will reserve from its holdings of CXI Common Stock a sufficient number
of shares of CXI Common Stock to permit the conversion in full of the
outstanding COES Preferred Shares and the exercise in full of the COES Warrants.
As of the Closing Date, the Parent Company had reserved sufficient shares of CXI
Common Stock for transfer to Purchaser upon exercise of the COES Preferred
Shares which are convertible, at Purchaser's option, at the Conversion Price, as
per Section 10 of this Agreement, and upon exercise of the COES Warrants. If the
Parent Company does not own sufficient shares of CXI Common Stock for transfer
to the Purchaser upon conversion of COES Preferred Shares and/or exercise of
COES Warrants, the Parent Company hereby agrees to promptly purchase or
otherwise acquire the sufficient amount of shares of CXI Common Stock and
transfer such shares to the Purchaser upon conversion of COES Preferred Shares
and/or exercise of COES Warrants.
Except for the consent of National Securities Corporation,
which has been obtained, the Parent Company has all requisite corporate right,
power and authority to transfer the shares of CXI Common Stock in its holdings
to Purchaser upon conversion of the COES Preferred Shares and exercise of the
COES Warrants.
3.4 Authorization. The Parent Company has all requisite
corporate right, power and authority to execute and deliver this Agreement and
to consummate the transactions contemplated hereby. All corporate action on the
part of the Parent Company, its directors and stockholders necessary for the
authorization, execution, delivery and performance of this Agreement by the
Parent Company, the authorization, sale, issuance and delivery of the COES
Preferred Shares and the performance of the Parent Company's obligations
hereunder has been taken. This Agreement has been duly executed and delivered by
the Parent Company and constitutes a legal, valid and binding obligation of the
Parent Company enforceable in accordance with its terms, subject to laws of
general application relating to bankruptcy, insolvency and the relief of debtors
and rules of law governing specific performance, injunctive relief or other
equitable remedies, and to limitations of public policy as they apply to the
indemnification provisions set forth in Section 8.4 or this Agreement. Upon
their issuance, transfer and delivery pursuant to this Agreement, the COES
Preferred Shares, COES Warrants and shares of CXI Common Stock transferable upon
conversion of the COES Preferred Shares (the "Conversion Shares") and exercise
of the COES Warrants (the "Warrant Shares") (collectively, the "Securities")
will be validly issued, fully paid and nonassessable and will be free of any
liens or encumbrances; provided, however, that the COES Preferred Shares and
COES Warrants are subject to restrictions on transfer under state and/or federal
securities laws. The issuance and sale of the COES Preferred Shares and COES
Warrants will not give rise to any preemptive right or right of first refusal or
right of participation on behalf of any person. Upon registration of the
Conversion Shares and the Warrant Shares pursuant to Section 8 of this
Agreement, there shall be no restriction on the transferability thereof other
than applicable prospectus delivery requirements.
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3.5 No Conflict. The execution and delivery of this Agreement
do not, and the consummation of the transactions contemplated hereby will not,
conflict with, or result in any violation of, or default (with or without notice
or lapse of time, or both), or give rise to a right termination, cancellation or
acceleration of any obligation or to a loss of a material benefit, under, any
provision of the Articles of Incorporation, and any amendments thereto, Bylaws,
stockholders agreements and any amendments thereto of the Parent Company or any
material mortgage, indenture, lease or other agreement or instrument, permit,
concession, franchise, license, judgment, order, decree statute, law, ordinance,
rule or regulation applicable to the Parent Company, its properties or assets.
3.6 Accuracy of Reports and Information. The Parent Company is
in full compliance, to the extent applicable, with all reporting obligations
under Section 12(b), 12(g) or 15(d), as applicable, of the Securities Exchange
Act of 1934, as amended (the "Exchange Act").
The Parent Company has filed all material required to be filed
pursuant to all reporting obligations, under either Section 13(a) or 15(d) of
the Exchange Act for a period of at least twelve (12) months immediately
preceding the offer or sale of the COES Preferred Shares (or for such shorter
period that the Parent Company has been required to file such material).
3.7 SEC Filings/Full Disclosure. None of the Parent Company's
filings with the SEC since January 1, 1997 contain any untrue statement of a
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. The Parent Company has, since January 1,
1997, timely filed all requisite forms, reports and exhibits thereto with the
SEC. The Parent Company's Annual Report on Form 10-K for the year ended December
31, 1996, its Quarterly Reports for the periods ended March 31, 1997 and all
Current Reports on Form 8-K filed by the Parent Company from January 1, 1996 to
date are referred to as the "COES SEC Reports."
There is no fact known to the Parent Company (other than
general economic conditions known to the public generally) that has not been
disclosed in writing to the Purchaser which could reasonably be expected to have
a material adverse effect on the condition (financial or otherwise) or in the
earnings, business affairs, business prospects, properties or assets of the
Parent Company, or (ii) could reasonably be expected to materially and adversely
affect the ability of the Parent Company to perform its obligations pursuant to
this Agreement.
3.8 Absence of Undisclosed Liabilities. The Parent Company has
no material liabilities or obligations, absolute or contingent (individually or
in the aggregate), except as set forth in the financial statements included in
the COES SEC (the "COES Financial Statements") or as incurred in the ordinary
course of business after the date of the COES Financial Statements.
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3.9 Governmental Consent, etc. No consent, approval or
authorization of or designation, declaration or filing with any governmental
authority on the part of the Parent Company is required in connection with the
valid execution and delivery of this Agreement, or the offer, sale or issuance
of the COES Preferred Shares, or the consummation of any other transaction
contemplated hereby, except the filing with the SEC of a registration statement
on Form S-3 or Form S-1 for the purpose of registering the CXI Common Stock
underlying the COES Preferred Shares and the COES Warrants.
3.10 Intellectual Property Rights. Except as disclosed in the
COES SEC Reports, the Parent Company has sufficient trademarks, trade names,
patent rights, copyrights and licenses to conduct its business as contemplated
therein. To the Parent Company's knowledge, neither the Parent Company nor its
products is infringing or will infringe any trademark, trade name, patent right,
copyright, license, trade secret or other similar right of others currently in
existence; and there is no claim being made against the Parent Company regarding
any trademark, trade name, patent, copyright, license, trade secret or other
intellectual property right which could have a material adverse effect on the
condition (financial or otherwise), business, results of operations or prospects
of the Parent Company.
3.11 Material Contracts. Except as set forth in the COES SEC
Reports, the agreements to which the Parent Company is a party described therein
are valid agreements, in full force and effect, the Parent Company is not in
material breach or material default (with or without notice or lapse of time, or
both) under any of such agreements, and, to the Parent Company's knowledge, the
other contracting party or parties thereto are not in material breach or
material default (with or without notice or lapse of time, or both) under any of
such agreements.
3.12 Litigation. There is no action, proceeding or
investigation pending, or to the Parent Company's knowledge threatened, against
the Parent Company which might result, either individually or in the aggregate,
in any material adverse change in the business, prospects, conditions, affairs
or operations of the Parent Company. The Parent Company is not a party to or
subject to the provisions of any order, writ, injunction, judgment or decree of
any court or government agency or instrumentality. There is no action, suit,
proceeding or investigation by the Parent Company currently pending or which the
Parent Company currently intends to initiate.
3.13 Title to Assets. Except as set forth in COES SEC Reports,
the Parent Company has good and marketable title to all properties and material
assets described therein as owned by it, free and clear of any pledge, lien,
security interest, encumbrance, claim or equitable interest other than such as
are not material to the business of the Parent Company.
3.14 Subsidiaries. The Parent Company does not presently own
or control, directly or indirectly, any interest in any other corporation,
partnership, association or other business entity, except as stated in the COES
SEC Reports.
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3.15 Required Governmental Permits. The Parent Company is in
possession of and operating in compliance with all authorizations, licenses,
certificates, consents, orders and permits from state, federal and other
regulatory authorities which are material to the conduct of its business, all of
which are valid and in full force and effect.
3.16 Listing. The Parent Company will maintain the listing of
its Common Stock on the "Pinksheets" or other organized, comparable United
States market or quotation system; provided, however, that the sole remedy for
Purchaser for breach of this representation shall be liquidated damages as
provided in Section 10.6.
3.17 Other Outstanding Securities/Financing Restrictions.
Except as set forth on the CXI SEC Reports (as defined herein) or as
contemplated hereby, there are no other outstanding debt or equity securities
presently convertible into shares of CXI Common Stock. COES contemplates selling
an aggregate of approximately 25,000 shares of COES Preferred Shares (including
the shares being offered and sold hereby) contemporaneously herewith, and
issuing an aggregate of approximately 462,500 additional COES Warrants
contemporaneously herewith, of which 150,000 such warrants will be issued to
entities which acquired COES Preferred Shares in May 1997 and the balance are
anticipated to be issued contemporaneously herewith to acquirors of additional
COES Preferred Shares (including the Purchaser).
The Parent Company cannot, without the prior approval in
writing from the Purchaser, obtain convertible debt or equity financing which is
convertible into securities of the Subsidiary Company for a period of ninety
(90) days following the effective date of the Registration Statement (as defined
herein); however, the Parent Company will not require prior approval if (a) at
least 80% of the net proceeds of the financing is part of an acquisition by the
Parent Company of control of another company or entity, (b) at least 80% of the
net proceeds of the financing is a refinancing of the Parent Company's debt, or
(c) the financing is part of a public offering of the Parent Company's
securities.
3.18 Right of Participation. In the event the parent Company
wishes to complete a financing similar in structure to the securities issued
hereby within one hundred and eighty (180) days from the Closing Date, the
Purchaser shall have the right to participate in such offering and shall have
three (3) business days to reply in writing after receipt of written notice of
such proposed financing from the Parent Company. In the event a writing is not
received by the Parent Company from the Purchaser specifying the extent of the
Purchaser's interest in so participating, this will be deemed a refusal by the
Purchaser of such right to participate.
3.19 Legal Opinion. Purchaser shall, upon purchase of the COES
Preferred Shares, receive an opinion letter from counsel to the Parent Company,
and the Parent Company represents that it will immediately obtain such an
opinion from counsel to the satisfaction of the Purchaser, to the effect that:
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(a) The Parent Company is duly incorporated, validly existing
and in good standing in the jurisdiction of its incorporation.
(b) There is no action, proceeding or investigation pending,
or to such counsel's knowledge, threatened against the Parent Company which
might result, either individually or in the aggregate, in any material adverse
change in the business, prospects, conditions, affairs or operations of the
Parent Company.
(c) The Parent Company is not a party to or subject to the
provisions of any order, writ, injunction, judgment or decree of any court or
government agency or instrumentality.
(d) There is no action, suit, proceeding or investigation by
the parent Company currently pending or, to such counsel's knowledge, which the
Parent Company currently intends to initiate.
(e) All issued and outstanding shares of CXI Common Stock have
been duly authorized and validly issued and are fully paid and nonassessable.
(f) This Securities Purchase Agreement and the Stock Purchase
Warrant, the issuance of the COES Preferred Shares and COES Warrants and the
transfer of the Conversion Shares and Warrant Shares have been duly approved by
all required corporate action, the requisite consent of National Securities
Corporation for the Parent Company to transfer the shares of CXI Common Stock in
its holdings to the Purchaser upon conversion of the COES Preferred Shares and
exercise of the COES Warrants has been duly obtained, and that all such
Securities, upon delivery, shall be validly issued and outstanding, fully paid
and nonassessable.
(g) The execution, delivery and performance of this Securities
Purchase Agreement and the Stock Purchase Warrant by the Parent Company, and the
consummation of the transactions contemplated thereby, will not, with or without
the giving of notice or the passage of time or both:
(i) Violate the provisions of any law, rule or
regulation which is material to the assets,
properties or business of the Parent Company;
(ii) Violate the provisions of the charter or bylaws
of the Parent Company; or
(iii) To the best of counsel's knowledge, violate any
judgment, decree, order or award of any court,
governmental body or arbitrator.
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(iv) To the best of counsel's knowledge, conflict
with, or result in the breach or termination of any
term or provision of, or constitute a default under,
or cause any acceleration under, or cause the
creation of any lien, charge or encumbrance upon the
properties or assets of the Parent Company pursuant
to, any note, bond, indenture, mortgage, lease, deed
of trust or other instrument, obligation, or
agreement to which the Parent Company is a party and
which is material to Parent Company, or by which the
Parent Company, or any of its material properties is
or may be bound.
(h) This Securities Purchase Agreement and the Stock Purchase
Warrant constitute the valid and legally binding obligations of the Parent
Company and are enforceable against the Parent Company in accordance with their
respective terms, subject to laws of general application relating to bankruptcy,
insolvency and the relief of debtors and rules of law governing specific
performance, injunctive relief or other equitable remedies, and, with respect to
the Securities Purchase Agreement, to limitations of public policy as they may
apply to the indemnification provisions set forth in Section 8.4 thereof.
3.20 Use of Proceeds. Except for payments aggregating $10,000
to the Subsidiary Company as provided herein, the Parent Company represents that
the net proceeds from this offering will be used for general corporate purposes.
3.21 No Poison Pill. The Parent Company represents that it
does not have, and has no current intention to adopt, a stockholder rights plan
("poison pill").
Section 4. General Representations and Warranties of the
Subsidiary Company. The Subsidiary Company hereby represents and warrants to,
and covenants with, the Purchaser that the following are true and correct as of
the date hereof and as of the Closing Date.
4.1 Organization; Qualification. The Subsidiary Company is a
corporation duly organized and validly existing under the laws of the State of
Delaware and is in good standing under such laws. The Subsidiary Company has all
requisite corporate power and authority to own, lease and operate its properties
and assets, and to carry on its business as presently conducted. The Subsidiary
Company is qualified to do business as a foreign corporation in each
jurisdiction in which the ownership of its property or the nature of its
business requires such qualification, except where failure to so qualify would
not have a material adverse effect on the Subsidiary Company.
4.2 Capitalization. The authorized capital stock of the
Subsidiary Company is as set forth in the CXI SEC Reports. All issued and
outstanding shares of Common Stock have been duly authorized and validly issued
and are fully paid and nonassessable.
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4.3 CXI Common Stock Transferable Upon Conversion of COES
Preferred Shares or Exercise of COES Warrants. Except for the consent of
National Securities Corporation, which has been obtained, the Subsidiary Company
has all requisite corporate right, power and authority to transfer shares of CXI
Common Stock owned by the Parent Company to the Purchaser upon conversion of the
COES Preferred Shares and exercise of the COES Warrants.
4.4 Authorization. The Subsidiary Company has all requisite
corporate right, power and authority to execute and deliver this Agreement and
to consummate the transactions contemplated hereby. All corporate action on the
part of the Subsidiary Company, its directors and stockholders necessary for the
authorization, execution, delivery and performance of this Agreement by the
Subsidiary Company, and the performance of the Subsidiary Company's obligations
hereunder has been taken. This Agreement has been duly executed and delivered by
the Subsidiary Company and constitutes a legal, valid and binding obligation of
the Subsidiary Company enforceable in accordance with its terms, subject to laws
of general application relating to bankruptcy, insolvency and the relief of
debtors and rules of law governing specific performance, injunctive relief or
other equitable remedies, and to limitations of public policy as they may apply
to the indemnification provisions set fourth in Section 8.4 of this Agreement.
Upon their issuance, transfer and delivery pursuant to this Agreement, the
Securities will have been validly issued, fully paid and nonassessable and will
be free of any liens or encumbrances; provided, however, that the COES Preferred
Shares and COES Warrants are subject to restrictions on transfer under state
and/or federal securities laws. Upon registration of the Conversion Shares and
the Warrant Shares pursuant to Section 8 of this Agreement, there shall be no
restriction on the transferability thereof other than applicable prospectus
delivery requirements.
4.5 No Conflict. The execution and delivery of this Agreement
do not, and the consummation of the transactions contemplated hereby will not,
conflict with, or result in any violation of, or default (with or without notice
or lapse of time, or both), or give rise to a right of termination, cancellation
or acceleration of any obligation or to a loss of a material benefit, under, any
provision of the Certificate of Incorporation, and any amendments thereto,
Bylaws, stockholders agreements and any amendments thereto of the Subsidiary
Company or any material mortgage, indenture, lease or other agreement or
instrument, permit, concession, franchise, license, judgment, order, decree
statute, law, ordinance, rule or regulation applicable to the Subsidiary
Company, its properties or assets.
4.6 Accuracy of Reports and Information. The Subsidiary
Company is in full compliance, to the extent applicable, with all reporting
obligations under Section 12(b), 12(g) or 15(d), as applicable, of the Exchange
Act. The Subsidiary Company has registered its Common Stock pursuant to Section
12 of the Exchange Act and the Common Stock is listed and trades on AMEX.
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The Subsidiary Company has filed all material required to be
filed pursuant to all reporting obligations, under either Section 13(a) or 15(d)
of the Exchange Act for a period of at least twelve (12) months immediately
proceeding the offer or sale of the COES Preferred Shares (or for such shorter
period that the Subsidiary Company has been required to file such material).
4.7 SEC Filings/Full Disclosure. None of the Subsidiary
Company's filings with the SEC since January 1, 1997 contain any untrue
statement of a 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. The Subsidiary Company
has, since January 1, 1997, timely filed all requisite forms reports and
exhibits thereto with the SEC. The Subsidiary Company's Prospectus declared
effective by the SEC on June 28, 1996, the Annual Report on Form 10-K for the
year ended December 31, 1996, its Quarterly Reports for the periods ended March
31, 1997 and all Current Reports on Form 8-K filed by the Subsidiary Company
from January 1, 1996 to date are referred to as the "CXI SEC Reports."
There is no fact known to the Subsidiary Company (other than
general economic conditions known to the public generally) that has not been
disclosed in writing to the Purchaser which could reasonably be expected to have
a material adverse effect on the condition (financial or otherwise) or in the
earnings, business affairs, business prospects, properties or assets of the
Subsidiary Company, or (ii) could reasonably be expected to materially and
adversely affect the ability of the Subsidiary Company to perform its
obligations pursuant to this Agreement.
4.8 Absence of Undisclosed Liabilities. The Subsidiary Company
has no material liabilities or obligations, absolute or contingent (individually
or in the aggregate), except as set forth in the financial statements included
in the CXI SEC Reports (the "CXI Financial Statements") or as incurred in the
ordinary course of business after the date of the CXI Financial Statements.
4.9 Governmental Consent, etc. No consent, approval or
authorization of or designation, declaration or filing with any governmental
authority on the part of the Subsidiary Company is required in connection with
the valid execution and delivery of this Agreement, or the offer, sale or
issuance of the COES Preferred Shares, or the consummation of any other
transaction contemplated hereby, except the filing with the SEC of a
registration statement on Form S-3 or S-1 for the purpose of registering the CXI
Common Stock underlying the COES Preferred Shares and the COES Warrants.
4.10 Intellectual Property Rights. Except as disclosed in the
CXI SEC Reports, the Subsidiary Company has sufficient trademarks, trade names,
patent rights, copyrights and licenses to conduct its business as contemplated
therein. To the Subsidiary Company's knowledge, neither the Subsidiary Company
nor its products is infringing or will infringe any trademark, trade name,
patent right, copyright, license, trade secret or other similar right of others
currently in existence; and there is no claim
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being made against the Subsidiary Company regarding any trademark, trade name,
patent, copyright, license, trade secret or other intellectual property right
which could have a material advisers effect on the condition (financial or
otherwise), business, results of operations or prospects of the Subsidiary
Company.
4.11 Material Contracts. Except as set forth in the CXI SEC
Reports, the agreements to which the Subsidiary Company is a party described
therein are valid agreements, in full force and effect, the Subsidiary Company
is not in material breach or material default (with or without notice or lapse
of time, or both) under any of such agreements, and, to the Subsidiary Company's
knowledge, the other contracting party or parties thereto are not in material
breach or material default (with or without notice or lapse of time, or both)
under any such agreements.
4.12 Litigation. There is no action, proceeding or
investigation pending, or to the Subsidiary Company's knowledge threatened,
against the Subsidiary Company which might result, either individually or in the
aggregate, in any material adverse change in the business, prospects,
conditions, affairs or operations of the Subsidiary Company. The Subsidiary
Company is not a party to or subject to the provisions of any order, writ,
injunction, judgment or decree of any court or government agency or
instrumentality. There is no action, suit, proceeding or investigation by the
Subsidiary Company currently pending or which the Subsidiary Company currently
intends to initiate.
4.13 Title to Assets. Except as set forth the CXI SEC Reports,
the Subsidiary Company has good and marketable title to all properties, and
material assets described therein as owned by it, free and clear of any pledge,
lien, security interest, encumbrance, claim or equitable interest other than
such as are not material to the business of the Subsidiary Company.
4.14 Subsidiaries. The Subsidiary Company does not presently
own or control, directly or indirectly, any interest in any other corporation,
partnership, association or other business entity, except as stated in the CXI
SEC Reports.
4.15 Required Governmental Permits. The Subsidiary Company is
in possession of and operating in compliance with all authorizations, licenses,
certificates, consents, orders and permits from state, federal and other
regulatory authorities which are material to the conduct of its business, all of
which are valid and in full force and effect.
4.16 Listing. The Subsidiary Company will maintain the listing
of its Common Stock on AMEX or other organized, comparable United States market
or quotation system; provided, however, that the sole remedy for Purchaser for
breach of this representation shall be liquidated damages as provided in Section
10.6.
4.17 Other Outstanding Securities/Financing Restrictions.
Except as set forth in the CXI SEC Reports or as contemplated hereby, there are
no other outstanding
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debt or equity securities presently convertible into shares of CXI Common Stock.
Except as set forth in the CXI SEC Reports, the Subsidiary Company has no
outstanding restricted shares of Common Stock, or shares of Common Stock sold
under Regulation S or Regulation D under the Securities Act of 1933, as amended
(the "Securities Act") or outstanding under any other exemption from
registration, which are available for sale as unrestricted ("free trading")
stock.
The Subsidiary Company cannot, without the prior approval in
writing from the Purchaser, obtain convertible debt or equity financing for a
period of ninety (90) days following the effective date of the Registration
Statement (as defined herein); however, the Subsidiary Company will not require
prior approval if (a) at least 80% of the net proceeds of the financing is part
of any acquisition by the Subsidiary Company of control of another company or
entity, (b) at least 80% of the net proceeds of the financing is a refinancing
of the Subsidiary Company's debt, or (c) the financing is part of a public
offering of the Subsidiary Company's securities.
4.18 Right of Participation. In the event the Subsidiary
Company wishes to complete a financing similar in structure to the securities
issued hereby within one hundred and eighty (180) days from the Closing Date,
the Purchaser shall have the right to participate in such offering and shall
have three (3) business days to reply in writing after receipt of written notice
of such proposed financing from the Subsidiary Company. In the event a writing
is not received by the Subsidiary Company from the Purchaser specifying the
extent of the Purchaser's interest in so participating, this will be deemed a
refusal by the Purchaser of such right to participate.
4.19 Legal Opinion. Purchaser shall, upon purchase of the COES
Preferred Shares, receive an opinion letter from counsel to the Subsidiary
Company, and the Subsidiary Company represents that it will immediately obtain
such an opinion from counsel to the satisfaction of the Purchaser, to the effect
that:
(a) The Subsidiary Company is duly incorporated, validly
existing and in good standing in the jurisdiction of its incorporation.
(b) There is no action, proceeding or investigation pending,
or to such counsel's knowledge, threatened against the Subsidiary
Company which might result, either individually or in the aggregate, in
any material adverse change in the business, prospects, conditions,
affairs or operations of the Subsidiary Company.
(c) The Subsidiary Company is not a party to or subject to the
provisions of any order, writ, injunction, judgment or decree of any
court or government agency or instrumentality.
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<PAGE> 16
(d) There is no action, suit, proceeding or investigation by
the Company currently pending, to such counsel's knowledge, or which
the Subsidiary Company currently intends to initiate.
(e) All issued and outstanding shares of CXI Common Stock have
been duly authorized and validly issued and are fully paid and
nonassessable.
(f) This Securities Purchase Agreement and the Stock Purchase
Warrant, the issuance of the COES Preferred Shares and COES Warrants
and the transfer of the Conversion Shares and Warrant Shares have been
duly approved by all required corporate action, the requisite consent
of National Securities Corporation for the Parent Company to transfer
the shares of CXI Common Stock in its holdings to the Purchaser upon
conversion of the COES Preferred Shares and exercise of the COES
Warrants has been duly obtained, and that all such Securities, upon
delivery, shall be validly issued and outstanding, fully paid and
nonassessable.
(g) The execution, delivery and performance of this Securities
Purchase Agreement and the Stock Purchase Warrant by the Subsidiary
Company, and the consummation of the transactions contemplated thereby,
will not, with or without the giving of notice or the passage of time
or both:
(i) Violate the provisions of any law, rule or
regulation which is material to the assets, properties or
business of the Subsidiary Company;
(ii) Violate the provisions of the charter or bylaws
of the Subsidiary Company; or
(iii) To the best of counsel's knowledge, violate any
judgment, decree, order or award of any court, governmental
body or arbitrator.
(iv) To the best of counsel's knowledge, conflict
with, or result in the breach or termination of any term or
provision of, or constitute a default under, or cause any
acceleration under, or cause the creation of any lien, charge
or encumbrance upon the properties or assets of the Subsidiary
Company pursuant to, any note, bond, indenture, mortgage,
lease, deed of trust or other instrument, obligation, or
agreement to which the Subsidiary Company is a party and which
is material to the Subsidiary Company or by which the
Subsidiary Company, or any of its material properties is or
may be bound.
(h) This Securities Purchase Agreement and the Stock Purchase
Warrant constitute the valid and legally binding obligations of the
Subsidiary Company and are enforceable against the Subsidiary Company
in accordance with their respective terms, subject to laws of general
application relating to
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<PAGE> 17
bankruptcy, insolvency and the relief of debtors and rules of law
governing specific performance, injunctive relief or other equitable
remedies, and, with respect to the Securities Purchase Agreement, to
limitations of public policy as they may apply to the indemnification
provisions set forth in Section 8.4 thereof.
4.20 No Poison Pill. The Subsidiary Company represents that it
does not have, and has no current intention to adopt, a stockholder rights plan
("poison pill").
Section 5. Representations, Warranties and Covenants of the
Purchaser. The Purchaser represents and warrants to, and covenants with, the
Parent Company and the Subsidiary Company that the following are true and
correct as of the date hereof and as of the Closing Date.
5.1 Authority. The Purchaser's signatory has all right, power,
authority and capacity to execute and deliver this Agreement and to consummate
the transactions contemplated hereby. This Agreement has been duly executed and
delivered by the Purchaser and will constitute the legal, valid and binding
obligations of the Purchaser, enforceable in accordance with its terms, subject
to laws or general application relating to bankruptcy, insolvency and the relief
of debtors and rules of laws governing specific performance, injunctive relief
or other equitable remedies, and to limitations of public policy as they may
apply to the indemnification provisions set forth in Section 8.4 of this
Agreement.
5.2 Investment Experience. Purchaser is an "accredited
investor" as defined in Rule 501(a) under the Securities Act. Purchaser is aware
of the Parent Company's and Subsidiary Company's business affairs and financial
conditions and has had access to and has acquired sufficient information about
the Parent Company and the Subsidiary Company, including the COES and CXI SEC
Reports, to reach an informed and knowledgeable decision to acquire the COES
Preferred Shares. Purchaser has such business and financial experience as to
require to give it the capacity to protect its own interests in connection with
the purchase of the COES Preferred Shares and the acquisition of the COES
Warrants.
5.3 Investment Intent. Without limiting its ability to resell
the COES Preferred Shares and the COES Warrants and underlying CXI Common Stock
pursuant to an effective registration statement, Purchaser represents that it is
purchasing the COES Preferred Shares of reinvestment purposes. Purchaser
understands that its acquisition of the COES Preferred Shares and the COES
Warrants has not been registered under the Securities Act or registered or
qualified under any state securities law in reliance on specific exemptions
therefrom, which exemptions may depend upon, among other things, the bona fide
nature of Purchaser's investment intent as expressed herein. Purchaser will not,
directly or indirectly, offer, sell, pledge, transfer or otherwise dispose of
(or solicit any offers to buy, purchase or otherwise acquire or take a pledge
of) any of the COES Preferred Shares or the COES Warrants except in compliance
with the Securities Act and
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<PAGE> 18
any applicable state securities laws, and the rules and regulations promulgated
thereunder.
5.4 Registration or Exemption Requirements. Purchaser further
acknowledges and understands that the COES Preferred Shares and the COES
Warrants may not be resold or otherwise transferred except in a transaction
registered under the Securities Act and any applicable state securities laws or
unless an exemption from such registration is available. Purchaser understands
that the certificate(s) evidencing the COES Preferred Shares and the COES
Warrants will be imprinted with a legend, subject to Section 5.7 below, that
prohibits the transfer thereof unless (I) they are registered or such
registration is not required, and (ii) if the transfer is pursuant to an
exemption from registration other than Rule 144 under the Securities Act and, if
the Parent Company shall so request in writing, an opinion of counsel reasonably
satisfactory to the Parent Company is obtained to the effect that the
transaction is so exempt.
5.5 No Legal, Tax or Investment Advice. Purchaser understands
that nothing in this Agreement or any other materials presented to Purchaser in
connection with the purchase and sale of the COES Preferred Shares and the
acquisition and issuance of the COES Warrants constitutes legal, tax or
investment advice. Purchaser has consulted such legal, tax and investment
advisors as it, in its sole discretion, has deemed necessary or appropriate in
connection with its purchase of the COES Preferred Shares and acquisition of the
COES Warrants.
5.6 Purchaser Review. Purchaser hereby represents and warrants
that the Purchaser has carefully examined the COES SEC Reports and CXI SEC
Reports and the COES and CXI Financial Statements contained therein. The
Purchaser acknowledges that the Parent Company and Subsidiary Company has made
available to the Purchaser all documents and information that it has requested
relating to the Parent Company and the Subsidiary Company and has provided
answers to all of its questions concerning the Parent Company and the Subsidiary
Company, the COES Preferred Shares and the COES Warrants. Nothing stated in the
previous two sentences, however, shall be deemed to affect the representations
and warranties of the Parent Company the Subsidiary Company contained in this
Agreement.
5.7 Legend. The certificate or certificates representing the
Securities shall be subject to a legend restricting transfer under the
Securities Act, such legend to be substantially as follows:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. SUCH SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT WHICH, EXCEPT IN
THE CASE OF AN EXEMPTION PURSUANT TO
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<PAGE> 19
RULE 144 UNDER SAID ACT, IS CONFIRMED IN A LEGAL OPINION SATISFACTORY
TO THE COMPANY."
The certificates shall also include any legends required by any applicable state
securities laws.
The legend(s) endorsed on a stock certificate pursuant to this
Section 5.7 or on any certificate representing any of the Securities shall be
removed and the Parent Company or the Subsidiary Company shall issue a
replacement certificate without such legend to the holder of such certificate if
the Securities represented by such certificate are registered under the
Securities Act or if such holder provides to the Parent Company or the
Subsidiary Company an opinion of counsel to the effect that a public sale,
transfer or assignment of such Securities may be made without registration.
5.8 Restrictions on Conversion of Shares. Notwithstanding
anything to the contrary contained herein, no COES Preferred Shares may be
converted by a Holder to the extent that, after giving effect to the Conversion
Shares issued pursuant to a Notice of Conversion, the total number of shares of
CXI Common Stock deemed beneficially owned by such Holder (other than by virtue
of the ownership of COES Preferred Shares or COES Warrants or ownership of other
securities that have limitations on a Holder's rights to convert or exercise
similar to those limitations set forth herein), together with all shares of CXI
Common Stock deemed beneficially owned by Holder's "affiliates" (as defined in
Rule 144 under the Securities Act) that would be aggregate for purposes of
determining whether a group under Section 13(d) of the Exchange Act exists,
would exceed 4.99% of the total issued and outstanding shares of CXI Common
Stock, provided that each Holder shall have the right to waive this restriction,
in whole or in part, immediately in case of a pending Change in Control
Transaction and in any other case upon 61 days prior notice to the Parent
Company and the Subsidiary Company. The delivery of a Notice of Conversion by
any Holder shall be deemed a presentation by such Holder it is in compliance
with this Section 5.8. A transferee of COES Preferred Shares shall not be bound
by this provision unless it expressly agrees to be so bound. The term "deemed
beneficially owned" as used in this Section 5.8 shall exclude shares that might
otherwise be deemed beneficially owned by reason of the convertibility of the
COES Preferred Shares.
Section 6. Conditions to the Purchaser's Obligation to
Purchase. The Parent Company and the Subsidiary Company understand that the
Purchaser's obligation to purchase the COES Preferred Shares is conditioned
upon:
(a) Acceptance by Purchaser of this Agreement for the sale of
the COES Preferred Shares, as evidence by the execution of this Agreement by its
authorized officers;
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<PAGE> 20
(b) Delivery of the COES Preferred Shares and COES Warrants to
counsel to COES for immediate delivery to the Purchaser against wire transfer of
funds as aforesaid;
(c)(i) The delivery at the Closing of a certificate from an
authorized officer of the Parent Company certifying that all representations and
warranties of the Parent Company are true and correct as of the Closing Date (in
the form annexed hereto as Exhibit C1);
(c)(ii) The delivery at the Closing of a certificate from an
authorized officer of the Subsidiary Company certifying that all representations
and warranties of the Subsidiary Company are true and correct as of the Closing
Date (in the form annexed hereto as Exhibit C2); and
(d) A filed Certificate of Designation.
Section 7. Conditions to Parent Company's Obligation to Sell.
Purchaser understands that the Parent Company's obligation to sell the COES
Preferred Shares is conditioned upon:
(a) The receipt and acceptance by the Parent Company of this
Agreement to issue the COES Preferred Shares as evidenced by execution of this
Agreement by the President or any Vice President of the Parent Company.
(b) Delivery to the Company, the Finder and Counsel for Parent
by Purchaser of good funds as payment in full for the purchase of the COES
Preferred Shares; and
(c) The delivery at the Closing of a certificate from an
authorized officer or representative of Purchaser certifying that all
representations and warranties of the Purchaser are true and correct as of the
Closing Date (in the form annexed hereto as Exhibit C3).
Section 8. Registration of the Shares; Compliance with the
Securities Act.
8.1 Definitions. For the purpose of this Section 8:
(a) the term "Registration Statement" shall mean any
registration statement required to be filed by Section 8.2 below, and shall
include any preliminary prospectus, final prospectus, exhibit or amendment
included in or relating to such registration statement; and
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<PAGE> 21
(b) the term "untrue statement" shall include any untrue
statement or alleged untrue statement, or any omission or alleged omission to
state in the Registration Statement a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
8.2 Registration Procedures and Expenses. The Parent Company
shall cause the Subsidiary Company to, and the Subsidiary Company shall:
(a) use its best efforts to file with the SEC not later than
September 15, 1997 a shelf registration statement under the Securities Act on
Form S-3, if the Subsidiary Company is eligible to file a registration statement
under such form (and if the Subsidiary Company is not eligible to file a
registration statement under Form S-3, to file with the SEC a registration
statement under the Securities Act on Form S-1 or any other form which is
appropriate), to register the Conversion Shares and Warrant Shares, and to use
its best efforts to cause such registration statement to be declared effective
by the SEC by not later than December 15, 1997. Such registration statement will
also cover shares issuable upon conversion of Series A Preferred Stock of CXI
sold by CXI pursuant to a certain Stock Purchase Agreement dated as of August
15, 1997;
(b) use its best efforts, subject to receipt of necessary
information from the Purchaser, to cause such Registration Statement to become
effective as promptly after filing as practicable;
(c) prepare and file with the SEC such amendments and
supplements to such Registration Statement and the prospectus used in connection
therewith as may be necessary to keep such Registration Statement effective
until termination of such obligation as provided in Section 8.9 below;
(d) furnish to the Purchaser with respect to the CXI Common
Stock registered on the Registration Statement (and to each underwriter, if any,
of such CXI Common Stock) such number of copies of prospectuses in conformity
with the requirements of the Securities Act and such other documents as the
Purchaser may reasonably request, in order to facilitate the public sale or
other disposition of all or any of the CXI Common Stock by the Purchaser;
provided, however, that the obligation of the Subsidiary Company to deliver
copies of prospectuses to the Purchaser shall be subject to the receipt by the
Subsidiary Company of reasonable assurances from the Purchaser that the
Purchaser will comply with the applicable provisions of the Securities Act and
of such other securities laws as may be applicable in connection with any use of
such prospectuses;
(e) file such documents as may be required of the Subsidiary
Company for normal securities law clearance for the resale of the Common Stock
in which states of the United States as may be reasonably requested by the
Purchaser; provided, however, that the Subsidiary Company shall not be required
in connection with
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this paragraph (e) to qualify as a foreign corporation or execute a general
consent to service of process in any jurisdiction;
(f) bear all expenses in connection with the procedures in
paragraphs (a) through (e) of this Section 8.2 and the registration of the CXI
Common Stock on such Registration Statement and the satisfaction of the blue sky
laws of such states, including the reasonable fees and expenses of legal counsel
to the Purchaser in connection with the procedures in paragraph (a) through (e)
of this Section 8.2, other than underwriting discounts and selling commissions
or expenses required by law to be borne by Purchaser; and
(g) in the event of the failure of Company to procure
registration, in accordance with Section 8.2(a) of this Agreement, of the
Conversion Shares and the Warrant Shares prior to any of the dates set forth
below in this Section 8.2(g), the Parent Company will pay Purchaser by wire
transfer, as liquidated damages for such failure and not as a penalty, for each
month or part thereof for which such failure continues or in the event of a
Suspension (as defined in Section 8.7) after such date, an amount equal to the
following percentages of the Liquidation Preference of all COES Preferred Shares
acquired by the Purchaser pursuant to this Agreement which are still owned by
such Purchaser and have not been converted:
<TABLE>
<CAPTION>
Required Effective Date Percentage
----------------------- ----------
<S> <C>
On or before November 19, 1997 1%
Between November 20 and
December 19, 1997 2%
After December 20, 1997 3%
</TABLE>
If the Parent Company does not remit the damages to the Purchaser as set forth
above, the Parent Company will pay the Purchaser reasonable costs of collection,
including attorneys fees, in addition to the liquidated damages. Such payment
shall be made to the Purchaser if due, monthly in arrears. The payment of such
liquidated damages shall not relieve the Subsidiary Company from its obligations
to register the Conversion Shares and Warrant Shares pursuant to this provision
and shall not affect or limit Purchaser's other rights or remedies as set forth
in this Agreement. The "Liquidation Preference" for a Share shall equal $100
(subject to adjustments for Reclassifications), plus all accrued and unpaid
dividends (which shall accrue through the Conversion Date, Redemption Date or
the date liquidated damages are paid, as applicable) and any then unpaid
liquidated damages (interest on which shall accrue at a rate of 2% per month)
arising under Sections 8.2(g), 10.2 or 10.6. Notwithstanding the foregoing, the
liquidated damages shall be limited to 1% per month or any portion thereof if
the delay in effectiveness of the registration statement beyond November 19,
1997 or the Suspension thereafter shall be for reasons outside the control of
the Parent Company or the Subsidiary Company
8.3 Underwriter. The Parent Company and the Subsidiary Company
understand that the Purchaser disclaims being an "underwriter" (as such term is
defined
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under the Securities Act and the rules and regulations promulgated thereunder
(an "Underwriter")), but Purchaser being deemed an Underwriter shall not relieve
the Parent Company and the Subsidiary Company of any obligation it has
hereunder.
8.4 Indemnification.
(a) General Indemnification. The Parent Company and the
Subsidiary Company together and the Purchaser agree to indemnify the other and
to hold the other harmless from and against any and all losses, damages,
liabilities, costs and expenses (including reasonable attorneys' fees) which the
other may sustain or incur in connection with the breach by the indemnifying
party of any representation, warranty or covenant made by it in this Agreement.
(b) Indemnification for Registration Statement.
(i) By Parent Company and Subsidiary Company. To the
extent permitted by law, the Parent Company and Subsidiary Company together will
indemnify and hold harmless each Holder, the directors, if any, of such Holder,
the officers, if any, of such Holder who sign the Registration Statement, each
person, if any, who controls such Holder, any underwriter (as defined in the
Securities Act) for the Holders and each person, if any, who controls any such
underwriter within the meaning of the Securities Act or the Exchange Act,
against any losses, claims, damages, expenses or liabilities (joint or several)
to which any of them may become subject under the Securities Act, the Exchange
Act or otherwise, insofar as such losses, claims, damages, expenses or
liabilities (or actions or proceedings, whether commenced or threatened, in
respect thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively, a "Violation"): (i) any untrue statement
or alleged untrue statement of a material fact contained in the Registration
Statement including any preliminary prospectus or final prospectus contained
therein or any amendments or supplements thereof, (ii) the omission or alleged
omission to state therein a material fact required to be stated therein, or
necessary to make the statements therein, in light of the circumstance in which
they are made, not misleading or (iii) any violation or alleged violation by the
Company of the Securities Act, the Exchange Act, any state securities law or any
rule or regulation promulgated under the Securities Act, the Exchange Act or any
state securities law; and the Company will reimburse the Holders and each such
underwriter or controlling person, promptly as such expenses are incurred, for
any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability action or
proceeding; provided, however, that the indemnity agreement contained in this
Section 8.4(b) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or action if such settlement is effected without the
consent of the Parent Company and the Subsidiary Company, which consents shall
not be unreasonably withheld, nor shall the Parent Company and Subsidiary
Company be liable in any such case for any such loss, claim, damage, liability
or action to the extent that it arises out of or is based upon a Violation which
occurs in reliance upon and in conformity with written information furnished
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<PAGE> 24
expressly for use in connection with such registration by the Holders or any
such underwriter or controlling person, as the case may be. Such indemnity shall
remain in full force and effect regardless of any investigation made by or on
behalf of the Holders or any such underwriter or controlling person and shall
survive the transfer of the Securities by Holders.
(ii) By Holders. To the extent permitted by law, each
Holder, severally and not jointly, will indemnify and hold harmless the
Subsidiary Company, each of its directors, each of its officers who have signed
the Registration Statement, each person, if any, who controls the Subsidiary
Company within the meaning of the Securities Act or the Exchange Act, any
underwriter and any other stockholder selling securities pursuant to the
Registration Statement or any of its directors or officers or any person who
controls such holder or underwriter, against any losses, claims, damages or
liabilities (joint or several) to which any of them may become subject, under
the Securities Act, the Exchange Act or other federal state law, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any Violation, in each case to the extent (and only to the
extent) that such Violation occurs in reliance upon and in conformity with
written information furnished by such Holder expressly for use in connection
with such registration, and such Holder will reimburse any legal or other
expenses reasonably incurred by any of them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that the indemnity agreement contained in this subsection 8.4(b) shall not apply
to amounts paid in settlement of such loss, claim, damage, liability or action
if such settlement is effected without the consent of such Holder, which consent
shall not be unreasonably withheld; and provided further, that the Holder shall
be liable under this paragraph for only that amount of losses, claims, damages
and liabilities as does not exceed the net proceeds to such Holder as a result
of the sale of the Securities pursuant to such registration.
(c) Procedure for Indemnification. Promptly after receipt by
an indemnified party under this Section 8.4 of notice of the commencement of any
action (including any governmental action), such indemnified party will, if a
claim in respect thereof is to be made against any indemnifying party under this
Section 8.4, deliver to the indemnifying party a written notice of commencement
thereof and the indemnifying party shall have the right to participate in, and,
to the extent the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume control of the defense thereof
with counsel mutually satisfactory to the parties; provided, however, that an
indemnified party shall have the right to retain its own counsel, with the fees
and expenses to be paid by the indemnifying party, if, in the reasonable opinion
of counsel for the indemnifying party, representation of such indemnified party
by the counsel retained by the indemnifying party would be inappropriate due to
actual or potential differing interests between such indemnified party and any
other party represented by such counsel in such proceeding. The failure to
deliver written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall relieve such indemnifying party of any
liability to the indemnified party under this Section 8.4 only the extent
prejudicial to its ability to defend such action, but the omission so to deliver
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<PAGE> 25
written notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party other than under this Section 8.4. The
indemnification required by this Section 8.4 shall be made by periodic payments
of the amount thereof during the course of the investigation or defense,
promptly as such expense, loss, damage or liability is incurred.
(d) Contribution. To the extent any indemnification by an
indemnifying party is prohibited or limited by law, the indemnifying party
agrees to make the maximum contribution with respect to any amounts for which it
otherwise would be liable under this Section 8.4 to the extent permitted by law,
provided that (i) no contribution shall be made under the circumstances where
the maker would not have been liable for indemnification under the fault
standards set fourth in this Section 8.4, (ii) no seller of the Securities
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any seller of the
Securities who was not guilty of such fraudulent misrepresentation and (iii)
contribution by any seller of the Securities shall be limited in amount to the
net amount of proceeds received by such seller from the sale of such Securities.
8.5 Information Available. So long as any registration
statement is effective covering the resale of the Conversion Shares of Warrant
Shares, the Parent Company and the Subsidiary Company will each furnish to
Purchaser:
(a) as soon as possible after available, one copy of (i) each
of its Annual Report to Stockholders (which Annual Report shall contain
financial statements audited in accordance with generally accepted accounting
principles in the United States of American by a national firm of certified
public accountants); (ii) if not included in substance in the Annual Report to
Stockholders, each of its annual report on Form 10-K within 100 days after the
end of each fiscal year of each Company, (iii) each of its Quarterly Reports to
Stockholders, and its quarterly report on Form 10-Q within sixty (60) days, and
(iv) a full copy of the registration statement covering the Conversion Shares
and Warrant Shares (the foregoing, in each case, excluding exhibits); and
(b) upon the reasonable request of Purchaser, such other
information that is generally available to the public.
8.6 Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the SEC which may at any time
permit the sale of the Conversion Shares and the Warrant Shares to the public
without registration, the Parent Company and the Subsidiary Company agrees to
use its best efforts to:
(a) make and keep public information available, as those terms
are understood and defined in Rule 144 under the Securities Act, at all times
after the effective date on which the Company becomes subject to the reporting
requirements of the Securities Act or the Exchange Act;
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<PAGE> 26
(b) use its best efforts to file with the SEC in a timely
manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act;
(c) furnish to Purchaser forthwith upon request a written
statement by the Parent Company or the Subsidiary Company as to its compliance
with the reporting requirements of said Rule 144, and of the Securities Act and
the Exchange Act, a copy of the most recent annual or quarterly report of the
Company, and such other reports and comments of the Parent Company or the
Subsidiary Company and other information in the possession of or reasonably
obtainable by the Parent Company or the Subsidiary Company as Purchaser may
reasonably request in availing itself of any rule or regulation of the SEC
allowing Purchaser to sell any such Conversion Shares or Warrant Shares without
registration.
8.7 Temporary Cessation of Offers and Sales by Purchaser. The
Purchaser acknowledges that there may occasionally be times when the Subsidiary
Company may be required to suspend the use of the prospectus forming part of the
Registration Statement (a "Suspension") until such time as an amendment to the
Registration Statement has been filed by the Company and declared effective by
the Commission, until the prospectus is supplemented or amended to comply with
the Securities Act, or until such time as the Subsidiary Company has filed an
appropriate report with the Commission pursuant to the Exchange Act. The
Subsidiary Company agrees to file any necessary amendments, supplements and
reports as soon as practicable under the circumstances. The Subsidiary Company
agrees to use its best efforts to cause a Suspension to be lifted within 10
business days during which time Purchaser agrees that it will not sell any
shares of Common Stock pursuant to such prospectus.
8.8 Transfer of Conversion Shares or Warrant Shares Stock
After Registration. Purchaser hereby covenants with the Parent Company and the
Subsidiary Company not to make any sale of the conversion Shares or Warrant
Shares except either (i) in accordance with the Registration Statement, in which
case Purchaser covenants to comply with the requirement of delivering a current
prospectus, (ii) in accordance with Rule 144, in which case Purchaser covenants
to comply with Rule 144, or (iii) as otherwise permitted by applicable law.
8.9 Termination of Obligations. The obligations of the Parent
Company and Subsidiary Company pursuant to Sections 8.2, 8.3 and 8.6 hereof
shall cease and terminate upon the earlier to occur of (i) such time as all of
the Conversion Shares of Warrant Shares have been re-sold, or (ii) such time as
all of the Common Stock may be resold pursuant to Rule 144(k) under the
Securities Act.
Section 9. Legal Fees and Expenses. Each of the parties shall
pay its own fees and expenses (including the fees of any attorneys, accountants,
appraisers or others engaged by such party) in connection with this Agreement
and the transactions contemplated hereby.
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Section 10. Conversion; Liquidated Damages.
10.1 Restrictions on Conversion. Conversion of all the COES
Preferred Shares may be made at the Conversion Price, the day following the date
that the Registration Statement for the CXI Common Stock underlying the COES
Preferred Stock and COES Warrants was declared effective by the SEC.
10.2 Notice of Conversion. Conversion of the COES Preferred
Shares to CXI Common Stock may be exercised in whole or in part by Purchaser
telecopying an executed and completed Notice of Conversion (in the form annexed
hereto as Exhibit D) to counsel for the Parent Company, with a copy to the
Parent Company and Subsidiary Company, and delivering the original Notice of
Conversion and the certificate representing the COES Preferred Shares to counsel
by hand or by express courier within three (3) business days of exercise. Each
date on which a Notice of Conversion is telecopied to and received by the Parent
Company in accordance with the provisions hereof shall be deemed a Conversion
Date. The Subsidiary Company will reissue and transmit the certificates in the
name of the Purchaser, or any other name as instructed by the Purchaser,
representing the CXI Common Stock transferable upon conversion of all or any
part of the COES Preferred Shares and COES Warrant Shares (and the Parent
Company will transmit any certificates for replacement COES Preferred Shares not
previously converted but included in the original certificate presented for
conversion) to the Purchaser via express courier within three (3) business days
after counsel for the Parent Company has received the original Notice of
Conversion and the certificate representing the COES Preferred Shares being so
converted. The Notice of Conversion and certificate representing the portion of
the COES Preferred Shares converted shall be delivered as follows:
To counsel of Parent Company:
Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel
153 East 53rd Street
New York, NY 10022
Attention: Stephen A. Weiss, Esq.
Telephone: 212-801-9200
Facsimile: 212-223-7161
27
<PAGE> 28
To the Parent Company:
Commodore Environmental Services, Inc.
150 East 58th Street
New York, NY 10155
Attention: Bentley J. Blum
Telephone: 212-935-5400
Facsimile: 212-753-0731
To the Subsidiary Company:
Commodore Applied Technologies, Inc.
150 East 58th Street
New York, NY 10155
Attention: Bentley J. Blum
Telephone: 212-935-5400
Facsimile: 212-753-0731
or to such other person at such other place as the Parent Company shall
designate to the Purchaser in writing.
In the event that the COES Preferred Shares are not converted
within three (3) business days of the Conversion Date, the Parent Company shall
be liable to Purchaser for actual damages incurred from the fourth business day
following the Conversion Date for such failure (provided that Purchaser has
delivered the original valid Notice of Conversion and the original
certificate(s) representing the COES Preferred Shares to be converted, or an
affidavit and indemnity agreement as to lost certificates reasonably
satisfactory to the Company). In the event the COES Preferred Shares are not
converted by the tenth (10th) business day following the Conversion Date, the
Parent Company shall pay to the Purchaser, by wire transfer, as liquidated
damages for such failure and not as a penalty, an amount in cash equal to one
(1%) percent per day of the Liquidation Preference for the COES Preferred Shares
to be converted which shall run from the tenth (10th) business day following the
Conversion Date; provided, however, that actual damages and liquidated damages
for a failure to deliver certificates of CXI Common Stock shall be determined in
accordance with Section 10.6, if both of the following conditions are satisfied
by the Parent Company: (i) the failure to deliver certificates of CXI Common
Stock is the result of a lack of available shares of CXI Common Stock and (ii)
the Parent Company commences, with ten (10) business days after the initial
Conversion Date to purchase or otherwise acquire the number of shares of CXI
Common Stock which is sufficient to permit conversion of all COES Preferred
Shares then outstanding at the Hypothetical Conversion Price (as hereinafter
defined) then in effect.
10.3 Mandatory Conversion. The COES Preferred Shares are
subject to mandatory conversion after five (5) years from the Closing Date, at
which time all COES
28
<PAGE> 29
Preferred Shares will automatically be converted at the Conversion Price, upon
the terms set forth in this section. Such five year period will be extended by
the number of days during such period that (i) the Subsidiary Company's Common
Stock has been Delisted and/or (ii) a Suspension has been in effect and by the
number of days after the 90th day or the 120th day, whichever date is applicable
as provided in Section 8.2(g) herein, that Registration Statement was not
declared effective. Any particular day in which more than one of the foregoing
condition events shall have been in effect shall only be counted once in
determining the number of days by which to extend the five year period prior to
mandatory conversion. In addition, mandatory conversion shall not occur for so
long as certain default events specified in Section 5(e) of the Certificate of
Designation are continuing.
10.4 Reservation of CXI Common Stock Transferable Upon
Conversion. The Parent Company shall at all times reserve and keep available out
of its holdings of shares of CXI Common Stock, such number of shares of CXI
Common Stock as shall from time to time be sufficient to effect the conversion
of all then outstanding COES Preferred Shares and COES Warrants, the sufficiency
of which shall be determined (in the case of the COES Preferred Shares) by using
a Conversion Price (the "Hypothetical Conversion Price") derived from a
hypothetical closing market price that is 75% of either (i) the actual Average
Closing Bid Price on the Closing Date or (ii) the actual Average Closing Bid
Price from time to time, whichever is lower, and in the case of the COES
Warrants, by the exercise price thereof. The Parent Company hereby covenants and
agrees that if at any time the Hypothetical Conversion Price falls to a level
that would not enable all outstanding COES Preferred Shares to be fully
converted and the outstanding COES Warrants to be fully exercised, the Parent
Company will promptly purchase or otherwise acquire the number of shares of CXI
Common Stock sufficient to permit the conversion of all COES Preferred Shares
then outstanding at the Hypothetical Conversion Price then in effect and the
exercise of all outstanding COES Warrants.
10.5 Liquidated Damages. In the event of a Delisting, a
Cumulative Suspension or Insufficient CXI Common Stock (each a "Damage Event"),
the Parent Company will pay to Purchaser (and to all other holders of the
Shares), by wire transfer, as liquidated damages for such non-availability and
not as a penalty, an amount in cash equal to 2% per month of the Liquidation
Preference of only those COES Preferred Shares then eligible for conversion,
without regard to Section 5.8, for the first two months after the occurrence of
a Damage Event, and 3% per month for each month thereafter. Similar liquidated
damages shall be paid with respect to any COES Preferred Shares not initially
eligible for conversion when the Damage Event first occurred but which
subsequently become eligible for conversion, without regard to Section 5.8,
commending in the first month that such COES Preferred Shares become eligible
for such conversion. Such liquidated damages shall continue to accrue and shall
be payable until the Damage Event has been cured, and, if not paid, interest
thereon shall accrue at a rate of 2% per month. At the Purchaser's election,
such liquidated damages may be paid in cash or may be added to the principal of
the COES Preferred Shares for subsequent conversion purposes. Notwithstanding
the foregoing, in the case of a Delisting, after six months
29
<PAGE> 30
from the date of such Delisting, the Parent Company shall have the option to
force Purchaser to as promptly as possible convert (in increments of no less
than $50,000) all or part of its COES Preferred Shares, subject to Purchaser
being able to sell the underlying Conversion Shares, and simultaneously sell
such Conversion Shares (where the conversion price therefor shall not be the
Conversion Price but instead shall equal 85% of the Purchaser's sale price of
the Conversion Shares, all as determined by Purchaser's actual trading records
(to be provided to the Company). In no event may the Company force Purchaser to
convert less than $50,000 of COES Preferred Shares at any one time.
Section 11. Redemption By Parent Company.
11.1 Parent Company's Right to Redeem. The Parent Company
shall have the right, at any time and from time to time, in its sole discretion,
to redeem in whole or in part the COES Preferred Shares then outstanding, except
that if the Purchaser or any Holder of the COES Preferred Shares has submitted a
Notice of Conversion, the Parent Company shall not have the right to redeem the
COES Preferred Shares which were submitted for conversion and the certificates
representing Conversion Shares should be delivered promptly according to Section
10.2 herein. If the Parent Company elects to redeem some, but not all, of the
COES Preferred Shares, the Parent Company shall redeem the COES Preferred Shares
pro rata among the Holders of all the COES Preferred Shares then outstanding.
The date of the Parent Company's redemption of COES Preferred Shares shall be
referred to as the "Redemption Date."
11.2 Redemption Price. The redemption price per COES Preferred
Share shall equal $125.
11.3 Mechanics of Redemption; Purchaser's Conversion Rights.
The Parent Company shall effect each such redemption by giving notice of its
election to redeem ("Redemption Notice"), by facsimile, by 5 P.M. New York City
time on the Redemption Date and shall provide a copy of such redemption notice
by overnight or 2-day courier, to Purchaser, all other Holders of COES Preferred
Shares and the Parent Company will redeem all or part of the COES Preferred
Shares. Upon the giving of any such Redemption Notice, and until the earlier of
either payment of the applicable redemption price or fifteen (15) business days
after the Redemption Date (or later as provided in Section 6(d) below), the
conversion rights in respect of the COES Preferred Shares and any other
outstanding shares of COES Convertible Preferred Stock called for redemptions
shall be suspended. Subject to the Parent Company's payment of the applicable
redemption price, the accrual of dividends in connection with the shares of COES
Convertible Preferred Stock called for redemption will suspend on the Redemption
Date.
11.4 Payment of Redemption Price. Upon receipt of a Redemption
Notice, Purchaser shall send its COES Preferred Shares being redeemed to the
Parent
30
<PAGE> 31
Company or its Transfer Agent within three (3) business days of the receipt of
such Redemption Notice, and the Parent Company shall pay the applicable
redemption price within fifteen (15) business days of the Redemption Date (such
fifteen (15) business day period shall be extended for each day the COES
Preferred Shares being redeemed have not been delivered to the Parent or its
Transfer Agent beyond the third (3rd) business day after receipt of the
Redemption Notice). The Parent Company shall not be obligated to deliver the
redemption price unless the COES Preferred Shares so redeemed are delivered to
the Parent Company or its Transfer Agent, or, in the event one or more
certificates have been lost, stolen, mutilated or destroyed, Purchaser delivers
to the Parent Company a lost certificate affidavit reasonably satisfactory to
Parent Company and its Transfer Agent.
11.5 Default of Parent Company's Redemption. If the Parent
Company fails to pay the applicable redemption price to the Purchaser and/or
other Holders of the COES Preferred Shares being redeemed by the Parent Company
within fifteen (15) business days of the Redemption Date (such fifteen (15)
business day period shall be extended for each day the COES Preferred Shares
being redeemed have not been delivered to the Parent or its Transfer Agent
beyond the third (3rd) business day after receipt of the Redemption Notice), the
Parent Company shall be deemed to have defaulted on their right to redeem such
COES Preferred Shares. Such COES Preferred Shares shall thereafter become
immediately convertible and the Conversion Price for such COES Preferred Shares
shall be equal to 75% of the Average Closing Bid Price. The Conversion Price for
such COES Preferred Shares shall not be subject to a floor.
11.6 Blackout Period. Notwithstanding the foregoing, the
Parent Company may not either send out a redemption notice or effect a
redemption during a Blackout Period (defined as a period during which the Parent
Company's or the Subsidiary Company's officers or directors would not be
entitled to buy or sell stock because of their holding of material non-public
information). In the event the Parent Company initiates a redemption during a
Blackout Period without having first made public material non-public
information, the Parent Company or the Subsidiary Company shall disclose the
non-public information that resulted in the Blackout Period, and no redemption
shall be effected until at least 10 days after the Company or the Subsidiary
Company shall have given the Holder written notice that the Blackout Period has
been lifted.
Section 12. Notices. All notices, requests, consents and other
communications hereunder shall be in writing, shall be mailed by first class
registered or certified airmail, postage prepaid, or shall be sent by overnight
courier or by facsimile, and shall be deemed given when received:
31
<PAGE> 32
(a) if to the Parent Company, to
Commodore Environmental Services, Inc.
150 East 58th Street
New York, NY 10155
Attention: Bentley J. Blum
Telephone: 212-935-5400
Facsimile: 212-753-0731
copy to:
Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel
153 East 53rd Street
New York, NY 10022
Attention: Stephen A. Weiss, Esq.
Telephone: 212-801-9200
Facsimile: 212-223-7161
or to such other person at such other place as the Parent Company shall
designate to the Purchaser in writing;
(b) if to the Subsidiary Company:
Commodore Applied Technologies, Inc.
150 East 58th Street
New York, NY 10155
Attention: Bentley J. Blum
Telephone: 212-935-5400
Facsimile: 212-753-0731
copy to:
Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel
153 East 53rd Street
New York, NY 10022
Attention: Stephen A. Weiss, Esq.
Telephone: 212-801-9200
Facsimile: 212-223-7161
or to such other person at such other place as the Subsidiary Company shall
designate to the Purchaser in writing;
32
<PAGE> 33
(c) if to the Purchaser, to:
Porter Partners, L.P.
c/o Porter Capital Management
100 Shoreline, Suite 211B
Mill Valley, California 94941
Attn: Mr. Jeffrey Porter
copy to: such person or entity as may be identified from time
to time by written notice from the Purchaser.
or to such other address or addresses as may have been furnished to the Parent
Company and the Subsidiary Company in writing; or
(d) if to any transferee or transferees of a Purchaser, at
such address or addresses as shall have been furnished to the Parent Company and
the Subsidiary Company at the time of the transfer or transfers, or at such
other address or addresses as may have been furnished by such transferee or
transferees to the Parent Company and the Subsidiary Company in writing.
Section 13. Miscellaneous.
13.1 Entire Agreement. This Agreement and the Exhibits hereto
embodies the entire agreement and understanding between the parties thereto with
respect to the subject matter hereof and supersedes all prior oral or written
agreements and understandings relating to the subject matter hereof. No
statement, representation, warranty, covenant or agreement or any kind not
expressly set forth in this Agreement or the Exhibits hereto shall affect or be
used to interpret, change or restrict, the express terms and provisions of this
Agreement.
13.2 Amendments. This Agreement may not be modified or amended
except pursuant to an instrument in writing singed by the Parent Company, the
Subsidiary Company and by Purchaser.
13.3 Headings. The headings of the various sections of this
Agreement have been inserted for convenience of reference only and shall not be
deemed to be part of this Agreement.
13.4 Severability. In case any provision contained in this
Agreement should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.
33
<PAGE> 34
13.5 Governing Law/Jurisdiction. This Agreement will be
construed and enforced in accordance with and governed by the laws of the State
of New York, except for matters arising under the Securities Act, without
reference to principles of conflicts of law. Each of the parties consents to the
jurisdiction of the courts of or located in the State of New York, specifically
the Southern District of New York and/or the Supreme Court of the state of New
York in connection with any dispute arising under this Agreement and hereby
waives, to the maximum extent permitted by law, any objection, including any
objection based on forum non conveniens, to the bringing of any such proceeding
in such jurisdictions. Each party hereby agrees that if another party to this
Agreement obtains a judgment against it in such a proceeding, the party which
obtained such judgment may enforce same by summary judgment in the courts of any
country having jurisdiction over the party against whom such judgment was
obtained, and each party hereby waives any defenses available to it under local
law and agrees to the enforcement of such a judgment. In addition, the parties
agree that the party against whom such judgment was obtained will pay the legal
fees of the party obtaining such judgment. Each party to this Agreement
irrevocably consents to the service of process in any such proceeding by the
mailing of copies thereof by registered or certified mail, postage prepaid, to
such party at its address set forth herein. Nothing herein shall affect the
right of any party to serve process in any other manner permitted by law.
13.6 Recovery of Attorney's Fees. Should any party bring an
action to enforce the terms of this Agreement then, if Purchaser prevails in
such action it should be entitled to recovery of its attorney's fees from the
Parent Company or the Subsidiary Company, and if the Parent Company or the
Subsidiary Company prevails in such action it shall be entitled to recovery of
its attorney's fees from the Purchaser.
13.7 Fees. Notwithstanding Section 13.6, the Parent Company
and the Subsidiary Company acknowledge that Purchaser shall have no
responsibility for the payment of any of its fees in connection with this
offering.
13.8 Counterparts/Facsimile. This Agreement may be executed in
two or more counterparts, each of which shall constitute an original, but all of
which, when taken together, shall constitute but one instrument, and shall
become effective when one or more counterparts have been signed by each party
hereto and delivered to the other party. In lieu of the original, a facsimile
transmission copy of the original shall be as effective and enforceable as the
original.
13.9 Publicity. The Purchaser shall not issue any press
releases or otherwise make any public statement with respect to the transactions
contemplated by this Agreement without the prior written consent of the Parent
Company and the Subsidiary Company, except as may be required by applicable law
or regulation.
13.10 Survival. The representations and warranties in this
Agreement shall survive Closing.
34
<PAGE> 35
Section 14. Limitation on Conversions. Notwithstanding
anything contained in this Agreement, the Stock Purchase Warrant, or the
Certificate of Designations, neither the Purchaser nor any subsequent Holder of
the COES Preferred Shares may elect to convert into CXI Common Stock more than
twenty (20%) percent of the aggregate number (the "Initial Number") of shares of
COES Preferred Shares owned by the Purchaser upon the consummation of the
acquisition by the Purchaser of the COES Preferred Shares pursuant to this
Agreement during any one calendar month, calculated from the first month during
which a conversion may occur; provided, that, such limitation on conversion
shall be on a cumulative basis so that if, for example, no shares of COES
Preferred Shares are converted into CXI Common Stock in any one month, then in
the next month 40% of the Initial Number of shares of COES Preferred Shares may
be converted into CXI Common Stock. In any event, the rights of conversion set
forth in this Section 14 shall be cumulative, so that any shares not converted
in any one calendar month may be accumulated with the number of convertible
shares in the next calendar month. No transfer or other disposition of COES
Preferred Shares by the Purchaser or any subsequent transferee shall be
effective unless prior thereto the transferee agrees in writing satisfactory to
COES and received by COES to be bound by the terms and conditions of this
Section.
Section 15. If, but only if, COES consummates during 1997 the
purchase of 50% or more of the voting capital stock of Lanxide Corporation, COES
shall promptly issue to the holders of the then outstanding shares of COES
Series D Preferred Stock, in proportion to their interests therein, three (3)
year warrants for such holders, in the aggregate, to purchase, in the aggregate,
three percent (3%) of the total number of shares of Lanxide Corporation common
stock and common stock equivalents so acquired by COES at the same price per
share paid by COES (which is presently estimated to be approximately $7.41 per
share but which may change in negotiations). The form of warrant shall contain
customary terms and provisions.
35
<PAGE> 36
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their duly authorized representatives the day and year first above
written.
COMMODORE ENVIRONMENTAL SERVICES, INC.
By /s/ Paul E. Hannesson
----------------------------------------
COMMODORE APPLIED TECHNOLOGIES, INC.
By /s/ Michael D. Fullwood
----------------------------------------
Purchaser: PORTER PARTNERS, L.P.
By /s/
----------------------------------------
Name:
Title:
36
<PAGE> 1
SECURITIES HAVE NOT REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN EXEMPTION
FROM REGISTRATION UNDER REGULATION D PROMULGATED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"). THIS AGREEMENT SHALL NOT CONSTITUTE AN
OFFER TO SELL NOR A SOLICITATION OF AN OFFER TO BUY THE SECURITIES IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL. THE
SECURITIES ARE "RESTRICTED" AND MAY NOT BE RESOLD OR TRANSFERRED EXCEPT AS
PERMITTED UNDER THE ACT PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.
AMENDMENT NO. 1 TO
7% PREFERRED STOCK
SECURITIES PURCHASE AGREEMENT
AND RELATED STOCK PURCHASE WARRANT
COMMODORE ENVIRONMENTAL SERVICES, INC.
AND
COMMODORE APPLIED TECHNOLOGIES, INC.
THIS AMENDMENT NO. 1 is made as of the 20th day of August,
1997, by and between COMMODORE ENVIRONMENTAL SERVICES, INC., traded on the
"Pinksheets" under the "COES' (the "Parent Company"), a corporation, with its
principal office at 150 East 58th Street, New York, NY 10155, COMMODORE APPLIED
TECHNOLOGIES INC., AMEX symbol "CXI" (the "Subsidiary Company"), a corporation,
with its principal office at 150 East 58th Street, New York, NY 10155 and the
undersigned (the "Purchaser"), with its principal office at the address set
forth below the signature of the Purchaser on the signature page hereof.
Reference is made to the 7% Preferred Stock Securities
Purchase Agreement made as of the 14th day of August, 1997 (the "7% Preferred
Stock Securities Purchase Agreement") by and among the parties hereto. All
capitalized terms herein are defined as set forth in the 7% Preferred Stock
Securities Purchase Agreement or by reference therein.
IN CONSIDERATION of the mutual covenants contained in this
Amendment, the Parent Company, Subsidiary Company and the Purchaser agree as
follows:
Section 1. Amendment of the Definition of the Term "Conversion
Price". Section 1 of the Agreement is hereby amended by deleting therefrom in
its entirety the definition of the term "Conversion Price" and substituting
therefor the following:
<PAGE> 2
"Conversion Price" means an amount equal to a fifteen (15%) percent
discount from either the lower of (i) the average of the low prices, or
(ii) the average of the closing bid prices of the CXI Common Stock as
reported by Bloomberg, L.P. ("Bloomberg") for the previous five (5)
business days ending on the day before the Conversion Date (the
"Average Closing Bid Price"); provided, however, if the Average Closing
Bid Price of the CXI Common Stock, as reported by Bloomberg, for any
consecutive thirty (30) days (such thirtieth day shall be the "First
Trigger Date") is equal to or less than $2.00 (the "Floor Average"),
the conversion price shall equal $2.00; if the Floor Average for any
consecutive thirty (30) days beginning any day after the First Trigger
Date is less than $2.00 ("Second Trigger Date"), the conversion price
shall equal $1.90; if the Floor Average for any thirty (30) days
beginning any day after the Second Trigger Date is less than $1.90 (the
"Third Trigger Date"), the conversion price shall equal $1.80; if the
Floor Average for any consecutive thirty (30) days beginning any day
after the Third Trigger Date is less than $1.80 (the "Fourth Trigger
Date"), the conversion price shall equal $1.70; if the Floor Average
for any consecutive thirty (30) days beginning any day after the Fourth
Trigger Date is less than $1.70 (the "Fifth Trigger Date"), the
conversion price shall equal $1.60; if the Floor Average for any
consecutive thirty (30) days beginning any day after the Fifth Trigger
Date is less than $1.60, the conversion price shall equal $1.50.
Subject to Section 11.5 herein, in no event shall the Conversion Price
be lower than $1.50 per share of CXI Common Stock. If the CXI Common
Stock is not traded on the American Stock Exchange, the Average Closing
Bid Price shall be the average closing bid price (and if not available,
the mean of the high and low prices) of the Common Stock on the
over-the-counter-market or the principal national securities exchange
or the Nasdaq National Market System or Nasdaq SmallCap Market System
on which the CXI Common Stock is traded for the previous five (5)
business days ending on the day before the Conversion Date.
The Conversion Price shall be equitably adjusted accordingly on a pro
rata basis in the event of the happening of certain events that would
affect the CXI Common Stock or COES Convertible Preferred Stock's value
including, but not limited to, forward and reverse stock splits,
issuance of stock dividends, subdivision of shares, combinations,
reclassifications, or the like (collectively "Reclassifications"). An
adjustment made pursuant to this section shall become effective
immediately after the effective date of such event retroactive to the
record date, if any, for such an event."
Section 2. Miscellaneous.
2.1 Headings. The headings of the various sections of this
Amendment have been inserted for convenience of reference only and shall not be
deemed to be part of this Amendment.
<PAGE> 3
2.2 Counterparts/Facsimile. This Amendment may be executed in
two or more counterparts, each of which shall constitute an original, but all of
which, when taken together, shall constitute but one instrument, and shall
become effective when one or more counterparts have been signed by each party
hereto and delivered to the other party. In lieu of the original, a facsimile
transmission copy of the original shall be as effective and enforceable as the
original.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be signed by their duly authorized representatives the day and year
first above written.
COMMODORE ENVIRONMENTAL SERVICES, INC.
By /s/ Paul E. Hannesson
-------------------------------------------
COMMODORE APPLIED TECHNOLOGIES, INC.
By /s/ Michael D. Fullwood
-------------------------------------------
Purchaser: EDJ LIMITED
By /s/
-------------------------------------------
Name:
Title:
Purchaser's Address:
Deltec Panamerica Trust Company
Deltec House
Lyman Cay
Box N-3229
Nassau, Bahamas
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be signed by their duly authorized representatives the day and year
first above written.
COMMODORE ENVIRONMENTAL SERVICES, INC.
By___________________________________________
COMMODORE APPLIED TECHNOLOGIES, INC.
By___________________________________________
Purchaser: PORTER PARTNERS, L.P.
By /s/
___________________________________________
Name:
Title:
Purchaser's Address:
c/o Porter Capital Management
100 Shoreline
Suite 211B
Mill Valley, California 94941
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be signed by their duly authorized representatives the day and year
first above written.
COMMODORE ENVIRONMENTAL SERVICES, INC.
By___________________________________________
COMMODORE APPLIED TECHNOLOGIES, INC.
By___________________________________________
Purchaser: ELARA LTD.
By /s/
___________________________________________
Name:
Title:
Purchaser's Address:
P.O. Box 438
Tropic Isle Building
Wickhams Cay
Road Town, Tortolla
British Virgin Islands
<PAGE> 1
SECURITIES HAVE NOT REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN EXEMPTION
FROM REGISTRATION UNDER REGULATION D PROMULGATED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"). THIS SUBSCRIPTION AGREEMENT SHALL NOT
CONSTITUTE AN OFFER TO SELL NOR A SOLICITATION OF AN OFFER TO BUY THE SECURITIES
IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL. THE
SECURITIES ARE "RESTRICTED" AND MAY NOT BE RESOLD OR TRANSFERRED EXCEPT AS
PERMITTED UNDER THE ACT PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.
7% PREFERRED STOCK
SECURITIES PURCHASE AGREEMENT
COMMODORE ENVIRONMENTAL SERVICES, INC.
AND
COMMODORE APPLIED TECHNOLOGIES, INC.
THIS AGREEMENT is made as of the 14th day of August, 1997, by
and between COMMODORE ENVIRONMENTAL SERVICES, INC., traded on the "Pinksheets"
under the "COES' (the "Parent Company"), a corporation, with its principal
office at 150 East 58th Street, New York, NY 10155, COMMODORE APPLIED
TECHNOLOGIES INC., AMEX symbol "CXI" (the "Subsidiary Company"), a corporation,
with its principal office at 150 East 58th Street, New York, NY 10155 and EDJ
LIMITED (the "Purchaser"), with its principal office at Deltec Panamerica Trust
Company, Deltec House, Lyford Cay, Box N-3229, Nassau, Bahamas.
IN CONSIDERATION of the mutual covenants contained in this
Agreement, the Parent Company, Subsidiary Company and the Purchaser agree as
follows:
Section 1. Certain Definitions. For purposes of this
Agreement:
"Change in Control Transaction" means the date the Parent
Company or the Subsidiary Company (i) sells or otherwise conveys all or
substantially all of its assets or (ii) effects a transaction (by merger or
otherwise) in which more than 50% of the voting power of the Parent Company or
the Subsidiary Company is disposed of, directly or indirectly, or if within any
12 month period there is a change of more than 50% of the members of the Parent
Company's or the Subsidiary Company's Board of Directors, or if any other
person, entity or group (as defined in Section 13(d) of the Exchange Act) and/or
any of their affiliates or associates acquires in excess of 50% of the Common
Stock.
<PAGE> 2
"Closing Date" means the date agreed to by the parties for the
delivery of the stock certificate against a wire transfer of the funds to the
Parent Company.
"Closing" means the completion of the purchase and sale of the
COES Preferred Shares on the Closing Date.
"COES Convertible Preferred Stock" means the 100,000 shares of
Series D Preferred Stock of the Parent Company, $.01 par value, convertible into
CXI Common Stock as hereinafter provided and which has the rights, preferences
and privileges set forth in the Certificate of Designation, Number, Powers,
Preferences and Relative, Participating, Optional, and Other Special Rights and
the Qualifications, Limitations, Restrictions, and Other Distinguishing
Characteristics of Series "D" Preferred Stock of COES (as amended and restated,
the "Series D Certificate of Designations"), a copy of which Certificate of
Designations is attached hereto as Exhibit A (the "Certificate of Designation").
"COES Preferred Shares" means the shares of COES Convertible
Preferred Stock purchased hereunder.
"Conversion Date" means the date on which the Purchaser has
telecopied the Notice of Conversion to counsel for the Parent Company.
"Conversion Price" means an amount equal to the lesser of (a)
$5.15, being one hundred and ten percent (110%) of the average closing price of
the CXI Common Stock for the five (5) business days immediately prior to the
date of this Agreement, or (b) a fifteen (15%) percent discount from the average
of either the low bid price or the closing price (such average to be selected at
the option of the holder of the COES Preferred Shares) of the CXI Common Stock
as reported by Bloomberg, L.P. ("Bloomberg") for the previous five (5) business
days ending on the day before the Conversion Date (the "Average Closing Bid
Price"); provided, however, if the average of the low bid price or the closing
price (whichever is applicable) of the CXI Common Stock, as reported by
Bloomberg ("Floor Average"), for any consecutive thirty (30) days is equal or
less than $2.00 (such thirtieth day shall be the "First Trigger Date"), the
conversion price shall equal $2.00; if the Floor Average for any consecutive
thirty (30) days beginning any day after the First Trigger Date is less than
$2.00 ("Second Trigger Date"), the conversion price shall equal $1.90; if the
Floor Average for any thirty (30) days beginning any day after the Second
Trigger Date is less than $1.90 (the "Third Trigger Date"), the conversion price
shall equal $1.80; if the Floor Average for any consecutive thirty (30) days
beginning any day after the Third Trigger Date is less than $1.80 (the "Fourth
Trigger Date"), the conversion price shall equal $1.70; if the Floor Average for
any consecutive thirty (30) days beginning any day after the Fourth Trigger Date
is less than $1.70 (the "Fifth Trigger Date"), the conversion price shall equal
$1.60; if the Floor Average for any consecutive thirty (30) days beginning any
day after the Fifth Trigger Date is less than $1.60, the conversion price shall
equal $1.50. Subject to Section 11.5 herein, in no event shall the Conversion
Price be lower than $1.50 per share of CXI
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Common Stock. If the CXI Common Stock is not traded on the American Stock
Exchange, the Average Closing Bid Price shall be the average closing bid price
(and if not available, the mean of the high and low prices) of the Common Stock
on the over-the-counter-market or the principal national securities exchange or
the Nasdaq National Market System or Nasdaq SmallCap Market System on which the
CXI Common Stock is traded for the previous five (5) business days ending on the
day before the Conversion Date.
The Conversion Price shall be equitably adjusted accordingly
on a pro rata basis in the event of the happening of certain events that would
affect the CXI Common Stock or COES Convertible Preferred Stock's value
including, but not limited to, forward and reverse stock splits, issuance of
stock dividends, subdivision of shares, combinations, reclassifications, or the
like (collectively "Reclassifications"). An adjustment made pursuant to this
section shall become effective immediately after the effective date of such
event retroactive to the record date, if any, for such an event.
"Convertible Date" means the date on which the COES Preferred
Shares will become convertible, which is the day following the date that the
Registration Statement for the shares of CXI Common Stock underlying the COES
Preferred Stock and COES Warrants has been declared effective by the Securities
and Exchange Commission ("SEC").
"Cumulative Suspension' means the date a Suspension (as
defined in Section 8.7) has occurred and is continuing or the date that is the
15th day in the aggregate that more than one Suspension has occurred since the
effective date of the Registration Statement.
"CXI Common Stock" means the underlying Common Stock of the
Subsidiary Company, $.001 par value.
"Delisting" means the date the CXI Common Stock is delisted
from AMEX and is not otherwise listed on the Nasdaq Stock Market or other
national securities exchange.
"Holder" means a holder of COES Preferred Shares.
"Insufficient CXI Common Stock" means the date the number of
shares of CXI Common Stock held by the Parent Company is not sufficient to
effect the conversion of all outstanding COES Preferred Shares then eligible for
conversion (whether or not the Holders have duly delivered Notices of
Conversion).
"Purchase Price" means the aggregate purchase price of the
COES Preferred Shares purchased.
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Section 2. Authorization and Sale of Shares.
2.1 Authorization. Subject to the terms and conditions of this
Agreement, the Parent Company has authorized the sale and issuance of the COES
Preferred Shares.
2.2 Agreement to Sell and Purchase the Shares. The Parent
Company will sell and the Purchaser will buy, in reliance upon the
representations and warranties of the Parent Company Subsidiary Company and
Purchaser contained in this Agreement, upon the terms and conditions hereinafter
set forth, One Thousand (1,000) COES Preferred Shares of COES Convertible
Preferred Stock for an aggregate purchase price of One Hundred Thousand Dollars
($100,000) for all such COES Preferred Shares based on U.S. $100 per share. The
COES Preferred Shares shall pay a 7% cumulative dividend, payable in cash or CXI
Common Stock at the Conversion Price, at the discretion of the Parent Company,
at the time of each conversion. Such purchase and sale shall occur on the
Closing Date. In addition, Parent Company will transfer to Purchaser for no
additional consideration, five-year warrants ("COES Warrants") to purchase
twelve and one-half (12-1/2) shares of CXI Common Stock for each COES Preferred
Share purchased, initially exercisable on the Convertible Date and for a period
of five years thereafter, at an initial exercise price equal to $7.14 per share
of the CXI Common Stock, subject to adjustment and resetting as set forth in the
form of COES Warrant attached hereto as Exhibit B.
2.3 Subsidiary Company. Whereas the Purchaser is purchasing
COES Preferred Shares from the Parent Company, and the Parent Company is
transferring CXI Common Stock to the Purchaser upon conversion of COES Preferred
Shares and exercise of COES Warrants, the Parent Company hereby agrees to
immediately remit 2.5% of the Purchase Price ($2.50 per COES Preferred Shares
which has a subscription price of $100 per COES Preferred Share) at the Closing
to the Subsidiary Company, constituting the sum of $2500 of aggregate
consideration for the Subsidiary Company's agreement to perform its obligations
as set forth in this Agreement and the Warrant Agreement, a form of which is
included in Exhibit B.
2.4 Time and Place of Closing. The Closing shall be held at
the offices of Greenberg Traurig, 153 East 53rd Street, 35th Floor, New York,
New York 10022 as promptly as practicable as agreed to by the parties to this
Agreement, but no later than August 15, 1997 at which time either party may
terminate this Agreement.
2.5 Payment and Delivery. At or prior to the Closing, the
following shall occur:
(a) Provided that Purchaser has been notified by
counsel to COES that the Parent Company has delivered to such counsel for
immediate delivery to Purchaser against wire transfer of funds as hereinafter
set forth certificates representing the COES Preferred Shares and COES Warrants
as provided in Section 2.5(b) below,
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Purchaser shall remit by wire transfer the Purchase Price as payment in full for
the COES Preferred Shares as follows: 89% of the Purchase Price ($89,000)
directly to the Parent Company, 9% of the Purchase Price $9,000) directly to
Avalon Research Group, Inc. (the "Finder"), and 2% of the Purchase Price
($2,000) directly to Stephen A. Weiss.
(b) The Parent Company shall deliver or cause to be
delivered to counsel to Seller for immediate delivery to Purchaser against wire
transfer of funds as aforesaid certificates representing the COES Preferred
Shares and the COES Warrants, registered in the name of Purchaser (or any
nominee designated by Purchaser at or prior to the Closing Date), free and clear
of all liens, claims, charges and encumbrances. Purchaser will receive such
certificates from counsel to COES, as applicable, after the Parent Company,
Finder and Stephen A. Weiss have received the Purchase Price directly from
Purchaser.
(c) Wire instructions for the Parent Company have
been separately provided to the Purchaser's counsel.
Section 3. General Representations and Warranties of the
Parent Company. The Parent Company hereby represents and warrants to, and
covenants with, the Purchaser that the following are true and correct as of the
date hereof and as of the Closing Date.
3.1 Organization; Qualification. The Parent Company is a
corporation duly organized and validly existing under the laws of the State of
Delaware and is in good standing under such laws. The Parent Company has all
requisite corporate power and authority to own, lease and operate its properties
and assets, and to carry on its business as presently conducted. The Parent
Company is qualified to do business as a foreign corporation in each
jurisdiction in which the ownership of its property or the nature of its
business requires such qualification, except where failure to so qualify would
not have a material adverse effect on the Parent Company.
3.2 Capitalization. The authorized capital stock of the Parent
Company is as set forth in footnote 12 of the audited consolidated financial
statements of the Parent Company set forth in its Form 10-K for the fiscal year
ended December 31, 1996, a true copy of which has been supplied to Purchaser,
provided that in addition 60,000 shares of the COES Preferred Shares and COES
Warrants for 600,000 shares of CXI Common Stock were issued in May 1997, and
40,000 additional COES Preferred Shares and 462,500 additional COES Warrants
have been authorized for issuance. The Series D Preferred Stock, when issued,
shall be duly authorized and validly issued and are fully paid and
nonassessable.
3.3 CXI Common Stock Transferable Upon Conversion of COES
Preferred Shares or Exercise of COES Warrants. The Parent Company currently owns
Fifteen Million (15,000,000) shares of CXI Common Stock, all of which have been
duly
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authorized and validly issued and are fully paid and nonassessable. The
Parent Company will reserve from its holdings of CXI Common Stock a sufficient
number of shares of CXI Common Stock to permit the conversion in full of the
outstanding COES Preferred Shares and the exercise in full of the COES Warrants.
As of the Closing Date, the Parent Company had reserved sufficient shares of CXI
Common Stock for transfer to Purchaser upon exercise of the COES Preferred
Shares which are convertible, at Purchaser's option, at the Conversion Price, as
per Section 10 of this Agreement, and upon exercise of the COES Warrants. If the
Parent Company does not own sufficient shares of CXI Common Stock for transfer
to the Purchaser upon conversion of COES Preferred Shares and/or exercise of
COES Warrants, the Parent Company hereby agrees to promptly purchase or
otherwise acquire the sufficient amount of shares of CXI Common Stock and
transfer such shares to the Purchaser upon conversion of COES Preferred Shares
and/or exercise of COES Warrants.
Except for the consent of National Securities Corporation,
which has been obtained, the Parent Company has all requisite corporate right,
power and authority to transfer the shares of CXI Common Stock in its holdings
to Purchaser upon conversion of the COES Preferred Shares and exercise of the
COES Warrants.
3.4 Authorization. The Parent Company has all requisite
corporate right, power and authority to execute and deliver this Agreement and
to consummate the transactions contemplated hereby. All corporate action on the
part of the Parent Company, its directors and stockholders necessary for the
authorization, execution, delivery and performance of this Agreement by the
Parent Company, the authorization, sale, issuance and delivery of the COES
Preferred Shares and the performance of the Parent Company's obligations
hereunder has been taken. This Agreement has been duly executed and delivered by
the Parent Company and constitutes a legal, valid and binding obligation of the
Parent Company enforceable in accordance with its terms, subject to laws of
general application relating to bankruptcy, insolvency and the relief of debtors
and rules of law governing specific performance, injunctive relief or other
equitable remedies, and to limitations of public policy as they apply to the
indemnification provisions set forth in Section 8.4 or this Agreement. Upon
their issuance, transfer and delivery pursuant to this Agreement, the COES
Preferred Shares, COES Warrants and shares of CXI Common Stock transferable upon
conversion of the COES Preferred Shares (the "Conversion Shares") and exercise
of the COES Warrants (the "Warrant Shares") (collectively, the "Securities")
will be validly issued, fully paid and nonassessable and will be free of any
liens or encumbrances; provided, however, that the COES Preferred Shares and
COES Warrants are subject to restrictions on transfer under state and/or federal
securities laws. The issuance and sale of the COES Preferred Shares and COES
Warrants will not give rise to any preemptive right or right of first refusal or
right of participation on behalf of any person. Upon registration of the
Conversion Shares and the Warrant Shares pursuant to Section 8 of this
Agreement, there shall be no restriction on the transferability thereof other
than applicable prospectus delivery requirements.
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3.5 No Conflict. The execution and delivery of this Agreement
do not, and the consummation of the transactions contemplated hereby will not,
conflict with, or result in any violation of, or default (with or without notice
or lapse of time, or both), or give rise to a right termination, cancellation or
acceleration of any obligation or to a loss of a material benefit, under, any
provision of the Articles of Incorporation, and any amendments thereto, Bylaws,
stockholders agreements and any amendments thereto of the Parent Company or any
material mortgage, indenture, lease or other agreement or instrument, permit,
concession, franchise, license, judgment, order, decree statute, law, ordinance,
rule or regulation applicable to the Parent Company, its properties or assets.
3.6 Accuracy of Reports and Information. The Parent Company is
in full compliance, to the extent applicable, with all reporting obligations
under Section 12(b), 12(g) or 15(d), as applicable, of the Securities Exchange
Act of 1934, as amended (the "Exchange Act").
The Parent Company has filed all material required to be filed
pursuant to all reporting obligations, under either Section 13(a) or 15(d) of
the Exchange Act for a period of at least twelve (12) months immediately
preceding the offer or sale of the COES Preferred Shares (or for such shorter
period that the Parent Company has been required to file such material).
3.7 SEC Filings/Full Disclosure. None of the Parent Company's
filings with the SEC since January 1, 1997 contain any untrue statement of a
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. The Parent Company has, since January 1,
1997, timely filed all requisite forms, reports and exhibits thereto with the
SEC. The Parent Company's Annual Report on Form 10-K for the year ended December
31, 1996, its Quarterly Reports for the periods ended March 31, 1997 and all
Current Reports on Form 8-K filed by the Parent Company from January 1, 1996 to
date are referred to as the "COES SEC Reports."
There is no fact known to the Parent Company (other than
general economic conditions known to the public generally) that has not been
disclosed in writing to the Purchaser which could reasonably be expected to have
a material adverse effect on the condition (financial or otherwise) or in the
earnings, business affairs, business prospects, properties or assets of the
Parent Company, or (ii) could reasonably be expected to materially and adversely
affect the ability of the Parent Company to perform its obligations pursuant to
this Agreement.
3.8 Absence of Undisclosed Liabilities. The Parent Company has
no material liabilities or obligations, absolute or contingent (individually or
in the aggregate), except as set forth in the financial statements included in
the COES SEC (the "COES Financial Statements") or as incurred in the ordinary
course of business after the date of the COES Financial Statements.
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3.9 Governmental Consent, etc. No consent, approval or
authorization of or designation, declaration or filing with any governmental
authority on the part of the Parent Company is required in connection with the
valid execution and delivery of this Agreement, or the offer, sale or issuance
of the COES Preferred Shares, or the consummation of any other transaction
contemplated hereby, except the filing with the SEC of a registration statement
on Form S-3 or Form S-1 for the purpose of registering the CXI Common Stock
underlying the COES Preferred Shares and the COES Warrants.
3.10 Intellectual Property Rights. Except as disclosed in the
COES SEC Reports, the Parent Company has sufficient trademarks, trade names,
patent rights, copyrights and licenses to conduct its business as contemplated
therein. To the Parent Company's knowledge, neither the Parent Company nor its
products is infringing or will infringe any trademark, trade name, patent right,
copyright, license, trade secret or other similar right of others currently in
existence; and there is no claim being made against the Parent Company regarding
any trademark, trade name, patent, copyright, license, trade secret or other
intellectual property right which could have a material adverse effect on the
condition (financial or otherwise), business, results of operations or prospects
of the Parent Company.
3.11 Material Contracts. Except as set forth in the COES SEC
Reports, the agreements to which the Parent Company is a party described therein
are valid agreements, in full force and effect, the Parent Company is not in
material breach or material default (with or without notice or lapse of time, or
both) under any of such agreements, and, to the Parent Company's knowledge, the
other contracting party or parties thereto are not in material breach or
material default (with or without notice or lapse of time, or both) under any of
such agreements.
3.12 Litigation. There is no action, proceeding or
investigation pending, or to the Parent Company's knowledge threatened, against
the Parent Company which might result, either individually or in the aggregate,
in any material adverse change in the business, prospects, conditions, affairs
or operations of the Parent Company. The Parent Company is not a party to or
subject to the provisions of any order, writ, injunction, judgment or decree of
any court or government agency or instrumentality. There is no action, suit,
proceeding or investigation by the Parent Company currently pending or which the
Parent Company currently intends to initiate.
3.13 Title to Assets. Except as set forth in COES SEC Reports,
the Parent Company has good and marketable title to all properties and material
assets described therein as owned by it, free and clear of any pledge, lien,
security interest, encumbrance, claim or equitable interest other than such as
are not material to the business of the Parent Company.
3.14 Subsidiaries. The Parent Company does not presently own
or control, directly or indirectly, any interest in any other corporation,
partnership, association or other business entity, except as stated in the COES
SEC Reports.
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3.15 Required Governmental Permits. The Parent Company is in
possession of and operating in compliance with all authorizations, licenses,
certificates, consents, orders and permits from state, federal and other
regulatory authorities which are material to the conduct of its business, all of
which are valid and in full force and effect.
3.16 Listing. The Parent Company will maintain the listing of
its Common Stock on the "Pinksheets" or other organized, comparable United
States market or quotation system; provided, however, that the sole remedy for
Purchaser for breach of this representation shall be liquidated damages as
provided in Section 10.6.
3.17 Other Outstanding Securities/Financing Restrictions.
Except as set forth on the CXI SEC Reports (as defined herein) or as
contemplated hereby, there are no other outstanding debt or equity securities
presently convertible into shares of CXI Common Stock. COES contemplates selling
an aggregate of approximately 25,000 shares of COES Preferred Shares (including
the shares being offered and sold hereby) contemporaneously herewith, and
issuing an aggregate of approximately 462,500 additional COES Warrants
contemporaneously herewith, of which 150,000 such warrants will be issued to
entities which acquired COES Preferred Shares in May 1997 and the balance are
anticipated to be issued contemporaneously herewith to acquirors of additional
COES Preferred Shares (including the Purchaser).
The Parent Company cannot, without the prior approval in
writing from the Purchaser, obtain convertible debt or equity financing which is
convertible into securities of the Subsidiary Company for a period of ninety
(90) days following the effective date of the Registration Statement (as defined
herein); however, the Parent Company will not require prior approval if (a) at
least 80% of the net proceeds of the financing is part of an acquisition by the
Parent Company of control of another company or entity, (b) at least 80% of the
net proceeds of the financing is a refinancing of the Parent Company's debt, or
(c) the financing is part of a public offering of the Parent Company's
securities.
3.18 Right of Participation. In the event the parent Company
wishes to complete a financing similar in structure to the securities issued
hereby within one hundred and eighty (180) days from the Closing Date, the
Purchaser shall have the right to participate in such offering and shall have
three (3) business days to reply in writing after receipt of written notice of
such proposed financing from the Parent Company. In the event a writing is not
received by the Parent Company from the Purchaser specifying the extent of the
Purchaser's interest in so participating, this will be deemed a refusal by the
Purchaser of such right to participate.
3.19 Legal Opinion. Purchaser shall, upon purchase of the COES
Preferred Shares, receive an opinion letter from counsel to the Parent Company,
and the Parent Company represents that it will immediately obtain such an
opinion from counsel to the satisfaction of the Purchaser, to the effect that:
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(a) The Parent Company is duly incorporated, validly existing
and in good standing in the jurisdiction of its incorporation.
(b) There is no action, proceeding or investigation pending,
or to such counsel's knowledge, threatened against the Parent Company which
might result, either individually or in the aggregate, in any material adverse
change in the business, prospects, conditions, affairs or operations of the
Parent Company.
(c) The Parent Company is not a party to or subject to the
provisions of any order, writ, injunction, judgment or decree of any court or
government agency or instrumentality.
(d) There is no action, suit, proceeding or investigation by
the parent Company currently pending or, to such counsel's knowledge, which the
Parent Company currently intends to initiate.
(e) All issued and outstanding shares of CXI Common Stock have
been duly authorized and validly issued and are fully paid and nonassessable.
(f) This Securities Purchase Agreement and the Stock Purchase
Warrant, the issuance of the COES Preferred Shares and COES Warrants and the
transfer of the Conversion Shares and Warrant Shares have been duly approved by
all required corporate action, the requisite consent of National Securities
Corporation for the Parent Company to transfer the shares of CXI Common Stock in
its holdings to the Purchaser upon conversion of the COES Preferred Shares and
exercise of the COES Warrants has been duly obtained, and that all such
Securities, upon delivery, shall be validly issued and outstanding, fully paid
and nonassessable.
(g) The execution, delivery and performance of this Securities
Purchase Agreement and the Stock Purchase Warrant by the Parent Company, and the
consummation of the transactions contemplated thereby, will not, with or without
the giving of notice or the passage of time or both:
(i) Violate the provisions of any law, rule or
regulation which is material to the assets, properties or business of the Parent
Company;
(ii) Violate the provisions of the charter or bylaws
of the Parent Company; or
(iii) To the best of counsel's knowledge, violate any
judgment, decree, order or award of any court, governmental body or arbitrator.
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(iv) To the best of counsel's knowledge, conflict
with, or result in the breach or termination of any
term or provision of, or constitute a default under,
or cause any acceleration under, or cause the
creation of any lien, charge or encumbrance upon the
properties or assets of the Parent Company pursuant
to, any note, bond, indenture, mortgage, lease, deed
of trust or other instrument, obligation, or
agreement to which the Parent Company is a party and
which is material to Parent Company, or by which the
Parent Company, or any of its material properties is
or may be bound.
(h) This Securities Purchase Agreement and the Stock Purchase
Warrant constitute the valid and legally binding obligations of the Parent
Company and are enforceable against the Parent Company in accordance with their
respective terms, subject to laws of general application relating to bankruptcy,
insolvency and the relief of debtors and rules of law governing specific
performance, injunctive relief or other equitable remedies, and, with respect to
the Securities Purchase Agreement, to limitations of public policy as they may
apply to the indemnification provisions set forth in Section 8.4 thereof.
3.20 Use of Proceeds. Except for payments aggregating $2500 to
the Subsidiary Company as provided herein, the Parent Company represents that
the net proceeds from this offering will be used for general corporate purposes.
3.21 No Poison Pill. The Parent Company represents that it
does not have, and has no current intention to adopt, a stockholder rights plan
("poison pill").
Section 4. General Representations and Warranties of the
Subsidiary Company. The Subsidiary Company hereby represents and warrants to,
and covenants with, the Purchaser that the following are true and correct as of
the date hereof and as of the Closing Date.
4.1 Organization; Qualification. The Subsidiary Company is a
corporation duly organized and validly existing under the laws of the State of
Delaware and is in good standing under such laws. The Subsidiary Company has all
requisite corporate power and authority to own, lease and operate its properties
and assets, and to carry on its business as presently conducted. The Subsidiary
Company is qualified to do business as a foreign corporation in each
jurisdiction in which the ownership of its property or the nature of its
business requires such qualification, except where failure to so qualify would
not have a material adverse effect on the Subsidiary Company.
4.2 Capitalization. The authorized capital stock of the
Subsidiary Company is as set forth in the CXI SEC Reports. All issued and
outstanding shares of Common Stock have been duly authorized and validly issued
and are fully paid and nonassessable.
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4.3 CXI Common Stock Transferable Upon Conversion of COES
Preferred Shares or Exercise of COES Warrants. Except for the consent of
National Securities Corporation, which has been obtained, the Subsidiary Company
has all requisite corporate right, power and authority to transfer shares of CXI
Common Stock owned by the Parent Company to the Purchaser upon conversion of the
COES Preferred Shares and exercise of the COES Warrants.
4.4 Authorization. The Subsidiary Company has all requisite
corporate right, power and authority to execute and deliver this Agreement and
to consummate the transactions contemplated hereby. All corporate action on the
part of the Subsidiary Company, its directors and stockholders necessary for the
authorization, execution, delivery and performance of this Agreement by the
Subsidiary Company, and the performance of the Subsidiary Company's obligations
hereunder has been taken. This Agreement has been duly executed and delivered by
the Subsidiary Company and constitutes a legal, valid and binding obligation of
the Subsidiary Company enforceable in accordance with its terms, subject to laws
of general application relating to bankruptcy, insolvency and the relief of
debtors and rules of law governing specific performance, injunctive relief or
other equitable remedies, and to limitations of public policy as they may apply
to the indemnification provisions set fourth in Section 8.4 of this Agreement.
Upon their issuance, transfer and delivery pursuant to this Agreement, the
Securities will have been validly issued, fully paid and nonassessable and will
be free of any liens or encumbrances; provided, however, that the COES Preferred
Shares and COES Warrants are subject to restrictions on transfer under state
and/or federal securities laws. Upon registration of the Conversion Shares and
the Warrant Shares pursuant to Section 8 of this Agreement, there shall be no
restriction on the transferability thereof other than applicable prospectus
delivery requirements.
4.5 No Conflict. The execution and delivery of this Agreement
do not, and the consummation of the transactions contemplated hereby will not,
conflict with, or result in any violation of, or default (with or without notice
or lapse of time, or both), or give rise to a right of termination, cancellation
or acceleration of any obligation or to a loss of a material benefit, under, any
provision of the Certificate of Incorporation, and any amendments thereto,
Bylaws, stockholders agreements and any amendments thereto of the Subsidiary
Company or any material mortgage, indenture, lease or other agreement or
instrument, permit, concession, franchise, license, judgment, order, decree
statute, law, ordinance, rule or regulation applicable to the Subsidiary
Company, its properties or assets.
4.6 Accuracy of Reports and Information. The Subsidiary
Company is in full compliance, to the extent applicable, with all reporting
obligations under Section 12(b), 12(g) or 15(d), as applicable, of the Exchange
Act. The Subsidiary Company has registered its Common Stock pursuant to Section
12 of the Exchange Act and the Common Stock is listed and trades on AMEX.
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The Subsidiary Company has filed all material required to be
filed pursuant to all reporting obligations, under either Section 13(a) or 15(d)
of the Exchange Act for a period of at least twelve (12) months immediately
proceeding the offer or sale of the COES Preferred Shares (or for such shorter
period that the Subsidiary Company has been required to file such material).
4.7 SEC Filings/Full Disclosure. None of the Subsidiary
Company's filings with the SEC since January 1, 1997 contain any untrue
statement of a 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. The Subsidiary Company
has, since January 1, 1997, timely filed all requisite forms reports and
exhibits thereto with the SEC. The Subsidiary Company's Prospectus declared
effective by the SEC on June 28, 1996, the Annual Report on Form 10-K for the
year ended December 31, 1996, its Quarterly Reports for the periods ended March
31, 1997 and all Current Reports on Form 8-K filed by the Subsidiary Company
from January 1, 1996 to date are referred to as the "CXI SEC Reports."
There is no fact known to the Subsidiary Company (other than
general economic conditions known to the public generally) that has not been
disclosed in writing to the Purchaser which could reasonably be expected to have
a material adverse effect on the condition (financial or otherwise) or in the
earnings, business affairs, business prospects, properties or assets of the
Subsidiary Company, or (ii) could reasonably be expected to materially and
adversely affect the ability of the Subsidiary Company to perform its
obligations pursuant to this Agreement.
4.8 Absence of Undisclosed Liabilities. The Subsidiary Company
has no material liabilities or obligations, absolute or contingent (individually
or in the aggregate), except as set forth in the financial statements included
in the CXI SEC Reports (the "CXI Financial Statements") or as incurred in the
ordinary course of business after the date of the CXI Financial Statements.
4.9 Governmental Consent, etc. No consent, approval or
authorization of or designation, declaration or filing with any governmental
authority on the part of the Subsidiary Company is required in connection with
the valid execution and delivery of this Agreement, or the offer, sale or
issuance of the COES Preferred Shares, or the consummation of any other
transaction contemplated hereby, except the filing with the SEC of a
registration statement on Form S-3 or S-1 for the purpose of registering the CXI
Common Stock underlying the COES Preferred Shares and the COES Warrants.
4.10 Intellectual Property Rights. Except as disclosed in the
CXI SEC Reports, the Subsidiary Company has sufficient trademarks, trade names,
patent rights, copyrights and licenses to conduct its business as contemplated
therein. To the Subsidiary Company's knowledge, neither the Subsidiary Company
nor its products is infringing or will infringe any trademark, trade name,
patent right, copyright, license, trade secret or other similar right of others
currently in existence; and there is no claim
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<PAGE> 14
being made against the Subsidiary Company regarding any trademark, trade name,
patent, copyright, license, trade secret or other intellectual property right
which could have a material advisers effect on the condition (financial or
otherwise), business, results of operations or prospects of the Subsidiary
Company.
4.11 Material Contracts. Except as set forth in the CXI SEC
Reports, the agreements to which the Subsidiary Company is a party described
therein are valid agreements, in full force and effect, the Subsidiary Company
is not in material breach or material default (with or without notice or lapse
of time, or both) under any of such agreements, and, to the Subsidiary Company's
knowledge, the other contracting party or parties thereto are not in material
breach or material default (with or without notice or lapse of time, or both)
under any such agreements.
4.12 Litigation. There is no action, proceeding or
investigation pending, or to the Subsidiary Company's knowledge threatened,
against the Subsidiary Company which might result, either individually or in the
aggregate, in any material adverse change in the business, prospects,
conditions, affairs or operations of the Subsidiary Company. The Subsidiary
Company is not a party to or subject to the provisions of any order, writ,
injunction, judgment or decree of any court or government agency or
instrumentality. There is no action, suit, proceeding or investigation by the
Subsidiary Company currently pending or which the Subsidiary Company currently
intends to initiate.
4.13 Title to Assets. Except as set forth the CXI SEC Reports,
the Subsidiary Company has good and marketable title to all properties, and
material assets described therein as owned by it, free and clear of any pledge,
lien, security interest, encumbrance, claim or equitable interest other than
such as are not material to the business of the Subsidiary Company.
4.14 Subsidiaries. The Subsidiary Company does not presently
own or control, directly or indirectly, any interest in any other corporation,
partnership, association or other business entity, except as stated in the CXI
SEC Reports.
4.15 Required Governmental Permits. The Subsidiary Company is
in possession of and operating in compliance with all authorizations, licenses,
certificates, consents, orders and permits from state, federal and other
regulatory authorities which are material to the conduct of its business, all of
which are valid and in full force and effect.
4.16 Listing. The Subsidiary Company will maintain the listing
of its Common Stock on AMEX or other organized, comparable United States market
or quotation system; provided, however, that the sole remedy for Purchaser for
breach of this representation shall be liquidated damages as provided in Section
10.6.
4.17 Other Outstanding Securities/Financing Restrictions.
Except as set forth in the CXI SEC Reports or as contemplated hereby, there are
no other outstanding
14
<PAGE> 15
debt or equity securities presently convertible into shares of CXI Common Stock.
Except as set forth in the CXI SEC Reports, the Subsidiary Company has no
outstanding restricted shares of Common Stock, or shares of Common Stock sold
under Regulation S or Regulation D under the Securities Act of 1933, as amended
(the "Securities Act") or outstanding under any other exemption from
registration, which are available for sale as unrestricted ("free trading")
stock.
The Subsidiary Company cannot, without the prior approval in
writing from the Purchaser, obtain convertible debt or equity financing for a
period of ninety (90) days following the effective date of the Registration
Statement (as defined herein); however, the Subsidiary Company will not require
prior approval if (a) at least 80% of the net proceeds of the financing is part
of any acquisition by the Subsidiary Company of control of another company or
entity, (b) at least 80% of the net proceeds of the financing is a refinancing
of the Subsidiary Company's debt, or (c) the financing is part of a public
offering of the Subsidiary Company's securities.
4.18 Right of Participation. In the event the Subsidiary
Company wishes to complete a financing similar in structure to the securities
issued hereby within one hundred and eighty (180) days from the Closing Date,
the Purchaser shall have the right to participate in such offering and shall
have three (3) business days to reply in writing after receipt of written notice
of such proposed financing from the Subsidiary Company. In the event a writing
is not received by the Subsidiary Company from the Purchaser specifying the
extent of the Purchaser's interest in so participating, this will be deemed a
refusal by the Purchaser of such right to participate.
4.19 Legal Opinion. Purchaser shall, upon purchase of the COES
Preferred Shares, receive an opinion letter from counsel to the Subsidiary
Company, and the Subsidiary Company represents that it will immediately obtain
such an opinion from counsel to the satisfaction of the Purchaser, to the effect
that:
(a) The Subsidiary Company is duly incorporated, validly
existing and in good standing in the jurisdiction of its incorporation.
(b) There is no action, proceeding or investigation pending,
or to such counsel's knowledge, threatened against the Subsidiary
Company which might result, either individually or in the aggregate, in
any material adverse change in the business, prospects, conditions,
affairs or operations of the Subsidiary Company.
(c) The Subsidiary Company is not a party to or subject to the
provisions of any order, writ, injunction, judgment or decree of any
court or government agency or instrumentality.
15
<PAGE> 16
(d) There is no action, suit, proceeding or investigation by
the Company currently pending, to such counsel's knowledge, or which
the Subsidiary Company currently intends to initiate.
(e) All issued and outstanding shares of CXI Common Stock have
been duly authorized and validly issued and are fully paid and
nonassessable.
(f) This Securities Purchase Agreement and the Stock Purchase
Warrant, the issuance of the COES Preferred Shares and COES Warrants
and the transfer of the Conversion Shares and Warrant Shares have been
duly approved by all required corporate action, the requisite consent
of National Securities Corporation for the Parent Company to transfer
the shares of CXI Common Stock in its holdings to the Purchaser upon
conversion of the COES Preferred Shares and exercise of the COES
Warrants has been duly obtained, and that all such Securities, upon
delivery, shall be validly issued and outstanding, fully paid and
nonassessable.
(g) The execution, delivery and performance of this Securities
Purchase Agreement and the Stock Purchase Warrant by the Subsidiary
Company, and the consummation of the transactions contemplated thereby,
will not, with or without the giving of notice or the passage of time
or both:
(i) Violate the provisions of any law, rule or
regulation which is material to the assets, properties or
business of the Subsidiary Company;
(ii) Violate the provisions of the charter or bylaws
of the Subsidiary Company; or
(iii) To the best of counsel's knowledge, violate any
judgment, decree, order or award of any court, governmental
body or arbitrator.
(iv) To the best of counsel's knowledge, conflict
with, or result in the breach or termination of any term or
provision of, or constitute a default under, or cause any
acceleration under, or cause the creation of any lien, charge
or encumbrance upon the properties or assets of the Subsidiary
Company pursuant to, any note, bond, indenture, mortgage,
lease, deed of trust or other instrument, obligation, or
agreement to which the Subsidiary Company is a party and which
is material to the Subsidiary Company or by which the
Subsidiary Company, or any of its material properties is or
may be bound.
(h) This Securities Purchase Agreement and the Stock Purchase
Warrant constitute the valid and legally binding obligations of the
Subsidiary Company and are enforceable against the Subsidiary Company
in accordance with their respective terms, subject to laws of general
application relating to
16
<PAGE> 17
bankruptcy, insolvency and the relief of debtors and rules of law
governing specific performance, injunctive relief or other equitable
remedies, and, with respect to the Securities Purchase Agreement, to
limitations of public policy as they may apply to the indemnification
provisions set forth in Section 8.4 thereof.
4.20 No Poison Pill. The Subsidiary Company represents that it
does not have, and has no current intention to adopt, a stockholder rights plan
("poison pill").
Section 5. Representations, Warranties and Covenants of the
Purchaser. The Purchaser represents and warrants to, and covenants with, the
Parent Company and the Subsidiary Company that the following are true and
correct as of the date hereof and as of the Closing Date.
5.1 Authority. The Purchaser's signatory has all right, power,
authority and capacity to execute and deliver this Agreement and to consummate
the transactions contemplated hereby. This Agreement has been duly executed and
delivered by the Purchaser and will constitute the legal, valid and binding
obligations of the Purchaser, enforceable in accordance with its terms, subject
to laws or general application relating to bankruptcy, insolvency and the relief
of debtors and rules of laws governing specific performance, injunctive relief
or other equitable remedies, and to limitations of public policy as they may
apply to the indemnification provisions set forth in Section 8.4 of this
Agreement.
5.2 Investment Experience. Purchaser is an "accredited
investor" as defined in Rule 501(a) under the Securities Act. Purchaser is aware
of the Parent Company's and Subsidiary Company's business affairs and financial
conditions and has had access to and has acquired sufficient information about
the Parent Company and the Subsidiary Company, including the COES and CXI SEC
Reports, to reach an informed and knowledgeable decision to acquire the COES
Preferred Shares. Purchaser has such business and financial experience as to
require to give it the capacity to protect its own interests in connection with
the purchase of the COES Preferred Shares and the acquisition of the COES
Warrants.
5.3 Investment Intent. Without limiting its ability to resell
the COES Preferred Shares and the COES Warrants and underlying CXI Common Stock
pursuant to an effective registration statement, Purchaser represents that it is
purchasing the COES Preferred Shares of reinvestment purposes. Purchaser
understands that its acquisition of the COES Preferred Shares and the COES
Warrants has not been registered under the Securities Act or registered or
qualified under any state securities law in reliance on specific exemptions
therefrom, which exemptions may depend upon, among other things, the bona fide
nature of Purchaser's investment intent as expressed herein. Purchaser will not,
directly or indirectly, offer, sell, pledge, transfer or otherwise dispose of
(or solicit any offers to buy, purchase or otherwise acquire or take a pledge
of) any of the COES Preferred Shares or the COES Warrants except in compliance
with the Securities Act and
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<PAGE> 18
any applicable state securities laws, and the rules and regulations promulgated
thereunder.
5.4 Registration or Exemption Requirements. Purchaser further
acknowledges and understands that the COES Preferred Shares and the COES
Warrants may not be resold or otherwise transferred except in a transaction
registered under the Securities Act and any applicable state securities laws or
unless an exemption from such registration is available. Purchaser understands
that the certificate(s) evidencing the COES Preferred Shares and the COES
Warrants will be imprinted with a legend, subject to Section 5.7 below, that
prohibits the transfer thereof unless (I) they are registered or such
registration is not required, and (ii) if the transfer is pursuant to an
exemption from registration other than Rule 144 under the Securities Act and, if
the Parent Company shall so request in writing, an opinion of counsel reasonably
satisfactory to the Parent Company is obtained to the effect that the
transaction is so exempt.
5.5 No Legal, Tax or Investment Advice. Purchaser understands
that nothing in this Agreement or any other materials presented to Purchaser in
connection with the purchase and sale of the COES Preferred Shares and the
acquisition and issuance of the COES Warrants constitutes legal, tax or
investment advice. Purchaser has consulted such legal, tax and investment
advisors as it, in its sole discretion, has deemed necessary or appropriate in
connection with its purchase of the COES Preferred Shares and acquisition of the
COES Warrants.
5.6 Purchaser Review. Purchaser hereby represents and warrants
that the Purchaser has carefully examined the COES SEC Reports and CXI SEC
Reports and the COES and CXI Financial Statements contained therein. The
Purchaser acknowledges that the Parent Company and Subsidiary Company has made
available to the Purchaser all documents and information that it has requested
relating to the Parent Company and the Subsidiary Company and has provided
answers to all of its questions concerning the Parent Company and the Subsidiary
Company, the COES Preferred Shares and the COES Warrants. Nothing stated in the
previous two sentences, however, shall be deemed to affect the representations
and warranties of the Parent Company the Subsidiary Company contained in this
Agreement.
5.7 Legend. The certificate or certificates representing the
Securities shall be subject to a legend restricting transfer under the
Securities Act, such legend to be substantially as follows:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. SUCH SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT WHICH, EXCEPT IN
THE CASE OF AN EXEMPTION PURSUANT TO
18
<PAGE> 19
RULE 144 UNDER SAID ACT, IS CONFIRMED IN A LEGAL OPINION SATISFACTORY
TO THE COMPANY."
The certificates shall also include any legends required by any applicable state
securities laws.
The legend(s) endorsed on a stock certificate pursuant to this
Section 5.7 or on any certificate representing any of the Securities shall be
removed and the Parent Company or the Subsidiary Company shall issue a
replacement certificate without such legend to the holder of such certificate if
the Securities represented by such certificate are registered under the
Securities Act or if such holder provides to the Parent Company or the
Subsidiary Company an opinion of counsel to the effect that a public sale,
transfer or assignment of such Securities may be made without registration.
5.8 Restrictions on Conversion of Shares. Notwithstanding
anything to the contrary contained herein, no COES Preferred Shares may be
converted by a Holder to the extent that, after giving effect to the Conversion
Shares issued pursuant to a Notice of Conversion, the total number of shares of
CXI Common Stock deemed beneficially owned by such Holder (other than by virtue
of the ownership of COES Preferred Shares or COES Warrants or ownership of other
securities that have limitations on a Holder's rights to convert or exercise
similar to those limitations set forth herein), together with all shares of CXI
Common Stock deemed beneficially owned by Holder's "affiliates" (as defined in
Rule 144 under the Securities Act) that would be aggregate for purposes of
determining whether a group under Section 13(d) of the Exchange Act exists,
would exceed 4.99% of the total issued and outstanding shares of CXI Common
Stock, provided that each Holder shall have the right to waive this restriction,
in whole or in part, immediately in case of a pending Change in Control
Transaction and in any other case upon 61 days prior notice to the Parent
Company and the Subsidiary Company. The delivery of a Notice of Conversion by
any Holder shall be deemed a presentation by such Holder it is in compliance
with this Section 5.8. A transferee of COES Preferred Shares shall not be bound
by this provision unless it expressly agrees to be so bound. The term "deemed
beneficially owned" as used in this Section 5.8 shall exclude shares that might
otherwise be deemed beneficially owned by reason of the convertibility of the
COES Preferred Shares.
Section 6. Conditions to the Purchaser's Obligation to
Purchase. The Parent Company and the Subsidiary Company understand that the
Purchaser's obligation to purchase the COES Preferred Shares is conditioned
upon:
(a) Acceptance by Purchaser of this Agreement for the sale of
the COES Preferred Shares, as evidence by the execution of this Agreement by its
authorized officers;
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<PAGE> 20
(b) Delivery of the COES Preferred Shares and COES
Warrants to counsel to COES for immediate delivery to the Purchaser against wire
transfer of funds as aforesaid;
(c)(i) The delivery at the Closing of a certificate from an
authorized officer of the Parent Company certifying that all representations and
warranties of the Parent Company are true and correct as of the Closing Date (in
the form annexed hereto as Exhibit C1);
(c)(ii) The delivery at the Closing of a certificate from an
authorized officer of the Subsidiary Company certifying that all representations
and warranties of the Subsidiary Company are true and correct as of the Closing
Date (in the form annexed hereto as Exhibit C2); and
(d) A filed Certificate of Designation.
Section 7. Conditions to Parent Company's Obligation to Sell.
Purchaser understands that the Parent Company's obligation to sell the COES
Preferred Shares is conditioned upon:
(a) The receipt and acceptance by the Parent Company of this
Agreement to issue the COES Preferred Shares as evidenced by execution of this
Agreement by the President or any Vice President of the Parent Company.
(b) Delivery to the Company, the Finder and Counsel for Parent
by Purchaser of good funds as payment in full for the purchase of the COES
Preferred Shares; and
(c) The delivery at the Closing of a certificate from an
authorized officer or representative of Purchaser certifying that all
representations and warranties of the Purchaser are true and correct as of the
Closing Date (in the form annexed hereto as Exhibit C3).
Section 8. Registration of the Shares; Compliance with the
Securities Act.
8.1 Definitions. For the purpose of this Section 8:
(a) the term "Registration Statement" shall mean any
registration statement required to be filed by Section 8.2 below, and shall
include any preliminary prospectus, final prospectus, exhibit or amendment
included in or relating to such registration statement; and
20
<PAGE> 21
(b) the term "untrue statement" shall include any untrue
statement or alleged untrue statement, or any omission or alleged omission to
state in the Registration Statement a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
8.2 Registration Procedures and Expenses. The Parent Company
shall cause the Subsidiary Company to, and the Subsidiary Company shall:
(a) use its best efforts to file with the SEC not later than
September 15, 1997 a shelf registration statement under the Securities Act on
Form S-3, if the Subsidiary Company is eligible to file a registration statement
under such form (and if the Subsidiary Company is not eligible to file a
registration statement under Form S-3, to file with the SEC a registration
statement under the Securities Act on Form S-1 or any other form which is
appropriate), to register the Conversion Shares and Warrant Shares, and to use
its best efforts to cause such registration statement to be declared effective
by the SEC by not later than December 15, 1997. Such registration statement will
also cover shares issuable upon conversion of Series A Preferred Stock of CXI
sold by CXI pursuant to a certain Stock Purchase Agreement dated as of August
15, 1997;
(b) use its best efforts, subject to receipt of necessary
information from the Purchaser, to cause such Registration Statement to become
effective as promptly after filing as practicable;
(c) prepare and file with the SEC such amendments and
supplements to such Registration Statement and the prospectus used in connection
therewith as may be necessary to keep such Registration Statement effective
until termination of such obligation as provided in Section 8.9 below;
(d) furnish to the Purchaser with respect to the CXI Common
Stock registered on the Registration Statement (and to each underwriter, if any,
of such CXI Common Stock) such number of copies of prospectuses in conformity
with the requirements of the Securities Act and such other documents as the
Purchaser may reasonably request, in order to facilitate the public sale or
other disposition of all or any of the CXI Common Stock by the Purchaser;
provided, however, that the obligation of the Subsidiary Company to deliver
copies of prospectuses to the Purchaser shall be subject to the receipt by the
Subsidiary Company of reasonable assurances from the Purchaser that the
Purchaser will comply with the applicable provisions of the Securities Act and
of such other securities laws as may be applicable in connection with any use of
such prospectuses;
(e) file such documents as may be required of the Subsidiary
Company for normal securities law clearance for the resale of the Common Stock
in which states of the United States as may be reasonably requested by the
Purchaser; provided, however, that the Subsidiary Company shall not be required
in connection with
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this paragraph (e) to qualify as a foreign corporation or execute a general
consent to service of process in any jurisdiction;
(f) bear all expenses in connection with the procedures in
paragraphs (a) through (e) of this Section 8.2 and the registration of the CXI
Common Stock on such Registration Statement and the satisfaction of the blue sky
laws of such states, including the reasonable fees and expenses of legal counsel
to the Purchaser in connection with the procedures in paragraph (a) through (e)
of this Section 8.2, other than underwriting discounts and selling commissions
or expenses required by law to be borne by Purchaser; and
(g) in the event of the failure of Company to procure
registration, in accordance with Section 8.2(a) of this Agreement, of the
Conversion Shares and the Warrant Shares prior to any of the dates set forth
below in this Section 8.2(g), the Parent Company will pay Purchaser by wire
transfer, as liquidated damages for such failure and not as a penalty, for each
month or part thereof for which such failure continues or in the event of a
Suspension (as defined in Section 8.7) after such date, an amount equal to the
following percentages of the Liquidation Preference of all COES Preferred Shares
acquired by the Purchaser pursuant to this Agreement which are still owned by
such Purchaser and have not been converted:
<TABLE>
<CAPTION>
Required Effective Date Percentage
----------------------- ----------
<S> <C>
On or before November 19, 1997 1%
Between November 20 and
December 19, 1997 2%
After December 20, 1997 3%
</TABLE>
If the Parent Company does not remit the damages to the Purchaser as set forth
above, the Parent Company will pay the Purchaser reasonable costs of collection,
including attorneys fees, in addition to the liquidated damages. Such payment
shall be made to the Purchaser if due, monthly in arrears. The payment of such
liquidated damages shall not relieve the Subsidiary Company from its obligations
to register the Conversion Shares and Warrant Shares pursuant to this provision
and shall not affect or limit Purchaser's other rights or remedies as set forth
in this Agreement. The "Liquidation Preference" for a Share shall equal $100
(subject to adjustments for Reclassifications), plus all accrued and unpaid
dividends (which shall accrue through the Conversion Date, Redemption Date or
the date liquidated damages are paid, as applicable) and any then unpaid
liquidated damages (interest on which shall accrue at a rate of 2% per month)
arising under Sections 8.2(g), 10.2 or 10.6. Notwithstanding the foregoing, the
liquidated damages shall be limited to 1% per month or any portion thereof if
the delay in effectiveness of the registration statement beyond November 19,
1997 or the Suspension thereafter shall be for reasons outside the control of
the Parent Company or the Subsidiary Company.
8.3 Underwriter. The Parent Company and the Subsidiary Company
understand that the Purchaser disclaims being an "underwriter" (as such term is
defined
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<PAGE> 23
under the Securities Act and the rules and regulations promulgated thereunder
(an "Underwriter")), but Purchaser being deemed an Underwriter shall not relieve
the Parent Company and the Subsidiary Company of any obligation it has
hereunder.
8.4 Indemnification.
(a) General Indemnification. The Parent Company and the
Subsidiary Company together and the Purchaser agree to indemnify the other and
to hold the other harmless from and against any and all losses, damages,
liabilities, costs and expenses (including reasonable attorneys' fees) which the
other may sustain or incur in connection with the breach by the indemnifying
party of any representation, warranty or covenant made by it in this Agreement.
(b) Indemnification for Registration Statement.
(i) By Parent Company and Subsidiary Company. To the extent
permitted by law, the Parent Company and Subsidiary Company together will
indemnify and hold harmless each Holder, the directors, if any, of such Holder,
the officers, if any, of such Holder who sign the Registration Statement, each
person, if any, who controls such Holder, any underwriter (as defined in the
Securities Act) for the Holders and each person, if any, who controls any such
underwriter within the meaning of the Securities Act or the Exchange Act,
against any losses, claims, damages, expenses or liabilities (joint or several)
to which any of them may become subject under the Securities Act, the Exchange
Act or otherwise, insofar as such losses, claims, damages, expenses or
liabilities (or actions or proceedings, whether commenced or threatened, in
respect thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively, a "Violation"): (i) any untrue statement
or alleged untrue statement of a material fact contained in the Registration
Statement including any preliminary prospectus or final prospectus contained
therein or any amendments or supplements thereof, (ii) the omission or alleged
omission to state therein a material fact required to be stated therein, or
necessary to make the statements therein, in light of the circumstance in which
they are made, not misleading or (iii) any violation or alleged violation by the
Company of the Securities Act, the Exchange Act, any state securities law or any
rule or regulation promulgated under the Securities Act, the Exchange Act or any
state securities law; and the Company will reimburse the Holders and each such
underwriter or controlling person, promptly as such expenses are incurred, for
any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability action or
proceeding; provided, however, that the indemnity agreement contained in this
Section 8.4(b) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or action if such settlement is effected without the
consent of the Parent Company and the Subsidiary Company, which consents shall
not be unreasonably withheld, nor shall the Parent Company and Subsidiary
Company be liable in any such case for any such loss, claim, damage, liability
or action to the extent that it arises out of or is based upon a Violation which
occurs in reliance upon and in conformity with written information furnished
23
<PAGE> 24
expressly for use in connection with such registration by the Holders or any
such underwriter or controlling person, as the case may be. Such indemnity shall
remain in full force and effect regardless of any investigation made by or on
behalf of the Holders or any such underwriter or controlling person and shall
survive the transfer of the Securities by Holders.
(ii) By Holders. To the extent permitted by law, each Holder,
severally and not jointly, will indemnify and hold harmless the Subsidiary
Company, each of its directors, each of its officers who have signed the
Registration Statement, each person, if any, who controls the Subsidiary Company
within the meaning of the Securities Act or the Exchange Act, any underwriter
and any other stockholder selling securities pursuant to the Registration
Statement or any of its directors or officers or any person who controls such
holder or underwriter, against any losses, claims, damages or liabilities (joint
or several) to which any of them may become subject, under the Securities Act,
the Exchange Act or other federal state law, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any Violation, in each case to the extent (and only to the extent) that
such Violation occurs in reliance upon and in conformity with written
information furnished by such Holder expressly for use in connection with such
registration, and such Holder will reimburse any legal or other expenses
reasonably incurred by any of them in connection with investigating or defending
any such loss, claim, damage, liability or action; provided, however, that the
indemnity agreement contained in this subsection 8.4(b) shall not apply to
amounts paid in settlement of such loss, claim, damage, liability or action if
such settlement is effected without the consent of such Holder, which consent
shall not be unreasonably withheld; and provided further, that the Holder shall
be liable under this paragraph for only that amount of losses, claims, damages
and liabilities as does not exceed the net proceeds to such Holder as a result
of the sale of the Securities pursuant to such registration.
(c) Procedure for Indemnification. Promptly after receipt by
an indemnified party under this Section 8.4 of notice of the commencement of any
action (including any governmental action), such indemnified party will, if a
claim in respect thereof is to be made against any indemnifying party under this
Section 8.4, deliver to the indemnifying party a written notice of commencement
thereof and the indemnifying party shall have the right to participate in, and,
to the extent the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume control of the defense thereof
with counsel mutually satisfactory to the parties; provided, however, that an
indemnified party shall have the right to retain its own counsel, with the fees
and expenses to be paid by the indemnifying party, if, in the reasonable opinion
of counsel for the indemnifying party, representation of such indemnified party
by the counsel retained by the indemnifying party would be inappropriate due to
actual or potential differing interests between such indemnified party and any
other party represented by such counsel in such proceeding. The failure to
deliver written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall relieve such indemnifying party of any
liability to the indemnified party under this Section 8.4 only the extent
prejudicial to its ability to defend such action, but the omission so to deliver
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<PAGE> 25
written notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party other than under this Section 8.4. The
indemnification required by this Section 8.4 shall be made by periodic payments
of the amount thereof during the course of the investigation or defense,
promptly as such expense, loss, damage or liability is incurred.
(d) Contribution. To the extent any indemnification by an
indemnifying party is prohibited or limited by law, the indemnifying party
agrees to make the maximum contribution with respect to any amounts for which it
otherwise would be liable under this Section 8.4 to the extent permitted by law,
provided that (i) no contribution shall be made under the circumstances where
the maker would not have been liable for indemnification under the fault
standards set fourth in this Section 8.4, (ii) no seller of the Securities
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any seller of the
Securities who was not guilty of such fraudulent misrepresentation and (iii)
contribution by any seller of the Securities shall be limited in amount to the
net amount of proceeds received by such seller from the sale of such Securities.
8.5 Information Available. So long as any registration
statement is effective covering the resale of the Conversion Shares of Warrant
Shares, the Parent Company and the Subsidiary Company will each furnish to
Purchaser:
(a) as soon as possible after available, one copy of (i) each
of its Annual Report to Stockholders (which Annual Report shall contain
financial statements audited in accordance with generally accepted accounting
principles in the United States of American by a national firm of certified
public accountants); (ii) if not included in substance in the Annual Report to
Stockholders, each of its annual report on Form 10-K within 100 days after the
end of each fiscal year of each Company, (iii) each of its Quarterly Reports to
Stockholders, and its quarterly report on Form 10-Q within sixty (60) days, and
(iv) a full copy of the registration statement covering the Conversion Shares
and Warrant Shares (the foregoing, in each case, excluding exhibits); and
(b) upon the reasonable request of Purchaser, such other
information that is generally available to the public.
8.6 Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the SEC which may at any time
permit the sale of the Conversion Shares and the Warrant Shares to the public
without registration, the Parent Company and the Subsidiary Company agrees to
use its best efforts to:
(a) make and keep public information available, as those terms
are understood and defined in Rule 144 under the Securities Act, at all times
after the effective date on which the Company becomes subject to the reporting
requirements of the Securities Act or the Exchange Act;
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<PAGE> 26
(b) use its best efforts to file with the SEC in a timely
manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act;
(c) furnish to Purchaser forthwith upon request a written
statement by the Parent Company or the Subsidiary Company as to its compliance
with the reporting requirements of said Rule 144, and of the Securities Act and
the Exchange Act, a copy of the most recent annual or quarterly report of the
Company, and such other reports and comments of the Parent Company or the
Subsidiary Company and other information in the possession of or reasonably
obtainable by the Parent Company or the Subsidiary Company as Purchaser may
reasonably request in availing itself of any rule or regulation of the SEC
allowing Purchaser to sell any such Conversion Shares or Warrant Shares without
registration.
8.7 Temporary Cessation of Offers and Sales by Purchaser. The
Purchaser acknowledges that there may occasionally be times when the Subsidiary
Company may be required to suspend the use of the prospectus forming part of the
Registration Statement (a "Suspension") until such time as an amendment to the
Registration Statement has been filed by the Company and declared effective by
the Commission, until the prospectus is supplemented or amended to comply with
the Securities Act, or until such time as the Subsidiary Company has filed an
appropriate report with the Commission pursuant to the Exchange Act. The
Subsidiary Company agrees to file any necessary amendments, supplements and
reports as soon as practicable under the circumstances. The Subsidiary Company
agrees to use its best efforts to cause a Suspension to be lifted within 10
business days during which time Purchaser agrees that it will not sell any
shares of Common Stock pursuant to such prospectus.
8.8 Transfer of Conversion Shares or Warrant Shares Stock
After Registration. Purchaser hereby covenants with the Parent Company and the
Subsidiary Company not to make any sale of the conversion Shares or Warrant
Shares except either (i) in accordance with the Registration Statement, in which
case Purchaser covenants to comply with the requirement of delivering a current
prospectus, (ii) in accordance with Rule 144, in which case Purchaser covenants
to comply with Rule 144, or (iii) as otherwise permitted by applicable law.
8.9 Termination of Obligations. The obligations of the Parent
Company and Subsidiary Company pursuant to Sections 8.2, 8.3 and 8.6 hereof
shall cease and terminate upon the earlier to occur of (i) such time as all of
the Conversion Shares of Warrant Shares have been re-sold, or (ii) such time as
all of the Common Stock may be resold pursuant to Rule 144(k) under the
Securities Act.
Section 9. Legal Fees and Expenses. Each of the parties shall
pay its own fees and expenses (including the fees of any attorneys, accountants,
appraisers or others
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<PAGE> 27
engaged by such party) in connection with this Agreement and the transactions
contemplated hereby.
Section 10. Conversion; Liquidated Damages.
10.1 Restrictions on Conversion. Conversion of all the COES
Preferred Shares may be made at the Conversion Price, the day following the date
that the Registration Statement for the CXI Common Stock underlying the COES
Preferred Stock and COES Warrants was declared effective by the SEC.
10.2 Notice of Conversion. Conversion of the COES Preferred
Shares to CXI Common Stock may be exercised in whole or in part by Purchaser
telecopying an executed and completed Notice of Conversion (in the form annexed
hereto as Exhibit D) to counsel for the Parent Company, with a copy to the
Parent Company and Subsidiary Company, and delivering the original Notice of
Conversion and the certificate representing the COES Preferred Shares to counsel
by hand or by express courier within three (3) business days of exercise. Each
date on which a Notice of Conversion is telecopied to and received by the Parent
Company in accordance with the provisions hereof shall be deemed a Conversion
Date. The Subsidiary Company will reissue and transmit the certificates in the
name of the Purchaser, or any other name as instructed by the Purchaser,
representing the CXI Common Stock transferable upon conversion of all or any
part of the COES Preferred Shares and COES Warrant Shares (and the Parent
Company will transmit any certificates for replacement COES Preferred Shares not
previously converted but included in the original certificate presented for
conversion) to the Purchaser via express courier within three (3) business days
after counsel for the Parent Company has received the original Notice of
Conversion and the certificate representing the COES Preferred Shares being so
converted. The Notice of Conversion and certificate representing the portion of
the COES Preferred Shares converted shall be delivered as follows:
To counsel of Parent Company:
Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel
153 East 53rd Street
New York, NY 10022
Attention: Stephen A. Weiss, Esq.
Telephone: 212-801-9200
Facsimile: 212-223-7161
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<PAGE> 28
To the Parent Company:
Commodore Environmental Services, Inc.
150 East 58th Street
New York, NY 10155
Attention: Bentley J. Blum
Telephone: 212-935-5400
Facsimile: 212-753-0731
To the Subsidiary Company:
Commodore Applied Technologies, Inc.
150 East 58th Street
New York, NY 10155
Attention: Bentley J. Blum
Telephone: 212-935-5400
Facsimile: 212-753-0731
or to such other person at such other place as the Parent Company shall
designate to the Purchaser in writing.
In the event that the COES Preferred Shares are not converted
within three (3) business days of the Conversion Date, the Parent Company shall
be liable to Purchaser for actual damages incurred from the fourth business day
following the Conversion Date for such failure (provided that Purchaser has
delivered the original valid Notice of Conversion and the original
certificate(s) representing the COES Preferred Shares to be converted, or an
affidavit and indemnity agreement as to lost certificates reasonably
satisfactory to the Company). In the event the COES Preferred Shares are not
converted by the tenth (10th) business day following the Conversion Date, the
Parent Company shall pay to the Purchaser, by wire transfer, as liquidated
damages for such failure and not as a penalty, an amount in cash equal to one
(1%) percent per day of the Liquidation Preference for the COES Preferred Shares
to be converted which shall run from the tenth (10th) business day following the
Conversion Date; provided, however, that actual damages and liquidated damages
for a failure to deliver certificates of CXI Common Stock shall be determined in
accordance with Section 10.6, if both of the following conditions are satisfied
by the Parent Company: (i) the failure to deliver certificates of CXI Common
Stock is the result of a lack of available shares of CXI Common Stock and (ii)
the Parent Company commences, with ten (10) business days after the initial
Conversion Date to purchase or otherwise acquire the number of shares of CXI
Common Stock which is sufficient to permit conversion of all COES Preferred
Shares then outstanding at the Hypothetical Conversion Price (as hereinafter
defined) then in effect.
10.3 Mandatory Conversion. The COES Preferred Shares are
subject to mandatory conversion after five (5) years from the Closing Date, at
which time all COES
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<PAGE> 29
Preferred Shares will automatically be converted at the Conversion Price, upon
the terms set forth in this section. Such five year period will be extended by
the number of days during such period that (i) the Subsidiary Company's Common
Stock has been Delisted and/or (ii) a Suspension has been in effect and by the
number of days after the 90th day or the 120th day, whichever date is applicable
as provided in Section 8.2(g) herein, that Registration Statement was not
declared effective. Any particular day in which more than one of the foregoing
condition events shall have been in effect shall only be counted once in
determining the number of days by which to extend the five year period prior to
mandatory conversion. In addition, mandatory conversion shall not occur for so
long as certain default events specified in Section 5(e) of the Certificate of
Designation are continuing.
10.4 Reservation of CXI Common Stock Transferable Upon
Conversion. The Parent Company shall at all times reserve and keep available out
of its holdings of shares of CXI Common Stock, such number of shares of CXI
Common Stock as shall from time to time be sufficient to effect the conversion
of all then outstanding COES Preferred Shares and COES Warrants, the sufficiency
of which shall be determined (in the case of the COES Preferred Shares) by using
a Conversion Price (the "Hypothetical Conversion Price") derived from a
hypothetical closing market price that is 75% of either (i) the actual Average
Closing Bid Price on the Closing Date or (ii) the actual Average Closing Bid
Price from time to time, whichever is lower, and in the case of the COES
Warrants, by the exercise price thereof. The Parent Company hereby covenants and
agrees that if at any time the Hypothetical Conversion Price falls to a level
that would not enable all outstanding COES Preferred Shares to be fully
converted and the outstanding COES Warrants to be fully exercised, the Parent
Company will promptly purchase or otherwise acquire the number of shares of CXI
Common Stock sufficient to permit the conversion of all COES Preferred Shares
then outstanding at the Hypothetical Conversion Price then in effect and the
exercise of all outstanding COES Warrants.
10.5 Liquidated Damages. In the event of a Delisting, a
Cumulative Suspension or Insufficient CXI Common Stock (each a "Damage Event"),
the Parent Company will pay to Purchaser (and to all other holders of the
Shares), by wire transfer, as liquidated damages for such non-availability and
not as a penalty, an amount in cash equal to 2% per month of the Liquidation
Preference of only those COES Preferred Shares then eligible for conversion,
without regard to Section 5.8, for the first two months after the occurrence of
a Damage Event, and 3% per month for each month thereafter. Similar liquidated
damages shall be paid with respect to any COES Preferred Shares not initially
eligible for conversion when the Damage Event first occurred but which
subsequently become eligible for conversion, without regard to Section 5.8,
commending in the first month that such COES Preferred Shares become eligible
for such conversion. Such liquidated damages shall continue to accrue and shall
be payable until the Damage Event has been cured, and, if not paid, interest
thereon shall accrue at a rate of 2% per month. At the Purchaser's election,
such liquidated damages may be paid in cash or may be added to the principal of
the COES Preferred Shares for subsequent conversion purposes. Notwithstanding
the foregoing, in the case of a Delisting, after six months
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<PAGE> 30
from the date of such Delisting, the Parent Company shall have the option to
force Purchaser to as promptly as possible convert (in increments of no less
than $50,000) all or part of its COES Preferred Shares, subject to Purchaser
being able to sell the underlying Conversion Shares, and simultaneously sell
such Conversion Shares (where the conversion price therefor shall not be the
Conversion Price but instead shall equal 85% of the Purchaser's sale price of
the Conversion Shares, all as determined by Purchaser's actual trading records
(to be provided to the Company). In no event may the Company force Purchaser to
convert less than $50,000 of COES Preferred Shares at any one time.
Section 11. Redemption By Parent Company.
11.1 Parent Company's Right to Redeem. The Parent Company
shall have the right, at any time and from time to time, in its sole discretion,
to redeem in whole or in part the COES Preferred Shares then outstanding, except
that if the Purchaser or any Holder of the COES Preferred Shares has submitted a
Notice of Conversion, the Parent Company shall not have the right to redeem the
COES Preferred Shares which were submitted for conversion and the certificates
representing Conversion Shares should be delivered promptly according to Section
10.2 herein. If the Parent Company elects to redeem some, but not all, of the
COES Preferred Shares, the Parent Company shall redeem the COES Preferred Shares
pro rata among the Holders of all the COES Preferred Shares then outstanding.
The date of the Parent Company's redemption of COES Preferred Shares shall be
referred to as the "Redemption Date."
11.2 Redemption Price. The redemption price per COES Preferred
Share shall equal $125.
11.3 Mechanics of Redemption; Purchaser's Conversion Rights.
The Parent Company shall effect each such redemption by giving notice of its
election to redeem ("Redemption Notice"), by facsimile, by 5 P.M. New York City
time on the Redemption Date and shall provide a copy of such redemption notice
by overnight or 2-day courier, to Purchaser, all other Holders of COES Preferred
Shares and the Parent Company will redeem all or part of the COES Preferred
Shares. Upon the giving of any such Redemption Notice, and until the earlier of
either payment of the applicable redemption price or fifteen (15) business days
after the Redemption Date (or later as provided in Section 6(d) below), the
conversion rights in respect of the COES Preferred Shares and any other
outstanding shares of COES Convertible Preferred Stock called for redemptions
shall be suspended. Subject to the Parent Company's payment of the applicable
redemption price, the accrual of dividends in connection with the shares of COES
Convertible Preferred Stock called for redemption will suspend on the Redemption
Date.
11.4 Payment of Redemption Price. Upon receipt of a Redemption
Notice, Purchaser shall send its COES Preferred Shares being redeemed to the
Parent
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<PAGE> 31
Company or its Transfer Agent within three (3) business days of the receipt of
such Redemption Notice, and the Parent Company shall pay the applicable
redemption price within fifteen (15) business days of the Redemption Date (such
fifteen (15) business day period shall be extended for each day the COES
Preferred Shares being redeemed have not been delivered to the Parent or its
Transfer Agent beyond the third (3rd) business day after receipt of the
Redemption Notice). The Parent Company shall not be obligated to deliver the
redemption price unless the COES Preferred Shares so redeemed are delivered to
the Parent Company or its Transfer Agent, or, in the event one or more
certificates have been lost, stolen, mutilated or destroyed, Purchaser delivers
to the Parent Company a lost certificate affidavit reasonably satisfactory to
Parent Company and its Transfer Agent.
11.5 Default of Parent Company's Redemption. If the Parent
Company fails to pay the applicable redemption price to the Purchaser and/or
other Holders of the COES Preferred Shares being redeemed by the Parent Company
within fifteen (15) business days of the Redemption Date (such fifteen (15)
business day period shall be extended for each day the COES Preferred Shares
being redeemed have not been delivered to the Parent or its Transfer Agent
beyond the third (3rd) business day after receipt of the Redemption Notice), the
Parent Company shall be deemed to have defaulted on their right to redeem such
COES Preferred Shares. Such COES Preferred Shares shall thereafter become
immediately convertible and the Conversion Price for such COES Preferred Shares
shall be equal to 75% of the Average Closing Bid Price. The Conversion Price for
such COES Preferred Shares shall not be subject to a floor.
11.6 Blackout Period. Notwithstanding the foregoing, the
Parent Company may not either send out a redemption notice or effect a
redemption during a Blackout Period (defined as a period during which the Parent
Company's or the Subsidiary Company's officers or directors would not be
entitled to buy or sell stock because of their holding of material non-public
information). In the event the Parent Company initiates a redemption during a
Blackout Period without having first made public material non-public
information, the Parent Company or the Subsidiary Company shall disclose the
non-public information that resulted in the Blackout Period, and no redemption
shall be effected until at least 10 days after the Company or the Subsidiary
Company shall have given the Holder written notice that the Blackout Period has
been lifted.
Section 12. Notices. All notices, requests, consents and other
communications hereunder shall be in writing, shall be mailed by first class
registered or certified airmail, postage prepaid, or shall be sent by overnight
courier or by facsimile, and shall be deemed given when received:
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<PAGE> 32
(a) if to the Parent Company, to
Commodore Environmental Services, Inc.
150 East 58th Street
New York, NY 10155
Attention: Bentley J. Blum
Telephone: 212-935-5400
Facsimile: 212-753-0731
copy to:
Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel
153 East 53rd Street
New York, NY 10022
Attention: Stephen A. Weiss, Esq.
Telephone: 212-801-9200
Facsimile: 212-223-7161
or to such other person at such other place as the Parent Company shall
designate to the Purchaser in writing;
(b) if to the Subsidiary Company:
Commodore Applied Technologies, Inc.
150 East 58th Street
New York, NY 10155
Attention: Bentley J. Blum
Telephone: 212-935-5400
Facsimile: 212-753-0731
copy to:
Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel
153 East 53rd Street
New York, NY 10022
Attention: Stephen A. Weiss, Esq.
Telephone: 212-801-9200
Facsimile: 212-223-7161
or to such other person at such other place as the Subsidiary Company shall
designate to the Purchaser in writing;
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<PAGE> 33
(c) if to the Purchaser, to:
EDJ Limited
c/o Porter Capital Management
100 Shoreline, Suite 211B
Mill Valley, California 94941
Attn: Mr. Jeffrey Porter
copy to: such person or entity as may be identified from time
to time by written notice from the Purchaser.
or to such other address or addresses as may have been furnished to the Parent
Company and the Subsidiary Company in writing; or
(d) if to any transferee or transferees of a Purchaser, at
such address or addresses as shall have been furnished to the Parent Company and
the Subsidiary Company at the time of the transfer or transfers, or at such
other address or addresses as may have been furnished by such transferee or
transferees to the Parent Company and the Subsidiary Company in writing.
Section 13. Miscellaneous.
13.1 Entire Agreement. This Agreement and the Exhibits hereto
embodies the entire agreement and understanding between the parties thereto with
respect to the subject matter hereof and supersedes all prior oral or written
agreements and understandings relating to the subject matter hereof. No
statement, representation, warranty, covenant or agreement or any kind not
expressly set forth in this Agreement or the Exhibits hereto shall affect or be
used to interpret, change or restrict, the express terms and provisions of this
Agreement.
13.2 Amendments. This Agreement may not be modified or amended
except pursuant to an instrument in writing singed by the Parent Company, the
Subsidiary Company and by Purchaser.
13.3 Headings. The headings of the various sections of this
Agreement have been inserted for convenience of reference only and shall not be
deemed to be part of this Agreement.
13.4 Severability. In case any provision contained in this
Agreement should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.
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<PAGE> 34
13.5 Governing Law/Jurisdiction. This Agreement will be
construed and enforced in accordance with and governed by the laws of the State
of New York, except for matters arising under the Securities Act, without
reference to principles of conflicts of law. Each of the parties consents to the
jurisdiction of the courts of or located in the State of New York, specifically
the Southern District of New York and/or the Supreme Court of the state of New
York in connection with any dispute arising under this Agreement and hereby
waives, to the maximum extent permitted by law, any objection, including any
objection based on forum non conveniens, to the bringing of any such proceeding
in such jurisdictions. Each party hereby agrees that if another party to this
Agreement obtains a judgment against it in such a proceeding, the party which
obtained such judgment may enforce same by summary judgment in the courts of any
country having jurisdiction over the party against whom such judgment was
obtained, and each party hereby waives any defenses available to it under local
law and agrees to the enforcement of such a judgment. In addition, the parties
agree that the party against whom such judgment was obtained will pay the legal
fees of the party obtaining such judgment. Each party to this Agreement
irrevocably consents to the service of process in any such proceeding by the
mailing of copies thereof by registered or certified mail, postage prepaid, to
such party at its address set forth herein. Nothing herein shall affect the
right of any party to serve process in any other manner permitted by law.
13.6 Recovery of Attorney's Fees. Should any party bring an
action to enforce the terms of this Agreement then, if Purchaser prevails in
such action it should be entitled to recovery of its attorney's fees from the
Parent Company or the Subsidiary Company, and if the Parent Company or the
Subsidiary Company prevails in such action it shall be entitled to recovery of
its attorney's fees from the Purchaser.
13.7 Fees. Notwithstanding Section 13.6, the Parent Company
and the Subsidiary Company acknowledge that Purchaser shall have no
responsibility for the payment of any of its fees in connection with this
offering.
13.8 Counterparts/Facsimile. This Agreement may be executed in
two or more counterparts, each of which shall constitute an original, but all of
which, when taken together, shall constitute but one instrument, and shall
become effective when one or more counterparts have been signed by each party
hereto and delivered to the other party. In lieu of the original, a facsimile
transmission copy of the original shall be as effective and enforceable as the
original.
13.9 Publicity. The Purchaser shall not issue any press
releases or otherwise make any public statement with respect to the transactions
contemplated by this Agreement without the prior written consent of the Parent
Company and the Subsidiary Company, except as may be required by applicable law
or regulation.
13.10 Survival. The representations and warranties in this
Agreement shall survive Closing.
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<PAGE> 35
Section 14. Limitation on Conversions. Notwithstanding
anything contained in this Agreement, the Stock Purchase Warrant, or the
Certificate of Designations, neither the Purchaser nor any subsequent Holder of
the COES Preferred Shares may elect to convert into CXI Common Stock more than
twenty (20%) percent of the aggregate number (the "Initial Number") of shares of
COES Preferred Shares owned by the Purchaser upon the consummation of the
acquisition by the Purchaser of the COES Preferred Shares pursuant to this
Agreement during any one calendar month, calculated from the first month during
which a conversion may occur; provided, that, such limitation on conversion
shall be on a cumulative basis so that if, for example, no shares of COES
Preferred Shares are converted into CXI Common Stock in any one month, then in
the next month 40% of the Initial Number of shares of COES Preferred Shares may
be converted into CXI Common Stock. In any event, the rights of conversion set
forth in this Section 14 shall be cumulative, so that any shares not converted
in any one calendar month may be accumulated with the number of convertible
shares in the next calendar month. No transfer or other disposition of COES
Preferred Shares by the Purchaser or any subsequent transferee shall be
effective unless prior thereto the transferee agrees in writing satisfactory to
COES and received by COES to be bound by the terms and conditions of this
Section.
Section 15. If, but only if, COES consummates during 1997 the
purchase of 50% or more of the voting capital stock of Lanxide Corporation, COES
shall promptly issue to the holders of the then outstanding shares of COES
Series D Preferred Stock, in proportion to their interests therein, three (3)
year warrants for such holders, in the aggregate, to purchase, in the aggregate,
three percent (3%) of the total number of shares of Lanxide Corporation common
stock and common stock equivalents so acquired by COES at the same price per
share paid by COES (which is presently estimated to be approximately $7.41 per
share but which may change in negotiations). The form of warrant shall contain
customary terms and provisions.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be signed by their duly authorized representatives the day and year
first above written.
COMMODORE ENVIRONMENTAL SERVICES, INC.
By /s/ Paul E. Hannesson
--------------------------------------------
COMMODORE APPLIED TECHNOLOGIES, INC.
By /s/ Michael D. Fullwood
--------------------------------------------
Purchaser: EDJ LIMITED
-----------------------------------
By /s/
--------------------------------------------
Name:
Title:
36
<PAGE> 1
SECURITIES HAVE NOT REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN EXEMPTION
FROM REGISTRATION UNDER REGULATION D PROMULGATED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"). THIS AGREEMENT SHALL NOT CONSTITUTE AN
OFFER TO SELL NOR A SOLICITATION OF AN OFFER TO BUY THE SECURITIES IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL. THE
SECURITIES ARE "RESTRICTED" AND MAY NOT BE RESOLD OR TRANSFERRED EXCEPT AS
PERMITTED UNDER THE ACT PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.
AMENDMENT NO. 1 TO
7% PREFERRED STOCK
SECURITIES PURCHASE AGREEMENT
AND RELATED STOCK PURCHASE WARRANT
COMMODORE ENVIRONMENTAL SERVICES, INC.
AND
COMMODORE APPLIED TECHNOLOGIES, INC.
THIS AMENDMENT NO. 1 is made as of the 20th day of August,
1997, by and between COMMODORE ENVIRONMENTAL SERVICES, INC., traded on
the "Pinksheets" under the "COES' (the "Parent Company"), a
corporation, with its principal office at 150 East 58th Street, New
York, NY 10155, COMMODORE APPLIED TECHNOLOGIES INC., AMEX symbol "CXI"
(the "Subsidiary Company"), a corporation, with its principal office at
150 East 58th Street, New York, NY 10155 and the undersigned (the
"Purchaser"), with its principal office at the address set forth below
the signature of the Purchaser on the signature page hereof.
Reference is made to the 7% Preferred Stock Securities
Purchase Agreement made as of the 14th day of August, 1997 (the "7%
Preferred Stock Securities Purchase Agreement") by and among the
parties hereto. All capitalized terms herein are defined as set forth
in the 7% Preferred Stock Securities Purchase Agreement or by reference
therein.
IN CONSIDERATION of the mutual covenants contained in this
Amendment, the Parent Company, Subsidiary Company and the Purchaser
agree as follows:
Section 1. Amendment of the Definition of the Term "Conversion
Price". Section 1 of the Agreement is hereby amended by deleting
therefrom in its entirety the definition of the term "Conversion Price"
and substituting therefor the following:
<PAGE> 2
"Conversion Price" means an amount equal to a fifteen (15%) percent
discount from either the lower of (i) the average of the low prices, or
(ii) the average of the closing bid prices of the CXI Common Stock as
reported by Bloomberg, L.P. ("Bloomberg") for the previous five (5)
business days ending on the day before the Conversion Date (the
"Average Closing Bid Price"); provided, however, if the Average Closing
Bid Price of the CXI Common Stock, as reported by Bloomberg , for any
consecutive thirty (30) days (such thirtieth day shall be the "First
Trigger Date") is equal to or less than $2.00 (the "Floor Average"),
the conversion price shall equal $2.00; if the Floor Average for any
consecutive thirty (30) days beginning any day after the First Trigger
Date is less than $2.00 ("Second Trigger Date"), the conversion price
shall equal $1.90; if the Floor Average for any thirty (30) days
beginning any day after the Second Trigger Date is less than $1.90 (the
"Third Trigger Date"), the conversion price shall equal $1.80; if the
Floor Average for any consecutive thirty (30) days beginning any day
after the Third Trigger Date is less than $1.80 (the "Fourth Trigger
Date"), the conversion price shall equal $1.70; if the Floor Average
for any consecutive thirty (30) days beginning any day after the Fourth
Trigger Date is less than $1.70 (the "Fifth Trigger Date"), the
conversion price shall equal $1.60; if the Floor Average for any
consecutive thirty (30) days beginning any day after the Fifth Trigger
Date is less than $1.60, the conversion price shall equal $1.50.
Subject to Section 11.5 herein, in no event shall the Conversion Price
be lower than $1.50 per share of CXI Common Stock. If the CXI Common
Stock is not traded on the American Stock Exchange, the Average Closing
Bid Price shall be the average closing bid price (and if not available,
the mean of the high and low prices) of the Common Stock on the
over-the -counter-market or the principal national securities exchange
or the Nasdaq National Market System or Nasdaq SmallCap Market System
on which the CXI Common Stock is traded for the previous five (5)
business days ending on the day before the Conversion Date.
The Conversion Price shall be equitably adjusted accordingly on a pro
rata basis in the event of the happening of certain events that would
affect the CXI Common Stock or COES Convertible Preferred Stock's value
including, but not limited to, forward and reverse stock splits,
issuance of stock dividends, subdivision of shares, combinations,
reclassifications, or the like (collectively "Reclassifications"). An
adjustment made pursuant to this section shall become effective
immediately after the effective date of such event retroactive to the
record date, if any, for such an event."
Section 2. Miscellaneous.
2.1 Headings. The headings of the various sections of this
Amendment have been inserted for convenience of reference only and shall not be
deemed to be part of this Amendment.
<PAGE> 3
2.2 Counterparts/Facsimile. This Amendment may be executed in
two or more counterparts, each of which shall constitute an original, but all of
which, when taken together, shall constitute but one instrument, and shall
become effective when one or more counterparts have been signed by each party
hereto and delivered to the other party. In lieu of the original, a facsimile
transmission copy of the original shall be as effective and enforceable as the
original.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be signed by their duly authorized representatives the day and year
first above written.
COMMODORE ENVIRONMENTAL SERVICES, INC.
By /s/ Paul E. Hannesson
--------------------------------------------------
COMMODORE APPLIED TECHNOLOGIES, INC.
By /s/ Michael D. Fullwood
--------------------------------------------------
Purchaser: EDJ LIMITED
By /s/
--------------------------------------------------
Name:
Title:
Purchaser's Address: Deltec Panamerica Trust Company
Deltec House
Lyman Cay
Box N-3229
Nassau, Bahamas
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be signed by their duly authorized representatives the day and year
first above written.
COMMODORE ENVIRONMENTAL SERVICES, INC.
By
--------------------------------------------------
COMMODORE APPLIED TECHNOLOGIES, INC.
By
--------------------------------------------------
Purchaser: PORTER PARTNERS, L.P.
By /s/
--------------------------------------------------
Name:
Title:
Purchaser's Address: c/o Porter Capital Management
100 Shoreline
Suite 211B
Mill Valley, California 94941
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be signed by their duly authorized representatives the day and year
first above written.
COMMODORE ENVIRONMENTAL SERVICES, INC.
By
--------------------------------------------------
COMMODORE APPLIED TECHNOLOGIES, INC.
By
--------------------------------------------------
Purchaser: ELARA LTD.
By /s/
--------------------------------------------------
Name:
Title:
Purchaser's Address: P.O. Box 438
Tropic Isle Building
Wickhams Cay
Road Town, Tortolla
British Virgin Islands
<PAGE> 1
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER REGULATION D PROMULGATED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "1933 ACT"). THIS STOCK PURCHASE WARRANT SHALL NOT
CONSTITUTE AN OFFER TO SELL NOR A SOLICITATION OF AN OFFER TO BUY THE SECURITIES
IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL. THE
SECURITIES ARE "RESTRICTED" AND MAY NOT BE RESOLD OR TRANSFERRED EXCEPT AS
PERMITTED UNDER THE 1933 ACT PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.
No. 97-D7
STOCK PURCHASE WARRANT
To Purchase 325,000 Shares of Common Stock of
COMMODORE APPLIED TECHNOLOGIES, INC.
from
COMMODORE ENVIRONMENTAL SERVICES, INC.
THIS CERTIFIES that, for value received, ELARA LTD. (the "Investor"),
is entitled upon the terms and subject to the conditions hereinafter set forth,
at any time on or after August 15, 1997 (the "Initial Exercise Date") and on or
prior to August 14, 2002 (the "Termination Date") but not thereafter, to
subscribe for and purchase from COMMODORE ENVIRONMENTAL SERVICES, INC., a
Delaware corporation (the "Parent Company"), 325,000 shares of its holdings of
Common Stock of COMMODORE APPLIED TECHNOLOGIES, INC. ("CXI Common Stock"), a
Delaware corporation (the "Subsidiary Company") (the "Warrant Shares"). The
purchase price of one share of CXI Common Stock (the "Exercise Price") under
this Warrant shall be Five Dollars and Fifteen Cents ($5.15). The Exercise Price
and the number of Warrant Shares shall be subject to adjustment as provided
herein. This warrant is being issued pursuant to a Preferred Stock Securities
Purchase Agreement, dated August 14, 1997, complete with all listed exhibits
thereto (the "Agreement") by and between the Parent Company, Subsidiary Company
and the Investor and is subject to its terms. In the event of any conflict
between the terms of this Warrant and the Agreement, the Agreement shall
control.
1. Title of Warrant. Prior to the expiration hereof and
subject to compliance with applicable laws, this Warrant and all rights
hereunder are transferable, in whole or in part, at the office or agency of the
Parent Company, by the holder hereof in person or by duly authorized attorney,
upon surrender of this Warrant together with the Assignment Form annexed hereto
properly endorsed.
<PAGE> 2
2. Authorization of Shares. The Parent Company and the
Subsidiary Company covenant that all shares of CXI Common Stock which may be
transferred upon the exercise of rights represented by this Warrant will, upon
exercise of the rights represented by this Warrant, be duly authorized, validly
issued, fully paid and non-assessable and free from all taxes, liens and
charters in respect of the issue thereof (other than taxes in respect of any
transfer occurring contemporaneously with such issue).
3. Exercise of Warrant. Exercise of the purchase rights
represented by this Warrant may be made at any time or times, in whole or in
part, on or after the Initial Exercise Date, and before the close of business on
the Termination Date, or such earlier date on which this Warrant may terminate
as provided in paragraph 11(a) below, by the surrender of this Warrant and the
Form of Election to Purchase annexed hereto duly executed, at the office of the
Parent Company (with copy to Stephen A. Weiss, Esq., Greenberg, Traurig,
Hoffman, Lipoff, Rosen & Quentel, 153 East 53rd Street, New York, NY 10022 or
such other office or agency of the Parent Company as it may designate by notice
in writing to the registered holder hereof at the address of such holder
appearing on the books of the Company) and upon payment of the Exercise Price of
the shares thereby purchased; whereupon the holder of this Warrant shall be
entitled to receive a certificate for the number of shares of CXI Common Stock
so purchased immediately. In the event upon exercising the Warrant, the transfer
agent requires an opinion of counsel, the Parent Company or the Subsidiary
Company shall have such opinion furnished to the transfer agent to the transfer
agent's satisfaction. In the event the Investor is relying on an exemption from
registration under the 1933 Act, the Warrant Shares shall be issued immediately,
if the Investor furnishes an opinion of counsel, reasonably satisfactory to the
Subsidiary Company, that such exemption from registration be available.
Certificates for shares purchased hereunder shall be delivered to the holder
hereof within three (3) business days after the date on which this Warrant shall
have been exercised as aforesaid. Payment of the Exercise Price of the shares
may be by certified check or cashier's check or by wire transfer to an account
designated by the Parent Company in an amount equal to the Exercise Price
multiplied by the number of shares being purchased.
4. No Fractional Shares or Scrip. No fractional shares or
scrip representing fractional shares shall be issued upon the exercise of this
Warrant.
5. Charges, Taxes and Expenses. Reissuance of certificates in
the name of the holder hereof for shares of CXI Common Stock upon the exercise
of this Warrant shall be made without charge to the holder hereof for any issue
or transfer tax or other incidental expense in respect of the issuance of such
certificate, all of which taxes and expenses shall be paid by the Company, and
such certificates shall be issued in the name of the holder of this Warrant or
in such name or names as may be directed by the holder of this Warrant;
provided, however, that in the event certificates for shares of CXI Common Stock
are to be issued in a name other than the name of the holder of this Warrant,
this Warrant when surrendered for exercise other than the name of the holder of
this Warrant, this Warrant when surrendered for exercise shall be accompanied by
the Assignment Form attached hereto duly executed by the holder hereof, together
with evidence satisfactory to the Subsidiary Company that such transfer or
assignment is being made in compliance with all applicable federal and state
securities laws; and provided, further, that upon any transfer involved in the
issuance or delivery of any certificates for shares
-2-
<PAGE> 3
of CXI Common Stock, the Subsidiary Company may require, as a condition thereto,
the payment of a sum sufficient to reimburse it for any transfer tax incidental
thereto.
6. Closing of Books. The Parent Company and the Subsidiary
Company will at no time close its shareholder books or records in any manner
which interferes with the timely exercise of this Warrant.
7. Voting Rights. This Warrant does not entitle the holder
hereof to any rights as a shareholder of the Subsidiary Company prior to the
exercise hereof except for the voting rights set forth in this paragraph. If,
however, at the time of the surrender of this Warrant and purchase the holder
hereof shall be entitled to exercise this Warrant, the shares so purchased shall
be and shall be deemed to be transferred and reissued to such holder as the
record owner of such shares as of the close of business on the date on which
this Warrant shall have been exercised. Prior to the date of such exercise and
except as otherwise required by applicable Delaware law, the holder of this
Warrant shall vote together with the Common Stock and not as a separate class on
any transaction with respect to which the Common Stock is entitled to vote
pursuant to applicable Delaware law or the Certificate of Incorporation. Each
Warrant shall be entitled to a number of votes per share equal to (i) one (1)
multiplied by (ii) the number of shares of Common Stock which may be acquired
upon exercise of this Warrant if the same were exercisable and were so exercised
on the record date used to determine shares eligible to vote on such
transaction.
8. Assignment and Transfer of Warrant. This Warrant may be
assigned by the surrender of this Warrant and the Assignment Form annexed hereto
duly executed at the office of the Parent Company (or such other office or
agency of the Parent Company as it may designate by notice in writing to the
registered holder hereof at the address of such holder appearing on the books of
the Parent Company); provided, however, that this Warrant may not be resold or
otherwise transferred except (i) in a transaction registered under the
Securities Act, or (ii) in a transaction pursuant to an exemption, if available,
from such registration and whereby, if requested by the Parent Company or the
Subsidiary Company, an opinion of counsel reasonably satisfactory to the Parent
Company or the Subsidiary Company is obtained by the holder of this Warrant to
the effect that the transaction is so exempt.
9. Loss, Theft, Destruction or Mutilation of Warrant. Each of
the Parent Company and the Subsidiary Company represents and warrants that upon
receipt by the Parent Company or the Subsidiary Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of any Warrant
or stock certificate, and in case of loss, reimbursement to the Parent Company
or the Subsidiary Company of all reasonable expenses incidental thereto, and
upon surrender and cancellation of such Warrant or stock certificate, if
mutilated, the Parent Company or the Subsidiary Company will make and deliver a
new Warrant or stock certificate of like tenor and dated as of such
cancellation, in lieu of this Warrant or stock certificate.
10. Saturdays, Sundays, Holidays, etc. If the last or
appointed day for the taking of any action or the expiration of any right
required or granted herein shall be a Saturday, Sunday or a legal holiday, then
such action may be taken or such right may be exercised on the next succeeding
day not a legal holiday.
-3-
<PAGE> 4
11. Effect of Certain Events.
(a) If at any time:
(i) the Parent Company or the Subsidiary Company
shall declare any cash dividend upon the CXI Common Stock;
(ii) the Parent Company or the Subsidiary Company
shall declare a dividend upon the CXI Common Stock payable in securities (other
than a dividend payable solely in CXI Common Stock) or make any special dividend
or other distribution to the holders of its Units;
(iii) the Parent Company or the Subsidiary Company
proposes (A) to sell or otherwise convey all or substantially all of its assets
or (B) to effect a transaction (by merger or otherwise) in which more than 50%
of the voting power of the Parent Company or the Subsidiary Company is disposed
of (collectively, a "Sale or Merger Transaction") in which the consideration to
be received by the Parent Company or the Subsidiary Company or its shareholders
consists solely of cash;
(iv) there shall be a voluntary or involuntary
dissolution, liquidation or winding-up of the Parent Company or the Subsidiary
Company;
the Parent Company or the Subsidiary Company shall give the holder of this
Warrant fifteen (15) days' written notice of the proposed effective date, by
certified or registered mail, postage prepaid, addressed to the registered
holder of this Warrant at the address of such holder as shown on the books of
the Parent Company. Such notice shall also specify, in the case of any such
dividend, distribution or option rights, the date on which the holders of Common
Shares shall be entitled thereto. Any notice relating to a Sale or Merger
Transaction shall also specify the date on which the holders of Common Shares
shall be entitled to exchange their Common Shares for securities or other
property deliverable upon such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation or winding-up, as the case may be. If the
Holder of the Warrant does not exercise this Warrant prior to the occurrence of
an event described above, except as provided in Section 13(a), the Holder shall
not be entitled to receive the benefits accruing to existing holders of the
Common Shares in such event.
(b) In case the Parent Company or Subsidiary Company
shall at any time effect a Sale or Merger Transaction in which the consideration
to be received by the Parent Company or the Subsidiary or their shareholders
consists in part of consideration other than cash, or shall issue any shares of
its capital stock in a reclassification of the CXI Common Stock, the holder of
this Warrant shall have the right thereafter to purchase, by exercise of action,
the kind and amount of shares and other securities and property which it would
have owned or have been entitled to receive after happening of such transaction
had this Warrant been exercised immediately prior thereto.
-4-
<PAGE> 5
12. Registration Rights. The Subsidiary Company shall use its
best efforts to file with the SEC not later than September 15, 1997 a shelf
registration statement under the Securities Act on Form S-3, if the Subsidiary
Company is eligible to file a registration statement under such form (and if the
Subsidiary Company is not eligible to file a registration statement under Form
S-3, to file with the SEC a registration statement under the Securities Act on
Form S-1 or any other form which is appropriate), to register the Conversion
Shares and Warrant Shares, and shall use its best efforts to cause such
registration statement to be declared effective by the SEC by not later than
December 15, 1997. Such registration statement will also cover shares issuable
upon conversion of Series A Preferred Stock of CXI sold by CXI pursuant to a
certain Stock Purchase Agreement dated as of August 15, 1997. In the event of
the failure of the Subsidiary Company to procure registration of the Warrant
Shares in accordance with Section 8.2(a) of the Agreement prior to any of the
dates set forth below in this Section 12, the Parent Company will pay to the
Investor by wire transfer, as liquidated damages for such failure and not as a
penalty, for each month or part thereof for which such failure continues or in
the event of a Suspension (as defined in Section 8.7 of the Agreement) after
such date, an amount equal to the following percentages of the product of the
Exercise Price and the number of Warrants held by the Investor which were
acquired by the Investor pursuant to the Agreement and have not been exercised
at such calculation date:
<TABLE>
<CAPTION>
Required Effective Date Percentage
----------------------- ----------
<S> <C>
On or before November 19, 1997 1%
Between November 20 and
December 19, 1997 2%
After December 20, 1997 3%
</TABLE>
If the Parent Company does not remit the damages to the Investor as set forth
above, the Parent Company will pay the Investor reasonable costs of collection,
including attorneys fees, in addition to the liquidated damages. Such payment
shall be made to the Investor if due, monthly in arrears. The payment of such
liquidated damages shall not relieve the Subsidiary Company from its obligations
to register the Conversion Shares and Warrant Shares and shall not affect or
limit Investor's other rights or remedies as set forth in this Warrant or the
Agreement. If not paid as required, interest on such damages will accrue at a
rate of 2% per month. Notwithstanding the foregoing, the liquidated damages
shall be limited to 1% per month or any portion thereof if the delay in
effectiveness of the registration statement beyond November 19, 1997 or the
Suspension thereafter shall be for reasons outside the control of the Parent
Company or the Subsidiary
-5-
<PAGE> 6
Company. The obligations of the Parent Company and the Subsidiary Company under
this paragraph 12 shall cease and terminate upon the earlier to occur of (x)
such time as all of the Warrant Shares have been re-sold or (y) such time as all
of the Warrant Shares may be re-sold pursuant to Rule 144 under the Securities
Act
13. Adjustments of Exercise Price and Number of Warrant
Shares. The number and kind of securities purchasable upon the exercise of this
Warrant and the Exercise Price shall be subject to adjustment from time to time
upon the happening of certain events, as hereinafter set forth:
(a) In case the Subsidiary Company shall at any time subdivide
its outstanding shares of Common Stock ("CXI Common Shares") into a greater
number of CXI Common Shares or declare a dividend or distribution upon its CXI
Common Shares payable in CXI Common Shares, the Exercise Price in effect
immediately prior to such subdivision or declaration shall be proportionately
reduced, and the number of Warrant Shares transferable upon exercise of the
Warrants shall be proportionately increased. Conversely, in case the outstanding
CXI Common Shares of the Subsidiary Company shall be combined into a smaller
number of CXI Common Shares, the Exercise Price in effect immediately prior to
such combination shall be proportionately increased, and the number of Warrant
Shares issuable upon exercise of the Warrants shall be proportionately reduced.
(b) (x) In case the Subsidiary Company shall issue shares of
CXI Common Stock ("Additional Shares") or (y) in case the Subsidiary Company
shall issue rights, options or warrants to purchase shares of CXI Common Stock
or securities convertible into or exchangeable for CXI Common Stock, in any case
at a Price Per Share (as defined in paragraph (c) below) which is lower than the
price per share of CXI Common Stock (as reported by Bloomberg, L.P.
("Bloomberg") over the 5-day trading period ending on the day prior to the
Closing (the "Trigger Price"), the number of Warrant Shares hereafter
purchasable upon the exercise of this Warrant shall be determined by multiplying
the number of Warrant Shares theretofore purchasable upon exercise of this
Warrant by the following fraction:
(A)(i) The number of shares of CXI Common Stock outstanding immediately
prior to the issuance of such Additional Shares or rights, options,
warrants or convertible securities, plus (ii) the number of Additional
Shares actually subscribed for and purchased and shares of CXI Common
Stock issuable upon conversion or exercise of such rights, options,
warrants, or convertible securities, divided by
(B)(i) The number of shares of CXI Common Stock outstanding immediately
prior to issuance of such Additional Shares or rights, options,
warrants or convertible securities plus (ii) the number of shares of
CXI Common Stock which the aggregate Proceeds (as defined in paragraph
(c) below) received by the Subsidiary Company upon the sale of such
Additional Shares or exercise or conversion of such rights, options,
warrants and convertible securities would purchase at the Trigger
Price.
Such adjustment shall be made whenever such Additional Shares or
rights, options, warrants or convertible securities are issued, and shall become
effective on the date of distribution
-6-
<PAGE> 7
retroactive to the record date for the determination of stockholders entitled to
receive such rights, options or warrants.
(c) For purposes of this Section 13, "Price Per Share" shall
be defined and determined according to the following formula:
R
P = ---
N
where
P = Price Per Share,
R = the "Proceeds" received or receivable by the
Subsidiary Company which (i) in the case of shares of CXI
Common Stock is the total amount received or receivable by the
Subsidiary Company in consideration for the sale and issuance
of such shares; (ii) in the case of rights, options or
warrants to subscribe for or purchase shares of CXI Common
Stock or of securities convertible into or exchangeable or
exercisable for shares of CXI Common Stock, is the total
amount received or receivable by the Subsidiary Company in
consideration for the sale and issuance of such rights,
options, warrants or convertible or exchangeable or
exercisable securities, plus the minimum aggregate amount of
additional consideration, other than the surrender of such
convertible or exchangeable securities, payable to the CXI
Company upon exercise, conversion or exchange thereof; and
(iii) in the case of rights, options or warrants to subscribe
for or purchase convertible or exchangeable or exercisable
securities, is the total amount received or receivable by the
Subsidiary Company in consideration for the sale and issuance
of such rights, options or warrants, plus the minimum
aggregate amount of additional consideration other than the
surrender of such convertible or exchangeable securities,
payable upon the exercise, conversion or exchange of such
rights, options or warrants and upon the conversion or
exchange or exercise of the convertible or exchangeable or
exercisable securities; provided that in each case the
proceeds received or receivable by the Subsidiary Company
shall be deemed to be the gross cash proceeds without
deducting therefrom any compensation paid or discount allowed
in the sale, underwriting or purchase thereof by underwriters
or dealers or other performing similar services or any
expenses incurred in connection therewith,
and
N = the "Number of Shares," which (i) in the
case of CXI Common Stock is the number of shares issued; (ii)
in the case of rights, options or warrants to subscribe for or
purchase shares of CXI Common Stock or of securities
convertible into or exchangeable or exercisable for shares of
CXI Common Stock,
-7-
<PAGE> 8
is the maximum number of shares of CXI Common Stock initially
issuable upon exercise, conversion or exchange thereof; and
(iii) in the case of rights, options or warrants to subscribe
for or purchase convertible or exchangeable or exercisable
securities, is the maximum number of shares of CXI Common
Stock initially issuable upon conversion, exchange or exercise
of the convertible, exchangeable or exercisable securities
issuable upon the exercise of such rights, options or
warrants.
If the Subsidiary Company shall issue shares of CXI Common
Stock or rights, options, warrants or convertible or exchangeable or exercisable
securities for a consideration consisting, in whole or in part, of property
other than cash, the amount of such consideration shall be determined in good
faith by the Board of Directors of the Subsidiary Company whose determination
shall be conclusive.
(d) Whenever the number of Warrant Shares purchasable upon the
exercise of this Warrant is adjusted, as herein provided, the Exercise Price
payable upon exercise of this Warrant shall be adjusted by multiplying such
Exercise Price immediately prior to such adjustment by a fraction, of which the
numerator shall be the number of Warrant Shares purchasable upon the exercise of
this Warrant immediately prior to such adjustment, and of which the denominator
shall be the number of Warrant Shares purchasable immediately thereafter.
(e) No adjustment in the number of Warrant Shares purchasable
hereunder shall be required unless such adjustment would result in an increase
or decrease of at least one percent (1%) of the Exercise Price; provided that
any adjustments which by reason of this paragraph (e) are not required to be
made shall be carried forward and taken into account in any subsequent
adjustment. All calculations shall be made to the nearest cent or to the nearest
one-thousandth of a share, as the case may be.
(f) No adjustment in the number of Warrant Shares purchasable
upon the exercise of this Warrant need be made under paragraph (b) or (c) if the
Subsidiary Company issues or distributes to the holder of this Warrant the
shares, rights, options, warrants or convertible or exchangeable securities, or
evidences of indebtedness or assets referred to in those paragraphs which the
holder of this Warrant would have been entitled to receive had this Warrant been
exercised prior to the happening of such event or the record date with respect
thereto. In no event shall the Subsidiary Company be required or obligated to
make any such distribution otherwise than in its sole discretion. No adjustment
in the number of Warrant shares purchasable upon the exercise of this Warrant
need be made for sales of CXI Common Stock pursuant to a Subsidiary Company plan
for reinvestment of dividends or interest. No adjustment need be made for a
change in the par value of the CXI Common Stock.
(g) In the event that at any time, as a result of an
adjustment made pursuant to paragraph (a) above, the holder of this Warrant
shall become entitled to purchase any securities of the Subsidiary Company other
than shares of CXI Common Stock, thereafter the number of such other shares so
purchasable upon exercise of this Warrant and the Exercise Price of such shares
shall be subject to adjustment from time to time in a manner and on terms as
nearly equivalent as
-8-
<PAGE> 9
practicable to the provisions with respect to the Warrant Shares contained in
paragraphs (a) through (g), inclusive, above.
14. Voluntary Adjustment by the Parent Company or the
Subsidiary Company. The Parent Company or the Subsidiary Company may at its
option, at any time during the term of this Warrant, reduce the then current
Exchange Price to any amount and for any period of time deemed appropriate by
the Board of Directors of the Parent Company or the Subsidiary Company.
15. Notice of Adjustment. Whenever the number of Warrant
Shares or number or kind of securities or other property purchasable upon the
exercise of this Warrant or the Exercise Price is adjusted, as herein provided,
the Parent Company or the Subsidiary Company shall promptly mail by registered
or certified mail, return receipt requested, to the transfer agent for the CXI
Common Stock and to the holder of this Warrant notice of such adjustment or
adjustments setting forth the number of Warrant Shares (and other securities or
property) purchasable upon the exercise of this Warrant and the Exercise Price
of such Warrant Shares after such adjustment, setting forth a brief statement of
the facts requiring such adjustment and setting forth computation by which such
adjustment was made. Such notice, in absence of manifest error, shall be
conclusive evidence of the correctness of such adjustment.
16. Authorized Shares. The Parent Company covenants that
during the period the Warrant is outstanding, it will reserve from its holdings
of CXI Common Stock a sufficient number of shares to provide for the transfer of
CXI Common Stock upon the exercise of any purchase rights under this Warrant.
Such reservation of shares of CXI Common Stock shall be in addition to those
shares of CXI Common Stock reserved pursuant to the Parent Company's Certificate
of Designation for its Series D Preferred Stock. The Parent Company and the
Subsidiary Company further covenant that the issuance of this Warrant shall
constitute full authority to their officers who are charged with the duty of
executing stock certificates to execute and issue the necessary certificates for
shares of the Subsidiary Company's Common Stock upon the exercise of the
purchase rights under this Warrant. The Parent Company and the Subsidiary
Company will take all such reasonable action as may be necessary to assure that
such shares of CXI Common Stock may be transferred and reissued as provided
herein without violation of any applicable law or regulation, or of any
requirements of AMEX or any domestic securities exchange upon which the CXI
Common Stock may be listed.
17. Restrictions on Exercise. Notwithstanding anything to the
contrary contained herein, no Warrants may be converted by a holder of Warrants
("Holders") to the extent that, after giving effect to the shares of CXI Common
Stock issued pursuant to the exercise hereof, the total number of shares of CXI
Common Stock deemed beneficially owned by such Holder (other than by virtue of
the ownership of shares of Series D Preferred Stock or Warrants or ownership of
other securities that have limitations on a Holder's rights to convert or
exercise similar to those limitations set forth herein), together with all
shares of CXI Common Stock deemed beneficially owned by Holder's "affiliates"
(as defined in Rule 144 under the 1933 Act) that would be aggregated for
purposes of determining whether a group under Section 13(d) of the Securities
Exchange Act of 1934, as amended, exists, would exceed 4.99% of the total issued
and outstanding shares of CXI Common Stock, provided that each Holder shall have
the right to waive this restriction, in whole or in part, immediately in case of
a pending Change in Control
-9-
<PAGE> 10
Transaction (as defined in the Agreement) and in any other case upon 61 days
prior to the exercise hereunder by Holder. The exercise of all or part of this
Warrant by any Holder shall be deemed a representation by such Holder it is in
compliance with this Section 17. A transferee of Warrants shall not be bound by
this provision unless it expressly agrees to be so bound. The term "deemed
beneficially owned" as used in this Section 17 shall exclude shares that might
otherwise be deemed beneficially owned by reason of the exercisability of the
Warrants.
18. Miscellaneous.
(a) Issue Date. The provisions of this Warrant shall be
construed and shall be given effect in all respects as if it had been issued and
delivered by the Parent Company and the Subsidiary Company on the date hereof.
This Warrant shall be binding upon any successors or assigned of the Parent
Company and the Subsidiary Company. This Warrant shall constitute a contract
under the laws of New York and for all purposes shall be construed in accordance
with and governed by the laws of said state without regard to its conflict of
law, principles or rules.
(b) Restrictions. The holder hereof acknowledges that the CXI
Common Stock acquired upon the exercise of this Warrant, if not registered, may
have restrictions upon its resale imposed by state and federal securities laws.
(c) Modification and Waiver. This Warrant and any provisions
hereof may be changed, waived, discharged or terminated only by an instrument in
writing signed by the party against which enforcement of the same is sought.
(d) Notices. Any notice, request or other document required or
permitted to be given or delivered to the holders hereof or the Parent Company
or the Subsidiary Company shall be delivered or shall be sent by certified or
registered mail, postage prepaid, or by overnight courier or by facsimile to
each such holder at its address (or fax number) as shown on the books of the
Parent Company or the Subsidiary Company or to the Parent Company and the
Subsidiary Company at the addresses (or fax numbers) set forth in the Agreement.
19. Reset of Exercise Price of Warrants. Notwithstanding
anything to the contrary herein, the Exercise Price shall be reset on the first
anniversary of the date of issuance of this Warrant to an exercise price which
shall be equal to the lesser of (i) the exercise price in effect immediately
prior to such anniversary date, or (ii) 110% of the closing bid price of the CXI
Common Stock on the day immediately prior to such first anniversary date of
issuance. as reported by Bloomberg. Furthermore, if at any time after such first
anniversary, the closing price of the CXI Common Stock for any period of ten
(10) consecutive trading days or more shall be less than fifty percent (50%) of
the closing price of the CXI Common Stock on the day immediately preceding such
first anniversary, the Exercise Price shall be further reset to 50% of the
closing price of the CXI Common Stock on the day immediately prior to such first
anniversary. The aforesaid 50% reset provision shall be applicable, if at all,
on only one occasion. The foregoing reset provisions expire if the CXI Common
Stock trades at a price of $10.00 or more at any time, commencing ninety (90)
days after the effective date of the registration statement filed pursuant to
Section 8.2(a) of the Agreement. In the event that, at any time and from time to
time from and after the date hereof, there shall occur any stock dividend, stock
split, combination of shares, recapitalization or other such event relating to
the then outstanding CXI Common
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<PAGE> 11
Stock, then all of the foregoing price calculations and amounts will be
appropriately arithmetically adjusted.
IN WITNESS WHEREOF, the Parent Company and the Subsidiary
Company have caused this Warrant to be executed by their officers thereunto duly
authorized.
Dated: August __, 1997
COMMODORE ENVIRONMENTAL SERVICES, INC.
By /s/ Paul E. Hannesson
-----------------------------------------
COMMODORE APPLIED TECHNOLOGIES, INC.
By /s/ Michael D. Fullwood
-----------------------------------------
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<PAGE> 12
ASSIGNMENT FORM
(To assign the foregoing warrant, execute
this form and supply required information.
Do not use this form to purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are
hereby assigned to _____________________________________________________________
whose address is ______________________________________________________________
Dated: ____________________________
Holder's Signature: ________________________
Holder's Address: __________________________
Signature Guaranteed: __________________________________________________________
NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant, without alteration or enlargement or any
change whatsoever, and must be guaranteed by a bank or trust company. Officers
of corporations and those acting in an fiduciary or other representative
capacity should file the proper evidence of authority to assign the foregoing
Warrant.
<PAGE> 13
[FORM OF ELECTION TO PURCHASE]
The undersigned hereby irrevocably elects to exercise the
right, represented by this Warrant Certificate, to purchase __________ Shares of
CXI Common Stock at an Exercise Price of $__________, and herewith tenders in
payment for such securities a certified check or official bank check payable in
New York Clearing House Funds to the order of Commodore Environmental Services,
Inc. in the amount of $___, all in accordance with the terms of the Stock
Purchase Warrant of Commodore Environmental Services, Inc. that a certificate
for such securities be registered in the name of _____________________________
whose address is ___________________________________________ and that such
Certificate be delivered to ___________________________ whose address is
____________________________________
Dated: __________
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)
<PAGE> 1
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER REGULATION D PROMULGATED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "1933 ACT"). THIS STOCK PURCHASE WARRANT SHALL NOT
CONSTITUTE AN OFFER TO SELL NOR A SOLICITATION OF AN OFFER TO BUY THE SECURITIES
IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL. THE
SECURITIES ARE "RESTRICTED" AND MAY NOT BE RESOLD OR TRANSFERRED EXCEPT AS
PERMITTED UNDER THE 1933 ACT PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.
No. 97-D8
STOCK PURCHASE WARRANT
To Purchase 50,000 Shares of Common Stock of
COMMODORE APPLIED TECHNOLOGIES, INC.
from
COMMODORE ENVIRONMENTAL SERVICES, INC.
THIS CERTIFIES that, for value received, PORTER PARTNERS, L.P. (the
"Investor"), is entitled upon the terms and subject to the conditions
hereinafter set forth, at any time on or after August 15, 1997 (the "Initial
Exercise Date") and on or prior to August 14, 2002 (the "Termination Date") but
not thereafter, to subscribe for and purchase from COMMODORE ENVIRONMENTAL
SERVICES, INC., a Delaware corporation (the "Parent Company"), 50,000 shares of
its holdings of Common Stock of COMMODORE APPLIED TECHNOLOGIES, INC. ("CXI
Common Stock"), a Delaware corporation (the "Subsidiary Company") (the "Warrant
Shares"). The purchase price of one share of CXI Common Stock (the "Exercise
Price") under this Warrant shall be Five Dollars and Fifteen Cents ($5.15). The
Exercise Price and the number of Warrant Shares shall be subject to adjustment
as provided herein. This warrant is being issued pursuant to a Preferred Stock
Securities Purchase Agreement, dated August 14, 1997, complete with all listed
exhibits thereto (the "Agreement") by and between the Parent Company, Subsidiary
Company and the Investor and is subject to its terms. In the event of any
conflict between the terms of this Warrant and the Agreement, the Agreement
shall control.
1. Title of Warrant. Prior to the expiration hereof and
subject to compliance with applicable laws, this Warrant and all rights
hereunder are transferable, in whole or in part, at the office or agency of the
Parent Company, by the holder hereof in person or by duly authorized
<PAGE> 2
attorney, upon surrender of this Warrant together with the Assignment Form
annexed hereto properly endorsed.
2. Authorization of Shares. The Parent Company and the
Subsidiary Company covenant that all shares of CXI Common Stock which may be
transferred upon the exercise of rights represented by this Warrant will, upon
exercise of the rights represented by this Warrant, be duly authorized, validly
issued, fully paid and non-assessable and free from all taxes, liens and
charters in respect of the issue thereof (other than taxes in respect of any
transfer occurring contemporaneously with such issue).
3. Exercise of Warrant. Exercise of the purchase rights
represented by this Warrant may be made at any time or times, in whole or in
part, on or after the Initial Exercise Date, and before the close of business on
the Termination Date, or such earlier date on which this Warrant may terminate
as provided in paragraph 11(a) below, by the surrender of this Warrant and the
Form of Election to Purchase annexed hereto duly executed, at the office of the
Parent Company (with copy to Stephen A. Weiss, Esq., Greenberg, Traurig,
Hoffman, Lipoff, Rosen & Quentel, 153 East 53rd Street, New York, NY 10022 or
such other office or agency of the Parent Company as it may designate by notice
in writing to the registered holder hereof at the address of such holder
appearing on the books of the Company) and upon payment of the Exercise Price of
the shares thereby purchased; whereupon the holder of this Warrant shall be
entitled to receive a certificate for the number of shares of CXI Common Stock
so purchased immediately. In the event upon exercising the Warrant, the transfer
agent requires an opinion of counsel, the Parent Company or the Subsidiary
Company shall have such opinion furnished to the transfer agent to the transfer
agent's satisfaction. In the event the Investor is relying on an exemption from
registration under the 1933 Act, the Warrant Shares shall be issued immediately,
if the Investor furnishes an opinion of counsel, reasonably satisfactory to the
Subsidiary Company, that such exemption from registration be available.
Certificates for shares purchased hereunder shall be delivered to the holder
hereof within three (3) business days after the date on which this Warrant shall
have been exercised as aforesaid. Payment of the Exercise Price of the shares
may be by certified check or cashier's check or by wire transfer to an account
designated by the Parent Company in an amount equal to the Exercise Price
multiplied by the number of shares being purchased.
4. No Fractional Shares or Scrip. No fractional shares or
scrip representing fractional shares shall be issued upon the exercise of this
Warrant.
5. Charges, Taxes and Expenses. Reissuance of certificates in
the name of the holder hereof for shares of CXI Common Stock upon the exercise
of this Warrant shall be made without charge to the holder hereof for any issue
or transfer tax or other incidental expense in respect of the issuance of such
certificate, all of which taxes and expenses shall be paid by the Company, and
such certificates shall be issued in the name of the holder of this Warrant or
in such name or names as may be directed by the holder of this Warrant;
provided, however, that in the event certificates for shares of CXI Common Stock
are to be issued in a name other than the name of the holder of this Warrant,
this Warrant when surrendered for exercise other than the
-2-
<PAGE> 3
name of the holder of this Warrant, this Warrant when surrendered for exercise
shall be accompanied by the Assignment Form attached hereto duly executed by the
holder hereof, together with evidence satisfactory to the Subsidiary Company
that such transfer or assignment is being made in compliance with all applicable
federal and state securities laws; and provided, further, that upon any transfer
involved in the issuance or delivery of any certificates for shares of CXI
Common Stock, the Subsidiary Company may require, as a condition thereto, the
payment of a sum sufficient to reimburse it for any transfer tax incidental
thereto.
6. Closing of Books. The Parent Company and the Subsidiary
Company will at no time close its shareholder books or records in any manner
which interferes with the timely exercise of this Warrant.
7. Voting Rights. This Warrant does not entitle the holder
hereof to any rights as a shareholder of the Subsidiary Company prior to the
exercise hereof except for the voting rights set forth in this paragraph. If,
however, at the time of the surrender of this Warrant and purchase the holder
hereof shall be entitled to exercise this Warrant, the shares so purchased shall
be and shall be deemed to be transferred and reissued to such holder as the
record owner of such shares as of the close of business on the date on which
this Warrant shall have been exercised. Prior to the date of such exercise and
except as otherwise required by applicable Delaware law, the holder of this
Warrant shall vote together with the Common Stock and not as a separate class on
any transaction with respect to which the Common Stock is entitled to vote
pursuant to applicable Delaware law or the Certificate of Incorporation. Each
Warrant shall be entitled to a number of votes per share equal to (i) one (1)
multiplied by (ii) the number of shares of Common Stock which may be acquired
upon exercise of this Warrant if the same were exercisable and were so exercised
on the record date used to determine shares eligible to vote on such
transaction.
8. Assignment and Transfer of Warrant. This Warrant may be
assigned by the surrender of this Warrant and the Assignment Form annexed hereto
duly executed at the office of the Parent Company (or such other office or
agency of the Parent Company as it may designate by notice in writing to the
registered holder hereof at the address of such holder appearing on the books of
the Parent Company); provided, however, that this Warrant may not be resold or
otherwise transferred except (i) in a transaction registered under the
Securities Act, or (ii) in a transaction pursuant to an exemption, if available,
from such registration and whereby, if requested by the Parent Company or the
Subsidiary Company, an opinion of counsel reasonably satisfactory to the Parent
Company or the Subsidiary Company is obtained by the holder of this Warrant to
the effect that the transaction is so exempt.
9. Loss, Theft, Destruction or Mutilation of Warrant. Each of
the Parent Company and the Subsidiary Company represents and warrants that upon
receipt by the Parent Company or the Subsidiary Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of any Warrant
or stock certificate, and in case of loss, reimbursement to the Parent Company
or the Subsidiary Company of all reasonable expenses incidental thereto, and
upon surrender and cancellation of such Warrant or stock certificate, if
mutilated, the Parent
-3-
<PAGE> 4
Company or the Subsidiary Company will make and deliver a new Warrant or stock
certificate of like tenor and dated as of such cancellation, in lieu of this
Warrant or stock certificate.
10. Saturdays, Sundays, Holidays, etc. If the last or
appointed day for the taking of any action or the expiration of any right
required or granted herein shall be a Saturday, Sunday or a legal holiday, then
such action may be taken or such right may be exercised on the next succeeding
day not a legal holiday.
11. Effect of Certain Events.
(a) If at any time:
(i) the Parent Company or the Subsidiary Company
shall declare any cash dividend upon the CXI Common Stock;
(ii) the Parent Company or the Subsidiary Company
shall declare a dividend upon the CXI Common Stock payable in
securities (other than a dividend payable solely in CXI Common
Stock) or make any special dividend or other distribution to
the holders of its Units;
(iii) the Parent Company or the Subsidiary Company
proposes (A) to sell or otherwise convey all or substantially
all of its assets or (B) to effect a transaction (by merger or
otherwise) in which more than 50% of the voting power of the
Parent Company or the Subsidiary Company is disposed of
(collectively, a "Sale or Merger Transaction") in which the
consideration to be received by the Parent Company or the
Subsidiary Company or its shareholders consists solely of
cash;
(iv) there shall be a voluntary or involuntary
dissolution, liquidation or winding-up of the Parent Company
or the Subsidiary Company;
the Parent Company or the Subsidiary Company shall give the holder of this
Warrant fifteen (15) days' written notice of the proposed effective date, by
certified or registered mail, postage prepaid, addressed to the registered
holder of this Warrant at the address of such holder as shown on the books of
the Parent Company. Such notice shall also specify, in the case of any such
dividend, distribution or option rights, the date on which the holders of Common
Shares shall be entitled thereto. Any notice relating to a Sale or Merger
Transaction shall also specify the date on which the holders of Common Shares
shall be entitled to exchange their Common Shares for securities or other
property deliverable upon such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation or winding-up, as the case may be. If the
Holder of the Warrant does not exercise this Warrant prior to the occurrence of
an event described above, except as provided in Section 13(a), the Holder shall
not be entitled to receive the benefits accruing to existing holders of the
Common Shares in such event.
-4-
<PAGE> 5
(b) In case the Parent Company or Subsidiary Company shall at
any time effect a Sale or Merger Transaction in which the consideration to be
received by the Parent Company or the Subsidiary or their shareholders consists
in part of consideration other than cash, or shall issue any shares of its
capital stock in a reclassification of the CXI Common Stock, the holder of this
Warrant shall have the right thereafter to purchase, by exercise of action, the
kind and amount of shares and other securities and property which it would have
owned or have been entitled to receive after happening of such transaction had
this Warrant been exercised immediately prior thereto.
12. Registration Rights. The Subsidiary Company shall use its best
efforts to file with the SEC not later than September 15, 1997 a shelf
registration statement under the Securities Act on Form S-3, if the Subsidiary
Company is eligible to file a registration statement under such form (and if the
Subsidiary Company is not eligible to file a registration statement under Form
S-3, to file with the SEC a registration statement under the Securities Act on
Form S-1 or any other form which is appropriate), to register the Conversion
Shares and Warrant Shares, and shall use its best efforts to cause such
registration statement to be declared effective by the SEC by not later than
December 15, 1997. Such registration statement will also cover shares issuable
upon conversion of Series A Preferred Stock of CXI sold by CXI pursuant to a
certain Stock Purchase Agreement dated as of August 15, 1997. In the event of
the failure of the Subsidiary Company to procure registration of the Warrant
Shares in accordance with Section 8.2(a) of the Agreement prior to any of the
dates set forth below in this Section 12, the Parent Company will pay to the
Investor by wire transfer, as liquidated damages for such failure and not as a
penalty, for each month or part thereof for which such failure continues or in
the event of a Suspension (as defined in Section 8.7 of the Agreement) after
such date, an amount equal to the following percentages of the product of the
Exercise Price and the number of Warrants held by the Investor which were
acquired by the Investor pursuant to the Agreement and have not been exercised
at such calculation date:
<TABLE>
<CAPTION>
Required Effective Date Percentage
----------------------- ----------
<S> <C>
On or before November 19, 1997 1%
Between November 20 and
December 19, 1997 2%
After December 20, 1997 3%
</TABLE>
If the Parent Company does not remit the damages to the Investor as set forth
above, the Parent Company will pay the Investor reasonable costs of collection,
including attorneys fees, in addition to the liquidated damages. Such payment
shall be made to the Investor if due, monthly in arrears. The payment of such
liquidated damages shall not relieve the Subsidiary Company from its obligations
to register the Conversion Shares and Warrant Shares and shall not affect or
limit Investor's other rights or remedies as set forth in this Warrant or the
Agreement. If not paid as required, interest on such damages will accrue at a
rate of 2% per month. Notwithstanding the foregoing, the liquidated damages
shall be limited to 1% per month or any portion thereof if the delay in
effectiveness of the registration statement beyond November 19, 1997 or the
Suspension thereafter shall be for reasons outside the control of the Parent
Company or the Subsidiary
-5-
<PAGE> 6
Company. The obligations of the Parent Company and the Subsidiary Company under
this paragraph 12 shall cease and terminate upon the earlier to occur of (x)
such time as all of the Warrant Shares have been re-sold or (y) such time as all
of the Warrant Shares may be re-sold pursuant to Rule 144 under the Securities
Act
13. Adjustments of Exercise Price and Number of Warrant
Shares. The number and kind of securities purchasable upon the exercise of this
Warrant and the Exercise Price shall be subject to adjustment from time to time
upon the happening of certain events, as hereinafter set forth:
(a) In case the Subsidiary Company shall at any time subdivide
its outstanding shares of Common Stock ("CXI Common Shares") into a greater
number of CXI Common Shares or declare a dividend or distribution upon its CXI
Common Shares payable in CXI Common Shares, the Exercise Price in effect
immediately prior to such subdivision or declaration shall be proportionately
reduced, and the number of Warrant Shares transferable upon exercise of the
Warrants shall be proportionately increased. Conversely, in case the outstanding
CXI Common Shares of the Subsidiary Company shall be combined into a smaller
number of CXI Common Shares, the Exercise Price in effect immediately prior to
such combination shall be proportionately increased, and the number of Warrant
Shares issuable upon exercise of the Warrants shall be proportionately reduced.
(b) (x) In case the Subsidiary Company shall issue shares of
CXI Common Stock ("Additional Shares") or (y) in case the Subsidiary Company
shall issue rights, options or warrants to purchase shares of CXI Common Stock
or securities convertible into or exchangeable for CXI Common Stock, in any case
at a Price Per Share (as defined in paragraph (c) below) which is lower than the
price per share of CXI Common Stock (as reported by Bloomberg, L.P.
("Bloomberg") over the 5-day trading period ending on the day prior to the
Closing (the "Trigger Price"), the number of Warrant Shares hereafter
purchasable upon the exercise of this Warrant shall be determined by multiplying
the number of Warrant Shares theretofore purchasable upon exercise of this
Warrant by the following fraction:
(A)(i) The number of shares of CXI Common Stock outstanding immediately
prior to the issuance of such Additional Shares or rights, options,
warrants or convertible securities, plus (ii) the number of Additional
Shares actually subscribed for and purchased and shares of CXI Common
Stock issuable upon conversion or exercise of such rights, options,
warrants, or convertible securities, divided by
(B)(i) The number of shares of CXI Common Stock outstanding immediately
prior to issuance of such Additional Shares or rights, options,
warrants or convertible securities plus (ii) the number of shares of
CXI Common Stock which the aggregate Proceeds (as defined in paragraph
(c) below) received by the Subsidiary Company upon the sale of such
Additional Shares or exercise or conversion of such rights, options,
warrants and convertible securities would purchase at the Trigger
Price.
Such adjustment shall be made whenever such Additional Shares or
rights, options, warrants or convertible securities are issued, and shall become
effective on the date of distribution
-6-
<PAGE> 7
retroactive to the record date for the determination of stockholders entitled to
receive such rights, options or warrants.
(c) For purposes of this Section 13, "Price Per Share" shall
be defined and determined according to the following formula:
R
P = -----------
N
where
P = Price Per Share,
R = the "Proceeds" received or receivable by the
Subsidiary Company which (i) in the case of shares of CXI
Common Stock is the total amount received or receivable by the
Subsidiary Company in consideration for the sale and issuance
of such shares; (ii) in the case of rights, options or
warrants to subscribe for or purchase shares of CXI Common
Stock or of securities convertible into or exchangeable or
exercisable for shares of CXI Common Stock, is the total
amount received or receivable by the Subsidiary Company in
consideration for the sale and issuance of such rights,
options, warrants or convertible or exchangeable or
exercisable securities, plus the minimum aggregate amount of
additional consideration, other than the surrender of such
convertible or exchangeable securities, payable to the CXI
Company upon exercise, conversion or exchange thereof; and
(iii) in the case of rights, options or warrants to subscribe
for or purchase convertible or exchangeable or exercisable
securities, is the total amount received or receivable by the
Subsidiary Company in consideration for the sale and issuance
of such rights, options or warrants, plus the minimum
aggregate amount of additional consideration other than the
surrender of such convertible or exchangeable securities,
payable upon the exercise, conversion or exchange of such
rights, options or warrants and upon the conversion or
exchange or exercise of the convertible or exchangeable or
exercisable securities; provided that in each case the
proceeds received or receivable by the Subsidiary Company
shall be deemed to be the gross cash proceeds without
deducting therefrom any compensation paid or discount allowed
in the sale, underwriting or purchase thereof by underwriters
or dealers or other performing similar services or any
expenses incurred in connection therewith,
and
N = the "Number of Shares," which (i) in the case of
CXI Common Stock is the number of shares issued; (ii) in the
case of rights, options or warrants to subscribe for or
purchase shares of CXI Common Stock or of securities
convertible into or exchangeable or exercisable for shares of
CXI Common Stock, is the maximum number of shares of CXI
Common Stock initially issuable upon
-7-
<PAGE> 8
exercise, conversion or exchange thereof; and (iii) in the
case of rights, options or warrants to subscribe for or
purchase convertible or exchangeable or exercisable
securities, is the maximum number of shares of CXI Common
Stock initially issuable upon conversion, exchange or exercise
of the convertible, exchangeable or exercisable securities
issuable upon the exercise of such rights, options or
warrants.
If the Subsidiary Company shall issue shares of CXI Common
Stock or rights, options, warrants or convertible or exchangeable or exercisable
securities for a consideration consisting, in whole or in part, of property
other than cash, the amount of such consideration shall be determined in good
faith by the Board of Directors of the Subsidiary Company whose determination
shall be conclusive.
(d) Whenever the number of Warrant Shares purchasable upon the
exercise of this Warrant is adjusted, as herein provided, the Exercise Price
payable upon exercise of this Warrant shall be adjusted by multiplying such
Exercise Price immediately prior to such adjustment by a fraction, of which the
numerator shall be the number of Warrant Shares purchasable upon the exercise of
this Warrant immediately prior to such adjustment, and of which the denominator
shall be the number of Warrant Shares purchasable immediately thereafter.
(e) No adjustment in the number of Warrant Shares purchasable
hereunder shall be required unless such adjustment would result in an increase
or decrease of at least one percent (1%) of the Exercise Price; provided that
any adjustments which by reason of this paragraph (e) are not required to be
made shall be carried forward and taken into account in any subsequent
adjustment. All calculations shall be made to the nearest cent or to the nearest
one-thousandth of a share, as the case may be.
(f) No adjustment in the number of Warrant Shares purchasable
upon the exercise of this Warrant need be made under paragraph (b) or (c) if the
Subsidiary Company issues or distributes to the holder of this Warrant the
shares, rights, options, warrants or convertible or exchangeable securities, or
evidences of indebtedness or assets referred to in those paragraphs which the
holder of this Warrant would have been entitled to receive had this Warrant been
exercised prior to the happening of such event or the record date with respect
thereto. In no event shall the Subsidiary Company be required or obligated to
make any such distribution otherwise than in its sole discretion. No adjustment
in the number of Warrant shares purchasable upon the exercise of this Warrant
need be made for sales of CXI Common Stock pursuant to a Subsidiary Company plan
for reinvestment of dividends or interest. No adjustment need be made for a
change in the par value of the CXI Common Stock.
(g) In the event that at any time, as a result of an
adjustment made pursuant to paragraph (a) above, the holder of this Warrant
shall become entitled to purchase any securities of the Subsidiary Company other
than shares of CXI Common Stock, thereafter the number of such other shares so
purchasable upon exercise of this Warrant and the Exercise Price of such shares
shall be subject to adjustment from time to time in a manner and on terms as
nearly equivalent as practicable to the provisions with respect to the Warrant
Shares contained in paragraphs (a) through (g), inclusive, above.
-8-
<PAGE> 9
14. Voluntary Adjustment by the Parent Company or the
Subsidiary Company. The Parent Company or the Subsidiary Company may at its
option, at any time during the term of this Warrant, reduce the then current
Exchange Price to any amount and for any period of time deemed appropriate by
the Board of Directors of the Parent Company or the Subsidiary Company.
15. Notice of Adjustment. Whenever the number of Warrant
Shares or number or kind of securities or other property purchasable upon the
exercise of this Warrant or the Exercise Price is adjusted, as herein provided,
the Parent Company or the Subsidiary Company shall promptly mail by registered
or certified mail, return receipt requested, to the transfer agent for the CXI
Common Stock and to the holder of this Warrant notice of such adjustment or
adjustments setting forth the number of Warrant Shares (and other securities or
property) purchasable upon the exercise of this Warrant and the Exercise Price
of such Warrant Shares after such adjustment, setting forth a brief statement of
the facts requiring such adjustment and setting forth computation by which such
adjustment was made. Such notice, in absence of manifest error, shall be
conclusive evidence of the correctness of such adjustment.
16. Authorized Shares. The Parent Company covenants that
during the period the Warrant is outstanding, it will reserve from its holdings
of CXI Common Stock a sufficient number of shares to provide for the transfer of
CXI Common Stock upon the exercise of any purchase rights under this Warrant.
Such reservation of shares of CXI Common Stock shall be in addition to those
shares of CXI Common Stock reserved pursuant to the Parent Company's Certificate
of Designation for its Series D Preferred Stock. The Parent Company and the
Subsidiary Company further covenant that the issuance of this Warrant shall
constitute full authority to their officers who are charged with the duty of
executing stock certificates to execute and issue the necessary certificates for
shares of the Subsidiary Company's Common Stock upon the exercise of the
purchase rights under this Warrant. The Parent Company and the Subsidiary
Company will take all such reasonable action as may be necessary to assure that
such shares of CXI Common Stock may be transferred and reissued as provided
herein without violation of any applicable law or regulation, or of any
requirements of AMEX or any domestic securities exchange upon which the CXI
Common Stock may be listed.
17. Restrictions on Exercise. Notwithstanding anything to the
contrary contained herein, no Warrants may be converted by a holder of Warrants
("Holders") to the extent that, after giving effect to the shares of CXI Common
Stock issued pursuant to the exercise hereof, the total number of shares of CXI
Common Stock deemed beneficially owned by such Holder (other than by virtue of
the ownership of shares of Series D Preferred Stock or Warrants or ownership of
other securities that have limitations on a Holder's rights to convert or
exercise similar to those limitations set forth herein), together with all
shares of CXI Common Stock deemed beneficially owned by Holder's "affiliates"
(as defined in Rule 144 under the 1933 Act) that would be aggregated for
purposes of determining whether a group under Section 13(d) of the Securities
Exchange Act of 1934, as amended, exists, would exceed 4.99% of the total issued
and outstanding shares of CXI Common Stock, provided that each Holder shall have
the right to waive this restriction, in whole or in part, immediately in case of
a pending Change in Control Transaction (as defined in the Agreement) and in any
other case upon 61 days prior to the exercise hereunder by Holder. The exercise
of all or part of this Warrant by any Holder shall
-9-
<PAGE> 10
be deemed a representation by such Holder it is in compliance with this Section
17. A transferee of Warrants shall not be bound by this provision unless it
expressly agrees to be so bound. The term "deemed beneficially owned" as used in
this Section 17 shall exclude shares that might otherwise be deemed beneficially
owned by reason of the exercisability of the Warrants.
18. Miscellaneous.
(a) Issue Date. The provisions of this Warrant shall be
construed and shall be given effect in all respects as if it had been issued and
delivered by the Parent Company and the Subsidiary Company on the date hereof.
This Warrant shall be binding upon any successors or assigned of the Parent
Company and the Subsidiary Company. This Warrant shall constitute a contract
under the laws of New York and for all purposes shall be construed in accordance
with and governed by the laws of said state without regard to its conflict of
law, principles or rules.
(b) Restrictions. The holder hereof acknowledges that the CXI
Common Stock acquired upon the exercise of this Warrant, if not registered, may
have restrictions upon its resale imposed by state and federal securities laws.
(c) Modification and Waiver. This Warrant and any provisions
hereof may be changed, waived, discharged or terminated only by an instrument in
writing signed by the party against which enforcement of the same is sought.
(d) Notices. Any notice, request or other document required or
permitted to be given or delivered to the holders hereof or the Parent Company
or the Subsidiary Company shall be delivered or shall be sent by certified or
registered mail, postage prepaid, or by overnight courier or by facsimile to
each such holder at its address (or fax number) as shown on the books of the
Parent Company or the Subsidiary Company or to the Parent Company and the
Subsidiary Company at the addresses (or fax numbers) set forth in the Agreement.
19. Reset of Exercise Price of Warrants. Notwithstanding
anything to the contrary herein, the Exercise Price shall be reset on the first
anniversary of the date of issuance of this Warrant to an exercise price which
shall be equal to the lesser of (i) the exercise price in effect immediately
prior to such anniversary date, or (ii) 110% of the closing bid price of the CXI
Common Stock on the day immediately prior to such first anniversary date of
issuance. as reported by Bloomberg. Furthermore, if at any time after such first
anniversary, the closing price of the CXI Common Stock for any period of ten
(10) consecutive trading days or more shall be less than fifty percent (50%) of
the closing price of the CXI Common Stock on the day immediately preceding such
first anniversary, the Exercise Price shall be further reset to 50% of the
closing price of the CXI Common Stock on the day immediately prior to such first
anniversary. The aforesaid 50% reset provision shall be applicable, if at all,
on only one occasion. The foregoing reset provisions expire if the CXI Common
Stock trades at a price of $10.00 or more at any time, commencing ninety (90)
days after the effective date of the registration statement filed pursuant to
Section 8.2(a) of the Agreement. In the event that, at any time and from time to
time from and after the date hereof, there shall occur any stock dividend, stock
split, combination of shares, recapitalization or other such event relating to
the then outstanding CXI Common
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<PAGE> 11
Stock, then all of the foregoing price calculations and amounts will be
appropriately arithmetically adjusted.
IN WITNESS WHEREOF, the Parent Company and the Subsidiary
Company have caused this Warrant to be executed by their officers thereunto duly
authorized.
Dated: August __, 1997
COMMODORE ENVIRONMENTAL SERVICES, INC.
By /s/ Paul E. Hannesson
-----------------------------------------
COMMODORE APPLIED TECHNOLOGIES, INC.
By /s/ Michael D. Fullwood
-----------------------------------------
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<PAGE> 12
ASSIGNMENT FORM
(To assign the foregoing warrant, execute
this form and supply required information.
Do not use this form to purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are
hereby assigned to _____________________________________________________________
whose address is _______________________________________________________________
Dated: _____________________, __________
Holder's Signature: _____________________________
Holder's Address: _____________________________
_____________________________
Signature Guaranteed: __________________________________________________________
NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant, without alteration or enlargement or any
change whatsoever, and must be guaranteed by a bank or trust company. Officers
of corporations and those acting in an fiduciary or other representative
capacity should file the proper evidence of authority to assign the foregoing
Warrant.
<PAGE> 13
[FORM OF ELECTION TO PURCHASE]
The undersigned hereby irrevocably elects to exercise the
right, represented by this Warrant Certificate, to purchase __________ Shares of
CXI Common Stock at an Exercise Price of $__________, and herewith tenders in
payment for such securities a certified check or official bank check payable in
New York Clearing House Funds to the order of Commodore Environmental Services,
Inc. in the amount of $___, all in accordance with the terms of the Stock
Purchase Warrant of Commodore Environmental Services, Inc. that a certificate
for such securities be registered in the name of _____________________________
whose address is ___________________________________________ and that such
Certificate be delivered to ___________________________ whose address is
__________________________________________________________.
Dated: __________
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)
<PAGE> 1
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER REGULATION D PROMULGATED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "1933 ACT"). THIS STOCK PURCHASE WARRANT SHALL NOT
CONSTITUTE AN OFFER TO SELL NOR A SOLICITATION OF AN OFFER TO BUY THE SECURITIES
IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL. THE
SECURITIES ARE "RESTRICTED" AND MAY NOT BE RESOLD OR TRANSFERRED EXCEPT AS
PERMITTED UNDER THE 1933 ACT PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.
No. 97-D9
STOCK PURCHASE WARRANT
To Purchase 12,500 Shares of Common Stock of
COMMODORE APPLIED TECHNOLOGIES, INC.
from
COMMODORE ENVIRONMENTAL SERVICES, INC.
THIS CERTIFIES that, for value received, EDJ LIMITED (the "Investor"),
is entitled upon the terms and subject to the conditions hereinafter set forth,
at any time on or after August 15, 1997 (the "Initial Exercise Date") and on or
prior to August 14, 2002 (the "Termination Date") but not thereafter, to
subscribe for and purchase from COMMODORE ENVIRONMENTAL SERVICES, INC., a
Delaware corporation (the "Parent Company"), 12,500 shares of its holdings of
Common Stock of COMMODORE APPLIED TECHNOLOGIES, INC. ("CXI Common Stock"), a
Delaware corporation (the "Subsidiary Company") (the "Warrant Shares"). The
purchase price of one share of CXI Common Stock (the "Exercise Price") under
this Warrant shall be Five Dollars and Fifteen Cents ($5.15). The Exercise Price
and the number of Warrant Shares shall be subject to adjustment as provided
herein. This warrant is being issued pursuant to a Preferred Stock Securities
Purchase Agreement, dated August 14, 1997, complete with all listed exhibits
thereto (the "Agreement") by and between the Parent Company, Subsidiary Company
and the Investor and is subject to its terms. In the event of any conflict
between the terms of this Warrant and the Agreement, the Agreement shall
control.
1. Title of Warrant. Prior to the expiration hereof and
subject to compliance with applicable laws, this Warrant and all rights
hereunder are transferable, in whole or in part, at the office or agency of the
Parent Company, by the holder hereof in person or by duly authorized
<PAGE> 2
attorney, upon surrender of this Warrant together with the Assignment Form
annexed hereto properly endorsed.
2. Authorization of Shares. The Parent Company and the
Subsidiary Company covenant that all shares of CXI Common Stock which may be
transferred upon the exercise of rights represented by this Warrant will, upon
exercise of the rights represented by this Warrant, be duly authorized, validly
issued, fully paid and non-assessable and free from all taxes, liens and
charters in respect of the issue thereof (other than taxes in respect of any
transfer occurring contemporaneously with such issue).
3. Exercise of Warrant. Exercise of the purchase rights
represented by this Warrant may be made at any time or times, in whole or in
part, on or after the Initial Exercise Date, and before the close of business on
the Termination Date, or such earlier date on which this Warrant may terminate
as provided in paragraph 11(a) below, by the surrender of this Warrant and the
Form of Election to Purchase annexed hereto duly executed, at the office of the
Parent Company (with copy to Stephen A. Weiss, Esq., Greenberg, Traurig,
Hoffman, Lipoff, Rosen & Quentel, 153 East 53rd Street, New York, NY 10022 or
such other office or agency of the Parent Company as it may designate by notice
in writing to the registered holder hereof at the address of such holder
appearing on the books of the Company) and upon payment of the Exercise Price of
the shares thereby purchased; whereupon the holder of this Warrant shall be
entitled to receive a certificate for the number of shares of CXI Common Stock
so purchased immediately. In the event upon exercising the Warrant, the transfer
agent requires an opinion of counsel, the Parent Company or the Subsidiary
Company shall have such opinion furnished to the transfer agent to the transfer
agent's satisfaction. In the event the Investor is relying on an exemption from
registration under the 1933 Act, the Warrant Shares shall be issued immediately,
if the Investor furnishes an opinion of counsel, reasonably satisfactory to the
Subsidiary Company, that such exemption from registration be available.
Certificates for shares purchased hereunder shall be delivered to the holder
hereof within three (3) business days after the date on which this Warrant shall
have been exercised as aforesaid. Payment of the Exercise Price of the shares
may be by certified check or cashier's check or by wire transfer to an account
designated by the Parent Company in an amount equal to the Exercise Price
multiplied by the number of shares being purchased.
4. No Fractional Shares or Scrip. No fractional shares or
scrip representing fractional shares shall be issued upon the exercise of this
Warrant.
5. Charges, Taxes and Expenses. Reissuance of certificates in
the name of the holder hereof for shares of CXI Common Stock upon the exercise
of this Warrant shall be made without charge to the holder hereof for any issue
or transfer tax or other incidental expense in respect of the issuance of such
certificate, all of which taxes and expenses shall be paid by the Company, and
such certificates shall be issued in the name of the holder of this Warrant or
in such name or names as may be directed by the holder of this Warrant;
provided, however, that in the event certificates for shares of CXI Common Stock
are to be issued in a name other than the name of the holder of this Warrant,
this Warrant when surrendered for exercise other than the
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<PAGE> 3
name of the holder of this Warrant, this Warrant when surrendered for exercise
shall be accompanied by the Assignment Form attached hereto duly executed by the
holder hereof, together with evidence satisfactory to the Subsidiary Company
that such transfer or assignment is being made in compliance with all applicable
federal and state securities laws; and provided, further, that upon any transfer
involved in the issuance or delivery of any certificates for shares of CXI
Common Stock, the Subsidiary Company may require, as a condition thereto, the
payment of a sum sufficient to reimburse it for any transfer tax incidental
thereto.
6. Closing of Books. The Parent Company and the Subsidiary
Company will at no time close its shareholder books or records in any manner
which interferes with the timely exercise of this Warrant.
7. Voting Rights. This Warrant does not entitle the holder
hereof to any rights as a shareholder of the Subsidiary Company prior to the
exercise hereof except for the voting rights set forth in this paragraph. If,
however, at the time of the surrender of this Warrant and purchase the holder
hereof shall be entitled to exercise this Warrant, the shares so purchased shall
be and shall be deemed to be transferred and reissued to such holder as the
record owner of such shares as of the close of business on the date on which
this Warrant shall have been exercised. Prior to the date of such exercise and
except as otherwise required by applicable Delaware law, the holder of this
Warrant shall vote together with the Common Stock and not as a separate class on
any transaction with respect to which the Common Stock is entitled to vote
pursuant to applicable Delaware law or the Certificate of Incorporation. Each
Warrant shall be entitled to a number of votes per share equal to (i) one (1)
multiplied by (ii) the number of shares of Common Stock which may be acquired
upon exercise of this Warrant if the same were exercisable and were so exercised
on the record date used to determine shares eligible to vote on such
transaction.
8. Assignment and Transfer of Warrant. This Warrant may be
assigned by the surrender of this Warrant and the Assignment Form annexed hereto
duly executed at the office of the Parent Company (or such other office or
agency of the Parent Company as it may designate by notice in writing to the
registered holder hereof at the address of such holder appearing on the books of
the Parent Company); provided, however, that this Warrant may not be resold or
otherwise transferred except (i) in a transaction registered under the
Securities Act, or (ii) in a transaction pursuant to an exemption, if available,
from such registration and whereby, if requested by the Parent Company or the
Subsidiary Company, an opinion of counsel reasonably satisfactory to the Parent
Company or the Subsidiary Company is obtained by the holder of this Warrant to
the effect that the transaction is so exempt.
9. Loss, Theft, Destruction or Mutilation of Warrant. Each of
the Parent Company and the Subsidiary Company represents and warrants that upon
receipt by the Parent Company or the Subsidiary Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of any Warrant
or stock certificate, and in case of loss, reimbursement to the Parent Company
or the Subsidiary Company of all reasonable expenses incidental thereto, and
upon surrender and cancellation of such Warrant or stock certificate, if
mutilated, the Parent
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<PAGE> 4
Company or the Subsidiary Company will make and deliver a new Warrant or stock
certificate of like tenor and dated as of such cancellation, in lieu of this
Warrant or stock certificate.
10. Saturdays, Sundays, Holidays, etc. If the last or
appointed day for the taking of any action or the expiration of any right
required or granted herein shall be a Saturday, Sunday or a legal holiday, then
such action may be taken or such right may be exercised on the next succeeding
day not a legal holiday.
11. Effect of Certain Events.
(a) If at any time:
(i) the Parent Company or the Subsidiary Company
shall declare any cash dividend upon the CXI Common Stock;
(ii) the Parent Company or the Subsidiary Company
shall declare a dividend upon the CXI Common Stock payable in
securities (other than a dividend payable solely in CXI Common
Stock) or make any special dividend or other distribution to
the holders of its Units;
(iii) the Parent Company or the Subsidiary Company
proposes (A) to sell or otherwise convey all or substantially
all of its assets or (B) to effect a transaction (by merger or
otherwise) in which more than 50% of the voting power of the
Parent Company or the Subsidiary Company is disposed of
(collectively, a "Sale or Merger Transaction") in which the
consideration to be received by the Parent Company or the
Subsidiary Company or its shareholders consists solely of
cash;
(iv) there shall be a voluntary or involuntary
dissolution, liquidation or winding-up of the Parent Company
or the Subsidiary Company;
the Parent Company or the Subsidiary Company shall give the holder of this
Warrant fifteen (15) days' written notice of the proposed effective date, by
certified or registered mail, postage prepaid, addressed to the registered
holder of this Warrant at the address of such holder as shown on the books of
the Parent Company. Such notice shall also specify, in the case of any such
dividend, distribution or option rights, the date on which the holders of Common
Shares shall be entitled thereto. Any notice relating to a Sale or Merger
Transaction shall also specify the date on which the holders of Common Shares
shall be entitled to exchange their Common Shares for securities or other
property deliverable upon such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation or winding-up, as the case may be. If the
Holder of the Warrant does not exercise this Warrant prior to the occurrence of
an event described above, except as provided in Section 13(a), the Holder shall
not be entitled to receive the benefits accruing to existing holders of the
Common Shares in such event.
-4-
<PAGE> 5
(b) In case the Parent Company or Subsidiary Company
shall at any time effect a Sale or Merger Transaction in which the consideration
to be received by the Parent Company or the Subsidiary or their shareholders
consists in part of consideration other than cash, or shall issue any shares of
its capital stock in a reclassification of the CXI Common Stock, the holder of
this Warrant shall have the right thereafter to purchase, by exercise of action,
the kind and amount of shares and other securities and property which it would
have owned or have been entitled to receive after happening of such transaction
had this Warrant been exercised immediately prior thereto.
12. Registration Rights. The Subsidiary Company shall use its
best efforts to file with the SEC not later than September 15, 1997 a shelf
registration statement under the Securities Act on Form S-3, if the Subsidiary
Company is eligible to file a registration statement under such form (and if the
Subsidiary Company is not eligible to file a registration statement under Form
S-3, to file with the SEC a registration statement under the Securities Act on
Form S-1 or any other form which is appropriate), to register the Conversion
Shares and Warrant Shares, and shall use its best efforts to cause such
registration statement to be declared effective by the SEC by not later than
December 15, 1997. Such registration statement will also cover shares issuable
upon conversion of Series A Preferred Stock of CXI sold by CXI pursuant to a
certain Stock Purchase Agreement dated as of August 15, 1997. In the event of
the failure of the Subsidiary Company to procure registration of the Warrant
Shares in accordance with Section 8.2(a) of the Agreement prior to any of the
dates set forth below in this Section 12, the Parent Company will pay to the
Investor by wire transfer, as liquidated damages for such failure and not as a
penalty, for each month or part thereof for which such failure continues or in
the event of a Suspension (as defined in Section 8.7 of the Agreement) after
such date, an amount equal to the following percentages of the product of the
Exercise Price and the number of Warrants held by the Investor which were
acquired by the Investor pursuant to the Agreement and have not been exercised
at such calculation date:
<TABLE>
<CAPTION>
Required Effective Date Percentage
----------------------- ----------
<S> <C>
On or before November 19, 1997 1%
Between November 20 and
December 19, 1997 2%
After December 20, 1997 3%
</TABLE>
If the Parent Company does not remit the damages to the Investor as set forth
above, the Parent Company will pay the Investor reasonable costs of collection,
including attorneys fees, in addition to the liquidated damages. Such payment
shall be made to the Investor if due, monthly in arrears. The payment of such
liquidated damages shall not relieve the Subsidiary Company from its obligations
to register the Conversion Shares and Warrant Shares and shall not affect or
limit Investor's other rights or remedies as set forth in this Warrant or the
Agreement. If not paid as required, interest on such damages will accrue at a
rate of 2% per month. Notwithstanding the foregoing, the liquidated damages
shall be limited to 1% per month or any portion thereof if the delay in
effectiveness of the registration statement beyond November 19, 1997 or the
Suspension thereafter shall be for reasons outside the control of the Parent
Company or the Subsidiary
-5-
<PAGE> 6
Company. The obligations of the Parent Company and the Subsidiary Company under
this paragraph 12 shall cease and terminate upon the earlier to occur of (x)
such time as all of the Warrant Shares have been re-sold or (y) such time as all
of the Warrant Shares may be re-sold pursuant to Rule 144 under the Securities
Act
13. Adjustments of Exercise Price and Number of Warrant
Shares. The number and kind of securities purchasable upon the exercise of this
Warrant and the Exercise Price shall be subject to adjustment from time to time
upon the happening of certain events, as hereinafter set forth:
(a) In case the Subsidiary Company shall at any time subdivide
its outstanding shares of Common Stock ("CXI Common Shares") into a greater
number of CXI Common Shares or declare a dividend or distribution upon its CXI
Common Shares payable in CXI Common Shares, the Exercise Price in effect
immediately prior to such subdivision or declaration shall be proportionately
reduced, and the number of Warrant Shares transferable upon exercise of the
Warrants shall be proportionately increased. Conversely, in case the outstanding
CXI Common Shares of the Subsidiary Company shall be combined into a smaller
number of CXI Common Shares, the Exercise Price in effect immediately prior to
such combination shall be proportionately increased, and the number of Warrant
Shares issuable upon exercise of the Warrants shall be proportionately reduced.
(b) (x) In case the Subsidiary Company shall issue shares of
CXI Common Stock ("Additional Shares") or (y) in case the Subsidiary Company
shall issue rights, options or warrants to purchase shares of CXI Common Stock
or securities convertible into or exchangeable for CXI Common Stock, in any case
at a Price Per Share (as defined in paragraph (c) below) which is lower than the
price per share of CXI Common Stock (as reported by Bloomberg, L.P.
("Bloomberg") over the 5-day trading period ending on the day prior to the
Closing (the "Trigger Price"), the number of Warrant Shares hereafter
purchasable upon the exercise of this Warrant shall be determined by multiplying
the number of Warrant Shares theretofore purchasable upon exercise of this
Warrant by the following fraction:
(A)(i) The number of shares of CXI Common Stock outstanding immediately
prior to the issuance of such Additional Shares or rights, options,
warrants or convertible securities, plus (ii) the number of Additional
Shares actually subscribed for and purchased and shares of CXI Common
Stock issuable upon conversion or exercise of such rights, options,
warrants, or convertible securities, divided by
(B)(i) The number of shares of CXI Common Stock outstanding immediately
prior to issuance of such Additional Shares or rights, options,
warrants or convertible securities plus (ii) the number of shares of
CXI Common Stock which the aggregate Proceeds (as defined in paragraph
(c) below) received by the Subsidiary Company upon the sale of such
Additional Shares or exercise or conversion of such rights, options,
warrants and convertible securities would purchase at the Trigger
Price.
Such adjustment shall be made whenever such Additional Shares or
rights, options, warrants or convertible securities are issued, and shall become
effective on the date of distribution
-6-
<PAGE> 7
retroactive to the record date for the determination of stockholders entitled to
receive such rights, options or warrants.
(c) For purposes of this Section 13, "Price Per Share" shall
be defined and determined according to the following formula:
R
P = ------
N
where
P = Price Per Share,
R = the "Proceeds" received or receivable by the Subsidiary
Company which (i) in the case of shares of CXI Common Stock is
the total amount received or receivable by the Subsidiary
Company in consideration for the sale and issuance of such
shares; (ii) in the case of rights, options or warrants to
subscribe for or purchase shares of CXI Common Stock or of
securities convertible into or exchangeable or exercisable for
shares of CXI Common Stock, is the total amount received or
receivable by the Subsidiary Company in consideration for the
sale and issuance of such rights, options, warrants or
convertible or exchangeable or exercisable securities, plus
the minimum aggregate amount of additional consideration,
other than the surrender of such convertible or exchangeable
securities, payable to the CXI Company upon exercise,
conversion or exchange thereof; and (iii) in the case of
rights, options or warrants to subscribe for or purchase
convertible or exchangeable or exercisable securities, is the
total amount received or receivable by the Subsidiary Company
in consideration for the sale and issuance of such rights,
options or warrants, plus the minimum aggregate amount of
additional consideration other than the surrender of such
convertible or exchangeable securities, payable upon the
exercise, conversion or exchange of such rights, options or
warrants and upon the conversion or exchange or exercise of
the convertible or exchangeable or exercisable securities;
provided that in each case the proceeds received or receivable
by the Subsidiary Company shall be deemed to be the gross cash
proceeds without deducting therefrom any compensation paid or
discount allowed in the sale, underwriting or purchase thereof
by underwriters or dealers or other performing similar
services or any expenses incurred in connection therewith,
and
N = the "Number of Shares," which (i) in the case of CXI
Common Stock is the number of shares issued; (ii) in the case
of rights, options or warrants to subscribe for or purchase
shares of CXI Common Stock or of securities convertible into
or exchangeable or exercisable for shares of CXI Common Stock,
is the maximum number of shares of CXI Common Stock initially
issuable upon exercise, conversion or exchange thereof; and
(iii) in the case of rights, options or warrants to subscribe
for or purchase convertible or exchangeable or exercisable
securities, is
-7-
<PAGE> 8
the maximum number of shares of CXI Common Stock initially
issuable upon conversion, exchange or exercise of the
convertible, exchangeable or exercisable securities issuable
upon the exercise of such rights, options or warrants.
If the Subsidiary Company shall issue shares of CXI Common
Stock or rights, options, warrants or convertible or exchangeable or exercisable
securities for a consideration consisting, in whole or in part, of property
other than cash, the amount of such consideration shall be determined in good
faith by the Board of Directors of the Subsidiary Company whose determination
shall be conclusive.
(d) Whenever the number of Warrant Shares purchasable upon the
exercise of this Warrant is adjusted, as herein provided, the Exercise Price
payable upon exercise of this Warrant shall be adjusted by multiplying such
Exercise Price immediately prior to such adjustment by a fraction, of which the
numerator shall be the number of Warrant Shares purchasable upon the exercise of
this Warrant immediately prior to such adjustment, and of which the denominator
shall be the number of Warrant Shares purchasable immediately thereafter.
(e) No adjustment in the number of Warrant Shares purchasable
hereunder shall be required unless such adjustment would result in an increase
or decrease of at least one percent (1%) of the Exercise Price; provided that
any adjustments which by reason of this paragraph (e) are not required to be
made shall be carried forward and taken into account in any subsequent
adjustment. All calculations shall be made to the nearest cent or to the nearest
one-thousandth of a share, as the case may be.
(f) No adjustment in the number of Warrant Shares purchasable
upon the exercise of this Warrant need be made under paragraph (b) or (c) if the
Subsidiary Company issues or distributes to the holder of this Warrant the
shares, rights, options, warrants or convertible or exchangeable securities, or
evidences of indebtedness or assets referred to in those paragraphs which the
holder of this Warrant would have been entitled to receive had this Warrant been
exercised prior to the happening of such event or the record date with respect
thereto. In no event shall the Subsidiary Company be required or obligated to
make any such distribution otherwise than in its sole discretion. No adjustment
in the number of Warrant shares purchasable upon the exercise of this Warrant
need be made for sales of CXI Common Stock pursuant to a Subsidiary Company plan
for reinvestment of dividends or interest. No adjustment need be made for a
change in the par value of the CXI Common Stock.
(g) In the event that at any time, as a result of an
adjustment made pursuant to paragraph (a) above, the holder of this Warrant
shall become entitled to purchase any securities of the Subsidiary Company other
than shares of CXI Common Stock, thereafter the number of such other shares so
purchasable upon exercise of this Warrant and the Exercise Price of such shares
shall be subject to adjustment from time to time in a manner and on terms as
nearly equivalent as practicable to the provisions with respect to the Warrant
Shares contained in paragraphs (a) through (g), inclusive, above.
-8-
<PAGE> 9
14. Voluntary Adjustment by the Parent Company or the
Subsidiary Company. The Parent Company or the Subsidiary Company may at its
option, at any time during the term of this Warrant, reduce the then current
Exchange Price to any amount and for any period of time deemed appropriate by
the Board of Directors of the Parent Company or the Subsidiary Company.
15. Notice of Adjustment. Whenever the number of Warrant
Shares or number or kind of securities or other property purchasable upon the
exercise of this Warrant or the Exercise Price is adjusted, as herein provided,
the Parent Company or the Subsidiary Company shall promptly mail by registered
or certified mail, return receipt requested, to the transfer agent for the CXI
Common Stock and to the holder of this Warrant notice of such adjustment or
adjustments setting forth the number of Warrant Shares (and other securities or
property) purchasable upon the exercise of this Warrant and the Exercise Price
of such Warrant Shares after such adjustment, setting forth a brief statement of
the facts requiring such adjustment and setting forth computation by which such
adjustment was made. Such notice, in absence of manifest error, shall be
conclusive evidence of the correctness of such adjustment.
16. Authorized Shares. The Parent Company covenants that
during the period the Warrant is outstanding, it will reserve from its holdings
of CXI Common Stock a sufficient number of shares to provide for the transfer of
CXI Common Stock upon the exercise of any purchase rights under this Warrant.
Such reservation of shares of CXI Common Stock shall be in addition to those
shares of CXI Common Stock reserved pursuant to the Parent Company's Certificate
of Designation for its Series D Preferred Stock. The Parent Company and the
Subsidiary Company further covenant that the issuance of this Warrant shall
constitute full authority to their officers who are charged with the duty of
executing stock certificates to execute and issue the necessary certificates for
shares of the Subsidiary Company's Common Stock upon the exercise of the
purchase rights under this Warrant. The Parent Company and the Subsidiary
Company will take all such reasonable action as may be necessary to assure that
such shares of CXI Common Stock may be transferred and reissued as provided
herein without violation of any applicable law or regulation, or of any
requirements of AMEX or any domestic securities exchange upon which the CXI
Common Stock may be listed.
17. Restrictions on Exercise. Notwithstanding anything to the
contrary contained herein, no Warrants may be converted by a holder of Warrants
("Holders") to the extent that, after giving effect to the shares of CXI Common
Stock issued pursuant to the exercise hereof, the total number of shares of CXI
Common Stock deemed beneficially owned by such Holder (other than by virtue of
the ownership of shares of Series D Preferred Stock or Warrants or ownership of
other securities that have limitations on a Holder's rights to convert or
exercise similar to those limitations set forth herein), together with all
shares of CXI Common Stock deemed beneficially owned by Holder's "affiliates"
(as defined in Rule 144 under the 1933 Act) that would be aggregated for
purposes of determining whether a group under Section 13(d) of the Securities
Exchange Act of 1934, as amended, exists, would exceed 4.99% of the total issued
and outstanding shares of CXI Common Stock, provided that each Holder shall have
the right to waive this restriction, in whole or in part, immediately in case of
a pending Change in Control Transaction (as defined in the Agreement) and in any
other case upon 61 days prior to the exercise hereunder by Holder. The exercise
of all or part of this Warrant by any Holder shall
-9-
<PAGE> 10
be deemed a representation by such Holder it is in compliance with this Section
17. A transferee of Warrants shall not be bound by this provision unless it
expressly agrees to be so bound. The term "deemed beneficially owned" as used
in this Section 17 shall exclude shares that might otherwise be deemed
beneficially owned by reason of the exercisability of the Warrants.
18. Miscellaneous.
(a) Issue Date. The provisions of this Warrant shall be
construed and shall be given effect in all respects as if it had been issued and
delivered by the Parent Company and the Subsidiary Company on the date hereof.
This Warrant shall be binding upon any successors or assigned of the Parent
Company and the Subsidiary Company. This Warrant shall constitute a contract
under the laws of New York and for all purposes shall be construed in accordance
with and governed by the laws of said state without regard to its conflict of
law, principles or rules.
(b) Restrictions. The holder hereof acknowledges that the CXI
Common Stock acquired upon the exercise of this Warrant, if not registered, may
have restrictions upon its resale imposed by state and federal securities laws.
(c) Modification and Waiver. This Warrant and any provisions
hereof may be changed, waived, discharged or terminated only by an instrument in
writing signed by the party against which enforcement of the same is sought.
(d) Notices. Any notice, request or other document required or
permitted to be given or delivered to the holders hereof or the Parent Company
or the Subsidiary Company shall be delivered or shall be sent by certified or
registered mail, postage prepaid, or by overnight courier or by facsimile to
each such holder at its address (or fax number) as shown on the books of the
Parent Company or the Subsidiary Company or to the Parent Company and the
Subsidiary Company at the addresses (or fax numbers) set forth in the Agreement.
19. Reset of Exercise Price of Warrants. Notwithstanding
anything to the contrary herein, the Exercise Price shall be reset on the first
anniversary of the date of issuance of this Warrant to an exercise price which
shall be equal to the lesser of (i) the exercise price in effect immediately
prior to such anniversary date, or (ii) 110% of the closing bid price of the CXI
Common Stock on the day immediately prior to such first anniversary date of
issuance. as reported by Bloomberg. Furthermore, if at any time after such first
anniversary, the closing price of the CXI Common Stock for any period of ten
(10) consecutive trading days or more shall be less than fifty percent (50%) of
the closing price of the CXI Common Stock on the day immediately preceding such
first anniversary, the Exercise Price shall be further reset to 50% of the
closing price of the CXI Common Stock on the day immediately prior to such first
anniversary. The aforesaid 50% reset provision shall be applicable, if at all,
on only one occasion. The foregoing reset provisions expire if the CXI Common
Stock trades at a price of $10.00 or more at any time, commencing ninety (90)
days after the effective date of the registration statement filed pursuant to
Section 8.2(a) of the Agreement. In the event that, at any time and from time to
time from and after the date hereof, there shall occur any stock dividend, stock
split, combination of shares, recapitalization or other such event relating to
the then outstanding CXI Common
-10-
<PAGE> 11
Stock, then all of the foregoing price calculations and amounts will be
appropriately arithmetically adjusted.
IN WITNESS WHEREOF, the Parent Company and the Subsidiary
Company have caused this Warrant to be executed by their officers thereunto duly
authorized.
Dated: August __, 1997
COMMODORE ENVIRONMENTAL SERVICES, INC.
By /s/ Paul E. Hannesson
-----------------------------------------
COMMODORE APPLIED TECHNOLOGIES, INC.
By /s/ Michael D. Fullwood
-----------------------------------------
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<PAGE> 12
ASSIGNMENT FORM
(To assign the foregoing warrant, execute
this form and supply required information.
Do not use this form to purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are
hereby assigned to _____________________________________________________________
whose address is _______________________________________________________________
Dated: _________________________
Holder's Signature: _________________________
Holder's Address: _________________________
_________________________
Signature Guaranteed: __________________________________________________________
NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant, without alteration or enlargement or any
change whatsoever, and must be guaranteed by a bank or trust company. Officers
of corporations and those acting in an fiduciary or other representative
capacity should file the proper evidence of authority to assign the foregoing
Warrant.
<PAGE> 13
[FORM OF ELECTION TO PURCHASE]
The undersigned hereby irrevocably elects to exercise the
right, represented by this Warrant Certificate, to purchase __________ Shares of
CXI Common Stock at an Exercise Price of $__________, and herewith tenders in
payment for such securities a certified check or official bank check payable in
New York Clearing House Funds to the order of Commodore Environmental Services,
Inc. in the amount of $___, all in accordance with the terms of the Stock
Purchase Warrant of Commodore Environmental Services, Inc. that a certificate
for such securities be registered in the name of _____________________________
whose address is ___________________________________________ and that such
Certificate be delivered to ___________________________ whose address is
____________________________________.
Dated: __________
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)
<PAGE> 1
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
COMMODORE ENVIRONMENTAL SERVICES, INC.
Pursuant to Section 242 of the Delaware
General Corporation Law
Pursuant to the provisions of Section 242 of the Delaware General
Corporation Law, the undersigned, being the duly elected Chairman of the Board,
President and Chief Executive Officer of the Corporation, hereby certifies and
sets forth as follows:
FIRST: The name of the Corporation is Commodore Environmental
Services, Inc. (the "Company").
SECOND: The Certificate of Incorporation of the Company was filed by the
Secretary of State on the 6th day of July, 1988.
THIRD: The Certificate of Incorporation of the Company authorizes the
issuance of 10,000,000 shares of Preferred Stock, par value $.01, and expressly
vests in the Board of Directors of the Company the authority provided therein
to issue any or all of said shares in one or more series any by resolution or
resolutions, the designation, number, full or limited voting powers, or the
denial of voting powers, preferences and relative, participating, optional, and
other special rights and the qualifications, limitations, restrictions, and
other distinguishing characteristics of each series to be issued.
FOURTH: The Board of Directors of the Company, pursuant to the
authority expressly vested in it as aforesaid, has adopted the attached
Amended and Restated Certificate of Designation increasing and amending the
Series "D" issue of Preferred Stock, which amendment, in accordance with
Section 242 of the General Corporation Law of the State of Delaware, have been
approved unanimously by the holders of outstanding Series "D" Preferred Stock
(being the only stockholders of the Company entitled to vote thereon) as of the
date hereof.
<PAGE> 2
FIFTH: The amendment to the Certificate of Incorporation herein
certified has been duly adopted in accordance with the provisions of Sections
228 and 242 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the undersigned hereby executes his name and affirm
that the statements made herein are true under the penalties of perjury, this
14th day of August, 1997.
/s/ Paul E. Hannesson
-------------------------------------
Paul E. Hannesson
Chairman of the Board,
President and Chief Executive Officer
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<PAGE> 3
AMENDED AND RESTATED
CERTIFICATE OF DESIGNATION, NUMBER, POWERS,
PREFERENCES AND RELATIVE, PARTICIPATING,
OPTIONAL, AND OTHER SPECIAL RIGHTS AND THE
QUALIFICATIONS, LIMITATIONS, RESTRICTIONS,
AND OTHER DISTINGUISHING CHARACTERISTICS
OF SERIES "D" PREFERRED STOCK
OF
COMMODORE ENVIRONMENTAL SERVICES, INC.
a Delaware Corporation
It is hereby certified that:
1. The name of the Company (hereinafter called the "Company") is
Commodore Environmental Services' Inc.
2. The certificate of incorporation [as amended] of the Company
authorizes the issuance of l0,000,000 shares of Preferred Stock, par value $.01,
and expressly vests in the Board of Directors of the Company the authority
provided therein to issue any or all of said shares in one or more series any by
resolution or resolutions, the designation, number, full or limited voting
powers, or the denial of voting powers, preferences and relative, participating,
optional, and other special rights and the qualifications, limitations,
restrictions, and other distinguishing characteristics of each series to be
issued.
3. The Board of Directors of the Company, pursuant to the authority
expressly vested in it as aforesaid, has adopted the following resolutions
creating a Series "D" issue of Preferred Stock:
RESOLVED, that One Hundred Thousand (100,000) of the 10,000,000
authorized shares of Preferred Stock of the Company shall be designated Series D
Preferred Stock, $.01 par value per share and shall possess the rights and
preferences set forth below:
Section 1. Designation and Amount. The series of Preferred
Stock designated and known as the "Series D Preferred Stock" shall have a par
value of $.01 per share and the number of shares constituting the Series D
Preferred Stock shall be 100,000. The Series D Preferred Stock shall have a
stated value of $100 per share, with a 7% per annum dividend as set forth
herein.
Section 2. Rank. The Series D Preferred Stock shall rank: (i)
prior to all of the Company's Common Stock, par value $.01 per share ("Common
Stock"); (ii) pari passu with all of the Company's Series B and Series C
Preferred Stock; (iii) junior to the Company Series AA Preferred Stock; (iv)
prior to any other class or series of capital stock of the Company hereafter
created (unless it specifically, by its terms, ranks on parity with the Series D
Preferred Stock), in each case as to distributions of assets upon liquidation,
dissolution or winding up of the Company, whether voluntary or involuntary (all
such distributions being referred to collectively as "Distributions").
<PAGE> 4
Section 3. Dividends. The Series D Preferred Stock will bear a
7% per annum cumulative dividend, payable at the time of conversion in cash or
common stock of Commodore Applied Technologies, Inc. ("CXI Common Stock"), which
is a subsidiary of the Company (the "Subsidiary"), at the Conversion Price (as
defined herein), at the Company's option. No dividends shall be paid on the CXI
Common Stock or any stock issued pursuant to Section 8 prior to the payment of
dividends on the Series D Preferred Stock.
Section 4. Liquidation Preference.
(a) In the event of any liquidation, dissolution or winding up
of the Company or the Subsidiary, either voluntary or involuntary, the Holders
of Series D Preferred Stock, pari passu with the Holders of Series B Preferred
Stock and Series C Preferred Stock, but after payment of an amount equal to
$1.00 per share plus any declared but unpaid dividends per share on all
outstanding Series AA Preferred Stock, shall be entitled to receive an amount
per share equal to the sum of (i) $100 for each outstanding share of Series D
Preferred Stock (subject to adjustments for Reclassifications (as defined
herein)), plus (ii) an amount equal to all accrued and unpaid dividends (which
shall accrue through the Conversion Date, Redemption Date (both as defined
herein) or the date liquidated damages are paid, as applicable) and any then
unpaid liquidated damages (interest on which shall accrue at a rate of 2% per
month) arising under Sections 5(c) or (g) (the "Liquidation Preference"). If
upon the occurrence of such event, the assets and funds available to be
distributed among the Holders of the Series D Preferred Stock shall be
insufficient to permit the payment to such Holders of the full preferential
amounts due to such Holders, then the entire assets and funds of the Company or
the Subsidiary legally available for distribution shall be distributed, first to
the Holders of the Series AA Preferred Stock, and then among the Holders of the
Series C and Series D Preferred Stock on a pro rata basis.
(b) A sale, conveyance or disposition of all or substantially
all of the assets of the Company or the Subsidiary shall be deemed to be a
liquidation, dissolution or winding up within the meaning of this Section 4;
provided further that, a consolidation, merger, acquisition, or other business
combination of the Company or the Subsidiary with or into any other company or
companies or the effectuation by the Company or the Subsidiary of a transaction
or series of related transactions in which more than 50% of the voting power of
the Company or the Subsidiary is disposed of shall not be treated as a
liquidation, dissolution or winding up within the meaning of this Section 4, but
instead shall be treated pursuant to Section 5(h)(ii) hereof.
Section 5. Conversion. The record Holders of this Series D
Preferred Stock sham have conversion rights as follows (the "Conversion
Rights"):
(a) Right to Convert. Each record Holder of Series D Preferred
Stock shall be entitled to convert shares of Series D Preferred Stock beginning
the day following the date that the Registration Statement for the CXI Common
Stock underlying the Series D Preferred Stock was declared effective by the
Securities and Exchange Commission, and at anytime thereafter, into that number
of fully-paid and non-assessable shares of CXI Common Stock of the
2
<PAGE> 5
Subsidiary (the "Conversion Shares") calculated in accordance with the following
formula (the "Conversion Rate"):
Number of shares issued upon conversion of one (1) share of Series D Preferred
Stock =
Liquidation Preference
----------------------
Conversion Price
where, "Conversion Price" means an amount equal to the lesser of (a) $5.15, or
(b) a fifteen (15%) percent discount from the average of either the low bid
price or the closing price (such average to be selected at the option of the
holder of the COES Preferred Shares) of the CXI Common Stock as reported by
Bloomberg, L.P. ("Bloomberg") for the previous five (5) business days ending on
the day before the Conversion Date (the "Average Closing Bid Price"); provided,
however, if the average of the low bid price or the closing price (whichever is
applicable)of the CXI Common Stock, as reported by Bloomberg ("Floor Average"),
for any consecutive thirty (30) days is equal or less than $2.00 (such thirtieth
day shall be the "First Trigger Date"), the conversion price shall equal $2.00;
if the Floor Average for any consecutive thirty (30) days beginning any day
after the First Trigger Date is less than $2.00 ("Second Trigger Date"), the
conversion price shall equal $1.90; if the Floor Average for any thirty (30)
days beginning any day after the Second Trigger Date is less than $1.90 (the
"Third Trigger Date"), the conversion price shall equal $1.80; if the Floor
Average for any consecutive thirty (30) days beginning any day after the Third
Trigger Date is less than $1.80 (the "Fourth Trigger Date"), the conversion
price shall equal $1.70; if the Floor Average for any consecutive thirty (30)
days beginning any day after the Fourth Trigger Date is less than $1.70 (the
"Fifth Trigger Date"), the conversion price shall equal $1.60; if the Floor
Average for any consecutive thirty (30) days beginning any day after the Fifth
Trigger Date is less than $1.60, the conversion price shall equal $1.50 Subject
to Section 6(e) herein, in no event shall the Conversion Price be lower than
$1.50 per share of CXI Common Stock. If the CXI Common Stock is not traded on
the American Stock Exchange, the Average Closing Bid Price shall be the average
closing bid price (and if not available, the mean of the high and low prices) of
the Common Stock on the over-the-counter-market or the principal national
securities exchange or the Nasdaq National Market System or Nasdaq SmallCap
Market System on which the CXI Common Stock is traded for the previous five (5)
business days ending on the day before the Conversion Date.
The Conversion Price shall be equitably adjusted accordingly
on a pro rata basis in the event of the happening of certain events that would
affect the CXI Common Stock or Series D Preferred Stock's value including, but
not limited to, forward and reverse stock splits, issuance of stock dividends,
subdivision of shares, combinations, reclassifications, or the like
(collectively "Reclassifications"). An adjustment made pursuant to this section
shall become effective immediately after the effective date of such event
retroactive to the record date, if any, for such an event.
(b) Mechanics of Conversion. Conversion of the Series D Preferred Stock
to CXI Common Stock may be exercised in whole or in part by Holder telecopying
an executed and completed Notice of Conversion (in the form annexed hereto as
Exhibit A) to counsel for
3
<PAGE> 6
the Company, with a copy to the Company and the Subsidiary, and delivering the
original Notice of Conversion and the certificate representing the Series D
Preferred Stock to counsel by
hand or by express courier within three (3) business days of exercise. Each date
on which a Notice of Conversion is telecopied to and received by the Company in
accordance with the provisions hereof shall be deemed a Conversion Date. The
Subsidiary will reissue and transmit the certificates in the name of the Holder,
or any other name as instructed by the Holder, representing the CXI Common Stock
transferable upon conversion of all or any part of the Series D Preferred Stock
(and the Company will transmit any certificates for replacement Series D
Preferred Stock not previously converted but included in the original
certificate presented for conversion) to the Holder via express courier within
three (3) business days after counsel for the Company has received the original
Notice of Conversion and the certificate representing the Series D Preferred
Stock being so converted. The Notice of Conversion and certificate representing
the portion of the Series D converted shall be delivered as follows:
To counsel of the Company:
Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel
153 East 53rd Street
New York, NY 10022
Attn: Stephen A. Weiss, Esq.
Telephone: 212-801-9200
Facsimile: 212-223-7161
To the Company:
Commodore Environmental Services, Inc.
150 East 58th Street
New York, NY 10155
Attn.: Bentley J. Blum
Telephone: 212-935-5400
Facsimile: 212-753-0731
To the Subsidiary:
Commodore Applied Technologies, Inc.
150 East 58th Street
New York, NY 10155
Attn.: Bentley J. Blum
Telephone: 212-935-5400
Facsimile: 212-753-0731
or to such other person at such other place as the Company shall designate to
the Holder in writing.
4
<PAGE> 7
In the event that the Series D Preferred Stock are not
converted within three (3) business days of the Conversion Date, the Company
shall be liable to Holder for actual damages incurred from the fourth business
day following the Conversion Date through the ninth business day following the
Conversion Date for such failure (provided that Holder has delivered the
original valid Notice of Conversion and the original certificate(s) representing
the Series D Preferred Stock to be converted, or an affidavit and indemnity
agreement as to lost certificates reasonably satisfactory to the Company). In
the event the Series D Preferred Stock are not converted by the tenth (l0th)
business day following the Conversion Date, the Company shall pay to the Holder,
by wire transfer, as liquidated damages for such failure and not as a penalty,
an amount in cash equal to one (1 %) percent per day of the Liquidation
Preference for the Series D Preferred Stock to be converted which shall run from
the tenth (l0th) business day following the Conversion Date; provided, however,
that actual damages and liquidated damages for a failure to deliver certificates
of CXI Common Stock shall be determined in accordance with Section 5(g), if both
of the following conditions are satisfied by the Company: (i) the failure to
deliver certificates of CXI Common Stock is the result of a lack of available
shares of CXI Common Stock and (ii) the Company commences, within ten (10)
business days after the initial Conversion Date to purchase or otherwise acquire
the number of shares of CXI Common Stock which is sufficient to permit
conversion of all Series D Preferred Stock then outstanding at the Hypothetical
Conversion Price (as hereinafter defined) then in effect.
(ii) No Fractional Shares. If any conversion of the
Series D Preferred Stock would create a fractional share of CXI Common Stock or
a right to acquire a fractional share of CXI Common Stock, such fractional share
shall be disregarded and the number of shares of CXI Common Stock issuable upon
conversion, shall be the next higher number of shares.
(c) Restrictions on Conversion of the Series D Preferred
Stock. Notwithstanding anything to the contrary contained herein, no shares of
Series D Preferred Stock may be converted by a Holder to the extent that, after
giving effect to the shares of CXI Common Stock issuable pursuant to a Notice of
Conversion, the total number of shares of CXI Common Stock deemed beneficially
owned by such Holder (other than by virtue of the ownership of the Series D
Preferred Stock or the warrants issued to Holder in connection with the issuance
of the Series D Preferred Stock or ownership of other securities that have
limitations on a Holder's rights to convert or exercise similar to those
limitations set forth herein), together with all shares of CXI Common Stock
deemed beneficially owned by Holder's "affiliates" (as defined in Rule 144 under
the Securities Act) that would be aggregated for purposes of determining whether
a group under Section 13(d) of the Securities Exchange Act of 1934 (the
"Exchange Act") exists, would exceed 4.99% of the total issued and outstanding
shares of CXI Common Stock, provided that each Holder shall have the right to
waive this restriction, in whole or in part, immediately in case of a pending
Change in Control Transaction (as defined herein) and in any other case upon 61
days prior notice to the Company. The delivery of a Notice of Conversion by any
Holder shall be deemed a representation by such Holder it is in compliance with
this Section 5(b). A transferee of the Series D Preferred Stock
5
<PAGE> 8
shall not be bound by this provision unless it expressly agrees to be so bound.
The term "deemed beneficially owned" as used in this Section 5(c) shall exclude
shares that might otherwise be deemed beneficially owned by reason of the
convertibility of the Series D Preferred Stock.
"Change in Control Transaction" means the date the Company or the
Subsidiary (I) sells or otherwise conveys all or substantially all of its assets
or (II) effects a transaction (by merger or otherwise) in which more than 50% of
the voting power of the Company or the Subsidiary is disposed of, directly or
indirectly, or if within any 12 month period there is a change of more than 50%
of the members of the Company's or the Subsidiary's Board of Directors, of if
any other person, entity or group (as defined in Section 13(d) of the Exchange
Act) and/or any of their affiliates or associates acquires in excess of 50% of
the CXI Common Stock.
(d) Mandatory Conversion. The Series D Preferred Stock is
subject to mandatory conversion after five (5) years from the date of the
closing of the sale of shares of Series D Preferred Stock (the "Closing Date"),
at which time all Series D Preferred Stock will automatically be converted at
the Conversion Price, upon the terms set forth in this section. Such five year
period will be extended by the number of days during such period that (i) the
Subsidiary's Common Stock has been Delisted (as defined herein); and/or (ii) a
Suspension (as defined herein) has been in effect and by the number of days
after the 90th day (if the Subsidiary is registering the Conversion Shares on
Form S-3) or the 120th day (if the Subsidiary is registering the Conversion
Shares on Form S-1), which date is applicable as provided from the date hereof
that the Registration Statement (as defined herein) was not declared effective.
Any particular day in which more than one of the foregoing condition events
shall have been in effect shall only be counted once in determining the number
of days by which to extend the five year period prior to mandatory conversion.
Mandatory conversion shall not occur in the event of the occurrence of one or
both of the following at the time of such mandatory conversion: (x) the Company
or the Subsidiary is unable, or admits in writing its inability, to pay its
debts, or is not paying its debts generally as they come due, or has made any
assignment for the benefit of creditors; or (y) the Company or the Subsidiary
has commenced, or there has been commenced against the Company or the
Subsidiary, any case, proceeding, or other action seeking to have an order for
relief entered with respect to the Company or the Subsidiary, or to adjudicate
the Company or the Subsidiary as a bankrupt or insolvent.
"Delisting" means the date the CXI Common Stock is delisted from the AMEX
and is not otherwise listed on the Nasdaq Stock Market or other national
securities exchange.
"Suspension" means the date of a suspension of the use of the prospectus
forming part of the registration statement (the "Registration Statement") filed
under the Securities Act of 1933, as amended (the "Securities Act") registering
the shares of CXI Common Stock issuable upon the conversions of the Series D
Preferred Stock.
(e) Reservation of Stock Issuable Upon Conversion. The Company
shall at all times reserve and keep available out of its holdings of shares of
CXI Common Stock, such number of shares of CXI Common Stock as shall from time
to time be sufficient to effect the
6
<PAGE> 9
conversion of all then outstanding Series D Preferred Stock, the sufficiency of
which shall be determined by using a Conversion Price (the "Hypothetical
Conversion Price") derived from a hypothetical closing market price that is 75%
of either (i) the actual Average Closing Bid Price on the Closing Date or (ii)
the actual Average Closing Bid Price from time to time, whichever is lower. The
Company hereby covenants and agrees that if at any time the Hypothetical
Conversion Price falls to a level that would not enable all outstanding Series D
Preferred Stock to be fully converted, the Company will promptly purchase or
otherwise acquire the number of shares of CXI Common Stock sufficient to permit
the conversion of all Series D Preferred Stock then outstanding at the
Hypothetical Conversion Price then in effect.
(g) Liquidated Damages. In the event of a Delisting, a
Cumulative Suspension (as defined herein) or Insufficient CXI Common Stock (as
defined herein) (each a "Damage Event"), the Company will pay to Holder (and to
all other holders of the Shares), by wire transfer, as liquidated damages for
such non-availability and not as a penalty, an amount in cash equal to 2% per
month of the Liquidation Preference of only those Series D Preferred Stock then
eligible for conversion, without regard to Section 5(c), for the first two
months after the occurrence of a Damage Event, and 3 % per month for each month
thereafter. Similar liquidated damages shall be paid with respect to any Series
D Preferred Stock not initially eligible for conversion when the Damage Event
first occurred but which subsequently become eligible for conversion, without
regard to Section 5(c), commencing in the first month that such Series D
Preferred Stock become eligible for such conversion. Such liquidated damages
shall continue to accrue and shall be payable until the Damage Event has been
cured, and, if not paid, interest thereon shall accrue at a rate of 2% per
month. At the Holder's election, such liquidated damages may be paid in cash or
may be added to the principal of the Series D Preferred Stock for subsequent
conversion purposes. Notwithstanding the foregoing, in the case of a Delisting,
after six months from the date of such Delisting, the Company shall have the
option to force Holder to as promptly as possible convert (in increments of no
less than $50,000) all or part of its Series D Preferred Stock, subject to
Holder being able to sell the underlying Conversion Shares, and simultaneously
sell such Conversion Shares (where the conversion price therefor shall not be
the Conversion Price but instead shall equal 85% of the Holder's sale price of
the Conversion Shares, all as determined by Holder's actual trading records (to
be provided to the Company). In no event may the Company force Holder to convert
less than $50,000 of Series D Preferred Stock at any one time.
"Cumulative Suspension" means the date a Suspension has
occurred and is continuing or the date that is the 15th day in the aggregate
that more than one Suspension has occurred since the effective date of the
Registration Statement.
"Insufficient CXI Common Stock" means the date the number of
shares of CXI Common Stock held by the Company is not sufficient to effect the
conversion of all outstanding Series D Preferred Stock then eligible for
conversion (whether or not the Holders have duly delivered Notices of
Conversion).
(h) Adjustment to Conversion Rate.
7
<PAGE> 10
(i) Adjustment to Fixed Conversion Price Due to
Stock Split, Stock Dividend, Etc. If at any time when the Series D Preferred
Stock is issued and outstanding, the number of outstanding shares of CXI Common
Stock is increased by a stock split, stock dividend, or other similar event, the
Conversion Price shall be proportionately reduced, or if the number of
outstanding shares of CXI Common Stock is decreased by a reverse stock split,
combination or reclassification of shares, or other similar event, the
Conversion Price shall be proportionately increased. In such event the Company
and the Subsidiary shall notify the Company's and the Subsidiary's transfer
agent of such change on or before the effective date thereof.
(ii) Adjustment Due to Merger, Consolidation, Etc.
If, prior to the conversion of all Series D Preferred Stock, there shall be any
merger, consolidation, exchange of shares, recapitalization, reorganization, or
other similar event, as a result of which shares of CXI Common Stock of the
Company or the Subsidiary shall be changed into the same or a different number
of shares of the same or another class or classes of stock or securities of the
Company or the Subsidiary or another entity, or other property, then the Holders
of Series D Preferred Stock shall, upon being given at least 30 days advance
written notice of such transaction, thereafter have the right to purchase and
receive upon conversion of Series D Preferred Stock, upon the basis and upon the
terms and conditions specified herein and in lieu of the shares of CXI Common
Stock immediately theretofore issuable upon conversion, such shares of stock
and/or securities or other property as may be issued or payable with respect to
or in exchange for the number of shares of CXI Common Stock immediately
theretofore purchasable and receivable upon the conversion of Series D Preferred
Stock held by such Holders had such merger, consolidation, exchange of shares,
recapitalization or reorganization not taken place, and in any such case
appropriate provisions shall be made with respect to the rights and interests of
the Holders of the Series D Preferred Stock to the end that the provisions
hereof (including, without limitation, provisions for adjustment of the
Conversion Rate and of the number of shares issuable upon conversion of the
Series D Preferred Stock) shall thereafter be applicable, as nearly as may be
practicable in relation to any shares of stock or securities thereafter
deliverable upon the conversion thereof. The Company or the Subsidiary shall not
effect any transaction described in this subsection 5(h) unless (1) Holder has
been given at least 30 days advance written notice of such transaction, and (2)
the resulting successor or acquiring entity (if not the Company or the
Subsidiary) assumes by written instrument the obligation to deliver to the
Holders of the Series D Preferred Stock such shares of stock and/or securities
or other property as, in accordance with the foregoing provisions, the Holders
of the Series D Preferred Stock may be entitled to receive upon conversion of
the Series D Preferred Stock.
(iii) No Fractional Shares. If any adjustment under
this Section 5(h) would create a fractional share of CXI Common Stock or a right
to acquire a fractional share of CXI Common Stock, such fractional share shall
be disregarded and the number of shares of CXI Common Stock issuable upon
conversion shall be the next higher number of shares, or
Section 6. Redemption By Parent Company.
8
<PAGE> 11
(a) The Company's Right to Redeem. The Company shall have the
right, at any time and from time to time, in its sole discretion, to redeem in
whole or in part the Series D Preferred Stock then outstanding, except that if
the Holder or any Holder of the Series D Preferred Stock has submitted a Notice
of Conversion, the Company shall not have the right to redeem the shares of
Series D Preferred Stock which were submitted for conversion and the
certificates representing Conversion Shares should be delivered promptly
according to Section 5(b) herein. If the Company elects to redeem some, but not
all, of the Series D Preferred Stock, the Company shall redeem the Series D
Preferred Stock pro rata among the Holders of all the Series D Preferred Stock
then outstanding. The date of the Company's redemption of Series D Preferred
Stock shall be referred to as the "Redemption Date. "
(b) Redemption Price. The redemption price pre Series D Preferred Stock
shall equal $125.
(c) Mechanics of Redemption; Holder's Conversion Rights. The Company
shall effect each such redemption by giving notice of its election to redeem
("Redemption Notice"), by facsimile, by 5 P.M. New York City time on the
Redemption Date and shall provide a copy of such redemption notice by overnight
or 2-day courier, to Holder, all other Holders of Series D Preferred Stock and
the Company's Transfer Agent. Such redemption notice shall indicate whether the
Company will redeem all or part of the Series D Preferred Stock. Upon the giving
of any such Redemption Notice, and until the earlier of either payment of the
applicable redemption price or fifteen (15) business days after the Redemption
Date (or later as provided in Section 6(d) below), the conversion rights in
respect of the Series D Preferred Stock called for redemptions shall be
suspended. Subject to the Company's payment of the applicable redemption price,
the accrual of dividends in connection with the shares of Series D Preferred
Stock called for redemption will suspend on the Redemption Date.
(d) Payment of Redemption Price. Upon receipt of a Redemption Notice,
Holder shall send its shares of Series D Preferred Stock being redeemed to the
Company or its Transfer Agent within three business (3) days of the receipt of
such Redemption Notice, and the Company shall pay the applicable redemption
price within fifteen (15) business days of the Redemption Date (such fifteen
business (15) day period shall be extended for each day the Series D Preferred
Stock being redeemed have not been delivered to the Company or its Transfer
Agent beyond the third (3rd) business day after receipt of the Redemption
Notice). The Company shall not be obligated to deliver the redemption price
unless the shares of Series D Preferred Stock so redeemed are delivered to the
Company or its Transfer Agent, or, in the event one or more certificates have
been lost, stolen, mutilated or destroyed, Holder delivers to the Company a lost
certificate affidavit reasonably satisfactory to Company and its Transfer Agent.
(e) Default of Company's Redemption. If the Company fails to pay the
applicable redemption price to the Holder and/or other Holders of the Series D
Preferred Stock being redeemed by the Company within fifteen (15) business days
of the Redemption Date (such fifteen business (15) day period shall be extended
for each day the Series D Preferred
9
<PAGE> 12
Stock being redeemed have not been delivered to the Company or its Transfer
Agent beyond the third business (3rd) day after receipt of the Redemption
Notice), the Company shall be deemed to have defaulted on their right to redeem
such shares of Series D Preferred Stock. Such shares of Series D Preferred Stock
shall thereafter become immediately convertible and the Conversion Price for
such shares of Series D Preferred Stock shall be equal to 75% of the Average
Closing Bid Price. The Conversion Price for such Series D Preferred Stock shall
not be subject to a floor.
(f) Blackout Period. Notwithstanding the foregoing, the
Company may not either send out a redemption notice or effect a redemption
during a Blackout Period (defined as a period during which the Company's or the
Subsidiary's officers or directors would not be entitled to buy or sell stock
because of their holding of material non-public information). In the event the
Company initiates a redemption during a Blackout Period without having first
made public material non-public information, the Company or the Subsidiary shall
disclose the non-public information that resulted in the Blackout Period, and no
redemption shall be effected until at least 10 days after the Company or the
Subsidiary shall have given the Holder written notice that the Blackout Period
has been lifted.
Section 7. Voting Rights. The Holders of the Series D
Preferred Stock shall have no voting power whatsoever, except with respect to
any amendment to the Company's or the Subsidiary's Certificate of Incorporation
which would have an adverse effect on the Series D Preferred Stock or as
otherwise provided by the General Corporation Law of the State of Delaware.
Section 8. Status of Converted Stock. In the event any shares
of Series D Preferred Stock shall be converted pursuant to Section 5 hereof, the
shares so converted shall be canceled, shall return to the status of authorized
but unissued Preferred Stock of no designated series, and shall not be issuable
by the Company as Series D Preferred Stock.
Section 9. Preference Rights. Nothing contained herein shall
be construed to prevent the Board of Directors of the Company from issuing one
or more series of Preferred Stock with dividend and/or liquidation preferences
junior to the dividend and liquidation preferences of the Series D Preferred
Stock.
10
<PAGE> 13
FURTHER RESOLVED, that the statements contained in the
foregoing resolutions creating and designating the said Series D issue of
Preferred Stock and fixing the number, powers, preferences and relative,
optional, participating, and other special rights and the qualifications,
limitations, restrictions, and other distinguishing characteristics thereof
shall, upon the effective date of said series, be deemed to be included in and
be a part of the certificate of incorporation of the corporation pursuant to the
provisions of Section 104 and 151 of the General Corporation Law of the State of
Delaware.
Signed on August 14, 1997
/s/ Paul E. Hannesson
___________________________________
Name: Paul E. Hannesson
Title: President
Attest
/s/ Michael D. Fullwood
___________________________________
Name: Michael D. Fullwood
Title: Secretary
11
<PAGE> 14
EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder in order to
Convert the 7% Preferred Stock)
The undersigned hereby irrevocably elects to convert ____________
shares of COES Preferred Stock represented by above Certificate No. _____ into
shares of common stock of COMMODORE APPLIED TECHNOLOGIES, INC. (the
"Subsidiary") according to the conditions hereof, as of the date written below.
The undersigned represents and warrants that:
All offers and sales by the undersigned of the shares of
Common Stock issuable to the undersigned upon conversion of
the COES Preferred Shares shall be made pursuant to an
exemption from registration under the Act, or pursuant to
registration of the Common Stock under the Securities Act of
1933, as amended.
<TABLE>
<CAPTION>
<S> <C>
_________________________________ ___________________________
Date of Conversion Applicable Conversion Price
_________________________________ ___________________________
Number of Shares of Common Stock $ Amount of Conversion
upon Conversion
_________________________________ ___________________________
Signature Name
Address: Delivery of Shares to:
</TABLE>
12
<PAGE> 1
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER REGULATION D PROMULGATED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "1933 ACT"). THIS STOCK PURCHASE WARRANT SHALL NOT
CONSTITUTE AN OFFER TO SELL NOR A SOLICITATION OF AN OFFER TO BUY THE SECURITIES
IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL. THE
SECURITIES ARE "RESTRICTED" AND MAY NOT BE RESOLD OR TRANSFERRED EXCEPT AS
PERMITTED UNDER THE 1933 ACT PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.
No. 97-D11
STOCK PURCHASE WARRANT
To Purchase 50,000 Shares of Common Stock of
COMMODORE APPLIED TECHNOLOGIES, INC.
from
COMMODORE ENVIRONMENTAL SERVICES, INC.
THIS CERTIFIES that, for value received, MILTON PARTNERS (the
"Investor"), is entitled upon the terms and subject to the conditions
hereinafter set forth, at any time on or after August 15, 1997 (the "Initial
Exercise Date") and on or prior to August 14, 2002 (the "Termination Date") but
not thereafter, to subscribe for and purchase from COMMODORE ENVIRONMENTAL
SERVICES, INC., a Delaware corporation (the "Parent Company"), 50,000 shares of
its holdings of Common Stock of COMMODORE APPLIED TECHNOLOGIES, INC. ("CXI
Common Stock"), a Delaware corporation (the "Subsidiary Company") (the "Warrant
Shares"). The purchase price of one share of CXI Common Stock (the "Exercise
Price") under this Warrant shall be Seven Dollars and Fourteen Cents ($7.14).
The Exercise Price and the number of Warrant Shares shall be subject to
adjustment as provided herein. This warrant is being issued pursuant to a
Preferred Stock Securities Purchase Agreement, dated May 20, 1997, as amended
August 18, 1997, complete with all listed exhibits thereto (the "Agreement") by
and between the Parent Company, Subsidiary Company and the Investor and is
subject to its terms. In the event of any conflict between the terms of this
Warrant and the Agreement, the Agreement shall control.
1. Title of Warrant. Prior to the expiration hereof and
subject to compliance with applicable laws, this Warrant and all rights
hereunder are transferable, in whole or in part, at the office or agency of the
Parent Company, by the holder hereof in person or by duly authorized attorney,
upon surrender of this Warrant together with the Assignment Form annexed hereto
properly endorsed.
<PAGE> 2
2. Authorization of Shares. The Parent Company and the
Subsidiary Company covenant that all shares of CXI Common Stock which may be
transferred upon the exercise of rights represented by this Warrant will, upon
exercise of the rights represented by this Warrant, be duly authorized, validly
issued, fully paid and non-assessable and free from all taxes, liens and
charters in respect of the issue thereof (other than taxes in respect of any
transfer occurring contemporaneously with such issue).
3. Exercise of Warrant. Exercise of the purchase rights
represented by this Warrant may be made at any time or times, in whole or in
part, on or after the Initial Exercise Date, and before the close of business on
the Termination Date, or such earlier date on which this Warrant may terminate
as provided in paragraph 11 (a) below, by the surrender of this Warrant and
the Form of Election to Purchase annexed hereto duly executed, at the office of
the Parent Company (with copy to Stephen A. Weiss, Esq., Greenberg, Traurig,
Hoffman, Lipoff, Rosen & Quentel, 153 East 53rd Street, New York, NY 10022 or
such other office or agency of the Parent Company as it may designate by notice
in writing to the registered holder hereof at the address of such holder
appearing on the books of the Company) and upon payment of the Exercise Price of
the shares thereby purchased; whereupon the holder of this Warrant shall be
entitled to receive a certificate for the number of shares of CXI Common Stock
so purchased immediately. In the event upon exercising the Warrant, the transfer
agent requires an opinion of counsel, the Parent Company or the Subsidiary
Company shall have such opinion furnished to the transfer agent to the transfer
agent's satisfaction. In the event the Investor is relying on an exemption from
registration under the 1933 Act, the Warrant Shares shall be issued immediately,
if the Investor furnishes an opinion of counsel, reasonably satisfactory to the
Subsidiary Company, that such exemption from registration be available.
Certificates for shares purchased hereunder shall be delivered to the holder
hereof within three (3) business days after the date on which this Warrant shall
have been exercised as aforesaid. Payment of the Exercise Price of the shares
may be by certified check or cashier's check or by wire transfer to an account
designated by the Parent Company in an amount equal to the Exercise Price
multiplied by the number of shares being purchased.
4. No Fractional Shares or Scrip. No fractional shares or
scrip representing fractional shares shall be issued upon the exercise of this
Warrant.
5. Charges, Taxes and Expenses. Reissuance of certificates in
the name of the holder hereof for shares of CXI Common Stock upon the exercise
of this Warrant shall be made without charge to the holder hereof for any issue
or transfer tax or other incidental expense in respect of the issuance of such
certificate, all of which taxes and expenses shall be paid by the Company, and
such certificates shall be issued in the name of the holder of this Warrant or
in such name or names as may be directed by the holder of this Warrant;
provided, however, that in the event certificates for shares of CXI Common Stock
are to be issued in a name other than the name of the holder of this Warrant,
this Warrant when surrendered for exercise other than the name of the holder of
this Warrant, this Warrant when surrendered for exercise shall be accompanied by
the Assignment Form attached hereto duly executed by the holder hereof, together
with evidence satisfactory to the Subsidiary Company that such transfer or
assignment is being made in compliance with all applicable federal and state
securities laws; and provided, further, that upon any transfer involved in the
issuance or delivery of any certificates for shares of
-2-
<PAGE> 3
CXI Common Stock, the Subsidiary Company may require, as a condition thereto,
the payment of a sum sufficient to reimburse it for any transfer tax incidental
thereto.
6. Closing of Books. The Parent Company and the Subsidiary
Company will at no time close its shareholder books or records in any manner
which interferes with the timely exercise of this Warrant.
7. Voting Rights. This Warrant does not entitle the holder
hereof to any rights as a shareholder of the Subsidiary Company prior to the
exercise hereof except for the voting rights set forth in this paragraph. If,
however, at the time of the surrender of this Warrant and purchase the holder
hereof shall be entitled to exercise this Warrant, the shares so purchased shall
be and shall be deemed to be transferred and reissued to such holder as the
record owner of such shares as of the close of business on the date on which
this Warrant shall have been exercised. Prior to the date of such exercise and
except as otherwise required by applicable Delaware law, the holder of this
Warrant shall vote together with the Common Stock and not as a separate class on
any transaction with respect to which the Common Stock is entitled to vote
pursuant to applicable Delaware law or the Certificate of Incorporation. Each
Warrant shall be entitled to a number of votes per share equal to (i) one (1)
multiplied by (ii) the number of shares of Common Stock which may be acquired
upon exercise of this Warrant if the same were exercisable and were so exercised
on the record date used to determine shares eligible to vote on such
transaction.
8. Assignment and Transfer of Warrant. This Warrant may be
assigned by the surrender of this Warrant and the Assignment Form annexed hereto
duly executed at the office of the Parent Company (or such other office or
agency of the Parent Company as it may designate by notice in writing to the
registered holder hereof at the address of such holder appearing on the books of
the Parent Company); provided, however, that this Warrant may not be resold or
otherwise transferred except (i) in a transaction registered under the
Securities Act, or (ii) in a transaction pursuant to an exemption, if available,
from such registration and whereby, if requested by the Parent Company or the
Subsidiary Company, an opinion of counsel reasonably satisfactory to the Parent
Company or the Subsidiary Company is obtained by the holder of this Warrant to
the effect that the transaction is so exempt.
9. Loss, Theft, Destruction or Mutilation of Warrant. Each of
the Parent Company and the Subsidiary Company represents and warrants that upon
receipt by the Parent Company or the Subsidiary Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of any Warrant
or stock certificate, and in case of loss, reimbursement to the Parent Company
or the Subsidiary Company of all reasonable expenses incidental thereto, and
upon surrender and cancellation of such Warrant or stock certificate, if
mutilated, the Parent Company or the Subsidiary Company will make and deliver a
new Warrant or stock certificate of like tenor and dated as of such
cancellation, in lieu of this Warrant or stock certificate.
10. Saturdays, Sundays, Holidays, etc. If the last or
appointed day for the taking of any action or the expiration of any right
required or granted herein shall be a Saturday, Sunday or a legal holiday, then
such action may be taken or such right may be exercised on the next succeeding
day not a legal holiday.
-3-
<PAGE> 4
11. Effect of Certain Events.
(a) If at any time:
(i) the Parent Company or the Subsidiary Company
shall declare any cash dividend upon the CXI Common Stock;
(ii) the Parent Company or the Subsidiary Company
shall declare a dividend upon the CXI Common Stock payable in
securities (other than a dividend payable solely in CXI Common
Stock) or make any special dividend or other distribution to
the holders of its Units;
(iii) the Parent Company or the Subsidiary Company
proposes (A) to sell or otherwise convey all or substantially
all of its assets or (B) to effect a transaction (by merger or
otherwise) in which more than 50% of the voting power of the
Parent Company or the Subsidiary Company is disposed of
(collectively, a "Sale or Merger Transaction") in which the
consideration to be received by the Parent Company or the
Subsidiary Company or its shareholders consists solely of
cash;
(iv) there shall be a voluntary or involuntary
dissolution, liquidation or winding-up of the Parent Company
or the Subsidiary Company;
the Parent Company or the Subsidiary Company shall give the holder of this
Warrant fifteen (15) days' written notice of the proposed effective date, by
certified or registered mail, postage prepaid, addressed to the registered
holder of this Warrant at the address of such holder as shown on the books of
the Parent Company. Such notice shall also specify, in the case of any such
dividend, distribution or option rights, the date on which the holders of Common
Shares shall be entitled thereto. Any notice relating to a Sale or Merger
Transaction shall also specify the date on which the holders of Common Shares
shall be entitled to exchange their Common Shares for securities or other
property deliverable upon such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation or winding-up, as the case may be. If the
Holder of the Warrant does not exercise this Warrant prior to the occurrence of
an event described above, except as provided in Section-13(a), the Holder shall
not be entitled to receive the benefits accruing to existing holders of the
Common Shares in such event.
(b) In case the Parent Company or Subsidiary Company
shall at any time effect a Sale or Merger Transaction in which the consideration
to be received by the Parent Company or the Subsidiary or their shareholders
consists in part of consideration other than cash, or shall issue any shares of
its capital stock in a reclassification of the CXI Common Stock, the holder of
this Warrant shall have the right thereafter to purchase, by exercise of action,
the kind and amount of shares and other securities and property which it would
have owned or have been entitled to receive after happening of such transaction
had this Warrant been exercised immediately prior thereto.
-4-
<PAGE> 5
12. Registration Rights. The Subsidiary Company shall use its
best efforts to file with the SEC not later than September 15, 1997 a shelf
registration statement under the Securities Act on Form S-3, if the Subsidiary
Company is eligible to file a registration statement under such form (and if the
Subsidiary Company is not eligible to file a registration statement under Form
S-3, to file with the SEC a registration statement under the Securities Act on
Form S-1 or any other form which is appropriate), to register the Conversion
Shares and Warrant Shares, and shall use its best efforts to cause such
registration statement to be declared effective by the SEC by not later than
December 15, 1997. Such registration statement will also cover shares issuable
upon conversion of Series A Preferred Stock of CXI sold by CXI pursuant to a
certain Stock Purchase Agreement dated as of August 15, 1997. In the event of
the failure of the Subsidiary Company to procure registration of the Warrant
Shares in accordance with Section 8.2(a) of the Agreement prior to any of the
dates set forth below in this Section 12, the Parent Company will pay to the
investor by wire transfer, as liquidated damages for such failure and not as a
penalty, for each month or part thereof for which such failure continues or in
the event of a Suspension (as defined in Section 8.7 of the Agreement) after
such date, an amount equal to the following percentages of the product of the
Exercise Price and the number of Warrants held by the Investor which were
acquired by the Investor pursuant to the Agreement and have not been exercised
at such calculation date:
<TABLE>
<CAPTION>
Required Effective Date Percentage
----------------------- ----------
<S> <C>
On or before November 19, 1997 1%
Between November 20 and
December 19, 1997 2%
After December 20, 1997 3%
</TABLE>
If the Parent Company does not remit the damages to the Investor as set forth
above, the Parent Company will pay the Investor reasonable costs of collection,
including attorneys fees, in addition to the liquidated damages. Such payment
shall be made to the Investor if due, monthly in arrears. The payment of such
liquidated damages shall not relieve the Subsidiary Company from its obligations
to register the Conversion Shares and Warrant Shares and shall not affect or
limit Investor's other rights or remedies as set forth in this Warrant or the
Agreement. If not paid as required, interest on such damages will accrue at a
rate of 2% per month. Notwithstanding the foregoing, the liquidated damages
shall be limited to 1% per month or any portion thereof if the delay in
effectiveness of the registration statement beyond November 19, 1997 or the
Suspension thereafter shall be for reasons outside the control of the Parent
Company or the Subsidiary
-5-
<PAGE> 6
Company. The obligations of the Parent Company and the Subsidiary Company under
this paragraph 12 shall cease and terminate upon the earlier to occur of (x)
such time as all of the Warrant Shares have been re-sold or (y) such time as all
of the Warrant Shares may be re-sold pursuant to Rule 144 under the Securities
Act
13. Adjustments of Exercise Price and Number of Warrant
Shares. The number and kind of securities purchasable upon the exercise of this
Warrant and the Exercise Price shall be subject to adjustment from time to time
upon the happening of certain events, as hereinafter set forth:
(a) In case the Subsidiary Company shall at any time subdivide
its outstanding shares of Common Stock ("CXI Common Shares") into a greater
number of CXI Common Shares or declare a dividend or distribution upon its CXI
Common Shares payable in CXI Common Shares, the Exercise Price in effect
immediately prior to such subdivision or declaration shall be proportionately
reduced, and the number of Warrant Shares transferable upon exercise of the
Warrants shall be proportionately increased. Conversely, in case the outstanding
CXI Common Shares of the Subsidiary Company shall be combined into a smaller
number of CXI Common Shares, the Exercise Price in effect immediately prior to
such combination shall be proportionately increased, and the number of Warrant
Shares issuable upon exercise of the Warrants shall be proportionately reduced.
(b) (x) In case the Subsidiary Company shall issue shares of
CXI Common Stock ("Additional Shares") or (y) in case the Subsidiary Company
shall issue rights, options or warrants to purchase shares of CXI Common Stock
or securities convertible into or exchangeable for CXI Common Stock, in any case
at a Price Per Share (as defined in paragraph (c) below) which is lower than the
price per share of CXI Common Stock (as reported by Bloomberg, L.P.
("Bloomberg") over the 5-day trading period ending on the day prior to the
Closing (the "Trigger Price"), the number of Warrant Shares hereafter
purchasable upon the exercise of this Warrant shall be determined by multiplying
the number of Warrant Shares theretofore purchasable upon exercise of this
Warrant by the following fraction:
(A)(i) The number of shares of CXI Common Stock outstanding immediately
prior to the issuance of such Additional Shares or rights, options,
warrants or convertible securities, plus (ii) the number of Additional
Shares actually subscribed for and purchased and shares of CXI Common
Stock issuable upon conversion or exercise of such rights, options,
warrants, or convertible securities, divided by
(B)(i) The number of shares of CXI Common Stock outstanding immediately
prior to issuance of such Additional Shares or rights, options,
warrants or convertible securities plus (ii) the number of shares of
CXI Common Stock which the aggregate Proceeds (as defined in paragraph
(c) below) received by the Subsidiary Company upon the sale of such
Additional Shares or exercise or conversion of such rights, options,
warrants and convertible securities would purchase at the Trigger
Price.
Such adjustment shall be made whenever such Additional Shares or
rights, options, warrants or convertible securities are issued, and shall become
effective on the date of distribution
-6-
<PAGE> 7
retroactive to the record date for the determination of stockholders entitled to
receive such rights, options or warrants.
(c) For purposes of this Section 13, "Price Per Share" shall be
defined and determined according to the following formula:
R
P = ----------------
N
where
P = Price Per Share,
R = the "Proceeds" received or receivable by the Subsidiary
Company which (i) in the case of shares of CXI Common Stock is
the total amount received or receivable by the Subsidiary
Company in consideration for the sale and issuance of such
shares; (ii) in the case of fights, options or warrants to
subscribe for or purchase shares of CXI Common Stock or of
securities convertible into or exchangeable or exercisable for
shares of CXI Common Stock, is the total amount received or
receivable by the Subsidiary Company in consideration for the
sale and issuance of such rights, options, warrants or
convertible or exchangeable or exercisable securities, plus
the minimum aggregate amount of additional consideration,
other than the surrender of such convertible or exchangeable
securities, payable to the CXI Company upon exercise,
conversion or exchange thereof, and (iii) in the case of
rights, options or warrants to subscribe for or purchase
convertible or exchangeable or exercisable securities, is the
total amount received or receivable by the Subsidiary Company
in consideration for the sale and issuance of such rights,
options or warrants, plus the minimum aggregate amount of
additional consideration other than the surrender of such
convertible or exchangeable securities, payable upon the
exercise, conversion or exchange of such rights, options or
warrants and upon the conversion or exchange or exercise of
the convertible or exchangeable or exercisable securities;
provided that in each case the proceeds received or receivable
by the Subsidiary Company shall be deemed to be the gross cash
proceeds without deducting therefrom any compensation paid or
discount allowed in the sale, underwriting or purchase thereof
by underwriters or dealers or other performing similar
services or any expenses incurred in connection therewith,
and
N = the "Number of Shares," which (i) in the case of CXI
Common Stock is the number of shares issued; (ii) in the case
of rights, options or warrants to subscribe for or purchase
shares of CXI Common Stock or of securities convertible into
or exchangeable or exercisable for shares of CXI Common Stock,
-7-
<PAGE> 8
is the maximum number of shares of CXI Common Stock initially
issuable upon exercise, conversion or "change thereof; and
(iii) in the case of rights, options or warrants to subscribe
for or purchase convertible or exchangeable or exercisable
securities, is the maximum number of shares of CXI Common
Stock initially issuable upon conversion, exchange or exercise
of the convertible, exchangeable or exercisable securities
issuable upon the exercise of such rights, options or
warrants.
If the Subsidiary Company shall issue shares of CXI Common Stock
or rights, options, warrants or convertible or exchangeable or exercisable
securities for a consideration consisting, in whole or in part, of property
other than cash, the amount of such consideration shall be determined in good
faith by the Board of Directors of the Subsidiary Company whose determination
shall be conclusive.
(d) Whenever the number of Warrant Shares purchasable upon the
exercise of this Warrant is adjusted, as herein provided, the Exercise Price
payable upon exercise of this Warrant shall be adjusted by multiplying such
Exercise Price immediately prior to such adjustment by a fraction, of which the
numerator shall be the number of Warrant Shares purchasable upon the exercise of
this Warrant immediately prior to such adjustment, and of which the denominator
shall be the number of Warrant Shares purchasable immediately thereafter.
(e) No adjustment in the number of Warrant Shares purchasable
hereunder shall be required unless such adjustment would result in an increase
or decrease of at least one percent (1%) of the Exercise Price; provided that
any adjustments which by reason of this paragraph (e) are not required to be
made shall be carried forward and taken into account in any subsequent
adjustment. All calculations shall be made to the nearest cent or to the nearest
one-thousandth of a share, as the case may be.
(f) No adjustment in the number of Warrant Shares purchasable
upon the exercise of this Warrant need be made under paragraph (b) or (c) if the
Subsidiary Company issues or distributes to the holder of this Warrant the
shares, rights, options, warrants or convertible or exchangeable securities, or
evidences of indebtedness or assets referred to in those paragraphs which the
holder of this Warrant would have been entitled to receive had this Warrant been
exercised prior to the happening of such event or the record date with respect
thereto. In no event shall the Subsidiary Company be required or obligated to
make any such distribution otherwise than in its sole discretion. No adjustment
in the number of Warrant shares purchasable upon the exercise of this Warrant
need be made for sales of CXI Common Stock pursuant to a Subsidiary Company plan
for reinvestment of dividends or interest. No adjustment need be made for a
change in the par value of the CXI Common Stock.
(g) In the event that at any time, as a result of an adjustment
made pursuant to paragraph (a) above, the holder of this Warrant shall become
entitled to purchase any securities of the Subsidiary Company other than shares
of CXI Common Stock, thereafter the number of such other shares so purchasable
upon exercise of this Warrant and the Exercise Price of such shares shall be
subject to adjustment from time to time in a manner and on terms as nearly
equivalent as
-8-
<PAGE> 9
practicable to the provisions with respect to the Warrant Shares contained in
paragraphs (a) through (g), inclusive, above.
14. Voluntary Adjustment by the Parent Company or the
Subsidiary Company. The Parent Company or the Subsidiary Company may at its
option, at any time during the term of this Warrant, reduce the then current
Exchange Price to any amount and for any period of time deemed appropriate by
the Board of Directors of the Parent Company or the Subsidiary Company.
15. Notice of Adjustment. Whenever the number of Warrant
Shares or number or kind of securities or other property purchasable upon the
exercise of this Warrant or the Exercise Price is adjusted, as herein provided,
the Parent Company or the Subsidiary Company shall promptly mail by registered
or certified mail, return receipt requested, to the transfer agent for the CXI
Common Stock and to the holder of this Warrant notice of such adjustment or
adjustments setting forth the number of Warrant Shares (and other securities or
property) purchasable upon the exercise of this Warrant and the Exercise Price
of such Warrant Shares after such adjustment, setting forth a brief statement of
the facts requiring such adjustment and setting forth computation by which such
adjustment was made. Such notice, in absence of manifest error, shall be
conclusive evidence of the correctness of such adjustment.
16. Authorized Shares. The Parent Company covenants that
during the period the Warrant is outstanding, it will reserve from its holdings
of CXI Common Stock a sufficient number of shares to provide for the transfer of
CXI Common Stock upon the exercise of any purchase rights under this Warrant.
Such reservation of shares of CXI Common Stock shall be in addition to those
shares of CXI Common Stock reserved pursuant to the Parent Company's Certificate
of Designation for its Series D Preferred Stock. The Parent Company and the
Subsidiary Company further covenant that the issuance of this Warrant shall
constitute full authority to their officers who are charged with the duty of
executing stock certificates to execute and issue the necessary certificates for
shares of the Subsidiary Company's Common Stock upon the exercise of the
purchase rights under this Warrant. The Parent Company and the Subsidiary
Company will take all such reasonable action as may be necessary to assure that
such shares of CXI Common Stock may be transferred and reissued as provided
herein without violation of any applicable law or regulation, or of any
requirements of AMEX or any domestic securities exchange upon which the CXI
Common Stock may be listed.
17. Restrictions on Exercise. Notwithstanding anything to the
contrary contained herein, no Warrants may be converted by a holder of Warrants
("Holders") to the extent that, after giving effect to the shares of CXI Common
Stock issued pursuant to the exercise hereof, the total number of shares of CXI
Common Stock deemed beneficially owned by such Holder (other than by virtue of
the ownership of shares of Series D Preferred Stock or Warrants or ownership of
other securities that have limitations on a Holder's rights to convert or
exercise similar to those limitations set forth herein), together with all
shares of CXI Common Stock deemed beneficially owned by Holder's "affiliates"
(as defined in Rule 144 under the 1933 Act) that would be aggregated for
purposes of determining whether a group under Section 13(d) of the Securities
Exchange Act of 1934, as amended, exists, would exceed 4.99% of the total issued
and outstanding shares of CXI Common Stock, provided that each Holder shall have
the right to waive this restriction, in whole or in part, immediately in case of
a pending Change in Control Transaction (as defined in the Agreement) and in any
other case upon 61 days prior to the exercise
-9-
<PAGE> 10
hereunder by Holder. The exercise of all or part of this Warrant by any Holder
shall be deemed a representation by such Holder it is in compliance with this
Section 17. A transferee of Warrants shall not be bound by this provision unless
it expressly agrees to be so bound. The term "deemed beneficially owned" as used
in this Section 17 shall exclude shares that might otherwise be deemed
beneficially owned by reason of the exercisability of the Warrants.
18. Miscellaneous.
(a) Issue Date. The provisions of this Warrant shall be
construed and shall be given effect in all respects as if it had been issued and
delivered by the Parent Company and the Subsidiary Company on the date hereof.
This Warrant shall be binding upon any successors or assigned of the Parent
Company and the Subsidiary Company. This Warrant shall constitute a contract
under the laws of New York and for all purposes shall be construed in accordance
with and governed by the laws of said state without regard to its conflict of
law, principles or rules.
(b) Restrictions. The holder hereof acknowledges that the CXI
Common Stock acquired upon the exercise of this Warrant, if not registered, may
have restrictions upon its resale imposed by state and federal securities laws.
(c) Modification and Waiver. This Warrant and any provisions
hereof may be changed, waived, discharged or terminated only by an instrument in
writing signed by the party against which enforcement of the same is sought.
(d) Notices. Any notice, request or other document required or
permitted to be given or delivered to the holders hereof or the Parent Company
or the Subsidiary Company shall be delivered or shall be sent by certified or
registered mail, postage prepaid, or by overnight courier or by facsimile to
each such holder at its address (or fax number) as shown on the books of the
Parent Company or the Subsidiary Company or to the Parent Company and the
Subsidiary Company at the addresses (or fax numbers) set forth in the Agreement.
19. Reset of Exercise Price of Warrants. Notwithstanding
anything to the contrary herein, the Exercise Price shall be reset on the first
anniversary of the date of issuance of this Warrant to an exercise price which
shall be equal to the lesser of (i) the exercise price in effect immediately
prior to such anniversary date, or (ii) 110% of the closing bid price of the CXI
Common Stock on the day immediately prior to such first anniversary date of
issuance. as reported by Bloomberg. Furthermore, if at any time after such first
anniversary, the closing price of the CXI Common Stock for any period of ten
(10) consecutive trading days or more shall be less than fifty percent (50%) of
the closing price of the CXI Common Stock on the day immediately preceding such
first anniversary, the Exercise Price shall be further reset to 50% of the
closing price of the CXI Common Stock on the day immediately prior to such first
anniversary. The aforesaid 50% reset provision shall be applicable, if at all,
on only one occasion. The foregoing reset provisions expire if the CXI Common
Stock trades at a price of $10.00 or more at any time, commencing ninety (90)
days after the effective date of the registration statement filed pursuant to
Section 8.2(a) of the Agreement. In the event that, at any time and from time to
time from and after the date hereof, there shall occur any stock dividend, stock
split, combination of shares, recapitalization or other such event relating to
the then outstanding CXI Common
-10-
<PAGE> 11
Stock, then all of the foregoing price calculations and amounts will be
appropriately arithmetically adjusted.
IN WITNESS WHEREOF, the Parent Company and the Subsidiary
Company have caused this Warrant to be executed by their officers thereunto duly
authorized.
Dated: August ___, 1997
COMMODORE ENVIRONMENTAL SERVICES, INC.
By /s/
___________________________________
COMMODORE APPLIED TECHNOLOGIES, INC.
By /s/
___________________________________
-11-
<PAGE> 12
ASSIGNMENT FORM
(To assign the foregoing warrant, execute this
form and supply required information. Do not
use this form to purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are
hereby
assigned to ____________________________________________________________________
whose address is _______________________________________________________________
Dated: ____________________________
Holder's Signature: ______________________________
Holder's Address: ________________________________
________________________________
Signature Guaranteed: __________________________________________________________
NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant, without alteration or enlargement or any
change whatsoever, and must be guaranteed by a bank or trust company. Officers
of corporations and those acting in an fiduciary or other representative
capacity should file the proper evidence of authority to assign the foregoing
Warrant.
<PAGE> 13
[FORM OF ELECTION TO PURCHASE]
The undersigned hereby irrevocably elects to exercise the
right, represented by this Warrant Certificate, to purchase __________ Shares of
CXI Common Stock at an Exercise Price of $_________, and herewith tenders in
payment for such securities a certified check or official bank check payable in
New York Clearing House Funds to the order of Commodore Environmental Services,
Inc. in the amount of $________, all in accordance with the terms of the Stock
Purchase Warrant of Commodore Environmental Services, Inc. that a certificate
for such securities be registered in the name of __________________ whose
address is _____________________________________ and that such Certificate be
delivered to __________________ whose address is _____________________________
______________________________.
Dated: _______________________
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)
<PAGE> 1
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER REGULATION D PROMULGATED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "1933 ACT"). THIS STOCK PURCHASE WARRANT SHALL NOT
CONSTITUTE AN OFFER TO SELL NOR A SOLICITATION OF AN OFFER TO BUY TEE SECURITIES
IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL. THE
SECURITIES ARE "RESTRICTED" AND MAY NOT BE RESOLD OR TRANSFERRED EXCEPT AS
PERMITTED UNDER THE 1933 ACT PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.
No. 97-D10
STOCK PURCHASE WARRANT
To Purchase 25,000 Shares of Common Stock of
COMMODORE APPLIED TECHNOLOGIES, INC.
from
COMMODORE ENVIRONMENTAL SERVICES, INC.
THIS CERTIFIES that, for value received, OKEMO PARTNERS LIMITED (the
"Investor"), is entitled upon the terms and subject to the conditions
hereinafter set forth, at any time on or after August 15, 1997 (the "Initial
Exercise Date") and on or prior to August 14, 2002 (the "Termination Date") but
not thereafter, to subscribe for and purchase from COMMODORE ENVIRONMENTAL
SERVICES, INC., a Delaware corporation (the "Parent Company"), 25,000 shares of
its holdings of Common Stock of COMMODORE APPLIED TECHNOLOGIES, INC. ("CXI
Common Stock"), a Delaware corporation (the "Subsidiary Company") (the "Warrant
Shares"). The purchase price of one share of CXI Common Stock (the "Exercise
Price") under this Warrant shall be Seven Dollars and Fourteen Cents ($7.14).
The Exercise Price and the number of Warrant Shares shall be subject to
adjustment as provided herein. This warrant is being issued pursuant to a
Preferred Stock Securities Purchase Agreement, dated May 20, 1997, as amended
August 18, 1997, complete with all listed exhibits thereto (the "Agreement") by
and between the Parent Company, Subsidiary Company and the Investor and is
subject to its terms. In the event of any conflict between the terms of this
Warrant and the Agreement, the Agreement shall control.
1. Title of Warrant. Prior to the expiration hereof and
subject to compliance with applicable laws, this Warrant and all rights
hereunder are transferable, in whole or in part, at the office or agency of the
Parent Company, by the holder hereof in person or by duly authorized attorney,
upon surrender of this Warrant together with the Assignment Form annexed hereto
properly endorsed.
<PAGE> 2
2. Authorization of Shares. The Parent Company and the
Subsidiary Company covenant that all shares of CXI Common Stock which may be
transferred upon the exercise of rights represented by this Warrant will, upon
exercise of the rights represented by this Warrant, be duly authorized, validly
issued, fully paid and non-assessable and free from all taxes, liens and
charters in respect of the issue thereof (other than taxes in respect of any
transfer occurring contemporaneously with such issue).
3. Exercise of Warrant. Exercise of the purchase rights
represented by this Warrant may be made at any time or times, in whole or in
part, on or after the Initial Exercise Date, and before the close of business on
the Termination Date, or such earlier date on which this Warrant may terminate
as provided in paragraph 11 (a) below, by the surrender of this Warrant and the
Form of Election to Purchase annexed hereto duly executed, at the office of the
Parent Company (with copy to Stephen A. Weiss, Esq., Greenberg, Traurig,
Hoffman, Lipoff, Rosen & Quentel, 153 East 53rd Street, New York, NY 10022 or
such other office or agency of the Parent Company as it may designate by notice
in writing to the registered holder hereof at the address of such holder
appearing on the books of the Company) and upon payment of the Exercise Price of
the shares thereby purchased; whereupon the holder of this Warrant shall be
entitled to receive a certificate for the number of shares of CXI Common Stock
so purchased immediately. In the event upon exercising the Warrant, the transfer
agent requires an opinion of counsel, the Parent Company or the Subsidiary
Company shall have such opinion furnished to the transfer agent to the transfer
agent's satisfaction. In the event the Investor is relying on an exemption from
registration under the 1933 Act, the Warrant Shares shall be issued immediately,
if the Investor furnishes an opinion of counsel, reasonably satisfactory to the
Subsidiary Company, that such exemption from registration be available.
Certificates for shares purchased hereunder shall be delivered to the holder
hereof within three (3) business days after the date on which this Warrant shall
have been exercised as aforesaid. Payment of the Exercise Price of the shares
may be by certified check or cashier's check or by wire transfer to an account
designated by the Parent Company in an amount equal to the Exercise Price
multiplied by the number of shares being purchased.
4. No Fractional Shares or Scrip. No fractional shares or
scrip representing fractional shares shall be issued upon the exercise of this
Warrant.
5. Charges, Taxes and Expenses. Reissuance of certificates in
the name of the holder hereof for shares of CXI Common Stock upon the exercise
of this Warrant shall be made without charge to the holder hereof for any issue
or transfer tax or other incidental expense in respect of the issuance of such
certificate, all of which taxes and expenses shall be paid by the Company, and
such certificates shall be issued in the name of the holder of this Warrant or
in such name or names as may be directed by the holder of this Warrant;
provided, however, that in the event certificates for shares of CXI Common Stock
are to be issued in a name other than the name of the holder of this Warrant,
this Warrant when surrendered for exercise other than the name of the holder of
this Warrant, this Warrant when surrendered for exercise shall be accompanied by
the Assignment Form attached hereto duly executed by the holder hereof, together
with evidence satisfactory to the Subsidiary Company that such transfer or
assignment is being made in compliance with all applicable federal and state
securities laws; and provided, further, that upon any transfer involved in the
issuance or delivery of any certificates for shares of
-2-
<PAGE> 3
CXI Common Stock, the Subsidiary Company may require, as a condition thereto,
the payment of a sum sufficient to reimburse it for any transfer tax incidental
thereto.
6. Closing of Books. The Parent Company and the Subsidiary
Company will at no time close its shareholder books or records in any manner
which interferes with the timely exercise of this Warrant.
7. Voting Rights. This Warrant does not entitle the holder
hereof to any rights as a shareholder of the Subsidiary Company prior to the
exercise hereof except for the voting rights set forth in this paragraph. If,
however, at the time of the surrender of this Warrant and purchase the holder
hereof shall be entitled to exercise this Warrant, the shares so purchased shall
be and shall be deemed to be transferred and reissued to such holder as the
record owner of such shares as of the close of business on the date on which
this Warrant shall have been exercised. Prior to the date of such exercise and
except as otherwise required by applicable Delaware law, the holder of this
Warrant shall vote together with the Common Stock and not as a separate class on
any transaction with respect to which the Common Stock is entitled to vote
pursuant to applicable Delaware law or the Certificate of Incorporation. Each
Warrant shall be entitled to a number of votes per share equal to (i) one (1)
multiplied by (ii) the number of shares of Common Stock which may be acquired
upon exercise of this Warrant if the same were exercisable and were so exercised
on the record date used to determine shares eligible to vote on such
transaction.
8. Assignment and Transfer of Warrant. This Warrant may be
assigned by the surrender of this Warrant and the Assignment Form annexed hereto
duly executed at the office of the Parent Company (or such other office or
agency of the Parent Company as it may designate by notice in writing to the
registered holder hereof at the address of such holder appearing on the books of
the Parent Company); provided, however, that this Warrant may not be resold or
otherwise transferred except (i) in a transaction registered under the
Securities Act, or (ii) in a transaction pursuant to an exemption, if available,
from such registration and whereby, if requested by the Parent Company or the
Subsidiary Company, an opinion of counsel reasonably satisfactory to the Parent
Company or the Subsidiary Company is obtained by the holder of this Warrant to
the effect that the transaction is so exempt.
9. Loss, Theft, Destruction or Mutilation of Warrant. Each of
the Parent Company and the Subsidiary Company represents and warrants that upon
receipt by the Parent Company or the Subsidiary Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of any Warrant
or stock certificate, and in case of loss, reimbursement to the Parent Company
or the Subsidiary Company of all reasonable expenses incidental thereto, and
upon surrender and cancellation of such Warrant or stock certificate, if
mutilated, the Parent Company or the Subsidiary Company will make and deliver a
new Warrant or stock certificate of like tenor and dated as of such
cancellation, in lieu of this Warrant or stock certificate.
10. Saturdays, Sundays, Holidays, etc. If the last or
appointed day for the taking of any action or the expiration of any right
required or granted herein shall be a Saturday, Sunday or a legal holiday, then
such action may be taken or such right may be exercised on the next succeeding
day not a legal holiday.
-3-
<PAGE> 4
11. Effect of Certain Events.
(a) If at any time:
(i) the Parent Company or the Subsidiary Company
shall declare any cash dividend upon the CXI Common Stock;
(ii) the Parent Company or the Subsidiary Company
shall declare a dividend upon the CXI Common Stock payable in
securities (other than a dividend payable solely in CXI Common
Stock) or make any special dividend or other distribution to
the holders of its Units;
(iii) the Parent Company or the Subsidiary Company
proposes (A) to sell or otherwise convey all or substantially
all of its assets or (B) to effect a transaction (by merger or
otherwise) in which more than 50% of the voting power of the
Parent Company or the Subsidiary Company is disposed of
(collectively, a "Sale or Merger Transaction") in which the
consideration to be received by the Parent Company or the
Subsidiary Company or its shareholders consists solely of
cash;
(iv) there shall be a voluntary or involuntary
dissolution, liquidation or winding-up of the Parent Company
or the Subsidiary Company;
the Parent Company or the Subsidiary Company shall give the holder of this
Warrant fifteen (15) days' written notice of the proposed effective date, by
certified or registered mail, postage prepaid, addressed to the registered
holder of this Warrant at the address of such holder as shown on the books of
the Parent Company. Such notice shall also specify, in the case of any such
dividend, distribution or option rights, the date on which the holders of Common
Shares shall be entitled thereto. Any notice relating to a Sale or Merger
Transaction shall also specify the date on which the holders of Common Shares
shall be entitled to exchange their Common Shares for securities or other
property deliverable upon such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation or winding-up, as the case may be. If the
Holder of the Warrant does not exercise this Warrant prior to the occurrence of
an event described above, except as provided in Section 13(a), the Holder shall
not be entitled to receive the benefits accruing to existing holders of the
Common Shares in such event.
(b) In case the Parent Company or Subsidiary Company
shall at any time effect a Sale or Merger Transaction in which the consideration
to be received by the Parent Company or the Subsidiary or their shareholders
consists in part of consideration other than cash, or shall issue any shares of
its capital stock in a reclassification of the CXI Common Stock, the holder of
this Warrant shall have the right thereafter to purchase, by exercise of action,
the kind and amount of shares and other securities and property which it would
have owned or have been entitled to receive after happening of such transaction
had this Warrant been exercised immediately prior thereto.
-4-
<PAGE> 5
12. Registration Rights. The Subsidiary Company shall use its
best efforts to file with the SEC not later than September 15, 1997 a shelf
registration statement under the Securities Act on Form S-3, if the Subsidiary
Company is eligible to file a registration statement under such form (and if the
Subsidiary Company is not eligible to file a registration statement under Form
S-3, to file with the SEC a registration statement under the Securities Act on
Form S1 or any other form which is appropriate), to register the Conversion
Shares and Warrant Shares, and shall use its best efforts to cause such
registration statement to be declared effective by the SEC by not later than
December 15, 1997. Such registration statement will also cover shares issuable
upon conversion of Series A Preferred Stock of CXI sold by CXI pursuant to a
certain Stock Purchase Agreement dated as of August 15, 1997. In the event of
the failure of the Subsidiary Company to procure registration of the Warrant
Shares in accordance with Section 8.2(a) of the Agreement prior to any of the
dates set forth below in this Section 12, the Parent Company will pay to the
Investor by wire transfer, as liquidated damages for such failure and not as a
penalty, for each month or part thereof for which such failure continues or in
the event of a Suspension (as defined in Section 8.7 of the Agreement) after
such date, an amount equal to the following percentages of the product of the
Exercise Price and the number of Warrants held by the Investor which were
acquired by the Investor pursuant to the Agreement and have not been exercised
at such calculation date:
<TABLE>
<CAPTION>
Required Effective Date Percentage
----------------------- ----------
<S> <C>
On or before November 19, 1997 1%
Between November 20 and
December 19, 1997 2%
After December 20, 1997 3%
</TABLE>
If the Parent Company does not remit the damages to the Investor as set forth
above, the Parent Company will pay the Investor reasonable costs of collection,
including attorneys fees, in addition to the liquidated damages. Such payment
shall be made to the Investor if due, monthly in arrears. The payment of such
liquidated damages shall not relieve the Subsidiary Company from its obligations
to register the Conversion Shares and Warrant Shares and shall not affect or
limit Investor's other rights or remedies as set forth in this Warrant or the
Agreement. If not paid as required, interest on such damages will accrue at a
rate of 2% per month. Notwithstanding the foregoing, the liquidated damages
shall be limited to 1% per month or any portion thereof if the delay in
effectiveness of the registration statement beyond November 19, 1997 or the
Suspension thereafter shall be for reasons outside the control of the Parent
Company or the Subsidiary
-5-
<PAGE> 6
Company. The obligations of the Parent Company and the Subsidiary Company under
this paragraph 12 shall cease and terminate upon the earlier to occur of (x)
such time as all of the Warrant Shares have been re-sold or (y) such time as all
of the Warrant Shares may be re-sold pursuant to Rule 144 under the Securities
Act
13. Adjustments of Exercise Price and Number of Warrant Shares.
The number and kind of securities purchasable upon the exercise of this Warrant
and the Exercise Price shall be subject to adjustment from time to time upon the
happening of certain events, as hereinafter set forth:
(a) In case the Subsidiary Company shall at any time subdivide
its outstanding shares of Common Stock ("CXI Common Shares") into a greater
number of CXI Common Shares or declare a dividend or distribution upon its CXI
Common Shares payable in CXI Common Shares, the Exercise Price in effect
immediately prior to such subdivision or declaration shall be proportionately
reduced, and the number of Warrant Shares transferable upon exercise of the
Warrants shall be proportionately increased. Conversely, in case the outstanding
CXI Common Shares of the Subsidiary Company shall be combined into a smaller
number of CXI Common Shares, the Exercise Price in effect immediately prior to
such combination shall be proportionately increased, and the number of Warrant
Shares issuable upon exercise of the Warrants shall be proportionately reduced.
(b) (x) In case the Subsidiary Company shall issue shares of
CXI Common Stock ("Additional Shares") or (y) in case the Subsidiary Company
shall issue rights, options or warrants to purchase shares of CXI Common Stock
or securities convertible into or exchangeable for CXI Common Stock, in any case
at a Price Per Share (as defined in paragraph (c) below) which is lower than the
price per share of CXI Common Stock (as reported by Bloomberg, L.P.
("Bloomberg") over the 5-day trading period ending on the day prior to the
Closing (the "Trigger Price"), the number of Warrant Shares hereafter
purchasable upon the exercise of this Warrant shall be determined by multiplying
the number of Warrant Shares theretofore purchasable upon exercise of this
Warrant by the following fraction:
(A)(i) The number of shares of CXI Common Stock outstanding immediately
prior to the issuance of such Additional Shares or rights, options,
warrants or convertible securities, plus (ii) the number of Additional
Shares actually subscribed for and purchased and shares of CXI Common
Stock issuable upon conversion or exercise of such rights, options,
warrants, or convertible securities, divided by
(B)(i) The number of shares of CXI Common Stock outstanding immediately
prior to issuance of such Additional Shares or rights, options,
warrants or convertible securities plus (ii) the number of shares of
CXI Common Stock which the aggregate Proceeds (as defined in paragraph
(c) below) received by the Subsidiary Company upon the sale of such
Additional Shares or exercise or conversion of such rights, options,
warrants and convertible securities would purchase at the Trigger
Price.
Such adjustment shall be made whenever such Additional Shares or
rights, options, warrants or convertible securities are issued, and shall become
effective on the date of distribution
-6-
<PAGE> 7
retroactive to the record date for the determination of stockholders entitled to
receive such rights, options or warrants.
(c) For purposes of this Section 13, "Price Per Share" shall be
defined and determined according to the following formula:
R
P = ----------------------
N
where
P = Price Per Share,
R = the "Proceeds" received or receivable by the Subsidiary
Company which (i) in the case of shares of CXI Common Stock is
the total amount received or receivable by the Subsidiary
Company in consideration for the sale and issuance of such
shares; (ii) in the case of rights, options or warrants to
subscribe for or purchase shares of CXI Common Stock or of
securities convertible into or exchangeable or exercisable for
shares of CXI Common Stock, is the total amount received or
receivable by the Subsidiary Company in consideration for the
sale and issuance of such rights, options, warrants or
convertible or exchangeable or exercisable securities, plus
the minimum aggregate amount of additional consideration,
other than the surrender of such convertible or exchangeable
securities, payable to the CXI Company upon exercise,
conversion or exchange thereof, and (iii) in the case of
rights, options or warrants to subscribe for or purchase
convertible or exchangeable or exercisable securities, is the
total amount received or receivable by the Subsidiary Company
in consideration for the sale and issuance of such rights,
options or warrants, plus the minimum aggregate amount of
additional consideration other than the surrender of such
convertible or exchangeable securities, payable upon the
exercise, conversion or exchange of such rights, options or
warrants and upon the conversion or exchange or exercise of
the convertible or exchangeable or exercisable securities;
provided that in each case the proceeds received or receivable
by the Subsidiary Company shall be deemed to be the gross cash
proceeds without deducting therefrom any compensation paid or
discount allowed in the sale, underwriting or purchase thereof
by underwriters or dealers or other performing similar
services or any expenses incurred in connection therewith,
and
N = the "Number of Shares," which (i) in the case of CXI
Common Stock is the number of shares issued; (ii) in the case
of rights, options or warrants to subscribe for or purchase
shares of CXI Common Stock or of securities convertible into
or exchangeable or exercisable for shares of CXI Common Stock,
-7-
<PAGE> 8
is the maximum number of shares of CXI Common Stock initially
issuable upon exercise, conversion or exchange thereof, and
(iii) in the case of rights, options or warrants to subscribe
for or purchase convertible or exchangeable or exercisable
securities, is the maximum number of shares of CXI Common
Stock initially issuable upon conversion, exchange or exercise
of the convertible, exchangeable or exercisable securities
issuable upon the exercise of such rights, options or
warrants.
If the Subsidiary Company shall issue shares of CXI Common Stock
or rights, options, warrants or convertible or exchangeable or exercisable
securities for a consideration consisting, in whole or in part, of property
other than cash, the amount of such consideration shall be determined in good
faith by the Board of Directors of the Subsidiary Company whose determination
shall be conclusive.
(d) Whenever the number of Warrant Shares purchasable upon the
exercise of this Warrant is adjusted, as herein provided, the Exercise Price
payable upon exercise of this Warrant shall be adjusted by multiplying such
Exercise Price immediately prior to such adjustment by a fraction, of which the
numerator shall be the number of Warrant Shares purchasable upon the exercise of
this Warrant immediately prior to such adjustment, and of which the denominator
shall be the number of Warrant Shares purchasable immediately thereafter.
(e) No adjustment in the number of Warrant Shares purchasable
hereunder shall be required unless such adjustment would result in an increase
or decrease of at least one percent (1%) of the Exercise Price; provided that
any adjustments which by reason of this paragraph (e) are not required to be
made shall be carried forward and taken into account in any subsequent
adjustment. All calculations shall be made to the nearest cent or to the nearest
one thousandth of a share, as the case may be.
(f) No adjustment in the number of Warrant Shares purchasable
upon the exercise of this Warrant need be made under paragraph (b) or (c) if the
Subsidiary Company issues or distributes to the holder of this Warrant the
shares, rights, options, warrants or convertible or exchangeable securities, or
evidences of indebtedness or assets referred to in those paragraphs which the
holder of this Warrant would have been entitled to receive had this Warrant been
exercised prior to the happening of such event or the record date with respect
thereto. In no event shall the Subsidiary Company be required or obligated to
make any such distribution otherwise than in its sole discretion. No adjustment
in the number of Warrant shares purchasable upon the exercise of this Warrant
need be made for sales of CXI Common Stock pursuant to a Subsidiary Company plan
for reinvestment of dividends or interest. No adjustment need be made for a
change in the par value of the CXI Common Stock.
(g) In the event that at any time, as a result of an
adjustment made pursuant to paragraph (a) above, the holder of this Warrant
shall become entitled to purchase any securities of the Subsidiary Company other
than shares of CXI Common Stock, thereafter the number of such other shares so
purchasable upon exercise of this Warrant and the Exercise Price of such shares
shall be subject to adjustment from time to time in a manner and on terms as
nearly equivalent as
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<PAGE> 9
practicable to the provisions with respect to the Warrant Shares contained in
paragraphs (a) through (g), inclusive, above.
14. Voluntary Adjustment by the Parent Company or the
Subsidiary. The Parent Company or the Subsidiary Company may at its option, at
any time during the term of this Warrant, reduce the then current Exchange
Price to any amount and for any period of time deemed appropriate by the Board
of Directors of the Parent Company or the Subsidiary Company.
15. Notice of Adjustment. Whenever the number of Warrant
Shares or number or kind of securities or other property purchasable upon the
exercise of this Warrant or the Exercise Price is adjusted, as herein provided,
the Parent Company or the Subsidiary Company shall promptly mail by registered
or certified mail, return receipt requested, to the transfer agent for the CXI
Common Stock and to the holder of this Warrant notice of such adjustment or
adjustments setting forth the number of Warrant Shares (and other securities or
property) purchasable upon the exercise of this Warrant and the Exercise Price
of such Warrant Shares after such adjustment, setting forth a brief statement of
the facts requiring such adjustment and setting forth computation by which such
adjustment was made. Such notice, in absence of manifest error, shall be
conclusive evidence of the correctness of such adjustment.
16. Authorized Shares. The Parent Company covenants that
during the period the Warrant is outstanding, it will reserve from its holdings
of CXI Common Stock a sufficient number of shares to provide for the transfer of
CXI Common Stock upon the exercise of any purchase rights under this Warrant.
Such reservation of shares of CXI Common Stock shall be in addition to those
shares of CXI Common Stock reserved pursuant to the Parent Company's Certificate
of Designation for its Series D Preferred Stock. The Parent Company and the
Subsidiary Company further covenant that the issuance of this Warrant shall
constitute full authority to their officers who are charged with the duty of
executing stock certificates to execute and issue the necessary certificates for
shares of the Subsidiary Company's Common Stock upon the exercise of the
purchase rights under this Warrant. The Parent Company and the Subsidiary
Company will take all such reasonable action as may be necessary to assure that
such shares of CXI Common Stock may be transferred and reissued as provided
herein without violation of any applicable law or regulation, or of any
requirements of AMEX or any domestic securities exchange upon which the CXI
Common Stock may be listed.
17. Restrictions on Exercise. Notwithstanding anything to the
contrary contained herein, no Warrants may be converted by a holder of Warrants
("Holders") to the extent that, after giving effect to the shares of CXI Common
Stock issued pursuant to the exercise hereof, the total number of shares of CXI
Common Stock deemed beneficially owned by such Holder (other than by virtue of
the ownership of shares of Series D Preferred Stock or Warrants or ownership of
other securities that have limitations on a Holder's rights to convert or
exercise similar to those limitations set forth herein), together with all
shares of CXI Common Stock deemed beneficially owned by Holder's "affiliates"
(as defined in Rule 144 under the 1933 Act) that would be aggregated for
purposes of determining whether a group under Section 13(d) of the Securities
Exchange Act of 1934, as amended, exists, would exceed 4.99% of the total
issued and outstanding shares of CXI Common Stock, provided that each Holder
shall have the right to waive this restriction, in whole or in part, immediately
in case of a pending Change in Control Transaction (as defined in the Agreement)
and in any other case upon 61 days prior to the exercise
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<PAGE> 10
hereunder by Holder. The exercise of all or part of this Warrant by any Holder
shall be deemed a representation by such Holder it is in compliance with this
Section 17. A transferee of Warrants shall not be bound by this provision unless
it expressly agrees to be so bound. The term "deemed beneficially owned" as used
in this Section 17 shall exclude shares that might otherwise be deemed
beneficially owned by reason of the exercisability of the Warrants.
18. Miscellaneous.
(a) Issue Date. The provisions of this Warrant shall be
construed and shall be given effect in all respects as if it had been issued and
delivered by the Parent Company and the Subsidiary Company on the date hereof.
This Warrant shall be binding upon any successors or assigned of the Parent
Company and the Subsidiary Company. This Warrant shall constitute a contract
under the laws of New York and for all purposes shall be construed in accordance
with and governed by the laws of said state without regard to its conflict of
law, principles or rules.
(b) Restrictions. The holder hereof acknowledges that the CXI
Common Stock acquired upon the exercise of this Warrant, if not registered, may
have restrictions upon its resale imposed by state and federal securities laws.
(c) Modification and Waiver. This Warrant and any provisions
hereof may be changed, waived, discharged or terminated only by an instrument in
writing signed by the party against which enforcement of the same is sought.
(d) Notices. Any notice, request or other document required or
permitted to be given or delivered to the holders hereof or the Parent Company
or the Subsidiary Company shall be delivered or shall be sent by certified or
registered mail, postage prepaid, or by overnight courier or by facsimile to
each such holder at its address (or fax number) as shown on the books of the
Parent Company or the Subsidiary Company or to the Parent Company and the
Subsidiary Company at the addresses (or fax numbers) set forth in the Agreement.
19. Reset of Exercise Price of Warrants. Notwithstanding
anything to the contrary herein, the Exercise Price shall be reset on the first
anniversary of the date of issuance of this Warrant to an exercise price which
shall be equal to the lesser of (i) the exercise price in effect immediately
prior to such anniversary date, or (ii) 10% of the closing bid price of the CXI
Common Stock on the day immediately prior to such first anniversary date of
issuance. as reported by Bloomberg. Furthermore, if at any time after such first
anniversary, the closing price of the CXI Common Stock for any period of ten
(10) consecutive trading days or more shall be less than fifty percent (50%) of
the closing price of the CXI Common Stock on the day immediately preceding such
first anniversary, the Exercise Price shall be further reset to 50% of the
closing price of the CXI Common Stock on the day immediately prior to such first
anniversary. The aforesaid 50% reset provision shall be applicable, if at all,
on only one occasion. The foregoing reset provisions expire if the CXI Common
Stock trades at a price of $10.00 or more at any time, commencing ninety (90)
days after the effective date of the registration statement filed pursuant to
Section 8.2(a) of the Agreement. In the event that, at any time and from time to
time from and after the date hereof, there shall occur any stock dividend, stock
split, combination of shares, recapitalization or other such event relating to
the then outstanding CXI Common
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<PAGE> 11
Stock, then all of the foregoing price calculations and amounts will be
appropriately arithmetically adjusted.
IN WITNESS WHEREOF, the Parent Company and the Subsidiary
Company have caused this Warrant to be executed by their officers thereunto duly
authorized.
Dated: August ___, 1997
COMMODORE ENVIRONMENTAL SERVICES, INC.
By /s/
___________________________________
COMMODORE APPLIED TECHNOLOGIES, INC.
By /s/
___________________________________
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<PAGE> 12
ASSIGNMENT FORM
(To assign the foregoing warrant, execute this
form and supply required information. Do not
use this form to purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are
hereby assigned to _____________________________________________________________
whose address is _______________________________________________________________
Dated: ____________________________
Holder's Signature: ______________________________
Holder's Address: ________________________________
________________________________
Signature Guaranteed: __________________________________________________________
NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant, without alteration or enlargement or any
change whatsoever, and must be guaranteed by a bank or trust company. Officers
of corporations and those acting in an fiduciary or other representative
capacity should file the proper evidence of authority to assign the foregoing
Warrant.
<PAGE> 13
[FORM OF ELECTION TO PURCHASE]
The undersigned hereby irrevocably elects to exercise the
right, represented by this Warrant Certificate, to purchase Shares of CXI
Common Stock at an Exercise Price of $ , and herewith tenders in payment
for such securities a certified check or official bank check payable in New York
Clearing House Funds to the order of Commodore Environmental Services, Inc. in
the amount of $ , all in accordance with the terms of the Stock Purchase
Warrant of Commodore Environmental Services, Inc. that a certificate for such
securities be registered in the name of ____________________ whose address is
_____________________________________ and that such Certificate be delivered to
______________________________ whose address is _______________________________
___________________________________
Dated: ______________
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)
<PAGE> 1
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER REGULATION D PROMULGATED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "1933 ACT"). THIS STOCK PURCHASE WARRANT SHALL NOT
CONSTITUTE AN OFFER TO SELL NOR A SOLICITATION OF AN OFFER TO BUY THE SECURITIES
IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL. THE
SECURITIES ARE "RESTRICTED" AND MAY NOT BE RESOLD OR TRANSFERRED EXCEPT AS
PERMITTED UNDER THE 1933 ACT PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.
No. 97-D12
STOCK PURCHASE WARRANT
To Purchase 75,000 Shares of Common Stock of
COMMODORE APPLIED TECHNOLOGIES, INC.
from
COMMODORE ENVIRONMENTAL SERVICES, INC.
THIS CERTIFIES that, for value received, AMERICAN INVESTMENT GROUP OF
NEW YORK, L.P. (the "Investor"), is entitled upon the terms and subject to the
conditions hereinafter set forth, at any time on or after August 15, 1997 (the
"Initial Exercise Date") and on or prior to August 14, 2002 (the "Termination
Date") but not thereafter, to subscribe for and purchase from COMMODORE
ENVIRONMENTAL SERVICES, INC., a Delaware corporation (the "Parent Company"),
75,000 shares of its holdings of Common Stock of COMMODORE APPLIED TECHNOLOGIES,
INC. ("CXI Common Stock"), a Delaware corporation (the "Subsidiary Company")
(the "Warrant Shares"). The purchase price of one share of CXI Common Stock (the
"Exercise Price") under this Warrant shall be Seven Dollars and Fourteen Cents
($7.14). The Exercise Price and the number of Warrant Shares shall be subject to
adjustment as provided herein. This warrant is being issued pursuant to a
Preferred Stock Securities Purchase Agreement, dated May 20, 1997, as amended
August 18, 1997, complete with all listed exhibits thereto (the "Agreement") by
and between the Parent Company, Subsidiary Company and the investor and is
subject to its terms. In the event of any conflict between the terms of this
Warrant and the Agreement, the Agreement shall control.
1. Title of Warrant. Prior to the expiration hereof and
subject to compliance with applicable laws, this Warrant and all rights
hereunder are transferable, in whole or in part, at the office or agency of the
Parent Company, by the holder hereof in person or by duly authorized attorney,
upon surrender of this Warrant together with the Assignment Form annexed hereto
properly endorsed.
<PAGE> 2
2. Authorization of Shares. The Parent Company and the
Subsidiary Company covenant that all shares of CXI Common Stock which may be
transferred upon the exercise of rights represented by this Warrant will, upon
exercise of the rights represented by this Warrant, be duly authorized, validly
issued, fully paid and non-assessable and free from all taxes, liens and
charters in respect of the issue thereof (other than taxes in respect of any
transfer occurring contemporaneously with such issue).
3. Exercise of Warrant. Exercise of the purchase rights
represented by this Warrant may be made at any time or times, in whole or in
part, on or after the Initial Exercise Date, and before the close of business on
the Termination Date, or such earlier date on which this Warrant may terminate
as provided in paragraph 11 (a) below, by the surrender of this Warrant and the
Form of Election to Purchase annexed hereto duly executed, at the office of the
Parent Company (with copy to Stephen A. Weiss, Esq., Greenberg, Traurig,
Hoffman, Lipoff, Rosen & Quentel, 153 East 53rd Street, New York, NY 10022 or
such other office or agency of the Parent Company as it may designate by notice
in writing to the registered holder hereof at the address of such holder
appearing on the books of the Company) and upon payment of the Exercise Price of
the shares thereby purchased; whereupon the holder of this Warrant shall be
entitled to receive a certificate for the number of shares of CXI Common Stock
so purchased immediately. In the event upon exercising the Warrant, the transfer
agent requires an opinion of counsel, the Parent Company or the Subsidiary
Company shall have such opinion furnished to the transfer agent to the transfer
agent's satisfaction. In the event the Investor is relying on an exemption from
registration under the 1933 Act, the Warrant Shares shall be issued immediately,
if the Investor furnishes an opinion of counsel, reasonably satisfactory to the
Subsidiary Company, that such exemption from registration be available.
Certificates for shares purchased hereunder shall be delivered to the holder
hereof within three (3) business days after the date on which this Warrant shall
have been exercised as aforesaid. Payment of the Exercise Price of the shares
may be by certified check or cashier's check or by wire transfer to an account
designated by the Parent Company in an amount equal to the Exercise Price
multiplied by the number of shares being purchased.
4. No Fractional Shares or Scrip. No fractional shares or
scrip representing fractional shares shall be issued upon the exercise of this
Warrant.
5. Charges, Taxes and Expenses. Reissuance of certificates in
the name of the holder hereof for shares of CXI Common Stock upon the exercise
of this Warrant shall be made without charge to the holder hereof for any issue
or transfer tax or other incidental expense in respect of the issuance of such
certificate, all of which taxes and expenses shall be paid by the Company, and
such certificates shall be issued in the name of the holder of this Warrant or
in such name or names as may be directed by the holder of this Warrant;
provided, however, that in the event certificates for shares of CXI Common Stock
are to be issued in a name other than the name of the holder of this Warrant,
this Warrant when surrendered for exercise other than the name of the holder of
this Warrant, this Warrant when surrendered for exercise shall be accompanied by
the Assignment Form attached hereto duly executed by the holder hereof together
with evidence satisfactory to the Subsidiary Company that such transfer or
assignment is being made in compliance with all applicable federal and state
securities laws; and provided, further, that upon any transfer involved in the
issuance or delivery of any certificates for shares
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<PAGE> 3
of CXI Common Stock, the Subsidiary Company may require, as a condition thereto,
the payment of a sum sufficient reimburse it for any transfer tax incidental
thereto.
6. Closing of Books. The Parent Company and the Subsidiary
Company will at no time close its shareholder books or records in any manner
which interferes with the timely exercise of this Warrant.
7. Voting Rights. This Warrant does not entitle the holder
hereof to any rights as a shareholder of the Subsidiary Company prior to the
exercise hereof except for the voting rights set forth in this paragraph. If,
however, at the time of the surrender of this Warrant and purchase the holder
hereof shall be entitled to exercise this Warrant, the shares so purchased shall
be and shall be deemed to be transferred and reissued to such holder as the
record owner of such shares as of the close of business on the date on which
this Warrant shall have been exercised. Prior to the date of such exercise and
except as otherwise required by applicable Delaware law, the holder of this
Warrant shall vote together with the Common Stock and not as a separate class on
any transaction with respect to which the Common Stock is entitled to vote
pursuant to applicable Delaware law or the Certificate of incorporation. Each
Warrant shall be entitled to a number of votes per share equal to (i) one (1)
multiplied by (ii) the number of shares of Common Stock which may be acquired
upon exercise of this Warrant if the same were exercisable and were so exercised
on the record date used to determine shares eligible to vote on such
transaction.
8. Assignment and Transfer of Warrant. This Warrant may be
assigned by the surrender of this Warrant and the Assignment Form annexed hereto
duly executed at the office of the Parent Company (or such other office or
agency of the Parent Company as it may designate by notice in writing to the
registered holder hereof at the address of such holder appearing on the books of
the Parent Company); provided, however, that this Warrant may not be resold or
otherwise transferred except (i) in a transaction registered under the
Securities Act, or (ii) in a transaction pursuant to an exemption, if available,
from such registration and whereby, if requested by the Parent Company or the
Subsidiary Company, an opinion of counsel reasonably satisfactory to the Parent
Company or the Subsidiary Company is obtained by the holder of this Warrant to
the effect that the transaction is so exempt.
9. Loss Theft, Destruction or Mutilation of Warrant. Each of
the Parent Company and the Subsidiary Company represents and warrants that upon
receipt by the Parent Company or the Subsidiary Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of any Warrant
or stock certificate, and in case of loss, reimbursement to the Parent Company
or the Subsidiary Company of all reasonable expenses incidental thereto, and
upon surrender and cancellation of such Warrant or stock certificate, if
mutilated, the Parent Company or the Subsidiary Company will make and deliver a
new Warrant or stock certificate of like tenor and dated as of such
cancellation, in lieu of this Warrant or stock certificate.
10. Saturdays, Sundays, Holidays, etc. If the last or
appointed day for the taking of any action or the expiration of any right
required or granted herein shall be a Saturday, Sunday or a legal holiday, then
such action may be taken or such right may be exercised on the next succeeding
day not a legal holiday.
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<PAGE> 4
11. Effect of Certain Events.
(a) If at any time:
(i) the Parent Company or the Subsidiary Company
shall declare any cash dividend upon the CXI Common Stock;
(ii) the Parent Company or the Subsidiary Company
shall declare a dividend upon the CXI Common Stock payable in
securities (other than a dividend payable solely in CXI Common
Stock) or make any special dividend or other distribution to
the holders of its Units;
(iii) the Parent Company or the Subsidiary Company
proposes (A) to sell or otherwise convey all or substantially
all of its assets or (B) to effect a transaction (by merger or
otherwise) in which more than 50% of the voting power of the
Parent Company or the Subsidiary Company is disposed of
(collectively, a "Sale or Merger Transaction") in which the
consideration to be received by the Parent Company or the
Subsidiary Company or its shareholders consists solely of
cash;
(iv) there shall be a voluntary or involuntary
dissolution, liquidation or winding-up of the Parent Company
or the Subsidiary Company;
the Parent Company or the Subsidiary Company shall give the holder of this
Warrant fifteen ( 15) days' written notice of the proposed effective date, by
certified or registered mail, postage prepaid, addressed to the registered
holder of this Warrant at the address of such holder as shown on the books of
the Parent Company. Such notice shall also specify, in the case of any such
dividend, distribution or option rights, the date on which the holders of Common
Shares shall be entitled thereto. Any notice relating to a Sale or Merger
Transaction shall also specify the date on which the holders of Common Shares
shall be entitled to exchange their Common Shares for securities or other
property deliverable upon such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation or winding-up, as the case may be. If the
Holder of the Warrant does not exercise this Warrant prior to the occurrence of
an event described above, except as provided in Section 13(a), the Holder shall
not be entitled to receive the benefits accruing to existing holders of the
Common Shares in such event.
(b) In case the Parent Company or Subsidiary Company shall at
any time effect a Sale or Merger Transaction in which the consideration to be
received by the Parent Company or the Subsidiary or their shareholders consists
in part of consideration other than cash, or shall issue any shares of its
capital stock in a reclassification of the CXI Common Stock, the holder of this
Warrant shall have the right thereafter to purchase, by exercise of action, the
kind and amount of shares and other securities and property which it would have
owned or have been entitled to receive after happening of such transaction had
this Warrant been exercised immediately prior thereto.
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<PAGE> 5
12. Registration Rights. The Subsidiary Company shall use its
best efforts to file with the SEC not later than September 15, 1997 a shelf
registration statement under the Securities Act on Form S-3, if the Subsidiary
Company is eligible to file a registration statement under such form (and if the
Subsidiary Company is not eligible to file a registration statement under Form
S-3, to file with the SEC a registration statement under the Securities Act on
Form S-1 or any other form which is appropriate), to register the Conversion
Shares and Warrant Shares, and shall use its best efforts to cause such
registration statement to be declared effective by the SEC by not later than
December 15, 1997. Such registration statement will also cover shares issuable
upon conversion of Series A Preferred Stock of CXI sold by CXI pursuant to a
certain Stock Purchase Agreement dated as of August 15, 1997. In the event of
the failure of the Subsidiary Company to procure registration of the Warrant
Shares in accordance with Section 8.2(a) of the Agreement prior to any of the
dates set forth below in this Section 12, the Parent Company will pay to the
Investor by wire transfer, as liquidated damages for such failure and not as a
penalty, for each month or part thereof for which such failure continues or in
the event of a Suspension (as defined in Section 8.7 of the Agreement) after
such date, an amount equal to the following percentages of the product of the
Exercise Price and the number of Warrants held by the Investor which were
acquired by the Investor pursuant to the Agreement and have not been exercised
at such calculation date:
Required Effective Date Percentage
----------------------- ----------
On or before November 19, 1997 1%
Between November 20 and
December 19, 1997 2%
After December 20, 1997 3%
If the Parent Company does not remit the damages to the Investor as set forth
above, the Parent Company will pay the Investor reasonable costs of collection,
including attorneys fees, in addition to the liquidated damages. Such payment
shall be made to the Investor if due, monthly in arrears. The payment of such
liquidated damages shall not relieve the Subsidiary Company from its obligations
to register the Conversion Shares and Warrant Shares and shall not affect or
limit Investor's other rights or remedies as set forth in this Warrant or the
Agreement. If not paid as required, interest on such damages will accrue at a
rate of 2% per month. Notwithstanding the foregoing, the liquidated damages
shall be limited to 1% per month or any portion thereof if the delay in
effectiveness of the registration statement beyond November 19, 1997 or the
Suspension thereafter shall be for reasons outside the control of the Parent
Company or the Subsidiary
-5-
<PAGE> 6
Company. The obligations of the Parent Company and the Subsidiary Company under
this paragraph 12 shall cease and terminate upon the earlier to occur of (x)
such time as all of the Warrant Shares have been re-sold or (y) such time as all
of the Warrant Shares may be re-sold pursuant to Rule 144 under the Securities
Act
13. Adjustments of Exercise Price and Number of Warrant
Shares. The number and kind of securities purchasable upon the exercise of this
Warrant and the Exercise Price shall be subject to adjustment from time to time
upon the happening of certain events, as hereinafter set forth:
(a) In case the Subsidiary Company shall at any time subdivide
its outstanding shares of Common Stock ("CXI Common Shares") into a greater
number of CXI Common Shares or declare a dividend or distribution upon its CXI
Common Shares payable in CXI Common Shares, the Exercise Price in effect
immediately prior to such subdivision or declaration shall be proportionately
reduced, and the number of Warrant Shares transferable upon exercise of the
Warrants shall be proportionately increased. Conversely, in case the outstanding
CXI Common Shares of the Subsidiary Company shall be combined into a smaller
number of CXI Common Shares, the Exercise Price in effect immediately prior to
such combination shall be proportionately increased, and the number of Warrant
Shares issuable upon exercise of the Warrants shall be proportionately reduced.
(b) (x) In case the Subsidiary Company shall issue shares of
CXI Common Stock ("Additional Shares") or (y) in case the Subsidiary Company
shall issue rights, options or warrants to purchase shares of CXI Common Stock
or securities convertible into or exchangeable for CXI Common Stock, in any case
at a Price Per Share (as defined in paragraph (c) below) which is lower than the
price per share of CXI Common Stock (as reported by Bloomberg, L.P.
("Bloomberg") over the 5-day trading period ending on the day prior to the
Closing (the "Trigger Price"), the number of Warrant Shares hereafter
purchasable upon the exercise of this Warrant shall be determined by multiplying
the number of Warrant Shares theretofore purchasable upon exercise of this
Warrant by the following fraction:
(A)(i) The number of shares of CXI Common Stock outstanding immediately
prior to the issuance of such Additional Shares or rights, options,
warrants or convertible securities, plus (ii) the number of Additional
Shares actually subscribed for and purchased and shares of CXI Common
Stock issuable upon conversion or exercise of such rights, options,
warrants, or convertible securities, divided by
(B)(i) The number of shares of CXI Common Stock outstanding immediately
prior to issuance of such Additional Shares or rights, options,
warrants or convertible securities plus (ii) the number of shares of
CXI Common Stock which the aggregate Proceeds (as defined in paragraph
(c) below) received by the Subsidiary Company upon the sale of such
Additional Shares or exercise or conversion of such rights, options,
warrants and convertible securities would purchase at the Trigger
Price.
Such adjustment shall be made whenever such Additional Shares or
rights, options, warrants or convertible securities are issued, and shall become
effective on the date of distribution
-6-
<PAGE> 7
retroactive to the record date for the determination of stockholders entitled to
receive such rights, options or warrants.
(c) For purposes of this Section 13, "Price Per Share" shall
be defined and determined according to the following formula:
R
P = ---------
N
where
P = Price Per Share,
R = the "Proceeds" received or receivable by the Subsidiary
Company which (i) in the case of shares of CXI Common Stock is
the total amount received or receivable by the Subsidiary
Company in consideration for the sale and issuance of such
shares; (ii) in the case of rights, options or warrants to
subscribe for or purchase shares of CXI Common Stock or of
securities convertible into or exchangeable or exercisable for
shares of CXI Common Stock, is the total amount received or
receivable by the Subsidiary Company in consideration for the
sale and issuance of such rights, options, warrants or
convertible or exchangeable or exercisable securities, plus
the minimum aggregate amount of additional consideration,
other than the surrender of such convertible or exchangeable
securities, payable to the CXI Company upon exercise,
conversion or exchange thereof; and (iii) in the case of
rights, options or warrants to subscribe for or purchase
convertible or exchangeable or exercisable securities, is the
total amount received or receivable by the Subsidiary Company
in consideration for the sale and issuance of such rights,
options or warrants, plus the minimum aggregate amount of
additional consideration other than the surrender of such
convertible or exchangeable securities, payable upon the
exercise, conversion or exchange of such rights, options or
warrants and upon the conversion or exchange or exercise of
the convertible or exchangeable or exercisable securities;
provided that in each case the proceeds received or receivable
by the Subsidiary Company shall be deemed to be the gross cash
proceeds without deducting therefrom any compensation paid or
discount allowed in the sale, underwriting or purchase thereof
by underwriters or dealers or other performing similar
services or any expenses incurred in connection therewith,
and
N = the "Number of Shares," which (i) in the case of CXI
Common Stock is the number of shares issued; (ii) in the case
of rights, options or warrants to subscribe for or purchase
shares of CXI Common Stock or of securities convertible into
or exchangeable or exercisable for shares of CXI Common Stock,
-7-
<PAGE> 8
is the maximum number of shares of CXI Common Stock initially
issuable upon exercise, conversion or exchange thereof; and
(iii) in the case of rights, options or warrants to subscribe
for or purchase convertible or exchangeable or exercisable
securities, is the maximum number of shares of CXI Common
Stock initially issuable upon conversion, exchange or exercise
of the convertible, exchangeable or exercisable securities
issuable upon the exercise of such rights, options or
warrants.
If the Subsidiary Company shall issue shares of CXI Common
Stock or rights, options, warrants or convertible or exchangeable or exercisable
securities for a consideration consisting, in whole or in part, of property
other than cash, the amount of such consideration shall be determined in good
faith by the Board of Directors of the Subsidiary Company whose determination
shall be conclusive.
(d) Whenever the number of Warrant Shares purchasable upon the
exercise of this Warrant is adjusted, as herein provided, the Exercise Price
payable upon exercise of this Warrant shall be adjusted by multiplying such
Exercise Price immediately prior to such adjustment by a fraction, of which the
numerator shall be the number of Warrant Shares purchasable upon the exercise of
this Warrant immediately prior to such adjustment, and of which the denominator
shall be the number of Warrant Shares purchasable immediately thereafter.
(e) No adjustment in the number of Warrant Shares purchasable
hereunder shall be required unless such adjustment would result in an increase
or decrease of at least one percent (1%) of the Exercise Price; provided that
any adjustments which by reason of this paragraph (e) are not required to be
made shall be carried forward and taken into account in any subsequent
adjustment. All calculations shall be made to the nearest cent or to the nearest
onethousandth of a share, as the case may be.
(f) No adjustment in the number of Warrant Shares purchasable
upon the exercise of this Warrant need be made under paragraph (b) or (c) if the
Subsidiary Company issues or distributes to the holder of this Warrant the
shares, rights, options, warrants or convertible or exchangeable securities, or
evidences of indebtedness or assets referred to in those paragraphs which the
holder of this Warrant would have been entitled to receive had this Warrant been
exercised prior to the happening of such event or the record date with respect
thereto. In no event shall the Subsidiary Company be required or obligated to
make any such distribution otherwise than in its sole discretion. No adjustment
in the number of Warrant shares purchasable upon the exercise of this Warrant
need be made for sales of CXI Common Stock pursuant to a Subsidiary Company plan
for reinvestment of dividends or interest. No adjustment need be made for a
change in the par value of the CXI Common Stock.
(g) In the event that at any time, as a result of an
adjustment made pursuant to paragraph (a) above, the holder of this Warrant
shall become entitled to purchase any securities of the Subsidiary Company other
than shares of CXI Common Stock, thereafter the number of such other shares so
purchasable upon exercise of this Warrant and the Exercise Price of such shares
shall be subject to adjustment from time to time in a manner and on terms as
nearly equivalent as
-8-
<PAGE> 9
practicable to the provisions with respect to the Warrant Shares contained in
paragraphs (a) through (g), inclusive, above.
14. Voluntary Adjustment by the Parent Company or the
Subsidiary Company. The Parent Company or the Subsidiary Company may at its
option, at any time during the term of this Warrant, reduce the then current
Exchange Price to any amount and for any period of time deemed appropriate by
the Board of Directors of the Parent Company or the Subsidiary Company.
15. Notice of Adjustment. Whenever the number of Warrant
Shares or number or kind of securities or other property purchasable upon the
exercise of this Warrant or the Exercise Price is adjusted, as herein provided,
the Parent Company or the Subsidiary Company shall promptly mail by registered
or certified mail, return receipt requested, to the transfer agent for the CXI
Common Stock and to the holder of this Warrant notice of such adjustment or
adjustments setting forth the number of Warrant Shares (and other securities or
property) purchasable upon the exercise of this Warrant and the Exercise Price
of such Warrant Shares after such adjustment, setting forth a brief statement of
the facts requiring such adjustment and setting forth computation by which such
adjustment was made. Such notice, in absence of manifest error, shall be
conclusive evidence of the correctness of such adjustment.
16. Authorized Shares. The Parent Company covenants that
during the period the Warrant is outstanding, it will reserve from its holdings
of CXI Common Stock a sufficient number of shares to provide for the transfer of
CXI Common Stock upon the exercise of any purchase rights under this Warrant.
Such reservation of shares of CXI Common Stock shall be in addition to those
shares of CXI Common Stock reserved pursuant to the Parent Company's Certificate
of Designation for its Series D Preferred Stock. The Parent Company and the
Subsidiary Company further covenant that the issuance of this Warrant shall
constitute full authority to their officers who are charged with the duty of
executing stock certificates to execute and issue the necessary certificates for
shares of the Subsidiary Company's Common Stock upon the exercise of the
purchase rights under this Warrant. The Parent Company and the Subsidiary
Company will take all such reasonable action as may be necessary to assure that
such shares of CXI Common Stock may be transferred and reissued as provided
herein without violation of any applicable law or regulation, or of any
requirements of AMEX or any domestic securities exchange upon which the CXI
Common Stock may be listed.
17. Restrictions on Exercise. Notwithstanding anything to the
contrary contained herein, no Warrants may be converted by a holder of Warrants
("Holders") to the extent that, after giving effect to the shares of CXI Common
Stock issued pursuant to the exercise hereof, the total number of shares of CXI
Common Stock deemed beneficially owned by such Holder (other than by virtue of
the ownership of shares of Series D Preferred Stock or Warrants or ownership of
other securities that have limitations on a Holder's rights to convert or
exercise similar to those limitations set forth herein), together with all
shares of CXI Common Stock deemed beneficially owned by Holder's "affiliates"
(as defined in Rule 144 under the 1933 Act) that would be aggregated for
purposes of determining whether a group under Section 13(d) of the Securities
Exchange Act of 1934, as amended, exists, would exceed 4.99% of the total
issued and outstanding shares of CXI Common Stock, provided that each Holder
shall have the right to waive this restriction, in whole or in part, immediately
in case of a pending Change in Control
-9-
<PAGE> 10
Transaction (as defined in the Agreement) and in any other case upon 61 days
prior to the exercise hereunder by Holder. The exercise of all or part of this
Warrant by any Holder shall be deemed a representation by such Holder it is in
compliance with this Section 17. A transferee of Warrants shall not be bound by
this provision unless it expressly agrees to be so bound. The term "deemed
beneficially owned" as used in this Section 17 shall exclude shares that might
otherwise be deemed beneficially owned by reason of the exercisability of the
Warrants.
18. Miscellaneous.
(a) Issue Date. The provisions of this Warrant shall be
construed and shall be given effect in all respects as if it had been issued and
delivered by the Parent Company and the Subsidiary Company on the date hereof.
This Warrant shall be binding upon any successors or assigned of the Parent
Company and the Subsidiary Company. This Warrant shall constitute a contract
under the laws of New York and for all purposes shall be construed in accordance
with and governed by the laws of said state without regard to its conflict of
law, principles or rules.
(b) Restrictions. The holder hereof acknowledges that the CXI
Common Stock acquired upon the exercise of this Warrant, if not registered, may
have restrictions upon its resale imposed by state and federal securities laws.
(c) Modification and Waiver. This Warrant and any provisions
hereof may be changed, waived, discharged or terminated only by an instrument in
writing signed by the party against which enforcement of the same is sought.
(d) Notices. Any notice, request or other document required or
permitted to be given or delivered to the holders hereof or the Parent Company
or the Subsidiary Company shall be delivered or shall be sent by certified or
registered mail, postage prepaid, or by overnight courier or by facsimile to
each such holder at its address (or fax number) as shown on the books of the
Parent Company or the Subsidiary Company or to the Parent Company and the
Subsidiary Company at the addresses (or fax numbers) set forth in the Agreement.
19. Reset of Exercise Price of Warrants. Notwithstanding
anything to the contrary herein, the Exercise Price shall be reset on the first
anniversary of the date of issuance of this Warrant to an exercise price which
shall be equal to the lesser of (i) the exercise price in effect immediately
prior to such anniversary date, or (ii) 110% of the closing bid price of the CXI
Common Stock on the day immediately prior to such first anniversary date of
issuance as reported by Bloomberg. Furthermore, if at any time after such first
anniversary, the closing price of the CXI Common Stock for any period of ten
(10) consecutive trading days or more shall be less than fifty percent (50%) of
the closing price of the CXI Common Stock on the day immediately preceding such
first anniversary, the Exercise Price shall be further reset to 50% of the
closing price of the CXI Common Stock on the day immediately prior to such first
anniversary. The aforesaid 50% reset provision shall be applicable, if at all,
on only one occasion. The foregoing reset provisions expire if the CXI Common
Stock trades at a price of $10.00 or more at any time, commencing ninety (90)
days after the effective date of the registration statement filed pursuant to
Section 8.2(a) of the Agreement. In the event that, at any time and from time to
time from and after the date hereof, there shall occur any stock dividend, stock
split, combination of shares, recapitalization or other such event relating to
the then outstanding CXI Common
-10-
<PAGE> 11
Stock, then all of the foregoing price calculations and amounts will be
appropriately arithmetically adjusted.
IN WITNESS WHEREOF, the Parent Company and the Subsidiary
Company have caused this Warrant to be executed by their officers thereunto duly
authorized.
Dated: August_, 1997
COMMODORE ENVIRONMENTAL SERVICES, INC.
By /s/
------------------------------------
COMMODORE APPLIED TECHNOLOGIES, INC.
By /s/
------------------------------------
-11-
<PAGE> 12
ASSIGNMENT FORM
(To assign the foregoing warrant, execute
this form and supply required information.
Do not use this form to purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are
hereby
assigned to_____________________________________________________________________
whose address is________________________________________________________________
Dated:_____________________________
Holder's Signature:_____________________________
Holder's Address: _____________________________
Signature Guaranteed:___________________________________________________________
NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant, without alteration or enlargement or any
change whatsoever, and must be guaranteed by a bank or trust company. Officers
of corporations and those acting in an fiduciary or other representative
capacity should file the proper evidence of authority to assign the foregoing
Warrant.
<PAGE> 13
[FORM OF ELECTION TO PURCHASE]
The undersigned hereby irrevocably elects to exercise the
right, represented by this Warrant Certificate, to purchase __________ Shares of
CXI Common Stock at an Exercise Price of $__________, and herewith tenders in
payment for such securities a certified check or official bank check payable in
New York Clearing House Funds to the order of Commodore Environmental Services,
Inc. in the amount of $____, all in accordance with the terms of the Stock
Purchase Warrant of Commodore Environmental Services, Inc. that a certificate
for such securities be registered in the name of ____________________ whose
address is ____________________ and that such Certificate be delivered to
____________________ whose address is ____________________.
Dated:_________
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)
<PAGE> 1
EXHIBIT 4.22
$4,000,000
COMMODORE APPLIED TECHNOLOGIES, INC.
8% CONVERTIBLE NOTE
MATURITY DATE: AUGUST 31, 2002
THIS NOTE AND THE COMMON STOCK THAT MAY BE ISSUABLE TO THE HOLDER HEREOF HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
SOLD, PLEDGED, HYPOTHECATED, DONATED OR OTHERWISE TRANSFERRED WITHOUT COMPLIANCE
WITH THE REGISTRATION OR QUALIFICATION PROVISIONS OF APPLICABLE FEDERAL AND
STATE SECURITIES LAWS OR APPLICABLE EXEMPTIONS THEREFROM.
FOR VALUE RECEIVED, COMMODORE APPLIED TECHNOLOGIES, INC., a
Delaware corporation (the "Company"), promises to pay to the order of COMMODORE
ENVIRONMENTAL SERVICES, INC., the registered holder or registered assigns hereof
(the "Holder"), the principal amount of FOUR MILLION ($4,000,000) payable on the
31st day of August 2002 (the "Maturity Date"), together with interest on the
outstanding principal amount of this Note, calculated on the basis of a 360 day
year and payable in arrears on a quarterly basis on the last day of March, June,
September and December of each year, at the rate of eight (8%) per annum,
commencing on September 30, 1997.
1. Payments and Prepayments.
(a) Payments of principal and interest on this Note shall be
made at the principal office of the Company, located at 150 East 58th Street,
New York, New York 10155, or such other place or places within the United States
as may be specified by the Holder of this Note in a written notice to the
Company at least ten (10) business days before a given payment date.
(b) Payments of principal and interest on this Note shall be
made in lawful money of the United States of America by mailing the Company's
good check in the proper amount to the Holder at least three days prior to the
due date of each payment or otherwise transferring funds so as to be received by
the Holder on the due date of each such payment.
(c) If any payment on this Note becomes due and payable on a
Saturday, Sunday or other day on which commercial banks in New York, New York
are authorized or required by law to close, the maturity thereof shall be
extended to the next succeeding business day and, with respect to payments of
principal, interest thereon shall be payable during such extension at the then
applicable rate.
<PAGE> 2
(d) This Note is subject to prepayment, in whole or in part,
at the option of the Company, at any time, without premium or penalty, upon
thirty (30) days written notice, subject to the Holder's right to convert the
outstanding principle and accrued interest thereon into the Company's Common
Stock prior to the date fixed for prepayment.
2. Security. The payment of this Note is not secured by any
collateral.
3. Conversion. The Holder of this Note will have the right,
exercisable at any time through the Maturity Date, by notice to the Company at
its principal office, at the Holder's option, to convert all or any portion of
the unpaid principal amount of this Note (such amount to be converted from time
to time being the "Conversion Amount") into such number of fully paid and
non-assessable shares of common stock, par value $.001 per share, of the Company
(the "Common Stock"), as shall be determined by dividing the Conversion Amount
by the Conversion Price. The Conversion Price shall be $3.89 per share, subject
to adjustment, from time to time, as provided in Section 4 below (such amount,
as so adjusted, being defined herein as the "Conversion Price"). The right of
conversion shall cease upon payment in full of all principal and interest and
other amounts due in respect of this Note.
4. Adjustments to Conversion Price.
(a) In case the Company shall at any time while this Note
shall be outstanding (i) declare a dividend on the outstanding Common Stock
payable in shares of its capital stock, (ii) subdivide the outstanding Common
Stock, (iii) combine the outstanding Common Stock into a smaller number of
shares, or (iv) issue any shares of its capital stock by reclassification of the
Common Stock (including any such reclassification in connection with a
consolidation or merger in which the Company is the continuing corporation),
then, in each case, the Conversion Price, and the number of shares of Common
Stock issuable upon conversion of this Note (the "Note Shares"), in effect at
the time of the record date for such dividend or of the effective date of such
subdivision, combination, or reclassification, shall be proportionately adjusted
so that the Holder after such time shall be entitled to receive the aggregate
number and kind of shares which, if such Note had been converted immediately
prior to such time, he would have owned upon such conversion and been entitled
to receive by virtue of such dividend, subdivision, combination, or
reclassification. Such adjustment shall be made successively whenever any event
listed above shall occur.
(b) In case the Company shall issue or fix a record date for
the issuance to all holders of Common Stock of rights, options, or warrants to
subscribe for or purchase Common Stock (or securities convertible into or
exchangeable for Common Stock) at a price per share (or having a conversion or
exchange price per share, if a security convertible into or exchangeable for
Common Stock) less than the Conversion Price per share of Common Stock on such
record date, then, in each case, the Conversion Price shall be adjusted by
multiplying the Conversion Price in effect immediately prior to such record date
by a fraction, the numerator of which shall be the number of shares of Common
Stock outstanding on such record date plus the number of shares of Common Stock
which the aggregate offering price of the total number of shares of
2
<PAGE> 3
Common Stock so to be offered (or the aggregate initial conversion or exchange
price of the convertible or exchangeable securities so to be offered) would
purchase at such current Conversion Price and the denominator of which shall be
the number of shares of Common Stock outstanding on such record date plus the
number of additional shares of Common Stock to be offered for subscription or
purchase (or into which the convertible or exchangeable securities so to be
offered are initially convertible or exchangeable). Such adjustment shall become
effective at the close of business on such record date; provided, however, that,
to the extent the shares of Common Stock (or securities convertible into or
exchangeable for shares of Common Stock) are not delivered, the Conversion Price
shall be readjusted after the expiration of such rights, options, or warrants
(but only with respect to Note converted after such expiration), to the
Conversion Price which would then be in effect had the adjustments made upon the
issuance of such rights, options, or warrants been made upon the basis of
delivery of only the number of shares of Common Stock (or securities convertible
into or exchangeable for shares of Common Stock) actually issued. In case any
subscription price may be paid in a consideration part or all of which shall be
in a form other than cash, the value of such consideration shall be as
determined in good faith by the board of directors of the Company, whose
determination shall be conclusive absent manifest error. Shares of Common Stock
owned by or held for the account of the Company or any majority-owned subsidiary
shall not be deemed outstanding for the purpose of any such computation.
(c) In case the Company shall distribute to all holders of
Common Stock (including any such distribution made to the stockholders of the
Company in connection with a consolidation or merger in which the Company is the
continuing corporation) evidences of its indebtedness or assets (other than cash
dividends or distributions and dividends payable in shares of Common Stock), or
rights, options, or warrants to subscribe for or purchase Common Stock, or
securities convertible into or exchangeable for shares of Common Stock
(excluding those with respect to the issuance of which an adjustment of the
Conversion Price is provided pursuant to Section 4(b) hereof), then, in each
case, the Conversion Price shall be adjusted by multiplying the Conversion Price
in effect immediately prior to the record date for the determination of
stockholders entitled to receive such distribution by a fraction, the numerator
of which shall be the Conversion Price per share of Common Stock on such record
date, less the fair market value (as determined in good faith by the board of
directors of the Company, whose determination shall be conclusive absent
manifest error) of the portion of the evidences of indebtedness or assets so to
be distributed, or of such rights, options, or warrants or convertible or
exchangeable securities, applicable to one share, and the denominator of which
shall be such current Conversion Price per share of Common Stock. Such
adjustment shall be made whenever any such distribution is made, and shall
become effective on the record date for the determination of shareholders
entitled to receive such distribution.
(d) In case the Company shall issue shares of Common Stock or
rights, options, or warrants to subscribe for or purchase Common Stock, or
securities convertible into or exchangeable for Common Stock (excluding shares,
rights, options, warrants, or convertible or exchangeable securities issued or
issuable (i) in any of the transactions with respect to which an adjustment of
the Conversion Price is provided pursuant to Sections 4(a), 4(b) or 4(c) above,
(ii)
3
<PAGE> 4
upon conversion of the Note or (iii) to management or employees of the Company
up to a maximum amount of shares of Common Stock), at a price per share
(determined, in the case of such rights, options, warrants, or convertible or
exchangeable securities, by dividing (x) the total amount received or receivable
by the Company in consideration of the sale and issuance of such rights,
options, warrants, or convertible or exchangeable securities, plus the minimum
aggregate consideration payable to the Company upon conversion, exercise, or
exchange thereof by (y) the maximum number of shares covered by such rights,
options, warrants, or convertible or exchangeable securities) lower than the
Conversion Price per share of Common Stock in effect immediately prior to such
issuance, then the Conversion Price shall be reduced on the date of such
issuance to a price (calculated to the nearest cent) determined by multiplying
the Conversion Price in effect immediately prior to such issuance by a fraction,
(iii) the numerator of which shall be an amount equal to the sum of (A) the
number of shares of Common Stock outstanding immediately prior to such issuance
plus (B) the quotient obtained by dividing the consideration received by the
Company upon such issuance by such current Conversion Price, and (iv) the
denominator of which shall be the total number of shares of Common Stock
outstanding immediately after such issuance. For the purposes of such
adjustments, the maximum number of shares which the holders of any such rights,
options, warrants, or convertible or exchangeable securities shall be entitled
to initially subscribe for or purchase or convert or exchange such securities
into shall be deemed to be issued and outstanding as of the date of such
issuance, and the consideration received by the Company therefor shall be deemed
to be the consideration received by the Company for such rights, options,
warrants, or convertible or exchangeable securities, plus the minimum aggregate
consideration or premiums stated in such rights, options, warrants, or
convertible or exchangeable securities to be paid for the shares covered
thereby. No further adjustment of the Conversion Price shall be made as a result
of the actual issuance of shares of Common Stock on conversion of such rights,
options, or warrants or on conversion or exchange of such convertible or
exchangeable securities. On the expiration or the termination of such rights,
options, or warrants, or the termination of such right to convert or exchange,
the Conversion Price shall be readjusted (but only with respect to Note
converted after such expiration or termination) to such Conversion Price as
would have obtained had the adjustments made upon the issuance of such rights,
options, warrants, or convertible or exchangeable securities been made upon the
basis of the delivery of only the number of shares of Common Stock actually
delivered upon the conversion of such rights, options, or warrants or upon the
conversion or exchange of any such securities; and on any change of the number
of shares of Common Stock deliverable upon the conversion of any such rights,
options, or warrants or conversion or exchange of such convertible or
exchangeable securities or any change in the consideration to be received by the
Company upon such conversion, conversion, or exchange, including, but not
limited to, a change resulting from the antidilution provisions thereof the
Conversion Price, as then in effect, shall forthwith be readjusted (but only
with respect to Note converted after such change) to such Conversion Price as
would have been obtained had an adjustment been made upon the issuance of such
rights, options, or warrants not converted prior to such change, or securities
not converted or exchanged prior to such change, on the basis of such change. In
case the Company shall issue shares of Common Stock or any such rights, options,
warrants, or convertible or exchangeable securities for a consideration
consisting, in whole or in part, of property other than cash or its equivalent,
then the "price per share" and the
4
<PAGE> 5
"consideration received by the Company" for purposes of the first sentence of
this Section 4(d) shall be as determined in good faith by the board of directors
of the Company, whose determination shall be conclusive absent manifest error.
Shares of Common Stock owned by or held for the account of the Company or any
majority-owned subsidiary shall not be deemed outstanding for the purpose of any
such computation.
(e) No adjustment in the Conversion Price shall be required if
such adjustment is less than $.05; provided, however, that any adjustments which
by reason of this Section 5 are not required to be made shall be carried forward
and taken into account in any subsequent adjustment. All calculations under this
Section 4 shall be made to the nearest cent or to the nearest one-thousandth of
a share, as the case may be.
(f) In any case in which this Section 4 shall require that an
adjustment in the Conversion Price be made effective as of a record date for a
specified event, the Company may elect to defer, until the occurrence of such
event, issuing to the Holder, if the Holder converted this Note after such
record date, the shares of Common Stock, if any, issuable upon such conversion
over and above the shares of Common Stock, if any, issuable upon such conversion
on the basis of the Conversion Price in effect prior to such adjustment;
provided, however, that the Company shall deliver to the Holder a due bill or
other appropriate instrument evidencing the Holder's right to receive such
additional shares upon the occurrence of the event requiring such adjustment.
(g) Upon each adjustment of the Conversion Price as a result
of the calculations made in Sections 4(b), 4(c) or 4(d) hereof, this Note shall
thereafter evidence the right to purchase, at the adjusted Conversion Price,
that number of shares (calculated to the nearest thousandth) obtained by
dividing (A) the product obtained by multiplying the number of shares
purchasable upon conversion of this Note prior to adjustment of the number of
shares by the Conversion Price in effect prior to adjustment of the Conversion
Price by (B) the Conversion Price in effect after such adjustment of the
Conversion Price.
(h) Whenever there shall be an adjustment as provided in this
Section 4, the Company shall promptly cause written notice thereof to be sent by
registered mail, postage prepaid, to the Holder, at its address as it shall
appear in the Note Register, which notice shall be accompanied by an officer's
certificate setting forth the number of Note Shares purchasable upon the
conversion of this Note and the Conversion Price after such adjustment and
setting forth a brief statement of the facts requiring such adjustment and the
computation thereof, which officer's certificate shall be conclusive evidence of
the correctness of any such adjustment absent manifest error.
(i) In case of any consolidation with or merger of the Company
with or into another corporation (other than a merger or consolidation in which
the Company is the surviving or continuing corporation), or in case of any sale,
lease, or conveyance to another corporation of the property and assets of any
nature of the Company as an entirety or substantially as an entirety, such
successor, leasing, or purchasing corporation, as the case may be, shall (x)
execute
5
<PAGE> 6
with the Holder an agreement providing that the Holder shall have the right
thereafter to receive upon conversion of this Note solely the kind and amount of
shares of stock and other securities, property, cash, or any combination thereof
receivable upon such consolidation, merger, sale, lease, or conveyance by a
holder of the number of shares of Common Stock for which this Note; might have
been converted immediately prior to such consolidation, merger, sale, lease, or
conveyance and (y) make effective provision in its certificate of incorporation
or otherwise, if necessary, to effect such agreement. Such agreement shall
provide for adjustments which shall be as nearly equivalent as practicable to
the adjustments in Section 5.
(j) In case of any reclassification or change of the shares of
Common Stock issuable upon conversion of this Note (other than a change in par
value or from no par value to a specified par value, or as a result of a
subdivision or combination, but including any change in the shares into two or
more classes or series of shares), or in case of any consolidation or merger of
another corporation into the Company in which the Company is the continuing
corporation and in which there is a reclassification or change (including a
change to the right to receive cash or other property) of the shares of Common
Stock (other than a change in par value, or from no par value to a specified par
value, or as a result of a subdivision or combination, but including any change
in the shares into two or more classes or series of shares), the Holder shall
have the right thereafter to receive upon conversion of this Note solely the
kind and amount of shares of stock and other securities, property, cash, or any
combination thereof receivable upon such reclassification, change,
consolidation, or merger by a holder of the number of shares of Common Stock for
which this Note might have been converted immediately prior to such
reclassification, change, consolidation, or merger. Thereafter, appropriate
provision shall be made for adjustments which shall be as nearly equivalent as
practicable to the adjustments in Section 4.
(k) The above provisions of this Section 4 shall similarly
apply to successive reclassifications and changes of shares of Common Stock and
to successive consolidations, mergers, sales, leases, or conveyances.
(1) In case at any time the Company shall propose
(i) to pay any dividend or make any distribution on shares of
Common Stock in shares of Common Stock or make any other
distribution (other than regularly scheduled cash dividends
which are not in a greater amount per share than the most
recent such cash dividend) to all holders of Common Stock; or
(ii) to issue any rights, warrants, or other securities to all
holders of Common Stock entitling them to purchase any
additional shares of Common Stock or any other rights,
warrants, or other securities; or
(iii) to effect any reclassification or change of outstanding
shares of Common Stock, or any consolidation, merger, sale,
lease, or conveyance
6
<PAGE> 7
of property, described in Section 4; or
(iv) to effect any liquidation, dissolution, or winding-up of
the Company; or
(v) to take any other action which would cause an adjustment
to the Conversion Price;
then, and in any one or more of such cases, the Company shall give written
notice thereof, by registered mail, postage prepaid, to the Holder at the
Holder's address as it shall appear in the Note Register, mailed at least 15
days prior to (i) the date as of which the holders of record of shares of Common
Stock to be entitled to receive any such dividend, distribution, rights,
warrants, or other securities are to be determined, (ii) the date on which any
such reclassification, change of outstanding shares of Common Stock,
consolidation, merger, sale, lease, conveyance of property, liquidation,
dissolution, or winding-up is expected to become effective, and the date as of
which it is expected that holders of record of shares of Common Stock shall be
entitled to exchange their shares for securities or other property, if any,
deliverable upon such reclassification, change of outstanding shares,
consolidation, merger, sale, lease, conveyance of property, liquidation,
dissolution, or winding-up, or (iii) the date of such action which would require
an adjustment to the Conversion Price.
5.Events of Default. In the event that:
(a) the Company defaults in the payment of any
installment of interest required to be made on this Note and
such default shall continue for a period of thirty (30) days;
(b) the Company defaults in making any payment of
principal on this Note required to be made on this Note and
such default shall continue for a period of ten (10) days;
(c) the Company fails to comply with the other provisions
of this Note, including, without limitation, Section 4 hereof
or
(d) the Company makes an assignment for the benefit of
creditors, or files a petition in bankruptcy as to itself, is
adjudicated insolvent or bankrupt, petitions receiver of or
any trustee for the Company or any substantial part of the
property of the Company under any bankruptcy, reorganization,
arrangement, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction, whether or not hereafter
in effect; or if there is hereafter commenced against the
Company any such proceeding and an order approving the
petition is entered or such proceeding remains undismissed for
a period of sixty (60) days, or the Company by any act or
omission to act indicates its consent to or approval of or
acquiescence in any such proceeding or the appointment of any
receiver of, or
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<PAGE> 8
trustee for, the Company or any substantial part of its
properties, or suffers any such receivership or trusteeship to
continue undischarged for a period of sixty (60) days.
then, and in any such event, and at any time thereafter, if such event shall
then be continuing, the holder of this Note may, by written notice of the
Company, declare this Note due and payable, whereupon the same shall be due and
payable without presentment, demand, protest or other notice of any kind.
6. Investment Representation.
(a) The Holder hereby acknowledges that this Note and the
Common Stock are not being registered (i) under the Act on the ground that the
issuance of the Note is exempt from registration under Section 4(2) of the Act
as not involving any public offering or (ii) under any applicable state
securities law because the issuance of this Note does not involve any public
offering; and that the Company's reliance on the Section 4(2) exemption of the
Act and under applicable state securities laws is predicated in part on the
representations hereby made to the Company by the Holder that it is acquiring
this Note for investment for its own account, with no present intention of
dividing its participation with others or reselling or otherwise distributing
the same, provided, nevertheless, to any requirement of law that the disposition
of its property shall at all time be within its control.
(b) The Holder hereby agrees that it will not sell or transfer
all or any part of this Note and/or Common Stock unless and until it shall first
have given notice to the Company describing such sale or transfer and furnished
to the Company either (a) an opinion, reasonably satisfactory to counsel for the
Company, of counsel (skilled in securities matters, selected by the Holder and
reasonably satisfactory to the Company) to the effect that the proposed sale or
transfer may be made without registration under the Act and without registration
or qualification under any state law, or (b) an interpretive letter from the
Securities and Exchange Commission to the effect that no enforcement action will
be recommended if the proposed sale or transfer is made without registration
under the Act.
(c) If, at the time of issuance of the Common Stock, no
registration statement is in effect with respect to such shares under applicable
provisions of the Act, the Company may at its election require that Holder
provide the Company with written reconfirmation of the Holder's investment
intent and that any stock certificate delivered to the Holder upon conversion of
this Note shall bear legends reading substantially as follows:
"TRANSFER OF THE SHARES REPRESENTED BY THIS CERTIFICATE IS
SUBJECT TO CERTAIN RESTRICTIONS SET FORTH IN THE NOTE PURSUANT
TO WHICH THESE SHARES WERE ISSUED BY THE COMPANY. COPIES OF
THOSE RESTRICTIONS ARE ON FILE AT THE PRINCIPAL OFFICES OF THE
COMPANY, AND NO TRANSFER OF SUCH
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<PAGE> 9
SHARES OR OF THIS CERTIFICATE, OR OF ANY SHARES OR OTHER
SECURITIES (OR CERTIFICATES THEREFOR) ISSUED IN EXCHANGE FOR
OR IN RESPECT OF SUCH SHARES, SHALL BE EFFECTIVE UNLESS AND
UNTIL THE TERMS AND CONDITIONS THEREIN SET FORTH SHALL HAVE
BEEN COMPLIED WITH."
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AND MAY NOT BE
SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 OR AN OPINION OF COUNSEL SATISFACTORY
TO THE ISSUER OF THIS CERTIFICATE THAT REGISTRATION IS NOT
REQUIRED UNDER SAID ACT."
In addition, so long as the foregoing legend may remain on any stock certificate
delivered to the Holder, the Company may maintain appropriate "stop transfer"
orders with respect to such certificates and the shares represented thereby on
its books and records and with those to whom it may delegate registrar and
transfer functions.
(d) The Company may refuse to recognize a transfer of this
Note or any Common Stock on its books should a holder attempt to transfer this
Note or any Common Stock otherwise than in compliance with this Section 6.
7. Miscellaneous.
(a) This Note is the obligation of the Company only, and no
recourse shall be had for the payment thereof or interest thereon against any
shareholder, officer or director of the Company, whether by virtue of any
constitution, statute, rule or law or otherwise, all such liability, by the
acceptance hereof and as part of the consideration hereof, being expressly
waived.
(b) Upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of this Note and of a
letter of indemnity reasonably satisfactory to the Company, and upon
reimbursement to the Company of all reasonable expenses incident thereto, and
upon surrender or cancellation of this Note, if mutilated, the Company will make
and deliver a new Note of like tenor in lieu of such lost, stolen, destroyed or
mutilated Note.
9
<PAGE> 10
THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF EACH OF THE
COMPANY AND THE HOLDER HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS AND
INSTRUMENTS MADE AND TO BE PERFORMED IN NEW YORK AND CANNOT BE MODIFIED OR
CHANGED ORALLY.
IN WITNESS WHEREOF, the Company has duly caused this Note to
be signed on its behalf, in its corporate name and by its duly authorized
officer as of this 23rd day of September 1997.
COMMODORE APPLIED TECHNOLOGIES, INC.
By /s/ Michael D. Fullwood
-----------------------------------
Name: Michael D. Fullwood
Title: Senior Vice President and Chief
Financial and Administrative Officer
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<PAGE> 1
Exhibit 4.23
NEITHER THE WARRANTS REPRESENTED BY THIS CERTIFICATE NOR THE SHARES
ISSUABLE UPON EXERCISE HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED. NEITHER THE WARRANTS NOR SUCH SHARES MAY BE
OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER SUCH ACT, OR AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT.
COMMODORE APPLIED TECHNOLOGIES, INC.
WARRANT FOR THE PURCHASE OF SHARES OF COMMON STOCK
No. 1 1,000,000 Shares
THIS CERTIFIES that, for value received, Commodore Environmental Services,
Inc. (the "Holder"), is entitled to subscribe for and purchase from Commodore
Applied Technologies, Inc., a Delaware corporation (the "Company"), subject to
compliance with any applicable stockholder approval or notice requirements, and
upon the terms and conditions set forth herein, at any time or from time to time
after the date hereof, and before 5:00 P.M. on August 31, 2002, New York time
(the "Exercise Period"), One Million (1,000,000) shares, par value $.001 per
share, of the Company ("Common Stock"), at an exercise price of $5.0325 per
share (the "Exercise Price"). As used herein the term "this Warrant" shall mean
and include this Warrant and any Warrant or Warrants hereafter issued as a
consequence of the exercise or transfer of this Warrant in whole or in part.
The number of shares of Common Stock issuable upon exercise of the Warrants
(the "Warrant Shares") and the Exercise Price may be adjusted from time to time
as hereinafter set forth.
1. This Warrant may be exercised during the Exercise Period, as to the
whole or any lesser number of the respective whole Warrant Shares, by the
surrender of this Warrant (with the election at the end hereof duly executed) to
the Company at its office as set forth in the form of election attached hereto,
or at such other place as is designated in writing by the Company, together with
a certified or bank cashier's check payable to the order of the Company in an
amount equal to the Exercise Price multiplied by the number of respective
Warrant Shares for which this Warrant is being exercised.
2. Upon each exercise of the Holder's rights to purchase Warrant Shares and
payment of the Exercise Price, the Holder shall be deemed to be the holder of
record of the Warrant Shares issuable upon such exercise, notwithstanding that
the transfer books of the Company shall then be closed or certificates
representing such Warrant Shares shall not then have been actually
<PAGE> 2
delivered to the Holder. As soon as practicable after each such exercise of this
Warrant and payment of the Holder a certificate or certificates for the Warrant
Shares issuable upon such exercise, registered in the name of the Holder or its
designee. If the Warrant should be exercised in part only, the Company shall,
upon surrender of this Warrant for cancellation, execute and deliver a new
Warrant evidencing the right of the Holder to purchase the balance of the
Warrant Shares (or portions thereof) subject to purchase hereunder.
3. Any Warrants issued upon the transfer or exercise in part of this
Warrant shall be numbered and shall be registered in a Warrant Register as
they are issued. The Company shall be entitled to treat the registered holder of
any Warrant on the Warrant Register as the Owner in fact thereof for all
purposes and shall not be bound to recognize any equitable or other claim to or
interest in such Warrant on the part of any other person, and shall not be
liable for any registration or transfer of Warrants which are registered or to
be registered in the name of a fiduciary or the nominee of a fiduciary unless
made with the actual knowledge that a fiduciary or nominee is committing a
breach of trust in requesting such registration or transfer, or with the
knowledge of such facts that its participation therein amounts to bad faith.
This Warrant shall be transferable only on the books of the Company upon
delivery thereof duly endorsed by the Holder or by his duly authorized attorney
or representative, or accompanied by proper evidence of succession, assignment,
or authority to transfer. In all cases or transfer by an attorney, executor,
administrator, guardian, or other legal representative, duly authenticated
evidence of his or its authority shall be produced. Upon any registration of
transfer, the Company shall deliver a new Warrant or Warrants to the person
entitled thereto. This Warrant may be exchanged, at the option of the Holder
thereof, for another Warrant, or other Warrants of different denominations, of
like tenor and representing in the aggregate the right to purchase a like
number of Warrant Shares (or portions thereof), upon surrender to the Company or
its duly authorized agent. Notwithstanding the foregoing, the Company shall have
no obligation to cause Warrants to be transferred on its books to any person if,
in the opinion of counsel to the Company, such transfer does not comply with the
provisions of the Securities Act of 1933, as amended (the "Act"), and the rules
and regulations thereunder.
4. The Company shall at all times reserve and keep available out of its
authorized and unissued Common Stock, solely for the purpose of providing for
the exercise of the rights to purchase all Warrant Shares granted pursuant to
the Warrants, such number of shares of Common Stock as shall, from time to time,
be sufficient therefor. The Company covenants that all shares of Common Stock
issuable upon exercise of this Warrant, upon receipt by the Company of the full
Exercise Price therefor, shall be validly issued, fully paid, nonassessable, and
free of preemptive rights.
5. (a) In case the Company shall at any time after the date the Warrants
were first issued (i) declare a dividend on the outstanding Common Stock payable
in shares of its capital stock, (ii) subdivide the outstanding Common Stock,
(iii) combine the outstanding Common Stock into a smaller number of shares, or
(iv) issue any shares of its capital stock by reclassification of the Common
Stock (including any such reclassification in connection with a
2
<PAGE> 3
consolidation or merger in which the Company is the continuing corporation),
then, in each case, the Exercise Price, and the number of Warrant Shares
issuable upon exercise of this Warrant, in effect at the time of the record date
for such dividend or of the effective date of such subdivision, combination, or
reclassification, shall be proportionately adjusted so that the Holder after
such time shall be entitled to receive the aggregate number and kind of shares
which, if such Warrant had been exercised immediately prior to such time, he
would have owned upon such exercise and been entitled to receive by virtue of
such dividend, subdivision, combination, or reclassification. Such adjustment
shall be made successively whenever any event listed above shall occur.
(b) In case the Company shall issue or fix a record date for the
issuance to all holders of Common Stock of rights, options, or warrants to
subscribe for or purchase Common Stock (or securities convertible into or
exchangeable for Common Stock) at a price per share (or having a conversion or
exchange price per share, if a security convertible into or exchangeable for
Common Stock) less than the Exercise Price per share of Common Stock on such
record date, then, in each case, the Exercise Price shall be adjusted by
multiplying the Exercise Price in effect immediately prior to such record date
by a fraction, the numerator of which shall be the number of shares of Common
Stock outstanding on such record date plus the number of shares of Common Stock
which the aggregate offering price of the total number of shares of Common Stock
so to be offered (or the aggregate initial conversion or exchange price of the
convertible or exchangeable securities so to be offered) would purchase at such
current Exercise Price and the denominator of which shall be the number of
shares of Common Stock outstanding on such record date plus the number of
additional shares of Common Stock to be offered for subscription or purchase (or
into which the convertible or exchangeable securities so to be offered are
initially convertible or exchangeable). Such adjustment shall become effective
at the close of business on such record date; provided, however, that, to the
extent the shares of Common Stock (or securities convertible into or
exchangeable for shares of Common Stock) are not delivered, the Exercise Price
shall be readjusted after the expiration of such rights, options, or warrants
(but only with respect to Warrants exercised after such expiration), to the
Exercise Price which would then be in effect had the adjustments made upon the
issuance of such rights, options, or warrants been made upon the basis of
delivery of only the number of shares of Common Stock (or securities convertible
into or exchangeable for shares of Common Stock) actually issued. In case any
subscription price may be paid in a consideration part or all of which shall be
in a form other than cash, the value of such consideration shall be as
determined in good faith by the board of directors of the Company, whose
determination shall be conclusive absent manifest error. Shares of Common Stock
owned by or held for the account of the Company or any majority-owned subsidiary
shall not be deemed outstanding for the purpose of any such computation.
(c) In case the Company shall distribute to all holders of Common
Stock (including any such distribution made to the stockholders of the Company
in connection with a consolidation or merger in which the Company is the
continuing corporation) evidences of its indebtedness or assets (other than cash
dividends or distributions and dividends payable in shares of Common Stock), or
rights, options, or warrants to subscribe for or purchase Common Stock, or
securities convertible into or exchangeable for shares of Common Stock
(excluding those with
3
<PAGE> 4
respect to the issuance of which an adjustment of the Exercise Price is provided
pursuant to Section 5(b) hereof), then, in each case, the Exercise Price shall
be adjusted by multiplying the Exercise Price in effect immediately prior to the
record date for the determination of stockholders entitled to receive such
distribution by a fraction, the numerator of which shall be the Exercise Price
per share of Common Stock on such record date, less the fair market value (as
determined in good faith by the board of directors of the Company, whose
determination shall be conclusive absent manifest error) of the portion of the
evidences of indebtedness or assets so to be distributed, or of such rights,
options, or warrants or convertible or exchangeable securities, applicable to
one share, and the denominator of which shall be such current Exercise Price per
share of Common Stock. Such adjustment shall be made whenever any such
distribution is made, and shall become effective on the record date for the
determination of shareholders entitled to receive such distribution.
(d) In case the Company shall issue shares of Common Stock or rights,
options, or warrants to subscribe for or purchase Common Stock, or securities
convertible into or exchangeable for Common Stock (excluding shares, rights,
options, warrants, or convertible or exchangeable securities issued or issuable
(i) in any of the transactions with respect to which an adjustment of the
Exercise Price is provided pursuant to Sections 5(a), 5(b) or 5(c) above, (ii)
upon exercise of the Warrants or (iii) to management or employees of the Company
up to a maximum amount of shares of Common Stock), at a price per share
(determined, in the case of such rights, options, warrants, or convertible or
exchangeable securities, by dividing (x) the total amount received or receivable
by the Company in consideration of the sale and issuance of such rights,
options, warrants, or convertible or exchangeable securities, plus the minimum
aggregate consideration payable to the Company upon exercise, conversion, or
exchange thereof, by (y) the maximum number of shares covered by such rights,
options, warrants, or convertible or exchangeable securities) lower than the
Exercise Price per share of Common Stock in effect immediately prior to such
issuance, then the Exercise Price shall be reduced on the date of such issuance
to a price (calculated to the nearest cent) determined by multiplying the
Exercise Price in effect immediately prior to such issuance by a fraction, (iii)
the numerator of which shall be an amount equal to the sum of (A) the number of
shares of Common Stock outstanding immediately prior to such issuance plus (B)
the quotient obtained by dividing the consideration received by the Company upon
such issuance by such current Exercise Price, and (iv) the denominator of which
shall be the total number of shares of Common Stock outstanding immediately
after such issuance. For the purposes of such adjustments, the maximum number of
shares which the holders of any such rights, options, warrants, or convertible
or exchangeable securities shall be entitled to initially subscribe for or
purchase or convert or exchange such securities into shall be deemed to be
issued and outstanding as of the date of such issuance, and the consideration
received by the Company therefor shall be deemed to be the consideration
received by the Company for such rights, options, warrants, or convertible or
exchangeable securities, plus the minimum aggregate consideration or premiums
stated in such rights, options, warrants, or convertible or exchangeable
securities to be paid for the shares covered thereby. No further adjustment of
the Exercise Price shall be made as a result of the actual issuance of shares of
Common Stock on exercise of such rights, options, or warrants or on conversion
or exchange
4
<PAGE> 5
of such convertible or exchangeable securities. On the expiration or the
termination of such rights, options, or warrants, or the termination of such
right to convert or exchange, the Exercise Price shall be readjusted (but only
with respect to Warrants exercised after such expiration or termination) to such
Exercise Price as would have obtained had the adjustments made upon the issuance
of such rights, options, warrants, or convertible or exchangeable securities
been made upon the basis of the delivery of only the number of shares of Common
Stock actually delivered upon the exercise of such rights, options, or warrants
or upon the conversion or exchange of any such securities; and on any change of
the number of shares of Common Stock deliverable upon the exercise of any such
rights, options, or warrants or conversion or exchange of such convertible or
exchangeable securities or any change in the consideration to be received by the
Company upon such exercise, conversion, or exchange, including, but not limited
to, a change resulting from the antidilution provisions thereof, the Exercise
Price, as then in effect, shall forthwith be readjusted (but only with respect
to Warrants exercised after such change) to such Exercise Price as would have
been obtained had an adjustment been made upon the issuance of such rights,
options, or warrants not exercised prior to such change, or securities not
converted or exchanged prior to such change, on the basis of such change. In
case the Company shall issue shares of Common Stock or any such rights, options,
warrants, or convertible or exchangeable securities for a consideration
consisting, in whole or in part, of property other than cash or its equivalent,
then the "price per share" and the "consideration received by the Company" for
purposes of the first sentence of this Section 5(d) shall be as determined in
good faith by the board of directors of the Company, whose determination shall
be conclusive absent manifest error. Shares of Common Stock owned by or held for
the account of the Company or any majority-owned subsidiary shall not be deemed
outstanding for the purpose of any such computation.
(e) No adjustment in the Exercise Price shall be required if such
adjustment is less than $.05; provided, however, that any adjustments which by
reason of this Section 5 are not required to be made shall be carried forward
and taken into account in any subsequent adjustment. All calculations under this
Section 5 shall be made to the nearest cent or to the nearest one-thousandth of
a share, as the case may be.
(f) In any case in which this Section 5 shall require that an
adjustment in the Exercise Price be made effective as of a record date for a
specified event, the Company may elect to defer, until the occurrence of such
event, issuing to the Holder, if the Holder exercised this Warrant after such
record date, the shares of Common Stock, if any, issuable upon such exercise
over and above the shares of Common Stock, if any, issuable upon such exercise
on the basis of the Exercise Price in effect prior to such adjustment; provided,
however, that the Company shall deliver to the Holder a due bill or other
appropriate instrument evidencing the Holder's right to receive such additional
shares upon the occurrence of the event requiring such adjustment.
(g) Upon each adjustment of the Exercise Price as a result of the
calculations made in Sections 5(b), 5(c) or 5(d) hereof, this Warrant shall
thereafter evidence the right to
5
<PAGE> 6
purchase, at the adjusted Exercise Price, that number of shares (calculated to
the nearest thousandth) obtained by dividing (A) the product obtained by
multiplying the number of shares purchasable upon exercise of this Warrant prior
to adjustment of the number of shares by the Exercise Price in effect prior to
adjustment of the Exercise Price by (B) the Exercise Price in effect after such
adjustment of the Exercise Price.
(h) Whenever there shall be an adjustment as provided in this Section
5, the Company shall promptly cause written notice thereof to be sent by
registered mail, postage prepaid, to the Holder, at its address as it shall
appear in the Warrant Register, which notice shall be accompanied by an
officer's certificate setting forth the number of Warrant Shares purchasable
upon the exercise of this Warrant and the Exercise Price after such adjustment
and setting forth a brief statement of the facts requiring such adjustment and
the computation thereof, which officer's certificate shall be conclusive
evidence of the correctness of any such adjustment absent manifest error.
6. (a) In case of any consolidation with or merger of the Company with or
into another corporation (other than a merger or consolidation in which the
Company is the surviving or continuing corporation), or in case of any sale,
lease, or conveyance to another corporation of the property and assets of any
nature of the Company as an entirety or substantially as an entirety, such
successor, leasing, or purchasing corporation, as the case may be, shall (i)
execute with the Holder an agreement providing that the Holder shall have the
right thereafter to receive upon exercise of this Warrant solely the kind and
amount of shares of stock and other securities, property, cash, or any
combination thereof receivable upon such consolidation, merger, sale, lease, or
conveyance by a holder of the number of shares of Common Stock for which this
Warrant; might have been exercised immediately prior to such consolidation,
merger, sale, lease, or conveyance and (ii) make effective provision in its
certificate of incorporation or otherwise, if necessary, to effect such
agreement. Such agreement shall provide for adjustments which shall be as nearly
equivalent as practicable to the adjustments in Section 5.
(b) In case of any reclassification or change of the shares of Common
Stock issuable upon exercise of this Warrant (other than a change in par value
or from no par value to a specified par value, or as a result of a subdivision
or combination, but including any change in the shares into two or more classes
or series of shares), or in case of any consolidation or merger of another
corporation into the Company in which the Company is the continuing corporation
and in which there is a reclassification or change (including a change to the
right to receive cash or other property) of the shares of Common Stock (other
than a change in par value, or from no par value to a specified par value, or as
a result of a subdivision or combination, but including any change in the shares
into two or more classes or series of shares), the Holder shall have the right
thereafter to receive upon exercise of this Warrant solely the kind and amount
of shares of stock and other securities, property, cash, or any combination
thereof receivable upon such reclassification, change, consolidation, or merger
by a holder of the number of shares of Common Stock for which this Warrant might
have been exercised immediately prior to such reclassification, change,
consolidation, or merger. Thereafter, appropriate provision shall be made
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<PAGE> 7
for adjustments which shall be as nearly equivalent as practicable to the
adjustments in Section 5.
(c) The above provisions of this Section 6 shall similarly
apply to successive reclassifications and changes of shares of Common Stock and
to successive consolidations, mergers, sales, leases, or conveyances.
7. In case at any time the Company shall propose
(a) to pay any dividend or make any distribution on shares of
Common Stock in shares of Common Stock or make any other distribution (other
than regularly scheduled cash dividends which are not in a greater amount per
share than the most recent such cash dividend) to all holders of Common Stock;
or
(b) to issue any rights, warrants, or other securities to all
holders of Common Stock entitling them to purchase any additional shares of
Common Stock or any other rights, warrants, or other securities; or
(c) to effect any reclassification or change of outstanding
shares of Common Stock, or any consolidation, merger, sale, lease, or conveyance
of property, described in Section 6; or
(d) to effect any liquidation, dissolution, or winding-up of
the Company; or
(e) to take any other action which would cause an adjustment
to the Exercise Price;
then, and in any one or more of such cases, the Company shall give written
notice thereof, by registered mail, postage prepaid, to the Holder at the
Holder's address as it shall appear in the Warrant Register, mailed at least 15
days prior to (i) the date as of which the holders of record of shares of Common
Stock to be entitled to receive any such dividend, distribution, rights,
warrants, or other securities are to be determined, (ii) the date on which any
such reclassification, change of outstanding shares of Common Stock,
consolidation, merger, sale, lease, conveyance of property, liquidation,
dissolution, or winding-up is expected to become effective, and the date as of
which it is expected that holders of record of shares of Common Stock shall be
entitled to exchange their shares for securities or other property, if any,
deliverable upon such reclassification, change of outstanding shares,
consolidation, merger, sale, lease, conveyance of property, liquidation,
dissolution, or winding-up, or (iii) the date of such action which would require
an adjustment to the Exercise Price.
8. (a) if at any time prior to the expiration of the Exercise Period,
the Company shall file a registration statement (other than a registration
statement on Form S-4, Form S-5, or
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<PAGE> 8
any successor form) with the Securities and Exchange Commission (the
"Commission") while any Registrable Securities (as hereinafter defined) are
outstanding, the Company shall give all the then holders of any Registrable
Securities (the "Eligible Holders") at least 30 days prior written notice of the
filing of such registration statement. If requested by any Eligible Holder in
writing within 20 days after receipt of any such notice, the Company shall, at
the Company's sole expense (other than the fees and disbursements of counsel for
the Eligible Holders and the underwriting discounts, if any, payable in respect
of the Registrable Securities sold by any Eligible Holder), register or qualify
all or, at each Eligible Holder's option, any portion of the Registrable
Securities of any Eligible Holders who shall have made such request,
concurrently with the registration of such other securities, all to the extent
requisite to permit the public offering and sale of the Registrable Securities
through the facilities of all appropriate securities exchanges and the
over-the-counter market, and will use its best efforts through its officers,
directors, auditors, and counsel to cause such registration statement to become
effective as promptly as practicable. Notwithstanding the foregoing, if the
managing underwriter of any such offering shall advise the Company in writing
that, in its opinion, the distribution of all or a portion of the Registrable
Securities requested to be included in the registration concurrently with the
securities being registered by the Company would materially adversely affect the
distribution of such securities by the Company for its own account, then any
Eligible Holder who shall have requested registration of his or its Registrable
Securities shall delay the offering and sale of such Registrable Securities (or
the portions thereof so designated by such managing underwriter) for such
period, not to exceed 90 days (the "Delay Period"), as the managing underwriter
shall request, provided that no such delay shall be required as to any
Registrable Securities if any securities of the Company are included in such
registration statement and eligible for sale during the Delay Period for the
account of any person other than the Company and any Eligible Holder unless the
securities included in such registration statement and eligible for sale during
the Delay Period for such other person shall have been reduced pro rata to the
reduction of the Registrable Securities which were requested to be included and
eligible for sale during the Delay Period in such registration. As used herein,
"Registrable Securities" shall mean the Warrants and the Warrant Shares which,
in each case, have not been previously sold pursuant to a registration statement
or Rule 144 promulgated under the Act.
(b) If, at any time prior to the expiration of the Exercise Period,
the Company shall receive a written request, from Eligible Holders who in the
aggregate own (or upon exercise of all Warrants then outstanding or issuable
would own) 50% of the total number of shares of Common Stock then included (or
upon such exercises would be included) in the Registrable Securities (the
"Majority Holders"), to register the sale of all or part of such Registrable
Securities, the Company shall, as promptly as practicable, prepare and file with
the Commission a registration statement sufficient to permit the public offering
and sale of the Registrable Securities through the facilities of all appropriate
securities exchanges and the over-the-counter market, and will use its best
efforts through its officers, directors, auditors, and counsel to cause such
registration statement to become effective as promptly as practicable; provided,
however, that the Company shall only be obligated to file one such registration
statement for which all expenses incurred in connection with such registration
(other than the fees and disbursements of
8
<PAGE> 9
counsel for the Eligible Holders and underwriting discounts, if any, payable in
respect of the Registrable Securities sold by the Eligible Holders) shall be
borne by the Company. The Company shall not be obligated to effect any
registration of its securities pursuant to this Section 8(b) within six months
after the effective date of a previous registration statement prepared and filed
in accordance with Sections 8(a) or 8(b). Within three business days after
receiving any request contemplated by this Section 8(b), the Company shall give
written notice to all the other Eligible Holders, advising each of them that the
Company is proceeding with such registration and offering to include therein all
or any portion of any such other Eligible Holder's Registrable Securities,
provided that the Company receives a written request to do so from such Eligible
Holder within 30 days after receipt by him or it of the Company's notice.
(c) In the event of a registration pursuant to the provisions of this
Section 8, the Company shall use its best efforts to cause the Registrable
Securities so registered to be registered or qualified for sale under the
securities or blue sky laws of such jurisdictions as the Eligible Holder or such
holders may reasonably request; provided, however, that the Company shall not be
required to qualify to do business in any state by reason of this Section 8(c)
in which it is not otherwise required to qualify to do business.
(d) The Company shall keep effective any registration or qualification
contemplated by this Section 8 and shall from time to time amend or supplement
each applicable registration statement, preliminary prospectus, final
prospectus, application, document, and communication for such period of time as
shall be required to permit the Eligible Holders to complete the offer and sale
of the Registrable Securities covered thereby. The Company shall in no event be
required to keep any such registration or qualification in effect for a period
in excess of nine months from the date on which the Eligible Holders are first
free to sell such Registrable Securities; provided, however, that, if the
Company is required to keep any such registration or qualification in effect
with respect to securities other than the Registrable Securities beyond such
period, the Company shall keep such registration or qualification in effect as
it relates to the Registrable Securities for so long as such registration or
qualification remains or is required to remain in effect in respect of such
other securities.
(e) In the event of a registration pursuant to the provisions of this
Section 8, the Company shall furnish to each Eligible Holder such number of
copies of the registration statement and of each amendment and supplement
thereto (in each case, including all exhibits), such reasonable number of copies
of each prospectus contained in such registration statement and each supplement
or amendment thereto (including each preliminary prospectus), all of which shall
conform to the requirements of the Act and the rules and regulations thereunder,
and such other documents, as any Eligible Holder may reasonably request to
facilitate the disposition of the Registrable Securities included in such
registration.
(f) In the event of a registration pursuant to the provisions of this
Section 8, the Company shall furnish each Eligible Holder of any Registrable
Securities so registered with an opinion of its counsel (reasonably acceptable
to the Eligible Holders) to the effect that (i) the
9
<PAGE> 10
registration statement has become effective under the Act and no order
suspending the effectiveness of the registration statement, preventing or
suspending the use of the registration statement, any preliminary prospectus,
any final prospectus, or any amendment or supplement thereto has been issued,
nor has the Commission or any securities or blue sky authority of any
jurisdiction instituted or threatened to institute any proceedings with respect
to such an order, (ii) the registration statement and each prospectus forming a
part thereof (including each preliminary prospectus), and any amendment or
supplement thereto, complies as to form with the Act and the rules and
regulations thereunder, and (iii) such counsel has no knowledge of any material
misstatement or omission in such registration statement or any prospectus, as
amended or supplemented. Such opinion shall also state the jurisdictions in
which the Registrable Securities have been registered or qualified for sale
pursuant to the provisions of Section 8(c).
(g) In the event of a registration pursuant to the provision of this
Section 8, the Company shall enter into a cross-indemnity agreement and a
contribution agreement, each in customary form, with each underwriter, if any,
and, if requested, enter into an underwriting agreement containing conventional
representations, warranties, allocation of expenses, and customary closing
conditions, including, but not limited to, opinions of counsel and accountants'
cold comfort letters, with any underwriter who acquires any Registrable
Securities.
(h) In the event of a registration pursuant to the provisions of this
Section 8:
(i) Each Eligible Holder shall furnish to the Company in writing
such appropriate information (relating to such Eligible Holder and the intention
of such Eligible Holder as to proposed methods of sale or other disposition of
their shares of Common Stock) and the identity of and compensation to be paid to
any proposed underwriters to be employed in connection therewith as the Company,
any underwriter, or the Commission or any other regulatory authority may
request;
(ii) the Eligible Holders shall enter into the usual and
customary form of underwriting agreement agreed to by the Company and any
underwriter with respect to any such offering, if required, and such
underwriting agreement shall contain the customary rights of indemnity between
the Company, the underwriters, and such Eligible Holders;
(iii) each Eligible Holder shall agree that he shall execute,
deliver and/or file with or supply the Company, any underwriters, the Commission
and/or any state or other regulatory authority such information, documents,
representations, undertakings and/or agreements necessary to carry out the
provisions of the registration covenants contained in this Section 8 and/or to
effect the registration or qualification of his or its Registrable Securities
under the Act and/or any of the laws and regulations of any state of
governmental instrumentality;
(iv) the Company's obligation to include any Registrable
Securities in a registration statement shall be subject to the written agreement
of each holder
10
<PAGE> 11
thereof to offer such securities in the same manner and on the same terms and
conditions as the other securities of the same class are being offered pursuant
to the registration statement, if such shares are being underwritten;
(v) in the event that all the Registrable Securities have not
been sold on or prior to the expiration of the period specified in Section 8(d)
above, the Company may de-register by post-effective amendment any Registrable
Securities covered by the registration statement, but not sold on or prior to
such date. The Company agrees that it will notify each holder of Registrable
Securities of the filing and effective date of such post-effective amendment;
and
(vi) each Eligible Holder agrees that upon notification by the
Company that the prospectus in respect to any public offering covered by the
provisions hereof is in need of revision, such Eligible Holder shall immediately
upon receipt of such notification (x) cease to offer or sell any securities of
the Company which must be accompanied by such prospectus, (y) return all such
prospectuses in such Eligible Holder's hands to the Company, and (z) not offer
or sell any securities of the Company until such Holder has been provided with a
current prospectus and the Company has given such Eligible Holder notification
permitting such Eligible Holder to resume offers and sales.
(i) The Company agrees that until all the Registrable Securities have
been sold under a registration statement or pursuant to Rule 144 under the Act,
it shall keep current in filing all reports, statements and other materials
required to be filed with the Commission to permit holders of the Registrable
Securities to sell such securities under Rule 144.
6) Except for rights granted to holders of the Warrants, the Company
will not, without the written consent of the Majority Holders, grant to any
persons the right to request the Company to register any securities of the
Company, provided that the Company may grant such registration rights to other
persons so long as such rights are subordinate or pari passu to the rights of
the Eligible Holders.
9. (a) Subject to the conditions set forth below, the Company agrees to
indemnify and hold harmless each Eligible Holder, its officers, directors,
partners, employees, agents and counsel, and each person, if any, who controls
any such person within the meaning of Section 15 of the Act or Section 20(a) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), from and
against any and all loss, liability, charge, claim, damage, and expense
whatsoever (which shall include, for all purposes of this Section 9, but not be
limited to, attorneys' fees and any and all reasonable expense whatsoever
incurred in investigating, preparing, or defending against any litigation,
commenced or threatened, or any claim whatsoever, and any and all amounts paid
in settlement of any claim or litigation), as and when incurred, arising out of
based upon, or in connection with: (i) any untrue statement or alleged untrue
statement of a material fact contained (A) in any registration statement,
preliminary prospectus, or final prospectus (as from time to time amended and
supplemented), or any amendment or
11
<PAGE> 12
supplement thereto, relating to the sale of any of the Registrable Securities,
or (B) in any application or other document or communication (in this Section 9
collectively called an "application") executed by or on behalf of the Company or
based upon written information furnished by or on behalf of the Company filed in
any jurisdiction in order to register or qualify any of the Registrable
Securities under the securities or blue sky laws thereof or filed with the
Commission or any securities exchange; or (ii) any omission or alleged omission
to state a material fact required to be stated in any document referenced in
clause (A) or (B) above or necessary to make the statements therein not
misleading, unless such statement or omission was made in reliance upon and in
conformity with written information furnished to the Company with respect to
such Eligible Holder by or on behalf of such person expressly for inclusion in
any registration statement, preliminary prospectus, or final prospectus, or any
amendment or supplement thereto, or in any application, as the case may be; or
(iii) any breach of any representation, warranty, covenant, or agreement of the
Company contained in this Warrant. The foregoing agreement to indemnify shall be
in addition to any liability the Company may otherwise have, including
liabilities arising under this Warrant.
If any action is brought against any Eligible Holder or any of its
officers, directors, partners, employees, agents, or counsel, or any controlling
persons of such person (an "indemnified party") in respect of which indemnity
may be sought against the Company pursuant to the foregoing paragraph, such
indemnified party or parties shall promptly notify the Company in writing of the
institution of such action (but the failure so to notify shall not relieve the
Company from any liability other than pursuant to this Section 9(a), except to
the extent it may have been prejudiced in any material respect by such failure)
and the Company shall promptly assume the defense of such action, including the
employment of counsel (reasonably satisfactory to such indemnified party or
parties) and payment of expenses. Such indemnified party or parties shall have
the right to employ its or their own counsel in any such case, but the fees and
expenses of such counsel shall be at the expense of such indemnified party or
parties unless the employment of such counsel shall have been authorized in
writing by the Company in connection with the defense of such action or the
Company shall not have promptly employed counsel reasonably satisfactory to such
indemnified party or parties to have charge of the defense of such action or
such indemnified party or parties shall have reasonably concluded that there may
be one or more legal defenses available to it or them or to other indemnified
parties which are different from or additional to those available to the
Company, in any of which events such fees and expenses shall be borne by the
Company and the Company shall not have the right to direct the defense of such
action on behalf of the indemnified party or parties. Anything in this Section
10 to the contrary notwithstanding, the Company shall not be liable for any
settlement of any such claim or action effected without its written consent,
which shall not be unreasonably withheld. The Company shall not, without the
prior written consent of each indemnified party that is not released as
described in this sentence, settle or compromise any action, or permit a default
or consent to the entry of judgment in or otherwise seek to terminate any
pending or threatened action, in respect of which indemnity may be sought
hereunder (whether or not any indemnified party is a party thereto), unless such
settlement, compromise, consent, or termination includes an unconditional
release of each indemnified party from all liability in respect of such action.
The
12
<PAGE> 13
Company agrees promptly to notify the Eligible Holders of the commencement of
any litigation or proceedings against the Company or any of its officers or
directors in connection with the sale of any Registrable Securities or any
preliminary prospectus, prospectus, registration statement, or amendment or
supplement thereto, or any application relating to any sale of any Registrable
Securities.
(b) The Holder agrees to indemnify and hold harmless the Company, each
director of the Company, each officer of the Company who shall have signed any
registration statement covering Registrable Securities held by the Holder, each
other person, if any, who controls the Company within the meaning of Section 15
of the Act or Section 20(a) of the Exchange Act, and its or their respective
counsel, to the same extent as the foregoing indemnity from the Company to the
Holder in Section 9(a), but only with respect to statements or omissions, if
any, made in any registration statement, preliminary prospectus, or final
prospectus (as from time to time amended and supplemented), or any amendment or
supplement thereto, or in any application, in reliance upon and in conformity
with written information furnished to the Company with respect to the Holder by
or on behalf of the Holder expressly for inclusion in any such registration
statement, preliminary prospectus, or final prospectus, or any amendment or
supplement thereto, or in any application, as the case may be. If any action
shall be brought against the Company or any other person so indemnified based on
any such registration statement, preliminary prospectus, or final prospectus, or
any amendment or supplement thereto, or in any application, and in respect of
which indemnity may be sought against the Holder pursuant to this Section 9(b),
the Holder shall have the rights and duties given to the Company, and the
Company and each other person so indemnified shall have the rights and duties
given to the indemnified parties, by the provisions of Section 9(a).
(c) To provide for just and equitable contribution, if (i) an
indemnified party makes a claim for indemnification pursuant to Section 9(a) or
9(b) (subject to the limitations thereof) but it is found in a final judicial
determination, not subject to further appeal, that such indemnification may not
be enforced in such case, even though this Agreement expressly provides for
indemnification in such case, or (ii) any indemnified or indemnifying party
seeks contribution under the Act, the Exchange Act or otherwise, then the
Company (including for this purpose any contribution made by or on behalf of any
director of the Company, any officer of the Company who signed any such
registration statement, any controlling person of the Company, and its or their
respective counsel), as one entity, and the Eligible Holders of the Registrable
Securities included in such registration in the aggregate (including for this
purpose any contribution by or on behalf of an indemnified party), as a second
entity, shall contribute to the losses, liabilities, claims, damages, and
expenses whatsoever to which any of them may be subject, on the basis of
relevant equitable considerations such as the relative fault of the Company and
such Eligible Holders in connection with the facts which resulted in such
losses, liabilities, claims, damages, and expenses. The relative fault, in the
case of an untrue statement, alleged untrue statement, omission, or alleged
omission, shall be determined by, among other things, whether such statement,
alleged statement, omission, or alleged omission relates to information supplied
by the Company or by such Eligible Holders, and the parties' relative intent,
knowledge, access to
13
<PAGE> 14
information, and opportunity to correct or prevent such statement, alleged
statement, omission, or alleged omission. The Company and the Holder agree that
it would be unjust and inequitable if the respective obligations of the Company
and the Eligible Holders for contribution were determined by pro rata or per
capita allocation of the aggregate losses, liabilities, claims, damages, and
expenses (even if the Holder and the other indemnified parties were treated as
one entity for such purpose) or by any other method of allocation that does not
reflect the equitable considerations referred to in this Section 9(c). In no
case shall any Eligible Holder be responsible for a portion of the contribution
obligation imposed on all Eligible Holders in excess of its pro rata share based
on the number of shares of Common Stock owned (or which would be owned upon
exercise of the Registrable Securities) by it and included in such registration
as compared to the number of shares of Common Stock owned (or which would be
owned upon exercise of the Registrable Securities) by all Eligible Holders and
included in such registration. No person guilty of a fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who is not guilty of such fraudulent
misrepresentation. For purposes of this Section 9(c), each person, if any, who
controls any Eligible Holder within the meaning of Section 15 of the Act or
Section 20(a) of the Exchange Act and each officer, director, partner, employee,
agent, and counsel of each such Eligible Holder or control person shall have the
same rights to contribution as such Eligible Holder or control person 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, each officer of the Company who shall
have signed any such registration statement, each director of the Company, and
its or their respective counsel shall have the same rights to contribution as
the Company, subject in each case to the provisions of this Section 9(c).
Anything in this Section 9(c) to the contrary notwithstanding, no party shall be
liable for contribution with respect to the settlement of any claim or action
effected without its written consent. This Section 9(c) is intended to supersede
any right to contribution under the Act, the Exchange Act or otherwise.
10. The issuance of any shares or other securities upon the exercise of
this Warrant, and the delivery of certificates or other instruments representing
such shares or other securities, shall be made without charge to the Holder for
any tax or other charge in respect of such issuance. The Company shall not,
however, be required to pay any tax which may be payable in respect of any
transfer involved in the issue and delivery of any certificate in a name other
than that of the Holder and the Company shall not be required to issue or
deliver any such certificate unless and until the person or persons requesting
the issue thereof shall have paid to the Company the amount of such tax or shall
have established to the satisfaction of the Company that such tax has been paid.
11. Certificates evidencing the Warrant Shares issued upon exercise of
the Warrants shall bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED. SUCH SHARES MAY NOT BE
OFFERED OR SOLD EXCEPT PURSUANT
14
<PAGE> 15
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT, OR AN EXEMPTION FROM
REGISTRATION UNDER SUCH ACT."
12. Upon receipt of evidence satisfactory to the Company of the loss,
theft, destruction, or mutilation of any Warrant (and upon surrender of any
Warrant if mutilated), and upon reimbursement of the Company's reasonable
incidental expenses, the Company shall execute and deliver to the Holder thereof
a new Warrant of like date, tenor, and denomination.
13. The Holder of any Warrant shall not have, solely on account of such
status, any rights of a stockholder of the Company, either at law or in equity,
or to any notice of meetings of stockholders or of any other proceedings of the
Company, except as provided in this Warrant.
14. Any notice or other communication required or permitted to be given
hereunder shall be in writing and shall be mailed by certified mail, return
receipt requested or sent by Federal Express, Express Mail, or similar overnight
delivery or courier service or delivered (in person or by telecopy, telex, or
similar telecommunications equipment) against receipt to the party to whom it is
to be given, if sent to the Company, at: 150 East 58th Street, Suite 3400, New
York, New York 10155, Attention: The Chairman or the Chief Executive Officer; or
if sent to the Holder, at the Holder's address as it shall appear on the Warrant
Register; or to such other address as the party shall have furnished in writing
in accordance with the provisions of this Section 14. Any notice or other
communication given by certified mail shall be deemed given at the time of
certification thereof, except for a notice changing a party's address which will
be deemed given at the time of receipt thereof. Any notice given by other means
permitted by this Section 14 shall be deemed given at the time of receipt
thereof
15. This Warrant shall be binding upon the Company and its successors
and assigns and shall inure to the benefit of the Holder and its successors and
assigns.
16. This Warrant shall be construed in accordance with the laws of the
State of New York applicable to contracts made and performed within such State,
without regard to principles of conflicts of law.
17. The Company irrevocably consents to the jurisdiction of the courts
of the State of New York and of any federal court located in such State in
connection with any action or proceeding arising out of or relating to this
Warrant, any document or instrument delivered pursuant to, in connection with or
simultaneously with this Warrant, or a breach of this Warrant or any such
document or instrument. In any such action or proceeding, the Company waives
personal service of any summons, complaint or other process.
15
<PAGE> 16
Dated: September 23, 1997
COMMODORE APPLIED TECHNOLOGIES, INC.
By: /s/
-------------------------------------
Name:
Title:
[Seal]
- ----------------------------------
Secretary 16
<PAGE> 17
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to transfer the
attached Warrant.)
FOR VALUE RECEIVED, _________________ hereby sells, assigns, and transfers unto
_________________ a Warrant to purchase Shares, par value $.001 per share, of
Commodore Applied Technologies, Inc. (the "Company"), together with all right,
title, and interest therein, and does hereby irrevocably constitute and appoint
_______________ attorney to transfer such Warrant on the books of the Company,
with full power of substitution.
Dated:_________________________
Signature___________________________________
NOTICE
The signature on the foregoing Assignment must correspond to the name as
written upon the face of this Warrant in every particular, without alteration or
enlargement or any change whatsoever.
17
<PAGE> 18
To: Commodore Applied Technologies, Inc.
150 East 58th Street, Suite 3400
New York, New York 10155
ELECTION TO EXERCISE
The undersigned hereby exercises its rights to Purchase _______________
Warrant Shares covered by the within warrant and tenders payment herewith in the
amount of $_____________ in accordance with the terms thereof, and requests that
certificates for such securities be issued in the name of, and delivered to:
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
(Print Name, Address and Social Security
or Tax Identification Number)
and, if such number of Warrant Shares shall not be all the Warrant Shares
covered by the within Warrant, that a new Warrant for the balance of the Warrant
Shares covered by the within Warrant be registered in the name of, and delivered
to, the undersigned at the address stated below.
Dated:______________________ Name __________________________________
(Print)
Address:_______________________________________________________________________
_______________________________________
(Signature)
18
<PAGE> 1
SECURITIES HAVE NOT REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN EXEMPTION
FROM REGISTRATION UNDER REGULATION D PROMULGATED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"). THIS SUBSCRIPTION AGREEMENT SHALL NOT
CONSTITUTE AN OFFER TO SELL NOR A SOLICITATION OF AN OFFER TO BUY THE SECURITIES
IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL. THE
SECURITIES ARE "RESTRICTED" AND MAY NOT BE RESOLD OR TRANSFERRED EXCEPT AS
PERMITTED UNDER THE ACT PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.
7% PREFERRED STOCK
SECURITIES PURCHASE AGREEMENT
COMMODORE ENVIRONMENTAL SERVICES, INC.
AND
COMMODORE APPLIED TECHNOLOGIES, INC.
THIS AGREEMENT is made as of the 14th day of August, 1997, by
and between COMMODORE ENVIRONMENTAL SERVICES, INC., traded on the "Pinksheets"
under the symbol "COES' (the "Parent Company"), a corporation, with its
principal office at 150 East 58th Street, New York, NY 10155, COMMODORE APPLIED
TECHNOLOGIES INC., AMEX symbol "CXI" (the "Subsidiary Company"), a corporation,
with its principal office at 150 East 58th Street, New York, NY 10155 and PORTER
PARTNERS, L.P. (the "Purchaser"), with its principal office at c/o Porter
Capital Management, 100 Shoreline, Suite 211B, Mill Valley, California 94941.
IN CONSIDERATION of the mutual covenants contained in this
Agreement, the Parent Company, Subsidiary Company and the Purchaser agree as
follows:
Section 1. Certain Definitions. For purposes of this
Agreement:
"Change in Control Transaction" means the date the Parent
Company or the Subsidiary Company (i) sells or otherwise conveys all or
substantially all of its assets or (ii) effects a transaction (by merger or
otherwise) in which more than 50% of the voting power of the Parent Company or
the Subsidiary Company is disposed of, directly or indirectly, or if within any
12 month period there is a change of more than 50% of the members of the Parent
Company's or the Subsidiary Company's Board of Directors, or if any other
person, entity or group (as defined in Section 13(d) of the Exchange Act) and/or
any of their affiliates or associates acquires in excess of 50% of the Common
Stock.
<PAGE> 2
"Closing Date" means the date agreed to by the parties for the
delivery of the stock certificate against a wire transfer of the funds to the
Parent Company.
"Closing" means the completion of the purchase and sale of the
COES Preferred Shares on the Closing Date.
"COES Convertible Preferred Stock" means the 100,000 shares of
Series D Preferred Stock of the Parent Company, $.01 par value, convertible into
CXI Common Stock as hereinafter provided and which has the rights, preferences
and privileges set forth in the Certificate of Designation, Number, Powers,
Preferences and Relative, Participating, Optional, and Other Special Rights and
the Qualifications, Limitations, Restrictions, and Other Distinguishing
Characteristics of Series "D" Preferred Stock of COES (as amended and restated,
the "Series D Certificate of Designations"), a copy of which Certificate of
Designations is attached hereto as Exhibit A (the "Certificate of Designation").
"COES Preferred Shares" means the shares of COES Convertible
Preferred Stock purchased hereunder.
"Conversion Date" means the date on which the Purchaser has
telecopied the Notice of Conversion to counsel for the Parent Company.
"Conversion Price" means an amount equal to the lesser of (a)
$5.15, being one hundred and ten percent (110%) of the average closing price of
the CXI Common Stock for the five (5) business days immediately prior to the
date of this Agreement, or (b) a fifteen (15%) percent discount from the average
of either the low bid price or the closing price (such average to be selected at
the option of the holder of the COES Preferred Shares) of the CXI Common Stock
as reported by Bloomberg, L.P. ("Bloomberg") for the previous five (5) business
days ending on the day before the Conversion Date (the "Average Closing Bid
Price"); provided, however, if the average of the low bid price or the closing
price (whichever is applicable)of the CXI Common Stock, as reported by Bloomberg
("Floor Average"), for any consecutive thirty (30) days is equal or less than
$2.00 (such thirtieth day shall be the "First Trigger Date"), the conversion
price shall equal $2.00; if the Floor Average for any consecutive thirty (30)
days beginning any day after the First Trigger Date is less than $2.00 ("Second
Trigger Date"), the conversion price shall equal $1.90; if the Floor Average for
any thirty (30) days beginning any day after the Second Trigger Date is less
than $1.90 (the "Third Trigger Date"), the conversion price shall equal $1.80;
if the Floor Average for any consecutive thirty (30) days beginning any day
after the Third Trigger Date is less than $1.80 (the "Fourth Trigger Date"), the
conversion price shall equal $1.70; if the Floor Average for any consecutive
thirty (30) days beginning any day after the Fourth Trigger Date is less than
$1.70 (the "Fifth Trigger Date"), the conversion price shall equal $1.60; if the
Floor Average for any consecutive thirty (30) days beginning any day after the
Fifth Trigger Date is less than $1.60, the conversion price shall equal $1.50.
Subject to Section 11.5 herein, in no event shall the Conversion Price be lower
than $1.50 per share of CXI
2
<PAGE> 3
Common Stock. If the CXI Common Stock is not traded on the American Stock
Exchange, the Average Closing Bid Price shall be the average closing bid price
(and if not available, the mean of the high and low prices) of the Common Stock
on the over-the-counter-market or the principal national securities exchange or
the Nasdaq National Market System or Nasdaq SmallCap Market System on which the
CXI Common Stock is traded for the previous five (5) business days ending on the
day before the Conversion Date.
The Conversion Price shall be equitably adjusted accordingly
on a pro rata basis in the event of the happening of certain events that would
affect the CXI Common Stock or COES Convertible Preferred Stock's value
including, but not limited to, forward and reverse stock splits, issuance of
stock dividends, subdivision of shares, combinations, reclassifications, or the
like (collectively "Reclassifications"). An adjustment made pursuant to this
section shall become effective immediately after the effective date of such
event retroactive to the record date, if any, for such an event.
"Convertible Date" means the date on which the COES Preferred
Shares will become convertible, which is the day following the date that the
Registration Statement for the shares of CXI Common Stock underlying the COES
Preferred Stock and COES Warrants has been declared effective by the Securities
and Exchange Commission ("SEC").
"Cumulative Suspension' means the date a Suspension (as
defined in Section 8.7) has occurred and is continuing or the date that is the
15th day in the aggregate that more than one Suspension has occurred since the
effective date of the Registration Statement.
"CXI Common Stock" means the underlying Common Stock of the
Subsidiary Company, $.001 par value.
"Delisting" means the date the CXI Common Stock is delisted
from AMEX and is not otherwise listed on the Nasdaq Stock Market or other
national securities exchange.
"Holder" means a holder of COES Preferred Shares.
"Insufficient CXI Common Stock" means the date the number of
shares of CXI Common Stock held by the Parent Company is not sufficient to
effect the conversion of all outstanding COES Preferred Shares then eligible for
conversion (whether or not the Holders have duly delivered Notices of
Conversion).
"Purchase Price" means the aggregate purchase price of the
COES Preferred Shares purchased.
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Section 2. Authorization and Sale of Shares.
2.1 Authorization. Subject to the terms and conditions of this
Agreement, the Parent Company has authorized the sale and issuance of the COES
Preferred Shares.
2.2 Agreement to Sell and Purchase the Shares. The Parent
Company will sell and the Purchaser will buy, in reliance upon the
representations and warranties of the Parent Company Subsidiary Company and
Purchaser contained in this Agreement, upon the terms and conditions hereinafter
set forth, Three Thousand (3,000) COES Preferred Shares of COES Convertible
Preferred Stock for an aggregate purchase price of Three Hundred Thousand
Dollars ($300,000) for all such COES Preferred Shares based on U.S. $100 per
share. The COES Preferred Shares shall pay a 7% cumulative dividend, payable in
cash or CXI Common Stock at the Conversion Price, at the discretion of the
Parent Company, at the time of each conversion. Such purchase and sale shall
occur on the Closing Date. In addition, Parent Company will transfer to
Purchaser for no additional consideration, five-year warrants ("COES Warrants")
to purchase twelve and one-half (12 -1/2) shares of CXI Common Stock for each
COES Preferred Share purchased, initially exercisable on the Convertible Date
and for a period of five years thereafter, at an initial exercise price equal to
$7.14 per share of the CXI Common Stock, subject to adjustment and resetting as
set forth in the form of COES Warrant attached hereto as Exhibit B.
2.3 Subsidiary Company. Whereas the Purchaser is purchasing
COES Preferred Shares from the Parent Company, and the Parent Company is
transferring CXI Common Stock to the Purchaser upon conversion of COES Preferred
Shares and exercise of COES Warrants, the Parent Company hereby agrees to
immediately remit 2.5% of the Purchase Price ($2.50 per COES Preferred Shares
which has a subscription price of $100 per COES Preferred Share) at the Closing
to the Subsidiary Company, constituting the sum of $2500 of aggregate
consideration for the Subsidiary Company's agreement to perform its obligations
as set forth in this Agreement and the Warrant Agreement, a form of which is
included in Exhibit B.
2.4 Time and Place of Closing. The Closing shall be held at
the offices of Greenberg Traurig, 153 East 53rd Street, 35th Floor, New York,
New York 10022 as promptly as practicable as agreed to by the parties to this
Agreement, but no later than August 15, 1997 at which time either party may
terminate this Agreement.
2.5 Payment and Delivery. At or prior to the Closing, the
following shall occur:
(a) Provided that Purchaser has been notified by
counsel to COES that the Parent Company has delivered to such counsel for
immediate delivery to Purchaser against wire transfer of funds as hereinafter
set forth certificates representing the COES Preferred Shares and COES Warrants
as provided in Section 2.5(b) below,
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Purchaser shall remit by wire transfer the Purchase Price as payment in full for
the COES Preferred Shares as follows: 89% of the Purchase Price ($267,000)
directly to the Parent Company, 9% of the Purchase Price ($27,000) directly to
Avalon Research Group, Inc. (the "Finder"), and 2% of the Purchase Price
($6,000) directly to Stephen A. Weiss.
(b) The Parent Company shall deliver or cause to be
delivered to counsel to Seller for immediate delivery to Purchaser against wire
transfer of funds as aforesaid certificates representing the COES Preferred
Shares and the COES Warrants, registered in the name of Purchaser (or any
nominee designated by Purchaser at or prior to the Closing Date), free and clear
of all liens, claims, charges and encumbrances. Purchaser will receive such
certificates from counsel to COES, as applicable, after the Parent Company,
Finder and Stephen A. Weiss have received the Purchase Price directly from
Purchaser.
(c) Wire instructions for the Parent Company have
been separately provided to the Purchaser's counsel.
Section 3. General Representations and Warranties of the
Parent Company. The Parent Company hereby represents and warrants to, and
covenants with, the Purchaser that the following are true and correct as of the
date hereof and as of the Closing Date.
3.1 Organization; Qualification. The Parent Company is a
corporation duly organized and validly existing under the laws of the State of
Delaware and is in good standing under such laws. The Parent Company has all
requisite corporate power and authority to own, lease and operate its properties
and assets, and to carry on its business as presently conducted. The Parent
Company is qualified to do business as a foreign corporation in each
jurisdiction in which the ownership of its property or the nature of its
business requires such qualification, except where failure to so qualify would
not have a material adverse effect on the Parent Company.
3.2 Capitalization. The authorized capital stock of the Parent
Company is as set forth in footnote 12 of the audited consolidated financial
statements of the Parent Company set forth in its Form 10-K for the fiscal year
ended December 31, 1996, a true copy of which has been supplied to Purchaser,
provided that in addition 60,000 shares of the COES Preferred Shares and COES
Warrants for 600,000 shares of CXI Common Stock were issued in May 1997, and
40,000 additional COES Preferred Shares and 462,500 additional COES Warrants
have been authorized for issuance. The Series D Preferred Stock, when issued,
shall be duly authorized and validly issued and are fully paid and
nonassessable.
3.3 CXI Common Stock Transferable Upon Conversion of COES
Preferred Shares or Exercise of COES Warrants. The Parent Company currently owns
Fifteen Million (15,000,000) shares of CXI Common Stock, all of which have been
duly
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authorized and validly issued and are fully paid and nonassessable. The Parent
Company will reserve from its holdings of CXI Common Stock a sufficient number
of shares of CXI Common Stock to permit the conversion in full of the
outstanding COES Preferred Shares and the exercise in full of the COES Warrants.
As of the Closing Date, the Parent Company had reserved sufficient shares of CXI
Common Stock for transfer to Purchaser upon exercise of the COES Preferred
Shares which are convertible, at Purchaser's option, at the Conversion Price, as
per Section 10 of this Agreement, and upon exercise of the COES Warrants. If the
Parent Company does not own sufficient shares of CXI Common Stock for transfer
to the Purchaser upon conversion of COES Preferred Shares and/or exercise of
COES Warrants, the Parent Company hereby agrees to promptly purchase or
otherwise acquire the sufficient amount of shares of CXI Common Stock and
transfer such shares to the Purchaser upon conversion of COES Preferred Shares
and/or exercise of COES Warrants.
Except for the consent of National Securities Corporation,
which has been obtained, the Parent Company has all requisite corporate right,
power and authority to transfer the shares of CXI Common Stock in its holdings
to Purchaser upon conversion of the COES Preferred Shares and exercise of the
COES Warrants.
3.4 Authorization. The Parent Company has all requisite
corporate right, power and authority to execute and deliver this Agreement and
to consummate the transactions contemplated hereby. All corporate action on the
part of the Parent Company, its directors and stockholders necessary for the
authorization, execution, delivery and performance of this Agreement by the
Parent Company, the authorization, sale, issuance and delivery of the COES
Preferred Shares and the performance of the Parent Company's obligations
hereunder has been taken. This Agreement has been duly executed and delivered by
the Parent Company and constitutes a legal, valid and binding obligation of the
Parent Company enforceable in accordance with its terms, subject to laws of
general application relating to bankruptcy, insolvency and the relief of debtors
and rules of law governing specific performance, injunctive relief or other
equitable remedies, and to limitations of public policy as they apply to the
indemnification provisions set forth in Section 8.4 or this Agreement. Upon
their issuance, transfer and delivery pursuant to this Agreement, the COES
Preferred Shares, COES Warrants and shares of CXI Common Stock transferable upon
conversion of the COES Preferred Shares (the "Conversion Shares") and exercise
of the COES Warrants (the "Warrant Shares") (collectively, the "Securities")
will be validly issued, fully paid and nonassessable and will be free of any
liens or encumbrances; provided, however, that the COES Preferred Shares and
COES Warrants are subject to restrictions on transfer under state and/or federal
securities laws. The issuance and sale of the COES Preferred Shares and COES
Warrants will not give rise to any preemptive right or right of first refusal or
right of participation on behalf of any person. Upon registration of the
Conversion Shares and the Warrant Shares pursuant to Section 8 of this
Agreement, there shall be no restriction on the transferability thereof other
than applicable prospectus delivery requirements.
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3.5 No Conflict. The execution and delivery of this Agreement
do not, and the consummation of the transactions contemplated hereby will not,
conflict with, or result in any violation of, or default (with or without notice
or lapse of time, or both), or give rise to a right termination, cancellation or
acceleration of any obligation or to a loss of a material benefit, under, any
provision of the Articles of Incorporation, and any amendments thereto, Bylaws,
stockholders agreements and any amendments thereto of the Parent Company or any
material mortgage, indenture, lease or other agreement or instrument, permit,
concession, franchise, license, judgment, order, decree statute, law, ordinance,
rule or regulation applicable to the Parent Company, its properties or assets.
3.6 Accuracy of Reports and Information. The Parent Company is
in full compliance, to the extent applicable, with all reporting obligations
under Section 12(b), 12(g) or 15(d), as applicable, of the Securities Exchange
Act of 1934, as amended (the "Exchange Act").
The Parent Company has filed all material required to be filed
pursuant to all reporting obligations, under either Section 13(a) or 15(d) of
the Exchange Act for a period of at least twelve (12) months immediately
preceding the offer or sale of the COES Preferred Shares (or for such shorter
period that the Parent Company has been required to file such material).
3.7 SEC Filings/Full Disclosure. None of the Parent Company's
filings with the SEC since January 1, 1997 contain any untrue statement of a
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. The Parent Company has, since January 1,
1997, timely filed all requisite forms, reports and exhibits thereto with the
SEC. The Parent Company's Annual Report on Form 10-K for the year ended December
31, 1996, its Quarterly Reports for the periods ended March 31, 1997 and all
Current Reports on Form 8-K filed by the Parent Company from January 1, 1996 to
date are referred to as the "COES SEC Reports."
There is no fact known to the Parent Company (other than
general economic conditions known to the public generally) that has not been
disclosed in writing to the Purchaser which could reasonably be expected to have
a material adverse effect on the condition (financial or otherwise) or in the
earnings, business affairs, business prospects, properties or assets of the
Parent Company, or (ii) could reasonably be expected to materially and adversely
affect the ability of the Parent Company to perform its obligations pursuant to
this Agreement.
3.8 Absence of Undisclosed Liabilities. The Parent Company has
no material liabilities or obligations, absolute or contingent (individually or
in the aggregate), except as set forth in the financial statements included in
the COES SEC (the "COES Financial Statements") or as incurred in the ordinary
course of business after the date of the COES Financial Statements.
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3.9 Governmental Consent, etc. No consent, approval or
authorization of or designation, declaration or filing with any governmental
authority on the part of the Parent Company is required in connection with the
valid execution and delivery of this Agreement, or the offer, sale or issuance
of the COES Preferred Shares, or the consummation of any other transaction
contemplated hereby, except the filing with the SEC of a registration statement
on Form S-3 or Form S-1 for the purpose of registering the CXI Common Stock
underlying the COES Preferred Shares and the COES Warrants.
3.10 Intellectual Property Rights. Except as disclosed in the
COES SEC Reports, the Parent Company has sufficient trademarks, trade names,
patent rights, copyrights and licenses to conduct its business as contemplated
therein. To the Parent Company's knowledge, neither the Parent Company nor its
products is infringing or will infringe any trademark, trade name, patent right,
copyright, license, trade secret or other similar right of others currently in
existence; and there is no claim being made against the Parent Company regarding
any trademark, trade name, patent, copyright, license, trade secret or other
intellectual property right which could have a material adverse effect on the
condition (financial or otherwise), business, results of operations or prospects
of the Parent Company.
3.11 Material Contracts. Except as set forth in the COES SEC
Reports, the agreements to which the Parent Company is a party described therein
are valid agreements, in full force and effect, the Parent Company is not in
material breach or material default (with or without notice or lapse of time, or
both) under any of such agreements, and, to the Parent Company's knowledge, the
other contracting party or parties thereto are not in material breach or
material default (with or without notice or lapse of time, or both) under any of
such agreements.
3.12 Litigation. There is no action, proceeding or
investigation pending, or to the Parent Company's knowledge threatened, against
the Parent Company which might result, either individually or in the aggregate,
in any material adverse change in the business, prospects, conditions, affairs
or operations of the Parent Company. The Parent Company is not a party to or
subject to the provisions of any order, writ, injunction, judgment or decree of
any court or government agency or instrumentality. There is no action, suit,
proceeding or investigation by the Parent Company currently pending or which the
Parent Company currently intends to initiate.
3.13 Title to Assets. Except as set forth in COES SEC Reports,
the Parent Company has good and marketable title to all properties and material
assets described therein as owned by it, free and clear of any pledge, lien,
security interest, encumbrance, claim or equitable interest other than such as
are not material to the business of the Parent Company.
3.14 Subsidiaries. The Parent Company does not presently own
or control, directly or indirectly, any interest in any other corporation,
partnership, association or other business entity, except as stated in the COES
SEC Reports.
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3.15 Required Governmental Permits. The Parent Company is in
possession of and operating in compliance with all authorizations, licenses,
certificates, consents, orders and permits from state, federal and other
regulatory authorities which are material to the conduct of its business, all of
which are valid and in full force and effect.
3.16 Listing. The Parent Company will maintain the listing of
its Common Stock on the "Pinksheets" or other organized, comparable United
States market or quotation system; provided, however, that the sole remedy for
Purchaser for breach of this representation shall be liquidated damages as
provided in Section 10.6.
3.17 Other Outstanding Securities/Financing Restrictions.
Except as set forth on the CXI SEC Reports (as defined herein) or as
contemplated hereby, there are no other outstanding debt or equity securities
presently convertible into shares of CXI Common Stock. COES contemplates selling
an aggregate of approximately 25,000 shares of COES Preferred Shares (including
the shares being offered and sold hereby) contemporaneously herewith, and
issuing an aggregate of approximately 462,500 additional COES Warrants
contemporaneously herewith, of which 150,000 such warrants will be issued to
entities which acquired COES Preferred Shares in May 1997 and the balance are
anticipated to be issued contemporaneously herewith to acquirors of additional
COES Preferred Shares (including the Purchaser).
The Parent Company cannot, without the prior approval in
writing from the Purchaser, obtain convertible debt or equity financing which is
convertible into securities of the Subsidiary Company for a period of ninety
(90) days following the effective date of the Registration Statement (as defined
herein); however, the Parent Company will not require prior approval if (a) at
least 80% of the net proceeds of the financing is part of an acquisition by the
Parent Company of control of another company or entity, (b) at least 80% of the
net proceeds of the financing is a refinancing of the Parent Company's debt, or
(c) the financing is part of a public offering of the Parent Company's
securities.
3.18 Right of Participation. In the event the parent Company
wishes to complete a financing similar in structure to the securities issued
hereby within one hundred and eighty (180) days from the Closing Date, the
Purchaser shall have the right to participate in such offering and shall have
three (3) business days to reply in writing after receipt of written notice of
such proposed financing from the Parent Company. In the event a writing is not
received by the Parent Company from the Purchaser specifying the extent of the
Purchaser's interest in so participating, this will be deemed a refusal by the
Purchaser of such right to participate.
3.19 Legal Opinion. Purchaser shall, upon purchase of the COES
Preferred Shares, receive an opinion letter from counsel to the Parent Company,
and the Parent Company represents that it will immediately obtain such an
opinion from counsel to the satisfaction of the Purchaser, to the effect that:
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(a) The Parent Company is duly incorporated, validly existing
and in good standing in the jurisdiction of its incorporation.
(b) There is no action, proceeding or investigation pending,
or to such counsel's knowledge, threatened against the Parent Company which
might result, either individually or in the aggregate, in any material adverse
change in the business, prospects, conditions, affairs or operations of the
Parent Company.
(c) The Parent Company is not a party to or subject to the
provisions of any order, writ, injunction, judgment or decree of any court or
government agency or instrumentality.
(d) There is no action, suit, proceeding or investigation by
the parent Company currently pending or, to such counsel's knowledge, which the
Parent Company currently intends to initiate.
(e) All issued and outstanding shares of CXI Common Stock have
been duly authorized and validly issued and are fully paid and nonassessable.
(f) This Securities Purchase Agreement and the Stock Purchase
Warrant, the issuance of the COES Preferred Shares and COES Warrants and the
transfer of the Conversion Shares and Warrant Shares have been duly approved by
all required corporate action, the requisite consent of National Securities
Corporation for the Parent Company to transfer the shares of CXI Common Stock in
its holdings to the Purchaser upon conversion of the COES Preferred Shares and
exercise of the COES Warrants has been duly obtained, and that all such
Securities, upon delivery, shall be validly issued and outstanding, fully paid
and nonassessable.
(g) The execution, delivery and performance of this Securities
Purchase Agreement and the Stock Purchase Warrant by the Parent Company, and the
consummation of the transactions contemplated thereby, will not, with or without
the giving of notice or the passage of time or both:
(i) Violate the provisions of any law, rule or
regulation which is material to the assets,
properties or business of the Parent Company;
(ii) Violate the provisions of the charter or bylaws
of the Parent Company; or
(iii) To the best of counsel's knowledge, violate any
judgment, decree, order or award of any court,
governmental body or arbitrator.
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(iv) To the best of counsel's knowledge, conflict
with, or result in the breach or termination of any
term or provision of, or constitute a default under,
or cause any acceleration under, or cause the
creation of any lien, charge or encumbrance upon the
properties or assets of the Parent Company pursuant
to, any note, bond, indenture, mortgage, lease, deed
of trust or other instrument, obligation, or
agreement to which the Parent Company is a party and
which is material to Parent Company, or by which the
Parent Company, or any of its material properties is
or may be bound.
(h) This Securities Purchase Agreement and the Stock Purchase
Warrant constitute the valid and legally binding obligations of the Parent
Company and are enforceable against the Parent Company in accordance with their
respective terms, subject to laws of general application relating to bankruptcy,
insolvency and the relief of debtors and rules of law governing specific
performance, injunctive relief or other equitable remedies, and, with respect to
the Securities Purchase Agreement, to limitations of public policy as they may
apply to the indemnification provisions set forth in Section 8.4 thereof.
3.20 Use of Proceeds. Except for payments aggregating $2500 to
the Subsidiary Company as provided herein, the Parent Company represents that
the net proceeds from this offering will be used for general corporate purposes.
3.21 No Poison Pill. The Parent Company represents that it
does not have, and has no current intention to adopt, a stockholder rights plan
("poison pill").
Section 4. General Representations and Warranties of the
Subsidiary Company. The Subsidiary Company hereby represents and warrants to,
and covenants with, the Purchaser that the following are true and correct as of
the date hereof and as of the Closing Date.
4.1 Organization; Qualification. The Subsidiary Company is a
corporation duly organized and validly existing under the laws of the State of
Delaware and is in good standing under such laws. The Subsidiary Company has all
requisite corporate power and authority to own, lease and operate its properties
and assets, and to carry on its business as presently conducted. The Subsidiary
Company is qualified to do business as a foreign corporation in each
jurisdiction in which the ownership of its property or the nature of its
business requires such qualification, except where failure to so qualify would
not have a material adverse effect on the Subsidiary Company.
4.2 Capitalization. The authorized capital stock of the
Subsidiary Company is as set forth in the CXI SEC Reports. All issued and
outstanding shares of Common Stock have been duly authorized and validly issued
and are fully paid and nonassessable.
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4.3 CXI Common Stock Transferable Upon Conversion of COES
Preferred Shares or Exercise of COES Warrants. Except for the consent of
National Securities Corporation, which has been obtained, the Subsidiary Company
has all requisite corporate right, power and authority to transfer shares of CXI
Common Stock owned by the Parent Company to the Purchaser upon conversion of the
COES Preferred Shares and exercise of the COES Warrants.
4.4 Authorization. The Subsidiary Company has all requisite
corporate right, power and authority to execute and deliver this Agreement and
to consummate the transactions contemplated hereby. All corporate action on the
part of the Subsidiary Company, its directors and stockholders necessary for the
authorization, execution, delivery and performance of this Agreement by the
Subsidiary Company, and the performance of the Subsidiary Company's obligations
hereunder has been taken. This Agreement has been duly executed and delivered by
the Subsidiary Company and constitutes a legal, valid and binding obligation of
the Subsidiary Company enforceable in accordance with its terms, subject to laws
of general application relating to bankruptcy, insolvency and the relief of
debtors and rules of law governing specific performance, injunctive relief or
other equitable remedies, and to limitations of public policy as they may apply
to the indemnification provisions set fourth in Section 8.4 of this Agreement.
Upon their issuance, transfer and delivery pursuant to this Agreement, the
Securities will have been validly issued, fully paid and nonassessable and will
be free of any liens or encumbrances; provided, however, that the COES Preferred
Shares and COES Warrants are subject to restrictions on transfer under state
and/or federal securities laws. Upon registration of the Conversion Shares and
the Warrant Shares pursuant to Section 8 of this Agreement, there shall be no
restriction on the transferability thereof other than applicable prospectus
delivery requirements.
4.5 No Conflict. The execution and delivery of this Agreement
do not, and the consummation of the transactions contemplated hereby will not,
conflict with, or result in any violation of, or default (with or without notice
or lapse of time, or both), or give rise to a right of termination, cancellation
or acceleration of any obligation or to a loss of a material benefit, under, any
provision of the Certificate of Incorporation, and any amendments thereto,
Bylaws, stockholders agreements and any amendments thereto of the Subsidiary
Company or any material mortgage, indenture, lease or other agreement or
instrument, permit, concession, franchise, license, judgment, order, decree
statute, law, ordinance, rule or regulation applicable to the Subsidiary
Company, its properties or assets.
4.6 Accuracy of Reports and Information. The Subsidiary
Company is in full compliance, to the extent applicable, with all reporting
obligations under Section 12(b), 12(g) or 15(d), as applicable, of the Exchange
Act. The Subsidiary Company has registered its Common Stock pursuant to Section
12 of the Exchange Act and the Common Stock is listed and trades on AMEX.
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The Subsidiary Company has filed all material required to be
filed pursuant to all reporting obligations, under either Section 13(a) or 15(d)
of the Exchange Act for a period of at least twelve (12) months immediately
proceeding the offer or sale of the COES Preferred Shares (or for such shorter
period that the Subsidiary Company has been required to file such material).
4.7 SEC Filings/Full Disclosure. None of the Subsidiary
Company's filings with the SEC since January 1, 1997 contain any untrue
statement of a 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. The Subsidiary Company
has, since January 1, 1997, timely filed all requisite forms reports and
exhibits thereto with the SEC. The Subsidiary Company's Prospectus declared
effective by the SEC on June 28, 1996, the Annual Report on Form 10-K for the
year ended December 31, 1996, its Quarterly Reports for the periods ended March
31, 1997 and all Current Reports on Form 8-K filed by the Subsidiary Company
from January 1, 1996 to date are referred to as the "CXI SEC Reports."
There is no fact known to the Subsidiary Company (other than
general economic conditions known to the public generally) that has not been
disclosed in writing to the Purchaser which could reasonably be expected to have
a material adverse effect on the condition (financial or otherwise) or in the
earnings, business affairs, business prospects, properties or assets of the
Subsidiary Company, or (ii) could reasonably be expected to materially and
adversely affect the ability of the Subsidiary Company to perform its
obligations pursuant to this Agreement.
4.8 Absence of Undisclosed Liabilities. The Subsidiary Company
has no material liabilities or obligations, absolute or contingent (individually
or in the aggregate), except as set forth in the financial statements included
in the CXI SEC Reports (the "CXI Financial Statements") or as incurred in the
ordinary course of business after the date of the CXI Financial Statements.
4.9 Governmental Consent, etc. No consent, approval or
authorization of or designation, declaration or filing with any governmental
authority on the part of the Subsidiary Company is required in connection with
the valid execution and delivery of this Agreement, or the offer, sale or
issuance of the COES Preferred Shares, or the consummation of any other
transaction contemplated hereby, except the filing with the SEC of a
registration statement on Form S-3 or S-1 for the purpose of registering the CXI
Common Stock underlying the COES Preferred Shares and the COES Warrants.
4.10 Intellectual Property Rights. Except as disclosed in the
CXI SEC Reports, the Subsidiary Company has sufficient trademarks, trade names,
patent rights, copyrights and licenses to conduct its business as contemplated
therein. To the Subsidiary Company's knowledge, neither the Subsidiary Company
nor its products is infringing or will infringe any trademark, trade name,
patent right, copyright, license, trade secret or other similar right of others
currently in existence; and there is no claim
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being made against the Subsidiary Company regarding any trademark, trade name,
patent, copyright, license, trade secret or other intellectual property right
which could have a material advisers effect on the condition (financial or
otherwise), business, results of operations or prospects of the Subsidiary
Company.
4.11 Material Contracts. Except as set forth in the CXI SEC
Reports, the agreements to which the Subsidiary Company is a party described
therein are valid agreements, in full force and effect, the Subsidiary Company
is not in material breach or material default (with or without notice or lapse
of time, or both) under any of such agreements, and, to the Subsidiary Company's
knowledge, the other contracting party or parties thereto are not in material
breach or material default (with or without notice or lapse of time, or both)
under any such agreements.
4.12 Litigation. There is no action, proceeding or
investigation pending, or to the Subsidiary Company's knowledge threatened,
against the Subsidiary Company which might result, either individually or in the
aggregate, in any material adverse change in the business, prospects,
conditions, affairs or operations of the Subsidiary Company. The Subsidiary
Company is not a party to or subject to the provisions of any order, writ,
injunction, judgment or decree of any court or government agency or
instrumentality. There is no action, suit, proceeding or investigation by the
Subsidiary Company currently pending or which the Subsidiary Company currently
intends to initiate.
4.13 Title to Assets. Except as set forth the CXI SEC Reports,
the Subsidiary Company has good and marketable title to all properties, and
material assets described therein as owned by it, free and clear of any pledge,
lien, security interest, encumbrance, claim or equitable interest other than
such as are not material to the business of the Subsidiary Company.
4.14 Subsidiaries. The Subsidiary Company does not presently
own or control, directly or indirectly, any interest in any other corporation,
partnership, association or other business entity, except as stated in the CXI
SEC Reports.
4.15 Required Governmental Permits. The Subsidiary Company is
in possession of and operating in compliance with all authorizations, licenses,
certificates, consents, orders and permits from state, federal and other
regulatory authorities which are material to the conduct of its business, all of
which are valid and in full force and effect.
4.16 Listing. The Subsidiary Company will maintain the listing
of its Common Stock on AMEX or other organized, comparable United States market
or quotation system; provided, however, that the sole remedy for Purchaser for
breach of this representation shall be liquidated damages as provided in Section
10.6.
4.17 Other Outstanding Securities/Financing Restrictions.
Except as set forth in the CXI SEC Reports or as contemplated hereby, there are
no other outstanding
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debt or equity securities presently convertible into shares of CXI Common Stock.
Except as set forth in the CXI SEC Reports, the Subsidiary Company has no
outstanding restricted shares of Common Stock, or shares of Common Stock sold
under Regulation S or Regulation D under the Securities Act of 1933, as amended
(the "Securities Act") or outstanding under any other exemption from
registration, which are available for sale as unrestricted ("free trading")
stock.
The Subsidiary Company cannot, without the prior approval in
writing from the Purchaser, obtain convertible debt or equity financing for a
period of ninety (90) days following the effective date of the Registration
Statement (as defined herein); however, the Subsidiary Company will not require
prior approval if (a) at least 80% of the net proceeds of the financing is part
of any acquisition by the Subsidiary Company of control of another company or
entity, (b) at least 80% of the net proceeds of the financing is a refinancing
of the Subsidiary Company's debt, or (c) the financing is part of a public
offering of the Subsidiary Company's securities.
4.18 Right of Participation. In the event the Subsidiary
Company wishes to complete a financing similar in structure to the securities
issued hereby within one hundred and eighty (180) days from the Closing Date,
the Purchaser shall have the right to participate in such offering and shall
have three (3) business days to reply in writing after receipt of written notice
of such proposed financing from the Subsidiary Company. In the event a writing
is not received by the Subsidiary Company from the Purchaser specifying the
extent of the Purchaser's interest in so participating, this will be deemed a
refusal by the Purchaser of such right to participate.
4.19 Legal Opinion. Purchaser shall, upon purchase of the COES
Preferred Shares, receive an opinion letter from counsel to the Subsidiary
Company, and the Subsidiary Company represents that it will immediately obtain
such an opinion from counsel to the satisfaction of the Purchaser, to the effect
that:
(a) The Subsidiary Company is duly incorporated, validly
existing and in good standing in the jurisdiction of its incorporation.
(b) There is no action, proceeding or investigation pending,
or to such counsel's knowledge, threatened against the Subsidiary
Company which might result, either individually or in the aggregate, in
any material adverse change in the business, prospects, conditions,
affairs or operations of the Subsidiary Company.
(c) The Subsidiary Company is not a party to or subject to the
provisions of any order, writ, injunction, judgment or decree of any
court or government agency or instrumentality.
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<PAGE> 16
(d) There is no action, suit, proceeding or investigation by
the Company currently pending, to such counsel's knowledge, or which
the Subsidiary Company currently intends to initiate.
(e) All issued and outstanding shares of CXI Common Stock have
been duly authorized and validly issued and are fully paid and
nonassessable.
(f) This Securities Purchase Agreement and the Stock Purchase
Warrant, the issuance of the COES Preferred Shares and COES Warrants
and the transfer of the Conversion Shares and Warrant Shares have been
duly approved by all required corporate action, the requisite consent
of National Securities Corporation for the Parent Company to transfer
the shares of CXI Common Stock in its holdings to the Purchaser upon
conversion of the COES Preferred Shares and exercise of the COES
Warrants has been duly obtained, and that all such Securities, upon
delivery, shall be validly issued and outstanding, fully paid and
nonassessable.
(g) The execution, delivery and performance of this Securities
Purchase Agreement and the Stock Purchase Warrant by the Subsidiary
Company, and the consummation of the transactions contemplated thereby,
will not, with or without the giving of notice or the passage of time
or both:
(i) Violate the provisions of any law, rule or
regulation which is material to the assets, properties or
business of the Subsidiary Company;
(ii) Violate the provisions of the charter or bylaws
of the Subsidiary Company; or
(iii) To the best of counsel's knowledge, violate any
judgment, decree, order or award of any court, governmental
body or arbitrator.
(iv) To the best of counsel's knowledge, conflict
with, or result in the breach or termination of any term or
provision of, or constitute a default under, or cause any
acceleration under, or cause the creation of any lien, charge
or encumbrance upon the properties or assets of the Subsidiary
Company pursuant to, any note, bond, indenture, mortgage,
lease, deed of trust or other instrument, obligation, or
agreement to which the Subsidiary Company is a party and which
is material to the Subsidiary Company or by which the
Subsidiary Company, or any of its material properties is or
may be bound.
(h) This Securities Purchase Agreement and the Stock Purchase
Warrant constitute the valid and legally binding obligations of the
Subsidiary Company and are enforceable against the Subsidiary Company
in accordance with their respective terms, subject to laws of general
application relating to
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<PAGE> 17
bankruptcy, insolvency and the relief of debtors and rules of law
governing specific performance, injunctive relief or other equitable
remedies, and, with respect to the Securities Purchase Agreement, to
limitations of public policy as they may apply to the indemnification
provisions set forth in Section 8.4 thereof.
4.20 No Poison Pill. The Subsidiary Company represents that it
does not have, and has no current intention to adopt, a stockholder rights plan
("poison pill").
Section 5. Representations, Warranties and Covenants of the
Purchaser. The Purchaser represents and warrants to, and covenants with, the
Parent Company and the Subsidiary Company that the following are true and
correct as of the date hereof and as of the Closing Date.
5.1 Authority. The Purchaser's signatory has all right, power,
authority and capacity to execute and deliver this Agreement and to consummate
the transactions contemplated hereby. This Agreement has been duly executed and
delivered by the Purchaser and will constitute the legal, valid and binding
obligations of the Purchaser, enforceable in accordance with its terms, subject
to laws or general application relating to bankruptcy, insolvency and the relief
of debtors and rules of laws governing specific performance, injunctive relief
or other equitable remedies, and to limitations of public policy as they may
apply to the indemnification provisions set forth in Section 8.4 of this
Agreement.
5.2 Investment Experience. Purchaser is an "accredited
investor" as defined in Rule 501(a) under the Securities Act. Purchaser is aware
of the Parent Company's and Subsidiary Company's business affairs and financial
conditions and has had access to and has acquired sufficient information about
the Parent Company and the Subsidiary Company, including the COES and CXI SEC
Reports, to reach an informed and knowledgeable decision to acquire the COES
Preferred Shares. Purchaser has such business and financial experience as to
require to give it the capacity to protect its own interests in connection with
the purchase of the COES Preferred Shares and the acquisition of the COES
Warrants.
5.3 Investment Intent. Without limiting its ability to resell
the COES Preferred Shares and the COES Warrants and underlying CXI Common Stock
pursuant to an effective registration statement, Purchaser represents that it is
purchasing the COES Preferred Shares of reinvestment purposes. Purchaser
understands that its acquisition of the COES Preferred Shares and the COES
Warrants has not been registered under the Securities Act or registered or
qualified under any state securities law in reliance on specific exemptions
therefrom, which exemptions may depend upon, among other things, the bona fide
nature of Purchaser's investment intent as expressed herein. Purchaser will not,
directly or indirectly, offer, sell, pledge, transfer or otherwise dispose of
(or solicit any offers to buy, purchase or otherwise acquire or take a pledge
of) any of the COES Preferred Shares or the COES Warrants except in compliance
with the Securities Act and
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<PAGE> 18
any applicable state securities laws, and the rules and regulations promulgated
thereunder.
5.4 Registration or Exemption Requirements. Purchaser further
acknowledges and understands that the COES Preferred Shares and the COES
Warrants may not be resold or otherwise transferred except in a transaction
registered under the Securities Act and any applicable state securities laws or
unless an exemption from such registration is available. Purchaser understands
that the certificate(s) evidencing the COES Preferred Shares and the COES
Warrants will be imprinted with a legend, subject to Section 5.7 below, that
prohibits the transfer thereof unless (I) they are registered or such
registration is not required, and (ii) if the transfer is pursuant to an
exemption from registration other than Rule 144 under the Securities Act and, if
the Parent Company shall so request in writing, an opinion of counsel reasonably
satisfactory to the Parent Company is obtained to the effect that the
transaction is so exempt.
5.5 No Legal, Tax or Investment Advice. Purchaser understands
that nothing in this Agreement or any other materials presented to Purchaser in
connection with the purchase and sale of the COES Preferred Shares and the
acquisition and issuance of the COES Warrants constitutes legal, tax or
investment advice. Purchaser has consulted such legal, tax and investment
advisors as it, in its sole discretion, has deemed necessary or appropriate in
connection with its purchase of the COES Preferred Shares and acquisition of the
COES Warrants.
5.6 Purchaser Review. Purchaser hereby represents and warrants
that the Purchaser has carefully examined the COES SEC Reports and CXI SEC
Reports and the COES and CXI Financial Statements contained therein. The
Purchaser acknowledges that the Parent Company and Subsidiary Company has made
available to the Purchaser all documents and information that it has requested
relating to the Parent Company and the Subsidiary Company and has provided
answers to all of its questions concerning the Parent Company and the Subsidiary
Company, the COES Preferred Shares and the COES Warrants. Nothing stated in the
previous two sentences, however, shall be deemed to affect the representations
and warranties of the Parent Company the Subsidiary Company contained in this
Agreement.
5.7 Legend. The certificate or certificates representing the
Securities shall be subject to a legend restricting transfer under the
Securities Act, such legend to be substantially as follows:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. SUCH SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT WHICH, EXCEPT IN
THE CASE OF AN EXEMPTION PURSUANT TO
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<PAGE> 19
RULE 144 UNDER SAID ACT, IS CONFIRMED IN A LEGAL OPINION SATISFACTORY
TO THE COMPANY."
The certificates shall also include any legends required by any applicable state
securities laws.
The legend(s) endorsed on a stock certificate pursuant to this
Section 5.7 or on any certificate representing any of the Securities shall be
removed and the Parent Company or the Subsidiary Company shall issue a
replacement certificate without such legend to the holder of such certificate if
the Securities represented by such certificate are registered under the
Securities Act or if such holder provides to the Parent Company or the
Subsidiary Company an opinion of counsel to the effect that a public sale,
transfer or assignment of such Securities may be made without registration.
5.8 Restrictions on Conversion of Shares. Notwithstanding
anything to the contrary contained herein, no COES Preferred Shares may be
converted by a Holder to the extent that, after giving effect to the Conversion
Shares issued pursuant to a Notice of Conversion, the total number of shares of
CXI Common Stock deemed beneficially owned by such Holder (other than by virtue
of the ownership of COES Preferred Shares or COES Warrants or ownership of other
securities that have limitations on a Holder's rights to convert or exercise
similar to those limitations set forth herein), together with all shares of CXI
Common Stock deemed beneficially owned by Holder's "affiliates" (as defined in
Rule 144 under the Securities Act) that would be aggregate for purposes of
determining whether a group under Section 13(d) of the Exchange Act exists,
would exceed 4.99% of the total issued and outstanding shares of CXI Common
Stock, provided that each Holder shall have the right to waive this restriction,
in whole or in part, immediately in case of a pending Change in Control
Transaction and in any other case upon 61 days prior notice to the Parent
Company and the Subsidiary Company. The delivery of a Notice of Conversion by
any Holder shall be deemed a presentation by such Holder it is in compliance
with this Section 5.8. A transferee of COES Preferred Shares shall not be bound
by this provision unless it expressly agrees to be so bound. The term "deemed
beneficially owned" as used in this Section 5.8 shall exclude shares that might
otherwise be deemed beneficially owned by reason of the convertibility of the
COES Preferred Shares.
Section 6. Conditions to the Purchaser's Obligation to
Purchase. The Parent Company and the Subsidiary Company understand that the
Purchaser's obligation to purchase the COES Preferred Shares is conditioned
upon:
(a) Acceptance by Purchaser of this Agreement for the sale of
the COES Preferred Shares, as evidence by the execution of this Agreement by its
authorized officers;
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<PAGE> 20
(b) Delivery of the COES Preferred Shares and COES Warrants to
counsel to COES for immediate delivery to the Purchaser against wire transfer of
funds as aforesaid;
(c)(i) The delivery at the Closing of a certificate from an
authorized officer of the Parent Company certifying that all representations and
warranties of the Parent Company are true and correct as of the Closing Date (in
the form annexed hereto as Exhibit C1);
(c)(ii) The delivery at the Closing of a certificate from an
authorized officer of the Subsidiary Company certifying that all representations
and warranties of the Subsidiary Company are true and correct as of the Closing
Date (in the form annexed hereto as Exhibit C2); and
(d) A filed Certificate of Designation.
Section 7. Conditions to Parent Company's Obligation to Sell.
Purchaser understands that the Parent Company's obligation to sell the COES
Preferred Shares is conditioned upon:
(a) The receipt and acceptance by the Parent Company of this
Agreement to issue the COES Preferred Shares as evidenced by execution of this
Agreement by the President or any Vice President of the Parent Company.
(b) Delivery to the Company, the Finder and Counsel for Parent
by Purchaser of good funds as payment in full for the purchase of the COES
Preferred Shares; and
(c) The delivery at the Closing of a certificate from an
authorized officer or representative of Purchaser certifying that all
representations and warranties of the Purchaser are true and correct as of the
Closing Date (in the form annexed hereto as Exhibit C3).
Section 8. Registration of the Shares; Compliance with the
Securities Act.
8.1 Definitions. For the purpose of this Section 8:
(a) the term "Registration Statement" shall mean any
registration statement required to be filed by Section 8.2 below, and shall
include any preliminary prospectus, final prospectus, exhibit or amendment
included in or relating to such registration statement; and
20
<PAGE> 21
(b) the term "untrue statement" shall include any untrue
statement or alleged untrue statement, or any omission or alleged omission to
state in the Registration Statement a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
8.2 Registration Procedures and Expenses. The Parent Company
shall cause the Subsidiary Company to, and the Subsidiary Company shall:
(a) use its best efforts to file with the SEC not later than
September 15, 1997 a shelf registration statement under the Securities Act on
Form S-3, if the Subsidiary Company is eligible to file a registration statement
under such form (and if the Subsidiary Company is not eligible to file a
registration statement under Form S-3, to file with the SEC a registration
statement under the Securities Act on Form S-1 or any other form which is
appropriate), to register the Conversion Shares and Warrant Shares, and to use
its best efforts to cause such registration statement to be declared effective
by the SEC by not later than December 15, 1997. Such registration statement will
also cover shares issuable upon conversion of Series A Preferred Stock of CXI
sold by CXI pursuant to a certain Stock Purchase Agreement dated as of August
15, 1997;
(b) use its best efforts, subject to receipt of necessary
information from the Purchaser, to cause such Registration Statement to become
effective as promptly after filing as practicable;
(c) prepare and file with the SEC such amendments and
supplements to such Registration Statement and the prospectus used in connection
therewith as may be necessary to keep such Registration Statement effective
until termination of such obligation as provided in Section 8.9 below;
(d) furnish to the Purchaser with respect to the CXI Common
Stock registered on the Registration Statement (and to each underwriter, if any,
of such CXI Common Stock) such number of copies of prospectuses in conformity
with the requirements of the Securities Act and such other documents as the
Purchaser may reasonably request, in order to facilitate the public sale or
other disposition of all or any of the CXI Common Stock by the Purchaser;
provided, however, that the obligation of the Subsidiary Company to deliver
copies of prospectuses to the Purchaser shall be subject to the receipt by the
Subsidiary Company of reasonable assurances from the Purchaser that the
Purchaser will comply with the applicable provisions of the Securities Act and
of such other securities laws as may be applicable in connection with any use of
such prospectuses;
(e) file such documents as may be required of the Subsidiary
Company for normal securities law clearance for the resale of the Common Stock
in which states of the United States as may be reasonably requested by the
Purchaser; provided, however, that the Subsidiary Company shall not be required
in connection with
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this paragraph (e) to qualify as a foreign corporation or execute a general
consent to service of process in any jurisdiction;
(f) bear all expenses in connection with the procedures in
paragraphs (a) through (e) of this Section 8.2 and the registration of the CXI
Common Stock on such Registration Statement and the satisfaction of the blue sky
laws of such states, including the reasonable fees and expenses of legal counsel
to the Purchaser in connection with the procedures in paragraph (a) through (e)
of this Section 8.2, other than underwriting discounts and selling commissions
or expenses required by law to be borne by Purchaser; and
(g) in the event of the failure of Company to procure
registration, in accordance with Section 8.2(a) of this Agreement, of the
Conversion Shares and the Warrant Shares prior to any of the dates set forth
below in this Section 8.2(g), the Parent Company will pay Purchaser by wire
transfer, as liquidated damages for such failure and not as a penalty, for each
month or part thereof for which such failure continues or in the event of a
Suspension (as defined in Section 8.7) after such date, an amount equal to the
following percentages of the Liquidation Preference of all COES Preferred Shares
acquired by the Purchaser pursuant to this Agreement which are still owned by
such Purchaser and have not been converted:
<TABLE>
<CAPTION>
Required Effective Date Percentage
----------------------- ----------
<S> <C>
On or before November 19, 1997 1%
Between November 20 and
December 19, 1997 2%
After December 20, 1997 3%
</TABLE>
If the Parent Company does not remit the damages to the Purchaser as set forth
above, the Parent Company will pay the Purchaser reasonable costs of collection,
including attorneys fees, in addition to the liquidated damages. Such payment
shall be made to the Purchaser if due, monthly in arrears. The payment of such
liquidated damages shall not relieve the Subsidiary Company from its obligations
to register the Conversion Shares and Warrant Shares pursuant to this provision
and shall not affect or limit Purchaser's other rights or remedies as set forth
in this Agreement. The "Liquidation Preference" for a Share shall equal $100
(subject to adjustments for Reclassifications), plus all accrued and unpaid
dividends (which shall accrue through the Conversion Date, Redemption Date or
the date liquidated damages are paid, as applicable) and any then unpaid
liquidated damages (interest on which shall accrue at a rate of 2% per month)
arising under Sections 8.2(g), 10.2 or 10.6. Notwithstanding the foregoing, the
liquidated damages shall be limited to 1% per month or any portion thereof if
the delay in effectiveness of the registration statement beyond November 19,
1997 or the Suspension thereafter shall be for reasons outside the control of
the Parent Company or the Subsidiary Company.
8.3 Underwriter. The Parent Company and the Subsidiary Company
understand that the Purchaser disclaims being an "underwriter" (as such term is
defined
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under the Securities Act and the rules and regulations promulgated thereunder
(an "Underwriter")), but Purchaser being deemed an Underwriter shall not relieve
the Parent Company and the Subsidiary Company of any obligation it has
hereunder.
8.4 Indemnification.
(a) General Indemnification. The Parent Company and the
Subsidiary Company together and the Purchaser agree to indemnify the other and
to hold the other harmless from and against any and all losses, damages,
liabilities, costs and expenses (including reasonable attorneys' fees) which the
other may sustain or incur in connection with the breach by the indemnifying
party of any representation, warranty or covenant made by it in this Agreement.
(b) Indemnification for Registration Statement.
(i) By Parent Company and Subsidiary Company. To the
extent permitted by law, the Parent Company and Subsidiary Company together will
indemnify and hold harmless each Holder, the directors, if any, of such Holder,
the officers, if any, of such Holder who sign the Registration Statement, each
person, if any, who controls such Holder, any underwriter (as defined in the
Securities Act) for the Holders and each person, if any, who controls any such
underwriter within the meaning of the Securities Act or the Exchange Act,
against any losses, claims, damages, expenses or liabilities (joint or several)
to which any of them may become subject under the Securities Act, the Exchange
Act or otherwise, insofar as such losses, claims, damages, expenses or
liabilities (or actions or proceedings, whether commenced or threatened, in
respect thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively, a "Violation"): (i) any untrue statement
or alleged untrue statement of a material fact contained in the Registration
Statement including any preliminary prospectus or final prospectus contained
therein or any amendments or supplements thereof, (ii) the omission or alleged
omission to state therein a material fact required to be stated therein, or
necessary to make the statements therein, in light of the circumstance in which
they are made, not misleading or (iii) any violation or alleged violation by the
Company of the Securities Act, the Exchange Act, any state securities law or any
rule or regulation promulgated under the Securities Act, the Exchange Act or any
state securities law; and the Company will reimburse the Holders and each such
underwriter or controlling person, promptly as such expenses are incurred, for
any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability action or
proceeding; provided, however, that the indemnity agreement contained in this
Section 8.4(b) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or action if such settlement is effected without the
consent of the Parent Company and the Subsidiary Company, which consents shall
not be unreasonably withheld, nor shall the Parent Company and Subsidiary
Company be liable in any such case for any such loss, claim, damage, liability
or action to the extent that it arises out of or is based upon a Violation which
occurs in reliance upon and in conformity with written information furnished
23
<PAGE> 24
expressly for use in connection with such registration by the Holders or any
such underwriter or controlling person, as the case may be. Such indemnity shall
remain in full force and effect regardless of any investigation made by or on
behalf of the Holders or any such underwriter or controlling person and shall
survive the transfer of the Securities by Holders.
(ii) By Holders. To the extent permitted by law, each
Holder, severally and not jointly, will indemnify and hold harmless the
Subsidiary Company, each of its directors, each of its officers who have signed
the Registration Statement, each person, if any, who controls the Subsidiary
Company within the meaning of the Securities Act or the Exchange Act, any
underwriter and any other stockholder selling securities pursuant to the
Registration Statement or any of its directors or officers or any person who
controls such holder or underwriter, against any losses, claims, damages or
liabilities (joint or several) to which any of them may become subject, under
the Securities Act, the Exchange Act or other federal state law, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any Violation, in each case to the extent (and only to the
extent) that such Violation occurs in reliance upon and in conformity with
written information furnished by such Holder expressly for use in connection
with such registration, and such Holder will reimburse any legal or other
expenses reasonably incurred by any of them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that the indemnity agreement contained in this subsection 8.4(b) shall not apply
to amounts paid in settlement of such loss, claim, damage, liability or action
if such settlement is effected without the consent of such Holder, which consent
shall not be unreasonably withheld; and provided further, that the Holder shall
be liable under this paragraph for only that amount of losses, claims, damages
and liabilities as does not exceed the net proceeds to such Holder as a result
of the sale of the Securities pursuant to such registration.
(c) Procedure for Indemnification. Promptly after receipt by
an indemnified party under this Section 8.4 of notice of the commencement of any
action (including any governmental action), such indemnified party will, if a
claim in respect thereof is to be made against any indemnifying party under this
Section 8.4, deliver to the indemnifying party a written notice of commencement
thereof and the indemnifying party shall have the right to participate in, and,
to the extent the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume control of the defense thereof
with counsel mutually satisfactory to the parties; provided, however, that an
indemnified party shall have the right to retain its own counsel, with the fees
and expenses to be paid by the indemnifying party, if, in the reasonable opinion
of counsel for the indemnifying party, representation of such indemnified party
by the counsel retained by the indemnifying party would be inappropriate due to
actual or potential differing interests between such indemnified party and any
other party represented by such counsel in such proceeding. The failure to
deliver written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall relieve such indemnifying party of any
liability to the indemnified party under this Section 8.4 only the extent
prejudicial to its ability to defend such action, but the omission so to deliver
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<PAGE> 25
written notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party other than under this Section 8.4. The
indemnification required by this Section 8.4 shall be made by periodic payments
of the amount thereof during the course of the investigation or defense,
promptly as such expense, loss, damage or liability is incurred.
(d) Contribution. To the extent any indemnification by an
indemnifying party is prohibited or limited by law, the indemnifying party
agrees to make the maximum contribution with respect to any amounts for which it
otherwise would be liable under this Section 8.4 to the extent permitted by law,
provided that (i) no contribution shall be made under the circumstances where
the maker would not have been liable for indemnification under the fault
standards set fourth in this Section 8.4, (ii) no seller of the Securities
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any seller of the
Securities who was not guilty of such fraudulent misrepresentation and (iii)
contribution by any seller of the Securities shall be limited in amount to the
net amount of proceeds received by such seller from the sale of such Securities.
8.5 Information Available. So long as any registration
statement is effective covering the resale of the Conversion Shares of Warrant
Shares, the Parent Company and the Subsidiary Company will each furnish to
Purchaser:
(a) as soon as possible after available, one copy of (i) each
of its Annual Report to Stockholders (which Annual Report shall contain
financial statements audited in accordance with generally accepted accounting
principles in the United States of American by a national firm of certified
public accountants); (ii) if not included in substance in the Annual Report to
Stockholders, each of its annual report on Form 10-K within 100 days after the
end of each fiscal year of each Company, (iii) each of its Quarterly Reports to
Stockholders, and its quarterly report on Form 10-Q within sixty (60) days, and
(iv) a full copy of the registration statement covering the Conversion Shares
and Warrant Shares (the foregoing, in each case, excluding exhibits); and
(b) upon the reasonable request of Purchaser, such other
information that is generally available to the public.
8.6 Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the SEC which may at any time
permit the sale of the Conversion Shares and the Warrant Shares to the public
without registration, the Parent Company and the Subsidiary Company agrees to
use its best efforts to:
(a) make and keep public information available, as those terms
are understood and defined in Rule 144 under the Securities Act, at all times
after the effective date on which the Company becomes subject to the reporting
requirements of the Securities Act or the Exchange Act;
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<PAGE> 26
(b) use its best efforts to file with the SEC in a timely
manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act;
(c) furnish to Purchaser forthwith upon request a written
statement by the Parent Company or the Subsidiary Company as to its compliance
with the reporting requirements of said Rule 144, and of the Securities Act and
the Exchange Act, a copy of the most recent annual or quarterly report of the
Company, and such other reports and comments of the Parent Company or the
Subsidiary Company and other information in the possession of or reasonably
obtainable by the Parent Company or the Subsidiary Company as Purchaser may
reasonably request in availing itself of any rule or regulation of the SEC
allowing Purchaser to sell any such Conversion Shares or Warrant Shares without
registration.
8.7 Temporary Cessation of Offers and Sales by Purchaser. The
Purchaser acknowledges that there may occasionally be times when the Subsidiary
Company may be required to suspend the use of the prospectus forming part of the
Registration Statement (a "Suspension") until such time as an amendment to the
Registration Statement has been filed by the Company and declared effective by
the Commission, until the prospectus is supplemented or amended to comply with
the Securities Act, or until such time as the Subsidiary Company has filed an
appropriate report with the Commission pursuant to the Exchange Act. The
Subsidiary Company agrees to file any necessary amendments, supplements and
reports as soon as practicable under the circumstances. The Subsidiary Company
agrees to use its best efforts to cause a Suspension to be lifted within 10
business days during which time Purchaser agrees that it will not sell any
shares of Common Stock pursuant to such prospectus.
8.8 Transfer of Conversion Shares or Warrant Shares Stock
After Registration. Purchaser hereby covenants with the Parent Company and the
Subsidiary Company not to make any sale of the conversion Shares or Warrant
Shares except either (i) in accordance with the Registration Statement, in which
case Purchaser covenants to comply with the requirement of delivering a current
prospectus, (ii) in accordance with Rule 144, in which case Purchaser covenants
to comply with Rule 144, or (iii) as otherwise permitted by applicable law.
8.9 Termination of Obligations. The obligations of the Parent
Company and Subsidiary Company pursuant to Sections 8.2, 8.3 and 8.6 hereof
shall cease and terminate upon the earlier to occur of (i) such time as all of
the Conversion Shares of Warrant Shares have been re-sold, or (ii) such time as
all of the Common Stock may be resold pursuant to Rule 144(k) under the
Securities Act.
Section 9. Legal Fees and Expenses. Each of the parties shall
pay its own fees and expenses (including the fees of any attorneys, accountants,
appraisers or others
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<PAGE> 27
engaged by such party) in connection with this Agreement and the transactions
contemplated hereby.
Section 10. Conversion; Liquidated Damages.
10.1 Restrictions on Conversion. Conversion of all the COES
Preferred Shares may be made at the Conversion Price, the day following the date
that the Registration Statement for the CXI Common Stock underlying the COES
Preferred Stock and COES Warrants was declared effective by the SEC.
10.2 Notice of Conversion. Conversion of the COES Preferred
Shares to CXI Common Stock may be exercised in whole or in part by Purchaser
telecopying an executed and completed Notice of Conversion (in the form annexed
hereto as Exhibit D) to counsel for the Parent Company, with a copy to the
Parent Company and Subsidiary Company, and delivering the original Notice of
Conversion and the certificate representing the COES Preferred Shares to counsel
by hand or by express courier within three (3) business days of exercise. Each
date on which a Notice of Conversion is telecopied to and received by the Parent
Company in accordance with the provisions hereof shall be deemed a Conversion
Date. The Subsidiary Company will reissue and transmit the certificates in the
name of the Purchaser, or any other name as instructed by the Purchaser,
representing the CXI Common Stock transferable upon conversion of all or any
part of the COES Preferred Shares and COES Warrant Shares (and the Parent
Company will transmit any certificates for replacement COES Preferred Shares not
previously converted but included in the original certificate presented for
conversion) to the Purchaser via express courier within three (3) business days
after counsel for the Parent Company has received the original Notice of
Conversion and the certificate representing the COES Preferred Shares being so
converted. The Notice of Conversion and certificate representing the portion of
the COES Preferred Shares converted shall be delivered as follows:
To counsel of Parent Company:
Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel
153 East 53rd Street
New York, NY 10022
Attention: Stephen A. Weiss, Esq.
Telephone: 212-801-9200
Facsimile: 212-223-7161
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<PAGE> 28
To the Parent Company:
Commodore Environmental Services, Inc.
150 East 58th Street
New York, NY 10155
Attention: Bentley J. Blum
Telephone: 212-935-5400
Facsimile: 212-753-0731
To the Subsidiary Company:
Commodore Applied Technologies, Inc.
150 East 58th Street
New York, NY 10155
Attention: Bentley J. Blum
Telephone: 212-935-5400
Facsimile: 212-753-0731
or to such other person at such other place as the Parent Company shall
designate to the Purchaser in writing.
In the event that the COES Preferred Shares are not converted
within three (3) business days of the Conversion Date, the Parent Company shall
be liable to Purchaser for actual damages incurred from the fourth business day
following the Conversion Date for such failure (provided that Purchaser has
delivered the original valid Notice of Conversion and the original
certificate(s) representing the COES Preferred Shares to be converted, or an
affidavit and indemnity agreement as to lost certificates reasonably
satisfactory to the Company). In the event the COES Preferred Shares are not
converted by the tenth (10th) business day following the Conversion Date, the
Parent Company shall pay to the Purchaser, by wire transfer, as liquidated
damages for such failure and not as a penalty, an amount in cash equal to one
(1%) percent per day of the Liquidation Preference for the COES Preferred Shares
to be converted which shall run from the tenth (10th) business day following the
Conversion Date; provided, however, that actual damages and liquidated damages
for a failure to deliver certificates of CXI Common Stock shall be determined in
accordance with Section 10.6, if both of the following conditions are satisfied
by the Parent Company: (i) the failure to deliver certificates of CXI Common
Stock is the result of a lack of available shares of CXI Common Stock and (ii)
the Parent Company commences, with ten (10) business days after the initial
Conversion Date to purchase or otherwise acquire the number of shares of CXI
Common Stock which is sufficient to permit conversion of all COES Preferred
Shares then outstanding at the Hypothetical Conversion Price (as hereinafter
defined) then in effect.
10.3 Mandatory Conversion. The COES Preferred Shares are
subject to mandatory conversion after five (5) years from the Closing Date, at
which time all COES
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<PAGE> 29
Preferred Shares will automatically be converted at the Conversion Price, upon
the terms set forth in this section. Such five year period will be extended by
the number of days during such period that (i) the Subsidiary Company's Common
Stock has been Delisted and/or (ii) a Suspension has been in effect and by the
number of days after the 90th day or the 120th day, whichever date is applicable
as provided in Section 8.2(g) herein, that Registration Statement was not
declared effective. Any particular day in which more than one of the foregoing
condition events shall have been in effect shall only be counted once in
determining the number of days by which to extend the five year period prior to
mandatory conversion. In addition, mandatory conversion shall not occur for so
long as certain default events specified in Section 5(e) of the Certificate of
Designation are continuing.
10.4 Reservation of CXI Common Stock Transferable Upon
Conversion. The Parent Company shall at all times reserve and keep available out
of its holdings of shares of CXI Common Stock, such number of shares of CXI
Common Stock as shall from time to time be sufficient to effect the conversion
of all then outstanding COES Preferred Shares and COES Warrants, the sufficiency
of which shall be determined (in the case of the COES Preferred Shares) by using
a Conversion Price (the "Hypothetical Conversion Price") derived from a
hypothetical closing market price that is 75% of either (i) the actual Average
Closing Bid Price on the Closing Date or (ii) the actual Average Closing Bid
Price from time to time, whichever is lower, and in the case of the COES
Warrants, by the exercise price thereof. The Parent Company hereby covenants and
agrees that if at any time the Hypothetical Conversion Price falls to a level
that would not enable all outstanding COES Preferred Shares to be fully
converted and the outstanding COES Warrants to be fully exercised, the Parent
Company will promptly purchase or otherwise acquire the number of shares of CXI
Common Stock sufficient to permit the conversion of all COES Preferred Shares
then outstanding at the Hypothetical Conversion Price then in effect and the
exercise of all outstanding COES Warrants.
10.5 Liquidated Damages. In the event of a Delisting, a
Cumulative Suspension or Insufficient CXI Common Stock (each a "Damage Event"),
the Parent Company will pay to Purchaser (and to all other holders of the
Shares), by wire transfer, as liquidated damages for such non-availability and
not as a penalty, an amount in cash equal to 2% per month of the Liquidation
Preference of only those COES Preferred Shares then eligible for conversion,
without regard to Section 5.8, for the first two months after the occurrence of
a Damage Event, and 3% per month for each month thereafter. Similar liquidated
damages shall be paid with respect to any COES Preferred Shares not initially
eligible for conversion when the Damage Event first occurred but which
subsequently become eligible for conversion, without regard to Section 5.8,
commending in the first month that such COES Preferred Shares become eligible
for such conversion. Such liquidated damages shall continue to accrue and shall
be payable until the Damage Event has been cured, and, if not paid, interest
thereon shall accrue at a rate of 2% per month. At the Purchaser's election,
such liquidated damages may be paid in cash or may be added to the principal of
the COES Preferred Shares for subsequent conversion purposes. Notwithstanding
the foregoing, in the case of a Delisting, after six months
29
<PAGE> 30
from the date of such Delisting, the Parent Company shall have the option to
force Purchaser to as promptly as possible convert (in increments of no less
than $50,000) all or part of its COES Preferred Shares, subject to Purchaser
being able to sell the underlying Conversion Shares, and simultaneously sell
such Conversion Shares (where the conversion price therefor shall not be the
Conversion Price but instead shall equal 85% of the Purchaser's sale price of
the Conversion Shares, all as determined by Purchaser's actual trading records
(to be provided to the Company). In no event may the Company force Purchaser to
convert less than $50,000 of COES Preferred Shares at any one time.
Section 11. Redemption By Parent Company.
11.1 Parent Company's Right to Redeem. The Parent Company
shall have the right, at any time and from time to time, in its sole discretion,
to redeem in whole or in part the COES Preferred Shares then outstanding, except
that if the Purchaser or any Holder of the COES Preferred Shares has submitted a
Notice of Conversion, the Parent Company shall not have the right to redeem the
COES Preferred Shares which were submitted for conversion and the certificates
representing Conversion Shares should be delivered promptly according to Section
10.2 herein. If the Parent Company elects to redeem some, but not all, of the
COES Preferred Shares, the Parent Company shall redeem the COES Preferred Shares
pro rata among the Holders of all the COES Preferred Shares then outstanding.
The date of the Parent Company's redemption of COES Preferred Shares shall be
referred to as the "Redemption Date."
11.2 Redemption Price. The redemption price per COES Preferred
Share shall equal $125.
11.3 Mechanics of Redemption; Purchaser's Conversion Rights.
The Parent Company shall effect each such redemption by giving notice of its
election to redeem ("Redemption Notice"), by facsimile, by 5 P.M. New York City
time on the Redemption Date and shall provide a copy of such redemption notice
by overnight or 2-day courier, to Purchaser, all other Holders of COES Preferred
Shares and the Parent Company will redeem all or part of the COES Preferred
Shares. Upon the giving of any such Redemption Notice, and until the earlier of
either payment of the applicable redemption price or fifteen (15) business days
after the Redemption Date (or later as provided in Section 6(d) below), the
conversion rights in respect of the COES Preferred Shares and any other
outstanding shares of COES Convertible Preferred Stock called for redemptions
shall be suspended. Subject to the Parent Company's payment of the applicable
redemption price, the accrual of dividends in connection with the shares of COES
Convertible Preferred Stock called for redemption will suspend on the Redemption
Date.
11.4 Payment of Redemption Price. Upon receipt of a Redemption
Notice, Purchaser shall send its COES Preferred Shares being redeemed to the
Parent
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<PAGE> 31
Company or its Transfer Agent within three (3) business days of the receipt of
such Redemption Notice, and the Parent Company shall pay the applicable
redemption price within fifteen (15) business days of the Redemption Date (such
fifteen (15) business day period shall be extended for each day the COES
Preferred Shares being redeemed have not been delivered to the Parent or its
Transfer Agent beyond the third (3rd) business day after receipt of the
Redemption Notice). The Parent Company shall not be obligated to deliver the
redemption price unless the COES Preferred Shares so redeemed are delivered to
the Parent Company or its Transfer Agent, or, in the event one or more
certificates have been lost, stolen, mutilated or destroyed, Purchaser delivers
to the Parent Company a lost certificate affidavit reasonably satisfactory to
Parent Company and its Transfer Agent.
11.5 Default of Parent Company's Redemption. If the Parent
Company fails to pay the applicable redemption price to the Purchaser and/or
other Holders of the COES Preferred Shares being redeemed by the Parent Company
within fifteen (15) business days of the Redemption Date (such fifteen (15)
business day period shall be extended for each day the COES Preferred Shares
being redeemed have not been delivered to the Parent or its Transfer Agent
beyond the third (3rd) business day after receipt of the Redemption Notice), the
Parent Company shall be deemed to have defaulted on their right to redeem such
COES Preferred Shares. Such COES Preferred Shares shall thereafter become
immediately convertible and the Conversion Price for such COES Preferred Shares
shall be equal to 75% of the Average Closing Bid Price. The Conversion Price for
such COES Preferred Shares shall not be subject to a floor.
11.6 Blackout Period. Notwithstanding the foregoing, the
Parent Company may not either send out a redemption notice or effect a
redemption during a Blackout Period (defined as a period during which the Parent
Company's or the Subsidiary Company's officers or directors would not be
entitled to buy or sell stock because of their holding of material non-public
information). In the event the Parent Company initiates a redemption during a
Blackout Period without having first made public material non-public
information, the Parent Company or the Subsidiary Company shall disclose the
non-public information that resulted in the Blackout Period, and no redemption
shall be effected until at least 10 days after the Company or the Subsidiary
Company shall have given the Holder written notice that the Blackout Period has
been lifted.
Section 12. Notices. All notices, requests, consents and other
communications hereunder shall be in writing, shall be mailed by first class
registered or certified airmail, postage prepaid, or shall be sent by overnight
courier or by facsimile, and shall be deemed given when received:
31
<PAGE> 32
(a) if to the Parent Company, to
Commodore Environmental Services, Inc.
150 East 58th Street
New York, NY 10155
Attention: Bentley J. Blum
Telephone: 212-935-5400
Facsimile: 212-753-0731
copy to:
Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel
153 East 53rd Street
New York, NY 10022
Attention: Stephen A. Weiss, Esq.
Telephone: 212-801-9200
Facsimile: 212-223-7161
or to such other person at such other place as the Parent Company shall
designate to the Purchaser in writing;
(b) if to the Subsidiary Company:
Commodore Applied Technologies, Inc.
150 East 58th Street
New York, NY 10155
Attention: Bentley J. Blum
Telephone: 212-935-5400
Facsimile: 212-753-0731
copy to:
Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel
153 East 53rd Street
New York, NY 10022
Attention: Stephen A. Weiss, Esq.
Telephone: 212-801-9200
Facsimile: 212-223-7161
or to such other person at such other place as the Subsidiary Company shall
designate to the Purchaser in writing;
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<PAGE> 33
(c) if to the Purchaser, to:
Porter Partners, L.P.
c/o Porter Capital Management
100 Shoreline, Suite 211B
Mill Valley, California 94941
Attn: Mr. Jeffrey Porter
copy to: such person or entity as may be identified from time
to time by written notice from the Purchaser.
or to such other address or addresses as may have been furnished to the Parent
Company and the Subsidiary Company in writing; or
(d) if to any transferee or transferees of a Purchaser, at
such address or addresses as shall have been furnished to the Parent Company and
the Subsidiary Company at the time of the transfer or transfers, or at such
other address or addresses as may have been furnished by such transferee or
transferees to the Parent Company and the Subsidiary Company in writing.
Section 13. Miscellaneous.
13.1 Entire Agreement. This Agreement and the Exhibits hereto
embodies the entire agreement and understanding between the parties thereto with
respect to the subject matter hereof and supersedes all prior oral or written
agreements and understandings relating to the subject matter hereof. No
statement, representation, warranty, covenant or agreement or any kind not
expressly set forth in this Agreement or the Exhibits hereto shall affect or be
used to interpret, change or restrict, the express terms and provisions of this
Agreement.
13.2 Amendments. This Agreement may not be modified or amended
except pursuant to an instrument in writing singed by the Parent Company, the
Subsidiary Company and by Purchaser.
13.3 Headings. The headings of the various sections of this
Agreement have been inserted for convenience of reference only and shall not be
deemed to be part of this Agreement.
13.4 Severability. In case any provision contained in this
Agreement should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.
33
<PAGE> 34
13.5 Governing Law/Jurisdiction. This Agreement will be
construed and enforced in accordance with and governed by the laws of the State
of New York, except for matters arising under the Securities Act, without
reference to principles of conflicts of law. Each of the parties consents to the
jurisdiction of the courts of or located in the State of New York, specifically
the Southern District of New York and/or the Supreme Court of the state of New
York in connection with any dispute arising under this Agreement and hereby
waives, to the maximum extent permitted by law, any objection, including any
objection based on forum non conveniens, to the bringing of any such proceeding
in such jurisdictions. Each party hereby agrees that if another party to this
Agreement obtains a judgment against it in such a proceeding, the party which
obtained such judgment may enforce same by summary judgment in the courts of any
country having jurisdiction over the party against whom such judgment was
obtained, and each party hereby waives any defenses available to it under local
law and agrees to the enforcement of such a judgment. In addition, the parties
agree that the party against whom such judgment was obtained will pay the legal
fees of the party obtaining such judgment. Each party to this Agreement
irrevocably consents to the service of process in any such proceeding by the
mailing of copies thereof by registered or certified mail, postage prepaid, to
such party at its address set forth herein. Nothing herein shall affect the
right of any party to serve process in any other manner permitted by law.
13.6 Recovery of Attorney's Fees. Should any party bring an
action to enforce the terms of this Agreement then, if Purchaser prevails in
such action it should be entitled to recovery of its attorney's fees from the
Parent Company or the Subsidiary Company, and if the Parent Company or the
Subsidiary Company prevails in such action it shall be entitled to recovery of
its attorney's fees from the Purchaser.
13.7 Fees. Notwithstanding Section 13.6, the Parent Company
and the Subsidiary Company acknowledge that Purchaser shall have no
responsibility for the payment of any of its fees in connection with this
offering.
13.8 Counterparts/Facsimile. This Agreement may be executed in
two or more counterparts, each of which shall constitute an original, but all of
which, when taken together, shall constitute but one instrument, and shall
become effective when one or more counterparts have been signed by each party
hereto and delivered to the other party. In lieu of the original, a facsimile
transmission copy of the original shall be as effective and enforceable as the
original.
13.9 Publicity. The Purchaser shall not issue any press
releases or otherwise make any public statement with respect to the transactions
contemplated by this Agreement without the prior written consent of the Parent
Company and the Subsidiary Company, except as may be required by applicable law
or regulation.
13.10 Survival. The representations and warranties in this
Agreement shall survive Closing.
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<PAGE> 35
Section 14. Limitation on Conversions. Notwithstanding
anything contained in this Agreement, the Stock Purchase Warrant, or the
Certificate of Designations, neither the Purchaser nor any subsequent Holder of
the COES Preferred Shares may elect to convert into CXI Common Stock more than
twenty (20%) percent of the aggregate number (the "Initial Number") of shares of
COES Preferred Shares owned by the Purchaser upon the consummation of the
acquisition by the Purchaser of the COES Preferred Shares pursuant to this
Agreement during any one calendar month, calculated from the first month during
which a conversion may occur; provided, that, such limitation on conversion
shall be on a cumulative basis so that if, for example, no shares of COES
Preferred Shares are converted into CXI Common Stock in any one month, then in
the next month 40% of the Initial Number of shares of COES Preferred Shares may
be converted into CXI Common Stock. In any event, the rights of conversion set
forth in this Section 14 shall be cumulative, so that any shares not converted
in any one calendar month may be accumulated with the number of convertible
shares in the next calendar month. No transfer or other disposition of COES
Preferred Shares by the Purchaser or any subsequent transferee shall be
effective unless prior thereto the transferee agrees in writing satisfactory to
COES and received by COES to be bound by the terms and conditions of this
Section.
Section 15. If, but only if, COES consummates during 1997 the
purchase of 50% or more of the voting capital stock of Lanxide Corporation, COES
shall promptly issue to the holders of the then outstanding shares of COES
Series D Preferred Stock, in proportion to their interests therein, three (3)
year warrants for such holders, in the aggregate, to purchase, in the aggregate,
three percent (3%) of the total number of shares of Lanxide Corporation common
stock and common stock equivalents so acquired by COES at the same price per
share paid by COES (which is presently estimated to be approximately $7.41 per
share but which may change in negotiations). The form of warrant shall contain
customary terms and provisions.
35
<PAGE> 36
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be signed by their duly authorized representatives the day and year
first above written.
COMMODORE ENVIRONMENTAL SERVICES, INC.
By /s/ Paul E. Hannesson
-----------------------------------
COMMODORE APPLIED TECHNOLOGIES, INC.
By /s/ Michael D. Fullwood
-----------------------------------
Purchaser: PORTER PARTNERS, L.P.
----------------------------
By /s/
-----------------------------------
Name:
Title:
36
<PAGE> 1
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER REGULATION D PROMULGATED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "1933 ACT"). THIS STOCK PURCHASE WARRANT SHALL NOT
CONSTITUTE AN OFFER TO SELL NOR A SOLICITATION OF AN OFFER TO BUY THE SECURITIES
IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL. THE
SECURITIES ARE "RESTRICTED" AND MAY NOT BE RESOLD OR TRANSFERRED EXCEPT AS
PERMITTED UNDER THE 1933 ACT PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.
No. 97-D13
STOCK PURCHASE WARRANT
To Purchase 37,500 Shares of Common Stock of
COMMODORE APPLIED TECHNOLOGIES, INC.
from
COMMODORE ENVIRONMENTAL SERVICES, INC.
THIS CERTIFIES that, for value received, PORTER PARTNERS, L.P. (the
"Investor"), is entitled upon the terms and subject to the conditions
hereinafter set forth, at any time on or after August 15, 1997 (the "Initial
Exercise Date") and on or prior to August 14, 2002 (the "Termination Date") but
not thereafter, to subscribe for and purchase from COMMODORE ENVIRONMENTAL
SERVICES, INC., a Delaware corporation (the "Parent Company"), 37,500 shares of
its holdings of Common Stock of COMMODORE APPLIED TECHNOLOGIES, INC. ("CXI
Common Stock"), a Delaware corporation (the "Subsidiary Company") (the "Warrant
Shares"). The purchase price of one share of CXI Common Stock (the "Exercise
Price") under this Warrant shall be Five Dollars and Fifteen Cents ($5.15). The
Exercise Price and the number of Warrant Shares shall be subject to adjustment
as provided herein. This warrant is being issued pursuant to a Preferred Stock
Securities Purchase Agreement, dated August 14, 1997, complete with all listed
exhibits thereto (the "Agreement") by and between the Parent Company, Subsidiary
Company and the Investor and is subject to its terms. In the event of any
conflict between the terms of this Warrant and the Agreement, the Agreement
shall control.
1. Title of Warrant. Prior to the expiration hereof and
subject to compliance with applicable laws, this Warrant and all rights
hereunder are transferable, in whole or in part, at the office or agency of the
Parent Company, by the holder hereof in person or by duly authorized attorney,
upon surrender of this Warrant together with the Assignment Form annexed hereto
properly endorsed.
<PAGE> 2
2. Authorization of Shares. The Parent Company and the
Subsidiary Company covenant that all shares of CXI Common Stock which may be
transferred upon the exercise of rights represented by this Warrant will, upon
exercise of the rights represented by this Warrant, be duly authorized, validly
issued, fully paid and non-assessable and free from all taxes, liens and
charters in respect of the issue thereof (other than taxes in respect of any
transfer occurring contemporaneously with such issue).
3. Exercise of Warrant. Exercise of the purchase rights
represented by this Warrant may be made at any time or times, in whole or in
part, on or after the Initial Exercise Date, and before the close of business on
the Termination Date, or such earlier date on which this Warrant may terminate
as provided in paragraph 11(a) below, by the surrender of this Warrant and the
Form of Election to Purchase annexed hereto duly executed, at the office of the
Parent Company (with copy to Stephen A. Weiss, Esq., Greenberg, Traurig,
Hoffman, Lipoff, Rosen & Quentel, 153 East 53rd Street, New York, NY 10022 or
such other office or agency of the Parent Company as it may designate by notice
in writing to the registered holder hereof at the address of such holder
appearing on the books of the Company) and upon payment of the Exercise Price of
the shares thereby purchased; whereupon the holder of this Warrant shall be
entitled to receive a certificate for the number of shares of CXI Common Stock
so purchased immediately. In the event upon exercising the Warrant, the transfer
agent requires an opinion of counsel, the Parent Company or the Subsidiary
Company shall have such opinion furnished to the transfer agent to the transfer
agent's satisfaction. In the event the Investor is relying on an exemption from
registration under the 1933 Act, the Warrant Shares shall be issued immediately,
if the Investor furnishes an opinion of counsel, reasonably satisfactory to the
Subsidiary Company, that such exemption from registration be available.
Certificates for shares purchased hereunder shall be delivered to the holder
hereof within three (3) business days after the date on which this Warrant shall
have been exercised as aforesaid. Payment of the Exercise Price of the shares
may be by certified check or cashier's check or by wire transfer to an account
designated by the Parent Company in an amount equal to the Exercise Price
multiplied by the number of shares being purchased.
4. No Fractional Shares or Scrip. No fractional shares or
scrip representing fractional shares shall be issued upon the exercise of this
Warrant.
5. Charges, Taxes and Expenses. Reissuance of certificates in
the name of the holder hereof for shares of CXI Common Stock upon the exercise
of this Warrant shall be made without charge to the holder hereof for any issue
or transfer tax or other incidental expense in respect of the issuance of such
certificate, all of which taxes and expenses shall be paid by the Company, and
such certificates shall be issued in the name of the holder of this Warrant or
in such name or names as may be directed by the holder of this Warrant;
provided, however, that in the event certificates for shares of CXI Common Stock
are to be issued in a name other than the name of the holder of this Warrant,
this Warrant when surrendered for exercise other than the name of the holder of
this Warrant, this Warrant when surrendered for exercise shall be accompanied by
the Assignment Form attached hereto duly executed by the holder hereof, together
with evidence satisfactory to the Subsidiary Company that such transfer or
assignment is being made in compliance with all applicable federal and state
securities laws; and provided,
-2-
<PAGE> 3
further, that upon any transfer involved in the issuance or delivery of any
certificates for shares of CXI Common Stock, the Subsidiary Company may require,
as a condition thereto, the payment of a sum sufficient to reimburse it for any
transfer tax incidental thereto.
6. Closing of Books. The Parent Company and the Subsidiary
Company will at no time close its shareholder books or records in any manner
which interferes with the timely exercise of this Warrant.
7. Voting Rights. This Warrant does not entitle the holder
hereof to any rights as a shareholder of the Subsidiary Company prior to the
exercise hereof except for the voting rights set forth in this paragraph. If,
however, at the time of the surrender of this Warrant and purchase the holder
hereof shall be entitled to exercise this Warrant, the shares so purchased shall
be and shall be deemed to be transferred and reissued to such holder as the
record owner of such shares as of the close of business on the date on which
this Warrant shall have been exercised. Prior to the date of such exercise and
except as otherwise required by applicable Delaware law, the holder of this
Warrant shall vote together with the Common Stock and not as a separate class on
any transaction with respect to which the Common Stock is entitled to vote
pursuant to applicable Delaware law or the Certificate of Incorporation. Each
Warrant shall be entitled to a number of votes per share equal to (i) one (1)
multiplied by (ii) the number of shares of Common Stock which may be acquired
upon exercise of this Warrant if the same were exercisable and were so exercised
on the record date used to determine shares eligible to vote on such
transaction.
8. Assignment and Transfer of Warrant. This Warrant may be
assigned by the surrender of this Warrant and the Assignment Form annexed hereto
duly executed at the office of the Parent Company (or such other office or
agency of the Parent Company as it may designate by notice in writing to the
registered holder hereof at the address of such holder appearing on the books of
the Parent Company); provided, however, that this Warrant may not be resold or
otherwise transferred except (i) in a transaction registered under the
Securities Act, or (ii) in a transaction pursuant to an exemption, if available,
from such registration and whereby, if requested by the Parent Company or the
Subsidiary Company, an opinion of counsel reasonably satisfactory to the Parent
Company or the Subsidiary Company is obtained by the holder of this Warrant to
the effect that the transaction is so exempt.
9. Loss, Theft, Destruction or Mutilation of Warrant. Each of
the Parent Company and the Subsidiary Company represents and warrants that upon
receipt by the Parent Company or the Subsidiary Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of any Warrant
or stock certificate, and in case of loss, reimbursement to the Parent Company
or the Subsidiary Company of all reasonable expenses incidental thereto, and
upon surrender and cancellation of such Warrant or stock certificate, if
mutilated, the Parent Company or the Subsidiary Company will make and deliver a
new Warrant or stock certificate of like tenor and dated as of such
cancellation, in lieu of this Warrant or stock certificate.
10. Saturdays, Sundays, Holidays, etc. If the last or
appointed day for the taking of any action or the expiration of any right
required or granted herein shall be a Saturday,
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<PAGE> 4
Sunday or a legal holiday, then such action may be taken or such right may be
exercised on the next succeeding day not a legal holiday.
11. Effect of Certain Events.
(a) If at any time:
(i) the Parent Company or the Subsidiary Company
shall declare any cash dividend upon the CXI Common Stock;
(ii) the Parent Company or the Subsidiary Company
shall declare a dividend upon the CXI Common Stock payable in securities (other
than a dividend payable solely in CXI Common Stock) or make any special dividend
or other distribution to the holders of its Units;
(iii) the Parent Company or the Subsidiary Company
proposes (A) to sell or otherwise convey all or substantially all of its assets
or (B) to effect a transaction (by merger or otherwise) in which more than 50%
of the voting power of the Parent Company or the Subsidiary Company is disposed
of (collectively, a "Sale or Merger Transaction") in which the consideration to
be received by the Parent Company or the Subsidiary Company or its shareholders
consists solely of cash;
(iv) there shall be a voluntary or involuntary
dissolution, liquidation or winding-up of the Parent Company or the Subsidiary
Company;
the Parent Company or the Subsidiary Company shall give the holder of this
Warrant fifteen (15) days' written notice of the proposed effective date, by
certified or registered mail, postage prepaid, addressed to the registered
holder of this Warrant at the address of such holder as shown on the books of
the Parent Company. Such notice shall also specify, in the case of any such
dividend, distribution or option rights, the date on which the holders of Common
Shares shall be entitled thereto. Any notice relating to a Sale or Merger
Transaction shall also specify the date on which the holders of Common Shares
shall be entitled to exchange their Common Shares for securities or other
property deliverable upon such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation or winding-up, as the case may be. If the
Holder of the Warrant does not exercise this Warrant prior to the occurrence of
an event described above, except as provided in Section 13(a), the Holder shall
not be entitled to receive the benefits accruing to existing holders of the
Common Shares in such event.
(b) In case the Parent Company or Subsidiary Company
shall at any time effect a Sale or Merger Transaction in which the consideration
to be received by the Parent Company or the Subsidiary or their shareholders
consists in part of consideration other than cash, or shall issue any shares of
its capital stock in a reclassification of the CXI Common Stock, the holder of
this Warrant shall have the right thereafter to purchase, by exercise of action,
the kind and amount of shares and other securities and property which it would
have owned or have been
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<PAGE> 5
entitled to receive after happening of such transaction had this Warrant been
exercised immediately prior thereto.
12. Registration Rights. The Subsidiary Company shall use its
best efforts to file with the SEC not later than September 15, 1997 a shelf
registration statement under the Securities Act on Form S-3, if the Subsidiary
Company is eligible to file a registration statement under such form (and if the
Subsidiary Company is not eligible to file a registration statement under Form
S-3, to file with the SEC a registration statement under the Securities Act on
Form S-1 or any other form which is appropriate), to register the Conversion
Shares and Warrant Shares, and shall use its best efforts to cause such
registration statement to be declared effective by the SEC by not later than
December 15, 1997. Such registration statement will also cover shares issuable
upon conversion of Series A Preferred Stock of CXI sold by CXI pursuant to a
certain Stock Purchase Agreement dated as of August 15, 1997. In the event of
the failure of the Subsidiary Company to procure registration of the Warrant
Shares in accordance with Section 8.2(a) of the Agreement prior to any of the
dates set forth below in this Section 12, the Parent Company will pay to the
Investor by wire transfer, as liquidated damages for such failure and not as a
penalty, for each month or part thereof for which such failure continues or in
the event of a Suspension (as defined in Section 8.7 of the Agreement) after
such date, an amount equal to the following percentages of the product of the
Exercise Price and the number of Warrants held by the Investor which were
acquired by the Investor pursuant to the Agreement and have not been exercised
at such calculation date:
<TABLE>
<CAPTION>
<S> <C>
Required Effective Date Percentage
----------------------- ----------
On or before November 19, 1997 1%
Between November 20 and
December 19, 1997 2%
After December 20, 1997 3%
</TABLE>
If the Parent Company does not remit the damages to the Investor as set forth
above, the Parent Company will pay the Investor reasonable costs of collection,
including attorneys fees, in addition to the liquidated damages. Such payment
shall be made to the Investor if due, monthly in arrears. The payment of such
liquidated damages shall not relieve the Subsidiary Company from its obligations
to register the Conversion Shares and Warrant Shares and shall not affect or
limit Investor's other rights or remedies as set forth in this Warrant or the
Agreement. If not paid as required, interest on such damages will accrue at a
rate of 2% per month. Notwithstanding the foregoing, the liquidated damages
shall be limited to 1% per month or any portion thereof if the delay in
effectiveness of the registration statement beyond November 19, 1997 or the
Suspension thereafter shall be for reasons outside the control of the Parent
Company or the Subsidiary
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<PAGE> 6
Company. The obligations of the Parent Company and the Subsidiary Company under
this paragraph 12 shall cease and terminate upon the earlier to occur of (x)
such time as all of the Warrant Shares have been re-sold or (y) such time as all
of the Warrant Shares may be re-sold pursuant to Rule 144 under the Securities
Act
13. Adjustments of Exercise Price and Number of Warrant
Shares. The number and kind of securities purchasable upon the exercise of this
Warrant and the Exercise Price shall be subject to adjustment from time to time
upon the happening of certain events, as hereinafter set forth:
(a) In case the Subsidiary Company shall at any time subdivide
its outstanding shares of Common Stock ("CXI Common Shares") into a greater
number of CXI Common Shares or declare a dividend or distribution upon its CXI
Common Shares payable in CXI Common Shares, the Exercise Price in effect
immediately prior to such subdivision or declaration shall be proportionately
reduced, and the number of Warrant Shares transferable upon exercise of the
Warrants shall be proportionately increased. Conversely, in case the outstanding
CXI Common Shares of the Subsidiary Company shall be combined into a smaller
number of CXI Common Shares, the Exercise Price in effect immediately prior to
such combination shall be proportionately increased, and the number of Warrant
Shares issuable upon exercise of the Warrants shall be proportionately reduced.
(b) (x) In case the Subsidiary Company shall issue shares of
CXI Common Stock ("Additional Shares") or (y) in case the Subsidiary Company
shall issue rights, options or warrants to purchase shares of CXI Common Stock
or securities convertible into or exchangeable for CXI Common Stock, in any case
at a Price Per Share (as defined in paragraph (c) below) which is lower than the
price per share of CXI Common Stock (as reported by Bloomberg, L.P.
("Bloomberg") over the 5-day trading period ending on the day prior to the
Closing (the "Trigger Price"), the number of Warrant Shares hereafter
purchasable upon the exercise of this Warrant shall be determined by multiplying
the number of Warrant Shares theretofore purchasable upon exercise of this
Warrant by the following fraction:
(A)(i) The number of shares of CXI Common Stock outstanding immediately
prior to the issuance of such Additional Shares or rights, options, warrants or
convertible securities, plus (ii) the number of Additional Shares actually
subscribed for and purchased and shares of CXI Common Stock issuable upon
conversion or exercise of such rights, options, warrants, or convertible
securities, divided by
(B)(i) The number of shares of CXI Common Stock outstanding immediately
prior to issuance of such Additional Shares or rights, options, warrants or
convertible securities plus (ii) the number of shares of CXI Common Stock which
the aggregate Proceeds (as defined in paragraph (c) below) received by the
Subsidiary Company upon the sale of such Additional Shares or exercise or
conversion of such rights, options, warrants and convertible securities would
purchase at the Trigger Price.
Such adjustment shall be made whenever such Additional Shares or
rights, options, warrants or convertible securities are issued, and shall become
effective on the date of distribution
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<PAGE> 7
retroactive to the record date for the determination of stockholders entitled to
receive such rights, options or warrants.
(c) For purposes of this Section 13, "Price Per Share" shall
be defined and determined according to the following formula:
R
P = --------
N
where
P = Price Per Share,
R = the "Proceeds" received or receivable by the
Subsidiary Company which (i) in the case of shares of CXI
Common Stock is the total amount received or receivable by the
Subsidiary Company in consideration for the sale and issuance
of such shares; (ii) in the case of rights, options or
warrants to subscribe for or purchase shares of CXI Common
Stock or of securities convertible into or exchangeable or
exercisable for shares of CXI Common Stock, is the total
amount received or receivable by the Subsidiary Company in
consideration for the sale and issuance of such rights,
options, warrants or convertible or exchangeable or
exercisable securities, plus the minimum aggregate amount of
additional consideration, other than the surrender of such
convertible or exchangeable securities, payable to the CXI
Company upon exercise, conversion or exchange thereof; and
(iii) in the case of rights, options or warrants to subscribe
for or purchase convertible or exchangeable or exercisable
securities, is the total amount received or receivable by the
Subsidiary Company in consideration for the sale and issuance
of such rights, options or warrants, plus the minimum
aggregate amount of additional consideration other than the
surrender of such convertible or exchangeable securities,
payable upon the exercise, conversion or exchange of such
rights, options or warrants and upon the conversion or
exchange or exercise of the convertible or exchangeable or
exercisable securities; provided that in each case the
proceeds received or receivable by the Subsidiary Company
shall be deemed to be the gross cash proceeds without
deducting therefrom any compensation paid or discount allowed
in the sale, underwriting or purchase thereof by underwriters
or dealers or other performing similar services or any
expenses incurred in connection therewith,
and
N = the "Number of Shares," which (i) in the case of
CXI Common Stock is the number of shares issued; (ii) in the
case of rights, options or warrants to subscribe for or
purchase shares of CXI Common Stock or of securities
convertible into or exchangeable or exercisable for shares of
CXI Common Stock, is the maximum number of shares of CXI
Common Stock initially issuable upon
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<PAGE> 8
exercise, conversion or exchange thereof; and (iii) in the
case of rights, options or warrants to subscribe for or
purchase convertible or exchangeable or exercisable
securities, is the maximum number of shares of CXI Common
Stock initially issuable upon conversion, exchange or exercise
of the convertible, exchangeable or exercisable securities
issuable upon the exercise of such rights, options or
warrants.
If the Subsidiary Company shall issue shares of CXI Common
Stock or rights, options, warrants or convertible or exchangeable or exercisable
securities for a consideration consisting, in whole or in part, of property
other than cash, the amount of such consideration shall be determined in good
faith by the Board of Directors of the Subsidiary Company whose determination
shall be conclusive.
(d) Whenever the number of Warrant Shares purchasable upon the
exercise of this Warrant is adjusted, as herein provided, the Exercise Price
payable upon exercise of this Warrant shall be adjusted by multiplying such
Exercise Price immediately prior to such adjustment by a fraction, of which the
numerator shall be the number of Warrant Shares purchasable upon the exercise of
this Warrant immediately prior to such adjustment, and of which the denominator
shall be the number of Warrant Shares purchasable immediately thereafter.
(e) No adjustment in the number of Warrant Shares purchasable
hereunder shall be required unless such adjustment would result in an increase
or decrease of at least one percent (1%) of the Exercise Price; provided that
any adjustments which by reason of this paragraph (e) are not required to be
made shall be carried forward and taken into account in any subsequent
adjustment. All calculations shall be made to the nearest cent or to the nearest
one-thousandth of a share, as the case may be.
(f) No adjustment in the number of Warrant Shares purchasable
upon the exercise of this Warrant need be made under paragraph (b) or (c) if the
Subsidiary Company issues or distributes to the holder of this Warrant the
shares, rights, options, warrants or convertible or exchangeable securities, or
evidences of indebtedness or assets referred to in those paragraphs which the
holder of this Warrant would have been entitled to receive had this Warrant been
exercised prior to the happening of such event or the record date with respect
thereto. In no event shall the Subsidiary Company be required or obligated to
make any such distribution otherwise than in its sole discretion. No adjustment
in the number of Warrant shares purchasable upon the exercise of this Warrant
need be made for sales of CXI Common Stock pursuant to a Subsidiary Company plan
for reinvestment of dividends or interest. No adjustment need be made for a
change in the par value of the CXI Common Stock.
(g) In the event that at any time, as a result of an
adjustment made pursuant to paragraph (a) above, the holder of this Warrant
shall become entitled to purchase any securities of the Subsidiary Company other
than shares of CXI Common Stock, thereafter the number of such other shares so
purchasable upon exercise of this Warrant and the Exercise Price of such shares
shall be subject to adjustment from time to time in a manner and on terms as
nearly equivalent as practicable to the provisions with respect to the Warrant
Shares contained in paragraphs (a) through (g), inclusive, above.
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<PAGE> 9
14. Voluntary Adjustment by the Parent Company or the
Subsidiary Company. The Parent Company or the Subsidiary Company may at its
option, at any time during the term of this Warrant, reduce the then current
Exchange Price to any amount and for any period of time deemed appropriate by
the Board of Directors of the Parent Company or the Subsidiary Company.
15. Notice of Adjustment. Whenever the number of Warrant
Shares or number or kind of securities or other property purchasable upon the
exercise of this Warrant or the Exercise Price is adjusted, as herein provided,
the Parent Company or the Subsidiary Company shall promptly mail by registered
or certified mail, return receipt requested, to the transfer agent for the CXI
Common Stock and to the holder of this Warrant notice of such adjustment or
adjustments setting forth the number of Warrant Shares (and other securities or
property) purchasable upon the exercise of this Warrant and the Exercise Price
of such Warrant Shares after such adjustment, setting forth a brief statement of
the facts requiring such adjustment and setting forth computation by which such
adjustment was made. Such notice, in absence of manifest error, shall be
conclusive evidence of the correctness of such adjustment.
16. Authorized Shares. The Parent Company covenants that
during the period the Warrant is outstanding, it will reserve from its holdings
of CXI Common Stock a sufficient number of shares to provide for the transfer of
CXI Common Stock upon the exercise of any purchase rights under this Warrant.
Such reservation of shares of CXI Common Stock shall be in addition to those
shares of CXI Common Stock reserved pursuant to the Parent Company's Certificate
of Designation for its Series D Preferred Stock. The Parent Company and the
Subsidiary Company further covenant that the issuance of this Warrant shall
constitute full authority to their officers who are charged with the duty of
executing stock certificates to execute and issue the necessary certificates for
shares of the Subsidiary Company's Common Stock upon the exercise of the
purchase rights under this Warrant. The Parent Company and the Subsidiary
Company will take all such reasonable action as may be necessary to assure that
such shares of CXI Common Stock may be transferred and reissued as provided
herein without violation of any applicable law or regulation, or of any
requirements of AMEX or any domestic securities exchange upon which the CXI
Common Stock may be listed.
17. Restrictions on Exercise. Notwithstanding anything to the
contrary contained herein, no Warrants may be converted by a holder of Warrants
("Holders") to the extent that, after giving effect to the shares of CXI Common
Stock issued pursuant to the exercise hereof, the total number of shares of CXI
Common Stock deemed beneficially owned by such Holder (other than by virtue of
the ownership of shares of Series D Preferred Stock or Warrants or ownership of
other securities that have limitations on a Holder's rights to convert or
exercise similar to those limitations set forth herein), together with all
shares of CXI Common Stock deemed beneficially owned by Holder's "affiliates"
(as defined in Rule 144 under the 1933 Act) that would be aggregated for
purposes of determining whether a group under Section 13(d) of the Securities
Exchange Act of 1934, as amended, exists, would exceed 4.99% of the total issued
and outstanding shares of CXI Common Stock, provided that each Holder shall have
the right to waive this restriction, in whole or in part, immediately in case of
a pending Change in Control Transaction (as defined in the Agreement) and in any
other case upon 61 days prior to the exercise hereunder by Holder. The exercise
of all or part of this Warrant by any Holder shall
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<PAGE> 10
be deemed a representation by such Holder it is in compliance with this Section
17. A transferee of Warrants shall not be bound by this provision unless it
expressly agrees to be so bound. The term "deemed beneficially owned" as used in
this Section 17 shall exclude shares that might otherwise be deemed beneficially
owned by reason of the exercisability of the Warrants.
18. Miscellaneous.
(a) Issue Date. The provisions of this Warrant shall be
construed and shall be given effect in all respects as if it had been issued and
delivered by the Parent Company and the Subsidiary Company on the date hereof.
This Warrant shall be binding upon any successors or assigned of the Parent
Company and the Subsidiary Company. This Warrant shall constitute a contract
under the laws of New York and for all purposes shall be construed in accordance
with and governed by the laws of said state without regard to its conflict of
law, principles or rules.
(b) Restrictions. The holder hereof acknowledges that the CXI
Common Stock acquired upon the exercise of this Warrant, if not registered, may
have restrictions upon its resale imposed by state and federal securities laws.
(c) Modification and Waiver. This Warrant and any provisions
hereof may be changed, waived, discharged or terminated only by an instrument in
writing signed by the party against which enforcement of the same is sought.
(d) Notices. Any notice, request or other document required or
permitted to be given or delivered to the holders hereof or the Parent Company
or the Subsidiary Company shall be delivered or shall be sent by certified or
registered mail, postage prepaid, or by overnight courier or by facsimile to
each such holder at its address (or fax number) as shown on the books of the
Parent Company or the Subsidiary Company or to the Parent Company and the
Subsidiary Company at the addresses (or fax numbers) set forth in the Agreement.
19. Reset of Exercise Price of Warrants. Notwithstanding
anything to the contrary herein, the Exercise Price shall be reset on the first
anniversary of the date of issuance of this Warrant to an exercise price which
shall be equal to the lesser of (i) the exercise price in effect immediately
prior to such anniversary date, or (ii) 110% of the closing bid price of the CXI
Common Stock on the day immediately prior to such first anniversary date of
issuance. as reported by Bloomberg. Furthermore, if at any time after such first
anniversary, the closing price of the CXI Common Stock for any period of ten
(10) consecutive trading days or more shall be less than fifty percent (50%) of
the closing price of the CXI Common Stock on the day immediately preceding such
first anniversary, the Exercise Price shall be further reset to 50% of the
closing price of the CXI Common Stock on the day immediately prior to such first
anniversary. The aforesaid 50% reset provision shall be applicable, if at all,
on only one occasion. The foregoing reset provisions expire if the CXI Common
Stock trades at a price of $10.00 or more at any time, commencing ninety (90)
days after the effective date of the registration statement filed pursuant to
Section 8.2(a) of the Agreement. In the event that, at any time and from time to
time from and after the date hereof, there shall occur any stock dividend, stock
split, combination of shares, recapitalization or other such event relating to
the then outstanding CXI Common Stock, then all of the foregoing price
calculations and amounts will be appropriately arithmetically adjusted.
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<PAGE> 11
IN WITNESS WHEREOF, the Parent Company and the Subsidiary
Company have caused this Warrant to be executed by their officers thereunto duly
authorized. Dated: September , 1997
--
COMMODORE ENVIRONMENTAL SERVICES, INC.
By /s/ Paul E. Hannesson
-------------------------------------
COMMODORE APPLIED TECHNOLOGIES, INC.
By /s/ Michael D. Fullwood
-------------------------------------
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<PAGE> 12
ASSIGNMENT FORM
(To assign the foregoing warrant, execute
this form and supply required information.
Do not use this form to purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are
hereby
assigned to ____________________________________________________________________
whose address is _______________________________________________________________
Dated: _______________________
Holder's Signature: ______________________________
Holder's Address: ______________________________
______________________________
Signature Guaranteed: __________________________________________________________
NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant, without alteration or enlargement or any
change whatsoever, and must be guaranteed by a bank or trust company. Officers
of corporations and those acting in an fiduciary or other representative
capacity should file the proper evidence of authority to assign the foregoing
Warrant.
<PAGE> 13
[FORM OF ELECTION TO PURCHASE]
The undersigned hereby irrevocably elects to exercise the
right, represented by this Warrant Certificate, to purchase __________ Shares of
CXI Common Stock at an Exercise Price of $__________, and herewith tenders in
payment for such securities a certified check or official bank check payable in
New York Clearing House Funds to the order of Commodore Environmental Services,
Inc. in the amount of $___, all in accordance with the terms of the Stock
Purchase Warrant of Commodore Environmental Services, Inc. that a certificate
for such securities be registered in the name of _____________________________
whose address is ___________________________________________ and that such
Certificate be delivered to ___________________________ whose address is
_______________________________________________________________________________.
Dated: __________
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)
