SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1534
COMMODORE APPLIED TECHNOLOGIES, INC.
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(Name of Issuer)
Common Stock, par value $0.001 per share
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(Title of Class of Securities)
202630 10 9
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(CUSIP Number)
Stephen A. Weiss, Esq.
Greenberg Traurig
The MetLife Building
200 Park Avenue, 15th Floor
New York, New York 10166
(212) 801-9200
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(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
November 24, 1999
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(Date of Event Which Requires Filing of This Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition that is the subject of this Schedule 13D, and is filing
this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the
following box |_|.
Note. Schedules filed in paper format shall include a signed original
and five copies of the schedule, including all exhibits. See Rule 13d-7(b)
for other parties to whom copies are to be sent.
(Continued on following pages)
(Page 1 of 15 Pages)
<PAGE>
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CUSIP No. 202630 10 9 SCHEDULE 13D Page 2 of 15 Pages
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1 NAMES OF REPORTING PERSONS
S.S. OR I. R. S. IDENTIFICATION NO. OF ABOVE PERSONS (ENTITIES ONLY)
Commodore Environmental Services, Inc.
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) |_|
(b) |_|
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3 SEC USE ONLY
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4 SOURCE OF FUNDS
OO (See Item 3)
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM
2(d) or 2(e)
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
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NUMBER OF 7 SOLE VOTING POWER 29,867,217(1)
SHARES -------------------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER -0-
OWNED BY -------------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER 29,867,217(1)
REPORTING -------------------------------------------------------------
PERSON WITH 10 SHARED DISPOSITIVE POWER -0-
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
29,867,217(1)
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
|_|
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
65.8%(2)
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14 TYPE OF REPORTING PERSON
CO
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(1) Includes 14,410,540 shares of common stock, par value $0.001 per share, of
the Issuer (the "Common Stock") underlying currently exercisable warrants held
by Commodore Environmental Services, Inc. at exercise prices ranging from $1.28
per share to $7.03 per share (collectively, the "Environmental Warrants").
(2) Calculated on the basis of 45,371,336 shares of Common Stock of the Issuer
outstanding as of November 24, 1999, giving effect to the full exercise of the
Environmental Warrants.
<PAGE>
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CUSIP No. 202630 10 9 SCHEDULE 13D Page 3 of 15 Pages
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1 NAMES OF REPORTING PERSONS
S.S. OR I. R. S. IDENTIFICATION NO. OF ABOVE PERSONS (ENTITIES ONLY)
Bentley J. Blum
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) |_|
(b) |_|
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3 SEC USE ONLY
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4 SOURCE OF FUNDS
OO (See Item 3)
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM
2(d) or 2(e)
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States
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NUMBER OF 7 SOLE VOTING POWER 70,000(1)
SHARES -------------------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER 29,867,217(2)
OWNED BY -------------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER 70,000(1)
REPORTING -------------------------------------------------------------
PERSON WITH 10 SHARED DISPOSITIVE POWER 29,867,217(2)
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
29,937,217(1)(2)
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
|_|
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
65.9%(3)
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14 TYPE OF REPORTING PERSON
IN
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(1) Represents 70,000 shares of Common Stock of the Issuer underlying currently
exercisable stock options granted to Mr. Blum by the Issuer under the Issuer's
1998 Stock Option Plan. to Mr. Blum by the Issuer under the Issuer's 1998 Stock
Option Plan.
(2) Represents all of the shares of the Issuer's Common Stock beneficially owned
directly by Commodore Environmental Services, Inc., a Delaware corporation
("Environmental"). By virtue of Mr. Blum's beneficial ownership of approximately
52.0% of the issued and outstanding shares of Environmental common stock and his
status as one of two members of the Board of Directors of Environmental, Mr.
Blum is deemed to be the indirect beneficial owner of all of the 29,867,217
shares of the Issuer's Common Stock beneficially owned directly by Environmental
and shares voting and dispositive power with respect to such shares with the
other member of Environmental's Board of Directors.
(3) Calculated on the basis of 45,441,336 shares of Common Stock of the Issuer
outstanding as of November 24, 1999, giving effect to the full exercise of the
Environmental Warrants and the stock options to purchase 70,000 shares of Common
Stock of the Issuer held by Mr. Blum.
<PAGE>
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CUSIP No. 202630 10 9 SCHEDULE 13D Page 4 of 15 Pages
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1 NAMES OF REPORTING PERSONS
S.S. OR I. R. S. IDENTIFICATION NO. OF ABOVE PERSONS (ENTITIES ONLY)
Paul E. Hannesson
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) |_|
(b) |_|
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3 SEC USE ONLY
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4 SOURCE OF FUNDS
OO (See Item 3)
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM
2(d) or 2(e)
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States
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NUMBER OF 7 SOLE VOTING POWER 577,500(1)
SHARES -------------------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER 2,983,650(2)
OWNED BY -------------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER 577,500(1)
REPORTING -------------------------------------------------------------
PERSON WITH 10 SHARED DISPOSITIVE POWER 2,983,650(2)
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
3,561,150(1)(2)
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
|_|
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
7.8%(3)
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14 TYPE OF REPORTING PERSON
IN
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(1) Represents 577,500 shares of Common Stock of the Issuer underlying currently
exercisable stock options granted to Mr. Hannesson by the Issuer under the
Issuer's 1998 Stock Option Plan.
(2) Represents shares of the Issuer's Common Stock beneficially owned directly
by Environmental, which Mr. Hannesson is deemed to beneficially own indirectly
by virtue of his beneficial ownership of approximately 10.0% of the issued and
outstanding shares of Environmental common stock. Mr. Hannesson shares voting
and dispositive power with respect to such shares with the members of
Environmental's Board of Directors.
(3) Calculated on the basis of 45,948,836 shares of Common Stock of the Issuer
outstanding as of November 24, 1999, giving effect to the full exercise of the
Environmental Warrants and the stock options to purchase 577,500 shares of
Common Stock of the Issuer held by Mr. Hannesson.
<PAGE>
Item 1. Security and Issuer.
This Statement on Schedule 13D (the "Statement") relates to shares of
common stock, par value $0.001 per share (the "Common Stock"), of Commodore
Applied Technologies, Inc., a Delaware corporation (the "Issuer"). The principal
executive offices of the Issuer are located at 150 East 58th Street, Suite 3400,
New York, New York 10155.
Item 2. Identity and Background.
This Statement is being filed by: (i) Commodore Environmental Services,
Inc., a Delaware corporation ("Environmental"); (ii) Bentley J. Blum ("Blum");
and (iii) Paul E. Hannesson ("Hannesson").
I. Commodore Environmental Services, Inc.
2(a) Name: Commodore Environmental Services, Inc.
2(b) Place of Organization: Delaware
2(c)(i) Principal Business: Investing in diverse environmental,
chemical and other businesses with a focus on new
technologies that may have a significant impact upon their
markets.
2(c)(ii) Address of Principal Business: 150 East 58th Street, Suite
3400, New York, New York 10155.
2(c)(iii) Address of Principal Office: 150 East 58th Street, Suite
3400, New York, New York 10155.
2(d) Environmental has not, during the past five years, been
convicted in a criminal proceeding.
2(e) Environmental was not, during the past five years, a party
to a civil proceeding of a judicial or administrative body
of competent jurisdiction and as a result of such proceeding
was or is not subject to a judgment, decree or final order
enjoining future violations of, or prohibiting or mandating
activities subject to, federal or state securities laws or
finding any violation with respect to such laws.
II. Bentley J. Blum
2(a) Name: Bentley J. Blum
2(b) Business Address: 150 East 58th Street, Suite 3400, New
York, New York 10155.
2(c) Present Principal Occupation:
(i) Chairman of the Board, President and Chief Executive
Officer of Environmental. Environmental invests in diverse
environmental, chemical and other businesses with a focus on
new technologies that may have a significant impact upon
their markets. The address of Environmental is 150 East 58th
Street, Suite 3400, New York, New York 10155.
(ii) Director of the Issuer. The Issuer is an environmental
treatment and services company which, through its operating
subsidiaries, provides a range of technologies and services
directed principally at remediating contamination in soils
and other materials, and disposing or reusing certain waste
by-products through development of inert and environmentally
sound technologies. The address of the Issuer is 150 East
58th Street, Suite 3400, New York, New York 10155.
(iii) President of Berkshire Coal Corporation. Berkshire
Coal Corporation is a management company which primarily
manages investments in various oil and drilling ventures.
The address of Berkshire Coal Corporation is 150 East 58th
Street, Suite 3400, New York, New York 10155.
Page 5 of 15 Pages
<PAGE>
2(d) Mr. Blum has not, during the past five years, been convicted
in a criminal proceeding (excluding traffic violations or
similar misdemeanors).
2(e) Mr. Blum was not, during the past five years, a party to a
civil proceeding of a judicial or administrative body of
competent jurisdiction and as a result of such proceeding
was or is not subject to a judgment, decree or final order
enjoining future violations of, or prohibiting or mandating
activities subject to, federal or state securities laws or
finding any violation with respect to such laws.
2(f) Citizenship: United States
III. Paul E. Hannesson
2(a) Name: Paul E. Hannesson
2(b) Business Address: 150 East 58th Street, Suite 3400, New
York, New York 10155.
2(c) Present Principal Occupation:
(i) Chairman of the Board, President and Chief Executive
Officer of the Issuer, and an executive officer of certain
of the Issuer's operating subsidiaries. The Issuer is an
environmental treatment and services company which, through
its operating subsidiaries, provides a range of technologies
and services directed principally at remediating
contamination in soils and other materials, and disposing or
reusing certain waste by-products through development of
inert and environmentally sound technologies. The address of
the Issuer is 150 East 58th Street, Suite 3400, New York,
New York 10155.
(ii) Chairman of the Board and Chief Executive Officer of
Commodore Separation Technologies, Inc. ("Separation"), an
87% owned subsidiary of Commodore Environmental Services LLC
(wholly-owned by Environmental). Separation is an
environmental treatment and services company that offers a
technology directed at selectively extracting and recovering
solubilized metals, radionuclides, biochemicals and other
targeted elements from aqueous and possibly gaseous process
streams in degrees of concentration and purity that permit
both the reuse of such elements and the disposal of the
process water or gas as non-toxic effluent with little or no
further treatment. The address of Separation is 3240 Town
Point Drive, Suite 200, Kennesaw, Georgia 30144.
2(d) Mr. Hannesson has not, during the past five years, been
convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors).
2(e) Mr. Hannesson was not, during the past five years, a party
to a civil proceeding of a judicial or administrative body
of competent jurisdiction and as a result of such proceeding
was or is not subject to a judgment, decree or final order
enjoining future violations of, or prohibiting or mandating
activities subject to, federal or state securities laws or
finding any violation with respect to such laws.
2(f) Citizenship: United States
Item 3. Source and Amount of Funds or Other Consideration.
In March 1996, the Issuer was formed as a wholly-owned subsidiary of
Environmental. Prior to the Issuer's initial public offering in June 1996, in
exchange for the issuance of 15,000,000 shares of Common Stock of the Issuer
(representing 100% of the outstanding shares of Common Stock of the Issuer at
the time), Environmental contributed to the Issuer (i) all of the assets and
properties (including joint working proposals, quotations and bids in respect to
projects and contracts awarded for feasibility studies), subject to all of the
liabilities, of its operating divisions relating to certain environmental
remediation technologies and the exploitation of such technologies in all
commercial and governmental applications; (ii) all of the outstanding shares of
the capital stock of certain corporate entities engaged in similar businesses;
and (iii) a $3.0 million promissory note. As a result of the Issuer's initial
public offering in June 1996, Environmental's beneficial ownership interest in
the Issuer was reduced from 100% to 73%.
Page 6 of 15 Pages
<PAGE>
In December 1996, as part of a corporate restructuring to consolidate all
of its current environmental technology businesses within the Issuer,
Environmental transferred to the Issuer all of the capital stock of Separation
and Commodore CFC Technologies, Inc. In addition, Environmental assigned to the
Issuer notes aggregating $976,200 at December 2, 1996, representing advances
previously made by Environmental to Separation. In consideration for such
transfers, the Issuer paid Environmental $3.0 million in cash and issued to
Environmental a warrant expiring December 1, 2003 to purchase 7,500,000 shares
of Common Stock of the Issuer at an exercise price of $15.00 per share, valued
at $2.4 million. Such warrant was subsequently amended to, among other things,
reduce the exercise price thereof from $15.00 per share to $10.00 per share.
From May 1997 through February 1998, in a series of private transactions,
Environmental sold an aggregate of 6,801,856 of the 15,000,000 shares of Common
Stock of the Issuer that it owned to certain private investors.
In September 1997, Environmental provided a $4.0 million unsecured loan to
the Issuer, evidenced by the Issuer's 8% convertible subordinated note (the
"Convertible Note"). Pursuant to the terms of the Convertible Note, the Issuer
was obligated to pay Environmental interest only at the rate of 8% per annum,
payable quarterly. Unless converted into Common Stock of the Issuer at any time,
the unpaid principal amount of the Convertible Note was due and payable,
together with accrued and unpaid interest, on August 31, 2002. Payments of
principal and accrued interest under the Convertible Note was subordinated to
all other indebtedness for money borrowed of the Issuer. Environmental had the
right to convert the Convertible Note into shares of Common Stock of the Issuer
at a conversion price of $3.89 per share. Such conversion price was fixed at
approximately 85% of the five day average closing bid price of the Common Stock
($4.575 per share) prior to August 22, 1997, the date that the executive
committees of the respective Boards of Directors of Environmental and the Issuer
authorized such loan. In connection with the $4.0 million loan, the Issuer
issued Environmental a five-year warrant to purchase 1,000,000 shares of Common
Stock of the Issuer at an exercise price of $5.0325 per share (approximately
110% of the $4.575 five day average closing bid price of the Common Stock prior
to August 22, 1997).
In March 1998, the Issuer prepaid $2.0 million of the Convertible Note by
(i) paying Environmental the sum of $500,000 in cash and (ii) transferring to
Environmental a promissory note, dated August 30, 1996, in the principal amount
of $1.5 million. To induce Environmental to accept the Issuer's prepayment of
$2.0 million of the Convertible Note (and thereby give up the right to convert
$2.0 million of the Convertible Note into Common Stock of the Issuer), the
Issuer issued to Environmental an additional warrant to purchase up to 514,000
shares of Common Stock of the Issuer at an exercise price of $4.50 per share.
Such exercise price was fixed at approximately 110% of the closing sale price of
the Common Stock on February 20, 1998, the trading day immediately prior to the
date the Board of Directors of Environmental approved such prepayment. The
estimated fair value of such warrant is approximately $340,000.
In February 1998, Environmental provided a $5,450,000 unsecured loan to the
Issuer, evidenced by the Issuer's 8% non-convertible note (the "Intercompany
Note"). Pursuant to the terms of the Intercompany Note, interest on the unpaid
principal balance of the Intercompany Note was payable at the rate of 8% per
annum semiannually in cash. The unpaid principal amount of the Intercompany Note
was due and payable, together with accrued and unpaid interest, on the earlier
to occur of (a) December 31, 1999, or (b) consummation of any public offering or
private placement of securities of the Issuer with net proceeds aggregating in
excess of $6.0 million, other than in respect of working capital financing or
secured financing of assets received by the Issuer in the ordinary course of
business from any bank or other lending institution. In connection with the
loan, the Issuer amended and restated in its entirety the five-year warrant to
purchase 7,500,000 shares of Common Stock issued to Environmental on December 2,
1996 to, among other things, reduce the exercise price of the warrant from
$15.00 per share to $10.00 per share. In addition, the Issuer issued to
Environmental an additional five-year warrant to purchase 1,500,000 shares of
Common Stock of the Issuer at an exercise price of $10.00 per share. Such
warrant was subsequently amended to reduce the exercise price thereof from
$10.00 per share to $1.50 per share.
Effective September 28, 1998, the Issuer repaid the remaining balances on
the Convertible Note and the Intercompany Note, which totaled an aggregate of
$6,755,864, by (i) transferring 10,000,000 shares of Separation
Page 7 of 15 Pages
<PAGE>
common stock, representing 87% of Separation's outstanding common stock, to
Commodore Environmental Services, LLC, a Delaware limited liability company
wholly-owned by Environmental; (ii) issuing 20,909 shares of newly created 6%
Series B Convertible Preferred Stock, par value $0.001 per share (the "Series B
Preferred Stock"), 10,189 shares of newly created 6% Series C Convertible
Preferred Stock, par value $0.001 per share (the "Series C Preferred Stock"),
and 20,391 shares of newly created 6% Series D Convertible Preferred Stock, par
value $0.001 per share (the "Series D Preferred Stock"), of the Issuer to
Environmental; (iii) assigning to Environmental an account receivable due to the
Issuer from Separation in the amount of $357,000; and (vi) amending the warrant
held by Environmental to purchase 1,500,000 shares of Common Stock of the Issuer
to reduce the exercise price thereof from $10.00 per share to $1.50 per share.
Pursuant to certain anti-dilution provisions contained in the Environmental
Warrants, the respective per share exercise prices of and number of shares
subject to the Environmental Warrants were adjusted in November 1999 as follows:
<TABLE>
<CAPTION>
Number of Shares Number of Shares
Originally Adjusted Currently Issuable
Original Exercise Price Issuable on Exercise Exercise Price on Exercise
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<S> <C> <C> <C> <C>
12/96 Warrant $10.00 (as amended) 7,500,000 $7.03 10,675,168
09/97 Warrant $5.0325 1,000,000 $3.78 1,331,062
02/98 Warrant $1.50 (as amended) 1,500,000 $1.28 1,754,029
03/98 Warrant $4.50 514,000 $3.56 650,281
---------- ------------
TOTAL 10,514,000 14,410,540
========== ============
</TABLE>
On November 24, 1999, Environmental elected to convert all of the issued
and outstanding shares of Series B Preferred Stock, Series C Preferred Stock and
Series D Preferred Stock into an aggregate of 7,258,533 shares of Common Stock
of the Issuer, and such shares of Common Stock were issued to Environmental as
of that date.
As a result of the foregoing transactions, as of November 24, 1999,
Environmental was the beneficial owner of 29,867,217 shares of Common Stock of
the Issuer (including 14,410,540 shares of Common Stock underlying the
Environmental Warrants), representing approximately 65.8% of the issued and
outstanding shares of Common Stock of the Issuer as of such date, giving effect
to the full exercise of the Environmental Warrants.
Bentley J. Blum is the Chairman of the Board, President and Chief Executive
Officer of Environmental and a director of the Issuer. Mr. Blum is deemed to be
the beneficial owner of 29,937,217 shares of Common Stock of the Issuer,
representing approximately 65.9% of the issued and outstanding shares of common
stock of the Issuer as of such date (giving effect to the full exercise of the
Environmental Warrants and all options to purchase shares of Common Stock of the
Issuer held by Mr. Blum), by virtue of his beneficial ownership of: (i) 70,000
shares of Common Stock underlying currently exercisable stock options granted to
Mr. Blum by the Issuer under its 1998 Stock Option Plan; and (ii) 34,979,737
shares of Environmental common stock, which includes 4,500,000 shares of
Environmental common stock underlying currently exercisable stock options
granted to Mr. Blum by Environmental and 2,000,000 shares of Environmental
common stock owned of record by Mr. Blum's spouse (but excludes 450,400 shares
of Environmental common stock owned by Mr. Blum's mother and 385,000 shares of
Environmental common stock owned by Mr. Blum's father), collectively
representing approximately 52.0% of the issued and outstanding shares of
Environmental common stock as of November 24, 1999. Mr. Blum disclaims any
beneficial interest in the shares of Environmental common stock owned by his
spouse, mother and father. The Board of Directors of Environmental has the power
to direct the vote and to direct the disposition of the 29,867,217 shares of
Common Stock of the Issuer beneficially owned directly by Environmental.
Environmental's Board of Directors currently consists of two directors, one of
which is Mr. Blum. By virtue of Mr. Blum's beneficial ownership of approximately
52.0% of the issued and outstanding shares of Environmental common stock and his
Page 8 of 15 Pages
<PAGE>
status as one of two members of the Board of Directors of Environmental, Mr.
Blum is deemed to be the indirect beneficial owner of all of the 29,867,217
shares of the Issuer's Common Stock beneficially owned directly by Environmental
and shares voting and dispositive power with respect to such shares with the
other member of Environmental's Board of Directors.
Paul E. Hannesson is the Chairman of the Board, President and Chief
Executive Officer of the Issuer. Mr. Hannesson is deemed to be the beneficial
owner of 3,561,150 shares of Common Stock of the Issuer, representing
approximately 7.8% of the issued and outstanding shares of common stock of the
Issuer as of such date (giving effect to the full exercise of the Environmental
Warrants and all options to purchase shares of Common Stock of the Issuer held
by Mr. Hannesson), by virtue of his beneficial ownership of: (i) 577,500 shares
of Common Stock underlying currently exercisable stock options granted to Mr.
Hannesson by the Issuer under its 1998 Stock Option Plan; and (ii) 6,325,705
shares of Environmental common stock, which includes 2,650,000 shares of
Environmental common stock owned of record by Mr. Hannesson's spouse, 3,150,000
shares of Environmental common stock owned of record by the Hannesson Family
Trust for the benefit of Mr. Hannesson's spouse, son and daughter, and 525,705
shares of Environmental common stock underlying currently exercisable stock
options granted to Mr. Hannesson by Environmental (but excludes 1,000,000 shares
of Environmental common stock owned of record by each of Jon Paul and Krista
Hannesson, the adult children of Mr. Hannesson), collectively representing
approximately 10.0% of the issued and outstanding shares of Environmental common
stock as of November 24, 1999. Mr. Hannesson disclaims any beneficial interest
in the shares of Environmental common stock owned by or for the benefit of his
spouse and children. Mr. Hannesson also owns stock options to purchase an
aggregate of 2,400,000 shares of Common Stock of the Issuer, which were granted
to Mr. Hannesson in July 1999 by the Issuer under its 1998 Stock Option Plan.
Such options are not currently exercisable, nor are they exercisable within 60
days from November 24, 1999.
Item 4. Purpose of Transaction.
The Reporting Persons acquired their shares of Common Stock of the Issuer
for the purpose of investment in the Issuer and not with the view to, or for
sale in connection with, any distribution thereof. The Reporting Persons have no
present intention or plan to effect any distribution of their shares of Common
Stock. Such Reporting Persons from time to time may review the merits of their
investment in the Issuer and evaluate their options with respect thereto.
(a) All of the Reporting Persons may from time to time acquire additional
shares of Common Stock through open market purchases, but have no present
intention of doing so. Environmental may also acquire up to 14,410,540
additional shares of Common Stock of the Issuer, subject to adjustment, through
its exercise of the Environmental Warrants, and may acquire additional shares of
Common Stock of the Issuer through its exercise of any additional warrants to
purchase shares of Common Stock or other securities of the Issuer that may be
issued to Environmental in the future in connection with negotiated transactions
between the Issuer and Environmental. Bentley J. Blum may also acquire
additional shares of Common Stock through stock options or other securities
granted to Mr. Blum by the Issuer in connection with his service as a member of
the Board of Directors of the Issuer, including, without limitation, up to
70,000 shares of Common Stock of the Issuer, subject to adjustment, underlying
stock options granted to Mr. Blum under that certain stock option agreement,
dated as of December 15, 1998 (the "Blum Stock Option Agreement"). Paul E.
Hannesson may also acquire additional shares of Common Stock through stock
options or other forms of executive compensation granted to Mr. Hannesson by the
Issuer in connection with his service as Chairman of the Board, President and
Chief Executive Officer of the Issuer, including, without limitation, up to
577,500 shares of Common Stock of the Issuer, subject to adjustment, underlying
stock options granted to Mr. Hannesson under that certain stock option
agreement, dated as of December 15, 1998 (the "Hannesson Stock Option
Agreement").
Except as set forth in this Item 4, none of the Reporting Persons has any
plans or proposals which relate to or would result in any of the actions
specified in clauses (a) through (j) of Item 4 of Schedule 13D. Notwithstanding
the foregoing, each of the Reporting Persons reserves the right, depending on
all relevant factors, to change its intention with respect to any and all of the
matters referred to above.
Page 9 of 15 Pages
<PAGE>
Item 5. Interest in Securities of Issuer.
(a) As of November 24, 1999, Environmental was the beneficial owner of
29,867,217 shares of Common Stock of the Issuer (including 14,410,540 shares of
Common Stock underlying the Environmental Warrants), representing approximately
65.8% of the issued and outstanding shares of Common Stock of the Issuer as of
such date, giving effect to the full exercise of the Environmental Warrants.
As of November 24, 1999, Bentley J. Blum was deemed to be the beneficial
owner of 29,937,217 shares of Common Stock of the Issuer, representing
approximately 65.9% of the issued and outstanding shares of common stock of the
Issuer as of such date (giving effect to the full exercise of the Environmental
Warrants and all options to purchase shares of Common Stock of the Issuer held
by Mr. Blum), by virtue of his beneficial ownership of: (i) 70,000 shares of
Common Stock underlying currently exercisable stock options granted to Mr. Blum
by the Issuer under its 1998 Stock Option Plan; and (ii) 34,979,737 shares of
Environmental common stock, which includes 4,500,000 shares of Environmental
common stock underlying currently exercisable stock options granted to Mr. Blum
by Environmental and 2,000,000 shares of Environmental common stock owned of
record by Mr. Blum's spouse (but excludes 450,400 shares of Environmental common
stock owned by Mr. Blum's mother and 385,000 shares of Environmental common
stock owned by Mr. Blum's father), collectively representing approximately 52.0%
of the issued and outstanding shares of Environmental common stock as of
November 24, 1999. Mr. Blum disclaims any beneficial interest in the shares of
Environmental common stock owned by his spouse, mother and father. The Board of
Directors of Environmental has the power to direct the vote and to direct the
disposition of the 29,867,217 shares of Common Stock of the Issuer beneficially
owned directly by Environmental. Environmental's Board of Directors currently
consists of two directors, one of which is Mr. Blum. By virtue of Mr. Blum's
beneficial ownership of approximately 52.0% of the issued and outstanding shares
of Environmental common stock and his status as one of two members of the Board
of Directors of Environmental, Mr. Blum is deemed to be the indirect beneficial
owner of all of the 29,867,217 shares of the Issuer's Common Stock beneficially
owned directly by Environmental and shares voting and dispositive power with
respect to such shares with the other member of Environmental's Board of
Directors.
As of November 24, 1999, Paul E. Hannesson was deemed to be the beneficial
owner of 3,561,150 shares of Common Stock of the Issuer, representing
approximately 7.8% of the issued and outstanding shares of common stock of the
Issuer as of such date (giving effect to the full exercise of the Environmental
Warrants and all options to purchase shares of Common Stock of the Issuer held
by Mr. Hannesson), by virtue of his beneficial ownership of: (i) 577,500 shares
of Common Stock underlying currently exercisable stock options granted to Mr.
Hannesson by the Issuer under its 1998 Stock Option Plan; and (ii) 6,325,705
shares of Environmental common stock, which includes 2,650,000 shares of
Environmental common stock owned of record by Mr. Hannesson's spouse, 3,150,000
shares of Environmental common stock owned of record by the Hannesson Family
Trust for the benefit of Mr. Hannesson's spouse, son and daughter, and 525,705
shares of Environmental common stock underlying currently exercisable stock
options granted to Mr. Hannesson by Environmental (but excludes 1,000,000 shares
of Environmental common stock owned of record by each of Jon Paul and Krista
Hannesson, the adult children of Mr. Hannesson), collectively representing
approximately 10.0% of the issued and outstanding shares of Environmental common
stock as of November 24, 1999. Mr. Hannesson disclaims any beneficial interest
in the shares of Environmental common stock owned by or for the benefit of his
spouse and children. Mr. Hannesson also owns stock options to purchase an
aggregate of 2,400,000 shares of Common Stock of the Issuer, which were granted
to Mr. Hannesson in July 1999 by the Issuer under its 1998 Stock Option Plan.
Such options are not currently exercisable, nor are they exercisable within 60
days from November 24, 1999.
Except as set forth in response to this Item 5(a), none of the Reporting
Persons presently owns beneficially any shares of Common Stock.
(b) Environmental has sole voting and dispositive power with respect to all
of the 29,867,217 shares of Common Stock of the Issuer that it beneficially
owns.
Bentley J. Blum has sole voting and dispositive power with respect to
70,000 shares of Common Stock of the Issuer underlying currently exercisable
stock options granted to Mr. Blum by the Issuer under its 1998
Page 10 of 15 Pages
<PAGE>
Stock Option Plan. By virtue of Mr. Blum's beneficial ownership of approximately
52.0% of the issued and outstanding shares of Environmental common stock and his
status as one of two members of the Board of Directors of Environmental, Mr.
Blum is deemed to be the indirect beneficial owner of all of the 29,867,217
shares of the Issuer's Common Stock beneficially owned directly by Environmental
and shares voting and dispositive power with respect to such shares with Jerry
Karlik, the other member of Environmental's Board of Directors. Mr. Karlik's
business address is 150 East 58th Street, Suite 3400, New York, New York 10155,
and his present principal occupation is Vice President and director of
Environmental, a company engaged in investing in diverse environmental, chemical
and other businesses with a focus on new technologies that may have a
significant impact upon their markets. Environmental's address is 150 East 58th
Street, Suite 3400, New York, New York 10155. Mr. Karlik has not, during the
past five years, been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors). Mr. Karlik was not, during the past five
years, a party to a civil proceeding of a judicial or administrative body of
competent jurisdiction and as a result of such proceeding was or is not subject
to a judgment, decree or final order enjoining future violations of, or
prohibiting or mandating activities subject to, federal or state securities laws
or finding any violation with respect to such laws.
Paul E. Hannesson has sole voting and dispositive power with respect to
577,500 shares of Common Stock of the Issuer underlying currently exercisable
stock options granted to Mr. Hannesson by the Issuer under its 1998 Stock Option
Plan. By virtue of Mr. Hannesson's beneficial ownership of approximately 10.0%
of the issued and outstanding shares of Environmental common stock, Mr.
Hannesson is deemed to be the indirect beneficial owner of 2,983,650 shares of
the Issuer's Common Stock beneficially owned directly by Environmental and
shares voting and dispositive power with respect to such shares with Bentley J.
Blum and Jerry Karlik, the members of Environmental's Board of Directors. Mr.
Hannesson also has sole voting and dispositive power with respect to 2,400,000
shares of Common Stock of the Issuer underlying stock options granted to Mr.
Hannesson by the Issuer under its 1998 Stock Option Plan, which options are not
currently exercisable, nor are they exercisable within 60 days from November 24,
1999.
(c) On November 24, 1999, Environmental elected to convert all of the
issued and outstanding shares of Series B Preferred Stock, Series C Preferred
Stock and Series D Preferred Stock into an aggregate of 7,258,533 shares of
Common Stock of the Issuer, and such shares of Common Stock were issued to
Environmental as of that date. The Series B Preferred Stock was converted into
2,987,000 shares of Common Stock of the Issuer at a conversion price of $0.70
per share, the Series C Preferred Stock was converted into 1,358,533 shares of
Common Stock of the Issuer at a conversion price of $0.75 per share, and the
Series D Preferred Stock was converted into 2,913,000 shares of Common Stock of
the Issuer at a conversion price of $0.70 per share. The transaction was
effected in New York City on November 24, 1999 by Environmental's delivery to
the Issuer of a notice of conversion with respect to all of such preferred
stock, whereupon the Issuer caused its transfer agent to issue an aggregate of
7,258,533 shares of its Common Stock to Environmental as of such date.
(d) and (e). Not Applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships With
Respect to Securities of the Issuer.
I. Commodore Environmental Services, Inc.
Environmental is the holder of the following Environmental Warrants:
(i) Warrant to purchase 10,675,168 shares of Common Stock of the Issuer at
an exercise price of $7.03 per share, which expires on December 1, 2003. The
warrant was originally issued to Environmental in December 1996 as a warrant to
purchase 7,500,000 shares of Common Stock of the Issuer at an exercise price of
$15.00 per share. The warrant was subsequently amended in February 1998 to,
among other things, reduce the exercise price of the warrant from $15.00 per
share to $10.00 per share. Pursuant to certain anti-dilution provisions
contained in the warrant, in November 1999 the exercise price of warrant was
adjusted to reduce the exercise price from $10.00 per share to $7.03 per share,
and the number of shares of Common Stock of the Issuer subject to the warrant
was adjusted to increase the number of shares from 7,500,000 shares to
10,675,168 shares.
Page 11 of 15 Pages
<PAGE>
(ii) Warrant to purchase 1,331,062 shares of Common Stock of the Issuer at
an exercise price of $3.78 per share, which expires on August 31, 2002. The
warrant was originally issued to Environmental in September 1997 as a warrant to
purchase 1,000,000 shares of Common Stock of the Issuer at an exercise price of
$5.0325 per share. Pursuant to certain anti-dilution provisions contained in the
warrant, in November 1999 the exercise price of warrant was adjusted to reduce
the exercise price from $5.0325 per share to $3.78 per share, and the number of
shares of Common Stock of the Issuer subject to the warrant was adjusted to
increase the number of shares from 1,000,000 shares to 1,331,062 shares.
(iii) Warrant to purchase 1,754,029 shares of Common Stock of the Issuer at
an exercise price of $1.28 per share, which expires on February 9, 2004. The
warrant was originally issued to Environmental in February 1998 as a warrant to
purchase 1,500,000 shares of Common Stock of the Issuer at an exercise price of
$10.00 per share. The warrant was subsequently amended effective September 1998
to reduce the exercise price of the warrant from $10.00 per share to $1.50 per
share. Pursuant to certain anti-dilution provisions contained in the warrant, in
November 1999 the exercise price of warrant was adjusted to reduce the exercise
price from $1.50 per share to $1.28 per share, and the number of shares of
Common Stock of the Issuer subject to the warrant was adjusted to increase the
number of shares from 1,500,000 shares to 1,754,029 shares.
(iv) Warrant to purchase 650,281 shares of Common Stock of the Issuer at an
exercise price of $3.56 per share, which expires on March 31, 2003. The warrant
was originally issued to Environmental in March 1998 as a warrant to purchase
514,000 shares of Common Stock of the Issuer at an exercise price of $4.50 per
share. Pursuant to certain anti-dilution provisions contained in the warrant, in
November 1999 the exercise price of warrant was adjusted to reduce the exercise
price from $4.50 per share to $3.56 per share, and the number of shares of
Common Stock of the Issuer subject to the warrant was adjusted to increase the
number of shares from 514,000 shares to 650,281 shares.
II. Bentley J. Blum
Mr. Blum and the Issuer are parties to the Blum Stock Option Agreement, in
which the Issuer granted to Mr. Blum non-qualified stock options to purchase up
to 70,000 shares of Common Stock of the Issuer, subject to adjustment, under the
Issuer's 1998 Stock Option Plan. Pursuant to the terms of the Blum Stock Option
Agreement, the purchase price of the shares of Common Stock of the Issuer
underlying the stock options is $0.4375 per share, subject to adjustment, and
the stock options will expire on December 14, 2008, subject to earlier
termination or cancellation under certain circumstances.
III. Paul E. Hannesson
Mr. Hannesson and the Issuer are parties to the Hannesson Stock Option
Agreement, in which the Issuer granted to Mr. Hannesson non-qualified stock
options to purchase up to 577,500 shares of Common Stock of the Issuer, subject
to adjustment, under the Issuer's 1998 Stock Option Plan. Pursuant to the terms
of the Hannesson Stock Option Agreement, the purchase price of the shares of
Common Stock of the Issuer underlying the stock options is $0.4375 per share,
subject to adjustment, and the stock options will expire on December 14, 2008,
subject to earlier termination or cancellation under certain circumstances.
Mr. Hannesson and Environmental are parties to an employment agreement,
dated November 18, 1996, which employment agreement expires by its terms on
December 31, 1999 (the "Hannesson Employment Agreement"). Pursuant to the
Hannesson Employment Agreement, Mr. Hannesson agreed to devote his business and
professional time and efforts to the business of Environmental as a senior
executive officer, and to serve in senior executive positions with one or more
of Environmental's subsidiaries at the time, including the Issuer. The Hannesson
Employment Agreement provides that Mr. Hannesson shall receive, among other
things, a base salary at an annual rate of $395,000 through December 31, 1997,
and will receive not less than $434,500 through December 31, 1998 and not less
than $477,950 through December 31, 1999, for services rendered to Environmental
and certain of its affiliates, including the Issuer. Pursuant to the Hannesson
Employment Agreement, Mr. Hannesson received, among other things: (i) a signing
bonus of (a) $150,000 cash and (b) options to purchase 950,000 shares of
Page 12 of 15 Pages
<PAGE>
common stock of Environmental, which options vested on the date of his
employment agreement (such options were subsequently exchanged for 500,000
shares of Enironmental common stock issued to the Hannesson Family Trust); and
(ii) options to purchase an aggregate of 2,500,000 shares of Environmental
common stock exercisable in installments over a period of five years commencing
on the date of the Hannesson Employment Agreement, all of which options were
subsequently conceled. Mr. Hannesson also received options to purchase common
stock of the Issuer and Separation in the amount of 1.0% of each company's total
outstanding shares of common stock on the date of grant, and is eligible to
receive incentive compensation of up to $225,000 per year for achieving certain
goals. Pursuant to the terms of the Hannesson Employment Agreement, Mr.
Hannesson is entitled to participate in the bonus plans of the Issuer, which may
from time to time include additional grants of stock options or other securities
to Mr. Hannesson in connection with his service as an executive officer and
director of the Issuer, which securities may be exchangeable for shares of
Common Stock of the Issuer.
Except for the foregoing, there are no contracts, arrangements,
understandings or relationships (legal or otherwise) among the Reporting Persons
named in Item 2 above and between such persons and any person with respect to
Issuer's Common Stock.
The Environmental Warrants, the Blum Stock Option Agreement, the Hannesson
Stock Option Agreement and the Hannesson Employment Agreement are incorporated
herein by reference as Exhibits 1 through 7, and the descriptions herein of such
documents are qualified in their entirety by reference to such documents.
Page 13 of 15 Pages
<PAGE>
Item 7. Material to be Filed as Exhibits.
The following documents are being filed or incorporated by reference as
Exhibits to this Statement and are each incorporated by reference herein.
Exhibit No. Document
----------- --------
1 Warrant to purchase 10,675,168 shares of Common Stock of the
Issuer issued to Environmental. (1)
2 Warrant to purchase 1,331,062 shares of Common Stock of the
Issuer issued to Environmental. (2)
3 Warrant to purchase 1,754,029 shares of Common Stock of the
Issuer issued to Environmental. (3)
4 Warrant to purchase 650,281 shares of Common Stock of the
Issuer issued to Environmental. (*)
5 Non-qualified Stock Option Agreement, dated as of December
15, 1998, between the Issuer and Bentley J. Blum. (*)
6 Non-qualified Stock Option Agreement, dated as of December
15, 1998, between the Issuer and Paul E. Hannesson. (*)
7 Employment Agreement, dated November 18, 1996, between
Environmental and Mr. Hannesson. (4)
8 Agreement of Joint Filing, dated December 6, 1999, by and
among Environmental, Bentley J. Blum and Paul E. Hannesson.
(*)
- ----------
(*) Filed herewith.
(1) Incorporated by reference and filed as an Exhibit to the Issuer's Current
Report on Form 8-K filed with the Securities and Exchange Commission on
February 23, 1998 (File No. 1-11871).
(2) Incorporated by reference and filed as an Exhibit to the Issuer's Current
Report on Form 8-K filed with the Securities and Exchange Commission on
October 3, 1997.
(3) Incorporated by reference and filed as an Exhibit to the Issuer's Current
Report on Form 8-K filed with the Securities and Exchange Commission on
January 5, 1999.
(4) Incorporated by reference and filed as an Exhibit to the Environmental's
Annual Report on Form 10-K for the year ended December 31, 1996, filed with
the Securities and Exchange Commission on April 15, 1997 (File No.
0-10054).
Page 14 of 15 Pages
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, the
undersigned do hereby certify that the information set forth in this statement
is true, complete and correct.
Dated: December 6, 1999
COMMODORE ENVIRONMENTAL SERVICES, INC.
By: /s/ BENTLEY J. BLUM
---------------------------------------
Name: Bentley J. Blum
Title: Chairman of the Board, President and
Chief Executive Officer
By: /s/ BENTLEY J. BLUM
---------------------------------------
BENTLEY J. BLUM
By: /s/ PAUL E. HANNESSON
--------------------------------------------
PAUL E. HANNESSON
Page 15 of 15 Pages
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Document
----------- --------
1 Warrant to purchase 10,675,168 shares of Common Stock of the
Issuer issued to Environmental. (1)
2 Warrant to purchase 1,331,062 shares of Common Stock of the
Issuer issued to Environmental. (2)
3 Warrant to purchase 1,754,029 shares of Common Stock of the
Issuer issued to Environmental. (3)
4 Warrant to purchase 650,281 shares of Common Stock of the
Issuer issued to Environmental. (*)
5 Non-qualified Stock Option Agreement, dated as of December
15, 1998, between the Issuer and Bentley J. Blum. (*)
6 Non-qualified Stock Option Agreement, dated as of December
15, 1998, between the Issuer and Paul E. Hannesson. (*)
7 Employment Agreement, dated November 18, 1996, between
Environmental and Mr. Hannesson. (4)
8 Agreement of Joint Filing, dated December 6, 1999, by and
among Environmental, Bentley J. Blum and Paul E. Hannesson.
(*)
- ----------
(*) Filed herewith.
(1) Incorporated by reference and filed as an Exhibit to the Issuer's Current
Report on Form 8-K filed with the Securities and Exchange Commission on
February 23, 1998 (File No. 1-11871).
(2) Incorporated by reference and filed as an Exhibit to the Issuer's Current
Report on Form 8-K filed with the Securities and Exchange Commission on
October 3, 1997.
(3) Incorporated by reference and filed as an Exhibit to the Issuer's Current
Report on Form 8-K filed with the Securities and Exchange Commission on
January 5, 1999.
(4) Incorporated by reference and filed as an Exhibit to the Environmental's
Annual Report on Form 10-K for the year ended December 31, 1996, filed with
the Securities and Exchange Commission on April 15, 1997 (File No.
0-10054).
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. __ 514,000 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"), 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 March 31, 2003, New York time (the
"Exercise Period"), Five Hundred Fourteen Thousand (514,000) shares, par value
$.001 per share, of the Company ("Common Stock"), at an exercise price of $4.50
per share (the "Exercise Price"). This Warrant is being issued in consideration
of the Holder's acceptance of the Company's partial prepayment of $2.0 million
in principal amount of the Company's 8% convertible subordinated note due August
31, 2002, evidencing the Holder's $4.0 million unsecured loan to the Company in
September 1997. 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, as follows:
(a) by the surrender of this Warrant (with the form of election at the
end hereof duly executed) to the Company at its office as set forth in the
form of election attached hereto, or at such other place as is designated
in writing by the Company, together with a certified or bank cashier's
check payable to the order of the Company in an amount equal to the
Exercise Price multiplied by the number of respective Warrant Shares for
which this Warrant is being exercised; or
1
<PAGE>
(b) by surrender of this Warrant (with the notice of cashless exercise
at the end hereof duly executed) to the Company at its office as set forth
in the notice of cashless exercise attached hereto, or at such other place
as is designated in writing by the Company, in which event the Company
shall issue to the Holder the number of Warrant Shares determined as
follows:
X = Y (A-B)/A
where:
X = the number of Warrant Shares to be issued to the Holder.
Y = the number of Warrant Shares with respect to which this
Warrant is being exercised.
A = the closing sale price of the Common Stock for the trading
day immediately prior to the date of exercise.
B = the Exercise Price.
2. Upon each exercise of the Holder's rights to purchase Warrant Shares,
either pursuant to Section 1(a) or (b) above, the Holder shall be deemed to be
the holder of record of the Warrant Shares issuable upon such exercise,
notwithstanding that the transfer books of the Company shall then be closed or
certificates representing such Warrant Shares shall not then have been actually
delivered to the Holder. For purposes of Rule 144 promulgated under the
Securities Act of 1933, as amended (the "Act"), it is intended, understood and
acknowledged that the Warrant Shares issued in a cashless exercise transaction
pursuant to Section 1(b) above shall be deemed to have been acquired by the
Holder, and the holding period for the Warrant Shares shall be deemed to have
been commenced, on the issue date of the Warrant. 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
2
<PAGE>
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 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 if such exercise is pursuant to Section 1(a) above, or
upon receipt by the Company of the notice of cashless exercise duly executed if
such exercise is pursuant to Section 1(b) above, shall be validly issued, fully
paid, nonassessable, and free of preemptive rights.
5. (a) In case the Company shall at any time after the date the Warrants
were first issued (i) declare a dividend on the outstanding Common Stock payable
in shares of its capital stock, (ii) subdivide the outstanding Common Stock,
(iii) combine the outstanding Common Stock into a smaller number of shares, or
(iv) issue any shares of its capital stock by reclassification of the Common
Stock (including any such reclassification in connection with a consolidation or
merger in which the Company is the continuing corporation), then, in each case,
the Exercise Price, and the number of Warrant Shares issuable upon exercise of
this Warrant, in effect at the time of the record date for such dividend or of
the effective date of such subdivision, combination, or reclassification, shall
be proportionately adjusted so that the Holder after such time shall be entitled
to receive the aggregate number and kind of shares which, if such Warrant had
been exercised immediately prior to such time, he would have owned upon such
exercise and 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
3
<PAGE>
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 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
4
<PAGE>
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 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
5
<PAGE>
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 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
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<PAGE>
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 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
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
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
7
<PAGE>
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
to effect any liquidation, dissolution, or winding-up of the Company;
or
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-8, or 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
8
<PAGE>
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 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
9
<PAGE>
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 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:
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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;
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;
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;
the Company's obligation to include any Registrable Securities in a
registration statement shall be subject to the written agreement of each
holder thereof to offer such securities in the same manner and on the same
terms and conditions as the other securities of the same class are being
offered pursuant to the registration statement, if such shares are being
underwritten;
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
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.
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(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.
(j) 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 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
12
<PAGE>
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 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,
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<PAGE>
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 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
14
<PAGE>
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 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
15
<PAGE>
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.
Dated: As of March 31, 1998 COMMODORE APPLIED TECHNOLOGIES, INC.
By: /s/ MICHAEL D. FULLWOOD
-------------------------------------
Name: Michael D. Fullwood
Title: Senior Vice President, Chief
Financial and Administrative
Officer, Secretary and General
Counsel
16
<PAGE>
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to
transfer the attached Warrant.)
FOR VALUE RECEIVED, ______________________________ hereby sells, assigns,
and transfers unto _____________________ a Warrant to purchase Shares, par value
$.001 per share, of Commodore Applied Technologies, Inc. (the "Company"),
together with all right, title, and interest therein, and does hereby
irrevocably constitute and appoint ___________________ attorney to transfer such
Warrant on the books of the Company, with full power of substitution.
Dated: ________________________
Signature _____________________
NOTICE
The signature on the foregoing Assignment must correspond to the name as
written upon the face of this Warrant in every particular, without alteration or
enlargement or any change whatsoever.
17
<PAGE>
To: Commodore Applied Technologies, Inc.
150 East 58th Street, Suite 3400
New York, New York 10155
ELECTION TO EXERCISE
The undersigned hereby exercises its rights to purchase ______________
Warrant Shares covered by the within warrant and tenders payment herewith in the
amount of $ _____________ in accordance with the terms thereof, and requests
that certificates for such securities be issued in the name of, and delivered
to:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print Name, Address and Social Security
or Tax Identification Number)
and, if such number of Warrant Shares shall not be all the Warrant Shares
covered by the within Warrant, that a new Warrant for the balance of the Warrant
Shares covered by the within Warrant be registered in the name of, and delivered
to, the undersigned at the address stated below.
Dated:_________________________ Name ____________________________
(Print)
Address: _______________________________________________________________________
____________________________
(Signature)
18
<PAGE>
To: Commodore Applied Technologies, Inc.
150 East 58th Street, Suite 3400
New York, New York 10155
NOTICE OF CASHLESS EXERCISE
(To be executed upon exercise of warrant
pursuant to Section 1(b))
The undersigned hereby irrevocably elects to exchange its Warrant for
___________ Warrant Shares pursuant to the cashless exercise provisions of the
within Warrant, as provided for in Section 1(b) of such Warrant, and requests
that a certificate or certificates for such Warrant Shares 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 which
the undersigned is entitled to purchase in accordance with 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)
(Signature must conform in
all respects to the name of
the Holder as specified on
the face of the Warrant)
19
NON-QUALIFIED STOCK OPTION AGREEMENT
AGREEMENT made as of the 15th day of December (the "Date of Grant") between
Commodore Applied Technologies, Inc., a Delaware corporation (hereinafter
referred to as the "Company"), and Bentley J. Blum, residing at 150 E. 58th
Street, Suite 3400, New York, NY, 10155 (hereinafter referred to as the
"Director").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company desires, in accordance with its 1998 Stock Option Plan
(the "Plan"), to provide the Director with an opportunity to acquire Common
Stock, $0.001 par value (hereinafter referred to as "Common Stock"), of the
Company on favorable terms and thereby increase his proprietary interest in the
continued progress and success of the business of the Company;
NOW, THEREFORE, in consideration of the premises, the mutual covenants
herein set forth and other good and valuable consideration, the Company and the
Director hereby agree as follows:
1. Confirmation of Grant of Option. Pursuant to a determination by the
Board of Directors of the Company, the Company, subject to the terms of the Plan
and this Agreement, hereby grants to the Director as a matter of separate
inducement and agreement, and in addition to and not in lieu of salary or other
compensation for services, the right to purchase (hereinafter referred to as the
"Option") an aggregate of 70,000 shares of Common Stock, subject to adjustment
as provided in the Plan (such shares, as adjusted, hereinafter being referred to
as the "Shares"). The Option is not intended to qualify as an incentive stock
option under Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code").
2. Purchase Price. The purchase price of shares of Common Stock covered by
the Option will be $0.4375 per share, subject to adjustment as provided in the
Plan.
3. Exercise of Option. (a) In accordance with the provisions of Section 21
hereof, by his execution and delivery hereof, the Director agrees to cancel all
prior options to acquire shares of Common Stock ("Prior Options"). The Option
shall be exercisable on the terms and conditions set forth and in accordance
with the vesting schedule applicable to the Prior Options, as though the Option
had been granted at the time of the grant of the Prior Options.
(b) The Option may be exercised pursuant to the provisions of this Section
3, by notice and payment to the Company as provided in Sections 9 and 14 hereof.
4. Term of Option. The term of the Option shall be a period of ten (10)
years from the Date of Grant, subject to earlier termination or cancellation as
provided in this Agreement.
<PAGE>
This Option, to the extent unexercised, shall expire on the day immediately
prior to the tenth (10th) anniversary of the Date of Grant. The holder of the
Option shall not have any rights to dividends or any other rights of a
stockholder with respect to any shares of Common Stock subject to the Option
until such shares shall have been issued to him (as evidenced by the appropriate
entry on the books of the Company or a duly authorized transfer agent of the
Company) provided that the date of issuance shall not be earlier than the date
this Option is exercised and payment of the full purchase price of the shares of
Common Stock (with respect to which this Option is exercised) is made to the
Company.
5. Non-transferability of Option. The Option shall not be assigned,
transferred or otherwise disposed of, or pledged or hypothecated in any way, and
shall not be subject to execution, attachment or other process, except as may be
provided in the Plan. Any assignment, transfer, pledge, hypothecation or other
disposition of the Option attempted contrary to the provisions of the Plan, or
any levy of execution, attachment or other process attempted upon the Option,
will be null and void and without effect. Any attempt to make any such
assignment, transfer, pledge, hypothecation or other disposition of the Option
will cause the Option to terminate immediately upon the happening of any such
event; provided, however, that any such termination of the Option under the
foregoing provisions of this Section 5 will not prejudice any rights or remedies
which the Company or any Parent or Subsidiary may have under this Agreement or
otherwise.
6. Exercise Upon Termination of Service as a Director. If the Director at
any time ceases to be a Director of the Company by reason of his removal as a
Director, the Option shall, at the time of such removal, terminate and the
Director shall forfeit all rights hereunder. If, however, the Director for any
other reason (other than Disability or death) ceases to be such an Director, the
Option may, subject to the provisions of Section 5 hereof, be exercised by the
Director to the same extent the Director would have been entitled under Section
3 hereof to exercise the Option immediately prior to such the termination of his
services as a Director, at any time within 30 days after such termination, at
the end of which period the Option, to the extent not then exercised, shall
terminate and the Director shall forfeit all rights hereunder, even if the
Director subsequently serves as a Director of the Company. In no event, however,
may the Option be exercised after the expiration of the term provided in Section
4 hereof.
7. Exercise Upon Death or Disability. (a) If the Director dies while he is
a Director of the Company, the Option may, subject to the provisions of Section
5 hereof, be exercised with respect to all or any part of the shares of Common
Stock as to which the deceased Director had not exercised the Option at the time
of his death (regardless of whether the option was fully exercisable at such
time) by the estate of the Director (or by the person or persons who acquire the
right to exercise the Option by written designation of the Director) at any time
within 90 days after the death of the Director, at the end of which period the
Option, to the extent not then exercised, shall terminate and the estate or
other beneficiaries shall forfeit all rights hereunder. In no event, however,
may the Option be exercised after the expiration of the term provided in Section
4 hereof.
<PAGE>
8. Registration. At the time of issuance, the shares of Common Stock
subject hereto and issuable upon the exercise hereof may not be registered under
the Securities Act of 1933, as amended, and, if required upon the request of
counsel to the Company, the Director will give a representation as to his
investment intent with respect to such shares prior to their issuance as set
forth in Section 8 hereof. The Company may register or qualify the shares
covered by the Option for sale pursuant to the Securities Act of 1933, as
amended, at any time prior to or after the exercise in whole or in part of the
Option.
9. Method of Exercise of Option. (a) Subject to the terms and conditions of
this Agreement, the Option shall be exercisable by notice in the manner set
forth in Exhibit A hereto (the "Notice") and provision for payment to the
Company in accordance with the procedure prescribed herein. Each such Notice
shall:
(i) state the election to exercise the Option and the number of Shares
with respect to which it is being exercised;
(ii) contain a representation and agreement as to investment intent,
if required by counsel to the Company with respect to such Shares, in a
form satisfactory to counsel to the Company;
(iii) be signed by the Director or the person or persons entitled to
exercise the Option and, if the Option is being exercised by any person or
persons other than the Director, be accompanied by proof, satisfactory to
counsel to the Company, of the right of such other person or persons to
exercise the Option;
(iv) include payment of the full purchase price for the shares of
Common Stock to be purchased pursuant to such exercise of the Option; and
(v) be received by the Company on or before the date of the expiration
of this Option. In the event the date of expiration of this Option falls on
a day which is not a regular business day at the Company's executive office
in New York, New York then such written Notice must be received at such
office on or before the last regular business day prior to such date of
expiration.
(b) Payment of the purchase price of any shares of Common Stock, in respect
of which the Option shall be exercised, shall be made by the Director or such
person or persons at the place specified by the Company on the date the Notice
is received by the Company (i) by delivering to the Company a certified or bank
cashier's check payable to the order of the Company, (ii) if consented to by the
Company in writing, by delivering to the Company properly endorsed certificates
of shares of Common Stock (or certificates accompanied by an appropriate stock
power) with signature guaranties by a bank or trust company, (iii) by having
withheld from the total number of shares of Common Stock to be acquired upon the
exercise of this Option a specified number of such shares of Common Stock, (iv)
by any form of "cashless" exercise or (v) by any combination of the foregoing.
For purposes of the immediately preceding sentence, an
<PAGE>
exercise effected by the tender of the Common Stock (or deemed to be effected by
the tender of Common Stock) may be consummated only with Common Stock (i) held
by the Director for six (6) months or (ii) acquired by the Director other than
under the Plan (or a similar plan maintained by the Company).
(c) The Option shall be deemed to have been exercised with respect to any
particular shares of Common Stock if, and only if, the preceding provisions of
this Section 9 and the provisions of Section 10 hereof shall have been complied
with, in which event the Option shall be deemed to have been exercised on the
date the Notice and related payment were received by the Company. Anything in
this Agreement to the contrary notwithstanding, any Notice given pursuant to the
provisions of this Section 9 shall be void and of no effect if all of the
preceding provisions of this Section 9 and the provisions of Section 10 shall
not have been complied with.
(d) The certificate or certificates for shares of Common Stock as to which
the Option shall be exercised will be registered in the name of the Director (or
in the name of the Director's estate or other beneficiary if the Option is
exercised after the Director's death), or if the Option is exercised by the
Director and if the Director so requests in the notice exercising the Option,
will be registered in the name of the Director and another person jointly, with
right of survivorship and will be delivered as soon as practical after the date
the Notice is received by the Company (accompanied by full payment of the
exercise price), but only upon compliance with all of the provisions of this
Agreement.
(e) If the Director fails to accept delivery of and pay for all or any part
of the number of Shares specified in such Notice, his right to exercise the
Option with respect to such undelivered Shares may be terminated in the sole
discretion of the Committee. The Option may be exercised only with respect to
full Shares.
(f) The Company shall not be required to issue or deliver any certificate
or certificates for shares of its Common Stock purchased upon the exercise of
any part of the Option prior to the payment to the Company, upon its demand, of
any amount requested by the Company for the purpose of satisfying its liability,
if any, to withhold federal, state or local income or earnings tax or any other
applicable tax or assessment (plus interest or penalties thereon, if any, caused
by a delay in making such payment) incurred by reason of the exercise of this
Option or the transfer of shares thereupon. Such payment shall be made by the
Director in cash or, with the written consent of the Company, by tendering to
the Company shares of Common Stock equal in value to the amount of the required
withholding. In the alternative, the Company may, at its option, satisfy such
withholding requirements by withholding from the shares of Common Stock to be
delivered to the Director pursuant to an exercise of the Option a number of
shares of Common Stock equal in value to the amount of the required withholding.
10. Approval of Counsel. The exercise of the Option and the issuance and
delivery of shares of Common Stock pursuant thereto shall be subject to approval
by the Company's counsel of all legal matters in connection therewith,
including, but not limited to, compliance with the requirements of the
Securities Act of 1933, as amended, and the Securities
<PAGE>
Exchange Act of 1934, as amended, and the rules and regulations thereunder, and
the requirements of any stock exchange or automated trading medium upon which
the Common Stock may then be listed or traded.
11. Resale of Common Stock. (a) If so requested by the Company, upon any
sale or transfer of the Common Stock purchased upon exercise of the Option the
Director shall deliver to the Company an opinion of counsel satisfactory to the
Company to the effect that either (i) the Common Stock to be sold or transferred
has been registered under the Securities Act of 1933, as amended, and that there
is in effect a current prospectus meeting the requirements of Section 10(a) of
said Act which is being or will be delivered to the purchaser or transferee at
or prior to the time of delivery of the certificates evidencing the Common Stock
to be sold or transferred, or (ii) such Common Stock may then be sold without
violating Section 5 of said Act.
(b) The Common Stock issued upon exercise of the Option shall bear the
following (or similar) legend if required by counsel for the Company:
THE SHARES EVIDENCED BY THIS CERTIFICATE MAY NOT BE SOLD,
TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF
UNLESS THEY HAVE FIRST BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR UNLESS, IN THE OPINION OF COUNSEL FOR THE
COMPANY, SUCH REGISTRATION IS NOT REQUIRED.
12. Reservation of Shares. The Company shall at all times during the term
of the Option reserve and keep available such number of shares of the Common
Stock as will be sufficient to satisfy the requirements of this Agreement.
13. Limitation of Action. The Director and the Company each acknowledges
that every right of action accruing to him or it, as the case may be, and
arising out of or in connection with this Agreement against the Company, on the
one hand, or against the Director, on the other hand, shall, irrespective of the
place where an action may be brought, cease and be barred by the expiration of
three years from the date of the act or omission in respect of which such right
of action arises.
14. Notices. Each notice relating to this Agreement shall be in writing and
delivered in person, by recognized overnight carrier or by certified mail to the
proper address. All notices to the Company or the Committee shall be addressed
to them at 150 E. 58th Street, New York, NY 10155-1596, Attn: President. All
notices to the Director shall be addressed to the Director or such other person
or persons at the Director's address above specified. Anyone to whom a notice
may be given under this Agreement may designate a new address by notice to that
effect.
15. Benefits of Agreement. This Agreement shall inure to the benefit of the
<PAGE>
Company, the Director and their respective heirs, executors, administrators,
personal representatives, successors and assigns.
16. Severability. In the event that any one or more provisions of this
Agreement shall be deemed to be illegal or unenforceable, such illegality or
unenforceability shall not affect the validity and enforceability of the
remaining legal and enforceable provisions hereof, which shall be construed as
if such illegal or unenforceable provision or provisions had not been inserted.
17. Governing Law. This Agreement will be construed and governed in
accordance with the laws of the State of Delaware.
18. Service as a Director. Nothing contained in this Agreement shall be
construed as (a) a contract of employment between the Director and the Company,
(b) as a right of the Director to continue as a Director of the Company beyond
the term for which he has been elected, or (c) as a limitation of the right of
the Company to remove the Director at any time, in accordance with applicable
law and the Company's by-laws.
19. Definitions. Unless otherwise defined herein, all capitalized terms
used in this Agreement shall have the same definitions as set forth in the Plan.
20. Incorporation of Terms of Plan. This Agreement shall be interpreted
under, and subject to, all of the terms and provisions of the Plan, which are
incorporated herein by reference.
21. Cancellation of Prior Option. By executing this Agreement the Director
hereby agrees that effective as of December 15, 1998, of all of his rights under
the Option(s) granted to him pursuant to the Amended and Restated Commodore
Applied Technologies, Inc. 1996 Stock Option Plan are hereby cancelled.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the Date
of Grant set forth above.
Commodore Applied Technologies, Inc.
By: /s/ PAUL E. HANNESSON
--------------------------
Name: Paul E. Hannesson
Title: Chairman of the Board
Name: Bentley J. Blum
<PAGE>
###-##-####
-----------------------------------
Social Security Number
ATTEST:
- -------------------------
<PAGE>
EXHIBIT A
NON-QUALIFIED STOCK OPTION EXERCISE FORM
[DATE]
Commodore Applied Technologies, Inc.
150 E. 58th Street, Suite 3400
New York, NY 10155-1596
Attention: President
Dear Sirs:
Pursuant to the provisions of the Non-Qualified Stock Option Agreement
dated [ ] (the "Agreement"), whereby you have granted to me a Non-Qualified
Option (the "Option") to purchase up to [ ] shares of the Common Stock of [ ]
(the "Company") subject to the terms of the Agreement, I hereby notify you that
I elect to exercise my option to purchase [ ] of the shares of Common Stock
covered by such Option at the $0.4375 per share price specified therein. In full
payment of the price for the shares being purchased hereby, I am delivering to
you herewith (i) certified or bank cashier's check payable to the order of the
Company in the amount of $____________,(1) or (ii) a certificate or certificates
for [ ] shares of Common Stock of the Company, and which have a fair market
value as of the date hereof of $___________, [and a certified or bank cashier's
check, payable to the order of the Company, in the amount of
$________________].(2) Any such stock certificate or certificates are endorsed,
or accompanied by an appropriate stock power, to the order of the Company, with
my signature guaranteed by a bank or trust company or by a member firm of the
New York Stock Exchange. I hereby acknowledge that I am purchasing these shares
for investment purposes only and not for resale in violation of any federal or
state securities laws.
Very truly yours,
------------------------------
[Address]
(For notices, reports, dividend
checks and other communications
to stockholders.)
- --------
1 $_____________ of this amount is the purchase price of the shares, and the
balance represents payment of withholding taxes as follows: Federal
$_____________, State $_________ and Local $_______.
2 $_____________ of this amount is at least equal to the current market value
of one share of Common Stock of the Company, and the balance represents
payment of withholding taxes as follows: Federal $________, State $_______
and Local $______.
<PAGE>
OPTION NO. _______________
================================================================================
Commodore Applied Technologies, Inc.
1998 Stock Option Plan
NON-QUALIFIED STOCK OPTION
Granted To
Bentley J. Blum
Optionee
70,000 $0.4375
- ------------------------- -------------------------
Number of Shares Price per Share
DATE GRANTED: December 15, 1998 EXPIRATION DATE: December 14, 2008
================================================================================
NON-QUALIFIED STOCK OPTION AGREEMENT
AGREEMENT made as of the 15th day of December, 1998 (the "Date of Grant")
between Commodore Applied Technologies, Inc., a Delaware corporation
(hereinafter referred to as the "Company"), and Paul E. Hannesson, residing at
150 E. 58th Street, Suite 3400, New York, NY, 10155 (hereinafter referred to as
the "Employee").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company desires, in connection with the employment of the
Employee and in accordance with its 1998 Stock Option Plan (the "Plan"), to
provide the Employee with an opportunity to acquire Common Stock, $0.001 par
value (hereinafter referred to as "Common Stock"), of the Company on favorable
terms and thereby increase his proprietary interest in the continued progress
and success of the business of the Company;
NOW, THEREFORE, in consideration of the premises, the mutual covenants
herein set forth and other good and valuable consideration, the Company and the
Employee hereby agree as follows:
1. Confirmation of Grant of Option. Pursuant to a determination by the
Board of Directors of the Company, the Company, subject to the terms of the Plan
and this Agreement, hereby grants to the Employee as a matter of separate
inducement and agreement, and in addition to and not in lieu of salary or other
compensation for services, the right to purchase (hereinafter referred to as the
"Option") an aggregate of 577,500 shares of Common Stock, subject to adjustment
as provided in the Plan (such shares, as adjusted, hereinafter being referred to
as the "Shares"). The Option is not intended to qualify as an incentive stock
option under Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code").
2. Purchase Price. The purchase price of shares of Common Stock covered by
the Option will be $0.4375 per share, subject to adjustment as provided in the
Plan.
3. Exercise of Option. (a) In accordance with the provisions of Section 21
hereof, by his execution and delivery hereof, the Employee agrees to cancel all
prior options to acquire shares of Common Stock ("Prior Options"). The Option
shall be exercisable on the terms and conditions set forth and in accordance
with the vesting schedule applicable to the Prior Options, as though the Option
had been granted at the time of the grant of the Prior Options.
(b) The Option may be exercised pursuant to the provisions of this Section
3, by notice and payment to the Company as provided in Sections 9 and 14 hereof.
4. Term of Option. The term of the Option shall be a period of ten (10)
years
<PAGE>
from the Date of Grant, subject to earlier termination or cancellation as
provided in this Agreement. This Option, to the extent unexercised, shall expire
on the day immediately prior to the tenth (10th) anniversary of the Date of
Grant. The holder of the Option shall not have any rights to dividends or any
other rights of a stockholder with respect to any shares of Common Stock subject
to the Option until such shares shall have been issued to him (as evidenced by
the appropriate entry on the books of the Company or a duly authorized transfer
agent of the Company) provided that the date of issuance shall not be earlier
than the date this Option is exercised and payment of the full purchase price of
the shares of Common Stock (with respect to which this Option is exercised) is
made to the Company.
5. Non-transferability of Option. The Option shall not be assigned,
transferred or otherwise disposed of, or pledged or hypothecated in any way, and
shall not be subject to execution, attachment or other process, except as may be
provided in the Plan. Any assignment, transfer, pledge, hypothecation or other
disposition of the Option attempted contrary to the provisions of the Plan, or
any levy of execution, attachment or other process attempted upon the Option,
will be null and void and without effect. Any attempt to make any such
assignment, transfer, pledge, hypothecation or other disposition of the Option
will cause the Option to terminate immediately upon the happening of any such
event; provided, however, that any such termination of the Option under the
foregoing provisions of this Section 5 will not prejudice any rights or remedies
which the Company or any Parent or Subsidiary may have under this Agreement or
otherwise.
6. Exercise Upon Cessation of Employment. (a) If the Employee at any time
ceases to be an employee of the Company and of any Parent or Subsidiary (i) by
reason of his discharge for Good Cause or (ii) due to his voluntary termination
of employment without the written consent of the Committee, the Option shall, at
the time of such termination of employment, terminate and the Employee shall
forfeit all rights hereunder. If, however, the Employee for any other reason
(other than Disability or death) ceases to be such an Employee, the Option may,
subject to the provisions of Section 5 hereof, be exercised by the Employee to
the same extent the Employee would have been entitled under Section 3 hereof to
exercise the Option immediately prior to such cessation of employment, at any
time within 30 days after such cessation of employment, at the end of which
period the Option, to the extent not then exercised, shall terminate and the
Employee shall forfeit all rights hereunder, even if the Employee subsequently
returns to the employ of the Company or any Parent or Subsidiary. In no event,
however, may the Option be exercised after the expiration of the term provided
in Section 4 hereof.
(b) The Option shall not be affected by any change of duties or position of
the Employee as long as he continues to be a full-time employee of the Company
or of any Parent or Subsidiary thereof. If the Employee is granted a temporary
leave of absence, such leave of absence shall be deemed a continuation of his
employment by the Company or of any Parent or Subsidiary thereof for the
purposes of this Agreement, but only if and so long as the employing corporation
consents thereto.
<PAGE>
7. Exercise Upon Death or Disability. (a) If the Employee dies while he is
employed by the Company or by any Parent or Subsidiary, the Option may, subject
to the provisions of Section 5 hereof, be exercised with respect to all or any
part of the shares of Common Stock as to which the deceased Employee had not
exercised the Option at the time of his death (regardless of whether the option
was fully exercisable at such time) by the estate of the Employee (or by the
person or persons who acquire the right to exercise the Option by written
designation of the Employee) at any time within 90 days after the death of the
Employee, at the end of which period the Option, to the extent not then
exercised, shall terminate and the estate or other beneficiaries shall forfeit
all rights hereunder. In no event, however, may the Option be exercised after
the expiration of the term provided in Section 4 hereof.
8. Registration. At the time of issuance, the shares of Common Stock
subject hereto and issuable upon the exercise hereof may not be registered under
the Securities Act of 1933, as amended, and, if required upon the request of
counsel to the Company, the Employee will give a representation as to his
investment intent with respect to such shares prior to their issuance as set
forth in Section 8 hereof. The Company may register or qualify the shares
covered by the Option for sale pursuant to the Securities Act of 1933, as
amended, at any time prior to or after the exercise in whole or in part of the
Option.
9. Method of Exercise of Option. (a) Subject to the terms and conditions of
this Agreement, the Option shall be exercisable by notice in the manner set
forth in Exhibit A hereto (the "Notice") and provision for payment to the
Company in accordance with the procedure prescribed herein. Each such Notice
shall:
(i) state the election to exercise the Option and the number of Shares
with respect to which it is being exercised;
(ii) contain a representation and agreement as to investment intent,
if required by counsel to the Company with respect to such Shares, in a
form satisfactory to counsel to the Company;
(iii) be signed by the Employee or the person or persons entitled to
exercise the Option and, if the Option is being exercised by any person or
persons other than the Employee, be accompanied by proof, satisfactory to
counsel to the Company, of the right of such other person or persons to
exercise the Option;
(iv) include payment of the full purchase price for the shares of
Common Stock to be purchased pursuant to such exercise of the Option; and
(v) be received by the Company on or before the date of the expiration
of this Option. In the event the date of expiration of this Option falls on
a day which is not a regular business day at the Company's executive office
in New York, New York then
<PAGE>
such written Notice must be received at such office on or before the last
regular business day prior to such date of expiration.
(b) Payment of the purchase price of any shares of Common Stock, in respect
of which the Option shall be exercised, shall be made by the Employee or such
person or persons at the place specified by the Company on the date the Notice
is received by the Company (i) by delivering to the Company a certified or bank
cashier's check payable to the order of the Company, (ii) if consented to by the
Company in writing, by delivering to the Company properly endorsed certificates
of shares of Common Stock (or certificates accompanied by an appropriate stock
power) with signature guaranties by a bank or trust company, (iii) by having
withheld from the total number of shares of Common Stock to be acquired upon the
exercise of this Option a specified number of such shares of Common Stock, (iv)
by any form of "cashless" exercise or (v) by any combination of the foregoing.
For purposes of the immediately preceding sentence, an exercise effected by the
tender of the Common Stock (or deemed to be effected by the tender of Common
Stock) may be consummated only with Common Stock (i) held by the Employee for
six (6) months or (ii) acquired by the Employee other than under the Plan (or a
similar plan maintained by the Company).
(c) The Option shall be deemed to have been exercised with respect to any
particular shares of Common Stock if, and only if, the preceding provisions of
this Section 9 and the provisions of Section 10 hereof shall have been complied
with, in which event the Option shall be deemed to have been exercised on the
date the Notice and related payment were received by the Company. Anything in
this Agreement to the contrary notwithstanding, any Notice given pursuant to the
provisions of this Section 9 shall be void and of no effect if all of the
preceding provisions of this Section 9 and the provisions of Section 10 shall
not have been complied with.
(d) The certificate or certificates for shares of Common Stock as to which
the Option shall be exercised will be registered in the name of the Employee (or
in the name of the Employee's estate or other beneficiary if the Option is
exercised after the Employee's death), or if the Option is exercised by the
Employee and if the Employee so requests in the notice exercising the Option,
will be registered in the name of the Employee and another person jointly, with
right of survivorship and will be delivered as soon as practical after the date
the Notice is received by the Company (accompanied by full payment of the
exercise price), but only upon compliance with all of the provisions of this
Agreement.
(e) If the Employee fails to accept delivery of and pay for all or any part
of the number of Shares specified in such Notice, his right to exercise the
Option with respect to such undelivered Shares may be terminated in the sole
discretion of the Committee. The Option may be exercised only with respect to
full Shares.
(f) The Company shall not be required to issue or deliver any certificate
or certificates for shares of its Common Stock purchased upon the exercise of
any part of the Option prior to the payment to the Company, upon its demand, of
any amount requested by the
<PAGE>
Company for the purpose of satisfying its liability, if any, to withhold
federal, state or local income or earnings tax or any other applicable tax or
assessment (plus interest or penalties thereon, if any, caused by a delay in
making such payment) incurred by reason of the exercise of this Option or the
transfer of shares thereupon. Such payment shall be made by the Employee in cash
or, with the written consent of the Company, by tendering to the Company shares
of Common Stock equal in value to the amount of the required withholding. In the
alternative, the Company may, at its option, satisfy such withholding
requirements by withholding from the shares of Common Stock to be delivered to
the Employee pursuant to an exercise of the Option a number of shares of Common
Stock equal in value to the amount of the required withholding.
10. Approval of Counsel. The exercise of the Option and the issuance and
delivery of shares of Common Stock pursuant thereto shall be subject to approval
by the Company's counsel of all legal matters in connection therewith,
including, but not limited to, compliance with the requirements of the
Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder, and the requirements of any
stock exchange or automated trading medium upon which the Common Stock may then
be listed or traded.
11. Resale of Common Stock. (a) If so requested by the Company, upon any
sale or transfer of the Common Stock purchased upon exercise of the Option the
Employee shall deliver to the Company an opinion of counsel satisfactory to the
Company to the effect that either (i) the Common Stock to be sold or transferred
has been registered under the Securities Act of 1933, as amended, and that there
is in effect a current prospectus meeting the requirements of Section 10(a) of
said Act which is being or will be delivered to the purchaser or transferee at
or prior to the time of delivery of the certificates evidencing the Common Stock
to be sold or transferred, or (ii) such Common Stock may then be sold without
violating Section 5 of said Act.
(b) The Common Stock issued upon exercise of the Option shall bear the
following (or similar) legend if required by counsel for the Company:
THE SHARES EVIDENCED BY THIS CERTIFICATE MAY NOT BE SOLD,
TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF
UNLESS THEY HAVE FIRST BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR UNLESS, IN THE OPINION OF COUNSEL
FOR THE COMPANY, SUCH REGISTRATION IS NOT REQUIRED.
12. Reservation of Shares. The Company shall at all times during the term
of the Option reserve and keep available such number of shares of the Common
Stock as will be sufficient to satisfy the requirements of this Agreement.
13. Limitation of Action. The Employee and the Company each acknowledges
<PAGE>
that every right of action accruing to him or it, as the case may be, and
arising out of or in connection with this Agreement against the Company or a
Parent or Subsidiary, on the one hand, or against the Employee, on the other
hand, shall, irrespective of the place where an action may be brought, cease and
be barred by the expiration of three years from the date of the act or omission
in respect of which such right of action arises.
14. Notices. Each notice relating to this Agreement shall be in writing and
delivered in person, by recognized overnight carrier or by certified mail to the
proper address. All notices to the Company or the Committee shall be addressed
to them at 150 E. 58th Street, New York, NY 10155-1596, Attn: President. All
notices to the Employee shall be addressed to the Employee or such other person
or persons at the Employee's address above specified. Anyone to whom a notice
may be given under this Agreement may designate a new address by notice to that
effect.
15. Benefits of Agreement. This Agreement shall inure to the benefit of the
Company, the Employee and their respective heirs, executors, administrators,
personal representatives, successors and assigns.
16. Severability. In the event that any one or more provisions of this
Agreement shall be deemed to be illegal or unenforceable, such illegality or
unenforceability shall not affect the validity and enforceability of the
remaining legal and enforceable provisions hereof, which shall be construed as
if such illegal or unenforceable provision or provisions had not been inserted.
17. Governing Law. This Agreement will be construed and governed in
accordance with the laws of the State of Delaware.
18. Employment. Nothing contained in this Agreement shall be construed as
(a) a contract of employment between the Employee and the Company or any Parent
or Subsidiary, (b) as a right of the Employee to be continued in the employ of
the Company or of any Parent or Subsidiary, or (c) as a limitation of the right
of the Company or of any Parent or Subsidiary to discharge the Employee at any
time, with or without cause (subject to any applicable employment agreement).
19. Definitions. Unless otherwise defined herein, all capitalized terms
used in this Agreement shall have the same definitions as set forth in the Plan.
20. Incorporation of Terms of Plan. This Agreement shall be interpreted
under, and subject to, all of the terms and provisions of the Plan, which are
incorporated herein by reference.
21. Cancellation of Prior Option. By executing this Agreement the Employee
hereby agrees that effective as of December 15, 1998, of all of his rights under
the Option(s) granted to him pursuant to the Amended and Restated Commodore
Applied Technologies, Inc.
<PAGE>
1996 Stock Option Plan are hereby cancelled.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the Date
of Grant set forth above.
Commodore Applied Technologies, Inc.
By: /s/ Paul E. Hannesson
--------------------------
Name: Paul E. Hannesson
Title: Chairman & C.E.O.
Paul E. Hannesson
###-##-####
-----------------------------------
Social Security Number
ATTEST:
- -------------------------
<PAGE>
EXHIBIT A
NON-QUALIFIED STOCK OPTION EXERCISE FORM
[DATE]
Commodore Applied Technologies, Inc.
150 E. 58th Street, Suite 3400
New York, NY 10155-1596
Attention: President
Dear Sirs:
Pursuant to the provisions of the Non-Qualified Stock Option Agreement
dated [ ] (the "Agreement"), whereby you have granted to me a Non-Qualified
Option (the "Option") to purchase up to [ ] shares of the Common Stock of [ ]
(the "Company") subject to the terms of the Agreement, I hereby notify you that
I elect to exercise my option to purchase [ ] of the shares of Common Stock
covered by such Option at the $0.4375 per share price specified therein. In full
payment of the price for the shares being purchased hereby, I am delivering to
you herewith (i) certified or bank cashier's check payable to the order of the
Company in the amount of $____________,(1) or (ii) a certificate or certificates
for [ ] shares of Common Stock of the Company, and which have a fair market
value as of the date hereof of $___________, [and a certified or bank cashier's
check, payable to the order of the Company, in the amount of
$________________].(2) Any such stock certificate or certificates are endorsed,
or accompanied by an appropriate stock power, to the order of the Company, with
my signature guaranteed by a bank or trust company or by a member firm of the
New York Stock Exchange. I hereby acknowledge that I am purchasing these shares
for investment purposes only and not for resale in violation of any federal or
state securities laws.
Very truly yours,
------------------------------
[Address]
(For notices, reports, dividend
checks and other communications to
stockholders.)
- --------
(1) $_____________ of this amount is the purchase price of the shares, and the
balance represents payment of withholding taxes as follows: Federal
$_____________, State $_________ and Local $_______.
(2) $_____________ of this amount is at least equal to the current market value
of one share of Common Stock of the Company, and the balance represents
payment of withholding taxes as follows: Federal $________, State $_______
and Local $______.
<PAGE>
OPTION NO. _______________
================================================================================
Commodore Applied Technologies, Inc.
1998 Stock Option Plan
NON-QUALIFIED STOCK OPTION
Granted To
Paul E. Hannesson
Optionee
577,500 $0.4375
- ------------------------- -------------------------
Number of Shares Price per Share
DATE GRANTED: December 15, 1998 EXPIRATION DATE: December 14, 2008
================================================================================
EXHIBIT 8
AGREEMENT OF JOINT FILING
Pursuant to Rule 13d-1(k)(1) under the Securities Exchange Act of 1534, as
amended, the undersigned hereby consent to the joint filing on their behalf of a
single Schedule 13D and any amendments thereto, with respect to the beneficial
ownership by each of the undersigned of shares of common stock, par value $0.001
per share, of Commodore Applied Technologies, Inc. The undersigned hereby
further agree that this statement may be executed in any number of counterparts,
each of which when so executed shall be deemed to be an original, but all of
which counterparts shall together constitute one and the same instrument.
Dated: December 6, 1999
COMMODORE ENVIRONMENTAL SERVICES, INC.
By: /s/ BENTLEY J. BLUM
---------------------------------------
Name: Bentley J. Blum
Title: Chairman of the Board, President and
Chief Executive Officer
/s/ BENTLEY J. BLUM
---------------------------------------------
BENTLEY J. BLUM
/s/ PAUL E. HANNESSON
---------------------------------------------
PAUL E. HANNESSON
