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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
Compositech Ltd.
- --------------------------------------------------------------------------------
(Name of issuer)
Common Stock, $.01 par value
- --------------------------------------------------------------------------------
(Title of class of securities)
204938-10-4
------------------------------------------------------------
(CUSIP number)
Perry Kliot
LaPointe Rosenstein
1250 Rene Levesque Blvd. Suite 1400
Montreal, Quebec Canada H3B 5E9
(514)925-6300
- --------------------------------------------------------------------------------
(Name, address and telephone number of person authorized to receive
notices and communications)
October 16, 1997
- --------------------------------------------------------------------------------
(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 which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ].
Check the following box if a fee is being paid with the statement. [ ] (A fee is
not required only if the reporting person: (1) has a previous statement on file
reporting beneficial ownership of more than five percent of the class of
securities described in Item 1; and (2) has filed no amendment subsequent
thereto reporting beneficial ownership of five percent or less of such class.)
(See Rule 13d-7.)
Note: Six copies of this statement, including all exhibits, should be filed
with the Commission. See Rule 13d-1(a) for other parties to whom copies are to
be sent.
* The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which would
alter the disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the Act (however, see
the Notes).
<PAGE>
SCHEDULE 13D
|-----------------------|
|CUSIP No. 204938-10-4 |
|-----------------------|
|----------------------------------------------------------------------------|
| 1 | NAME OF REPORTING PERSON |
| | S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON |
| | |
| | Industries Devma, Inc. |
|---------|------------------------------------------------------------------|
| 2 | CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]|
| | (b) [X]|
|---------|------------------------------------------------------------------|
| 3 | SEC USE ONLY |
| | |
|---------|------------------------------------------------------------------|
| 4 | SOURCE OF FUNDS* |
| | WC |
|---------|------------------------------------------------------------------|
| 5 | CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED |
| | PURSUANT TO ITEMS 2(d) or 2(e) [ ] |
|---------|------------------------------------------------------------------|
| 6 | CITIZENSHIP OR PLACE OF ORGANIZATION |
| | |
| | Quebec, Canada |
- ----------------|-----|-----------------------------------------------------|
| | | |
| NUMBER OF | 7 | SOLE VOTING POWER |
| | | |
| SHARES | | 710,795 |
| |-----|-----------------------------------------------------|
| BENEFICIALLY | | |
| | 8 | SHARED VOTING POWER |
| OWNED BY EACH | | -- |
| |-----|-----------------------------------------------------|
| REPORTING | | |
| | 9 | SOLE DISPOSITIVE POWER |
| PERSON | | |
| | | 710,795 |
| WITH |-----|-----------------------------------------------------|
| | | |
| | 10 | SHARED DISPOSITIVE POWER |
| | | --- |
|----------------------------------------------------------------------------|
| 11 | AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON |
| | |
| | 710,795 |
|---------|------------------------------------------------------------------|
| 12 | CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) |
| | EXCLUDES CERTAIN SHARES* [ ] |
| | |
|---------|------------------------------------------------------------------|
| 13 | PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) |
| | |
| | 9.6% |
|---------|------------------------------------------------------------------|
| 14 | TYPE OF REPORTING PERSON * |
| | |
| | CO |
|----------------------------------------------------------------------------|
* SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE>
Item 1. Security and Issuer
This statement on Schedule 13D relates to the Common Stock, $0.01 par
value per share (the "Common Stock") of Compositech Ltd., a Delaware corporation
(the "Issuer"). The principal executive offices of the Issuer are located at 120
Ricefield Lane, Hauppauge, NY 11788-2008.
Item 2. Identity and Background
(i) This statement is being filed by Industries Devma Inc., a
corporation organized under the laws of Quebec ("Devma").
(ii) The address of the principal office and principal place of
business of Devma is 600, de la Gauchetiere Street West, Suite 1700, Montreal,
Quebec, H3B 4L8, Canada.
(iii) Devma is a holding company for investments in canadian and
american companies.
(iv) Set forth in Exhibit I is the name and present principal
occupation or employment and the name, principal business and address of any
corporation or other organization in which such employment is conducted, of each
of the directors and executive officers of Devma as of the date hereof.
(v) During the past five years, none of Devma, and to the best
knowledge of Devma, any person named in Exhibit I to this Schedule 13D, has been
convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors).
(vi) During the past five years, none of Devma, and to the best
knowledge of Devma, any person named in Exhibit I to this Schedule 13D, was a
party to a civil proceeding of a judicial or administrative body of competent
jurisdiction as a result of which such person was or is subject to a judgment,
decree or final order enjoining future violations of or prohibiting or mandating
activity subject to Federal or state securities laws or finding any violation
with respect to such laws.
(vii) All of the directors and executive officers of Devma named in
Exhibit I are citizens of Canada.
Item 3. Source and Amount of Funds or Other Consideration
On October 16, 1997, the Issuer, Devma, Societe Innovatech du Grand
Montreal ("Innovatech"), Fonds de Solidarite des Travailleurs du Quebec (F.T.Q.)
("FSTQ") and Fonds Regional de Solidarite Ile de Montreal, limited partnership,
("Fonds Regional") (Devma, Innovatech, FSTQ et Fonds Regional are hereinafter
collectively referred to as the "Investors") entered into a Subscription
Agreement (the "Subscription Agreement"), pursuant to which each Investor agreed
to make an equity investment of the following amount in the Issuer in return for
the following number of shares of Common Stock.
Investor Amount Number of Shares
-------- ------ ----------------
Devma $3,749,992.96562 Cdn 533,095
Innovatech $3,749,992.96562 Cdn 533,095
FSTQ $7.03438 Cdn 1
Fonds Regional $7.03438 Cdn 1
<PAGE>
The purchase price for this investment was paid out of the available cash of
each Investor.
Item 4. Purpose of Transaction
As described more fully in Item 3 above, this statement relates to the
acquisition of 533,095 shares of Common Stock by Devma.
On October 16, 1997, the Issuer and the Investors entered into a Stock
Exchange Agreement (the "Stock Exchange Agreement") pursuant to which each
Investor may, at any time and from time to time, exchange all or part of the
Class A or Class B common shares it holds in the capital stock of CTEK Laminates
Inc. ("CTEK") (a canadian corporation) for shares of Common Stock of the Issuer.
In addition, pursuant to the Stock Exchange Agreement, the Issuer may, only if
certain conditions are met, require all of the Investors (and not less than all
of them) to exchange all (and not less than all) of their Class A and Class B
common shares of CTEK for shares of Common Stock of the Issuer. Presently, each
Investor holds the following number and class of common shares in the capital
stock of CTEK:
Investor Number of Class A common shares
-------- -------------------------------
Devma 177,700
Innovatech 177,700
FSTQ 639,714
Fonds Regional 71,078
In addition, pursuant to a Registration Rights Agreement between the
Issuer and the Investors dated October 16, 1997, each Investor has been granted
certain registration rights relating to the Common Stock held by it (including
any Common Stock received pursuant to its exchange rights provided in the Stock
Exchange Agreement). Such registration rights shall become effective on July 2,
1998 or such earlier date that any of the management lock-up agreements entered
into by certain shareholders of the Issuer expire. The shares of Common Stock
acquired by Devma have been acquired for the purpose of making an investment in
the Issuer and not with the present intention of acquiring control of the
Issuer's business.
Devma intends from time to time to review its investment in the Issuer
on the basis of various factors, including the Issuer's business, financial
condition, results of operations and prospects, general economic and industry
conditions, the securities markets in general and those for the Issuer's
securities in particular, as well as other developments, and other investment
opportunities. Based upon such review, Devma will take such actions in the
future as Devma may deem appropriate in light of the circumstances existing from
time to time. If Devma believes that further investment in the Issuer is
attractive, whether because of the market price of the Issuer's securities or
otherwise, Devma may acquire shares of Common Stock or other securities of the
Issuer either pursuant to the Stock Exchange Agreement or pursuant to the
Investors' Agreement (which is more fully described hereinafter in Item 6), in
the open market or in privately-negotiated transactions. Similarly, depending on
market and other factors, Devma may determine to dispose of some or all of the
Common Stock currently owned by Devma or otherwise acquired by Devma either
pursuant to the Stock Exchange Agreement or pursuant to the Investors'
Agreement, in the open market or in privately negotiated transactions.
Except as stated above, Devma and, to the best knowledge of Devma, all
persons listed on Schedule I have no present plans which relate to or would
result in:
<PAGE>
(a) The acquisition by any person of additional securities of the Issuer,
or the disposition of securities of the Issuer;
(b) An extraordinary corporate transaction, such as a merger,
reorganization or liquidation, involving the Issuer or any of its
subsidiaries;
(c) A sale or transfer of a material amount of assets of the Issuer or any
of its subsidiaries;
(d) Any change in the present board of directors or management of the
Issuer, including any plans or proposals to change the number or term
of directors or to fill any existing vacancies on the board;
(e) Any material change in the present capitalization or dividend policy
of the Issuer;
(f) Any other material change in the Issuer's business or corporate
structure;
(g) Changes in the Issuer's charter, by-laws or instruments corresponding
thereto or other actions which may impede the acquisition of control
of the Issuer by any person;
(h) Causing a class of securities of the Issuer to be delisted from a
national securities exchange or to cease to be authorized to be quoted
in an inter-dealer quotation system of a registered national
securities association;
(i) A class of equity securities of the Issuer becoming eligible for
termination of registration pursuant to Section 12(g)(4) of the
Securities Exchange Act of 1934; or
(j) Any action similar to any of those enumerated above.
Item 5. Interest in Securities of the Issuer
(a) Amount Beneficially Owned:
Devma presently owns 533,095 shares of Common Stock and would
acquire 177,700 additional shares of Common Stock upon exchange
of all its common shares of CTEK if such exchange occurred as of
the date hereof.
Percent of Class:
Based on 7,236,631 shares outstanding, being the number of shares
of Common Stock represented by the Issuer to the Investors to be
outstanding as of October 16, 1997 before the purchase of shares
by the Investors (6,170,439) plus the Investors' shares of Common
Stock issued on October 16, 1997 (1,066,192):
Devma beneficially owns 9.6% of the outstanding Common Stock
(b) Number of shares as to which Devma has:
(i) sole power to vote or direct the vote: 710,795 shares
(ii) shared power to vote or direct the vote: 0 shares
(iii) sole power to dispose or to direct the disposition of:
710,795 shares
(iv) shared power to dispose or to direct the disposition of:
0 shares
<PAGE>
(c) Except as set forth in Item 3 herein, none of Devma, and to the
best knowledge of Devma, any person named in Schedule I has effected any
transaction in the Common Stock during the past 60 days.
(d) Pursuant to an agreement between the Investors entered into on
October 17, 1997 (the "Investors' Agreement") more fully described hereinafter
in Item 6, notwithstanding the actual number of shares of Common Stock of the
Issuer and the actual number of common shares of CTEK owned by each Investor,
all dividends received by the Investors on their shares of Common Stock of the
Issuer and the common shares of CTEK shall be redistributed in the following
manner between the Investors: Devma shall receive 33.33% of such sums,
Innovatech shall receive 33.33% of such sums, FSTQ shall receive 30% of such
sums and Fonds Regional shall receive 3.33% of such sums.
(e) Not applicable
Item 6. Contracts, Arrangements, Understandings or Relationships With Respect to
Securities of the Issuer.
Pursuant to an agreement dated October 16, 1997 between the Issuer, the
Investors and Fred E. Klimpl and Jonas Medney, the Issuer agreed to use its best
efforts to nominate for election by its stockholders, cause the election of and
thereafter continue in office, one person designated by the Investors.
Furthermore, each of Fred E. Klimpl, a director of the Issuer and holder of
599,990 shares of the issued and outstanding shares of Common Stock and Jonas
Medney, a director of the Issuer and holder of 1,199,977 shares of the issued
and outstanding shares of Common Stock, has agreed, subject to certain
limitations and solely in his capacity as a shareholder of the Issuer, to vote
his shares of the capital stock of the Issuer in a manner so as to give effect
to the foregoing covenant of the Issuer. No agreement among the Investors has
been reached as to how to designate such director.
The Investors' Agreement states that, notwithstanding the
actual number of shares of Common Stock and common shares held by each Investor
in the capital of the Issuer and CTEK, respectively, when one Investor wishes to
exchange the common shares of CTEK for shares of Common Stock of the Issuer
pursuant to the Exchange Agreement discussed in Item 4, but one or more of the
other Investors does not wish to proceed with such exchange, a reallocation of
the shares of all Investors will be effected to reflect the following holdings:
Investor Shares of Common Stock of Issuer Class A shares of CTEK
- -------- -------------------------------- ----------------------
Devma 355,398 355,397
Innovatech 355,398 355,397
FSTQ 319,858 319,858
Fonds Regional 35,539 35,539
The Investors have also agreed to redistribute their shareholding in
the Issuer and CTEK in the event of a forced liquidation or sale by an Investor
of shares of the Issuer or CTEK.
For purposes of dividends, notwithstanding the actual number of shares
of Common Stock of the Issuer and the actual number of common shares of CTEK
owned by each Investor, all dividends received by the Investors on their shares
of Common Stock of the Issuer and the common shares of CTEK shall be
redistributed in the following manner between the Investors: Devma shall receive
33.33% of such sums, Innovatech shall receive 33.33% of such sums, FSTQ shall
receive 30% of such sums and Fonds Regional shall receive 3.33% of such sums.
<PAGE>
However, the Investors' Agreement only governs shares of Common Stock
of the Issuer issued to the Investors on October 16, 1997 and common shares of
CTEK issued to the Investors on October 16, 1997 and does not govern any
additional shares acquired thereafter by any of the Investors.
Item 7. Material to be Filed as Exhibits.
Exhibit I List of Directors and Officers of Devma
Exhibit II Subscription Agreement dated October 16, 1997 by and between the
Issuer and the Investors
Exhibit III Subscription Agreement dated October 16, 1997 by and between
CTEK and the Investors
Exhibit IV Stock Exchange Agreement dated October 16, 1997 by and between
the Issuer and the Investors
Exhibit V Agreement dated October 16, 1997 by and between the Issuer, the
Investors, Jonas Medney and Fred E. Klimpl
Exhibit VI Agreement dated October 17, 1997 by and among the Investors
<PAGE>
Signature
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: December 2, 1997 INDUSTRIES DEVMA, INC.
By: /s/ Michel Beland
-------------------------------
Title: Secretary
By: /s/ Pierre Laflamme
-------------------------------
Title: Director
<PAGE>
Exhibit I
INDUSTRIES DEVMA INC.
LIST OF DIRECTORS
Jacinthe Dauphin Vice President Development, Chemicals
Societe generale de financement du Quebec
600 de La Gauchetiere Street West
Suite 1700
Montreal (Quebec) H3B 4L8
Richard Fredette Vice President Corporate Planning
Societe generale de financement du Quebec
600 de La Gauchetiere Street West
Suite 1700
Montreal (Quebec) H3B 4L8
Pierre Laflamme Vice President Development, High Technology
Societe generale de financement du Quebec
600 de La Gauchetiere Street West
Suite 1700
Montreal (Quebec) H3B 4L8
Daniel Paille Vice President and Chief
Financial Officer Societe generale
de financement du Quebec
600 de La Gauchetiere Street West
Suite 1700
Montreal (Quebec) H3B 4L8
Louis-M. Riopel Senior Vice President, Development
Societe generale de financement du Quebec
600 de La Gauchetiere Street West
Suite 1700
Montreal (Quebec) H3B 4L8
Andre Roy Vice President, Corporate
Affairs Societe generale de
financement du Quebec
600 de La Gauchetiere Street West
Suite 1700
Montreal (Quebec) H3B 4L8
<PAGE>
LIST OF SENIOR EXECUTIVES
Michel Beland General Counsel and Secretary
Secretary Societe generale de financement du Quebec
600 de La Gauchetiere Street West
Suite 1700
Montreal (Quebec) H3B 4L8
Louis-M. Riopel Senior Vice President, Development
President Societe generale de financement du Quebec
600 de La Gauchetiere Street West
Suite 1700
Montreal (Quebec) H3B 4L8
<PAGE>
Exhibit II
SUBSCRIPTION AGREEMENT MADE AND ENTERED INTO IN THE CITY AND DISTRICT OF
MONTREAL, ON THE 16TH DAY OF OCTOBER, 1997
BY AND AMONG: SOCIETE INNOVATECH DU GRAND MONTREAL, a body politic duly
constituted according to An Act respecting Societe Innovatech du
Grand Montreal, R.S.Q., ch. S-17.2, having its head office and
principal place of business in the City of Montreal, Province of
Quebec,
(hereinafter referred to as "Innovatech")
PARTY OF THE FIRST PART
-----------------------
AND: INDUSTRIES DEVMA INC. , a body politic and corporate, duly
incorporated according to the Companies Act (Quebec), having its
head office and principal place of business in the City of
Montreal, Province of Quebec,
(hereinafter referred to as "Devma")
PARTY OF THE SECOND PART
------------------------
AND: FONDS DE SOLIDARITE DES TRAVAILLEURS DU QUEBEC (F.T.Q), a joint
stock company, duly incorporated according to the Act
establishing the Fonds de Solidarite des Travailleurs du Quebec
(F.T.Q), having its head office and principal place of business
in the City of Montreal, Province of Quebec,
(hereinafter referred to as "FSTQ")
PARTY OF THE THIRD PART
-----------------------
AND: FONDS REGIONAL DE SOLIDARITE ILE DE MONTREAL, limited
partnership, a limited partnership organized under the laws of
the Province of Quebec, herein represented by Gestion du Fonds
Regional de Solidarite Ile de Montreal Inc., its general partner,
having its head office and principal place of business in the
City of Montreal, Province of Quebec,
(hereinafter referred to as "Fonds Regional")
PARTY OF THE FOURTH PART
------------------------
<PAGE>
-2-
AND: COMPOSITECH LTD., a body corporate, duly incorporated according
to the laws of the State of Delaware, having its head office and
principal place of business in the Hamlet of Hauppauge, State of
New York,
(hereinafter referred to as the "Corporation")
PARTY OF THE FIFTH PART
-----------------------
1. PREAMBLE
1.1. WHEREAS each of Innovatech, Devma, FSTQ and Fonds Regional wishes
to subscribe for Common Shares (as hereinafter defined), the
whole at the price and on the terms and conditions hereinafter
set out in this Agreement.
NOW, THEREFORE, THIS AGREEMENT WITNESSETH:
2. INTERPRETATION
2.1. Definitions. In this Agreement:
2.1.1. "Actual Knowledge" - an individual will be deemed to have
"Actual Knowledge" of a particular fact or other matter if:
2.1.1.1. such individual is actually aware of such fact or other
matter, or
2.1.1.2. a prudent individual could be expected to discover or
otherwise become aware of such fact or other matter in the
course of conducting a reasonably comprehensive review of
the files, books and records of the Corporation.
A Person (other than an individual) will be deemed to have "Actual
Knowledge" of a particular fact or other matter if any individual who is serving
as an officer of such Person has, or at any time had, Actual Knowledge of such
fact or other matter;
2.1.2. "Agreement" means this Subscription Agreement and all
instruments supplemental hereto or in amendment or
confirmation hereof; "herein", "hereof", "hereto",
"hereunder" and similar expressions mean and refer to this
Agreement and not to any particular Section, subsection or
other subdivision; "Section", "subsection" or other
subdivision of this Agreement means and refers to the
specified Section, subsection or other subdivision of this
Agreement;
<PAGE>
-3-
2.1.3. "Annual Report" means the Corporation's Annual Report on
Form 10-KSB under the Securities Exchange Act of 1934 for
the fiscal year ended December 31, 1996;
2.1.4. "Applicable Law" means any domestic or foreign federal,
state, provincial, county, local, municipal and regional
statute, law, ordinance, rule, regulation, restriction,
regulatory policy or guideline, by-law (zoning or
otherwise), principles of common law, civil law or equity,
as well as Permits, Orders, decrees and rules (having the
force of law), and any judgments or injunctions issued,
prolongated, approved or entered thereunder, in each case,
to which the given party is subject or bound or to which the
given asset is subject;
2.1.5. "Assets" means all of the assets, rights and properties of
the Corporation, of whatsoever nature, kind or description,
including movable or immovable, real or personal, tangible
or intangible;
2.1.6. "Balance Sheet Date" means December 31, 1996;
2.1.7. "Benefit Plans" means all pension, retirement, profit
sharing, bonus, savings, compensation, incentive, severance,
stock option, stock purchase, stock appreciation and other
fringe benefit plans, programs, arrangements or practices
covering any or all past or present employees, shareholders,
directors or officers of the Corporation, other than group
insurance, medical, dental, hospitalization, disability or
death benefit plans;
2.1.8. "Books and Records" means all books of account, accounting
records, files, data and writings and other financial
information; lists and files of past, present and
prospective customers and contacts, purchasing and marketing
records, personnel and payroll records; and all data stored
on computer support devices relating to any of the
aforementioned materials;
2.1.9. "Budget and Projections" means the budget and projections of
the Corporation set forth in a writing dated the date hereof
identified to this paragraph 2.1.9;
2.1.10. "Business Day" means any day, other than a Saturday or
Sunday or a day on which the principal commercial banks in
the State of New York are not open for business during
normal banking hours;
2.1.11. "Common Shares" means the shares of Common Stock as
described in the Articles of Incorporation of the
Corporation, as amended and restated;
2.1.12. "Compositech Canada" means Lamines CTEK Inc.;
<PAGE>
-4-
2.1.13. "Compositech Canada Shareholders Agreement" means the
shareholders agreement of even date herewith among the
parties hereto and Compositech Canada setting forth the
terms and conditions which will govern the relationship of
the parties hereto as shareholders of Compositech Canada;
2.1.14. "Contracts" means all agreements, obligations and
undertakings of whatsoever nature, kind or description;
2.1.15. "Devma Shares" has the meaning ascribed thereto in
subsection 3.3;
2.1.16. "dollar", "dollars" and the sign "$" each mean, unless
otherwise indicated, lawful money of the United States;
2.1.17. "ERISA" shall have the meaning ascribed thereto in
subsection 4.2.22.2;
2.1.18. "Encumbrances" means any encumbrance of any nature, kind or
description whatever and includes a security interest,
mortgage, lien, hypothecation, pledge, prior claim,
assignment, charge, trust or deemed trust (whether
contractual, statutory or howsoever otherwise arising),
voting trust or pooling agreement with respect to
securities, right of first refusal, easement, servitude,
restrictive covenant, encroachment or other survey or title
defect, any adverse claim or any other right, option or
claim of any Person of any nature, kind or description
whatever, or any covenant or other agreement, restriction or
limitation on transferability;
2.1.19. "Environment" means surface waters, ground water, drinking
water supply, land-surface, subsurface strata, air, both
inside and outside of buildings and structures, and plant
and animal life;
2.1.20. "Environmental Law" means any Applicable Law relating to the
pollution or protection of the Environment;
2.1.21. "Equipment" means all furnishings, fixtures, machinery,
equipment, tooling, spare parts, leasehold improvements,
supplies, computer hardware, telephone systems, signs and
all other tangible property, together with all related
accessories and maintenance equipment, including without
limitation, the Manufacturing Equipment;
2.1.22. "Exchange Rights" means the rights granted to each Investor
under the Stock Exchange Agreement to exchange their shares
in the capital stock of Compositech Canada for Common
Shares;
2.1.23. "FSTQ Shares" has the meaning ascribed thereto in subsection
3.4;
<PAGE>
-5-
2.1.24. "Financial Statements" means the audited financial
statements of the Corporation for the fiscal year ended
December 31, 1996, consisting of the balance sheet,
statements of operations, statements of shareholders' equity
and statements of cash flows of the Corporation as at or for
the period ended December 31, 1996, a copy of which is
contained in the Annual Report;
2.1.25. "Fonds Regional Shares" has the meaning ascribed thereto in
subsection 3.5;
2.1.26. "Generally Accepted Accounting Principles" means generally
accepted accounting principles in the United States of
America applicable as at the date on which any calculation
or determination is required to be made in accordance with
generally accepted accounting principles, consistently
applied since the incorporation of the Corporation,
including those set forth in the opinions and pronouncements
of the Accounting Principles Board of the American Institute
of Certified Public Accountants, or any successor institute,
and statements and pronouncements of the Financial
Accounting Standards Board or in such other statements by
such other entity as is approved by a significant segment of
the accounting profession in the United States of America;
2.1.27. "Governmental Body" means (i) any domestic or foreign
national, federal, provincial, state, county, local,
municipal or other government or body, (ii) any
multinational, multilateral or international body, (iii) any
subdivision, agent, commission, board, instrumentality or
authority of any of the foregoing governments or bodies,
(iv) any quasi-governmental or private body exercising any
regulatory, expropriation or taxing authority under or for
the account of any of the foregoing governments or bodies,
or (v) any domestic, foreign, international, multilateral or
multinational judicial, quasi-judicial, arbitration or
administrative court, tribunal, commission, board or panel;
2.1.28. "Hazardous Substances" means any toxic substance or waste,
pollutant, contaminant, hazardous substance or waste,
hazardous material, special waste, industrial waste,
petroleum-derived substance or waste, or any constituent of
any of same as such terms are regulated under or defined by
any Environmental Law;
2.1.29. "including" and "includes" is to be deemed to be followed by
the statement "without limitation" and neither of such terms
shall be construed as limiting any word or statement which
precedes it to the specific or similar items or matters
immediately following it;
2.1.30. "Information" has the meaning ascribed thereto in
subparagraph 4.2.24.1;
<PAGE>
-6-
2.1.31. "Innovatech Shares" shall have the meaning ascribed thereto
in subsection 3.2;
2.1.32. "Integral Circuit" means laminates with integral circuits or
printed circuit boards with integral circuits as described
by the following claims or parts of such claims set forth in
Licensor's patents Nos. 4,943,334, 5,037,691 and 5,478,421:
(i) claims 70-73 of U.S. Patent 4,943,334;
(ii) claims 16 and 26-30 of U.S. Patent No. 4,943,334,
provided that the conductivesurface is in the form
of a series of conductive line traces etched or
formed between two or more pads (hereinafter
called a "circuit") and further provided that the
circuit is formed on the tooling and transferred
to the laminate or printed circuit board during
the molding process;
(iii) claims 7, 8, 36, 37, 42 and 43 of U.S. Patent No.
5,037,691, provided that the metal or metallic
coating is in the form of a circuit; and
(iv) claims 4, 5, 8-11, 50, 64 and 73 of U.S. Patent
No. 5,478,421, provided that the metal or
conductive surface is in the form of a circuit and
further provided that the circuit is formed on the
tooling and transferred to the laminate or printed
circuit board during the molding process;
2.1.33. "Intellectual Property Rights" means, collectively:
2.1.33.1. all intellectual property rights of whatsoever
nature, kind or description including:
2.1.33.1.1. all trade marks, service marks, trade
mark and service mark registrations,
trade mark and service mark
applications, rights under registered
user agreements, trade names and other
trade mark and service mark rights,
2.1.33.1.2. all copyrights, industrial designs and
registrations thereof and applications
therefor,
2.1.33.1.3. all inventions, patents, patent
applications and patent rights
(including any patents issuing on such
applications or rights),
2.1.33.1.4. all licenses, sub-licenses and
franchises,
<PAGE>
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2.1.33.1.5. all Trade Secrets and proprietary and
confidential information,
2.1.33.1.6. all computer software and rights
related thereto,
2.1.33.1.7. all renewals, modifications,
developments and extensions of any of
the items listed in subsections
2.1.33.1.1 through 2.1.33.1.6
(inclusively) hereof; and
2.1.33.2. all patterns, plans, designs, research data, other
proprietary know-how, processes, drawings,
technology, inventions, formulae, specifications,
performance data, quality control information,
unpatented blue prints, flow sheets, equipment and
parts lists, instructions, manuals, records and
procedures, and all licenses, agreements and other
contracts and commitments relating to any of the
foregoing;
2.1.34. "Investors" means Innovatech, Devma, FSTQ and Fonds Regional
collectively and "Investor" means either of them;
2.1.35. "Knowledge" - an individual will be deemed to have
"Knowledge" of a particular fact or other matter if:
2.1.35.1. such individual is actually aware of such fact or
other matter, or
2.1.35.2. a prudent individual could be expected to discover
or otherwise become aware of such fact or other
matter in the course of conducting a reasonably
comprehensive investigation concerning the
existence of such fact or other matter.
A Person (other than an individual) will be deemed to have
"Knowledge" of a particular fact or other matter if any individual who is
serving, as an officer of such Person has, or at any time had, Knowledge of such
fact or other matter;
2.1.36. "License Agreement" means that certain technology licensing
agreement entered into between the Corporation and
Compositech Canada on the date hereof by which the
Corporation licenses and/or sub-licenses to Compositech
Canada the Intellectual Property and Technology (as such
terms are defined in the License Agreement);
2.1.37. "Manufacturing Equipment" means all machinery and equipment
developed or used by the Corporation in order to manufacture
Products;
2.1.38. "Material Applicable Laws" means the Applicable Laws which
are material to the business or operations of the
Corporation. Without limiting
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the generality of the foregoing, an Applicable Law will be
deemed to be a Material Applicable Law if a breach thereof
or non-compliance therewith would have a material adverse
effect on the financial position of the Corporation;
2.1.39. "Material Assets" means the Assets which are, individually
or in the aggregate, material to the business or operations
of the Corporation;
2.1.40. "Material Contracts" means the Contracts which are,
individually or in the aggregate, material to the business
or operations of the Corporation, including, without
limitation, those Contracts which are required to be listed
in any Annual Report required to be filed on Form 10-KSB
under the Securities Exchange Act of 1934 and by Item 601 of
Regulation S-B under the Securities Exchange Act of 1934, as
amended. Without limiting the generality of the foregoing, a
Contract will be deemed to be a Material Contract if a
breach or default thereunder would have a material adverse
effect on the financial position of the Corporation;
2.1.41. "Material Permits" means the Permits which are material to
the business or operations of the Corporation. Without
limiting the generality of the foregoing, a Permit will be
deemed to be a Material Permit if a breach or default in
respect thereof or the failure to obtain or maintain such a
Permit would have a material adverse effect of the financial
position of the Corporation;
2.1.42. "Multi Layer Printed Circuit Boards" means the circuit
boards defined in one or more of claims 18-26 and 63-68 of
U.S. Patent No. 5,037,691 or the circuit boards produced
using the process described in any of the claims of U.S.
Patents Nos. 5,376,326 and 5,512,224;
2.1.43. "Maximum Indemnification Amount" has the meaning ascribed
thereto in paragraph 6.11.4;
2.1.44. "Order" means any order (draft or otherwise), judgment,
injunction, decree, award or writ of any Governmental Body;
2.1.45. "ordinary course of business" means an action taken by a
Person that is:
2.1.45.1. consistent with the past practices of such Person
and is taken in the ordinary course of the normal
day-to-day operations of such Person,
2.1.45.2. not required to be authorized by the board of
directors of such Person (or by any Person or
group of Persons exercising similar
-9-
authority) and is not required to be specifically
authorized by the parent company (if any) of such
Person, and
2.1.45.3. similar in nature and magnitude to actions
customarily taken, without any authorization by
the board of directors (or by any Person or group
of Persons exercising similar authority), in the
ordinary course of the normal day-to-day
operations of other Persons that are in the same
line of business as such Person;
2.1.46. "Permit" means any license, permit, certificate,
authorization, approval, right, privilege, consent,
concession or franchise issued, granted, conferred or
otherwise created by a Governmental Body;
2.1.47. "Person" means an individual, corporation, company,
partnership, trust, unincorporated association, entity with
judicial personality, Governmental Body; and pronouns when
they refer to a Person have a similarly extended meaning;
2.1.48. "Premises" means the real property, together with all
buildings, structures, fixtures and improvements thereon,
covered by the Real Property Lease;
2.1.49. "Prime Rate" means the interest rate quoted publicly by the
Corporation's regular bankers as the reference rate of
interest for commercial demand loans made in US dollars and
commonly known as such bank's prime rate, as adjusted from
time to time, on the basis of the Prime Rate in effect on
the first day of each month;
2.1.50. "Principal Intellectual Property Rights" has the meaning
ascribed thereto in subparagraph 4.2.24.2;
2.1.51. "Products" means laminates for printed wiring boards and all
other uses developed and/or manufactured by the Corporation,
provided, however, that Multi Layer Printed Circuit Boards
and Integral Circuits shall not be deemed Products;
2.1.52. "Proxy Statement" means the proxy statement filed by the
Corporation pursuant to Regulation 14A on May 15, 1997;
2.1.53. "Purchased Securities" means the Innovatech Shares, the
Devma Shares, the FSTQ Shares and the Fonds Regional Shares;
2.1.54. "Release" means any release, spill, emission, leaking,
pumping, injection, deposit, disposal, discharge, dispersal,
leaching or migration into the Environment;
<PAGE>
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2.1.55. "Real Property Lease" means the existing tenancy agreement,
as amended, between the Corporation, as tenant, and
Ricefield Number 6, as landlord, covering the Premises, a
copy of which is contained in Exhibit 10.1 and 10.1.1 of the
Registration Statement, the rights of Ricefield Number 6 in
the Real Property Lease having been assigned to Reckson
Operating Partnership, L.P. on December 5, 1996;
2.1.56. "Registration Statement" means the Corporation's
registration statement No. 333-3564-NY on Form SB-2 under
the Securities Act, declared effective on July 2, 1996 and
all exhibits annexed thereto;
2.1.57. "Remedial Action" means all actions, whether voluntary or
involuntary, necessary to comply with applicable
Environmental Laws in order to i) clean up, remove, treat,
cover or in any other manner adjust Hazardous Substances in
the Environment or ii) perform remedial studies,
investigations, restoration and post-remedial studies,
investigations or monitoring on, about or in any of the
Premises;
2.1.58. "Securities Act" means the Securities Act of 1933 (United
States), as amended from time to time;
2.1.59. "Share Adjustment" means (i) any subdivision, redivision or
change of the outstanding Common Shares into a greater
number of Common Shares or (ii) any reduction, combination
or consolidation of the outstanding Common Shares into a
smaller number of Common Shares;
2.1.60. "Stock Exchange Agreement" means the stock exchange
agreement of even date among the Investors and the
Corporation, providing inter alia for the exchange by the
Investors of the shares of the capital stock of Compositech
Canada held by them for Common Shares;
2.1.61. "Subscription Agreement in Compositech Canada" means the
subscription agreement of even date among the Investors and
Compositech Canada setting forth the rights and obligations
of each of the Investors with respect to its subscription
for shares in the capital stock of Compositech Canada;
2.1.62. "Tax Returns" means all reports, returns or other
information, or any amendment thereof, required to be filed
in connection with any Taxes;
2.1.63. "Taxes" means all taxes, foreign or domestic, whether
federal, state, provincial, county, local, municipal or
otherwise (including income, profit, corporation, business,
excise, sales, goods and services, value-added, franchise,
withholding, capital, transfer, stamp, unemployment
compensation, payroll, property, and duties), whether or not
measured in
<PAGE>
-11-
whole or in part by net income, and including interest and
penalties with respect thereto;
2.1.64. "Trade Secrets" means information and data which: (a)
derives economic value, actual or potential, from not being
generally known to, and not being readily ascertainable by
proper means by, other Persons who can obtain economic value
from its disclosure or use; and (b) is the subject of
efforts that are reasonable under the circumstances to
maintain its secrecy.
2.2 Gender. Any reference in this Agreement to any gender shall include
both genders and the neutral, and words used herein importing the
singular number only shall include the plural and vice versa.
2.3. Headings. The division of this Agreement into Sections, subsections
and other subdivisions, and the insertion of headings are for
convenience of reference only and shall not affect or be utilized in
the construction or interpretation of this Agreement.
2.4. Severability. Any Section, subsection or other subdivision of this
Agreement or any other provision of this Agreement which is, or
becomes, illegal, invalid or unenforceable shall be severed therefrom
and shall be ineffective to the extent of such illegality, invalidity
or unenforceability and shall not affect or impair the remaining
provisions hereof, which provisions shall be severed from an illegal
or unenforceable Section, subsection or other subdivision of this
Agreement or any other provisions of this Agreement.
2.5. Entire Agreement. This Agreement together with any other instruments
to be delivered pursuant hereto, including without limitation, a
writing of the Corporation dated the date hereof, containing certain
documents and information which are specifically identified to
particular sections of this Agreement, constitute the entire agreement
among the parties pertaining to the subject matter hereof and
supersede all prior agreements, understandings, negotiations, and
discussions, whether oral or written, among any or all of the parties.
2.6. Amendments. No amendment of this Agreement shall be binding unless
otherwise expressly provided in an instrument duly executed by each of
the parties hereto.
2.7. Waiver. Except as otherwise provided in this Agreement, no waiver of
any of the provisions of this Agreement shall be deemed to constitute
a waiver of any other provisions (whether or not similar), nor shall
such waiver constitute a continuing waiver unless otherwise expressly
provided in an instrument duly executed by the parties.
<PAGE>
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2.8. Delays. When calculating the period of time within which or following
which any act is to be done or step taken pursuant to this Agreement,
the day which is the reference day in calculating such period shall be
excluded. If the day on which such delay expires is not a Business
Day, then the delay shall be extended to the next succeeding Business
Day.
2.9. Preamble. The preamble hereof shall form an integral part of this
Agreement.
2.10. Governing Law. This Agreement shall be governed in all respects by
the laws of the State of New York as they are applied to agreements
entered into in New York between New York residents and performed
entirely within New York.
2.11. Currency. Unless otherwise specified, all statements of or references
to dollar amounts in this Agreement are of or to the lawful currency
of the United States.
3. SUBSCRIPTIONS FOR SHARES
3.1. Investors' Subscription. Each Investor hereby subscribes for the
number of Common Shares of the Corporation's share capital set forth
hereinafter at the aggregate subscription price set forth hereinafter.
The Corporation hereby accepts the subscription of each Investor for
their Common Shares, subject to the terms and conditions contained
herein.
================================================================================
Investor Number of Common Shares Aggregate Price
- --------------------------------------------------------------------------------
Innovatech 533,095 $ 3,749,992.96562 Cdn
- --------------------------------------------------------------------------------
Devma 533,095 $ 3,749,992.96562 Cdn
- --------------------------------------------------------------------------------
FSTQ 1 $7.03438 Cdn
- --------------------------------------------------------------------------------
Fonds Regional 1 $7.03438 Cdn
================================================================================
3.2. Payment and Issue of Innovatech Shares. Innovatech hereby agrees to
remit to the Corporation on the date hereof the aggregate subscription
price set forth in subsection 3.1 vis-a-vis Innovatech for the number
of Common Shares set forth vis-a-vis Innovatech (the "Innovatech
Shares"), and the Corporation shall, upon receipt of such aggregate
subscription price, issue the Innovatech Shares to Innovatech and
deliver share certificates representing same.
<PAGE>
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3.3. Payment and Issue of Devma Shares. Devma hereby agrees to remit to the
Corporation on the date hereof the aggregate subscription price set
forth in subsection 3.1 vis-a-vis Devma for the number of Common
Shares set forth vis-a-vis Devma (the "Devma Shares"), and the
Corporation shall, upon receipt of such aggregate subscription price,
issue the Devma Shares to Devma and deliver share certificates
representing same.
3.4. Payment and Issue of FSTQ Shares. FSTQ hereby agrees to remit to the
Corporation on the date hereof the aggregate subscription price set
forth in subsection 3.1 vis-a-vis FSTQ for the number of Common Shares
set forth vis-a-vis FSTQ (the "FSTQ Shares"), and the Corporation
shall, upon receipt of such aggregate subscription price, issue the
FSTQ Shares to FSTQ and deliver share certificates representing same.
3.5. Payment and Issue of Fonds Regional Shares. Fonds Regional hereby
agrees to remit to the Corporation on the date hereof the aggregate
subscription price set forth in subsection 3.1 vis-a-vis Fonds
Regional for the number of Common Shares set forth vis-a-vis Fonds
Regional (the "Fonds Regional Shares"), and the Corporation shall,
upon receipt of such aggregate subscription price, issue the Fonds
Regional Shares to Fonds Regional and deliver share certificates
representing same.
3.6. Subscription by the Corporation for Class "B" common shares of
Compositech Canada. The Corporation hereby acknowledges and confirms
that it is a condition precedent to the subscriptions by the Investors
for the Purchased Securities hereunder that the aggregate subscription
prices paid by the Investors to the Corporation be used exclusively
and in their entirety by the Corporation to subscribe for Class "B"
common shares of Compositech Canada in the manner provided for in the
subscription agreement dated the date hereof between the Corporation
and Compositech Canada, and the Corporation hereby directs the
Investors to remit the aggregate subscription prices for the Purchased
Securities directly to Compositech Canada for such purpose.
4. REPRESENTATIONS, WARRANTIES AND ACKNOWLEDGEMENTS
4.1. Representations, Warranties and Acknowledgements of the Investors.
Each Investor (with respect to itself, and not with respect to the
other Investors) hereby represents and warrants, severally and not
jointly, to the Corporation and to the other Investors, and
acknowledges and confirms that the Corporation and the other
Investors, are relying upon such representations and warranties in
connection herewith and would not have entered into this Agreement
without such representations and warranties:
4.1.1. such Investor is duly incorporated, constituted or formed,
validly existing and in good standing under the laws of its
jurisdiction of incorporation or under the laws pursuant to
which it was constituted or formed;
4.1.2. such Investor has the necessary corporate power and
authority to execute this Agreement and to perform its
obligations hereunder. The execution of this Agreement by
such Investor and the performance by such Investor of its
obligations hereunder have been duly authorized by all
necessary action
<PAGE>
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on its part and do not require any action or consent of, any
registration with, or notification to any Person, or any
action or consent under any laws of the Province of Quebec
or of Canada to which such Investor is subject;
4.1.3. the execution of this Agreement, the consummation of the
transactions contemplated herein, the performance by such
Investor of its obligations hereunder and the compliance by
it with this Agreement do not:
4.1.3.1. violate, contravene or breach, or constitute a
default under, the constating documents, law or
by-laws of such Investor;
4.1.3.2. violate, contravene or breach, or constitute a
default under any contract, agreement, indenture,
instruments, or commitment to which such Investor
may be a party, or its properties may be subject,
or by which it is bound or affected; or
4.1.3.3. violate, contravene or breach any laws to which
such Investor is subject;
4.1.4. neither such Investor nor any of its respective
shareholders, directors, officers, employees or agents has
employed or incurred any liability to any broker, finder or
agent for any brokerage fees, finder's fees, commissions or
other amounts with respect to this Agreement or any of the
transactions contemplated hereby;
4.1.5. such Investor is acquiring the Purchased Securities as
provided in this Agreement for investment for its own
account (or for the account of any of the other Investors),
and not with the view to, or for resale in connection with,
any distribution thereof;
4.1.6. such Investor is an "accredited investor" within the meaning
of Rule 501 under the Securities Act;
4.1.7. each Investor hereby makes the following acknowledgements:
4.1.7.1. it understands that the acquisition of Purchased
Securities as provided in this Agreement has not
been registered or qualified under the Securities
Act or under any applicable U.S. state securities
laws, but is being extended to such Investor
pursuant to a specific exemption from the
registration provisions of the Securities Act and
such laws, the availability of which depends upon,
among other things, the bona fide nature of its
investment intent and the accuracy of the
representations set forth in paragraph 4.1.5;
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<PAGE>
4.1.7.2. it understands that the Purchased Securities
acquired pursuant to this Agreement must be held
by it indefinitely unless a subsequent disposition
thereof is registered and/or qualified under the
Securities Act and applicable U.S. state
securities laws or, in the opinion of such
Investor's counsel reasonably satisfactory to the
Corporation, exempt from such registration and/or
qualification;
4.1.8. it understands that the certificates representing its
Purchased Securities will bear a legend containing the
restrictions referred to in subparagraph 4.1.7.2.
4.2. Representations and Warranties of the Corporation. The Corporation
hereby represents and warrants as follows to each of the Investors and
acknowledges and confirms that the Investors are relying upon such
representations and warranties in connection herewith and would not
have entered into this Agreement without such representations and
warranties:
4.2.1. 1933 Act Representation. The offer, issuance and sale of the
Purchased Securities hereunder is exempt from the
registration and prospectus delivery requirements of the
Securities Act;
4.2.2. "Blue Sky" Law Compliance. The Corporation has made all
filings and taken all actions necessary to comply with all
"blue sky" laws with regard to the sale of the Purchased
Securities as contemplated by this Agreement;
4.2.3. Corporate Organization and Authority. The Corporation is
duly incorporated and organized, validly existing, and in
good standing under the laws of its jurisdiction of
incorporation. The Corporation is registered, licensed or
otherwise qualified as an out of state or foreign
corporation in good standing in any jurisdiction where not
to be so registered, licensed or otherwise qualified and in
good standing would have a material adverse affect on the
business, the operations or Assets of the Corporation. The
Corporation is registered, licensed or otherwise qualified
to do business in the State of New York. The execution and
delivery of this Agreement and the performance of the
transactions contemplated hereby will not, with or without
the giving of notice and/or the passage of time, or both (i)
violate any provision of Applicable Law, or require any
consent, approval or authorization of, or any declaration,
filing or registration with or notice to, any third party,
Governmental Body or otherwise, (ii) result in the loss of
any right under or conflict with or result in a default of
any provision or termination of or accelerate the date of
performance of any obligation under any Material Contract to
which the Corporation may be a party or by which the
Corporation or any of its Material Assets may be bound, or
(iii) conflict with or result in a default of any provision
or termination of any of
<PAGE>
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the corporate documents or by-laws of the Corporation. This
Agreement constitutes a valid and binding obligation of the
Corporation enforceable against it in accordance with its
terms, subject to laws of general application affecting
creditors' rights and the exercise of judicial discretion in
accordance with general equitable principles;
4.2.4. Corporate Documents. Exhibit 3.1 of the Annual Report and
Exhibit 3.3 of the Registration Statement contain true and
complete copies of the corporate documents, including the
authorized capital stock of the Corporation and by-laws,
respectively, of the Corporation, neither of which has been
amended and there is no application pending for the
amendment of any of same. The minute books and corporate
records of the Corporation, which have been made available
to the Investor's solicitors for review prior to the date
hereof, have been maintained in accordance with the
Applicable Law and contain true and complete records of all
the by-laws of the Corporation and all meetings and consents
in lieu of meetings of the board of directors of the
Corporation and its shareholders, and accurately and
completely reflect all matters referred to in such minutes
and consents. All resolutions contained in such records have
been duly passed and all such meetings have been duly called
and held. The share certificate books and the registers of
shareholders, directors and transfers of the Corporation are
complete and accurate;
4.2.5. Issued Shares. Immediately before giving effect to this
Agreement and the Stock Exchange Agreement, the only issued
and outstanding shares in the capital stock of the
Corporation (and rights, options and warrants to acquire
same) are as set out in a writing dated the date hereof
identified to this paragraph. All such shares are validly
issued, fully paid and non-assessable and all shares to be
issued pursuant to this Agreement, upon receipt by the
Corporation of the consideration in respect of such shares,
will be validly issued, fully paid and non-assessable. There
are no other outstanding shares, warrants, rights, options,
securities convertible into shares of the capital stock of
the Corporation or any other agreements or rights to
purchase or subscribe for any shares of the capital stock of
the Corporation or convert any obligation or shares into any
shares of the capital stock of the Corporation and the
Corporation has not agreed to issue or sell any shares of
its capital stock or any securities of any kind except as
set out in this Agreement and the Stock Exchange Agreement;
4.2.6. Subsidiaries. The Corporation has no subsidiary nor owns any
equity or other interest in any corporation, partnership,
joint venture or other entity;
4.2.7. Power and Authority. The Corporation has the requisite
corporate power, authority and capacity to carry on its
business and to own and operate its Assets.
<PAGE>
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4.2.8. Powers of Attorney. No Person holds any general or special
power of attorney from the Corporation;
4.2.9. Financial Statements. The Financial Statements and the
interim financial statements of the Corporation dated June
30, 1997, a copy of which is contained in Form 10-QSB for
the quarterly period ended June 30, 1997:
4.2.9.1. have been prepared in accordance with Generally
Accepted Accounting Principles,
4.2.9.2. are true and complete in all material respects,
4.2.9.3. present fairly the assets and liabilities of the
Corporation and present fairly the financial
condition and the results of the operations of the
Corporation, as at the dates thereof and for the
periods covered thereby,
4.2.9.4. present fairly proper accruals, as at the dates
thereof and for the periods covered thereby,
including accruals of amounts and other
remuneration arrangements for employees of the
Corporation (including management fees and
employee incentives), which though not payable
until a time after the end of the relevant period,
are attributable to activities undertaken during
that period,
4.2.9.5. contain or reflect adequate reserves for all
liabilities and obligations of the Corporation as
at the dates thereof.
No information has become available to the Corporation
that would render the Financial Statements or the interim financial statements
of the Corporation dated June 30, 1997 not fairly stated;
4.2.10. Undisclosed Liabilities of the Corporation. The Corporation
has no liabilities of any kind except liabilities disclosed
or provided for in the Financial Statements and liabilities
incurred in the ordinary course of business since the
Balance Sheet Date which are not, in the aggregate, material
and adverse to its business, or to its financial condition
or results of operations and do not constitute a violation,
contravention or breach of any covenant, agreement or
obligation contained in this Agreement or constitute a
breach of any representation or warranty made in or pursuant
to this Agreement;
4.2.11. Subsequent Activities of the Corporation. Except as
disclosed in a writing dated the date hereof identified to
this paragraph, since the Balance
<PAGE>
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Sheet Date, there has not occurred any change in the
condition, financial or otherwise, or prospects of the
Corporation other than changes occurring in the ordinary
course of business which changes, individually or in the
aggregate, have not materially adversely affected its
business, financial condition, results of operations or
prospects; without limiting the generality of the foregoing,
since the Balance Sheet Date, the Corporation has not,
directly or indirectly:
4.2.11.1. declared or paid any dividend on its capital stock
or redeemed, purchased or otherwise acquired any
shares of its capital stock, or otherwise reduced
its paid up capital or altered its capital stock,
4.2.11.2. entered into any Contract outside the ordinary
course of business,
4.2.11.3. increased the salary, benefits, bonuses or other
compensation of its officers, directors or
employees, except in the ordinary course of
business or adopted any Benefit Plan,
4.2.11.4. sold, leased, mortgaged, hypothecated, pledged or
otherwise subjected any of its Material Assets to
any Encumbrance,
4.2.11.5. settled any liability, claim, dispute,
proceedings, suit or appeal pending against it or
any of its Material Assets,
4.2.11.6. suffered any extraordinary loss,
4.2.11.7. purchased or leased, or made any commitment to
purchase or lease, any Assets, except for
purchases of Equipment and supplies in the
ordinary course of business,
4.2.11.8. made any change in personnel practices, except in
the ordinary course of business,
4.2.11.9. cancelled or released any debts or claims,
4.2.11.10. made any change in its accounting principles,
policies or practices as heretofore applied,
including the basis upon which its assets and
liabilities are recorded on its books, its
earnings are ascertained or the methods or rates
of depreciation or amortization employed,
4.2.11.11. reimbursed any loans or advances made to the
Corporation by any shareholder, director or
officer of the Corporation,
<PAGE>
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4.2.11.12. violated any provision of any Material Contract
to which it is a party or by which it or any of
its Material Assets may be bound, or
4.2.11.13. agreed to do any of the things described in
subsections 4.2.11.1 through 4.2.11.12,
inclusively, hereof;
4.2.12. Title to Assets. Except as disclosed in a writing dated the
date hereof and identified to this paragraph, the
Corporation is the legal and beneficial owner of, has good
and marketable title to and possesses all its Assets free
and clear of any Encumbrances;
4.2.13. Equipment. The Corporation owns or leases all Equipment
necessary to conduct its business as presently conducted,
all of which is located at the Premises. All of the
Equipment (i) is in good working order and operating
condition and has been regularly serviced and properly
maintained and (ii) is adequate and sufficient for the
continuing conduct of the business of the Corporation as now
conducted. There are no outstanding work orders relating to
any of the Equipment which have been received from or
required by any applicable Governmental Body;
4.2.14. Assets. All the Assets owned or used by the Corporation are
located at the Premises, except as disclosed in a writing
dated the date hereof and identified to this paragraph.
4.2.15. Litigation. Except as disclosed in a writing dated the date
hereof and identified to this paragraph, there is no
existing or, to the Corporation's Knowledge, threatened
claim, demand, suit, action, cause of action, dispute,
proceeding, litigation, investigation, grievance,
arbitration, governmental proceeding or other proceeding,
including appeals and applications for review, in progress
against, by, affecting or relating to the Corporation and/or
any of its Assets. There is no state of facts, to the
Corporation's Knowledge, which could provide a valid basis
for any of the foregoing. There is not at present
outstanding against, affecting or relating to the
Corporation and/or its Assets any Order which adversely
affects the Corporation in any way or that in any way
relates to this Agreement or the transactions contemplated
hereby;
4.2.16. Insurance. The Corporation has such policies of insurance,
issued by responsible insurers, as are usually carried by
persons engaged in business activities similar to the
business activities of the Corporation, which includes all
risk property insurance, public product liability insurance
and general liability insurance, workers compensation
insurance, fire insurance, directors' liability insurance
and business interruption insurance. True and
<PAGE>
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complete copies of the most recent inspection reports, if
any, received from insurance underwriters as to the
condition of the Assets and the Corporation's business have
been delivered to the Investors. The Corporation is not in
default with respect to any of the provisions contained in
any such insurance policy. For any current claim that has
not been settled or finally determined, the Corporation has
not failed to give any notice or present any claim under any
such insurance policy in a due and timely fashion such that
the insurer would be entitled to terminate coverage or deny
liability on any such claim. All such policies of insurance
are in full force and effect. Except as disclosed in a
writing dated the date hereof and identified to this
paragraph, there have been no liability or other claims
against the Corporation;
4.2.17. Real Property Lease and Premises
4.2.17.1. The Real Property Lease, is the only lease, offer
to lease, sublease, license or other agreement
under which the Corporation uses or occupies or
has the right to use or occupy, now or in the
future, any immovable or real property or any
buildings, structures, fixtures or improvements
thereon,
4.2.17.2. all of the land, buildings, structures and
improvements currently used by the Corporation in
the conduct of its business are included in the
Real Property Lease,
4.2.17.3. the Corporation has not entered into any sublease,
license or other agreement granting to any Person
any right to the possession, use, occupancy or
enjoyment of the Premises or any portion thereof,
4.2.17.4. there are no work orders of any applicable
Governmental Body outstanding against the Premises
and the Corporation has not received any
deficiency notices, requests or written or oral
advice of any breach of Applicable Law in respect
of the foregoing which could, if not corrected,
become such a work order or could require
performance of work or expenditure of money to
correct. The Premises are in compliance with the
requirements of all insurance companies who have
policies covering the Premises,
4.2.17.5. all water, gas, electrical, steam, compressed air,
telecommunication, sanitary and storm sewage lines
and systems and other similar systems serving the
Premises are in working order and operating
condition. The continued existence, use, occupancy
and operation of each such line and
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system is not dependent on the granting of any
Permit, exception, approval or variance, and
4.2.17.6. all Material Permits, as well as all approvals and
authorizations from all insurance companies and
fire rating organizations, required to have been
issued to the Corporation to enable the Premises
to be lawfully occupied and used by the
Corporation for all of the purposes for which it
is currently occupied and used have been lawfully
issued and are in full force and effect and no
action by the Corporation is required in order
that such certificates, permits, licenses,
approvals and authorizations will remain valid
following the completion of the transactions
contemplated hereby;
4.2.18. Place of Business. The Corporation carries on business at
the Premises and has no other place of business;
4.2.19. Environmental Matters. Without limiting the generality of
subsection 4.2.15 or 4.2.26 hereof:
4.2.19.1. the operations of, and the use of the Premises and
Equipment by the Corporation are now and have been
in compliance, in all material respects, with
applicable Environmental Law, and the operations
of and use of the Premises by any predecessor in
interest of the Corporation or any present or
prior owner, lessee or occupant of the Premises
have, to the Knowledge of the Corporation, been in
compliance, in all material respects, with
applicable Environmental Law,
4.2.19.2. Except as set forth in a writing dated the date
hereof and identified to this subparagraph, the
Corporation has obtained and holds all Material
Permits required under applicable Environmental
Law for the conduct of its operations and all such
Material Permits are valid and in full force and
effect. All documentation in connection with
obtaining the Permit referred to in such writing
has been filed with the appropriate authority or
Governmental Body. The Corporation has not
received any notice amending, revoking or
replacing any Material Permits or requiring the
issuance of any additional Permits. The
Corporation has filed in a timely manner all
reports, notifications and plans required pursuant
to any such Material Permits,
4.2.19.3. there has been no material Release by the
Corporation (or to the Knowledge of the
Corporation by any predecessor in interest of
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the Corporation or any present or prior owner,
lessee or occupant of the Premises), of Hazardous
Substances in, under or on the Premises and the
Premises are free of any material contamination by
the Corporation (or to the Knowledge of the
Corporation by any predecessor in interest of the
Corporation or any present or prior owner, lessee
or occupant of the Premises) of the Environment by
Hazardous Substances therein or thereon,
4.2.19.4. the Corporation has not received, nor is it likely
to receive as a result of the consummation of the
transactions contemplated hereby, any notification
pursuant to applicable Environmental Law that any
of its current or past operations (or to the
Knowledge of the Corporation those of any
predecessor in interest of the Corporation or any
present or prior owner, lessee or occupant of the
Premises) or any by-product thereof or of the
Premises, is or may be implicated in or subject to
any proceeding, investigation, claim, lawsuit,
order, agreement or evaluation by any Person as to
whether i) any Remedial Action is or may be needed
to respond to a Release or threatened Release of a
Hazardous Substance into the Environment; ii) any
recovery is sought from the Corporation or its
directors, officers or other executives for any
liability, damage or loss, or any action, suit or
proceeding commenced against the Corporation,
related to or arising from the current or past
operations of the Corporation or the operation of
the Premises; or iii) the Corporation is or may be
a potentially responsible party for a Remedial
Action, pursuant to applicable Environmental Law,
and
4.2.19.5. to the Knowledge of the Corporation there is no
basis for any action, suit, claim, penalty, fine,
investigation or proceeding with respect to any
obligation of the Corporation to remediate
conditions pursuant to applicable Environmental
Law or any other potential source of liability for
the Corporation or its directors, officers or
other executives under applicable Environmental
Law in connection with any Release of Hazardous
Substance by the Corporation (or any predecessor
in interest of the Corporation or any present or
prior owner, lessee or occupant of the Premises);
4.2.20. Books and Records. The Books and Records of the Corporation
are true and complete in all material respects;
4.2.21. Employees and Labour Relations.
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4.2.21.1. The Annual Report and Proxy Statement, contain a
true and complete list of the employees of the
Corporation who are officers, directors and/or
shareholders of the Corporation detailing total
remuneration and position held. All officers and
employees of the Corporation received compensation
from the Corporation solely in consideration of
services performed on its behalf. The compensation
of all officers and employees of the Corporation
was paid entirely by the Corporation,
4.2.21.2. Exhibits 10.24, 10.25 and 10.26 of the
Registration Statement and the writing dated the
date hereof and identified to this paragraph
contain true and complete copies of all employment
agreements of senior management to which the
Corporation is a party. Without limiting the
generality of subsection 4.2.23 hereof and except
as disclosed in the writing dated the date hereof
and identified to this paragraph, there is no
employment or similar agreement to which the
Corporation is a party providing for a specified
notice of termination or fixed term of employment
or requiring any deferred compensation or benefits
to be paid or provided following such termination,
except as provided in such employment agreements
of senior management. To the Knowledge of the
Corporation, none of the officers, directors or
other key employees of the Corporation has any
present intention to terminate his employment.
There is no director, officer or employee of the
Corporation who cannot be dismissed upon such
notice as is required by Applicable Law. The
Corporation and all employees are in material
compliance with the terms and conditions of their
employment agreements and each such agreement is
in compliance with Applicable Laws,
4.2.21.3. without limiting the generality of subsection
4.2.26 hereof, the Corporation is in compliance
with all Material Applicable Law respecting
employment and employment practices, terms and
conditions of employment, wages, hours of work and
human and civil rights,
4.2.21.4. without limiting the generality of subsection
4.2.23 hereof, the Corporation is not bound by or
subject to any collective bargaining agreement or
collective bargaining obligation or selection of a
collective bargaining representative for employees
(or any ongoing organizing activity), order of any
or other labour board, administration or
Governmental Body,
<PAGE>
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4.2.21.5. without limiting the generality of subsection
4.2.15 hereof, there are no labour disruptions
pending or threatened against the Corporation and
the Corporation is not involved in any controversy
with any of its employees except in the ordinary
course of business, and
4.2.21.6. without limiting the generality of subsection
4.2.15 hereof, there has never been and there is
not presently pending or existing any strike,
slowdown, picketing, work stoppage, labour
arbitration or proceeding in respect of any
grievance of any employee or other labour dispute
against, affecting or threatened against the
Corporation, and there is no fact, condition or
circumstance which could provide the basis
therefor. No application for the certification of
a collective bargaining unit has been instituted
or is pending or threatened;
4.2.22. Benefit Plans.
4.2.22.1. Exhibits 10.22 and 10.23 of the Registration
Statement and Exhibit 1 of the Proxy Statement
contain true and complete copies of all Benefit
Plans maintained or contributed to by the
Corporation or from which the employees of the
Corporation benefit,
4.2.22.2. Except as disclosed in a writing dated the date
hereof and identified to this paragraph, the
Corporation has not at any time contributed to (or
been obligated to contribute to) any plan subject
to Title IV or Part I of Title I of the United
States Employee Retirement Income Security Act,
1974, as amended ("ERISA"). The Corporation is in
compliance with ERISA, the United States Internal
Revenue Code of 1986, as amended, and the
regulations thereunder. Without limiting the
generality of subsection 4.2.26 hereof, each of
the Benefit Plans listed in such exhibits has been
maintained in compliance with its terms and all
requirements prescribed by Applicable Law, are in
good standing under all Applicable Law, and
without limiting the generality of subsection
4.2.23 hereof, there are no outstanding defaults
or violations by the Corporation of any obligation
required to be performed by it in connection with
any Benefit Plan.
4.2.22.3. no promises or commitments have been made by the
Corporation to amend any Benefit Plan or to
provide increased benefits thereunder or to
establish any Benefit Plan;
<PAGE>
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4.2.23. Material Contracts. The exhibits to the Registration
Statement, the Annual Report and the Corporation's
registration statement No. 333-32241 on Form S-3 under the
Securities Act filed on July 28, 1997 contain true and
complete copies of all Material Contracts to which the
Corporation is a party or by which it or its Material Assets
may be bound. The Corporation is not in violation of or in
default with respect to and no event has occurred which,
with lapse of time or action by a third party, or both,
could result in violation of or a default with respect to
any of the Material Contracts contained in such exhibits.
Each of the Material Contracts contained in such exhibits is
in full force and effect and valid, binding and enforceable
in accordance with its terms and, to the Knowledge of the
Corporation, all parties to such Material Contracts (other
than the Corporation) are in compliance with their
obligations thereunder. Neither of the Corporation and, to
the Knowledge of the Corporation, none of the parties to
such Material Contracts (other than the Corporation) intends
to terminate its obligations under any of such Material
Contracts;
4.2.24. Intellectual Property.
4.2.24.1. All information and representations (collectively
the "Information") given and made to the Investors
by the Corporation herein or in a writing dated
the date hereof and identified to this
subparagraph, relating to the Principal
Intellectual Property Rights (as hereinafter
defined), the Manufacturing Equipment and the
Products are complete and true, and all
Information relates only to the Principal
Intellectual Property Rights, the Manufacturing
Equipment and the Products and not to any other
Intellectual Property Rights of, or equipment or
products manufactured by, the Corporation or any
other Person.
4.2.24.2. A true and complete list and copy of all
Intellectual Property Rights of the Corporation
except those specified in paragraphs 2.1.33.1.5
and 2.1.33.2 and a true and complete list and copy
in all material respects of the Intellectual
Property Rights of the Corporation specified in
paragraphs 2.1.33.1.5 and 2.1.33.2 related to,
used in or useful for the research, development,
manufacture, sale, lease, license and service of
the Manufacturing Equipment and the Products and
used in or useful for the conduct of its business
are set forth in a writing dated the date hereof
and identified to this subparagraph (the
"Principal Intellectual Property Rights"), none of
the applications and registrations in respect of
which has been opposed or held unenforceable
(except as set forth in a writing
<PAGE>
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dated the date hereof and identified to this
subparagraph) and each of which is in full force
and effect. In addition, a true and complete list
and copy of all Intellectual Property Rights of
the Corporation (other than the Principal
Intellectual Property Rights) are set forth in a
writing dated the date hereof and identified to
this subparagraph. Except as disclosed in a
writing dated the date hereof and identified to
this paragraph, the Corporation is the absolute
owner of the applications and registrations in
respect of the Principal Intellectual Property
Rights. Except as set forth in such writing and
for commonly available business software not
material for the development and manufacturing of
Products or Manufacturing Equipment, to the Actual
Knowledge of the Corporation, the Corporation is
the absolute owner of and has the right to exclude
others from using the Principal Intellectual
Property Rights, and the Corporation has the right
to use and license the Principal Intellectual
Property Rights, without making any payment to any
Person or granting rights to any Person in
exchange. The Corporation's patents and
trademarks, as listed and explained in such
writing, have been duly registered with, filed in
or issued by, as the case may be, such
Governmental Bodies as is indicated in such
writing and, except as otherwise set forth in such
writing, such registrations, filing and issuances
remain in full force and effect. The Principal
Intellectual Property Rights cover the technology
used to develop and manufacture the Products and
the Manufacturing Equipment. The Principal
Intellectual Property Rights are sufficient for
the lawful conduct, ownership and operation of the
Corporation's business and to enable the research,
development, manufacture, use, sale, lease,
license and service of the Products and the
Manufacturing Equipment as represented in the
Information and to the Actual Knowledge of the
Corporation, there are no Intellectual Property
Rights of any Person which impair or prevent the
development, manufacture, use, sale, lease,
license and service of the Products and the
Manufacturing Equipment, now existing or under
development by the Corporation. The Corporation
has, to its Actual Knowledge, the unabridged right
to bring actions for the infringement of all of
its Principal Intellectual Property Rights,
4.2.24.3. without limiting the generality of subsection
4.2.3 hereof, the execution, delivery and
performance of the Agreement and the consummation
of the transactions contemplated thereby will not
breach, violate or conflict with any instrument or
agreement governing any of the Principal
Intellectual Property Rights, and
<PAGE>
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will not cause the forfeiture or termination or
give rise to a right of forfeiture or termination
of the Principal Intellectual Property Rights or
in any way impair the right of the Corporation to
use, sell, license or dispose of or to bring any
action for the infringement of any of the
Principal Intellectual Property Rights or portion
thereof,
4.2.24.4. to the Knowledge of the Corporation, none of the
Principal Intellectual Property Rights have been
unlawfully derived, in part or in whole, from the
Intellectual Property Rights of any other Person.
All employees of, and consultants to, the
Corporation have entered into agreements with the
Corporation pursuant to which all Intellectual
Property Rights developed by them in the course of
and pursuant to their relationship with the
Corporation belong solely, without any
restrictions or obligations whatsoever, to the
Corporation, and all such agreements are included
in the Material Contracts. The Corporation has
entered into confidentiality and non-disclosure
agreements with all employees of the Corporation
or consultants, third party developers or any
other Persons with access to or knowledge of the
Principal Intellectual Property Rights, other than
with Persons who are obligated by law to maintain
such information in confidence and attorneys and
accountants who have ethical obligations to
maintain such information in confidence. The
Corporation has to its Knowledge taken all
reasonable and practical steps sufficient to
safeguard and maintain the secrecy and
confidentiality of, and its proprietary rights in,
all of the information and data forming part of
the Corporation's Trade Secrets. To the Knowledge
of the Corporation, the essential information and
data required to develop and manufacture the
Manufacturing Equipment and the Products are Trade
Secrets of the Corporation,
4.2.24.5. none of the development, manufacture, marketing,
license, sale or use of any product or service
currently licensed or sold by the Corporation or
currently under development or proposed to be
developed by the Corporation, to the Knowledge of
the Corporation, violates or will violate any
Contract with any Person or, to the Actual
Knowledge of the Corporation, infringes or will
infringe any Intellectual Property Rights of any
Person. Except as set forth in a writing
identified to this subparagraph, there are no
pending or to the Knowledge of the Corporation,
threatened proceedings, litigation or other
adverse claims affecting, or with respect to, any
part of the Principal Intellectual Property Rights
and, except as set forth in such
<PAGE>
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writing, to the Knowledge of the Corporation, no
Person is infringing any Principal Intellectual
Property Right,
4.2.24.6. except as set forth in such writing identified to
this paragraph and except for the license granted
pursuant to the License Agreement, no license or
sub-license has been granted or other Contract has
been entered into with respect to any of the
Principal Intellectual Property Rights. The
Corporation has not conducted business under any
name other than its current corporate name;
4.2.24.7. the license that will be granted to Compositech
Canada by the Corporation on the date hereof
pursuant to the License Agreement shall be validly
granted and enforceable against the Corporation;
4.2.25. Related Transactions. Except as set forth in the Financial
Statements, and except for current unpaid salaries, the
Corporation has no indebtedness to any of its shareholders,
directors, officers or employees, past or present, or to any
Person not dealing at arm's-length with any of such Persons;
and no shareholder, director, officer or employee, past or
present, of the Corporation or any Person not dealing at
arm's-length with any of such Persons has any indebtedness
to the Corporation;
4.2.26. Compliance with Applicable Law. The Corporation has
conducted and is conducting its business in compliance with
all Material Applicable Laws, and the Corporation is not in
breach of any Material Applicable Law, including any
securities law;
4.2.27. Qualifications. The Corporation has not been required to
suspend operations of its business or been liable for a fine
or penalty as a result of the operation of its business. The
Corporation has all Material Permits necessary for the
conduct of its business and such Material Permits are
validly issued, in full force and effect and the Corporation
is in compliance therewith, and none of such Material
Permits will be affected by the transactions contemplated
hereby;
4.2.28. Absence of Guarantees. Without limiting the generality of
subsection 4.2.23 hereof and except for commitments
disclosed in the Financial Statements, the Corporation is
not a party to or bound by any comfort letter, understanding
or agreement of guarantee, indemnification, assumption or
endorsement or any like commitment with respect to the
liabilities (whether accrued, absolute, contingent or
otherwise) or obligations of any Person;
<PAGE>
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4.2.29. Tax Matters.
4.2.29.1. Tax Returns required by Applicable Law to be filed
by, or with respect to the activities of the
Corporation with applicable Governmental Bodies
have been properly and timely filed with the
appropriate Governmental Bodies and all such Tax
Returns are true and complete and all Taxes shown
to be due on such Tax Returns have been paid,
4.2.29.2. with respect to the Corporation: i) there are no
unpaid Taxes now due and no deficiency for Taxes
has been assessed by any applicable Governmental
Body, ii) no audit of any Tax Return is in
progress or pending or threatened, and iii) no
waiver of any statute of limitations has been
given or is in effect with respect to the
assessment of any Taxes,
4.2.29.3. all Taxes shown on all Tax Returns for which the
Corporation is liable have been paid or accrued
and adequately reserved on its Books and Records
and financial statements (including the Financial
Statements) of the Corporation. The Corporation is
not taxed as an "S corporation" (within the
meaning of Section 1361(a) of the United States
Internal Revenue Code of 1986, as amended),
4.2.29.4. none of the Tax Returns of the Corporation have
ever been examined or audited by any taxing
Governmental Body at any time, except as provided
in subparagraph 4.2.29.2 hereof,
4.2.29.5. the Corporation has never entered into any closing
or similar agreement with any taxing Governmental
Body,
4.2.29.6. in each jurisdiction in which the Corporation is
paying or has paid sales tax, sales tax audits
have been conducted and completed through June 30,
1994,
4.2.29.7. copies of all deficiencies, assessments and
notices from all taxing Governmental Bodies, if
any, have been delivered to the Investors,
4.2.29.8. the Corporation was not a member of an entity
required to file a federal partnership Tax Return
that is expected to have taxable income for any
taxable period beginning prior to the date hereof
that is in excess of cash distributions of such
income to be made after the date hereof,
<PAGE>
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4.2.29.9. the Corporation has not adopted a plan of complete
liquidation and no consent has been filed on
behalf of any of them pursuant to Section 341(f)
of the United States Internal Revenue Code of
1986, as amended, or any predecessor provision,
4.2.29.10. the Corporation has not taken any action not in
the ordinary course of business that would have
the effect of deferring any Tax liability from any
taxable period ending prior to the date hereof,
4.2.29.11. without limiting the generality of the foregoing,
the Corporation has collected all sales, goods and
services and use taxes required to be collected
and has remitted same on a timely basis to the
appropriate Governmental Body, or has been
furnished properly completed exemption
certificates for all exempt transactions. The
Corporation has in its possession all Books and
Records, including supporting documents, required
by Applicable Law regarding the collection and
payment of all sales, goods and services and use
taxes required to be collected and paid over and
regarding all exempt transactions for all periods
open under the applicable statutes of limitations
as of the date hereof, and the Corporation has
maintained all such Books and Records, including
supporting documents, in the manner required by
applicable sales, goods and services and use tax
statutes and regulations,
4.2.29.12. the Corporation has withheld from each payment
made to each of its past and present shareholders,
agents, employees, officers and directors all
deductions required to be made therefrom and has
paid same to the proper Governmental Body;
4.2.30. Accounts Receivable and Payable. A true and complete (i)
trade accounts receivable listing of the Corporation as of
June 30, 1997, and (ii) accounts payable listing of the
Corporation as of August 21, 1997 are set forth in a writing
dated the date hereof and identified to this paragraph. The
accounts receivable of the Corporation reflected on the
Financial Statements and those created after the Balance
Sheet Date, are genuine and bona fide receivables which
arose in the ordinary course of business, and net of
reserves (which reserves are adequate and determined in
accordance with Generally Accepted Accounting Principles,
consistently applied) are collectible in full when due
without any discount, set-off or counterclaim;
4.2.31. No Broker. Without limiting the generality of subsection
4.2.23 hereof and except as set forth in a writing dated the
date hereof and identified to this paragraph, none of the
directors of the Corporation or the Corporation
<PAGE>
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has employed, nor is any of them subject to any claim of,
any broker, finder, consultant or other intermediary in
connection with any of the transactions contemplated by this
Agreement;
4.2.32. Accuracy of Information.
4.2.32.1. The Corporation has made or caused to be made
reasonable inquiry with respect to each covenant,
agreement, obligation, representation and warranty
of the Corporation contained in this Agreement and
any other document or certificate referred to
herein or furnished by the Corporation to the
Investors pursuant thereto, and none of the
aforesaid covenants, agreements, obligations,
representations, warranties or documents or
certificates contains any untrue statement of a
material fact or omits to state a material fact
necessary to make such covenant, agreement,
obligation, representation, warranty or other
document or certificate not misleading, and
4.2.32.2. to its Knowledge, there is no fact, condition or
circumstance which (i) materially adversely or in
the future may (so far as the Corporation can now
reasonably foresee) materially adversely affect
the business, operations, properties, prospects,
or condition of the Corporation or the ability of
the Corporation to perform its covenants,
agreements and obligations under this Agreement or
(ii) relates to the business of the Corporation
and might reasonably be expected to deter an
Investor from entering into this Agreement or any
other agreements entered into between the
Investors and the Corporation on the date hereof;
4.2.33. Budget and Projections. The information contained
in the Budget and Projections was prepared in good
faith and represents the Corporation's reasonable
estimates.
5. SURVIVAL OF REPRESENTATIONS AND WARRANTIES
5.1. Survival. Notwithstanding any investigation conducted prior or
subsequent to the date hereof, the parties shall be entitled to rely
upon the representations and warranties set forth herein and all
representations and warranties made by, and all covenants, obligations
and agreements of, the parties, under or pursuant to this Agreement or
any other document or certificate delivered in connection therewith
shall survive the date hereof.
6. INDEMNIFICATION
6.1. Definitions. As used in this Section 6:
<PAGE>
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6.1.1. "Additional Indemnity" means the additional indemnity
payable to the Indemnified Party pursuant to subsection 6.5
hereof and calculated in accordance with such subsection;
6.1.2. "Claim" means any act, omission or state of facts and any
demand, action, suit, proceeding, investigation,
arbitration, trial, claim, assessment, judgment, settlement
or compromise relating thereto which may give rise to a
right to indemnification under subsection 6.2 or 6.3 hereof;
6.1.3. "Direct Claim" means any Claim by an Indemnified Party
against an Indemnifying Party which does not result from a
Third Party Claim;
6.1.4. "Indemnifying Party" means any party obligated to provide
indemnification under this Agreement;
6.1.5. "Indemnified Party" means any party entitled to
indemnification under this Agreement;
6.1.6. "Indemnity Payment" means the aggregate amount of each Loss
and Additional Indemnity required to be paid pursuant to
subsection 6.2 or the amount of each Loss required to be
paid pursuant to subsection 6.3 hereof;
6.1.7. "Loss" means any and all loss (including diminution in
value), liability, damage (excluding punitive, exemplary,
consequential, indirect and incidental damage), cost,
expense, charge, fine, penalty or assessment (after taking
into account any tax benefit actually received), resulting
from or arising out of any Claim, including the costs and
expenses of any action, suit, proceeding, demand,
assessment, judgment, settlement or compromise relating
thereto and all interest, damages, fines and penalties and
reasonable attorneys', accountants' and experts' fees and
expenses incurred in connection therewith;
6.1.8. "Proportion" means a fraction, the numerator of which is the
number of Common Shares owned by the Indemnified Party and
the denominator of which shall be the total of the Common
Shares issued and outstanding; and
6.1.9. "Third Party Claim" means any Claim asserted against an
Indemnified Party by any Person who is not a party to this
Agreement.
6.2. Indemnification by the Corporation. The Corporation hereby agrees to
indemnify and save and hold harmless each Investor from and against
any Loss suffered or incurred, directly or indirectly, by such
Investor as a result of, arising out of or relating to:
<PAGE>
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6.2.1. any violation, contravention or breach of any covenant,
agreement or obligation of the Corporation under or pursuant
to this Agreement or any other document or certificate
delivered to such Investor by or on behalf of the
Corporation in connection therewith, as well as any Claim by
any Person containing allegations which, if true, would
constitute such an event; and
6.2.2. any incorrectness in, or breach of, any representation or
warranty made by the Corporation in this Agreement, or made
or to be made in any other document or certificate delivered
or to be delivered to such Investor by or on behalf of the
Corporation in connection therewith, as well as any Claim by
any Person containing allegations which, if true, would
constitute such an event.
6.3. Indemnification by Investors. Each Investor hereby agrees to,
severally and not jointly with other Investors, each Investor having
made the representations and warranties with respect to itself only,
indemnify and save and hold harmless the Corporation from and against
any Loss suffered or incurred, directly or indirectly, by it as a
result of, arising out of or relating to:
6.3.1. any violation, contravention or breach of any covenant,
agreement or obligation of such Investor under or pursuant
to this Agreement or any other document or certificate
delivered to the Corporation by or on behalf of such
Investor in connection therewith, as well as any Claim by
any Person containing allegations which, if true, would
constitute such an event; and
6.3.2. any incorrectness in, or breach of, any representation or
warranty made by such Investor in this Agreement, or made or
to be made in any other document or certificate delivered or
to be delivered to the Corporation by or on behalf of such
Investor in connection therewith, as well as any Claim by
any Person containing allegations which, if true, would
constitute such an event.
6.4. Payment and Interest. The Indemnifying Party shall reimburse, on
demand, to the Indemnified Party the amount of each Loss suffered or
incurred by the Indemnified Party and, in the event that subsection
6.5 applies, shall pay, on demand, to the Indemnified Party the amount
of the Additional Indemnity, the whole as of the date that the
Indemnified Party incurs such Loss, together with interest on such
amount(s) from the aforesaid date until payment in full at a rate per
annum equal to the Prime Rate, plus two (2) percentage points.
Interest shall be calculated and payable monthly on the last day of
each month during which any amount in respect of any Loss, and/or any
Additional Indemnity if applicable, remained unpaid, both before and
after an arbitration award and/or judgment, with interest on overdue
interest calculated and payable at the same rate. The interest
<PAGE>
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payable in any month shall be calculated on the average amount of all
amounts in respect of any Loss, and/or any Additional Indemnity if
applicable, that remained unpaid at any time during such month. This
amount shall be calculated by i) multiplying any amount in respect of
each Loss that remained unpaid at any time during such month by the
number of days that amount remained unpaid during such month and ii)
dividing the aggregate of all such products by the number of days in
such month. If such Claim is subsequently determined not to have been
valid, the Indemnified Party shall reimburse the Indemnifying Party
for the amount so paid together with interest at the Prime Rate per
annum, plus two (2) percentage points, calculated and payable monthly
as provided previously in this subsection, from the month such payment
was made by the Indemnifying Party to the month in which the
Indemnified Party repaid such amount.
6.5. Additional Indemnity. If the Corporation is the Indemnifying Party, in
addition to the reimbursement to the Indemnified Party of the amount
of each Loss suffered or incurred by the Indemnified Party as provided
in subsection 6.4 hereof, the Indemnifying Party shall pay, on demand,
to the Indemnified Party the Additional Indemnity, the whole as
provided in subsection 6.4 hereof. The Additional Indemnity shall be
calculated in accordance with the following formula:
(Infinity) (n+1)
AI = (SIGMA) x y
n = 0
where: AI = Additional Indemnity
x = Loss
y = Proportion
n = 0, 1, 2, 3, 4 ...
Example: if Loss = $200,000
Proportion = 150,000 = 15 %
-------
1,000,000
AI = (200,000 X 15%) + (200,000 X 15% X 15%) + (200,000 X 15% X 15% X 15%) ...
AI = $30,000 + $4,500 + $675 + $101.25 + $15.19 + $2.28 + $0.34 + $0.05 + $0.008
The Additional Indemnity payable to the Indemnified Party is an amount of
$35,294.12
6.6. Notification. Promptly upon obtaining knowledge thereof, the
Indemnified Party shall notify the Indemnifying Party of each Claim
which the Indemnified Party has determined has given or could give
rise to indemnification under this Section 6, describing such Claim in
reasonable detail. In circumstances where the Indemnifying Party is
notified of such Claim but not promptly, the Indemnifying Party shall
not be relieved from any duty to indemnify and save and hold harmless
<PAGE>
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which otherwise might exist with respect to such Claim unless (and
only to that extent) the omission to notify promptly materially
prejudices the ability of the Indemnifying Party to exercise its right
to defend provided in this Section 6.
6.7. Defense of Third Party Claims. The Indemnifying Party shall have the
right, after receipt of the Indemnified Party's notice under
subsection 6.6 hereof with respect to a Third Party Claim and upon
giving written notice to the Indemnified Party within ten (10)
Business Days of such receipt, and subject to the rights of any
insurer or other third party having potential liability therefor, to
defend the Third Party Claim at its own cost and expense with counsel
of its own selection, provided that:
6.7.1. the Indemnified Party shall at all times have the right to
fully participate in the defense at its own expense;
6.7.2. the Third Party Claim seeks only monetary damages and does
not seek any injunctive or other relief against the
Indemnified Party;
6.7.3. the Indemnifying Party unconditionally acknowledges in
writing its obligation to indemnify and save and hold the
Indemnified Party harmless with respect to the Third Party
Claim, if it is found that such obligation exists; and
6.7.4. legal counsel chosen by the Indemnifying Party is
satisfactory to the Indemnified Party, acting reasonably.
6.8. Settlement of a Third Party Claim. The Indemnifying Party shall not be
permitted to compromise and settle or to cause a compromise and
settlement of any Third Party Claim, without the prior written consent
of the Indemnified Party, unless:
6.8.1. the terms of the compromise and settlement require only the
payment of money and do not require the Indemnified Party to
admit any wrongdoing or take or refrain from taking any
action;
6.8.2. the Indemnifying Party delivers to the Indemnified Party a
letter of credit, surety bond or similar security in form
and substance satisfactory to the Indemnified Party, acting
reasonably, in the amount of such compromise and settlement
(including interest and costs, if any, payable pursuant
thereto) as security for the payment thereof;
6.8.3. the Indemnified Party receives, as part of the compromise
and settlement, a legally binding and enforceable
unconditional satisfaction and release, which is in form and
substance satisfactory to the Indemnified Party, acting
reasonably; and
<PAGE>
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6.8.4. the Third Party Claim and any claim or liability of the
Indemnified Party with respect to such Third Party Claim is
being fully satisfied because of the compromise and
settlement and the Indemnified Party is being released from
any and all obligations or liabilities it may have with
respect to the Third Party Claim.
6.9. Waiver of Right to Defend Third Party Claims. If the Indemnifying
Party fails:
6.9.1. within fifteen (15) Business Days from receipt of the notice
of a Third Party Claim to give notice of its intention to
defend the Third Party Claim in accordance with subsection
6.7 hereof, or
6.9.2. to comply at any time with any of subsections 6.7.1 through
6.7.4 (inclusively) hereof,
then the Indemnifying Party shall be deemed to have waived its right to defend
the Third Party Claim and the Indemnified Party shall have the right (but not
the obligation) to undertake the defense of the Third Party Claim and compromise
and settle the Third Party Claim on behalf, for the account and at the risk and
expense of the Indemnifying Party.
6.10. Direct Claims. If the Indemnifying Party fails to respond in writing
to any written notice of a Direct Claim given by the Indemnified Party
pursuant to subsection 6.6 hereof, and fails to make an Indemnity
Payment to the Indemnified Party within ten (10) Business Days
thereof, the Indemnifying Party shall be deemed to have rejected such
Direct Claim, in which event the Indemnified Party shall be free to
pursue such rights, recourses and remedies as may be available to it.
6.11. De Minimis, Deductible and Maximum Payment. Notwithstanding anything
contained herein:
6.11.1. the Investors shall not be entitled to indemnification
arising under subsection 6.2.2 hereof unless the aggregate
of all amounts payable by the Corporation in connection with
its indemnification obligations thereunder exceeds ten
thousand dollars ($10,000);
6.11.2. the Corporation shall not be entitled to indemnification
arising under subsection 6.3.2 hereof unless the aggregate
of all amounts payable by the Investors in connection with
their indemnification obligations thereunder exceeds ten
thousand dollars ($10,000);
6.11.3. the amounts payable by the Indemnifying Parties to the
Indemnified Parties in connection with their indemnification
obligations pursuant to subsection 6.2.2 or 6.3.2, as the
case may be, are subject to a cumulative deductible of one
hundred thousand dollars ($100,000). For purposes of clarity
and
<PAGE>
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without limiting the foregoing, the Indemnified Parties
shall not be entitled to any payment unless the aggregate of
all the amounts which should have been paid by the
Indemnifying Parties to the Indemnified Parties in
connection with their indemnification obligations pursuant
to subsection 6.2.2 or 6.3.2, as the case may be, is greater
than one hundred thousand dollars ($100,000);
6.11.4. the aggregate amount payable by the Corporation to an
Investor in connection with the indemnification obligations
pursuant to subsection 6.2. shall be limited to the
aggregate of the following amounts (the "Maximum
Indemnification Amount") (i) the aggregate subscription
price paid by such Investor for all of its Common Shares
pursuant to this Agreement; (ii) the aggregate subscription
price paid by such Investor for all of its shares in the
capital stock of Compositech Canada pursuant to the
Subscription Agreement in Compositech Canada; (iii) the
aggregate subscription price paid by such Investor for all
other shares subscribed for in the capital stock of
Compositech Canada; (iv) the aggregate purchase price paid
by such Investor for all shares in the capital stock of
Compositech Canada purchased from the Corporation; (v) the
aggregate amount loaned to Compositech Canada by such
Investor; (vi) the aggregate amount paid by such Investor in
connection with any guarantees furnished by it on behalf of
Compositech Canada and (vii) all other costs and expenses
incurred by such Investor in connection with the matters
described in items (i) through (vi) above. In the event of a
transfer by any Investor to (a) another Investor, (b) a
Permitted Transferee (as defined in the Compositech Canada
Shareholders Agreement) of such Investor, (c) a Governmental
Body of or controlled by the Government of Quebec or (d) a
limited partnership controlled by such Investor or by any
Governmental Body of or controlled by the Government of
Quebec or of which such Investor or any Governmental Body of
or controlled by the Government of Quebec holds the majority
of the limited partnership units, of any of the shares
contemplated in items (i) through (iv) above and/or any of
the indebtedness contemplated in items (v) and (vi) above,
the Maximum Indemnification Amount in connection with such
transferee shall be increased by the portion of the selling
Investor's Maximum Indemnification Amount corresponding to
the transferred shares and/or indebtedness and the Maximum
Indemnification Amount of such selling Investor shall be
reduced accordingly.
6.12. Right of Offset. Without in any way limiting the terms of this
Section 6, each party shall have the right to offset against all
amounts payable from time to time by it to any other party, howsoever
arising, including under this Agreement, any amount owing by such
other party pursuant to the indemnification obligations contained in
this Agreement to the party intending to offset.
<PAGE>
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6.13. Cumulative Rights. The rights, recourses and remedies provided to an
Indemnified Party under this Section 6 are cumulative with any other
right, recourse and remedy such Indemnified Party may have or may
hereafter acquire under Applicable Law, and any right, recourse or
remedy of such Indemnified Party may be asserted completely against
the Indemnifying Party, without regard to the rights, recourses or
remedies the Indemnified Party may have against any other Person.
6.14. Representations and Warranties included in Subscription Agreement in
Compositech Canada. The Corporation hereby agrees and confirms that
the representations and warranties made by it in this Agreement apply
in favour of the Investors as if made in the Subscription Agreement in
Compositech Canada. The Corporation hereby acknowledges and confirms
that the Investors are relying upon such representations and
warranties in connection with the Subscription Agreement in
Compositech Canada and would not have entered into the Subscription
Agreement in Compositech Canada without such representations and
warranties. Without in any way limiting the terms of this Section 6,
the Corporation hereby agrees and confirms that any Loss suffered or
incurred, directly or indirectly, by the Investors, in connection with
their investments in Compositech Canada pursuant to the Subscription
Agreement in Compositech Canada or otherwise shall be considered as a
Loss for the purposes hereof.
7. COVENANTS OF THE CORPORATION
7.1. The Corporation hereby covenants and agrees that for as long as an
Investor owns any Common Shares, it shall:
7.1.1. provide all financial information about the Corporation to
such Investor in the same manner and on the same terms as
provided to its other shareholders;
7.1.2. pay and discharge all Taxes, when due, unless the
Corporation is contesting the payment of such Taxes in good
faith;
7.1.3. keep its Equipment (and those of any of its subsidiaries) in
good repair, working order and condition and keep its Assets
properly insured;
7.1.4. keep and maintain Books and Records which are complete and
accurate in all material respects, and keep and maintain
complete and accurate Tax Returns;
7.1.5. comply with all Material Applicable Laws;
7.1.6. properly maintain and protect its corporate existence and
Intellectual Property Rights; and
<PAGE>
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7.1.7. ensure that all its employees are bound by confidentiality
agreements adequate to protect the Corporation's
confidential information.
7.2. The Corporation hereby covenants and agrees that for as long as the
Investors or one or more of the Investors own at least 710,794 Common
Shares in the aggregate, it shall, at all reasonable times, allow such
Investors to visit any of the Corporation's facilities, inspect the
Corporation's Books and Records and the Assets located in such
facilities and discuss with its officers the affairs and finances of
the Corporation. The number of Common Shares specified above shall be
adjusted to take into account changes to the Common Shares occurring
from time to time from the date hereof. Such number of Common Shares
(or any security or other property or rights such Common Shares may
have become) shall be adjusted to take into account any Share
Adjustment or Capital Reorganization (as such term is defined in the
Stock Exchange Agreement) and the adjustments provided for herein are
cumulative and shall be made successively whenever an event referred
to in this subsection 7.2 occurs.
7.3. The Corporation hereby covenants and agrees to forthwith take all
necessary action to list the Purchased Securities, to the extent not
already listed, on the Nasdaq Small Cap Market and on such other
securities exchange or over-the-counter market where the Corporation's
Common Shares are listed.
8. GENERAL PROVISIONS
8.1. Further Documents. Each party upon the request of the others, shall
do, execute, acknowledge and deliver or cause to be done, executed,
acknowledged or delivered all such further acts, deeds, documents,
assignments, transfers, conveyances, powers of attorney and assurances
as may be reasonably necessary or desirable to effect complete
consummation of the transactions contemplated by this Agreement.
8.2. Default Interest. Subject to the provisions of subsection 6.4 hereof,
if any party fails to pay any other party any amounts due hereunder
within ten (10) days of the due date, the party owing such money shall
pay to the party owed such money, from the date such amount was due,
interest at the Prime Rate, plus two (2) percentage points, compounded
monthly and payable on demand.
8.3. Successors and Assigns. This Agreement and the provisions hereof shall
enure to the benefit of and be binding upon the parties and their
respective successors and permitted assigns. Notwithstanding any
provision of this Agreement, the representations and warranties of the
Corporation set forth in subsection 4.2 hereof and the covenants of
the Corporation set forth in Section 7 hereof shall not benefit any
purchaser of any Purchased Securities, except if the purchaser is (i)
already an Investor; (ii) a Permitted Transferee (as defined in the
Compositech
<PAGE>
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Canada Shareholders Agreement) of an Investor; (iii) a Governmental
Body of or controlled by the Government of Quebec; or (iv) a limited
partnership controlled by an Investor or by any Governmental Body of
or controlled by the Government of Quebec or of which an Investor or
any Governmental Body of or controlled by the Government of Quebec
holds the majority of the limited partnership units.
8.4. Arbitration. All disputes or controversies between the parties in
respect of the validity,
interpretation or performance of the provisions of this Agreement
shall be definitively dealt with using the rules of conciliation and
arbitration of the International Chamber of Commerce, by one or more
arbitrators appointed in accordance with said rules, and to the
exclusion of any courts, except for injunctive relief and any
provisional remedy, including seizure before judgment or attachment,
which may be obtained from any court or tribunal having jurisdiction.
Any arbitration proceeding required pursuant to the terms thereof
shall take place in New York, New York and shall be conducted in both
the English and French language. The cost of the arbitration shall be
borne in the manner provided for in the arbitration award.
8.5. Expenses. The parties hereto hereby acknowledge and confirm that all
legal fees and expenses incurred by the Investors in connection with
this Agreement, the Subscription Agreement in Compositech Canada and
all other agreements entered into among the Investors, the Corporation
and/or Compositech Canada on the date hereof shall be borne by the
Investors and that all legal fees and expenses incurred by the
Corporation in connection with this Agreement, the subscription by it
for shares of Compositech Canada and all other agreements entered into
among the Corporation, the Investors and/or Compositech Canada on the
date hereof shall be borne by the Corporation.
8.6. Notices. All offers, acceptances, rejections, notices, requests,
authorizations, permissions directions, demands and other
communications hereunder shall be given in writing and shall be given
by telecopier, or delivered by hand, to the other party at the
following addresses:
if to Devma: INDUSTRIES DEVMA INC.
600, de la Gauchetiere Street West Suite
1700 Montreal, Quebec H3B 4L8
Attention: President
Telecopier: (514) 395-8055
<PAGE>
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if to Innovatech: SOCIETE INNOVATECH DU GRAND MONTREAL
2020 University Avenue
Suite 1527
Montreal, Quebec
H3A 2A5
Attention: President
Telecopier: (514) 864-4220
if to FSTQ: FONDS DE SOLIDARITE DES TRAVAILLEURS DU
QUEBEC (F.T.Q.)
8717 Berri Street
Montreal, Quebec
H2M 2T9
Attention: Vice President, Legal Affairs
Telecopier: (514) 383-2500
with a copy to: Senior Vice President, Investments
Telecopier: (514) 383-2505
if to Fonds Regional: FONDS REGIONAL DE SOLIDARITE ILE DE MONTREAL, limited
partnership
255, St-Jacques Street West
3rd Floor
Montreal, Quebec
H2Y 1M6
Attention: Managing Director
Telecopier: (514) 845-0625
if to the Corporation: COMPOSITECH LTD.
120 Ricefield Lane
Hauppauge, New York
11788-2008, U.S.A.
Attention: the President
Telecopier: (516) 436-5203
<PAGE>
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with a copy
in all cases to: LAPOINTE ROSENSTEIN
1250 Rene-Levesque Blvd. West
Suite 1400
Montreal, Quebec
H3B 5E9
Attention: Perry Kliot
Telecopier: (514) 925-9001
with a copy
in all cases to: DONOVAN, LEISURE, NEWTON & IRVINE
30 Rockefeller Plaza
New York, New York
10112
Attention: Edward F. Cox, Esq.
Telecopier: (212) 632-3315
or at such other address as the parties may have previously indicated to the
other parties in writing in conformity with the foregoing. Any such notice,
request, demand or other communication shall be deemed to have been received on
the date of delivery if delivered by hand, or the next Business Day immediately
following the date of transmission if sent by telecopier. The original copy of
any notice sent by telecopier shall be forwarded to the other party by
registered mail, receipt return requested.
8.7. Time of the essence. Time shall be of the essence in this Agreement.
8.8. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all
of which together shall constitute one and the same document.
8.9. Language. The parties hereto state their express wish that this
Agreement as well as all documentation contemplated hereby or
pertaining hereto or to be executed in connection herewith be drawn up
in the English language; les parties expriment leur desir explicite a
l'effet que cette convention de meme que tous documents envisages par
les presentes ou y ayant trait ou qui seront signes relativement aux
presentes soient rediges en anglais.
<PAGE>
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IN WITNESS WHEREOF, the parties have signed at the place and on the
date first hereinabove mentioned.
INDUSTRIES DEVMA INC.
Per: /s/ Louis Riopel
--------------------------
Louis Riopel
Per: /s/ Michel Beland
--------------------------
Michel Beland
SOCIETE INNOVATECH DU GRAND MONTREAL
Per: /s/ Hubert Manseau
--------------------------
Hubert Manseau
FONDS DE SOLIDARITE DES TRAVAILLEURS DU QUEBEC (F.T.Q.)
Per: /s/ Richard Bourget
--------------------------
Richard Bourget
FONDS REGIONAL DE SOLIDARITE DE MONTREAL, limited partnership, by its general
partner, Gestion du Fonds Regional de Solidarite Ile de Montreal Inc.
Per: /s/ Danielle Blanchard
--------------------------
Danielle Blanchard
COMPOSITECH LTD.
Per: /s/ Jonas Medney
--------------------------
Jonas Medney
<PAGE>
Exhibit III
SUBSCRIPTION AGREEMENT MADE AND ENTERED INTO IN THE CITY AND DISTRICT OF
MONTREAL, ON THE 16TH DAY OF OCTOBER, 1997
BY AND AMONG: SOCIETE INNOVATECH DU GRAND MONTREAL, a body politic duly
constituted according to An Act respecting Societe Innovatech du
Grand Montreal, R.S.Q., ch. S-17.2, having its head office and
principal place of business in the City of Montreal, Province of
Quebec,
(hereinafter referred to as "Innovatech")
PARTY OF THE FIRST PART
-----------------------
AND: INDUSTRIES DEVMA INC. , a body politic and corporate, duly
incorporated according to the Companies Act (Quebec), having its
head office and principal place of business in the City of
Montreal, Province of Quebec,
(hereinafter referred to as "Devma")
PARTY OF THE SECOND PART
------------------------
AND: FONDS DE SOLIDARITE DES TRAVAILLEURS DU QUEBEC (F.T.Q), a joint
stock company, duly incorporated according to the Act
establishing the Fonds de Solidarite des Travailleurs du Quebec
(F.T.Q), having its head office and principal place of business
in the City of Montreal, Province of Quebec,
(hereinafter referred to as "FSTQ")
PARTY OF THE THIRD PART
-----------------------
AND: FONDS REGIONAL DE SOLIDARITE ILE DE MONTREAL, limited
partnership, a limited partnership organized under the laws of
the Province of Quebec, herein represented by Gestion du Fonds
Regional de Solidarite Ile de Montreal Inc., its general partner,
having its head office and principal place of business in the
City of Montreal, Province of Quebec,
(hereinafter referred to as "Fonds Regional")
PARTY OF THE FOURTH PART
------------------------
<PAGE>
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AND: LAMINES CTEK INC., a body politic and corporate, duly
incorporated according to the Canadian Business Corporations Act,
having its head office and principal place of business in the
City of Montreal, Province of Quebec,
(hereinafter referred to as the "Corporation")
PARTY OF THE FIFTH PART
-----------------------
1. PREAMBLE
1.1. WHEREAS each of Innovatech, Devma, FSTQ and Fonds wishes to subscribe
for shares from the treasury of the Corporation at the price set forth
hereinafter, the whole on the terms and conditions hereinafter set out
in this Agreement.
1.2. WHEREAS concurrently with the execution of this Agreement, Compositech
Ltd. entered into a Subscription Agreement with the Corporation (the
"Compositech Subscription Agreement") providing for the subscription
by Compositech Ltd. for shares from the treasury of the Corporation.
1.3. WHEREAS concurrently with the execution of this Agreement, each of
Innovatech, Devma, FSTQ and Fonds entered into a Subscription
Agreement with Compositech Ltd. (the "Subscription Agreement in
Compositech") providing for the subscription by each of Innovatech,
Devma, FSTQ and Fonds for shares of Compositech Ltd.
NOW, THEREFORE, THIS AGREEMENT WITNESSETH:
2. INTERPRETATION
2.1. Definitions. In this Agreement:
2.1.1. "Agreement" shall mean this Subscription Agreement and all
instruments supplemental hereto or in amendment or
confirmation hereof; "herein", "hereof", "hereto",
"hereunder" and similar expressions mean and refer to this
Agreement and not to any particular Section, subsection or
other subdivision; "Section", "subsection" or other
subdivision of this Agreement means and refers to the
specified Section, subsection or other subdivision of this
Agreement;
2.1.2. "Business Day" shall mean any day, other than a Saturday or
Sunday or a day on which the principal commercial banks in
the Province of Quebec are not open for business during
normal banking hours;
<PAGE>
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2.1.3. "Class A Common Shares" shall have the meaning ascribed
thereto in the Articles of Incorporation of the Corporation,
as amended;
2.1.4. "Class B Common Shares" shall have the meaning ascribed
thereto in the Articles of Incorporation of the Corporation,
as amended;
2.1.5. "Compositech" shall mean Compositech Ltd.;
2.1.6. "Compositech Subscription Agreement" shall have the meaning
ascribed thereto in subsection 1.2;
2.1.7. "Devma Shares" shall have the meaning ascribed thereto at
subsection 3.3;
2.1.8. "dollar", "dollars" and the sign "$" shall, unless otherwise
indicated, each mean lawful money of Canada;
2.1.9. "FSTQ Shares" shall have the meaning ascribed thereto at
subsection 3.5;
2.1.10. "Fonds Shares" shall have the meaning ascribed thereto at
subsection 3.7;
2.1.11. "Governmental Body" shall mean (i) any domestic or foreign
national, federal, provincial, state, municipal or other
government or body, (ii) any multinational, multilateral or
international body, (iii) any subdivision, agent,
commission, board, instrumentality or authority of any of
the foregoing governments or bodies, (iv) any
quasi-governmental or private body exercising any
regulatory, expropriation or taxing authority under or for
the account of any of the foregoing governments or bodies,
or (v) any domestic, foreign, international, multilateral or
multinational judicial, quasi-judicial, arbitration or
administrative court, tribunal, commission, board or panel;
2.1.12. "Innovatech Shares" shall have the meaning ascribed thereto
in subsection 3.1;
2.1.13. "Investors" shall mean Innovatech, Devma, FSTQ and Fonds
collectively and "Investor" shall mean any one of them;
2.1.14. "Person" shall mean an individual, partnership, joint
venture, trustee, trust, corporation, division of a
corporation, unincorporated organization or other entity,
entity with judicial personality, Governmental Body, and
pronouns when they refer to a Person have a similarly
extended meaning;
2.1.15. "Prime Rate" means the interest rate quoted publicly by the
Corporation's regular bankers as the reference rate of
interest for commercial demand loans made in Canadian
dollars and commonly known as such bank's prime
<PAGE>
-4-
rate, as adjusted from time to time, on the basis of the
Prime Rate in effect on the first day of each month;
2.1.16. "Shareholders Agreement" shall mean the Shareholders
Agreement of even date among the parties hereto and
Compositech setting forth the terms and conditions which
will govern the relationship of the Investors and
Compositech as shareholders of the Corporation;
2.1.17. "Subscription Agreement in Compositech" shall have the
meaning ascribed thereto in subsection 1.3.
2.2. Gender. Any reference in this Agreement to any gender shall include
both genders and the neutral, and words used herein importing the
singular number only shall include the plural and vice versa.
2.3. Headings. The division of this Agreement into Sections, subsections
and other subdivisions, and the insertion of headings are for
convenience of reference only and shall not affect or be utilized in
the construction or interpretation of this Agreement.
2.4. Severability. Any Section, subsection or other subdivision of this
Agreement or any other provision of this Agreement which is, or
becomes, illegal, invalid or unenforceable shall be severed therefrom
and shall be ineffective to the extent of such illegality, invalidity
or unenforceability and shall not affect or impair the remaining
provisions hereof, which provisions shall be severed from an illegal
or unenforceable Section, subsection or other subdivision of this
Agreement or any other provisions of this Agreement.
2.5. Entire Agreement. This Agreement together with any other instruments
to be delivered pursuant hereto, constitute the entire agreement among
the parties pertaining to the subject matter hereof and supersede all
prior agreements, understandings, negotiations, and discussions,
whether oral or written, among any or all of the parties.
2.6. Amendments. No amendment of this Agreement shall be binding unless
otherwise expressly provided in an instrument duly executed by each of
the parties hereto.
2.7. Waiver. Except as otherwise provided in this Agreement, no waiver of
any of the provisions of this Agreement shall be deemed to constitute
a waiver of any other provisions (whether or not similar), nor shall
such waiver constitute a continuing waiver unless otherwise expressly
provided in an instrument duly executed by the parties.
<PAGE>
-5-
2.8. Delays. When calculating the period of time within which or following
which any act is to be done or step taken pursuant to this Agreement,
the day which is the reference day in calculating such period shall be
excluded. If the day on which such delay expires is not a Business
Day, then the delay shall be extended to the next succeeding Business
Day.
2.9. Preamble. The preamble hereof shall form an integral part of this
Agreement.
2.10. Governing Law. This Agreement shall be governed by and interpreted
and enforced in accordance with the laws of the Province of Quebec and
the laws of Canada applicable therein.
3. SUBSCRIPTIONS
3.1. Innovatech Subscription. Innovatech hereby subscribes for one hundred
seventy-seven thousand seven hundred (177,700) Class A Common Shares
(collectively the "Innovatech Shares") of the Corporation's share
capital at the aggregate subscription price of $ 1,250,007.03438. The
Corporation hereby accepts the subscription of Innovatech for the
Innovatech Shares subject to the terms and conditions contained
herein.
3.2. Payment and Issue of Innovatech Shares. Innovatech hereby agrees to
remit to the Corporation on the date hereof the aggregate subscription
price set forth in subsection 3.1, and the Corporation shall, upon
receipt of a cheque for the aggregate subscription price set forth in
subsection 3.1, issue the Innovatech Shares to Innovatech and deliver
share certificates representing same.
3.3. Devma Subscription. Devma hereby subscribes for one hundred
seventy-seven thousand seven hundred (177,700) Class A Common Shares
(collectively the "Devma Shares") of the Corporation's share capital
at the aggregate subscription price of $ 1,250,007.03438. The
Corporation hereby accepts the subscription of Devma for the Devma
Shares subject to the terms and conditions contained herein.
3.4. Payment and Issue of Devma Shares. Devma hereby agrees to remit to the
Corporation on the date hereof the aggregate subscription price set
forth in subsection 3.3, and the Corporation shall, upon receipt of a
cheque for the aggregate subscription price set forth in subsection
3.3, issue the Devma Shares to Devma and deliver share certificates
representing same.
3.5. FSTQ Subscription. FSTQ hereby subscribes for six hundred thirty nine
thousand seven hundred fourteen (639,714) Class A Common Shares
(collectively the "FSTQ Shares") of the Corporation's share capital at
the aggregate subscription price of $ 4,499,992.96562. The Corporation
hereby accepts the subscription of FSTQ for the FSTQ Shares subject to
the terms and conditions contained herein.
<PAGE>
-6-
3.6. Payment and Issue of FSTQ Shares. FSTQ hereby agrees to remit to the
Corporation on the date hereof the aggregate subscription price set
forth in subsection 3.5, and the Corporation shall, upon receipt of a
cheque for the aggregate subscription price set forth in subsection
3.5, issue the FSTQ Shares to FSTQ and deliver share certificates
representing same.
3.7. Fonds Subscription. Fonds hereby subscribes for seventy one thousand
seventy eight (71,078) Class A Common Shares (collectively the "Fonds
Shares") of the Corporation's share capital at the aggregate
subscription price of $ 499,992.96562. The Corporation hereby accepts
the subscription of Fonds for the Fonds Shares subject to the terms
and conditions contained herein.
3.8. Payment and Issue of Fonds Shares. Fonds hereby agrees to remit to the
Corporation on the date hereof the aggregate subscription price set
forth in subsection 3.7, and the Corporation shall, upon receipt of a
cheque for the aggregate subscription price set forth in subsection
3.7, issue the Fonds Shares to Fonds and deliver share certificates
representing same.
4. REPRESENTATIONS AND WARRANTIES
4.1. Representations and Warranties of the Investors. Each Investor (with
respect to itself, and not with respect to the other Investor) hereby
represents and warrants severally, but not solidarily, to the
Corporation and to the other Investors, and acknowledges and confirms
that the Corporation and the other Investors, are relying upon such
representations and warranties in connection herewith and would not
have entered into this Agreement without such representations and
warranties:
4.1.1. such Investor is duly incorporated, constituted or formed,
validly existing and in good standing under the laws of its
jurisdiction of incorporation or under the laws pursuant to
which it was constituted or formed;
4.1.2. such Investor has the necessary corporate power and
authority to execute this Agreement and to perform its
obligations hereunder. The execution of this Agreement by
such Investor and the performance by such Investor of its
obligations hereunder have been duly authorized by all
necessary action on its part and do not require any action
or consent of, any registration with, or notification to any
Person, or any action or consent under any laws to which
such Investor is subject;
4.1.3. the execution of this Agreement, the consummation of the
transactions contemplated herein, the performance by such
Investor of its obligations hereunder and the compliance by
it with this Agreement do not:
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4.1.3.1. violate, contravene or breach, or constitute a
default under, the constating documents, law or
by-laws of such Investor;
4.1.3.2. violate, contravene or breach, or constitute a
default under any contract, agreement, indenture,
instruments, or commitment to which such Investor
may be a party, or its properties may be subject,
or by which it is bound or affected; or
4.1.3.3. violate, contravene or breach any laws to which
such Investor is subject;
4.1.4. neither such Investor nor any of its respective
shareholders, directors, officers, employees or agents has
employed or incurred any liability to any broker, finder or
agent for any brokerage fees, finder's fees, commissions or
other amounts with respect to this Agreement or any of the
transactions contemplated hereby.
4.2. Representations and Warranties of the Corporation. The Corporation
hereby represents and warrants as follows to each of the Investors and
acknowledges and confirms that the Investors are relying upon such
representations and warranties in connection herewith and would not
have entered into this Agreement without such representations and
warranties:
4.2.1. the Corporation:
4.2.1.1. is duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of
incorporation; and
4.2.1.2. has not carried on any business since its
incorporation;
4.2.2. there are no pending or threatened proceedings, litigation
or other adverse claims affecting, or with respect to, the
Corporation or its assets;
4.2.3. the Corporation has the necessary corporate power and
authority to execute this Agreement and to perform its
obligations hereunder. The execution of this Agreement by
the Corporation and the performance by the Corporation of
its obligations hereunder have been duly authorized by all
necessary action on its part and do not require any actions
or consent of, any registration with, or notification to,
any Person, or any action or consent under any laws to which
the Corporation is subject;
4.2.4. the execution of this Agreement, the consummation of the
transactions contemplated herein, the performance by the
Corporation of its obligations hereunder and the compliance
by it with this Agreement do not:
<PAGE>
-8-
4.2.4.1. violate, contravene or breach, or constitute a
default under, the constating documents or by-laws
of the Corporation;
4.2.4.2. violate, contravene or breach, or constitute a
default under any contract, agreement, indenture,
instruments, or commitment to which the
Corporation may be a party, or its properties may
be subject, or by which it is bound or affected;
or
4.2.4.3. violate, contravene or breach any applicable laws
to which the Corporation is subject;
4.2.5. the authorized capital of the Corporation consists of an
unlimited number of Class A Common Shares and an unlimited
number of Class B Common Shares. After giving effect to this
Agreement, the Compositech Subscription Agreement and the
repurchase of one (1) Class B Common Share held by FSTQ and
one (1) Class B Common Share held by Compositech, the only
shares of the Corporation which will be issued and
outstanding will be the Innovatech Shares, the Devma Shares,
the FSTQ Shares, the Fonds Shares and the Compositech Shares
(as defined in the Compositech Subscription Agreement) and
upon receipt by the Corporation of payment therefor in full,
such shares will be issued and outstanding as fully paid and
non-assessable;
4.2.6. no Person has any agreement, option, right or privilege
(whether pre-emptive or contractual) capable of becoming an
agreement for the purchase from the Corporation of any
securities of the Corporation, other than as provided in the
Compositech Subscription Agreement and in the Shareholders
Agreement;
4.2.7. neither the Corporation nor any of its respective directors,
officers, employees or agents has employed or incurred any
liability to any broker, finder or agent for any brokerage
fees, finder's fees, commissions or other amounts with
respect to this Agreement or any of the transactions
contemplated hereby;
4.2.8. the Corporation is not a non-resident of Canada within the
meaning of the Income Tax Act (Canada).
4.3. Representations and Warranties of Compositech and Indemnification.
Compositech acknowledges that subsection 4.2 and Section 6 of the
Subscription Agreement in Compositech shall apply in favour of the
Investors as if made in this Agreement. Compositech hereby
acknowledges and confirms that the Investors are relying upon such
representations and warranties in connection with
<PAGE>
-9-
this Agreement and would not have entered into this Agreement without
such representations and warranties.
4.4. Reliance on Representations and Warranties. Notwithstanding any
investigation conducted prior or subsequent to the date hereof, the
parties shall be entitled to rely upon the representations and
warranties set forth herein and all representations and warranties
made by, and all covenants, obligations and agreements of the parties
and Compositech, under or pursuant to this Agreement or any other
document or certificate delivered in connection therewith, shall
survive the date hereof.
5. OBLIGATIONS OF THE CORPORATION
5.1. Shares of FSTQ. The Corporation, and its subsidiaries, if any, shall
make an annual contribution, together with all of its/their employees
residing in Quebec, for the acquisition of shares of FSTQ, on a
dollar-for-dollar basis, up to a maximum contribution of $250.00 per
annum per employee.
5.2. "Fondation d'education et de formation economique des travailleurs du
Fonds". The Corporation, and its subsidiaries, if any, shall make an
annual contribution to the "Fondation d'education et de formation
economique des travailleurs du Fonds" in an amount equal to $40.00 per
employee per annum.
5.3. Deductions at source. The Corporation, and its subsidiaries, if any,
shall implement a deduction at source procedure enabling the employees
of the Corporation, and its subsidiaries, if any, to acquire class A
shares of FSTQ by way of direct deductions from each pay cheque and
the remittance of such contribution to FSTQ on the date of payment of
the salary to such employees.
5.4. Tax advantages. The Corporation and its subsidiaries, if any, shall
accomplish all acts and things necessary to enable an employee, at his
discretion, to benefit from the federal and provincial tax advantages
with respect to such employee's subscriptions for shares of FSTQ and
to advise the employees of the tax election which can be made in
connection therewith.
6. INDEMNIFICATION
6.1. Definitions. As used in this Section 6:
6.1.1. "Claim" means any act, omission or state of facts and any
demand, action, suit, proceeding, investigation,
arbitration, trial, claim, assessment, judgment, settlement
or compromise relating thereto which may give rise to a
right to indemnification under subsection 6.2 or 6.3 hereof;
<PAGE>
-10-
6.1.2. "Direct Claim" means any Claim by an Indemnified Party
against an Indemnifying Party which does not result from a
Third Party Claim;
6.1.3. "Indemnifying Party" means any party obligated to provide
indemnification under this Agreement pursuant to this
Section 6;
6.1.4. "Indemnified Party" means any party entitled to
indemnification under this Agreement pursuant to this
Section 6;
6.1.5. "Indemnity Payment" means the aggregate amount of each Loss
required to be paid pursuant to subsection 6.2 or the amount
of each Loss required to be paid pursuant to subsection 6.3
hereof;
6.1.6. "Loss" means any and all loss (including diminution in
value), liability, damage (excluding punitive, exemplary,
consequential, indirect and incidental damage), cost,
expense, charge, fine, penalty or assessment (after taking
into account any tax benefit actually received), resulting
from or arising out of any Claim, including the costs and
expenses of any action, suit, proceeding, demand,
assessment, judgment, settlement or compromise relating
thereto and all interest, damages, fines and penalties and
reasonable attorneys', accountants' and experts' fees and
expenses incurred in connection therewith; and
6.1.7. "Third Party Claim" means any Claim asserted against an
Indemnified Party by any Person who is not a party to this
Agreement.
6.2. Indemnification by the Corporation. The Corporation hereby agrees to
indemnify and save and hold harmless the Investors from and against
any Loss suffered or incurred, directly or indirectly, by the
Investors as a result of, arising out of or relating to:
6.2.1. any violation, contravention or breach of any covenant,
agreement or obligation of the Corporation under or pursuant
to this Agreement or any other document or certificate
delivered to the Investors by or on behalf of the
Corporation in connection therewith, as well as any Claim by
any Person containing allegations which, if true, would
constitute such an event; and
6.2.2. any incorrectness in, or breach of, any representation or
warranty made by the Corporation in this Agreement, or made
or to be made in any other document or certificate delivered
or to be delivered to the Investors by or on behalf of the
Corporation in connection therewith, as well as any Claim by
any Person containing allegations which, if true, would
constitute such an event.
<PAGE>
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6.3. Indemnification by Investors. Each Investor hereby agrees to,
severally and not jointly with other Investors, each Investor having
made the representations and warranties with respect to itself only,
indemnify and save and hold harmless the Corporation from and against
any Loss suffered or incurred, directly or indirectly, by it as a
result of, arising out of or relating to:
6.3.1. any violation, contravention or breach of any covenant,
agreement or obligation of such Investor under or pursuant
to this Agreement or any other document or certificate
delivered to the Corporation by or on behalf of such
Investor in connection therewith, as well as any Claim by
any Person containing allegations which, if true, would
constitute such an event; and
6.3.2. any incorrectness in, or breach of, any representation or
warranty made by such Investor in this Agreement, or made or
to be made in any other document or certificate delivered or
to be delivered to the Corporation by or on behalf of such
Investor in connection therewith, as well as any Claim by
any Person containing allegations which, if true, would
constitute such an event.
6.4. Payment and Interest. The Indemnifying Party shall reimburse, on
demand, to the Indemnified Party the amount of each Loss suffered or
incurred by the Indemnified Party, the whole as of the date that the
Indemnified Party incurs such Loss, together with interest on such
amount(s) from the aforesaid date until payment in full at a rate per
annum equal to the Prime Rate, plus two (2) percentage points.
Interest shall be calculated and payable monthly on the last day of
each month during which any amount in respect of any Loss remained
unpaid, both before and after an arbitration award and/or judgment,
with interest on overdue interest calculated and payable at the same
rate.
6.5. Notification. Promptly upon obtaining knowledge thereof, the
Indemnified Party shall notify the Indemnifying Party of each Claim
which the Indemnified Party has determined has given or could give
rise to indemnification under this Section 6, describing such Claim in
reasonable detail. In circumstances where the Indemnifying Party is
notified of such Claim but not promptly, the Indemnifying Party shall
not be relieved from any duty to indemnify and save and hold harmless
which otherwise might exist with respect to such Claim unless (and
only to that extent) the omission to notify promptly materially
prejudices the ability of the Indemnifying Party to exercise its right
to defend provided in this Section 6.
6.6. Defense of Third Party Claims. The Indemnifying Party shall have the
right, after receipt of the Indemnified Party's notice under
subsection 6.5 hereof with respect to a Third Party Claim and upon
giving written notice to the Indemnified Party within ten (10)
Business Days of such receipt, and subject to the rights of any
insurer or other third party having potential liability therefor, to
defend the
<PAGE>
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Third Party Claim at its own cost and expense with counsel of its own
selection, provided that:
6.6.1. the Indemnified Party shall at all times have the right to
fully participate in the defense at its own expense;
6.6.2. the Third Party Claim seeks only monetary damages and does
not seek any injunctive or other relief against the
Indemnified Party;
6.6.3. the Indemnifying Party unconditionally acknowledges in
writing its obligation to indemnify and save and hold the
Indemnified Party harmless with respect to the Third Party
Claim, if it is found that such obligation exists;
6.6.4. legal counsel chosen by the Indemnifying Party is
satisfactory to the Indemnified Party, acting reasonably;
and
6.6.5. the Indemnifying Party delivers a letter of credit, surety
bond or similar security in form and substance satisfactory
to the Indemnified Party, acting reasonably, in an amount
which the Indemnified Party, acting reasonably, determines
is sufficient to cover such Third Party Claim as security
for the payment of amounts payable by the Indemnifying Party
to the Indemnified Party pursuant hereto, inclusive of
reasonably estimated interest and costs. Amounts payable by
the Indemnifying Party pursuant to a Third Party Claim shall
be paid in accordance with the terms of the settlement or
judgment, as applicable, but in any event prior to the
expiry of any delay for a judgment to become executory.
6.7. Waiver of Right to Defend Third Party Claims. If the Indemnifying
Party fails:
6.7.1. within fifteen (15) Business Days from receipt of the notice
of a Third Party Claim to give notice of its intention to
defend the Third Party Claim in accordance with subsection
6.6 hereof, or
6.7.2. to comply at any time with any of subsections 6.6.1 through
6.6.5 (inclusively) hereof,
then the Indemnifying Party shall be deemed to have waived its right to defend
the Third Party Claim and the Indemnified Party shall have the right (but not
the obligation) to undertake the defense of the Third Party Claim and compromise
and settle the Third Party Claim on behalf, for the account and at the risk and
expense of the Indemnifying Party.
6.8. Direct Claims. If the Indemnifying Party fails to respond in writing
to any written notice of a Direct Claim given by the Indemnified Party
pursuant to subsection 6.5 hereof, and fails to make an Indemnity
Payment to the Indemnified Party within ten
<PAGE>
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(10) Business Days thereof, the Indemnifying Party shall be deemed to
have rejected such Direct Claim, in which event the Indemnified Party
shall be free to pursue such rights, recourses and remedies as may be
available to it.
6.9. Right of Offset. Without in any way limiting the terms of this Section
6, each party shall have the right to offset against all amounts
payable from time to time by it to the other party, howsoever arising,
including under this Agreement, any amount owing by such other party
pursuant to the indemnification obligations contained in this
Agreement to the party intending to offset.
6.10.Cumulative Rights. The rights, recourses and remedies provided to an
Indemnified Party under this Section 6 are cumulative with any other
right, recourse and remedy such Indemnified Party may have or may
hereafter acquire under Applicable Law, and any right, recourse or
remedy of such Indemnified Party may be asserted completely against
the Indemnifying Party, without regard to the rights, recourses or
remedies the Indemnified Party may have against any other Person.
7. GENERAL PROVISIONS
7.1. Further documents. Each party upon the request of the others, shall
do, execute, acknowledge and deliver or cause to be done, executed,
acknowledged or delivered all such further acts, deeds, documents,
assignments, transfers, conveyances, powers of attorney and assurances
as may be reasonably necessary or desirable to effect complete
consummation of the transactions contemplated by this Agreement.
7.2. Default Interest. Subject to the provisions of subsection 6.4 hereof
and subsection 6.4 of the Subscription Agreement in Compositech, if
any party fails to pay any other party any amounts due hereunder
within ten (10) days of the due date, the party owing such money shall
pay to the party owed such money, from the date such amount was due,
interest at the Prime Rate, plus two (2) percentage points, compounded
monthly and payable on demand.
7.3. Successors and assigns. This Agreement and the provisions hereof shall
enure to the benefit of and be binding upon the parties and their
respective successors and permitted assigns.
7.4. Arbitration. All disputes or controversies between the parties
(including Compositech) in respect of the validity, interpretation or
performance of the provisions of this Agreement shall be definitively
dealt with using the rules of conciliation and arbitration of the
International Chamber of Commerce, by one or more arbitrators
appointed in accordance with said rules, and to the exclusion of any
courts, except for injunctive relief and any provisional remedy,
including seizure before judgment, which may be obtained from any
court or tribunal having
<PAGE>
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jurisdiction. Any arbitration proceeding required pursuant to the
terms hereof shall take place in Montreal, Quebec and shall be
conducted in both the English and French language. The cost of
arbitration shall be borne in the manner provided for in the
arbitration award.
7.5. Notices. All offers, acceptances, rejections, notices, requests,
authorizations, permissions, directions, demands and other
communications hereunder shall be given in writing and shall be given
by telecopier, or delivered by hand, to the other party at the
following addresses:
if to Devma: INDUSTRIES DEVMA INC.
600, de la Gauchetiere Street West
Suite 1700
Montreal, Quebec
H3B 4L8
Attention: President
Telecopier: (514) 395-8055
if to Innovatech: SOCIETE INNOVATECH DU GRAND MONTREAL
2020 University Avenue
Suite 1527
Montreal, Quebec
H3A 2A5
Attention: President and Chief Executive Officer
Telecopier: (514) 864-4220
if to FSTQ: FONDS DE SOLIDARITE DES TRAVAILLEURS DU QUEBEC (F.T.Q)
8717 Berri Street
Montreal, Quebec
H2M 2T9
Attention: Vice President, Legal Affairs
Telecopier: (514) 383-2500
with a copy to: Senior Vice President, Investments
Telecopier: (514) 383-2505
<PAGE>
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if to Fonds: FONDS REGIONAL DE SOLIDARITE ILE DE MONTREAL,
limited partnership
255, St-Jacques Street West
3rd Floor
Montreal, Quebec
H2Y 1M6
Attention: Managing Director
Telecopier: (514) 845-0625
if to the
Corporation: LAMINES CTEK INC.
600 de la Gauchetiere Street West Suite 1700
Montreal, Quebec H3B 4L8
Attention: Chairman and President
Telecopier: (514) 395-8055
if to Compositech: COMPOSITECH LTD.
120 Ricefield Lane
Hauppauge, New York
11788-2008, U.S.A.
Attention: the President
Telecopier: (516) 436-5203
with a copy in
all cases to: DONOVAN, LEISURE, NEWTON & IRVINE
30 Rockefeller Plaza
New York, New York
10112
Attention: Edward F. Cox, Esq.
Telecopier: (212) 632-3315
<PAGE>
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with a copy in
all cases to: LAPOINTE ROSENSTEIN
1250 Rene-Levesque Blvd. West
Suite 1400
Montreal, Quebec
H3B 5E9
Attention: Me Perry Kliot
Telecopier: (514) 925-9001
or at such other address as the parties may have previously indicated to the
other parties in writing in conformity with the foregoing. Any such notice,
request, demand or other communication shall be deemed to have been received on
the date of delivery if delivered by hand, or the next Business Day immediately
following the date of transmission if sent by telecopier. The original copy of
any notice sent by telecopier shall be forwarded to the other party by
registered mail, receipt return requested.
7.6. Time of the essence. Time shall be of the essence in this Agreement.
7.7. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all
of which together shall constitute one and the same document.
7.8. Language. The parties hereto state their express wish that this
Agreement as well as all documentation contemplated hereby or
pertaining hereto or to be executed in connection herewith be drawn up
in the English language; les parties expriment leur desir explicite a
l'effet que cette convention de meme que tous documents envisages par
les presentes ou y ayant trait ou qui seront signes relativement aux
presentes soient rediges en anglais.
IN WITNESS WHEREOF, the parties have signed at the place and on the date
first hereinabove mentioned.
LAMINES CTEK INC. INDUSTRIES DEVMA INC.
Per: /s/ Louis Riopel Per: /s/ Michel Beland
------------------------------ -------------------------------
Louis Riopel Michel Beland
Per: /s/ Louis Riopel
-------------------------------
Louis Riopel
<PAGE>
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SOCIETE INNOVATECH DU FONDS DE SOLIDARITE DES
GRAND MONTREAL TRAVAILLEURS DU QUEBEC (F.T.Q.)
Per: /s/ Hubert Manseau Per: /s/ Richard Bourget
------------------------------ -------------------------------
Hubert Manseau Richard Bourget
FONDS REGIONAL DE SOLIDARITE ILE DE MONTREAL,
limited partnership, by its general partner,
Gestion du Fonds Regional de Solidarite
Ile de Montreal Inc.
Per: /s/ Danielle Blanchard
-------------------------------
Danielle Blanchard
<PAGE>
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INTERVENTION
THE UNDERSIGNED INTERVENES TO THESE PRESENTS, agrees to be bound by the
provisions of subsections 4.3 and 4.4 of this Agreement which are applicable to
it and takes cognizance of the provisions of Section 5 of this Agreement.
Montreal, this 16th day of October, 1997.
COMPOSITECH LTD.
Per: /s/ Jonas Medney
-----------------------
Jonas Medney
<PAGE>
Exhibit IV
STOCK EXCHANGE AGREEMENT MADE AND ENTERED INTO IN THE CITY AND DISTRICT OF
MONTREAL, ON THE 16TH DAY OF OCTOBER, 1997
BY AND AMONG: COMPOSITECH LTD., a body corporate, duly incorporated according
to the laws of the State of Delaware, having its head office and
principal place of business in the Hamlet of Hauppauge, State of
New York,
(hereinafter referred to as the "Company")
PARTY OF THE FIRST PART
-----------------------
AND: SOCIETE INNOVATECH DU GRAND MONTREAL, a body
politic, duly constituted according to An Act
respecting Societe Innovatech du Grand Montreal,
R.S.Q., ch. S-17.2, having its head office and
principal place of business in the City of
Montreal, Province of Quebec,
(hereinafter referred to as "Innovatech")
PARTY OF THE SECOND PART
------------------------
AND: INDUSTRIES DEVMA INC., a body politic and
corporate, duly incorporated according to the
Companies Act (Quebec), having its head office and
principal place of business in the City of
Montreal, Province of Quebec,
(hereinafter referred to as "Devma")
PARTY OF THE THIRD PART
-----------------------
AND: FONDS DE SOLIDARITE DES TRAVAILLEURS DU QUEBEC
(F.T.Q), a joint stock company, duly incorporated
according to the Act establishing the Fonds de
Solidarite des Travailleurs du Quebec (F.T.Q),
having its head office and principal place of
business in the City of Montreal, Province of
Quebec,
(hereinafter referred to as "Fonds")
PARTY OF THE FOURTH PART
------------------------
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AND: FONDS REGIONAL DE SOLIDARITE ILE DE MONTREAL,
limited partnership, a limited partnership
organized under the laws of the Province of
Quebec, herein represented by Gestion du Fonds
Regional de Solidarite Ile de Montreal Inc., its
general partner, having its head office and
principal place of business in the City of
Montreal, Province of Quebec,
(hereinafter referred to as "FR")
PARTY OF THE FIFTH PART
-----------------------
PREAMBLE
WHEREAS concurrently with the execution of this Agreement, Innovatech,
Devma, Fonds, FR and the Company have subscribed for common shares in
the capital stock of Lamines CTEK Inc. ("Canco");
WHEREAS the Company has agreed to grant to each of Innovatech, Devma, Fonds
and FR the right to exchange their common shares in the capital stock
of Canco for common shares in the capital stock of the Company on the
terms and conditions set out in this Stock Exchange Agreement;
WHEREAS Innovatech, Devma, Fonds and FR have agreed to grant to the Company
the right to cause Innovatech, Devma, Fonds and FR to exchange their
common shares in the capital stock of Canco for common shares in the
capital stock of the Company on the terms and conditions set out in
this Stock Exchange Agreement.
NOW, THEREFORE, THIS AGREEMENT WITNESSETH:
DEFINITIONS
Definitions. In this Agreement:
"Adjusted Aggregate Distress Common Shares" shall mean the total
number of Common Shares which would be issued to each Purchaser
upon the exchange of its Total Distress Canco Shares in
accordance with subsections 3.4 and 3.5 hereof;
"Adjusted Aggregate Initial Common Shares" shall mean the total number
of Common Shares which would be issued to each Purchaser upon the
exchange of all of its Initial Canco Shares in accordance with
subsections 3.4 and 3.5 hereof;
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"Adjusted Aggregate Project Common Shares" shall mean the total number
of Common Shares which would be issued to each Purchaser upon the
exchange of its Total Project Canco Shares in accordance with
subsections 3.4 and 3.5 hereof;
"Adjusted Aggregate Subsequent Common Shares" shall mean the total
number of Common Shares which would be issued to each Purchaser
upon the exchange of its Total Subsequent Canco Shares in
accordance with subsections 3.4 and 3.5 hereof;
"Adjustment Commencement Date" shall mean (i) with respect to the
Initial Canco Shares and the Project Canco Shares, the date
hereof; (ii) with respect to the Distress Canco Shares, the date
agreed to between the Purchaser in question and the Company at
the same time as the price per Common Share provided for in
paragraph 2.1.44 hereof is agreed upon, failing which, the date
the advance (which resulted in the issuance of such Distress
Canco Shares upon the conversion provided for in subsection 12.9
of the Shareholders Agreement) was initially made by such
Purchaser pursuant to Section 12 of the Shareholders Agreement;
and (iii) with respect to the Subsequent Canco Shares, the date
of issuance thereof;
"Agreement" shall mean this Stock Exchange Agreement and all
instruments supplemental hereto or in amendment or confirmation
hereof; "herein", "hereof", "hereto", "hereunder" and similar
expressions mean and refer to this Agreement and not to any
particular Section, subsection or other subdivision; "Section",
"subsection" or other subdivision of this Agreement means and
refers to the specified Section, subsection or other subdivision
of this Agreement;
"Average Closing Price Per Common Share" shall mean the weighted
average closing price per Common Share for the sixty trading (60)
days immediately preceding the date on which the determination
must be made on Nasdaq (Small Cap Market) or if the Common Shares
are not listed on Nasdaq (Small Cap Market), on any stock
exchange on which the Common Shares are listed, or if the Common
Shares are not listed on either Nasdaq (Small Cap Market) or any
stock exchange, in the over-the-counter market. In the event that
the Common Shares are listed on more than one exchange (including
Nasdaq Small Cap Market), in order to calculate the closing price
per Common Share on each day, the average of the closing price
per Common Share on all the exchanges will be used;
"BusinessDay" shall mean any day, other than a Saturday or Sunday or a
day on which the principal commercial banks in the State of New
York or the Province of Quebec are not open for business during
normal banking hours;
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"Canco" shall have the meaning ascribed thereto in subsection 1.1;
"Canco Shares" shall mean the Initial Canco Shares, the Project Canco
Shares, the Distress Canco Shares and the Subsequent Canco
Shares, collectively;
"Capital Reorganization" shall mean (i) any reclassification of any
Common Shares at any time outstanding or change of any Common
Shares into other shares or into other securities or other
capital reorganization (other than a Share Reorganization); (ii)
any amalgamation, consolidation or merger of the Company with or
into any other corporation or other entity (other than a
consolidation, amalgamation or merger which does not result in
any reclassification of the outstanding Common Shares or a change
of the Common Shares into other shares or securities); (iii) any
transfer of the undertaking or assets of the Company as an
entirety or substantially as an entirety to another corporation
or other entity;
"Charges"shall mean any security interest, hypothec, prior claim,
lien, charge, pledge, encumbrance, mortgage, adverse claim or
title retention agreement of any nature or kind whatsoever;
"Closing" shall mean the closing of any exchange of any Canco Shares
for Common Shares;
"Closing Date" shall mean the date of each Closing;
"Common Shares" shall mean the Company's common stock having the
rights, privileges and preferences as set forth in the Restated
Certificate of Incorporation of the Company dated February 18,
1997, provided however, that in the event of a Recapitalization,
"Common Shares" shall thereafter mean the shares, securities or
other property or rights which a Purchaser is entitled to receive
in accordance with subsection 3.5 upon the exchange referred to
in subsection 3.2 or 3.3;
"Company SEC Documents" shall have the meaning ascribed thereto in
paragraph 6.1.1;
"Company Shares" shall mean any class of shares of the Company's
stock;
"Currency Exchange Rate" means the noon rate as reported by the Bank
of Canada, for the conversion of Canadian dollars into US
dollars;
"Distress Canco Shares" shall mean the common shares in the capital
stock of Canco issued to any of the Purchasers pursuant to
Section 12 of the Shareholders Agreement;
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"dollar","dollars" and the sign "$" shall, unless otherwise indicated,
each mean lawful money of the United States;
"Exchange Act" shall mean the Securities Exchange Act of 1934 (United
States), as amended from time to time;
"Exchange Rate" shall mean at any time, the number of Common Shares
that each Purchaser shall be entitled to receive for each Canco
Share from time to time pursuant to subsection 3.4;
"Exchange Right" shall have the meaning ascribed thereto in subsection
3.2;
"Forced Closing" shall have the meaning ascribed thereto in subsection
5.4;
"Forced Exchange" shall have the meaning ascribed thereto in
subsection 3.3;
"Forced Exchange Conditions" shall have the meaning ascribed thereto
in subsection 5.1;
"Forced Exchange Notice" shall have the meaning ascribed thereto in
subsection 5.2;
"Initial Canco Shares" shall mean the 1,066,192 class "A" common
shares in the capital stock of Canco issued to the Purchasers on
the date hereof;
"Notice of Exchange" shall have the meaning ascribed thereto in
subsection 4.1;
"Person" shall mean an individual, corporation, company, partnership,
trust, unincorporated association, entity with judicial
personality, governmental authority or any other entity
recognized by law and pronouns when they refer to a Person shall
have a similarly extended meaning;
"Project Canco Shares" shall mean the common shares in the capital
stock of Canco issued to any of the Purchasers pursuant to
Section 11 of the Shareholders Agreement;
"Purchasers" shall mean Innovatech, Devma, Fonds and FR and all
transferees of Canco Shares of Innovatech, Devma, Fonds or FR
(other than the Company) in accordance with the Shareholders
Agreement, collectively and "Purchaser" shall mean any one of
them;
"Purchaser's Sale Notice" shall have the meaning ascribed thereto in
subsection 5.3;
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"Recapitalization" shall have the meaning ascribed thereto in
subsection 3.5;
"Registration Rights Agreement" shall mean the registration rights
agreement of even date among the Purchasers and the Company
providing for the obligation of the Company to register the
Common Shares of the Purchasers;
"Share Reorganization" shall mean (i) any issue of Company Shares or
securities exchangeable for or convertible into Company Shares to
any holders of Common Shares as a stock dividend; (ii) any
distribution on any of its outstanding Common Shares payable in
Company Shares or securities exchangeable for or convertible into
Company Shares; (iii) any subdivision, redivision or change of
its outstanding Common Shares into a greater number of Common
Shares; or (iv) any reduction, combination or consolidation of
its outstanding Common Shares into a smaller number of Common
Shares;
"SEC" shall mean the United Stated Securities and Exchange Commission;
"SEC Documents" shall mean the documents filed by the Company with the
SEC at any time;
"Securities Act" shall mean the Securities Act of 1933 (United
States), as amended from time to time;
"Shareholders Agreement" shall mean the memorandum of agreement of
even date between the parties hereto and Canco setting forth the
terms and conditions which will govern the relationship of the
shareholders of Canco.
"Special Distribution" shall mean any issue, distribution or dividend
to any holders of Common Shares of any securities or other
property or rights (other than a cash dividend payable in the
ordinary course of the Company's business), which does not
constitute a Share Reorganization;
"Subsequent Canco Shares" shall mean the common shares in the capital
stock of Canco to be issued to any of the Purchasers pursuant to
Section 13 of the Shareholders Agreement;
"Total Distress Canco Shares" shall mean the total number of Distress
Canco Shares issued to a Purchaser on a given date upon the
conversion of any or all of the advance made by such Purchaser,
the whole as contemplated in subsection 12.9 of the Shareholders
Agreement;
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"Total Distress Common Shares" shall mean the quotient obtained when
dividing the (i) aggregate subscription price paid by a Purchaser
for the Distress Canco Shares on a given date (being the dollar
amount of the advance made by such Purchaser and any interest
accrued thereon which is being converted for such Distress Canco
Shares pursuant to subsection 12.9 of the Shareholders Agreement)
converted into US dollars at the Currency Exchange Rate on the
date such advance was initially made by such Purchaser pursuant
to Section 12 of the Shareholders Agreement by (ii) a price per
Common Share to be negotiated in good faith by such Purchaser and
the Company on or prior to the date such advance is made by such
Purchaser. If, however, no agreement is reached by the date of
such advance, the denominator referred to in (ii) above shall be
the Average Closing Price Per Common Share as calculated on the
date such advance was initially made by such Purchaser pursuant
to Section 12 of the Shareholders Agreement (the denominator
determined pursuant to (ii) above or the denominator determined
in accordance with the last sentence of this paragraph 2.1.44
being hereinafter referred to as the "Distress Price Per Common
Share");
"Total Initial Common Shares" shall mean the quotient obtained when
dividing the (i) aggregate subscription price paid by each
Purchaser for its Initial Canco Shares converted into US dollars
at the Currency Exchange Rate on that date by (ii) $5.09;
"Total Project Canco Shares" shall mean the total number of Project
Canco Shares issued to a Purchaser on a given date pursuant to
Section 11 of the Shareholders Agreement;
"Total Project Common Shares" shall mean the quotient obtained when
dividing the (i) aggregate subscription price and/or
consideration paid by a Purchaser for the Total Project Canco
Shares on a given date converted into US dollars at the Currency
Exchange Rate on that date by (ii) $5.09;
"Total Subsequent Canco Shares" shall mean the total number of
Subsequent Canco Shares issued to a Purchaser on a given date
pursuant to Section 13 of the Shareholders Agreement;
"Total Subsequent Common Shares" shall mean the quotient obtained when
dividing the (i) aggregate subscription price paid by a Purchaser
for the Subsequent Canco Shares on a given date converted into US
dollars at the Currency Exchange Rate on that date by (ii) the
Average Closing Price Per Common Share as determined on the date
of the subscription by such Purchaser for such Subsequent Canco
Shares (the "Subsequent Average Closing Price Per Common Share");
"Voluntary Closing" shall have the meaning ascribed thereto in
subsection 4.1;
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"Weighted Average Price Per Common Share" shall have the meaning
ascribed thereto in Schedule 2.1.51;
AUTHORIZATION AND EXCHANGE OF CANCO SHARES
Authorization. Prior to the date hereof, the Company has authorized
the exchange and issuance, in accordance with the terms hereof,
of up to one million two hundred thousand (1,200,000) Common
Shares.
Voluntary Exchange of Canco Shares. Subject to the terms and
conditions hereof, each Purchaser shall have the right to
exchange, at any time and from time to time, all or part of its
Canco Shares for Common Shares at the Exchange Rate (the
"Exchange Right").
Forced Exchange of Canco Shares. Subject to the terms and conditions
hereof, the Company shall have the right to require all (and not
less than all) of the Purchasers to exchange all (and not less
than all) of their Canco Shares for Common Shares at the Exchange
Rate (the "Forced Exchange"), it being understood that this right
may only be exercised by the Company for all of the Canco Shares
held by all the Purchasers.
Exchange Rate. Subject to subsections 3.5 and 3.7, the Company shall
issue to each Purchaser upon delivery by such Purchaser of (i)
each Initial Canco Share, one (1) Common Share; (ii) each Project
Canco Share, that number of Common Shares as is equal to the
quotient obtained when dividing the Total Project Common Shares
of such Purchaser by the Total Project Canco Shares of such
Purchaser; (iii) each Distress Canco Share, that number of Common
Shares as is equal to the quotient obtained when dividing the
Total Distress Common Shares of such Purchaser by the Total
Distress Canco Shares of such Purchaser; and (iv) each Subsequent
Canco Share, that number of Common Shares as is equal to the
quotient obtained when dividing the Total Subsequent Common
Shares of such Purchaser by the Total Subsequent Canco Shares of
such Purchaser. In the event that Project Canco Shares, Distress
Canco Shares or Subsequent Canco Shares are issued on more than
one occasion, the Exchange Rate will be determined separately at
the time of each issuance and, as a consequence, the Exchange
Rate may not be the same for all Project Canco Shares, all
Distress Canco Shares or all Subsequent Canco Shares.
Adjustment to the Number of Common Shares. The number of Common Shares
to be issued upon the exchange referred to in subsection 3.2 or
3.3 shall be adjusted to take into account changes to and
dilutive events in respect of the Common Shares occurring during
the period from the Adjustment Commencement Date until the date
of such exchange. Such adjustment shall be made such that the
Purchasers shall be issued such number of Common Shares (or any
security or other property or rights such Common Shares may have
become) as shall be equal to the number
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of Common Shares (or such security or other property or rights
which the Common Shares may have become) the Purchasers would
have been issued in the aggregate if they had exercised the
Exchange Right or if the Company had exercised the Forced
Exchange upon the Adjustment Commencement Date and the Purchasers
had owned such shares from the Adjustment Commencement Date until
the date of the exchange. For greater clarity, but without
limiting the generality of the foregoing, if the Company shall
undertake a Share Reorganization, Capital Reorganization or
Special Distribution (collectively, a "Recapitalization") prior
to the issuance of the Common Shares to the Purchasers upon the
exchange referred to in subsection 3.2 or 3.3, each Purchaser
shall receive upon the exchange referred to in subsection 3.2 or
3.3 such number of Common Shares or securities or other property
or rights as such Purchaser would have received following such
Recapitalization had such Purchaser been issued its Common Shares
pursuant to any exchange prior to such Recapitalization and had
subsequently participated fully in such Recapitalization. The
adjustments provided for herein are cumulative and such
adjustments shall be made successively whenever an event referred
to in this subsection 3.5 occurs.
Officer's Statement. Whenever the Exchange Rate is adjusted as
provided in subsection 3.5, the Company shall forthwith send to
each Purchaser a statement, signed by an officer of the Company,
describing in reasonable detail the facts giving rise to such
adjustment, as well as the new Exchange Rate. This statement
shall be accompanied by a letter from the auditors of the Company
confirming the new Exchange Rate. If a dispute arises with
respect to any adjustment in the Exchange Rate, such dispute
shall be settled by arbitration in the manner provided in
subsection 8.4 hereof.
Fractional Shares. No fractional Common Shares shall be issued upon
the exchange of the Canco Shares pursuant to subsection 3.2 or
3.3. In lieu of issuing any fractional Common Shares to any
Purchaser upon such exchange, the Company shall pay to such
Purchaser a cash adjustment in respect thereof in an amount equal
to the product obtained when multiplying the Average Closing
Price Per Common Share calculated on the date of the exchange by
the fraction of the Common Share which would otherwise have been
issued.
EXCHANGE RIGHT
Voluntary Closing. Each closing of the exchange of the Canco Shares
for Common Shares pursuant to subsection 3.2 (the "Voluntary
Closing") shall be held at the offices of the Company in
Hauppauge, New York, at 10:00 a.m., local time, fifteen (15)
Business Days after receipt by the Company of a properly
completed and executed notice of exchange in the form attached
hereto as Schedule "4.1" (the "Notice of Exchange") on behalf of
any Purchaser or at such other time and place upon which the
Company and such Purchaser shall mutually agree.
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Delivery. At each Voluntary Closing, each Purchaser who has given a
Notice of Exchange shall surrender the certificate or
certificates for the Canco Shares contemplated therein duly
endorsed. Thereupon, the Company shall issue and deliver at such
office to such Purchaser a certificate or certificates for the
number of Common Shares to which such Purchaser is entitled
pursuant to subsection 3.4. Such exchange shall be deemed to have
been made at the close of business on the date of receipt by the
Company of the Notice of Exchange and the Purchaser entitled to
receive Common Shares issuable upon such exchange shall be
treated for all purposes as the record-holder of such Common
Shares on the date of receipt by the Company of the Notice of
Exchange.
Conditions Precedent to Voluntary Closing. The obligation of each
Purchaser to proceed with each Voluntary Closing is subject to
each of the conditions hereinbelow set forth being satisfied as
of the Closing Date all of which are agreed to be material and
are inserted for the exclusive benefit of such Purchaser, and may
be waived in whole or in part by such Purchaser, provided that
any waiver to be effective must be in writing:
the representations and warranties of the Company contained in
this Agreement shall be true and correct in all respects as
if made at and as of the date of such Closing;
the Company shall have complied with all its covenants,
obligations and agreements contained in this Agreement;
provided that the Notice of Exchange contemplates the exchange of
all of such Purchaser's Canco Shares, such Purchaser shall
have been released from all guarantees furnished by it on
behalf of Canco and Canco shall have repaid to such
Purchaser all amounts loaned by such Purchaser to Canco,
together with all interest accrued thereon prior to the
Closing Date;
provided that the Notice of Exchange contemplates the exchange of
all of such Purchaser's Canco Shares, the Company and Canco
shall have released such Purchaser from all claims which
they or either of them has or may have against such
Purchaser for matters arising out of its association with
Canco prior to the Closing Date;
the Company shall have furnished to such Purchaser an opinion
addressed to it and dated the date of such Closing
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from Donovan Leisure Newton & Irvine or other United States
counsel to the Company acceptable to such Purchaser,
covering substantially the same matters as were covered in
the opinion furnished by such counsel to the Purchasers on
the date hereof;
the Company shall have furnished to such Purchaser an officer's
certificate certifying that the representations and
warranties of the Company contained in this Agreement are
true and correct in all respects as if made at and as of the
date of such Closing and confirming that the Company has
complied with all its covenants, obligations and agreements
contained in this Agreement;
the Company shall have delivered to such Purchaser all consents
and approvals of all Persons required in order to consummate
the transactions contemplated by the exchange set forth in
subsection 3.2 and this Section 4. In addition, and without
limiting the generality of the foregoing, the consents of
the ministries of the governments of Quebec and Canada
responsible for the financial assistance to be provided to
Canco by the Entente Auxiliaire Canada-Quebec sur le
developpement industriel (1991) pursuant to a letter
agreement dated April 22, 1997 and accepted by Canco on May
19, 1997 (the "Entente Canada-Quebec Consents") and the
consent of any lender of Canco shall have been delivered to
such Purchaser; and
if a demand registration in accordance with subsection 4.1 of
the Registration Rights Agreement is requested by such
Purchaser within five (5) Business Days following receipt by
the Company of the Notice of Exchange, the Company shall
have filed all appropriate registration statements or resale
registration statements required by the Registration Rights
Agreement in connection with the Common Shares to be issued
to such Purchaser upon the exercise of the Exchange Right
and same shall have been declared effective.
Failure to Satisfy Conditions Precedent to Voluntary Closing. In the
event that any of the conditions precedent set forth in
subsection 4.3 hereof shall not have been fulfilled and/or
performed as of the Closing Date, each Purchaser may, at its
option, either (i) advise the Company that it shall not proceed
with the exchange of its Canco Shares as contemplated in the
Notice of Exchange or (ii) proceed with the exchange of such
Canco Shares, in either case without prejudice to such
Purchaser's rights, recourses and remedies.
Failure to Satisfy Certain Condition Precedent to Voluntary Closing.
Notwithstanding the provisions of subsection 4.4, in the event
that the only condition precedent not to have been fulfilled
and/or performed as of the Closing Date is the condition
precedent set forth in paragraph 4.3.8, then each of the
Purchasers may, at its option, either (i) proceed with the
exchange of its Canco Shares, without prejudice to its rights,
recourses and remedies or (ii) postpone the Closing Date until
this condition precedent is fulfilled and/or performed, provided
that if same is not fulfilled and/or performed within 90 days of
the original Closing Date, then each of the Purchasers shall be
entitled to exercise either of the options set forth in
subsection 4.4.
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FORCED EXCHANGE
Conditions to Exercise Forced Exchange. The Company shall have the
right to exercise the Forced Exchange only if the following
conditions (the "Forced Exchange Conditions") are met at the time
the Forced Exchange Notice (as hereinafter defined) is given, at
the time a Purchaser's Sale Notice (as hereinafter defined), if
any, is given and on the Closing Date:
the Average Closing Price Per Common Share is at least 150% of
the Weighted Average Price Per Common Share in respect of
each Purchaser;
Canco's manufacturing facility in Montreal, Quebec has been
completed and is operating at its normal capacity during the
immediately preceding three consecutive months, normal
capacity for any three month period being both manufacturing
and shipping of 2,475,000 square feet of laminates during
such three month period in response to firm orders received
by Canco in the normal course of business justifying the
manufacturing of such quantity of laminates;
Notice of Forced Exchange. Should the Company wish to require all of
the Purchasers to exchange all of their Canco Shares for Common
Shares, it shall be obliged to provide the Purchasers with a
notice to that effect (the "Forced Exchange Notice") together
with evidence that the conditions set forth in paragraphs 5.1.1
and 5.1.2 have been met on that day.
Purchaser's Sale. Each of the Purchasers shall have fifteen (15)
Business Days from receipt of the Forced Exchange Notice in which
to notify the Company (the "Purchaser's Sale Notice") that it
wishes to sell all or a portion of its Common Shares (including,
without limitation, the Common Shares to be issued to such
Purchaser upon the Forced Exchange) at a price per Common Share
at least equal to the Average Closing Price Per Common Share
calculated on the date of such Purchaser's Sale Notice. In the
event that any Purchaser so notifies the Company, the Company
shall be obliged to purchase for cancellation or cause a third
party to purchase such Common Shares in the manner provided for
in this Section 5.
Forced Closing. The closing of the exchange of the Canco Shares for
Common Shares pursuant to subsection 5.1 (the "Forced Closing")
shall be held at the offices of the Company in Hauppauge, New
York, at 10:00 a.m., local time, twenty (20) Business Days after
receipt by the Purchasers of the Forced Exchange Notice or at
such other time and place upon which the Company and the
Purchasers shall mutually agree.
Condition Precedent to Forced Closing. The obligation of the
Purchasers to proceed with the Forced Closing is subject to each
of the conditions hereinbelow set forth being satisfied as of the
Closing Date all of which are agreed to be material and are
inserted for the exclusive benefit of the Purchasers and may be
waived in whole or
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in part by the Purchasers, provided that any waiver to be
effective must be in writing:
the representations and warranties of the Company contained in
this Agreement shall be true and correct in all respects as
if made at and as of the date of the Closing;
the Company shall have complied with all its covenants,
obligations and agreements contained in this Agreement;
the Purchasers shall have been released from all guarantees
furnished by them on behalf of Canco and Canco shall have
repaid to each of the Purchasers all amounts loaned by such
Purchaser to Canco, together with all interest accrued
thereon prior to the Closing Date;
the Company and Canco shall have released the Purchasers from
all claims which they have or either of them has or may have
against the Purchasers or any of them for matters arising
out of their association with Canco prior to the Closing
Date;
the Company shall, if required by any Purchaser in accordance
with such Purchaser's Sale Notice, purchase for cancellation
or cause a third party to purchase that number of Common
Shares held by such Purchaser (including, without
limitation, the Common Shares to be issued to such Purchaser
upon the Forced Exchange) as is set out in such Purchaser's
Sale Notice at a price per Common Share at least equal to
the Average Closing Price Per Common Share calculated on the
date of such Purchaser's Sale Notice. The purchase price for
such Common Shares shall be payable in cash on the Closing
Date concurrently with the Forced Closing;
the Company shall have furnished to the Purchasers an opinion
addressed to them and dated the date of the Closing from
Donovan Leisure Newton & Irvine or other United States
counsel to the Company acceptable to such Purchasers,
covering substantially the same matters as were covered in
the opinion furnished by such counsel to the Purchasers on
the date hereof;
the Company shall have furnished to the Purchasers an officer's
certificate (i) certifying that the representations and
warranties of the Company contained in this Agreement are
true and correct in all respects as if made at and as of the
Closing Date and that the conditions set forth in paragraphs
5.1.1 and 5.1.2 hereof continue to be true and correct as of
the Closing Date and (ii) confirming that the Company has
complied with all its covenants, obligations and agreements
contained in this Agreement;
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the Company shall have delivered to the Purchasers all consents
and approvals of all Persons required in order to consummate
the transactions contemplated by the Forced Exchange, each
Purchaser's Sale Notice and this Section 5. In addition, and
without limiting the generality of the foregoing, the
Entente Canada-Quebec Consents and the consent of any lender
of Canco shall have been delivered to the Purchasers; and
if a demand registration in accordance with subsection 4.1 of
the Registration Rights Agreement is requested by such
Purchaser within five (5) Business Days following receipt of
the Forced Exchange Notice, the Company shall have filed all
appropriate registration statements or resale registration
statements required by the Registration Rights Agreement in
connection with the Common Shares to be issued upon the
Forced Exchange and same shall have been declared effective.
Failure to Satisfy Conditions Precedent to Forced Closing. In the event
that any of the conditions precedent set forth in subsections 5.5
hereof shall not have been fulfilled and/or performed as of the
Closing Date, each of the Purchasers may, at its option, either (i)
advise the Company that it refuses to proceed with the exchange of its
Canco Shares or (ii) proceed with the exchange of its Canco Shares, in
either case, without prejudice to its rights, recourses and remedies.
In the event, however, that one or more but less than all of the
Purchasers exercises the option set forth in (i) above, then the
Company shall have the right not to proceed with the Closing of the
Forced Exchange of the Canco Shares held by the other Purchasers who
wished to proceed therewith, in which case such other Purchasers shall
be deemed to have exercised the option set forth in (i) above.
Failure to Satisfy Certain Condition Precedent to Forced Closing.
Notwithstanding the first sentence of subsection 5.6, in the event
that the only condition precedent not to have been fulfilled and/or
performed as of the Closing Date is the condition precedent set forth
in paragraph 5.5.9, then each of the Purchasers may, at its option,
either (i) proceed with the exchange of its Canco Shares, without
prejudice to its rights, recourses and remedies; or (ii) postpone the
Closing Date until this condition precedent is fulfilled and/or
performed, provided that if same is not fulfilled and/or performed
within 90 days of the original Closing Date, then each of the
Purchasers shall be entitled to exercise either of the options set
forth in the first sentence of subsection 5.6. In the event, however,
that one or more but less than all of the Purchasers exercises the
option set forth in (i) above, then the Company shall have the right
not to proceed with the Closing of the Forced Exchange of the Canco
Shares held by the other Purchasers who wish to proceed therewith, in
which case such other Purchasers shall be deemed to have exercised the
option set forth in (ii) above.
Delivery. At the Forced Closing, the Purchasers shall surrender the
certificates representing all of the Canco Shares, duly endorsed.
Thereupon, the Company
<PAGE>
-15-
shall issue and deliver to the Purchasers certificates for the number
of Common Shares to which the Purchasers are entitled pursuant to
subsection 3.4. Such exchange shall be deemed to have been made at the
close of business on the date of receipt by the Purchasers of the
Forced Exchange Notice and the Purchasers shall be treated for all
purposes as the record-holders of such Common Shares on the date of
receipt by the Purchasers of the Forced Exchange Notice. In addition,
in the event that any Purchaser has provided the Company with its
Purchaser's Sale Notice, such Purchaser shall also surrender the
certificates representing all of the Common Shares which it wishes to
sell, duly endorsed, against payment of the purchase price therefor.
REPRESENTATIONS, WARRANTIES, ACKNOWLEDGEMENTS
AND COVENANTS OF THE COMPANY
Representations and Warranties. The Company hereby represents and warrants
to each of the Purchasers, as of the date hereof, the following:
Public Filings. The Company has delivered to the Purchasers accurate
and complete copies (excluding copies of exhibits) of each
report, registration statement (on a form other than Form S-8)
and definitive proxy statement filed by the Company with the SEC
between July 2, 1996 and the date the representation or warranty
is made (the "Company SEC Documents"). As of the time it was
filed with the SEC (or, if amended or superseded by a filing
prior to the date of this Agreement, then on the date of such
filing): (i) each of the Company SEC Documents complied in all
material respects with the applicable requirements of the
Securities Act or the Exchange Act, as the case may be; and (ii)
none of the Company SEC Documents contained any untrue statement
of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were
made, not misleading.
Financial Statements. The consolidated, if applicable, financial
statements contained in the Company SEC Documents: (i) complied
as to form in all material respects with the published rules and
regulations of the SEC applicable thereto; (ii) were prepared in
accordance with generally accepted accounting principles applied
on a consistent basis throughout the periods covered, except as
may be indicated in the notes to such financial statements and
(in the case of unaudited statements) as permitted by Form 10-Q
of the SEC, and except that unaudited financial statements may
not contain footnotes and are subject to normal and recurring
year-end audit adjustments; and (iii) fairly present the
financial position of the Company as of the respective dates
thereof and the consolidated, if applicable, results of
operations of the Company for the periods covered thereby.
<PAGE>
-16-
Organization, Good Standing and Qualification. The Company is a
corporation duly organized, validly existing, and in good
standing under the laws of the State of Delaware. The Company has
full power and authority to own and operate its properties and
assets, and to carry on its business as presently conducted and
as presently proposed to be conducted.
Corporate Power. The Company has all requisite legal and corporate
power and authority to execute and deliver this Agreement and to
carry out and perform its obligations under the terms of this
Agreement. Without limiting the generality of the foregoing, all
corporate action on the part of the Company, its directors and
shareholders necessary (i) for the authorization, execution,
delivery and performance of this Agreement by the Company, (ii)
for the authorization, issuance and delivery of the Common Shares
pursuant to this Agreement and (iii) for the purchase for
cancellation by the Company or the sale to the third party of
each Purchaser's Common Shares in connection with its Purchaser's
Sale Notice has been taken prior to the execution hereof.
Offering Valid. Assuming the accuracy of the representations and
warranties of the Purchasers contained in Section 7 hereof, the
offer, sale and issuance of the Common Shares pursuant to this
Agreement is or will be exempt from the registration requirements
of the Securities Act and all state "blue sky" laws or has been
or will have been registered or qualified under the registration,
permit or qualification requirements of all applicable federal
and state securities laws.
Binding Agreement. This Agreement, when executed and delivered by the
Company, shall constitute a valid and binding obligation of the
Company, enforceable in accordance with its terms, subject to
laws of general application affecting creditors' rights and the
exercise of judicial discretion in accordance with general
equitable principles.
Issuance of Common Shares. The issuance of Common Shares pursuant to
this Agreement is and will not be subject to any preemptive
rights or rights of first refusal. When issued in compliance with
the provisions of this Agreement and the Restated Certificate of
Incorporation of the Company dated February 18, 1997, as amended,
the Common Shares will be validly issued, fully paid and
non-assessable, and will be free of all Charges and restrictions
on transfer other than restrictions on transfer under state
and/or federal securities laws at the time a transfer by a
Purchaser is proposed.
Consents. No consent, approval, authorization, order, registration or
qualification of or with any federal or state court or
governmental agency or body or any Person is required to enter
into this Agreement or for the
<PAGE>
-17-
consummation by the Company of the transactions contemplated by
this Agreement, except such consents, approvals, authorizations,
orders, registrations or qualifications which have been obtained
by the Company prior to the date hereof;
Compliance with Laws. The Company is not in violation of any law,
ordinance, administrative or governmental rule or regulation or
court decree applicable to it, and is not in violation with any
term or condition of, and has not failed to obtain, any license,
permit, franchise or other administrative or governmental
authorization necessary to the ownership of its property or to
the conduct of its business, which violation, non-compliance or
failure to obtain, individually or in the aggregate, would
adversely affect the consummation by the Company of the
transactions contemplated by this Agreement;
Compliance with Other Instruments. The execution and delivery of this
Agreement and the fulfilment of the terms hereof do not result in
a breach of, do not conflict with, and do not constitute a
default under, whether after notice or lapse of time, (i) any
statute, rule or regulation applicable to the Company; (ii) any
court judgment, decree or order binding the Company; or (iii) the
constituent documents and by-laws of the Company.
Reservation of Stock. The Company has reserved up to one million two
hundred thousand (1,200,000) Common Shares for issuance
hereunder.
Brokers or Finders. The Purchasers have not incurred and will not
incur, directly or indirectly, as a result of any action taken by
the Company any liability for any brokerage fees, finder's fees,
or agents' commissions or other similar charges in connection
with this Agreement.
Covenants of the Company. The Company hereby covenants as follows:
SEC Documents. As soon as practicable after the filing of any SEC
Documents, and in any event within twenty (20) days thereafter,
the Company will furnish each of the Purchasers with such SEC
Documents;
Reservation of Stock. So long as any Canco Shares remain outstanding,
the Company will at all times reserve and keep available, solely
for issuance and delivery upon the exercise of the Exchange Right
or the Forced Exchange, all Common Shares issuable from time to
time upon such exchange;
Listing of Shares. Promptly after the issuance of the Common Shares to
any of the Purchasers pursuant to this Agreement, if the
Company's securities are publicly traded, the Company shall take
all necessary action to list such
<PAGE>
-18-
Common Shares, to the extent not already listed, on the Nasdaq
Small Cap Market and on such other securities exchange or
over-the-counter market where the Company's securities are
listed;
Securities Act Exemption. The Company shall use its best efforts to
cause the issuance of the Common Shares to any Purchaser pursuant
to this Agreement to be made pursuant to such exemption or
exemptions from registration under the Securities Act as may be
reasonably requested by such Purchaser;
Notice and Information Rights. The Company shall from the date hereof
deliver to each Purchaser such information and notices as the
Company is required to deliver to the holders of Common Shares of
the Company pursuant to the Company's Restated Certificate of
Incorporation dated February 18, 1997, as amended, or otherwise.
Declaration of Dividends. The Company shall at least ninety (90) days
prior to the declaration of any dividend (other than a stock
dividend), advise each Purchaser or same in writing.
Recapitalization. The Company shall at least ninety (90) days prior to
any Recapitalization, advise each Purchaser of same in writing.
REPRESENTATIONS, WARRANTIES AND ACKNOWLEDGEMENTS
OF THE PURCHASERS
Representation and Warranties. Each Purchaser hereby, severally and not
jointly and severally, represents and warrants to the Company as
follows:
Investment. In each case, it is acquiring the right to acquire, and
will acquire, Common Shares as provided in this Agreement, as
well as any share it may acquire from another Purchaser, for
investment for its own account (or for the account of any of the
other Purchasers), and not with the view to, or for resale in
connection with, any distribution thereof.
Title to Canco Shares. It is upon the date hereof the owner of record
of its Canco Shares and shall be upon each Closing Date the owner
(both beneficially and of record) of its Canco Shares. It will
have upon each Closing Date good and marketable title to the
Canco Shares and the absolute right, power and capacity to
transfer and deliver the Canco Shares to the Company pursuant to
this Agreement, free and clear of all Charges.
Brokers or Finders. The Company has not incurred and will not incur,
directly or indirectly, as a result of any action taken by such
Purchaser any brokerage fees, finder's fees, agents' commissions
or other similar charges in connection with this Agreement.
<PAGE>
-19-
Acknowledgements. Each Purchaser hereby makes the following
acknowledgements:
Registration. It understands that neither the right to acquire, nor
any acquisition of, Common Shares as provided in this Agreement
has been, or will be, registered or qualified under the
Securities Act or under any applicable U.S. state securities
laws, in reliance on specific exemptions from the registration
provisions of the Securities Act and such laws, the availability
of which depends upon, among other things, the bona fide nature
of its investment intent and the accuracy of the other
representations and acknowledgments set forth in this Section
7.1.1.
Non-transferability. It acknowledges that any Common Shares actually
acquired pursuant to this Agreement must be held by it
indefinitely unless a subsequent disposition thereof is
registered and/or qualified under the Securities Act and
applicable U.S. state securities laws or, in the opinion of
Purchaser's counsel reasonably satisfactory to the Company,
exempt from such registration and/or qualification.
Accredited Investor. It is an "accredited investor" within the meaning
of Rule 501 under the Securities Act.
Legends. It understands that the certificates representing Common
Shares will bear a legend containing the restrictions referred to
in paragraphs 7.1.1 and 7.1.2 above.
GENERAL PROVISIONS
Governing Law. This Agreement shall be governed in all respects by the laws
of the State of New York as they are applied to agreements entered
into in New York between New York residents and performed entirely
within New York.
Further Documents. Each party upon the request of the others, shall do,
execute, acknowledge and deliver or cause to be done, executed,
acknowledged or delivered all such further acts, deeds, documents,
assignments, transfers, conveyances, powers of attorney and assurances
as may be reasonably necessary or desirable to effect complete
consummation of the transactions contemplated by this Agreement.
Successors and Assigns. The provisions hereof shall enure to the benefit of
and be binding upon the parties hereto and their respective
successors, assigns, heirs, executors and administrators.
Notwithstanding the foregoing, the Company shall not be entitled to
assign its rights hereunder. The parties hereto hereby confirm
<PAGE>
-20-
that each transferee of any Canco Shares shall benefit from the
Exchange Rights contemplated in this Agreement provided that the
transfer of such Canco Shares was made in conformity with the
Shareholders Agreement.
Arbitration. All disputes or controversies between the parties in
respect of the validity, interpretation or performance of the
provisions of this Agreement shall be definitively dealt with
using the rules of conciliation and arbitration of the
International Chamber of Commerce, by one or more arbitrators
appointed in accordance with said rules, and to the exclusion
of any courts, except for any injunctive relief and any
provisional remedy, including seizure before judgment or
attachment, which may be obtained from any court or tribunal
having jurisdiction. Any arbitration proceeding required
pursuant to the terms hereof shall take place in New York, New
York and shall be conducted in both the English and French
language. The cost of the arbitration shall be borne in the
manner provided for in the arbitration award.
Notices. All offers, acceptances, rejections, notices, requests,
authorizations, permissions, directions, demands and other
communications hereunder shall be given in writing and shall
be given by telecopier, or delivered by hand, to the other
parties at the following addresses:
If to Devma: INDUSTRIES DEVMA INC.
600 de la Gauchetiere Street West
Suite 1700
Montreal, Quebec H3B 4L8
Attention: President
Telecopier: (514) 395-8055
if to Innovatech: SOCIETE INNOVATECH DU GRAND MONTREAL
2020 University Avenue
Suite 1527
Montreal, Quebec
H3A 2A5
Attention: President and Chief Executive Officer
Telecopier: (514) 864-4220
<PAGE>
-21-
if to Fonds: FONDS DE SOLIDARITE DES TRAVAILLEURS
DU QUEBEC (F.T.Q.)
8717 Berri Street
Montreal, Quebec
H2M 2T9
Attention: Vice President, Legal Affairs
Telecopier: (514) 383-2500
with a copy to: Senior Vice President, Investments
Telecopier: (514) 383-2505
if to FR: FONDS REGIONAL DE SOLIDARITE ILE DE
MONTREAL, limited partnership
255 St-Jacques Street West
3rd Floor
Montreal, Quebec
H2Y 1M6
Attention: Managing Director
Telecopier: (514) 845-0625
if to the Company: COMPOSITECH LTD.
120 Ricefield Lane
Hauppauge, New York
11788-2008
Attention: the President
Telecopier: (516) 436-5203
with a copy in all
cases to: LAPOINTE ROSENSTEIN
1250 Rene-Levesque Blvd. West
Suite 1400
Montreal, Quebec
H3B 5E9
Attention: Me Perry Kliot
Telecopier: (514) 925-9001
<PAGE>
-22-
with a copy in all
cases to: DONOVAN LEISURE NEWTON & IRVINE
30 Rockefeller Plaza
New York, New York
10112
Attention: Edward F. Cox, Esq.
Telecopier: (212) 632-3315
or at such other address as the parties may have previously indicated to the
other parties in writing in conformity with the foregoing. Any such notice,
request, demand or other communication shall be deemed to have been received on
the date of delivery if delivered by hand, or the next Business Day immediately
following the date of transmission if sent by telecopier. The original copy of
any notice sent by telecopier shall be forwarded to the other parties by
registered mail, receipt return requested.
Time of the Essence. Time shall be of the essence in this Agreement.
Delays. When calculating the period of time within which or following which
any act is to be done or step taken pursuant to this Agreement, the
day which is the reference day in calculating such period shall be
excluded. If the day on which such delay expires is not a Business
Day, then the delay shall be extended to the next succeeding Business
Day.
Entire Agreement; Amendment. This Agreement and the Shareholders Agreement
and the other documents delivered pursuant hereto constitute the full
and entire understanding and agreement among the parties with regard
to the subjects hereof and thereof, and no party shall be liable or
bound to any other party in any manner by any warranties,
representations or covenants except as specifically set forth herein
or therein. In the event that any provision of this Agreement
conflicts with any provision of the Shareholders Agreement, the former
provision shall prevail. Except as expressly provided herein, neither
this Agreement nor any term hereof may be amended, other than by a
written instrument signed by all the parties hereto.
Gender. Any reference in this Agreement to any gender shall include both
genders and the neutral, and words used herein importing the singular
number only shall include the plural and vice versa.
Headings.The division of this Agreement into Sections, subsections and
other subdivisions, and the insertion of headings are for convenience
of reference only and shall not affect or be utilized in the
construction or interpretation of this Agreement.
Waiver. Any waiver, permit, consent or approval of any kind or character on
the part of any party of any breach or default under this Agreement,
or any waiver on the part
<PAGE>
-23-
of any party of any provisions or conditions of this Agreement, must
be in writing and shall be effective only to the extent specifically
set forth in such writing. All remedies, either under this Agreement
or by law or otherwise afforded to any party, shall be cumulative and
not alternative.
Preamble. The preamble hereof shall form an integral part of this
Agreement.
Counterparts. This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original, but all of which
together shall constitute one and the same document.
Severability. In the event that any provision of this Agreement becomes or
is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and
effect without said provision.
<PAGE>
-24-
IN WITNESS WHEREOF, the parties have signed at the place and on the date
first hereinabove mentioned.
INDUSTRIES DEVMA INC. FONDS DE SOLIDARITE DES
TRAVAILLEURS DU QUEBEC (F.T.Q.)
Per: /s/ Louis Riopel Per: /s/ Richard Bourget
---------------------------- ----------------------------
Louis Riopel Richard Bourget
Per: /s/ Michel Beland
----------------------------
Michel Beland
SOCIETE INNOVATECH DU GRAND FONDS REGIONAL DE SOLIDARITE
MONTREAL ILE DE MONTREAL, limited partnership,
by its general partner, Gestion du Fonds
Regional de Solidarite Ile de Montreal Inc.
Per: /s/ Hubert Manseau Per: /s/ Danielle Blanchard
---------------------------- ---------------------------
Hubert Manseau Danielle Blanchard
COMPOSITECH LTD.
Per: /s/ Jonas Medney
----------------------------
Jonas Medney
<PAGE>
Stock Exchange Agreement
Compositech Ltd.
SCHEDULE 4.1
NOTICE OF EXCHANGE
In accordance with the terms of that certain Stock Exchange Agreement,
dated October 16, 1997, by and among Compositech Ltd. (the "Company") and the
Purchasers (as defined therein) (the "Stock Exchange Agreement"), notice is
hereby given pursuant to subsection 4.1 of the Stock Exchange Agreement that the
undersigned Purchaser elects to exchange ______________ Initial Canco Shares (as
defined in the Stock Exchange Agreement), _________________ Project Canco Shares
(as defined in the Stock Exchange Agreement), ________________ Distress Canco
Shares (as defined in the Stock Exchange Agreement) and/or ______________
Subsequent Canco Shares (as defined in the Stock Exchange Agreement),
representing ___% of the Initial Canco Shares, ___% of the Project Canco Shares,
___% of the Distress Canco Shares and ___% of the Subsequent Canco Shares, as
the case may be, held by such Purchaser on the date hereof, for the number of
Common Shares (as defined in the Stock Exchange Agreement) calculated pursuant
to the relevant provisions of the Stock Exchange Agreement.
Date:______________________, _______ .
PURCHASER
Per:__________________________________________
Print Name:___________________________________
Title:________________________________________
<PAGE>
Stock Exchange Agreement
Compositech Ltd.
SCHEDULE 2.1.51
WEIGHTED AVERAGE PRICE PER COMMON SHARE =
(Total Initial Common Shares of each Purchaser x $5.09) + (Total Project Common
Shares of each Purchaser x $5.09) + (Total Distress Common Shares of each
Purchaser x Distress Price Per Common Share of each Purchaser) ("A") + (Total
Subsequent Common Shares of each Purchaser x Subsequent Average Closing Price
Per Common Share) ("B")
Adjusted Aggregate Initial Common Shares of each Purchaser + Adjusted Aggregate
Project Common Shares of each Purchaser + Adjusted Aggregate Distress Common
Shares of each Purchaser + Adjusted Aggregate Subsequent Common Shares of each
Purchaser.
In the event that Distress Canco Shares or Subsequent Canco Shares are issued on
more than one occasion, the determination of A and B in the numerator mentioned
above shall be calculated separately on each occasion and then aggregated.
<PAGE>
Exhibit V
AGREEMENT
For one dollar ($1.00) and other good and valuable consideration paid by
each of Societe Innovatech du Grand Montreal, Industries Devma Inc., Fonds de
Solidarite des travailleurs du Quebec (F.T.C.) and fonds Reginal de Solidarite
de Montreal, limited partnership (collectively the "Investors") to Compositech
Ltd. (the "Corporation"), the receipt and sufficiency of which is hereby
acknowledged by the Corporation, the Corporation hereby covenants and agrees
that it shall, upon the request of the Investors, use its best efforts to
nominate for election by its stockholders, cause the election of and thereafter
continue in office, one person designated by the Investors to serve on the
Corporation's Board of Directors (the "Investors' Nominee"); provided, however,
that (i) the Investors' Nominee shall have experience commensurate with serving
as a director of the Corporation, and (ii) the Investors' Nominee shall not at
the time of designation or at any time thereafter be, or have been, involved in
any legal proceedings which would be required to be disclosed pursuant to Item
401(f) of Regulation S-K (17 C.F.R. ss.229) in a filing with the United States
Securities and Exchange Commission. Subject to the terms of this Agreement, the
Corporation shall continue to include in the Board of Directors slate of
nominees for election as a director of the Corporation at its annual meeting of
stockholders, any special meeting of stockholders or by consent of stockholders
in lieu of a meeting, the Investors' Nominee. If the Investors' Nominee is
unable to serve, subject to the foregoing proviso, the Corporation shall use its
best efforts to elect as a director another person designated by the Investors.
For one dollar ($1.00) and other good and valuable consideration paid by
each of the Investors, as well as by the Corporation (as set forth below), to
each of Fred E. Klimpl and Jonas Medney (collectively the "Principal
Shareholders"), the receipt and sufficiency of which is hereby acknowledged by
each of the Principal Shareholders, each of the Principal Shareholders hereby
covenants and agrees solely in his capacity as a shareholder of the Corporation
to vote his shares of the capital stock of the Corporation in a manner so as to
give effect to the foregoing paragraph. In the event, however, that an
Investors' Nominee is not acceptable to the Principal Shareholders, acting
reasonably, without regard to whether to proviso of the foregoing paragraph has
been satisfied, the Principal Shareholders shall advise the Investors of same in
writing within 48 hours of being provided with such information generally
required in regard to a director of a corporation pursuant to Item 401 of
Regulation S-K in respect to the proposed Investors' Nominee, whereupon the
Investors shall designate another person if they wish the Principal Shareholders
to vote in favor of the Investors' Nominee. The right provided to the Principal
Shareholders in the preceding sentence may be exercised only once with respect
to each meeting or consent pursuant to which the Corporation's stockholders are
being asked to vote for nominees to the Board of Directors of the Corporation;
thereafter, in the case of any such meeting or consent where such right has been
exercised, the Principal Shareholder shall not be entitled to refuse the next
proposed Investors' Nominee in accordance with the above sentence.
<PAGE>
Exhibit V
As further conditions of the Corporation's and the Principal Shareholders'
obligations under this Agreement, (i) the Investors shall cooperate in and bear
the entire cost (including the reasonable legal expenses of the Corporation
and/or the Principal Shareholders) of providing in a timely manner all
information that is required to be disclosed in, and, to the extent required by
law, shall cause to have prepared and filed, a Statement on Schedule 13D under
the Exchange Act and any and all amendments required with respect thereto (the
"Schedule 13D") as may be required by virtue of this Agreement and the
Investors' investment in the Corporation, and (ii) each of the Investors
severally agrees to indemnify and hold harmless, to the extent permitted by law,
each of the Principal Shareholders from and against any and all liabilities,
losses, damages, settlements, claims, costs or expenses, including, without
limitation, reasonable attorneys' fees (collectively, "Liabilities") under U.S.
Federal, state or local laws arising out of or due to (A) any untrue statement
or alleged untrue statement of a material fact by such Investor contained in the
Schedule 13D of (B) any omission or alleged omission by such Investor to state
in the Schedule 13D a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading. As consideration for the Principal Shareholders
entering into this agreement, the Corporation agrees to indemnify and hold
harmless, to the extent permitted by law, each Principal Shareholder from and
against all Liabilities under U.S. Federal, state or local laws arising out of
or due to the Principal Shareholder's compliance with the terms of this
Agreement. Such agreement by the Corporation to indemnify shall survive any
cancellation or termination, or the invalidity or unenforceability of, the
remaining terms hereof.
This Agreement shall terminate on the date on which the Investors own less
than the number of shares of Common Stock of the Corporation in the aggregate as
is specified in Section 7.2 of the Subscription Agreement of even date herewith
among the Investors and the Corporation, as such number of shares may be
adjusted in accordance with the terms of Section 7.2 of the Subscription
Agreement.
Notwithstanding any of the foregoing, nothing shall prevent the
Corporation's directors or officers, acting individually or collectively, from
taking any action required for such directors or officers to discharge their
fiduciary duties to the Corporation and its shareholders. All notices and other
communications hereunder shall be given in writing and shall be given by
telecopier, or delivered by hand, to the other parties at their respective
addresses set forth herein. Any such notice or other communication shall be
deemed to have been received on the date of delivery if delivered by hand, or
the next business day immediately following the date of transmission if sent by
telecopier. The original copy of any notice sent by telecopier shall be
forwarded to the other parties by registered mail, receipt return requested.
As used in this Agreement, the "Investor" shall include a transferee of
shares of Common Stock of the Corporation owned by the Investors which
transferee is: (i) a corporation, all of the shares of which are owned by any
Investor, both as registered owned and as beneficial owner; ((ii) a governmental
body of or controlled by
<PAGE>
Exhibit V
the Government of Quebec; or (iii) a limited partnership controlled by an
Investor or by any governmental body of or controlled by the Government of
Quebec or of which an Investor or any governmental body of or controlled by the
Government of Quebec holds the majority of the limited partnership units.
This Agreement shall be governed in all respects by the laws of the State
of New York as they are applied to agreements entered into in New York between
New York residents and performed entirely within New York.
<PAGE>
Exhibit V
IN WITNESS WHEREOF, the parties have signed at the place and on the date
first herinabove mentioned.
COMPOSITECH LTD.
Per: /s/ Jonas Medney /s/ Fred E. Klimpl
------------------------- ---------------------------
Jonas Medney Fred E. Klimpl
Address: Address:
120 Ricefield Lane 120 Ricefield Lane
Hauppauge, New York Hauppauge, New York
11788-2008, U.S.A. 11788-2008, U.S.A.
Attention: the President Attention: Fred E. Klimpl
Telecopier: (516) 436-5203
SOCIETE INNOVATECH DU FONDS DE SOLIDARITE DES
GRAND MONTREAL TRAVAILLEURS DU QUEBEC (F.T.Q.)
Per: /s/ Hubert Manseau Per: /s/ Richard Bourget
------------------------- ---------------------------
Hubert Manseau Richard Bourget, Senior Vice
President, Investments
Address: Address:
2020 University Avenue 8717 Berri Street
Suite 1527 Montreal, Quebec
Montreal, Quebec H2M2T9
H3A2A5 Attention: Vice President, Legal Affairs
Attention: President and Chief Telecopier: (514) 383-2500
Executive Officer with a copy to: Senior Vice President,
Telecopier: (514) 864-4220 Investments
Telecopier: (514) 383-2505
<PAGE>
Exhibit V
INDUSTRIES DEVMA, INC. FONDS REGIONAL DE
SOLIDARITE ILE DE
Per: /s/ Louis Riopel MONTREAL, by its general partner,
------------------------- Gestion du Fonds Regional de Solidarite
Louis Riopel Ile de Montreal Inc.
Per: /s/ Michel Beland Per: /s/ Danielle Blanchard
------------------------- ----------------------------
Michel Beland Danielle Blanchard
Address: Address:
600, de la Gauchetiere Street West 255, St-Jacques Street West
Suite 1700 3rd Floor
Montreal, Quebec Montreal, Quebec
H3B4L8 H2Y1M6
Attention: President Attention: Managing Directors
Telecopier: (514) 395-8055 Telecopier: (514) 845-0625
<PAGE>
Exhibit VI
AGREEMENT ENTERED INTO AT MONTREAL, PROVINCE OF QUEBEC, THIS 17th DAY OF
OCTOBER, 1997
AMONG: INDUSTRIES DEVMA INC., having its principal place of business at 600
de La Gauchetiere West, Suite 1700, Montreal, Quebec, H3B 4L8
(hereinafter referred to as "Devma")
PARTY OF THE FIRST PART
-----------------------
AND: SOCIETE INNOVATECH DU GRAND MONTREAL, a body politic duly
constituted according to the Act respecting Societe
Innovatech du Grand Montreal (L.Q. 1992, C. 33), having its
principal place of business at 2020 University Street, Suite
1527, in the City and District of Montreal, Quebec,
(hereinafter referred to as "Innovatech")
PARTY OF THE SECOND PART
------------------------
AND: FONDS DE SOLIDARITE DES TRAVAILLEURS DU QUEBEC (F.T.Q.), a
legal person duly constituted according to the Act
establishing the Fonds de solidarite des travailleurs du
Quebec (F.T.Q.), having its head office at 8717 Berri
Street, Montreal, Quebec, H2M 2T9,
(hereinafter referred to as "Fonds")
PARTY OF THE THIRD PART
-----------------------
AND: FONDS REGIONAL DE SOLIDARITE ILE DE MONTREAL, limited
partnership, a limited partnership organized pursuant to the
laws of Quebec, represented herein by its general partner,
Gestion du Fonds Regional de Solidarite Ile de Montreal
Inc., having its principal place of business at 255
St-Jacques Street West, 3rd floor, Montreal, Quebec,
(hereinafter referred to as "Fonds regional")
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PARTY OF THE FOURTH PART
------------------------
(Each party shall also be designated herein as the
"Investor". Where the term "Investors" is used, this term
includes Devma, Innovatech, Fonds and Fonds regional
acting.)
THE PARTIES HAVE AGREED AS FOLLOWS:
1. Pursuant to the Lamines CTEK Inc. (Compositech Canada) and Compositech
Ltd. (Compositech US) transaction, each of Devma and Innovatech
invested $3,749,992.96562 in Compositech US and each of Fonds and
Fonds regional invested $7.03438 in Compositech US, for a total
participation of $7,500,000, being 1,066,192 common shares in the
capital of Compositech US. Each of Devma and Innovatech invested
$1,250,007.03438 in Compositech Canada, Fonds invested
$4,499,992.96562 in Compositech Canada and Fonds regional invested
$499,992.96562 in Compositech Canada, for a total participation of
$7,500,000, being 1,066,192 Class "A" shares of the capital of
Compositech Canada. The present Agreement solely contemplates the
shares issued at the time of such subscriptions.
2. The terms and conditions of the Compositech Canada and Compositech US
transaction are provided for in various agreements entered into
between the Investors and Compositech US for the purposes of
Compositech Canada and Compositech US, namely the Compositech US
subscription agreement, the Compositech Canada subscription agreement,
the Compositech Canada shareholders agreement and the exchange
agreement. The present Agreement shall be read together with the
Compositech Canada shareholders agreement, with respect to those rules
governing the relationship between the Investors.
3. The allocation of the capital is as follows:
In Compositech Canada :
======================================================================
Name Amount Number of shares
----------------------------------------------------------------------
Devma $1,250,007.03438 177,700
----------------------------------------------------------------------
Innovatech $1,250,007.03438 177,700
----------------------------------------------------------------------
Fonds $4,499,992.96562 639,714
----------------------------------------------------------------------
Fonds regional $499,992.96562 71,078
----------------------------------------------------------------------
Compositech US $7,500,000 1,066,192
======================================================================
TOTAL $15,000,000 2,132,384
======================================================================
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In Compositech US
======================================================================
Name Amount Number of shares
----------------------------------------------------------------------
Devma $3,749,992.96562 533,095
----------------------------------------------------------------------
Innovatech $3,749,992.96562 533,095
----------------------------------------------------------------------
Fonds $7.03438 1
----------------------------------------------------------------------
Fonds regional $7.03438 1
======================================================================
4. The issue price per share for the shares of Compositech US and
Compositech Canada was set at $7.03438. The shares of both Compositech
US and of Compositech Canada, were issued at an identical issue price
in order to facilitate the eventual exchange of shares on a share per
share basis at the time such exchange is effected pursuant to the
exchange agreement entered into between the Investors and Compositech
US or the reallocation of shares of Compositech Canada or Compositech
US among the Investors.
The present Agreement exclusively contemplates the 710,792 shares held
by Fonds and Fonds regional in the capital of Compositech Canada and
the 533,095 shares held by Devma and the 533,095 shares held by
Innovatech in the capital of Compositech US.
For the purposes herein, Fonds and Fonds regional hereby represent to
the other Investors that they are acting together through Fonds. Fonds
regional represents that it has granted to Fonds a proxy for the
purpose of all matters related to Compositech Canada and/or
Compositech US and in particular all matters relating to the present
Agreement.
5. Notwithstanding the allocation set forth in paragraph 3 and
independent of the allocation of the capital and the number of shares
held by each Investor in the capital of Compositech US and Compositech
Canada, the objective of the Investors is to have, at a given time, an
equal position with respect to shares in Compositech US and
Compositech Canada, Fonds and Fonds regional to be considered
together. Moreover, independent of the actual allocation, each
Investor (Fonds regional with/and through Fonds) shall have identical
rights from the date hereof regarding voting, dividends and other
privileges attached to the shares of Compositech Canada and regarding
dividends and other privileges attached to the shares of Compositech
US.
6. Dividends
Any dividend on the shares of the capital of Compositech Canada or
Compositech US shall be redistributed in equal parts among the
Investors. Where the Investors receive a direct payment of dividends,
each undertakes to proceed with a reallocation of the
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amounts received into equal parts among the Investors and as a result
shall proceed to a redistribution of such amounts. The Investors
undertake to distribute the shares among them immediately prior to the
declaration or payment of a dividend, in order to avoid any
unfavourable tax consequences against one or the other of the
Investors.
7. Vote
With respect to Compositech Canada, the Investors agree that the
Compositech Canada shareholders agreement will at all times provide
for a proportional representation of Investors on the board of
directors of Compositech Canada. Given that the Investors are holders
of an equal number of shares and given their intention to maintain
such participation in equal numbers, each shall designate a
representative to the board of directors provided that the Investors
are entitled to designate three (3) representatives. This principle
shall be modified where one or more of the Investors proceed to
additional investments by way of share purchases, which alters their
respective shareholdings. In such a case, the designation of the
representatives, whether it is for three (3), four (4) or more
representatives pursuant to the provisions in the Compositech Canada
shareholders agreement, shall be made on a proportional basis based on
the number of shares held by each of the Investors. Where the
Investors have proceeded together to additional investments on a pro
rata basis to their respective participation by way of share
purchases, the designation of additional representatives (more than 3)
shall be made by way of a common agreement among the Investors to have
an equitable representation among the Investors and where appropriate,
provide the opportunity to each Investor to designate an additional
representative to the board of directors of Compositech Canada. For
the purposes hereof, "held" means the shares deemed to be held by each
Investor in equal parts plus the shares actually acquired thereafter
and held by one or more of the Investors. In addition, where at any
time the three (3) Investors have the right to designate less than
three (3) representatives to the board of directors of Compositech
Canada, the parties shall appoint their representatives by way of
mutual agreement or in a proportional manner as provided for
hereinabove. With respect to the board of directors and shareholders
meetings of Compositech Canada, the Investors agree to vote as
shareholders and to mandate their representative to vote as a director
in accordance with the decision taken by the majority (51% of the
voting shares held by the Investors). The Investors shall consult with
each other before taking any decision.
Notwithstanding the rules provided for hereinabove, the provisions of
section 6 of the shareholders agreement with respect to Compositech
Canada shall have priority and precedence over the provisions of the
present paragraph.
8. Conversion or exchange at the discretion of the Investors
The shares held by the Investors in the capital of Compositech Canada
confer a right to exchange such shares for shares in the capital of
Compositech US, the whole as provided
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for in the exchange agreement. Within three (3) years following
execution of the Compositech Canada shareholders agreement, where an
Investor wishes to proceed to an exchange of shares that it holds in
the capital of Compositech Canada for shares in the capital of
Compositech US, it shall provide written notice to this effect to the
two (2) other Investors and shall not so proceed until all the
Investors have proceeded together to the exchange of their shares or
have mutually agreed to some other mechanism. In such a case or at any
time, commencing from the third (3rd) year following the execution of
the Compositech Canada shareholders agreement, where an Investor
wishes to proceed to an exchange of shares that it holds in the
capital of Compositech Canada for shares in the capital of Compositech
US, the provisions provided for hereinafter shall apply.
Upon an Investor giving notice to the others of its intention to
exchange shares and therefore to redistribute the shares in order that
each Investor holds an equal number of shares in the capital of
Compositech Canada and in the capital of Compositech US, the following
provisions shall apply:
8.1 where each Investor is prepared to proceed with an exchange for
shares in Compositech US, each Investor shall exchange its shares
in the capital of Compositech Canada for shares in the capital of
Compositech US according to the provisions of the exchange
agreement. Consequently, with respect to the shares contemplated
by the initial subscription, the three Investors shall hold an
equal number of shares in the capital of Compositech US without
executing any transaction among them.
8.2 where one or more Investors do not wish to proceed to the
exchange, the Investors shall proceed to an allocation among them
whereby Fonds shall sell 177,697 shares in the capital of
Compositech Canada to Devma and 177,698 shares in the capital of
Compositech Canada to Innovatech for a price of $7.03438 per
share. Simultaneously, Fonds shall purchase 177,697 shares in the
capital of Compositech US from Devma and 177,698 shares in the
capital of Compositech US from Innovatech at a price of $7.03438
per share.
The parties agree that with respect to the redistribution of shares among
them pursuant to any transaction contemplated herein, the value of the
issued shares in the capital of Compositech Canada shall be $7.03438 per
share and the value of each issued share in the capital of Compositech US
and held by Devma and Innovatech shall be equal to $7.03438 per share,
notwithstanding the fair market value of said shares at the date of such
transaction.
In addition, the right for an Investor to proceed to an exchange of its
shares shall be subject to the right of first refusal agreed upon by each
for the benefit of the other Investors and provided for in the Compositech
Canada shareholders agreement.
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The parties also undertake to proceed to a redistribution and reallocation
of shares held in the capital of Compositech Canada and Compositech US
pursuant to any provision provided for in the Compositech Canada
shareholders agreement with respect to the sale, alienation or disposition
of shares and in particular, the provisions provided for in sections 15 and
20 of the shareholders agreement.
9. Exchange at the discretion of Compositech US
Where Compositech US exercises its right provided for in the exchange
agreement to require the exchange by the Investors of their shares in the
capital of Compositech Canada for shares in the capital of Compositech US,
the Investors shall proceed to the exchange of shares in the capital of
Compositech Canada for shares in the capital of Compositech US, the whole,
according to the provisions provided for in the exchange agreement which
bind the Investors to Compositech US and to the rules provided for in
paragraph 0 hereinabove.
10. Miscellaneous provisions
With respect to dividends or other dispositions of assets, if any, any
adjustments, where required, shall be made one (1) time per year, on the
anniversary date of the execution of the present Agreement, unless an
adjustment becomes necessary during the year, and in particular, any
adjustment necessary for the reallocation of shares among the Investors to
give effect to the present Agreement.
11. Purchase of additional shares
The present Agreement governs exclusively the holding and reallocation of
shares issued upon the closing of the Compositech Canada and Compositech US
transaction (initial subscription). Any acquisition of additional shares by
one or more of the Investors shall be governed by the Compositech Canada
shareholders agreement, subject to the exercise of the voting right
provided for in paragraph 0 herein.
12. Taxation
Where a transaction is completed among the Investors pursuant to the
present Agreement and any taxes are payable (sale or disposition of shares)
and where Devma and/or Innovatech would not otherwise be taxed had the
Fonds held the number of shares it should have held in the capital stock of
Compositech US, Fonds undertakes and agrees to assume the entire tax
liability owed by Devma and/or Innovatech and to indemnify and pay any
claim for taxes that may become exigible.
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Notwithstanding the provisions of the preceding paragraph, Devma and
Innovatech represent that they are not liable for tax in Canada nor in the
United States on capital gains nor on dividends received from a Canadian or
American corporation except for certain deductions at source for dividends
paid by an American corporation to Canadian Investors. No unfavourable
consequence shall be suffered or incurred by Devma or Innovatech by way of
holding shares in the capital of Compositech US as provided for in the
present Agreement. Each of Devma and Innovatech shall use its best efforts
to inform Fonds in the shortest delays of any change in its tax status, if
any, and in order to proceed to the redistribution of shares prior to the
coming into force of any such change.
For the purposes of any transaction, Devma and Innovatech shall be deemed
to have held their shares in the capital of Compositech Canada commencing
from the date of execution of the Compositech Canada subscription agreement
and, if applicable, any tax implication created by the fact that Fonds
holds securities which shall be eventually assigned and transferred to
Devma and Innovatech shall be assumed entirely by Fonds and adjustments
shall be made with Innovatech and Devma where necessary.
Each of Devma and Innovatech agrees and accepts to amend the mechanism of
redistribution of shares held in the capital of Compositech Canada and
Compositech US in the event that a mechanism for redistributing shares held
in the capital of Compositech Canada and Compositech US becomes more tax
advantageous for Fonds without creating any costs or additional tax
liability for Devma and/or Innovatech.
13. Arbitration
Any dispute or litigation that may arise in connection with the present
Agreement shall be finally settled according to the rules of conciliation
and arbitration of the Quebec Centre for National and International
Commercial Arbitration annexed hereto as Schedule 1, at the date hereof by
one or more arbitrators appointed in conformity with such rules and without
recourse to any court proceedings. Any arbitration procedure required
pursuant to the present shall be held at Montreal, Province of Quebec.
14. Final provisions
14.1 Any notice, request or communication required or permitted pursuant to
the present Agreement, shall be made in writing and transmitted either
by bailiff, prepaid registered mail, receipt return requested, or
shall be hand delivered to the parties herein at the addresses
indicated at the beginning of the present Agreement or any other
address that one or the other parties may indicate to the other
parties in the manner provided for herein. Any such notice shall be
deemed to have been received on the day of service in the case of
service by bailiff, on the 5th day following the date of mailing if
sent by mail and the day of its delivery, if delivered by hand.
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14.2 This Agreement supersedes all prior agreements, whether oral or
written, with respect to the subject matter hereof. This Agreement
cannot be modified or amended except by instrument in writing signed
by all the parties hereto.
14.3 All copies of the present Agreement, upon signature by each of the
parties, shall constitute an original. The parties elect the domicile
of the District of Montreal for the purposes of the execution of the
present Agreement.
14.4 The parties undertake, within the limits of their undertakings
contained herein, to sign any document, to ensure the holding of all
meetings and adoption of all resolutions and by-laws, to exercise
their voting rights and their influence, and to do or execute or have
done or have executed all other acts that may be necessary or
advisable in order to give full effect to the present Agreement.
14.5 The present Agreement shall be binding upon the parties and shall be
binding and enure to the benefit of their successors and assigns.
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IN WITNESS WHEREOF, the parties have executed the present Agreement on the date
and place mentioned hereinabove.
SOCIETE INNOVATECH DU FONDS DE SOLIDARITE DES
GRAND MONTREAL TRAVAILLEURS DU QUEBEC (F.T.Q.)
Per: /s/ Hubert Manseau Per: /s/ Richard Bourget
---------------------------- -----------------------------
INDUSTRIES DEVMA, INC. FONDS REGIONAL DE
SOLIDARITE ILE DE
Per: /s/ Michel Beland MONTREAL, by its general partner,
---------------------------- Gestion du Fonds Regional de Solidarite
Ile de Montreal Inc.
Per: /s/ Pierre Laflamme Per: /s/ Danielle Blanchard
---------------------------- -----------------------------
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The preceding document is a translation, from French, of the original agreement
reached by the parties. The undersigned hereby represent and warrant that the
translation is a fair and accurate representation of the agreement between the
parties.
SOCIETE INNOVATECH DU FONDS DE SOLIDARITE DES
GRAND MONTREAL TRAVAILLEURS DU QUEBEC (F.T.Q.)
Per: /s/ Hubert Manseau Per: /s/ Richard Bourget
---------------------------- --------------------------------
INDUSTRIES DEVMA, INC. FONDS REGIONAL DE
SOLIDARITE ILE DE
Per: /s/ Michel Beland MONTREAL, by its general partner,
----------------------------- Gestion du Fonds Regional de Solidarite
Ile de Montreal Inc.
Per: /s/ Pierre Laflamme Per: /s/ Danielle Blanchard
----------------------------- ---------------------------------
